PolarityTE Inc (PTE) 2008 Q4 法說會逐字稿

Welcome to the Majesco Entertainment Company's fourth quarter and full year 2008 earnings conference call. As a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). This conference is being recorded. At this time, I would like to turn the conference over to Mike Smargiassi of Brainerd Communicators. Mr. Smargiassi.

Thank you, and good afternoon, everyone. I would like to welcome you to Majesco Entertainment's conference call today. Before we get started, I would like to remind you that this call is being recorded and the audio broadcast and replay of this teleconference will be available in the Investor Relations section of the Company's web site. As a reminder, this call may contain forward-looking statements including statements regarding Management's intentions, hopes, expectations, representations, plans or predictions about the future. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 995. These forward-looking statements are subject to risks and uncertainties that could cause actual results or actual future results to differ materially from the expectations set forth in the forward-looking statements. Factors that could cause actual results to differ materially are specified in the Company's annual report on Form 10(K) for the year ended October 31st, 2007 and other filings with the SEC. The Company does not undertake or specifically disclaims any obligation to release publicly the results of any revisions that may be made to any forward-looking statements to reflect occurrences of anticipated or unanticipated events or circumstances after the date of such statements.

To facilitate a comparison between the reported periods, the Company has presented both GAAP and non-GAAP financial results. GAAP financial measures include expenses related to non-cash compensation, settlement of litigation and related charges net, gains related to the settlement of liabilities and other gains and charges in the fair value of warrants. Operating income, net income and basic and diluted income and loss per share have been adjusted to report non-GAAP financial measures that exclude these expenses, charges and income related to non-cash compensation, gains on these settlements and warrants. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and the Company's prospects for the future. These measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results. Reconciliations between GAAP and non-GAAP financial measures is included in the press release issued earlier this afternoon. On the call today we have Jesse Sutton, Chief Executive Officer, John Gross, Chief Financial Officer, and Gui Karyo, Executive Vice President of Operations. I would now like to turn the call over to Jesse.

Thanks, Mike. Good afternoon everyone and thank you for joining us today. I will open up the call with some highlights and an overview of our performance for fiscal 2008. John will follow with a financial review and our outlook and I will conclude with comments on some of our upcoming titles. Gui, John and I will then be happy to take your questions.

2008 was an exceptional year across all performance metrics. We exceeded the revenue guidance provided in September and achieved profitability ahead of schedule as we continue to successfully execute on our business plan which we implemented two years ago. For the year we delivered revenue of $63.9 million, a 25.3% increase over the last year. This was in part driven by solid sales from a number of titles throughout the year and a terrific fourth quarter in which revenue increased 51.2%, exceeding our internal expectations. I would remind you that this performance does not include the latest release from our Cooking Mama franchise, World Cooking for the Wii which was released in early November. We are successfully converting this growth into bottom line returns as we achieve profitability ahead of schedule. For the year non-GAAP operating income was $2.8 million, an improvement of $2.6 million from 2007, and non-GAAP net income was $2.1 million for fiscal 2008, an improvement of $3.4 million from 2007. The progress we have made in driving profitability is a direct result of our focus on reasonably priced products for the mass market consumer and on our operating discipline in the past two years. During this time we have right-sized our cost structure and organized our operations to deliver profitable growth as we continue to execute on our business plan.

Our growth strategy remains focused on the fastest growing market segment in the industry, the family friendly mass market genre. This segment of the market has been driven by the success of Nintendo's Wii and DS platforms and their ability to deliver intuitive, fun game play. While we view all platforms as potential opportunities, the Nintendo systems currently present the best fit with our core strategy of producing fun to play, intuitive games, and we are fortunate to have a strong relationship and track record with Nintendo. Our combined Wii and DS business, which is at the heart of our strategy, increased 64% for the year and 86% for the quarter. During the year, we successfully expanded our product line as we shipped 23 titles, including 13 DS and ten Wii. New DS releases in 2008 included Cooking Mama 2, Dinner with Friends, Cake Mania 2 and Left Brain Right Brain 2. For the Wii, Wonder World Amusement Park and Jillian Michael's Fitness Ultimatum 2009, which supports the new Wii balance board accessory. International sales for the full year were 9.3% of total revenue. However, for the fourth quarter international represented 17% of sales as we improved our product availability during the quarter. We continue to view international as a very attractive opportunity to grow and diversify our revenue streams. Non U.S. markets remain a top focus for our management team, specifically the securing of rights in Europe and Asia.

We have also made considerable progress in our efforts to build a library of intellectual property rights, which we believe will enhance the value of our Company. Majesco studios, which launched in early are '08, will release its first title Wonder World Amusement Park for the DS on January 20th. This will be followed by Our House, also for the DS, in late spring. We have taken a very prudent approach as we build our studio with essentially a neutral cost impact when compared to third party development. Our goal remains to generate 10-15% of our total releases through the studio. Finally, we had a very successful fourth quarter and holiday sales period despite the unpredictable economic environment. Our titles have clearly resonated with our target market, as video game consumers seek quality family entertainment. Our Cooking Mama franchise has sold over 3.4 million units across four SKUs, the most recent of which just launched in mid-November.

In summary, 2008 was an outstanding year as we successfully executed on our strategy and delivered an improved financial performance. We are well-positioned to benefit from consumer trends given our focus on the fastest growing segment of the market. We have entered this unpredictable economic period ahead of the curve regarding cost structure and operating efficiencies, given our efforts to improve profitability over the past two years. We have a proven and disciplined business model and a management team that is committed to growing the Company in a profitable manner. As a result of our financial progress and evolving business plan and improving our top and bottom line results, we believe we possess an attractive risk/reward profile for investors and look forward to building on our success in 2009. I would now like to pass the call to John Gross, Majesco's Chief Financial Officer, to provide the financial review of our fiscal fourth quarter and full year 2008. John?

Thanks, Jesse. Before I review our performance in detail I'd like to provide some highlights regarding the revenue, profitability and liquidity. With respect to revenue, our revenue in the quarter was up an impressive 51% to $18 million versus a year ago. This growth was driven by strong domestic performance as well as a 40% improvement in international revenue, as we benefited from from additional product availability which had previously been delayed. For the full year our revenue increased 25.3% to $63.9 million, exceeding our guidance. This is driven by domestic revenue increase of 55%, sales across our Cooking Mama franchise and the performance of a number of other titles including Wild Earth, Wonder World and Gillian Michaels in the fourth quarter. As Jesse mentioned our core business, the Wii and DS, were up 64% for the year and 86% for the quarter.

Our gross margin in the fourth quarter was 27.8%, off from the 30.9% in the year earlier period. This was primarily the result of holiday value programs that, while profitable, were at a lower margin. For the full year our gross margin was 36.1%, in line with our guidance of modest improvement over the 33.9% we reported in 2007. As for profitability, for the full year we improved operating and net income and achieved profitability ahead of our internal projections. We reduced our GAAP and non-GAAP operating and net losses for the quarter and for the year we significantly improved our profitability in both operating and net income. For the full year of 2008 GAAP operating income was $1.5 million, compared to a $3.8 million loss last year. Non-GAAP operating income was $2.8 million for the year ended October 31st, versus non-GAAP operating income of $232,000 last year. We improved our operating profitability by $2.6 million on a $13 million revenue increase. Non-GAAP net income for fiscal 2008 was $2.1 million versus a $1.3 million net loss in 2007. GAAP net income per share was $0.08 per share versus a loss per share of $0.20 in fiscal 2007. Non-GAAP net income per share was $0.08 versus a loss of $0.06 in fiscal 2007.

Turning to liquidity while our cash balance was down from last quarter and last year, it was a reflection of pre-holiday activity. We substantially built our inventory, which we reduced through the holiday period, and launched our second Cooking Mama Wii title in November. We expect to be at least back to normal levels, if not better, at the end of the first quarter. We've made significant progress from both an operating and financial perspective over the past two years. We believe we are well-positioned as we enter fiscal 2009 to continue to build value for our shareholders. Now for the details. The split between domestic and international revenues in the fourth quarter was 83% and 17% respectively. This compares to 81% domestic and 19% international in the same quarter last year. We continue to evaluate a number of opportunities to enhance our international performance and our long-term goal is to bring the split more in line with the overall industry. The 51% increase in total revenue for the quarter was driven by strong performance across both domestic and international. Our domestic sales saw strong growth both in the Cooking Mama franchise and our other products including Jillian Michaels. International sales were led by the performance of Wild Earth and Wonder World.

Overall our expenses are under control as we remain disciplined in our approach to the business. Cost of goods sold was up slightly in the quarter as a percentage of sales, primarily due to holiday value programs and an increase in lower margin international products released in the quarter. The increase in operating expenses includes an increase in volume related selling and marketing expenses in addition to a $300,000 bad debt write-off. However, our SG&A line was actually down as a percentage of sales, highlighting the operating leverage in the business. Our total cash fixed cost for the quarter which includes G&A, product research, and the fixed portion of selling and marketing related primarily to employee costs remained within our expectations at roughly $3.5 million. This excludes the costs associated with our studio and non-cash compensation. For the full year, both total cost of goods sold and total operating expenses were down as a percentage of sales. Product costs dropped as a percentage of sales largely as a result of a higher percentage of higher priced Wii sales in 2008 versus 2007.

Our software development costs as a percent of sales declined as a higher average cost per product was more than offset by higher sales. Operating expenses for 2008 include a $300,000 reduction in the settlement litigation accrual, operating expenses for 2007 fiscal year include a $2.8 million charge related to the settlement litigation and a gain on settlement liabilities of $300,000. Net of these items, operating expenses for the year as a percent of sales were down slightly from 2007. Our variable selling and marketing expenses were also down slightly as a percent of sales as they increased 21%, which was less than our overall revenue increase. In order to facilitate a comparison between the reported periods, we are providing both GAAP and non-GAAP financial results for operating income, net income and basic and diluted results per share. Our non-GAAP results exclude the impact of expenses related to non-cash compensation, the settlement of litigation and other liabilities net and changes in the fair value of warrants. The GAAP operating loss for the fourth quarter was $900,000, which included a $400,000 non-cash compensation expense, compared to 2007 operating loss of $1.5 million which included a $300,000 charge in connection with the class action litigation and a non-cash compensation expense of $500,000. Non-GAAP fourth quarter operating loss was $0.5 million dollars compared to a non-GAAP operating loss of $700,000 in 2007.

For the full year, the company's GAAP operating income was $1.5 million, which included a $300,000 gain in connection with the class action litigation and a $1.6 million non-cash compensation expense. This is compared to an operating loss of $3.8 million during the same period in 2007, which included a $2.8 million charge in connection with the class action litigation and a $1.5 million non-cash compensation expense. Non-GAAP operating income for the full year 2008 was $2.8 million compared to a non-GAAP operating income of $200,000 for the same period in 2007. For the full year GAAP net income was $2.1 million or $0.08 per share, which included a $1.3 million non-cash gain in the fair value of warrants issued, compared to a full year 2007 GAAP net loss of $4.8 million or $0.20 cents per share which included a $600,000 non-cash gain in the fair value of warrants issued. Non-GAAP net income was $2.1 million or $0.08 per share in 2008 compared to a non-GAAP net loss of $1.3 million or $0.06 per share in 2007. Financing costs decreased 58% to $649,000 for the year from $1.6 million in 2007. This is a direct result of the capital raised in the Fall of 2007 in addition to lower factoring fees and improved cash flow generation from the business.

Turning to our balance sheet, as of October 31st, we had $5.5 million in cash or cash equivalents. Our due to factor was $983,000 which represents gross receivables sold to the factor of $12 million, less allowances of $3.1 million and advances from the factor of $9.6 million. This compares to our 2007 fiscal year end due to factor of $1.5 million which represents gross receivables sold to the factor of $7 million, less allowances of $3.1 million and advances from the factor of $5.4 million at October 31st, 2007. Our inventory was $5.6 million at fiscal year end 2008 versus $3.9 million a year ago. This increase in inventory was in line with our internal plan to build inventory for the holiday period. Almost all of the increase was for Cooking Mama and was sold during the first quarter of 2009. We expect to be back to normal inventory levels at the end of the first quarter. Our capitalized software development costs and license fees were up versus year end 2007 reflecting the growth in the number of titles we are publishing and the higher cost and longer development cycles of Wii titles.

Turning to guidance for 2009. For fiscal 2009, we expect net revenue to be in excess of $70 million, up from the $63.9 million we reported in 2008. We also expect to be profitable for the full fiscal year. We believe that our gross margins for the full year will be similar to 2008. While we are off to a strong start in the first quarter of 2009, we have limited visibility into the rest of the year due to the current unpredictable economic environment. Our guidance assumes the release of approximately 31 titles in 2009. We expect to update our guidance when we report fiscal first quarter 2009 results in March. I'll now turn the call back over to Jesse. Jesse?

Thanks, John. I would like to conclude with some comments on our 2009 lineup, which includes a number of titles that we are very excited about. Fiscal Q1 titles include Cooking Mama World Kitchen for the Wii, the sequel to the best selling Cooking Mama Cook-off game that has sold more than 700,000 units and challenges players to use the Wii remote as the ultimate cooking utensil. Cake Mania In the Mix for Wii marks the first introduction of Sand Lot Games best selling PC title on the Wii system. The game integrates motion based control with the series signature cake baking, multitasking game play style. Left Brain Right Brain 2 for the DS is a follow-up to the original hit that features all new challenges to train both hemispheres of the brain and help players become truly ambidextrous. Wonder World Amusement Park for the DS is the first game from Majesco Studios Santa Monica. This companion game to the Wii version lets players experience a complete day of the park in the palm of their hands. Used the touch screen players can toss, drive, shoot, whack and spin in more than two dozen mini games throughout six themed zones.

Looking at the rest of fiscal 2009, some of our announced titles include Gardening Mama for DS starring Mama from the multi-million selling Cooking Mama franchise and is the first gardening game available on DS. Gardening Mama transforms the stylus into a universal gardening tool that players will use to plant, nurture to plant, and harvest flowers, fruits and vegetables. Math Blaster in the Prime Adventure for DS is inspired by original hit PC game from knowledge adventure that makes learning fun by combining a variety of adventure based learning games with challenging mathematical puzzles and unique capabilities of Nintendo DS. Our House Party for Wii turns the Wii remote into the ultimate home renovating tool that lets players compete party style to build their own personalized trophy home that they can then share with friends via Wii connect 24. Our House on DS is the second game from Majesco Studios Santa Monica. This companion game to the Wii version lets players work as contractors and then use their work for hire earnings to design, build and decorate their own personalized home. Rolling Rascals for DS challenges players to roll adorable round pets around obstacles and into identical twos to clear them from the game board in this addictive puzzler. And Major Minors Majesco March for Wii marks the return of the creative team behind the renowned (inaudible) franchise. Legendary game designer and multimedia musician (inaudible) and famed New York artist Rodney Allen Greenblat. The game turns the Wii remote into a special baton, the band leader major minor -- that band leader major minor uses to keep tempo, recruit new band members and pick up valuable items while marching through whimsical locations. That concludes our formal remarks. Operator, if you can review the Q&A instructions, please.

(Operator Instructions). Our first question comes from Michael Pachter at Wedbush Morgan.

Hi Jesse and John. I'm sorry about the Giants and I hope your good results have allowed you to overcome your grief. I have a couple of easy questions, I think. You are guiding to relatively flat margins on revenues that will be at least 10% higher. So if I'm doing the math right, we are going to see gross profits grow by about $2 million. Should we expect that you can continue to manage your operating expense or should we expect an increase in OpEx, because I'm trying to get to a profit number?

I will let John talk about the OpEx. I just want to specifically note that I happen to be a very big Pittsburgh Steeler fan and that they are still alive and doing well, so from that perspective looking forward to the future with them. From another point of view, John, why don't you take the discussion.

Sure. As you know, the operating expenses are a combination of both variable selling and marketing expenses as well as fixed costs. We would expect to see an uptick in the advertising and marketing line, which is obviously part of the operating expenses, as we are supporting our products with a little bit more media than we have in the past.

Okay. That's fine. I just wondered, but we wouldn't expect anything dramatic in G&A or product development.

No.

That makes sense. Okay. Thank you. My second question, I'm looking at your first quarter which is about two weeks from being concluded, so you should have a pretty good feel and we are going to get NPD numbers in a couple of days, but should I expect the pattern over the four quarters that's similar in 2009 to what we saw in 2008 with kind of lumpiness on the front and back quarters and then slightly dip in the middle two.

I think that's a fair someone, but I also think that it also relates to products that get delivered in which quarters. But I think overall it's a fair assumption.

And finally are we -- should we be looking for continued international sales growth? I mean had you a 40% year=over-year growth in Q4. Should we expect that that's going to continue? Are we going to see a much more robust international sales for all of '09?

I think that from an overall '09 perspective, it's fair to expect growth. From a quarter to quarter perspective, I think it really has to --

Title specific, sure.

-- product that we are delivering in Europe at that time.

Okay, guys, thank you very, very much.

Our next question comes from Jon Gruber at Gruber & McBaine.

I'm a Steeler fan, too. Anyway, Jesse, Jillian Michaels, how's that doing? How did that do at Christmas and what's the outlook and what's your plans past this version?

We are happy to say that the product is doing well. think the November NPD numbers illustrated that it is doing well. It continued to sell into December. We'll wait until the NPD numbers come out to -- it's a brand that we think is -- that we are hoping to continue here into 2009 and 2010.

My second question is you said 70 plus, 70 seems a little bit on the -- so what's the plus? I mean could you do another 25%, which -- could you be slightly closer to 80? I mean, what's the plus here? What's your range? 70 to 90? 70 to -- what's your view there?

I think as the year goes on and this unpredictable market rights itself and becomes clearer, we will have a better sense of where that plus is and we'll come back on a quarter to quarter basis and continue to update the investor community accordingly.

Okay. And another one, gross margin was funky in the fourth quarter. You had $4 million revenue over estimates yet none of it fell to the gross margin line. And then why going forward do you see no improvement from the gross margin, which included those fourth quarter gross margins?

It's basically a product mix perspective and I'll let John elaborate on that.

It's a few things, Jon. First of all, in the fourth quarter we typically have a higher percentage of what have we call our value programs which are by nature lower margin. I think as we step back and look at it, to sort of follow up on a point that Michael raised, in terms of our margins, it's extremely difficult to look at our margins on a quarter to quarter basis because they are so dramatically influenced by the introductions of products. For example, in the first quarter we have our Cooking Mama Wii product. And in those quarters we tend to have large bumps in margin like we did in the third quarter. And then, for example, in the fourth quarter with the value programs it will dip. I think the only way to look at our gross margins is to look at them over the four quarters. The second part of your question as it relates to 2009 and why we are guiding in that respect there, are we are -- we have found that we are doing better to a large degree when we are investing a little bit more in product and so you will see a slight uptick in develop costs. But our expectation is over time that obviously that will be offset by the success of the products.

That wouldn't affect gross margins. Development costs is in R&D, right?

No, it does affect gross margin. No, the R&D is the -- only the fixed cost, what you see down in operating expenses. That's the fixed cost of our internal production department, which manages the outside development and our QA group. The outside development costs that we pay to outside developers to build our product.

That's in gross margin.

Right, as well the majority of our studio costs are in gross margin.

Is it pretty much independent if you do $74 million or $81 million, the gross margin, you think it would still be flat or with the higher number it would be higher?

I would think if it's higher, it would most likely be slightly higher as we would be getting a better return on the development investment. It would depend if we are doing additional products or exactly what the mix is, but if I was guessing I would think that that would be a result of higher sales on the same level of marketing and the same development costs. Obviously we have royalties that we pay on a per unit basis, so our piece of that wouldn't matter.

And the Wii and Nintendo split and other, do you have that?

Yes, it was in our release. If you hold for a second, but the Wii/DS product mix for 2008, it's virtually 100% in 2008.

I meant the mix between the Wii and the DS.

In 2008 -- in 2008 for the year -- bear with me a second here -- in 2008 for the year, we are looking at about two-to-one DS to Wii. But the Wii has caught up. The Wii doubled year over year and DS was up around 50%.

Thank you very much.

But that's largely a function of also titles. We did a lot more Wii titles in 2008 than we did in 2007.

Thank you.

(Operator Instructions). Our next question comes from John Taylor at Arcadia Investment Corp.

Hi, a lot of questions on margin, I guess. Let me approach it this way. I wonder if you could talk about the kind of marginal contribution once you load everything in. I mean in Q4 it looks like for every additional dollar you generated about 4% margin on additional operating income. And yet for the year, as you noted, it was more like 20%. So if we're looking at Q1 which has got more Jillian and Cooking Mama and stuff like that in it, what would you think the contribution margin might be on each additional dollar of revenue? Could you maybe take a stab at it that way?

I think, John, the only challenge in doing that is it's a question of -- it's a question of product mix, so it's a question of where every dollar of revenue comes from. Obviously if every dollar comes from -- if every dollar of improved revenues comes from the Jillians and Cooking Mama, then you see the kind of margins that we had in the third quarter last year and the first quarter last year, of 2008. When you -- if those are -- if you have a bigger influx of value based products and less launchings in that individual quarter, you are just going to ends up with lower margins. The way we view it is on an overall annual basis and we hope that the products that I would call our big triple A products will sell way beyond our expectations and grow our margins accordingly.

So if you look at Q4, the one you just reported and maybe Q1 last year is the basis, do you happen to have what the mix was between the full and the discounted or value based for any of those periods?

Q1 last year and Q4 this year?

Yes, in other words, of the -- yes, of the -- what was the mix like between full and value priced in Q4, right, in the period you just reported, which would account for some of the margin erosion? And maybe what was the base that we can compare off of for last year in Q1?

I would have to go back and take a look at Q1 but just intuitively, the value programs tends to be more prevalent at holiday so it would be both a little bit of our fourth quarter because of the nature of our fiscal year and our first quarter. But the other factor that Jesse mentioned is, for example, in the first quarter of this year, when we dropped Cooking Mama in November, we are getting a full quarter, quarter's worth of margin and revenue from that. We had nothing in the fourth quarter. So I keep coming back, John, to saying that the best way of looking at the business is to really look at it over a four quarter point of view unless you have a particular insight in terms of something happening in a particular quarter where you would say, knowing nothing else, you would expect our first quarter this year to be very strong because you've got Cooking Mama and because we did Jillian late in the fourth quarter of last year. So we are going to get some carry through from that. We are doing Gardening Mama this year, which is somewhere around the bubble at the end of the -- mid to the end of the second quarter. So, again, that's going to be a factor there. If it's in the second quarter, obviously it's going to be very positive. If it ends up in the third quarter then that's going to flip it over.

That's what I'm getting at. It looks like visibility for Q1, because of Jillian and Mama 2 are -- is looking pretty good. Si I think we are all trying to get what the marginal contribution might be off of potential upside and maybe back to Michael's earlier question, maybe the year is distributed a little bit differently because of early visibility. Who knows. But that's what I'm trying to get at, the earnings implication of that.

I think a lot of it has to do with the continued revenue generated from those two products over the course of the year and how well they do.

Okay. Let me switch gears then. Jesse, you highlighted number of titles, I think it was you, in Q1. Do you have the international IP rights to all of those that you mentioned in your script?

Let me run through them.

Mama World Kitchen maybe not, but the other ones.

World Kitchen we do not nor Jillian but Wonder World DS we do, as we do Cake.

So Wonder World you do, Cake you do, Jillian you don't. What about Our House, Math Blaster, Major Minor?

Our house isn't going to release until spring, it wasn't one of the Q1 products. Math Blaster is -- I would have to double-check with the sales but I'm pretty sure that is a domestic product.

Our House and Major Minor are both internal IPs that we have worldwide rights for.

So of those, about half it looks like are -- you have got global rights to or at least European. Okay. Can you give us an update on the status of the lawsuit? Getting resolved?

Yes, as we have previously announced, we have signed settlement agreements in the class action and our litigation with Trident Capital. The settlements are both subject to court approval. At this particular time, we can't predict exactly what that date will be and the shares will be distributed to the settlement class if and when the court grants that approval to the settlement and the settlement becomes effective.

Do you have like a hearing date or something like that that's kind of sooner rather than later?

Not at this time.

Is that unusual that you wouldn't have kind of a date to finalize this?

Is it unusual?

Yes, it seems like you would want to get this done with so I'm just curious why there's not a hearing date or something, a motion date or whatever.

At this point there's a hearing date in process, but we haven't finalized that date.

Okay. So that's still up in the air, I guess. Channel inventories, so what's your -- what are your reserves right now against receivables and could you give us a sense of where channel inventories are relative to, say, 12 months ago?

Yes, from the point of view of our product actually the channel inventories are lower than they were in the past. All of our fourth quarter product actually did quite well. So the reserves now on a comparative basis are probably a little less than they were last year. Based on the sell through in the channel.

Okay. Nothing you could quantify for us, though?

No, but I would say that the inventories are significantly lower than they were last year.

Okay. Great. Thank you.

There are no more questions at this time. I would like to turn the conference back over to management for any additional remarks.

Thanks again for joining us today. We look forward to speaking to you again at our fourth quarter 2009 earnings call in March.

Thank you all very much for participating in the Majesco Entertainment Company's conference call. This concludes today's events. Thank you.