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Mad Catz(R) Reports Fiscal 2016 First Quarter Financial Results

20:00 EDT 12 Aug 2015 | Globe Newswire

SAN DIEGO, Aug. 13, 2015 (GLOBE NEWSWIRE) -- Mad Catz Interactive, Inc. ("Mad Catz" or the "Company") (NYSE MKT:MCZ) (TSX:MCZ), today announced financial results for the fiscal 2016 first quarter ended June 30, 2015.

Key Highlights of Fiscal 2016 First Quarter and Subsequent:

  • Fiscal 2016 first quarter net sales decreased 23% to $13.0 million, driven by a 33% decrease in net sales to EMEA, a 9% decrease in net sales to the Americas and a 19% decrease in net sales to APAC;
  • Gross margin declined to 22.2% from 30.2% in the prior year quarter;
  • Total operating expenses increased 7% from the prior year period to $6.6 million;
  • Operating loss was ($3.8 million), compared to an operating loss of ($1.1 million) in the prior year quarter;
  • Diluted loss per share was ($0.05) for the fiscal 2016 first quarter, compared to a diluted loss per share of ($0.02) last year;
  • Net position of bank loan, less cash, of $5.8 million at June 30, 2015, compared to $2.8 million at March 31, 2015 and $5.3 million at June 30, 2014;
  • Announced new financing facilities with New Star Business Credit and FGI to provide combined financing of up to $30.0 million, increasing to $45.0 million from September 30, 2015 to December 31, 2015;
  • Announced pre-order availability of Rock Band™ 4 Band-in-a Box™ Software Bundle and Wireless Fender™ Stratocaster™ Guitar Controller and Software Bundle at various global retailers;
  • Announced pre-order availability of R.A.T. PROX starting August 4, 2015; and,
  • Announced agreement with Cloud Imperium™ Games to create dedicated Saitek-branded Star Citizen™ gaming hardware.
 
Summary of Financials
(in thousands, except margins and per share data)
       
  Three Months  
  Ended June 30,  
  2015 2014 Change
       
Net sales $12,974 $16,747  (23%)
Gross profit 2,878 5,063  (43%)
Total operating expenses 6,640 6,194 7%
Operating loss (3,762) (1,131) 233%
Net loss (3,965) (1,245) 218%
Net loss per share, basic and diluted ($0.05) ($0.02) 150%
       
Gross margin 22.2% 30.2% (800) bps
       
Adjusted EBITDA (loss) (1) ($3,065) ($446) 587%

(1) Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 8.

"Two broad trends drove continued challenges in the first quarter of Fiscal 2016. First, consumers were largely focused on products for the next generation consoles as evidenced by our 83% sales growth for next generation products. This drove a sharp decline in the demand for legacy platform products and more than offset the next generation product growth. Second, demand in Europe has been very weak and competitors continue to be very promotional in an effort to drive sales," said Karen McGinnis, Chief Financial Officer of Mad Catz. "While total operating expenses grew by 7% on the back of increased spend around marketing and product development to support the upcoming Rock Band 4 launch and holiday season, our focus on and efforts to drive additional operational efficiencies across the business resulted in an 8% year-over-year decrease in G&A expenses. Additionally, we secured new and expanded financing that we believe will provide the financial capacity and flexibility we need to support our expected growth in the remainder of fiscal 2016."

 
Summary of Key Sales Metrics
  Three Months  
  Ended June 30,  
(in thousands) 2015 2014 Change
       
Net Sales by Geography      
EMEA $5,643 $8,373  (33%)
Americas 4,974 5,449  (9%)
APAC 2,357 2,925  (19%)
  $12,974 $16,747  (23%)
Sales by Platform as a % of Gross Sales      
PC and Mac 45% 47%  
Next gen consoles (a) 28% 12%  
Universal 15% 25%  
Smart devices 10% 8%  
Legacy consoles (b) 2% 7%  
All others 0% 1%  
  100% 100%  
Sales by Category as a % of Gross Sales      
Audio 38% 39%  
Specialty controllers 32% 22%  
Mice and keyboards 17% 26%  
Controllers 8% 7%  
Accessories 4% 5%  
Games and other 1% 1%  
  100% 100%  
Sales by Brand as a % of Gross Sales      
Tritton 34% 36%  
Mad Catz 34% 35%  
Saitek 24% 18%  
Other 8% 11%  
  100% 100%  
       
(a) Includes products developed for Xbox One, PlayStation 4 and Wii U. 
(b) Includes products developed for Xbox 360, PlayStation 3 and Wii. 

Darren Richardson, President and Chief Executive Officer of Mad Catz, commented, "We are very excited to launch Rock Band 4 in October through our partnership with Harmonix. Response to the new gameplay has been overwhelmingly positive and the game has received great critical reviews and won multiple awards. We have also seen strong consumer preorders and strong initial purchase orders from retailers. Factory production is now fully ramped up and we expect shipments to retailers to begin in September ahead of the October launch. In Fiscal 2016, we expect sales of Rock Band 4 products to contribute to significant sales growth, improved operating leverage, and increased cash flow."

"As we look ahead to the balance of Fiscal 2016 and beyond, we believe we have positioned Mad Catz to capitalize on the growth opportunities in front of us, including our initiatives around leveraging the extensive – and still expanding – next generation console installed base, the highly acclaimed and much anticipated release of Rock Band 4, the development of mobile gaming, and the ongoing appeal of PC gaming. We believe industry trends are healthy, we are executing on our plan to consistently strengthen our competitive advantages in the marketplace and remain confident that we have both the resources and know-how to drive long-term success."

The Company will host a conference call and simultaneous webcast on August 13, 2015, at 5:00 p.m. ET, which can be accessed by dialing (212) 231-2937. Following its completion, a replay of the call can be accessed for 30 days at the Company's Web site (www.madcatz.com, select "About Us/Investor Relations") or for seven days via telephone at (800) 633-8284 (reservation #21773461) or, for International callers, at (402) 977-9140.

About Mad Catz

Mad Catz Interactive, Inc. ("Mad Catz") (NYSE MKT:MCZ) (TSX:MCZ) is a global provider of innovative interactive entertainment products marketed under its Mad Catz® (gaming), Tritton® (audio), and Saitek® (simulation) brands. Mad Catz products cater to passionate gamers across multiple platforms including in-home gaming consoles, handheld gaming consoles, Windows® PC and Mac® computers, smart phones, tablets and other mobile devices. Mad Catz distributes its products through its online store as well as distribution via many leading retailers around the globe. Headquartered in San Diego, California, Mad Catz maintains offices in Europe and Asia. For additional information about Mad Catz and its products, please visit the Company's website at www.madcatz.com.

Social Media

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https://www.youtube.com/user/MadCatzCompany

Safe Harbor

Information in this press release that involves the Company's expectations business prospects, plans, intentions or strategies regarding its future are forward-looking statements that are not facts and that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate," "estimate," "expect," "project," "intend," "should," "plan," "goal," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. Among the factors that could cause the Company's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release are the following: the ability to maintain or renew the Company's licenses; competitive developments affecting the Company's current products; first-party price reductions; availability of capital under our credit facilities; commercial acceptance of new in-home gaming consoles; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; unanticipated product delays; or a downturn in the market or industry. A further list and description of these and other factors, risks, uncertainties and other matters can be found in the Company's most recent annual report, and any subsequent quarterly reports, filed with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators. The forward-looking statements in this release are based upon information available to the Company as of the date of this release, and the Company assumes no obligation to update any such forward-looking statements as a result of new information or future events or developments, except as may be require by applicable law. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of the Company and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

- TABLES FOLLOW -

 
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited) 
     
  Three Months
  Ended June 30,
  2015 2014
     
Net sales $12,974 $16,747
Cost of sales 10,096 11,684
Gross profit 2,878 5,063
Operating expenses:    
Sales and marketing 2,716 2,412
General and administrative 2,894 3,151
Research and development 921 522
Amortization of intangible assets 109 109
Total operating expenses 6,640 6,194
Operating loss (3,762) (1,131)
Other expense:    
Interest expense, net (257) (158)
Foreign currency exchange gain (loss), net 61 (35)
Change in fair value of warrant liabilities (46) (19)
Other income 12 81
Total other expense (230) (131)
Loss before income taxes (3,992) (1,262)
Income tax benefit  27 17
Net loss ($3,965) ($1,245)
Net loss per share:    
Basic  ($0.05) ($0.02)
Diluted  ($0.05) ($0.02)
Shares used in per share computations:    
Basic 73,469,571 64,081,689
Diluted  73,469,571 64,081,689
 
Consolidated Balance Sheets
(in thousands)
(Unaudited) 
     
  June 30, March 31,
  2015 2015
ASSETS    
Current assets:    
Cash $2,137 $5,142
Accounts receivable, net 6,180 7,823
Other receivables 688 560
Inventories 17,828 15,479
Deferred tax assets 2,245 2,245
Income taxes receivable 341 967
Prepaid expenses and other current assets 1,226 1,293
Total current assets 30,645 33,509
Deferred tax assets 7,641 7,605
Other assets 494 418
Property and equipment, net 3,420 3,376
Intangible assets, net 2,475 2,584
Total assets $44,675 $47,492
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities:    
Bank loan $7,916 $7,920
Accounts payable 16,686 16,404
Accrued liabilities 4,316 4,196
Notes payable 980 1,015
Income taxes payable 102 141
Total current liabilities 30,000 29,676
Notes payable, less current portion 102 36
Warrant liabilities 1,233 1,187
Deferred tax liabilities 43 43
Deferred rent 786 762
Total liabilities 32,164 31,704
     
Shareholders' equity:    
Common stock 63,266 63,128
Accumulated other comprehensive loss (4,573) (5,123)
Accumulated deficit (46,182) (42,217)
Total shareholders' equity 12,511 15,788
Total liabilities and shareholders' equity $44,675 $47,492
 
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited) 
     
  Three Months
  Ended June 30,
  2015 2014
Cash flows from operating activities:    
Net loss ($3,965) ($1,245)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization  486  501
Accrued and unpaid interest expense on note payable --  10
Amortization of deferred financing fees  127  15
Loss on disposal of assets  6 --
Stock-based compensation  138  123
Change in fair value of warrant liabilities  46  19
Benefit for deferred income taxes  (36)  (37)
Changes in operating assets and liabilities:    
Accounts receivable  1,797  629
Other receivables  (116)  134
Inventories  (2,129)  (493)
Prepaid expenses and other current assets  73  190
Other assets  51  162
Accounts payable  157  (96)
Accrued liabilities  272  (262)
Deferred rent  26 --
Income taxes receivable/payable  651  (227)
Net cash used in operating activities (2,416) (577)
Cash flows from investing activities:    
Purchases of property and equipment  (309)  (261)
Net cash used in investing activities (309) (261)
Cash flows from financing activities:    
Borrowings on bank loan  9,431  13,686
Repayments on bank loan  (9,435)  (11,535)
Payment of financing fees  (250)  (50)
Borrowings on notes payable 95 --
Repayments on notes payable  (79)  (375)
Proceeds from exercise of stock options --  66
Payment of expenses related to issuance of common stock  (102) --
Net cash (used in) provided by financing activities (340) 1,792
Effects of foreign currency exchange rate changes on cash 60 15
Net (decrease) increase in cash (3,005) 969
Cash, beginning of period 5,142 1,496
Cash, end of period $2,137 $2,465
 
Supplementary Data
Adjusted EBITDA (Loss) Reconciliation (non-GAAP)
(in thousands)
(Unaudited)
     
  Three Months
  Ended June 30,
  2015 2014
     
Net loss ($3,965) ($1,245)
Adjustments:    
Depreciation and amortization  486  516
Stock-based compensation  138  123
Change in fair value of warrant liabilities  46  19
Interest expense, net  257  158
Income tax benefit  (27)  (17)
Adjusted EBITDA (loss) ($3,065) ($446)

Adjusted EBITDA (loss), a non-GAAP financial measure, represents net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation, the gain/loss on the change in the fair value of the related warrant liability, goodwill impairment, if any, and acquisition related items. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net income (loss) as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. As defined, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe, however, that in addition to the performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Company's operating performance. We use Adjusted EBITDA as a measurement of operating performance in comparing our performance on a consistent basis over prior periods, as it removes from operating results the impact of our capital structure, including the interest expense resulting from our outstanding debt, and our asset base, including depreciation and amortization of our capital and intangible assets. In addition, Adjusted EBITDA is an important measure for our lender.

CONTACT: Karen McGinnis
         Chief Financial Officer
         Mad Catz Interactive, Inc.
         kmcginnis@madcatz.com or (858) 790-5040
         
         Joseph Jaffoni, Norberto Aja, Jim Leahy
         JCIR
         mcz@jcir.com or (212) 835-8500

Mad Catz Interactive, Inc. logo

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