Mad Catz Interactive, Inc. (AMEX/TSX: MCZ):
Conference Call:
Today, June 10th, 2010 at 5:00 p.m. ET
Dial-in numbers:
(212) 231-2910 (U.S. & International)
Webcast:
www.madcatz.com (Select
“Investors”)
Replay Information:
See text of the release
Mad Catz Interactive, Inc. (“Mad Catz” or “the Company”)
(AMEX/TSX: MCZ), a leading third-party interactive entertainment
accessory provider, today announced financial results for the
fiscal fourth quarter and year ended March 31, 2010.
For the fiscal year ended March 31, 2010, the Company generated
record net sales of $119.0 million, a 5.7% increase from $112.6
million in fiscal 2009. Gross profit for the fiscal year increased
13.7% to a record $36.4 million, from $32.0 million in the prior
fiscal year. Gross profit margin for fiscal 2010 was 30.6%,
compared to 28.4% in fiscal 2009. Total operating expenses in
fiscal 2010 declined 10.7% to $28.2 million, from $31.6 million –
exclusive of the $27.9 million goodwill impairment in the prior
fiscal year – and the Company recorded an operating profit of $8.2
million, compared to an operating loss of $27.5 million in fiscal
2009.
Reflecting tax expense of $1.5 million and $2.9 million in
fiscal 2010 and 2009, respectively, the Company recorded net income
of $4.5 million, matching a Company record $0.08 per diluted share,
in the fiscal year ended March 31, 2010, compared to a net loss of
$32.6 million, a loss of $0.59 per diluted share, inclusive of the
goodwill impairment, in the prior fiscal year.
Adjusted EBITDA, a non-GAAP measure (defined as earnings before
interest, taxes, depreciation and amortization and goodwill
impairment), was a record $11.9 million in fiscal 2010, an increase
of 165.6% from $4.5 million in fiscal 2009. Adjusted net income and
adjusted diluted earnings per share, which exclude the impact of
amortization of intangibles, stock-based compensation and goodwill
impairment (if any), were $6.7 million and $0.12, respectively, in
fiscal 2010 versus $1.0 million and $0.02, respectively, in fiscal
2009. A reconciliation of adjusted EBITDA, adjusted net income and
adjusted diluted earnings per share to the Company’s net income is
included in the financial tables accompanying this release.
For the fiscal fourth quarter ended March 31, 2010 Mad Catz
reported record net sales of $26.3 million, an increase of 15.4%
from $22.8 million in the fiscal 2009 fourth quarter. Gross profit
for the March 2010 quarter rose 27.7% to $7.1 million, from $5.5
million in the same quarter of the prior year. Gross profit margin
for the fiscal 2010 fourth quarter was 26.9%, compared with 24.3%
in the same quarter a year ago. Total operating expenses in the
fiscal 2010 fourth quarter rose 29.0% to $6.3 million and the
Company recorded operating income of $0.7 million, compared to $0.6
million in the comparable prior year period. Foreign exchange gain
for the fiscal 2010 fourth quarter was under $0.1 million, compared
to a foreign exchange loss of $1.4 million in the fiscal 2009
fourth quarter. Reflecting a tax benefit of $0.5 million, the
Company reported net income of $0.8 million for the quarter ended
March 31, 2010, or $0.02 per diluted share, compared to a net loss
of $3.7 million, or a loss of $0.07 per diluted share, in the
fourth quarter of the prior fiscal year, inclusive of income tax
expense of $2.5 million.
Adjusted EBITDA was $1.7 million in the fourth quarter of fiscal
2010, compared to an adjusted negative EBITDA of $0.3 million in
the fourth quarter of fiscal 2009. Adjusted net income and adjusted
diluted earnings per share were $0.8 million and $0.01,
respectively, in the fiscal fourth quarter of 2010 versus adjusted
net loss and adjusted diluted loss per share of $0.6 million and
$0.01, respectively, in the same prior year period.
Commenting on the results, Darren Richardson, President and
Chief Executive Officer of Mad Catz, said, “Our record sales and
profits in fiscal 2010 reflect the strategic and operational
initiatives we’ve undertaken over the past few years which we
believe position the Company for continued growth in the future.
The Company’s revenue growth in the face of challenging economic
and industry environments reflects continued progress in our
efforts to expand our offerings of premium and distinctive
interactive entertainment accessories at higher price points and
with strong margins. I am pleased to report that we have achieved
the goal we set at the beginning of the fiscal year, to reduce our
operating expenses by a minimum of ten percent, and we achieved
these efficiencies without impairing our ability to grow the
business. As we continue to maintain a disciplined approach to
managing our costs, we believe we can further demonstrate the
operating leverage inherent in our business model, and plan to grow
revenue at a higher rate than discretionary costs.
“We are also pleased with the improvement in Mad Catz’ fiscal
year-end balance sheet, reflecting our strong financial results and
operating discipline for the year, as we lowered our bank loan
balance net of cash by nearly 85%, and reduced inventories by
nearly 5%, compared to the respective balances at March 31,
2009.”
Summary of Fiscal 2010 and Fourth Quarter Key
Metrics:
- Full year fiscal 2010 net sales
increased 5.7% to $119.0 million, while fiscal fourth quarter sales
rose 15.4% to $26.3 million:
- North American net sales
decreased 1.0% to $66.3 million, and increased 4.6% to $15.3
million, in fiscal 2010 full-year and fourth quarter, respectively.
North American net sales represented 55.8% and 58.1% of full-year
and quarterly net sales, respectively;
- European net sales rose 18.2% to
$49.0 million, and 37.0% to $10.2 million, in fiscal 2010 and the
fiscal 2010 fourth quarter, respectively. European net sales
represented 41.1% and 38.8% of full-year and quarterly net sales,
respectively; and,
- Net sales to other countries
decreased 11.3% to $3.7 million, and increased 10.1% to $0.8
million, in fiscal 2010 and the fiscal 2010 fourth quarter,
respectively. Net sales to other countries represented 3.1% in both
the full-year and quarterly net sales, respectively.
- Gross sales by platform:
- Xbox 360™ products accounted for
31% and 32% of sales in the fiscal 2010 full-year and fourth
quarter versus 19% and 26% in the respective prior year
periods;
- PC products sales were 22% and
20% of sales in the fiscal 2010 full-year and fourth quarter versus
29% and 28% a year ago, respectively;
- PlayStation® 3 products sales
accounted for 17% and 18% of fiscal 2010 full-year and fourth
quarter sales versus 8% and 13% in the respective prior year
periods;
- Wii platform products
represented 13% and 16% of fiscal 2010 full-year and fourth quarter
sales versus 16% and 10% in the prior year periods,
respectively;
- Handheld platform products were
4% and 3% of sales in the fiscal 2010 full-year and fourth quarter
periods versus 10% and 7% in the prior year’s respective periods;
and,
- All other platforms accounted
for 13% and 11% of fiscal 2010 full-year and fourth quarter sales
versus 18% and 16% in the respective prior year periods.
- Gross sales by category:
- Controllers represented 28% of
sales in both the fiscal 2010 full-year and fourth quarter versus
23% and 21% in respective prior year periods;
- Specialty controllers accounted
for 24% and 21% of sales in the fiscal 2010 full-year and fourth
quarter versus 16% and 26% in the prior year periods,
respectively;
- Accessories sales were 24% and
23% of sales in the fiscal 2010 full-year and fourth quarter versus
46% and 28% in the prior year’s respective periods;
- Audio products accounted for 15%
and 20% of fiscal 2010 full-year and fourth quarter sales versus 7%
and 6% of sales in the prior year periods, respectively;
- PC input device sales were 8%
and 7% of sales in the fiscal 2010 full-year and fourth quarter
versus 6% and 11% in the respective prior year periods;
- Game sales accounted for 1% of
sales in the full-year and fourth quarter of both fiscal 2010 and
2009; and,
- All other sales were 0% in both
the fiscal 2010 full-year and fourth quarter versus 1% and 7% in
the respective prior year periods.
- Reported net position of bank
loan less cash at March 31, 2010 of $1.6 million compared to $17.4
million as of December 31, 2009 and $10.4 million at March 31,
2009.
- Reduced accrued interest and
notes payable related to the Saitek acquisition by $1.5 million
during the quarter ended March 31, 2010.
Highlights of New Products Shipped in the Fourth Quarter of
Fiscal 2010 and Subsequent to Fiscal Year-End:
Highlights of Recent/Upcoming Mad Catz Product
Launches:
- Cyborg R.A.T. 9 Gaming Mouse
(expected later this summer; $129.99 MSRP);
- Eclipse litetouch™ Keyboard
(expected later this summer; $99.99 MSRP); and,
- Cyborg R.A.T. 3 Gaming Mouse
(expected later this summer; $49.99 MSRP)
Summary of Other Key Developments in the Fourth Quarter of
Fiscal 2010 and Subsequent to Fiscal Year-End:
- Signed a multi-year licensing
agreement with Harmonix Music Systems, a wholly owned subsidiary of
Viacom, to serve as the principal peripherals partner for the Rock
Band franchise. The agreement gives Mad Catz the international
rights to produce and distribute Rock Band music videogame
controllers for future iterations of Rock Band;
- Acquired TRITTON Technologies, a
provider of gaming audio headsets, high-performance multimedia
consumer electronics and computer peripherals, for $1 million in
cash at closing and a maximum earn-out of $9 million in cash over
five years subject to the sales of TRITTON products. TRITTON’s core
products, its gaming headsets, operate on all major gaming
platforms and include a variety of unique features. TRITTON also
offers a line of distinctive USB video products;
- Signed an extension of the
license agreement with Activision whereby the Company will create
accessories related to the next iteration of the Call of Duty
videogame franchise, Call of Duty: Black Ops, scheduled to be
launched in November 2010; and,
- Signed a license agreement with
Major League Gaming (“MLG”) whereby the Company will work with MLG
professional gamers to create high-end controllers and fight
sticks.
Mr. Richardson concluded, “Our top priority in fiscal 2010 was
positioning Mad Catz to emerge from the severe economic downturn as
a far stronger Company, while continuing to invest in areas and
activities that position Mad Catz to drive top and bottom-line
growth in the quarters to come. Despite the many challenges we
faced during the year, we accomplished our primary goal and our
focus for fiscal 2011 is on achieving further top-line growth and
improved profitability even as our business continues to face the
challenges of the global economy – in particular, the impact of the
strength of the U.S. Dollar.
“Our strategy to drive continued profitable growth includes
continuing to increase the flow of premium products across our
major brands and maintaining our disciplined approach to working
capital management and product placement profitability. We also
intend to further solidify our brand strategy and connection to the
relevant consumers through a combination of distinctive product
offerings and enhanced community outreach. Under our Eclipse (home
and office products) and Cyborg (pro-gaming) brands, we are
beginning to ship the PC products we unveiled to great enthusiasm
at CES. Under our Mad Catz casual gaming brand, we will be the
official peripherals partner of Harmonix/MTV for the upcoming
launch of Rock Band 3 planned for October, and we have recently
extended our agreement with Activision for accessories relating to
the next release in their highly-successful Call of Duty franchise.
Under our Saitek (simulation) brand, we intend to launch a variety
of initiatives targeting the flight simulation gaming community.
Finally, our recent acquisition of TRITTON Technologies will help
us expand our presence in the gaming audio headset space, one of
the fastest-growing segments in the videogame industry. With these
and other new product offerings in combination with our
strengthened balance sheet, we are excited about our opportunities
in fiscal 2011.”
The Company will host a conference call and simultaneous webcast
on June 10, 2010, at 5:00 p.m. ET, which can be accessed by dialing
(212) 231-2910. Following its completion, a replay of the call can
be accessed for 30 days at the Company's Web site (www.madcatz.com,
select “Investors”) or for 7 days via telephone at (800) 633-8284
(reservation #21472953) or, for International callers, at (402)
977-9140.
About Mad Catz Interactive, Inc.
Mad Catz is a leading global provider of innovative products for
the interactive entertainment industry. Mad Catz develops and
markets accessories for videogame systems and PCs under its Mad
Catz (casual gaming), Saitek (simulation), Cyborg (pro gaming),
Eclipse (home and office) and TRITTON (gaming audio) brands. Mad
Catz also operates e-commerce and content websites for videogame
and PC products under its GameShark brand, develops, manufactures
and markets proprietary earphones under its AirDrives brand and
publishes and distributes video/PC games. Mad Catz distributes its
products through most of the leading retailers offering interactive
entertainment products and has offices in North America, Europe and
Asia. For additional information please go to www.madcatz.com as
well as www.store.gameshark.com, www.saitek.com,
www.cyborggaming.com, www.eclipsetouch.com,
www.trittontechnologies.com, www.gameshark.com and
www.airdrives.com.
Safe Harbor for Forward Looking Statements: This press release
contains forward-looking statements about the Company's business
prospects that involve substantial risks and uncertainties. The
Company assumes no obligation except as required by law to update
the forward-looking statements contained in this press release as a
result of new information or future events or developments. You can
identify these statements by the fact that they use 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 actual
results to differ materially are the following: the ability to
fulfill our filing our stated requirements with the Securities and
Exchange Commission and Ontario Securities Commission; the ability
to maintain or renew the Company's licenses; competitive
developments affecting the Company's current products; first party
price reductions; the ability to successfully market both new and
existing products domestically and internationally; difficulties or
delays in manufacturing; or a downturn in the market or industry. A
further list and description of these risks, uncertainties and
other matters can be found in the Company's reports filed with the
Securities and Exchange Commission and the Canadian Securities
Administrators.
- TABLES FOLLOW -
MAD CATZ INTERACTIVE,
INC.
Consolidated Statements of
Operations
(unaudited, in thousands of US$,
except share and per share data)
Three Months Ended
March 31,
Year Ended
March 31,
2010 2009 2010 2009
Net sales $ 26,268 $ 22,770 $ 119,012 $ 112,563 Cost
of sales
19,193
17,230 82,616
80,558 Gross profit 7,075 5,540 36,396
32,005 Operating expenses: Sales and marketing 2,706 2,428
11,452 13,216 General and administrative 2,811 2,361 12,343 14,968
Research and development 624 209 2,657 1,076 Goodwill Impairment -
(626 ) - 27,887 Amortization of intangibles
190
532 1,758
2,344 Total operating expenses
6,331 4,904 28,210 59,491
Operating income (loss)
744
636
8,186
(27,486
)
Interest expense, net (597 ) (579 ) (2,235 ) (2,094 ) Foreign
exchange gain (loss), net 40 (1,356 ) (270 ) (462 ) Other income
114 117
252 361
Income (loss) before income taxes 301 (1,182 ) 5,933 (29,681 )
Income tax (expense) benefit
537
(2,507
)
(1,470
)
(2,933
)
Net income (loss)
$
838
$
(3,689
)
$
4,463
$
(32,614
)
Net income (loss) per share: Basic $ 0.02 $ (0.07 ) $
0.08 $ (0.59 ) Diluted $ 0.02 $ (0.07 ) $ 0.08 $ (0.59 )
Weighted average number of common shares outstanding: Basic
55,098,549 55,098,549 55,098,549 55,088,960 Diluted
55,117,299 55,098,549
55,103,237 55,088,960
MAD CATZ INTERACTIVE,
INC.
Consolidated Balance Sheets
(unaudited in thousands of
US$)
March 31,
March 31, 2010 2009 Assets
Current assets: Cash $ 2,245 $ 2,890 Accounts receivable, net
14,620 15,524 Other receivables 123 471 Inventories 16,975 17,774
Deferred tax assets 17 19 Income tax receivables 21 759 Other
current assets 1,410 1,491 35,411 38,928 Deferred tax assets
766 484 Other assets 626 362 Property and equipment, net 3,452
2,242 Intangible assets, net 2,828 5,118 Goodwill 8,466 8,467 Total
assets $ 51,549 $ 55,601
Liabilities and Shareholders'
Equity Current liabilities: Bank loan $ 3,829 $ 13,272
Accounts payable and accrued liabilities 19,859 19,457 Note payable
- 847 Income taxes payable 1,670 655 25,358 34,231 Other long term
liabilities 357 453 Notes payable 14,500 14,500 Total
liabilities 40,215 49,184 Shareholders’ equity:
Common stock, no par value,
unlimited shares authorized; 55,098,549 shares issued and
outstanding at March 31, 2010 and March 31, 2009
48,865
48,255
Other comprehensive income (loss) (55 ) 101 Accumulated deficit
(37,476 ) (41,939 ) Total shareholders’ equity 11,334 6,417 Total
liabilities and shareholders’ equity $ 51,549
$ 55,601
Geographical Sales Data
The Company's net sales were
generated in the following geographic regions:
Three Months Ended
March 31,
Year Ended
March 31,
2010 2009 2010 2009 Net
sales United States $ 14,704 $ 13,963 $ 63,223 $ 65,003 Europe
10,194 7,441 49,005 41,442 Canada 554 625 3,109 1,974 Other
countries
816 741
3,675 4,144 $ 26,268
$ 22,770 $ 119,012 $ 112,563
MAD CATZ INTERACTIVE,
INC.
Supplementary Data
(unaudited, in thousands of
US$)
Adjusted Net Income
Reconciliation (non GAAP)
Three Months Ended Year Ended March
31, March 31, 2010 2009 2010
2009 Pre-tax income (loss) $301 $(1,182 )
$5,933 $(29,681 ) Amortization of intangible assets $337 $679
$2,345 $2,931 Goodwill impairment - $(626 ) -- $27,887 Stock-based
compensation cost $152 $144 $610 $481 Adjusted pre-tax income
(loss)* $790 $(985 ) $8,888 $1,618
Adjusted provision for income
taxes (at effective rate)*
($12 ) $(404 ) $2,213 $662 Adjusted net income (loss) * $802 $(581
) $6,675 $956
Adjusted diluted earnings (loss)
per share*
$0.01 $(0.01 ) $0.12 $0.02
*Adjusted net income and adjusted diluted earnings per share are
non-GAAP financial measures and are not intended to be considered
in isolation from, as a substitute for, or superior to, the
financial information prepared and presented in accordance with
GAAP, and may be different from non-GAAP financial measures used by
other companies. In addition, these non-GAAP measures have
limitations in that they do not reflect all of the amounts
associated with the Company's results of operations as determined
in accordance with GAAP. Mad Catz believes that certain non-GAAP
financial measures, when taken together with the corresponding GAAP
financial measures, provide meaningful supplemental information
regarding the Company's performance by excluding certain items that
may not be indicative of the Company's core business, operating
results or future outlook. Mad Catz’ management uses, and believes
that investors benefit from referring to, these non-GAAP financial
measures in assessing the Company’s operating results, as well as
when planning, forecasting and analyzing future periods. These
non-GAAP measures, specifically those that adjust for stock-based
compensation, amortization of intangibles and goodwill impairment,
also facilitate comparisons of the Company’s performance to prior
periods.
**For the three and twelve month periods ended March 31, 2009,
the effective tax rate was determined by adding back the goodwill
impairment charge to the adjusted pre-tax income and excluding the
valuation allowance on US deferred tax assets.
EBITDA and Adjusted EBITDA Reconciliation (non GAAP)
Adjusted EBITDA represents net income plus interest, taxes,
depreciation, amortization and goodwill impairment.
Three Months Ended
March 31,
Year Ended
March 31,
2010 2009 2010 2009
Net income (loss) $ 838 $ (3,689 ) $ 4,463 $ (32,614 )
Adjustments: Interest expense 597 579 2,235 2,094 Income tax
expense (benefit) (537 ) 2,507 1,470 2,933 Depreciation and
amortization 762 950 3,766 4,193 EBITDA $ 1,660 $ 345 $ 11,934 $
(23,394 ) Goodwill impairment - (626 ) - 27,887 Adjusted
EBITDA $ 1,660 $ (281 ) $ 11,934
$ 4,493
EBITDA, a non-GAAP financial measure, represents net income
before interest, taxes, depreciation and amortization. Prior to the
third quarter of fiscal 2009, we had not recorded any goodwill
impairment charges. To address the goodwill impairment charge
recorded in fiscal 2009, we modified the calculation to exclude
this non-operating, non-cash charge and defined the result as
“Adjusted EBITDA”. We believe this to be a more meaningful
measurement of performance than the previously calculated EBITDA.
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 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 generally accepted
accounting principles. 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. Our management uses 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. We note that other companies may
calculate adjusted EBITDA differently which may effect the
comparability of this number to that of other companies.
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