Exhibit 99.1
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Conference Call: | | Today, August 10, 2006 at 11:00 a.m. EDT |
Dial-in numbers: | | 888/214-7562 (US and CAN) or 415/537-1905 (International) |
Webcast: | | www.madcatz.com (Select “Investors”) |
Replay Information: | | See release text |
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News Announcement | | For Immediate Release |
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Contact: | | |
Cy Talbot | | Joseph Jaffoni, David Jacoby |
Mad Catz Interactive, Inc. | | Jaffoni & Collins Incorporated |
619/683-9830 | | 212/835-8500 ormcz@jcir.com |
MAD CATZ REPORTS FISCAL 2007 FIRST QUARTER RESULTS
- Net Sales Rise 22.6% and Gross Margin Improves to 20.7% -
San Diego, California, August 10, 2006 — Mad Catz Interactive, Inc. (“Mad Catz”) (AMEX/TSX: MCZ), a leading worldwide third party video game accessory provider, today announced financial results for the three-month period ended June 30, 2006, the Company’s fiscal 2007 first quarter.
Net sales for the quarter ended June 30, 2006 were $18.1 million, a 22.6% increase from $14.8 million in the prior year first quarter. Gross profit for the quarter increased 61.7% to $3.7 million from $2.3 million in the first quarter of fiscal year 2006. Gross profit margin for the fiscal 2007 first quarter was 20.7% compared with 15.7% in the first quarter of fiscal 2006. Net loss for the quarter ended June 30, 2006 was $0.9 million or $0.02 per basic and diluted share compared to a net loss of $2.1 million or $0.04 per basic and diluted share for the first quarter of fiscal 2006. EBITDA, a non-GAAP measure (defined as earnings before interest, taxes, depreciation and amortization), was negative $0.4 million in the fiscal 2007 first quarter compared to negative EBITDA of $2.3 million in the first quarter of fiscal 2006. A reconciliation of EBITDA to the Company’s net loss on a U.S. GAAP basis is included in the financial tables accompanying this release.
Sales and marketing expenses in the fiscal 2007 first quarter were $2.5 million, or 14% of net sales, compared with $2.5 million, or 17% of net sales, in the prior year. For the quarter ended June 30, 2006, general and administrative expenses were $1.9 million, a 16% increase from $1.7 million in the prior year period. Research and development expenses decreased to $0.2 million during the first quarter of fiscal 2007 compared with $0.5 million in the same quarter of fiscal 2006. The loss before income taxes for the quarter ended June 30, 2006 was $1.2 million, as compared to the loss before income taxes of $3.1 million in the prior year first quarter.
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| Mad Catz Interactive, 8/10/06 | | page 2 |
Fiscal 2007 First Quarter Highlights:
| | • | | Achieved highest level of first quarter net sales in Company history despite console transition and seasonality |
| | • | | Strong North American sales growth driven byReal World Golf distribution |
| | • | | U.S. sales increased 29% |
| | • | | Canadian sales rose 89% |
| | • | | Launched full range of accessories for Nintendo’s DS Lite in June |
| | • | | Total operating expenses declined to 27.0% of net sales in the first quarter of fiscal 2007 from 32.5% in prior year period |
| | • | | Added three new members to the Board of Directors |
| | • | | Accomplished executives with a diverse range of relevant experience |
Commenting on the results, Darren Richardson, Mad Catz’ President and CEO, stated, “Mad Catz achieved record first quarter net revenues despite the industry challenges presented by the ongoing console transition and the fact that the fiscal first quarter is historically our slowest period of the year. Our ability to overcome these industry and seasonality factors is a direct result of our initiatives to diversify our revenue sources as evidenced by the success this quarter ofReal World Golf which drove an increase in net sales and gross profit, and offset continuing softness in our core accessory business.
“In addition to generating revenue growth and diversification through our strategy of offering select game software, we also succeeded in reducing operating expenses as a percentage of net sales from year ago levels. Sales and marketing expenses rose slightly over last year’s first quarter reflecting the promotion ofReal World Golf, which more than offset lower trade show costs and reduced staffing costs. General and administrative costs rose primarily due to legal expenses incurred related to litigation that went to trial in June where Mad Catz prevailed on all claims where the jury rendered a verdict. Research and development spending declined from last year’s levels that included higher software development costs. While we presently have limited visibility in terms of products and accessories that we’ll bring to market for the soon-to-be-released Sony PlayStation 3™ and Nintendo Wii™ platforms, we plan to increase investment in R&D in coming quarters for new console development.
“In addition to our ongoing focus on product innovation and revenue diversification, during the fiscal 2007 first quarter we made additional progress in managing the balance sheet. On a quarterly sequential basis, inventories were reduced by an additional $4.2 million, or 23%, and inventories at June 30, 2006 were 44% below year-ago levels. Bank borrowings also fell significantly from year-ago levels as we ended the fiscal 2007 first quarter with $12.8 million outstanding on our credit facility compared with $16.6 million at the same time last year. These reductions go hand in hand as we have more closely aligned our inventory levels with expected customer sales.”
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| Mad Catz Interactive, 8/10/06 | | page 3 |
Mr. Richardson concluded, “We are excited about the prospects of launching Real World Golf 2 for PlayStation 2 in Europe later this month. Concurrently, Mad Catz continues to deploy its strategies to offset the impact of the transition, including expanding our international operations, adding new revenue streams and licensed and branded accessories, publishing additional software titles and developing products for new consoles that do not require first party licenses.”
The Company will host a conference call and simultaneous webcast today August 10, 2006, at 11:00 a.m. EDT. Following its completion, a replay of the call can be accessed for 30 days on the Internet from the Company’s Web site (www.madcatz.com, select “Investors”) or until August 14 at 1:00 p.m. EDT via telephone at 800/633-8284 or, for International callers, at 402/977-9140 (reservation # 21300364).
About Mad Catz
Mad Catz is a worldwide leader of innovative peripherals in the interactive entertainment industry. Mad Catz designs and markets a full range of accessories for video game systems and publishes video game software, including the industry leading GameShark brand of video game enhancements. Mad Catz has distribution through most leading retailers offering interactive entertainment products. Mad Catz has its operating headquarters in San Diego, California and offices in Canada, Europe and Asia. For additional information go towww.madcatz.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,” “confident” 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 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; delays in the Company’s ability to obtain products from its manufacturers in China; market and general economic conditions. 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–
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| Mad Catz Interactive, 8/10/06 | | page 4 |
MAD CATZ INTERACTIVE, INC.
Consolidated Statements of Operations
(in thousands of U.S. dollars, except per share data)
(unaudited)
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| | | Three Months Ended June 30 | |
| | | 2006 | | | 2005 | |
Net sales | | $ | 18,141 | | | $ | 14,792 | |
Cost of sales | | | 14,393 | | | | 12,474 | |
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Gross profit | | | 3,748 | | | | 2,318 | |
Operating expenses: | | | | | | | | |
Sales and marketing | | | 2,544 | | | | 2,469 | |
General and administration | | | 1,940 | | | | 1,666 | |
Research and development | | | 219 | | | | 478 | |
Amortization of intangible assets | | | 201 | | | | 201 | |
| | | | | | | | |
Total operating expenses | | | 4,904 | | | | 4,814 | |
Operating income (loss) | | | (1,156 | ) | | | (2,496 | ) |
Interest expense, net | | | (273 | ) | | | (326 | ) |
Foreign exchange gain (loss) | | | 162 | | | | (360 | ) |
Other income | | | 57 | | | | 114 | |
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Loss before income taxes | | | (1,210 | ) | | | (3,068 | ) |
Income tax (benefit) | | | (334 | ) | | | (956 | ) |
| | | | | | | | |
Net loss | | $ | (876 | ) | | $ | (2,112 | ) |
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Basic and diluted net loss per share | | $ | (0.02 | ) | | $ | (0.04 | ) |
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Shares used in calculating basic and diluted net loss per share | | | 54,244,383 | | | | 54,244,383 | |
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–tables follow–
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| Mad Catz Interactive, 8/10/06 | | page 5 |
MAD CATZ INTERACTIVE, INC.
Consolidated Balance Sheets
(in thousands of U.S. dollars)
| | | | | | | | |
| | | June 30, | | | March 31,
2006 | |
| | | 2006 (unaudited) | | |
| Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash | | $ | 1,721 | | | $ | 1,607 | |
Accounts receivable, net of allowances of $4,975 and $5,198 at June 30, 2006 and March 31, 2006, respectively | | | 13,000 | | | | 12,024 | |
Other receivables | | | — | | | | 429 | |
Inventories | | | 14,203 | | | | 18,390 | |
Income taxes receivables | | | 1,781 | | | | 1,275 | |
Deferred tax assets | | | 2,586 | | | | 2,586 | |
Other current assets | | | 1,279 | | | | 1,661 | |
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Total current assets | | | 34,570 | | | | 37,972 | |
Deferred tax assets | | | 3,339 | | | | 3,339 | |
Property and equipment, net | | | 2,172 | | | | 2,427 | |
Intangible assets, net | | | 2,433 | | | | 2,634 | |
Goodwill | | | 23,312 | | | | 22,363 | |
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Total assets | | $ | 65,826 | | | $ | 68,735 | |
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| Liabilities and Shareholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Bank loan | | $ | 12,811 | | | $ | 8,581 | |
Accounts payable | | | 12,204 | | | | 19,502 | |
Accrued liabilities | | | 3,613 | | | | 3,800 | |
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Total current liabilities | | | 28,628 | | | | 31,883 | |
Shareholders’ equity: | | | | | | | | |
Common stock, no par value, unlimited shares authorized; 54,244,383 shares issued and outstanding at June 30, 2006 and March 31, 2006 | | | 46,746 | | | | 46,746 | |
Accumulated other comprehensive income | | | 8,338 | | | | 7,116 | |
Accumulated deficit | | | (17,886 | ) | | | (17,010 | ) |
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Total shareholders’ equity | | | 37,198 | | | | 36,852 | |
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Total liabilities and shareholders’ equity | | $ | 65,826 | | | $ | 68,735 | |
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–tables follow–
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| Mad Catz Interactive, 8/10/06 | | page 6 |
MAD CATZ INTERACTIVE, INC.
Supplementary Data
(unaudited)
(in thousands of U.S. dollars)
Geographical Sales Data
The Company’s net sales are attributable to the following countries:
| | | | | | |
| | | Three Months Ended June 30, |
| | | 2006 | | 2005 |
Sales | | | | | | |
United States | | $ | 13,689 | | $ | 10,646 |
Europe | | | 2,462 | | | 3,118 |
Canada | | | 1,881 | | | 996 |
Other countries | | | 109 | | | 32 |
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| | $ | 18,141 | | $ | 14,792 |
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EBITDA Reconciliation
EBITDA represents net loss plus interest, taxes, depreciation and amortization.
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| | | Three Months Ended June 30, | |
| | | 2006 | | | 2005 | |
Net loss | | $ | (876 | ) | | $ | (2,112 | ) |
Adjustments: | | | | | | | | |
Interest expense | | | 273 | | | | 326 | |
Income tax (benefit) | | | (334 | ) | | | (956 | ) |
Depreciation and amortization | | | 511 | | | | 453 | |
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EBITDA | | $ | (426 | ) | | $ | (2,289 | ) |
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EBITDA represents net income (loss) plus interest, taxes, depreciation and amortization. EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating income 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 accounting principles generally accepted in the United States. As defined, 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, EBITDA is a useful financial performance measurement for assessing our Company’s operating performance. Our management uses 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 some of our assets.
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