Exhibit 99.1
MAD CATZ® REPORTS FISCAL 2014 THIRD QUARTER FINANCIAL RESULTS
Net Sales of $32.9 Million; Diluted Net Loss per Share of $0.01
San Diego, CA – February 6, 2014 – Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2014 third quarter ended December 31, 2013.
Key Highlights of Fiscal 2014 Third Quarter and Subsequent:
• | Net sales in the quarter declined 27% to $32.9 million, with the Company’s European sales down 9% and sales to North America and APAC down 48% and 27%, respectively; |
• | Gross margin was 24.1%, compared to 28.7% in the third quarter last year; |
• | Total operating expenses decreased 20% year-over-year to $7.0 million; |
• | Diluted loss per share of ($0.01), compared to diluted earnings per share of $0.05 in the third quarter last year; |
• | Net position of bank loan, less cash, of $11.1 million at December 31, 2013, compared to $6.1 million at March 31, 2013 and $13.5 million at December 31, 2012; |
• | Announced the S.T.R.I.K.E.M Mobile Gaming Keyboard for mobile devices; |
• | Shipped the TRITTON™ Kunai™ Mobile Stereo Headset for handheld consoles, Windows® PC, Mac®, and smart devices; |
• | Shipped the M.O.J.O.™ Micro-Console™ for Android™; |
• | Announced the Saitek® X-55 RHINO® H.O.T.A.S. System for Windows® PC; |
• | Announced the R.A.T.TE (Tournament Edition) Gaming Mouse for Windows® PC and Mac®; |
• | Shipped the TRITTON Kama Stereo Headset for PlayStation® 4 and PlayStation® Vita; and |
• | Appointed John Nyholt and Scott Guthrie to the Board of Directors. |
Summary of Financials
(in US$ thousands, except margins and per-share data)
Three Months Ended December 31, | Change | Nine Months Ended December 31, | Change | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||
Net sales | $ | 32,889 | $ | 45,019 | (27 | )% | $ | 69,412 | $ | 98,056 | (29 | )% | ||||||||||||
Gross profit | 7,925 | 12,903 | (39 | )% | 18,060 | 28,165 | (36 | )% | ||||||||||||||||
Total operating expenses | 7,023 | 8,759 | (20 | )% | 22,893 | 25,201 | (9 | )% | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | 902 | 4,144 | (78 | )% | (4,833 | ) | 2,964 | (263 | )% | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net (loss) income | ($ | 566 | ) | $ | 3,127 | (118 | )% | ($ | 7,176 | ) | $ | 960 | (848 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net (loss) income per share, basic | ($ | 0.01 | ) | $ | 0.05 | (120 | )% | ($ | 0.11 | ) | $ | 0.02 | (650 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net (loss) income per share, diluted | ($ | 0.01 | ) | $ | 0.05 | (120 | )% | ($ | 0.11 | ) | $ | 0.01 | (1200 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Gross margin | 24.1 | % | 28.7 | % | (4.6 | )% | 26.0 | % | 28.7 | % | (2.7 | )% | ||||||||||||
EBITDA (loss)(1) | $ | 1,556 | $ | 5,202 | (70 | )% | ($ | 3,407 | ) | $ | 5,830 | (158 | )% | |||||||||||
Adjusted EBITDA (loss)(1) | $ | 1,333 | $ | 5,390 | (75 | )% | ($ | 2,797 | ) | $ | 7,056 | (140 | )% |
(1) | Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 7. |
Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “The 2013 holiday quarter was pivotal for the video games industry with the launch of Xbox One and PlayStation 4 marking the turning point in the console transition. Consistent with other industry participants, sales of our legacy console products declined at a faster-than-anticipated pace following the launch. However, we successfully reduced our inventory levels of legacy console products during the holiday selling season, and we believe demand will continue for these products.”
Mr. Richardson added, “Looking forward, we expect the console launches will provide strong new catalysts for the video game market and create what we believe is an attractive long-term opportunity for Mad Catz, particularly as consumers who upgraded to the new consoles begin to turn their focus to games and related accessories.”
Summary of Key Sales Metrics
Three Months Ended December 31, | Change | Nine Months Ended December 31, | Change | |||||||||||||||||||||
(in US$ thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||
Net Sales by Geography | ||||||||||||||||||||||||
Europe | $ | 20,983 | $ | 23,164 | (9 | )% | $ | 40,575 | $ | 47,930 | (15 | )% | ||||||||||||
North America | 9,877 | 19,060 | (48 | )% | 23,195 | 43,142 | (46 | )% | ||||||||||||||||
APAC | 2,029 | 2,795 | (27 | )% | 5,642 | 6,984 | (19 | )% | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total | $ | 32,889 | $ | 45,019 | (27 | )% | $ | 69,412 | $ | 98,056 | (29 | )% | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Sales by Platform as a % of Gross Sales | ||||||||||||||||||||||||
PC and Mac | 40 | % | 30 | % | 44 | % | 31 | % | ||||||||||||||||
Universal | 34 | % | 25 | % | 30 | % | 26 | % | ||||||||||||||||
Xbox 360 | 12 | % | 33 | % | 13 | % | 31 | % | ||||||||||||||||
Playstation 3 | 8 | % | 7 | % | 8 | % | 8 | % | ||||||||||||||||
All Others | 6 | % | 5 | % | 5 | % | 4 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Sales by Product Category as a % of Gross Sales | ||||||||||||||||||||||||
Audio | 51 | % | 54 | % | 46 | % | 48 | % | ||||||||||||||||
Mice and Keyboards | 25 | % | 19 | % | 29 | % | 20 | % | ||||||||||||||||
Specialty Controllers | 15 | % | 13 | % | 16 | % | 14 | % | ||||||||||||||||
Accessories | 5 | % | 7 | % | 6 | % | 8 | % | ||||||||||||||||
Controllers | 1 | % | 5 | % | 1 | % | 6 | % | ||||||||||||||||
Games and Other | 3 | % | 2 | % | 2 | % | 4 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Sales by Brand as a % of Gross Sales | ||||||||||||||||||||||||
Mad Catz | 42 | % | 41 | % | 45 | % | 45 | % | ||||||||||||||||
Tritton | 46 | % | 50 | % | 42 | % | 45 | % | ||||||||||||||||
Saitek | 11 | % | 8 | % | 12 | % | 8 | % | ||||||||||||||||
Other | 1 | % | 1 | % | 1 | % | 2 | % | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
Karen McGinnis, Chief Financial Officer of Mad Catz, commented, “We continued to see general weakness in our sales during the fiscal 2014 third quarter, as demand decreased ahead of the late November launch of new gaming consoles. Sales were down across all regions and categories, although declines in Europe were less than in North America and Asia-Pacific. Gross margin during the quarter decreased to 24% due primarily to a $1.5 million write-down of raw materials related to products for legacy gaming consoles, while operating expenses during the quarter decreased 20% from prior year. Overall, we knew this would be a challenging fiscal year due to the impact of the gaming console transition, yet we remained focused on effectively managing our overall liquidity position by reducing inventory levels and expenses, and managing our accounts receivable collection efforts. We are making progress and remain confident that our business strategy, product offerings and financial position will be able to deliver improved results on the back side of the console transition and continued growth of the mobile gaming market.”
Mr. Richardson added, “We have a robust product pipeline for Xbox One and PlayStation 4 users as well as a unique mobile gaming initiative in place in our GameSmart product line-up, led by our M.O.J.O. Micro-Console for Android. Mobile is an extremely exciting opportunity for Mad Catz, and we believe that creating an entire ecosystem of products for mobile gaming, as mobile devices and games continue to expand their support of controllers and accessories, will make Mad Catz a go-to provider of mobile products as gamers continue to add mobile to their device lineup.”
Mr. Richardson concluded, “Console transitions initially create a challenging environment for us but we believe that we are pursuing the correct strategy for the future. Our focus – and our goal – is to bring to market a compelling consumer offering on a global basis. We believe that Mad Catz can succeed if we build on our strengths to pursue targeted segments within the video game industry, and leverage our strong and deep distribution footprint to deliver products with the right design and features that are central to the passionate gamer’s experience.”
The Company will host a conference call and simultaneous webcast on February 6, 2014, at 5:00 p.m. ET, which can be accessed by dialing (212) 231-2915. 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 #21706431) or, for International callers, at (402) 977-9140.
About Mad Catz
Mad Catz Interactive, Inc. (“Mad Catz”) (NYSE MKT/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 atwww.madcatz.com.
Social Media
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 facility; 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.
Contact:
Karen McGinnis
Chief Financial Officer
Mad Catz Interactive, Inc.
kmcginnis@madcatz.com or (619) 683-9830
Joseph Jaffoni, Norberto Aja, Jim Leahy
JCIR
mcz@jcir.com or (212) 835-8500
- TABLES FOLLOW -
Consolidated Statements of Operations
(in thousands of U.S. dollars, except share and per share data)
(unaudited)
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | $ | 32,889 | $ | 45,019 | $ | 69,412 | $ | 98,056 | ||||||||
Cost of sales | 24,964 | 32,116 | 51,352 | 69,891 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 7,925 | 12,903 | 18,060 | 28,165 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 3,189 | 4,084 | 10,018 | 11,323 | ||||||||||||
General and administrative | 2,655 | 3,042 | 8,903 | 8,818 | ||||||||||||
Research and development | 1,062 | 1,080 | 3,240 | 3,318 | ||||||||||||
Acquisition related items | (53 | ) | 320 | 99 | 1,044 | |||||||||||
Amortization of intangibles | 170 | 233 | 633 | 698 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 7,023 | 8,759 | 22,893 | 25,201 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss) | 902 | 4,144 | (4,833 | ) | 2,964 | |||||||||||
Other (expense) income: | ||||||||||||||||
Interest expense, net | (223 | ) | (227 | ) | (476 | ) | (747 | ) | ||||||||
Foreign currency exchange (loss) gain, net | (292 | ) | 5 | (708 | ) | 11 | ||||||||||
Change in fair value of warrant liability | 324 | 273 | (10 | ) | 343 | |||||||||||
Other income | 4 | 31 | 101 | 108 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other (expense) income | (187 | ) | 82 | (1,093 | ) | (285 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) before income taxes | 715 | 4,226 | (5,926 | ) | 2,679 | |||||||||||
Income tax expense | (1,281 | ) | (1,099 | ) | (1,250 | ) | (1,719 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (loss) income | ($ | 566 | ) | $ | 3,127 | ($ | 7,176 | ) | $ | 960 | ||||||
|
|
|
|
|
|
|
| |||||||||
Net (loss) income per share: | ||||||||||||||||
Basic | ($ | 0.01 | ) | $ | 0.05 | ($ | 0.11 | ) | $ | 0.02 | ||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | ($ | 0.01 | ) | $ | 0.05 | ($ | 0.11 | ) | $ | 0.01 | ||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 63,931,506 | 63,477,399 | 63,700,413 | 63,469,217 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | 63,931,506 | 64,346,093 | 63,700,413 | 64,262,884 | ||||||||||||
|
|
|
|
|
|
|
|
Consolidated Balance Sheets
(in thousands of U.S. dollars)
(unaudited)
December 31, 2013 | March 31, 2013 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 3,540 | $ | 2,773 | ||||
Accounts receivable, net | 13,227 | 13,884 | ||||||
Other receivables | 2,637 | 1,374 | ||||||
Inventories | 20,604 | 23,795 | ||||||
Deferred tax assets | 239 | 257 | ||||||
Income tax receivable | — | 344 | ||||||
Prepaid expenses and other current assets | 2,608 | 2,711 | ||||||
|
|
|
| |||||
Total current assets | 42,855 | 45,138 | ||||||
Deferred tax assets | 379 | 370 | ||||||
Other assets | 436 | 359 | ||||||
Property and equipment, net | 2,728 | 2,977 | ||||||
Intangible assets, net | 3,131 | 3,679 | ||||||
|
|
|
| |||||
Total assets | $ | 49,529 | $ | 52,523 | ||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Bank loan | $ | 14,632 | $ | 8,888 | ||||
Accounts payable | 13,276 | 15,573 | ||||||
Accrued liabilities | 6,241 | 6,652 | ||||||
Contingent consideration | 1,158 | 1,650 | ||||||
Income taxes payable | 423 | 258 | ||||||
|
|
|
| |||||
Total current liabilities | 35,730 | 33,021 | ||||||
Contingent consideration | 1,155 | 2,214 | ||||||
Warrant liability | 159 | 149 | ||||||
Deferred tax liabilities | 155 | 152 | ||||||
Other long-term liabilities | 34 | 109 | ||||||
|
|
|
| |||||
Total liabilities | $ | 37,233 | $ | 35,645 | ||||
|
|
|
| |||||
Shareholders’ equity: | ||||||||
Common stock | 60,791 | 60,102 | ||||||
Accumulated other comprehensive loss | (1,796 | ) | (3,701 | ) | ||||
Accumulated deficit | (46,699 | ) | (39,523 | ) | ||||
|
|
|
| |||||
Total shareholders’ equity | 12,296 | 16,878 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 49,529 | $ | 52,523 | ||||
|
|
|
|
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
(unaudited)
Nine Months Ended December 31, | ||||||||
2013 | 2012 | |||||||
Operating activities: | ||||||||
Net (loss) income | ($ | 7,176 | ) | $ | 960 | |||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 2,017 | 2,304 | ||||||
Amortization of deferred financing fees | 26 | 100 | ||||||
Provision for deferred income taxes | 12 | 5 | ||||||
Loss on disposal or sale of assets | — | 7 | ||||||
Stock-based compensation | 501 | 525 | ||||||
Contingent consideration, net of payments | (764 | ) | 431 | |||||
Change in fair value of warrant liability | 10 | (343 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 789 | (13,182 | ) | |||||
Other receivables | (1,009 | ) | (672 | ) | ||||
Inventories | 3,833 | 4,436 | ||||||
Prepaid expenses and other current assets | 124 | (294 | ) | |||||
Other assets | (111 | ) | 320 | |||||
Accounts payable | (1,937 | ) | 6,382 | |||||
Accrued liabilities | (328 | ) | 927 | |||||
Income taxes receivable/payable | 612 | 720 | ||||||
|
|
|
| |||||
Net cash (used in) provided by operating activities | (3,401 | ) | 2,626 | |||||
|
|
|
| |||||
Investing activities: | ||||||||
Purchases of property and equipment | (994 | ) | (870 | ) | ||||
Purchases of intangible assets | (80 | ) | — | |||||
|
|
|
| |||||
Net cash used in investing activities | (1,074 | ) | (870 | ) | ||||
|
|
|
| |||||
Financing activities: | ||||||||
Borrowings on bank loan | 57,535 | 65,350 | ||||||
Repayments on bank loan | (51,791 | ) | (63,979 | ) | ||||
Payment of financing costs | (40 | ) | (100 | ) | ||||
Payment of contingent consideration | (787 | ) | (980 | ) | ||||
Proceeds from exercise of stock options | 188 | 7 | ||||||
|
|
|
| |||||
Net cash provided by financing activities | 5,105 | 298 | ||||||
|
|
|
| |||||
Effects of foreign currency exchange rate changes on cash | 137 | 3 | ||||||
|
|
|
| |||||
Net increase in cash | 767 | 2,057 | ||||||
Cash, beginning of period | 2,773 | 2,474 | ||||||
|
|
|
| |||||
Cash, end of period | $ | 3,540 | $ | 4,531 | ||||
|
|
|
|
Supplementary Data
EBITDA and Adjusted EBITDA Reconciliation (non-GAAP)
(in thousands of U.S. dollars)
(unaudited)
Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net (loss) income | ($ | 566 | ) | $ | 3,127 | ($ | 7,176 | ) | $ | 960 | ||||||
Interest expense, net | 223 | 227 | 476 | 747 | ||||||||||||
Income tax expense | 1,281 | 1,099 | 1,250 | 1,719 | ||||||||||||
Depreciation and amortization | 618 | 749 | 2,043 | 2,404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA (loss) | 1,556 | 5,202 | (3,407 | ) | 5,830 | |||||||||||
Stock-based compensation | 154 | 141 | 501 | 525 | ||||||||||||
Change in fair value of warrant liability | (324 | ) | (273 | ) | 10 | (343 | ) | |||||||||
Acquisition related items | (53 | ) | 320 | 99 | 1,044 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted EBITDA (loss) | $ | 1,333 | $ | 5,390 | ($ | 2,797 | ) | $ | 7,056 | |||||||
|
|
|
|
|
|
|
|
EBITDA, a non-GAAP financial measure, represents net (loss) income before interest, taxes, and depreciation and amortization. Beginning in the second quarter of fiscal 2014, we revised our calculation of Adjusted EBITDA to exclude 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. We believe that excluding these non-operating, non-cash items from EBITDA better reflects our underlying 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 in the United States. 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.