Thursday, November 7th 2013

Mad Catz Reports Fiscal 2014 Second Quarter Financial Results

Mad Catz Interactive, Inc., today announced financial results for the fiscal 2014 second quarter ended September 30, 2013. Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, "Our fiscal 2014 second quarter results were significantly impacted by the ongoing console transition around the upcoming launch of the Xbox One and PlayStation 4 gaming consoles. Sales were generally down across the board during the quarter, with Saitek-branded PC and Mac products being the one of our three brands showing a gain over the prior year. Our Tritton headset business was impacted by a significant shift towards lower price point products, while sales of our legacy controller products and non-recurring games, specifically Damage Inc., also contributed to the decline in net sales."
"The video game industry and Mad Catz are in front of a major milestone as the 2013 holiday season approaches and I am confident that our newest products position us to benefit from this inflection point as the console transition and rapidly growing appeal of mobile gaming gain traction. We are excited by the opportunities the Xbox One and PlayStation 4 consoles will bring and believe our products will make a positive contribution to sales as the new consoles roll out creating a spur in sales of products for both legacy and new consoles. In addition, we believe our GameSmart initiative, including our M.O.J.O. micro console for Android, will position us for the emergence of a new industry segment for mobile products."

Mr. Richardson concluded, "The recent announcements from Apple and Google introducing support for gaming peripherals establishes the infrastructure to support a core gaming experience on mobile. As game developers begin to take advantage of the full potential of the new operating systems, our GameSmart initiative will be well positioned to fully leverage this emerging opportunity with its one-of-a kind ecosystem of gaming accessories."

Karen McGinnis, Chief Financial Officer of Mad Catz, added, "Fiscal 2014 second quarter net sales were affected by general weakness around the globe. On a category basis, sales of our mice and keyboards were essentially flat with the prior year quarter driven by better-than-expected gaming keyboard sales which offset weaker sales of gaming mice. Sales of our Saitek-branded products were up slightly over the prior year while our Tritton and Mad Catz-branded audio products were significantly affected by the console transition and a consumer shift towards lower price point headsets. Due to our second quarter financial results, we were in violation of the fixed charge covenant ratio in our Credit Facility as of September 30, 2013. However, we were successful in obtaining a waiver and entered into an amendment of the Credit Facility. The amendment removed the quarterly fixed charge coverage ratio requirement through March 31, 2014, established new monthly financial covenants through May 31, 2014, increased the interest rate, and lowered the inventory sublimit and overall availability on the line of credit."

Key Fiscal 2014 Second Quarter Highlights:
  • Net sales in the quarter declined 43% to $17.8 million, as the Company's sales to North America declined 51% and sales to Europe and APAC each declined 37%;
  • Gross margin was 26.7%, compared to 28.8% in the second quarter last year;
  • Total operating expenses decreased slightly year-over-year to $8.4 million;
  • Diluted loss per share of $0.07 compared to diluted loss per share of $0.01 in the second quarter last year;
  • Net position of bank loan, less cash, was $11.4 million at September 30, 2013, compared to $6.1 million at March 31, 2013 and $19.3 million at September 30, 2012;
  • Shipped the TRITTON Pro+ True 5.1 Surround Sound Headset for Windows PC and Mac;
  • Shipped the S.T.R.I.K.E.3 Professional Gaming Keyboard for Windows PC;
  • Announced the Force Feedback Racing Wheel for Xbox One;
  • Entered into an agreement with Electronics Arts to create a range of Titanfall-branded gaming products around the Company's TRITTON gaming headsets, R.A.T. mice, S.T.R.I.K.E. keyboards, F.R.E.Q. gaming headsets and G.L.I.D.E. gaming surfaces; and
  • Began taking pre-orders for the Mad Catz M.O.J.O. Android Micro Console, which is expected to begin shipping in limited quantities on December 10, 2013.
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