Mad Catz Fiscal Q1 2011, $19.9M

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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 its first fiscal quarter ended June 30, 2010.

Mad Catz reported net sales for the quarter ended June 30, 2010 of $19.9 million, a decrease of 11.0% from the $22.4 million in net sales recorded in the comparable prior year quarter. The net sales decline is primarily due to lower sales of Street Fighter IV ™ products, which were initially released during the fiscal fourth quarter of 2009 and had high sales in the fiscal first quarter of 2010. Also contributing to the decline were lower sales of products for the PC and handheld platforms. These factors were partially offset by higher audio product sales related to one month of contribution from TRITTON Technologies, which the Company acquired on May 28 of this year, and the success of sales of third party products on a distribution basis. While gross profit fell 6.5% to $5.9 million from $6.4 million in the same quarter of the prior year, product mix helped drive a 143 basis point year-over-year improvement in gross profit margin to 29.9%. This gross profit margin improvement was achieved despite a negative impact of approximately 160 basis points related to foreign currency translation.

Total operating expenses in the fiscal 2011 first quarter rose 5.7% to $6.8 million and the Company reported an operating loss of $0.8 million compared to an operating loss of just under $0.1 million a year ago. Foreign exchange loss for the first quarter of fiscal 2011 totaled $0.2 million, compared to a foreign exchange loss of $0.3 million for the comparable prior year quarter. Reflecting an income tax benefit of $0.1 million, Mad Catz reported a net loss of $1.4 million in the quarter ended June 30, 2010, or a loss per diluted share of $0.02, compared to a net loss of $1.0 million, or a loss of $0.02 per diluted share, after income tax expense of $0.2 million in the first quarter of the prior fiscal year.

EBITDA (a non-GAAP measure defined as earnings before interest, taxes, depreciation and amortization), fell to a loss of $0.3 million in the fiscal 2011 first quarter, compared with EBITDA of $0.7 million in the comparable prior year period.

Commenting on the Company’s results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “A tough comparison with last year’s Street Fighter IV product success and the timing of the new product releases in this year’s fiscal first quarter led to lower net sales relative to the near-record level of a year-ago. However, we continue to believe we can achieve or exceed our previously-stated goal of high single-digit percent year-over-year organic revenue growth in fiscal 2011. We remain focused on diversifying our product offerings, continuing to expand our growth outside of North America, aligning the Company with some of the industry’s most popular and anticipated game titles, and bringing high-value products to market that enhance the gaming experience. We believe the success of this strategy will be evident in the coming quarters, as it was in fiscal 2010.

First Quarter Fiscal 2011 Financial Highlights:

  • Net sales for the first quarter of fiscal 2011 declined 11.0% from the prior year quarter:
    • North American net sales fell 25.3% to $10.8 million or 54.2% of quarterly sales;
    • European net sales rose 14.9% to $8.3 million or 41.9% of quarterly sales; and,
    • Net sales to other countries were up 17.7% to $0.8 million or 3.8% of quarterly sales.
  • Gross sales by platform were diversified as follows:
    • Xbox 360 accounted for 31% of total gross sales vs. 32% a year ago;
    • PLAYSTATION 3 accounted for 24% of total gross sales vs. 19% in the prior year;
    • PC represented 17% of total gross sales vs. 22% a year ago;
    • Wii products represented 10% of total gross sales vs. 8% in the prior year quarter;
    • Handhelds represented 3% of total gross sales vs. 7% a year ago; and,
    • All other platforms represented 15% of total gross sales vs. 12% in the prior year quarter.
  • Gross sales by category were as follows:
    • Audio products accounted for 33% of total gross sales vs. 10% in the prior year quarter;
    • Specialty controllers represented 22% of total gross sales vs. 40% a year ago;
    • Controllers accounted for 22% of total gross sales vs. 16% in the prior year quarter;
    • Accessories represented 16% of total gross sales vs. 24% a year ago;
    • PC devices accounted for 6% of total gross sales vs. 8% in the prior year quarter; and,
    • Game sales represented 1% of total gross sales vs. 2% a year ago.
  • Reported net position of bank loan less cash at June 30, 2010 of $10.6 million compared to $1.6 million as of March 31, 2010 and $9.4 million at June 30, 2009.

Highlights of New Products Shipped in and Subsequent to First Quarter of Fiscal 2011:

  • Cyborg R.A.T. 7 Gaming Mouse;
  • Cyborg R.A.T. 5 Gaming Mouse;
  • Eclipse Wireless litetouch Keyboard;
  • Eclipse litetouch Keyboard;
  • Sonic the Hedgehog products for Nintendo DSi and DS Lite; and,
  • Licensed Nintendo DSi products.

Summary of Key Developments and License Agreements in First Quarter of Fiscal 2011:

  • Acquired TRITTON Technologies, a provider of gaming audio headsets, high-performance multimedia consumer electronics and computer peripherals, for $1.4 million in cash at closing and a maximum earn-out of $8.7 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;
  • 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;
  • Signed extension of video/PC game accessories agreement with Activision Publishing to produce and globally distribute branded controllers and accessories for the expected November 2010 launch of Call of Duty: Black Ops;
  • Multi-year, global agreement with Major League Gaming (MLG) that gives the Company a license to develop MLG-branded PC and videogame controllers and fight sticks. Mad Catz also becomes a sponsor of MLG Pro Circuit Competitions; and,
  • Won the Peripherals & Accessories Brand of the Year award at the 2010 MCV Industry Excellence Awards in London, England
In : PC

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