Mad Catz(R) Reports Fiscal 2016 Second Quarter Financial Results

SAN DIEGO, Nov. 5, 2015 (GLOBE NEWSWIRE) — Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT:MCZ) (TSX:MCZ), today announced financial results for the fiscal 2016 second quarter ended September 30, 2015.

Key Highlights of Fiscal 2016 Second Quarter and Subsequent:

  • Fiscal 2016 second quarter net sales increased 73% to $38.9 million, the highest second quarter net sales in the Company’s history;
  • Net sales growth driven by a 272% increase in net sales to the Americas, partially offset by an 11% decrease in net sales to EMEA and a 48% decrease in net sales to APAC;
  • Gross margin declined to 23.1% from 30.0% in the prior year quarter;
  • Total operating expenses increased 14% from the prior year period to $8.1 million;
  • Operating income was $0.9 million compared to an operating loss of $0.4 million in the prior year quarter;
  • Diluted loss per share was ($0.02) for the fiscal 2016 second quarter, compared to a diluted loss per share of ($0.01) last year;
  • Net position of bank loans, less cash, of $12.7 million at September 30, 2015, compared to $5.8 million at June 30, 2015 and $8.9 million at September 30, 2014;
  • Shipped Rock Band™ 4 Band-in-a Box™ Software Bundle, Wireless Fender™ Stratocaster™ Guitar Controller and Software Bundle, and stand-alone software for Xbox One and PlayStation™ 4 to retailers ahead of the October 6th launch date for Rock Band 4;
  • Announced F.R.E.Q.TE™ 7.1 surround sound gaming headset for Windows PC;
  • Announced pre-order availability of the first Street Fighter™ V licensed fightstick starting October 26, 2015;
  • Shipped R.A.T. PROX™ high-performance gaming mouse, a 2015 CES Innovation Award Honoree;
  • Shipped R.A.T. PROS™ tournament-grade gaming mouse; and,
  • Established an “At-the-Market” (“ATM”) equity offering program through which the Company may sell from time to time up to an aggregate of $25.0 million of our common stock.
Summary of Financials
(in thousands, except margins and per share data)
Three Months
Ended September 30,
Six Months
Ended September 30,
Net sales$38,918$22,46773%$51,892$39,21432%
Gross profit9,0066,73134%11,88411,7941%
Total operating expenses8,1477,15514%14,78713,34911%
Operating income (loss)859(424)(303%)(2,903)(1,555)87%
Net loss(1,611)(922)75%(5,576)(2,167)157%
Net loss per share, basic and diluted($0.02)($0.01)100%($0.08)($0.03)167%
Gross margin23.1%30.0%(690) bps22.9%30.1%(720) bps
Adjusted EBITDA (loss) (1)$1,391($111)(1,353%)($1,674)($557)201%
(1) Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 8.

Commenting on the Company’s fiscal 2016 second quarter results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “We are very pleased to announce record second quarter sales driven by the successful launch of Rock Band 4. As expected, we started shipping product to retailers at the end of September, ahead of the October 6th launch date, and we expect Rock Band 4 to contribute to significant sales growth, improved operating leverage, and increased cash flow in Fiscal 2016.”

Summary of Key Sales Metrics
Three Months
Ended September 30,
Six Months
Ended September 30,
(in thousands)20152014Change20152014Change
Net Sales by Geography
Sales by Platform as a % of Gross Sales
Next gen consoles (a)73%21%61%17%
PC and Mac17%43%25%45%
Smart devices3%11%5%10%
Legacy consoles (b)1%5%1%6%
Sales by Category as a % of Gross Sales
Specialty controllers69%25%59%24%
Mice and keyboards7%22%10%23%
Games and other5%1%4%1%
Sales by Brand as a % of Gross Sales
Mad Catz75%34%64%34%
(a) Includes products developed for Xbox One, PlayStation 4 and Wii U.
(b) Includes products developed for Xbox 360, PlayStation 3 and Wii.

Karen McGinnis, Chief Financial Officer of Mad Catz, commented, “We are pleased with our return to top-line growth for the quarter and year-to-date and remain confident that our business strategy, product offerings and financial position will help us return to sales growth and profitability in fiscal 2016. We remain focused on effectively managing our inventory, expenses and accounts receivable while positioning the Company to benefit from the upcoming holiday season.”

The Company will host a conference call and simultaneous webcast on November 5, 2015, at 5:00 p.m. ET, which can be accessed by dialing (303) 223-4376. Following its completion, a replay of the call can be accessed for 30 days at the Company’s Web site (, select “About Us/Investor Relations”) or via telephone at (800) 633-8284 (reservation #21783853) or, for International callers, at (402) 977-9140.

About Mad Catz

Mad Catz Interactive, Inc. (“Mad Catz”) (NYSE MKT:MCZ) (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 at

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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 facilities; 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.

Consolidated Statements of Operations
(in thousands, except share and per share data)
Three Months
Ended September 30,
Six Months
Ended September 30,
Net sales$38,918$22,467$51,892$39,214
Cost of sales29,91215,73640,00827,420
Gross profit9,0066,73111,88411,794
Operating expenses:
Sales and marketing4,4573,4777,1735,889
General and administrative2,6382,7225,5325,873
Research and development9418461,8621,368
Amortization of intangible assets111110220219
Total operating expenses8,1477,15514,78713,349
Operating income (loss)859(424)(2,903)(1,555)
Other expense:
Interest expense, net(364)(167)(621)(325)
Foreign currency exchange loss, net(154)(382)(93)(417)
Change in fair value of warrant liabilities(871)74(917)55
Other income (expense)10(2)2279
Total other expense(1,379)(477)(1,609)(608)
Loss before income taxes(520)(901)(4,512)(2,163)
Income tax expense(1,091)(21)(1,064)(4)
Net loss($1,611)($922)($5,576)($2,167)
Net loss per share:
Shares used in per share computations:
Consolidated Balance Sheets
(in thousands)
September 30,
March 31,
Current assets:
Accounts receivable, net27,6597,823
Other receivables992560
Deferred tax assets1,5662,245
Income taxes receivable341967
Prepaid expenses and other current assets1,8971,293
Total current assets72,57033,509
Deferred tax assets7,6067,605
Other assets686418
Property and equipment, net3,8263,376
Intangible assets, net2,4902,584
Total assets$87,178$47,492
Current liabilities:
Bank loans$19,638$7,920
Accounts payable38,75516,404
Accrued liabilities13,6474,196
Notes payable9191,015
Income taxes payable557141
Total current liabilities73,51629,676
Notes payable, less current portion9736
Warrant liabilities2,1041,187
Deferred tax liabilities4343
Deferred rent738762
Total liabilities76,49831,704
Shareholders’ equity:
Common stock63,39063,128
Accumulated other comprehensive loss(4,917)(5,123)
Accumulated deficit(47,793)(42,217)
Total shareholders’ equity10,68015,788
Total liabilities and shareholders’ equity$87,178$47,492
Consolidated Statements of Cash Flows
(in thousands)
Six Months
Ended September 30,
Cash flows from operating activities:
Net loss($5,576)($2,167)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,0381,060
Accrued and unpaid interest expense on note payable10
Amortization of deferred financing fees18936
Loss on disposal of assets66
Stock-based compensation262240
Change in fair value of warrant liabilities917(55)
Provision for deferred income taxes67844
Changes in operating assets and liabilities:
Accounts receivable(19,790)(4,195)
Other receivables(431)205
Prepaid expenses and other current assets(357)(319)
Other assets85187
Accounts payable22,2804,332
Accrued liabilities9,602285
Deferred rent(24)
Income taxes receivable/payable1,045(330)
Net cash used in operating activities(7,701)(3,738)
Cash flows from investing activities:
Purchases of intangible assets(25)
Purchases of property and equipment(1,245)(686)
Net cash used in investing activities(1,270)(686)
Cash flows from financing activities:
Borrowings on bank loans41,95529,220
Repayments on bank loans(30,248)(24,297)
Payment of financing fees(720)(50)
Borrowings on notes payable95
Repayments on notes payable(160)(469)
Proceeds from exercise of stock options236
Payment of expenses related to issuance of common stock(164)
Net cash provided by financing activities10,7584,640
Effects of foreign currency exchange rate changes on cash41(46)
Net increase in cash1,828170
Cash, beginning of period5,1421,496
Cash, end of period$6,970$1,666
Supplementary Data
Adjusted EBITDA (Loss) Reconciliation (non-GAAP)
(in thousands)
Three Months
Ended September 30,
Six Months
Ended September 30,
Net loss($1,611)($922)($5,576)($2,167)
Depreciation and amortization5525801,0381,096
Stock-based compensation124117262240
Change in fair value of warrant liabilities871(74)917(55)
Interest expense, net364167621325
Income tax expense1,091211,0644
Adjusted EBITDA (loss)$1,391($111)($1,674)($557)
Adjusted EBITDA (loss), a non-GAAP (“Generally Accepted Accounting Principles”) financial measure, represents net loss before interest, taxes, depreciation and amortization, stock-based compensation and change in the fair value of warrant liabilities. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net loss 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 GAAP. 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. Our management believes, 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.
CONTACT: Karen McGinnis
         Chief Financial Officer
         Mad Catz Interactive, Inc. or (858) 790-5040
         Joseph Jaffoni, Norberto Aja, Jim Leahy
         JCIR or (212) 835-8500