Attached files
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| 8-K - 8-K - MAD CATZ INTERACTIVE INC | d85075d8k.htm |
Exhibit 99.1
MAD CATZ® REPORTS FISCAL 2016 FIRST QUARTER FINANCIAL RESULTS
San Diego, CA – August 13, 2015 – Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2016 first quarter ended June 30, 2015.
Key Highlights of Fiscal 2016 First Quarter and Subsequent:
| ● | Fiscal 2016 first quarter net sales decreased 23% to $13.0 million, driven by a 33% decrease in net sales to EMEA, a 9% decrease in net sales to the Americas and a 19% decrease in net sales to APAC; |
| ● | Gross margin declined to 22.2% from 30.2% in the prior year quarter; |
| ● | Total operating expenses increased 7% from the prior year period to $6.6 million; |
| ● | Operating loss was ($3.8 million), compared to an operating loss of ($1.1 million) in the prior year quarter; |
| ● | Diluted loss per share was ($0.05) for the fiscal 2016 first quarter, compared to a diluted loss per share of ($0.02) last year; |
| ● | Net position of bank loan, less cash, of $5.8 million at June 30, 2015, compared to $2.8 million at March 31, 2015 and $5.3 million at June 30, 2014; |
| ● | Announced new financing facilities with New Star Business Credit and FGI to provide combined financing of up to $30.0 million, increasing to $45.0 million from September 30, 2015 to December 31, 2015; |
| ● | Announced pre-order availability of Rock Band™ 4 Band-in-a Box™ Software Bundle and Wireless Fender™ Stratocaster™ Guitar Controller and Software Bundle at various global retailers; |
| ● | Announced pre-order availability of R.A.T. PROX starting August 4, 2015; and, |
| ● | Announced agreement with Cloud Imperium™ Games to create dedicated Saitek-branded Star Citizen™ gaming hardware. |
1
Summary of Financials
(in thousands, except margins and per share data)
| Three Months
Ended June 30, |
Change | |||||||||||
| 2015 | 2014 | |||||||||||
| Net sales |
$12,974 | $16,747 | (23%) | |||||||||
| Gross profit |
2,878 | 5,063 | (43%) | |||||||||
| Total operating expenses |
6,640 | 6,194 | 7% | |||||||||
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| Operating loss |
(3,762) | (1,131) | 233% | |||||||||
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| Net loss |
(3,965) | (1,245) | 218% | |||||||||
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| Net loss per share, basic and diluted |
($0.05) | ($0.02) | 150% | |||||||||
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| Gross margin |
22.2% | 30.2% | (800) bps | |||||||||
| Adjusted EBITDA (loss) (1) |
($3,065) | ($446) | 587% | |||||||||
| (1) | Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 8. |
“Two broad trends drove continued challenges in the first quarter of Fiscal 2016. First, consumers were largely focused on products for the next generation consoles as evidenced by our 83% sales growth for next generation products. This drove a sharp decline in the demand for legacy platform products and more than offset the next generation product growth. Second, demand in Europe has been very weak and competitors continue to be very promotional in an effort to drive sales,” said Karen McGinnis, Chief Financial Officer of Mad Catz. “While total operating expenses grew by 7% on the back of increased spend around marketing and product development to support the upcoming Rock Band 4 launch and holiday season, our focus on and efforts to drive additional operational efficiencies across the business resulted in an 8% year-over-year decrease in G&A expenses. Additionally, we secured new and expanded financing that we believe will provide the financial capacity and flexibility we need to support our expected growth in the remainder of fiscal 2016.”
2
Summary of Key Sales Metrics
| Three Months
Ended June 30, |
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| (in thousands) | 2015 | 2014 | Change | |||||||||
| Net Sales by Geography |
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| EMEA |
$5,643 | $8,373 | (33%) | |||||||||
| Americas |
4,974 | 5,449 | (9%) | |||||||||
| APAC |
2,357 | 2,925 | (19%) | |||||||||
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| $12,974 | $16,747 | (23%) | ||||||||||
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| Sales by Platform as a % of Gross Sales |
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| PC and Mac |
45% | 47% | ||||||||||
| Next gen consoles (a) |
28% | 12% | ||||||||||
| Universal |
15% | 25% | ||||||||||
| Smart devices |
10% | 8% | ||||||||||
| Legacy consoles (b) |
2% | 7% | ||||||||||
| All others |
0% | 1% | ||||||||||
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| 100% | 100% | |||||||||||
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| Sales by Category as a % of Gross Sales |
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| Audio |
38% | 39% | ||||||||||
| Specialty controllers |
32% | 22% | ||||||||||
| Mice and keyboards |
17% | 26% | ||||||||||
| Controllers |
8% | 7% | ||||||||||
| Accessories |
4% | 5% | ||||||||||
| Games and other |
1% | 1% | ||||||||||
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| 100% | 100% | |||||||||||
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| Sales by Brand as a % of Gross Sales |
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| Tritton |
34% | 36% | ||||||||||
| Mad Catz |
34% | 35% | ||||||||||
| Saitek |
24% | 18% | ||||||||||
| Other |
8% | 11% | ||||||||||
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| 100% | 100% | |||||||||||
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(a) Includes products developed for Xbox One, PlayStation 4 and Wii U.
(b) Includes products developed for Xbox 360, PlayStation 3 and Wii.
Darren Richardson, President and Chief Executive Officer of Mad Catz, commented, “We are very excited to launch Rock Band 4 in October through our partnership with Harmonix. Response to the new gameplay has been overwhelmingly positive and the game has received great critical reviews and won multiple awards. We have also seen strong consumer preorders and strong initial purchase orders from retailers. Factory production is now fully ramped up and we expect shipments to retailers to begin in September ahead of the October launch. In Fiscal 2016, we expect sales of Rock Band 4 products to contribute to significant sales growth, improved operating leverage, and increased cash flow.”
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“As we look ahead to the balance of Fiscal 2016 and beyond, we believe we have positioned Mad Catz to capitalize on the growth opportunities in front of us, including our initiatives around leveraging the extensive – and still expanding – next generation console installed base, the highly acclaimed and much anticipated release of Rock Band 4, the development of mobile gaming, and the ongoing appeal of PC gaming. We believe industry trends are healthy, we are executing on our plan to consistently strengthen our competitive advantages in the marketplace and remain confident that we have both the resources and know-how to drive long-term success.”
The Company will host a conference call and simultaneous webcast on August 13, 2015, at 5:00 p.m. ET, which can be accessed by dialing (212) 231-2937. 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 #21773461) 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 at www.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 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.
Contact:
| Karen McGinnis |
Joseph Jaffoni, Norberto Aja, Jim Leahy | |
|
Chief Financial Officer |
JCIR | |
|
Mad Catz Interactive, Inc. |
mcz@jcir.com or (212) 835-8500 | |
|
kmcginnis@madcatz.com or (858) 790-5040 |
- TABLES FOLLOW -
4
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
| Three Months
Ended June 30, |
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| 2015 | 2014 | |||||||
| Net sales |
$12,974 | $16,747 | ||||||
| Cost of sales |
10,096 | 11,684 | ||||||
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| Gross profit |
2,878 | 5,063 | ||||||
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| Operating expenses: |
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| Sales and marketing |
2,716 | 2,412 | ||||||
| General and administrative |
2,894 | 3,151 | ||||||
| Research and development |
921 | 522 | ||||||
| Amortization of intangible assets |
109 | 109 | ||||||
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| Total operating expenses |
6,640 | 6,194 | ||||||
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| Operating loss |
(3,762) | (1,131) | ||||||
| Other expense: |
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| Interest expense, net |
(257) | (158) | ||||||
| Foreign currency exchange gain (loss), net |
61 | (35) | ||||||
| Change in fair value of warrant liabilities |
(46) | (19) | ||||||
| Other income |
12 | 81 | ||||||
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| Total other expense |
(230) | (131) | ||||||
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| Loss before income taxes |
(3,992) | (1,262) | ||||||
| Income tax benefit |
27 | 17 | ||||||
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| Net loss |
($3,965) | ($1,245) | ||||||
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| Net loss per share: |
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| Basic |
($0.05) | ($0.02) | ||||||
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| Diluted |
($0.05) | ($0.02) | ||||||
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| Shares used in per share computations: |
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| Basic |
73,469,571 | 64,081,689 | ||||||
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| Diluted |
73,469,571 | 64,081,689 | ||||||
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5
Consolidated Balance Sheets
(in thousands)
(Unaudited)
| June 30,
2015 |
March 31,
2015 |
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| ASSETS |
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| Current assets: |
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| Cash |
$2,137 | $5,142 | ||||||
| Accounts receivable, net |
6,180 | 7,823 | ||||||
| Other receivables |
688 | 560 | ||||||
| Inventories |
17,828 | 15,479 | ||||||
| Deferred tax assets |
2,245 | 2,245 | ||||||
| Income taxes receivable |
341 | 967 | ||||||
| Prepaid expenses and other current assets |
1,226 | 1,293 | ||||||
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| Total current assets |
30,645 | 33,509 | ||||||
| Deferred tax assets |
7,641 | 7,605 | ||||||
| Other assets |
494 | 418 | ||||||
| Property and equipment, net |
3,420 | 3,376 | ||||||
| Intangible assets, net |
2,475 | 2,584 | ||||||
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| Total assets |
$44,675 | $47,492 | ||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Bank loan |
$7,916 | $7,920 | ||||||
| Accounts payable |
16,686 | 16,404 | ||||||
| Accrued liabilities |
4,316 | 4,196 | ||||||
| Notes payable |
980 | 1,015 | ||||||
| Income taxes payable |
102 | 141 | ||||||
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| Total current liabilities |
30,000 | 29,676 | ||||||
| Notes payable, less current portion |
102 | 36 | ||||||
| Warrant liabilities |
1,233 | 1,187 | ||||||
| Deferred tax liabilities |
43 | 43 | ||||||
| Deferred rent |
786 | 762 | ||||||
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| Total liabilities |
32,164 | 31,704 | ||||||
| Shareholders’ equity: |
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| Common stock |
63,266 | 63,128 | ||||||
| Accumulated other comprehensive loss |
(4,573) | (5,123) | ||||||
| Accumulated deficit |
(46,182) | (42,217) | ||||||
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| Total shareholders’ equity |
12,511 | 15,788 | ||||||
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| Total liabilities and shareholders’ equity |
$44,675 | $47,492 | ||||||
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6
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Three Months
Ended June 30, |
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| 2015 | 2014 | |||||||
| Cash flows from operating activities: |
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| Net loss |
($3,965) | ($1,245) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation and amortization |
486 | 501 | ||||||
| Accrued and unpaid interest expense on note payable |
- | 10 | ||||||
| Amortization of deferred financing fees |
127 | 15 | ||||||
| Loss on disposale of assets |
6 | - | ||||||
| Stock-based compensation |
138 | 123 | ||||||
| Change in fair value of warrant liabilities |
46 | 19 | ||||||
| Benefit for deferred income taxes |
(36) | (37) | ||||||
| Changes in operating assets and liabilities: |
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| Accounts receivable |
1,797 | 629 | ||||||
| Other receivables |
(116) | 134 | ||||||
| Inventories |
(2,129) | (493) | ||||||
| Prepaid expenses and other current assets |
73 | 190 | ||||||
| Other assets |
51 | 162 | ||||||
| Accounts payable |
157 | (96) | ||||||
| Accrued liabilities |
272 | (262) | ||||||
| Deferred rent |
26 | - | ||||||
| Income taxes receivable/payable |
651 | (227) | ||||||
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| Net cash used in operating activities |
(2,416) | (577) | ||||||
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| Cash flows from investing activities: |
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| Purchases of property and equipment |
(309) | (261) | ||||||
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| Net cash used in investing activities |
(309) | (261) | ||||||
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| Cash flows from financing activities: |
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| Borrowings on bank loan |
9,431 | 13,686 | ||||||
| Repayments on bank loan |
(9,435) | (11,535) | ||||||
| Payment of financing fees |
(250) | (50) | ||||||
| Borrowings on notes payable |
95 | - | ||||||
| Repayments on notes payable |
(79) | (375) | ||||||
| Proceeds from exercise of stock options |
- | 66 | ||||||
| Payment of expenses related to issuance of common stock |
(102) | - | ||||||
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| Net cash (used in) provided by financing activities |
(340) | 1,792 | ||||||
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| Effects of foreign currency exchange rate changes on cash |
60 | 15 | ||||||
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| Net (decrease) increase in cash |
(3,005) | 969 | ||||||
| Cash, beginning of period |
5,142 | 1,496 | ||||||
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| Cash, end of period |
$2,137 | $2,465 | ||||||
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7
Supplementary Data
Adjusted EBITDA (Loss) Reconciliation (non-GAAP)
(in thousands)
(Unaudited)
| Three Months
Ended June 30, |
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| 2015 | 2014 | |||||||
| Net loss |
($3,965) | ($1,245) | ||||||
| Adjustments: |
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| Depreciation and amortization |
486 | 516 | ||||||
| Stock-based compensation |
138 | 123 | ||||||
| Change in fair value of warrant liabilities |
46 | 19 | ||||||
| Interest expense, net |
257 | 158 | ||||||
| Income tax benefit |
(27) | (17) | ||||||
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| Adjusted EBITDA (loss) |
($3,065) | ($446) | ||||||
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Adjusted EBITDA (loss), a non-GAAP financial measure, represents net income (loss) before interest, taxes, depreciation and amortization, 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. 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 (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. 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. We use 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.
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