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8-K - FORM 8-K - MAD CATZ INTERACTIVE INC | a58588e8vk.htm |
Exhibit 99.1
Conference Call:
|
Today, February 9th, 2011 at 5:00 p.m. ET | |
Dial-in number:
|
212/231-2901 (U.S. & International) | |
Webcast:
|
www.madcatz.com (Select Investors) | |
Replay Information:
|
See release text |
News Announcement
|
For Immediate Release | |
Contact: |
||
Darren Richardson, Allyson Vanderford
|
Joseph Jaffoni, Norberto Aja, Jim Leahy | |
Chief Executive Officer, Interim CFO
|
Jaffoni & Collins Incorporated | |
Mad Catz Interactive, Inc.
|
212/835-8500 or mcz@jcir.com | |
619/683-9830 |
MAD CATZ FISCAL 2011 Q3 NET SALES RISE 91% TO $93 MILLION;
73% INCREASE IN NET INCOME AND DILUTED EPS OF $0.15
73% INCREASE IN NET INCOME AND DILUTED EPS OF $0.15
Highest Quarterly Net Sales, Gross Profit, Net Income and EBITDA in Company History
San Diego, California February 9, 2011 Mad Catz Interactive, Inc. (Mad Catz or the
Company) (AMEX/TSX: MCZ), a leading third-party interactive entertainment accessory provider,
today announced record quarterly financial results for its fiscal 2011 third quarter ended December
31, 2010.
For the quarter ended December 31, 2010, Mad Catz generated net sales of $93.0 million, the highest
quarterly sales in the Companys history and a 90.6% increase from net sales of $48.8 million in
the fiscal 2010 third quarter. Net sales in North America, the Companys largest market, grew
129.6% to $56.4 million in the fiscal 2011 third quarter, while net sales to Europe increased 52.9%
year-over-year to a record $35.1 million. Gross profit in the fiscal 2011 third quarter rose 65.6%
to $26.4 million from the prior year period while gross profit margin declined by 4.3 percentage
points to 28.4%, primarily due to a shift in the Companys sales mix which included higher levels
of licensed products.
Reflecting tax expense of $4.6 million in the fiscal 2011 third quarter versus $1.6 million in the
prior year fiscal third quarter, the Company reported a 73.4% rise in net income to $9.7 million,
or $0.15 per diluted share, compared with net income of $5.6 million, or $0.09 per diluted share a
year ago.
EBITDA, a non-GAAP measure (defined as earnings before interest, taxes, depreciation and
amortization), in the three months ended December 31, 2010, increased by 83.4% to a quarterly
record $16.0 million, compared to EBITDA of $8.7 million in the prior year quarter. Adjusted net
income and adjusted diluted earnings per share, which exclude the impact of amortization of
intangibles, stock-based compensation and goodwill impairment (if any), were $10.2 million and
$0.16, respectively, in the fiscal third quarter versus $6.2 million and $0.10, respectively, in
the prior year quarter. EBITDA, Adjusted net income and adjusted diluted earning per share are
non-GAAP financial measures and are reconciled to the most comparable GAAP measure in the financial
tables at the end of this release.
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Mad Catz Interactive, Inc., 2/9/11 | page 2 |
In the fiscal 2011 nine-month period ended December 31, 2010, the Company generated record net
sales of $150.3 million, a 62.0% increase from the $92.7 million in the first nine months of the
prior fiscal year. Gross profit for the fiscal 2011 year-to-date period increased 46.1% to a
record $42.8 million, from $29.3 million in the prior year while gross profit margin was 28.5%
compared to 31.6% a year ago. Total operating expenses in the first nine months of fiscal 2011
were $25.7 million, up 17.7% from $21.9 million in the prior year-to-date period and, as a
percentage of net sales, declined to 17.1% from 23.6% a year ago. The Company recorded an
operating profit of $17.1 million and $7.4 million in the first nine months of fiscal 2011 and
fiscal 2010, respectively, representing growth of 129.9%. Reflecting tax expense of $5.6 million
in the fiscal 2011 year-to-date period and $2.0 million in the comparable year-ago period, the
Company reported net income of $9.4 million, or $0.16 per diluted share, compared with a net income
of $3.6 million, or $0.07 per diluted share a year ago.
In the fiscal 2011 year-to-date period, EBITDA rose to a record $19.3 million, a 88.1% increase
compared to EBITDA of $10.3 million in the first nine months of fiscal 2010. Adjusted net income
and adjusted diluted earnings per share, which exclude the impact of amortization of intangibles
and stock-based compensation, were $10.7 million and $0.18, respectively, in the fiscal 2011
year-to-date period versus $5.9 million and $0.11, respectively, in the comparable year ago period.
Third Quarter Fiscal 2011 Financial Highlights:
| Net sales for the third quarter of fiscal 2011 increased 90.6% from the prior year quarter: |
| North American net sales rose 129.6% to $56.4 million or 60.7% of quarterly sales; | ||
| European net sales rose 52.9% to $35.1 million or 37.8% of quarterly sales; and | ||
| Net sales to other countries increased 14.4% to $1.4 million or 1.5% of quarterly sales. |
| Gross sales by product group were as follows: |
| Xbox 360® accounted for 31% of total gross sales in both periods; | ||
| PlayStation 3® accounted for 19% of total gross sales vs. 17% in the prior year; | ||
| Wii® products represented 19% of total gross sales vs. 14% in the prior year; | ||
| PC represented 12% of total gross sales vs. 23% a year ago; | ||
| Handhelds represented 2% of total gross sales vs. 3% a year ago; and | ||
| All other platforms represented 17% of total gross sales vs. 12% in the prior year. |
| Gross sales by category were as follows: |
| Specialty controllers represented 29% of total gross sales vs. 21% a year ago; | ||
| Audio products represented 24% of total gross sales vs. 10% in the prior year; | ||
| Games represented 16% of total gross sales vs. 2% a year ago; | ||
| Controllers represented 16% of total gross sales vs. 26% a year ago; | ||
| Accessories represented 9% of total gross sales vs. 30% a year ago; | ||
| PC devices represented 6% of total gross sales vs. 8% in the prior year; and | ||
| All other sales represented less than 1% of total gross sales vs. 3% a year ago. |
| Reported net position of bank loan less cash at December 31, 2010, of $15.9 million, compared to $17.4 million at December 31, 2009 and $1.6 million as of March 31, 2010. |
-more-
Mad Catz Interactive, Inc., 2/9/11 | page 3 |
New Products Shipped in and Subsequent to Third Quarter of Fiscal 2011 include:
| Cyborg R.A.T. 9 Wireless Pro Gaming Mouse; | |
| Cyborg Gaming Lights with amBX Technology for the PC; | |
| Rock Band 3 product range, including wireless Keyboards, Mustang ProGuitar, PRO-Drums and PRO-Cymbals Kit; | |
| Mad Catz Wireless Racing Wheel for the Xbox 360 video game system; and, | |
| Three Licensed Limited Edition Call of Duty®: Black Ops Tritton Powered Professional Gaming Audio Headsets for console & PC. |
Recent Key Developments and License Agreements:
| Announced agreement with THQ Inc. to produce branded videogame accessories based on the WWE® All Stars intellectual property; | |
| Released the limited edition Sonic the Hedgehog Figure Inductive Charger featuring a six inch tall Sonic and charge base for use with the Wii; | |
| Entered into agreement with Epic Games, Inc. to produce a range of accessories for Gears of War 3, scheduled to be released exclusively for Xbox 360® during the 2011 holiday season; | |
| Secured license for Marvel® Vs. Capcom® 3: Fate of Two Worlds Arcade FightStick: for the Xbox® 360 and PS3, expected to be available concurrent with the mid-February game launch; and, | |
| Entered into an agreement with Microsoft® Corporation to produce a range of licensed, co-branded audio headsets under the Companys Tritton brand and Microsofts Xbox 360® brand. |
Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz,
said, We are very pleased with the record results for the fiscal 2011 third quarter and fiscal
2011 year-to-date periods. As we continue to execute on our initiatives to re-position Mad Catz as
a provider of premium products that enhance the gaming experience, we remain focused on further
leveraging our manufacturing and distribution capabilities and aligning ourselves with key titles.
Our line of Rock Band 3 peripherals and Call of Duty: Black Ops products, both of which met with
strong consumer demand, are great examples of this alignment with the industrys biggest
franchises. In addition, we enjoyed great success with Tritton Technologies, our gaming audio line
acquired in early fiscal 2011. These, along with our highly acclaimed Cyborg pro gaming mice,
provide us with the strongest product portfolio in Mad Catz history. In addition, our strategy to
focus on premium products has resulted in three consecutive years of year-over-year growth in third
quarter and nine month net sales, gross profit, earnings, EPS and EBITDA results.
Reflecting the excellent fiscal third quarter retail sell-in of our range of products, we ended
the quarter with $9.9 million of cash, $51.2 million of accounts receivable, $32.5 million of
inventories and accounts payable of $55.3 million, including the outstanding balance under our bank
loan. We expect significant improvements in our fiscal 2011 year-end balance sheet, including a
positive cash position net of bank borrowings, and believe our strengthened balance sheet will
allow us the financial flexibility to further grow sales, earnings and free cash flow while
pursuing other means to enhance shareholder value.
Mad Catz Interactive, Inc., 2/9/11 | page 4 |
Mr. Richardson concluded, Looking ahead, we continue to actively build and roll out a diversified
pipeline of exciting products, such as the recently announced audio headset partnership with
Microsoft, the Marvel vs. Capcom Arcade FightSticks for the Xbox 360 and
PS3, and the range of accessories for Gears of War 3. Building on what was a great holiday
quarter, we are confident in our positioning for the fourth quarter of fiscal 2011 and fiscal 2012
as a whole.
The Company will host a conference call and simultaneous webcast on February 9, 2011, at 5:00 p.m.
ET, which can be accessed by dialing 212/231-2901. Following its completion, a replay of the call
can be accessed for 30 days at the Companys Web site (www.madcatz.com, select Investors) or for
7 days via telephone at 800/633-8284 (reservation #21509221) or, for International callers, at
402/977-9140.
-more-
Mad Catz Interactive, Inc., 2/9/11 | page 5 |
About Mad Catz Interactive, Inc.
Mad Catz is a leading global provider of innovative products for the interactive entertainment
industry. Mad Catz develops and markets accessories for videogame systems and PCs under its Mad
Catz (casual gaming), Saitek (simulation), Cyborg (pro gaming), Eclipse (home and office) and
Tritton (gaming audio) brands. Mad Catz also operates e-commerce and content websites for
videogame and PC products under its GameShark brand, develops, manufactures and markets proprietary
earphones under its AirDrives brand, and publishes and distributes video/PC games. Mad Catz
distributes its products through most of the leading retailers offering interactive entertainment
products and has offices in North America, Europe and Asia. For additional information please go
to www.madcatz.com, as well as www.store.gameshark.com, www.saitek.com, www.cyborggaming.com,
www.eclipsetouch.com, www.trittontechnologies.com, www.gameshark.com and www.airdrives.com.
Mad Catz product updates and demonstrations can be found on Facebook, Twitter or YouTube.
Safe Harbor for Forward Looking Statements: This press release contains forward-looking
statements about the Companys business prospects that involve substantial risks and uncertainties.
The Company assumes no obligation to update the forward-looking statements contained in this press
release as a result of new information or future events or developments. You can identify these
statements by the fact that they use 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 actual results to differ materially are the following: the ability to maintain or renew
the Companys licenses; competitive developments affecting the Companys current products; first
party price reductions; the ability to successfully market both new and existing products
domestically and internationally; difficulties or delays in manufacturing; or a downturn in the
market or industry. A further list and description of these risks, uncertainties and other matters
can be found in the Companys reports filed with the Securities and Exchange Commission and the
Canadian Securities Administrators.
-TABLES FOLLOW-
Mad Catz Interactive, Inc., 2/9/11 | page 6 |
MAD CATZ INTERACTIVE, INC.
Consolidated Statements of Operations
(unaudited, in thousands of US$, except share and per share data)
Consolidated Statements of Operations
(unaudited, in thousands of US$, except share and per share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales |
$ | 92,957 | $ | 48,763 | $ | 150,276 | $ | 92,745 | ||||||||
Cost of sales |
66,556 | 32,822 | 107,429 | 63,424 | ||||||||||||
Gross profit |
26,401 | 15,941 | 42,847 | 29,321 | ||||||||||||
Operating expenses: |
||||||||||||||||
Sales and marketing |
4,935 | 3,696 | 10,982 | 8,747 | ||||||||||||
General and administrative |
4,047 | 3,465 | 10,565 | 9,533 | ||||||||||||
Research and development |
1,089 | 741 | 2,780 | 2,033 | ||||||||||||
Acquisition related items |
102 | | 708 | | ||||||||||||
Amortization of intangible assets |
244 | 395 | 708 | 1,567 | ||||||||||||
Total operating expenses |
10,417 | 8,297 | 25,743 | 21,880 | ||||||||||||
Operating income |
15,984 | 7,644 | 17,104 | 7,441 | ||||||||||||
Interest expense, net |
(1,046 | ) | (645 | ) | (2,284 | ) | (1,637 | ) | ||||||||
Foreign exchange gain (loss), net |
(736 | ) | 109 | (41 | ) | (310 | ) | |||||||||
Other income |
46 | 42 | 223 | 138 | ||||||||||||
Income before income taxes |
14,248 | 7,150 | 15,002 | 5,632 | ||||||||||||
Income tax expense |
4,552 | 1,558 | 5,554 | 2,007 | ||||||||||||
Net income |
$ | 9,696 | $ | 5,592 | $ | 9,448 | $ | 3,625 | ||||||||
Basic net income per share |
$ | 0.18 | $ | 0.10 | $ | 0.17 | $ | 0.07 | ||||||||
Diluted net income per share |
$ | 0.15 | $ | 0.09 | $ | 0.16 | $ | 0.07 | ||||||||
Weighted average shares basic |
55,278,606 | 55,098,549 | 55,158,786 | 55,098,549 | ||||||||||||
Weighted average shares diluted |
66,684,037 | 65,316,293 | 65,819,064 | 55,098,549 | ||||||||||||
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Mad Catz Interactive, Inc., 2/9/11 | page 7 |
MAD CATZ INTERACTIVE, INC.
Consolidated Balance Sheets
(unaudited in thousands of US$)
Consolidated Balance Sheets
(unaudited in thousands of US$)
December 31, | March 31, | |||||||
2010 | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash |
$ | 9,921 | $ | 2,245 | ||||
Accounts receivable, net |
51,239 | 14,620 | ||||||
Other receivables |
290 | 123 | ||||||
Inventories |
32,511 | 16,975 | ||||||
Deferred tax assets |
17 | 17 | ||||||
Income taxes receivable |
21 | 21 | ||||||
Other current assets |
1,559 | 1,410 | ||||||
95,558 | 35,411 | |||||||
Deferred tax assets |
739 | 766 | ||||||
Other assets |
784 | 626 | ||||||
Property and equipment, net |
3,684 | 3,452 | ||||||
Intangible assets, net |
5,805 | 2,828 | ||||||
Goodwill |
11,387 | 8,466 | ||||||
Total assets |
$ | 117,957 | $ | 51,549 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities: |
||||||||
Bank loan |
$ | 25,813 | $ | 3,829 | ||||
Accounts payable |
29,488 | 11,871 | ||||||
Accrued liabilities |
15,978 | 7,988 | ||||||
Notes payable |
333 | | ||||||
Contingent consideration, current |
1,035 | | ||||||
Income taxes payable |
4,265 | 1,670 | ||||||
76,912 | 25,358 | |||||||
Other long term liabilities |
1,690 | 357 | ||||||
Contingent consideration |
3,297 | | ||||||
Notes payable |
14,500 | 14,500 | ||||||
Total liabilities |
96,399 | 40,215 | ||||||
Shareholders equity: |
||||||||
Common stock |
49,681 | 48,865 | ||||||
Other comprehensive income |
(95 | ) | (55 | ) | ||||
Accumulated deficit |
(28,028 | ) | (37,476 | ) | ||||
Total shareholders equity |
21,558 | 11,334 | ||||||
Total liabilities and shareholders equity |
$ | 117,957 | $ | 51,549 | ||||
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Mad Catz Interactive, Inc., 2/9/11 | page 8 |
MAD CATZ INTERACTIVE, INC.
Supplementary Data
(unaudited, in thousands of US$)
Supplementary Data
(unaudited, in thousands of US$)
Geographical Sales Data
The Companys net sales were generated in the following geographic regions:
Three months ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net sales: |
||||||||||||||||
United States |
$ | 52,908 | $ | 23,375 | $ | 87,311 | $ | 48,520 | ||||||||
Europe |
35,141 | 22,982 | 55,720 | 38,811 | ||||||||||||
Canada |
3,530 | 1,201 | 4,332 | 2,555 | ||||||||||||
Other countries |
1,378 | 1,205 | 2,913 | 2,859 | ||||||||||||
$ | 92,957 | $ | 48,763 | $ | 150,276 | $ | 92,745 | |||||||||
Adjusted Net Income Reconciliation (non GAAP)
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Pre-tax Income |
$ | 14,248 | $ | 7,150 | $ | 15,002 | $ | 5,632 | ||||||||
Amortization of intangible assets |
244 | 541 | 708 | 2,008 | ||||||||||||
Stock-based compensation cost |
128 | 150 | 458 | 458 | ||||||||||||
Adjusted pre-tax income* |
14,620 | 7,841 | 16,168 | 8,098 | ||||||||||||
Adjusted provision for income
taxes (at effective rate) |
4,462 | 1,610 | 5,463 | 2,201 | ||||||||||||
Adjusted net income* |
$ | 10,158 | $ | 6,231 | $ | 10,705 | $ | 5,897 | ||||||||
Adjusted diluted earnings per share* |
$ | 0.16 | $ | 0.10 | $ | 0.18 | $ | 0.11 | ||||||||
* | Adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures and are not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Companys results of operations as determined in accordance with GAAP. Mad Catz believes that certain non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Companys performance by excluding certain items that may not be indicative of the Companys core business, operating results or future outlook. Mad Catz management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Companys operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP measures, specifically those that adjust for stock-based compensation and amortization of intangibles, also facilitate comparisons of the Companys performance to prior periods. |
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Mad Catz Interactive, Inc., 2/9/11 | page 9 |
EBITDA Reconciliation (non GAAP)
EBITDA represents net loss plus interest, taxes, depreciation and amortization.
Three months ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Income |
$ | 9,696 | $ | 5,592 | $ | 9,448 | $ | 3,625 | ||||||||
Adjustments: |
||||||||||||||||
Interest expense |
1,046 | 645 | 2,284 | 1,637 | ||||||||||||
Income tax expense |
4,552 | 1,558 | 5,554 | 2,007 | ||||||||||||
Depreciation and amortization |
690 | 920 | 2,036 | 3,003 | ||||||||||||
EBITDA |
$ | 15,984 | $ | 8,715 | $ | 19,322 | $ | 10,272 | ||||||||
EBITDA represents net loss plus interest, taxes, depreciation and amortization. EBITDA is not
intended to represent cash flows for the period, nor is it being presented as an alternative to
operating income 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
accounting principles generally accepted in the United States. As defined, 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
operating performance measures found in our financial statements, EBITDA is a useful financial
performance measurement for assessing our Companys operating performance. Our management uses
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 some of our assets.
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