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8-K - FORM 8-K - MAD CATZ INTERACTIVE INCd949548d8k.htm

Exhibit 99.1

 

LOGO

MAD CATZ® REPORTS FISCAL 2015 FOURTH QUARTER AND YEAR END FINANCIAL RESULTS

San Diego, CA – June 25, 2015 – Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2015 fourth quarter and full year ended March 31, 2015.

Key Highlights of Fiscal 2015 Fourth Quarter and Subsequent:

 

    Fiscal 2015 fourth quarter net sales decreased 18% to $16.6 million, driven by a 27% decrease in net sales to EMEA and a 25% decrease in net sales to APAC, partially offset by a 6% increase in net sales in the Americas;

 

    Gross margin declined to 23.4% from 23.9% in the prior year quarter;

 

    Total operating expenses decreased 6% from the prior year period to $6.2 million;

 

    Diluted income per share was $0.09 for the fiscal 2015 fourth quarter, compared to a diluted loss per share of less than ($0.01) last year;

 

    Net position of bank loan, less cash, of $2.8 million at March 31, 2015, compared to $10.7 million at December 31, 2014 and $4.1 million at March 31, 2014;

 

    Announced agreement with Harmonix Music Systems™ to launch Rock Band™ 4 on PlayStation™ 4 and Xbox One;

 

    Announced the S.U.R.F.R™ wireless media and game controller for Android™ powered smart TVs and media devices, smartphones, tablets and home theater PCs;

 

    Announced the L.Y.N.X.™ 3 mobile wireless controller for Android smart devices, tablets and Windows PC;

 

    Announced an agreement with Capcom to produce a range of next-generation licensed Street Fighter™ V fighting game controllers for PlayStation 4;

 

    Announced agreement with Dovetail Games for the retail distribution of Microsoft Flight Simulator X: Steam Edition;

 

    Appointed Mr. Carlo Chiarello to the Board of Directors;

 

    Raised $3.7 million in a registered direct offering through the issuance of approximately 9.0 million shares of common stock and warrants to purchase approximately 4.5 million additional shares of common stock exercisable at $0.61 per share;

 

    Extended working capital credit facility with Wells Fargo Capital Finance LLC to July 31, 2016; and

 

    Received critical acclaim on Rock Band 4 at E3, including the award for “Best Music Game” from IGN, the world’s largest video game news site, and IGN nominations for “Best PS4 Game” and “Best Xbox One Game”.

 

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Key Financial Highlights of Fiscal 2015:

 

    Fiscal 2015 net sales decreased 4% to $86.2 million, driven by a 13% decrease in net sales to EMEA and a 2% decrease in net sales to the Americas, partially offset by a 50% increase in net sales in APAC;

 

    Gross margin for Fiscal 2015 was 27.7% compared to 25.5% in Fiscal 2014;

 

    Total operating expenses in Fiscal 2015 decreased 13% year-over-year to $25.5 million;

 

    Operating loss of ($1.6 million) represented a $4.9 million improvement over the prior year;

 

    Diluted income per share in Fiscal 2015 was $0.07 compared to a loss of ($0.12) in the prior year; and

 

    Fiscal 2015 Adjusted EBITDA increased to $0.3 million from ($4.0 million) in Fiscal 2014.

Summary of Financials

(in thousands, except margins and per share data)

 

     (unaudited)
Three Months
Ended March 31,
          Twelve Months
Ended March 31,
       
     2015     2014     Change     2015     2014     Change  

Net sales

   $ 16,558      $ 20,217        (18 %)    $ 86,223      $ 89,629        (4 %) 

Gross profit

     3,872        4,838        (20 %)      23,844        22,898        4

Total operating expenses

     6,167        6,527        (6 %)      25,487        29,420        (13 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Operating loss

  (2,295   (1,689   36   (1,643   (6,522   (75 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income (loss)

  5,556      (265   (2197 %)    4,747      (7,441   (164 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income (loss) per share, basic and diluted

$ 0.09    $ 0.00      100 $ 0.07    ($ 0.12   (158 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Gross margin

  23.4   23.9   (50 ) bps    27.7   25.5   220 bps   

Adjusted EBITDA (loss) (1)

($ 1,841 ($ 1,155   59 $ 315    ($ 3,952   (108 %) 

 

(1) Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 8.

Commenting on the Company’s Fiscal 2015 fourth quarter and full year results, Karen McGinnis, Chief Financial Officer of Mad Catz, said, “Fiscal 2015 was a challenging year for Mad Catz, as net sales for the fourth quarter and full year decreased 18% and 4% from their respective prior year periods. The net sales performance in Fiscal 2015 was driven primarily by a decrease in sales of our products, primarily audio, designed for legacy consoles and universal platforms due to the launch of the PlayStation 4 and Xbox One consoles in November 2013. Although we are experiencing strong growth in products developed for these new consoles, the decline in sales of products related to the legacy consoles has been greater than we and others in the industry anticipated. Despite the net sales decline in Fiscal 2015, our focus on profitable product placements and efforts to drive additional operational efficiencies across the business resulted in a 4% increase in gross profit and a 13% decrease in operating expenses compared to the prior year. As a result, we reduced our operating loss by $4.9 million, generated positive adjusted EBITDA of $0.3 million and ended the year with a net position of bank loan less cash of

 

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$2.8 million. Additionally, we recognized a tax benefit of $7.2 million, which resulted in net income of $4.7 million, or $0.07 per share, for the fiscal year. Although working capital remains tight, we believe we have positioned ourselves well to capitalize on the growth opportunities in fiscal 2016.”

Summary of Key Sales Metrics

 

     Three Months
Ended March 31,
          Twelve Months
Ended March 31,
       
(in thousands)    2015     2014     Change     2015     2014     Change  

Net Sales by Geography

            

EMEA

   $ 9,143      $ 12,557        (27 %)    $ 46,247      $ 53,132        (13 %) 

Americas

     5,615        5,275        6     27,897        28,470        (2 %) 

APAC

     1,800        2,385        (25 %)      12,079        8,027        50
  

 

 

   

 

 

     

 

 

   

 

 

   
$ 16,558    $ 20,217      (18 %)  $ 86,223    $ 89,629      (4 %) 
  

 

 

   

 

 

     

 

 

   

 

 

   

Sales by Platform as a % of Gross Sales

PC and Mac

  52   47   46   45

Universal

  17   25   22   29

Next gen consoles (a)

  24   11   21   3

Smart devices

  5   4   7   2

Legacy consoles (b)

  2   12   4   19

All others

  —     1   —     2
  

 

 

   

 

 

     

 

 

   

 

 

   
  100   100   100   100
  

 

 

   

 

 

     

 

 

   

 

 

   

Sales by Category as a % of Gross Sales

Audio

  40   47   42   47

Specialty controllers

  31   18   25   16

Mice and keyboards

  22   28   23   29

Controllers

  4   2   6   1

Accessories

  2   3   3   5

Games and Other

  1   2   1   2
  

 

 

   

 

 

     

 

 

   

 

 

   
  100   100   100   100
  

 

 

   

 

 

     

 

 

   

 

 

   

Sales by Brand as a % of Gross Sales

Tritton

  37   43   39   42

Mad Catz

  34   39   34   41

Saitek

  25   14   19   12

Other

  4   4   8   5
  

 

 

   

 

 

     

 

 

   

 

 

   
  100   100   100   100
  

 

 

   

 

 

     

 

 

   

 

 

   

 

(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, “Although the past couple of years have been challenging for us and the industry, we are pleased with our ability to drive operational improvements while still investing in new product development in order to capitalize on growth opportunities from the ongoing console transition as well as the increasing popularity of mobile gaming. We believe fiscal 2016 will be an exciting year for Mad Catz, particularly as we work with Harmonix to launch Rock Band 4 this holiday season. The initial response from consumers and retailers to the launch announcement and new game play has been very positive, and we expect sales of Rock Band 4 products to contribute to significant sales growth, operating leverage and cash flow in Fiscal 2016.”

 

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The Company will host a conference call and simultaneous webcast on June 25, 2015, at 5:00 p.m. ET, which can be accessed by dialing (212) 231-2910. 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 #21769534) 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

 

LOGO

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 facility; 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 -

 

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Consolidated Statements of Operations

(in thousands, except share and per share data)

 

     (unaudited)
Three Months
Ended March 31,
    Twelve Months
Ended March 31,
 
     2015     2014     2015     2014  

Net sales

   $ 16,558      $ 20,217      $ 86,223      $ 89,629   

Cost of sales

     12,686        15,379        62,379        66,731   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  3,872      4,838      23,844      22,898   

Operating expenses:

Sales and marketing

  2,691      2,638      11,253      12,656   

General and administrative

  2,592      2,746      10,802      11,649   

Research and development

  775      998      2,995      4,238   

Acquisition related items

  0      35      —        134   

Amortization of intangible assets

  109      110      437      743   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  6,167      6,527      25,487      29,420   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  (2,295   (1,689   (1,643   (6,522
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

Interest expense, net

  (212   (183   (775   (659

Foreign currency exchange loss, net

  (284   (162   (784   (870

Change in fair value of warrant liability

  542      84      598      74   

Other income

  80      41      172      142   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

  126      (220   (789   (1,313
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

  (2,169   (1,909   (2,432   (7,835

Income tax benefit

  7,725      1,644      7,179      394   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ 5,556    ($ 265 $ 4,747    ($ 7,441
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

Basic

$ 0.09    ($ 0.00 $ 0.07    ($ 0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

$ 0.09    ($ 0.00 $ 0.07    ($ 0.12
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share computations:

Basic

  64,688,371      63,931,506      64,350,893      63,757,395   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  64,798,978      63,931,506      64,776,699      63,757,395   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Consolidated Balance Sheets

(in thousands)

 

     March 31,
2015
    March 31,
2014
 

ASSETS

    

Current assets:

    

Cash

   $ 5,142      $ 1,496   

Accounts receivable, net

     7,823        8,059   

Other receivables

     560        1,531   

Inventories

     15,479        17,189   

Deferred tax assets

     2,245        926   

Income tax receivable

     967        895   

Prepaid expenses and other current assets

     1,293        1,605   
  

 

 

   

 

 

 

Total current assets

  33,509      31,701   

Deferred tax assets

  7,605      1,334   

Other assets

  418      499   

Property and equipment, net

  3,376      2,737   

Intangible assets, net

  2,584      3,022   
  

 

 

   

 

 

 

Total assets

$ 47,492    $ 39,293   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Bank loan

$ 7,920    $ 5,612   

Accounts payable

  16,404      13,661   

Accrued liabilities

  4,196      4,874   

Notes payable

  1,015      1,336   

Income taxes payable

  141      330   
  

 

 

   

 

 

 

Total current liabilities

  29,676      25,813   

Notes payable, less current portion

  36      1,023   

Warrant liabilities

  1,187      75   

Deferred tax liabilities

  43      178   

Deferred rent

  762      78   
  

 

 

   

 

 

 

Total liabilities

  31,704      27,167   

Shareholders’ equity:

Common stock

  63,128      60,847   

Accumulated other comprehensive loss

  (5,123   (1,757

Accumulated deficit

  (42,217   (46,964
  

 

 

   

 

 

 
  

 

 

   

 

 

 

Total shareholders’ equity

  15,788      12,126   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

$ 47,492    $ 39,293   
  

 

 

   

 

 

 

 

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Consolidated Statements of Cash Flows

(in thousands)

 

     Twelve Months
Ended March 31,
 
     2015     2014  

Cash flows from operating activities:

    

Net income (loss)

   $ 4,747        (7,441

Adjustments to reconcile net income (loss) to net cash

    

provided by operating activities:

    

Depreciation and amortization

     2,050        2,568   

Accrued and unpaid interest expense on note payable

     10        11   

Amortization of deferred financing fees

     87        39   

(Gain) loss on disposal of assets

     (73     79   

Stock-based compensation

     520        557   

Change in fair value of contingent consideration

     —          (729

Change in fair value of warrant liabilities

     (598     (74

(Benefit) provision for deferred income taxes

     (8,039     (1,607

Changes in operating assets and liabilities:

    

Accounts receivable

     141        6,406   

Other receivables

     582        (142

Inventories

     1,024        7,265   

Prepaid expenses and other current assets

     187        1,216   

Other assets

     47        (153

Accounts payable

     1,627        (1,890

Accrued liabilities

     (1,131     (1,601

Deferred rent

     410        —     

Income taxes receivable/payable

     (119     (417
  

 

 

   

 

 

 

Net cash provided by operating activities

  1,472      4,087   
  

 

 

   

 

 

 

Cash flows from investing activities:

Purchases of property and equipment

  (2,067   (1,461

Purchases of intangible assets

  —        (80
  

 

 

   

 

 

 

Net cash used in investing activities

  (2,067   (1,541
  

 

 

   

 

 

 

Cash flows from financing activities:

Borrowings on bank loan

  65,442      69,810   

Repayments on bank loan

  (63,134   (73,086

Payment of financing fees

  (85   (40

Repayments on notes payable

  (1,434   —     

Proceeds from issuance of common stock

  3,399      —     

Proceeds from exercise of stock options

  236      188   

Payment of contingent consideration

  —        (787
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  4,424      (3,915
  

 

 

   

 

 

 

Effects of foreign currency exchange rate changes on cash

  (183   92   
  

 

 

   

 

 

 

Net increase (decrease) in cash

  3,646      (1,277

Cash, beginning of period

  1,496      2,773   
  

 

 

   

 

 

 

Cash, end of period

$ 5,142    $ 1,496   
  

 

 

   

 

 

 

 

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Supplementary Data

Adjusted EBITDA (Loss) Reconciliation (non-GAAP)

(in thousands)

(Unaudited)

 

     Three Months
Ended March 31,
    Twelve Months
Ended March 31,
 
     2015     2014     2015     2014  

Net income (loss)

   $ 5,556      ($ 265   $ 4,747      ($ 7,441

Adjustments:

        

Depreciation and amortization

     514        564        2,050        2,607   

Stock-based compensation

     144        56        520        557   

Change in fair value of warrant liability

     (542     (84     (598     (74

Acquisition related items

     —          35        —          134   

Interest expense, net

     212        183        775        659   

Income tax benefit

     (7,725     (1,644     (7,179     (394
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (loss)

($ 1,841 ($ 1,155 $ 315    ($ 3,952
  

 

 

   

 

 

   

 

 

   

 

 

 

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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