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Mad Catz® Reports Fiscal 2014 Fourth Quarter And Year End Financial Results

Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT/TSX: MCZ), today announced financial results for the fiscal 2014 fourth quarter and full year ended March 31, 2014.

Key Highlights of Fiscal 2014 Fourth Quarter and Subsequent:
  • Fiscal 2014 fourth quarter net sales declined 18% to $20.2 million, driven by a decline in sales to EMEA, the Americas and APAC of 11%, 35% and 1%, respectively;
  • Gross margin for the Fiscal 2014 fourth quarter was 23.9%, compared to 25.8% in the prior year;
  • Total operating expenses in the Fiscal 2014 fourth quarter decreased 65% from the prior year period to $6.5 million;
  • Diluted loss per share was ($0.00) for the Fiscal 2014 fourth quarter, compared to a diluted loss per share of ($0.19) in the prior year quarter;
  • Net position of bank loan, less cash, of $4.1 million at March 31, 2014, compared to $11.1 million at December 31, 2013 and $6.1 million at March 31, 2013;
  • Announced new range of Xbox One™ licensed headsets;
  • Announced agreement to bring OUYA content to the M.O.J.O.™ Micro-Console™;
  • Began shipping the KUNAI™ and FREQ 4D™ headsets as well as Titanfall™-licensed headset, mouse and keyboard; and
  • Announced a co-marketing agreement to promote OnLive’s cloud gaming service on the M.O.J.O. Micro-Console.

Key Financial Highlights of Fiscal 2014:
  • Fiscal 2014 net sales declined 27% to $89.6 million, driven by a decline in sales to EMEA, the Americas and APAC of 14%, 45% and 14%, respectively;
  • Gross margin for Fiscal 2014 was 25.5%, compared to 28.1% in Fiscal 2013;
  • Total operating expenses in Fiscal 2014 decreased 33% year-over-year to $29.4 million; and
  • Diluted loss per share was ($0.12) for Fiscal 2014 compared to ($0.18) in the prior year.

Summary of Financials

(in US$ thousands, except margins and per-share data)
       
Three Months Years
Ended March 31, Ended March 31,
  2014       2013   Change   2014       2013   Change
 
Net sales $ 20,217 $ 24,608 (18 )% $ 89,629 $ 122,664 (27 )%
Gross profit 4,838 6,351 (24 )% 22,898 34,516 (34 )%
Total operating expenses   6,527     18,830   (65 )%   29,420     44,032   (33 )%
Operating loss   (1,689 )   (12,479 ) (86 )%   (6,522 )   (9,516 ) (31 )%
Net loss   ($265 )   ($12,160 ) (98 )%   ($7,441 )   ($11,200 ) (34 )%
Net loss per share, basic   ($0.00 )   ($0.19 ) (100 )%   ($0.12 )   ($0.18 ) (33 )%
Net loss per share, diluted   ($0.00 )   ($0.19 ) (100 )%   ($0.12 )   ($0.18 ) (33 )%
 
Gross margin 23.9 % 25.8 % (1.9 )% 25.5 % 28.1 % (2.6 )%
 
Adjusted EBITDA (loss) (1) ($1,155 ) ($81 ) (1326 )% ($3,952 ) $ 6,434 (161 )%
 

(1) Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 7.

Commenting on the Company’s Fiscal 2014 fourth quarter and full year results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “Sales of our console products are rebounding on the back of strong next gen console sales. Products for next gen consoles accounted for 11% of our fourth quarter sales and we expect that growth to accelerate once our Xbox One headset range ships in the summer. We are adding key new products to our mice and keyboard category, which we believe will revitalize growth of our PC and Mac products. In addition, we are seeing early signs of traction in our GameSmart products for Smart devices. Products for Smart devices accounted for 4% of our sales in the fourth quarter and we expect that growth to accelerate with the launch of new controller-enabled games and a growing installed base of micro-consoles. While sales of our legacy console products are likely to decline, we believe that the console manufacturers’ commitment to support the legacy consoles over the next few years will allow us to continue to sell these legacy products as we build out our line of next gen products .”

Summary of Key Sales Metrics
       
Three Months Years
Ended March 31, Ended March 31,
(in US$ thousands)   2014       2013   Change     2014       2013   Change
 
Net Sales by Geography
EMEA $ 12,557 $ 14,030 (11 )% $ 53,132 $ 61,960 (14 )%
Americas 5,275 8,174 (35 )% 28,470 51,316 (45 )%
APAC   2,385     2,404   (1 )%   8,027       9,388   (14 )%
Total $ 20,217   $ 24,608   (18 )% $ 89,629     $ 122,664   (27 )%
 
Sales by Platform as a % of Gross Sales
PC and Mac 47 % 42 % 45 % 33 %
Universal 25 % 24 % 29 % 25 %
Next gen consoles (a) 11 % 0 % 3 % 1 %
Legacy consoles (b) 12 % 32 % 19 % 39 %
Smart devices 4 % 1 % 2 % 1 %
All others   1 %   1 %   2 %   1 %
  100 %   100 %   100 %   100 %
 
Sales by Product Category as a % of Gross Sales
Audio 47 % 45 % 47 % 48 %
Mice and Keyboards 28 % 28 % 29 % 21 %
Specialty controllers 18 % 15 % 16 % 14 %
Accessories 3 % 7 % 5 % 8 %
Controllers 2 % 3 % 1 % 5 %
Games & Other   2 %   2 %   2 %   4 %
  100 %   100 %   100 %   100 %
 
Sales by Brand as a % of Gross Sales
Mad Catz 39 % 46 % 41 % 45 %
Tritton 43 % 41 % 42 % 44 %
Saitek 14 % 11 % 12 % 9 %
Other   4 %   2 %   5 %   2 %
  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.
 

Karen McGinnis, Chief Financial Officer of Mad Catz, commented, “We experienced ongoing weakness in our sales during the fourth quarter and throughout fiscal 2014 as sales were down across all regions and categories, although declines in EMEA were less than in the Americas and APAC. Gross margin during the fourth quarter decreased to 24% due primarily to an increase in distribution costs as a percentage of net sales and increases in sales of products with lower margin, offset partially by a decrease in inventory write-downs as a percentage of net sales. However, we successfully reduced operating expenses, which offset some of the decline in gross profit. Overall, we knew this would be a challenging fiscal year due to the impact of the gaming console transition, yet we remained focused on effectively managing our overall liquidity position by reducing inventory levels and expenses, and managing our accounts receivable collection efforts. As a result, we ended the quarter with a net position of bank loan less cash of only $4.1 million, compared to $6.1 million a year ago and $11.1 million last quarter.”

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