Mad Catz Interactive's CEO Discusses F1Q13 Results - Earnings Call Transcript

Mad Catz Interactive, Inc. (MCZ)

F1Q13 Earnings Call

August 8, 2012 5:00 p.m. ET


Norberto Aja - Investor Relations

Darren Richardson - President and Chief Executive Officer

Allyson Evans - Chief Financial Officer


Ronald Rotter - RLR Partners

Stan Trilling – Credit Suisse



Ladies and gentlemen thank you for standing by. Welcome to the Mad Catz Fiscal 2013 First Quarter Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded, Wednesday, August 8, 2012.

I would now turn the conference call over to Norberto Aja. Please go ahead, sir.

Norberto Aja

Thank you, operator. Good afternoon everyone and welcome to Mad Catz's fiscal 2013 first quarter conference call. With me on the call today are Darren Richardson, Mad Catz's President and Chief Executive Officer; and Allyson Evans, Mad Catz's Chief Financial Officer. Darren will begin the call by providing an overview of the results and the principal drivers behind them. Afterwards, Allyson will review the financial results in greater detail, before turning the call back to Darren for some closing remarks.

Before we begin, however, let me just take a few minutes to read the Safe Harbor language. Today's discussions will contain forward-looking statements about the company's financial results, estimates and business prospects that involve substantial risks and uncertainties. The company assumes no obligation to update the forward-looking statements contained in this conference call as a result of new information or future events or developments. You can identify these statements by the fact that they use the words such as anticipate, estimate, expect, project, intend, plan, 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 company's licenses, competitive developments affecting the company's current products, first party price reductions, price protection taken in response to price cuts, the ability to successfully market both new and existing products domestically and internationally, difficulties or delays in manufacturing, delays in the company’s ability to obtain products from its manufacturers in China, and market and general economic conditions. A further list and description of these risks, uncertainties and other matters can be found in the company's reports filed with the appropriate regulatory authorities.

Today's call, August 8, 2012, and webcast includes non-GAAP financial measures within the meaning of the SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today's press release.

With that, I would now like to introduce Darren Richardson, President and Chief Executive Officer of Mad Catz. Darren?

Darren Richardson

Thank you, Norberto, and good afternoon everyone. Thank you for joining us on your fiscal 2013 first quarter conference call. Three years ago we made a strategic decision to shift our focus towards high value products designed for passionate hardcore consumers. This shift hasn’t happened overnight and is still ongoing. We are now reaching an inflection point where the growth in the targeted product categories is more than offsetting the decline in the sales of legacy products.

We are pleased to see strong net sales growth of 33% for our first quarter, historically our weakest quarter of the year. And specially pleased to see all territories return to growth. In the first quarter of fiscal 2013, sales of PC and Mac input device products, predominantly gaming mice and keyboards, grew 83% and accounted for 21% of sales. Sales of Saitek flight simulation products grew 22% and accounted for 10% of sales. The sale of audio products grew 107% and accounted for 44% of sales. On an annualized basis, sales of audio products accounted for 41% of sales, or $50 million in net sales, meeting our previously stated goal of having our line of audio products account for 40% to 50% of net sales.

We also believe these premium products have much a longer product life span and offer the best path forward as the video game industry reaches a transition with casual gamers migrating to mobile gaming, leaving hardcore gamers who demand the best. We realize and understand that more sales of these key products are needed and we are committed to increasing our sales and marketing efforts to expand awareness of these products, while keeping a sharp eye on operating expenses.

In addition to our focus on creating aspirational products, we have also expanded our geographic footprint as we continue to build a worldwide sales and marketing team. As games increasingly cross geographic borders and the internet allows worldwide online competition, the company is committed to positioning itself as a leading provider of products that optimize the passionate video gamers’ performance on a global basis.

Last year we announced the opening of our sales and marketing office in Japan. We are starting to realize the benefits of our investment and expanding our geographic footprint, especially in the Asia Pacific region. Our sales classified to other countries have grown from 2% of sales in fiscal 2011 to 5% of sales in fiscal 2012, and now represent 7% of sales in the first quarter of fiscal 2013. We are hopeful that the addition of our recently announced sales and marketing office in South Korea will further accelerate sales in that vibrant gaming market.

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