Mad Catz Fiscal 2013 Third Quarter EPS Improves to $0.05 Compared to Prior Year EPS of $0.02 Continued International Success Drives 11% Year-to-Date Sales Growth Business Wire SAN DIEGO -- February 5, 2013 Mad Catz Interactive, Inc. (NYSE MKT/TSX: MCZ): Conference Call: Today, February 5, 2013 at 5:00 p.m. ET Dial-in numbers: (303) 223-2680 (U.S. & International) Webcast: www.madcatz.com (Select “Investors”) Replay Information: See text of the release Mad Catz Interactive, Inc. (“Mad Catz” or the “Company”) (NYSE MKT/TSX: MCZ), today announced financial results for its third fiscal quarter ended December 31, 2012. For the quarter ended December 31, 2012, the Company generated net sales of $45.0 million, a decrease of 3% from net sales of $46.2 million in the prior year quarter. Gross profit increased 15% to $12.9 million, from $11.2 million in the prior year quarter, while gross profit margin improved to 29% from 24% a year ago. Total operating expenses in the fiscal 2013 third quarter were $8.8 million, down 3% from $9.0 million in the prior year quarter, leading to operating income of $4.1 million, a $1.9 million improvement from the $2.2 million recorded in the prior year quarter. Foreign exchange gain was less than $0.1 million, compared to a loss of $0.5 million in the prior year quarter. Reflecting income tax expense of $1.1 million, the Company recorded net income of $3.1 million, or $0.05 per diluted share, in the fiscal 2013 third quarter, compared to $1.5 million, or $0.02 per diluted share, in the prior year quarter. Adjusted EBITDA, a non-GAAP measure (defined as earnings before interest, taxes, depreciation and amortization and change in fair value of warrant liability), was $4.9 million in the fiscal 2013 third quarter, compared to $2.5 million a year ago. Adjusted net income and adjusted income per share, which exclude the impact of amortization of intangibles, stock-based compensation, change in warrant liability and goodwill impairment (if any), were $3.2 million and $0.05, respectively, versus adjusted net income and adjusted income per share of $1.7 million and $0.03, respectively, in the prior year quarter. A reconciliation of Adjusted EBITDA, adjusted net income and adjusted income per share to the Company’s net income and net income per share is included in the financial tables accompanying this release. In the nine months ended December 31, 2012, the Company generated net sales of $98.1 million, an increase of 11% from net sales of $88.4 million in the prior year period. Year to date, gross profit increased 25% to $28.2 million, from $22.6 million in the prior year period, while gross profit margin improved to 29% from 26% a year ago. Total operating expenses in the nine months ended December 31, 2012, were $25.2 million, down 6% from $26.9 million in the prior year period, leading to operating income of $3.0 million, compared to an operating loss of $4.3 million in the prior year period. Foreign exchange gain was less than $0.1 million, compared to a loss of $0.3 million in the prior year period. Reflecting income tax expense of $1.7 million, the Company recorded net income of $1.0 million, or $0.01 per diluted share, in the nine months ended December 31, 2012, compared to a net loss of $2.4 million, or $0.04 per diluted share, in the prior year period. Adjusted EBITDA was $5.4 million in the nine months ended December 31, 2012, compared to a loss of $2.1 million in the prior year period. Adjusted net income and adjusted income per share were $1.8 million and $0.03, respectively, versus adjusted net loss and adjusted loss per share of $4.4 million and $0.07, respectively, in the prior year quarter. Summary of Fiscal 2013 Third Quarter Key Metrics: *Fiscal 2013 third quarter net sales decreased 3% from the prior year quarter to $45.0 million: *North American net sales decreased 13% to $19.1 million, representing 42% of net sales; *European net sales increased 2% to $23.2 million, representing 52% of net sales; and, *Net sales to other countries increased 78% to $2.8 million, representing 6% of net sales. *Gross sales by platform: *Xbox 360™ products accounted for 33% of total gross sales, versus 35% in the prior year quarter; *PC and Mac products accounted for 30% of total gross sales, versus 26% in the prior year quarter; *PlayStation 3 products accounted for 7% of total gross sales, versus 5% in the prior year quarter; *Wii-U and Wii products accounted for 2% of total gross sales, versus 3% in the prior year quarter; *Handheld platform products accounted for less than 1% of total gross sales, versus 2% in the prior year quarter; and, *All other platforms accounted for 28% of total gross sales, versus 29% in the prior quarter. *Gross sales by category: *Audio products accounted for 54% of total gross sales, versus 39% in the prior year quarter; *PC and Mac input device products accounted for 19% of total gross sales, versus 13% in the prior year quarter; *Specialty controllers accounted for 13% of total gross sales, versus 24% in the prior year quarter; *Accessories accounted for 7% of total gross sales, versus 9% in the prior year quarter; *Controllers accounted for 5% of total gross sales, versus 9% in the prior year quarter; and, *Game products accounted for 2% of total gross sales, versus 6% in the prior year quarter. *Gross sales by brand: *Tritton products accounted for 50% of total gross sales, versus 34% in the prior year quarter; *Mad Catz products accounted for 41% of total gross sales, versus 53% in the prior year quarter; *Saitek products accounted for 8% of total gross sales, versus 10% in the prior year quarter; and, *Other branded products accounted for 1% of total gross sales, versus 3% in the prior year quarter. *Reported net position of bank loan less cash at December 31, 2012, of $13.5 million, compared to $15.5 million as of December 31, 2011, and $14.2 million at March 31, 2012. Highlights of New Products Shipped in Fiscal 2013 Third Quarter and Subsequent: *Halo 4 licensed versions of the Warhead and Trigger headsets for Xbox 360; *Mad Catz S.T.R.I.K.E. 5™ gaming keyboard for PC and Mac; *Tritton Kunai headsets for the WiiU, 3DS and DSi; and, *Combat Pilot, a new multi-player flight simulation experience. Highlights of Upcoming Product Launches: *R.A.T.^M mobile gaming mouse for PC, Mac and smart devices ; *F.R.E.Q.^M headset for PC, Mac and smart devices; *M.O.U.S.^9 wireless mouse for PC, Mac and smart devices; and *C.T.R.L.^R wireless gamepad for smart devices. Key Developments in Fiscal 2013 Third Quarter and Subsequent: *Announced GameSmart™ technology initiative for smart devices. Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, “Three years ago, we made a strategic decision to shift our focus towards high-value products designed for passionate, hard core gaming consumers. Though this major transition is still on-going, we have now reached an inflection point in which growth in our targeted product categories is surpassing the decline in the sales of our legacy products. “Net sales during the holiday period declined 3% with the continuing growth in Europe, Canada and Asia-Pacific offset by a decline in sales in the United States. In the third quarter of fiscal 2013 sales of PC and Mac input device products, predominately gaming mice and keyboards, grew 40% and accounted for 19% of sales. Sales of audio products grew 33% and accounted for 54% of sales. “On a year to date basis net sales grew by 11% with European net sales up 15%, Asia Pacific up 126% Canada up 44%, and the United States down 4%. Year to date, sales of PC and Mac input device products grew 52% and accounted for 20% of sales. Sales of audio products grew 33% and accounted for 48% of sales. With 68% of our business growing at over 30% on a year over year basis, we are confident that the strategy to reposition the Company is taking effect, despite the on-going cautious consumer environment and challenging industry trends. “We also believe that our growing portfolio of premium products have much longer life spans and offer the best path forward as the video game industry reaches a transition with many casual gamers migrating to mobile gaming, leaving hard core gamers who demand superior products. We realize that increased sales of our premium 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 continue to expand our geographic footprint by building a worldwide sales and marketing team. As the Internet allows for increased worldwide on-line competition, the Company is committed to positioning itself as a leading provider of products that optimize the passionate video gamer’s performance on a global basis. “For example, we continue to invest in sales and marketing in the Asia Pacific region and are starting to realize the benefits of that investment through our expanded geographic footprint. Sales to Other Countries accounted for 2% of net sales in fiscal 2011, 5% of sales in fiscal 2012, and 7% of sales in the first three quarters of fiscal 2013. “We are also excited about the GameSmart initiative announced earlier this month. GameSmart aims to enable core gaming on smart devices, equivalent to the console living room or PC gaming experience. We’re committed to adding smart device compatibility to our core gaming products wherever practical and to playing a pivotal role in bringing core gaming to smart devices. We are excited about this new initiative and believe it fits with our long-term strategy of designing innovative products for passionate gamers.” Mr. Richardson concluded, “Looking ahead, we have a range of exciting initiatives that should benefit calendar 2013 and beyond. Our expanding line of products for passionate consumers is going into wide distribution in many parts of the world aided by our expanding global distribution footprint. The launch of the WiiU marked the first of a new generation of consoles that we believe will provide additional product opportunities. We intend to increase marketing and awareness efforts for our universally acclaimed audio products and R.A.T. PC and Mac products and plan to further fill out the PC and Mac product range. We intend to continue targeting software opportunities that pose manageable downside risk by complementing our hardware initiatives. We are also committed to supporting the professional gaming community through the development of products that live up to their exacting demands.” The Company will host a conference call and simultaneous webcast on February 5, 2013, at 5:00 p.m. ET, which can be accessed by dialing (303) 223-2680. 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/Investors”) or for 7 days via telephone at (800) 633-8284 (reservation #21647758) or, for International callers, at (402) 977-9140. About Mad Catz Mad Catz Interactive, Inc. (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 also develops flight simulation software through its internal ThunderHawk Studios™; publishes games under its Mad Catz brand; and distributes games and videogame products for third parties. Mad Catz distributes its products through most leading retailers offering interactive entertainment products and has offices in North America, Europe and Asia. For additional information please go to www.madcatz.com. Social Media Facebook: http://www.facebook.com/MadCatzInc Twitter: http://twitter.com/MadCatzInc YouTube: http://www.youtube.com/MadCatzCompany Safe Harbor This press release contains forward-looking statements about the Company's 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 Company's licenses; competitive developments affecting the Company's current products; first party price reductions; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; the continuing impact of current economic conditions or a further downturn in the market or industry. A further list and description of these risks, uncertainties and other matters can be found in the Company's reports filed with the Securities and Exchange Commission and the Canadian Securities Administrators. MAD CATZ INTERACTIVE, INC. 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, 2012 2011 2012 2011 Net sales $ 45,019 $ 46,188 $ 98,056 $ 88,402 Cost of sales 32,116 34,954 69,891 65,792 Gross profit 12,903 11,234 28,165 22,610 Operating expenses: Sales and 4,084 4,455 11,323 11,467 marketing General and 3,042 2,832 8,818 9,433 administrative Research and 1,080 1,285 3,318 4,476 development Acquisition 320 187 1,044 779 related items Amortization of intangible 233 235 698 721 assets Total operating 8,759 8,994 25,201 26,876 expenses Operating 4,144 2,240 2,964 (4,266 ) income (loss) Interest (227 ) (371 ) (747 ) (818 ) expense, net Foreign exchange gain 5 (536 ) 11 (338 ) (loss), net Change in fair value of 273 162 343 2,696 warrant liability Other income 31 7 108 39 Income (loss) before income 4,226 1,502 2,679 (2,687 ) taxes Income tax expense 1,099 (32 ) 1,719 (251 ) (benefit) Net income $ 3,127 $ 1,534 $ 960 $ (2,436 ) (loss) Basic net income (loss) $ 0.05 $ 0.02 $ 0.02 $ (0.04 ) per share Diluted net income (loss) $ 0.05 $ 0.02 $ 0.01 $ (0.04 ) per share Weighted average shares 63,477,399 63,456,085 63,469,217 62,973,993 - basic Weighted average shares 64,346,093 64,348,742 64,262,884 62,973,993 - diluted MAD CATZ INTERACTIVE, INC. Consolidated Balance Sheets (unaudited in thousands of US$) December 31, March 31, 2012 2012 Assets Current assets: Cash $ 4,531 $ 2,474 Accounts receivable, net 28,426 15,278 Other receivables 1,865 1,196 Inventories 28,074 32,521 Deferred tax assets 110 110 Income tax receivable 1,747 1,747 Other current assets 3,599 3,305 68,352 56,631 Deferred tax assets 435 440 Other assets 471 863 Property and equipment, net 3,293 4,037 Intangible assets, net 3,920 4,626 Goodwill 10,485 10,476 Total assets $ 86,956 $ 77,073 Liabilities and Shareholders' Equity Current liabilities: Bank loan $ 18,025 $ 16,654 Accounts payable 24,033 17,634 Accrued liabilities 7,330 6,401 Contingent consideration, current 1,614 1,600 Income taxes payable 2,096 1,375 Total current liabilities 53,098 43,664 Long term liabilities: Other long term liabilities 140 211 Deferred tax liabilities 245 245 Contingent consideration 2,206 2,769 Warrant liability 350 693 Total liabilities 56,039 47,582 Shareholders’ equity: Common stock 59,965 59,432 Other comprehensive loss (1,685 ) (1,618 ) Accumulated deficit (27,363 ) (28,323 ) Total shareholders’ equity 30,917 29,491 Total liabilities and shareholders’ equity $ 86,956 $ 77,073 MAD CATZ INTERACTIVE, INC. Supplementary Data (unaudited, in thousands of US$) Geographical Sales Data The Company's net sales were generated in the following geographic regions: Three months ended Nine months ended December 31, December 31, 2012 2011 2012 2011 Net sales: United States $ 17,074 $ 20,650 $ 39,257 $ 40,760 Europe 23,164 22,781 47,930 41,849 Canada 1,986 1,189 3,885 2,701 Other countries 2,795 1,568 6,984 3,092 $ 45,019 $ 46,188 $ 98,056 $ 88,402 Adjusted Net Income Reconciliation (non GAAP) Three Months Ended Nine Months Ended December 31, December 31, 2012 2011 2012 2011 Pre-tax income (loss) $ 4,226 $ 1,502 $ 2,679 $ (2,687 ) Amortization of intangible 233 236 698 721 assets Change in fair value of warrant (273 ) (162 ) (343 ) (2,696 ) liability Stock-based compensation 141 189 525 468 cost Adjusted pre-tax income 4,327 1,765 3,559 (4,194 ) (loss)* Adjusted provision for income taxes (at effective 1,090 (59 ) 1,787 (203 ) rate) Adjusted net income $ 3,237 $ 1,824 $ 1,772 $ (3,991 ) (loss)* Adjusted diluted earnings $ 0.05 $ 0.03 $ 0.03 $ (0.06 ) (loss) per share* *Adjusted net income and adjusted diluted loss 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 Company's 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 Company's performance by excluding certain items that may not be indicative of the Company's 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 Company’s operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP measures, specifically those that adjust for stock-based compensation, amortization of intangibles and goodwill impairment, and change in fair value of warrant liability, also facilitate comparisons of the Company’s performance to prior periods. EBITDA and Adjusted EBITDA Reconciliation (non GAAP) Three months ended Nine months ended December 31, December 31, 2012 2011 2012 2011 Net income (loss) $ 3,127 $ 1,534 $ 960 $ (2,436 ) Adjustments: Interest expense 227 371 747 818 Income tax expense (benefit) 1,099 (32 ) 1,719 (251 ) Depreciation and amortization 740 798 2,304 2,431 EBITDA 5,193 2,671 5,730 562 Change in fair value of (273 ) (162 ) (343 ) (2,696 ) warrant liability Adjusted EBITDA (loss) $ 4,920 $ 2,509 $ 5,387 $ (2,134 ) EBITDA, a non-GAAP financial measure, represents net income or loss before interest, taxes, depreciation and amortization. To address the Warrants issued in the first quarter of fiscal 2012 and the resulting gain/loss on the change in the related warrant liability, we have excluded this non-operating, non-cash charge and defined the result as “Adjusted EBITDA”. We believe this to be a more meaningful measurement of performance than the previously calculated EBITDA. Adjusted EBITDA represents net loss plus interest, taxes, depreciation and amortization and change in fair value of warrant liability. Adjusted 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, 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 operating performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Company’s operating performance. Our management uses 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. Contact: Mad Catz Interactive, Inc. Allyson Evans, CFO 619-683-9830 or JCIR Joseph Jaffoni, Norberto Aja, James Leahy 212-835-8500 or firstname.lastname@example.org
Mad Catz Fiscal 2013 Third Quarter EPS Improves to $0.05 Compared to Prior Year EPS of $0.02
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