Mad Catz Announces Q1 Financials
INDUSTRY NEWS posted on 20 AUG 2008 by Jim Zabek
Profitability skyrockets.
Mad Catz Interactive, Inc. (“Mad Catz” or “the Company”) (AMEX/TSX: MCZ), a leading third-party interactive entertainment accessory provider, today announced financial results for the fiscal 2009 first quarter ended June 30, 2008.
Mad Catz reported net sales for the fiscal first quarter ended June 30, 2008 of $23.2 million, a 58.9% increase from $14.6 million in the fiscal 2008 first quarter. Gross profit for the quarter rose 72.3% to $8.1 million, from $4.7 million in the fiscal 2008 first quarter. Gross profit margin for the first quarter of fiscal 2009 improved by 280 basis points to 34.9% compared to 32.1% in the prior year period. Net loss for the quarter ended June 30, 2008 was $0.8 million, or $0.01 per diluted share, compared to a net loss of $0.2 million, or break-even on a diluted share basis, for the first quarter of fiscal 2008. EBITDA, a non-GAAP measure (defined as earnings before interest, taxes, depreciation and amortization), was $0.3 million in the fiscal 2009 first quarter, compared to EBITDA of $0.4 million in the fiscal 2008 first quarter. A reconciliation of EBITDA to the Company’s net income is included in the financial tables accompanying this release.
Selling, general and administrative expenses totaled $7.9 million, or 34.0% of net sales, compared with $4.5 million, or 30.8% of net sales, in the prior year period. Research and development expenses increased to $0.5 million during the first quarter of fiscal 2009 compared with $0.3 million in the first quarter of fiscal 2008. The loss before income taxes for the quarter ended June 30, 2008 was $1.3 million, as compared to a loss before income taxes of $0.1 million in the prior year first quarter.
Fiscal 2009 First Quarter and Recent Highlights:
* Generated record first quarter net sales of $23.2 million;
* Generated record first quarter gross profit of $8.1 million;
* Generated record first quarter gross profit margin of 34.9%;
* Increased European net sales in the first quarter to 41% of total net sales as compared to 29% of total net sales in the first quarter of fiscal 2008;
* Further diversified and expanded product lines and brand license portfolio:
* Expanded product sales for the popular Nintendo Wii™ platform with shipment of new line of accessories compatible with the Wii Fit system;
* Renewed and expanded multi-year licensing agreement with Microsoft Corporation to manufacture, market, and sell Xbox 360-branded console-carrying backpacks, messenger bags and sling bags for controllers and other game accessories;
* Obtained license from Ubisoft® to produce branded accessories for the Petz® series of video games on the Wii™ and Nintendo DS™;
* Further enhanced portfolio of sports license agreements with the addition of several major franchises including Manchester United, Liverpool and Arsenal Football Clubs;
* Secured multi-year license from Ubisoft® to produce branded accessories based on the Rayman Raving Rabbids® series of games;
* Entered into a multi-year license agreement with Coffin Case Company to produce carrying cases, videogame accessories cases, guitar straps and other accessories for use with Rock Band and Guitar Hero;
* Introduced Saitek’s new ‘Expressions’ range of lifestyle-themed PC accessories designed to combine quality engineering with unique and original style; and
* Achieved further retail presence for AirDrives™ and AirDrives™ for iPhone in the U.S. and U.K.;
* Continued to identify integration opportunities related to November 2007 acquisition of leading PC peripherals provider Saitek;
* Appointed Thomas Brown Chairman of the Board; and
* Reported net position of bank loan less cash at June 30, 2008 of $10.9 million (inclusive of approximately a $15 million increase in the bank loan balance as part consideration of the Saitek acquisition) compared to $6.2 million as of March 31, 2008.
Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, stated, “Mad Catz’ record first quarter net sales of $23.2 million and gross profit margin of 34.9% reflect the significant progress we continue to make in diversifying our product lines, expanding our international presence and building our portfolio of prominent licenses. During the quarter we introduced a popular new line of accessories to coincide with the launch of Nintendo’s Wii Fit system, which meaningfully enhanced our product offerings on the Wii console.
“As a result of the expansion of our product offerings for the current generation of consoles, Mad Catz reached an important inflection point in the first quarter of 2008, as sales for the current generation of consoles surpassed those of the prior generation for the first time. We plan to build on this momentum through the high quality range of accessories we expect to begin shipping in North America and Europe in the second quarter for the hit Rock Band™ game, which has potential to serve as an important source of revenue for Mad Catz through the 2008 holiday season and beyond.
“During the first quarter Mad Catz also made significant progress in extending our geographic reach and product diversification by leveraging our acquisition of leading PC peripherals provider Saitek. PC-based products comprised a significant portion of our revenues during the first quarter, broadening our product offerings and reducing Mad Catz’ reliance on gaming console-specific products. In addition, net sales into the European market in the fiscal 2009 first quarter more than doubled from the prior year period, with Europe now accounting for over 40% of net sales.
“We believe we can significantly reduce SG&A as a percentage of net sales from the levels recorded in the first quarter and we remain focused on effecting further cost management initiatives to improve our operating efficiency. By increasing the coordination and integration between Mad Catz’ and Saitek’s global operations, we expect to enhance both the sales and operating efficiency of the combined entity.
“Consistent with our initiative to further strengthen our portfolio of globally recognized brand licenses, during the first quarter Mad Catz entered into several agreements to align our products with some of the most popular and recognizable franchises worldwide. Our new Manchester United, Liverpool and Arsenal Football Club licenses should help leverage the increased penetration our products are gaining throughout Europe, while our Rayman Raving Rabbids® and Petz® licenses should help broaden our portfolio of products appealing to a younger demographic. These recent agreements add further depth to what we consider to an impressive portfolio of brand licenses and we expect our licensed product lines to be an important driver of sales for Mad Catz for the upcoming holiday season and through this fiscal year.”
Mr. Richardson concluded, “While there is still progress to be made, Mad Catz has proven its ability to successfully execute upon its goals to gain traction on the current generation of consoles, diversify its product lines, expand its geographic presence and achieve improved gross margins. As a result, we are poised to enter the holiday season with a broad suite of products and deep portfolio of entertaining brand licenses, which we believe favorably positions Mad Catz to capitalize upon the success of our products and the strength of the interactive entertainment industry and generate shareholder value.”
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