Company Update (NYSE:MCZ): Mad Catz Interactive, Inc. (USA) Reports Fiscal 2016 Fourth Quarter and Year End Financial Results

Mad Catz Interactive, Inc. (USA) (NYSEMKT:MCZ) announced financial results for the fiscal 2016 fourth quarter and full year ended March 31, 2016.

Key Highlights of Fiscal 2016 Fourth Quarter and Subsequent:

  • Fiscal 2016 fourth quarter net sales increased 4%  over the prior year fourth quarter to $17.1 million, driven by a 57% increase in net sales to the Americas and a 7% increase in net sales to APAC, partially offset by a 30% decrease in net sales to EMEA;
  • Gross margin declined to (5.1%) from 23.4% in the prior year quarter, driven by $6.8 million of charges related to Rock Band 4 for inventory write-downs, material authorizations and price reductions with retailers;
  • Total operating expenses increased 36% from the prior year period to $8.4 million, including $3.0 millionfor severance and restructuring costs;
  • Operating loss was ($9.3 million), compared to ($2.3 million) in the prior year;
  • Diluted net loss per share was ($0.10), compared to diluted net income per share of $0.09 in the prior year;
  • Net position of bank loans, less cash and restricted cash, was $13.0 million at March 31, 2016, compared to $17.7 million at December 31, 2015 and $2.8 million at March 31, 2015;
  • Sold no shares under the “At-the-Market” (“ATM”) equity offering program;
  • Announced “Designed for Samsung” versions of the Micro C.T.R.L.R™ Mobile Gamepad and S.U.R.F.R™Wireless Media and Game Controller;
  • Voluntarily delisted common shares from the Toronto Stock Exchange as part of ongoing measures aimed at lowering operating costs;
  • Shipped new range of Street Fighter™ V licensed controllers, including fightsticks, Tournament Edition fightsticks and fightpad controllers;
  • Announced the X-56 Rhino H.O.T.A.S. Advanced Flight Control System™, the Company’s newest addition to its Saitek Pro Flight Range of PC-based simulation accessories;
  • Completed restructuring plan focused on lowering operating costs, increasing efficiencies and better aligning the Company’s resources with its needs and goals, with the expectation of generating annualized net savings of $6 million to $7 million starting in the first quarter of Fiscal 2017; and,
  • Agreement with Harmonix for Rock Band 4 was terminated resulting in a 120-day wind-down period, ending September 6, 2016, to sell remaining $8.3 million of Rock Band 4 inventory.

Key Financial Highlights of Fiscal 2016:

  • Fiscal 2016 net sales increased 55% over the prior year to $134.1 million, driven by a 215% increase in net sales to the Americas, partially offset by a 17% decrease in net sales to EMEA and 35% decrease in net sales in APAC;
  • Gross margin was 16.7%, compared to 27.7% in Fiscal 2015;
  • Total operating expenses in Fiscal 2016 increased 25% year-over-year to $31.8 million;
  • Operating loss for Fiscal 2016 was ($9.4 million), compared to an operating loss of ($1.6 million) for the prior year; and,
  • Diluted net loss per share in Fiscal 2016 was ($0.16), compared to diluted net income per share of $0.07in the prior year.

Commenting on the Company’s Fiscal 2016 fourth quarter and full year results, David McKeon, Chief Financial Officer of Mad Catz, said, “The fourth quarter of Fiscal 2016 wrapped up a mixed year for Mad Catz.  While we saw strong top-line results in the quarter and full year driven by sales of Rock Band 4 products, weaker than expected consumer demand for Rock Band 4 led to lower gross profit margins, higher expenses and a loss of $0.16 per share for the full year.”

“Despite the Rock Band 4-related challenges, Mad Catz did make some notable progress in the Fiscal 2016 fourth quarter.  We saw improved sales of our audio and fightstick products for next generation consoles and continued development work which will allow us to further refresh our core product lines.  In addition, we completed a significant restructuring program that will save the Company approximately $6 to $7 million on an annualized basis beginning in the first quarter of Fiscal 2017.  While there is much work to be done and we continue to have working capital constraints, we are confident that Fiscal 2017 will benefit from the Company’s recent efforts.”

Karen McGinnis, President and Chief Executive Officer of Mad Catz, commented, “The past few months have been an incredibly busy time at Mad Catz, a time of great change that we are confident will result in improvements across key operational and financial metrics.  Each of our initial objectives has been executed with incredible speed, many of them already showing a positive impact on the Company’s operations and financial results.”

“Looking ahead, we’re starting the new fiscal year with a strong management team in place and with smart and dedicated employees who have already begun executing our vision and strategy.  We believe Fiscal 2017 will be a year of hard work, steady improvement and execution.  Our future will be based on our ability to innovate, execute and make continued progress towards sustainable and profitable growth.”

Going Concern Explanatory Paragraph in Audit Opinion

Pursuant to the disclosure requirements of NYSE MKT Company Guide Section 610(b), the Company is reporting that its audited consolidated financial statements for the fiscal year ended March 31, 2016, included in the Company’s Annual Report on Form 10-K which it expects to file with the Securities and Exchange Commission on or about June 2, 2016, will contain an audit opinion from its independent registered public accounting firm that includes an explanatory paragraph related to the Company’s ability to continue as a going concern. (Original Source)

Shares of Mad Catz are down $4.41% to $0.18 in pre-market trading. MCZ has a 1-year high of $0.75 and a 1-year low of $0.18. The stock’s 50-day moving average is $0.21 and its 200-day moving average is $0.30.

Mad Catz Interactive, Inc. operates as a provider of interactive entertainment products. It includes designing, manufacturing, sales, marketing, and distribution of products marketed under Mad Catz (gaming), Tritton (audio), and Saitek (simulation) brands. The company was founded on August 25, 1993 and is headquartered in San Diego, CA.


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