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

Mad Catz Interactive, Inc. (USA) (NYSEMKT:MCZ) announced financial results for the fiscal 2016 third quarter ended December 31, 2015. Mad Catz also announced the adoption of a Company-wide restructuring plan that includes several executive level and Board of Directors changes as specified in the Company’s previous announcement dated February 8, 2016.

Key Highlights of Fiscal 2016 Third Quarter and Subsequent:

  • Fiscal 2016 third quarter net sales increased 114% to $65.0 million, the second highest quarterly net sales in the Company’s history;
  • Net sales growth driven by a 391% increase in net sales to the Americas, partially offset by a 6% decrease in net sales to EMEA and a 56% decrease in net sales to APAC;
  • Gross margin declined to 17.5% from 26.9% in the prior year quarter;
  • Total operating expenses increased 44% from the prior year period to $8.6 million;
  • Operating income increased 28% to $2.8 million;
  • Diluted net income per share was $0.02 for the fiscal 2016 third quarter, consistent with the prior year;
  • Net position of bank loans, less cash and restricted cash, of $17.7 million at December 31, 2015, compared to $12.7 million at September 30, 2015 and $10.7 million at December 31, 2014;
  • Sold no shares under the “At-the-Market” (“ATM”) equity offering program;
  • Shipped F.R.E.Q.TE™ 7.1 surround sound gaming headset for Windows PC;
  • Announced the Tritton Katana HD 7.1 surround sound gaming headset, a 2016 CES Innovation Award Honoree and the First HDMI™-powered gaming headset for gaming consoles, Windows PC, smart devices and HDMI audio sources;
  • Announced the R.A.T. 1 gaming mouse, a 2016 CES Innovation Award Honoree;
  • Shipped the stand-alone Rock Band™ 4 Wireless Fender™ Stratocaster™ Guitar Controller and the stand-alone Rock Band™ 4 Triple Cymbals Expansion Kit;
  • Announced new range of Street Fighter™ V licensed controllers, including fightsticks, Tournament Edition fightsticks and fightpad controllers;
  • Announced the E.S. PRO1™ Gaming Earbuds specifically designed for eSports gamers;
  • Announced that the Company will be the first to offer traditional video game controller hardware for the “Designed for Samsung” program;
  • Announced executive level and Board of Directors changes including the departure of Chairman of the Board, Thomas Brown; President and CEO, Darren Richardson; SVP Business Affairs, General Counsel and Secretary, Whitney Peterson; and, the appointment of John Nyholt as Chairman of the Board; Karen McGinnis as President, CEO and member of the Board of Directors; David McKeon as CFO; Tyson Marshall as General Counsel and Secretary; and Andrew Young as Chief Technology Officer; and,
  • The Board of Directors approved a restructuring plan focused on lowering operating costs, increasing efficiencies and better aligning the Company’s resources with its needs and goals.

Restructuring Plan

On February 5, 2016, the Company’s Board of Directors approved a restructuring plan focused on lowering operating costs, increasing efficiencies and better aligning its workforce with the needs of the business. The plan consists of a reduction in the number of positions across the organization equal to approximately 37% of the total workforce and includes changes at the executive level. As a result of these actions, the Company expects to record a pre-tax cash restructuring charge of approximately $3.0 million during the fourth quarter of fiscal 2016, comprised primarily of severance and benefits afforded to terminated employees and executive officers (inclusive of amounts due Messrs. Richardson and Peterson pursuant to their amended and restated employment agreements, dated as of April 22, 2014). The Company anticipates that the actions associated with these headcount reductions will be substantially completed by the end of the fourth quarter of fiscal 2016, and that these actions will result in annual savings in excess of $5.0 millionstarting in the first quarter of fiscal 2017.

In addition and as announced yesterday on February 8, 2016, the Company’s Board of Directors approved several changes to its executive leadership team and Board of Directors composition, effective immediately. Those changes include:


  • Thomas Brown resigned from the Company’s Board, including from his roles as Chairman of the Board and member of the Audit Committee;
  • Darren Richardson agreed to resign from his position as President and Chief Executive Officer of the Company and as a member of the Company’s Board of Directors; and,
  • Whitney Peterson agreed to resign from his position as Senior Vice President of Business Affairs, General Counsel, and Corporate Secretary of the Company.


  • Mr. John Nyholt as Chairman of the Board. Mr. Nyholt has been a director of the Company since October 2013;
  • Karen McGinnis as President and Chief Executive Officer and member of the Company’s Board.  Ms. McGinnis was previously Chief Financial Officer of the Company;
  • David McKeon as Chief Financial Officer. Mr. McKeon was previously VP, Corporate Controller of the Company;
  • Tyson Marshall as General Counsel and Corporate Secretary.  Mr. Marshall was previously Associate General Counsel of the Company; and,
  • Andrew Young as Chief Technology Officer. Mr. Young was previously Vice President, Product Development of the Company.

Ms. McGinnis, added, “Today, we are announcing a restructuring plan that we strongly believe will enable Mad Catz to be more competitive and increase our focus on operational, technological and commercial actions that will help us achieve our long-term vision. These changes will allow us to operate more effectively and help create an organization that is more agile, able to pursue growth and regain share in our core markets by simplifying our processes and reducing our operating costs, thus increasing our competitiveness and profitability without compromising the quality of our product offering. This realignment of our resources will also enable us to better support strategic initiatives that will make our product slate more competitive, help us gain added consumer interest and create sustainable shareholder value.

“In closing, I’d like to recognize the tremendous value that Thomas, Darren and Whitney have brought to Mad Catz during their tenure, thank them for their many contributions throughout the years and wish them the very best.”. (Original Source)

Shares of Mad Catz are down nearly 4% in after-hours trading. MCZ has a 1-year high of $0.75 and a 1-year low of $0.23. The stock’s 50-day moving average is $0.38 and its 200-day moving average is $0.48.

Mad Catz Interactive Inc designs, manufactures through third parties in Asia, markets, sells and distributes accessories forvideogame platforms, the personal computer and, to a lesser extent the iPod and other audio devices.


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