Mad Catz Reports First Quarter Fiscal 2008 Results

    - Gross Profit Margin Rises to a Record 32% and Gross Profit Rises 32% to
$4.7 Million -

    SAN DIEGO, August 14 /CNW/ - Mad Catz Interactive, Inc. ("Mad Catz" or
"the Company") (AMEX/TSX: MCZ), a leading worldwide provider of third-party
video game peripherals, today announced financial results for the fiscal 2008
first quarter ended June 30, 2007.

    Net sales for the fiscal first quarter ended June 30, 2007 were $14.6
million, a 19.6% decrease from $18.1 million in the fiscal 2007 first quarter.
Gross profit for the quarter increased 31.9% to $4.7 million from $3.5 million
in the prior year first quarter. Gross profit margin for first quarter of
fiscal 2008 was a record 32.1% compared to 19.6% in fiscal 2007 first quarter.
Net loss for the quarter ended June 30, 2007 was $0.2 million, or break-even
on a per share basis, compared to a net loss of $0.9 million, or $(0.02) per
share, for the quarter ended June 30, 2006. EBITDA, a non-GAAP measure
(defined as earnings before interest, taxes, depreciation and amortization),
was $0.4 million in fiscal 2008 first quarter compared to EBITDA of negative
$0.4 million in fiscal 2007 first quarter. A reconciliation of EBITDA to the
Company's net loss on a U.S. GAAP basis is included in the financial tables
accompanying this release.

    Sales and marketing expenses in the fiscal 2008 first quarter were $1.7
million, or 11.9% of net sales, compared with $2.5 million, or 14.0% of net
sales, in the same prior year period. For the quarter ended June 30, 2007,
general and administrative expenses were $2.8 million, a 44.3% increase from
$1.9 million in the prior year period. Research and development expenses
increased to $0.3 million during the first quarter of fiscal 2008 compared
with $0.2 million in the same quarter of fiscal 2007. The loss before income
taxes for the quarter ended June 30, 2007 was $0.1 million, as compared to the
loss before income taxes of $1.2 million in the prior year first quarter.

    Fiscal 2008 First Quarter Highlights:

    --  Operating loss in this seasonally slowest quarter narrowed from $1.2
million in Q1 '07 to a first quarter record of $0.2 million in Q1 '08;

    --  Achieved record quarterly gross margin of 32.1%;

    --  EBITDA rose to $0.4 million compared to a negative EBITDA of $0.4
million in Q1 '07;

    --  Continued geographic diversification as European sales rose 69.4%
from year ago levels to $4.2 million reflecting increased demand for new
console products as well as increased sales to several key customers;

    --  Increased penetration into the current generation console marketplace
as sales of products and related accessories for Xbox 360(TM), Playstation(R)
3 and Wii(TM) accounted for 46% of the Company's net sales as compared to 11%
in the prior year period and 39% in the fourth quarter of fiscal 2007;

    --  Continued efforts to maintain strong balance sheet as net working
capital increased to $14.6 million from $5.5 million (165%), net debt
(outstanding bank debt less cash) was reduced by $10.7 million (97%) and
inventory was further reduced by $0.3 million (2%) from the same period in
fiscal 2007;

    --  Continued to align current and upcoming Mad Catz products with
professional sports leagues and highly-anticipated software releases:

           -- Entered into license agreements with Microsoft and
              Bioware(R) to produce a new line of customized accessories
              to support the highly-anticipated upcoming launches of
              Halo(R) 3 and Mass Effect(TM) video games;
           -- Entered into a license agreement with Ubisoft to produce a
              new line of customized accessories to support the
              highly-anticipated upcoming launches of Assassin's Creed(TM)
              and Tom Clancy's Splinter Cell Conviction(TM) video games;
           -- Entered into a license agreement with the National Hockey
              League ("NHL") to produce branded controllers and related
              accessories; and,
           -- Renewed and/or expanded license agreements with the major
              sports leagues including the National Football League
              ("NFL"), National Basketball Association ("NBA") and Major
              League Baseball ("MLB").

    Commenting on the results, Darren Richardson, Mad Catz' President and
CEO, stated, "During the first quarter, Mad Catz continued to see the benefits
of our initiatives to add higher margin products and selectively eliminate
existing products while improving operating efficiencies. Despite the fact
that year-over-year net sales decreased due to contributions from Real World
Golf sales in the prior year first quarter and ongoing effects of the console
transition, we were able to achieve record gross margin levels of over 32%
fueled by the continued elimination of select low margin product placements,
lower inventory levels and decreased distribution costs. As a result of our
improved operating efficiencies we were able to make meaningful progress
toward profitability during what is seasonally our slowest quarter, and posted
break-even EPS versus a $0.02 per share loss in the year-ago period.

    "In addition to our progress over the past several quarters in driving
operating efficiencies, we've also developed and acquired rights to an
entertaining and diverse set of upcoming products. Mad Catz now has license
agreements in place to create customized products and accessories for
attractive brands including each of the four major sports leagues as well as
agreements to produce accessories to accompany the launches of some of the
most highly-anticipated software titles of the upcoming holiday season
including Halo 3, Mass Effect, Assassin's Creed and Tom Clancy's Splinter Cell
Conviction. In addition to these entertainment and sports licenses, we are
diversifying our product offerings via adjacent categories and we plan to
launch our proprietary AirDrives personal audio hybrid earphones utilizing the
InAir(TM) Technology this fall. We are very excited by the prospects for this
innovative technology as it creates a unique opportunity for listeners to
integrate music into their every day activities, eliminating the need to
choose between music and social interaction. Further, a recent study conducted
by the San Diego Hearing Center demonstrates that AirDrives are the first
earphones approved for all-day listening in accordance with House Ear
Institute and Occupational Health & Safety Administration (OHSA) standards. We
believe these health and safety benefits augment AirDrives' distinctive

    Mr. Richardson concluded, "With our seasonally slowest quarter now behind
us, the benefit of a broad portfolio of licensed brands and continued
penetration into the current generation console marketplace, Mad Catz is
poised to enter what will be an important holiday season. We are entering this
period with improved levels of operational and working capital efficiency as
well as early sales momentum of products and accessories for the current
generation consoles. While we will continue to feel the effects of a difficult
operating environment related to the prior generation of consoles, we believe
we are well-positioned to take advantage of the opportunities ahead as the
installed base of current generation consoles continues to grow. We are also
continuing our ongoing efforts to expand our portfolio of relevant licenses,
broaden our offerings into adjacent product categories and develop attractive
hardware-software bundles, and we look forward to reporting our progress on
these efforts as we seek to increase shareholder value throughout the
remainder of the fiscal year."

    The Company will host a conference call and simultaneous webcast today
August 14, 2007, at 5:00 p.m. EDT. Following its completion, a replay of the
call can be accessed for 30 days at the Company's Web site (,
select "Investors") or for 7 days via telephone at 800/633-8284 (reservation #
21345986) or, for International callers, at 402/977-9140.

    About Mad Catz

    Mad Catz is a worldwide leader of innovative peripherals in the
interactive entertainment industry. Mad Catz designs and markets a full range
of accessories for video game systems and publishes video game software,
including the industry leading GameShark brand of video game enhancements. Mad
Catz sells its products to most leading retailers offering interactive
entertainment products. Mad Catz has its operating headquarters in San Diego,
California and offices in Canada, Europe and Asia. For additional information
go to

    Safe Harbor for Forward Looking Statements:

    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 except as may be required by law. You can identify
these statements by the fact that they use words such as "anticipate,"
"estimate," "expect," "project," "intend," "should," "plan," "goal,"
"believe," the negative of such expressions, 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; or a 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.

    Conference Call:    Today, August 14, 2007 at 5:00 p.m. EDT
    Dial-in numbers:    800/ 926-4402 (US and CAN) or 212/ 231-2902 
    Webcast:   (Select "Investors")
    Replay Information: See release text

                          MAD CATZ INTERACTIVE, INC.
                    Consolidated Statements Of Operations
      (unaudited, in thousands of US$, except share and per share data)

                                                    Three Months Ended
                                                         June 30,
                                                     2007         2006
                                                 ------------ ------------

    Net sales                                    $    14,578  $    18,141

    Cost of sales                                      9,899       14,594
                                                 ------------ ------------

    Gross profit                                       4,679        3,547

    Operating expenses:
      Sales and marketing                              1,733        2,544
      General and administrative                       2,800        1,940
      Research and development                           314          219
                                                 ------------ ------------
        Total operating expenses                       4,847        4,703
                                                 ------------ ------------

    Operating loss                                      (168)      (1,156)
         Interest expense, net                           (99)        (273)
         Foreign exchange gain, net                       30          162
         Other income                                     91           57
                                                 ------------ ------------

    Loss before income taxes                            (146)      (1,210)
    Income tax expense (benefit)                          35         (334)
                                                 ------------ ------------

    Net loss                                     $      (181) $      (876)
                                                 ------------ ------------

    Net loss per share:
    Basic and diluted                            $     (0.00) $     (0.02)
                                                 ------------ ------------

    Number of shares used in computation:
    Basic and diluted                             54,355,326   54,244,383
                                                 ------------ ------------

                          MAD CATZ INTERACTIVE, INC.
                         Consolidated Balance Sheets
                            (in thousands of US$)

                                                   June 30,     March 31,
                                                     2007         2007
                                                 ------------- -----------
    Assets                                        (unaudited)

    Current assets:
      Cash                                       $      1,939  $    2,350
      Accounts receivable, net                         11,100      13,937
      Other receivables                                   605         542
      Inventories                                      13,859      12,804
      Deferred tax assets                               2,009       2,009
      Other current assets                              1,537       1,385
                                                 ------------- -----------
                                                       31,049      33,027

    Deferred tax assets                                 1,871       1,801
    Deferred financing fees                                78          86
    Property and equipment, net                         1,601       1,658
    Intangible assets, net                              1,675       1,848
    Goodwill                                           17,483      17,483
                                                 ------------- -----------
    Total assets                                 $     53,757  $   55,903
                                                 ------------- -----------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank loan                                  $      2,293  $    1,345
      Accounts payable and accrued liabilities         13,861      16,847
      Income taxes payable                                262         484
                                                 ------------- -----------
                                                       16,416      18,676

    Shareholders' equity:
      Common stock, no par value, unlimited
       shares authorized; 54,873,549 and
       54,244,383 shares issued and outstanding
       at June 30, 2007 and March 31, 2007,
       respectively                                    47,430      47,105
      Other comprehensive income - cumulative
       translation adjustment                           2,585       2,615
      Accumulated deficit                             (12,674)    (12,493)
                                                 ------------- -----------
      Total shareholders' equity                       37,341      37,227
                                                 ------------- -----------
    Total liabilities and shareholders' equity   $     53,757  $   55,903
                                                 ------------- -----------

                          MAD CATZ INTERACTIVE, INC.
                              Supplementary Data
                       (unaudited, in thousands of US$)

    Geographical Sales Data
    The Company's net sales are attributable to the following geographic

                                                   Three Months Ended
                                                        June 30,
                                                  2007           2006
                                              -------------- -------------
        Net sales
           United States                      $      9,715   $     13,689
           Europe                                    4,171          2,462
           Canada                                      686          1,881
           Other countries                               6            109
                                              -------------- -------------
                                              $     14,578   $     18,141
                                              -------------- -------------

    EBITDA Reconciliation

    EBITDA represents net income plus interest, taxes, depreciation and

                                                   Three Months Ended
                                                        June 30,
                                                  2007           2006
                                              -------------- -------------

        Net income (loss)                     $       (181)  $       (876)

        Interest expense                                99            273
        Income tax expense (benefit)                    35           (334)
        Depreciation and amortization                  448            511
                                              -------------- -------------

        EBITDA                                $        401   $       (426)
                                              -------------- -------------

    EBITDA represents net income (loss) plus interest, taxes, depreciation
and amortization. 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, 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 performance measures
found in our financial statements, EBITDA is a useful financial performance
measurement for assessing our Company's operating performance. Our management
uses 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 some of our assets.

For further information:

For further information: Mad Catz Interactive, Inc. Stewart Halpern,
800-831-1442 or Jaffoni & Collins Incorporated Joseph Jaffoni or David Jacoby,

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