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Mad Catz Interactive, Inc. (“Mad Catz” or “the Company”) (NYSEAmex/TSX: MCZ), a leading third-party interactive entertainment accessory provider, today announced financial results for its fiscal third quarter ended December 31, 2009.
Mad Catz reported net sales for the quarter ended December 31, 2009 of $48.8 million, an increase of 19% from third quarter net sales of $40.8 million in fiscal 2009 and the second-best quarter of sales in the Company’s history. Net sales in North America, the Company’s largest market, totaled $24.6 million, while net sales to Europe increased to a record $23.0 million for the fiscal 2010 third quarter. Gross profit of $15.9 million in the fiscal 2010 third quarter represented an increase of 51% from $10.5 million in the same quarter of the prior year, primarily due to a shift in the Company’s product mix and a return to more normal levels of reserves as a percentage of sales as compared to last year’s period of unusual economic uncertainty. Gross profit margin improved by nearly 7 percentage points to 33% from 26% in the year-ago quarter.
Excluding the $28.5 million goodwill impairment charge taken in the third quarter of fiscal 2009, total operating expenses in the third quarter of fiscal 2010 decreased by 2% to $8.3 million, resulting in operating income of $7.6 million for the quarter, compared to operating income of $2.1 million in the year ago period. In the first nine months of fiscal 2010, Mad Catz reduced its total operating expenses by approximately 16%, or $4.2 million, compared to the first nine months of the prior fiscal year when excluding the goodwill impairment charge taken in the year-ago period. The Company had a foreign exchange gain of $0.1 million for the third quarter of fiscal 2010, compared to a $1.0 million gain in the prior year’s fiscal third quarter. Reflecting income tax expenses of $1.6 million, Mad Catz reported record quarterly net income of $5.6 million in the quarter ended December 31, 2009, or $0.09 per diluted share – also a quarterly record – compared to a net loss of $26.9 million, or a loss of $0.49 per diluted share after income tax expenses of $1.1 million in the third quarter of the prior fiscal year.
EBITDA, a non-GAAP measure (defined as earnings before interest, taxes, depreciation and amortization), was the highest for any quarter in the Company’s history, rising 107% to $8.7 million in the third fiscal quarter, compared with EBITDA (excluding goodwill impairment) of $4.2 million in the comparable period of fiscal 2009.
Commenting on the results, Darren Richardson, President and Chief Executive Officer of Mad Catz, stated, “We are pleased to report strong sales growth in our fiscal third quarter, as well as record quarterly net income, diluted EPS and EBITDA. These results reflect our success in aligning the Company with some of the industry’s most popular and anticipated titles, and in bringing high-value products to market that enhance the gaming experience. During the quarter, Mad Catz achieved strong growth in sales and gross margin at the same time, we continued to maintain our operating cost discipline, demonstrating the operating leverage potential of our business model.
“Net sales growth was led by record quarterly sales from our European operations, which rose 58% over the prior year period. In the U.S., we experienced a slight year-over-year decline in sales due to the cautious consumer environment coupled with a tough year-over-year comparison given the strong sales of Wii™ accessories in the same period last year.
“We continued to make meaningful progress on our cost management initiatives as selling, general and administrative expenses decreased by 6% to $7.2 million during the quarter and by 21% to $18.3 million over the first nine months of the fiscal year. At the same time, and excluding the one-time goodwill impairment charge taken in the prior year quarter, we were able to lower total operating expenses in the quarter by 2% versus the year-ago period and by 16% over the first nine months of the fiscal year. With the Company’s significant progress on expense reduction during the first nine months of fiscal 2010, we are well ahead of our previously stated goal of lowering SG&A expenses by no less than 10% in fiscal 2010 versus fiscal 2009.
“While the videogame industry has experienced significant economic-related pressure, we are highly encouraged by the consumer reception to our product portfolio and believe that our strategy to diversify our product line-up across a broader range of licensed and non-licensed properties, hardware platforms, both within the videogame sector as well as expanding into the PC market, will continue to serve the Company well. We also believe our balance sheet provides us the financial flexibility to continue our efforts to grow sales, earnings, free cash flow and shareholder value.”