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Mad Catz Posts Continuing Losses; CEO Remains Optimistic

Mad Catz Interactive Inc. closed the books on a disappointing year, despite the apparent promise of its fall release of peripherals for the latest installment of the Rock Band videogame.

In its annual securities filing released June 2, the company’s auditor expressed doubt about Mad Catz’s ability to continue as going concern.

CEO Karen McGinnis, who took the helm in February, vowed to make fiscal 2017 better.

Mad Catz (NYSE: MCZ) posted a net loss of 16 cents per share for fiscal 2016. Weaker than expected consumer demand for Rock Band 4 led to lower gross profit margins and higher expenses, according to David McKeon, the company’s chief financial officer.

The Scripps Ranch maker of computer game peripherals reported a fourth quarter net loss of $7.3 million on net sales of $17.1 million. In the same quarter one year ago, Mad Catz reported net income of $5.6 million on net sales of $16.6 million. The company’s fiscal year ends March 31.

Expenses in the recently ended fourth quarter included a $3.0 million charge for restructuring and severance. With the restructuring, the company said it expects to save $6.0 million to $7.0 million a year going forward.

For the year, Mad Catz reported a net loss of $11.6 million on net sales of $134.1 million. In fiscal 2015, the company reported net income of $4.7 million on net sales of $86.2 million. Revenue grew substantially in fiscal 2016 but so did cost of sales. Gross profit in 2016 was 6 percent less than 2015.

KPMG LLP said in Mad Catz’s annual securities filing that “the company’s recurring losses from operations and liquidity position raise substantial doubt about its ability to continue as a going concern.”

“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,” McGinnis said in a prepared statement issued June 2. The board elevated McGinnis from CFO to CEO in February after CEO Darrin Richardson stepped down. Mad Catz’s chairman, Tom Brown, also resigned in February.

“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,” McGinnis said.

“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.”


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