Mad Catz reveals reduced profits in Q2 fiscal results

Peripheral manufacturer Mad Catz has revealed its financial results for the second quarter of its 2006 fiscal year, revealing a 19.5 percent downturn in gross profits compared to the same period in 2005.

Gross profits were posted at USD 4.1 million; a substantial decline from the USD 5 million in the same period last year. The company attributes the decline in part to an increase in sales and marketing spend, which increased by 23 percent to USD 2.9 million. In addition, general and administrative expenses increased by 33.1 percent compared to the same period last year.

In more positive news, net sales for the quarter reached USD 23.7 million, an increase of 14 percent on the same period in 2004. The company's successes with NFL branded peripherals released in August, EU and North American distribution deals for Real World Golf and Pump it Up dance titles, and the strong sales of its GameShark branded controllers and accessories line have all contributed to the positive sales revenue.

Mad Catz has also secured a peripheral licensing contract for Microsoft's Xbox 360 console; though revenue from the sale of these peripherals is expected to be steady throughout 2006 and will not necessarily have any serious impact on results for the current fiscal year.

Darren Richardson, President and CEO of Mad Catz Interactive commented on the results, stating: "The 15 percent year over year second quarter revenue growth is positive and reflects our successful expansion in the European market, as well as our ability to leverage our distribution network and take advantage of our broadened portfolio of video games and licensed products. Despite the net sales growth driven by increased revenue from our European presence, video game titles and licensed products, we were unable to offset a decline in overall gross margins. We have implemented cost reduction initiatives on some of the high-volume, low-margin products that affect the margin mix and expect the impact of these changes will begin to take effect during November."

"While we are looking forward to the November launch of Microsoft's Xbox 360 console, we anticipate modest sales contributions this fiscal year. We anticipate the real potential from this license will unfold as the installed base gathers momentum in calendar 2006," he concluded.