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PARK CITY, Utah, Nov. 5, 2015 (GLOBE NEWSWIRE) — Skullcandy, Inc. (NASDAQ:SKUL) today announced financial results for the third quarter ended September 30, 2015.

Third quarter 2015 reported results versus the same quarter a year ago

Net sales: $67.2 million vs. $58.1 million, up 16% (up 19% currency neutral)

Gross margin: 41.0% vs. 45.3%, down 430 basis points (down 272 basis points currency neutral)

Selling, general and administrative expense (SG&A): $24.5 million vs. $22.7 million, up 8%

SG&A expense as a percent of net sales: 36.4% vs. 39.2%

Operating income: $3.1 million vs. $3.6 million, down $0.5 million (up 29% currency neutral)

Earnings per share $0.08, up 8% (up 29% currency neutral)

"Our third quarter performance was highlighted by twenty two percent net sales growth in the U.S. and fourteen percent constant currency net sales growth in our international markets. Our product innovation, demand creation and distribution strategies are resonating with Skullcandy and Astro consumers around the world," said Hoby Darling, President and Chief Executive Officer. "Our deep relationship with our consumer, coupled with our ability to be nimble and quick to market allows us to serve our consumer innovative and creative products that align with current trends. Our new Skullcandy wireless ear buds and headphones are a great example and an awesome addition to our existing product lineup that already includes several of the best-selling styles at retail. Strong sell-through of our new wireless products and increased year over year sales of our traditional wired products contributed to Skullcandy being the number one chosen headphones in the US for the fourth consecutive quarter. At the same time, Astro continues to dominate the high end of the gaming market with its leading portfolio of next-generation compatible headsets that now include Halo 5 and Call of Duty licensed editions. We remain very confident in the strategic course that we have set for the Company."

Net sales in the third quarter of 2015 increased 16% to $67.2 million from $58.1 million in the same quarter a year ago, or an increase of 19% on a currency neutral basis. Domestic (U.S.) net sales increased 22% to $47.0 million from $38.5 million in the same quarter a year ago, due to increases in both Audio and Gaming categories. International (Non U.S.) net sales increased 3% to $20.2 million from $19.5 million in the same quarter a year ago, or an increase of 14% on a currency neutral basis, primarily due to increased audio product sales in India, Australia, China and increased gaming product sales in Europe.

Gross profit in the third quarter of 2015 increased 5% to $27.6 million from $26.3 million in the same quarter a year ago, or an increase of 12% on a currency neutral basis. Gross margin decreased to 41.0% in the third quarter of 2015 from 45.3% in the same quarter a year ago primarily due to approximately 160 basis points of negative foreign currency effects and product mix shift towards generally lower margin wireless and gaming products.

Selling, general and administrative (SG&A) expenses in the third quarter of 2015 increased 8% to $24.5 million from $22.7 million in the same quarter a year ago, or an increase of 10% on a currency neutral basis. The increase in SG&A expenses is primarily due to increases in demand creation, research and innovation, personnel, and in-store display depreciation expenses, partially offset by a decrease in foreign sales tax. As a percentage of net sales, SG&A expenses decreased 280 basis points to 36.4% as compared to 39.2% in the same quarter a year ago.

Operating income in the third quarter of 2015 was $3.1 million compared to $3.6 million in the same quarter a year ago, but was up 29% on a currency neutral basis. This slight decrease in operating income is due to a lower gross margin percentage and increased SG&A expenses to fund future growth, partially offset by net sales.

Net income in the third quarter of 2015 was $2.3 million, or $0.08 per share, based on 28.8 million weighted average diluted common shares outstanding. Net income in the same quarter a year ago was $2.1 million, or $0.07 per share, based on 28.5 million weighted average diluted common shares outstanding. On a currency neutral basis, net income increased 30%.

*"Currency neutral basis," assumes the foreign exchange rates in effect for the three months ended September 30, 2015 were in effect for the three months ended September 30, 2014 and that neither period receives the effect of foreign currency related income or expense. See the supplemental financial information for additional information regarding currency neutral basis.

Balance Sheet Highlights

As of September 30, 2015, cash, cash equivalents, and short-term investments totaled $13.9 million compared to $36.6 million as of December 31, 2014. This decrease mostly reflects the Company's implementation of accelerated payment programs with certain contract manufacturers that began during the second quarter of 2015. In part due to the accelerated payment programs, our Accounts Payable and Accrued Liabilities decreased $11.6 million and $10.4 million from December 31, 2014 to September 30, 2015, respectively. The Company expects to realize product cost reductions and gross margin benefits as a result of such accelerated payment programs. Furthermore, the decrease in cash, cash equivalents, and short-term investments was also due to payments for in-store displays that were placed into service. The Company continued to have no outstanding debt. Accounts receivable, net decreased 12% to $65.5 million as of September 30, 2015 from $74.4 million as of December 31, 2014. Inventories, net increased 14% to $62.5 million as of September 30, 2015 from $55.0 million as of December 31, 2014.

2015 Full Year and Fourth Quarter Financial Outlook

For the full year 2015, the Company forecasts net sales to increase 10-11% over 2014 levels, or approximately 13% on a constant currency basis, and net income on a U.S. GAAP fully-diluted per share basis of a range of $0.37 to $0.39, an increase of 42% over 2014 levels, or approximately 82% on a constant currency basis.

For the fourth quarter of 2015, the Company forecasts net sales to increase 5-7% over 2014 levels, or approximately 9% on a constant currency basis, and net income on a U.S. GAAP fully-diluted per share basis of a range of $0.38 to $0.40, an increase of 49% over 2014 levels, or approximately 65% on a constant currency basis.

Call Information

A conference call to discuss the third quarter of 2015 results is scheduled for today, November 5, 2015, at 4:30 PM Eastern Time / 2:30 PM Mountain Time. A broadcast of the call will be available on the Company's website, www.skullcandy.com. In addition, a replay of the call will be available shortly after the conclusion of the call and remain available through November 13, 2015. To access the telephone replay, listeners should dial (877) 870-5176 or (858) 384-5517 and entering conference ID number 116963.

About Skullcandy, Inc.

Skullcandy is the original lifestyle and performance audio brand inspired by the creativity and irreverence of youth culture. Skullcandy designs, markets and distributes audio and gaming headphones, earbuds, speakers and other accessories under the Skullcandy, Astro Gaming and 2XL brands. Skullcandy launched in 2003 and quickly became an international audio brand by bringing innovation, bold color, character and performance to an otherwise monochromatic audio space. Skullcandy products are sold and distributed through a variety of channels in the U.S. and approximately 80 countries worldwide, including the Company's websites at www.skullcandy.com and www.astrogaming.com. Skullcandy offers a wide array of styles and price points and are expanding into complementary audio products and categories such as sports performance, women's and wireless offerings, as well as partnerships with leading manufacturers to license the Skullcandy brand.

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding the Company's anticipated future financial and operating results and any other statements about the Company's future expectations, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management's current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from expectations are disclosed under the "Risk Factors" section of the 2014 10-K filed with the Securities and Exchange Commission ("SEC") on March 13, 2015 and our 2015 10-Qs. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company does not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

-Financial Tables Follow-

SKULLCANDY, INC.

SUPPLEMENTAL FINANCIAL INFORMATION

(in thousands of dollars)

(unaudited)

Three months ended September 30,

2015

2014

% Change

% Change Currency Neutral

Net sales

$ 67,168

$ 58,055

16%

19%

Gross profit

27,553

26,324

5%

12%

Selling, general and administrative expenses

24,471

22,741

8%

10%

Income from operations

3,082

3,583

(14)%

29%

Net income attributable to Skullcandy, Inc.

$ 2,301

$ 2,106

9%

30%

Diluted earnings per share

$ 0.08

$ 0.07

14%

29%

Skullcandy is a global company and reports financial information in U.S. dollars in accordance with generally accepted accounting principles in the United States ("GAAP"). Foreign currency exchange rate fluctuations impact the amounts reported by Skullcandy from translating its operating results into U.S. dollars, and from entering various transactions denominated in different currencies.

*These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present currency neutral financial information, which is a non-GAAP financial measure. Currency neutral financial information assumes a constant exchange rate between the periods being compared for purposes of currency translations into U.S. dollars (i.e., assumes the foreign exchange rates used to determine results for the three months ended September 30, 2015 apply to the period against which such results are being compared). We use currency neutral information to provide a framework to assess how our business performed.

Certain amounts included in the calculations of currency neutral operating results, which constitute non-GAAP measures, are subject to management allocations and assumptions. The company believes the presentation of information on currency neutral basis is helpful to investors by making it easier to compare the company's performance in one period to that of another period without the variability caused by fluctuations in currency exchange rates.

These currency neutral performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with GAAP. The currency neutral information presented may not be comparable to similarly titled measures reported by other companies.

SKULLCANDY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of dollars, except share and per share information)

(unaudited)

Three months ended September 30,

Nine months ended September 30,

2015

2014

2015

2014

Net sales

$ 67,168

$ 58,055

$ 171,359

$ 150,996

Cost of goods sold

39,615

31,731

100,249

82,280

Gross profit

27,553

26,324

71,110

68,716

Selling, general and administrative expenses

24,471

22,741

70,651

67,749

Income from operations

3,082

3,583

459

967

Other expense

261

934

1,144

729

Interest (income) expense

(1)

(9)

(12)

183

Income (loss) before income taxes and noncontrolling interest

2,822

2,658

(673)

55

Income tax expense (benefit)

697

507

(116)

(284)

Net income (loss)

2,125

2,151

(557)

339

Net income (loss) attributable to noncontrolling interest

(176)

45

(344)

124

Net income (loss) attributable to Skullcandy, Inc.

$ 2,301

$ 2,106

$ (213)

$ 215

Net income (loss) per common share attributable to Skullcandy, Inc.

Basic

$ 0.08

$ 0.07

$ (0.01)

$ 0.01

Diluted

0.08

0.07

(0.01)

0.01

Weighted average common shares outstanding

Basic

28,477,595

28,135,731

28,375,055

28,005,875

Diluted

28,754,262

28,487,657

28,375,055

28,424,555

SKULLCANDY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of dollars)

(unaudited)

September 30,

December 31,

2015

2014

Assets

Current assets:

Cash and cash equivalents

$ 10,354

$ 21,623

Short-term investments

3,541

15,010

Total cash, cash equivalents, and short-term investments

13,895

36,633

Accounts receivable, net

65,471

74,358

Inventories, net

62,478

54,981

Prepaid expenses and other current assets

7,628

4,050

Current deferred tax assets

4,163

3,052

Total current assets

153,635

173,074

Property and equipment, net

14,624

12,911

Intangibles

7,778

8,814

Goodwill

13,867

13,867

Deferred financing fees

34

41

Non-current deferred tax assets

1,390

3,459

Total assets

$ 191,328

$ 212,166

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$ 15,700

$ 27,309

Accrued liabilities

18,713

29,161

Current deferred tax liabilities

524

184

Total current liabilities

34,937

56,654

Non-current deferred tax liabilities

1,288

1,418

Other non-current liabilities

1,008

557

Total liabilities

37,233

58,629

Stockholders' equity:

Common stock

3

3

Treasury stock

(43,294)

(43,294)

Additional paid-in capital

137,583

136,132

Accumulated other comprehensive loss

(960)

(625)

Retained earnings

60,567

60,781

Total stockholders' equity

153,899

152,997

Noncontrolling interest

196

540

Total Skullcandy stockholders' equity

154,095

153,537

Total liabilities and Skullcandy stockholders' equity

$ 191,328

$ 212,166

SKULLCANDY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of dollars)

(unaudited)

Nine Months Ended

September 30,

2015

2014

Cash flows from operating activities:

Net income (loss)

$ (557)

$ 339

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

8,002

7,020

Loss on disposal of property and equipment and intangible assets

64

690

Provision for doubtful accounts, net

311

618

Deferred income taxes

843

(2,419)

Non-cash interest expense

7

186

Amortization of stock-based compensation expense

3,178

2,591

Foreign currency remeasurement losses

1,594

382

Changes in operating assets and liabilities:

Accounts receivable

7,600

3,865

Inventories

(8,289)

(24,191)

Prepaid expenses and other current assets

(4,189)

(2,286)

Accounts payable

(10,485)

17,133

Accrued liabilities

(12,428)

1,421

Net cash (used in) provided by operating activities

(14,349)

5,349

Cash flows from investing activities:

Purchase of property and equipment

(8,206)

(5,766)

Purchases of short-term investments

—

(15,000)

Proceeds from sale of short-term investments

11,488

—

Net cash provided by (used in) investing activities

3,282

(20,766)

Cash flows from financing activities:

Debt issuance costs

—

(5)

Proceeds from exercise of stock options

359

1,777

Taxes paid related net share settlement of equity awards

(462)

—

Income tax benefit (detriment) from share based compensation

135

(394)

Net cash provided by financing activities

32

1,378

Effect of exchange rate changes on cash and cash equivalents

(234)

(78)

Net decrease in cash and cash equivalents

(11,269)

(14,117)

Cash and cash equivalents, beginning of period

21,623

38,835

Cash and cash equivalents, end of period

$ 10,354

$ 24,718

Supplemental cash flow information:

Cash paid for income tax

$ 3,779

$ 1,430

Supplemental non-cash activities:

Purchases of property and equipment financed through accounts payable

$ 627

$ —

SKULLCANDY, INC. SEGMENT INFORMATION (unaudited)

We manage our business in two segments which are comprised of Domestic and International. The Domestic segment primarily consists of Skullcandy and Astro Gaming product sales to customers in the United States. The international segment primarily includes Skullcandy product sales to customers in Europe, Asia, Canada, Mexico (through the Company's joint venture), and all other geographic areas outside the United States that are served by the Company's International operations.

The table below summarizes information about reportable segments for the three and nine months ended September 30, 2015 and 2014 (in thousands):

Three months ended September 30,

2015

2014

$ Change

% Change

Net sales:

Domestic

$ 46,976

$ 38,521

$ 8,455

22%

International

20,192

19,534

658

3%

Total net sales

$ 67,168

$ 58,055

$ 9,113

16%

Three months ended September 30,

2015

2014

$ Change

% Change

Gross profit:

Domestic

$ 20,044

$ 17,185

$ 2,859

17%

International

7,509

9,139

(1,630)

(18)%

Total gross profit

$ 27,553

$ 26,324

$ 1,229

5%

Three months ended September 30,

2015

2014

Basis Point Change

Gross margin %:

Domestic

42.7%

44.6%

(190)

International

37.2%

46.8%

(960)

Total gross margin

41.0%

45.3%

(430)

Nine Months Ended September 30,

2015

2014

$ Change

% Change

Net sales:

Domestic

$ 119,380

$ 104,102

$ 15,278

15%

International

51,979

46,894

5,085

11%

Total net sales

$ 171,359

$ 150,996

$ 20,363

13%

Nine Months Ended September 30,

2015

2014

$ Change

% Change

Gross profit:

Domestic

$ 50,478

$ 47,120

$ 3,358

7%

International

20,632

21,596

(964)

(4)%

Total gross profit

$ 71,110

$ 68,716

$ 2,394

3%

Nine Months Ended September 30,

2015

2014

Basis Point Change

Gross margin %:

Domestic

42.3%

45.3%

(300)

International

39.7%

46.1%

(640)

Total gross margin

41.5%

45.5%

(400)

CONTACT: ICR
Brendon Frey
203-682-8200
[email protected]

SAN DIEGO, Nov. 5, 2015 (GLOBE NEWSWIRE) — Mad Catz Interactive, Inc. ("Mad Catz" or the "Company") (NYSE MKT:MCZ) (TSX:MCZ), today announced financial results for the fiscal 2016 second quarter ended September 30, 2015.

Key Highlights of Fiscal 2016 Second Quarter and Subsequent:

Fiscal 2016 second quarter net sales increased 73% to $38.9 million, the highest second quarter net sales in the Company's history;

Net sales growth driven by a 272% increase in net sales to the Americas, partially offset by an 11% decrease in net sales to EMEA and a 48% decrease in net sales to APAC;

Gross margin declined to 23.1% from 30.0% in the prior year quarter;

Total operating expenses increased 14% from the prior year period to $8.1 million;

Operating income was $0.9 million compared to an operating loss of $0.4 million in the prior year quarter;

Diluted loss per share was ($0.02) for the fiscal 2016 second quarter, compared to a diluted loss per share of ($0.01) last year;

Net position of bank loans, less cash, of $12.7 million at September 30, 2015, compared to $5.8 million at June 30, 2015 and $8.9 million at September 30, 2014;

Shipped Rock Band™ 4 Band-in-a Box™ Software Bundle, Wireless Fender™ Stratocaster™ Guitar Controller and Software Bundle, and stand-alone software for Xbox One and PlayStation™ 4 to retailers ahead of the October 6th launch date for Rock Band 4;

Announced F.R.E.Q.TE™ 7.1 surround sound gaming headset for Windows PC;

Announced pre-order availability of the first Street Fighter™ V licensed fightstick starting October 26, 2015;

Shipped R.A.T. PROX™ high-performance gaming mouse, a 2015 CES Innovation Award Honoree;

Shipped R.A.T. PROS™ tournament-grade gaming mouse; and,

Established an "At-the-Market" ("ATM") equity offering program through which the Company may sell from time to time up to an aggregate of $25.0 million of our common stock.

Summary of Financials

(in thousands, except margins and per share data)

Three Months Ended September 30,

Six Months Ended September 30,

2015

2014

Change

2015

2014

Change

Net sales

$38,918

$22,467

73%

$51,892

$39,214

32%

Gross profit

9,006

6,731

34%

11,884

11,794

1%

Total operating expenses

8,147

7,155

14%

14,787

13,349

11%

Operating income (loss)

859

(424)

(303%)

(2,903)

(1,555)

87%

Net loss

(1,611)

(922)

75%

(5,576)

(2,167)

157%

Net loss per share, basic and diluted

($0.02)

($0.01)

100%

($0.08)

($0.03)

167%

Gross margin

23.1%

30.0%

(690) bps

22.9%

30.1%

(720) bps

Adjusted EBITDA (loss) (1)

$1,391

($111)

(1,353%)

($1,674)

($557)

201%

(1) Definitions, disclosures and reconciliations regarding non-GAAP financial information are included on page 8.

Commenting on the Company's fiscal 2016 second quarter results, Darren Richardson, President and Chief Executive Officer of Mad Catz, said, "We are very pleased to announce record second quarter sales driven by the successful launch of Rock Band 4. As expected, we started shipping product to retailers at the end of September, ahead of the October 6th launch date, and we expect Rock Band 4 to contribute to significant sales growth, improved operating leverage, and increased cash flow in Fiscal 2016."

Summary of Key Sales Metrics

Three Months Ended September 30,

Six Months Ended September 30,

(in thousands)

2015

2014

Change

2015

2014

Change

Net Sales by Geography

Americas

$27,027

$7,260

272%

$32,002

$12,709

152%

EMEA

9,656

10,904

(11%)

15,298

19,278

(21%)

APAC

2,235

4,303

(48%)

4,592

7,227

(36%)

$38,918

$22,467

73%

$51,892

$39,214

32%

Sales by Platform as a % of Gross Sales

Next gen consoles (a)

73%

21%

61%

17%

PC and Mac

17%

43%

25%

45%

Universal

6%

20%

8%

22%

Smart devices

3%

11%

5%

10%

Legacy consoles (b)

1%

5%

1%

6%

100%

100%

100%

100%

Sales by Category as a % of Gross Sales

Specialty controllers

69%

25%

59%

24%

Audio

17%

39%

22%

39%

Mice and keyboards

7%

22%

10%

23%

Games and other

5%

1%

4%

1%

Controllers

1%

9%

3%

9%

Accessories

1%

4%

2%

4%

100%

100%

100%

100%

Sales by Brand as a % of Gross Sales

Mad Catz

75%

34%

64%

34%

Tritton

15%

37%

20%

37%

Saitek

9%

18%

13%

18%

Other

1%

11%

3%

11%

100%

100%

100%

100%

(a) Includes products developed for Xbox One, PlayStation 4 and Wii U.

(b) Includes products developed for Xbox 360, PlayStation 3 and Wii.

Karen McGinnis, Chief Financial Officer of Mad Catz, commented, "We are pleased with our return to top-line growth for the quarter and year-to-date and remain confident that our business strategy, product offerings and financial position will help us return to sales growth and profitability in fiscal 2016. We remain focused on effectively managing our inventory, expenses and accounts receivable while positioning the Company to benefit from the upcoming holiday season."

The Company will host a conference call and simultaneous webcast on November 5, 2015, at 5:00 p.m. ET, which can be accessed by dialing (303) 223-4376. Following its completion, a replay of the call can be accessed for 30 days at the Company's Web site (www.madcatz.com, select "About Us/Investor Relations") or via telephone at (800) 633-8284 (reservation #21783853) or, for International callers, at (402) 977-9140.

About Mad Catz

Mad Catz Interactive, Inc. ("Mad Catz") (NYSE MKT:MCZ) (TSX:MCZ) is a global provider of innovative interactive entertainment products marketed under its Mad Catz® (gaming), Tritton® (audio), and Saitek® (simulation) brands. Mad Catz products cater to passionate gamers across multiple platforms including in-home gaming consoles, handheld gaming consoles, Windows® PC and Mac® computers, smart phones, tablets and other mobile devices. Mad Catz distributes its products through its online store as well as distribution via many leading retailers around the globe. Headquartered in San Diego, California, Mad Catz maintains offices in Europe and Asia. For additional information about Mad Catz and its products, please visit the Company's website at www.madcatz.com.

Social Media

Facebook, Twitter, YouTube

Safe Harbor

Information in this press release that involves the Company's expectations business prospects, plans, intentions or strategies regarding its future are forward-looking statements that are not facts and that involve substantial risks and uncertainties. You can identify these statements by the use of words such as "anticipate," "estimate," "expect," "project," "intend," "should," "plan," "goal," "believe," 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 the Company's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release 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; availability of capital under our credit facilities; commercial acceptance of new in-home gaming consoles; the ability to successfully market both new and existing products domestically and internationally; difficulties or delays in manufacturing; unanticipated product delays; or a downturn in the market or industry. A further list and description of these and other factors, risks, uncertainties and other matters can be found in the Company's most recent annual report, and any subsequent quarterly reports, filed with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators. The forward-looking statements in this release are based upon information available to the Company as of the date of this release, and the Company assumes no obligation to update any such forward-looking statements as a result of new information or future events or developments, except as may be require by applicable law. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of the Company and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended September 30,

Six Months Ended September 30,

2015

2014

2015

2014

Net sales

$38,918

$22,467

$51,892

$39,214

Cost of sales

29,912

15,736

40,008

27,420

Gross profit

9,006

6,731

11,884

11,794

Operating expenses:

Sales and marketing

4,457

3,477

7,173

5,889

General and administrative

2,638

2,722

5,532

5,873

Research and development

941

846

1,862

1,368

Amortization of intangible assets

111

110

220

219

Total operating expenses

8,147

7,155

14,787

13,349

Operating income (loss)

859

(424)

(2,903)

(1,555)

Other expense:

Interest expense, net

(364)

(167)

(621)

(325)

Foreign currency exchange loss, net

(154)

(382)

(93)

(417)

Change in fair value of warrant liabilities

(871)

74

(917)

55

Other income (expense)

10

(2)

22

79

Total other expense

(1,379)

(477)

(1,609)

(608)

Loss before income taxes

(520)

(901)

(4,512)

(2,163)

Income tax expense

(1,091)

(21)

(1,064)

(4)

Net loss

($1,611)

($922)

($5,576)

($2,167)

Net loss per share:

Basic

($0.02)

($0.01)

($0.08)

($0.03)

Diluted

($0.02)

($0.01)

($0.08)

($0.03)

Shares used in per share computations:

Basic

73,469,571

64,149,124

73,469,571

64,115,591

Diluted

73,469,571

64,149,124

73,469,571

64,115,591

Consolidated Balance Sheets

(in thousands)

(Unaudited)

September 30, 2015

March 31, 2015

ASSETS

Current assets:

Cash

$6,970

$5,142

Accounts receivable, net

27,659

7,823

Other receivables

992

560

Inventories

33,145

15,479

Deferred tax assets

1,566

2,245

Income taxes receivable

341

967

Prepaid expenses and other current assets

1,897

1,293

Total current assets

72,570

33,509

Deferred tax assets

7,606

7,605

Other assets

686

418

Property and equipment, net

3,826

3,376

Intangible assets, net

2,490

2,584

Total assets

$87,178

$47,492

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Bank loans

$19,638

$7,920

Accounts payable

38,755

16,404

Accrued liabilities

13,647

4,196

Notes payable

919

1,015

Income taxes payable

557

141

Total current liabilities

73,516

29,676

Notes payable, less current portion

97

36

Warrant liabilities

2,104

1,187

Deferred tax liabilities

43

43

Deferred rent

738

762

Total liabilities

76,498

31,704

Shareholders' equity:

Common stock

63,390

63,128

Accumulated other comprehensive loss

(4,917)

(5,123)

Accumulated deficit

(47,793)

(42,217)

Total shareholders' equity

10,680

15,788

Total liabilities and shareholders' equity

$87,178

$47,492

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six Months Ended September 30,

2015

2014

Cash flows from operating activities:

Net loss

($5,576)

($2,167)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

1,038

1,060

Accrued and unpaid interest expense on note payable

—

10

Amortization of deferred financing fees

189

36

Loss on disposal of assets

6

6

Stock-based compensation

262

240

Change in fair value of warrant liabilities

917

(55)

Provision for deferred income taxes

678

44

Changes in operating assets and liabilities:

Accounts receivable

(19,790)

(4,195)

Other receivables

(431)

205

Inventories

(17,625)

(3,077)

Prepaid expenses and other current assets

(357)

(319)

Other assets

85

187

Accounts payable

22,280

4,332

Accrued liabilities

9,602

285

Deferred rent

(24)

—

Income taxes receivable/payable

1,045

(330)

Net cash used in operating activities

(7,701)

(3,738)

Cash flows from investing activities:

Purchases of intangible assets

(25)

—

Purchases of property and equipment

(1,245)

(686)

Net cash used in investing activities

(1,270)

(686)

Cash flows from financing activities:

Borrowings on bank loans

41,955

29,220

Repayments on bank loans

(30,248)

(24,297)

Payment of financing fees

(720)

(50)

Borrowings on notes payable

95

—

Repayments on notes payable

(160)

(469)

Proceeds from exercise of stock options

—

236

Payment of expenses related to issuance of common stock

(164)

—

Net cash provided by financing activities

10,758

4,640

Effects of foreign currency exchange rate changes on cash

41

(46)

Net increase in cash

1,828

170

Cash, beginning of period

5,142

1,496

Cash, end of period

$6,970

$1,666

Supplementary Data

Adjusted EBITDA (Loss) Reconciliation (non-GAAP)

(in thousands)

(Unaudited)

Three Months Ended September 30,

Six Months Ended September 30,

2015

2014

2015

2014

Net loss

($1,611)

($922)

($5,576)

($2,167)

Adjustments:

Depreciation and amortization

552

580

1,038

1,096

Stock-based compensation

124

117

262

240

Change in fair value of warrant liabilities

871

(74)

917

(55)

Interest expense, net

364

167

621

325

Income tax expense

1,091

21

1,064

4

Adjusted EBITDA (loss)

$1,391

($111)

($1,674)

($557)

Adjusted EBITDA (loss), a non-GAAP ("Generally Accepted Accounting Principles") financial measure, represents net loss before interest, taxes, depreciation and amortization, stock-based compensation and change in the fair value of warrant liabilities. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net loss 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 GAAP. As defined, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. Our management believes, however, that in addition to the performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Company's operating performance. Our management uses Adjusted 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 our capital and intangible assets. In addition, Adjusted EBITDA is an important measure for our lender.
CONTACT: Karen McGinnis
Chief Financial Officer
Mad Catz Interactive, Inc.
[email protected] or (858) 790-5040

Joseph Jaffoni, Norberto Aja, Jim Leahy
JCIR
[email protected] or (212) 835-8500