Tritton Audio Product Sales Are Topping Mad Catz’s Expectations, CEO Says

The performance of Tritton Technologies game audio products “has greatly exceeded our expectations” since buying that company early this fiscal year, Mad Catz Interactive CEO Darren Richardson said Wednesday in an earnings call for fiscal Q3 ended Dec. 31. Tritton products “contributed over $20 million to our revenues” since May, and Mad Catz is “very excited about the potential of this brand, and [we] know there is significant upside ahead as we leverage our global distribution platform,” he said.

Mad Katz’s Q3 revenue soared 91 percent to $93 million from the year-ago quarter, mainly on “strong sales of Rock Band 3 products, the continued rapid growth in Tritton audio products and our line of Call of Duty accessories,” said interim Chief Financial Officer Allyson Vanderford. “Additional increases came from our Cyborg line of gaming mice and the third-party distribution of Turtle Beach products in Europe.” Profit grew to $9.7 million, or 15 cents a share, from $5.6 million, or 9 cents.

Mad Catz was “very pleased with the all-time record results” for Q3 and year-to-date, Richardson said. Although gross margin “fell 4 percentage points to 28.4 percent due in part to the expected low margins on our Rock Band product line,” he said Mad Catz generated a quarterly record $26.4 million in gross profit, up 65 percent from fiscal Q3 2010.

Mad Catz financed its November 2007 acquisition of Winkler Atlantic Holdings, the private holding company owning computer accessory maker Saitek, through a $14.5 million convertible note. The note required the partial repayment of interest starting in June 2009, and there is a payment of about $2.4 million due at the end of Q4, said Vanderford. “We foresee no problem in making this payment or meeting any of our other commitments,” she said. Mad Catz expects to report “significant improvements in our fiscal 2011 year-end balance sheet including a positive cash position net of bank borrowings and look to use this added financial flexibility to further grow the business and drive sales, earnings and free cash flow while enhancing shareholder value,” she said.

Q3 sales in North America, Mad Catz’s largest market, soared 129.6 percent to $56.4 million from the year-ago period, while sales to Europe increased 52.9 percent to a record $35.1 million. Sales to other countries grew 14.4 percent to $1.4 million. Gross profit rose 65.6 percent to $26.4 million, but gross profit margin fell 4.3 percentage points to 28.4 percent, mainly due to a shift in Mad Catz’s “sales mix which included higher levels of licensed products,” it said.

Sales of Xbox 360 products accounted for 31 percent of Mad Catz’s total gross sales in Q3, flat with Q3 the prior year, the company said. PS3 sales represented 19 percent of gross sales, up from 17 percent, while Wii grew to 19 percent from 14 percent, PC fell to 12 percent from 23 percent, handheld systems dipped to 2 percent from 3 percent, and all other platforms grew to 17 percent from 12 percent. Specialty controllers accounted for 29 percent of Mad Catz’s gross Q3 sales, up from 21 percent, while audio jumped to 24 percent from 10 percent, games increased to 16 percent from 2 percent, controllers fell to 16 percent from 26 percent, PC devices dipped to 6 percent from 8 percent, other accessories tumbled to 9 percent from 30 percent, and all other products fell to less than 1 percent from 3 percent.