Madcatz – Q2 2008 Earnings Report

By: ispeculatornew
Date posted: 11.23.2007 (2:24 pm) | Write a Comment  (2 Comments)

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MCZ – Mad Catz Interactive (American Stock Exchange) – (Closing Price – 1.08)

Mad Catz Interactive reported moderate results for their fiscal 2008 second quarter and they announced the acquisition of Saitek, a PC games peripheral provider.

In the second quarter Mad Catz Interactive posted earnings of 0.02 per diluted share on revenues of 16.9 million. Revenues were down 35% from the second quarter of last year due to the “culling process to reduce low-margin product placement, the continuing impact of the console transition and strong software sales in the year-ago quarter attributable to Real World Golf 2”. Net income of 0.9 million and earnings per share of 0.02 were “both record levels for Mad Catz’ fiscal second quarter.”

I think revenue was a little soft in the quarter but net income was good. Since Mad Catz is focused on reducing low margin products I think NI (net income) and EPS (earnings per share) are better indicators of how the company is performing. Considering NI and EPS were at “record levels” I believe the turnaround in Mad Catz is still on track.

The acquisition of Saitek is another positive development for Mad Catz. Saitek is a complimentary business that Mad Catz “expects to be accretive to its fiscal 2008 earnings and cash flow”. The acquisition will also help strengthen Mad Catz’s retail distribution network, particularly in Europe.

Looking forward I expect the stock price of Mad Catz to drift up in anticipation of Mad Catz’s strongest quarter. I would recommend continuing to hold your shares for what should be a strong quarter in Q3.

Disclosure: I have no position in Mad Catz.  

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2 Comments

  1. Comment by Harvey Rosen — November 24, 2007 @ 5:44 pm

    Disclosure: I have a significant exposure to MCZ (i.e 3% of my portfolio.). I believe that this quarter’s results were better than “moderate”. They achieved what they set out to do. They eschewed low margin business. They posted a record earnings quarter on 35% less sales. The new CFO ( one key to my positive take on MCZ) purchased another 50K shares at $1.06 after earnings were released. He previously purchased 50K at $.80 after a prior earnings release. I believe that the addition of this CFO to the management team was very significant. He was previously head of finance at Take Two Interavtive. MCZ subsequently purchased Joytech, a Take Two subsidiary. He was also a Managing Director for Entertainment Equity Research at RBC. He also ahd stints at BOA, ING and CSFB. Bottom line, he has Wall Street contacts. Don’t be surprised if “the Street” picks up coverage on MCZ in the near future.The exposure certainly can’t hurt. The Saitek acquision gives MCZ another high margin business and creates cross selling opportunites in their markets. I estimate that earnings for Fiscal Year 3/08 should be about $.16 and Fiscal Yearr 3/09 near $.20. What would MCZ be worth then? The big kicker could be Air-Drives. If Apple has any interest, watch out above! If anyone has a reasoned bearish scenario, please present it.

  2. Comment by admin — November 24, 2007 @ 6:24 pm

    Good post. I think MCZ was a little light on revenue and the results could of been better. I still like MCZ a lot though. I would be very surprised if MCZ got any analyst coverage (too small and not enough interest). If an analyst does start coverage they will be late to the party as usual.

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