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Rock Band 4 hurt Mad Catz in 2016

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Investor call reveals just how bad things are for the peripherals manufacturer

Mad Catz

Yesterday, on a regularly scheduled call with investors, peripherals manufacturer Mad Catz shed some light on the company’s ongoing struggles. Among the issues discussed was the challenge of co-publishing Rock Band 4, and the sale of flight control manufacturer Saitek.

The company revealed that revenue had dropped 71 percent year-over-year, and that it had experienced a net loss of $3.5 million. Headcount, which had been 225 people before restructuring, is now down to 111.

“We didn’t anticipate a year ago was just how much more of a burden Rock Band 4 was going to be,” said Mad Catz chief executive officer Karen McGinnis.

The quarterly call was overshadowed by last week’s announcement of a formal warning from the New York Stock Exchange (NYSE) indicating that Mad Catz could soon be delisted. At the time, stock was trading at about 13 cents a share, well below the 20 cent threshold to remain on the NYSE.

Today, after the investor call, that share price is closer to 8 cents.

McGinnis was candid about the failure of the Rock Band 4 line of products to raise the company’s prospects. While the inventory has been sold, it did not generate as much revenue as the company had hoped. As of May 2016, Rock Band developer Harmonix is now working with PDP as its co-publisher.

A reverse stock split, designed to raise the price of existing stock back over the 20 cent mark, appears imminent over the next six months.

“If we don’t figure out some strategic alternatives,” McGinnis said, “some additional financing, we're looking at all different options. ... We started out [the fiscal year] with a really big hole. We were able to sell all the Rock Band 4 inventory, we were able to sell a product line for $13 million and that got some much-needed cash in. But again, since it didn’t correct everything, the biggest constraint is supply, and if you don’t have enough product to sell, it makes it really hard to generate profits.”

You can find the full transcript on Seeking Alpha.