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Mad Catz Interactive, Inc. (NYSEMKT:MCZ)

F4Q2011 Earnings Call

June 14, 2011, 17:00 p.m. ET

Executives

Norberto Aja - IR

Darren Richardson - President and CEO

Allyson Vanderford - Interim CFO

Analysts

Steve Lemmer - Boldt Capital

Matt Strafford - Sidoti & Company

Stan Trilling - Credit Suisse

Barry Ogman - JP Turner

Sean Michael - Private Investor

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Mad Catz Interactive Fiscal 2011 Fourth Quarter Results Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Tuesday, June 14, 2011.

I would now like to turn the conference over to Mr. Norberto Aja. Please go ahead sir.

Norberto Aja

Thank you, operator. Good afternoon everyone and welcome to Mad Catz’s fiscal 2011 fourth quarter and full-year conference call. With me on the call today are Darren Richardson, Mad Catz’s President and Chief Executive Officer, and Allyson Vanderford, Mad Catz’s Chief Financial Officer. Darren will provide an overview of the results and the principal drivers behind them. Afterwards Allyson will review the financial results in greater detail before turning the call back to Darren for some closing remarks.

Before we begin, however, let me just take a few minutes to read the Safe Harbor language. Today’s discussion will contain forward-looking statements about the company’s financial results, estimates and business prospects that involve substantial risks and uncertainties.

The company assumes no obligation to update the forward-looking statements contained in this conference call as a result of new information or future events or developments. You can identify these statements by the fact that they use the words such as anticipate, estimate, expect, project, intend, plan, 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 actual results to differ materially 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, price protection taken in response to price cuts, the ability to successfully market both new and existing products domestically and internationally, difficulties or delays in manufacturing, delays in the company’s ability to obtain products from its manufacturers in China, market and general economic conditions.

A further list and description of these risks, uncertainties and other matters can be found in the company’s reports filed with the appropriate regulatory authorities. Today’s call, June 14, 2011 and webcast includes non-GAAP financial measures within the meaning of the SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in today’s press release.

With that, I would now like to introduce Darren Richardson, President and CEO of Mad Catz. Darren?

Darren Richardson

Thank you, Norberto. Good afternoon everyone and thank you for joining us. Let me begin by saying that we are very pleased with the record results for the fourth quarter and full-year. The $184 million in fiscal 2011 net sales outpaced our fiscal 2010 full-year net sales record by $65 million, while the 33.7 million in net sales for the fiscal 2011 fourth quarter marked the 7.2 million improvement over the prior fourth quarter net sales record.

These results demonstrate the excellent progress we are making on key initiatives we have discussed to build shareholder value, expanding our distribution footprint, developing products for passionate consumers and exploring adjacent product categories.

Our first international sales office was opened in 2002 and today we had teams of sales and marketing professionals working directly with most key retailers in North America, Europe and increasingly Asia. Our international market penetration continues to be a key driver of our success and in fiscal 2011 over 40% of our sales were generated outside the United States and we recorded double-digit sales growth in all territories.

We successfully leveraged the company’s deep distribution platform with a range of compelling products. Some were internally developed like the Cyborg (inaudible) that have won multiple accolades including the prestigious Best PC product of 2010 Award from IGN. Some were developed to support specific games like Rock Band 3, Street Fighter and Call of Duty. And some were acquired like our Tritton line of [playing gaming] audio products.

The sources of these products highlight our growing justification but more importantly each of these offerings bought the strong positive response from consumers who are passionate about games. We also expanded our presence in adjacent categories and more than offset lower sales of our traditional controller and accessories products. Especially controllers and audio products each accounted or approximately 27% of our sales and games accounted for 11% of sales, while controllers and accessories accounted for 15% and 12%, respectively, with an even lower percentage being value priced, lacking a fundamental shift in the business.

In addition to record sales we continue to leverage our top line growth all the way down through the income statement, and delivered strong results on gross profit, operating income, net income, earnings per share and EBITDA for the quarter and the fiscal year. We finished the year with a strong balance sheet, net debt of 1.7 million was inline with the prior year and higher receivables were approximately inline with the higher sales. Even though inventory returns increased from the prior year, the overall inventory balance at year-end is higher than we would have liked. And initiative is underway to reduce the inventory balance and accounts payable trending lower than sales growth is a result of lower purchases and response to that initiative.

Subsequent to year-end, we raised $12.2 million in a private placement financing through the issuance of approximately 6.35 million shares of common stock plus warrants to purchase approximately 2.54 million additional shares of common stock exercisable at $2.56 per share.

The proceeds plus working capital we used to repay all principal and interest related to the 14.5 million convertible loan note issued when the company purchased the Saitek group of companies in November 2007. Just the convertible loan note could have been converted into 10.22 million shares the transaction was accretive to shareholders.

With that I would like to turn the call over to Allyson to provide some additional color on the results, but before I do, I would like to take a moment to thank Allyson for her contribution to a company and to her capacity of Controller and more recently Interim CFO, and congratulate her on promotion to the position of CFO. Allyson?

Allyson Vanderford

Thanks Darren. Let me begin with the brief review of the income statement. Net sales for fiscal 2011 were $184 million up 55% from a $119 million in fiscal 2010. Net sales were primarily driven by strong sales of our products related to Rock Band 3 which launched in September 2010 and align of Tritton gaming headset product. To a lesser extent the full-year also benefited from sales of our Cyborg granted gaming product.

Looking at our sales in greater detail, North America rose approximately 71% to $113 million in fiscal 2011 and represented 62% of total net sales for the year. This compares with 56% of sales in the prior year period. The European net sales rose 36% to $67 million in fiscal 2011 and represented 36% of total net sales compared to 41% of net sales in the prior year.

Sales of Rock Band 3 and Tritton products were strong in North America, while our European sales also benefited from the distribution of third party products including Turtle Beach. Net sales to other geographies increased 11% to $4 million or 2% of total fiscal 2011 net sales.

Gross profit margin fell to 29% in fiscal 2011 from 30.6% in the prior year largely due to lower margins related to foreign exchange fluctuation and to a lesser extent our Rock Band 3 accessories. Our gross margin performance for the full-year is within the guidance range we set at the beginning of the year. While the Rock Band 3 accessories negatively impacted gross margin dollars, strong sales of these and other products allowed us to grow gross profit dollars by 47% to a record $53 million from $36 million last year.

Total operating expenses for the year rose 23% to $35 million representing 19% of net sales and driving an operating profit of $19 million in fiscal 2011. This compares favorably to $28 million of operating expenses in the prior fiscal year which represented 24% of net sales and generated operating income of $8 million. The increase of operating expenses on an absolute dollar basis was primarily driven by payment of bonuses that exceeded the prior year period and an on-going investment in the research and development activities which have resulted in our strong current and future product pipeline.

For the year the company recorded a foreign exchange gain of $1.2 million compared to a foreign exchange loss of $0.3 million a year ago. The gain was primarily due to the fluctuation of the British pound and euro against the U.S. dollar and the Hong Kong dollar. After income tax expense of $6.4 million compared to $1.5 million in the prior year, net income for the fiscal year ended March 31, 2011 was $10.9 million or $0.18 per diluted share compared to net income of $4.5 million or $0.08 per diluted share in the prior fiscal year. EBITDA are widely used measure to monitor financial performance increased 89% to a record $23 million in fiscal 2011 from $12 million in the prior year.

Moving on to the fiscal 2011 fourth quarter, net sales were $34 million up 28% from $26 million in the fiscal 2010 fourth quarter. Sales in the quarter were driven primarily by our Tritton branded gaming headsets and to a lesser extent by our Rock Band 3, Cyborg and Saitek branded accessories.

North American net sales were up 41% to $21 million in the fiscal 2011 fourth quarter, representing 64% of quarterly net sales. This compares with 58% of sales in the prior year period. European net sales were at 9% to $11 million in the fiscal 2011 fourth quarter and represented 33% of quarterly net sales compared to 39% of quarterly net sales in the prior period. Net sales to other geographies increased 41% to $1.2 million or 3% of quarterly net sales in the fiscal 2011 fourth quarter.

Gross profit margin improved nicely to 31.2% from 26.9% in the fourth quarter of fiscal 2010 largely due to a mix shift in the quarter away from Rock Band 3 sales. As a result gross profit dollars grew 49% to $10.5 million from $7.1 million in the same quarter of the prior year.

Total operating expenses for the fourth quarter of fiscal 2011 rose 40% to $9 million representing 26% of net sales and driving an operating profit of $2 million in the quarter. This compares favorably to $6 million of operating expenses in the comparable prior year period which represented 24% of net sales and generated operating income of just under $1 million.

Foreign exchange gain for the fourth quarter of fiscal 2011 totaled $1.2 million compared to a minimal foreign exchange gain in the prior year quarter. As noted in my comments about the year, currency fluctuation between the British pound and euro against the U.S. dollar and Hong Kong dollar were the primary drivers of the foreign exchange gain for the quarter.

After income tax expense of $0.8 million versus a $0.5 million income tax benefit in the prior year period, net income for the fiscal fourth quarter of 2011 was $1.5 million or $0.03 per diluted share compared to net income of $0.8 million or $0.02 per diluted share in the fourth quarter last year. EBITDA increased 114% to $3.6 million in the fiscal 2011 fourth quarter from $1.7 million in the comparable prior year period.

Moving on to our balance sheet, as of March 31, 2011 we reported borrowings under the revolving credit facility of $5.4 million and an acquisition of bank loan less cash of $1.7 million. This compares to borrowings of $3.8 million and an acquisition of bank loan less cash of $1.6 million as of March 31, 2010.

Inventory of $28 million is up 65% from $17 million last year, primarily related to higher Rock Band 3 and Tritton product. Inventory turns on a trailing four quarter basis were 5.2 times up from 4.2 times in the prior four quarter period. Accounts receivable of $19.8 million were up from $14.6 million at the end of the prior fiscal year primarily reflecting the higher sales volume. Our gross DSO were 41 days compared to 57 days a year ago.

Finally, I wanted to briefly comment on our debt repayment and share offering, both of which occurred subsequent to the end of the fiscal 2011 period. In late April, we closed on a $12.2 million private placement financing including approximately 6.35 million shares of common stock and warrants to purchase approximately 2.54 million additional shares of common stock exercisable at $2.56 per share. Using these funds and cash on hand in early May we repaid all principal and interest related to the $14.5 million convertible loan note incurred when the company purchased the Saitek group of companies in November 2007.

As a result of these actions, Mad Catz expects to eliminate approximately $1.1 million of annual interest expense and will retire 10.22 million common shares that had been included in our fully diluted earnings per share calculation.

In summary, we are extremely pleased with our financial position at the end of fiscal 2011 and our subsequent actions further solidify our balance sheet which should allow Mad Catz to further grow our business, take advantage of our new opportunities and software, drive continued increases in earnings and free cash flow and enhance shareholder value. Our products continue to gain wide spread critical and customer claim which is clearly evident in yet another year of record financial performance.

I would now like to turn the call back to Darren for some closing remarks. Darren?

Darren Richardson

Thanks Allyson. At the same point last year I pointed out that there were many reasons to be apprehensive about fiscal 2011, world economy appeared uncertain and the video game industry have been soft, exchange rate volatility had the potentially to be a significant headwind for our international sales and we are facing similar exchange rate exposure in China and potential cost increases as a result of increasing labor costs. Many of those concerns remain a factor today, and provide good cost for apprehension when we look forward to fiscal 2012. However, last year we made significant investments in growth initiatives, in spite of the outlook and for the most part that was successful. Going forward we remain focused on profitably growing the business by expanding our distribution foot print, developing products for passionate consumers and exploring adjacent product categories whether it's organic or by acquisition we intent to add additional sales and marketing people and the new sales offices in growing markets, we intent to spend more on marketing, new product development and research and development and we intent to continue to explore opportunities in adjacent categories.

In short we are focused on continuing to grow the business. To that end we are excited about the potential impact to a number of initiatives we have undertaken. I would like to highlight three of them in particular. First, in February we announced an exclusive agreement with Microsoft to develop wireless co-branded Tritton headsets for the Xbox 360 console. The sales of audio products accounted for 30% of our sales in Q4, and we believe audio products will continue to be a major growth driver going forward and could account for 40 to 50% of our sales in fiscal 2012.

Second, we recently signed a license agreement with [MP Games] to create accessories for the next generation of the Gears of War franchise scheduled for launch this upcoming holiday season.

Third, we recently acquired V-Max Simulation, announced the formation of ThunderHawk Studios, and previewed an upcoming game release titled War Wings, Hellcatz. These initiatives were intended to leverage our market share leadership and global distribution of flight stimulation hardware. Last year games accounted for 11% of our sales and in fiscal 2012 we expect to take additional steps as we pursue our longer term goal of expanding our participation in developing, publishing and distributing games.

In conclusion, our focus remains on building our key hardware brands by bringing high value products to market that enhance the gaming experience. Mad Catz, our console and casual video game brand, Tritton our gaming audio brand, Cyborg, our hardcore PC and console gaming brand, Saitek our simulation brand, an Eclipse our PC input device and multimedia brand. We are delivering the best product in Mad Catz history, our customers are responding enthusiastically, and our results are highlighting a value of the initiatives that continue to position Mad Catz for sustainable profitable growth.

That concludes my prepared remarks for today, but before we move into the Q&A session, I just like to take a moment and thank the entire team at Mad Catz for their contribution to another outstanding year. I would now like to turn the call back to the operator so we can answer any questions. Thanks operator.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Steve Lemmer of Boldt Capital. Please proceed.

Steve Lemmer - Boldt Capital

A couple questions for you. Firstly, I was hoping you could give a few more numbers on Rock Band, what that did, your Rock Band products, in revenue, both for the fiscal year and in Q4. And what you expect to happen going forward with Rock Band?

Darren Richardson

Yes, we don’t breakout individual products or categories where we can’t say that because of non-disclosure agreements, but yes one of the things I have mentioned the couple of times if you back Rock Band and Tritton out of our number you still have positive double-digit growth for the year. And so, effectively what we have is solid growth on pretty much all different sections of the business and we want to continue driving that. In terms of the [go forward] that is now in absolute in terms of what the outlook for Rock Band is this year, but it's something materializes we will be the first ones to put out an announcement and let everybody know.

Steve Lemmer - Boldt Capital

Okay. And then my second question, you had mentioned in Europe you have distribution agreement with Turtle Beach. I know Turtle Beach competes with Tritton. Is that relationship on firm ground or what's the standing there?

Darren Richardson

No. In fact, we have just discontinued the bulk of the Turtle Beach distribution and that's in our Q4 numbers.

Operator

Our next question comes from the line of Matt Strafford with Sidoti & Company. Please proceed.

Matt Strafford - Sidoti & Company

Hello, Darren, congratulations. Great year. Just had a little bit more on the international question. I was just curious, pretty impressive growth for the year. But do you see that as being it for that channel or do you think there is room to expand that?

Darren Richardson

There is definitely room to expand. Some of the products we had this year and Rock Band I think is one of the more obvious ones, have much more of a North American focus and so as we move forward, you will see some normalization of growth across all the different categories, but North America clearly out performed Europe but again in all territories we had double-digit growth rate, and we're focused on continuing to drive growth on an international as well as domestic basis.

Matt Strafford - Sidoti & Company

All right. And then switching gears a little bit, just in terms of the overall product mix, as Tritton becomes more of a factor in that mix, should we expect to see the margin profile increase?

Darren Richardson

I think there is a couple of things with the way the product mix is going. If you look at the core of the Mad Catz product, a lot of the sales are driven by licensing agreements which are great business but you are constantly reinventing that business and looking for the new opportunities on a year to year basis. The thing that is really pleasing with the Tritton growth as well as the Cyborg and then the Saitek business and the eclipse to a lesser extent again is those products have multi-year life expectancy, so starting to develop a body of business that is continuing business that we have control over as opposed to looking at new opportunities from year-to-year. I think there is some good opportunities on that front. In terms of the margin, one of the big margin drivers for last year or negative margin drivers for last year were the Rock Band bundles in particular and that really was a Q2 and a little bit of predominantly Q3 event, and so as we kind of hit Q4, you see margins bounce back to where I would like to think are going to be sustainable going forward. I know in the past I have talked to our goal internally is to get margins back up over 30% on annualized basis, and keep margins over 30% on annualized basis, so once we drop down under 30%, where we're unhappy about that so that's not something that we're comfortable with internally and so we're very much focused on that on the go-forward basis.

Matt Strafford - Sidoti & Company

Very helpful. Thanks. Just one last one for you. I was just curious if you could maybe comment on what you're seeing in the marketplace currently? Has the mat been comparable year-over-year, a little softer?

Darren Richardson

No. It is soft, but it was soft last year as well, so it’s interesting outlook for where we are today but also for the year, but that said, we've had three record sales growth years against some of the worst economic back drop that we have seen and so where we're still intent on taking some swings at continuing to grow the business, the last couple of years we have been successful in hooking together some successful initiatives, and this year again where we're very much focused and committed to driving growth. Obviously a stronger videogame industry and a stronger economy makes that a lot ease easier and a lot more achievable but we're still focused on growing this year.

Operator

(Operator Instructions) Our next question comes from the line of Stan Trilling with Credit Suisse. Please proceed.

Stan Trilling - Credit Suisse

Hi Darren, congratulations on a great quarter, great year. And a couple of questions. First of all, on the new product, new Tritton product for the Xbox, when will that be shipped?

Darren Richardson

We'll expect to see those start to roll out in Q2, and then the bulk of it probably in Q3 is when will you start to see the meaningful contribution.

Stan Trilling - Credit Suisse

And could you talk at all about your plans to promote the product?

Darren Richardson

Yes. I mean, the nice thing about this product is it is a co-branded Microsoft product, so it sits comfortably between first party and the third party. We just showed the product at E-3 for the first time unveiled last week, and I think if you do any internet searches, you will see some fantastic coverage of the product and reviews of the product and I think IGN ran a full front page exclusive on the product, so there is an incredible amount of retail as well as consumer interest, so we're excited about the product offering. I think the products themselves are developing nicely, and the feedback is incredibly positive from a perspective of there is the design of the product, and the feature sets in the products, and again it continues to move the company into an area where we're doing premium technology driven differentiated products that people get excited about when they hear that they are becoming available, so I think that's going to be the key growth driver for the business as we go forward.

Stan Trilling - Credit Suisse

You just gave me a great segue into my next question. Congratulations on having a differentiated product, a non-commodity product. How much of your product line is still semi commodity versus where it was two years ago?

Darren Richardson

Well, if you look at the category breakout in the press release and again you will see that in the 10-K that got filed today as well, the 10-K will have a lot more detail on those bits and pieces plus some of the history on the trends on those percentages, but if you go back not too many years, control pads were over 50% of Mad Catz sales. This last year I think the number was about 15% on control pads and about 12% on accessories and then within that control pad category a large part of those were the Call of Duty control pads which are a premium and a couple of other licensed control pads which were definitely premium products that sell at a premium to the first party products. So when you try to drill down to what the old value prized products are within the business, it’s becoming quite a small part of the business. At this stage I would say probably less than 20% of the business. The other thing is when you look we broke brands out as well so that you can see percentage of sales by brand, and again I think the branding trends also show where the business is going in terms of business that doesn't need to be reinvented each year and business that's not heavily licensed dependent. We're really pleased with the growth in that part of the business and it just gives the business a much more stable foundation as well.

Stan Trilling - Credit Suisse

Terrific. One last question having to do with the simulation game business. You're going up against some pretty big boys in this area where they're spending tens of millions of dollars on developing, sometimes more than that, on the promotion. Can you give us some sort of idea of what type of cost parameters we should be looking at in game development in this area?

Darren Richardson

Well, first of all, I think any areas that we're looking at on game development we're trying to identify niches where we have some core competent. Core competence could come from the fact we're the leader on the hardware side and also the fact that we have a long solid track record of negotiating and executing great license agreements with all sorts of household name properties from all of the big companies in the interactive entertainment industry and the entertainment industry at large. At no point do we intend to look at doing huge budget products that compete with the big tier 1 publishers. If we do anything, it would be complementary to what they're doing, and I think we've got a fairly risk adverse strategy in the way we go in. As a company I think we have and just from being in the hardware business, it’s easier to lose money on products than it is to make money on products and so we do have a very conservative attitude to going into business and going into different product opportunities, but at the same time I think we have a good track record of executing well, so flight simulation is not a huge category. It’s not the sexiest category that you will find within the video game space, but it’s an area where we have a lot of knowledge, we got a very dedicated and loyal consumer following under our Saitek brands so doing some product that tap into there, drive additional hardware sales and create a stronger bond with consumers that we're working with in that space I think are really nice adjuncts to the business we're already doing.

Stan Trilling - Credit Suisse

I appreciate your frugality and your risk-averse stance but can you give us some sort of idea, be a little bit more specific on what does it cost to create a game in this flight simulation space.

Darren Richardson

I guess the short answer is it depend and what I will say is that the budget we are biding into a budget that we can actually manage.

Operator

(Operator Instructions) Our next question comes from the line of Barry Ogman with JP Turner. Please proceed.

Barry Ogman - JP Turner

Congratulations, Darren, and to your employees. Great company, great performance. On a future distribution basis, Darren, what markets do you want to be in that you're not in? And what markets do you think you can get into next, even if they're outside your original scope, that would grow the company on an international basis? Where do you want to be and where do you think you could be?

Darren Richardson

The key is following a lot of our large retailers around the world and so within Europe and our European distribution we have done a good job of that. We have in the last year we have put sales people on the ground and we did have sales people in the UK, in France and in Germany. And we have added people in Barcelona and also in Scandinavia looking after those markets on a direct basis. So, it allows us to deal with the larger retailers in those markets on a direct basis. We also deal with retailers in countries like Italy on a direct basis. So, there is some opportunities to put some additional people on the ground close to key retailers in some of those market and work with retailers on a direct basis rather than through distribution in some of those markets.

You also have some of the emerging markets in the last couple of years we added sales people in Hong Kong and Shanghai looking after the Chinese market and we're seeing some good results there is and we'll continue to add people to markets as those markets evolve. We're seeing growth in Korea but we don't have anybody on the ground there at the moment and then we're also seeing growth in the Japanese market which is probably about a 20% of the entire videogame space happens in Japan, so there is a lot of opportunities. In addition to that you have the emerging markets with the BRIC countries where through distribution we're seeing some great growth opportunities there as well. We're going to continue to follow consumers around and work with key retailers in those markets to the extent it makes sense.

Barry Ogman - JP Turner

Excellent. Sounds like a lot of growth in front of you.

Darren Richardson

Yes, and if you look back nine years ago we had a U.S. sales company. Today we've got 85 people in Europe and about 50 to 60 of those, probably 50 of those people directly involved in sales and marketing efforts in all different countries and in the countries we compete in, they're staffed predominantly by local people who have seen as local competitors in dealing with local competitors in those countries and we actually have become really the only true global player in our space and in most of those areas we're competing with local competitors and we still manage to establish ourselves between the number one, two or three positions in each of those markets and when you can go into new international markets and take a market share leadership or at least being competing at the front end of the pack, I think that's a testament to the strength of the product offerings as well.

Barry Ogman - JP Turner

That was one great answer to a little question. Excellent. One moment, please. Can you break down as far using assets, using your resources, do you see more going into marketing coming forward versus product development?

Darren Richardson

If you look at research and development and particularly research and development is just to get into Q4, of fiscal 2011 versus Q1 of fiscal 2011, you can see that we're definitely accelerating our spend on R&D. Not all of our product development initiatives end up as R&D because it categorizes R&D is actual true research and development. On product we basically have this great global distribution footprint. We're continuing to expand it. To leverage it we need to have more and more product to be able to put through that pipeline to be able to get leverage from it, and so given the nature of a lot of the products we're doing now, those products require marketing because they are more than just a price driven product that is sold because it is cheaper than the product next to it. You need to be able to drive demand. We're actually seeing strong demand for those products and products that are developing momentum in the marketplace all and of their own as well, so we will definitely have more spend in terms of promoting product, no question.

Operator

Our next question is a follow-up from the line of Steve Lemmer with Boldt Capital. Please proceed.

Steve Lemmer - Boldt Capital

Hi, there. Thanks. Just one follow-up to my two previous questions. So what type of revenue was being generated through the Turtle Beach distribution agreement?

Darren Richardson

We can't break that out specifically, but it is incorporated in the audio sales that are broken out, but we also have audio products that are sold under Mad Catz, Cyborg, and Saitek as well. Each of those different brands has the same range of audio products.

Steve Lemmer - Boldt Capital

Okay. So the numbers for Turtle Beach are within the audio?

Darren Richardson

Within the audio. You basically have Tritton, Mad Catz, Cyborg, and Saitek audio products.

Steve Lemmer - Boldt Capital

All right. And so I think what you had said is that growth without Tritton and without Rock Band grew double-digits last year?

Darren Richardson

Yes.

Steve Lemmer - Boldt Capital

And so is it similar numbers in the fourth quarter? I know it is your seasonally slowest quarter but is it similar numbers in the fourth quarter, as well?

Darren Richardson

Yes. In fact, that's a good question. Tritton yes, I would say off the top of my head I would say probably it is. Certainly Rock Band and Tritton. I know Cyborg is really kind of coming on stream in the fourth quarter as well, and you can see it on the brand breakout with fourth quarter percentage of total sales versus year-to-date percentage of sales. You should be able to rough in an estimation of what that is.

Steve Lemmer - Boldt Capital

Okay. And then also, with Rock Band, there is a lot of uncertainty. There hasn't been an announcement of a next Rock Band. Am I right about that?

Darren Richardson

We're definitely not in a position to do any announcements about anybody else's products.

Operator

Our next question comes from the line of Sean Michael a Private Investor. Please proceed.

Sean Michael - Private Investor

I just had a question on your category breakdown. What types of products would be included in the games category?

Darren Richardson

We basically have some chess products, handheld products, a couple of other software products but a large part of that would have been Rock Band 3 software that we distributed as bundles.

Sean Michael - Private Investor

And then the Rock Band instruments themselves would be specialty controllers?

Darren Richardson

Specialty controllers, yes.

Sean Michael - Private Investor

Okay. Thank you.

Darren Richardson

And then you also get like a lot of the Saitek flight simulation products would also come under specialty controllers.

Operator

At this time we appear to have no further questions registered. Mr. Richardson, I would now turn the call back to you for closing remarks you may have.

Darren Richardson

Thanks to everyone for joining us today. We look forward to updating you on our progress when we host our fiscal first quarter 2012 call after we get those results out. Thanks a lot.

Operator

Ladies and gentlemen, that does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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