Midway's losses more than doubled in its third quarter, the publisher said today, as it missed its estimates in spite of revenue growth.
The publisher reported a $75.9 million loss, compared to the $33.5 million loss in the same period last year, against revenues of $51.4 million up year-over-year from $36.7 million.
Over the quarter, it consolidated its Southern California studio and laid off a significant number of its Austin staff alongside a canceled project there, a process Midway refers to as "optimization." It also dropped its underperforming licenses in order to focus on its stronger ones, like TNA! Impact, Mortal Kombat and The Wheelman.
It also sold a quantity of its accounts receivable to National Amusements Inc, whose cash infusions have largely kept the embattled publisher afloat. NAI's president, Shari Redstone, was chairman of Midway's board until she announced her departure earlier today.
Overall, the company's share value has dropped 67 percent in a year, struggling particularly in recent weeks as the extent of NAI's debt and the impact of the current credit crunch on Midway majority stakeholder Sumner Redstone, father of Shari, became clear.
But president and CEO Matt Booty, just recently confirmed to lead the organization after several months in an interim role, says that the hit Midway's taken this quarter can be attributed to the company's turnaround expenses.
"In the second and third quarters of 2008 we have focused on addressing several critical issues that were affecting the ability of our company to achieve success, and the third quarter results and associated non-cash charges reflect that effort,” Booty says.
"Our current focus is the upcoming launch of Mortal Kombat vs. DC Universe, which aligns our Company with the exceptional Warner Bros. brand of DC Comics. We expect that the fourth quarter will represent significant progress toward completion of these efforts, and that we will enter 2009 with a renewed focus on Midway’s key strengths."
Wedbush Morgan analyst Michael Pachter thinks the company has a shot at returning to profitability. "Notwithstanding the continued restructuring theme and likely delay of a return to profitability by another year, we remain cautiously optimistic that Midway will perform better in 2009 than it is expected to perform in 2008," he said.
"Midway’s lineup in Q4 includes sequels to previously successful brands like Mortal Kombat and Blitz: The League. We believe that strong catalog sales plus the addition of The Wheelman and This Is Vegas to the 2009 lineup will enable Midway to approach profitability next year."