Chicago, Illinois, August 2, 2007 -- Midway Games Inc. (NYSE: MWY) today announced results of operations for the three month period ended June 30, 2007. The Company also confirmed its prior full year guidance and provided revenue and earnings guidance for the third quarter ending September 30, 2007.
SECOND QUARTER RESULTS
Net revenues for the 2007 second quarter were $31.8 million, compared to the 2006 second quarter net revenues of $25.9 million and ahead of prior guidance of approximately $29 million. The 2007 second quarter net loss was $14.3 million, or a loss of $0.16 per basic and diluted share, compared with a 2006 second quarter net loss of $31.0 million, or a loss of $0.34 per basic and diluted share.
On a non-GAAP basis, excluding the impact of stock-option expenses and certain non-cash items, the 2007 second quarter loss was $11.0 million or a loss of $0.12 per basic and diluted share, compared to the Company’s previous non-GAAP guidance of a loss of approximately $0.14 per basic and diluted share. For the 2006 second quarter, on a non-GAAP basis, the Company had a loss of $29.9 million, or a loss of $0.33 per basic and diluted share. A reconciliation of non-GAAP results to GAAP results is provided at the end of this press release.
Other recent operating highlights include:
- <*>Midway launched in North America The Lord of the Rings Online: Shadows of Angmar for PC, and worldwide Mortal Kombat: Armageddon for the Wii, Hour of Victory for the Xbox 360, Hot Brain for the PSP, and Touchmaster for the Nintendo DS.*> <*>Several of Midway’s games shown at this year’s E3 Media&Business Summit received awards and critical praise including Stranglehold with first runner up for IGN’s“Best Action Game,” Unreal Tournament 3 with runner up for IGN’s“Best Graphics Technology” and“PS3 Best First Person Shooter,” and finalist for GameSpot’s“Best Shooter,” as well as multiple other accolades and nominations.*> <*>Midway, in conjunction with developer Epic Games, Inc., and Sony Computer Entertainment America, announced that the highly anticipated and award-winning Unreal Tournament 3 will be exclusive to the PlayStation 3 and PC in 2007. Unreal Tournament 3 will also be the first console game to feature robust user generated content including multiplayer maps, custom game modes and much more.*> <*>Midway also announced upcoming Nintendo exclusives including Cruis'n and Game Party for Wii; and Ultimate Mortal Kombat, The Bee Game, and Foster's Home for Imaginary Friends for Nintendo DS.*>
David F. Zucker, president and chief executive officer, commented,“In addition to successful second quarter launches including The Lord of the Rings Online and Mortal Kombat: Armageddon for the Wii, we continued to extend our casual games business. Along with Touchmaster brought to the Nintendo DS and Hot Brain for the PSP, we released six of our classic titles on the PlayStation Online Store, and we have become one of the top sellers of classic arcade games on Microsoft’s Xbox Live Arcade.”>
During the third quarter, the Company expects to release worldwide Stranglehold for the PS3, Xbox 360, and PC, and Hour of Victory for PC; MYST for the Nintendo DS in Europe; and Big Buck Hunter for the PC in North America. For the third quarter ending September 30, 2007, Midway expects the following:
- <*>Net revenues of approximately $50 million, with a net loss of approximately $0.23 per basic and diluted share.*> <*>On a non-GAAP basis, Midway expects a third quarter loss of approximately $0.17 per basic and diluted share, which excludes approximately:*>
o $0.05 of non-cash convertible debt interest expense.
For the year ending December 31, 2007, Midway’s full year outlook remains unchanged:
- <*>Net revenues are expected to grow approximately 36% to $225 million with a net loss of approximately $0.44 per basic and diluted share.*> <*>On a non-GAAP basis, Midway expects a loss of approximately $0.27 per basic and diluted share, which excludes approximately:*>
o $0.13 of non-cash convertible debt interest expense, and
o $0.02 of deferred income tax expense related to goodwill.
Mr. Zucker concluded,“The response to our 2007 line-up at E3 was overwhelmingly positive, and we believe this sets the stage for our upcoming releases of Stranglehold, BlackSite: Area 51, and Unreal Tournament 3, as well as our other titles for the remainder of this year. We are at the culmination of the first part of our next generation strategy, and we are very excited to show the market the fruits of our labors starting with Stranglehold.”
NON-GAAP FINANCIAL MEASURES
Midway has included non-GAAP financial measures in its quarterly results and 2007 outlook. Midway does not intend for the presentation of the non-GAAP financial measures to be isolated from, a substitute for, or superior to the information that has been presented in accordance with GAAP. In addition, information used in the non-GAAP financial measures may be presented differently from non-GAAP financial measures used by other companies. The non-GAAP financial measures used by Midway include non-GAAP basic and diluted loss per share.
Midway considers the non-GAAP financial measures used herein, when used together with the corresponding GAAP measures, to be helpful in providing meaningful additional information regarding its performance by excluding specific items that may not be indicative of Midway’s core business or projected operating results. These non-GAAP financial measures exclude the following items:
Stock Option Expense. Midway adopted SFAS No. 123R,“Share-Based Payment” beginning January 1, 2006, in which it began to recognize as an expense the fair value of its stock options. A non-GAAP measurement that excludes stock option expense identifies this component of compensation expense that does not require cash outlay.
Non-cash convertible debt interest expense. In accordance with GAAP, Midway is required to record discounts on its convertible senior notes as a result of decreases in the conversion prices of these notes. These amounts are amortized as interest expense through the first date on which the holders may redeem the notes. There is no cash outlay associated with this interest expense. A non-GAAP measurement that excludes the convertible debt non-cash interest expense allows for a more direct comparison to prior periods, and also distinguishes this interest expense from the remainder of the interest expense, which requires (or required) a cash outlay by Midway.
Deferred tax expense related to goodwill. Midway recognizes deferred tax expense related to increases in the difference between the book basis and tax basis of goodwill. Goodwill is not amortized for book purposes but is amortized for tax purposes. This increase in the book to tax basis difference causes an increase in the related deferred tax liability balance that cannot be offset against deferred tax assets. Given the nature of this deferred tax expense, a non-GAAP measurement that excludes this expense is deemed appropriate.>
In the future, Midway may consider whether other significant items should be excluded when arriving at non-GAAP measures of financial performance.
Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 10:00 A.M. EDT today, Thursday, August 2, 2007. The conference call number is (866) 271-5140 or (617) 213-8893 (international callers). The passcode for the call is 48396825. Please call ten minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call on the Internet at www.investor.midway.com or at www.earnings.com. Please log-on fifteen minutes in advance to ensure that you are connected prior to the call's initiation. Following its completion, a replay of the call can be accessed until August 9th by dialing (888) 286-8010 or (617) 801-6888 (international callers). The passcode for the replay is 85745153. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com .
Midway Games Inc. (NYSE:MWY), headquartered in Chicago, Illinois, with offices throughout the world, is a leading developer and publisher of interactive entertainment software for major video game systems and personal computers. More information about Midway and its products can be found at www.midway.com .
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Midway– Investor Relations
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This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 concerning future business conditions and the outlook for Midway Games Inc. (the "Company") based on currently available information that involves risks and uncertainties. The Company's actual results could differ materially from those anticipated in the forward-looking statements as a result of these risks and uncertainties, including, without limitation, the financial strength of the interactive entertainment industry, dependence on new product introductions and the ability to maintain the scheduling of such introductions, the current console platform transition and other technological changes, dependence on major platform manufacturers and other risks more fully described under "Item 1. Business - Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and in more recent filings made by the Company with the Securities and Exchange Commission. Each forward-looking statement, including, without limitation, financial guidance, speaks only as of the date on which it is made, and Midway undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, except as required by law.