THQ net loss shrinks but revenue drops in second quarter
SAN FRANCISCO (Reuters) - THQ Inc THQI.O narrowed quarterly losses but failed to arrest a revenue decline after its marquee "Darksiders II" title fell short of expectations in a sluggish video games market.
The company, which had trimmed staff and shut non-core businesses in an effort to revive the business, sold just 1.4 million units of the action-adventure game since its August launch, far short of a break-even target of 2 million.
On Monday, executives said they were pushing back the release of key titles such as its "South Park" game that were not yet ready for primetime - a postponement that will increase the company's need for capital.
THQ has hired Centerview Partners LLC to help it evaluate financing and "strategic alternatives" to raise capital and improve liquidity, but executives did not elaborate on what options were on the table.
"The new release timing and our limited financial resources had created a need for additional capital," Chief Executive Brian Farrell told analysts on a conference call, in which he and other executives chose not to field questions.
THQ also has $100 million in convertible notes that are due in August 2014.
Potentially fuelling uncertainty, the company on Monday suspended earnings guidance and withdrew its previously given outlook for fiscal 2013.
THQ, known for its wrestling videogames, has been losing ground to larger rivals including Activision Blizzard Inc (ATVI.O). The company's stockholders approved a 1-for-10 reverse share split of its common stock in late June to raise its stock price and avoid being delisted.
On Monday, the company announced that the spring 2013 launch of "South Park: The Stick of Truth", based on the popular animated television series, was postponed to fiscal 2014.
The releases of strategy game "Company of Heroes 2" and first-person shooter "Metro: Last Light", expected in March, have also been delayed.
That leaves the company without a tentpole title for the holidays apart from its just-launched "WWE '13" title, and the underperforming "Darksiders II".
"'Darksiders II' did not perform to our expectations or live up to its generally favorable reception," THQ President Jason Rubin told analysts on the earnings call.
Rubin was brought on board this summer to focus on high-quality titles, streamline the product pipeline and reignite its prospects. Rubin is the co-founder of game studio Naughty Dog, which makes the "Uncharted" series for Sony Corp (SNE.N)(6758.T).
The company said total revenue dropped to $91.8 million from $119.6 million a year ago. It posted a net loss of $12.1 million, or $1.76 per share, compared to a net loss of $46.9 million, or $6.86 per share, a year ago.
Wall Street analysts on average had expected the company to report a net loss of $3.47 per share, according to Thomson Reuters I/B/E/S. The company also exceeded Wall Street's revenue expectations of $84.26 million.
Ahead of the earnings report, shares of the games maker rose 5.6 percent to close at $3.02 on the Nasdaq. After-hours trade was halted pending the results.
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