THQ ANNOUNCES FISCAL 2005 SECOND QUARTER RESULTS
Company Reiterates Fiscal 2005 Guidance of $1.10 EPS. THQ Renews Key Long-Term License Agreements with Pixar and Nickelodeon.
CALABASAS HILLS, Calif. - October 27, 2004 - THQ Inc. (NASDAQ: THQI) today announced financial results for the second quarter of fiscal 2005 and reiterated guidance of net sales of $680 million and $1.10 earnings per diluted share for the fiscal year ending March 31, 2005.
For the three months ended September 30, 2004, THQ reported net sales of $96.3 million and a net loss of $6.4 million, or $0.16 per share, ahead of guidance of $82 million net sales and a loss of $0.20 per share. For the same period a year ago, THQ reported net sales of $126.5 million and net income of $3.6 million, or $0.09 per diluted share, which included other income of $4 million (pre-tax), or $0.06 per diluted share, from an insurance settlement.
For the six months ended September 30, 2004, THQ reported net sales of $184.5 million and a net loss of $10.3 million, or $0.27 per share. In the corresponding prior-year period, with significantly more new product releases, THQ posted net sales of $224.6 million and net income of $32,000, or $0.00 per diluted share.
"Our better-than-expected results this quarter were driven by the outstanding performance of new releases WarhammerÒ 40,000: Dawn of WarÔ, WWEÔ Day of ReckoningÔ, and Full Spectrum WarriorÔ as well as strong catalog sales in our international territories," said Brian Farrell, president and chief executive officer, THQ. "Both WarhammerÒ 40,000: Dawn of WarÔ, our first release from recently acquired Relic Entertainment, and Full Spectrum WarriorÔ underscore our strategy of gaining share against the core gamer. We are extremely pleased with WarhammerÒ 40,000: Dawn of WarÔ, which ranks as a top-selling title in multiple territories and we look forward to more ground-breaking games from Relic and our deep internal development studio organization."
Farrell continued, "Our recent successes in extending our relationships with Nickelodeon and Pixar and continued momentum in our product development organization position THQ for growth through the upcoming console transition and beyond."
Fiscal 2005 Financial Guidance
THQ reiterated guidance for the fiscal year ending March 31, 2005 and provided initial guidance for the third and fourth quarters of fiscal 2005:
- For the fiscal year ending March 31, 2005, THQ continues to expect net sales of approximately $680 million and net income of approximately $1.10 per diluted share.
*THQ stated that THQ WirelessÔ is expected to contribute more than $20 million of THQ's net sales in fiscal 2005.
- For the third quarter of fiscal 2005, the company expects net sales of approximately $330 million and net income of about $1.15 per diluted share.
*For the fourth quarter of fiscal 2005, the company expects net sales of approximately $165 million and net income of about $0.21 per diluted share.
Product Release Schedule:
Fiscal 2005 Third Quarter
Farrell said that the third quarter release schedule is highlighted by established mass-market brands, including three titles anticipated to ship more than one million units: The Incredibles, WWE SmackDown!Ô vs. RawÔ and The SpongeBob SquarePantsÔ Movie. Other highly anticipated titles for the quarter include the recently released Tak 2: The Staff of Dreams and The Polar Express.
Fiscal 2005 Fourth Quarter
Key product releases anticipated for the fiscal 2005 fourth quarter include: The PunisherÔ, from internal studio Volition in January; MX vs. ATV Unleashed, from internal studio Rainbow in February; and Full Spectrum WarriorÔ for PlayStationÒ 2 and WWEÔ: WrestlemaniaÒ XXI in March.
Fiscal 2006 First Quarter
The company said that it plans to release three new original titles in the fiscal 2006 first quarter. Pandemic Studios' Destroy All Humans!Ô and S.T.A.L.K.E.R.: Shadow of Chernobyl from GSC Game World are now scheduled to ship in April and May of 2005, respectively. In addition, the company plans to release Juiced in the fiscal 2006 first quarter.
"Our holiday 2004 drive titles are based on some of the biggest brands in entertainment, including three of the most highly anticipated theatrical releases of the season," Farrell said. "Our fiscal 2005 fourth quarter portfolio includes a deep line-up of titles that appeal to both the core gamer and mass-market consumer. As we move into fiscal 2006, we plan to deliver a steady stream of quality titles throughout the year."
THQ Secures Long-Term, Strategic License Agreements and Expands Core Gamer Offerings
- In August 2004, THQ announced an exclusive multi-property publishing agreement with Pixar Animation Studios granting THQ worldwide interactive rights to four upcoming Pixar animated feature films. The agreement starts in 2006 and includes all current and future video game console systems, PC/MAC, and handheld and wireless devices through 2013.
- In October 2004, THQ renewed its master interactive license agreement with Nickelodeon granting THQ worldwide interactive rights through 2010 to publish games based on all existing and future animated TV and movie properties targeting kids ages 6-14.
- THQ continued to build its stable of core gamer titles with new exclusive worldwide publishing rights to the "Juiced" franchise, the highly anticipated street racing property by Juice Games. Subject to final contract and certain closing conditions, THQ plans to release "Juiced" for the PlayStationÒ 2 computer entertainment system, the XboxÒ videogame system from Microsoft and PC in the first quarter of fiscal 2006.
Product Development Momentum
- THQ, consistent with its strategy to grow internal development capabilities, opened a new studio in the San Diego area. The new studio, Concrete Games, is focusing on next-generation console technology and development, and becomes THQ's ninth internally owned studio.
- Underscoring the strength of THQ's product development organization, THQ was recently rated the number two independent publisher by Game Developer Magazine. THQ received the highest internal developer satisfaction rating of all publishers.
Q2 Titles Top Sales Charts
- WWE Day of ReckoningÔ was the #2 best-selling Game Cube title for the month of September, according to The NPD Group.
- WarhammerÒ 40,000: Dawn of WarÔ ranks as a top selling PC title in the US, UK, France, Germany and Australia (according to the NPD Group, UK Chart Track, GFK and Media Control).
- THQ, building on its leadership on handheld devices, plans to launch Ping Pals for the NintendoÒ DS portable game system in early December. Ping Pals takes advantage of the highly anticipated two-way messaging feature in the DS system. The company also plans to bring its market-leading kids and family brands to the platform, including games based on the Disney/Pixar films Cars and The Incredibles, as well as SpongeBob SquarePantsÔ and Tak. In addition, THQ has four Sony PlayStationÒ Portable (PSP) titles in development, and plans to release its successful MX brand for the PSP launch.
- THQ WirelessÔ continued to build its content and technology offerings and grow its revenue base. Through MINICK USA, THQ WirelessÔ now offers the US market the added value of mobile applications such as Short Message Service (SMS) voting and information services. This week marked the launch of its first premium SMS campaign with the NFL that enables fans to vote their favorite NFL players into the Pro Bowl. THQ Wireless also enhanced its growing product portfolio with two new SpongeBob SquarePantsÔ games and seven Midway arcade titles for mobile devices.
Investor Conference Call:
THQ management will host an investor conference call today, October 27, 2004, at 2:00 p.m. PDT (5:00 p.m. EDT) to review the company's financial results and operations for the quarter ended September 30, 2004 and discuss its future outlook. The call may be accessed by dialing (800) 299-7635 domestic or (617) 786-2901 international, access code is 87846239, or by visiting THQ's Web site at www.thq.com.