THQ's Q1 results

AGOURA HILLS, Calif., Aug 09, 2010:  THQ Inc. (NASDAQ:THQI) today reported financial results for the fiscal 2011 first quarter ended June 30, 2010, in line with the company's guidance provided on June 14, 2010.

For the fiscal first quarter ended June 30, 2010, THQ reported net sales of $149.4 million, compared with $243.5 million in the prior-year period. On a non-GAAP basis, for the three months ended June 30, 2010, the company reported net sales of $160.3 million, compared with $233.9 million a year ago. Fiscal 2011 first quarter net sales were driven primarily by sales of  UFC ^® Undisputed ^TM 2010. For the same quarter last year, THQ's net sales were driven primarily by sales of  UFC 2009 Undisputedand  Red Faction ^® : Guerrilla ^TM . No title comparable to  Red Faction: Guerrilla was released during the first quarter of fiscal 2011.

For the three months ended June 30, 2010, the company reported a net loss of $30.1 million, or $0.44 per share, compared with net income of $6.4 million, or $0.09 per diluted share, in the prior-year period. On a non-GAAP basis, for the three months ended June 30, 2010, the company reported a net loss of $14.4 million, or $0.21 per share, compared with non-GAAP net income of $6.9 million, or $0.10 per diluted share, in the prior-year period.

A reconciliation of non-GAAP to GAAP results is provided in the accompanying financial tables.

THQ President and CEO Brian Farrell said, "During the quarter, we continued to bring superior quality games to market, with  UFC Undisputed 2010 achievingan 85 Metacritic rating. We also delivered our most critically acclaimed E3 showing ever with a strong line-up of games in development, several of which are based on proven long-term franchises. Our goal this fiscal year continues to be to position THQ for growth in fiscal 2012 and beyond."

Farrell added, "We are excited about the opportunity for industry growth provided by rapidly expanding online markets and new gaming platforms such as Kinect, Move and Nintendo 3DS. We are developing franchises on these new gaming platforms and we are increasing our investment in online and digital gaming to benefit from these emerging markets."

Fiscal 2011 First Quarter Highlights and Recent Developments

Business Outlook

Fiscal Year Ending March 31, 2011

The company continues to expect to report non-GAAP fiscal 2011 net sales in the range of $845 million to $865 million and roughly breakeven non-GAAP earnings per share for the full year.

Fiscal Second Quarter Ending September 30, 2010

THQ expects to report non-GAAP net sales in the range of $60 - $70 million, and a non-GAAP loss per share in the range of $0.60 - $0.65, as no new major titles are scheduled for release during the fiscal 2011 second quarter.

Non-GAAP Financial Measures

In addition to results determined in accordance with GAAP, the company discloses certain non-GAAP financial measures that exclude the following:

For non-GAAP purposes, the company uses a fixed, long-term projected tax rate of 15% to evaluate its operating performance, as well as to forecast, plan and analyze future periods.

THQ may consider whether other significant items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

The company excludes these expenses from its non-GAAP financial measures primarily because its management does not believe they reflect the company's primary business, ongoing operating results or future outlook. THQ's management believes that the use of non-GAAP financial measures provides meaningful supplemental information regarding its financial condition and results of operations, and helps investors compare actual results to its long-term operating goals as well as to its performance in prior periods. The non-GAAP financial measures included in this earnings release have been reconciled to the comparable GAAP results in the accompanying tables, and should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

In addition to the reasons stated above, which are generally applicable to each of the items THQ excludes from its non-GAAP financial measures, the company's management uses certain of the non-GAAP financial measures for the following reasons:

Stock-Based Compensation. THQ does not consider stock-based compensation charges when evaluating the performance of its business or formulating its operating plans. Stock-based compensation charges are subject to significant fluctuation outside of the control of management due to the variables used to estimate the fair value of a share-based payment, such as THQ's stock price, interest rates and the volatility of the company's stock price. Further, when considering the impact of equity award grants, THQ places a greater emphasis on the use of such grants as retention tools for long-term stockholder value creation, as well as overall stockholder dilution, rather than the accounting charges associated with such grants.

Deferred Revenue/Costs. The company recognizes the revenue and related costs from the sale of certain titles for which the online service is determined to be a deliverable over the estimated online service period. Although the company defers the recognition of all or a portion of its net revenue and costs with respect to these titles, there is no impact to its operating cash flow. THQ's management excludes the impact of deferred net revenue and costs related to packaged games when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.

Business Realignment Expense. Although THQ has incurred business realignment expenses in the past, each charge relates to a discrete event based on a unique set of business objectives. Management does not believe these charges reflect the company's primary business, ongoing operating results or future outlook. As such, the company believes it is appropriate to exclude these expenses from its non-GAAP financial measures.

Fiscal Periods

Our fiscal year ends on the Saturday nearest March 31st. For simplicity, we present all fiscal periods as ending on a calendar month end. Our fiscal 2011 first quarter ended on July 3, 2010. Our fiscal 2010 first quarter ended on June 27, 2009. The fiscal three month periods ended June 30, 2010 and 2009 consisted of 13 weeks.

Investor Conference Call

THQ will host a conference call to discuss fiscal 2011 first quarter results today at 2:00 p.m. Pacific/5:00 p.m. Eastern. Please dial 877.356.8075 domestic or 706.902.0203 international, conference ID 89684852 to listen to the call or visit the  THQ Inc. Investor Relations Home page at  http://investor.thq.com. The online archive of the broadcast will be available approximately two hours after the live call ends. In addition, a telephonic replay of the conference call will be provided approximately two hours after the live call ends through August 11, 2010, by dialing 800.642.1687, domestic, or 706.645.9291, international, conference ID 89684852.

About THQ

THQ Inc. (NASDAQ:THQI) is a leading worldwide developer and publisher of interactive entertainment software. Headquartered in Los Angeles County, California, THQ sells product through its global network of offices located throughout North America, Europe and Asia Pacific. More information about THQ and its products may be found at  http://www.thq.com and http://www.thqwireless.com. THQ, Company of Heroes, de Blob, Devil's Third, Homefront, Red Faction, Red Faction: Armageddon, Red Faction: Guerrilla, Red Faction: Origins, Saints Row and their respective logos are trademarks and/or registered trademarks of THQ Inc.

Microsoft, Xbox, Xbox 360, Xbox Live, the Xbox logos, and the Xbox Live logo are either registered trademarks or trademarks of Microsoft Corporation in the U.S. and/or other countries.

"PlayStation" is a registered trademark of Sony Computer Entertainment Inc.

Wii, Nintendo DS and Nintendo DSi are trademarks of Nintendo.

All other trademarks are property of their respective owners.

This press release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, the company's expectations for the second quarter and full fiscal year ending March 31, 2011, and for the company's product releases in future periods. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ") and are based upon management's beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive and technological factors affecting the operations, markets, products, services and pricing of THQ. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers should carefully review the risk factors and the information that could materially affect THQ's financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Quarterly Reports on Form 10-Q and its Annual Report on Form 10-K for the fiscal period ended March 31, 2010, and particularly the discussion of risk factors that may affect results of operations set forth therein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.