AGOURA HILLS, Calif.--(BUSINESS WIRE)--May 6, 2008--THQ Inc.
(NASDAQ: THQI) today announced financial results for the fourth
quarter and fiscal year ended March 31, 2008, and provided its
financial outlook for the first quarter ending June 30, 2008, and
fiscal year ending March 31, 2009.
For the twelve months ended March 31, 2008, THQ reported net sales
of $1,030.5 million, compared with $1,026.9 million in the prior year.
On a non-GAAP basis, the company reported fiscal 2008 net sales of
$1,061.0 million, which excludes the effects of deferred revenue from
Frontlines(TM): Fuel of War(TM). Fiscal 2008 marks the company's 13th
consecutive year of revenue growth.
For the fiscal year ended March 31, 2008, the company reported a
net loss of $35.3 million, or $0.53 per share. In the prior year, the
company reported net income of $68.0 million, or $1.01 per diluted
share. On a non-GAAP basis, excluding stock-based compensation and the
effects of deferred revenue and costs of Frontlines: Fuel of War, the
company reported a fiscal 2008 net loss of $13.6 million, or $0.20 per
share. In fiscal 2007, the company reported non-GAAP net income of
$84.0 million, or $1.24 per diluted share, which excluded stock-based
compensation. THQ's GAAP and non-GAAP net (loss) income for fiscal
2008 and fiscal 2007 includes a $1.5 million and $3.1 million,
respectively, gain on discontinued operations from the sale of Minick
AG.
"In fiscal 2008, we did not achieve our revenue and profit targets
and we are taking aggressive steps to ensure that we significantly
improve execution in fiscal 2009 and beyond," said Brian Farrell, THQ
president and CEO. "Going forward, we are focused on three key
initiatives. We are rolling out a stronger slate of products. We have
put in place and are executing against initiatives to improve our
product quality and competitiveness. We are also realigning our cost
structure to generate significant operating leverage in fiscal 2009.
We believe these initiatives will restore profitable growth and
improve value for shareholders."
For the fourth quarter of fiscal 2008, THQ reported net sales of
$187.0 million, up from $172.1 million for the same period a year ago.
On a non-GAAP basis, the company reported net sales of $217.6 million,
which excludes the impact of deferred revenue from Frontlines: Fuel of
War on both the Xbox 360(R) and Windows PC platforms.
Fiscal fourth quarter net sales, which exceeded prior guidance,
were led by Frontlines: Fuel of War, MX vs. ATV(TM) Untamed(TM) and
WWE(R) SmackDown(R) vs. Raw(R) 2008. The company stated that MX vs.
ATV Untamed and WWE SmackDown vs. Raw 2008 exceeded expectations, and
Frontlines: Fuel of War met expectations, during the quarter. However,
the company experienced weaker-than-expected sell through of some of
its previously released titles, which resulted in
greater-than-anticipated price protection and reserves, as well as
increased software amortization expense during the quarter.
As a result, for the fourth quarter of fiscal 2008, the company
reported a net loss of $34.5 million, or $0.52 per share. For the same
period a year ago, THQ reported net income of $6.5 million, or $0.09
per diluted share. On a non-GAAP basis, the company reported a fiscal
fourth quarter net loss of $24.8 million, or $0.37 per share,
excluding stock-based compensation and the effects of deferred revenue
and costs of Frontlines: Fuel of War. For the same period a year ago,
the company reported non-GAAP net income of $10.1 million, or $0.15
per diluted share, which excluded stock-based compensation. THQ's GAAP
and non-GAAP net income for the fourth quarter of fiscal 2007 includes
a $973,000 gain on discontinued operations from the sale of Minick AG.
A reconciliation of non-GAAP to GAAP results is provided in the
accompanying financial tables.
"We believe our stronger fiscal 2009 product line-up is positioned
to take advantage of the expanding demographic on the growing
installed base of new gaming systems," said Farrell. "Our line-up is
anchored by Saints Row(TM) 2 and Red Faction(R) Guerrilla(TM), sequels
to two of our most successful original franchises. We have a strong
slate of new original titles developed specifically for the Nintendo
Wii platform. We are introducing two new promising original brands, de
Blob(TM) and Darksiders(TM). And, we plan to launch new games based on
our proven annual franchises: WWE SmackDown vs. Raw 2009,
Disney/Pixar's Wall-E and a portfolio of Nickelodeon titles."
Farrell continued, "As part of our strategy of managing some of
the biggest brands in entertainment in the video game category, we are
thrilled with our new relationship with DreamWorks Animation.
DreamWorks Animation is one of the most proven brands in entertainment
based on their exceptional creative talent and box office success.
We're also excited about launching our first games based on the
Ultimate Fighting Championship in spring of next year in conjunction
with a prime UFC event. And importantly, the new WWE Legends of
Wrestlemania game next March is a great addition to our portfolio."
Fiscal 2009 Guidance
THQ issued initial guidance for the first quarter ending June 30,
2008, and fiscal year ending March 31, 2009, which excludes the
effects of deferred revenue and costs, stock-based compensation and
restructuring costs, as follows:
For the fiscal year ending March 31, 2009, THQ expects net sales
in the range of approximately $1,175 million to $1,200 million
and operating margins in the high single digits, resulting in
earnings per diluted share in the range of approximately $0.95 to
$1.05.
For the fiscal first quarter ending June 30, 2008, THQ expects to
report net sales in the range of approximately $115 million to
$125 million and a net loss per share in the range of
approximately $0.38 to $0.42. The anticipated loss reflects a
light product release schedule and the timing of expenses.
Fiscal 2008 Highlights and Recent Developments:
The company recently strengthened its portfolio of licensed
franchises with the addition of:
a new relationship with DreamWorks Animation to publish games
based on the studio's 2010 fall animated feature film; and
WWE Legends of Wrestlemania, which is scheduled for the
fourth quarter of fiscal 2009.
The company enhanced its offering of online and casual games with
the addition of:
a co-publishing agreement with Shanda Interactive
Entertainment Limited to bring Company of Heroes Online to the
Chinese market in fiscal 2009; and
the acquisition of Elephant Entertainment.
THQ unveiled an extensive line-up of new original games designed
specifically for the Nintendo Wii, including de Blob, Deadly
Creatures(TM), Big Beach Sports(TM) and All Star Cheer(TM).
THQ strengthened its Studio System with the acquisition of Big
Huge Games and the appointment of two new executives to help
drive improved product development execution and new intellectual
property creation.
Fiscal 2008 Sales Achievements:
THQ shipped 6 million units of WWE SmackDown vs. Raw 2008, driving
THQ's third consecutive year as the #1 fighting publisher, with a
33% market share in the US, according to the NPD Group.
Lifetime shipments of THQ's games based on Nickelodeon and WWE each
surpassed $1 billion.
THQ shipped more than 1.5 million units of the #1 off-road racing
game, MX vs. ATV Untamed, bringing life-to-date franchise
shipments to 6.5 million units.
THQ established two new original franchises: Frontlines: Fuel of
War and Drawn to Life(TM).
THQ's international net sales increased significantly, to 51% of
total global net sales from 42% a year ago, as THQ continued to
execute on its international growth strategy.
During fiscal 2008, the company repurchased $54.9 million of
common stock. The company currently has $28.6 million authorized and
available for repurchase.
Non-GAAP Financial Measures
In addition to results determined in accordance with GAAP, THQ
discloses certain non-GAAP financial measures that include deferred
revenue and expenses, and exclude stock-based compensation expense and
related income tax effects. The non-GAAP financial measures included
in the earnings release have been reconciled to the comparable GAAP
results 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.
Stock-Based Compensation. When evaluating the performance of its
business, THQ does not consider stock-based compensation charges.
Likewise, THQ excludes stock-based compensation expense from its short
and long-term operating plans. In contrast, THQ's management team is
held accountable for cash-based compensation and such amounts are
included in the company's operating plans. In addition, the
stock-based compensation charges are subject to significant
fluctuation outside 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 THQ's stock
price. Further, when considering the impact of equity award grants,
THQ places a greater emphasis on overall shareholder dilution rather
than the accounting charges associated with such grants.
Deferred Revenue/Costs. Due to the significant online
functionality of Frontlines: Fuel of War, the company recognizes
revenue and costs from the sale of this title over the estimated
online service period. Although THQ will defer the recognition of a
significant portion of its net revenue and costs, there will be no
adverse impact to its operating cash flow. Internally, THQ excludes
the impact of the change in deferred net revenue and costs related to
packaged games in its non-GAAP financial measures when evaluating the
company's operating performance, when planning, forecasting and
analyzing future periods, and when assessing the performance of its
management team. The company believes that excluding the impact of the
change in deferred net revenue and costs from its operating results is
important to facilitate comparisons to prior periods during which the
company did not publish any titles that required deferral of revenue
and costs.
In the financial tables below, THQ has provided a reconciliation
of the most comparable GAAP financial measure to each of the
historical non-GAAP financial measures used in this press release.
Investor Conference Call
THQ will host a conference call to discuss fiscal fourth quarter
results today at 2:00 p.m. Pacific/5:00 p.m. Eastern. Please dial
877.356.8075 or 706.902.0203, conference ID 44843020 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 May 8, 2008,
by dialing 800.642.1687 or 706.645.9291, conference ID 44843020.
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
www.thq.com and www.thqwireless.com. THQ, THQ Wireless, Big Huge
Games, All Star Cheer, Big Beach Sports, Darksiders, de Blob, Deadly
Creatures, Drawn to Life, Frontlines: Fuel of War, MX vs. ATV Untamed,
Red Faction: Guerrilla, Saints Row 2 and their respective logos are
trademarks and/or registered trademarks of THQ Inc.
All other trademarks are trademarks or registered trademarks 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 revenue and earnings per share for the
quarter ending June 30, 2008, and the fiscal year ending March 31,
2009, and for the company's product releases and financial performance
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, 2007, 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.
THQ Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
March 31, March 31,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Net sales $ 187,024 $ 172,089 $1,030,467 $1,026,856
Costs and expenses:
Cost of sales - product
costs 82,365 63,332 389,097 351,449
Cost of sales -
software amortization
and royalties 54,621 25,098 231,800 165,462
Cost of sales - license
amortization and
royalties 13,274 12,630 99,524 99,533
Cost of sales - venture
partner expense 2,815 1,745 24,056 16,730
Product development 34,365 23,271 128,869 97,105
Selling and marketing 39,793 23,109 175,288 139,958
General and
administrative 17,632 19,142 69,901 78,413
---------- ---------- ---------- ----------
Total costs and
expenses 244,865 168,327 1,118,535 948,650
---------- ---------- ---------- ----------
Income (loss) from
continuing operations (57,841) 3,762 (88,068) 78,206
Interest and other
income, net 2,096 3,751 15,433 12,822
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes and
minority interest (55,745) 7,513 (72,635) 91,028
Income taxes (21,214) 1,991 (35,785) 26,206
---------- ---------- ---------- ----------
Income (loss) from
continuing operations
before minority interest (34,531) 5,522 (36,850) 64,822
Minority interest -- -- -- 136
---------- ---------- ---------- ----------
Income (loss) from
continuing operations (34,531) 5,522 (36,850) 64,958
Gain on sale of
discontinued
operations, net of tax -- 973 1,513 3,080
---------- ---------- ---------- ----------
Net income (loss) $ (34,531) $ 6,495 $ (35,337)$ 68,038
========== ========== ========== ==========
Earnings (loss) per share
- basic:
Continuing operations $ (0.52) $ 0.08 $ (0.55)$ 1.00
Discontinued operations -- 0.02 0.02 0.05
---------- ---------- ---------- ----------
Earnings (loss) per share
- basic $ (0.52) $ 0.10 $ (0.53)$ 1.05
========== ========== ========== ==========
Shares used in per share
calculation - basic 66,392 66,052 66,475 65,039
========== ========== ========== ==========
Earnings (loss) per share
- diluted:
Continuing operations $ (0.52) $ 0.08 $ (0.55)$ 0.96
Discontinued operations -- 0.01 0.02 0.05
---------- ---------- ---------- ----------
Earnings (loss) per share
- diluted $ (0.52) $ 0.09 $ (0.53)$ 1.01
========== ========== ========== ==========
Shares used in per share
calculation - diluted 66,392 68,746 66,475 67,593
========== ========== ========== ==========
THQ Inc. and Subsidiaries
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
(a)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------- ----------------------
2008 2007 2008 2007
---------- -------- ---------- ----------
Net sales $ 187,024 $172,089 $1,030,467 $1,026,856
Changes in deferred net
revenue (b) 30,547 -- 30,547 --
---------- -------- ---------- ----------
Non-GAAP net sales $ 217,571 $172,089 $1,061,014 $1,026,856
========== ======== ========== ==========
Three Months Ended Twelve Months Ended
March 31, March 31,
-------------------- ----------------------
2008 2007 2008 2007
---------- -------- ---------- ----------
Income (loss) from
continuing operations $ (34,531) $ 5,522 $ (36,850) $ 64,958
Non-GAAP adjustments:
Changes in deferred net
revenue (b) 30,547 -- 30,547 --
Change in deferred cost
of sales:
Change in deferred
product costs (7,482) -- (7,482) --
Change in deferred
software
amortization and
royalties (13,161) -- (13,161) --
---------- -------- ---------- ----------
Total change in
deferred cost of sales
(b) (20,643) -- (20,643) --
Stock-based
compensation and
related costs:
Cost of sales -
software
amortization and
royalties 1,409 1,299 6,800 2,087
Product development 1,339 1,237 4,773 4,824
Selling and marketing 571 1,035 2,654 3,521
General and
administrative 1,631 2,471 8,444 11,461
Interest and other
income, net -- -- -- 61
---------- -------- ---------- ----------
Total stock-based
compensation and
related costs (c) 4,950 6,042 22,671 21,954
Income tax adjustments
(d) (5,140) (2,485) (10,859) (5,943)
---------- -------- ---------- ----------
Total non-GAAP
adjustments 9,714 3,557 21,716 16,011
---------- -------- ---------- ----------
Non-GAAP income (loss)
from continuing
operations (24,817) 9,079 (15,134) 80,969
Gain on sale of
discontinued
operations, net of tax -- 973 1,513 3,080
---------- -------- ---------- ----------
Non-GAAP net income
(loss) $ (24,817) $ 10,052 $ (13,621) $ 84,049
========== ======== ========== ==========
Non-GAAP earnings (loss)
per share - diluted:
Non-GAAP continuing
operations $ (0.37) $ 0.13 $ (0.23) $ 1.20
Discontinued operations -- 0.02 0.03 0.04
---------- -------- ---------- ----------
Non-GAAP earnings (loss)
per share - diluted $ (0.37) $ 0.15 $ (0.20) $ 1.24
========== ======== ========== ==========
Notes:
(a) See explanation above regarding the Company's practice on
reporting non-GAAP financial measures.
(b) Prior to fiscal 2008, the Company did not defer net revenue or the
related cost of sales.
(c) Stock-based compensation expense recorded under SFAS 123(R) in
fiscal 2008 and fiscal 2007, and the payroll tax effects of our
historical stock option grant practices investigation.
(d) Income tax associated with stock-based compensation expense and
deferred revenue and related costs, as well as the payroll tax
effects of our historical stock option grant practices investigation.
THQ Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
(In thousands)
March 31, March 31,
2008 2007
----------- -----------
ASSETS
Cash, cash equivalents and short-term
investments $ 317,504 $ 457,958
Accounts receivable, net of allowances 112,843 67,586
Inventory 38,240 27,381
Licenses 47,182 41,406
Software development 155,821 130,512
Income taxes receivable -- 18,525
Prepaid expenses and other current assets 24,487 16,238
----------- -----------
Total current assets 696,077 759,606
Property and equipment, net 50,465 45,095
Licenses, net of current portion 39,597 49,661
Software development, net of current
portion 25,369 33,766
Income taxes receivable, net of current
portion 7,098 2,163
Deferred income taxes 55,115 15,812
Goodwill 122,385 88,688
Long-term marketable securities 52,599 --
Other long-term assets, net 20,002 18,750
----------- -----------
TOTAL ASSETS $1,068,707 $1,013,541
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 61,700 $ 28,225
Accrued and other current liabilities 202,102 143,418
Income tax payable 8,634 --
Deferred income taxes 16,783 25,647
----------- -----------
Total current liabilities 289,219 197,290
Other long-term liabilities 38,717 47,294
----------- -----------
Total liabilities 327,936 244,584
Total stockholders' equity 740,771 768,957
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,068,707 $1,013,541
=========== ===========
THQ Inc. and Subsidiaries
Unaudited Supplemental Financial Information
Three Months Ended Twelve Months Ended
March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- ---------
Platform Revenue Mix
Consoles
Microsoft Xbox 360 6.3% 6.5% 12.6% 13.1%
Microsoft Xbox 0.1 1.1 0.2 2.7
Nintendo Wii 12.4 3.5 8.9 2.9
Nintendo Game Cube 0.2 2.0 0.7 5.1
Sony PlayStation 3 6.6 -- 8.3 --
Sony PlayStation 2 18.1 21.9 24.5 29.7
------- ------ ------- --------
43.7 35.0 55.2 53.5
------- ------ ------- --------
Handheld
Nintendo Dual Screen 29.2 14.9 22.0 11.1
Nintendo Game Boy Advance 2.3 10.6 3.6 11.7
Sony PlayStation Portable 8.6 5.6 8.2 6.4
Wireless 2.8 2.5 1.9 2.6
------- ------ ------- --------
42.9 33.6 35.7 31.8
------- ------ ------- --------
PC 13.4 30.6 9.1 14.6
Other -- 0.8 0.0 0.1
------- ------ ------- --------
100.0% 100.0% 100.0% 100.0%
======= ====== ======= ========
Geographic Revenue Mix
Domestic 43.3% 52.5% 48.8% 58.4%
Foreign 56.7 47.5 51.2 41.6
------- ------ ------- --------
100.0% 100.0% 100.0% 100.0%
======= ====== ======= ========
CONTACT:
THQ/Investor Relations
Julie MacMedan, 818-871-5125
or
THQ/Media Relations
Liz Pieri, 818-871-5061
SOURCE: THQ Inc.
