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™:
Fuel of War™. 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® and Windows PC platforms.
Fiscal fourth quarter net sales, which exceeded prior guidance, were led
by Frontlines: Fuel of War, MX vs. ATV™
Untamed™ and WWE®
SmackDown® vs. Raw®
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™ 2 and Red Faction®
Guerrilla™, 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™
and Darksiders™. 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:
Fiscal 2008 Highlights and Recent
Developments:
Fiscal 2008 Sales Achievements:
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. Furt
