On paper, the publisher of such top-selling franchises including Finding Nemo, Full Spectrum Warrior, and Tak reported numbers that paled when compared with those of the same quarter a year ago. For the company's second quarter of fiscal year 2005, which ended September 30, 2004, revenues were off 23 percent compared to last year; and instead of reporting a profit as it did for the same quarter in its FY04, the company lost money.
Investors, however, rewarded the company in after-hours trading, pushing its share price up. Why? Apparently, Wall Street sees value in THQ's future--enough so to forgive its currently lackluster finances. For the quarter, the company reported net sales of $96.3 million and a net loss of $6.4 million. But those superficially bad numbers actually beat THQ's expected revenues for the quarter by almost $15 million.
For the current October-December quarter, the company says it expects to drive $330 million in revenue, up 13 percent from last year's holiday quarter. CFO Edward Zinser said it expects three titles to sell over a million units during the quarter: The Incredibles (based on the Pixar film), The SpongeBob SquarePants Movie, and Tak 2. More dramatically, Zinser said he expects THQ to also outperform the previous year's January-March quarter. In today's conference call, Zinser said the company expects to realize revenues of $165 million in the Jan-Mar '05 quarter, a year-on-year increase of 34 percent.
Zinser said THQ was in the process of shipping 2.5 million copies of The Incredibles into the worldwide retail channel, 1.2 million copies of The SpongeBob SquarePants Movie, and next week, the company will ship 1.5 million copies of the latest of its popular wrestling games, WWE SmackDown! vs. Raw.
In 2005, THQ is looking for strong sales from The Punisher in January, MX vs. ATV Unleashed in either February or March, Full Spectrum Warrior for the PS2 in March, and Destroy all Humans! for Xbox and PS2 in April, according to Zinser.
Also on the positive side, THQ stated that its THQ Wireless division is expected to contribute more than $20 million of THQ's net sales in fiscal 2005, three times what it contributed a year ago. Costs associated with developing its wireless gaming business are expected to climb, but the company is confident that the mobile entertainment sector holds substantial potential.
President and CEO Brian Farrell tempted listeners with the news that THQ has bought Southern California-based studio Concrete Games. The new studio--THQ's ninth internal developer--is expected to contribute both creative content and next-gen technology. However, when asked to elaborate on the purchase, Farrell declined, saying now was not the time to get into specifics. "When we want to get more aggressive with announcements, you'll know why we're not talking much about the company at this moment."