THQ Q1 losses nearly triple to $27M

1 million WALL-Es help April-June revenues increase by $33.1 million, but ballooning development costs push Saints Row and SmackDown publisher into the red.


In the middle of a week full of earning reports from gamemakers--including Sony, Nintendo, Capcom, and Electronic Arts--THQ today opened up its financial books. For the quarter ending June 30, 2008, the company posted net earnings of $137.6 million, $33.1 more than what it took in a year ago.

THQ's increased earnings came in very large part to its game based on WALL-E, the critically acclaimed computer-animated film from Pixar. Released for the Mac, PC, DS, PSP, Xbox 360, PlayStation 2, and PlayStation 3, the game sold over a million copies as of the end of June, despite receiving only middling reviews.

WALL-E is the latest--and one of the last--Pixar tie-ins from the publisher, which has a deal that only covers two more films from the Disney subsidiary: 2009's Up! and an unnamed 2011 project. Disney will self-develop and publish the game based on Toy Story 3, due out in 2010. To keep its film tie-ins coming, THQ inked a deal with Pixar archrival Dreamworks Animation to make a game based on its 2010 offering, Master Mind.

But while WALL-E boosted THQ's revenues, the publisher's bottom line was torpedoed by the ballooning cost of making games. Citing the cost of "important improvements in our creative development organization," the Agoura Hills, California-based company reported a net loss of $27.2 million ($0.41 per share) for the April-June quarter. The shortfall is nearly triple the $9.3 million ($0.14 per share) deficit it suffered during the same quarter last year. The red ink is expected to continue during the current three-month period, for which THQ expects a net per-share loss of between $0.35 and $0.39.

Unsurprisingly, though, THQ executives are optimistic. "Our fiscal 2009 product line-up and long-term product pipeline are well-positioned to take advantage of the expanding demographic of gamers on the growing installed base of game platforms," said CEO Brian Farrell in a statement. "We have a robust product slate of key titles scheduled to launch in each of the next several quarters, starting with de Blob in September; Saints Row 2 and WWE SmackDown vs. Raw! 2009 in the holiday quarter; Red Faction Guerrilla, Darksiders: Wrath of War, and Legends of Wrestlemania in our fiscal fourth quarter; and UFC 2009 Undisputed in the first quarter of fiscal 2010."

For its overall 2009 fiscal year, which ends at the end of next March, THQ expects revenue of $1.15 billion to $1.175 billion and earnings per share of $0.80 to $0.90.

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