THQ Reports Increased Revenue, Lower Yearly Profits

THQ today announced its financial results for the fiscal year ending March 31, 2006, during which the company reported its 11th consecutive year of sales growth, but coupled with a decline in both quarterly and annual profits, as the console transition continues to negatively affect game companies. For the fourth quarter, THQ reported a fourth quarter net loss of $7.9 million, compared to profit of $10.1 million in fiscal 2005. Fourth quarter net sales of $148.1 million, down from the previous year's $171.9 million. Despite this, THQ reported net sales of $806.6 million, up from $756.7 million in fiscal 2005, but reduced profit of $34.3 million, down significantly from $62.8 in the previous year. The company stated that fiscal 2006 results reflect increased investment in product development in preparation for the next-generation of video game consoles. The top selling games for the company for the year were The Outfit, an action shooter for the Xbox 360, and WWE SmackDown vs. Raw 2006, the latest game in the company's long running relationship with World Wrestling Entertainment. Other strong selling titles for the year included those from its Nickelodeon and Disney/Pixar brands, as well as Juiced and Destroy All Humans!. However, THQ restated that costs associated with its strategic agreement with Japanese game developer YUKE's for developing games based on the WWE wrestling brand, as well as well as increased internal development staffing to produce wrestling titles, along with the poor retail performance of Full Spectrum Warrior: Ten Hammers negatively impacted the company's financials. Consistent with previous guidance, THQ reported that for the fiscal year ending March 31, 2007, it expects net sales in the range of $900 million to $950 million. For the first quarter of fiscal 2007, the company expects net sales of approximately $125 million. "We continue to execute against our plans to manage through the platform transition,” commented Brian Farrell, president and CEO, THQ. “We expect our investments in next-generation product development to begin yielding strong results starting in fiscal 2007 with products such as Saints Row and WWE SmackDown vs. RAW 2007. In fiscal 2008, we plan to release an increasing number of next-generation titles in order to capitalize on the growing hardware installed base, including products such as Frontlines: Fuel of War and others yet to be announced." Farrell continued by claiming: "With strong licenses secured for the long term, 1,200 people in our internal studio system, a growing direct international business and more than $370 million in cash and short-term investments, we are well positioned to expand our leadership in the video game industry." THQ shares were up over a dollar to $25.48 in mid-market trading.