THQ Reports Loss For Q2, New San Diego Studio

Author: by Andrew Wilson, Simon Carless

This afternoon, THQ issued its financial results covering the second quarter fiscal 2005, as well as the six-month period ended September 30th, 2004. Driven in part by sales of Full Spectrum Warrior, Warhammer 40,000: Dawn Of War, WWE Day Of Reckoning and other titles, THQ reported net sales of $96.3 million, slightly better than forecasted, but still leading to a net loss of $6.4 million. In contrast, THQ reported net sales of $126.5 million and net income of $3.6 million for the same period a year ago. Commenting on the quarterly results, Brian Farrell, president and chief executive officer of THQ, said: "Our better-than-expected results this quarter were driven by the outstanding performance of new releases... as well as strong catalog sales in our international territories." On the software front, THQ reported that PC RTS game Warhammer 40,000: Dawn Of War has enjoyed strong sales, topping charts across the U.S. (NPD), UK (Chart Track), France and Germany (Media Control) and Australia (GfK). Recently released GameCube title WWE Day Of Reckoning also faired well during the quarter, ranking on the NPD software charts as the #2 selling GameCube game for the month of September. The company then outlined its third quarter fiscal software line-up as including WWE SmackDown! vs Raw, The SpongeBob SquarePants Movie, Tak 2 and The Polar Express, all launching before the New Year. This is followed by a fourth quarter fiscal line-up including: The Punisher, MX vs. ATV Unleashed, WWE Wrestlemania XXI and a previously unconfirmed PlayStation 2 version of popular Xbox/PC strategy action title Full Spectrum Warrior. THQ’s fiscal 2006 first quarter will see Pandemic Studios’ 'little green men' action game Destroy All Humans and GSC Game World’s first-person title S.T.A.L.K.E.R.: Shadow of Chernobyl, shipping during April and May of 2005 respectively. During its earnings call, THQ re-iterated its recently re-signed licensing deal with Pixar Animation Studio, explaining that the multi-property agreement will kick off during 2006 with the launch of Cars. THQ also reported continued strong sales of the Finding Nemo game adaptation, which has managed to ship 6 million units since its release in 2003. The company also recently extended its licensing agreement to Nickelodeon's various TV cartoon properties through 2010. THQ also touched briefly on its development resources, revealing the opening of an all-new studio in the San Diego area. Called Concrete Games, the studio comes as the ninth internal studio worldwide, and will focus on next-generation console technology and development. In relation to general development, THQ also specified that it has the not insignificant total of 75 to 80 SKUs in current development worldwide. The company also revealed next-gen handheld plans, announcing licensed titles Cars, The Incredibles, Tak and SpongeBob SquarePants for the Nintendo DS at unspecified future dates, and confirming four PlayStation Portable titles, including MX Unleashed as a launch window title. Going forward, THQ's full-year guidance was announced as including net sales of $680 million and a corresponding net income of $44 million, a slight disappointment to some analysts (although still comfortably profitable), since the company refused to raise its income predictions from previous quarters.