HP $2.20-Q1 Sales +49%, Earnings +16%, in what is the worst Q for them traditionally. I own some of this stock and they seem to be doing quite well designing and selling video games. Another Cdn success story in the making?
Hip Interactive Corp. Reports 49% Increase in Sales and a 16% Growth in Net Earnings For First Quarter
Monday August 11, 9:26 am ET
TORONTO, ONTARIO--
Statement of Earnings
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Three months ended
June 30
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(in $ millions except per share amounts) 2003 2002
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Sales $80.8 $54.1
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Gross profit 9.2 7.5
Operating expenses 6.3 4.7
Interest expense 0.2 0.3
Amortization of property and
equipment 0.4 0.4
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Earnings before income taxes 2.3 2.1
Income tax 0.8 0.8
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Net earnings for the period 1.5 1.3
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Basic earnings per share $0.03 $0.03
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Diluted earnings per share $0.03 $0.03
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Hip Interactive Corp. (TSX:HP - News), Canada's leading electronic entertainment provider of video games, PC games, accessories and movies, today announced results for the quarter ended June 30, 2003. Sales for the first fiscal quarter were $80.8 million compared to $54.1 million for the same quarter last year, an increase of 49%.
During the quarter, the Company became the exclusive supplier of third party accessories for Zellers for the next three years. In accordance with the agreement, and as is the common practice in the industry, the Company took back inventory which was supplied by Zellers former supplier, to free up shelf space for the sell-in of the Hip Gear accessory product line. As a result, during the quarter, the Company charged $0.7 million to selling, general and administrative expense relating to the cost of obtaining the Zellers business.
After this charge, net earnings for the quarter were $1.5 million up 16% from $1.3 million for the same period last year. Earnings per share were $0.03, which on a larger base of shares outstanding remained flat to the comparable period last year.
"We are pleased with our progress and results for the first fiscal quarter, particularly as this quarter is typically the softest quarter of the year in our industry. We are encouraged with the growth of our strategically important Hip Gear(TM) accessory and Hip Games(TM) publishing businesses. In addition, as at June 30, 2003, we had cash on our balance sheet of $5.3 million. Going forward, we will continue to use our loan facility to fund the growth of our accessories and publishing businesses, and to take advantage of early payment discounts and special opportunity buys," said Arindra Singh, President and Chief Executive Officer of Hip. "Our strategy is to focus our efforts and capital on our higher margin businesses, being Hip Gear(TM) and Hip Games(TM), on the strength of our distribution business."
Sales for the Company's Hip Games(TM) Publishing division increased to $6.1 million for the quarter ended June 30, 2003 compared to $2.7 million for the same period last year. "We are particularly pleased with the significant progress that our Hip Games(TM) Publishing team has be able to achieve in such a relatively short period of time," continued Mr. Singh. "Looking forward, we have recently signed an agreement with ARUSH Entertainment to be the exclusive North American distributor for the video game Playboy: The Mansion, an empire building simulation game with intriguing social interactions, which is expected to be released on three platforms during the fall of 2004. In a recent article in PC Gamer magazine, Playboy: The Mansion was rated as one of the top 20 games introduced at last May's Electronic Entertainment Expo (E3). In addition, during the first quarter we signed an agreement with L.S.P. to co-publish and exclusively distribute 14 titles, subject to obtaining first party approval, in North America that are due for release over the next twelve months. And finally, after only nine months of distributing Riverdeep titles, branded as Broderbund and The Learning Company, Hip Games(TM) has extended that licensed publishing agreement to five years."
Sales of Hip Gear(TM) accessories increased to $2.4 million for the three months ended June 30, 2003 compared to $0.8 million for the same period last year. Mr. Singh added, "Our Hip Gear(TM) division has also made a lot of progress over the past few months, adding several new retailers in the U.S, such as Blockbuster, and in Canada, being named the exclusive supplier of third party accessories for Zellers."
"As the weakest quarter for our industry, the first quarter presents some unique challenges," concluded Mr. Singh. "We met both the challenges and market expectations. We have noticed some softness in the market, however in spite of that and because of the diversity of our business, we expect to deliver double digit growth in net earnings for fiscal 2004."
HIP WILL HOST AN INVESTOR CONFERENCE CALL AND WEBCAST AT 10:00 A.M. (TORONTO TIME) ON MONDAY, AUGUST 11, 2003 TO REVIEW THE COMPANY'S FINANCIAL RESULTS. LISTENERS CAN CALL 416-640-1907 (LOCAL) OR 800-814-4853 (LONG DISTANCE). THE WEBCAST WILL BE AVAILABLE ON HIP'S WEBSITE (WWW.HIPINTERACTIVE.COM - MEDIA - UPCOMING). A REPLAY OF THE CALL WILL BE AVAILABLE ONE HOUR AFTER THE CALL UNTIL MIDNIGHT ON AUGUST 18, 2003. TO ACCESS THE REPLAY, CALL 416-640-1917 - PASSCODE 21010826#. THE WEBCAST WILL BE AVAILABLE FOR 30 DAYS FOLLOWING THE LIVE CALL.
About Hip Interactive
Hip Interactive (www.hipinteractive.com) is a leading North American provider of electronic entertainment products, including PC and video games, movies, video arcade games, and proprietary games, branded as Hip Games(TM), and accessories, branded as Hip Gear(TM). The Company distributes all first party products, including Sony, Microsoft and Nintendo hardware, software and accessories, as well as third party licensed video game software. Hip uses its distribution business to leverage into higher margin, higher growth areas of the electronic entertainment industry, such as licensing, publishing and the distribution of proprietary games and accessories. Hip Interactive trades on The Toronto Stock Exchange under the trading symbol "HP" and has 59,217,844 common shares issued and outstanding.
Hip Interactive Corp. - Consolidated Balance Sheet
June 30 March 31
in $ thousands 2003 2003
(unaudited)
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Assets
Current assets
Cash $ 5,321 $ 3,300
Accounts receivable 34,578 41,614
Inventory 28,226 27,936
Prepaids and other assets 4,200 2,560
Future income taxes 691 680
Current portion of notes receivable 362 362
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73,378 76,452
Notes receivable 615 615
Other assets 4,200 2,300
Property and equipment 8,661 7,884
Future income taxes 434 430
Goodwill 22,685 22,685
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109,973 110,366
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities 58,630 59,887
Income taxes payable 1,145 2,379
Current portion of capital lease
obligations 921 1,017
Current liabilities of discontinued
operations 80 101
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60,776 63,384
Capital lease obligations - 202
Future income taxes 326 280
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61,102 63,866
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Shareholders' Equity
Capital stock 44,695 39,508
Other equity 1,753 6,031
Contributed surplus 3,362 3,362
Deficit (939) (2,401)
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48,871 46,500
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109,973 110,366
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Hip Interactive Corp. - Consolidated Statement of Operations
3 months ended
June 30
in $ thousands except
per share amounts (unaudited) 2003 2002
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Sales $ 80,782 $ 54,077
Cost of sales 71,623 46,615
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Gross profit 9,159 7,462
Selling, general and administrative expenses 6,260 4,696
Interest expense - net 214 263
Amortization of property and equipment 449 410
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Earnings before income taxes 2,236 2,093
Income taxes 774 837
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Net earnings for the period 1,462 1,256
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Weighted average number of common shares (in
thousands)
Basic 53,077 50,010
Diluted 58,495 50,010
Earnings per share
Basic $0.03 $0.03
Diluted $0.03 $0.03
Hip Interactive Corp. - Consolidated Statement of Cash Flows
3 months ended June 30
in $ thousands -
unaudited 2003 2002
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Cash provided by (used in)
Operating Activities:
Net earnings for the period 1,462 1,256
Items not affecting cash:
Amortization of property and equipment 449 410
Future income taxes 31 821
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1,942 2,487
Net change in non-cash working capital balances 696 (10,025)
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2,638 (7,538)
Financing Activities
Capital lease obligations (298) (420)
Issuance of Common Shares - net of share issue
costs 909 --
Increase in bank indebtedness -- 8,015
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611 7,595
Investing Activities
Purchase of property and equipment (1,228) (694)
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(1,228) (694)
Increase (decrease) in cash 2,021 (637)
Cash - Beginning of period 3,300 637
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Cash - End of period 5,321 --
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Hip Interactive Corp. - Supplementary Information
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Sales
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In $ millions - unaudited
Three months ended June 30
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2003 2002 $ Increase % Increase
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Video Games $ 44.9 $ 31.9 $ 13.0 41%
PC Games(i) 8.2 12.7 (4.6) (36%)
Movies(ii) 16.5 3.0 13.6 453%
Publishing 6.1 2.7 3.4 126%
Hip Gear(iii) 3.5 1.8 1.7 94%
Hip Coin 1.6 2.0 (0.4) (20%)
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$ 80.8 $ 54.1 26.7 49%
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(i) PC Games includes sales from Logistics Services business
(ii) Movies business includes the results of TTvica Inc.,
acquired August 30, 2002
(iii)Hip Gear accessories business results include sales of
proprietary Hip Gear accessories, bundled game software, and
for the prior year, sales of value priced third party accessory
merchandise.
Hip Gear Sales are comprised of:
In $ millions 2003 2002
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Hip Gear accessories 2.4 0.8
Bundled software 1.1 1.0
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3.5 1.8
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Earnings before income taxes
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In $ millions - unaudited
Three months ended June 30
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2003 2002 $ Increase
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Video Games $ 1.5 $ 1.2 $ 0.3
PC Games 0.4 1.2 (0.8)
Movies 0.3 -- 0.3
Publishing 1.5 0.4 1.1
Hip Gear (0.5)(i) 0.4 (0.9)
Hip Coin (0.3) -- (0.3)
Corporate (including
interest expense) (0.7) (1.1) 0.4
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$ 2.2 $ 2.1 $ 0.1
(i) includes $0.7 million cost of obtaining Zellers as a
customer.
Balance Sheet Ratios
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June 30, 2003 March 31, 2003
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Days sales in Accounts
Receivable 44 days 46 days
Days purchases in Accounts
Payable 68 days 68 days
Inventory Turnover 11.4 times 11.5 times
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Contact:
Hip Interactive Corp.
Jennifer Lee
For investor and media inquiries
Phone: (905) 362-3760 ext. 277
Fax: (905) 362-2358
jlee@hipinteractive.com
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Source: Hip Interactive Corp |
