Tom Seltzer went above and beyond with his conf. call recap--some great stuff in there. Read and weep, Woodland:
<<I just listened to the conference call as well and typed notes as they talked. Here's my
recollection. I apologize but this is in all caps. I'll post in two or more parts if it won't all fit.
The best comments are at the very end:
THQ CONFERENCE CALL: 12/4/98
BF = BRIAN FARRELL
SM = SEAN MCGOWAN
PIPER = PIPER, JAFFRAY ANALYST (DIDN'T CATCH NAME)
KA = KURT ALEXANDER
SH= STUART HALPERN
JT = JOHN TAYLOR
EW = ED WILLIAMS
RW = RUSHWARE
BF: RUSHWARE = GERM. SFTWRE DISTRIBUTION IN DUSSELDORF; DIRECT
DISTRIBUTION TO GERMAN AND GERMAN-SPEAKING COUNTRIES; SOFTGOLD
IS
RW SUBSIDIARY; RW IS LUCASARTS DISTRIBUTOR; HAS EXCLUSIVE RIGHTS TO
LUCASARTS TITLES THRU MID-2000 IN GERMANY AND NON-EXCLUSIVE IN
OTHER GERMAN SPEAKING COUNTRIES.
THQ U.S. WILL PUBLISH AND DISTRIBUTE SOFTGOLD TITLES IN U.S.; JURGEN
GOELDNER WILL STAY AS MANAGER; REVENUES FOR RW WERE ABOUT $37
MILLION IN 1997 AND ARE JUST UNDER THAT FOR 1ST 11 MOS. OF 1998;
ACQUISITION SHOULD ALLOW THQ INT'L REVENUES FOR 1999 TO BE APPROX.
25 - 30%.
ACQUISITION WILL BE ACCRETIVE BY ABOUT 5% FOR 1999; SOFT PREDICTION
1998 = THQ HAS SHIPPED ALL PLANNED TITLES FOR 1998; TRSTS REPORTS
STILL HAS REVENGE #1 TITLE FOR FIRST 2 WEEKS OF NOVEMBER;
RUGRATS = THQ IS EXTREMELY PLEASED WITH BOTH GB AND N64; HAS RE-
ORDERED AND WILL LAUNCH THESE TWO INTERNATIONALLY IN 1Q ‘99
CO. IS VERY STRONGLY POSITIONED FOR ‘99
Q&A:
SH: CAN YOU CHARACTERIZE PROFITABILITY OF RW AND/OR MIX BETWEEN
PUBLISHING AND DISTRIBUTION? WHAT LEVEL OF THQ SALES CURRENTLY IN
GERMANY? WHAT % DOES THQ EXPECT RE ROYALTIES GIVEN SUCCESS OF
RUGRATS AND REVENGE?
BF: RW PROFIT MARGINS WILL BE LOWER B/C THEY ARE PRIMARILY
DISTRIBUTION; SYNERGIES W/ THQ SHOULD HELP; 7 - 10% OPERATING MARGIN
WOULD BE GREAT;
THQ'S CURRENT SALES IN GERMANY ARE ABOUT $8 - $10 MILLION; WITH RW,
THQ WILL HAVE BOTH HIGHER REVENUE AND INCREASED MARGINS IN
GERMANY; GERMANY IS LARGEST MARKET IN EUROPE
ROYALTY RATES THIS QUARTER WILL BE ABOUT 19% - 20%; NO CHANGE FROM
PAST QUARTERS
SM: WHAT WILL YOUR PC REVENUE BE VS. TOTAL REVENUE IN ‘99?
BF: IT WILL GO UP SIGNIFICANTLY; PERHAPS A TOTAL OF 20% GIVEN RW'S
DEAL WITH LUCAS; MAYBE 15% - 20%.
SM: WHAT DO YOU MEAN BY 5% ACCRETION FOR 1999 DUE TO RW?
BF: 5% VS. CURRENT ANALYSTS' ESTIMATES.
SM: WHAT'S ON SCHEDULE FOR SECOND HALF OF ‘99?
BF: NOT CONCERNED ABOUT BEATING NEXT YEAR'S ESTIMATES. WILL HAVE
WWF. STILL NEGOTIATING WITH JAKK RE HOW TO ACCOUNT FOR
EVERYTHING. RUGRATS WILL BE SEQUELED. TWO ERTS TITLES, ROADRASH
AND NUCLEAR STRIKE, WILL BE SECOND HALF '99; QUEST SEQUEL WILL BE IN
FOURTH QUARTER '99.
SM: WILL YOU HAVE RW TITLES IN '99?
BF: YES, THINKS THERE ARE 4-5 TITLES FOR NEXT YEAR.
SM: WILL YOU DO WWF DREAMCAST FOR 4Q 1999?
BF: NOT SURE; WILL PROBABLY DO OTHER PLATFORMS, 1 OR 2, FOR 4Q 1999, BUT
NOT SURE ABOUT DREAMCAST. LOOKING AT DREAMCAST CONSOLE SALES.
COULD PORT CODE OVER BUT NOT SURE ABOUT 4Q '99.
PIPER: BREAKDOWN B/T RW DISTRIBUTION AND PUBLISHING?
BF: 80%ISH DISTRIBUTING AND 20%ISH PUBLISHING.
PIPER: WHAT ABOUT RW CONTENT?
BF: CURRENTLY 4 PRODUCTS; 3 FOR PC AND 1 FOR PLAYSTATION; PERHAPS
MORE STUFF FROM SOFTGOLD SIDE; THQ WILL ANNOUNCE TITLES SOON.
FUNSOFT GROUP WAS A FAIRLY GOOD IDEA BUT IT DIDN'T HAVE ENOUGH
CONTENT TO COMPETE WITH LARGER PUBLISHERS. THQ BELIEVES THAT, WITH
ITS OWN THROUGHPUT AND THE LUCAS STUFF, RW WILL BE PROFITABLE ON A
STANDALONE BASIS.
ED WILLIAMS (MONESS CRESPI): RW RECEIVABLES?
BF: VERY CURRENT; LESS THAN 60 DAYS' SALES; INVENTORIES ARE SLIGHTLY
HIGHER B/C THEY ARE A PUBLISHER (HIGHER BACK CATALOG GAMES)-- $2 - $4
MILLION; NOT UNUSUAL.
EW: SEASONALITY OF RW?
BF: MORE TIED TO 4TH QUARTER JUST LIKE THQ. BF DOES NOT KNOW EURO
RELEASE SCHEDULE FOR STAR WARS STUFF; PROBABLY 3RD QUARTER FOR
SIGNIFICANT LUCAS-RELATED REVENUES B/C STAR WARS MOVIE PROBABLY
WON'T BE RELEASED IN EUROPE UNTIL AFTER U.S. RELEASE. GAMES WILL
COINCIDE WITH MOVIE IF SOFTGOLD CAN TRANSLATE IN TIME.
EW: LUCAS HAS EXCLUSIVE DEAL WITH NINTENDO. HOW DOES THAT AFFECT
RW?
BF: RW HAS PC AND PLAYSTATION FOR LUCAS-RELATED PRODUCTS. SOFTGOLD
DOES LOCALIZATION. RW DOES NOT HAVE NINTENDO OR ACTIVISION RIGHTS
FOR LUCAS STUFF.
JOHN TAYLOR (ARCADIA INVESTMENT): THQ TAX RATE FOR NEXT YEAR?
BF: NO MATERIAL IMPACT ON THQ'S TAXES DUE TO RW ACQUISITION. GERMAN
TAXES ARE HIGHER, BUT NO MATERIAL IMPACT.
JT: LUCAS IS NOTORIOUS FOR HARD-BARGAINING. WILL THAT KNOCK DOWN
MARGINS?
BF: PROBABLY NOT? 7 - 10%. BF JUST GOT BACK FROM GERMANY YESTERDAY,
AND GYSI IS GOING OVER SOON TO MAKE SURE SYSTEMS ARE IN PLACE. BF
FEELS THEY HAVE BEEN PRETTY GOOD AT ESTIMATING IN PAST.
JT: ESTIMATES ON PLATFORM SHIPMENTS FOR '98 AND '99?
BF: BF WILL GET BACK TO HIM PRIVATELY; DOESN'T HAVE INFO FOR '98 [I THINK
I MISSED THIS PART]
RW WILL INCREASE PC TITLES FOR NEXT YEAR. THQ WILL PROBABLY RELEASE A
TOTAL OF 11 - 14 PC TITLES IN '99; 13 - 16 PLAYSTATION; 6-8 GB AND 6 - 8
NINTENDO TITLES. ALL THIS IS FOR NEXT YEAR.>>
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I'm going to bed. Pull and highlight quotes at will everybody. :)
Marc |
