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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Kory who wrote (7163)	7/23/1998 6:36:00 PM
From: gofrank150	Read Replies (1) \| Respond to of 14266

My cc notes, not much more than what Todd had, but maybe one or two new things: ========== Intro by Farrell ú Very upbeat, `excellent quarter', commented on 14th consecutive quarter Gysi - Numbers Review ú (BTW, did anyone else thinked he seemed nervous? seemed to stumble over words a lot and later when he gave some percents, I dont think they added to 100!) ú Platform breakdown - 59% n64, 25% psx, 16% gb ú International - 23% (attributed to World Cup and Nitro) ú Royalties - comparable to last year but much lower than prior quarters. For upcoming quarters, it should trend back towards the levels seen in q4 1997, and q1 1998. ú Sales - 12.8% ty vs. 10.5% ly; mosltly due to Quest ads and more mktg support of other games ú Continue the practice of dropping a large portion of the increasing revenues to the bottom line. ú GameFX charge is not deductible for tax purposes. Tax Rate this quarter was 25% - some NOL was recognized internationally. ú 6 month platform breakdown - 64% n64, 43% psx, 9% gb; Intl 17% of first half sales ú Even if we include charges we are ahead of last year! ú Balance Sheet: 20.2 million in cash, 2.6 million in inventory - higher than normal because of titles shipping late in the quarter but Still turning at 43x per year, still haven't tapped their line of credit. Farrell - Accomplishment / Outlook: ú We continue to hit on all cylinders! Accomplishments: ú Quest is doing quite well, #6 overall for June on TRSTS; Ads clearly pushed demand ú Granstream Saga - Established beachhead in the RP genre and has established THQ in that area ú We shipped all games scheduled for release in this quartere ú WCW down to 25%, which was largely Nitro Internationally ú Closed GameFX deal; 3D Acceleration is clearly the key to the future in PC Market and with consoles too beginning with Sega Dreamcast ú E3 - very successful; very pleased with reception of `broad line' of games; Devil Dice, Red Jack both well received, Rugrats pumped by Sony; ú NWO received award for gameplay ú Closed WWF deal - stressed they pulled it off within 90 days of losing WCW Outlook ú Very strong hardware environment: Sony and N64 selling for 129.99; Color gameboy coming late 98 ú Excited about Bassmasters PC, Brunswick, Rugrats, Bugs Life ú NWO part of Nintendo Players Choice Program; asked to join and will be included in a $4 million ad campaign (all paid by Nintendo). They will rerelease at a lower price. ú In all `FUTURE VERY BRIGHT' Q & A Sean McGowan - GKM ** 1. Affect of ATVI deal with disney? Answer - none; relationship strong, THQI still a favored licensee, confirmed Toy Story II in 99 (had we heard that yet?) 2. Terms of Players Choice Program? business model not as attractive (higher margin pct), but will pump dollars to the bottom line THQ was going to rerelease at a lower price in 4q 98 anyway, not doing it sooner They often recut deals with licensors to enable rereleases at a lower price Wholesale price will be $33 3. Should we be upping full year numbers? We are comfortable (very comfortable) with numbers but wouldn't guide them up at this point, but maybe will revisit it later (yeah, like after they blow away 3q?) Stuart Halpern - Furman-Selz 1. Tax Rate Dynamics - Gysi: Hard to nail down, lots of factors. Still using 33-34% for 3q and 4q. 2. Profit margin is exceeding prior guidance of 300-400 basis pt improvement. Should we adjust our expectations for the rest of the year? Gysi - expects the 3q and 4q to be more in line with prior expectations. Some of that will be driven by Player's Choice program on NWO. 3. Rlse Schedules - are games being pushed out? The schedule is always changing. Shao Lin may move into q1 to avoid Christmas Noise. Gave no specifics. Ed ? - Moness, Crespi, & Hart * 1. How is Rugrats development going? - Very Well; On target for Nov rlse on psx, gb. Pleased with product, targeting younger audience, sony also pleased with it - just reviewed it with them last week; Expects Sony to help market the game to attract younger audience. GB will not be colorized, would like to but wouldn't be confident it would be done in time if they tried. 2. Are you seeing Quest 64 reorders? Not sure if they really answered the question - all they really said I think, was that they are making more. Bob Peterson - Piper Jaffray ** 1. Inane question about Bowling for the PC. Took no notes on it all - sorry. 2. Development - Internal vs External? Brian said it didn't necessarily matter to him where it came from and gave his usual spiel on the topic. James Lin - Wedbush Morgan Are software prices in general coming down? Brian said in general no, but there was a whole new market of `mass market' software like Deer Hunter that would be priced lower, but also cost 30-50% less to develop. Top games still fetch the $50 premium price and should continue to do so.