THQ Fourth Quarter Net Income Increases 84% to $0.95
Per Share on Record Revenue of $111,318,000
Business Wire - February 25, 1999 08:21
CALABASAS, Calif.--(BUSINESS WIRE)--Feb. 25, 1999--
1998 Net Income Increases 148% to $23,221,000 (Before Acquisition Charge) on 141% Revenue
Gain
THQ Inc. (NASDAQ NMS: THQI) announced today that net income for the fourth quarter ended
December 31, 1998 increased 84% to a record $11,419,000, or $0.95 per diluted share, on
12,054,000 diluted common shares outstanding. This compares to net income of $6,203,000, or
$0.56 per diluted share, for the fourth quarter of 1997 on 11,121,000 diluted common shares
outstanding. Revenue increased 128% to a record $111,318,000 from $48,903,000 for the same
period a year earlier.
For the year ended December 31, 1998, net sales were $215,060,000, a 141% increase from the
$89,362,000 reported for fiscal 1997. Net income for the year was $23,221,000, or $2.00 per
diluted share (before a one-time charge of $7,232,000 related to the acquisition of GameFx Inc. on
May 1, 1998), versus $9,345,000 or $0.90 per diluted share for fiscal 1997. Including the one-time
charge, net income for the year ended December 31, 1998 was $15,989,000, or $1.38 per diluted
share.
"During 1998, THQ took its place among the top tier of game publishers," said Brian J. Farrell,
president and chief executive officer, THQ. "In addition to setting new records for sales and profits, we
accomplished all of our strategic goals for the year, including a dramatic expansion of our list of titles
and our worldwide distribution network. We are delivering on our commitment to provide
leading-edge content for all game platforms, for all game genres, worldwide. THQ has the momentum
and the tools needed to become a dominant game publisher. We look forward to further growth in
1999 as we work toward achieving this aggressive goal."
Fourth quarter results reflected strong sales of "WCW/NWO Revenge" for the Nintendo 64, and
"Rugrats: Search for Reptar" for the PlayStation and Game Boy. "It is important to note, THQ's
growth for 1998 was achieved with fewer titles shipped than in 1997. This means that we realized
greater revenue per title than ever before in the Company's history, which we believe speaks to the
high quality and entertainment value of our games," Farrell said.
As announced earlier this week, THQ placed among the top ten publishers in three different console
system categories in the NPD TRSTS 1998 annual report of all software publishers. THQ was ranked
the number four software publisher for the month of January 1999, and topped the console category
for January 1999 with "WCW/NWO Thunder" for the PlayStation. THQ Inc. is a leading developer,
publisher and distributor of interactive entertainment software worldwide for a variety of hardware
platforms including PC CD-ROM and those manufactured by Nintendo and Sony. The THQ web site
is located at www.thq.com.
The statements contained in this release, which are not historical facts, may be deemed to constitute
forward-looking statements. Actual results may differ materially from those projected in such
statements due to a number of risks and uncertainties, including, without limitation, demand and
competition for the Company's products, and other risks and uncertainties detailed in the Company's
filings with the Securities and Exchange Commission.
THQ Inc.
Fourth Quarter Earnings Announcement, 1998
Condensed Statements of Operations
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
Net sales $111,318 $48,903 $215,060 $89,362
Costs and expenses:
Cost of sales 54,806 25,459 100,001 48,110
Royalties 27,026 8,436 48,120 14,758
Product development 1,693 757 5,092 1,610
Selling 9,408 4,537 20,262 8,670
General and
administrative 3,135 2,172 9,897 5,379
In process research
and development(1) 0 0 7,232 0
Total costs and
expenses 96,068 41,361 190,604 78,527
Income from operations 15,250 7,542 24,456 10,835
Interest income, net 139 135 863 464
Income before income
taxes 15,389 7,677 25,319 11,299
Provision for income
taxes 3,970 1,474 9,330 1,954
Net income $ 11,419 $ 6,203 $ 15,989 $ 9,345
Net income per
share - diluted $ 0.95 $ 0.56 $ 1.38 $ 0.90
Shares used in per
share calculation 12,054 11,121 11,626 10,352
Add back in process
research and
development(1) $ 0 $ 0 $ 7,232 $ 0
Net income before in
process research
and development $ 11,419 $ 6,203 $ 23,221 $ 9,345
Net income per share
before in process
research and
development $ 0.95 $ 0.56 $ 2.00 $ 0.90
Shares used in per
share calculation 12,054 11,121 11,626 10,352
(1) In process research and development represents purchased costs
related to the acquisition of GameFx Inc., an applied technology
company focused on the development of interactive entertainment
software utilizing proprietary 3D acceleration technology.
THQ Inc.
Fourth Quarter Earnings Announcement, 1998
Condensed Balance Sheets
(In thousands)
December 31, December 31,
1998 1997
ASSETS
Cash and cash equivalents $ 19,019 $ 11,724
Accounts receivable - net 59,520 30,856
Inventory 16,937 1,425
Prepaid and deferred
royalties 6,770 3,145
Software development costs 3,011 3,879
Deferred income taxes 5,860 1,666
Prepaid expenses and
other current assets 1,548 478
Total current assets 112,665 53,173
Property and equipment, net 2,451 1,163
Deferred royalties - net
of current portion 375 500
Software development
cost - net of
current portion 1,173 0
Deferred income taxes -
net of current portion 4,514 0
Other long term assets 7,739 652
Total assets $128,917 $ 55,488
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable and
accrued expenses $ 29,676 $ 10,952
Accrued royalties 16,594 7,284
Income taxes payable 8,266 3,475
Advance from bank 9,909 0
Total current liabilities 64,445 21,711
Accrued royalties - net of
current portion 375 250
Common stock 113 4
Additional paid-in capital 62,087 47,559
Cumulative foreign currency
translation adjustment 60 81
Retained earnings
(accumulated deficit) 1,837 (14,117)
Total shareholders' equity 64,097 33,527
Total liabilities and
shareholders' equity $128,917 $ 55,488
OTHER INFORMATION
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
Platform Revenue Mix
Nintendo 64 65.0% 49.1% 55.0% 27.0%
PlayStation 18.1 15.1 30.5 21.7
PC 2.9 6.5 2.1 3.9
16 Bit 0.3 18.2 0.9 23.5
GameBoy 8.6 11.1 8.1 23.7
Other 5.1 0.0 3.4 0.2
100.0% 100.0% 100.0% 100.0%
Geographic Revenue Mix
Domestic 88.0% 86.2% 86.5% 84.3%
Foreign 12.0 13.8 13.5 15.7
100.0% 100.0% 100.0% 100.0%
CONTACT: THQ/Investor Relations
Deborah Lake, 818/591-1310
dlake@thq.com
or
THQ/Media Relations
Aimee Greenholtz, 818/223-3116
aim@thq.com
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