THQ 2004 Annual Report Download - page 20

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THQ delivered on our goals in fiscal 2004. We outperformed the video game software market with 37% revenue growth
over the prior twelve months. We were one of only two U.S. video game software publishers to gain market share
in calendar 2003, according to The NPD Group, a leading independent market information provider. We achieved the
#2 independent video game software publisher ranking for all of 2003, with a 6.6% market share, and maintained the #2
position for the first four months of 2004, according to NPD.
THQ reported record revenues of $641 million in fiscal 2004. We also grew net income to $35.8 million, or $0.92
per diluted share, compared with $2.5 million, or $0.06 per diluted share in the prior twelve months. We posted a
7.6% operating margin, up sharply from 2.6% in the prior twelve months. We generated operating cash flow in excess of
$71 million, further strengthening our already rock solid balance sheet. At March 31,2004, we had $277 million in cash and
investments, or $7.10 per diluted share, with no debt.
We successfully improved product quality across the board and achieved the best game quality ratings in THQ’s history.
We also significantly enhanced our internal development studio organization to rival that of any publisher, with 17 teams
across eight studios. With leading franchises, a strong balance sheet and world-class studio operations, we are well positioned
to be a leader through the remainder of the current console cycle and into the next generation of hardware.
CREATING BLOCKBUSTER FRANCHISES
THQ continued to capitalize on our strength of appealing to the mass-market video game consumer with four titles
posting sales in excess of one million units in fiscal 2004:Disney/Pixar’s Finding Nemo, SpongeBob SquarePants™: Battle for Bikini
Bottom™
,WWE SmackDown!™: Here Comes The Pain™and Tak and the Power of Juju. Products based on each of these brands
will return as key drivers of THQ’s fiscal 2005 results.
Worldwide shipments of the first property in our long-term partnership with Disney and Pixar, Disney/Pixar’s Finding
Nemo, have now exceeded five million units. We are excited about launching games on all platforms based on the next Walt
Disney Pictures presentation of a Pixar Animation Studios film, The Incredibles, as the movie releases around the globe this
holiday season.
Titles based on one of our most enduring franchises, World Wrestling Entertainment™, shipped more than three million
units worldwide, reflecting the highest game quality ratings for the WWE™SmackDown!™PlayStation®2 series in THQ history.
In fiscal 2005, we will publish distinct WWE™games on each console as well as Game Boy®Advance.
Video games based on the SpongeBob SquarePants™franchise continue to be top sellers for THQ. In fiscal 2004, we
shipped more than three million units of games based on this brand. We are pleased to be launching new titles based on The
SpongeBob SquarePants™Movie this holiday season.
In addition, one of the most rewarding achievements for THQ last year was the successful launch of a new original
property, Tak and the Power of Juju, created in collaboration with our partner Nickelodeon. This “game-first” launch
underscores the creativity and strength of our partnership with Nickelodeon and adds a million-plus unit franchise to THQ’s
portfolio. We look forward to releasing Tak 2: The Staff of Dreams this fall, which will be supported by a comprehensive
marketing spend by both THQ and Nickelodeon.
We are also extremely pleased with the performance of MX Unleashed, which was developed internally by our Rainbow
Studios™and ranked in the top-ten best selling titles on PlayStation®2 and Xbox®in its first two months of sales, according
to NPD. Capitalizing on this success, we are already working on a sequel for fiscal 2005.
PREDICTABLE HITS, HIGH-PROFILE NEW PROPERTIES
Building on our successful portfolio strategy, we again expect to derive approximately two-thirds of our revenues from
proven franchises in the coming fiscal year. Many of these brands will help us maintain our leadership in the family and
handheld markets, as the mass-market segment of the video game market continues to expand. Each of our best-selling
brands of fiscal 2004 will return this fiscal year.
In addition to these outstanding franchises, THQ’s mass-market lineup in fiscal 2005 will include games based on popular
Nickelodeon titles The Fairly OddParents, Jimmy Neutron and Nicktoons and Warner Bros.’ holiday movie Polar Express.
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