THQ on Wednesday reported a deeper quarterly loss for its second quarter ending September 30, losing $92.4 million versus $47 million during the previous year's quarter.
The losses came despite a rise in revenues: the $146 million it reported represents an 89 percent increase from the $77.1 reported during its fiscal 2010 Q2.
Revenues were far ahead of analyst estimates, which averaged at $104.2 million. According to the company, the disparity was due to better-than-expected sales of its Warhammer 40K: Space Marine, which shipped 1.2 million copies during the quarter.
In addition to beating analyst estimates, the company's quarter also beat its own guidance.
"We are encouraged that our second quarter performance exceeded our expectations, particularly in a quarter with a light release schedule," said president and CEO Brian Farrell.
"Our two biggest quarters of the year remain ahead of us, and we are focused on execution."
The company revealed that digital revenues for the six months ending September 30 were 68 percent higher than during the same six months one year ago.
Looking forward, the company is projecting its biggest Q3 ever on the backs of Saints Row: The Third and its line of uDraw games and accessories. Its guidance currently calls for revenues of $510 to 550 million.
While I'm not suggesting their business model is perfect, or even great, this statement doesn't make sense. It's comparing year-by-year figures, and you can certainly make more money while spending more money. Clearly, as they had expected to lose MORE money than they did, it must be part of their plan ...
I mean, like so many other professions, you can aim to make your real profit in 2-4 months of the year, and then try to get by the other 8-10 from that. It happens. People have lived that way for centuries ...
"It's comparing year-by-year figures, and you can certainly make more money while spending more money."
Maybe I am overlooking something, but I don't get your point, THQ isn't making more money while spending more money, they are increasing their revenues and at the same time widening their losses. No info was given about their investments in the article. And yes, the numbers are comparing YoY 2010/2011, what's wrong with it? The result, that they managed to increase their revenues and it did lead to a widened loss stays, maybe I don't understand your argument, but I can't see, why the fact, that these numbers are YoY changes anything.
In fiscal year 2010, THQ ended the quarters 3 and 4 also with a net loss, the idea, that they could make up the losses of Q1 and Q2 in Q3 and Q4 wasn't becoming reality, at least in 2010. So I still believe it is a flawed business model.
"I mean, like so many other professions, you can aim to make your real profit in 2-4 months of the year, and then try to get by the other 8-10 from that. It happens.
People have lived that way for centuries ... "
I disagree, even in an agricultural society, nobody could made enough "profit" (a term, that doesn't suit an agricultural society anyway), in 2-4 months of the year and spend it to get by the other 8-10 months, people never lived that way.
I think it's called investing--You need to spend money in order to make money--and I'm sure they are putting out quite a bit on SR, but there are probably other things going on behind the scenes that no body but the company is aware of.
@Christian - It seems that a good portion of what you're arguing simply wasn't stated in your initial blanket statement. That said, I still disagree with parts of it.
I'm not going to claim to know the finer points of THQs business plan, or off-hand know what their year-to-year has been for every quarter. I'm not trying to argue the specifics. The point was that whatever their business model is, they're clearly expecting these losses. I don't think because it didn't work once that it means the whole thing is flawed, nor do we know that they're in a current situation that would allow them to completely switch their business model. In essence, we, as outsiders in this, don't know nearly enough about their situation to grade it. You think it's bad. That's fine. I don't claim it's good, just that it's possible.
As far as the second point, my own mother has lived like this for the last 8 years. She's an artist and has made the majority of her annual income around the Christmas season, then coasts the rest of the year off losses and break-evens. It's not quite the 1-shot sum of 'work 2 months, do whatever for 10', but it is the model of 'profit for 1 quarter, lose for 3 others'.
Nothing against investing, but that's something, we don't know, THQ didn't published any numbers about their investments. They can be higher then last year, they can be the same as in last year or they can be lower then in last year. This is an information, we didn't have.
All we know is their revenue and their net loss, none of these two numbers says anything about investments.
It is dangerous to believe that higher revenues and widened losses are a sign for more investments, it can also be a sign for better sales at lower prices, that lead to a loss per unit. Or it can mean, that they indeed sold many more of their new games, then expected, but that these games were to expensive in development, so that the sales can't cover the development costs.
@Nick
If you look at the financial results of THQ from the last years, you can easily see, they don't have a working business model. And even if they are expecting the losses it doesn't mean, they can live with it. Many companies in the games industry had to learn this lessen: Acclaim or Williams are just two examples for companies, that expected losses for a few years in a row and one day were bankrupt.
I mean, like so many other professions, you can aim to make your real profit in 2-4 months of the year, and then try to get by the other 8-10 from that. It happens. People have lived that way for centuries ...
*shrug*
Maybe I am overlooking something, but I don't get your point, THQ isn't making more money while spending more money, they are increasing their revenues and at the same time widening their losses. No info was given about their investments in the article. And yes, the numbers are comparing YoY 2010/2011, what's wrong with it? The result, that they managed to increase their revenues and it did lead to a widened loss stays, maybe I don't understand your argument, but I can't see, why the fact, that these numbers are YoY changes anything.
In fiscal year 2010, THQ ended the quarters 3 and 4 also with a net loss, the idea, that they could make up the losses of Q1 and Q2 in Q3 and Q4 wasn't becoming reality, at least in 2010. So I still believe it is a flawed business model.
"I mean, like so many other professions, you can aim to make your real profit in 2-4 months of the year, and then try to get by the other 8-10 from that. It happens.
People have lived that way for centuries ... "
I disagree, even in an agricultural society, nobody could made enough "profit" (a term, that doesn't suit an agricultural society anyway), in 2-4 months of the year and spend it to get by the other 8-10 months, people never lived that way.
I'm not going to claim to know the finer points of THQs business plan, or off-hand know what their year-to-year has been for every quarter. I'm not trying to argue the specifics. The point was that whatever their business model is, they're clearly expecting these losses. I don't think because it didn't work once that it means the whole thing is flawed, nor do we know that they're in a current situation that would allow them to completely switch their business model. In essence, we, as outsiders in this, don't know nearly enough about their situation to grade it. You think it's bad. That's fine. I don't claim it's good, just that it's possible.
As far as the second point, my own mother has lived like this for the last 8 years. She's an artist and has made the majority of her annual income around the Christmas season, then coasts the rest of the year off losses and break-evens. It's not quite the 1-shot sum of 'work 2 months, do whatever for 10', but it is the model of 'profit for 1 quarter, lose for 3 others'.
Nothing against investing, but that's something, we don't know, THQ didn't published any numbers about their investments. They can be higher then last year, they can be the same as in last year or they can be lower then in last year. This is an information, we didn't have.
All we know is their revenue and their net loss, none of these two numbers says anything about investments.
It is dangerous to believe that higher revenues and widened losses are a sign for more investments, it can also be a sign for better sales at lower prices, that lead to a loss per unit. Or it can mean, that they indeed sold many more of their new games, then expected, but that these games were to expensive in development, so that the sales can't cover the development costs.
@Nick
If you look at the financial results of THQ from the last years, you can easily see, they don't have a working business model. And even if they are expecting the losses it doesn't mean, they can live with it. Many companies in the games industry had to learn this lessen: Acclaim or Williams are just two examples for companies, that expected losses for a few years in a row and one day were bankrupt.