THQ Earnings Call Gives Little Reason for Confidence

[Karloff]

THQ Earnings Call Gives Little Reason for Confidence

Wedbush analyst Michael Pachter says THQ could be about to go bankrupt.

THQ recently announced game release delays [http://www.escapistmagazine.com/news/view/120505-THQ-Delays-South-Park-Company-of-Heroes-2-and-Metro-Last-Light] for some of its most anticipated titles, and its earnings call - in which it discussed its current financial position and plans for the future - gave little reason to think that things are about to change for the troubled Darksiders and Saints Row developer. Though the company is exploring its options, Wedbush analyst Michael Pachter has said that unless things improve, THQ is on its way out.

"Should its financial position continue to deteriorate," Pachter said, "we expect THQ to raise financing through an equity sale that could lead to dilution of existing shareholders We expect creditors to be asked to renegotiate terms at a discount; if they are unwilling, bankruptcy is possible."

THQ President Jason Rubin did little to lighten the gloom during the investment call. Quick to remind investors that when he joined the company "there was a certain number of titles already too far along in the development cycle for me to have much of an impact," Rubin went on to say that Darksiders 2, though favourably reviewed, didn't do that well.

"Observing this and other recent industry releases," Rubin said, "one is left with a firm understanding that in the current marketplace, only the absolute top tier of releases is making impact on the game consumer."

"As mentioned in today's press release," said THQ CFO Paul Pucino, "we are no longer providing net sales and earnings guidance. And we are withdrawing our previous guidance for fiscal '13 in our projected operating model."

CEO Brian Farrell said that a lack of revenue, combined with mounting debt, had forced THQ to turn to financial advisor Centerview Partners "to evaluate our strategic alternatives." One of the first things Centerview told THQ, according to Farrell, was not to answer any questions until after the review was over.

That left those listening in with little to inspire them, no reason to think things would improve in the short term, and no means of asking THQ what it intended to do next.

Source: VG24/7 [http://seekingalpha.com/article/980111-thq-management-discusses-q2-2013-results-earnings-call-transcript?page=1]


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[gardian06]

in other words because Michael fucking Pachter says that THQ is going under: THQ will become a strong and driving force in the industry, and rival EA

 

[Lawyer105]

I wonder what this means for Vigil and Dark Millenium... probably bad things, although I really hope not!

 

[AzrealMaximillion]

Honestly, I hope other publishers scoop up the titles/developers that THQ pushed back if they go under. The next batch of THQ games would actually make them money because they were, I don't know, good?

 

[gigastar]

Oh look, a forecast in the gaming industry from the man who predicted that Gearbox was sending Borderlands out to die.

However this time he has credible sources to go on, so i assume THQ will make a recovery by the end of next year instead of the end of the month.

 

[gardian06]

In other words: THQ's cashflow has become rather Stillwater.

you are rather punny (most of the time) do you actually try?

 

[Meight08]

God fucking damnit they were one of the last good publishers out there, they put their faith in the core gamers and the core gamers let them drop like a rock.

 

[Jandau]

"Observing this and other recent industry releases," Rubin said, "one is left with a firm understanding that in the current marketplace, only the absolute top tier of releases is making impact on the game consumer."

And this is why THQ will go under. He totally missed the point. The problem isn't that you need to be in the "top AAA tier", whatever that's supposed to mean. It's that your budgets are too bloated and you're therefore unable to get a decent return on your investment. Developers and publishers make money on niche games, small releases and such all the time. You don't have to be "top tier", you need to have realistic expectations and manage your funding accordingly. If you can't do that, you will die out and no amount of trying will change that.

Also, the fact that THQ has some brilliant franchises to work with, like Homeworld and Dawn of War and they still manage to fuck up is proof of nothing short of incompetence...

 

[Adam Jensen_v1legacy]

Yet another example of Pachter's idiocy. Please dude, stop talking. We know THQ is in a financial crisis and your analysis is that they MAY go bankrupt. How the fuck is that even news? Maybe they will, maybe they won't. Nothing's changed for them.

It's not an analysis if you just pull something out of your ass.

 

[GoaThief]

Darksiders 2 was a misstep, I preferred many aspects of the original but it was still a pretty solid game. However, to make a "decent" ROI it had to ship a ludicrous amount of copies, similar to how EA have been talking about Dead Space 3 needing to ship 5 million.

I really quite like a lot of titles THQ have been getting out there, none seem to be excellent though or manage to generate enough hype with the masses. A shame and if hey go it'll be a major loss.

 

[Andy Shandy]

Well since it's what's Pachter said, the complete opposite is now bound to happen. Which is good for THQ, I guess.

 

[shintakie10]

in other words because Michael fucking Pachter says that THQ is going under: THQ will become a strong and driving force in the industry, and rival EA

That better be the case since they are among the best publishers in the industry. I mean they recently delayed their big heavy hitters for a few months, how many other companies would do that?

A lot of them?

Blizzard has made a livin off of delayin their games over and over and over to the point that if they give a release date that isn't within a couple months you can bet your life that it'll be delayed for upwards of 6 months.

 

[Sylveria]

in other words because Michael fucking Pachter says that THQ is going under: THQ will become a strong and driving force in the industry, and rival EA

That better be the case since they are among the best publishers in the industry. I mean they recently delayed their big heavy hitters for a few months, how many other companies would do that?

A lot of them?

Blizzard has made a livin off of delayin their games over and over and over to the point that if they give a release date that isn't within a couple months you can bet your life that it'll be delayed for upwards of 6 months.

Outside of Blizzard and Valve, I can't think of many publishers that delay games and yield positive results.

 

[Jhooud]

Regardless of what anyone thinks of Pachter, the fact that THQ's CFO said...

"As mentioned in today's press release," said THQ CFO Paul Pucino, "we are no longer providing net sales and earnings guidance. And we are withdrawing our previous guidance for fiscal '13 in our projected operating model."

...means that the company is in far worse straits than I'd thought. Which is sad, I've truly enjoyed their games. Particularly their take on the Warhammer 40k universe.

 

[DrunkOnEstus]

Snip

Yeah I was pretty much going to say this. Darksiders 2 didn't need the massive advertising budget, taking all the steps that the "AAA" games do. It's almost like they have this wishful thinking that if you dress up your game and shove it in everyone's face the way AAA games are, then you will yield those results. They should know what their place is now, and start working in the AAA direction if that's what they want. I know the margins for error are smaller compared to the PS2 days, but you have to be realistic and play based on the cards in your hand.