THQ Inc. Earnings Cheat Sheet: Streak of Two Straight Quarters of Expanding Margins Snapped

Hampered by higher costs, THQ Inc. (NASDAQ:THQI) booked a net loss in the second quarter. THQ is a worldwide developer and publisher of interactive entertainment software for all popular game systems.

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THQ Earnings Cheat Sheet for the Second Quarter

Results: Loss widened to $92.4 million ($1.35 per diluted share) from $47 million (loss of 69 cents per share) in the same quarter a year earlier.

Revenue: Rose 89.5% to $146 million from the year earlier quarter.

Actual vs. Wall St. Expectations: THQI reported adjusted net loss of 69 cents per share. By that measure, the company beat the mean analyst estimate of a loss of 86 cents per share. It beat the average revenue estimate of $104.2 million.

Quoting Management: “We are encouraged that our second quarter performance exceeded our expectations, particularly in a quarter with a light release schedule,” said Brian Farrell, THQ President and Chief Executive Officer. “Our two biggest quarters of the year remain ahead of us, and we are focused on execution. In Q3 we are planning for the largest quarter in our history, in terms of sales and earnings, driven by Saints Row: The Third, the uDraw GameTablet, and WWE ’12. With UFC Undisputed three launching in the fourth quarter, we are well-positioned to deliver a strong second half of fiscal 2012.”

Key Stats:

Gross margin shrank 23.6 percentage points to -8.9%. The contraction appeared to be driven by increased costs, which rose more than twofold from the year earlier quarter while revenue rose 89.5%.

The company topped expectations last quarter after falling short of forecasts in the first quarter with a loss of 92 cents versus a mean estimate of a loss of 59 cents per share.

The company’s revenue has now risen for two straight quarters. In the first quarter, revenue increased 30.6% to $195.2 million from the year earlier quarter.

Looking Forward: Over the past ninety days, the average estimate for the third quarter has fallen from $1.34 per share to $1.33, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved from a loss of 21 cents a share to a loss of 22 cents over the last sixty days.

Competitors to Watch: Electronic Arts Inc. (NASDAQ:ERTS), Microsoft Corporation (NASDAQ:MSFT), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Activision Blizzard, Inc. (NASDAQ:ATVI), KONAMI CORPORATION (NYSE:KNM), Majesco Entertainment Co. (NASDAQ:COOL), The Walt Disney Company (NYSE:DIS) and Sony Corporation (NYSE:SNE).

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(Source: Xignite Financials)