THQ Reports Fiscal 2011 Fourth Quarter and Year End Results

THQ Inc. (NASDAQ: THQI) today reported financial results for the fourth quarter and fiscal year ended March 31, 2011.

Financial Highlights

Q4 Non-GAAP net sales were $248.6 million, consistent with guidance of $245 - $260 million.

Q4 Non-GAAP EPS of $0.15 was at the high end of guidance of $0.05 - $0.15.

A reconciliation of non-GAAP to GAAP results is provided in the accompanying financial tables.

"THQ posted strong fourth quarter results primarily driven by the success of Homefront,” said THQ President and CEO Brian Farrell. "We have already shipped 2.6 million units, a solid start for this new franchise, which kicks off the strongest pipeline of AAA core games in our history. We also continued to grow the uDraw franchise with the successful international debut of this compelling new tablet. Today, I am pleased to announce that we plan to bring exclusively designed uDraw GameTablets to Microsoft Xbox 360 and Sony PS3 platforms this holiday.”

Farrell continued, "We expect to generate significant growth, profitability and cash in fiscal 2012, driven by the latest installments of multi-million unit selling franchises, Saints Row, Red Faction, Warhammer 40,000, MX vs. ATV, UFC, WWE, and uDraw. We are creating a digital ecosystem for each of these games that will continue to keep consumers engaged and generate additional revenue opportunities beyond the initial retail sale. We also continue to aggressively invest in our digital initiatives, including online social and mobile offerings as well as our Warhammer 40,000: Dark Millennium Online MMO.”

FISCAL 2011 HIGHLIGHTS AND RECENT DEVELOPMENTS

Product Highlights

• Life to date, THQ’s new owned IP, Homefront, has shipped 2.6 million units
  • For the month of March 2011, Homefront was the #1 title on Xbox 360 and the #3 title on PS3, in the US and the top five European markets¹.
  • Homefront remains the best-selling week-one new console release in 2011 in the UK.

  ¹Source: NPD (Total US Market, March 2011); GfK (Euro 5, March 2011)

• In fiscal 2011, THQ shipped:
  • 1.7 million units of the uDraw GameTablet,
  • 4 million units of WWE branded videogames: SmackDown^® vs. Raw^® 2011 and WWE All Stars, and
  • 3 million units of UFC^® Undisputed™ 2010.

New Franchises and Innovations

• In fiscal 2011, THQ added Homefront to its growing portfolio of owned brands, which includes Saints Row^®, Red Faction^®, Darksiders^® and MX vs. ATV^®.
• THQ brought to market the uDraw GameTablet, a first-of-its-kind, innovative new gaming accessory, which hit retail store shelves worldwide in fiscal 2011, gaining instant popularity for its creativity and unique functionality. Today the company announced plans to bring exclusively designed uDraw GameTablets to Microsoft Xbox 360 and Sony PS3 platforms this holiday.
• The company continued to increase its investment in digital content, including social and mobile games, today announcing plans to bring Jimmy Buffet’s popular Margaritaville brand to Facebook, iPad and iPhone in fiscal 2012.

First Quarter Fiscal 2012 Release Schedule

THQ has announced the following key releases scheduled for the first quarter of fiscal 2012:

Investor Conference Call

THQ will host a conference call to discuss fiscal 2011 fourth quarter results, and fiscal 2012 guidance today at 2:00 p.m. Pacific/5:00 p.m. Eastern. Please dial (877) 356-8075 domestic or (706) 902-0203 international, conference ID 61833420 to listen to the call or visit the THQ Inc. Investor Relations Home page at http://investor.thq.com. The online archive of the broadcast will be available approximately two hours after the live call ends. In addition, a telephonic replay of the conference call will be accessible approximately two hours after the live call ends through May 5, 2011 by dialing (800) 642-1687 domestically, or (706) 645-9291 internationally, conference ID 61833420.

Non-GAAP Financial Measures

In addition to results determined in accordance with GAAP, the company discloses certain non-GAAP financial measures that exclude the following:

• stock-based compensation expense,
• the impact of certain deferred revenue and related costs,
• business realignment expense,
• impact of capitalized interest,
• other-than-temporary impairment on investments and any subsequent realized gains on those investments, and mark-to-market adjustments on investments, and
• other significant charges and benefits.

For non-GAAP purposes, the company uses a fixed, long-term projected tax rate of 15% to evaluate its operating performance, as well as to forecast, plan and analyze future periods.

THQ may consider whether other significant items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

The company excludes these expenses from its non-GAAP financial measures primarily because its management does not believe they reflect the company's primary business, ongoing operating results or future outlook. THQ's management believes that the use of non-GAAP financial measures provides meaningful supplemental information regarding its financial condition and results of operations, and helps investors compare actual results to its long-term operating goals as well as to its performance in prior periods. The non-GAAP financial measures included in this earnings release have been reconciled to the comparable GAAP results in the accompanying tables, and should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

In addition to the reasons stated above, which are generally applicable to each of the items THQ excludes from its non-GAAP financial measures, the company's management uses certain of the non-GAAP financial measures for the following reasons:

Stock-Based Compensation. THQ does not consider stock-based compensation charges when evaluating the performance of its business or formulating its operating plans. Stock-based compensation charges are subject to significant fluctuation outside of the control of management due to the variables used to estimate the fair value of a share-based payment, such as THQ's stock price, interest rates and the volatility of the company's stock price. Further, when considering the impact of equity award grants, THQ places a greater emphasis on the use of such grants as retention tools for long-term stockholder value creation, as well as overall stockholder dilution, rather than the accounting charges associated with such grants.

Deferred Revenue/Costs. The company recognizes the revenue and related costs from the sale of certain titles for which the online service is determined to be a deliverable over the estimated online service period. Although the company defers the recognition of all or a portion of its net revenue and costs with respect to these titles, there is no impact to its operating cash flow. THQ's management excludes the impact of deferred net revenue and costs when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.

Business Realignment Expense. Although THQ has incurred business realignment expenses in the past, each charge relates to a discrete event based on a unique set of business objectives. Management does not believe these charges reflect the company's primary business, ongoing operating results or future outlook. As such, the company believes it is appropriate to exclude these expenses from its non-GAAP financial measures.

Impact of Capitalized Interest. The company capitalizes interest expense as a component of capitalized software development. THQ’s management considers interest cost to be a financing cost in the period in which it is incurred, and thus excludes the impact of the capitalization of interest costs to software development and the subsequent amortization expense when evaluating the company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.

Other significant charges and benefits. THQ does not consider certain significant charges and benefits that are related to discrete events or market conditions to be indicative of ongoing operating results or future outlook. As a result, the company believes it appropriate to exclude expenses and benefits such as legal settlements or market-related impairments, from its non-GAAP financial measures.

Fiscal Periods

Our fiscal year ends on the Saturday nearest March 31st. For simplicity, we present all fiscal periods as ending on a calendar month end. In fiscal 2011, our fourth quarter and fiscal year ended on April 2, 2011. In fiscal 2010, our fourth quarter and fiscal year ended on April 3, 2010. The fiscal three month periods ended March 31, 2011 and 2010 consisted of 13 weeks. The fiscal twelve month periods ended March 31, 2011 and 2010 consisted of 52 and 53 weeks, respectively.

About THQ

THQ Inc. (NASDAQ: THQI) is a leading worldwide developer and publisher of interactive entertainment software. The company develops its products for all popular game systems, personal computers and wireless devices. Headquartered in Los Angeles County, California, THQ sells product through its global network of offices located throughout North America, Europe and Asia Pacific. More information about THQ and its products may be found at www.thq.com. THQ, Darksiders, Homefront, MX vs ATV, MX vs ATV: Alive, Red Faction, Red Faction: Armageddon, Saints Row, uDraw, uDraw GameTablet and their respective logos are trademarks and/or registered trademarks of THQ Inc.

Microsoft, Xbox, Xbox 360, Xbox Live, the Xbox logos, and the Xbox Live logo are either registered trademarks or trademarks of Microsoft Corporation in the U.S. and/or other countries.

"PlayStation" is a registered trademark of Sony Computer Entertainment Inc.

Wii, Nintendo DS and Nintendo DSi are trademarks of Nintendo.

All other trademarks are property of their respective owners.

The statements contained in this press release that are not historical facts may be "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, the company's expectations to generate significant growth, profitability and cash in fiscal 2012 and for product releases in future periods. These forward-looking statements are based on current expectations, estimates and projections about the business of THQ Inc. and its subsidiaries (collectively referred to as "THQ”) and are based upon management’s current beliefs and certain assumptions made by management. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, business, competitive, economic, legal, political and technological factors affecting our industry, operations, markets, products or pricing. Readers should carefully review the risk factors and the information that could materially affect THQ’s financial results, described in other documents that THQ files from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal period ended March 31, 2010, and subsequent Quarterly Reports on Form 10-Q, and particularly the discussion of trends and risk factors set forth therein. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties or to revise or publicly release the results of any revision to these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

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Notes:

The following table provides further detail on the income statement classification of certain non-GAAP adjustments that impact cost and expenses (in thousands):

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Notes: