MARVEL RELEASES Q1 2005 NUMBERS

[MattBrady]

Marvel today released its Q1 2005 numbers, beating predictions on earnings by $0.04 per share, but still seeing an 11.5% decrease in earnings from the same period one year ago. Included in the numbers, according to Marvel, was a $10 million charge for the resolution of all past and future payments claimed by Stan Lee, with whom, Marvel has settled, as was also reported today by the company.

The company’s net income dropped to $27.7 million from $31.3 million in Q1 2004. Marvel’s total sales declined to $104.1 million from $122.3 million during the same period last year. The $10 million charge associated with Lee was reflected in $0.06 per share, resulting in a Q1 showing of $0.25 per share versus $0.27 in 2004.

By division:

Marvel’s publishing saw a 14% increase compared to a year ago, rising to $22.4 million due to, “strength in core comic and trade paperback sales. Marvel achieved increases of approximately 14% in both the number of comic book titles shipped and in the average circulation per title in Q1 2005 compared to the prior year period. Operating income in Q1 2005 was $8.9 million, an operating margin of 40%, compared to an operating margin of 37% in the prior-year period.”

The distinction between years is important, as in early 2004 and into Q2 2004, Marvel was seeing an increase in the number of titles shipped, but a decrease in the average circulation per title.

Licensing continued to be the company’s hottest burning engine in Q1 2005 as well, showing a 52% increase from the same period last year. According to Marvel, the increase was due mostly to “significantly improved contributions from, and the consolidation of, the joint venture with Sony for Spider-Man movie merchandising, as well as contributions from international licensing and studio operations. Q1 2005 net licensing sales include approximately $11.0 million in gross sales recognized as a result of the consolidation of the JV, compared to the year ago period in which Marvel's portion of the JV's results were recorded as equity in net income of the joint venture of $8.1 million. International licensing net sales, excluding JV activity, increased more than 96% year-over-year to $9.4 million as Marvel's new international offices continued to leverage global marketing momentum.”

In toys, Marvel took another shot to the crotch, with an expected 81% decrease from the same period in 2004, to $10.5 million. The decrease was due mostly to a cooling of the Spider-Man and Lord of the Rings toy lines. Case in points – Spider-Man 2 sales in Q1 2005: $1.9 million. In 2004: $44.8 million. The numbers show what many toy manufactures are struggling to find: a sustainable product and/or franchise that will provide a solid base of income, regardless of fluctuations based on popular products. As it stands, Marvel should show a stronger Q2 2005 in toys

In Marvel’s release of the numbers, Marvel's Chairman, Morton Handel, commented, "Marvel's character and corporate brands are firmly established with consumers on a worldwide basis. Our strong Q1 operating results reflect the continued high level of demand for consumer and media products based on our characters. In order to further leverage this high level of awareness and interest in our characters, this morning we announced plans to produce our own slate of feature films. We expect that the global promotional value of these projects will complement the extensive pipeline of film projects we already have in development with studio partners and further our transformation into a leading global entertainment company. We plan to fund these film projects through the utilization of a non-recourse revolving credit facility, thereby maintaining strict adherence to our business model which limits capital investment.

"Our consumer products group continues to make tremendous strides in leveraging the global awareness of our media projects. In publishing, Marvel's direct segment market share in March 2005 exceeded 55%, which reflects the high quality of our product and increased retail support. Finally, we are pleased with the initial demand for the Fantastic Four toy line and are optimistic regarding the performance of this brand at retail."

As of March 31st, Marvel had cash and short-term investments of $243 million.

As usual in the numbers releases, Marvel ran though it’s upcoming film slate with little if any, new information: X-Men 3, summer 2006; Spider-Man 3, May 4th, 2007; Ghost Rider, 2006; The Punisher 2, 2006; Namor, 2007; with Iron Man, Luke Cage, Deathlok, The Hulk 2, Ant-Man, Black Panther, Captain America, Killraven, Nick Fury,
Silver Surfer and Thor all in development.

Partnership with Lions Gate to develop, produce and distribute original animated DVD features. Four projects in 2D/3D format are in development with the first release slated for 2006. Titles include: The Avengers 1, The Avengers 2, Iron Man and Dr. Strange.

Marvel Character Animated TV Projects in Development: Partnership with Antefilms Distribution to produce an original animated television series based on the Fantastic Four. 26, thirty-minute 2D/3D animated episodes are planned with initial TV airings in 2006.

Marvel Character Live Action TV Projects in Development: Brother Voodoo.

In its earnings predictions, Marvel is maintaining 2005 profit guidance of $1.07 to $1.12 per share on sales of $370 million to $390 million. Meanwhile, analysts are forecasting earnings of $1.10 per share on sales of $389.3 million.

UPDATE 11:43 am, EST: During this morning’s conference call with investors, Marvel executives illuminated some of the points from the report. In regards to the deal with Paramount, it was stressed that Marvel will now have greater creative control over their films, with Avi Arad pointing out that while Marvel does have solid relationships with studios, the move to producing their own films was a natural growth for the company. Along with Captain America and Nick Fury, Arad did mention The Avengers as an upcoming film project. Arad said that he hopes that the firstfruits of the relationship with Paramount will see screens by the end of 2007 or early 2008.

Arad noted that changes in the film schedule included with the Q2 numbers, citing the deletions and moves of previously announced films as one of the reasons that spurred Marvel to move into production – this way, Arad said, Marvel will have more control over release dates and production schedules.

As mentioned above, Arad pointed out that while Elektra was a box office disappointment, the DVD sales made up for it, which bodes very well for Marvel moving into production on its own, as it will receive all the profits from DVD sales.

Arad also announced that a Fantastic Four trailer will be attached to Star Wars Episode III.

X-Men 3 is slated for a Memorial Day 2006 opening.

The upcoming Ghost Rider film starring Nic Cage will have a tie in with “choppers” according to Arad, as well as a “unique” video game (to be announced at E3), and “interesting” toy line – after which Arad referenced the Evil Kenevil toys from the ‘70s.

The animated FF will debut with the release of Fantastic Four on DVD later this year, in order to continue the franchise until the sequel. “We won’t go dark between sequels,” Arad said.

During the Q&A Arad noted that release about a Killraven film with Sony was premature, and that the reported deal with Sony is not complete, with many studios clamoring for the property.

In speaking about a live-action Avengers movie, Arad pointed out that the team has had numerous characters in it over the years, so developing a film won’t be a problem, even if some traditional “Avengers” characters are licensed to other studios, such as Iron Man and Thor.

[HowAreWeToLive]

Djimon Hounsou should play Black Panther. He's an incredible actor, and from Benin.

[RyanMcLelland]

As an Ultraverse enthusiast...what is happening with Prime? They announced it with Namor and now...no news.

[bluedevil2002]

Originally posted by MattBrady
The numbers show what many toy manufactures are struggling to find: a sustainable product and/or franchise that will provide a solid base of income, regardless of fluctuations based on popular products. As it stands, Marvel should show a stronger Q2 2005 in toys

Well if Marvel Legends were easier to find, and they'd do more characters (like an Invisible Woman not in a box set), I'm sure that would help.

[Cyphon]

The animated Avengers and Ironman, is that the traditional or Ultimate versions. I recall reading something about it being more Ultimates than traditional Avengers.

[Alfonso]

Originally posted by RyanMcLelland
As an Ultraverse enthusiast...what is happening with Prime? They announced it with Namor and now...no news.

Good call

[AllAboutMe]

Brother Voodoo!!!!

[MattBrady]

Originally posted by RyanMcLelland
As an Ultraverse enthusiast...what is happening with Prime? They announced it with Namor and now...no news.

just updated: "Arad noted that changes in the film schedule included with the Q2 numbers, citing the deletions and moves of previously announced films as one of the reasons that spurred Marvel to move into production – this way, Arad said, Marvel will have more control over release dates and production schedules. "

basically, with Prime at another studio, Marvel was under their control for the shifts the other studio would want.

MattB

[yanni111]

what about a deadpool movie!! Theres been talk/rumors of a deadpool movie for a few years now. I think it if they do it they have to do the character more as a professional assasin who takes his job seriously but has a good sense of humor but not silly. The humor has to be sarcastic and laid back. I dont think it would work as a total goofball making jokes every other second while shooting his guns. Or maybe that would work? i love Deadpool!

[Ace]

I've been sort of baffled by the new Avengers decision. It would seem to me that it would make much more sense for Marvel to use some of the second stringers/characters not licensed to other studios in their flagship title so that they might develop them more in preperation for a movie.

That's how they're going to make money, by developing further a potential property, not by selling an extra fiftythousand comic books with a title full of Spider-Man and Wolverine.

[cindercatz]

Originally posted by Ace


That's how they're going to make money, by developing further a potential property, not by selling an extra fiftythousand comic books with a title full of Spider-Man and Wolverine.

exactly

If they really understood how to maximize their product awareness (which sells movies, as opposed to brand awareness, witness Elektra, Catwoman), that should consider heavily in their publishing decisions. This is the way they're going, so they better figure it out.

Edit: "BRAND" being MARVEL ENTERTAINMENT INC. or MARVEL, which they attempted to establish following the success of both "X-MEN" and "SPIDERMAN" franchises

[GeorgeG]

I didn't see a Wolverine movie in that list.

[ramberk]

Originally posted by Ace
I've been sort of baffled by the new Avengers decision. It would seem to me that it would make much more sense for Marvel to use some of the second stringers/characters not licensed to other studios in their flagship title so that they might develop them more in preperation for a movie.

That's how they're going to make money, by developing further a potential property, not by selling an extra fiftythousand comic books with a title full of Spider-Man and Wolverine.

Ugh. Enough of these lame arguments/complaints. Marvel and DC can get partial blame for flooding the market with spin-offs and multiple series' of the same franchise BUT its also our own faults. There are plenty of great non-superhero American comics out there. But is anyone reading them? Just a small percentage of the population.

Ex Machina, Powers, Fables, Y the Last Man-- these books should be selling 100K a month. I like spandex as much as the next guy, but I also like variety.

As for second stringers-- there's a reason they're second stringers. Its true Marvel should develop them but no one is reading them. Even second string x-men characters aren't able to sustain their own monthly comic books. New characters are having a hard time getting an audience.

What does it take to produce new characters and boost the visibility of second stringers? Top notch creative teams-- like how MK Daredevil and MK Inhumans had it back way back when. But the best creators are not salivating to do a Deathlok book.

Marvel quite simply needs to do is find new, fresh writers. And they are sort of doing this. THey have Orson Scott Card right? And then there's the kid who wrote the Warlock and Phoenix:End Song minis right?

But even quality titles get overlooked. Just look at how Runaways has been struggling forever. Blame the audience too.

[Tiger47]

wait...did they just say they're making an Avengers movie???????

[emanon]

Originally posted by GeorgeG
I didn't see a Wolverine movie in that list.

And I for one thank the powers that be for that since that character is way over-exposed and even more over-rated.

How I wish Marvel would gurantee that he would be killed off permanently without any chance of ever being resurrected or used in any shape way or form (or even referred to in passing) during the "House of M" story line, I would buy the series.

[Poolboy]

What about a mention for a Deadpool Movie. Ryan Reynolds was being sought after by Arad, Reynolds saying he wasn't interested, then he's very enthusiastic to do Deadpool saying he's a big fan of the character....

SO LET US KNOW, DAMMIT!!!

I want my DP movie fix...

If they are going to do an Avengers movie, they need to do it with the rosters from the 60's and 70's. It makes sense to use the original team.