MARVEL REPORTS Q1 2007 NUMBERS

[MattBrady]

Marvel today reported its 1st Quarter, 2007 numbers with net sales rising to $151.4 million, and net income increasing $46.8 million (56 cents a share), compared to $90.1 million and $17.5 million (17 cents a share) of the same time last year. Marvel credits licensing operations plus “increased contributions” from both comics and toys. Spider-Man 3’s minimum licensing guarantees are reflected in the numbers. Analysts were predicting nets sales of $102 million and 35 cent per share profit.

From Marvel’s report:

Marvel's Chairman, Morton Handel, commented, "Marvel's businesses benefited from global visibility and demand created for Marvel-branded merchandise, primarily from the recent release of major studio-licensed feature films including Spider-Man 3, which achieved a record-breaking opening weekend domestic box office of $151 million. Our Q1 performance also reflects the diverse base of revenue sources that we have built across consumer product segments.

"We are very pleased with our partnership with Hasbro and their performance under our toy license agreement. With the support of our toy division personnel, Hasbro has executed a broad and compelling toy line across multiple categories, and the line is performing well in the marketplace. Of note, the release of Spider-Man 3 triggered a second, non-refundable minimum guarantee payment to Marvel, amounting to $70 million, pursuant to our toy license agreement with Hasbro. That payment has already been received in the second quarter and will be recognized as revenue in future periods as royalties are 'earned out' under the agreement.

"Marvel is working on a growing array of initiatives to drive consumer exposure and provide new revenue streams in coming years. These initiatives adhere to our risk- and capital-averse business model. In support of our Marvel Studios film slate, we have partnered with Sega(R) to produce video games based on Iron Man and The Incredible Hulk as well as Captain America and Thor. Additionally, in late March we executed a license agreement in connection with the development in Dubai of a major new theme park destination centered on the Marvel Universe of characters. Work has also begun on Marvel's first Broadway project, with the development, by our licensee, of a
Spider-Man musical led by director Julie Taymor. Music for the project is being created by Bono and The Edge of the rock band U2. Both initiatives will take several years to develop but are expected to support Marvel's core objectives.

"Lastly, work on our Marvel Studios self-produced feature film line-up for 2008 progresses on schedule. Principal photography is proceeding well and on schedule for Iron Man, and pre-production on
Hulk, the filming of which is scheduled to begin this summer, is achieving important milestones. Recent progress includes the casting of Edward Norton in the lead role of Bruce Banner and Liv Tyler as his love interest, Betty Ross."

By company segment:

Licensing (Q1 07/Q1 06):

Net Sales $98.9 million/$39.6 million

Licensing Segment net sales more than doubled from the year-ago period to $98.9 million, primarily due to the contribution of Marvel's Spider-Man merchandising joint venture (JV) with Sony and strength in domestic licensing. The Spider-Man JV had revenues of $56.9 million in Q1 2007 which were triggered by the passing of the "on-shelf date" related to Spider-Man 3 feature film. International licensing sales declined slightly from Q1 2006 levels, principally due a gain recorded in the Q1 2006 period. Revenues from Marvel Studios increased due to participation payments on past films as well as option payments on potential future films.

Publishing (Q1 07/Q1 06):

Net Sales: $27.5 million/$23.9 million

Marvel's Publishing Segment net sales increased 15% or $3.6 million from Q1 2006 to $27.5 million principally due to higher unit volumes in the direct and bookstore markets and a price increase that was instituted on various titles during April 2006. Comic book sales also benefited from the final two issues of Civil War, a high-profile special comic book series which has tie-ins to established comic book series, and Dark Tower, a comic book series based on novels by Stephen King, sales of which began in the first quarter of 2007. Publishing segment operating income in Q1 2007 was $11.5 million with an operating margin of 42%, compared to $8.9 million in operating income and an operating margin of 37% in the prior-year period. The improvement in operating margin principally reflects the benefit of operating leverage on higher sales.

Toys (Q1 07/Q1 06):

Net Sales: $25.0 million/$26.6 million

The transition in Marvel's Toy Segment net sales from toys produced by Marvel in 2006 to toy production principally by Hasbro, Marvel's master toy licensee, in 2007, contributed to a modest year-over-year decrease in segment revenues to $25.0 million versus $26.6 million in Q1 2006. However, margins improved sharply in the Toy Segment in Q1 2007 reflecting contributions of higher margin license and service fee income. Sales recorded in 2006 as wholesale sales subject to the corresponding cost of revenues expense generated operating margins of 15% versus operating margins of 61% achieved in Q1 2007.

As of March 31, 2007, Marvel had cash and investments of $40.8 million (including $10.6 million in restricted cash) and no borrowings under its $100 million line of credit with HSBC Bank. During the first quarter of 2007, Marvel purchased approximately 829,000 shares, at an average price of $26.75 under its repurchase program. As of March 31, 2007, the Company had $27.9 million remaining under its $100 million share repurchase authorization announced June 5, 2006.

Marvel also released a list of its upcoming media projects with its report. No breaking news, other than some scheduleing adjustements, and slow progress notes on others, including:

Captain America, Nick Fury, Thor, and The Avnegers film projects are all listed with “writer engaged.”

The Fantastic Four animated series will relaunch in June of this year.

The new Spider-Man animated series produced by Sony is “in development” and will air on Kids WB!

Wolverine and the X-Men and Iron Man are both in development with 26, 30 minute episodes scheduled.

the Doctor Strange direct to DVD animated feature is due foir release on August 14th, while Teen Avengers is slated for a July 2008 release.

Both the Iron Man and Incredible Hulk videogames being published by Sega are targeted for 2008 releases.

Looking ahead, Marvel named some key factors that will affect its earnings in the coming year, including:

Expected strong Spider-Man movie merchandise licensing triggered by the theatrical release of the Spider-Man 3 movie.

Toy license contributions related to Marvel's toy license agreement with Hasbro.

Initial film license revenue contributions from feature films slated for release in 2007.

Strong contributions from domestic and international licensing revenues.

Strong growth in interactive revenues from anticipated license fees in excess of minimum guarantees.

Continued, modest top-line and bottom-line growth from the publishing division.

An estimated effective tax rate of 38-40% in 2007.

Marvel anticipates the majority of its revenue and net income for 2007 will occur in the first half of the year.

Marvel's guidance is based on 84 million diluted shares outstanding for 2007 and does not reflect any prospective share repurchase activity in 2007.

[Johnny Smith]

First post.

Awesome!!!

Wonder how high the stock price will go today?

[GenisFan]

No Punisher 2 news?? Uh-oh.

[WildcardZ]

Originally Posted by GenisFan

No Punisher 2 news?? Uh-oh.

I'm sure it is still coming out, but financially speaking, it doesn't rank next to other projects involving more popular characters. No disrespect is intended to the people working on the movie, the comics, or to fans of the Punisher, but that is the way it is. Personally, it is one of my favorite Marvel movies to date.

[bigdaddyhub]

Originally Posted by WildcardZ

I'm sure it is still coming out, but financially speaking, it doesn't rank next to other projects involving more popular characters. No disrespect is intended to the people working on the movie, the comics, or to fans of the Punisher, but that is the way it is. Personally, it is one of my favorite Marvel movies to date.

Um...Methinks you missed the intended sarcasm. The more appropriate response should probably be:

ZOMG!!!!!! Ounisher 2 would PWNNNN!!!

[HeX111]

Glad to hear that Marvel's doing well in all avenues of their entertainment spectrum. Especially glad that the publishing arm is still sitting very solid.

[Michael Heide]

Originally Posted by MattBrady

Wolverine and the X-Men and Iron Man are both in development with 26, 30 minute episodes scheduled.

the Doctor Strange direct to DVD animated feature is due foir release on August 14th, while Teen Avengers is slated for a July 2008 release.

Why is Wolverine and the X-Men in bold letters? This series was announced years ago and I think I even saw preview art online somewhere. Oh, and "Teen Avengers"? That sounds weak.

[Punchy]

Originally Posted by Michael Heide

Why is Wolverine and the X-Men in bold letters? This series was announced years ago and I think I even saw preview art online somewhere. Oh, and "Teen Avengers"? That sounds weak.

That's exactly what everyone said about the Young Avengers comic, and it's now one of Marvel's biggest hits of recent times.

Or it would be if it was coming out

[Colossus2420]

Originally Posted by Johnny Smith

First post.

Awesome!!!

Wonder how high the stock price will go today?

Not very, especially with what's looking to be a downmarket day. It opened up higher at 30.15 and has since dropped to 29.47 on already over half its average daily volume. Analysts say that the blistering Spiderman 3 weekend stands to help the theaters in the short term (already evidenced by price jumps) and that Marvel stands to make more out of its Hasbro licensing deal than the movie itself.

Hasbro (HAS) is the one to watch, if anything. Especially with the Transformers coming out later this summer, another Hasbro license.

[artiepants]

Originally Posted by Punchy

That's exactly what everyone said about the Young Avengers comic, and it's now one of Marvel's biggest hits of recent times.

I feel like i read that a fair amount, but IIRC YA didn't actaully sell that great, it was pretty middlin' (mid 50s is what i recall...) it was more that it got a lot of critcal acclaim when it started, which i kinda think was a lot of backlash against New Avengers.

[ramberk]

Originally Posted by artiepants

I feel like i read that a fair amount, but IIRC YA didn't actaully sell that great, it was pretty middlin' (mid 50s is what i recall...) it was more that it got a lot of critcal acclaim when it started, which i kinda think was a lot of backlash against New Avengers.

Actually, the book sold great (IMO). A book that sells 50K copies and has completely new characters is a hit. A lot of well established Marvel characters can barely sell 20 to 30K copies a month.

I'm willing to bet that Young Avengers could become one of Marvel's best selling books if they could publish it on a monthly schedule. And you know Marvel is trying their best to maintain interest on the characters. Last year's mni-series with Runaways is evident of that. So are the numerous cameos they make throughout other books. The YA even got their own action figures for crying out loud!

I remember when JoeQ showed a slide with YA art a few years ago at San Diego, I wasn't sure what to think. It still blows my mind how popular these characters have become.

[Hokeyboy]

I love how everyone's a financial analyst.


You can't tell anything about a company's performance from their quarterlies. You have to analyze cash flows, take a look at balance sheets, income statements, and then throw all of that out and read the notes at the end of the report, the "real" information: what are considered assets, what method of depreciation is being used, amortization, what losses are written off for this quarter or further down the road, etc.

[AbacusComics]

Originally Posted by Punchy

That's exactly what everyone said about the Young Avengers comic, and it's now one of Marvel's biggest hits of recent times.

Or it would be if it was coming out

Not surprising. Teen Titans is so popular nowadays, that a Marvel version of the book was begging to happen.

[KingPagla]

Originally Posted by Colossus2420

Not very, especially with what's looking to be a downmarket day. It opened up higher at 30.15 and has since dropped to 29.47 on already over half its average daily volume. Analysts say that the blistering Spiderman 3 weekend stands to help the theaters in the short term (already evidenced by price jumps) and that Marvel stands to make more out of its Hasbro licensing deal than the movie itself.

Hasbro (HAS) is the one to watch, if anything. Especially with the Transformers coming out later this summer, another Hasbro license.

I think Marvel is doing a great job in keeping the stock relatively stable these last few weeks. The share price usualy takes a biiig hit with the release of every big movie after a steady build up.
This time around with Spider-Man 3, they've been able to counteract much of this negative action by bulding excitement for future releases with steady updates about The Iron-Man and Hulk movies

[Scorned1]

Originally Posted by ramberk

I remember when JoeQ showed a slide with YA art a few years ago at San Diego, I wasn't sure what to think. It still blows my mind how popular these characters have become.

Thanks for the laugh out loud this morning mate.

[Colossus2420]

Originally Posted by Hokeyboy

I love how everyone's a financial analyst.

Well, actually, I am.

[LikeaPhoenix]

Wow, Marvel has come a long way since the bankruptcy . Hope it can sustain and maintain this kind of growth .

[nickmaynard]

Avnegers Asesmeble!

[Nightfly]

Since they're working so happily w/ Hasbro I am wondering....

where is ROM: Spaceknight??

[von Doom, M.D.]

The size of that Marvel tag in the article preview is disconcerting.

[Speedball93]

Originally Posted by LikeaPhoenix

Wow, Marvel has come a long way since the bankruptcy . Hope it can sustain and maintain this kind of growth .

It is hard to even remember when they were going through the backruptcy. That seems like such a long time ago, but it really wasn't.

[Cap_America]

Is it me, or does anyone else feel like Marvel is wasting their time and money on Hulk? I guess it's subjective, but Hulk's seen movie failure already, why try again? Move on. And a Spider-Man musical? I didn't think it would work, but having Bono is a big advantage...I still don't think it'll work.

I think the good stuff won't come for a long time: Captain America and Thor movies and video games, The Avnegers movie, Iron Man video game. I'll be waiting a long time.
We'll have to see if the animated shows for X-Men and Spider-man are like the great 90's or the horrific Evolution/2099 respectively. I already know they're wasting time on Iron Man, Hulk, and FF cartoons. I bet some of you didn't even know there was a new FF cartoon as of a few months ago on cartoonnetwork, but that failed (probably because it was too much anime for an American product). It think they're wasting their time on Dr. Strange and teen Avengers, maybe a regular Avengers would work.

I'm optimistic for the far future, but not the near future.

[Alexjh]

A rather cynical view there - considering that Hulk is a house hold name brand, it would be rather odd of them to not try, besides, if the respective DC people had the same views, then Batman and Superman would have never returned to the big screen. The main problem with the Hulk is that it wasn't enough like what people think of as the hulk - too little smashing.

Ironically for what you are suggesting for the cartoon series the Spider-man unlimited cartoon went under because it was in direct competition with anime (specifically Pokemon) I'm not necessarily suggesting they'll be wonderful, but they'll get brand recognition alone enough to carry them a certain way.

If anything, if I was Marvel my aim would be to increase awareness of lesser known characters - all the big licenses have already been done or are in production, ventures to raise interest in lesser characters - such as the Moon knight tv series or the Dr Strange film are the way they should be going. Or they could do an updated version of the old silver surfer series....ah that was great.

Now ideally at this point - the surfer will become popular enough from the FF that he'll get a film of his own, and a couple of more risky film ventures - say... Deadpool / Iron Fist / Gambit / Cable level characters ie ones without as much name recognition, but have been able to support decent runs on ongoings would do Marvle a lot of good if they did them right.

[KingPagla]

Originally Posted by Nightfly

Since they're working so happily w/ Hasbro I am wondering....

where is ROM: Spaceknight??

Holy Crap, You're right!!!!
I hadn't thought of that!

[Hokeyboy]

Originally Posted by Colossus2420

Well, actually, I am.