Marvel released its Q3 results today and the numbers blew away expectations, including its own guidance from only a month ago. Marvel made $6.7 million in the quarter on $84.4 million in sales, compared to a loss of $5.1 million on sales of $43 million in the year ago period. Just a few weeks ago, on September 24, Marvel raised its guidance for third quarter to $3-$5 million in profits on $63-$68 million in sales from $3-$4 million in profits on $45-$50 million in sales. Marvel now expects $21-$24 million in profits on $275 to $280 million in sales for the full year. In the conference call with analysts, outgoing Marvel CEO Peter Cuneo called it a 'Golden Age' for Marvel.
As has been the case throughout Marvel's recent rejuvenation, licensing led the way, with a 317% increase in revenues for Q3 vs. Q3 2001. Part of that increase actually reflects a move in toy revenues from the Toy Biz division to licensing as the toy business transitions from Spider-Man movie toys, which were accounted for through Marvel's joint venture with Sony into the toy division to non-movie toys which are now accounted for as licensing revenue because of Marvel's new toy structure with separate company Toy Biz Worldwide (see 'Marvel Cash Flow Positive in Q2' from last year for the description of this new arrangement). Regardless, that accounted for only a small portion of the increase in licensing. Marvel signed 61 new licensing deals during the quarter, including this management team's biggest deal ever, the full universe MMORPG deal with Vivendi Universal (see 'Marvel Licenses MMORPG').
The toy business was also up substantially despite the move of some revenues to licensing -- an 82% increase in sales vs. the same period in 2001. Toys based on Spider-Man and The Two Towers were the prime drivers of revenues. Marvel said that it had taken the impact of west coast port problems on its toy business into account in its Q4 guidance, but that it had less visibility to the effects on the first quarter of next year, a period for which retailers may not have planned as extensively.
Publishing was the slowest-growing division; sales were up about 20% vs. the same period last year. Referring to the growth in the market and in Marvel's sales, President Bill Jemas said that they 'don't really see any end in sight.' Marvel is expecting its three major movie releases to drive publishing revenues next year; Jemas said that Marvel had 'shattered the myth' that movies don't drive comic sales. Graphic novel sales through bookstores and ad revenues were also contributors to growth. While still robust, this growth rate was down from a 60% growth rate in the second quarter (see 'Blockbuster Bucks Buoy Bottom Line').
Marvel ended the quarter with $58 million in cash. The company is continuing to improve its balance sheet. It prepaid part of its term loan during the quarter; its redemption of preferred shares is going well; and it plans to redeem some or all of its 12% debt in July of 2004, using its cash and/or new financing at better interest rates for that purpose.
