Marvel has announced higher guidance for 2002 and is predicting an even better year in 2003. Marvel raised its 2002 sales estimate $5 million to $280-$285 million for the year, and its 2002 EBIDTA (earnings before interest, depreciation, taxes, and amortization) estimate $6 million to $78-$83 million for the year. The increase in 2002 estimates was attributed to better than expected performance of licensed toys and additional payments related to Spider-Man movie licensing. Free cash flow for the year will be approximately $58 to $62 million. But after the cost of exchanging preferred shares for common shares, the cost of paying off its HSBC bank loan early, and its asset impairment charge, Marvel will still lose over $50 million in 2002.
The profit prospects for 2003 are considerably better, with Marvel predicting a net profit of $42 to $45 million on reduced sales of $205-$215 million. Publishing and licensing are both expected to improve in 2003, partially offset by a reduction in toy revenue (because of a change in the way it accounts for toy sales, revenues are moving from toys to licensing). The reduction of debt and preferred share interest payments related due to the 2002 improvements in its balance sheet will also account for some of that improvement.
One source of improved licensing revenues will be the new deal Marvel announced with Activision for videogames today. The deal provides for Activision to produce videogames for all platforms based on Spider-Man, Fantastic Four, X-Men, and Iron Man through 2009. According to the announcement, the deal incorporates 'improved financial terms commensurate with the enormous popularity of the Marvel franchises.' In addition to the rights to the comic book properties, the deal also gives Activision videogame rights to movies and TV series based on X-Men, FF, and Iron Man, with a separate deal giving it the right to the Spider-Man movie and its sequels.
In the pipe for 2003 from Activision are X2: Wolverine's Revenge, which is due for simultaneous release with the second X-Men movie in May and multi-platform releases based on Fantastic Four and Iron Man. The release also implied that there will be a new Spider-Man release in 2003. In 2002, Activision's Spider-Man ranked as the #4 videogame franchise in the U.S. in the first 11 months of 2002.