Marvel Entertainment Inc. announced operating results for the quarter ending March 31st, 2006.  Licensing revenue fell by 44% leading to an overall decline in first quarter profits of 37%.  But Marvel did beat analysts' estimates by posting earnings of $.19 per share on revenue of $90.1 million vs. estimates of $.12 per share on revenue of $77.5 million.  Marvel also raised its full-year earnings guidance to between $.46 and $.57 per share and authorized a further $100 million share repurchase program.

Licensing revenues declined primarily because of the decline in sales of Spider-Man licensed products (and because Marvel received a $15 million payment in Q1 2005 based on box office and DVD sales from Spidey II and advances related to the commencement of production on Spidey III).  International licensing grew by 30% versus the same quarter in 2005, but it wasn't enough to offset the decline in domestic licensing revenues.

Net publishing sales increased by 6.7% year-over-year primarily due to higher sales in the direct market resulting from increasing comic sales leading into Marvel's big summer marketing event, Civil War.  However operating income remained the same due to a decline in operating margin from 40% to 37% caused by 'a slight escalation in talent and paper costs.' 

Marvel's toy sales ballooned from $10.5 million in Q1 2005 to $26.6 million in the most recent quarter, but this was a result of bringing all their toy production and wholesaling in-house (see 'Marvel, Hasbro Ink Five-Year Deal').  The expenses involved in moving from royalty and service fee income in 2005 when Toy Biz Worldwide produced and sold the Marvel toys to actually producing and selling the toys created a precipitous drop in operating margin, which translated into an actual drop in operating income from $4.4 million in the first quarter of 2005 to $4.0 million in Q1 2006.

Marvel expects only nominal contributions from the X-Men 3 feature film (debuting on May 26th) and modest initial revenues from the Ultimate Avengers animated direct-to-DVD release and the Fantastic Four animated series, which should begin airing in the fall on the Cartoon Network. 

The Marvel Studios announcements made in conjunction with the company's Q1 financials were identical to those recently announced and previously covered by ICv2 (see 'Marvel Movie Slate Takes Shape').