Marvel reported its Q1 2002 results today, and for the first time in recent memory issued guidance for the coming year.  That guidance calls for a fiscal year profit, the first since Marvel emerged from its Chapter 11 bankruptcy, of $2-$4 million after payment of its preferred share dividends.  That would be an improvement of $12.8-$14.8 million over Marvel's $10.8 million 2001 loss, and an improvement of around $47 million over the $43.5 million loss Marvel would have shown in 2001 without a one-time repurchase of notes at a discount.

 

The Spider-Man movie accounts for much of that anticipated improvement in 2002 results.  Although it didn't break out the specific 2002 contribution of royalties from the movie and the associated merchandise co-venture with Sony, Marvel did say that it expects Spider-Man to generate $70-$100 million in total EBITDA (earnings before interest, taxes, depreciation, and amortization), of which $60-$90 million would be recognized over the next two years. 

 

Marvel's Q1 results were the foundation for its anticipated full year improvement.  Sales were up 34% to $57 million for the quarter, EBITDA was around $10 million, and the loss after payment of dividends to preferred shareholders (who are paid in stock unless there's enough cash to go around) was $3.4 million, which compares very favorably against the $12.7 million loss in Q1 2001. 

 

 Marvel did benefit from the change in accounting rules related to write-off of goodwill.  It took almost no amortization costs in Q1, vs. nearly $6 million in Q1 2001.  It plans to do its 'impairment test' of its goodwill to determine how much to write it down during Q2 2002. 

 

In the break-out of Marvel's divisional revenue, there was improvement in all segments.  Most notable was a sales increase of 24% in the toy division, which had been dropping through the recent restucturing (toy sales dropped 45% in 2001, see 'Marvel Annual Report 2001'). 

 

Publishing sales were up 43%, behind a 240% increase in trade paperback sales, attributed to increased penetration into bookstores, among other things, and a 27% increase in comic book sales.  This 27% increase matches exactly the percentage increase ICv2 found in its analysis of first quarter comic orders last March (see 'Comics and Graphic Novels Complete Q1 Hat Trick'). 

 

Licensing was up 69% to over $9 million for the quarter.  This increase was not due to the Spider-Man movie or its merchandising; an agreement with Sony prevented the recognition of any revenue prior to the release of the film.  Marvel noted other major licenses as contributing to the results:  a major mass market apparel license with NTD of Canada, agreements in several new categories, and a promotional license for a Chevrolet TV commercial. 

 

Marvel stock was down $.75 today, as it continued its post-movie release weakness.  A negative report in the NY Post, which noted registrations to sell shares by major stockholders, is among the factors that have been reported to be weighing down the stock price.  Regardless, the continued improvement in Marvel's is a bullish sign for the comic business, and gives additional security as to the stability of this major comic and toy company.