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Executives

Lisa Mueller

Brian J. Farrell - Executive Chairman and Chief Executive Officer

Paul J. Pucino - Chief Financial Officer, Chief Accounting Officer and Executive Vice President

Jason Rubin - President

Analysts

Arvind Bhatia - Sterne Agee & Leach Inc., Research Division

Douglas Creutz - Cowen and Company, LLC, Research Division

Atul Bagga - Lazard Capital Markets LLC, Research Division

Thomas Andrews

Bradley G. Safalow - PAA Research LLC

Ryan Gee - BofA Merrill Lynch, Research Division

Michael Hickey - National Alliance Capital Markets, Research Division

THQ (THQI) Q1 2013 Earnings Call August 6, 2012 5:00 PM ET

Operator

Good afternoon. My name is Dianne, and I will be your conference operator today. At this time, I would like to welcome everyone to the THQ Inc. Fiscal 2013 First Quarter Results Conference Call. [Operator Instructions] I would now like to turn the call over to Lisa Mueller, Director of Investor Relations. You may begin your conference.

Lisa Mueller

Thank you, and good afternoon, everyone. On today's call, we will make forward-looking statements regarding our current expectations, estimates and projections about the business of THQ, including statements regarding our expectations for the second quarter ending September 30, 2012, and the fiscal year ending March 31, 2013.

These statements are based upon management's beliefs and certain assumptions made by management and are subject to risks and uncertainties that may cause actual results to differ materially from today's forward-looking statements due to the discussion of trends, risk factors and other cautionary statements that are described in our March 31, 2012, Form 10-K and subsequent filings with the SEC. A copy of these filings may be obtained from our website. Unless otherwise required by law, THQ disclaims any obligation to update its view on any such risks or uncertainties after the date these statements are made.

In describing THQ's financial performance on our call today, we will discuss non-GAAP measures including net sales and EPS. These non-GAAP measures exclude the following: stock-based compensation expense; certain deferred revenue and related costs; business realignment and related expenses; capitalized interest; and other significant charges and benefits.

Non-GAAP results also include the impact of any foreign currency fluctuations on our available-for-sale investment securities. As a reminder, our non-GAAP EPS excludes any impact for the if-converted method of accounting for our convertible debt. Also, we capitalize interest associated with our convertible debt for GAAP purposes. For non-GAAP purposes, we continue to recognize interest expense as incurred. Please refer to the reconciliation of these measures to GAAP results in the tables provided in today's release and on our website.

On today's call, joining us from management, are Brian Farrell, Chairman and CEO; Paul Pucino, Executive Vice President and CFO; and Jason Rubin, President. To begin, I would now like to introduce Brian Farrell, our Chairman and Chief Executive Officer. Brian?

Brian J. Farrell

Thank you, Lisa, and good afternoon, everyone. On the call today, I will give you an update on the progress we have made over the last several months, highlighted by the hiring of Jason Rubin as our President. Paul will give you details on the quarter and our financial outlook, and then Jason will discuss his first 60 days on the job and share how he has affected and will continue to affect change at THQ.

For the first quarter of fiscal 2013, we reported net sales of $39 million and a net loss of $3.41 per share after adjusting for our recent 1-for-10 reverse stock split. Obviously, it was a light quarter reflecting no new releases but we are pleased that our results were better than our expectations due to sales of our catalog titles led by Saints Row: The Third and WWE '12, as well as our digital revenues.

More importantly, over the last 8 months, we have taken a number of steps to transform THQ and put it back on the path to profitability and growth. Since the restructuring that we began in January, we have exited nonperforming businesses, shed underperforming licenses and discontinued titles and products that did not fit our strategy or profitability targets.

We also significantly reduced costs and headcount in our corporate and global publishing organizations. As part of these efforts, we streamlined our product portfolio to focus on those titles we believe can achieve robust profitability and create long-term shareholder value. In the last 8 months, we have reduced our annual licensing commitments by $32 million and our annualized product development spend, selling and marketing expense and G&A by approximately $180 million, creating significantly better operating leverage going forward.

Additionally, in May, we bolstered our management team by naming Jason Rubin as our new President. Jason is a proven talent in the video game industry, who in a short time here, has already made important contributions to our company. He has energized our studios, brought us a fresh point of view on our intellectual properties and is formulating a plan to enable THQ to compete and thrive in the evolving market for games. Jason will share with you his perspective momentarily.

Following all of these recent actions, we believe THQ is well positioned to return to profitability and to create shareholder value. As we've said, our strategy is to develop and market high-demand core games with a significant digital component. These connected experiences are integral to increasing customer engagement, retention and monetization in our increasingly digital future.

With that, Paul will review our Q1 financials in more detail and discuss our guidance for fiscal '13 and Q2. Paul?

Paul J. Pucino

Thank you, Brian, and good afternoon. I will begin with a recap of our fiscal '13 first quarter results and then discuss our future business outlook. To recap the first quarter, for the 3 months ended June 30, 2012, we reported net sales of $39 million, compared with $141 million in the prior year Q1 and a net loss of $3.41 per share, compared to a net loss of $9.42 one year ago. As a reminder, our earnings per share amounts for the current and prior period have been adjusted for the 1-for-10 reverse stock split, which was effective as of July 5, 2012.

The largest contributors to Q1 sales were Saints Row: The Third, WWE '12 and UFC Undisputed 3. Digital revenues in the first quarter were $13 million. Net sales were lower than the year-ago quarter due to no major releases compared with the release of Red Faction: Armageddon and MX vs. ATV Alive in the year-ago quarter.

Because we had no new major releases, virtually all of first quarter net sales were catalog compared to 37% in the year-ago quarter. Our Q1 product cost as a percent of net sales was 42%, slightly higher than 41% in Q1 of last year. Software amortization as a percent of net sales was 32%, significantly lower than the year-ago quarter, primarily because the prior-year quarter included the impact of continued amortization for titles released late in the fourth quarter of fiscal '11.

License amortization and royalties at 6% of net sales increased approximately 2 percentage points from 4% in the year-ago quarter. On a dollar basis, license amortization and royalties of $2.5 million were 59% lower than the year-ago quarter. Gross margin in the first quarter of fiscal '13 improved to 19.6% compared to 9.5% in the year-ago quarter.

Turning now to operating expenses. Product development expense decreased to $9 million from $26 million in the year-ago quarter due to previously announced reductions in product development expenditures as a result of our more focused product slate. Selling and marketing expenses decreased from $50 million in the year-ago quarter to $15 million, reflecting no new releases in the quarter versus 3 core releases in the year-ago quarter. G&A of $9 million was $2 million lower than the year-ago quarter, and we reported an operating loss of $25 million compared with an operating loss of $75 million in the year-ago quarter.

Interest and other expense of $2 million consisted primarily of interest expense on our convertible notes and foreign exchange losses. Income tax benefit of $4 million reflects our estimated 15% non-GAAP tax rate. As a result, we reported a first quarter net loss of $3.41 per share compared with a net loss of $9.42 per share in the year-ago quarter.

Now moving on to the balance sheet. As of June 30, 2012, we had $21 million in cash and equivalents. We did not draw against our $50 million credit facility during the quarter, but as we stated last quarter, our intention is to utilize the facility to help us fund working capital throughout the year. We have since borrowed $10 million and intend to make additional borrowings over time to fund our working capital needs.

Net accounts receivable of $4 million decreased from $16 million at the end of fiscal '12, reflecting lower sales volumes and no new releases within the quarter. Accounts receivable reserves of $47 million at quarter end compared with $70 million at March 31, 2012. Inventory was $15 million compared with $19 million at March 31, 2012.

Our investment and licenses of $58 million compared to $65 million at March 31, 2012, reflecting amortization of our prepaid license balance. Capitalized software development of $117 million is down $14 million from March 31, 2012, due to amortization of titles that have been released and changes in our slate as a result of our restructuring efforts. Accounts payable of $50 million at quarter end compared with $43 million at March 31, 2012, and accounts -- and accrued liabilities of $53 million at quarter end compared with $84 million at March 31, 2012.

Now I'd like to share with you our guidance. First, let's take a moment to review the timing of our product releases throughout the year. Darksiders 2 releases next week, anchoring our second quarter. The third quarter contains the release of WWE scheduled for release on October 30, and the fourth quarter has 3 releases scheduled, including Company of Heroes 2, Metro: Last Light and South Park. Keep in mind that Saints Row: The Third - Enter The Dominatrix expansion pack was originally scheduled for release in Q2 and its move out of fiscal '13 had a $20 million impact to net sales and a $0.30 impact to net earnings. We expect a full-fledged Saints Row sequel coming in calendar '13 to generate far greater net sales and earnings than the expansion pack.

For the second quarter of fiscal '13, we expect to report net sales in the range of $75 million to $85 million, compared with $120 million a year ago. We expect to report a second quarter net loss per diluted share ranging from $3.50 to $4.50. This compares with a net loss per share of $6.86 in the prior-year period. For the full year, we continue to expect to report fiscal '13 net sales in the range of $390 million to $410 million compared with $836 million in fiscal '12. We continue to expect to report a net loss in the range of $2.80 to $4.30 versus a loss of $14.25 for fiscal '12.

Our operating model for fiscal '13 is as follows: Product cost as a percent of net sales, low 30s; software amortization as a percent of net sales, mid-20s; software amortization will be lower as a percent of net sales in the second half of the year than in the first half; license amortization and royalties as a percent of net sales, about 5% to 6%; product development expense of about $50 million for the year or about $13 million per quarter; selling and marketing expense of approximately 20% to 25% of net sales; selling and marketing will also be lower as a percent of net sales from the second half of the year than in the first half; G&A of approximately $35 million, or approximately $9 million per quarter; net interest expense of about $1.5 million per quarter; tax rate of 15%; and finally, share count of about 7 million. Once again, please note this is a full year target model for fiscal '13 and that results for quarters will fluctuate due to sales mix, level of net sales and relative investment levels.

With respect to cash, we expect our fiscal '13 year-end balance to show a decline from the fiscal '12 year end balance due to the projected operating loss for the year and a potentially significant investment in accounts receivable at the end of the fiscal year as a result of our release schedule. Once again, we will use cash as we invest in inventories and receivables ahead of our planned releases. We intend to continue using our credit facility to help us fund these working capital needs throughout the year.

And with that, I'd now like to turn the call over to Jason.

Jason Rubin

Thank you, Paul. I'm speaking to you from our office in London. I'm returning from visits to 4A Games in Kiev, the developer of Metro: Last Light and Crytek's studios in Nottingham, the developer of Homefront 2. In the first 60 days on the job, I've been reviewing and evaluating all aspects of our business, from the way vet concepts, the process by which we develop games, and the end experience we create for our users. As someone who has a history of creating highly successful franchises, I believe that my perspective can help make our portfolio stronger and more commercially appealing.

I want to share with you my impressions of the company and a few thoughts on the future. THQ has talented studios, strong intellectual property and is now nimble enough to navigate the complexities and take advantage of a marketplace in transition. During the first 2 months, I've evaluated projects at our internal and external development teams. I've been focusing primarily on upcoming projects including Darksiders 2, South Park: The Stick of Truth, Metro: Last Light and Homefront 2; as well as the titles being developed by Turtle Rock Studios, Collision, Crytek and Patrice Désilets. Beyond our announced titles, in the last 60 days, all 4 of our internal studios began working on new titles that represent the type of product we believe will make THQ successful in the future.

I've also been formulating a long-term plan of how we will leverage our internal and external studios based on the changes that are happening and that we expect to happen in our business in the near future. My immediate focus is to take advantage of opportunities to strengthen our current product pipeline. With meeting Volition, for example, I found that the in-progress Saints Row: The Third - Enter The Dominatrix expansion pack was an incredible amount of fun to play. I had so much fun playing and experimenting that we rethought the opportunity and decided to turn the expansion into a full sequel and move the release to calendar '13 and incorporate the assets into a full-sized broader game. The financial reward for a full-fledged sequel of Saints Row: 4, if you will, should far outweigh the short-term impact of moving the former expansion pack out of fiscal 2013.

I look at every title for such opportunities to improve performance. In moving forward, THQ will leverage the individual strength of each of our studios and intellectual properties, and match the right game experiences with the right business models to exploit new and emerging trends in gaming. To help realize this vision, we hired Ron Moravek as our EVP of Production. Ron has substantial experience in production management. Ron also has a deep history with THQ and in core games, having founded Relic and serving as COO of EA Canada. He also has a history of working with and leading several startups, addressing new, developing segments of the video game and other markets.

Together, we are focused on where we can win in console games and emerging markets and platforms and where the risk reward is favorable for a company of our size. We've also stopped development in certain areas that are not productive for our new strategy.

Consistent with this vision, THQ has made a few changes to previously announced projects. First, we made the determination not to pursue any future casual Facebook games. Second, we will not be publishing casual mobile games, including those with innovative leisure. And third, we have decided not to pursue further preproduction on inSANE and have returned all of our IP rights to Guillermo del Toro. By canceling these explorations outside of our core business, we feel we can improve focus on our core game portfolio, which remains unchanged.

There is an incredible amount of opportunity on the horizon. Digital distribution, always-on connectivity and alternate business models will bring disruption to the game business in the coming years. This disruption will impact all publishers and all developers that will give THQ a unique opportunity to carve out a niche with more diverse product types, pricing and distribution.

We are now focused on that opportunity exclusively, and we will be investing in R&D, technologies and tools to continue exploitation of the direct digital connection with our consumers. As Brian mentioned earlier, we have made changes to the company, such as consolidating the QA team from Phoenix to Montréal, and we will continue to optimize the business to improve results and position THQ for the future.

THQ has exciting IP and I see great potential in our near-term slate, starting with Darksiders 2. If you follow me on Twitter, you know that I've spent an excess of 30 hours playing the title the first time through and that doesn't include the side missions. It is a huge, deep and compelling gaming experience. Digital can be very proud of creating a sequel of this size and scope. The extra 6 weeks the company gave the team for polish and fine-tuning really show. Preorders are tracking well ahead of those of the first game, and early reviews of the game have been universally positive. We're pleased with increasing awareness and purchase intent metrics and look forward to the launch next week.

We also look forward to WWE '13 coming in late October, followed by Company of Heroes 2, Metro: Last Light and South Park: The Stick of Truth in the fourth quarter. Having said that, an ongoing part of my job is to evaluate titles to determine if there are opportunities to reposition or retarget the games to improve long-term success. Such changes may result in extending the production schedule to increase their appeal, or to take advantage of competitive windows that may increase their return on investment. In every case, the goal will be to deliver the best possible game in the best possible window so that we can generate the greatest returns for shareholders.

With that, I'll turn the call over to the operator for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Arvind Bhatia with Sterne Agee.

Arvind Bhatia - Sterne Agee & Leach Inc., Research Division

A couple of questions for you. First one is, I wanted to see if you guys could talk about the breakeven level for the firm as of this point with all the changes. I think you guys had given some guidance in the past. And then also for Jason, Darksiders 2, given the preorders, I mean, I want to ask if you guys are expecting that title to do better than the last one, and I ask that in the context of preorders not necessarily that indicative anymore, seems like for many of the titles. Just wondering what your thoughts are. And maybe what the break even is for Darksiders 2 given the extra amount of time that was spent on it?

Brian J. Farrell

Jason, why don't you start with the Darksiders preorders?

Jason Rubin

Well, we're very happy with the pre-orders. As we said, they're tracking ahead of Darksiders 1 pre-orders. And as you said, these days, preorders are a little hard to judge. So I think I'm going to withhold judgment on what that means, but certainly we're feeling very good about it and hope that the trend carries through sales.

Brian J. Farrell

And then Arvind, with respect to the break even on individual titles, as Paul has mentioned a number of times, it's generally in the range of $2 million. We don't want to get into any more specifics beyond that so we're not going to go any further than that.

Paul J. Pucino

And in terms of break even with respect to the overall business, as we said on the last call, somewhere in the area of $850 million to $860 million -- I'm sorry, $450 million to $460 million.

Operator

Your next question comes from Doug Creutz with Cowen.

Douglas Creutz - Cowen and Company, LLC, Research Division

I've heard a couple now of companies say that catalog sales have been very strong, and that sort of maybe flies in the conventional wisdom that there's a problem with AAA titles. What's your take on what's going on? Is that a reflection of the fact that there are simply fewer new games being replaced in the marketplace -- released in the marketplace or is it something else?

Brian J. Farrell

Yes, this is Brian. Doug, I don't think there's a real trend going on. I think, both with respect to new releases and catalog, it depends on the individual titles. So for example for us, ever since the launch of Saints Row: The Third, it's been a very strong catalog. I think that, that IP in the title itself has resonated with consumers. So I think it's a title-by-title thing, both on new releases and catalog. I don't think there's anything market-wide that we'd be willing to say is a trend.

Operator

Your next question comes from Atul Bagga with Lazard Capital.

Atul Bagga - Lazard Capital Markets LLC, Research Division

Brian, Paul, can you guys share about -- internally for break even point, when do you expect -- are you guys internally planning it to be sometime in -- fiscal '14 or beyond that? And also if you can talk a little bit about balance sheet. Do you have any plans to strengthen the balance sheet? Any plans to raise anything?

Paul J. Pucino

Well, with respect to when we reach the break even, obviously, we haven't given guidance for fiscal '14 at this point. It's certainly the objective, certainly the goal of the company, to be profitable, but we have not given specific guidance for fiscal '14 at this point. With respect to the balance sheet, we're not going to get into detail about what we plan on doing going forward. But if you look at the balance sheet, as Brian and I have mentioned in the past, when we made the decision to move Darksiders to August, we did that based upon several things, one of which was strengthening the product and making it into a higher quality product; number two, having a better release window from a marketing perspective. And as part of all that, we forecasted where we were going to be from a cash perspective. Where we thought we were going to be is where we're at, so that's good. Also when you look at the balance sheet as of 6/30, we had virtually no shipments since February at that point in time so very low receivables. We had very low receivables at that point in time because we haven't shipped any product. Well we're starting to ship product now so we should start to see some cash coming in the door. As of June 30, we had also not used our credit facility at all at that point. As I mentioned in my prepared remarks, we have now started to borrow. We've borrowed $10 million as of today and you'll see an 8-K on that tomorrow. So again, where we thought we were going to be, balance of the year, you'll see us continuing to use the facility to fund working capital needs. And so again, where we thought we were going to be at this point.

Operator

Your next question comes from the line of Edward Williams with BMO Capital Markets.

Thomas Andrews

This is Tom Andrews standing in for Edward. First, one housekeeping item. What was digital revenue in the year-ago quarter to compare against the $13 million in the just reported quarter?

Paul J. Pucino

We'll have to look that up and get back to you.

Thomas Andrews

Okay. And then when you kind of look at we're at the tail end of the current cycle and going into the next one, how do you see development costs trending? Are they going to be higher? Are they going to be significantly higher? Are you going to see a kind of step up that we saw from the PS2/Xbox cycle to the current cycle?

Brian J. Farrell

Well, I think if you look at what's been happening on the PC, the generational change, if you will, as we've moved from DX10 to DX11 hasn't been, to a certain extent, the same impact that previous ones had. Certainly, when you went from 2D to 3D many, many years ago at the beginning of the PlayStation era, that was a major leap and costs went up significantly. As processors got extremely complex to try to get more and more graphics prowess out of the hardware, the PlayStation 2 jumped with also a massive change. I think the transition we're looking at in hardware right now is somewhat different. I think the transition is much more kind of focused around opportunities in different types of business -- different types of distribution, different types of business models, a lot more online, a lot more ability to track and relate to the consumer and things like that rather than a humongous change in the foundation of 3D graphics. So I don't expect costs to jump like they have in the past as we move forward.

Operator

The next question comes from Brad Safalow with PAA Research.

Bradley G. Safalow - PAA Research LLC

Just a housekeeping question. The software development amortization charge you took in the quarter, does that include inSANE and Devil's Third? Or will we see inSANE in this current quarter?

Paul J. Pucino

It includes inSANE. Devil's Third was taken last quarter.

Bradley G. Safalow - PAA Research LLC

Okay. And then just overall, have you guys -- Darksiders does appear to be generating a lot of buzz. Have you changed your expectation? I think last quarter, you said that no title in the fiscal year, in terms of how you're establishing your guidance, would exceed the $2.25 million you had expected out of WWE '13. Has any of that changed?

Brian J. Farrell

No, I mean Darksiders is behaving just as we anticipated and hoped, Brad. As Jason said earlier, the preorders have ramped nicely. I think our marketing group has done an excellent job building awareness, although the other metrics we track are very encouraging. The window that we selected is great. And perhaps most importantly, the initial reviews we're seeing show that the team at Visual just did an outstanding job on the game. We're going to launch pretty much what we thought we were going to launch. And right now, it's all about launching it and it's all about sell-through. So we're very optimistic about the title, we're proud of the title, but we're going to wait to get more specific until after the title launches next week.

Bradley G. Safalow - PAA Research LLC

Okay. And then Jason, the comment you made in your prepared remarks about maximizing the economics of each title based on the release window. You look at the March '13 quarter. Obviously, you have 3 great pieces of IP [ph] as far as THQ is concerned, but you're also in a release window that may look to be one of the most competitive for a March quarter in quite some time, particularly if GTA is in that quarter. Are you telling us that basically if GTA goes into the quarter, you might change when you release the games? Or how are you guys thinking about that?

Jason Rubin

I don't think that I would relate it to any single product. We're always looking at what we should do. I will say a title like South Park is very unique. It certainly competes in so much as everybody, only has so many dollars and so much share, but it is a very, very unique product. Company of Heroes is a PC-only title. It has a very hard-core consistent user base that would be attracted to a sequel that a second highest-rated RTS of all time regardless of when it came out, may not coincide with any other specific large title that would come out. Metro also is a very unique opportunity and a very unique title. So I don't think that the titles necessary get pushed around by other titles so much as other opportunities, and obviously, our desire to make them as good as we can possibly make them as titles.

Bradley G. Safalow - PAA Research LLC

Okay. So your comments are more reflective of maximizing game quality, not the competitive window at least as far as what you're referring to for the slate as of now?

Jason Rubin

I think we're referring to everything. We're looking at everything. But I don't think any specific title is going to push our products around.

Bradley G. Safalow - PAA Research LLC

Okay. And then last question, I'll get back in the queue. The 4 new titles that you launched at the 4 owned studios, how many of those are a traditional console-based monetization? All of them? Some of them? None of them? Are you being...

Jason Rubin

One of those answers. I don't really want to get into specifically what we've done. We'll be announcing the titles and what we're working on once the appropriate time comes. But we are definitely looking at new monetization opportunities and definitely looking at opportunities that we see coming down the road based on what we've seen in the PC, with Steam and anticipate to spread to other areas of the market.

Operator

[Operator Instructions] Your next question comes from Justin Post with Bank of America.

Ryan Gee - BofA Merrill Lynch, Research Division

This is Ryan Gee calling in for Justin. Sorry if you guys went over this on the call, but hoping if you can just go into more detail about, I guess, the decision to move Saints Row out to next year. How should we think about the potential of that title? I know you said that as a stand-alone packaged goods product, it would be up versus kind of a digital extension. But is there any way you can tie that to how it would be versus Saints Row 3? Should we think of it being 3 million to 4 million units on its own next year? Or as an extension or an expansion pack is -- the opportunity is a little bit less? Any help there would be great.

Brian J. Farrell

It is definitely not an expansion pack. It will be a complete standalone sequel. As I said in the call, a Saints Row 4, if you will, I think it will be a Saints Row 4, a full one. So we hope to have similar sales, if not better sales than our past titles.

Operator

Your next question comes from the line of Mike Hickey of National Alliance Security.

Michael Hickey - National Alliance Capital Markets, Research Division

Brian, maybe it's a little bit too early to get too strong of a perspective, but thinking about the holiday period and obviously, maybe some economic considerations, what's your feel for retail, your retail partners and in terms of maybe sentiment going into the holiday? And then can you just give us a little bit of a perspective on what you guys are seeing in Europe and kind of the market conditions there for your games? I've got a couple of follow-ups please.

Brian J. Farrell

I appreciate the uplifting question, Mike, but no, it's clear that there are some economic headwinds. I mean, those headlines are not great right now. There's obviously been some titles in the market that have not performed well. The NPD headlines have not been terribly strong. But what we look at is the slate of titles coming in the industry, and I think that's going to bode well. Most of our retail partners are actually fairly optimistic. We've gone through the long period in the industry, the summer doldrums, if you will, and people tend to start getting more optimistic during this back-to-school time. So I don't think there's anything we're seeing that would make this holiday season look substantially better or worse than the last 2 or 3. I think the competitive slate is going to be good. I think that will reinvigorate the consumer. But the real question, as you point out is, how much firepower does the consumer have and I just don't think we know the answer to that question.

Michael Hickey - National Alliance Capital Markets, Research Division

I hear that, it's tough to know. On the Darksiders, it looks like the metrics your -- the preorders look strong and definitely, there's some buzz for the game. The Olympics have kind of been creating a near-term disruption for other entertainment mediums like the box office and so forth and I'm sure games as well, as we're all kind of watching what's happening over in London. Your game comes out a couple of days, I think, after the Olympics end. But is there any sort of residual impact, Brian or Jason, that you think that might have on the game's ultimate performance?

Brian J. Farrell

We certainly don't think so, or we would not have selected this date, Mike. When we selected this date, we knew the Olympics were occurring. We think the audience for Darksiders, while they may be watching the Olympics, the fact that there's been no real significant core game release in a couple of months bodes well for the title. We hope we've stimulated a lot of latent demand, but again we're going to find out in a little over a week.

Michael Hickey - National Alliance Capital Markets, Research Division

Okay. And Jason, one last question. It looks like -- it's no secret there's enough noise, or rumors, or speculation on next-gen consoles outside of the Wii U, looking for maybe a '13, early '14 release for Microsoft and Sony, respectively. But can you -- there's one question on debt expense I think you addressed that really well in terms of maybe a potential negative. But can you talk to maybe the opportunities that you see for your company and your games as the next-generation consoles roll out?

Jason Rubin

No, I really can't because there aren't any announced next-generation consoles or any specs. I can only look to what's happening on the PC, which has generally been an indicative kind of indices on what's going to happen on hardware. And I look at the alternate distribution models there, and I look at various sized games and kind of an opening market of very broad opportunity for developers and for publishers. And I would hope and expect that eventually to move throughout the game industry. But beyond that, I certainly can't take guesses.

Operator

Your next question comes from Brad Safalow with PAA Research.

Bradley G. Safalow - PAA Research LLC

Just on '14, can you at least define for us what is known about the release slate and how many more titles you have that are unannounced?

Brian J. Farrell

Brad, this is Brian. It's premature to get in -- this is our Q1 of fiscal '13 call. It's premature to get into fiscal '14 at this time. I think we've been very forthcoming with the products that are in the pipeline for the most part, but we haven't locked down the entire release slate obviously. And as Jason mentioned, there are some new titles that studios are working on that certainly would be way premature to talk about release dates. So we're just not in a position to get that detailed at this point.

Bradley G. Safalow - PAA Research LLC

Okay. And then just as far as the blackout or the restriction on insider buying, is that still in place or is that going to be removed subsequent at some point after this call, this call or this quarter?

Brian J. Farrell

Yes, we don't -- you know the general rule, Brad, is about having access to material inside information. So we don't announce when the window is open or not open. We just have to conduct ourselves according to the securities laws. And so once again, that's as far as we can go.

Operator

At this time, I would now like to turn the call back over to Brian Farrell, Chairman and CEO, for closing remarks.

Brian J. Farrell

Thanks. Just in closing, we're pleased to have exceeded our expectation in what was a light quarter. We are encouraged by the progress we've made in repositioning the company and by the indicators leading up to the launch of Darksiders 2 next week. I'd like to thank our dedicated and tireless employees around the globe for their continued hard work and their loyalty during this time of transition. And thanks to everyone for joining us on the call today.

Operator

This concludes today's presentation. You may now disconnect.

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Source: THQ Management Discusses Q1 2013 Results - Earnings Call Transcript
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