THQ Nordic

Research note


THQ Nordic: First comment Q3, surprisingly strong

Today THQ Nordic released their report for the third quarter of 2017. The company showed remarkably strong income from new titles despite a rather slim release schedule. The income level was 57% above our projections, but the margins were almost spot-on. THQ Nordic continues to impress, and we look forward to Q4, which will be a massive quarter in terms of both released titles and income.

The income from new releases widely exceeded our projections, the large deviance show how hard it’s to project the correct sales levels for a company like THQ Nordic on a quarterly basis. Sine Mora Ex’s sales on Nintendo Switch seem to have been the main contributor. We believe that gaming companies should be evaluated on annualized numbers instead due to the large swings in quarterly income. The income level was 57% above our projections and the reported margins were almost spot-on, but the absolute numbers, of course, was higher than our estimates due to the income outperformance.

The fourth quarter will be critical as THQ Nordic is releasing a massive amount of new content.

Titles released so far in Q4 are: Battle Chasers (XB1, PC, PS4), The Muscle Hustle (iOS, Android) We Sing Pop (XB1, PC), ELEX (XB1, PC, PS4), This is the Police (Nintendo Switch, online).

Coming announced titles set to be released during Q4 are: Black Mirror (XB1, PC, PS4), Battle Chasers (Nintendo Switch), SpellForce 3 (PC), This is the Police (Nintendo Switch, offline), Wreckfest (PC), de Blob (XB1, PS4).

So far the releases have meet management’s, expectations which are comforting. We are looking forward to Battle Chasers release on the new Nintendo platform, given the strong performance of Sine Mora EX on Switch.  SpellForce 3 is also one of the more significant franchises within THQ Nordic’s portfolio.  

Despite the massive amount of new titles coming during Q4, what gets us truly exited is the pipeline for 2018 and beyond. THQ Nordic still has 16 unannounced projects that are under development. We know that the company aims to release Darksiders 3, MX vs. ATV All Out, Biomutant, Aquanox, Rad Rodgers during 2018, the first three of those games are easily the most significant releases in the company's history (to date). We are confident that the company will reveal more about the 2018 pipeline in the coming months. On the report presentation Lars Wingefors, CEO, said they had signed some deals for own IP titles planned for 2019. THQ Nordic continues to expand their portfolio and leverage their IP asset.

Despite the large outperformance during Q3 we will most likely only make minor positive adjustments for our projections during the next quarter. However, we will take a more in-depth look at our forecasts for 2018 and 2019 given the positive stance from the company. THQ Nordic is also continuously working on deals and armed with more than SEK 600m in cash a new announcement could come at any time. 

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