THQ Nordic

Research note


THQ Nordic: First comment Q1, just the beginning of the journey

Today THQ Nordic released their report for the first quarter of 2018. The reported figures were considerably stronger than our projections. We have highlighted the difficulties in producing estimates for THQ Nordic’s Q1, as it was the first report quarter after the Koch Media acquisition, none the less this was an exceptionally strong performance by the company. We will look into our projections and will likely have to make some positive adjustments, which will likely lead to increased valuation. We continue to be confident in THQ Nordic’s future journey, a journey that just has begun.

Like we have previously stated; Q1 was exceptionally hard to predict because of the many moving components from new releases and the Koch Media acquisition. None the less the figures during Q1 was exceptionally strong. The strong gross profit was a real surprise, something we will look into further. The company announced that Metro Exodus would be released in Q1’19 instead of our earlier assessment of Q4’18, this is of no concern to us or the valuation of the company. It’s much better to deliver quality than stress out a release due to a committed launch date.

Koch Media was consolidated into the Group from 14th of February; If the company would have been consolidated from the 1st of January, the net sales of the Group would have landed at SEK 939.5m.

Keydrivers of sales where;

  • THQ Nordic Vienne: MX vs. ATV and Titan Quest
  • Games Koch Media, Deep Silver: Kingdom Come Deliverance, Radiant Historia: Perfect Chronology and Surviving Mars

Total (consolidated) Games sales amounted to SEK 391m, where SEK 246.1m was from new releases and SEK 144.9m from backlog.

  • Partner Publishing/film produced an income of SEK 241.9m. C64 Mini seems like it has been a true success. The company also states that the backlog saw strong sales figures.

Q2 is most often a softer quarter for game sales. However, the pipeline for THQ Nordic looks incredibly strong. In total, the group has 54 ongoing game development projects, where 19 is announced. We will look into our projections as we now have more ground to understand cost drivers and seasonality patterns etc. We will most likely make some upwards adjustments following the report, which will have a positive effect on our valuation of the company. We continue to be confident in THQ Nordic’s future journey, a journey that just has begun.

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