Marvel Reports 2Q '09 Earnings - Publishing Revenue Flat

On Tuesday Marvel released its Q2 2009 numbers, reporting that its second-quarter profit and sales declines, primarily due to lower licensing revenue that was aided last year by Marvel's Iron Man and Incredible Hulk movies, and Spider-Man 3 in 2007.

While profits were down from year ago, from $46.7 million or 59 cents a share in Q2 2008 to $29m or 37 cents share this year (down 38%), and revenue down from $156.9m to $116.3m from year-to-year (down 26%), both figures beat the estimates of the "street", which expected a profit of 31 cents a share on revenue of $105.8m.

Marvel Entertainment stock was trading at $39.88 a share, down .53 points, or -1.31% in mid-day trading.

"Marvel's solid (second-quarter) operating results reflect the strength of our core businesses supported by the growing global exposure of our corporate and character brands," said Chairman Morton Handel in a statement. "We remain focused on extending demand for Marvel branded entertainment and licensed products, particularly for brands and international markets that have previously been underdeveloped. We pursue these initiatives while maintaining the strategic and financial discipline that has yielded high operating margins and strong cash flows."

“Principal photography for our Iron Man 2 feature film concluded on schedule last month, and the media and fan anticipation for this May 2010 release continues to build, as was demonstrated by tremendous media coverage and positive fan response around the recent Comic-Con in San Diego, attended by well over 120,000 fans. Iron Man 2 will be the first of four self-produced films to debut over the two year period 2010-2012, in an ambitious creative project that will, for the first time, unite many of Marvel’s favorite Super Heroes in a story arc that builds to The Avengers in May 2012."

For the full 2010 calendar year, Marvel said it expects a profit of $1.25 to $1.35 per share, up from its earlier outlook of $1.10 to $1.35 per share.

Marvel Publishing revenue was essentially flat in Q2 2009 compared to the same quarter in 2008, slipping just $100k from $31.8 million to $31.7 million. Operating income was down by a higher margin however, dropping nearly 7% from $11.7m to $10.9m. Marvel attributed the decline to "lower level of high-margin advertising and custom publishing sales reflecting conditions in the broader advertising market."

From Marvel's 2Q 2009 earnings report:

"• Q2 2009 Licensing Segment net sales of $51.8 million were higher than anticipated primarily reflecting strength in collecting worldwide royalty minimum guarantees. Licensing Segment net sales declined versus Q2 2008 reflecting the recognition in the year-ago period of merchandise licensing revenue related to the Iron Man and The Incredible Hulk feature films, as well as a decrease in revenue from the Spider-Man JV. Licensing Segment operating income was $34.1 million in Q2 2009, reflecting an operating margin of 66%."

"• Q2 2009 Publishing Segment net sales were in line with Q2 2008 and reflect a $5.9 million or 23% sequential increase over Q1 2009. The sequential improvement principally reflects a gain in advertising and custom publishing sales as well as an increase in the number of comic and trade titles released. Operating income declined by 7% on a year-over-year basis to $10.9 million in Q2 2009, principally attributable to a lower level of high-margin advertising and custom publishing sales reflecting conditions in the broader advertising market. The Publishing Segment operating margin was 34% in Q2 2009 versus 37% in Q2 2008."

"• Film Production Segment net sales in Q2 2009 primarily reflect initial revenues for the Iron Man domestic pay TV window as well as ongoing Iron Man DVD sales. Against these revenues, Marvel amortized capitalized film production costs of $18.9 million. Marvel had film production revenue of $28.9 million and operating income of $2.2 million in Q2 2008, primarily from the theatrical component of foreign presales of Iron Man and The Incredible Hulk."

"Primary Assumptions for 2009 Financial Guidance:

• The Licensing segment is expected to contribute net sales of approximately $205 million - $215 million in 2009 with an operating margin of approximately 66 - 70%.

• The Film Production segment is expected to contribute revenues of approximately $145 million - $150 million in 2009 and to generate an operating margin of approximately 15% - 21%.

• The Publishing segment is expected to contribute net sales of approximately $115 million - $120 million in 2009, with an operating margin of approximately 31% - 35%, reflecting an anticipated $5 million negative impact to operating income from digital media initiatives.

• Corporate overhead, net is expected to approximate $31 million in 2009.

• Marvel anticipates a 2009 effective tax rate of 38.0%.

• Marvel’s guidance is based on 78.4 million diluted shares for 2009 and does not reflect any future share repurchase activity."

Marvel's full 2Q 2009 earnings report can be read here.

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