Event Brief of Q3 2006 THQ Inc Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

PARTICIPANTS

. Brian Farrell, THQ Inc, President, CEO . Julie MacMedan, THQ Inc, Director, IR . Ed Zinser, THQ Inc, CFO . Heath Terry, Credit Suisse, Analyst . Tony Gikas, Piper Jaffray, Analyst . Edward Williams, Harris Nesbitt, Analyst . Mike Wallace, UBS, Analyst . Justin Post, Merrill Lynch, Analyst . Elizabeth Osur, Citigroup, Analyst . John Taylor, Arcadia, Analyst . Mark Argento, Craig-Hallum, Analyst . Gary Cooper, Banc of America Securities, Analyst . Ashim for Jeetil Patel, Deutsche Bank, Analyst

OVERVIEW

Co. reported 3Q06 net sales of $358m. 3Q06 net income was $47.6m. 3Q06 EPS was $0.72. Co. is projecting approx. $135m in net revenue in 4Q06.

FINANCIAL DATA

A. Key Data From Call 1. 3Q06 net sales = $358m. 2. 3Q06 net income = $47.6m. 3. 3Q06 EPS = $0.72. 4. 3Q06 GM = 65%. 5. 4Q06 net revenue guidance = approx. $135m.

PRESENTATION SUMMARY

S1. Business Review (B.F.) 1. Opening Comments: 1. Co. is pleased with its better than expected 3Q06 results and its recent accomplishments.

2. In calendar 2005, THQI gained share in all of its key markets

and consistently executed in a challenging period for the

industry. 3. Co.'s strategy to target the mass market this holiday proved successful. 4. Over the year, THQI grew share against the core gamer and realized the benefits of its increasingly direct global sales network. 5. THQI enhanced its studio system and took a first mover position in the exciting new area of dynamic in-game advertising. 6. Going forward, Co. intends to build on its success as it continues to navigate through the console transition. 7. 3Q06 net sales were $358m and net income was $0.72 per share, 1. This was ahead of guidance of net sales of $320m and net income of $0.65 per share. 2. Business Highlights:

1. During 3Q06, Co. shipped more that 1m units each of its key

titles based on content from its long-term partnerships with

Disney/Pixar, Nickelodeon and the WWE. 2. THQI shipped more than 1m units of its new title aimed at girls, Bratz Rock Angelz.

3. The standout title this holiday was WWE SmackDown vs. RAW 2006

on both PS2 and the PlayStation portable. 1. Revenue from this franchise increased more than 20% over last year and Co. shipped 2.5m units during the holiday qtr., including 400,000 units on PSP.

4. Co.'s success in the holiday qtr. helped drive the market

share gains it achieved worldwide in 2005. 5. For calendar 2005, THQI ranked as the Number 3 independent video game publisher worldwide excluding Japan according to NPD Group, Chart Track and GfK data. 6. THQI's 2005 US video game market share increased to 7.1% from 6.7% a year ago, as Co. grew revenues in a declining market. 7. Co. posted strong market share gains in Europe and Asia

Pacific in 2005. 8. In the UK, Co. grew shares to 6.4% from 4.8% in the prior year. 9. In Australia, THQI increased its market share to 12% from 9% in the prior year. 10. THQI's 2005 market share gains reflect its execution on the strategy it outlined last year. 1. These gains reflect THQI's growing direct presence overseas. 11. In the past year, THQI expanded its European operations to facilitate direct sales of the products in the Australian, Benelux, Nordic, Portuguese, and Spanish markets. 12. Co. is opening a new office in Japan later this month.

1. With the addition of this office, Co.'s global reach now includes direct operations in all major sales territories. 13. In 2005, Co. continued to enhance its growing studio system. 14. On 02/03/06, THQI announced details about one of its newest studios, Kaos. 1. Co. is excited about the talent at Kaos which includes industry veterans from the R&D team responsible for the

multi-million unit franchise Battlefield 2. 2. Co. looks forward to the launch of its first project, an original property for next-generation consoles and PCs slated for calendar 2007. 15. During the holiday qtr., Co. took a first mover position in the new area of dynamic in-game advertising for the announced agreement with Massive Incorporated. 1. Dynamic in-game advertising offers THQI a new revenue stream. 2. Co. plans to exploit this opportunity over the next several years in the online, PC, and next gen titles. 3. New Releases: 1. Next month, Co. plans to release its first Xbox 360 title, The Outfit, from its Relic Entertainment studio.

2. Slated for the March qtr. is the sequel, the Full Spectrum

Warrior called Ten Hammers. 1. The game is planned for PS2, Xbox, and PC. 3. Consistent with its strategy of releasing game for new handheld platforms as the install base ramps, during the March qtr., Co. plans to ship three new titles for the Sony PSP and two games for the Nintendo DS. 4. With expected March qtr. net sales, FY06 is expected to mark the eleventh consecutive year of revenue growth.

S2. Financial Review (E.Z.) 1. 3Q06 Results: 1. Net sales were $358m, ahead of guidance of $320m and 11% below 3Q05. 2. EPS was $0.72, favorable to guidance of $0.65 and below $1.05

in 3Q05, which included $0.13 per share in R&D tax credits claimed for prior years. 3. Net sales were driven by WWE SmackDown vs. RAW 2006, Incredibles: Rise of the Underminer, SpongeBob SquarePants: Lights Camera PANTS!, and Bratz Rock Angelz.

1. These key titles accounted for approx. half of the quarterly

revenue and performed well worldwide. 2. Better than expected WWE sales drove the revenue gain vs. guidance. 3. Decline vs. 3Q05 reflected the Incredibles and SpongeBob SquarePant movie titles, which were supported by theatrical releases last year. 4. GM was 65%, down 3 points from 3Q05. 1. This was due primarily to the mix of GBA dual packs, catalog titles, and lower net pricing for titles that were released in 1Q06. 5. License amortization and royalty costs of 12% of net sales decreased by 190 BP vs. last year. 1. Approx. 100 BP of the decline was due to the write-off of the Mattel license in 3Q05 and the remainder was due to the sales mix this year, which included more owned intellectual properties.

6. Software development amortization of 9% was down 260 BP vs.

3Q05. 1. 3Q05 included additional amortization expense for products that did not meet sales expectations. 7. Product development expenses of $24m were essentially flat vs. 3Q05.

8. Selling and marketing expenses of 12% of net sales were the

same as 3Q05. 9. G&A expenses were $18m, up $5.7m vs. 3Q05.

1. The increase was primarily due to $3.5m gain on FX activity

in 3Q05. 2. Depreciation expense, driven by hardware and software

purchases including development kits for next-generation platforms and leasehold improvements, accounted for the remaining increase.

10. Interest income was $1.8m, up from $0.8m in 3Q05 due to the

higher cash balance and higher yields. 11. Net income was $47.6m or $0.72 per share vs. net income of $62.9m or $1.05 per share 3Q05, which included $0.13 per share in R&D tax credits claimed for prior years. 12. Profit results vs. 3Q05 primarily reflect the impact of lower sales this holiday qtr. 2. Balance Sheet: 1. THQI ended 3Q06 with $296m or $4.50 per diluted share in cash and investments. 1. This represents an increase of $94m vs. Dec. 2004 balance of $202m, but a decline of $35m vs. March 2005. 2. This decline reflects increased use of working capital due to seasonality and growth. 2. Net AR increased to $188m from $74m in March 2005 and was down 14% vs. prior year due to sales decline this holiday qtr. vs. 3Q05. 3. DSO was 48 days, an improvement vs. 49 days in 3Q05. 4. AR reserves were $80m at 3Q06 end, up $22m from March 2005 balance of $58m.

5. Coverage on a trailing nine-month of sales basis was 9% vs.

10% in the prior year qtr. 1. Increase in the catalog business, which requires less price protection and lower weeks on hand in the channel in North America …