Well, that stinks. Thanks to the writers' strike, Marvel Entertainment
So, after Iron Man and The Incredible Hulk are released in May and June, there could be at least a 15-month gap till the next self-produced film is released (assuming a Q4 2009 release). There goes the guidance of two Marvel studio releases per year.
I've a call into Marvel to discuss the ramifications of the delay. I'll return with what I learn, and my revised valuation, in the coming days. For now, let's talk numbers. They still look very good.
For the fourth quarter, revenue was up 28% and net income more than doubled. Operating margin improved by more than 16 percentage points, thanks to a toy licensing deal with Hasbro
Actually, licensing in general was a huge business. Revenue from its product placement and other such deals with the likes of Crocs
Licensing also accounted for roughly 56% of total revenue in 2007. Thanks for that goes to its Spider-Man joint venture with Sony
Revenue, as a whole, was up 38% in 2007. Per-share net income rose more than 150%. And cash flow, while not on the same growth trajectory as before, was bountiful:
Components of Adj. Cash From Operations |
2007* |
2006* |
2005* |
2004* |
---|---|---|---|---|
Reported net income |
$139,823 |
$58,704 |
$102,819 |
$124,877 |
Depreciation and amortization |
$5,970 |
$14,322 |
$4,534 |
$3,783 |
Amortization of financing costs |
$4,980 |
$4,980 |
$1,660 |
$3,446 |
Deferred revenue |
($28,956) |
$140,087 |
($6,093) |
($6,063) |
Film production costs |
($251,045) |
($15,055) |
$0 |
$0 |
Borrowings from film facility |
$255,926 |
$7,400 |
$25,800 |
$0 |
Capital expenditures |
($2,659) |
($16,286) |
($4,289) |
($3,586) |
Adj. Operating Cash Flow |
$124,039 |
$194,152 |
$124,431 |
$122,457 |
*Numbers in thousands.
The net effect of that cash creation is massive. Marvel repurchased $211.9 million in stock, issued no new recourse debt, and yet ended 2007 with $72 million in cash, restricted cash, and short-term investments, up from $40 million at the end of 2006.
Talk about impressive.
Actually, more impressive is that Marvel didn't raise guidance for 2008, even though it easily could have. Why? Buybacks and movies. Neither factors into Marvel's full-year projections.
That's crazy. Iron Man looks like anything but a flop, the Incredible Hulk has a low hurdle, and Lions Gate
Then there's the buybacks. Marvel's board has authorized yet another $100 million share repurchase. Roughly $10 million went to buy stock so far in the first quarter; 414,000 or so shares at $24.01 apiece.
So, take heart, true believer. Marvel has earned a reputation for conservative management and lowball guidance. Could that be enough to make up for what appears to be a lack of adequate long-term planning in its studio division? That's a question I'll address after talking with Marvel. Stay tuned.
Face-front, Fool! Related Foolishness awaits:
- Marvel wasn't voted the best stock for 2008, but it could have been.
- Here's why Marvel is a screaming buy.