01—Abstract
Summary
Summary of the 10-K filed May 23, 2012. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) reported net revenue of $825.8 milliona for the fiscal year ended March 31, 2012, a decrease of 27.4% from the previous year, and a net loss of $108.8 million, a reversal from the $48.5 million net income in fiscal year 2011.
This decline was primarily attributed to lower sales from prior year releases like 'Red Dead Redemption' and 'Mafia II', partially offset by contributions from newer titles such as 'L.A. Noire' and 'Duke Nukem Forever'. The company's strong brands, Rockstar Games and 2K, continue to drive development across various platforms.
Despite the net loss, Take-Two maintained a solid cash position, ending the year with $420.3 millionb in cash and cash equivalents, bolstered by a significant convertible note issuance in November 2011. The company is strategically focusing on developing high-quality, internally-owned intellectual property and leveraging emerging technologies like digital distribution and mobile gaming.
However, significant risks remain, including dependence on "hit" titles, intense competition, product development delays, and economic uncertainties impacting consumer spending. The company's future success hinges on its ability to consistently deliver commercially successful "hit" titles and adapt to the evolving gaming landscape, particularly with upcoming major releases like 'Grand Theft Auto V'.
02—Key points
Key Highlights
- Net revenue for the fiscal year ended March 31, 2012, decreased by 27.4% to $825.8 million, reflecting a challenging sales period compared to the prior year.
- The company reported a net loss of $108.8 million for fiscal year 2012, a significant reversal from a net income of $48.5 million in fiscal year 2011.
- Despite the net loss, cash and cash equivalents increased to $420.3 million as of March 31, 2012, supported by a $250 million issuance of 1.75% Convertible Notes in November 2011.
- Key franchises like Grand Theft Auto and NBA 2K continue to be significant revenue contributors, with 'Grand Theft Auto' products alone accounting for 13.8% of net revenue.
- The company is actively investing in digital distribution, mobile gaming, and online content, recognizing these as important growth opportunities.
- Significant risks highlighted include heavy reliance on "hit" titles, intense industry competition, product development challenges, and potential economic downturns affecting consumer discretionary spending.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2012, Take Two Interactive Software Inc lost $0.13.
- Revenue$825.8M100.0%
- Cost of revenue−$528.9M64.0%
- Gross profit$297.0M36.0%
- Operating costs−$381.2M46.2%
- Operating income−$84.3M10.2%
- Interest, other & tax−$24.6M3.0%
- Net income−$108.8M13.2%
04—Financials
Financial Highlights
Figures from 10-KFY2012filed May 23, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $825.82M$1.14B | −27.4% |
| Cost of Revenue | $528.86M$689.38M | −23.3% |
| Gross Profit | $296.97M$447.50M | −33.6% |
| Operating Expenses | $381.23M$370.35M | +2.9% |
| Operating Income | -$84.27M$77.14M | −209.2% |
| Net Income | -$108.82M$48.46M | −324.6% |
| EPS (Basic) | $-1.31$0.56 | −333.9% |
| EPS (Diluted) | $-1.31$0.56 | −333.9% |
| Shares Outstanding (Basic) | 83.36M80.51M | +3.5% |
| Shares Outstanding (Diluted) | 83.36M80.52M | +3.5% |
05—Questions
Frequently Asked Questions
What was the primary reason for the decline in revenue and the shift to a net loss in fiscal year 2012?
The decline in revenue and the shift to a net loss were primarily due to lower sales from the previous fiscal year's highly successful titles, such as 'Red Dead Redemption' and 'Mafia II', as well as a decrease in sales from the 'Grand Theft Auto' franchise. This was only partially offset by contributions from newly released titles like 'L.A. Noire' and 'Duke Nukem Forever'.
How is Take-Two Interactive managing its cash flow and financial position given the net loss?
Despite the net loss, Take-Two Interactive ended fiscal year 2012 with a strong cash position of $420.3 million. This was significantly bolstered by the issuance of $250 million in 1.75% Convertible Notes in November 2011, demonstrating a proactive approach to capital management and liquidity.
What are Take-Two's key strategies for future growth?
The company's core strategies involve developing and publishing high-quality, internally-owned intellectual property, focusing on compelling franchises with potential for sequels and add-on content. They are also actively investing in and leveraging emerging trends such as digital distribution, mobile gaming (including smartphones and tablets), and online gaming platforms, especially in the rapidly growing Asia-Pacific markets.
What are the major risks facing Take-Two Interactive according to the filing?
The company faces several significant risks. These include a heavy dependence on the success of its "hit" titles, particularly 'Grand Theft Auto', and the need to continually release new successful titles. Intense competition within the video game industry, potential delays and cost overruns in product development, the cyclical nature of hardware platforms, and the impact of broader economic conditions on consumer discretionary spending are also major concerns.
06—Continue