10-QPeriod: Q1 FY2004

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q1 Ended Apr 30, 2003

Filed June 6, 2003For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. reported a strong first quarter for fiscal year 2003, with net sales increasing by 14.0% year-over-year to $194.2 million. This growth was driven by a significant rise in distribution revenues, which more than offset a slight decrease in publishing revenues. The company demonstrated improved profitability, with net income rising by 58.1% to $15.2 million, leading to diluted earnings per share of $0.36, up from $0.25 in the prior year's comparable quarter. For the first six months of fiscal year 2003, Take-Two continued its upward trajectory, with net sales growing 33.0% to $603.0 million. The company's profitability also saw substantial improvement, with net income increasing by 47.8% to $65.7 million, resulting in diluted earnings per share of $1.55, up from $1.16 in the same period last year. This robust performance was largely fueled by the successful launch of "Grand Theft Auto: Vice City" and other key titles, coupled with strong performance in its distribution segment.

Key Highlights

  • 1Net sales for the three months ended April 30, 2003, increased by 14.0% to $194.2 million compared to the prior year.
  • 2Net income for the three months ended April 30, 2003, increased by 58.1% to $15.2 million compared to the prior year.
  • 3Diluted earnings per share for the three months ended April 30, 2003, were $0.36, an increase from $0.25 in the prior year.
  • 4For the six months ended April 30, 2003, net sales grew by 33.0% to $603.0 million.
  • 5Net income for the six months ended April 30, 2003, increased by 47.8% to $65.7 million.
  • 6Diluted earnings per share for the six months ended April 30, 2003, were $1.55, up from $1.16 in the prior year.
  • 7The company completed two acquisitions: Angel Studios, Inc. and Barking Dog Studios Ltd., to strengthen its development capabilities.

Frequently Asked Questions

Revenue growth was primarily driven by a significant increase in distribution revenues, which more than offset a slight decrease in publishing revenues. The company saw growth in sales of third-party titles and an increasing market share for budget titles in North American retail channels.

Profitability significantly improved. For the three months ended April 30, 2003, net income increased by 58.1% to $15.2 million. For the six months ended April 30, 2003, net income increased by 47.8% to $65.7 million, demonstrating strong operational leverage.

The company completed the acquisitions of Angel Studios, Inc. and Barking Dog Studios Ltd. These acquisitions are expected to strengthen the company's development capabilities. While the report notes that the pro forma impact of these acquisitions on prior periods was not material, they contributed to increased research and development costs and intangible asset amortization in the current period.

Yes, the report highlights several risks common in the interactive entertainment industry, including short product life cycles, dependence on a limited number of titles for revenue, seasonal sales fluctuations, rapidly changing technology, intense competition, reliance on third-party licensing and publishing arrangements, product returns and price protection, and credit risks associated with accounts receivable. The company is also under SEC investigation regarding accounting matters.