01—Abstract
Summary
Summary of the 10-Q filed September 3, 2009. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported a significant revenue decline in the nine months ended July 31, 2009, compared to the same period in 2008, largely due to the prior year's release of the highly successful Grand Theft Auto IV.
Net revenue fell from $1.21 billion to $625 milliona. This revenue drop also resulted in a substantial net loss of $115.9 million for the nine-month period, a stark contrast to the $112.1 million net income reported in the prior year. The company has taken steps to strengthen its financial position, including issuing $138 million in convertible senior notes in June 2009.
However, the balance sheet reflects a considerable decrease in cash and cash equivalents, down to $174.8 millionb from $280.3 million at the start of the fiscal year, primarily due to operating losses. Despite the financial challenges, the company continues to invest in future game development, as evidenced by the significant balance of software development costs and licenses.
02—Key points
Key Highlights
- Net revenue for the nine months ended July 31, 2009, decreased by 48.5% to $625.1 million, down from $1.21 billion in the prior year, driven by the absence of major title releases like Grand Theft Auto IV.
- The company reported a net loss of $115.9 million for the nine months ended July 31, 2009, compared to a net income of $112.1 million in the same period of 2008.
- Cash and cash equivalents decreased by $105.5 million during the first nine months of fiscal 2009, ending at $174.8 million as of July 31, 2009.
- In June 2009, Take-Two issued $138 million in 4.375% convertible senior notes due 2014 to bolster its liquidity.
- Operating expenses were significantly reduced, with selling and marketing down 20.7% and general and administrative down 20.6% year-over-year for the nine-month period.
- The publishing segment remains the dominant revenue driver, though its share of total revenue decreased from 81.3% to 66.9% due to the strong performance of the distribution segment in the current period.
- The company is facing ongoing legal proceedings, including a securities class action lawsuit, for which a settlement is being proposed for $20.115 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2010, Take Two Interactive Software Inc lost $1.31.
- Revenue$50.6M100.0%
- Cost of revenue−$39.5M78.1%
- Gross profit$11.1M21.9%
- Operating costs−$54.2M107.1%
- Operating income−$43.1M85.2%
- Interest, other & tax−$22.9M45.3%
- Net income−$66.1M130.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2010filed September 3, 2009Financial Statements
05—Questions
Frequently Asked Questions
What is the primary reason for the significant drop in revenue and the shift to a net loss compared to the prior year?
The substantial decrease in revenue and the resulting net loss are primarily attributable to the absence of major blockbuster title releases in the current period, most notably Grand Theft Auto IV, which was a significant revenue driver in the prior year. The company's financial performance is highly dependent on the timing and success of its major game launches.
How has Take-Two Interactive addressed its liquidity needs given the decrease in cash and the operating losses?
To improve its liquidity position, Take-Two Interactive issued $138 million in convertible senior notes in June 2009. The company also has an available credit line and expects its current cash on hand and projected cash flow from operations to be sufficient for the next 12 months.
What is the company's outlook for its publishing and distribution segments?
The publishing segment remains the core business, but its relative contribution to revenue has decreased due to lower sales following the prior year's major releases. The distribution segment showed improved performance, partly due to acting as an agent for other publishers and a focus on higher-margin software. The company continues to invest in new game development across various platforms and genres.
What are the major legal risks the company is currently facing?
The company is involved in several legal proceedings, including a securities class action lawsuit related to Grand Theft Auto: San Andreas and option backdating. A settlement of $20.115 million is proposed for this matter, with a significant portion covered by insurance. Other legal matters include derivative actions and personal injury claims, though some have seen favorable rulings or are being settled.
06—Continue