10-QPeriod: Q3 FY2010

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q3 Ended Jan 31, 2010

Filed March 10, 2010For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) filed its 10-Q for the period ending January 31, 2010, reporting a net loss of $33.9 million on net revenue of $163.2 million for the quarter. This represents an improvement from the prior year's net loss of $50.4 million, with revenue increasing by 9.3% year-over-year. The company has successfully divested its distribution business, "Jack of all Games," to focus on its core publishing operations, which is expected to streamline its business and improve resource allocation. Key financial developments include a significant increase in gross profit margin due to lower royalty expenses and reduced price concessions, despite higher development royalties on certain titles. Operating expenses saw a notable decrease, driven primarily by lower general and administrative costs (including reduced legal fees) and research and development spending. The company maintained a strong cash position with $106.0 million in cash and cash equivalents, and ample liquidity through its credit agreement, though it continues to invest heavily in software development.

Financial Highlights

46 data points
Beta

Revenue

$360.36M

43.5% Gross Margin

Net Income

$37.92M

10.5% Net Margin

EPS (Diluted)

$0.43

Total Assets

$1.01B

Cash & Equivalents

$102.08M

Free Cash Flow

-$17.92M

Financial Statements
Beta
Revenue$360.36M
Cost of Revenue$203.74M
Gross Profit$156.63M
R&D Expenses$15.66M
Operating Expenses$112.16M
Operating Income$44.46M
Net Income$37.92M
EPS (Basic)$0.45
EPS (Diluted)$0.43

Key Highlights

  • 1Net revenue increased by 9.3% to $163.2 million for the quarter ended January 31, 2010, compared to $149.4 million in the prior year period.
  • 2Gross profit margin improved significantly to 38.5% from 31.2% year-over-year, driven by lower royalty expenses and reduced price concessions.
  • 3Total operating expenses decreased by 13.1% to $89.4 million, primarily due to a 25.4% reduction in general and administrative expenses and a 26.2% decrease in R&D.
  • 4The company reported a net loss of $33.9 million ($0.43 per share) for the quarter, an improvement from the $50.4 million net loss ($0.66 per share) in the prior year.
  • 5Cash and cash equivalents stood at $105.98 million as of January 31, 2010, a slight increase from $102.08 million at the end of the previous fiscal year.
  • 6The company completed the sale of its "Jack of all Games" distribution business in February 2010, classifying its results as discontinued operations, to focus on publishing.
  • 7Long-term debt includes $138 million in convertible senior notes issued in June 2009.

Frequently Asked Questions

Net revenue increased by 9.3% to $163.2 million for the quarter ended January 31, 2010, up from $149.4 million in the same period last year. This growth was primarily driven by strong performance from the 2K label, particularly the game "Borderlands" released in October 2009, and a significant year-over-year increase in revenue from the "NBA" franchise. Partially offsetting these gains were decreases in revenue from the "Grand Theft Auto" franchise.

Total operating expenses decreased by 13.1% to $89.4 million. This reduction was largely due to a 25.4% decrease in general and administrative expenses, which included lower legal fees and settlement costs, and a 26.2% decrease in research and development spending. The company also benefited from an improved gross profit margin (38.5% vs. 31.2%), driven by lower royalty expenses and fewer price concessions. These factors contributed to a narrowed net loss of $33.9 million compared to $50.4 million in the prior year.

The sale of the "Jack of all Games" third-party distribution business, completed in February 2010, is a strategic move to allow Take-Two to focus its resources on its core publishing operations. The financial results of this divested business have been classified as discontinued operations, simplifying the company's financial statements and allowing management to concentrate on developing and marketing its own intellectual property and franchises.

Take-Two Interactive maintains a healthy liquidity position with $106.0 million in cash and cash equivalents as of January 31, 2010. The company also has access to a $140 million credit agreement, of which $131.9 million was available for borrowing as of the quarter-end, with no outstanding borrowings. Management believes these resources, along with projected cash flow from operations, are sufficient to meet working capital, capital expenditure, and commitment needs for at least the next 12 months.