01—Abstract
Summary
Summary of the 10-Q filed June 9, 2010. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) reported its first quarter results for fiscal year 2010 (ending April 30, 2010).
The company demonstrated a significant turnaround in its financial performance compared to the prior year, moving from a net loss to a net income. This improvement was driven by a substantial increase in net revenue, particularly from current-generation console titles like 'BioShock 2' and 'Borderlands.' The company also successfully divested its distribution business, allowing for a sharper focus on its core publishing operations. Financially, TTWO saw a strong increase in gross profit due to a better pricing mix and higher revenue.
While operating expenses also rose, particularly in selling and marketing to support new releases, the overall operational efficiency improved, leading to a positive operating income. The company's cash position strengthened significantly due to improved operating and investing activities, including proceeds from the sale of its distribution arm. Despite ongoing legal matters, the company expresses confidence in its liquidity and future operations.
02—Key points
Key Highlights
- Net income of $16.8 million for the quarter, a significant improvement from a net loss of $10.1 million in the prior year's quarter.
- Net revenue increased by 53.8% to $268.0 million, driven by strong performance of current-generation console titles.
- Gross profit margin improved to 41.5% from 36.9% in the prior year's quarter.
- Successfully completed the sale of its Jack of all Games distribution business in February 2010 for approximately $44 million, allowing for increased focus on publishing.
- Cash and cash equivalents increased to $180.5 million as of April 30, 2010, up from $102.1 million at the beginning of the fiscal year.
- Operating expenses decreased by 17.8% in General and Administrative costs, reflecting reduced legal and settlement expenses.
- Despite ongoing litigation, the company believes it has adequate liquidity to meet its cash requirements for the next 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2011, Take Two Interactive Software Inc kept $0.07.
- Revenue$375.4M100.0%
- Cost of revenue−$244.0M65.0%
- Gross profit$131.3M35.0%
- Operating costs−$96.0M25.6%
- Operating income$35.4M9.4%
- Interest, other & tax−$9.1M2.4%
- Net income$26.3M7.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed June 9, 2010Financial Statements
| Revenue | $375.39M |
| Cost of Revenue | $244.05M |
| Gross Profit | $131.34M |
| Operating Expenses | $95.95M |
| Operating Income | $35.39M |
| Net Income | $26.31M |
| EPS (Basic) | $0.31 |
| EPS (Diluted) | $0.30 |
| Shares Outstanding (Basic) | 79.34M |
| Shares Outstanding (Diluted) | 92.28M |
05—Questions
Frequently Asked Questions
What was the primary driver behind Take-Two's improved financial performance in this quarter?
The primary driver was a substantial increase in net revenue, up 53.8% to $268.0 million. This growth was largely fueled by the successful release and sales of key titles on current-generation consoles, particularly 'BioShock 2' and 'Borderlands,' contributing to a significant rebound from a net loss in the prior year to a net income of $16.8 million this quarter.
How has the divestiture of the distribution business impacted the company?
The divestiture of the Jack of all Games distribution business in February 2010 for approximately $44 million has allowed Take-Two to sharpen its focus on its core publishing operations. This strategic move has also contributed to strengthening the company's cash position.
What is the company's current cash position and outlook on liquidity?
As of April 30, 2010, Take-Two's cash and cash equivalents stood at $180.5 million, a significant increase from $102.1 million at the start of the fiscal year. The company believes its current cash, projected cash flow from operations, and availability under its credit agreement provide sufficient liquidity to meet its needs for at least the next 12 months.
Are there any significant legal proceedings that investors should be aware of?
Take-Two is involved in several ongoing legal proceedings, including class action lawsuits related to 'Grand Theft Auto: San Andreas' and option backdating allegations. While the company has entered into settlement agreements for some of these, others are still pending. The company has accrued for certain legal matters and believes that any unfavorable resolution, unless otherwise disclosed, would not be material. However, investors should monitor these developments as they can potentially impact financial condition, results of operations, or cash flows.
06—Continue