01—Abstract
Summary
Summary of the 10-Q filed February 3, 2012. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) reported its third-quarter and nine-month results for the period ending December 31, 2011.
The company saw a significant year-over-year decrease in net revenue for both the quarter and the nine-month period, primarily attributed to lower sales of established titles like "Red Dead Redemption" and the "Grand Theft Auto" franchise, partially offset by newer releases such as "L.A. Noire." Financially, the company experienced a net loss for the nine-month period, contrasting with a net profit in the prior year. This shift was influenced by lower revenues and increased operating expenses, particularly in general and administrative costs driven by stock-based compensation related to a management agreement.
Despite the operational challenges, Take-Two significantly bolstered its cash position through the issuance of $250 milliona in 1.75% Convertible Notes in November 2011. The company maintained a strong liquidity position with over $453 million in cash and cash equivalents at the end of the period.
02—Key points
Key Highlights
- Net revenue declined significantly year-over-year for both the three and nine months ended December 31, 2011, impacted by a difficult comparison to strong prior-year releases like 'Red Dead Redemption'.
- The company reported a net loss of $41.98 million for the nine months ended December 31, 2011, a reversal from a net income of $70.51 million in the same period last year.
- Cash and cash equivalents increased substantially to $453.3 million as of December 31, 2011, up from $280.4 million at March 31, 2011, largely due to the issuance of $250 million in 1.75% Convertible Notes.
- Operating expenses saw a modest increase for the nine-month period, driven by higher general and administrative costs, including increased stock-based compensation.
- Key upcoming releases mentioned include 'Max Payne 3', 'BioShock Infinite', 'XCOM: Enemy Unknown', and the highly anticipated 'Grand Theft Auto V'.
- The company continued to manage its debt obligations, with both the 4.375% Convertible Notes due 2014 and the newly issued 1.75% Convertible Notes due 2016 in compliance with their respective covenants.
- International revenue remained a significant portion of total revenue, though it saw a slight decrease as a percentage for the quarter compared to the prior year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2012, Take Two Interactive Software Inc kept $0.06.
- Revenue$236.3M100.0%
- Cost of revenue−$126.5M53.5%
- Gross profit$109.9M46.5%
- Operating costs−$89.6M37.9%
- Operating income$20.2M8.6%
- Interest, other & tax−$6.1M2.6%
- Net income$14.1M6.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2012filed February 3, 2012Financial Statements
Q3 FY2012 against Q3 FY2011
| Line item | Q3 FY2012Q3 FY2011 | Change |
|---|---|---|
| Revenue | $236.32M$334.26M | −29.3% |
| Cost of Revenue | $126.47M$188.65M | −33.0% |
| Gross Profit | $109.86M$145.61M | −24.6% |
| Operating Expenses | $89.61M$96.93M | −7.5% |
| Operating Income | $20.25M$48.68M | −58.4% |
| Net Income | $14.10M$40.86M | −65.5% |
| EPS (Basic) | $0.16$0.47 | −66.0% |
| EPS (Diluted) | $0.16$0.45 | −64.4% |
| Shares Outstanding (Basic) | 83.56M80.74M | +3.5% |
| Shares Outstanding (Diluted) | 83.56M93.68M | −10.8% |
05—Questions
Frequently Asked Questions
What is the company's overall financial performance for this period?
For the nine months ended December 31, 2011, Take-Two Interactive reported a net loss of $41.98 million, a significant shift from the net income of $70.51 million reported in the same period last year. This downturn was driven by a substantial decrease in net revenue, primarily due to the phasing out of major titles from the prior year and the performance of newer releases. While the company's operational performance showed a decline, its cash position strengthened considerably.
How has the company's cash position changed, and what is the outlook for liquidity?
Take-Two's cash and cash equivalents saw a significant increase, reaching $453.3 million by December 31, 2011, up from $280.4 million at the beginning of the fiscal year. This improvement was largely fueled by the successful issuance of $250 million in 1.75% Convertible Notes in November 2011. The company believes its current cash reserves, along with its credit facilities, will provide sufficient liquidity to meet its obligations for at least the next 12 months.
What are the main drivers behind the revenue decline?
The primary reason for the revenue decline is a difficult year-over-year comparison, as the prior year benefited from strong sales of major titles like 'Red Dead Redemption' and 'Mafia II'. While new releases like 'L.A. Noire' and 'Duke Nukem Forever' contributed positively, they did not fully offset the decline from the prior year's blockbuster hits. Sales from console platforms remain the largest contributor to revenue, but PC and handheld sales also contribute to the overall revenue mix.
What is the company's strategy for future growth given the current performance?
Take-Two's strategy continues to focus on developing and publishing high-quality, internally developed titles to build successful franchises. The company has a robust product pipeline, including highly anticipated titles such as 'Grand Theft Auto V', 'Max Payne 3', and 'BioShock Infinite', which are expected to drive future revenue growth. They are also expanding into digital distribution and social gaming to capture emerging market trends.
06—Continue