01—Abstract
Summary
Summary of the 10-Q filed August 1, 2012. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported a significant net loss of $110.8 milliona for the three months ended June 30, 2012, a substantial increase from the $8.7 million loss in the prior year.
This widening loss was primarily driven by a sharp decline in net revenue, which fell 32.4% to $226.1 millionb, largely due to lower sales of previously released titles like 'L.A. Noire' and 'Duke Nukem Forever.' While new releases such as 'Max Payne 3' and 'Spec Ops: The Line' contributed revenue, they did not offset the decline from prior periods. The company's gross profit margin also significantly compressed to 17.4% from 36.8% year-over-year, impacted by higher development costs and a less favorable product mix.
Despite the challenging revenue and profitability trends, Take-Two maintained a solid cash position, ending the quarter with $367.1 millionc in cash and cash equivalents. The company has access to a $100 million revolving credit facility, of which no amounts were drawn as of June 30, 2012, providing a substantial liquidity buffer.
However, the increasing operating expenses, particularly in selling and marketing and general and administrative costs (the latter including a significant contractual provision), coupled with the overall net loss, represent key areas of concern for investors. The company has a pipeline of anticipated game releases, including 'Borderlands 2' and 'Grand Theft Auto V,' which will be critical for future revenue generation and profitability.
02—Key points
Key Highlights
- Net loss widened significantly to $110.8 million for the quarter ended June 30, 2012, compared to a $8.7 million net loss in the prior year.
- Net revenue decreased by 32.4% to $226.1 million due to lower sales of prior period titles, partially offset by new releases.
- Gross profit margin contracted sharply to 17.4% from 36.8% year-over-year, driven by increased costs and a less favorable product mix.
- Selling and marketing expenses increased by 5.8% and general and administrative expenses rose by 41.3%, impacting overall operating expenses.
- The company ended the quarter with $367.1 million in cash and cash equivalents, indicating a strong liquidity position.
- Access to an undrawn $100 million revolving credit facility provides additional financial flexibility.
- Upcoming titles like 'Borderlands 2,' 'NBA 2K13,' 'XCOM: Enemy Unknown,' 'BioShock Infinite,' and 'Grand Theft Auto V' are crucial for future performance.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2013, Take Two Interactive Software Inc lost $0.49.
- Revenue$226.1M100.0%
- Cost of revenue−$186.7M82.6%
- Gross profit$39.4M17.4%
- Operating costs−$140.3M62.0%
- Operating income−$100.9M44.6%
- Interest, other & tax−$10.0M4.4%
- Net income−$110.8M49.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed August 1, 2012Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $226.14M$334.38M | −32.4% |
| Cost of Revenue | $186.73M$211.22M | −11.6% |
| Gross Profit | $39.41M$123.16M | −68.0% |
| Operating Expenses | $140.29M$125.02M | +12.2% |
| Operating Income | -$100.88M-$1.86M | −5315.0% |
| Net Income | -$110.84M-$8.71M | −1172.1% |
| EPS (Basic) | $-1.30$-0.11 | −1081.8% |
| EPS (Diluted) | $-1.30$-0.11 | −1081.8% |
| Shares Outstanding (Basic) | 85.01M82.50M | +3.0% |
| Shares Outstanding (Diluted) | 85.01M82.50M | +3.0% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant increase in net loss for the quarter?
The primary reason for the significant increase in net loss is a substantial decrease in net revenue, down 32.4% year-over-year, mainly due to lower sales from previously released titles like 'L.A. Noire' and 'Duke Nukem Forever.' This revenue decline, combined with an increase in operating expenses and a compressed gross profit margin, led to the wider net loss.
How is the company managing its liquidity given the operational losses?
The company maintains a strong liquidity position with $367.1 million in cash and cash equivalents as of June 30, 2012. Furthermore, it has access to an undrawn $100 million revolving credit facility, which provides additional financial flexibility to cover working capital needs and operational requirements.
What are the key upcoming product releases that investors should watch for?
Key upcoming releases that are critical for future revenue include 'Borderlands 2,' 'NBA 2K13,' 'XCOM: Enemy Unknown,' 'BioShock Infinite,' and the highly anticipated 'Grand Theft Auto V.' The success of these titles will be essential in reversing the current revenue and profitability trends.
Are there any significant new expenses or cost increases impacting the company's profitability?
Yes, general and administrative expenses saw a significant increase of 41.3%, largely due to a $15.0 million contractual provision recorded in June 2012. Selling and marketing expenses also increased slightly to support new product launches.
06—Continue