01—Abstract
Summary
Summary of the 10-Q filed February 4, 2014. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported a significant surge in revenue and net income for the three and nine months ended December 31, 2013, primarily driven by the highly successful launch of "Grand Theft Auto V." The company's balance sheet saw a substantial increase in cash and cash equivalents, growing from $402.5 million to $972.2 milliona, reflecting strong operational cash flow.
Despite this positive performance, the company also engaged in significant financing activities, including the issuance of new convertible notes and substantial share repurchases, notably a large buyback from the Icahn Group. Investors should note the significant reliance on the "Grand Theft Auto" franchise for revenue, as well as the company's ongoing investments in research and development and the transition to new gaming console platforms.
02—Key points
Key Highlights
- Net revenue for the three months ended December 31, 2013, dramatically increased to $1.86 billion from $415.8 million in the prior year, largely due to Grand Theft Auto V.
- Net income for the three months ended December 31, 2013, was $578.4 million, a substantial improvement from $71.4 million in the same period last year.
- Cash and cash equivalents surged to $972.2 million as of December 31, 2013, up from $402.5 million at the end of the prior fiscal quarter.
- The company repurchased approximately 12 million shares from the Icahn Group for $203.5 million in November 2013, alongside other open market repurchases.
- Significant debt financing activities included the issuance of $287.5 million in 1.00% Convertible Notes due 2018.
- Console game sales accounted for 96.7% of revenue in the most recent quarter, highlighting the industry's shift and the company's focus on major platforms.
- The company expects continued investment in R&D and is navigating the transition to new console hardware (PS4 and Xbox One).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2014, Take Two Interactive Software Inc kept $0.31.
- Revenue$1.86B100.0%
- Cost of revenue−$1.12B60.1%
- Gross profit$744.1M39.9%
- Operating costs−$137.8M7.4%
- Operating income$606.3M32.5%
- Interest, other & tax−$27.9M1.5%
- Net income$578.4M31.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2014filed February 4, 2014Financial Statements
Q3 FY2014 against Q3 FY2013
| Line item | Q3 FY2014Q3 FY2013 | Change |
|---|---|---|
| Revenue | $1.86B$415.77M | +348.3% |
| Cost of Revenue | $1.12B$216.30M | +417.7% |
| Gross Profit | $744.13M$199.47M | +273.0% |
| Operating Expenses | $137.84M$118.48M | +16.3% |
| Operating Income | $606.29M$80.99M | +648.6% |
| Net Income | $578.43M$71.36M | +710.5% |
| EPS (Basic) | $5.88$0.76 | +673.7% |
| EPS (Diluted) | $4.69$0.66 | +610.6% |
| Shares Outstanding (Basic) | 85.06M85.74M | −0.8% |
| Shares Outstanding (Diluted) | 111.81M111.76M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of Take-Two's strong financial performance in the reported quarter?
The primary driver was the exceptionally strong performance of "Grand Theft Auto V," which was released in September 2013. Sales from this title significantly boosted net revenue and profitability for both the three and nine-month periods ending December 31, 2013.
How has the company managed its cash position and capital structure?
Take-Two significantly increased its cash and cash equivalents to $972.2 million, primarily from strong operating cash flows generated by game sales. The company also engaged in substantial financing activities, issuing new convertible debt ($287.5 million) and conducting significant share repurchases, including a major transaction with the Icahn Group, indicating a focus on capital management and potentially shareholder returns.
What are the key risks or uncertainties facing Take-Two?
Key risks include the heavy reliance on major franchises like Grand Theft Auto, as revenue can fluctuate significantly based on release schedules. The company is also subject to the cyclical nature of the gaming hardware industry, with new console generations (PS4, Xbox One) impacting sales, and faces competition and potential disruptions from the transition to digital distribution and evolving consumer preferences.
How is the company addressing the shift to new gaming consoles?
Take-Two is actively supporting the new console platforms, with console sales already representing a dominant share of its revenue (96.7% in the latest quarter). The company continues to invest in research and development for these platforms and is managing its product pipeline to capitalize on market transitions.
06—Continue