01—Abstract
Summary
Summary of the 10-Q filed August 6, 2014. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) reported a net loss of $35.4 milliona for the three months ended June 30, 2014, a significant improvement from the $61.9 million net loss in the same period of the prior year.
This reduction in net loss was driven by a substantial increase in gross profit margin, which rose to 56.8% from 34.2% year-over-year, primarily due to lower cost of goods sold as a percentage of net revenue and reduced software development impairment charges compared to the prior year. Net revenue for the quarter decreased by 12.1% to $125.4 millionb, largely due to a decline in sales from previously released titles, though this was partially offset by strong performance from the Grand Theft Auto franchise, particularly Grand Theft Auto V and Grand Theft Auto Online. The company continues to see a significant shift towards digital distribution, with digital online channels now representing 63.9% of net revenue, up from 51.1% in the prior year.
The balance sheet shows a decrease in total assets to $1.61 billionc from $1.80 billion sequentially, with a notable drop in cash and cash equivalents from $935.4 million to $822.0 million. Despite the sequential decrease in cash, the company maintains a strong liquidity position with $822 million in cash and cash equivalents and an available borrowing capacity of $57.3 million under its credit agreement, indicating sufficient resources to fund operations.
02—Key points
Key Highlights
- Net loss improved significantly to $35.4 million from $61.9 million in the prior year's comparable quarter.
- Gross profit margin increased substantially to 56.8% from 34.2% year-over-year.
- Net revenue decreased 12.1% to $125.4 million, impacted by lower sales from older titles, but partially offset by Grand Theft Auto franchise performance.
- Shift to digital distribution continues, with digital online revenue now representing 63.9% of total net revenue.
- Cash and cash equivalents decreased sequentially to $822.0 million from $935.4 million, primarily due to operating and investing activities.
- Company maintained compliance with debt covenants and has $57.3 million available under its credit agreement.
- Significant year-over-year increase in general and administrative expenses, driven by stock-based compensation related to management agreements.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2015, Take Two Interactive Software Inc lost $0.28.
- Revenue$125.4M100.0%
- Cost of revenue−$54.2M43.2%
- Gross profit$71.3M56.8%
- Operating costs−$104.5M83.3%
- Operating income−$33.2M26.5%
- Interest, other & tax−$2.2M1.7%
- Net income−$35.4M28.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2015filed August 6, 2014Financial Statements
Q1 FY2015 against Q1 FY2014
| Line item | Q1 FY2015Q1 FY2014 | Change |
|---|---|---|
| Revenue | $125.42M$142.67M | −12.1% |
| Cost of Revenue | $54.16M$93.84M | −42.3% |
| Gross Profit | $71.27M$48.83M | +46.0% |
| Operating Expenses | $104.48M$98.39M | +6.2% |
| Operating Income | -$33.21M-$49.56M | +33.0% |
| Net Income | -$35.40M-$61.91M | +42.8% |
| EPS (Basic) | $-0.45$-0.71 | +36.6% |
| EPS (Diluted) | $-0.45$-0.71 | +36.6% |
| Shares Outstanding (Basic) | 79.37M86.99M | −8.8% |
05—Questions
Frequently Asked Questions
What was Take-Two's financial performance in the first quarter of fiscal year 2015?
For the three months ended June 30, 2014, Take-Two reported a net loss of $35.4 million, an improvement from the $61.9 million net loss in the same period of the prior year. Net revenue declined by 12.1% to $125.4 million, primarily due to lower sales of titles released in previous years. However, the gross profit margin significantly improved to 56.8% from 34.2% due to a shift towards digital sales and lower cost of goods sold.
How is the company's revenue mix evolving?
The company is experiencing a strong trend towards digital distribution. For the quarter ended June 30, 2014, revenue from digital online channels increased to 63.9% of total net revenue, up from 51.1% in the prior year's comparable period. Conversely, revenue from physical retail and other channels decreased to 36.1%.
What is the company's current liquidity and debt situation?
As of June 30, 2014, Take-Two had $822.0 million in cash and cash equivalents. The company has $57.3 million available under its $100 million credit agreement and is in compliance with all debt covenants. The company has two series of convertible notes outstanding: $1.75% Convertible Notes due 2016 and $1.00% Convertible Notes due 2018.
What are the key drivers for the change in operating expenses?
Total operating expenses increased by 6.2% year-over-year. General and administrative expenses saw a significant increase (19.8%) mainly due to higher stock-based compensation expenses related to management agreements and increased personnel and IT costs. Research and development expenses also increased (15.6%) primarily due to higher personnel costs and stock-based compensation. Selling and marketing expenses decreased by 11.4%, mainly due to lower advertising expenses compared to the prior year which included significant launch campaigns.
06—Continue