01—Abstract
Summary
Summary of the 10-Q filed October 30, 2014. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) filed its quarterly report on Form 10-Q for the period ending September 30, 2014.
The company reported a net loss of $41.4 milliona for the third quarter, a significant improvement from the $124.1 million loss in the same period last year. This improvement was primarily driven by a substantial reduction in selling and marketing expenses and a notable increase in gross profit, benefiting from higher sales from the Grand Theft Auto franchise and a shift towards digital revenue streams. Financially, the company demonstrated improved operational efficiency, with total operating expenses decreasing by 29.5% year-over-year for the quarter.
The company also recognized a significant gain of $19.0 millionb from the sale of its long-term investment in Twitch Interactive, Inc. While revenue saw a decline of 15.2% year-over-year in the quarter, the improved profitability and strategic sale of assets indicate a focus on financial stabilization. The company maintained a strong cash position with $754.4 million in cash and cash equivalents, though this was a decrease from the previous fiscal year-end, largely due to operational cash usage and investing activities.
02—Key points
Key Highlights
- Net loss narrowed significantly to $41.4 million for Q3 FY2015, down from $124.1 million in Q3 FY2014.
- Gross profit margin improved substantially to 58.8% from 37.9% year-over-year, driven by lower cost of goods sold.
- Selling and marketing expenses decreased by 51.5% year-over-year, largely due to reduced advertising spend following the Grand Theft Auto V launch.
- The company realized a $19.0 million pre-tax gain from the sale of its investment in Twitch Interactive, Inc.
- Net revenue declined by 15.2% year-over-year, primarily due to lower sales of catalog titles, though partially offset by Grand Theft Auto franchise sales.
- Cash and cash equivalents stood at $754.4 million as of September 30, 2014, a decrease from $935.4 million at the end of FY2014, reflecting operational cash usage and investment activities.
- The company reported improved profitability on a per-share basis, with a loss of $0.51 per share, compared to a loss of $1.40 per share in the prior year's quarter.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2015, Take Two Interactive Software Inc lost $0.33.
- Revenue$126.3M100.0%
- Cost of revenue−$52.0M41.2%
- Gross profit$74.3M58.8%
- Operating costs−$122.8M97.2%
- Operating income−$48.5M38.4%
- Interest, other & tax$7.1M5.7%
- Net income−$41.4M32.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed October 30, 2014Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $126.28M$148.82M | −15.2% |
| Cost of Revenue | $52.02M$92.46M | −43.7% |
| Gross Profit | $74.26M$56.36M | +31.8% |
| Operating Expenses | $122.77M$174.25M | −29.5% |
| Operating Income | -$48.51M-$117.89M | +58.8% |
| Net Income | -$41.37M-$124.12M | +66.7% |
| EPS (Basic) | $-0.51$-1.40 | +63.6% |
| EPS (Diluted) | $-0.51$-1.40 | +63.6% |
| Shares Outstanding (Basic) | 80.36M88.82M | −9.5% |
| Shares Outstanding (Diluted) | 80.36M— | — |
05—Questions
Frequently Asked Questions
What is the company's overall financial performance for the quarter?
For the three months ended September 30, 2014, Take-Two Interactive reported a net loss of $41.4 million, which is a significant improvement compared to the $124.1 million net loss in the same period of the prior year. This was driven by a substantial decrease in operating expenses, particularly selling and marketing, and an increase in gross profit margin.
How did the Grand Theft Auto franchise perform during the quarter?
The Grand Theft Auto franchise, primarily driven by sales of Grand Theft Auto V and Grand Theft Auto Online, contributed positively, with sales increasing by $20.2 million year-over-year for the quarter. This helped offset declines in other catalog titles.
What impact did the sale of Twitch Interactive have on the company's financials?
In September 2014, Take-Two Interactive sold its investment in Twitch Interactive, Inc., recognizing a pre-tax gain of approximately $19.0 million. This gain contributed positively to the company's results for the period.
How is the company managing its liquidity and debt?
The company reported $754.4 million in cash and cash equivalents as of September 30, 2014. They have a Credit Agreement providing up to $100 million in borrowings, with no outstanding borrowings as of the reporting date. The company also has significant convertible notes outstanding, with interest rates of 1.75% and 1.00% due in 2016 and 2018, respectively. Management believes they have sufficient liquidity for the next 12 months.
06—Continue