01—Abstract
Summary
Summary of the 10-Q filed February 6, 2015. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. (TTWO) reported its financial results for the third quarter and first nine months of fiscal year 2015, ending December 31, 2014.
The company experienced a significant year-over-year decline in net revenue for both the quarter and the nine-month period, largely attributable to the strong performance of Grand Theft Auto V in the prior year. While console revenue decreased as a percentage of total revenue, digital online revenue showed substantial growth. Financially, the company reported a net loss for the nine-month period, a stark contrast to the significant net income generated in the same period last year.
This shift is primarily driven by lower revenue and a substantial increase in operating expenses, particularly in selling and marketing and general and administrative costs. Despite the revenue decline and net loss, the company maintained a solid cash position, with over $897 milliona in cash and cash equivalents and short-term investments at the end of the period.
02—Key points
Key Highlights
- Net revenue for the three months ended December 31, 2014, decreased by 71.5% year-over-year to $531.1 million, primarily due to the comparison against the strong launch of Grand Theft Auto V in the prior year's quarter.
- For the nine months ended December 31, 2014, net revenue declined by 63.7% to $782.8 million, also significantly impacted by the prior year's Grand Theft Auto V performance.
- The company reported a net loss of $36.7 million for the nine months ended December 31, 2014, compared to a net income of $392.4 million in the prior year.
- Operating expenses increased by 36.0% for the quarter and 1.0% for the nine-month period, driven by higher selling and marketing, and general and administrative costs.
- Digital online revenue showed significant growth, increasing to 28.2% of total revenue for the quarter and 39.7% for the nine-month period, indicating a shift in distribution channels.
- Cash and cash equivalents and short-term investments remained strong at $897.5 million as of December 31, 2014, providing a healthy liquidity position.
- The company's share repurchase program remained authorized, although no shares were repurchased during the reported nine-month period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2015, Take Two Interactive Software Inc kept $0.08.
- Revenue$531.1M100.0%
- Cost of revenue−$278.0M52.3%
- Gross profit$253.1M47.7%
- Operating costs−$187.5M35.3%
- Operating income$65.6M12.4%
- Interest, other & tax−$25.5M4.8%
- Net income$40.1M7.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2015filed February 6, 2015Financial Statements
Q3 FY2015 against Q3 FY2014
| Line item | Q3 FY2015Q3 FY2014 | Change |
|---|---|---|
| Revenue | $531.15M$1.86B | −71.5% |
| Cost of Revenue | $278.01M$1.12B | −75.2% |
| Gross Profit | $253.13M$744.13M | −66.0% |
| Operating Expenses | $187.52M$137.84M | +36.0% |
| Operating Income | $65.61M$606.29M | −89.2% |
| Net Income | $40.09M$578.43M | −93.1% |
| EPS (Basic) | $0.46$5.88 | −92.2% |
| EPS (Diluted) | $0.42$4.69 | −91.0% |
| Shares Outstanding (Basic) | 87.48M85.06M | +2.8% |
| Shares Outstanding (Diluted) | 107.11M111.81M | −4.2% |
05—Questions
Frequently Asked Questions
What is the primary reason for the significant year-over-year decline in revenue?
The substantial decrease in net revenue for both the three and nine months ended December 31, 2014, is primarily due to a tough comparison against the prior year, which benefited from the highly successful launch of Grand Theft Auto V on older generation consoles. While Grand Theft Auto V was released on new-generation consoles in November 2014, it did not fully offset the revenue comparison against the prior year's launch.
How has the company's profitability changed compared to the previous year?
Profitability has significantly decreased. The company reported a net loss of $36.7 million for the nine months ended December 31, 2014, a sharp contrast to the net income of $392.4 million in the same period last year. This is driven by lower revenues and increased operating expenses, particularly in selling, marketing, and general administrative costs.
What is the company's liquidity position?
The company maintains a strong liquidity position, with cash and cash equivalents and short-term investments totaling $897.5 million as of December 31, 2014. This provides ample resources to fund operations, working capital, and commitments for at least the next 12 months.
What is the trend regarding digital distribution versus physical retail?
There is a clear trend towards digital distribution. Net revenue from digital online channels increased significantly, comprising 28.2% of total revenue for the quarter and 39.7% for the nine-month period, while physical retail revenue's share of total revenue has decreased.
06—Continue