01—Abstract
Summary
Summary of the 10-Q filed August 3, 2017. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported a strong performance for the first quarter of fiscal year 2018 (ended June 30, 2017), significantly improving its financial results compared to the prior year.
The company achieved net income of $60.3 milliona, a substantial turnaround from a net loss of $38.6 million in the same period last year, translating to earnings per share of $0.56 on a diluted basis. This improvement was driven by a robust increase in net revenue, up 34.2% to $418.2 million, fueled by strong performance from key franchises like NBA 2K, Grand Theft Auto V (including GTA Online), and Mafia III, as well as contributions from the recently acquired Social Point titles. Digital channel revenue was particularly strong, growing 55.8% and representing 64.1% of total net revenue, highlighting the company's successful shift towards digital distribution and recurring consumer spending.
The company also demonstrated improved operational efficiency, with gross profit margin expanding significantly to 53.5%b from 38.6% in the prior year, largely due to favorable revenue recognition adjustments and lower amortization costs. While operating expenses increased, this was primarily due to business reorganization costs and R&D for new titles, but was outpaced by revenue growth, leading to a significant increase in operating income. The company maintains a healthy balance sheet with substantial cash and short-term investments, and has access to a credit facility, positioning it well for future growth and investment.
02—Key points
Key Highlights
- Reported a net income of $60.3 million, a significant improvement from a net loss of $38.6 million in the prior year period.
- Net revenue increased by 34.2% to $418.2 million, driven by strong performance from NBA 2K, Grand Theft Auto V/Online, Mafia III, and Social Point titles.
- Gross profit margin expanded significantly to 53.5% from 38.6% in the prior year, aided by favorable revenue recognition and amortization changes.
- Digital channel revenue surged by 55.8% and now constitutes 64.1% of total net revenue, indicating a successful shift to digital distribution and in-game spending.
- Operating expenses increased by 9.0%, but were outpaced by revenue growth, leading to a substantial increase in operating income.
- Maintained a strong liquidity position with $828.1 million in cash and cash equivalents and $452.9 million in short-term investments.
- Announced a strategic reorganization, incurring $10.6 million in related expenses for the period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Take Two Interactive Software Inc kept $0.14.
- Revenue$418.2M100.0%
- Cost of revenue−$194.6M46.5%
- Gross profit$223.6M53.5%
- Operating costs−$173.4M41.5%
- Operating income$50.2M12.0%
- Interest, other & tax$10.1M2.4%
- Net income$60.3M14.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed August 3, 2017Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $418.22M$311.55M | +34.2% |
| Cost of Revenue | $194.57M$191.38M | +1.7% |
| Gross Profit | $223.65M$120.17M | +86.1% |
| Operating Expenses | $173.43M$159.16M | +9.0% |
| Operating Income | $50.22M-$38.98M | +228.8% |
| Interest Expense | $5.75M— | — |
| Net Income | $60.28M-$38.57M | +256.3% |
| EPS (Basic) | $0.57$-0.46 | +223.9% |
| EPS (Diluted) | $0.56$-0.46 | +221.7% |
| Shares Outstanding (Basic) | 105.49M84.59M | +24.7% |
| Shares Outstanding (Diluted) | 118.78M84.59M | +40.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of Take-Two's improved financial performance in this quarter?
The primary driver was a significant increase in net revenue, up 34.2% year-over-year to $418.2 million. This growth was largely fueled by strong sales from key franchises like NBA 2K, Grand Theft Auto V (including GTA Online), Mafia III, and the newly acquired Social Point mobile titles. Additionally, the shift towards digital distribution and recurrent consumer spending channels significantly boosted revenue.
How did the company's profitability change, and what contributed to it?
Profitability saw a dramatic improvement, with net income swinging from a loss of $38.6 million in the prior year to a profit of $60.3 million. This was driven by the substantial revenue increase, coupled with an expansion of the gross profit margin to 53.5% from 38.6%. Favorable changes in revenue recognition related to Grand Theft Auto V's service period and reduced amortization of capitalized software costs contributed to the improved margin.
What is the company's current liquidity position?
Take-Two maintains a strong liquidity position. As of June 30, 2017, the company held $828.1 million in cash and cash equivalents and $452.9 million in short-term investments. They also have access to a $100 million credit facility, of which they had no outstanding borrowings at the end of the quarter.
Are there any significant upcoming releases or developments mentioned?
The report lists future key titles including Red Dead Redemption 2 (Spring 2018), NBA 2K18 (September 2017), and WWE 2K18 (October 2017). The company also announced a strategic reorganization at one of its labels, which resulted in $10.6 million in business reorganization expenses for the quarter.
06—Continue