01—Abstract
Summary
Summary of the 10-Q filed February 7, 2023. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported its fiscal third-quarter 2023 results, showing a significant increase in net revenue primarily driven by the acquisition of Zynga.
Net revenue for the quarter rose 55.9% to $1.41 billiona, largely due to the strong contribution from Zynga's mobile games, which now represent over half of the company's total revenue. However, the company reported a net loss of $153.4 million for the quarter, a substantial swing from the $144.6 million net income in the same period last year. This loss is attributable to increased operating expenses, including higher marketing, research and development, and administrative costs, largely related to the integration of Zynga and other strategic investments.
Despite the quarterly loss, the company's Net Bookings, a key operational metric, showed robust growth, increasing 59.7% to $1.38 billionb. This growth was also fueled by the inclusion of Zynga's portfolio and new releases like PGA TOUR 2K23 and Marvel's Midnight Suns.
The company ended the quarter with a solid cash position, though it saw a decrease from the prior quarter due to investing activities, primarily related to the Zynga acquisition. Investors should monitor the integration progress of Zynga and the company's ability to manage its increased operating expenses while capitalizing on its expanded portfolio.
02—Key points
Key Highlights
- Net revenue surged 55.9% to $1.41 billion, primarily driven by the Zynga acquisition.
- Mobile games, largely from Zynga, now constitute 51.2% of net revenue, a significant shift from 11.5% in the prior year.
- The company reported a net loss of $153.4 million for the quarter, compared to a net income of $144.6 million in the prior year's comparable period.
- Net Bookings, a key operational metric, increased by 59.7% to $1.38 billion, indicating strong underlying sales.
- Operating expenses saw a substantial increase, with Selling and Marketing up 230.2% and Research and Development up 104.1%, largely due to the Zynga acquisition and integration costs.
- Cash and cash equivalents decreased to $1.30 billion from $2.20 billion sequentially, primarily due to investing activities related to acquisitions.
- Goodwill increased significantly from $674.6 million to $6.79 billion, reflecting the impact of the Zynga and Popcore acquisitions.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2023, Take Two Interactive Software Inc lost $0.11.
- Revenue$1.41B100.0%
- Cost of revenue−$691.9M49.1%
- Gross profit$715.9M50.9%
- Operating costs−$888.8M63.1%
- Operating income−$172.9M12.3%
- Interest, other & tax$19.5M1.4%
- Net income−$153.4M10.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed February 7, 2023Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $1.41B$903.30M | +55.9% |
| Cost of Revenue | $691.90M$350.40M | +97.5% |
| Gross Profit | $715.90M$552.90M | +29.5% |
| Operating Expenses | $888.80M$398.80M | +122.9% |
| Operating Income | -$172.90M$154.10M | −212.2% |
| Interest Expense | $29.50M— | — |
| Net Income | -$153.40M$144.60M | −206.1% |
| EPS (Basic) | $-0.91$1.25 | −172.8% |
| EPS (Diluted) | $-0.91$1.24 | −173.4% |
| Shares Outstanding (Basic) | 168.00M115.30M | +45.7% |
| Shares Outstanding (Diluted) | 168.00M116.70M | +44.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue increase in the quarter?
The primary driver of the significant increase in net revenue was the acquisition of Zynga in May 2022. Zynga's mobile game portfolio contributed substantially to the consolidated revenue, shifting the platform revenue mix towards mobile.
Why did Take-Two report a net loss despite the revenue growth?
The net loss was primarily due to a significant increase in operating expenses, including higher selling and marketing, research and development, and general and administrative costs. These increases are largely associated with the integration of Zynga, amortization of acquired intangible assets, and other strategic investments.
How has the Zynga acquisition impacted the company's balance sheet?
The Zynga acquisition has substantially increased the company's assets, particularly goodwill, which rose from $674.6 million to $6.79 billion due to the acquisition accounting. It also led to a significant increase in liabilities, notably long-term debt and deferred revenue.
What is the company's outlook regarding its increased debt levels?
The company took on significant debt, including $2.7 billion in Senior Notes, to finance the Zynga acquisition. While the company has a revolving credit facility and a term loan, it has repaid recent drawdowns. The interest expense related to this debt has increased significantly, impacting profitability.
06—Continue