10-QPeriod: Q2 FY2024

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q2 Ended Sep 30, 2023

Filed November 9, 2023For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. reported a net loss of $543.6 million for the third quarter of fiscal year 2024, compared to a net loss of $257.0 million in the same period last year. Revenue for the quarter was $1.30 billion, a decrease of 6.8% year-over-year, primarily driven by lower net revenue from mobile games and certain key franchises. The company experienced significant operating expenses, including a $165.4 million goodwill impairment charge and increased cost of revenue. Despite the net loss, the company's Net Bookings showed a modest increase year-over-year for the six-month period, largely driven by the acquisition of Zynga and a strong performance in the recurrent consumer spending (RCS) segment. Management highlighted ongoing investments in content and strategic initiatives, while also managing debt obligations, including the repayment of a portion of its 2024 Notes.

Financial Highlights

53 data points
Beta

Revenue

$1.30B

32.0% Gross Margin

Net Income

-$543.60M

-41.8% Net Margin

EPS (Diluted)

$-3.20

Total Assets

$15.21B

Cash & Equivalents

$756.80M

Free Cash Flow

$36.40M

Financial Statements
Beta
Revenue$1.30B
Cost of Revenue$883.80M
Gross Profit$415.40M
Operating Expenses$959.10M
Operating Income-$543.70M
Interest Expense$31.30M
Net Income-$543.60M
EPS (Basic)$-3.20
EPS (Diluted)$-3.20
Shares Outstanding (Basic)169.90M

Key Highlights

  • 1Net loss for the quarter widened to $543.6 million from $257.0 million in the prior year period.
  • 2Total net revenue decreased by 6.8% to $1.30 billion compared to the prior year period, impacted by lower sales from mobile titles and key franchises like NBA 2K and Tiny Tina's Wonderlands.
  • 3The company recorded a significant goodwill impairment charge of $165.4 million during the quarter.
  • 4Cost of revenue increased substantially due to impairment charges on developed game technology intangible assets, leading to a gross profit margin of 32.0% compared to 48.8% in the prior year.
  • 5Recurrent consumer spending (RCS) continues to be a significant driver, representing 77.0% of net revenue for the quarter.
  • 6Net Bookings increased by 5.6% for the six-month period, largely attributed to the contributions from the Zynga acquisition and strong performance in the hyper-casual mobile portfolio.
  • 7The company repurchased $650.0 million of its 2024 Notes, resulting in a debt extinguishment gain and a reduction in short-term debt.

Frequently Asked Questions

The increased net loss was primarily driven by a substantial goodwill impairment charge of $165.4 million and higher cost of revenue, which included impairment charges for developed game technology intangible assets. These factors significantly impacted the company's gross profit and overall profitability for the quarter.

The acquisition of Zynga continues to be a significant factor, particularly for the six-month period, contributing to an increase in Net Bookings and revenue. The recurrent consumer spending (RCS) segment, which includes many of Zynga's mobile titles, showed strong performance, driving the overall increase in Net Bookings for the first six months of the fiscal year.

The company's liquidity position appears stable. As of September 30, 2023, Take-Two had $1.29 billion in cash, cash equivalents, and restricted cash. They anticipate current cash, cash equivalents, short-term investments, projected cash flow from operations, and availability under their credit agreement will be sufficient to meet their liquidity needs. Debt management, including the repurchase of 2024 Notes, was also a key financial activity.

Key risks and challenges include ongoing macroeconomic and geopolitical factors affecting consumer demand and foreign currency exchange rates. The company also faces risks related to product release schedules, competition, dependence on key franchises, and changes in platform fees imposed by digital storefronts like Apple and Google. The recent impairment charges also indicate potential issues with the performance of certain acquired assets or reporting units.