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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Third Quarter 2014

New York, NY – February 3, 2014 – Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong financial results for fiscal third quarter 2014, ended December 31, 2013.  In addition, the Company increased its financial outlook for fiscal year 2014, ending March 31, 2014, and provided its initial financial outlook for fiscal fourth quarter 2014, ending March 31, 2014.

GAAP Financial Results
For fiscal third quarter 2014, GAAP net revenue increased to $1.86 billion, as compared to $415.8 million for fiscal third quarter 2013.  GAAP net income from continuing operations was $578.4 million, or $4.69 per diluted share, as compared to $70.9 million, or $0.66 per diluted share, for the year-ago period.  As of December 31, 2013, the Company had cash and cash equivalents of $972.2 million.

Non-GAAP Financial Results
For fiscal third quarter 2014, Non-GAAP net revenue grew to $767.7 million, as compared to $405.0 million for the year-ago period.  Non-GAAP net income increased to $210.7 million, or $1.70 per diluted share, as compared to $78.8 million, or $0.67 per diluted share, for the year-ago period.

The largest contributors to net revenue in fiscal third quarter 2014 were Grand Theft Auto V®NBA® 2K14, and WWE® 2K14.  Non-GAAP net revenue from digitally-delivered content grew 42% year-over-year to $132.8 million, driven by the Grand Theft Auto series, the NBA 2Kfranchise, and offerings for Borderlands® 2 and BioShock® Infinite.  Catalog sales accounted for $113.0 million of Non-GAAP net revenue led by offerings for Borderlands 2, the Grand Theft Auto series, XCOM®: Enemy UnknownBioShock Infinite, and Sid Meier’s Civilization® V.

Management Comments
“Take-Two’s business continued to outperform expectations significantly during the fiscal third quarter,” said Strauss Zelnick, Chairman and CEO of Take-Two.  “Our results were driven by robust holiday demand for Grand Theft Auto V, the franchise record-breaking launch of NBA 2K14, the successful release of WWE 2K14, and strong growth in digitally-delivered revenues led by Grand Theft Auto Online.  Take-Two was the top video game publisher of 2013, according to the NPD Group, underscoring our positive momentum over the past year.

“As a result of our third quarter performance, we have once again raised our revenue and earnings outlook for fiscal 2014, which is poised to be a record year for Take-Two.  Looking ahead, we firmly expect to deliver Non-GAAP earnings in fiscal 2015 and every year for the foreseeable future.  This confidence is based on our development pipeline of groundbreaking new intellectual properties and offerings from our proven franchises, which bear the hallmark of our commitment to provide the highest quality entertainment experiences.”

Business and Product Highlights
Since October 1, 2013:

  • Take-Two finished as the top video game publisher of 2013.*

  • Take-Two deployed $276.8 million to repurchase 16.24 million shares of its common stock, including 12.02 million shares repurchased from the Icahn Group.


Rockstar Games:

  • Launched Grand Theft Auto Online, the dynamic and persistent online game, which is free with every copy of Grand Theft Auto V.

  • Grand Theft Auto V finished as the best-selling video game of 2013.*  To date, Grand Theft Auto V has sold-in more than 32.5 million units.

  • Released Grand Theft Auto: San Andreas for select iOS, Android, Amazon Kindle and Windows Phone devices.


2K:

  • Launched NBA 2K14, which is the fastest-selling release in the history of our top-selling and top-rated NBA video game simulation franchise** that has sold-in nearly 35 million units to date.   Developed by Visual Concepts, NBA 2K14 has already sold-in more than 5 million units and is Take-Two’s first offering for the PlayStation®4 computer entertainment system and Xbox One, the all-in-one games and entertainment system from Microsoft.  The title is also available for the Xbox 360, PS3 and PC.

  • Launched WWE 2K14 for the Xbox 360 and PS3.  Developed by Yukes, WWE 2K14 is being supported with downloadable add-on content, including a Season Pass.

  • Released the Borderlands 2 Game of the Year Edition for the Xbox 360, PS3 and PC.  Borderlands 2 is now the highest-selling title in 2K’s history with more than 8.5 million units sold-in to date.

  • Released XCOM: Enemy Within, the expanded experience of Firaxis Games’ “Game of the Year” award-winning strategy title, XCOM: Enemy Unknown, for the Xbox 360, PS3, PC and Mac.

  • Announced that Evolve is planned for launch on the Xbox One, PS4 and PC in fall 2014.  Developed by Turtle Rock Studios, the renowned creators of Left 4 DeadEvolve is an all-new shooter that blends cooperative and competitive multiplayer experiences.


* According to The NPD Group’s Retail Tracking Service.

** According to 2008-2013 Metacritic.com and The NPD Group estimates of U.S. retail video game sales through December 2013.

Financial Outlook for Fiscal 2014
Take-Two is increasing its financial outlook for fiscal year 2014 primarily to reflect its strong fiscal third quarter results and lower share count due to its repurchase of 16.24 million shares in November, 2013.  In addition, the Company is providing its initial financial outlook for its fiscal fourth quarter ending March 31, 2014 as follows:

































































































Fourth Quarter
Ending 3/31/2014 
(2)
Fiscal Year
Ending 3/31/2014 
(2)
Non-GAAP Net Revenue $170 to $200 Million $2.35 to $2.38 Billion
Non-GAAP net income per diluted   share $0.00 to $0.10 $4.15 to $4.25
Net effect from deferral in net revenues and related cost of goods sold                  $0.10                $0.21
Stock-based compensation expense  per share (1)                  $0.09                $0.56
Business reorganization, restructuring and related expenses $0.02 $0.03
Non-cash amortization of discount      on convertible notes per share $0.04 $0.20
Loss on extinguishment of debt $0.00 $0.07
Gain on convertible note hedge and warrants, net $0.00 ($0.04)
Non-cash tax expense per share  $0.00 $0.02



  1.   The Company's stock-based compensation expense for the periods above includes the cost of approximately 1.9 million restricted shares previously granted to ZelnickMedia that are subject to variable accounting.  Actual expense to be recorded in connection with these shares is dependent upon several factors, including future changes in Take-Two's stock price.

  2.   In connection with the redemption of the Company’s 4.375% Notes, the weighted average fully diluted share count used to calculate all Non-GAAP per share amounts includes the 12.93 million shares underlying the 4.375% Notes through June 12, 2013 (notice of redemption date) and the 3.2 million shares ultimately issued upon conversion of the 4.375% Notes subsequent to June 12, 2013.



Key assumptions and dependencies underlying the Company’s financial outlook include: the timely delivery of the titles included in this financial outlook; the ability to develop and publish products that capture market share for video game and computer entertainment systems; and stable foreign exchange rates.  See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases
The following titles were released since October 1, 2013:










Label              Title                                                                                      Platforms                            Release Date
Rockstar Games    Grand Theft Auto Online                                                                                    Xbox 360, PS3                                    October 1, 2013
2K                          NBA 2K14                                                                                                          Xbox 360, PS3, PC, iOS, Android       October 1, 2013*
2K                          Borderlands 2 Game of the Year Edition                                                           Xbox 360, PS3, PC                             October 8, 2013*
2K                          The Bureau: XCOM Declassified Hanger 6 R&D (DLC)                                    Xbox 360                                             October 8, 2013
2K                          XCOM: Enemy Unknown for iOS Multiplayer Update                                        iOS                                                      October 10, 2013
2K                          NBA 2K14 Superfan Pack                                                                                  Xbox 360, PS3                                    October 15, 2013
2K                          Sid Meier’s Civilization V: Scrambled Continents (DLC)                                    PC                                                       October 17, 2013
2K                          Borderlands 2: Headhunter 1: TK Baha’s Bloody Harvest (DLC)                      Xbox 360, PS3, PC                             October 22, 2013
2K                          Holiday Bundle: Spec Ops® : The Line, Mafia II & Borderlands 2                     Xbox 360, PS3                                    October 22, 2013
2K                          Holiday Bundle: BioShock, Borderlands 2 & XCOM: Enemy Unknown             Xbox 360, PS3                                    October 22, 2013
2K                          Holiday Bundle: BioShock 2, The Darkness II™ & Mafia II                               Xbox 360, PS3                                    October 22, 2013
2K                          Holiday Bundle: XCOM: Enemy Unknown & Sid Meier’s Civilization V             PC                                                       October 22, 2013
2K                          WWE 2K14                                                                                                        Xbox 360, PS3                                    October 29, 2013*
2K                         MyNBA 2K14                                                                                                      iOS, Google Play, Android                  November 1, 2013
2K                         Sid Meier's Ace Patrol: Pacific Skies                                                                  PC (Steam exclusive)                         November 5, 2013
2K                         Sid Meier’s Civilization V: Scrambled Nations (DLC)                                         PC                                                       November 5, 2013
2K                         Sid Meier's Ace Patrol: Pacific Skies                                                                  iOS                                                      November 7, 2013
2K                         BioShock Infinite: Burial at Sea – Episode 1 (DLC)                                            Xbox 360, PS3, PC                             November 12, 2013
2K                         XCOM: Enemy Within                                                                                         Xbox 360, PS3, PC, Mac                    November 12, 2013*
2K                         WWE 2K14: nWo Pack (DLC)                                                                             Xbox 360, PS3                                   November 12, 2013
2K                         NBA 2K14                                                                                                           PS4                                                     November 15, 2013
2K                         NBA 2K14                                                                                                           Xbox One                                            November 19, 2013
2K                         Borderlands 2: Headhunter 2: Wattle Gobbler (DLC)                                         Xbox 360, PS3, PC                             November 26, 2013
2K                         WWE 2K14: WWE Superstars and Moves Pack (DLC)                                     Xbox 360, PS3                                    December 3, 2013
Rockstar Games   Grand Theft Auto: San Andreas                                                                         iOS                                                     December 12, 2013
2K                         Sensei Wars©                                                                                                     iOS, Google Play, Android                 December 12, 2013
2K                         Borderlands 2: Headhunter 3: How Marcus Saved Mercenary Day (DLC)        Xbox 360, PS3, PC, Mac                    December 17, 2013
Rockstar Games  Grand Theft Auto: San Andreas                                                                          Android, Kindle                                   December 20, 2013
2K                         WWE 2K14: WWE Legends and Creations Pack (DLC)                                    Xbox 360, PS3                                    January 7, 2014
Rockstar Games  Grand Theft Auto: San Andreas                                                                          Windows Phone                                 January 27, 2014*North American release date; international release date typically follows three days after.

Take-Two's lineup of future titles announced to date includes:








Label              Title                                                                                      Platforms                            Release Date
2K                         Sid Meier’s Civilization V: The Complete Edition                                                PC                                                       February 4, 2014
2K                         Borderlands 2 & Dishonored™ Bundle                                                               Xbox 360, PS3 , PC                            February 11, 2014
2K                         The Elder Scrolls® V: Skyrim & BioShock Infinite Bundle                                  Xbox 360, PS3 , PC                            February 11, 2014
2K                         XCOM: Enemy Unknown: The Complete Edition                                               PC                                                       March 4, 2014
2K                         BioShock Infinite: Burial at Sea – Episode 2 (DLC)                                            Xbox 360, PS3, PC                             TBA
2K                         Evolve                                                                                                                 Xbox One, PS4, PC                             Fall 2014
2K                         NBA 2K15                                                                                                           TBA                                                      Fiscal 2015
2K                         WWE 2K15                                                                                                         TBA                                                      Fiscal 2015

Conference Call
Take-Two will host a conference call today at 4:30 p.m. Eastern Time to review these results and discuss other topics.  The call can be accessed by dialing (877) 407-0984 or (201) 689-8577.  A live listen-only webcast of the call will be available by visiting http://ir.take2games.com and a replay will be available following the call at the same location.

Non-GAAP Financial Measures 
In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses Non-GAAP measures of financial performance.  The Company believes that these Non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in gaining an understanding of the Company’s ongoing business. These Non-GAAP financial measures also provide for comparative results from period to period.  Therefore, the Company believes it is appropriate to exclude the impact of certain items as follows:

  • Net effect from deferral in net revenues and related cost of goods sold - the Company defers revenue and related costs from the sale of certain titles that have undelivered elements upon the sale of the game and recognizes that revenue upon the delivery of the undelivered elements.  As there is no impact to the Company’s operating cash flow, management excludes the impact of deferred net revenue and related costs from its Non-GAAP financial measures when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.  In addition, we believe that these Non-GAAP financial measures provide a more timely indication of trends in our business, provide comparability with the way our business is measured by analysts, and provide consistency with industry data sources.

  • Stock-based compensation – the Company does not consider stock-based compensation charges when evaluating business performance and management does not contemplate stock-based compensation expense in its short- and long-term operating plans.  As a result, the Company has excluded such expenses from its Non-GAAP financial measures.

  • Business reorganization, restructuring and related expenses – although the Company has incurred business reorganization expenses in the past, each charge relates to a discrete event


based on a unique set of business objectives. Management does not believe these charges
reflect the Company's primary business, ongoing operating results or future outlook. As such, the
Company believes it is appropriate to exclude these expenses and related charges from its Non-
GAAP financial measures.

  • Non-cash amortization of discount on convertible notes – the Company records non-cash amortization of discount on convertible notes as interest expense in addition to the interest expense already recorded for coupon payments.  The Company excludes the non-cash portion of the interest expense from its Non-GAAP financial measures because these amounts are unrelated to its ongoing business operations.

  • Loss on extinguishment of debt – the Company recorded a loss on extinguishment of debt as a result of settling its 4.375% Convertible Notes in August 2013.  The Company excludes the impact of such transactions when evaluating the Company’s operating performance.  Management does not believe this loss reflects the Company's primary business, ongoing operating results or future outlook.  As such, the Company believes it is appropriate to exclude this loss from its Non-GAAP financial measures.

  • Gain on convertible note hedge and warrants, net – the Company entered into unwind agreements with respect to its convertible note hedge and warrant transactions.  As a result of the unwind agreements, these transactions were accounted for as derivatives whereby gains and losses resulting from changes in the fair value were reported in gain on convertible note hedge and warrants, net.  The Company excludes the impact of such transactions when evaluating the Company’s operating performance.  Management does not believe these gains and losses reflect the Company's primary business, ongoing operating results or future outlook.  As such, the Company believes it is appropriate to exclude these gains and losses from its Non-GAAP financial measures.

  • Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill – due to the nature of the adjustment as well as the expectation that it will not have any cash impact in the foreseeable future, the Company believes it is appropriate to exclude this expense from its Non-GAAP financial measures.

  • Income (loss) from discontinued operations – the Company does not engage in sales of subsidiaries on a regular basis and therefore believes it is appropriate to exclude such gains (losses) from its Non-GAAP financial measures.  As the Company is no longer active in its discontinued operations, it believes it is appropriate to exclude income (losses) thereon from its Non-GAAP financial measures.


These Non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results.  These Non-GAAP financial measures may be different from similarly titled measures used by other companies.

About Take-Two Interactive Software
Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, marketer and publisher of interactive entertainment for consumers around the globe.  The Company develops and publishes products through its two wholly-owned labels Rockstar Games and 2K.  Our products are designed for console systems, handheld gaming systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services.  The Company’s common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at http://www.take2games.com.

All trademarks and copyrights contained herein are the property of their respective holders.

Cautionary Note Regarding Forward-Looking Statements
The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance.  Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.  Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: our dependence on key management and product development personnel, our dependence on our Grand Theft Auto products and our ability to develop other hit titles for current and next-generation platforms, the timely release and significant market acceptance of our games, the ability to maintain acceptable pricing levels on our games, our ability to raise capital if needed and risks associated with international operations.  Other important factors and information are contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2013, in the section entitled "Risk Factors," the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2013, and the Company's other periodic filings with the SEC, which can be accessed at www.take2games.com.  All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.