Take-Two Interactive Software, Inc. Reports Financial Results for Third Quarter Fiscal 2011
February, 8 2011
TAKE-TWO INTERACTIVE SOFTWARE, INC. REPORTS FINANCIAL RESULTS FOR THIRD QUARTER FISCAL 2011
Net Revenue was $334.3 Million
Non-GAAP Income from Continuing Operations per Diluted Share was $0.52
Company Increases Financial Guidance for Fiscal 2011
New York, NY – February 8, 2011 – Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced financial results for its fiscal third quarter ended December 31, 2010. In addition, the Company increased its financial guidance for the fiscal year 2011. As previously announced, the Company has changed its fiscal year-end from October 31 to March 31 and all results are now reported in accordance with this change.
For the third quarter ended December 31, 2010, net revenue was $334.3 million, as compared to $360.4 million for the year-ago period. GAAP income from continuing operations was $40.8 million, or $0.45 per diluted share, as compared to $39.4 million, or $0.44 per diluted share, for the year-ago period. Non-GAAP income from continuing operations was $49.5 million, or $0.52 per diluted share, as compared to $49.2 million, or $0.53 per diluted share, for the year-ago period. Non-GAAP income from continuing operations excludes certain non-cash and non-operational gains and losses identified on the attached reconciliation of GAAP and Non-GAAP measures.
The strongest contributors to net revenue and profitability in the third quarter this year included NBA® 2K11, Red Dead Redemption, Red Dead Redemption: Undead Nightmare (standalone disc), Grand Theft Auto IV: Complete, Borderlands™ Game of the Year and Sid Meier’s Civilization® V. Catalog titles that contributed to the strength in the recent period were led by the Grand Theft Auto franchise. Digitally delivered content also continued to be an important component of Take-Two’s sales, particularly driven by strong sales of offerings for Red Dead Redemption, Borderlands and Sid Meier’s Civilization V.
For the nine-months ended December 31, 2010, net revenue increased 80% year-over-year to $954.6 million. GAAP income from continuing operations increased to $76.2 million, or $0.88 per diluted share, as compared to a loss of ($98.4) million, or ($1.27) per share, for the year-ago period. Non-GAAP income from continuing operations increased to $108.8 million, or $1.15 per diluted share, as compared to a loss of ($67.5) million, or ($0.87) per share, for the year-ago period.
Management Comments
Strauss Zelnick, Chairman and Chief Executive Officer of Take-Two, commented, “Strong holiday sales enabled Take-Two to continue to deliver better-than-expected revenue and earnings in the third quarter. Our results year-to-date clearly demonstrate the Company’s ability to translate its world-class creative resources and diverse portfolio of triple-A franchises into meaningful profits.
“Looking ahead to the balance of the year and fiscal 2012, I have never been more enthusiastic about our diverse line-up of upcoming releases. From unique, groundbreaking new titles such as L.A. Noire, to the long anticipated return of Duke Nukem, the interactive entertainment industry’s most irreverent hero, we will deliver a broad array of entertainment experiences that promise to delight audiences around the world
“In addition to producing triple-A titles focused on the traditional console market, we are also actively pursuing opportunities to grow our revenues by leveraging the strength of our brands in emerging markets and across new platforms and distribution channels. These include opportunities in Asia and Latin America, evolving downloadable content models and online multiplayer experiences.”
Product Highlights
Since October 1, 2010:
· Rockstar Games released Red Dead Redemption: Undead Nightmare as both a standalone disc and DLC.
· Rockstar Games’ Red Dead Redemption has sold-in over 8 million units worldwide since launching in May 2010.
· Rockstar Games announced that it plans to release L.A. Noire on May 17, 2011 in North America and May 20, 2011 in Europe.
· 2K Sports launched NBA 2K11, which to date has sold-in nearly 4 million units worldwide and received the highest scores in the history of the franchise (89 – Metacritic.com).
· 2K Sports signed pitcher Roy Halladay of the Philadelphia Phillies as the cover athlete for Major League Baseball 2K11, which is planned to launch on March 8, 2011. The label is supporting the launch of the title with the Major League Baseball 2K11 Challenge that will award $1 million to the first person to pitch a perfect game using the latest installment of the popular franchise during the contest period.
· 2K Sports announced that it plans to release Top Spin 4 on March 15, 2011.
· 2K Games announced that it plans to release Duke Nukem Forever® on May 3, 2011 in North America and on May 6, 2011 internationally.
· 2K Games announced that it plans to release The Darkness™ II in fall 2011.
· 2K Play released Nickelodeon Fit, the Company’s first fitness title for children featuring the television network’s popular characters, exclusively for the Wii™ system.
· 2K Play announced that it plans to release Carnival Games®: Monkey See, Monkey Do™ for Kinect for Xbox 360 in April 2011. The Carnival Gamesfranchise has sold more than 7 million units worldwide and the title marks the Company’s first offering for Microsoft’s new interactive entertainment hardware.
Financial Guidance
Based on its strong results year-to-date and outlook for the remainder of the fiscal year, Take-Two has increased its financial guidance for both the fourth quarter and full year of fiscal 2011. The Company’s updated financial guidance is as follows:
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(a) The Company's stock-based compensation expense for the periods above includes the cost of approximately 1.5 million shares previously issued 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.
Key assumptions and dependencies underlying the Company’s guidance include continued consumer acceptance of the Xbox 360, PlayStation 3 and Wii; the ability to develop and publish products that capture market share for these current generation systems while continuing to leverage opportunities on certain prior generation platforms; the timely delivery of the titles detailed in this release; and stable foreign exchange rates.
Product Releases
The following titles released during the fiscal third quarter of 2011:
| Title | Platform | |||||
| Borderlands™ Game of the Year | Xbox 360, PS3, PC | |||||
| Dora’s Big Birthday Adventure | Wii, PS2 | |||||
| Dora’s Cooking Club | DS | |||||
| Grand Theft Auto IV: Complete | Xbox 360, PS3 | |||||
| Grand Theft Auto Trilogy | Mac | |||||
| Mafia® II: Joe’s Adventures (DLC) | Xbox 360, PS3, PC | |||||
| Mega Bloks: Diego’s Build and Rescue | DS | |||||
| NBA® 2K11 | Xbox 360, PS3, PS2, PSP, Wii, PC | |||||
| Nickelodeon® Fit | Wii | |||||
| Red Dead Redemption: Undead Nightmare (standalone disc) | Xbox 360, PS3 | |||||
| Red Dead Redemption: Undead Nightmare Pack (DLC) | Xbox 360, PS3 | |||||
| Sid Meier’s Civilization V: Babylonian Civilization Pack (DLC) | PC | |||||
| Sid Meier’s Civilization V: Mongols and Scenario Pack (DLC) | PC | |||||
| Sid Meier’s Civilization V: The Double Civilization and Scenario Pack: Spain and Inca (DLC) | PC | |||||
Take-Two's lineup of future titles announced to date includes:
Title
Major League Baseball 2K11
Top Spin 4
Carnival Games®: Monkey See, Monkey Do™
Duke Nukem Forever
L.A. Noire
The Darkness II
Spec Ops: The Line
XCOM
BioShock® Infinite
*North American release date; international release follows three days after.
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 that exclude certain non-recurring or non-cash items. Non-GAAP gross profit, income (loss) and earnings (loss) per share are measures that exclude certain non-recurring or non-cash items and should be considered in addition to results prepared in accordance with GAAP. They 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.
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 certain items as follows:
< >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.Business reorganization, restructuring and related expenses – the Company does not engage in reorganization activities on a regular basis and therefore believes it is appropriate to exclude business reorganization, restructuring and related expenses from its Non-GAAP financial measures.Gain (loss) on sale of subsidiaries and 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.Professional fees and expenses associated with unusual legal and other matters – the Company has incurred expenses for professional fees and has accrued for legal settlements that are outside its ordinary course of business. As a result, the Company has excluded such expenses from its Non-GAAP financial measures. Non-cash interest expense related to convertible debt – The Company records non-cash interest expense on its convertible notes 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.Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill and the impact of the cancellation of stock options – 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.www.take2games.com.
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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 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 Transition Report on Form 10-KT for the five month transition period ended March 31, 2010, in the section entitled "Risk Factors," 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.