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Take-Two Interactive Software, Inc. Reports Results For Fiscal First Quarter 2014

“With Grand Theft Auto V launching on September 17th, followed by the releases of NBA 2K14 and WWE® 2K14, fiscal 2014 is poised to be one of our best years ever. Looking ahead, we are well-positioned to capitalize on the opportunities presented by the upcoming launches of the next-generation consoles. We have an extensive development pipeline, highlighted by proven franchises and groundbreaking new intellectual property. As a result, we expect to continue to deliver Non-GAAP profits in fiscal 2015 and for the foreseeable future.”

Business and Product Highlights

Since April 1, 2013:

  • Take-Two completed a $287.5 million principal amount offering of 1% convertible senior notes due 2018. This offering enables the Company to refinance its 4.375% convertible senior notes due 2014 on substantially improved terms. It also provides Take-Two with additional capital to take advantage of potential opportunities for acquisitions, strategic investments, share repurchases and other initiatives to grow its business and create shareholder value.

Rockstar Games:

  • Released Max Payne 3, the critically acclaimed, gritty action title, for Mac®.
  • Announced full details of the Special Edition and Collector’s Edition of Grand Theft Auto V, which are now available for pre-order from participating retailers. Grand Theft Auto V is scheduled to launch worldwide on September 17, 2013 for Xbox 360 and PS3.

2K:

  • Released Sid Meier's Civilization® V: Brave New World, the second expansion pack for the award-winning Civilization V, for the PC and Mac.
  • Launched XCOM®: Enemy Unknown for iOS. Developed by Firaxis Games, this mobile version of one of 2012’s most critically acclaimed console/PC releases received an average Metacritic score of 92 and became one of the highest user-rated games to hit the App Store during the quarter.
  • Released several new free-to-play titles designed exclusively for smartphones and tablets, including Haunted Hollow™, Sid Meier’s Ace Patrol™, Beejumbled™ and Turd Birds™.
  • Pro Baseball® 2K, our online baseball simulation game created in partnership with Nexon, launched commercially in Korea .
  • Revealed that the cover art for WWE 2K14 will feature WWE superstar Dwayne “The Rock®” Johnson. Developed by Yukes, WWE 2K14 will be the next title from the renowned WWE video game franchise and is scheduled for release for the Xbox 360 and PS3 on October 29, 2013 in North America and November 1, 2013 internationally.
  • Announced that 2013 NBA MVP, LeBron James, will make his video game cover debut on NBA 2K14, the next installment of the top-selling and top-rated NBA video game simulation franchise*. James will lead 2K’s groundbreaking NBA 2K franchise into the future of sports video games with two dynamic and unique experiences for current and next generation consoles. NBA 2K14 is planned for launch on October 1, 2013 in North America and October 4, 2013 internationally for the Xbox 360, PS3 and PC. The title will also be Take-Two’s first offering for the next-generation consoles coming later this year.
  • Announced that The Bureau: XCOM Declassified™, 2K Marin’s third-person squad-based tactical shooter, is planned for release on August 20, 2013 in North America and August 23, 2013 internationally for the Xbox 360, PS3 and PC. The Bureau will deliver a new experience within the XCOM universe, telling the origin story of the clandestine XCOM organization and mankind’s first encounter with the mysterious alien threat.

* According to 2008-2012 Metacritic.com and The NPD Group estimates of U.S. retail video game sales through June 2013.

Financial Outlook for Fiscal 2014

Take-Two is increasing its financial outlook for fiscal year 2014 to reflect its strong first quarter results and outlook for the remainder of the year. In addition, the Company is providing its initial financial outlook for its fiscal second quarter ending September 30, 2013 as follows:

       

Second Quarter

Fiscal Year

Ending 9/30/2013

   

Ending 3/31/2014

 

Non-GAAP Net Revenue

$750 to $800 Million

$1.775 to $1.875 Billion

 

Non-GAAP net income per diluted share (1)

$1.20 to $1.35

$2.25 to $2.50

 

Stock-based compensation expense per share (2)

$0.12

$0.30

 

Non-cash amortization of discount on convertible notes per share

$0.05

$0.18

 

Non-cash tax expense per share

$0.00

$0.01

 

Note:

 

All Non-GAAP per share amounts are calculated based on a fully diluted share count that includes an estimate of the weighted average shares expected to be issued from the conversion for cash and shares in connection with the previously announced redemption of the Company’s 4.375% Convertible Senior Notes due 2014 (the “4.375% Notes”) (approximately 1.0 million shares in the second quarter ending 9/30/2013 and 1.5 million shares in the fiscal year ending 3/31/2014), and excludes the 12.93 million shares underlying the 4.375% Notes.

1)

Non-GAAP net income per diluted share for the second quarter ending 9/30/2013 and fiscal year ending 3/31/2014 exclude the impact of any debt extinguishment loss or gain which will be recorded upon the redemption of all of the 4.375% Notes.

2)

The Company's stock-based compensation expense for the periods above includes the cost of approximately 1.9 million shares 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 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 April 1, 2013:

 

Label

     

Title

     

Platforms

     

Release Date

2K

Borderlands 2: Ultimate Vault Hunter Upgrade Pack (DLC)

Xbox 360, PS3, PC

April 2, 2013

2K

Haunted Hollow

iOS

May 2, 2013

2K

Pro Baseball 2K

Nexon (Korea only)

May 2, 2013

2K

Sid Meier’s Ace Patrol

iOS

May 9, 2013

2K

Borderlands 2: Psycho Pack (DLC)

Xbox 360, PS3, PC

May 14, 2013

2K

Beejumbled

iOS, Android

June 13, 2013

2K

XCOM: Enemy Unknown for iOS

iOS

June 20, 2013

Rockstar Games

Max Payne 3

Mac

June 20, 2013

2K

Borderlands 2: Tiny Tina’s Assault on Dragon Keep (DLC)

Xbox 360, PS3, PC

June 25, 2013

2K

Sid Meier's Civilization V: Brave New World

PC, Mac

July 9, 2013*

2K

Turd Birds

iOS, Android

July 11, 2013

2K

BioShock Infinite: Clash in the Clouds (DLC)

Xbox 360, PS3, PC

July 30, 2013

 

*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

     

Planned Release

2K    

The Bureau: XCOM Declassified

      Xbox 360, PS3, PC       August 20, 2013*
Rockstar Games

Grand Theft Auto V

Xbox 360, PS3 September 17, 2013
2K

NBA 2K14

Xbox 360, PS3, PC

October 1, 2013*

2K

WWE 2K14

Xbox 360, PS3

October 29, 2013*

2K

Borderlands 2: Ultimate Vault Hunter Upgrade Pack 2: Digistruct Peak Challenge (DLC)

Xbox 360, PS3, PC

Fall 2013

2K

NBA 2K14

Xbox One, PS4

Late 2013

2K

BioShock Infinite: Burial at Sea (DLC)

Xbox 360, PS3, PC

TBA

 

*North American release date; international release date typically 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. 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 - 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.
  • 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.
  • 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.
  • Gain (loss) on change in fair value of convertible note hedge and warrant transactions – the Company entered into unwind agreements with respect to its convertible note hedge and warrant transactions. These transactions are now accounted for as derivatives whereby gains and losses resulting from changes in the fair value are reported in interest and other, 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 .

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.

Stock quotes in this article: TTWO 

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