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TheStreet Open House

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

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 Registration Statement on Form S-3 filed with the SEC on June 12, 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.

   
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts)
 
Three months ended June 30,
  2013     2012  
 
 
Net revenue $ 142,667   $ 226,139  
 
Cost of goods sold:
Software development costs and royalties 53,728 105,004
Product costs 30,987 72,259
Licenses 6,187 8,520
Internal royalties   2,940     948  
Total cost of goods sold   93,842     186,731  
 
Gross profit 48,825 39,408
 
Selling and marketing 41,601 79,007
General and administrative 32,860 43,202
Research and development 20,871 15,312
Depreciation and amortization   3,057     2,769  
Total operating expenses   98,389     140,290  
Loss from operations (49,564 ) (100,882 )
Interest and other, net   (11,233 )   (8,049 )
Loss from continuing operations before income taxes (60,797 ) (108,931 )
Provision for income taxes   1,087     1,841  
Loss from continuing operations (61,884 ) (110,772 )
Loss from discontinued operations, net of taxes   (30 )   (66 )
Net loss $ (61,914 ) $ (110,838 )
 
Earnings (loss) per share:
Continuing operations $ (0.71 ) $ (1.30 )
Discontinued operations   -     -  
Basic earnings (loss) per share $ (0.71 ) $ (1.30 )
 
Continuing operations $ (0.71 ) $ (1.30 )
Discontinued operations   -     -  
Diluted earnings (loss) per share $ (0.71 ) $ (1.30 )
 
Weighted average shares outstanding:    
Basic 86,992 85,010
Diluted   86,992     85,010  
 
 
 
Three months ended June 30,
OTHER INFORMATION   2013     2012  
 
Geographic revenue mix
United States 60 % 47 %
International 40 % 53 %
 
Platform revenue mix
Console 73 % 84 %
PC and other 25 % 14 %
Handheld 2 % 2 %
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
       
June 30, March 31,
  2013     2013  
 
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 646,315 $ 402,502

Accounts receivable, net of allowances of $52,103 and $64,081 at June 30, 2013 and March 31, 2013, respectively

35,202 189,596
Inventory 27,852 30,218
Software development costs and licenses 191,449 198,955
Convertible note hedge receivable 62,759 -
Prepaid expenses and other   56,600     44,881  
Total current assets   1,020,177     866,152  
 
Fixed assets, net 30,285 25,362
Software development costs and licenses, net of current portion 102,121 95,241
Goodwill 226,289 225,992
Other intangibles, net 8,666 8,827
Other assets   60,567     56,265  
Total assets $ 1,448,105   $ 1,277,839  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,382 $ 79,932
Accrued expenses and other current liabilities 194,635 228,916
Long-term debt, current portion 127,768 -
Convertible note warrant liability 39,354 -
Deferred revenue 27,983 26,919
Liabilities of discontinued operations   1,165     1,232  
Total current liabilities   416,287     336,999  
 
Long-term debt 408,925 335,202
Other long-term liabilities 15,631 17,087
Liabilities of discontinued operations, net of current portion   281     556  
Total liabilities   841,124     689,844  
Commitments and contingencies
 
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized - -

Common stock, $.01 par value, 200,000 shares authorized; 94,738 and 93,743 shares issued and outstanding at June 30, 2013 and March 31, 2013, respectively

947 937
Additional paid-in capital 914,338 832,460
Accumulated deficit (302,744 ) (240,830 )
Accumulated other comprehensive loss   (5,560 )   (4,572 )
Total stockholders' equity   606,981     587,995  
Total liabilities and stockholders' equity $ 1,448,105   $ 1,277,839  
 
   
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
 
Three months ended June 30,
  2013         2012  
 
Operating activities:
Net loss $ (61,914 ) $ (110,838 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization and impairment of software development costs and licenses 43,238 95,488
Depreciation and amortization 3,057 2,769
Loss from discontinued operations 30 66
Amortization and impairment of intellectual property 139 4,209
Stock-based compensation 5,947 7,006
Amortization of discount on Convertible Notes 5,346 4,543
Amortization of debt issuance costs 497 511
Net loss on change in fair value of convertible note hedge and warrant 1,911 -
Other, net 742 581
Changes in assets and liabilities, net of effect from purchases of businesses:
Accounts receivable 154,394 (26,672 )
Inventory 2,366 (5,510 )
Software development costs and licenses (42,070 ) (56,332 )
Prepaid expenses, other current and other non-current assets (14,591 ) 2,105
Deferred revenue 1,064 484
Accounts payable, accrued expenses and other liabilities (92,583 ) 29,484
Net cash used in discontinued operations   (372 )   (410 )
Net cash provided by (used in) operating activities   7,201     (52,516 )
 
Investing activities:
Purchase of fixed assets   (7,994 )   (3,290 )
Net cash used in investing activities   (7,994 )   (3,290 )
 
Financing activities:
Proceeds from issuance of Convertible Notes 246,250 -
Payment of debt issuance costs   (2,043 )   -  
Net cash provided by financing activities   244,207     -  
 
Effects of foreign exchange rates on cash and cash equivalents   399     2,583  
 
Net increase (decrease) in cash and cash equivalents 243,813 (53,223 )
Cash and cash equivalents, beginning of period   402,502     420,279  
Cash and cash equivalents, end of period $ 646,315   $ 367,056  
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO Non-GAAP MEASURES (Unaudited)    
(in thousands, except per share amounts)
   
 
 
Three months ended June 30,
  2013     2012  
Net Revenues
GAAP Net Revenues $ 142,667 $ 226,139
Net effect from deferral in net revenues   1,636     -  
Non-GAAP Net Revenues $ 144,303   $ 226,139  
 
Gross Profit
GAAP Gross Profit $ 48,825 $ 39,408
Net effect from deferral in net revenues 1,143 -
Stock-based compensation   1,098     4,948  
Non-GAAP Gross Profit $ 51,066   $ 44,356  
 
Loss from Operations
GAAP Loss from Operations $ (49,564 ) $ (100,882 )
Net effect from deferral in net revenues 1,143 -
Stock-based compensation   5,947     7,006  
Non-GAAP Loss from Operations $ (42,474 ) $ (93,876 )
 
Net Loss
GAAP Net Loss $ (61,914 ) $ (110,838 )
Net effect from deferral in net revenues 1,143 -
Stock-based compensation 5,947 7,006
Non-cash amortization of discount on Convertible Notes 5,346 4,543
Net loss on change in fair value of convertible note hedge and warrant 1,911 -
Non-cash tax expense 482 473
Discontinued operations   30     66  
Non-GAAP Net Loss $ (47,055 ) $ (98,750 )
 
Diluted Earnings (Loss) Per Share
GAAP earnings (loss) per share $ (0.71 ) $ (1.30 )
Non-GAAP earnings (loss) per share $ (0.54 ) $ (1.16 )
 
Number of diluted shares used in computation
GAAP 86,992 85,010
Non-GAAP 86,992 85,010




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