 |  |
 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Take-Two Interactive Software, Inc. Reports First Quarter Fiscal 2008 Financial ResultsTop and Bottom Line Results Exceed Guidance Company Raises Fiscal 2008 Guidance and Provides Second Quarter Guidance New York, NY – March 11, 2008 – Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today announced financial results for its first quarter ended January 31, 2008. Net revenue for the first quarter was $240.4 million, compared to $277.3 million for the same quarter of fiscal 2007, which benefited from more new game releases in last year’s holiday season. First quarter sales were led by BioShock, Carnival Games™, NBA 2K8, Grand Theft Auto catalog titles, and the release of Grand Theft Auto: Vice City Stories in Japan. Distribution revenue rose year over year, fueled by the strength of next generation software and hardware sales, including robust demand for Wii™ products. Net loss for the first quarter was $38.0 million or $0.52 per share, compared to a net loss of $21.5 million or $0.30 per share in the first quarter of fiscal 2007. The first quarter results include $6.1 million in stock-based compensation expense ($0.08 per share); and $1.7 million in expenses related to unusual legal matters and business reorganization costs ($0.02 per share). Results for the first quarter of 2007 included $4.0 million in stock-based compensation expense ($0.06 per share); and $7.2 million in expenses related to unusual legal matters ($0.10 per share). Non-GAAP net loss was $30.3 million or $0.41 per share in the first quarter, compared to a net loss of $10.3 million or $0.14 per share in the first quarter of 2007. (Please refer to Non-GAAP Financial Measures and reconciliation tables included later in this release for additional information and details on non-GAAP items.) Business Highlights Among the significant recent business developments, Take-Two noted the following: · Rockstar Games announced a worldwide release date of April 29, 2008 for the highly anticipated Grand Theft Auto IV. · 2K Games said today that BioShock 2, the sequel to the wholly owned and internally developed title, is being developed by 2K Marin and is planned for release in the fourth quarter of fiscal 2009. The critically acclaimed BioShock title has sold over 2 million units worldwide since its launch in August. · Carnival Games™, a wholly owned and internally developed title for the Wii™, shipped over 1 million units since its debut in late August. 2K Play will be bringing this popular title to the Nintendo DS™ this summer. · 2K Play announced today that Carnival Games: Mini-Golf™, a brand extension of the Carnival Games franchise, is coming exclusively to the Wii this fall. · 2K announced the acquisition of Illusion Softworks, the creator and owner of several hit video game franchises, including Mafia, Hidden & Dangerous and Vietcong. Renamed 2K Czech, the Czech Republic based studio is currently developing Mafia II for next generation consoles and Games for Windows®. Strauss Zelnick, Chairman of Take-Two, stated, “We are pleased with Take-Two’s stronger than expected top and bottom line results for the first quarter. Our performance benefited from a diverse range of hit titles in the first quarter, and we are eagerly awaiting the release of Grand Theft Auto IV in the second quarter. We believe that our extraordinary creative assets and improving operational efficiency will be sources of significant value for shareholders as the interactive entertainment industry moves further into the current growth cycle.”
Ben Feder, Chief Executive Officer of Take-Two, added, “We’re excited about our robust product lineup, most of which is based on internally-owned and developed IP. With one of the strongest release schedules in the industry, Take-Two is clearly well positioned for the future. In addition to Grand Theft Auto IV, for the balance of fiscal 2008 our releases will include Midnight Club: Los Angeles, Sid Meier’s Civilization Revolution, Top Spin 3, Don King Presents: Prizefighter, Carnival Games for DS, Carnival Games: Mini-Golf for Wii, NBA® 2K9, NHL® 2K9, episodic content for Grand Theft Auto IV on Xbox 360, as well as other titles. We also have significant visibility into fiscal 2009, which includes additional episodic content for Grand Theft Auto IV, Mafia II, Borderlands™, BioShock 2, our complete sports lineup, additional Nick Jr. titles under our agreement with Nickelodeon, and several new brands.”
Financial Guidance
The Company is providing guidance for the second quarter ending April 30, 2008 and is raising its guidance for the fiscal year ending October 31, 2008 as detailed below. Fiscal 2008 guidance reflects the release of Borderlands for Xbox 360, PLAYSTATION 3 and Games for Windows® in fiscal 2009 instead of fiscal 2008 in order to allow additional development time for this highly anticipated game and provide a better balance in the release of Take-Two’s triple-A titles.
Key assumptions and dependencies underlying the Company’s guidance include continued consumer acceptance of the Xbox 360® video game and entertainment system from Microsoft, PLAYSTATION®3 computer entertainment system and Wii™ home video game system from Nintendo; the ability to develop and publish products that capture market share for these next generation systems while continuing to leverage opportunities on legacy platforms; as well as the timely delivery of the titles detailed in this release.
Product Pipeline
The following titles shipped during the first and second quarters of 2008:
Take-Two's lineup announced to date for the remainder of fiscal 2008 includes the following titles:
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, operating loss, net loss and basic and diluted 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 non-GAAP measures exclude the following items from the Company’s statements of operations:
In addition, the Company may consider whether other significant non-recurring items that arise in the future should also be excluded from the non-GAAP financial measures it uses.
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:
Business reorganization, restructuring and related expenses In March 2007, the Company’s stockholders elected a new slate of members to Take-Two’s Board of Directors, who immediately removed the Company’s former President and Chief Executive Officer. Subsequently, the Company’s former Chief Financial Officer resigned. As a result of these actions and the implementation of a business reorganization plan, the Company incurred significant costs in the year ended October 31, 2007 to reduce headcount, relocate employees and consolidate sales and operational functions.
The Company recorded additional business reorganization costs in the first quarter ended January 31, 2008, and expects that additional business reorganization, restructuring and related costs will be recorded in the remainder of the 2008 fiscal year. Such costs are expected to relate to severance, asset write-offs and associated professional fees. The Company does not engage in reorganization activities on a regular basis and therefore believes it is appropriate to exclude business reorganization expenses from its non-GAAP financial measures.
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 their short and long-term operating plans. Furthermore, executive and management incentive compensation plans are generally based on measures that exclude the impact of stock-based compensation. The Company places greater emphasis on shareholder dilution than accounting charges when assessing the impact of stock-based equity awards.
Professional fees and expenses associated with the Company’s stock options investigation and certain other unusual regulatory and legal matters The Company has incurred significant legal and other professional fees associated with both the investigation of stock option grants and the Company’s responses to the New York County District Attorney’s subpoenas. One of management’s primary objectives is to bring conclusion to its regulatory matters. The Company continues to incur 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.
EBITDA and Adjusted EBITDA Earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”) is a financial measure not calculated and presented in accordance with accounting principles generally accepted in the United States. Management uses EBITDA adjusted for business reorganization and related expenses (“Adjusted EBITDA”), among other measures, in evaluating the performance of the Company’s business units. Adjusted EBITDA is also a significant component of the Company’s incentive compensation plans. Adjusted EBITDA should not be considered in isolation from, or as a substitute for, net income/(loss) prepared in accordance with GAAP.
About Take-Two Interactive Software
Headquartered in New York City, Take-Two Interactive Software, Inc., is a global developer, marketer, distributor and publisher of interactive entertainment software games for the PC, PLAYSTATION®3 and PlayStation®2 computer entertainment systems, PSP® (PlayStation®Portable) system, Xbox 360® and Xbox® video game and entertainment systems from Microsoft, Wii™, Nintendo GameCube™, Nintendo DS™ and Game Boy® Advance. The Company publishes and develops products through its wholly owned labels Rockstar Games, 2K Games, 2K Sports and 2K Play, and distributes software, hardware and accessories in North America through its Jack of All Games subsidiary. Take-Two’s common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at www.take2games.com.
All trademarks and copyrights contained herein are the property of their respective holders.
Microsoft, Windows, the Windows Vista Start button, Xbox, Xbox 360, Xbox LIVE, and the Xbox logos are trademarks of the Microsoft group of companies, and 'Games for Windows' and the Windows Vista Start button logo are used under license from Microsoft.
“PlayStation”, “PLAYSTATION”, and “PS” Family logo are registered trademarks of Sony Computer Entertainment Inc.
Wii and Nintendo DS are trademarks of Nintendo. © 2006 Nintendo. This press release contains forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws. Such forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to them. The Company has no obligation to update such forward-looking statements. Actual results may vary significantly from these forward-looking statements based on a variety of factors. These risks and uncertainties include the matters relating to the Special Committee's investigation of the Company's stock option grants and the restatement of our consolidated financial statements. The investigation and conclusions of the Special Committee may result in claims and proceedings relating to such matters, including previously disclosed shareholder and derivative litigation and actions by the Securities and Exchange Commission and/or other governmental agencies and negative tax or other implications for the Company resulting from any accounting adjustments or other factors. Further risks and uncertainties associated with Electronic Arts' unsolicited proposal to acquire the Company include: the risk that key employees may pursue other employment opportunities due to concerns as to their employment security with the Company; the risk that the acquisition proposal will make it more difficult for the Company to execute its strategic plan and pursue other strategic opportunities; the risk that the future trading price of our common stock is likely to be volatile and could be subject to wide price fluctuations; and the risk that stockholder litigation in connection with Electronic Arts' unsolicited proposal, or otherwise, may result in significant costs of defense, indemnification and liability. Other important factors are described in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2007, in the section entitled "Risk Factors" as updated in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2008, in the section entitled “Risk Factors.” All forward-looking statements are qualified by these cautionary statements and are made only as of the date they are made. | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
|
 | |
 | |
 | |
 | |
 | |
 | |
 | |
 |
