Take-Two Interactive Software, Inc. (TTWO)
Q3 2008 Earnings Call
September 4, 2008 4:30 pm ET
Cindy Buckwalter - Executive Vice President
Strauss Zelnick - Chairman of the Board
Benjamin Feder - CEO
Lainie Goldstein - CFO
Anthony Gikas - Piper Jaffray
Mike Hickey - Janco Partners
Daniel Ernst - Hudson Square Research
Benjamin Schachter - UBS
Doug Creutz - Cowen & Company
Edward Williams - BMO Capital Markets
Eric Handler - Lehman Brothers
John Taylor – Arcadia Investment Corporation
Previous Statements by TTWO
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Welcome and thank you all for joining us for our third quarter conference call. Today’s call will be led by Strauss Zelnick, Chairman of Take-Two; Ben Feder, our CEO; and Lainie Goldstein, our CFO. Our team will be available to answer your questions during the Q&A session following our prepared remarks.
Before we begin, I would first like to quickly review our Safe Harbor statement by reminding everyone that the statements made during this call that are not historical facts are considered forward-looking statements under Federal Securities Laws.
These forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements. Actual operating results may vary significantly from these forward-looking statements based on a variety of factors, including the risks associated with our process to evaluate strategic alternatives.
These important factors are described in our press release today and our filings with the SEC, including our 10-K for the fiscal year ended October 31, 2007 and our 10-Qs for the interim quarters of fiscal 2008. These documents may be obtained from our website at www.taketwogames.com.
Now let me turn the call over to Strauss.
Thanks Cindy, good afternoon everyone, thanks for joining us. Take-Two’s third quarter results beat expectations by a wide margin. This clearly demonstrates that our company is in terrific shape and that we’re positioned to create even greater stockholder value in the future.
We’re performing well in all aspects of our business creatively, operationally and financially. From a product perspective our industry leading creative teams are building an increasingly diverse portfolio of interactive entertainment brands that are massive winners with consumers.
Our strong third quarter performance was driven by a broad range of [inaudible] from our powerhouse Grand Theft Auto to Civilization to newer brands like Carnival Games, as well as our sports titles led by Top Spin 3 and Major League Baseball 2K8.
In an industry where strong contact is a critical determinant of success, we have an increasingly formidable advantage. Operationally our ongoing efforts to drive increased efficiency have gained significant traction over the past 16 months. We have now implemented all of our previously announced cost saving measures and will reap the benefits of these initiatives going forward both in terms of higher productivity and the ability to reinvest the savings to grow our business.
On the financial front our third quarter results continued the trend of dramatic performance improvements that we consistently delivered throughout this fiscal year. Our top line revenue and non-GAAP EPS results once again outperformed our guidance and exceeded even the most optimistic analyst estimates.
Before I turn the call over to Benjamin I’d like to give you a brief update on our strategic review process. As you know Electronic Arts agreed to a presentation by our management team consistent with our process following the expiration of their [inaudible] tender offer. At the same time we’re actively continuing our other formal discussions as we previously disclosed.
Our Board and management team have at all times conducted this process and its deliberate focus and reasoned manner with the goal of pursing the task that will create the greatest possible values for our stockholders. We’ll continue to do so.
Now Benjamin will discuss the third quarter results in more detail and provide us with additional detail on our creative and operational progress.
Thanks Strauss, our third quarter results were in a word fantastic. This marks the fifth quarter in a row that we’ve beaten our own guidance as well as consensus expectations. Strauss and I have urged our team to remain focused on the business despite the considerable potential for distraction and their ability to do so is reflected in our strong performance.
Net revenue for the quarter was $434 million, more than double the $206 million we reported in Q 3 last year. Earnings on a non-GAAP basis were $0.93 per share compared with a net loss one year ago and also were sharply higher then consensus.
The quarter’s results were driven by better then expected performance of Grand Theft Auto IV which shipped in Q2 and also our newly released titles Top Spin 3, Sid Meier’s Civilization Revolution which both shipped in the third quarter.
Our strong performance is reflected in our increased cash position. We had nearly $339 million in cash at the end of the quarter, well over $4.00 per share and paid off the balance owed on our credit line. To be clear, the company is debt free.
I’d like to expand on Strauss’ point about our creative performance. Thanks to the efforts of nearly 1,400 development team members worldwide and a disciplined product investment review process, we now have the strongest and most diverse portfolio in Take-Two’s history.