Take-Two Interactive Software, Inc. to Change Non-GAAP Financial Measures
August 02 2016 - 4:05PM
Business Wire
Company will discontinue reporting Non-GAAP net
revenue
Non-GAAP earnings will no longer be adjusted
for deferred net revenues and related costs of goods sold
Changes will have no effect on Company’s
business, GAAP net revenue, GAAP earnings, cash flow or balance
sheet
Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today
announced that, starting with its results for the fiscal first
quarter 2017, ended June 30, 2016, which will be reported on August
4, 2016, the Company will modify the calculation of its Non-GAAP
financial measures. The changes are being made to comply with the
SEC’s updated Compliance and Disclosure Interpretations issued on
May 17, 2016. These changes will have no effect on Take-Two’s
business, GAAP net revenue, GAAP earnings, cash flow, balance sheet
or how its management and Board of Directors evaluate the Company’s
performance. The Company will continue to report Non-GAAP financial
measures that adjust for the items set forth below under the
heading “Non-GAAP Financial Measures”.
Changes to Non-GAAP Financial
Measures
The specific changes to Take-Two’s Non-GAAP financial measures
will be as follows:
- The Company will discontinue
reporting Non-GAAP net revenue. Take-Two had previously
reported Non-GAAP net revenue, which was adjusted for the net
effect from deferral in net revenue. Going forward, the Company
will only report GAAP net revenue and will separately disclose
the change in deferred net revenue, which represents revenue
recognized during the current period that was deferred in prior
periods, net of revenue that is being deferred into future periods.
For those who choose to do so, the change in deferred net revenue
can be added to GAAP net revenue to calculate the financial measure
that Take-Two formerly reported as Non-GAAP net revenue.
- Non-GAAP gross profit, income from
operations, and net income will no longer be adjusted for the net
effect from deferral in net revenue and related costs of goods
sold. Going forward, Take-Two will separately disclose:
- The change in deferred costs of
goods sold, which represents costs of goods sold recognized
during the current period that were deferred in prior periods, net
of costs of goods sold that are being deferred into future periods.
For those who choose to do so, the change in deferred costs of
goods sold can be added to the Company’s new Non-GAAP costs of
goods sold to calculate the financial measure that Take-Two
formerly reported as Non-GAAP costs of goods sold.
- The net effect from deferral of net
revenue and related costs of goods sold, which represents the
after-tax net effect from the change in deferred revenue and the
change in deferred costs of goods sold. For those who choose to do
so, the net effect from deferral of net revenue and related costs
of goods sold can be added to the Company’s new Non-GAAP net income
to calculate the financial measure that Take-Two formerly reported
as Non-GAAP net income.
New Operational Metric
In addition, starting with its results for fiscal first quarter
2017, the Company will report a new operational metric:
bookings – which represents the total amount billed by the
Company from sales of physical product sold-in to retail and
available to consumers, net of allowances, plus products
digitally-delivered to consumers during the period. In addition,
Take-Two will separately report digitally-delivered bookings
(including recurrent consumer spending) and catalog
bookings.
Take-Two is providing these metrics because they are used by its
management and Board of Directors to evaluate the performance of
the Company’s business.
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. These Non-GAAP
financial measures are not intended to be considered in isolation
from, as a substitute for, or superior to, the corresponding GAAP
financial measures, and may be different from similarly titled
measures used by other companies. Management believes that the
presentation of these Non-GAAP financial measures facilitates
comparison of the Company’s operating performance between periods
and helps investors to better understand the operating results of
Take-Two by excluding certain items that may not be indicative of
the Company's core business, operating results or future outlook,
such as stock-based compensation and non-cash amortization of
discount on convertible notes; charges relating to business
reorganizations; and gains on strategic non-core business
investments. Internally, management makes Non-GAAP adjustments to
the Company’s financial measures as set forth below to assess the
company's operating results and in planning and forecasting. The
Non-GAAP adjustments to the Company’s financial measures are as
follows:
- Stock-based compensation – stock-based
compensation is a non-cash expense that is subject to stock price
volatility. 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. In addition, when considering the impact
of equity award grants, the Company places a greater emphasis on
overall shareholder dilution rather than the accounting charges
associated with such grants. As a result, the Company has excluded
such expenses from its Non-GAAP financial measures.
- Business reorganization – although the
Company has incurred business reorganization expenses in the past,
each charge relates to a discrete event based on a unique set of
business objectives and circumstances. Management does not believe
these charges reflect the Company's primary business, ongoing
operating results or future outlook. As such, the Company believes
it is appropriate to exclude these expenses and related charges
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 on long-term investment, net –
from time to time, the Company makes strategic non-core business
investments. Because the Company does not exercise significant
control over these investments, it excludes the impact of any gains
and losses on such investments from its Non-GAAP financial
measures.
- Income tax adjustment – the Company
calculates a provision/benefit for income taxes on a standalone,
Non-GAAP basis inclusive of the adjustments noted above. The income
tax adjustment reflects the difference between our GAAP and
Non-GAAP provision/benefit for income taxes.
In the future, Take-Two may also consider whether other items
should also be excluded in calculating the Non-GAAP financial
measures used by the Company.
About Take-Two Interactive
Software
Headquartered in New York City, Take-Two Interactive
Software, Inc. is a leading developer, publisher and marketer
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 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, the timely release and significant market acceptance of our
games, the ability to maintain acceptable pricing levels on our
games, and risks associated with international operations. Other
important factors and information are contained in the Company's
most recent Annual Report on Form 10-K, including the risks
summarized in the section entitled "Risk Factors," the Company’s
most recent Quarterly Report on Form 10-Q, 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20160802006830/en/
Take-Two Interactive Software, Inc.Investor
Relations:Henry A. Diamond, 646-536-3005Senior Vice
PresidentInvestor Relations & Corporate
CommunicationsHenry.Diamond@take2games.comorTake-Two Interactive
Software, Inc.Corporate Press:Alan Lewis, 646-536-2983Vice
PresidentCorporate Communications & Public
AffairsAlan.Lewis@take2games.com
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