Exchange: LSE | Sector: Technology | Industry: Media Entertainment
Q1 2025
Published: Aug 9, 2024
Earnings Highlights
Revenue of $1.34B up 4.2% year-over-year
EPS of $-1.52 decreased by 24.6% from previous year
Gross margin of 57.6%
Net income of -262.00M
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Take-Two Interactive Software Inc (0LCX.L) QQ1 2025 Results: Revenue Growth Amid Margin Pressure and Elevated Leverage – A Cautious but Developing Outlook
Executive Summary
Take-Two Interactive Software Inc reported QQ1 2025 revenue of USD 1.3382 billion, with a gross profit of USD 771.1 million and a gross margin of 57.6%. EBITDA stood at USD 116.3 million, while operating income was negative USD 184.9 million and net income was a negative USD 262.0 million. The quarter showed a modest year-over-year revenue increase of 4.16% but a QoQ revenue decline of 4.37%. Net income, by contrast, fell 27.2% YoY and rose about 91% QoQ, reflecting ongoing cost pressures and a high operating expense base that continued to weigh on profitability. The company generated negative operating cash flow of USD 191.0 million and free cash flow of USD -226.1 million, with a cash balance of USD 1.4719 billion at period end and total debt of USD 4.1223 billion, resulting in a net debt position of USD 2.7351 billion.
From a balance sheet perspective, Take-Two carries a substantial goodwill and intangible asset load (Goodwill USD 4.7068 billion; Intangibles USD 4.6119 billion; total intangible/goodwill around USD 9.3187 billion), underscoring the importance of intellectual property and acquisition-driven growth but highlighting impairment risk if near-term performance does not meet expectations. Liquidity remains supported by cash and equivalents (USD 1.3872 billion) but the current ratio sits near 0.9, signaling tighter near-term working capital liquidity. Management commentary (where available) will be critical to assess plans to monetize live services, scale mobile/game services, and manage costs to drive cash generation. Overall, the QQ1 results underscore a business in the early stages of leveraging its IP portfolio toward more sustainable profitability, contingent on pipeline execution and cost discipline.
Operating Income: USD -184.9M; Operating Margin -13.82%; YoY +9.50% (improvement in losses); QoQ improvement not explicit due to seasonality but still negative.
EBITDA: USD 116.3M; EBITDA Margin 8.69%.
Net Income: USD -262.0M; Net Margin -19.58%; YoY -27.18%; QoQ +90.97% (strong sequential improvement in a negative quarter).
Financial Highlights
Revenue and Profitability
- Revenue: USD 1.3382B; YoY +4.16%; QoQ -4.37%.
- Gross Profit: USD 771.1M; Gross Margin 57.6%; YoY +13.53%; QoQ -10.50%.
- Operating Income: USD -184.9M; Operating Margin -13.82%; YoY +9.50% (improvement in losses); QoQ improvement not explicit due to seasonality but still negative.
- EBITDA: USD 116.3M; EBITDA Margin 8.69%.
- Net Income: USD -262.0M; Net Margin -19.58%; YoY -27.18%; QoQ +90.97% (strong sequential improvement in a negative quarter).
- Earnings per Share (EPS): USD -1.52; Diluted EPS: USD -1.52; Weighted avg shares ~172.3M.
Cash Flow and Liquidity
- Net Cash Provided by Operating Activities: USD -191.0M (cash burn from ops).
- Free Cash Flow: USD -226.1M (capex USD 35.1M).
- Cash and Equivalents at End of Period: USD 1.3872B; Cash and Short-Term Investments: USD 1.4026B.
- Net Change in Cash: USD +369.9M; Net Cash Used in Financing Activities: USD -? (net positive USD 596.5M reported in financing activities).
- Debt Position: Total debt USD 4.1223B; Net debt USD 2.7351B; Interest coverage negative, highlighting ongoing leverage concerns.
Balance Sheet Health
- Total Assets: USD 12.946B; Total Liabilities: USD 6.9531B; Total Stockholders’ Equity: USD 5.9915B.
- Current Assets: USD 2.559B; Current Liabilities: USD 2.8463B; Current ratio 0.899; Quick ratio 0.899; Cash ratio 0.487.
- Major Intangible Assets: Goodwill USD 4.7068B; Intangible Assets USD 4.6119B; Goodwill and Intangibles total USD 9.3187B.
- Equity Multipliers and Returns: ROE negative; ROA negative; Asset turnover 0.103; Cash flow per share (operating) -1.11; Free cash flow per share -1.31.
Operating and Efficiency Metrics
- Asset Turnover: 0.103; Fixed Asset Turnover: 1.747; Revenue per dollar of assets remains modest, reflecting substantial intangible assets and a large IP portfolio driving long-term value but near-term cash generation pressures.
- Net Debt to EBITDA and other leverage metrics indicate a high leverage profile relative to current earnings power.
Notes on Guidance and Peer Context
- The dataset does not include explicit forward guidance from management for QQ2 2025 or beyond. The company operates in a mature, IP-centric consumer entertainment market with heavy reliance on evergreen franchises (e.g., GTA, NBA 2K) and live-services monetization, which can influence revenue volatility and cash flow profiles across quarters.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.34B
4.16%
-4.37%
Gross Profit
771.10M
13.53%
-10.50%
Operating Income
-184.90M
9.50%
93.18%
Net Income
-262.00M
-27.18%
90.97%
EPS
-1.52
-24.59%
91.07%
Key Financial Ratios
currentRatio
0.9
grossProfitMargin
57.6%
operatingProfitMargin
-13.8%
netProfitMargin
-19.6%
returnOnAssets
-2.02%
returnOnEquity
-4.37%
debtEquityRatio
0.69
operatingCashFlowPerShare
$-1.11
freeCashFlowPerShare
$-1.31
priceToBookRatio
4.44
priceEarningsRatio
-25.36
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript availability: No earnings transcript data provided in the current dataset. Consequently, no management quotes or thematic highlights from the QQ1 2025 call can be extracted. Investors should look to official transcripts for color on: 1) monetization strategy for live services and recurrent revenue streams, 2) commentary on cost controls, and 3) any color on the cadence of major releases and planned investments that could affect near-term margin trajectory.
N/A
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N/A
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Forward Guidance
Guidance absent in the provided data. Based on the quantitative results and industry dynamics, the following forward-looking considerations are relevant: - Revenue trajectory will likely hinge on ongoing monetization of live services for core franchises (GTA Online, NBA 2K), new content cycles, and any mobile investments. - Margin recovery would depend on controlling operating expenses (R&D and SG&A/S&M) relative to topline growth, plus potential operating leverage as higher revenue runs through the fixed cost base. - Balance sheet discipline remains crucial given elevated leverage; focus on reducing net debt and enhancing cash flow generation to support capital allocation priorities (IP development, potential acquisitions, and share repurchase activity, if pursued). - Investors should monitor management commentary on pipeline milestones, timing of major releases, and any steps to optimize working capital and capital expenditure intensity over the next several quarters. Potential catalysts include a stronger-than-expected ramp in live-service monetization, favorable product mix, and tangible progress toward cash flow stabilization.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0LCX.L Focus
57.62%
-13.80%
-4.37%
-25.36%
0K7U.L
43.00%
8.23%
1.44%
31.77%
0OAL.L
1.00%
6.02%
2.80%
10.92%
0IR9.L
77.50%
23.70%
-2.18%
43.08%
0IC9.L
56.00%
26.30%
2.46%
15.14%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Take-Two presents a high-risk, high-uncertainty investment story. The QQ1 2025 results show topline growth but persistent profitability and cash flow challenges, underpinned by a substantial debt load and a heavy intangible asset base. The stock trades with high valuation multiples relative to earnings (negative earnings; elevated EV/Revenue) and exposed to swings in release cadence and live-service monetization success. The investment case hinges on a clear path to positive free cash flow, meaningful deleveraging, and a sustained, scalable monetization model for live services across core IPs. Catalyst potential exists if management articulates a concrete plan to accelerate cash flow conversion and demonstrates progress on the pipeline and cost discipline. Investors should monitor engagement in live-service monetization, pipeline execution, and any steps toward debt reduction and working capital optimization over the coming quarters.
Key Investment Factors
Growth Potential
Upside potential from monetizing live-service components of flagship IPs (e.g., GTA and NBA 2K franchises), expanding mobile and cross-platform offerings, and leveraging Private Division titles for recurring revenue streams. A successful pipeline and improved cost discipline could drive a more favorable margin profile and cash flow generation in the medium term.
Profitability Risk
High leverage and negative net income in QQ1 2025 raise near-term financial risk. Heavy intangible assets increase impairment risk if performance underwhelms. Dependence on blockbuster releases and the speed of monetization in live services adds operational risk, while macroeconomic softness could dampen consumer discretionary spending on entertainment.
Financial Position
Solid liquidity due to USD 1.39B in cash; but substantial total debt (USD 4.12B) and negative operating cash flow present ongoing leverage risk. Large goodwill/intangible base creates potential impairment risk; balance sheet strength will depend on cash flow trajectory and potential deleveraging.
SWOT Analysis
Strengths
Extensive IP portfolio with proven franchises (e.g., GTA, NBA 2K) and diversified brand universe.
Scale and distribution reach across console, PC, and mobile platforms.
Large cash balance supports liquidity and potential strategic options.
Weaknesses
Negative net income and negative operating cash flow in QQ1 2025.
High reliance on blockbuster releases and high R&D spend supporting a volatile earnings profile.
Substantial goodwill and intangible assets increasing impairment risk.
Opportunities
Expansion of live-service monetization and ongoing IP reboots/spinoffs.
Growth in mobile and cross-platform monetization; potential for new subscription or service models.
Potential strategic partnerships or selective acquisitions to accelerate growth and cash generation.
Threats
Economic sensitivity reducing consumer spending on entertainment.
Industry competition and platform shifts affecting monetization efficiency.
Impairment risk associated with large intangible asset base if performance deteriorates.