Take-Two News Release

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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Second Quarter 2019
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GAAP net revenue grew 11% to $492.7 million

GAAP net income increased to $0.22 per diluted share

Net Bookings grew 1% to $583.4 million

Company raises financial outlook for fiscal year 2019

NEW YORK--(BUSINESS WIRE)--Nov. 7, 2018-- Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for its fiscal second quarter 2019 ended September 30, 2018. In addition, the Company provided its initial financial outlook for its fiscal third quarter ending December 31, 2018, and raised its financial outlook for its fiscal year ending March 31, 2019. For additional information, please see the fiscal second quarter 2019 results slide deck posted to the Company’s investor relations website at http://ir.take2games.com.

Fiscal Second Quarter 2019 GAAP Financial Highlights

Net revenue grew 11% to $492.7 million, as compared to $443.6 million in last year’s fiscal second quarter. Recurrent consumer spending (virtual currency, add-on content and in-game purchases) grew 12% and accounted for 49% of total net revenue. The largest contributors to net revenue in fiscal second quarter 2019 were NBA® 2K19 and NBA 2K18, Grand Theft Auto® Online and Grand Theft Auto V, NBA 2K Online 2, Dragon City and Monster Legends, and WWE® SuperCard.

Digitally-delivered net revenue grew 18% to $358.4 million, as compared to $302.9 million in last year’s fiscal second quarter, and accounted for 73% of total net revenue. The largest contributors to digitally-delivered net revenue in fiscal second quarter 2019 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18 and NBA 2K19, NBA 2K Online 2, Monster Legends and Dragon City, and WWE SuperCard.

Net income increased to $25.4 million, or $0.22 per diluted share, as compared to a net loss of $2.7 million, or $0.03 per diluted share, for the comparable period last year.

As of September 30, 2018, the Company had cash and short-term investments of $1.025 billion.

The following data, together with a management reporting tax rate of 20%, are used internally by the Company’s management and Board of Directors to adjust the Company’s GAAP financial results in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

   

Three Months Ended September 30, 2018

   

Financial Data

$ in thousands

Statement of
operations

   

Change in deferred
net revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization &
impairment of
acquired
intangible assets

       
Net revenue $ 492,667 90,754
Cost of goods sold   234,880     5,622       (7,688 )     (3,670 )
 
Gross profit 257,787 85,132 7,688 3,670
 
Operating expenses   231,801           (22,654 )     (1,742 )
 
Income from operations 25,986 85,132 30,342 5,412
Interest and other, net   4,975     (3 )            
Income before income taxes 30,961 85,129 30,342 5,412
 

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 116.1 million.

Operational Metric – Net Bookings

Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides and publisher incentives.

During fiscal second quarter 2019, total Net Bookings grew 1% to $583.4 million, as compared to $577.0 million during last year’s fiscal second quarter. Net Bookings from recurrent consumer spending grew 28% and accounted for 53% of total Net Bookings. The largest contributors to Net Bookings in fiscal second quarter 2019 were NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, Dragon City and Monster Legends, WWE SuperCard, and NBA 2K Online 2.

Catalog accounted for $287.8 million of Net Bookings led by Grand Theft Auto, Dragon City and Monster Legends, and NBA 2K.

Digitally-delivered Net Bookings grew 20% to $426.2 million, as compared to $355.7 million in last year’s fiscal second quarter, and accounted for 73% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal second quarter 2019 were NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, Dragon City and Monster Legends, WWE SuperCard, and NBA 2K Online 2.

New Non-GAAP Financial Measure

Starting in fiscal second quarter 2019, the Company is reporting a Non-GAAP measure of financial performance: Adjusted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. Please see the section below titled “Non-GAAP Financial Measure” for additional information.

Management Comments

“Take-Two delivered better-than-expected operating results, including growth in Net Bookings, during the fiscal second quarter,” said Strauss Zelnick, Chairman and CEO of Take-Two. “This outperformance was driven primarily by Grand Theft Auto V and Grand Theft Auto Online, as well as the successful launch of NBA 2K19.

“On October 26th, Rockstar Games launched its highly-anticipated Red Dead Redemption 2, the label’s first game built from the ground up for the current console generation. Red Dead Redemption 2 has received outstanding reviews, with numerous critics awarding the title a perfect score. The title is now tied with Grand Theft Auto V as the highest rated title on PlayStation 4 and Xbox One, with a 97 Metacritic score. A massive commercial success, Red Dead Redemption 2 has set numerous records, including achieving the biggest opening weekend in the history of entertainment, with over $725 million in retail sell-through during its first three days. Red Dead Redemption 2 sold-in more units in its first 8 days than the original blockbuster Red Dead Redemption sold in its first 8 years and, as of today, the title has sold-in over 17 million units worldwide.

“As a result of our strong second quarter performance and outstanding early results from Red Dead Redemption 2, we are raising our financial outlook for fiscal 2019, which is also poised to be a record year for Net Bookings and Adjusted Operating Cash Flow. Looking ahead, we have a strong development pipeline across our labels and are exceedingly well positioned for long-term growth and margin expansion.”

Business and Product Highlights

Since July 1, 2018:

Rockstar Games:

  • Launched Red Dead Redemption 2 for PlayStation 4 and Xbox One. Told across the deepest and most expansive Rockstar world to date, Red Dead Redemption 2 is Rockstar’s first game built from the ground up for the current console generation. The title has received outstanding reviews, with numerous influential critics awarding Red Dead Redemption 2 a perfect score, including IGN, The Guardian, Game Informer, The Telegraph, Digital Trends and others. Following are some highlights from reviews:
    • The Washington Post: “Jaw-dropping at every level.”
    • The Hollywood Reporter: “What Rockstar has delivered in Red Dead Redemption 2 is not just the best game of the year, but the best game of the decade.”
    • CNET: "Red Dead Redemption 2 has undoubtedly raised the bar for narrative open-world games and will likely have a lasting impact on how they are made in the future.
    • GQ UK: "Red Dead Redemption 2 is Rockstar’s best game; a grand, magnificent adventure that’s vast yet intimate... It's a landmark moment for the open world genre, and for the medium as a whole."
    Red Dead Redemption 2 has also been a massive commercial success and has set numerous records. The title’s list of initial benchmarks includes:
    • Biggest opening weekend in retail sell-through across all entertainment releases (over $725 million);
    • Second biggest launch (three days) in retail sell-through across all entertainment releases (next to Grand Theft Auto V);
    • Biggest entertainment launch of 2018;
    • Most pre-ordered full game ever on PlayStation Network;
    • Biggest day one full game sales ever on PlayStation Network;
    • Biggest first three days full game sales ever on PlayStation Network.

    Red Dead Redemption 2 sold-in more units in its first 8 days than the original blockbuster Red Dead Redemption sold in its first 8 years and, as of today, the title has sold-in over 17 million units worldwide.

  • Released new free content updates for Grand Theft Auto Online, including:
    • Sumo (Remix) Adversary Mode, in which players try to reach a safe zone to avoid going up in flames before the timer runs out while pieces of the track may or may not disappear at random.
    • Running Back (Remix) Adversary Mode, where players attempt to drive an undersized Panto hatchback Runner into the end zone while being both flanked and opposed by an upgraded fleet of 5-star recruits in Tezeracts.
    • Trading Places (Remix) mode, a menacing collision of super-human agility and devastating firepower.
    • Hunting Pack (Remix) mode, which challenges a Runner to prevent an onboard bomb from detonating, while a team of Defenders must protect the Runner at all costs.
    • GTA Online: After Hours, which enables players to partner with legendary club impresario Tony Prince to open and operate a top-shelf nightclub featuring world-class DJ acts and use that club as a front for a network of criminal enterprises.
    • Numerous new vehicles, weapons and more.

2K:

  • Released Carnival Games®, for Nintendo Switch. Built from the ground up for Nintendo Switch, Carnival Games can be played alone or with up to four players simultaneously, leveraging the unique accessibility of the console’s Joy-Con controllers. Carnival Games was also released for PlayStation 4 and Xbox One.
  • Launched Saber Interactive’s arcade-action sports game, NBA 2K Playgrounds 2, for Xbox One, PlayStation 4, Nintendo Switch and PC. This over-the-top, two-on-two basketball experience complements 2K’s top-selling NBA 2K series and expands the label’s footprint in the basketball video game space.
  • Launched WWE 2K19, the next release from our flagship WWE video game franchise, for PlayStation 4, Xbox One and Windows PC. For the first time ever, 2K introduced the WWE 2K19 Million Dollar Challenge, where eligible entrants participate in an international contest in which the finalist will compete one-on-one in WWE 2K19 against AJ Styles for the chance to win $1 million. WWE 2K19 is being supported with a series of downloadable content, including a Season Pass.
  • Launched NBA 2K19, the latest iteration of our top-rated and top-selling NBA video game simulation series for the past 17 years, for PlayStation 4, Xbox One, Nintendo Switch and Windows PC. 2K also released the NBA 2K19 20th Anniversary Edition, featuring three-time NBA Champion, four-time NBA MVP and avid NBA 2K gamer LeBron James on the cover. NBA 2K19 received positive reviews from influential critics:
    • Forbes noted, “There is no such thing as a perfect sports game, but this is as close as it gets”;
    • IGN called the title “the best of the series”;
    • Game Informer said it “isn’t just a game, it’s a lifestyle.
    According to The NPD Group, based on combined physical and digital sales in the U.S.:
    • NBA 2K19 achieved the highest launch month dollar sales of any Sports genre game released since it began tracking the industry in 1995;
    • NBA 2K19 represents the biggest launch of any game in the NBA 2K franchise;
    • NBA 2K19 is the best-selling Sports game of 2018 year-to-date.
  • Published The Golf Club 2019 Featuring PGA TOUR®the latest entry in the award-winning golf simulation series, for digital download on PlayStation 4, Xbox One and PC. Developed by HB Studios, The Golf Club 2019 Featuring PGA TOUR marks the franchise’s first release featuring the official PGA TOUR license and, after its first two months in market, has experienced more than a 30% increase in units sold over last year’s entry, The Golf Club 2. Physical versions of the game will be available at participating retailers on November 13, 2018 in North America and November 16, 2018 internationally.
  • Announced that Borderlands 2 VR will launch for PlayStation VR on December 14, 2018. For the first time ever, Borderlands 2 VR enables players to immerse themselves virtually in the mayhem-filled world of Borderlands, the popular shooter-looter developed by Gearbox Software.
  • Announced that Sid Meier’s Civilization® VI, winner of The Game Awards’ and DICE Awards’ Best Strategy Game 2016, is coming to Nintendo Switch on November 16, 2018. Additionally, 2K and Firaxis Games have partnered with Aspyr Media to bring Civilization VI to Nintendo Switch and ensure the experience meets the same high standards of the beloved series.

Financial Outlook for Fiscal 2019

Take-Two is providing its initial financial outlook for its fiscal third quarter ending December 31, 2018 and is raising its financial outlook for its fiscal year ending March 31, 2019, as follows:

Third Quarter Ending December 31, 2018

  • GAAP net revenue is expected to range from $1.10 to $1.15 billion
  • GAAP net income is expected to range from $36 to $48 million
  • GAAP diluted net income per share is expected to range from $0.31 to $0.41
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 117.1 million (1)
  • Net Bookings (operational metric) are expected to range from $1.40 to $1.45 billion

The Company is also providing selected data and its management reporting tax rate of 20% that are used internally by its management and Board of Directors to adjust the Company’s GAAP financial outlook in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

   

Three Months Ending December 31, 2018

   

Financial Data

$ in millions GAAP outlook (2)    

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

Net revenue $1,100 to $1,150 $300        
 
Cost of goods sold $773 to $799 $100 ($98) ($2)
 
Operating Expenses $290 to $300 ($20) ($2)
 
Interest and other, net ($7)
 
Income before income taxes $44 to $58 $200 $118 $4
 

Fiscal Year Ending March 31, 2019

  • GAAP net revenue is expected to range from $2.55 to $2.65 billion
  • GAAP net income is expected to range from $202 to $232 million
  • GAAP diluted net income per share is expected to range from $1.73 to $1.98
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 116.9 million (3)
  • Net cash provided by operating activities is expected to be approximately $663 million, which includes a decrease of $67 million recorded in the first 6-months of fiscal 2019 due to the Company’s adoption of Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash
  • Adjusted Operating Cash Flow (Non-GAAP) is expected to be approximately $730 million
  • Capital expenditures are expected to be approximately $60 million
  • Net Bookings (operational metric) are expected to range from $2.80 to $2.90 billion

The Company is also providing selected data and its management reporting tax rate of 20% that are used internally by its management and Board of Directors to adjust the Company’s GAAP financial outlook in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

   

Twelve Months Ending March 31, 2019

   

Financial Data

$ in millions

GAAP outlook (2)

   

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

       
Net revenue $2,550 to $2,650 $250
 
Cost of goods sold $1,450 to $1,474 $90 ($155) ($10)
 
Operating Expenses $890 to $930 ($90) ($7)
 
Interest and other, net ($25)
 
Income before income taxes $236 to 272 $160 $245 $17
 
        1)   For the fiscal third quarter ending December 31, 2018, the Company’s fully diluted share count used for both GAAP and management reporting purposes is expected to be 117.1 million, which includes 114.0 million basic shares and 3.1 million shares representing the potential dilution from unvested employee stock grants.
2) The individual components of the financial outlook may not foot to the totals, as the Company does not expect actual results for every component to be at the low end or high end of the outlook range simultaneously.
3) For the fiscal year ending March 31, 2019, the Company’s fully diluted share count used for both GAAP and management reporting purposes is expected to be 116.9 million, which includes 113.7 million basic shares and 3.2 million shares representing the potential dilution from unvested employee stock grants.
 

Key assumptions and dependencies underlying the Company’s financial outlook include: the timely delivery of the titles included in this financial outlook; continued consumer acceptance of Xbox One and PlayStation 4; the ability to develop and publish products that capture market share for these current generation systems while also leveraging opportunities on Nintendo Switch, Xbox 360, PlayStation 3, PC and mobile platforms; and stable foreign exchange rates. See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases

The following titles were released since July 1, 2018:

Label

   

Title

   

Platforms

     

Release Date

2K    

NBA 2K Online 2

    Tencent (China only)       August 2, 2018
2K

The Golf Club 2019 Featuring PGA TOUR (Digital SKU)

PS4, Xbox One, PC August 28, 2018
2K

NBA 2K19 20th Anniversary Edition

PS4, Xbox One, Switch, PC September 7, 2018
2K

NBA 2K19 Standard Edition

PS4, Xbox One, Switch, PC September 11, 2018
2K

WWE 2K19 Deluxe and Wooooo! Editions

PS4, Xbox One, PC October 5, 2018
2K

WWE 2K19 Standard Edition

PS4, Xbox One, PC October 9, 2018
2K

NBA 2K Playgrounds 2

PS4, Xbox One, Switch, PC October 16, 2018
Rockstar Games

Red Dead Redemption 2

PS4, Xbox One October 26, 2018
2K

Carnival Games

PS4, Xbox One, Switch November 6, 2018
 

Take-Two's lineup of future titles announced to date includes:

 

Label

   

Title

   

Platforms

     

Release Date

2K

The Golf Club 2019 Featuring PGA TOUR (Physical SKU)

PS4, Xbox One, PC November 13, 2018 *
2K

Sid Meier’s Civilization VI

Switch November 16, 2018
2K

Borderlands 2 VR

PS VR December 14, 2018
 

* North American release date. International release date is 3 days later.

 

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 Measure

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses a Non-GAAP measure of financial performance: Adjusted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. The Company’s management believes it is important to consider Adjusted Operating Cash Flow, in addition to net cash from operating activities, as it provides more transparency into current business trends without regard to the timing of payments from restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations.

This Non-GAAP financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. This Non-GAAP financial measure may be different from similarly titled measures used by other companies. In the future, Take-Two may also consider whether other items should also be excluded in calculating this Non-GAAP financial measure used by the Company. Management believes that the presentation of this Non-GAAP financial measure provides investors with additional useful information to measure Take-Two's financial and operating performance. In particular, this measure facilitates comparison of our operating performance between periods and may help investors to understand better the operating results of Take-Two. Internally, management uses this Non-GAAP financial measure in assessing the Company's operating results and in planning and forecasting. A reconciliation of this Non-GAAP financial measure to the most comparable GAAP measure is contained in the financial tables to this press release.

Final Results

The financial results discussed herein are presented on a preliminary basis; final data will be included in Take-Two’s Quarterly Report on Form 10-Q for the period ended September 30, 2018.

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 principally through its wholly-owned labels Rockstar Games and 2K, as well as its Private Division label and Social Point, a leading developer of mobile games. 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," “should,” "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.

 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
       
Three months ended September 30, Six months ended September 30,
2018   2017     2018     2017  
 
 
Net revenue $ 492,667 $ 443,562   $ 880,649   $ 861,778  
 
Cost of goods sold:
Internal royalties 82,113 104,049 135,280 181,753
Product costs 55,885 42,563 94,026 86,632
Software development costs and royalties 42,648 66,782 72,436 110,411
Licenses   54,234   33,154     64,503     62,321  
Total cost of goods sold   234,880   246,548     366,245     441,117  
 
Gross profit 257,787 197,014 514,404 420,661
 
Selling and marketing 94,165 76,914 152,471 129,128
General and administrative 67,320 60,824 135,055 121,427
Research and development 60,565 49,999 111,277 92,268
Depreciation and amortization 9,751 18,883 19,011 26,626
Business reorganization   -   1,713     (242 )   12,312  
Total operating expenses   231,801   208,333     417,572     381,761  
Income (loss) from operations 25,986 (11,319 ) 96,832 38,900
Interest and other, net   4,975   (2,969 )   11,576     (5,777 )
Income (loss) before income taxes 30,961 (14,288 ) 108,408 33,123
Provision for (benefit from) income taxes   5,594   (11,552 )   11,348     (24,417 )
Net income (loss) $ 25,367 $ (2,736 ) $ 97,060   $ 57,540  
 
Earnings (loss) per share:
Basic earnings (loss) per share $ 0.22 $ (0.03 ) $ 0.86 $ 0.54
Diluted earnings (loss) per share $ 0.22 $ (0.03 ) $ 0.84 $ 0.53
 
Weighted average shares outstanding:
Basic 113,735 109,430 113,339 107,232
Diluted 116,095 109,430 115,801 109,356
 
Computation of Basic EPS:
Net income (loss) $ 25,367 $ (2,736 ) $ 97,060 $ 57,540
Less: net income allocated to participating securities   -   -     -     (487 )
Net income (loss) for basic EPS calculation $ 25,367 $ (2,736 ) $ 97,060   $ 57,053  
 
Weighted average shares outstanding - basic 113,735 105,494 113,339 107,232
Less: weighted average participating shares outstanding   -   -     -     (908 )
Weighted average common shares outstanding - basic   113,735   105,494     113,339     106,324  
 
Basic earnings (loss) per share $ 0.22 $ (0.03 ) $ 0.86 $ 0.54
 
Computation of Diluted EPS:
Net income (loss) $ 25,367 $ (2,736 ) $ 97,060 $ 57,540
Less: net income allocated to participating securities   -   -     -     (478 )
Net income (loss) for diluted EPS calculation $ 25,367 $ (2,736 ) $ 97,060   $ 57,062  
 
Weighted average common shares outstanding - basic 113,735 105,494 113,339 106,324
Add: dilutive effect of common stock equivalents   2,360   -     2,462     3,032  
Total weighted average shares outstanding - diluted 116,095 105,494 115,801 109,356
Less: weighted average participating shares outstanding   -   -     -     (908 )
Weighted average common shares outstanding - diluted   116,095   105,494     115,801     108,448  
 
Diluted earnings (loss) per share $ 0.22 $ (0.03 ) $ 0.84 $ 0.53
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
       
September 30,

   March 31,   

  2018     2018  
 
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 462,347 $ 808,973
Short-term investments 562,952 615,406
Restricted cash 370,747 437,398

Accounts receivable, net of allowances of $350 and $54,290 at September 30, 2018 and March 31, 2018, respectively

534,633 247,649
Inventory 40,541 15,162
Software development costs and licenses 36,912 33,284
Deferred cost of goods sold 20,957 117,851
Prepaid expenses and other   162,647     133,454  
Total current assets   2,191,736     2,409,177  
 
Fixed assets, net 110,900 102,478
Software development costs and licenses, net of current portion 794,120 639,369
Deferred cost of goods sold, net of current portion 489 26,719
Goodwill 389,816 399,530
Other intangibles, net 87,318 103,681
Other assets   80,810     56,887  
Total assets $ 3,655,189   $ 3,737,841  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 77,298 $ 35,029
Accrued expenses and other current liabilities 853,467 914,748
Deferred revenue   559,024     777,152  
Total current liabilities   1,489,789     1,726,929  
 
Long-term debt - 8,068
Non-current deferred revenue 15,407 355,589
Other long-term liabilities   205,554     158,285  
Total liabilities   1,710,750     2,248,871  
 
 
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized -
Common stock, $.01 par value, 200,000 shares authorized; 134,106 and 132,743 shares
issued and 113,804 and 114,038 outstanding at September 30, 2018 and March 31, 2018, respectively 1,341 1,327
Additional paid-in capital 1,951,128 1,888,039
Treasury stock, at cost; 20,302 and 18,705 common shares at September 30, 2018 and March 31, 2018, respectively (611,680 ) (458,180 )
Retained earnings 640,849 73,516
Accumulated other comprehensive loss   (37,199 )   (15,732 )
Total stockholders' equity   1,944,439     1,488,970  
Total liabilities and stockholders' equity $ 3,655,189   $ 3,737,841  
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
    Six months ended September 30,
  2017
  2018   (as adjusted) (1)
 
Operating activities:
Net income $ 97,060 $ 57,540
 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment of software development costs and licenses 20,269 38,862
Depreciation 18,753 15,369
Amortization of intellectual property 12,272 17,286
Impairment of in-process research and development - 11,257
Stock-based compensation 54,941 83,083
Amortization of discount on Convertible Notes 91 13,915
Gain on redemption of Convertible Notes - (4,141 )
Amortization of debt issuance costs 32 482
Other, net (1,737 ) 1,194
Changes in assets and liabilities, net of impact of adoption of Topic 606:
Accounts receivable (233,236 ) (209,198 )
Inventory (25,925 ) (18,721 )
Software development costs and licenses (133,008 ) (146,009 )
Prepaid expenses and other current and other non-current assets (6,681 ) (45,089 )
Deferred revenue 12,601 65,671
Deferred cost of goods sold 6,867 4,379
Accounts payable, accrued expenses and other liabilities   (28,334 )   246,472  
Net cash (used in) provided by operating activities   (206,035 )   132,352  
 
Investing activities:
Change in bank time deposits 33,604 (40,000 )
Proceeds from available-for-sale securities 114,266 111,480
Purchases of available-for-sale securities (95,888 ) (134,273 )
Purchases of fixed assets (29,144 ) (32,717 )
Asset acquisition - (25,965 )
Business acquisition   (3,149 )   -  
Net cash provided by (used in) investing activities   19,689     (121,475 )
 
Financing activities:
Tax payment related to net share settlements on restricted stock awards (63,967 ) (86,125 )
Repurchase of common stock   (153,500 )   -  
Net cash used in financing activities   (217,467 )   (86,125 )
 
Effects of foreign currency exchange rates on cash and cash equivalents   (9,464 )   12,761  
 
Net change in cash and cash equivalents and restricted cash (413,277 ) (62,487 )
Cash and cash equivalents and restricted cash, beginning of year   1,246,371     1,281,214  
Cash and cash equivalents and restricted cash, end of period $ 833,094   $ 1,218,727  
 
(1) During Q1 FY19, the Company adopted Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash and applied that standard retroactively. The application of this new standard resulted in a decrease to net cash from operating activities of $66.7 million in Q2 FY19 and an increase of $131.3 million in Q2 FY18, which are reflected herein.
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)        
 
Three Months Ended

September 30, 2018

Three Months Ended

September 30, 2017

Amount % of Total Amount % of Total
 
Net revenue by geographic region
United States $ 279,306 57% $ 276,005 62%
International   213,361 43%   167,557 38%
Total net revenue $ 492,667 100% $ 443,562 100%
 
Net bookings by geographic region
United States $ 362,477 62% $ 348,082 60%
International   220,944 38%   228,907 40%
Total net bookings $ 583,421 100% $ 576,989 100%
 
 
Three Months Ended

September 30, 2018

  Three Months Ended

September 30, 2017

Amount % of Total Amount % of Total
 
Net revenue by distribution channel
Digital online $ 358,371 73% $ 302,886 68%
Physical retail and other   134,296 27%   140,676 32%
Total net revenue $ 492,667 100% $ 443,562 100%
 
Net bookings by distribution channel
Digital online $ 426,180 73% $ 355,736 62%
Physical retail and other   157,241 27%   221,253 38%
Total net bookings $ 583,421 100% $ 576,989 100%
 
 
Three Months Ended

September 30, 2018

  Three Months Ended

September 30, 2017

Amount % of Total Amount % of Total
Net revenue by platform mix
Console $ 372,240 76% $ 360,465 81%
PC and other   120,427 24%   83,097 19%
Total net revenue $ 492,667 100% $ 443,562 100%
 
Net bookings by platform mix
Console $ 477,970 82% $ 485,864 84%
PC and other   105,451 18%   91,125 16%
Total net bookings $ 583,421 100% $ 576,989 100%
 
   
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)    
 
Six Months Ended

September 30, 2018

Six Months Ended

September 30, 2017

Amount % of Total Amount % of Total
 
Net revenue by geographic region
United States $ 500,717 57% $ 534,265 62%
International   379,932 43%   327,513 38%
Total net revenue $ 880,649 100% $ 861,778 100%
 
Net bookings by geographic region
United States $ 519,125 60% $ 547,953 59%
International   352,621 40%   377,341 41%
Total net bookings $ 871,746 100% $ 925,294 100%
 
 
Six Months Ended

September 30, 2018

  Six Months Ended

September 30, 2017

Amount % of Total Amount % of Total
 
Net revenue by distribution channel
Digital online $ 673,418 76% $ 571,122 66%
Physical retail and other   207,231 24%   290,656 34%
Total net revenue $ 880,649 100% $ 861,778 100%
 
Net bookings by distribution channel
Digital online $ 678,941 78% $ 636,650 69%
Physical retail and other   192,805 22%   288,644 31%
Total net bookings $ 871,746 100% $ 925,294 100%
 
 
Six Months Ended

September 30, 2018

Six Months Ended

September 30, 2017

Amount % of Total Amount % of Total
Net revenue by Platform Mix
Console $ 666,970 76% $ 705,382 82%
PC and other   213,679 24%   156,396 18%
Total net revenue $ 880,649 100% $ 861,778 100%
 
Net bookings by platform mix
Console $ 677,890 78% $ 751,614 81%
PC and other   193,856 22%   173,680 19%
Total net bookings $ 871,746 100% $ 925,294 100%
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA            
(in thousands)
  Three Months Ended September 30, 2018   Net revenue  

Cost of goods sold-
internal royalties

 

Cost of goods sold-
product costs

 

Cost of goods sold-
software development
costs and royalties

 

Cost of goods sold-
licenses

 

Selling and
marketing

 
As reported $ 492,667 $ 82,113 $ 55,885 $ 42,648 $ 54,234 $ 94,165
Net effect from deferral and related cost of goods sold 90,754 1,534 3,492 596
Stock-based compensation (7,688 ) (4,874 )
Amortization and impairment of acquired intangibles (3,670 )
 
Three Months Ended September 30, 2018  

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Interest and other, net

 
As reported $ 67,320 $ 60,565 $ 9,751 $ 4,975
Net effect from deferral and related cost of goods sold (3 )
Stock-based compensation (12,926 ) (4,854 )
Non-cash amounts related to convertible notes
Amortization and impairment of acquired intangibles (1,615 ) (127 )
 
Three Months Ended September 30, 2017   Net revenue  

Cost of goods sold-
internal royalties

 

Cost of goods sold-
product costs

 

Cost of goods sold-
software development
costs and royalties

 

Cost of goods sold-
licenses

 

Selling and
marketing

 
As reported $ 443,562 $ 104,049 $ 42,563 $ 66,782 $ 33,154 $ 76,914
Net effect from deferral and related cost of goods sold 133,427 16,538 4,604 12,788
Stock-based compensation (28,065 ) (3,186 )
Amortization and impairment of acquired intangibles (4,899 ) (2,470 )
 
Three Months Ended September 30, 2017  

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business
reorganization

  Interest and other, net
 
As reported $ 60,824 $ 49,999 $ 18,883 $ 1,713 $ (2,969 )
Stock-based compensation (19,458 ) (8,302 )
Amortization and impairment of acquired intangibles (38 ) (1,630 ) (11,385 )
Acquisition related expenses 7,012
Non-cash amounts related to convertible notes 5,640
Impact of business reorganization (1,713 )
Other, net (93 )
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
 
Six Months Ended September 30, 2018   Net Revenue  

Cost of Goods Sold-
Internal Royalties

 

Cost of Goods Sold-
Product Costs

 

Cost of goods sold-
software development
costs and royalties

 

Cost of Goods Sold-
Licenses

 

Selling and
Marketing

 
As reported $ 880,649 $ 135,280 $ 94,026 $ 72,436 $ 64,503 $ 152,471
Net effect from deferral and related cost of goods sold (8,903 ) (6,871 ) 3,483 596
Stock-based compensation (11,658 ) (9,648 )
Amortization and impairment of acquired intangibles (8,742 )
 
Six Months Ended September 30, 2018  

General and
Administrative

 

Research and
Development

 

Depreciation and
Amortization

 

Business
Reorganization

  Interest and Other, net
 
As reported $ 135,055 $ 111,277 $ 19,011 ($ 242 ) $ 11,576
Net effect from deferral and related cost of goods sold (598 )
Stock-based compensation (24,444 ) (9,191 )
Non-cash amounts related to convertible notes 91
Amortization and impairment of acquired intangibles (3,274 ) (257 )
Impact of business reorganization 242
 
Six Months Ended September 30, 2017  

Net Revenue

 

Cost of Goods Sold-
Internal Royalties

 

Cost of Goods Sold-
Software
Development Costs
and Royalties

 

Cost of Goods Sold-
Software
Development Costs
and Royalties

 

Cost of Goods Sold-
Licenses

 

Selling and
Marketing

 
As reported $ 861,778 $ 181,753 $ 86,632 $ 110,411 $ 62,321 $ 129,128
Net effect from deferral and related cost of goods sold 63,516 (1,268 ) (3,052 ) (2,043 )
Stock-based compensation (31,546 ) (5,772 )
Amortization and impairment of acquired intangibles (9,140 ) (4,778 )
 
Six Months Ended September 30, 2017  

General and
Administrative

 

Research and
Development

 

Depreciation and
Amortization

  Interest and Other, net
 
As reported $ 121,427 $ 92,268 $ 26,626 $ (5,777 )
Stock-based compensation (32,578 ) (10,766 )
Non-cash amounts related to convertible notes 9,774
Acquisition related expenses 6,956
Amortization and impairment of acquired intangibles (3,153 ) (11,505 )
Other, net (93 )
 
   
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)
 
Six months ended September 30,
  2018     2017  
Net cash (used in) provided by operating activities $ (206,035 ) $ 132,352
Net change in Restricted cash (1)   66,651     (131,283 )
Adjusted Operating Cash Flow $ (139,384 ) $ 1,069  
 
 
FY 2019 FY 2018
Restricted cash beginning of period (4/1) $ 437,398 $ 337,818
Restricted cash end of period (9/30)   370,747     469,101  
(1) Net change in Restricted cash $ 66,651     ($ 131,283 )

Source: Take-Two Interactive

Take-Two Interactive Software, Inc.
Investor Relations:
Henry A. Diamond, 646-536-3005
Senior Vice President
Investor Relations & Corporate Communications
Henry.Diamond@take2games.com
or
Corporate Press:
Alan Lewis, 646-536-2983
Vice President
Corporate Communications & Public Affairs
Alan.Lewis@take2games.com