Take-Two News Release

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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Year 2019

GAAP net revenue grew to $2.668 billion

GAAP net income increased to $2.90 per diluted share

GAAP net cash provided by operating activities increased 71% to $843.5 million

Adjusted Operating Cash Flow (Non-GAAP) increased 82% to $715.5 million

Net Bookings grew 47% to $2.929 billion

Repurchased 3.72 million shares of common stock for $362.4 million during fiscal year 2019, including 1.12 million shares for $100.0 million during the fiscal fourth quarter

NEW YORK--(BUSINESS WIRE)--May 13, 2019-- Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for its fourth quarter and fiscal year 2019, ended March 31, 2019, and provided its initial outlook for its fiscal first quarter 2020, ending June 30, 2019, and fiscal year 2020, ending March 31, 2020.

Fiscal Fourth Quarter 2019 Financial Highlights

On April 1, 2018, the Company adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how the Company recognizes and reports net revenue and net income; however, it does not materially impact Net Bookings (our operational metric). Financial data for periods prior to April 1, 2018 have not been restated.

GAAP net revenue grew to $539.0 million, as compared to $450.3 million in last year’s fiscal fourth quarter. Recurrent consumer spending (virtual currency, add-on content and in-game purchases) increased and accounted for 54% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal fourth quarter 2019 were NBA® 2K19, Grand Theft Auto® Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization® VI, Dragon City and Monster Legends, and WWE® SuperCard and WWE 2K19.

Digitally-delivered GAAP net revenue grew to $413.5 million, as compared to $301.4 million in last year’s fiscal fourth quarter, and accounted for 77% of total GAAP net revenue. The largest contributors to digitally-delivered GAAP net revenue in fiscal fourth quarter 2019 were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

GAAP net income was $56.8 million, or $0.50 per diluted share, as compared to $90.9 million, or $0.77 per diluted share, for the year-ago period.

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 March 31, 2019

         
       

Financial Data

$ in thousands  

Statement of
operations

   

Change in deferred
net revenue and
related cost of
goods sold

   

Stock-based
compensation

   

 

Impact of
business
reorganization

   

Amortization &
impairment of
acquired
intangible assets

                             
Net revenue   $ 539,007     (50,596 )                  
Cost of goods sold     258,915     (17,606 )     (41,335 )           (3,919 )
                             
Gross profit     280,092     (32,990 )     41,335             3,919  
                             
Operating expenses     222,031           (27,754 )     (1,214 )     (1,702 )
                             
Income from operations     58,061     (32,990 )     69,089       1,214       5,621  
Interest and other, net     6,466     3,419                    
Income before income taxes     64,527     (29,571 )     69,089      

1,214

      5,621  
                                       

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 113.9 million.

Fiscal Fourth Quarter 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.

Total Net Bookings grew 19% to $488.4 million, as compared to $411.4 million during last year’s fiscal fourth quarter. Net Bookings from recurrent consumer spending grew 27% year-over-year and accounted for 62% of total Net Bookings. The largest contributors to Net Bookings were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

Catalog accounted for $254.5 million of Net Bookings led by Grand Theft Auto, Sid Meier’s Civilization VI, and Dragon City and Monster Legends.

Digitally-delivered Net Bookings grew 26% to $419.0 million, as compared to $333.1 million in last year’s fiscal fourth quarter, and accounted for 86% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal fourth quarter 2019 were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

Fiscal Year 2019 Financial Highlights

GAAP net revenue grew to $2.668 billion, as compared to $1.793 billion in fiscal year 2018. Recurrent consumer spending increased and accounted for 40% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal year 2019 were Red Dead Redemption 2 and Red Dead Online, Grand Theft Auto Online and Grand Theft Auto V,NBA 2K19 and NBA 2K18, WWE 2K19 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

Digitally-delivered GAAP net revenue grew to $1.682 billion, as compared to $1.131 billion in fiscal year 2018, and accounted for 63% of total GAAP net revenue. The largest contributors to digitally-delivered GAAP net revenue in fiscal year 2019 were Grand Theft Auto Online and Grand Theft Auto V,NBA 2K19 and NBA 2K18, Red Dead Redemption 2 and Red Dead Online, Monster Legends and Dragon City, WWE SuperCard and WWE 2K19, and Sid Meier’s Civilization VI.

GAAP net income increased to $333.8 million, or $2.90 per diluted share, as compared to $173.5 million, or $1.54 per diluted share, in fiscal year 2018. GAAP net income for fiscal year 2019 included a favorable impact from the release of certain valuation allowances on the Company's deferred tax assets resulting in the recognition of a $107.1 million tax benefit.

GAAP net cash provided by operating activities increased 71% to $843.5 million, as compared to $493.5 million in fiscal year 2018. Adjusted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, increased 82% to $715.5 million, as compared to $393.9 million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of March 31, 2019, the Company had cash and short-term investments of $1.571 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:

   

Twelve Months Ended March 31, 2019

           
         

Financial Data

$ in thousands  

Statement of
operations

   

Change in
deferred
net
revenue
and related
cost of
goods sold

   

Stock-based
compensation

   

 

 

 

Impact of
business
reorganization

   

Amortization
& impairment
of acquired
intangible
assets

   

 

Non-cash
amounts
related to
convertible
notes

                                   
Net revenue   $ 2,668,394     260,330                        
Cost of goods sold     1,523,644     66,614     (149,075 )           (16,290 )      
                                   
Gross profit     1,144,750     193,716     149,075             16,290        
                                   
Operating expenses     938,078           (98,625 )     4,958       (6,943 )      
                                   
Income from operations     206,672     193,716     247,700       (4,958 )     23,233        
Interest and other, net     26,113     2,508                       91
Income before income taxes     232,785     196,224     247,700      

(4,958

)

    23,233      

91

                                   

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 115.2 million.

Fiscal Year 2019 Operational Metric – Net Bookings

Total Net Bookings grew 47% to $2.929 billion, as compared to $1.991 billion in fiscal year 2018. Net Bookings from recurrent consumer spending grew 20% and accounted for 39% of total Net Bookings. The largest contributors to Net Bookings were Red Dead Redemption 2 and Red Dead Online,NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, WWE 2K19 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

Digitally-delivered Net Bookings grew 33% to $1.802 billion, as compared to $1.350 billion in fiscal year 2018, and accounted for 62% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal year 2019 were NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Dragon City and Monster Legends, WWE SuperCard and WWE 2K19, and Sid Meier’s Civilization VI.

Management Comments

“Take-Two finished a stellar year with strong fourth quarter operating results highlighted by the outperformance of Grand Theft Auto Online and Grand Theft Auto V, as well as NBA 2K19, and significant ongoing sales of our blockbuster hit, Red Dead Redemption 2,” said Strauss Zelnick, Chairman and CEO of Take-Two. “For the full fiscal year, our Company delivered record Net Bookings and Adjusted Operating Cash Flow, which exceeded our outlook at the start of the year, along with strong earnings growth driven by the record-breaking launch of Red Dead Redemption 2, the outstanding performance of NBA 2K, and better-than expected results from Grand Theft Auto Online and Grand Theft Auto V.

“We expect fiscal 2020 to be another strong year for Take-Two, with operating results currently forecasted to be lower than fiscal 2019, due to the extraordinary success of Red Dead Redemption 2, and growing as compared to fiscal 2018.

“Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. In addition, we are actively investing in emerging opportunities such as Private Division, mobile games, eSports and geographic expansion that have the potential to be enormous drivers of growth. We are exceedingly well positioned to generate significant growth and margin expansion over the long-term.”

Business and Product Highlights

Since January 1, 2019:

Take-Two:

  • During fiscal year 2019, the Company repurchased 3.72 million shares of common stock for $362.4 million, including 1.12 million shares for $100.0 million during the fiscal fourth quarter.

Rockstar Games:

  • Continued to update the Red Dead Online Beta with new content, gameplay balancing and bug fixes, including the following:
    • Showdown Modes, including Plunder, Up in Smoke and Spoils of War. These player-versus-player modes are tight, dramatic competitive matches that allow for quick structured gameplay sessions;
    • Target Races, where players shoot targets while on horseback to pass checkpoints while racing and be first to finish;
    • Fishing Challenge, a new Competitive Challenge to the Free Roam Event rotation, in which players compete to catch the most weight in fish;
    • Gun Rush, where players gather weapons and ammunition while the play area shrinks in this mode for up to 32 players. Available to play in Free-for-All and Team variations, where the last one standing wins;
    • Numerous new Weapons, Clothing, Emotes and more.
  • Released new numerous new missions, vehicles, weapons and other content for Grand Theft Auto Online.

2K:

  • Announced that Borderlands® 3, the next installment in the critically acclaimed shooter-looter series from Gearbox Software, will launch worldwide on September 13, 2019 for PlayStation 4, Xbox One and Windows PC. At launch, Borderlands 3will be available for PC exclusively through the Epic Games store and will be available on additional PC digital storefronts in April 2020. The franchise, which combines the exhilarating action of a first-person shooter with the rich progression and loot systems of a role-playing game, has sold-in more than 43 million units worldwide, and Borderlands 2 still draws in more than one million unique monthly users more than six years after the game’s initial release in 2012.
  • Launched the Borderlands: Game of the Year Edition on PlayStation 4, Xbox One, and Windows PC. This brand new definitive version of the original game boasts ultra HD remastered graphics, significant quality-of-life content updates, and includes all add-on content. In addition, Gearbox and 2K released an Ultra HD Texture Pack that increases the visual fidelity of Borderlands: The Handsome Collection on consoles, and provides a visual upgrade for Borderlands 2, Borderlands: The Pre-Sequel, and all the game add-ons for both titles on PC.
  • Launched Sid Meier’s Civilization VI: Gathering Storm for Windows PC. Developed by Firaxis Games, Gathering Storm is the largest and most financially successful expansion pack ever created for a Civilization game,and thesecond pack for the critically-acclaimed and award-winning Sid Meier’s Civilization VI.
  • Released NBA 2K Mobile as a free download for Android devices. Previously launched on iOS phones and tablets, NBA 2K Mobile enables players to experience console quality graphics on the go while they collect their favorite NBA players, build dream teams, and step onto the court in lifelike 5v5 match-ups.
  • Announced that video game industry veteran Michael Condrey has joined 2K as President of the label’s new game development studio based in Silicon Valley. Condrey is best known for co-founding Sledgehammer Games and leading development for the renowned Call of Duty franchise, including Call of Duty: Modern Warfare 3. Condrey also served as Chief Operating Officer and Director at Visceral Games in establishing the popular Dead Space franchise. In his new role with 2K, Condrey will build and lead a new development team to work on an unannounced project.
  • Announced, together with The National Basketball Association (NBA) and National Basketball Players Association (NBPA), a significant, multiyear global partnership extension. The agreement expands upon the success of NBA 2K, the top-rated and top-selling NBA video game simulation series for the past 17 years* that has sold-in over 90 million units worldwide.

Private Division:

  • Revealed that The Outer Worlds, a new intellectual property created by Obsidian Entertainment, and Ancestors: The Humankind Odyssey, the debut title from Panache Digital Games, which are both planned for launch in calendar 2019 on PC, PlayStation 4 and Xbox One, will be available for PC exclusively through Epic Games store for 12-months. The Outer Worlds can also be purchased at the Microsoft Windows store.

Social Point:

  • Launched Word Life, our latest free-to-play mobile offering, for iOS and Android devices. The game brings a new dimension to traditional word puzzle games, boasting a multiplayer mode where players can battle with words in exciting match-offs to see who is the most-skilled competitor.
  • Launched Tasty Town for iOS and Android devices. This all-new free-to-play mobile game enables players to fulfill their culinary dreams of designing and managing their own restaurant

* According to 2000 - 2019 Metacritic.com and Gamerankings.com.

Outlook for Fiscal 2020

Take-Two is providing its initial outlook for its fiscal first quarter ending June 30, 2019 and its fiscal year ending March 31, 2020:

First Quarter Ending June 30, 2019

  • GAAP net revenue is expected to range from $485 to $535 million
  • GAAP net income is expected to range from $74 to $86 million
  • GAAP diluted net income per share is expected to range from $0.65 to $0.75
  • Share count used to calculate GAAP diluted net income per share is expected to be 113.7 million (1)
  • Share count used to calculate management reporting diluted net income per share is expected to be 112.7 million (2)
  • Net Bookings (operational metric) are expected to range from $310 to $360 million

The Company is also providing selected data and its management reporting tax rate of 17%, which 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 June 30, 2019

         
       

Financial Data

$ in millions     GAAP outlook (3)    

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

                         
Net revenue     $485 to $535     ($175)            
                         
Cost of goods sold     $165 to $191     ($30)     ($18)     ($2)
                         
Operating Expenses     $246 to $256           ($24)     ($2)
                         
Interest and other, net     ($11)                  
                         
Income before income taxes     $85 to $99     ($145)     $42     $4
                         

Fiscal Year Ending March 31, 2020

  • GAAP net revenue is expected to range from $2.7 to $2.8 billion
  • GAAP net income is expected to range from $389 to $418 million
  • GAAP diluted net income per share is expected to range from $3.39 to $3.65
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.6 million (4)
  • Net cash provided by operating activities is expected to be over $430 million
  • Adjusted Operating Cash Flow (Non-GAAP) is expected to be over $450 million (5)
  • Capital expenditures are expected to be approximately $90 million
  • Net Bookings (operational metric) are expected to range from $2.5 to $2.6 billion

The Company is also providing selected data and its management reporting tax rate of 17%, which 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, 2020

             
           

Financial Data

$ in millions    

GAAP outlook (3)

   

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

                         
Net revenue     $2,700 to $2,800     ($200)            
                         
Cost of goods sold     $1,241 to $1,287     ($100)     ($75)     ($10)
                         
Operating Expenses     $1,056 to $1,076           ($79)     ($7)
                         
Interest and other, net     ($44)                  
                         
Income before income taxes     $447 to $481     ($100)     $154     $17
                         
    1)   Includes 112.7 million basic shares and 1.0 million shares representing the potential dilution from unvested employee stock grants.
    2)   Includes 112.7 million basic shares.
    3)   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.
    4)   Includes 113.1 million basic shares and 1.5 million shares representing the potential dilution from unvested employee stock grants.
    5)   Includes a $20.0 million net decrease in restricted cash for fiscal 2020.
         

Key assumptions and dependencies underlying the Company’s 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 PC, mobile and other platforms; and stable foreign exchange rates. See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases

The following titles were released since January 1, 2019:

Label

   

Title

   

Platforms

   

Release Date

2K    

WWE 2K19: Rising Stars Pack (DLC)

    PS4, Xbox One, PC     January 22, 2019
Social Point    

Tasty Town

    iOS, Android     January 31, 2019
2K    

Sid Meier’s Civilization VI: Gathering Storm (Expansion Pack)

    PC     February 14, 2019
Private Division    

Kerbal Space Program: History & Parts Pack (DLC)

    PS4, Xbox One     March 28, 2019
2K    

Borderlands: Game of the Year Edition

    PS4, Xbox One, PC     April 3, 2019
2K    

NBA 2K Mobile

    Android     April 17,2019
Social Point    

Word Life

    iOS, Android     May 9, 2019
 
Take-Two's lineup of future titles announced to date includes:            
 

Label

   

Title

   

Platforms

   

Release Date

Private Division    

Kerbal Space Program: Breaking Ground (DLC)

    PC     May 30, 2019
2K    

Borderlands 3

    PS4, Xbox One, PC     September 13, 2019
2K    

NBA 2K20

    TBA     TBA
2K    

WWE 2K20

    TBA     TBA
Private Division    

Ancestors: The Humankind Odyssey

    PS4, Xbox One, PC (digital only)     2019 (fiscal 2020)
Private Division    

The Outer Worlds

    PS4, Xbox One, PC     2019 (fiscal 2020)
                   

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 Annual Report on Form 10-K for the period ended March 31, 2019.

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 March 31,   Twelve months ended March 31,
    2019     2018       2019       2018  
                 
                 
Net revenue   $ 539,007   $ 450,274     $ 2,668,394     $ 1,792,892  
                 
Cost of goods sold:                
Internal royalties     74,142     88,271       610,804       383,020  
Software development costs and royalties     111,596     26,981       449,198       191,400  
Product costs     44,914     47,177       322,148       203,301  
Licenses     28,263     26,782       141,494       120,590  
Total cost of goods sold     258,915     189,211       1,523,644       898,311  
                 
Gross profit     280,092     261,063       1,144,750       894,581  
                 
Selling and marketing     77,607     47,451       391,400       256,092  
General and administrative     75,541     60,450       281,234       247,828  
Research and development     56,588     54,128       230,170       196,373  
Depreciation and amortization     11,081     9,479       40,232       43,969  
Business reorganization     1,214     1,730       (4,958 )     14,742  
Total operating expenses     222,031     173,238       938,078       759,004  
Income from operations     58,061     87,825       206,672       135,577  
Interest and other, net     6,466     3,451       26,113       1,048  
Income before income taxes     64,527     91,276       232,785       136,625  
Provision for (benefit from) income taxes     7,698     423       (101,052 )     (36,908 )
Net income   $ 56,829   $ 90,853     $ 333,837     $ 173,533  
                  173,533  
Earnings per share:                
Basic earnings per share   $ 0.50   $ 0.80     $ 2.95     $ 1.57  
Diluted earnings per share   $ 0.50   $ 0.77     $ 2.90     $ 1.54  
                 
Weighted average shares outstanding:                
Basic     112,614     113,330       113,176       110,210  
Diluted     113,939     118,675       115,198       112,864  
                 
Computation of Basic EPS:                
Net income   $ 56,829   $ 90,853     $ 333,837     $ 173,533  
Less: net income allocated to participating securities     -     (82 )     -       (159 )
Net income for basic EPS calculation   $ 56,829   $ 90,771     $ 333,837     $ 173,374  
                 
Weighted average shares outstanding - basic     112,614     113,330       113,176       110,210  
Less: weighted average participating shares outstanding     -     (102 )     -       (101 )
Weighted average common shares outstanding - basic     112,614     113,228       113,176       110,109  
                 
Basic earnings per share   $ 0.50   $ 0.80     $ 2.95     $ 1.57  
                 
Computation of Diluted EPS:                
Net income   $ 56,829   $ 90,853     $ 333,837     $ 173,533  
Less: net income allocated to participating securities     -     (78 )     -       (155 )
Add: interest expense, net of tax, on Convertible Notes     -     249       -       -  
Net income for diluted EPS calculation   $ 56,829   $ 91,024     $ 333,837     $ 173,378  
                 
Weighted average common shares outstanding - basic     112,614     113,228       113,176       110,109  
Add: dilutive effect of common stock equivalents     1,325     5,447       2,022       2,755  
Total weighted average shares outstanding - diluted     113,939     118,675       115,198       112,864  
Less: weighted average participating shares outstanding     -     (102 )     -       (101 )
Weighted average common shares outstanding - diluted     113,939     118,573       115,198       112,763  
                 
Diluted earnings per share   $ 0.50   $ 0.77     $ 2.90     $ 1.54  
                               
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
         
    March 31,   March 31,
      2019       2018  
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 826,525     $ 808,973  
Short-term investments     744,485       615,406  
Restricted cash     565,461       437,398  

Accounts receivable, net of allowances of $995 and $54,290 at March 31, 2019 and 2018, respectively

    395,729       247,649  
Inventory     28,200       15,162  
Software development costs and licenses     28,880       33,284  
Deferred cost of goods sold     51,867       117,851  
Prepaid expenses and other     186,688       133,454  
Total current assets     2,827,835       2,409,177  
         
Fixed assets, net     127,882       102,478  
Software development costs and licenses, net of current portion     603,436       639,369  
Deferred cost of goods sold, net of current portion     1,028       26,719  
Goodwill     381,717       399,530  
Other intangibles, net     73,115       103,681  
Deferred tax assets     134,732       4,930  
Other assets     93,320       51,957  
Total assets   $ 4,243,065     $ 3,737,841  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 72,797     $ 35,029  
Accrued expenses and other current liabilities     1,035,695       914,748  
Deferred revenue     843,302       777,152  
Total current liabilities     1,951,794       1,726,929  
         
Long-term debt     -       8,068  
Non-current deferred revenue     21,058       355,589  
Other long-term liabilities     229,633       158,285  
Total liabilities     2,202,485       2,248,871  
         
         
Stockholders' equity:        
Preferred stock, $.01 par value, 5,000 shares authorized     -        
Common stock, $.01 par value, 200,000 shares authorized; 134,602 and 132,743 shares        
issued and 112,181 and 114,038 outstanding at March 31, 2019 and, 2018, respectively     1,346       1,327  
Additional paid-in capital     2,019,369       1,888,039  
Treasury stock, at cost; 22,421 and 18,705 common shares at March 31, 2019 and, 2018, respectively     (820,572 )     (458,180 )
Retained earnings     877,626       73,516  
Accumulated other comprehensive loss     (37,189 )     (15,732 )
Total stockholders' equity     2,040,580       1,488,970  
Total liabilities and stockholders' equity   $ 4,243,065     $ 3,737,841  
                 
 

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

    Twelve months ended March 31,
      2019     2018

(as adjusted) (1)

         

Operating activities:

       
Net income   $ 333,837     $ 173,533  
     
Adjustments to reconcile net income to net cash provided by operating activities:    
Amortization and impairment of software development costs and licenses     201,221       77,887  
Depreciation     39,726       32,202  
Amortization of intellectual property     23,879       34,830  
Impairment of in-process research and development     -       11,257  
Stock-based compensation     247,700       116,349  
Deferred income taxes     110,603       (32,523 )
Amortization of discount on Convertible Notes     91       15,662  
Gain on redemption of Convertible Notes     -       (4,900 )
Amortization of debt issuance costs     809       578  
Other, net     (225 )     6,375  
Changes in assets and liabilities, net of impact of adoption of Topic 606:    
Accounts receivable     (98,075 )     (26,998 )
Inventory     (14,403 )     3,917  
Software development costs and licenses     (206,831 )     (225,269 )
Prepaid expenses and other current and other non-current assets     (275,800 )     (74,544 )
Deferred revenue     304,713       198,397  
Deferred cost of goods sold     (24,882 )     (11,959 )
Accounts payable, accrued expenses and other liabilities     201,152       198,733  
Net cash provided by operating activities     843,515       493,527  
         

Investing activities:

       
Change in bank time deposits     (171,057 )     (40,918 )
Proceeds from available-for-sale securities     325,133       241,012  
Purchases of available-for-sale securities     (282,534 )     (369,998 )
Purchases of fixed assets     (66,969 )     (61,557 )
Purchase of long-term investments     -       (5,000 )
Asset acquisition     -       (25,965 )
Business acquisition     (28,149 )     (9,401 )
Net cash used in investing activities     (223,576 )     (271,827 )
         

Financing activities:

       
Tax payment related to net share settlements on restricted stock awards     (101,293 )     (112,884 )
Repurchase of common stock     (362,392 )     (154,792 )
Other     -       (13,791 )
Net cash used in financing activities     (463,685 )     (281,467 )
         
Effects of foreign currency exchange rates on cash and cash equivalents     (10,639 )     24,924  
         
Net change in cash and cash equivalents and restricted cash     145,615       (34,843 )
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   $ 1,391,986     $ 1,246,371  
                 
(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 $128.1 million in FY19 and a decrease of $99.6 million in 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

March 31, 2019

  Three Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
                 
Net revenue by geographic region                
United States   $ 274,621   51%   $ 255,710   57%
International     264,386   49%     194,564   43%
Total net revenue   $ 539,007   100%   $ 450,274   100%
                 
Net bookings by geographic region                
United States   $ 284,209   58%   $ 232,272   56%
International     204,201   42%     179,096   44%
Total net bookings   $ 488,410   100%   $ 411,369   100%
                 
                 
    Three Months Ended

March 31, 2019

  Three Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
                 
Net revenue by distribution channel                
Digital online   $ 413,469   77%   $ 301,382   67%
Physical retail and other     125,538   23%     148,892   33%
Total net revenue   $ 539,007   100%   $ 450,274   100%
                 
Net bookings by distribution channel                
Digital online   $ 418,993   86%   $ 333,135   81%
Physical retail and other     69,417   14%     78,233   19%
Total net bookings   $ 488,410   100%   $ 411,369   100%
                 
                 
    Three Months Ended

March 31, 2019

  Three Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
Net revenue by platform mix                
Console   $ 422,432   78%   $ 363,464   81%
PC and other     116,575   22%     86,810   19%
Total net revenue   $ 539,007   100%   $ 450,274   100%
                 
Net bookings by platform mix                
Console   $ 364,873   75%   $ 313,368   76%
PC and other     123,537   25%     98,000   24%
Total net bookings   $ 488,410   100%   $ 411,368   100%
                     
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)                
                 
    Twelve Months Ended

March 31, 2019

  Twelve Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
                 
Net revenue by geographic region                
United States   $ 1,426,907   53%   $ 1,052,313   59%
International     1,241,487   47%     740,579   41%
Total net revenue   $ 2,668,394   100%   $ 1,792,892   100%
                 
Net bookings by geographic region                
United States   $ 1,606,675   55%   $ 1,161,502   58%
International     1,322,049   45%     829,100   42%
Total net bookings   $ 2,928,724   100%   $ 1,990,602   100%
                 
                 
    Twelve Months Ended

March 31, 2019

  Twelve Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
                 
Net revenue by distribution channel                
Digital online   $ 1,681,609   63%   $ 1,130,946   63%
Physical retail and other     986,785   37%     661,946   37%
Total net revenue   $ 2,668,394   100%   $ 1,792,892   100%
                 
Net bookings by distribution channel                
Digital online   $ 1,801,710   62%   $ 1,349,508   68%
Physical retail and other     1,127,014   38%     641,094   32%
Total net bookings   $ 2,928,724   100%   $ 1,990,602   100%
                 
                 
    Twelve Months Ended

March 31, 2019

  Twelve Months Ended

March 31, 2018

    Amount   % of Total   Amount   % of Total
Net revenue by Platform Mix                
Console   $ 2,233,861   84%   $ 1,463,307   82%
PC and other     434,533   16%     329,586   18%
Total net revenue   $ 2,668,394   100%   $ 1,792,892   100%
                 
Net bookings by platform mix                
Console   $ 2,497,157   85%   $ 1,611,625   81%
PC and other     431,567   15%     378,977   19%
Total net bookings   $ 2,928,724   100%   $ 1,990,602   100%
                     
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
                           

 

Three Months Ended March 31, 2019

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software
development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

                           
As reported   $ 539,007     $ 74,142     $ 111,596     $ 44,914     $ 28,263     $ 77,607  
                           
  Net effect from deferral and related cost of goods sold     (50,596 )         (5,455 )     (12,205 )     54      
  Stock-based compensation             (41,335 )             (7,363 )
  Amortization and impairment of acquired intangibles             (3,919 )            
                           

 

Three Months Ended March 31, 2019

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
                           
As reported   $ 75,541     $ 56,588     $ 11,081     $ 1,214     $ 6,466      
  Net effect from deferral and related cost of goods sold                     3,419      
  Stock-based compensation     (13,669 )     (6,722 )                
  Amortization and impairment of acquired intangibles         (1,578 )     (124 )            
  Impact of business reorganization                 (1,214 )        
                           

 

Three Months Ended March 31, 2018

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software
development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

                           
As reported   $ 450,274     $ 88,271     $ 26,981     $ 47,177     $ 26,782     $ 47,451  
  Net effect from deferral and related cost of goods sold     (38,905 )         (3,244 )     (12,397 )     (9,020 )    
  Stock-based compensation             (1,325 )             (4,471 )
  Amortization and impairment of acquired intangibles             (5,292 )             (852 )
                             
                             

 

Three Months Ended March 31, 2018

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
                           
As reported   $ 60,450     $ 54,128     $ 9,479     $ 1,730     $ 3,451      
  Stock-based compensation     (9,408 )     (5,030 )         (3 )        
  Amortization and impairment of acquired intangibles         (1,705 )     (134 )            
  Non-cash amounts related to convertible notes                     193      
  Impact of business reorganization                 (1,727 )        
  Acquisition related expenses     142                      
                             
                             
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
                             

 

Twelve Months Ended March 31, 2019

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

                             
As reported   $ 2,668,394     $ 610,804     $ 449,198     $ 322,148     $ 141,494     $ 391,400  
  Net effect from deferral and related cost of goods sold     260,330           40,943       24,882       789      
  Stock-based compensation             (149,075 )             (23,685 )
  Amortization and impairment of acquired intangibles             (16,290 )            

 

 
                             

 

Twelve Months Ended March 31, 2019

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
                             
As reported   $ 281,234     $ 230,170     $ 40,232       ($ 4,958 )   $ 26,113      
  Net effect from deferral and related cost of goods sold                     2,508      
  Stock-based compensation     (51,903 )     (23,037 )                
  Non-cash amounts related to convertible notes                     91      
  Non-cash (gain) loss on redemption of Convertible Notes                        
  Amortization and impairment of acquired intangibles         (6,437 )     (506 )            
  Impact of business reorganization                 4,958          
                             

 

Twelve Months Ended March 31, 2018

  Net Revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

                             
As reported   $ 1,792,892     $ 383,020     $ 191,400     $ 203,301     $ 120,590     $ 256,092  
  Net effect from deferral and related cost of goods sold     197,710           (5,812 )     6,912       5,900      
  Stock-based compensation             (24,610 )             (13,258 )
  Amortization of intangibles             (19,719 )             (8,107 )
                             

 

Twelve Months Ended March 31, 2018

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
                             
As reported   $ 247,828     $ 196,373     $ 43,969     $ 14,742     $ 1,048      
  Stock-based compensation     (58,037 )     (18,020 )         (2,424 )        
  Non-cash amounts related to convertible notes                     10,762      
  Acquisition related expenses     7,080                      
  Amortization and impairment of acquired intangibles         (6,494 )     (11,767 )            
  Impact of business reorganization                 (12,318 )        
  Other, net                     (93 )    
                               
           
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES          
RECONCILIATION OF GAAP TO NON-GAAP MEASURE          
(in thousands)          
           
    Twelve months ended March 31,
      2019         2018  
Net cash provided by operating activities   $ 843,515       $ 493,527  
Net change in Restricted cash (1)     (128,063 )       (99,580 )
Adjusted Operating Cash Flow   $ 715,452       $ 393,947  
           
           
    FY 2019     FY 2018
Restricted cash beginning of period (4/1)   $ 437,398       $ 337,818  
Restricted cash end of period (3/31)     565,461         437,398  
(1) Net change in Restricted cash   $ (128,063 )       ($ 99,580 )

 

Source: Take-Two Interactive

(Investor Relations)
Henry A. Diamond
Senior Vice President
Investor Relations & Corporate Communications
Take-Two Interactive Software, Inc.
(646) 536-3005
Henry.Diamond@take2games.com

(Corporate Press)
Alan Lewis
Vice President
Corporate Communications & Public Affairs
Take-Two Interactive Software, Inc.
(646) 536-2983
Alan.Lewis@take2games.com