Take-Two News Release

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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Second Quarter 2020

GAAP net revenue grew 74% to $857.8 million

GAAP net income per diluted share grew 186% to $0.63

GAAP net cash provided by operating activities for the six-months ended September 30, 2019 increased to $144.2 million

Adjusted Unrestricted Operating Cash Flow (Non-GAAP) for the six-months ended September 30, 2019 increased to $41.2 million

Net Bookings grew 63% to $950.5 million

Company raises operating outlook for fiscal year 2020

NEW YORK--(BUSINESS WIRE)--Nov. 7, 2019-- Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for its fiscal second quarter 2020 ended September 30, 2019. In addition, the Company provided its initial outlook for its fiscal third quarter ending December 31, 2019, and raised its operating outlook for its fiscal year ending March 31, 2020. For additional information, please see the fiscal second quarter 2020 results slide deck posted to the Company’s investor relations website at http://ir.take2games.com.

Fiscal Second Quarter 2020 Financial Highlights

GAAP net revenue grew 74% to $857.8 million, as compared to $492.7 million in last year’s fiscal second quarter. Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content and in-game purchases) increased 32% and accounted for 37% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal second quarter 2020 were Borderlands® 3; NBA® 2K20 and NBA 2K19; Grand Theft Auto® Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE® 2K19 and WWE SuperCard.

Digitally-delivered GAAP net revenue grew 72% to $615.8 million, as compared to $358.4 million in last year’s fiscal second quarter, and accounted for 72% of total GAAP net revenue. The largest contributors to GAAP digitally-delivered net revenue in fiscal second quarter 2020 were NBA 2K20 and NBA 2K19; Borderlands 3; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE 2K19 and WWE SuperCard.

GAAP net income was $71.8 million, or $0.63 per diluted share, as compared to $25.4 million, or $0.22 per diluted share, for the comparable period last year.

During the 6-month period ended September 30, 2019, GAAP net cash provided by (used in) operating activities increased to $144.2 million, as compared to ($206.0) million in the same period last year. During the 6-month period ended September 30, 2019, Adjusted Unrestricted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, increased to $41.2 million, as compared to ($139.4) million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of September 30, 2019, the Company had cash and short-term investments of $1.505 billion.

The following data, together with a management reporting tax rate of 17%, 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, 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

 

 

 

 

Business
acquisition

 

Amortization
& impairment
of acquired
intangible
assets

                 

 

 

 

 

 

Net revenue

   

$857,841

 

92,675

 

     

 

 

 

 

 

Cost of goods sold

   

468,248

 

(26,932

)

 

(27,832

)

 

 

 

 

 

 

(3,311

 

)

Gross Profit

   

389,593

 

119,607

 

 

27,832

 

 

 

 

 

 

 

3,311

 

 

Operating expenses

   

314,773

     

(27,936

)

 

 

(327

 

)

 

 

(41

 

)

 

 

(1,667

 

)

Income from operations

   

74,820

 

119,607

 

 

55,768

 

 

 

327

 

 

 

 

41

 

 

 

 

4,978

 

 

                             

Interest and other, net

   

8,054

 

1,306

 

     

 

 

 

 

 

Income before income taxes

   

82,874

 

120,913

 

 

55,768

 

 

 

327

 

 

 

 

41

 

 

 

 

4,978

 

 

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 114.1 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 2020, total Net Bookings grew 63% to $950.5 million, as compared to $583.4 million during last year’s fiscal second quarter. Net Bookings from recurrent consumer spending grew 39% and accounted for 45% of total Net Bookings. The largest contributors to Net Bookings in fiscal second quarter 2020 were NBA 2K20 and NBA 2K19; Borderlands 3; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE SuperCard and WWE 2K19.

Catalog accounted for $372.1 million of Net Bookings led by Grand Theft Auto, NBA 2K, Red Dead Redemption, and Social Point’s mobile offerings.

Digitally-delivered Net Bookings grew 63% to $695.3 million, as compared to $426.2 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 2020 were NBA 2K20 and NBA 2K19; Grand Theft Auto Online and Grand Theft Auto V; Borderlands 3; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE SuperCard and WWE 2K19.

Management Comments

“Our positive momentum continued in the second quarter, enabling our Company to generate operating results that significantly exceeded our expectations,” said Strauss Zelnick, Chairman and CEO of Take-Two. “We delivered strong Net Bookings, cash flow and earnings growth, fueled by the performance of NBA 2K, Borderlands 3, Grand Theft Auto Online and Grand Theft Auto V, and Red Dead Redemption 2 and Red Dead Online. Once again, our strategy of creating the highest-quality entertainment in the industry translated into outstanding results.

“As a result of our better-than-expected second quarter operating results, we are once again raising our operating outlook for fiscal 2020. The third quarter is off to a solid start with the launches of The Outer Worlds, Red Dead Redemption 2 for PC and WWE 2K20, and we will bolster our holiday line-up with offerings for Google Stadia and Sid Meier’s Civilization VI for PlayStation 4 and Xbox One. Throughout the fiscal year, we will continue to support our titles with experiences designed to captivate audiences and drive ongoing engagement, including new content for Grand Theft Auto Online and Red Dead Online.

“Looking ahead, Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. We are actively investing in emerging markets, platforms and business models, and are exceedingly well positioned to capitalize on the positive trends in our industry and to generate growth and margin expansion over the long-term.”

Business and Product Highlights

Since July 1, 2019:

Rockstar Games:

  • Launched Red Dead Redemption 2 for PC. The first game in the Red Dead Redemption series to be offered on PC, the title features a range of graphical and technical enhancements for increased immersion along with new Bounty Hunting Missions, Gang Hideouts, Weapons and more. Red Dead Redemption 2 for PC also includes free access to the shared living world of Red Dead Online, featuring all previously released improvements and the latest content updates for the complete online experience.
  • Revealed the Rockstar Games Launcher, a new Windows desktop application that enables consumers to quickly and easily access their Rockstar Games PC collection in a single place, across both digital and disc-based titles, including purchases from other digital stores, manage cloud saves, and more. Players can also use the Launcher to shop for new Rockstar Games PC titles.
  • Released new free content updates for Grand Theft Auto Online, including:
    • The Diamond Casino & Resort, a brand new property and social space in Grand Theft Auto Online, featuring access to a variety of classic casino activities plus the opportunity to stay in the most luxurious residence in all of Los Santos, featuring customizable Penthouse suites complete with private screening rooms; a bar with new Arcade Games; and an outdoor Roof Terrace complete with an Infinity Pool and sweeping views of the Los Santos skyline. The Diamond Casino & Resort also features a new, six-mission storyline featuring fan-favorite characters, plus dozens of new Freemode missions, vehicles, collectibles and more. The Diamond Casino & Resort update was Grand Theft Auto Online’s biggest launch ever, delivering record player engagement across daily, weekly and monthly active users in July, and then again in August.
    • Numerous new missions, vehicles, weapons and other content.
  • Released new free content updates for Red Dead Online, including:
    • Frontier Pursuits, an ongoing series of Specialist Roles for players to inhabit, including tracking down wanted criminals as a Bounty Hunter, developing a new business at Camp as a Trader, or searching for rare and valuable items as a Collector, with a wide array of themed activities and new items and abilities to unlock as they progress through one or multiple Roles. The Frontier Pursuits update also includes a wide range of new features and gameplay changes, including across the board changes to player animation systems to improve movement and responsiveness; as well as new items; weapons; clothing; horse-drawn vehicles and additional horse breeds; role-specific Free Roam Events; and additional game balancing and improvements.
    • The Outlaw Pass, a way for Red Dead Online players to pay to access a wide array of ongoing upgrades, items and perks at a discounted value.
  • Launched L.A. Noire: The VR Case Files for PlayStation VR. The title was previously released for HTC Vive and the Oculus Rift, and includes seven self-contained cases from the original game rebuilt specifically for virtual reality.
  • Announced an exciting new program through which Rockstar Games Social Club members who are Twitch Prime subscribers receive free in-game rewards, bonuses and exclusive discounts in both Grand Theft Auto Online and Red Dead Online simply by linking their Twitch Prime and Social Club accounts.
  • Announced Red Dead Redemption 2 as a launch title for Stadia™.

2K:

  • Launched Borderlands 3, the next installment in the critically acclaimed shooter-looter series from Gearbox Software, for PlayStation 4, Xbox One and PC. On launch day, the title was the #1 game on Twitch, and within the first five days of launch, had amassed more than 8 million hours of viewed content on the streaming service. Borderlands 3 received positive critical acclaim, including from Forbes, IGN, Shacknews, Destructoid and Meristation, all of which scored the title 9 out of 10. The title has exceeded our expectations, and sold-in more than 5 million units within its first five days of launch, making Borderlands 3 the fastest-selling title in 2K history and highest-selling title for the label on PC. Within its first five days in market, retail sell-through of Borderlands 3 was up more than 50% compared to its predecessor, and 70% of units were purchased digitally, setting a new record for a 2K cross-platform title. On October 24, 2019, 2K began its robust post-launch content offerings for the title with the launch of the Bloody Harvest seasonal event, and has much more content planned. Borderlands 3 will also be available on Google Stadia when it launches this month.
  • Launched NBA 2K20, the next iteration of our top-rated and top-selling NBA video game simulation series* developed by Visual Concepts, for PlayStation4, Xbox One, Nintendo Switch, PC, iOS and Android. According to The NPD Group, NBA 2K20 debuted as the best-selling game of September 2019, and is the best-selling game of 2019 year-to-date. In addition, The NPD Group noted that NBA 2K20’s launch month sales were the highest for any sports game in history, and the NBA 2K series is now the 6th largest video game franchise based on tracked full-game dollar sales. 2K announced the NBA 2K20 x Nike Gamer Exclusive Program, an innovative and first-of-its-kind gaming and sneaker partnership, which launched within the new MyPLAYER Nation mode. This program provides players with the opportunity to unlock virtual Nike Gamer Exclusive sneakers for their MyPLAYER to wear in-game and to purchase real-life versions of the shoes from Nike. NBA 2K20 will also be available on Google Stadia when it launches this month.
  • Launched WWE 2K20, the newest release in our flagship WWE video game franchise that is now developed by Visual Concepts, for PlayStation 4, Xbox One and PC. Current Raw® Women’s Champion Becky Lynch® and WWE Superstar Roman Reigns™ are the cover Superstars for the title, which is being supported with downloadable add-on content, including a Season Pass.
  • Released the Sid Meier’s Civilization® VI: Rise and Fall expansion pack for iOS through Aspyr. 2K also announced that they will bring all of the previously released add-on content for Civilization VI to both iOS and Nintendo Switch later this year.
  • Announced that Sid Meier’s Civilization VI will launch for Xbox One and PlayStation 4 on November 22, 2019. Developed by Firaxis Games, and winner of The Game Awards’ Best Strategy Game and DICE Awards’ Best Strategy Game in 2016, Civilization VI’s upcoming launch marks the first time since 2008 that a Civilization game has been available on Xbox or PlayStation consoles.

Private Division:

  • Launched The Outer Worlds for Xbox One, PlayStation 4 and PC. Created by the renowned RPG developer, Obsidian Entertainment, The Outer Worlds is a dark and witty player-driven story set in a colony at the farthest reaches of the galaxy. The title will also be available for Nintendo Switch in calendar 2020, during our fiscal year 2020.
  • Launched Ancestors: The Humankind Odyssey for digital download on PC. Ancestors: The Humankind Odyssey is the debut title from Panache Digital Games, the studio co-founded in 2014 by Patrice Désilets, the original creative director of the Assassin’s Creed franchise. The title will be available for digital download on PlayStation4 and Xbox One on December 6, 2019.
  • Announced that Disintegration, an upcoming sci-fi, first-person shooter, will launch digitally for PlayStation4, Xbox One and PC in calendar 2020, during our fiscal year 2021. Disintegration is the debut title from V1 Interactive, the independent development studio co-founded in 2014 by Marcus Lehto, former creative director at Bungie and co-creator of Halo.
  • Announced that Kerbal Space Program 2, the sequel to the beloved original space sim, is in development and is now planned for launch on PC, PlayStation 4 and Xbox One during our fiscal year 2021. The original Kerbal Space Program has sold-in over 3.5 million units worldwide, and earned a Metacritic rating of 88 and a Steam user score of 91%.

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

Outlook for Fiscal 2020

Take-Two is providing its initial outlook for its fiscal third quarter ending December 31, 2019 and is raising its operating outlook for the fiscal year ending March 31, 2020:

Third Quarter Ending December 31, 2019

  • GAAP net revenue is expected to range from $915 to $965 million
  • GAAP net income is expected to range from $159 to $170 million
  • GAAP diluted net income per share is expected to range from $1.39 to $1.49
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.4 million (1)
  • Net Bookings (operational metric) are expected to range from $860 to $910 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 December 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

   

$915 to $965

   

($55)

           
     

 

   

 

           

Cost of goods sold

   

$425 to $452

   

$10

   

($63)

   

($2)

     

 

   

 

           

Operating Expenses

   

$312 to $322

   

 

   

($25)

   

($2)

                         

Interest and other, net

   

($9)

   

 

           
                         

Income before income taxes

   

$187 to $200

   

($65)

   

$88

   

$4

Fiscal Year Ending March 31, 2020

  • GAAP net revenue is expected to range from $2.93 to $3.03 billion
  • GAAP net income is expected to range from $388 to $416 million
  • GAAP diluted net income per share is expected to range from $3.38 to $3.63
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.6 million (3)
  • Net cash provided by operating activities is expected to be over $430 million
  • Adjusted Unrestricted Operating Cash Flow (Non-GAAP) is expected to be over $450 million (4)
  • Capital expenditures are expected to be approximately $75 million
  • Net Bookings (operational metric) are expected to range from $2.75 to $2.85 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

 

 

 

 

Reorganization
& acquisition

                     

 

Net revenue

   

 $2,930 to $3,030

 

($180)

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

Cost of goods sold

   

$1,388 to $1,434

 

($100)

 

($115)

 

($10)

 

 

     

 

 

 

 

 

 

 

 

 

Operating Expenses

   

$1,117 to $1,137

 

 

 

($99)

 

($7)

 

($1)

     

 

 

 

 

 

 

 

 

 

Interest and other, net

   

($37)

 

($1)

 

 

 

 

 

 

     

 

 

 

 

 

 

 

 

 

Income before income taxes

   

$462 to $496

 

($79)

 

$214

 

$17

 

 $1

 

1)

Includes 113.3 million basic shares and 1.1 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)

Includes 113.1 million basic shares and 1.5 million shares representing the potential dilution from unvested employee stock grants.

  4)

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 July 1, 2019:

                   

Label

   

Title

   

Platforms

   

Release Date

Rockstar Games

   

Grand Theft Auto Online: The Diamond Casino & Resort

   

PS4, Xbox One, PC

   

July 23, 2019

2K

   

Sid Meier’s Civilization VI: Rise and Fall (Expansion Pack)

   

iOS

   

July 23, 2019

Private Division

   

Ancestors: The Humankind Odyssey

   

PC (digital only)

   

August 27, 2019

2K

   

NBA 2K20

   

PS4, Xbox One, Switch, PC, iOS, Android

   

September 6, 2019

Rockstar Games

   

Red Dead Online: Frontier Pursuits

   

PS4, Xbox One

   

September 10, 2019

2K

   

Borderlands 3

   

PS4, Xbox One, PC

   

September 13, 2019

Rockstar Games

   

L.A Noire: The VR Case Files

   

PlayStation VR

   

September 24, 2019

2K

   

WWE 2K20

   

PS4, Xbox One, PC

   

October 22, 2019

Private Division

   

The Outer Worlds

   

PS4, Xbox One, PC

   

October 25, 2019

Rockstar Games

   

Red Dead Redemption 2

   

PC

   

November 5, 2019

                   

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

                   

Label

   

Title

   

Platforms

   

Release Date

2K

   

Sid Meier’s Civilization VI

   

Xbox One, PS4

   

November 22, 2019

Rockstar Games

   

Red Dead Redemption 2

   

Stadia

   

November 2019

2K

   

NBA 2K20

   

Stadia

   

November 2019

2K

   

Borderlands 3

   

Stadia

   

November 2019

Private Division

   

Ancestors: The Humankind Odyssey

   

PS4, Xbox One (digital only)

   

December 6, 2019

Private Division

   

Kerbal Space Program Breaking Ground Expansion

   

PS4, Xbox One

   

December 2019

Private Division

   

The Outer Worlds

   

Switch

   

2020 (fiscal 2020)

Private Division

   

Kerbal Space Program 2

   

PC, PS4, Xbox One

   

Fiscal 2021

Private Division

   

Disintegration

   

TBA

   

2020 (fiscal 2021)

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 Unrestricted 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 Unrestricted 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, 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. We develop and publish products through our labels Rockstar Games, 2K, and Private Division, as well as 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,
   

2019

 

2018

 

2019

 

 

2018

 

                 
                 
Net revenue  

$

857,841

 

$

492,667

 

$

1,398,300

 

$

880,649

 

                 
Cost of goods sold:                
Software development costs and royalties  

 

211,996

 

 

42,648

 

 

320,437

 

 

72,436

 

Internal royalties  

 

109,991

 

 

82,113

 

 

172,880

 

 

135,280

 

Product costs  

 

86,568

 

 

55,885

 

 

134,203

 

 

94,026

 

Licenses  

 

59,693

 

 

54,234

 

 

82,197

 

 

64,503

 

Total cost of goods sold  

 

468,248

 

 

234,880

 

 

709,717

 

 

366,245

 

                 
Gross profit  

 

389,593

 

 

257,787

 

 

688,583

 

 

514,404

 

                 
Selling and marketing  

 

149,566

 

 

94,165

 

 

241,387

 

 

152,471

 

General and administrative  

 

76,659

 

 

67,320

 

 

151,492

 

 

135,055

 

Research and development  

 

76,197

 

 

60,565

 

 

145,160

 

 

111,277

 

Depreciation and amortization  

 

12,024

 

 

9,751

 

 

23,281

 

 

19,011

 

Business reorganization  

 

327

 

 

-

 

 

713

 

 

(242

)

Total operating expenses  

 

314,773

 

 

231,801

 

 

562,033

 

 

417,572

 

Income from operations  

 

74,820

 

 

25,986

 

 

126,550

 

 

96,832

 

Interest and other, net  

 

8,054

 

 

4,975

 

 

18,479

 

 

11,576

 

Income before income taxes  

 

82,874

 

 

30,961

 

 

145,029

 

 

108,408

 

Provision for income taxes  

 

11,059

 

 

5,594

 

 

26,934

 

 

11,348

 

Net income  

$

71,815

 

$

25,367

 

$

118,095

 

$

97,060

 

                 
Earnings per share:                
Basic earnings per share  

$

0.63

 

$

0.22

 

$

1.05

 

$

0.86

 

Diluted earnings per share  

$

0.63

 

$

0.22

 

$

1.04

 

$

0.84

 

                 
Weighted average shares outstanding:                
Basic  

 

113,117

 

 

113,735

 

 

112,869

 

 

113,339

 

Diluted  

 

114,076

 

 

116,095

 

 

113,923

 

 

115,801

 

                 
Computation of Basic EPS:                
Net income  

$

71,815

 

$

25,367

 

$

118,095

 

$

97,060

 

                 
Weighted average shares outstanding - basic  

 

113,117

 

 

113,735

 

 

112,869

 

 

113,339

 

                 
Basic earnings per share  

$

0.63

 

$

0.22

 

$

1.05

 

$

0.86

 

                 
Computation of Diluted EPS:                
Net income  

$

71,815

 

$

25,367

 

$

118,095

 

$

97,060

 

                 
Weighted average shares outstanding - basic  

 

113,117

 

 

113,735

 

 

112,869

 

 

113,339

 

Add: dilutive effect of common stock equivalents  

 

959

 

 

2,360

 

 

1,054

 

 

2,462

 

 

 

 

114,076

 

 

116,095

 

 

113,923

 

 

115,801

 

                 
Diluted earnings per share  

$

0.63

 

$

0.22

 

$

1.04

 

$

0.84

 

                           
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
         
   

September 30,

 

March 31,

   

 

2019

 

 

 

2019

 

         
ASSETS   (Unaudited)    
Current assets:        
Cash and cash equivalents  

$

762,032

 

 

$

826,525

 

Short-term investments  

 

742,613

 

 

 

744,485

 

Restricted cash  

 

668,371

 

 

 

565,461

 

Accounts receivable, net of allowances of $442 and $995 at September 30, 2019 and March 31, 2019, respectively  

 

858,597

 

 

 

395,729

 

Inventory  

 

39,293

 

 

 

28,200

 

Software development costs and licenses  

 

62,328

 

 

 

28,880

 

Deferred cost of goods sold  

 

36,426

 

 

 

51,867

 

Prepaid expenses and other  

 

218,673

 

 

 

186,688

 

Total current assets  

 

3,388,333

 

 

 

2,827,835

 

         
Fixed assets, net  

 

129,168

 

 

 

127,882

 

Right-of-use assets  

 

119,313

 

 

 

-

 

Software development costs and licenses, net of current portion  

 

527,622

 

 

 

603,436

 

Deferred cost of goods sold, net of current portion  

 

479

 

 

 

1,028

 

Goodwill  

 

383,778

 

 

 

381,717

 

Other intangibles, net  

 

61,159

 

 

 

73,115

 

Deferred tax assets  

 

110,167

 

 

 

134,732

 

Other assets  

 

95,092

 

 

 

93,320

 

Total assets  

$

4,815,111

 

 

$

4,243,065

 

         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable  

$

114,946

 

 

$

72,797

 

Accrued expenses and other current liabilities  

 

1,251,196

 

 

 

1,035,695

 

Deferred revenue  

 

901,813

 

 

 

843,302

 

Lease liabilities  

 

22,273

 

 

 

-

 

Total current liabilities  

 

2,290,228

 

 

 

1,951,794

 

         
Non-current deferred revenue  

 

25,378

 

 

 

21,058

 

Non-current lease liabilities  

 

118,789

 

 

 

-

 

Other long-term liabilities  

 

198,953

 

 

 

229,633

 

Total liabilities  

 

2,633,348

 

 

 

2,202,485

 

         
         
Stockholders' equity:        
Preferred stock, $.01 par value, 5,000 shares authorized  

 

-

 

 

 

-

 

Common stock, $.01 par value, 200,000 shares authorized; 135,616 and 134,602 shares        
issued and 113,195 and 112,181 outstanding at September 30, 2019 and, March 31, 2019, respectively  

 

1,356

 

 

 

1,346

 

Additional paid-in capital  

 

2,059,720

 

 

 

2,019,369

 

Treasury stock, at cost; 22,421 common shares at September 30, 2019 and, March 31, 2019, respectively  

 

(820,572

)

 

 

(820,572

)

Retained earnings  

 

995,721

 

 

 

877,626

 

Accumulated other comprehensive loss  

 

(54,462

)

 

 

(37,189

)

Total stockholders' equity  

 

2,181,763

 

 

 

2,040,580

 

Total liabilities and stockholders' equity  

$

4,815,111

 

 

$

4,243,065

 

         
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
      Six months ended September 30,
     

 

2019

 

 

 

2018

 

           
Operating activities:        
  Net income  

$

118,095

 

 

$

97,060

 

  Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
  Amortization and impairment of software development costs and licenses  

 

72,505

 

 

 

20,269

 

  Depreciation  

 

23,037

 

 

 

18,753

 

  Amortization of intellectual property  

 

10,627

 

 

 

12,272

 

  Stock-based compensation  

 

113,199

 

 

 

54,941

 

  Other, net  

 

4,325

 

 

 

(1,614

)

  Changes in assets and liabilities:        
  Accounts receivable  

 

(463,019

)

 

 

(233,236

)

  Inventory  

 

(12,064

)

 

 

(25,925

)

  Software development costs and licenses  

 

(51,932

)

 

 

(133,008

)

  Prepaid expenses and other current and other non-current assets  

 

(131,055

)

 

 

(6,681

)

  Deferred revenue  

 

66,148

 

 

 

12,601

 

  Deferred cost of goods sold  

 

15,287

 

 

 

6,867

 

  Accounts payable, accrued expenses and other liabilities  

 

379,005

 

 

 

(28,334

)

  Net cash provided by (used in) operating activities  

 

144,158

 

 

 

(206,035

)

           
Investing activities:        
  Change in bank time deposits  

 

6,720

 

 

 

33,604

 

  Proceeds from available-for-sale securities  

 

137,071

 

 

 

114,266

 

  Purchases of available-for-sale securities  

 

(141,244

)

 

 

(95,888

)

  Purchases of fixed assets  

 

(25,532

)

 

 

(29,144

)

  Purchase of long-term investment  

 

(4,500

)

 

 

-

 

  Business acquisitions  

 

(8,715

)

 

 

(3,149

)

  Net cash (used in) provided by investing activities  

 

(36,200

)

 

 

19,689

 

           
Financing activities:        
  Tax payment related to net share settlements on restricted stock awards  

 

(61,478

)

 

 

(63,967

)

  Repurchase of common stock  

 

-

 

 

 

(153,500

)

  Net cash used in financing activities  

 

(61,478

)

 

 

(217,467

)

           
  Effects of foreign currency exchange rates on cash and cash equivalents  

 

(8,063

)

 

 

(9,464

)

           
  Net change in cash and cash equivalents and restricted cash  

 

38,417

 

 

 

(413,277

)

  Cash and cash equivalents and restricted cash, beginning of year  

 

1,391,986

 

 

 

1,246,371

 

  Cash and cash equivalents and restricted cash, end of period  

$

1,430,403

 

 

$

833,094

 

           
         
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, 2019
  Three Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
                   
Net revenue by geographic region                  
United States    

$

494,661

 

58

%

 

$

279,306

 

57

%

International    

 

363,180

 

42

%

 

 

213,361

 

43

%

Total net revenue    

$

857,841

 

100

%

 

$

492,667

 

100

%

                   
Net bookings by geographic region                  
United States    

$

567,503

 

60

%

 

$

362,477

 

62

%

International    

 

383,013

 

40

%

 

 

220,944

 

38

%

Total net bookings    

$

950,516

 

100

%

 

$

583,421

 

100

%

                   
                   
      Three Months Ended
September 30, 2019
  Three Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
                   
Net revenue by distribution channel                  
Digital online    

$

615,774

 

72

%

 

$

358,371

 

73

%

Physical retail and other    

 

242,067

 

28

%

 

 

134,296

 

27

%

Total net revenue    

$

857,841

 

100

%

 

$

492,667

 

100

%

                   
Net bookings by distribution channel                  
Digital online    

$

695,346

 

73

%

 

$

426,180

 

73

%

Physical retail and other    

 

255,170

 

27

%

 

 

157,241

 

27

%

Total net bookings    

$

950,516

 

100

%

 

$

583,421

 

100

%

                   
                   
      Three Months Ended
September 30, 2019
  Three Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
Net revenue by platform mix                  
Console    

$

651,818

 

76

%

 

$

372,240

 

76

%

PC and other    

 

206,023

 

24

%

 

 

120,427

 

24

%

Total net revenue    

$

857,841

 

100

%

 

$

492,667

 

100

%

                   
Net bookings by platform mix                  
Console    

$

737,085

 

78

%

 

$

477,970

 

82

%

PC and other    

 

213,431

 

22

%

 

 

105,451

 

18

%

Total net bookings    

$

950,516

 

100

%

 

$

583,421

 

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, 2019
  Six Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
                   
Net revenue by geographic region                  
United States    

$

825,140

 

59

%

 

$

500,717

 

57

%

International    

 

573,160

 

41

%

 

 

379,932

 

43

%

Total net revenue    

$

1,398,300

 

100

%

 

$

880,649

 

100

%

                   
Net bookings by geographic region                  
United States    

$

826,738

 

60

%

 

$

519,125

 

60

%

International    

 

546,018

 

40

%

 

 

352,621

 

40

%

Total net bookings    

$

1,372,756

 

100

%

 

$

871,746

 

100

%

                   
                   
      Six Months Ended
September 30, 2019
  Six Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
                   
Net revenue by distribution channel                  
Digital online    

$

1,043,555

 

75

%

 

$

673,418

 

76

%

Physical retail and other    

 

354,745

 

25

%

 

 

207,231

 

24

%

Total net revenue    

$

1,398,300

 

100

%

 

$

880,649

 

100

%

                   
Net bookings by distribution channel                  
Digital online    

$

1,077,825

 

79

%

 

$

678,941

 

78

%

Physical retail and other    

 

294,931

 

21

%

 

 

192,805

 

22

%

Total net bookings    

$

1,372,756

 

100

%

 

$

871,746

 

100

%

                   
                   
      Six Months Ended
September 30, 2019
  Six Months Ended
September 30, 2018
      Amount   % of Total   Amount   % of Total
Net revenue by Platform Mix                  
Console    

$

1,086,632

 

78

%

 

$

666,970

 

76

%

PC and other    

 

311,668

 

22

%

 

 

213,679

 

24

%

Total net revenue    

$

1,398,300

 

100

%

 

$

880,649

 

100

%

                   
Net bookings by platform mix                  
Console    

$

1,049,716

 

76

%

 

$

677,890

 

78

%

PC and other    

 

323,040

 

24

%

 

 

193,856

 

22

%

Total net bookings    

$

1,372,756

 

100

%

 

$

871,746

 

100

%

                   
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA                        
(in thousands)                        
  Three Months Ended September 30, 2019   Net revenue   Cost of goods sold-
Software development
costs and royalties
  Cost of goods sold-
Internal royalties
  Cost of goods sold-
Product costs
  Cost of goods sold-
Licenses
  Selling and
marketing
                             
As reported  

$

857,841

 

 

$

211,996

 

 

$

109,991

 

 

$

86,568

 

 

$

59,693

 

 

$

149,566

 

    Net effect from deferral and related cost of goods sold  

 

92,675

 

 

 

(26,161

)

     

 

(1,904

)

 

 

1,133

 

   
    Stock-based compensation      

 

(27,832

)

             

 

(3,744

)

    Amortization and impairment of acquired intangibles      

 

(3,311

)

               
                             
  Three Months Ended September 30, 2019   General and
administrative
  Research and
development
  Depreciation and
amortization
  Business reorganization   Interest and other,
net
   
                             
As reported  

$

76,659

 

 

$

76,197

 

 

$

12,024

 

 

$

327

 

 

$

8,054

 

   
    Net effect from deferral and related cost of goods sold                  

 

1,306

 

   
    Stock-based compensation  

 

(13,576

)

 

 

(10,616

)

               
    Amortization and impairment of acquired intangibles      

 

(1,546

)

 

 

(121

)

           
    Impact of business reorganization              

 

(327

)

       
    Acquisition related expenses  

 

(41

)

                   
                             
  Three Months Ended September 30, 2018   Net revenue   Cost of goods sold-
Software development
costs and royalties
  Cost of goods sold-
Internal royalties
  Cost of goods sold-
Product costs
  Cost of goods sold-
Licenses
  Selling and
marketing
                             
As reported  

$

492,667

 

 

$

42,648

 

 

$

82,113

 

 

$

55,885

 

 

$

54,234

 

 

$

94,165

 

    Net effect from deferral and related cost of goods sold  

 

90,754

 

 

 

3,492

 

     

 

1,534

 

 

 

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
  Business reorganization   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

)

               
    Amortization and impairment of acquired intangibles      

 

(1,615

)

 

 

(127

)

           
                             
                             
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA                        
(in thousands)                        
  Six Months Ended September 30, 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  

$

1,398,300

 

 

$

172,880

 

 

$

320,437

 

 

$

134,203

 

 

$

82,197

 

 

$

241,387

 

    Net effect from deferral and related cost of goods sold  

 

(25,544

)

     

 

(39,320

)

 

 

(17,553

)

 

 

344

 

   
    Stock-based compensation          

 

(58,630

)

         

 

(10,220

)

    Amortization and impairment of acquired intangibles          

 

(7,015

)

           
                             
  Six Months Ended September 30, 2019   General and
administrative
  Research and
development
  Depreciation and
amortization
  Business reorganization   Interest and other,
net
   
                             
As reported  

$

151,492

 

 

$

145,160

 

 

$

23,281

 

 

$

713

 

 

$

18,479

 

   
    Net effect from deferral and related cost of goods sold                  

 

812

 

   
    Stock-based compensation  

 

(27,143

)

 

 

(17,206

)

               
    Amortization and impairment of acquired intangibles      

 

(3,106

)

 

 

(244

)

           
    Impact of business reorganization              

 

(713

)

       
    Acquisition related expenses  

 

(367

)

                   
  Six Months Ended September 30, 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  

$

880,649

 

 

$

135,280

 

 

$

72,436

 

 

$

94,026

 

 

$

64,503

 

 

$

152,471

 

    Net effect from deferral and related cost of goods sold  

 

(8,903

)

     

 

3,483

 

 

 

(6,871

)

 

 

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

 

       
                             
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)            
             
        Six months ended September 30,
       

 

2019

 

 

 

2018

 

Net cash from operating activities      

$

144,158

 

 

$

(206,035

)

Net change in Restricted cash (1)      

 

(102,910

)

 

 

66,651

 

Adjusted Unrestricted Operating Cash Flow      

$

41,248

 

 

$

(139,384

)

             
         
        FY 2020   FY 2019
Restricted cash beginning of period (4/1)      

$

565,461

 

 

$

437,398

 

Restricted cash end of period (9/30)      

 

668,371

 

 

 

370,747

 

(1) Net change in Restricted cash      

$

(102,910

)

 

$

66,651

 

             

 

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