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)–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 3 will 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 the second 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.

Contacts

(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

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