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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)–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:

2K:

Private Division:

* 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

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

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.

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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