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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal First Quarter 2021

GAAP net revenue grew 54% to $831.3 million, a fiscal first quarter record

GAAP net income per diluted share increased 88% to $0.77

GAAP net cash provided by operating activities for the three-months ended June 30, 2020 increased 310% to $445.4 million

Adjusted Unrestricted Operating Cash Flow (Non-GAAP) for the three-months ended June 30, 2020 increased 595% to $324.0 million

Net Bookings grew 136% to $996.2 million, a fiscal first quarter record

Company raises outlook for fiscal year 2021

NEW YORK–(BUSINESS WIRE)–Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for its fiscal first quarter 2021 ended June 30, 2020. In addition, the Company provided its initial outlook for its fiscal second quarter ending September 30, 2020 and increased its outlook for the fiscal year 2021, ending March 31, 2021. For additional information, please see the fiscal first quarter 2021 results slide deck posted to the Company’s investor relations website at http://ir.take2games.com.

Fiscal First Quarter 2021 Financial Highlights

GAAP net revenue increased 54% to $831.3 million, a fiscal first quarter record, as compared to $540.5 million in last year’s fiscal first quarter. Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content and in-game purchases) increased 52% and accounted for 58% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal first quarter 2021 were Grand Theft Auto® Online and Grand Theft Auto V; NBA® 2K20; Red Dead Redemption 2 and Red Dead Online; Borderlands® 3; Sid Meier’s Civilization VI; Social Point’s mobile offerings; the WWE® series; and The Outer Worlds.

Digitally-delivered GAAP net revenue increased 70% to $726.2 million, as compared to $427.8 million in last year’s fiscal first quarter, and accounted for 87% of total GAAP net revenue. The largest contributors to GAAP digitally-delivered net revenue in fiscal first quarter 2021 were Grand Theft Auto Online and Grand Theft Auto V; NBA 2K20; Red Dead Redemption 2 and Red Dead Online; Borderlands 3; Sid Meier’s Civilization VI; the WWE series; and Social Point’s mobile offerings.

GAAP net income increased 91% to $88.5 million, or $0.77 per diluted share, as compared to $46.3 million, or $0.41 per diluted share, for the comparable period last year.

During the three-month period ended June 30, 2020, GAAP net cash provided by operating activities increased 310% to $445.4 million, as compared to $108.5 million in the same period last year. During the three-month period ended June 30, 2020, Adjusted Unrestricted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, increased 594% to $324.0 million, as compared to $46.6 million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of June 30, 2020, the Company had cash and short-term investments of $2.285 billion.

The following data, together with a management reporting tax rate of 16%, 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 June 30, 2020

 

 

Financial Data

$ in thousands

Statement of

operations

 

Change in deferred

net revenue and

related cost of

goods sold

 

Stock-based

compensation

 

Amortization &

impairment of

acquired intangible

assets

     

 

Net revenue

$831,310

 

164,939

 

   

 

Cost of goods sold

476,689

 

(1,223

)

 

(29,033

)

 

 

(3,282

 

)

Gross Profit

354,621

 

166,162

 

 

29,033

 

 

 

3,282

 

 

Operating expenses

272,478

   

(24,378

)

 

 

(1,672

 

)

Income from operations

82,143

 

166,162

 

 

53,411

 

 

 

4,954

 

 

       

Interest and other, net

8,218

 

(761

)

   

 

Income before income taxes

90,361

 

165,401

 

 

53,411

 

 

 

4,954

 

 

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 114.96 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 first quarter 2021, total Net Bookings grew 136% to $996.2 million, a fiscal first quarter record, as compared to $422.2 million during last year’s fiscal first quarter. Net Bookings from recurrent consumer spending grew 127% and accounted for 65% of total Net Bookings. The largest contributors to Net Bookings in fiscal first quarter 2021 were Grand Theft Auto Online and Grand Theft Auto V; NBA 2K20; Red Dead Redemption 2 and Red Dead Online; Borderlands 3; Social Point’s mobile offerings; Sid Meier’s Civilization VI; the WWE series; and The Outer Worlds.

Catalog accounted for $915.5 million of Net Bookings led by Grand Theft Auto, NBA 2K, Red Dead Redemption, Borderlands, Social Point’s mobile offerings, Sid Meier’s Civilization, and the WWE series.

Digitally-delivered Net Bookings grew 139% to $915.2 million, as compared to $382.5 million in last year’s fiscal first quarter, and accounted for 92% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal first quarter 2021 were Grand Theft Auto Online and Grand Theft Auto V; NBA 2K20; Red Dead Redemption 2 and Red Dead Online; Borderlands 3; Social Point’s mobile offerings; Sid Meier’s Civilization VI; and the WWE series.

Management Comments

“Fiscal 2021 is off to a terrific start with first quarter operating results that significantly exceeded our expectations, including fiscal first quarter records for GAAP net revenue and Net Bookings”, said Strauss Zelnick, Chairman and CEO of Take-Two. “Our extraordinary results were driven primarily by the outperformance of NBA 2K20, Grand Theft Auto V and Grand Theft Auto Online, Red Dead Redemption 2 and Red Dead Online, and Social Point’s mobile games.

“As a result of our better-than-expected first quarter operating results and increased forecast for the balance of the year, we are raising our fiscal 2021 outlook, which is poised to be another great year for Take-Two.

With the strongest development pipeline in the history of the Company and our ongoing investment in emerging markets, platforms and business models, Take-Two is exceedingly well positioned to capitalize on the many positive trends in our industry and to generate growth and margin expansion over the long-term.”

COVID-19 Response

At Take-Two, our number one priority is the health and safety of our employees and their families. All of our offices moved largely to work-from-home environments by mid-March and several are starting to open on a voluntary basis. The digital nature of our content means our creative talent can continue to work on game development from home. Although the shift to remote working adds complexity and challenges in some areas of the game development process, based on our work to date, we currently do not expect any additional delays.

With more people staying at home, we have experienced, and are continuing to experience, heightened levels of engagement and Net Bookings growth-to-date. The full extent of the impact of the COVID-19 pandemic to our business, operations and financial results will depend on numerous evolving factors that we are not able to predict. The key risks to our business are set forth under the heading “Cautionary Note Regarding Forward Looking Statements” in this release and in Take-Two’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Business and Product Highlights

Since April 1, 2020:

Take-Two:

Rockstar Games:

2K:

Private Division:

Outlook for Fiscal 2021

Take-Two is providing its initial outlook for its fiscal second quarter ending September 30, 2020 and increasing its outlook for the fiscal year ending March 31, 2021:

Second Quarter Ending September 30, 2020

The Company is also providing selected data and its management reporting tax rate of 16%, 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 September 30, 2020

 

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

$750 to $800

 

 

$25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

$355 to $381

 

 

$30

 

 

($38)

 

 

($2)

 

 

 

 

 

 

 

 

 

 

Operating Expenses

$285 to $295

 

 

 

 

 

($23)

 

 

($2)

       

Interest and other, net

($1)

 

 

 

 

 

 

 

 

 

       

Income before income taxes

$111 to $125

 

 

($5)

 

 

$61

 

 

$4

Fiscal Year Ending March 31, 2021

The Company is also providing selected data and its management reporting tax rate of 16%, 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, 2021

 

Financial Data

$ in millions

GAAP outlook (2)

 

Change in

deferred net

revenue and

related cost of

goods sold

 

Stock-based

compensation

 

Amortization of

acquired

intangible

assets

       

Net revenue

$2,800 to $2,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

$1,275 to $1,320

 

 

$4

 

 

($61)

 

 

($10)

 

 

 

 

 

 

 

 

 

 

Operating Expenses

$1,151 to $1,171

 

 

 

 

 

($94)

 

 

($7)

       

Interest and other, net

($13)

 

 

$1

 

 

 

 

 

 

       

Income before income taxes

$387 to $422

 

 

($5)

 

 

$155

 

 

$17

1)

Includes 113.9 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 a $25 million net decrease in restricted cash for fiscal 2021.

Key assumptions and dependencies underlying the Company’s outlook include: the timely delivery of the titles included in this financial outlook; continuing benefit from sheltering at home, which we have included in the fiscal second quarter 2021, but have not yet factored into the back half of the fiscal year; a stable economic environment; 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 next-gen consoles, PC, mobile and other platforms; and stable foreign exchange rates. See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases

The following titles have been released since April 1, 2020:

Label

Title

Platforms

Release Date

2K

XCOM: Chimera Squad

PC

April 24, 2020

2K

Mafia II Definitive Edition and Mafia III Definitive Edition

PS4, Xbox One, PC

May 19, 2020

2K

Sid Meier’s Civilization VI – Frontier Pass (DLC)

PS4, Xbox One, Switch, PC

May 21, 2020

2K

BioShock: The Collection

Switch

May 29, 2020

2K

Borderlands Legendary Collection

Switch

May 29, 2020

2K

XCOM 2 Collection

Switch

May 29, 2020

Private Division

The Outer Worlds

Switch

June 5, 2020

Private Division

Disintegration

PS4, Xbox One, PC

June 16, 2020

2K

Borderlands 3: Bounty of Blood (DLC)

PS4, Xbox One, PC, Stadia

June 25, 2020

Private Division

Kerbal Space Program: Shared Horizons (free update)

PC

July 1, 2020

2K

Sid Meier’s Civilization VI – New Frontier Pass: Ethiopia Pack (DLC)

PS4, Xbox One, Switch, PC

July 23, 2020

Rockstar Games

Red Dead Online: The Naturalist

PS4, Xbox One, PC, Stadia

July 28, 2020

 

 

 

 

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

 

Label

Title

Platforms

Release Date

2K

PGA TOUR 2K21

PS4, Xbox One, Switch, PC Stadia

August 21, 2020

2K

NBA 2K21

PS4, Xbox One, Switch, PC, Stadia

September 4, 2020

2K

WWE 2K Battlegrounds

PS4, Xbox One, Switch, PC, Stadia

September 18, 2020

2K

Mafia I Definitive Edition

PS4, Xbox One, PC

September 25, 2020

2K

NBA 2K21

PS5, Xbox Series X

Holiday 2020

Rockstar Games

Grand Theft Auto V

PS5, Xbox Series X

Fiscal 2022

Private Division

Kerbal Space Program 2

PS4, Xbox One, PC

Fall 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.

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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