News

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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