Non-GAAP Net Revenue Grew 142% to $366.4 Million

Non-GAAP Net Revenue from Digitally-Delivered Content Grew 139% to $254.0 Million

Non-GAAP Net Income Increased to $0.31 Per Diluted Share

NEW YORK--(BUSINESS WIRE)-- Take-Two Interactive Software, Inc. (NASDAQ: TTWO) today reported strong financial results for fiscal first quarter 2016, ended June 30, 2015. In addition, the Company reiterated its financial outlook for the fiscal year ending March 31, 2016, and provided its initial financial outlook for the fiscal second quarter 2016, ending September 30, 2015.

GAAP Financial Results

For fiscal first quarter 2016, GAAP net revenue grew 119% to $275.3 million, as compared to $125.4 million for fiscal first quarter 2015. GAAP net loss was $67.0 million, or $0.81 per diluted share, as compared to $35.4 million, or $0.45 per diluted share, for the year-ago period. GAAP results for fiscal first quarter 2016 reflect the deferral of net revenue and cost of goods sold related to sell-in of certain titles during the quarter.

During fiscal first quarter 2016, the Company’s cash and short-term investments balance increased to $1.191 billion as of June 30, 2015, up from $1.098 billion as of March 31, 2015.

Non-GAAP Financial Results

For fiscal first quarter 2016, Non-GAAP net revenue grew 142% to $366.4 million, as compared to $151.6 million for the year-ago period. Non-GAAP net income increased to $34.2 million, or $0.31 per diluted share, as compared to Non-GAAP net loss of $11.2 million, or $0.14 per diluted share, for the year-ago period.

The largest contributors to Non-GAAP net revenue in fiscal first quarter 2016 were Grand Theft Auto® V and Grand Theft Auto Online, NBA® 2K15, Borderlands®: The Handsome Collection and WWE® 2K15. Non-GAAP net revenue from digitally-delivered content grew 139% year-over-year to $254.0 million. The largest contributors to Non-GAAP net revenue from digitally-delivered content were the Grand Theft Auto, NBA 2K, Borderlands and WWE 2K series, and Evolve™. Revenue from recurrent consumer spending (virtual currency, downloadable add-on content and online games) grew 47% year-over-year and accounted for 36% of Non-GAAP net revenue from digitally-delivered content, or 25% of total Non-GAAP net revenue. Catalog sales accounted for $67.5 million of Non-GAAP net revenue led by the Grand Theft Auto and Borderlands series.

Management Comments

“Our business continued its positive momentum during the fiscal first quarter, enabling Take-Two to deliver significant growth in revenue, Non-GAAP earnings and cash flow,” said Strauss Zelnick, Chairman and CEO of Take-Two. “These results were driven by strong consumer demand for Grand Theft Auto V, NBA 2K15 and an array of other titles, along with better-than-expected growth in recurrent consumer spending.

“Fiscal 2016 is off to a solid start and promises to be another year of meaningful Non-GAAP profits for our organization. We have a robust development pipeline and are well-positioned to generate revenue growth and margin expansion in future years, and returns for our shareholders over the long-term.”

Business and Product Highlights

Since April 1, 2015:

Rockstar Games:

• Launched Grand Theft Auto V and Grand Theft Auto Online for PC. Grand Theft Auto V has now sold-in over 54 million units across PlayStation 4, PlayStation 3, Xbox One, Xbox 360 and PC.
• Released new free content updates for Grand Theft Auto Online, including The Ill-Gotten Gains Updates Part One and Part Two for all five platforms.

2K:

• Brought WWE simulation video gaming to the PC and mobile platforms for the first time ever with the release of WWE 2K15 for PC and WWE 2K for iOS and Android.
• Announced that NBA 2K16, the next iteration of our top-rated NBA video game simulation series*, will define the ultimate intersection of sports and pop culture with three unique game covers from NBA All-Stars Stephen Curry, James Harden and Anthony Davis, as well as feature an all-new MyCAREER mode written and directed by acclaimed filmmaker Spike Lee. NBA 2K16 is planned for launch on September 29, 2015 on the PlayStation 4, PlayStation 3, Xbox One, Xbox 360 and PC.
• Announced that WWE Hall of Famer Stone Cold Steve Austin® will be the cover Superstar for WWE 2K16. In addition, action movie icon Arnold Schwarzenegger will make his series debut, and consumers who pre-order the game from participating retailers will receive two playable characters based on his famous film roles from The Terminator and Terminator 2: Judgment Day. WWE 2K16 is planned to launch in North America on October 27, 2015, and internationally on October 30, 2015, for Xbox One, Xbox 360, PlayStation 4 and PlayStation 3.
• Announced that XCOM® 2, the sequel to the Game of the Year award-winning strategy title XCOM: Enemy Unknown, is currently in development at 2K’s Firaxis Games studio for PC. XCOM 2 is planned for release in November 2015.
• Announced that Sid Meier’s Civilization: Beyond Earth – Rising Tide, an expansion pack for the popular PC title from Firaxis Games, is planned for release in fall 2015.
• Announced that Battleborn™, which is currently in development for PlayStation 4, Xbox One and PC by the creators of Borderlands at Gearbox Software, is planned for release on February 9, 2016.
• Announced that Mafia® III, the next installment in 2K’s successful organized crime franchise, is currently in development for Xbox One, PlayStation 4 and PC at Hangar 13, 2K’s new development studio. Mafia III is planned for release during calendar 2016 (fiscal year 2017).

*According to Gamerankings.com.

Financial Outlook for Fiscal 2016

Take-Two is providing its initial financial outlook for the fiscal second quarter ending September 30, 2015, and reiterating its financial outlook for the fiscal year ending March 31, 2016 as follows:

					Second Quarter			Fiscal Year
					Ending 9/30/2015			Ending 3/31/2016
		Non-GAAP net revenue			$275 to $325 Million			$1.3 to $1.4 Billion
		Non-GAAP net income per diluted share (1)			$0.05 to $0.15			$0.75 to $1.00
		GAAP to Non-GAAP Reconciling Items (2):
		Net effect from deferral in net revenues and related cost of goods sold			($0.51)			($0.51)
		Stock-based compensation expense (3)			$0.11			$0.46
		Business reorganization, restructuring and related expenses			$0.00			$0.01
		Non-cash amortization of discount on convertible notes			$0.04			$0.15
		Non-cash tax expense			$0.00			$0.02
1)		For the fiscal second quarter ending September 30, 2015 and fiscal year ending March 31, 2016, our Non-GAAP net income per diluted share outlook is calculated using the “if-converted” method as a result of the issuances of our 1.75% Convertible Notes in November 2011 and 1.00% Convertible Notes in June 2013, and Non-GAAP diluted net income for the second quarter and fiscal year is adjusted by adding-back $1.4 million and $5.5 million, respectively, related to coupon interest and debt issuance costs, net of tax. Shares used to calculate our Non-GAAP net income per diluted share outlook are as follows:
		Weighted average basic shares			84.5 Million			84.5 Million
		Add: Weighted average participating shares			4.0 Million			4.0 Million
		Add: Potential Dilution from convertible notes			26.5 Million			26.5 Million
		Total weighted average diluted shares			115.0 Million			115.0 Million
2)		All GAAP to Non-GAAP reconciling items are net of tax and per share.
3)		The Company's stock-based compensation expense for the periods above includes the cost of approximately 1.1 million restricted stock units previously granted to ZelnickMedia that are subject to variable accounting. Actual expense to be recorded in connection with these shares is dependent upon several factors, including future changes in Take-Two's stock price.

Key assumptions and dependencies underlying the Company’s financial outlook include: the timely delivery of the titles included in this financial outlook; continued consumer acceptance of the Xbox One and PlayStation 4; the ability to develop and publish products that capture market share for these new-generation systems while continuing to leverage opportunities on the Xbox 360, PlayStation 3 and PC; and stable foreign exchange rates. See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases

The following titles were released since April 1, 2015:

Label			Title			Platforms			Release Date
Rockstar Games			Grand Theft Auto V			PC			April 14, 2015
2K			WWE 2K			iOS and Android Devices			April 16, 2015
2K			WWE 2K15			PC			April 28, 2015
2K			Evolve: Hunting Season 2 (DLC)			Xbox One, PS4, PC			June 24, 2015

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

Label			Title			Platforms			Release Date
2K			NBA 2K16			Xbox 360, Xbox One, PS3, PS4, PC, Mobile			September 29, 2015
2K			WWE 2K16			Xbox 360, Xbox One, PS3, PS4			October 27, 2015*
2K			XCOM 2			PC, Mac, Linux			November 2015
2K			Sid Meier’s Civilization Beyond Earth – Rising Tide (expansion pack)			PC			Fall 2015
2K			Battleborn			Xbox One, PS4, PC			February 9, 2016
2K			Mafia III			Xbox One, PS4, PC			Fiscal Year 2017
*North American release date; international release date followed three days after.

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 Measures

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses Non-GAAP measures of financial performance. The Company believes that these Non-GAAP financial measures, when taken into consideration with the corresponding GAAP financial measures, are important in gaining an understanding of the Company’s ongoing business. These Non-GAAP financial measures also provide for comparative results from period to period. Therefore, the Company believes it is appropriate to exclude the following Non-GAAP items, net of applicable taxes, as discussed below:

• Net effect from deferral in net revenues and related cost of goods sold – the Company defers revenue and related costs from the sale of certain titles that have undelivered elements upon the sale of the game and recognizes that revenue upon the delivery of the undelivered elements. The Company also defers revenue and related costs for certain sales generated from certain titles for which we have or expect to provide certain additional add-on content. These amounts are deferred over the estimated remaining life of the game to which they pertain. As there is no impact to the Company’s operating cash flow, management excludes the impact of deferred net revenue and related costs from its Non-GAAP financial measures when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. In addition, we believe that these Non-GAAP financial measures provide a more timely indication of trends in our business, provide comparability with the way our business is measured by analysts, and provide consistency with industry data sources.
• Stock-based compensation – the Company does not consider stock-based compensation charges when evaluating business performance and management does not contemplate stock-based compensation expense in its short- and long-term operating plans. As a result, the Company has excluded such expenses from its Non-GAAP financial measures.
• Business reorganization, restructuring and related expenses – although the Company has incurred business reorganization expenses in the past, each charge relates to a discrete event based on a unique set of business objectives. Management does not believe these charges reflect the Company's primary business, ongoing operating results or future outlook. As such, the Company believes it is appropriate to exclude these expenses and related charges from its Non- GAAP financial measures.
• Non-cash amortization of discount on convertible notes – the Company records non-cash amortization of discount on convertible notes as interest expense in addition to the interest expense already recorded for coupon payments. The Company excludes the non-cash portion of the interest expense from its Non-GAAP financial measures because these amounts are unrelated to its ongoing business operations.
• Non-cash tax expense for the impact of deferred tax liabilities associated with tax deductible amortization of goodwill – due to the nature of the adjustment as well as the expectation that it will not have any cash impact in the foreseeable future, the Company believes it is appropriate to exclude this expense from its Non-GAAP financial measures.

These Non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. These Non-GAAP financial measures may be different from similarly titled measures used by other companies.

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 June 30, 2015.

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 through its two wholly-owned labels Rockstar Games and 2K. 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," "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, our ability to raise capital if needed and risks associated with international operations. Other important factors and information are contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015, including the risks summarized in the section entitled "Risk Factors," 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 (Unaudited)
(in thousands, except per share amounts)
			Three months ended June 30,
				2015				2014
Net revenue			$	275,297			$	125,425
Cost of goods sold:
Internal royalties				105,829				8,298
Software development costs and royalties				50,493				20,306
Product costs				39,941				18,592
Licenses				6,352				6,960
Total cost of goods sold				202,615				54,156
Gross profit				72,682				71,269
General and administrative				49,035				39,352
Selling and marketing				45,567				36,846
Research and development				34,142				24,132
Depreciation and amortization				6,575				4,148
Total operating expenses				135,319				104,478
Loss from operations				(62,637	)			(33,209	)
Interest and other, net				(7,534	)			(7,719	)
Loss from operations before income taxes				(70,171	)			(40,928	)
Benefit for income taxes				(3,148	)			(5,525	)
Net loss			$	(67,023	)		$	(35,403	)
Net loss per share:
Basic and diluted net loss per share			$	(0.81	)		$	(0.45	)
Diluted net loss per share
Weighted average shares outstanding:
Basic and diluted				82,833				79,369
Computation of Basic and Diluted EPS:
Net loss			$	(67,023	)		$	(35,403	)
Weighted average shares outstanding - basic and diluted				82,833				79,369
Basic and diluted loss per share			$	(0.81	)		$	(0.45	)
			Three months ended June 30,
OTHER INFORMATION				2015				2014
Geographic revenue mix
United States				52	%			52	%
International				48	%			48	%
Platform revenue mix
Console				81	%			67	%
PC and other				19	%			33	%
Net revenue by distribution channel:
Digital online				56	%			64	%
Physical retail and other				44	%			36	%

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
			June 30,				March 31,
				2015			2015
ASSETS			(Unaudited)
Current assets:
Cash and cash equivalents			$	815,784			911,120
Short-term investments				375,013			186,929
Restricted cash				229,993			169,678
Accounts receivable, net of allowances of $63,456 and $70,471 at June 30, 2015 and
March 31, 2015, respectively				130,915			217,860
Inventory				12,453			20,051
Software development costs and licenses				201,014			163,385
Deferred cost of goods sold				66,041			56,779
Prepaid expenses and other				76,763			55,506
Total current assets				1,907,976			1,781,308
Fixed assets, net				83,089			69,792
Software development costs and licenses, net of current portion				109,406			124,329
Deferred cost of goods sold, net of current portion				15,230			19,869
Goodwill				219,036			217,288
Other intangibles, net				4,737			4,769
Other assets				13,130			13,745
Total assets			$	2,352,604			2,231,100
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable			$	29,531			38,789
Accrued expenses and other current liabilities				504,329			444,738
Deferred revenue				572,440			482,733
Total current liabilities				1,106,300			966,260
Long-term debt				481,784			476,057
Non-current deferred revenue				172,727			164,618
Other long-term liabilities				64,954			61,077
Total liabilities				1,825,765			1,668,012
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized				-			-
Common stock, $.01 par value, 200,000 shares authorized; 104,570 and 104,594 shares
issued and 88,332 and 88,356 outstanding at June 30, 2015 and March 31, 2015, respectively				1,046			1,046
Additional paid-in capital				1,049,910			1,028,197
Treasury stock, at cost (16,238 common shares at June 30, 2015 and March 31, 2015)				(276,836	)		(276,836	)
Accumulated deficit				(225,718	)		(158,695	)
Accumulated other comprehensive loss				(21,563	)		(30,624	)
Total stockholders' equity				526,839			563,088
Total liabilities and stockholders' equity			$	2,352,604			2,231,100

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
			Three months ended June 30,
				2015				2014
Operating activities:
	Net loss		$	(67,023	)		$	(35,403	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
	Amortization and impairment of software development costs and licenses			23,590				7,255
	Depreciation and amortization			6,575				4,148
	Amortization and impairment of intellectual property			32				105
	Stock-based compensation			19,086				9,979
	Amortization of discount on Convertible Notes			5,727				5,377
	Amortization of debt issuance costs			398				431
	Other, net			183				134
	Changes in assets and liabilities:
	Restricted cash			(60,315	)			132,002
	Accounts receivable			87,198				9,978
	Inventory			8,341				6,633
	Software development costs and licenses			(43,131	)			(42,990	)
	Prepaid expenses, other current and other non-current assets			(20,693	)			(2,622	)
	Deferred revenue			91,903				26,176
	Deferred cost of goods sold			1,243				225
	Accounts payable, accrued expenses and other liabilities			52,368				(208,944	)
	Net cash provided (used) by operating activities			105,482				(87,516	)
Investing activities:
	Purchase of fixed assets			(18,769	)			(8,392	)
	Purchases of short-term investments			(187,489	)			(19,415	)
	Net cash used in investing activities			(206,258	)			(27,807	)
Financing activities:
	Excess tax benefit from stock-based compensation			8,066				-
	Tax payment related to net share settlements on restricted stock awards			(6,541	)			-
	Net cash provided by financing activities			1,525				-
	Effects of foreign exchange rates on cash and cash equivalents			3,915				1,923
	Net decrease in cash and cash equivalents			(95,336	)			(113,400	)
	Cash and cash equivalents, beginning of year			911,120				935,400
	Cash and cash equivalents, end of period		$	815,784			$	822,000

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO Non-GAAP MEASURES (Unaudited)
(in thousands, except per share amounts)
						Three months ended June 30,
							2015					2014
Net Revenues
	GAAP Net Revenues					$	275,297				$	125,425
			Net effect from deferral in net revenues				91,095					26,186
	Non-GAAP Net Revenues					$	366,392				$	151,611
Digital Online Revenues (included in Net Revenues above)
	GAAP Digital Online Revenues					$	153,985				$	80,201
			Net effect from deferral in digital online revenues				99,978					26,186
	Non-GAAP Digital Online Revenues					$	253,963				$	106,387
Gross Profit
	GAAP Gross Profit					$	72,682				$	71,269
			Net effect from deferral in net revenues and related cost of goods sold				90,965					15,318
			Stock-based compensation				4,694					1,471
	Non-GAAP Gross Profit						168,341				$	88,058
Income (Loss) from Operations
	GAAP Loss from Operations					$	(62,637	)			$	(33,209	)
			Net effect from deferral in net revenues and related cost of goods sold				90,965					15,318
			Stock-based compensation				19,086					9,979
			Business reorganization, restructuring and related				1,228					195
	Non-GAAP Income (Loss) from Operations					$	48,642				$	(7,717	)
Net Income (Loss)
	GAAP Net Loss					$	(67,023	)			$	(35,403	)
			Net effect from deferral in net revenues and related cost of goods sold				85,164					11,757
			Stock-based compensation				11,327					7,659
			Business reorganization, restructuring and related				773					156
			Non-cash amortization of discount on Convertible Notes				3,603					4,127
			Non-cash tax expense				364					473
	Non-GAAP Net Income (Loss)					$	34,208				$	(11,231	)
Diluted Earnings (Loss) Per Share
	GAAP loss per share					$	(0.81	)			$	(0.45	)
	Non-GAAP earnings (loss) per share					$	0.31				$	(0.14	)
	Number of diluted shares used in computation
			GAAP				82,833					79,369
			Non-GAAP				114,442					79,369
Computation of Diluted GAAP EPS:
	Net loss					$	(67,023	)			$	(35,403	)
			Net income (loss) for diluted EPS calculation			$	(67,023	)			$	(35,403	)
	Weighted average shares outstanding - diluted						82,833					79,369
	Diluted earnings (loss) per share					$	(0.81	)			$	(0.45	)
Computation of Diluted Non-GAAP EPS:
	Non-GAAP net earnings (loss)					$	34,208				$	(11,231	)
		Less: net income (loss) allocated to participating securities					(1,541	)				-
		Add: interest expense, net of tax, on Convertible Notes					1,372					-
			Net income (loss) for diluted earnings per share calculation			$	34,039				$	(11,231	)
	Weighted average shares outstanding - basic						82,833					79,369
		Add: dilutive effect of common stock equivalents					31,609					-
			Total weighted average shares outstanding - diluted				114,442					79,369
		Less: weighted average participating shares outstanding					5,154
			Weighted average common shares outstanding - diluted				109,288					79,369
	Diluted earnings (loss) per share					$	0.31				$	(0.14	)

View source version on businesswire.com: http://www.businesswire.com/news/home/20150810006006/en/

Take-Two Interactive Software, Inc.

Investor Relations:

Henry A. Diamond, 646-536-3005

Senior Vice President

Investor Relations & Corporate Communications

[email protected]

or

Corporate Press:

Alan Lewis, 646-536-2983

Vice President

Corporate Communications & Public Affairs

[email protected]

Source: Take-Two Interactive

Press Releases

Mizuho Securities Raises Price Target on Take-Two Interactive Software (TTWO) Following 1Q16 August 11, 2015 7:36 AM Sterne Agee CRT Raises Price Target on Take-Two Interactive Software (TTWO) Following 1Q EPS Miss August 11, 2015 6:41 AM Take-Two Interactive Software (TTWO) Misses Q1 EPS by 5cAugust 10, 2015 4:06 PM