Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Year 2019

May 13, 2019 4:05 PM

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.

�

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

�

Income before income taxes

232,785

196,224

247,700

(4,958

)

23,233

�

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

�

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

�

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. 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, and risks associated with international operations. Other important factors and information are contained in the Company's most recent Annual Report on Form 10-K, including the risks summarized in the section entitled "Risk Factors," the Company’s most recent Quarterly Report on Form 10-Q, 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

(in thousands, except per share amounts)

�

Three months ended March 31,

Twelve months ended March 31,

2019

�

2018

�

2019

�

2018

�

Net revenue

539,007

450,274

�

2,668,394

�

1,792,892

�

Cost of goods sold:

Internal royalties

74,142

88,271

610,804

383,020

Software development costs and royalties

111,596

26,981

449,198

191,400

Product costs

44,914

47,177

322,148

203,301

Licenses

�

28,263

�

26,782

�

141,494

�

120,590

�

Total cost of goods sold

�

258,915

�

189,211

�

1,523,644

�

898,311

�

Gross profit

280,092

261,063

1,144,750

894,581

�

Selling and marketing

77,607

47,451

391,400

256,092

General and administrative

75,541

60,450

281,234

247,828

Research and development

56,588

54,128

230,170

196,373

Depreciation and amortization

11,081

9,479

40,232

43,969

Business reorganization

�

1,214

�

1,730

�

(4,958

)

�

14,742

�

Total operating expenses

�

222,031

�

173,238

�

938,078

�

759,004

�

Income from operations

58,061

87,825

206,672

135,577

Interest and other, net

�

6,466

�

3,451

�

26,113

�

1,048

�

Income before income taxes

64,527

91,276

232,785

136,625

Provision for (benefit from) income taxes

�

7,698

�

423

�

(101,052

)

�

(36,908

)

Net income

56,829

90,853

�

333,837

�

173,533

�

173,533

Earnings per share:

Basic earnings per share

0.50

0.80

2.95

1.57

Diluted earnings per share

0.50

0.77

2.90

1.54

�

Weighted average shares outstanding:

Basic

112,614

113,330

113,176

110,210

Diluted

113,939

118,675

115,198

112,864

�

Computation of Basic EPS:

Net income

56,829

90,853

333,837

173,533

Less: net income allocated to participating securities

�

(82

)

�

(159

)

Net income for basic EPS calculation

56,829

90,771

�

333,837

�

173,374

�

Weighted average shares outstanding - basic

112,614

113,330

113,176

110,210

Less: weighted average participating shares outstanding

�

(102

)

�

(101

)

Weighted average common shares outstanding - basic

�

112,614

�

113,228

�

113,176

�

110,109

�

Basic earnings per share

0.50

0.80

2.95

1.57

�

Computation of Diluted EPS:

Net income

56,829

90,853

333,837

173,533

Less: net income allocated to participating securities

(78

)

(155

)

Add: interest expense, net of tax, on Convertible Notes

�

249

�

Net income for diluted EPS calculation

56,829

91,024

�

333,837

�

173,378

�

Weighted average common shares outstanding - basic

112,614

113,228

113,176

110,109

Add: dilutive effect of common stock equivalents

�

1,325

�

5,447

�

2,022

�

2,755

�

Total weighted average shares outstanding - diluted

113,939

118,675

115,198

112,864

Less: weighted average participating shares outstanding

�

(102

)

�

(101

)

Weighted average common shares outstanding - diluted

�

113,939

�

118,573

�

115,198

�

112,763

�

Diluted earnings per share

0.50

0.77

2.90

1.54

�

�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
	�				�
		March 31,				March 31,
		�	2019	�		�	2018	�
						�
ASSETS
Current assets:
Cash and cash equivalents		$	826,525			$	808,973
Short-term investments			744,485				615,406
Restricted cash			565,461				437,398
Accounts receivable, net of allowances of $995 and $54,290 at March 31, 2019 and 2018, respectively			395,729				247,649
Inventory			28,200				15,162
Software development costs and licenses			28,880				33,284
Deferred cost of goods sold			51,867				117,851
Prepaid expenses and other		�	186,688	�		�	133,454	�
Total current assets		�	2,827,835	�		�	2,409,177	�
						�
Fixed assets, net			127,882				102,478
Software development costs and licenses, net of current portion			603,436				639,369
Deferred cost of goods sold, net of current portion			1,028				26,719
Goodwill			381,717				399,530
Other intangibles, net			73,115				103,681
Deferred tax assets			134,732				4,930
Other assets		�	93,320	�		�	51,957	�
Total assets		$	4,243,065	�		$	3,737,841	�
						�
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	72,797			$	35,029
Accrued expenses and other current liabilities			1,035,695				914,748
Deferred revenue		�	843,302	�		�	777,152	�
Total current liabilities		�	1,951,794	�		�	1,726,929	�
						�
Long-term debt			-				8,068
Non-current deferred revenue			21,058				355,589
Other long-term liabilities		�	229,633	�		�	158,285	�
Total liabilities		�	2,202,485	�		�	2,248,871	�
						�
						�
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized			-				—
Common stock, $.01 par value, 200,000 shares authorized; 134,602 and 132,743 shares
issued and 112,181 and 114,038 outstanding at March 31, 2019 and, 2018, respectively			1,346				1,327
Additional paid-in capital			2,019,369				1,888,039
Treasury stock, at cost; 22,421 and 18,705 common shares at March 31, 2019 and, 2018, respectively			(820,572	)			(458,180	)
Retained earnings			877,626				73,516
Accumulated other comprehensive loss		�	(37,189	)		�	(15,732	)
Total stockholders' equity		�	2,040,580	�		�	1,488,970	�
Total liabilities and stockholders' equity		$	4,243,065	�		$	3,737,841	�
								�

�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	�	Twelve months ended March 31,
		�	2019	�	�	2018 (as adjusted) (1)
						�
Operating activities:
Net income		$	333,837			$	173,533
		�
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment of software development costs and licenses			201,221				77,887
Depreciation			39,726				32,202
Amortization of intellectual property			23,879				34,830
Impairment of in-process research and development			-				11,257
Stock-based compensation			247,700				116,349
Deferred income taxes			110,603				(32,523	)
Amortization of discount on Convertible Notes			91				15,662
Gain on redemption of Convertible Notes			-				(4,900	)
Amortization of debt issuance costs			809				578
Other, net			(225	)			6,375
Changes in assets and liabilities, net of impact of adoption of Topic 606:
Accounts receivable			(98,075	)			(26,998	)
Inventory			(14,403	)			3,917
Software development costs and licenses			(206,831	)			(225,269	)
Prepaid expenses and other current and other non-current assets			(275,800	)			(74,544	)
Deferred revenue			304,713				198,397
Deferred cost of goods sold			(24,882	)			(11,959	)
Accounts payable, accrued expenses and other liabilities		�	201,152	�		�	198,733	�
Net cash provided by operating activities		�	843,515	�		�	493,527	�
						�
Investing activities:
Change in bank time deposits			(171,057	)			(40,918	)
Proceeds from available-for-sale securities			325,133				241,012
Purchases of available-for-sale securities			(282,534	)			(369,998	)
Purchases of fixed assets			(66,969	)			(61,557	)
Purchase of long-term investments			-				(5,000	)
Asset acquisition			-				(25,965	)
Business acquisition		�	(28,149	)		�	(9,401	)
Net cash used in investing activities		�	(223,576	)		�	(271,827	)
						�
Financing activities:
Tax payment related to net share settlements on restricted stock awards			(101,293	)			(112,884	)
Repurchase of common stock			(362,392	)			(154,792	)
Other		�	-	�		�	(13,791	)
Net cash used in financing activities		�	(463,685	)		�	(281,467	)
						�
Effects of foreign currency exchange rates on cash and cash equivalents		�	(10,639	)		�	24,924	�
						�
Net change in cash and cash equivalents and restricted cash			145,615				(34,843	)
Cash and cash equivalents and restricted cash, beginning of year		�	1,246,371	�		�	1,281,214	�
Cash and cash equivalents and restricted cash, end of period		$	1,391,986	�		$	1,246,371	�
								�

(1) During Q1 FY19, the Company adopted Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash and applied that standard retroactively. The application of this new standard resulted in a decrease to net cash from operating activities of $128.1 million in FY19 and a decrease of $99.6 million in FY18, which are reflected herein.

�

						�			�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)	�			�
										�
		Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
										�
Net revenue by geographic region
United States		$	274,621		51%		$	255,710		57%
International		�	264,386		49%		�	194,564		43%
Total net revenue		$	539,007		100%		$	450,274		100%
										�
Net bookings by geographic region
United States		$	284,209		58%		$	232,272		56%
International		�	204,201		42%		�	179,096		44%
Total net bookings		$	488,410		100%		$	411,369		100%
										�
										�
		Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
										�
Net revenue by distribution channel
Digital online		$	413,469		77%		$	301,382		67%
Physical retail and other		�	125,538		23%		�	148,892		33%
Total net revenue		$	539,007		100%		$	450,274		100%
										�
Net bookings by distribution channel
Digital online		$	418,993		86%		$	333,135		81%
Physical retail and other		�	69,417		14%		�	78,233		19%
Total net bookings		$	488,410		100%		$	411,369		100%
										�
										�
		Three Months Ended March 31, 2019					Three Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
Net revenue by platform mix
Console		$	422,432		78%		$	363,464		81%
PC and other		�	116,575		22%		�	86,810		19%
Total net revenue		$	539,007		100%		$	450,274		100%
										�
Net bookings by platform mix
Console		$	364,873		75%		$	313,368		76%
PC and other		�	123,537		25%		�	98,000		24%
Total net bookings		$	488,410		100%		$	411,368		100%
										�

�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)	�			�		�			�
										�
		Twelve Months Ended March 31, 2019					Twelve Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
										�
Net revenue by geographic region
United States		$	1,426,907		53%		$	1,052,313		59%
International		�	1,241,487		47%		�	740,579		41%
Total net revenue		$	2,668,394		100%		$	1,792,892		100%
										�
Net bookings by geographic region
United States		$	1,606,675		55%		$	1,161,502		58%
International		�	1,322,049		45%		�	829,100		42%
Total net bookings		$	2,928,724		100%		$	1,990,602		100%
										�
										�
		Twelve Months Ended March 31, 2019					Twelve Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
										�
Net revenue by distribution channel
Digital online		$	1,681,609		63%		$	1,130,946		63%
Physical retail and other		�	986,785		37%		�	661,946		37%
Total net revenue		$	2,668,394		100%		$	1,792,892		100%
										�
Net bookings by distribution channel
Digital online		$	1,801,710		62%		$	1,349,508		68%
Physical retail and other		�	1,127,014		38%		�	641,094		32%
Total net bookings		$	2,928,724		100%		$	1,990,602		100%
										�
										�
		Twelve Months Ended March 31, 2019					Twelve Months Ended March 31, 2018
		Amount			% of Total		Amount			% of Total
Net revenue by Platform Mix
Console		$	2,233,861		84%		$	1,463,307		82%
PC and other		�	434,533		16%		�	329,586		18%
Total net revenue		$	2,668,394		100%		$	1,792,892		100%
										�
Net bookings by platform mix
Console		$	2,497,157		85%		$	1,611,625		81%
PC and other		�	431,567		15%		�	378,977		19%
Total net bookings		$	2,928,724		100%		$	1,990,602		100%
										�

�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
�		�				�				�				�				�				�
�	Three Months Ended March 31, 2019	�	Net revenue			�	Cost of goods sold- Internal royalties			�	Cost of goods sold- Software development costs and royalties			�	Cost of goods sold- Product costs			�	Cost of goods sold- Licenses			�	Selling and marketing
																							�
As reported			$	539,007			$	74,142			$	111,596			$	44,914			$	28,263			$	77,607
																							�
	Net effect from deferral and related cost of goods sold			(50,596	)							(5,455	)			(12,205	)			54
	Stock-based compensation											(41,335	)											(7,363	)
	Amortization and impairment of acquired intangibles											(3,919	)
																							�
�	Three Months Ended March 31, 2019	�	General and administrative			�	Research and development			�	Depreciation and amortization			�	Business reorganization			�	Interest and other, net
																							�
As reported			$	75,541			$	56,588			$	11,081			$	1,214			$	6,466
	Net effect from deferral and related cost of goods sold																			3,419
	Stock-based compensation			(13,669	)			(6,722	)
	Amortization and impairment of acquired intangibles							(1,578	)			(124	)
	Impact of business reorganization															(1,214	)
																							�
�	Three Months Ended March 31, 2018	�	Net revenue			�	Cost of goods sold- Internal royalties			�	Cost of goods sold- Software development costs and royalties			�	Cost of goods sold- Product costs			�	Cost of goods sold- Licenses			�	Selling and marketing
																							�
As reported			$	450,274			$	88,271			$	26,981			$	47,177			$	26,782			$	47,451
	Net effect from deferral and related cost of goods sold			(38,905	)							(3,244	)			(12,397	)			(9,020	)
	Stock-based compensation											(1,325	)											(4,471	)
	Amortization and impairment of acquired intangibles											(5,292	)											(852	)
	�
																							�
�	Three Months Ended March 31, 2018	�	General and administrative			�	Research and development			�	Depreciation and amortization			�	Business reorganization			�	Interest and other, net
																							�
As reported			$	60,450			$	54,128			$	9,479			$	1,730			$	3,451
	Stock-based compensation			(9,408	)			(5,030	)							(3	)
	Amortization and impairment of acquired intangibles							(1,705	)			(134	)
	Non-cash amounts related to convertible notes																			193
	Impact of business reorganization															(1,727	)
	Acquisition related expenses			142
																							�
																							�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
																							�
�	Twelve Months Ended March 31, 2019	�	Net revenue			�	Cost of goods sold- Internal royalties			�	Cost of goods sold- Software development costs and royalties			�	Cost of goods sold- Product costs			�	Cost of goods sold- Licenses			�	Selling and marketing
																							�
As reported			$	2,668,394			$	610,804			$	449,198			$	322,148			$	141,494			$	391,400
	Net effect from deferral and related cost of goods sold			260,330								40,943				24,882				789
	Stock-based compensation											(149,075	)											(23,685	)
	Amortization and impairment of acquired intangibles											(16,290	)											�
																							�
�	Twelve Months Ended March 31, 2019	�	General and administrative			�	Research and development			�	Depreciation and amortization			�	Business reorganization			�	Interest and other, net
																							�
As reported			$	281,234			$	230,170			$	40,232				($ 4,958	)		$	26,113
	Net effect from deferral and related cost of goods sold																			2,508
	Stock-based compensation			(51,903	)			(23,037	)
	Non-cash amounts related to convertible notes																			91
	Non-cash (gain) loss on redemption of Convertible Notes
	Amortization and impairment of acquired intangibles							(6,437	)			(506	)
	Impact of business reorganization															4,958
																							�
�	Twelve Months Ended March 31, 2018	�	Net Revenue			�	Cost of goods sold- Internal royalties			�	Cost of goods sold- Software development costs and royalties			�	Cost of goods sold- Product costs			�	Cost of goods sold- Licenses			�	Selling and marketing
																							�
As reported			$	1,792,892			$	383,020			$	191,400			$	203,301			$	120,590			$	256,092
	Net effect from deferral and related cost of goods sold			197,710								(5,812	)			6,912				5,900
	Stock-based compensation											(24,610	)											(13,258	)
	Amortization of intangibles											(19,719	)											(8,107	)
																							�
�	Twelve Months Ended March 31, 2018	�	General and administrative			�	Research and development			�	Depreciation and amortization			�	Business reorganization			�	Interest and other, net
																							�
As reported			$	247,828			$	196,373			$	43,969			$	14,742			$	1,048
	Stock-based compensation			(58,037	)			(18,020	)							(2,424	)
	Non-cash amounts related to convertible notes																			10,762
	Acquisition related expenses			7,080
	Amortization and impairment of acquired intangibles							(6,494	)			(11,767	)
	Impact of business reorganization															(12,318	)
	Other, net																			(93	)
																							�

	�				�	�
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)
							�
		Twelve months ended March 31,
		�	2019	�			�	2018	�
Net cash provided by operating activities		$	843,515				$	493,527
Net change in Restricted cash (1)		�	(128,063	)			�	(99,580	)
Adjusted Operating Cash Flow		$	715,452	�			$	393,947	�
							�
							�
		FY 2019					FY 2018
Restricted cash beginning of period (4/1)		$	437,398				$	337,818
Restricted cash end of period (3/31)		�	565,461	�			�	437,398	�
(1) Net change in Restricted cash		$	(128,063	)			�	($ 99,580	)

View source version on businesswire.com: https://www.businesswire.com/news/home/20190513005780/en/

(Investor Relations)

Henry A. Diamond

Senior Vice President

Investor Relations & Corporate Communications

Take-Two Interactive Software, Inc.

(646) 536-3005

[email protected]

(Corporate Press)

Alan Lewis

Vice President

Corporate Communications & Public Affairs

Take-Two Interactive Software, Inc.

(646) 536-2983

[email protected]

Source: Take-Two Interactive

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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Year 2019

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