Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Second Quarter 2020

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for its fiscal second quarter 2020 ended September 30, 2019. In addition, the Company provided its initial outlook for its fiscal third quarter ending December 31, 2019, and raised its operating outlook for its fiscal year ending March 31, 2020. For additional information, please see the fiscal second quarter 2020 results slide deck posted to the Company’s investor relations website at http://ir.take2games.com.

Fiscal Second Quarter 2020 Financial Highlights

GAAP net revenue grew 74% to $857.8 million, as compared to $492.7 million in last year’s fiscal second quarter. Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content and in-game purchases) increased 32% and accounted for 37% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal second quarter 2020 were Borderlands 3; NBA 2K20 and NBA 2K19; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE 2K19 and WWE SuperCard.

Digitally-delivered GAAP net revenue grew 72% to $615.8 million, as compared to $358.4 million in last year’s fiscal second quarter, and accounted for 72% of total GAAP net revenue. The largest contributors to GAAP digitally-delivered net revenue in fiscal second quarter 2020 were NBA 2K20 and NBA 2K19; Borderlands 3; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE 2K19 and WWE SuperCard.

GAAP net income was $71.8 million, or $0.63 per diluted share, as compared to $25.4 million, or $0.22 per diluted share, for the comparable period last year.

During the 6-month period ended September 30, 2019, GAAP net cash provided by (used in) operating activities increased to $144.2 million, as compared to ($206.0) million in the same period last year. During the 6-month period ended September 30, 2019, Adjusted Unrestricted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, increased to $41.2 million, as compared to ($139.4) million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of September 30, 2019, the Company had cash and short-term investments of $1.505 billion.

The following data, together with a management reporting tax rate of 17%, are used internally by the Company’s management and Board of Directors to adjust the Company’s GAAP financial results in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

			Three Months Ended September 30, 2019
					Financial Data
$ in thousands			Statement of operations		Change in deferred net revenue and related cost of goods sold			Stock-based compensation			Impact of business reorganization			Business acquisition			Amortization & impairment of acquired intangible assets
Net revenue			$857,841		92,675
Cost of goods sold			468,248		(26,932	)		(27,832	)								(3,311	)
Gross Profit			389,593		119,607			27,832									3,311
Operating expenses			314,773					(27,936	)		(327	)		(41	)		(1,667	)
Income from operations			74,820		119,607			55,768			327			41			4,978
Interest and other, net			8,054		1,306
Income before income taxes			82,874		120,913			55,768			327			41			4,978

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 114.1 million.

Operational Metric – Net Bookings

Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides and publisher incentives.

During fiscal second quarter 2020, total Net Bookings grew 63% to $950.5 million, as compared to $583.4 million during last year’s fiscal second quarter. Net Bookings from recurrent consumer spending grew 39% and accounted for 45% of total Net Bookings. The largest contributors to Net Bookings in fiscal second quarter 2020 were NBA 2K20 and NBA 2K19; Borderlands 3; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE SuperCard and WWE 2K19.

Catalog accounted for $372.1 million of Net Bookings led by Grand Theft Auto, NBA 2K, Red Dead Redemption, and Social Point’s mobile offerings.

Digitally-delivered Net Bookings grew 63% to $695.3 million, as compared to $426.2 million in last year’s fiscal second quarter, and accounted for 73% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal second quarter 2020 were NBA 2K20 and NBA 2K19; Grand Theft Auto Online and Grand Theft Auto V; Borderlands 3; Red Dead Redemption 2 and Red Dead Online; Social Point’s mobile offerings; and WWE SuperCard and WWE 2K19.

Management Comments

“Our positive momentum continued in the second quarter, enabling our Company to generate operating results that significantly exceeded our expectations,” said Strauss Zelnick, Chairman and CEO of Take-Two. “We delivered strong Net Bookings, cash flow and earnings growth, fueled by the performance of NBA 2K, Borderlands 3, Grand Theft Auto Online and Grand Theft Auto V, and Red Dead Redemption 2 and Red Dead Online. Once again, our strategy of creating the highest-quality entertainment in the industry translated into outstanding results.

“As a result of our better-than-expected second quarter operating results, we are once again raising our operating outlook for fiscal 2020. The third quarter is off to a solid start with the launches of The Outer Worlds, Red Dead Redemption 2 for PC and WWE 2K20, and we will bolster our holiday line-up with offerings for Google Stadia and Sid Meier’s Civilization VI for PlayStation 4 and Xbox One. Throughout the fiscal year, we will continue to support our titles with experiences designed to captivate audiences and drive ongoing engagement, including new content for Grand Theft Auto Online and Red Dead Online.

“Looking ahead, Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. We are actively investing in emerging markets, platforms and business models, and are exceedingly well positioned to capitalize on the positive trends in our industry and to generate growth and margin expansion over the long-term.”

Business and Product Highlights

Since July 1, 2019:

Rockstar Games:

• Launched Red Dead Redemption 2 for PC. The first game in the Red Dead Redemption series to be offered on PC, the title features a range of graphical and technical enhancements for increased immersion along with new Bounty Hunting Missions, Gang Hideouts, Weapons and more. Red Dead Redemption 2 for PC also includes free access to the shared living world of Red Dead Online, featuring all previously released improvements and the latest content updates for the complete online experience.
• Revealed the Rockstar Games Launcher, a new Windows desktop application that enables consumers to quickly and easily access their Rockstar Games PC collection in a single place, across both digital and disc-based titles, including purchases from other digital stores, manage cloud saves, and more. Players can also use the Launcher to shop for new Rockstar Games PC titles.
• Released new free content updates for Grand Theft Auto Online, including:
  • The Diamond Casino & Resort, a brand new property and social space in Grand Theft Auto Online, featuring access to a variety of classic casino activities plus the opportunity to stay in the most luxurious residence in all of Los Santos, featuring customizable Penthouse suites complete with private screening rooms; a bar with new Arcade Games; and an outdoor Roof Terrace complete with an Infinity Pool and sweeping views of the Los Santos skyline. The Diamond Casino & Resort also features a new, six-mission storyline featuring fan-favorite characters, plus dozens of new Freemode missions, vehicles, collectibles and more. The Diamond Casino & Resort update was Grand Theft Auto Online’s biggest launch ever, delivering record player engagement across daily, weekly and monthly active users in July, and then again in August.
  • Numerous new missions, vehicles, weapons and other content.
• Released new free content updates for Red Dead Online, including:
  • Frontier Pursuits, an ongoing series of Specialist Roles for players to inhabit, including tracking down wanted criminals as a Bounty Hunter, developing a new business at Camp as a Trader, or searching for rare and valuable items as a Collector, with a wide array of themed activities and new items and abilities to unlock as they progress through one or multiple Roles. The Frontier Pursuits update also includes a wide range of new features and gameplay changes, including across the board changes to player animation systems to improve movement and responsiveness; as well as new items; weapons; clothing; horse-drawn vehicles and additional horse breeds; role-specific Free Roam Events; and additional game balancing and improvements.
  • The Outlaw Pass, a way for Red Dead Online players to pay to access a wide array of ongoing upgrades, items and perks at a discounted value.
• Launched L.A. Noire: The VR Case Files for PlayStation VR. The title was previously released for HTC Vive and the Oculus Rift, and includes seven self-contained cases from the original game rebuilt specifically for virtual reality.
• Announced an exciting new program through which Rockstar Games Social Club members who are Twitch Prime subscribers receive free in-game rewards, bonuses and exclusive discounts in both Grand Theft Auto Online and Red Dead Online simply by linking their Twitch Prime and Social Club accounts.
• Announced Red Dead Redemption 2 as a launch title for Stadia.

2K:

• Launched Borderlands 3, the next installment in the critically acclaimed shooter-looter series from Gearbox Software, for PlayStation 4, Xbox One and PC. On launch day, the title was the #1 game on Twitch, and within the first five days of launch, had amassed more than 8 million hours of viewed content on the streaming service. Borderlands 3 received positive critical acclaim, including from Forbes, IGN, Shacknews, Destructoid and Meristation, all of which scored the title 9 out of 10. The title has exceeded our expectations, and sold-in more than 5 million units within its first five days of launch, making Borderlands 3 the fastest-selling title in 2K history and highest-selling title for the label on PC. Within its first five days in market, retail sell-through of Borderlands 3 was up more than 50% compared to its predecessor, and 70% of units were purchased digitally, setting a new record for a 2K cross-platform title. On October 24, 2019, 2K began its robust post-launch content offerings for the title with the launch of the Bloody Harvest seasonal event, and has much more content planned. Borderlands 3 will also be available on Google Stadia when it launches this month.
• Launched NBA 2K20, the next iteration of our top-rated and top-selling NBA video game simulation series* developed by Visual Concepts, for PlayStation 4, Xbox One, Nintendo Switch, PC, iOS and Android. According to The NPD Group, NBA 2K20 debuted as the best-selling game of September 2019, and is the best-selling game of 2019 year-to-date. In addition, The NPD Group noted that NBA 2K20’s launch month sales were the highest for any sports game in history, and the NBA 2K series is now the 6^th largest video game franchise based on tracked full-game dollar sales. 2K announced the NBA 2K20 x Nike Gamer Exclusive Program, an innovative and first-of-its-kind gaming and sneaker partnership, which launched within the new MyPLAYER Nation mode. This program provides players with the opportunity to unlock virtual Nike Gamer Exclusive sneakers for their MyPLAYER to wear in-game and to purchase real-life versions of the shoes from Nike. NBA 2K20 will also be available on Google Stadia when it launches this month.
• Launched WWE 2K20, the newest release in our flagship WWE video game franchise that is now developed by Visual Concepts, for PlayStation 4, Xbox One and PC. Current Raw Women’s Champion Becky Lynch and WWE Superstar Roman Reigns are the cover Superstars for the title, which is being supported with downloadable add-on content, including a Season Pass.
• Released the Sid Meier’s Civilization VI: Rise and Fall expansion pack for iOS through Aspyr. 2K also announced that they will bring all of the previously released add-on content for Civilization VI to both iOS and Nintendo Switch later this year.
• Announced that Sid Meier’s Civilization VI will launch for Xbox One and PlayStation 4 on November 22, 2019. Developed by Firaxis Games, and winner of The Game Awards’ Best Strategy Game and DICE Awards’ Best Strategy Game in 2016, Civilization VI’s upcoming launch marks the first time since 2008 that a Civilization game has been available on Xbox or PlayStation consoles.

Private Division:

• Launched The Outer Worlds for Xbox One, PlayStation 4 and PC. Created by the renowned RPG developer, Obsidian Entertainment, The Outer Worlds is a dark and witty player-driven story set in a colony at the farthest reaches of the galaxy. The title will also be available for Nintendo Switch in calendar 2020, during our fiscal year 2020.
• Launched Ancestors: The Humankind Odyssey for digital download on PC. Ancestors: The Humankind Odyssey is the debut title from Panache Digital Games, the studio co-founded in 2014 by Patrice Désilets, the original creative director of the Assassin’s Creed franchise. The title will be available for digital download on PlayStation4 and Xbox One on December 6, 2019.
• Announced that Disintegration, an upcoming sci-fi, first-person shooter, will launch digitally for PlayStation4, Xbox One and PC in calendar 2020, during our fiscal year 2021. Disintegration is the debut title from V1 Interactive, the independent development studio co-founded in 2014 by Marcus Lehto, former creative director at Bungie and co-creator of Halo.
• Announced that Kerbal Space Program 2, the sequel to the beloved original space sim, is in development and is now planned for launch on PC, PlayStation 4 and Xbox One during our fiscal year 2021. The original Kerbal Space Program has sold-in over 3.5 million units worldwide, and earned a Metacritic rating of 88 and a Steam user score of 91%.

* According to 2000 - 2019 Metacritic.com and Gamerankings.com.

Outlook for Fiscal 2020

Take-Two is providing its initial outlook for its fiscal third quarter ending December 31, 2019 and is raising its operating outlook for the fiscal year ending March 31, 2020:

Third Quarter Ending December 31, 2019

• GAAP net revenue is expected to range from $915 to $965 million
• GAAP net income is expected to range from $159 to $170 million
• GAAP diluted net income per share is expected to range from $1.39 to $1.49
• Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.4 million ⁽¹⁾
• Net Bookings (operational metric) are expected to range from $860 to $910 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 December 31, 2019

Financial Data

$ in millions

GAAP outlook (2)

Change in deferred net revenue and related cost of goods sold

Stock-based compensation

Amortization of acquired intangible assets

Net revenue

$915 to $965

($55)

Cost of goods sold

$425 to $452

$10

($63)

($2)

Operating Expenses

$312 to $322

($25)

($2)

Interest and other, net

($9)

Income before income taxes

$187 to $200

($65)

$88

$4

Fiscal Year Ending March 31, 2020

• GAAP net revenue is expected to range from $2.93 to $3.03 billion
• GAAP net income is expected to range from $388 to $416 million
• GAAP diluted net income per share is expected to range from $3.38 to $3.63
• Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.6 million ⁽³⁾
• Net cash provided by operating activities is expected to be over $430 million
• Adjusted Unrestricted Operating Cash Flow (Non-GAAP) is expected to be over $450 million ⁽⁴⁾
• Capital expenditures are expected to be approximately $75 million
• Net Bookings (operational metric) are expected to range from $2.75 to $2.85 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			Reorganization & acquisition
Net revenue			$2,930 to $3,030		($180)
Cost of goods sold			$1,388 to $1,434		($100)			($115)			($10)
Operating Expenses			$1,117 to $1,137					($99)			($7)			($1)
Interest and other, net			($37)		($1)
Income before income taxes			$462 to $496		($79)			$214			$17			$1

	1)	Includes 113.3 million basic shares and 1.1 million shares representing the potential dilution from unvested employee stock grants.
	2)	The individual components of the financial outlook may not foot to the totals, as the Company does not expect actual results for every component to be at the low end or high end of the outlook range simultaneously.
	3)	Includes 113.1 million basic shares and 1.5 million shares representing the potential dilution from unvested employee stock grants.
	4)	Includes a $20.0 million net decrease in restricted cash for fiscal 2020.

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

Product Releases

The following titles were released since July 1, 2019:

Label			Title			Platforms			Release Date
Rockstar Games			Grand Theft Auto Online: The Diamond Casino & Resort			PS4, Xbox One, PC			July 23, 2019
2K			Sid Meier’s Civilization VI: Rise and Fall (Expansion Pack)			iOS			July 23, 2019
Private Division			Ancestors: The Humankind Odyssey			PC (digital only)			August 27, 2019
2K			NBA 2K20			PS4, Xbox One, Switch, PC, iOS, Android			September 6, 2019
Rockstar Games			Red Dead Online: Frontier Pursuits			PS4, Xbox One			September 10, 2019
2K			Borderlands 3			PS4, Xbox One, PC			September 13, 2019
Rockstar Games			L.A Noire: The VR Case Files			PlayStation VR			September 24, 2019
2K			WWE 2K20			PS4, Xbox One, PC			October 22, 2019
Private Division			The Outer Worlds			PS4, Xbox One, PC			October 25, 2019
Rockstar Games			Red Dead Redemption 2			PC			November 5, 2019
Take-Two's lineup of future titles announced to date includes:
Label			Title			Platforms			Release Date
2K			Sid Meier’s Civilization VI			Xbox One, PS4			November 22, 2019
Rockstar Games			Red Dead Redemption 2			Stadia			November 2019
2K			NBA 2K20			Stadia			November 2019
2K			Borderlands 3			Stadia			November 2019
Private Division			Ancestors: The Humankind Odyssey			PS4, Xbox One (digital only)			December 6, 2019
Private Division			Kerbal Space Program Breaking Ground Expansion			PS4, Xbox One			December 2019
Private Division			The Outer Worlds			Switch			2020 (fiscal 2020)
Private Division			Kerbal Space Program 2			PC, PS4, Xbox One			Fiscal 2021
Private Division			Disintegration			TBA			2020 (fiscal 2021)

Conference Call

Take-Two will host a conference call today at 4:30 p.m. Eastern Time to review these results and discuss other topics. The call can be accessed by dialing [phone] or [phone]. A live listen-only webcast of the call will be available by visiting http://ir.take2games.com and a replay will be available following the call at the same location.

Non-GAAP Financial Measure

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses a Non-GAAP measure of financial performance: Adjusted Unrestricted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. The Company’s management believes it is important to consider Adjusted Unrestricted Operating Cash Flow, in addition to net cash from operating activities, as it provides more transparency into current business trends without regard to the timing of payments from restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations.

This Non-GAAP financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. This Non-GAAP financial measure may be different from similarly titled measures used by other companies. In the future, Take-Two may also consider whether other items should also be excluded in calculating this Non-GAAP financial measure used by the Company. Management believes that the presentation of this Non-GAAP financial measure provides investors with additional useful information to measure Take-Two's financial and operating performance. In particular, this measure facilitates comparison of our operating performance between periods and may help investors to understand better the operating results of Take-Two. Internally, management uses this Non-GAAP financial measure in assessing the Company's operating results and in planning and forecasting. A reconciliation of this Non-GAAP financial measure to the most comparable GAAP measure is contained in the financial tables to this press release.

Final Results

The financial results discussed herein are presented on a preliminary basis; final data will be included in Take-Two’s Quarterly Report on Form 10-Q for the period ended September 30, 2019.

About Take-Two Interactive Software

Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe. We develop and publish products through our labels Rockstar Games, 2K, and Private Division, as well as Social Point, a leading developer of mobile games. Our products are designed for console systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services. 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 September 30,						Six months ended September 30,
		2019			2018			2019				2018
Net revenue		$	857,841		$	492,667		$	1,398,300		$	880,649
Cost of goods sold:
Software development costs and royalties			211,996			42,648			320,437			72,436
Internal royalties			109,991			82,113			172,880			135,280
Product costs			86,568			55,885			134,203			94,026
Licenses			59,693			54,234			82,197			64,503
Total cost of goods sold			468,248			234,880			709,717			366,245
Gross profit			389,593			257,787			688,583			514,404
Selling and marketing			149,566			94,165			241,387			152,471
General and administrative			76,659			67,320			151,492			135,055
Research and development			76,197			60,565			145,160			111,277
Depreciation and amortization			12,024			9,751			23,281			19,011
Business reorganization			327			-			713			(242	)
Total operating expenses			314,773			231,801			562,033			417,572
Income from operations			74,820			25,986			126,550			96,832
Interest and other, net			8,054			4,975			18,479			11,576
Income before income taxes			82,874			30,961			145,029			108,408
Provision for income taxes			11,059			5,594			26,934			11,348
Net income		$	71,815		$	25,367		$	118,095		$	97,060
Earnings per share:
Basic earnings per share		$	0.63		$	0.22		$	1.05		$	0.86
Diluted earnings per share		$	0.63		$	0.22		$	1.04		$	0.84
Weighted average shares outstanding:
Basic			113,117			113,735			112,869			113,339
Diluted			114,076			116,095			113,923			115,801
Computation of Basic EPS:
Net income		$	71,815		$	25,367		$	118,095		$	97,060
Weighted average shares outstanding - basic			113,117			113,735			112,869			113,339
Basic earnings per share		$	0.63		$	0.22		$	1.05		$	0.86
Computation of Diluted EPS:
Net income		$	71,815		$	25,367		$	118,095		$	97,060
Weighted average shares outstanding - basic			113,117			113,735			112,869			113,339
Add: dilutive effect of common stock equivalents			959			2,360			1,054			2,462
			114,076			116,095			113,923			115,801
Diluted earnings per share		$	0.63		$	0.22		$	1.04		$	0.84

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
		September 30,				March 31,
			2019				2019
ASSETS		(Unaudited)
Current assets:
Cash and cash equivalents		$	762,032			$	826,525
Short-term investments			742,613				744,485
Restricted cash			668,371				565,461
Accounts receivable, net of allowances of $442 and $995 at September 30, 2019 and March 31, 2019, respectively			858,597				395,729
Inventory			39,293				28,200
Software development costs and licenses			62,328				28,880
Deferred cost of goods sold			36,426				51,867
Prepaid expenses and other			218,673				186,688
Total current assets			3,388,333				2,827,835
Fixed assets, net			129,168				127,882
Right-of-use assets			119,313				-
Software development costs and licenses, net of current portion			527,622				603,436
Deferred cost of goods sold, net of current portion			479				1,028
Goodwill			383,778				381,717
Other intangibles, net			61,159				73,115
Deferred tax assets			110,167				134,732
Other assets			95,092				93,320
Total assets		$	4,815,111			$	4,243,065
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	114,946			$	72,797
Accrued expenses and other current liabilities			1,251,196				1,035,695
Deferred revenue			901,813				843,302
Lease liabilities			22,273				-
Total current liabilities			2,290,228				1,951,794
Non-current deferred revenue			25,378				21,058
Non-current lease liabilities			118,789				-
Other long-term liabilities			198,953				229,633
Total liabilities			2,633,348				2,202,485
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized			-				-
Common stock, $.01 par value, 200,000 shares authorized; 135,616 and 134,602 shares
issued and 113,195 and 112,181 outstanding at September 30, 2019 and, March 31, 2019, respectively			1,356				1,346
Additional paid-in capital			2,059,720				2,019,369
Treasury stock, at cost; 22,421 common shares at September 30, 2019 and, March 31, 2019, respectively			(820,572	)			(820,572	)
Retained earnings			995,721				877,626
Accumulated other comprehensive loss			(54,462	)			(37,189	)
Total stockholders' equity			2,181,763				2,040,580
Total liabilities and stockholders' equity		$	4,815,111			$	4,243,065

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
			Six months ended September 30,
				2019				2018
Operating activities:
	Net income		$	118,095			$	97,060
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
	Amortization and impairment of software development costs and licenses			72,505				20,269
	Depreciation			23,037				18,753
	Amortization of intellectual property			10,627				12,272
	Stock-based compensation			113,199				54,941
	Other, net			4,325				(1,614	)
	Changes in assets and liabilities:
	Accounts receivable			(463,019	)			(233,236	)
	Inventory			(12,064	)			(25,925	)
	Software development costs and licenses			(51,932	)			(133,008	)
	Prepaid expenses and other current and other non-current assets			(131,055	)			(6,681	)
	Deferred revenue			66,148				12,601
	Deferred cost of goods sold			15,287				6,867
	Accounts payable, accrued expenses and other liabilities			379,005				(28,334	)
	Net cash provided by (used in) operating activities			144,158				(206,035	)
Investing activities:
	Change in bank time deposits			6,720				33,604
	Proceeds from available-for-sale securities			137,071				114,266
	Purchases of available-for-sale securities			(141,244	)			(95,888	)
	Purchases of fixed assets			(25,532	)			(29,144	)
	Purchase of long-term investment			(4,500	)			-
	Business acquisitions			(8,715	)			(3,149	)
	Net cash (used in) provided by investing activities			(36,200	)			19,689
Financing activities:
	Tax payment related to net share settlements on restricted stock awards			(61,478	)			(63,967	)
	Repurchase of common stock			-				(153,500	)
	Net cash used in financing activities			(61,478	)			(217,467	)
	Effects of foreign currency exchange rates on cash and cash equivalents			(8,063	)			(9,464	)
	Net change in cash and cash equivalents and restricted cash			38,417				(413,277	)
	Cash and cash equivalents and restricted cash, beginning of year			1,391,986				1,246,371
	Cash and cash equivalents and restricted cash, end of period		$	1,430,403			$	833,094

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 September 30, 2019						Three Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by geographic region
United States			$	494,661		58	%		$	279,306		57	%
International				363,180		42	%			213,361		43	%
Total net revenue			$	857,841		100	%		$	492,667		100	%
Net bookings by geographic region
United States			$	567,503		60	%		$	362,477		62	%
International				383,013		40	%			220,944		38	%
Total net bookings			$	950,516		100	%		$	583,421		100	%
			Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by distribution channel
Digital online			$	615,774		72	%		$	358,371		73	%
Physical retail and other				242,067		28	%			134,296		27	%
Total net revenue			$	857,841		100	%		$	492,667		100	%
Net bookings by distribution channel
Digital online			$	695,346		73	%		$	426,180		73	%
Physical retail and other				255,170		27	%			157,241		27	%
Total net bookings			$	950,516		100	%		$	583,421		100	%
			Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by platform mix
Console			$	651,818		76	%		$	372,240		76	%
PC and other				206,023		24	%			120,427		24	%
Total net revenue			$	857,841		100	%		$	492,667		100	%
Net bookings by platform mix
Console			$	737,085		78	%		$	477,970		82	%
PC and other				213,431		22	%			105,451		18	%
Total net bookings			$	950,516		100	%		$	583,421		100	%

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)
			Six Months Ended September 30, 2019						Six Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by geographic region
United States			$	825,140		59	%		$	500,717		57	%
International				573,160		41	%			379,932		43	%
Total net revenue			$	1,398,300		100	%		$	880,649		100	%
Net bookings by geographic region
United States			$	826,738		60	%		$	519,125		60	%
International				546,018		40	%			352,621		40	%
Total net bookings			$	1,372,756		100	%		$	871,746		100	%
			Six Months Ended September 30, 2019						Six Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by distribution channel
Digital online			$	1,043,555		75	%		$	673,418		76	%
Physical retail and other				354,745		25	%			207,231		24	%
Total net revenue			$	1,398,300		100	%		$	880,649		100	%
Net bookings by distribution channel
Digital online			$	1,077,825		79	%		$	678,941		78	%
Physical retail and other				294,931		21	%			192,805		22	%
Total net bookings			$	1,372,756		100	%		$	871,746		100	%
			Six Months Ended September 30, 2019						Six Months Ended September 30, 2018
			Amount			% of Total			Amount			% of Total
Net revenue by Platform Mix
Console			$	1,086,632		78	%		$	666,970		76	%
PC and other				311,668		22	%			213,679		24	%
Total net revenue			$	1,398,300		100	%		$	880,649		100	%
Net bookings by platform mix
Console			$	1,049,716		76	%		$	677,890		78	%
PC and other				323,040		24	%			193,856		22	%
Total net bookings			$	1,372,756		100	%		$	871,746		100	%

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
	Three Months Ended September 30, 2019			Net revenue				Cost of goods sold- Software development costs and royalties				Cost of goods sold- Internal royalties				Cost of goods sold- Product costs				Cost of goods sold- Licenses				Selling and marketing
As reported				$	857,841			$	211,996			$	109,991			$	86,568			$	59,693			$	149,566
		Net effect from deferral and related cost of goods sold			92,675				(26,161	)							(1,904	)			1,133
		Stock-based compensation							(27,832	)															(3,744	)
		Amortization and impairment of acquired intangibles							(3,311	)
	Three Months Ended September 30, 2019			General and administrative				Research and development				Depreciation and amortization				Business reorganization				Interest and other, net
As reported				$	76,659			$	76,197			$	12,024			$	327			$	8,054
		Net effect from deferral and related cost of goods sold																			1,306
		Stock-based compensation			(13,576	)			(10,616	)
		Amortization and impairment of acquired intangibles							(1,546	)			(121	)
		Impact of business reorganization															(327	)
		Acquisition related expenses			(41	)
	Three Months Ended September 30, 2018			Net revenue				Cost of goods sold- Software development costs and royalties				Cost of goods sold- Internal royalties				Cost of goods sold- Product costs				Cost of goods sold- Licenses				Selling and marketing
As reported				$	492,667			$	42,648			$	82,113			$	55,885			$	54,234			$	94,165
		Net effect from deferral and related cost of goods sold			90,754				3,492								1,534				596
		Stock-based compensation							(7,688	)															(4,874	)
		Amortization and impairment of acquired intangibles							(3,670	)
	Three Months Ended September 30, 2018			General and administrative				Research and development				Depreciation and amortization				Business reorganization				Interest and other, net
As reported				$	67,320			$	60,565			$	9,751			$	-			$	4,975
		Net effect from deferral and related cost of goods sold																			(3	)
		Stock-based compensation			(12,926	)			(4,854	)
		Amortization and impairment of acquired intangibles							(1,615	)			(127	)
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
	Six Months Ended September 30, 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				$	1,398,300			$	172,880			$	320,437			$	134,203			$	82,197			$	241,387
		Net effect from deferral and related cost of goods sold			(25,544	)							(39,320	)			(17,553	)			344
		Stock-based compensation											(58,630	)											(10,220	)
		Amortization and impairment of acquired intangibles											(7,015	)
	Six Months Ended September 30, 2019			General and administrative				Research and development				Depreciation and amortization				Business reorganization				Interest and other, net
As reported				$	151,492			$	145,160			$	23,281			$	713			$	18,479
		Net effect from deferral and related cost of goods sold																			812
		Stock-based compensation			(27,143	)			(17,206	)
		Amortization and impairment of acquired intangibles							(3,106	)			(244	)
		Impact of business reorganization															(713	)
		Acquisition related expenses			(367	)
	Six Months Ended September 30, 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				$	880,649			$	135,280			$	72,436			$	94,026			$	64,503			$	152,471
		Net effect from deferral and related cost of goods sold			(8,903	)							3,483				(6,871	)			596
		Stock-based compensation											(11,658	)											(9,648	)
		Amortization and impairment of acquired intangibles											(8,742	)
	Six Months Ended September 30, 2018			General and administrative				Research and development				Depreciation and amortization				Business reorganization				Interest and other, net
As reported				$	135,055			$	111,277			$	19,011			($	242	)		$	11,576
		Net effect from deferral and related cost of goods sold																			(598	)
		Stock-based compensation			(24,444	)			(9,191	)
		Non-cash amounts related to convertible notes																			91
		Amortization and impairment of acquired intangibles							(3,274	)			(257	)
		Impact of business reorganization															242

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)
				Six months ended September 30,
					2019				2018
Net cash from operating activities				$	144,158			$	(206,035	)
Net change in Restricted cash (1)					(102,910	)			66,651
Adjusted Unrestricted Operating Cash Flow				$	41,248			$	(139,384	)
				FY 2020				FY 2019
Restricted cash beginning of period (4/1)				$	565,461			$	437,398
Restricted cash end of period (9/30)					668,371				370,747
(1) Net change in Restricted cash				$	(102,910	)		$	66,651

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191107005978/en/