10-KPeriod: FY2019

TAKE TWO INTERACTIVE SOFTWARE INC Annual Report, Year Ended Mar 31, 2019

Filed May 14, 2019For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported a strong performance for the fiscal year ended March 31, 2019, driven by significant revenue growth, largely attributed to the successful launch of 'Red Dead Redemption 2' and the adoption of new revenue recognition standards (ASC 606). Net revenue increased by 48.8% to $2.67 billion, with net income more than doubling to $333.8 million. The company's strategy of focusing on high-quality, internally-developed franchises like Grand Theft Auto and Red Dead Redemption continues to pay off, complemented by strong performance from the NBA 2K series. The shift towards digital distribution and recurrent consumer spending, which now accounts for 40.1% of net revenue, highlights the evolving industry landscape and Take-Two's successful adaptation. Despite a substantial increase in selling and marketing expenses, primarily due to launch-related activities for 'Red Dead Redemption 2', the company demonstrated operational leverage, with operating income growing significantly. The company also managed its balance sheet effectively, with a substantial increase in cash and cash equivalents, bolstered by strong operating cash flows.

Financial Highlights

54 data points
Beta

Revenue

$2.67B

42.9% Gross Margin

Net Income

$333.84M

12.5% Net Margin

EPS (Diluted)

$2.90

Total Assets

$4.24B

Cash & Equivalents

$826.52M

Free Cash Flow

$776.55M

Financial Statements
Beta
Revenue$2.67B
Cost of Revenue$1.52B
Gross Profit$1.14B
Operating Expenses$938.08M
Operating Income$206.67M
Net Income$333.84M
EPS (Basic)$2.95
EPS (Diluted)$2.90
Shares Outstanding (Basic)113.18M
Shares Outstanding (Diluted)115.20M

Key Highlights

  • 1Net revenue surged by 48.8% to $2.67 billion for the fiscal year ended March 31, 2019.
  • 2Net income more than doubled to $333.8 million, with diluted EPS reaching $2.90.
  • 3The successful launch of 'Red Dead Redemption 2' was a major revenue driver, contributing 32.1% of net revenue.
  • 4Recurrent consumer spending (virtual currency, add-on content, in-game purchases) increased to 40.1% of net revenue.
  • 5Digital online distribution channels accounted for 63.0% of net revenue, underscoring the shift in consumer purchasing habits.
  • 6The company's balance sheet strengthened, with cash and cash equivalents increasing to $1.39 billion.
  • 7Adoption of new revenue recognition standards (ASC 606) significantly impacted revenue reporting, accelerating recognition for certain titles.

Frequently Asked Questions

The primary drivers were the highly successful launch of 'Red Dead Redemption 2', strong ongoing sales from 'Grand Theft Auto V' and 'Grand Theft Auto Online', and the NBA 2K franchise. Additionally, the adoption of new revenue recognition standards (ASC 606) significantly impacted reported revenue by accelerating recognition for certain titles.

Take-Two is increasingly focusing on recurrent consumer spending, which includes virtual currency, add-on content, and in-game purchases, now representing 40.1% of net revenue. The company also continues to expand its presence in mobile gaming through its Social Point label and is exploring new intellectual property through its Private Division label.

Digital online channels are a significant and growing part of Take-Two's business, accounting for 63.0% of net revenue. The company views this channel as a key growth opportunity and expects its importance to continue increasing over the long term.

Key risks include a heavy reliance on 'hit' titles, particularly from the Grand Theft Auto and Red Dead Redemption franchises, the potential for product development delays and cost overruns, intense industry competition, dependence on a limited number of large customers, and the evolving regulatory landscape for digital privacy and data protection.