01—Abstract
Summary
Summary of the 10-K filed May 14, 2019. Cited figures are marked; the original filing is the authoritative source.
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 milliona. 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.
02—Key points
Key Highlights
- Net revenue surged by 48.8% to $2.67 billion for the fiscal year ended March 31, 2019.
- Net income more than doubled to $333.8 million, with diluted EPS reaching $2.90.
- The successful launch of 'Red Dead Redemption 2' was a major revenue driver, contributing 32.1% of net revenue.
- Recurrent consumer spending (virtual currency, add-on content, in-game purchases) increased to 40.1% of net revenue.
- Digital online distribution channels accounted for 63.0% of net revenue, underscoring the shift in consumer purchasing habits.
- The company's balance sheet strengthened, with cash and cash equivalents increasing to $1.39 billion.
- Adoption of new revenue recognition standards (ASC 606) significantly impacted revenue reporting, accelerating recognition for certain titles.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Take Two Interactive Software Inc kept $0.13.
- Revenue$2.67B100.0%
- Cost of revenue−$1.52B57.1%
- Gross profit$1.14B42.9%
- Operating costs−$938.1M35.2%
- Operating income$206.7M7.7%
- Interest, other & tax$127.2M4.8%
- Net income$333.8M12.5%
Where FY2019 revenue went
$2.67B- Cost of revenue: $1.52B, 57% of revenue
- Operating costs: $938.1M, 35% of revenue
- Operating income: $206.7M, 7.7% of revenue
Kept 7.7% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed May 14, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.67B$1.79B | +48.8% |
| Cost of Revenue | $1.52B$898.31M | +69.6% |
| Gross Profit | $1.14B$894.58M | +28.0% |
| Operating Expenses | $938.08M$759.00M | +23.6% |
| Operating Income | $206.67M$135.58M | +52.4% |
| Net Income | $333.84M$173.53M | +92.4% |
| EPS (Basic) | $2.95$1.57 | +87.9% |
| EPS (Diluted) | $2.90$1.54 | +88.3% |
| Shares Outstanding (Basic) | 113.18M110.21M | +2.7% |
| Shares Outstanding (Diluted) | 115.20M112.86M | +2.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of Take-Two's financial performance in fiscal year 2019?
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.
How is the company diversifying its revenue streams?
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.
What is the company's outlook on digital distribution?
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.
Are there any significant risks highlighted in the filing?
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.
06—Continue