01—Abstract
Summary
Summary of the 10-Q filed November 8, 2019. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc.'s (TTWO) Q2 fiscal year 2020 (ended September 30, 2019) results show a significant increase in net revenue, driven primarily by strong performance from new releases like Borderlands 3 and continued success of established franchises such as Grand Theft Auto and Red Dead Redemption.
The company reported a substantial year-over-year revenue growth, reflecting the strength of its diverse portfolio across console, PC, and digital platforms. While gross profit margin saw a decrease due to higher royalties and amortization, overall profitability improved substantially compared to the prior year period, with net income and diluted EPS showing robust gains.
The company's strategic focus on recurrent consumer spending, including in-game purchases and add-on content, continues to contribute significantly to revenue, complementing its strong performance in full game sales. TTWO also demonstrated solid cash flow generation from operations, and maintained a healthy liquidity position with substantial cash and short-term investments, supported by an available revolving credit facility.
02—Key points
Key Highlights
- Net revenue surged by 74.1% to $857.8 million for the three months ended September 30, 2019, compared to $492.7 million in the prior year period, driven by new releases and strong franchise performance.
- Net income for the quarter more than doubled to $71.8 million, up from $25.4 million in the same period last year, indicating improved profitability.
- Diluted Earnings Per Share (EPS) increased to $0.63 from $0.22 in the prior year quarter, reflecting the strong net income growth.
- Recurrent consumer spending revenue, a key growth driver, increased by $77.9 million, although its share of total revenue decreased slightly.
- Digital online channels continued to be the dominant distribution method, accounting for 71.8% of net revenue.
- The company ended the quarter with a strong liquidity position, holding $1.43 billion in cash, cash equivalents, and restricted cash.
- Operating expenses increased significantly, particularly in selling and marketing, due to increased advertising for new releases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Take Two Interactive Software Inc kept $0.08.
- Revenue$857.8M100.0%
- Cost of revenue−$468.2M54.6%
- Gross profit$389.6M45.4%
- Operating costs−$314.8M36.7%
- Operating income$74.8M8.7%
- Interest, other & tax−$3.0M0.4%
- Net income$71.8M8.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed November 8, 2019Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $857.84M$492.67M | +74.1% |
| Cost of Revenue | $468.25M$234.88M | +99.4% |
| Gross Profit | $389.59M$257.79M | +51.1% |
| Operating Expenses | $314.77M$231.80M | +35.8% |
| Operating Income | $74.82M$25.99M | +187.9% |
| Net Income | $71.81M$25.37M | +183.1% |
| EPS (Basic) | $0.63$0.22 | +186.4% |
| EPS (Diluted) | $0.63$0.22 | +186.4% |
| Shares Outstanding (Basic) | 113.12M113.73M | −0.5% |
| Shares Outstanding (Diluted) | 114.08M116.09M | −1.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in this quarter?
Revenue growth was primarily driven by the successful launch of Borderlands 3 in September 2019, continued strong sales of Red Dead Redemption 2 (released October 2018), and ongoing performance from the Grand Theft Auto franchise, particularly Grand Theft Auto Online. The NBA 2K franchise also contributed positively.
How did the company's profitability change compared to the previous year?
Profitability significantly improved. Net income increased from $25.4 million in the prior year's quarter to $71.8 million in the current quarter. Diluted EPS rose to $0.63 from $0.22, indicating enhanced earnings power.
What is the company's liquidity and financial health like?
Take-Two Interactive maintains a strong liquidity position with $1.43 billion in cash, cash equivalents, and restricted cash as of September 30, 2019. The company also has $198.3 million available under its revolving credit facility, demonstrating ample resources to fund operations and strategic initiatives.
How is the company balancing full game sales with recurrent consumer spending?
The company is successfully balancing both. While full game and other revenue increased significantly due to new releases, recurrent consumer spending also saw an absolute dollar increase, contributing $318.5 million and demonstrating continued engagement with existing titles and add-on content.
06—Continue