01—Abstract
Summary
Summary of the 10-Q filed February 7, 2020. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software, Inc. reported its financial results for the nine months ended December 31, 2019, and the third quarter of fiscal year 2020.
The company saw a significant increase in Net Revenue, driven by strong performance in recurrent consumer spending and new title releases like Borderlands 3 and The Outer Worlds, partially offset by a decline in revenue from Red Dead Redemption 2. The company also experienced a notable improvement in gross profit margin due to a favorable shift towards digital distribution and higher-margin recurrent spending. Operationally, the company continued to invest heavily in research and development and selling and marketing, reflecting its strategy of developing new intellectual property and supporting its existing franchises.
Despite an increase in operating expenses, the company demonstrated improved profitability from operations, benefiting from increased revenue and improved gross margins. The balance sheet shows a healthy cash position and increased assets, including the recognition of right-of-use assets due to the adoption of new lease accounting standards.
02—Key points
Key Highlights
- Net revenue increased by 9.3% to $2.33 billion for the nine months ended December 31, 2019, compared to the prior year, driven by new releases and recurrent consumer spending.
- Gross profit margin improved significantly to 50.7% for the nine months ended December 31, 2019, from 40.6% in the prior year, due to a shift towards digital sales and higher-margin offerings.
- Recurrent consumer spending revenue increased by 25.1% to $973.8 million for the nine months ended December 31, 2019, indicating strong ongoing player engagement.
- Operating expenses increased by 22.7% to $878.2 million for the nine months, largely due to increased investments in selling & marketing and R&D for new titles.
- Net income for the nine months remained strong at $281.7 million, a slight increase from $277.0 million in the prior year, with diluted EPS at $2.47.
- The company maintained a strong liquidity position with $1.74 billion in cash, cash equivalents, and restricted cash as of December 31, 2019.
- The company adopted new lease accounting standards (ASC 842) in April 2019, resulting in the recognition of right-of-use assets and lease liabilities on the balance sheet.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2020, Take Two Interactive Software Inc kept $0.18.
- Revenue$930.1M100.0%
- Cost of revenue−$437.1M47.0%
- Gross profit$493.0M53.0%
- Operating costs−$316.2M34.0%
- Operating income$176.8M19.0%
- Interest, other & tax−$13.2M1.4%
- Net income$163.6M17.6%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed February 7, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $930.13M$1.25B | −25.5% |
| Cost of Revenue | $437.09M$898.48M | −51.4% |
| Gross Profit | $493.04M$350.25M | +40.8% |
| Operating Expenses | $316.20M$298.48M | +5.9% |
| Operating Income | $176.83M$51.78M | +241.5% |
| Net Income | $163.64M$179.95M | −9.1% |
| EPS (Basic) | $1.44$1.59 | −9.4% |
| EPS (Diluted) | $1.43$1.57 | −8.9% |
| Shares Outstanding (Basic) | 113.25M113.43M | −0.2% |
| Shares Outstanding (Diluted) | 114.25M114.74M | −0.4% |
05—Questions
Frequently Asked Questions
What is the primary driver of revenue growth for Take-Two Interactive?
Revenue growth is primarily driven by recurrent consumer spending, which includes revenue from virtual currency, add-on content, and in-game purchases. The release of new, successful titles such as Borderlands 3 and The Outer Worlds also significantly contributes to revenue increases.
How has the company's profitability changed?
Profitability, as measured by gross profit margin, has significantly improved. For the nine months ended December 31, 2019, the gross profit margin increased to 50.7% from 40.6% in the prior year. This improvement is attributed to a shift in revenue mix towards higher-margin digital sales and recurrent consumer spending.
What is the company's financial position regarding cash and debt?
Take-Two Interactive maintains a strong financial position with $1.74 billion in cash, cash equivalents, and restricted cash as of December 31, 2019. The company also has a $200 million revolving credit facility, of which none was borrowed as of the reporting date, indicating ample liquidity.
How is the company investing for future growth?
The company is significantly increasing its investment in Research & Development and Selling & Marketing. This indicates a strategic focus on developing new intellectual property and supporting both new and existing franchises to drive future revenue and engagement.
06—Continue