01—Abstract
Summary
Summary of the 10-Q filed August 4, 2020. Cited figures are marked; the original filing is the authoritative source.
Take-Two Interactive Software Inc. (TTWO) reported strong financial results for the quarter ended June 30, 2020, with net revenue increasing by 53.8% year-over-year to $831.3 milliona.
This significant growth was driven by robust sales from key franchises like Grand Theft Auto (including GTA Online and GTA V), NBA 2K, Borderlands 3, and Red Dead Redemption 2 (including Red Dead Online). The company also saw a substantial increase in net cash provided by operating activities, reaching $445.4 millionb, up from $108.5 million in the prior year period. This indicates strong operational performance and efficient cash generation.
The company's strategic shift towards digital distribution continues to yield positive results, with digital online revenue accounting for 87.4% of total net revenue, up from 79.2% in the prior year. Recurrent consumer spending, which includes in-game purchases and add-on content, also showed strong performance, contributing 57.7% to net revenue. Despite an increase in cost of goods sold, the company managed its operating expenses effectively, leading to a significant increase in net income to $88.5 millionc from $46.3 million in the comparable prior-year period, with diluted EPS rising to $0.77 from $0.41.
02—Key points
Key Highlights
- Net revenue surged by 53.8% to $831.3 million, driven by strong performance of key franchises like Grand Theft Auto and NBA 2K.
- Digital online revenue represented 87.4% of total net revenue, highlighting the company's successful transition to digital distribution.
- Recurrent consumer spending continued to be a major revenue driver, accounting for 57.7% of net revenue.
- Net income more than doubled to $88.5 million, leading to a significant increase in diluted EPS to $0.77.
- Net cash provided by operating activities dramatically increased to $445.4 million, showcasing robust operational cash generation.
- The company maintained a strong balance sheet with $1.4 billion in cash and cash equivalents and $880.8 million in short-term investments.
- Despite increased cost of goods sold, operating expenses were managed effectively, with selling and marketing expenses decreasing year-over-year.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Take Two Interactive Software Inc kept $0.11.
- Revenue$831.3M100.0%
- Cost of revenue−$476.7M57.3%
- Gross profit$354.6M42.7%
- Operating costs−$272.5M32.8%
- Operating income$82.1M9.9%
- Interest, other & tax$6.4M0.8%
- Net income$88.5M10.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed August 4, 2020Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $831.31M$540.46M | +53.8% |
| Cost of Revenue | $476.69M$241.47M | +97.4% |
| Gross Profit | $354.62M$298.99M | +18.6% |
| Operating Expenses | $272.48M$247.26M | +10.2% |
| Operating Income | $82.14M$51.73M | +58.8% |
| Net Income | $88.50M$46.28M | +91.2% |
| EPS (Basic) | $0.78$0.41 | +90.2% |
| EPS (Diluted) | $0.77$0.41 | +87.8% |
| Shares Outstanding (Basic) | 113.86M112.62M | +1.1% |
| Shares Outstanding (Diluted) | 114.96M113.73M | +1.1% |
05—Questions
Frequently Asked Questions
What were the main drivers of the significant revenue growth in this quarter?
The significant revenue growth was primarily driven by strong sales from the company's major franchises, including Grand Theft Auto (GTA Online and GTA V), NBA 2K, Borderlands 3, and Red Dead Redemption 2 (including Red Dead Online). Increased recurrent consumer spending and the continued shift to digital online channels also contributed significantly.
How did the company manage its expenses during this period?
While cost of goods sold increased due to higher revenue, Take-Two Interactive managed its operating expenses effectively. Selling and marketing expenses decreased year-over-year, partly due to lower marketing spend on certain titles and reduced travel due to COVID-19 related restrictions. Research and development expenses saw a modest increase, primarily due to higher personnel and IT costs.
What is the company's cash position and liquidity outlook?
The company reported a strong cash position with $1.4 billion in cash and cash equivalents and $880.8 million in short-term investments as of June 30, 2020. Net cash provided by operating activities was robust at $445.4 million. Management believes its current liquidity and available credit facilities provide sufficient resources to meet its short-term and long-term cash requirements.
What impact is the COVID-19 pandemic having on the company's operations and outlook?
The company noted a positive impact on its results in the first quarter of fiscal year 2021 (which includes the reported quarter) due to increased consumer engagement with its products resulting from pandemic-related closures and movement restrictions. However, management acknowledges uncertainty regarding the duration of these effects and potential offsetting impacts from deteriorating economic conditions. The company has implemented measures to mitigate negative impacts, such as transitioning to remote work, and has observed minimal disruption to date.
06—Continue