10-QPeriod: Q2 FY2021

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q2 Ended Sep 30, 2020

Filed November 6, 2020For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its fiscal second-quarter and year-to-date results for the period ending September 30, 2020. The company demonstrated strong top-line growth for the first six months of the fiscal year, with net revenue increasing by 19.6% year-over-year to $1.67 billion, driven primarily by strong performance in recurrent consumer spending and digital distribution channels. The company also saw significant improvements in profitability, with net income rising to $187.8 million for the six-month period, up from $118.1 million in the prior year. Diluted earnings per share also saw a substantial increase. The acquisition of Playdots, Inc., a mobile game developer, on September 4, 2020, is expected to bolster the company's mobile offerings and expand its portfolio of intellectual property.

Financial Highlights

53 data points
Beta

Revenue

$841.14M

48.6% Gross Margin

Net Income

$99.32M

11.8% Net Margin

EPS (Diluted)

$0.86

Total Assets

$5.84B

Cash & Equivalents

$1.35B

Free Cash Flow

$165.21M

Financial Statements
Beta
Revenue$841.14M
Cost of Revenue$432.50M
Gross Profit$408.64M
Operating Expenses$293.27M
Operating Income$115.37M
Net Income$99.32M
EPS (Basic)$0.87
EPS (Diluted)$0.86
Shares Outstanding (Basic)114.44M
Shares Outstanding (Diluted)115.41M

Key Highlights

  • 1Net revenue for the six months ended September 30, 2020, increased by 19.6% to $1.67 billion, compared to $1.40 billion in the prior year.
  • 2Recurrent consumer spending revenue, which includes virtual currency and in-game purchases, was a significant growth driver, increasing by 341.8 million for the six-month period.
  • 3Digital online distribution channels accounted for 86.0% of net revenue for the six months ended September 30, 2020, highlighting the shift towards digital sales.
  • 4Net income for the six months increased by 58.9% to $187.8 million, compared to $118.1 million in the prior year.
  • 5Diluted earnings per share rose to $1.63 for the six months, a substantial increase from $1.04 in the prior year.
  • 6The company completed the acquisition of Playdots, Inc. on September 4, 2020, for approximately $195.5 million, aiming to strengthen its mobile game portfolio.
  • 7As of September 30, 2020, the company had $1.04 billion in short-term investments, providing significant financial flexibility.

Frequently Asked Questions

The primary drivers of revenue growth were the strong performance in recurrent consumer spending (in-game purchases, virtual currency, etc.) and the continued shift towards digital distribution channels, which accounted for 86.0% of net revenue for the six months ended September 30, 2020.

The acquisition of Playdots, Inc. on September 4, 2020, for approximately $195.5 million (cash and stock) is expected to enhance Take-Two's mobile game offerings and expand its intellectual property. While the direct financial impact in this reporting period is minimal, it represents a strategic investment for future growth in the mobile segment.

Take-Two Interactive maintains a strong liquidity position with $1.04 billion in short-term investments and $1.35 billion in cash and cash equivalents as of September 30, 2020. The company anticipates sufficient liquidity to meet its obligations, supported by operating cash flows and an available revolving credit facility.

The company noted a positive impact on its results in the initial phases of the pandemic due to increased consumer engagement. However, it acknowledges the uncertainty of continued effects and potential offsetting impacts from deteriorating economic conditions. Take-Two has implemented work-from-home policies with minimal disruption to operations and continues to monitor the situation closely.