10-QPeriod: Q2 FY2022

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q2 Ended Sep 30, 2021

Filed November 4, 2021For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its second-quarter results for fiscal year 2022, ending September 30, 2021. The company generated net revenue of $858.2 million, a slight increase of 2.0% year-over-year, primarily driven by growth in recurrent consumer spending and mobile segments, offsetting a decline in full game and physical retail sales. The company's net income for the quarter significantly decreased to $10.3 million from $99.3 million in the prior year, resulting in diluted EPS of $0.09 compared to $0.86. This decline was largely influenced by increased operating expenses, including higher selling, general, and administrative, and research and development costs, as well as a significant increase in the fair value of contingent earn-out liabilities related to the Nordeus acquisition. Despite the sequential earnings decline, the company's balance sheet remains robust with $1.7 billion in cash and cash equivalents and restricted cash, and it continues to execute on its strategic growth initiatives, including ongoing development and marketing for key franchises.

Financial Highlights

54 data points
Beta

Revenue

$858.20M

46.8% Gross Margin

Net Income

$10.20M

1.2% Net Margin

EPS (Diluted)

$0.09

Total Assets

$6.62B

Cash & Equivalents

$856.90M

Free Cash Flow

$110.70M

Financial Statements
Beta
Revenue$858.20M
Cost of Revenue$456.70M
Gross Profit$401.50M
Operating Expenses$381.40M
Operating Income$20.10M
Net Income$10.20M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)115.80M
Shares Outstanding (Diluted)116.80M

Key Highlights

  • 1Net revenue for the quarter was $858.2 million, a 2.0% increase year-over-year, driven by recurrent consumer spending and mobile growth.
  • 2Net income declined significantly to $10.3 million from $99.3 million in the prior year's quarter.
  • 3Diluted EPS decreased to $0.09 from $0.86 in the comparable prior year period.
  • 4Operating expenses increased significantly, with Selling & Marketing up 19.6%, General & Administrative up 39.3%, and R&D up 36.8% year-over-year for the quarter.
  • 5The company completed the acquisition of Nordeus in June 2021 for an aggregate fair value of $289.8 million, which includes a significant contingent earn-out consideration.
  • 6Net Bookings decreased by 13.2% year-over-year for the six-month period, primarily due to lower bookings from Grand Theft Auto V and Online, and NBA 2K.
  • 7The company continued its share repurchase program, spending $200.0 million during the quarter.

Frequently Asked Questions

The significant decrease in net income was primarily driven by a substantial increase in operating expenses, particularly in selling and marketing, general and administrative, and research and development. Additionally, an increase in the fair value of the contingent earn-out liability related to the Nordeus acquisition contributed to the decline.

The acquisition of Nordeus, completed in June 2021, added to revenue, particularly in the mobile segment. However, it also resulted in a significant increase in general and administrative expenses due to the fair value adjustment of the contingent earn-out consideration, which negatively impacted net income for the quarter.

For the six months ended September 30, 2021, Net Bookings decreased by 13.2% compared to the prior year. This decline was primarily attributed to lower bookings from key titles such as Grand Theft Auto V and Grand Theft Auto Online, and the NBA 2K franchise. The company's performance is closely tied to the release schedule and performance of its major franchises.

Take-Two Interactive maintains a strong liquidity position with $1.7 billion in cash and cash equivalents and restricted cash as of September 30, 2021. The company has access to a $250 million revolving credit facility, of which $247.8 million was available. Cash flow from operations remains positive, and the company continues to execute its capital allocation strategy, including share repurchases.