10-QPeriod: Q3 FY2022

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q3 Ended Dec 31, 2021

Filed February 8, 2022For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its third-quarter fiscal year 2022 results, ending December 31, 2021. The company saw a year-over-year increase in net revenue, driven by strong performance in recurrent consumer spending and the release of Grand Theft Auto: The Trilogy - The Definitive Edition. The acquisition of Nordeus has also contributed positively to the mobile segment. While net revenue saw growth, profitability experienced a decline compared to the prior year period, primarily due to increased operating expenses, particularly in research and development and general and administrative costs, alongside a significant increase in the fair value of contingent earn-out liabilities related to acquisitions. The company also announced a significant development: a definitive merger agreement to acquire Zynga Inc., a leading mobile game developer, for an enterprise value of approximately $12.7 billion. This strategic move signals a strong focus on expanding its mobile footprint.

Financial Highlights

54 data points
Beta

Revenue

$903.30M

61.2% Gross Margin

Net Income

$144.60M

16.0% Net Margin

EPS (Diluted)

$1.24

Total Assets

$6.36B

Cash & Equivalents

$986.74M

Free Cash Flow

-$286.70M

Financial Statements
Beta
Revenue$903.30M
Cost of Revenue$350.40M
Gross Profit$552.90M
Operating Expenses$398.80M
Operating Income$154.10M
Net Income$144.60M
EPS (Basic)$1.25
EPS (Diluted)$1.24
Shares Outstanding (Basic)115.30M
Shares Outstanding (Diluted)116.70M

Key Highlights

  • 1Net revenue increased by 4.9% to $903.3 million for the three months ended December 31, 2021, compared to the prior year period.
  • 2Recurrent consumer spending represented 60.6% of net revenue for the quarter, indicating continued consumer engagement.
  • 3Operating expenses increased by 17.8% to $398.8 million, driven by higher R&D and G&A expenses, impacting operating income.
  • 4Net income decreased to $144.5 million from $182.2 million in the prior year quarter, resulting in diluted EPS of $1.24, down from $1.57.
  • 5The company announced a definitive agreement to acquire Zynga Inc. for an enterprise value of approximately $12.7 billion, a significant strategic move to bolster its mobile presence.
  • 6Cash and cash equivalents decreased to $1.36 billion as of December 31, 2021, from $2.06 billion as of March 31, 2021, largely due to investing activities, including acquisitions and share repurchases.
  • 7Net Bookings increased by 6.4% to $866.1 million for the quarter, driven by the Grand Theft Auto franchise and the Nordeus acquisition.

Frequently Asked Questions

For the three months ended December 31, 2021, Take-Two Interactive reported net revenue of $903.3 million, an increase of 4.9% year-over-year. However, net income decreased to $144.5 million from $182.2 million in the prior year period, with diluted earnings per share at $1.24 compared to $1.57. This decline in net income was attributed to increased operating expenses, particularly in research and development and general and administrative costs, as well as changes in the fair value of contingent liabilities.

Revenue growth was primarily driven by the Grand Theft Auto franchise, particularly the release of Grand Theft Auto: The Trilogy - The Definitive Edition, and the ongoing success of Grand Theft Auto Online. Additionally, recurrent consumer spending, which includes virtual currency and in-game purchases, continues to be a significant contributor. The acquisition of Nordeus also bolstered revenue from the mobile segment, with titles like Top Eleven showing strong performance.

The announced definitive agreement to acquire Zynga Inc. for an enterprise value of approximately $12.7 billion is a major strategic development. This acquisition is expected to significantly expand Take-Two's presence in the mobile gaming market, which is a high-growth segment. It is anticipated to close in the first quarter of fiscal year 2023, subject to regulatory and shareholder approvals.

The company's cash and cash equivalents decreased from $2.06 billion to $1.36 billion between March 31, 2021, and December 31, 2021. This decrease was primarily due to significant investing activities, including the acquisition of Nordeus and purchases of available-for-sale securities, as well as financing activities such as share repurchases. The company stated it has sufficient liquidity from its cash, short-term investments, operating cash flows, and its credit agreement to meet its obligations.