10-QPeriod: Q1 FY2024

TAKE TWO INTERACTIVE SOFTWARE INC Quarterly Report for Q1 Ended Jun 30, 2023

Filed August 9, 2023For Securities:TTWO

Summary

Take-Two Interactive Software, Inc. (TTWO) reported its first-quarter fiscal year 2024 results, showcasing a notable increase in net revenue to $1.28 billion, up 16.5% year-over-year, primarily driven by the strong performance of its mobile segment and the continued contribution of its acquired Zynga assets. Recurrent consumer spending (RCS) also saw significant growth, representing 83.2% of net revenue. Despite the revenue increase, the company reported a net loss of $206.0 million, or $1.22 per share, a widening from the $104.0 million loss in the prior year period, reflecting increased operating expenses, particularly in sales and marketing and research and development, largely due to post-acquisition integration and strategic investments. The company's balance sheet reflects a substantial cash position and manageable debt levels, with ongoing efforts to optimize its debt structure, including the early retirement of a portion of its 2024 Notes. The strategic focus remains on expanding its mobile offerings, investing in new content, and leveraging its strong intellectual property portfolio across its key labels including Rockstar Games, 2K, and Zynga. Investors should note the significant shift towards recurring consumer spending and mobile revenue as key growth drivers.

Financial Highlights

53 data points
Beta

Revenue

$1.28B

52.9% Gross Margin

Net Income

-$206.00M

-16.0% Net Margin

EPS (Diluted)

$-1.22

Total Assets

$15.53B

Cash & Equivalents

$775.80M

Free Cash Flow

-$26.50M

Financial Statements
Beta
Revenue$1.28B
Cost of Revenue$605.50M
Gross Profit$679.20M
Operating Expenses$883.50M
Operating Income-$204.30M
Interest Expense$34.50M
Net Income-$206.00M
EPS (Basic)$-1.22
EPS (Diluted)$-1.22
Shares Outstanding (Basic)169.40M

Key Highlights

  • 1Net revenue increased by 16.5% year-over-year to $1.28 billion, driven by the mobile segment and Zynga's contributions.
  • 2Recurrent consumer spending (RCS) accounted for 83.2% of net revenue, indicating a strong recurring revenue base.
  • 3Net loss widened to $206.0 million ($1.22 per share) from $104.0 million ($0.76 per share) in the prior year, reflecting increased operating expenses.
  • 4Selling and marketing expenses increased by 47.3% and R&D expenses by 41.4%, largely due to the Zynga acquisition and related investments.
  • 5Mobile revenue saw a significant increase of $310.4 million, now representing 52.9% of total net revenue, up from 33.5% in the prior year.
  • 6The company repaid $650.0 million of its 2024 Notes and recognized a gain on extinguishment of debt.
  • 7Cash and cash equivalents, including restricted cash, stood at $1.26 billion as of June 30, 2023.

Frequently Asked Questions

The primary driver for the revenue growth was the significant increase in net revenue from the mobile segment, largely due to the ongoing contributions from the Zynga acquisition and its hyper-casual mobile portfolio. Recurrent consumer spending also played a major role, accounting for the majority of the net revenue.

The net loss widened primarily due to a substantial increase in operating expenses. Selling and marketing expenses rose by 47.3% and research and development expenses increased by 41.4%. These increases are attributed to marketing efforts for new titles, investments in the mobile portfolio, and increased personnel costs following the Zynga acquisition and integration.

The Zynga acquisition has significantly shifted the company's revenue mix towards mobile and recurrent consumer spending. Mobile revenue increased substantially, now representing over half of the total net revenue, while recurrent consumer spending forms the dominant portion of overall revenue, indicating a successful integration and shift in business model.

The company has substantial debt, including senior notes and convertible notes. Notably, it repaid $650.0 million of its 2024 Notes in June 2023, recognizing a gain on extinguishment. The company also has a $500.0 million revolving credit facility, with no borrowings outstanding as of June 30, 2023, providing significant liquidity.