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Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Year 2019

NEW YORK--(BUSINESS WIRE)--

GAAP net revenue grew to $2.668 billion

GAAP net income increased to $2.90 per diluted share

GAAP net cash provided by operating activities increased 71% to $843.5 million

Adjusted Operating Cash Flow (Non-GAAP) increased 82% to $715.5 million

Net Bookings grew 47% to $2.929 billion

Repurchased 3.72 million shares of common stock for $362.4 million during fiscal year 2019, including 1.12 million shares for $100.0 million during the fiscal fourth quarter

Take-Two Interactive Software, Inc. (TTWO) today reported strong results for its fourth quarter and fiscal year 2019, ended March 31, 2019, and provided its initial outlook for its fiscal first quarter 2020, ending June 30, 2019, and fiscal year 2020, ending March 31, 2020.

Fiscal Fourth Quarter 2019 Financial Highlights

On April 1, 2018, the Company adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how the Company recognizes and reports net revenue and net income; however, it does not materially impact Net Bookings (our operational metric). Financial data for periods prior to April 1, 2018 have not been restated.

GAAP net revenue grew to $539.0 million, as compared to $450.3 million in last year’s fiscal fourth quarter. Recurrent consumer spending (virtual currency, add-on content and in-game purchases) increased and accounted for 54% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal fourth quarter 2019 were NBA® 2K19, Grand Theft Auto® Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization® VI, Dragon City and Monster Legends, and WWE® SuperCard and WWE 2K19.

Digitally-delivered GAAP net revenue grew to $413.5 million, as compared to $301.4 million in last year’s fiscal fourth quarter, and accounted for 77% of total GAAP net revenue. The largest contributors to digitally-delivered GAAP net revenue in fiscal fourth quarter 2019 were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

GAAP net income was $56.8 million, or $0.50 per diluted share, as compared to $90.9 million, or $0.77 per diluted share, for the year-ago period.

The following data, together with a management reporting tax rate of 20%, are used internally by the Company’s management and Board of Directors to adjust the Company’s GAAP financial results in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

 

Three Months Ended March 31, 2019

   

Financial Data

$ in thousands

Statement of
operations

   

Change in deferred
net revenue and
related cost of
goods sold

   

Stock-based
compensation

   

 

Impact of
business
reorganization

   

Amortization &
impairment of
acquired
intangible assets

           
Net revenue $ 539,007 (50,596 )
Cost of goods sold   258,915     (17,606 )     (41,335 )           (3,919 )
 
Gross profit 280,092 (32,990 ) 41,335 3,919
 
Operating expenses   222,031           (27,754 )     (1,214 )     (1,702 )
 
Income from operations 58,061 (32,990 ) 69,089 1,214 5,621
Interest and other, net   6,466     3,419                    
Income before income taxes 64,527 (29,571 ) 69,089

1,214

5,621
 

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 113.9 million.

Fiscal Fourth Quarter Operational Metric – Net Bookings

Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides and publisher incentives.

Total Net Bookings grew 19% to $488.4 million, as compared to $411.4 million during last year’s fiscal fourth quarter. Net Bookings from recurrent consumer spending grew 27% year-over-year and accounted for 62% of total Net Bookings. The largest contributors to Net Bookings were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

Catalog accounted for $254.5 million of Net Bookings led by Grand Theft Auto, Sid Meier’s Civilization VI, and Dragon City and Monster Legends.

Digitally-delivered Net Bookings grew 26% to $419.0 million, as compared to $333.1 million in last year’s fiscal fourth quarter, and accounted for 86% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal fourth quarter 2019 were NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Sid Meier’s Civilization VI, Dragon City and Monster Legends, and WWE SuperCard and WWE 2K19.

Fiscal Year 2019 Financial Highlights

GAAP net revenue grew to $2.668 billion, as compared to $1.793 billion in fiscal year 2018. Recurrent consumer spending increased and accounted for 40% of total GAAP net revenue. The largest contributors to GAAP net revenue in fiscal year 2019 were Red Dead Redemption 2 and Red Dead Online, Grand Theft Auto Online and Grand Theft Auto V, NBA 2K19 and NBA 2K18, WWE 2K19 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

Digitally-delivered GAAP net revenue grew to $1.682 billion, as compared to $1.131 billion in fiscal year 2018, and accounted for 63% of total GAAP net revenue. The largest contributors to digitally-delivered GAAP net revenue in fiscal year 2019 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K19 and NBA 2K18, Red Dead Redemption 2 and Red Dead Online, Monster Legends and Dragon City, WWE SuperCard and WWE 2K19, and Sid Meier’s Civilization VI.

GAAP net income increased to $333.8 million, or $2.90 per diluted share, as compared to $173.5 million, or $1.54 per diluted share, in fiscal year 2018. GAAP net income for fiscal year 2019 included a favorable impact from the release of certain valuation allowances on the Company's deferred tax assets resulting in the recognition of a $107.1 million tax benefit.

GAAP net cash provided by operating activities increased 71% to $843.5 million, as compared to $493.5 million in fiscal year 2018. Adjusted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, increased 82% to $715.5 million, as compared to $393.9 million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of March 31, 2019, the Company had cash and short-term investments of $1.571 billion.

The following data, together with a management reporting tax rate of 20%, are used internally by the Company’s management and Board of Directors to adjust the Company’s GAAP financial results in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

 

Twelve Months Ended March 31, 2019

   

Financial Data

$ in thousands

Statement of
operations

   

Change in
deferred
net
revenue
and related
cost of
goods sold

   

Stock-based
compensation

   

 

 

 

Impact of
business
reorganization

   

Amortization
& impairment
of acquired
intangible
assets

   

 

Non-cash
amounts
related to
convertible
notes

               
Net revenue $ 2,668,394 260,330
Cost of goods sold   1,523,644     66,614     (149,075 )           (16,290 )      
 
Gross profit 1,144,750 193,716 149,075 16,290
 
Operating expenses   938,078           (98,625 )     4,958       (6,943 )      
 
Income from operations 206,672 193,716 247,700 (4,958 ) 23,233
Interest and other, net   26,113     2,508                       91
Income before income taxes 232,785 196,224 247,700

(4,958

)

23,233

91

 

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 115.2 million.

Fiscal Year 2019 Operational Metric – Net Bookings

Total Net Bookings grew 47% to $2.929 billion, as compared to $1.991 billion in fiscal year 2018. Net Bookings from recurrent consumer spending grew 20% and accounted for 39% of total Net Bookings. The largest contributors to Net Bookings were Red Dead Redemption 2 and Red Dead Online, NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, WWE 2K19 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

Digitally-delivered Net Bookings grew 33% to $1.802 billion, as compared to $1.350 billion in fiscal year 2018, and accounted for 62% of total Net Bookings. The largest contributors to digitally-delivered Net Bookings in fiscal year 2019 were NBA 2K19 and NBA 2K18, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Dragon City and Monster Legends, WWE SuperCard and WWE 2K19, and Sid Meier’s Civilization VI.

Management Comments

“Take-Two finished a stellar year with strong fourth quarter operating results highlighted by the outperformance of Grand Theft Auto Online and Grand Theft Auto V, as well as NBA 2K19, and significant ongoing sales of our blockbuster hit, Red Dead Redemption 2,” said Strauss Zelnick, Chairman and CEO of Take-Two. “For the full fiscal year, our Company delivered record Net Bookings and Adjusted Operating Cash Flow, which exceeded our outlook at the start of the year, along with strong earnings growth driven by the record-breaking launch of Red Dead Redemption 2, the outstanding performance of NBA 2K, and better-than expected results from Grand Theft Auto Online and Grand Theft Auto V.

“We expect fiscal 2020 to be another strong year for Take-Two, with operating results currently forecasted to be lower than fiscal 2019, due to the extraordinary success of Red Dead Redemption 2, and growing as compared to fiscal 2018.

“Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. In addition, we are actively investing in emerging opportunities such as Private Division, mobile games, eSports and geographic expansion that have the potential to be enormous drivers of growth. We are exceedingly well positioned to generate significant growth and margin expansion over the long-term.”

Business and Product Highlights

Since January 1, 2019:

Take-Two:

  • During fiscal year 2019, the Company repurchased 3.72 million shares of common stock for $362.4 million, including 1.12 million shares for $100.0 million during the fiscal fourth quarter.

Rockstar Games:

  • Continued to update the Red Dead Online Beta with new content, gameplay balancing and bug fixes, including the following:
    • Showdown Modes, including Plunder, Up in Smoke and Spoils of War. These player-versus-player modes are tight, dramatic competitive matches that allow for quick structured gameplay sessions;
    • Target Races, where players shoot targets while on horseback to pass checkpoints while racing and be first to finish;
    • Fishing Challenge, a new Competitive Challenge to the Free Roam Event rotation, in which players compete to catch the most weight in fish;
    • Gun Rush, where players gather weapons and ammunition while the play area shrinks in this mode for up to 32 players. Available to play in Free-for-All and Team variations, where the last one standing wins;
    • Numerous new Weapons, Clothing, Emotes and more.
  • Released new numerous new missions, vehicles, weapons and other content for Grand Theft Auto Online.

2K:

  • Announced that Borderlands® 3, the next installment in the critically acclaimed shooter-looter series from Gearbox Software, will launch worldwide on September 13, 2019 for PlayStation 4, Xbox One and Windows PC. At launch, Borderlands 3 will be available for PC exclusively through the Epic Games store and will be available on additional PC digital storefronts in April 2020. The franchise, which combines the exhilarating action of a first-person shooter with the rich progression and loot systems of a role-playing game, has sold-in more than 43 million units worldwide, and Borderlands 2 still draws in more than one million unique monthly users more than six years after the game’s initial release in 2012.
  • Launched the Borderlands: Game of the Year Edition on PlayStation 4, Xbox One, and Windows PC. This brand new definitive version of the original game boasts ultra HD remastered graphics, significant quality-of-life content updates, and includes all add-on content. In addition, Gearbox and 2K released an Ultra HD Texture Pack that increases the visual fidelity of Borderlands: The Handsome Collection on consoles, and provides a visual upgrade for Borderlands 2, Borderlands: The Pre-Sequel, and all the game add-ons for both titles on PC.
  • Launched Sid Meier’s Civilization VI: Gathering Storm for Windows PC. Developed by Firaxis Games, Gathering Storm is the largest and most financially successful expansion pack ever created for a Civilization game, and the second pack for the critically-acclaimed and award-winning Sid Meier’s Civilization VI.
  • Released NBA 2K Mobile as a free download for Android devices. Previously launched on iOS phones and tablets, NBA 2K Mobile enables players to experience console quality graphics on the go while they collect their favorite NBA players, build dream teams, and step onto the court in lifelike 5v5 match-ups.
  • Announced that video game industry veteran Michael Condrey has joined 2K as President of the label’s new game development studio based in Silicon Valley. Condrey is best known for co-founding Sledgehammer Games and leading development for the renowned Call of Duty franchise, including Call of Duty: Modern Warfare 3. Condrey also served as Chief Operating Officer and Director at Visceral Games in establishing the popular Dead Space franchise. In his new role with 2K, Condrey will build and lead a new development team to work on an unannounced project.
  • Announced, together with The National Basketball Association (NBA) and National Basketball Players Association (NBPA), a significant, multiyear global partnership extension. The agreement expands upon the success of NBA 2K, the top-rated and top-selling NBA video game simulation series for the past 17 years* that has sold-in over 90 million units worldwide.

Private Division:

  • Revealed that The Outer Worlds, a new intellectual property created by Obsidian Entertainment, and Ancestors: The Humankind Odyssey, the debut title from Panache Digital Games, which are both planned for launch in calendar 2019 on PC, PlayStation 4 and Xbox One, will be available for PC exclusively through Epic Games store for 12-months. The Outer Worlds can also be purchased at the Microsoft Windows store.

Social Point:

  • Launched Word Life, our latest free-to-play mobile offering, for iOS and Android devices. The game brings a new dimension to traditional word puzzle games, boasting a multiplayer mode where players can battle with words in exciting match-offs to see who is the most-skilled competitor.
  • Launched Tasty Town for iOS and Android devices. This all-new free-to-play mobile game enables players to fulfill their culinary dreams of designing and managing their own restaurant

* According to 2000 - 2019 Metacritic.com and Gamerankings.com.

Outlook for Fiscal 2020

Take-Two is providing its initial outlook for its fiscal first quarter ending June 30, 2019 and its fiscal year ending March 31, 2020:

First Quarter Ending June 30, 2019

  • GAAP net revenue is expected to range from $485 to $535 million
  • GAAP net income is expected to range from $74 to $86 million
  • GAAP diluted net income per share is expected to range from $0.65 to $0.75
  • Share count used to calculate GAAP diluted net income per share is expected to be 113.7 million (1)
  • Share count used to calculate management reporting diluted net income per share is expected to be 112.7 million (2)
  • Net Bookings (operational metric) are expected to range from $310 to $360 million

The Company is also providing selected data and its management reporting tax rate of 17%, which are used internally by its management and Board of Directors to adjust the Company’s GAAP financial outlook in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

   

Three Months Ending June 30, 2019

 

Financial Data

$ in millions GAAP outlook (3)    

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

         
Net revenue $485 to $535 ($175)
 
Cost of goods sold $165 to $191 ($30) ($18) ($2)
 
Operating Expenses $246 to $256 ($24) ($2)
 
Interest and other, net ($11)
 
Income before income taxes $85 to $99 ($145) $42 $4
 

Fiscal Year Ending March 31, 2020

  • GAAP net revenue is expected to range from $2.7 to $2.8 billion
  • GAAP net income is expected to range from $389 to $418 million
  • GAAP diluted net income per share is expected to range from $3.39 to $3.65
  • Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.6 million (4)
  • Net cash provided by operating activities is expected to be over $430 million
  • Adjusted Operating Cash Flow (Non-GAAP) is expected to be over $450 million (5)
  • Capital expenditures are expected to be approximately $90 million
  • Net Bookings (operational metric) are expected to range from $2.5 to $2.6 billion

The Company is also providing selected data and its management reporting tax rate of 17%, which are used internally by its management and Board of Directors to adjust the Company’s GAAP financial outlook in order to facilitate comparison of its operating performance between periods and to better understand its core business and future outlook:

   

Twelve Months Ending March 31, 2020

   

Financial Data

$ in millions

GAAP outlook (3)

   

Change in
deferred net
revenue and
related cost of
goods sold

   

Stock-based
compensation

   

Amortization of
acquired
intangible
assets

       
Net revenue $2,700 to $2,800 ($200)
 
Cost of goods sold $1,241 to $1,287 ($100) ($75) ($10)
 
Operating Expenses $1,056 to $1,076 ($79) ($7)
 
Interest and other, net ($44)
 
Income before income taxes $447 to $481 ($100) $154 $17
 
    1)   Includes 112.7 million basic shares and 1.0 million shares representing the potential dilution from unvested employee stock grants.
2) Includes 112.7 million basic shares.
3) The individual components of the financial outlook may not foot to the totals, as the Company does not expect actual results for every component to be at the low end or high end of the outlook range simultaneously.
4) Includes 113.1 million basic shares and 1.5 million shares representing the potential dilution from unvested employee stock grants.
5) Includes a $20.0 million net decrease in restricted cash for fiscal 2020.
 

Key assumptions and dependencies underlying the Company’s outlook include: the timely delivery of the titles included in this financial outlook; continued consumer acceptance of Xbox One and PlayStation 4; the ability to develop and publish products that capture market share for these current generation systems while also leveraging opportunities on PC, mobile and other platforms; and stable foreign exchange rates. See also “Cautionary Note Regarding Forward Looking Statements” below.

Product Releases

The following titles were released since January 1, 2019:

Label

   

Title

   

Platforms

   

Release Date

2K    

WWE 2K19: Rising Stars Pack (DLC)

    PS4, Xbox One, PC     January 22, 2019
Social Point

Tasty Town

iOS, Android January 31, 2019
2K

Sid Meier’s Civilization VI: Gathering Storm (Expansion Pack)

PC February 14, 2019
Private Division

Kerbal Space Program: History & Parts Pack (DLC)

PS4, Xbox One March 28, 2019
2K

Borderlands: Game of the Year Edition

PS4, Xbox One, PC April 3, 2019
2K

NBA 2K Mobile

Android April 17,2019
Social Point

Word Life

iOS, Android May 9, 2019
 
Take-Two's lineup of future titles announced to date includes:
 

Label

   

Title

   

Platforms

   

Release Date

Private Division

Kerbal Space Program: Breaking Ground (DLC)

PC May 30, 2019
2K

Borderlands 3

PS4, Xbox One, PC September 13, 2019
2K

NBA 2K20

TBA TBA
2K

WWE 2K20

TBA TBA
Private Division

Ancestors: The Humankind Odyssey

PS4, Xbox One, PC (digital only) 2019 (fiscal 2020)
Private Division

The Outer Worlds

PS4, Xbox One, PC 2019 (fiscal 2020)
 

Conference Call

Take-Two will host a conference call today at 4:30 p.m. Eastern Time to review these results and discuss other topics. The call can be accessed by dialing (877) 407-0984 or (201) 689-8577. A live listen-only webcast of the call will be available by visiting http://ir.take2games.com and a replay will be available following the call at the same location.

Non-GAAP Financial Measure

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses a Non-GAAP measure of financial performance: Adjusted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. The Company’s management believes it is important to consider Adjusted Operating Cash Flow, in addition to net cash from operating activities, as it provides more transparency into current business trends without regard to the timing of payments from restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations.

This Non-GAAP financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. This Non-GAAP financial measure may be different from similarly titled measures used by other companies. In the future, Take-Two may also consider whether other items should also be excluded in calculating this Non-GAAP financial measure used by the Company. Management believes that the presentation of this Non-GAAP financial measure provides investors with additional useful information to measure Take-Two's financial and operating performance. In particular, this measure facilitates comparison of our operating performance between periods and may help investors to understand better the operating results of Take-Two. Internally, management uses this Non-GAAP financial measure in assessing the Company's operating results and in planning and forecasting. A reconciliation of this Non-GAAP financial measure to the most comparable GAAP measure is contained in the financial tables to this press release.

Final Results

The financial results discussed herein are presented on a preliminary basis; final data will be included in Take-Two’s Annual Report on Form 10-K for the period ended March 31, 2019.

About Take-Two Interactive Software

Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, publisher and marketer of interactive entertainment for consumers around the globe. The Company develops and publishes products principally through its wholly-owned labels Rockstar Games and 2K, as well as its Private Division label and Social Point, a leading developer of mobile games. Our products are designed for console systems and personal computers, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms and cloud streaming services. The Company’s common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at http://www.take2games.com.

All trademarks and copyrights contained herein are the property of their respective holders.

Cautionary Note Regarding Forward-Looking Statements

The statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," “should,” "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: our dependence on key management and product development personnel, our dependence on our Grand Theft Auto products and our ability to develop other hit titles, the timely release and significant market acceptance of our games, the ability to maintain acceptable pricing levels on our games, and risks associated with international operations. Other important factors and information are contained in the Company's most recent Annual Report on Form 10-K, including the risks summarized in the section entitled "Risk Factors," the Company’s most recent Quarterly Report on Form 10-Q, and the Company's other periodic filings with the SEC, which can be accessed at www.take2games.com. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
       
Three months ended March 31, Twelve months ended March 31,
2019   2018     2019     2018  
 
 
Net revenue $ 539,007 $ 450,274   $ 2,668,394   $ 1,792,892  
 
Cost of goods sold:
Internal royalties 74,142 88,271 610,804 383,020
Software development costs and royalties 111,596 26,981 449,198 191,400
Product costs 44,914 47,177 322,148 203,301
Licenses   28,263   26,782     141,494     120,590  
Total cost of goods sold   258,915   189,211     1,523,644     898,311  
 
Gross profit 280,092 261,063 1,144,750 894,581
 
Selling and marketing 77,607 47,451 391,400 256,092
General and administrative 75,541 60,450 281,234 247,828
Research and development 56,588 54,128 230,170 196,373
Depreciation and amortization 11,081 9,479 40,232 43,969
Business reorganization   1,214   1,730     (4,958 )   14,742  
Total operating expenses   222,031   173,238     938,078     759,004  
Income from operations 58,061 87,825 206,672 135,577
Interest and other, net   6,466   3,451     26,113     1,048  
Income before income taxes 64,527 91,276 232,785 136,625
Provision for (benefit from) income taxes   7,698   423     (101,052 )   (36,908 )
Net income $ 56,829 $ 90,853   $ 333,837   $ 173,533  
173,533
Earnings per share:
Basic earnings per share $ 0.50 $ 0.80 $ 2.95 $ 1.57
Diluted earnings per share $ 0.50 $ 0.77 $ 2.90 $ 1.54
 
Weighted average shares outstanding:
Basic 112,614 113,330 113,176 110,210
Diluted 113,939 118,675 115,198 112,864
 
Computation of Basic EPS:
Net income $ 56,829 $ 90,853 $ 333,837 $ 173,533
Less: net income allocated to participating securities   -   (82 )   -     (159 )
Net income for basic EPS calculation $ 56,829 $ 90,771   $ 333,837   $ 173,374  
 
Weighted average shares outstanding - basic 112,614 113,330 113,176 110,210
Less: weighted average participating shares outstanding   -   (102 )   -     (101 )
Weighted average common shares outstanding - basic   112,614   113,228     113,176     110,109  
 
Basic earnings per share $ 0.50 $ 0.80 $ 2.95 $ 1.57
 
Computation of Diluted EPS:
Net income $ 56,829 $ 90,853 $ 333,837 $ 173,533
Less: net income allocated to participating securities - (78 ) - (155 )
Add: interest expense, net of tax, on Convertible Notes   -   249     -     -  
Net income for diluted EPS calculation $ 56,829 $ 91,024   $ 333,837   $ 173,378  
 
Weighted average common shares outstanding - basic 112,614 113,228 113,176 110,109
Add: dilutive effect of common stock equivalents   1,325   5,447     2,022     2,755  
Total weighted average shares outstanding - diluted 113,939 118,675 115,198 112,864
Less: weighted average participating shares outstanding   -   (102 )   -     (101 )
Weighted average common shares outstanding - diluted   113,939   118,573     115,198     112,763  
 
Diluted earnings per share $ 0.50 $ 0.77 $ 2.90 $ 1.54
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
   
March 31, March 31,
  2019     2018  
 
ASSETS
Current assets:
Cash and cash equivalents $ 826,525 $ 808,973
Short-term investments 744,485 615,406
Restricted cash 565,461 437,398

Accounts receivable, net of allowances of $995 and $54,290 at March 31, 2019 and 2018, respectively

395,729 247,649
Inventory 28,200 15,162
Software development costs and licenses 28,880 33,284
Deferred cost of goods sold 51,867 117,851
Prepaid expenses and other   186,688     133,454  
Total current assets   2,827,835     2,409,177  
 
Fixed assets, net 127,882 102,478
Software development costs and licenses, net of current portion 603,436 639,369
Deferred cost of goods sold, net of current portion 1,028 26,719
Goodwill 381,717 399,530
Other intangibles, net 73,115 103,681
Deferred tax assets 134,732 4,930
Other assets   93,320     51,957  
Total assets $ 4,243,065   $ 3,737,841  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 72,797 $ 35,029
Accrued expenses and other current liabilities 1,035,695 914,748
Deferred revenue   843,302     777,152  
Total current liabilities   1,951,794     1,726,929  
 
Long-term debt - 8,068
Non-current deferred revenue 21,058 355,589
Other long-term liabilities   229,633     158,285  
Total liabilities   2,202,485     2,248,871  
 
 
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized -
Common stock, $.01 par value, 200,000 shares authorized; 134,602 and 132,743 shares
issued and 112,181 and 114,038 outstanding at March 31, 2019 and, 2018, respectively 1,346 1,327
Additional paid-in capital 2,019,369 1,888,039
Treasury stock, at cost; 22,421 and 18,705 common shares at March 31, 2019 and, 2018, respectively (820,572 ) (458,180 )
Retained earnings 877,626 73,516
Accumulated other comprehensive loss   (37,189 )   (15,732 )
Total stockholders' equity   2,040,580     1,488,970  
Total liabilities and stockholders' equity $ 4,243,065   $ 3,737,841  
 
 

TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

  Twelve months ended March 31,
  2019     2018

(as adjusted) (1)

 

Operating activities:

Net income $ 333,837 $ 173,533
 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and impairment of software development costs and licenses 201,221 77,887
Depreciation 39,726 32,202
Amortization of intellectual property 23,879 34,830
Impairment of in-process research and development - 11,257
Stock-based compensation 247,700 116,349
Deferred income taxes 110,603 (32,523 )
Amortization of discount on Convertible Notes 91 15,662
Gain on redemption of Convertible Notes - (4,900 )
Amortization of debt issuance costs 809 578
Other, net (225 ) 6,375
Changes in assets and liabilities, net of impact of adoption of Topic 606:
Accounts receivable (98,075 ) (26,998 )
Inventory (14,403 ) 3,917
Software development costs and licenses (206,831 ) (225,269 )
Prepaid expenses and other current and other non-current assets (275,800 ) (74,544 )
Deferred revenue 304,713 198,397
Deferred cost of goods sold (24,882 ) (11,959 )
Accounts payable, accrued expenses and other liabilities   201,152     198,733  
Net cash provided by operating activities   843,515     493,527  
 

Investing activities:

Change in bank time deposits (171,057 ) (40,918 )
Proceeds from available-for-sale securities 325,133 241,012
Purchases of available-for-sale securities (282,534 ) (369,998 )
Purchases of fixed assets (66,969 ) (61,557 )
Purchase of long-term investments - (5,000 )
Asset acquisition - (25,965 )
Business acquisition   (28,149 )   (9,401 )
Net cash used in investing activities   (223,576 )   (271,827 )
 

Financing activities:

Tax payment related to net share settlements on restricted stock awards (101,293 ) (112,884 )
Repurchase of common stock (362,392 ) (154,792 )
Other   -     (13,791 )
Net cash used in financing activities   (463,685 )   (281,467 )
 
Effects of foreign currency exchange rates on cash and cash equivalents   (10,639 )   24,924  
 
Net change in cash and cash equivalents and restricted cash 145,615 (34,843 )
Cash and cash equivalents and restricted cash, beginning of year   1,246,371     1,281,214  
Cash and cash equivalents and restricted cash, end of period $ 1,391,986   $ 1,246,371  
 
(1) During Q1 FY19, the Company adopted Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash and applied that standard retroactively. The application of this new standard resulted in a decrease to net cash from operating activities of $128.1 million in FY19 and a decrease of $99.6 million in FY18, which are reflected herein.
 
   
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)    
 
Three Months Ended

March 31, 2019

Three Months Ended

March 31, 2018

Amount % of Total Amount % of Total
 
Net revenue by geographic region
United States $ 274,621 51% $ 255,710 57%
International   264,386 49%   194,564 43%
Total net revenue $ 539,007 100% $ 450,274 100%
 
Net bookings by geographic region
United States $ 284,209 58% $ 232,272 56%
International   204,201 42%   179,096 44%
Total net bookings $ 488,410 100% $ 411,369 100%
 
 
Three Months Ended

March 31, 2019

Three Months Ended

March 31, 2018

Amount % of Total Amount % of Total
 
Net revenue by distribution channel
Digital online $ 413,469 77% $ 301,382 67%
Physical retail and other   125,538 23%   148,892 33%
Total net revenue $ 539,007 100% $ 450,274 100%
 
Net bookings by distribution channel
Digital online $ 418,993 86% $ 333,135 81%
Physical retail and other   69,417 14%   78,233 19%
Total net bookings $ 488,410 100% $ 411,369 100%
 
 
Three Months Ended

March 31, 2019

Three Months Ended

March 31, 2018

Amount % of Total Amount % of Total
Net revenue by platform mix
Console $ 422,432 78% $ 363,464 81%
PC and other   116,575 22%   86,810 19%
Total net revenue $ 539,007 100% $ 450,274 100%
 
Net bookings by platform mix
Console $ 364,873 75% $ 313,368 76%
PC and other   123,537 25%   98,000 24%
Total net bookings $ 488,410 100% $ 411,368 100%
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
Net Revenue and Net Bookings by Geographic Region, Distribution Channel, and Platform Mix
(in thousands)        
 
Twelve Months Ended

March 31, 2019

Twelve Months Ended

March 31, 2018

Amount % of Total Amount % of Total
 
Net revenue by geographic region
United States $ 1,426,907 53% $ 1,052,313 59%
International   1,241,487 47%   740,579 41%
Total net revenue $ 2,668,394 100% $ 1,792,892 100%
 
Net bookings by geographic region
United States $ 1,606,675 55% $ 1,161,502 58%
International   1,322,049 45%   829,100 42%
Total net bookings $ 2,928,724 100% $ 1,990,602 100%
 
 
Twelve Months Ended

March 31, 2019

Twelve Months Ended

March 31, 2018

Amount % of Total Amount % of Total
 
Net revenue by distribution channel
Digital online $ 1,681,609 63% $ 1,130,946 63%
Physical retail and other   986,785 37%   661,946 37%
Total net revenue $ 2,668,394 100% $ 1,792,892 100%
 
Net bookings by distribution channel
Digital online $ 1,801,710 62% $ 1,349,508 68%
Physical retail and other   1,127,014 38%   641,094 32%
Total net bookings $ 2,928,724 100% $ 1,990,602 100%
 
 
Twelve Months Ended

March 31, 2019

Twelve Months Ended

March 31, 2018

Amount % of Total Amount % of Total
Net revenue by Platform Mix
Console $ 2,233,861 84% $ 1,463,307 82%
PC and other   434,533 16%   329,586 18%
Total net revenue $ 2,668,394 100% $ 1,792,892 100%
 
Net bookings by platform mix
Console $ 2,497,157 85% $ 1,611,625 81%
PC and other   431,567 15%   378,977 19%
Total net bookings $ 2,928,724 100% $ 1,990,602 100%
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
             

 

Three Months Ended March 31, 2019

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software
development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

 
As reported $ 539,007 $ 74,142 $ 111,596 $ 44,914 $ 28,263 $ 77,607
 
Net effect from deferral and related cost of goods sold (50,596 ) (5,455 ) (12,205 ) 54
Stock-based compensation (41,335 ) (7,363 )
Amortization and impairment of acquired intangibles (3,919 )
 

 

Three Months Ended March 31, 2019

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
As reported $ 75,541 $ 56,588 $ 11,081 $ 1,214 $ 6,466
Net effect from deferral and related cost of goods sold 3,419
Stock-based compensation (13,669 ) (6,722 )
Amortization and impairment of acquired intangibles (1,578 ) (124 )
Impact of business reorganization (1,214 )
 

 

Three Months Ended March 31, 2018

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software
development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

 
As reported $ 450,274 $ 88,271 $ 26,981 $ 47,177 $ 26,782 $ 47,451
Net effect from deferral and related cost of goods sold (38,905 ) (3,244 ) (12,397 ) (9,020 )
Stock-based compensation (1,325 ) (4,471 )
Amortization and impairment of acquired intangibles (5,292 ) (852 )
 
 

 

Three Months Ended March 31, 2018

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
As reported $ 60,450 $ 54,128 $ 9,479 $ 1,730 $ 3,451
Stock-based compensation (9,408 ) (5,030 ) (3 )
Amortization and impairment of acquired intangibles (1,705 ) (134 )
Non-cash amounts related to convertible notes 193
Impact of business reorganization (1,727 )
Acquisition related expenses 142
 
 
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
ADDITIONAL DATA
(in thousands)
 

 

Twelve Months Ended March 31, 2019

  Net revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

 
As reported $ 2,668,394 $ 610,804 $ 449,198 $ 322,148 $ 141,494 $ 391,400
Net effect from deferral and related cost of goods sold 260,330 40,943 24,882 789
Stock-based compensation (149,075 ) (23,685 )
Amortization and impairment of acquired intangibles (16,290 )

 

 

 

Twelve Months Ended March 31, 2019

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
As reported $ 281,234 $ 230,170 $ 40,232 ($ 4,958 ) $ 26,113
Net effect from deferral and related cost of goods sold 2,508
Stock-based compensation (51,903 ) (23,037 )
Non-cash amounts related to convertible notes 91
Non-cash (gain) loss on redemption of Convertible Notes
Amortization and impairment of acquired intangibles (6,437 ) (506 )
Impact of business reorganization 4,958
 

 

Twelve Months Ended March 31, 2018

  Net Revenue  

Cost of goods sold-
Internal royalties

 

Cost of goods sold-
Software development costs
and royalties

 

Cost of goods sold-
Product costs

 

Cost of goods sold-
Licenses

 

Selling and
marketing

 
As reported $ 1,792,892 $ 383,020 $ 191,400 $ 203,301 $ 120,590 $ 256,092
Net effect from deferral and related cost of goods sold 197,710 (5,812 ) 6,912 5,900
Stock-based compensation (24,610 ) (13,258 )
Amortization of intangibles (19,719 ) (8,107 )
 

 

Twelve Months Ended March 31, 2018

 

General and
administrative

 

Research and
development

 

Depreciation and
amortization

 

Business reorganization

 

Interest and other,
net

 
As reported $ 247,828 $ 196,373 $ 43,969 $ 14,742 $ 1,048
Stock-based compensation (58,037 ) (18,020 ) (2,424 )
Non-cash amounts related to convertible notes 10,762
Acquisition related expenses 7,080
Amortization and impairment of acquired intangibles (6,494 ) (11,767 )
Impact of business reorganization (12,318 )
Other, net (93 )
 
     
TAKE-TWO INTERACTIVE SOFTWARE, INC. and SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURE
(in thousands)
 
Twelve months ended March 31,
  2019     2018  
Net cash provided by operating activities $ 843,515 $ 493,527
Net change in Restricted cash (1)   (128,063 )   (99,580 )
Adjusted Operating Cash Flow $ 715,452   $ 393,947  
 
 
FY 2019 FY 2018
Restricted cash beginning of period (4/1) $ 437,398 $ 337,818
Restricted cash end of period (3/31)   565,461     437,398  
(1) Net change in Restricted cash $ (128,063 )   ($ 99,580 )

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