Take Two Interactive Software Inc 10-Q for FY2021 Q1

Take Two Interactive Software Inc (TTWO)

10-Q 2020-08-04 For: 2020-06-30

Added on April 09, 2026

About this 10-Q

Take Two Interactive Software Inc filed this 10-Q on August 4, 2020, covering the quarter ended June 30, 2020 (FY2021 Q1).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $831.31M; up 53.8% from $540.46M a year earlier
Net income: $88.51M; up 91.2% from net income of $46.28M a year earlier
Diluted EPS: $0.77; up 87.8% from $0.41 a year earlier

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OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $.01 par value	TTWO	NASDAQ Global Select Market


PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Stockholder's Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	32
	Signatures	33


	June 30, 2020		March 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,404,124	$	1,357,664
Short-term investments	880,825		644,003
Restricted cash and cash equivalents	467,622		546,604
Accounts receivable, net of allowances of $2,201 and $443 at June 30, 2020 and March 31, 2020, respectively	685,169		592,555
Inventory	19,486		19,108
Software development costs and licenses	31,714		40,316
Deferred cost of goods sold	14,281		19,598
Prepaid expenses and other	183,712		273,503
Total current assets	3,686,933		3,493,351
Fixed assets, net	128,904		131,888
Right-of-use assets	158,018		154,284
Software development costs and licenses, net of current portion	409,962		401,778
Goodwill	389,825		386,494
Other intangibles, net	46,746		51,260
Deferred tax assets	120,892		116,676
Long-term restricted cash and cash equivalents	289,526		89,124
Other assets	138,435		123,977
Total assets	$	5,369,241	$	4,948,832
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	56,410	$	65,684
Accrued expenses and other current liabilities	1,136,628		1,169,884
Deferred revenue	928,100		777,784
Lease liabilities	27,602		25,187
Total current liabilities	2,148,740		2,038,539

Non-current deferred revenue	32,851		28,339
Non-current lease liabilities	153,506		152,059
Non-current software development royalties	300,970		104,417
Other long-term liabilities	82,146		86,234
Total liabilities	$	2,718,213	$	2,409,588
Commitments and contingencies (See Note 13)
Stockholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized; no shares issued and outstanding at June 30, 2020 and March 31, 2020	—		—
Common stock, $.01 par value, 200,000 shares authorized; 136,689 and 135,927 shares issued and 114,268 and 113,506 outstanding at June 30, 2020 and March 31, 2020, respectively	1,367		1,359
Additional paid-in capital	2,151,774		2,134,748
Treasury stock, at cost; 22,421 common shares at June 30, 2020 and March 31, 2020	(820,572)		(820,572)
Retained earnings	1,370,590		1,282,085
Accumulated other comprehensive loss	(52,131)		(58,376)
Total stockholders' equity	2,651,028		2,539,244
Total liabilities and stockholders' equity	$	5,369,241	$	4,948,832


	Three Months Ended June 30,
	2020		2019
Net revenue	$	831,310	$	540,459
Cost of goods sold	476,689		241,469
Gross profit	354,621		298,990
General and administrative	102,173		74,833
Selling and marketing	84,779		91,821
Research and development	73,108		68,963
Depreciation and amortization	12,418		11,257
Business reorganization	—		386
Total operating expenses	272,478		247,260
Income from operations	82,143		51,730
Interest and other, net	8,218		10,425
Income before income taxes	90,361		62,155
Provision for income taxes	1,856		15,875
Net income	$	88,505	$	46,280
Earnings per share:
Basic earnings per share	$	0.78	$	0.41
Diluted earnings per share	$	0.77	$	0.41


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended June 30,
	2020		2019
Net income	$	88,505	$	46,280
Other comprehensive income (loss):
Foreign currency translation adjustment	4,701		(8,797)
Cash flow hedges:
Change in unrealized gains	(3,817)		202
Reclassification to earnings	(1,333)		1,083
Tax effect on effective cash flow hedges	845		(9)
Change in fair value of effective cash flow hedge	(4,305)		1,276



Change in fair value of available for sale securities	5,849		722
Other comprehensive income (loss)	6,245		(6,799)
Comprehensive income	$	94,750	$	39,481


	Three Months Ended June 30, 2020
	Common Stock					Additional Paid-in Capital		Treasury Stock							Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity
	Shares	Amount					Shares			Amount

Balance, March 31, 2020	135,927	$	1,359	$	2,134,748	(22,421)		$	(820,572)		$	1,282,085	$	(58,376)	$	2,539,244
Net income	—	—		—		—		—			88,505		—		88,505
Change in cumulative foreign currency translation adjustment	—	—		—		—		—			—		4,701		4,701
Change in unrealized gains on cash flow hedge, net	—	—		—		—		—			—		(4,305)		(4,305)
Net unrealized gain on available-for-sale securities, net of taxes	—	—		—		—		—			—		5,849		5,849
Stock-based compensation	—	—		49,037		—		—			—		—		49,037

Issuance of restricted stock, net of forfeitures and cancellations	979	10		(10)		—		—			—		—		—
Net share settlement of restricted stock awards	(282)	(3)		(38,503)		—		—			—		—		(38,506)
Employee share purchase plan settlement	65	1		6,502		—		—			—		—		6,503
Balance, June 30, 2020	136,689	$	1,367	$	2,151,774	(22,421)		$	(820,572)		$	1,370,590	$	(52,131)	$	2,651,028


	Three Months Ended June 30, 2019
	Common Stock					Additional Paid-in Capital		Treasury Stock							Retained Earnings		Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity
	Shares	Amount					Shares			Amount

Balance, March 31, 2019	134,602	$	1,346	$	2,019,369	(22,421)		$	(820,572)		$	877,626	$	(37,189)	$	2,040,580
Net income	—	—		—		—		—			46,280		—		46,280
Change in cumulative foreign currency translation adjustment	—	—		—		—		—			—		(8,797)		(8,797)
Change in unrealized gains on cash flow hedge, net	—	—		—		—		—			—		1,276		1,276
Net unrealized gain on available-for-sale securities, net of taxes	—	—		—		—		—			—		722		722
Stock-based compensation	—	—		53,251		—		—			—		—		53,251
Repurchased common stock	—	—		—		—		—			—		—		—
Issuance of restricted stock, net of forfeitures and cancellations	1,339	13		(13)		—		—			—		—		—
Net share settlement of restricted stock awards	(476)	(5)		(52,113)		—		—			—		—		(52,118)
Employee share purchase plan settlement	62	1		5,132		—		—			—		—		5,133
Balance, June 30, 2019	135,527	$	1,355	$	2,025,626	(22,421)		$	(820,572)		$	923,906	$	(43,988)	$	2,086,327


	June 30, 2020		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Balance Sheet Classification
Money market funds	$	498,644	$	498,644	$	—	$	—	Cash and cash equivalents
Bank-time deposits	213,000		213,000		—		—		Cash and cash equivalents
Commercial paper	94,105		—		94,105		—		Cash and cash equivalents

Corporate bonds	37,261		—		37,261		—		Cash and cash equivalents
Corporate bonds	401,198		—		401,198		—		Short-term investments
Bank-time deposits	352,026		352,026		—		—		Short-term investments
US Treasuries	28,684		28,684		—		—		Short-term investments
Asset-backed securities	1,007		—		1,007		—		Short-term investments
Commercial paper	97,910		—		97,910		—		Short-term investments
Money market funds	467,298		467,298		—		—		Restricted cash and cash equivalents
Bank-time deposits	324		324		—		—		Restricted cash and cash equivalents
Money market funds	289,526		289,526		—		—		Long-term restricted cash and cash equivalents
Private equity	5,364		—		—		5,364		Other assets
Foreign currency forward contracts	(242)		—		(242)		—		Accrued expenses and other current liabilities
Total recurring fair value measurements, net	$	2,486,105	$	1,849,502	$	631,239	$	5,364


	March 31, 2020		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)		Balance Sheet Classification
Money market funds	$	497,861	$	497,861	$	—	$	—	Cash and cash equivalents
Bank-time deposits	313,757		313,757		—		—		Cash and cash equivalents
Commercial paper	97,544		—		97,544		—		Cash and cash equivalents
Corporate bonds	9,888		—		9,888		—		Cash and cash equivalents
Money market funds	546,604		546,604		—		—		Restricted cash and cash equialents
Corporate bonds	334,631		—		334,631		—		Short-term investments
Bank-time deposits	191,000		191,000		—		—		Short-term investments
US Treasuries	30,819		30,819		—		—		Short-term investments
Commercial paper	87,553		—		87,553		—		Short-term investments
Cross-currency swap	11,275		—		11,275		—		Prepaid expenses and other
Money market funds	89,124		89,124		—		—		Long-term restricted cash and cash equivalents
Private equity	2,759		—		—		2,759		Other assets
Foreign currency forward contracts	(11)		—		(11)		—		Accrued and other current liabilities
Total recurring fair value measurements, net	$	2,212,804	$	1,669,165	$	540,880	$	2,759


	June 30, 2020
			Gross Unrealized
	Cost or Amortized Cost		Gains		Losses		Fair Value
Short-term investments
Bank time deposits	$	352,026	$	—	$	—	$	352,026
Available-for-sale securities:
Corporate bonds	398,792		2,672		(266)		401,198
US Treasuries	28,444		240		—		28,684
Asset-backed securities	1,000		7		—		1,007
Commercial paper	97,910		—		—		97,910
Total Short-term investments	$	878,172	$	2,919	$	(266)	$	880,825


	June 30, 2020
	Amortized Cost		Fair Value
Short-term investments
Due in 1 year or less	$	747,633	$	748,872
Due in 1 - 2 years	129,539		130,946
Due in 2 - 3 years	1,000		1,007
Total short-term investments	$	878,172	$	880,825


	June 30, 2020		March 31, 2020
Forward contracts to sell foreign currencies	$	126,114	$	122,024
Forward contracts to purchase foreign currencies	81,751		52,596


	June 30, 2020		March 31, 2020
Finished products	$	18,039	$	17,984
Parts and supplies	1,447		1,124
Inventory	$	19,486	$	19,108


	Three Months Ended June 30,
	2020	2019
Time-based	79	92
Market-based(1)	145	168
Performance-based(1)
IP	24	28
Recurrent Consumer Spending ("RCS")	24	28
Total—Performance-based	48	56
Total Restricted Stock Units	272	316


	June 30, 2020		March 31, 2020
Available borrowings	$	198,336	$	198,336
Outstanding letters of credit	1,664		1,664


	Three Months Ended June 30,
	2020		2019		Increase/ (decrease)		% Increase/ (decrease)
Net Bookings	$	996,249	$	422,240	$	574,009	135.9	%


	Three Months Ended June 30,
	2020						2019
Net revenue by geographic region:
United States	$	470,490	56.6	%	$	330,479	61.1	%
International	360,820		43.4	%	209,980		38.9	%
Net revenue by platform:
Console	$	611,685	73.6	%	$	434,814	80.5	%
PC and other	219,625		26.4	%	105,645		19.5	%
Net revenue by distribution channel:
Digital online	$	726,226	87.4	%	$	427,781	79.2	%
Physical retail and other	105,084		12.6	%	112,678		20.8	%
Net revenue by content:
Recurrent consumer spending	$	479,405	57.7	%	$	314,858	58.3	%
Full game and other	351,905		42.3	%	225,601		41.7	%


	June 30, 2020						March 31, 2020
	Current		Non-current		Current		Non-current
Software development costs, internally developed	$	10,491	$	321,524	$	17,367	$	305,970
Software development costs, externally developed	13,674		84,188		10,971		92,908
Licenses	7,549		4,250		11,978		2,900
Software development costs and licenses	$	31,714	$	409,962	$	40,316	$	401,778


	June 30, 2020		March 31, 2020
Software development royalties	793,744		$	822,416
Licenses	82,916		57,651
Compensation and benefits	71,218		81,791
Refund liability	54,820		77,829
Marketing and promotions	32,684		40,797
Other	101,246		89,400
Accrued expenses and other current liabilities	$	1,136,628	$	1,169,884


	Three Months Ended June 30, 2020
	Foreign currency translation adjustments		Unrealized gain (loss) on forward contracts		Unrealized gain (loss) on cross-currency swap		Unrealized gain (loss) on available-for- sales securities		Total
Balance at March 31, 2020	$	(60,535)	$	600	$	4,305	$	(2,746)	$	(58,376)
Other comprehensive income (loss) before reclassifications	4,701		—		(2,972)		5,849		7,578
Amounts reclassified from accumulated other comprehensive loss	—		—		(1,333)		—		(1,333)
Balance at June 30, 2020	$	(55,834)	$	600	$	—	$	3,103	$	(52,131)


	Three Months Ended June 30, 2019
	Foreign currency translation adjustments		Unrealized gain (loss) on derivative instruments		Unrealized gain (loss) on cross-currency swap		Unrealized gain (loss) on available-for- sales securities		Total
Balance at March 31, 2019	$	(33,090)	$	600	$	(5,285)	$	586	$	(37,189)
Other comprehensive income (loss) before reclassifications	(8,797)		—		193		722		(7,882)
Amounts reclassified from accumulated other comprehensive loss	—		—		1,083		—		1,083
Balance at June 30, 2019	$	(41,887)	$	600	$	(4,009)	$	1,308	$	(43,988)


	Three Months Ended June 30,
(thousands of dollars)	2020						2019
Net revenue	$	831,310	100.0	%	$	540,459	100.0	%
Cost of goods sold	476,689		57.3	%	241,469		44.7	%
Gross profit	354,621		42.7	%	298,990		55.3	%
General and administrative	102,173		12.3	%	74,833		13.8	%
Selling and marketing	84,779		10.2	%	91,821		17.0	%
Research and development	73,108		8.8	%	68,963		12.8	%
Depreciation and amortization	12,418		1.5	%	11,257		2.1	%
Business reorganization	—		—	%	386		0.1	%
Total operating expenses	272,478		32.8	%	247,260		45.8	%
Income from operations	82,143		9.9	%	51,730		9.6	%
Interest and other, net	8,218		1.0	%	10,425		1.9	%
Income before income taxes	90,361		10.9	%	62,155		11.5	%
Provision for income taxes	1,856		0.2	%	15,875		2.9	%
Net income	$	88,505	10.6	%	$	46,280	8.6	%


(thousands of dollars)	2020		% of net revenue		2019		% of net revenue		Increase/ (decrease)		% Increase/ (decrease)
General and administrative	$	102,173	12.3	%	$	74,833	13.8	%	$	27,340	36.5	%
Selling and marketing	84,779		10.2	%	91,821		17.0	%	(7,042)		(7.7)	%
Research and development	73,108		8.8	%	68,963		12.8	%	4,145		6.0	%
Depreciation and amortization	12,418		1.5	%	11,257		2.1	%	1,161		10.3	%
Business reorganization	—		—	%	386		0.1	%	(386)		(100.0)	%
Total operating expenses⁽¹⁾	$	272,478	32.8	%	$	247,260	45.8	%	$	25,218	10.2	%


Period	Shares purchased	Average price per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the repurchase program
April 1-30, 2020	—	$	—	—	3,818
May 1-31, 2020	—	$	—	—	3,818
June 1-30, 2020	—	$	—	—	3,818


Exhibits:
10.1			Restricted Unit Agreement dated as of April 13, 2020, by and between Take-Two Interactive Software, Inc. and ZelnickMedia Corporation (incorporated by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-3 filed with the Securities and Exchange Commission on April 13, 2020)
31.1			Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Calculation Linkbase Document
101.LAB			Inline XBRL Taxonomy Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Presentation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Document


August 3, 2020			/s/ STRAUSS ZELNICK
			Strauss Zelnick Chairman and Chief Executive Officer


August 3, 2020			/s/ LAINIE GOLDSTEIN
			Lainie Goldstein Chief Financial Officer