Take-Two Interactive Software, Inc. Reports Strong Results for Fiscal Second Quarter 2022

GAAP net revenue increased 2% to $858.2 million

GAAP net income per diluted share was $0.09

GAAP net cash provided by operating activities for the six-months ended September 30, 2021 was $283.7 million

Adjusted Unrestricted Operating Cash Flow (Non-GAAP) for the six-months ended September 30, 2021 was $56.1 million

Net Bookings increased 3% to $984.9 million

Company raises its Net Bookings outlook for fiscal year 2022 to $3.3 to $3.4 billion

Company repurchased 1.26 million shares of common stock for approximately $200 million at an average share price of $158.67

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) today reported strong results for the second quarter of its fiscal year 2022, ending September 30, 2021. In addition, the Company raised its outlook for the fiscal year 2022, ending March 31, 2022, and provided its initial outlook for the third quarter of its fiscal year 2022, ending December 31, 2021. For further information, please see the second quarter fiscal 2022 results slide deck posted to the Company’s investor relations website at http://ir.take2games.com.

Second Quarter Fiscal 2022 Financial Highlights

GAAP net revenue increased 2% to $858.2 million, as compared to $841.1 million in last year’s fiscal second quarter. Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content and in-game purchases) increased 8% and accounted for 66% of total GAAP net revenue. Digitally-delivered GAAP net revenue increased 7% to $779.1 million, as compared to $725.7 million in last year’s fiscal second quarter, and accounted for 91% of total GAAP net revenue. The largest contributors to GAAP net revenue were NBA® 2K22 and NBA 2K21; Grand Theft Auto® Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Borderlands® 3; Two Dots®; Sid Meier’s Civilization® VI; and Dragon City®.

GAAP net income was $10.3 million, or $0.09 per diluted share, as compared to $99.3 million, or $0.86 per diluted share, for the comparable period last year. Cost of goods sold included a $53 million impairment charge related to the Company's decision not to proceed with further development of an unannounced title in its pipeline.

During the six month-period ended September 30, 2021, GAAP net cash provided by operating activities was $283.7 million, as compared to $626.7 million in the same period last year. During the six month-period ended September 30, 2021, Adjusted Unrestricted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, was $56.1 million, as compared to $536.2 million in the same period last year (please see the section below titled “Non-GAAP Financial Measure” for additional information). As of September 30, 2021, the Company had cash and short-term investments of $2.3 billion.

The following data, together with a management reporting tax rate of 16%, 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:

In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 116.8 million.

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.

During fiscal second quarter 2022, total Net Bookings increased 3% to $984.9 million, as compared to $957.5 million during last year’s fiscal second quarter. Net Bookings from recurrent consumer spending increased 7% and accounted for 69% of total Net Bookings. Digitally-delivered Net Bookings increased 9% to $876.1 million, as compared to $806.1 million in last year’s fiscal second quarter, and accounted for 89% of total Net Bookings. The largest contributors to Net Bookings were NBA 2K22 and NBA 2K21; Grand Theft Auto Online and Grand Theft Auto V; Red Dead Redemption 2 and Red Dead Online; Borderlands 3; Top Eleven; Sid Meier’s Civilization VI; and Dragon City.

Catalog accounted for $629.2 million of Net Bookings led by Grand Theft Auto, NBA 2K, Red Dead Redemption, Borderlands, Top Eleven, Sid Meier’s Civilization and Dragon City.

Management Comments

“Our second quarter results were outstanding, highlighted by Net Bookings of $985 million, which greatly exceeded our expectations and increased 3% as compared to last year,” said Strauss Zelnick, Chairman and CEO of Take-Two. “We experienced consistently strong engagement trends across our key franchises, underscoring the durability of our offerings and the deep relationships that we have established with new, existing, and returning players.”

“As a result of our better-than-expected second quarter operating results, along with our updated forecast for the balance of the year, we are raising our Net Bookings guidance for the year to $3.3 to $3.4 billion.”

“We remain highly optimistic about our ability to capitalize further on the positive trends of our industry. As we continue to harness and enhance our competitive advantages – our incredible creative talent, best-in-class marketing and technology, and strong balance sheet – we will introduce new entertainment experiences that we believe have vast commercial potential and the ability to drive long-term engagement and recurrent consumer spending. We also expect to continue to attract the very best creators who share in our vision to set new benchmarks and captivate audiences throughout the world.”

COVID-19 Update

At Take-Two, our number one priority has remained the health and safety of our employees and their families. We are taking a prudent approach relating to our return to office cadence and planning. Some of our offices are open, and we plan for the majority of our offices to reopen in the coming months. Given the evolving dynamics of the COVID-19 pandemic, we are strictly following protocols from local governments and health officials to ensure that we are adhering to their safety standards.

Due to the shelter-in-place orders that began last year, we experienced heightened levels of engagement and Net Bookings growth during our fiscal 2021 period. As the return to normalcy continues to unfold, the impact to our business, operations and financial results will depend on numerous evolving factors that we are not able to predict. The key risks to our business are set forth under the heading “Cautionary Note Regarding Forward-Looking Statements” in this release and in Take-Two’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Business and Product Highlights

Since July 1, 2021:

Take-Two:

• The Company repurchased 1.26 million shares of common stock for approximately $200 million, at an average share price of $158.67 per share.

Rockstar Games:

• On November 11^th, Rockstar Games will digitally launch Grand Theft Auto: The Trilogy – The Definitive Edition for PlayStation 5, PlayStation 4, Xbox Series X|S, Xbox One, Nintendo Switch, and the Rockstar Games Launcher for PC. The Definitive Edition will feature across-the-board upgrades for all three games, including graphical improvements and modern controls for all three titles, while still maintaining the classic and distinct aesthetic of the original games. Grand Theft Auto: The Trilogy – The Definitive Edition will launch physically for consoles on December 7^th and will release for iOS and Android devices in the first half of calendar 2022. As part of the 20^th anniversary celebration, fans can also collect an array of special commemorative gear in Grand Theft Auto Online throughout a series of upcoming events this Fall.
• Released new free content updates for Grand Theft Auto Online:
  • On July 20^th, delivered the Los Santos Tuners update, another major update for Grand Theft Auto Online’s evolving world. The Los Santos Tuners update brought a renewed focus to the underground street racing scene and introduced a host of innovative and highly requested features, including the LS Car Meet – a shared social space where players can get together to modify, test and race their cars, get tattoos, and more. The update also added 17 highly customizable vehicles, a shoppable auto workshop, new robbery Contracts and street races, and the ability to add music in a new way through collectible media sticks.
  • Rockstar Games continued to provide an array of free content for their vast and growing online communities. To celebrate Halloween, Grand Theft Auto Online added a series of random events to shock and surprise players, including driverless phantom killer cars, superhuman slashers, UFOs that bend the laws of physics, and more, including bonuses on Alien Survival modes, and a new Arcade game.
• Released new free content updates for Red Dead Online:
  • On July 13^th, released the Blood Money update for Red Dead Online. The update introduced a series of criminal-themed opportunities; complex new missions, including the game's first train robbery; and The Quick Draw Club - a series of four distinct, rapid-fire passes featuring criminal-themed unlockable rewards, bonuses, and more.
  • Rockstar Games introduced new content to players following the Blood Money update, including new missions, contracts, special bonuses and rare items.
• Rockstar Games looks forward to launching the expanded and enhanced version of Grand Theft Auto V and a standalone version of Grand Theft Online for new-generation consoles in March 2022. Players will enjoy a range of technical and graphical improvements across the entire experience including performance enhancements for select vehicles in Grand Theft Auto Online, and much more.

2K:

• On September 10^th, launched NBA 2K22, the next iteration of the top-rated NBA video game simulation series of the past 20 years. Global phenomenon and two-time NBA All-Star, Luka Dončić, appears on the cover of the Standard Edition and Cross-Gen Digital Bundle, while the premium NBA 75^th Anniversary Edition showcases NBA legends Kareem Abdul-Jabbar, Dirk Nowitzki, and Kevin Durant. In North America, players are able to purchase a special version of the Standard Edition featuring six-time WNBA All-Star and WNBA Champion, Candace Parker on the cover and available exclusively through GameStop and EB Games. In Japan, players can also purchase a special version of the Standard Edition featuring Washington Wizards Rui Hachimura, a rising star who was the first Japanese player to not only be drafted in the first round in 2019, but also to reach the NBA Playoffs.
• Launched the NBA 2K22 Arcade Edition on Apple Arcade on October 19^th. The game offers the all-new Association mode, where players can be the GM or Head Coach of their favorite NBA Franchises and build their own NBA dream teams, as well as other popular modes including MyCOURT, Online Multiplayer mode, and MyCAREER.
• Announced Season 4 of NBA 2K Mobile, which includes a new Courtside Pass to unlock exclusive rewards, updated player likenesses and jerseys, card stats to reflect the current NBA season, and more.
• In September, PGA TOUR 2K21 surpassed 2.5 million units sold-in around the globe, a key milestone for the series. Alongside this announcement, 2K and HB Studios revealed the theme for its all-new custom courses coming to multiplayer playlists, as well as a collaboration with lifestyle brand and gaming collective 100 Thieves.
• On October 14^th, 2K and HB Studios launched the PGA TOUR 2K21 Baller Edition, which includes the base game, all previously released DLC courses and game modes, an assortment of exclusive adidas apparel and gear, and the Golden Touch Pack featuring a gold putter and driver.
• 2K and Visual Concepts revealed new details behind WWE 2K22, which is planned for launch in March 2022. WWE 2K22 promises new controls, incredible graphics, and a redesigned engine for the most impressive WWE 2K experience to date. As part of the game’s development process, 85% of the in-game roster has taken part in facial scanning for ultra-realistic and updated character models, and more than 3,400 new animations have been captured.
• WWE SuperCard released content updates, including new card tiers, rewards and the return of John Cena with a “Summer of Cena” gift redeemable for a limited time.
• Announced that, for the first time ever, the Borderlands 3 Ultimate Edition will be available in physical disc form for PlayStation 5 and Xbox Series X. Borderlands 3 Ultimate Edition will be released on November 12^th and feature the award-winning base game plus all six content add-ons and the full collection of bonus cosmetic packs. The PlayStation 5 and Xbox Series X versions are optimized to take full advantage of the new-gen hardware's processing power.
• Announced that Tiny Tina’s Wonderlands, a new franchise from 2K and Gearbox, will be released in March 2022. The game is an epic adventure full of whimsy, wonder, and high-powered weaponry set in a chaotic fantasy world where magic, broadswords, and bullets collide. Tiny Tina’s Wonderlands is a full experience with a rich, story-driven co-op campaign and repeatable end-game content.
• 2K and Marvel Entertainment announced Marvel's Midnight Suns, a new tactical RPG set in the darker side of the Marvel Universe that brings players face-to-face against supernatural forces as they team up with and live among the Midnight Suns, Earth’s last line of defense against the underworld. Marvel’s Midnight Suns is now expected to launch in the second half of Calendar 2022 (Fiscal Year 2023), as compared to prior expectations of March 2022 (Fiscal Year 2022).
• 2K has expanded its presence in Montréal, Québec to support several of its business units, including Global Services, an internal team responsible for artists, animators, motion capture and visual effects specialists, project managers, sound designers, user researchers, and more who work across the label’s growing portfolio of original franchises and licensed products.
• 2K Foundations, in partnership with the Municipality of Ljubljana and Dallas Mavericks All-Star Guard Luka Dončić, unveiled its latest project in Ljubljana, Slovenia. Together, they refurbished the athlete’s childhood court and added new seating and lighting. 2K Foundations is the philanthropic arm of 2K that supports and inspires underserved communities by directly investing in local enrichment programs.

Private Division:

• On August 13^th, Private Division and Supergiant Games partnered together to release a physical edition of Hades for PlayStation and Xbox platforms. Hades is a winner of over 50 “Game of the Year” awards and is currently Metacritic’s highest rated game for the PlayStation 5 and Xbox Series X.
• On September 8^th, released Murder on Eridanos, the final expansion for The Outer Worlds, for the Nintendo Switch.
• On September 24^th, released Kerbal Space Program Enhanced Edition for PlayStation 5 and Xbox Series X|S. The title contains multiple hardware advancements and developments, which allow for an upgraded resolution, improved frame-rate, advanced shaders, better textures, and additional performance improvements.
• OlliOlli World, the skateboarding action-platformer from Roll7 remains on track to launch this winter in fiscal Q4 for PlayStation 4, PlayStation 5, Xbox One, Xbox Series X|S, PC and Nintendo Switch.

T2 Mobile Games:

• Continued the integration of Socialpoint, Playdots, and Nordeus into “T2 Mobile Games.” This new structure is helping Take-Two’s mobile teams achieve cost synergies and share best practices.
• Many of our mobile games launched new features, challenges, and marketing activations to drive player engagement. Our studios will continue to introduce new enhancements to their games this year to further optimize the player experience.
• Nordeus released Top Eleven 2022, the latest installment of their mobile title that is the world’s most successful soccer management game of all time. Top Eleven 2022 delivers significant updates to the gameplay and soccer management experience.

Outlook for Fiscal 2022

Take-Two is raising its outlook for the fiscal year ending March 31, 2022 and providing its initial outlook for its fiscal third quarter ending December 31, 2021:

Fiscal Year Ending March 31, 2022

• GAAP net revenue is expected to range from $3.35 to $3.45 billion
• GAAP net income is expected to range from $320 to $350 million
• GAAP diluted net income per share is expected to range from $2.75 to $3.00
• Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 116.6 million⁽¹⁾
• Net cash provided by operating activities is expected to be over $380 million
• Adjusted Unrestricted Operating Cash Flow (Non-GAAP) is expected to be over $400 million ⁽²⁾
• Capital expenditures are expected to be approximately $170 million
• Net Bookings (operational metric) are expected to range from $3.3 to $3.4 billion

The Company is also providing selected data and its management reporting tax rate of 16%, 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:

Third Quarter Ending December 31, 2021

• GAAP net revenue is expected to range from $840 to $890 million
• GAAP net income is expected to range from $99 to $111 million
• GAAP diluted net income per share is expected to range from $0.85 to $0.95
• Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 116.3 million ⁽⁴⁾
• Net Bookings (operational metric) are expected to range from $800 to $850 million

The Company is also providing selected data and its management reporting tax rate of 16%, 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:

Key assumptions and dependencies underlying the Company’s outlook include: the timely delivery of the titles included in this financial outlook; a stable economic environment; continued consumer acceptance of Xbox One and PlayStation 4, as well as continued growth in the installed base of PlayStation 5 and Xbox Series X|S; 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 have been released since July 1, 2021:

Take-Two's future lineup announced to-date includes:

Share Repurchase Authorization

In November, the Company's Board of Directors authorized an increase of 7.4 million shares to the number of its shares of common stock that the Company is permitted to repurchase, resulting in an aggregate of 10 million shares remaining available for repurchase as of the date of the additional authorization. The authorization permits the Company to purchase shares from time to time through a variety of methods, including in the open market or through privately negotiated transactions, in accordance with applicable securities laws. It does not obligate the Company to make any purchases at any specific time or situation. Repurchases are subject to the availability of stock, prevailing market conditions, the trading price of the stock, the Company's financial performance and other conditions. The program may be suspended or discontinued at any time for any reason. As of October 22, 2021, the Company had approximately 115.3 million common shares outstanding.

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 Unrestricted 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 Unrestricted 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 Quarterly Report on Form 10-Q for the period ended September 30, 2021.

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. We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 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

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: the uncertainty of the impact of the COVID-19 pandemic and measures taken in response thereto; the effect that measures taken to mitigate the COVID-19 pandemic have on our operations, including our ability to timely deliver our titles and other products, and on the operations of our counterparties, including retailers and distributors; the effects of the COVID-19 pandemic on both consumer demand and the discretionary spending patterns of our customers as the situation with the pandemic continues to evolve; the risks of conducting business internationally; the impact of reductions in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio; the impact of potential inflation; volatility in foreign currency exchange rates; our dependence on key management and product development personnel; our dependence on our NBA 2K and Grand Theft Auto products and our ability to develop other hit titles; our ability to leverage opportunities on PlayStation®5 and Xbox Series X|S; 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.

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