Net revenue was $450.3 million, as compared to $571.6 million in last year’s fiscal fourth quarter. Recurrent consumer spending (virtual currency, add-on content and in-game purchases) grew 42% year-over-year and accounted for 44% of total net revenue. The largest contributors to net revenue in fiscal fourth quarter 2018 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18, Sid Meier’s Civilization VI, WWE 2K18 and WWE SuperCard, and Dragon City and Monster Legends.
Digitally-delivered net revenue grew 8% to $301.4 million, as compared to $278.7 million in last year’s fiscal fourth quarter. The largest contributors to digitally-delivered net revenue in fiscal fourth quarter 2018 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18, Sid Meier’s Civilization VI, and WWE 2K18 and WWE SuperCard.
Net income was $90.9 million, or $0.77 per diluted share, as compared to $99.3 million, or $0.89 per diluted share, for the year-ago period.
The following data, together with a management reporting tax rate of 22%, 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, 2018 | ||||||||||||||||||||||||||||
Financial Data | ||||||||||||||||||||||||||||
| $ in thousands | Statement of | Change in | Stock-based | Non-cash |
Acquisition | Amortization | Business | |||||||||||||||||||||
| Net revenue | $ | 450,274 | (38,905 | ) | ||||||||||||||||||||||||
| Cost of goods sold | 189,211 | (24,661 | ) | (1,325 | ) | (5,292 | ) | |||||||||||||||||||||
| Gross profit | 261,063 | (14,244 | ) | 1,325 | 5,292 | |||||||||||||||||||||||
| Operating expenses | 173,238 | (18,912 | ) | 142 | (2,691 | ) | (1,727 | ) | ||||||||||||||||||||
| Income from operations | 87,825 | (14,244 | ) | 20,237 | (142 | ) | 7,983 | 1,727 | ||||||||||||||||||||
| Interest and other, net | (3,451 | ) | 193 | |||||||||||||||||||||||||
| Income before income taxes | 91,276 | (14,244 | ) | 20,237 | 193 | (142 | ) | 7,983 | 1,727 | |||||||||||||||||||
In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 118.7 million and adds back to net income the interest expense, net of tax, on its convertible notes of $0.01 million.
Fiscal Fourth Quarter Operational Metric – Net Bookings
Total Net Bookings grew to $411.4 million, as compared to $407.1 million during last year’s fiscal fourth quarter. Net Bookings from recurrent consumer spending grew 15% year-over-year and accounted for 58% of total Net Bookings. The largest contributors to Net Bookings were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18, Dragon City and Monster Legends, WWE 2K18 and WWE SuperCard, and Sid Meier’s Civilization VI.
Catalog accounted for $293.1 million of Net Bookings led by Grand Theft Auto, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.
Digitally-delivered Net Bookings grew 12% to $333.1 million, as compared to $298.5 million in last year’s fiscal fourth quarter. The largest contributors to digitally-delivered Net Bookings in fiscal fourth quarter 2018 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18, Sid Meier’s Civilization VI, Monster Legends and Dragon City, and WWE SuperCard and WWE 2K18.
Fiscal Year 2018 GAAP Financial Highlights
Net revenue grew to $1.793 billion, as compared to $1.780 billion in fiscal year 2017. Recurrent consumer spending grew 63% and accounted for 42% of total net revenue. The largest contributors to net revenue in fiscal year 2018 were Grand Theft Auto V and Grand Theft Auto Online, NBA 2K17 and NBA 2K18, WWE 2K18 and WWE SuperCard, Sid Meier’s Civilization VI, and Dragon City and Monster Legends.
Digitally-delivered net revenue grew 23% to $1.131 billion, as compared to $921.7 million in fiscal year 2017. The largest contributors to digitally-delivered net revenue in fiscal year 2018 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K17 and NBA 2K18, WWE 2K18 and WWE SuperCard, and Sid Meier’s Civilization VI.
Net income increased 158% to $173.5 million, or $1.54 per diluted share, as compared to $67.3 million, or $0.72 per diluted share, in fiscal year 2017.
Net cash provided by operating activities grew 19% to $393.9 million, as compared to $331.4 million in fiscal year 2017. As of March 31, 2018, the Company had cash and short-term investments of $1.424 billion.
The following data, together with a management reporting tax rate of 22%, 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, 2018 | |||||||||||||||||||||||||||
Financial Data | |||||||||||||||||||||||||||
| $ in thousands | Statement of | Change in | Stock-based | Non-cash | Acquisition | Amortization | Business | ||||||||||||||||||||
| Net revenue | $ | 1,792,892 | 197,710 | ||||||||||||||||||||||||
| Cost of goods sold | 898,311 | (32,063 | ) | (24,610 | ) | 19,344 | |||||||||||||||||||||
| Gross profit | 894,581 | 229,773 | 24,610 | (19,344 | ) | ||||||||||||||||||||||
| Operating expenses | 759,004 | (91,739 | ) | 7,080 | (26,368 | ) | (12,318 | ) | |||||||||||||||||||
| Income from operations | 135,577 | 229,773 | 116,349 | (7,080 | ) | 7,024 | 12,318 | ||||||||||||||||||||
| Interest and other, net | 1,048 | 10,762 | |||||||||||||||||||||||||
| Income before income taxes | 136,625 | 229,773 | 116,349 | 10,762 | (7,080 | ) | 7,024 | 12,318 | |||||||||||||||||||
In order to calculate net income per diluted share for management reporting purposes, the Company uses its fully diluted share count of 117.6 million and adds back to net income the interest expense, net of tax, on its convertible notes of $0.83 million.
Fiscal Year 2018 Operational Metric – Net Bookings
Total Net Bookings grew 5% to $1.991 billion, as compared to $1.904 billion in fiscal year 2017. Net Bookings from recurrent consumer spending grew 48% and accounted for 48% of total Net Bookings. The largest contributors to Net Bookings were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18 and NBA 2K17, WWE 2K18 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.
Digitally-delivered Net Bookings grew 25% to $1.350 billion, as compared to $1.081 billion in fiscal year 2017. The largest contributors to digitally-delivered Net Bookings in fiscal year 2018 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K18 and NBA 2K17, Monster Legends and Dragon City, and WWE SuperCard and WWE 2K18.
Management Comments
“During the fourth quarter, Take-Two delivered Net Bookings growth driven by increased recurrent consumer spending – including better-than-expected results from Grand Theft Auto Online,” said Strauss Zelnick, Chairman and CEO of Take-Two. “Our solid performance marked the completion of another outstanding year for our Company, highlighted by growth in Net Bookings, earnings and net cash provided by operating activities, along with margin expansion. Grand Theft Auto Online and NBA 2K generated record results, exceeding our original expectations, and we benefited from strong ongoing sales of Grand Theft Auto V and other catalog titles.
“We expect fiscal 2019 to be another year of profitable growth for Take-Two, including both record Net Bookings and record net cash provided by operating activities, led by the launch of Red Dead Redemption 2 along with new annual releases from NBA 2K and WWE 2K. We will also continue to support our titles with offerings designed to drive engagement and recurrent consumer spending. The highly-anticipated title from one of 2K’s biggest franchises, which had been planned for release during the current fiscal year, is now planned for launch during fiscal 2020 to allow for additional development time. We remain as excited as ever about this title, and expect it to enhance our results next fiscal year.
“This year is the 25th anniversary of Take-Two and, over that time, we have built our Company into a diversified and profitable enterprise. Take-Two is exceedingly well-positioned – creatively, strategically and financially – for continued growth and returns for our shareholders over the long-term.”
Business and Product Highlights
Since January 1, 2018:
Take-Two:
- During fiscal year 2018, the Company repurchased 1.51 million shares of its common stock for $154.8 million. During fiscal first quarter 2019 to date, the Company has repurchased 1.60 million shares of its common stock for $153.5 million.
- Effective March 19, 2018, Take-Two was added to the S&P 500 index.
Rockstar Games:
- Released Grand Theft Auto V: Premium Online Edition for PlayStation 4, Xbox One and PC. The Premium Online Edition includes the complete Grand Theft Auto V story experience, the ever-evolving world of Grand Theft Auto Online, and all existing gameplay upgrades and content. Purchasers also receive the Criminal Enterprise Starter Pack that gives players access to a huge range of content including properties, vehicles, weapons and more valued at over GTA$10,000,000 plus GTA$1,000,000 Bonus Cash.
- Released LA Noire: The VR Case Files, featuring seven select cases from the original game rebuilt specifically for a virtual reality experience, for Oculus Rift. LA Noire: The VR Case Files is also available for the HTC VIVE™ system.
- Released new free content updates for Grand Theft Auto Online, including:
- The Southern San Andreas Super Sport Series, which introduced two new racing modes – Hot Ring Circuit and Target Assault, additional Transform races and Special Vehicle races, two new Adversary modes: The Vespucci Job and Trap Door, 13 new vehicles, and new tools for the Race Creator.
- The Air Quota and Hardest Target Adversary Modes.
- Numerous all-new vehicles and aircraft.
- Announced that Red Dead Redemption 2 will launch for PlayStation 4 and Xbox One on October 26, 2018.
2K:
- NBA 2K18 became our highest-selling sports title ever, with sell-in to date of over 9 million units.
- Released the Sid Meier’s Civilization VI: Rise and Fall expansion pack for PC. This expansion builds upon the critically acclaimed gameplay experience of Civilization VI giving players new choices, strategies, and challenges as they guide a civilization through the ages. The expansion introduces new Golden Ages and Dark Ages, a new city Loyalty system, and Governors who can be stationed in players’ cities. Civilization VI: Rise and Fall also adds nine new leaders and eight new civilizations from across the world, giving players even more variety and diversity in how they play Civilization VI.
- Announced that it is working in partnership with Tencent to co-develop NBA 2K Online 2 in China. The title currently is in closed Beta testing and planned for commercial release this fall. NBA 2K Online 2 is based on the console edition of NBA 2K and features 2K’s legendary gameplay, 27 customizable position types, new player trading systems, eSports-optimized features, localized commentary and more.
- Announced that Hangar 13 – the critically acclaimed storytellers and developer of Mafia III – has expanded with the opening of a new location in Brighton, United Kingdom, furthering the studio’s efforts to tap into the world’s most talented development pools and build a globally diverse team. Hangar 13 is currently working on an unannounced AAA project for 2K and will continue to scale in both the U.S. and Europe at a pace consistent with the development of the game.
Private Division:
- Released Kerbal Space Program Enhanced Edition, the new console version of the beloved space simulation game, for digital download on PlayStation 4 and Xbox One. Kerbal Space Program Enhanced Edition is built from the ground up to include re-worked and console-optimized UI, a new control scheme exclusively for consoles, and more ways to enjoy launching spaceships into orbit.
- Released Kerbal Space Program: Making History Expansion for PC. This first expansion for the critically acclaimed space simulation adds a wealth of new and exciting content to the game, including a robust Mission Builder that lets players create and share their own scenarios, and a History Pack containing missions inspired by historical moments in space exploration.
- Announced that Kerbal Space Program will be released on Tencent’s WeGame distribution platform as a premium PC game at a date to be determined.
Financial Outlook for Fiscal 2019
Take-Two is providing its initial financial outlook for its fiscal first quarter ending June 30, 2018 and its fiscal year ending March 31, 2019.
First Quarter Ending June 30, 2018
- GAAP net revenue is expected to range from $345 to $395 million
- GAAP net income is expected to range from $62 to $74 million
- GAAP diluted net income per share is expected to range from $0.53 to $0.63
- Share count used to calculate GAAP diluted net income per share is expected to be 116.7 million (1)
- Net Bookings (operational metric) are expected to range from $215 to $265 million
The Company is also providing selected data and its updated management reporting tax rate of 20% that 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, 2018 | ||||||||||||
| Financial Data | |||||||||||
| $ in millions | GAAP outlook (2) | Change in | Stock-based | Amortization of | ||||||||
| Net revenue | $345 to $395 | ($130) | ||||||||||
| Cost of goods sold | $83 to $109 | ($8) | ($6) | ($4) | ||||||||
| Operating Expenses | $190 to $200 | ($30) | ($2) | |||||||||
| Interest and other, net | ($1) | |||||||||||
| Income before income taxes | $73 to 87 | ($122) | $36 | $6 | ||||||||
Fiscal Year Ending March 31, 2019
- GAAP net revenue is expected to range from $2.50 to $2.60 billion
- GAAP net income is expected to range from $180 to $211 million
- GAAP diluted net income per share is expected to range from $1.53 to $1.80
- Share count used to calculate GAAP diluted net income per share is expected to be 117.2 million (4)
- Net cash provided by operating activities is expected to be approximately $710 million
- Capital expenditures are expected to be approximately $60 million
- Net Bookings (operational metric) are expected to range from $2.67 to $2.77 billion
The Company is also providing selected data and its updated management reporting tax rate of 20% that 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, 2019 | ||||||||||||
Financial Data | ||||||||||||
| $ in millions | GAAP outlook (2) | Change in | Stock-based | Amortization of | ||||||||
| Net revenue | $2,500 to $2,600 | $170 | ||||||||||
| Cost of goods sold | $1,411 to $1,434 | $100 | ($176) | ($4) | ||||||||
| Operating Expenses | $885 to $925 | ($122) | ($2) | |||||||||
| Interest and other, net | ($7) | |||||||||||
| Income before income taxes | $211 to 248 | $70 | $298 | $6 | ||||||||
| 1) | For the fiscal first quarter ending June 30, 2018, the Company’s diluted share count used for management reporting purposes is expected to be 116.3 million, which includes 112.8 million basic shares and 3.5 million shares representing the potential dilution from unvested employee stock grants, because using the “if converted” method and the Company’s fully-diluted share count of 116.7 million, which includes 0.4 million shares representing the potential dilution from convertible notes, would be anti-dilutive. | ||||
| 2) | 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. | ||||
| 3) | The Company's stock-based compensation expense for the periods above includes the cost of approximately 0.6 million restricted stock units previously granted to ZelnickMedia that are subject to variable accounting. Actual expense to be recorded in connection with these shares is dependent upon several factors, including future changes in Take-Two's stock price. | ||||
| 4) | For the fiscal year ending March 31, 2019, the Company’s fully diluted share count used for both GAAP and management reporting purposes is expected to be 117.2 million, which includes 113.6 million basic shares and 3.6 million shares representing the potential dilution from unvested employee stock grants. The interest expense, net of tax, on the convertible notes, which is added back to net income to calculate diluted net income per share for management reporting purposes is $0.03 million. | ||||
Key assumptions and dependencies underlying the Company’s financial 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 new-generation systems while also leveraging opportunities on Nintendo Switch, Xbox 360, PlayStation 3, PC and mobile 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, 2018:
Label | Title | Platforms | Release Date | |||||||||
| Private Division | Kerbal Space Program Enhanced Edition | PS4, Xbox One | January 16, 2018 | |||||||||
| 2K | WWE 2K18: Enduring Icons Pack (DLC) | PS4, Xbox One, PC | January 16, 2018 | |||||||||
| 2K | XCOM 2 Collection | PC | February 1, 2018 | |||||||||
| 2K | Sid Meier’s Civilization VI: Rise and Fall (DLC) | PC | February 8, 2018 | |||||||||
| 2K | XCOM 2 Collection | PS4, Xbox One | February 21, 2018 | |||||||||
| Private Division | Kerbal Space Program: Making History Expansion (DLC) | PC | March 13, 2018 | |||||||||
| Rockstar Games | L.A. Noire: The VR Case Files | Oculus Rift | March 29, 2018 | |||||||||
| Rockstar Games | Grand Theft Auto V: Premium Online Edition | PS4, Xbox One, PC | April 20, 2018 | |||||||||
| Take-Two's lineup of future titles announced to date includes: | ||||||||||||
Label | Title | Platforms | Release Date | |||||||||
| Rockstar Games | Red Dead Redemption 2 | PS4, Xbox One | October 26, 2018 | |||||||||
| 2K | NBA 2K19 | TBA | Fall 2018 | |||||||||
| 2K | WWE 2K19 | TBA | Fall 2018 |