Take-Two Interactive Software FY2023 Q2 Earnings Release
Download PDFNov, 2022 TAKE -TWO INTERACTIVE
SOFTWARE, INC.
(NASDAQ: TTWO)
SECOND QUARTER FISCAL 2023 RESULTS &
GUIDANCE SUMMARY
CAUTIONARY NOTE:
FORWARD LOOKING STATEMENTS
Statements contained herein which are not historical facts are considered forward -looking statements under federal securities la ws 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 s tatements 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 uncertai nti es, 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 o f risks and uncertainties including: risks relating to our
combination with Zynga; the uncertainty of the impact of the COVID -19 pandemic and measures taken in response thereto; the effec t 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 sit uation with the pandemic continues to evolve;
the risks of conducting business internationally; the impact of changes in interest rates by the Federal Reserve and other ce ntr al banks, including on our short -term investment
portfolio; the impact of potential inflation; volatility in foreign currency exchange rates; our dependence on key management an d 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 opportunitie s o n 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 ass oci ated with international operations.
Other important factors and information are contained in the Company’s most recent Annual Report on Form 10 -K, including the ris ks 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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Q2 FY2023 Results Summary:
GAAP
FINANCIAL SUMMARY ($ in millions, except EPS)
Note: GAAP results were impacted by amortization of acquired intangibles and business acquisition costs
Q 2
ACTUAL GUID ANCE
GAAP Net Revenue $1,394 $1,370 TO $1,420
Operating Expenses $932 $849 TO $859
GAAP Net Income $(257) $(160) TO $(144)
GAAP EPS $(1.54) $(0.96) TO $(0.86)
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Q2 FY2023 RESULTS SUMMARY:
SELECT MANAGEMENT RESULTS
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• Net Bookings were $1.5 billion, which was in -line with our guidance
• Movement in foreign currency exchange rates negatively impacted our
Net Bookings by approximately 1%
• With consumers navigating ongoing macroeconomic uncertainties, we
believe that our financial performance demonstrates the incredible
quality of our games and the significant value that our interactive
entertainment experiences provide our players
• RCS rose 76%. NBA 2K and Rollic’s hyper -casual mobile portfolio
outperformed our plans, while we experienced some softness across
other parts of our portfolio as the interactive entertainment industry
faced continued headwinds
• We ended the quarter with over $1.3 billion in cash and short -term
investments and $3.3 billion of debt
SELECT FINANCIAL DATA ($ in millions)
Q2
ACTUAL GUID ANCE
Net Bookings $1,505 $1,500 TO $1,550
Recurrent Consumer Spending
Growth (RCS)
+76% +85%
Digitally -Delivered Net Bookings
Growth
+62% +70%
Note: Results from last year did not include Zynga business.
$985
$1,505
$876
$1,421
Q2 FY22 Q2 FY23 Recurrent Consumer Spending Physical & Other Digital
69% of
Total
80% of
Total
$109
$84
N e t R e v e n u e & N e t B o o k i n g s
GAAP Net Revenue
Net Bookings (Operational Metric)
$ in Millions
$523
$405
$684
$400
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$858
$1,394
$779
$1,319
Q2 FY22 Q2 FY23 Recurrent Consumer Spending Physical & Other Digital
66% of
Total
79% of
Total
$79
$75
$ in Millions
$3,553 $3,408
$5,400 -$5,500
$3,148 $3,085
96% of
Total
FY21 FY22 FY23E Recurrent Consumer Spending Physical & Other Digital
65% of
Total
64% of
Total
$405 $323 77% of
Total
$405 $323
$3,373 $3,505
$5,410 -$5,510
$2,972 $3,149
FY21 FY22 FY23E Recurrent Consumer Spending Physical & Other Digital
64% of
Total 65% of
Total
$400 $356
$400 $356
C a s h F l o w
$912
$258
$630
$69
$159 $150
FY21 FY22 FY23E
Net Cash From Operating Activities Capital Expenditures
$920
$425
$650
$69
$159 $150
FY21 FY22 FY23E
Adjusted Unrestricted Operating Cash Flow Capital Expenditures
Net Cash From Operating Activities
Adjusted Unrestricted Operating Cash Flow (Non -GAAP) (1)
$ in Millions
$ in Millions
(1) The Company is reporting a Non -GAAP measure of financial performance: Adjusted unrestricted Operating Cash Flow, which is define d as GAAP net cash from operating activities, adjusted for changes in restricted cash. See slide 15 for a reconciliation to the most directly comparable GAAP measure.
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$284
$155 $111 $99
6 Months FY22 6 Months FY23
Net Cash From Operating Activities Capital Expenditures
$56 -$17
$111 $99
6 Months FY22 6 Months FY23
Adjusted Unrestricted Operating Cash Flow Capital Expenditures
FY 2023 GUIDANCE:
GAAP
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FY 2023 REVISED GUIDANCE PRIOR GUIDANCE
GAAP Net Revenue $5,410 TO $5,510 PREVIOUSLY: $5,730 TO $5,830
Operating Expenses $3,398 TO $3,418 PREVIOUSLY: $3,367 TO $3,377
GAAP Net Loss $(674) TO $(631) PREVIOUSLY: $(438) TO $(398)
GAAP EPS $(4.22) TO $(3.95) PREVIOUSLY: $(2.75) TO $(2.50)
FISCAL YEAR 2023 GUIDANCE ($ in millions, except EPS)
FY 2023 GUIDANCE:
SELECT FINANCIAL DATA
(3) The individual components of the financial outlook may not foot 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.
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FISCAL YEAR 2023 GUIDANCE ($ in millions, except EPS)
• We expect to deliver Net Bookings of $5.4 to $5.5 billion. Approximately 70% of
the downward revision reflects lowered expectations for our mobile business and
shifts in our release slate, while the balance reflects an updated view for the rest
of our portfolio, based on current business trends across the interactive
entertainment industry. Our guidance reflects $50 million of FX headwinds
• Net Bookings by label is expected to be: 45% Zynga (which includes our former T2
mobile titles), 36% 2K, 18% Rockstar Games and 1% Private Division
• In light of the current economic backdrop, we continue to monitor our costs
prudently to find potential areas of savings this year, while being mindful of the
resources we need to support our strong growth trajectory
• We remain highly confident in our diverse and extensive development pipeline
that we expect will deliver us sequential growth and record performance over the
next several years
FY 2023
REVISED GUIDANCE
($ IN MILLIONS)
FY 2023
PRIOR GUIDANCE
($ IN MILLIONS)
Net Bookings $5,400 TO $5,500 $5,800 TO $5,900
Recurrent Consumer Spending Growth +90% YOY +110% YOY
Digitally -Delivered Net Bookings Growth +70% YOY +80% YOY
Non -GAAP Adjusted Unrestricted
Operating Cash Flow
OVER $650 OVER $700
Q3 FY2023 GUIDANCE:
GAAP
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Q3 FISCAL 2023 GUIDANCE ($ in millions, except EPS)
Q3 FY23 GUIDANCE
GAAP Net Revenue $1,430 TO $1,480
Operating Expenses $897 TO $907
GAAP Net Loss $(160) TO $(142)
GAAP EPS $(0.95) TO $(0.85)
Note: GAAP results are expected to be impacted by amortization of acquired intangibles and business acquisition costs
Q3 FY2023 GUIDANCE:
SELECT FINANCIAL DATA
(3) The individual components of the financial outlook may not foot the totals, as the Company does not expect actual results for every component to be at the low end or high end of the outlook range simultaneously. 10
Q3 FISCAL 2023 GUIDANCE ($ in millions, except EPS)
• We expect to deliver Net Bookings of $1.41 billion to $1.46 billion
• Our revised guidance includes several shifts in our pipeline, further fluctuations in FX rates, and
an updated view for the rest of our portfolio, based on current business trends across the
interactive entertainment industry, particularly in mobile
Q3 FY2023 GUIDANCE
($ IN MILLIONS)
Net Bookings $1,410 TO $1,460
Recurrent Consumer Spending Growth +125% YOY
Digitally -Delivered Net Bookings
Growth
+80% YOY
FY23 -FY25 PIPELINE DETAILS
* FY23 -25 release estimates provided as of May 16, 2022; however, mobile titles have been updated on August 8, 2022 to reflect Z ynga. Full updated FY24/25 pipeline details to be given with Q4 FY2023 results.
** Mobile count excludes Rollic’s portfolio of hypercasual games. These titles are a snapshot of our current development pipeline. It is likely that some of these titles will not be d eveloped through completion, that launch timing may change, and that we will also be adding new titles to our slate. 11
FY 2023 –FY
2025* TITLES ANNOUNCED TO -DATE
Immersive Core
Independent
Mobile**
(Titles in development & soft launch)
Mid -Core
New Iterations
of Previously Released
Titles
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• The Quarry (2K) –Launched June 10, 2022 (Fiscal 2023)
• NBA 2K23 (2K) –Launched September 9, 2022 (Fiscal 2023)
• PGA TOUR2K23 (2K) –Launched October 14, 2022 (Fiscal 2023)
• Marvel’s Midnight Suns (2K) –Launching December 2, 2022 (Fiscal 2023) (PS5, Xbox Series X/S, PC); TBA (PS4, Xbox One,
Switch)
• Kerbal Space Program 2 (Private Division) –Early Access Launching February 24, 2023 for PC (Fiscal 2023)
• WWE 2K23 (2K) –Launching Fiscal 2023
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• Grand Theft Auto: The Trilogy –The Definitive Edition (Rockstar Games)
• Several Zynga titles in soft -launch, including Star Wars Hunters
• New Tales from the Borderlands (2K) –Launched October 21, 2022 (Fiscal 2023)
• Rollerdrome (Private Division) –Launched August 16, 2022 (Fiscal 2023)
PIPELINE DEFINITIONS
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Titles that have the deepest gameplay and the most hours of content. Examples include our key sports franchises (e.g. PGA TOUR2K and
NBA 2K ) as well as Grand Theft Auto and Red Dead Redemption (to name a few).
IMMERSIVE CORE
Externally -developed Private Division releases.
INDEPENDENT
Any title released on a mobile platform.
MOBILE
Titles that are either an arcade title (like WWE Battlegrounds ) or games that have many hours of gameplay, but not to the same extent
as an immersive core title.
MID -CORE
This includes ports and remastered titles. Sequels would not fall into this category.
NEW ITERATIONS OF PRIOR RELEASES
NON -GAAP FINANCIAL MEASURE
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In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Compa ny uses Non -GAAP measures of financial performance:
Adjusted Unrestricted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, and EBITDA, which is defined as GAAP
net income (loss) excluding interest income (expense), provision for (benefit from) income taxes, depreciation expense, and a mor tization and impairment of acquired intangibles.
The Company’s management believes it is important to consider Adjusted Unrestricted Operating Cash Flow, in addition to net c ash 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 r ela ted to a dedicated account limited to the payment of
certain internal royalty obligations. The Company’s management believes it is important to consider EBITDA, in addition to n et income, as it removes the effect of certain non -cash
expenses, debt -related charges, and income taxes. The Company has chosen to report EBITDA in light of the recent closing of the Zynga acquisition, including the related debt
financing. Management believes that, when considered together with reported amounts, EBITDA is useful to investors and manage men t in understanding the Company’s ongoing
operations and in analysis of ongoing operating trends and provides useful additional information relating to the Company’s o per ations and financial condition.
These Non -GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. These Non -GAAP financial measures 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 these Non –
GAAP financial measures used by the Company. Management believes that the presentation of these Non -GAAP financial measures pro vides investors with additional useful
information to measure Take -Two’s financial and operating performance. In particular, these measures facilitate comparison of o ur operating performance between periods and may
help investors to understand better the operating results of Take -Two. Internally, management uses these Non -GAAP financial mea sures in assessing the Company’s operating results
and in planning and forecasting. A reconciliation of these Non -GAAP financial measures to the most comparable GAAP measure is c ontained in the financial tables to this press
release.
RECONCILIATION OF GAAP TO NON -GAAP MEASURE
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TAKE -TWO INTERACTIVE SOFTWARE, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON -GAAP
MEASURE
(in millions)
RECONCILIATION OF GAAP TO NON -GAAP MEASURE
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TAKE -TWO INTERACTIVE SOFTWARE, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON -GAAP
MEASURE
(in millions)
RECONCILIATION OF GAAP TO NON -GAAP MEASURE
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TAKE -TWO INTERACTIVE SOFTWARE, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO NON -GAAP
MEASURE
(in millions)
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