Share repurchase trend
In a bid to enhance shareholder wealth, Take-Two Interactive Software (TTWO) continues to buy back shares. Strong free cash flow and lower leverage have encouraged the company to boost its share repurchase program going forward.
Take-Two repurchased shares worth ~$110 million in 9M18 (the first nine months of 2018) compared with ~$26.6 million in 9M17. At the end of fiscal 2017, the company had bought ~$303 million in shares at an average of ~$61 million every year in the last four years.
In fiscal 2018, Take-Two made two repurchases, of 1.06 and 1.1 million shares, respectively. To date, the company is still left with ~9 million shares to be repurchased under the company’s buyback program.
Factors influencing share buybacks
The graph above shows Take-Two’s share repurchase trends in the last four years. Take-Two has generated healthy free cash flow over the years. The entertainment development company exited fiscal 2017 with free cash flow of ~$310 million, compared with $224 million in fiscal 2016. In the last five years, the company has maintained average free cash flow of ~$269 million every year. This healthy cash flow suggests that the company is not dependent on debt to drive its share repurchase plan.
In fiscal 2017, Take-Two had a long-term debt-to-equity ratio of 0.25, compared with 0.85 in fiscal 2016. Declining leverage and healthy free cash flow may boost the company’s future share repurchase goals. Software companies Citrix Systems (CTXS) and IBM (IBM) bought back shares worth $1.2 billion and $0.7 billion, respectively, in 2017.