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Video game publisher Take-Two Interactive Software reported better than expected earnings Tuesday. $TTWO names NBA® 2K20 and NBA 2K19, Grand Theft Auto® Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization® VI, Social Point’s mobile games, and WWE® SuperCard and WWE 2K20 helped raise guidance .

Grand Theft Auto

TAKE-TWO INTERACTIVE SOFTWARE, INC - NASDAQ: TTWO

Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content and in-game purchases) increased 40% and accounted for 54% of total GAAP net revenue.

Reported Earnings After Close Wednessday

$1.07 Beat Exp $0.89 EPS and $760.50M Beat $585.27 Million Forecast in Revenue

Earnings

Take-Two Interactive Software Inc.(NASDAQ:TTWO) reported fourth quarter and fiscal year 2020, ended March 31, 2020, and provided its initial outlook for its fiscal first quarter 2021, ending June 30, 2020, and fiscal year 2021, ending March 31, 2021.

GAAP net income grew 116% to $122.7 million, or $1.07 per diluted share, as compared to $56.8 million, or $0.50 per diluted share, for the year-ago period. The consensus EPS Estimate is $0.89 (+78.0% Y/Y) and the consensus Revenue Estimate is $585.27M (+19.8% Y/Y). GAAP net revenue grew 41% to $760.5 million, as compared to $539.0 million in last year’s fiscal fourth quarter.

The largest contributors to GAAP net revenue in fiscal fourth quarter 2020 were NBA® 2K20 and NBA 2K19, Grand Theft Auto® Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization® VI, Social Point’s mobile games, and WWE® SuperCard and WWE 2K20.

TAKE-TWO INTERACTIVE SOFTWARE, INC NASDAQ: TTWO

Market Reaction After hours $154.04 +7.20 (+4.9%)

“Our significantly better-than-expected fourth quarter results concluded another extraordinary year for Take-Two, during which we achieved numerous milestones, including record Net Bookings of nearly $3 billion, as well as record digitally-delivered Net Bookings, Net Bookings from recurrent consumer spending, and earnings,” said Strauss Zelnick, Chairman and CEO of Take-Two. “Nearly all of our titles outperformed in the fourth quarter, including NBA 2K20, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2, Borderlands 3 and Social Point’s mobile games.

Highlights

Take Two Interactive Software TTWO Q4 2020 earnings

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.

  • Total Net Bookings grew 49% to $729.4 million, as compared to $488.4 million during last year’s fiscal fourth quarter.
  • Net Bookings from recurrent consumer spending grew 47% year-over-year and accounted for 61% of total Net Bookings.
  • The largest contributors to Net Bookings were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile games, and WWE SuperCard and WWE 2K20.
  • Catalog accounted for $432.1 million of Net Bookings led by Grand Theft Auto, Red Dead Redemption, Sid Meier’s Civilization, and Social Point’s mobile offerings.
  • Digitally-delivered Net Bookings grew 60% to $672.1 million, as compared to $419.0 million in last year’s fiscal fourth quarter, and accounted for 92% of total Net Bookings.
  • The largest contributors to digitally-delivered Net Bookings in fiscal fourth quarter 2020 were Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile games, and WWE SuperCard and WWE 2K20.

Fiscal Year 2020 Financial Highlights

  • GAAP net revenue grew 16% to $3.089 billion, as compared to $2.668 billion in fiscal year 2019.
  • Recurrent consumer spending increased 29% and accounted for 45% of total GAAP net revenue.
  • Largest contributors to GAAP net revenue in fiscal year 2020 were NBA 2K20 and NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, The Outer Worlds, WWE SuperCard and WWE 2K20, Social Point’s mobile games, and Sid Meier’s Civilization VI.
  • Digitally-delivered GAAP net revenue grew 41% to $2.379 billion, as compared to $1.682 billion in fiscal year 2019, and accounted for 77% of total GAAP net revenue.
  • The largest contributors to digitally-delivered GAAP net revenue in fiscal year 2020 were NBA 2K20 and NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, The Outer Worlds, Sid Meier’s Civilization VI, Social Point’s mobile games, and WWE SuperCard and WWE 2K20.
  • GAAP net income increased 21% to $404.5 million, or $3.54 per diluted share, as compared to $333.8 million, or $2.90 per diluted share, in fiscal year 2019. GAAP net cash provided by operating activities was $685.7 million, as compared to $843.5 million in fiscal year 2019.

Adjusted Unrestricted Operating Cash Flow (Non-GAAP), which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash, was $615.4 million, as compared to $715.5 million last year 

Cash Position

As of March 31, 2020, the Company had cash and short-term investments of $2.002 billion. The following data, together with a management reporting tax rate of 17%, 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:

Last year Red Redemption was an instant hit which should come as a big relief for the firm to reduce its dependency on the Grand Theft Auto franchise. Within three months after launch, the company sold 23 million units, surpassing analyst lifetime estimates for the game.

NBA 2K franchise has also been getting good traction with gamers. Jointly owned with NBA, the game was launched in May 2018 on the lines of a sports league format. Take-Two has announced that next season would see 21 teams participating which would augur well to bump up its revenues. This also would help the firm to grow its esports business in the near future.

A gaming stock's guidance is affected by the games they produce and when and with Take Two the money tree, “Grand Theft Auto Online”. 

Red Dead Redemption 2

Outlook

“Looking ahead, Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. While fiscal 2021 will be a light new release year, we expect to deliver strong results, reflecting the diversity and strength of our catalog and live service offerings. We have an array of titles that we will begin to launch in fiscal 2022, which we expect to drive sequential growth that year. Our Company remains superbly positioned – creatively, operationally and financially – to capitalize on the many positive trends in our industry, and to deliver continued growth and returns for our shareholders over the long-term."

Outlook for Fiscal 2021

Take-Two is providing its initial outlook for its fiscal first quarter ending June 30, 2020 and its fiscal year ending March 31, 2021: First Quarter Ending June 30, 2020 GAAP net revenue is expected to range from $775 to $825 million GAAP net income is expected to range from $103 to $116 million GAAP diluted net income per share is expected to range from $0.90 to $1.00 Share count used to calculate both GAAP and management reporting diluted net income per share is expected to be 114.8 million (1) Net Bookings (operational metric) are expected to range from $800 to $850 million

What is impressive with $TTWO is both Grand Theft Auto V and Grand Theft Auto Online remain among the company biggest contributors nearly four years after they were first launched for Playstation 3 and Xbox 360. NBA 2K18, WWE 2K18, WWE SuperCard and Mafia III all were top contributors Red Dead Redemption 2 was an exciting addition for fiscal year 2019.

Grand Theft Auto V includes access to Grand Theft Auto Online, which initially launched in 2013. Rockstar Games is also known for developing brands in other genres, including the LA Noire, Bully and Manhunt franchises. Rockstar Games continues to expand on the company’s established franchises by developing sequels, offering downloadable add-on episodes, content and virtual currency, and releasing titles for smartphones and tablets.

Software titles published by the company’s Rockstar Games label are primarily internally developed. It expects Rockstar Games, its wholly-owned publisher of the Grand Theft Auto, Max Payne, Midnight Club, Red Dead, and other franchises, to continue to operate in the action/adventure product category and create groundbreaking entertainment by utilizing its existing titles, as well as developing new brands.

TTWO’s 2K label has published various entertainment properties across all key platforms and across a range of genres, including shooter, action, role-playing, strategy, sports and family/casual entertainment.

2K's internally owned and developed franchises include the critically acclaimed, multi-million unit selling BioShock, Mafia, Sid Meier's Civilization and XCOM Enemy Unknown series. 2K also publishes highly externally developed franchises, such as Borderlands and Evolve. 2K's realistic sports simulation titles, including the company’s primary NBA 2K series.

Source: TTWO, Alphastreet,

From The TradersCommunity Research Desk

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