Take-Two Interactive reported a loss for the seasonally slow fourth fiscal quarter, but the company beat expectations for both revenues and profits thanks to the strength of ongoing sales of past hits.
While it was a quiet quarter for Take-Two, the company continues to draw a ton of attention — including from possible acquisition suitors — for making some of the best games in the business, like the recently launched LA Noire(pictured), which has gotten universal praise for its strong storytelling, characters, and realistic depiction of human faces.
New York-based Take-Two had no major releases in the quarter, but it generated revenue from previous hits including NBA 2K11, Top Spin 4, Major League Baseball 2K11, Grand Theft Auto IV: Complete, and Red Dead Redemption: Undead Nightmare. For the upcoming quarter, the company is hopeful about strong reviews for LA Noire, developed for RockStar by Team Bondi in Australia. Duke Nukem Forever, a comic and crude shooting game that was in the making for 15 years, will also ship on June 14.
“We are thrilled with the launch of LA Noire,” said chairman and chief executive Strauss Zelnick. There are no sales numbers available yet but he said he was very encouraged by the initial sales reports. “We have every reason to believe LA Noire will be another strong franchise for the company.”
He said the company has now beat financial targets for six quarters in a row. On top of that, the company met its longstanding goal of reporting a profitable year at a time when the company didn’t release a Grand Theft Auto game. Overall, the company had a great year because of Red Dead Redemption, released a year ago, a spectacular Wild West game that kept selling all year long.
Digital game sales were $102 million in revenue in fiscal 2011, mainly on sales of downloadable online content for games such as Red Dead Redemption. Take-Two has proven its creative game is the “best in the business,” Zelnick said.
Zelnick said the company had extended its development relationship with RockStar Games, the maker of big hits like Grand Theft Auto, Red Dead Redemption and LA Noire. That agreement means that RockStar’s leaders — Sam Houser, Dan Houser and Leslie Benzies — will continue to make games for Take-Two on similar economic terms as they have in the past. RockStar is critical to Take-Two’s ability to sell multi-million-unit-selling games. Take-Two also extended its management agreement with Zelnick’s firm, Zelnick Media.
For the fourth quarter ended March 31, net revenue was $182.3 million, compared with $233.2 million a year earlier. Loss from continuing operations was $22.4 million, or 27 cents a share, compared with a GAAP loss of $9.7 million, or 13 cents a share a year ago. Non-GAAP loss was $14.4 million, or 18 cents a share, compared with net income of $3 million, or 4 cents a share, a year ago.
For the year, revenue grew 49 percent to $1.14 billion. GAAP income was $53.8 million, or 62 cents a share, compared to a loss of $108.1 million, or $1.39 a share a year earlier. Non-GAAP net income was $94.3 million, or $1.02 a share, up from a loss of $65.9 million, or 85 cents a share, a year earlier. Digital revenue is now 15 percent of the company’s revenue in the quarter.
“While it is still very early to discuss fiscal 2013, we have a very strong pipeline of titles in development and currently expect to achieve substantial earnings growth,” Zelnick said. Non-GAAP earnings per share are expected to be higher than $2 a share for the year ending March 31, 2012.
BioShock Infinite, another highly anticipated game, is expected to ship during 2012. (However, Take-Two said that sales results from BioShock Infinite are not in the forecast numbers, since it’s always possible such games can slip their schedules).
That game and others will be on display at the E3 video game trade show starting June 6. The Darkness II will ship on Oct. 4, and Spec Ops: The Line will ship in the first half of fiscal 2013. Take-Two has extended its long-term partnership with the National Basketball Association, a market where rival Electronic Arts doesn’t have an entry this year. Take-Two’s NBA 2K11 has sold more than 5 million copies.
Take-Two continues to make an online version of NBA 2K for China in partnership with Tencent. It is also collaborating with Nexon for an online game in Korea and has announced a massively multiplayer online game with XL Games in Asia. The NBA 2K online game has been in the works for a long time (since 2009) but the company game no update on when it would debut.
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