Take-Two Interactive reported relatively weak results for the third fiscal quarter ended December 31 in a report today that came just two days after the company announced it was losing a key executive at its Rockstar Games label.
The publisher had GAAP net revenue of $930.1 million, which is down 25% from $1.25 billion a year ago. And it reported GAAP net income of $1.43 a share, down from $1.57 a share a year ago. On an adjusted basis, the earnings fell short of analyst expectations.
The top sources of revenue included Red Dead Redemption 2, Grand Theft Auto V, Grand Theft Auto Online, Red Dead Online, Borderlands 3, The Outer Worlds, and NBA 2K20. But new games released in the fall, like Borderlands 3 and The Outer Worlds (which both sold well), could not compare in revenue to the 2018 release of Red Dead Redemption 2, which was seven years in the making.
“Throughout the 2019 holiday season, we experienced robust demand for our offerings that drove third-quarter operating results solidly within our increased outlook,” said Strauss Zelnick, CEO of Take-Two, in a statement. “Highlights included the performance of Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2 and Red Dead Online, The Outer Worlds and Borderlands 3, reflecting our ability to deliver some of the most captivating experiences in the entertainment industry. Fiscal 2020 is shaping up to be another terrific year for Take-Two.”
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Grand Theft Auto V has now sold more than 120 million copies to date, while Red Dead Redemption 2 is at 29 million copies. The number means that GTA V sold an estimated 20 million in 2019. Borderlands 3 has sold nearly 8 million units, and the company expects Gearbox Software’s title to set a record for the Borderlands series.
In a conference call, Zelnick said that the performance was above what the company predicted previously.
Zelnick added, “Take-Two’s development pipeline over the coming years is the largest and most diverse in our history, including releases from our largest franchises, new IP and a broad mix of gameplay experiences, all designed to captivate and engage audiences well beyond initial release. In addition, we are actively investing in emerging markets, platforms and business models that have the potential to enhance growth. Take-Two is exceedingly well-positioned to capitalize on the many positive trends in our industry and to generate growth and margin expansion over the long-term.”
Analysts expected Take-Two to report adjusted earnings per share of $1.33 on bookings of $920 million. On an adjusted basis, Take-Two reported earnings per share of $1.43 a share on bookings of $888.2 million.
For the fourth fiscal quarter ending March 31, revenues are expected to be $635 million to $685 million, with GAAP net income at 92 cents to $1.12 a share. For the fourth fiscal quarter, analysts expected $1.36 a share on revenues of $677 million.
In after-hours trading, Take-Two’s stock price fell 9.6% to $115.20 per share.
Earlier this week, Take-Two said that Dan Houser, vice president of creative and cofounder of Take-Two’s Rockstar Games label, will leave the company on March 11. Houser’s brother Sam, also a cofounder, will remain at Rockstar. Dan was one of the creative forces behind games such as Grand Theft Auto V and Red Dead Redemption 2, which are part of game families that have generated billions of dollars in sales for Take-Two. Take-Two’s stock price fell after the Houser announcement on Tuesday, but it recovered 6% in trading on Thursday.
Regarding Dan’s departure, Zelnick said on the call that the creative executive had been on extended leave since the spring and he wished him well. Zelnick said that Sam has been in control during that time and continued to do a great job with the Rockstar label.
Zelnick said that recurrent consumer spending grew 54% in the quarter for Grand Theft Auto Online, which has enjoyed a resurgence with its Diamond Casino & Resort and Diamond Casino Heist updates. Those effectively create a casino inside GTA Online where players can keep on spending money. As a result, GTA Online is on target for a record year for the fiscal year ending March 2020.
And Zelnick said that Red Dead Online hit a new peak in player numbers in December after its Moonshiners update, and it outperformed expectations in the quarter. Overall, recurrent consumer spending grew 6% in the third fiscal quarter, and accounted for 41% of total net bookings.
One of the big original titles coming is Disintegration from the Private Division label, working with developer V1 Interactive led by Marcus Lehto. That game will debut in 2020. Kerbal Space Program 2 is also coming in fiscal 2021, ending March 31, 2021.
Social Point, the Spanish team that works on mobile, has five games in the market such as Monster Legends. And it has 10 games in development.
Take-Two has released three games — Red Dead Redemption 2, NBA 2K20, and Borderlands 3 — on the Google Stadia cloud-gaming service.
Zelnick said the company doesn’t lead with monetization. Rather, it “leads with entertainment and engagement.” While recurrent consumer spending for NBA 2K20 isn’t as high as the company had hoped, the company is addressing that and it continues to note the title’s engagement is up.
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