Take-Two Interactive Software (TTWO): Grand Theft Auto and Red Dead Redemption drive strong start to FY2021

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) kicked off fiscal year 2021 with a solid start as Q1 revenues and net bookings gained massively from a spike in gaming driven by lockdowns and shelter-in-place orders due to the coronavirus pandemic.

Among the biggest contributors to the growth in revenue and net bookings were the Grand Theft Auto and Red Dead Redemption franchises, both of which outperformed expectations in the first quarter of 2021.

Quarterly performance

Net revenues rose 54% to $831.3 million, helped by a 52% increase in recurrent consumer spending. Recurrent consumer spending comes from ongoing customer engagement including virtual currency, add-on content and in-game purchases. Take-Two witnessed high levels of engagement as people stayed home due to the health crisis, which in turn drove growth in net bookings.

Total net bookings increased 136% to $996.2 million, with net bookings from recurrent consumer spending rising 127% and digitally-delivered net bookings growing 139%. The biggest contributors to growth in revenue and net bookings were Grand Theft Auto Online and Grand Theft Auto V, NBA2K20, Red Dead Redemption 2 and Red Dead Online, among others.

Top performers

Sales of Grand Theft Auto V exceeded expectations, with the title now sold in around 135 million units. Recurrent consumer spending on Grand Theft Auto Online grew 155% marking a new record and outperforming expectations. Unprecedented player volume trends drove records in average multiplayer MAUs, putting Grand Theft Auto Online on track to establish a new bookings record in fiscal 2021.

Another factor driving the strong performance of Grand Theft Auto Online was the partnership with Epic Games Store in which Grand Theft Auto V was offered free for a week in mid-May. This promotion did not affect paid sales of the title.

Red Dead Redemption 2 also outperformed expectations and has sold in over 32 million units worldwide to-date. The title sold through twice as many units compared to last year. Engagement levels and recurrent consumer spending on Red Dead Online continues to increase, with the title acquiring around twice as many users year-over-year and with a growth of 50% in average multiplayer MAUs. Net bookings from Red Dead Online grew 118%, exceeding expectations.  

New releases

On its quarterly conference call, Take-Two said its current pipeline is more than double what it was five years ago in terms of number of games, including 54% internally developed titles and 46% externally developed titles.  

“With the strongest development pipeline in the history of the Company and our ongoing investment in emerging markets, platforms and business models, 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.” – Strauss Zelnick, Chairman and CEO

Outlook

For the second quarter of 2021, net bookings are expected to be $775-825 million. The largest contributor to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Social Point’s mobile games, Sid Meier’s Civilization VI and The Outer Worlds. Digitally-delivered net bookings are expected to be flat while recurrent consumer spending is expected to grow by approx. 10%.

For fiscal year 2021, net bookings is expected to be $2.8-2.9 billion. The company is seeing high levels of engagement and sales as people stay at home, and it has included this in the second quarter guidance but not in the outlook for the latter half of the year. Digitally-delivered net bookings is expected to increase by approx. 3%, driven by digitally-delivered sales and recurrent consumer spending.