Take-Two Interactive Q3 Earnings: Red Dead Redemption redeems the gaming giant

Take-Two Interactive Software (TTWO), the studio that brings the NBA 2K games and the hit title Grand Theft Auto, reported its third-quarter 2019 results on Feb 6 before the bell. Quarterly revenue grew to $1.25 billion, and earnings improved to $179.9 million or $1.57 per diluted share from last year’s $25.1 million or $0.21 per diluted share.

The maker of Red Dead Redemption 2 also posted quarterly adjusted revenue of $1.57 billion, beating Street estimates. However, weaker-than-expected outlook pulled the stock down more than 10% in pre-market trade surged following the announcement.

The gaming giant had beaten Street estimates in the last four quarters. Looking closely at the results, Take-Two saw the total cost of goods sold spike over three times to $898.4 million, on massive internal royalties, product costs, and rising software development costs and royalties. This was the major driver in pulling down profit for the three-month period despite the impressive results.

During the third quarter of 2019, total net bookings soared 140% to $1.57 billion, with those from recurrent consumer spending growing 31%.

Net bookings benefitted from Red Dead Redemption 2, NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, WWE 2K19 and WWE SuperCard, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

The total catalog accounted for $243.9 million of net bookings led by Grand Theft Auto, Dragon City and Monster Legends, and Sid Meier’s Civilization VI.

HIT TITLES

Take-Two wiped Electonic Arts (EA) title Battlefield V this holiday season with its Red Dead Redemption 2 sales. This was also when Activision Blizzard’s (ATVI) released Call of Duty: Black Ops 4. But demand for Take-Two’s hit game overshadowed even the tough competition from the Call of Duty series.

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The gaming giant also bagged the rights to publish The Golf Club 2019 in the third quarter, which features PGA TOUR — a sports gaming title of which EA was earlier the sole provider.

In the quarter, Take-Two also launched Borderlands 2 VR — a new offering on its another popular title.

LOOKING AHEAD

Take-Two sees fourth-quarter net bookings to range from $450 million to $500 million, generating GAAP net income of $76-89 million on estimated net revenue of $530-580 million. GAAP earnings is expected to be $0.67-0.77 per diluted share.

For fiscal 2019, GAAP net revenue is expected to be $2.66-2.71 billion and generate net income of $354-367 million. GAAP net income is expected to be $3.07-3.18 per diluted share. Take-Two expects $2.89-2.94 billion worth of net bookings in the fiscal year.

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