Take-Two (TTWO) Q3 Loss Narrows Y/Y, Revenues Decline
Take-Two Interactive Software TTWO reported a third-quarter fiscal 2024 GAAP net loss of 54 cents per share, narrower than a loss of 91 cents in the year-ago quarter.
The Zacks Consensus Estimate for earnings was pegged at 72 cents per share.
GAAP net revenues decreased 3% year over year to $1.37 billion. Revenues from the United States declined 7.7% year over year to $818.3 million and accounted for 60% of GAAP net revenues. The rest came from international, revenues of which increased 5.2% year over year to $548 million.
Game revenues (88.4% of revenues) decreased 2% year over year to $1.21 billion. Advertising revenues (11.6% of revenues) decreased 10.4% year over year to $158.1 million.
The consensus mark for revenues was pegged at $1.34 billion.
Take-Two Interactive Software, Inc. Price, Consensus and EPS Surprise
Take-Two Interactive Software, Inc. price-consensus-eps-surprise-chart | Take-Two Interactive Software, Inc. Quote
Bookings declined 3.2% year over year to $1.34 billion. Bookings from the United States declined 9.8% year over year to $786.6 million and accounted for 58.8% of GAAP bookings. The rest came from international, bookings from which increased 8% year over year to $551.2 million.
Take-Two shares fell 9.2% in after-hours trading following disappointing fiscal third-quarter results.
Top-Line Details
Recurrent consumer spending (which is generated from ongoing consumer engagement and includes virtual currency, add-on content, in-game purchases and advertising) decreased 7% year over year. It accounted for 76% of total GAAP net revenues and 75% of total net bookings.
Recurrent consumer spending suffered from weakness in mobile advertising and NBA 2K. Recurrent consumer spending for Grand Theft Auto Online virtual currency increased notably. GTA+ membership also increased significantly.
Games including NBA 2K24 and NBA 2K23, Grand Theft Auto Online and Grand Theft Auto V, hyper-casual mobile portfolio, Empires & Puzzles, Toon Blast, Red Dead Redemption 2 and Red Dead Online, Merge Dragons!, Words With Friends and Grand Theft Auto: The Trilogy - The Definitive Edition were the major contributors to top-line in the reported quarter.
Grand Theft Auto Online and Grand Theft Auto V, the Red Dead Redemption series and Zynga’s in-app purchases, driven by Toon Blast, exceeded Take-Two’s expectations. The company witnessed softness in mobile advertising and NBA 2K24.
In terms of distribution channels, Digital online revenues declined 3% year over year to $1.30 billion and accounted for 95% of GAAP net revenues. Physical retail and other revenues fell 3% year over year to $69 million and accounted for 51% of GAAP net revenues.
Digital online bookings fell 3% year over year to $1.27 billion and accounted for 94.8% of bookings. Physical retail and other revenues declined 6.7% from the year-ago quarter to $69.4 million and contributed 5.2% of bookings.
In terms of platform, revenues from mobile, console, and PC and other accounted for 51.7%, 40.1% and 8.2% of GAAP net revenues, respectively. Mobile revenues declined 2% year over year to $706.7 million. Console revenues fell 2.5% year over year to $547.6 million. PC and other revenues declined 10.5% year over year to $112 million.
Bookings from mobile, console, and PC and other accounted for 52.2%, 39.2% and 8.6% of bookings, respectively. Mobile bookings declined 2.1% year over year to $698 million. Console revenues fell 3.2% year over year to $524.3 million. PC and other revenues declined 9.5% year over year to $115.6 million.
Operating Details
Take-Two’s GAAP gross profit decreased 5.3% year over year to $678.1 million. Gross margin contracted 120 basis points (bps) on a year-over-year basis to 49.6%.
Operating expenses decreased 9.1% year over year to $807.6 million.
Selling expenses declined 17.7% year over year to $367.6 million. General and administrative expenses fell 2.3% year over year to $165 million. Research & development expenses declined 2.4% year over year to $232.4 million.
Operating loss was $129.5 million compared with the year-ago quarter’s operating loss of $173 million.
Balance Sheet
As of Dec 31, 2023, Take-Two had $1.11 billion in cash, cash equivalents and short-term investments compared with $1.23 billion as of Sep 30, 2023.
The company had a debt of $3.08 billion as of Dec 31, which remained almost unchanged from Sep 30, 2023.
Guidance
For the fourth quarter of fiscal 2024, Take-Two expects GAAP net revenues between $1.32 billion and $1.37 billion. The company expects net bookings between $1.27 billion and $1.32 billion.
Operating expenses are expected between $896 million and $906 million. It expects a loss between $1 and 90 cents per share.
For fiscal 2024, the company expects GAAP net revenues between $5.27 billion and $5.32 billion. The company expects net bookings for fiscal 2024 between $5.25 billion and $5.30 billion, lower than its previous guidance range of $5.45 to $5.55 billion.
Operating expenses are expected between $3.55 billion and $3.56 billion. It expects a loss between $5.95 and $5.85 per share.
For fiscal 2024, net cash provided by operating activities is expected to be roughly $90 million. Capital expenditures are expected to be approximately $150 million.
Zacks Rank & Stocks to Consider
Currently, TTWO carries a Zacks Rank #3 (Hold).
Shares of Take-Two have gained 5.4% year to date, outperforming the Zacks Consumer Discretionary sector’s growth of 1.2%.
AMC Networks AMCX, Roku ROKU and Genasys GNSS are some better-ranked stocks that investors can consider in the broader sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of AMC Networks have declined 9.3% year to date. AMCX is set to report its fourth-quarter 2023 results on Feb 9.
Shares of Roku have gained 3.3% year to date. ROKU is slated to report its fourth-quarter 2023 results on Feb 15.
Shares of Genasys have declined 23.2% year to date. GNSS is set to report its first-quarter fiscal 2024 results on Feb 13.
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