Take Two Interactive Software TTWO reported fourth-quarter fiscal 2020 GAAP earnings of $1.07 per share, up 114% year over year.
Net revenues increased 41.1% from the year-ago quarter to $760.5 million. The top line was driven by heightened user engagement levels and net bookings growth attributed to coronavirus-led lockdown.
NBA 2K20 and NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile games, WWE SuperCard and WWE 2K20 were the biggest contributors to the company’s fourth-quarter fiscal 2020 top-line growth.
Recurrent consumer spending (virtual currency, add-on content and in-game purchases, including the allocated value of virtual currency and add-on content incorporated in special editions of certain games) increased 40% and accounted for 54% of total GAAP net revenues.
The Zacks Consensus Estimate for earnings and revenues was pegged at 88 cents per share and $578 million, respectively.
TakeTwo Interactive Software, Inc. Price, Consensus and EPS Surprise
TakeTwo Interactive Software, Inc. price-consensus-eps-surprise-chart | TakeTwo Interactive Software, Inc. Quote
Digital revenues (88.4% of revenues) increased 53.5% year over year to $634.7 million. Notably, growth was driven by NBA 2K20 and NBA 2K19, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile games, WWE SuperCard and WWE 2K20.
Meanwhile, revenues from Physical retailer and other segments (7.5% of revenues) remained flat year over year at $125.9 million.
Region-wise, revenues from the United States (54.4% of revenues) increased 50.6% year over year to $413.7 million. Moreover, revenues from International markets (45.6% of revenues) increased 31.2% to $346.8 million.
On the basis of platforms, revenues from console (71.3% of revenues) increased 28.3% to $542.2 million while revenues from PC and other (28.7% of revenues) surged 87.3% to $218.4 million.
Net bookings of $729.4 million increased 49.3% on a year-over-year basis.
Net bookings from recurrent consumer spending grew 47% year over year and accounted for 61% of total net bookings. Notably, growth was driven by NBA 2K20, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Sid Meier’s Civilization VI, Social Point’s mobile games, WWE SuperCard and WWE 2K20.
Notably, Catalog accounted for $432.1 million of net bookings. Strong demand for Grand Theft Auto, Red Dead Redemption, Sid Meier’s Civilization VI and Social Point’s mobile offerings was observed in the reported quarter.
Digitally-delivered net bookings (92.1% of net bookings) grew 60.4% to $672.1 million. However, bookings from Physical retail (7.9% of net bookings) and other segments declined 17.4% to $57.4 million.
Take Two’s gross profit increased 30.3% year over year to $364.86 million. Reported gross margin of 48% contracted 400 basis points (bps) from the year-ago quarter.
Reported operating expenses increased 9.5% year over year to $243 million, primarily due to higher research & development (R&D) and general & administrative (G&A) expenses in the quarter. R&D and G&A expenses increased 21.4% and 8.8%, respectively, on a year-over-year basis.
Meanwhile, selling & marketing (S&M) expenses increased 3% year over year to $80 million in the reported quarter.
Income from operations came in at $121.9 million, up 109.9% year over year. Operating margin expanded 530 bps from the year-ago quarter.
For the first quarter of fiscal 2021, Take Two expects GAAP net revenues between $775 million and $825 million. The company projects GAAP earnings between 90 cents and $1 per share.
Net bookings are projected between $800 million and $850 million. Significant contribution to net bookings is expected to be made by Grand Theft Auto Online and Grand Theft Auto V and NBA 2K20, Red Dead Redemption 2 and Red Dead Online and Borderlands 3.
For the months of April and May, Take-Two’s labels will come together to donate 5% of net bookings (after platform fees) from in-game purchases from Grand Theft Auto Online and Red Dead Online from Rockstar Games, NBA 2K20 and NBA 2K19 from 2K Games, Dragon City from Social Point, as well as from full-game digital sales of The Outer Worlds from Private Division, to support an array of COVID-19 charities and local businesses in need.
The company projects recurrent consumer spending to grow approximately 75% year over year, driven primarily by growth in Grand Theft Auto Online and NBA 2K20.
Moreover, digitally delivered net bookings are expected to double year over year. The company assumes that 81% of current generation console games will be delivered digitally, up from 75% in the same period last year.
For fiscal 2020, net bookings are expected between $2.55 billion and $2.65 billion. The largest contributors 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, Social Point's mobile game, Borderlands 3, Civilization VI and The Outer Worlds.
Take-Two expects geographic net bookings split to be about 60% United States and 40% International.
The company expects digitally delivered net bookings to decline about 8% from the last year. As a percentage of business, digital is projected to represent 86%, up from 82% last year.
GAAP net revenues are likely to be in the range of $2.63-$2.73 billion. Take Two projects GAAP earnings of $2.60-$2.85 per share.
Total operating expenses are expected to range between $1.1 billion and $1.12 billion.
Take Two expects recurrent consumer spending to be roughly flat compared with fiscal 2020, driven primarily by growth in NBA 2K and offset by lower allocated recurrent consumer spending from the Borderlands 3 and Red Dead Redemption 2 Premium Edition.
Current consumer spending as a percentage of business is expected to grow to approximately 60% compared to 51% last year.
Zacks Rank and Stocks to Consider
Take Two currently has a Zacks Rank #2 (Buy).
Glu Mobile Inc. GLUU, Activision Blizzard ATVI and Netflix Inc. NFLX are other top-ranked stocks in the broader Consumer & Discretionary sector. All the three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Activision Blizzard, Gluu Mobile and Netflix is 18.8%, 30% and 30%, respectively.
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