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Take-Two's (TTWO) Q1 Loss Widens Y/Y, Revenues Increase

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Take-Two Interactive Software (TTWO - Free Report) incurred first-quarter fiscal 2025 GAAP net loss of $1.52 per share, wider than a loss of $1.22 reported in the year-ago quarter.

The Zacks Consensus Estimate for earnings was pegged at 1 cent per share.

GAAP net revenues increased 1.3% year over year to $1.21 billion. The figure missed the Zacks Consensus Estimate by 1.52%.

Revenues from the United States increased 2.1% year over year to $820.5 million and accounted for 61.3% of GAAP net revenues. The rest came from international, revenues of which increased 7.7% year over year to $517.7 million.

Game revenues (90.9% of total revenues) increased 11% year over year to $1.21 billion. Advertising revenues (9.1% of total revenues) plunged 35.6% year over year to $121.5 million.

Bookings improved 1.4% year over year to $1.21 billion. Bookings from the United States increased 0.3% year over year to $728.5 million and accounted for 59.8% of GAAP bookings. The rest came from international, bookings from which increased 3% year over year to $489.6 million.

Quarter Details

Recurrent consumer spending was flat for the period and accounted for 83% of Net Bookings. Mobile increased mid-single digits, driven by the addition of Match Factory and growth in Toon Blast, which was partially offset by declines in the hyper-casual mobile portfolio and Empires and Puzzles. Grand Theft Auto Online and NBA 2K were both down. 

In terms of distribution channels, Digital online revenues increased 4.5% year over year to $1.29 billion and accounted for 96.8% of GAAP net revenues. Physical retail and other revenues rose 3.2% year over year to $42.7 million and accounted for 3.2% of GAAP net revenues.

Digital online bookings improved 1.8% year over year to $1.18 billion and accounted for 97.5% of bookings. Physical retail and other bookings declined 13.7% from the year-ago quarter to $30.8 million and contributed 2.5% of bookings.

In terms of platform, revenues from mobile, console, and PC and other accounted for 54%, 38% and 8% of GAAP net revenues, respectively. Mobile revenues increased 6.3% year over year to $722.5 million. Console revenues inched up 0.9% year over year to $508.9 million. PC and other revenues increased 6.4% year over year to $106.8 million.

Bookings from mobile, console, and PC and other accounted for 58.2%, 33.3% and 8.5% of bookings, respectively. Mobile bookings increased 2.9% year over year to $709.3 million. PC and other revenues increased 11.5% year over year to $103.4 million. Console revenues fell 3.3% year over year to $405.5 million.

Gaming Metric Details

During the quarter, the company launched TopSpin 2K25, No Rest for the Wicked on Early Access for PC, NFL 2K Playmakers and Star Wars Hunters

Unit sales for Grand Theft Auto V continue to grow, and to date, the title has sold more than 200 million units. Grand Theft Auto Online also surpassed projections, led by its Summer content pack, Bottom Dollar Bounties, which launched on Jun 25. The audience for Rockstar’s premium membership service, GTA+, grew strong double digits over last year, with Rockstar Games offering its members an array of valuable benefits that range from enhancing the in-game experience to providing access to their classic titles, including the recent addition of L.A. Noire.

Red Dead Redemption 2 has sold more than 65 million units to date.

NBA 2K24 delivered a solid quarter and has sold close to 11 million units to date. The franchise continues to expand its audience through several innovative mobile experiences, including NBA 2K24: MyTEAM, a free-to-play card-collecting experience that has been downloaded nearly three million times since its launch in February. Moreover, NBA 2K24 Arcade Edition continues to enjoy huge success on Apple Arcade and is consistently a top 2 game on the service.

WWE 2K24, which launched at the end of Fiscal 2024, has continued to grow its audience and enhance its profitability. Players have logged 27 million hours of gameplay across more than 200 million matches to date, featuring a series-high roster of over 300 past and present superstars.

On Apr 4, 2K and Cat Daddy Games released NFL 2K Playmakers, a new free-to-play mobile title that allows fans to collect NFL player cards and assemble an exciting roster of offensive, defensive and special teams. On Apr 26, 2K and Hangar 13 launched TopSpin 2K25, marking the return of our popular tennis franchise after a 13-year hiatus.

Zynga delivered another solid quarter driven by Toon Blast, which delivered strong year-over-year growth for the third consecutive quarter. It has become a top-10 grossing game in the U.S. Apple App Store this quarter and has achieved more than $2.5 billion in lifetime gross bookings.

On Jun 4, Zynga and Lucasfilm Games launched Star Wars: Hunters – the label’s first-ever cross-platform title, which is available for free on Nintendo Switch and iOS and Android devices.

The company’s blended monetization efforts in hyper-casual are progressing well at Rollic, which crossed 3.6 billion all-time downloads. Fan-favorite titles, Screw Jam and Twisted Tangle, both performed well in the reported quarter, becoming top-50 and top-100 grossing games, respectively, in the U.S. Apple App Store.

Operating Details

Take-Two’s GAAP gross profit increased 9.1% year over year to $650.9 million. Gross margin expanded 380 basis points on a year-over-year basis to 53.4%.

Operating expenses rose 8.2% year over year to $956 million. On a management basis, operating expenses rose 10% year over year. This is largely due to an increase in ongoing marketing support for Match Factory, as well as other mobile and immersive core launches planned for the year, the addition of Gearbox and higher personnel costs, partially offset by savings from the cost reduction program.

Selling expenses rose 8% year over year to $431.4 million. General and administrative expenses grew 6.4% year over year to $210.5 million. Research & development expenses declined 7.9% year over year to $219.8 million.

Operating loss was $184.9 million compared with the year-ago quarter’s operating loss of $204.3 million.

Balance Sheet

As of Jun 30, 2024, Take-Two had $1.09 billion in cash, cash equivalents and short-term investments compared with $776 million as of Mar 31, 2024.

The company had a debt of $3.65 billion as of Jun 30, 2024, compared with $3.08 as of Mar 31, 2024.

Guidance

For the second quarter of fiscal 2025, Take-Two expects GAAP net revenues between $1.29 billion and $1.34 billion. 

Operating expenses are expected between $982 million and $992 million. On a management basis, operating expenses are expected to grow 27% year over year

It expects loss per share between $2.15 and $2.3. Per management, the reporting tax rate is anticipated to be 18%.

Net Bookings are expected in the range of $1.42-$1.47 billion. The company reported net bookings of $1.44 billion in the year-ago quarter. TTWO’s release slate for the guided quarter includes Game of Thrones: Legends and NBA 2K25.

The largest contributors to Net Bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory, hyper-casual mobile portfolio, Empires & Puzzles, Words with Friends, the Red Dead Redemption series and Merge Dragons.

The company projects recurrent consumer spending to increase 5%, which assumes a low double-digit increase for mobile.

For fiscal 2025, the company expects GAAP net revenues between $5.57 billion and $5.67 billion. The company expects net bookings in the range of $5.55-$5.65 billion.

Operating expenses are expected in the band of $3.695-$3.715 billion. It expects loss per share between $3.95 and $4.33.

For fiscal 2025, net cash provided by operating activities is expected to be $(200) million. Capital expenditures are expected to be $140 million.

Zacks Rank & Other Stocks to Consider

Currently, TTWO carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Consumer Discretionary sector are GameSquare Holdings, Inc. (GAME - Free Report) , H&R Block (HRB - Free Report) and Madison Square Garden Entertainment Corp. (MSGE - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GameSquare Holdings is scheduled to report second-quarter 2024 results on Aug 14. The Zacks Consensus Estimate for GAME’s loss per share has narrowed by 2 cents to 9 cents over the past 30 days. 

H&R Block is set to report second-quarter 2024 results on Aug 15. The Zacks Consensus Estimate for HRB’s earnings is pegged at $1.71 per share, which has remained unchanged over the past 30 days. 

Madison Square Garden Entertainment is slated to report second-quarter 2024 results on Aug 16. The Zacks Consensus Estimate for MSGE’s loss per share is pegged at 57 cents, which has remained unchanged over the past 30 days.

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