Take Two Interactive Software TTWO reported second-quarter fiscal 2021 earnings of 86 cents per share, up 36.5% year over year.
Net revenues decreased 1.9% year over year to $841.1 million. However, bookings climbed 0.5% year over year to $957.5 million.
Digital revenues (84.6% of revenues) increased 15.5% year over year to $711.3 million. Physical retail and other segment revenues (15.4% of revenues) declined 46.4% year over year to $129.8 million.
Grand Theft Auto (GTA) Online and GTA V, NBA 2K20 and NBA 2K21, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, PGA TOUR 2K21, Sid Meier’s Civilization VI, Social Point’s mobile offerings, the WWE series, and the Mafia: Definitive Editions and Mafia: Trilogy were the biggest contributors to the company’s second-quarter fiscal 2021 top line.
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 56% year over year and accounted for 59% of total revenues.
The Zacks Consensus Estimate for earnings and revenues was pegged at $1.45 per share and $843 million, respectively.
Top-Line Details
Region-wise, revenues from the United States (59.9% of revenues) increased 1.8% year over year to $503.6 million. However, international revenues (40.1% of revenues) decreased 7.1% to $337.6 million.
On the basis of platforms, revenues from console (76.2% of revenues) decreased 1.6% to $641.3 million. Revenues from PC and other (23.8% of revenues) fell 3% to $199.9 million.
Booking (NASDAQ:BKNG) Details
Net bookings from recurrent consumer spending grew 43% year over year and accounted for 64% of net bookings. Notably, growth was driven by GTA Online and GTA V, NBA 2K21 and NBA 2K20, Red Dead Redemption 2 and Red Dead Online, Borderlands 3, Social Point’s mobile offerings, Sid Meier’s Civilization VI, the WWE series, and Mafia: Definitive Edition and Mafia: Trilogy.
Notably, Catalog accounted for $587.3 million of net bookings. Strong demand for GTA, NBA 2K ,Red Dead Redemption, Borderlands, Social Point’s mobile offerings, the Mafia: Definitive Edition and Mafia: Trilogy, and the WWE series were witnessed in the reported quarter.
Digitally delivered net bookings (84.6% of net bookings) grew 13.9% to $791.7 million. However, bookings from Physical retail and other segments (17.3% of net bookings) decreased 35% to $165.8 million.
New Game Releases
During the reported quarter, Take Two division 2K launched NBA 2K21, Mafia: Definitive Edition, WWE 2K Battlegrounds and PGA TOUR 2K21.
Mafia: Definitive Edition was launched for PlayStation 4, Xbox One, and PC. WWE 2K Battlegrounds was also launched for Nintendo’s NTDOY Switch (NYSE:SWCH) and Alphabet (NASDAQ:GOOGL) GOOGL division Google’s Stadia apart from PlayStation 4, Xbox One and PC.
Moreover, PGA TOUR 2K21 was launched for PlayStation 4, Xbox One, Switch (digital), PC and Stadia.
2K also announced the launch of Borderlands 3 for PlayStation 5 and Xbox Series X when the next console systems launch in November 2020.
Additionally, Season 7 of WWE SuperCard, is scheduled to launch in November 2020 as a free, downloadable update for iOS, Android and Facebook (NASDAQ:FB) FB Gaming.
Further, Take Two’s Private Division along with Obsidian Entertainment launched The Outer Worlds: Peril on Gorgon.
Operating Details
Take Two’s gross profit increased 4.9% year over year to $408.6 million. Reported gross margin of 48.6% expanded 320 basis points (bps) year over year.
Operating expenses decreased 6.8% year over year to $293.3 million primarily due to lower selling & marketing (S&M) and research & development (R&D) expenses in the reported quarter. S&M and G&A expenses decreased 24% and 2.6%, respectively, on a year-over-year basis. However, general & administrative expenses increased 19.4% year over year.
Operating income came in at $115.4 million, up 54.2% year over year. Operating margin expanded 500 bps year over year to 13.7%.
Balance Sheet
As of Sep 30, 2020, TakeTwo had $2.84 billion in cash, cash equivalents and short-term investments compared with $2.75 billion as of Jun 30, 2020.
Acquisition Details
During the reported quarter, the company bought Two Dots developer Playdots for final consideration of $196 million, comprised of $98 million in cash and the balance in newly issued shares of TakeTwo common stock.
Moreover, Take Two division Rockstar Games acquired Dundee, Scotland-based Ruffian Games, and renamed it Rockstar Dundee.
Guidance
For the third quarter of fiscal 2021, Take Two expects GAAP net revenues between $760 million and $810 million. The company projects GAAP earnings between $1.10 and $1.21 per share.
Net bookings are projected between $675 million and $725 million.
For fiscal 2021, net bookings are expected between $3.15 billion and $3.25 billion. GAAP net revenues are likely to be in the range of $3.05-$3.15 billion. Take Two projects GAAP earnings of $3.22-$3.49 per share.
This Zacks Rank #3 (Hold) company currently expects net cash flow to be more than $690 million for the fiscal year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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