Take-Two Interactive Software (TTWO -0.39%), the publisher behind blockbuster game franchises like "Grand Theft Auto" and "NBA 2K," released its earnings for the fourth quarter of fiscal year 2024 on May 16. The results showed both triumphs in revenue and challenges in profitability.
Total net revenue for the quarter was $1.3994 billion, surpassing management's guidance of $1.323 billion to $1.373 billion. However, the substantial goodwill impairment charges contributed to a net loss per share of $17.02, far exceeding the anticipated loss range of $0.90 to $1.00 per share. Overall, the quarter was mixed, with revenue strengths overshadowed by profitability concerns.
| Metric | Q4 2024 | Management's Guidance | Q4 2023 | Change (YoY) |
|---|---|---|---|---|
| Total Net Revenue (million) | $1,399 | $1,323 - $1,373 | $1,446 | (3.3%) |
| Net Bookings (million) | $1,349 | $1,270 - $1,320 | $1,393 | (3.2%) |
| Non-GAAP EBITDA (million) | ($19.6) | $33 - $55 | $87.0 | N/A |
| Net Loss Per Share | ($17.02) | ($1.00) to ($0.90) | ($3.62) | (370%) |
Data sources: Results and management guidance from the company's SEC filings. YoY = Year over Year. PP = percentage points.
Understanding Take-Two Interactive's business
Take-Two Interactive is a leading video game developer and publisher known for titles like "Grand Theft Auto," "Red Dead Redemption," and "NBA 2K." The company's business model primarily relies on the success of its game franchises, recurrent consumer spending on downloadable content (DLC), and in-game purchases.
Recently, the company has focused on growth in digital and mobile platforms, primarily through its acquisition of mobile games specialist Zynga. Key success factors include the performance of major franchises, the ability to monetize through digital channels, international market penetration, talent acquisition and development, and the integration of Zynga.
Quarterly highlights: financial and operational performances
Take-Two surpassed management's revenue expectations in the fourth quarter, posting $1.399 billion against a guidance range of $1.323 billion to $1.373 billion. Net bookings came in at $1.349 billion, exceeding the expected $1.270 billion to $1.320 billion range. The digital online channel was especially strong, accounting for 95% of the quarter's net revenue.
Despite robust revenue, Take-Two's profitability was below expectations. Non-GAAP earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at a negative $19.6 million, underperforming the guided range of a $33 million to $55 million profit. The company cited significant goodwill impairment charges amounting to $2.18 billion as a primary cause for the widened loss, driving the net loss per share to $17.02. The cost-cutting program that resulted in these impairment charges also led to $398 million in other non-cash charges this quarter.
All told, the company reported operating expenses of $3.18 billion for the quarter. The impairment charges heavily impacted profitability and resulted in a massive GAAP net loss of $2.9 billion for the quarter, a considerable increase from the previous year's net loss of $153 million.
Key operational metrics were mixed. Recurrent consumer spending, which includes revenues from DLCs and in-game purchases, declined by 2% but remained a significant revenue driver, accounting for 79% of bookings and net revenues. The company highlighted standout performances from major franchises such as "NBA 2K24" and "Grand Theft Auto Online," which continue to engage a large user base.
There were notable developments in mobile gaming. Titles like "Match Factory!" on iOS and Android showcased the growth and monetization potential of Zynga's mobile platform under Take-Two's umbrella.
Looking ahead: focus areas and future prospects
Management provided financial guidance for fiscal 2025, projecting net bookings between $5.55 billion and $5.65 billion, signaling anticipated growth from fiscal 2024. Total GAAP net revenue is expected to be between $5.57 billion and $5.67 billion. This outlook includes significant expected contributions from anticipated titles like "Grand Theft Auto VI" slated for a Fall 2025 release, "NBA 2K25," "WWE 2K25," and "Star Wars Hunters."
The company aims to address profitability issues through continued cost-reduction initiatives and enhancing operational efficiency. Investors should monitor upcoming product releases closely as well as trends in recurrent consumer spending. Integration synergies from the Zynga acquisition and the performance of new mobile games will also be critical factors in achieving future financial goals.
