Take-Two reports June quarter bookings of $1.2B, up 20%

Take-Two Interactive Software reported its bookings rose 20% to $1.2 billion for the quarter ended June 30.

The company credited ongoing revenues from Grand Theft Auto Online and Grand Theft Auto V, and NBA 2K23 for the increase in bookings from a year ago. Analysts had expected slightly better bookings at $1.21 billion.

Grand Theft Auto V has sold-in more than 185 million copies since 2013, up from 180 million in the previous quarter. Red Dead Redemption 2 has sold-in 55 million copies, up from 53 million in the previous quarter. And NBA 2K23 exceeded plans and has now sold-in over 13 million copies, up from 11 million in the previous quarter. In after-hours trading, Take-Two’s stock is up 0.7% to $141.15 a share.

Take-Two also reiterated its optimistic guidance for the fiscal year 2024, which ends March 31, 2024, with overall bookings for the year expected to hit $5.45 billion to $5.55 billion.

The company expects to launch 52 titles through fiscal 2026, or by the end of March 31, 2026. A couple of big launches in the current fiscal 2024 year are Star Wars Hunters and Top Troops, both coming from Zynga. The Hunters game will feature battles across the iconic worlds of Star Wars.

“We had a strong start to the fiscal year and achieved net bookings of $1.2 billion, which was at the high end of our expectations,” said Strauss Zelnick, CEO of Take-Two, in an interview with GamesBeat. “Our performance was led by our catalog of iconic, industry-leading intellectual properties, which continues to resonate with our player communities worldwide.”

Zelnick added, “Our core business trends remain healthy, and we are reiterating our prior guidance of $5.45 to $5.55 billion in net bookings for fiscal 2024. Our teams are making excellent progress on our strategic focus areas, including the advancement of our eagerly anticipated development pipeline and capitalizing on our revenue-driven opportunities and synergies, all while maintaining a deep focus on efficiency. We remain confident that we are positioning our business for a significant inflection point in fiscal 2025, which we believe will include new record levels of operating performance. We would like to thank all of our stakeholders for their continued support, and we look forward to delivering on this exciting next chapter.”

I’m expecting that the company will launch Grand Theft Auto VI by fiscal year 2025, and that’s what that confidence reflects. But Take-Two isn’t commenting on when that game will launch. In an interview with GamesBeat, Zelnick had nothing more to offer than saying the company’s release schedule made them confident.

I asked Zelnick about generative AI’s impact and whether it might slow down Take-Two’s hiring if people were more efficient with the technology.

“Well, it all depends on how we’re trying to populate our teams to develop our pipeline. We’ve been engaged in enormous growth on the developer side for a very long time, we now have over 9,000 developers working on properties here. And we’ll continue to grow that number. I don’t think that generative AI will reduce the size of our teams,” Zelnick said. “And, and even if the size of the teams are reduced, the work that will go away is the lowest value work, the least interesting work. And there’ll be more work at the highest levels, more exciting work, and frankly, the more high paying work.”

For the first fiscal quarter ended June 30, Take-Two reported net bookings grew 20% to $1.20 billion, as compared to $1 billion during last year’s fiscal first quarter. Net bookings from recurrent consumer spending grew 38% and accounted for 84% of total net bookings.

The largest contributors to net bookings were NBA 2K23, Grand Theft Auto Online and Grand Theft Auto V. On top of that, contributors included Zynga’s Rollic hyper-casual mobile portfolio, Empires & Puzzles, Toon Blast, Merge Dragons!, Words with Friends, Red Dead Redemption 2 and Red Dead Online, and Toy Blast.

On a GAAP basis, net revenue was up 17% to $1.28 billion, compared to $1.1 billion a year ago. GAAP recurrent consumer spending increased 29% and accounted for 83% of total GAAP net revenue. GAAP net loss was $206.0 million, or $1.22 per share, as compared to $104.0 million, or $0.76 per share, for the
comparable period last year. The results included impairment charges of $18.2 million related to capitalized software development costs. That means game spending is headed upward.

Net bookings is Take-Two’s operational metric and defined as the net amount of products and services sold digitally or sold-in physically during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides and publisher incentives.

I asked about the view of the economy in our interview. Zelnick said, “I have the same view, we’ve been in a recession that caused the market to be down year over year and pointing to meaningfully year over year 10%, if not a bit more. Mobile is now looking like it’s flat year over year, maybe even slightly up consoles beginning to look up. So I think things are turning but it’s early days.”

Outlook for Fiscal 2024

Take-Two is revising its outlook for the fiscal year ending March 31, 2024 and is providing its initial outlook for its fiscal second quarter ending September 30, 2023.

Take-Two expects total GAAP net revenue of $5.37 billion to $5.47 billion for the fiscal year ending March 31, 2024.

It expects a loss of $3.20 a share to $2.95 a share, or $545 million to $501 million, for the same period. On a non-GAAP basis, the company expects earnings before interest, taxes, depreciation and amortization (EBITDA) to be $413 million to $466 million.

For the second quarter ending September 30, Take-Two expects GAAP net revenue of $1.26 billion to $1.31 billion, and it expects a net loss of $1 to 90 cents a share, or $213 million to $192 million. The EBITDA is expected to be $43 million to $64 million.

Zelnick Q&A

We interviewed Zelnick about the results.

GamesBeat: Do you have any more details that help explain how fiscal 2025 will be an inflection point for you in performance?

Zelnick: Sorry, what kind of detail are you looking for?

GamesBeat: I guess the kind of details that you don’t like to share. Why are you confident that will be such a good year?

Zelnick: Our prior release schedule.

GamesBeat: All right.

GamesBeat: Recurrent consumer spending is high. What do you think of the value of subscription revenue versus a battle pass model? I assume you’re not yet fans of subscriptions.

Zelnick: We’re not at all opposed to subscriptions. You have to offer consumers great value. GTA+ has a subscription program that’s continuing to grow. Consumers like it, we continue to add features. So if you can offer something powerful to consumers, there can be a great benefit.

When I’ve spoken publicly about subscriptions, I’m talking about broad based subscription programs that offer a multitude of titles, not a single title subscription program, like World of Warcraft, for example. It’s hard to get consumers to subscribe to a single title, but if they fall in love with it, they can. And obviously a battle pass typically subscribing, essentially, for a season. And a subscription program, like World of Warcraft is, you know, for on an on an ongoing basis, typically monthly. A GTA+ is a monthly program as well.

So that’s very different than a broad based subscription program, and specifically very different from a broad based subscription program that’s offering frontline titles with retail, which is something that I do not feel makes sense. The folks at Sony agree with that. I think the folks at Microsoft are, are still living in another place, collectively.

GamesBeat: In some of the trials like Apple vs Epic and the Microsoft antitrust trial, we saw some interesting figures come out. Things like the spending on big games like The Last of Us Part II. Did you take any insights from some of that about the state of the industry?

Zelnick: I’m not sure I learned anything from those filings that I didn’t know regarding the state of the industry.

GamesBeat: No surprise that big games are expensive to make?

Zelnick: That would not come as a surprise to me.

GamesBeat: Any thoughts on the Apple Vision Pro for your business?

Zelnick: I haven’t tried it. So I’m not going to comment. I’m can’t wait to try it.

GamesBeat: We’ve asked you about blockchain and the metaverse. So what’s your view on generative AI, and its relation to those past hot trends?

Zelnick: I’m a believer in generative AI. And I’ve said so how could I not be we’ve been engaged with AI forever at this company and other companies that I’m involved with. So generative AI is a broad rubric for tools and technical tools typically enhance technically driven businesses. And that will be the case with generative AI.

I think people that lost their way if they believe that machines are going to replace human creativity or human genius. Generative AI is made up of datasets with compute, plus large language models. And by definition, that’s a backward looking tool as all tools are. And it’s predictive based on prior data. You can make entertainment titles that are entirely derivative of previous titles.

Typically, they don’t do very well. In certain instances, they can do okay, but the biggest hits are always unexpected and forward looking. And that’s what we aim to make around here.

So our teams are already using generative AI for for assistance. Both in terms of creativity and language and for coding, and I have no doubt that there’s plenty of opportunity there to enhance efficiency and reduce costs. But I think they will simply be that the bar is higher for creative quality. And I will continue to require humanization.

GamesBeat: Do you think that the efficiency and sort of cost reduction will mean that maybe you’ll hire people more slowly?

Zelnick: Well, it all depends on how we’re trying to populate our teams to develop our pipeline. We’ve been engaged in enormous growth on the developer side for a very long time, we now have over 9,000 developers working on properties here. And we’ll continue to grow that number. I don’t think that generative AI will reduce the size of our teams.

And, and even if the size of the teams are reduced, the work that will go away is the lowest value work, the least interesting work. And there’ll be more work at the highest levels, more exciting work, and frankly, the more high paying work.

I think generative AI, like all tools in human history, will increase employment, not reduce employment, and will enhance the value of human activity. So you know, 120 years ago, 60 to 70% of America’s workforce was engaged in agriculture. Today, it’s less than 2%. And we feed our country and the rest of the world. And I don’t hear people moaning that they can’t get farm jobs.

GamesBeat: Interesting. You remarked about favorable business trends [in the press release]. Do you have a different view of the economy now compared to the past and how it affects Take-Two?

Zelnick: I have the same view, we’ve been in a recession that caused the market to be down year over year and pointing to meaningfully year over year 10%, if not a bit more. Mobile is now looking like it’s flat year over year, maybe even slightly up consoles beginning to look up. So I think things are turning but it’s early days.