Take-Two Earnings Lift the Stock. People Are Still Playing More Videogames

By Connor Smith

Customers for Take-Two Interactive Software remain more engaged with its videogames than before the pandemic, according to CEO Strausss Zelnick, a shift that helped the company to report better earnings than expected for its fiscal fourth quarter.

Take-Two reported net income of $111 million, or 95 cents a share, ahead of the consensus call for 65 cents among Wall Street analysts surveyed by the data provider FactSet. Non-GAAP earnings were $1.09 a share, compared with analyst estimates of $1.

Net bookings, a form of adjusted revenue, rose 8% year over year to $846 million. Analysts polled by FactSet had anticipated net bookings of $883 million.

The videogame firm also expects to close its acquisition of Zynga on May 23.

Take-Two stock was 3.96% higher in after-hours trading following the release. Shares are down 38% so far this year and off 34% from 12 months ago.

​CEO Strauss Zelnick told Barron's that although engagement with its games has moderated from its pandemic-era highs, it remains better than it was before the crisis. He said the new releases WWE 2K22 and Tiny Tina's Wonderlands, as well as continued strength from Red Dead Redemption Online, outperformed expectations.

"We're obviously pleased about the earnings that come out of that, which are meaningfully above our most recent guidance, which in and of itself had been increased over the year," Zelnick said. "So it was a terrific year for us. And we're very excited about what is coming this current year with a lot of new releases. Obviously, the expected closing of the Zynga transaction, which should happen on Monday, and what that means as well."

Take-Two announced the $12.7 billion cash-and-stock deal for Zynga in January. The deal gives Take-Two a far stronger footprint in the mobile games business, adding key franchises like Words With Friends, as well as Zynga's data and mobile advertising resources. Zelnick told Barron's.

For the 2023 fiscal year, Take-Two forecasts net bookings between $3.75 billion and $3.85 billion, and GAAP earnings between $1.90 a share and $2.15 a share. Wall Street had been forecasting bookings of $4.15 billion and earnings of $3.19 a share -- an expectation that doesn't include the merger with Zynga.

Asked about nonfungible tokens, or NFTS, given falling valuations for cryptocurrencies and other digital assets, Zelnick reiterated his view that Take-Two sees an opportunity in rare durable goods.

"We've, however, seen everything in the Web 3.0 space be overlaid with speculation," Zelnick said. "And unless and until the speculation largely is driven out of the system, it's hard to imagine how we can participate, because we're not speculators. And our consumers aren't speculators."

Zelnick did note that he thinks there is a real business in Web 3.0, and that blockchain technology can and will be relevant to parts of Take-Two's business, but not until there's a correction from largely speculative activity.

"Once it's corrected, we'll then get to see what the business really looks like," he said. "And we're doing a huge amount of research so that we're in a position to act when the time is right."