Take-Two Interactive Software
missed December quarter earnings expectations and cut its outlook for the second time this fiscal year. CEO Strauss Zelnick told Barron’s that inflation and softness in the economy made gamers more careful with their spending, which impacted sales on in-game items.
Take-Two (ticker: TTWO) reported a fiscal third quarter net loss of $153.4 million, or 91 cents a share on net bookings of $1.38 billion. The consensus among analysts polled by FactSet was for a net loss of 85 cents a share and bookings—a form of adjusted revenue—of $1.46 billion. Non-GAAP earnings were 86 cents a share, below expectations for adjusted earnings of 89 cents a share.
The firm expects fiscal 2023 net bookings of between $5.2 billion and $5.25 billion, below the bottom end of its prior outlook and below consensus expectations at $5.45 billion.
Take-Two shares were down 1.5% in after-hours trading.
“I take personal responsibility for falling short on the number side, and the team gets all the credit for delivering great titles that continue to perform,” Zelnick told Barron’s. “It’s clearly a matter of market conditions. And our competitors have seen that as well.”
Take-Two, the firm behind Grand Theft Auto, Red Dead Redemption, and NBA 2K franchises, acquired mobile games firm Zynga last year. Zelnick said that amid inflation and softness in the economy, gamers were more careful with their spending, which led them to promotions and established blockbuster titles. He notes that consumers were spending less on mobile titles when there was an option to also play free.
“And while they haven’t stopped spending altogether, consumers were very focused on spending on digital entertainment during the pandemic while they were stuck at home,” Zelnick added. “Now, there’s some focus on events and entertainment that you enjoy outside of your home, so we are seeing pressure on our format—disproportionate pressure.”
Asked about the current quarter, Zelnick said Take-Two is seeing continued pressure on the console side of its business and a little less pressure on the mobile side. The company says it’s looking at ways to cut costs, including personnel, processes, infrastructure, and other areas. It expects such cuts to yield $50 million of annual savings, which is in addition to expectations of $100 million in annual cost synergies that it expects to realize from its merger with Zynga.
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