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November 6, 2015 -Take-Two Interactive Raises Outlook as Revenue Soars

The Wall Street Journal/Sarah E. Needleman and Tess Stynes

Take-Two Interactive Software Inc. on Thursday raised its outlook for the year after its most popular videogames powered quarterly revenue and profit past forecasts.

Revenue in the fiscal second quarter more than doubled, while profit of 30 cents on an adjusted basis blew past even the high end of the company’s outlook.

In an interview, Chief Executive Strauss Zelnick said the company’s entire slate of games sold well, though he checked off a number of areas that did particularly well. Those included sales of two heavyweight games: “NBA 2K16,” which sold some four million copies, and “Grand Theft Auto V,” one of the best-selling PC games of all time.

He also credited gamers’ recurring spending on digital goods, a rising tide that has lifted the entire industry. Adjusted digital revenue grew 39%, comprising more than half of total adjusted revenue. Like its rivals Electronic Arts Inc. and Activision Blizzard Inc., Take-Two has shifted its focus in recent years to selling content delivered over the Internet, including full-game downloads, expansion packs and subscriptions.

“Digitally delivered revenue, especially recurrent consumer spending, remains a high-margin growth opportunity and a key strategic focus for our organization,” Mr. Zelnick said on an earnings call with analysts, adding that digital distribution is a “higher-margin business.”

Sales of older games, so-called catalog titles, meanwhile, accounted for $165.8 million in adjusted revenue.

For the year ending in March, Take-Two raised its outlook on an adjusted basis to per-share profit of $1 to $1.15 and revenue of $1.33 billion to $1.43 billion. Previously, it expected per-share profit of 75 cents to $1 on revenue of $1.3 billion to $1.4 billion.

For the holiday quarter, the company expects per-share earnings of between 40 cents and 50 cents on revenue of $400 million to $450 million. Analysts polled by Thomson Reuters expected per-share profit of 45 cents and revenue of $453 million.

Take-Two, like other videogame makers, provides adjusted figures because generally accepted accounting principles spread out sales of online-enabled games over a period that companies think it will provide content for the games.

On that adjusted basis, revenue in the second quarter ended Sept. 30 more than doubled to $364.9 million, above the company’s guidance of between $275 million and $325 million. Adjusted earnings, which exclude other one-time items, were 30 cents a share, well above 15 cents, the top end of the company’s forecasts.

On a GAAP basis, net profit came to $54.7 million, or 55 cents a share, compared with a year-earlier loss of $41.4 million, or 51 cents a share. Revenue more than doubled to $347 million.