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Take-Two Beats Profit Expectations Despite Thin Slate of Holiday Releases
February, 3 2016

The Wall Street Journal/Sarah E. Needleman

The videogame industry’s embrace of digital content and its unwavering demand for popular franchises helped Take-Two Interactive Software Inc. turn out a solid holiday quarter despite a thin slate of releases.

The publisher of the hit “Grand Theft Auto” franchise Wednesday beefed up its full-year outlook and reported adjusted revenue and profit for the fiscal third quarter that topped Wall Street’s forecasts.

Take-Two didn’t release big titles during the October through December period on par with a year earlier, when it published “Grand Theft Auto Online” and a refresh of “Grand Theft Auto V” for newer consoles.

The strategy isn’t to pump out annual games in hit franchises save for sports, Chief Executive Strauss Zelnick said in an interview. “We bring titles to market when they are ready,” he said.

The dearth, though, showed up in adjusted revenue that sank 49% to $486.8 million. Adjusted profit, meanwhile, dropped to 89 cents a share from $1.87 a year earlier.

Still, the strength of previously released titles, namely the latest “Grand Theft Auto” games and a new “NBA 2K” game in September, bolstered the coffers. Analysts surveyed by Thomson Reuters had expected Take-Two to report $452.8 million in revenue and profit of 50 cents a share on an adjusted basis.

On a conference call with analysts, Mr. Zelnick said successful businesses, particularly in media, count on their back catalog year in and year out. “Catalog really matters to us,” he said.

While there wasn’t a brand new “GTA” in the quarter, Take-Two released a bevy of digital free and paid updates for that franchise and others—“Grand Theft Auto Online” gamers could drop virtual coin for a “superyacht” fully loaded with helicopters and personal watercraft, for example.

Spending on total digital, which includes full-game, downloads, slipped 1.7%. But Take-Two recorded its most “recurrent consumer spending” ever. Such spending includes virtual currency and add-ons that keep buyers coming back for more. In its recent quarterly earnings report, rival Electronic Arts Inc. said it posted more revenue from digital sales than any other in its history.

For the fiscal year ending March 31, Take-Two now expects per-share profit of $1.65 to $1.75, above the $1 to $1.15 it previously had forecast. It expects adjusted revenue between $1.48 billion and $1.53 billion, up from a prior range of $1.33 billion to $1.43 billion.

Take-Two, like other videogame companies, focuses on adjusted figures because U.S. accounting rules require deferring a portion of revenue from online-enabled games.

Under generally accepted accounting principles, Take-Two said quarterly revenue fell 22% to $414.2 million. It reported a GAAP loss of $42.4 million.