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Take-Two Raises Its Outlook as Digital Content Drove Holiday Results
February, 3 2015

The Wall Street Journal/Sarah E. Needleman

Take-Two Interactive Software Inc. raised its full-year outlook Tuesday as sales of digital game content drove revenue and profit in the important holiday quarter higher than Wall Street’s forecasts.

Take-Two reported fiscal third-quarter net income of $40.1 million, or 42 cents a share, down from $578.4 million, or $4.69 a share, a year earlier.

Excluding stock-based compensation, deferred net revenue and other items, profit came to of $1.87 a share, up from $1.70 a year earlier. Net revenue, adjusting for stock-based compensation and other items, rose 24% to $954 million.

The results handily topped forecasts. Three months ago, Take-Two had projected a profit of $1.35 to $1.45 a share on revenue of $745 million to $760 million. Analysts recently surveyed by Thomson Reuters were expecting profit of $1.52 a share on $797.7 million in revenue.

Adjusted net revenue from digitally delivered content rose 64% to $217.2 million.

Much like the movie industry, game publishers lean on proven winners for sequels. For Take-Two, that includes its venerable crime franchise “Grand Theft Auto.”

In November, the company released a refreshed version of the latest installment, “Grand Theft Auto V,” for Sony Corp.’s PlayStation 4 and Microsoft Corp.’s Xbox One that sold nearly 10 million copies. All together, “GTA V,” which first went on sale in 2013, has sold more than 45 million units, the company said.

There is more to come: a PC version of the game is penciled in for March 24, pushed back from an original launch date of Jan. 27. It’s unlikely that a recent blowback in Australia, in which two retailers pulled the refreshed console version from shelves, will derail momentum.

Take-Two also has new intellectual property coming this quarter. It plans next week to start selling “Evolve,” a multiplayer shooter for PCs and consoles that originally was scheduled for last fall. The game won’t face significant competition in the genre until the newest edition of Electronic Arts Inc.’s “Battlefield” franchise goes on sale March 17.

“It’s a window here where you’re not going to see competitive product,” said Mike Hickey, an analyst at Benchmark Capital. He expects Take-Two to sell about four million copies of Evolve in the current quarter. “That’s pretty significant for a new IP,” he said.

Take-Two again raised is financial projection for the year that ends March 31, saying it now expects a profit of $1.65 to $1.75 a share on adjusted revenue of $1.65 billion to $1.7 billion. In October, it had projected a profit of $1.05 to $1.30 a share on revenue of $1.4 billion to $1.5 billion.