Take-Two Q3 Investor Call: Yeah, They’re Rich

With Grand Theft Auto V’s surprise delay to September, it’s tempting to wonder if there’s any turmoil behind the scenes at Rockstar parent company Take-Two Interactive Software. Put them aside. Any question that Take-Two bestrides the universe like a colossus was obliterated, perhaps forever (or until the GTA series stops selling), after the company revealed its performance during its fiscal year 2013 third quarter. Simply put, they’re rolling in dough, thanks to Borderlands 2 and NBA 2K13, with a little help from Rockstar’s back catalogue.

Take-Two exceeded its predictions for the quarter, even coming close to doubling its year over year performance with total net revenues of $415.8 million, up from $236.3 million one year ago. Not only that, but GAAP net income earned from continuing operations during the period was a strong $70.9 million, a staggering increase from last year’s $14.2 million. In fact, revenues for Q3 and Q2 have erased the losses from the first quarter, leaving the company at the end of December in especially good shape, with $448.7 million cash in hand and “no borrowing on our $100 million line of credit.” The success has prompted Take-Two’s board to make it rain a little bit for investors, as the company announced during the call that a limited repurchase of company stock has been authorized. If you’re a shareholder, I’d recommend picking out your new dream house now.

The strongest drivers of Take-Two’s impressive success in the quarter were Borderlands 2 and NBA 2K13. Borderlands 2 has sold around 6 million units and is on track to be the most successful game in 2K history. Meanwhile, NBA 2K13 sold “nearly” 4.5 million units and is now the most successful game in NBA 2K history. XCOM: Enemy Unknown was also cited as a success as well, though Take-Two focused on that game’s critical acclaim and did not reveal specific figures.

DLC and downloads were also strong drivers of sales, with digitally delivered content accounting for 23% of total revenues in the quarter. In particular, Borderlands 2 add-ons and the NBA 2K ‘Everywhere Experience’ both contributed to what Take-Two called “the highest ever [earnings] from digitally delivered goods,” nearly triple what they were a year ago.

PC-specific sales figures didn’t factor into the call, but partnerships with Asian firms specializing in online gaming were confirmed to be continuing, and Take-Two said they expect tablets and other mobile devices to be a strong growth opportunity going into the next fiscal year. I expect we should be on the lookout for more GTA ports in the coming years.

Finally, catalog sales of Rockstar titles like Grand Theft Auto IV and Red Dead Redemption contributed to quarterly earnings significantly. Rockstar’s impact on company finances is so strong, in fact, that the company estimates the developer’s games will account for 25% of all Take-Two earnings in fiscal year 2013. For explanation of just why Rockstar is being granted such leeway in getting surefire hit Grand Theft Auto V to stores, look no further than that.

Obviously, the delay of GTA V was on everyone’s mind, and the Q&A portion of the call saw most questions devoted to it. Take-Two is confident that sales of the long-awaited return to San Andreas will ensure company-wide revenues in fiscal year 2014 to meet or exceed the current fiscal year, touted during the call as Take-Two’s best ever. “Grand theft auto stands alone,” Take-Two CEO Strauss Zelnick said. “It’s a unique property and we think it’s just going to blow people away at a level no one anticipates.” When asked about the reasons for the delay, he said bluntly that “[it's] the time it takes to make sure it’s everything everyone expects, and then some. As it happens it’s a great window.”

One caller asked about the possibility of a next gen console release, even going so far as to wonder if it’s wise to release the game so close to the presumed launch of the upcoming Playstation and Microsoft next gen consoles. To that, Strauss said “There is not one gamer who’s going to sit out GTA V hoping there will be [a better version]. GTA V is going to come out in September.” Make a note people.

Up next for the company? BioShock Infinite drops March 26, and is expected to be the primary engine of Q4 sales. But before that, Borderlands 2 DLC will be collected on a single disc with the Add-On Content Pack, due out February 26. It will contain all previously released DLC with the exception of Sir Hammerlock. The company will also be releasing a limited edition e-book set in the BioShock universe within the next week.

But none of that matters, does it? From here on out we’re all looking feverishly to September.

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