In this segment of the Motley Fool Money podcast, host Chris Hill and Fool analysts Jason Moser, Matt Argersinger, and Ron Gross reflect on the latest results from Take-Two Interactive (TTWO -1.30%). Like all video game companies not named Epic, it's suffering a bit from the overwhelming popularity of Fortnite Battle Royale, but the Fools -- like its execs on the conference call -- are more focused on Take-Two's strengths.
A full transcript follows the video.
This video was recorded on May 18, 2018.
Chris Hill: Mixed fourth quarter report for Take-Two Interactive. The video game maker's profits came in stronger than Wall Street was expecting, but overall sales were light. Matty, the NBA playoffs are getting good ratings, but Take-Two's NBA game was not exactly flying off the shelves.
Matt Argersinger: No. And there's something called Fortnite that might have. This is great, I went through the conference call. We've been talking about this for a few weeks now. Fortnite was mentioned 17 times on Take-Two's conference call, to the point where Strauss Zelnick, the CEO of Take-Two, I felt like he was getting a little frustrated. He started out saying, "Fortnite is great, it's a hit, it's bringing in new players. It shows how robust our industry is."
Hill: "We love when other game makers have huge successes!"
Ron Gross: "The youngsters are coming in!"
Argersinger: But, by the end, he was saying, "Look, it's a hit. Hits, by their nature, tend to be unexpected. But hey, we have Red Dead Redemption 2 coming out this summer! Watch out for that hit!" But, you're right. You mentioned, revenue was lighter than expected, down year over year, actually. I like to focus on what Take-Two calls recurrent customer spending, which is spending after the fact. So, customers buy the game, what do they do after that? Things like virtual currency, add-on content, in-game purchases, that was up 42% year over year.
And, I think, with companies like Take-Two -- and I do this with Activision and Electronic Arts as well -- you tend to look at three-year rolling periods for these companies. It smooths out all the boom and bust from blockbuster hits. If you look at Take-Two's three-year rolling revenue, it's up 17%. I think that's the right metric to look at. So, solid growth, for sure.
Hill: Can we come up with a better name for the metric recurrent customer spending?
Gross: [laughs] Doesn't roll off the tongue for you?
Argersinger: And the other companies call it digital spending. Take-Two is taking a different tack.