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 (NASDAQ:TTWO). 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.
Chris Hill has no position in any of the stocks mentioned. Jason Moser has no position in any of the stocks mentioned. Matthew Argersinger owns shares of Activision Blizzard. Ron Gross owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard and Take-Two Interactive. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.