Take-Two Interactive (NASDAQ:TTWO) recently announced sales growth that blew past management's outlook. The video game giant's NBA 2K20, Grand Theft Auto, and Borderland brands were just a few of the standouts that allowed net bookings to jump 49% in the fiscal 2020 fourth quarter compared to a 21% increase for rival Activision Blizzard.
Some of that market-thumping growth reflected the increased stay-at-home time that put a premium on electronic entertainment options, especially around sports brands. But in a conference call with Wall Street analysts, CEO Strauss Zelnick and his team explained how Take-Two's positive momentum could carry right through to the fiscal year that started on April 1.
Let's look at some highlights from that presentation.
Blowing past targets
Our significantly better-than-expected fourth quarter results finished a terrific year for Take-Two, during which we achieved record results. [...] Total net bookings grew 49% to $720 million as compared to our outlook of $540 million to $590 million. This outstanding result was driven by the exceptional performance of our titles in the fourth quarter.
-- CFO Lainie Goldstein
The biggest contributor to the sales beat was gamers' enthusiasm for Take-Two's subscription-based services. Sports fans flocked to the NBA 2K20 title even before shelter-in-place recommendations started in mid-March. That success pushed spending up 18% for the brand, which has sold 12 million copies so far, or 33% more than last year's iteration in the same period.
Grand Theft Auto set new records for engagement with help from fresh content releases, and executives said Borderlands 3 and Red Dead Redemption 2 also meaningfully exceeded their targets. Overall, subscription spending jumped 87% in the quarter and was up 40% for the full year.
A packed pipeline
Across our internally-owned labels and outside development studio partners, we currently have 93 titles planned for release over the next five years through fiscal 2025. Of the 93 titles, 63 are core gaming experiences, including 15 platform extensions of existing titles; 17 are mid-core or arcade-style experiences; and 13 titles are casual experiences. 47 of these 93 titles are from existing franchises, and 46 are from new intellectual properties.
-- President Karl Slatoff
The current fiscal year will be a light one for new releases due to the transition to a new generation of gaming consoles. That's a key reason why management is predicting a drop in net bookings in fiscal 2021, down to $2.6 billion from $3.0 billion in 2020.
But Take-Two still has some big launches slated for the next few months, including in existing brands like Mafia and Civilization, and new intellectual properties like Disintegration, the sci-fi shooter heading to all major gaming platforms this summer.
Looking further out, Take-Two has nearly 100 titles set to launch over the next five years, split roughly down the middle between new and established brands.
An enduring lift
There is no doubt that our recent results have benefited from people sheltering at home as players have sought interactive entertainment to stay connected and engaged with friends and family.
Take-Two's cautious outlook for the new year assumes challenges coming from the next-gen console transition and potential pressure from sluggish economic growth. It also reflects an expected move away from at-home entertainment as major economies restart and social-distancing efforts are relaxed.
Management is aiming to take full advantage of the bigger entertainment platform they've built this past year, though, with a flood of quality content on the way. "The connections and communities built will remain in place once people resume their normal activities and should continue to benefit our industry's results," Zelnick predicted.