In the earnings preview for Take-Two Interactive (TTWO 0.26%) published ahead of earnings, one of the chief concerns I had was that analyst expectations may have been too aggressive. Indeed, with analyst consensus sitting at the high end of Take-Two's full-year guidance, there was risk of investor disappointment if the company didn't guide upward.
Well, the results are in, and it looks as though Take-Two really delivered.
Full-year revenue and earnings-per-share guidance raised
Before Take-Two's most recent earnings release, the company's full-year revenue guidance stood at between $1.35 billion and $1.45 billion, and non-GAAP earnings per share stood between $0.80 and $1.05. The analyst consensus called for $1.44 billion and $1.05, respectively.
It seems that Take-Two was being conservative, as the company's newly revised guidance calls for between $1.4 billion and $1.5 billion in revenue -- putting the midpoint at $1.45 billion -- and between $1.05 and $1.30 in earnings per share, implying a midpoint of $1.175 per share.
I was worried that the analysts were being overly bullish, but it seems that they weren't bullish enough.
New titles leading the way
Take-Two reported that it saw "strong catalog sales" in addition to "continued growth in digitally delivered revenue from recurrent consumer spending." Management also cited the "successful launches" of several new titles and claimed that there is "tremendous anticipation for [Take-Two's] upcoming releases."
For example, Take-Two noted in its earnings release that it launched multiple titles, including WWE2K15, Borderlands: The Pre-Sequel, and NBA 2K15 across a wide variety of platforms. Additionally, Take-Two took the time to remind investors that it will be launching Grand Theft Auto V on Xbox One and PlayStation 4 in November, with the PC version to follow in January.
Take-Two launched a number of titles that look as though they will perform well, and there's reason to be optimistic that Take-Two will be able to double-dip on its hit title, Grand Theft Auto V, when it launches on next-generation consoles and the PC.
However, new titles are only part of the story.
Digital revenue looking good
One way game publishers try to maximize the return they get on the games they develop is to offer additional content that can be purchased later following the original release of a given game. Take-Two reported that revenue generated from "recurrent consumer spending," which includes "virtual currency, downloadable add-on content, and online games," grew by an eye-popping 45% year over year and constituted 58% of revenue from digitally delivered content.
All-told, Take-Two reported digitally delivered content of $89.8 million for the quarter, which was down from $105.5 million last year. Take-Two noted, however, that this decline was due to the fact that digitally delivered content "benefited from the launch of Grand Theft Auto V" last year.
Take-Two is getting really good at increasing the value that it's able to extract from its customers of a title beyond the initial game sale. This is great news for long-term investors.
Foolish bottom line
Although Take-Two's business is necessarily lumpy -- a common point that many investors observe -- management seems to have done a commendable job of smoothing out the company's revenue profile in between Grand Theft Auto launches. Indeed, as the company continues to add strong new franchises to its stable, and as it continues to find ways to drive "recurrent consumer spending," it seems that Take-Two continues to do right by its long-term stockholders.
