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Take-Two Exceeds Earnings Expectations For First Quarter 2014
The first quarter of 2014 has been good to Take-Two. Not only has the company exceeded earnings expectations, but it has raised its outlook for the remainder of the fiscal year.
Strong sales of Borderlands 2, the Grand Theft Auto series, and Red Dead Redemption propelled Take-Two ahead. Interestingly, Bioshock Infinite is not mentioned here, indicating that the sales drop-off for the title might have been significant. With significant DLC coming out today and later in the year (compared with Borderlands 2, which has had a steady stream), it will be interesting to see if more copies start to move.
Non-GAAP net loss continues to decrease, down from $98.8 million to $47.1 million year-over-year. Non-GAAP net revenue was down year over year though, largely due to significant sales last year of Max Payne 3 and Spec Ops: The Line.
2K is predicting a strong year, largely driven by Grand Theft Auto V, NBA 2K14, and WWE 2K14. The Grand Theft Auto back catalog remains one Take-Two's key tentpoles, and the release of a new title should drive even more interest to legacy entries.
Take-Two's cash reserves improved over last quarter from $402 million to $646 million. The company's operating losses continue to narrow, and with the upcoming releases in September and October, Take-Two is poised to return to positive net revenue for this year.
[Source: Take-Two]
Our Take
Things are looking very good for Take-Two. The company has made smart moves and the upcoming release of Grand Theft Auto V is going to rocket their earnings. Take-Two is also typically averse to licensing, but smartly entered into an agreement with the WWE following the collapse of THQ.
That franchise has an installed user base that eagerly purchases year after year. In short, it's a sure thing. The only potential weak spot in the lineup is The Bureau: XCOM Declassified, which only suffers from stiff competition with Saints Row IV and Splinter Cell: Blacklist on August 20. I've played The Bureau, and I like it, but it's definitely the underdog.
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