What happened
Take-Two Interactive Software (TTWO 0.85%), maker of the popular Grand Theft Auto video game franchise, put pedal to the metal Thursday morning and raced ahead 10.7% through 9:45 a.m. ET after beating earnings last night.
Analysts were looking for a $0.68-per-share (pro forma) profit from Take-Two Interactive in its fiscal Q4 2023, but Take-Two actually reported a profit of $0.85, adjusted for one-time items.
NASDAQ: TTWO
Key Data Points
So what
But that news may not be quite as good as it sounds.
Although Take-Two reported a pro forma profit, its earnings as calculated according to generally accepted accounting principles (GAAP) were negative -- deeply negative. Despite growing sales 56% year over year (to $1.45 billion), Take-Two ended Q4 with a $3.62-per-share loss, versus last year's Q4 profit of $0.95 per share. Similarly, for the full year (Q4 being the final quarter), Take-Two grew its revenues 53% to $5.35 billion, but recorded a GAAP loss -- $7.03 per share, versus $3.58 per share in profit a year ago.
Big jumps in software development costs -- up 500% year over year in Q4 and 285% for the year -- and in marketing spending (which tripled in both periods), and in research and development spending (up 147% and 119%) all contributed to the losses, and Take-Two burned cash for the year -- $203 million, after generating nearly $100 million in cash in fiscal 2022.
Now what
So...good news and bad news.
The worse news is that things don't look to be improving at Take-Two Interactive anytime soon. Giving guidance for the coming first fiscal quarter of 2024, and for the full year, Take-Two warned that it's likely to lose about $1 on sales of no more than $1.26 billion this coming quarter. For the year as well, investors should probably anticipate a loss -- anywhere from $2.80 per share to $3.05.
And sales will inch up at best 2% year over year to $5.47 billion.
Admittedly, the more distant future looks brighter for Take-Two. Analysts forecast a return to profitability in fiscal 2025, and for profits to literally double in fiscal 2026, to $3.05 per share. Still, those happy days are still a few years away. While investors are cheering Take-Two's "earnings beat" pretty loudly today, I suspect this enthusiasm may wane as the drumbeat of losses rolls on between now and then.
