Take-Two Initiates New Cost-Cutting Measures as Q3 Sales Decline 3%

Take-Two has released its financial results for the third fiscal quarter, which covers the three months ending December 31. Despite reporting a slight decline in sales and bookings, the company managed to beat its guidance and posted its smallest quarterly net loss since the acquisition of Zynga in May 2022. Key highlights include: - Net revenue: $1.37 billion, representing a 3% year-over-year decline - Net loss: $91.6 million, compared to $153 million in the same quarter last year - Total net bookings: $1.34 billion, down 3% year-over-year The company saw strong performance from its usual titles, including Grand Theft Auto 5 and Online, Red Dead Redemption, and Zynga's lineup, which exceeded expectations. However, NBA 2K24 sales were softer than expected, affecting recurrent consumer spending. NBA 2K24 has sold-in 7 million units, compared to 8 million units for NBA 2K23 at the same point in its lifecycle. According to Take-Two CEO Strauss Zelnick, "This is still a very good news story. NBA 2K24 is the number one-selling sports title in North America and the number one basketball title. We've sold-in over 7 million units, and in time, NBA 2K24 will generate net bookings in line with NBA 2K23. This is largely a timing matter." Zelnick attributed the slower sales of NBA 2K24 on older systems to consumers transitioning to new hardware. Elsewhere, Grand Theft Auto 5 has reached 195 million units sold-in to retailers, with the largest ever increase in new Grand Theft Auto Online accounts driven by the holiday Chop Shop update. Red Dead Redemption 2 has shipped 61 million units, and Zelnick was optimistic about the company's mobile performance and the quarter's debuts from Zynga, including Top Troops and Match Factory. When asked about the challenges of launching new mobile games, Zelnick stated, "I think it's been changing of late. Outside of our business, Monopoly Go is a significant hit. Inside our company, we have two significant hits: Match Factory and Top Troops. I think it's a reflection of the consumer rebounding. Mobile had its first down year ever in 2022, but it's been recovering since. I'm encouraged that our investment in high-quality mobile interactive entertainment is paying off." Zelnick added, "Match Factory is not just a promising title; it looks huge." Despite the optimism, Take-Two is implementing another cost reduction plan, which is expected to be more extensive than the previous one. While Zelnick did not disclose the number of layoffs, he emphasized the need for efficiency, particularly in advance of the company's pipeline. "We want to ensure we can maximize our operating leverage," Zelnick said. "Our cost profile isn't just about headcount; our biggest expense is marketing. Optimizing marketing would be a great way to make the company more efficient." Some parts of the company have already experienced layoffs, including 31st Union and Visual Concepts Austin. Despite beating expectations in the third quarter, Take-Two lowered its full-year guidance to $5.25 billion - $5.3 billion, citing the softness of NBA 2K24 sales, weakness in mobile advertising, and delayed releases.