Video-game publisher Take-Two Interactive Software Inc. (TTWO), Thursday reported a wider net loss for the fourth quarter, hurt mainly by non-cash goodwill and intangible impairment charges, as well as non-cash tax expense, notwithstanding an increase in net revenues. Adjusted profit, nevertheless came in line with Street estimates, while revenue came in ahead of expectations. Looking ahead, the company reaffirmed its first quarter and full year 2010 earnings outlook.
The New York-based software firm reported a net loss for the third quarter of $21.99 million or $0.28 per share, compared to a loss of $14.95 million or $0.20 per share in the year-ago quarter.
Net income for the recent quarter included $14.8 million of non-cash goodwill and intangible impairment charges, $9.8 million in stock-based compensation expense, and $4.3 million in non-cash tax expense for the cumulative impact of deferred tax liabilities associated with tax deductible amortization of goodwill.
Net income for the fourth quarter of 2008 included $9.3 million of stock-based compensation expense and $7.2 million in professional fees and expenses related to unusual matters and business reorganization costs.
Excluding items, the company's non-GAAP net income for the quarter rose to $7.0 million or $0.09 per share from $1.6 million or $0.02 per share in the same quarter last year.
On average, eighteen analysts polled by Thomson Reuters expected the company to earn $0.09 per share for the quarter. Analysts estimates typically exclude special items.
Net revenue for the fourth quarter increased to $343.4 million from $323.4 million in the prior-year quarter. Seventeen analysts had a revenue consensus of $340.43 million for the fourth quarter.
Take-Two noted that fourth quarter fiscal 2009 sales were led by Borderlands, NBA 2K10, Grand Theft Auto: Episodes from Liberty City, Grand Theft Auto: The Ballad of Gay Tony, and Grand Theft Auto IV.
The company had forecast non-GAAP earnings to be in the range of $0.05 to $0.10 per share on revenues ranging from $325 million to $350 million for the fourth quarter.
In the immediately preceding third quarter, the company reported a swung to loss, as revenue dropped 68% from last year when it benefited from the post-launch performance of its blockbuster title Grand Theft Auto IV. Third quarter sales were led by catalog titles, including "Grand Theft Auto IV", along with "The BIGS 2" and "Major League Baseball 2K9".
Among Take-Two's rivals, The Redwood City, California-based video-game publisher Electronic Arts Inc. (ERTS) posted a wider net loss in its second quarter, as revenue dropped mainly because of revenue deferral related to certain online-enabled packaged goods games and digital content.
Another runner, the Santa Monica, California-based Activision Blizzard Inc. (ATVI), reported a profit for the third quarter from a loss in the prior year, benefited mainly by strong response to Activision Publishing's Guitar Hero 5, Marvel: Ultimate Alliance 2, and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment's World of Warcraft.
Earlier this month, Take-Two had expected fourth-quarter results to trail behind its prior guidance due to to factors such as the performance of its Major League Baseball titles in the fourth quarter. The baseball titles reduced earnings by $0.09 per share, along with an impairment of capitalized software based on sales estimates for its baseball titles in fiscal 2010, representing $0.05 per share.
During the quarter, the company incurred inventory write downs in its distribution business, primarily related to prior generation software of $0.07 per share, and realized lower-than-expected initial performance of several of its key holiday releases.
For the full year 2009, Take-Two reported a net loss of $137.9 million or $1.80 per share, compared to GAAP net income of $97.1 million or $1.28 in fiscal 2008.
Non-GAAP net loss for fiscal year 2009 was $85.7 million or $1.12 per share, compared to non-GAAP net income of $158.2 million or $2.08 per share in the prior year period.
Net revenue for the full year dropped to $968.5 million from $1.54 billion in the corresponding year-ago period.
Looking ahead to the first quarter, the company reiterated its guidance and expects revenue in the range of $210 million - $260 million with a non-GAAP net loss in the range of $0.40 - $0.50 per share. Analysts currently anticipate the company to report a loss of $0.47 per share on revenue of $226.61 million for the quarter.
For the full year 2010, the company reiterated its guidance and expects revenue in the range of $1.0 billion - $1.2 billion with non-GAAP loss in the range of $0.40 - $0.60 per share. Analysts currently anticipate the company to report a loss of $0.42 per share on revenue of $1.13 billion for the full year.
The company's expected fiscal year 2010 results primarily reflect the movement of one triple-A title out of the fiscal year; a non-GAAP net loss from the company's Major League Baseball business in the range of $30 million to $35 million or $0.38 to $0.44 per share; higher development costs for certain titles; as well as the impact of the continued difficult retail environment.
Commenting on the results, chairman of Take-Two, Strauss Zelnick said, "Our company and industry experienced a very difficult economic environment in 2009. We believe that 2010 will continue to be challenging and our outlook, while disappointing, reflects a prudent approach to managing our business."
Take-Two's titles planned for launch in 2010 include BioShock 2, Mafia II, Max Payne 3, and Red Dead Redemption. The company said it expects the global release of BioShock 2 on February 9, 2010, and Red Dead Redemption on April 27, 2010. Mafia II is scheduled for release during the first half of 2010 and Max Payne 3 is now planned for release during the fourth quarter of fiscal 2010.
TTWO closed Thursday's regular trading at $8.25, up $0.15 or 1.85%, on a volume of 5.81 million shares on the Nasdaq. In after hours, the stock is trading at $8.02, down $0.23 or 2.79%. In the past 52-week period, the stock trended in the range of $5.56 - $12.57, with an average 3-month volume of 2.99 million shares.
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