Gaming company Take-Two Interactive has missed earnings expectations in its first report since its acquisition of mobile gaming company Zynga.
Despite higher revenue, Take-Two Interactive swung to a first quarter loss amid economic headwinds for the mobile industry. In the three months ended June 30, the company reported revenue of $1.1 billion, compared to $813.3 million in year-earlier quarter.
Take-Two swung to a first quarter net loss of $104 million, or a loss per share of 76 cents, compared to net income of $152.3 million, or earnings per share of $1.32 last year. Both the revenue and per-share earnings lines came in below Wall Street consensus forecasts.
Take-Two reached an agreement to acquire the mobile gaming company in January 2022 and the deal closed on May 23, meaning Zynga was represented in 39 days of the quarter.
Net bookings reached $1 billion, a 41 percent increase compared to $711.4 million in the previous year’s quarter. “We are seeing some softness in the mobile market. The good news is we’re doing better than most, if not all, and I think we’re seeing an offsetting increase in our market share,” Strauss Zelnick, chairman and CEO of Take-Two, told analysts during an after-market conference call when asked to comment on market conditions for the mobile industry.
Zelnick also argued Hollywood was not immune to a threatened recession as consumer spending took a hit from rising inflation. “Over and over again, I’ve said I don’t believe the entertainment business is recession proof or even necessarily recession resistant. We’re seeing now that decline in consumer spending. An increase in inflation will have an impact on the industry. You’ve seen it from our report today and from our competitors’ reports as well,” he told analysts.
Shares of the gaming company fell 7 percent after hours on Monday. The top contributors to fourth quarter net revenue included NBA 2K22; Grand Theft Auto Online and Grand Theft Auto V; Tiny Tina’s Wonderlands; Empires & Puzzles; Red Dead Redemption 2 and Red Dead Online; WWE 2K22; Rollic’s hyper-casual portfolio; The Quarry; Toon Blast; and Top Eleven.
“Our long term vison is clearer than ever and we believe that our combination with Zynga will enable us to capitalize better on the evolving dynamics of the interactive entertainment industry,” Zelnick told analysts during prepared remarks. Both companies are discussing potential new projects to collaborate on and Take Two anticipates $100 million of annual cost synergies over five years from the newly-merged companies post-close, with $50 million in cost savings to be secured in the first year.
Take-Two also revised its outlook for the fiscal year 2023 to include Zynga, but lowered estimates from previous forecasts. Take-Two now expects net bookings of $5.8 billion to $5.9 billion during the year, net revenue ranging from $5.73 to $5.83 billion and a net loss of $438 to $398 million, or a loss per share of $2.75 to $2.50.