Take-Two Interactive Software, Inc. (TTWO) on Q3 2021 Results - Earnings Call Transcript

Operator: Greetings and welcome to Take-Two Q3 Fiscal Year ‘21 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Nicole Shevins Senior Vice President of Investor Relations and Corporate Communications. Thank you, Nicole. You may begin. Nicole Shevins: Good afternoon. I recently joined Take-Two and I’d like to thank you for joining our conference call to discuss our results for the third quarter of fiscal year 2021 ended December 31, of 2020. I’m thrilled to the team and look forward to working with all of you. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks. I'd like to remind everyone that statements made during this call that are not historical facts are considered forward-looking statements under Federal Securities Laws. These forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements. Actual operating results may vary significantly from these forward-looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, including the risks summarized in the section entitled Risk Factors. I'd also like to note that unless otherwise stated all numbers we will be discussing today are GAAP and all comparisons are year-over-year. Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. Our press release also contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook. Our press release and filings with the SEC may be obtained from our website at take2games.com. And now, I'll turn the call over to Strauss. Strauss Zelnick: I’d like to welcome Nicole to our team. And I am confident that she will enhance our investor relations efforts going forward. On behalf of our entire management team, I'd like to acknowledge those who have been and continue to be affected by the global pandemic. No words can bring comfort to those who have suffered. However, we do remain hopeful that better days lie ahead and that we all may return to an enjoy our lives as we once did. We remain immensely grateful to frontline workers who are caring selflessly for those in need ensuring the vaccines are being delivered and administered and helping the world navigate further in these troubling times. Karl Slatoff: Thanks, Strauss. I'd like to begin by recognizing the ongoing work of our teams around the world and continue to deliver incredible results that are a testament to this unwavering commitment to quality, our deeply rooted culture of collaboration and the singular drive to achieve our goals. Our unique ability to captivate and engage audiences has never been more evident nor more important than in these challenging times. And we remain immensely grateful to our player communities for making our games part of their lives. I’ll now discuss our recent and upcoming releases. On January 27, 2K released the fourth roster update for WWE 2K Battlegrounds, which adds to the games outrageous in and out of the ring action. The update, which features many popular superstars and legends including China, Mark Henry, Christian and more. On Wednesday 2K will release the fifth update that will feature even more fan favorites and we will share details shortly. On January 28, 2K and Firaxis Games released the Vietnam & Kublai Khan Pack for Sid Meier's Civilization VI as part of the new frontier paths for PlayStation 4, Xbox One, Nintendo Switch and PC. Each pack in the past features new civilizations and leaders and is also available for individual purchase. The Final Frontier Pass pack will be released next month and 2K will have more to share about that in the coming weeks. In addition, last week, private division launched their beloved space simulation Kerbal Space Program on Tencent's WeGame platform in China. We are very pleased to build upon our successful partnership with Tencent and believe that releasing Kerbal Space Program on WeGame represents a great opportunity to expand the global community and bolster our offerings in China. Lainie Goldstein: Thanks, Karl. And good afternoon, everyone. Today I’ll discuss our third quarter results and then review our financial outlook for the fourth quarter and fiscal year 2021. Please note that additional details regarding our actual results and outlets are contained in our press release. Net bookings were $814 million this results exceeded our outlook of $675 million to $725 million, driven primarily by the outperformance of Grand Theft Auto Online and Grand Theft Auto V, the Mafia Definitive Edition and Mafia Trilogy, NBA 2K and Red Dead Redemption 2. Digitally delivered net bookings declined by 4% as compared to our outlook of a 15% decline and accounted for 82% of the total. This has also exceeded our outlook primarily due to the outperformance of recurrent consumer spending. Our third quarter results last year benefited from the launches of Red Dead Redemption 2 on PC and the Outer World. During the third quarter 56% of sales of console games were delivered digitally up from 44% last year. Recurrent consumer spending grew 30% as compared to our outlook of 5% growth and accounted for 58% of total net bookings. This growth was driven primarily by Grand Theft Auto Online and NBA 2K. GAAP net revenue was $861 million and cost of goods sold was $346 million. Operating expenses increased by 7% to $339 million due primarily to the addition of Playdots, higher personnel costs and IT expenses partially offset by lower marketing expenses. And GAAP net income grew 11% to $182 million or $1.57 per share as compared to $164 million or $1.43 per share in the third quarter last year. Our GAAP net income benefited from $40.6 million of realized and unrealized gains on a long-term investment. We ended the quarter with $2.42 billion of cash into our term investments. Not Included in this balance is the cash portion of our offer to acquire Codemasters which was included in restricted cash. As this amount not been considered still restricted as of December 31, our cash and short-term investments for this quarter end would have been $2.7 billion. As of January 13, 2021, the offer lapsed and the cash was no longer restricted. Now to our guidance, starting with the fiscal fourth quarter, we projected net bookings to range from $602 million to $652 million compared to $729 million in the fourth quarter last year. Last year's fourth quarter benefited from the recognition of higher license fees from Digital Partners to provide free downloads of certain games on their platform and from the launch of Borderlands 3 and this decline is also due to the initial surge in digital downloads at the onset of shelter at home orders in March 2020. We expect digitally delivered net bookings to be down approximately 10%. Digital is projected to represent 93% of total net bookings which is in line with last year. Forecast assumes that 73% of console game sales will be delivered digitally up from 63% last year. The current consumer spending to be up approximately 5% due to continued engagement in our titles. Virtual currency is driving this increase and is partially offset by lower add-on content due to last year launch of the for Borderlands 3. The largest contributors to net bookings are expected to be NBA 2K21, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social points mobile games, Two Dots, Borderlands 3 and Sid Meier's Civilization VI. We expect GAAP net revenue to range from $702 million to $752 million and cost of goods sold to range from $267 million to $293 million. Operating expenses are expected to range from $316 million to $326 million. As at the midpoint this represents a 32% increase over last year, driven primarily by higher marketing and research and development expenses and the addition of Playdots. And GAAP net income is expected to range from $102 million to $113 million or $0.88 to $0.98 per share. For management reporting purposes, we expect our tax rate to be 16% throughout fiscal 2021. We are again increasing our full year outlook which now includes record net bookings and operating results. This will be the fifth consecutive year that these two metrics have grown. Our net bookings outlook range is now $3.37 billion to $3.42 billion, up from our previous guidance of $3.15 billion to $3.25 billion and original guidance of $2.55 billion to $2.65 billion. This is being driven by our third quarter outperformance along with an updated forecast for the fourth quarter, which has improved primarily due to higher recurrent consumer spending from Grand Theft Auto Online and NBA 2K as well as strong performance from Grand Theft Auto V and Red Dead Redemption 2. We expect growth from the prior year from NBA 2K, Grand Theft Auto Online and Grand Theft Auto V and Social Point’s mobile games to be offset primarily by lower results from Borderlands 3. The largest contributor to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Point’s mobile games, Borderlands 3 Sid Meier’s Civilization VI, the Mafia Definitive Edition and Mafia Trilogy and PGA TOUR 2K21. We expect the net bookings breakdown from our labels to be roughly 55% 2K, 35% Rockstar Games and 10% Private Division, Social Point and Playdots. And we forecast our geographic net bookings split to be about 60% United States and 40% International. We now project digitally delivered net bookings to increase by approximately 20% as compared to our prior outlook of 15% growth. As a percentage of our business digital projected to represent 87% of net bookings from 82% last year. A forecast assumes that 63% of console game sales will be delivered digitally up from 55% last year. We now expect recurrent consumer spending to grow by approximately 45% as compared to our prior outlook of 30% growth and represent approximately 64% of net bookings as compared to 51% last year. Growth is being driven primarily by NBA 2K, Grand Theft Auto Online, the Addition of Playdots and Social Point’s mobile games. We are increasing our non-GAAP adjusted unrestricted operating cash flow outlet to more than $750 million up from our prior outlets of more than $650 million. We've planned to deploy approximately $75 million for capital expenditures. We expect GAAP net revenue to range from $3.24 billion to $3.29 billion and cost of goods sold to range from $1.52 billion to $1.55 billion. Total operating expenses are expected to range from $1.22 billion to $1.23 billion. The midpoint this represents a 9% increase over the prior year driven by the addition to Playdots higher headcount, IT, research and development expense and charitable contributions, partially offset by lower marketing expenses. And we expect GAAP net income to range from $472 million to $484 million or $4.08 to $4.18 per share. In closing, we are very pleased with the ongoing momentum that we have experienced so far in fiscal 2021, including our expectations to deliver both record net bookings and operating results for the full year. We remain extremely confident in our long-term growth trajectory and our ability to deliver shareholder value driven by our key competitive advantages, our incredible portfolio of creative assets, our strong fundamentals and healthy balance sheet and of course our industry leading talent. Thank you. I'll now turn the call back this Strauss. Strauss Zelnick: Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their hard work, commitment to excellence and for delivering another outstanding quarter. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. One moment please while we pull for questions. Thank you. Our first question comes from Mario Lu with Barclays. Please proceed with your question. Mario Lu: Great, thanks for taking the question. So I have one high level strategy M&A question and the second one on GTA. So the first one, you guys mentioned, more copies of GTA 5 sold in 2020 than in any year since launch. And then similarly, Red Dead Online saw more players in December since launch. So it seems like you guys are benefiting well on the trend that gamers are gravitating towards the largest gaming franchises. So that being said, curious to hear what your overall view is on growing your core franchises, and potentially expanding them into new platforms and business models versus expanding your portfolio with new IP either organically or through M&A? And I have the follow up. Strauss Zelnick: Great, thanks, Mario, it's sort of all of the above. So it's exciting that we have these extraordinary franchises that keep captivating and engaging consumers many years after launch. And the reason that that's occurring is first of all the initial quality, which is unmatched in our business. And second, because our labels, both Rockstar Games and 2K continue to deliver content on an ongoing basis that further causes captivation and engagement. And if we keep doing that, then we'll continue we think to have similar results. I think you're right that consumers get really comfortable within excited by specific franchises. And if you keep delivering great content, they will maintain their involvement on an ongoing basis, we're seeing that in all forms of the entertainment business. At the same time, we always have to create new titles both new iterations of existing beloved franchises, and new intellectual property. And if we don't do that, then we're burning the furniture. So to that end, in the next five years, we expect to bring 93 new releases to market which is more than double what our development capacity was just a few years ago. So we're both excited by the continued growing engagement in our existing entities as well as what the future can bring with new releases. Mario Lu: Great. And then the second question on GTA Online, you guys mentioned, over half of your players did the recent high solo. So I'm personally surprised that number since more and more players are playing games as a means of social connection. So how did that percentage, compare versus your internal expectations? And does that change how you do single player opportunity, even in an existing online environment like GTA Online? Strauss Zelnick: Well, no, this wasn't coincidental. I mean, the folks at Rockstar Games intended to create a powerful single player experience a story driven experience. And Rockstar has always been known for great stories and great single player experiences and then developed in addition, a massive multiplayer opportunity over the past years. And I think it's a reminder not that we needed one, the Rockstar Games can do both of those things at the highest possible level of execution in our business. There was a, I think there was an argument just a couple years ago, not around here, not in this shop. But in some of our competitors offices, that single player is dead, that it's all about multiplayer. We didn't believe that I said specifically and publicly that we didn't believe that, our labels don't believe that. And we deliver an array of experiences that range from hyper casual mobile, to the most complex, the most robust, single player and multiplayer experiences. And we intend to continue doing that. Mario Lu: That's helpful. Thank you. Operator: Thank you. Our next question comes from Mike Ng with Goldman Sachs. Please proceed with your question. Mike Ng: Great. Thank you very much for the question. I was hoping you could talk about how the success of GTA 5 units this year, as well as any learnings from the standalone Red Dead Online experience, informs your view about what GTA Enhanced Edition and the standalone GTA Online should look like or will look like next year and perhaps how it should perform? Thanks. Strauss Zelnick: Well, I really appreciate the sentiment behind the question. But I sort of put it in the category of how high is up? We don't tend to speculate and we haven't offered any initial guidance for next fiscal year either. So we'll sharpen our pencil in the coming months and of course we will create initial guidance and that will reflect partially that performance. But in general, if history is any guide, it will be very successful indeed. And I would -- that wouldn't surprise me. Mike Ng: Great. Thanks, I can certainly appreciate that. And just as another question, can you talk a little bit about the Music Locker experience within GTA Online? Obviously, it's -- it feels like it's someone's unique? Is there an opportunity for Rockstar 2K to incorporate even more use for lack of better words, real world elements or real world partners into virtual worlds like GTA Online? Thanks. Karl Slatoff: Hi, it’s Karl speaking. Yes, obviously the Music Locker experience is very unique. It's a terrific application and then in GTA. Music has always been a really, really important part of the Grand Theft Auto franchise and it will continue to be; it's always been part of the culture of the Grand Theft Auto franchise, and people explore it and enjoy the found new music through the franchise over-and-over again, I don't want to speculate about what's in Rockstars plans as it relates to music, but rest assured music is always has always been and will always be a large part of what GTA is all about. Mike Ng: Great. Thanks, Karl. Thanks, Strauss. Operator: Thank you. Our next question comes from Colin Sebastian with Robert W. Baird. Please proceed with your question. Colin Sebastian: Great. Good afternoon, everyone. Two questions from me. First-off, as you look back at the pricing strategy for NBA over the holidays, is it safe to say you feel that that was the right strategy and I guess does it set a new bar for AAA frontline content on next-gen platforms? And then secondly, bigger picture, just given the ongoing industry consolidation Strauss and the interest you've shown in participating activity are you seeing still compelling opportunities out there in the market even as competition for deals seems pretty intense and valuations look like they're also on the rise, any commentary there will be helpful? Thanks. Strauss Zelnick: Yes, in terms of frontline pricing for NBA 2K21, I think that worked out very much as expected. And as planned, it's in a premium offering at the highest possible level, the title was built from the ground up for next-gen, so first title here that has been created that way. And the acceptance by consumers has been nothing short of extraordinary, the title sold in over 8 million units. Now, we haven't talked about pricing on other titles. So it would be premature to discuss that we'll talk about that and title-by-title basis going forward. In terms of consolidation, you've seen a lot of deals out there, most recently Embracer is, is merging with Gearbox, a company near and dear to our heart and we're grateful that we'll still be in business with Gearbox and they'll still be working with us on Borderlands and on other titles. We acquired Playdots just a few months ago and we're excited about how that deals gone. We lost the Codemasters deal to our friends out west that was disappointing but reflects our discipline in such matters. So there is an awful lot going on, I tend to agree Colin that pricing can be pretty heavy. And we have a stated strategy and a disciplined approach. It served us well. We have yet to make an acquisition that that hasn't worked out. And we're looking for great teams, great intellectual property and for an arrangement that would be accretive to shareholder value. And we will -- we'll look for that and at times aggressively. But, we have a sort of firm -- we have a firm grasp on hand calculator in one hand and on our approach strategy and tactics in the other. Colin Sebastian: All right, thanks, Strauss. Operator: Thank you. Our next question comes from Doug Creutz with Cowen & Co. Please proceed with your question. Doug Creutz: Hey, thanks. You've always been known for Take-Two’s always been known for putting out some of the deepest and most complex games in the market. And there's been a debate, I think, emerging in the industry about whether the current pace of AAA game development and sustainable both, I think for getting games out the door, and then the sense that life services are becoming more and more of an arms race in terms of who can put the most content out the quickest. There was a competing game that came out recently that was highly anticipated where I think it was a clear case of that studios reach exceeding their grasp, what have you been doing? And what are you doing sort of operationally, structurally, to make sure that your ability to keep raising the bar and your entertainment experiences doesn't run afoul of some of these issues? Thanks. Strauss Zelnick: Well, first of all you never want to sit back and just say, we've always been able to do it's totally fine. It'll be fine going forward. We're always looking over our shoulders. We're always trying to figure out what we can do better. We're, I think the most self critical group I've ever run into. How do we maintain our commitment to quality by making sure that our creative teams pursue what they're passionate is about, and don't pursue something they're not passionate about and by maintaining operational and financial discipline at the same time. And the effect of that is we can have long development cycles. And we've been criticized for that. But I think the case that you're alluding to reflects the fact that you're always better served to wait for perfection if you can create perfection. And all of our labels are seeking perfection. And we don't always succeed, sometimes we fall short. But that's the goal. And if anything in these times cause us to sharpen our minds further and sharpen our discipline further and try harder. So yes right and it's great that Rockstar Games continues to put out add-on content and additional content for Grand Theft Auto Online and for Red Dead Online. But they've put out material that they really believe in that they're passionate about and that is of the highest possible quality. And that means we're not on a weekly cadence and we're not going to be in that means we don't necessarily know the exact release date. But what we do know is that we will wait for it to be as close to perfect as anything can be. And that's true 2K. That's true, it's Social Point and that's true a Private Division. And that's an unwavering commitment. And it's part of our strategy. And it comes from the top of the company. And we are prepared to accept the results when we fall short in terms of timing or when we sometimes spend a little more than we would like because it always pays-off. Doug Creutz: Thanks. Operator: Thank you. Our next question comes from Brian Nowak with Morgan Stanley. Please proceed with your question. Brian Nowak: Thanks for taking my question. I just -- Strauss wanted to dig a little more into the 93 pipeline number you mentioned earlier tonight again. I think it's very similar to what you guys said last year. So I guess the question is, is this the same 93 titles we had a year ago or some being shutdown and you have new ones in there? And then just the way that we kind of better understand, how do we think about breaking that apart? Anyway, you'd like to between categories, between mobile, between AAA, between more mid-tier games just how should we think about what within this 93 titles? Karl Slatoff: Hey, Brain, it's Karl, I'll take this one. So to answer the first part of the question, we -- the 93 titles that we put out, there was a snapshot, it was a moment in time and we really haven't given any updates on that since then. Of course, things move in and out all the time. It hasn't really been that long since then. So you can't really expect that there's going to be a significant amount of movement, but I can tell you for sure. There's something that have fallen on, something that are back end. But generally speaking, these are still pretty good numbers in general. But, again we do expect that this pipeline will be fluid, as we get things through various milestones. So it will be changing overtime. But we haven't provided any additional updates, other than the 93 initial announcement that we made. And just to break it down a little bit for you, in terms of what comprises that 93. So on a high level, 63 of those titles of the 93 are, we would consider core gaming experiences. And 17 of them are sort of mid core arcade style experiences and 13 of them are what we would consider to be casual experiences. About half of them 47 of the titles are from existing IP or sequels. And the rest of them are for our new intellectual property. So we are making investments in new IP, very important, so I spoke about that earlier. And then in terms of platforms, 72 of the 93 titles are planned for console PC or streaming, including seven of those that will also be available on mobile. So that would leave 21 that are that are on the list for specifically for mobile. And also from a business model perspective 67 of the 93 are -- they required the purchase and 26 are completely free to play. So that's the breakdown as it was the last time we did it. But we do expect that that will be moving around as we as we go deeper into that pipeline and over the next few years. Brian Nowak: Okay. Thanks, Karl. Operator: Thank you. Our next question comes from Bryan Kraft with Deutsche Bank. Please proceed with your question. Bryan Kraft: Hi, good afternoon, we'd love to understand at this point, your latest thinking about the mobile gaming opportunity for you in terms of what kinds of IP and games are likely to succeed, how much capital and resources and make sense to put behind mobile. And what the broader strategy is going forward in the mobile space? Thank you. Karl Slatoff: It's a Karl again. So obviously, the mobile component of our business has becoming more and more important with our acquisition of Social Point and Playdots. So we're very committed to it. Not to mention mobile activity our label levels, specifically 2K with WWE, SuperCard, et cetera and some NBA properties. So we are, we are highly invested in the mobile business and we expect that it will be a even growing part of our investment going forward. But it really does boil -- our strategy boils down to a few components. And the first really is focuses around new -- creating new IP for the mobile space. And that's around our Social Point and Playdots business. So it's IP that's created specifically for the mobile environment. And, we've been investing in that obviously over the past couple years, specifically to M&A but also now organically now that we've got a pretty sizable platform between those two acquisitions. The second component is bringing our core franchises to the mobile platforms. So these are games that are more or less ports or they could be slight variations of games, existing content that exists. So we've done that quite successfully for many, many years. And will continue to do so where it's appropriate. And then the third component is really just bringing our core is integrating a mobile experience with our core experiences. So these are things like companion apps, which we've done effectively with Red Dead Redemption, we've done it with Mafia’s, we've done it with a number of our franchises, where you can have a separate mobile experience that you can use. And it can be used to enhance your core experience, pretty much at the same time or maybe offline, when you're not in front of your television set of your console. So those are really are the components of our strategy. But obviously it's a growing part of the industry. We're very tapped into it. And we're investing more and more. Bryan Kraft: Thanks, Karl. Operator: Thank you. Our next question is from Matthew Thornton with Truist Securities. Please proceed with your question. Matthew Thornton: Hey, good afternoon, everybody. Thanks for taking the question. Maybe, two if I could, maybe for either Strauss or Karl. First one is just higher level, you referred to the pipeline, the 93 projects a little earlier. I'm just wondering if there's any color if you can offer just as to how we're kind of progressing and maybe it's a little bit early, but just any incremental thoughts as to what the linearity is shaping up to look like there any color around the pipeline would be helpful there. And then just secondly, PGA TOUR, it's fairly small game but it was well reviewed. So it looks like successful by all accounts, I am curious if that was successful number are large enough where it could actually become a recurring title and join NBA and WWE in that regard, any thoughts there? Thanks, guys. Strauss Zelnick: So on the first part of the pipeline, I really don't have more information I can give you in terms of the pace of that pipeline and when the titles coming out, but rest assured, you will be hearing a lot more about that in the coming months. And as we talk about our release schedule. So unfortunately, I don't have any more to give you on that. And then in terms of the PGA TOUR 2K, we are incredibly excited about that the performance of that title. And I'd like to say that, that we're not surprised. But I am personally a little bit surprised we -- it's done fantastically well, we've sold around 2 million units or so which is a fantastic result. And we're just really getting started. So we do think that there's a future in this franchise for us. We haven't really announced much about what specifically that means. But what that is out there, this is something that we feel like it merits investment from our side. And that's something that we can really turn into very profitable and exciting franchise for us going forward for many years. Operator: Thank you. Our next question comes from Benjamin Black with Evercore ISI. Please proceed with your question. Benjamin Black: Great, thank you for the question. So obviously the gaming category as a whole has benefited from these extended stay-at-home provisions, but as we look to the account of ‘21, I'm really curious to hear what data points or trends you're seeing that could give us, some confidence and the sustainability as one of the trends we're seeing today. And then secondly, I wonder if you could talk a little bit more about the decision to disaggregate Red Dead Online from the core game, what are some of the key findings you have there? And I am curious to hear how Red Dead Online is deferring relative to GTA online at a comfortable stage with lifecycle? Thank you. Strauss Zelnick: Sorry, on the first question I, I'm hard pressed to know what data that would be except that we continue to do very well. And an engagement is very high. We had not planned in our numbers for the fourth quarter to see growth driven by the pandemic that has not been our approach. But of course, we continue to outperform and the net bookings that we're guiding to for the fiscal now are $800 million higher than our original guidance. So we're grateful for the growth. I think, under any circumstances, post-pandemic and hopefully there will be post-pandemic demand will be higher than pre-pandemic demand. I think it's quite clear that, that there's been a systemic shift in favor of Interactive Entertainment and activate a media consultancy confirm that. But I don't know whether there'll be some fall-off as people are out and about and doing, doing things outside of the home, it wouldn't surprise me if there were, but as long as we continue to deliver great experiences, I think we'll see continued growth. What was your second question again? Benjamin Black: Second question was really around the decision to desegregate Red Dead Online. And also, how Red Dead Online now is fairing relative to GTA online of the comparable stage of its lifecycle? Strauss Zelnick: So they're very different titles and they're really not comparable in any way. So both massive hits. And the decision I think was based on offering more opportunities to engage with the title, titles been in market for some time. And Rockstar has shown a willingness to experiment with different marketing models, all in an effort to enhance the size of the audience and to increase customer engagement and enjoyment. And I think it's working out really well. And I'm looking forward to seeing how Grand Theft Auto Online sales when the two is available as a standalone experience in fiscal ‘22. Benjamin Black: Excellent. Thank you very much. Operator: Thank you. Our next question comes from Mike Hickey with the Benchmark Company. Please proceed with your question. Mike Hickey: Strauss, Lainie, Karl, Nicole thanks for taking my questions, guys. Congrats on an incredible quarter and guide. I know it's early, but as we sort of think about fiscal year ‘22 here, obviously you've got a lot of momentum in your life service. Looks like a step up here and engagement is going to be lasting. You do have some visibility on the pipeline. Obviously, you have more, I am just curious if you think you can grow the fiscal year ‘22 and you sort of -- you can't exactly answer that. Maybe just grow obviously grow looking forward to? And the second question is, the work from home scenario or duration is continued to sort of expand here and just sort of curious the impact that has had on the developer culture and productivity when you look sort of in the medium-term of your pipeline? Thanks, guys. Lainie Goldstein: Hey, Mike. So for fiscal year ‘22, At this point, it's a little early for us to provide fiscal ‘22 guidance. We're also currently in the process of completing our detailed budget for fiscal ‘22. And as you know, we typically guide for the next fiscal year, when we report our fourth quarter earnings in May. But it's important to keep in mind that this is clearly a record year for us, partly driven by the benefit of individuals sheltering at home and it remains to be seen how long these trends will go on. And when we originally projected sequential growth for fiscal ‘22 versus fiscal ‘21, our fiscal ‘21 guidance was projecting a decrease from fiscal 2020. And now we're expecting record net bookings for fiscal ‘21 which represents 30% growth over our original guidance and year-over-year growth compared to fiscal ‘20. Also, we expect record adjusted unrestricted operating cash flow over $750 million, which is more than double our original estimate. So we'll see in May, will give you a little bit of an update at that point. So that's when we'll give you some more details on ‘22. Strauss Zelnick: And Mike with regard to working from home, I can't predict how much longer that'll be the case. We follow, what government requirements and suggestions are and we follow the science and the facts. Some of our offices are open, no one is obligated to come to the office, if they're uncomfortable in doing so. That said, we've been extraordinarily productive. Our IT team did an A plus job making remote work possible for our company. We moved over to remote work within a week of needing to shelter at home. And we haven't missed a beat not even not at all, we have one title that was delayed Kerbal Space Program 2 that was hit. And more importantly, the quality of our releases has been extraordinary. I appreciate the question about culture. I think it's actually difficult to build a culture in a remote work environment. But I don't think it's impossible to do that, when you've already gotten to know each other. When you build a powerful company with a powerful business model and a powerful team. I think, to the contrary, in a challenging time, everyone pulled together and knew that it was our collective job to make sure the company didn't -- you didn't have any issues, and in fact, continued to grow. And that's exactly what happened. But, and so if any -- in any case, I think moral may actually be stronger, but it's not something that can or should last forever. And it has been taxing and I think people are actually working harder at home than they did in offices, even though there is no commute. I think it creates a lot of challenges. And I'm looking forward to it ending. So I know you're not -- we're not one of those companies where we believe like, oh this is a great idea everyone will just work from home. I think certain people may be able to work from home or if that's truly their interest, I think generally speaking will benefit from being together as a group. Operator: Thank you. Our next question comes from Eric Handler with MKM Partners. Please proceed with your question. Eric Handler: Yes, thank you. I appreciate the question. Thinking about, the Grand Theft Auto franchise and the fact that we've now sold over 140 million units of the game. And granted there's probably some overlap, where people have more than one copy of the game. But it seems like there is a huge audience of people that have probably never played GTA IV or any of the other prior GTA games that came out before that. And I just wonder, how do you think about obviously there's a huge appetite for GTA content and how -- what's your perspective there in terms of thinking about remastering pre-prior games. Strauss Zelnick: I'd say it's a great and encouraging question. I'm kind of inclined to leave it more as a statement than a question. And any updates on our release schedule will come from Rockstar Games. Eric Handler: Fair enough. Thanks a lot. Operator: Thank you. Our next question comes from Stephen Ju with Credit Suisse. Please proceed with your question. Stephen Ju: Okay. Thank you so much. Strauss, over the last few years, I think the industry has gone from needing to acquire customers with massive advertising campaigns every time there was a new iteration of a game to that was set up where you are in front of your user base all the time. And he just called out, I think, in a prior answer, again the captivation and engagement with what is now basically a perpetual service model. So do you anticipate going forward potentially further operating margin benefits due to what might be a decreased need for marketing spend? And I guess, building on one of the M&A questions earlier and this is definitely not an either or question. But do you think your time and Take-Two’s capital are probably better served adding to the teams you already have at Rockstar 2K, where there already seems to be a pretty good culture of excellence there? Thanks. Strauss Zelnick: It's a -- thank you for the question. I don't think you're going to see a reduction in our marketing spend, because we're launching new iterations of existing franchises. And we're launching new intellectual property in a highly competitive market. And I think we'll continue to spend support those releases. So I don't think you'll see leverage there. You see leverage, though, of course, is when you sell more units. So if you make bigger hits, and we make bigger hits than anyone else in the market, then obviously you're amortizing that marketing spend across a larger number of units. So a marketing spend as a percent of your net bookings can be lower to be accepted you have greater success. And that's certainly our goal. And in that event, of course, we'd have higher operating margins. And you've seen that reflected in the growth in our operating margins, as you've seen the growth in our hits in the last 14 years. And I would hope that that will continue, but we entirely driven by whatever success we have or don't have. I think where you can, have a little more confidence around growth in the margins would be in the shift to digital distribution, which is an extra and which is happening and digitally distributed products were 82% of our net bookings in the quarter. And we think that the world is heading towards more than that. And that will help our margins as well as our competitors’ margins. Also, of course, our recurrent consumer spending is higher margin because the cost associated with the content that drives recurrent consumer spending is lower than the costs related to an initial large release. So to the extent that we continue to deliver add-on content, to beloved titles, which is our goal, you could see an increase in operating margins coming from that as well. But again, that's reliant upon creating hits. And that won't occur if we don't create more hits. So everything comes down to creating bigger and bigger hits. And that's our goal and our strategy. Karl Slatoff: . Strauss Zelnick: Sorry and I think on your second question, thanks for the reminder, Karl, it's all of the above, we're adding to the team's 2K and Rockstar as they work on more properties and bigger properties. We are adding to the teams at Social Point and Private Division selectively as we work on new properties. And we have shown a willingness to acquire companies and add that way as well very, very selectively. So we're a growth business. And you'll see that on our headcount. I'm hopeful that our headcount essentially goes to production capacity, engineering capacity and doesn't go to fixed corporate overhead. Stephen Ju: Thank you. Operator: Thank you. Our last question comes from Ryan Gee with Bank of America. Please proceed with your question. Ryan Gee: Hey, guys, thanks for squeezing me in right there. First one for Lainie, we're about a month away from last year when most of us were all sent indoors. And we saw that increased demand for gaming content. So just so we're all on the same page here. Do you mind refreshing us how much maybe GTA online NBA 2K online, I mean NBA 2K perhaps outperformed your expectations in the March quarter last year or maybe it's actually more in the June quarter? But if you could try and quantify that, so that we can have our model set accordingly. That would be a fantastic. And then a question for either Strauss or Karl. You guys acquired a Ruffian Games or Rockstar acquired Ruffian late last year. I believe that they have a history in the shooter category with the Halo franchise specifically. So are they coming on board to broaden Rockstar’s reached designers like that or what role do you anticipate they'll play in the future of that studio either supporting or more and more lead development role? Thanks. Strauss Zelnick: We're thrilled to welcome the Ruffian team to Rockstar Games and to Take-Two and we think they're an extraordinarily talented team. And we're looking forward to them becoming a part of Rockstar Games. And beyond that they'll be more announcements in due time. Lainie Goldstein: And Ryan on the title-by-title on that -- for the fourth quarter last year I don't have that information in front of me, but we can follow up with you on that. But we -- all of our titles, I think over performed in that quarter but on a title-by-title basis. It was a significant overachievement specifically on GTA online and for NBA 2K. Ryan Gee: Very nice. Thanks, guys. Strauss Zelnick: Well, thank you all very much for joining us today. Obviously, we're really proud of what the entire team has achieved. The results are extraordinary. And all of us are so grateful to our colleagues around the world. And of course, we're grateful to you for joining us today. Thanks so much. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.
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Take-Two Interactive Software, Inc. (NASDAQ:TTWO) Maintains Buy Rating Amidst Potential Data Breach Investigation

  • Ascendiant maintains its "Buy" rating for NASDAQ:TTWO, priced at $208.06.
  • TTWO's stock price has experienced a slight decrease to $208.05, indicating some volatility.
  • An ongoing investigation into potential data breaches on the Borderlands website could impact Take-Two Interactive's reputation and financial standing.

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is a prominent player in the video game industry, known for its popular franchises like Grand Theft Auto and Borderlands. The company develops and publishes interactive entertainment for consumers worldwide. It competes with other major gaming companies such as Electronic Arts and Activision Blizzard. On March 3, 2025, Ascendiant maintained its "Buy" rating for TTWO stock, which was priced at $208.06 at the time.

Despite the positive rating from Ascendiant, TTWO's stock price has seen a slight decrease. Currently, the stock is priced at $208.05, reflecting a decrease of approximately 1.85% or $3.93. The stock has traded between $207.79 and $214.50 today, indicating some volatility in its price. Over the past year, TTWO has experienced a high of $218.75 and a low of $135.24, showcasing its fluctuating performance.

The company's market capitalization is approximately $36.72 billion, highlighting its significant presence in the gaming industry. With a trading volume of 1,736,454 shares on the NASDAQ exchange, TTWO remains an actively traded stock. However, the ongoing investigation by Levi & Korsinsky, LLP into potential data breaches on the Borderlands website could impact the company's reputation and financial standing.

The investigation suggests that legally protected data may have been unlawfully intercepted during transactions on the Borderlands platform. If Take-Two Interactive is found responsible for failing to secure this data, it could face legal and financial consequences. This situation could affect customer trust and potentially influence the company's stock performance in the future.

Take-Two Interactive Reiterates Annual Booking Guidance Despite Widened Loss

Take-Two Interactive Software (NASDAQ:TTWO) reaffirmed its annual bookings guidance and projected future growth, even as it forecasted a deeper annual loss and delivered mixed fiscal first-quarter results. The video game maker reported a Q1 loss of $1.52 per share on revenue of $1.34 billion, missing analyst expectations of a $1.37 per share loss on $1.26 billion in revenue.

Net bookings, which represent the net amount of products and services sold digitally or physically, rose 1% to $1.22 billion. For fiscal Q2, Take-Two anticipates a net loss ranging from $2.15 to $2.30 per share and net bookings between $1.42 billion and $1.47 billion. The company also revised its fiscal 2025 loss forecast to a range of $3.95 to $4.33 per share, compared to its previous estimate of $3.50 to $3.90.

Despite the wider loss forecast, Take-Two maintained its bookings guidance for the year at $5.55 billion to $5.65 billion and highlighted expected growth in the coming years. The company anticipates sequential increases in net bookings in fiscal 2026 and 2027, which it believes will drive long-term shareholder value.

Following the results, Take-Two's shares rose more than 4% on Friday.

Take-Two Interactive Software's Financial Outlook Amid Industry Challenges

  • Take-Two Interactive Software, Inc. (NASDAQ:TTWO) projects second-quarter bookings to fall short of expectations due to a slowdown in consumer spending.
  • The company remains optimistic about future growth, particularly with the upcoming launch of "Grand Theft Auto VI."
  • Despite near-term challenges, Take-Two's diverse development pipeline and strategic focus on long-term growth highlight its resilience and potential for future success.

NASDAQ:TTWO, Take-Two Interactive Software, is a major player in the video game industry, known for its blockbuster titles like "Grand Theft Auto" (GTA) and "NBA 2K." Recently, the company projected its second-quarter bookings to fall short of Wall Street expectations, a development attributed to a slowdown in consumer spending on its flagship games amid an uncertain economic climate. Despite this immediate challenge, Take-Two remains optimistic about its future, particularly with the highly anticipated launch of "Grand Theft Auto VI" next year. This optimism is rooted in the franchise's proven track record of success, with its predecessor, "GTA V," achieving over 200 million units sold worldwide.

The company's stock responded positively to this long-term outlook, with shares rising more than 5% in extended trading. This investor confidence is bolstered by the insights of analysts like Michael Pachter from Wedbush Securities, who points to the upcoming release of "GTA VI" as a key driver for growth in bookings over the next two fiscal years. Furthermore, Take-Two's announcement of a robust development pipeline, planning around 40 titles through fiscal 2027, underscores its commitment to sustaining growth and innovation in the gaming sector.

However, the near-term forecasts present a more challenging picture. Take-Two expects second-quarter bookings to range between $1.42 billion and $1.47 billion, slightly below the consensus analyst estimate of $1.47 billion as per LSEG data. This projection reflects the impact of declining recurrent consumer spending on "GTA Online" during the first quarter, hinting at a potential dip in player engagement for this live-service game. The company's first-quarter bookings, totaling $1.22 billion, also fell short of the expected $1.25 billion, further illustrating the immediate hurdles faced by the company.

Despite these challenges, Take-Two has reassured stakeholders that the ongoing video game performers strike has not affected its title development, a sentiment shared by its industry peer, Electronic Arts. This resilience is further demonstrated by the company's surprising first-quarter profit of 5 cents per share on an adjusted basis, defying expectations of a 2-cent loss. This financial performance, coupled with the strategic focus on long-term growth through high-profile releases and a diverse development pipeline, positions Take-Two Interactive Software as a company with promising prospects, navigating through short-term uncertainties with a clear vision for future success.

Take-Two Interactive’s Price Target Cut Amid GTA VI Delay

Baird analysts cut their price target for Take-Two Interactive (NASDAQ:TTWO) to $172 from $173 while keeping an Outperform rating on the stock.

The analysts noted that the delay of GTA VI to fiscal 2026 from 2025 was not unexpected by investors. Management's commentary suggests a high level of confidence in this new release window.

The analysts are optimistic about the anticipated return to bookings growth in fiscal 2025 and stable or improved operating margins as the company focuses on reducing overhead. Additionally, the increase in mobile bookings is a positive sign, though it is partly due to higher marketing expenditures.

Take-Two Plunges 7% Following Guidance Cut

Take-Two Interactive Software (NASDAQ:TTWO) experienced a decline of over 7% pre-market today following the announcement of an unexpected fiscal third-quarter loss and a downward revision of its annual forecast. The video game publisher cited challenges including a downturn in mobile advertising and lower sales for its NBA 2K24 basketball franchise as key factors behind its performance.

The company disclosed an adjusted loss of $0.54 per share, which did not meet the anticipated earnings of $0.72 per share.

Looking forward to fiscal 2024, Take-Two adjusted its net bookings forecast to a range between $5.25 billion and $5.3 billion, down from the previous projection of $5.45 billion to $5.55 billion. The company now anticipates a net loss per share ranging from $5.95 to $5.85, based on projected revenue of $5.27 billion to $5.32 billion. This marks a shift from earlier loss estimates of $5.62 to $5.35 per share, with revenue expectations previously set between $5.37 billion and $5.47 billion.

Take-Two Interactive Software Upgraded at Deutsche Bank, Shares Gain 3%

Deutsche Bank analysts upgraded Take-Two Interactive Software (NASDAQ:TTWO) to Buy from Hold on Tuesday, also lifting the share price target from $155 to $175. As a result, shares rose more than 3% intra-day today.

The analysts’ note explained the upgrade, citing enhanced long-term prospects and near-term driving factors for the stock. They emphasized the recent announcement by Take-Two that Rockstar Games would release the first trailer for the next "Grand Theft Auto" installment in early December.

The analysts believe that this significant product announcement, particularly the eagerly awaited GTA 6 trailer, will likely boost investor enthusiasm and act as a key driver for the stock's performance.

Furthermore, they expect that as fiscal 2024 progresses into its second half and into 2025, Take-Two will begin announcing other major titles from its extensive development pipeline, which encompasses 14 core immersive games across 2025 and 2026.

Take-Two Posts Mixed Q2 Results, Shares Drop 3%

Take-Two Interactive Software (NASDAQ:TTWO) reported mixed results for its second quarter on Wednesday but maintained its full-year outlook and expressed confidence in its positioning for the upcoming holiday season. Following the results, shares rose more than 3% intra-day today.

The video game company posted a quarterly loss of $3.20 per share, with revenue reaching $1.44 billion. This compares to Wall Street's expectations of a $1.03 earnings per share on revenue of $1.43 billion.

Looking ahead to the third quarter, Take-Two forecasts a loss per share ranging from $0.73 to $0.63 and revenue between $1.29 billion and $1.34 billion. These projections stand in contrast to analysts' expectations, which anticipate an earnings per share of $0.93 and higher revenue of $1.43 billion.

Despite the prevailing economic uncertainties, Take-Two reiterated its net bookings guidance for the fiscal year 2024, expecting them to be between $5.45 billion and $5.55 billion, and projecting revenues to range from $5.37 billion to $5.47 billion.