Take-Two Interactive Software, Inc.

Greetings. Welcome to Take Two Interactive Software Q2 Fiscal Year 2020 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the form of presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications. Thank you, sir. You may begin.

Good afternoon. Welcome and thank you for joining Take-Two's conference call to discuss its results for the second quarter of fiscal year 2020, ended September 30th, 2019. Today's call will be led by Strauss Zelnick, Take-Two's chairman and chief executive officer, Carl Sladoff, our president, and Laney Goldstein, our chief financial officer. We will be available to answer your questions during the Q&A session following our prepared remarks. Before we begin, 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. 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 www.take2games.com. And now I'll turn the call over to Steve Crowley.

Steve Crowley Thanks Hank. Good afternoon and thank you for joining us today. I'm pleased to report that Take-Two's positive momentum continued in the second quarter Enabling our company to generate operating results had significantly exceeded our expectations. We delivered strong net bookings, cash flow, and earnings growth fueled by the performance of NBA 2K, Borderlands 3, Grand Theft Auto Online, and Grand Theft Auto 5, and Red Dead Redemption 2 and Red Dead Online. Once again, our strategy of creating the highest quality entertainment in the industry translated into outstanding results. On September 13th, 2K and Gearbox Software launched Borderlands 3, the latest installment in our genre-defining shooter-looter series. The title has exceeded our expectations and sold more than 5 million units within its first five days of launch, making it the fastest-selling title in 2K's history and the highest-selling title for the label on PC. Within its first five days in market, retail sell through Borderlands 3 was up more than 50% compared to its predecessor. and 70% of units were purchased digitally, setting a new record for a 2K cross-platform title. Borderlands 3 received resoundingly positive critical acclaim, with Forbes, IGN, Shaq News, Destructoid, and Maristation all scoring the title 9 out of 10. To date, Borderlands 3 has sold in nearly 7 million units worldwide. I'd like to congratulate the teams at Gearbox and 2K on a stellar launch and taking this beloved series to new heights. Carl will share details about our post-launch content plan that will keep players engaged in the world of Borderlands 3. Our industry-leading basketball series continued to grow during the second quarter, with net bookings up approximately 9% despite a difficult comparison driven by the successful September 6 launch of NBA 2K20. According to the MPD group, NBA 2K20 is the best-selling game of 2019 to date. delivered the highest launch month sales for any sports game in history, and the NBA 2K series is now the sixth largest video game franchise in the industry based on dollar sales. Consumer demand for NBA 2K20 remains strong, and the title has sold in nearly 6 million units to date, generating growth over the prior year's release. During the second quarter, recurrent consumer spending on NBA 2K grew 32% to a new record and remained the single largest contributor to that category of our business. Engagement with NBA 2K20 also increased, driven by a consistent new content schedule with daily active users up almost 20% compared to NBA 2K19, and my career and my team growing by more than 30% and 150%, respectively. We expect lifetime netbookings from NBA 2K20 to set a new record for the series. In addition, 2K recently announced the NBA 2K20 and Nike Gamer exclusive program, an innovative, first-of-its-kind gaming and sneaker partnership. This program provides players with the opportunity to unlock virtual Nike Gamer exclusive sneakers for their MyPlayer to wear in-game and to purchase real-life versions of the same shoes from Nike. I'd like to congratulate 2K and Visual Concepts for once again redefining what is possible in sports gaming and capturing superbly every nuance of the NBA and the pop culture that envelops it. Grand Theft Auto Online and Grand Theft Auto V once again exceeded our expectations, delivering the best quarter yet with respect to daily, weekly, and monthly active users, and our best summer ever in terms of new online users and new users overall. Recurrent consumer spending on Grand Theft Auto Online grew 23% to a new record, driven by the July release of the Diamond Casino and Resort update. This update was Grand Theft Auto Online's biggest content launch ever, delivering record player engagement across daily, weekly, and monthly active users in July, and then again in August. As a result of the title's better-than-expected performance fiscal year-to-date and improved outlook for the balance of the year, we now expect Grand Theft Auto Online to grow in fiscal 2020. Grand Theft Auto V remains the standard-bearer for excellence in our industry and one of the most revered and successful entertainment experiences of all time. The title continues to expand its audience around the world, and has now sold in more than 115 million units. Red Dead Online continues to gain momentum and grew sequentially during the second quarter. Following the massive content drop in May when the title exited its beta phase, on September 10th, the world of Red Dead Online evolved further with the release of the Frontier Pursuits update. This update introduced three specialist roles, including tracking down wanted criminals as a bounty hunter, searching the world for treasure and other exotic items to sell as a collector, and building a business as a trader. Rockstar Games intends to add more new roles in the future, enabling players fully to inhabit their characters as they carve out a life on the frontier. Rockstar Games also introduced the popular Outlaw Pass, a way for Red Dead Online players to pay to access a wide array of ongoing upgrades, items, and perks at a discounted value. Throughout the year, Rockstar Games will continue to support both Red Dead Online and Grand Theft Auto Online, with many more updates in order to drive engagement and player growth. We remain as excited as ever about the long-term opportunity for Red Dead Online to be a meaningful driver of our current consumer spending. In addition, Red Dead Redemption 2 continues to grow its audience and to date has sold in almost 26.5 million units worldwide. Earlier this week, the title launched on PC with an array of features designed specifically for that audience, including numerous graphical enhancements, a fully featured photo mode, new content additions for the game's story mode, and more. On August 27th, Private Division launched Ancestors, The Humankind Odyssey for digital download on PC. The title is the first release from Panache Digital Games, the studio co-founded by Patrice Desilets, the original creative director of the Assassin's Creed franchise. Ancestors, The Humankind Odyssey was lauded by the media for its sophistication and unique approach to the survival category. and will be available for digital download on PlayStation 4 and Xbox One on December 6th. Our second quarter results were also enhanced by Social Points Mobile Games, the WWE 2K franchise, and Sid Meier's Civilization VI. One of our key strategic priorities is to find new and innovative ways to drive growth and engagement with our titles after their initial purchase. From free-to-play open worlds to additional chapters and content, we aim to provide consumers with the highest quality offerings that meaningfully add to their overall gameplay experience. To that end, during the second quarter, recurrent consumer spending significantly exceeded our expectations, growing 39% and accounting for 45% of our total net bookings. In addition to virtual currency for NBA 2K, Grand Theft Auto Online, and Red Dead Online, recurrent consumer spending was enhanced by a variety of other offerings, including Sales of the Borderlands 3 Premium Editions, which include additional content that is allocated to recurrent consumer spending. In the free-to-play category, Social Point remains a meaningful contributor to our results through its mobile titles, Dragon City, Monster Legends, World Chef, Tasty Town, and Word Life. During the quarter, Social Point added new content, challenges, and updates to these games. Our Barcelona-based studio continues to invest in its broad pipeline of new games planned for launch in the coming years. WWE Supercard has now been downloaded nearly 20 million times and remains 2K's highest-grossing mobile title. And recurrent consumer spending on NBA 2K Online in China outperformed our expectations, growing 27% in the second quarter. The title remains the number one PC online sports game in China, with more than 47 million registered users. Lastly, add-on content grew more than 60% led by offerings for Sid Meier's Civilization VI and the Borderlands franchise. As a result of our better than expected second quarter operating results, we're once again raising our operating outlook for fiscal 2020. Looking ahead, we have the strongest development pipeline in our history. We're continuing to grow our portfolio with the highest quality entertainment experiences, including sequels from our biggest franchises, as well as exciting new IP. In addition, We're actively investing in emerging markets, platforms, and business models, such as mobile, streaming, direct-to-consumer, and subscription, in order to expand our audience around the world. With the promise of new consoles and continuous technological advances, our creative teams have an increasingly robust canvas on which to achieve their vision and set new benchmarks for excellence. Take-Two is exceedingly well-positioned to generate growth and margin expansion for our shareholders over the long term. I'll now turn the call over to Carl.