Take-Two Interactive Software, Inc.

Greetings and welcome to the Take-Two Interactive Software third quarter fiscal year 19 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to Hank Diamond, Senior Vice President of IR and Corporate Communications. Please go ahead, Mr. Diamond.

Good morning. Welcome and thank you for joining K2's conference call to discuss its results for the third quarter of fiscal year 2019 and in December 31st, 2018. Today's call will be led by Stroud-Belnick, K2's chairman and chief executive officer, Carl Sladoff, our president, and Lainey 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 risk 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.take2gains.com. And now, I'll turn the call over to Jeff.

Thanks, Hank. Good morning, and thank you for joining us today. I'm pleased to report that during the third quarter, Take-Two delivered better than expected results, driven primarily by the record-breaking launch of Red Dead Redemption 2, as well as the strong performance of NBA 2K19. We generated significant cash flow and ended the period with $1.6 billion in cash and short-term investments after deploying $109 million to repurchase 1 million shares of our stock. On October 26th, Rockstar Games launched Red Dead Redemption 2, which set numerous records, including achieving the biggest opening weekend in the history of entertainment with over $725 million in sell-through during its first three days. In fact, Red Dead Redemption 2 sold in more units in its first eight days than its predecessor sold in its first eight years. The title has exceeded our expectations and to date has sold in over 23 million units worldwide. According to the MPD Group, based on combined physical and digital sales in the U.S., Red Dead Redemption 2 was the best-selling video game of 2018, a testament to Rockstar Games' unparalleled ability to create the highest quality entertainment experiences Red Dead Redemption 2 received near-perfect critical reviews and multiple Game of the Year awards. The titles tied with Grand Theft Auto V are the highest rated title on PlayStation 4 and Xbox One, with a 97 Metacritic score. In late November, Rockstar Games launched the Red Dead Online Beta, a new multiplayer experience set against the backdrop of Red Dead Redemption 2's enormous and vibrant open world. Free with the purchase of Red Dead Redemption 2, the Red Dead Online beta is an evolution of the classic multiplayer experience in the original Red Dead Redemption, blending narrative with competitive and cooperative gameplay in fun new ways. Rockstar Games continues to refine the vast world of Red Dead Online and will deliver ongoing updates to grow and evolve this experience. I'd like to congratulate the entire team at Rockstar Games for the phenomenal, critical, and commercial success of Red Dead Redemption 2. Grand Theft Auto Online and Grand Theft Auto 5 remain significant contributors to our results more than five years after their launch. During the third quarter, Rockstar Games supported Grand Theft Auto Online with the Arena War update, as well as Festive Surprise 2018, Halloween themed content, and more. During December, combined monthly active users across Grand Theft Auto Online and Red Dead Online took Rockstar to a new record. Rockstar Games will continue to support both products with innovative new content in order to drive engagement and recurrent consumer spending. We're very excited for the future of these two highly robust ongoing living game worlds. Turning toward industry-leading basketball simulation, NBA 2K19 exceeded our expectations in the third quarter, driven primarily by strong growth and recurrent consumer spending. Sales of the game also surpassed our outlook, We now expect lifetime unit sales of NBA 2K19 to be slightly up over the prior year's release. According to the MPD group, based on combined physical and digital sales in the U.S., NBA 2K19 was the best-selling sports title in 2018 and the third best-selling game overall. In addition, 2018 marks the third consecutive year that an NBA 2K title was the best-selling sports game of the year. An important part of NBA 2K19's success has been the increase in engagement over the prior year's release. NBA 2K19 has generated more than 50% growth in online multiplayer games per day, and both daily active users and the number of games that they play have also increased meaningfully. We've also seen significant increases in engagement with the My Team mode for NBA 2K19, with daily average users up to 28% and games played up 46%. On average, nearly 12 million games of NBA 2K19 are being played daily, which reflects the many enhancements the 2K and visual concepts introduced this year. As a result of this strong engagement, recurrent consumer spending on NBA 2K grew 39% in the third quarter to a new record and was the largest single contributor to recurrent consumer spending in the period. We expect the net bookings from NBA 2K19, including recurrent consumer spending, will be the highest ever for a 2K sports title. On January 15th, 2K announced a significant multi-year partnership expansion with the NBA and the Players Association. The NBA has been an outstanding partner, and we're thrilled to be in business with Adam Silver, Michelle Roberts, and their teams, and we're very pleased with the terms of our partnership expansion, which enables NBA 2K to continue to grow and be highly profitable, both for Take-Two and the NBA. We have a broad range of basketball offerings across console, PC, mobile, online in China, and eSports. and I'm confident that we'll continue to find new and innovative ways to captivate and engage fans and expand further the success of the NBA 2K brand. In early October, 2K launched WWE 2K19, the latest installment in our popular sports entertainment series. Developed collaboratively by Ukes and Visual Concepts, the title received improved reviews and has been supported with a series of downloadable content, including the season pass. The WWE brand continues to expand worldwide, and we believe there remains a substantial long-term opportunity to grow our WWE 2K series by leveraging further the development expertise of 2K and visual concepts. Our third quarter results were also enhanced by a variety of other offerings, led by Social Points mobile games, Sid Meier's Civilization VI for the Nintendo Switch, which significantly exceeded our expectations, and WWE Supercard. At Take-Two, our goal is to serve our audiences by delivering the highest quality entertainment that exceeds expectations in terms of the value they receive from both the money and time that they spend on our products. If we deliver on that goal consistently, we'll engage our customers and provide returns for our shareholders over the long term. A hallmark of our approach is finding new and exciting ways to drive engagement through creativity and innovation. The execution of this philosophy results in our audiences remaining immersed in our titles well after their initial launch and has been a key driver of our ongoing success. This is reflected in the strong growth in engagement and recurrent consumer spending on our titles over the past several years. During the third quarter, recurrent consumer spending exceeded expectations, growing 31% to a new record and accounting for 22% of total net bookings. The biggest contributors to this outperformance were strong sales of the Red Dead Redemption 2 Special Edition and Ultimate Edition, which include additional content that is allocated to recurrent consumer spending along with robust growth in recurrent consumer spending on NBA 2K. In addition, recurrent consumer spending was enhanced by a variety of other offerings. In the free-to-play category, SocialPoint once again was a significant contributor to our results through its two biggest mobile titles, Dragon City and Monster Legends. During the third quarter, combined net bookings from these titles grew sequentially. Recurrent consumer spending on WWE Supercard grew double digits, net of platform fees, and 2K released the fifth season of its popular card battle game and several content updates. WWE Supercard has now been downloaded nearly 18.5 million times and is 2K's highest grossing mobile title. And net bookings from NBA 2K Online in China more than doubled, driven by the launch of NBA 2K Online 2 in August. Total combined registered users for NBA 2K Online 2 and its predecessor currently stand at 43 million, and the franchise remains the number one PT online sports game in China. Asia remains a significant long-term growth opportunity for our business. We're very encouraged by recent developments in China. Add-on content grew 9%, led by offerings for Sid Meier's Civilization, WWE 2K19, and XCOM 2. As a result of our strong performance in the third quarter, we're increasing our outlook for fiscal 2019. Our long-term success has been the result of our creative team's ability to connect deeply with audiences across a myriad of platforms and offerings. As our industry continues to embrace new technologies that enhance consumers' experience with and access to interactive entertainment, we remain focused on broadening the reach of our content and expanding further globally. Take you to a better position than ever, creatively, strategically, and financially, to capitalize on the vast opportunities that will shape the future of our business and our industry. I'll now turn the call over to Carl.