Take-Two Interactive Software, Inc.

Greetings, and welcome to Take-Two Interactive Software's Q3 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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. 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. Thank you. You may begin.

Good afternoon. Welcome and thank you for joining Take-Two's conference call to discuss its results for the third quarter of fiscal year 2020, ended December 31st, 2019. Today's call will be led by Strauss Delnick, 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 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.take2games.com. And now I'll turn the call over to Stroud.

Thanks Hank. Good afternoon and thank you for joining us today. Throughout the 2019 holiday season, we experienced robust demand for our offerings that drove third quarter operating results solidly within our increased outlook. Our net bookings were substantially higher than what we included for the third quarter when we gave our original fiscal 2020 outlook last May, as well as when we increased our outlook last August. Highlights are the performance of Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2, and Red Dead Online, The Outer Worlds, and Borderlands 3, reflecting our ability to deliver some of the most captivating experiences in the entertainment industry. Grand Theft Auto Online once again exceeded our expectations, delivering its best holiday quarter ever for both audience size and net bookings. During the third quarter, recurring consumer spending on Grand Theft Auto Online grew 54%, driven by Rockstar Games' continued release of engaging new content. Grand Theft Auto Online had its biggest series of back-to-back updates ever in terms of player numbers. with records in audience size in December and the third quarter following the release of the Diamond Casino and Resort update in July and the Diamond Casino Heist in December. We're now on track to deliver a new record for Grand Theft Auto Online recurrent consumer spending in fiscal 2020. Sales of Grand Theft Auto V also exceeded our expectations, and the title is now sold in more than 120 million units. According to the NPD Group, Grand Theft Auto V was the best-selling game of the decade in the U.S., based on both unit and dollar sales. Red Dead Online continues to gain momentum, both in terms of engagement and recurrent consumer spending. Net bookings from Red Dead Online outperformed our expectations during the third quarter, almost tripling both year-over-year and sequentially, excluding digital content bundled with the Red Dead Redemption 2 Premium Editions. Red Dead Online hit a new peak in player numbers in December following the release of the latest update, Moonshiners, and then exceeded those numbers and set a new record in January. We remain as excited as ever about the long-term opportunity for Red Dead Online to be a significant driver of our current consumer spending. In November, Red Dead Redemption 2 launched for the PC and Google Stadia and to date has sold in over 29 million units. According to the MPD group, Red Dead Redemption 2 was the top title of the last four years based on U.S. dollar sales. It bears noting that the collective lifetime sell-in of Grand Theft Auto V and Red Dead Redemption 2 is now more than 150 million units worldwide, with over 250 million lifetime game accounts created across both titles. Rockstar Games' total online audience is also its biggest to date, having recorded record numbers in the third quarter. On October 25th, Private Division launched The Outer Worlds for Xbox One, PlayStation 4, and PC. Developed by Obsidian Entertainment, The Outer Worlds has significantly exceeded our expectations and has sold in more than 2 million units to date. Critical response to the game has been outstanding, and The Outer Worlds has won more than 75 awards, including Game of the Year from the New York Video Game Critics Circle and Destructoid, and Best RPG of the Year from IGN, Shaq News, Gameranx, and others. The title is also a finalist for the DICE Awards Outstanding Achievement in Story and the RPG of the Year. We're confident that The Outer Worlds will continue to expand its audience, including through its release on the Nintendo Switch, which is now planned for fiscal 2021. Unit sales of NBA 2K20, the latest installment in our industry-leading basketball series, have outperformed our expectations. and the titles have sold in over 8 million units to date, up slightly over NBA 2K19 in the same period. In November, the title was released for Google Stadia. In addition, engagement with NBA 2K20 is reaching all-time highs, with average daily active users growing and my team users up more than 35%. In addition, NBA 2K20 has generated more than 276 million views on YouTube and and over 8 million hours of content watched on Twitch across hundreds of channels. While this increased engagement led to strong growth in recurring consumer spending in certain modes of NBA 2K20, we've not experienced the same positive benefits across the entire game due to some specific design changes, which we plan to address in future versions of NBA 2K. Because of this, we no longer expect lifetime net bookings for NBA 2K20 to be a record for the series, However, we continue to expect recurrent consumer spending for the NBA 2K franchise to grow in the strong double digits for fiscal 2020. Taking creative risk is part of Take-Two's DNA as we constantly strive to improve the gameplay experience for our audiences. More often than not, this results in enhancing our growth, which is reflected in the substantial long-term outperformance of NBA 2K. Turning to Borderlands 3, the latest installment in our genre-defining shooter-looter series continues to expand its audience since its record-breaking launch in September, with more than 50% user growth in comparison to Borderlands 2 at the same time in its lifecycle. 2K and Gearbox are supporting the game with free content, as well as four downloadable campaign expansions, which are included with the Borderlands 3 Super Deluxe Edition and the Season Pass, or can be purchased separately upon release. The first of these expansions, Moxie's Heist and the Handsome Jackpot, was released during the third quarter and was positively received by critics and consumers alike, helping to drive a season-pass attach rate for Borderlands 3 that was a record both for the series and for 2K at the same point in the title's lifecycle. In December, Borderlands 3 was released for Google Stadia and will be available on Steam in the coming months. To date, Borderlands 3 has sold nearly 8 million units, and we expect lifetime unit sales to be a record for the series. Earlier in the quarter, 2K launched WWE 2K20 for PlayStation 4, Xbox One, and PC. WWE 2K20 features several new gameplay modes that celebrate the WWE's thriving women's division, as well as an array of fan-favorite superstars, legends, and match types. While we're disappointed that WWE 2K20 did not meet our expectations, both in terms of sales and quality, 2K is actively working with visual concepts to ensure that these issues are addressed in the future, and they'll have more to share on their plans soon. The WWE brand continues to expand worldwide, and there remains a substantial long-term opportunity to grow our WWE 2K series by improving the quality of the game. Among Take-Two's core tenets is our aim to be the most creative and the most innovative company in the entertainment industry. Today, in addition to delivering the highest quality standalone entertainment experiences, we measure our success by our ability to captivate and engage audiences well beyond a title's initial release. To that end, during the third quarter, recurrent consumer spending grew 6% and accounted for 41% 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, In the free-to-play category, Social Point continues to be 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, special events, and updates to these games. Our Barcelona-based studio continues to invest in its broad and innovative pipeline of new games planned for launch in the coming years. 2K launched Season 6 of WWE Supercard, featuring all-new card tiers and upgraded features. The title has now been downloaded more than 20 million times and remains 2K's highest grossing mobile title. NBA 2K Online in China remains the number one PC online sports game in China with more than 48 million registered users. Add-on content grew 135% led by offerings for Borderlands 3, Sid Meier's Civilization VI, and WWE 2K20. Finally, sales of Borderlands 3 Premium Editions, which include additional content that is allocated to recurrent consumer spending, also contributed during the period. As a result of our solid third quarter results and outlook for the fourth quarter, we're increasing the low end of our fiscal 2020 operating outlook while maintaining the high end. Fiscal 2020 is shaping up to be another terrific year for Take-Two. Looking ahead, our company has the strongest development pipeline in its history, and we're committed to supporting our titles with offerings designed to drive ongoing engagement. In addition, we're actively investing in emerging markets, platforms, and business models that have significant potential to enhance our growth. Take-Two is exceedingly well-positioned to capitalize on the many positive trends in our industry and to generate returns for our shareholders over the long term. I'll now turn the call over to Carl.