Take-Two Interactive Software, Inc.

Greetings and welcome to Take-Two Interactive Software second quarter full year 2021 earnings conference call. At this time, all participants are on 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. As a reminder, 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.

Good afternoon. Welcome and thank you for joining Take-Two's conference call to discuss its results for the second quarter of fiscal 2021, ended September 30, 2020. Today's call will will be led by Strauss-Zelnick, Take-Two's Chairman and Chief Executive Officer, Carl Sladoff, our President, and Lanie 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 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 findings 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 filing with the SEC may be obtained from our website at www.take2games.com. And now, I'll turn the call over to Strauss.

Thanks, Hank. Good afternoon, and thank you for joining us today. I'd like to begin by acknowledging those who've been affected by the global pandemic. On behalf of our entire management team, I'd like to express our deepest sympathies and shared hope that in time, this crisis shall pass. We remain immensely grateful to everyone who serves on the front lines caring for those in need and helping the world navigate these challenging times. I'm pleased to report that our positive momentum continued in the second quarter, with operating results that significantly exceeded our expectations. Our stellar results were highlighted by the outperformance of NBA 2K, PGA Tour 2K21, and the Mafia Definitive Editions and Mafia Trilogy. Our ability to deliver the highest quality entertainment experiences to our audiences during these challenging times is a reflection of the professionalism and the passion of our entire organization. I'm immensely proud of our teams throughout the world that embody our core tenets of creativity, innovation, and efficiency. On September 4th, 2K and Visual Concepts launched NBA 2K21, the latest installment in our industry-leading basketball simulation series for PlayStation 4, Xbox One, Nintendo Switch, PC, and Stadia. The title is off to a remarkable start, and net bookings from the title have outperformed our expectations. To date, NBA 2K21 has sold in over 5 million units. As compared with the second quarter of fiscal 2020, net bookings for the NBA 2K series grew 28%, and recurrent consumer spending significantly exceeded our expectations, growing an incredible 76%. Consumer engagement with NBA 2K continues to increase, with daily active users, my career users, and my team users growing significantly. Moreover, NBA 2K21 users have been more deeply engaged with the game, with average games played per user up 21% as compared to NBA 2K20 in the same period. Next week, NBA 2K21 will launch for next-gen platforms, which Carl will discuss shortly. I'd like to congratulate 2K and Visual Concepts for delivering another outstanding entry in this beloved franchise. Seven years after its initial release, Grand Theft Auto V continues to grow its audience. The title is now sold in over 135 million units and remains one of the most successful and iconic experiences in all of entertainment. In addition, recurrent consumer spending on Grand Theft Auto Online outperformed our second quarter forecast and was the title's best second quarter ever in terms of both active players and new players. During the month of August, Rockstar Games released the Los Santos Summer Special for Grand Theft Auto Online, featuring an array of new vehicles, co-op missions, business battles, racetracks, the open-wheel race creator, and more. We continue to expect Grand Theft Auto Online to establish a new netbooking record in fiscal 2021. Red Dead Redemption 2 also outperformed and to date has sold in over 34 million units worldwide. Net bookings from Red Dead Redemption 2 grew an outstanding 124%, including 106% growth in full game sales. Engagement with and recurrent consumer spending on Red Dead Online continues to increase, with net bookings from the title surpassing expectations, growing 96%. Furthermore, the title grew 28% in audience and growth in new players increased was 47%. During the second quarter, Rockstar Games added new content to Red Dead Online, including the Naturalist update, a new specialist role, including the ability to hunt, track, and study legendary animals, as well as new poaching missions and free roam events, two new weapons, the advanced camera, and more, including the latest edition of Outlaw Pass, the Outlaw Pass number three. Throughout the coming year, Rockstar Games will continue to support both Red Dead Online and and Grand Theft Auto Online with more content updates to keep new and returning players excited and engaged. In late summer, 2K enhanced further our sports simulation offerings with the release of PGA Tour 2K21 for PlayStation 4, Xbox One, Nintendo Switch, PC, and Stadia. Developed by HB Studios, PGA Tour 2K21 was universally lauded by consumers and critics, including Game Informer, Golf Digest, and USA Today for being an incredibly fun, realistic, an engaging entry into the category. The title has exceeded our expectations and to date has sold in over 1 million units. According to the MPD group, PGA Tour 2K21 was the fastest-selling golf game by units over the past 10 years. And in addition, according to Metacritic, the title is the highest-rated golf simulation of the current console generation. I'd like to congratulate the teams at 2K and HB Studios for continuing to support the game with additional post-launch content. During the second quarter, 2K also released WWE 2K Battlegrounds, a completely new WWE game featuring arcade-style brawling action for PlayStation 4, Xbox One, Nintendo Switch, PC, and Stadia. We're very pleased to expand our WWE offerings with a title that provides both casual gamers and diehard wrestling fans with an over-the-top pick-up-and-play experience. The title has exceeded our expectations and is being supported with post-launch content. In addition, during the period, 2K released Mafia Definitive Edition for PlayStation 4, Xbox One, and PC. The title, which has exceeded our sales expectations and received significant critical acclaim, was comprehensively remade from the ground up. The release of Mafia Definitive Edition completes the full Mafia trilogy, a collection featuring definitive editions of all three Mafia titles. The definitive editions of Mafia, Mafia 2, and Mafia 3 are available individually or as part of the trilogy. To date, these titles have collectively sold in over 2 million units. Turning to private division, during the second quarter, the label released Peril on Gorgon, a narrative expansion for their award-winning RPG, The Outer Worlds, from Obsidian Entertainment. Peril on Gorgon is the first of two expansions that can be purchased individually or bundled at a discount in The Outer Worlds expansion pass. The Outer Worlds continues to outperform our expectations and has now sold in over 3 million units. Our second quarter results were also enhanced by a variety of other offerings led by Borderlands 3, Social Points Mobile Games, and Sid Meier's Civilization VI. During the second quarter, recurrent consumer spending exceeded our expectations, growing 43% and accounted for 64% of net bookings. In addition to virtual currency for NBA 2K, Grand Theft Auto Online, and Red Dead Online, Recurrent consumer spending was enhanced by the following offerings. In the free-to-play category, SocialPoint's live games, including Dragon City, Monster Legends, World Chef, Tasty Town, and WordLife, outperformed during the second quarter, matching the net bookings record achieved in the previous quarter. Live games delivered new fresh content, events, and experiences to boost engagement and enhance the customer experience, and net bookings grew 55%. The studio continues to invest in its broad and innovative pipeline of more than 10 new games planned for launch in the coming years. WWE Supercard also outperformed during the second quarter, growing 24%. The title has now been downloaded more than 22 million times and remains 2K's highest-grossing mobile title. Later this month, 2K will deliver Season 7 of our popular free-to-play sports entertainment mobile game. And NBA 2K Online in China grew 13%, and remains a significant contributor to our results. The title is the number one PC online sports game in China with more than 50 million registered users. Add-on content grew 254% and outperformed expectations led by offerings for the Borderlands series and Sid Meier's Civilization VI. As a result of our better than expected second quarter performance and improved outlook for the back half of the year, we're increasing our outlook for fiscal 2021 which we expect to deliver a new record for net bookings of over $3 billion. In September, as part of our ongoing strategy to expand selectively our portfolio of owned intellectual property and to diversify and strengthen further our mobile offerings, we acquired PlayDots, a longstanding leader in the mobile puzzle genre. Founded in 2013 and based in New York City, PlayDots builds mobile games with unique and thoughtful designs. The studio has created three hits, DOTS, 2Dots and Dots & Co., which have collectively been downloaded over 100 million times. They're best known for 2Dots, which has been downloaded over 80 million times since its launch six years ago, and that continues to engage deeply audiences throughout the world. PlayDots' near-term strategy for growth includes live ops technology and the addition of numerous features to its core games, such as scavenger hunts and social leaderboards, which are driving meaningful long-term consumer engagements. In addition, PlayDots will remain focused on existing IP and will continue to create new properties as they've done since their inception. We're very pleased to welcome Neera Frat and the entire team at PlayDots to the Take-Two family and are excited by the potential of their development pipeline and positive long-term contributions to our business. It bears noting the next week will usher in an exciting new era in the history of our industry. The eagerly anticipated launches of two new gaming platforms from Microsoft and Sony mark the latest technological advances that promise to provide our world-class development teams with better platforms on which to captivate and engage our audiences. We're both prepared and thrilled to take this next step. And Carl will have more to share about our offerings for this next generation. As we've seen over the past several months, consumers' appetite for and participation in interactive entertainment has never been stronger. We believe that this trend, coupled with the fervor for new gaming platforms, bodes well for the upcoming holiday season, and that interactive entertainment will be among the most popular gift-giving items. Looking ahead, Take-Two has the strongest development pipeline in its history, including sequels from our biggest franchises, as well as exciting new IP. We continue to make great strides to increase the scale of our enterprise, both organically and through selective, inorganic, accretive opportunities. In closing, our company remains superbly positioned creatively, operationally, and financially to capitalize on the many positive trends in our industry and to deliver growth and returns for our shareholders over the long term. I'll now turn the call over to Carl.