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spk02: 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.
spk11: 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.
spk09: 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.
spk05: Thanks, Charles. I'd like to begin by thanking our teams for continuing their stellar work and achieving strong results that are lining up to deliver a record year for net bookings. Our culture of collaboration, coupled with the company's commitment to creating the best entertainment experiences, is driving our ongoing success and the ability to engage with audiences more deeply than ever before. I'll now discuss our recent and upcoming releases. As Strauss mentioned, we are very excited about next week's introduction of two new leading-edge gaming platforms. Through these new robust platforms, our development teams have an even greater ability to captivate and engage audiences with our renowned franchises and new intellectual properties. We are thrilled to deliver at launch two of 2K's most successful and popular franchises, NBA 2K and Borderlands, for both platforms. NBA 2K21 was built from the ground up for next-generation consoles and will once again redefine the standard for sports simulations. In addition to unparalleled graphics and loading speeds, NBA 2K21 will introduce several initiatives to bridge current and new console generations of the game, including My Team cross-progression and a shared VC wallet within the same console families. Furthermore, NBA legend Kobe Bryant's lifetime achievement of basketball excellence is celebrated with the NBA 2K21 Mamba Forever Edition, which will provide players with seamless access to both current and next generation versions of the game. Just yesterday, 2K released the trailer for The City, featuring a completely overhauled park experience, exclusive to NBA 2K21 on next-gen consoles. Originally introduced in NBA 2K14 for Xbox One and PS4, the park helped push 2K forward by creating a competitive online basketball environment that allowed our quickly growing community to compete against each other outside of the authentic NBA experience. This experience has evolved over the years into the neighborhood and now what we have proudly introduced as the city, which is many times larger and more immersive community-based experience only possible on next gen consoles. It is Visual Concept's most ambitious execution of a virtual basketball community. Borderlands 3 has been fully optimized for next gen consoles, so Mayhem will be bigger and bolder than ever before. All players who own the game on current gen will be able to download the next gen upgrade within the same console family for free. This free next gen upgrade will add a number of exclusive features, including 4K resolution at 60 frames per second in single player and online co-op, plus support for three and four player split screen co-op. In addition, Rockstar Games has announced that they will bring their iconic Grand Theft Auto 5 to the next generation of consoles in the second half of calendar 2021, during fiscal year 2022. The new generation versions of the game will feature a range of technical improvements, visual upgrades, and performance enhancements to take full advantage of the latest hardware, making the game more beautiful and more responsive than ever. For the community of Grand Theft Auto Online, the journey through this ever-evolving world will continue on the next generation consoles with more new updates, including additional content exclusive to the new consoles and PC. There will also be new standalone version of Grand Theft Auto Online coming in the second half of calendar 2021, which will be available for free exclusively on PlayStation 5 during the first three months. Rockstar Games will share more details on the new versions of Grand Theft Auto 5 in the months ahead. Driving long-term consumer engagement with our titles after their initial launch remains a key strategic priority for our organization. There are a myriad of ways that our creative teams strive to do this, However, we are always focused on designing games with the goal of giving players experiences that far exceed their expectations, and importantly, are worthy of their time and money. To that end, we recently released an array of add-on content for some of our key titles. Last month, 2K and HB Studios released two updates for our popular golf simulation, PGA Tour 2K21. The three-hole matchmaking update allows players to play a quick multiplayer round with friends. Two weeks ago, the team launched a Halloween update featuring fun, holiday-themed cosmetic items to customize players and courses. Players can expect additional content to be released for PGA Tour 2K21 throughout the year. In addition, Private Division, in partnership with the European Space Agency, released their Shared Horizon update for Kerbal Space Program for PS4 and Xbox One. The update celebrates the agency's contributions to space exploration and is free for all players of the critically acclaimed physics-based space simulation game. Private Division's new development studio, Intercept Games, remains hard at work on Kerbal Space Program 2, which is now planned for release during fiscal 2023. Tomorrow, 2K will release the first update for their new wrestling title, WWE 2K Battlegrounds. The update features new superstars and legends, that will be made available throughout the month, adding to the game's outrageous in-and-out-of-the-ring action. 2K will make additional superstars available in December, and we'll share more details in the coming weeks. More than a year after the initial launch of Borderlands 3, engagement with the title remained incredibly strong. Next week, due to the immense popularity and success of the title's add-on content strategy in Season Pass, 2K and Gearbox Software will launch a second Season Pass for the game, The Season Pass 2, which will be available for all previous released and all next-gen versions of the game, will include two brand-new content add-ons. The Designer's Cut add-on will add all new ways to play Borderlands 3 by introducing a new skill tree for each Vault Hunter, a new standalone mode called Arms Race, and more, while the Director's Cut add-on includes additional missions, end-game content, and behind-the-scenes extras. Designer's Cut will be available for purchase starting on November 10th while Director's Cut is planned for release in spring of next year. Rockstar Games has announced that both Grand Theft Auto Online and Red Dead Online will receive major updates later this year, featuring an extension to existing Frontier pursuits for Red Dead Online, as well as Grand Theft Auto Online's biggest update ever, which will feature a new take on heists in a new location. Firaxis Games will continue to deliver new content for Sid Meier's Civilization VI, as part of their new Frontier Pass for PlayStation 4, Xbox One, Nintendo Switch, PC, and mobile, featuring new civilizations and leaders that will be made available on a bi-monthly basis through the end of March 2021. Later this year, the new Frontier Pass will come to mobile platforms, and each pack will be available for individual purchase. And during the first half of calendar 2021, Private Division will release The Outer Worlds Murder on Eridanus, the second narrative expansion for their successful RPG from Obsidian Entertainment. The expansion will be available individually or at a discount as part of the Outer Worlds expansion pass, which also includes the previously released Parallel and Gorgon. Turning to esports, the NBA 2K League concluded its third season on August 28th with Wizards District Gaming winning the 2020 NBA 2K League Championships. All 2020 season games aired live on the NBA 2K League's Twitch channel, in addition to select games airing live on ESPN2, ESPN's digital platforms, Sportsnet in Canada, and the NBA 2K League's YouTube channel, and on delay on EGG Network in Southeast Asia and Loco in India. Dash Radio's Nothing But Net channel also provided live game coverage. The NBA 2K League has begun the trial process for its fourth season, set to take place in 2021. The new format will include more than 35 Pro-Am tournaments hosted by league teams as part of the NBA 2K League Draft Prospect Series, featuring a first-of-its-kind NBA 2K League Combine. The league will enable 2K fans and players to engage with the league and showcase their excitement throughout the offseason by awarding draft eligibility on a rolling basis to members of the 2K community who excel in the tournaments as part of the draft prospect series. In addition, we continue to develop and showcase female 2K players. The league is involved with several elite all-woman 2K teams who are participating in Pro-Am 2K tournaments throughout the year. We are very excited about the continued success and growth of the NBA 2K League, which has the long-term potential to enhance engagement and to be a driver of profits for our company. Looking ahead, we have the strongest development pipeline in Take-Two's history, as well as significant potential to drive increased engagement and recurrent consumer spending. In addition, we are investing in a number of emerging opportunities that have the potential to enhance our growth rate. Whether transitioning our audiences seamlessly onto new platforms, capitalizing on new business models and distribution channels, or increasing our presence in emerging markets, Take-Two is exceedingly well positioned to generate value to consumers as well as growth and margin expansion for our company. I'll now turn the call over to Lainey.
spk06: Thanks, Carl, and good afternoon, everyone. Today I'll discuss our second quarter results and then review our financial outlook for the third quarter and fiscal year 2021. Please note that additional details regarding our actual results and outlook are contained in our press release. As Strauss mentioned, we delivered second quarter operating results that significantly exceeded our expectations. Net bookings grew to $958 million. This result exceeded our outlook of $775 to $825 million, driven primarily by the outperformance of NBA 2K, PGA Tour 2K21, and the Mafia Definitive Editions and Mafia Trilogy. Digitally delivered netbookings grew 14% as compared to our flat outlook and accounted for 83% of the total. This result exceeded our outlook primarily due to the outperformance of recurrent consumer spending. During the second quarter, 59% of sales of current generation console games were delivered digitally, up from 51% last year. Recurrent consumer spending grew 43% as compared to our outlook of 10% growth and accounted for 64% of total netbooking. This growth was driven primarily by NBA 2K, Social Points mobile games, Red Dead Online and Red Dead Redemption 2, and Sid Meier's Civilization VI. Gap net revenue was $841 million and cost of goods sold was $433 million. Operating expenses decreased by 7% to $293 million due primarily to lower marketing expenses. And GapNet income grew to $99 million, or $0.86 per share, as compared to $72 million, or $0.63 per share, in the second quarter last year. Now to our guidance, starting with the fiscal third quarter. We project net bookings to range from $675 to $725 million, compared to $888 million in the third quarter last year, which benefited from the launch of Red Death Redemption 2 on PC and the Outer Worlds. The largest contributors to net bookings are expected to be NDA 2K21, Grand Theft Auto Online and Grand Theft Auto 5, Red Dead Redemption 2 and Red Dead Online, Social Points Mobile Games, Borderlands 3, Sid Meier's Civilization VI, and PGA Tour 2K21. We expect digitally delivered net bookings to be down approximately 15% due to lower digitally delivered sales of Red Dead Redemption 2 on PC and The Outer Worlds, which launched last year. Digitally delivered net bookings are projected to account for 82% of the total compared to 78% last year. Our forecast assumes that 71% of our current generation console game sales will be delivered digitally from 44% last year. We project recurrent consumer spending to grow by approximately 5%. We expect gap net revenue to range from $760 to $810 million. and cost of goods sold to range from $291 to $317 million. Operating expenses are expected to range from $325 to $335 million. At the bin point, this represents a 4% increase over last year, driven primarily by the addition of play dots, higher research and development and IT expenses, partially offset by lower marketing and stock compensation expenses. And gap net income is expected to range from $128 to $140 million, or $1.10 to $1.21 per share. For management reporting purposes, we expect our tax rate to be 16% throughout fiscal 2021. We are increasing our full-year outlook, which now includes record NEP bookings. This will be the third consecutive year that NEP bookings have grown. Our net bookings outlook range is now $3.15 to $3.25 billion, up from $2.8 to $2.9 billion. This is being driven by our second quarter outperformance, along with an updated forecast for the balance of the year, which has improved primarily due to higher recurrent consumer spending from NBA 2K, Grand Theft Auto Online, Red Dead Online, and the addition of PlayDots, as well as strong performance from Red Dead Redemption 2, PGA Tour 2K21, and the Mafia Definitive Edition and Mafia Trilogy. We expect growth over the prior year from NBA 2K, Grand Theft Auto Online, Red Dead Online, and Social Points mobile games to be offset by lower results from Borderlands 3, Grand Theft Auto 5, and Red Dead Redemption 2. The largest contributors to netbookings are expected to be NBA 2K, Grand Theft Auto Online, and Grand Theft Auto 5, Red Dead Redemption 2, and Red Dead Online, Social Points mobile games, Borderlands 3, Cinemio Civilization 6, 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 booking split to be about 60% United States and 40% International. We now project digitally delivered net bookings to increase by approximately 15% as compared to our prior outlook of 3% growth. This growth is being driven by our current consumer spending and digitally delivered sales. As a percentage of our business, digital is projected to represent 87% of net bookings, up from 82% last year. Our forecast assumes that 70% of current generation console game sales will be delivered digitally, up from 55% last year. We now expect recurring super spending to grow by approximately 30% as compared to our prior outlook of 16% growth, and to represent approximately 63% of net bookings as compared to 51% last year. This growth is being driven primarily by NBA 2K, Grand Theft Auto Online, the addition of PlayDots, Social Points mobile games, and Red Dead Online. We are increasing our non-GAAP-adjusted unrestricted operating cash flow outlook to more than $650 million up from our prior outlook of more than $500 million. We plan to deploy approximately $75 million for capital expenditure. We expect GAAP net revenue to range from $3.05 to $3.15 billion and cost of goods sold to range from $1.44 to $1.49 billion. Total operating expenses are expected to range from $1.21 to $1.23 billion. At the midpoint, this represents an 8% increase over the prior year, driven by the addition of play dots, higher headcount, research and development expense, and charitable contributions, partially offset by lower marketing and stock compensation expenses. And we expect gap net income to range from $372 to $403 million, or $3.22 to $3.49 per share. In closing, fiscal 2021 is poised to be another year with record net bookings, despite a light release late. With our industry-leading creative assets, sound financial foundation, and unwavering commitment to operational excellence, our company is superbly positioned to navigate these uncertain times, capitalize on positive industry trends, and to deliver strong results for our shareholders over the long term. Thank you. I'll now turn the call back to Jess.
spk12: Did you all hear that?
spk09: Did you all hear that?
spk03: Did you all hear that? Okay.
spk09: There's some reverb going through the conference. Sorry, I apologize. Thanks, Blaney and Carl. On behalf of our entire management team, I'd like again to thank our colleagues for their hard work, commitment to excellence, and for delivering another exceptional quarter. To our shareholders, I'd like to express our appreciation for your continued support, and we'll now take your questions and apologies for my failure with the mute button.
spk02: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Mario Lu with Barclays. Please proceed with your question.
spk01: Great. Thanks for taking the questions. I have one on NDA and then one high level. For the one on NBA, you know, the city on NextGen looks pretty amazing, and you're also bringing back affiliations, which is exciting. I believe this year is also the first time NBA 2K will have two different NBA seasons within three months of its release. So with that being said, anything you can provide in terms of the lift unit sales from both the city and a second NBA season and their impact on the fiscal 3Q guide would be helpful. And then... And then secondly, Strauss, just curious if you have updated thoughts on the overall subscription model within video games. I think I agree with you that subscription may not translate well in this industry since users only play a few titles a year. But we've seen recently companies like Microsoft push hard with its Game Pass subscription. And then with the overall gaming audience expanding due to sheltering in place and more casual titles, like Fall Guys and Among Us being more popular. So I'm just curious if your stance on subscription has changed at all. Thank you.
spk05: Hi, it's Carl. I'll take the first question on NBA. Obviously, yes, this is really the first time that we've got this kind of overlap in the season, not only just our own, not only just the basketball season itself, but in our own game. Obviously, with what Strauss has said before, it's had a really positive impact with us because net bookings for our series grew 28% and recurrent consumer spending grew, I think it was 76%. So these are really incredible results, and it's really exciting. But it's a bit of uncharted territory. And I can tell you that we couldn't be more thrilled about it because with the new platform coming out and with the NBA 2K21 being built from the ground up and also all of the new features that are coming up, while I don't have specific lift numbers for you that are associated with the city itself, obviously that was a huge commitment made by the team at Visual Concepts and the 2K team. And we're really, really excited about it. And any time you do come out with something that could be a game changer for any game, but specifically for our game, we tend to see really excellent results. And we've already seen great, great results. And I think it's going to be even better when we launch our next-gen platform. And we're very excited about it.
spk09: And Mario, regarding your question on subscriptions, no, I don't think our views have changed much. We're open-minded. Um, we're highly skeptical that subscriptions will be the only way or the primary way that interactive entertainment is distributed. And that's because of the way people consume it and the price point for owning a title, um, which is very reasonable on very, very low actually for on a per hour basis. Um, so I, I think it's unlikely that subscription sort of supplant frontline video game sales as the primary business model. Um, Subscriptions can play a role in delivering catalog. We've supported numerous subscription offerings with catalog titles. I imagine we'll continue to do so. And in any case, at the end of the day, the consumer will decide, and we will be where the consumer is.
spk03: Great. Thank you both.
spk02: Our next question is from Eric Handler with MKM Partners. Please proceed with your question.
spk12: Yes. Good evening. Thanks for the question. I wondered if you can give us any updates about your thoughts on pricing. You've announced NBA 2K is going to have a $10 price increase console versus console system, or next gen versus current gen. How you're thinking with that, and then I'll have a follow-up question.
spk09: Yeah, thanks, Eric. You know, pricing is determined on a title-by-title basis. We already explained that the reason for the the price that we set for mba 2k 21 for next gen reflected the fact that there hasn't been a front line price increase since 2005 and yet production costs have gone up two or three hundred percent on the one hand also because we believe we develop deliver vastly more value to the consumer than the price we charge that's our goal at all times um as i said on a per hour basis interactive entertainment's an incredible bargain and the us has the lowest frontline pricing of any anywhere on earth. So we, we think it makes sense and we believe consumers are fine with it as a result.
spk12: Okay. And then as a follow-up you know, PlayDots looks like it's potentially a very nice tuck in acquisition. You know, as you look at the M&A landscape you know, Is there much out there for additional acquisitions? It seems like there's more mobile type deals to be had rather than, you know, console specific tech companies. But what if you could just give us some color on the M&A landscape?
spk09: Look, we have seen an acceleration in M&A activity. You know, obviously Microsoft is acquiring Bethesda, for example, which is a significant, I believe, you know, seven some odd billion dollar transaction. And so I think you're going to continue to see increased M&A activity just because of the heat around the category and the amount of capital that's being deployed by big companies to pursue it. From our point of view, we have almost $2.4 billion in cash. We have no debt. And we are anxious to build our business, aggressively doing so. And we use our capital to support organic growth, our primary story at Take-Two. We also will use our cash to acquire companies when they're strategically consonant and when those deals are accretive. And we return capital to the shareholders on a regular basis through buybacks. And that will continue to be our approach.
spk03: Thank you.
spk02: Our next question is from Drew Crum with Stiefel. Please proceed with your question.
spk10: Okay. Thanks. Hey, guys. Good afternoon. For Strauss or Carl, can you comment on cross-platform play and how you think about this across your portfolio, and specifically if the next-gen version of GE will feature cross-play? And then I have a follow-up.
spk05: Hi, Joe. It's Carl. We do think about cross-play a lot, and I think for a lot of games that are out in the market that do support cross-play, it makes a lot of sense. It's certainly something that's very intriguing to us. It's something that we're capable of doing, and obviously it's not just our decision alone. There's platforms involved as well. We haven't made any specific announcements about cross-play. We are enabling certain cross-generational platforms. cross-generational opportunities within our games. But in terms of cross-play, it's very interesting. I think from a player liquidity perspective, it can be a very compelling thing. But for some games, it also has certain limitations. If you're cross-playing between mobile and console games, it's not always the best experience for everybody. So there are considerations that you have to make when making those types of decisions. But obviously, we do consider it. And it's a great opportunity for our industry in general going into this next generation.
spk10: Got it. Okay. And Laney, if I heard you correctly, you indicated the RCS would be up 5% in the December quarter. Is that correct?
spk06: Yes, that's correct for the third quarter.
spk10: Okay. Can you talk about the assumed deceleration and how that aligns with the timing of the big updates for Rockstar Online?
spk06: So for GTA, we have for Q3, we have it coming down in the third quarter versus last year. And, you know, when we look at GTA, we always sort of look at it being out for seven years, and we think about the quarters going forward. And since, you know, it's something that has been out for so long, we tend to forecast it as coming down each quarter, and it always beats our expectations. So when we go out into the future, you know, that seems to be how, you know, we guide for that title.
spk10: Okay.
spk06: The growth in the quarter is coming from the NBA title.
spk10: Okay. Got it. Thanks, guys.
spk02: Our next question comes from Mike New with Goldman Sachs. Please proceed with your question.
spk14: Great, thanks. Strauss, I was wondering if you could provide your view on using free-to-play experiences to enhance the reach of your franchises. For instance, in the spirit of Call of Duty Warzone and Call of Duty Modern Warfare, would it ever make sense to make a free-to-play component available for GTA or NBA 2K? Thanks.
spk09: Well, look, we're pretty open-minded. And at the same time, we deliver the highest quality experiences in the business. And we charge much less for them than we believe they are worth to consumers. And then we deliver typically an ongoing component that is free. And that's already a great deal of value. Any monetization, of course, is totally optional. And unlike many sort of casual titles, The monetization is not necessary to enjoy the experience. It's an additional benefit, but there are no toll booths in any of our online games that are attached to our core games. We have, on occasion, promoted our games very cheaply, or in a couple of instances, free, which effectively means you have access to the online component free as a promotion. And I wouldn't rule out the possibility of doing that. And of course, Rockstar has announced that GTA Online will be a standalone experience for next gen coming in second half of 2021. And that it'll be free for PS5 users for about three months. So as you can see, we're open-minded about our business model. And I wouldn't rule out the possibility that at some point, certain experiences can become free as a matter of the entry point. I like, you know, what I consider sort of tethered free to play where, you know, 100% of the people acknowledge the value of the title and pay to play it. And on an ongoing basis, you have what is effectively a free-to-play experience attached that can go on for many years. Grand Theft Auto Online, of course, has been successful for seven years and is expected to set a new record in this fiscal year, amazingly enough. I think that you're also implying another question, which is some of our competitors have taken legacy IP and and created standalone mobile free-to-play titles related to that IP and branded that IP. And we have not done that yet. We have not announced any plans to do it. And the world in which we would do it, of course, would be when our labels are excited by the opportunity creatively and when we think we can deliver something to consumers that's absolutely stellar.
spk14: Great. That's incredibly helpful. Thank you, Shresth.
spk02: Our next question is from Garrick Johnson with BMO Capital Markets. Please proceed with your question.
spk07: Great. Thank you. Good evening, Strauss. Hey, Carl. Laney. On MBA2K, I have a two-part question. So you decided to not offer free upgrades from current to next-gen, but you did release Mamba Forever dual access for $100. What did you see people do? Did you see people mix up immediately to Mamba Forever or maybe delay the purchase of 21 until next time it comes out so maybe we see a second wave?
spk05: Yeah, I mean, I don't have any specifics to share. This is Carl, by the way. I don't have any specifics. It's a great question. I don't have specifics to share with you about what activity we've seen. And by the way, it's kind of hard to know because we're still pretty early in it. We've sold already 5 million units. and we've had lots of nice action around all of our SKUs, but we don't know what people would otherwise be doing. So it's sort of hard for us to know whether people are waiting or whether they're going for the Mamba now or they're just buying the current gen and they'll buy the next gen later or just buy current gen. It's a little bit of uncharted territory, and it remains to be seen. But what we were very gracious for and proud of is the fact that the activity and the engagement around what we've seen so far has been incredible. So no matter how much it breaks down by SKU, I think we're looking at a really good release for MBA 2K21. Okay.
spk07: Thank you, Carl. And by the way, there's $100,000 worth of virtual currency in Mamba Forever. So how much of that contributed to the 76% recurrent consumer spending growth in MBA? Okay.
spk03: We don't share that level of detail. Okay, thanks.
spk02: Our next question is from Brian Nowak with Morgan Stanley. Please proceed with your question.
spk04: Hi, everyone. Thanks for taking my question. It's Matt on for Brian. So kind of, you know, following up on the city content in MBA2K, Are you seeing any new types of behavior, particularly in the last few months inside of the games, whether it's, you know, people socializing more rather than just playing games or kind of like, you know, new use cases that you're noticing players, you know, eke out? And, you know, is cities kind of, you know, an opportunity to expand on that and sort of like keep users stickier by adding new sorts of in-game activities? And then just secondly, you know, just wondering if you could provide an update on, you know, the progress with some of the newer studios like 31st Union and Cloud Chamber. Is, you know, everything in place to sort of, you know, hit the pipeline that you guys shared earlier this year? Thanks.
spk05: Hey, Matt. It's Carl. In terms of the city, I think the real quick answer to the question is, you know, really since the park came back out in 14, we've seen more social activities in NBA generally speaking. And as the environments got more sophisticated and there was more things to do, that social activity has been increasing all along. And you see big jumps in that as well. When you come out, when we moved from the park to the neighborhood, we saw a marked difference in how people play in the game. You create events. People create their own events within the communities themselves. And the more that you give within these communities and within these spaces, within these worlds, It encourages people to spend more time there. And that's a really great thing from an engagement perspective, because number one, I think it does actually, people love it. And driving engagement also drives economics for us. And that's one of our objectives. So building out the city was a huge endeavor that VC took on. We think it's going to be really well received. We think people are going to spend a lot of time in the city. And it really will take that whole concept of open world social gaming to another level in the context of NBA. So we're very excited.
spk09: Yeah, in terms of how things are going at our studios, particularly our new studios, the answer is very, very well. We have an extraordinary pipeline. We've doubled our prior pipeline of releases over the next five years. You mentioned two of our studios. You know, I'd really talk about all of our studios, and there are many now. and everything is looking great and is on target. We do not expect to see any slippage. And while I think working from home is really tough, and I admire our colleagues for doing such a great job doing it, you know, it isn't the same as being in the office, and yet we have not seen any slowdown in our expected cadence of releases.
spk03: Great. Thank you.
spk02: Our next question is from Todd Junger with Sanford Bernstein. Please proceed with your question.
spk08: Hi, thanks. One sort of high-level one and then one housekeeping. The higher-level one, just following on, you've been asked so far about subscription and free-to-play and really every permutation of business model and platform. I'm going to ask sort of the mobile question version of that, if you don't mind. especially given you've seen some other AAA publishers be very aggressive and you could argue successful in taking what used to be console IP, finding a big home for it, relatively big home for it in mobile. When you start to think about the role of mobile across your IP portfolio in studios, I wonder if you have any big ideas there that fits for any of your big IP, and if so, do you have the sort of resources you need in-house to make that sort of development effort. Thanks. And then the super quick one is, if you don't mind, so I know typically you guys aim to release a AAA frontline title generally every year outside of 2K, NBA 2K. You didn't have one this year. I wonder when you look at next year, do the remastered versions of GTA and RDR, does that fit your definition of a AAA console release or not? Thanks.
spk09: Yeah, thanks. In terms of the portfolio of owned intellectual property, of which we're very proud, we have 11 franchises that have sold over 5 million units with an individual release and over 60 that have sold over 2 million units. And there's some of the most extraordinary franchises in the entertainment business, never mind the interactive entertainment business. I think I alluded to this earlier. We wouldn't rule out the possibility of making a standalone mobile title based on that intellectual property. It would be driven by The label's creative desire to do so and a belief that we could do an extraordinary job at it. We have a lot of talent in the mobile space now at numerous labels, Play.SocialPoint, 2K, and others. And I don't doubt that we could put together the resources for the properties that make sense. So stay tuned on that topic. It is not lost on us that the biggest hits in the mobile business are native to the mobile business. They are not based on licensed IPs. They're not based on console IP. The biggest hits are native to the business. And in terms of our ongoing release schedule, you know, we haven't said very much at all about fiscal 22. We have said that GTA Online and GTA 5 are coming for next gen in the second half of calendar 21. We've said the Kerbal Space Program 2 is coming in fiscal 23. But we will be talking about our release schedule for 22 in due time, and our goal remains the same, but it's too early to comment what the release schedule will look like.
spk05: To answer your question specifically, though, about the platform extensions and whether we consider them the part of our core gaming experience, we do. So we did say before the 93 titles, 63 that we mentioned that are in our pipeline, which is more than double what it was five years ago, by the way. 63 of those are core gaming experiences, and that includes 15 platform extensions.
spk08: Got it. That's helpful. And sorry for any redundancy on the mobile there, but I appreciate the additional comments. That was helpful. Thanks, everybody.
spk02: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment, please, while we poll for questions. Our next question is from Alex Giamma with Jefferies. Please proceed with your question. Great.
spk13: Thanks for the question. Strauss, I think the messaging recently has still been for growth from the company as we think about next year, as we think about fiscal 22. Does that change at all as you continue to beat and raise expectations this year and the comp gets any more challenging, or is the expectation still for growth next year?
spk03: Thank you.
spk06: So for fiscal year 22, given that we now expect next bookings of over $3 billion this fiscal year, it's too early to predict whether our business will grow next year. Our results this year have benefited from sheltering at home, and it remains to be seen whether that will continue to last into next year. So it's just a little bit too early to call at this point.
spk13: Got it. Thanks, Lainey.
spk02: We have reached the end of the question and answer session. At this time, I'd like to turn the call back over to Strauss Zelnick for closing comments.
spk09: Thank you very much. On behalf of everyone at Take-Two, I'd like to wish you all a very happy and healthy holiday season. These are extraordinary times, and I wish you all the best through them. And once again, I'd like to thank all of our colleagues for their incredible work and for these extraordinary results. Have a great evening.
spk02: This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
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