Take-Two Interactive Software, Inc.

Good afternoon and welcome to the Take-Two Interactive Software second quarter fiscal year 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow a formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to our host, Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. Thank you. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the second quarter of fiscal year 2023, ended September 30, 2022. Today's call will be led by Strauss Belnick, Take-Two's Chairman and Chief Executive Officer, Carl Sladeff, 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 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 in 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 filings with the SEC may be obtained from our website at TakeDueGames.com. And now I'll turn the call over to Strauss.

Thanks, Nicole. Good afternoon, and thank you for joining us today. I'm pleased to report that we delivered another consecutive quarter of solid results with net bookings of $1.5 billion. We experienced healthy player engagement driven by exciting new game releases, post-launch content updates, and bold beats from many of our mobile offerings, even as consumers continue to navigate the effects of various macroeconomic and geopolitical factors. We made excellent progress with our integration of Zynga. We remain highly optimistic about the vast long-term growth potential for the mobile industry. which is expected to reach over $160 billion in gross bookings within the next four years. Some of our key achievements in the period include we successfully reached our 100-day integration milestone at the end of August. Zynga's president, Frank Chabot, and his leadership team have evaluated our mobile portfolio, including existing games and titles in development, and they've identified numerous opportunities to enhance our performance. These initiatives include reorganizing several teams, sharing development tools, resources, and best practices across our mobile studios, conceptualizing new bold beats, and leveraging Zynga's highly valuable publishing platform, which is now even stronger following the recent acquisition of Stormhaven. We're also starting to expand our direct-to-consumer efforts more meaningfully across our mobile portfolio further to enhance profitability. We remain committed to delivering $500 million of annual net bookings opportunities over time. The Zynga team has been working with our other labels to explore potential creative projects. As part of this process, we've identified certain underrepresented genres in our mobile portfolio that we believe we can pursue more aggressively over time. Our efforts to deliver cross synergies are tracking extremely well. And we're now confident that we can achieve over $100 million of annual savings within the first two years post-close. I'd like to thank Frank, his leadership team, and all of our new colleagues at Zynga once again for helping to make our combination happen so seamlessly. We're thrilled to have Zynga as part of our Take-Two family. Turning to our second quarter results, our net bookings performance was within our guidance range. led by Grand Theft Auto 5, which exceeded our expectations, and to date has sold in more than 170 million units worldwide. Starting July 26, Grand Theft Auto Online launched its latest major update, The Criminal Enterprises, introducing expanded game play across the criminal careers of executives, bikers, nightclub owners, and gun runners, as well as the opportunity to work with federal agents to uncover a criminal conspiracy in the new Operation Paper Trail series of contact missions. The update also featured a range of new vehicles and more, including the new Community series, showcasing some of the most fun and unique experiences created by players across the globe. This major update also delivered a host of overall improvements to the gameplay experience, including increased payouts across a wide array of activities and several other player-requested features. The Criminal Enterprises was very well received, and we've seen millions of players engaging with significant new features, such as the ability to run cell missions in private lobbies, new weapon wheel controls, and more. In addition, Rockstar Games' GTA Plus subscription service continues to grow its members, who enjoy a rotation of numerous exclusive in-game benefits, including vehicles, upgrades, and gear every month. On September 9th, 2K and Visual Concepts successfully launched NBA 2K23, with the title earning an 80-plus Metacritic rating at launch and receiving praise for raising the bar on the top-selling sports title in the U.S. To date, NBA 2K23 has sold nearly 5 million units, alongside significant growth in virtual currency sales and a higher average selling price compared to NBA 2K22. Player engagement has been very strong, with more than 2 million daily active users and 4% growth in average days played. We believe that NBA 2K23 will continue to grow its audience as the title provides a year-round experience for its fervent community of players throughout the world. I'd like to congratulate the teams at 2K and Visual Concepts for once again delivering such a stellar basketball experience. The franchise's momentum extends beyond the core console experience. with NBA 2K22 Arcade Edition for Apple Arcade remaining the number one game on the platform and our recent launch of NBA 2K23 Arcade Edition offering many new features and improvements. Furthermore, NBA 2K Online in China continues to be the number one PC online sports game in the country with nearly 59 million registered users. Red Dead Redemption 2 is continuing to impress. with selling at more than 46 million units worldwide to date and more active players in this second quarter than we've seen for the comparable period in previous years. 2K supported WWE 2K22 and Tiny Tina's Wonderland with the final downloadable content packs for each title, which were made available individually and as part of the game's season passes. During the quarter, recurrent consumer spending rose 76% and accounted for 80% of net bookings. Zynga continues to experience strong engagement among its active players, and we believe that we're maintaining our market share globally. Our mobile business delivered mid-teens growth in advertising bookings on a year-over-year basis, outperforming the broader industry. At the same time, in-app purchases continue to be under some pressure due to current macroeconomic conditions. Some key highlights of our mobile offerings during the quarter include the Rollick business remained very strong and exceeded our plan. Notably, Rollick surpassed 2 billion lifetime downloads worldwide and has now launched 19 titles that have reached the number one or number two most downloaded game position in the U.S. App Store. Several of Zynga's titles celebrated milestones, including the second anniversary of Harry Potter Puzzles and Spells, the 10th anniversary of Farmville, and the 15th anniversary of Zynga Poker. Each of these anniversaries was supported with an array of in-game events and unique content offerings. Zynga unveiled several high-profile brand integrations, including Social Point's partnership with AMC Network's The Walking Dead and Dragon City and Monster Legends, CSR2's debut of Pagani's new multi-million dollar Utopia hypercar, And Game of Thrones Slots Casino launched a new in-game event, Week of the Dragon, in conjunction with HBO's new hit fantasy series, House of the Dragon. Turning to our outlook, we now expect to deliver net bookings of $5.4 to $5.5 billion in fiscal 2023. Our reduced forecast reflects shifts in our pipeline, fluctuations in FX rates, and a more cautious view of the current macroeconomic backdrop, particularly in mobile. Laney will provide more detail on our outlook shortly. Despite these headwinds and their effect on our guidance for the year, we remain highly confident in our diverse and extensive development pipeline that we expect will deliver us sequential growth and record performance over the next several years. Take-Two has a proven strategy, consistent track record of success, driven by our core tenets. We aspire to be the most creative, the most innovative, the most efficient entertainment company in the world. As we strive to capitalize on the numerous opportunities ahead of us, we're committed to creating significant long-term value for our shareholders. I'll now turn the call over to Carl.