Take-Two Interactive Software, Inc.

Greetings and welcome to the Take Two, third quarter 2023 earnings conference call. At this time, all participants are in a 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. It is now my pleasure to introduce your host, Nicole Shevin, Senior Vice President of IR and Corporate Communications. Thank you, Nicole. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the third quarter of fiscal year 2023 and the December 31st, 2022. Today's call will be led by Strauss-Velnick, State Q'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 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 filings with the SEC may be obtained from our website at take2games.com. And now I'll turn the call over to Strauss.

Thanks, Nicole. Good afternoon, and thank you for joining us today. During the third quarter, we continued to execute on our ambition to create the highest quality, most engaging interactive entertainment franchises in the industry, to deliver them across an array of platforms, and to captivate our global audiences. All of our new game releases and post-launch content have received significant critical acclaim, and we're pleased to have the highest catalog sales based on units sold in the Americas. The strength of our portfolio reflects the passion, vision, artistic acumen, and hard work of our world-renowned development teams and studios, and we're immensely proud of our long-standing commitment to quality. Notwithstanding our creative achievements, Our third quarter net bookings of $1.38 billion were slightly below our prior guidance. We believe that as a result of macroeconomic conditions, consumers shifted holiday spending toward established blockbuster franchises and titles that were offered with pricing promotions. While our catalog benefited from this trend, it affected the performance of certain of our new releases and recurrent consumer spending for some of our console and PC games. Despite the current market, we believe that our long-term success will be driven by our consistent ability to create the best entertainment experiences, including sequels of our beloved franchises and the introduction of engaging new intellectual properties. Sales of Grand Theft Auto V exceeded our expectations during the holiday season, and to date, the title has sold in more than 175 million units. During the quarter, Rockstar Games released an array of new content for both Halloween and the holiday season, as well as a new story-driven update, Los Santos Drug Wars. The update launched in December and continues to deliver exciting new story and gameplay features to players across the winter season, including a new business, taxi missions, and much more to come, which is continuing to drive stronger engagement with our player base. We were also pleased with the performance of Red Dead Redemption 2, which outpaced our expectations, driven by successful holiday promotions and events. To date, the title has sold in more than 50 million units. During the quarter, Rockstar Games continued to release new updates for Red Dead Online, including a new Halloween hardcore telegram mission and new Call to Arms locations for Halloween and the holidays. We remain incredibly pleased with the enduring quality of these entertainment experiences. Grand Theft Auto V was ranked number three for units sold in the U.S. during calendar year 2022 on all platforms and was number two overall for 2022 on Steam. Additionally, 2022 was GTA V's 10th consecutive year in the NPD Top 5 for unit sales. Red Dead Redemption 2 also continues to resonate strongly with players, ranking as the number one selling game on Steam for the quarter and number three for 2022. NBA 2K23, which remains the number one selling sports title in North America, continues to expand its audience and to date has sold in over 8 million units. Full game sales for NBA 2K23 are up 3% year over year, and my team users grew more than 50% over last year, as players enjoyed assembling their rosters of the NBA's all-time greatest stars to dominate the competition. In addition, NBA 2K23 Arcade Edition remains the number one game on Apple Arcade, since its launch in October. 2K and HB Studios supported PGA Tour 2K23 with a limited edition holiday bundle that included NBA 2K23 and new content featuring branded gear from Barstool Sports, 100 Thieves, and Dude Perfect. HB Studios will release more content and features, including the addition of Pebble Beach, cosplay functionality, and ranked matchmaking. On December 2nd, 2K and Firaxis Games launched Marvel's Midnight Suns on Windows PC via Steam and Epic Games Store, PlayStation 5, and Xbox Series X and S. The title launched to critical acclaim with VGC rating it a 5 out of 5, calling it a modern strategy classic. PC gamers said it was completely brilliant, scoring an 88 out of 100, and Rock Paper Shotgun called it one of the best superhero games. The title is being supported with a series of post-launch content that can be purchased individually or as part of the game season's pass. During the quarter, Zynga's in-app purchases performed in line with our expectations, and we saw mobile trends improve from prior lows, particularly during the holiday season. The label continued to experience strong engagement among its active players, and we believe that we're maintaining our global market share. Our advertising business outpaced the broader industry as we continued to introduce new ad supply and products, optimize our networks to increase ad yields, and roll out chart boost throughout our inventory. A few key highlights of our mobile offerings during the quarter include Empires and Puzzles was a top performer due to strong seasonal content and Black Friday offerings. This is one of our first titles to leverage our direct consumer platform for in-app purchases, which we believe can enhance significantly the margins for our mobile portfolio over the next few years. Rollick's Balls and Ropes reached the number one spot for most downloaded game in the U.S. in December, giving Rollick a total of 20 games that have reached the number one or number two spot in Apple's U.S. App Store. We acquired PopCore, which offers a unique balance of hyper-casual experiences that also prioritize long-term player retention rates. This strengthens our leadership among hyper-casual publishers with respect to downloads and revenue. Following the acquisition, PopCore's game Tap Away reached the number one spot for most downloaded game multiple times throughout the quarter in Apple's US App Store. Zynga's casino titles remained resilient, with Game of Thrones slots posting its best quarter ever. Top Eleven had a strong quarter, driven by various in-game updates celebrating the World Cup. CSR Racing 2 released Race Pass, which features innovative new rewards that are driving stronger retention and monetization. Our combination with Zynga remains highly accretive to our business. We remain committed to delivering our planned synergies and we're well on our way to exceed our target of $100 million in annual cost savings within the first two years post-close. During the quarter, recurrent consumer spending rose 117% and accounted for 78% of net bookings. Turning to our outlook, we're operating in an environment that is in many ways more challenging than we anticipated, and we're lowering our fiscal 2023 net bookings guidance to $5.2 to $5.25 billion to take this backdrop into account. To be clear, I take personal responsibility for our revised downward guidance. We believe there's always more to achieve, particularly when we fall short of our expectations. We've embarked on a company-wide cost reduction program that will optimize our expense structure while also positioning us to deliver on our anticipated growth trajectory. We expect to achieve savings in excess of $50 million as a result of this initiative. Our balance sheet remains strong, allowing us to navigate these uncertain times with confidence. We've always managed our business for the long term. As we achieve the powerful synergies from our combination with Zynga, release new titles from our robust multiyear pipeline, and execute on our cost savings initiatives, we expect to deliver sequential growth and record performance over the next several years. Our business and creative teams have done a phenomenal job during these challenging times, and I'd like to thank all of our colleagues for their tireless work. I'd also like to thank our shareholders for their continued support. I look forward to sharing our progress with you on all of our key initiatives. I'll now turn the call over to Carl.