Take-Two Interactive Software, Inc.

Greetings and welcome to the Take-Two Q4 fiscal year 2023 earnings 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 call is being recorded. It is now my pleasure to introduce your host, Nicole Shevins, Senior Vice President of IR and Corporate Communications. Thank you, Ms. Shevins. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year 2023 as of March 31st, 2023. Today's call 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 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 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 measure to the most comparable gap 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 TakeTwoGames.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 concluded fiscal 2023 by delivering strong fourth quarter results, including net bookings of $1.4 billion, which were above the high end of our expectations. On behalf of our management team, I'd like to thank all of our colleagues around the world for helping us achieve these results and supporting our vision to become a more scaled, diverse, industry-leading organization especially as we navigate an oftentimes volatile and uncertain economic landscape. With fiscal 2024 underway, our initial expectation is to deliver full-year net bookings in the range of $5.45 to $5.55 billion. We're assuming a continuation of the current challenging consumer backdrop within our forecasts. Additionally, the development timelines of some of our titles have lengthened especially as we strive to redefine the creative standards of excellence of our industry, which affect our release slate for the year. Looking ahead to fiscal 2025 is a highly anticipated year for our company. For the last several years, we've been preparing our business to release an incredibly robust pipeline of projects that we believe will take our company to even greater levels of success. In fiscal 2025, we expect to enter this new era by launching several groundbreaking titles that we believe will set new standards in our industry and enable us to achieve over $8 billion in net bookings and over $1 billion in adjusted unrestricted operating cash flow. We expect to sustain this momentum by delivering even higher levels of operating results in fiscal 2026 and beyond. I'd now like to discuss several key highlights from fiscal 2023, which was a milestone year in the 30-year history of our organization. We delivered net bookings of $5.3 billion, which reflects both the transformative evolution of our company through our combination with Zynga and our ability to create, market, and distribute the highest quality entertainment experiences. We made excellent progress integrating Zynga. The combination has been highly accretive to our business as we've embarked on new revenue-driven opportunities, exceeded our anticipated cost synergies for year one, and enhanced further our mobile platform through select acquisitions. As we approach the one-year anniversary of our combination, we're immensely proud of the trajectory of our integration and the strength of our shared culture and values. Our headcount now stands at nearly 12,000 talented individuals, including approximately 9,000 developers in our studios throughout the world, which positions us exceedingly well to reach the full potential of our pipeline. And we've maintained our focus on our core tenet of efficiency. We've taken a rigorous approach through our cost reduction program announced in February, which we believe will surpass meaningfully the $50 million in annual savings that we originally anticipated. Our fourth quarter outperformance was led by strong results from Grand Theft Auto 5 and Grand Theft Auto Online, Red Dead Redemption 2, and Zynga's mobile portfolio. Broadly speaking, the macroeconomic environment remained relatively consistent with what we experienced throughout the third quarter holiday season. While consumers continued to exercise restraint with their purchasing behaviors, They prioritized blockbuster franchises and titles that offered great value. As a result, our vast catalog of proven, high-quality titles achieved strong results. As part of our ongoing portfolio management measures, we made the decision to cancel several unannounced titles in development, which we believe will enable us to tighten our focus and reallocate resources to projects for which our creative teams have higher levels of conviction and expectations of success, excluding the associated write-offs Our fourth quarter and full year management earnings results were above the high end of our guidance. We manage our pipeline actively, sometimes making difficult decisions to ensure that we're meeting our creative standards and achieving financial returns that are consistent with the goals of our company. We believe that an evolving, robust pipeline is an essential part of our long-term strategy to expand, enhance, and diversify our portfolio, to grow our player base, and to launch a multitude of new hit franchises across an array of platforms and business models. Turning to the performance of our titles for the period, Grand Theft Auto V exceeded our expectations, and to date the title has sold in more than 180 million units worldwide. As hardware supply constraints receded, Grand Theft Auto V and Grand Theft Auto Online adoption on the latest generation of platforms continued to grow. For the first three weeks of Grand Theft Auto Online's holiday update, PlayStation 5 and Xbox Series X and S consoles grew to 14% of its audience penetration and 25% of its revenue penetration, up from 11% and 20%, respectively, versus last summer's content update for the comparable period. During the period, Rockstar Games continued to support the passionate global Grand Theft Auto online community with an array of new content offerings, including The Last Dose, an epic finale of the Los Santos Drug Wars update, as well as the roving gun van, taxi work missions, a new 50-car garage, new vehicles, clothes, weapons, modes, and much more. Los Santos Drug Wars introduced a phased approach to delivering high-value content, creating a much longer tail of sustained engagement and net bookings than we've seen with previous content updates. Additionally, GTA Plus, Rockstar's premium membership program, continues to perform well, driven by a positive response to monthly events since the launch of Los Santos Drug Wars. Red Dead Redemption 2 outperformed our plans, and to date, the title has sold in more than 53 million units worldwide. We're also pleased with the continued engagement of players with Red Dead Online, as demonstrated by its 10% year-on-year increase in new online players on all platforms. NBA 2K23 continues to grow its audience, with the title selling in over 11 million units to date, a record for the series at this stage, and achieving its highest ever virtual currency sales. In addition, engagement with NBA 2K23 remained incredibly strong, with approximately 2.3 million daily active users, including growth in the city, my career, and my team users. NBA 2K23 Arcade Edition continues to bring the best basketball experience to mobile devices and has maintained its number one position on Apple Arcade. Building upon Visual Concept's resounding success in reinvigorating our WWE franchise last year, WWE 2K23 enjoys the highest Metacritic review score average in the history of the series. Engagement with the game has been outstanding, players logging nearly 8 million hours of gameplay and facing off in more than 100 million matches. 2K is supporting the title with a series of add-on content that can be purchased individually or as part of a season pass. We value deeply our relationship with the WWE and look forward to continuing and expanding upon our successful partnership in the years to come. Private Division and Intercept Games launched Kerbal Space Program 2 in early access for PC on Steam, Epic Games Store, and other storefronts. Our teams are encouraged by the incoming player feedback, and we've already implemented several updates with more on the way as development continues. Last week, Private Division announced a partnership with Game Freak to publish their upcoming new action adventure IP, which is one of Private Division's most ambitious projects to date. In addition, Private Division and the Roll7 studio were recently honored with two prestigious industry awards, the BAFTA for Best British Game for Roller Drone and Best Sports Game at Dice for Olly Olly World. Zynga's mobile business had a strong finish to the year. In-app purchases were above our expectations. Momentum has continued, and we were pleased to experience strong demand over the Easter holiday. Efforts to increase our advertising business are tracking well, with ad revenue growing quarter over quarter and accounting for approximately 27% of Zynga's net bookings. Our teams are successfully increasing advertising supply in our games, investing in optimization, and implementing new ad products which are helping us monetize a much broader cohort of users. Our direct consumer efforts are tracking well with numerous titles currently on our platforms and plans for nearly all mobile games across our labels to leverage our highly profitable proprietary distribution channel over the next few years. A few highlights of Zynga's offerings during the period include Empires and Puzzles, Zynga's highest grossing title, drove engagement through its new in-game event, Season of Love. Zynga's social casino portfolio had its best quarter in nearly two years, driven by record performance from Game of Thrones Slots Casino and strong overall results from Zynga Poker, Hit It Rich, and Wizard of Oz Slots. Top Eleven had a robust quarter and launched its Proving Ground England mini-game update in February, which challenged players to recreate the greatest moments in English football history. The new race pass from CSR Racing 2 continued to drive player engagement, retention, and monetization with innovative new profile banners for players to collect. We remain quite pleased with our hyper-casual mobile business. Popcore achieved strong results during its first full quarter under our ownership. Additionally, Rollick has increased its profitability, and the studio celebrated several milestones during the period, including the first anniversary of its title, Fill the Fridge, and its social media-inspired pressure-washing run reaching the number one most downloaded spot in Apple's U.S. App Store. In closing, as we continue to pursue our mission to be the most creative, the most innovative, and the most efficient entertainment company in the world, we do so incredibly well-positioned with a broader portfolio of owned intellectual property, a deeper pool of the industry's top creative talent, and the sound infrastructure to capitalize on the vast opportunities on the horizon. As we execute on our strategy, we believe that we can increase meaningfully our scale and prominence within the industry, grow margins, and achieve record-breaking operating results for fiscal 2025 and beyond. I'll now turn the call over to Charles.