Take-Two Interactive Software, Inc.

Greetings. Welcome to Take-Two's third quarter fiscal year 2024 earnings call. At this time, all participants are in 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. Please note this conference is being recorded. I will now turn the conference call over to Nicole Chauvin, 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 third quarter of fiscal year 2024, ended December 31st, 2023. Today's call will be led by Strauss-Zelnick, Take-Two's Chairman and Chief Executive Officer, Carl Sladoff, our President, and Laney 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. I'm pleased to report that we achieved solid results, including net bookings of $1.3 billion. Our performance reflects our unwavering commitment to quality, the ongoing contributions from our outstanding portfolio, which is one of the strongest and most diverse in the entertainment industry, and our immensely talented creative teams. During the period, Grand Theft Auto V, Grand Theft Auto Online, the Red Dead Redemption series, and Zynga's in-app purchases, led by Toon Blast, exceeded our plans, driven by engaging new content, partnerships, and activations. This was partially offset by some softness in mobile advertising and sales for NBA 2K24. 2K is implementing measures to enhance performance for the title, such as offering new events and promotions, and delivering an exciting and engaging content lineup. we expect lifetime net bookings for the title to be in line with NBA 2K23. Due to these factors, a planned release moving out of the fourth quarter, and increased marketing for Zynga's new hit mobile title, Match Factory, we're lowering our full year outlook. While the timing of Match Factory's user acquisition expense will reduce our profitability in the current fiscal year, we believe that this investment will allow us to grow our audience meaningfully and increase the lifetime value of the Match Factory franchise. We've always managed to take two for the long term, and we have great confidence in our groundbreaking pipeline for fiscal 2025 and beyond, which we believe will enable us to grow our net bookings, increase our scale, and enhance our profitability. At the same time, our teams are always looking for ways in which we can operate at the highest level of efficiency, which is one of our core tenets. We're currently working on a significant cost reduction program across our entire business, to maximize our margins while still investing for growth. These measures are incremental, too, and even more robust than our prior cost reduction program, and we aim to achieve greater operating leverage as we roll out our eagerly anticipated release schedule. Turning to the performance of our titles during the quarter, momentum for Grand Theft Auto remains phenomenal. Sales of Grand Theft Auto V exceeded our expectations during the holiday season, and to date, the title has sold in more than 195 million units worldwide. During the quarter, Rockstar Games released its holiday update for Grand Theft Auto Online, the Chop Shop, which captured the highest number of active users in several years, including the largest ever increase in new Grand Theft Auto Online accounts. driven by the variety and depth of new vehicles and robberies, positive community sentiment, and the game's inclusion in various subscription services. The Grand Theft Auto series is also benefiting meaningfully from excitement surrounding Rockstar's announcement of Grand Theft Auto 6 and the release of its first trailer, which had 93 million views in 24 hours, broke YouTube's records for a non-music video launch, and along with partner channels, became the biggest video debut ever. Rockstar's recent partnership with Netflix to launch the GTA trilogy is also a resounding success, quickly yielding the highest rate of installs and engagement on the subscription services game platform. In addition, Rockstar's membership program, GTA Plus, continues to grow rapidly, powered by enhanced benefits for members, including a rotating assortment of classic Rockstar titles. Red Dead Redemption 2 also surpassed our plans, as our exciting holiday promotions and events resonated deeply with players. To date, the title has sold in more than 61 million units worldwide. During the quarter, Rockstar Games supported Red Dead Online with free updates, including the new All Hallows Call to Arms locations, a trio of new Dead of Night maps, and a hardcore telegram mission alongside the return of the Halloween Pass 2. NBA 2K24 remains the number one basketball simulation experience in our industry, and to date has sold in over 7 million units. Unit sales for the Gen 9 version of the game are growing at a double-digit percentage increase over last year due to an enhanced gameplay experience and wider console availability. As players migrate to Gen 9 platforms, we are seeing significant declines in demand for our Gen 8 offering. players have been highly engaged with many of NBA 2K24's new features, including a season pass that helped average revenue per user grow 30% year over year. On October 6th, 2K and Gearbox Software launched the Borderlands 3 Ultimate Edition for Nintendo Switch. We're pleased to expand further our beloved franchise by enabling players to make some mayhem at home or on the go with this thrilling, high-stakes adventure. Now, turning to Zynga. We're very pleased with the team's ability to create successful new mobile games, including Peaks Match Factory, which launched on iOS in November and Android in late December. The title is a top 30 grossing game on the Apple App Store and key target markets, such as the UK and the US, and has shown stellar retention and monetization metrics on par with previous category-leading peak titles, such as Toon Blast. Based on these excellent metrics, we see strong long-term potential for the title and we're planning to invest in new features and a robust marketing campaign to capitalize on its popularity with consumers and to scale it further. Zynga's other recent release, Top Troops, increased its engagement by more than 10% over last quarter, propelled by the launch of new features and semi-monthly battles. Looking ahead, the team is focusing on new brand collaborations, player competitions, and social and community engagements. Overall, Zynga's in-app purchases exceeded our expectations with significant sequential improvement compared to last quarter. This was led by Toon Blast, which materially outperformed, delivering its highest ever average revenue per daily average user and over 50% growth in its daily in-app purchase revenue compared to last quarter. While we're encouraged by the trajectory of Zynga's in-app purchases, its ad revenues were below our expectations. due to some changes that we're implementing in the hypercasual business, including a heightened focus on our profitability and the launch of new features that deliver blended monetization. Our direct-to-consumer business continues to grow and enjoyed a record holiday season. Our teams are working actively to add more titles each quarter to this highly accretive owned distribution channel. Looking ahead, Zynga has numerous titles in development and soft launch, that we're eager to release worldwide in fiscal 2025 and beyond. It bears noting that launching HIT Mobile titles is both highly complex and challenging, and we're gratified by Zynga's unique ability to release new properties to capture mind share and market share. In closing, although we're lowering our outlook for the year, we believe that our company's potential is vast and unique. Driven by our creative talent, our owned and controlled intellectual property, and our groundbreaking new pipeline for fiscal 2025 and beyond. As we execute on our strategic priorities, we believe that we'll deliver an array of unparalleled entertainment experiences that can captivate, engage, and redefine our industry for audiences around the globe. I'll now turn the call over to Carl.