Take-Two Interactive Software, Inc.

Greetings and welcome to the Take-Two fourth quarter and fiscal year 2024 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 is being recorded. It is now my pleasure to introduce your 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 fourth quarter and fiscal year 2024 ended March 31, 2024. Today's call will be led by Strauss Zelnick, Take-Two'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 TakeTwoGames.com. And now I'll turn the call over to Strav.

Thanks, Nicole. Good afternoon, and thank you for joining us today. I'm pleased to report that we concluded fiscal 2024 with strength, including net bookings of $1.35 billion, which exceeded the high end of our guidance range. Contributing to our positive results was the outperformance of NBA 2K24, Zynga's in-app purchases led by Toon Blast and our newest hit, Match Factory, and the Red Dead Redemption and Grand Theft Auto series. During fiscal 2024, we generated net bookings of $5.33 billion, driven by our high-quality titles and our ability to engage consistently our player communities. With fiscal 2025 underway, our portfolio is gaining momentum, and we have many exciting releases planned for the year. We expect net bookings to be in the range of $5.55 to $5.65 billion, representing 5% year-over-year growth. Our outlook reflects a narrowing of Rockstar Games' previously established window of calendar 2025 to fall of calendar 2025 for Grand Theft Auto VI. We're highly confident that Rockstar Games will deliver an unparalleled entertainment experience, and our expectations for the commercial impact of the title continue to increase. As we release our groundbreaking pipeline, we expect to achieve tremendous growth, including sequential increases in net bookings in fiscal 2025, 2026, and 2027. We've been executing our substantial cost reduction program, which we now anticipate will result in over $165 million of annual cost savings from our current and future expenses. This will enable us to run our business more efficiently and achieve greater operating leverage as our large-scale titles come to market. Now, turning to our performance during the quarter. NBA 2K24, which remains the number one basketball simulation experience in our industry, surpassed our expectations as players responded to our promotions, in-game content strategy, and updates within seasons. To date, the title has sold in over 9 million units. Engagement remains high with nearly 2 million consumers playing daily. Our industry-leading NBA 2K brand also continued to expand its audience through several innovative mobile experiences, including NBA 2K24 My Team, the new free-to-download mobile experience that allows players to sync progress between console and mobile devices as they play their favorite My Team modes on the go, NBA 2K Mobile, and NBA 2K24 Arcade Edition, which is consistently in the top five on Apple Arcade. The Grand Theft Auto series delivered another fantastic quarter, partially driven by an array of free content updates for Grand Theft Auto Online, including new vehicles, drag races, holiday-themed items to celebrate Lunar New Year and Valentine's Day, new community series jobs, and more. Unit sales for Grand Theft Auto V exceeded our forecast, and to date, the title has sold in approximately 200 million units worldwide. We're thrilled that more than a decade after their initial releases, Grand Theft Auto 5 and Grand Theft Auto Online grew their audience size by an incredible 35% and 23%, respectively, for the full year. Grand Theft Auto 5 also reclaimed its top spot as the most watched video game across all platforms, according to StreamHatchet, thanks largely to the tremendous viewership from the series' thriving role-play community. Rockstar's premium subscription service, GTA Plus, also continues to grow, with membership for the quarter almost doubling over the same period in the prior year as Rockstar continues to add valuable benefits to players. Red Dead Redemption 2 also surpassed our expectations and is sold in nearly 64 million units worldwide. We continue to expand the audience for the series with Red Dead Redemption and Undead Nightmare recently added to the roster of games included within the GTA Plus library. Borderlands 3 outpaced our forecast and we're thrilled that Randy Pitchford and Gearbox Entertainment are slated to join officially 2K's renowned internal studios in the coming weeks. We've already identified many potential growth opportunities for the Borderlands series and Gearbox's catalog, which we plan to pursue once the studio is integrated into our organization. We're also excited to see growing buzz for the star-studded Borderlands feature film, which is planned for release by Lionsgate this summer. WWE 2K24 has been a resounding success and is the highest-rated sports simulation of 2024. The title is also the highest rated installment in the history of our popular wrestling franchise on Xbox, with an 83 average Metacritic score. Engagement has been exceptional, with players logging over 11 million hours across more than 110 million played matches. In addition, the four years of WrestleMania pack has the highest attach rate for a super deluxe DLC in the series history, with more than 25% of WWE 2K24 players owning it. 2K and Visual Concepts are continuing to support the title and will have additional packs launching throughout the fall. I'd like to thank our friends Nick Kahn and Ari Emanuel over at WWE, TKO, and WME for their continued support. Additionally, I'd like to express our immense gratitude to our team at Visual Concepts for their outstanding work on our WWE 2K and NBA 2K franchises, which are both important annual contributors for our company. Zynga delivered outstanding results for the period, led by robust in-app purchases. Match Factory is accelerating and proving to be a hit, already establishing itself as a top 20 grossing game in the U.S. Apple App Store and reaching millions of new users with its launch on the Google Play Store. We're pleased that new bold beats and other exciting features have propelled average daily play time to around 60 minutes per user. Toon Blast maintained its positive momentum, achieving nearly 20% growth of in-app purchases compared to the third quarter, driven by a new Dragons Treasure competition and many other features. We'd like to congratulate the team at Peak for their incredible performance. Top Troops launched several content updates, as well as a major cross-media collaboration with the popular influencer MrBeast. The team plans to release additional enhancements to core gameplay and progression systems to drive further growth. Momentum continues at Rollick with the studio crossing 3.5 billion all-time downloads and announcing a new partnership with Mattel to introduce a mass-market Barbie mobile game later this calendar year. Our blended monetization efforts in hypercasual are progressing well within Rollick, which has resulted in Twisted Tangle and Screwjam both becoming top 100 grossing games on the U.S. Apple App Store. Our direct-to-consumer business continues to grow, and 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 this fiscal year, including Star Wars Hunters and Game of Thrones Legends. In closing, I'm highly confident in our business, led by our top creative talent, our industry-leading portfolio of owned intellectual property, our sound balance sheet, and our increasingly efficient infrastructure. Our teams are laser-focused on our core tenets of creativity, innovation, and efficiency, and as we deliver our groundbreaking pipeline over the next several years, we're poised also to deliver industry-leading growth and shareholder returns. I'll now turn the call over to Carl.

Thanks, Rouse. I'd like to thank our teams for their dedication and hard work as we continue to build the foundation for our future, which we believe is more promising than ever. We are extremely excited about our upcoming pipeline, which includes approximately 40 titles through fiscal 2027. Our updated release schedule reflects the actions of our recent cost reduction program through which we canceled several titles to focus our efforts and resources on the franchises we believe represent our best opportunities to achieve significant critical and commercial success. These titles did not include any of our core franchises and were not expected to material effect our net bookings growth. Turning to fiscal 2025. We have 16 titles in our pipeline, three of which have already been released. We have seven immersive core titles, including Top Spin, NBA, and WWE 2K25, and the next iteration in one of 2K's biggest and most beloved franchises, with the first details coming in just a few short weeks at Summer Games Fest Kickoff Live. Of these titles, Top Spin 2K25 was released by 2K and Hangar 13 on April 26th. The revival of our popular tennis franchise has been well received by critics and provides deep personalization, iconic venues, and industry-leading gameplay. With Topspin 2K25, we continue to broaden our sports offerings, and 2K will support the title with season packs throughout the year. We have two independent titles from Private Division, the first of which is Moon Studios' No Rest for the Wicked, which launched on April 18th into early access on PC. This new ARPG was well received for its visual combat, distinct art style, and rich narrative. Private Division, along with Weta Workshop, also announced Tales of the Shire, a Lord of the Rings game, which is planned for release later this year. The teams recently revealed a new trailer for this cozy Hobbit-like sim, which is set in the Middle Earth universe of J.R.R. Tolkien. We have five mobile titles, including NFL 2K Playmakers, Star Wars Hunters, and Game of Thrones Legends. NFL 2K Playmakers was released on April 23rd by 2K and CatData Games for iOS and Android devices. In this non-simulation tactical card battle, players can collect NFL player cards to assemble an exciting roster while also experiencing a variety of game modes and features. We're proud to add NFL 2K Playmakers to our ever-growing mobile portfolio in partnership with the NFL and the NFL Player Association. Lastly, we have two new iterations of prior releases planned for this year. As always, our labels will continue to provide new content and experiences that drive engagement and recurring consumer spending across many of our key offerings. Looking ahead, our pipeline for fiscal 2026 and 2027 has 24 titles planned. including 15 immersive core releases, six of which are sports simulation games, one independent title, five mobile games, and three new iterations of previously released titles. In closing, we believe that the many opportunities ahead of us will deliver a period of meaningful long-term growth, margin expansion, and shareholder returns. I'll now turn the call over to Laney.

Thanks, Carl, and good afternoon, everyone. We delivered a strong finish to fiscal 2024 and are entering fiscal 2025 with momentum, including healthy trends across our key franchises. Throughout the year, we released successful hit titles, engaged players with a steady cadence of in-game content, and continued to position our organization for the long term. We also deepened our commitment to efficiency and made some decisions that, while difficult, will align our resources with the initiatives for which we have the highest levels of conviction. We are confident that, over time, these steps will drive our scale, enhance our margins, and deliver industry-leading returns for our shareholders. I'd like to thank our team for their vision, passion, and dedication. Turning to our results, we delivered fourth quarter net bookings of $1.35 billion, which was above our guidance range of $1.27 to $1.32 billion. This reflected better than expected results from MBA 2K24, Zingas in-app purchases led by Toon Glass and Mash Factory, the Red Dead Redemption series, and the Grand Theft Auto series. The current consumer spending declined 2% for the period and accounted for 79% of net bookings. This was above our outlook, driven by the outperformance of NBA 2K, Twin Blast, and Match Factory. The current consumer spending declined for Grand Theft Auto Online, although it was up for virtual currency and GTA Plus. NBA 2K was in line with the prior year, and mobile increased slightly. During the quarter, we successfully launched WWE 2K24, which demonstrates 2K and Visual Concept's ability to raise the bar further for our popular wrestling series. GAAP net revenue decreased 3% to $1.4 billion, while cost of revenue declined 24% to $930 million and included an impairment charge of $304 million related to acquired intangible assets. Operating expenses increased by 244% to $3.2 billion due to a goodwill impairment charge of $2.2 billion and $93 million of business reorganization expenses related to our recently announced cost reduction program. On a management basis, operating expenses rose 20% year over year, which was slightly above our guidance due to higher personnel and IT expenses and professional fees. For fiscal 2024, we achieved net bookings of $5.33 billion, which was slightly above our revised guidance range of $5.25 to $5.3 billion. The current consumer spending grew 2%, which exceeded our outlook. and accounted for 78% of net bookings. Recurrent consumer spending for mobile increased high single digits, NBA 2K virtual currency and seasons was up slightly, and Grand Theft Auto Online virtual currency and GTA Plus membership was flat. Non-GAAP adjusted unrestricted operating cash flow was $42 million as compared to our outlook of approximately $100 million due to higher external developer advances, cash tax, and interest payments. We spent approximately $142 million on capital expenditures, primarily for game technology and office build-outs. GapNet revenue was flat at $5.35 billion and cost of revenue increased 1% to $3.1 billion, which included an impairment charge of $577 million related to acquired intangible assets. Operating expenses increased 69% to $5.8 billion due to an impairment charge of $2.3 billion related to Goodwill and $105 million business reorganization charge related to our cost reduction program. On a management basis, operating expenses rose 15% year-over-year and were slightly above our guidance due to the factors I mentioned earlier that affected the fourth quarter. Today we've provided our outlook for fiscal 2025. We project netbookings to range from $5.55 billion to $5.65 billion, which represents 5% growth over fiscal 2024. The largest contributors to netbookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Empires and Puzzles, our hyper-casual mobile portfolio, Match Factory, the Red Dead Redemption series, an unannounced immersive core title from 2K, and Words with Friends. We expect recurrent consumer spending to be up approximately 3% compared to fiscal 2024, and to represent 76% of net bookings. Our recurrent consumer spending forecast assumes high single-digit growth for mobile, a slight increase for NBA 2K, and a decline for Grand Theft Auto Online. We expect the net bookings breakdown from our labels to be roughly 50% Zynga, 31% 2K, 17% Rockstar Games, and 2% other. And we forecast our geographic net booking split to be about 60% United States and 40% international. We expect non-GAAP-adjusted, unrestricted operating cash flow to be an outflow of $200 million, and we plan to deploy approximately $140 million for capital expenditures, primarily for game technology and office build-out. We expect GAAP net revenue to range from $5.57 to $5.67 billion, and cost of revenue to range from $2.43 to $2.46 billion. In terms of operating expenses, we recently implemented a cost reduction program that is expected to deliver over $165 million of annual cost savings across our entire business. As part of these efforts, we have eliminated several projects in development that we did not anticipate would meet our financial benchmark. We also took actions to streamline our organizational structure, which reduced both existing headcount and future hiring needs. Our total operating expenses are expected to range from $3.56 to $3.58 billion as compared to $5.83 billion last year. On a management basis, we expect operating expense growth of approximately 7% year over year, which is largely due to an increase in ongoing marketing support from Match Factory as well as other mobile and immersive core launches planned for the year, partially offset by savings from our cost reduction program. Looking ahead, and as Charles mentioned earlier, we have narrowed the previously established release window for Grants.06 to fall of calendar 2025 from calendar 2025. As development advances, our confidence in the title and its potential commercial impact continue to grow. That said, we are not providing specific guidance beyond fiscal 2025, as our release schedule includes numerous titles each year, and even modest shifts can have significant effect on results in any given period. Our outlook for the lifetime value of our pipeline remains as strong as ever, and we expect sequential growth in net bookings in fiscal 2025, 2026, and 2027. Now moving on to our guidance for the fiscal first quarter. We project net bookings to range from $1.2 to $1.25 billion, compared to $1.2 billion in the first quarter last year. Our release date for the quarter includes Stoppins 2K25, No Rest for the Wicked on Early Access for PC, and NFL 2K Playmakers, all of which have already released, and Star Wars Hunters. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Team Glass, Empires and Puzzles, our hyper-casual mobile portfolio, MassFactory, the Red Dead Redemption series, Words as Friends, and Zynga Poker. We project the current consumer spending to increase by approximately 1%, which assumes mid-single-digit growth in mobile, flat results for MBA 2K, and a decline for Grants.io Online. We expect GapNet revenue to range from $1.3 to $1.35 billion. Operating expenses are planned to range from $928 to $938 million. On a management basis, operating expenses are expected to grow by approximately 14% year over year, which is primarily driven by additional marketing for Match Factory, partially offset by our cost reduction program. In closing, we believe that we are very well positioned to deliver the highest quality content in our industry and to enhance our profitability as we grow our scale and maintain our focus on efficiency. We're extremely excited about our path to the future, and we look forward to sharing more details about the many catalysts ahead for our company. Thank you. I'll now turn the call back to Strauss.

Thanks, Lani and Carl. On behalf of our entire management team, I'd like to thank our colleagues for their dedication to our business and for creating the highest quality, most engaging entertainment franchises that captivate our global audiences. And to our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star 2 if you would 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 keys. Our first question comes from the line of Eric Handler with Roth MKM. Please proceed with your question.

Good afternoon. Thanks for the question. Strauss, I wonder if we could talk a little bit about the gearbox acquisition. In the past, you've expressed that you never really felt the need to own all of gearbox. Here you are about to own all of gearbox. Can you talk about how you think about now owning all of gearbox and some of the opportunities that you'll have with that?

Thanks, Eric. What I was referring to is when asked when Gearbox was sold to Embracer whether that caused us to have any concern, my response was no because we have a long-term publishing agreement and that's been mutually beneficial for our company and for Gearbox as it was for Embracer. However, when the opportunity presented itself for us to acquire the company on terms that we felt were reasonable, we frankly jumped at the opportunity. We have all the respect in the world for Randy Pitchford and his team. He has the ability to bring AAA products to market responsibly and on a very reliable and rather rapid cadence. And he's a hit maker. And it's very hard to make a new hit. And Tiny Tino was a new hit. And, of course, Borderlands just goes from strength to strength. So we're thrilled to have Gearbox in the family.

Okay. And then, Laney, with regards to the annual cost savings that you announced, how much of that should be seen in fiscal 25?

So we'll start to see it in fiscal 25, but we'll see a full annualization of it in fiscal year 26. So the majority of the plan was executed in Q4 and Q1, but pieces of it will come through this year.

And our next question comes from the line of Doug Krutz with TD Cowen. Please proceed with your question.

Hey, thank you. The ability of Rollick to launch top 100 grossing games is a really pleasant surprise. Just wondering if you could talk about how to think about the life cycle of those games. Typically, Rollick's games are sort of, you know, they're hot for a while and then they move on to something next, something else. Is this going to be the case for these monetizing games as well, or is it planned to have a longer life cycle? Thank you.

Undoubtedly, this so-called hybrid casual approach should lead to longer life cycles because the hyper casual approach really was, you know, put it out there, get a bunch of downloads, offer a rather light experience, you know, generate advertising revenue, have the users move on to the next. And that was great while it lasted, but, you know, long-term entertainment businesses are all driven by great content. And Rollick's proving that it has the ability with its partner studios to do just that and to deliver content that is durable and long-lasting. It remains to be seen whether we can truly create forever franchises at Rollick. I believe we can. We haven't done so yet, but we're off to a really good start.

Thank you.

And our next question comes from the line of Colin Sebastian with Baird. Please proceed with your question.

Thanks. Good afternoon. Maybe a couple for me. I guess first off on the change to the guidance and the outlook, what is your level of confidence, Strauss, in the calendar 25 launch of GTA 6? And is there anything else more specific you can talk about that's behind that postponement? And then secondly, on the high single-digit mobile growth, I'm curious how much of that is related to any recovery you're seeing broadly in mobile gaming or is that more specific to the increase in marketing spend and these titles that are outperforming your expectations for this year? Thank you.

Thanks, Colin. We actually narrowed calendar 2025 to fall of 2025, and we feel really good about that release date, and obviously we feel great about the title that is to come. And with regard to mobile, What we do at Zynga, because we are a market leader, of course, is driven by the market in which we live. And it is gratifying that after a down year and then a slightly down year, we're heading into a flatter up year for the industry. Obviously, though, what's driving our expected results would be our hits, including Match Factory, which is performing really, really well. And we said that we were spending a lot in UA in the fourth quarter. We did. And that's turned out to be productive spending.

All right, thank you.

Our next question comes from the line of Matthew Cost with Morgan Stanley. Please proceed with your question.

Hi, everyone. Thanks for taking the question. I guess between the success you've had with Match Factory and some new launch titles, setting a release date for Star Wars Hunters, and then the incremental marketing behind mobile, it seems like there's definitely more momentum in that business, which is great to see. I guess when we think about your analytical framework for investing in the marketing behind mobile, what are you targeting from a margin or payback perspective? And when should we expect to see this investment turn into profitable flow through from the mobile side?

So I hope, like everyone else, we look at these very same metrics, which is cost of acquisition, what kind of retention you expect, which is to say what kind of churn you get, the spending that you have on average, and therefore the lifetime value. And the longer a payback period you're willing to accept, of course, the more risk you take in those calculations because they're all based on extrapolating from current data and past data, and they can change at any given time. So I'm not prepared to share sort of our outside payback period. Suffice to say, though, that we want to have a great deal of confidence that we're looking at a positive LTV.

Great, thank you. And when would you expect to see this investment that you're making in mobile flip from a cost center to driving incremental profits?

So, of course, our mobile division is profitable. I understand what you're asking, which is frankly just another way of asking the same question you asked before, which I declined to answer. However, I do give you extra credit points for rephrasing it in a way that I might dive into it. However, so we don't share our exact payback periods. We do, however, tailor our user acquisition spending so that we expect a meaningfully positive LTV in a period of time such that we have confidence that even if we're wrong, we're not so wrong and we're not making money.

I hope that clarifies it a bit. It does. Thank you.

Our next question comes from the line of Drew Crum with Stifel. Please proceed with your question.

Hey guys, good afternoon. So could you address your forecast for NBA 2K RCS in fiscal 25 for a slight increase? Is low single digits growth the new normal for this going forward or is there something unique in fiscal 25 that's influencing that view? Thanks.

So we absolutely expect growth in NBA, and that's not just on the RCS side, but also on the full game sale side as well. This year is a little bit more challenging because we are still in the transition from Gen 8 to Gen 9, and Gen 9 is outperforming our expectations and doing fantastically well. I'd say we're a little bit more challenged on the Gen 8 side. As we continue to transition, I think we're going to see more tailwinds and headwinds in that regard. And when you look at the recurring consumer spending specifically, when you look at it specifically as it relates to Gen 9, it's off the charts. It's fantastic. So we've seen significant growth there. So again, I think we will have momentum just as we transition to Gen 9, and as people continue to engage more deeply in the game, we're going to continue to see very strong RCS growth.

Our next question comes from the line of Benjamin Soft with Deutsche Bank. Please proceed with your question.

Hey, guys. Thanks for the question. I was wondering if you guys could talk a little bit more about the change in bookings this year versus what you guys were talking about last quarter, how much comes from moving GTA versus any other shifts versus restructuring. And then, yeah, I guess I'll stop there. Thanks.

So for fiscal year 25, the outlook reflects a narrowing of Rockstar Games' previously established window from the calendar 2025 to fall, as we mentioned. There were also some other movements within the release schedule and also with our cost-cutting plan that is also part of the overall results for that year.

Got it. And then a housekeeping question. Does your current outlook reflect the acquisition of Gearbox or is that going to be updated next quarter after it's closed?

No, it's not included since the transaction hasn't closed yet, so we will expect to include it next quarter when we close, and we expect it to be slightly accretive to our management results.

Okay, that's helpful. Thanks, guys.

Our next question comes from the line of Martin Yang with Oppenheimer. Please proceed with your question.

Hi, thank you for taking my question. First question on statistics. With a narrowed window Is there any associated changes to your plan regarding the live service portion of GTA 6?

So Rockstar hasn't given any details on what its expectations are for the release. It's been a wonderful trailer that they put out that broke the Internet. And more news will come from Rockstar in the fullness of time.

Thank you. I have a second question on NBA. How is NBA's transition challenges in between console generations compared to other annually releasing titles on the market, either from 2K or from other external competitors? And do you attribute the challenges mostly to 2K or to markets?

I'm sorry, was your question about the transition from console generation from the last transition to this transition? Okay. So that's going back quite some time, and frankly, I don't have the exact figures in front of me. But generally speaking, I would say that the delta between the games this year, the Gen 9 game, Gen 8 game, is much broader. And I think that creates... that creates a more obvious difference between the two to do two games. And frankly, I can't even remember if we had two completely separate games back then. But in any case, the DELSA is quite significant this time around. So I would expect that the transition is more, the effect of the transition is more pronounced in this console generation. And I forget your second question. Was there another one? So do you,

How does it compare to other studios with annual recurring titles?

Yeah, we're not really commenting on our competitors. And most of our other studios, we don't have as much, because NBA comes out every year, so you're going to see that transition more brightly. We don't have the same effect in most of our other games. Occasionally we would, but they wouldn't be comparable games to NBA anyway. And again, like I said, we don't really comment about our competitors and their experiences.

Thanks, Carl.

Our next question comes from the line of Mike Hickey with Benchmark. Please proceed with your question.

Hey, Strauss. Carl Laney. Nicole, thanks for taking our questions. Congrats on the quarter. Strauss, in your prepared comments, you mentioned that your expectations for the commercial impact from GTA 6 have increased. I'm just curious if you could explaining what's driving that up to enthusiasm for the game. And then the second question on your guidance, curious why you're not providing medium term. You've done that before, and it feels like here you have at least better visibility on the primary catalyst driving that growth. And then on 27, tying into that question, wondering where your confidence is that you can grow sequentially. off 26. Is that sort of primarily the GTA ecosystem driving that growth in 27 or is a combination of that and other AAA games that you plan to release? Thanks, guys.

Thanks, Mike, for those questions. I think our confidence continues to increase just because Grand Theft Auto 5 continues to perform so well. We've now sold in over 200 million units and every quarter we continue to be pleased by the ongoing sales of the full game. And engagement in the past fiscal year with Grand Theft Auto 5 was up about 35% with Grand Theft Auto Online was up about 23%, I believe. That's extraordinary growth at this stage of the game, more than 10 years after the initial release. So I think we feel as though the market's anticipation is at a fever pitch. And of course, expectations are very high everywhere in this boardroom and and all around the world for the perfection of what Rockstar typically delivers. In terms of your question, I think you're asking your second question, you know, why didn't we provide very specific guidance for a top line number going forward? And the answer is, generally speaking, we have not done that except when it was necessary to clarify where we felt the company was going. We think now we're being very specific about this fiscal year and about the next couple of fiscal years by saying we expect, relating to your third question, sequential growth on top line. And we think that pretty much answers the question. Finally, the second part of your third question, is that driven by the GTA ecosystem? The answer is certainly we have expectations for that ecosystem. And again, given that full game sales continue to be strong for GTA 5 this many years later, at the same time, we also have a number of other powerful releases coming out. about which we're highly optimistic. And, of course, we have card hits in the marketplace. Match Factory is a huge hit and only accelerating.

Nice. Thanks, Josh. Good luck, guys.

Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Thanks so much for taking the question. Maybe if I could just ask a big picture one that's two parts. When you come out of the activity you just went through in terms of reevaluating your pipeline and looking at resource allocation across the organization, what were some of the key learnings on the right mix of content is for you guys to meet your hurdle rate going forward? And what were some of the key learnings of how much of the resource allocation decisions are now setting the company up on a multi-year view, or do you think they're going to be a continued refinement as you look to marry resources and the IP pipeline in the years ahead? Thanks so much.

So in terms of looking at our pipeline, this is not really new to us. This is a process that we go through, that we've been going through for at least the last 17 years since I've been here. But what we're looking for specifically around this pipeline the look that we just took, is that we understand in the industry right now that the biggest games are winning and they're taking more share. And that's obviously a fact that we've noticed and take very seriously. They were simply looking for the projects that we think have the highest chance for commercial success and for critical success, and going through and combing through the pipeline and then making the tough choices. It's always difficult to cancel any project, but in this context, it was something that was necessary and really part of our normalized process. So we absolutely expect that that will continue in the future. This was a pretty tough look and a pretty big look, so I think most of that is behind us. But we will be adding, and we will be subtracting over the next few years, and that's part of what we do. And we will continue to invest in new IP as well. That is not off the table for us. That's very important. That's the lifeblood of the industry, and if you're not investing in new IP, we think it's a big mistake.

Our next question comes from the line of Jason Basnet with Citi. Please proceed with your question.

I just had one question on GTA 6. This narrowing from calendar 25 to the fall of 25, do you think there's an ancillary benefit to that of sort of syncing up with the holiday season? Or do you feel like GTA is such a powerful franchise that it really doesn't confer any sort of incremental benefits?

While it probably doesn't matter, I think we'd all rather be in the release window that we're looking at now.

Okay, thank you.

Our next question comes from the line of James Heaney with Jefferies. Please proceed with your question.

Yeah, thank you for taking the question. What have been some of the unlocks on the mobile side of the business? You did call out the better than expected results in Zanga's IP business, but Just curious if there's anything you could say specifically on the advertising side of the business. Thank you.

Look, we have two important businesses within mobile, in-app purchases and advertising. and they're both relevant. We took a hit on advertising as we rethought our hyper-casual business and turned it into a blended hybrid casual business where there are in-app purchases as well. At the same time, we built up advertising inside mobile by putting advertising units in games that previously did not have them. In any case, advertising should be a meaningful growth area for us in the mobile business. With regard to in-app purchases, We have the same opportunities and limitations that any other mobile company has, and our ability to grow in-app purchases is driven by our ability to have people download and play hit titles. That's what we're focused on.

Thank you.

Our next question comes from the line of Clay Griffin with Moffitt Nathanson. Please proceed with your question.

Yes, good afternoon. Thank you. I'm curious if you guys would talk about the broader PC strategy. I know that there's just tons and tons of engagement, particularly for GTA on PC. Not all of that gets monetized. I think in the past you've described that as maybe it's a good thing to have that there. You don't necessarily need to monetize all of it. But There are some interesting products out there, Overwolf and the like. And so maybe I'm just curious what you guys are seeing or thinking about your opportunity to unlock monetization on PC.

So we look at the PC platform as we do with any platform, and it all starts with content, first and foremost. And we agree, it's a very powerful platform, and we've got some very strong third-party partners, also the ability for us to sell directly to the consumer. So these are all compelling things for us, and we'll continue to develop and support the PC platform as long as the gamer's there. Wherever the gamer is, that's where we're going to be. And again, I don't really see us looking at the PC modernization as any differently than we would on any other platform. It really is more about game to game. What works for certain games? What doesn't work for certain games? And the overarching edict that we live by is over deliver on content and the monetization will follow.

Great, thanks Carl.

And our next question comes from the line of Chris Scholl with UBS.

Please proceed with your question.

Great. Thank you for taking the questions. We saw Rockstar announce a price increase for GTA Plus. I recognize it's been several years, but can you help us think through the rationale? And as you look ahead to TA6, what are your latest thoughts around the pricing dynamics for the franchise or your portfolio in general as these games continue to get larger with more robust experiences? Thank you.

Look, there's more content constantly being made available, and we really aim to deliver great value at any given time. We're so focused on delivering more value than what we charge, and that's sort of the rubric. And any time we establish a price, we want to make sure that it's good news for the consumer, that the experience vastly over-delivers in the context of the cost. That's the goal.

Great. Thank you.

And our next question comes from the line of Omar Basalki with Bank of America. Please proceed with your question.

Sure. I have two questions, one on mobile and then just one again on the sequential growth. So is there any more color at all you can give us on how you're going to grow sequentially in fiscal 27 after lapping just such a tough comp in fiscal 26 when GTA 6 is going to launch. It just seems counterintuitive. When I look back at the last two times Rockstar released a mega title, Red Dead Redemption in fiscal 19, fiscal 20 did not grow. And Grand Theft Auto 5 in fiscal 14, fiscal 15 was down 30%. I'm just kind of trying to square those couple of things there. You know, will it be Rockstar that continues to drive that sequential growth in fiscal 27? Any more color there would be really great.

Yes, fair question. Look, the business has really changed, and certainly since 2019, and absolutely since 2015, and in ways that are obvious now and in ways that we project in the future. The sequential growth is driven by our overall pipeline, and we're now a large and diversified company. And we do have GTA 6 coming. We have great aspirations for GTA 6. And as I said earlier, we've been selling full-game GTA 5s for over 10 years. And we continue to sell more in a given year than most other standalone releases sell in their first year, even at our big competitors' companies. So we actually think There's a compelling case that the full game sales will continue to be robust for years to come. Equally, we have a pipeline both announced and unannounced that's very exciting. We have an annualized pipeline that will, of course, continue to come that's quite significant. And we have a mobile business that we frankly feel has been right-sized, well-structured, and is now back in growth mode. And there's evidence of that, you know, the performance of Match Factory, the performance of Toon Blast, and the stable performance of many other big titles. There are also geographical growth opportunities that we're very focused on. We don't spend a lot of time talking about it, but it's a huge part of our strategy. You know, our business and our competitors' businesses remain largely U.S. and Western Europe focused. And we think there are enormous opportunities for growth in Asia, India, and Africa, and where we and everyone else who isn't located in those geographies are deeply underpenetrated. So there are numerous opportunities for growth, but to put your mind at ease, this isn't a stick a finger in your mouth and hold it in the air and hope for the best kind of number. This is driven by our release schedule and our pipeline.

Okay. And along kind of the same lines, I think a lot of people are going to be super excited about GTA 6 coming out. Do you make any assumptions about the perhaps re-acceleration of growth in the console installed base or console sales? Because your title may bring a lot of lapsed gamers back into the ecosystem in your forecasts.

We're using IGDG's projections, which are pretty substantial. So for Gen 9 alone, their view is that there are about 81 million consoles worldwide currently. That was at the end of the last year. They project that will rise to 111 by the end of this year and 175 by the end of 2027. Now, we don't necessarily subscribe or not subscribe to those views, but that shows an awful lot of growth, and we do expect a very significant attach rate.

Thanks a lot. I appreciate it.

Thank you. We have reached the end of our question and answer session. And with that, I would like to turn the floor back over to CEO Strauss-Zelnick for any closing comments.

Before we sign off, I just want to thank everyone who works at Take-Two and all of our affiliates. These have been challenging times, and in addition to delivering hits, we've asked everyone to dig deep and make sure the business is highly efficient and right-sized, and that's challenging. And one of the most extraordinary things about our organization is the amazing morale and focus on the common good. We're here for our customers first and foremost, for our colleagues, who deliver to our customers every day and for our shareholders. And we're extraordinarily excited both about the position we're in, about the fiscal year in which we're currently operating, and about our amazing pipeline and the years ahead. Thank you for joining us today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.