Earnings call: Take-Two anticipates growth with GTA VI on horizon

Take-Two (NASDAQ:TTWO) Interactive Software, Inc. (NASDAQ: TTWO) has reported strong financial results for the fourth quarter and fiscal year 2024, surpassing guidance with net bookings of $1.35 billion for the quarter and $5.33 billion for the year. The company has set its sights on a robust fiscal 2025, projecting net bookings between $5.55 billion and $5.65 billion, largely propelled by the highly anticipated release of Grand Theft Auto VI in fall 2025.

The gaming giant also announced the acquisition of Gearbox, a move expected to be slightly accretive to management results, and the implementation of a cost reduction program projected to save over $165 million annually. Take-Two is confident in its diverse pipeline, which includes approximately 40 titles through fiscal 2027, and expects high single-digit growth in its mobile division.

Key Takeaways

• Take-Two's net bookings exceeded expectations at $1.35 billion for Q4 and $5.33 billion for FY 2024.
• The company anticipates net bookings for FY 2025 to be between $5.55 billion and $5.65 billion.
• Grand Theft Auto VI is expected to drive significant growth following its release in fall 2025.
• Take-Two has acquired Gearbox, with expectations of a positive impact on future results.
• A cost reduction program is expected to yield over $165 million in annual savings.
• The mobile gaming division is projected to see high single-digit growth.
• The company has a strong pipeline with 40 titles planned through fiscal 2027.

Company Outlook

• Fiscal 2025 net bookings projected between $5.55 billion and $5.65 billion.
• Grand Theft Auto VI release slated for fall 2025, expected to contribute significantly to growth.
• Recurrent consumer spending anticipated to grow approximately 3%.
• Operating expenses for FY 2025 forecasted to be between $3.56 billion and $3.58 billion.

Bearish Highlights

• Recurrent consumer spending declined 2% in the fourth quarter.
• Non-GAAP adjusted unrestricted operating cash flow expected to be an outflow of $200 million.

Bullish Highlights

• Strong sales of NBA 2K24, Grand Theft Auto V, Red Dead Redemption 2, and WWE 2K24.
• The mobile division expected to experience high single-digit growth.
• The acquisition of Gearbox and cost reduction program likely to improve financial results.

Misses

• The company did not provide specific details on the financial impact of the Gearbox acquisition for the current outlook.

Q&A Highlights

• CEO Strauss Zelnick expressed confidence in the upcoming release of GTA VI and its potential for success.
• The company is optimistic about the growth opportunities in Asia, India, and Africa.
• Take-Two Interactive plans to continue supporting the PC platform and maintain a competitive pricing strategy.
• Projections indicate significant growth in the console market, with expectations of a high attach rate for Take-Two's games.

Take-Two Interactive's strong performance in fiscal 2024 and its strategic plans for the future, including the release of Grand Theft Auto VI and the expansion into high-growth markets, signal a positive outlook for the company. With a focus on core franchises, mobile games, and cost efficiency, Take-Two aims to deliver value to its shareholders and capitalize on the growing global demand for interactive entertainment.

InvestingPro Insights

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) has demonstrated a robust financial performance in the last fiscal year and has ambitious plans for the future. To provide further context to these results and projections, here are some key metrics and insights from InvestingPro:

• The company's market capitalization stands at a solid $24.92 billion, reflecting investor confidence in its market position and future growth potential.

• Despite not being profitable over the last twelve months, analysts predict that Take-Two will return to profitability this year, as indicated by an InvestingPro Tip. This is particularly relevant considering the upcoming release of Grand Theft Auto VI, which is expected to be a significant revenue driver.

• Take-Two operates with a moderate level of debt and has a Price / Book ratio of 2.93 as of the last twelve months ending Q3 2024. This suggests that the company's assets are valued reasonably in relation to its share price.

InvestingPro Tips further reveal that the stock generally trades with low price volatility, which may appeal to investors looking for a stable investment in the gaming sector. Additionally, while the company does not pay a dividend, it has shown a high return over the last decade, highlighting the potential for capital gains.

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Full transcript - Take-Two Interactive (TTWO) Q4 2024:

Operator: 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. [Operator Instructions] 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.

Nicole Shevins: 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; Karl Slatoff, our President; and Lainie 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.

Strauss Zelnick: 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 (NASDAQ:ZNGA)'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 billion 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 continues to expand its audience through several innovative mobile experiences including NBA 2K24 MyTEAM, the new free-to-download mobile experience that allows players to sync progress between console and mobile devices, as they play their favorite MyTEAM modes on the go, NBA 2K Mobile and NBA 2K24 Arcade Edition, which is consistently in the top five on Apple (NASDAQ:AAPL) 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 is sold in approximately 200 million units worldwide. We're thrilled that more than a decade after their initial releases, Grand Theft Auto V and Grand Theft Auto Online grew their audience size by an incredible 35% and 23% respectively for the full year. Grand Theft Auto V 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+, 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 has 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+ library. Borderlands 3 outpaced our forecasts and we are thrilled that Randy Pitchford and Gearbox Entertainment are slated to join officially 2K’s renowned internal studios in the coming weeks. We have 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 are 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 [40 years] (ph) of WrestleMania Pack has the highest attach rate for a Super Deluxe (NYSE:DLX) 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 US Apple App Store and reaching millions of new users with its launch on the Google (NASDAQ:GOOGL) Play store. We are 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 Rollic, with the studio crossing 3.5 billion all-time downloads and announcing a new partnership with Mattel (NASDAQ:MAT) to introduce a mass-market Barbie mobile game later this calendar year. Our blended monetization efforts in hyper-casual are progressing well within Rollic, which has resulted in Twisted Tangle and Screw Jam 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 are eager to release worldwide this fiscal year, including Star Wars Hunters and Game of Thrones: Legends. In closing, I am 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 ground-breaking pipeline over the next several years, we are poised also to deliver industry-leading growth and shareholder returns. I will now turn the call over to Karl.

Karl Slatoff: Thanks, Strauss. 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 cancelled 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 materially affect 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 TopSpin, 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, TopSpin 2K25 was released by 2K and Hangar 13 on April 26. 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 Studio’s No Rest for the Wicked, which launched on April 18th into Early Access on PC. This new ARPG was well received for its visceral combat, distinct art style and rich narrative. Private Division, along with Wētā Workshop, also announced Tales of the Shire: A The Lord of the Rings Game, which is planned for release later this year. The teams recently revealed a new trailer for this cozy, hobbit life 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 Cat Daddy 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’s Association. Lastly, we have two new iterations of prior releases planned for the year. As always, our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our key offerings. Looking ahead, our pipeline for Fiscal 2026 and 2027 has 24 titles planned, including, l5 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 Lainie.

Lainie Goldstein: Thanks Karl 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 teams 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 billion to $1.32 billion. This reflected better-than-expected results from NBA 2K24; Zynga’s in-app purchases, led by Toon Blast and Match Factory; the Red Dead Redemption series and the Grand Theft Auto series. Recurrent 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, Toon Blast, and Match Factory. Recurrent consumer spending declined for Grand Theft Auto Online, although it was up for virtual currency and GTA+. 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 billion to $5.3 billion. Recurrent 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+ 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. GAAP net 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 a $105 million business reorganization charge related to our cost-reduction programs. 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 provided our outlook for Fiscal 2025. We project net bookings to range from $5.55 billion to $5.65 billion, which represents 5% growth over Fiscal 2024. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Empires & 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 bookings 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 buildouts. We expect GAAP net revenue to range from $5.57 billion to $5.67 billion and cost of revenue to range from $2.43 billion to $2.46 billion. Turning to 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 benchmarks. 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 billion 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 for 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 Strauss mentioned earlier, we have narrowed the previously established release window for Grand Theft Auto VI 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 a 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 onto our guidance for the fiscal first quarter. We project net bookings to range from $1.2 billion to $1.25 billion, compared to $1.2 billion in the first quarter last year. Our release slate for the quarter includes TopSpin 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, Toon Blast, Empires & Puzzles, our hyper-casual mobile portfolio, Match Factory, the Red Dead Redemption series, Words With Friends, and Zynga Poker. We project recurrent consumer spending to increase by approximately 1%, which assumes mid single-digit growth in mobile, flat results for NBA 2K, and a decline for Grand Theft Auto Online. We expect GAAP net revenue to range from $1.3 billion to $1.35 billion. Operating expenses are planned to range from $928 million 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 are extremely excited about our path for 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.

Strauss Zelnick: Thanks, Lainie and Karl. 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 to 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?

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Eric Handler with Roth MKM. Please proceed with your question.

Eric Handler: Good afternoon. Thanks for the question. Strauss, I wonder if you 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 have with that?

Strauss Zelnick: 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 and 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 is a hit maker. And it's very hard to make a new hit, and [Tiny Tino] (ph) was a new hit. And of course, Borderlands just goes from strength to strength. So we're thrilled to have Gearbox in the family.

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

Lainie Goldstein: 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.

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

Doug Creutz: Hi, thank you. The ability of Rollic 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, Rollic's games are sort of -- 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 a plan to have a longer life cycle. Thank you.

Strauss Zelnick: Undoubtedly, this so-called hybrid casual approach should lead to longer life cycles because the hypercasual approach really was put it out there, get a bunch of downloads offer a rather light experience, generate advertising revenue, have the users move on to the next. And that was great while it lasted, but long-term entertainment businesses are all driven by great content. And Rollic'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 Rollic. I believe we can. We haven't done so yet, but we are off to a really good start.

Doug Creutz: Thank you.

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

Colin Sebastian: 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 VI. 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.

Strauss Zelnick: 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 on UA in the fourth quarter we did, and that's turned out to be productive spending.

Colin Sebastian: All right. Thank you.

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

Matthew Cost: Hi, everyone. Thanks for taking my question. I guess between the success you've had with Match Factory! and some new launch titles setting release date for Star Wars Hunters and then the incremental marketing behind mobile. It seems like there is 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 a profitable flow-through from the mobile side?

Strauss Zelnick: So I hope like everyone else, we look at the 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 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 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.

Matthew Cost: Great. Thank you. And when would you expect to see mobile this investment that you’re making in mobile flip from a cost center due to driving incremental profit?

Strauss Zelnick: 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 decline 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 that we're not making money. I hope that clarifies it a bit.

Matthew Cost: Okay, thank you.

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

Drew Crum: Thanks. Hi 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.

Karl Slatoff: So we absolutely expect growth in NBA. And that's not just on the RCS side but also on the full game sales 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 are going to see more tailwinds than 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 chart. It is 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.

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

Benjamin Soff: Hi 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 the restructuring? And then, yes, I guess I'll stop there. Thanks.

Lainie Goldstein: 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, 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.

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

Lainie Goldstein: No, it is 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.

Benjamin Soff: Okay. That’s helpful, thanks guys.

Operator: The next question comes from the line of Martin Yang with Oppenheimer. Please proceed with your question.

Martin Yang: Hi, thank you for taking my question. First question on statistics. With a narrow window of release, is there any associated changes to your plan regarding the live service portion of GTA 6.

Strauss Zelnick: 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.

Martin Yang: 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 to mostly to 2K or to market?

Karl Slatoff: I'm sorry, was your question about the transition from console generation from the last transition to this transition?

Martin Yang: Right.

Karl Slatoff: 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 in this year, the Gen 8 game is much broader. And I think that creates a more obvious difference between the two-- to do two games. And frankly, I can't remember if we had two completely separate games back then. But in any case, the Delta 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?

Martin Yang: On this [indiscernible] how does it compare to other studios with annual recurring --.

Karl Slatoff: Yes. We're not really commenting on our competitors. And most of our other studios, we don't have as much NBA comes out every year. So you're going to see that transition more rightly. 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 the -- our competitors and their experiences.

Martin Yang: Got it. Thanks Karl.

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

Mike Hickey: Hi Strauss, Karl, Lainie and Nicole. Congrats on the quarter. Strauss, in your prepared comments, you mentioned that your expectations for the commercial impact from GTA 6 and increased. I'm just curious if you could explain 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 catalysts driving that growth. And then on [2027] (ph) tying into that question, I'm wondering where your confidence is that you can grow sequentially [2026] (ph). Is that sort of primarily the GTA ecosystem driving that growth in '27, or is it a combination of that and other AAA games that you plan to release. Thanks guys.

Strauss Zelnick: Thanks, Mike, for those questions. I think our confidence continues to increase just because Grand Theft Auto V 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 V was up about 35% with Grand Theft Auto Online was up about 23%, I believe. That's extraordinary growth at this stage again 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 all around the world for the perfection of what Rockstar typically delivers. In terms of your question, I think you were asking your second question, 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 are 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 V this many years later. At the same time, we also have a number of other powerful releases coming about which we're highly optimistic. And of course we have [car hits] (ph) in the marketplace. Match Factory is a huge hit and only accelerating.

Mike Hickey: Thanks, Strauss. Good luck guys.

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

Eric Sheridan: Thanks so much for taking the question. Maybe I can 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 right, 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 multiyear view? Or do you think there are going to be a continued refinement as you look to marry resources and the IP pipeline in the years ahead? Thanks so much.

Karl Slatoff: So in terms of looking at our pipeline, I mean 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 as I've been here. And -- but what we're looking for specifically around this -- the look that we just took is that we're looking look -- 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 noticed and take us very seriously. We're simply looking for the projects that we think have the highest chance for commercial success and for critical success. And going through and coming through those and going through and then making the tough choices. It's always difficult to cancel any projects. 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 it will be both with will continue to invest in new IP as well. That is not off the table for us. That's very important. That's the life level blood of the industry. And if you're not investing in new IP, we think it's a biggest [stack] (ph).

Operator: The next question comes from the line of Jason Basmo with Citi. Please proceed with question.

Jason Bazinet: I just had one question on GTA VI. This narrowing from calendar '25 to the fall of 25%. Do you think there's an ancillary benefit of 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 benefit .

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

Jason Bazinet: Okay, thank you.

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

James Heaney: 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 Zynga's IP business, but just curious if there's anything you could say specifically on the advertising side of the business. Thank you.

Strauss Zelnick: Look, we have two important businesses within mobile in-app purchases and advertising and they're both relevant. We hit on advertising as we rethought our hyper-casual business and turned it into a blended hybrid casual business where they 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 regards to app purchases, we have the same opportunities and limitations that any other mobile company has and our ability to grow in our purchases is driven by our ability to have people download and play hip titles. That's what we're focused on.

James Heaney: Thank you.

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

Clay Griffin: 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 describe 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 over Wolf 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. Thanks.

Karl Slatoff: So we look at the PC platform as we do 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 is 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 monetization 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 overdeliver on content and the monetization will follow.

Clay Griffin: Great, thanks Karl.

Operator: And our next question comes from the line of Chris Schoell with UBS. Please proceed with your question.

Chris Schoell: Hi, great. Thank you for taking the question. We saw Rockstar announce a price increase for GTA. I recognize it's been 7 years, but can you help us think through the rationale? And as you look at GTA VI, so 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.

Strauss Zelnick: 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 our prices, 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.

Chris Schoell: Great. Thank you.

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

Omar Dessouky: 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 VI is going to launch. It just seems counterintuitive. When I look back at the last 2 times, Rockstar released a mega title, Red Dead Redemption in fiscal '19, fiscal '20 did not grow. And Grand Theft Auto V in fiscal '14, fiscal '15 was down 30% I'm just kind of trying to square those couple of things there. Will it be Rockstar that continues to drive that sequential growth in fiscal '27? Any more color there would be really great.

Strauss Zelnick: Yes, it's a 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 VI coming. We have great aspirations for GTA VI. And as I said earlier, we've been selling full game, GTA V for over 10 years. And we continue to sell more in a given year than most other standalone releases selling their first year, even at our big competitors company. So we actually think there is 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 rightsized, well-structured and is now back in growth mode. And there's evidence of that. 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. Our business and our competitors' businesses remain largely US and Western Europe focused. And we think there are enormous opportunities for growth in Asia, India and Africa, 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 reminded ease, this isn't stick 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.

Omar Dessouky: Okay. And along kind of the same lines, I think a lot of people are going to be super excited about GTA VI coming out. Do you make any assumptions about the perhaps a reacceleration 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.

Strauss Zelnick: We are using IDG's projections, which are pretty substantial. So for Gen 9 alone, their view is that they're about 81 million consoles worldwide currently that was at the end of the last year, they project that will rise to 111 million by the end of this year and [175 million] (ph) 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.

Omar Dessouky: Thanks a lot. Appreciate it.

Operator: 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.

Strauss Zelnick: Before we sign off, I just want to thank everyone who works at Take-Two in 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, rightsized. 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 are here for our customers for our 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 in the years ahead. Thank you for joining us today.

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

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