Take-Two Interactive Software(TTWO) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported third-quarter net bookings of $1.37 billion, which was within the guidance range of$1.35 billion to $1.4 billion, driven by strong performance in NBA 2K [9][32] - GAAP net revenue was$1.36 billion, flat compared to the previous year, while the cost of revenue declined by 13% to $600 million [34] - Operating expenses increased by 10$892 million, with a management basis increase of 8% year-over-year [35][40] Business Line Data and Key Metrics Changes - NBA 2K saw over 30% growth, significantly surpassing forecasts, with recurrent consumer spending up over 30% and daily active users up nearly 20% [12][33] - Mobile segment recurrent consumer spending grew mid-single digits, below expectations, primarily due to underperformance in hyper-casual titles and Empires and Puzzles [16][33] - The Grand Theft Auto series continues to perform well, with GTA V selling over 210 million units worldwide and GTA Online showing strong engagement [14][15] Market Data and Key Metrics Changes - The company expects net bookings for fiscal year 2025 to be between $5.55 billion and$5.65 billion, representing a 5% growth over fiscal 2024 [10][36] - The geographic split of net bookings is projected to be approximately 60% from the United States and 40% from international markets [38] Company Strategy and Development Direction - The company is optimistic about the upcoming releases, including Sid Meier's Civilization VII, Mafia: The Old Country, Grand Theft Auto VI, and Borderlands 4, which are expected to drive significant growth [11][28] - The focus remains on creating innovative and engaging entertainment experiences, with expectations for record levels of net bookings in fiscal 2026 and 2027 [12][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the commercial potential of upcoming titles and the transformative effect they will have on the business and industry [11][22] - The company acknowledged challenges in the mobile segment but remains optimistic about Zynga's ability to create new franchises and maintain momentum [17][21] Other Important Information - The company is maintaining its guidance for the fourth quarter, projecting net bookings between $1.48 billion and$1.58 billion, with significant contributions expected from NBA 2K and new releases [42][43] - Non-GAAP adjusted unrestricted operating cash flow is expected to be an outflow of $150 million, unchanged from prior forecasts [39] Q&A Session Summary Question: Potential revenue synergies from Zynga acquisition - Management noted that while bringing legacy IP to mobile is an opportunity, the biggest hits in mobile are often native to mobile, and they are working on interesting projects that have not yet been announced [50][52] Question: Profitability of Match Factory - Management confirmed that Match Factory is expected to turn profitable towards the end of fiscal 2025, with continued strong performance [56][57] Question: Market bifurcation in mobile gaming - Management disagreed with the notion of a bifurcated market, emphasizing that Zynga's mobile business has a broad range of owned and licensed IP, which offers opportunities for growth [58][59] Question: Performance of NBA 2K - Management attributed the success of NBA 2K to both the transition to next-gen consoles and ongoing innovations in gameplay, which have resonated well with players [67][70] Question: Marketing strategies for new titles - Marketing efforts are typically ramped up around the launch of titles, with a focus on digital marketing and consumer engagement [85][87] Question: Evaluation of Netflix partnership for WWE - Management expressed a positive relationship with Netflix and emphasized the importance of evaluating opportunities based on consumer benefits [90][92] Question: Capitalized software on the balance sheet - Management clarified that the capitalized software reflects the technological feasibility of titles and will be amortized as those titles release [113][115] Question: Reactivation of GTA fans with GTA VI launch - Management highlighted the importance of delivering quality content to engage both current and lapsed players, without predicting specific reactivation rates [120][124] Question: Roblox platform as a potential destination - Management views Roblox as a competitive situation and does not currently see it as a viable destination for Take-Two's content, but remains open to opportunities [130][132]