EARNINGS CALL — FULL TEXT

Take-Two Interactive Q1 Fiscal 2027 Earnings Call — Transcript

August 7, 2026 · ~57m 46s · 1324 segments

Auto-transcribed with timestamps. Confirm exact figures against the official results hub, which links the source release.

Hello, everyone. Thank you for joining us and welcome to the Take-Two Interactive Software

First Quarter Fiscal Year 2027 Results Conference Call.

After today's prepared remarks, we will host a question and answer session. If you would

like to ask a question, please press star 1 to raise your hand. To withdraw your question,

press star 1 again. I will now hand the conference over to Nicole Shevins, SVP Investor

Relations and Corporate Communications. Nicole, please go ahead.

Good morning. Thank you for joining our conference call to discuss our results for the first quarter

of Fiscal Year 2027 and to June 30, 2026. Today's call will be led by Straus Zelnik,

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 10K and quarterly report on Form 10Q, including the

risk 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 GAP 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 GAP financial results in order to evaluate our operating performance. Our press release

also contains a reconciliation of any non-GAP financial measure to the most comparable GAP

measure. In addition, we have posted to our website a slide deck that visually presents

our results and financial outlook. Our press release and filings with the SEC may be obtained

from our website at TakeTwoGames.com. And now I'll turn the call over to Strauss.

Thanks, Nicole. Good morning and thank you for joining us today.

Fiscal 2027 is off to an excellent start led by the power of our diverse portfolio

and the strong consistent execution of our strategy at all of our labels. We delivered

first quarter net bookings of approximately $1.39 billion, which was slightly above the

high end of our guidance range, primarily due to the outperformance of MBA2K and the

Grand Theft Auto series. We're reiterating our fiscal 2027 outlook for net bookings

of $8 to $8.2 billion, which reflects both ongoing positive trends in our business

and our high degree of confidence around the November 19th release of Grand Theft Auto 6.

We expect to sustain this new level of scale and generate strong cash flows for the next

several years as we release a robust development pipeline, capitalize on incremental opportunities

within our highly established hit franchises, and continue to apply our proven, long-term

approach to managing the company. Now, turning to highlights for the period.

MBA2K26's performance was outstanding and concluded a record year for the franchise.

To date, the title is sold in over 12 million units, reflecting 9% growth compared to

MBA2K25. Engagement was up meaningfully during the quarter with the current

consumer spending growing 7%, driven by a 15% increase in average daily active

users, a 25% increase in my career daily active users, and a 35% increase in average

games played per user. The achievements of this year's iteration of the series are a

testament to visual concepts ability continually to deliver new, innovative

ways for fans to stay engaged, and our live service execution remains a cornerstone

of MBA2K's sustained success. During the quarter, 2K also supported

Borderlands 4, Sid Meyers Civilization 7, and WWE2K26, with an array of new offerings,

which enhanced player engagement and sentiment. The Grand Theft Auto series

once again exceeded expectations, and to date, Grand Theft Auto 5 has sold in

over 230 million units worldwide. Our current consumer spending for the series

grew 3%, and GTA Plus continues to thrive, all led by a series of content

offerings, including the addition of the Rockstar mission creator, an all new

suite of innovative and in-depth tools empowering the player community to

bring missions to life. Global excitement for the launch of Grand

Theft Auto 6 continues to build, with the title having an exceptional start

to pre-orders. With Rockstar Games recent announcement of Grand Theft

Auto 6 and extended look coming on August 27th, we believe that

consumers passion and anticipation for the next evolution of this iconic

series will grow further, leading up to the title's November 19th release.

Turning to our mobile business, Zynga performed in line with our expectations

and were pleased that many of our forever franchises continue to resonate

with players. Net bookings for Tombblast grew 8% over last year. The

title was supported by a new marketing campaign featuring Emmy-nominated

actor Giancarlo Esposito. Empires and puzzles maintained steady

momentum, anchored by a successful ninth anniversary campaign and the

introduction of new heroes and character abilities. Words with Friends

exceeded our forecast with Net bookings growing 8% year over year, led by

strong ad performance and higher player engagement with several

features, including Dice Challenge, the title's latest permanent one-on-one

game mode. Top 11 surpassed our expectations with Net bookings

increasing 15% year over year as fans enjoyed a special in-game event

featuring player versus environment matches in 10 international locations.

2K's mobile offerings continue to perform well with strong downloads

and engagement across key titles. NBA 2K All-Star, our mobile title in

China in partnership with Tencent, surpassed 10 million registered users

since launching last year and is yielding strong profit margins. Our

mobile direct-to-consumer channel remains a significant driver of

revenue and margin enhancement with many of Zynga's titles offering this

feature and further growth anticipated. Guided by our core

pillars to be the most creative, innovative and efficient entertainment

company in the world, our 13,000 colleagues share a singular vision

for excellence and hit creation. Each day we strive to bring joy to

our player communities and value to our shareholders. I'd like to express

my gratitude to our teams for their immense passion and unwavering commitment

to our mission to make the most captivating and engaging experiences

in the entertainment business. We believe that Fiscal 2027 will be an

inflection point for take two, one that will write an exciting new

chapter in our history and provide the foundation for new levels of

success and the creation of groundbreaking

entertainment experiences. I'll now turn the call over to Carl.

Thanks, Trouse. I'd like to thank our teams for delivering a great start to the

year and setting the stage for the most exciting pipeline in our company's

history. And I'll discuss our recent and

upcoming releases. On July 8th, 2K and HB Studios

launched Season 7 for PGA Tour 2K25, a free update which

added the 154th Open Championship at Royal Berkdorf

Golf Club. The team is planning to launch Season 8 in late September

and is hard at work on this year's release of PGA

Tour 2K27. 2K will share more details in the coming months.

On July 14th, Rockstar Games launched the Quartz Center Heist

for GTA Online, which introduced an all-new blockbuster heist

targeting Los Santos' premier cultural institution

with an array of artwork for the taking. On July 30th,

2K and Gearbox launched Bounty Pack 4, murders and acquisitions for Borderlands

4, which includes a new story mission and cosmetic items.

Fans can look forward to even more action in September when Gearbox releases

additional content including the title's next story pack.

On August 14th, 2K and Hangar 13 will release

The Man of Honor Story expansion for Mafia the Old Country.

With Hangar 13's industry leading capabilities and narrative driven

action titles, players will enjoy two new story chapters

and all new content for the game's free ride mode.

2K and Visual Concepts will launch the WrestleMania 42 pack for

WWE 2K26 on August 19th, followed by new

seasons as part of the ringside pass during the fall.

WWE 2K27 is currently in development and 2K will provide updates later this year.

On September 4th, 2K and Visual Concepts will launch

NBA 2K27, the next installment of our industry

leading basketball simulation that provides the most realistic

and authentic NBA experience in interactive entertainment.

This year, Victor Wembanyama of the San Antonio Spurs will be on the cover

of the Standard Edition, Katelyn Clark of the Indiana Fever will be on the cover

of the Deluxe Edition, and Chicago Bulls legend Derek Rose will be on the cover

of the Ultra Edition with early access available as part of the Deluxe

and Ultra Editions. Last week, a first look trailer of NBA 2K27's gameplay

was revealed and the response has been positive

with fans and the media expressing excitement over the title's improved

graphics and enhanced player movement and presentation.

2K will share more about the game soon including the NBA 2K27 preseason breakdown

full game reveal on August 18th. Zingo will continue to focus on enhancing

its existing mobile portfolio with bold beats and updates as well as

releasing new titles including Top Goal which is currently in

soft launch. The title recently introduced

real world soccer stars as well as enhanced 3D match simulation

and player versus player gameplay. In closing, we are deeply excited about

this year highlighted by the November 19th launch of Grand Theft Auto 6

which will usher in a new era of growth for our company and returns for

our shareholders. We remain steadfast in our mission

and commitment to delivering the highest quality entertainment experiences

that captivate and engage audiences throughout the world.

I'll now turn the call over to Laney. Thanks Carl and good morning everyone.

We achieved excellent first quarter results driven by our powerful franchises

industry leading talent and unwavering commitment to our strategic vision.

I'd like to thank our teams for their hard work which has enabled us to

reach this exciting point within our company's history.

Turning to our results, we delivered first quarter net bookings of $1.39

which was slightly above our guidance range of $1.32 to $1.37

billion. This primarily reflected better than expected

performance from NBA 2K and the Grand Theft Auto series.

Recurring consumer spending declined 1% for the period

which was favorable to our guidance of a 3% decline

and accounted for 84% of net bookings. NBA 2K grew 7%. The Grand Theft Auto

series rose 3% and as expected mobiles declined 7% over last year.

Gap net revenue increased 2% to $1.5 billion while cost of revenue

rose 17% to $651 million and included a $43

million impairment charge related to the decision

not to proceed with an unannounced title from a third-party developer.

Operating expenses were flat at $918 million.

On a management basis, operating expenses declined 1% year over year

which was favorable to our forecast of 3% growth

due to timing of marketing expenses across our labels.

With the ongoing positive trends in our business and excitement around the

November 19th release of Grand Theft Auto 6,

we are reiterating our fiscal 2027 net bookings outlook range

of $8 to $8.2 billion which represents approximately 20% growth

over fiscal 2026 at the midpoint. The largest contributors to net bookings

are expected to be the Grand Theft Auto series, NBA 2K,

Tombblast, MASH Factory, Empires and Puzzles,

Wars with Friends, the Red Dead Redemption series,

WWE 2K, Color Block Jam and Zynga Program. We continue to expect what

current consumer spending to be in line with fiscal 2026

and to represent 64% of net bookings. The underlying drivers remain unchanged.

The NBA 2K projected to grow high single digits. The Grand Theft Auto series

expected to be up and mobile expected to be down

due to last year's success of Color Block Jam

and our assumption that trends will moderate for several of Zynga's

mature mobile titles. We now expect the net bookings breakdown

from our labels to be roughly 37% Rockstar Games,

34% Zynga and 29% 2K. We continue to forecast operating cashflow in

excess of $1 billion and we remain on track to be in a net cash

position by the end of the fiscal year. We now plan to deploy

approximately $290 million of capital expenditures

which is up from our prior forecast due to a planned real estate

purchase. We continue to expect GapNet revenue

to range from $7.9 to $8.1 billion while we now expect

cost of revenue to range from $3.54 to $3.66 billion.

Our total operating expenses are now expected to range

from $4.15 to $4.17 billion. On a management basis we expect operating

expense growth of approximately 7% year over year

which is down slightly from our prior forecast.

Now moving on to our guidance for the fiscal second quarter.

We project net bookings to range from $1.62 to $1.67 billion

compared to $1.96 billion in the second quarter last year.

Our release date for the quarter includes NBA 2K 27

as well as new content updates for various titles.

The largest contributors to net bookings are expected to be NBA 2K,

The Grand Theft Auto series, Tombblast, Match Factory,

Empires and Puzzles, Words with Friends, Hellerblock Jam,

The Borderlands Franchise, The Red Dead Redemption Series

and Zynga Poker. We project recurring consumer spending to decline by

approximately 5% which assumes growth for NBA 2K

and The Grand Theft Auto series while mobile is expected to be down.

We expect net revenue to range from $1.42 to $1.47 billion.

Operating expenses are planned to range from $1.01 to $1.02 billion.

On a management basis operating expenses are expected to decline

by approximately 5% year over year as last year included

significant marketing expenses for the launch of Borderlands 4.

Looking ahead, fiscal 2027 is on track to be a milestone year for our company

led by the release of Grand Theft Auto 6.

We have great ambitions as our teams have carefully curated new opportunities

that we believe will sustain this new level of scale for the foreseeable future

including live service enhancements, franchise extensions,

a launch of new IP and international expansion.

In addition, we will continue to evaluate a creative M&A.

As we bring these opportunities to fruition,

we are confident in our ability to enhance our financial profile further

and generate strong cash flows setting us on a path to deliver continued growth

and long-term shareholder returns.

Thank you. I'll now turn the call back to Strauss.

Thanks, Lenny and Carl. On behalf of our entire management team,

I'd like to thank our colleagues for an excellent start

to what is poised to be an outstanding year for take two.

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 begin the question and answer session.

If you would like to ask a question, please press star one to raise your hand.

To withdraw your question, press star one again.

We ask that you pick up your handset when asking a question

to allow for optimum sound quality.

If you are muted locally, please remember to unmute your device.

Please stand by while we compile the Q&A roster.

Your first question comes from the line of Doug Croots with TD Cohen.

Your line is open. Please go ahead.

Thank you. One of your peers that reported previously suggested

that there had been some slowdown in the mobile market

in Q2, which they attributed to macro uncertainty.

Just wondered if you saw the same thing.

If you saw different things, any commentary you could offer would be helpful.

No, it's really not what we're seeing.

Our results have been affected by how color block jam

is doing versus last year in terms of copying

because it was a new title last year.

But apart from that, we've delivered some really good news in mobile.

There's no doubt there's a bit of pressure on user acquisition at the moment.

And I think that that comes and goes in the marketplace.

But no, we don't feel like the consumer is pulling back at all.

Great. Thank you.

Your next question comes from the line of Andrew Maroc with Raymond James.

Your line is open. Please go ahead.

Hi. Thanks for taking my questions.

Maybe one on the GTA VI extended look.

I guess if you could give us a little bit more color on the thinking

that went into the decision to go with Netflix for the timed exclusivity

rather than just the traditional route of releasing it on a free platform

like YouTube or through Rockstar Socials.

You know, this is the first of its kind partnership with Netflix.

They're a great marketing partner for us and distribution partner, as you know.

We also work with virtually every social media outlet on Earth.

This is part of Rockstar Games' marketing strategy.

We're excited for everyone to see an extended look of Grand Theft Auto VI.

I'm not prepared to tell you how it's going to go.

But I feel really good about it.

And of course, six hours after the initial launch on Netflix,

it will be available on Rockstar Games' channel on YouTube

and I think ultimately many other outlets.

Great. Thank you.

Maybe one more if I could.

Not that you needed any other tailwinds into GTA VI launch excitement,

but can you talk a little bit about the court center update for GTA online

and maybe how that's been in terms of bringing in some lapsed players

ahead of the GTA VI launch?

Thank you.

We're actually very pleased how things are going right now.

We typically don't give specific details about how releases are doing,

but I can tell you that right now we're very pleased with how things are going.

And like all the Rockstar releases, they're exciting.

They're well received by players and they always bring in,

they always reactivate folks so far so good.

Your next question comes from the line of Brian Pitts with BMO Capital Markets.

Your line is open. Please go ahead.

Thanks for the question.

Recently announced the $80 base game for GTA VI,

but ultimately decided to leave NBA 2K27 base pricing at $70.

As you think about go-forward base pricing,

help us understand how you're thinking about being able to price games

at a more premium price with more traditional AAA game prices

around the $70 price point.

Thank you.

Look, we've said this many, many, many times.

Our goal is to deliver way more value to consumers than what we charge them.

And the truth is that the real cost of a AAA video game

is a whole lot lower today than it was 20 years ago.

Pricing has not kept pace with inflation.

And our goal is to continue to over deliver for our consumers

because how do you feel about any experience

is the intersection of the experience itself and what you pay for it.

So to say that we expect that Grand Theft Auto VI

will be an incredible bargain as experiences go

is a gross understatement

because Rockstar Games is known for over delivering.

And when people engage with our titles

and Carl just answered a question about GTA Online,

remember we're 13 years after GTA Online was launched

and people are still highly engaged.

And we have record-setting engagement at times.

So that's our goal.

Our goal is not to maximize price.

So in this case, I think what we've decided to do

makes a whole lot of sense in the context of what we're delivering

and that's the lens through which we're going forward as well.

Thanks, chef.

Your next question comes from the line of Eric Handler with Roth Capital.

Your line is open.

Please go ahead.

A gentle reminder to unmute locally.

Sorry about that.

Good morning.

Apologize for I had you unmute.

Strauss, I wonder if you could give a little bit of background

on the decision to go with Netflix

for the extended trailer lines?

Did they approach you?

Did you approach them?

I assume for exclusivity,

they probably paid a little bit of a premium to get that.

Netflix is a close partner of the company

and we have tight relationships up and down the line.

So we're always in conversation about things that we can do together.

And this is a groundbreaking partnership that Rockstar arranged

with our friends at Netflix

and we're really excited about how it's going to come about.

I wouldn't normally give detail on sort of the nature

of the back and forth or the terms of the arrangement.

Okay, thanks.

And then as a follow-up, with tip costs rising so much

the input costs for hardware rising significantly.

There's talks about the next-gen consoles maybe getting delayed.

I know you're a software company

and you produce for whatever is out there.

But I'm curious about your big picture thoughts on the industry

just given the rising cost of hardware.

Look, the rising cost of hardware is not a good thing.

And we wouldn't argue that it is.

I don't think it will slow us down any

because we believe we're delivering experiences that people want.

However, a lower price point for hardware would be a good thing

because there'd be more hardware in people's hands.

So I cannot argue this is a positive

but equally we don't see it as a headwind either.

And going forward, look, two things that I think are relevant.

Probably the most relevant thing is the world continues to move

to open systems and that will continue.

So 20 years ago, when we showed up here at Take 2

for a console release that was available on PC at launch,

PC would represent 1% to 2% of the overall sales.

Today, that can be 40% or 50% in a similar situation.

And I believe that's going to grow because people have PCs

that have outboard controllers.

They work great as game machines and I think that will continue.

Number two, with the advent of streaming,

which we really do believe is around the corner

in terms of having something in slow latency

and really works well for consumers,

machines that weren't game machines before will become game machines.

So without regard to what happens in the console business,

which is a consequence to us, of course,

we see the overall installed base

as a practical matter growing materially.

And if you believe in streaming, and to be clear, we really do.

And I'm happy to put a timeline on that.

I think we'll be in commercial streaming mode within three years.

And by commercial, I mean low latency.

I mean, that can 10X the effective installed base.

Now, it doesn't mean we're in a 10X our revenue

and we wouldn't project that we would,

but because obviously your avid consumers already had access

to video game machines.

But I do think it creates great opportunity for titles

that are broadly desirable even outside of core markets.

And we do have titles like that, obviously.

The third thing is that interactive entertainment

and the most important thing remains America's pastime

and the world's pastime.

It is the fastest growing part of the entertainment business.

That's going to continue as the cohort ages and grows.

All we need to do is the hardest thing you can do,

which is continue to make hits.

Thank you.

Your next question comes from the line

of Colin Sebastian with Baird.

Your line is open.

Please go ahead.

Thanks.

Good morning.

I appreciate the questions.

I guess on NBA, the next game coming up here shortly,

I mean, following another strong year for the franchise,

what do you think is going to be part of this game

that might differentiate or provide

the opportunity to grow the franchise another year?

And then secondly, on an unrelated topic,

just curious on any update to how

your studios are deploying AI tools internally.

I know we've talked about this quite a bit,

but the technology seems to be developing fairly quickly.

So are those tools capturing any additional value

and perhaps maybe more measurable efficiency?

So any commentary on that would be helpful.

Thank you.

So in terms of NBA, obviously,

NBA 2K26 performance was outstanding.

It was a record for us,

both on units and engagement.

And I think that's the key.

And we get the same question almost every quarter,

certainly every year, about how high can high be

and how the growth is.

And every time we get the question,

we answer it the same way.

And it's really, I don't want to say it's unlimited,

but there's still a huge amount of growth potential

in the NBA franchise.

And that would be coming both from increased units,

geographic expansion, et cetera.

And bringing more customers back,

year over year, still a lot of wood to chop there

and also more and more engagement.

So we continue to refine that.

And what really drives that is the folks

at Visual Concepts and 2K and their efforts

to year upon year to innovate.

And it's really hard to do that on an annual release.

And yet somehow through the brilliance

and hard work of the team, they're able to do it.

So I would just answer the same way we had before,

which is the growth is going to be coming

from the same place it always does,

and that's through the innovation

and the creativity of the teams.

We did announce some fun things

in terms of cover athletes for NBA 2K27.

I'm going to leave all the exciting news

about what's next for that title with 2K,

which is August 18th, I think,

is when there's going to be a more of a reveal.

And with regard to your question about AI,

look, we are first and foremost an entertainment company

and always have been.

However, we're an entertainment company

that creates its entertainment in computers and always has.

So this company, its products and its approach

was built on AI and machine learning

well before it became buzzword du jour.

So we're dyed in the wool adopters of new technology

to the extent it enhances our ability to do what we do.

And we have a three-part strategy,

two parts of which are innovation and efficiency.

So we have projects that sort of fall

into both the basic research

and the applied research buckets here

to see the basic research side,

the art of the possible on the applied research side,

how we can innovate more

and how we can create additional efficiencies.

And that threads through our entire company.

All that said, the first of our core pillars is creativity.

And we have 13,000 colleagues around the world,

the vast majority of whom are people who are creative every day.

And we believe that technology can enhance their creativity,

but we do not believe it can or should replace their creativity.

And ultimately, we make the spoke entertainment products

and we aim to make the best ones in the world.

And technology should make it easier

for incredibly creative people to innovate.

But for better or for worse,

and I happen to think it's very much for the better,

those tools are not going to replace anyone.

So unlike some of our competitors

who are announcing opportunities

to save hundreds of millions of dollars with AI,

I've said since the beginning

that the history of new technology

in the interactive entertainment business

is efficiencies are created, are indeed created.

But then we find ways to do bigger and bigger things.

And we actually don't reduce the cost of doing those things,

but we can meaningfully increase the quality.

And what does meaningfully increase the quality mean for us?

It means making bigger and bigger hits

that appeal to more and more consumers.

And that's our job.

Our job is not to lead in technology.

Our job is to lead in entertainment.

And as it happens, we use technology to try to do that.

Great. Thank you.

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

Your line is open.

Please go ahead.

Great. Thank you.

In the slides and prepared remarks,

you mentioned international expansion

and evaluating a creative M&A.

Can you just walk us through the opportunities

you see overseas for your franchises

that are maybe untapped today?

And for M&A, remind us of the criteria you use

when evaluating deals,

the types of assets you would be most interested in

and any particular regions

where you feel like you would like to scale your operations.

Thank you.

Yeah, we've been very focused here

on increasing our international footprint.

As you know, companies like T2 and there are many of us,

but there are some,

basically derived by 80% of their revenue

from the US, Western Europe,

and one or two countries in Asia.

The rest of the world's really underrepresented,

even though they love video games, of course,

and even though they have devices typically low-res,

low-capable mobile devices, but devices nonetheless.

So for example, despite the number of people in India,

our revenue out of India is really, really tiny.

People in India love mobile video games.

Same is true for Africa, a massive market,

but our revenue footprint is very low.

And we're also underrepresented in places like Latin America.

Obviously, Russia, much of the Middle East and much of Asia,

although we do have a significant amount of business in China.

And the select of other countries,

South Korea, Taiwan, for example,

growing business in Indonesia, little business in Vietnam.

So it's been an enormous strategic priority

for us to begin to build up in these underrepresented

territories in a way that appeals to local consumers.

We have a geo-pricing tool for that purpose

because the different markets have a different ability to pay.

That's a tool that we created in-house

that allows us to experiment in a way that doesn't infect

other parts of our business and other parts of the world.

And in certain instances, we're working on properties

that may only appeal to some of those markets very selectively.

So my goal is that in the next 10 years,

we flip the percentage of our revenue that comes from the U.S.

and international markets in the other direction

because we've grown the overall business.

And if we don't invest here now,

we run the risk of being behind in 10 years.

So it's an area of enormous focus.

Turning to your second question about M&A,

we've always looked at inorganic growth

through the same sort of three categories.

First, are we buying owned intellectual property?

Secondly, are we buying tools and teams

that are valuable?

And third, is the transaction immediately

accretive to EBITDA and to GAP earnings?

And generally speaking, our acquisitions

have ticked all those boxes.

Then we have the broad river because is there a cultural fit?

We've done many small talking acquisitions

and then we've obviously done one very, very large acquisition.

And I'm proud to say that unlike history

for most corporations, public corporations,

our track record is excellent.

I think virtually all of our deals have worked out

if you define worked out as being accretive and long lasting.

And certainly the Zynga deal has been terrifically successful

as has the Gearbox deal, our most recent larger transactions.

So we'll continue to look at the world that way

and in terms of areas in which we're not representative,

thankfully we don't really have that anymore.

We're a big mobile company, we're a big console and PC company.

So we don't have any must haves,

but there are certainly some nice to haves

and we think some opportunities will come our way.

We also, to finish the thought,

have this allergy to being over leveraged.

And we have very, very light net leverage now.

We expect to be in a net cash position in about 30 seconds.

Sorry, not exactly 30 seconds, but you get what I mean.

And once we're back in a net cash position,

I think that would be the time when we'd be more likely

to think about an organic opportunity.

That was very helpful. Thank you.

Your next question comes from the line of Mike Hickey with Stonex.

Your line is open. Please go ahead.

Hey, Strauss Carl, Lainy, Nicole, Gregor, guys.

Thanks for taking our questions.

First one, Strauss.

You mentioned in your prepared remarks

that you think 27 will be an inflection point

in your company's history.

Obviously, that's a strong statement.

I'm sure there's an obvious answer as well.

But I am curious sort of what that means to you exactly

when you say that and maybe details

and why you believe that.

And then we've got a quick follow-up.

Well, it's a great, it's obviously a great question.

And I think the point is that if you look historically

at big, really, really big releases for this company,

I'm thinking obviously of Grand Theft Auto and Red Dead.

They didn't just affect us positively for a quarter.

They had ongoing effects on our company.

And we also have this massive pipeline

that we think quite extraordinary.

And we have live services and we have a catalog.

So if you believe, as I said, I do before

that there are opportunities in terms of organic growth

because the market is growing

and because we're trying to extend it to other markets.

And we have a pipeline and we have a huge,

what we believe is a huge release coming up.

There's a lot of fuel for the fire.

Nice. As a follow-up to the streaming comment,

I think you said that you think we could have

a commercial streaming solution within three years

that would solve the latency problem.

Strauss, it feels like we've been down this road

at least twice.

But I'm curious to hear that.

Obviously the TAM is exciting at 10 times.

I've heard that before,

but it's never really materialized.

So is there something that you're seeing different today

in terms of the tech solution

or some change that's sort of giving you better visibility

that could actually have a real streaming solution

in the future?

Because obviously that would be a sea change to the industry.

It is a very fair and accurate comment.

And even when we supported Stadia some years ago,

we talked at the same time we were supporting Stadia

about concerns about latency.

And you're right, it's sort of certain things

remain perpetually in the future,

like nuclear fusion, which is perpetually 30 years away,

although people think it's not now.

I hope it's not.

I don't think that's the case here

because of enormous advances in hyperscalar networks

and advances in edge network technology.

And I think, for example,

there's one player in the market

that's looking at rolling out a significant edge network

that would address latency, at least in the US.

So I picked three years because we know it's not tomorrow,

but I don't think it's five years.

But of course I could be wrong

and we're not betting any of our company on this.

We just see it as another one of the many embedded

call options in our security.

Thanks for asking.

Your next question comes from the line of Alec Brondolo

with Wells Fargo.

Your line is open.

Please go ahead.

Yeah.

Hey, thanks so much.

Appreciate the question.

Maybe two for me.

Can you help us maybe walk us through the thinking

behind the GTA 6 premium skew mix?

I think Red Dead Redemption 2 launched with three skews.

GTA 6 only had two.

You didn't offer early access in the premium skew,

which I think has been a big part of the hook,

or the upsell driver on some of the other titles

over the last several years.

And then maybe secondly,

encouraging to hear pre-order data for GTA 6 is strong.

I guess I'd love to get your perspective

as someone that's been in the industry a long time.

How do you think about the incrementality

of pre-order units as they flow in?

Is it possible that kind of hype around the game

is pulling forward sales

that you otherwise would have earned post-release

into pre-release and the strong data

won't prove to be that incremental?

Thanks.

We don't tend to give a lot of color around pricing or additions.

We leave that to our labels,

but I think Rockstar feels that offering a phenomenal value

at $80 makes sense for some consumers,

and then offering incremental value

at a modestly increased price makes sense for consumers.

And given the hype around this title,

I mean, I think we could have made

any number of other pricing choices,

but as I said earlier,

our focus is on delivering way, way, way more value

than what we charge for something.

And with regard to pre-orders,

our pre-orders are exceptional.

No one's ever seen anything like this before

at take two or in the industry.

That said, you could absolutely be right.

We just don't know.

So could demand be pulled forward?

Sure.

And one of the reasons

that we're not changing our guidance is to be clear.

We haven't sold one unit yet.

You can cancel a pre-order.

So around here, we're sort of allergic to victory laps,

but one thing we certainly don't do

is take a victory lap before we run the event.

So the news is great so far.

We're incredibly excited.

We couldn't be more excited than we are,

and yet we are realistic and at best,

cautiously optimistic,

and we're going to leave it at that until the thing occurs.

Thank you.

Your next question comes from the line of Matthew Kost

with Morgan Stanley.

Your line is open.

Please go ahead.

Good morning.

Thanks for taking the questions.

I was wondering if you could comment on Sony's decision

to get rid of physical disk sales for new games

beginning in the beginning of 2028.

Will that have a material impact on their gross margins

or will you continue to sell box download codes

at a similar gross margin,

presumably at a similar scale going forward?

And then secondly, if you could just comment

on your progress shifting towards direct payments

inside of Zynga business,

and if that's still something that is currently increasing

and has a significant runway ahead.

Thank you.

Thanks for your questions.

So I'm not going to comment on Sony's own decision,

but in terms of our decision,

look, our business is well over 90%

digitally distributed as it is.

It's already a digital business.

So in certain instances,

especially if it's a big game,

disks just, and note I said disks,

don't really make sense for the consumer.

Also most instances,

you have to register online to play anyhow.

So if you're already connected,

like who cares if you download digitally,

it's all the same and it's much more convenient.

So that's where the world is going in our opinion.

And I think Sony understands that.

We certainly understand that.

That doesn't mean that we won't have physical additions now

and then I'm sure we will in the same way

that they're still vinyl in the recorded music business.

But in other instances, it just won't make sense.

On direct to consumer,

yes that remains growth business for us.

We are not direct to consumer

across our entire mobile portfolio yet,

but we're getting closer

and we are seeing growth there.

We have not,

we don't talk about the actual percentage

and we don't talk about our goals

in terms of the percentage of our business.

What we want to do is be where the consumer is.

So we will support and continue to support

all third party distributors

who treat us appropriately

and with which we can make sound economic arrangements.

And at the same time,

we'll offer direct to consumer opportunities

for consumers who want to avail themselves with those.

There is no doubt that our direct to consumer business

has had a material effect positive

on our margins in the mobile business.

Great, thank you.

Your next question comes from the line

of Jason Bazanay with Citi.

Your line is open.

Please go ahead.

As you can imagine,

the buy side is doing everything they can

to sort of monitor these pre-orders

to gauge sort of demand for GTA.

I don't know if there's anything

you can share from a historical perspective

as experts on sort of ranges

or how people should sort of think

about pre-orders in terms of

what bookings ultimately are for a title.

I think it would be helpful just because

there's some risk that the buy.

I've just gotten some crazy emails

from buy side or something.

How big the GTA should be.

So any sort of ring fencing or dimensionalization

that you could offer I think would be super helpful.

I like that ring fencing of dimensionalization

which is another way of saying

how many units are you going to sell?

The answer is I don't know

and I'm not going to tell you.

But I can say that the level of pre-orders

is unprecedented and astonishing

and we're very grateful for that.

But they are so unprecedented

that we just don't know how it will translate

into sales.

And which is a question I answered earlier.

We genuinely don't know.

And we just don't believe

in claiming victory before it occurs.

Thank you.

Your next question comes from the line

of Eric Sheridan with Goldman Sachs.

Your line is open.

Please go ahead.

Thanks so much for taking the question.

Strauss wanted to know if you could

apply it about any evolution

in your thinking about mobile gaming

and being more tied into AAA quality of content

when you think about the advances

in mobile silicon and processing.

And a second part of the question

would be with Grand Theft Auto

and the community you have there

how should we be thinking about

either engagement or maybe even gameplay

components of Grand Theft Auto

that could be an extension

of the launch later this year.

Thanks so much.

Yeah.

You're 100 percent right that if you believe

in Moore's law what we'll be able to do

with mobile games will grow materially

if not exponentially.

And what I said earlier about streaming

basically means that all games

will become mobile games if you wish.

But I think and I haven't used the word

mobile all the time as a result

when we talk about mobile versus console

we're really not talking about

where you consume the title

or on what device.

We're talking about two different types

of interactive entertainment.

What we call a console or PC title

is big and you spend hours on it

and often you consume it on a big screen.

What we call mobile is light experience

typically an avid consumer of a mobile game

will play that game five to seven times a day

for around nine minutes per session.

It's a very different consumption experience.

A console experience is akin

to sitting down and watching a movie

or binge watching a series for an evening.

A mobile experience is something you do

when you have a few moments free

and you want to relax and enjoy

and be entertained.

And so the change in technology

that will allow a console experience

effectively to become a mobile experience

probably broadens the market

but I don't think means that casual

or hyper casual or semi casual

or double A games necessarily go away.

I think there's going to be a need

and a desire for all different kinds

of interactive entertainment

and as technology enhances the art of the possible

there'll be new formats that are delivered.

An example of that not that's not interactive

but an example of a new format

that digital technology has enabled is micro dramas

and that's huge business in China

and a growing business in the US

that didn't exist five years ago.

So there's some moral equivalent there of

an interactive entertainment

and one of the things that we think about here

is the unknown unknown

like what's the next thing that's coming

in interactive entertainment

at which we can excel

which our customers would love

that new technology enables.

We spent a lot of time thinking about that.

In terms of Grand Theft Auto

and you know where it's going

in the future that's something

that we're not talking about today

and in the fullness of time

I'm sure Rockstar will talk about.

Thank you.

Your next question comes from the line

of Ron Song with Wolf Research.

Your line is open please go ahead.

Good morning.

Can you guys share any updates

on your thoughts about

advertising's place in T2

especially with a continued shift

to open platforms and streaming.

You've been clear that it makes

less sense for the consumers

who are paying $70 plus

for a triple A game

but how can you strategically

employ advertising

beyond mobile games

in a way that's not overly

intrusive.

Thanks.

Yeah advertising

is a growing part

of our mobile business.

We've rolled out ad units

and many of our titles

have previously did not have them

and our view really is

look if you're going to engage

with one of our mobile titles

we ought to be able to monetize

that engagement in some way.

So if you only engage

within that payments

your monetize

pardon me

less than 20% of the audience

typically

often quite a bit less than 20%

but if you have advertising

as an option

you could monetize 100%

of the audience

in one form or another.

So that has been a big part

of our strategy in mobile

and we have rolled out

advertising units

in most but not all of our

titles so far.

On the console side

look

you're correcting

and quoting me saying

if you're paying

you know premium price

you probably shouldn't be

subject to advertising

unless the advertising

is sort of endemic to the title.

So when you go to a basketball game

or watch a basketball game

on television

you know you're accustomed

to seeing advertising

in and around that game

you know advertising

in the arena for example

and in our video game

you'll see that too

and that's appropriate

and we are able to monetize that.

It is a relatively small part

of the console business though

and I expect that

that will continue to be

the case.

Your next question

comes from the line of

Martin Yang with Oppenheimer.

Your line is open

please go ahead.

Hi thank you for taking my

question.

Two questions

one on the

Netflix partnership

do you think this is a

one-off deal

or this more creative

use of Roxx or IP

signals a broader framework

for licensing

Roxx or content

in the longer term

especially when you consider

there will be numerous

ways to

share

derivative content

off gameplay

after the game launches.

Well while this particular

partnership is groundbreaking

and unique

you know

Roxx star has licensed

content to Netflix

before as has

the rest of

take two

we have a close partnership

with Netflix

and they they are

in the video game business

and we're very happy

to be their partner

and you know

I'm sure there'll be

plenty of things

that we can do with Netflix

and many other outlets

in the future.

So you know

we we want to be ubiquitous

we want to be where our

customers are

we have

you know

we believe the

best

and biggest collection

of owned intellectual

property

in the interactive

entertainment business

and

and you know

wherever you are

when you wake up

if you want to engage

with our content

we want you to be able

to do so.

The question on

GTA online

more recently we see

a higher frequency

of content updates

does that

require

you putting

additional resources

into GTA online

development team

or you're really

just spreading out

cutting historically

larger

less frequent updates

into smaller chunks.

You know

generally speaking

our update

cadence

for GTA online

has been pretty stable

and

you know

some of the updates

have been amazing

some have been

less successful

but generally speaking

consumers really love them

but the cadence

hasn't really changed

and we do apply

significant resources

to that

and you know

we expect to continue

to support GTA online

going forward.

Thank you.

Your next question

comes from the line

of Jim Callahan

with Piper Sandler.

Your line is open

please go ahead.

Hi thanks for taking

the questions.

I guess one on kind of

GTA 6

pre-orders

it's something that

the demand

for the deluxe edition

has been

extremely strong

any comment

we can kind of

provide on

what that could look like

what that maybe the mix

kind of looks like

as we

get closer

to

to release of the game

would be helpful.

Thank you.

Look I

think that Rockstar

got it right

in terms of

the pricing

of this standard edition

and the pricing

of the deluxe edition

and I think

there's no doubt

the consumers are

really excited about both

and I think

depending on

you know

your own ability

to pay

and

how avid a consumer

you are

you can choose

between them but

the pre-orders

have been exceptional

and we're happy

with the mix as well.

That's great

and then maybe

just a follow-up on

the user acquisition

cost

comment on mobile

I guess kind of

how do we parse that out

from

what overall

engagement looks like

broadly on mobile

that would be

any comment there

would be helpful

thank you.

Engagement is

is fine

and as I said

you know

we're very happy

with what we see

in the marketplace

and you know

we have some titles

that are just doing

incredibly well

we have the top for

year-over-year

comp

on

our color block jam

so

that has affected

our numbers

but that's really

a copying issue

not a performance issue

so

give people what they want

they show up for it

and we have some

titles that just

continue to do great

like tune blast

and you know

match factory

and words with friends

and appires and puzzles

and

many other big titles

so

the consumers there

that said

user acquisition

a cost

or a reflection

of any number of things

at any given time

including what else

is going on in the market

and what our competitors

are doing

and in certain instances

we'll have

competitors who from

our point of view

are vastly

overspending in UAE

and that'll make it

less economic

for us to spend

so we really

pay attention to

how much we spend on UAE

and

how that

fits with the lifetime value

of

the property

and

you know

we want to make sure that

every nickel

that we spend

in marketing

comes back

you know

at a significant multiple

and some of our competitors

don't seem to look at the world

that way

and if there are a bunch of them

in a given period of time

that can crowd us

out of the market

sometimes it happens

very helpful

thank you

there are no further questions

at this time

I will now turn the call

back to Strauss Selnick

for closing remarks

the first thing

and the most important thing

is

that we all

want to reiterate

our enormous gratitude

to our 13,000

colleagues around the world

who work hard every day

to deliver

the best

entertainment properties

to consumers

wherever they are

whatever devices they have

and whatever interests they have

and more often than not

our teams

are brilliantly

succeeded

that task

and

that's everything

that's the whole shoot and match

and

and

and we are aware of that

and as I said

highly grateful for that

we're also really excited

about what we believe

the future will bring

for our company

and for our colleagues

and all of that

should translate

into enormous benefits

for our shareholders

we have a wonderful year

that we're in process

hoping things are going

really well

and we have great expectations

for the upcoming launch

of the GTA 6

NBA 2K

WWE

and lots of other titles

coming from

with the console

on the mobile side

and as I said

we expect that

this will usher

in a new period of success

at a different

and enhanced level

for take two

so

you know

we couldn't feel

more optimistic

than we do

we've big smiles

on our faces

and yet we know

we have to

wake up every day

and do the hard work

to deliver

that's our goal

thank you so much

for joining us today

this concludes today's call

thank you for attending

you may now disconnect