Q3 2025 Take-Two Interactive Software Inc Earnings Call
Okay.
Abby: Ladies and gentlemen, thank you for standing by my name is Abby and I will be your conference operator today.
Abby: At this time I would like to welcome everyone to the take two third quarter fiscal year 2025 earnings call.
All lines have been placed on mute to prevent any background noise.
Abby: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time simply prestige Starkey followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one a second time.
Speaker Change: Thank you and I would now like to turn the call over to Nicole <unk> Senior Vice President of Investor Relations and corporate Communications you may begin.
Speaker Change: Good afternoon. Thank you for joining our conference call to discuss our results for the third quarter of fiscal year 2025, and then December 31, 2020 for today's call will be led by Strauss Zelnick take two's, Chairman and Chief Executive Officer, Carl laid off our president and Lena Goldstein, Our Chief Financial Officer, we will be.
Speaker Change: 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.
Speaker Change: Forward looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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 schlemmer website, a slide deck.
Strauss Zelnick: That visually presents our results and financial outlook, our press release and filings with the FCC may be obtained from our website I'd take two games dot com and now I'll turn the call over to Strauss.
Strauss Zelnick: I am pleased to report that we achieved solid results during the holiday season, our net bookings of $1 $3 $7 billion were within our guidance range.
Strauss Zelnick: Significant outperformance and NDA to K helped to offset moderation in some of our mobile franchises at the same time, our operating results cost expectations led by the upside from <unk> as well as the shift in timing of expenses that benefited the quarter.
Strauss Zelnick: We are reiterating our fiscal 2025 net bookings guidance of $5 $5 five to $5 65 billion and our.
Strauss Zelnick: Our outlook for full year operating performance.
Strauss Zelnick: While third quarter operating results exceeded expectations, we expect the fourth quarter to be affected by a continuation of current mobile trends.
Strauss Zelnick: As well as the shift of some operating expenses into the period.
Strauss Zelnick: Looking ahead. This calendar year is shaping up to be one of the strongest ever for take two Sid Meier's civilization seven launched an early access today with the official launch on February 11th.
Strauss Zelnick: And we also plan to release Mafia the old country in the summer Grand Theft auto six in the fall and borderlands for before year end.
Strauss Zelnick: We also remain confident in <unk> ability to create new mobile forever franchises as demonstrated by their ongoing success with mass factory.
Strauss Zelnick: We're exceedingly optimistic about the commercial potential of our titles and believe it will have a transformative effect on our business and our industry over the long term.
Strauss Zelnick: As we execute on our mission to create our industry's most innovative and engaging entertainment experiences. We remain highly confident that we will achieve sequential increases in and record levels of net bookings in fiscal 2026 and 2027.
Strauss Zelnick: Now turning to our business highlights from the period.
Strauss Zelnick: NBA <unk> K delivered a phenomenal quarter, yielding significant upside to our forecast.
Strauss Zelnick: To date the title has sold in over 7 million units and engagement was extremely strong compared to last year with recurrent consumer spending up over 30% daily active users up nearly 20% at.
Strauss Zelnick: Monthly active users up nearly 10%.
Strauss Zelnick: With community inspired enhancements to game play major technological updates and the addition of new game modes. The team of visual concepts has once again demonstrated their ability to deliver innovation to this beloved series, while also solidifying its position at the center of basketball culture.
Strauss Zelnick: <unk> two K continues to expand our industry, leading basketball franchise with NBA <unk>. Arcade addition, my team NBA <unk> mobile and NDA to U K online in China, all of which contributed to another highly successful year for the MBA Teekay franchise as a whole.
Strauss Zelnick: The Grand Theft Auto series remains our industry's standard bearer for excellence and to date Grand Theft Auto <unk> has sold in over 210 million units worldwide.
Strauss Zelnick: GTA online delivered a strong quarter led by its holiday update agents with sabotage, which players praised for its depth, new upgrades and array of content.
Strauss Zelnick: Moreover, GTA plus continues to grow its reach with membership for the quarter, increasing 10% year over year.
Strauss Zelnick: Rockstar games continues to expand the audience for Red Dead redemption, two which has sold in more than 70 million units to date.
Strauss Zelnick: The title is currently enjoying its highest level of concurrent players on steam in addition, red dead online engaged its audience further during the period with a release of the fan favorite Halloween pass featuring seasonal theme to bonuses and rewards.
Speaker Change: Turning to mobile recurrent consumer spending grew mid single digits. While this was somewhat below our plan, we remain highly optimistic about <unk> future.
Speaker Change: John Glass and toy blast, both delivered double digit growth led by engaging features including new event types.
Speaker Change: The player profiles and enhanced tuna.
Speaker Change: Matt factory is performing very well and remains on track to become Zynga second largest title by the end of this fiscal year in terms of net bookings.
Speaker Change: We'd like to thank the team peak for their strong execution.
Speaker Change: And one of the top grossing titles in the puzzle genre.
Speaker Change: While empires and puzzles performed below our expectations in the quarter were confident in the future of this highly profitable forever franchise. Our team is launching new event types and corresponding heroes.
Speaker Change: As well as increasing in game rewards.
Speaker Change: Zynga continuing to leverage the zeitgeist of pop culture, and broadened its partnerships with leading entertainment brands and personalities, including words with friends with Bravo is real Housewives, Zynga poker with actor comedian Rob Riggle.
Speaker Change: Power slapped with Teekay out.
Speaker Change: Our teams are growing our direct to consumer offerings and deploying key learnings across our portfolio. During the holiday season, we achieved strong double digit D to C conversion in several major titles and we're taking action to maintain this momentum.
Speaker Change: We are confident in Zynga has continued ability to launch successful new titles as well as brand extensions for some of our console IP in the quarters ahead, we look forward to launching new mobile experiences, including the latest installment of Zynga is highly successful racing franchise.
Speaker Change: <unk> III.
Strauss Zelnick: In closing we're forecasting in calendar year 2025 to be an inflection point for take two from the groundbreaking release of Grand theft Auto six with the unmatched pipeline that UK is set to deliver as we introduce new products to our passionate communities of fans. We're confident that we will usher in a new period of growth and returns.
Speaker Change: Our shareholders I'll now turn the call over to Carl.
Carl: Thanks, Ralph I'd like to thank our teams for delivering another strong quarter for continuing to captivate and engage our player communities with the highest quality entertainment experiences.
Carl: We are excited to bring to market several releases during the remainder of fiscal 2025.
Carl: On February 11th two K and for access games will launch Sid Meier's civilization, seven the highly anticipated revolutionary new chapter in our epic Forex strategy franchise.
Carl: The reception for the game within the media has been very positive, including Gamespot who said that it's game play remains unrivaled and engaging for countless hours.
Carl: <unk> has already set a new franchise record for preorders and player sentiment is extremely positive with a title recognized as the most anticipated game of 2025 during the PC gaming show in December.
Carl: We'd like to thank the entire for access teams are once again challenging players around the world to take one more turn.
Carl: <unk> series that isn't gross players for more than 30 years.
Carl: On February 28, <unk> and HP Studios will launch PGA tour TK 25, the latest entry in our golf simulation franchise that will appeal to both casual and hardcore golf fans.
Carl: The title features three of the major championships, where their respective courses for the 2025 season, several franchise advancements more immersive and customizable my career experience and a robust suite of creation tools are meeting equipment and apparel brands.
Carl: In addition fans can look forward to a diverse roster grows at launch, including executive director and all time, Great Tiger Woods.
On March 14th two came visual concepts will launch WWE <unk> 25.
Carl: Players on <unk>, five and Xbox series X and S will enjoy the island and all new interactive and online WWE seemed world that provides an immersive experience for players can prove they are worthy of the attention of the tribal chiefs.
Carl: WWE <unk> 25 will also include an all new bloodline themed showcase newbrough environments match types and stipulations and the largest ever roster with over 300 playable superstars.
Carl: WWE <unk> 25 will be supported with a series of add on packs that can be purchased individually or together as part of the season pass.
Speaker Change: In addition, <unk> and Netflix are collaborating to bring WWE <unk> exclusively to mobile devices. This fall.
Speaker Change: Looking ahead, we are highly optimistic about our planned pipeline for fiscal 2026, which includes Grand theft auto six launching this fall.
Speaker Change: This summer to K and hangar 13 will transport players to the brutal criminal underworld of 90 to 100, Sicily and Mafia the all country.
Speaker Change: Which builds upon the legacy of <unk> popular organized crime franchise. It is sold in more than 35 million units.
Speaker Change: Our announcement trailer received an outstanding response, and we expect the excitement to grow as Teekay and hangar 13, unveil more about the game leading up to its launch.
Speaker Change: Okay, and gearbox software, creating something truly special with borderlands for which promises to take the serious signature gameplay and storytelling to an all new level.
Speaker Change: At the game awards to paying gearbox revealed a new trailer, which introduced the exciting new world of Cairo, and a brand new villain timekeeper.
Speaker Change: <unk> has quickly become one of this year's most anticipated games and players can expect an incredible action packed experience from gearbox a studio that created the luder shooter genre.
Speaker Change: In closing, we look forward to releasing these groundbreaking titles in the coming year that will set us in motion to deliver the strongest multiyear growth trajectory and pipeline in our company's history.
Laney: I'll now turn the call over to Laney.
Laney: Thanks, Karl and good afternoon, everyone. We delivered solid third quarter results led by the power of our diversified business. During the period, our teams brought innovation to our existing franchises enhance our relationships with our player communities and made outstanding progress on our eagerly anticipated pipeline.
I'd like to thank our teams for their disciplined execution and continued focus.
Laney: Turning to our results, we achieved third quarter net bookings of $1 $37 billion.
Laney: That's within our guidance range of $1 three five to $1 5 billion.
Laney: We delivered outstanding performance in NBA to Kay, which helped offset moderation experience and some of our mobile franchises.
Laney: Recurrent consumer spending rose, 9% over last year, which was in line with our guidance and accounted for 79% of net bookings.
Laney: NBA <unk> grew over 30%, which greatly surpassed our forecast led by new features and innovation in our game modes.
Laney: <unk> increased 6% driven by the addition of match factory and strength in June last time last March in France. However, this was below our guidance of low double digit growth, primarily due to underperformance in our hyper casual mobile portfolio and empires and puzzles and as anticipated Grand theft Auto online declined.
Laney: GAAP net revenue was $1 $36 billion and was flat to last year.
Cost of revenue declined 13% to $600 million.
Laney: As the prior year included an impairment charge related to acquired intangibles.
Laney: Operating expenses increased by 10% to $892 million on a management basis operating expenses rose 8% year. After year. This was favorable to our forecast largely due to a shift in timing of expenses into the fourth quarter. This shift along with the outperformance of MBA Teekay job operating results that were above the high end.
Laney: Our guidance range.
Laney: Turning to our outlook I'll begin with our full fiscal year expectations as Jeff mentioned, we are reiterating our net bookings outlook range of $5 55 to 565 billion.
Laney: Which represents 5% growth over fiscal 2024.
Laney: Larger contributors to net bookings are expected to be NBA <unk> Grand theft Auto series, two blast or hyper casual mobile portfolio match factory and Parison puzzle Red Dead Redemption series Genmar civilization, seven and words with friends.
Laney: We are raising our recurrent consumer spending forecast at 5% growth, which represents 78% of net bookings driven by the phenomenal performance. We are experiencing in MBIA UK, which we now expect to grow low double digits.
Laney: Mobile is now expected to grow low single digits as we are factoring in the current business trends.
Laney: <unk> online is still expected to decline.
Laney: We project the net bookings breakdown from our labels to be roughly 49% zynga, 34%, Teekay and 17% Rockstar games.
We forecast our geographic network from spud to be about 60%, United States and 40% International.
Laney: non-GAAP adjusted unrestricted operating cash flow is expected to be an outflow of $150 million, which is unchanged from our prior forecast and we remain on track to deploy approximately $140 million.
Laney: With capital expenditures, primarily for game technology and office build outs we.
Laney: We continue to expect GAAP net revenue to range from 557 to $5 $67 billion.
Laney: While we now expect cost of revenue to range too.
Laney: The 244 billion.
Laney: Total operating expenses are still expected to range from $3 77 to $3 79 billion as.
Laney: As compared to $5 eight $3 billion last year on a management basis, we expect operating expense growth of approximately 10% year over year, which is unchanged from our prior guidance and is largely due to an increase in ongoing marketing supports mass factory as well as other mobile and immersive <unk> launches planned for the year. The addition of gearbox and higher personnel.
Laney: Costs, partially offset by savings from our cost reduction program.
Laney: <unk> incremental marketing and the addition of gearbox our operating expenses are expected to grow low single digits over last year.
Laney: As it relates to our operating performance for our third quarter results exceeded our expectations. We are maintaining our outlook for the fiscal year as we are factoring several dynamics, including Sean and MBA, two K offset by continuation of the mobile trends, we've been experiencing and the shift of some operating expenses in the fourth quarter.
Laney: Now moving onto our guidance for the fiscal fourth quarter, We project net bookings to range from $1 48 to $1 five 8 billion compared to $1 $35 billion in the prior year.
Laney: The lease rate for the quarter include Sid Meier's civilization, seven PGA tour, <unk> and WWE <unk> 25 largest contributors to net bookings are expected to be NBA TK. The Grand theft Auto series, Sid Meier's civilization, seven Jim Glass Mat factory are hyper casual mobile portfolio.
Laney: Parison puzzle WWE, <unk> 25, and words with friends.
Laney: We project recurrent consumer spending to increase by approximately 3%, which assumes a high teens percentage increase for NBA <unk>, partly offset by declines in both mobile and Grand theft Auto online.
Laney: We expect GAAP net revenue to range from 1516 2 billion.
Laney: Operating expenses are planned to range from $900 million to $905 million on a management basis operating expenses are expected to decline approximately 2% year over year, which was primarily driven by a more normalized level of marketing mass factory at the title has now been in the market for over a year as well as savings from our cost reduction efforts.
Laney: In closing we are forecasting a milestone year ahead of us and we look forward to showing our fans and the global gaming community, our new titles can take our industry to another level of creativity.
Speaker Change: We are also optimistic that the chapter ahead will set us on a path to achieving new financial goals, including reaching a record level of scale enhancing our profitability and unlocking significant value for our shareholders. Thank you I'll now turn the call back distress.
Speaker Change: Thanks, Lenny and Karl on behalf of our entire management team I'd like to thank our colleagues for embodying our core tenants of creativity innovation and efficiency and.
Speaker Change: And for delivering another consecutive quarter of strong results to our shareholders I want to express our appreciation for your continued support we will now take your questions operator.
Thank you and we will now begin the question and answer session. If you have dialed in and then we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: I would like to withdraw your question Press Star one a second time.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again.
Speaker Change: Is star one if you would like to join the queue.
Speaker Change: And your first question comes from the line of Doug <unk> with TD Cowen Your line is open.
Speaker Change: Hey, Thank you.
Speaker Change: When when you originally bought Zynga a few years ago part of the thesis was that you saw the potential for revenue synergies down the line and I think most of US took that to mean Mary in your existing IP to their mobile skill set.
Speaker Change: I know youre not going to talk about specifics, but as you look out at the pipeline for the next two years do you feel like Youre getting closer to realizing some of those synergies.
Speaker Change: Is that something that is a key component of your optimistic outlook for the next few years. Thanks.
Speaker Change: Thanks for your question actually at the time I was.
Speaker Change: It was pretty clear that while.
Bringing legacy core IP to mobile could be an opportunity.
Speaker Change: Also noted that the biggest hits in mobile our native mobile and there are precious few examples in the marketplace of very big mobile successes that are based on core game IP call of duty mobile being one of them.
Speaker Change: That said, we actually are working on.
Speaker Change: Some interesting projects that we have not announced yet which we feel good about what I did identify as an area of revenue synergies, though it has come to fruition, which is building our direct to consumer business inside our mobile business, which was a combined project.
Speaker Change: Between take two in Zambia that we kicked off very early and that has turned into a very significant business generating meaningful incremental contribution.
Great. Thank you.
Speaker Change: And your next question comes from the line of Eric Handler with Roth Capital. Your line is open.
Eric Handler: Good afternoon, and thanks for the question I'm going to keep it on the mobile.
Speaker Change: Side of things as well.
Eric Handler: One.
Eric Handler: You had said batch factory was I believe going to be.
Eric Handler: Either breakeven or profitable at.
Eric Handler: The end of fiscal 'twenty five is that still the case.
Eric Handler: And then I'll follow up.
Eric Handler: Ladies thanks tax rate.
Eric Handler: Yes, so match factory towards the end of the year is going to start to turn profitable.
Eric Handler: <unk> is doing extremely well with continuing to do a lot of marketing for the title. So it definitely has gone towards the very end of the year, we're turning profitable, but the game is continuing to do better and better as the game stays in the market.
Speaker Change: Okay, and then just broadly speaking with mobile it did seem like there was some broad based weakness just overall.
Speaker Change: Are you seeing this the market's becoming just more bifurcated that.
Speaker Change: It's only the biggest games that are doing well now and you have to keep spending a lot to keep those gains doing well.
Speaker Change: No thats actually not the case, it's still a pretty broad based business at Zynga.
And that's one of the things that is so appealing we think about our mobile business.
Speaker Change: In the same way that our console business. We think reflects the best collection of owned intellectual property in the industry, our mobile business I think has the.
Speaker Change: Greatest sort of breadth of owned and licensed IP in the mobile business, which we think is protective on the downside and offers great opportunity in the upside.
Speaker Change: There are not the same kind of mobile tailwind the industry experienced up until mid 'twenty two quarters 22 was a down year and.
Speaker Change: Then the industry slowly returned to growth, but the growth is is still.
Speaker Change: The lower rate than we would like but it has yet and I don't believe it will turn into.
Speaker Change: Our kind of top five business, there's still a lot of opportunity for the top 50, or 100, or even 200 titles to make a difference there as one of their challenge in the business, which is.
Speaker Change: As you know in the mobile business, unlike the console business.
Speaker Change: We and our competitors do not capitalized development costs, even after technical feasibility and your marketing expenses of course are currently written off as well, which.
Speaker Change: Which is true for all of our businesses, but in the mobile business. You spent a lot of money in UA in the belief and hope that it will come back to you in a subsequent period.
Speaker Change: We're very conservative in the way, we do that but nonetheless that burdens our current results.
Speaker Change: More hits you have in mobile the worst or current results can actually look for a period of time and Thats one of the things that we did see with match factory as Lenny said, we expect that to turn and we're going to begin to benefit from that.
Speaker Change: Extraordinary yet in the coming periods. We also hope that we will have other big hits coming on the mobile side. So it's a really good story for take two and Zynga Division.
Speaker Change: Somewhat less good story for the industry and it is not an across the board great story for Zynga and that a couple of our legacy titles, most notably empires <unk> puzzles are faced some challenges, but that's not a that's an industry problem. That's a game problem that is a problem that we're addressing and we're already seeing some good news.
Speaker Change: That's helpful. Thanks, Chris.
Speaker Change: And your next question comes from the line of Andrew Moreau with Raymond James Your line is open.
Speaker Change: Hi, Thanks for taking my question one on NBA to start.
Speaker Change: Obviously seeing some pretty good rebound there no pun intended.
Speaker Change: But how much of that do you think is just kind of one the comp effect of the journey transition issues that you had last year and how much is just kind of an underlying residents success with the NBA fan base.
Speaker Change: Yes.
Speaker Change: So I think on the <unk>.
Speaker Change: Certainly on the PC side of the business.
Speaker Change: A lot has to do with G&A versus Gen nine and.
Speaker Change: Benefiting from that without question, but.
Speaker Change: But honestly if the game is just continuing to innovate.
Speaker Change: Quality is amazing and the folks at Teekay and V C.
Speaker Change: Concepts.
Speaker Change: Year upon year, proving that they've been able to come out with new modes, new innovations not everything works all the time, but this team is just data fine what sports gaming is and they define what innovation is and I think there are enough.
Speaker Change: Design changes in this game that have really just accrued to our benefit.
Speaker Change: And we're really excited about that and we still feel that we're that we've got a lot of upside from where we are right. Now. So generally speaking we're very pleased about the performance of an NDA.
Speaker Change: We think there's a lot of greenfield in front of us.
Speaker Change: And the <unk>, Keith was a bit of a headwind for us historically, but no longer.
Speaker Change: Alright, much appreciate it and then maybe one more kind of along those lines, but with your franchises that have bigger audiences, but maybe take a little while between releases thinking like Mafia and borderlands. How does your approach to building excitement around those launches differ from franchises with faster release schedules and how is the response to those two games Ben.
Among their communities versus your hopes.
Speaker Change: Look I think we market everything as though it's a brand new title.
Speaker Change: We never sort of.
Speaker Change: Draft on prior success.
Speaker Change: And.
Speaker Change: We also need to communicate to consumers that there is an element of what is tried and true and beloved and that there is an element of new which is we're exempt for example, what we always do and civilizations today as early access day for <unk> seven and once again the team at for access has pushed the envelope.
Speaker Change: Sure.
Speaker Change: <unk>.
Speaker Change: It's mostly been really really well received that's also received a little bit of criticism too. So I think in all instances, we benefit by having a franchise that gives us a marketing umbrella, but we never rest on those laurels.
Speaker Change: We still have to be very engaged with our consumers to let them know what we have when it's coming and that it's worth engaging with.
Speaker Change: Okay.
Speaker Change: And your next question comes from the line of Cory Carpenter with Jpmorgan. Your line is open.
Hey, good afternoon. Thanks for the questions Carl could you just expand a bit on the NBA game changes the teams need that are resonating. The players you beyond that you need to <unk> constant change and Josh for you now that we have more details on the switch to that had been released to confirm just curious how you think about the opportunity to expand your relationship with them going for.
Speaker Change: Thanks.
Speaker Change: Sure I can take the second one first expand our relationship with them.
Speaker Change: Now that we have with details on switch to sorry.
Speaker Change: Alright.
Speaker Change: I missed the switch to park.
Look we've had obviously a long standing relationship with Nintendo we've supported the platform when it made sense for the individual release there was a time when Nintendo platforms are really geared at younger audiences and that was reflected in our release schedule and now today with switch and potentially with switch.
Speaker Change: To the.
Speaker Change: The switch our device can support any audience.
Speaker Change: As you know as you May have noted <unk> seven is available now on switch so while we have nothing specific to report.
Speaker Change: We actually would fully expect to support switch.
Speaker Change: Yeah.
Speaker Change: And Carlos is going to comment on your question regarding which elements of NBA <unk>.
Speaker Change: Really.
Speaker Change: Excited to consumers this time around.
Speaker Change: Sure. So we introduced a bunch of new features that we're designing for Rick for the core players and I think things like the new shooting in drug Eluting mechanics, and Theres, a new bass progression system that was very well received.
Speaker Change: A smaller city.
Speaker Change: Whats really concentrate the activities. So you don't have to run around as much.
Speaker Change: To get to the interesting things that play.
Speaker Change: <unk> can do.
Speaker Change: There was a return of the old NBA to K parks courts that people love.
Speaker Change: And there was also a full overhaul to the my team mode, So quite a bit of innovation for us.
Speaker Change: Okay. Thank you.
Speaker Change: Do we have another question.
Speaker Change: Hey, Joe.
Speaker Change: Our next question is from Martin.
Speaker Change: Your next question comes from the line of James <unk> with Jefferies. Your line is open.
Okay.
James: Okay, great. Yeah. Thanks. Thanks for the question Wendy can you just talk about the right level of marketing spend needed to support the launches of your new titles.
Speaker Change: How soon before launches should we expect you to begin ramping up your marketing efforts and how does that impact the ramp of expenses. Thank you.
Speaker Change: So in terms of the marketing it usually is.
Speaker Change: The launch of the title side.
More recent years it has spread a little bit further along especially if there is an online.
Speaker Change: And that of our current consumer spending with the title. So that the title budgets are usually around the same size as they were in the past they really havent gotten smaller even in even when we have titles that are new versions of previous releases Theres just so much importance in terms of.
Speaker Change: Marketing and getting people excited about the title and it's just really different types of marketing that has been in the past. So there's a lot more digital marketing and marketing for our consumers and analytics and different ways of getting to our consumers than we have in the app. So it's usually a bigger amount at launch and then spread out.
Speaker Change: Compared to the time that the titles lifecycle.
Speaker Change: Great. Thank you.
Speaker Change: And we will take our next question from the line of Matthew cost with Morgan Stanley. Your line is open.
Speaker Change: Great. Thanks, Thanks, everyone for taking the question.
Speaker Change: On the Netflix partnership for WWE.
Speaker Change: Wondering how you evaluate the attractiveness of those opportunities in terms of partnering with new distribution nodes like Netflix.
Speaker Change: And if those will become financially material is there more nice to have going forward and how you think them through that's question one second.
Speaker Change: Second question is just about some media reports in the past couple of months that you may have started using a new mediation partner for your AD inventory yet at Zynga and that you may have received the payment I think one of the article said of $150 million to do that is that accurate and if so how and when would that payment be accounted for it. Thank you.
Speaker Change: I'll take the first question and Lanny will take the second we have numerous distribution partners in the business and we have a great relationship with Netflix in particular, and we will evaluate an opportunity primarily to see if it benefits our consumers, we want to be where our consumer.
Speaker Change: Saar, we're not precious or religious about limiting them to a particular platform or for example.
Speaker Change: Even our own platform, we have an opportunity for consumers to.
Speaker Change: Come directly to a store that one of our labels has or obviously to work through the app stores.
Speaker Change: To work through third parties, we have physical distribution and we've also worked with subscription services and we've worked with Netflix before in every instance, there obviously economics related to that particular opportunity.
Speaker Change: And we try to tailor to the opportunity to the consumers who are trying to reach.
Lina: And Lina your line is open about about mediation.
Speaker Change: Yes, so in terms of the economics of the deal we haven't given any detail.
Speaker Change: They were around the CR, but when we do account for things like that is usually spread along with value at the upper <unk> to the organization.
Speaker Change: Great. Thank you very much.
Speaker Change: And your next question comes from the line of Chris Shaw with UBS. Your line is open.
Speaker Change: Great. Thank you Lanny.
Speaker Change: Recognize in recent years <unk> been investing ahead of the new pipeline as we start to see the benefit of these immersive core titles coming to market can you just revisit how youre thinking about cash flow generation relative to the guidance you had given historically and alongside this ramp how are you thinking about capital allocation and the options you have available to you. Thank you.
Speaker Change: Sure. So when we think about going forward in the next couple of years and the strong cash flow that we expect to generate from our pipeline.
Speaker Change: Our capital allocation plan is definitely include paying down some of our debt over the next couple of years, but we also have a lot of acquisition opportunities available to us. So it's possible that if we make some acquisitions on the timing of the capital allocation plans could be adjusted based on that.
Speaker Change: So I think theres a lot of things that are big opportunities for us going forward and all of that will be available to us.
Speaker Change: Okay, great. Thank you and if I can just fit in one more with <unk> launching can you just help us think through the uplift you're factoring into your guidance and how does that expectation compared to prior iterations of the franchise. Thank you.
Speaker Change: So.
Speaker Change: Turning to next year, we're in the middle of our budgeting process right now so we're not providing any specific guidance we.
Speaker Change: We do expect to give that out during our may call, but with that said, we're really excited about the pipeline that forecast are released next year and also Thats released in this quarter.
Speaker Change: As Keith mentioned, we remain highly confident that we'll achieve sequential increases and record levels of net bookings.
Speaker Change: In fiscal 2026 and 2027.
Speaker Change: Okay, great. Thank you.
Speaker Change: And your next question comes from the line of Michael Hickey with benchmark. Your line is open.
Hey, guys Strauss Karl any Nicole nice quarter. Thanks for taking our questions just two from US curious on your.
Speaker Change: Fiscal 'twenty six pipeline to three games are you reaffirming launch and timing expectations or is this more of.
Speaker Change: The continuation of the previously provided slate.
Speaker Change: Things to come from your studios as new information becomes available.
Speaker Change: And the second question is on project details it looks like Michaels now gone for gone from 31st Union. So just curious how leadership to this transition was the studio and how this impacts the future of the game. Thanks guys.
Speaker Change: So on the first point, yes, we did today reaffirm our schedule through the remainder of the calendar year.
Speaker Change: I think we were pretty clear about that and regarding 31st Union project ethos.
We're super Grateful to Michael for the Great work he did.
Speaker Change: Bringing this project to us.
Speaker Change: Spearheading it and getting it to the stage that it is that she is going to continue in an advisory role and for that we're also grateful.
Speaker Change: The transition leadership will be provided by a combination of 31st Union and <unk> executives and we feel highly confident that we're going to deliver a great project over time, when we we remain fully committed to details we're still really excited about it.
Speaker Change: Okay. Thanks, guys.
Speaker Change: And your next question comes from the line of Jason Bazinet with Citigroup. Your line is open.
Just had a very simple question.
Speaker Change: The 1 billion nine that sits on the balance sheet for capitalized software.
Speaker Change: Should we look at that as sort of apples to apples in terms of your accounting policy versus where you were five years ago or is there some change in accounting that would cause that number to be.
March I'm, just trying to get a sense of is it should investors look at that as indicative of.
Speaker Change: Potentially the quality of your number of gains that are going on school.
Speaker Change: Onto the income statement over the next couple of years.
Speaker Change: No nothing has changed in terms of our policy. That's the capital software for the games that have been put up on the balance sheet based on the technological feasibility of those title and they'll get amortized as those titles for release over the lifetime of those titles.
Speaker Change: Understood. Thank you.
Speaker Change: And your next question comes from the line of Omar <unk> with Bank of America.
Speaker Change: Okay.
Speaker Change: Hi, Thanks.
Speaker Change: So glad to see GTA six reaffirms for fall 'twenty five launch.
Speaker Change: I wanted to ask.
Speaker Change: Yes.
Speaker Change: How much of the.
Speaker Change: The total number of fans that have ever.
Speaker Change: Touch DTA and have brand awareness of GTA.
Speaker Change: Potentially be reactivated once this GTA six launch actually happens.
Speaker Change: I gather that there is a much smaller percentage of those small percent of those fans that today are highly engaged.
Speaker Change: But with the launch of GTA six it will become an intergenerational intergenerational franchise. The first title having been released around the year 2000.
Speaker Change: So I could very easily see a.
Speaker Change: That plane.
Speaker Change: With the Sun after having not played the game for a couple of decades.
Speaker Change: So do you have a sense of.
Speaker Change: Relative to the current base of players that's highly engaged what the base of lapsed players that may potentially come back it could be like is it one times as big twice as big any any kind of framework there to help us think about this launch it would be great.
Speaker Change: Well I appreciate the question.
Speaker Change: Sort of the sentiment underlying the question is sort of falls into the category of how high is up and I declined to.
Speaker Change: Ever predict that.
Speaker Change: We believe that arrogance is the enemy of continued success.
Speaker Change: We run scared, we're looking over our shoulder our competitors are not asleep.
Speaker Change: <unk>.
Speaker Change: And so what do we do about that we try to be the most creative the most innovative and the most efficient company in the entertainment industry.
Speaker Change: And Rockstar games in particular seeks perfection in everything they do and.
Speaker Change: And we believe that if we do that right.
And we focus on delivering for consumers, that's our best opportunity to succeed.
Speaker Change: To answer your question mathematically.
Speaker Change: It's okay.
Speaker Change: I mean, its pretty interesting if you look at GTA five because that title crossed three console generations and still remains the best selling title having sold in over 210 million units GTA online now over 10 years old.
Speaker Change: Still has enormous ongoing engagement.
Speaker Change: So there is certainly evidence that if you give consumers what they want they will show up for it and they will stick around loyally for a very long time.
Speaker Change: Equally we have enormous respect for how hard that is to do with.
Speaker Change: With regard to the upcoming release of GTA six obviously this is a console release, we know what the current.
And.
Speaker Change: Console installed base looks like so.
There is the broad universe of console owners.
Speaker Change: To look at and that's that is something to be mindful of.
Speaker Change: At the same time, we don't spend a lot of time looking at sort of attach rates, which I think is basically is the question you're posing.
Speaker Change: Because that'll take care of itself if we do a great job now are we aware of.
Speaker Change: Who our consumers are and do we know how to market them. A target then we do we have an extraordinary corporate consumer database with I think nearly 1 million records in it.
Speaker Change: We observe of course, all privacy regulations, but we are able to market to a significant portion of that database. So we're mindful of who.
Speaker Change: <unk> been engaged with GTA online previously we're mindful of those who we believe will be interested in the title going forward and we can tailor our marketing accordingly, but we genuinely don't spend a lot of time thinking about well is this going to be X number of units or Y number of units because that doesn't change anything that we can.
Speaker Change: We can do we focus on what we can affect and we let the outcomes take care of themselves.
Speaker Change: And I'm, sorry, I said 1 million consumer records I met the $1 billion.
Speaker Change: Thank you for your response I was only off by three digits. So.
Speaker Change: Got it.
Speaker Change: And your final question comes from the line of Clay Griffin with Moffett Nathanson. Your line is open.
Clay Griffin: Great. Good evening, thanks for taking the question.
Strauss Love to get your cannot hear the operator is the operator speaking.
Speaker Change: Strauss can you hear me now.
Speaker Change: Hello can we have your number or are you able to hear us.
Speaker Change: Yes can you hear me.
Speaker Change: And Mr. Zelnick are you able to hear us.
Speaker Change: Thank.
Speaker Change: Danielle.
Speaker Change: Okay now I can hear you got it okay.
Speaker Change: Perfect Alright.
Speaker Change: Mr <unk>.
Speaker Change: Now clay Griffin with Moffett Nathanson.
Speaker Change: Yeah, Hey, sorry for the technical difficulty.
Speaker Change: I'd love to get your impression of the momentum of the robotics platform you talked about Hey, we'll we'll be wherever consumers are.
Speaker Change: Is that do you view that as a.
Speaker Change: Substitute products and whats your vision, what would have to happen for you guys too.
Speaker Change: Develop content for that platform as it is it is it a viable destination for the type of content that would take to producers.
Speaker Change: Look <unk> is a combination of a platform and a collection of games.
Speaker Change: User generated games.
Speaker Change: Largely and.
Speaker Change: I understand that they market themselves as a platform however from from our point of view.
Speaker Change: It is.
Speaker Change: Competitive situation, so while I wouldn't rule anything out it's hard to imagine that we would see roadblocks as a destination for take two.
Speaker Change: <unk> game, but again.
Speaker Change: If there is a reason for us to be there then we would contemplate it.
Speaker Change: Understood and then just maybe turning back to MBA Teekay Rcs.
Speaker Change: I assume that Youre aware of the kind of mid quarter slipped that happened at your competitors live service.
Speaker Change: And credit to the team at visual visual concepts for a great product, but it does seem that.
Speaker Change: We're seeing kind of small is changes to these live services are driving bigger results than what we're used to kind of intra quarter I wonder if that's.
Speaker Change: Your impression I know its like as you add complexity.
Speaker Change: Haps, maybe we're all losing a little bit of visibility is that your impression or is that just a function of.
Speaker Change: MBA UK executing at a really high level versus maybe some mistakes elsewhere.
Speaker Change: Yes, I mean, I really can't speak to.
Speaker Change: <unk> and the decision that it made but certainly.
Speaker Change: It's very important in these type of life services games that the development.
Speaker Change: The game and the actual.
Speaker Change: Monetization piece of the game.
Speaker Change: Our hand in hand, and you really can't have one or the other and one thing that we've learned over the years that the most important thing about developing.
Speaker Change: Particularly for fourth gains that you can't have massive innovation year over year and you have a significant live services component is that engagement is everything and the more the consumer engages them more ultimately that youre going to be able to benefit.
Speaker Change: The economics of the business so for us it's not necessarily we don't necessarily look at the business about tweaking the economy of course, we do that but the idea is really more the focus of the teams marketing and development.
Speaker Change: To increase engagement and Thats, all about the quality and the execution.
Speaker Change: Barry.
Speaker Change: The tweaking of the economy.
Speaker Change: Never is the leading factor, it's always about engagement and quality experience and I think if you stray from that that's why I think you run into trouble.
Speaker Change: Yes.
Speaker Change: Understand that Carl I, just I think.
Speaker Change: Are you, referring to kind of tweaks and actual gameplay you mentioned some of the improvements that were made in the UK.
Speaker Change: Yes, I wouldn't call them.
Speaker Change: Massive changes, but it had an outsized effect and it sounds like we saw the opposite of your competitor and so the question is are you starting to see that.
Speaker Change: As a general rule or perhaps maybe youre, losing some visibility maybe even internally for some of these live services intra quarter.
Speaker Change: I'm going to take that.
Speaker Change: No I don't feel that way.
Speaker Change: We are utterly focused on trying to present, the very best possible experience.
Speaker Change: Sometimes we fall a bit short in certain areas, sometimes we missed the boat a little bit two of our competitors as well but.
Speaker Change: I think the focus remains intense on every part of the experience.
Speaker Change: Understood. Thanks, guys.
Speaker Change: And that concludes our question and answer session I will now turn the conference back over to Mr. Strauss Zelnick for closing remarks.
Strauss Zelnick: Well first thank you for attending and I'd like to apologize to all of you for our technical difficulties today.
Hopefully the message came across but despite that because the message is a powerful one we had a solid quarter for which we're very grateful and we have.
Strauss Zelnick: What we believe is an extraordinary release schedule through the rest of the calendar year and of course, our expectations are.
Strauss Zelnick: Our very rosy indeed for fiscal 'twenty, six 'twenty, seven where we expect sequential increases in net bookings and we expect to set new financial records. All of that is a reflection of what our creative and business teams do every day, which is to seek excellence in everything they do and none of us could be.
Strauss Zelnick: We're proud and we are of those teams and their commitment their loyalty to this enterprise.
Strauss Zelnick: We are we are so grateful so I just wanted to say thank you to all of my many thousands of colleagues around the world many of whom are listening right. Now. Thank you for your fine work I'd also like to thank our shareholders for your support over these many years.
Strauss Zelnick: We aim to continue to deliver on hopefully to over deliver going forward. So thank you all.
Strauss Zelnick: And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
Strauss Zelnick: [music].
Yes.
Strauss Zelnick: [music].
Strauss Zelnick: Okay.
Strauss Zelnick: [music].
Strauss Zelnick: Yes.
Strauss Zelnick: [music].
Strauss Zelnick: Okay.
Strauss Zelnick: [music].
Strauss Zelnick: Yes.
Strauss Zelnick: [music].