Q4 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 interactive fourth quarter 2025 earnings call.
Abby: 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 press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Nicole: 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 fourth quarter and fiscal year 'twenty twenty-five ends at March 31, 2025, today's call will be led by Strauss Zelnick take two's, Chairman and Chief Executive Officer, Carl laid off our president and leaning Goldstein, our Chief Financial Officer.
Speaker Change: 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.
Speaker Change: Currently available to US we have no obligation to update these forward looking statements actual operating results may vary significantly from these forward looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the company's most recent annual report on Form 10-K, and quarterly report on Form 10-Q include.
Speaker Change: 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 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.
Strauss Zelnick: It contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook, our press release and filings with the SEC may be obtained from our website at take two games Dot Com and now I'll turn the call over to Strauss.
Strauss Zelnick: Thanks, Nicole good afternoon, and thank you for joining us today.
Strauss Zelnick: We concluded our 2025 fiscal year with outstanding results, including fourth quarter net bookings of $1.5 billion to $8 billion.
Strauss Zelnick: Which was the top of our guidance range.
Strauss Zelnick: Each of our labels contributed meaningfully to our performance.
Strauss Zelnick: <unk> posted a fantastic quarter with successful launches of Sid Meier's civilization, Southern WWE, UK twenty-five and PGA tour <unk> 25.
Strauss Zelnick: N D H U K delivered one of its strongest periods on record, including recurrent consumer spending growth of 42%.
Strauss Zelnick: Rockstar games has excelled once again.
Strauss Zelnick: That's auto and Red Dead redemption series, surpassing our forecasts.
Strauss Zelnick: Zynga continued to gain momentum led by match factory human blast <unk> newest Ted.
Strauss Zelnick: Colored block Jam.
Strauss Zelnick: We are providing our initial financial outlook for fiscal 2026, including net bookings of five $9 billion to $6 billion, which represents 5% year over year growth at the midpoint of the range.
Strauss Zelnick: This outlook assumes a continuation of our current positive trends, including health and mobile performance and ongoing strength in N V. H U K as well as the release of several eagerly anticipated titles, including Mafia, the old country and borderlands for.
Strauss Zelnick: Rockstar expects to release Grand Theft Auto six on May 26, 2026, which is in our fiscal year 2027.
Strauss Zelnick: I believe affording Rockstar additional time for such a groundbreaking project is a worthy investment.
Strauss Zelnick: Grand Theft Auto six began development in earnest in 2020, following the massive success of Red dead redemption two.
Speaker Change: Title is now the most anticipated entertainment property of all time.
Speaker Change: Consumer anticipation is unprecedented with trailer truth cross platform to view last week shattering records to become the biggest video launch of all time with over 475 million views in 24 hours.
Speaker Change: This follows trailer one's record breaking debut of 93 million views in 24 hours on Youtube alone.
Speaker Change: Spotify streams of the track featured in the trailer hot together by the pointer sisters.
Speaker Change: Surged by 182000%.
Speaker Change: Once again proving rock stars ability to influence popular culture.
Speaker Change: The ambition and complexity of Grand theft auto sector is greater than any previous Rockstar title.
Speaker Change: And the team is poised to release another astonishing entertainment experience will exceed.
Speaker Change: He'd players' expectations.
Speaker Change: Now I'll share more specific highlights from the quarter.
Speaker Change: <unk> 25 posted near record performance and exceeded our forecast. The date. The title has sold in nearly 10 million units, a 7% increase compared to <unk> 24 during the same timeframe.
Speaker Change: Engagement grew significantly daily active users my career daily players in average games per user increasing 30, 40 and 80% respectively.
Speaker Change: We're also pleased with the performance of our brand extensions for the franchise NBA.
Speaker Change: <unk> 25 Arcade addition remains a top five performing title on Apple arcade.
Speaker Change: MBA tree Count line in China continues to hold its place as the number one PC sports game in country.
Speaker Change: And our NBA <unk> all stars mobile title, which we developed in partnership with Tencent and launched on March 25th is maintaining the number one spot on the iOS Sports game chart for both downloads and revenue in China.
Speaker Change: I'd like to thank Adam silver at the MBA and Andre you go to all of the NBA players Association for their extraordinary partnership and.
Speaker Change: In support.
Speaker Change: Okay as release of WWE UK 25 was met with great critical acclaim, including a score of 84, a Metacritic for Xbox series X and all time high for the series on that platform.
Speaker Change: Visual concepts introduced new features including the island, a highly immersive WWE seemed world where players can explore compete in live events and earn rewards.
Speaker Change: Consumer appetite for the franchise is growing with recurrent consumer spending up 20% during the quarter.
Speaker Change: This includes strong performance from WWE Super card, which achieved near record levels of net bookings in March.
Speaker Change: WWE <unk> 25 has been integrated regularly and so WWE is televised programming.
Speaker Change: Also a co sponsor of last month's spectacular Wrestlemania was 41.
Speaker Change: In addition, <unk> is bringing WWE too Jay to switch to this summer as well as bringing WWE to Kate and mobile devices. This fall in partnership with Netflix.
Speaker Change: I'd like to thank Nick Colin and his team at <unk> for their immense support as we raise the bar for excellence for our beloved wrestling franchise.
Speaker Change: <unk> and H B studio successfully launched PGA tour, UK 25, which earned a Metacritic score of ADM, Playstation five and is generating significant recurrent consumer spending growth compared to the prior iteration.
Speaker Change: I'd like to thank our partners at Pega for helping us create another superb golf experience.
Speaker Change: During the period <unk> released Sid Meier's civilization, seven the revolutionary New chapter in our esteemed strategy franchise.
Speaker Change: As stewards of the civilization series for access games strives to bring innovation with each new release, we're confident that the development teams ongoing efforts to update key areas of the game will deliver outstanding results over the franchise's typically long sales cycle.
Speaker Change: Our teams are pursuing opportunities to expand the audience, including the recent launch of civilization seven VR for <unk>, III and <unk> as well as the titles upcoming release on switch too, which will offer new motor controls for a highly intuitive game experience.
Strauss Zelnick: The Grand Theft Auto series once again exceeded our expectations and to date GTA five has sold in over 215 million units for current consumer spending outperformed our forecast growing 5% year over year led by an array of new modes rewards and vehicles for GTA online as well as ongoing demand for <unk>.
Speaker Change: Hey, plus memberships.
Speaker Change: Our games continues to expand the possibilities for engagement with the series through ongoing development of its five them creator platform.
Speaker Change: Red Dead redemption, two also outperformed with net bookings growing 23% over last year Rockstar games continues to support Red dead online with a series of rewards that engage their community further.
Speaker Change: Zynga outperformed during the period and we're pleased that their momentum is continuing to fiscal 2026 <unk>.
Speaker Change: <unk> delivered fantastic results match factory exceeded our expectations driven by first class live ops execution and the introduction of mission Center, a limited time events that drove significant player engagement.
Speaker Change: Net bookings grew meaningfully over last quarter and the title was generating profits.
Speaker Change: Net bookings for <unk> grew 7% over last year, primarily due to the introduction of the Cannes Festival.
Speaker Change: We're also thrilled title achieved its largest quarter of net bookings since zynga acquired peaks in 2020.
Speaker Change: <unk> colored block Jam is scaling rapidly and is currently a top 10 downloaded game and among the top grossing titles in the U S. Apple App store.
Speaker Change: In just four months of operation the title has become profitable and is making an impressive contribution to our mobile net bookings.
Speaker Change: We're encouraged to see stabilization in empires, <unk> puzzles small giant improve the titles in game economy to support faster player progression and fund new features based on player feedback like instant power Simon hero coach and visiting outfitter.
Speaker Change: Zynga has numerous titles in development and soft launch that were eager to bring to market worldwide.
Speaker Change: Our direct to consumer business delivered record performance as our teams continue to launch new offers events and enhanced personalization, which are driving better conversion.
Speaker Change: While we have been implementing data CNR titles for some time, we do believe there is an even greater opportunity to expand this highly accretive channel given recent beneficial court rulings.
Speaker Change: As we approach the three year anniversary of our acquisition of Zynga. We're extremely pleased with the label has become an integral part of our company Zynga is core franchises are strong and we're energized by the team's unique ability to launch hits in a highly competitive mobile market demonstrating further the effectiveness of their multi studio.
Speaker Change: Approach and continued excellence in live ops.
Speaker Change: In closing with a player first approach and a deep commitment to quality, we strive to create the best entertainment experiences for our global communities and to redefine our art form.
Speaker Change: As we bring our exciting lineup to market, including Grand theft Auto six in fiscal 2027, we expect to achieve record levels of net bookings that will establish a new baseline for our business and set us on a path of enhanced profitability.
Carlos: I'll now turn the call over to Carlos.
Carlos: Thanks, Ross I'd like to thank our teams for another strong quarter and for laying the groundwork for this exciting next chapter in our company's history.
Speaker Change: As Charles mentioned, we are extremely optimistic about our upcoming pipeline, which includes approximately 38 titles through fiscal 2028.
Speaker Change: During fiscal 2026, we plan to release 13 titles, including four within the immersive core category.
Speaker Change: This includes mafia, the whole country, which teekay and hangar 13 will introduce on August eight.
Speaker Change: Linear narrative driven game as a premium experience in the vein of early Mafia titles set again.
Speaker Change: The stunning authentic background of 1900 Sicily.
Speaker Change: Pre orders are off to a strong start following the debut of the first official gameplay trailer at Pax East last week and we're excited for its upcoming launch.
Speaker Change: Additionally, <unk> and gearbox will launch borderlands four on September 12.
Speaker Change: Last month during the Playstation state of play our teams shared an extended look at the action packed the gameplay coming in the tail players.
Speaker Change: Players are treated to a first look at two of four new vaults centers as a tour has to a secret black site and determined this range showcasing the destructive power of an updated gear system.
Speaker Change: The borderlands community reacted very positively with a game trending on X and becoming one of the most wishlist of games on steam.
Okay and gearbox will also release borderlands for for the switch to in the future.
Speaker Change: And as always we will release the next iterations of our industry, leading annual sports franchises NBA <unk> and.
Speaker Change: And WWE <unk>.
Speaker Change: We also plan to bring to market five mobile titles this fiscal year, including WWE <unk> for Netflix in the fall and we're launching four new iterations of prior releases, including the recent release of civilization seven VR for meta quest, III and <unk> as well as civilization seven for switch two.
Speaker Change: Our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our key offerings.
Speaker Change: Looking ahead, we currently expect to deliver 25 titles throughout fiscal 2027, and 2028, including 17 immersive core releases, including granted six and five sports simulation games.
Speaker Change: For mobile games and for new iterations of previously released titles.
Speaker Change: In closing, we look forward to delivering our groundbreaking titles, which we believe will enable us to achieve a period of meaningful long term growth and shareholder returns.
Lanny: Now I'll turn the call over to Lanny.
Lanny: Thanks, Carl and good afternoon, everyone. We delivered an outstanding finish to fiscal 2025 with broad based strength across our company.
Lanny: Throughout the year, we positioned our business for sustainable long term growth by releasing new hit title and experiences across our label advancing the development of many keeps releases we plan to launch in the coming quarters successfully acquiring gearbox and continuing to implement our previously announced cost reduction program.
Lanny: Through these actions we are setting our business up for a strong multiyear period of growth and enhanced profitability and I'd like to thank our team for their passion and dedication.
Lanny: Turning to our results, we delivered fourth quarter net bookings of 158 billion.
Lanny: Which was the top of our guidance range of $1 48 billion $158 billion.
Lanny: This reflected better than expected performance from MBA UK 25.
Lanny: Zynga level seen last our hyper casual mobile portfolio and that factory.
Lanny: Dead redemption theories and Grand theft auto online.
Lanny: The current consumer spending growth with phenomenon, increasing 14% over last year and accounted for 77% of net bookings and the ATK grow over 40% Atlanta thought of online and mobile both increased mid single digits.
Lanny: All of these businesses greatly exceeded our forecast.
Lanny: During the quarter, we launched Sid Meier's civilization, seven PGA tour, $2 25, and WWE today 25 <unk>.
Lanny: GAAP net revenue increased 13% to 158 billion.
Lanny: Cost of revenue declined 16% to $779 million.
Lanny: Primarily due to lower impairment of acquired intangibles in the current year as well as timing of development credits.
Lanny: Operating expenses increased by 44% to $4 6 billion.
Lanny: An impairment expense of $3 6 billion.
Lanny: Related to goodwill and acquired intangible assets on a management basis operating expenses rose 3% year over year.
Lanny: It's above our guidance due to higher development costs for titles that technologically feasible.
Lanny: For fiscal 2025, we achieved net bookings of 565 billion.
Lanny: This was also the top of our guidance range of 555% to 565 billion.
Lanny: The current consumer spending exceeded our outlook around 7% and accounted for 80% of net bookings.
Lanny: ATK grew high teens, although increased mid single digits and Grand theft Auto online declined modestly.
Lanny: Operating cash flow was an outflow of $45 million compared to our forecast of an outflow of $200 million.
Lanny: Due to timing of tax payments and lower development costs.
Lanny: We spent approximately $169 million in capital expenditure, which was above our forecast of $140 million, primarily due to higher gains technology expenses GAAP.
Lanny: GAAP net revenue rose, 5% to $5 60 billion cost of revenue decreased 17% to $2 6 billion.
Lanny: Generally due to lower impairment of acquired intangibles in the current year as well as timing of development credits.
Lanny: Operating expenses increased 28% to $7 5 billion due.
Lanny: Due to the impairment charges that I mentioned previously that we recorded during our fourth quarter.
Lanny: On a management basis operating expenses rose, 11% year over year.
Lanny: Our guidance due to higher development costs for titles not technologically feasible.
Lanny: Today, we are providing our initial outlook for fiscal 2026, we project net bookings to range from $5 9 billion to $6 billion.
Lanny: This represents 5% growth over fiscal 2025 at the midpoint.
Lanny: Largest contributors to net bookings are expected to be NBA <unk> Grand theft Auto series <unk> glass borderlands for NASDAQ <unk> empires, <unk> puzzles, whereas its brands Red dead redemption series and Zynga poker.
Lanny: We expect recurrent consumer spending to be flat compared to fiscal 2025 and to represent 76% of net bookings.
Lanny: Our current consumer spending forecast assumes high single digit growth for NBA, <unk> and declined to mobile and Grand theft Auto online.
Lanny: We expect the net bookings breakdown from our labels to be roughly 45, presenting at 39% to Kay and 16% Rockstar games.
Lanny: We expect the operating cash flow to be approximately $130 million and we plan to deploy approximately $140 million of capital expenditures for game technology and office build outs.
Lanny: We expect GAAP net revenue to range from $5 95 to $6 5 billion.
Lanny: Cost of revenue to range from two five to $2 55 billion.
Lanny: Our total operating expenses are expected to range from $3 78 to $3 8 billion.
Lanny: On a management basis, we expect operating expense growth of approximately 3% year over year, which is largely due to higher marketing expenses now.
Lanny: Now moving on to our guidance for the fiscal first quarter, We project net bookings to range from one five to $1 3 billion compared to $1 2 billion in the first quarter last year.
Lanny: The largest contributor to net bookings are expected to be NBA <unk> Grand theft Auto series, Tim Black color blocks and that factory empires, <unk> puzzles versus brands Red dead redemption theory, and Zynga poker with rich African consumer spending to increase by approximately 7%, which assumes some double digit growth.
Lanny: NBA <unk> flat results from mobile and a modest decline for Grand theft Auto online.
Lanny: Our release slate for the quarter includes two new offerings of civilization seven including its VR launch in April and its upcoming launch on switch to in June.
Lanny: GAAP net revenue to range from $1 35 to $1 4 billion.
Lanny: And cost of revenue to range from $544 million to $562 million.
Lanny: Operating expenses are planned to range from $908 million to $980 million on a management basis operating expenses are expected to grow by approximately 2% year over year, primarily driven by higher development costs.
Lanny: In closing our core businesses are showing strength into fiscal 2026, and our long term outlook continues to be positive fiscal 2027 represents a massive inflection point in our business and our teams have worked long and hard for one that we believe will significantly enhance our multiyear financial profile we have.
Confident that this will be an exciting period from our many stakeholders from our colleagues to our players industry partners and shareholders and we appreciate all your support along the way. Thank you I'll now turn the call back to SaaS.
Thanks, Lenny and Karl on behalf of our entire management team I'd like to thank our colleagues for delivering another outstanding year for building, an incredibly sound foundation creatively financially and culturally as we enter this new inflection points for <unk> growth in continued success for our shareholders I want to express our appreciation.
Lanny: <unk> for your continued support.
Lanny: We will now take your questions operator.
Lanny: Thank you.
Speaker Change: And we will now begin the question and answer session.
Speaker Change: Mobile Dan and 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: If you would like to withdraw your question simply press Star one a second time.
Speaker Change: If you are called upon to ask your question and are you 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, it is star one if you would like to join the queue.
Speaker Change: And our first question comes from the line of Doug <unk> with TD Cowen Your line is open.
Eric Handler: We did lose connection with Mr. <unk>, we will move to our next question Eric Handler with Roth Capital. Your line is open.
Eric Handler: Good afternoon, thanks for the question.
Eric Handler: First I thought it was very interesting with all the industry discussion that's been going on about maybe prices for games going up to $80.
Eric Handler: You chose a different tact with.
Eric Handler: With Mafia and doing a $50 $60 price SKU.
Eric Handler: Can you maybe talk about what went into that decision and do you see future.
Eric Handler: Game releases sort of having a variable pricing along a wide range of scale.
Eric Handler: Yeah.
Eric Handler: So.
Speaker Change: Thanks, Eric we've always had variable pricing and the rubric.
Speaker Change: We employ is one of delivering more value to consumers and what we charge. That's our job we aim to make the best entertainment on Earth and bring that all consumers wherever they are.
Speaker Change: And we need to deliver value in so doing so that's really how we look at it in the case of Mafia the whole country.
Speaker Change: It is extraordinary it looks amazing.
Speaker Change: And we want to get it into as many hands as we possibly can and I think our view is that if you create a huge hit and everyone wants it and everyone buys at the revenue is going to take care of itself.
Speaker Change: Okay, and then as a follow up I guess for leaning maybe a level of accounting.
Speaker Change: The $3 5 billion goodwill impairment.
Speaker Change: I assume it was related to zynga in some form.
Speaker Change: <unk> made the accounting issues here, but is there anything structurally changing with.
Speaker Change: With Zynga.
Eric Handler: Eric we haven't discussed which of our reporting units on the impairment was from.
Eric Handler: But it was a partial impairment of one of our units and its result of updating long term expectations and thats something that we are required to test.
Eric Handler: Annually or whenever the indicators of impairment arise and this is something that we're going to be that we would do all the time based on how our forecasts are updated.
Speaker Change: Okay. Thanks.
Speaker Change: And our next question comes from the line of Douglas <unk> with TD Cowen Your line is open.
Speaker Change: Hey, sorry about that I fat fingered my first attempt.
Speaker Change: Just looking at it from a high level.
Speaker Change: Last period of peak performance for your business you are able to reach.
Speaker Change: Low to mid 20% operating margins in the wake of the success of Red dead, two and into the pandemic just wondering if anything about the business or the industry has changed structurally.
Speaker Change: When your current pipeline reaches fruition, you would not be able to reach those margin levels again. Thank you.
Speaker Change: There is no reason why we wouldn't be able to reach those margins and that is how we've been building the business and working on the cost reduction program and being more efficient working to move to those margins as we built our scale as we've mentioned the gross margins are definitely hampered by the increase.
Speaker Change: In the.
Speaker Change: Development cost for the title, but we've been doing a lot of.
Speaker Change: Shockstall things within the business to offset those costs and you'll see that in our expenses being reduced the CRM seen those margins coming down.
Speaker Change: Great. Thank you.
Speaker Change: And our next question comes from the line of Colin Sebastian with Baird. Your line is open.
Colin Sebastian: Thanks, I appreciate the questions have a couple.
Colin Sebastian: First the mobile segment performance looks looks impressive relative to the broader mobile gaming space. So hoping you could maybe drill down on that a bit in terms of what's working in this environment that could be customer acquisition retention or or game mechanics, and then maybe some of the background of why this segment wouldn't necessarily be positioned to grow again.
Colin Sebastian: This fiscal year. Thank you.
Colin Sebastian: <unk>.
Colin Sebastian: Youre right the mobile gaming segments challenging one broadly, creating new mobile hips is incredibly difficult.
Colin Sebastian: I think right now Zynga is the only company in the space that is regularly creating new native mobile hits. Most recently with match factory in color block Jam, both of which are profitable already.
Colin Sebastian: So we feel really good about what's going on how is that happening it's happening because we have incredibly talented creative people and incredibly talented publishing folks.
Colin Sebastian: And very specifically the team at peak and the team Rowlock are doing a great job along with many other studios a singer.
Colin Sebastian: And given the outstanding results that we saw from a lot of our top cutoff in fiscal 2025. Some of those are mature titles that have been out for many years. We expect that there may be some moderation of trends for those titles in fiscal 2026, and that's what's affecting that business into next year.
Colin Sebastian: Okay. Thank you.
Colin Sebastian: Yeah.
Speaker Change: And our next question comes from the line of Chris Shaw with UBS. Your line is open.
Speaker Change: Okay, Great. Thank you you mentioned, a new baseline for the business on net bookings once GTA six launches in fiscal 'twenty seven in the past I know you pointed to $8 billion of annual bookings and over $1 billion of cash generation. Once the pipeline scaled appreciate there's been a number of shifts since that guidance was given but is it fair that your long term assumptions for the business haven't changed.
Speaker Change: As you think about the sustainability of performance post Ta <unk> console release can you help us think through some of the key drivers in your mind. Thank you.
Speaker Change: I'll take a shot at it however, we do issue annual guidance for a reason the farther away we are from.
Speaker Change: The results the harder it is to predict because things can change.
Speaker Change: Whether that's internal or external however in terms of our both our hope center expectations.
Speaker Change: We're more optimistic than we were before and that optimism is reflected in our expectations.
Speaker Change: For net bookings at our expectations for free cash flow.
Speaker Change: We just in the normal course would not typically guide to those numbers. Thus far in advance we have said that we expect sequential growth for both fiscal 2006 and 27 in the guidance. We just gave of course.
Speaker Change: In the absence of the release of Grand Theft Auto still reflects meaning.
Speaker Change: Meaningful year over year top line growth and reflects a new record for net bookings for this company.
Speaker Change: Got it thank you and if I could just fit one more in going back to the first GTA six trailer I believe you saw a meaningful uplift in engagement and monetization for GTA online with it I. Appreciate its early but are you seeing similar uplift right now from the second trailer and could that potentially drive some upside versus your expectations for declines at GTA online.
Speaker Change: In fiscal 'twenty six thank you.
Speaker Change: Well remember in the fourth quarter actually we saw better news than expected for GTA online Red dead online and GTA plus.
Speaker Change: In aggregate, the GTA online and Red dead online and worked down a bit in the full fiscal year.
Speaker Change: In terms of your specific question about the trailer too early to say, whether there was an immediate result, frankly, we're not super focused on one week or 10 day results. However, just as a reminder, most everyone knows us.
Speaker Change: The trailer did set a record for views in its first 24 hours $475 million.
So essentially once again Rockstar games broke the internet and we feel really good about that and what that means for the upcoming releases DTA socs.
Speaker Change: Great. Thank you very much.
Speaker Change: And our next question comes from the line of Andrew Mok with Raymond James Your line is open.
Andrew Mok: Hi, Thanks for taking my questions, maybe first on the Nintendo switch, so pretty exciting news with borderlands for coming.
Andrew Mok: To the platform as well as <unk> seven so I guess as you've seen the reception and seen the technical specifications of that platform over the last little bit. How do you think what are the boundaries of the switch as a partner a distribution partner for you is it something where the entire.
Andrew Mok: Take two lineup is eligible or is it really just kind of an opportunistic thing for certain titles and then I have a follow up.
Andrew Mok: We're launching four titles Nintendo switch to and Thats I think a bigger array of releases than we've ever offered before with the new Nintendo platform.
Andrew Mok: Historically being a third party and Nintendo business has been a bit challenging I think nintendo's been very forthcoming in addressing that and we are stepping up to because we have great optimism.
Andrew Mok: For the platform.
Andrew Mok: In terms of what we would bring to any platform. We address it on a case by case basis, we obviously want to be where the consumers are.
Andrew Mok: Yes.
Andrew Mok: But we would we would not necessarily bring every title coverage platform. They are also great catalog opportunities as well.
Speaker Change: Understood. Thank you and then maybe one on the mobile side. So I was zynga as you mentioned on a little bit of a role here.
Speaker Change: It seemed like match factory was one of the was one of the titles that kind of seemed like an inflection point. So I guess the question I would have is how much.
Speaker Change: The match factory playbook is instructive to future Zynga releases in current successes like color block Jam and again, how much of that is kind of idiosyncratic to the title being launched thank you.
Speaker Change: I think we learn from every release, we learn on the Dev side, we learn on the marketing side.
Speaker Change: Remember colored block Jam came from a different studio and match factory manufacturer came from deep color block Jam from Raleigh and <unk>.
Speaker Change: Colored blocks of them was really a reflection of the evolution of strategy at Rollins. However, all of our studios worked together that's the whole point of being one company.
Speaker Change: They have great creative independents, they do coordinate to share best practices.
Speaker Change: Zynga itself, obviously shares best practices with take two other label to take to an example of that is our consumer database, which has many hundreds of millions of consumer records.
Speaker Change: We are able to address legally.
Speaker Change: And we can make the consumer database available in certain instances cross label. When it makes sense, we think that gives us an enormous competitive advantage another competitive actions and launching Washington mobile title of courses have mobile customers. We can promote inside our ecosystem on a much more efficient basis and someone could outside of nikos.
Speaker Change: A system like ours and there are very few companies that are close to as large as we are in the mobile space.
Speaker Change: None of that matters, if you don't make something consumers want and that's the trick was hard as hard on mobile is hard and console, it's hard in the entertainment business broadly.
Speaker Change: But that's our job remember our goal is to be the most creative the most innovative the most efficient company in the entertainment industry. All we care about around here is making big hits.
Speaker Change: And our next question comes from the line of Matthew cost with Morgan Stanley. Your line is open.
Speaker Change: Hi, everybody. Thanks for taking the questions I guess, just starting out on the NBA to U K I mean, another really strong quarter for that franchise and a second in a row I guess is there anything that you would call out that's driving that continued strength and even the acceleration versus what you saw last quarter and then separately on the mobile side when.
Speaker Change: Do you think about the impact to be seen.
Speaker Change: Court rulings that had on the direct to consumer opportunity.
Speaker Change: Will that allow you to execute the shifts towards direct payments faster does it raise the ceiling long term I mean, how should we think about the financial impact of that thank you.
Speaker Change: So on the NBA side look I don't think Theres anything specific thats been done in this quarter that would call out the performance of the MBA, which has been absolutely a fantastic I think it's more of a reflection on the ongoing strategy and the ongoing strength of this particular iteration on the team at <unk> and visual concepts put a significant effort every year they put a significant.
Speaker Change: Ever into creating new innovations in the game.
Speaker Change: Which is very tough to do when youre on a 12 month cycle and particularly this year.
Folks at GKN visual concepts really listen to the consumer and focus on that core consumer bringing back a lot of features that consumers are asking for or from the past for example in the auction house in the my team excuse me and my team mode working on different.
Speaker Change: The new prevailing mechanics et cetera, all these things add up to make the game, just better and better and our focus is always on engagement and Thats, where the growth has really been is that year over year.
Speaker Change: This game has engagement has gone up the engagement. This in this particular quarter assistant fantastic.
Speaker Change: And that's without regard to the increase of 7%.
Speaker Change: Year over year, so that that relentless focus on quality is really what's driving that success.
Speaker Change: I said, specifically in the quarter my team is having a fantastic quarter, so that helps a lot as well.
Speaker Change: With regard to direct to consumer we entered the direct to consumer business and mobile immediately upon closing the acquisition of Zynga and it's become a significant and indeed material part of our business pretty much in just the way that we outlined.
Speaker Change: In terms of the topline and Bottomline effects I've been saying for years that I expected the cost of third party distribution to decline, whilst we've been saying for years, but I believe the whole business would open up more than it has been I do think the recent court rulings reflects movement in that direction. It is early however, these are all positive signs for us.
Speaker Change: And our next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thanks, so much for taking the questions maybe two parter if I could.
Eric Sheridan: The partnership with Netflix will continue to be some of the key learnings from scaling games via Netflix as a distribution partner and do you think there's any scale for Netflix to become an increased partner of transforming some of your gaming IP into more mainstream media IP for their video formats over the medium.
Eric Sheridan: Two long term thanks, so much.
So our partners our partner partnership with Netflix has been a fantastic obviously, the most attractive part of that is that number one they seem very serious about gaming and have shown that over and over at this point, which is which is great news for us.
Eric Sheridan: There are a lot of consumers.
Eric Sheridan: Netflix gets together and where the marketing power that they have with incredible content, which we have been able to offer and you know thats going to be a great recipe for success. So we're very sanguine on that relationship.
Eric Sheridan: We've only done a few titles at this point.
Eric Sheridan: And but.
Eric Sheridan: Obviously, we think that there is an opportunity again on a game by game basis for us to continue to bring titles to the Netflix I'm not announcing anything at this point, but we do think that they're a terrific partner.
In terms of other media, that's an area, where we have done some deals in the past and we are doing bioshock with Netflix.
Eric Sheridan: So we are looking at things of that opportunity, but I wouldn't say, that's driving the partnership that sort of a nice to have not necessarily a must have for the partnership but when you can bring that kind of synergy value to the table. Obviously, that's always a strong consideration and the nice thing for us to do.
Eric Sheridan: Great. Thank you.
Speaker Change: And our next question comes from the line of JMP <unk> with Jefferies. Your line is open.
Speaker Change: Great. Thanks, guys for the questions just looking at your guidance for fiscal 'twenty. Six can you talk through some of the puts and takes just on operating expenses for the year is it fair to say that we should just expect.
Speaker Change: Mobile marketing expenses to remain elevated and then just anything on GTA related marketing costs for the second half.
Speaker Change: We expect operating expense by approximately 3% year over year and that is largely due to higher marketing expenses and that is for our current year marketing.
Speaker Change: Our current year titles and for future title.
Speaker Change: But we do expect to deliver operating expense leverage as our net bookings growth of 6% as planned to outpace your operating expense expansion.
Speaker Change: Great and then maybe just a quick one on your bookings guidance for fiscal 'twenty six we did notice it has a more narrow range than usual. So just interested to hear the reasoning behind that and what gives you conviction.
Speaker Change: More narrow range. Thank.
Speaker Change: Thank you.
Speaker Change: It's not add more narrower range than usual.
Speaker Change: Usually for the full year, we gave a specific type of range and then on a quarter by quarter basis, there could be different.
Speaker Change: Not different than it usually is.
Speaker Change: Thanks.
Speaker Change: And as a reminder, it is star one if you would like to join the queue and ask a question. Our next question comes from the line of Michael Hickey with Benchmark Company. Your line is open.
Speaker Change: These trials any call on the call congrats guys on a quarter and strong year, just two questions from US first on GTA six can you talk about sort of the bill.
Speaker Change: Record exciting that Youre seeing for the game. What you think is driving demand to record levels for this franchise always is one of the biggest franchises in the world.
Speaker Change: How are you measuring this demand just besides.
Speaker Change: Trailer views.
Speaker Change: The first question and then the second question is a follow up on the software pricing.
Speaker Change: Microsoft Nintendo both moving to AED do you guys anticipate adopting this price point across any of your upcoming games. What is assumed in your guidance. Thanks guys.
Speaker Change: Hey, Mike Thanks for your questions.
Speaker Change: Look why do I think GTA six was so widely anticipated first of all I can't tell you how much I appreciate the tenor of the question we all do.
Speaker Change: Grand Theft auto five has been the standard bearer not just for our company, but for the industry since it was launched.
It's not only survived through three console generations thrived in here. It is this many years later and still does.
Speaker Change: Number one titles.
Speaker Change: This hold in 215 million units and continues to sell and Grand theft Auto online just had a phenomenal quarter in GTA plus is doing great. So consumers are actively engaged with all things Greg thought Oh. This is an ongoing business and yet in terms of our new at array.
Speaker Change: <unk> it's.
Speaker Change: It's been some time, so theres enormous anticipation on the one kind of on the other hand, it's still fresh it's still in market. So.
Speaker Change: Everyone anticipates, the next James Bond movie, but Theres nothing in between.
Speaker Change: When you have in your head as what you saw the last time around in this case, everyone anticipates. The next iteration of Grand theft Auto and lots of people are currently engaged today with Grand theft auto to that so I think that's that's one sign obviously 475 million trailer views in 24 hours tells you something.
Speaker Change: It's not just Wow that was great trailer. It tells you something.
Speaker Change: More than that and we of course do market research trends here on the market research that we've done this is pretty cynosure, but look we are not in the business of claiming success until it happens all we're focused on is making the best possible Entertainment here. That's all the rock stars focusing on that's our job the rest will take care of itself.
Speaker Change: In terms of pricing, we obviously don't talk about specific pricing here pricing is set at the label level in the context of the individual release, we have had variable pricing here for very long time, and as I've said earlier in the call. We want to focus on value, we wanted to deliver way way way more value to a consumer and whatever that consumer.
Speaker Change: That's our job we have to do that job.
Speaker Change: And Thats, our focus not on the topline pressures.
Speaker Change: Yes. Thank you good luck guys.
And our next question comes from the line of Brian Pitz with BMO capital markets. Your line is open.
Speaker Change: Yes. Thanks for the question on console price increases through the gaming ecosystem any impact on your guide for this year and if so maybe help us size that impact and then looking at the nearly $2 billion of software development costs and the balance sheet for capitalize on games of development any color you could provide us what percent is related to GTA.
Speaker Change: Six versus other titles. Thanks.
Speaker Change: Look our guide is for the next.
Speaker Change: 10 months essentially.
Speaker Change: Yes.
Speaker Change: Part of the fiscal year that hasn't elapsed yet.
Speaker Change: It's very difficult to predict where tariffs will land.
Speaker Change: Given how things have bumped around so far.
Feel reasonably confident.
Speaker Change: Our dog wouldn't be meaningfully affected.
Speaker Change: And less tariffs ran off in a very different direction than we currently expect.
Speaker Change: In any case, there is already a very substantial installed base for all of our target platforms, except Nintendo switch to it just yet.
Speaker Change: And.
Speaker Change: So I think enough insight that we can be meaningfully affected by any changes.
Speaker Change: And for the balance sheet, the $2 billion of development costs.
Speaker Change: It really is supporting our extremely robust release schedule that we talked about the next two years and beyond discussed on a title by title basis.
Speaker Change: Thanks, everyone.
Speaker Change: And our next question comes from Martin Yang with Oppenheimer. Your line is open.
Martin Yang: Alright, Thank you for taking my questions.
Martin Yang: My one question is about the internal royalty volumes in the talks breakdown can you maybe talk about the.
Martin Yang: The year over year and quarter over quarter increase what drove that is that related to any milestone achieved rockstar. Thank you.
Martin Yang: I'm sorry could you repeat the question we had trouble understanding you.
Martin Yang: Oh, sorry.
Martin Yang: Noisy background.
Speaker Change: Can you talk about the internal royalties in the Cogs breakdown.
Speaker Change: A good increase on a year over year and quarter on quarter basis, what drove that increase I think it's around our royalties this quarter.
And in term of royalties and the breakdown is driven by the product mix.
Speaker Change: It changes from quarter to quarter and also by year to year based on the mix of the business on the top line.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: And ladies and gentlemen that concludes our question and answer session. I will now turn the conference back over to Mr. Strauss Zelnick for closing remarks.
Speaker Change: Okay.
Strauss Zelnick: Well first as always thank you for joining US today. Obviously this was a good news, meaning and we're all super excited.
Strauss Zelnick: All of the results that we have the pleasure of announcing here are driven by the many thousands of people who commit their professional lives to take two and all of our affiliates.
Strauss Zelnick: <unk> are incredibly hard work and creative labels.
Strauss Zelnick: I want to express enormous appreciation for the work of our colleagues that work is what delivers the results. We just get to talk about them.
Strauss Zelnick: I also want to thank our shareholders for their continued support.
Strauss Zelnick: This is a great time for our company and a really exciting and challenging time in our industry and in the entertainment industry broadly.
Strauss Zelnick: We're good at addressing challenges here, we'd like to address challenges.
Strauss Zelnick: We think that the release schedule that we have coming to market is second to none certainly second to none in our history.
Strauss Zelnick: And it's our job to deliver we don't ever take credit for things that don't happen.
Strauss Zelnick: A lot of what we talked about today is in the future. We know we have to buckle down every day.
Strauss Zelnick: And deliver the results arrogance is the enemy of continued success so with I.
Strauss Zelnick: I hope great humility.
Strauss Zelnick: Aim to deliver and over deliver we thank you for listening today and we thank you for your support.
And ladies and gentlemen that concludes today's conference call and we thank you for your participation you may now disconnect.
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