TTWO - Earnings call transcript Q1 2019 | Take-Two Interactive Software, Inc.

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Operator

Greetings, and welcome to the Take-Two Interactive Software First Quarter Fiscal Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Hank Diamond, Senior Vice President, Investor Relations and Corporate Communications.

Henry A. Diamond

afternoon. Good you the conference year first June XXXX. thank its to XXXX joining XX, for results quarter for and call Take-Two's discuss ended Welcome of fiscal and led and President; Goldstein, our Zelnick, Today's Slatoff, Officer. Lainie by Financial will Officer; Karl be Take-Two's call Chairman Chief Chief Executive our Strauss

your be answer the session questions will We to following Q&A during available our remarks. prepared

federal that considered I'd that statements on statements made this well available under call currently everyone forward-looking forward-looking like are made to as information facts remind are laws. to begin, historical are we the Before our not These beliefs assumptions securities statements management us. and during based by of as

risks forward-looking no Form forward-looking the are XX-K variety update these are the we unless quarterly a Form recent obligation factors results Risk report be of section all statements. on on stated, factors. have all including otherwise These may the described including to and And year-over-year. annual I'd with today based like discussing from that filings statements report to summarized will entitled in our important on operating numbers note We most in these company's GAAP. Factors. are SEC, also Actual vary comparisons the XX-Q, significantly

evaluate Additional our adjust to our details outlook press operating financial that regarding in management our in performance. uses internally GAAP to actual are release, order items contained our results and results our including the financial

deck visually financial outlook. addition, we to and results In presents our a posted website that have our slide

adoption operational our ways. but www.takeXgames.com. Note Prior net of quarter not fiscal restated. may materially This from filings SEC website number in be results of GAAP at metric, release bookings does XXX. first and a our not press Our have affect our ASC periods impact obtained does been results with reflect our the that our

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Strauss H. Zelnick

performance XXXX to that Thanks, better-than-expected consumer pleased and solid results off Theft Grand first with demand is NBA well start, joining you driven today. was operating that thank afternoon delivering Good XKXX, as for us a outlook. Theft exceeded quarter I'm business Hank. spending fiscal our to report ongoing strong as on and Online Auto for This recurrent Auto V. Grand by our

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up total During from the first quarter, XX% year. recurrent last for of consumer bookings, spending accounted XX% net

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financially, phenomenal capitalize celebrate many on we century As industry's quarter of our strategically, opportunities. and a Take-Two well-positioned, creatively, exceedingly is to entertainment,

success. Our ingredient ability is unmatched ongoing to play our the the connected development to highest-quality deliver entertainment team's through key and engagement experiences ongoing drive

As a call result, is and to deliver term. returns Karl. over Take-Two now shareholders growth turn poised for the our long over to I'll the

Karl Slatoff

XK featuring cover. NBA Today, Greatness, feature on The will our standout To will favorite words iconic the will LeBron cover September including NBA I'll a an XK gamer All-Star, four-time anniversary, XKXX cover. feature Giannis and on Equality. franchise's James the focus Akron's trademark release son Champion, NBA This Edition, and authenticity. artistic chosen Strive by NBA XXth Anniversary Strauss. and will NBA Antetokounmpo, XK Edition Standard development which special XX, launch Milwaukee composition pipeline. LeBron, will mark the on Thanks, XXth Bucks personally style NBA for also and alongside series' two-time deliver NBA the three-time avid MVP of Driven, XKXX,

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world both fans its traditional with engage and continues NBA throughout most ways popular with audience and to our Our numerous emerging providing across XK basketball the successful industry's to brand expand platforms, series.

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Lainie Goldstein

regarding then our our Thanks, in first contained discuss fiscal financial Karl. results details press actual Good review quarter afternoon, year release. our that the additional note and and outlook outlook everyone. Please financial results, I'll XXXX. for second our Today, quarter are

of bookings business which fiscal range XXXX. million, of our primarily to mentioned, Total due operating were in results the Strauss As $XXX XX% Theft V XKXX. for on outlook consumer to Grand spending Auto exceeded our million well better-than-expected $XXX $XXX year. Digitally-delivered net net delivered accounting of bookings quarter XX% outperformance first the the $XXX million, Grand of Online Auto million, as NBA total, were from Theft last as recurrent and up

of by decreased by quarter to and to Turning income statement. Operating net GAAP increased from goods XX% to million. $XXX details first some million our $XXX X% revenue cost sold decreased expenses $X.XX $XXX million prior-year personnel to higher GAAP the due was million $XX share, primarily per expense. And up X% income from to period. in share net for million or $X.XX per $XX

result of in approximately of able an we million with short-term back period were quarter, billion X.X our $XX at $X.X market a stock conditions the ended of shares buy favorable investments. the first during and cash price As and average we to

the fiscal of Now, I will Starting with highlights review XXXX the outlook. second our financial fiscal quarter.

million. bookings expect $XXX We net million range $XXX to to from

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a deploy our for the increase capital restricted reflects We the $XX during result, to in $XX first cash the outlook As expenditures. million million change approximately quarter. plan from

$X.X and to $X.XX goods the billion At $XXX $XXX expect midpoint, $XXX range range $X.X marketing, to $X.XX expenses. GAAP expected and driven of from by this share. $X.XX to prior income increase from we GAAP compensation personnel, per million higher a stock-based or IT year, range million XX% represents And billion. expect over the expenses to revenue are billion to sold range million. billion million costs We to net Total from to $XXX to from operating $X.XX net

be years record expect our In and solid fiscal one rate to For best of to closing, be ever with is start is expected XXXX off management a XX%. reporting results. tax purposes, operating to poised our we

Over financial industry turn term, expansion our the to firm assets, leading for strong shareholders. to now long call deliver to and growth excellence foundation and position commitment the creative margin Strauss. our I'll company our you. operational Thank back

Strauss H. Zelnick

I'd Thanks, to entire questions. support. express delivering now colleagues your Karl for management start behalf to team, take continued our Lainie. of the shareholders, thank appreciation Operator? for our want a to our And On our I and your like We'll to successful year.

Operator

we time, this a At question-and-answer session. be will conducting

Justin your question first Lynch. comes with question. from Our of Please Post Merrill proceed

Justin Post

question. for Great. taking Thank my you

up said Theft can about you Can spend Grand you revisit recurrent monetize in that you with engagement's think and this that you to what's Could think how from slightly you of quarter Lainie, and kind happy XQ. After Thank me guided the franchise? fiscal Hours, to what just down remind to up wanted that. in then, Just the Auto: you quarter? you're talk you. drive up second going And I guided to

Strauss H. Zelnick

Justin. Thanks,

and terms a captivating In Hours, and great creating time. is After engaging it's period of looking really everything That's about. consumers and of course, focus, Monetization of follow. entertainment to strong we're that tends very our on over long concerned

updates, strong. the very have been results monetization With typically the significant

Lainie Goldstein

So to QX consumer GTA due in for for expect growth the lower and Point be Social and Online that's we to NBA recurrent consumer higher spending. that's do spending, offset QX, by recurrent it in XK, the

Justin Post

Great. Thank you.

Operator

of your from proceed comes Brian question. Please question next Our with Jefferies. Fitzgerald

Brian P. Fitzgerald

it's do Strauss, you're of you've the Any in early year last you And around kind seasons October. early were Anniversary years, How competitive programs, around Thanks. seeing Tip-Off? of in wondering of what Got maybe around with seen what dynamics a from then, the has with access market questions. access. most think comments when about previous think Editions, kind this and holiday? about from holiday Deluxe things week changed you like it Thanks. of when big in every games coming and years couple one you

Strauss H. Zelnick

we season take to competition time for and for the of we Yeah. the back for never expectations just don't then granted years, release. basically only early. worried well. Brian. create at anything phenomenal go Thanks take high entertainment always products effectively, our the too as just We inundated, it launch seriously. many explain questions, October don't that competition. We're about and have have best company enormously we about people really the was I you do with what X. frontline to market and claim and well Redemption happened. success your And We We're when Dead released note, performed excited in Red holiday when season holiday would this We

it comes to think all down So, quality. I

something access of have we great In do other kind want. in consumers programs. We as do of of early and all them benefits as long terms the believe have programs, that those you

So, for it's us. worked well

Brian P. Fitzgerald

Strauss. Thanks,

Operator

question. next Our Eric Handler of Partners. your comes MKM question with Please from proceed

Eric O. Handler

Yes. and question. thanks for Good the afternoon

you're X% you want every that wondering Just any X%, seeing a much metrics you whatever or does of us or give units about some wonder if if digital I'm revenue parallel into help incremental around you – it, number type whatever curious sold NBA. to in drive? that? with I year, could how extra put

Strauss H. Zelnick

Yeah.

incremental you're units obviously, So, right, spending. incremental have more success, and have as engagement. Therefore, recurrent sell consumer we more have typically we we also

And are success. linear describe of breeds aware but don't success relationship, it. So, we actually the we

Eric O. Handler

the that assume revenue that game, faster the growth to outpacing game is and game the safe or on from side? it is digital revenue the you're of getting growth in units the part the So, itself, itself? growth outpacing digital seeing digital is the percentage of core recurrent But you're growth

Strauss H. Zelnick

are or you digitally full game about talking units or sure understand, talking recurrent I distributed you you I make about percentage want talking to that about are consumer of spending, the are are both?

Eric O. Handler

spending I'm to the talking relative the game? about consumer (XX:XX) core recurring

Strauss H. Zelnick

Yeah.

with better and recurrent job continues a ongoing the both do we spending for opportunities consumer game with rise. As engagement, to

Lainie Goldstein

QX, be spending in and on for up NBA full to the to recurrent consumer grow year. it expect for we And

Eric O. Handler

expecting to I'm again? sorry, say game you Lainie, could that You're grow...? the

Lainie Goldstein

QX XK NBA growth full expecting the and consumer year. in in for recurrent for We're spending

Eric O. Handler

question. comment of Are the Okay. end you that? buying since on you back quick been one just then stocks to willing Great. quarter? any Have And the

Strauss H. Zelnick

after announcements those make of end quarter. We the the

Eric O. Handler

Thank you enough. Fair Okay. much. very

Operator

proceed question. Please Our Goldman next question your of comes from with Sachs. Merwin Chris

Christopher Merwin

Hey. Hello. me Can okay? you hear guys

Strauss H. Zelnick

fine. just Yes. We you hear

Christopher Merwin

Okay.

if that I it could, I couple used Dead be also giving for for Online GTA free of preorders, Dead and questions, are is showed digital can away Sorry looks GTA about you that up there just in revolver noticed Red cash a Online. like that. Yeah, that a Red in

So, like about like for the Dead mix XXXX so wondering look digital you maybe that's how of was that a far far preorders And a Red there seen the those could you. is that preorder along in then, you digital it on strategy titles. to and data? to Red Dead I of lines, strategy plan and what realized physical if I with you guided you've bit both, units. being GTA relative in Red could been Dead so between the and a that to impact if grow you to the But online Thank download you've those downloads consistent two has what overall higher digital down I SKU seems there cross-promote from XXXX? talk reported fiscal fiscal more guidance mix community? guess, of, comment the just

Strauss H. Zelnick

order, preorders reverse we Red Dead stacking regard your has and question, digital techniques employed potential between talk Theft And some Grand to X, cross-promotion versus thanks creative how In in up, cross-promotion. Redemption Yeah. really Auto are about with for Games Rockstar don't physical.

just an Theft of lot pretty of of fans Redemption, Social they're a Club And Grand Red but of awful not not Auto, lot fans, there and Dead just Rockstar members also Games. think exciting. has are I of avid

labels their And Rockstar their more But going the on always that certain on cross-promotion on. And that think there's will quite that I'm development and our prefer and detail you so, that coming promotion we as their I know, get marketing. in great do some months. it's

Christopher Merwin

Thank Okay. you.

Operator

next The Our Please of question question. with Benchmark proceed from your comes Mike Company. Hickey

Mike Hickey

my an on questions. Lainie, quarter. Hank. Karl, Strauss, for Hey, taking awesome Yeah. Congratulations Thanks

Just two.

you just maybe, what Is you appreciate franchise? clarification Is that entirely to for Karl, that it. clarify Rockstar? comment, to multi-player that that you Or I'd add new new online said the on hear Dead experience about if or an I Red correctly? that a did First, new X, can

Karl Slatoff

more been just there There all-new that. details coming any is to We really an Karl. Redemption. Mike. Yeah. Dead simply about than other Hi, nothing that other It's with said add Red online that. given There hasn't is experience

Mike Hickey

right. find excited it. Well, be to we'll Okay. they announce All when out

it which then head looks which it, within I'm XXX% count up X,XXX, professionals, guessing, call to R&D Grand Theft Rockstar, guessing V. count, is about when dramatically, X,XXX, pretty XXXX, thinking up about in from on question is plus maybe maybe like I'm XX%. you Second higher you're And from XXXX, you're released maybe head R&D Auto close

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be And games, So XXX% big V, four may count up GTA years. four within releases in since four now head Rockstar.

future it releases you you. guess, to in the annual an on So, of been where historically this seems from releasing basis? I the provide terms Rockstar content Rockstar, of increasing question is does pace what increase Thank in agreeable within they've resources

Strauss H. Zelnick

But the focused meaningfully group-wide, made grown count. And think fact count, don't your on our off. specificity We've Mike, out we really I development. are much percentages head on no head of Yeah. that give that's that secret we've

and add-on which changed. And really to In standalone a the ever I that development if with Theft since heard your resources title know, Rockstar captivate has Games engage post-release. downloadable I the of cadence, pioneered Grand had with is our And that, consumers content. into create a think Back to terms release correctly, do of we a moving and company IV title. question, back finding putting of title, on business lot involved it the years to Auto X, you next the ways when as to ago, marketplace, focused XX on spending has business – big

net a when Now quite don't with success, that opportunity. – of bookings last transformed our our it you that we're consumer recurrent business, of of we've content, labels, don't It's we it's have such to spending, both title, first the But in nearly our know, and in of have core opportunity. a quarter. course, revenues do as business half we and the from up bit our that's add-on had at we have year. we come that's call an it fortunate successful XX% the And

certain think and very, Theft what business creatively dealing almost sold-in a very and teams now we the our units. label, XK are reflected XXX or Redemption now other we million different I programs, in raise of our quite that in the V, which reflected Auto reflected also in like with has in Grand of So, continue whether Borderlands bar our in Dead do, basketball to the Red quality done development was X. for Civilization. I'm program, And that's it'll It's work franchise in be at our or

I be count think of would and expectation isn't that appetite made our wonderful is certainly, some our grow secret that We've have financial constraint intellectual the not more. property So, your we and, fact for no should an head growth.

constraint Our only franchises. based is are grow hiring by. that more our and on brightest, hard creative talent based people more way, even to the can are Those rapidly, the and and throughout allow if disciplined us existing even on franchises a launch on insistent will we property that in best come organization. new our albeit we develop to And intellectual

titles mobile It in come, because record-breaking saying free-to-play that's but changed, you products, diverse. indeed XK, or what's attractive spending, in know it the without avenues whether we're of massively Theft changed. just Auto optimistic. to title, the because a or kind, titles is that's don't And online lead or numerous title coming our cadence China, has that's way its that headquartered come, our So not a console now of And consumer business what's Grand long-winded to includes recurrent talking opportunity about has includes frontline mobile from we pretty Online. Barcelona, biggest to to

Mike Hickey

Good Strauss. luck, guys. Thanks,

Operator

Stochel Please Our question. Consumer of Raymond next from with question comes your Research. Edge proceed

Raymond L. Stochel

update, if like I'm but a correct recently? certainly more heading the are wrong, be me seem Thanks. afterhours changes promotional any bit LTV Great. so taking for question. Thanks but Auto talk Theft how think currency? within you game have Grand in-game also discounting my you Please driven. both you little into but the the for about And that had much you V, could does it about Can

Strauss H. Zelnick

typically that our of are, under we say, talking about of exceedingly But lot as that, I marketplace, expect, given need great We leverage physical price which beyond means we're policies. enjoyed more spend don't more into titles. and historically, have, be we promotional, the profile. a we inventory color. a that our we're we've leverage, put any not for we much When our don't about more our titles you'd deal regarding pricing are. give hit time successful The the to price time whole we judicious at would pressure pricing

Operator

Brandon Please with BTIG. from comes of Ross next question. proceed Our your question

Mark Kelley

guys. Hi, the on is Thanks Mark taking Kelley Brandon. for for questions. This

last Just Visual couple a there Can XK, interested NBA the anything speak the expectations? Thanks, quarter revenue throughout this strong just for bit in Concepts to new NBA recurrent you us. doing relative to disappointment season? On of keep And is quarter. a XKXX a after was strength players is to guys.

Karl Slatoff

This is Hi. Karl.

QX. about So, which just believe answer your question, I to first was

NBA keep some way XKXX affected QX could couple in the potential things, been was a on Lainie believe into to season. Concepts by continuing to had that of out has longer plans market said, games down there, forecasted consumer be other in it recurrent competition a engaged that meaningful And address certainly also be. market. people Visual and being the are we spending than exceeded expectations So our to as we less had for

share So, What helps our experience with specifics right now, I've on got was drive Visual engagement that economic ultimately, which but working rest second to no assured, to situation. Concepts improving question? and, is the you always

Lainie Goldstein

was That it.

Strauss H. Zelnick

it. covered You

Karl Slatoff

Okay.

Operator

Gee Our proceed question next from your Please question. Barclays. with of comes Ryan

Ryan Gee

for if I guys. Hi. afternoon, my taking two, may. questions; Good Thanks

one mobile based on There about IP. studios a game was on their popular developing from an new Western of this First, Tencent announcement mobile. morning

XK with so, mobile NBA X extends today announcement the PC I don't believe I this that And on over to mobile. of Online that anything launching or for there, heard fall

observations Tencent, about can around opportunity So, the there. maybe then, any mobile on NBA have on with franchise you that's for considered? over your have you talk And guys sports I follow-up. Or maybe a whether mobile just something

Strauss H. Zelnick

Yeah.

We anything. haven't announced

mobile XK the in rest interesting. title a a title the notion is China here. broadly, think world, for We, obviously, I or, of of NBA have always in the

think we anything, yet opportunity, it's announce. to interesting haven't an So, but I

Ryan Gee

at and longer maybe Division know end with then And guys then announced year, of Private term, I projects the time. enough. last that to those Fair Okay. thinking you several go along

add ideally to we that have on under sort lines, of able guys any you update one there's those umbrella? that along if And the those to or Thanks. curious I'm any timeline see and be studios out? come of realistic So, what's additional those any projects, if might two kind of plans then, of

Strauss H. Zelnick

marketplace more Kerbal four the them at four well. and Private we which a which which We in There Division. on any of we are the mentioned we've we And Right pending Division, Program, are doing titles do really have to number come we're Well in projects that Private is development. have Division now from is about what acquired Space excited in have pending. incredibly don't fiscal XXXX. Private but releases of

Operator

Andrew of Uerkwitz question with next & Our from your Please proceed Company. Oppenheimer question. comes

Andrew Uerkwitz

Hey. Thanks for taking guys. my question,

for like to follow-up, play the could of a to GTA think Thank quarterback learned it have then, the Monday of a share like you? of amount number as it you and it Red you. from Online, number Online? you the what or bit hours you second game? spending? And buy apply you could surprises playing, what a that Dead Is they're the Is little you continue dig people guys. they're you, continually seems who that If at morning and the surprises down Could success look

Strauss H. Zelnick

video I all imagination for that captured for just old to we'll our just title the the multiple D, success of the the question, and of the answer set long we is choice your attribute incredibly Rockstar of for robust. keeps the And content extraordinary an ought a continues online it game. on to engaged the what experience Games many the so unexpected basis. and so be. people is And ongoing drop you industry great into things then above. first fact answer's different a company, the to do the do to not standard The So, game but think yes, public allows which It

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Operator

gentlemen, and management to remarks. the for closing back session. of have question-and-answer our reached end Ladies I would we call turn the like to

Strauss H. Zelnick

for Well, joining first of us you all, thank today.

say and we're Secondly, (XX:XX) also hardest of for extraordinary here and of our our are to in shareholders to and have very whom best support. your that's business, many for are many in listening, all people all in think again grateful reflected of We're the work colleagues we of involved the grateful I'd York whom to our thanks they're continued like show around and the all working just we world, New colleagues their to these results.

So, joining you thank us today. for

Operator

This concludes today's teleconference.

disconnect you this for your lines may at participation. You your time. Thank

Take-Two Interactive Software (TTWO) 2 Aug 182019 Q1 Earnings call transcript