Take-Two Interactive Software(TTWO) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net bookings of $1.96 billion for Q2 2026, significantly exceeding expectations and marking the best second quarter in the company's history [5][17] - GAAP net revenue increased by 31% to $1.77 billion, while cost of revenue rose by 27% to $793 million [18] - Operating expenses increased by 5% to $1.1 billion, with management basis operating expenses rising by 13% year over year [18] - The company raised its net bookings outlook for fiscal 2026 to a range of $6.4 billion to $6.5 billion, reflecting a 14% growth over fiscal 2025 at the midpoint [19][20] Business Line Data and Key Metrics Changes - The mobile business outperformed expectations, with Toon Blast growing 26% year over year and Match Factory achieving record net bookings with a 20% increase [6][8] - NBA 2K26 sold over 5 million units, representing a double-digit increase over NBA 2K25, with recurrent consumer spending growth of 45% [10][17] - The Grand Theft Auto Online community remains highly engaged, with GTA Plus membership growing over 20% year over year [12][28] Market Data and Key Metrics Changes - The company expects recurrent consumer spending to grow approximately 11%, driven by NBA 2K and higher expectations for several mobile titles [20] - The net bookings breakdown is projected to be approximately 46% from Zynga, 39% from 2K, and 15% from Rockstar Games [20] Company Strategy and Development Direction - The company aims to expand core franchises and release groundbreaking new titles, with a strong pipeline including Grand Theft Auto VI and other major releases [16][24] - The focus on mobile direct-to-consumer business is expected to enhance net bookings and margins through new payment mechanisms [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, expecting to achieve record levels of net bookings in fiscal 2027 [13][24] - The company acknowledges modest industry tailwinds contributing to recurrent consumer spending growth [28][70] Other Important Information - The release date for Grand Theft Auto VI has been pushed to November 19, 2026, to ensure a high-quality product [6][16] - The company is focused on maintaining engagement in existing franchises while preparing for future releases [28][63] Q&A Session Summary Question: Common denominators in strong RCS performance - Management noted that the creative teams are delivering high-quality experiences, which correlates positively with performance [28] Question: Impact of being the last standalone publisher - Management expressed confidence in their position and emphasized the importance of maintaining creativity and performance [30][31] Question: Alternate payment mechanisms and margin uplift - Management confirmed that the direct-to-consumer initiative has been successful and is expected to improve margins [34][35] Question: Drivers behind the new GTA timeline - The decision to delay was based on the desire to deliver a polished experience that meets consumer expectations [38] Question: Incremental audiences for NBA - Management indicated that returning players and international engagement are key to driving recurring consumer spending [42] Question: Importance of launch period for Borderlands - Management acknowledged that the launch was softer than expected but remains optimistic about long-term sales [45] Question: Sustaining Zynga's outperformance - Management attributed Zynga's success to strong leadership and execution, with a focus on fewer titles and higher quality [48][49] Question: AI implementation in non-creative parts - Management clarified that AI is being used to improve efficiency but does not replace the need for creativity in game development [51][53] Question: Update on BioShock franchise - Management expressed excitement about the new leadership for the BioShock franchise and the positive trajectory of its development [57][58]