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 the second quarter, significantly exceeding expectations and marking the best second quarter in the company's history [7][18] - GAAP net revenue increased by 31% to $1.77 billion, while the cost of revenue rose by 27% to $793 million [19] - Operating expenses increased by 5% to $1.1 billion, with management basis operating expenses rising by 13% year over year [19][23] - Recurrent consumer spending grew by 20%, accounting for 73% of net bookings, with expectations for recurrent consumer spending to grow approximately 11% for the full fiscal year [19][21] 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 [8][9] - NBA 2K26 sold over 5 million units, representing a double-digit increase over NBA 2K25, with average selling prices reaching an all-time high [11] - Borderlands 4 received high critical praise but faced challenges with optimization and performance on PC, impacting initial sales [12][51] Market Data and Key Metrics Changes - The company expects net bookings for fiscal 2026 to range from $6.4 billion to $6.5 billion, reflecting a 14% growth over fiscal 2025 [20] - The breakdown of net bookings is projected to be approximately 46% from Zynga, 39% from 2K, and 15% from Rockstar Games [21] 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 franchises [17][25] - The focus on mobile direct-to-consumer business is expected to enhance net bookings and margins through new payment mechanisms and technologies [10][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong performance and a commitment to delivering high-quality entertainment experiences [15][25] - The company acknowledged the challenges faced with the delay of Grand Theft Auto VI but emphasized the importance of delivering a polished product [8][44] Other Important Information - The company has raised its full fiscal year guidance for net bookings and GAAP net revenue, reflecting strong performance in key titles [20][22] - The mobile gaming sector is experiencing pockets of growth, with the company attributing its success to quality and consumer engagement [82] Q&A Session Summary Question: Insights on RCS performance and GTA content updates - Management noted that the strong RCS performance is due to quality game development and engagement strategies, and there will be no change in support for GTA Online despite the release delay [30][31] Question: Impact of being a standalone publisher - Management acknowledged the competitive position as a standalone publisher but emphasized the importance of maintaining creative performance and economic success [36][37] Question: Mobile margins and alternate payment mechanisms - Management confirmed that the direct-to-consumer initiative has improved margins and that the rollout of alternate payment mechanisms is widespread across the mobile portfolio [41][42] Question: NBA audience expansion - Management indicated that returning players and international engagement are key to driving growth in the NBA franchise, with significant room for improvement in player retention [48][49] Question: M&A opportunities in mobile gaming - Management expressed a selective approach to M&A, focusing on strategic alignment and cultural fit, while highlighting the success of past acquisitions [55][57] Question: AI implementation in game development - Management clarified that while AI is not a replacement for creativity, it is being used to improve efficiency in non-creative areas of game development [60][61] Question: Update on BioShock franchise - Management confirmed that Rod Ferguson has been brought on to lead the BioShock franchise, with expectations for the next installment to exceed consumer expectations [64][66] Question: Ad revenue performance - Management noted that ad revenue growth is driven by strong performance across the mobile business, particularly from Rollic titles [68]