Take-Two Interactive Software(TTWO) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - GAAP net revenue decreased by 7% to $1.3 billion, while cost of revenue increased by 24% to $884 million, driven by an impairment charge of $220 million and $190 million amortization of acquired intangibles [31] - Operating expenses increased by 3% to $959 million, including $165 million of loan impairment, but were flat year-over-year on a management basis due to lower marketing expenditures [31][34] - Net bookings for the quarter were $1.44 billion, at the high end of guidance, with recurrent consumer spending accounting for 78% of net bookings [38][58] Business Line Data and Key Metrics Changes - Grand Theft Auto V and Grand Theft Auto Online continued to perform exceptionally well, with Grand Theft Auto V sold in approximately 190 million units and Red Dead Redemption 2 surpassing 57 million units sold [40][43] - NBA 2K24 launched successfully, with engagement and virtual currency bookings exceeding expectations, driving double growth in ARPU compared to NBA 2K23 [45] - The mobile business saw strong performance with new titles like PowerSlap and Top Troops, contributing positively to KPIs and engagement metrics [47][53] Market Data and Key Metrics Changes - The geographic net booking split is projected to be about 65% United States and 35% international, with a forecasted current consumer spending growth of 4% compared to fiscal 2023 [59] - The breakdown of net bookings from labels is expected to be roughly 49% Zynga, 31% 2K, 18% Rockstar Games, and 2% other [59] Company Strategy and Development Direction - The company is focused on being the most creative, innovative, and efficient entertainment company, with a robust and diverse development pipeline [12][13][39] - The strategy includes optimizing cost structures while investing for growth, with a commitment to enhancing profitability and performance across various business segments [33][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the holiday season, citing the strength of the product catalog and anticipated strong hardware sales [12][115] - The company reiterated its fiscal 2024 net bookings guidance of $5.45 billion to $5.55 billion, indicating confidence in upcoming releases and overall market conditions [12][85] Other Important Information - The company recorded an impairment charge of $220 million related to intangible assets and $165 million of goodwill, reflecting updated long-term projections for one of its reporting units [72] - The anticipated trailer for the next Grand Theft Auto is expected to be revealed in December, generating excitement and potential positive impact on catalog revenue [16][121] Q&A Session Summary Question: Thoughts on fiscal '25 and '26 guidance - Management expects net bookings to be below $8 billion due to shifts in the pipeline but not materially so [64][120] Question: Acquisition of FiveM and its implications - The acquisition is seen as a way to learn about user-generated content and monetize it, with a focus on protecting intellectual property [65] Question: Engagement with GTA+ subscribers - No materially different behavior was observed between subscribers and non-subscribers, indicating positive engagement [68] Question: Clarification on advertising revenue - There is a difference between GAAP revenue for advertising and advertising bookings due to deferrals [69] Question: Details on the write-down taken in the quarter - The write-down was related to intangible assets and goodwill, reflecting updated long-term projections [71] Question: Impact of potential strike on production - Management is optimistic about labor negotiations and believes they are well-protected in case of a strike [121] Question: Updated thoughts on AI - AI is expected to enhance efficiency and creativity, but it is not anticipated to create hit games on its own [124]