Take-Two Interactive Software(TTWO) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported first quarter Net Bookings of $1 billion, with pre-combination Net Bookings of $731 million, reflecting a 3% year-over-year growth [7][40] - GAAP net revenue increased by 36% to $1.1 billion, while operating expenses rose by 125% to $704 million, primarily due to the addition of Zynga [42][43] - The GAAP net loss was $104 million, or $0.76 per share, significantly impacted by $117 million of amortization of acquired intangibles and $165 million of business acquisition costs [43][49] Business Line Data and Key Metrics Changes - Recurrent consumer spending rose by 48%, accounting for 73% of Net Bookings, significantly above prior guidance [20][41] - Digitally-delivered Net Bookings increased by 41%, representing 95% of total Net Bookings, with 77% of console game sales delivered digitally [42][46] - NBA 2K22 and WWE 2K22 were highlighted as strong performers, with NBA 2K22 selling over 12 million units and WWE 2K22 achieving over 330 million in-game matches played [13][14] Market Data and Key Metrics Changes - The company noted a strong performance in the mobile sector, with Zynga's contributions significantly enhancing results, despite some macroeconomic pressures affecting in-app purchases [20][21] - The latest generation console players of Grand Theft Auto Online grew over 40% this quarter, with monetization rates 36% higher than previous generation players [16] - The company expects recurrent consumer spending to grow by approximately 110% and digitally-delivered Net Bookings to increase by approximately 80% for the fiscal year [47][48] Company Strategy and Development Direction - The integration with Zynga is expected to yield $100 million in annual cost synergies within two years, with a focus on enhancing mobile offerings and leveraging Zynga's ad tech platform [10][39] - The company aims to introduce mobile games based on popular intellectual properties, targeting key mobile-first emerging markets [12][23] - The long-term vision includes expanding the mobile presence and enhancing margins through a diverse pipeline of games [22][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential of the mobile industry, despite current macroeconomic challenges [9][20] - The company acknowledged some softness in the mobile market but believes it is outperforming competitors and maintaining healthy market share [60][62] - The outlook for fiscal year 2023 includes Net Bookings guidance of $5.8 billion to $5.9 billion, incorporating Zynga's contributions [22][46] Other Important Information - The company ended the quarter with over $1.3 billion in cash and short-term investments and $3.3 billion in debt [45] - The integration of corporate functions and systems has been progressing well, with no disruptions reported [10][39] Q&A Session Summary Question: Changes in guidance regarding Marvel's Midnight Suns - Management indicated that shifts in the pipeline and foreign exchange movements were the most significant factors affecting guidance [56][58] Question: State of the mobile industry and integration of Zynga's portfolio - Management noted some softness in the mobile market but emphasized that Zynga's diverse portfolio is a meaningful offset [60][62] Question: RCS percentage of bookings for legacy Take-Two - Management did not break out RCS for the pre-combination business but noted outperformance in key titles [68][70] Question: Changes in Zynga's pipeline and macro factors - Management confirmed movements in Zynga's pipeline due to FX rates and overall ad market pressures [80] Question: Impact of Google advertising format changes - Management expressed no current concerns regarding potential impacts from changes in Google ad formats [84] Question: Business plan for Chartboost - Management indicated that Chartboost currently deals with third parties and sees potential for growth in that area [87] Question: Outlook for mobile game market and expense base - Management acknowledged an increase in operating expenses due to Zynga but maintained that mid- to long-term growth prospects remain strong [88][89] Question: Development resources for mobile versus PC and console - Management stated that while there are no immediate plans for significant headcount increases, growth is expected to lead to some increases in development resources [91][92] Question: Pipeline shifts and game readiness - Management clarified that game shifts are typically based on development readiness rather than macroeconomic factors [94][95] Question: Resilience of gaming spend in a recession - Management noted that while gaming is generally resilient, current economic conditions may impact consumer spending, particularly in free-to-play models [98][99]