Take-Two Interactive Software(TTWO) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net bookings of $1.38 billion, slightly below prior guidance, attributed to cautious consumer spending during the holiday season [19][33] - GAAP net revenue increased 56% to $1.41 billion, while cost of revenue rose 97% to $692 million [48] - Operating expenses increased by 123% to $889 million, primarily due to the addition of Zynga and higher marketing and stock-based compensation expenses [48] - The GAAP net loss was $153 million, or $0.91 per share, impacted by $302 million of amortization of acquired intangibles and $24 million of business acquisition costs [48] Business Line Data and Key Metrics Changes - Recurrent consumer spending rose 117% and accounted for 78% of net bookings [46] - Digitally delivered net bookings increased 72% and represented 95% of the total [2] - The largest contributors to net bookings are expected to be NBA 2K, Grand Theft Auto Online, and Grand Theft Auto V [5] Market Data and Key Metrics Changes - The geographic net bookings split is projected to be about 65% from the United States and 35% from international markets [5] - The company expects recurrent consumer spending to grow by approximately 85% and digitally delivered net bookings to increase by approximately 60% [6] Company Strategy and Development Direction - The company is focused on enhancing profitability for its hyper-casual business and evaluating cost savings opportunities to structurally enhance margins [9][4] - The strategy includes delivering captivating entertainment experiences across all platforms and geographies, with a commitment to long-term growth [26] - The company aims to achieve over $50 million in annual savings through a cost reduction program, in addition to over $100 million in annual cost synergies from the Zynga acquisition [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a more challenging operating environment than anticipated, leading to a lowered fiscal 2023 net bookings guidance to $5.2 billion to $5.25 billion [47] - Despite the current challenges, management expressed confidence in long-term growth potential and the ability to deliver sequential growth and record performance over the next several years [22][56] Other Important Information - The company plans to release several new titles, including Kerbal Space Program 2 and WWE 2K23, with ongoing support for existing franchises [11][14] - The combination with Zynga is seen as highly accretive, with strong engagement among active players and a commitment to delivering planned synergies [46][45] Q&A Session Summary Question: Can you discuss mobile advertising integration in Zynga games? - Management confirmed that advertising has been integrated into Zynga titles that previously did not include it, and they are seeing early signs of success with direct-to-consumer platforms [51][58] Question: How is the company addressing the mobile market post-IDFA? - Management indicated that they are realigning their marketing strategy in mobile to address the post-IDFA landscape and are optimistic about future growth [94][96] Question: What are the expectations for fiscal 2024? - Management expects sequential growth and record results over the next couple of years, with specific guidance to be provided in the coming months [104] Question: How does the company view the impact of macroeconomic conditions on new releases? - Management believes that macroeconomic conditions have influenced consumer behavior, leading to a preference for established franchises and promotional titles [126][128] Question: What is the outlook for mobile game development? - Management acknowledged the challenges in developing new hits in mobile but remains optimistic about the potential for success with new titles [136][137]