Take-Two Interactive Software, Inc (TTWO)
Q3 2013 Earnings Call
February 05, 2013 04:30 pm ET
Hank Diamond – SVP-Investor Relations
Strauss Zelnick – Executive Chairman, Chief Executive Officer
Karl Slatoff – EVP, Chief Operating Officer
Lainie Goldstein – Chief Financial Officer
James Hardiman – Longbow Research
Ben Schachter – Macquarie Capital
Arvind Bhatia – Sterne Agee
Daniel Ernst – Hudson Square Research
Andrew Connor – Piper Jaffray
Mike Hickey – National Alliance Securities
Brian Fitzgerald – Jefferies
Saul Ponedd – BMO Capital Markets
Phil Boyer – Credit Suisse
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It is now my pleasure to introduce your host, Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications for Take-Two Interactive. Thank you, sir. You may begin.
Good afternoon. Welcome and thank you for joining Take-Two’s conference call to discuss its results for the third quarter of fiscal year 2013 ended December 31, 2012. Today’s call will be led by Strauss Zelnick, Take-Two’s Chairman and Chief Executive Officer; Karl Slatoff, our Chief Operating Officer; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.
Before we begin, I’d like to remind everyone that the statements made during this call that are not historical facts are considered forward-looking statements under federal securities laws. These forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements.
Actual operating results may vary significantly from these forward-looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012. These documents may be obtained from our website at www.take2games.com.
And now, I’ll turn the call over to Strauss.
Thanks, Hank. Good afternoon and thank you for joining us today. I am pleased to report that Take-Two delivered strong revenue growth, profits, and cash flow in the third quarter. The key drivers of our results were the record-breaking release of NBA 2K13, continued strong sales of Borderlands 2, the successful release of XCOM: Enemy Unknown, and robust holiday sales of our catalog and digital delivered offerings. These results exceeded our outlook and demonstrate that the market for the highest quality interactive entertainment remains strong.
NBA 2K13 has quickly become the most profitable release in the history of 2K sports. The title achieved record-setting first week sales and has already sold in nearly 4.5 million units worldwide. Considered by many to be the best release of NBA 2K yet, the title received massive critical acclaim, including more than 37 awards for sports game of the year or best games of 2012.
The success of NBA 2K13 has been enhanced by sales of virtual goods and the introduction of our multi-platform NBA 2K Everywhere experience. These offerings allow consumers to immerse themselves further into the game’s authentic basketball culture, both at home and on the go, and helped enable the franchise to generate its highest ever digitally delivered revenues. I’d like to thank the teams at Visual Concepts and 2K for their stellar work and ongoing commitment to excellence.
Building on its extraordinary launch in September, Borderlands 2 continues to expand its audience and remains on pace to become the highest selling title in 2K’s history. It has also been the largest contributor to our digitally delivered revenue this year, driven both by strong sales of full-game downloads and high attach rates for the titles out on content, especially the Borderlands 2 season pass.
With nearly 6 million units sold in to-date, an average Metacritic score of 90 and 73 end-of-year awards worldwide, Borderlands 2 has taken the already successful Borderlands franchise to another level, enabling it to become one of Take-Two’s and the industry’s most important long-term properties.
Rounding out 2K’s slate of successful new titles is XCOM: Enemy Unknown. Developed by the strategy experts at Firaxis Games, XCOM: Enemy Unknown reinvents one of the industry’s most beloved franchises as a unique action strategy game. The title was one of the highest rated releases of 2012, achieving a near 90 Metacritic score, and winning an impressive 18 game of the year awards worldwide. As a result, Firaxis Games received the number one spot in Game Informer magazine’s prestigious Developer of the Year rankings. A commercial success, XCOM: Enemy Unknown has generated particularly strong digitally delivered sales and is being supported with a popular add-on content campaign.
With Borderlands 2, NBA 2K13 and XCOM: Enemy Unknown, 2K has delivered three of the 10 highest rated console releases of 2012 based on average Metacritic score. I’d like to congratulate 2K on what’s shaping up to be the label’s best year ever both in terms of financial results and creative achievement.
In addition to new releases, an important driver of our third quarter results was strong holiday demand for our popular catalog offerings. Catalog sales continue to be led by Rockstar Games iconic titles, Grand Theft Auto IV and Red Dead Redemption, which are still delighting consumers years after launch.
Our diverse portfolio of catalog titles is a valuable asset that sets Take-Two apart from the competition and provides the company with a meaningful and relatively stable revenue and profit stream in virtually every period. Revenue from digitally delivered content more than tripled year-over-year and accounted for 23% of non-GAAP net revenue in the third quarter. The largest contributors were full game downloads and add-on content for our console and PC titles.