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Take-Two Interactive Software, Inc. (TTWO)

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Take-Two Interactive Software, Inc. (TTWO)

Q3 2017 Earnings Call

February 07, 2017 4:30 pm ET

Executives

Henry A. Diamond - Take-Two Interactive Software, Inc.

Strauss H. Zelnick - Take-Two Interactive Software, Inc.

Karl Slatoff - Take-Two Interactive Software, Inc.

Lainie Goldstein - Take-Two Interactive Software, Inc.

Analysts

Benjamin Schachter - Macquarie Capital (USA), Inc.

Eric O. Handler - MKM Partners LLC

Michael Hickey - The Benchmark Co. LLC

Doug Creutz - Cowen and Company, LLC

Timothy O'Shea - Jefferies LLC

San Q. Phan - Mizuho Securities USA, Inc.

Presentation

Operator

Greetings and welcome to the Take-Two Interactive Software Third Quarter Fiscal Year 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Hank Diamond, Senior Vice President of Investor Relations & Corporate Communications. Thank you. Mr. Diamond, you may begin.

Henry A. Diamond - Take-Two Interactive Software, Inc.

Good afternoon. Welcome and thank you for joining Take-Two's conference call to discuss its results for the third quarter of fiscal year 2017 ended December 31, 2016. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; 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 most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, including the risks summarized in the section entitled Risk Factors.

I'd also like to note that, unless otherwise stated, all numbers we will be discussing today are GAAP. And unless otherwise stated, all comparisons are year-over-year. Our press release and filings with the SEC may be obtained from our website at www.take2games.com.

And now, I'll turn the call over to Strauss.

Strauss H. Zelnick - Take-Two Interactive Software, Inc.

Thanks, Hank. Good afternoon and thank you for joining us today. I'm pleased to report that Take-Two had a highly successful holiday quarter. Consumer demand for our new releases and catalog was strong throughout the period and players continue to engage significantly with our games after purchase. As a result, we delivered better-than-expected bookings, including our best ever quarter for recurrent consumer spending, along with double-digit growth in both net revenue and net cash provided by operating activities.

As of December 31, 2016, we had over $1.4 billion in cash and short-term investments on our balance sheet. Grand Theft Auto V and Grand Theft Auto Online continue to outperform our expectations as they have in every quarter since their release. Grand Theft Auto V remains the highest rated game of the current console generation and a must-have title for gamers on both console and PC with sell-in now surpassing 75 million units.

According to data from the NPD Group that combines physical sales and full game downloads, Grand Theft Auto V was the number six selling game across all platforms in 2016. In addition, Grand Theft Auto Online continues to deliver growth in both engagement and bookings with a record number of players in December, driven by the ongoing release of new content.

During the third quarter, Rockstar Games supported Grand Theft Auto Online with four significant updates, Bikers, Deadline, Import/Export, and Festive Surprise 2016, and has many more planned going forward. The sustained performance of Grand Theft Auto V and Grand Theft Auto Online is a remarkable achievement and a testimony to Rockstar Games' tireless commitment to excellence, especially since these titles initially launched more than three years ago.

On October 7, 2K launched Mafia III. Developed by 2K's newest studio, Hangar 13, Mafia III received critical praise for its deep storytelling and authentic period setting. The title achieved the highest first week sell-in of any game in 2K's history and was a popular choice for consumers during the holiday season. To-date, Mafia III has sold-in approximately 5 million units.

2K and Hangar 13 have continued to support Mafia III with numerous free content offerings, including character clothing, vehicle customization, racing challenges and more. The team is currently working on three exciting downloadable story expansions that will be released this year which can be purchased individually or as part of the Mafia III Season Pass.

NBA 2K17 delivered growth during the holiday season and continues to delight both new and longtime fans of our industry-leading basketball series. Launched in September, NBA 2K17 is the highest-rated sports title of the current console generation and the highest-rated title in the history of the series, based on average Metacritic score. Today, NBA 2K17 has sold-in nearly 7 million units, up approximately 10% over last year's release and is poised to become our highest selling sports title ever.

Engagement with the brand continues to grow with consumers already playing more than 1 billion games of NBA 2K17, up 27% over last year. More than half of these were multiplayer which increased 61%. This strong engagement with both NBA 2K17 and the MyNBA2K companion app drove record bookings from recurrent consumer spending for the series, which grew 56% in the third quarter. In addition, 2K and Visual Concepts continue to expand the brand's reach through emerging platforms and business models.

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