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Take-Two Interactive Software, Inc. (TTWO)

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Take-Two Interactive Software, Inc. (TTWO)

Q4 2017 Results Conference Call

May 23, 2017 04:30 PM ET

Executives

Henry Diamond - IR

Strauss Zelnick - CEO

Karl Slatoff - President

Lainie Goldstein - CFO

Analysts

Mike Olson - Piper Jaffray

Tim O'Shea - Jeffrey

Drew Crum - Stifel

Eric Handler - MKM Partners

Justin Post - BoA Merrill Lynch

San Phan - Mizuho

Ray Stochel - Consumer Edge Research

Ben Schachter - Macquarie

Chris Hum - Crédit Suisse

Presentation

Operator

Greetings, and welcome to the Take-Two Interactive Software fourth quarter fiscal Year '17 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Hank Diamond, Senior Vice President of Investor Relations. Mr. Diamond, you may begin

Henry Diamond

Good morning. Welcome, and thank you for joining Take-Two's conference call to discuss its results for the fourth quarter and fiscal year 2017 ended March 31, 2017. 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've 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 [Audio Gap]

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 Zelnick

Thanks, Hank. Good morning, and thank you for joining us today. Before we begin, all of us here at Take-Two all around the world want to acknowledge and express our sympathy in the wake of these terrible and tragic attacks in Manchester. It's terribly sad that at an entertainment event, where people went to be pleased and delighted, that this terrible thing occurred, and we're deeply saddened by it, and obviously, puts into context the conversations we're having today.

So with that said, we'll turn our attention to business. Consumer demand for offerings remained exceedingly strong in the fourth quarter, finishing off another outstanding year for our organization. During fiscal 2017, we delivered bookings that significantly exceeded our expectations, along with revenue growth and margin expansion. These results were driven by the continued extraordinary performance of Grand Theft Auto V and Grand Theft Auto Online, a diverse array of titles from 2K and record digitally delivered revenue and bookings, including our highest-ever from recurrent consumer spending.

Our business performance converted into substantial cash provided by our operating activities, which grew 27% to $331 million. We invested our capital to grow and diversify our business further, including acquiring Social Point, a leading free-to-play mobile game developer. As of March 31, 2017, we had $1.4 billion in cash and short-term investments. Grand Theft Auto V and Grand Theft Auto Online outperformed our expectations during the fourth quarter as they have in every period since their release. Grand Theft Auto V remains our industry's standard bearer for creative excellence and the highest-rated game of the current console generation, with selling now surpassing 80 million units. The title continues to attract and delight new audiences; especially, the install base of PlayStation 4 and Xbox One expands further. In addition, Grand Theft Auto Online again delivered year-over-year bookings growth in the fourth quarter, substantially exceeding our expectations and was the single largest contributor to recurrent consumer spending. Rockstar Games has driven sustained engagement through the ongoing release of a wide array of three additional content. Most recently, the Cunning Stunts: Special Vehicle Circuit update, followed by the Land Grab and Tiny Racers modes. In total, Rockstar Games released 12 significant updates during fiscal 2017, coupled with a regular weekly schedule of new content offerings and as much more planned going forward. It's a remarkable achievement that recurrent consumer spending on Grand Theft Auto Online has grown every year since its release and reached record levels in fiscal 2017 more than 3 years after its initial launch.

Our results also benefited from 2K's robust holiday lineup. NBA 2K17 remains the top-rated sports game of the current console generation and is poised to become our highest-selling sports title ever, with selling to date of nearly 8 million units. Engagement with and recurrent consumer spending on our industry-leading basketball series continues to grow, with over 2 billion games of NBA 2K17 played on PlayStation 4 and Xbox One, up 16% over NBA 2K16. More than 1.3 billion of these games were multiplayer, a 40% increase, and the average time the consumer spent playing multiplayer games increased by nearly 30%. This remarkably strong engagement helps to drive record recurrent consumer spending on NBA 2K, which grew 71% during fiscal 2017. Furthermore, we're thrilled to broaden our industry-leading basketball brand and expand our footprint in the evolving world of competitive gaming, with the upcoming launch of the NBA 2K eSports league, which Karl will discuss in more detail.

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