TTWO - NASDAQ

Ladies and gentlemen, thank you for standing by. My name is Abbie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Take-Two Interactive Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] And I would now like to turn the call over to Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year 2025, ended March 31, 2025. Today’s call will be led by Strauss

Thanks, Nicole. Good afternoon, and thank you for joining us today. We concluded our 2025 fiscal year with outstanding results, including fourth quarter net bookings of $1.58 billion, which was the top of our guidance range. Each of our labels contributed meaningfully to our performance. 2K posted a fantastic quarter, with the successful launches of Sid Meier’s Civilization VII, WWE 2K25, and PGA TOUR 2K25. NBA 2K delivered one of its strongest periods on-record, including recurrent consumer spending growth of 42%. Rockstar Games excelled once again, with the Grand Theft Auto and Red Dead Redemption series surpassing our forecasts; and

I’ll now turn the call over to Karl.

Thanks, Strauss. I’d like to thank our teams for another strong quarter, and for laying the groundwork for this exciting next chapter in our company’s history. As Strauss mentioned, we are extremely optimistic about our upcoming pipeline, which includes approximately 38 titles through fiscal 2028. During fiscal 2026, we plan to release 13 titles, including four within the immersive core category. This includes Mafia: The Old Country, which 2K and Hangar 13 will introduce on August 8. This linear, narrative driven game is a premium experience in the vein of early Mafia titles, set against the stunning, authentic backdrop of 1900 Sicily. Pre-orders are off to a strong start following the debut of the first official gameplay trailer at PAX East last week, and we’re excited for its upcoming launch. Additionally, 2K and Gearbox will launch Borderlands 4 on September 12. Last month, during the PlayStation State of Play, our teams shared an extended look at the action packed gameplay coming in the title. Players were treated to a first look at two of four new Vault Hunters as they tore a path through a secret black site in Terminus Range, showcasing the destructive power of an updated gear system. The Borderlands community reacted very positively, with the game trending on X, and becoming one of the most wish-listed games onSteam. 2K and Gearbox will also release Borderlands 4 for the Switch 2 in the future. And, as always, we will release the next iterations of our industry leading annual sports franchises, NBA 2K and WWE 2K. We also plan to bring to market five mobile titles this fiscal year, including WWE 2K for Netflix in the fall and we are launching four new iterations of prior releases, including the recent release of Civilization VII VR for Meta Quest 3 and 3S, as well as Civilization VII for Switch 2. Our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our key offerings. Looking ahead, we currently expect to deliver 25 titles throughout fiscal 2027 and 2028 including, 17 immersive core releases, including Grand Theft Auto VI and five sports simulation games; four mobile games; and four new iterations of previously released titles. In closing, we look forward to delivering our groundbreaking titles, which we believe will enable us to achieve a period of meaningful long-term growth and shareholder returns. I’ll now turn the call over to Lainie.

Thanks, Karl and good afternoon, everyone. We delivered an outstanding finish to fiscal 2025, with broad-based strength across our company. Throughout the year, we positioned our business for sustainable, long-term growth by releasing new hit titles and experiences across our labels; advancing the development of many key releases we plan to launch in the coming quarters; successfully acquiring Gearbox; and continuing to implement our previously announced cost reduction program. Through these actions, we are setting our business up for a strong multi-year period of growth and enhanced profitability, and I’d like to thank our teams for their passion and dedication. Turning to our results, we delivered fourth quarter net bookings of $1.58 billion, which was the top of our guidance range of $1.48 billion to $1.58 billion. This reflected better than expected performance from NBA 2K25;

Thanks, Lainie and Carl. On behalf of our entire management team, I'd like to thank our colleagues for delivering another outstanding year and for building an incredibly sound foundation, creatively, financially, and culturally as we enter this new inflection point for Take-Two's growth and continued success. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And our first question comes from the line of Doug Creutz with TD Cowen. Your line is open. We did lose connection with Mr. Creutz. We will move to our question, Eric Handler with ROTH Capital. Your line is open.

Good afternoon. Thanks for the question. First, I thought it was very interesting with all the industry discussion that's been going on about maybe prices for games going up to $80, you chose a different path with, with Mafia and doing a $50 or $60 price view. Can you maybe talk about what went into that decision? And do you see future, game releases sort of having a variable pricing along a wide range scale?

So, thanks, Eric. We've always had variable pricing. And the rubric, that we employ is one of delivering way more value to consumers than what we charge, that's our job. We aim to make the best entertainment on earth and bring that to all consumers wherever they are, and we need to deliver value in so doing. So that's really how we look at it. In the case of Mafia: The Old Country, we think it's extraordinary. It looks amazing, and we want to get it into as many hands as we possibly can. And I think our view is that if you create a huge hit and everyone wants it and everyone buys it, the revenue is going to take care of itself.

Okay. And then as a follow-up with this for Lainie, maybe a little about counting. The $3.5 billion goodwill impairment, I assume was related to

Eric, we haven't discussed, which of our reporting units, the impairment was from, but it was a partial impairment of one of our units. And it's a result of updating long-term expectations and that's something that we are required to test, annually or whenever the indicators of the impairment arise. And this is something that we're going to be -- that we would do all the time, based on how our forecasts are updated.

Okay. Thanks.

And our next question comes from the line of Douglas Creutz with TD Cowen. Your line is open.

Hey. Sorry about that, I fat fingered my first attempt. Just looking at it from a high level, the last period of peak performance of your business, you were able to reach low to mid-20% operating margins in the wake of the success of Red Dead 2 and in the pandemic. Just wondering if anything about the business or the industry has changed structurally such that when your current pipeline reaches fruition, you would not be able to reach those margin levels again? Thank you.

There's no reason why we wouldn't be able to reach those margins. That is how we've been building the business and working on the cost reduction program and being more efficient, working to move to those margins as we build our scale. As we've mentioned, the gross margins are definitely hampered by the increase in the development costs for the titles, but we've been doing a lot of structural things within the business to offset those costs. And you'll see that in our expenses being reduced this year and seeing those margins coming down.

Great. Thank you.

And our next question comes from the line of Colin Sebastian with Baird. Your line is open.

Thanks. I appreciate the questions. I have a couple. I guess, first, the mobile segment performance looks impressive relative to the broader mobile gaming space. So hoping you could maybe drill down on that a bit in terms of what's working in this environment, that could be customer acquisition retention or game mechanics. And then, maybe some of the background of why the segment would necessarily be positioned to grow again this fiscal year? Thank you.

You're right. The mobile gaming segment is a challenging one broadly, creating new mobile hits is incredibly difficult. And I think right now,

And given the outstanding results that we saw from a lot of our top titles in fiscal 2025, some of those are mature titles that have been out for many years. We expect that there may be some moderation of trends for those titles in fiscal 2026, and that's what's affecting that business into next year.

Okay. Thank you.

And our next question comes from the line of Chris Schoell with UBS. Your line is open.

Great. Thank you. You mentioned a new baseline for the business on net bookings once GTA VI launches in fiscal '27. In the past, I know you pointed to $8 billion of annual bookings and over $1 billion of cash generation once the pipeline scaled. Appreciate there's been a number of shifts since that guidance was given, but is it fair that your long-term assumptions for the business haven't changed. And as you think about the sustainability of performance post GTA VI console release, can you help us think through some of the key drivers in your mind? Thank you.

I'll take a shot at it. However, we do issue annual guidance for a reason. The further away we are from the results, the harder it is to predict because things can change, whether that's internal or external. However, in terms of our -- both our hopes and our expectations, we're more optimistic than we were before, and that optimism is reflected in our expectations for net bookings and our expectations for free cash flow. We just, in the normal course, would not typically guide to those numbers this far in advance. We have said that we expect sequential growth for both fiscal '26 and '27. And the guidance we just gave, of course, in the absence of the release of Grand Theft Auto VI still reflects meaningful year-over-year top line growth and reflects a new record for net bookings for this company.

Got it. Thank you. And if I can just fit one more in. Going back to the first GTA VI trailer, I believe you saw a meaningful uplift in engagement and monetization for GTA Online with it. I appreciate it's early, but are you seeing similar uplift right now from the second trailer? And could that potentially drive some upside versus your expectations for declines at GTA Online in fiscal '26? Thank you.

Well, remember, in the fourth quarter, actually, we saw better news than expected for GTA Online, Red Dead Online and GTA+. In aggregate, GTA Online and Red Dead Online were down a bit in the full fiscal year. In terms of your specific question about the trailer, too early to say whether there was an immediate result. Frankly, we're not super focused on one week or 10 day results. However, just as a reminder, and I think most everyone knows this, the trailer did set a record for views in its first 24 hours, 475 million. So essentially, once again, Rockstar Games broke the Internet and we feel really good about that and what that means for the upcoming release of GTA VI.

Great. Thank you very much.

And our next question comes from the line of Andrew Marok with Raymond James. Your line is open.

Hi. Thanks for taking my questions. Maybe first on the Nintendo Switch. So pretty exciting news with Borderlands 4 coming to the platform as well as Sid VII. So I guess as you've seen the reception and seen the technical specifications of that platform over the last little bit, how do you think -- what are the boundaries of the Switch as a partner, a distribution partner for you? Is it something where the entire take Take-Two line up is eligible or is it really just kind of an opportunistic thing for certain titles? And then I have a follow-up.

We're launching four titles with Nintendo Switch 2, and that's, I think, a bigger array of releases than we've ever offered before with the new Nintendo platform. Historically, being a third-party in the Nintendo business has been a bit challenging. I think Nintendo has been very forthcoming and addressing that and we're stepping up too because we have great optimism for the platform. In terms of what we would bring to any platform, we address it on a case-by-case basis. We obviously want to be where the consumers are. But we would not necessarily bring every title to very platform. They are also a great Catalog opportunities as well.

Understood. Thank you. And then maybe one on the mobile side. So

I think we learned from every release. We learn on the dev side, we learn on the marketing side up. Remember, Colored Block Jam came from a different studio than Match Factory!. Match Factory! came from Peak, Color Block Jam from Rollic. And I think Color Block Jam was really a reflection of an evolution of strategy at Rollic. However, all of our studios work together, that's the whole point of being one company. They have great creative independents. They do coordinate the share best practices than

And our next question comes from the line of Matthew Cost with Morgan Stanley. Your line is open.

Hi, everybody. Thanks for taking the questions. I guess just starting out on NBA 2K. I mean another really strong quarter for that franchise, it's second in a row. I guess is there anything that you would call out that's driving that continued strength and even the acceleration versus what you saw last quarter? And then separately, on the mobile side, when you think about the impact with the recent court rulings have had on the direct-to-consumer opportunity. Will that allow you to execute the shift towards direct payment faster? Does it raise the ceiling long term? I mean how should we think about the financial impact of that? Thank you.

So on the NBA side, look, I don't think there's anything specific that's been done in this quarter that would call out the performance of the NBA, which has been absolutely fantastic. I think it's more of a reflection on the ongoing strategy and the ongoing strength of this particular iteration. The team at 2K and Visual Concept put a significant effort every year. They put a significant effort into creating new innovations in the game, which is very tough to do when you're on a 12-month cycle. And particularly this year, the folks at 2K and Visual Concepts really listen to the consumer and focused on that core consumer on bringing back a lot of features that consumers are asking for or from the past, like, for example, the Auto House and the MyTEAM, excuse me, the MyTEAM mode, working on different like doubling mechanics, etc., all these things add up to make the game just better and better. And the focus is always on engagement, and that's where the growth has really been is that year-over-year this game has -- engagement has gone up. I mean the engagement in this particular quarter has just been fantastic. And that's with that regard to the increase of 7% in units year-over-year. So that relentless focus on quality is really what's driving that success. And I said specifically in the quarter, MyTEAM is having a fantastic quarter, so that helps a lot as well.

With regard to direct-to-consumer, we enter the direct-to-consumer business in mobile immediately upon closing the acquisition of

And our next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Thanks so much for taking the questions. Maybe two-parter, if I could. In terms of the partnership with Netflix, what continues to be some of the key learnings from scaling games via Netflix as a distribution partner? And do you think there's any scale for Netflix to become an increased partner of transforming some of your gaming IP into more mainstream media IP for their video formats over the medium to long term? Thanks so much.

So our partnership with Netflix has been fantastic. Obviously, the most attractive part of that is that, number one, they seem very serious about gaming and have shown that over and over at this point, which is great news for us and there are a lot of consumers. And when Netflix gets together and with the marketing power that they have with incredible content, which we've been able to offer, then you know that's going to be a great recipe for success. So we're very sanguine on that relationship. We've only done a few titles at this point. And -- but obviously, we think that there's an opportunity, again, on a game-by-game basis for us to continue to bring titles to the Netflix. I'm not announcing anything at this point, but we do believe that they're a terrific partner. In terms of other media, that's an area where we have done some deals in the past, and we are doing a BioShock movie with Netflix so we are looking at things like that opportunity. But I wouldn't say that's driving the partnership. That's sort of a nice to have not necessarily a must have for the partnership. But when you can bring that kind of synergy value to the table, obviously, that's always a strong consideration and a nice thing for us to do.

Great. Thank you.

And our next question comes from the line of James Heaney with Jefferies. Your line is open.

Great. Thanks guys for the questions. Just looking at your guidance for fiscal '26, can you talk through some of the puts and takes just on operating expenses for the year? Is it fair to say that we should just expect mobile marketing expense to remain elevated? And then just anything on GTA-related marketing cost for the second half? Thanks.

We expect operating expense growth of approximately 3% year-over-year, and that is largely due to higher marketing expenses, and that is for our current year marketing for our current year titles and for future titles. But we do expect to deliver operating expense leverage as our net bookings growth of 6% is planned to outpace our operating expense expansion.

Great. And then maybe just a quick one on your bookings guidance for fiscal '26. We did notice it as a more maybe narrow range than usual. So just interested to hear the reasoning behind that and what gives you conviction in a more narrow range? Thank you.

It's not a more narrow range than usual. I mean usually, for the full year, we gave a specific type of range on a quarter-by-quarter basis, it could be different, but it's not different than it usually is.

Thanks.

[Operator Instructions] Our next question comes from the line of Michael Hickey with The Benchmark Company. Your line is open.

Hey, Strauss, Lainie, Karl, Nicole. Congrats guys on a quarter and a strong year. Just two questions from us. First on GTA VI, can you talk about sort of the record excitement you're seeing for the game? What you think is driving demand to record levels for this franchise? Obviously, it's one of the biggest franchises in the world, and how you're measuring this demand just besides trailer views? That's the first question. And then the second question was a follow-up on the software pricing. Microsoft, Nintendo both moving to 80, do you guys anticipate adopting this price point across any of your upcoming games and what is assumed in your guidance? Thanks, guys.

Hi Mike. Thanks for your questions. Look, why do I think GTA VI is so widely anticipated. First of all, I can't tell you how much I appreciate the tenor of the question. We all do. Look, Grand Theft Auto V is in the standard bar, not just for our company but for the industry since it was launched, it's not only survived through three console generations, it survived and here it is many years later and still the number one title since GTA V was sold in 215 million units and continues to sell and Grand Theft Auto Online, just had a phenomenal quarter, and GTA+ is doing great. So consumers are actively engaged with all things, Grand Theft Auto. This is an ongoing business and yet in terms of a new iteration, it's been some time. So there's enormous anticipation on the one hand. And on the other hand, it's still fresh, it's still in market. So everyone anticipates the next James Bond movie, but there's nothing in between. What you have in your head is what you saw the last time around. In this case, everyone anticipates the next generation of Grand Theft Auto and lots of people are currently engaged today with Grand Theft Auto today. So I think that's one sign. Obviously, 475 million trailer views within 24 hours tells you something. It's not just that, wow, that was a great trailer. It tells you something more than that. And we of course do market research around here. And the market research that we've done is pretty astonishing. But look, we're not in the business of claiming success until it happens. All we're focused on is making the best possible entertainment here, that's all that Rockstar is focusing on, that's our job. The rest will take care of itself. In terms of pricing, we obviously don't talk about specific pricing here. Pricing is set at the label level in the context of the individual release. We have had variable pricing here for a very long time. And as I said earlier in the call, we want to focus on value. We want to deliver way, way, way more value to a consumer than whatever that consumer pays, that's our job. We have to do that job and that's our focus, not on what the top line price is.

Thank you, Strauss. Good luck, guys.

And our next question comes from the line of Brian Pitz with BMO Capital Markets. Your line is open.

Yeah. Thanks for the question. On console price increases to the gaming ecosystem, any impact on your guide for this year? And if so, maybe help us size that impact? And then looking at the nearly $2 billion of software development cost on the balance sheet for capitalized in games and development, any color you could provide as to what percent is related to GTA VI versus other titles? Thanks.

Look, our guide is for the next 10 months essentially, that's the part of the fiscal year that hasn't elapsed yet. And it's very difficult to predict where tariffs will land or given how things have bumped around so far. We feel reasonably confident that our guide wouldn't be meaningfully affected in less tariffs ran off in a very different direction than we currently expect. In any case, it's already a very substantial installed base for all of our target platforms except in Nintendo Switch 2 which just yet to be launched. And so we have, I think, enough insight that we wouldn't be meaningfully affected by any changes.

And for the balance sheet, the $2 billion of development cost, it really is supporting our extremely robust release schedule that we talked about for the next few years, and we don't discuss on a title-by-title basis.

Thanks, everyone.

And our next question comes from Martin Yang with Oppenheimer. Your line is open.

Hi. Thank you for taking the questions. One question is about internal royalties in the COGS breakdown. Can you maybe talk about the year-over-year and quarter-to-quarter increase, what drove that? Is that related to any milestone achieved Rockstar? Thank you.

I'm sorry, could you repeat the question? We had trouble understanding you.

Sorry. I'm in a pretty noisy background. Can you talk about the internal royalties in the COGS breakdown, a good increase on a year-over-year and quarter-over-quarter basis, what drove that increase in internal royalties this quarter?

Internal royalties, the breakdown is driven by the product mix. So it changes from quarter-to-quarter and also by year-to-year based on mix of the business on the top line.

Thank you.

And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the conference back over to Mr. Strauss

Well, first, as always, thank you for joining us today. Obviously, this was a good news meeting, and we're all super excited. All of the results that we have the pleasure of announcing here are driven by the many thousands of people who commit their professional lives to Take-Two and all of our affiliates and our incredibly hard working creative labels, and I want to express enormous appreciation for the work of our colleagues. That work is what delivers the results we just get to talk about them. I also want to thank our shareholders for their continued support. This is a great time for our company and a really exciting and challenging time in our industry and in the entertainment industry broadly. We're good at addressing challenges here. We like to address challenges. We think that the release schedule that we have coming to market is second to none, certainly second to none in our history and it's our job to deliver. We don't ever take credit for things that don't happen. A lot of what we talked about today is in the future, we know we have to buckle down every day and deliver the results. Arrogance is the enemy of continued success. So with, I hope, great humility we aim to deliver and over deliver. We thank you for listening today, and we thank you for your support.