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Edited Transcript of TTWO.OQ earnings conference call or presentation 8-Feb-21 9:30pm GMT

·54 min read

Q3 2021 Take-Two Interactive Software Inc Earnings Call NEW YORK Feb 11, 2021 (Thomson StreetEvents) -- Edited Transcript of Take-Two Interactive Software Inc earnings conference call or presentation Monday, February 8, 2021 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Karl Slatoff Take-Two Interactive Software, Inc. - President * Lainie Goldstein Take-Two Interactive Software, Inc. - CFO * Nicole B. Shevins Take-Two Interactive Software, Inc. - SVP of IR & Corporate Communications * Strauss H. Zelnick Take-Two Interactive Software, Inc. - Executive Chairman & CEO ================================================================================ Conference Call Participants ================================================================================ * Benjamin Thomas Black Evercore ISI Institutional Equities, Research Division - Co-Head of Internet Research * Brian Thomas Nowak Morgan Stanley, Research Division - Research Analyst * Bryan D. Kraft Deutsche Bank AG, Research Division - Senior Analyst * Colin Alan Sebastian Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Douglas Lippl Creutz Cowen and Company, LLC, Research Division - MD & Senior Research Analyst * Eric Owen Handler MKM Partners LLC, Research Division - MD, Sector Head & Senior Analyst * Matthew Corey Thornton Truist Securities, Inc., Research Division - VP * Michael Ng Goldman Sachs Group, Inc., Research Division - Research Analyst * Michael Joseph Hickey The Benchmark Company, LLC, Research Division - Senior Equity Analyst * Ryan Gee BofA Securities, Research Division - VP of US Equity Research * Stephen D. Ju Crédit Suisse AG, Research Division - Director * X. Lu Barclays Bank PLC, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the Take-Two Q3 Fiscal Year '21 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. Thank you, Nicole, you may begin. -------------------------------------------------------------------------------- Nicole B. Shevins, Take-Two Interactive Software, Inc. - SVP of IR & Corporate Communications [2] -------------------------------------------------------------------------------- Good afternoon. I recently joined Take-Two, and I'd like to thank you for joining our conference call to discuss our results for the third quarter of fiscal year 2021 ended December 31, 2020. I'm thrilled to join the team and look forward to working with all of you. 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. I'd like to remind everyone that 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 all comparisons are year-over-year. Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. Our press release also contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook. Our press release and filings with the SEC may be obtained from our website at take2games.com. And now I'll turn the call over to Strauss. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [3] -------------------------------------------------------------------------------- I'd like to welcome Nicole to our team, and I'm confident that she'll enhance our Investor Relations efforts going forward. On behalf of our entire management team, I'd like to acknowledge those who've been and continue to be affected by the global pandemic. No words can bring comfort to those who've suffered. However, we do remain hopeful that better days lie ahead and that we all may return to and enjoy our lives as we once did. We remain immensely grateful to frontline workers who are caring selflessly for those in need, ensuring the vaccines are being delivered and administered and helping the world navigate further these troubling times. Turning to Take-Two. Due to an incredibly strong holiday season coupled with our ability to provide consistently the highest-quality entertainment experiences, especially as many individuals continue to shelter at home, Take-Two delivered operating results that significantly exceeded our expectations. The outperformance of Grand Theft Auto Online, Grand Theft Auto V, NBA 2K, the Mafia Definitive Editions of Mafia: Trilogy and Red Dead Redemption 2 reflects our development team's boundless passion, creativity and commitment to captivate and engage audiences. In the history of the entertainment industry, there's perhaps no experience that's more loved, more expansive, more critically-acclaimed and more successful than Rockstar Games' Grand Theft Auto. Grand Theft Auto V remains one of the most iconic titles ever released and continues to exceed our expectations, having sold in over 140 million units. In fact, in calendar 2020, more copies of Grand Theft Auto V were sold than in any other year except for 2013 when it first launched on PlayStation 3 and Xbox 360. In addition, recurrent consumer spending on Grand Theft Auto Online outperformed our third quarter forecast and grew 28% year-over-year. In December, Rockstar Games released Grand Theft Auto Online's biggest update to date, the Cayo Perico Heist. Featuring a radical new approach to heist design as well as a new tropical island to explore, the Cayo Perico Heist is an all-new Grand Theft auto Online adventure in which players can choose to take on a heist with a crew of up to 4 or, for the first time, plan, prepare and execute the daring island heist all on their own. Notably, more than 50% of those playing the Cayo Perico Heist are engaging with this as a new single-player experience. Cayo Perico Heist also introduces an array of exciting new weapons and vehicles, a new virtual night club and social space for players to get together and experience the world's best DJs, plus a host of updates across the entire world. In addition, overall engagement with Grand Theft Auto Online continues to set new benchmarks as the title had more players in every month and for the entirety of calendar 2020 than in any other year since its launch. 2020 also marked Grand Theft Auto Online's highest participation rate ever by both new players and reactivated players who return to experience Rockstar Games array of new content offerings. Grand Theft Auto Online is expected to achieve a new net bookings record in fiscal 2021. Red Dead Redemption 2 also outperformed and, to date, has sold in over 36 million units worldwide. In December, Rockstar Games released a stand-alone version of Red Dead Online on PlayStation 4, Xbox One and PC that, for the first time, allows new players who do not already own Red Dead Redemption 2 to experience everything Red Dead Online has to offer, including access to all future content updates. Players also have the option to unlock Red Dead Redemption 2 story mode via an array -- via an additional purchase. In addition, during the quarter, Rockstar Games released an array of content updates for Red Dead Online, including new legendary animals and sightings missions for the Naturalist role; action-packed new missions for the Bounty Hunter role, with the addition of the prestigious Bounty Hunter License, plus Outlaw Pass #4 and an assortment of new clothing, weapons, enhancements and more. As a result of these offerings, engagement with Red Dead Online reached new heights, and there were more players including more new players in the month of December than in any other month since its beta launch in 2018. In addition, Red Dead Online grew its audience and had more overall players in calendar 2020 than 2019. Rockstar Games will continue to support both Red Dead Online and Grand Theft Auto Online with more content updates throughout calendar 2021 to keep new and returning players excited and engaged. Another beloved franchise that's both a perennial favored among consumers and an integral contributor to our ongoing success is NBA 2K from 2K and Visual Concepts. Renowned for being our industry's leading basketball simulation series, each year, NBA 2K continues to reinvent how people experience basketball and its rich culture and influence. NBA 2K21 once again raised the bar for the series and was our first offering that was built from the ground up for next-generation consoles. The title boasts groundbreaking technological advancements, new modes and many exclusive robust features. To date, NBA 2K21 has exceeded our expectations and has sold in over 8 million units across all platforms. In addition, during the third quarter, net bookings for the NBA 2K series grew 48%, and recurring consumer spending significantly exceeded our expectations, growing 67%. Furthermore, consumer engagement with NBA 2K remains incredibly strong across daily active users, MyCAREER users and MyTeam users. Moreover, NBA 2K21 users have been more deeply engaged with the game with average games played per user up 14% as compared to NBA 2K20 in the same period. During the quarter, 2K expanded further the breadth of its NBA 2K offerings with the releases of NBA's SuperCard and NBA 2K Mobile Season 3 for iOS and Android devices. During the third quarter, 2K bolstered our initial offerings for PlayStation 5 and Xbox Series X with our beloved shooter-looter title, Borderlands 3. The title was fully optimized for next-generation consoles, making mayhem bigger and bolder than ever before. All players who own or purchase the game on prior consoles will be able to download the new platform upgrade within the same console family for free. This free upgrade will add several exclusive features, including 4K resolution at 60 frames per second and single player and online co-op, plus support for 3 and 4 players split screen co-op. Borderlands 3's launch for next-generation platforms was well-received, and we've seen the games user base grow steadily. 2K is supporting the title within game events and new content, including the release of the Designer's Cut, which is the first of 2 offerings as part of the Season Pass 2 to for all versions of the game. Our third quarter results were also enhanced by a variety of other offerings led by the Mafia Definitive Editions and Mafia: Trilogy, the WWE series, Sid Meier's Civilization VI and PGA Tour 2K21. Driving engagement with our titles after initial launch remains among our most important long-term growth and margin opportunities and is a key strategic priority of our organization. We now support virtually all our new releases with innovative offerings to achieve this goal. That said, we're highly mindful that, first and foremost, we're an entertainment company, and we're in the service of our audience. We strive to give consumers more of what they love in the ability to stay captivated and engaged within their favorite experiences and passionate communities. To that end, during the third quarter, we released an array of free and paid add-on content for our popular hit releases, including Kerbal Space Program, PGA Tour 2K21, Sid Meier's Civilization VI and WWE 2K battlegrounds. During the third quarter, recurrent consumer spending exceeded our expectations, growing 30%, which was double our original outlook and accounted for 58% of net bookings. In addition to NBA 2K, Grand Theft Auto Online and Red Dead Online, the recurrent consumer spending was enhanced by the following offerings: Social Point live games, including Dragon City, Monster Legends, Word Life, World Chef and Tasty Town, outperformed during the third quarter and exceeded expectations. Live games delivered new fresh content, events and experiences to boost engagement and enhance players' enjoyment, and net bookings grew 39%. The studio continues to invest in its broad and innovative pipeline of new games planned for launch in the coming years. Playdots completed the rollout of their biggest feature update of the year for their popular Two Dots title, including competitive leaderboards. This update played a key role in driving average revenue per daily active user, up 12% as compared with the second quarter of fiscal '21. Two Dots is now experiencing its highest player conversion rates ever as a result of these new and expanded live-ops features, which continue to perform very well. We expect Playdots to be a significant contributor to our results and expect growth over the long term. WWE SuperCard also outperformed during the third quarter, growing 16%. During the period, 2K launched season 7 of this popular free-to-play sports entertainment mobile game. The title has now been downloaded more than 22 million times and remains 2K's highest grossing mobile title. And NBA 2K Online in China grew 49% and remains a significant contributor to our results. The title is the #1 PC online sports game in China with more than 51 million registered users. Add-on content grew 8% and outperformed expectations, led by offerings for the Borderlands Series and Sid Meier's Civilization VI. As a result of our better-than-expected third quarter performance and increased forecast for the remainder of the year, we're once again raising our outlook for fiscal year 2021, and we expect to achieve record net bookings of $3.37 billion to $3.42 billion. In closing, Take-Two is exceedingly well-positioned to capitalize further on the positive trends of our industry to pursue our core mission to become the most innovative, creative and efficient entertainment company in the world and to deliver growth and returns for our shareholders over the long term. I'll now turn the call over to Karl. -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [4] -------------------------------------------------------------------------------- Thanks, Strauss. I'd like to begin by recognizing the ongoing work of our teams around the world. We continue to deliver incredible results that are a testament to Take-Two's unwavering commitment to quality, our deeply rooted culture of collaboration and a singular drive to achieve our goals. Our unique ability to captivate and engage audiences has never been more evident nor more important than in these challenging times, and we remain immensely grateful to our player communities for making our games part of their lives. I'll now discuss our recent and upcoming releases. On January 27, 2K released the fourth roster update for WWE 2K Battlegrounds, which adds to the game's outrageous in-and-out-of-the-ring action. The update, which features many popular superstars and legends, including Chyna, Mark Henry, Christian and more. On Wednesday, 2K will release the fifth update that will feature even more fan favorites, and they will share detail shortly. On January 28, 2K and Firaxis Games released the Vietnam and KubeCon pack for Sid Meier's Civilization VI as part of the new Frontier Pass for Playstation 4, Xbox One, Nintendo Switch and PC. Each pack in this pass features new civilizations and leaders and is also available for individual purchase. The final Frontier Pass pack will be released next month, and 2K will have more to share about that in the coming weeks. In addition, last week, Private Division launched their beloved space simulation, Kerbal Space Program on Tencent's WeGame platform in China. We are very pleased to build upon our successful partnership with Tencent and believe that releasing Kerbal Space Program on WeGame represents a great opportunity to expand the global community and bolster our offerings in China. On February 10, Private Division and Obsidian Entertainment will release the Outer World's Peril on Gorgon, the first narrative-led expansion for the critically-acclaimed darkly humorous sci-fi RPG for the Nintendo Switch. The expansion was released previously for Playstation 4, Xbox One and PC and is available individually or as a discount as part of the Outer Worlds Expansion Pass, which will also include the Outer Worlds Murder on Eridanos, the second expansion set to launch on PlayStation 4, Xbox One and PC this fiscal year and on Nintendo Switch later in calendar 2021. This spring, 2K will release the Director's Cut, the new add-on content for Season Pass 2 for Borderlands 3 that will be available for all released versions of the game. The Director's Cut add-on will include new missions, in-game content and behind-the-scenes extras. On behalf of our team, I would like to congratulate Gearbox Software on their recently announced merger with Embracer. This marks an exciting new chapter in the studio's history, and we look forward to continuing our successful partnership with Gearbox, including the long-term publishing relationship for the Borderlands franchise going forward and some unannounced projects that will be revealed over time. Throughout the year, Rockstar Games will continue to support both Grand Theft Auto Online and Red Dead Online, with more content updates to keep new and returning players excited and engaged. In addition, during the second half of calendar 2021, Rockstar Games will bring the blockbuster hit, Grand Theft Auto V, to the latest generation of consoles. The new releases will feature a range of technical improvements, visual upgrades and performance enhancements to take full advantage of the latest hardware, making the game more beautiful and more responsive than ever. For the expanded community of Grand Theft Auto Online, the journey through this ever evolving world will continue on the latest generation consoles with additional new updates, including content that is exclusive to the new consoles and PC. There will also be a new stand-alone version of Grand Theft Auto Online coming in the second half of calendar 2021, which will be available for free exclusively on PlayStation 5 during the first 3 months. Rockstar Games will share more detail on the new versions of Grand Theft Auto V in the months ahead. Turning to e-sports. The NBA 2K League is gearing up for its fourth season that will take place later this year. After a series of program tournaments and a first-of-its-kind league combine during the fall, the league is currently prepping for this year's upcoming player draft. As part of the league's continued commitment to identifying the best players in the world, this off-season, the league is hosting a series of online qualifying events for international players and will award draft eligibility to top performers from each event. In addition, I'm pleased to share that for the second consecutive year, the NBA 2K League was given top honors at the Tempest Awards as part of the annual e-sports business summit. I'd like to congratulate League President, Brendan Donohue, and his team on these honors. We remain very excited about the continued success and growth of the NBA 2K League, which has the long-term potential to enhance engagement and to be a driver of profits for our company. Looking ahead, our organization is currently undertaking numerous initiatives that we believe will add scale to our business and drive continued success. As an entertainment company, our lifeblood is our world-renowned creative talent and portfolio of owned intellectual property. With nearly 4,900 colleagues around the world in our development studios that are home to some of the most commercially and critically successful brands in our industry, we are significantly expanding the breadth and depth of our offerings and currently have the largest, most diverse long-term product pipeline in our history. While we are excited by the potential of these future releases, we are still pursuing our goal of creating a more consistent release schedule and increasing our development capacity. To that end, we continually explore both organic and inorganic opportunities and maintain a highly-disciplined approach to ensure that our investments will be accretive to our shareholders and consistent with our strategy. In addition, we have always maintained a willingness to explore and experiment with new markets and business models that can both expand the reach of our content and broaden the scope of our audience. We are investing prudently to enhance our global infrastructure and resources that support our creative endeavors, including data analytics and in-game engagement with players. Through all these efforts, we believe that Take-Two is poised to generate growth and margin expansion over the long term. I'll now turn the call over to Lainie. -------------------------------------------------------------------------------- Lainie Goldstein, Take-Two Interactive Software, Inc. - CFO [5] -------------------------------------------------------------------------------- Thanks, Karl, and good afternoon, everyone. Today, I'll discuss our third quarter results and then review our financial outlook for the fourth quarter and fiscal year 2021. Please note that additional details regarding our actual results and outlook are contained in our press release. Net bookings were $814 million. This result exceeded our outlook of $675 million to $725 million, driven primarily by the outperformance of Grand Theft Auto Online and Grand Theft Auto V, the Mafia Definitive Editions and Mafia: Trilogy, NBA 2K and Red Dead Redemption 2. Digitally-delivered net bookings declined by 4% as compared to our outlook of a 15% decline and accounted for 82% of the total. This result exceeded our outlook, primarily due to the outperformance of recurrent consumer spending. Our third quarter results last year benefited from the launches of Red Dead Redemption 2 on PC and the Outer Worlds. During the third quarter, 56% of sales of console games were delivered digitally, up from 44% last year. Recurrent consumer spending grew 30% as compared to our outlook of 5% growth and accounted for 58% of total net bookings. This growth was driven primarily by Grand Theft Auto Online and NBA 2K. GAAP net revenue was $861 million, and cost of goods sold was $346 million. Operating expenses increased by 7% to $339 million due primarily to the addition of Playdots, higher personnel costs and IT expenses, partially offset by lower marketing expenses. And GAAP net income grew 11% to $182 million or $1.57 per share as compared to $164 million or $1.43 per share in the third quarter last year. Our GAAP net income benefited from $40.6 million of realized and unrealized gains on a long-term investment. We ended the quarter with $2.42 billion of cash and short-term investments. Not included in this balance is the cash portion of our offer to acquire Codemasters, which was included in restricted cash. As this amount not being considered still restricted as of December 31, our cash and short-term investments for the quarter end would have been $2.7 million. As of January 13, 2021, the offer lapsed, and the cash is no longer restricted. Now to our guidance, starting with the fiscal fourth quarter. We project net bookings to range from $602 million to $652 million compared to $729 million in the fourth quarter last year. Last year's fourth quarter benefited from the recognition of higher license fees from digital partners to provide free downloads of certain games on their platform and from the launch of Borderlands 3 on Steam. This decline is also due to the initial surge in digital downloads at the onset of shelter-at-home orders in March 2020. Therefore, we expect digitally-delivered net bookings to be down approximately 10%. Digital is projected to represent 93% of total net bookings, which is in line with last year. Forecast assumes that 73% of console game sales will be delivered digitally, up from 63% last year. We project recurrent consumer spending to be up approximately 5% due to continued engagement in our title. Virtual currency is driving this increase and is partially offset by lower add-on content due to last year's launch of the second DLC for Borderlands 3. The largest contributors to net bookings are expected to be NBA 2K21, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Point's mobile games, Two Dots, Borderlands 3 and Sid Meier's Civilization VI. We expect GAAP net revenue to range from $702 million to $752 million and cost of goods sold to range from $267 million to $293 million. Operating expenses are expected to range from $316 million to $326 million. At the midpoint, this represents a 32% increase over last year driven primarily by higher marketing and research and development expenses and the addition of Playdots, and GAAP net income is expected to range from $102 million to $113 million or $0.88 to $0.98 per share. For management reporting purposes, we expect our tax rate to be 16% throughout fiscal 2021. We are again increasing our full year outlook, which now includes record net bookings and operating results. This will be the fifth consecutive year that these 2 metrics have grown. Our net bookings outlook range is now $3.37 billion to $3.42 billion, up from our previous guidance of $3.15 billion to $3.25 billion and original guidance of $2.55 billion to $2.65 billion. This is being driven by our third quarter outperformance along with an updated forecast for the fourth quarter, which has improved primarily due to higher recurrent consumer spending from Grand Theft Auto Online and NBA 2K as well as strong performance from Grand Theft Auto V and Red Dead Redemption 2. We expect growth from the prior year from NBA 2K, Grand Theft Auto Online and Grand Theft V and Social Point's mobile games to be offset primarily by lower results from Borderlands 3. The largest contributors to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Point's mobile games, Borderlands 3, Sid Meier's Civilization VI the Mafia Definitive Editions and Mafia: Trilogy and PGA Tour 2K21. We expect the net bookings breakdown from our labels to be roughly 55% 2K, 35% Rockstar Games and 10% Private Division, Social Point and Playdots. And we forecast our geographic net bookings split to be about 60% United States and 40% international. We now project digitally-delivered net bookings to increase by approximately 20% as compared to our prior outlook of 15% growth. As a percentage of our business, digital is projected to represent 87% of net bookings, up from 82% last year. Our forecast assumes that 63% of console game sales will be delivered digitally, up from 55% last year. We now expect recurrent consumer spending to grow by approximately 45% as compared to our prior outlook of 30% growth and to represent approximately 64% of net bookings as compared to 51% last year. Growth is being driven primarily by NBA 2K, Grand Theft Auto Online, the addition of Playdots and Social Point's mobile games. We are increasing our non-GAAP adjusted unrestricted operating cash flow outlook to more than $750 million, up from our prior outlook of more than $650 million. We plan to deploy approximately $75 million for capital expenditures. We expect GAAP net revenue to range from $3.24 billion to $3.29 billion and cost of goods sold to range from $1.52 billion to $1.55 billion. Total operating expenses are expected to range from $1.22 billion to $1.23 billion. At the midpoint, this represents a 9% increase over the prior year driven by the addition of Playdots, higher headcount, IT, research and development expense and charitable contributions, partially offset by lower marketing expenses. And we expect GAAP net income to range from $472 million to $484 million or $4.08 to $4.18 per share. In closing, we are very pleased with the ongoing momentum that we have experienced so far in fiscal 2021, including our expectations to deliver both record net bookings and operating results for the full year. We remain extremely confident in our long-term growth trajectory and our ability to deliver shareholder value driven by our key competitive advantages, our incredible portfolio of creative assets, our strong fundamentals and healthy balance sheet and, of course, our industry-leading talent. Thank you. I'll now turn the call back to Strauss. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [6] -------------------------------------------------------------------------------- Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their hard work, commitment to excellence and for delivering another outstanding quarter. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Mario Lu with Barclays. -------------------------------------------------------------------------------- X. Lu, Barclays Bank PLC, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Great. So I have one high-level strategy and M&A question and the second one on GTA. So the first one, you guys mentioned more copies of GTA V sold in 2020 than any year since launch, and then similarly, Red Dead Online saw more players in December since launch. So it seems like you guys are benefiting well on the trend that gamers are gravitating towards the largest gaming franchises. So that being said, curious to hear what your overall view is on growing your core franchises and potentially expanding them into new platforms and business models versus expanding your portfolio with new IP, either organically or through M&A. And I have a follow-up. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [3] -------------------------------------------------------------------------------- Great. Thanks, Mario. It's sort of all of the above. So it's exciting that we have these extraordinary franchises that keep captivating and engaging consumers many years after launch. And the reason that that's occurring is, first of all, the initial quality, which is unmatched in our business; and second, because our labels, both Rockstar Games and 2K, continue to deliver content on an ongoing basis that further causes captivation and engagement. And if we keep doing that, then we'll continue, we think, to have similar results. I think you're right that consumers get really comfortable with and excited by specific franchises. And if you keep delivering great content, they will maintain their involvement on an ongoing basis. We're seeing that in all forms of the entertainment business. At the same time, we always have to create new titles, both new iterations of existing beloved franchises and new intellectual property. And if we don't do that, then we're burning the furniture. So to that end, in the next 5 years, we expect to bring 93 new releases to market, which is more than double what our development capacity was just a few years ago. So we're both excited by the continued growing engagement in our existing entities as well as what the future can bring with new releases. -------------------------------------------------------------------------------- X. Lu, Barclays Bank PLC, Research Division - Research Analyst [4] -------------------------------------------------------------------------------- Great. And then the second question on GTA Online, you guys mentioned over half of your players did the recent heist solo. So I'm presently surprised that number since more and more players are playing games as a means of social connection. So how did that percentage compare versus your internal expectations? And does that change how you view single-player opportunity even in an existing online environment like GTA Online? -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [5] -------------------------------------------------------------------------------- Well, no, this wasn't coincidental. I mean the folks at Rockstar Games intended to create a powerful single-player experience, a story-driven experience. And Rockstar has always been known for great stories and great single-player experiences and then developed, in addition, a massive multiplayer opportunity over the past years. And I think it's a reminder, not that we needed one, that Rockstar Games can do both of those things at the highest possible level of execution in our business. There was a -- I think it was an argument just a couple of years ago, not around here, not in this shop, but in some of our competitors' offices that single player is dead, that it's all about multiplayer. We didn't believe that. I said specifically and publicly that we didn't believe that. Our labels don't believe that, and we deliver an array of experiences that range from hyper-casual mobile to the most complex, the most robust single-player and multiplayer experiences, and we intend to continue doing that. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Our next question comes from Mike Ng with Goldman Sachs. -------------------------------------------------------------------------------- Michael Ng, Goldman Sachs Group, Inc., Research Division - Research Analyst [7] -------------------------------------------------------------------------------- Great. I just want to talk about how the success of GTA 5 units this year as well as any learnings from the stand-alone Red Dead Online experience informs your view about what GTA enhanced edition and the standalone GTA Online should look like or will look like next year and perhaps how it should perform. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [8] -------------------------------------------------------------------------------- Well, I really appreciate the sentiment behind the question, but I'd sort of put in the category of how high is up. We don't tend to speculate, and we haven't offered any initial guidance for next fiscal year either. So we'll sharpen our pencil in the coming months, and of course, we'll create initial guidance, and that will reflect partially that performance. But in general, if history is any guide, it will be very successful indeed, and that wouldn't surprise me. -------------------------------------------------------------------------------- Michael Ng, Goldman Sachs Group, Inc., Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Great. I can certainly appreciate that. And just as another question, can you talk a little bit about the Music Locker experience within GTA online? Obviously, it's -- it feels like it's somewhat unique. Is there an opportunity for Rockstar or 2K to incorporate even more, I guess, for a lack of better words, real-world elements or real-world partners into a virtual world like GTA Online? -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [10] -------------------------------------------------------------------------------- It's Karl speaking. Yes, obviously, the Music Locker experience is very unique. It's a terrific application in GTA. Music has always been a really, really important part of the Grand Theft Auto franchise, and it will continue to be. It's always been part of the culture of the Grand Theft Auto franchise, and people explored and enjoyed and found new music through the franchise over and over again. I don't want to speculate about what's in Rockstar's plans as it relates to music, but rest assured, music has always been and will always be a large part of what GTA is all about. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Our next question comes from Colin Sebastian with Robert W. Baird. -------------------------------------------------------------------------------- Colin Alan Sebastian, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [12] -------------------------------------------------------------------------------- Great. Two questions for me. First off, as you look back at the pricing strategy for NBA over the holidays, is it safe to say you feel that, that was the right strategy? And I guess does a set a new bar for AAA frontline content on next-gen platforms? And then secondly, bigger picture, just given the ongoing industry consolidation, Strauss, and the interest you've shown in participating that activity, are you seeing still compelling opportunities out there in the market even as competition for deals seems pretty intense and valuations look like they're also on the rise? Any commentary there would be helpful. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [13] -------------------------------------------------------------------------------- Yes. In terms of frontline pricing for NBA 2K21, I think that worked out very much as expected and as planned. It's a premium offering at the highest possible level. The title was built from the ground up for next-gen. It's the first title here that has been created that way, and the acceptance by consumers has been nothing short of extraordinary. The title sold in over 8 million units. Now we haven't talked about pricing on other titles, so it'd be premature to discuss that. We'll talk about that on a title-by-title basis going forward. In terms of consolidation, you've seen a lot of deals out there. Most recently, Embracer is merging with Gearbox, a company near and dear to our heart, and we're grateful that we'll still be in business with Gearbox and they'll still be working with us some on Borderlands and other titles. We acquired Playdots just a few months ago, and we're excited about how that deal has gone. We lost the Codemasters' deal to our friends out west. That was disappointing but reflects our discipline in such matters. So there is an awful lot going on. I tend to agree, Colin, that pricing can be pretty heavy, and we have a stated strategy and a disciplined approach. It served us well. We have yet to make an acquisition that hasn't worked out. We're looking for great teams, great intellectual property and for an arrangement that would be accretive to shareholder value. And we'll look for that and at times aggressively, but we have sort of a firm -- we have a firm grasp on the hand calculator in one hand and on our approach, strategy and tactics on the other. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Our next question comes from Doug Creutz with Cowen & Co. -------------------------------------------------------------------------------- Douglas Lippl Creutz, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [15] -------------------------------------------------------------------------------- You've always been known for -- Take-Two has been known for putting out some of the deepest and most complex games in the market, and there's been a debate, I think, emerging in the industry about whether the current pace of AAA game development is sustainable, both I think for getting games out the door and then the sense that live services are becoming more and more of an arms race in terms of who can put the most content out the quickest. There was a competing game that came out recently that was highly anticipated where I think it was a clear case of that studio's reach exceeding their grasp. What have you been doing and what are you doing sort of operationally structurally to make sure that your ability to keep raising the bar and your entertainment experiences doesn't run a file of some of these issues? -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [16] -------------------------------------------------------------------------------- Well, first of all, you never want to sit back and just say we've always been able to do it, it's totally fine, it will be fine going forward. We're always looking over our shareholders. We're always trying to figure out what we can do better. We're, I think, the most self-critical group I've ever run into. How do we maintain our commitment to quality? By making sure that our creative teams pursue what they're passionate about and don't pursue something they're not passionate about and by maintaining operational and financial discipline at the same time. And the effect of that is that we can have long development cycles, and we've been criticized for that. But I think the case that you're alluding to reflects the fact that you're always better served to wait for perfection if you can create perfection, and all of our labels are seeking perfection. And we don't always succeed. Sometimes we fall short, but that's the goal. And if anything, these times cause us to sharpen our minds further and sharpen our discipline further and try harder. So yes, it's great that Rockstar Games continues to put out add-on content and additional content for Grand Theft Auto Online and for Red Dead Online. But they put out material that they really believe in, that they're passionate about and that is of the highest possible quality, and that means we're not on a weekly cadence and we're not going to be in. That means we don't necessarily know the exact release date, but what we do know is if we will wait for it to be as close to perfect as anything can be. And that's true at 2K, and that's true at Social Point, and that's true at Private Division, And that's an unwavering commitment, and it's part of our strategy, and it comes from the top of the company. And we are prepared to accept the results when we fall short in terms of timing or when we sometimes spend a little more than we would like because it always pays off. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Our next question comes from Brian Nowak with Morgan Stanley. -------------------------------------------------------------------------------- Brian Thomas Nowak, Morgan Stanley, Research Division - Research Analyst [18] -------------------------------------------------------------------------------- Strauss, I wanted to dig a little more into the 93 pipeline number you mentioned earlier tonight again. I think it's very similar to what you guys said last year. So I guess the question is, is this the same 93 titles we had a year ago? Or are some being shut down and you have new ones in there? And then just so we can kind of better understand, how do we think about breaking that apart any way you'd like to between categories, between mobile, between AAA, between more mid-tier games? Just how should we think about what's in this 93 titles? -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [19] -------------------------------------------------------------------------------- Hi, Brian. It's Karl. I'll take this one. So to answer the first part of the question, the 93 titles that we put out there was a snapshot. It was a moment in time, and we really haven't given any updates on that since then. Of course, things move in and out all the time. It hasn't really been that long since then, so you can't really expect that there's going to be a significant amount of movement. But I can tell you, for sure, there are some things that have fallen out and some things that are back in. But generally speaking, these are still pretty good numbers in general. But again, we do expect that this pipeline will be fluid as we get things through various milestones, so it will be changing over time. But we haven't provided any additional updates other than the 93 initial announcement that we made. And just to break it down a little bit for you in terms of what comprises that 93, so on a high level, 63 of those titles of the 93, we would consider core gaming experiences, and 17 of them are sort of mid-core arcade style experiences, and 13 of them are what we consider to be casual experiences. About half of them, 47 of the titles, are from existing IP or sequels, and the rest of them are for our new intellectual properties. So we are making investments in new IP, very important. Strauss spoke about that earlier. And then in terms of platforms, 72 of the 93 titles are planned for console, PC or streaming, including 7 of those that will also be available on mobile. So that would leave 21 that are on the list specifically for mobile. And also, from a business model perspective, 67 of the 93 are -- they're required to be purchased, and 26 are completely free-to-play. So that's the breakdown as it was the last time we did it, but we do expect that, that will be moving around as we go deeper into that pipeline and over the next few years. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Our next question comes from Bryan Kraft with Deutsche Bank. -------------------------------------------------------------------------------- Bryan D. Kraft, Deutsche Bank AG, Research Division - Senior Analyst [21] -------------------------------------------------------------------------------- Would love to understand, at this point, your latest thinking about the mobile gaming opportunity for you in terms of what kinds of IP and games are likely to succeed, how much capital and resources it makes sense to put behind mobile and what the broader strategy is going forward in the mobile space. -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [22] -------------------------------------------------------------------------------- It's Karl again. So obviously, the mobile component of our business is becoming more and more important with our acquisition of Social Point and Dots, so we are very committed to it, not to mention mobile activity on our label levels, specifically at 2K with WWE SuperCard, et cetera, and some NBA properties. So we are highly invested in the mobile business, and we expect that it'll be even growing part of our investment going forward. But it really does -- our strategy boils down to a few components, and the first really is it focuses around new -- creating new IP for the mobile space, and that's around our Social Point and Playdots business. So it's IP that's created specifically for the mobile environment. And we've been investing in that, obviously, over the past couple of years, specifically through M&A, but also now organically now that we've got a pretty sizable platform between those 2 acquisitions. The second component is bringing our core franchises to the mobile platforms. So these are games that are more or less port, so there could be site variations of games, existing content that exists. So we've done that quite successfully for many, many years, and we'll continue to do so where it's appropriate. And then the third component is really just bringing our core -- is integrating a mobile experience with our core experiences. So these are things like companion apps, which we've done effectively with Red Dead Redemption, we did it with Mafia, as we've done it with a number of our franchises where you can have a separate mobile experience that you can use, and it can be used to enhance your core experience pretty much at the same time or maybe off-line or when you're not in front of your television side of your console. So those are really the components of our strategy, but obviously, it's a growing part of the industry. We're very tapped into it, and we're investing more and more. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- (Operator Instructions) Our next question is from Matthew Thornton with Trust Securities. -------------------------------------------------------------------------------- Matthew Corey Thornton, Truist Securities, Inc., Research Division - VP [24] -------------------------------------------------------------------------------- Maybe 2, if I could, maybe for either Strauss or Karl. First one is just higher level. You referred to the pipeline, the 93 projects a little bit earlier. I'm just wondering if there's any color you can offer just as to how we're kind of progressing. And maybe it's a little bit early, but just any incremental thoughts as to what the linearity is shaping up to look like there? Any color around the pipeline would be helpful there. And then just secondly, PGA Tour, it's fairly a small game, but it was well-reviewed, so it looks like successful by all accounts. I'm curious that, that was successful enough or large enough where it could actually become a recurring title and join NBA and WWE in that regard. Any thoughts there? -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [25] -------------------------------------------------------------------------------- So on the first part of the pipeline, I really don't have more information I can give you in terms of the pace of that pipeline and when these titles are coming out. But rest assured, you will be hearing a lot more about that in the coming months and as we talk about our release schedule. So unfortunately, I don't have any more to give you on that. And then in terms of the PGA Tour 2K, we are incredibly excited about that, the performance of that title. And I'd like to say that we're not surprised, but I am personally a little bit surprised. We -- it's done fantastically well. We've sold around 2 million units or so, which is a fantastic result, and we're just really getting started. So we do think that there's a future in this franchise for us. We haven't really announced much about what specifically that means. But with that a doubt, this is something that we feel like it merits investment from our side, and that's something that we can really turn into a very profitable and exciting franchise for us going forward for many years. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Our next question comes from Benjamin Black with Evercore ISI. -------------------------------------------------------------------------------- Benjamin Thomas Black, Evercore ISI Institutional Equities, Research Division - Co-Head of Internet Research [27] -------------------------------------------------------------------------------- Great. So obviously, the gaming category as a whole has benefited from these extended stay-at-home provisions. But as we look to calendar '21, I'd be curious to hear what data points or trends you're seeing that could give us some confidence in the sustainability of some of the trends we're seeing today. And then secondly, I was wondering if you could talk a little bit more about the decision to disaggregate Red Dead Online from the core game. What are some of the key findings you have there? And curious to hear how Red Dead Online is faring relative to GTA Online at a comparable stage with life cycle. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [28] -------------------------------------------------------------------------------- Sorry, on the first question, I'm hard-pressed to know what data that would be, except that we continue to do very well and engagement is very high. We had not planned in our numbers for the fourth quarter to see growth driven by the pandemic. That has not been our approach. But of course, we continue to outperform and the net bookings that we're guiding to for the fiscal now are $800 million higher than our original guidance. So we're grateful for the growth. I think under any circumstances, post-pandemic, and hopefully, there will be post-pandemic, demand will be higher than pre-pandemic demand. I think it's quite clear that there's been a systemic shift in favor of interactive entertainment. And Activate, our media consultancy, confirmed that. But I don't know whether there'll be some falloff as people are out and about and doing things outside of the home. It wouldn't surprise me if there were. But as long as we continue to deliver great experiences, I think we'll see continued growth. What was your second question again? -------------------------------------------------------------------------------- Benjamin Thomas Black, Evercore ISI Institutional Equities, Research Division - Co-Head of Internet Research [29] -------------------------------------------------------------------------------- Second question was really around the decision to disaggregate Red Dead Online and also how Red Dead Online now is faring relative to GTA Online at the comparable stage of its life cycle. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [30] -------------------------------------------------------------------------------- So they're very different titles, and they're really not comparable in any way. They're both massive hits. And the decision, I think, was based on offering more opportunities to engage with the title. Title has been in market for some time, and Rockstar has shown a willingness to experiment with different marketing models, all in an effort to enhance the size of the audience and to increase customer engagement and enjoyment. And I think it's working out really well, and I'm looking forward to seeing how Grand Theft Auto Online fares when it, too, is available as a stand-alone experience in fiscal '22. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Our next question comes from Mike Hickey with The Benchmark Company. -------------------------------------------------------------------------------- Michael Joseph Hickey, The Benchmark Company, LLC, Research Division - Senior Equity Analyst [32] -------------------------------------------------------------------------------- I know it's early, but as we sort of think about fiscal year '22 here, obviously, you've got a lot of momentum in your live service. And it looks like the step-up here in engagement is going to be lasting. You do have some visibility on the pipeline. Obviously, you have more. I'm just curious if you think you can grow in fiscal year '22. And sort of if you can't exactly answer that, maybe just choose to grow. Obviously, growth is generally a good thing we're looking forward to. Then the second question is the work-from-home scenario duration has continued to sort of extend here and just sort of curious the impact that has had on the developer culture and productivity when you look sort of in the medium term of your pipeline. -------------------------------------------------------------------------------- Lainie Goldstein, Take-Two Interactive Software, Inc. - CFO [33] -------------------------------------------------------------------------------- Mike, so for fiscal year '22, at this point, it's a little early for us to advise fiscal '22 guidance. We're also currently in the process of completing our detailed budget for fiscal '22, and as you know, we typically guide to the next fiscal year when we report our fourth quarter earnings in May. But it's important to keep in mind that this is clearly a record year for us, partly driven by the benefit of individual sheltering at home, and it remains to be seen how long these trends will go on. And when we originally projected sequential growth for fiscal '22 versus fiscal '21, our fiscal '21 guidance was projecting a decrease from fiscal 2020. And now we're expecting record net bookings for fiscal '21, which represents 30% growth over our original guidance and year-over-year growth compared to fiscal '20. Also, we expect record adjusted unrestricted operating cash flow over $750 million, which is more than double our original estimate. So we'll see in May, we'll give you a little bit of an update at that point, so that's when we'll give you some more details on '22. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [34] -------------------------------------------------------------------------------- And Mike, with regard to working from home, I can't predict how much longer that will be the case. We follow what government requirements and suggestions are, and we follow the science and the facts. Some of our offices are open. No one is obligated to come to the office if they're uncomfortable in doing so. That said, we've been extraordinarily productive. Our IT team did an A+ job making remote work possible for our company. We've moved it over to remote work within a week of needing to shelter at home. And we haven't missed a beat, not even not at all. We had one title that was delayed, Kerbal Space Program 2, and that was it. And more importantly, the quality of our releases has been extraordinary. You -- I appreciate the question about culture. I think it's actually difficult to build a culture in a remote work environment, but I don't think it's impossible to do that when you've already gotten to know each other, when you built a powerful company with a powerful business model and a powerful team. I think to the contrary, in a challenging time, everyone pulled together and knew that it was our collective job to make sure the company didn't have any issues and, in fact, continue to grow, and that's exactly what happened. But -- and so in any case, I think morale may actually be stronger, but it's not something that can or should last forever, and it has been taxing. And I think people are actually working harder at home than they did in offices even though there is no commute. I think it creates a lot of challenges, and I'm looking forward to it ending. So no, you're not -- we're not one of those companies where we believe like, "Oh, this is a great idea, everyone will just work from home." I think certain people may be able to work from home more if that's truly their interest. I think generally speaking, we'll benefit from being together as a group. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- Our next question comes from Eric Handler with MKM Partners. -------------------------------------------------------------------------------- Eric Owen Handler, MKM Partners LLC, Research Division - MD, Sector Head & Senior Analyst [36] -------------------------------------------------------------------------------- Thinking about the Grand Theft Auto franchise and the fact that you've now sold over 140 million units of the game, and granted, there's probably some overlap where people have more than one copy of the game, but it seems like there is a huge audience of people that have probably never played GTA IV or any of the other prior GTA games that came out before that. And I just wonder, how do you think about -- obviously, there's a huge appetite for GTA content. And what's your perspective there in terms of thinking about remastering prior games? -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [37] -------------------------------------------------------------------------------- It's a great and encouraging question. I'm kind of inclined to leave it more as a statement than a question, and any updates on our release schedule will come from Rockstar Games. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- Our next question comes from Stephen Ju with Crédit Suisse. -------------------------------------------------------------------------------- Stephen D. Ju, Crédit Suisse AG, Research Division - Director [39] -------------------------------------------------------------------------------- Strauss, over the last few years, I think the industry has gone from needing to acquire customers with massive advertising campaigns every time there was a new iteration of a game to that was set up where you are in front of your user base all the time, and you just called out, I think, in a prior answer, captivation and engagement with what is now basically a perpetual service model. So do you anticipate, going forward, potentially further operating margin benefits due to what might be a decrease need for marketing spend? And I guess building on one of the M&A questions earlier and this is definitely not an either/or question, but do you think your time and Take-Two's capital are probably better served adding to the teams you already have at Rockstar or 2K, where there already seems to be a pretty good culture of excellence there? -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [40] -------------------------------------------------------------------------------- It's a -- thank you for the question. I don't think you're going to see a reduction in our marketing spend because we're launching new iterations of existing franchises, and we're launching new intellectual property in a highly competitive market, and I think we'll continue to spend to support those releases. So I don't think you'll see leverage there. Where you see leverage, though, of course, is when you sell more units. So if you make bigger hits, and we make bigger hits than anyone else in the market, then obviously, you're amortizing that marketing spend across a larger number of units. So a marketing spend as a percent of your net bookings can be lower to the extent that you have greater success, and that's certainly our goal. And in that event, of course, we'd have higher operating margins, and you've seen that reflected in the growth in our operating margins, as you've seen the growth in our hits in the last 14 years. And I would hope that, that would continue, but it will be entirely driven by whatever success we have or don't have. I think where you can have a little more confidence around growth and the margins would be in the shift to digital distribution, which is inexorable and which is happening. And digitally-distributed products were 82% of our net bookings in the quarter, and we think that the world is heading towards more than that, and that will help our margins as well as our competitors' margins. Also, of course, our recurrent consumer spending is higher margin because the cost associated with the content that drives recurrent consumer spending is lower than the cost related to an initial large release. So to the extent that we continue to deliver add-on content to beloved titles, which is our goal, you could see an increase in operating margins coming from that as well. But again, that's reliant upon creating hits, and that won't occur if we don't create more hits. So everything comes down to creating bigger and bigger hits, and that's our goal and our strategy. -------------------------------------------------------------------------------- Karl Slatoff, Take-Two Interactive Software, Inc. - President [41] -------------------------------------------------------------------------------- His building. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [42] -------------------------------------------------------------------------------- Sorry. And I think on your second question, thanks for the reminder, Karl, it's all of the above. We're adding to the teams at 2K and at Rockstar as they work on more properties and bigger properties. We are adding to the teams at Social Point and Private Division selectively as we work on new properties, and we have shown a willingness to acquire companies and add that way as well very, very selectively. So we're a growth business, and you'll see that on our headcount. I'm hopeful that our headcount essentially goes to production capacity, engineering capacity and doesn't go to fixed corporate overhead. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- Our last question comes from Ryan Gee with Bank of America. -------------------------------------------------------------------------------- Ryan Gee, BofA Securities, Research Division - VP of US Equity Research [44] -------------------------------------------------------------------------------- First one for Lainie, we're about a month away from last year when most of us were all sent indoors, and we saw that increased demand for gaming content. So just so we're all on the same page here, do you mind refreshing us how much maybe GTA Online, NBA 2K Online -- I mean NBA 2K perhaps outperformed your expectations in the March quarter last year -- or maybe it's actually more in the June quarter? But if you could try and quantify that so that we can have our model set up accordingly, that would be fantastic. And then a question for either Strauss or Karl, you guys acquired Ruffian Games -- or Rockstar acquired Ruffian late last year. I believe that they have a history in the shooter category with the Halo franchise specifically. So are they coming on board to broaden Rockstar's reach to genres like that? Or what role do you anticipate they'll play in the future of that studio, either supporting or more of a lead development role? -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [45] -------------------------------------------------------------------------------- We're thrilled to welcome the Ruffian team to Rockstar Games and to Take-Two, and we think they're an extraordinarily talented team, and we're looking forward to them becoming a part of Rockstar Games. And beyond that, there'll be more announcements in due time. -------------------------------------------------------------------------------- Lainie Goldstein, Take-Two Interactive Software, Inc. - CFO [46] -------------------------------------------------------------------------------- And Ryan, on the title-by-title on the -- for the fourth quarter last year, I don't have that information in front of me, but we can follow up with you on that. But all of our titles, I think, overperformed in that quarter. But on a title-by-title basis, it was a significant overachievement, specifically on GTA Online and for NBA 2K. -------------------------------------------------------------------------------- Strauss H. Zelnick, Take-Two Interactive Software, Inc. - Executive Chairman & CEO [47] -------------------------------------------------------------------------------- Well, thank you all very much for joining us today. Obviously, we're really proud of what the entire team has achieved. The results are extraordinary, and all of us are so grateful to our colleagues around the world. And of course, we're grateful to you for joining us today. Thanks so much. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.