Take-Two Interactive Stock

Hello, everyone. Thank you for joining us, and welcome to the Take-Two Interactive Software Second Quarter Fiscal Year 2027 Results Conference Call. [Operator Instructions].

I will now hand the conference over to Nicole Shevins, SVP, Investor Relations and Corporate Communications. Nicole, please go ahead.

Good afternoon. Thank you for joining our conference call to discuss our results for the second quarter of fiscal year 2027 ended September 30, 2026. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.

Before we begin, I'd like to remind everyone that 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.

Thanks, Nicole. Good afternoon, and thank you for joining us today. We delivered second quarter net bookings of $1.6 billion, which was slightly below our guidance range of $1.62 billion to $1.67 billion, while NBA2K '27 launched successfully and achieved the second highest net bookings performance in the history of the series, it was below our forecast for the period. Our mobile business performed in line with our plans and the Grand Theft Auto series exceeded our forecast ahead of next week's eagerly anticipated launch of Grand Theft Auto V.

We're reiterating our fiscal 2027 outlook for net bookings of $8 billion to $8.2 billion. Preorders for Grand Theft Auto V are tracking far in excess of our initial expectations, and we know that the numbers will speak for themselves soon enough. Our outlook also includes the launches of new mobile and previously announced sports titles and growth in recurrent consumer spending for NBA 2K '27 during the second half of our fiscal year, driven by the largest slate of post-launch content in franchise history.

Turning to highlights from the period. Brad Theft Auto V continues to expand its audience and to date the title has sold nearly 235 million units worldwide. The series grew a double-digit percentage for both recurrent consumer spending and average monthly members for GTA as players enjoy the latest major update to Court Center Heist, along with monthly events, new races and more.

In September, Rockstar Games unveiled No Pixel 5, the next evolution of Grand Theft Auto V's role play community with an entirely overhauled experience, new locations and graphic enhancements focused on player immersion. To celebrate the launch throughout the month, players were able to earn exclusive items within Grand Theft Auto Online by watching select Role Play streamers on Twitch. Rockstar Games will continue to support Grand Theft on online with new content and ongoing events for its vast community.

Grand Theft Auto VI coming to the world on November 19 promises to be not only highly engaging, but in fact, the biggest and most detailed groundbreaking experience of Rockstar Games has ever created. As you've undoubtedly seen, marketing for the title is well underway across the globe and has included an extended look at the game, which premiered on Netflix and became the platform's most viewed title for the week drawing in 31 million consumers in just its first 4 days, an array of in-depth features and magazine covers, the reveal of the official sound track, which included 3 tracks that debuted in the top air respective build board charts. The announcement of a special night and [indiscernible] in partnership with the NBA, where the Miami -- he will play as a Vice City versus the Milwaukee buck and a series of unique in-person activations, celebrating Vice City in Miami.

We're immensely proud of the team at Rockstar Games for their unparalleled commitment to and passion for elevating our art form and all entertainment.

2K and Visual Concepts once again delivered to the most realistic and authentic NBA experience in interactive entertainment with NBA 2K27, which has sold over 4 million units so far. The launch window was unusually busy with numerous entertainment experiences competing for players' attention. We expect an acceleration of net bookings and engagement during the second half of the year as 2K and Visual Concepts plan to introduce a robust slate of in-game content, including exciting theme seasons, all new college basketball experiences and innovation within my team.

During the quarter, Borderlands 4 offered new downloadable content and introduced several promotions, which are driving improved engagement and player retention. The Borderlands franchise has now surpassed 100 million units sold, marking an incredible milestone for Gearbox and 2K. We look forward to even more content for Borderlands for and what lies ahead for the series.

During the period, 2K released add-on content and updates from Mafia: The Old Country, Sid Meier's Civilization VII, PGA TOUR 2K and WWE 2K, which enhanced gameplay and player engagement further for these titles.

Mobile performed in line with our expectations, underscoring the importance and impact of our diversified business. As we had anticipated, net bookings for color block cam decreased double digits compared to its peak performance during last year's second quarter. Net bookings for TumeBlast grew 4% over last year's record second quarter results driven by a new in-game feature called Beam, which assists players while solving puzzles and has been increasing engagement and level progression. Words with Friends benefited from a multi-platform collaboration with the hit TV show, Wheel of Fortune, including a dedicated on-air theme week and in game puzzles and online events for players, which drove net bookings growth of 6%.

Our advertising business improved sequentially as we successfully attract new partners and increased ad yields. 2K's mobile offerings also continue to perform well with solid downloads and engagement across key titles. NBA 2K Allstar, our mobile title in partnership with Tencent in China surpassed 11 million registered users since launching last year and is yielding strong profit margins. We continue to see strength in our mobile and direct-to-consumer channel, which remains a significant driver of revenue and margins as we include new titles, foster direct relationships with players and reduce payment friction to enhance the user experience and drive repeat purchases. These efforts position our direct-to-consumer platform as a durable and expanding engine for net bookings growth and long-term profitability.

Looking ahead, Zynga continues to develop and test many new titles and several are promising based on their initial performance in soft launch, including top goal. We believe that fiscal 2027 will be an historic year for Take-Two, driven by our unwavering commitment to delivering the highest quality entertainment experiences. Guided by our core pillars, creativity, innovation and efficiency, we're confident in our ability to build on this incredible year and to set new benchmarks as we deliver on our plan for long-term success.

I'd like to express my gratitude to our 13,000 colleagues around the world for their dedication to our common mission and for making our company what it is today and what we will be tomorrow.

I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams who do their best work every day in the pursuit of our creative, financial and operational goals. I'll now discuss our recent and upcoming releases. On October 8, 2K and Gearbox released Risk to Ring 2 Halo concepts, which introduced 2 new playable survivors, new regions to explore and expanded gameplay mechanics to deepen the player experience.

2K continued to innovate its mobile offerings for the NBA 2K franchise. On October 20, NBA 2K Mobile Season 9 launched with new modes that connects in-game action to real-world NBA schedules, a REWIND feature that allows players to enjoy historic and iconic NBA moments, and real-time PDP matches. Additionally, NBA 2K27 Arcade edition made its debut last week, offering WNBA Playout, new expansion teams, deeper career journeys and progressions, a new 5D5 experience and exclusive goat skills and rewards.

On October 28, 2K and Visual Concepts continued their post-launch content for WWE 2K26, with the release of Ringside Pass Season 6 and the stand-alone Street Fighter Elite pack which marks our first-ever collaboration with Capcom and includes signature character moves and theme cosmetic creation parts. 2K also released Season 13 for WWE Supercard last week, which has now been downloaded nearly 40 million times since its initial launch.

Firaxis announced new content for Sid Meier's Civilization VII for 2027 and including Arc of tomorrow, a comprehensive free update, extending gameplay into the atomic age and Earthrise, the title's first major premium expansion featuring extended core mechanics and space error progression. These additions will provide players with more ways to take one more turn in this iconic strategy series.

In the coming months, 2K will provide updates on PGA TOUR 2K27 and WWE 2K27, both of which are slated to launch later this fiscal year. Zynga will continue to focus on enhancing its existing mobile portfolio with bold beats and updates as well as releasing new titles, including Top Gold, which is currently in soft launch.

It's incredibly exciting to be just days away from Rockstar Games launch of Grand Theft Auto V, and preloads are rolling out across the world. This is a defining moment for our company and the entertainment industry, and our teams are proudly supporting this global phenomenon. With our robust and diverse long-term product development pipeline, we are well positioned to capitalize on our many opportunities on the horizon to engage audiences throughout the world.

I'll now turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. Our second quarter net bookings were $1.6 billion, which was modestly below our guidance range of $1.62 billion to $1.67 billion. Recurrent consumer spending was down 9% for the period compared to our guidance of a 5% decline, driven by NBA 2K and accounted for 81% of net bookings.

Compared to last year, NBA 2K in mobile each decreased, while the Grand Theft Auto series was up. GAAP net revenue decreased 16% to $1.5 billion. Cost of revenue decreased 20% to $637 million, and operating expenses decreased 9% to $978 million. On a management basis, operating expenses declined 9% year-over-year. This was favorable to our forecast due to lower personnel and user acquisition costs.

Turning to our outlook. We are exceedingly optimistic about the rest of the year and are reiterating our fiscal 2027 net bookings outlook range of $8 billion to $8.2 billion. The launch of Grand Theft Auto V is only 10 days away and the level of preorders generated is extraordinary. Additionally, 2K and Visual Concepts plan to deliver the most innovative array of in-game content ever released for NBA 2K, which gives us confidence that recurrent consumer spending for the franchise will accelerate during the second half of the year.

The largest contributors to net bookings are expected to be the Grand Theft Auto series, NBA 2K, [indiscernible] Mass factory and Paris & Puzzles, Words With Friends, Red Dead Redemption Series, Colorblock Jam, WWE2K and Zynga Poker.

We continue to expect recurrent consumer spending to be in line with fiscal 2026, representing 65% of net bookings. This assumes strong growth for the Grand Theft Auto series, largely due to our outlook of robust sales of Grand Theft Auto VI Ultimate Edition, which includes add-on content and high single-digit growth for NBA 2K. We continue to expect a decline in mobile due to last year's success of Colorblock Jam and our assumption that trends will moderate for several of Zynga's mature mobile titles.

We project the net bookings breakdown from our labels through roughly 37% Rockstar Games, 34% Zynga and 29% 2K. We remain on track to deliver operating cash flow in excess of $1 billion and to be in a net cash position by the end of the fiscal year. Our expectation to deploy approximately $290 million of capital expenditures is unchanged. We expect GAAP net revenue to range from $7.98 billion to $8.18 billion, cost of revenue to range from $3.68 billion to $3.8 billion and operating expenses to range from $4.08 billion to $4.1 billion.

On a management basis, we now expect operating expense growth of approximately 5% year-over-year, which is favorable to our prior forecast due to lower user acquisition costs, part of which is related to timing. The expense growth compared to last year is primarily driven by marketing for Grand Theft Auto VI and higher R&D costs.

Now moving on to our guidance for the fiscal third quarter. We project net bookings to range from $3.35 billion to $3.5 billion, compared to $1.76 billion in the prior year. The largest contributor to net bookings are expected to be the Grand Theft Auto series, NBA 2K, Toon Blast, Mass factory, Empires & Puzzles, Words With Friends, GredDead Redemption Series, Colorblock Jam, SingerPoker and Toy Blast.

We project recurrent consumer spending to increase by approximately 12% and which assumes significant growth for the Grand Theft Auto series, driven by sales of Grand Theft Auto VI, Ultimate Edition growth for NBA 2K and a decline in mobile. We expect GAAP net revenue to range from $3.27 billion to $3.42 billion, cost of revenue to range from $1.65 billion to $1.73 billion, and operating expenses to range from $1.16 billion to $1.18 billion.

On a management basis, operating expenses are expected to grow by approximately 21% year-over-year, which is primarily driven by marketing costs to support the launch of Grand Theft Auto VI.

In closing, we are extremely optimistic about our path ahead. And next week's launch of Grand Theft Auto VI is just the beginning. We believe that we can take our core franchises to the next level of success by releasing engaging new content and enhancing our live service offerings, all while launching new hit titles, expanding our geographic footprint and pursuing accretive M&A. As we execute this extensive multifaceted strategy to drive growth, we feel confident in our ability to unlock greater earnings power and deliver long-term shareholder value.

I'd like to thank our talented and passionate colleagues around the world for their hard work and for getting us at this pivotal moment in a multiyear growth story. I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to once again thank our colleagues for their contributions to our success. And to our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Andrew Marok with Raymond James.

You mentioned the GTA VI marketing mega campaign. Obviously, a lot of innovative ideas going on there. Just in general, how is that trending versus your expectations in terms of building awareness around the launch date and hype for the game?

We do track awareness and anticipation and everything is trending very positively.

Great. And then maybe kind of related question perhaps. But without commenting on the time lines of any specific titles, was wondering if you could speak to this concept of AI-assisted reverse engineering and decompilation of games. How does that affect your approach to things like development, security measures and things like that?

I really focused on that, obviously. Look, this business has been largely immune to piracy concerns forever because of file sizes, complexity of piracy, being connected to servers and the like. And undoubtedly, it will be very difficult to replicate the experience of consuming our game is intended because of technical limitations. That said, it's going to become more of a challenge, as you said, and we're aware of that. So we are utterly focused on enhancing our technical defenses and enhancing our legal activities appropriately.

And at the same time, without in any way being cavalier every entertainment business that exists is subject to some element of piracy. So this is likely to invade our business to a greater or lesser extent. I think it will be manageable and we are focused on it.

Your next question comes from the line of Doug Creutz with TD Cowen.

There have been earnings calls in the past, and I forgot how long they were. But at one point, you had said that you expected to be able to grow revenue and earnings for the company in the year after you launched GTA VI. I was just wondering, is that -- is that a comment you still stand by? Or have things evolved such that you don't want to stand on that comment anymore?

Tempting as it is, Doug, I'm not going to give you guidance for fiscal '28 today. We have said that we expect to set a new baseline for performance going forward. And we do think that there's a great opportunity for growth. There are so many wonderful things ahead for us. We have the most diverse and powerful portfolio of intellectual property in the industry. And there are more -- there's more than 1 sort of defining item of what's next for us. So many elements of our business plan offer opportunity for higher net bookings and earnings power.

So despite the fact that many of our franchises and to be clear, we have 15 that have sold at least 5 million units in an individual release in our PC and console business. Despite that, so many have achieved this massive commercial scale. We think there's enormous opportunity ahead for many of them, including GTA. We think the world is going to look dramatically different over the next decade because with the backdrop of our commitment to releasing the highest quality entertainment experiences, we think we'll be able to reach gamers in new ways, for example, including streaming in new geographies.

And also, we'll be able to continue to engage with consumers post launch, which is a stated part of our strategy since the beginning of what we call recurrent consumer spending.

We're also one of the few interactive entertainment companies who is willing and able to take the risk of investing in new intellectual property. It is the riskiest thing that we do. It's also paid off for us mightily over the past 19 years, even though we certainly haven't always been successful.

In addition, we've taken a disciplined approach to M&A. Our deals have been accretive and successful across the board. We think there are selective opportunities going forward, especially because our balance sheet is aimed at being very conservative and very strong. By year-end, we expect to be in a net cash position again right now, we're geared at less than 1x LTM EBITDA.

And finally, we have numerous strategic initiatives we're working on that range from big to very big to huge that are under consideration and in development. So we think the future is really bright across the board.

Your next question comes from the line of Eric Handler with ROTH Capital Partners.

I think -- we'll start with an accounting question for Lainie. Given the strong growth in console RCS expected in the third quarter, which you attribute to the GTA VI ultimate addition, should we assume that if the standard addition is $80, the ultimate addition is $100, that $20 goes to count as RCS?

Yes. So the add-on content can be also purchased separately. So it's allocated to RCS.

Okay. That's helpful. I guess I'll show you an NBA question. I'm just curious, the decline that you saw in 2Q, would you attribute that to maybe just not having the prior gen SKUs? Or was there something else in there that maybe didn't resonate with fans?

This is Karl. So it's -- first of all, it is the second highest launch we've ever had. We're very excited about the launch, and we knew -- NBA expect to accelerate going to the second half of the year. We've kind of seen this before on a number of different occasions. And it's really hard to know exactly what has caused a little bit of softness versus our expectations in the launch. And there's other things going on in the market, both inside and outside the gaming media. But given the slate of content that's coming up and the hard work that BC is doing right now on the game over the next half of the year, we're pretty confident that we're going to see a rebound, which we've seen before in the past as well.

So we're very excited about it. NBA is off to a great start, and we think it's going to get even better as the year goes on.

Your next question comes from the line of Chris Schoell with UBS.

You cited unprecedent preorders, with several more months of preorder data now behind you. Can you just help us understand maybe what keeps you from incorporating some of that strength into guidance? And as console prices continue to rise, how are you thinking about maximizing the accessibility and reach of a franchise like GTA beyond the traditional console audience? Does the higher cost of hardware increase the importance or potentially accelerate the timing of expanding availability through other platforms like PC or streaming?

Thanks, Chris. On the first point, we're days away from the launch of GTA VI, and we tend to avoid claiming success before it occurs. So as soon as we have some experience for launch, we're going to be very happy to describe what's going on and how we see it. There is really no need to update numbers right now.

On the second point, any information about new SKUs and the like will always come from our labels.

Okay. Great. And maybe if I can just fit in 1 more. Lainie, it appears the gross margins are down slightly in the full year guidance. Can you just help us understand the drivers there?

So it's due to the mix of the business, and it's being offset by some changes in the operating expenses.

Your next question comes from the line of Bryan Smilek with JPMorgan.

Strauss, I believe you mentioned that Rockstar will continue to support GTA Online with new content and ongoing events for its community. Can you just elaborate a bit on the role of -- no Pixel user-generated content, not only across GTA across the broader video gaming industry going forward in your view?

We're really excited about the launch of NoPixel5, which is really a professional version of the RPG business that we purchased with 5M. And look, we're thrilled that there are hundreds of thousands of consumers who like to engage with Grand Theft Auto [indiscernible] mind in this way. And we think there's plenty more opportunity to be seen here. So it's early days, and it remains to be seen how this develops.

Any time our community wants to engage with our intellectual property, we want to be supportive if we can be. And I think this is a great example of that.

Great. And Lainie, curious, I think you called out more favorable user acquisition trend versus initial guidance a few times. So could you just elaborate a little bit more on your comments there?

Sure. We talked about the operating expenses being a little bit lower, and that was due to lower user acquisition costs and some of that was due to timing, and that is mostly due to some of the movement in some of the new releases for our mobile titles.

Your next question comes from the line of Mike Hickey with StoneX.

Strauss, Lainie, Karl and Nicole, congrats guys on the upcoming release. I can only imagine how excited all of you are. Just on the preorder demand. Curious Strauss, what you think is driving such strong preorders here that have now exceeded your expectations?

Look, the title is so widely anticipated and consumers appear very, very excited. And all the press so far has been universally positive. So makes me nervous even saying those words, Mike, but they are true, and we still aren't ready to declare victory. Hopefully, we'll be able to do that in the fullness of time. I don't -- we don't have to wait too long. I don't think.

Pretty exciting. I guess maybe just last topic question, Strauss, maybe if you could just speak to Rockstar's competitive advantage as you see it moving forward, especially in AI influence world that seems to be evolving right in front of us?

Look, technology benefits us. It's always been true. We've always created our entertainment inside computers with technology. All advances have benefited us, but I don't expect that, that will change. In fact, I hope it will accelerate.

I think at the same time, what we're known for here is the desire to make the best entertainment under and the fact that more often than not we succeed. And the creativity that drives that success is human creativity, harnessing technology. And I think that's what you'll see in the future. Undoubtedly, some of the most recent technological advances that you've seen have made it easier to create assets. Well, that is consistent with the story of our business. When I started in interactive entertainment longer ago than I would like to say, it was really difficult to create an asset in a computer today, it's a whole lot easier. But it's not easier making a big hit, making a big hit was hard then, it's hard now and it's going to be hard in the future. And hit creation remains the purview of human beings.

Your next question comes from the line of James Heaney with Jefferies.

In the press release, you mentioned you're looking to explore new business opportunities. Is there anything in particular you can say about this comment? And what are areas that maybe you haven't explored in the past that potentially could look interesting to you?

[Technical Difficulty]

[indiscernible] business opportunities, is there anything you can say about this particular comment? What are the areas maybe that you haven't explored in the past, that interesting to you? And then I had a follow-up.

I appreciate the question. Just first of all, let me apologize for the technical difficulty we just encountered. And if I believe I was in the middle of answering a question, and we'll be happy to follow up with anyone separately through Alan, Lewis and Nicole Shevins' offices if there was a lack of clarity with regard to that. So I do apologize.

I have some specifics to share about sort of the picture I painted of the future, but not so many for what I hope for obvious reasons. So making more and better hits for our current platforms, obviously, is the first order of business. And you can see how that's been reflected in our results in the past years. Second, there are new opportunities to reach consumers, distribution technologies, streaming among them, if streaming, for example, comes to fruition that could vastly expand the size of our market, other distribution opportunities include reaching new geographies economically that we have not been able to reach economically in the past.

So there's a massive population of people who play video games in India and Africa and Asia outside of the countries we currently monetize, which include China, South Korea, Taiwan and Vietnam, but not so many others. We don't sell much in Russia right now for obvious reasons, not much in Latin America. So our business still remains largely U.S., U.K. and Western Europe business with a couple of pockets in Asia. And yet interactive entertainment is the world's past time and is only becoming more so in the future. So if we can find out how to reach people who don't necessarily have the latest and most expensive technology. And if we can reach people outside of the most developed geographies, we could see our business grow materially.

Equally, we think -- equally, we think that we haven't yet scratched the surface on what's potentially available creatively. The current expression of interactive entertainment through PC, console and mobile is super exciting, but we haven't reached the creative asset that other entertainment industries have. And I don't think we will for years. That's what we call around here the unknown, unknown and Lord knows we're trying to find it. And then there's a whole bunch of other stuff we're working on that I'm not going to share with you.

And maybe if we could just get an update on the progress you've made on transitioning to D2C within the Mono portfolio. Just how you'd characterize the benefits you're seeing both to revenue growth and margins?

It's not a transition. It's an evolution. And we still have third-party partners. We value them greatly. We don't expect to transition away from them. We have not described the percentage of our business that comes direct to consumer mobile. It is significant, and it is growing, and it obviously has a very meaningful margin and bottom line impact. It also allows us to interact directly with our consumers to market to them directly, and that's positive as well.

Your next question comes from the line of Omar Dessouky with Bank of America.

So your rationale for the Grand Theft Auto series, RCS guidance being up year-on-year, has changed slightly from your description last quarter? You've now additionally disclosed that robust sales of Ultimate Edition add-on content, the driver of growth. So when you gave the GTA Series RCS growth guidance for the full year in August, was it also based largely on ultimate addition add-on content? Or are there other contributors to growth that may now have been pushed out into fiscal '28? And I have a follow-up question, please.

There was a change to what we said last quarter, what we're saying now. We have talked about the Ultimate Addition last year as we had last quarter, we had a SKU plan, and we said that it had additional add-on content. And since I mentioned before, that can be purchased separately so that was allocated to the RCS and that was the only component that was in the RCS included as well as GTA line, and that hasn't changed.

Okay. And just my follow-up question is what is your strategy to retain the first wave of gamers that play Grand Theft Auto VI after they finish the content. For example, do you expect players to continue playing Grand Theft Auto online on the San Andreas map once they finish the Vice City single-player missions or, for example, do they -- would they just continue to replay Grand Theft Auto VI single-player missions?

You just described an array of high-class problems. So look, there's so much to be done in all things for Grand Theft Auto. I've literally never had to answer the question about what do we do when we finished because you can always keep going. There's so much fun to be had. I think that will be the case in this situation as well.

Your next question comes from the line of Jason Bazinet with Citi.

About 3 weeks ago, there was an interview on Bloomberg with Rockstar's Head of Publishing that the development costs for GTA VI were not more than $1.5 billion, and it sparked a bit of a debate on the buy side about whether that figure was for the stand-alone version or also encompass the online version. Any comment you have on that?

We haven't spoken about budgets at all. Obviously, we've invested heavily in Grand Theft Auto VI, and I hope in the fullness of time, that will prove to be a sound investment. I would like to point out that someone is saying something is not more than something does not mean it's close to something, half of something, or quarter of something or 1/10 of something. So I wouldn't -- I wouldn't arrive at a conclusion based on what that -- what -- the correct answer to that question that was offered before.

Your next question comes from the line of Drew Crum with B. Riley.

Your next question comes from the line of Clark Lampen with U.S. Bank BTIG.

I guess following on Jason's last question, that same interview. There was a reference to sort of GTA VI being a foundation upon which you can build content at faster pace. It seems that, that comment seems like it's sort of been keeping with your answer around sort of building more high-quality content as a part of the sort of new business opportunities. Just curious if you could help us understand whether it's a comment is in sort of relation to life services updates being more frequent than we've had in the past with precedent GTA titles, whether this opens the door to a shorter cycle, I guess, between releases for major franchises or perhaps both? Just would be curious if you could help us understand sort of what the specific opportunities are?

Look, we've said since the launch of recurrent consumer spending that our goal is to stay engaged with our consumers in between huge releases. And now, of course, our business has been transformed. The vast majority of our net bookings comes from recurrent consumer spending, comes from ongoing live engagement with our hip titles and big, huge releases are additional tentpoles to support that.

And I think what I was saying earlier is that I think that this model will continue to evolve and that our teams more and more have the ability to because of the quality of our franchises to engage with consumers in a way that consumers love and want more of. If you're making something that's no good, no one wants any more. If you're making something that's great, people want more of it. And if you're making something that's the best in the world, then there's nearly an unlimited appetite as long as everything else you make remains the best in the world, is technology, our partner in accelerating this engagement and accelerating this development and accelerating the marketing related there too, yes, it is. But at the end of the day, what's going to drive this success is our human creativity, harnessing the technology at hand, focused on making the best entertainment on Earth.

And if I maybe could follow up, I guess, on the mobile business. A lot of the growth that we're seeing across the industry right now has been driven by in-app advertising. I wanted to see maybe similar to the update that you gave us around DTC. This might be sort of part of the evolution of that business, but the prevalence of advertising? And I guess your sort of growth outlook for that component of the business, I guess, would be appreciated.

Yes. I think we're really only talking about our mobile business here or largely about our mobile business here. I do think there's a great opportunity for advertising. Historically, advertising in mobile has been endemic. It's been advertising in mobile games for mobile games. And I think more and more brands are seeing an opportunity to engage with consumers through the lens of their love for interactive entertainment. If we're able to expand our business meaningfully into brand advertising, and we already have started, then that should be a terrific opportunity for us.

Also our view is that we ought to be monetizing all of our engagement. Historically, mobile video games monetized under 20% of the audience, typically 10% of the audience through in-app purchases. We have the ability technically to serve people what they want. And if they want a free experience, they can be served ads. And if they want an ad-free experience, they can make purchases. But what doesn't make a whole lot of sense is serving consumers for free at a cost to us. So I think there's a huge opportunity for us in the ad business. Our numbers reflect that. And I also think the nature of the business will change in a way that's positive for us.

Your next question comes from the line of Drew Crum with B. Riley.

So as part of your outlook commentary for fiscal 3Q, you noted continued growth in the installed base for PlayStation Xbox, as we think about attach rates or tie ratios for GTA VI, is there a figure you can share that embedded in your guidance with price increases on console hardware, has that changed? And how does it compare to that number around the launch of GTA V?

Well, I understand that clarity on the question would benefit your models. It really doesn't do anything for us. [indiscernible] So right now, Rockstar has completed the development of GTA VI. That may not come as a surprise to you since we're 10 days away from the release. They have done their very best work, and it's going to come to consumers soon. And they're in the middle of their marketing campaign, which also unsurprisingly is fully baked.

So at this point, it's the job of the organization to make sure that we do an A+ job technically and delivering this product to consumers. And then of course, Rockstar will focus on what comes next, and we'll announce that in the fullness of time.

Your next question comes from the line of Ron Song with Wolfe Research.

I think this is a question for Lainie, but taking a different angle on the OpEx question. When we look out on a management basis, it does look like the 4Q OpEx is going to be implied up in like the 10% range. So is there anything you can share on the drivers here as we exit the GTA VI launch next week, whether it's on the potential R&D side, marketing for both the title and just the broader organization?

This is mostly being driven by increases in R&D as well as some modest growth in selling and marketing and also investment in IT senses.

Your next question comes from the line of Martin Yang with Oppenheimer.

Your PC player seems to engage with GTA a bit differently than console, there are role-play options. Over time, do you think you want to close the player experience gap between console and PC? Or do you view 2 platforms as more independent because of their respective technical capabilities?

I'm not sure I agree with the way you phrase that. I do think certain titles, for example, Civilization is a title that existed on PC and then spread out to console. There are other titles like NBA 2K, which are available on basically all platforms simultaneously. And of course, GTA VI is available on to consoles when it launches on November 19. So it really varies title by title. But generally speaking, the experiences on console and PC tend to be roughly the same. This can vary, but generally speaking, the capabilities of the PC platform today are different materially from console capabilities.

I have a quick follow-up on marketing. How do you think about the marketing for GTA after launch? Should we view marketing expense more weighted towards later in FY '27 to have the music experience for the launch weekend. Should we expect more marketing going -- still maintaining strong pace after GTA VI launch date?

The majority of it in marketing will be around the launch in Q3, but we will have some ongoing marketing into Q4, but it will be in a great in Q4.

Your next question comes from the line of Jim Callahan with Piper Sandler.

I had a follow-up on some of sort of like the console gracing that's going on. I guess if we get the actual piracy part of size, interest clearly a lot of consumer interest in sort of modifying their own versions of games, understand the investments behind role playing, but I'm curious, does this change how you think about GTA Online at all? Or does this open up new potential monetization opportunities?

It's a really great question. And again, our purchase of 5M reflected our support of consumers, certain consumers' desires to engage as a creator with our intellectual property. And we've allowed modding in many of our other games. We're just not religious on the topic. The 5M business is a profitable business for us. It does create an economic opportunity. But the way we run the business around here, and I think that's the last question.

So I'll finish on this thought is, at the risk of being very repetitive. The mission of this company is to create the best entertainment on earth and bring it to consumers around the world. If we do that right, the monetization takes care of itself. And I think that you're going to see that from us in this fiscal year and in future fiscal years, I think we're likely to be off to a really great start for the rest of this year, very shortly.

There are no further questions at this time. I will now turn the call back to Strauss Zelnick for closing remarks.

First, thanks for joining us today, and thank you so much for your patience during our technical lapse. Again, I apologize for that. I want to just take a minute to express my gratitude to our 13,000 incredibly hard-working, dedicated and committed colleagues around the world. It's a great quarter. We feel terrific about the rest of the year and the years forward. And the only reason I can say those words with confidence is because of the A+ team that shows up every day, our creative groups are executive groups in numerous offices all around the world. I also want to say thank you to our shareholders for their support, and thank you today for attending the call. I want to wish you a happy and healthy upcoming holiday season, and I know you'll are going to have a great time playing GTA VI while you're at home for the holidays. Thanks, everyone.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Take-Two Interactive Software First Quarter Fiscal Year 2027 Results Conference Call. [Operator Instructions]

I will now hand the conference over to Nicole Shevins, SVP, Investor Relations and Corporate Communications. Nicole, please go ahead.

Good morning. Thank you for joining our conference call to discuss our results for the first quarter of fiscal year 2027 ended June 30, 2026. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.

Before we begin, I'd like to remind everyone that 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.

Thanks, Nicole. Good morning, and thank you for joining us today. Fiscal 2027 is off to an excellent start, led by the power of our diverse portfolio and the strong consistent execution of our strategy in all of our labels. We delivered first quarter net bookings of approximately $1.39 billion, which was slightly above the high end of our guidance range, primarily due to the outperformance of NBA 2K and the Grand Theft Auto series. .

We're reiterating our fiscal 2027 outlook for net bookings of $8 billion to $8.2 billion, which reflects both ongoing positive trends in our business and our high degree of confidence around the November 19 release of Grand Theft Auto VI. We expect to sustain this new level of scale and generate strong cash flows for the next several years as we release our robust development pipeline, capitalize on incremental opportunities within our highly established hit franchises and continue to apply our proven long-term approach to managing the company.

Now turning to highlights for the period. NBA 2K26 performance was outstanding and concluded a record year for the franchise. To date, the title has sold in over 12 million units, reflecting 9% growth compared to NBA 2K25. Engagement was up meaningfully during the quarter with recurrent consumer spending growing 7%, driven by a 15% increase in average daily active users, a 25% increase in my career daily active users and a 35% increase in average games played per user. The achievements of this year's iteration of the series are a testament to visual concept's ability continually to deliver new innovative ways for fans to stay engaged, and our live service execution remains a cornerstone of NBA 2K's sustained success.

During the quarter, 2K also supported Borderlands 4, Sid Meier's Civilization VII and WWE 2K26 with an array of new offerings, which enhanced player engagement and sentiment. The Grand Theft Auto series once again exceeded expectations. And to date, Grand Theft Auto V has sold in over 230 million units worldwide. Recurrent consumer spending for the series grew 3% and GTA+ continues to thrive, all led by a series of content offerings, including the addition of the Rockstar Mission creator, an all-new suite of innovative and in-depth tools, empowering the player community to bring missions to life.

Global excitement for the launch of Grand Theft Auto VI continues to build with the title having an exceptional start to preorders. With Rockstar Games recent announcement of Grand Theft Auto V, an extended look coming on August 27, we believe that consumers' passion and anticipation for the next evolution of this iconic series will grow further, leading up to the title's November 19 release.

Turning to our mobile business. Zynga performed in line with our expectations, and we're pleased that many of our forever franchises continue to resonate with players. Net bookings for Toon Blast grew 8% over last year. The title was supported by a new marketing campaign featuring Emmy nominated actor, Giancarlo Esposito.

Empires & Puzzles maintained steady momentum, anchored by a successful ninth anniversary campaign and the introduction of new heroes and character abilities. Words With Friends exceeded our forecast with net bookings growing 8% year-over-year led by strong ad performance and higher player engagement with several features, including Dice Challenge, the title's latest permanent one-in-one game mode.

Top Eleven surpassed our expectations with net bookings increasing 15% year-over-year as fans enjoyed a special in-game event featuring player versus environment matches in 10 international locations.

2K's mobile offerings continue to perform well with strong downloads and engagement across key titles. NBA 2K AllStar, our mobile title in China in partnership with Tencent surpassed 10 million registered users since launching last year and is yielding strong profit margins.

Our mobile direct-to-consumer channel remains a significant driver of revenue and margin enhancement with many of Zynga's titles offering this feature and further growth anticipated.

Guided by our core pillars to be the most creative, innovative and efficient entertainment company in the world, our 13,000 colleagues share a singular vision for excellence and hit creation. Each day, we strive to bring joy to our player communities and value to our shareholders.

I'd like to express my gratitude to our teams for their immense passion and unwavering commitment to our mission to make the most captivating and engaging experiences in the entertainment business. We believe that fiscal 2027 will be an inflection point for Take-Two, one that will write an exciting new chapter in our history and provide the foundation for new levels of success and the creation of groundbreaking entertainment experiences.

I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams for delivering a great start to the year and setting the stage for the most exciting pipeline in our company's history. I'll now discuss our recent and upcoming releases.

On July 8, 2K and HB Studios launched Season 7 for PGA Tour 2K25, a free update, which added the 154th open champing chip at Royal [indiscernible] Golf Club. The team is planning to launch Season 8 in late September and is hard at work on this year's release of PGA Tour 2K27. 2K will share more details in the coming months.

On July 14, Rockstar Games launched the Court Center Heist for GTA Online, which introduced an all-new blockbuster hit targeting La Antos premier cultural institution with an array of art work for the taking.

On July 30, 2K and Gearbox launched Bounty Pack 4, mergers and acquisitions for Borderlands 4, which includes a new story mission and cosmetic items. Fans can look forward to even more action in September when Gearbox releases additional content, including the title's next story pack.

On August 14, 2K and Hangar 13 will release the Man of Honor store expansion for Mafia the Old Country. With Hangar 13's industry-leading capabilities and narrative-driven action titles, players will enjoy 2 new story chapters and all new content for the games free ride mode.

2K and Visual Concepts will launch the WrestleMania 42 pack for WWE 2K26 on August 19, followed by new seasons as part of the Ringside Pass during the fall. WWE 2K27 is currently in development, and 2K will provide updates later this year.

On September 4, 2K and Visual Concepts will launch NBA 2K27. The next installment of our industry-leading basketball simulation that provides the most realistic and authentic NBA experience in interactive entertainment.

This year, Victor Webinyama of the San Antonio Spurs will be on the cover of the standard edition. Caitlin Clark of the Indiana fever, will be on the cover of the Deluxe edition, and Chicago Bulls Legend, Derrick Rose, will be on the cover of the Ultra Edition with early access available as part of the Deluxe and Ultra editions. Last week, a first-look trailer of NBA 2K27's gameplay was revealed and the response has been positive with fans and the media expressing excitement over the titles improved graphics and enhanced player movement and presentation. 2K will share more about the game soon, including the NBA 2K27 preseason breakdown full game review on August 18.

Zynga will continue to focus on enhancing its existing mobile portfolio with bold beats and updates as well as releasing new titles, including Top Goal, which is currently in soft launch. The title recently introduced real-world soccer stars as well as enhanced 3D MAX simulation and player versus player gameplay.

In closing, we are deeply excited about this year, highlighted by the November 19 launch of Grand Theft Auto V, which will usher in a new era of growth for our company and returns for our shareholders. We remain steadfast in our mission and commitment to delivering the highest quality entertainment experiences that captivate and engage audiences throughout the world.

I'll now turn the call over to Lainie.

Thanks, Karl, and good morning, everyone. We achieved excellent first quarter results driven by our powerful franchises, industry-leading talent and unwavering commitment to our strategic vision. I'd like to thank our teams for their hard work, which has enabled us to reach this exciting point within our company's history.

Turning to our results. We delivered first quarter net bookings of $1.39 billion, which was slightly above our guidance range of $1.32 billion to $1.37 billion. This primarily reflected better-than-expected performance from NBA 2K and the Grand Theft Auto series. Recurrent consumer spending declined 1% for the period, which was favorable to our guidance of a 3% decline, and accounted for 84% of net bookings. NBA 2K grew 7%, The Grand Theft Auto series rose 3%, and as expected, Mobile declined 7% over last year.

GAAP net revenue increased 2% to $1.5 billion. Our cost of revenue rose 17% to $651 million, and included a $43 million impairment charge related to the decision not to proceed with an unannounced title from a third-party developer.

Operating expenses were flat at $98 million. On a management basis, operating expenses declined 1% year-over-year, which was favorable to our forecast of 3% growth due to timing of marketing expenses across our labels.

With the ongoing positive trends in our business and excitement around the November 19 release of Grand Theft Auto V, we are reiterating our fiscal 2027 net bookings outlook range of $8 billion to $8.2 billion, which represents approximately 20% growth over fiscal 2026 at the midpoint. The largest contributors to net bookings are expected to be the Grand Theft Auto series, NBA 2K, Toon Blast, Mash Factory and Pirates & Puzzles, Words With Friends, The Red Dead Redemption series, WWE 2K, Colorblock Jam and Zynga Poker. We continue to expect recurrent consumer spending to be in line with fiscal 2026 and to represent 64% of net bookings.

The underlying drivers remain unchanged. The NBA 2K projected to grow high single digits. The Grand Theft Auto series is expected to be up and Mobile is expected to be down due to last year's success of Colorblock Jam and our assumption that trends will moderate for several of Zynga's mature mobile titles. We now expect the net bookings breakdown from our labels to roughly 37% Rockstar Games, 34% Zynga and 29% 2K.

We continue to forecast operating cash flow in excess of $1 billion, and we remain on track to be in a net cash position by the end of the fiscal year. We now plan to deploy approximately $290 million of capital expenditures, which is up from our prior forecast due to a planned real estate purchase. We continue to expect GAAP net revenue to range from $7.9 billion to $8.1 billion, while we now expect cost of revenue to range from $3.54 billion to $3.66 billion. Our total operating expenses are now expected to range from $4.15 billion to $4.17 billion.

On a management basis, we expect operating expense growth of approximately 7% year-over-year, which is down slightly from our prior forecast.

Now moving on to our guidance for the fiscal second quarter. We project net bookings to range from $1.62 billion to $1.67 billion, compared to $1.96 billion in the second quarter last year. Our release slate for the quarter includes NBA 2K27 as well as new content updates for various titles. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory, Pirates & Puzzles, Words With Friends, [ HellebockJam ], the Borderlands franchise, the Red Dead Redemption Series and Zynga Poker.

We project recurrent consumer spending to decline by approximately 5% and which assumes growth for NBA 2K and the Grand Theft Auto series, while Mobile is expected to be down.

We expect GAAP net revenue to range from $1.42 billion to $1.47 billion. Operating expenses are planned to range from $1.01 billion to $1.02 billion. On a management basis, operating expenses are expected to decline by approximately 5% year-over-year as last year included significant marketing expenses for the launch of Borderlands 4.

Looking ahead, fiscal 2027 is on track to be a milestone year for our company, led by the release of Grand Theft Auto V. We have great ambitions as our teams have carefully curated new opportunities that we believe will sustain this new level of scale for the foreseeable future, including live service enhancements, franchise extensions, the launch of new IP and international expansion.

In addition, we will continue to evaluate accretive M&A. As we bring these opportunities to fruition, we are confident in our ability to enhance our financial profile further and generate strong cash flows, setting us on a path to deliver continued growth and long-term shareholder returns. Thank you. I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for an excellent start to what is poised to be an outstanding year for Take-Two. And to our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Doug Creutz with TD Cowen.

One of your peers that reported previously suggested that there have been some slowdown in the Mobile market in Q2, which they attributed to macro uncertainty. Just wondered if you saw the same thing, if you saw different things. Any commentary you could offer would be helpful.

No, it's really not what we're seeing. Our results have been affected by how Color Block JM is doing versus last year in terms of coping because it was a new title last year. But apart from that, we've delivered some really good news in mobile. There's no doubt there's a bit of pressure on user acquisition at the moment. And I think that, that comes and goes in the marketplace. But no, we don't feel like the consumer is going back at all.

Your next question comes from the line of Andrew Marok with Raymond James.

Maybe one on the GTA 6 extended look. I guess if you could give us a little bit more color on the thinking that went into the decision to go with Netflix for the time exclusivity rather than just the traditional route of releasing it on a free platform like YouTube or through Rockstar Social?

This is the first of its kind partnership with Netflix. They're a great marketing partner for us and distribution partner, as you know. We also work with virtually every social media outlet on earth. This is part of Rockstar Games marketing strategy. We're excited for everyone to see an extended look of Grand Theft Auto V, I'm not prepared to tell you how it's going to go, but I feel really good about it. And of course, 6 hours after the initial launch of Netflix that will be available on Rockstar Games Channel and YouTube and I think, ultimately, many other outlets.

Great. And maybe one more, if I could. Not that you needed any other tailwinds into GTA 6 launch excitement. But can you talk a little bit about the court center update for GTA Online and maybe how that's been in terms of bringing in some lapsed players ahead of the GTA 6 launch?

We're actually very pleased how things are going right now. We typically don't give specific details about how releases are doing, but I can tell you that right now, we're very pleased with how things are going. And like all the Rockstar releases, they're exciting. They're well received by players and they always bring in -- they always reactivate folks. So, so far, so good. .

Your next question comes from the line of Brian Pitz with BMO Capital Markets.

You recently announced the $80 base game for GTA 6, but ultimately decided to leave NBA 2K27 base pricing at $70. As you think about go-forward base pricing, help us understand how you're thinking about being able to price games at a more premium price with more traditional AAA game prices around the $70 price point?

Look, we've said this many, many, many times, our goal is to deliver way more value to consumers than what we charge them. And the truth is that the real cost of a AAA video game is a whole lot lower today than it was 20 years ago. Pricing has not kept pace with inflation. And our goal is to continue to over deliver for our consumers because how you feel about any experience is the intersection of the experience itself and what you paid for it.

So to say that we expect that Grand Theft Auto 6 will be an incredible bargain as experiences go as it grows understatement because Rockstar Games is known for over-delivering. And when people engage with our titles and Karl just to answer the question about [indiscernible] online, remember, we're 13 years after GTA Online was launched and people are still highly engaged, and we have record-setting engagement at times.

So that's our goal. Our goal is not to maximize price. So in this case, I think what we're -- what we've decided to do, makes a whole lot of sense in the context of what we're delivering, and that's the lens through which we'll look going forward as well.

Your next question comes from the line of Eric Handler with ROTH Capital.

Strauss, I wonder if you could give a little bit of background on the decision to go with Netflix for the extended trailer lines. Did they approach you? Did you approach them? I assume for exclusivity, they probably paid a little bit of a premium to get that?

Netflix is a close partner of the company, and we have tight relationships up and down the line. So we're always in conversations about things that we can do together. And this is a groundbreaking partnership that Rockstar arranged with our friends at Netflix, and we're really excited about how it's going to come back. I would normally give detail on sort of the nature of the back and forth or the terms of the arrangement. .

Okay. And then as a follow-up, with chip costs rising so much and the input costs for hardware rising significantly, there's talks about the next-gen consoles, maybe getting delayed. I know you're a software company and you produce for whatever is out there. But I'm curious about your big picture thoughts on the industry just given the rising cost of hardware?

Look, the rising cost of hardware is not a good thing, and we would argue that it is. I don't think it will slow us down any because we're delivering -- we believe we're delivering experiences that people want. However, a lower price point for hardware would be a good thing because there would be more hardware in people's hands. So I cannot argue this is a positive, but equally, we don't see it as a headwind either.

And going forward, look, 2 things that I think are relevant. Probably the most relevant thing is the world continues to move to open systems, and that will continue. So 20 years ago when we showed up here Take-Two for a console release that was available on PC at launch, PC would represent 1% to 2% of the overall sales. Today, that can be 40% or 50% in a similar situation. And I believe that's going to grow because people have PCs that have outport controllers. They work great as game machines, and I think that will continue.

Number two, with the advent of streaming, which we really do believe is around the corner in terms of having something in low latency and really works well for consumers, machines that weren't game machines before will become game machines. So without regard to what happens in the console business, which is a consequence to us, of course, we see the overall installed base as a practical matter, growing materially. And if you believe in streaming and to be clear, we really do, and I'm happy to put a time line, I think we'll be in commercial streaming mode within 3 years. And by commercial, I mean, low latency. I mean that can 10x the effective installed base. Now it doesn't mean we're 10x our revenue and we wouldn't project we would. But because, obviously, your avid consumers already had access to video game machines. But I do think it creates great opportunity for titles that are broadly desirable even outside of core markets and we do have titles like that, obviously.

The third thing is that interactive entertainment and the most important thing remains Americas past time and the world's past time, it is the fastest-growing part of the entertainment business. That's going to continue as the cohort ages and grows. All we need to do is the hardest thing you can do. We just continue to make hits.

Your next question comes from the line of Colin Sebastian with Baird.

I guess on NBA, the next game coming up here shortly, I mean, following another strong year for the franchise, what do you think is going to be part of this game that might differentiate or provide the opportunity to grow the franchise another year?

And then secondly, on an unrelated topic, just curious on any update to how your studios are deploying AI tools internally. I know we've talked about this quite a bit, but the technology seems to be developing fairly quickly. So are those tools capturing any additional value and perhaps maybe more measurable efficiencies. So any commentary on that would be helpful.

So in terms of NBA, obviously, NBA 2K26 performance was outstanding. It's a record for us, both on units and engagement. And I think that's the key. And we get the question -- the same question almost every quarter, certainly every year about how high it can be and how the growth is. And every time we get the question, we answer it the same way. And it's really -- I don't want to say it's unlimited, but there's still a huge amount of growth potential in the NBA franchise, and that would be coming both from increased units, geographic expansion, et cetera, and bringing more customers back year-over-year, there's still a lot of wood to chop there and also more and more engagement.

So we continue to refine that. And what really drives that is the folks at Visual Concepts and 2K and their efforts to year upon year to innovate. And it's really hard to do that on an annual release and yet somehow through the brilliant and hard work of the team, they're able to do it.

So I would just answer the same what we had before, which is the growth is going to be coming from the same place it always does, and that's through the innovation and the creativity of the teams. We did announce some fun things in terms of cover athletes for NBA 2K27. I'm going to leave all the exciting news about what's next for that title with 2K what is August 18, I think, is when there's going to be more of a review.

And with regard to your question about AI, look, we are, first and foremost, an entertainment company and always have been. However, we're an entertainment company that creates its entertainment in computers and always has. So this company, its products and its approach was built on AI and machine learning well before it became buzzword [indiscernible].

So we're diving the adopters of new technology to the extent it enhances our ability to do what we do. And we have a 3-part strategy, 2 parts of which are innovation and efficiency. So we have projects that sort of fall into both the basic research and the applied research buckets here to see in the basic research side of the -- the possible on the applied research side, how we can innovate more and how we can create additional efficiencies. And that threads through our entire company.

All that said, the first of our core pillars is creativity, and we have 13,000 colleagues around the world. The vast majority of whom are people who are creative every day. And we believe the technology can enhance their creativity, but we do not believe it can or should replace their creativity. And ultimately, we make the spoke entertainment products and we aim to make the best ones in the world, and technology should make it easier for our incredibly creative people to innovate. But for better or for worse, and I happen to think it's very much for the better, those tools are not going to replace any.

So unlike some of our competitors who are announcing opportunities to save hundreds of millions of dollars with AI. I've said since the beginning that the history of new technology in the interactive entertainment business is efficiencies are creative -- are deep creative, but then we find ways to do bigger and bigger things. And we actually don't reduce the cost of doing those things, but we can meaningfully increase the quality. And what does meaningfully increase the quality mean for us, it means making bigger and bigger hits that appeal to more and more consumers. And that's our job. Our job is not to lead in technology. Our job is to lead in entertainment. And as it happens, we use technology to try to do that.

Your next question comes from the line of Chris Schoell with UBS.

In the slides and prepared remarks, you mentioned international expansion and evaluating accretive M&A. Can you just walk us through the opportunities you see overseas for your franchises that are maybe untapped today. And for M&A, remind us of the criteria you use when evaluating deals, the types of assets you would be most interested in? And any particular regions where you feel like you would like to scale your operations?

Yes. We've been very focused here on increasing our international footprint. As you know, companies like Take-Two, many of us, but there are some basically drive about 80% of their revenue from the U.S. Western Europe and 1 or 2 countries in Asia. The rest of the world is really underrepresented, even though they love video games, of course. And even though they have devices typically as low capable mobile devices, but devices nonetheless.

So for example, despite the number of people in India, our revenue out of India is really, really tiny. People in India love probably mobile video games. Same is true for Africa, a massive market, but our revenue footprint is very low. And we're also underrepresented in places like Latin America, obviously, Russia, much of the Middle East and much of Asia, although we do have a significant amount of business in China, and select of other countries. South Korea, Taiwan, for example, growing business in the Indonesia, a little business in Vietnam.

So it's been an enormous strategic priority for us to begin to build up in these underrepresented territories in a way that appeals to local consumers. We have a geo pricing tool for that purpose because different markets have a different ability to pay. That's our tool that we created in-house that allows us to experiment in a way that doesn't infect other parts of our business and other parts of the world. And in certain instances, we're working on properties that may only appeal to some of those markets very selective. So my goal is that in the next 10 years, we flipped the percentage of our revenue that comes from the U.S. and international markets in the other direction because we've grown the overall business. And if we don't invest here now, we run the risk of being behind in 10 years. So it's a narrative of enormous focus.

Turning to your second question about M&A. We've always looked to inorganic growth through the same sort of 3 categories. First, are we buying owned intellectual property. Secondly, are we buying tools and teams that are valuable and third is the transaction immediately accretive to EBITDA and to GAAP earnings. And generally speaking, our acquisitions have ticked all those boxes, then we have the [indiscernible] a cultural fit. We've done many small tuck-in acquisitions, and then we've obviously done 1 very, very large acquisition. And I'm sad to say that unlike the history for most corporations, public corporations, our track record is excellent.

I think virtually all of our deals have worked out if you define worked out as being accretive and long lasting. And certainly, the Zynga has been terrifically successful as has the gearbox deal, our most recent larger transactions. So we'll continue to look at the world that way and in terms of areas in which we're not representative. Thankfully, we normally have that. I mean, we're a big mobile company. We're a big console and PC company. So we don't have any must-haves, but there are some -- certainly some nice to have, and we think some opportunities will come our way.

We also -- just to finish the thought, have this allergy to being over-leveraged. And we have very, very light net leverage now. We expect to be in a net cash position in about 30 seconds, start not exactly 30 seconds, but you get what I mean. And once we're back in a net cash position, I think that would be the time when we'd be more likely to think about in the organic opportunity.

Your next question comes from the line of Mike Hickey with StoneX.

Great quarter guys. First one, Strauss you mentioned in your [indiscernible] to you exactly you say that and maybe details on why I believe that. And we've got a quick follow-up. .

Well, it's a great -- it's obviously a great question. And I think the point is that if you look historically at big really, really big releases for this company. I'm thinking obviously of Grand Theft Auto and Red Dead. They didn't just affect us positively for a quarter. They had ongoing effects on our company. And we also have this massive pipeline that's, we think, quite extraordinary, and we have live services, and we have a catalog.

So if you believe, as I said, I do before that there are opportunities in terms of organic growth because the market is growing and because we're trying to extend into other markets and we have a pipeline and we have -- where we believe is a huge release coming up. There's a lot of fuel for the fire.

Nice. The -- as a follow-up to the streaming comment, I think you said that you think we could have a commercial streaming solution within 3 years that would solve the latency problem. Strauss it feels like we've been down this road at least twice. But I'm curious to hear that. Obviously, the TAM is exciting at 10x. I've heard that before, but it's never really materialized. So is there something that you're seeing different today in terms of the tech solution or some change that's sort of giving you better visibility that could actually have a real streaming solution in the future because, obviously, that would be a fee change to the industry.

It is a very fair and accurate comment. And even when we supported Stadia some years ago, we were -- we talked in -- at the same time, supporting Stadia about concerns about latency. And you're right, sort of certain things remain perpetually in the future, like nuclear fusion, which is perpetually 30 years away, although people think it's not now. I hope it's not. [indiscernible]

Maybe 2 for me. Could you help us -- maybe walk us through the thinking behind the GTA V premium [indiscernible] strong. I guess I'd love to get your perspective, as someone who's been in the industry a long time. How do you think about the incrementality of preorder units as they flow in. Is it possible that kind of hyper on the game is pulling forward sales that you otherwise would have earned post release into pre-release and the strong data won't prove to be that incremental?

Yes. We don't tend to give a lot of color around pricing or additions. We leave that to our labels. But I think Rockstar feels that offering a phenomenal value at $80, makes sense for some consumers and then offering incremental value at a modestly increased price makes sense for consumers. And given the hype around this title, I mean, I think we could have made any number of other pricing choices. But as I said earlier, our focus is on delivering way, way, way more value than what we charge for something.

And with regard to preorders, our preorders are exceptional. No one's ever seen anything like this before at Take-Two or in the industry. That said, you could absolutely be right. We just don't know. So could demand be pulled forward? Sure. And one of the reasons that we're not changing our guidance is, to be clear, we haven't sold one unit yet. You can cancel a preorder. So we -- around here, like we're sort of allergic to victory laps. But one thing we certainly don't do is take a victory lap before we run the event. So the news is great so far. We're incredibly excited. We couldn't be more excited than we are, and yet we are realistic and at best, cautiously optimistic, and we're going to leave it at that until the thing occurs.

Your next question comes from the line of Matthew Cost with Morgan Stanley.

Your next question comes from the line of Matthew Cost with Morgan Stanley. aI was wondering if you could comment on Sony's decision to get rid of physical disc sales for new games beginning -- in the beginning of 2028. Will that have a material impact on your gross margins? Or will you continue to sell boxed download codes at a similar gross margin, presumably at a similar scale going forward? And then secondly, if you could just comment on your progress shifting towards direct payments inside of the Zynga business and if that's still something that is currently increasing and has a significant runway ahead.

Thanks for your questions. I'm not going to comment on Sony's own decision. But in terms of our decision, look, our business is well over 90% digitally distributed as it's already a digital business. So in certain instances, especially if it's a big game, disks and not I said disks don't really make sense for the consumer. Also, in most instances, you have to register online to play anyhow. So if you're already connected, like who cares if you download digitally, it's all the same, and it's much more convenient. So that's where the world is going in our opinion, and I think some understands that. We certainly understand that. It doesn't mean that we won't have physical itions now and then I'm sure we will in the same way that they're still vinyl in the recorded music business. But in other instances, it just won't make sense.

On direct-to-consumer, yes, that remains a growth business for us. We are not direct-to-consumer across our entire mobile portfolio yet, but we're getting closer, and we are seeing growth there. We have not -- we don't talk about the actual percentage, and we don't talk about our goals in terms of the percentage of our business. What we want to do is be where the consumer is. So we will support and continue to support all third-party distributors who treat us appropriately and with which we can make sound economic arrangements. And at the same time, we'll offer direct-to-consumer opportunities for consumers who want to avail themselves of those. There is no doubt that our direct-to-consumer business has had a material effect positive on our margins in the mobile business.

Your next question comes from the line of Jason Bazinet with Citi.

As you can imagine, the buy side is doing everything they can to sort of monitor these preorders to gauge sort of demand for GTA. I don't know if there's anything you can share from a historical perspective as experts on sort of ranges or how people should sort of think about preorders in terms of what bookings ultimately are for a title. I think it would be helpful just because there's some risk that they -- I've just gotten some crazy e-mails from buy side or something how big they think GTA should be. So any sort of ring-fencing or dimensionalization that you could offer, I think, would be super helpful.

I like that ring-fencing of dimensionalization, which is another way of saying how many units are you going to sell? The answer is I don't know, and I'm not going to tell you. But I can say that the level of preorders is unprecedented and astonishing, and we're very grateful for that. But they are so unprecedented that we just don't know how it will translate. -- into sales, and which is a question I answered earlier, we genuinely don't know. And we just don't believe in claiming victory before it occurs.

Your next question comes from the line of Eric Sheridan with Goldman Sachs.

Strauss, I wanted to know if you could opine about any evolution in your thinking about mobile gaming and being more tied into AAA quality of content. When you think about the advances in mobile silicon and processing.

And a second part of the question would be with Grand Theft Auto and the community you have there, how should we be thinking about either engagement or maybe even gameplay components of Grand Theft Auto that could be extension of the launch later this year?

Yes. You're 100% right that if you believe in Moore's Law, what we'll be able to do with mobile games will grow materially, if not exponentially. And what I said earlier about streaming basically means that all games will become mobile games, if you wish.

But I think -- and I haven't used the word mobile all the time as a result. When we talk about mobile versus console, we're really not talking about where you consume the title or on what device. We're talking about 2 different types of interactive entertainment -- what we call a console or PC title is big, and you spend hours on it and often you consume it on a big screen. What we call mobile is light experience, typically, the avid consumer of mobile game, we'll play that game 5 to 7 times a day for around 9 minutes per session. It's a very different consumption experience.

Console experience is akin to sitting down and watching a movie or binge watching a series for an evening. A mobile experience is something you do when you have a few moments free and you want to relax and enjoy and be entertained. And so the change in technology that will allow a console experience effectively to become a mobile experience probably broadens the market. But I don't think it means that casual or hypercasual or semi casual or AA games necessarily go away. I think there's going to be a need and a desire for all different kinds of interactive entertainment and as technology enhances the art of the possible, there'll be new formats that are delivered.

An example of that, not -- it's not interactive, but an example of a new format that digital technology has enabled the microdromis. And that's a huge business in China and a growing business in the U.S. It didn't exist 5 years ago. So there's some more equivalent thereof in interactive entertainment. And one of the things that we think about here is the unknown, unknown, like what's the next thing that's coming in interactive entertainment at which we can excel, which our customers would love that new technology enables. We spent a lot of time thinking about that.

In terms of Grand Theft Auto and where it's going in the future, that's something that we're not talking about today and in the fullness of time, I'm sure Rockstar will talk about.

Your next question comes from the line of Ron Song with Wolfe Research.

Can you guys share any updates on your thoughts about advertising place in Take-Two, especially with the continued shift to open platforms and streaming. You've been clear that it makes a lot of sense for the consumers who are paying $70 plus or AAA. But by how can you strategically employ advertising beyond mobile games in a way that's not overly increases?

Yes. Advertising is a growing part of our mobile business. We've rolled out ad units in many of our titles that previously did not have them. And our view really is, look, if you're engaged with one of our mobile titles, we ought to be able to monetize that engagement in some way. So if you only engage with in-app payments, you're monetized -- pardon me, less than 20% of the audience typically often quite a bit less than 20%. But if you have advertising as an option, you could monetize 100% of the audience in one form or another.

So that has been a big part of our strategy in mobile, and we have rolled out advertising units in most, but not all of our titles so far.

On the console side, look, you're correct and quoted me is saying, if you're paying premium price, you probably shouldn't be subject to advertising, unless the advertising is sort of endemic to the title. So when you go to a basketball game or watch a basketball game on television, you're accustomed to seeing advertising in and around that game, advertising in the arena, for example. And in our video game, you'll see that, too, and that's appropriate, and we are able to monetize that. It is a relatively small part of the console business, so, I expect that, that will continue to be the case.

Your next question comes from the line of Martin Yang with Oppenheimer.

Two questions. One, on the Netflix partnership. Do you think this is a one-off deal or there is more creative use of Rockstar IP signals a broader framework for licensing Rockstar content in the longer term, especially when you consider there will be numerous ways to share derivative content off gameplay after the game launches?

While this particular partnership is groundbreaking and unique. Rockstar has licensed content to Netflix before as has the rest of Take-Two, we have close partnership with Netflix, and they are in the video game business, and we're very happy to be their partner. And I'm sure there will be plenty of things that we can do with Netflix and many other outlets in the future.

So we want to be ubiquitous. We want to be where our customers are. We have -- we believe, the best and biggest collection of owned intellectual property in the interactive entertainment business. And wherever you are when you wake up, if you want to engage with our content, we want to be able to do so.

The question on GTA Online. More recently, we see a higher frequency of content updates. Does that require you putting additional resources into [indiscernible] development team? Are you really just spreading out cutting historically a larger less frequent updates into smaller chunkds?

Generally speaking, our update cadence for GTA Online has been pretty stable, and some of the updates have been amazing. Some have been less successful. But generally speaking, consumers really love them. But the cadence hasn't really changed and we do apply significant resources to that. And we expect to continue to support GTA Online going forward.

Your next question comes from the line of Jim Callahan with Piper Sandler.

I guess one on kind of GTA 6 preorders, it sounds like the demand for the deluxe edition has been extremely strong. Any comment we can kind of provide on what that could look like, what maybe the mix kind of looks like as we get closer to release of the game would be helpful.

Look, I think that Rockstar got it right in terms of the pricing of this standard addition and the pricing of the Deluxe Edition. And I think there's no doubt that consumers are really excited about both. And I think depending on your own ability to pay and how [indiscernible] consumer you are you can choose between them. But we're the preorders have been exceptional, and we're happy with the mix as well.

Okay. That's great. And then maybe just a follow-up on the user acquisition cost comment on mobile. I guess kind of how do we parse that out from what overall engagement looks like broadly on mobile, that would be -- any comment there would be helpful.

Our engagement is fine. And as I said, we're very happy with what we see in the marketplace. And we have some titles that are just doing incredibly well. We have a tougher year-over-year comp on [indiscernible]. So that has affected our numbers, but that's really a comping issue, not performance issue.

So give people what they want, they show up for it, and we have some titles that continue to do great, like Toon Blast and Match Factory and Words With Friends and Empires & Puzzles and many other big titles.

So the consumer is there. That said, user acquisition costs or a reflection of any number of things at any given time, including what else on the market and what our competitors are doing. And in certain instances, we'll have competitors who, from our point of view are vastly overspending in UA and that will make it less economic for us to spend. So we really pay attention to how much we spend on UA and how that fits with the lifetime value of the property, and we want to make sure that every nickel that we spend in marketing comes back at a significant multiple. And some of our competitors don't seem to look at the world that way. And if there are a bunch of them in a given period of time, that can crowd us out of the market. Sometimes it happens.

There are no further questions at this time. I will now turn the call back to Strauss Zelnick for closing remarks.

The first thing and the most important thing is that we all want to reiterate our enormous gratitude to our 13,000 colleagues around the world who work hard every day to deliver the best entertainment properties to consumers wherever they are -- whatever devices they have and whatever interest they have. And more often than not, our teams are brilliantly succeeded that task. And that's everything. That's the whole shooting match, and we are aware of that. And as I said, highly grateful for that. We're also really excited about what we believe the future will bring for our company and for our colleagues. And all of that should translate into enormous benefits for our shareholders.

We have a wonderful year that we're in process of and things are going really well, and we have great expectations for the upcoming launch of GTA 6, NBA 2K, WWE and lots of other titles coming from both the console and the mobile side. And as I said, we expect that this will usher in a new period of success at a different and enhanced level for Take-Two. So we couldn't feel more optimistic than we do with big smiles on our faces. And yet we know we have to wake up every day and do the hard work to deliver. That's our goal. Thank you so much for joining us today.

This concludes today's call. Thank you for attending. You may now disconnect.

All right. Thank you all for being here today. My name is Doug Creutz. I'm the senior media and entertainment analyst here at TD Cowen. As PSA, I'm sure you all know the Extel voting window is open. TD appreciates your vote as do I. And I'm very pleased to have with me here today the Chairman and CEO of Take-Two Interactive, Strauss Zelnick.

Thanks, Doug. Nice to be here.

I have been joking with clients that artificial general intelligence is like GTA VI. It's always 12 to 18 months away. But I'm going to have to retire that joke because we are now less than 6 months away from GTA VI. We do think it's going to be the biggest entertainment launch of all time, which is a high bar. So how do you define success for a product like that beyond revenue units? And how does Rockstar define success? And what's their ambition for the product?

Well, we are aiming to make in everything that we do, the greatest entertainment on earth. That's our goal. Our goal is to make phenomenal entertainment. And our strategy is to be the most creative, the most innovative and the most efficient company in the entertainment industry. And each of our labels in its own way tries to create something extraordinary in everything that they do. And sometimes we fall short, of course. And that you probably put a fine point on that at Rockstar, given the critic scores that they've always enjoyed and the breathtaking success of Grand Theft Auto and Red Dead and other intellectual properties that Rockstar has brought to market over its 25-year history. So you can imagine that the ambitions are very, very high and both for Rockstar and for Take-Two. But I think you would define success. You can't help it in terms of the scores that it gets the reviews it gets and the unit sales.

Do you think about it in terms of engagement over the long term?

Well, of course, we can't help thinking that way because Grand Theft Auto V has thrived through 3 console generations and is sold in 230 million units. So -- and has been around for the better part of 13 years and shows no signs of abating. And Grand Theft Auto Online, of course, remains a very powerful property. And you've seen the economic effect of that title when Rockstar generates meaningful unit sales year in, year out and also has significant recurrent consumer spending year in, year out. And we've also guided to significant recurrent consumer spending going forward for Rockstar.

Yes. And you anticipated my next question you had on your earnings call last week.

It's amazing how you can anticipate the next question when you provide them to our Head of IR, Nicole, in advance. It's extraordinary -- I have this incredible mental capacity to read.

You're giving away our secrets. So yes, you did guide to GTA.

I want to see if you guys are awake. And these conferences, like it's just to get a smile out of you all is challenging. So I'm so gratified to do eventually. I don't want to be in the third slot today. Sorry, go ahead.

So you did talk about GTA recurrent consumer spending growing this year. And I know you're not going to divulge sort of what the plans are for the GTA VI launch. But can you talk about what Rockstar has learned from GTA Online and Red Dead Online in terms of running a successful live service title? What they may have learned from observing other parts of your portfolio like NBA 2K and Zynga or even looking at some other high-profile live service launches in the last few years that haven't gone well?

So remember, we have live services at Rockstar now, right? We have GTA Online, we have GTA+. We have the FiveM business. So we already have that in market, and we expect those businesses to continue to thrive. There would be no reason that they would not. And what have we learned? Give consumers something great and they show up for it. We've learned the oldest lesson in the entertainment business.

In terms of how getting the mix...

By the way, that leads me to a story, which is true. So I started in the movie business and the television business. And Columbia -- I worked at Columbia Pictures and the -- I bet there's no one here who knows this. But the head of Columbia Pictures in its heyday, Columbia Pictures was a B studio going back into the old days. And the head of Columbia Pictures was a guy named Harry Cohn. Anyone know this? This is a true story.

And Harry Cohn was detested, reviled in the movie business by everyone. And so much so that there was some amusement at the fact that people were at his funeral. And -- two stories about that. One is someone said to, I think, Jack Warner, but I'm not sure, why do you think there's so many people at Harry Cohn's funeral? And he did say, give people what they want, they come out for it.

And true story. And the rabbi who officiated at the funeral was a famous rabbi in Los Angeles named Rabbi Magnin. And someone went up to him and said, rabbi, you must be able to say something nice about Harry Cohn. I mean this was the rabbi at the funeral, and he said, he's dead. Okay. But I digress. Anyway, you give people what they want, they come out for it.

That is true. If we look...

You can look it up. Both are true stories.

If we look beyond GTA VI, I'd imagine a few things are probably...

I'm trying to divert you. It's just not working.

I know. I know. I know. I'm going to talk -- we'll move on from this for just a second. I would think Rockstar would probably, beyond GTA VI, not like to have another 13-year gap between GTA releases. Maybe not. I mean, obviously, GTA V has done very well. And I assume Rockstar has other ideas that they like to pursue beyond just GTA. So how are you and they thinking about how they evolve over the next 10 or so years to best serve their audience and create value for the company organizationally?

The only way I can answer that is to say these are the very conversations we always have with all of our labels, Rockstar included. And we have a plan. And our plan might not be to have a specific cadence around our properties because we're not a cadence-driven company. We never have been. We -- I didn't show up at Take-Two nearly 20 years ago and say, the way everyone else was. We're going to annualize our products like clockwork to the contrary, and I was an outlier at the time. I said the only products we're going to annualize are sports entertainment properties. We are specifically not going to do it with everything else. That was very unheard of in the business at the time.

And the thesis was that if you do that, a, you're going to burn off your intellectual property because you're in market too often; b, you can't possibly deliver the kind of quality you need to deliver an A+ property by doing that. And I'm not going to name the properties, but we've seen that some very competitive properties have had good annual releases and bad annual releases because it's just so hard to do. And also, if you take a look at the intellectual property landscape when I joined Take-Two at 2007, GTA was not the #1 property. It was a top 5 property, but it was not the #1 property. And take a look at what happened to the properties that were higher up in the food chain that were annualized to see what happens.

So we set a new standard in the business, which is you have to make stuff that's great and creating some anticipation on the part of the consumer is a good thing. That doesn't mean that we said there should be an eight-year gap between releases. What has driven the gap is the amount of time it takes to do something that is as good as it can possibly be for that intellectual property. And sometimes, for example, with Borderlands, Gearbox has done a great job coming to market somewhere between 2 and 4 years after a release and generally speaking, succeeded mightily at doing it. And in other instances, for example, BioShock it's taken longer than we would like.

In the case of GTA V, it was not a simple story of like, wow, guys, took you a long time to come back to market because look at what Rockstar launched. Again, they relaunched and they actually remade the title for PC. They relaunched and remade the title for each new generation, and they launched GTA Online plus other services that were either acquired or launched. To the extent that GTA has become a thriving business, that's an ongoing business. So it's not as simple as, wow, what have you been up to for 13 years? The answer is they've been up to quite a lot. And I think one of the reasons that GTA VI is so widely anticipated is that we now have a GTA ecosystem that Rockstar built.

I would imagine that it's not as simple as saying, oh, let's just pour more resources into Rockstar that they probably are finding the right people to work in that environment probably not the easiest thing in the world.

Look, we -- again, I'm not to name names, but a very big resource-heavy company went into the video game business about, what, 12 years ago. And they've had one title that was moderately successful. It is not about headcount. It is not about technology. I know you'll get to that. It is about the intersection of talent, passion and resource that creates hits. And so it isn't as simple as let's hire more people. Obviously, you have to hire the right people and then manage them the right way with the right creative vision in the first place and then with daily attention to execution, which is ultimately my job, right?

Let's move on to NBA 2K, another very big franchise. You had a tremendous run over the last couple of years, double-digit RCS growth. Can you talk about...

And a huge year this year.

Yes. What they've gotten right to drive all that growth? And you did guide to, I think, 7% growth in the coming fiscal year. What lends you the confidence that you can continue to grow it off of such a tough comp for last year?

We hate talking about what we got right because I'm a big believer that arrogance is the enemy of continued success. And the team at Visual Concepts, if Greg Thomas were sitting here, he would be happy to tell you all the things that we got wrong and all the things that we need to do better at. And I sort of would dive in. But because I didn't actually create the title, I can compliment the team appropriately.

I think what they got right is this wonderful intersection of phenomenal sports simulation game with the creation of a culture and the importation and enhancement of the world surrounding basketball and that you have the ability to show up in that title in NBA 2K and NBA online and play the game or engage with the culture of the game or both. And I also think that Greg and his team at Visual Concepts do a great job of listening to the consumer and making sure that enhancements are in service, not of like enhancing revenue, but in service of creating a better experience, if we create a better experience, the revenue should follow.

So while we're happy here at an investor conference to talk about setting records for unit sales and revenue related thereto and recurrent consumer spending, that comes from meeting the consumers' needs, exceeding their needs, exceeding expectations and getting up the next day and doing it again. And in certain instances, making changes when we've gotten feedback, they're like, no, this isn't what we want. So I think the reason the game has done so well in the past couple of years, it's an amazing game. Just a great, great game. By the way, not the only great game in market. We're running scared at all times. And our friends at EA have the #1 sports title worldwide in FC. So we know the competition has, and we know what we got to do to continue to win.

Do you feel like there's still a lot of untapped opportunity outside the U.S. with NBA?

Huge. I mean basketball is a growth sport. It is growing outside. There's no secret that there's a lot of attention around growth in Europe. And we're very optimistic about where European growth could lead, but also growth in developing markets. And that's a broader theme at Take-Two, where we're very focused on growing developing markets. So remember, the nature of a multinational interactive entertainment company today, unless you're a Chinese company, is that 80% of your revenue comes out of the U.S., U.K., Western Europe and a little pockets of Asia.

And you're not serving at all in a meaningful way, Russia, Latin America, India, Africa and the Middle East. And we want to change that. And so we're aggressively building up our international markets presence, which is challenging because it requires you to invest in advance of revenue, something we hate doing, but we are doing that.

And can you talk a bit about opportunity with college basketball that you see?

Well, I mean, there was a mode. I think the team at 2K and Visual Concepts did a great job getting to market so quickly on college basketball and the consumers loved it, but it's early days. There's much more to come. I think there were 16 or 17 universities represented. It was a really great start.

As a Duke basketball fan, I'm excited to see what you bring.

More to come, much more to come.

Let's talk about some other things that you've talked about coming in the AAA side. You've announced Judas, you've announced Project Ethos. I think you said last week that you would have 7 AAA sequels in total in fiscal '28 and '29, which I assume includes the BioShock sequel that you've talked about. And as you mentioned earlier, BioShock has been brewing for a long time. Judice, I think you announced in 2022. When you think about value creation at the company beyond GTA, how important are these titles to that?

Incredibly important. And I mean, Lainie is sitting here, but I think in the past few years, GTAs total business has been less than 15% of our overall net bookings, if I have that right. So 85% of the company has not been about GTA. And that is in no way to detract from its importance as title. Obviously, it's to make the note that we're a big diversified company with lots of hits, and we have -- half of our business is mobile, of course, and half is console and PC.

So our job is to grow in all directions because we're serving consumers everywhere, every kind of consumer wherever they are and however they want to engage. That's our job. That's what we're trying to do. That's our mission. And in this past year, past fiscal that we just reported, of course, all of our labels did better than expected. So the goal is not to work on one title at a time, right? The goal is to build up our business by delivering great hits and to have largely owned intellectual property that we can bring to the consumer over and over again. So we have 11 franchises. Do I have that right, that have each sold over 5 million units? I think it's -- sorry. It's up to 13.

And those -- when I showed up here, the number was 1, to be clear,. And it's really hard to do. And I'm not really in the business of patting our collective selves in the backs, but no one else has done that, no one else has done that. And we have invested heavily and sometimes had failures and missteps in so doing. But the reason our company is as valuable as it is, is because we have all these franchises that deliver over and over again. And in most instances, actually sell more units with the new iteration in the prior release, not every situation, but most, which is a real outlier in the business. And again, a reflection of our willingness to invest behind quality.

I'm sure you've seen some execs and former execs in the last several years have said that they think AAA development costs are becoming unsustainable in terms of the amount of money that has to be poured in and the risk of failure. Like, how do you think about that?

They're not wrong. I mean -- but this is -- it's odd that you would say this, but the cost of making the best entertainment on earth is actually an entry barrier. And so -- you don't want to go up against that from the outside. But when you're in the inside, if you're judicious and you're careful about your capital allocation, one could argue it's actually a benefit because you have fewer high-end competitors. That's reliant upon the fact that the money is well spent, which is to say that you're making hits.

So it is a game for the big boys. The entertainment business at maturity is always a top 10 or 20 business, always. And if you think otherwise, you're kidding yourself, is not a long-tail business. It's a long-tail business when you're in the top 10 business. That's great. Like, we have a terrific catalog. It generates revenue and cash flow year in, year out. We have terrific live services, generates revenue and cash flow year in, year out. But the locomotive for all that is the front line and the front line has to include sequels and new intellectual property if you want to be in a more powerful position in 10 or 20 years than you are today, and that's our goal.

We've been -- this management team has never looked at the business quarter-to-quarter. As you know, I don't. And as you know, we're willing to do things that other people would see as unnatural acts because we don't look at things quarter-to-quarter. We're building this business for 5, 10, 15, 20 years, hence, even though the odds of my sitting in the seat in 20 years are reasonably low, but hey, you never know. So -- but that's the goal. And the reason that we have the market cap we have today is because I looked at that 20 years ago when we had a $700 million market cap. I wasn't playing quarter-to-quarter. We've made a lot of really hard decisions.

And by the way, we were in the wilderness for quite some time. And then we were undervalued for quite some time where people are like, is this real? And then finally, it began to come to fruition, but did not happen overnight. And now we're in this incredible position of luxury, what a terrible shame it would be if we incinerated by now thinking short term. So yes, we're going to have to invest a lot of money behind our creative teams if we still want to be delivering the best entertainment on earth.

We have to be judicious about capital allocation. We have to be thoughtful. And at times, we're going to have to take hits because we were wrong. But if we get it right, and I do believe we'll get it right with Grand Theft Auto and with BioShock and I hope with Ethos and with many other titles, we do get it right with NBA 2K. These are immensely profitable enterprises despite high production costs and high marketing costs.

I've always said to clients, there's no amount of money you can spend on a hit that's too much and no amount of money you can spend on a flop that's too little.

That's right.

And that's just how you have to approach the business.

We try not to spend much on flops. The best thing is like when you put out something that doesn't work and you run into someone -- this has happened to me also in the movie business more typically. But you run someone at a cocktail party and they're like, why did you make that horrible flop? It's like because I thought it was going to be a hit. Like, what do you think? I thought like that would be a good idea. Let's do that even though it's going to be a flop because I thought it was going to be a hit.

Where it's a little more complicated is mobile because you kind of don't know. So the way we have addressed that is meaningfully to reduce our exposure prelaunch in mobile. When we took over Zynga, they had a couple of projects that had huge numbers attached to that were legacy projects. We don't do that anymore because the hit ratios are so low in mobile, it just doesn't make sense. And really to focus mightily on fewer than 10 new launches a year in hopes of having 1 or 2 hits a year. And that strategy has paid off. It's what led to Color Block Jam and Match Factory and some titles that are doing really well that are somewhat smaller than that. And we hope that we'll be able to do that year in, year out.

But what we have done in mobile is gotten out of the business of spending massive amounts of money where the hit ratios just don't bear up. And mobile is essentially a direct marketing business on the marketing side, whereas PC and console releases feel more like brand marketing. So we do a bunch of performance marketing. But when you market a PC or console title, it's a lot like marketing a movie release in the old days for me, whereas marketing a mobile title is much more performance -- direct marketing. And I have a whole history in the old-fashioned direct marketing business. And one thing about direct marketing is it's very difficult to predict. It's the data that tells you the answer.

So if you're in a situation where you can't predict, like we doubled down on GTA because we believe, okay, if we get this right, it should do really, really, really well. But you can't double down on the mobile title because the hit ratios are just too low. So I can't tell you the numbers, but it cost us -- I mean, it was like a rounding error to get to market on Color Block Jam. It was just very, very, very low. Now then you have to invest in marketing. So equally, Match Factory, it wasn't a rounding error, but it was an inexpensive title, but then we had to really spend on marketing, and we made no bones about it. We were public about it. And it takes a while to get your money back when you do that, too.

Yes. And you had a great year in mobile. You grew 13%.

Yes, Frank Gibeau and the team at Zynga have done a phenomenal job.

You've also -- I mean, you talked about your new titles, Toon Blast, which is a much older title.

That's 14 years old and just set a record, it's incredible.

Yes. I mean, what's been the driver of that incredible growth spurt this long after launch?

It's been engaging with the legacy consumers. It's less about DAU growth and much more about engaging with the consumers who love the title and giving them what they want.

Do you feel like -- you talked about how much you have to invest in marketing to have a mobile title have a chance of success. Is that as much of a barrier to entry on mobile as development costs are for console?

It's a great question. And the answer is yes, it really is. So the good news is you can actually -- especially with AI, you can develop a mobile title really cheaply and get it to market. But if the payback period for the marketing is 2 years, and there are companies that think 2 years is too short. So we have direct competitors who spend up to like 5-year paybacks as far as we can tell, which we think is insane. But either way, think about what you have to spend to start getting positive cash flow.

So there's -- the entry barriers are enormous unless you create something that's actually a viral hit, and that doesn't really happen anymore. I mean, there are outliers, but they really are very few and far between. I can't think of one. So our friends at Scopely, for example, spent a massive amount of money on MONOPOLY GO. Now it paid off. It's a very profitable title. It's a huge title, but they spent an enormous amount of money supporting the marketing before the money came back. And we spent a lot of money on other titles.

So yes, it's a huge barrier to entry in mobile. There's a whole lot of business actually growing up of independent companies that are financing UA for mobile companies. So I don't know if you know this, but they're all private. So I'm not going to help you all out. But there are probably 5 companies that have raised private capital and they finance UA and then they take it back off the top.

Is their edge that they are really skilled at it? Or is this...

But that's their idea. I mean, if they're not really skilled at it, they're not going to be around very long. But so far, one of them used to -- one of the guys doing it that used to work for me is super talented. And it's still a small business because he does have to be very selective, but it's working.

You've talked about direct-to-consumer as an important margin growth vector for mobile. And we've seen -- there are some companies that report their DTC as a percent of total revenue. It does seem like there's been a big acceleration at companies like Playtika in the last year in terms of they're getting up to 40%. How is that going for you? And do you see a lot of continued runway there as a margin growth driver?

It's going really well. We are not direct-to-consumer in every one of our mobile titles, but we're nearly there. We don't talk about the percentage, but it's meaningful. And in fact, if you go back to the comments I made during the Zynga acquisition, when we talk about synergies and particularly revenue synergies, I outlined as one of the areas of revenue synergy going direct-to-consumer. And we vastly exceeded our expectations that we laid out at that time. Because at that time, direct-to-consumer at Zynga was 0% of their revenue. So it's a whole lot higher than that.

At the same time, we are not -- our strategy is not bring people to our company store to increase margin. Our strategy is to be the best entertainment company on earth by delivering more hits than anyone else and delivering them to consumers where they are and how they want to consume our titles. That's our job. And so if they want to buy stuff from a store, as long as that store treats us fairly and protects our intellectual property, we're going to be in business with that store.

I do think that third-party distribution costs will go down, partially for regulatory reasons, partially as a result of litigation and partially and probably most appropriately as a result of competition. And -- but third-party stores are important to us because they market our titles, too, and they are really good partners to us. So you can't ask someone to be a good partner on the one hand and then grab their wallet on the other hand. So we're -- it's a balance. There are consumers who want to engage with us directly, great. We'll do that. There are consumers who want to buy through the store, we'll do that. Just want to be treated fairly when we're at the store.

Do you feel like the third-party distributors are already becoming better partners because of the pressure that they're seeing from potential?

Well, they've always actually been really good partners. They've just been pricey partners. And I do think that they're -- but I do think third-party distributors understand now that those costs have to come down.

Okay. Just stepping back a bit, there's been a lot of hammering about the video game industry over the last few years. Obviously, there's been a lot of layoffs across the industry, at least a perceived lack of market growth, whether that's true or not.

It's actually not the stats I've recently seen from Newzoo, like the growing market.

I mean, I agree, but this is what I hear and -- we really read the headlines...

To what Matthew Ball wrote.

Yes.

But actually, it's not been borne out in what we're seeing. We've done incredibly well. And much as I would love to take full credit for that, I think we have felt industry tailwinds. We really have. We certainly have not felt headwinds. We felt a lot of headwinds in 2022, mid-'22 in both mobile and console. We saw it post pandemic. That's not what we're seeing now. We're feeling modest tailwinds.

So you feel -- if you looked at the next 5 years, where you think the opportunity is for the industry, you feel good about...

Oh my God. I mean it's breathtaking for -- and I'll give you 2 big reasons. put everything else to the side, streaming and developing markets. Those are 2 areas of focus for us. So will streaming technology bring PC content to consumers who previously couldn't get it because they didn't have PCs? You bet. What is a big barrier? It's obviously latency. And there are numerous companies, both domestically and internationally that are addressing that. And in the U.S., I think it will be edge network driven. Outside of the U.S., it will be driven by things like Starlink.

And it won't work for every title, but it will work for some. And it certainly does not mean if you've got whatever, I don't know, there are 8 billion people and you got like 2 billion or 3 billion phones and you've got an installed base of console of under 200 million, it does not mean you're in a 10x the market, obviously, because avid consumers are in the console business or in the PC business.

It does mean, though, that I think you're going to meaningfully address consumers who previously could not consume your products. So streaming should be really huge for us. And then the second thing, as I mentioned earlier, developing markets. We've got well over 1 billion people that we can serve in India that we do not serve now. Just by way of one example, 500 million people in the Middle East. So we do serve the Middle East, but not as effectively as we aim to do in the future.

So we can't have a TMT conference these days without discussing AI.

No. By the way, I got invited to a dinner, and it was like one of these think tank dinners. It was like, would you please come to dinner in [indiscernible], a small group of people to talk about AI. And I am a very polite person, which you know. And generally, I would say, I'm sorry, thank you very much for the invitation, but I can't make it. But I just couldn't help myself. I wrote back and I said, I can't spend 5 minutes having another discussion about AI, but thank you for the invite. I did actually say that I cannot do it. And clearly, the person I sent it to did not read the response. Like oh, you'll come another...

It was probably an AI bot.

Not to discuss AI, I won't. But anyway, I'm going to -- we only have 25 seconds.

We have 25 seconds.

[indiscernible] board. I've never eyed the clock so much. Please go ahead.

And the executive and other company I cover said that AI is ultimately going to allow a team of 3 people to develop a GTA class game within a week. What's your view on that?

That would be -- wouldn't that be great for us? No, that's not can't achieve. Anything that we have 3-part strategy, be the most creative, be the most efficient, be the most innovative. And if we have tools that allow us to be more innovative, more efficient and more creative, we're all in. That's what we've used tools for before.

I think the problem with the conclusion that people reach when the executive says that is, and therefore, they will make a hit that's as big as GTA, and there's 0 evidence for that. Because we've had technology forever that would allow people to recreate what we do. Maybe it's not done in a week, but who cares? Given how much GTA is worth, if you could make something that's as good as GTA and performs as well, would it bother you that it currently takes 13 years? Of course, not. Like why wouldn't you do that? So -- and people have tried. Anyone running into Assassin's Creed?I mean, people have tried to make titles that competed directly with GTA.

And by the way, this isn't by way of my saying no one could ever compete with us. To the contrary, I'm simply saying that the ability to use tools to create intellectual property is totally different than creating hits. It's just a different exercise. And there -- anyone see the 007 early reviews and early scores, like it was done by my friend, Casper Daugaard and his team, and it looks phenomenal. It looks great, and they're outside of the major studio system.

It is absolutely possible to make something of great quality. And if tools allow you to do that great, but they'll also allow us to increase our quality and increase our efficiency. Making a hit is different than making an asset. They're just different things. And I have no doubt that technology is going to allow us to make better assets more efficiently, like that's the history of technology. But making hits, making hits seems to get harder and harder and harder as entertainment industries mature. We do not have a monopoly in hit creation. As I said earlier, arrogance is the enemy of continued success.

I don't believe for a minute that technological advances give someone else an edge or give us an edge. It's just the tool set. It's available to everyone. And the key thing is that all of this is going to be totally commoditized. Show me one AI company, just one, who's offering their services or products to companies on an exclusive basis. They don't exist. So when that executive has that button to push, I'll have the same damn button. And the folks at Rockstar seem to be able to make these massive hits and lots of other people have tried, lots and lots, including former Rockstar employees. And so far, they haven't been able to do. It doesn't mean they can't in the future.

By the way, we're always running scared. But it won't be technology that changes the game. That won't be the change. What will change is that some extraordinarily creative individual or individuals are going to show up and do something astonishing. Our goal is to get those people to work within the Take-Two system. If we fail to do that, we fail. If we continue to be the home of creativity, the company that welcomes and encourages and supports and finances the best talent in the business, then the rest will take care of itself. And technology is in service of those goals, not at odds with them.

That's great. I don't think that was 5 minutes. Thank you so much.

Thanks for having me. Thanks so much. Thanks all.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter and fiscal year 2026 and Take-Two Interactive Software Results Call. [Operator Instructions] I would now like to turn the call over to Nicole Shevins, Senior Vice President, Investor Relations and Corporate Communications. Nicole, please go ahead.

Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year 2026 ended March 31, 2026.

Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.

Before we begin, I'd like to remind everyone that states 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.

Thanks, Nicole. Good afternoon, and thank you for joining us today. I'm pleased to report that we concluded fiscal year 2026 with excellent results, including fourth quarter net bookings of $1.58 billion which was above the high end of our guidance range. Net bookings for the full fiscal year were $6.7 billion, which was approximately $750 million above the initial guidance we provided last May. .

NBA 2K delivered record net bookings and recurrent consumer spending. Zynga achieved its highest level of net bookings since we acquired the business in 2022 and the Grand Theft Auto series, once again exceeded our expectations and continued to drive significant net bookings and deep engagement with its passionate community of players.

Fiscal 2027 is poised to be a breakout year for Take-Two, led by the November 19 release of Grand Theft VI, arguably the most anticipated entertainment property of all time and we're excited that Rockstar Games will start their marketing campaign this summer. Our initial financial outlook for fiscal 2027 includes record net bookings of $8 billion to $8.2 billion. This reflects meaningful growth over last year, led by the launch of Grand Theft Auto VI, along with the successful execution across our entire portfolio.

We expect to sustain this higher level of scale and generate strong cash flows well into the future as we release our robust long-term development pipeline and capitalize on new opportunities across our highly established multifaceted business. Turning to highlights from the quarter. I'll begin with our fantastic mobile performance. Toon Blast grew approximately 25% year-over-year as Peak introduced new events and features, including Temple Guardians, Deep Quest and refined level experiences. Match Factory! continued to perform with players responding positively to its live service execution and a continuous pipeline of play-friendly features such as the collectible album.

Empires & Puzzles outpaced our forecast and grew 5% over last year, driven by a robust slate of in-game events celebrating the Titles Nift anniversary. Color Block Jam grew 15% year-over-year and remains the highest grossing title in Rollic's history. Top Eleven delivered its strongest quarter ever after 16 years in market, driven by superb performance of the Bundesliga and live operations innovation. 2K's mobile offerings posted another solid quarter with WWE SuperCard reaching nearly 39 million lifetime downloads.

NBA 2K Mobile continuing to expand its audience. NBA 2K26 Arcade edition maintaining its top 5 position on the Apple Arcade charts and NBA 2K AllStar in China growing to nearly 10 million registered users for just 1 year end market.

Our direct-to-consumer channel continues to drive net bookings and margin growth as we integrate additional mobile titles from our portfolio and deepen our relationships with players by reducing payment friction and enhancing the end-to-end user experience, which is generating movements in conversion and customer loyalty. As the regulatory landscape continues to evolve, we're even more confident in the sustainability and growth profile of this platform.

The Grand Theft Auto series continues to outpace expectations significantly and demonstrate incredible momentum leading up to the launch of Grand Theft Auto VI on November 19. Recurrent consumer spending grew 5% year-over-year with strong engagement in GTA Online, driven by a Safe House and the Hills, one of the best-performing updates in its history. This content offering provided a wide range of community-requested features including mansion properties, the return of Michael Disanto from Grand Theft Auto V, all new missions, vehicles, exclusive GTAs benefits and the powerful new Rockstar mission creator that allows content creators to make their own GTA experiences.

Sales of Grand Theft Auto V advanced further with nearly 230 million units sold in to date. GTAs continues to see significant growth year-over-year led by the holiday update and highly attractive monthly benefits such as the inclusion of NBA-2K26 and its games library. In addition, Rockstar Games Red Dead Redemption to achieved its highest level of annual unit sales since its launch year, with over 85 million units sold in to date. During the quarter, our sports offerings also performed well. NBA 2K26 continued to expand its audience -- to date, the title has sold in over 10 million units, representing a 5% increase over NBA 2K25.

Recurrent customer spending grew 10% as we benefit from higher daily active users and games played per user. In keeping with our strategic focus on innovation, Visual Concepts launched season NBA 2K26, their first-ever college themed offering featuring 16 iconic universities, which was welcomed by NBA 2K's vast community and provided a glimpse of what's to come in college basketball for next year and beyond. I'd like to thank our partners at the NBA and the NBA Players Association for their continued engagement and support in our collective mission.

On March 13, 2K and Visual Concepts launched WWE 2K26, which was well received by critics and consumers alike. Engagement has been excellent with recurrent consumer spending up 20% year-over-year and more than 85 million matches played an increase of 7% compared to WWE 2K25. 2K is supporting the title with multiple updates through its ringside pass. I'd like to thank Nick Con and his team at for their unwavering support and partnership as we continue to evolve this series further for fans of the game.

PGA Tour 2K25 enjoyed a fantastic resurgence. 2K captured an influx of new players and drove strong organic interest by aligning Season 5 with the start of the PGA tour season in January and including the title on PlayStation Plus. During the quarter, our consumers played 60 million rounds of golf representing a 110 [indiscernible] increase over the third quarter. 2K will support the franchise throughout the year with several more content updates.

In closing, we're incredibly excited by the promise of our future for our players, our organization and our shareholders. This year has the opportunity to be a major inflection point for our company. defined by groundbreaking entertainment experiences, creative and operational excellence and record net bookings. With our flexible balance sheet, our strong cash position and our expectation that we'll generate over $1 billion in operating cash flow this fiscal year. We believe that we're extraordinarily well positioned to take measure, creative risks, to pursue accretive M&A and to invest in technology that will unlock greater creative capabilities and operational efficiencies across our organization.

I'm immensely proud of our teams and exceedingly optimistic that we'll continue to drive greater success and shareholder value for the long term. 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 an exciting chapter in our company's history. We are extremely optimistic about our upcoming pipeline, which includes 29 titles through fiscal 2029. In the interest of Precision, we are now only counting mobile games in our pipeline that have been specifically scheduled for worldwide launch within the 3-year window. Our teams continue to develop and test many new titles not reflected in this outlook, some of which may be added to our multi-accounts.

Fiscal 2027 is set to be a milestone year led by the launch of Grand Theft Auto VI on November 19. We plan to release 6 additional titles during the fiscal year. including 2 mobile titles, 3 sports titles, which are NBA 2K27, PGA Tour 2K27 and WWE 2K27 and 1 platform extension. Our labels will also continue to provide new content and experiences that drive engagement and recurring consumer spending across many of our previously released titles.

Looking ahead, we currently expect to deliver 22 titles throughout fiscal 2028 and 2029, including 1 mobile title, 5 sports titles -- new IPs and 13 core existing IPs, which includes 7 sequels and 6 Remix remasters and platform extensions. We look forward to sharing more about our groundbreaking pipeline, which we believe will drive a new period of growth and long-term returns for our shareholders.

I'll now turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. Fiscal 2026 was an exceptional year for Take-Two as we achieved record net bookings and operating performance. Each of our labels significantly outperformed the initial forecast we provided last May as our teams maintained their focus on product innovation and delivering the highest levels of quality and value. I'd like to thank our teams for their passion and dedication to embark on this milestone year marked by the highly anticipated release of Grand Theft Auto VI and strength across our core businesses results.

We delivered fourth quarter net bookings of $1.58 billion, which was above the high end of our guidance range of $1.51 billion and $1.56 billion. This reflected better-than-expected formats from the Grand Theft Auto series, several mobile titles and the Red Dead Redemption series. Recurrent consumer spending growth was strong, increasing 7% over last year and accounting for 82% of net bookings. This included 7% growth from mobile and 5% growth for Grand Theft Auto Online, both of which surpassed our expirations.

NBA 2K increased 10%, which represented one of the strongest fourth quarters franchise history but was softer than anticipated as trends moderated from the extreme growth we achieved during the second and third quarters of the year. During the quarter, we launched Sid Meier's Civilization 7 for Apple Arcade, PGA Tour 2K25 for Switch 2 and WWE 2K26.

GAAP net revenue increased 6% to $1.68 billion, while cost of revenue declined 5% to $741 million. Operating expenses decreased significantly to $928 million, as last year included a $3.6 billion impairment expense related to goodwill and acquired intangible assets. On a management basis, operating expenses declined 2% year-over-year. which was favorable to our guidance due to lower marketing expenditures, some of which shifted out of the period.

For fiscal 2026, we achieved net bookings of $6.72 billion which was above the high end of our guidance range of $6.65 billion to $6.7 billion. Recurrent consumer spending grew 17% and accounted for 78% of net bookings. NBA 2K grew over 30% and Mobile increased 13% and Grand Theft Auto Online increased 6%, all sharply exceeding our initial May guidance. Operating cash flow was $624 million compared to our forecast of $450 million reflecting our fantastic fourth quarter. We spent approximately $163 million in capital expenditures, which due to timing is favorable to our forecast.

GAAP net revenue rose 18% to $6.65 billion, and cost of revenue increased 11% to $2.8 billion. Operating expenses decreased significantly to $3.9 billion due to the impairment charges that I mentioned previously from -- fourth quarter. On a management basis, operating expenses rose 7% year-over-year, which represented strong leverage over the prior year. Today, we are providing our initial outlook for fiscal 2027. We project net bookings to range from $8 billion to $8.2 billion, which reflects approximately 20% growth over fiscal 2026 and primarily due to the launch of Grand Theft Auto VI on November 19, along with successful execution across our entire portfolio.

The largest contributors to net bookings are expected to be the Grand Theft Auto series, NBA 2K, Toon Blast, Match Factory, Empires & Puzzles, the Red Dead Redemption series, Words with Friends, Color Block Jam and Zynga Poker. We expect recurrent consumer spending to be flat in fiscal 2026 and to represent 65% of net bookings. Our current consumer spending forecast assumes NBA 2K is up high single digits, the Grand Theft Auto series up and mobile is down due to last year's success of Color Block Jam and our assumption that trends will moderate for several of Zynga's mature mobile titles. We expect the net bookings breakdown from our labels to be roughly 36% Rockstar Games, 35% Zynga and 29% 2K.

We have forecast operating cash flow in excess of $1 billion, and we expect to be in a net cash position by the end of the fiscal year planned to deploy approximately $200 million of capital expenditures for game technology and office build-outs. We expect GAAP net revenue to range from $7.9 billion to $8.1 billion and cost of revenue to range from $3.5 billion to $3.62 billion. Our total operating expenses are expected to range from $4.18 billion to $4.2 billion. On a management basis, we expect operating expense growth of approximately 8% year-over-year. which represents significant leverage over fiscal 2026. This growth is largely due to higher marketing expense to support the launch of Grand Theft Auto VI and our new mobile releases as well as higher R&D costs.

Now moving on to our guidance for the fiscal first quarter. We project net bookings to range from $1.32 billion to $1.37 billion compared to $1.4 billion in the first quarter last year. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, Empires and Puzzles, the Red Dead Redemption series, Color Block Jam, Words with Friends and Zynga Poker. We project recurrent consumer spending to decline approximately 3%, which assumes high single-digit growth for NBA 2K and declines for mobile and the Grand Theft Auto series.

We expect GAAP net revenue to range from $1.5 billion to $1.5 billion and cost of revenue to range from $578 million to $594 million. Operating expenses are planned to range from $926 million to $936 million. On a management basis, operating expenses are expected to grow by approximately 3% year-over-year, primarily driven by a modest increase in personnel costs. In closing, fiscal 2027 will introduce a new level of operating performance which we expect to sustain well into the future driven by a robust pipeline and expansion opportunities across our core franchises with the first on incorporating new technologies and tools, we feel confident in our ability to scale our business generate operational efficiencies and leverage the power of our balance sheet, which we believe will drive long-term shareholder returns. Thank you.

I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues around the world for their commitment to excellence and to our strategy of being the most creative, the most innovative and the most efficient company in the entertainment industry. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator? .

[Operator Instructions] Your first question comes from the line of Eric Handler with ROTH Capital Partners.

Lainie, just a couple of things within the guidance. It looks like, at least on a non-GAAP basis, your operating expenses are looking, let's call it for round number purposes, about $3.8 billion. That's a $300 million incremental increase on a year-over-year basis. How much of that is due to marketing. And when you look at sort of like the trend for the next couple of years for G&A and R&D, what do those trajectories look like? I assume it'll be much smaller than revenue growth.

Yes, that's correct. So we expect to have a lot of leverage over the next couple of years as we continue to scale the business. And for the $300 million higher for this coming year, about half of that is for selling and marketing expenses for the entire company as we have significant marketing for our entire pipeline of titles that are coming out this year. .

Okay. That's helpful. And then as a follow-up, how should we think about RCS and once GTA 6 comes out, how are you sort of thinking about the trajectory of GTA Online when that game is launched?

Rockstar will provide more details on the GTA series when they're ready to talk about that.

Yes. I think you're asking, though, what do we expect to happen with the recurrent consumer spending regarding GTA Online? And look, I think to say that everyone has been pleased by the ongoing trajectory of GTA Online, Red Dead Online, the sales of GTA V, the sales of Red Dead would be a great understatement. These titles have proven to be vastly more resilient than anyone expected. And I think it's a reflection of the quality of work that Rockstar has done despite the fact that Grand Theft Auto V is now has been in market for 3 console generations, it continues to sell. It's now up to 230 million units, Red Dead at 85 million units. So we're extraordinarily pleased with how Rockstar's titles have performed. It's difficult to know exactly how Grand Theft Auto Online will do after the release of Grand Theft Auto VI. But certainly, it will stay in market. And certainly, there are many, many consumers who love the title.

Your next question comes from the line of Colin Sebastian with Baird.

Congratulations on the year. I have a couple of questions as well. I guess, first off, as cash flow and flex in the -- for the guidance for the coming fiscal year, how are you guys thinking about capital allocation between returning to shareholders versus other uses? And I have a follow-up.

So this will sound only consistent with our answer to this question. It's the same as it has been for as long as we've been in the position of having positive cash flow and positive cash balances. There are 3 uses of our capital here first, to support organic growth. This company's story has largely been an organic growth story. And we certainly have expectations for organic growth in fiscal '27 and we believe that fiscal '27 is setting a new benchmark and a standard for this company going forward. And that's all organic. But as you can see from the numbers, we have to invest to be in a position where we can grow in that way. And our balance sheet and our P&L allows us to do just that, that will continue.

The second use of our capital is very selectively when it makes strategic sense and let me emphasize this when it's accretive we are willing to engage in inorganic opportunities, the most recent meaningful one was, of course, the acquisition of Zynga in 2022 for $9.7 billion in cash and stock, and then more recently, the acquisition of gearbox. And so I'm proud to say that all of our acquisitions have turned out to be accretive and successful over nearly 2-decade period. That's pretty breathtaking for corporations, not generally a case. And I think that's because we're immensely disciplined. You're not going to see us doing deals hand over fist. But assuming our balance sheet continues to improve, I think you could imagine more inorganic growth in the future as well.

And we've already said in this release today that we expect to be in a net cash position by the end of the fiscal year. And finally, we've earned capital to the shareholders when it makes sense. So far, we've done that through share buybacks, and they are opportunistic, and we believe that share buybacks make sense for our shareholders when they were executed at deep value. Our last buyback was done at $158 a share. We'll see how the stock opens tomorrow, but I think what that was a pretty good plan on our side. So like all stocks, they move around different price points. Our stock traded down as low as, I think, $195 in the last 6 weeks. And there is an opportunity to return capital to the shareholders when it makes sense.

Thanks for the reminder on those Strauss. I guess maybe as a follow-up and maybe some of the structural issues in the industry including sales of current-gen consoles. I'm just curious how that impacts your thinking or your assumptions in terms of establishing pricing and preorder expectations for titles like GTA VI in the coming year?

Sorry, what would the relationship be from your point of view?

The number of -- the installed base of hardware may not be as high in this current console generation as it might otherwise have been -- certainly value price points for certain titles have done well versus premium pricing. So those considerations.

Look, when we look at pricing, I would not say we look at it in the constant of the installed base. We absolutely look at pricing in the context of the property itself. And so we want to do every situation, whether that's console, mobile, PC, frontline or catalog is delivered to the consumer vastly more entertainment value than what we charge. We want the consumer to have a great experience. So we think a consumer experience is the intersection of what you get and what you pay for it. .

And probably a great example of that is Mafia the old country, which is a terrific title. But it's not a 100-hour experience, not a 50-hour experience. And so we price the title at $50 and consumers were thrilled and we had a massive hit. Now I suspect we could have priced at a higher level. We wanted to make sure that consumers loved it and part of loving something is feeling good about what you pay for.

Your next question comes from the line of Doug Creutz with TD Cowen.

I wanted to ask in the context of your guidance at mobile, you're assuming is down this year based on some attenuation in the performance of older games. Is that based on anything you're seeing in the year-to-date? Or is that more of a, hey, these are older titles, let's be prudent in our outlook. Similar to, I think, for many years, you guys sort of said we expect GTI line to be down because it's a many year old live service game and then would typically do better. Can you just give some context around that? And then also what you might be assuming for your 2 new mobile launches within that guide?

So it's a very fair question. We had a great year at Zynga, and I think it's more the way you characterize it, which is we're not prepared to guide to continually beating expectations materially to any business unit. So we do guide as we see it, and this is how we see it. However, as you said, it is a reflection of the fact that some titles that were newer last year or older this year. Now all that said, Tom Blast was up 25%, and it's a very old title. So we do have opportunities to exceed our expectations now and then. But this is our best estimate sitting here today.

As far as our expectations around new launches, we -- in the mobile side, particularly, we never anticipate huge numbers because it's just impossible to do so. Hit ratios are just too low. So our guidance would typically reflect our expectations around the marketing spend in the year because we don't -- we would never guide around doing something silly in the mobile business, if you're getting bad immediate results from a marketing spend, you stop doing it. And our dev costs are pretty manageable in the mobile world. So I would say unlike say, console where -- you have a big release growth. I'm not going to give you the example you want. So we have basketball coming up, like we know how many units it's sold so far, 10 million units sold in today. The prior year, the year before that, we have a sense of the market like we can estimate that pretty well with an event. But with mobile, we just don't have the ability to do that. So I think it is you're correctly intuited that our mobile numbers would not include an expectation for some massive new release yet.

Your next question comes from the line of Cory Carpenter with JPMorgan.

I have 2 questions on NBA 2K. Clearly, I think, record year for the franchise this year. But hoping you could expand a bit on the trends you saw in the quarter. I think they moderated in the prepared remarks, a little more than you had expected. So what did you see there? And then -- and Karl, maybe could you talk a bit about the engagement that you saw with the initial college basketball rollout.

So for NBA, this is one of our strongest quarters for Q4 in the franchise history. In terms of looking at our expectations, this reflects the extreme growth of Q2 and Q3, where we saw a high concentration of spending our most engaged players early in the year, which left less upside opportunity heading into Q4. So that's really what we saw in Q4 this year. .

And on the college piece, yes, we are very excited about our college release for Season V. I would describe at this point is it's a taste of what's to come. We did a deal with feature 16 universities. It's basically validated our expectations and the opportunity that we think will be very meaningful for us going forward. So the short answer is stay tuned. It's very exciting for us, and we're very happy how things have turned out so far.

And maybe as a follow-up, Strauss, on the last earnings call, Google Genie had just launched in beta. There's been some conversations more recently around the ability for AI to perhaps create GTA VI in a couple of months. I know this is a bit of a generic high-level question you've touched on before, but just given this remains a pretty big debate among investors, I thought it would be helpful to hear your latest views just around what you're seeing in AI and how you expect it to change the gaming industry and Take-Two in particular?

We remain enormously optimistic. Technology helped build this company. Video games are created largely inside computers and always happen. When I started in the video game business in 1993 we were making 32-bit games, and they certainly look at anything like they do today. That's all driven by tech. I think the sort of confusion around the belief that somehow more efficient asset creation puts us at some disadvantage or creates a competitive advantage for someone else. And I don't just don't believe that's the case -- to the event that technology allows anyone to do a better job in asset creation, naturally will avail ourselves with the same technology.

If you take a look at the tech end market that is currently licensed for the creation of video games, it's licensed broadly, no one exclusively licensed this technology for video games. So if a competitor has access to AI and that allows someone to do something better quicker, cheaper than we would have access to the same thing. The second point that I've made that I would stand behind is that the asset creation is not same as hit creation. So the entire story around the Gemini release was when you can create assets that look like video games more easily than it could be for it. I hope that's true because that will benefit us naturally.

We have 3-part strategy, data most created would be the most innovative to be the most efficient seems to me that even if it doesn't help with creativity, it certainly should help with efficiency and innovation. So that could be thrilling, but we do have to remind ourselves asset creation is not the same as the creation. And the best example of that is, there are thousands of new move releases a year, but there's a handful of new mobile hits a year, and we make some of them. Despite in fact, everyone has access to the same tech because everyone likes it's exactly the same underlying technology for the creation of mobile titles as we do, right?

So I remain highly optimistic. Now I'll give you a real-world example. I was visiting one of our studios, and they showed me some advertisements that they were putting together to advertise their games. And these were live action ads, and they were funny in 15- to 30-second ad units that you've seen a zillion times. And they were all created with licensed AI, legal AI. And the script was done in-house for free, well, people colleagues who work in the company already. And the software [indiscernible] the AI software use the entire cost of making the spot was 0 and previously, we hired third-party companies to actually create those with human beings, and those spots could cost $25,000, $50,000, $100,000.

Now please note we -- not only were we not interested in resuing our head count to make this happen. We don't have the opportunity to produce our head count to make this happen. The entire marketing team at this particular studio is 2 people. They're doing a great job. But what does AI as allowed them to do be more efficient, make great stuff and do it cheaper. And this is all the benefit to our company.

Your next question comes from the line of Chris Schoell with UBS.

Strauss, I believe it was a few quarters ago, you mentioned your expectations for GTA VI continue to increase. Any updates you can provide on your general expectations and levels of confidence for the franchise based on the indicators you have at this point? And how do you expect that this title will perform relative to GTA 5 and then Lainie, maybe I know there's a lot of noise to margins this year with the marketing and the software -- I believe I heard you said there's a lot of leverage over the next few years, but can you just remind us how you're thinking of the ability to return to the historic margin levels that Take-Two used to see? .

I don't recall the comment you alluded to. I'm pretty much -- I think I've always said the same thing, which is we're all -- how could we not be we're all extraordinarily excited about what Rockstar Games is working on. We're all incredibly enthusiastic about the upcoming release. And equally, this is a management team that never claim success before it occurs. And I'm pretty sure that every time we've had the luxury of having a conversation about an upcoming release that looked good, I've said we absolutely never opine on how high is up.

We certainly work toward the best result and hope for the best result. But that is out of our hands, it's in the hands of Rockstar from a development point of view and a marketing point of view is trying to make the best entertainment property that possibly can and then bringing it effectively to consumers all over the world. That's what we aim to do. And we do feel really, really good about it.

Margin improvement remains a key priority in our financial strategy, but we recognize that margins will fluctuate over time based on a variety of factors. In fiscal 2027, we're reaching a new level of operating performance, which we expect to sustain well into the future, driven by a robust pipeline and expansion opportunities across our core franchises. So as we operate at this new level and generate operational efficiencies through reduction efforts and leveraging technologies, including AI, we aim to enhance our margin profile over time. .

So if you think about our operating expense leverage, it represents our largest opportunity, which we believe we can achieve as we grow our sales both organically and inorganically. We've mentioned previously that gross margins on many of our titles are affected by the increasing cost of development -- so we've been making many structural improvements, including the driving efficiencies and reducing expenses. So you've seen some of that coming through the P&L in the last couple of years and the leverage we've seen in the last year in terms of our operating expenses. Also the DTC efforts in mobile, that's also working towards improving our margins. So this was a year where we scaled the business meaningfully, and we achieved strong leverage on our expense structure. So we'll continue to do that as we look into the future.

Your next question comes from the line of Andrew Marok with Raymond James.

Maybe one on the Rockstar Mission creator. I know Strauss called that out in the prepared remarks is an interesting factor. I guess are there any learnings from the early days of that and some of the recent missions that were created as you look to sale UGC and some of your Rockstar properties? And then I have a follow-up.

Look, we're trying to meet players where they are. And to the extent that people want to have a hand in creation there are numerous opportunities for them to do so. So I just think it's incredibly exciting, and our company embraces these advances. So we're not precious about what we do or we're open-minded. An example -- another example of that is the 5M business. Where this started as sort of a business that was outside of our 4 walls. And now it's a business that's inside our walls. And we're thrilled that it is .

Okay. And then maybe one more on mobile, if I could. I know that there has been some kind of correlation between the mobile business and macroeconomic factors as I guess what level of conservatism might you be baking into the guide around general economic conditions as it relates to the mobile business?

Well, look, we we're not economists at we certainly point of view about where the economy is going. And that is one of the factors we consider when we build guidance. .

Your next question comes from the line of Matthew Cost with Morgan Stanley.

Strauss, there's a comment you made in the prepared remarks about your expectation to sustain higher levels of scale going forward. Just given the potential for Grand Theft Auto performance this year, that's a high bar to clear going forward. So as investors think about the opportunity to sustain your scale off of that base, how should they think about the mix between just an ongoing significant revenue contribution from Grand Theft Auto versus the pipeline that you went into some good detail in the prepared remarks discussing. And then I have one follow-up.

It reminds me of my it's Box D, all of the above. .

Your next question comes from the line of James Heaney with Jefferies.

Yes. Great. Maybe just diving in again on mobile. I mean, it's been impressive to see continued growth of Toon Blast and Match Factory! as kind of the biggest drivers for the segment. I was just hoping you could go in some detail about the unique drivers across those franchises that you think has sort of enabled them to continue growing this far after the initial launch.

Well, actually very different. So Toon Blast has been around for a really long time. Match Factory! Is relatively new. So Match Factory! last year was still in growth mode and we projected that it would moderate, and we'll see what actually happens. Toon Blast is legacy title. And with regard to Toon Blast, what you're seeing is a title where the consumers who are involved are getting more and more involved. And that's a reflection of the content that Peak is putting into the game and offers that are made to consumers. So basically, with regard to legacy title, where you might have a sharp growth curve on DAUs, you will have an effort to actually serve the consumers we have much more effectively.

And I think that's what you're seeing in Toon Blast. Match Factory! is still in pretty steep early. It's not that older title. So it's very different. We need to be muscular in both areas. We need to be able to run our live services businesses really well for a long, long time, and Zynga does a phenomenal job with that. But by the way, so does Rockstar, right? GTA Online is a live services business. It's 13 years old, that online is a legacy live services business. So NBA2K online is a live services business. We have to do everything well here. It's what makes us place an exciting place to work.

We've got a pipeline of frontline titles. We've got to turn them into hits. We don't always succeed, but we have to try. We have live services business that I just mentioned, we have to optimize those across both mobile, console and PC and then, of course, we have a catalog. And when you add it all up and we do a good job across the board, you get the kind of year that we got last year, and we now expect to make a meaningful step up, obviously driven largely by the launch of GTA VI, but also driven by performance of the rest of the business.

And then we expect to set that as a new base from which to -- and that's a reflection of firing in all cylinders. Undoubtedly, we'll have some lapses along the way. We don't know where the lapses will be. But if history is any guide, we'll also have some titles that will meaningfully beat expectations going forward. And part of our [ 35 ] strategy of being the most created and most innovative and the most efficient is indeed to be the most innovative. And if you look at the history of the company, we've been a leader in innovations, whether that's cost developing development or marketing. And that in the coming years, we'll be able to innovate further.

And I don't know exactly what form that will take, but I would just note that this company doesn't look anything like it did 19 years ago despite still being in the interactive entertainment business. Lots of what we do here didn't even exist back then. And this industry, never mind the company is still on a sharp growth curve in terms of its cohort of engaged consumers and the opportunities to do new things and bring those new things to people in new ways.

Your next question comes from the line of Jason Bazinet, Citi.

I just had a quick historical question. In the past, when you've been confronted with these big titles like, I don't know, whether it's GTA 4 or 5 or the last 2 Red Beds, how accurate would you say your firm, your management team was in terms of predicting how well these titles would do? Were there some that's sort of disappointed or others that really beat? Or were they sort of all within a pretty tight confidential in terms of your own internal expectations?

So with regard to the titles you mentioned, as it happened, they all performed better than we had expected, but we've had plenty of other titles that disappointed candidly. Thankfully, not of late, and they tend to be few and far between. But it would not be accurate to say that our expectations are always exceeded, not accurate in the least. And that's why we are, I think, appropriately humble around here. This is the entertainment business. It is unforgiving. We try our hardest. We do not always succeed.

Your next question comes from the line of Alec Brondolo with Wells Fargo.

I think I want to maybe try to ask Colin Sebastian's question in a little bit of a different way. I think that there's been a lot of conversations in the industry over the last several months. The growth of roadblocks on the growth of lower priced games on steam in the $10 to $20 price point and it seems like it's mostly driven by younger gamers. I mean, obviously, Take-Two doesn't participate meaningfully in those categories. You have a couple of lower price games that fits -- like Mafia. I think the question is like what is the level of confidence that the newer cohort of gamers will graduate into more premium AAA experiences over time? Like I think the question is like is the young person that's playing Roblox, are they going to want to play $80 Grand Theft Auto VI when they grow up? Or might they be habituated onto lower fidelity titles? Any thoughts there would be helpful.

So actually, it's the contrary. When entertainment properties are aimed at children, I don't know if you have children, but right around the age of like 10 or 11, they do not want to be children anymore. They want to be teenagers. And so one of the issues, and this is not by way of being critical of anyone else in the industry. But one of the issues children's programming, whether that's linear entertainment or interactive entertainment is that children reach a certain point, they don't want to be engaged with kids programming anymore even if it's appealing to them. It's not that a certain kind of kids-oriented interactive entertainment is necessarily a feeder to what we do in certain parts of this company, but we also do make plenty of entertainment [indiscernible] that's available for all audiences. .

But with regard to our rated titles, it's not necessarily the case that something else is a feeder to it. It's a different business. But it is a business that is only available if you're 17 or above. And I think if you engage with Interactive Entertainment and you are 17 or above, it's very difficult for me to imagine that you wouldn't be incredibly interested in RM-rated titles, specifically one that is coming up.

Your next question comes from the line of Eric Sheridan at Goldman Sachs.

May be we'll dig on 2 of the topics we've talked about on the call. So far with respect to mobile advertising and building additional optimization around user acquisition, how are you thinking about the signals as more mobile advertising becomes driven by AI and machine learning, with respect to either being able to deploy more dollars at a higher return on ad spend or possibly becoming more efficient with respect to advertising? And if possible, another quick follow-up.

Well, we certainly try to do that. When we work with [indiscernible], and we are trying to advise of course, our return on ad spend. And sometimes are doing really well in the market and at other times you are frustrated in the market, depending on what's going on. There have been moments for example, when we really couldn't get out there and spend because we didn't -- we could not have inventory at a price that made sense. There are other times when we can do that change. It's our job to make sure that we understand the payback period on what we're spending. And we have very tight guidelines about that but you have to be on top of it all the time because when you spend money in mobile, as you know, you're spending it based on an expectation and you'll earn it back over a period.

And that expectation is based on prior history, but prior history isn't always just positive with regard to what happens in the future. So we are constantly on a daily basis, tuning up our models that will inform how we spend money on user acquisition. As I said, sometimes it's greater, sometimes it gets lower. We also have this weird anomaly, which I'm sure you're aware of, which is if we're out of the UA business for a period of time because we don't like it, of course, we make more money because there's no UA that spend that comes back the same day in its entirety. Sometimes you get a really quick payback periods. We have experiences where the payback period as been as quick as 90 days. And I don't think we talked publicly about our expectations around the payback period in general. But let's just say, I think we're more conservative than most.

To answer your question, are there new opportunities to be more efficient in this area, guess, I believe so. And of course, it's not lost on anyone that after Apple changed their attribution characteristics, the entire industry is challenged, but you can see from our own results, with Zynga last year that we have surmounted those challenges, and we feel pretty good about how the business operates now.

Great. And if I could just ask one more. With respect to your approach to go-to-market with DTC, any new learnings about what the opportunity set might look like or the ceiling of that opportunity might be to grow the percentage of mix from DTC over time?

Well, look, I've been saying for a long time, I thought of sort of the competitive landscape and the regulatory landscape will be favorable with regard to our overall distribution cost and taking as part of our overall distribution cost, our D2C costs, which is materially lower than third-party costs, but multiplied by the share of market related to DTC. And we have said that, that share has been growing. We have not talked about what percent it is or where it's going. What we want to make sure though is two things. Number one, we want to be where the consumer is. The goal of this company is not to control distribution. The goal of this company is to [indiscernible] and bring them to consumers wherever they are, however they want them. and of course, to do so on economic terms.

We value our third-party retailers greatly. We especially value them when they provide marketing opportunities for us. And we understand that there's a value in the marketing that third-party retailers can provide. And that would intersect with how much they charge us for access to their consumers. So the more value a third-party retailer provides to us from a marketing point of view, the more comfortable we are working with them -- at the same time it is a role for direct-to-consumer opportunities. For us, it's all of the above.

Your next question comes from the line of Mike Hickey with StoneX.

Strauss, Karl, Lainie, and Nicole, congrats guys on a great year and a great guide, very exciting. Just 2 questions, Strauss first. I think you referenced before being astonished by Rockstar's marketing creativity. Clearly, you've got precedent there. Can you talk, I guess, philosophically about how Rockstar thinks about building anticipation for a game launch of this scale and how beneficial that marketing effort can be in terms of sustaining or even building demand for around the current GTA ecosystem? And if that ancillary benefit is baked into your guidance? I have a follow-up.

Well, look, thanks for the question. I'm obviously not going to go into detail. What we've said about marketing GTA 6 is that marketing will start this summer. And as you know, any information around releases and marketing comes from our labels. And that shouldn't be news to you. That said, is there -- do we see in any release no matter how highly anticipated it is both the need to market the title and the opportunity in marketing the title, we do. And I was asked about this earlier because I absolutely refused to use a title of ours as an example, or someone else's. And I said, so there's a new release of mission impossible, and it's starring Tom Cruise, we all know what that looks like and I for when I'm going to see that movie, like I'm going to see that movie. But Paramount still spend a whole lot of money to market that to make sure that people know it's out. It's great and it's worth seeing.

And I think that's the sort of the entertainment business. So I don't think there's any situation where one can expect to have a massive hit and not engage heavily in the marketing. And that will be true for this company across the board. And I think, again, at [indiscernible], actually, I think I think this company does spectacular marketing and whatever we did last year, we got to do better this year ever, we do this year to do better next year. We demand it of ourselves and frankly, the market demands it of us.

Nice. On AI stats, not to be redundant, you gave a really thorough answer, but maybe just for clarification. Do you feel like at this point you've got broad buy-in from your studio leadership around the use of AI tools, not just in marketing but in game development. And when you think about these tools over time, I know you're doing a lot in terms of investing in product tools related to -- do you think this will allow you and your studio teams to unlock maybe some dormant franchise IP or even new -- that may not have been produced over the last decade plus due to resource constraints. And if that's the case, would you look to build head count into that opportunity?

I think that everyone is bought into the possibilities of technology. And I think there are times when some of my colleagues think I'm too conservative on the topic. I've actually never been accused internally like going too fast or doing crazy stuff. I think I probably err on the side of being a little more conservative. Think about it. The people who are on the front lines of developing here are absolute experts in software, in heart and in video games. And the way they got the job to work at a company like this is because they were on the front lines and because they were innovating and they were highly creative and because they're more efficient.

So you have to assume that they're going to be the first people to embrace new technology that allows them to do a better job. That said, we're known for making these beautiful handcrafted titles around here. And any technology that we use, I think, will be in the hands of necessarily creative people, and we'll take the form of handcraft. Our art is created in computers. It always has been. But our is created by human beings using computers. And I believe that will continue to be the case.

Your next question comes from the line of Brian Pitz from BMO Capital Markets.

I'll try a couple here. Any big color you can provide on GTA 6 around your framework for the PC release as well as if the game has any chance of being cross platform. Also, any best estimates on when we could see a presale launch for the game? If not, perhaps you could at least provide your best estimate of timing on hearing more details.

Yes. As you know, look, the PC market is a great market, and it's growing for console type titles and it's a market we serve avidly. And virtually all of our hit titles end up on all platforms over time. That said, Rockstar Games has announced GTA 6 for console only so far. And we're excited about our November 19 release. .

Your next question comes from the line of Ron Song with Wolfe Research.

Just turning back to NBA. I know Lainie talked about the fourth quarter, but as we look at fiscal '27 and lapping that 30% RCS growth, I guess -- is there anything you can like share a breakdown on what gives you the line of sight to being able to sustain like the high single digits? I guess I'm really trying to get at how you think about the stage of growth for monetization and engagement for the basketball franchise noting what Karl said about the state teamed comment?

So we're pretty proud of NBA 2K's fiscal 2026 record-breaking results, and we're applying the successful learnings of our strategy for this year. including within NBA 2K27. And while fiscal 2026 set records, we have a consistent track record of delivering strong sustainable RCS growth and are confident in doing so in fiscal 2027. So when BC looks at the game each year, they just do not sort of rest on their laurels. They continue to make this game bigger and better every year, and we've seen that time and time again. .

Your next question comes from the line of Martin Yang with Oppenheimer.

I have one question on mobile. Zynga has meaningful presence in Turkey with Rollic and peak. Can you maybe comment on whether those studios have benefited from the local government policy that favors developers that was released this year.

So obviously, we've had a lot of great success in the Turkish market from a development perspective. Some of our biggest and best titles in our studios are in Turkey. We have a fantastic relationship with our developers there. And we love being in that environment. In terms of sort of the government opportunities, to the extent that there are opportunities in any jurisdiction where we operate, we would take advantage of those as much as we possibly can. Local jurisdictions are very important business partners to us, and it's something that we take very seriously because it's an opportunity. It's not only good for us, but it's also good for the local markets. .

Your next question comes from the line of Omar Dessouky with Bank of America.

So Strauss, I was in the audience at a conference you spoke at recently. And you made a couple of comments that really caught my attention. So one comment was that you'd price your games to reflect the value that they provide for consumers. And then a second comment was that the retail price of video games has gone down in real terms over the years. So do your comments imply that you also believe a $70 price tag would be too low for GTA 6 relative to its value to consumers. Because by that logic, a $70 price tag applies to me that the consumer value of GTA V will also go down. Now if I misheard your comments, I apologize. However, if my logic is flawed then what would a $70 price tag imply about the consumer value of GTA 6 relative to its predecessor.

I think what I was trying to get at was on real terms, video games from a better and better deal for consumers over a period of time. And that that's a good thing. So I don't think the comments are in conflict. In other words, if you can give people something really great, and you can offer it on really favorable economic terms, that's a win-win. So I was really trying to make the point that even though I think the value has grown materially, certainly, a video game release today is vastly more exciting, compelling intriguing and longer-lasting entertainment than it was when I was at Crystal Dynamics in 1993.

But in real terms, frontline prices have declined. I was using that as a backdrop to point out that we think that the most important thing is to deliver the best entertainment on earth. And then the second most important thing is to do it on really favorable economic terms. But I didn't mean to guide in any way how you should think about our upcoming unannounced price on any release, that will become clear to the market in the fullness of time. whatever it is, though, we wanted to represent enormous value to the consumer.

Your next question comes from the line of Clay Griffin with MoffatNathanson LLC.

You all had such success with I think you coined the phrase actually tethered free-to-play with GTA Online. It helped you sell full game units and full game unit sales helped onboard people on the GTA Online. I know the industry has changed a lot over the years, but -- and you haven't announced any pricing or packaging as it relates to this topic. But just curious if there are dynamics evolutions in the industry that would make that decision different than the decision you so successfully used with GTA 5 and GTA Online the tethered free-to-play strategy.

I think, of course, not having announced any online version for GTA 6. It certainly would be premature to talk about an upcoming business model for something that we haven't talked about. But I think conceptually, what we pride ourselves on here is being thoughtful and open-minded and trying to meet consumers where they are and trying to optimize the entertainment or experience for those consumers. And that's where we've been talking about a lot on this call. When it really comes down to what does this company think about?

24/7, what do I think about? I think about making sure that this is an enterprise that more so than any other entertainment at [indiscernible] focuses on making hit properties that excite and engage consumers. That's what we all think. Right now, I'm in a room with our staff, right? We don't -- in this room, we're executives, right? The IR team and the finance team, the operations team, legal team. But our job, we don't make the titles here. We don't market, not [indiscernible], not the room this talking you today. But our mission is to make great entertainment properties. And if we get that right as an organization, all 14,000 people, full-time colleagues and contractors associated with Take-Two in our affiliates, focus on making the best entertainment on earth then everything else will take care of itself.

Naturally, we have to be the most thoughtful people, the most aggressive people with regard to market and distribution, by the way, legal activities, finance activities, accounting activities, tax activities as well. That's our job. The mission of the organization is to make great entertainment. And having spent a long time in every entertainment business risk, I can tell you one thing, hits your alls, make great hits over and over and over again, you're an upgrade enterprise. And we're so proud of everything this body does, and we're so proud of the culture in which we do it. But if we don't get up every day and make it, none of that matters. So that's our job. That's what we focus on.

And frankly, the results that we're talking about today and the guidance that we gave you for tomorrow, all of that is based on having made hits, having delivered its and an expectation, but we are going less -- an expectation that we're going to continue doing just that at a higher and higher level.

Your next question comes from the line of Andrew Crum of B. Riley Securities.

So looking at your net bookings guidance, how, if in any way, is potential cannibalization from GTA VI influencing your view or range of outcomes you see for fiscal '27?

Look, cannibalization doesn't really apply to the Entertainment business. In the Entertainment business, you compete against everything, you compete against your competitors, you compete against yourselves. You compete against nothing -- choice to do nothing. So if you're in the grocery business, like everyone needs to eat, so you're competing with the grocery store next store. With regard to entertainment, if there's something that you want in the market and then there's something else that you want you'll try to buy both. And if there's nothing that you want, you won't buy either. So there's no one-to-one cannibalization.

And in fact, history shows that when there's a big hit in the market, you know what it does, energizes consumers around the entertainment market, and they consume more. So I actually think we were fortunate enough to have the kind of year that we expect we'll even do a little better than we expect. It's not just going to be good for Take-Two and our labels. It's going to be good for the industry as a whole.

That concludes our question-and-answer session. I will now turn the call back to Strauss Zelnick for closing remarks.

I've spoken an awful lot today. And as you pointed out, I've been in a bunch of conferences lately, too. So maybe no one needs to hear any more than -- more from me. I would like to say this, though, we delivered great results that we talked about today. And we set our guidance that reflects great results going forward. All of that comes from our colleagues around the world.

So I want to take a minute to express -- this management team's enormous gratitude and my personal gratitude to our creative teams, our marketing teams and our distribution teams and our finance teams and our operations teams all over the world more than 100 offices around the world, if I'm not mistaken, who work incredibly hard and an incredibly dedicated way to support our collective mission. All of this is because of their work. I just -- I get to organize the victory lap.

So thank you to our team. And then I'd like to take a moment also to thank our shareholders and everyone who supports us and the people who attended this call. It's always nice to have a good news call, and we're really happy to share it with you all.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 Fiscal Year 2026 Quarterly Earnings Results Call. [Operator Instructions]

I would now like to turn the call over to Nicole Shevins, Senior Vice President, Investor Relations and Corporate Communications. Nicole, please go ahead.

Good afternoon. Thank you for joining our conference call to discuss our results for the Third Quarter of Fiscal Year 2026 ended December 31, 2025. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.

Before we begin, I'd like to remind everyone that 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.

Thanks, Nicole. Good afternoon, and thank you for joining us today. I'm pleased to report that we delivered another outstanding quarter, including net bookings of $1.76 billion, which surpassed meaningfully the high end of our guidance. All of our labels outperformed substantially our expectations and contributed to our ongoing success. Due to our strong results and positive momentum that has continued into the current quarter, we're once again raising our outlook for the full fiscal year. We now expect net bookings to range from $6.65 billion to $6.7 billion which represents 18% growth compared to fiscal 2025. At the midpoint, our revised net bookings forecast is approximately $725 million above the initial outlook we provided in May 2025 which reflects the creative passion, hard work and consistent execution of our teams.

Turning to highlights from the period. I'll begin with the fantastic performance of our mobile business. Peaks forever franchise, Toon Blast grew 43% year-over-year and surpassed $3 billion in lifetime net bookings, an extraordinary achievement for a title that has been engaging players for more than 8 years. The game continues to rank among our most valuable franchises, showcasing the long-term value of our Match 3 portfolio. Match Factory! another hit from Peak grew approximately 17% over last year. The title remains a top contributor 2 years after its launch, affirming our strategy of building a diverse portfolio of games with vast global appeal. Color Block Jam remains Rollic's all-time top-performing title and was featured in Apple's 2025 free games list in the U.S., underscoring the title's success.

Empires & Puzzles and Words with Friends grew 11% and 6%, respectively, over last year. Advertising revenues grew 10% over last year, driven by higher average revenue per daily active user and we're highly confident in the future of this component of the business. 2K's mobile offerings also had another solid quarter with WWE SuperCard surpassing 38 million lifetime downloads. NBA 2K Mobile continuing to expand its audience NBA 2K26 Arcade edition holding its top 5 position on the Apple Arcade charts and NBA 2K All-Star in China growing to nearly 9 million registered users after less than 1 year in market.

Our mobile direct-to-consumer business delivered its strongest quarter on record. We've introduced recent enhancements that enable more personalized offers, flexible pricing, reduced payment friction and alternative payment methods. With the regulatory environment becoming even more favorable to us, we view direct-to-consumer as a meaningful growth driver that will help accelerate net bookings, margins and profitability. NBA 2K26 delivered another stellar quarter, yielding significant upside to our forecast. To date, the title was sold in approximately 8 million units, representing a high single-digit percentage increase over NBA 2K25. Recurrent consumer spending, daily active users and my career daily active users all grew 30% year-over-year. Based on its phenomenal year-to-date performance, NBA 2K is on track to generate the highest level of annual net bookings and recurrent consumer spending in franchise history. I'd like to thank the NBA and NBA Players Association for their extraordinary partnership and support.

The Grand Theft Auto series also vastly outpaced our forecast with recurrent consumer spending growth of 27%, led by GTA Online, a Safe House in the Hill's update which featured long-awaited mansion properties and the return of the fan favorite protagonist, [ Michael Besanta ]. Full game sales of Grand Theft Auto V remains strong, with the title now having sold in over 225 million units since its launch in 2013. GTA+ continues to thrive with membership levels nearly doubling over the same period last year, and we're excited about its potential to add even more value to the player experience in the future.

In December, Rockstar Games expanded Red Dead Redemption and On Dead Nightmare to new platforms, bringing these classic blockbusters to PlayStation 5, Xbox Series [ X Nest ], Nintendo Switch 2 and iOS and Android mobile devices for Netflix subscribers. We're immensely proud of our teams and their ability to deliver consistently the highest quality and most engaging entertainment experiences. As we continue to explore and invest in new technologies particularly AI will unlock greater efficiencies that will allow our talent to focus on the kind of innovation that has enabled us continually to set new creative and commercial benchmarks in interactive entertainment.

Our execution throughout fiscal 2026 has been extraordinary, and we're highly confident as we approach fiscal 2027, which promises to be groundbreaking for Take-Two and the entire entertainment industry led by the November 19 release of Grand Theft Auto VI with Rockstar's launch marketing set to begin this summer, with ongoing momentum in our business, coupled with our robust forward release schedule, we continue to project record levels of net bookings in fiscal 2027, which we believe will establish a higher financial baseline set us on a path to enhanced profitability and further provide balance sheet strength and flexibility.

I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams for delivering another fantastic quarter, which reflects our world-class talent and the breadth and depth of our portfolio.

I'll now discuss our recent and planned product offerings for the balance of fiscal 2026. On January 14, 2K and HB Studios announced an array of new content for PGA Tour 2K25 including 3 new courses for the 2026 major champion chips. The 2026 PGA Championship at [ Oronamin ] Golf Club, the 126th U.S. open at [ ChinaCache's ] Golf Club and the 154th open at Royal [ Birkdale ] Golf Club with more to come, including new seasons. Additionally, we look forward to growing the community with the launch of PGA Tour 2K25 or Nintendo Switch 2 on Friday.

[ Praxis ] Games will continue to deliver a steady cadence of updates for [ Sidmeyers ] Civilization 7. And on Thursday, 2K will launch Civilization 7 for mobile devices exclusively on [ APA ] Arcade representing an exciting opportunity to expand the civilization audience. On March 13, 2K and Visual Concepts will once again raise the bar for our wresting franchise with the release of WWE 2K26. Featuring the biggest roster in the series history, players will be able to choose from over 400 legends and current superstars and enjoy new customization options throughout the game. We plan to support the release with a new ringside pass live service model and a series of add-on packs that can be purchased individually or together as part of the season pass.

[ Duke ] and Gearbox Software will continue to support Borderlands 4 with new content and updates and we expect the title to achieve strong sell-through over its lifetime. Zynga will continue to deliver new features and drive innovation across its live services as well as pursue the development of new titles. Looking ahead, we believe strongly in our upcoming launches and will provide our initial 3-year pipeline for fiscal 2027 through fiscal 2029, with our Q4 results in May.

I'll now turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. Our third quarter results were fantastic with all of our labels delivering excellent results, and we are pleased to once again raise our outlook for the fiscal year. With many of our core franchises continuing to thrive, fiscal 2026 is on track to be one of our strongest years in recent history. And I'd like to thank our teams for their vision, passion and dedication.

Turning to our performance. We delivered third quarter net bookings of $1.76 billion, which was significantly above the high end of our guidance range of $1.55 billion to $1.6 billion. This reflected better-than-expected performance from NBA 2K, the Grand Theft Auto series and several mobile titles, including Tune Blast, Empires & Puzzles and Top 11. Recurrent consumer spending rose 23% for the period. We strongly outperformed our guidance of 8% growth and accounted for 76% of net bookings. NBA 2K grew 30%, Grand Theft Auto Online increased 27% and Mobile increased 19%, all of which exceeded our expectations.

During the quarter, we launched WWE 2K Mobile for Netflix and Red Dead Redemption and [indiscernible] Nightmare for several new platforms. GAAP net revenue increased 25% to $1.7 billion. Cost of revenue increased 26% to $754 million, and operating expenses increased 10% to $984 million.

On a management basis, operating expenses rose [ 12% ] year-over-year, which was in line with our guidance and represented significant operating expense leverage on our fantastic top line growth.

Turning to our guidance. I'll begin with our full fiscal year expectations. We are once again raising our net bookings outlook and now expect to achieve $6.65 billion to $6.7 billion, which represents 18% growth at the midpoint over fiscal 2025. The increase reflects our third quarter outperformance and higher expectations for several of our key titles during the fourth quarter. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, [ Nash ] Factory, Empires & Puzzles, Color Block Jam, Borderlands, the Red Dead Redemption series and Words with Friends. We now expect recurrent consumer spending to grow approximately 17% and represents 78% of the bookings. This is up significantly from our prior forecast of 11% driven by strong momentum across most of our major franchises.

Our advised recurrent consumer spending forecast assumes that NBA 2K grows approximately 37%. Mobile increases approximately 13% and Grand Theft Auto Online increases slightly. All of these expectations are raised from our prior forecast. We project the net bookings breakdown from our labels to be roughly 46% Zynga, 38% 2K and 16% Rockstar Games.

We are raising our operating cash flow forecast to approximately $450 million, which is up from our prior expectation of $250 million, with the increase reflecting the strength in our business. We remain on track to deploy approximately $180 million in capital expenditures. We are also updating our forecast for GAAP net revenue, which is now expected to range from $6.55 billion, $6.6 billion of revenue, which is expected to range from $2.78 billion to $2.8 billion.

Our total operating expenses are now expected to range from $3.96 billion to $3.97 million compared to $7.45 billion last year, which included a $3.6 billion impairment of goodwill and intangible assets. On a management basis, we now expect operating expense growth of approximately 8% year-over-year which is down slightly from our prior forecast due to a shift of some marketing expenses into next year. Given our strong net bookings outlook, this assumes meaningful operating expense leverage over last year.

Now moving on to our guidance for the fiscal fourth quarter. We project net bookings to range from $1.51 billion to $1.56 billion compared to $1.58 billion in the prior year. Our release slate for the quarter includes [ Sid Meier's Civilization VI ] for Apple Arcade, PGA Tour 2K25 for Switch 2 and WWE 2K26. The largest contributors to net bookings are expected to be NBA 2K and the Grand Theft Auto series, Toon Blast, Nash factory, WWE 2K, Empire on Puzzles, Color Block Jam, Red Dead Redemption Series and Words with Friends.

We project recurrent consumer spending to increase by approximately 7%, which assumes a high 20% increase for NBA 2K, mid-single-digit growth for Mobile and a modest decline for Grand Theft Auto Online. We expect GAAP net revenue to range from $1.57 billion to $1.62 billion and cost of revenue to range from $675 million to $692 million. Operating expenses are planned to range $973 million to $983 million. On a management basis, operating expenses are expected to grow by approximately 3% year-over-year, which is primarily driven by higher performance-based compensation and user acquisition investments to support robust performance in our mobile portfolio, which is partly offset by lower production expenses.

In closing, our business momentum remains outstanding. We are very confident in our future. With Grand Theft Auto VI and other eagerly anticipated titles on the horizon, we believe that we will generate higher earnings power, strengthen our balance sheet and deliver sustainable shareholder returns.

I'd like to thank you all for your support and look forward to sharing more details in the coming months including our initial outlook for fiscal 2027 when we report our fourth quarter results in May.

Thank you. I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their shared commitment to excellence and Take-Two's long-term success. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Doug Creutz with TD Cowen.

The last few days, the equity markets have really punished your stock and those of other video game makers because of fears about what AI means for your business. I wondered, Strauss, if you'd like to expound upon whether you think what's happening in the market is an accurate reflection of the threats and opportunities you see coming from AI.

Thanks, Doug. I have to admit, I'm a little confused. The video game business, since its inception was built on the back of machine learning and artificial intelligence. We create our games in computers with technology. And ever since questions began about generative AI about 18 months ago, I've been incredibly enthusiastic about what the future can bring.

As it happens now, we're actively embracing generative AI. We have hundreds of pilots and implementations across our company, including with our studios. And we are seeing opportunities to drive efficiencies, reduce costs and create the opportunity to do what digital technology has always allowed which is the mundane tasks become easier and less relevant, which frees up our creators to do the more interesting tasks of making superb entertainment. The history of the interactive entertainment business has been one of great creators using technology to do amazing things to please audiences, and that's our job round here, and that remains unchanged, except perhaps accelerated.

Just a reminder, our strategy has 3 parts: be the most creative, be the most innovative and being the most efficient company in the entertainment business. And generative AI squarely falls within the category of innovation and is already moving into the category of efficiency. I'm hopeful that it will also move into the category of creativity as it allows our creators to use digital tools to expand what we do to make it even more beautiful and even more engaging and even more exciting.

Our next question comes from the line of Eric Handler with ROTH Capital Partners.

Strauss, you just had another really strong quarter with Mobile. And Mobile has just been on a very big payer for the last 7 quarters now. Wondering if you could talk about some of the initiatives or bold [indiscernible] used to call them that what are you finding us really resonating? What is keeping these games that have been out for a number of years still relevant and drawing in new players?

Well, our Zynga team still refers to bold beats. They're a big part of what we do. And just to put a fine point on it, you're right. Our Mobile business is up 19% year-over-year. Toon Blast was up 43%, Match Factory! 17%, Empires & Puzzles 11%, Words with Friends 6%, and Color Block Jam is a huge hit for Rollic. And that really is the tip of the iceberg. We really are firing on all cylinders. At Zynga and also with 2K's mobile properties.

What do I think is going on? Look, I think we are actually making hits. And that is still pretty unusual. In the Mobile business, the hardest thing to do is create new hits in the Mobile business. And Zynga has proven an ability to do so by doing what we do, which is creating a home for the best talent in the business, encouraging them to pursue their passions and supporting them and marketing with an A+ structure and a really strong balance sheet. It's really hard to do that. There aren't very many companies that we're doing. And I believe we're the only company that's doing it over and over again.

You are right also, though, that the backdrop is strong. There was a disappointing moment in mid-22, which as it happens when we acquired Zynga, where for the first time the Mobile market was down post-pandemic and it was down more than we expected, and it took a while to rebound. The market has rebounded. There are tailwinds. And so much as I'd like to take credit for all of the team's success, a, that's not really my style. B., I do think a rising tide [indiscernible] ships, and we are benefiting from consumer engagement with mobile games.

Great. That's helpful. I also wondered, would you be willing to sort of give some type of indication of what percentage of your mobile recurrent spending is coming from direct-to-consumer?

It's meaningful. We haven't actually given a number. The environment for direct-to-consumer is improving. It has been a big strategy since we acquired Zynga. You may recall, when we talked about the synergies that we would find on the revenue side, I said in calls right after the acquisition that we thought the potential for direct-to-consumer could be seen as a revenue synergy because that effectively what happens is we actually capture a higher share of those revenues and enhance our margins. The recent regulatory environment has become much more favorable, and we also predicted that. And I do think we're going to continue to see third-party take rates decline, which will drop to the bottom line.

Your next question comes from the line of Colin Sebastian with Baird.

A couple of questions for me. And maybe first, continuing on the RCS theme of growth. Maybe you could expand a bit on the safe house expansion in terms of driving higher levels of engagement. Are there specific learnings from that informing other future content updates? And I guess, secondly, maybe to Strauss, how are you thinking about capital allocation priorities with the growing cash balance which is likely also going to expand quite a bit later this year?

So what we learned from a Safe House and Hill's update is that when you deliver great material consumers show up, and Rockstar always aims to do the best possible work. Some of the content updates have performed better than others, and this one has been nothing short of stellar. But I think the broader point is the one that matters, which is as we head into the release of GTA 6, I think there was some trepidation on the fear of market participants that GTA 5 or GTA Online would somehow become less relevant. And I think the contrary is true. The anticipation is yielding even more engagement with GTA. GTA 5, of course, has now sold in 225 million units.

What's it is all driven by? The reason that GTA is so extraordinary is because Rockstar makes an extraordinary game and continues to make extraordinary features and additions and opportunities and Safe House update basically shows that. So this is an example of where our strategy pays off. We're focused on creativity pays off.

Yes. I'm sorry, on your second question, [indiscernible]. Sorry, I was so excited with my words there. I got diverted from your second. I thought that was pretty poetic myself. But in any case, capital allocation remains unchanged. So we have 3 uses of our capital, and I agree that if things go well and as planned our cash balance should continue to grow. And of course, we are generating significantly more operating cash flow than expected this year with these results.

The first is, of course, to support organic growth. That's been our story here. This is an organic growth company with a handful of very selective acquisitions, thankfully, all accretive ones, most notably the acquisition of Zynga in 2022. So that leads me to the second use of our capital, which is inorganic growth opportunities, and we'll continue to pursue those in just a selective and disciplined way, and we are looking only for accretive opportunities.

And the third is to return capital to the shareholders, which we've done over and over again. We've typically done so opportunistically with buybacks. And thankfully, our buybacks have all turned out to be good for the shareholders in the fullness of time. I am a believer that you do buybacks when your balance sheet can afford it on the one hand and when you can do so at deep value on the other hand. Our most recent buyback was executed about $158 a share. There were some moments where people thought that was a bad thing. Turns out it was a very good thing.

Your next question comes from the line of Chris Schoell with UBS.

You've seen consistent outperformance with NBA 2K and continue to post very strong growth despite the difficult comparisons. Could you just touch on what is resonating most do you think, with players. And as you think about the next leg of growth for the franchise, what do you see as the biggest opportunity? Is it going to be growth internationally, expanding the user base or enhancing monetization?

So it's hard to say that one particular thing is driving the success with NBA. Obviously, it's been an incredible year for us. selling a lot of units and also the performance of RCS across the board and engagement has been off the charts, 30-plus percent year-over-year on basically every mode that we have. Those things don't come easy. And I think the best way to describe why this works for us is because it's the way that DC and 2K run their business, which is really in the state of perpetual diligence. They're constantly communicating with the consumers, seeing what the consumer is doing, watching how they play, seeing what works, doesn't work and refining the game year after year. And it's that maniacal attention to detail. When you add it up year-over-year, that culminates in so much success. And this is one of those years where everything was just humming in the right direction.

And on top of that, there's always an effort every year to do something a little bit different and a little new. For example, Cruise this year, which is a really interesting concept. People can pair up together with 50 people, play against other teams, and it's a really exciting thing, a social thing, which has had a pretty big impact on my career mode. So it's not one thing, it's everything. And I'd say it's culture as much as it is anything else.

I think there was a second part. Biggest opportunity. Well, first of all, the biggest opportunity is to continue to do more of what I just described. which will lead to a higher installed base of folks and also to higher engagement, which ultimately leads to higher monetization. I do believe that there is a significant international expansion opportunity. The MBA continues to be an amazing partner for us. They're expanding internationally. Basketball is a global sport, and we've got that going for us. So I think that will help us drive and just without regard to just the [ NBA ] expanding, there are lots of opportunities for us to expand also in North America as well as we grow with a brand in partnership with NBA.

So at this point, I think the sky is still the limit. We surprised ourselves every year. The game does better and better. So we're very optimistic about the future basically.

Your next question comes from the line of Andrew Marok with Raymond James.

Maybe specifically, again, back to the commentary on generative AI, we hear loud and clear Take-Two's ability to harness that. But maybe on [ Genie ] specifically, we've been getting a lot of questions from investors about the similarities and differences between world models and game engines. Can you maybe give us an overview of what you think tools like [ Genie ] can and cannot do as it relates to some of the proprietary game engines that you operate?

So in terms of commenting on the specific technology, I think -- I don't think we're going to go into the great details about the tech differences because, frankly, [ Genie ] are early in its iteration at this point and trying to make a comparison to a game engine is just really -- they're not even in the same ballpark. Genie is not a game engine. And I would -- it's very exciting technology, and I think it's -- the question is how tenant benefit our creators. And I think there will be a moment in time that will become more defined. It certainly doesn't replace the creative process.

And I would say, look, I mean, it looks to me more like a procedurally generated interactive video. At this point, there are limitations, and Google has said as much. So to compare the technologies, I think there's really no way to do that because they're so far apart. And there are so many more elements to game development that go beyond world creation. And the question is what is the world creation. so even beyond world creation, there's everything else that's involved. There's the storyline, there's emotional connection, there's vibe, there's mission structure. All of those things, you cannot capture through AI and certainly not through a world builder. So that's just a very, very small component of what we do. And if this tool bears out, it will make a component of what we do all that much better and more efficient.

Your next question comes from the line of Ed Alter with Jefferies.

Thanks for the question. I want to dig into your mobile advertising results. I think it's the second time that you guys have grown that year-over-year since acquiring Zynga. I just wanted to dig into what's going so right there and where kind of the opportunity for continued growth in the mobile advertising space is for you guys?

That's pretty simple. When we took over Zynga, there weren't a lot of ad units in most of the games, and we have selectively added ad units pretty much across the board, not entirely certain games don't merit that.

Also, I think Zynga has been very smart about the way they go ahead -- go about monetizing that advertising, and there really is much more opportunity there without interfering with the experience at all. The strategy ultimately is to make sure that one way or another, we monetize the bulk of our users. As you know, in the mobile games business, viewer than 20% of your users actually engage with you to pay and without creating any friction in the experience, we think there's an opportunity selectively to apply advertising to the part of the market that doesn't currently want to pay.

So experiences have to be great across the board. That's our job, right? We deliver great entertainment experiences. And equally, we have an obligation to monetize those experiences so that we can pay our creators and keep making hits.

Great. And given your comments on how the impending GTA VI is a positive for GTA Online in current form, what -- what is your view on what GTA Online is going to continue to be the current iteration once GTA VI does come out?

Look, Rockstar Games is the locus of information about where the titles go, content and marketing. And generally, we have a pretty light touch when we talk about the label's creative activities. At the same time, I have every reason to believe we'll continue to support GTA Online. There's a great community that loves it, it stays engaged. And again, in this quarter, Rockstar has shown that when you deliver great additional content, despite how long GTA Online has been a market, people show up.

Your next question comes from the line of Jason Bazinet with Citi.

I think this is a while back, but I think when you first talked about GTA 6 coming out, you noted that -- or you expected your non-GAAP earnings to grow the year after it was released not just for your release being the base. I just wonder, is that still true? And do you mind just sort of unpacking sort of the main drivers of that? Presumably, one of it is just getting 4 quarters attribution, but what else would you say are the key drivers of that expectation if it is still true?

What we have been saying is that we expect that our release schedule is going to drive sequential growth next year. And then that will bring us to establish a new baseline for our business going forward. So we haven't really been talking about detailed guidance beyond fiscal year '26. And now in our May earnings call, we'll give you our guidance for fiscal year '27. And we're not planning on providing detailed guidance for any years beyond that at this time because our lease schedule includes numerous titles each year and even modest shifts can have significant effect on results in any given period.

So all of our years will be driven by our release schedule, and we have a very robust release schedule over the next couple of years, and that's what's really driving the growth in the business.

Your next question comes from the line of Alec Brondolo with Wells Fargo.

It seems like the market is creating potential opportunities for M&A. So in that light, can you maybe refresh our understanding of what makes the studio appealing to Take-Two? You noted in response to a prior question that any M&A has to be accretive. And so with that said, what are the other qualities in the studio you look for?

Well, if you're right to ask that because of accretive is a financial calculation based on the decision to proceed. The decision is based on the talent, the technology and the intellectual property. And we think there may be some opportunities out there that you have to be incredibly selective. Broadly in the market, as you know, most corporate M&A fails because most corporate management teams love the notion of presiding over a bigger and bigger empire. We don't look at the world that way.

Our job is to entertain the world. Our job is to make the most creative properties that anyone can make and to bring them to consumers wherever they are. If there is an enterprise available on favorable terms that sits within that strategy and can operate within our unique culture then it's potentially interesting to us.

Your next question comes from the line of Mike Hickey with Benchmark Company.

Good quarter guys, congratulations. I guess the first question, you've got two is on GTA 6. Glad to hear that summer marketing is going to start here, that's encouraging. But just sort of curious, Strauss how much marketing you really have to do here, if there's leverage versus prior releases, just given the strength of GTA 5, GTA Online effect that this is a massive pent-up demand for will be part of the [indiscernible], does it seem like you have to market much. So just curious, you would be there.

And then I guess on the top of affordability, which is obviously very topical, certainly within the video game space, just curious your specific thoughts given that we're sort of year 5 here approaching your [indiscernible] of the current console cycle and pricing and consoles are going up. We've got now memory cost issue. So they can even go up further by the time the GTA 6 comes out. We've also seen some inflation on software. So just broadly speaking, how you think your consumer fits within that affordability picture and how you think about providing value, which knows the centerpiece of what you've done historically?

Mike. I mean I love your question, your first question, like are we just going to sit back and relax as we head into the release of GTA 6? And I think the opposite is true. You're talking to a team that you've known for 17 years, and we're in the business of eating red meat for breakfast. I think we'll be having a lot more red meat in the coming months.

So there -- we are very fortunate that consumer anticipation for GTA 6 is indeed huge. And one does have to be judicious in the way one markets such an extraordinary property. But rest assured that I think you'll be pretty astonished by the creativity that Rockstar's marketing team brings to consumers in the coming months.

On the affordability question, we do feel a compact with the consumer. We've talked about for a very long time to deliver way more value than what we charge. I think we're known for that. And we're in the business of entertaining people. We're not in the business of creating revenue. Revenue comes from entertaining people. And interactive entertainment on a real basis is getting more and more affordable all the time because we offer extraordinary value for the money. People engage with our properties for hours and hours and hours, and on a real basis, frontline prices have declined in the past 20 years, meaningfully declined.

So we see it the same way, which is we do believe in democracizing access to what we do around here, we want everyone to be able to engage. I just mentioned in terms of mobile. You want to have a great mobile experience. We offer the best mobile experiences on earth free. And you can play them have a wonderful experience completely free. On the console side, of course, that's not expected by consumers because of the deep value that we bring. And consumers do expect to pay for that. But on a real basis, we're making it more and more affordable and more and more accessible.

Your next question comes from the line of Drew Crum with B. Riley Securities.

So you have a few undated mobile titles as part of your frontline release schedule, recognizing it's been a tough launch market for new titles for a while now. based on the strength they're experiencing with your mobile business, can you comment on what you're seeing in terms of market dynamics for launching new games and whether the backdrop is more [indiscernible] of delivering new hits.

There are really only 2 companies in the mobile space who are delivering new hits in the last 5 years, we're one of them. it's super hard. It's incredibly hard. It's been hard. You're quite right. Ever since you had a pay for user acquisition, which is the better part of, I guess, 9 years, it's become much more difficult. And the early days of mobile, of course, was a new market and people are very accepting of new IP and new markets. So we're exceedingly respectful of the difficulty of launching any new hit, and that includes in our mobile space.

I do think the Zynga team has come up with an approach that is more likely to succeed more regularly than our prior approach because [indiscernible] awhile to arrive at this. And once again, it sort of be selective and focus on the best talent in the business and make sure that talent pursues their passion and then, of course, listen to the data and iterate according to the data. But you can't iterate at the beginning to create a hit. You need to create a fashion to create the hit from which you build.

Your next question comes from the line of Brian Pitz with BMO Capital Markets.

Strauss, we saw our recent announcement of CFX Marketplace, which appears to be a push in the direction of UGC gaming. Can you talk more about this launch and how you're thinking about the broader opportunity? And also maybe any insights around developer economics in the marketplace with respect to bookings?

I mean, I think that we've always welcomed for quite some time, user-generated content. We have that in numerous parts of our business. Of course, we have the role playing server business at Rockstar. So we see this as an important and interesting development with more opportunity to come. At the end of the day, what we're known for here is our creators making the very best in entertainment, and that's our job. And we think that, that never goes away as a driver of the business. At the same time, there are users who want to create and engage and we want to create a home for them as well. And tools that make that more viable and more accessible could be an opportunity for us.

Your next question comes from the line of [ Martin Yang ] with Oppenheimer.

I have a question on engagement and then follow-up on monetization. First on engagement, can you maybe talk about how the GTA player base are you engaging with the game? Is it primarily on GTA Online? Or do you see still the full game getting substantial playing hours or user or [ MAUs ]?

Look, we sold a whole bunch of units of GTA 5 in the quarter, and Rockstar continues to bring new consumers into the tent. So it's both. It's the full game, and it's the online version, which was up meaningfully year-over-year, about 27%.

Your next question comes from the line of Omar Dessouky with Bank of America.

It's Omar Dessouky. So I think you mentioned that Zynga comprised a little bit less than half of your revenue of the entire business. Over the last couple of years, it's been well known that solutions to avoid app store fees would become commercially available and there have been in several that have been announced, such as, for example, [ Unity's ] cross-platform e-commerce solution that would help reduce the amount of fees that game developers have to take to the app stores.

How much of your fees -- the distribution fees that you pay to the app stores do you think are addressable through such a third-party solution outside of the fact that you already have growth in your own DTC channel, are the 2 mutually exclusive? And how much do you think you can save? And how much time will it be before you implement such a third-party solution?

So I'm not really going to comment on third-party solutions. And the fact is a lot of our [ DSC ] efforts, we really do in-house at this point. That's not to say that their port solutions can't be helpful now or in the future. But primarily, this is an internally driven thing for us.

And in terms of the opportunity, I think we've said before, right now, it's still pretty early. It's growing in terms of not all of our games, even some of our really large games are not -- don't have D2C components to them. I think all of them at one point could. We'll see how that shakes out. So we're pretty early in the process, and we think there's a lot of growth ahead of us. But it's something that we're certainly excited about. It improves our margins and the -- as Strauss mentioned earlier, the legislative environment has been favorable towards that.

That concludes our question-and-answer session. I will now turn the call back over to Strauss Zelnick for closing remarks.

Thank you so much for joining us today. Obviously, we're thrilled with the company's results. We're thrilled with our revised outlook for the rest of the year. And we're beyond thrilled with our expectations for next year, including WWE coming up this year. And of course, NBA 2K and then most notably GTA 6.

I want to just take a minute to thank our teams, our creative teams for showing up every day, bringing their passion to the table, not taking no for an answer and always willing to push as far as they can to deliver the most extraordinary entertainment experiences. And I want to thank our executive teams who subscribe to our strategy of creativity, efficiency and innovation and will also show up every day doing their very best work in service of our collective goal to be the best entertainment company on earth.

Thank you to our shareholders for your support. These are really exciting times, and we're happy that you're along for the ride.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Carla, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter fiscal year 2026 Earnings Call for Take-Two Interactive Software. [Operator Instructions]

Thank you. I will now like to turn the call over to Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. Please go ahead.

Good afternoon. Thank you for joining our conference call to discuss our results for the second quarter of fiscal year 2026 ended September 30, 2025. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks. .

Before we begin, I'd like to remind everyone that 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 take-twogames.com. And now I'll turn the call over to Strauss.

Thanks, Nicole. Good afternoon, and thank you for joining us today. We delivered fantastic second quarter results, including net bookings of $1.96 billion, which vastly exceeded our expectations and represent the best second quarter of net bookings in our company's history. We have many achievements during the period. 2K launched 3 major titles, including NBA 2K26, which set multiple records and has been delivering an unprecedented level of in-game spending. Our mobile business outperformed substantially driven by our teams unparalleled innovation and live services and Grand theft Auto online continued to benefit from its highly engaged community. .

Due to these outstanding second quarter results and our optimism for the balance of the fiscal year, we're again raising our net bookings outlook for fiscal 2026 to $6.4 billion to $6.5 billion. Rockstar Games has announced that Grand Theft Auto V will now be released on November 19, 2026, giving the team some additional time to finish the game with a high level of polish players expect and deserve.

Rockstar has our full support, of course, and we're confident they'll deliver an unrivaled blockbuster entertainment experience. Turning to highlights from the period. Our mobile business delivered another quarter of excellent results. Peaks Forever franchise Toone Blast, grew 26% year-over-year and approximately 90% over the past 2 years, driven by new gameplay elements and meta-game features such as card collection.

Match Factory!, another hit title from Peak, achieved record net bookings and grew 20% over last year. Players responded positively to innovative new features, including the Super Bowl Power Up which increased engagement and monetization within the game. Rollic's hit title, Color Block Jam continues to engage and grow its audience with new features and levels and remains the highest grossing title in the studio's history. In addition, Rollic surpassed 3.8 billion lifetime downloads and achieved a new net bookings record for the quarter.

The CSR franchise achieved $1 billion in lifetime in-game spending with more than 180 million players worldwide since its launch in 2012, which we believe indicates great momentum ahead of the release of CSR 3. Zynga Poker launched on Steam with full cross-functionality enabling players to enjoy the game freely across mobile, web browsers and PC. 2K's mobile offerings had another strong quarter with WWE SuperCard surpassing 38 million lifetime downloads. NBA 2K Mobile continued to grow its audience and the 2K26 Arcade edition holding its top 5 position on the Apple Arcade charts and NBA 2K All-Star in China, capturing 8 million registered users after just 6 months in market.

We continue to focus on our mobile direct-to-consumer business and are achieving higher conversion driven by new offers, events and enhanced personalization. Also as a result of recent legislative changes, our teams have rolled out new technologies that enable direct transactions and new payment mechanisms, including solutions designed to support international growth, which should help us expand meaningfully net bookings and margins via this highly accretive channel.

With the record-breaking launch of NBA 2K26, 2K and Visual Concepts proved once again their ability to create phenomenal gameplay, innovate with new features and optimize live service offerings. To date, the title is sold in over 5 million units, representing a double-digit increase over NBA 2K25 and with average selling prices reaching an all-time high, led by higher sales on premium additions. We were pleased to see daily active users and MyCAREER daily active users grow nearly 30% and nearly 40%, respectively, which contributed to recurrent consumer spending growth of 45%.

Players love many of the game's new features, including a thriving hub of competition, a more accessible layout, all new rewards and fresh cosmetics. I'd like to congratulate 2K and Visual Concepts for once again delivering a superb basketball experience led by innovation and an unwavering commitment to excellence.

2K and Gearbox Software lunch Borderlands 4, the latest offering in our beloved looter shooter franchise. The game received high critical praise, with many reviewers calling it the best Borderlands yet. The series highly active community eagerly welcomed the title. And during its opening weekend, it reached the largest concurrent player count on Steam in franchise history. Borderlands 4 also dominated YouTube with 300 million views and are in the #1 spot on Twitch during its launch, underscoring the franchises enduring mass appeal.

While we experienced some challenges with optimization and performance on PC, Gearbox has been addressing these issues and releasing updates to improve gameplay. We're confident that Borderlands 4 will achieve strong unit sales over its lifetime. We're immensely proud of Gearbox and look forward to robust post-launch content offerings that will support the game in the months ahead.

2K and Hangar 13 released Mafia: The Old Country, the first new entry in our popular organized crime franchise in nearly a decade, which earned the vast praise from critics and consumers alike. The title quickly surpassed our internal expectations and affirmed our belief that consumer demand remains strong for premium narrative-driven experiences that overindex on value. The team at Hangar 13 will continue to push the boundaries for cinematic experiences in this series and in future creative pursuits.

Grand Theft Auto V continues to grow its audience. And to date, the title has sold in more than 220 million units worldwide. Players remain deeply engaged with Grand Theft Auto Online, which added holiday theme jobs and rewards as well as new vehicles, community events and outfits. GTA+ continued to increase its membership achieving over 20% growth year-over-year. We're pleased with the consumers' ongoing passion and engagement with the franchise, which we believe will help usher in a record-breaking launch for Grand Theft Auto V.

In closing, we're very pleased with our position as one of the largest, most diversified companies within the interactive entertainment industry, a sector that we believe will enjoy robust growth. As we embrace our core values and focus on delivering the most captivating and engaging entertainment experiences, we expect to achieve record levels of net bookings in fiscal 2027, establish a new baseline for our business, and enhance our profitability. I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams for delivering another terrific quarter, which reflects our unique ability to consistently deliver the highest quality entertainment experiences. Our teams plan to sustain this momentum over the balance of the year by releasing an array of new content and product offerings. Following the successful launches of Mafia: The Old Country, NBA 2K26 and Borderlands 4, 2K plans to release new content and updates for each game that will provide our fans with even greater opportunities to engage with these franchises.

Zynga will continue to enhance its portfolio with the introduction of new features and innovation in live services, while also pursuing new titles. During the fourth quarter of our fiscal year, 2K and Visual Concepts will launch WWE 2K26, the next installment in our popular wrestling franchise. Since taking over the series, Visual Concepts has immersed players in the most intense and realistic action that the Squared circle Can hold.

And WWE 2K26 will continue this legacy. 2K will have more to share about the game shortly. Looking ahead, we believe strongly in our long-term pipeline, which includes the release of Grand Theft Auto V on November 19, 2026 as well as the future launches of Judas, Project ETHOS, CSR 3, [indiscernible], the next BioShock and many other exciting new titles from across our labels.

In closing, we are thrilled with our performance for the first half of fiscal 2026. As we continue to execute our proven strategy and capitalize on emerging opportunities, we expect 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. Our second quarter results were truly fantastic. We are excited to raise our annual net bookings outlook for the second consecutive quarter. Our outperformance was driven by many of our key titles, which underscores the strength of our core franchises and the power of our diverse portfolio of owned intellectual property. .

I'd like to thank our teams for their outstanding execution and unwavering focus on creativity, innovation and efficiency. Turning to our results. We delivered second quarter net bookings of $1.96 billion, which was significantly above our guidance range of $1.7 billion to $1.75 billion. This reflected better-than-expected performance from NBA 2K, Mafia: The Old Country and several mobile titles, including Toon Blast, Color Block Jam, Match Factory! and Empires & Puzzles, which more than offset softness in the initial launch of Borderlands 4.

Recurrent consumer spending rose 20% for the period, which outperformed our guidance of 1% growth and accounted for 73% of net bookings. NBA 2K grew 45%. Mobile increased mid-teens and Grand Theft Auto Online declined as expected. During the quarter, we launched Mafia: The Old Country, NBA 2K26 and Borderlands 4. GAAP net revenue increased 31% to $1.77 billion, cost of revenue increased 27% to $793 million, and operating expenses increased 5% to $1.1 billion.

On a management basis, operating expenses rose 13% year-over-year, which represented significant operating expense leverage on our strong top line growth. Operating expense dollars were above our forecast due to incremental user acquisition investments to support robust performance in our mobile portfolio and higher performance-based compensation, which was partly offset by a shift in some console marketing and IT expenses into the second half of the year.

Turning to our guidance. I'll begin with our full fiscal year expectations. Our momentum is strong, and we are raising our net bookings outlook range to $6.4 billion to $6.5 billion, which represents 14% growth over fiscal 2025 and at the midpoint. The increase reflects our second quarter outperformance and higher expectations for many of our core franchises for the second half of the year.

The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, Borderlands 4, Color Block Jam, Empires & Puzzles, the Red Dead Redemption series and Words with Friends. We now expect recurrent consumer spending to grow approximately 11%, representing 77% of net bookings. This growth percentage is more than double our prior forecast of 4%, driven by NBA 2K and higher expectations for several mobile titles. Our revised recurrent consumer spending forecast assumes that NBA 2K now grows in the mid-20% range.

Mobile increases approximately 10% and and Grand Theft Auto Online declines, which is unchanged from our prior forecast. We project the net bookings breakdown from our labels to be roughly 46% Zynga, 39% 2K and 15% Rockstar Games. We are raising our operating cash flow forecast to approximately $250 million, reflecting the strength in our business. We now expect to deploy approximately $180 million in capital expenditures which is above our prior guidance due to the acquisition of an office building to support our global footprint. We're also increasing our forecast for GAAP net revenue, which is now expected to range from $6.38 billion to $6.48 billion and the cost of revenue, which is now expected to range from $2.66 billion to $2.69 billion.

Our total operating expenses are expected to range from $3.98 billion to $4 billion compared to $7.45 billion last year. On a management basis, we now expect operating expense growth of approximately 9% year-over-year, which represents notable operating expense leverage on our higher net bookings outlook. Our forecast for operating expense dollars is increasing due to incremental marketing to support our mobile portfolio and higher performance-based compensation.

Now moving on to our guidance for the fiscal third quarter. We project net bookings to range from $1.55 billion to $1.6 billion compared to $1.37 billion in the prior year. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, the Red Dead Redemption Series, Color Block Jam, Empires & Puzzles, Borderlands 4 and Words with Friends. We project recurrent consumer spending to increase by approximately 8%, which assumes low double-digit growth in mobile, a mid-single-digit increase for NBA 2K and a decline for Grand Theft Auto Online.

We expect GAAP net revenue to range from $1.57 billion to $1.62 billion. Operating expenses are planned to range from $980 million to $990 million. On a management basis, operating expenses are expected to grow by approximately 12% year-over-year, which is primarily driven by incremental user acquisition investments to support our robust performance in our mobile portfolio and higher performance-based compensation.

In closing, we are thrilled with the strength in our business today, and we are extremely optimistic about the future ahead. As we execute on our strategic priorities, which include expanding our core franchises to even greater levels of commercial success, releasing groundbreaking new heads, driving efficiencies and capitalizing on new business opportunities we believe that we will meaningfully grow our scale and our profitability. I'd like to thank you all for your support and look forward to sharing more details on our exciting pipeline in the coming months. Thank you. I'll now turn the call back to Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for continuing to deliver outstanding results for Take-Two. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator? .

[Operator Instructions] Your first question comes from Colin Sebastian with Baird.

Great. I guess, I mean, on the RCS performance, I mean that's really, really strong. And I'm curious if there are any common denominators across NBA Mobile, other titles where you're seeing that strength, anything specific you've learn from that, that maybe you can apply to other franchises going forward? And then considering the change in release date for GTA, just curious, does that change the cadence of content updates or marketing support for the existing franchise for GTA Online over the next year as we -- as you work to maintain engagement in the meantime.

So on the second question first, I don't think you'll see any change and Rockstar has a history of supporting GTA Online and of course, the title continues to perform incredibly well. I also know the GTA+ was up 20% year-over-year in the quarter, which is just great news. So -- and Grand Theft Auto V has now sold 220 million units. It's a pretty great story. We expect that story to continue in a similar way. In terms of your first question, I think are you asking whether we think there are sort of industry tailwinds that are driving recurrent consumer spending across the board?

Well, actually, it could be that or more specific to the way that you're developing games is there something within RCS within the mechanics that you're seeing is resonating with with gamers in particular? Or maybe they're just specific to those titles?

So my sense is that despite what some industry observers are saying that there are modest tailwinds in the business. I think we're seeing those. And equally, look, our approach here is to seek perfection in everything we do and to try to engage and captivate our consumers. And when we do that effectively, monetization follows. And - so I don't -- none of us is in the business of taking victory laps, even though we're very proud of the quarter. But I think the answer to your question is that our creative teams are delivering and they're delivering at the highest possible level.

And so when I see commentary in the industry that's negative about what's going on, I think if you try to correlate quality with performance, you're going to find SOME exceedingly positive correlation. And actually, I think you can find causation there as well, gives people something great, they're going to come out for it.

Your next question comes from Doug Creutz with TD Cowen.

It appears that you're soon going to be the last publicly traded stand-alone publisher of scale standing. I wondered your view on how that affects your ability to attract talent, your ability to place games in the market? Just sort of is there anything about that strategically that affects your competitive position?

I think the answer is I'm not sure. We're always running scared around here. I'm fond of saying arrogance is the enemy of continued success. And I do think we're in a terrific position. We're performing much better than expected economically, and that's because we're performing better than expected creatively. And that's always our story around here. And if we can maintain that, then we have a wonderful future ahead of us. It is true that at year-end, we're really very under-leveraged.

It is true that in relatively short order, we expect to be a net cash company again. And it's true that we're independent and we have a publicly traded security. And I think all of those things can be advantageous in the right hands. But none of that will will lead us to claim success before we deliver it. And whenever we have good results, our [indiscernible] is to take no victory lap, get up the next day and try to do it again. So that's what we'll keep doing. We do think we're well positioned.

Your next question comes from Chris Schoell with UBS.

Great. We saw 1 of your peers see outperformance on mobile margins due to the recent iOS changes. Can you just walk us through how widely available open payment mechanisms are across your portfolio today? And does that provide any uplift to gross margins in the quarter or your expectations for the year? And maybe just along these lines, any thoughts on the recently proposed changes to Google Play and what it means for your business?

Look, I've been saying for years that I expected the cost of third-party distribution to decline. And as soon as we close the Zynga transaction, we launched a direct-to-consumer initiative that has been successful. We value our partnerships with retailers. We don't have any reason to believe that those will ever become extent. At the same time, distribution costs naturally will decline with competition. and in certain instances with litigation and legislation.

And you're seeing that now. So our direct-to-consumer business is doing really well, if it's been rolled out almost across our entire mobile portfolio, not the entire portfolio because it doesn't necessarily fit everywhere. And the most recent litigation result definitely puts us in a stronger position. And not only will net bookings rise more rapidly than expected, but margins too will rise with them. So it's all good news. We're not specifically calling out how that margin change will affect our year, except obviously, we've increased our guidance for the year.

Got it. And if I can just fit in one more, maybe just on the new GTA time line. Anything you can share as to what the drivers were and what gives you confidence that the state will stick?

Yes, the drivers are a desire to deliver as perfect an entertainment experience as we possibly can and to try to live up to consumers' extraordinary expectations and then exceed those expectations. And it's always painful when we move a date. We have done so occasionally in the past, and we've never regretted it in retrospect. I would like to point out that we have some competitors that in the event where more polish was required and the required slipping a date, they chose not to slip the date, and they did so at their peril.

Your next question comes from Andrew Marok with Raymond James.

Maybe 1 on NBA and one on Borderlands. As it relates to NBA, we saw some of the metrics that you disclosed today. We're not well -- they were well above what you would normally consider for kind of a mature sports franchise. So I guess -- where are you getting these incremental audiences from? Are there new cohorts of players that you're expanding into? And I guess, what inning would you say that you're in, in terms of accessing the total NBA audience? And then I'll follow up with the Borderlands question.

So in terms of the cohorts that we're seeing, obviously, returning players are a huge cohort for us. And I would say we're -- every year, we're getting a little better at bringing people back into the game. But -- and -- but there's still a lot of opportunity to improve on that. So you asked about what inning we are. We are certainly not getting 100% of our people back every single year.

If we were to do -- be able to do that, we would have substantial, substantial upside. And I'm not saying that we will be able to do that, but there is certainly a lot of room for improvement there. In terms of other players, we're having some success internationally as well, but also getting more engagement of the player base that we have. That's been a significant part of our ability to drive recurrent consumer spending in NBA which has had significant improvements year-over-year.

We're doing more interesting things like bringing people in earlier for early access with premiums and just making the game tighter and listening to our audience base. And like we always say, higher the engagement, the more engagement, the monetization follows. It's not the other way around, and that's been our mantra pretty much from day 1. So I'd love to say we're in the first inning, that's probably not true, but we're certainly not even to the seventh innings stretch at this point. So it's probably somewhere in between.

Got it. Really appreciate that. And then on Borderlands, in these kind of longer-lived titles, how important is the launch period? And I guess, to the extent that the PC issues caused a little bit of a drag, how does player behavior change in one of those titles versus maybe an annual release or maybe you don't have as much time to sort of make up anything that sell short of expectations around the launch period?

Well, we see -- I mean your question implies that we see this the same way. The release was a bit softer than we would have liked for the reasons that you said. Gearbox has been addressing the PC challenges. And I think in retrospect, we feel there are things that we could have done better, but we intend to do better in the future. In the fullness of time, we think the unit sales on this title will be very solid, and the economic results will be in line with our expectations.

Your next question comes from Matthew Cost with Morgan Stanley.

I wanted to ask a little bit about mobile and Zynga. Obviously, it's been a stretch here of really strong outperformance for that business versus the broader mobile gaming market. So 2 parter. One, what is your level of confidence in their ability to sustain that continued outperformance of the market versus the market? Do you see that as a function of new game launches growing existing titles and then connected to that. Is there an opportunity to do M&A in the mobile gaming space something that as an independent company, Zynga [indiscernible] success with, is that something you're considering doing more of to build on the momentum that Zynga has today?

Yes. I mean what do I attribute their outperformance to, great leadership, great execution. So Frank Gibeau, who's our -- the CEO of Zynga, he's doing a terrific job, leading the team. and our creative teams, Pete, Rollic, all of our studios, frankly, right now are doing a wonderful job, both running live services on existing titles and launching new titles. So we have to keep doing more of that. What gives me confidence that we can. I think our approach has been narrowed and honed down at the label where we're being very careful economically. We're pursuing far fewer titles at once.

We're willing to walk away from titles that don't work earlier and focus on our winners. I also think our creative teams have really hit their stride. That said, we take none of this for granted. And we know that looking backwards is not going to help us accept to learn from our errors and to a lesser extent, our successes. We have to look forward, and we have some great releases coming up. So we're focused on those. So we have Topical coming from [indiscernible] and other titles coming out, which we're very optimistic. But the fact that I'm optimistic is relevant what's relevance to what the consumer says.

On the M&A side, we're very selective here. We're very proud of the fact that I don't think we have had an acquisition in our history that didn't work out. And that's an enviable and unusual track record for any corporation, any public company. We'd like that to continue. How do we do that? Well, make sure something is strategically aligned, of course, don't step outside of that zone, make sure that the cultures fit or can fit so that the integrations make sense and make sure that the deal is immediately accretive, if not to GAAP earnings, at least to management and cash flow.

So that has been our rubric and seems to have worked. So I guess what that implies is discipline and selectivity, which has served us well. Good news is we have a really strong balance sheet, and we have been able to do acquisitions in the relatively recent past. It wasn't that long ago that we bought Gearbox.

Your next question comes from Eric Handler with ROTH Capital Partners.

Straus, you've been very vocal on AI and how it's not a positive for creative development for video games. But I'm curious if you're having any success implementing AI in other sort of noncreative parts of the video game development, be it QC, be it artwork or whatever? And how you're adding it to what your developments?

Yes. To be clear, I didn't say that -- I didn't say it as a positive. What I said was that AI is based on backward-looking data sets, meeting compute meeting LLMs. and none of that replaces forward-looking genius. That's not an opinion. That's actual. I define anyone to controvert those facts. Of course, technology drives a lot of what we do around here. Now creativity is the lifeblood of the organization.

But how do we express our creativity. We do so with computers, with technical tools. We always have. So as tool sets improve, we can become more efficient, we can become more effective and our creative people, therefore freed up to be more creative. So AI depending on how you define it and properly deployed, of course, is positive for creativity and therefore, is, of course, positive for game creation. To your question

about what's the nature of rollout, we have seen some efficiencies. I think there are plenty of areas of business where the tools that we have rolled out at the enterprise are helping us we are not either using this as an excuse to or, frankly, seeing the opportunity to reduce headcount. We are seeing this as an opportunity to take our very talented people and release them for more mundane tasks so they can do more creative and more interesting tasks, and we can work better as an organization. But if you said, can you cut your cost profile by 5% tomorrow by using all things AI, the answer is no. .

Our next question comes from Ed Alter with Jefferies.

I appreciate the mention of the pipeline and specifically BioShock, you guys made a pretty key hire there with [ Rod Burgers ] during the quarter. I'd love to just get an update on that title and kind of what his mandate is at the studio.

Sure. Yes, we're very excited that we brought Rod on to the Cloud Chamber, and he is the new Head of the BioShock franchise. He's obviously an incredible industry veteran. He's got history with the Bioshock franchise, specifically with Infinite. He's also been involved with Gears of War and Diablo and it's -- we're just so grateful that he's come to work with us at Cloud Chamber. .

Bioshock is a very important franchise for us. It's one of our U.K.'s biggest franchises, and we're very excited about the release of the next BioShock. We've made some changes in the organization. We're shifting some things around. But right now, we feel that the game is on a great track for us to deliver something that's going to exceed consumers' expectations. So not much more to update other than that and the fact that the next Bioshock is going to take the franchise to the next level, which is always our ambition with all of our franchises.

And then on ad revenue, it's been up 2 quarters and now for timing quite a while. Can you talk about what's going right there? Is that Color Block Jam? Or is there a broader Rollic portfolio just performing across the board?

It's really across the entire mobile business, particularly Rollic, though, they've achieved fantastic performance, and this is what's driving the higher ad revenue for the quarter.

Your next question comes from Michael Hickey with Benchmark.

Yes. Congrats guys in the quarter and raising your numbers for the year. Obviously, sorry to hear the the delay of GTA V, but November next year strauss going to be pretty awesome. Just curious, I guess, internally how the Rockstar team is holding up with the delays. I'm guessing it could be challenges on motivation or culture. I don't know, but I'm guessing it's hard on them to have to deal with the delay as well.

I'm sure they're very excited to get the game out. And then in terms of Polish, I mean, I think I know what that means, but just sort of curious what Rockstar brands is polished. And then how much of -- they have a huge team now. So how much of the team, Strauss, as much as you can tell us as focused on polish versus maybe other content ideas or projects that could be part of that GTA ecosystem or otherwise.

Yes. obviously, Mike, you know us well. You know me well, I can't talk about how the inner workings of the studio are reflected in current activities. So I can't -- I wouldn't answer that question. On the first point, I think the culture of Rockstar is extraordinary, and we're all pushing hard to seek perfection. And that's not just words.

I mean the Metacritic scores of Rockstar releases are generally speaking [indiscernible], with very few exceptions have been over 95%. And GTA V, you know, has been the standard bearer, not just for our company but for the industry through 3 console generations. And to this day, is still, I would argue, the most technologically advanced title in the marketplace despite it's more than a decade old. And that doesn't happen by accident. So it's -- Rockstar's culture is one of performance. Take-Two's culture as a whole, which is reflected in all of our labels is one of seeking excellence, teamwork, and kindness.

And that's a recipe that works really, really well. I can't deny that at any given time, if things don't go exactly as you like, but there's some disappointment but we're pretty good about brushing ourselves off and picking ourselves up and playing another day. And we've always done that. We learned from things that don't go as well as we'd like. And we aim to exceed all expectations, our own and those of our consumers. And we, frankly, rarely fall short, but we don't let that divert us either because we just try to order. I think that defines what Rockstar is doing now and they're feeling now.

Your next question comes from Martin Yang with Oppenheimer.

Can you talk about the premium SKU mix in NBA this year? How much is it higher than previous years? And then can you also talk about impact of having more season passes embedded in the premium SKU, whether or not that's a material uplift to your RCS growth for 2K26.

So 1 of the drivers -- So generally speaking, the more -- a bit higher the mix of the premium SKUs, obviously, the average selling price is higher. That is certainly a case this time around, and we've seen some really great reactions to our premium mix SKUs. And we believe, at least partly, if not in large part, was the effect of offering 7 days of early access to our players, which is longer than we did last time. And there is some RCS embedded in that as part of that package. So we it would have a really significant impact, and I think that's overall helped our average selling price. So it was certainly a successful strategy that we entered this year.

Your next question comes from Alec Brondolo with Wells Fargo.

I appreciate it. I actually want to go back to the first question that was asked and maybe actually ask about macro in the mobile game or in the game category in general. I think people consider this pure category, maybe low single-digit grower, but Take-two RCS is up 20, we have mobile game ad networks growing well in excess of 20%. [ Road Block ] seems to be growing bookings 50% or 60%. And so from our [indiscernible] perspective, is it possible are you may be starting to feel like we're entering a more positive cycle for industry growth? And to the extent that's true, perhaps you might opine on what the consumer behavior behind that is.

I do sense their tailwinds as much as I would love to take credit for everything good that's going on and disclaim responsibility for anything bad going on. No, I sort of agree with you. I think it feels like there is -- the consumers are once again moving in our direction sort of how it felt at the beginning of pandemic, maybe not quite as much enthusiasm. And we're unaccustomed to the world fueling this way because, of course, there was a decline in mid-'22 and took a while to settle out and then there was a return to modest growth. But as you yourself said, these are pockets of growth. And these pockets are defined by quality. And so we have to still be an outlier to deliver results like these. And that's our goal.

Your final question comes from Clay Griffin with MoffettNathanson.

I just want to circle back on mobile. Strauss, you had all of the points in terms of the margin improvement in the near term, but also over the course of the last several fiscal years. It looks like rough math that the mobile business in general will be pretty close to where it was on a pro forma basis, call it in '22. I just would love to ask you maybe you could just level set in terms of all of the -- whether it's the discipline in the titles, whether it's the efficiency and the UA spend, whatever, it does seem like there's been a pretty notable expansion in margins from then to now, notwithstanding the opportunities that you called out, but wondering if you could maybe just give us a framework in terms of the overall improvement maybe in mobile margins from, call it, 2, 3 years ago to now?

Look, we're -- honestly, we're just executing better. There were things that we were doing upon the acquisition that we either stop doing or we're doing a whole lot more efficiently and effectively. And one of the reasons that, that transaction came about is that we had like-minded cultures. And I think we aligned on the culture I described earlier and we aligned on our pillars of creativity, innovation and efficiency.

And we have an extraordinary leadership team that is open-minded and wants to win. And then we have amazing creative people throughout the organization who are bound and determined to do the very best work anyone can in the space. I think that's what it comes down to. And all of that done right is reflected in things like net bookings and margins. When you think about all these calls we've been doing for all this time, we talked about the numbers quite correctly, I think, as a result of what we do, not a driver of what we do.

None of us wakes up in the morning and says, let's talk about where our stock price ought to go. We talk about where our company ought to go. And if we get that right, the stock price is going to do just fine. I think and Nicole, our Head of IR, is sitting with me that in the 18 years that this management team has been responsible for overseeing our stock has appreciated something close to 5,000%. And that's a result of our strategy. That is not our strategy. And what we aim to do around here is make the best entertainment on earth and bring it to everyone on earth wherever they want it, whenever they want it, however they want. If we do that right, if we keep doing that right, if we're willing to question ourselves and always try harder and try again when we fall short, probably ought to see continued performance

There are no further questions at this time. I'll now turn the call back over to Strauss for any closing remarks.

I'd just like to take a moment once again to express my gratitude for the nearly 13,000 people who devote their careers to Take-Two and all of our affiliates all over the world because they're the ones who've delivered these amazing results. I want to thank the team at Rockstar who is diligently working on delivering the best entertainment experience of all time. And of course, I want to thank our shareholders for all of their support. So thank you for attending the call today. We really appreciate it. .

This concludes today's conference call. Thank you for participating. You may now disconnect.