Good afternoon. Welcome, and thank you for joining Take-Two's conference call to discuss its results for the fourth quarter and fiscal year 2020, ended March 31, 2020. 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. 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 www.take2games.com. And now I'll turn the call over to Strauss.

Thanks, Hank. Good afternoon, and thank you for joining us today. Before I begin, on behalf of our entire management team and colleagues around the world, I'd like to express our deep condolences for those who've lost their lives or lost family members during this pandemic. In every corner of the world, heroes in the form of first responders and healthcare workers put their lives at risk to take care of the ill, preserve life, and enable societies to return to normal, for which we're all incredibly grateful. I'm also proud of our entire organization for seamlessly and successfully shifting to a work-from-home environment to keep our company moving forward and to continue to deliver the best entertainment experiences to our audiences. Turning to our business. Our significantly better-than-expected fourth quarter results concluded another extraordinary year for Take-Two, during which we achieved numerous milestones, including record net bookings of nearly $3 billion as well as record digitally delivered net bookings, recurrent consumer spending, and earnings. Nearly all of our titles outperformed in the fourth quarter, including NBA 2K20, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2, Borderlands 3 and Social Point's mobile games, to name just a few. During the fourth quarter, both recurrent consumer spending on and full game sales of NBA 2K20 significantly outperformed our expectations. Consumer engagement with NBA 2K remained at record levels throughout fiscal 2020, with daily active users growing 13% and MyTeam users increasing nearly 50%. During the fourth quarter, over 9 million hours of NBA 2K gameplay were watched on Twitch across more than 1,100 channels, representing a 40% increase over the third quarter. This strong engagement began prior to people sheltering at home and resulted in recurrent consumer spending growth of 18% in the fourth quarter, reversing our expectation of a decline. This positive trend was driven primarily by the success of February content drops for MyTeam. For the full year, recurrent consumer spending on the NBA 2K franchise grew nearly 30% to a new record and remained the largest contributor to that part of our business. To date, NBA 2K20 has sold in over 12 million units, up 33% over NBA 2K19 in the same period. We now expect the lifetime units, recurrent consumer spending, and net bookings for NBA 2K20 will be the highest ever for a 2K sports title. I'd like to thank visual concepts and 2K for doing an incredible job addressing the prior issues with NBA 2K20 and delivering another year of record results. As part of our broader support of those in need during the COVID-19 pandemic, 2K partnered with the NBA, NBA players association, and ESPN to create the NBA 2K players tournament comprised of 16 NBA stars that raised funds for the Arizona Food Bank network. We are incredibly proud to include this unique program among our worldwide COVID-19 response initiatives. The positive momentum for Grand Theft Auto Online continues with superlative performance in both players and net bookings. Since the July launch of the Diamond Casino & Resort update, Grand Theft Auto Online achieved its best-ever monthly active users in both July and August 2019 and then grew sequentially each month from December 2019 through March 2020. This exceptional engagement helped to drive recurrent consumer spending growth of 87% during the fourth quarter and 40% for the full fiscal year, new records in both periods. In addition, sales of Grand Theft Auto V surpassed our expectations, and the title is now sold in over 130 million units, further cementing its position as the must-have title of the current console generation. Red Dead Redemption 2 also exceeded our expectations in the fourth quarter and to date has sold in more than 31 million units worldwide. Both engagement and recurrent consumer spending on Red Dead Online continue to gain momentum. Net bookings grew 62% in the fourth quarter and more than tripled for the full year, excluding digital content bundled with the Red Dead Redemption 2 premium additions. Throughout the coming year, Rockstar Games will continue to support both Red Dead Online and Grand Theft Auto Online with more content updates to keep new and returning players excited and engaged. Borderlands 3, the latest installment in our genre-defining shooter-looter series, outperformed our expectations in the fourth quarter and the title is now sold in over 10 million units, up 50% over Borderlands 2 in the same period. On March 13, Borderlands 3 was released on an array of PC retailers, including Steam, where sales of the game exceeded our projections. During the fourth quarter, 2K and Gearbox launched Guns, Love, and Tentacles: The Marriage of Wainwright & Hammerlock, the second of 4 announced paid campaigns that are included in the Borderlands 3 Super Deluxe Edition and the Season Pass or it can be purchased separately upon release. The Season Pass attach rate for Borderlands 3 continues to be the highest in 2K's in the franchise's history, and there's more content coming. Borderlands 3's monthly active users have steadily climbed in each month during the fourth quarter. And in March, we had the largest influx of new players since the launch due to its release on Steam. We attribute this success in part to 2K's and Gearbox software's continued effort to support Borderlands 3 as a live service game with weekly events, free content drops, and consistent communication with fans that should continue to benefit the title and the series over the long term. During fiscal 2020, Private Division launched their most successful release to date with The Outer Worlds. The title is an immense critical and commercial success and has significantly exceeded our expectations with more than 2.5 million units sold to date. The Outer Worlds is a perfect example of how Private Division can complement our core portfolio selectively and contribute meaningful results to our bottom line. Our fiscal 2020 results were also enhanced by a variety of other offerings led by NBA 2K19, Sid Meier's Civilization VI, Social Point's mobile games, and the WWE 2K series. In fiscal 2020, recurring consumer spending grew 34% to a new record and accounted for 51% of our total net bookings. In addition to virtual currency for NBA 2K, Grand Theft Auto Online, and Red Dead Online, recurring consumer spending was enhanced by a variety of other offerings. In the free-to-play category, Social Point outperformed our expectations in the fourth quarter and remains a significant contributor to our results through its 2 biggest games: Dragon City and Monster Legends, as well as Word Life, Tasty Town, and World Chef. Social Point continues to invest in its broad and innovative pipeline of more than 10 new games planned for launch in the coming years. WWE SuperCard also outperformed during the fourth quarter, growing 20%. The title has now been downloaded more than 20 million times and remains 2K's highest-grossing mobile title. And NBA 2K Online in China significantly exceeded our expectations, growing 37% and 25% during the fourth quarter and full year, respectively. The title remains the #1 PC online sports game in China with more than 49 million registered users. Add-on content grew 85% in fiscal 2020, led by offerings for the Borderlands franchise, Sid Meier's Civilization VI, and WWE 2K20. Finally, sales of Borderlands 3 premium additions, which include additional content that is allocated to recurrent consumer spending, also contributed positively to our results. Looking ahead, our company has the strongest development pipeline in its history, including sequels from our biggest franchises as well as exciting new IP. While fiscal 2021 will be a light year for new releases, we expect to deliver strong results due to the diversity and strength of our catalog and live service offerings. Transition to a new console cycle is always a very exciting time for our industry, and our development teams are already taking their creative aspirations to a new level by finding ways to push the limits of this new technology; however, the speed of these transitions can be unpredictable, particularly in a year upended by COVID-19. And our fiscal 2021 release slate reflects our strategy to bring our creative achievements to the largest possible audience. Our commitment to deliver the highest quality titles and give them optimal conditions to achieve success remains resolute. We have an array of titles that we'll begin to launch in fiscal 2022, which we expect to drive sequential growth that year. Karl will discuss this in more detail shortly. There's no doubt that our recent results have benefited from people sheltering at home as players have sought interactive entertainment to stay connected and engaged with friends and family. The connections and communities built will remain in place once people resume their normal activities and should continue to benefit our industry's results. We're fortunate to work in an industry that can bring some positivity in a difficult time. As previously mentioned, all of Take-Two's labels have come together to deliver a portion of proceeds from April and May to COVID-19 charities worldwide. Looking ahead, Take-Two remains superbly positioned creatively, operationally, and financially, to capitalize on the many positive trends in our industry and to deliver continued growth and returns for our shareholders over the long term. I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to join Strauss in expressing our condolences to all those who have lost loved ones and are facing adversity during this global pandemic. We at Take-Two are very fortunate to have colleagues around the world who continue to dedicate themselves to our mission despite very difficult and uncertain times. I'll now discuss our recent and upcoming releases. On April 24, 2K and Games released XCOM: Chimera Squad, an all-new standalone title in the award-winning, turn-based XCOM tactical series. Set 5 years after the events of XCOM 2, Chimera Squad provides a dynamic and unique experience for fans and new players. The title has received strong reviews, including 4.5 out of 5 stars from Screen Rant, who said Chimera Squad is a worthy addition for any turn-based strategy fan collection. Comics & Gaming Magazine gave the title an 8.5 out of 10 and called it a whole new dimension of strategy. Yesterday, 2K launched the Mafia Trilogy for PlayStation 4, Xbox One, and PC. The Trilogy combines all 3 previously released Mafia titles into a single package curated by 2K's Hangar 13 development studio. Mafia II and Mafia III are currently available with the purchase of the Trilogy, while Mafia I will be delivered on August 28, as the game is being completely remade from the ground up, including new technology, new voice acting, new game mechanics, and more. Starting tomorrow and through March 2021, 2K and Firaxis Games will begin their bimonthly release of 6 downloadable content packs as part of the all-new Sid Meier's Civilization VI New Frontier Pass for PlayStation 4, Xbox One, Nintendo Switch, and PC. Later this year, the new Frontier Pass will come to mobile platforms and each pack will be available for individual purchase. The new Frontier Pass will provide 8 new civilizations, 9 new leaders, and a variety of new gameplay modes and content. In addition, Firaxis Games will also provide free updates between packs that feature new maps, scenarios, balance updates, and more. On May 29, 2K will continue to bolster our offerings for the Nintendo Switch with some of their most popular and successful franchises, including BioShock: The Collection, the Borderlands Legendary Collection, and the XCOM 2 Collection. In addition, on June 5, Private Division will release the critically acclaimed player choice-driven RPG, the Outer Worlds for the Switch. On June 16, Private Division will launch Disintegration for PlayStation 4, Xbox One, and PC. Developed by V1 Interactive, the independent studio founded by Halo co-creator, Marcus Lehto, Disintegration is a Sci-Fi first-person shooter that blends real-time tactical elements to create an entirely new experience featuring a thrilling single-player campaign as well as frenetic multiplayer gameplay. Disintegration is currently available for preorder, including an array of bonus cosmetic digital content for use in multiplayer modes. Early this week, Private Division and Squad announced a partnership with the European Space Agency to launch a new Kerbal Space Program update entitled Shared Horizons, which is planned to launch on PC on July 1, 2020. The update will also be available later this year on consoles. On August 21, 2K will release PGA Tour 2K21 for PlayStation 4, Xbox One, Nintendo Switch, PC, and Stadia. Developed by HB Studios, PGA Tour 2K21 will feature PGA Tour professional, Justin Thomas, on the cover; officially licensed pro players, courses and gear; the most realistic course scanning to date; play-by-play commentary by Luke Elvy and Rich Beem; a new PGA TOUR Career Mode, online and local multiplayer; course and player customization; and online societies. In addition, throughout the coming months, 2K will release additional content offerings for NBA 2K20 and Borderlands 3. Additional details will be revealed shortly. And Rockstar Games will continue to provide an array of content and gameplay experiences for the vast open worlds of Grand Theft Auto Online and Red Dead Online, which continue to set engagement records. Selectively expanding our sports offerings remains an exciting growth opportunity for our company. In March, 2K announced a partnership with the NFL, encompassing multiple games. The partnership marks the return of football-themed games to 2K's stable of renowned sports titles as well as an expansion of video game properties for the NFL. While specific game titles, developers, and release dates will be revealed over time, we can confirm that these projects will be non-simulation football game experiences and will launch starting in calendar year 2021, during fiscal 2022. We're thrilled to be back in business with the NFL, which is one of the most successful sports brands in the world. We're confident that our forthcoming NFL offerings will be extremely fun, highly engaging, and deeply social experiences. Last month, 2K announced that it would be extending the production time line for the next WWE 2K franchise simulation game to ensure that the development team at Visual Concepts has the opportunity to create the best experience possible. We also believe that there is a meaningful opportunity to expand our WWE offerings. To that end, 2K announced WWE 2K Battlegrounds, a completely new gaming experience that will feature arcade-style action and over-the-top superstar designs, environments, and moves. WWE 2K Battlegrounds is being developed by Saber Interactive, the studio behind NBA 2K Playgrounds, and is scheduled to launch this fall. 2K will have more to share about the games in the coming months. The team at Private Division's new Seattle studio remains hard at work on Kerbal Space Program 2, the next generation of the popular space simulation franchise. Due to delays from COVID-19, we are moving the release of the game to fall 2021 in order to provide the team with the time they need to create the best Kerbal Space Program experience possible. Turning to eSports. On May 5, the NBA 2K League began its 2020 season, planning at least 6 weeks of remote gameplay. All 23 NBA 2K League teams are participating in regular-season gameplay in their local markets from their homes with games simulcast live on the NBA 2K League's Twitch and YouTube channels. Details surrounding the remainder of the 2020 season schedule and structure will be shared as information becomes available. We are very excited about the continued progress and growth of the league, which has a long-term potential to enhance engagement and to be a driver of profits for our company. In order to build the scale of our organization, we continue to make significant investments to enhance our industry-leading portfolio of intellectual property. I'll now provide visibility into our long-term pipeline which is the strongest in our company's history. Note that we are only including full game releases and not add-on content. Across our internally-owned labels and outside development studio partners, we currently have 93 titles planned for release over the next 5 years through fiscal 2025. Of the 93 titles, 63 are core gaming experiences, including 15 platform extensions of existing titles; 17 are mid-core or arcade-style experiences, and 13 titles are casual experiences. 47 of these 93 titles are from existing franchises, and 46 are from new intellectual properties. In terms of platforms, 72 of the 93 titles are planned for console, PC, and/or streaming, including 7 that will also be available on mobile and 21 are planned specifically for mobile. With respect to business models, 67 of the 93 are games that are required to be purchased and 26 are free-to-play. Note that these figures reflect a snapshot of our current pipeline as it stands today. It is likely that some of these titles will not be developed through completion, and we will undoubtedly be adding new titles to our slate. As Strauss mentioned, fiscal 2021 will be a light new release year; however, given our strong pipeline and expectations for increasing recurring consumer spending, we expect sequential growth to resume in fiscal 2022. In closing, we are incredibly excited about the many long-term opportunities for our company to deliver the most captivating and engaging experiences in all of entertainment to audiences around the world. Whether capitalizing on new platforms, embracing new business models and distribution channels, and expanding into emerging markets, 2K is exceedingly well-positioned to generate value to consumers as well as growth and margin expansion for our shareholders.

Thanks, Karl, and good afternoon, everyone. Today, I'll discuss our fourth quarter and fiscal 2020 results and then review our financial outlook for the first quarter and fiscal year 2021. Please note that additional details regarding our actual results and outlook are contained in our press release. I would also like to express my deepest condolences to those who have been affected by the COVID-19 pandemic. I'm also immensely proud of my colleagues around the world, who continue to support our organization with the utmost level of professionalism and dedication to both our business and consumers. As Strauss mentioned, our significantly better-than-expected fourth quarter results finished a terrific year for Take-Two, during which we achieved record results. Starting with the fourth quarter, total net bookings grew 49% to $729 million, as compared to our outlook of $540 million to $590 million. This outstanding result was driven by the exceptional performance of our titles in the fourth quarter. Recurrent consumer spending grew 47% and accounted for 61% of total net bookings as compared to our outlook of over 10% growth. Recurrent consumer spending exceeded our outlook due primarily to the record performance of NBA 2K and Grand Theft Auto Online. Digitally delivered net bookings grew 60% and accounted for 92% of the total as compared to our outlook of over 20% growth. This result exceeded our outlook due to the outperformance of recurrent consumer spending and digitally delivered full game sales. During the fourth quarter, 65% of sales of current generation console games were delivered digitally, up from 57% last year. GAAP net revenue grew 41% to $761 million and cost of goods sold increased to $396 million. Operating expenses increased by 9% to $243 million, due primarily to higher R&D expense, and GAAP net income grew to $123 million or $1.07 per share as compared to $57 million or $0.50 per share in the fourth quarter of fiscal 2019. Turning to our fiscal 2020 results. Total net bookings grew to a new record of $2.99 billion. This extraordinary result was driven by growth from NBA 2K, Grand Theft Auto Online, and Grand Theft Auto V and the record-breaking launch of Borderlands 3. Recurrent consumer spending grew 34% to a new record and accounted for 51% of total net bookings. This exceeded our outlook of 25% growth. Digitally delivered net bookings grew 35% to a new record of $2.4 billion and accounted for 82% of the total. This too exceeded our outlook of 25% growth due to better-than-expected recurring consumer spending and digitally delivered full game sales. During fiscal 2020, 55% of sales of current generation console games were delivered digitally, up from 38% last year. Non-GAAP adjusted unrestricted operating cash flow was $615 million as compared to our outlook of over $500 million. During fiscal 2020, we spent $53 million in capital expenditures. At fiscal year-end, our cash and short-term investments balance was over $2 billion. GAAP net revenue grew 16% to $3.09 billion and cost of goods sold increased to $1.5 billion. Operating expenses increased by 20% to $1.1 billion due primarily to higher R&D and marketing expenses, and GAAP net income grew to $404 million or $3.54 per share. Today, we gave a strong initial outlook for fiscal 2021. Our operating results are currently expected to be lower than fiscal 2020 due to the likely reschedule, coupled with continued investments in our future pipeline that should enable us to scale further and improve margins over time. When people began the shelter-at-home, we saw an increase in consumer engagement with our titles due to the online accessibility and the social nature of our products. We're continuing to experience this positive trend, which is reflected in our first quarter outlook. We have not included any additional benefit from this trend in our outlook for the back half of the year nor we assumed a deep recession or further delays in releases, which could affect our results. Now to our guidance. Starting with the fiscal first quarter. We project net bookings to range from $800 million to $850 million, up 93% from $422 million in the first quarter last year. This increase is being driven primarily by expected growth from Grand Theft Auto Online and Grand Theft Auto V, NBA 2K, Red Dead Redemption 2, and the Borderlands franchise. The largest contributor to net bookings are expected to be Grand Theft Auto Online and Grand Theft Auto V, NBA 2K20, Red Dead Redemption 2, and Red Dead Online and Borderlands 3. We project recurrent consumer spending to grow by approximately 75%. This growth is expected to be driven primarily by Grand Theft Auto Online and NBA 2K20. We also expect digitally delivered net bookings to double. Our forecast assumes that 81% of our current generation console game sales will be delivered digitally, up from 75% in the same period last year. We expect GAAP net revenue to range from $775 million to $825 million and cost of goods sold to range from $392 million to $480 million. Operating expenses are expected to range from $267 million to $277 million. At the midpoint, this represents a 10% increase over last year, driven primarily by higher R&D expense and charitable contribution. And GAAP net income is expected to range from $103 million to $116 million or $0.90 to $1 per share. For management reporting purposes, we expect our tax rate to be 16% throughout fiscal 2021. Turning to our outlook for the full fiscal year. We project net bookings to range from $2.55 billion to $2.65 billion. We expect growth from NBA 2K to be offset by lower results from Borderlands 3, Red Dead Redemption 2, and Grand Theft Auto V. Grand Theft Auto Online and Red Dead Online, excluding digital content bundles with the premium edition, are projected to be approximately in line with fiscal 2020. The largest contributor to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Social Point's mobile games, Borderlands 3, Civilization VI, and The Outer Worlds. We expect the net bookings breakdown from our label to be roughly 55% 2K, 35% Rockstar Games, and 10% Private Division and Social Point. And we forecast our geographic net booking split to be about 60% United States and 40% international. We expect recurrent consumer spending to be roughly flat as compared to fiscal 2020, driven primarily by growth from NBA 2K, offset by lower allocated recurrent consumer spending from the Borderlands 3 and Red Dead Redemption 2 premium edition. The current consumer spending as a percentage of our business is expected to grow to approximately 60% versus 51% last year. We project digitally-delivered net bookings to decline by about 8%. As a percent of our business, digital is projected to represent 86%, up from 82% last year. Our forecast assumes that 68% of current generation console game sales will be delivered digitally, up from 55% last year. We expect to generate more than $350 million in non-GAAP adjusted unrestricted operating cash flow, and we plan to deploy approximately $75 million for capital expenditures. The increase in capital expenditures over the prior year was primarily due to spending on studio and office build-outs and IT expense. We expect GAAP net revenue to range from $2.63 to $2.73 billion and cost of goods sold to range from $1.19 to $1.24 billion. Total operating expenses are expected to range from $1.10 to $1.12 billion. At the midpoint, this represents a 1% decrease over the prior year, driven by lower marketing and stock compensation expenses, partially offset by higher R&D expense and charitable contribution. And we expect GAAP net income to range from $299 million to $329 million or $2.60 to $2.85 per share. In closing, fiscal 2020 was a record year for Take-Two, whether delivering incredible stand-alone entertainment experiences or providing engaging live services that captivate and connect communities around the world, our ability to serve our audiences has never been better. Fiscal 2021 promises to be another great year for our organization, and we are well-positioned to both capitalize on the many opportunities within our industry and to navigate the uncertainties of these times. We have the strongest development pipeline in our company's history, and we expect sequential growth to resume in fiscal 2022. With our world-class creative assets, focus on operational excellence, and disciplined approach to capital allocation, Take-Two is positioned to generate significant growth and margin expansion over the long term.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their hard work, their commitment to excellence, and for delivering another outstanding year, particularly under these circumstances. For our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

Our first question comes from Colin Sebastian with Robert W. Baird.

Congrats on the strong quarter and hope you all are doing well. And also, thanks for the visibility on the pipeline, that's very helpful. I was wondering if you could add any color on the linearity of planned releases over that 3- or 4-year time period. And then, Strauss, maybe a bigger picture question, as the publisher of the world's most successful open world franchise, I wonder if you think there's a real business opportunity for a metaverse type environment. I know this is one of the more topical discussion points in certain industry circles right now, but with the next-gen on the horizon and given what we've just been going through, I wonder if you see any potential for that.

I believe what you're asking is whether we should anticipate a steady upward trend in our releases, net bookings, and cash flow. Our aim is to have several significant releases each year, both from our existing franchises and new intellectual properties. As highlighted in Karl's description, we have a lot of exciting content on the way that aligns with this plan. However, that does not guarantee linearity each year, as demonstrated in fiscal '21. The positive aspect is that our robust catalog, live service offerings, and annual releases provide us with strength even in a lighter year, although our goal is not to have light years. We strive to perform better in years when we can launch multiple titles, and ideally, we may even have blockbuster titles among those. I do not think the variability in our results will diminish, especially with some of the largest entertainment properties that do not release annually to maintain their status. We aspire for smoother growth, but some variability will remain. While I would like to address your question in broader terms, I believe it is more suited for our labels. Once we delve into the specifics of the content and our future plans, those inquiries will be best answered at the label level in due time.

Our next question comes from Mike Ng with Goldman Sachs.

I just had a question about the pipeline visibility. Could you just give us a sense of what the completion rate for games in development have been in the past? And could you just help us think about exactly what a core gaming experience is? I think you guys said 72 games for PC console streaming over the next 5 years, so it's 14 games a year on average. Is this just a significant increase in output relative to what you've done in the past? Or is there add-on content or something else in those numbers?

To address the last part of your question first, we did not include add-on content in those numbers. They represent only full game releases. Defining our core experience can be challenging, but it's not necessarily linked to our largest investments. While core games typically require more significant investments because they are larger and more engaging, it doesn’t mean all investments will follow that trend. As we've mentioned previously, there’s a lot of new intellectual property, which tends to be riskier. Development budgets for new IP are usually lower. Therefore, we will have a diverse range of investments across various types of releases, including core games. Core games aim for engaging experiences where players might spend anywhere from 5 minutes to 5 hours at a time. Labeling them as AAA might be misleading because that term implies a certain level of investment that does not specifically apply here. As for the first part of your question, I'm sorry, I can't recall it.

It was about the percentage of games in development that typically go through completion in the past?

I don't have a specific number for you. However, it's clear that games from existing franchises tend to have a much higher completion rate. For new intellectual properties at various development stages, like those in the prototype phase, the completion time could vary significantly, potentially being around half to 75% of the typical time. We have several titles at different development stages. Generally, as we introduce more new projects with new IPs, you can expect the completion rates to be lower compared to just existing franchises. We have a lot of IPs in our pipeline. It's also important to note that the numbers assume all these projects will release as planned, which we know won’t happen, and that no additional projects will be added, which is also unlikely. Our current pipeline is larger than ever before, and we aim to maintain this development pace. Building scale is crucial for us, and this initiative contributes to that need.

Our next question is from Mario Lu with Barclays.

I have one question about the NBA and another more general question. Regarding the NBA, I noticed that NBA 2K21 is still expected to be released in fall 2020. Can you share any insights on what might happen to its release date if the NBA season remains suspended for the rest of the year? Also, Strauss, you previously mentioned that consumers typically watch 150 hours of linear TV and 45 hours of video games. How have those viewing hours changed during the current COVID situation? What is your perspective on how time spent on entertainment and video games will look in a post-COVID world?

Sure. This is Karl for NBA. We're hopeful for an NBA season, and we have experienced delayed starts in the past, including a strike. While we don't want to suggest that it won't affect the game at all, we've generally managed to continue our business effectively even when there are delays or changes in the season. Obviously, everyone around the world is wishing for an NBA season. However, if that doesn't happen for some reason, I believe the game itself remains an engaging experience, and we will be alright.

This is Strauss. Regarding engagement, Activate, a prominent media consultancy, recently shared some research with us. All age groups and demographics have seen an increase of about 39% in time spent gaming during the COVID shelter-in-place period, while time spent on video and linear entertainment has risen by approximately 43%. Both are similar, but linear entertainment has seen a slightly higher increase. Notably, their research indicates that post-COVID, as people return to their usual routines, time spent gaming is expected to grow at a faster rate of about 14%, compared to an 8% sustained increase in time spent on linear entertainment when compared to pre-COVID-19 levels. This suggests a significant shift, indicating that we will witness substantial growth in interactive entertainment that surpasses the growth in linear entertainment, a trend we have already started to observe. I believe that the two paths will diverge, favoring interactive entertainment. The reason for this belief is that, despite the tragic circumstances of sheltering at home, people have sought out entertainment. Many have returned to and discovered interactive entertainment, recognizing not only its beauty and engagement but also its fun and competitive aspects, depending on the game. It offers great stories and characters, as well as the ability to connect with friends and communities worldwide. You can make new friends and interact with them while playing, utilizing chat clients to communicate. This isn't a moment for joy; we are genuinely saddened by the current global situation, but I think the insightful perspective is that all existing trends have been expedited by this crisis. The shift toward interactive entertainment and the growth within this sector is one of those trends. Nonetheless, we must execute daily. The growth in this sector won't benefit us without creating exceptional games and delivering hits.

Our next question is from Brian Fitzgerald with Wells Fargo.

I wanted to ask about what you see on a regional basis, if there's any differentiating engagement dynamics as we kind of meter through areas getting hard hit and then responding a bit, China, and then as places around the world return to some of the normal on the development side. How was your shift to work from home? Was that kind of lockstep, no real problems? And then what are you seeing as regions start to get back to work in Asia Pac?

Thanks, Brian. I apologize for the delay. We're all working remotely. We don't notice significant regional differences, and there haven't been any major changes as regions have returned to work. For instance, NBA 2K Online in China has now reached 49 million registered users, remains the top PC sports title in the country, and saw a 25% year-over-year increase, with about a 40% rise in the quarter. We're not observing significant changes as people go back to work; however, we expect that this level of engagement won't remain the same as things normalize, but it will be higher than it was previously. In terms of working from home, we consider ourselves fortunate. We learned a valuable lesson during Hurricane Sandy when we were unprepared, and since then, we've operated as a compliant company with top-notch disaster recovery systems. In fact, we had organized a work-from-home test day on March 12, and then we had to implement it just around that time. A week later, 5,000 employees were effectively working from home, fully equipped. We could see that their productivity had actually increased while working remotely, especially as they adapted to working at their computers. We're lucky to have an incredibly talented and dedicated team who believe in our company's mission and enjoy working together. We made it our goal to support people during this challenging time and have stayed connected with our teams, communicating regularly. I'm holding three town hall meetings next week on Zoom across different time zones and aim to connect with nearly everyone in the company. Everything has gone really well, and we haven't lost momentum. Though it may become more challenging over time, I still don't anticipate we will lose our stride. That said, I don’t believe that shutting down our physical offices and solely working from home is as effective. While it's somewhat effective during emergencies, there's no replacement for in-person collaboration and connection.

Our next question is from Eric Sheridan with UBS.

I would like to ask a longer-term question based on some of your previous answers regarding the current environment and its implications for long-term engagement. Considering what you've observed in the past couple of months, albeit a brief timeframe against a challenging backdrop, has it influenced your perspective on game distribution, game development, or even game monetization in the long term? Specifically, do you see increased levels of engagement potentially impacting interactive payment models in the medium to long term, and how are you considering the quality of content along with the methods of monetization to take advantage of this surge in engagement?

We've learned a lot already and continue to do so. Our approach hasn’t changed significantly. When discussing monetization, our primary goal is to provide an exceptional entertainment experience. We believe that if we focus on delivering quality, monetization will follow naturally. Our aim is not to constantly chase monetization, but we recognize the importance of being compensated fairly so we can support our talented team and deliver returns to our investors. We care about all our stakeholders, and while we operate as a for-profit organization, monetization is not an issue for us. When we produce outstanding entertainment, audiences will respond. Providing something of great value ensures that people are willing to pay for it. We believe that the quality of an experience must align with the perceived value of that experience. For instance, if you have a fantastic meal at a great restaurant but feel overcharged, you won't return, regardless of your ability to pay. Thus, it’s essential that we always deliver more than what we charge, as that is the goal of our company and all our labels. Increased engagement naturally leads to increased monetization, which is reflected in our current results and guidance.

Our next question is from Ryan Gee with Bank of America.

A couple of quick ones for you here, one for Lainie then maybe for Karl. Lainie, if we rewind back to fiscal '18, that's probably the last year you didn't really have any big new AAA titles beyond sports. I noticed that the profit margin, earnings per share was higher than what you're guiding to for fiscal '21, even at the high end. I know there are share count and tax rate differences going on, but maybe what's the 1 or 2 differences you would call us to as to why fiscal '21 maybe doesn't look as robust as compared to fiscal '18? And then, Karl, just on Mafia real quick. Can you remind us how material that franchise has been for Take-Two in the past? It sounds like this Trilogy is a quasi-new game with some ports and remasters along with it. So what's the opportunity we should really think about this type of game, the Trilogy, in '21?

Ryan, I don't have the exact numbers right now, but I can tell you that higher R&D expenses are definitely one of the factors contributing to the increase. As Karl mentioned regarding our release schedule, our pipeline of titles has grown significantly over the past couple of years. You might have noticed the details about our upcoming titles over the next five years, which we've been focused on expanding. A substantial part of this development is reflected in our R&D expenses, which have increased our operating expenses. This rise in operating expenses has impacted our bottom line margin, alongside an overall increase in our general and administrative expenses due to higher personnel costs and IT expenses for cybersecurity and online games. I believe this is where you're seeing the most significant increase for the overall business.

Mafia has been a very successful franchise for us over a long time with Mafia I, Mafia II, and Mafia III. To give you an idea, Mafia III has already sold around 7 million units. Mafia II and Mafia I have also performed well, making it a significant contributor for us. We are very excited about the Trilogy. While it includes the same three games, many improvements are being made. Mafia I will be essentially remade with new technology, new voice acting, new game mechanics, and much more. A lot of effort is going into releasing the Trilogy. We have had great success with these collections. Although they are not completely new experiences, there is always a new audience to attract, and existing fans can enjoy them in a different way based on the generation of each individual title. This franchise has been meaningful for us, and we are really looking forward to the release of the Trilogy.

Next question is from Brian Nowak with Morgan Stanley.

Two on GTA. So recently, there's been an offering on the Epic Games store where people have been able to get GTA for free on PC. Can you update us on your thinking about lowering barriers to entry to some of these big RCS-driven games, whether it's NBA 2K or obviously this recent thing with GTA? Presumably, getting people into the ecosystem, driving the network effects and engaging them and ultimately monetizing that engagement is such a big part of the business. How do you think about the risk/reward of bringing people in for free versus charging them for upfront access? And has that changed at all recently? And then just following up on something that came up earlier in the call. You mentioned 15 platform extensions. Is GTA V one of those 15?

Thank you, Brian, for your question. I believe your question was also a good one. It encompasses all aspects. Grand Theft Auto V is a title that has been around for 7 years. Clearly, it has been available at lower price points than when it was first released. We also have an online component that presents monetization opportunities. Specific promotions with certain outlets and deals can be beneficial for us. We think it's a solid strategy to expand the audience, enhance engagement, and increase the user base. This, in turn, will lead to higher net bookings and increased profits. That was the reasoning behind it. We are very selective with these promotions, and they are usually offered for limited times when it makes sense for catalog titles. We haven't made any announcements that are reflected in today's release. As you know, we refrain from discussing specific new titles during these calls and leave those discussions to the labels.

Our next question is from Todd Juenger with Sanford Bernstein.

For either Karl or Strauss, whoever feels like it. I hope you don't mind me going back to the engagement question yet one more time, but I'd love to explore it this way. When you think about the increased engagement recently, can you help us understand how much of that you think is proportionately driven by existing gamers who are playing more versus perhaps lapsed gamers who have come back versus perhaps new people to gaming? And any differences in that answer based on either platform, PC versus console versus mobile, or by your major franchises.

It's Karl. In terms of engagement, my answer might not fully satisfy you, but it's really a combination of everything. We're seeing activity from new gamers, existing gamers, and those returning to our franchises. We track all of this, even though we don't share those numbers publicly. What keeps people coming back, including new players, is the consistent release of new content. Each time we introduce new content, it generates publicity that draws people back into the franchise, engages our current audience, and attracts new players. I haven't observed significant changes in these dynamics related to the pandemic, but we do have various strategies to attract new players. We continually experiment with pricing models, including subscription services and limited-time offers, which all contribute to renewed excitement and engagement with our games. This trend is not just temporary; it's something we've seen consistently over time.

Our next question is from Eric Handler with MKM Partners.

Strauss, considering all the games you have in your pipeline, could you discuss the scale and infrastructure? If even half of those games are successful, do you have the necessary personnel in place to effectively distribute and market them?

I thought you were going to ask do we have everything in place to develop, and we still will be building up our development teams. In terms of marketing and distribution, yes, I mean one of the reasons that we've talked about the need for scale in order to have competitive operating margins. We already have competitive gross margins, highly competitive gross margins. To have competitive operating margins, you need scale with the same level of success of your games, and that's our goal here. But the reason you get those higher operating margins with more net bookings is because you don't build up your fixed overhead and your fixed overhead would typically include marketing and distribution expenses. I fully expect that our distribution will become more efficient as the world moves more to digital distribution. We already have a highly efficient distribution mechanism. And yes, with volume, you might increase your marketing head count modestly but not all that significantly. Naturally, our development head count is part of the cost of making a game. And you should expect with volume that our development expense goes up, and you're already seeing that.

Our next question comes from Matthew Thornton with SunTrust.

I have a couple of questions. First, can you provide a breakdown of the pipeline title count by label? I don’t believe you mentioned this earlier. Second, regarding recurring titles, such as NBA 2K, which will have several releases over the next five years, is each release counted separately or just as one title? Lastly, Strauss, how do you approach growth targets over a multi-year period? Do you consider the growth rate based on a blockbuster launch or take a longer 5-year frame into account? I’m interested in how you define growth milestones for the business over an extended period.

It's Karl. Yes, you're correct, we did not provide a breakdown by label, but we do have releases from all the labels. We don't have further details to share, but there are numerous releases from each of our labels, including Private Division, 2K, Rockstar, and Social Point. Regarding how the breakdown works, if there is a sequel or a franchise that releases annually, that would be reflected as part of our entire pipeline. So yes, it would be counted.

And in terms of how we look at growth, good news is we're operators. We're also investors. We also are big shareholders. We look at it exactly the way you would. We're looking for growth in net bookings. We're looking for growth in EBITDA. We're looking for growth in recurrent consumer spending because it reflects solidity in the business. It's much less volatile than initial releases could be. And finally, we're looking for growth in our stock price. And that's how we're judged. So I think in exactly the way you would look at it, scale, because it's correlated with operating margins in the way that I said earlier, the scale of your operating profit or your EBITDA or your operating cash flow and, of course, your stock price. And on those metrics, we've done very well indeed for quite some time.

Our next question comes from Mike Hickey with The Benchmark Company.

I was curious to your view on the economy over your fiscal year '21, '22. I think you said you didn't see a deep recession, but I'm curious what sort of recovery you expect and how unemployment or other factors you look at could impact online game sales or live service as it relates to your guidance.

Thanks, Mike. Our expectations for fiscal '21 remain unchanged despite the recent positive developments during this challenging period in the latter half of the year. We aren't anticipating this level of consumer engagement and spending to persist. Similarly, we are not preparing for a severe, extended consumer recession. I would say we are in a balanced position, as it's difficult to predict with certainty. Personally, I believe we will witness a relatively quick recovery driven by consumer activity once the situation stabilizes, and I think that stabilization may occur sooner than many expect. However, my personal views do not influence our projections. Therefore, we are planning for economic conditions to remain stable. If an unexpected prolonged consumer recession were to occur, it could have a negative impact on our results. Conversely, if there is a sudden significant economic expansion, that could positively affect our results. Hence, we are assuming relative stability and do not expect continued high levels of engagement and monetization as we have seen recently.

That's helpful. The last one from me. On fiscal year '22, you noted your expectation for sequential growth. And of course, you guys tend to be very conservative, which is a good thing. Maybe I missed it, but broadly speaking, can you sort of talk to the drivers of growth for fiscal year '22? And obviously, it looks like half the year is in your first quarter guidance for '21. So we think there's probably upside there. Do you expect to grow over fiscal year '20 in '22?

Yes. Sorry. I think probably not much to add. We expect sequential growth year-over-year in fiscal '22, and that is driven by the release schedule that Karl described in the pipeline that we're investing in. So we expect some releases coming out of that pipeline in fiscal '22, and we expect them to generate sequential growth, so as simple as that.

The next question is from Doug Creutz with Cowen and Company.

I went back 10 to 15 years ago. There were a lot of successful sports franchises out there. Most of the major leagues supported multiple simulation and arcade titles. You had an MLB title. There was golf, tennis, extreme sports, so on and so on. You go to today and there's basically 3 enormous titles in sports in the market, including NBA 2K, but few others that are kind of hanging on by the skin of their teeth and that's it, presumably the other ones on the way because it became uneconomical to make them at diminishing unit numbers. You've got a PGA title. You're working on some NFL titles. You're continuing to invest in WWE. Is it simply a function of getting the cost structure down to a level where they can be profitable at relatively low unit numbers? Or do you see something in the market where you think there are opportunities opening up that maybe didn't exist 2, 3, 4 years ago?

There are certain sports that won't attract the same audiences as major leagues like the NBA or FIFA. We're thrilled to be returning to football, especially with the NFL, which is a globally recognized brand. We've previously succeeded in the NFL and have high hopes for our contributions to that market. While we are not entering the simulation sector, we recognize significant growth potential where we currently stand. However, it’s true that smaller sports don't provide the same financial opportunities as larger ones, and you must adjust spending accordingly. Smaller audiences require smaller development budgets, but that doesn't diminish the potential for profitability. We believe there are opportunities in some lesser-known sports that can be successful with a reasonable budget, provided we deliver excellent content to engage consumers, which will ultimately drive the economics.

Our next question comes from Ray Stochel with Consumer Edge Research.

A high-level question on this topic of scale and I guess how you guys are thinking about investments in your forward pipeline. I'd love to know more about your green-light process. And I guess if you look at the last 10 or so years plus of video gaming, there's been a lot of focus on really growing in that head content. Even you yourself have seen a lot of success with GTA and NBA. And it does seem like you have a lot of smaller titles or tuck-in titles or AA titles that are in your pipeline. So how do we think about you green-lighting those titles in addition to what you just talked about with things like NBA and PGA? And what do the unit economics look like for those titles relative to some of the big AAA releases? And I guess is that something that could eventually lead to a lower margin structure on a per unit basis, which would sort of limit the upside of what you're talking about with scale?

Yes. I believe what you're really referring to is our strategy regarding new intellectual property. Generally, we have focused on our strong franchises, which have produced significant economic results through consumer engagement. However, it’s essential to invest in new IP to maintain a fresh pipeline, as you can never predict where the next hit might come from. You’re correct that the investment approach for new IP differs from that of established franchises. We constantly seek innovative ways to enhance our product lineup, including launching new IP that has potential. Success doesn’t have to happen with the first release; for instance, Bruce Springsteen took time to achieve his first gold album, needing several tries to get there. The goal is to explore various options while managing risk effectively, ensuring that if something doesn’t succeed initially, we don’t face catastrophic losses, yet still find value in our efforts. Even if the first attempt isn’t a financial success, our focus is always on iterative growth. When we identify an audience with the second title, we can invest more in marketing and development to propel that franchise forward. Franchise development is about not needing immediate success comparable to established titles like Grand Theft Auto or NBA right from the start. Adopting that mindset would discourage us from launching new projects, which is limiting. While the temptation to streamline investments for efficiency and higher margins is understandable, it can stifle our creative and economic potential. We must remain thoughtful about our investment levels, be patient, and approach franchise development with a long-term perspective. In fact, our franchises tend to grow with each release, and there’s a reason for that: we prioritize a long-term view.

Got it. As you experience success with some of your new intellectual properties, how do you plan to handle a potential blockbuster hit right at the start? Will you be able to shift some of your resources towards ongoing spending and adjust that model immediately? Or do you intend to keep the studio paths separate? For instance, if you have a title that could rank below something like Grand Theft Auto but alongside Borderlands, would you allocate other studios to focus on the ongoing spending opportunity, or will you continue with the pipeline strategy you’ve established?

If you have a title that unexpectedly becomes a hit, you can definitely shift resources quickly. If a significant opportunity arises through ongoing consumer spending, you can extend the life of that franchise. Borderlands serves as a perfect example; while the first Borderlands was successful, Borderlands 2 became hugely popular. Our plans for downloadable content expanded significantly during that time. I can't recall our original DLC plan, but it certainly wasn’t the 10 to 12 releases we ended up with. You can always invest more as time goes on, especially in games with a strong micro-transaction model. However, you should never change the core nature of the game, as that would be detrimental. The appeal of a hit game lies in its existing format. If you alter it, even with the intent to maximize profit from consumers, you risk damaging the franchise, and that's not something we would do.

Our next question is from Alex Giaimo with Jefferies.

Just for Lainie, circling back to the earlier question on margins and how it relates to the full year guide, I understand the color around R&D expenses being up, but it also looks like the guidance is implying gross margins that are a bit lighter than we expected. Curious if that's just conservatism or something specific to call out. We would think that you would see some gross margin improvement especially with the accelerated shift we're seeing in digital right now. Any color there would be helpful.

The gross margin is slightly down, but it is essentially flat compared to last year. We are noticing a slight increase from the mix of digital and recurrent consumer spending, as recurrent consumer spending typically has a higher margin. However, this is being balanced out by having fewer new releases this year, which is why the margin is flat. It's still early in the year, and as recurrent consumer spending remains strong, we anticipate seeing a slight increase towards the end of the year.

We have reached the end of the question-and-answer session. I would now like to turn the call over to management for closing comments.

Well, we just want to thank everyone for attending the call. Once again, we want to extend our best wishes to everyone who's listening today for your health, for your loved ones' health, and our condolences for any losses that you or your loved ones have suffered. We know this is an incredibly challenging time. We feel blessed to be able to be of some small consolation by bringing light entertainment to people. We're proud of what we do. We're grateful to be able to do it. And once again, I want to express my gratitude to our colleagues for their dedication for showing up with smiles on their faces for doing such amazing work. The reason we're able to have these extraordinary results is solely a function of that work. So thank you so much for joining us, and our very best wishes.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.