Greetings, and welcome to the Take-Two Interactive First Quarter Fiscal Year 2025 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you, Nicole Shevins, SVP of Investor Relations and Corporate Communications. Thank you, Nicole. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the first quarter of fiscal year 2025 ended June 30, 2024. 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 fiscal year 2025 is off to a solid start. Our first-quarter net bookings of $1.2 billion were in line with our expectations, and our management team remains highly confident in our path forward. We're reiterating our net bookings outlook for the year. As we release our groundbreaking pipeline, we expect to achieve tremendous growth, including sequential increases in net bookings in fiscal 2026 and 2027. I'd like to thank our talented teams across our labels for their boundless passion, hard work, and dedication to our mission. Now turning to our business highlights from the quarter. The Grand Theft Auto series exceeded our expectations as momentum continues to build ahead of the launch of Grand Theft Auto VI in fall of 2025. Unit sales for Grand Theft Auto V continue to grow. And to date, the title has sold in over 200 million units. Grand Theft Auto Online also surpassed our projections, led by its summer content pack, Bottom Dollar Bounties, which launched June 25. The audience for Rockstar's premium membership service GTA Plus grew strong double digits over last year, with Rockstar Games offering its members an array of valuable benefits that range from enhancing the in-game experience to providing access to their classic titles, including the recent addition of LNR. We're pleased with the performance of Red Dead Redemption 2, which has sold in more than 65 million units to date. In addition, Red Dead Online continued to engage its audience during the period with new monthly bonuses and free outfits inspired by top content creators within the Red Dead community. NBA 2K24 delivered a solid quarter and to date has sold in close to 11 million units. Engagement remains strong with users playing more frequently and participating in more games compared to NBA 2K23 for the same period last year. The franchise continues to expand its audience through several innovative mobile experiences, including NBA 2K24 MyTEAM, a free-to-play card-collecting experience that has been downloaded nearly 3 million times since its launch in February. Moreover, NBA 2K24 Arcade edition continues to enjoy huge success on Apple Arcade and is consistently a top 2 game on the service. WWE 2K24, which launched at the end of fiscal 2024, has continued to grow its audience and enhance its profitability. Our teams have driven meaningful engagement through the release of several content packs with more on the way. To date, players have logged 27 million hours of gameplay across more than 200 million matches, featuring a series-high roster of over 300 past and present superstars. On April 4, 2K and Cat Daddy Games released NFL 2K Playmakers, a new free-to-play mobile title that allows fans to collect NFL player cards and assemble an exciting roster of offensive, defensive, and special teams. We're proud to add NFL 2K Playmakers to our ever-expanding mobile portfolio in partnership with the NFL and the NFL Players Association. On April 26, 2K and Hangar 13 launched TopSpin 2K25, marking the return of our popular Tennis franchise after a 13-year hiatus. The title was well-received by critics and fans alike, who praised its authentic tennis experience, deep personalization, and legendary venues. 2K is supporting TopSpin with a series of center core passes that feature iconic courts, brands, and tournaments. During the period, we added to the caliber of our world-class development teams with our acquisition of Gearbox Entertainment. We're thrilled to welcome Randy Pitchford and his studio to the Take-Two and 2K family. We've identified many potential growth opportunities for the Borderlands series and Gearbox's catalog. In addition, tomorrow marks the box office view of the Star-Studded Borderlands feature film from Lions Gate, and we hope that audiences will enjoy experiencing the series vibrant and character-driven world on the big screen. Zynga delivered another solid quarter, including phenomenal performance at peak. Match Factory! is scaling quickly and has established itself as one of Zynga's largest contributors to net bookings. The title is responding well to our investment and user acquisition, reflected in net bookings growth of more than 50% over last quarter. We believe that there are even more growth opportunities ahead as we add new features and updates. Toon Blast delivered strong year-over-year growth for the third consecutive quarter. As the title celebrates its seventh anniversary this month, we're pleased that this has become a top 10 grossing game in the U.S. Apple App Store this quarter and has achieved more than $2.5 billion in lifetime gross bookings. On June 4, Zynga and Lucasfilm Games launched Star Wars: Hunters, the label's first-ever cross-platform title, which is available for free on the Nintendo Switch and iOS and Android devices. Expanding the iconic Star Wars universe with new locations and characters, the competitive battle arena game received a tremendous amount of fanfare from the media and audiences around the globe. Players can look forward to additional content offerings coming soon. Our blended monetization efforts in hypercasual are progressing well at Rollic, which crossed 3.6 billion all-time downloads. Fan-favorite titles Screw Jam and Twisted Tangle both performed well this quarter, becoming top 50 and top 100 grossing games, respectively, in the U.S. Apple App Store. Our direct-to-consumer business continues to grow, and our teams are working actively to add more titles each quarter to this highly accretive owned distribution channel. Looking ahead, Zynga has numerous titles in development and soft launch, including the latest installment in their popular racing franchise CSR Racing 3. In closing, I believe that our talented creative teams and owned portfolio of iconic entertainment franchises are driving both the consistent performance of our company and our potential to achieve unprecedented levels of multiyear growth as we focus on our strategic priorities and embody our core tenets of creativity, innovation, and efficiency. I'm confident that we'll set new benchmarks for our industry and deliver strong returns for our shareholders. I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams for continuing to deliver immersive and engaging entertainment experiences that are strengthening the foundation for our long-term success. Turning to our recent releases and announced offerings for the current year. On July 25, Zynga launched a new puzzle RPG title, Game of Thrones: Legends, which invites players to journey through the magical land of Westeros featuring characters, lore, and storylines from HBO's popular Game of Thrones and House of the Dragon franchises. The game marked the exciting return of Emmy and Golden Globe-nominated actor, Kit Harington to the franchise, who also starred in a marketing campaign set in the title's immersive world. Player reception has been positive, with the title entering the top 10 in the overall free games category on the U.S. Apple App Store and on Google Play in the U.S. 2K and Visual Concepts will once again set new standards of excellence and realism for basketball in our industry with the launch of NBA 2K25. The title officially launches on September 6, and we are excited to offer fans that have pre-ordered the game the ability to play up to 2 days early. Players will be able to forge a dynasty in my career and compete in the new MyTEAM modes. Those on Gen 9 platforms will experience an added sixth era in my NBA, a more dense and interactive city, and the chance to cement their legacy status in the W. We are thrilled that Visual Concepts will release the Gen 9 version of NBA 2K25 for PC, which will provide our passionate community access to our series' most advanced gameplay and stunning graphics. 2K will have more details to share about the game leading up to its launch. In addition, Visual Concepts is currently developing WWE 2K25, which promises to take our successful pro wrestling franchise to new heights when it launches later this fiscal year. Later this month, 2K for Access games will reveal more details about the eagerly anticipated launch of Sid Meier's Civilization VII, a revolutionary new chapter in our epic strategy video game franchise. In this 4X strategy game, players can establish their civilization and construct cities and architectural wonders to expand their territory, conquer or cooperate with rival civilizations, and explore the far reaches of the unknown world. We can't wait for Sid fans around the world to enjoy what promises to be the best title in the series' 30-year history. We also successfully launched a mobile civilization game in China through our partnership with Tencent and are pleased that the title hit #1 on iOS and Android stores at launch. In closing, as we continue to execute upon our strategy, we believe that there are many opportunities that will enable us to deliver a period of significant margin expansion, long-term growth and shareholder returns for Take-Two.

Thanks, Karl, and good afternoon, everyone. We achieved solid first-quarter results by engaging our players with exciting new game releases and content updates while maintaining our focus on efficiency. We continue to have great confidence in our ability to deliver a multiyear period of growth. Our core franchises remain healthy. Our teams are hard at work on the most ambitious development pipeline in our company's history, and we remain focused on new growth opportunities to enhance our business model and financial profile. I'd like to thank our teams for enabling us to captivate millions of players every day and for their unwavering support of our long-term vision. Turning to our results. We delivered first-quarter net bookings of $1.22 billion, which was in line with our guidance range of $1.2 billion to $1.25 billion. Recurrent consumer spending was flat for the period and accounted for 83% of net bookings. Mobile increased mid-single digits, driven by the addition of Match Factory! and growth in Toon Blast, which was partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. Grand Theft Auto Online and NBA 2K were both down. During the quarter, we launched TopSpin 2K25, Rest for the Wicked on Early Access for PC, NFL 2K Playmakers, and Star Wars: Hunters. GAAP net revenue increased 4% to $1.34 billion, while cost of revenue declined 6% to $567 million, and operating expenses increased by 8% to $956 million. On a management basis, operating expenses rose 12% year-over-year which was better than our forecast due to lower R&D and marketing costs. Turning to our guidance, I'll begin with our full fiscal year expectations. Our business is performing well. And as Strauss mentioned, we are reiterating our net bookings outlook range of $5.55 billion to $5.65 billion, which represents 5% growth over fiscal 2024. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, our hypercasual mobile portfolio, Match Factory!, Empires & Puzzles, the Red Dead Redemption series, Sid Meier's Civilization VII, and Words With Friends. We continue to expect recurrent consumer spending growth of approximately 3%, representing 77% of net bookings. Our recurrent consumer spending forecast assumes a high single-digit increase for mobile, driven by Match Factory! and Toon Blast, which are partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. We expect flat results for NBA 2K and declines for Grand Theft Auto Online. We expect the net bookings breakdown from our labels to be roughly 50% Zynga, 32% 2K, 17% Rockstar Games and 1% other. And we forecast our geographic net booking split to be about 60% United States and 40% international. We now expect non-GAAP adjusted unrestricted operating cash flow to be an outflow of $150 million, and we plan to deploy approximately $140 million of capital expenditures primarily for game technology and office build-outs. We expect GAAP net revenue to range from $5.57 billion to $5.67 billion and cost of revenue to range from $2.38 billion to $2.41 billion. The total operating expenses are expected to range from $3.7 billion to $3.72 billion as compared to $5.83 billion last year. On a management basis, we expect operating expense growth of approximately 10% year-over-year. This is largely due to an increase in ongoing marketing support from Match Factory! as well as other mobile and immersive core launches planned for the year. The addition of Gearbox and higher personnel costs, partially offset by savings from our cost reduction program. Excluding incremental marketing and the addition of Gearbox, our operating expenses are expected to grow low single digits over last year. Now moving on to our guidance for the fiscal second quarter. We project net bookings to range from $1.42 billion to $1.47 billion compared to $1.44 billion in the second quarter last year. Our release slate for the quarter includes Game of Thrones: Legends and NBA 2K25. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, our hyper-casual mobile portfolio, Empires & Puzzles, Words With Friends, the Red Dead Redemption series, and Merge Dragons!. We project recurrent consumer spending to increase by approximately 5%, which assumes a low double-digit increase from mobile driven by the addition of Match Factory! and growth in Toon Blast, which are partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. We expect flat results for NBA 2K and a decline for Grand Theft Auto Online. We expect GAAP net revenue to range from $1.29 billion to $1.34 billion. Operating expenses are planned to range from $982 million to $992 million. On a management basis, operating expenses are expected to grow by approximately 27% year-over-year, which is primarily driven by additional marketing from Match Factory! and Game of Thrones: Legends and the addition of Gearbox, partially offset by savings from our cost reduction programs. In closing, we are confident in our ability to deliver a strong multiyear trajectory of growth, driven by our industry-leading talent, our diverse portfolio of iconic owned intellectual properties, and our groundbreaking development pipeline. As we capitalize on our competitive advantages and pursue our strategic priorities, we believe that we will continue to grow our business, enhance our profitability, and deliver long-term value for our shareholders. 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 delivering results consistently that reflect our unique ability to provide the highest quality and most engaging entertainment offerings to our player communities. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

And the first question comes from Doug Creutz with TD Cowen.

Your largest peer just released the college football game that has done exceptionally well, as I'm sure you've seen. Just curious if that's caused any thoughts about potentially adding a college basketball feature to NBA 2K, whether it's a unit-based item or just another mode in the game. It seems like there might be a nice opportunity there.

Thanks for the question, Doug. We have indeed noticed the success with college football, and it's certainly exciting for the industry. We are aware of our history with college basketball and are always listening to our community to see if there is something we could potentially explore in the future. We haven't made any announcements at this time, but we are paying attention.

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

I guess first off, with at least a year or so to go on development of the next GTA, I was just curious if you could sort of outline perhaps generically at this point in the production cycle of a game at scale, what parts of development are left to complete, I guess, are you still in the midst of core development? Are you approaching the testing stage? Any sort of color there, I think would be interesting. And as a follow-up, Lainie, the increase in OpEx guidance for the year, is that more to support marketing new titles? Or was that something related to Gearbox? Any clarification there would be great.

Thanks, Colin. First of all, where we would be in development would be title-specific, so at this stage of the game, it really would vary depending on the title. There's really no cookie-cutter to answer your question. But in any case, it's not the kind of insight that we would give with regard to any specific development that's going on in the company.

And in terms of the increase in OpEx, it's mostly driven by the acquisition of Gearbox and to a lesser extent, higher marketing, personnel, and occupancy expenses.

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

Following up on the previous question, with the recent news of the strikes starting, I noticed reports indicating that ongoing game developments before September will remain unaffected. For some of the earlier projects, how are you managing to adjust your processes to continue making progress? Is there a stage in the development process where you might encounter obstacles?

So look, we deeply value our talent relationships. And historically, we've worked very successfully with all of the unions. We continue to work hard to come to a resolution on this current situation. In fact, we have common ground on 24 out of 25 proposals. So I'm pretty confident that we can get to a deal that will be mutually beneficial. At the same time, we don't expect any impact whatsoever on our titles that are in development. If the strike went on for a very long time, obviously, that would affect us, and that wouldn't be a good situation for the industry, but we're cautiously optimistic that we'll be able to find common ground and that's certainly our goal.

Got you. And then maybe one quick clarification question on the back of that. Is there anything to consider on the expense side related to the strikes, like potential savings from stopping labor? Or is that just something that probably isn't very material?

We certainly don't get any benefit from the situation.

And the next question comes from the line of Drew Crum with Stifel.

So I want to go back to Doug's question on college football as it relates to NBA 2K, Curious if you're seeing anything in terms of leading indicators you track or anticipating any impact on sales from what appears to be now a more crowded sports category. And then, Lainie, just on RCS, it looked like there was a tad off your guidance for fiscal 1Q, but you kept the annual outlook unchanged. Can you just reconcile the two?

Thanks for the question, Drew. In terms of the question about college football, no, we're not expecting. We're not seeing any significant or any impact on our NBA title based on the success of it. Look, we're always competing for the customer's mind share and while across all titles. So I don't necessarily think it's necessarily a sports issue for us, but we're not anticipating any effect on engagement in '25.

And for the RCS full year, it's being driven by Match Factory! and Toon Blast. So that's why we're able to keep the full year forecast.

Which is good news.

Yes. So it's introducing fantastic.

And the next question comes from the line of Benjamin Soff with Deutsche Bank.

I wanted to ask a little bit about Star Wars: Hunters and it seems like the first game of that type that you guys have released since acquiring Zynga. And so does this provide a blueprint to bring more AAA content to mobile? I'm just kind of curious to get your thoughts there.

We are very happy with Star Wars: Hunters; it was a really ambitious title, and the team at Natural Motion has done a great job. The Zynga label is excited to launch this cross-platform title. It's still early to evaluate how it will perform, so it's too soon to tell, but it has made a really good start. I believe this successful development could potentially inform other titles, but each one is unique. As you know, we prefer to focus on intellectual properties that we own.

And then as a quick follow-up, it looks like the outlook for NBA RCS changed a little bit. Just curious if you could drill down into the moving pieces there.

So we had a slight miss in Q1. That was driven by fewer active users in the center this year, which was driven by lower sales of units due to the Gen 8 unit. But when we look at the full year, we expect it overall to be—and a lot of that is driven by NBA 2K24. We still have the same expectations that we did for NBA 2K25 as we did at the beginning of the year.

And the next question comes from the line of Martin Yang with Oppenheimer & Company.

First question regarding your overall view. Can you give us an updated view on your approach to UGC across different franchises? And how are you open to maybe modeling both on PC and console for your future games?

We've been very open-minded, and we certainly are very excited about many things that our users are delivering in their engagement with our titles and other people's titles. Obviously, we're excited about what we see in the modern community for PTA. And we think that's pretty exciting. At the end of the day, payment companies need to bring great entertainment to consumers. That is the starting point. And I'm not a believer that the industry will turn into a UGC-driven industry. However, for certain titles, for example, Roblox, they are really more platforms than they are mutual entertainment titles, and I think at this company, we pride ourselves on making the best entertainment of any sort—and if consumers want to add to that and enhance that for their own use, generally speaking, we would like to enable that behavior, generally speaking, protective of our intellectual property, but we do think that can be a positive addition to the industry. I don't think it will define either our company or the industry, however.

Got it. Another question from Lainie. Can you maybe clarify if the GTA and NBA 2K24 did both franchises grow bookings on a year-over-year basis in the first quarter?

So for the quarter for GTA, we saw some— the title declined for net bookings in RCS. I'm sorry, what was the second that you asked about?

2K24 comparison, 2K23...

Well, I don't have 24 or 23, but in general, NBA 2K declined in the quarter.

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

Strauss, Karl, Lainie, Nicole. Great quarters, guys. Just to Strauss, obviously, a lot of debate on our economic future here near term. Always curious your opinion. But I guess more importantly, just how you're thinking about maybe sort of a darkening macroeconomic picture impact on your business. You already sort of weathered one storm on a mobile live service. Do you feel like you're more resilient if you go into a more challenging environment again? And then number two, it looks like trends in current Gen hardware sales have slowed, and prior Gen is feeling pretty sticky here. Some of that maybe is the macro, some of it maybe just haven't seen the price release trials that we normally do at this point in the cycle. And other pieces, maybe services like GTA still being very strong on prior Gen. So just curious, your view on sort of where we are in the cycle, and what implications it may have for your business. Obviously, it's impacted NBA, but thinking about maybe new software that is more current Gen versus prior Gen, what sort of challenges, opportunities you might have from that situation.

As drawdowns go, it was not a terrible drawdown. The unemployment rate at 4.2% or 4.4% is still very low unemployment; 114,000 jobs or so were added in the period, which is solid. As you know, people have left the workforce, so I'm not particularly worried from one report that we're heading into some kind of consumer recession; I don't see it. Now I'm also not in the business of predicting that sort of thing. But the metrics don't support that. Generally speaking, the entertainment business is pretty resilient in such a situation. Of course, the business is not countercyclical, and in some massive downturn, we would, of course, be negatively affected; but I just don't see that on the horizon. So not a current concern for us, and we're awfully well-positioned. As you know, our industry is back in growth mode; console businesses for software that is up low single digits, mobile's up mid-single digits. So there are tailwinds, and our mobile business is really performing with all these new great titles we referenced today, and we're really excited about our console pipeline as well, which we think will continue to perform. Obviously, we're announcing a quarter where we're right on track with very consistent results that are squarely within or better than guidance and consensus. We've reiterated our guidance for the year, and we've said that we expect tremendous growth in fiscal '26 and '27. So we're about as optimistic as we can be without overstating the case, something that we try really hard not to do. Specifically, with regard to hardware, I saw the same stats that you did, and it looks like if you just measure 4 years in, last time, this time seems to be like there's a bit of slowing. And the report I saw said where we are the pro devices and the like. But everything always changes. Four years ago, PC wasn't anywhere near as meaningful as it is today for console-type releases. That's a big growth market. And no, I don't think what consumers are saying is they're good with Gen 8 and don't care about Gen 9. We saw the exact contrary with regard to NBA 2K where Gen 8 actually was not a high performer and performed worse than we expected; Gen 9 has been incredibly powerful. So I think the Gen 9 platforms will continue to perform. I think you'll continue to see meaningful growth in that installed base. And I wouldn't put too much weight on a particular period of time. I was asked earlier today by someone what's next on the hardware side. And we're not in the hardware business, and I wouldn't even know how to answer that question. But what's next on the entertainment side, on the software side, is we've got a bunch of great titles in market, great live services, and great new titles coming. We have the best pipeline we've ever had, and it's close to coming to fruition; we feel really great about that.

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

Strauss, I wanted to ask you how big is the opportunity for a second soccer simulation game in the market? Whether you would comment on any rumors about 2K acquiring the FIFA license? And what your philosophy is on developing sports games, how long they might take, and what your strength might be in that regard.

Yes, there's a lot there. Look, we're in the software business. We have the #1 mobile software manager title in the top 11. We're really happy that we do. And we're also very mindful that it's incredibly difficult to build a great SIM experience for console. It takes a long time. And that if you do it right, your users are very loyal and very embedded. I would just now with regards to the FIFA license it does not bring along with it; it doesn't come with players, teams, or leagues. So it's not as simple, for example, as negotiating with the NFL or the NBA or MLB, where at most you have to negotiate with a league and a players association. So for anyone who would want to compete in a straight-ahead SIM environment for soccer, you wouldn't just have to address one particular brand license; there's a whole lot more than that. And I think from our point of view, we have a great sports portfolio led by NBA 2K. We have WWE 2K, which is growing and profitable—really robust. We have a superb partner in 2K, a great partner at the NBA with the NBA and the NBA Players Association, with great partners, the NFL and the NFL Players Association. We're in the tennis business, we're in the golf business, and the list goes on; I'm sure we will make more announcements in due course.

The next question comes from the line of Clay Griffin with MoffettNathanson.

Curious on the year-over-year change in advertising net revenue, I suspect that's something to do with the reorientation of the hypercasual business. But Strauss, maybe just talk about what you think advertising can do for your more core portfolio of mobile titles like what you have in peak. And would you prefer to see kind of, I guess, the external sources of demand in advertising there? Or do you think the bigger opportunity is this continued push into direct-to-consumer and really just investing in more of the in-app side?

It really varies title by title. There are certain titles that really aren't built for much advertising; they're really more meant for in-app purchases. There are titles that can be both—and then there are titles that really have to be ad-driven. We have all of those. And we want to make sure that we do offer appropriate ad units where they do make sense, and that has been a very significant area of growth for Zynga since the acquisition, and I think that will continue. What we want to make sure is that we monetize all of the engagement. This is—historically, the mobile business has been one where you monetized a very small part of the engagement. And we don't think that ought to be the case. We think that if consumers engage, there ought to be a way to monetize through advertising through in-app purchases, potentially through both as long as it's a really high-quality experience. I think that's a completely separate topic from a direct-to-consumer offering. And that has been an area of enormous growth for many of our titles. But again, not all of them, obviously, if the title is only ad-driven, that's not a relevant opportunity. We still really value our retail partners for distribution and marketing. We intend to stay in business with them. Our strategy is to be where the consumer is. We don't intend to cut anyone off. We'll try to own 100% of the business. However, when it makes sense to go direct-to-consumer, we will, and that has presented an enormous margin opportunity for us.

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

You pointed to the multiyear ramp in bookings as the pipeline builds in '26 and '27. Lainie, can you remind us how you're thinking about operating leverage and efficiencies alongside the bookings ramp? I recognize you've been going through a period of development and investment, which has impacted margins in recent years. But is it fair to think we can see a return to more historic margin levels amongst your cost initiatives are implemented and these new titles are released?

We're going to do in '26 and '27 when we look at the pipeline and bring it to fruition. We really have been working very hard in terms of reducing our cost structure of the organization and looking at places that we could be more and more efficient. So we have announced a couple of cost-cutting initiatives that we've been doing over the last couple of years and looking at ways to streamline our costs between our corporate departments and our labels, as well as looking for areas that we can continue to improve. Also looking at our pipeline, looking at titles that we think will be the most commercially successful. So we've been doing a lot of that this past year, and we'll see an annualization of those costs in fiscal year '26. So that will improve our margins, and we expect to continue to look for those opportunities in the future, which will continue to improve our margins in '26 and '27 as well.

Our final question comes from Ed Alter with Jefferies.

I noticed the big GTA update this June was right at the end of the quarter where last year it was a few weeks earlier. Could you just talk about how those 2 updates did kind of compare to each other rather than with the arbitrary quarter end?

So we're actually really excited about the summer release for detail online this year, and it was a fantastic result for us. In terms of comparing them directly to the—typically, we don't even really compare the releases. They're all very different. They had—and we have different expectations and they have different deliveries. This was very strong for us, and it certainly helped us exceed our expectations for the quarter. But in terms of giving a direct comparison between this one and the last one, that's not something that we're prepared to do.

Ladies and gentlemen, at this time, we have reached the end of the Q&A session. Now I would like to pass the call back over to Strauss for any closing comments.

I just want to thank our team that delivered these great results, as always. We believe we have the best and most talented creative teams in the business, and we're so grateful that we do, we have a phenomenally talented executive leadership team as well. We have 1,500 colleagues all around the world who work really hard every day in service of delivering the best entertainment to our consumers. That's what they deserve, and that's what we aim to give them. Thank you for joining us today. We're really optimistic about the rest of the year and the years ahead.

And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.