Please standby, we’re about to begin. Good afternoon, everyone. My name is Bo and I will be your conference operator today. At this time, I would like to welcome everyone to the Take-Two Interactive Second Quarter Fiscal Year 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Also, today's call is being recorded. Now at this time, I'll turn things over to Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. Please go ahead, ma'am.

Good afternoon. Thank you for joining our conference call to discuss our results for the second quarter of fiscal year 2025 ended September 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 we delivered strong second quarter results. Our net bookings of $1.47 billion were at the top end of our guidance range, driven by the continued success of the Grand Theft Auto and Borderlands franchises. Our operating results surpassed our plans, largely due to a shift in the timing of marketing expenses within the year. We're reiterating our fiscal 2025 net bookings guidance range of $5.55 billion to $5.65 billion, and we remain confident that we'll achieve sequential increases and record levels of net bookings in fiscal 2026 and 2027. Now turning to our business highlights from the quarter. Sales of Grand Theft Auto V outperformed our expectations and to date, the title has sold more than 205 million units worldwide. Grand Theft Auto Online also exceeded our plans, driven by sustained engagement with the summer content pack Bottom Dollar Bounties and an array of updates, including the new multistage Assault on ATT-16 mode and experience improvements such as a new anti-cheat system for the PC version of Grand Theft Auto Online. Momentum also continued within GTA+, as Rockstar grew its membership by 35% over last year and added the classic title Bully to the library of available games. Red Dead Redemption 2 posted another fantastic quarter. The title has sold more than 67 million units to date and 6 years after its release, still ranks in the top 10 for unit sales globally according to GSD. Rockstar Games was pleased to expand its audience further with the successful launch of Red Dead Redemption and Undead Nightmare for PC on October 29. On September 6, 2K and Visual Concepts launched NBA 2K25, which scored among the highest ratings on new-gen consoles in recent franchise history. Our teams continue to raise the bar for excellence with the addition of 9,000 new pro play animations that provide increased authenticity and all-new dribble engine, representing the biggest technological update in the series' 26-year history and a more interactive and engaging experience in The City. To date, the title has sold in nearly 4.5 million units and achieved phenomenal recurrent consumer spending performance. Compared to NBA 2K24 for the same period last year, NBA 2K25 delivered meaningful double-digit growth in average revenue per user and 40% growth in average gains per user. I'd like to congratulate 2K and Visual Concepts for another stellar launch in our industry-leading NBA franchise. Our catalog also outperformed, led by our immensely popular Borderlands franchise. Now that Gearbox has officially joined the 2K and Take-Two family, we're eager to capitalize on the many potential growth opportunities for Borderlands, Tiny Tina's Wonderlands, and other Gearbox titles. Zynga delivered another quarter of solid results. Match Factory! is scaling rapidly and is on track to become Zynga's second-largest title by the end of this year in terms of projected annual net bookings. The title grew approximately 16% over last quarter, driven by its engaging gameplay, including the recent Star Race Bold B and our strategic investments in user acquisition. Toon Blast is maintaining its fantastic path of growth, with net bookings increasing more than 50% over last year as our teams deploy highly engaging new features, including new single-player and team-based events and social challenges. We're also achieving great results as we apply our learnings to other games in Zynga's portfolio, including Toy Blast. Our blended monetization efforts in hypercasual are advancing well. In particular, Screw Jam remains a top 50 game in the U.S. App Lab store. We're encouraged by the net bookings and profitability milestones that the title has reached and we're optimistic about it going forward. Nordeus released the highly anticipated 2025 edition of our popular soccer manager game, Top Eleven. Backed by a month-long marketing campaign, the release generated positive sentiment around the community which helped solidify the largest in-app purchase spending per active user in the game's 14-year history. During the quarter, Zynga launched Game of Thrones: Legends and we remain excited about the label's future mobile launches, including CSR 3 Street Car Racing. We continue to expand our offerings within our highly accretive direct-to-consumer business. With our current success and new titles on the horizon, we're confident in the future outlook of our mobile business. In closing, we believe that Take-Two remains exceedingly well positioned for the balance of this fiscal year and for the long term. Our vision is clear, our talent is unparalleled and we have one of the strongest portfolios of owned intellectual property in our industry. As we release our pipeline, including many of our industry's most highly anticipated sequels, we expect to deliver leading returns for our shareholders.

Thanks, Strauss. I'd like to thank our teams for consistently executing against our strategy and for positioning our company to deliver the strongest anticipated growth trajectory and multiyear pipeline in our history. Turning to our recent releases and announced games in development. On February 11, 2K and Firaxis Games will launch Sid Meier's Civilization VII, the highly anticipated revolutionary new chapter in our Epic 4X strategy game franchise. 2K has been promoting the title across many key activations, including a developer panel at PacWest and PAX Australia, various community live streams, a first look video series, and developer diaries. Firaxis recently revealed details about their partnership with Ashani Tribe featuring Leader Takumsa, who appears as a playable character. We can't wait for Sid fans around the world to take one more turn and enjoy what promises to be the best title in the series' 33-year history. Later this fiscal year, Visual Concepts will launch WWE 2K25 which promises to take our successful pro wrestling franchise to new heights. 2K will have more to share about the game in the coming months. Looking ahead, we expect fiscal 2026 to be a milestone year as we plan to release several blockbuster titles, including Rockstar Games' Grand Theft Auto VI in the fall of 2025, Borderlands 4, and Mafia: The Old Country. The latter two were unveiled by 2K this past summer at Gamescom, with each announcement featuring a game trailer that received a tremendous reception from their dedicated communities of fans. Rockstar Games also plans to bring the much-requested PlayStation 5 and Xbox Series features of GTA Online to the PC platform in the new year. In addition, we recently made the strategic decision to sell our private division label to focus our resources on growing our core and mobile businesses for the long term. As part of this transaction, the buyer purchased our rights to substantially all of private division's live and unreleased titles. Take-Two will continue to support No Rest for the Wicked, which launched in Early Access on PC in April. We are grateful for the contributions that the private division team has made to our company and are confident that they will continue to achieve success in their new home. In closing, our teams are hard at work on the strongest and most diverse line-up in our company's history. As we deliver exciting new hits and pursue new business opportunities, we believe that we will achieve sustainable profitable growth and shareholder returns.

Thanks, Karl and good afternoon, everyone. We achieved another consecutive quarter of strong results, led by our diversified portfolio of industry-leading intellectual properties. During the period, we delivered exciting new offerings and continued to make great progress advancing our development pipeline, which reinforces our confidence in our outlook for this year and our multiyear growth trajectory. I'd like to thank our teams for their consistent execution and unwavering focus on creativity, innovation and efficiency. Turning to our results; we delivered second quarter net bookings of $1.47 billion, which was at the top of our guidance range of $1.42 billion to $1.47 billion, driven by the strength of the Grand Theft Auto and Borderlands franchises. Recurrent consumer spending rose 6% for the period, which was slightly above our guidance of 5% and accounted for 81% of net bookings. Mobile increased high single digits, driven by the addition of Match Factory! and strong growth in Toon Blast, which was partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. NBA 2K grew low single digits, while Grand Theft Auto Online was relatively flat. During the quarter, we launched NBA 2K25 and Game of Thrones: Legends. GAAP net revenue increased 4% to $1.35 billion, while cost of revenue declined 29% to $625 million, as the prior year included an impairment charge related to acquired intangibles. Operating expenses increased by 7% to $1 billion. On a management basis, operating expenses rose 24% year-over-year. This was favorable to our forecast, largely due to a shift in timing of marketing expenses within the year and drove operating results that were above our prior guidance range. 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 now expect recurrent consumer spending to grow approximately 4%, representing 78% of net bookings. This is up slightly from our prior forecast of 3%, driven by NBA 2K. Our recurrent consumer spending forecast continues to assume a high single-digit increase for mobile, driven by Match Factory! and Toon Blast, partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. NBA 2K is expected to grow low single digits, which is up from our prior forecast of flat, while Grand Theft Auto Online is still expected to decline. We project a net bookings breakdown from our labels to be roughly 51% Zynga, 32% 2K, and 17% Rockstar Games. And we forecast our geographic net bookings split to be about 60% United States and 40% international. Non-GAAP adjusted unrestricted operating cash flow is expected to be an outflow of $150 million which is unchanged from our prior forecast. And we remain on track to deploy approximately $140 million of capital expenditures, primarily for game technology and office build-outs. We continue to expect GAAP net revenue to range from $5.57 billion to $5.67 billion, while we now expect cost of revenue to range from $2.4 billion to $2.42 billion. Total operating expenses are now expected to range from $3.77 billion to $3.79 billion as compared to $5.83 billion last year. On a management basis, we continue to expect operating expense growth of approximately 10% year-over-year. This is largely due to an increase in ongoing marketing support for 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 third quarter. We project net bookings to range from $1.35 billion to $1.4 billion compared to $1.34 billion in the prior year. Our release slate for the quarter includes Red Dead Redemption and Undead Nightmare for PC which launched last week. 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, Words With Friends, and Merge Dragons! We project recurrent consumer spending to increase by approximately 9%, which assumes a low double-digit increase for mobile, driven by the addition of Match Factory! and growth in Toon Blast, partially offset by declines in our hypercasual mobile portfolio and Empires & Puzzles. We expect an increase for NBA 2K and a decline for Grand Theft Auto Online. We expect GAAP net revenue to range from $1.36 billion to $1.41 billion. Operating expenses are planned to range from $913 million to $923 million. On a management basis, operating expenses are expected to grow by approximately 11% year-over-year which is primarily driven by additional marketing for Match Factory! and the addition of Gearbox, partially offset by savings from our cost reduction program. In closing, there are many exciting upcoming catalysts that we believe will enable our company to achieve new record levels of net bookings performance. As we expand our product offerings and grow our scale, we expect to deliver strong operating leverage and robust shareholder value. I'd like to thank you all for your support and look forward to sharing more details on our ground-breaking pipeline in the coming months. Thank you.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for delivering another consecutive quarter of outstanding results that embody our core tenets of creativity, innovation, and efficiency. To our shareholders, I want to express our appreciation for your continued support. We'll now take your questions.

Thank you. We'll go first this afternoon to Doug Creutz at TD Cowen.

Back in May, you had talked about having 7 core titles for the year. And we've got about 5 months to go and I think we've got line of sight on 4 that have either been already launched or we have clear dates on. Those other 3, are they still in the software line-up for the year? Or perhaps they've been moved out? And what kind of impact does that have on your overall guidance?

Labels will provide more detail on the upcoming titles when they're ready to do so. Also keep in mind that while we provided our pipeline expectations for fiscal '25 in May, we do not update our release expectations unless there is a financial reason to do so.

Thank you. We'll go next now to Eric Handler of ROTH Capital.

If you could focus in on mobile a little bit. How much of the growth do you say is specific to your 2 titles that are just doing absolutely great right now? How are you seeing the mobile industry in general doing? Do you feel like there's a lift going on, broadly speaking, that's helping as well as just sort of the strength of the games that you have?

We're really excited about the performance of Match Factory and Toon Blast, which have significantly contributed to our growth in the mobile sector. While they aren't the only factors, they play a major role at this time. Overall, we're feeling optimistic about the mobile industry. We appreciate that consumers are rewarding companies for taking risks and launching new, engaging titles. We're lucky to have one of those titles and hopefully more in the pipeline. We're thrilled about the new titles we've announced, as well as others we haven't yet disclosed. New intellectual property is crucial for the industry, and our commitment to investing in new IP is paying off. This shift has been the biggest change in the mobile industry over the past couple of years and it’s visible across the entire industry, not just with us. We've seen several other significant successes in the market, which is very satisfying. What was the last part of your question?

No, no. It was just about what you're seeing and how you're seeing the industry in general. I wonder if you could just talk about your thoughts on mobile advertising? And with user acquisition, what are you seeing there? And at this point, do you keep using Chartboost or do you need more than just what Chartboost can offer?

So you're referring to customer acquisition rather than monetization, correct?

Correct.

Okay. Yes. So look, we've always used more than Chartboost. So I'd say, working with third parties is something that we have done and will continue to do in the future. We don't rely just on one, and we'd like to spread our business across several. So it's really not just one specific strategy. It's a combination of both, including also our enormous internal database. We are, I would say, a little bit less reliant on third parties than some other of our competitors just based on the fact that we've got such a broad portfolio of mobile games and such an enormous database across all of those games.

Thank you. We go next now to Colin Sebastian at Baird.

I guess a couple of high-level questions for me as well. We've been seeing this trend towards consolidating market share among a fewer number of publishers and games. Obviously, including Take-Two. But there are structural shifts underway in the industry in terms of cost of game development, maybe even changing distribution. So I'd be curious to hear maybe your thoughts of if those forces could perhaps unlock more development, more new IP? Or is it more about optimizing what you already have in terms of core franchises?

Look, this business is beginning to mature. And an emphasis on the beginning. This is going to be the fastest growing part of the entertainment business for some time to come. But in the early stages of maturation, it shouldn't be surprising first that quality standards increase. Consumers always want higher-quality products, and that the big and good get bigger and better, and the bad and small get worse and smaller. And that's just the history of the entertainment business. We're obviously proud of how we've done and we have grown meaningfully in the past 18 years, mostly organically until the acquisition of Zynga in 2022. And obviously, that was a big inorganic step forward as well. Today, we find ourselves the number 2 pure play in the industry worldwide and we think we're incredibly well positioned going forward, first because of our strategy of trying to be the most creative, innovative, and efficient company in the entertainment business. Secondly, because we have this extraordinarily diverse portfolio that covers all bases in the interactive entertainment industry, driven by owned intellectual property. In fact, we're pretty sure we have the best collection of owned intellectual property in the business. We think that's a recipe for success. If we get it right, our earnings power should enable us to grow further. What we've always said is we've used our capital first to support organic growth; secondly, selectively to support accretive inorganic growth; and third, to return capital to the shareholders on favorable terms. I expect that we'll continue to try to do that. Does that mean life gets harder? Yes, it's harder and harder to make big hits. We're so grateful to our creative teams because that's exactly what they focus on every day. We get to do the easy stuff like talk to you all. They have to do the hard stuff, which is make the hits that drive this industry. That gets harder all the time, but it's a challenge that we accept with enthusiasm because it's what drives all of us, even those of us around this table who don't actually make video games day-to-day. Our focus is to serve consumers with the best possible entertainment. Will that become harder, more complex, more expensive despite advances in technology, notably generative AI? Yes, that's the history of the entertainment business. But if you get it right, the opportunity is extraordinary, and we're trying really hard to get it right.

Got it. That's a very helpful perspective. Thanks, Strauss. One quick housekeeping question. The improvement in GTA performance versus being down in Q1, is that timing around the summer? Or I guess, late summer release packs? Or is that sort of more of a broad-based improvement?

I think it's more broad based. The title has been doing extremely well. The engagement is there and strong. We're seeing that coming out of Q2 and we expect to see that through the rest of the year.

Thank you. We go next now to Andrew Marok of Raymond James.

We see a lot of content now coming in fiscal '26 with the announcement of Mafia and Borderlands in addition to GTA VI. So with the commentary about record net bookings results in fiscal '26 and '27, just wondering if there's any sort of color or visibility you can give into kind of those assumptions built into '27 to see growth off of what's already quite a busy content slate in '26?

So let me get this straight. This used to be a company where we didn't mention anything till 4 months before releasing. Now I'm being asked, 'Why can't I have some insight into fiscal 2027?' I mean, I don't remember what I had for breakfast this morning. So I think the answer is, we're really excited about the pipeline. And by giving the color that we've given on fiscal '27, we're making the point that this pipeline is going to be robust and durable, and we take those statements seriously. But no, on this call, I will not be announcing our pipeline for more than 2.5 years from now.

Well, much appreciated. But maybe a smaller question that can get a little bit more granular in the near term here. So saw the addition of that paid gravity ball mode in NBA 2K this year. Seems like a little bit of a new offering, maybe bigger than a micro transaction but smaller than an expansion or a DLC. With what you've seen in gravity ball so far, how are you thinking about that sort of paid game mode concept in other franchises across the portfolio?

I mentioned our three-part strategy and the middle part being innovation and I'm really proud that Visual Concepts and 2K decided to innovate with Gravity Ball, most importantly, creatively. Then secondarily, as a matter of business model. And we've already learned a lot. It's a great little mini game, really terrific. I think consumers really like it. It's too early to say that, okay, our future is paid mini games inside bigger platform type games. But I think it's a reflection of the fact that our creative teams are open-minded and willing to try new things and aren't being precious about the IP that they create. To the contrary, they know consumers want to have fun with it and so they equally need to have fun with it. So it's an exciting development; probably too early to call it a trend.

Thank you. We go next now to Cory Carpenter with JPMorgan.

Hoping you could elaborate a bit on your decision to sell Private Division. And then Lainie, for you, just any color you can give us in terms of how you expect this to impact the P&L?

Look, it's always hard to part with friends and colleagues. That's actually the hardest thing that we have to do occasionally. We're really impressed with what Michael Morris and the team built in Private Division. They brought on board and launched a number of titles over the past several years. Virtually all of them worked out and a couple of them were pretty big breakouts. At the same time, it became clear that our thesis, which is to work with independent developers, bring them into this independently minded division and perhaps create new, huge durable intellectual properties for the company, was going to be challenging at best because the titles, though big, were not big in the context of our core intellectual properties at 2K and Rockstar. Our job really is to focus on making the biggest and best hits for the marketplace. We're not the long tail of a company. We are top 10 hit makers around here. That's who we are on the console side. That's where we are in the mobile side. That is the core of any mature entertainment business, being a top 10 player. Those are the companies that matter, those are the companies that grow, those are the companies with operating margins. So that's what we need to focus on; that became clear. We're really thrilled that we found a great home for Private Division.

And Lainie, any comments on the digital P&L impact from that?

Sure. So the P&L impact this year is immaterial to the bottom line. There's a little bit of effect on the net bookings but we were able to offset that by the strength of the NBA franchise.

Thank you. We go next now to Ed Alter at Jefferies.

NBA 2K received much better reviews this year. However, I understand it has sold 4.5 million units, which is unchanged from the previous year. In your opinion, how do higher review scores for an annual title like this translate to sales in RCS?

I agree. It's great that you acknowledged the improved review scores. The team at Visual Concepts and 2K put in a lot of effort to enhance the game, introducing new modes and opportunities along with bringing back some fan-favorite modes that were missing in previous versions. They worked diligently to ensure an engaging experience. We are seeing a significant increase in player engagement compared to the last game, as well as in recurrent consumer spending. This indicates that when players try the game, they enjoy it, engage deeply, and that drives monetization. The improved scores reflect this engagement, and we are noting positive economic trends. While it’s tempting to focus on unit sales comparisons, it's important to highlight that transitioning to Gen 9 on PC has substantially benefited the PC version. The Gen 9 console market is growing, but the decline in Gen 8 is still impacting us. We anticipate that eventually, this trend will reverse as Gen 9 continues to gain traction and players have more reasons to upgrade from Gen 8.

Yes, great. And just on the hypercasual games, it looks like they're doing incredible. How much of that is from kind of direct revenue that was in the ads monetization strategy? And how much of that is incremental from this new strategy on hypercasual and our purchases?

It's a combination of both. We've previously mentioned that our hyper-hybrid casual businesses are experiencing two key factors. First, our focus on profitability has exerted some downward pressure on revenues overall. Second, our business, which used to rely almost entirely on advertising, is evolving. We now have successful in-app purchases, with games like Screw Jam exemplifying this trend. These games are lasting longer and engaging players more effectively than before. We are open to generating revenue through either in-app purchases or advertising, and what we're witnessing is a blend of both. However, this varies from game to game, as not every game will implement in-app purchases, but the trend is increasingly common.

Thank you. We go next now to Benjamin Soff, Deutsche Bank.

Yes, thanks for the question. I wanted to ask about Borderlands. Can you please break out the contribution from the film? And did you see the benefit to game sales from the film? Would you expect to maybe look at doing that a little bit more in the future, bringing more of your IP to movies or shows? And then for Lainie, I wanted to ask about the shift in timing from ticketing expenses. Is there anything you can add as far as color there?

Thanks for your question. With regard to Borderlands, we don't really need to break out the contribution from the film because while it was economically positive, it wasn't material to our results. Even though the film was disappointing, it actually benefited our catalog sales. So that is a sign that making a movie or a television show based on our very high-quality IP can drive catalog sales and that can be a good thing. All that said, we're really selective. One of the reasons we have been so selective about licensing is we would really prefer that everything that comes out with our brands in it is really, really successful. We can't guarantee that, especially when it's out of our hands. So we have licensed other titles and will continue selectively, with an emphasis on the word selectively.

And the marketing expenses in Q2, that moved out due to timing. It was a combination of some of our release titles and some unreleased titles, but all within the year.

We'll go next now to Mike Hickey of Benchmark.

Congrats on the quarter. I'm curious about the new consoles entering the market, specifically the Pro and the Switch. Broadly speaking, what are your thoughts on these? Do you see any commercial opportunities with your catalog games, possibly with enhanced or special editions for the PS5 Pro? Additionally, do you believe that a Switch 2 would be a more viable platform than its predecessor for your game portfolio? I have a follow-up question.

We don't tend to comment meaningfully on the decisions of the hardware makers except to say that successful platforms benefit the business, and we support successful platforms and we're happy to do so. We don't have any product announcements to make. We don't make those announcements on these calls, as you know, Mike. And with regard to Switch, my view was never count Nintendo out.

Fair enough. I guess the next question is about Project Eagle. You've received some market feedback, and I'm curious about how you're considering that feedback and whether it has influenced the game's development or its release timing.

Look, I couldn't be more proud than I am with the team of 31st Union and what they brought to market, and consumers embraced Ethos and really enjoyed the play test, and we were thrilled to see it in market. The whole point of a play test is to get feedback and to engage the community in helping us make the best possible experience. I know Michael Condrey and the whole team, we're enthused about that feedback and found it really, really useful. So we're off to a great start and it's more to come.

Thank you. We go next now to Arthur Chu of Bank of America.

This is Arthur on for Omar. So it's good to see double-digit growth in average revenue per gamer for NBA. Would you expect the improvement in average monetization to be a greater driver of future growth for this particular franchise compared to, for example, user growth? And I guess, how should we think about some of the different drivers of monetization improvements going forward?

Look, we're optimistic about user growth as well as spending per user, and they're driven by the same thing which is quality. So the quality of the game, the quality of the end game experiences that lead to recurrent consumer spending. As big as this title has been, we still think there's a whole lot more ground to cover and the NBA is making big strides internationally and obviously made new broadcast deals that are very robust. There's every reason to believe that this is a huge growth business going forward and we're thrilled to be in business with the NBA and the NBA Players Association. They are superb partners and support us all the time to the best of their abilities and then some, and we see the results. We keep making a better and better game every year, and the team at Visual Concepts is trying to do just that, then we'll be rewarded with a bigger footprint. Within that footprint, bigger engagement and that will lead to more profitable revenue.

We go next now to Eric Sheridan of Goldman Sachs.

Maybe two, if I could. First, just following up on the last question. Obviously, moving beyond just NBA broadly, any updated views about the way you're thinking about the intersection between sports and gaming as a long-term opportunity and whether that would be an area where incremental capital and incremental investment in the business to grow the IP portfolio over the longer term based on what you were seeing in the market? And then, I know we spoke earlier on the call about the consumer landscape. But in the last year, we've spoken about whether the consumer was receptive or not to new IP as opposed to legacy IP. Have you seen any shifts in consumer behavior with respect to openness to experiment with newer titles as opposed to more legacy titles that might inform some of how you position IP going forward?

I want to make sure I understood your first question. You were asking whether you think there's an opportunity for us to go after our sports portfolio?

Yes. Why they're in the sports portfolio broadly, Strauss.

That's what I thought. And the answer is, sort of, because the biggest sports are obviously baseball, football, basketball, and soccer. We do have other sports entertainment titles, for example, WWE, which is a really important title for us. We have our golf game, which is a phenomenal game. We have a tennis game. We have lots of other titles in the past. We've done boxing and we've done hockey and we've done baseball. But it's the Big 4 that really matter, and that's a pretty competitive space. We're very respectful of how hard it is to compete in those areas as people where we dominate. So I think there's some selective opportunity. But the footprint is big enough now and the growth opportunities are great enough now that even working on what we have gives us plenty to do with plenty of opportunity, leveled by great optimism. In terms of your question about new intellectual property, we're different than a lot of other big companies. It's tempting for a big company to rest on its laurels. We have a lot of intellectual property. We know that if we put out a sequel, it's a lower-risk proposition than new intellectual property. But everything degrades. And even though most of our franchise equals tend to do better than the prior release, and we're really proud of that because that's not standard for the industry. The truth is there is this thing called decay and entropy. It’s a feature of physics and human life and everything that exists on earth. Ultimately, everything does decay, including hit titles. If we're not trying new things and making new intellectual property, to say that we're resting on our laurels really understates it. We're running the risk of burning the furniture to heat the house. That doesn't end well. So we do it, even though it doesn't always succeed. The good news is, frankly, our hit ratios are really high for this industry. They are high in mobile, thanks to our mobile team led by Frank Gibeau, and the recent hits in our mobile division are pretty stellar. We have Match Factory! from Peak. Toon Blast is not new, but it's a huge revitalized success, also from Peak. Many other titles have had great success with Top 11 from Nordeus, and with Screw Jam from Rollic. We have teams delivering new hits all the time in mobile and in console. We're really proud of that. It does mean the risk profile is higher; it does mean that when we get it wrong, and we will get wrong now and then, we take a hit and that affects our operating margins. But in the fullness of time, it's one of the key ways to create durable value. To be clear, if we had not been willing to create new intellectual property when we showed up here 18 years ago when the risk profile of this enterprise was vastly greater than it is today, none of us would be sitting here today and you wouldn't be listening to this call. That's just the fact.

Thank you. We go next now to Clay Griffin with MoffetNathanson.

I'm curious, you guys are talking about how Gen 8 has been sort of pro and con in the sense that it's a long-lived installed base. But harder to execute on some of the things that your teams want to do. I'm curious as we roll the tape forward into fiscal '26 and '27 when some of your key marquee properties are coming out, which I'm sure will be groundbreaking in many respects. Curious if the bifurcation of the Xbox platform becomes a challenge and what the teams are doing to deal with that?

You mean a challenge because Xbox isn't performing as well as PlayStation? Just so I can understand the question.

Well, just that Series S is by design, a lower specked console. Presumably, GTA VI will push a lot of boundaries technically, I would suspect.

Yes. Look, we support the platforms where the consumers are for as long as they're there, and we find a way to support platforms despite different levels of tech. Our labels are really good at that. I'm not really worried. I've never worried about where hardware was going. I've said this many times over the years, because, first of all, I don't worry about things over which I have zero control. Secondly, because I do believe in the audience. The audience is going to show up if you have great properties. We just have to make sure to be on an array of platforms. And if one platform diminishes in value, there's always another one. We're seeing great growth in PC right now, for example. I have been able to view that open formats would continue to grow. PC is an open format. I do think PC will continue to be a more and more important part of the console business going forward, and that isn't complicated for us to support at all. The bottom line is, we are selective about which platforms we support. We make the tech work when we can make it work as long as the audience is big enough to make that worthwhile.

That makes sense. And to that end, I guess, Strauss, maybe update us on the possibility. I know it's a U.S. jurisdictional issue only on a limited basis but just kind of what you're seeing on the Android side from kind of a proper cable third-party app store development, what that might look like over the next couple of years?

I'm sorry, I want to make sure I understand. You're talking about take rates? Or are you talking about the economics or you're talking about the tech?

All of the above. Just your initial thoughts about the potential of having a more vibrant third-party alternative app store in Android, even though the...

That would be good news for us. We support virtually all retailers. We are not beholden only to our own outlets, although we do have our own outlets and that's proven for mobile to be very effective indeed as margin building. But we support all commerce. We won't be where the consumer is. On the economic side, I have been a believer that take rates and distribution costs will continue to decline. There's a lot of evidence that will be the case. We're not counting on it. It's not in our numbers, but we do believe in it.

We go next now to Chris Schoell at UBS.

Lainie, using the midpoint of your guidance range, I believe, implies an acceleration in bookings growth in fiscal 4Q. Can you just help us think through the drivers there? I recognize Civilization is launching but any other drivers you're willing to flag at this stage? And then Strauss, Netflix called out that they learned how big existing games like Grand Theft Auto can be on the platform. Now that you've had some time to digest, what learnings do you take away from that partnership? And I recognize the deal is small overall, but do you see the opportunity to scale such efforts and license other IP going forward?

So for Q4, yes, you're right. We have Civ 7 releasing. We also have our PGA title releasing in the quarter and our WWE title. Last year, we only had our WWE title, so that's a big difference between this year and last year, and it's also a reason why we have more new releases in Q4 which is why there's a bigger quarter in Q4 than Q3.

So we've shown a willingness to license to many other platforms, both because we thought there were good businesses or because they were friends and we wanted to support them, or because we thought it was an interesting experiment. We wouldn't talk publicly about upcoming deals until they're ready to be announced. Typically, they would be announced by our labels. We think very, very highly of Netflix. We value the relationship with them greatly. I think it is pretty important for them to offer a robust array of audio-visual entertainment to their subscribers. That definition has to include interactive entertainment. We think we have the best collection of owned intellectual property in the business. So no surprise that we're in business with them, and we hope to do more business with them.

Thank you. And seeing as there's no further questions at this time. Mr. Zelnick, I'd like to turn things back to you, sir, for any closing comments.

I want to thank our creative colleagues at our labels who make the hits that we have the great pleasure of talking about in meetings like this. I want to thank all of our publishing folks who do a great job at marketing, our distribution team, which is unparalleled. And of course, our corporate team, who's represented here today. We're thrilled with our results, but we know that this is just the beginning of an amazing few years ahead of us. We're excited to be able to share that news with you today. Thank you for joining us. Thanks for your support and happy holidays. It's early but a happy new year to all. We’ll talk after the New Year.

Thank you, Mr. Zelnick. Again, ladies and gentlemen, that will conclude today's Take-Two Interactive second quarter fiscal year 2025 earnings call. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.