Hello and thank you for standing by. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter in fiscal year 2026 Take-Two Interactive Software results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then be number one on your telephone keypad. I would now like to turn the call over to Nicole Shebbins, Senior Vice President, Investor Relations and Corporate Communications. Nicole, please go ahead. Good afternoon.

Thank you for joining our conference call to discuss our results for the fourth quarter in fiscal year 2026 and in March 31, 2026. Today's call will be led by Strauss Delnick, Take-Two's Chairman and Chief Executive Officer, Carl Sladoff, our President, and Lainey 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 gap 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 TakeTwoGames.com. And now I'll turn the call over to Strauss.

Thanks, Nicole. Good afternoon and thank you for joining us today. I'm pleased to report that we concluded fiscal year 2026 with excellent results, including fourth quarter net bookings of $1.58 billion, which was above the high end of our guidance range. Net bookings for the full fiscal year were $6.7 billion, which was approximately $750 million above the initial guidance we provided last May. NBA 2K delivered record net bookings and recurrent consumer spending. Zynga achieved its highest level of net bookings since we acquired the business in 2022. And the Grand Theft Auto series once again exceeded our expectations and continued to drive significant net bookings and deep engagement with its passionate community of players. Fiscal 2027 is poised to be a breakout year for Take-Two, led by the November 19th release of Grand Theft Auto 6, arguably the most anticipated entertainment property of all time, and we're excited that Rockstar Games will start their marketing campaign this summer. Our initial financial outlook for fiscal 2027 includes record net bookings of $8 to $8.2 billion. This reflects meaningful growth over last year, led by the launch of Grand Theft Auto 6, along with a successful execution across our entire portfolio. We expect to sustain this higher level of scale and generate strong cash flows well into the future as we release our robust long-term development pipeline and capitalize on new opportunities across our highly established, multifaceted business. Turning to highlights from the quarter, i'll begin with our fantastic mobile performance toon blast grew approximately 25 year over year as peak introduced new events and features including temple guardians deep quest and refined level experiences match factory continued to perform with players responding positively to its live service execution and a continuous pipeline of player-friendly features such as the collectible album empires and puzzles outpaced our forecast and grew five percent over last year driven by a robust slate of in-game events celebrating the title's ninth anniversary color block jam grew 15 year over year and remains the highest grossing title in rollox history top 11 delivered its strongest quarter ever after 16 years in market driven by superb performance of the Bundesliga and live operations innovation. 2K's mobile offerings posted another solid quarter with WWE Supercard reaching nearly 39 million lifetime downloads, NBA 2K Mobile continuing to expand its audience, NBA 2K26 Arcade Edition maintaining its top five position on the Apple Arcade charts, and NBA 2K All-Star in China growing to nearly 10 million registered users after just one year in market. Our direct-to-consumer channel continues to drive net bookings and margin growth as we integrate additional mobile titles from our portfolio and deepen our relationships with players by reducing payment friction and enhancing the end-to-end user experience, which is generating improvements in conversion and customer loyalty. As the regulatory landscape continues to evolve, we're even more competent in the sustainability and growth profile of this platform. The Grand Theft Auto series continues to outpace expectations significantly and demonstrate incredible momentum leading up to the launch of Grand Theft Auto 6 on November 19th. Recurrent consumer spending grew 5% year over year, with strong engagement in GTA Online, driven by a safe house in the hills, one of the best performing updates in its history. This content offering provided a wide range of community requested features, including mansion properties the return of michael de santa from grand theft auto 5 all new missions vehicles exclusive gta plus benefits and the powerful new rockstar mission creator that allows content creators to make their own gta experiences sales of grand theft auto 5 advanced further with nearly 230 million units sold in to date gta plus continues to see significant growth year-over-year, led by the holiday update and highly attractive monthly benefits, such as the inclusion of NBA 2K26 in its games library. In addition, Rockstar Games Red Dead Redemption 2 achieved its highest level of annual unit sales since its launch year, with over 85 million units sold in to date. During the quarter, our sports offerings also performed well. NBA 2K26 continued to expand its audience to date the title has sold in over 10 million units representing a five percent increase over mba 2k25 for current consumer spending grew 10 as we benefited from higher daily active users and games played per user in keeping with our strategic focus on innovation visual concepts launched season five for mba 2k26 their first ever college themed offering featuring 16 iconic universities, which was welcomed by NBA 2K's vast community and provided a glimpse of what's to come in college basketball for next year and beyond. I'd like to thank our partners at the NBA and the NBA Players Association for their continued engagement and support in our collective mission. On March 13th, 2K and Visual Concepts launched WWE 2K26, which was well-received by critics and consumers alike. Engagement has been excellent, with recurrent consumer spending up 20% year-over-year and more than 85 million matches played, an increase of 7% compared to WWE 2K25. 2K is supporting the title with multiple updates through its ringside pass. I'd like to thank Nick Khan and his team at TKO for their unwavering support and partnership as we continue to evolve this series further for fans of the game. PGA TOUR 2K25 enjoyed a fantastic resurgence. 2K captured an influx of new players and drove strong organic interest by aligning Season 5 with the start of the PGA TOUR season in January and including the title in PlayStation Plus. During the quarter, our consumers played 60 million rounds of golf, representing a 110% increase over the third quarter. 2K will support the franchise throughout the year with several more content updates. In closing, we're incredibly excited by the promise of our future – for our players, our organization, and our shareholders. This year has the opportunity to be a major inflection point for our company, defined by groundbreaking entertainment experiences, creative and operational excellence, and record net bookings. With our flexible balance sheet, our strong cash position, and our expectation that we'll generate over $1 billion in operating cash flow this fiscal year, we believe that we're extraordinarily well positioned to take measured creative risks, to pursue accretive M&A, and to invest in technology that will unlock greater creative capabilities and operational efficiencies across our organization. I'm immensely proud of our teams and exceedingly optimistic that we'll continue to drive greater success and shareholder value for the long term. I'll

now turn the call over to Carl. Thanks, Strauss. I'd like to thank our teams for another strong quarter and for laying the groundwork for an exciting chapter in our company's history. We are extremely optimistic about our upcoming pipeline, which includes 29 titles through fiscal 2029. In the interest of precision, we are now only counting mobile games in our pipeline that have been specifically scheduled for worldwide launch within the three-year window. Our teams continue to develop and test many new titles not reflected in this outlook, some of which may be added to our multi-year count. Fiscal 2027 is set to be a milestone year, led by the launch of Grand Theft Auto 6 on November 19. We plan to release six additional titles during the fiscal year, including two mobile titles, three sports titles, which are NBA 2K27, PGA Tour 2K27, and WWE 2K27, and one platform extension. Our labels will also continue to provide new content and experiences that drive engagement and recurring consumer spending across many of our previously released titles. Looking ahead, we currently expect to deliver 22 titles throughout fiscal 2028 and 2029, including one mobile title, five sports titles, three core new IPs, and 13 core existing IPs, which include seven sequels and six remakes, remasters, and platform extensions. We look forward to sharing more about our groundbreaking pipeline, which we believe will drive a new period of growth and long-term returns for our shareholders. I'll now turn the call over to Lainey.

Thanks, Carl, and good afternoon, everyone. Fiscal 2026 was an exceptional year for Take-Two, as we achieved record net bookings and operating performance. Each of our labels significantly outperformed the initial forecast we provided last May, as our teams maintained their focus on product innovation and delivering the highest levels of quality and value. I'd like to thank our teams for their passion and dedication as we embark on this milestone year marked by the highly anticipated release of Grand Theft Auto 6 and strength across our core businesses. Turning to our results, we delivered fourth quarter netbookings of $1.58 billion, dollars which was above the high end of our guidance range of 1.51 to 1.56 billion dollars this reflected better than expected performance from the grand theft auto series several mobile titles and the red dead redemption series the current consumer spending growth was strong increasing seven percent over last year and accounting for 82 of net bookings this included seven percent growth for mobile and five percent growth for grand theft auto online both of which surpassed our expectations. NBA 2K increased 10%, which represented one of the strongest fourth quarters in franchise history, but was softer than anticipated as trends moderated from the extreme growth we achieved during the second and third quarters of the year. During the quarter, we launched Sid Meier Civilization 7 for Apple Arcade, VGA Tour 2K25 for Switch 2, and WWE 2K26. Gap net revenue increased 6% to $1.68 billion, while cost of revenue declined 5%, $741 million. Operating expenses decreased significantly to $928 million, as last year included a $3.6 billion impairment expense related to goodwill and acquired intangible assets. On a management basis, operating expenses declined 2% year-over-year, which was favorable to our guidance due to lower marketing expenditures, some of which shifted out of the period. For fiscal 2026, we achieved net bookings of $6.72 billion, which was above the high end of our guidance range of $6.65 to $6.7 billion. Recurrent consumer spending grew 17% and accounted for 78% of net bookings. MBA2K grew over 30%, mobile increased 13%, and Grand Theft Auto Online increased 6%, all sharply exceeding our initial May guidance. Operating cash flow was $624 million compared to our forecast of $450 million, reflecting our fantastic fourth quarter. We spent approximately $163 million in capital expenditures, which due to timing is favorable to our forecast. Gap net revenue rose 18% to $6.65 billion and cost of revenue increased 11% to $2.8 billion. Operating expenses decreased significantly to $3.9 billion due to the impairment charges that I mentioned previously from last year's fourth quarter. On a management basis, operating expenses rose 7% year-over-year, which represented strong leverage over the prior year. Today, we are providing our initial outlook for fiscal 2027. We project netbookings to range from $8 billion to $8.2 billion, which reflects approximately 20% growth over fiscal 2026, primarily due to the launch of Grand Theft Auto 6 on November 19th, along with successful execution across our entire portfolio. The largest contributors to net bookings are expected to be the Grand Theft Auto series, NBA 2K, Tomb Blast, MASH Factory, Empires and Puzzles, the Red Dead Redemption series, Words with Friends, Color Block Jam, and Zinger Poker. We expect recurrent consumer spending to be flat to fiscal 2026 and to represent 65% of net bookings. Our recurrent consumer spending forecast assumes NBA 2K is up high single digits, the Grand Theft Auto Series is up, and mobile is down, due to last year's success of Colorblock Jam and our assumption that trends will moderate for several of Zynga's mature mobile titles. We expect the net bookings breakdown from our labels to be roughly 36% Rockstar Games, 35% Zynga, and 29% 2K. We are forecasting operating cash flow in excess of $1 billion, and we expect to be in a net cash position by the end of the fiscal year. We plan to deploy approximately $200 million of capital expenditures for game technology and office build-outs. We expect gap net revenue to range from $7.9 to $8.1 billion and cost of revenue to range from $3.5 to $3.62 billion. Our total operating expenses are expected to range from $4.18 to $4.2 billion. On a management basis, we expect operating expense growth of approximately 8% year-over-year, which represents significant leverage over fiscal 2026. This growth is largely due to higher marketing expense to support the launch of Grand Theft Auto 6 and our new mobile releases, as well as higher R&D costs. Now moving on to our guidance for the fiscal first quarter. We project netbookings to range from $1.32 to $1.37 billion, compared to $1.42 billion in the first quarter last year. The largest contributors to netbookings are expected to be NBA 2K, the Grand Theft Auto series, Tomb Blast, Match Factory, Empires and Puzzles, the Red Dead Redemption series, Color Black Jam, Words with Friends, and Zynga Poker. We project with current consumer spending to decline by approximately 3%, which assumes high single-digit growth for NBA 2K and declines for mobile and the Grand Theft Auto series. We expect GapNet revenue to range from $1.45 to $1.5 billion and costs of revenue to range from $578 to $594 million. dollars. Operating expenses are planned to range from 926 to 936 million dollars. On a management basis, operating expenses are expected to grow by approximately three percent year-over-year, primarily driven by a modest increase in personnel costs. In closing, fiscal 2027 will introduce a new level of operating performance, which we expect to sustain well into the future, driven by a robust pipeline and expansion opportunities across our core franchises. With our focus on incorporating new technologies and tools, we feel confident in our ability to scale our business, generate operational efficiencies, and leverage the power of our balance sheet, which we believe will drive long-term shareholder returns. Thank you. I'll now turn the call back to Strauss. Thanks, Lainey and Karl. On behalf of

our entire management team, I'd like to thank our colleagues around the world for their commitment to excellence and to our strategy of being the most creative, the most innovative, and the most efficient company in the entertainment industry to our shareholders i want to express our appreciation for your continued support we'll now take your questions operator at this time if you would like

to ask a question press star sending number one on your telephone keypad to withdraw your question simply press star one again we will pause for just a moment to compile the q a roster Your first question comes from the line of Eric Handler with Roth Capital Partners. Please go ahead.

Good afternoon. Thanks for the question. Laney, just a couple things within the guidance. Looks like, at least on a non-GAAP basis, your operating expenses are looking, let's call it for round number purposes, about $3.8 billion. That's a $300 million incremental increase on a year-over-year basis how much of that is due to marketing and when you look at sort of like the trend for the next couple years for gna and r d what do those trajectories look like i assume they'll be much

smaller than revenue growth yes that's correct um so we expect to have a lot of leverage over the next couple of years as we continue to scale the business and for the 300 million higher for this coming year. About half of that is for selling and marketing expenses for the entire company as we have significant marketing for our entire pipeline of titles that are coming out this

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

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

Yeah, I think you're asking, though, what do we expect will happen with recurrent consumer spending regarding GTA Online? And look, I think to say that everyone has been pleased by the ongoing trajectory of GTA Online, Red Dead Online, the sales of GTA 5, the sales of Red Dead would be a great understatement. These titles have proven to be vastly more resilient than anyone expected, and I think it's a reflection of the quality of the work that Rockstar has done, despite the fact that Grand Theft Auto V has now been in market for three console generations. It continues to sell. It's now up to 230 million units. Red Dead is up to 85 million units. So, you know, we're so extraordinarily pleased with how Rockstar's titles have performed. it's difficult to know exactly how Grand Theft Auto Online will do after the release of Grand Theft Auto 6, but certainly it will stay in market, and certainly there are many, many consumers who

love the title. Thank you. Very helpful. Your next question comes from the line of Colin Sebastian with Baird. Please go ahead. Thanks. Congratulations on the year. I have a couple

questions as well. I guess, first off, as cash flow and flux per the guidance for the coming fiscal year, how are you guys thinking of returning to share? So, you know, this will sound

boringly consistent with our answer to this question. It's the same as it has been for as long as we've been in the position of having positive cash flow and positive cash balances. There are three uses of our capital here. First, to support organic growth. This company's story has largely been an organic growth story. And we certainly have expectations for organic growth in fiscal 27. And we believe that fiscal 27 is setting a new benchmark, a new standard for this company going forward. That's all organic. But as you can see from our numbers, we have to invest to be in a position where we can grow in that way. And our balance sheet and our P&L allows us to do just that. Well, that'll continue. The second use of our capital is very selectively when it makes strategic sense, and let me emphasize this, when it's a creative, we are willing to engage in inorganic opportunities. The most recent meaningful one was, of course, the acquisition of Zynga in 2022 for $9.7 billion in cash and stock, and then more recently, the acquisition of Gearbox. And so I'm proud to say that all of our acquisitions have turned out to be accretive and successful over nearly a two-decade period. That's pretty breathtaking for corporations, not generally the case. And I think that's because we're immensely disciplined. You're not going to see us doing deals hand over fist, but assuming our balance sheet continues to improve, I think you could imagine more inorganic growth in the future as well. And we've already said in this release today that we expect to be in the net cash position by the end of the fiscal year. And finally, we return capital to the shareholders when it makes sense. So far, we've done that through share buybacks, and they are opportunistic. We believe that share buybacks make sense for our shareholders when they are executed at deep value. Our last buyback was done at $158 a share. We'll see how the stock opens tomorrow, but I think no matter what, But that was a pretty good plan on our side. So like all stocks, they move around different price points. Our stock traded down as low as, I think, 195 in the last six weeks. And there is an opportunity to return capital to the shareholders when it makes sense.

Thanks for the reminder on those, Strauss. I guess maybe as a follow-up and maybe some of the structural issues in the industry, including sales of current-gen consoles. I'm just curious how that impacts, you know, your thinking or your assumptions in terms of establishing pricing for titles like GTA 6.

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

The install base of hardware may not be as high in this current console generation as it might otherwise have been. You know, certainly value price points have done well versus premium pricing.

Look, when we look at pricing, I would not say we look at it in the context of the install base. We absolutely look at pricing in the context of the property itself. And so what we want to do in every situation, whether that's console, mobile, PC, front line or catalog, is deliver to the consumer vastly more entertainment value than what we charge. We want the consumer to have a great experience. And we think a consumer experience is the intersection of what you get and what you pay for it. And probably a great example of that is Mafia, the old country, which is a terrific title. But it's not, you know, it's not a 100-hour experience, not a 50-hour experience. And so we priced the title at $50, and consumers were thrilled, and we had a massive hit on our hands. I suspect we could have priced it at a higher level. We wanted to make sure that consumers loved it, and part of loving something is feeling good about what you pay for it.

Your next question comes from the line of Doug Kreutz with TD Cohen. Please go ahead.

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

mobile launches within that guide? Thank you. So it's a very fair question. We had a great year at Zynga, and I think it's more the way you characterized it, which is we're not prepared to guide to, you know, continually beating expectations materially at any business unit. So we do guide as we see it, you know, and this is how we see it. However, as you said, it is a reflection of the fact that some titles that were newer last year are older this year. Now, all that said, you know, Toon Blast was up 25% and it's a very old title. So we do have opportunities to exceed our expectations. now and then. But this is our best estimate sitting here today. As far as our expectations around new launches, in the mobile side particularly, we never anticipate huge numbers because it's just impossible to do so. Hit ratios are just too low. So our guidance would typically reflect our expectations around the marketing spend in the year because we would never guide around doing something silly you know in the mobile business if you're if you're getting bad immediate results from a marketing expense you stop doing it and our dev costs are pretty manageable in the mobile world so i would say um unlike say console where you know you have a big release i'm not going to give you the example you want so we have basketball coming up like you know we know how many units it sold so far 10 million units sold in today we know the prior year the year before that we have a sense of the market like we can estimate that pretty well within a band but with mobile we just don't have the ability to do that so I think if it is um you you correctly intuited that our mobile numbers would not include an expectation for some massive new release yet

very helpful thank you your next question comes from the line of Corey Carpenter with JP Morgan

please go ahead good afternoon I had two questions on NBA 2k uh clearly you know I think record year for the franchise this year, but hoping you could expand a bit on the trends you saw in the quarter. I think they moderated, you said, in the prepared remarks a little more than you'd expected. So what did you see there? And then, Carl, maybe could you talk a bit about the engagement that you saw with the initial college basketball rollout? Thank you. So for NBA, this is one

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

about our college release for season five. I would describe it at this point as it's a taste of what's to come. We did a deal that featured 16 universities. It's basically validated our expectations and the opportunity that we think would be very meaningful for us going forward. So the short answer is stay tuned. It's very exciting for us, and we're very happy how things

have turned out so far. And maybe as a follow-up, Strauss, on the last earnings call, Google Genie had just launched in beta. There's been some conversations more recently around the ability for AI to perhaps create GTA 6 in a couple of months. I know this is a bit of a generic high-level question you've touched on before, but just given this remains a pretty big debate among investors, I thought it'd be helpful to hear your latest views just around what you're seeing in AI and how you expect it to change the gaming industry in Take-Two in particular.

We remain enormously optimistic. Technology helped build this company. Video games are created largely inside computers and always have them. When I started the video game business in 1993, we were making 32-bit games, and they certainly didn't look anything like they do today, and that's all driven by tech. I think the sort of confusion surrounds a belief that somehow more efficient asset creation puts us at some disadvantage or creates a competitive advantage for someone else, and I just don't believe that's the case. to the extent that technology allows anyone to do a better job in asset creation naturally will avail ourselves of the same technology. If you take a look at the tech in market that is currently licensed for the creation of video games, it's licensed broadly. No one exclusively licenses technology for video games. So if a competitor has access to AI and that allows someone to do something better quicker um cheaper then we would have access to the same thing the second point that i've made that i would you know i would stand behind is um uh is that the um asset creation is not the same as hit creation so you know the entire story around the gemini release was wow you can create assets that look like video games more easily than you could before i hope that's true because that'll benefit us naturally you know we have three-part strategy be the most creative be the most innovative be the most efficient seems to me that even if it doesn't help with creativity it certainly should help with efficiency and innovation so that could that could be thrilling but we do have to remind ourselves asset creation is not the same as hit creation and the best example of that is you know there are thousands of new mobile releases a year but there's a handful of new mobile hits a year and we make some of them um despite the fact that everyone has access to the same tech because everyone licenses exactly the same underlying technology for the creation of mobile titles as we do like so um i i remain highly optimistic now i'll give you a real world example i was visiting one of our studios and um they showed me some advertisements that they were putting together to advertise their games and these were live action ads um and they were funny and cute 15 to 30 second ad units that you've seen a zillion times um and uh they were all created with ai licensed ai legal ai and um the script was done in-house for free well by you know people colleagues or company already and the software was used as software was used the entire cost of making the spot was zero and previously we hired third-party companies to actually create those with human beings, and those spots could cost $25,000, $50,000, $100,000. Now, please note, not only were we not interested in reducing our headcount to make this happen, we didn't have the opportunity to reduce our headcount to make this happen. The entire marketing team at this particular studio is two people. They're doing a great job. But what AI has allowed them to do is be more efficient, make great stuff, and do it cheaper. And this is all a benefit to our company. Thank you.

Your next question comes from the line of Chris Shull with UBS. Please go ahead.

Great. Strauss, I believe it was a few quarters ago you mentioned your expectations for GTA 6 continue to increase. Any updates you can provide on your general expectations and levels of confidence for the franchise based on the indicators you have at this point? And how do you expect that this title will perform relative to GTA 5? and that Laney, maybe I know there's a lot of noise to margins this year with the marketing and the software Amort, but I believe I heard you said there's a lot of leverage over the next few years, but can you just remind us how you're thinking about the ability to return to the historic margin levels that Take-Two used to see? Thank you. You know, I don't recall the comment

you alluded to. I'm pretty much, I think I've always said the same thing, which is, you know, we're all, how could we not be? We're all extraordinarily excited about what Rockstar on games is working on we're all incredibly enthusiastic about the upcoming release and equally you know this is a management team that never claims success before it occurs and i'm pretty sure that every time we've had the luxury of having a conversation about an upcoming release that looked good i've said you know we absolutely never opine on how high is up we certainly work toward the best result and hope for the best result but you know that that is out of our hands. What's in the hands of Rockstar from a development point of view and a marketing point of view is trying to make the best entertainment property they possibly can and then bringing it effectively to consumers all over the world. That's what we aim to do and we

do feel really, really good about it. Margin improvement remains a key priority in our financial strategy, but we recognize that margins will fluctuate over time based on a variety of factors. In fiscal 2027, we're reaching a new level of operating performance, which we expect to sustain well into the future, driven by a robust pipeline and expansion opportunities across our core franchises. So as we operate at this new level and generate operational efficiencies through reduction efforts and leveraging new technologies, including AI, we aim to enhance our margin profile over time. So if you think about our operating expense leverage, it represents our largest opportunity, which we believe we can achieve as we grow our scale both organically and inorganically. We've mentioned previously that gross margins of many of our titles are affected by the increasing cost of development. So we've been making many structural improvements, including the driving efficiencies and reducing expenses. So you've seen some of that coming through the P&L in the last couple of years and the leverage we've seen in the last year in terms of our operating expenses also the d2c efforts in mobile that's also working towards improving our margins so this was a year where we scaled the business meaningfully and we achieved strong leverage on our expense structure so we'll continue to do that

as we look into the future thank you your next question comes from the line of andrew marrock

with raymond james please go ahead hi thanks for taking my questions um maybe one on the rockstar mission creator i know strauss called that out in the uh in the prepared remarks as an interesting factor i guess are there any learnings from the early days of that and some of the recent missions that were created as you look to scale ugc and some of your rockstar properties and then

i have a follow-up look um we're trying to meet players where they are and to the extent that people want to have a hand in creation there are numerous opportunities for them to do so So, you know, I just think it's incredibly exciting and our company embraces these advances. So, you know, we're not precious about what we do here. We're open-minded. Another example of that is the 5M business, you know, where this started as sort of a business that was outside of our four walls. And, you know, and now it's a business that's inside our four walls. And we're thrilled that it is.

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

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

Your next question comes from the line of Matthew Kost with Morgan Stanley. Please go ahead.

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

discussing and then I have one follow-up thank you it reminds me of my SATs it's box d all of the

above okay your next question comes from the line of James Heaney with Jeffries please go ahead

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

after the initial launch. Thanks. Well, actually very different. So Tomb Blast has been around for a really long time. Match Factory is relatively new. So So Match Factory last year was still in growth mode and we projected that it would moderate and we'll see what actually happens. Tomb Blast is a legacy title and with regards to Tomb Blast, what you're seeing is a title where the consumers who are involved are getting more and more involved and that's a reflection of the content that Peak is putting into the game and offers that are made to consumers. So basically, with regard to the legacy title, where you may not have a sharp growth curve on DAUs, you will have an effort to actually serve the consumers we have much more effectively. And I think that's what you're seeing in Tombless. Match Factory is still in pretty steep early. It's not that old a title. So they're very different. We need to have, you know, we need to be muscular in both areas. We need to be able to, you know, to run our live services businesses really well for a long, long time. And Zynga does a phenomenal job at that. But by the way, you know, so does Rockstar, right? GTA Online is a live services business. It's 13 years old. That online is a, you know, legacy live services business. So NBA 2K Online is a live services business. And we have to do everything well here. It's what makes this place an exciting place to work. You know, we've got a pipeline of frontline titles. We've got to turn them into hits. We don't always succeed, but we have to try. You know, we have a live services business that I just mentioned. We have to optimize those across both mobile console and PC. And then, of course, we have a catalog. And when you add it all up and we do a good job across the board, you get the kind of year that we got last year. And we now expect to make a meaningful step up, you know, obviously driven largely by the launch of GTA 6, but also driven by performance of the rest of the business. And then we expect to set that as a new base from which to grow. and that's a reflection of firing on all cylinders undoubtedly we'll have some lapses along the way we don't know where the lapses will be but you know if history is any guide we'll also have some some titles that will meaningfully beat expectations going forward and part of our three-part strategy of being the most creative the most innovative and the most efficient is indeed to be the most innovative and if you look at the history of the company you know we've been a leader in innovations whether that's cross developing development or marketing and i i I have no doubt in the coming years, we'll be able to innovate further. And I don't know exactly what form that will take, but I would just note that this company doesn't look anything like it did 19 years ago, despite still being in the interactive entertainment business. Lots of what we do here didn't even exist back then. And this industry, never mind the company, is still on a sharp growth curve in terms of its cohort of engaged consumers and the opportunities to do new things and bring those new things to people in new ways.

Helpful context.

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

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

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

Understood. Thank you for that, Collar.

Your next question comes from the line of Alec Brundelow with Wells Fargo. Please go ahead.

Yeah, hey, thanks so much for the question. I appreciate it. I think I want to maybe try to ask Collin and Sebastian's question in a little bit of a different way. I think that there's been a lot of conversations in the industry over the last several months about the growth of Roblox, the growth of lower priced games on Steam and the $10 to $20 price point. It seems like it's mostly driven by younger gamers. I mean, obviously, Take-Two doesn't participate meaningfully in those categories. You have a couple of lower priced games, but that's the other range like Mafia. I think the question is, like, what is the level of confidence that the newer cohort of gamers will graduate into more premium AAA experiences over time? Like, I think the question is, like, is the young person that's playing Roblox, are they going to want to play $80 Grand Theft Auto 6 when they grow up? Or might they be habituated on to lower fidelity titles? Any thoughts there would be helpful?

So, actually, it's the contrary. when entertainment properties are aimed at children you know I don't know if you have children but right around the age of like 10 or 11 they do not want to be children anymore they want to be teenagers and so one of the issues and this is not by way of being critical of anyone else in the industry but one of the issues with children's programming whether that's linear entertainment or interactive entertainment is that you know children reach a certain point they don't want to be engaged with kids programming anymore even if it's appealing to them so it's not that a certain kind of kids oriented interactive entertainment is necessarily a feeder to what we do in certain parts of this company remember we also do make plenty of entertainment around here that's available for all audiences but with regard to our m-rated titles it's not necessarily the case that something else is a feeder to it it's it's a different business But it is a business that is only available if you're 17 or above. And I think if you engage with interactive entertainment and you're 17 or above, it's very difficult for me to imagine that you wouldn't be incredibly interested in RM-rated titles, specifically one that is coming up.

Perfect. Thanks so much.

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

Thanks so much for taking the question. Maybe building on two of these topics we've talked about on the call so far, with respect to mobile advertising and building additional optimization around user acquisition, how do you think about the signals as more mobile advertising becomes driven by AI and machine learning with respect to either being able to deploy more dollars at a higher return on ad spend or possibly becoming more efficient with respect to advertising? And if possible, I have a quick follow-up.

well we certainly try to do that you know we work with app plugin and uh and we are trying to optimize uh of course our return on ad spend um and and sometimes things are going really well in the market other times we're frustrated in the market depending on on what's going on um there have been moments for example when we really couldn't get out there and spend because you know we didn't we could not find inventory at a price that made sense there are other times when we can do that that changes it's our job to make sure that we understand the payback period on what we're spending and we have very tight guidelines about that um and but you have to be on top of it all the time because when you spend money in mobile as you know you're you're spending it based on an expectation and you'll earn it back over a period of time that expectation is based on prior history but prior history isn't always um dispositive with regard to what happens in the future. So we are constantly on a daily basis tuning up our models that will inform how we spend money on user acquisition. As I said, sometimes it's greater, sometimes it's lower. We also have this weird anomaly, which I'm sure you're aware of, which is if we're out of the UA business for a period of time because we don't like it, of course we make more money because there's no UA that's spent that comes back the same day in its entirety. Sometimes you get a really quick payback period. We have experiences where the payback period has been as quick as 90 days. And I don't think we talk publicly about our expectations around the payback period in general. But let's just say I think we're more conservative than most. To answer your question, are there new opportunities to be more efficient in this area? Yes, I believe so. And of course, it's not lost on anyone that after Apple changed their attribution characteristics, the entire industry was challenged. But you can see from our own results with Zynga last year that we have surmounted those challenges and we feel pretty good about how the business operates now great and if i could

just ask one more um with respect to your approach to go to market with dtc any new learnings about what the opportunity set might look like or the ceiling of that opportunity might be to grow uh the percentage of mix from dtc over time thanks so much but look i've been saying for a long time

that i thought sort of the competitive landscape and the regulatory landscape would be favorable with regard to our overall distribution cost and taking as part of our overall distribution cost our D2C cost, which is materially lower than third-party cost, but multiplied by the share of market related to DTC. And we have said that that share has been growing. We have not talked about what percent it is or where it's going. What we want to make sure, though, is two things. Number one, we want to be where the consumer is. The goal of this company is not to control distribution the goal of this company is to make hits and bring them to consumers wherever they are however they want them and of course to do so on economic terms we value our third-party retailers greatly we especially value them when they provide marketing opportunities for us and we understand that there's a value in the marketing that third-party retailers can provide and that would intersect with how much they charge us for access to their consumers so the more value a third-party retailer provides to us from a marketing point of view, the more comfortable we are working with them. At the same time, there is a role for direct-to-consumer opportunities.

For us, it's all of the above. Your next question comes from the line of Mike Hickey with StoneX.

Please go ahead. Hey, Strauss, Carl, Laney, Nicole. Congrats, guys. A great year and a great guide. Very exciting. Just two questions, Strauss. First, I think you referenced before being astonished by Rockstar's marketing creativity. Clearly, they've got precedent there. Can you talk, I guess, philosophically about how Rockstar thinks about building anticipation for a game launch of this scale and how beneficial that marketing effort can be in terms of sustaining or even building demand for around the current GTA ecosystem, and if that ancillary benefit is baked into your guidance.

Well, look, thanks for the question. You know, I'm obviously not going to go into detail. What we've said about marketing GTA 6 is that marketing will start this summer. And as you know, you know, any information around releases and marketing comes from our labels, and that shouldn't be news to you. that said um is there do we see in any release no matter how highly anticipated it is both the need to market the title and the opportunity in marketing the title we do and um you know i was i was asked about this earlier and i because i absolutely refuse to use a title of ours as an example i use someone else's and i said so there's a you know a new release of mission impossible and it's starring tom cruise like we all know what that looks like and i for one i'm going to see that movie like i'm gonna see that movie but um paramount still spends a whole lot of money to market that to make sure that people know it's out and it's great and it's worth seeing and i think that's the story of the entertainment business so you know i i don't think there's any situation where one can expect to have a massive hit and not engage heavily in the marketing and you know i think that will be true for this company across the board and i think again across the board actually i think i think this company does spectacular marketing and you know whatever we did last year we got to do better this year whenever we do this year we're going to do better next year we demand it of ourselves and frankly the market demands it of us nice the um on ai

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

I think that everyone is bought into the possibilities of new technology. and I think there are times when some of my colleagues think I'm too conservative on the topic. I've actually never been accused internally of going too fast or doing crazy stuff. I think I probably err on the side of being a little more conservative. Think about it. The people who are on the front lines of developing here are absolute experts in software, in art, and video games. And the way they got the job to work at a company like this is because they were on the front lines and because they were innovating and they were highly creative and because they were efficient. So you have to assume that they're going to be the first people to embrace new technology that allows them to do a better job. That said, we're known for making these beautiful handcrafted titles around here. And any technology that we use, I think, will be in the hands of immensely creative people and will take the form of handcraft. Our art is created in computers. It always has been. But our art is created by human beings using computers. And I believe that

will continue to be the case. Thanks, guys. Your next question comes from the line of Brian Pitts

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

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

Your next question comes from the line of Ron Song with Wolf Research. Please go ahead.

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

thanks so we're incredibly proud of um nba 2k's fiscal 2026 record-breaking results and we're applying the successful learnings to our strategy for this year including within nba 2k 27 and while fiscal 2026 set records, we have a consistent track record of delivering strong, sustainable RCS growth and are confident in doing so in fiscal 2027. So, you know, when VC looks at the game each year, they just do not, you know, sort of rest on their laurels. They continue to make this game bigger and better every year. And we've seen that time and time again. Your next question comes from

the line of Martin Yang with Oppenheimer. Please go ahead. Hi, thank you for taking my question.

I have one question on mobile. Zynga has meaningful presence in Turkey with Rolik and Peek, and you made a comment on whether those studios have benefited from the local government policy that favors developers that was released this year.

So obviously we've had a lot of great success in the Turkish market from a development perspective. Some of our biggest and best titles in our studios are in Turkey. We have a fantastic relationship with our developers there, and we love being in that environment. In terms of sort of the government influence, government opportunities, to the extent that there are opportunities available in any jurisdiction where we operate, we would take advantage of those as much as we possibly can. And local jurisdictions are very important business partners to us, and it's something that we take very seriously because it's an opportunity.

It's not only good for us, but it's also good for the local markets.

Thanks, Carl.

Your next question comes from the line of Omar Dusuki with Bank of America. Please go ahead.

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

I think what I was trying to get at was on real terms, video games have become a better and better deal for consumers over a period of time, and that that's a good thing. So I don't think the comments are in conflict. in conflict in other words if you can give people something really great and you can offer it on really favorable economic terms that's a win-win so i was really trying to make the point that even though i think the value has grown materially certainly a video game you know released today is vastly more exciting compelling intriguing and longer lasting entertainment than it was when i was at crystal dynamics in 1993. um but in real terms frontline prices have declined. I was using that as a backdrop to point out that we think that the most important thing is to deliver the best entertainment on earth. And then the second most important thing is to do it on really favorable economic terms. But I didn't mean to guide in any way, you know, how you should think about our upcoming unannounced price on any release, you know, that will become clear to the market in the fullness of time. Whatever it is, though, we want it to represent enormous value to the consumer.

Okay. Thanks a lot.

Your next question comes from the line of Clay Gripen with Moffitt Nathanson, LLC. Please go ahead.

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

free-to-play strategy. I think, of course, not having announced any online version for gta6 it certainly would be premature to talk about you know an upcoming business model for something that we haven't talked about um but i think conceptually what we pride ourselves on here is being thoughtful and open-minded um and trying to meet consumers where they are and trying to optimize the entertainment for experience for those consumers and that's where we've been talking about a lot on this call you know when it really comes down to what does this company think about you know 24 7 what do i think about i think about making sure that this is an enterprise that more so than any other entertainment enterprise on earth focuses on making hip properties that excite and engage consumers that's what we all think about right now i'm in a room with you know our staff right we don't they're in this room you know we're we're staff executives right the ir team the finance team the operations team legal team um but our job we don't make we don't make the titles here we don't market them not in this room not the room that's talking to you today but our mission is to make great entertainment properties and if we get that right as an organization all 14 000 people full-time colleagues and contractors associated with take two and our affiliates focus on making the best entertainment on earth then everything else will take care of itself naturally we have to be the most thoughtful people the most aggressive people with regard to marketing and distribution by the way legal activities finance activities accounting activities tax activities as well that's our job the mission of the organization is to make great entertainment and having spent a long time in every entertainment business there is i can tell you one thing hits cure all hills make great hits over and over and over again you're gonna have a great enterprise and we're so proud of everything this company does and we're so proud of the culture in which we do it but if we don't get up every day and make hits none of that matters so that's our job that's what we focus on and frankly the results that we're talking about today and the guidance that we gave you for tomorrow all of that is based on having made hits, having delivered hits, and an expectation. But we are going to bless you in an expectation that we're going to continue doing just that at a higher and higher level. Thank you. Thanks for that.

Your next question comes from the line of Drew Crum, B. Riley Securities. Please go ahead.

Okay, thanks. Hey, guys. Good afternoon. So, looking at your net bookings guidance, how, if in any way, is potential cannibalization from GTA 6 influencing your view or range of

outcomes you see for fiscal 27? Thanks. Look, cannibalization doesn't really apply to the entertainment business. In the entertainment business, you compete against everything. You compete against your competitors. You compete against yourselves. You compete against nothing, you know, choice to do nothing. So if you're in the grocery business, like everyone needs to eat, so you're competing with the grocery store next door. With regard to entertainment, you know, if there's something that you want in the market and then there's something else that you want you you'll try to buy both um and if there's nothing that you want you won't buy either uh so there's no one-to-one cannibalization and in fact history shows that when there's a big hit in the market you know what it does energizes consumers around the entertainment market and they consume more so i actually think if we're fortunate enough to have the kind of year that we expect maybe we'll even do a little better than we expect um that's not just going be good for take two and our labels it's going to be good for the industry as a whole thank you

that concludes our question and answer session i will now turn the call back to strauss zelnick

for closing remarks i've spoken an awful lot today and as you pointed out i've been in a bunch of conferences lately too so maybe no one needs to hear any more than me uh nor more from me i would like to say this though um we delivered um great results that we talked about today and we set a guidance that reflects great results going forward. All of that comes from our colleagues around the world. So I want to take a minute to express this management team's enormous gratitude and my personal gratitude to our creative teams, our marketing teams, and our distribution teams, and our finance teams, and our operations teams all over the world, more than 100 offices around world if i'm not mistaken um who work incredibly hard and an incredibly dedicated way to support our collective mission um all of this all of this is because of their work i just get to i get to organize the victory lap so um thank you um to our team and then i'd like to take a moment also to thank our shareholders and everyone who supports us and the people who attended this call um it's always nice to have a good news call and we're really happy to share with you all

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