Take-Two Interactive Software, Inc. (NASDAQ: TTWO) Fourth Quarter 2022 Earnings Conference Call May 16, 2022 4:30 p. m. Eastern Time
Participating companies
Nicole Shevins – Senior Vice President, RI and Corporate Communications
Strauss Zelnick – President and Chief Executive Officer
Karl Slatoff – President
Lainie Goldstein – Chief Financial Officer
Conference Call Participants
Andrew Uerkwitz – Jefferies
Eric Handler – MKM Partners
Matthew Thornton – Truist Values
mario lu – barclays
Colin Sébastien – Baird
Omar Dessouky – Bank of America
Benjamin Soff – Deutsche Bank
Brian Fitzgerald – Wells Fargo
Cost of Matthew – Morgan Stanley
Mike Hickey – The reference company
Doug Creutz – Cowen
Martin Yang – Oppenheimer
Andrew Marok-Raymond James
Clay Griffin – MoffettNathanson
Drew Crum – Stifel
Operator
Greetings and welcome to take-Two’s fourth quarter and fiscal year 2022 earnings convention call. Right now, all participants are in listen-only mode. A question-and-answer consultation will be the official presentation. [Operator Instructions] As a reminder, this convention is being recorded lately.
I would now like to speak with your host, Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. You can get started.
Nicole Chevins
Good afternoon. Thank you for joining our convention call to discuss our effects for the fourth quarter and fiscal year 2022 that ended March 31, 2022. Today’s call will be led by Strauss Zelnick, president and CEO of Take-Two; Karl Slatoff our president; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions in the Q&A inquiry after our comments are ready.
Before we begin, I would like to remind everyone that statements made in this call that are not old facts are considered forward-looking statements under federal securities laws. These forward-looking statements are based on the ideals of our management, as well as on the assumptions made by us and on the data that has been provided to us recently. We assume no legal responsibility to update those forward-looking statements.
Actual effects of the transactions may differ materially from forward-looking statements based on points. These vital points are described in our FILINGs with the SEC, adding the Company’s most recent Annual Report on Form 10-K and the Quarterly Report on Form 10-Q, adding the hazards summarized in the segment titled Risk Factors.
I should also point out that, unless otherwise stated, all the numbers we will discuss today are GAAP compliant and all comparisons are year after year. Additional main points related to our actual effects and outlook are contained in our press release, adding the pieces that our control uses internally to adjust our GAAP monetary effects to evaluate our operating performance. Our press release also includes a reconciliation of any non-GAAP monetary measures with the comparable maximum GAAP measure.
In addition, we have published a slideshow on our website that visually presents our monetary effects and outlook. Our press release and second-place presentations can be received at take-twogames. com.
And now I pass it on to Strauss.
Strauss-Zelnick
Thank you Nicole. Hello and thank you for joining us today. Our strong effects in the fourth quarter capped a successful year for our business. We achieved net bookings of $3. 4 billion, reflecting our artistic team’s unwavering commitment to quality and the ability to deliver captivating and engaging entertainment reporting that spans geographies and generations.
On behalf of our leadership team, I must thank all of our colleagues around the world for helping us get those results, especially as we continue to navigate the new general after the pandemic.
During the year, we strategically positioned our organization for long-term growth. To that end, we have strengthened our artistic groups by onboarding nearly 1000 new developers, by acquiring several talented studios, which will help us expand our features and our portfolio of developing offerings.
We have further expanded our portfolio with the advent of new intellectual assets and business models to encourage player engagement. We have agreed to our continued partnership with Zynga, which will particularly increase our audience and exponentially increase our net bookings from mobile devices. , the fastest developing interactive entertainment segment, while also offering us really broad load synergies and profit opportunities. As we increase our scale, we can increase our margins in particular.
Finally, we have complex our ESG efforts and I am pleased that we have recently published our first committed report, which includes data on our projects to date, such as our roadmap for the future.
During the quarter, our new WWE 2K22 and Tiny Tina’s Wonderlands exceeded our expectations, as did Red Dead Redemption 2. NBA 2K22 has continued to grow its audience, with the name promoting more than 10 million games to date and surpassing last year’s sales.
During the fourth quarter, engagement remained very strong with an average of active gaming days increasing by 6% and an average of user-consistent games increasing by 13% year-over-year. In addition, NBA 2K22 Arcade Edition continues to occupy the top position in the rating of Apple Arcade’s most productive games. And throughout the year, NBA 2K Mobile downloads increased nearly 25% through fiscal 2021.
We see a significant opportunity to upload exclusive, cutting-edge reports from the game and focus on expanding our player base. On March 11, 2K and Visual Concepts triumphantly returned to the ring with the highly anticipated release of WWE 2K22, which achieved the highest Metacritic. scores on the Xbox and PlayStation platforms in the franchise’s history.
Setting new benchmarks for quality, the name offers more features and innovations than any previous edition of the series, adding a redesigned game engine, new controls, basic innovations, improved visuals, and a variety of demands through our passionate player base.
In particular, the sale of WWE 2K22 in the first 4 weeks exceeded the grades reached for WWE 2K19 and WWE 2K20, even with the revised release window that was not the holiday season. Consumer engagement with the name has been exceptional with over 140 million in the game. matches played to date and over 5. 6 million hours of WWE 2K22 content viewed on Twitch.
I need to thank 2K and the WWE team at Visual Concepts for their commitment to restoring this incredible franchise. We greatly appreciate WWE’s immense work in launching this year’s game and look forward to continuing and developing our successful partnership for years to come.
On March 25, 2K and Gearbox Software unveiled Tiny Tina’s Wonderlands, an all-new fantasy-driven offering that has propelled our partnership with Gearbox to new artistic heights and is the launch of the most productive new 2K franchise in several years. The name resonated with grassroots enthusiasts and new audiences with only about 30% of players who have never played a Borderland name.
To date, Tiny Tina’s Wonderlands has exceeded our expectations and supports cosplay game functionality, a variety of post-launch content, and a season pass. I want to congratulate 2K and Gearbox for delivering stellar gameplay and take a look at the odds. of this new franchise in the coming years.
During the fourth quarter, Rockstar Games expanded the success of its iconic entertainment experience, Grand Theft Auto V, with the release of new, enhanced versions of the game, particularly for PlayStation 5 and Xbox Series X and S. This is the third generation of consoles, so the game has been available since its initial release in 2013. And to date, the inventory has sold more than 16. 5 million units.
Also for the first time, Grand Theft Auto Online was created as a standalone name for next-gen consoles. Packed with a variety of graphical and technical improvements, a new race builder, new cars, and much more, those versions have been well earned through the game’s vast community of players.
During the period, Grand Theft Auto Online maintained its large audience compared to last year, while expanding by 8% and 74% compared to the fourth quarter of fiscal years 2020 and 2019, respectively. In addition, Rockstar Games has introduced GTA, an all-new club program exclusive to Grand Theft Auto Online players on PlayStation 5 and Xbox Series X/S consoles, where attendees can get a variety of valuable benefits for players, adding a monthly deposit of GTA dollars and other bonuses designed to help players notice all that Grand Theft Auto Online has to offer, adding main content packs like The Contract from the last vacation.
The initial conversion was above our expectations, which bodes well for it to be a driving force for continued engagement over time.
Red Dead Redemption 2 has continued to expand its games and, to date, has sold more than 44 million worldwide. The effects of the series particularly exceeded our expectations for the period, which is further proof of the continued popularity of Rockstar’s successful entertainment experiences. .
As for Private Division, the newly acquired studio through the labels, Roll7, effectively introduced OlliOlli World in February, which received critical acclaim for its unique artistic taste and impressive gameplay mechanics. We will give the name with its first expansion, VOID Riders, in the first part of this fiscal year.
Championing independent skill in our industry, Private Division recently signed 4 new publishing deals with leading independent developers Die Gute Fabrik, Evening Star, Piccolo Studio and Yellow Brick Games. We look forward to working with those skilled teams.
In the fourth quarter, recurring customer spend decreased by 6% year-over-year and accounted for 60% of net bookings. In recent months, the client has noticed a wide diversity of high-quality new versions on the market for a long time, adding several of our own exciting titles that have not launched significant live service offerings. We believe this dynamic has had an effect on our customers’ overall recurring spend.
NBA 2K and Grand Theft Auto Online were the participants most sensitive to recurring customer spend in the fourth quarter and many of our loose offerings were also notable drivers. Top Eleven continued to perform very well after our acquisition and was our number one cellular inventory in the fourth quarter. Two Dots saw remarkable year-over-year expansion and recorded its most productive net booking performance, thanks to new in-game events and successful marketing activations. Dragon City and Monster Legends ended the year on a high note, supported through staggered live operations;
WWE SuperCard has now been downloaded over 26 million times and remains 2K’s highest-grossing mobile game; and NBA 2K Online in China exceeded our expectations. The name remains the number one online PC sports game in the region with nearly 57 million registered users.
We are incredibly excited about our long-term expansion path, adding our ongoing blend with Zynga. This will be a transformative time for Take-Two as we continue to build on our core principles to become the most innovative, artistic and effective entertainment company in the world. Together, we will create an inexhaustible source of industry-leading titles spanning key interactive entertainment platforms and genres, developed through some of the industry’s top artistic and forward-thinking talent. Later this week, our respective shareholders will vote on the transaction which, assuming those approvals are obtained, is expected to close on May 23, 2022.
Independently, for fiscal 2023, we expect to succeed at a new record of $3750 million to $3850 million in net reserves, as we plan to launch many exciting launches during the year.
Looking ahead, and excluding the effect of our merger with Zynga, we expect fiscal years 2024 and 2025 to set even higher records for our company’s net reserves, along with a significant increase in profitability. Lainie will provide more important points about our outlook shortly, while Karl will provide an update on our exciting and varied multi-year project portfolio, comprising approximately 69 titles that we expect to launch through fiscal 2025.
To conclude, we are very positive about our future. As we continue to grow our business and implement our expansion strategies, Take-Two remains incredibly well placed to develop its length and knowledge within the industry, generating margins and delivering long-term price to our shareholders.
Now I will pass the call to Karl.
Charles Slatoff
Thank you, Strauss. Je I would like to start by thanking our groups around the world for offering an exceptional year for our company. Our strong effects were driven by the passion, creativity and commitment of our colleagues to deliver price to all our stakeholders.
Now I’ll talk about our recent first quarter releases. On April 21, 2K and Gearbox Software unveiled Coiled Captors, the first of 4 exciting DLC packs for Tiny Tina’s Wonderlands Season Pass. With a new environment, a boss encounter, and mythical loot, the offering represents a post-launch experience of this exciting new franchise.
On April 26, 2K and Visual Concepts unveiled The Banzai Pack, with five playable Superstars, as well as MyFACTION EVO cards for each. This is the first of five DLC offerings planned for WWE 2K22, which will be available separately. and as a component of the Season Pass of the game of the year.
Going forward, fiscal 2023 will be an exciting year for Take-Two as we bring exciting new entertainment reports to our players, while developing our business through our ongoing combination with Zynga.
I will now provide the main points in Take-Two’s fiscal year 2023 pipeline independently, which includes 18 planned launches. they include, The Quarry, which is a new narrative 2K horror game and Supermassive Games, where each and every choice, big or small, shapes your story and determines who lives to tell it.
With an iconic set of Hollywood stars, adding David Arquette, Ariel Winter, Justice Smith, Brenda Song, Lance Henriksen, Lin Shaye and many more, The Quarry will launch on June 10 on PlayStation and Xbox consoles and on Windows PC Steam.
Marvel’s Midnight Suns is scheduled for the moment as part of the 2022 calendar and is one of the most anticipated games this year. The name evolves through Firaxis Games, the acclaimed studio that has brought iconic franchises like Sid Meier’s Civilization and XCOM. to the public and showcases the most respected heroes of the Marvel Universe in a completely new gaming experience. 2K will have more to share in the coming months.
Kerbal Space Program 2, which comes from Private Division and Intercept Games, is now expected to launch for PC early in the 2023 calendar and for consoles later in the 2023 calendar. Expectations for the name are high, with more than 12 million perspectives on the ad. Trailer. The committed Kerbal network can take a look at more facts about the game and its new features in the ongoing gameplay reveal video series.
When it comes to our annual sports offerings, enthusiasts can expect entirely new versions of our popular sports series, adding NBA 2K23, WWE 2K23 and PGA TOUR 2K23, which will debut with legendary golf icon Tiger Woods as the game’s executive director. 2K I’ll soon have more on those titles.
Continuing our portfolio for fiscal year 2023, we plan to launch 8 cell phone names, add 4 new franchises and 4 existing franchises; and 3 midcore/arcade names to buy, which come with a new 2K sports name, a new Private Division franchise, and a new game Tales from the Borderlands, which will feature new characters and stories set in the Borderlands universe. you will have a new iteration of an already released name to buy.
Our labels will continue to offer new content and reports that drive customer engagement and recurring spending across many of their successful franchises, NBA 2K, Grand Theft Auto Online, Red Dead Redemption Online, WWE 2K, Tiny Tina’s Wonderlands, OlliOlli World and more. .
Excluding our ongoing merger with Zynga, we expect to deliver 51 securities in fiscal years 2024 and 2025, paving the way for a strong acceleration in net reserve expansion and profitability. This includes: 18 immersive base versions, seven of which are sports simulation games. 16 of them will be paid, while two will be free;
10 standalone titles, all available for purchase, 12 loose mobile games; 4 medium core games to buy, adding two for sports purposes; and seven new iterations of titles already released, all of which will be on sale.
Keep in mind that those titles are a snapshot of our existing progression line. Chances are, some of those titles won’t evolve until their completion, the release schedule will possibly replace them, and we’ll also load new titles on our list. .
In addition to our full game releases, we will continue to offer post-launch content for many of our releases, ranging from virtual currency sales to DLC packs and season passes.
As far as esports is concerned, the NBA 2K League unveiled its fifth season on March 23 and included new backers, such as Google and Coinbase. This year, the league partnered with the city of Indianapolis to host all tournaments, as well as the playoffs and finals. , in his new house in pan am pavilion. The League’s overall prize pool has grown to $2. 5 million this season, the largest since its inception. We remain very excited about the continued good fortune and expansion of the NBA 2K League, which is a prospective term to engage and be a profit motive force for our business.
In conclusion, as we execute our biological expansion projects and unlock new opportunities presented through our ongoing transaction with Zynga, we are able to expand our portfolio and capitalize further on new platforms, business models, emerging markets and distribution channels. As we realize those expansion opportunities, Take-Two is incredibly well placed to offer long-term pricing to our shareholders.
I’m going to call Lainie now.
Laini Goldstein
Thank you Karl and good afternoon everyone. Today, I will discuss our fourth quarter and fiscal 2022 effects and then review our full-year monetary outlook and the first quarter of fiscal 2023. Please note that our initial outlook does not come with Zynga on our projected effects or interest expenses in the note that Take-Two issued in April to fund the portion of money from our ongoing acquisition of Zynga. Additional main points related to our actual effects and perspectives are included in our press release.
I am incredibly pleased with Take-Two’s accomplishments in the fourth quarter and fiscal year. We delivered strong financial results, took exciting steps to position the company for long-term growth, and announced our pending transformative combination with Zynga, which brings great potential to our portfolio and monetary profile. I would like to thank our groups for their passion, commitment and for helping Take-Two achieve its strategic vision.
As of our fourth quarter, overall net reserves increased 8% to $846 million. Our new WWE 2K22 and Tiny Tina’s Wonderlands exceeded our expectations, as did Red Dead Redemption 2. During the period, digitally delivered net bookings exceeded 4% and accounted for 91% of the total. This exceeded our expectations through a slight increase, due to the superior performance of sales of digitally delivered full games. 75% of console game sales were delivered digitally, up from last year.
As Strauss mentioned, in recent months there has been a great diversity of new versions on the market for a long time, adding several of our exciting titles that have not implemented significant live service offerings. As a result, our customers’ recurring expense decreased to 6% and accounted for 60% of total net bookings.
Net GAAP revenue stream increased 11% to $930 million, while the goods sold charge increased 43% to $399 million, driven by amortization of software progression pricing for our fourth quarter releases. In addition to Nordeus, adding its additional value as well as consistent with marketing and transaction prices. And, the net source of GAAP revenue $111 million, or $0. 95 consistent with participation, compared to $219 million, or $1. 88 consistent with participation, in the fourth quarter of fiscal 2021.
In terms of our fiscal 2022 results, overall net reserves were $3410 million, up from $3550 million a year earlier. however, as the world began to settle into a new normal, there was a moderation of trends that benefited our industry at the height of the pandemic.
As a result, digitally delivered net bookings decreased by 2%, beating our forecast with a decrease of 3%, and accounted for 91% of the total. 68% of our console game sales were delivered digitally, up from 64% last year. recurring customer spend fell 6%.
Unrestricted non-GAAP adjusted operating money was $425 million, compared to our address of over $400 million. In fiscal year 2022, we spent $159 million on capital expenditures. .
Gaap net sales increased 4% to $3500 million, while the charge for goods sold remained solid at $1500 million. In line with expenses, they increased by 24% to $1500 million, basically due to the additions of Playdots and Nordeus, adding the revaluation of their upper value -above; build in line with personnel, inventory compensation, marketing and IT expenses; and consistent with transaction fees. And, net GAAP revenue stream of $418 million, or $3. 58 consistent with consistent percentage, compared to $589 million, or $5. 09 consistent with last year’s consistent percentage.
Today, we provide our initial fiscal year 2023 outlook for Take-Two independently. We expect net reserves to be between $3. 75 billion and $3. 85 billion, which represents a new record for the company and implies a strong expansion of 11%. at the midpoint. We have an exciting portfolio of releases that we plan to bring to market this year, adding 6 immersive top titles, which is twice as much as we delivered in fiscal 2022.
The main participants in the net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Red Dead Redemption 2 and Red Dead Online, Tiny Tina’s Wonderlands, Marvel’s Midnight Suns and PGA TOUR 2K23. We expect the net booking distribution of our labels to be around 60% from 2K, 30% from Rockstar Games and 10% from Private Division and T2 Mobile Games. And we expect our geographic distribution of net reserves to be approximately 60% in the U. S. U. S. and 40% internationally.
We expect recurring customer spend to be strong for fiscal 2022 and account for 58% of net bookings, up from 64% last year due to more new launches. up to 10% and represent 91% of net reserves, which is in line with last year. Our forecast assumes that 71% of console game sales will be delivered digitally, up from 68% last year. to generate more than $350 million in unrestricted non-GAAP adjusted operating cash flow, and we expect to deploy approximately $120 million for capital expenditures. We expect GAAP net income to be between $3. 67 billion and $3. 77 billion and the charge for goods sold between $1. 66 billion and $1. 7 billion. Our overall operating expenses are estimated to be between $1. 74 billion and $1. 76 billion.
Halfway through, this represents a cumulative 17% compared to last year. As Karl mentioned, we have around 69 titles that we plan to deliver in the next 3 years, and we will be investing in our pipeline in key areas such as marketing, people and IT.
And we expect the net source of GAAP revenue to be between $223 million and $252 million, or $1. 90 to $2. 15 according to participation. For MD purposes
Let’s now turn to our forecast for the fiscal first quarter. We expect net reserves to be between $700 million and $750 million, up from $711 million in the first quarter of last year. The main participants in net bookings are expected to be NBA 2K22, Grand Theft Auto Online and Grand Theft Auto V, Tiny Tina’s Wonderlands, Red Dead Redemption 2 and Red Dead Online, The Quarry and WWE 2K22.
We expect digitally delivered net bookings to increase by up to 2%. Our forecast assumes that 78% of console game sales will be delivered digitally, up from 73% in the same era last year. We expect a 10% decrease in recurring customer spend, as the momentum behind our own exciting actions that haven’t launched significant live service offerings will continue into the first quarter.
We expect GAAP net income to be between $810 million and $860 million and the charge for goods sold to be between $307 million and $333 million. a 25% increase over last year, basically due to expenses consistent with the body of workers and marketing, as well as transaction fees. with share
In conclusion, we have great confidence in our ability to generate accelerated expansion in fiscal 2023 and beyond, and our continued combination with Zynga will take our business to an even higher point of scale and earning capacity. As we execute our strategic initiatives, we can deliver sustainable and successful expansion to our shareholders.
Thank you. I will now refer the back to Strauss.
Strauss-Zelnick
Thank you Lainie and Karl. On behalf of our entire control team, I would like to thank our colleagues for providing an exceptional year. And to our shareholders, I must express our gratitude for their continued support.
Let’s turn now to your questions. Operator?
Q&A session
Operator
At that time, we will conduct a question-and-answer session. [Operator Instructions] The first is by Andrew Uerkwitz of Jefferies. Continue with your matrix
Andrew Uerkwitz
Thanks a lot. Only two fasts. The first in RCS, it seems to be guiding this department into fiscal year 2022. Is it more of a product of quantity, or is there something you see in the underlying engagement statistics that reassures you about some of the difficult COVID compositions here in the first part are achievable? Thank you.
Laini Goldstein
So, the first year is definitely due to the competition opposite to the year with COVID last year. So we had a very smart first quarter. So, competing with this quarter was very difficult. And then this quarter, we saw a lot of other people betting on the full game, which we launched just like some of our competitors. So this also affected RCS in the quarter.
Andrew Uerkwitz
They gave it to me And then, in the consultant, I just look to find out why the consultant was flat and for. . . it turns out that it is still difficult. So is it comforting to come back with more RCS for 2023 or something?other?
Laini Goldstein
So in the first quarter, we expect a decrease of about 10% and that’s the continuation of what we’re seeing in the fourth quarter, which are players who play all the games in our games and some of our competitors. . So it continues. We saw it in the first quarter. And we look forward to seeing that. For the whole year, we expect it to be solid throughout the year. So, some of our new games that are coming out don’t have recurring customer expenses related to that. We hope the NBA is ready for the year. And then GTA Online and Red Dead Online, we hope the NBA is ready for the year.
Andrew Uerkwitz
they gave it to me Very much thanks. And then, Strauss, you did a glorious podcast the month before, I think, with LionTree. You discussed mergers and acquisitions and the importance of listening to offers. Simply out of interest with the conversion valuations that we have observed in the panorama and the market in which we are located. What is your broadest opinion on M&A activity here at current levels and market volatility?
Strauss-Zelnick
Well, no one likes to see their percentage value fall, however, in the end, we will rely on the basics and that’s how we see the company. So, we have a really strong company. We continue to meet and exceed expectations, as we did in this quarter and year, last year.
We have just published a first orientation that gives a very positive look at our company and the market. We are still in a very positive position. And I think corporations in the same scenario probably feel the same way. When the global market appreciates, there is nothing we can do about it, and nothing we would like to do about it.
We don’t want access to capital markets at that level of value. We are under-indebted, no matter how you see it. We have a small amount of investment grade debt near the end of the Zynga transaction. And then we have a really tough company that we expect to continue to pull at full speed. Therefore, momentary adjustments in the market are irrelevant to us.
Andrew Uerkwitz
they gave it to me thank you very much guys.
Operator
Our next comes from Eric Handler’s lineage with MKM Partners. Continue with your matrix
eric controller
Thank you very much and I appreciate the question. Two questions, Strauss, maybe you can start. Do you think there is some kind of replacement going on, in the personal tastes of the players for more type of game in the story mode compared to the type of live game and others?Do people just crave this mode of storytelling a little more lately?
Charles Slatoff
Hi, Karl de C. Actually, I think that, as an industry, we have never deviated from the appeal of storybook content. We’ve said we believe in this kind of content. We have taken this into account as a company. it’s the ultimate entertainment experience. And I think what you’re seeing is that other games on the market are taking advantage of it.
I think there are quite a few out there right now, so maybe it looks like this. But when you look at overtime, story-based content has been a significant amount, a significant component of the business and also the economics behind the industry. And we hope that will be the case in the future.
eric controller
Genial. Merci. Et just as a momentary query comparing your recommendation to what you did in the S-4 a few months ago, I’m curious if there, when you look at the kind of options, it turns out that the reserve advisor is a little lower than your internal budget. The EPS consultant is a bit bigger than the internal budgets. Something I can communicate, perhaps what has been left out since then?
Laini Goldstein
The projections we gave in the S-4 were not exactly our indications as those figures reflected our internal estimates at a given time that was back in December 2021. So, there’s a certain fluidity in our release list, our marketing plans, the general desires for operating expenses, and those can replace our projections over time.
Similarly, our net reserve forecasts were affected by the scenario between Russia and Ukraine. Therefore, those numbers are not included in our projections in our forecast at this time. So, it actually affected him. Therefore, there are changes in our effect on our software development costs and marketing costs, which has also affected the bottom line. Those are some of the differences between the steering and the S-4.
eric controller
Thank you Laini.
Operator
The following comes from Matthew Thornton of Truist Securities. Continue with yourArray
Matthew Thorton
– press a little. But Lainie, I wonder if maybe you can quantify some of the discrete things that happened in the last 3 months. And my point is Russia, as you mentioned, and the currency. How can we think of this headwind compared to where we were 3 months ago?
And then more broadly I don’t know if it’s for Strauss or for Karl. Any final thoughts on where you think we are in the “reopening”?Are we at an overall pace? And similarly, just the habit of the players, obviously, there are still a lot going on on the macro front. I’m a little curious to know what you see in the habit of players in general. Any color would be very useful. Thanks guys.
Laini Goldstein
So, for the former, Russia and Ukraine are not a huge number for us, but it is something that has replaced between the S-4 and our council. Probably a bigger difference on the top line with more fluidity in our release schedule.
In terms of currency, it wasn’t a big upgrade for us between the few months. We have a fairly large herbal coverage. So, there isn’t a big update between then and now for us. When we set our forecasts, we set them based on the spot rate at the time. Therefore, any initial adjustment from the time we made our forecasts can make a difference in the future. . But for now, it’s based on this spot rate.
Charles Slatoff
And in terms of the post-COVID outlook, it looks like we’re in a normalized scenario right now. And, in fact, things turned out pretty well as we thought. We expected our audiences to stay with us and they did. It was also expected to see some negative reaction in terms of engagement among that audience, which we have partly noted. And I think you can see this reflected in the entire industry.
But at this point, I would say it normalized, stabilized and I think we’re back on the expansion trajectory that we all expected a year ago, when we expected [it to happen] (ph) around here.
Operator
Our next comes from Mario Lu from Barclays. Continue with yourArray
mario lu
Impressive. Thanks for answering the question. I have two in GTA. So for GTA V, they argued that the conversion rate was higher than their expectations. So is there any option that this type of subscription will also be introduced to existing generation players? And then secondly, you discussed that I think the full annual consultant spend for existing clients in the Greater Toronto Area will decrease this year. So how do we think about the update speed this year for GTA Online and the long term in terms of the existing generation compared? to the next generation? Thank you.
Strauss-Zelnick
Yes, we have not given any news related to the expansion of the subscription offer. We are very happy with the way it has been implemented so far. We are very happy with the conversion rate. And it’s transparent that consumers love the opportunity to interact with GTA Online and appreciate what we offer through a subscription. And when it comes to ongoing content updates, Rockstar has said there will be more content to come and we’re excited about that.
Operator
Our next comes from Colin Sebastian de Baird. Continue with your
colin sebastien
Very well. Thank you. Good afternoon everyone. Maybe it’s just a follow-up to the normalization of usage trends and the monetization of engagement. I guess we’re seeing developing considerations about a recession, maybe even stagflation. economic recessions. But Strauss is curious, I guess he’s thinking about the macroeconomic environment. Are there scenarios in which we can see an effect on the expansion of the investment strategy on the horizon?
And similar to that on the cellular side, I want to say there are considerations that the slowdown that we saw in the March quarter may continue into the year. It’s funny, if it affects all of your Zynga synergies and integration plans. Thank you.
Strauss-Zelnick
Thank you for your question. Listen, other people would like to claim that entertainment is countercyclical or immune to cyclicality, that’s not the case. The entertainment sector will be affected by an overall economic slowdown. However, we can be perceived as resistant to such a slowdown. So, for example, if you go back to 2008 and 2009, the market grew by 20% in 2008. It declined in 2009, but the 12% decline was less pronounced than in many other industries. And after September 11, the U. S. gaming market will be able to. . . The U. S. economy grew to 42% in 2001 and 11% in 2002.
So, in the event of a customer recession, and I’m not going to comment on that because I’m not sure my opinion is very valid. In such a case, I believe that we will be resilient but not immune but we can face such a slowdown without any problem. And listen, if you broadcast wonderful entertainment, other people will come for it, and they will come out in good times and bad, they will come out more in bad times.
By the way, I don’t think there’s any evidence that we’re going to have stagflation. Stagflation referred to a time when there was maximum unemployment and maximum inflation. And because of peak inflation, lending rates were above 16%. We’re not at that level. We are not close to this level and we have very low unemployment rates in this country right now. Therefore, stagflation does not seem to me to be a significant risk. Some kind of moderate recession, I think, I suppose, is conceptually a risk. , but it wouldn’t have an impact on this business that we can understand at the time.
In terms of mobile gaming, T2 Mobile’s games performed very well. They performed incredibly well and continue to perform well in the fourth quarter. So if you’re a consultant on how we’ll do it, we feel great about the ongoing mix with Zynga and we think there are glorious opportunities out there. And we think some of the challenges, for example, global post-IDFA create opportunities for a company that has the kind of customer knowledge base that we have in conjunction with Zynga and the data analytics that we have to help us navigate that database.
Operator
Our next comes from Omar Dessouky’s lineage with Bank of America. Continue with your matrix
Omar Dessouky
Hello thank you very much. There has been some debate in the market about the length of grand theft Auto 6’s overall addressable market, which was discussed in Rockstar’s blog post as it will be released in the Gen9 console cycle, while Grand Theft Auto V was introduced some time before PlayStation 4 and Xbox One presentation. So will the functionality of such a graphically extensive TS game on Xbox One and PlayStation 4 or even Nintendo Switch, as it will be on Xbox X and PlayStation 5 and the streaming generation has the ability to make legacy consoles and mobile devices capable of satisfactory functionality. for such an advanced game?
Strauss-Zelnick
Well, in the opposite order, there are actually a lot of streaming platforms that are running lately. Stadia is still up and running. It’s that they don’t have many titles and have a relatively small audience. We’ve been very supportive of Stadia, but to be clear, it’s a small component of our business. And, of course, there’s Xbox, but those significant markets right now.
I’m not sure I understood the question, if you ask how the release of the next update of the Grand Theft Auto series, which was discussed through Rockstar’s blog on blogpost, as you pointed out, will have a healthy effect on the launch of the upcoming platforms. Is that your question, which you’re talking about?
Omar Dessouky
No. C is the question of what happens to the installed base. We deserve to think of the installed base as Xbox One; sorry, Xbox One, PlayStation four plus Xbox X PlayStation five or just Xbox X PlayStation five, in which case the TAM would be smaller?
Strauss-Zelnick
So, Rockstar didn’t communicate the main points about the next generation of Grand Theft Auto. Therefore, there will be more data to come. But I have no doubt that when that time comes, there will be an iteration that we will launch in a physically very powerful market.
Omar Dessouky
Okay. Can I ask you for a quick follow-up? In terms of capitalized progression spend, does it generally increase as you approach the release of a great game like Grand Theft Auto 6 or are they solid over time?
Laini Goldstein
It is based on the games that are running and the duration of the groups that are running in the game. So, over time, the balance of the balance will accumulate and decrease depending on the titles that come out and how the games develop. But this is not so. correspond to no specific game. There are many games in the works. As Karl said, there are a lot of titles in the pipeline and most of them are in all caps apart from our mobile titles.
Operator
The next one comes from Benjamin Soff of Deutsche Bank. Continue with yourArray
Benjamin Soff
Hi, guys. Thanks for the question. So, right now, the FIFA license is officially a bottom-up type. I sought to evaluate your interest in creating a football franchise, with or without simulation and if you have an idea or an idea about it, how do you see it?the other opportunities and demanding situations found there?Thank you.
Charles Slatoff
Well, we have realized this and we have a tendency to be attentive to our activities at all times. We are very happy to expand our sporting activity and we do not have much more to say at the moment.
Benjamin Soff
okay.
Operator
The following is from Brian Fitzgerald of Wells Fargo. Continue with your matrix
Brian Fitzgerald
Tiny Tina’s attack on Dragon Keep. Il appeared on PS5 PlayStation Plus and included an early order from Wonderland. So, just ask yourself if this Dragons Keep commitment corresponds to the pre-order in the end generated conversions, if it was a dynamic exclusive, if you, if it was useful for the operation of, that specific marketing program. And then, Strauss highlighted the cross-play feature with Tiny Tina. Is there anything noticeable to report in relation to what you see in the cross-form?the platform plays it compared to other previous games or other cohorts of players because you discussed a large influx of those who hadn’t played borderlands games yet.
Charles Slatoff
I will first answer the moment component of the query in terms of cross-play. The cross-play component of Tiny Tina’s Wonderlands is great. And we’re excited about it. We believe that cross-play is sometimes ideal for the consumer, so that other people can play opposite each other on console and PC, that’s an ideal situation. And we think that skill helped with Tiny Tina. No I have express knowledge for percentage over the number of new people due to cross-play, that part I don’t have to percentage. But I can tell you that it’s obviously a smart component and it runs very well through Gearbox. And I, can I ask you to do it? I didn’t perceive the first component of the Assault on Dragons query. What was the express query?
Brian Fitzgerald
So there was, if I didn’t forget correctly, there was one: it stood out, Assault on Dragon stood out on PS5 and PlayStation Plus and included a Wonderlands pre-order screen. So I wonder if this commitment to Dragon Keep has created momentum and generated conversions in terms of pre-orders or even participation, and then, in the end, buy Wonderland?
Charles Slatoff
Ouais. Si I can, again, I don’t have any express numbers to share with you, however, it was vital marketing for us. Any time we can re-engage a customer base in a franchise, especially to launch a new franchise, it will have a very positive effect. And obviously, we were lucky enough to have Tiny Tina, because she’s one of the most beloved characters in the Borderlands series. So, to get access to that, they released content before the release of Wonderlands, obviously, a boost given earlier had a positive effect on us.
Operator
The following comes from Matthew Cost of Morgan Stanley. Continue with yourArray
Cost of Matthieu
Hello World. Thank you for answering the questions. I guess, on the hiring front alone, you discussed in the ready comments that you added 1,000 developers to the developer base this year. What do you see at the festival for those developers and wage inflation?And if you see any wage inflation, does it have an effect on hiring clients for the rest of the year?And then on the M&A front, obviously, it’s still closing the deal with Zynga, but it turns out that we’re at a point after many years of running the company with very little leverage and liquidity on the balance sheet, as if there were opportunities to acquire assets whose valuations were depressed. about the type of integration effort in the short term?Thank you.
Charles Slatoff
Of course. In terms of wage inflation, I think, like many other companies, we feel that wage inflation has an effect, especially since the hard labor market is pretty tight right now. That said, we actually believe we are very well placed to attract and retain talent. We offer highly competitive payment and benefits packages, many of which come with benefit-sharing and equity. So when the company succeeds, our workers succeed and that is greatly appreciated.
And there’s also the detail of our culture, where other people come here because they love to run here. And they can, and especially in the artistic aspect where they have the freedom to pursue their passions in a way that allows them to enrich themselves at the same time. So, yes, I would say that everyone in the total market feels that some have an effect on the tight hard work market. But I think sometimes speaking, we’re pretty well positioned, because we take into consideration being our competitive force.
Strauss-Zelnick
And on the M&A side, our history has been, at most, one of biological expansion for a long time. We have selectively acquired corporations with the right intellectual assets and the right equipment. And then, of course, we acquired Social Point, Playdots and Nordeus. in order to enter the cellular sector, and with the utmost enthusiasm, we plan to conclude our combination with Zynga next week.
But in the 15 years of this control team’s lifestyle at Take-Two, most of our growth, most of our good fortune has been generated organically. And I think it will keep moving forward, and we have a wonderful opportunity because combined with Zynga, we have the most productive collection of intellectual assets owned by PC, console, and cell phone in the enterprise. And I think the creatives with the maximum talent, the executives with the maximum talent. Of course, I speak from our point of view, but I think and I think we have to keep that promise and we will do it organically.
I don’t know what opportunities exist given what I hope will be a near-term reassessment of interactive entertainment stocks. Ultimately, all values will be based on their basic principles. And the basic principles of this company are pretty much falsified and I think they will continue to be. That being said, we do have the ability, in a very disciplined way, to do more inorganic expansion deals. And if they make sense to us, we’ll look for them. But that is not the first order of the day.
Operator
The next one comes from Matthew Thornton’s line with Truist Securities. Continue with yourArray
Matthew Thorton
Hello, good afternoon, guys. Some quick follow ups. Let’s go back to the question of capital allocation, Strauss. I think a few quarters went by, maybe it was the third fiscal quarter that he bought stock for the first time in several years. I know you have done it very opportunistically at times. So my first query here is, given the pullback in the stock after you struck a deal with Zynga, would buybacks or opportunistic buybacks be something you’d consider, or maybe you’re looking to de-leverage faster, just kind of mind over there?
And then, just a moment after Zynga’s closing, would you wait until the next quarter to publish a pro forma tip?Is this something you can do to maintain the quarter?Any way we think about it would be helpful. Thank you all again.
Strauss-Zelnick
We have said that we return capital to shareholders when it makes economic sense and we have made buybacks opportunistically. $158 consistent with the consistent percentage found here today, we were wrong about it. But it is still the opinion of this control team that represents the high price of this company for what it is worth.
We are heading towards a transaction in which we have leveraged the company for the first time. And I think, again, acquisitions may not be our first agenda, but we maintain the flexibility to continue acquisitions if we do at all.
Operator
The next one comes from Mike’s line. Sorry if you were still. . .
Strauss-Zelnick
I am sorry. We still have Lainie so far in the question component.
Operator
My apologies.
Laini Goldstein
No problem. Therefore, for the recommendation with Zynga, we plan to provide a consolidated recommendation when our first quarter takes effect in early August.
Operator
The next one comes from Mike Hickey’s line with The Benchmark Company. Continue with yourArray
Mike Hickey
Hey, thank you. Hey, Strauss, Karl, Lainie, Nicole have good little neighborhoods. Congratulations. And thank you for answering my questions. Two questions. The first, I don’t know how much you can communicate about it, however, Lainie, maybe your philosophy on guidance when it comes to cell phones, do you think there’s a lot of delta out there in terms of what Zynga has brought to the street historically?And then more, I guess the top view, when you look at the cell market in the first quarter here, how do you think about cell growth?Does it meet expectations? And I have a follow-up.
Laini Goldstein
So, in terms of our cell orientation process, we haven’t closed the deal yet. So, we’re going to start working intensively with Zynga and have the ability to perceive the numbers with them and make sure we have a consistent technique on how to plan our entire business. So that’s the plan right now.
Mike Hickey
And then, Strauss, did you have a vision of the expansion of the cellular market, if it’s still going where you thought it would be, or if the end of the first quarter replaced your vision?
Strauss-Zelnick
We do not track quarter-to-quarter expansion statistics. But in the long run, there is a huge opportunity in interactive entertainment in general and that cell phone will remain a rapidly developing market segment.
Operator
Our next comes from the doug Creutz line with Cowen
doug creutz
Hey, thank you. One of Zynga’s most sensible executives recently left to take over as CEO of another company. I was just wondering if you could update your plans on how cellular activity will be controlled assuming the transaction ends. Thank you.
Strauss-Zelnick
It’s a bit early to have this verbal exchange because the transaction hasn’t concluded yet. Zynga has been effectively operating as an independent company for approximately 15 years and has a highly experienced key staff in all areas of its business. Under the leadership of Frank Gibeau, Zynga has a wide diversity of talent, adding many executives who precisely in contact with the public in their roles, however, run the company day by day. Therefore, we are very confident that there are many talented executives in what will become take-two’s Zynga division, assuming everything goes according to plan. And we are very excited about the long-term combination and will have much more to say about this venture once the deal is concluded.
doug creutz
Not bad. Thank you.
Operator
Our next comes from Martin Yang’s lineage with Oppenheimer. Continue with your matrix
martin yang
Hello, good afternoon. Thank you for responding to my query. This is more of a long-term consultation for Strauss. Can you tell us how you would describe the effect of individual wonderful creators?Is there an effect on the final results of the announcement of the games?And has that really replaced you since you started working in the industry?
Strauss-Zelnick
Well, I think we’ve put more emphasis on artistic skill at Take-Two than any other company in the interactive entertainment industry and our good fortune has reflected that choice. It’s a simple thing to say, but it’s a complicated thing to do.
We inspire the largest number of artistic people in the industry to come to our company and work on what they are passionate about. And we make decisions that are in the service of this approach, this strategy, and our purpose of making wonderful art and making wonderful successes.
Paintings are done through teams, all paintings here are done through teams, however, leadership is crucial. And we have wonderful artistic leadership in all grades and we are proud of this wonderful artistic leadership and grateful to them for the effects they continue to bring. here.
Operator
The next one comes from Andrew Marok with Raymond James. Continue with your matrix
Andre Marok
Hello, thank you for answering my questions. They discussed that they noticed some good luck in the standalone edition of GTA Online. I guess players entering GTA Online right now, how are they different from former GTA Online players in that you can also provide a quantitative count around them?And then, secondly, are there any updates I need to share about your partnership with the NFL?Thank you.
Strauss-Zelnick
Oui. Je I think for GTA players, I think what’s more appealing is that the market continues to grow, that we sold 165 million games of the name, although it was introduced in 2013, the name has now governed 3 generations of consoles. And when we created a standalone edition of Grand Theft Auto Online, many other people showed up to play.
So, obviously, the market is massive and continues to grow. And I think Rockstar has done a great job of continuing to make the market available to other people for a long period of time. But no, we don’t have anything express to say about the other express people who came forward, we have a lot of smart data.
And we have nothing to say right now about the partnership with the NFL, we’re excited about that and we’re taking a look at upcoming releases.
Operator
Our next comes from Clay Griffin with MoffettNathanson. Continue with yourArray
Clay tap
Yes. Hello. Good afternoon. Just a point of explanation. I know it expired in the quarter, but the standalone value of GTA Online is that: I guess it’s booked in RCS, or maybe there’s a nuance there, just to confirm it.
And then, alone, I’m curious if you could think of the strategy around that. I think Strauss called you the mix of the full online game of connected loose play, how successful it has been in the past. . But all the thinking around: do we assume it’s some kind of MO, I guess, for full-length titles of this length or look [ph]?
Strauss-Zelnick
Sorry, I apologize. If you can, what is your query about prices?.
Laini Goldstein
Autonomous.
Clay tap
I’m just curious to know if the standalone value of GTA Online is the one that is reserved as a recurring expense of the client, or if it is reserved as a complete game, I guess that is the first query and the query of the moment. . .
Laini Goldstein
So, the standalone game itself is a complete game, but if you play it online and buy virtual currency, it’s RCS.
Strauss-Zelnick
And your question at the moment? Sorry, I missed moment one.
Clay tap
Of course. Not just the general opinion about the relative good fortune of linking GTA Online to GTA V, if we expect this to be the kind of modus operandi for games of this scale for the largest IP address in the future.
Strauss-Zelnick
We said we plan to offer opportunities to interact with our names on an ongoing basis after they are published. Our purpose is to provide sub-opportunities and monetize them when it makes sense. But there are all the other tactics to do so. This can be downloaded simply through the additional content or it can simply be an online multiplayer game. It is based on the name and as labels prepare to market and release names that will be specified periodically. Therefore, it varies from name to name. There will not be a single technique in the future.
Operator
Our next comes from Drew Crum with Stifel. Continue with yourArray
drew crum
Thanks. Hi guys. Good afternoon. So, I know there are comments in the preamble about the expansion of profitability in fiscal years 2024 and 2025. Is it a scale function or do you also plan to slow down capital spending?And where will we see the fluctuation of investment loans in the future?Thank you.
Laini Goldstein
It is a mixture of scale and also investments other than direct marketing. We expect them to slow down. Direct marketing will be in line with the titles that come out. But other expenses such as staffing, IT spending, and rent, we expect to decrease.
drew crum
Yes. Not bad. Thank you.
Strauss-Zelnick
We need to thank you all for your questions today, for your attention, for your participation and for your support. We appreciate it. Thank you all.
Operator
This concludes today’s conference. You can disconnect your at this time. And we thank you for your participation.