Take-Two Interactive Software’s (TTWO) CEO Strauss Zelnick on Q1 2015 Results – Earnings Call Transcript

Source: Seeking Alpha

Take-Two Interactive Software (NASDAQ:TTWO)

Q1 2015 Earnings Call

August 05, 2014 4:30 pm ET

Executives

Henry A. Diamond – Senior Vice President of Investor Relations & Corporate Communications

Strauss H. Zelnick – Chairman, Chief Executive Officer, Member of Executive Committee and Member of Special Litigation Committee

Karl Slatoff – President

Lainie Goldstein – Chief Financial Officer and Principal Accounting Officer

Analysts

Andrew E. Crum – Stifel, Nicolaus & Company, Incorporated, Research Division

Thomas F. Andrews – BMO Capital Markets Canada

Brian Patrick Fitzgerald – Jefferies LLC, Research Division

Zachary Arrick

Ryan Gee – BofA Merrill Lynch, Research Division

Operator

Greetings, and welcome to the Take-Two Interactive Software First Quarter Fiscal Year 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications for Take-Two Interactive. Thank you, Mr. Diamond, you may begin.

Henry A. Diamond – Senior Vice President of Investor Relations & Corporate Communications

Good afternoon. Welcome, and thank you for joining Take-Two’s conference call to discuss its results for the first quarter of fiscal year 2015 ended June 30, 2014. Today’s call will be led by Strauss Zelnick, Take-Two’s Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks.

Before we begin, I’d like to remind everyone that the 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 annual report on Form 10-K for the fiscal year ended March 31, 2014.

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I’d also like to note that, unless otherwise stated, all numbers we will be discussing today are non-GAAP. Please refer to our earnings release for a GAAP to non-GAAP reconciliation and further explanation. Our earnings release and filings with the SEC may be obtained from our website at www.take2games.com.

And now, I’ll turn the call over to Strauss.

Strauss H. Zelnick – Chairman, Chief Executive Officer, Member of Executive Committee and Member of Special Litigation Committee

Thanks, Hank. Good afternoon, and thank you for joining us today.

Take-Two’s fiscal year 2015 is off to a solid start, with the first quarter marking our eighth consecutive period of better-than-expected results. I’m especially pleased to report that we’re able to deliver non-GAAP revenue growth without the benefit of any major new releases, driven by our expanding portfolio of digitally delivered offerings, continued growth in our NBA 2K franchise and persistent demand for Grand Theft Auto V.

NBA 2K14 continues to expand its global audience and has become our first sports release to cross the 7 million unit selling mark. The title has captivated gamers on both current and next-gen platforms, surpassing both FIFA and Madden as the third highest unit selling title of any genre on PlayStation 4 and Xbox One in the United States. Over the past 5 releases, the NBA 2K franchise has grown at a compounded annual rate of 35%, reflecting the consistent ability of 2K and Visual Concepts to raise the bar for excellence and build the series into one of our company’s most important and durable franchises.

Last September, Grand Theft Auto V delivered the most successful launch in the history of entertainment, achieving $1 billion in retail sales in only 3 days. Nearly a year later, the title continues to attract new audiences in Xbox 360 and PlayStation 3, with worldwide selling now surpassing 34 million units. Fans can look forward to Rockstar Game’s release of the PlayStation 4, Xbox One and PC versions this fall, which Karl will have more to share about shortly.

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During the first quarter, digitally delivered revenue grew 43% year-over-year, to $106.4 million. Nearly 90% of this growth came from recurrent consumer spending, which accounted for approximately 60% of our digitally delivered revenue during the period. The remainder came from full game downloads across console, PC and mobile platforms. The largest contributor to recurrent consumer spending was virtual currency for Grand Theft Auto Online and NBA 2K14.

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