Operator: 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 and Fiscal Year 2026 Take-Two Interactive Software Results Call. [Operator Instructions] I would now like to turn the call over to Nicole Shevins, Senior Vice President, Investor Relations and Corporate Communications. Nicole, please go ahead.

Nicole Shevins: Good afternoon. Thank you for joining our conference call to discuss our results for the fourth quarter and fiscal year 2026 ended March 31, 2026. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our President; and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q&A session following our prepared remarks. Before we begin, I'd like to remind everyone that statements made during this call that are not historical facts are considered forward-looking statements under federal securities laws. These forward-looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements. Actual operating results may vary significantly from these forward-looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the company's most recent annual report on Form 10-K and quarterly report on Form 10-Q, including the risks summarized in the section entitled Risk Factors. I'd also like to note that unless otherwise stated, all numbers we will be discussing today are GAAP and all comparisons are year-over-year. Additional details regarding our actual results and outlook are contained in our press release, including the items that our management uses internally to adjust our GAAP financial results in order to evaluate our operating performance. Our press release also contains a reconciliation of any non-GAAP financial measure to the most comparable GAAP measure. In addition, we have posted to our website a slide deck that visually presents our results and financial outlook. Our press release and filings with the SEC may be obtained from our website at take2games.com. And now I'll turn the call over to Strauss.

Strauss Zelnick: 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 continue 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 19 release of Grand Theft Auto VI, 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 billion to $8.2 billion. This reflects meaningful growth over last year, led by the launch of Grand Theft Auto VI, along with the 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 & Puzzles outpaced our forecast and grew 5% 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 Rollic's history. Top Eleven 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 5 position on the Apple Arcade charts and NBA 2K All-Star in China growing to nearly 10 million registered users after just 1 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 confident 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 VI on November 19. Recurrent Consumer Spending grew 5% year-over-year with strong engagement in GTA Online, driven by A Safehouse 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 V, all-new missions, vehicles, exclusive GTA+ benefits and the powerful, new Rockstar Mission Creator that allows content creators to make their own GTA experiences. Sales of Grand Theft Auto V advanced further with nearly 230 million units sold-in to-date. GTA+ 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 5% increase over NBA 2K25. Recurrent 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 5 for NBA 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 13, 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 Kahn and his team at TKO for their unwavering support and partnership as we continue to evolve the 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 Karl.

Karl Slatoff: 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 3-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 multiyear count. Fiscal 2027 is set to be a milestone year, led by the launch of Grand Theft Auto VI on November 19. We plan to release 6 additional titles during the fiscal year, including 2 mobile titles; 3 sports titles, which are NBA 2K27, PGA TOUR 2K27 and WWE 2K27; and 1 platform extension. Our labels will also continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our previously released titles. Looking ahead, we currently expect to deliver 22 titles throughout fiscal 2028 and 2029, including 1 mobile title, 5 sports titles, 3 core new IPs and 13 core existing IPs, which includes 7 sequels and 6 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 Lainie.

Lainie Goldstein: Thanks, Karl, 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 VI and strength across our core businesses. Turning to our results. We delivered fourth quarter Net Bookings of $1.58 billion, which was above the high end of our guidance range of $1.51 billion to $1.56 billion. This reflected better-than-expected performance from the Grand Theft Auto series, several mobile titles and the Red Dead Redemption series. Recurrent consumer spending growth was strong, increasing 7% over last year and accounting for 82% of net bookings. This included 7% growth for mobile and 5% 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's Civilization VII for Apple Arcade, PGA TOUR 2K25 for Switch 2 and WWE 2K26. GAAP net revenue increased 6% to $1.68 billion, while cost of revenue declined 5% to $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 billion to $6.7 billion. Recurrent consumer spending grew 17% and accounted for 78% of net bookings. NBA 2K 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. GAAP 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 net bookings 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 VI on November 19, 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, Toon Blast, Match Factory!, Empires & Puzzles, the Red Dead Redemption Series, Words With Friends, Color Block Jam and Zynga 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 Color Block 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-out. We expect GAAP net revenue to range from $7.9 billion to $8.1 billion and cost of revenue to range from $3.5 billion to $3.62 billion. Our total operating expenses are expected to range from $4.18 billion 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 VI 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 net bookings to range from $1.32 billion to $1.37 billion compared to $1.42 billion in the first quarter last year. The largest contributors to net bookings are expected to be NBA 2K, the Grand Theft Auto series, Toon Blast, Match Factory!, Empires & Puzzles, the Red Dead Redemption series, Color Block Jam, Words With Friends and Zynga Poker. We project recurrent 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 GAAP net revenue to range from $1.45 billion to $1.5 billion and cost of revenue to range from $578 million to $594 million. Operating expenses are planned to range from $926 million to $936 million. On a management basis, operating expenses are expected to grow by approximately 3% 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.

Strauss Zelnick: Thanks, Lainie 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. For our shareholders, I want to express our appreciation for your continued support. We'll now take your questions. Operator?

Operator: [Operator Instructions] Your first question comes from the line of Eric Handler with ROTH Capital Partners.

Eric Handler: Lainie, just a couple of things within the guidance. It 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 of years for G&A and R&D, what do those trajectories look like? I assume they'll be much smaller than revenue growth.

Lainie Goldstein: Yes, that's correct. 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.

Eric Handler: Okay. That's helpful. And then as a follow-up, how should we think about RCS? And once GTA VI comes out, how are you sort of thinking about the trajectory of GTA Online when that game is launched?

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

Strauss Zelnick: Yes. I think you're asking, though, to 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 V, 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 is now -- has been in market for 3 console generations, it continues to sell. It's now up to 230 million units. Red Dead is up to 85 million units. 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 VI, but certainly, it will stay in market. And certainly, there are many, many consumers who love the title.

Operator: Your next question comes from the line of Colin Sebastian with Baird.

Colin Sebastian: Congratulations on the year. I have a couple of questions as well. I guess, first off, as cash flow inflects in the -- per the guidance for the coming fiscal year, how are you guys thinking about capital allocation between returning to shareholders versus other uses? And I have a follow-up.

Strauss Zelnick: So 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 3 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 will continue. The second use of our capital is very selectively when it makes strategic sense and let me emphasize this, when it's accretive, 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 2-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 a 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, and 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, that was a pretty good plan on our side. So look, like all stocks, they move around at different price points. Our stock traded down as low as, I think, $195 in the last 6 weeks. And there is an opportunity to return capital to the shareholders when it makes sense.

Colin Sebastian: 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 your thinking or your assumptions in terms of establishing pricing and preorder expectations for titles like GTA VI in the coming year.

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

Colin Sebastian: The number of -- the installed base of hardware may not be as high in this current console generation as it might otherwise have been. Certainly, value price points for certain titles have done well versus premium pricing. So those considerations.

Strauss Zelnick: Look, when we look at pricing, I would not say we look at it in the context of the installed 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, frontline 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 the 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 a 100-hour experience, it's 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 at a higher level. We wanted to make sure that consumers loved it and part of loving something is feeling good about what you paid for it.

Operator: Your next question comes from the line of Doug Creutz with TD Cowen.

Douglas Creutz: 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 have sort of said, we expect GTA Online to be down because it's a many year old live service game and then it would typically do better. Can you just give some context around that? And then also what you might be assuming for your 2 new mobile launches within that guide?

Strauss Zelnick: So it's a very fair question. We had a great year at Zynga. And I think it's more the way you characterize it, which is we're not prepared to guide to continually beating expectations materially at any business unit. So we do guide as we see it, 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, 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 don't -- we would never guide around doing something silly in the mobile business, if you're getting bad immediate results from a marketing spend, you stop doing it. And our dev costs are pretty manageable in the mobile world. So I would say, unlike, say, console where you have a big release go, I'm not going to give you the example you want. So we have basketball coming up, like we know how many units it sold so far, 10 million units sold in to-date. We know the prior year, the year before that, we had 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 it is -- you correctly intuited that our mobile numbers would not include an expectation for some massive new release hit.

Operator: Your next question comes from the line of Cory Carpenter with JPMorgan.

Cory Carpenter: I had 2 questions on NBA 2K. Clearly, 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, as you said in the prepared remarks, a little more than you had expected. So what did you see there? And then Karl, maybe could you talk a bit about the engagement that you saw with the initial college basketball rollout?

Lainie Goldstein: 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.

Karl Slatoff: And on the college piece, yes, we are very excited about our college release for Season 5. 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 will 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.

Cory Carpenter: 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 VI 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 would 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.

Strauss Zelnick: We remain enormously optimistic. Technology helped build this company. Video games are created largely inside computers and always have been. When I started in the video game business in 1993, we were making 32-bit games, and they certainly 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, we'll avail ourselves with 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 licensed this technology for video games. So if a competitor has access to AI and that allows someone to do something better, quicker, cheaper, then we would have access to the same thing. The second point that I've made that I would stand behind is that the asset creation is not the same as hit creation. So 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 will benefit us naturally. We have a 3-part strategy, be the most creative, be the most innovative, be the most efficient. It seems to me that even if it doesn't help with creativity, it certainly should help with efficiency and innovation. So 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 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. 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. So I remain highly optimistic. Now I'll give you a real-world example. I was visiting one of our studios, and they showed me some advertisements that they were putting together to advertise their games. And these were live action ads, and they were funny and cute, 15- to 30-second ad units that you've seen a zillion times. And they were all created with AI, licensed AI, legal AI. And the script was done in-house for free, well, by people, colleagues or company already. And the software was used, AI software was used. The entire cost of making this spot was 0. 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, we -- 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.

Operator: Your next question comes from the line of Chris Schoell with UBS.

Christopher Schoell: Strauss, I believe it was a few quarters ago, you mentioned your expectations for GTA VI 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 V? And then, Lainie, 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?

Strauss Zelnick: I don't recall the comment you alluded to. I'm pretty much -- I think I've always said the same thing, which is we're all -- how could we not be? We're all extraordinarily excited about what Rockstar Games is working on. We're all incredibly enthusiastic about the upcoming release. And equally, 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 look good, I've said we absolutely never opine on how high is up. We certainly work towards the best result and hope for the best result. But 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 that 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.

Lainie Goldstein: 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.

Operator: Your next question comes from the line of Andrew Marok with Raymond James.

Andrew Marok: Maybe one on the Rockstar Mission Creator. I know Strauss called that out 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.

Strauss Zelnick: Look, 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 I just think it's incredibly exciting, and our company embraces these advances. So we're not precious about what we do here. We're open-minded. An example -- another example of that is the FiveM business, where this started as sort of a business that was outside of our 4 walls. And now it's a business that's inside our 4 walls, and we're thrilled that it is.

Andrew Marok: Okay. 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?

Strauss Zelnick: Well, look, 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.

Operator: Your next question comes from the line of Matthew Cost with Morgan Stanley.

Matthew Cost: Strauss, there was 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.

Strauss Zelnick: It reminds me of my SATs, it's box D, all of the above.

Operator: Your next question comes from the line of James Heaney with Jefferies.

James Heaney: Yes. Great. Maybe just diving in again on mobile. I mean it's just been impressive to see continued growth of Toon Blast and Match Factory! as kind of the biggest drivers for the segment. I was just hoping you could go in some detail about the unique drivers across those franchises that you think has sort of enabled them to continue growing this far after the initial launch.

Strauss Zelnick: Well, actually, very different. So Toon Blast has been around for a really long time. Match Factory! is relatively new. So Match Factory! last year was still in growth mode. And we projected that it would moderate, and we'll see what actually happens. Toon Blast is a legacy title. And with regard to Toon 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 Toon Blast. Match Factory! is still in pretty steep early. It's not that old a title. So it's very different. We need to be muscular in both areas. We need to be able to to run our live services businesses really well for a long, long time, and Zynga does a phenomenal job with that. But by the way, so does Rockstar, right? GTA Online is a live services business. It's 13 years old. That online is a 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. We've got a pipeline of frontline titles. We got to turn them into hits. We don't always succeed, but we have to try. We have 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, kind of year that we got last year, and we now expect to make a meaningful step up, obviously driven largely by the launch of GTA VI, but also driven by the 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 if history is any guide, we'll also have some titles that will meaningfully beat expectations going forward. And part of our 3-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, we've been a leader in innovations, whether that's cross development or marketing. And 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. 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.

Operator: Your next question comes from the line of Jason Bazinet with Citi.

Jason Bazinet: I just had a quick historical question. In the past, when you've been confronted with these big titles like, I don't know, whether it's GTA IV or V or the last 2 Red Deads, how accurate would you say your firm, your management team was in terms of predicting 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?

Strauss Zelnick: 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. Thankfully, not of late, and they tend to be few and far between. But it would not be accurate to say that our expectations are always exceeded, not accurate in the least. And that's why we are, I think, appropriately humble around here. This is the entertainment business. This is unforgiving. We try our hardest. We do not always succeed.

Operator: Your next question comes from the line of Alec Brondolo with Wells Fargo.

Alec Brondolo: I think I want to maybe try to ask Colin 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 in 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 in the $50 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 VI when they grow up? Or might they be habituated after lower fidelity titles? Any thoughts there would be helpful.

Strauss Zelnick: So actually, it's the contrary. When entertainment properties are aimed at children, 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 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 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 our M-rated titles, specifically one that is coming up.

Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs.

Eric Sheridan: Maybe building on two of the topics we've talked about on the call so far. With respect to mobile advertising and building additional optimization around user acquisition, how are you thinking 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.

Strauss Zelnick: Well, we certainly try to do that. We work with AppLovin, and we are trying to optimize, of course, our return on ad spend. And sometimes things are going really well in the market. Other times they're frustrated in the market depending on what's going on. There have been moments, for example, when we really couldn't get out there and spend because we didn't -- we could not find inventory at a price that makes 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. 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 spending it based on an expectation and you earn it back over a period of time. That expectation is based on prior history, but prior history isn't always just positive 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 talked 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.

Eric Sheridan: Great. And if I could just ask one more. 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 the percentage of mix from DTC over time?

Strauss Zelnick: But look, I've been saying for a long time that I thought both 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 costs, our D2C cost, which is materially lower than third-party costs, 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.

Operator: Your next question comes from the line of Mike Hickey with StoneX.

Michael Hickey: Strauss, Karl, Lainie, Nicole, congrats guys on 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? I have a follow-up.

Strauss Zelnick: Well, look, thanks for the question. I'm obviously not going to go into detail what we've said about marketing GTA VI is that marketing will start this summer. And as you know, any information around releases and marketing comes from our labels and that shouldn't be news to you. That said, 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 I was asked about this earlier because I absolutely refused to use a title of ours as an example, I used someone else's. And I said, so there's a new release of Mission: Impossible, and it's starring Tom Cruise, like we all know what that looks like. And I, for one, am going to see that movie, like I'm going to see that movie. But 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 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 I think that will be true for this company across the board. And I think, again, across the board, actually, I think this company does spectacular marketing. And whatever we did last year, we got to do better this year. Whatever we do this year, we got to do better next year. We demand it of ourselves. And frankly, the market demands of us.

Michael Hickey: Nice. On AI, Strauss, 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?

Strauss Zelnick: I think that everyone has 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 like 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 handcrafting. 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.

Operator: Your next question comes from the line of Brian Pitz with BMO Capital Markets.

Brian Pitz: I'll try a couple here. Any additional color you can provide on GTA VI around your framework for the PC release as well as if the game has any chance of being cross-platform? Also, any best estimate on when we could see a presale launch for the game? If not, perhaps you could at least provide your best guestimate of timing on hearing more of these details.

Strauss Zelnick: Yes. As you know, look, the PC market is 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 19 release.

Operator: Your next question comes from the line of Ram Song with Wolfe Research.

Taebin Song: Just turning back to NBA. I know Lainie 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 like share like 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 at how you think about the stage of growth for monetization and engagement for the basketball franchise, noting what Karl said about the stay tuned comment.

Lainie Goldstein: So we're incredibly proud of NBA 2K's fiscal 2026 record-breaking results, and we're applying the successful learnings to our strategy for this year, including within NBA 2K27. 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 when VC looks at the game each year, they just do not 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.

Operator: Your next question comes from the line of Martin Yang with Oppenheimer.

Martin Yang: I have one question on mobile. Zynga has meaningful presence in Turkey with Rollic and Peak. Can you maybe comment on whether those studios have benefited from the local government policy that favors developers that was released this year?

Karl Slatoff: 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 opportunities, to the extent that any -- that there are opportunities available in any jurisdiction where we operate, we would take advantage of those as much as we possibly can. 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.

Operator: Your next question comes from the line of Omar Dessouky with Bank of America.

Omar Dessouky: 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 would 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 VI relative to its value to consumers? Because by that logic, a $70 price tag implies to me that the consumer value of GTA VI will also go down. Now if I 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 VI relative to its predecessor?

Strauss Zelnick: 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 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 released today is vastly more exciting, compelling, intriguing and longer-lasting entertainment than it was when I was at Crystal Dynamics in 1993. 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 how you should think about our upcoming unannounced price on any release. That will be -- 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.

Operator: Your next question comes from the line of Clay Griffin with MoffettNathanson LLC.

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

Strauss Zelnick: I think, of course, not having announced any online version for GTA VI, it certainly would be premature to talk about an upcoming business model for something that we haven't talked about. But I think conceptually, what we pride ourselves on here is being thoughtful and open-minded and trying to meet consumers where they are and trying to optimize the entertainment experience for those consumers. And that's what we've been talking about a lot on this call. When it really comes down to it, what does this company think about? 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 hit properties that excite and engage consumers. That's what we all think about. Right now, I'm in a room with our staff, right? We don't -- in this room, we're staff executives, right? The IR team, the finance team, the operations team, legal team. But our job, we don't make 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 focused 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. And 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 ills. Make great hits over and over and over again -- 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 that we are going to blast through and an expectation that we're going to continue doing just that at a higher and higher level.

Operator: Your next question comes from the line of Drew Crum with B. Riley Securities.

Andrew Crum: So looking at your net bookings guidance, how, if in any way, is potential cannibalization from GTA VI influencing your view or range of outcomes you see for fiscal '27?

Strauss Zelnick: 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, the 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. But with regard to entertainment, if there's something that you want in the market and then there's something else that you want, you'll try to buy both. And if there's nothing that you want, you won't buy either. 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. That's not just going to be good for Take-Two and our labels. It's going to be good for the industry as a whole.

Operator: That concludes our question-and-answer session. I will now turn the call back to Strauss Zelnick for closing remarks.

Strauss Zelnick: 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 from me -- not more from me. I would like to say this, though, we delivered 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, I think more than 100 offices around the world, if I'm not mistaken, who work incredibly hard in an incredibly dedicated way to support our collective mission. All of this is because of their work. I just -- I get to organize the victory lap. So thank you 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. It's always nice to have a good news call, and we're really happy to share with you all.

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