Yahoo Finance

Q & A Highlights

Q: With the industry discussing potential game price increases to $80, why did Take-Two choose a $50-$60 price range for Mafia? Will future releases have variable pricing? A: Strauss Zelnick, CEO: We've always had variable pricing, aiming to deliver more value than what we charge. For Mafia, we want to reach as many players as possible, believing that if a game is a hit, revenue will follow.

Q: Regarding the $3.5 billion goodwill impairment, is it related to Zynga, and are there structural changes at Zynga? A: Lainie Goldstein, CFO: We haven't specified which unit the impairment is from, but it was a partial impairment due to updated long-term expectations. This is a regular process based on forecast updates.

Q: Can Take-Two achieve the low to mid-20% operating margins seen during the peak performance period post-Red Dead 2 and the pandemic? A: Lainie Goldstein, CFO: There's no reason we can't reach those margins again. We're working on cost reduction and efficiency to offset increased development costs, aiming to build scale and improve margins.

Q: What drives the impressive performance of the mobile segment, and why is it positioned to grow this fiscal year? A: Strauss Zelnick, CEO: Creating new mobile hits is challenging, but Zynga is succeeding with titles like Match Factory! and Color Block Jam. This success is due to talented teams and effective publishing strategies.

Q: What are the long-term assumptions for Take-Two's business post-GTA VI launch, and what are the key drivers for sustainability? A: Strauss Zelnick, CEO: While we don't provide long-term guidance, we're more optimistic than before. We expect sequential growth in fiscal '26 and '27, with GTA VI contributing to record net bookings and free cash flow.

Q: How is the Nintendo Switch 2 viewed as a distribution partner, and will more Take-Two titles be available on the platform? A: Strauss Zelnick, CEO: We're launching four titles with Switch 2, more than ever before. We evaluate each platform on a case-by-case basis, aiming to be where consumers are, but not every title will be on every platform.

Q: What are the key learnings from scaling games via Netflix, and could Netflix help transform gaming IP into mainstream media? A: Karl Slatoff, President: Netflix is a great partner, serious about gaming, and has a large consumer base. While we've done some media deals like the BioShock movie, it's not the primary driver of our partnership.

Q: What are the expectations for operating expenses in fiscal '26, and how do they relate to GTA-related marketing costs? A: Lainie Goldstein, CFO: We expect a 3% year-over-year increase in operating expenses, mainly due to higher marketing costs for current and future titles. We aim for operating expense leverage as net bookings growth outpaces expense expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.