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Take-Two and Zynga to Combine, Bringing Together Best-in-Class Intellectual Properties and a Market-Leading, Diversified Mobile Publishing Platform, to Enhance Positioning as a Global Leader in Interactive Entertainment

take two zynga presentation

  • Take-Two to acquire all the outstanding shares of Zynga for a total value of $9.86 1 per share – $3.50 in cash and $6.36 1 in shares of Take-Two common stock, implying an enterprise value of $12.7 billion
  • Transaction represents a 64% premium to Zynga’s closing share price on January 7, 2022
  • Establishes Take-Two as one of the largest publishers of mobile games, the fastest-growing segment of the interactive entertainment industry
  • Unifies highly complementary businesses, including Take-Two’s best-in-class portfolio of console and PC games and Zynga’s industry-leading mobile franchises
  • Creates one of the largest publicly traded interactive entertainment companies in the world, with $6.1 billion in trailing twelve-month pro-forma Net Bookings for the period ended September 30, 2021
  • Transaction expected to deliver approximately $100 million of annual cost synergies within the first two years after closing, and more than $500 million of annual Net Bookings opportunities over time
  • Conference call to discuss the transaction is scheduled for this morning at 8AM ET

New York, NY and San Francisco, CA – January 10, 2022 – Take-Two Interactive (NASDAQ: TTWO) (the “Company”) and Zynga (NASDAQ: ZNGA), two leaders in interactive and mobile entertainment, today announced that they have entered into a definitive agreement, under which Take-Two will acquire all of the outstanding shares of Zynga in a cash and stock transaction valued at $9.86 1 per Zynga share, based on the market close as of January 7, 2022, with a total enterprise value of approximately $12.7 billion. Under the terms and subject to the conditions of the agreement, Zynga stockholders will receive $3.50 in cash and $6.36 1 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing of the transaction. The purchase price represents a premium of 64% to Zynga’s closing share price on January 7, 2022.

This transformative combination unifies two global leaders in the interactive entertainment business and establishes Take-Two as one of the largest and most diversified mobile game publishers in the industry, with $6.1 billion in pro-forma Net Bookings for the trailing twelve-month period ended September 30, 2021.

Both companies have created and expanded iconic franchises, which will combine to form one of the largest and most diverse portfolios of intellectual properties in the sector. Take-Two’s labels are home to some of the most beloved series in the world, including Grand Theft Auto®, Red Dead Redemption®, Midnight Club®, NBA 2K®, BioShock®, Borderlands®, Civilization®, Mafia®, and Kerbal Space Program®, while Zynga’s portfolio includes renowned titles, such as CSR Racing™, Empires & Puzzles™, FarmVille™, Golf Rival™, Hair Challenge™, Harry Potter: Puzzles & Spells™, High Heels! ™, Merge Dragons!™, Toon Blast™, Toy Blast™, Words With Friends™, and Zynga Poker™.

Management Comments

“We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry,” said Strauss Zelnick, Chairman and CEO of Take-Two. “This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity. Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months. As we combine our complementary businesses and operate at a much larger scale, we believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual Net Bookings opportunities over time.”

“Combining Zynga’s expertise in mobile and next-generation platforms with Take-Two’s best-in-class capabilities and intellectual property will enable us to further advance our mission to connect the world through games while achieving significant growth and synergies together,” said Frank Gibeau, CEO of Zynga. “I am proud of our team’s hard work to deliver a strong finish to 2021, with one of the best performances in Zynga’s history. We are incredibly excited to have found a partner in Take-Two that shares our commitment to investing in our players, amplifying our creative culture, and generating more value for stockholders. With this transformative transaction, we begin a new journey which will allow us to create even better games, reach larger audiences and achieve significant growth as a leader in the next era of gaming.”

Strategic Rationale and Stockholder Value Creation

With Zynga’s stockholders receiving approximately 64.5% 1 of the transaction consideration in Take-Two stock, both groups of stockholders will benefit from the combined company’s greater scale, enhanced financial profile, and the synergies created through the transaction.

Combined company is well-positioned to capitalize on the interactive entertainment industry’s strong tailwinds, including a leadership position in mobile. The video game sector has experienced rapid growth over the last few years and is now the largest vertical in the entertainment industry 2 . Mobile gaming is the fastest growing segment within the industry, with an estimated $136 billion 2 in gross bookings in 2021, and an expected compound annual growth rate of 8% 2 over the next three years. The transaction is expected to establish Take-Two as a leader in mobile gaming, with mobile expected to comprise over 50% of its Net Bookings in Fiscal Year 2023 (as compared to an estimated 12% in Fiscal Year 2022). The transaction will bolster Take-Two’s mobile offerings, which include popular games such as Dragon City, Monster Legends, Top Eleven, Two Dots, and WWE SuperCard, and consist of a diverse array of titles that focus on many of the most popular genres in mobile gaming, including casual, hyper-casual, lifestyle, mid-core, puzzle, social casino and sports games.

Formation of an industry-leading portfolio, comprising Take-Two’s best-in-class intellectual properties and Zynga’s renowned mobile titles. The transaction will create a powerful and diverse portfolio of industry-leading titles that span key platforms and genres across interactive entertainment, developed by some of the most creative and forward-thinking talent within the industry. By sharing best practices and key data insights across the enterprise, the Company is expected to benefit from significant development and publishing synergies, unlock new revenue streams and reach new audiences around the world.

The combined entity has significantly greater scale , with $6.1 billion in Net Bookings, and $769 million 3 in Adjusted Unrestricted Operating Cash Flow on a pro-forma basis for the trailing twelve-month period ended September 30, 2021. Looking ahead, the combined company is expected to deliver a 14% 4 compound annual growth rate for Net Bookings (excluding the annual Net Bookings opportunities and any future acquisitions) over the three-year period from Take-Two’s Fiscal Years 2021 through 2024.

Addition of Zynga’s mobile titles will expand the Company’s base of Recurrent Consumer Spending (“RCS”). Through the addition of Zynga’s mobile business, particularly its diversified portfolio of live services and upcoming pipeline of new releases, Take-Two will increase its sources of RCS, a highly-attractive revenue stream that helps reduce volatility across reporting periods that has historically been driven by the cadence of Take-Two’s console and PC release slate.

Take-Two has also identified over $500 million of incremental annual Net Bookings opportunities to unlock over time, driven by:

Creation of new mobile games for many of the iconic franchises within Take-Two’s portfolio of intellectual property. Take-Two has an extensive catalog of commercially and critically successful console and PC titles with engaged and loyal communities of players, and there is a meaningful opportunity to create mobile games and new cross-platform experiences for many of these properties. Zynga’s nearly 3,000 employees include highly-talented mobile developers, paving the way for Take-Two to accelerate this strategic initiative and introduce its iconic intellectual properties across the fastest-growing platform in the industry.

Ability to optimize RCS by leveraging the collective knowledge across both companies. Both Take-Two and Zynga have extensive capabilities to engage players through live operations (“LiveOps”) and RCS initiatives. By combining resources and proven acumen, the teams at Take-Two and Zynga will deploy best-in-class practices throughout the organization to enhance and grow existing titles across the portfolio. Key opportunities include cross-marketing through a larger, shared customer database and improving game economies through more effective data analytics and machine learning models.

Other strategic benefits include the use of Zynga’s Chartboost advertising platform, which will improve new user acquisition through better audience targeting and optimize mobile advertising inventory to achieve greater yields; geographic expansion into growth markets across Asia, including India, and the Middle East, among other regions; and an enhanced focus on technological innovation and new business models that will utilize the collective knowledge of forward-thinking talent.

Take-Two expects approximately $100 million of annual cost synergies within the first two years after closing, primarily driven by the rationalization of duplicative overhead including corporate general and administrative expenses and public company costs, as well as the benefit of scale efficiencies across the enterprise.

The acquisition is structured to maintain a strong balance sheet , including significant annual cash generation. The combined company’s strategic and financial flexibility is expected to be greater than each company on a standalone basis, providing Take-Two with the financial resources to continue to invest in talent, development, and innovation, while also pursuing select inorganic growth opportunities.

At the close of the transaction, Strauss Zelnick will continue to serve as Chairman and CEO, and the management team of Take-Two will continue to lead the combined company. Zynga’s highly skilled and proven management team, led by Frank Gibeau and Zynga’s President of Publishing, Bernard Kim, will drive the strategic direction for Take-Two’s mobile efforts and will oversee the integration, and day-to-day operations of the combined Zynga and T2 Mobile Games business, which will operate under the Zynga brand as its own label within the Company. Additionally, Take-Two will expand its Board of Directors to 10 members upon the closing of the transaction to add two members from Zynga’s Board of Directors.

Terms of the Acquisition

Zynga stockholders will receive $3.50 in cash and $6.36 1 in shares of Take-Two common stock for each share of Zynga common stock outstanding at the closing. The transaction is valued at $9.86 1 per share of Zynga common stock based on the market closing as of January 7, 2022, implying an enterprise value of approximately $12.7 billion.

The transaction includes a collar mechanism on the equity consideration, so that if Take-Two’s 20-day volume weighted average price (“VWAP”) ending on the third trading day prior to closing is in a range from $156.50 to $181.88, the exchange ratio would be adjusted to deliver total consideration value of $9.86 per Zynga share (including $6.36 of equity value based on that VWAP and $3.50 in cash). If the VWAP exceeds the higher end of that range, the exchange ratio would be 0.0350 per share, and if the VWAP falls below the lower end of that range, the exchange ratio would be 0.0406 per share.

Within the collar range, the final number of Take-Two shares estimated to be issued on a fully diluted basis will range between approximately 50.3 million and 58.5 million shares. Upon closing of the transaction, current Take-Two stockholders will own between 67.2% and 70.4% and current Zynga stockholders are expected to own between 29.6% and 32.8% of the combined company on a fully diluted basis, respectively, including the shares associated with expected settlement of Zynga’s two outstanding series of convertible notes due 2024 and 2026.

As part of the transaction, Take-Two has received committed financing of $2.7 billion from J.P. Morgan and intends to fund the cash component of the transaction through a combination of cash from its balance sheet as well as proceeds of new debt issuance.

The merger agreement provides for a “go-shop” provision under which Zynga and its Board of Directors may actively solicit, receive, evaluate, and potentially enter negotiations with parties that offer alternative proposals during a 45-day period following the execution date of the definitive agreement, expiring on February 24, 2022. There can be no assurance this process will result in a superior proposal. Zynga does not intend to disclose developments about this process unless and until its Board of Directors has made a decision with respect to any potential superior proposal.

  • Within a 7.5% symmetrical collar based on a Take-Two share price of $169.19 as the midpoint.
  • Source: IDG Consulting.
  • Based on the trailing twelve-month period ended September 30, 2021. Combines Take-Two’s Adjusted Unrestricted Operating Cash Flow of $467 million and Zynga’s Operating Cash Flow of $302 million.
  • Due to different fiscal year ends, appropriate modifications were made to calculate information based on Take-Two’s fiscal year end.

Approvals and Close Timing

The transaction, which is expected to be completed during the first quarter of Take-Two’s Fiscal Year 2023, ending June 30, 2022, is subject to the approval of both Take-Two and Zynga stockholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

The transaction has been unanimously approved by the Take-Two and Zynga Boards of Directors. Moreover, each director and executive officer of Take-Two and Zynga have entered into voting agreements to support the transaction.

J.P. Morgan and LionTree Advisors are serving as financial advisors to Take-Two and Willkie Farr & Gallagher LLP is serving as legal counsel. Goldman Sachs & Co. LLC is acting as financial advisor to Zynga and Wilson Sonsini Goodrich & Rosati, Professional Corporation is serving as legal counsel.

Transaction Conference Call and Supplemental Materials

Take-Two and Zynga will host a conference call today at 8:00 a.m. Eastern Time to review the transaction and host a question and answer session. The call can be accessed by dialing (877) 407-0984 or (201) 689-8577. A live listen-only webcast of the call will be available by visiting http://ir.take2games.com . During the conference call and webcast, management will review a presentation summarizing the transaction, which can be accessed at http://t2mobile.take2games.com . All materials will be available following the call at the same location.

Operational Metric – Net Bookings

Net Bookings is defined as the net amount of products and services sold digitally or sold-in physically during the period, and includes licensing fees, merchandise, in-game advertising, strategy guides and publisher incentives.

Non-GAAP Financial Measure

In addition to reporting financial results in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses a Non-GAAP measure of financial performance: Adjusted Unrestricted Operating Cash Flow, which is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. The Company’s management believes it is important to consider Adjusted Unrestricted Operating Cash Flow, in addition to net cash from operating activities, as it provides more transparency into current business trends without regard to the timing of payments from restricted cash, which is primarily related to a dedicated account limited to the payment of certain internal royalty obligations. This Non-GAAP financial measure is not intended to be considered in isolation from, as a substitute for, or superior to, GAAP results. This Non-GAAP financial measure may be different from similarly titled measures used by other companies. In the future, Take-Two may also consider whether other items should also be excluded in calculating this Non-GAAP financial measure used by the Company. Management believes that the presentation of this Non-GAAP financial measure provides investors with additional useful information to measure Take-Two’s financial and operating performance. In particular, this measure facilitates comparison of our operating performance between periods and may help investors to understand better the operating results of Take-Two. Internally, management uses this Non-GAAP financial measure in assessing the Company’s operating results and in planning and forecasting.

About Take-Two Interactive Software

Headquartered in New York City, Take-Two Interactive Software, Inc. is a leading developer, publisher, and marketer of interactive entertainment for consumers around the globe. We develop and publish products principally through Rockstar Games, 2K, Private Division, and T2 Mobile Games. Our products are designed for console systems, personal computers, and mobile, including smartphones and tablets, and are delivered through physical retail, digital download, online platforms, and cloud streaming services. The Company’s common stock is publicly traded on NASDAQ under the symbol TTWO. For more corporate and product information please visit our website at http://www.take2games.com .

About Zynga

Zynga is a global leader in interactive entertainment with a mission to connect the world through games. With massive global reach in more than 175 countries and regions, Zynga has a diverse portfolio of popular game franchises that have been downloaded more than four billion times on mobile including CSR Racing™, Empires & Puzzles™, FarmVille™, Golf Rival™, Hair Challenge™, Harry Potter: Puzzles & Spells™, High Heels!™, Merge Dragons!™, Merge Magic!™, Toon Blast™, Toy Blast™, Words With Friends™ and Zynga Poker™. With Chartboost, a leading mobile advertising and monetization platform, Zynga is an industry-leading next-generation platform with the ability to optimize programmatic advertising and yields at scale. Founded in 2007, Zynga is headquartered in California with locations in North America, Europe and Asia. For more information, visit www.zynga.com or follow Zynga on Twitter, Instagram, Facebook or the Zynga blog.

All trademarks and copyrights contained herein are the property of their respective holders.

Additional Information About the Proposed Acquisition and Where to Find It

This communication relates to a proposed business combination of Take-Two and Zynga that will become the subject of a registration statement on Form S-4 to be filed by Take-Two with the U.S. Securities and Exchange Commission (the “SEC”), which will include a joint proxy statement/prospectus. The registration statement on Form S-4, including the joint proxy statement/prospectus, will provide full details of the proposed combination and the attendant benefits and risks. This communication is not a substitute for the registration statement on Form S-4, including the joint proxy statement/prospectus, or any other document that Take-Two or Zynga may file with the SEC or send to their respective stockholders in connection with the proposed combination. Investors and security holders are urged to read the registration statement on Form S-4, including the definitive joint proxy statement/prospectus, and all other relevant documents filed with the SEC or sent to Take-Two’s or Zynga’s stockholders as they become available because they will contain important information about the proposed combination. All documents, when filed, will be available free of charge at the SEC’s website (www.sec.gov). You may also obtain these documents by contacting Take-Two’s Investor Relations department at [email protected]; or by contacting Zynga’s Investor Relations department at [email protected]. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

Participants in the Solicitation

Take-Two, Zynga and their respective directors and executive officers may be deemed to be participants in any solicitation of proxies in connection with the proposed business combination. Information about Take-Two’s directors and executive officers is available in Take-Two’s proxy statement dated July 27, 2021 for its 2021 Annual Meeting of Stockholders. Information about Zynga’s directors and executive officers is available in Zynga’s proxy statement dated April 5, 2021 for its 2021 Annual Meeting of Stockholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the registration statement on Form S-4, including the joint proxy statement/prospectus, and all other relevant materials to be filed with the SEC regarding the proposed combination when they become available. Investors should read the registration statement on Form S-4, including the joint proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions.

Cautionary Note Regarding Forward-Looking Statements

Statements contained herein which are not historical facts may be considered forward-looking statements under federal securities laws and may be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the proposed business combination of Take-Two and Zynga and the outlook for Take-Two’s or Zynga’s future business and financial performance. Such forward-looking statements are based on the current beliefs of Take-Two’s and Zynga’s respective management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the inability to obtain Take-Two’s or Zynga’s respective stockholder approval or the failure to satisfy other conditions to completion of the proposed combination, including receipt of regulatory approvals, on a timely basis or at all; risks that the proposed combination disrupts each company’s current plans and operations; the diversion of the attention of the respective management teams of Take-Two and Zynga from their respective ongoing business operations; the ability of either Take-Two, Zynga or the combined company to retain key personnel; the ability to realize the benefits of the proposed combination, including net bookings opportunities and cost synergies; the ability to successfully integrate Zynga’s business with Take-Two’s business or to integrate the businesses within the anticipated timeframe; the outcome of any legal proceedings that may be instituted against Take-Two, Zynga or others following announcement of the proposed combination; the amount of the costs, fees, expenses and charges related to the proposed combination; the uncertainty of the impact of the COVID-19 pandemic and measures taken in response thereto; the effect of economic, market or business conditions, including competition, consumer demand and the discretionary spending patterns of customers, or changes in such conditions, have on Take-Two’s, Zynga’s and the combined company’s operations, revenue, cash flow, operating expenses, employee hiring and retention, relationships with business partners, the development, launch or monetization of games and other products, and customer engagement, retention and growth; the risks of conducting Take-Two’s and Zynga’s business internationally; the impact of changes in interest rates by the Federal Reserve and other central banks; the impact of potential inflation, volatility in foreign currency exchange rates and supply chain disruptions; the ability to maintain acceptable pricing levels and monetization rates for Take-Two’s and Zynga’s games; and risks relating to the market value of Take-Two’s common stock to be issued in the proposed combination.

Other important factors and information are contained in Take-Two’s and Zynga’s most recent Annual Reports on Form 10-K, including the risks summarized in the section entitled “Risk Factors,” Take-Two’s and Zynga’s most recent Quarterly Reports on Form 10-Q, and each company’s other periodic filings with the SEC, which can be accessed at www.take2games.com in the case of Take-Two, http://investor.zynga.com in the case of Zynga, or www.sec.gov. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. Neither Take-Two nor Zynga undertakes any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

(Investor Relations) Nicole Shevins Senior Vice President Investor Relations & Corporate Communications Take-Two Interactive Software, Inc. (646) 536-3005 [email protected]

(Corporate Press) Alan Lewis Vice President Corporate Communications & Public Affairs Take-Two Interactive Software, Inc. (646) 536-2983 [email protected]

(Investor Relations) Rebecca Lau Vice President Investor Relations & Corporate Finance [email protected]

(Corporate Press) Kenny Johnston Director Communications [email protected]

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take two zynga presentation

Take-Two Interactive just announced its intent to buy FarmVille developer Zynga for $12.7 billion in what could be the biggest acquisition in video game history. It’s an absolutely massive deal; to put it in perspective, the acquisition would be $5 billion more than Microsoft’s $7.5 billion purchase of the parent company of Skyrim maker Bethesda Softworks. You could throw in the money Disney paid for Lucasfilm and still have cash left over.

So what is Take-Two getting for its money? Yes, big Zynga games like FarmVille , Words With Friends , and High Heels! will join Take-Two’s own roster of franchises that includes Grand Theft Auto , NBA 2K , and Civilization . But perhaps more importantly, Take-Two will now be able to use Zynga’s expertise building hugely popular free-to-play mobile titles so it can make new hit games based on its own properties. In fact, Zynga will be the new brand for Take Two’s mobile efforts, and current Zynga CEO Frank Gibeau will lead that organization, indicating the potential direction of Take Two’s mobile future. 

Developers across the industry have been bringing big franchises to mobile

Developers across the industry have been bringing big franchises to mobile and earning a lot of money doing so. PUBG Mobile was the top-grossing mobile game worldwide in November 2021, earning “close to” $254 million, according to Sensor Tower . League of Legends: Wild Rift , the mobile-optimized version of the hit PC MOBA, was in the top ten for App Store revenue that same month. Pokémon Go brought in more than $5 billion in revenue as of its five-year birthday in July , Sensor Tower reported . The Tencent-owned studio that makes Call of Duty: Mobile reportedly earned $10 billion in 2020 .

And some of the biggest publishers have been buying their way into the space for years, with Activision Blizzard buying Candy Crush maker King for $5.9 billion in 2015 and EA buying Kim Kardashian: Hollywood developer Glu and Golf Clash maker Playdemic in 2021. Mobile games are big business, and it’s not hard to see Take-Two releasing free-to-play mobile versions of its biggest franchises with the help of Zynga. 

Take-Two was fairly explicit Monday on its intention to take this path. “We see tremendous untapped potential to bring Take-Two’s renowned console and PC properties to mobile, a high-priority initiative that will be energized by the addition of Zynga’s leading development, publishing, and live operations teams,” Take-Two CEO Strauss Zelnick said in an investor call Monday. Take-Two also noted that the acquisition offered a “clear path to bring Take-Two’s console/PC games to mobile” in an investor presentation ( PDF ). (The deal is expected to close in Take-Two’s first fiscal quarter of 2023, which ends on June 30th, 2022.)

The Zynga acquisition doesn’t mean that Take-Two will be bringing its franchises to mobile for the first time. Right now, you can download and play Grand Theft Auto III , Vice City , and San Andreas on your phone, for example. But those are paid titles on the iOS App Store and likely aren’t nearly as lucrative as some of the huge free-to-play hits on the market right now. (Take-Two already has some experience in that space, with its microtransaction-laden version of NBA 2K for mobile.)

It’s not hard to imagine Take-Two wanting to translate the massive success of ‘GTA Online’ to mobile

And speaking of GTA , it’s not hard to imagine Take-Two wanting to translate the massive success of GTA Online onto mobile platforms with Zynga’s expertise. Despite being released in 2013 — and requiring that you own Grand Theft Auto V to play it ( well, for now ) — GTA Online has remained hugely popular. In February 2021, Take-Two said the game “had more players in every month and for the entirety of calendar 2020 than in any other year since its launch,” according to GameSpot . It also offers in-game currency for real-world money that has proven to be lucrative; Take-Two cited the game as one of its largest contributors to its revenue as recently as its November earnings release ( PDF ).

In addition to the very obvious business opportunity there — it’s hard not to see some sort of free-to-play GTA being an absolutely massive hit — Zynga also brings expertise in supporting games for years at a time. Zynga still offers multiple free-to-play versions of Words With Friends , including both a “classic” version and a sequel, Words With Friends 2 , which seems like a better way to generate long-term revenue from a franchise than one-offs like 2K Games’ expensive and short-lived iOS port of BioShock . Imagine Take-Two and Zynga replicating the long-term model for GTA , Red Dead Redemption , Borderlands , and the rest of its titles, and you can start to see why Take-Two decided to pay as much as it did for the FarmVille -maker.

The deal isn’t just about turning Take-Two games into mobile hits. Take-Two highlighted how its “expertise in console/PC can be applied to Zynga’s cross-play ambitions;” Zynga is set to put its toe into console gaming with Star Wars: Hunters, which is coming to Nintendo Switch, iOS, and Android sometime this year . Take-Two plans to use Zynga’s Chartboost ad platform to “acquire new users more efficiently and optimize mobile ad inventory.” And yes, there may be something with NFTs in the future — Gibeau said during Monday’s investor call that “the idea that players will play-to-earn or play-to-own is a very compelling idea that we think will have legs as the industry develops,” according to Decrypt .

But it seems likely that the biggest shift following the acquisition is that Take-Two will start expanding its most important franchises into the lucrative world of free mobile games. While we don’t know exactly when the first games from the Take-Two / Zynga tie-up might be released, the acquisition could mean the next GTA might not be as far off as fans have worried — it just might be on your phone instead.

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Take-Two to acquire mobile gaming giant Zynga for $12.7B

take two zynga presentation

Huge consolidation is afoot in the world of gaming. Today Take-Two Interactive announced a plan to acquire mobile games giant Zynga, in a deal valued at $9.86 per share — $3.50 in cash and the remaining $6.36 in shares of Take-Two common stock. Zynga’s enterprise value in the deal works out to $12.7 billion.

The deal will bring together two gaming powerhouses, Take-Two in consoles and PC games (including such iconic titles as Grand Theft Auto) and Zynga in a massive swathe of mobile games, a genre that was arguably largely defined by the company (it’s behind FarmVille, Empires & Puzzles, Words with Friends and more).

The deal, Take-Two said, will result in $6.1 billion in 12-month pro-forma net bookings (ending September 30, 2021), making it one of the largest gaming companies overall, regardless of platform.

The transaction is expected to close in Q1 of fiscal year 2023, subject to shareholder and regulatory approvals.

“We are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry,” said Strauss Zelnick, chairman and CEO of Take-Two, in a statement. “This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity. Zynga also has a highly talented and deeply experienced team, and we look forward to welcoming them into the Take-Two family in the coming months. As we combine our complementary businesses and operate at a much larger scale, we believe that we will deliver significant value to both sets of stockholders, including $100 million of annual cost synergies within the first two years post-closing and at least $500 million of annual Net Bookings opportunities over time.”

“Combining Zynga’s expertise in mobile and next-generation platforms with Take-Two’s best-in-class capabilities and intellectual property will enable us to further advance our mission to connect the world through games while achieving significant growth and synergies together,” added Frank Gibeau, CEO of Zynga. “I am proud of our team’s hard work to deliver a strong finish to 2021, with one of the best performances in Zynga’s history. We are incredibly excited to have found a partner in Take-Two that shares our commitment to investing in our players, amplifying our creative culture, and generating more value for stockholders. With this transformative transaction, we begin a new journey which will allow us to create even better games, reach larger audiences and achieve significant growth as a leader in the next era of gaming.”

Strauss Zelnick will lead the larger company, with Gibeau and Zynga’s president of Publishing, Bernard Kim, overseeing the larger mobile business (including integrating Zynga with Take-Two’s existing mobile operations).

As with a lot of other consolidation moves, this is about cost savings through synergies. Take-Two said the deal would help the larger business save about $100 million annually after two years (first will come integrations). Take-Two already has a number of mobile games titles and has expanded its franchises into mobile, but this will give the company a significantly larger holding in the space.

This is key, considering how Zynga has fared over the years. Since a huge boom in its share price when it first went public, the company has been on a bit of a roller coaster, and over the last year has seen its share price drop , making it an acquisition target.

The move also puts to an end an era of sorts. As a startup based out of San Francisco’s SOMA district just as the city was coming into its own as a tech hub separate from Silicon Valley, it was an early mover in spotting and scaling the mobile gaming opportunity.

Initially it found huge traction as a social gaming giant, leaning on growth by way of Facebook’s social graph, but as that became annoying and spammy, over time Facebook changed the rules and cut off Zynga’s audience supply. More generally, the mobile gaming market has proven to be a more precarious one when it comes to consumer tastes and usage, and so a lot of Zynga’s success has been banked around finding (and sometimes acquiring) the next hot new title and franchise to replace those that have waned in popularity. (One of its bigger recent acquisitions was acquiring, in 2020, Turkey’s Peak Games, which had already established traction with Toon Blast and Toy Blast, for $1.8 billion .)

Combining with Take-Two, which also publishes Red Dead Redemption, Midnight Club, NBA 2K, BioShock, Borderlands, Civilization, Mafia and Kerbal Space Program, will give it a large library of franchises and IP from which to build new mobile gaming experiences. Similarly, Zynga’s IP may now find new traction in different formats and different screens.

What is interesting is whether and how the larger company will use its expanded content IP to think about how it engages with the market at large. These days so much action in gaming happens more on the platforms where people meet to discuss games and be social with each other, whether that is over Twitch, Discord or somewhere else.

The gaming market has seen a huge surge of attention in the last couple of years, as one of the “winners” in the wake of the COVID-19 pandemic with more people looking for diversions while staying put at home.Take-Two quoted figures that said overall the mobile gaming industry saw $136 billion in gross bookings in 2021 and is growing currently at 8%. Mobile will now account for half of Take-Two’s bookings, it said.

More to come…

Take-Two’s Zynga Bid Shows Connected Economy and Mobile, Personalized Advertising’s Appeal

Take Two, Zynga Show Connected Economy Appeal

Online gaming — particularly mobile gaming — is cementing its place as part the foundation that keeps the connected economy, well, connected, across all avenues of digital interaction, particularly across leisure-related activities.

To that end, Take-Two Interactive announced in a Monday (Jan. 10) press release that it would buy buying mobile gaming company Zynga for $12.7 billion.

You might remember Zynga as the company behind the once-wildly popular Farmville titles that were a mainstay of Facebook. In recent years, the company has seen momentum with Zynga Poker, Words with Friends and Harry Potter-related titles.

In the announcement detailing the deal, the companies said the combined entity will benefit from “development and publishing synergies, unlock new revenue streams and reach new audiences around the world.”

In terms of the numbers, Take-Two/Zynga will have $6.1 billion in net bookings and is targeting a 14% compound annual growth rate (CAGR) for net bookings. Take-Two has said that adding Zynga’s mobile titles will expand recurrent consumer spending.

In presentation materials Monday the three-year CAGR of the mobile game industry globally has been estimated at 8%, where gross bookings were worth about $136 billion last year.

Zynga’s installed base, according to that presentation, is tied to 183 million monthly mobile active users.

As for the connected economy part of the equation, Zynga delivers 10 billion monthly ad impressions, with 4 billion installs across Zynga’s games to date. Take-Two has said that the acquisition announced Monday offers a “clear path” to bring Take-Two’s console/PC games to mobile conduits, and to use Zynga’s scale and Chartboost ad platform to, per the merger presentation, “acquire new users more efficiently and optimize mobile ad inventory.”

The Advertising Component

Part of Zynga’s own business model rests with personalized advertising. The company explains on its website that it displays advertising in its games to “help us deliver a free-to-play game experience.” Zynga and its partners collect information about users and their devices (identifiers and addresses, the games played, and demographic details) and uses that info to craft personalized, target advertising.

Contextualized advertising, we contend, is part and parcel of the connected economy, as it follows and moves with users as they shift seamlessly between any number of daily activities conducted across mobile devices.

Broadly speaking, by building out and extending in-game advertising, players are prompted to make impulse buys (or at least mull a product or service for a later transaction). There are also advergames, which are games that are tied directly, and built upon, certain brands or products.

In the age of the pandemic, it’s not too far-fetched to state that mobile devices (and yes, gaming) — the smartphones, especially — have become a constant presence by our sides. We’re wielding more devices than ever, and thus, companies have more avenues through which to engage with us.

By way of example, PYMNTS’ research shows that mainstream consumers at nearly half of users recently surveyed, owned an average of 6.8 devices and high-tech consumers (9% of the total respondent pool at the end of last year) own an average of 12 devices.

Read more: High Tech Consumers Own an Average of 12 Devices

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Stock TTWO

Take-Two Interactive Software, Inc.

Us8740541094.

  • Take Two Interactive Software : Q4 2023 Earnings Presentation

TAKE-TWO INTERACTIVE

SOFTWARE, INC.

(NASDAQ: TTWO)

FOURTH QUARTER AND FISCAL 2023 RESULTS & GUIDANCE SUMMARY

CAUTIONARY NOTE:

FORWARD LOOKING STATEMENTS

Statements contained herein which are not historical facts are considered forward-looking statements under federal securities laws and may be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects," "seeks," "should," "will," or words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company's future business and financial performance. Such forward-looking statements are based on the current beliefs of our management as well as assumptions made by and information currently available to them, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may vary materially from these forward-looking statements based on a variety of risks and uncertainties including: risks relating to our combination with Zynga; the uncertainty of the impact of the COVID-19 pandemic and measures taken in response thereto; the effect that measures taken to mitigate the COVID-19 pandemic have on our operations, including our ability to timely deliver our titles and other products, and on the operations of our counterparties, including retailers and distributors; the effects of the COVID-19 pandemic on both consumer demand and the discretionary spending patterns of our customers as the situation with the pandemic continues to evolve; the risks of conducting business internationally; the impact of changes in interest rates by the Federal Reserve and other central banks, including on our short-term investment portfolio; the impact of potential inflation; volatility in foreign currency exchange rates; our dependence on key management and product development personnel; our dependence on our NBA 2K and Grand Theft Auto products and our ability to develop other hit titles; our ability to leverage opportunities on PlayStation®5 and Xbox Series X|S; the timely release and significant market acceptance of our games; the ability to maintain acceptable pricing levels on our games; and risks associated with international operations.

Other important factors and information are contained in the Company's most recent Annual Report on Form 10-K, including the risks summarized in the section entitled "Risk Factors," the Company's most recent Quarterly Report on Form 10-Q, and the Company's other periodic filings with the SEC, which can be accessed at www.take2games.com. All forward-looking statements are qualified by these cautionary statements and apply only as of the date they are made. The Company undertakes no obligation to update any forward- looking statement, whether as a result of new information, future events or otherwise.

Q4 FY2023 RESULTS SUMMARY:

FINANCIAL SUMMARY ($ in millions, except EPS)

Note: GAAP results were impacted by amortization of acquired intangibles and business acquisition costs

SELECT MANAGEMENT RESULTS

SELECT FINANCIAL DATA ($ in millions)

  • Net Bookings were $1.39 billion, which was above the high end of our guidance range
  • Our results reflected better-than-expected results from Grand Theft Auto V and Grand Theft Auto Online, Red Dead Redemption 2 , and Zynga's mobile portfolio
  • RCS rose 115%, which was above our outlook, primarily driven by Zynga and Grand Theft Auto Online
  • As a part of our ongoing portfolio management measures, we made the decision to cancel several unannounced titles in development, which we believe will enable us to tighten our focus and reallocate resources to projects for which our creative teams have higher levels of conviction and expectations of success. Excluding the associated write-offs, our fourth quarter and full-year management earnings results were above the high end of our guidance

Note: Results from last year did not include Zynga business.

FY2023 RESULTS SUMMARY:

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Take-Two Interactive Software Inc. published this content on 17 May 2023 and is solely responsible for the information contained therein. Distributed by Public , unedited and unaltered, on 17 May 2023 20:25:08 UTC .

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Take-Two will buy Zynga, in a union of two top game makers.

Adding Zynga’s stable of app developers is meant to help Take-Two roll out more smartphone versions of its popular video game titles.

take two zynga presentation

By Michael J. de la Merced and Kellen Browning

  • Jan. 10, 2022

The video game publisher Take-Two Interactive agreed on Monday to buy Zynga , a mobile game maker, for more than $11 billion, in a deal that unites the makers of Grand Theft Auto and FarmVille.

With the deal, Take-Two — known for producing games like Grand Theft Auto and NBA 2K for traditional platforms like the Sony PlayStation console and personal computers — is acquiring a specialist in mobile and social gaming, with Zynga’s best-known titles including Words With Friends and other apps.

Adding Zynga’s stable of app developers is meant to help Take-Two roll out more smartphone versions of its popular titles. Zynga will also help Take-Two expand its revenue from so-called recurrent consumer spending, in which players pay for new content and upgrades within games.

The deal values Zynga at about $12.7 billion, making it one of the largest in the history of the video game industry, topping the purchase of Supercell by the Chinese internet giant Tencent in 2016 for $10 billion and Microsoft’s acquisition of ZeniMax Media for $7.5 billion in 2020.

The gaming industry has boomed during the pandemic, providing large tech companies with the cash to buy smaller rivals. It has also helped more troubled companies like Zynga, which found early success tying itself to Facebook with the mobile game FarmVille. The company stumbled as the mobile gaming industry shifted away from social media and toward apps like Clash of Clans and Candy Crush.

Zynga has laid off employees and cycled through executives over the years as it struggled to maintain relevance. It was still losing money — $42 million — in its most recent quarterly earnings report.

By contrast, Take-Two is profitable and has gone on a buying spree since the pandemic, adding a handful of smaller studios to its portfolio of games.

“This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity,” Strauss Zelnick, Take-Two’s chairman and chief executive, said in a statement.

Frank Gibeau, Zynga’s chief executive, said in a statement that combining the two companies would “allow us to create even better games, reach larger audiences and achieve significant growth as a leader in the next era of gaming.”

Under the terms of the deal, Take-Two will pay $3.50 in cash and $6.36 worth of newly issued stock for each Zynga share. That amounts to $9.86 a share, up 64 percent from where Zynga closed on Friday.

Michael de la Merced joined The Times as a reporter in 2006, covering Wall Street and finance. Among his main coverage areas are mergers and acquisitions, bankruptcies and the private equity industry. More about Michael J. de la Merced

Kellen Browning is a technology reporter in the Bay Area covering the video game industry and general tech news. He graduated from Pomona College. More about Kellen Browning

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Take-Two Interactive To Acquire Zynga

January 12, 2022 — 03:32 am EST

Written by Trefis Team for Trefis  ->

[Updated: 1/10/2022] Take-Two To Acquire Zynga

Take-Two Interactive (NASDAQ: TTWO) has announced its plan to acquire Zynga (NASDAQ: ZNGA) in a deal valued at $12.7 billion. Zynga shareholders will get $9.86 per share, including $3.50 in cash and $6.36 of Take-Two stock. This transaction reflects a large 64% premium to Zynga’s current value of $6 per share. We have long maintained our view that ZNGA stock is undervalued, given its decline of over 37% over the last one year, compared to a large 23% rise for the broader S&P500.

Declining user engagement levels compared to the pandemic, and changes to Apple’s ad tracking policy are some of the reasons why ZNGA stock was being weighed down over the recent quarters. Zynga over the recent years has made multiple acquisitions and improved its revenue growth, a trend which is expected to continue going forward, as well. The stock price of ZNGA is up over 50% in after hours trading. Our coverage on Zynga, which includes Zynga Revenue Comparison , Zynga EBITDA Comparison , and Zynga Valuation, among others, provides more details on the company’s financial performance.

While ZNGA stock will likely see higher levels today, it is helpful to see how its peers stack up. Check out Zynga Stock Comparison With Peers to see how ZNGA stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

Below you’ll find our previous coverage of ZNGA stock where you can track our view over time.

[Updated: 12/7/2021] ZNGA Stock Update

The stock price of Zynga (NASDAQ: ZNGA) continues to underperform its peers as well as broader indices. While the S&P500 index has seen a rise of 9% over the last six months, ZNGA stock is down over 40%. Now, most of the gaming stocks, including TTWO and EA, have also underperformed the broader markets with negative returns of over 10% in the last six months, still faring better than ZNGA. ATVI stock is also down over 40% over the last six months, but it has its own stock-specific issues. Overall, user engagement levels for gaming were very high last year, when people were confined to their homes, but now with economies opening up, engagement levels are lower compared to last year.

For Zynga, such a large stock decline is unwarranted, in our view. Other than falling user engagement levels, what has impacted ZNGA stock is rising competition from the likes of Roblox, a gaming platform where users can play games developed by other users in a metaverse (refers to a virtual reality environment where users can interact with each other), and there are concerns over Apple’s policy on in-game advertising. Apple released a privacy update for iOS in April, making it hard for applications to track iPhone users without their consent. This ad-tracking change is likely to result in higher player acquisition costs for Zynga.

That said, the advertising growth of nearly 2x in Q3 2021, also aided by Rollic’s hyper-causal gaming portfolio acquisition, was better than the street estimates. The management also raised its full-year outlook and it has new game launches slated for Q4 and 2022, which, along with its Chartboost acquisition this year, is likely to bolster the top and bottom line growth going forward.

Going by our Zynga’s valuation of a little over $10, based on expected EPS of $0.38 and a P/E multiple of 27x, there is an upside potential of over 60% from the current levels of around $6. In fact, the $11 estimate as per average of analyst forecasts, reflects an even larger 73% upside from the current levels, clearly pointing that ZNGA stock is undervalued currently, and investors can use the current dip as a buying opportunity for strong gains in the long term.

But what about the near term, given that ZNGA stock has seen a fall of 12% in a month? Going by its historical performance, there is a slightly higher chance of a fall in ZNGA stock over the next month. Out of 313 instances in the last ten years that ZNGA stock saw a twenty-one day fall of 12% or more, 154 of them resulted in ZNGA stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 154 out of 313, or only a 49% chance of a rise in ZNGA stock over the coming month . See our analysis on  ZNGA Stock Chances of Rise for more details.

So, if this follows its historical pattern, ZNGA stock may remain sideways in the near term. However, given that the stock is undervalued with a large upside potential, we still find the current levels to be attractive.

Wondering how Zynga’s peers stack up. Check out Zynga Stock Comparison With Peers to see how ZNGA stock compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

[Updated: 9/22/2021] ZNGA Stock Decline

The stock price of Zynga (NASDAQ: ZNGA) has seen a decline of 6.5% over the last week, while it is down 22% year-to-date. ZNGA stock has seen a gradual decline since it reported sluggish Q2 results in early August. Despite the recent acquisition of Rollic, the earnings were well short of our estimates, and there are rising concerns if Zynga can seen a meaningful earnings expansion over the coming years, something which the company has delivered in the past. Furthermore, there are already signs of slowing growth in user engagement levels after a sharp rise during the pandemic and gaming stocks at large have seen lower levels over the recent months.

Now, there are some positive developments for Zynga as well. Recently, a federal judge ruled that Apple can’t force developers to use in-app purchases. Gaming developers, such as Zynga, will now be able to offer payment options other than Apple, which takes between 15-30% of gross sales. This should help gaming companies improve their margins going forward.

The company also plans to launch FarmVille 3 for mobile, and it will likely result in better growth for Zynga’s revenue going forward, given the popularity of the franchise. The company will also launch its free-to-play Star Wars game, which is expected to bolster its user base and in-game purchases. Zynga also announced a social deception game – ReVamp – for Snapchat.

If you are considering Zynga stock as an investment option over a larger time frame, you can explore our forecast for Zynga’s valuation . We have maintained our view that ZNGA stock is undervalued and any dip can be used as a buying opportunity for long-term investors. But what about the near-term? Will ZNGA stock continue its downward trajectory over the coming weeks, or is a rise in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for ZNGA stock average around -0.4% in the next  one-month (twenty-one trading days) period after experiencing a 6.5% fall over the previous week (five trading days), implying that the stock is best avoided in the near term . But how would the returns fare if you are interested in holding ZNGA stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Zynga stock price forecast . You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

If ZNGA stock moved by -5% over five trading days, then over the next twenty-one trading days ZNGA stock moves an average of 0.3%, with only a 52% probability of a positive return over this period, based on the stock’s historical performance.

Some Fun Scenarios, FAQs & Making Sense of Zynga Stock Movements:

Question 1: Is the price forecast for Zynga stock higher after a drop?

Answer: Consider two situations,

Case 1: Zynga stock drops by -5% or more in a week

Case 2: Zynga stock rises by 5% or more in a week

Is the price forecast for Zynga stock higher over the subsequent month after Case 1 or Case 2?

ZNGA stock fares better after Case 2 , with an expected return of 0.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 0.3% for Case 2. This implies a price forecast of $8 in Case 1 and a figure of $8 in Case 2 using ZNGA market price of $7.66 on 9/22/2021.

In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.

Try the Trefis machine learning engine above to see for yourself how the forecast for Zynga stock is likely to changes after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Zynga stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For ZNGA stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

take two zynga presentation

You can try the engine to see what this table looks like for Zynga after a larger loss over the last week, month, or quarter.

Question 3: What about the stock price forecast after a rise if you wait for a while?

Answer: The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Zynga stock by changing the inputs in the charts above.

[Updated: 8/10/2021] ZNGA Stock Update

Zynga (NASDAQ: ZNGA) recently reported its Q2 results, which were below our estimates. The company reported revenues of $712 million, in-line with the consensus estimate of $713 million but slightly lower than our forecast of $725 million. The company’s adjusted EPS of $0.05 was well below the $0.11 per Trefis and $0.09 consensus estimates. While the company benefited from its recent acquisitions, including Rollic, a slower than expected growth in user pay impacted the company’s overall performance. Note that is was a tough comparison to the prior year quarter, which benefited from Covid-19 related lockdowns, as people were confined to their homes, eschewing more public forms of entertainment. This resulted in higher user-engagement levels for gaming companies, including Zynga.

Looking forward, the company has lowered its outlook for revenues to be around $2.8 billion, 3% lower than its previous guidance. This can primarily be attributed to two factors – 1. reopening of economies resulting in lower user engagement levels, and 2. Apple’s ad-tracking changes resulting in higher player acquisition costs for Zynga. Following a dismal Q2, and lowered guidance,  ZNGA stock plummeted 18% in a single trading session on Aug 6.

We have updated our model following the Q2 release. We now forecast sales to be $2.6 billion for the full-year 2021, up 33% y-o-y, compared to our previous estimate of around $2.9 billion, and lower than the company’s guidance. Looking at the bottom line, we now estimate adjusted EPS to be $0.36, compared to our earlier estimate of $0.45. We believe that the impact of Apple’s changes to ad tracking on Zynga’s earnings will likely be higher than earlier estimated. Given the changes to our revenues and earnings forecast, we have revised our Zynga Valuation at a little over $11 per share, based on $0.36 expected EPS and a little under 31x P/E multiple for 2021. Although this marks a 20% discount to our prior estimate, it is still at a premium of around 37% to the current market price of $8, implying that ZNGA is undervalued currently, and investors can use this dip to buy for long-term gains.

[Updated: 8/4/2021] Zynga Q2 Earnings Preview

Zynga (NASDAQ: ZNGA) is scheduled to report its Q2 2021 results on Thursday, Aug 5. We expect the company to likely post revenue and earnings above the consensus estimates, primarily led by continued growth in the company’s key franchises – Empires & Puzzles and Merge Dragons.  Zynga’s top-line will also be bolstered by contribution from its recent acquisitions.  However, the company has cautioned for some pressure on advertising due to changes in the policies related to advertising from Apple. Barring the pressure on advertising, we expect Zynga to navigate well based on these trends over the latest quarter.

Furthermore, our forecast indicates that Zynga’s valuation is $14 per share, which is 40% above the current market price of around $10, implying that ZNGA stock is undervalued at its current levels. Our interactive dashboard analysis on Zynga Pre-Earnings  has additional details.

(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates Zynga’s Q2 2021 revenues (total bookings – includes change in deferred revenue along with total revenue) to be around $725 m illion , slightly above the $713 million consensus estimate, and $710 million per the company’s provided guidance. Despite the economies opening up with vaccination programs underway in multiple countries, the user engagement levels for gaming has remained on the higher side, compared to the pre-pandemic levels, and Zynga, in particular, has benefited significantly, due to its recently acquired gaming portfolios, which should bolster the overall top-line growth in Q2. Zynga’s Q1 2021 total bookings were up a solid 69% y-o-y to $720 million, primarily driven by higher user engagement levels for its top games, as well as the contribution from acquisitions of games from Rollic. Our dashboard on  Zynga Revenues  offers more details on the company’s segments.

2) EPS likely to be above the consensus estimates

Zynga’s Q2 2021 adjusted earnings per share (EPS) is expected to be $0.11 per Trefis analysis, two cents above the consensus estimate of $0.09. The company’s net loss of $23 million in Q1 2021 was much better than a $104 million loss in the prior year quarter. However, on an adjusted basis, the company reported earnings of $84 million or $0.08 on a per share basis. For the full year 2021, we expect the adjusted EPS to be higher at $0.45 compared to $0.35 in 2020, and above the $0.40 consensus estimate.

(3) Stock price estimate a large 40% above the current market price

Going by our  Zynga’s Valuation , with an EPS estimate of $0.45 and a P/E multiple of 31x in 2021, this translates into a price of $14, which is 40% above the current market price of around $10. In fact, at the current market price of $10, ZNGA stock is trading at just 22x its 2021 EPS estimate of $0.45. We continue to believe that Zynga deserves a higher P/E multiple given the strong revenue and earnings growth delivered over the recent past, a trend expected to continue going forward, as well.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.

While ZNGA stock looks undervalued, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for IAC Interactive vs Activision Blizzard.

What if you’re looking for a more balanced portfolio instead? Here’s a  high-quality portfolio  that’s beaten the market consistently since the end of 2016.

[1] Month-to-date and year-to-date as of 1/10/2022 [2] Cumulative total returns since the end of 2016

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Take-Two Interactive Software Earnings Transcript (NASDAQ:TTWO)

Presentation.

Greetings. Welcome to Take-Two's Third Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions]

I will now turn the conference call over to Nicole Shevins, Senior Vice President of Investor Relations and Corporate Communications. Thank you. You may begin.

Good afternoon. Thank you for joining our conference call to discuss our results for the third quarter of fiscal year 2024 ended December 31, 2023. 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.

Thanks, Nicole. Good afternoon, and thank you for joining us today. I'm pleased to report that we achieved solid results, including net bookings of $1.3 billion. Our performance reflects our unwavering commitment to quality, the ongoing contributions from our outstanding portfolio, which is one of the strongest and most diverse in the entertainment industry, and our immensely talented creative teams.

During the period, Grand Theft Auto V, Grand Theft Auto Online, the Red Dead Redemption series and Zynga's in-app purchases, led by Toon Blast, exceeded our plans, driven by engaging new content, partnerships and activations. This was partially offset by some softness in mobile advertising and sales for NBA 2K24. 2K is implementing measures to enhance performance for the title, such as offering new events and promotions and delivering an exciting and engaging content line-up. We expect lifetime net bookings for the title to be in line with NBA 2K23.

Due to these factors, a planned release moving out of the fourth quarter and increased marketing for Zynga's new hit mobile title Match Factory!, we're lowering our full-year outlook. While the timing of Match Factory!'s user acquisition expense will reduce our profitability in the current fiscal year, we believe that this investment will allow us to grow our audience meaningfully and increase the lifetime value of the Match Factory! franchise. We've always managed Take-Two for the long-term, and we have great confidence in our groundbreaking pipeline for fiscal 2025 and beyond, which we believe will enable us to grow our net bookings, increase our scale and enhance our profitability. At the same time, our teams are always looking for ways in which we can operate at the highest level of efficiency, which is one of our core tenets.

We're currently working on a significant cost reduction program across our entire business to maximize our margins while still investing for growth. These measures are incremental to and even more robust than our prior cost reduction program, and we aim to achieve greater operating leverage as we roll out our eagerly anticipated release schedule.

Turning to the performance of our titles during the quarter. Momentum for Grand Theft Auto remains phenomenal. Sales of Grand Theft Auto V exceeded our expectations during the holiday season, and to-date, the title is sold in more than 195 million units worldwide. During the quarter, Rockstar Games released its holiday update for Grand Theft Auto Online: The Chop Shop, which captured the highest number of active users in several years, including the largest ever increase in new Grand Theft Auto Online accounts, driven by the variety and depth of new vehicles and robberies, positive community sentiment and the game's inclusion in various subscription services.

The Grand Theft Auto series is also benefiting meaningfully from excitement surrounding Rockstar's announcement of Grand Theft Auto VI and the release of its first trailer, which, at 93 million views in 24 hours, broke YouTube's records for a non-music video launch and, along with partner channels, became the biggest video debut ever. Rockstar's recent partnership with Netflix to launch the GTA Trilogy is also a resounding success, quickly yielding the highest rate of installs and engagement on the subscription services game platform. In addition, Rockstar's membership program, GTA+, continues to grow rapidly, powered by enhanced benefits for members, including a rotating assortment of classic Rockstar titles.

Red Dead Redemption 2 also surpassed our plans, as our exciting holiday promotions and events resonated deeply with players. To-date, the title is sold in more than 61 million units worldwide. During the quarter, Rockstar Games supported Red Dead Online with free updates, including the new All Hallows' Call to Arms locations, a trio of new Dead of Night maps and a Hardcore Telegram Mission alongside the return of the Halloween Pass 2. NBA 2K24 remains the number one basketball simulation experience in our industry, and to-date, is sold in over 7 million units.

Unit sales for the Gen 9 version of the game are growing at a double-digit percentage increase over last year due to an enhanced gameplay experience and wider console availability. As players migrate to Gen 9 platforms, we are seeing significant declines in demand for our Gen 8 offering. Players have been highly engaged with many of NBA 2K24's new features, including a Season Pass that helped average revenue per user grow 30% year-over-year. On October 6, 2K and Gearbox Software launched the Borderlands 3 Ultimate Edition for Nintendo Switch. We're pleased to expand further our beloved franchise by enabling players to make some mayhem at home or on the go with this thrilling high stakes adventure.

Now turning to Zynga. We're very pleased with the team's ability to create successful new mobile games, including Peak's Match Factory!, which launched on iOS in November and Android in late December. The title is a top 30 grossing game on the Apple App Store in key target markets, such as the U.K. and the U.S., and has shown stellar retention and monetization metrics on par with previous category-leading Peak titles such as Toon Blast. Based on these excellent metrics, we see strong long-term potential for the title, and we're planning to invest in new features and a robust marketing campaign to capitalize on its popularity with consumers and to scale it further.

Zynga's other recent release, Top Troops, increased its engagement by more than 10% over last quarter, propelled by the launch of new features and semi-monthly battles. Looking ahead, the team is focusing on new brand collaborations, player competitions and social and community engagements. Overall, Zynga's in-app purchases exceeded our expectations with significant sequential improvement compared to last quarter. This was led by Toon Blast, which materially outperformed, delivering its highest ever average revenue per daily average user and over 50% growth in its daily in-app purchase revenue compared to last quarter.

While we're encouraged by the trajectory of Zynga's in-app purchases, its ad revenues were below our expectations due to some changes that we're implementing in the hypercasual business, including a heightened focus on our profitability and the launch of new features that deliver blended monetization. Our direct-to-consumer business continues to grow and enjoyed a record holiday season. Our teams are working actively to add more titles each quarter to this highly accretive owned distribution channel.

Looking ahead, Zynga has numerous titles in development and soft launch that we're eager to release worldwide in fiscal 2025 and beyond. It bears noting that launching hit mobile titles is both highly complex and challenging, and we're gratified by Zynga's unique ability to release new properties to capture mind share and market share.

In closing, although we're lowering our outlook for the year, we believe that our company's potential is vast and unique, driven by our creative talent, our owned and controlled intellectual property and our groundbreaking new pipeline for fiscal 2025 and beyond. As we execute on our strategic priorities, we believe that we'll deliver an array of unparalleled entertainment experiences that can captivate, engage and redefine our industry for audiences around the globe.

I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to thank our teams for delivering another solid quarter and adding to the continued positive momentum of our business. I'll now turn to our upcoming launches for the balance of fiscal 2024 and beyond. This quarter, Private Division and Evening Star will launch Penny's Big Breakaway, a 3D platforming game. Private Division will share more news about this exciting release shortly.

On March 8, 2K and Visual Concepts will launch WWE 2K24. The title will feature several franchise advancements, including the 2K Showcase of the Immortals, celebrating 40 years of WrestleMania, four new match types, two new MyRISE experiences and much more. We're thrilled to build upon our long-standing partnership with WWE and to continue to set new creative benchmarks for this franchise. At The Game Awards in December, Private Division announced No Rest for the Wicked, an action role-playing game from Moon Studios, creators of the critically acclaimed Ori and Blind Forest, and Ori and the Will of the Wisps. The title will launch Early Access on PC in the first quarter of fiscal 2025 with a full release on PlayStation 5, Xbox Series X and S, and PC thereafter. We will reveal more information about the game on March one during the label's Wicked Inside digital showcase.

After 13 years, we're pleased that 2K will return to tennis and broaden its sports offerings with the upcoming release of Top Spin 2K25. Developed by Hangar 13, the title was poised to provide an incredibly realistic and engaging tennis simulation featuring the world's top players and courts. 2K will share more details in the coming weeks, including an expected launch date.

Zynga continues to deliver on their outstanding pipeline with their much anticipated titles, Star Wars Hunters and Game of Thrones: Legends, each slated for global release in calendar 2024. We are encouraged by both games' performances and soft launch and are confident that they will resonate with broad audiences when they debut worldwide. At the same time, Zynga's hypercasual studios plan to release a steady cadence of mobile titles for games that has the potential for enhanced retention rates and a mix of in-app purchases and advertising to drive higher monetization and profitability. And as always, our labels will continue to provide new content and experiences that drive engagement and recurrent consumer spending across many of our key offerings. Looking ahead, we remain highly optimistic about what we believe to be the strongest and most exciting development pipeline in our company's history.

I'll now turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. We delivered solid holiday results, including net bookings of $1.34 billion, which was within our guidance range. I'd like to thank our talented teams for their commitment to creativity, innovation, quality and value, which allows us to provide outstanding entertainment experiences for our players across the world.

Grand Theft Auto V, Grand Theft Auto Online, the Red Dead Redemption series and Zynga's in-app purchases, led by Toon Blast, exceeded our expectations. This was partially offset by softness in mobile advertising in NBA 2K. Recurrent consumer spending declined 7% for the period and accounted for 75% of net bookings. This was slightly less than our outlook, driven by weakness in mobile advertising and NBA 2K, which was largely due to the effect of lower unit sales on its in-game monetization. Recurrent consumer spending for Grand Theft Auto Online, virtual currency and GTA+ membership was up notably.

During the quarter, we launched several mobile titles, including Top Troops, Match Factory! and NBA 2K24 Arcade Edition for Apple Arcade as well as Borderlands 3 Ultimate Edition for Switch. GAAP net revenue decreased 3% to $1.37 billion, and cost of revenue declined 1% to $688 million, which included an impairment charge of $53 million and $177 million of amortization of acquired intangibles. Operating expenses decreased by 10% to $808 million. On a management basis, operating expenses rose 4% year-over-year and was favorable to our guidance due to lower marketing and personnel expenses.

Turning to our guidance, I'll begin with our full fiscal year expectations. As Strauss mentioned, we are lowering our outlook to reflect the softness we are currently experiencing in mobile advertising and NBA 2K24, a planned release moving out of the fourth quarter and increased marketing for Zynga's new hit mobile title Match Factory!, which we believe will enable us to scale it more meaningfully to reach its full long-term potential.

Our revised net bookings forecast is $5.25 billion to $5.3 billion. We expect the net bookings breakdown from our labels to be roughly 51% Zynga, 30% 2K and 19% Rockstar Games. And we forecast a geographic net booking split to be about 60% United States and 40% International. We are projecting recurrent consumer spending of 1% compared to fiscal 2023, which includes a full-year of Zynga, partially offset by a slight decline in NBA 2K. Grand Theft Auto Online is expected to deliver modest growth for virtual currency and GTA+ membership. RCS is expected to represent 79% of net bookings.

We plan to generate approximately $100 million in non-GAAP adjusted unrestricted operating cash flow and to deploy approximately $150 million for capital expenditures, primarily to support our office buildouts and larger footprint. We now forecast GAAP net revenue to range from $5.27 billion to $5.32 billion. Our total operating expenses are now planned to range from $3.55 billion to $3.56 billion as compared to $3.45 billion last year. On a management basis, we continue to expect operating expense growth of approximately 14% year-over-year due to a full-year of Zynga and increase in personnel marketing expenses and higher depreciation, which are being partially offset by the realization of synergies from our combination with Zynga and savings from our prior cost reduction program announced last year.

Now moving on to our guidance for the fiscal fourth quarter. We project net bookings to range from $1.27 billion to $1.32 billion compared to $1.4 billion in the fourth quarter last year. Our release slate for the quarter includes WWE 2K24 as well as Penny's Big Breakaway from Private Division. The largest contributor to net bookings are expected to be NBA 2K, Grand Theft Auto Online and Grand Theft Auto V, Toon Blast, our hypercasual mobile portfolio, Empire & Puzzles, WWE 2K24, Red Dead Redemption two and Red Dead Online, Words with Friends and Match Factory!

We project recurrent consumer spending to decrease by approximately 5%, which assumes flat results for Zynga and a decline for NBA 2K, with Grand Theft Auto Online, virtual currency and GTA+ membership are expected to be up. We project GAAP net revenue to range from $1.32 billion to $1.37 billion. Operating expenses are planned to range from $896 million to $906 million. On a management basis, operating expenses are expected to grow by approximately 17% year-over-year, driven by the additional marketing expense for Match Factory! that I mentioned previously, higher personnel costs and an increase in depreciation, which are being partially offset by the realization of synergies from our combination with Zynga and savings from our prior cost reduction programs that we announced last year.

Looking ahead, our teams remain committed to efficiency. We've begun a rigorous analysis to identify additional areas for cost optimization. The expected savings are incremental to our previously announced cost reduction program, and we expect that it will be more expansive. We believe that these measures will enhance our margin profile and position our business for greater operating leverage in the future.

In closing, while we are disappointed to have lowered our outlook for the year, we are exceedingly confident in our growth prospects. With our industry-leading portfolio and passionate teams, we believe that we are poised to deliver the best content in our industry, reach new record levels of operating performance and deliver long-term value for our shareholders.

Thank you for your continued support. I'll now turn the call back to, Strauss.

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for enabling us to achieve our goals and deliver another solid quarter. And to our shareholders, I want to express our appreciation for your continued support.

We'll now take your questions. Operator?

Questions and Answers

Thank you. [Operator Instructions] Our first question is from Eric Handler with ROTH MKM. Please proceed.

Yes. Thank you, and good afternoon. Wonder if you could maybe give a little meat to the bone, so to speak, with your cost-cutting program. How much cost or net savings have you generated so far? What do you think this next plan could do and over what time?

Lainie will take that.

Sure. So for the synergies with Zynga, we realized over $100 million in savings, and the original cost-cutting program that we announced previously was over $50 million. So we do expect this plan to enhance our margins, both by reducing costs from our existing cost base and avoiding future costs, and they'll be incremental to these other cost-cutting programs that we had and even more robust than the prior cost reduction program. And next quarter, we'll be in a position to give a little more details on the plan.

Helpful. And then, with regards to the advertising weakness that you're seeing, is that all related to what's going on with the hypercasual business or does it extend also to in game advertising for casual games?

This is Strauss. So it's basically the hypercasual business, and we're really optimizing the business from profitability. So there's always a balance. We're also seeing that we can actually have in-app payments in our hypercasual business. So it's really moving to a hybrid model, and we're very excited about that. There is great opportunity in that business.

Our next question is from David Karnovsky with J.P. Morgan. Please proceed.

Hi. Thank you. I guess, first, with some of the momentum and investment for Match Factory! and the game delay, is there any update to your fiscal '25 or '26 forecast?

Lainie is going to take that.

It were -- currently, it's the middle of our budgeting process. At this time, the number is tracking a little above $7 billion for net bookings for the year and given the typical shifts and tweaks that occur in our forecasting process, and this amount is still huge growth over this year.

And our pipeline is groundbreaking for next year and beyond, and our teams are making excellent progress on game development. And nothing material has changed with regard to the lifetime value of our portfolio. And both -- we'll provide our initial outlook for fiscal year '25 when we report our Q4 and full-year fiscal year '24 results in May.

Okay. And then, just how Match Factory! looks to be the most substantial new launch for Zynga since the acquisition. Want to see if you could speak kind of more broadly to the process of launching new mobile games, whether this reflects any kind of broader improvement in UA or content generation there? Thanks.

I think so. I mean, I've said repeatedly in the past few years that the hardest thing that anyone in the industry can do is create a new mobile hit. It's super hard. And so much so that one of our big competitors just decided they weren't going to try it anymore. It was off the table. We stuck with it and so did some of our competitors. So clearly, the market's becoming more receptive and more reactive. There's a big title from one of our competitors, Monopoly GO!, which is a huge hit, and we're gratified obviously here to see so much traction already in Top Troops and Match Factory!

And Match Factory!'s already a top-30 title in the U.S. and U.K. Apple App Stores with lots of continued traction in the rest of the world, and it's really just beginning. We are supporting the title in the quarter, and that's not money that we could possibly recoup in the quarter. So to put some color around the guidance change, that's really good news, not bad news, that's going to be a very profitable expenditure that will come back to us in the next fiscal year. Because of the way we structure UA, we structure for relatively quick paybacks compared to the industry because we're conservative.

So, I do think -- look, I think the team in Zynga is doing a phenomenal job delivering great properties. It starts there. It always starts there. And yes, I also believe the market's becoming more reactive. Remember, the market was down for the first time in its history in 2022, and it was flattish after that. And there were no new hits for years from us or anyone else. That's clearly changing. I think, it puts further evidence on the table that being exposed to mobile through the Zynga acquisition was a really, really good thing for this company, and we're highly optimistic going forward.

Our next question is from Doug Creutz with TD Cowen. Please proceed.

Yeah. I wondered, if you could be a little more specific relative to the guidance cut to the fiscal year, how much came from the title delay on the topline versus the other factors you cited? And to what extent the delay of the title out of the year might have impacted your operating income? Because presumably you will be marketing for it less. Thank you.

So for the full-year, when you look at the changes that we made to the fourth quarter forecast, the biggest drivers were towards the user acquisition spend and marketing for Match Factory!, then the lower mobile advertising that we were seeing, updating expectations for NBA 2K24 and the shift of an unnamed title out of the year, so those are the top four primary reasons for the change.

In that order?

Yes. That was the order of magnitude. [Phonetic]

Our next question is from Andrew Marok with Raymond James. Please proceed.

Great. Thanks for taking my question. Good commentary on the Netflix tie up with the GTA trilogy. I guess, going back to maybe how that came about, what made you guys want to partner with that kind of fledgling mobile gaming platform and be one of the first major third-party titles out there?

Look, we have to balance all the different elements that go into choosing how, where and when to distribute our titles, and as our titles enter the catalog, we can be flexible about how to distribute. We tend to support all emerging platforms as long as they serve consumers and as long as the terms under which we support the platforms make sense to us.

Great. And then maybe a little bit more of an esoteric question, but interested to maybe dig into that hypercasual commentary. Is there anything that's maybe changed in the last few months or quarters with player behavior in hypercasual games that they're now willing to do in-app purchases?

All about quality. I think, Rollic has been really focused on making more and more robust titles. Remember, hypercasual came about as a business where you'd actually look at hundreds of games a month and put them out into the market and see what would stick and then a game would stick for three months and then roll off. And what's happening now is Rollic has title. Rollic, we believe, is a leader in the space, has titles that are much more durable and long-lasting and turning into games that could be games that last for years. We hope that, that will happen. And as those games are more durable and offer more playing value to consumers, there's an opportunity in certain of those games to have in-app purchases.

So we're really, moving from hypercasual to hybrid casual. But it's all about quality and meeting the consumer where they are. And the story of the entertainment business is always a move to quality. And remember, we're still, in many ways, in the nascent business. Interactive entertainment is roughly 30 years old, mobile's roughly 12 years old, and these are early-stage businesses. And they started off as glorified toy businesses and then they turned into entertainment businesses and now they're year-round entertainment businesses. All of that's great news for a company like ours. We are the number two pure-play interactive entertainment company on earth, and it's still early innings, and we're seeing a lot of movement in mobile.

Our three-part strategy includes the word innovation. And innovation means that even if you start as hypercasual, if consumers want you to go upmarket and give them something that's deeper and more compelling and more long lasting, you have to be there to do it. I would say our hypercasual team, led by Barak Virdal [Phonetic] in Istanbul, is first class.

Great. I appreciate the detail.

Our next question is from Benjamin Soff with Deutsche Bank. Please proceed.

Hey, guys. Thanks for taking the question. A follow up on the GTA trilogy for mobile. Does this provide a blueprint for how to bring more of your titles to mobile in the future? And just curious if you see an opportunity for additional partnerships with Netflix for additional mobile titles going forward as well? Thanks.

I'm not sure this is a model for mobile distribution, because ultimately, it all depends on how you define mobile. We think of mobile as a game that you typically play on your phone, and we have a big portfolio of games like that. And we'd love to do more with Netflix, who wouldn't, as long as the consumers are happy to be there and as long as the economics of those arrangements make good sense.

Our next question is from Drew Crum with Stifel. Please proceed.

Okay, thanks. Hey, guys. Good afternoon. So on NBA 2K, I think it was enjoying some pretty strong engagement in RCS trends into the early part of fiscal 3Q, at least. Any thoughts or explanation around what transpired thereafter? And just any more additional color you can give us in terms of your expectations for fiscal 4Q?

Yes. Karl is going to take that.

[Speech Overlap] I'm sorry. Sorry, Strauss. The engagement has been incredible for NBA 2K24, and that continues to be the case. We still have very strong momentum around RCS, also driven specifically by our Season Pass. The Gen 9 SKU is behaving -- is performing incredibly well. We've got double-digit growth over 2K23 at this point. Yet, the real story here is that Gen 8 is actually underperforming our expectations. And I think as people transition more towards Gen 9 and experience all that NBA, the franchise has to offer in the Gen 9 SKU, then you're going to see continued growth in that franchise. So, we feel really great about where the engagement is. Engagement in the title is fantastic. It really is -- any sort of softness that we're seeing is really a story about the Gen 8 product at this point.

Okay. Thanks.

Our next question is from Martin Yang with Oppenheimer and Company. Please proceed.

Thank you for taking my question. The two-part question regarding GTA trailer's reception, do you see a meaningful uplift for themselves due to the trailer performance on YouTube? And then given that strong performance, do you think that, could be future marketing events for GTA could be planned in conjunction with potential updates from other games, GTA, Red Dead? Does that change your view on how to market the GTA VI in the next 12 months?

Look, we're really gratified that the announcement of the trailer was a huge event online, and then the trailer debut between YouTube and other marketing partners set a record for a video to view. So we couldn't be happier or more excited by the initial trailer. And I do think that excitement around GTA VI has had a halo effect on the entire franchise. We've now sold in 195 million units of GTA V, and GTA Online continues to perform above our expectations. So, I do think all things GTA lead to more excitement.

As far as the marketing programs, I think Rockstar is particularly expert in marketing their titles and, I think, is considering all the appropriate angles.

Got it. Thank you. And then another question regarding marketing is we've seen Judas and Top Spin with trailers and the revealers or teasers without a release date. Is our overall philosophy to market new games changed or is it still largely based on studio level decision on when they will release or announce the release dates for new games?

Marketing is really driven by our labels and our studios, and we don't have a fixed march to a release from particular marketing beats. [Phonetic]

Got it. Thank you.

Our next question is from Timothy O'Shea with BMO Capital Markets. Please proceed.

Yes. Hi. Thank you for taking my question. Back on Grand Theft Auto, we spoken about the Grand Theft Auto trailer. My question is really, is there a way to quantify or maybe compare what you saw in terms of all this anticipation for GTA VI compared with how the level of anticipation that you saw for GTA V ahead of that game's announcement? And then, I had a follow-up.

It is possible to do research around that. And our sense is that the anticipation is much higher, much, much higher.

On the other hand, 195 million units to-date is nothing to sneeze at. So we stopped well short of making predictions about how the title will do, but clearly, anticipation is running very, very high.

Yeah. Thank you. That's very helpful. And then just quickly, can we talk about how you make the decision about when to launch a game like Grand Theft Auto VI? Like, who makes the call? What motivates them? Assuming this is game quality, game finish, polish, maybe there's a desire to hit a specific launch window. Or really anything else that might influence Rockstar's decision about the timing of when to launch this game? Thank you.

We're seeking perfection. And when we feel we've optimized creatively, that's the time to release, so -- and we're all in this together. In terms of motivations and incentives, the financial incentives of everyone who works at this company are aligned with those of the shareholders. So we essentially have, call it what you will, we have profit sharing plans throughout the company at the operating level.

And at the senior level, compensation is driven largely by TSR. So our goal is to align the interest of everyone who works there with the interest of the shareholders. That keeps us all pointing in the same direction. So you are right, there is an inherent tension potentially between getting something to market and creating perfection, but this company errs on the side of perfection.

Thanks, Strauss. Yeah, anticipation is pretty high around here too. So we look forward to seeing the game.

Our next question is from Mike Hickey with Benchmark Company. Please proceed.

Hey Strauss, Karl, Lainie, Nicole, thanks for taking our questions. Lainie, just curious on your updated '25 view, I think this is two quarters, it's come down a bit, maybe now more than the last quarter. And I think I heard you said that maybe '25 and '26 is sort of the same. So, any color you can give us in terms of sort of bridging where you were for '25 versus what you are thinking now? And if in fact you are still thinking '25 and '26 together is kind of where your original guidance was.

And then on the cost cutting. Obviously, we're seeing a lot of that in the industry. I don't know if it's unprecedented trials or not, but no doubt, it's significant. And you've already gone through one round. Just sort of curious your motivation here to take another sort of big cost reduction, especially given what it look like, in the next two years, you're going to have pretty significant growth given your pipeline coming to fruition. Thanks guys.

Hi Mike. So, for fiscal year '25, as I mentioned, it's really driven by changes in the release schedule. And obviously, that will move some of the titles out into years going forward, because the lifetime value of our portfolio hasn't changed. So, we should -- we do expect to see growth in fiscal year '26 over '25, so that hasn't changed. So, it's just a regular process of re-forecasting and updating the business. And this time, we are working on our budget. So, that's where the numbers are falling out.

And Mike, in terms of cost reduction, as I said, and as you know, we have a three part strategy that's supported us well through thick and thin. And that is, first and foremost, to be the most creative company, also to be the most innovative; and finally, always to be the most efficient company in the entertainment business. And that's a big challenge, and we mean it, and everyone here means it.

And I think that it's time to take another look at efficiency and make sure that everyone is focused on the things that really matter and only the things that really matter, and put ourselves in a position where we have the opportunity for great operating leverage as these titles come to market and as the revenues flow through the system.

Thanks guys.

Our next question is from Brian Fitzgerald with Wells Fargo. Please proceed.

Thanks. Strauss, I just wanted your opinion on this recent Disney, and Epic deal. Obviously, you have your own strong IP, but we're just curious how you think that might impact access to license IP maybe for the industry at large, if we continue to see this type of tie-ups? Thanks.

It's a good question. I only know what I read in the release and what you also read. What I read was that they're making an investment in a leading company, Epic, which is -- obviously has a spectacular franchise in Fortnite. And then there was some talk around sort of creating a Fortnite/Disney ecosystem. And I don't know exactly what that means, but I'm not betting against my friends at Epic or Disney, and I wish them well. So I guess it remains to be seen.

But they're two fine companies, and I think anything that's good for consumers and it creates excitement in our industry is good for Take-Two because it keeps people engaged with the properties that we bring to market, and we have the best collection of owned intellectual property in the business, bar none. And we're the number two player in the space, so -- and we'd like to go from here. So I see it as a net positive for the business, and we'll see how they do with it. But I'm certainly not betting against them.

Thank you. Appreciate it.

Our next question is from Omar Dessouky with Bank of America. Please proceed.

Hi. Thanks for taking the question. Back in May, on your fourth quarter call, you gave a $1 billion operating cash flow guide. And since you have updated us on the fiscal '25 topline outlook, I was wondering if you could also update us on the fiscal '25 operating cash flow outlook and any puts and takes around that? And then, I have a quick follow-up.

Great. That's Lainie.

And so, Omar, we haven't updated that number. We are still working on our budget right now. We would expect that number to change along with the release schedule changes, and it will depend on when the titles are released during the year of when the aUFCF will be collected.

Okay. So, maybe riffing off of Brian's question about kind of Epic and Disney, thinking about Grand Theft Auto Online, do you see any potential for Grand Theft Auto to be a trans-media property, which maybe involves brands and IP from franchises outside of Take-Two? Yeah, that's the question.

Yeah. Look, we really do prefer that our labels talk about what's going to go on in a title creatively. And I could riff endlessly and share my opinions, but I prefer to hear from Rockstar, and they will talk about what's coming in due time.

Appreciate it. Thank you.

Our next question is from Chris Schoell with UBS. Please proceed.

Great. Thank you for taking the questions. Just going back to the Zynga deal, at the time, you had talked about revenue synergies that would come through in time. Can you just remind us where those initiatives stand today and how your thoughts might have evolved since you closed the deal?

And then second question, just any early learnings you can give us on the iOS fee changes in Europe and how this might inform your mobile strategy going forward? Thanks.

Yeah. I mean, I mean we've made great progress across-the-board, including on the revenue side. The biggest area of synergy so far has been our direct-to-consumer initiative, which was a collective initiative to offer the consumer the ability to purchase in-app currency for mobile games directly. And that's been exceedingly successful, rolled out very quickly and quite profitable, and there's a lot more upside to come. There are numerous other areas on which we're making progress, but we're kind of ticking the box with that one by itself.

And in terms of game store changes, this will -- there are a lot of moving parts here, and they -- some of the decisions you mentioned in Europe and some of the decisions in the U.S. are contradictory. So there's a lot of dust left to shake out. But on balance, I remain of the view that I've stated years ago, that distribution costs will come down meaningfully. They already are.

Great. Thank you.

Our next question is from Clay Griffin with MoffettNathanson. Please proceed.

Great. Thanks. Good afternoon. Curious if you guys have a reaction to a speculation, I suppose, that Microsoft may be looking to take some of the titles that were formerly exclusive to the Xbox platform and making those more widely available? It seems at least part of that rationale, if it's true, maybe around just the cost to develop big titles. And Strauss, love to get your thoughts on particular areas of development that are particularly sticky as it relates to cost. Thanks.

Well, the big console titles are expensive and time consuming to create, and if you want to make the very, very best, it takes a long time and it costs a lot of money. I really don't want to speak for Microsoft and their strategy. There's been a lot of noise around that lately. I have no doubt that they'll express where they're heading. I would just say that if you take a look at their market cap now compared to a few years ago, you don't want to bet against that management team.

Great. Thanks.

We have reached the end of our question-and-answer session. I will now turn the call back over to Strauss for closing remarks.

First, as always, I want to thank our teams for delivering such great work with such extraordinary commitment. Everything that goes on here is a team effort. And we are all aligned, all in this together and all working to do our level best to create the best entertainment for our consumers and to do it within the four walls of superb company with a great culture.

I also want to thank our shareholders for their continued support. We're really excited about what is to come. Thanks for joining us today.

[Operator Closing Remarks]

Participants

Corporate executives.

  • Nicole Shevins, Senior Vice President, Investor Relations and Corporate Communications
  • Strauss Zelnick, Chairman and Chief Executive Officer
  • Karl Slatoff, President
  • Lainie Goldstein, Chief Financial Officer
  • Eric Handler, ROTH Capital Partners
  • David Karnovsky, J.P. Morgan
  • Doug Creutz, TD Cowen
  • Andrew Marok, Raymond James & Associates
  • Benjamin Soff, Deutsche Bank
  • Drew Crum, Stifel Nicolaus
  • Martin Yang, Oppenheimer & Co. Inc.
  • Tim O'Shea, BMO Capital Markets
  • Mike Hickey, Benchmark
  • Brian Fitzgerald, Wells Fargo Securities
  • Omar Dessouky, Bank of America Securities
  • Christopher Schoell, Ubs Securities
  • Clay Griffin, MoffettNathanson

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Take-Two Interactive Software Earnings Transcript (NASDAQ:TTWO)

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Take-two completes $12.7b acquisition of zynga.

The purchase will bring in several popular mobile games to Take-Two.

By Caitlin Huston

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Strauss Zelnick

Take-Two Interactive has officially acquired social and mobile gaming company Zynga .

The $12.7 billion acquisition, announced in January, was completed Monday. The combined company will bring a new slate of popular games to Take-Two, including Zynga’s Farmville , Words with Friends and Zynga Poker. 

“We are thrilled to complete our combination with Zynga, which is a pivotal step to increase exponentially our net bookings from mobile, the fastest-growing segment in interactive entertainment, while also providing us with substantial cost synergies and revenue opportunities,” said Strauss Zelnick , chairman and CEO of Take-Two.

Under the terms of the agreement, Zynga shareholders received $3.50 in cash and 0.0406 shares of Take-Two common stock per share of Zynga common stock. Shareholders voted to approve the deal last week. 

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Take-two lowers guidance, plans cost-cutting amid "challenging" gaming market, entertainment stock picks for 2023: what wall street is bullish about despite downbeat sentiment.

Take-Two recently reported strong fourth-quarter earnings, with games such as NBA 2K22 and NBA 2K21 ; Grand Theft Auto Online and Grand Theft Auto V and Tiny Tina’s Wonderlands driving revenue. At the time, executives said they expected the acquisition of Zynga to create a  “powerhouse of industry leading titles” at the company. 

It was previously announced that Zynga CEO Frank Gibeau will stay on with the company and oversee the combination of Zynga and the T2 Mobile Games business. The combined entity will operate under the Zynga brand. 

“We are excited for Zynga’s next-generation mobile platform, free-to-play expertise, diverse offering of games and incredible team to join the Take-Two family,” Gibeau said in the press release. “We are eager to continue building an unparalleled portfolio of games that will reach broader markets and lead to continued growth for this next chapter of Zynga’s history.”

May 23, 8 a.m. PT: Updated story to reflect that Bernard Kim, Zynga’s president of publishing, will leave Zynga to become the chief executive of Match Group starting May 31.

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Rockstar Parent Company Wants Zynga to Turn Its Biggest Series Into Mobile Games

Take-two sees its biggest franchises, including grand theft auto as, "basically nearly entirely un-exploited from mobile and free-to-play.".

Joe Skrebels Avatar

Grand Theft Auto parent company Take-Two just bought Zynga in a practically unprecedented $12.7 billion deal , and part of the reasoning is that it wants the opportunity to bring some of its biggest console and PC game properties to mobile.

In an investor presentation following the announcement of the deal, Take-Two CEO Strauss Zelnick discussed the deal and presented a slideshow to investors. Under a slide titled, 'Product Portfolios are Highly Complementary', Take-Two shows how the company's respective games and studios can be used in tandem.

Of particular interest to many fans will be the line-up of Take-Two games, with the likes of Grand Theft Auto, Red Dead Redemption, BioShock and Mafia listed alongside a caption reading, "Opportunity to bring Take-Two's console/PC properties to mobile & add new game modes". Those games are paired with a list of Zynga's in-house studios, which are listed as having a "track record of successfully executing mobile game development."

Take-Two's slide about synergies with Zynga. (Image credit: Take-Two)

In a Q&A segment, Zelnick expanded on that point while discussing the benefits of the deal: “Perhaps most importantly we have the ability [with Zynga] – from both a development and a publishing point of view – to optimise the creation of new titles; new titles based on Take-Two’s core intellectual property. We believe we have the best collection of console and PC intellectual property in the interactive entertainment business – and it’s basically nearly entirely un-exploited from mobile and free-to-play around the world."

Zelnick didn't specify which specific franchises would be considered for mobile development, nor whether those would take the form of new games, or ports. He also called it "early days" for the collaboration, so it may be some time before we see those projects announced or released.

Even before the Zynga deal, Take-Two's plans were extensive, with the company aiming to dramatically increase the number of "core" titles it released, with 19 games set for the next three years .

Joe Skrebels is IGN's Executive Editor of News. Follow him on Twitter . Have a tip for us? Want to discuss a possible story? Please send an email to [email protected] .

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Take-Two Interactive (TTWO) lowers FY 2024 revenue forecast

Take-Two Interactive's forecast for the full fiscal year is well below analyst expectations.

Donovan Erskine

Take-Two Interactive (TTWO), one of the gaming industry’s biggest publishers, has released its earnings report for Q3 2024. In addition to showing a beat on earnings and revenue, the company provided some guidance for the full fiscal year 2024. Despite a rather fruitful quarter, Take-Two has lowered its guidance for FY 2024.

Take-Two Interactive shared its updated guidance for the fiscal year in its Q3 2024 earnings report . While analysts were originally predicting $5.5 billion for Take-Two’s full-year revenue, the publisher is now forecasting somewhere in the range of $5.27 to $5.32 billion. The company particularly cites a decrease in sales of mobile ads and NBA 2K24 as leading causes for the change in outlook.

Take-Two Interactive's stock chart as of February 8, 2024

Despite the lowered guidance, there was still plenty of good news to be found in Take-Two’s latest report. This included the fact that Red Dead Redemption 2 has surpassed 61 million copies sold. Stick with Shacknews for the latest financial news out of the gaming business.

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Donovan is a young journalist from Maryland, who likes to game. His oldest gaming memory is playing Pajama Sam on his mom's desktop during weekends. Pokémon Emerald, Halo 2, and the original Star Wars Battlefront 2 were some of the most influential titles in awakening his love for video games. After interning for Shacknews throughout college, Donovan graduated from Bowie State University in 2020 with a major in broadcast journalism and joined the team full-time. He is a huge Scream nerd and film fanatic that will talk with you about movies and games all day. You can follow him on twitter @Donimals_

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Donovan Erskine posted a new article, Take-Two Interactive (TTWO) lowers FY 2024 revenue forecast

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  6. Take-Two Interactive Confirms Completion of Zynga Acquisition for $12.7

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  1. Take-Two and Zynga to Combine, Bringing Together Best-in-Class

    Take-Two to acquire all the outstanding shares of Zynga for a total value of $9.861 per share - $3.50 in cash and $6.361 in shares of Take-Two common stock, implying an enterprise value of $12.7 billion Transaction represents a 64% premium to Zynga's closing share price on January 7, 2022

  2. Quarterly Earnings

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  3. Take-Two Interactive Software, Inc. Completes Combination with Zynga

    Download PDF NEW YORK -- (BUSINESS WIRE)--May 23, 2022-- Take-Two Interactive Software, Inc. (NASDAQ: TTWO) ("Take-Two" or the "Company") announced today the completion of its combination with Zynga Inc. ("Zynga").

  4. Q3 2024 Take-Two Interactive Software Inc Earnings Call

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    Take-Two and Zynga Combine to Enhance Positioning as a Global Leader in Interactive Entertainment Establishes Take-Two as one of the largest publicly traded interactive entertainment companies in the world with a leadership position in mobile Diverse Portfolio of Industry-Leading Intellectual Property

  6. Take-Two has officially acquired Zynga

    May 23, 2022, 8:46 AM PDT Take-Two has officially completed its $12.7 billion deal for social game developer Zynga, the two companies announced Monday. With the acquisition, Take-Two...

  7. Take-Two Interactive Software, Inc. and Zynga Inc. Stockholders Approve

    NEW YORK & SAN FRANCISCO-- ( BUSINESS WIRE )--Take-Two Interactive Software, Inc. (NASDAQ: TTWO) and Zynga Inc. (NASDAQ: ZNGA), two leaders in interactive entertainment, announced today...

  8. Take-Two completes $12.7B acquisition of mobile games giant Zynga

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    Jan 10, 2022, 1:47 PM PST Take-Two wants to bring its franchises to mobile, and Zynga can help. Image: Rockstar Games Take-Two Interactive just announced its intent to buy FarmVille...

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  12. Take-Two Interactive Software (TTWO) Q3 2024 Earnings Call Transcript

    TTWO earnings call for the period ending December 31, 2023. Image source: The Motley Fool. Take-Two Interactive Software ( TTWO 0.02%) Q3 2024 Earnings Call. Feb 08, 2024, 4:30 p.m. ET.

  13. Corporate Profile

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  14. Take Two Interactive Software : Q4 2023 Earnings Presentation

    Net Bookings were $1.39 billion, which was above the high end of our guidance range; Our results reflected better-than-expected results from Grand Theft Auto V and Grand Theft Auto Online, Red Dead Redemption 2, and Zynga's mobile portfolio ; RCS rose 115%, which was above our outlook, primarily driven by Zynga and Grand Theft Auto Online; As a part of our ongoing portfolio management measures ...

  15. Take-Two will buy Zynga, in a union of two top game makers

    By Michael J. de la Merced and Kellen Browning Jan. 10, 2022 The video game publisher Take-Two Interactive agreed on Monday to buy Zynga, a mobile game maker, for more than $11 billion, in a...

  16. Take-Two Interactive To Acquire Zynga

    Take-Two Interactive (NASDAQ: TTWO) has announced its plan to acquire Zynga (NASDAQ: ZNGA) in a deal valued at $12.7 billion. Zynga shareholders will get $9.86 per share, including...

  17. Take-Two Interactive Software, Inc. Completes Combination with Zynga

    NEW YORK-- ( BUSINESS WIRE )--Take-Two Interactive Software, Inc. (NASDAQ: TTWO) ("Take-Two" or the "Company") announced today the completion of its combination with Zynga Inc. ("Zynga ...

  18. Take-Two Interactive Software Earnings Transcript (NASDAQ:TTWO)

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  19. Take-Two Interactive to Acquire Zynga in $12.7B Deal

    Take-Two, led by chairman and CEO Strauss Zelnick, will acquire all of the outstanding shares of Zynga in a cash and stock transaction valued at $9.861 per Zynga share, based on the market close ...

  20. Take-Two Completes $12.7B Acquisition of Zynga

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    Take-Two Interactive Software, Inc. 2024 Q3 - Results - Earnings Call Presentation Feb. 08, 2024 9:13 PM ET Take-Two Interactive Software, Inc. (TTWO) Stock SA Transcripts

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  27. Take-Two Interactive Software, Inc. and Zynga Inc. Stockholders Approve

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  28. Take-Two Interactive Software, Inc. Reports Results for Fiscal Third

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  29. Take-Two Interactive (TTWO) lowers FY 2024 revenue forecast

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