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01/10 16:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance, particularly in NBA 2K engagement and recurrent consumer spending. Despite slight deceleration in mobile growth guidance, other areas like Grand Theft Auto and Toon Blast show robust growth. Shareholder returns and capital allocation strategies are positive, with opportunistic buybacks. The Q&A reveals some uncertainties in advertising revenue and economic impacts, but overall sentiment remains positive due to strong product performance and strategic planning.
Net Bookings $1.42 billion for Q1 FY26, significantly above the guidance range of $1.25 billion to $1.3 billion. This was driven by better-than-expected performance from several Mobile titles, including Toon Blast, Match Factory!, NBA 2K All-Star, and Color Block Jam, as well as NBA 2K and the Grand Theft Auto series.
Recurrent Consumer Spending Grew 17% year-over-year for Q1 FY26, significantly above the guidance of 7% growth. This accounted for 83% of net bookings. Growth was driven by NBA 2K (up nearly 50%), Mobile (grew low teens), and Grand Theft Auto Online (increased low single digits).
GAAP Net Revenue Increased 12% year-over-year to $1.5 billion for Q1 FY26. This growth was supported by strong performance across labels and new game features.
Cost of Revenue Declined 1% year-over-year to $559 million for Q1 FY26, reflecting efficient cost management.
Operating Expenses Decreased 3% year-over-year to $923 million for Q1 FY26. On a management basis, operating expenses rose 3% year-over-year, primarily due to higher personnel costs.
NBA 2K Engagement Daily active users and MyCAREER daily active users each grew 30% year-over-year, driving a 48% increase in recurrent consumer spending for NBA 2K25.
Grand Theft Auto V Sales Over 215 million units sold worldwide to date. Engagement for Grand Theft Auto Online benefited from the launch of Grand Theft Auto VI Trailer Two and the Money Fronts Summer Content Pack, leading to higher-than-expected recurrent consumer spending growth.
Toon Blast Growth Grew 22% year-over-year and nearly 75% on a 2-year basis, driven by the Seasonal Collection feature.
Match Factory! Growth Achieved record net bookings, growing 33% year-over-year, driven by new features such as the Treasure Cave event and new levels.
Color Block Jam Performance Became the highest-grossing title in Rollic's history, supported by the Pilot's Drop feature, which amplified engagement and monetization.
Mobile Game Success: Peak's Toon Blast grew 22% YoY and 75% over 2 years. Match Factory! achieved record net bookings with 33% YoY growth. Rollic's Color Block Jam became the highest-grossing title in the studio's history.
New Game Launches: Mafia: The Old Country, NBA 2K26, and Borderlands 4 are set to launch this quarter. Civilization VII was released for Nintendo Switch 2.
NBA 2K Series: NBA 2K25 sold over 11.5 million units with 48% growth in recurrent consumer spending. NBA 2K26 will feature new Pro Play features and launch on Nintendo Switch 2.
Mobile Market Expansion: Direct-to-consumer mobile business achieved better conversion rates through new offers, events, and enhanced personalization.
Partnership Expansion: 2K announced a new multiyear global partnership with NBA, NBA PA, and WNBA PA, extending relationships with NBA G League and USA Basketball.
Financial Performance: Net bookings for Q1 FY26 exceeded $1.4 billion, surpassing expectations. Recurrent consumer spending grew 17%, accounting for 83% of net bookings.
Cost Management: Operating expenses decreased 3% YoY, while marketing expenses were within forecast range.
Pipeline and Profitability: The company expects record net bookings in FY27, setting a higher baseline for profitability.
Platform Expansion: Games like NBA 2K26 and Civilization VII are being launched on Nintendo Switch 2, expanding platform reach.
Mobile Business Growth: While the mobile business has shown strong growth, there is a risk of over-reliance on a few key titles like Toon Blast and Color Block Jam. Any decline in user engagement or competition in the mobile gaming space could adversely impact revenues.
Grand Theft Auto Online: Although engagement and new player accounts have grown, the company expects a decline in Grand Theft Auto Online's net bookings in the future, which could affect overall financial performance.
Operating Expenses: Operating expenses are expected to grow by 5% year-over-year, driven by higher personnel costs and increased marketing spend. This could pressure profitability if revenue growth does not keep pace.
Recurrent Consumer Spending: Recurrent consumer spending is expected to grow only modestly at 4%, which may not be sufficient to offset declines in other areas like Grand Theft Auto Online.
Dependence on Key Franchises: The company heavily relies on key franchises like NBA 2K, Grand Theft Auto, and Borderlands. Any underperformance in these franchises could significantly impact financial results.
Market Competition: The gaming industry is highly competitive, and the company faces risks from competitors launching similar or superior products, which could erode market share.
Economic Uncertainty: Broader economic uncertainties could impact consumer spending on entertainment, including video games, potentially affecting the company's revenue.
Regulatory Risks: Changes in regulations, particularly in mobile gaming and in-game monetization practices, could pose challenges to the company's business model.
Net Bookings Outlook for Fiscal 2026: Raised to $6.05 billion to $6.15 billion, reflecting 8% growth over fiscal 2025 at the midpoint.
Record Levels of Net Bookings in Fiscal 2027: Expected to establish a higher baseline for the business and set a path for enhanced profitability.
Recurrent Consumer Spending Growth: Revised upward to approximately 4%, representing 76% of net bookings.
Operating Cash Flow and Capital Expenditures: Operating cash flow expected to be approximately $130 million and capital expenditures approximately $140 million.
Second Quarter Fiscal 2026 Net Bookings: Projected to range from $1.7 billion to $1.75 billion, driven by releases such as Mafia: The Old Country, NBA 2K26, and Borderlands 4.
Pipeline Ambitions: Company set to deliver the most ambitious pipeline in its history, unlocking new record levels of scale and enhanced profitability.
Shareholder Returns: As we continue to execute our proven strategy and capitalize on emerging markets and opportunities, we believe that we will achieve a period of meaningful long-term growth and shareholder returns.
Shareholder Returns: As we release exciting new hits and explore additional growth opportunities, both organic and inorganic, we expect to achieve meaningful returns for our shareholders.
The earnings call highlights strong financial metrics, including raised net bookings outlook and recurrent consumer spending growth. Management's confidence in new releases and strategic focus on quality content suggest positive sentiment. Despite a softer release for Borderlands, optimism remains for future launches. Analysts' questions indicate acknowledgment of strategic positioning and growth potential. Overall, the company's strong financial performance, ambitious pipeline, and positive analyst sentiment suggest a positive stock price reaction.
The earnings call highlights strong financial performance, particularly in NBA 2K engagement and recurrent consumer spending. Despite slight deceleration in mobile growth guidance, other areas like Grand Theft Auto and Toon Blast show robust growth. Shareholder returns and capital allocation strategies are positive, with opportunistic buybacks. The Q&A reveals some uncertainties in advertising revenue and economic impacts, but overall sentiment remains positive due to strong product performance and strategic planning.
The earnings call presents a mixed picture: strong financial performance with increased net bookings and revenue, but significant goodwill impairment and high operating expenses raise concerns. The Q&A section reveals management's optimism but also avoidance of specific details on impairments and development costs. The ambitious GTA VI project poses risks, and no shareholder return plan was announced. Overall, the positive aspects are balanced by uncertainties and lack of clear guidance, leading to a neutral sentiment prediction for the stock price movement.
The earnings call presents mixed signals: strong net bookings and revenue growth, especially in key franchises, are offset by significant impairment charges affecting operating expenses. The Q&A session reveals management's optimism but lacks clarity on key issues like Zynga's impairment and post-GTA VI performance, suggesting potential concerns. The fiscal guidance aligns with expectations, yet the substantial goodwill impairment and increased operating expenses temper the positive financial metrics. The absence of a clear structural change explanation and cautious guidance on future performance contribute to a neutral sentiment.
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