Greetings, and to Interactive Software Second Quarter Full Year 2019 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Would now like to turn the conference over to Hank Diamond, SVP of IR.
Please proceed.
Good afternoon. Welcome and thank you for joining Takeau's conference call to discuss its results for the second quarter of this year 2019 ended September 30, 2018. Today's call will be led by Strauss Zelnick take 2 Chairman and Chief Executive Officer Carl Slado, our President and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q And A session following our prepared remarks. Before we begin, I'd 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 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 A and quarterly report on Form Ten 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 financial outlook are contained in our press release including the items that our management uses internally to adjust 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 www.taketogains.com. And now I'll turn the call over to Strauss.
Thanks, Hank. Good afternoon, and thank you for joining us today. I'm pleased to report that during the second quarter, Taytu delivered better than expected operating results, including growth in net bookings. This outperformance was driven primarily by Grand Theft Auto Five and Grand Theft Auto Online, as well as the successful release of NBA 2k19. On September 11, 2k launch NBA 2k19 to critical acclaim.
Forbes noted there's no such thing as a perfect sports game, but this is as close as it gets. IGN called NBA 2k19, the best of the series. And game informer said the title isn't just a game. It's a lifestyle. During the second quarter, net bookings from NBA 2k19 grew 10% over last year's release, driven by better than expected growth in recurrent consumer spending.
In addition, digitally delivered sales of the game increased significantly. According to the MPD group, based on combined physical and digital sales in the U. S, we NDA 2K19 achieved the highest launch month in terms of dollar sales of any sports game released since it began tracking industry sales in 1995. NDA 2K19 represents the biggest launch of any title in the NBA 2K series. And NBA 2 19 is now the best selling sports game of 2018 year to date.
Our industry leading basketball series continues to benefit from strong engagement and recurrent consumer spending. For NBA 2k19 online games played percentage of players who buy virtual currency and average revenue per user, all have increased double digits over NBA 2k18. During the second quarter, recurrent consumer spending on NBA 2K grew approximately 70% to a new record. In fact, NBA 2K was the single largest contributor to recurrent consumer spending in the period. We expect the net bookings from NBA 2k19, including recurrent consumer spending will be the highest ever for a 2K sports title.
I'd like to congratulate Visual Concepts and 2K for continuing to innovate our beloved basketball series and setting the standard for sports games and interactive entertainment. Even with its tremendous success, we believe that there remains a substantial worldwide opportunity for NBA 2k, both in terms of unit 2nd quarter as it has in every period since its release. Recurrent consumer spending on the title grew sequentially and was close to flat year over year. During the quarter, Rockstar Games supported Grant Theft Auto Online with an array of new content highlighted by the highly successful after hour update, and they have much more planned going forward. Sales of Grand Theft Auto V also outperformed our expectations, and the title is now sold in more than including Social Point's mobile games, NBA 2K18, WWE SuperCard and NBA 2K Online 2 in China.
Delivering new and innovative ways for consumers to stay captivated by and engage with our titles after their initial launch remains a key strategic priority for our organization. During the second quarter, recurrent consumer spending exceeded our expectations, growing 28% and accounting for 53% of total net bookings. In addition to virtual currency for NBA 2k and Grand Theft Auto Online, recurrent consumer spending was enhanced by a variety of offerings. In the free to play category, Social Point once again was a significant contributor to our results through its 2 biggest mobile titles: Dragon City and Monster Legends. Combined net bookings from these two games grew sequentially over the first quarter.
Social Point remains focused on its exciting pipeline, which includes 10 new games in development. Recurring consumer spending on WWE SuperCard grew 47 percent net of platform fees and the game has now been downloaded over 18,000,000 times. 2 Ks supported WWE SuperCard with 3 updates during the second quarter and has announced that WWE SuperCard season 5 will be released this fall. And NBA 2K Online in China grew 85 percent, driven by the launch of NBA 2K Online 2 in August, Total combined registered users for NBA 2K on line 2 and its predecessor currently stands 40,000,000 people and the franchise remains the number one PC online sports game in China. Add on content also contributed meaningfully led by offerings for Sid Meier's Civilization and Xcom 2.
On October 26, Rockstar Games launched a highly anticipated title, Red Dead Redemption 2. Our collaboration among all of Rockstar Games studios worldwide, including more than 2000 team members, Red Dead 2 features the deepest and most expansive rockstar world to date and is the label's first experience built from the ground up for the current console generation. Red Dead Redemption 2 has received outstanding reviews with numerous influential critics awarding the title of Perfect Score, including IGN, the Guardian, game informer, the telegraph, digital trends and others. The Washington Post called it jaw dropping at every level. Holy reporter said what Rockstar has delivered in Red Dead Redemption 2 is not just the best game of the year, but the best game of the decade.
CNet wrote Red Dead Redemption 2 has undoubtedly raised the bar for narrative Open World games and will likely have a lasting impact on how they're made in the future. And GQ UK said Red Dead Redemption 2 is Rockstar's best game, a grand, magnificent adventure that's vast, yet intimate. Red Dead Redemption 2 is now tied with Grand Theft Auto 5 as the highest rated title on PlayStation 4 and Xbox 1 with a 97 Metacritic score. Red Dead Redemption 2 has also exceeded our sales expectations to date. The title is at numerous records, including achieving the biggest opening weekend in the history of entertainment, with over $725,000,000 in retail sell through during the 1st 3 days.
Red Dead Redemption 2 sold in more units its 1st 8 days in the original blockbuster Red Dead Redemption sold in its 1st 8 years. And as of today, the title is sold in over 17,000,000 units worldwide I'd like to congratulate the entire team of Rockstar Games for once again raising the bar for what can be achieved creatively in interactive entertainment. Well as delivering resounding critical and commercial success. As a result of our strong performance in the second quarter and out understanding early results from Red Dead Redemption 2. We're increasing our financial outlook for fiscal 2019, which is also poised to be a record year for net bookings and operating cash flow.
This is one of the most exciting times in our organization's 25 year history. New Technologies, business models, and distribution platforms are enabling interactive entertainment to reach consumers like never before and allowing our business to evolve further and expand globally. Take 2 is exceedingly well positioned to capitalize on all the positive trends in our industry. Creatively, we're home to the best development teams in the business. Which have a proven track record of delivering the highest quality entertainment that captivates audiences and keeps them engaged.
Operationally, we're committed to excellence, we strive to opportunities, both organic and inorganic. As a result, Take 2 is better positioned than ever to deliver growth and returns for our shareholders over the long term. I'll now turn the call over to Carl.
Thanks, Strauss.
Today I'll begin by discussing our other recent launches. On October 9, 2K returned to the ring with WWE 2K19, the latest installment in our popular sports entertainment series. Developed collaboratively by YUPES and Visual Concepts. The title received positive reviews from critics, including Bleacher Report, who called the Game Phenomenal, and IGN, who noted, my career this year is fantastic and is exactly what the template should look like in future years. WW 2K19 is being supported with a series of downloadable content, including a season pass, as well as the WWE 2K19 $1,000,000 challenge.
Where one finalist will compete 1 on 1 against A. J. Styles for the chance to win a $1,000,000 grant prize. On October 16th, 2K bolstered our NBA Basketball offerings with the release of NBA 2K playgrounds 2. Title is a fun throwback to the classic 212 or Kate style basketball that continues to earn worldwide fans a critical acclaim.
IGN rated the game an 8 out of 10 and said NBA 2K playframes to prove that pickup and play RK basketball is still alive and well. NBA 2K playgrounds 2 features multiple ways to play it in your own with friends war against the world. The game is being supported with a series of post launch updates featuring 180 additional players, including NBA legend, Kareem Abdul Jabbar, as well as additional playgrounds. Yesterday, 2K launched Carnival games for Nintendo Switch, PlayStation 4, and X Plus 1. This new offering from our popular franchise that is sold in over 9,500,000 units worldwide is perfectly timed for the upcoming holiday season.
Offered at a family friendly price point of $39.99, Carmel Games is fun for gamers of all ages. On Nintendo Switch, the title can be played alone or with up to four people simultaneously, leveraging the unique accessibility of the console's Joy Con controllers. The game features 20 exciting re imagined games and 4 unique allies that can be played at home or on the go alone or with family and friends. Turning to our upcoming releases. On November 13th in North America and on November 16th, Internationally, 2 cable released physical versions of the golf club 2019 featuring PGA Tour for PlayStation 4 and Xbox 1.
Developed by HP Studios, 2K launched the game digitally for these consoles and PC this past summer, marking the franchise's first release featuring the official PGA tour license. Within its 1st 2 months in market, the title sold in over 30% more units than last year's edition. In addition, Critics agreed that the golf club 2019 featuring PGA Tour is the most comprehensive and engaging virtual golf experience to date. With Operation Sports calling it exciting fun and authentic, and GameSpot saying it's a dry color for the golf simulation series, We're pleased to expand our sports portfolio and continue to explore opportunities to complement our offerings. On November 16, 2K for access games were launched Sid Meier's Civilization VI for Nintendo Switch.
Civilization VI won both the Game Awards and Dice Awards best strategy game in 2016. And on Nintendo Switch, the title will include the latest game updates and improvements as well as 4 additional content packs that add new civilizations, leaders and scenarios. We are confident that gamers will enjoy taking one more turn in our beloved award winning strategy series on the Nintendo Switch. On December 14, 2K and Gearbox software will bring the critically and genre defining shooter Litter Borderlands franchise to PlayStation VR with Borderlands 2 VR. Available for digital download, the title brings the iconic world of Pandora to life like never before, with brand new VR specific features, like bad ass megaphone time, first person perspective driving, and all new VR specific Vault Hunter skills and abilities, and more.
Just in time for the holidays, both fans in the press are excited for Borderlands VR rival, but game informer saying, grab your guns and get into Pandora once again with Borderlands 2 VR on PSVR. I'd like to take him on to join Strauss in congratulating Rockstar Games on the phenomenal success of Red Dead Redemption 2. Later this month, Rockstar Games is planning to launch an initial public beta of Red Dead Online. A new online connected experience set against the backdrop of Red Dead Redemption 2's enormous open world. Red Dead Online is an evolution classic multiplayer experience in the original Red Dead Redemption, blending narrative with competitive and cooperative gameplay and fun new ways.
Using the game play of Red Dead Redemption 2 as a foundation, the vast world of Red Dead Online will be ready to be explored alone or with friends and will feature constant updates and adjustments to grow and evolve this experience for all players. Access to Red Dead Online will be free with the purchase of Red Dead Redemption 2 on both PlayStation 4 and Xbox 1. In the coming months, we will continue to support our titles with additional content designed to drive consumer engagement, including updates for Grand Theft Auto Online, WWE SuperCard and more. In addition, we will continue to broaden our offerings for mobile devices. Following the successful completion of the NBA 2 K leagues inaugural season, or additional teams have signed on, bringing the total to 21 teams that will compete in season 2.
The draft qualification process for Season 2 began last week and will conclude November 6. 26. Non retained players from the 1st season will automatically be entered into the draft pool for Season 2. The MD A 2K league also plans to conduct 1 or more tournaments outside of North America to identify additional international players the 2019 draft pool. We look forward to the continued progress and growth of the league, which has the long term potential to enhance engagements, to be a meaningful driver of profits for our company.
Looking ahead, our labels have a strong development pipeline, which includes groundbreaking, new intellectual properties, releases from our renowned franchises. In addition, we'll continue to support our games with offerings designed to enhance players' experience and drive engagement. This is an incredibly dynamic time for our company and the industry with vast opportunities presented by emerging platforms, business models and markets that are enabling us to reach new consumers in all new ways. We're excited about the future and confident in our ability to continue to provide value to our consumers and returns for our shareholders over
and then review our financial outlook are contained in our press release. Strauss mentioned, our business delivered better than expected operating results in the second quarter. Total net bookings grew to dollars due primarily to the outperformance of Grand Theft Auto5 and Grand Theft Auto Online, as well as the successful launch of NBA 2k19. Digital delivered net bookings grew 20 percent to $426,000,000 and accounted for 73% of the total. During the that exceeded our expectations.
Turning to some details from our second quarter income statement. GAAP net revenue increased by 11% to $493,000,000 and cost of goods sold decreased 5% to $235,000,000. Operating expenses increased by 11 percent to $232,000,000 due primarily to higher marketing spend as well as R and D expense titles that are not technologically feasible. And GAAP net income was $25,000,000 or $0.22 per share, up from a loss of operating and financial outlook, starting with the fiscal third quarter. We expect net bookings to range from 1,400,000,000 up from $654,000,000 in the third quarter last year, driven by the record breaking launch of Red Dead Redemption 2.
I would like to join Strauss and Carl in congratulating Rockstar Games for delivering this incredible creative and commercial achievement. The largest contributors to net bookings are expected to be Red Dead Redemption 2, NBA 2K19, Grand Theft Auto Online And Grand Theft Auto Five, and WWE 2K19. We expect recurrent consumer spending to be approximately flat and we expect digitally delivered net bookings to increase by around 70%. Our forecast assumes that 30% of our current generation console gains will be delivered digitally, up from 26% in third quarter last year. We expect GAAP net revenue to range from $1,100,000,000 to $1,150,000,000 and cost of goods sold to range from 773 $799,000,000.
Operating expenses are expected to range from $290,000,000 to $300,000,000. At the midpoint, this represents a 45% increase over last year, driven primarily by higher marketing expense. And GAAP net income is expected to range from $36,000,000 to $48,000,000 or $0.31 to $0.41 per share. Turning to our outlook for the full fiscal year. We are raising our fiscal 2019 operating outlook primarily as a result of our stronger than expected second quarter results and increased outlook for Red Dead Redemption 2, as well as higher recurrent consumer spending on NBA 2K.
These are partially offset by modestly reduced unit expectations for NBA 2k19 and WWE 2k19. We now forecast net bookings to range from $2,800,000,000 to $2,900,000,000, up from our prior outlook of $2,700,000,000 to $2,800,000,000 As a midpoint, this represents a 43% increase over fiscal 2018, driven primarily by the launch of Red Dead Redemption 2, and expected growth from NBA 2K, which we forecast to be partially offset by lower net bookings from Grand Theft Auto V and Grand Theft Auto Online. The largest contributors to net bookings are expected to be Red Dead Redemption 2, Red Dead Online, NBA 2K, Grand Theft Auto Online and Grand Theft Auto5, WWE 2K, and Social points mobile offerings. We expect the net bookings breakdown from our label to be roughly 60% Rockstar gains, 35% 2K, and 5% Social Point and Other. And we forecast a geographic net bookings split to be about 55 Percent United States and 45% international.
We now expect recurrent consumer spending to grow in the low teens and we have increased our digitally delivered net bookings growth to approximately 30%. Our increased forecast for digitally delivered net bookings is driven primarily by a higher full game download mix for Red Dead Redemption 2 and NBA 2K19. We now forecast that 37% of our current generation console games will be delivered digitally in fiscal 2019, up from 34% last year and up from our prior expectation of 32%. We expect to generate approximately $20,000,000 increase from our prior implied outlook. Adjusted operating cash flow is our new non GAAP measure.
And is defined as GAAP net cash from operating activities, adjusted for changes in restricted cash. It is equivalent to what we formally reported as GAAP net cash from operating prior to our April 1 adoption of a new accounting standard, which requires a changes in restricted cash to be included within our cash flow statement. We plan to to range from $2,550,000,000 to $2,650,000,000 and cost of goods sold to range from $1,450,000,000 to $1,470,000,000. Total operating expenses are forecasted to range from $890,000,000 to $930,000,000. At the midpoint, this represents a 20% increase over the prior year, driven primarily by higher marketing, personnel, IT and R and D expenses.
And we expect GAAP net income to range from $202,000,000 to $232,000,000 or $1.73 to $1.98 per share. For management reporting purposes, we expect our tax rate to be 20%. In closing, during the first half of fiscal twenty nineteen, take to produce strong results, and we are poised to generate record operating results for the full year. Over the long term, our industry leading creative assets, firm commitment to operational excellence and strong financial foundation position our company to deliver growth and margin expansion for our shareholders. Thank you.
I'll now turn the call back to Strauss.
Thanks, Carl and Lenny. On behalf of our entire management team, I'd like to thank our colleagues for their dedication and hard work and for delivering another successful quarter. To our shareholders, I want to express our appreciation for your continued support. And we'll now take
you. Our first question comes from Mike Olson with Piper Jaffray. Please proceed with your question.
Good afternoon and congrats on the results and the launch. I realize we're only 10 days into this and it'll only be relevant over a longer period of time, but at this point, do you think you're seeing any material cannibalization of GT online from the launch of Red Dead Redemption 2 and somewhat related to that? Is it likely that Rockstar will release content updates for GTA5 and red dead redemption 2 in a staggered manner coming quarters or will they just kind of be released when they're ready? Thanks.
I've been asked repeatedly over prior calls about whether I felt cannibalization would potentially be an issue. And my view is that all games, all products all a product stand alone. They compete with everything in the market. They compete with themselves. Then they compete with nothing at all because if, if they're a bunch of good stuff out there.
You'll want to consume it all. And if there's nothing that appeals to you, you don't need entertainment at any given time. The fact that Red Dead Redemption 2 has come from Rockstar Games does not make it more or less competitive with other title in the marketplace. And specifically to answer your question, we do not see any cannibalization nor do I expect any.
Thank you.
Our next question comes from Tim O'Shea with Jefferies. Please proceed with your question.
Yes. So thank you for taking my question. I'm just curious, what kind of marketing promotional activity should we expect for Red Dead through the holidays. I'm just wondering if this is the type of game that will be a gifted item. Was this a type of game that could see a nice boost during the holiday shopping season.
And just given the strength of the early sales with Red Dead, I'm wondering how strong this game could sell through the rest of the December quarter. Thanks.
I think you can obviously expect that we'll be very supportive of the title on an ongoing basis. More specific details would be given by Rockstar.
Our next question comes from Ryan Gee with Barclays. Please proceed with your question.
Maybe for Laney, if we just see some rough math, it puts red dead redemption somewhere at already around the $700,000,000 in net bookings to date. That compares to your new guidance for the Rockstar business to do about $1,700,000,000, up from the 1.5 that was in the guidance last quarter. So how should we think about that gap being made up by the rest of the Rockstar product? Should we think that that's really in your guidance primarily unit sales or is it really catalog of GTA or perhaps the 2 rocks are online businesses? Any color you could give there would be great.
So what you're referring to are retail sales, not just what our sell through would be in our wholesale sales, which be for digital and physical. So, those numbers aren't comparative, but if you think about just Q2 in general, And we've lifted the full year, and that is due to the increased outlook for Red Dead Redemption 2 and then higher RCS on MBA, partially offset by reduced unit sales expectations for NBA 2k19 and WWE 2k19.
Our next question comes from Eric Handler with MKM Partners. Please proceed with your question.
Yes. Thank you very much for the question. A couple
of things
on Red Dead. Laney, in particular, I wondered, if you can talk about the dispersion between the base SKU and how you did versus the 2 other premium SKUs. Wondering if you might give a little insight there. And then, also as, when you think about the game, and the online portion of the game. Can you maybe talk about some possibly some similarities in how GTA online ramped when it first started and how you think that might progress with, with Red Dead.
Hey, Eric, it's Strauss. No, we we we don't break down how the different additions have sold we will break down some details, but we don't tend to break that down. And it's way too early to talk about Red Dead Redemption 2 online has launched yet. It will launch in public beta towards the end of the month, Rockstar will have a lot more to say about it. But we're not making any current predictions.
Fair enough. And then I guess just just one quick follow-up. I wondered, I'm not sure if I missed it or not, but, the how Red Dead did in terms of full game downloads versus physical sales?
We're not giving the detail by title, Eric, but we did say that we have seen a higher portion of digital sales versus physical than we had already had originally expected. So for the full year, we're expecting on current gen. Our full game downloads to be 37%, up from 34% last year. And we had expected it to be 32% when we gave out guidance last time.
Understood. Thank you very much.
Our next question comes from Justin Post with Merrill Lynch. Please proceed with your question.
Great. Thank you and congrats on Red Dead. I'll move over to MBA. Can you talk about the dynamics that may be driving units a little bit below your forecast but RCS higher. And then Lanny, I think Lanny, I'm sorry.
I think you have, about $800,000,000 of long term capitalized stock were on the balance sheet. I imagine some of that's related to Red Dead. Wondering why that's not in the short term side and then how that will flow through the income statement the next few quarters. Thank you.
Hi, Justin. It's Carl. Just to address your first question about the dynamics of the units will have forecast, at this point. So yeah, we, we, or to date, the units of NBA 2K19 are down modestly. Versus 2018.
So we're forecasting them down a little bit for the, for the full year. You know, you don't ever have exact answer to why that's the case. But we have seen a higher number of consumers who bought NBA 2k18 continue to be engaged with that title, and they haven't converted over to 2k19 yet, which, certainly could have an effect on the unit sales of M. A. 2k19.
There's also some competitive dynamics couldn't be affecting it. There are a lot of titles in the market, now. But the, but, but 2K continues to pursue strategies to increase number of units out there. So we're obviously not taking it thing down. In terms of RCS, I mean, to get you right, I mean, consumers are much more engaged.
I think that the good news on here is is actually are in the title, all the key all the key metrics are much better than they had been in the past. And that just shows you just, credit to how engaging the title is and how much visual content improves that title year upon year.
So for CAPS software for long term, We wouldn't see, Red Dead Redemption move into short term until the game releases. So you wouldn't see a movement of that until Q3. And that number that $800,000,000 includes capitalized stock expense, and that won't go through our management reporting. You'll only see that go through our GAAP reporting. And once we release the games, we'll be creating a lifetime estimate of the title.
And we don't share our lifetime estimates, but a blockbuster title, you can imagine has a bit of a longer life. And that will help you to determine what the amortization period is over the life of the title.
Great. Thank you.
Our next question comes from Ben Schachter with Macquarie Group. Please proceed with your question.
Hey, guys. Congratulations on the launch. Just really a great experience and I'm personally spending probably too much time chasing the legendary bear. On sales, can you talk a little bit about the international opportunity, where it's done well, where it's not done as well, where as you would have liked, and where you think you could grow And then separately, Lainie, you listed, Red Dead online second when you talked about a contributor for FY19, I believe, in the script. Can you clarify what that means in terms of the magnitude of Red Dead Online for this year's guide?
How you're thinking about monetizing there? And then just one more on the capitalized part. If we assume that the success of GTA on or GTA was so long, for this one, obviously, it's going to be more than a year of utilized software amortization? Is it 2 years? Is it 3 years?
And is it straight line? Or would it be relative to sales? Thanks.
So, thanks for your questions. I'm glad you liked the game. You know, I actually went into Carl's office right before this meeting. I mean, he was playing it. That is the truth.
So it's it's, beloved already here. It's selling great around the world there. It's incredibly strong everywhere. It's, It's doing very, very well in international markets. And in terms of online, we're not breaking breaking out, read that online for the year.
And Laney, you'll take the 3rd question.
Sure. So, yes, it's true. GPA did have a really long life we would look at all of our titles and similar titles to determine the lifetime. But we have to look at history of all of our titles. And GTA is definitely a unusual circumstance.
But if from blockbuster, you would assume that it would be more it wouldn't be just 1 year, it would be a longer life than that. And in terms of how we would amortize, it would probably be over the the revenue stream. It's the low, it's the higher of the, that are straight line and based on the launch quantity, I would assume that it would go over the revenue stream.
Great. And just a quick follow-up. So you did say Red Dead Online when you were talking about revenue. So should we assume that that means there is monetization in Red Dead Online and that part of the guide?
I didn't say Red Dead Online. I was talking about Red Dead, the launch of Red Dead.
Our next question comes from Brian Nowak with Morgan Stanley. Please proceed with your question.
Great. Thanks for taking my questions. I have 2 The first one, Strauss, just as you kind of you step back, you've done a great job the last couple of years sort of building up a stable of software engineers and the ability to put out more content how do you think about the potential to sort of put out more recurring titles on an annual basis in the next 2, 3, 4 years? Where are you now as far as capacity? The second one, you mentioned that 2 new games sorry, 10 new games in development at Social Point.
Any thoughts on timing and
all you can share with us.
And what genres of mobile are you most excited about? Thanks.
Well, thanks for your question. And regarding our, upcoming release schedule, we've said that our goal in any years to have a handful of really powerful frontline releases and those would be, taking advantage of our a collection of franchises. We have 11 franchises that, that have each had at least 15,000,000 unit release. We have over 60 that have sold at least 2,000,000 units in an individual release. So we will certainly bring back beloved franchises to market and we aim to create new intellectual property every year as well.
We haven't always been able to do that, but that's our goal. And in so doing, that looks an awful lot like annualizing titles without bringing really high quality titles or trying to bring really high quality titles to market frequently, which we think is exceedingly difficult to do. We think if you're able to do that right, we should be able to have an incredibly powerful frontline release program without, asking too much from, from either our development teams or the consumers in terms of over and over again, bringing a non sports title to market sports entertainment titles on the other hand are annualized. They work really well. So I think that's what you should expect, going forward.
The second question was with regard to Social Point. The games are sort of described as Midcore. They're deeper. They're engaging. They're intended to be deeper and engaging.
Beyond that social point of talk about their upcoming releases, because important that our labels speak for themselves from the point of view of development and marketing. But it's a diverse array of titles that are expected to be highly competitive. We're thrilled that they've hits in the marketplace and we're, we're excited about what is to come.
Great.
Thanks. Our next question comes from Evan Wingren with KeyBanc. Please proceed with your question. Thank
you. Just wanted to ask quickly about the RCS outlook for for 3Q. I think you mentioned it was flat, respecting that the DMZIA did launch a bit later in the quarter last year for GTA. Just trying to understand the puts and takes given your comment to NBA 2K is growing and with respect to Strauss's comment that you don't expect cannibalization. So just trying to understand that dynamic.
And then just to be crystal clear, because I was actually a little so confused. You're saying there is no nothing in the guide for Red Dead Online?
Thanks.
No, we didn't say there wasn't anything in the guidance. We just said that when I was talking about the amortization of capitalized software is talking about the core products of Red Dead Redemption 2 and the full game that was already released. For recurrent consumer spending, what we're talking about in terms of the full year is that NBA 2K is going to be up for the full year. We will have Red Dead Redemption 2 launch and that's, sometime later this month. And so it won't be like a full quarter So that's, why the number wouldn't be up significantly.
And we did say it was offset by GTN line which is reduced and we have, we had given out original guidance for DT online, to be down for the full year and also expectations every time the title comes out each quarter.
Okay. Thanks. And then just one quick one on NBA 2K. Give a sense for what, why this title given that it was so well reviewed relative to last year, has sort of underperformed your expectations slightly? Thank you.
Hi. Yes, the title has not underperformed our expectations. This point, and actually from a revenue perspective, we still anticipate this is going to be, our highest title ever. And we did say that the units are bit below, where we expected them to be at this point in time. And, you know, as I said in an earlier question, could be a vast array of reasons we've got a lot more people engaged in 2 K18 for a longer period of time that may have not transitioned over.
There is, although there are a lot of games in the market But like I said, 2K is obviously focused on trying to bring the audience base as high as it possibly can be and grow it.
Next question comes from Todd Juenger with Sanford Bernstein. Please proceed with your question.
At this point, it's hard not to overlap a bit with some previous ones, but can I go back to the NDA 2K number? I want to make sure I heard it right. I thought I heard 70%, 70% increase in recurring revenue. If I heard that right, that's obviously, very big number. I I know you said it had to do with more players, higher attach rate, more ARPU, any more detail that would be helpful.
But I guess more broadly, what do you think about the game is driving such a change in behavior? Was there any change in the game design? Is it just is there some timing issues? Is it just the evolution of just that concept generally being accepted by consumers? Trying to understand what drove that result, if I heard it correctly.
Thanks.
You did hear it right. 70% recurring consumer spending over last year's quarter. And it is good, great result. And it's reflective of a lot more engagement and the increase engagement, we think, is that the consumers who are inside the game are avid consumers, they love what, visual concepts is bringing to market. And, they're voting.
They're voting that they love it. So I wish I could give you answer, Lord knows we'd like to know too. I can confirm that our approach every year is to make the game better, deeper more entertaining, more captivating, more engaging. That's the goal. And when you see this kind of change in recurrence for spending, that obviously is reflective of engagement.
Our next question comes from Ray Stochel with Consumer Research. Please proceed with your question.
Great. Thanks for taking my questions. So, a couple here on Red Dead Redemption 2 in Rockstar. So, the first would be whether or not Red Dead Redemption 2 change how you're thinking about your current cash position now that you are sort of through the launch of the game and you know it's been successful. Then in addition to that, could you isolate any key driver of Red Dead's success relative to your expectations?
Would that be review scores or preorders or just the general customer reception? And then one thing with Rockstar Broadly, do you guys think about Rockstar's social club as a big competitive advantage? And is there any way that we can think about social club and sort of a bigger context. If you have any data points on social club, that'd be great.
So, in terms of, the successful year that we expect to have affecting our cash position We expect that adjusted cash flow from operations will be over $700,000,000 and CapEx will be as expected, around 60,000,000 We announced that we had cash of a little over $1,000,000,000 at the end of this quarter. So you can do the math. We obviously expect to have a significant cash balance at year end. We've said that our expectations with regard to our cash are first to support our growth on an ongoing basis. That's really our story.
This is a company that's been driven by organic growth, largely. Secondly, when we find great opportunities to support inorganic growth opportunities. For example, the purchase of Social Point, we look through a rather very narrow lens though, we want a deal to be accretive, if not immediately them very quickly. And that does matter to us. And then of course, we're prepared to return capital to our shareholders.
We bought back around $300,000,000 of stock in the last 12 months or so. Those are the free uses of cash. But, it's obviously a great place for us to be with no debt. I would observe that if you have concerns about the economy and I think you know, many of us feel like it's riding high and when we don't know when it will change, we do know that at some point it changes that having a significant cash asset is strategically beneficial. And we do want to be well positioned for long term growth.
We are not a quarter to quarter company. So the second thing, I think you asked what drives the enormous success red dead redemption too. And the answer, I think, is that rockstar is known to make the best games in the business. And I think the creation of Grant Theft Auto5, which has really became a threshold event for the industry for Rockstar, for Take 2 as a whole. And because it basically demonstrated that if something is, you know, so good as to be breathtaking, that you can have amazing results.
And I think when consumers understood, which they did, that Red Dead Redemption 2 would be the first game built from the ground up for the next generation by Rockstar Games. That became a must have item. Now when something is a must have to have item and you get it at home, it's got to be great. And 97 Metacritic the ties that we grant Theft Auto5 basically says it's great. And I promise you if you play video games and you play Red Dead Redemption too, you will agree it's great.
So what drives the success of any hit is that it's phenomenal and usually phenomenal in a somewhat unexpected way as high as the expectations were for this release. I'm not sure anyone could have anticipated just how amazing it is. With regard to, the Rockstar Social Club, it's a vibrant passionate community. The label supports it continuously. It has lots and lots of people who are engaged.
We don't give much more detail than that, but we do think it's a strategically interesting and beneficial asset.
Our next question comes from Mike Hickey with The Benchmark Company. Please proceed with your question.
Hey, Strauss. It's Carl Lainie Hink. Congrats on an awesome quarter, guys, and congrats on Red Dead and the Rockstar as well. The truly amazing success Curious on Red Dead Online. This is a bit of a stretch.
Obviously, as competitive gameplay elements to at least I think that's what you said. Do you see any sports opportunity at all for that game? And I guess more broadly speaking, it's hard to get a read on what Rockstar is thinking philosophically. Obviously, they've nailed single player, they've nailed live service, but do you think they have any ambitions to compete in these forward market over time?
I think if there is any sports interest, Rockstar will talk about it. Think, as always, we want our labels to be out in front with marketing announcements. I would observe that so far, Take 2's E sports ambitions have centered around NBA 2K and the NBA 2K leak.
Okay, cool. The last one from me, you said 17,000,000 units sold in. Any perspective on what the channel looks like on the physical side, obviously?
It's selling rapidly.
That's what it sounds like. All right. Thanks guys. Good luck with
Our next question comes from Brandon Ross with BTIG. Please proceed.
Hi, thanks for taking the questions. Just a follow-up on the capital question from earlier. M and A opportunities seem obvious within gaming, whether kind of bulking up in mobile or console. Maybe you can update us on your what your ideal opportunities within gaming would be besides being accretive. And if there are any other strategic opportunities in adjacent businesses that might make sense for you guys?
And then, on Social Point, you called out Social Point success, this past quarter and the number of titles that are coming. Are there any ways you see them working with 2K or Rockstar to make those mid core games, based on, I guess, Thanks.
Thanks for your good questions. I know you said, yes, we know you want acquisitions to be accretive, but believe it or not, that's a relatively unusual approach, in our business. And it shouldn't be. It really is relevant because in the absence of thinking about that. You'd look at a whole bunch of things into the presence of that as a metric.
You don't look at so many things at all. Generally, what we've said is an acquisition should bring us owned intellectual property. Teams and potentially technology. It doesn't have to bring all 3. We've done acquisitions that brought us 1 of 3 for 2 or 3, 3 of the 3 would be even better.
And we are indeed very selective. Most corporate acquisitions fail. And thankfully, the ones we've done around here at least so far have succeeded we'd like to keep it that way. To your second question about Social Point, their focus as is the focus of all of our labels is to create their own intellectual property. And I would just note that in terms of the biggest titles in mobile, they're all native to mobile.
They're all made for that platform. There's no doubt that we've had success with intellectual property brought to the platform, WWE SuperCard being a great example. But the really huge successes are native, and that's what Social Point is trying to achieve. I wouldn't rule out the possibility of Social Point working with another label inside, to take 2 family. But that isn't the current approach and it wouldn't be our primary approach.
Thank you.
Our next question comes from Drew Crum with Stifel. Please proceed with your question.
Okay, thanks. Hi guys. Good afternoon. So can you talk about the frequency of content updates we should expect, for Red Dead 2 online? And I think And I apologize if I missed the response, the question, but I think there was an earlier question on whether Rockstar will stay or the release schedule between Red Dead Online.
In GTA online? And then separately, Red Dead 1 was not on PC. Any updated thoughts on making Red Dead 2 available on PC down the road? Thanks.
Sorry, could you just repeat the third question?
Strouse, just on making Red Dead 2 available on PC?
On making it available on PC. So on Rockstar, you know, would normally update, everyone on upcoming releases and that would sort of answer all of your but, it's too early to talk about content updates for Red Dead to online because it hasn't launched yet, obviously, Historically, obviously, we have updated content for our online offerings. And in terms of ongoing releases, Rockstar will talk about what their intentions are going forward. Regarding all upcoming products and that the same would hold true for platforms. So in this particular instance, I can't really give you too much clarity.
Apologies.
Okay. Thanks guys.
Our next question comes from Andrew Yerkwitz with Oppenheimer. Please proceed with your question.
One of the big benefits I think GTA5 experienced was the fact that it was such a great game that when a new console cycle came, people all went out and bought it again. Sony and Xbox tend to talk a lot about forward backwards compatibility. Does that does that change that dynamic as we approach the next console cycle? Because it looks like Red Dead could easily have the legs to last for multiple years. And then, as a second question, you showed NBA 2K at the Apple event, civilization 6 is the full game, I think, is on Ipad and Iphones and mobile.
Are those devices becoming powerful enough that they become an entire another medium for you to push a lot of your content to? Thanks.
Yes, I don't think backwards compatibility is actually all that important. I think the reason that we had such a great experience with Grand Theft Auto V when we brought it to new generation is first of all, the content was meaningfully updated with amazing new features. And secondly, because the title is so extraordinary that it remained the standard bearer for the new generation straight through until the release of red dead redemption, too, because nothing stood up to it technically or creatively. So how Red Dead Redemption 2 fares going forward is hard to know, but it's certainly off to a great start. But we don't, our our success is out of our control.
Our success is built by making the very best entertainment that we possibly we're grateful that at least so far, it appears that it's some of the best entertainment made. And that's the whole drill. On your point about, technical abilities, and thanks for referencing the apple event, we're really thrilled to participate for MDA. I do think that it's just a matter of time before mobile devices are every bit as powerful. The question is whether the form factor is gonna heal to every kind of title.
Then I'm skeptical that it will. I say that and then you can find people who like to watch movies on their smartphone. So I'm sure you can find some people who, when the platforms are powerful enough and to be clear, they're not yet. But when they are, We'll be really happy to play our very, very deep, very robust, very memory intensive, technologically intensive titles. On platforms like iPads or smartphones.
But right now, we're not, we're not quite there yet. But if you believe in Moore's Law, I do, just a matter of time, probably not that long a time before that's the case.
Got it. Thank you very much guys. Appreciate it.
Our next question comes from Doug Cruise with Cowen and Company. Please proceed with your question.
Thanks. This is for Strauss. You were recently named Interim Chairman of CBS and congratulations on that, by the way. Is there a company that's facing a lot of important decisions over the next 2 years, both internally and externally and I've even seen your name mentioned in the press release in one spot in conjunction as being a possible CEO candidate. So the responsibilities there at all affect what you're doing at Take 2?
Has there been any kind of reshuffling and responsibilities? And how do you think about kind of balancing those roles off against each other? Thank you.
The CVS role is specifically interim and non executive. So you have think of it as a board seat with the responsibility to convene meetings. And I'm grateful for any opportunity to be service, to friends in the industry. Take 2 is where my head and my heart remains. I'm really proud of what the team here has accomplished in the last 11 years.
I'm firmly committed to the company. I love what I do every day. And it keeps all of us plenty busy. I'd observe that, I'm one of only 4 1300 team members. And, this is a team effort.
And I'm really proud of what we together accomplished, but it is not a singular activity. So it's kind of you to ask the question, but much more relevant question is how does the team feel about continuing to do this together? And my primary job is to make sure that we constantly have a fantastic strategy backed up by an amazing culture that this remains the place of choice for people who want to do the very best work in entertainment. And that when they are here, they get to pursue what they're passionate about because more often than not, that yields the kind of results that we're talking about today. So I'm really grateful to be able to do this every day, and I'm quite and to be specific entirely committed to continuing to do so.
At this time, I would like to turn the call back to management for closing comments.
I just want to thank everyone for joining us today. We're obviously grateful for, terrific second quarter. We're thrilled that we're able to guide up for the year. And, it is a gross understatement to say that we're excited for the initial release of Red Dead Redemption 2 And we have, wonderful hopes for how the title will continue to unfold. Thank you again for joining us.
We really appreciate your support.
This does conclude today's teleconference. You may disconnect.