Greetings. Welcome to the Take-Two Interactive Software Q2 Fiscal Year 2020 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications. Thank you, sir. You may begin.

Good afternoon. Welcome, and thank you for joining Take-Two's Conference Call to discuss its results for the second quarter of fiscal year 2020 ended September 30, 2019. 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. 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.take2games.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 Take-Two's positive momentum continued in the second quarter, enabling our company to generate operating results that significantly exceeded our expectations. We delivered a strong net bookings, cash flow and earnings growth, fueled by the performance of NBA 2K, Borderlands 3, Grand Theft Auto Online and Grand Theft Auto V, and Red Dead Redemption 2 and Red Dead Online. Once again, our strategy of creating the highest-quality entertainment in the industry translated into outstanding results. On September 13, 2K and Gearbox Software launched Borderlands 3, the latest installment in our genre-defining shooter-looter series. The title has exceeded our expectations and sold more than 5 million units within its first 5 days of launch, making it the fastest selling title in 2K's history and the highest selling title for the label on PC. Within its first 5 days in market, retail sell-through Borderlands 3 was up more than 50% compared to its predecessor, and 70% of units were purchased digitally, setting a new record for a 2K cross-platform title. Borderlands 3 received resoundingly positive critical acclaim with Forbes, IGN, Shacknews, Destructoid, and Meristation, all scoring the title 9 out of 10. Today, Borderlands 3 has sold-in nearly 7 million units worldwide. I'd like to congratulate the teams at Gearbox and 2K on a stellar launch in taking this beloved series to new heights. Karl will share details about our post-launch content plan that will keep players engaged in the world of Borderlands 3. Our industry-leading basketball series continued to grow during the second quarter. With net bookings up approximately 9% despite a difficult comparison, driven by the successful September 6 launch of NBA 2K20. According to The NPD Group, NBA 2K20 is the best-selling game of…

Thanks, Strauss. I'd like to begin by thanking our teams for delivering another strong quarter that exceeded our expectations. I'll now discuss our recent and upcoming releases. On October 22, 2K launched WWE 2K20, the latest offering in our flagship WWE franchise for PlayStation 4, Xbox One and PC. Developed by Visual Concepts, WWE 2K20 features several new gameplay modes that celebrate the WWE's thriving women's division, as well as an array of fan-favorite superstars, legends and match types. Earlier this year, 2K announced the philanthropic partnership with Leukemia & Lymphoma Society, in conjunction with WWE Superstar Roman Reigns, who is a leukemia survivor that helps raise awareness and $500,000 for this important cause. While we are disappointed with the reviews and consumer feedback for WWE 2K20, last week, Visual Concepts released a patch that should address many of the concerns, and they will continue to make further enhancements to the gameplay experience. The WWE brand continues to expand worldwide, and we believe there remains a substantial long-term opportunity to grow our WWE 2K series by improving the quality of the game. On October 25, Private Division launched The Outer World for Xbox One, PlayStation 4 and PC. Developed by Obsidian Entertainment, The Outer Worlds marks the reunion of Tim Cain and Leonard Boyarsky, the original creators of Fallout, who have introduced an entirely new single player, sci-fi, RPG experience. A critical and commercial success, The Outer Worlds is exceeding our expectations and reviews have been outstanding, with GameStop giving the game 9 out of 10; Game Informer, 9.25 out of 10; and EGM, a perfect 5 out of 5. In early 2020, The Outer Worlds will be released for Nintendo Switch. As noted by Strauss, on November 5, Rockstar Games launched Red Dead Redemption 2 for PC, which is…

Thanks Karl, good afternoon, everyone. Today we'll discuss our second quarter results and then review our financial outlook for the third quarter and fiscal year 2020. Please note that additional details regarding our actual results and outlook are contained in our press release. As Strauss mentioned, our positive momentum continued in the second quarter, enabling us to generate operating results that significantly exceeded our expectations. Total net bookings grew 63% to $951 million as compared to our outlook of $860 million to $910 million. This outperformance is driven primarily by better-than-expected results from Grand Theft Auto V and Grand Theft Auto Online and Borderlands 3. Recurrent consumer spending grew 39% and accounted for 45% of total net bookings as compared to our outlook of over 20% growth. Recurrent consumer spending exceeded our expectations due primarily to the outperformance of Grand Theft Auto Online. Digitally delivered net bookings grew 63% and accounted for 73% of the total as compared to our outlook of over 40% growth. This result exceeded our expectations due to the outperformance of recurrent consumer spending and the higher than forecasted mix of digital sales of Borderlands 3 and Grand Theft Auto V. During the second quarter, 51% of current generation console games were delivered digitally, up from 47% last year. Turning to some details from our second quarter income statement. GAAP net revenue grew to $858 million and cost of goods sold increased to $468 million. Operating expenses increased by 36% to $315 million, due primarily to higher marketing, personnel and R&D costs. And GAAP net income was $72 million or $0.63 per share as compared to $25 million or $0.22 per share in the second quarter of fiscal 2019. Adjusted unrestricted operating cash flow for the 6 months ended September 30, 2019, increased to $41 million,…

Thanks, Lainie and Karl. On behalf of our entire management team, I'd like to thank our colleagues for their dedication, their hard work, their commitment to excellence. And to our shareholders, I'd like to express our appreciation for your continued support. We'll now take your questions. Operator?

[Operator Instructions] Our first comes from the line of Eric Handler with MKM Partners.

Two quick things. First, with Outer Worlds, I believe you said it was selling ahead of expectations, wonder if you might be able to put some actual numbers to that, if you don't mind? And then secondly, with Red Dead Online, wondered -- obviously, you don't talk about revenue for that game, but wondered if you might be able to at least talk about the some of the trajectory, how it compares to RCS for other games? Or how you have found that game to be tracking?

Eric, it's Strauss. On Outer Worlds, we're not releasing any specific numbers yet. It's outperforming our expectations handily. It got amazing reviews, we're super excited about it. But it's very, very early. So as we learn more, we'll disclose more. And on Red Dead Online, we did say that we're up sequentially in the quarter. We have a lot of momentum. The new content is definitely performing. People really like it, they're engaged with it. We feel great about it, and that's pretty much where we're at, at the moment.

Our next question comes from the line of Alex Giaimo with Jefferies.

This is David on for Alex. Hoping to get a little bit of color on Social Point. Last quarter, you said you had 10 number of games in development. Is that still the number we should be thinking about or that changed at all?

Yes. Thanks for your question. I think a couple of notes about Social Point. First of all, there are 5 live games that are doing well in the market. So Dragon City and Monster Legends but also World Chef, Tasty Town and Word Life. So that's super exciting. And at any given time, we have 8 to 10 new titles in development at Social Point. So yes, that's roughly correct. We're really excited about what is coming to us in the future.

[Operator Instructions] Since there are no further questions left in the queue, I would like to turn the floor back over to management for any closing remarks.

Obviously, we've had a great quarter. We raised our outlook for the year. We're really excited about how the company is doing. This company is all about creativity, innovation and efficiency. Our goal is to make the highest-quality entertainment in the business and, in fact, in the entertainment business. More often than not, our creative teams succeed at that, and we couldn't be more grateful to them than we are. So thank you so much for joining us today. We're looking forward to the rest of our fiscal year and then beyond that as well.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.