Take-Two Interactive Software's CEO Hosts Annual Shareholder Meeting (Transcript)

Sep.18.13 | About: Take-Two Interactive (TTWO)

Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

Annual Shareholder Meeting

September 18, 2013 4:00 pm ET

Executives

Henry Diamond

Strauss H. Zelnick - Chairman, Chief Executive Officer, Member of Executive Committee and Member of Special Litigation Committee

Seth D. Krauss - Chief Legal Officer, Executive Vice President and General Counsel

Henry Diamond

Good afternoon. Thank you for joining us today for our Annual Meeting. My name is Hank Diamond, and I'm Senior Vice President of Investor Relations and Corporate Communications for Take-Two.

Please note that today's shareholder meeting is being broadcast by a listen-only webcast that is available on our website at www.take2games.com. A replay of the webcast will also be available on our website later today.

Before we begin, I'd like to remind everyone that the statements made during this meeting, 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. Other important factors and information are contained in the company's annual report on Form 10-K for the fiscal year ended March 31, 2013, in the section entitled Risk Factors, the company's quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2013, and the company's other periodic filings with the SEC, which can be accessed at www.take2games.com.

I'd now like to introduce Strauss Zelnick, Chairman and CEO of Take-Two.

Strauss H. Zelnick

Thank you, Jim -- thanks, Hank. Good afternoon and welcome. The Annual Meeting of stockholders of Take-Two Interactive Software will please come to order. Today's agenda includes a discussion of our fiscal year 2013 performance, recent results and outlook; a review of the procedures for today's meeting and the proposals to be voted upon; and finally, a question-and-answer session.

I'd like to introduce the officers of the company who are here with us today. Karl Slatoff, our President; Lainie Goldstein, our Chief Financial Officer; Seth Krauss, Executive Vice President and General Counsel; Linda Zabriskie Associate General Counsel and Secretary of the company. I'd also like to introduce our board members who are present with us today: Robert Bowman; SungHwan Cho, Brett Icahn; J. Moses; James Nelson; Michael Dornemann and Michael Sheresky.

Fiscal 2013 was an exceptional year for Take-Two. We delivered 48% net revenue growth and profitability in a non-GAAP basis. Our results were driven by robust demand for our groundbreaking new releases, iconic catalog titles and expanding portfolio of digitally delivered offerings. Take-Two's commitment to captivate consumers with the highest-quality interactive entertainment enabled our organization to deliver strong results despite a challenging environment for many in our industry. Some of the key achievements during the past year included the following: Rockstar Games launched Max Payne 3, which deliver the label's signature cinematic style of action and storytelling; 2K released a string of some of the year's top-rated releases, including Borderlands 2, which is on track to become the highest selling release in the history of 2K, with over 7 million units sold in to date; NBA 2K13, the highest-selling and most profitable sports title in the history of 2K and the top basketball game for the 12th year in a row; BioShock Infinite, which received stellar reviews and is on track to become the highest selling title in the BioShock franchise; and XCOM: Enemy Unknown, which reimagined one of the industry's most beloved franchises as a unique turn-based strategy game.

We broadened our mobile slate with core titles including: Max Payne Mobile, Borderlands Legends, NBA 2K13 and Grand Theft Auto: Vice City; casual titles such as GridBlock; and our first mobile social game for Japan, NBA 2K All Stars. We made significant progress on our initiatives to develop online games for Asia, including the commercial launches of NBA 2K Online in China and Pro Baseball 2K in Korea. We delivered record revenue from digitally delivered content driven by strong demand for full game downloads, add-on content for our new releases and in-game sales of virtual goods.

We expanded our portfolio of industry-leading franchises by acquiring the exclusive worldwide rights to publish the WWE videogame series across all major platforms and on distribution channels. And we enhanced our solid financial foundation with the completion of a $287.5 million offering of 1% convertible notes. This offering enabled us to refinance our 4.375% convertible notes on substantially improved terms, while also providing additional cash for strategic investments, acquisitions and other initiatives to grow our business and create shareholder value.

Our recent results confirm that the market for the highest-quality, current-generation titles remains strong, even as anticipation builds for the upcoming launches of next-generation consoles. Today, we're better positioned for success than in any other time in our 20-year history.

Fiscal year 2014 is shaping up to be one of our very best ever, highlighted by yesterday's extraordinary launch of this year's most highly anticipated title, Grand Theft Auto V. Earlier today, we announced that Grand Theft Auto V delivered the highest first day sales of any title in the history of the company and the Grand Theft Auto series. It's already received widespread critical acclaim, and achieved an estimated sell-through of more than $800 million during the first 24 hours of its release. All of us at Take-Two are thrilled with the initial response to Grand Theft Auto V. Once again, the team at Rockstar Games have outdone themselves, setting the entertainment industry's new standard for creativity, innovation and excellence.

Beginning at midnight on Monday, consumers around the world gathered in anticipation to be among the first to experience the evolution of this remarkable series. In North America alone, more than 8,300 stores opened their doors at midnight to welcome fans whose loyalty and enthusiasm were rewarded with what the New York Times called, "The most immersive spectacle in interactive entertainment". We're incredibly proud of Rockstar Games' creative achievement and couldn't be more pleased with the success of the launch.

On October 1, Rockstar Games will release Grand Theft Auto online, the revolutionary new open world online game that comes free with every copy of Grand Theft Auto V. Looking ahead, we have a terrific slate of new releases and development for the balance of the year and beyond. On October 1, 2K is poised, once again, to redefine the basketball genre for interactive entertainment with the release of NBA 2K14. We're thrilled that the 2013 NBA MVP, Lebron James, will make his video game cover debut with this title. NBA 2K set the benchmark for sports gaming on the current generation of consoles, and NBA 2K14 will continue that legacy on the next generation, as our first offering for PlayStation 4 and Xbox One.

On October 29, gamers will step into the ring with some of the biggest names in sports entertainment with the launch of WWE 2K14. The title will be the most electrifying, authentic and comprehensive WWE video game experience to date, and features WWE superstar Dwayne "The Rock" Johnson on its cover. And in November 12, 2K will release XCOM: Enemy Within, a rich expansion pack for XCOM: Enemy Unknown that will enhance the title's beloved tactical strategic and multiplayer Gameplay, providing nearly limitless hours of entertainment. In addition, we'll deliver new downloadable add-on content offerings for some of our most popular titles, including Borderlands 2 and BioShock Infinite, that promise to engage customers further with our brands.

Our industry appears to be entering an exciting growth period, driven by the upcoming launches of next-generation consoles, as well as the increasing popularity of emerging mobile and online platforms. With our world-class creative teams, diversed portfolio of the highest-quality franchises in the business, cutting-edge technology and strong balance sheet, Take-Two has all of the assets required to capitalize on these opportunities. We have an extensive pipeline of next-generation titles in development, including both new intellectual property and releases from our proven franchises, and expect to deliver profits on a non-GAAP basis every year for the foreseeable future.

We'd like to thank our dedicated colleagues around the world for their stellar work throughout the year, and setting the stage for what we believe will be one of the most exciting chapters in our history. To our shareholders, we want to express our gratitude for your continued support.

I'll now turn the podium over to Seth Krauss.

Seth D. Krauss

Thank you, Strauss. Good afternoon. I will act as the chair of this portion of the meeting. Ms. Zabriskie will act as secretary of the meeting. This meeting will be conducted in accordance with the agenda that was distributed at the start of the meeting. And as detailed in Take-Two's proxy filing, the proposals to be considered and voted upon at this Annual Meeting are as follows: First, the election of 8 directors to hold office until the next Annual Stockholder Meeting and until their respective successors have been duly elected and qualified; second, the approval of an amendment to the Take-Two Interactive Inc. 2009 Stock Incentive Plan to increase the available shares reserved thereunder; third, the casting of an advisory vote to approve the compensation of the named executive officers; fourth, the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2014; and such other business as may properly come before the Annual Shareholder Meeting or any adjournment thereof.

I will note that only stockholders of record at the close of business on July 24, 2013 are entitled to vote on these proposals at this annual meeting or any adjournment thereof. This meeting will be conducted in accordance with the procedural rules that have been established and distributed today to ensure that stockholders have an opportunity to properly consider and vote upon the business that come before this meeting. I would like to take a moment to review several of those key rules.

Anyone wishing to address the meeting must be a stockholder of record or a person holding a valid proxy from a stockholder of record. Stockholders of record should have a yellow-coded nametag and yellow index card stating stockholder of record, which was provided at the registration area before the meeting.

Following the presentation of the proposals on the agenda and while the polls are deemed open for voting, we will entertain questions directly related to the matters being voted upon. During the question-and-answer period, each speaker will be limited to 3 minutes. Anyone who would like to ask a question will do so using the microphone at the front of the room in order to have the questions heard on our webcast today. Any stockholder that wants to ask a question must state their name and whether they are a personal stockholder or an authorized representative of the stockholder, in which case such a stockholder might must also be identified. No one shall be permitted to allot all or part of their time to another speaker. After we have concluded the business of the meeting, the meeting will be adjourned, then we'll open the floor to general questions. By your presence at this meeting, you acknowledge your understanding of and willingness to abide by the procedural rules that were provided to you today.

Now let us continue with the business of the meeting.

Ms. Zabriskie, will you please present proof of the notice of the meeting?

Let the record reflect that I have been presented with a copy of the notice of Annual Meeting of the Stockholders dated July 29, 2013, and the proxy dated July 29, 2013, together with an affidavit of an authorized representative of Broadridge, the company responsible for mailing said materials, affirming as to the mailing on August 6, 2013, of Notice of Annual Meeting and proxy materials to stockholders of record at the close of business on July 24, 2013. I order the affidavit of mailing to be filed with the minutes of this meeting.

Ms. Zabriskie will you please present the list of stockholders as of the close of business on July 24, 2013, the record date fixed by the Board of Directors for purpose of determining the stockholders entitled to vote at this meeting?

Let the record reflect that I've been presented with a list of stockholders of record as of the close of business on July 24, 2013, furnished by an authorized representative of the company's transfer agent. There are 92,879,333 shares of common stock entitled to vote at this meeting. The list of stockholders will be open for inspection by any stockholder of record for the duration of this meeting.

I hereby appoint Tom Ty [ph] of Broadridge to act as inspector of elections to determine: first, the number of shares outstanding and entitled to vote; second, the number of shares represented at the meeting; third, the existence of a quorum; fourth, the validity and effect of proxies; and fifth, to receive and tabulate the votes on the matters to be acted upon on the meeting. Mr. Ty [ph] has executed an affidavit to faithfully execute his duties as the inspector. The secretary will attach the affidavit to the minutes of this meeting. It is anticipated that the results will be reported to me as soon as is practicable.

Is there any stockholder present who has not filled out the attendance sheet showing the name of the stockholder and the number of shares he or she owns?

All stockholders of record who have not submitted proxies should do so unless they wish to vote in person. If you have previously executed a proxy and now wish to vote in person, the proxy will be returned upon your request.

Mr. Ty, please state the number of shares of common stock present in person or by proxy.

Unknown Attendee

There are present, by proxy and in person, more than 50% of the outstanding shares entitled to vote at this meeting.

Seth D. Krauss

Legal notice of the meeting having been given and a quorum being present, the meeting is lawfully convened and ready to transact business.

The first order of business on the agenda is, to elect 8 directors to serve until the Annual Meeting of Stockholders of the company to be held in 2014, and until their successors have been duly elected and qualified. Nominations are now in order.

Unknown Executive

I nominate the following persons, who are named in the company's proxy statement, to serve as directors of the company until the Annual Meeting of Stockholders to be held in 2014 and until their successors have been duly elected and qualified: Strauss Zelnick; Robert A. Bowman; SungHwan Cho; Michael Dornemann; Brett Icahn; J. Moses; James L. Nelson; and Michael Sheresky.

Henry Diamond

I second the nomination.

Seth D. Krauss

If there is a stockholder who did not yet have a ballot who wishes to vote in person, please raise your hand so that the inspector of elections can deliver a ballot to you.

The next order of business on the agenda is to vote upon the approval of and the adoption of an amendment to Take-Two Interactive Software Inc.'s 2009 Stock Incentive Plan to increase the available shares reserved thereunder. Proposals are now in order.

Unknown Executive

I propose that the stockholders approve the adoption of an amendment to the company's 2009 Stock Incentive Plan as set forth in Annex A to the proxy statement.

Henry Diamond

I second the proposal.

Seth D. Krauss

If there is a stockholder who did not yet have a ballot who wishes to vote in person, please raise your hand so that the inspector of elections can deliver a ballot to you.

The next order of business on the agenda is to cap an advisory vote to approve the compensation of the company's named executive officers. Proposals are now in order.

Unknown Executive

I propose that the stockholders approve the compensation of the company's named executive officers on an advisory basis as set forth within the proxy statement.

Henry Diamond

I second the proposal.

Seth D. Krauss

If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the inspector of elections can deliver a ballot to you.

The next order of business on the agenda is to vote upon the proposal to ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending March 31, 2014. I would like to introduce Michael Portegello. He is here today representing Ernst & Young and will be available to answer questions after the meeting. Proposals are now in order.

Unknown Executive

I propose that the stockholders approve the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending March 31, 2014, as set forth in the proxy statement.

Henry Diamond

I second the proposal.

Seth D. Krauss

If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the inspector of elections can deliver a ballot to you.

Do any stockholders have questions related to the business of the meeting? As a reminder, please limit your questions directly to the proposals presented that are to be voted upon at this meeting. Any stockholder who wants to ask a question must state their name and whether they are a personal stockholder or an authorized representative of a stockholder, in which case, such stockholder must also be identified. As a reminder, all speakers will be limited to 3 minutes and no one shall be permitted to allot all or part of their time to another speaker.

Please make sure that you've completed all necessary information on your ballots and cast your votes as you've intended to do so for the 4 agenda items. Will the inspector of elections please collect the ballots?

[Voting]

Seth D. Krauss

The ballots having been collected, I now declare the polls closed. As I've mentioned previously, the inspector of elections will tabulate the results of the voting, which will be reported to me as soon as practicable.

As I also noted earlier, once the business of the meeting is concluded, we will officially conclude the meeting. There being no additional business to be conducted at the meeting, the business of the annual meeting is hereby concluded, and we now open the floor to a question-and-answer period. As a reminder, any stockholder who wants to ask a question must state their name and whether they are a personal stakeholder and an authorized representative of the stockholder, in which case, such stockholder must be identified.

At this point, I'll turn the floor back over to Strauss Zelnick, Chairman and CEO of Take-Two.

Strauss H. Zelnick

Thanks, Seth. We'd now like to open the floor to questions, following the rules Mr. Krauss outlined earlier in the meeting.

Thank you, all, for joining us today.

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