Take-Two Interactive Software Inc (TTWO) — Q2 2017 Transcript

Good afternoon. Welcome, and thank you for joining Take-Two's conference call to discuss its results for the second quarter fiscal year 2017 ended September 30, 2016. 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 the statements made during this call that are not historical facts are considered forward-looking statements under federal securities law. 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 in 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. Our press release provides a reconciliation of our GAAP to non-GAAP measurements and further explanation. And on our website, we have provided additional details regarding the non-GAAP components of our cost of goods sold and operating expenses. 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 business continued to outperform during the second quarter, enabling us to deliver strong net revenue and better-than-expected bookings growth. Our outstanding results were driven by the launch of NBA 2K17, ongoing robust demand for Grand Theft Auto V, and increased recurrent consumer spending, including growth in bookings from Grand Theft Auto Online. NBA 2K17 launched to stellar reviews, quickly becoming the top-rated annual sports game of the current console generation and the highest-rated release in the history of our industry-leading basketball series based on average Metacritic score. NBA 2K17 had the strongest launch in the history of the series and has continued to grow over last year's release, with sell-in to date of more than 4.5 million units. Moreover, during the second quarter, bookings from recurrent consumer spending on NBA 2K grew by 160%, driven by both online play and the MyNBA 2K mobile companion app. Sales of virtual currency for NBA 2K have continued to grow with each new release and remain the largest contributor to recurrent consumer spending next to Grand Theft Auto Online. I'd like to congratulate the team at Visual Concepts for once again raising the bar for excellence by delivering an incredible experience that perfectly captures the authenticity of pro basketball and the passion of our audience for both the sport and its pop culture connection. Grand Theft Auto V and Grand Theft Auto Online also continued to exceed our expectations as they have in every quarter since their release. More than three years after its initial launch, Grand Theft Auto V remains the must-have title for gamers on both console and PC, with sell-in now surpassing 70 million units. In addition, Grand Theft Auto Online once again delivered bookings growth and remained the single largest contributor to recurrent consumer spending. During the second quarter, Rockstar Games supported Grand Theft Auto Online with two significant free content updates, Bikers and Cunning Stunts as well as numerous other content drops and events for fans. This ongoing release of rich and varied additional content continues to be a key driver of consumers' sustained engagement with Grand Theft Auto Online, and Rockstar Games has much more planned going forward. The launch of the BioShock: The Collection and XCOM 2 for PlayStation 4 and Xbox One were well-received by critics and consumers alike, and sales of BioShock: The Collection significantly exceeded our expectations. In addition, an array of offerings from our diverse catalog also contributed to the strength of our second quarter results. We continue to capitalize successfully on our industry's ongoing transition to digital distribution. During the second quarter, digitally delivered bookings exceeded our expectations and grew 59% to $210.8 million, driven by growth in both recurrent consumer spending and full game downloads. Recurrent consumer spending grew 63% and accounted for 52% of digitally delivered bookings or 24% of total bookings. In addition to virtual currency for Grand Theft Auto Online and NBA 2K, recurrent consumer spending was enhanced by free-to-play games led by NBA 2K Online in China and WWE SuperCard, both of which grew year-over-year, and downloadable add-on content led by offerings for Sid Meier's Civilization, Borderlands, and XCOM. Our holiday season is off to a great start with a diverse array of new titles that Karl will discuss shortly. We believe that this holiday season will be a robust one for our industry, highlighted by top-tier software offerings and further growth in the installed base of new-gen consoles. Looking further ahead, fiscal 2018 is poised to be another strong year for our company. We expect to grow both bookings and cash provided by operating activities driven by our release slate led by Rockstar Games' highly anticipated launch of Red Dead Redemption 2. Plans for worldwide release in fall 2017 for PlayStation 4 and Xbox One, Red Dead Redemption 2's vast open world will provide the foundation for both an epic story and a brand-new online multiplayer experience. We're incredibly excited about Red Dead Redemption 2 as well as the tremendous response to Rockstar Games' breathtaking announcement trailer. Interactive entertainment is today's most immersive, engaging, and dynamic art form. Ongoing advances in technology enabled our teams to push their creative limits, reach audiences throughout the world across both established and emerging platforms, and build communities that stay deeply connected to our brands. And we're just scratching the surface. The potential for our industry has never been stronger, and Take-Two is exceedingly well positioned to capitalize on this opportunity strategically, creatively, and financially to deliver returns for our shareholders over the long term.

Thanks, Strauss. Today, I'll discuss our recent releases and pipeline for the remainder of fiscal 2017. On October 7, 2K launched Mafia III, a highly immersive and action-packed addition to our popular organized crime series. Developed by 2K's newest studio, Hangar 13, Mafia III received critical praise for its deep storytelling and epic setting. For example, Forbes called Mafia III fantastic, while IGN said, "Its writing and performances are some of the best of this entire generation and New Bordeaux is a fantastic setting." Mafia III is the fastest-selling game in 2K's history, with week 1 sell-in of more than 4.5 million units and ongoing strong demand. We are also witnessing very high interest in the game beyond just sales with more than 88 million YouTube views of Mafia III in just its first week. The team at Hangar 13 departed from the traditional mobster story that Mafia fans were accustomed to and leaned into the racially charged tensions of the time rather than shying away from them. Their creative approach has paid off with a tremendous story-driven experience that sets a new bar for storytelling video games. 2K and Hangar 13 are only just getting started and have more content planned for Mafia III in the near future. On October 11, 2K released WWE 2K17 and brought our popular sports entertainment series to exciting new heights. WWE 2K17 received strong reviews from influential critics, including Forbes which scored it 8.6 out of 10 and called the game easily the best wrestling release in over a decade; and IGN, which scored the title 8.2 out of 10. We expect that sell-in of WWE 2K17 will be up over last year's release, continuing the trend that the series has delivered for every year since we acquired the license. WWE 2K17 is being supported with a variety of downloadable add-on content, including a Season Pass. I'd like to congratulate Yuke's and Visual Concepts for continuing to grow and enhance this annual series. On October 21, 2K launched Sid Meier's Civilization VI, the latest offering from our award-winning turn-based strategy series that has sold-in over 37 million units worldwide. Developed by Firaxis Games, Civilization VI marks the 25th anniversary of the series and provides the most detailed, vivid and beautiful experience ever featured in the civilization game. The title has received outstanding reviews from critics, including 9.5 out of 10 from Game Informer, 9.4 out of 10 from IGN, 93 out of 100 from PC Gamer, and 90 out of 100 from GameSpot. Civilization VI is the fastest-selling title in the history of the series and is exceeding our expectations, with sell-in already surpassing 1 million units. I'd like to congratulate Firaxis on yet another stellar addition to this beloved series that has entertained gamers for one-quarter of a century, a truly remarkable achievement. Lastly, 2K launched Carnival Games VR, a new take on our hit franchise created by Cat Daddy Games, which has sold-in more than 9 million units worldwide. A first offering in virtual reality, Carnival Games VR delivered the highly accessible entertainment experience that enables players to immerse themselves in the familiar classic fun of our popular Carnival Games series in a virtual reality setting. The title is currently available worldwide through digital download for HTC Vive and PlayStation VR, and will release later this year for Oculus Rift. Virtual and augmented reality are exciting emerging platforms that have the potential to enhance the way interactive entertainment is created and experienced, and we will continue to invest in this business. In addition to our diverse lineup of frontline titles, we will continue to deliver innovative, digitally delivered offerings designed to drive consumer engagement and sustain consumer spending on our games. We will also continue to selectively release free-to-play mobile games, many of which support our core IP. During October, we launched Mafia III Rivals, a mobile battle RPG game, and NHL SuperCard 2K17, a NHL collectible card-battling game. Later this month, we will release WWE SuperCard Season 3, a free update to the popular WWE collectible card-battling game that has been downloaded more than 11 million times and is our most financially successful free-to-play mobile offering. Each of these games is available for iOS and Android devices. Turning to industry news. We are happy that 2K had the opportunity to collaborate with Nintendo on their first look video for Nintendo Switch, which was revealed last month and will launch in March of 2017. While we are not confirming any specific titles at this time, we are pleased to announce our partnership with Nintendo and support of the Nintendo Switch. We look forward to revealing specific games and details at a later date. In closing, we have an exciting long-term development pipeline which features sequels from our renowned franchises as well as new intellectual property that promise to further diversify our industry-leading portfolio. In addition, our creative teams continually seek innovative ways to drive engagement with our titles and growth in recurrent consumer spending as well as invest in emerging platforms and business models that present entirely new opportunities for Take-Two.

Thanks, Karl, and good afternoon, everyone. Today, I'll discuss our fiscal second quarter results and financial outlooks for the remainder of the year. As a reminder, we are no longer reporting non-GAAP financial measures that adjust for deferrals of net revenue and related cost of goods sold. All comparisons are year-over-year unless otherwise stated. Our press release provides a reconciliation of our GAAP to non-GAAP measurements. We have provided additional details regarding the non-GAAP components of our cost of goods sold and operating expenses on our website. As mentioned by Strauss, we had an outstanding second quarter, both from a business and financial perspective. Sales of our offerings significantly exceeded our expectations, with total bookings growing 28% to $452.8 million. The upside of bookings is driven by the stronger-than-expected performance of Grand Theft Auto V and Grand Theft Auto Online, NBA 2K17, and BioShock: The Collection. Digitally delivered bookings grew 59% to $210.8 million and accounted for 47% of total bookings. Our better-than-expected digitally delivered bookings were driven by growth in recurrent consumer spending and Grand Theft Auto Online and NBA 2K, along with increased full game downloads. Turning to our reported financials. We delivered net revenue and non-GAAP net income towards the high end of our outlook. Our better-than-expected bookings did not drive upside to revenues and net income because most of the outperformance was driven by sales of titles that we are required to defer. In addition, earnings upside was muted by higher internal royalties. Internal royalties are calculated using results that are adjusted to exclude the impact from deferrals, and unlike certain other cost of goods sold, internal royalties are not deferred. Turning to the details of our P&L. Second-quarter net revenue grew by 21% to $420.2 million. Growth was driven primarily by the recognition of previously deferred revenues from Grand Theft Auto V and NBA 2K16, along with sales of BioShock: The Collection and XCOM 2. Second-quarter net revenue was reduced by a $59.3 million change in deferred net revenue. This is higher than our forecast due to the better-than-expected performance of Grand Theft Auto V and Grand Theft Auto Online as well as NBA 2K17, as we are required to defer revenue and related cost of goods sold from these titles. Digitally delivered net revenue grew 14% to $230.8 million and was reduced by a $3.4 million change in deferred net revenue. Non-GAAP cost of goods sold was $200 million, up by $60.2 million. This increase was due to higher internal royalties, which are not deferred, as well as higher licenses and product costs, which were in line with net revenue growth for the period. Non-GAAP cost of goods sold was reduced by a $28.8 million change in deferred cost of goods sold. Non-GAAP operating expenses were $154.7 million, up by $30.3 million due primarily to higher marketing expenses for the launches of our new releases. And non-GAAP net income was $50.7 million or $0.45 per share, which was reduced by $23.4 million from the net effects from deferral of net revenue and related cost of goods sold. As of September 30, our cash and short-term investment balance was $1.17 billion. We used a modest amount of cash in the second quarter primarily due to the majority of receivables associated with our second quarter releases being collected in the third quarter. Now I will review the highlights of our financial outlook. Further details as well as the reconciliation of our non-GAAP financial outlook to GAAP are contained in our press release and on our website. Starting with the fiscal third quarter. We expect total bookings to grow by 42% at the midpoint of our outlook and to range from $650 million to $700 million. This growth is being driven primarily by the launches of Mafia III and Civilization VI, coupled with growth from NBA 2K and WWE 2K, which is expected to be partially offset by moderating bookings from Grand Theft Auto V and Grand Theft Auto Online. The largest contributors to bookings in the third quarter are expected to be Grand Theft Auto V and Grand Theft Auto Online, Mafia III, NBA 2K17, WWE 2K17, and Civilization VI. We expect to generate strong cash from operating activities, driven by sales growth and the collection of receivables from the second quarter. We expect net revenue to range from $475 million to $525 million. Net revenue is expected to be reduced by a $200 million change in deferred net revenue. The substantial change in deferred net revenue is being driven primarily by Mafia III, which is being deferred into the fourth quarter due to undelivered additional content, plus deferred revenue from NBA 2K17. We expect total non-GAAP cost of goods sold to range from $257 million to $272 million, which is expected to be reduced by a $120 million change in deferred cost of goods sold. Total non-GAAP operating expenses are expected to range from $175 million to $195 million. At the midpoint, this represents a 39% increase over last year due primarily to higher marketing expenses to support Mafia III and our other new releases. And we expect non-GAAP net income to range from $34 million to $45 million or $0.30 to $0.40 per share, which is expected to be reduced by approximately $62 million from the net effects from the deferral of net revenue and related cost of goods sold. Our third quarter net income outlook is impacted by the requirement that we recognize all the marketing costs incurred in the period for Mafia III but defer the gross profits from the title into the fourth quarter. Turning to our outlook for the full fiscal year. As a result of our better-than-expected second quarter sales and strong outlook for the remainder of the year, we are raising our bookings outlook by $100 million. We now expect total bookings to grow by 10% at the midpoint of our outlook and to range from $1.6 billion to $1.7 billion, driven by our updated assumption that increased bookings from our new launches and from NBA 2K and WWE 2K will be partially offset by approximately flat bookings from Grand Theft Auto Online and moderating bookings from Grand Theft Auto V. In addition, we now expect digitally delivered bookings to grow at a rate consistent with total bookings driven by increases in both recurrent consumer spending and full game downloads. The largest contributors to bookings are expected to be NBA 2K17 and NBA 2K16, Grand Theft Auto V and Grand Theft Auto Online, Mafia III, WWE 2K17, Sid Meier's Civilization VI, and Battleborn. We expect the bookings breakdown from our label to be roughly 70% 2K and 30% Rockstar Games. And we expect our geographic bookings split to be about 60% United States and 40% international. We expect to generate cash from operating activities of approximately $300 million, up about 15% over last year. And we plan to deploy approximately $50 million through capital expenditures. We are reaffirming our full year outlook for net revenue and non-GAAP net income per share. Our increased outlook for bookings does not translate into a higher forecast for net revenues and net income because most of the increase is being driven by sales of titles that we are required to defer. In addition, we expect to report higher internal royalties due primarily to the outperformance of Grand Theft Auto V and Grand Theft Auto Online. We continue to expect net revenue to range from $1.75 billion to $1.85 billion, which is expected to benefit from an $80 million change in deferred net revenue. We expect non-GAAP cost of goods sold to range from $878 million to $911 million, which is being increased by a $17 million change in deferred cost of goods sold. Total non-GAAP operating expenses are expected to range from $585 million to $615 million. At the midpoint, this represents a 24% increase over the prior year, driven primarily by marketing expenses for fiscal 2017 and 2018 release slate as well as higher R&D expense and depreciation expense. And we expect non-GAAP net income to range from $226 million to $255 million or $2 to $2.25 per share, which is expected to benefit by approximately $49 million from the net effects from deferral of net revenue and related cost of goods sold. With the first half of fiscal 2017 successfully completed, Take-Two remains poised to achieve another year of strong results. Our ability to launch a broad array of the highest-quality entertainment experiences underscores our creative leadership and innovation, and our financial results reflect our commitment to operational excellence. We will aim to carry forward this positive momentum throughout the holiday season and over the long term, to deliver growth and margin expansion for our shareholders.

Thanks, Karl and Lainie. On behalf of our entire management team, I'd like to thank all of our colleagues for delivering another strong quarter. And to our shareholders, I want to express our appreciation for your continued support. We'll now be happy to take your questions. Operator?

Congratulations on the NBA 2K ratings. Have you noticed if the reviews for Mafia are impacting game sales? Do you believe those reviews are accurate? Additionally, regarding the sustainability of this year's earnings, you can factor in Red Dead for next year, but considering that Rockstar accounts for 30% of earnings this year, mostly from GTA, how do you assess the sustainability of that moving forward?

Justin, thanks for your questions. Yes, we're really excited about the performance of NBA 2K17, it’s the strongest launch in the history of the franchise, and we had record first week sell-in and a 160% increase year-over-year in virtual currency sales. So it's looking really good. And obviously, the reviews and scores are great, too. On Mafia, we've got great news on the revenue side that you alluded to, first-week fastest sell-in title in 2K's history with 4.5 million units sold-in. And in terms of the reviews and scores, sort of an odd anomaly, you're right, the scores are lower than we would have liked, but there are a lot of stellar reviews. And I think the most prominent reviewers really loved it and recognized that what we're doing here, from the story, art, character, and excitement perspective, is really unmatched in the marketplace. So I think we and our competitors are seeing some anomalies in the review system. We take them as they are. We don't argue with it. But I think we do have an enormous number of exceedingly favorable reviews. And most importantly, consumers love the title and they're buying it hand over fist. And at the end of the day, that's how we're judged. In terms of sustainability of earnings, we are looking for another strong year in 2018. We're thrilled that Rockstar has announced Red Dead Redemption 2 for the fall. Obviously, we're going to give guidance in the normal course as we would, and that's a time when I think we can dig further into your questions. The truth, though, is in the history of the company for really the past that we can recall, this company has been performing across our labels regularly, both in terms of new releases and in terms of catalog, and the results are directionally sound. Things are good and getting better, and that's probably what we're most excited about now. So we'll get into more detail about how each of the labels is doing when we give more specific information and when we do give initial guidance for the year. We're not there yet.

On Red Dead 2, I realize it's a long ways away, but is there anything you can share on how Rockstar will monetize the game with digital content? Specifically, do you anticipate some form of kind of Red Dead online offering in order to replicate the success that you've had with GTA Online? And then secondly, related to GTA Online, I just want to make sure I heard it right, did you say that it grew year-over-year in the quarter? Can you say how it compared to the June quarter and how it did sequentially?

Yes. In reverse order, we are expressing year-over-year growth, and we haven't said anything about quarter-over-quarter. It's not really the way we feel we ought to look at it. We're looking at it year-over-year, and it continues to outperform our expectations. In terms of Red Dead 2, Rockstar has announced that there'll be an online component. We're excited about that. We haven't talked about monetization schemes nor do we expect to. The approach of our company in both of our labels is to delight the consumer first, and the revenue and profits will take care of themselves and it has proven to be a very good strategy and one I expect will repeat.

I have two questions for you. First, at the start of the year, you mentioned that marketing costs would be elevated in the fourth quarter of fiscal '17. With Red Dead Redemption scheduled for release in the fall of '17, will those marketing costs remain elevated in this year's fourth quarter ahead of potential new releases in the first quarter, or have they been adjusted? Secondly, I’d like to know about Civilization Online in Korea. I’ve heard the game has been halted for a revamp and is expected to relaunch. Can you provide some statistics about that game and discuss its significance?

It's Lainie. For the marketing costs, we never said that they were going to be in the fourth quarter. We just said that the full year was going to be up from the previous year to support our overall pipeline for 2017 and also for some titles for 2018. So we still have a robust marketing expense category this year, and that hasn't changed.

And Eric, it's Karl. I'll answer your question on Civ Online. So we launched it in December of 2015 in Korea. And as you know, we partnered with XLGAMES on that initiative. We have suspended the game in Korea at this point, but we have plans to bring Civ Online to Taiwan, Hong Kong, Macau, and China through our publishing partnership with Game First and Qihoo 360. So stay tuned for more results in the future.

WWE launch for the Season Pass, we were wondering maybe what the traction looks like there and maybe any notable differential dynamics with respect to Season Pass adoption across titles or genres.

Brian, it's Karl. We don't have any Season Pass information to share with you on WWE. On WWE, we typically don't give specifics about that. And I'm sorry, what was the second part of your question?

Do you believe there are different factors influencing Season Pass adoption in NBA compared to WWE and other game genres?

Yes, I mean, I think every game, even within genres, is very different in terms of Season Pass pickup, and it's really just a question of what our ultimately, what our DLC offering is going to be. And some products, we don't even do Season Passes. So it really varies game by game. And I wouldn’t say that anything specific is genre to genre.

You mentioned that you had some of these outperformance with the BioShock Collection. Obviously, that's an older title, a high-quality title that you were able to remaster. I think we also saw Skyrim recently has relaunched and has done well. I think I asked you this question six months ago. But I'm just wondering, given some of these titles coming into the market, these remasters and doing exceptionally well, does that increase your appetite to want to do that with some of your other catalog games?

Potentially yes. Anytime we have something that goes well or doesn't go well, it definitely informs our decision-making. While we don't have anything specific to announce, those announcements would come from our labels. The good news is we have a rich trove of intellectual property, and there are definitely more things that will be brought to the market in the future. However, there is nothing that we would announce on today's call.

I would like to clarify regarding GTA Online. For Q3, I believe you mentioned that you expect it to moderate, which seems to be based on a year-over-year perspective that you explained earlier. I'm interested in the reasoning behind this—are you being conservative, or is it related to content? This leads me to a question about Rockstar and their capability to continue creating content now that the development of Red Dead Redemption 2 is complete. I have a quick follow-up as well.

Yes. Thanks, Mike. It's Strauss. We've been saying for some time that we expected Grand Theft Auto Online to moderate, and so far, we're able to report year-over-year growth in the quarter. The title is over three years old. It continues to delight consumers. We're thrilled with its performance. Over time, though, the expectation remains that it will moderate. And obviously, we can't call it more specifically than that. It's not actually formulaic. And Rockstar Games has enormous bandwidth to work on a multiplicity of opportunities simultaneously. And I think we all can be really proud of their ability to do so and to delight consumers while delivering experiences that critics resoundingly rate as perfect or very nearly perfect. So we have an enormous amount of confidence in that label and their performance, and we're incredibly excited about what is to come.

Absolutely. I think it was announced last year that there were 8 million weekly players on GTA Online. I know that bookings are up. Is the player count also increasing, or is that just a higher average revenue per user?

That's a valid question. We typically don't share those statistics. The reason for this is that we don't consider those metrics to be particularly useful for this title. However, we have mentioned that its performance has been excellent year-over-year, and we anticipate that the results may moderate somewhat in the upcoming quarters. We believe this information gives investors a clear idea of what to expect.

Okay. Fair enough. This is my last question. We have some insight into your fiscal '18 and Red Dead Redemption 2, which seems to be a significant driver for you. However, I'm also curious about your ongoing titles, NBA 2K and WWE 2K, in terms of the overall slate. Should we expect a similar size or number of titles as in fiscal '17? Additionally, how do you view new intellectual properties? You've been proactive in launching new franchises, so I'm interested to know if you still intend to pursue that strategy.

All good and fair questions. This is early for us to give insight into the future. It's something we know investors have asked for and that we're trying to do. And you're right, there's plenty to come in fiscal '18 that we'll talk about in the future. We're not going to give more specifics than that right now. It definitely would be premature. We have said that we expect bookings growth. We have said that we expect cash flow growth. And as you know, we don't say things like that without being exceedingly thoughtful about what we're saying. As far as new intellectual property, look, every year, since this management team took over the company, nearly every year, we've launched successful new IP, not every year, but nearly every year. And we do think that any solid entertainment company is constantly creating new hits in addition to bringing beloved franchises back to market. You're absolutely right. It's very challenging to do that, and it is risky to do that. And we're not always successful at it. It remains a key part of our strategy on an ongoing basis. And when I say that, though, I probably should put a very fine point on our selectivity for that to work, given the amount of investment that's required that we have to be incredibly disciplined. What that means is that our creative teams are encouraged to focus on something they are highly passionate about. And then I would say, everyone at this company is laser-focused on quality. And again, even that doesn't always work out according to plan, but more often than not, it does.

We noticed some higher-priced SKUs for NBA. I'm interested in your perspective on how digital content is offered at the point of purchase compared to follow-on DLC content. How do you manage the balance in providing that content?

Are you talking about the limited-edition launches? I assume you are?

Yes.

If we have a perspective on delivering something truly exciting to consumers that fits within a limited edition, we've discovered that it's often suitable to set a higher price point for that, and we are thrilled with the demand we've observed. We don't see this as a compromise; we can achieve all of it. We can provide extra digital content in a limited edition and also offer it after the launch, whether free or for a fee. We are equipped to handle all these options. Our aim is to exceed consumer expectations. For instance, with Mafia III, there will be free content updates available. Similarly, Rockstar Games has released a considerable amount of free content for GTA Online. As mentioned earlier, our goal is not to squeeze our consumers for every penny. Instead, we aim to provide significantly more value than what we charge, fostering exceptional loyalty for our brands, labels, and products. Ultimately, by over-delivering for consumers, we also support our shareholders.

We’d just like to thank you all for joining us today. Obviously, we're incredibly proud of the results this quarter. Those results are driven by over 2,000 highly creative folks at this company who every day take enormous creative risks to deliver the best entertainment properties in the business. And then they're, in turn, supported by nearly 1,000 people who work in the business side, publishing side of this organization to try to bring those properties to market worldwide in the best possible light. We're incredibly gratified by the results, incredibly proud of what the company has achieved and yet we do believe we're just scratching the surface. Interactive entertainment is the fastest-growing part of the audiovisual entertainment industry, and it's going to stay that way for a long time to come. We and our competitors, in fairness, have the wind at our collective backs. Now it's our job to execute. We're proud of what we've done to date, and we know we have to get up tomorrow and do it all over again. Thanks so much for joining.