Take-Two Interactive Software, Inc. (TTWO) Q4 2013 Earnings Report, Transcript and Summary

Greetings, and welcome to the Take-Two Fourth Quarter Fiscal Year 2013 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Diamond, Senior Vice President of Investor Relations and Corporate Communications for Take-Two Interactive. Thank you, Mr. Diamond, you may begin.

Good afternoon. Welcome, and thank you for joining Take-Two's conference call to discuss its results for the fourth quarter and fiscal year 2013 ended March 31, 2013. 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 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 annual report on Form 10-K for the fiscal year ended March 31, 2012. These documents may be obtained from our website at www.take2games.com. I'd also like to note that unless otherwise stated, all numbers we will be discussing today are non-GAAP. Please refer to our earnings release, which is posted at www.take2games.com, for a GAAP to non-GAAP reconciliation and further explanation. And now I'll turn the call over to Strauss.

Thanks, Hank. Good afternoon, and thanks for joining us today. I'm pleased to report that Take-Two delivered strong revenue growth and solid non-GAAP earnings for both the fourth quarter and fiscal 2013. These results were driven by robust demand for our new releases, catalog titles and expanding portfolio of digitally delivered offerings. While many in our sector have faced serious challenges, we continue to benefit from a focus on our core strategic values: creativity, innovation and efficiency. During the past year, our world-class creative teams released some of the industry's most captivating and groundbreaking entertainment experiences. Our unwavering commitment to quality enabled our titles to attract and delight audiences time and time again. This results in near-term hits and sustainable catalog value, which create ongoing profits and long-term returns for our shareholders. Fiscal 2013 began with the release of Rockstar Games Max Payne 3. This gritty action-packed third-person shooter received excellent reviews and introduced multiplayer Gameplay for the first time to this popular franchise. The title delivered Rockstar's signature cinematic style of action and storytelling while redefining the genre, with revolutionary advances in targeting and animation. Max Payne 3 is sold in over 4 million units to date and continues to attract new fans. Borderlands 2 remains on track to become the highest selling release in the history of 2K, with approximately 6 million units sold in to date and counting. The title received fantastic reviews, yielding a 90 average Metacritic score and won more than 55 editorial awards. Borderlands 2 was the largest contributor to our digitally delivered revenue last year based on high demand for the game's innovative downloadable add-on content, as well as full game downloads. NBA 2K13 won more than 38 editorial honors, including numerous Sports Game of the Year awards, and quickly became the most profitable sports title in the history of 2K. This is the 12th consecutive year in which we delivered the topped ranked NBA simulation game and the third consecutive release of the franchise to sell in more than 5 million units. The performance of NBA 2K13 has been enhanced by record digital sales for the franchise, including virtual goods. The team at Visual Concepts continues to raise the bar for excellence with each annual release of the series. XCOM: Enemy Unknown reimagines one of the industry's most beloved franchises, as a unique turn-based strategy game. Developed by 2K's Firaxis Games studio, XCOM: Enemy Unknown was one of the highest-rated releases of 2012, achieving a near 90 average Metacritic score and winning an impressive 18 Game of the Year awards. The title has generated particularly strong digitally delivered sales, and it's opened the door for future brand extensions, which Karl will discuss. We wound up the fiscal year with the eagerly anticipated launch of BioShock Infinite, the highest-rated release of 2013 so far, with a terrific 94 average Metacritic score. Critics have universally praised BioShock Infinite, with the Associated Press calling it "a new standard for video game storytelling" and NBC News declaring it "a masterpiece." The title is already a commercial success with over 3.7 million units sold in to date and record first-month sell-through for the franchise. BioShock Infinite will be supported by an array of downloadable add-on content. And we're already seeing solid attach rates for its Season Pass. I'd like to congratulate Ken Levine and the team at Irrational Games, as well as the team at 2K for turning this launch into a major tentpole event for our company and the industry. I'd like to take a moment to commend everyone at 2K for consecutively launching 4 of the past year's most critically acclaimed titles. That's simply an outstanding achievement. It bears noting that since its founding in 2005, 2K has flourished to become a home for some of our industry's top talent and most important franchises. Moreover, 2K's success has played an integral role in our diversification, growth and ability to deliver consistent profits. Our fiscal 2013 results also benefited from robust sales of catalog titles, particularly Rockstar Games' iconic Grand Theft Auto IV and Red Dead Redemption, as well as the profitable release of Major League Baseball 2K13. In addition to delivering stronger financial results, we continue to execute our strategic objectives during the past year. We further diversified our business across distribution channels, expanded our offerings for new platforms and geographies and enhanced our portfolio of industry-leading franchises. We remain keenly judicious and analytical in our approach, mindfully balancing increased risk with increased reward. To that end, we expanded aggressively our digitally delivered offerings for both traditional and emerging platforms, which are contributing significantly to our growth and profitability. Most of our new releases are now available for digital download on the day of launch, and all of our fiscal 2013 AAA releases are being supported by innovative downloadable add-on content. We're also now receiving high-margin revenue from in-game purchases of virtual goods, both in front-line titles such as NBA 2K13 and in mobile and online titles, many of which are free-to-play. During fiscal 2013, we generated record digitally delivered revenue, which accounted for 22% of our total. We broadened our mobile slate with core releases including Max Payne Mobile, Borderlands Legends, NBA 2K13 and Grand Theft Auto: Vice City. Casual releases such as Herd, Herd, Herd and GridBlock and our first mobile social game for Japan, NBA 2K All Stars. We continue to believe that interactive entertainment for mobile platforms, especially tablets, represents an important emerging growth opportunity. And we've numerous projects in our pipeline, some of which Karl will discuss later. We've also made substantial progress developing online games for Asian markets. NBA 2K Online, developed in partnership with Tencent, launched commercially in China in October. Usage and player engagement with the game continue the game momentum. And according to QQ Games, it's now among the top 10 most played PC games in Internet cafés in China. Pro Baseball 2K, developed in partnership with Nexon Corporation, launched commercially in Korea on May 2. The game offers an authentic Korean Pro Baseball simulation experience based on the MLB 2K engine. And finally, we revealed that the massively multiplayer online game that 2K is developing in partnership with XLGAMES is based on our successful Civilization franchise. Civilization Online will release initially in Korea, and production is being led by online gaming luminary, Jake Song. It's one of the most exciting and ambitious online game development initiatives in the region. We're highly enthusiastic about the opportunity for our online projects to augment our core business with a relatively stable, higher-margin revenue stream over time. In February, we acquired the exclusive worldwide rights to publish the popular WWE franchise across all major platforms and distribution channels. We believe there's an untapped opportunity to enhance further the performance of this profitable franchise by leveraging 2K's superb development and marketing resources, which have made our NBA 2K brand an annual hit. WWE is already contributing to our results with WWE 13. I'm pleased to note that 2013 marks the 20th anniversary of Take-Two. And today, our company stands in a stronger position than at any other time in our history. Although we've come very far, we believe that some of our most successful times are ahead. Interactive entertainment is a cyclical business. Our industry appears poised to enter an exciting growth period, driven by the upcoming launches of the next-generation consoles, as well as the increasing popularity of emerging mobile and online platforms. With our world-class creative teams, diverse 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. Fiscal 2014 promises to be one of our best years ever, highlighted by the upcoming launch of Grand Theft Auto V in September. We also have an extraordinary pipeline of titles in development for next-generation platforms, including groundbreaking new intellectual property and releases from our proven franchises. As a result, our current outlook is to be profitable on a non-GAAP basis in fiscal 2015 and for the foreseeable future. I'll now turn the call over to Karl.

Thanks, Strauss. I'd like to begin by giving an update on our recent releases and development pipeline for fiscal year 2014. As mentioned earlier, mobile gaming is an area of increased focus for our company. These offerings generally require much smaller development teams, budgets and timelines than console releases. However, the passion and desire we require of our creative talent to captivate audiences remains a constant. I'd now like to highlight some of our recent and upcoming mobile releases. Firaxis Games, 2K's renowned studio behind our Civilization and XCOM franchises, has been hard at work on several new titles for the iOS-enabled mobile devices. The first is Haunted Hollow, a free-to-play strategy title, which can be enjoyed by families, strategy buffs and horror enthusiasts alike. The game launched on May 2, and the response has been very positive, with game sites such as Kotaku raving that "2K and Firaxis want their players to party." Second is Sid Meier's Ace Patrol, an original title created by the legendary game designer himself, which immerses players in strategic World War I air combat scenarios. This free-to-play title released on May 9 and offers the high-quality 3D strategy experience that players expect from Sid Meier and Firaxis. Anticipation for the title was high, with Wall Street Journal noting that Ace Patrol marks one of Take-Two's "biggest steps in its effort to become an influential player in the mobile market." And finally, we will release our critically acclaimed console and PC title, XCOM: Enemy Unknown for iOS this summer. XCOM: Enemy Unknown was one of the highest-rated releases of 2012, and the iOS version will offer a full experience to mobile gamers. We'll have more mobile titles to discuss in the coming months. Turning to our console and PC releases. This year, we'll have several new downloadable add-on content offerings from Borderlands 2 and BioShock Infinite that will further immerse players in these incredibly popular and successful titles. Consumers who took advantage of our Season Pass savings will be amongst the first to expand their experiences in Pandora and Columbia with even more Gameplay content. To date, we have announced new content launching for Borderlands 2 tomorrow and on June 25. Building on the success of Sid Meier's Civilization V: Gods & Kings Expansion Pack, which was released last summer, 2K will release Sid Meier's Civilization V: Brave New World on July 9. This second expansion pack for the award-winning Civilization V will provide new depth and replayability through the introduction of international trade, as well as a focus on culture and diplomacy. On August 20, 2K Marin, the studio behind BioShock 2, will expand our successful XCOM franchise with the release of the Bureau: XCOM Declassified. Set in 1962, at the height of the Cold War, this third-person tactical shooter tells the story of the founding of the top-secret XCOM organization. We're very excited about Marin's vision for this title, the result of which is a narrative-driven experience that will challenge players unlike any other third-person tactical shooter. Turning to what many in our industry are predicting to be the biggest and most important launch of the current console generation, Grand Theft Auto V is on track for its planned worldwide release launch on September 17. Rockstar Games recently released 3 new character trailers to an overwhelmingly positive response from both fans and media. In addition, 2 weeks ago, the game was demoed for press, and resulting converse has been exponential -- I'm sorry, exceptional. It's worth noting that people are responding not only to the game's vast size and scope but also to its innovative 3-character structure and heist mission design, which offer immense opportunities for game play and storytelling that should raise the bar, not only for this franchise but for all interactive entertainment. Rockstar Games continues to prove that they have the passion and scale to take meaningful creative risks with one of the world's biggest entertainment brands. We're confident that the team at Rockstar North is creating something genuinely special, and look forward to the game's release in September. On October 1, NBA 2K14 will return to the hardwood and Visual Concepts is poised to, once again, raise the bar in sports gaming with the #1 basketball video game franchise for more than a decade. In October 29, 2K will put gamers in the squared circle with some of biggest names in sports entertainment today, for the launch of WWE 2K14. The title promises to build on the successful franchise, which we recently acquired. I'd now like to take a moment to discuss the upcoming E3 show in Los Angeles. This year, our labels will not have a booth on the show floor. Both Rockstar Games and 2K have instead decided to focus their marketing and PR efforts on a series of events throughout the spring and summer. Our team, however, will be present at the show, and we look forward to seeing many of you there. As stated earlier by Strauss, today, Take-Two is better positioned for consistent profitability than in any other time in its history. We've built one of the strongest intellectual property portfolios in our industry, including 9 franchises with individual titles that have sold in 5 million units or more. Fueled by our existing portfolio of franchises and ongoing initiatives to develop new intellectual property, we have an extensive pipeline of unannounced core titles in development for multiple platforms, including next-gen consoles. We plan to support many of these releases with downloadable add-on content and other incremental revenue opportunities. In addition, we have numerous titles in development for mobile and online platforms, which range from core gaming to more casual and social experiences. And finally, we have our online initiatives in Asia, which are expected to contribute growing revenue and profits in 2014. In closing, I'd like to join Strauss in congratulating and thanking all of our employees for delivering such fantastic titles and results this year. We are highly optimistic about our long-term outlook and are confident that our best days are still yet to come. Thanks, and I'd now like to turn the call over to Lainie.

Thanks, Karl, and good afternoon, everyone. Today, I'll review our results for the fourth quarter and full year fiscal 2013, and then discuss our outlook for the first quarter and full year fiscal 2014. All of the numbers I'll be providing today are non-GAAP results from continuing operations, and all comparisons are year-over-year, unless otherwise stated. Our press release provides a reconciliation of our GAAP to non-GAAP measurement. Starting with our results for the fourth quarter, net revenue increased 105% to $303.1 million. This exceeded our outlook range of $235 million to $285 million due to the blockbuster release of BioShock Infinite, along with the strong sales of catalog titles and digitally delivered offerings. Catalog sales accounted for 25% of net revenue, led by Grand Theft Auto IV, Red Dead Redemption and Sid Meier's Civilization V. Revenue from digitally delivered content grew 192% year-over-year and accounted for 27% of net revenue. The largest contributors were offerings for Borderlands 2, BioShock Infinite, the Grand Theft Auto franchise and NBA 2K13. In addition, continuing sales of NBA 2K13 and Borderlands 2, along with the release of Major League Baseball 2K13, also contributed meaningfully to our fourth quarter results. Gross margin increased 27.7 percentage points to 49.6%, due primarily to lower license expense as a result of the expiration of our previous contract with Major League Baseball. Operating expenses were approximately $105 million, up about $22 million. The principal driver was higher marketing expenses to support BioShock Infinite. Interest and other expense increased to $2.9 million, due primarily to the absence of a gain-on-sale recorded in the prior year's fiscal fourth quarter. And non-GAAP net income was $42.9 million or $0.38 per diluted share, as compared to a net loss of $50.9 million or $0.60 per share in fiscal fourth quarter 2012. This result significantly exceeded our outlook range of $0.10 to $0.25 per share. On a GAAP basis, we reported net income from continuing operations of $21.2 million or $0.23 per share. Turning now to our results for the full year. Net revenue increased 48% to $1.2 billion. This significant growth was driven primarily by our robust slate of fiscal 2013 releases led by Borderlands 2, NBA 2K13, BioShock Infinite and Max Payne 3, along with higher sales of catalog titles from Grand Theft Auto franchise and record sales of digitally delivered content. Revenue from digitally delivered content grew 148% to a record $264 million, the largest contributors were offerings of Borderlands 2, the Grand Theft Auto franchise and NBA 2K13. Gross margin was 42.2%, up 5.6 percentage points from prior year. The increase is due to lower license expense, resulting from the expiration of our previous contract with Major League Baseball, along with the strong performance of our fiscal 2013 releases. Operating expenses were approximately $467 million, up about $150 million over the prior year. The principal driver was higher marketing expenses to support our larger slates of fiscal 2013 releases. Interest and other expense increased to $12.5 million due to the full year impact of the convertible notes that we issued in November of 2011 and the absence of a gain on sale recorded in the prior year. And non-GAAP net income was $33.1 million or $0.36 per diluted share, as compared to net loss of $59.4 million or $0.71 per share in fiscal 2012. On a GAAP basis, we reported a net loss from continuing operations of $31.2 million or $0.36 per share. As previously disclosed, both our GAAP and non-GAAP results for the year include a $15 million negative impact from a onetime contractual obligation, which was recorded in the first quarter. Turning to some key items from our balance sheet. At March 31, 2013, as compared to December 31, 2012, our cash balance decreased to $402.5 million. Our accounts receivable balance increased to $189.6 million, primarily reflecting receivables associated with the release of BioShock Infinite near the end of the fourth quarter. Inventory was relatively flat at $30.2 million, and software development costs and licenses increased to $294.2 million, reflecting the development efforts around our pipeline of upcoming releases. Now I'll review our financial outlook for the first quarter and fiscal 2014, which is provided on a non-GAAP basis. Starting with the full year, we expect to deliver significant growth in both revenue and earnings driven by the launch of Grand Theft Auto V, which is planned for September 17, 2013. Our initial outlook is for net revenue to range from $1.75 billion to $1.85 billion and net income to range from $2.05 to $2.30 per share. Turning to the details of our full year outlook. Our expected revenue range assumes the on-time release of the titles we have planned for launch during fiscal 2014. We expect the revenue breakdown from our labels to be roughly 65% from Rockstar and 35% from 2K. We expect our geographic revenue split to be about 50% United States and 50% international. We expect gross margins in the low 40s. Total operating expenses are expected to increase by approximately 3%, primarily due to additional staffing at our studios to support our release schedule. Selling and marketing expense is expected to be about 15% of net revenue based on the midpoint of our outlook range. And we project interest and other expense of approximately $12.5 million, tax expense of about $11 million and fully diluted shares of approximately 122 million, which includes 8 million of participating shares for our unvested stock-based compensation awards and 26 million shares, representing the potential dilution from our convertible notes under the if-converted method of accounting. Turning to the first quarter. We expect non-GAAP revenue to range from $100 million to $125 million and non-GAAP net loss to range from $0.55 to $0.70 per share. The majority of our revenue in the first quarter is expected to come from Grand Theft Auto franchise, BioShock Infinite, NBA 2K13 and Borderlands 2. We expect first quarter gross margins in the mid to upper 40s. Total operating expenses are expected to decrease by approximately 26% from the prior year's first quarter, driven primarily by lower sales and marketing expense and the absence of the $15 million onetime contractual obligation recognized in the first quarter last year. Selling and marketing expense is expected to be about 40% of net revenue based on the midpoint of our outlook range. Our first quarter outlook also reflects interest and other expense of approximately $3 million, tax expense of about $3 million and a share count of approximately 87 million. In closing, we are pleased to deliver 3 consecutive quarters of strong revenue growth and profits. These results enable us to overcome our first quarter loss and deliver solid non-GAAP earnings for the full year. I would like to join Strauss and Karl in congratulating our employees on their outstanding creative and operational achievements, which make our financial results possible. We will continue to balance our creative drive with a disciplined approach to operational efficiency and capital allocation to drive long-term returns for our shareholders. Thank you. Now I turn the call back to Strauss.

Thanks, Karl and Lainie. On behalf of our entire management team, I'd like to thank our employees for their stellar work in delivering outstanding results this past year and for setting the stage for I believe will be one of the most exciting chapters in our history. And to our shareholders, I want to express our gratitude for your continued support and belief in our vision. We'll now take your questions. Operator?

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

I'm just -- I know you don't like to talk about specific games. But if you can look in the aggregate, what type of uplift or the overall percentage of revenue that you are getting from digital components of games like for Borderlands and BioShock and all the other top games, the contributions you're getting from those -- from the digital side there or maybe also the mobile uplift as well, too?

Yes, we don't disclose the breakout. We do talk about the fact that digitally delivered revenue in the quarter was 27% of our net revenues. So it's quite meaningful. But the reason that it's not something we cover is it's really not relevant. Our view is that we should make our products available to consumers wherever they are, however they want to receive it, without regard to platforms. And whether something's delivered on a disc or ephemerally, is really a detail and should be a detail for us. We want to be where the consumers are.

Our next question comes from the line of Ben Schachter with Macquarie.

Three quick questions for you. One, thank you for the guidance post FY '14, I'm talking about FY '15 and beyond, I think that's very helpful. I was wondering if you could just walk through what gives you the confidence to be able to give that guidance now? And the second question is something I don't think we've talked about a lot publicly, but that's your cash balance. Historically, it's never been that big. I was wondering if you could talk about what that cash balance may look like by the end of FY '14? And any potential plans for that cash? And then finally, the 1Q guidance, relatively low, especially given that BioShock had a great release. I'm wondering why the 1Q guidance might not be a little higher given potential reorders on BioShock?

So Ben, in terms of the foreseeable future, our outlook is based on a multi-year plan, which currently projects ongoing profitability for the company. And then in addition, our development pipeline, which extends out even further, gives us confidence in our ability to be consistently profitable over the long term. So that's really what backs that number up. In terms of our cash balance, we don't share our projections or our cash flow going forward. But we do plan to be cash positive this year, as you can see by our earnings. In terms of the use of the cash, it's really in line with how we look at our cash balance now. And we look for our opportunities for acquisitions, investing in our current pipeline or other titles that make sense for us, as well as in Asia, some of our online titles there. And then we also would look to do -- we announced the share repurchase and if that makes sense for us, we definitely would do that as well. Your third question for me?

Just the Q1 guide just seems a little bit low relative to how strong the quarter ended in particularly with BioShock, I'm wondering why Q1 guidance couldn't be higher given potential for BioShock reorders and some other things that are going on in the quarter?

Well, we definitely do have BioShock reorders scheduled for the quarter and the lifetime units for that title. We definitely -- we have increased our expectations for that, but we also have no major new titles releasing during the quarter. So a lot of the revenue was from our catalog, which has lower margins. And we also have some significant marketing costs for some future releases, as well as for some already released titles in the quarter.

Our next question comes from line of Justin Post with Merrill Lynch.

I believe you said 65% of revenues in fiscal '14 from Rockstar, which equates to somewhere around $1.1 billion to $1.5 billion. Can you -- $1.1 billion to $1.15 billion -- Can you tell us what else besides GTA will be supporting that number? Do you expect a lot of catalog for Rockstar? And then maybe, Strauss, could you tell us just kind of what kind of presence you might have at E3, if any?

On the 65% from Rockstar, it would be for the GTA release, as well as our strong catalog. And then for E3, he asked...

I'm sorry, I missed that question. Justin, could you repeat that question regarding E3?

Sure. Just kind of what kind of presence you expect to have this year and what's kind of your just overall philosophy towards that show of having a big presence?

Justin, it's Karl. We do -- as I said in my remarks, we don't plan to have a booth on this floor this year, but we will be there. 2K and Rockstar have other events, marketing and PR events planned over the summer. So our philosophy on the show is that we like the show, we participate in a meaningful way in the show. It's a great place for the industry to get together, and we're highly supportive of it. This year it just didn't make sense for us in the same -- at the same level.

Our next question comes from line of Mike Olson Junior with Piper Jaffray.

One of the assumptions that many people make about transitioning to new console platforms is there'll be related uptick in development expense. But we haven't necessarily heard that from others in this space. Could you just share your thoughts on what you expect for any impact on development expense for next-gen consoles? And then another one related to marketing around GTA V. Just any thoughts around kind of how you're going to be marketing it and then maybe talking high-level about the role that you think marketing plays in the industry today given the sort of concentration of big-budget titles that we're going to see arriving this fall and holiday?

Thanks. We haven't talked specifically about development expense. You're right that, historically, as new platforms enable new work are launched, development expenses have indeed gone up. We're fortunate that we were also able to take our top-quality titles and deliver strong revenues from those titles and, therefore, deliver profitability. So one of our -- 1 of the 3 tenets of our strategic approach here is efficiency, and we aim to be the most efficient company in the business. And that includes development spending. So it's a major area of focus for us. Our goal is to deliver the highest quality titles and sort of market them as effectively, if not more effectively, than anyone else. Which leads me to answer your question on marketing Grand Theft Auto and other titles. And look, I'm really proud of our worldwide marketing and sales operation. I think over and over again, we've proven that, that's a major strategic asset. There are only fewer than a handful of companies that are in the industry who have it. Every time we release a major title, we have to innovate because, basically, when we market something in an innovative way, the industry takes notice. And frankly, when our competitors do, we take notice. So we have some tricks up our sleeve going forward. I'm not going to discuss them today. You'll see them as they unfold. But marketing is obviously a crucial part of what makes us as successful as we have been and intend to continue to be.

Our next question comes from the line of Daniel Ernst with Hudson Square Research.

Two questions, if I might. First, an observation. In your press release, you noted that Grand Theft Auto IV continues to be a primary driver of catalog sales, which suggests to me that the title of the franchise has a lot longer legs than maybe one might expect. So my question on Grand Theft Auto is if you look at the slate of title coming out after GTA, what is your -- can you just give us a sense of how you're thinking about DLC or add-on content? I mean, obviously, you're not going to give us a specific plan here, but sort of how you're thinking about keeping the business relationship with the customers that love your game after the core game is launched? And then second question on development expense, also. If we look back 6 years ago at this time, we didn't have an opportunity to put on titles like you guys produced on a flip phone. And today, there's a lot of platforms that may be addressed what you do. What is the distribution of your R&D spend look like for next-gen consoles versus supporting old-gen consoles and versus mobile? How that kind of development budget, if you have a little [ph] dollar, where does it go? Does it go to mobile? Does it go to supporting kind of the core business?

Yes, I think, Daniel. For our AAA releases of late, we've offered downloadable content for all of those releases. So clearly, trying to keep customers engaged, trying to keep the games in their hands and most, importantly, trying to delight our customers remains our primary focus. And the reason we've done, as well as we have is that despite the ups and downs in the marketplace, our scores remain high, and we keep giving customers what they want. So whether that means downloadable content, whether that means companion apps on other devices, whether that means in-game goods, whether that means free-to-play opportunities, we're ecumenical. We want to be where the customer is and on whatever device he or she uses, wherever he or she is all over the world. That's our stated strategy, and we intend to keep on doing it. So we haven't made any specific announcements with regard to downloadable content for future releases. But historically, we have been there. In terms of development expense, we do not break it out among platforms. As you would imagine, our big console tentpole releases are very costly compared to some of our other releases, but we have not broken out those line items.

Our next question comes from the line of Doug Creutz with Cowen & Company.

I just wonder if you could verify that the guidance you've given for fiscal '14 is just predicated on the titles that you announced to date for fiscal '14, that there's not anything that's critical to that guidance that you haven't announced yet?

There are some unannounced titles in fiscal '14's guidance. However, they are not very material to the overall outlook for the year.

Our next question comes from the line of Mike Hickey with national alliance securities.

Just curious on Rockstar, they've been pacing about 1 big game per year, should we continue to think that's how they're going to perform here at fiscal '15 and beyond?

We haven't talked about how they're going to perform going forward. But putting out one massive tentpole title a year takes an enormous amount of effort. And it's worked very well with Rockstar so far.

Okay. And then just curious, Strauss, what you think on next-gen software pricing. I mean, I pre-ordered GTA V today at $60. It's pretty close to next-gen consoles coming out. Do you think you're going to have a premium to where current gen is currently priced? Or how do you think that's going to impact current gen pricing, I guess, is what I'm getting at?

The government doesn't take kindly to me talking about pricing. So we tend not to talk about our pricing. We do offer premium product.

Yes, you do. Okay. And then last question, just curious, on WWE, obviously, it's always been, from what I can tell, a pretty good game here. And I think the marketing benefits a lot from the WWE. I mean what do you think, strategically, on that? Is there other drivers? Is there ancillary products? Is there something else you can do with it? And I'm curious kind of where the breakeven is on that game?

We're really excited about being in business with WWE. I was just at their Massive event and it was extraordinary. I think there were 90,000 fans in the arena, and it was raining. And it's an amazing franchise that pleases the whole family, and we're delighted to be in business with WWE. We're working as closely as possible with the development team and with the WWE folks in Stamford. And we are -- our aim is to put out an A-plus product and give an A-plus marketing that's utterly consistent with the franchise. We think the demographics are sound and growing, and we couldn't be more thrilled. As far as our financial expectations, I think you know that, generally speaking, we try not to enter into arrangements unless we have a good deal of confidence that they're going to be profitable.

[Operator Instructions] Our next question comes from line of Brian Fitzgerald with Jefferies. Brian Patrick Fitzgerald - Jefferies & Company, Inc., Research Division: A couple of questions on mobile platforms. Do you see in every differentiation in terms of trends on Android versus iOS, maybe in emerging markets? And then as you think about marketing around those products and around emerging markets, is there -- can you give us any color on how it differentiates from your marketing programs for console-based games?

Yes, I mean, there are -- market by market, there obviously are trends Android versus iOS. iOS is a very powerful domestic platform, Android tends to be a more powerful international platform. But again, our strategy is to make our titles available for all of these platforms and to be ecumenical about it. When we don't have to make a bet, we don't want to make a bet. Occasionally, we do, especially with regard to consoles. But with regard to the mobile platforms, we're pretty much able to support everything that's out there. As you can imagine, our marketing expenses have to be tailored to the economic opportunity. The bulk of the economic opportunity that faces our company now is driven by our AAA console titles and the catalog related thereto. So that's where our marketing expenses go. As mobile titles grow in importance, I'm sure we'll be competitive with our marketing spend. But we are not big believers in the if-we-build-it-they-will-come strategy in business. We tend to be a little more grounded than that. And our view is we want to make sure that there is a market. And then we want to satisfy and delight the market. We do not see it as an opportunity for us to go build a market.

Our next question comes from the line of the Stephen Ju with Crédit Suisse. Stephen Ju - Crédit Suisse AG, Research Division: Strauss, as you have mentioned of the upcoming new consoles and your release slate, is there anything you can share in terms of the cost to port a game between platforms, either down port or up port as you might think it's appropriate? And do you think it will be a relatively straightforward process or something more time-consuming based on the feedback from your development teams?

Yes. And look, there's nothing straightforward about making what we hope will be the standard bearers of the industry. And there's no question that developing for what will be next-gen will be complicated and for the type of titles we do, will be costly. That said, we have a very strong balance sheet, and we align our business with our costs. And one of our 3 strategic objectives is to be the most efficient company in the business. We haven't talked specifically about the cost profile of next-gen releases, and we don't aim to do that now. But we are exceedingly mindful of costs, and we are hopeful that over time, there will be some efficiencies as we support every platform that's out there. But it's too early to say that, that will be the case.

Mr. Zelnick, we have no further questions at this time. I would now like to turn the floor back over to you for additional or closing comments.

Well, thanks, everyone, for joining us. We're thrilled to be able to deliver such good news across the board, whether it's our last year -- last quarter's results, last year's results, our guidance for this year or our outlook for the future. We're also pleased that our strategic initiatives are coming along so effectively. We're grateful to our shareholders for their support and first and foremost, to our creative teams, our marketing teams, our distribution teams and the business teams that make it all happen. So thanks very much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.