GameStop Corp. (GME) Q4 2011 Earnings Report, Transcript and Summary

Good morning. Welcome to GameStop Corporation's Fourth Quarter 2011 Earnings and 2012 Outlook Call. [Operator Instructions] I would like to remind you that this call is covered by the Safe Harbor disclosure contained in GameStop's public documents, and this is the property of GameStop. It is not for rebroadcast or use by any other party without prior written consent of GameStop. At this time, I would like to turn the call over to Paul Raines, CEO of GameStop Corporation. Please go ahead, sir.

Good morning, and welcome to GameStop's year ending conference call and strategic update. Before we get started, I would like to recognize the thousands of GameStop Micromania, EB Games and Kongregate associates, who continue to provide the best customer service and innovation in 15 countries around the world. Thank you for joining us for what we believe will be an important update to investors with interest in GameStop. We have scheduled a longer call than usual today so that we can spend time discussing our strategy for 2012, as well as our 2011 accomplishments and results. Please be sure to follow along with the slide presentation, which can be found at investor.gamestop.com while you listen to our presentation. I am joined on the call today by Tony Bartel, our President; Rob Lloyd, Executive Vice President and Chief Financial Officer; Mike Mauler, Executive Vice President for International; and Matt Hodges, our Vice President of Investor Relations. Investors who have followed GameStop know that we launched a strategic review of the company in 2009 and have been executing against that plan during the last 3 years. We are pleased to share with you today the progress we made in 2011, and more importantly, how we will continue to innovate and transform GameStop in 2012 as a hybrid retailer of physical and digital products in the gaming and mobile space. During early April of last year, we shared with you at our Investor Day a very clear and well-thought-out strategy. That strategy started with maximizing our brick-and-mortar stores. During 2011, we continued to leverage the store footprint to drive sales of physical console gaming products and added a $323 million digital console business or DLC sold at retail. We reduced our store footprint by 1% in the U.S. for the last 2 years by leveraging our PowerUp Rewards program to drive profitable transfers of existing customer traffic from closing stores to open stores. At the same time, we slowed store development in international markets and consolidated support functions in smaller countries to reduce costs. We also exited Northern Ireland and Portugal, which Mike Mauler will discuss later in the call. During 2011, the physical console category declined faster than we projected in our market model. At the same time, GameStop has grown market share to record levels and created new business models that are filling the profitability gap. Rob Lloyd will provide an update today on our revisions to our outlook. Our second plank of the strategy we gave you last year was to reposition the preowned business. We are, by far, the largest retailer in the world for preowned games. And multiple competitors around the world have attempted and failed to succeed in this space partly because it is a tougher business than they expected and partly because GameStop is an exceedingly efficient operator. During 2011, we reorganized our leadership to bring more resources to preowned, added sophisticated assortment planning and visual merchandising around top-selling games and made deeper investments in regional stock balancing algorithms to drive inventory availability. At the same time, we used PowerUp Rewards to bring great preowned value to our best customers and offer them opportunities to trade more frequently with us. We are pleased with the 6% growth in preowned around the world and are forecasting mid-single digit growth for 2012 in preowned. We are also pleased that we generated $1.2 billion of in-store credit around the world that allowed us to grow new game market share. We also told you in 2011 that we wanted to own and strengthen our relationship with our customers. We are excited to say that the PowerUp Rewards program, launched nationally in October of 2010, has now reached over 17 million members in just 18 months and is integrated throughout the GameStop network. This program, which is much more than a loyalty or a relationship program, is driving growth in new title launches and market share, preowned sales and trade; and is a premier customer-acquisition platform for digital services. The PowerUp Program drives share of wallet of existing customers, maximizes the value of large spender and is a platform for acquiring customers and launching new digital businesses. 90% of members have purchased in the last 12 months with an aggregate game library of over 250 million games. The impact of the program on spend is compelling. PowerUp members trade at 3x the rate of nonmembers, pick up reservations at a 10% greater rate, open e-mail at double the rate and are 5x more profitable. The PowerUp program at GameStop has gone beyond a loyalty program to become a customer-acquisition platform. I will use 2 examples to illustrate this. You see on the accompanying slide a PowerUp e-mail sent to a member during holiday, offering preowned games recommended based on a customer's existing game library. This particular customer was notified of their existing trade balance with GameStop and was also offered early admittance to a Buy 2 Get 1 promotion in store. The result of this e-mail campaign was that over 50% of PowerUp members transacted, creating over $20 million in incremental sales. Another example comes from the launch of recommerce trades at GameStop. In this e-mail, the customer is notified of iDevice trades at GameStop based on their historic spend. And the result is that over 90% of trades on iDevices during the promotional period came from PowerUp customers. If you are a PowerUp Rewards member, you know that we have created a compelling communication channel with you to drive value and launch new businesses as we are using the program to drive growth in DLC, Impulse PC downloads and Kongregate.com casual gameplay. Last year, we also shared with you our strategy to grow the Digital business. Tony Bartel will share further details with you. But I will just note that in 2011, we grew all channels of our digital businesses successfully. Console digital grew at over 64% as GameStop created a unique technology to bring consumers' launch day downloads and opportunities for added content. A testament to our strength in this area is that 2/3 of the 1 million Call of Duty Elite digital subscriptions sold in the first week were sold by GameStop. Our Kongregate casual game platform doubled last year, showing the power of in-store promotion and linkage to PowerUp Rewards. We shared with you last year that we are committed to a disciplined approach to capital allocation, and our actions continue to demonstrate that commitment. We articulated a target of 17% return on invested capital by 2014 in our strategic plan and have returned more than 100% of free cash flow to shareholders in 2011. We bought back 11 million shares in 2011 and retired all of our remaining long-term debt during the year. Our research indicates that with that action, we are 1 of 22 companies in the S&P 500 and 1 of 8 retailers who are long-term debt free. As a final note, our Board of Directors approved in February a $0.15 per share quarterly dividend that we believe is an important further component in our capital allocation discipline. As investors in GameStop, you should understand that we are disciplined stewards of your capital. Before I turn the call over to Rob for details on 2011, let me reiterate that we are bullish on GameStop's business in 2012. While there are unknowns around the aging console cycle, we expect to continue gaining share and driving our preowned digital and mobile businesses this year. In the case of digital and recommerce, GameStop will have revenues of over $800 million in 2012 from businesses that did not exist for us a mere 2 years ago. Later on in our presentation today, I will provide you with details on a 6th plank of our strategy, and that is the launch of a mobile category. Operating margins are forecast to rise above 7%, indicating that we are seeing leverage from the investments made in the last 2 years. The transformation is underway, and we are seeing results from our work. I will now turn the call over to Rob.

Thank you, Paul. Good morning, everyone. I'd like to start by briefly recapping our fourth quarter and fiscal 2011 year end results, then I'll provide our outlook for the first quarter and fiscal 2012. In the fourth quarter, total global sales decreased 3% from the fourth quarter 2010 to $3.58 billion, primarily due to the weakness in Wii hardware and the overlap of the Kinect launch. Comparable store sales for the quarter were down 3.6%. Earnings per share were $1.73, excluding impairment and restructuring charges, which I'll cover in a minute. For the full year, sales increased slightly over 2010 to $9.55 billion, primarily due to growth in software and preowned, which overcame the weakness in hardware. Comparable store sales for the year were down 2.1%, with U.S. comps down 1.2% and international comps down 4%. Earnings per share grew 7% over last year to $2.87, excluding the impairment and restructuring charges. The earnings per share of $2.87 was 98% of our EPS target for performance-based compensation granted in February 2011. 98% achievement yields a 95% payout. As a result, you will see Form 4s filed in the next couple of days for our named executive officers for the forfeiture of 5% of the performance shares that were granted. Gross margins improved by 190 basis points for the fourth quarter and 130 basis points for the full year. Our sales mix shifted from hardware to preowned and new software, and the margin in the other category improved as our Digital business and PowerUp Pro membership grew. During the fourth quarter, we recorded charges totaling $81.2 million for asset impairments and the cost of exiting certain markets and non-core businesses. The largest impairment charge of $37.8 million, related to the Micromania tradename, as sales have not met the initial forecast used to value that tradename upon the acquisition of Micromania in 2008. We impaired our investment in a small movie retail chain we sold in early 2011. Cost to close markets such as Portugal and Northern Ireland include fixed asset and other asset write-offs, severance costs and lease termination costs. In addition, there were charges for impairing and closing underperforming stores in most of our markets. The total charges were $64.6 million after tax and $0.47 per share for the quarter. Debt retirement costs were less than $0.01 per share. Excluding these charges, net earnings for the quarter increased to $239.5 million, and diluted earnings per share of $1.73 were up 10% over the prior year quarter and in line with reiterated guidance communicated on January 9. Sales by category showed the challenges in hardware, which extended to accessories in the other category. The slowdown in Wii sales and the overlap of the Kinect launch, which I mentioned earlier, led to hardware sales declines of 20% in Q4 and 6.3% for the year. New software increased 3.8% in the fourth quarter and 2% for the year, resulting from strong titles like Call of Duty: Modern Warfare 3 and Elder Scrolls V: Skyrim. GameStop increased its fourth quarter software market share in the U.S. by 270 basis points. Following growth in market share in the fourth quarter of 2010, we have compelling evidence that the PowerUp Rewards program has improved our competitive position. We spoke throughout 2011 about efforts to grow the preowned business. Preowned product sales increased 1.5% to a record $818 million in the quarter, including 3.5% growth in the U.S. Preowned sales increased 6.1% for the full year. The full year growth was comparable in the U.S. and internationally, with Europe showing the highest growth. Overall, sales in the other category declined 6.2% in the fourth quarter and 3.4% for the year due to the overlap of big PC titles and due to a decline in accessories corresponding to the decline in hardware. Offsetting these declines were increases in revenues from our PowerUp Rewards Pro membership, which increased 31% for the fourth quarter and 37% for the year and increases in digital revenues. Revenues from the recommerce and mobile businesses are in the other category. And by year end, we were selling iDevices in 460 stores and tablets in 200. On the bottom half of this slide, margins on hardware fell due to the overlap of the Kinect, which is a higher margin than the rest of the hardware category. The margin story for the year is in preowned and the other category. As we told you a year ago, we were overly promotional with the preowned business in Q4 of 2010 and that we would return to a normalized level of margins in 2011. Margins increased 210 basis points over the prior year quarter to 46.3%, demonstrating that we were able to do that. The exciting margin story continues in the other category, which improves the -- improved over 500 basis points to 38.9% in the fourth quarter and 39.8% for the year. Our digital revenues accounted for $109 million in gross margin and over 70% of the growth in the other category gross margin for the year. During 2011, we closed 211 stores in the U.S. and opened 178. We opened 170 -- 107 stores internationally and closed 61. Last year, we forecasted that if we could capture between 40% and 60% of the sales at our closing U.S. stores, we could increase the profitability of the combined closing and nearby stores by 20% to 30%. We now have over a year's worth of data on closing stores using the PowerUp program and are pleased to report that we have achieved the 40% sales transfer rate and the 20% improvement in combined profits. In addition, PowerUp Rewards data shows an additional 8% to 10% of sales are transferred to other nearby stores, which are not used in our profit measurements. We will use the same data and techniques to continue to shrink our U.S. store base in 2012. Our non-GAAP digital receipts grew 52.4% during the quarter and 57% for the year. Console digital grew 64% as we continue to refine the launch day marketing of DLC. PC digital grew over 42%. Our GAAP digital revenues totaled $207 million with a blended margin rate of 53%. Tony will discuss our digital business in more detail. I'd like to provide a brief update on our capital allocation plan. During the fourth quarter, we purchased 2 million shares for a total of $45.3 million under the share buyback authorization from November 2011. We also retired the remaining 125 million of senior notes. And as you heard us say, we are debt free. Thus far, in the first quarter of 2012, we've repurchased 3.3 million shares at an average of $22.97 for a total of $76 million. Since we began buying back stock in January 2010, we’ve repurchased 37.7 million shares at an average of $20.62 for a total of $778 million. We also repurchased $450 million of debt in the same time period. On February 7, 2012, we announced our first dividend, which we paid on March 12. We announced today that our board approved a new $500 million authorization for stock buyback, which replaces the $253 million remaining on the existing authorization. Now I'll turn it over to Mike Mauler to update you on our International businesses.

Thanks, Rob. Good morning, everyone. Overall, international results met expectations in 2011. Despite industry declines and poor macroeconomic conditions, our European operations had a solid year, generating operating income of $70.6 million with 3.5% earnings growth over the prior year, excluding charges. A strong focus on cost control and higher gross margins drove this improvement in operating earnings, with our French and Italian businesses leading the field with operating margins of 7.2% and 6.7%, respectively, among the best in the world. As communicated during Investor Day, implementing best practices across our territories resulted in significant improvements in a number of areas. We realized strong growth in European preowned sales and margin, which exceeded the U.S. Our loyalty program, founded in France, was rolled out to Australia, New Zealand and Spain. And during the year, we leveraged the technology investments and processes developed in the U.S. to drive strong growth in our console and PC digital businesses. 12 months ago, we committed to expanding our e-commerce capabilities. Since then, we have made significant investments in technology which has helped us to achieve a 36% increase in sales versus prior year. One of the primary drivers of margin growth for the international markets was the expansion of our private label accessory business. By leveraging our global footprint with our manufacturers, high-margin, private label accessory sales grew 37% versus prior year. Finally, strong progress was made during 2011 and leveraging our global purchasing power to provide unique and exclusive content to our customers worldwide. Along with exclusive content on key titles such as the Adam's edition of Assassin's Creed and the Battlefield 3 Physical Warfare pack, we also coordinated with the console manufacturers to launch an exclusive White PlayStation 3 and a Call of Duty-branded Xbox 360 in Europe. 2011 was a year not only focused on investing in our key markets to drive growth but also a year of reducing costs and restructuring underperforming markets. In Northern Europe, the U.K., Ireland and Scandinavia, we are consolidating operations in Dublin for 6 markets. This consolidation is on schedule for completion in May of this year. The consolidated Northern European operation will also include shared service functions for e-commerce and IT support, creating a Center of Excellence and reducing operating costs. These changes, combined with the closing of all stores in the U.K. and Northern Ireland, where we are focused entirely on competing digitally, will enhance our profitability in this region over the coming years. In Iberia, we closed our unprofitable Portuguese operations, closed 27 underperforming stores in Spain and underwent significant reductions in back-office personnel in order to rightsize our costs in this market. During 2011, we also closed 30 underperforming stores across other countries, and we will continue to evaluate industry conditions and look for opportunities to consolidate our store base in some market in order to increase profitability. As a result of our international restructuring efforts, we will realize positive earning per share accretion of $0.05 to $0.06 annually. The success of our strategic initiatives and restructuring in 2011 has built a solid foundation for 2012, where we will be focused on 3 core strategic initiatives. We will expand our console and PC digital businesses by completing our POSA rollout across all territories and by investing in DLC. Leveraging the technical capabilities developed in the U.S., we are working with our publishing partners to roll out DLC capabilities in all markets. And we are currently in the pilot phase in Italy and Germany. In 2012, we will leverage best practices from the U.S. to build our mobile businesses in all markets. As of today, I'm pleased to say that we have launched iDevice trades in 12 countries over the last 4 weeks, and we are very excited by this further expansion to our buy-sell-trade model. We have also just recently begun selling gaming tablets in Australia, and we will see this product line roll out to other key markets during the year. Finally, after successful implementations of our loyalty program in Australia, New Zealand and Spain, we will accelerate our loyalty rollout to 4 additional markets during 2012. Implementing robust loyalty program in these markets is the glue that ties together our brick-and-mortar capabilities, services and digital offerings into one cohesive value proposition to our hybrid customers. And now I will turn it over to Tony for his comments.

Thank you, Mike. As Paul shared with you earlier, the investments made in the digital space are working, and we are ahead of our digital growth forecast of 57% digital growth in 2011. We prudently invested in building blocks for the future that are growing quickly, and we avoided the allure of highly-priced technology companies. In short, we believe that we are leading our customers into the hybrid experience that enhances their enjoyment of gaming. Our growth projections for the global digital business remain at a healthy 13% CAGR through 2014, led by strong growth in downloadable content and mobile gaming. As I'll discuss later, we have invested or are investing in each digital growth area to apply our unique strength to provide consumers with a strong and compelling proposition. As we look at our progress towards our goal of $1.5 billion of digital receipts by 2014, we are ahead of schedule as our $453 million of digital receipts represented 57% growth over last year. This year, we expect our digital business to grow 50%, keeping us on pace to reach our $1.5 billion goal. As Rob shared earlier, we expect that our digital revenue will be accretive to our gross margins on a GAAP basis and will be similar to our overall margin on a non-GAAP basis. Let me detail the actions that GameStop has taken to drive growth in each digital category. In DLC, we are very confident that we are introducing and enabling new customers to enter the exciting world of expanded content. Based on the survey of customers about DLC in our stores, we found that 1/2 of them had never purchased DLC before. And when we asked them about their intent to purchase again at GameStop, 91% of these customers said that they intended to repurchase at GameStop. This was nearly double the repurchase intent of any other DLC source. In addition to the knowledge of our associates, a key reason that people purchase DLC at GameStop is due to the fact we have alternative currency sources. In fact, 70% of the currency that's used to purchase DLC in our stores is some form other than credit such as cash, gift cards and trade credits. So for these customers who are unable or unwilling to provide a credit card for an online purchase, we provide an excellent and informed choice to purchase DLC. When you look at the satisfaction of these customers, it is a very high 87%. When asked about what the top drivers of the satisfaction were, customers answered the integration with PowerUp Rewards and the knowledge of our associates, 2 factors that others find hard to replicate. Speaking of PowerUp Rewards, this is an integral part of our digital experience and an example of how it has evolved into a customer-acquisition platform. When we pre-order or pre-sell DLC, the code to activate the DLC is sent to the PowerUp Reward member's secure electronic locker at the same time that the DLC becomes available online. To show how powerful the program is when all of these elements come together, here are the results from the launch of Activision's Call of Duty: ELITE, the largest DLC launch of all time. GameStop worked closely with Activision throughout the pre-sell process and through the launch process to generate over 2/3 of the customers who purchase this DLC during the first week of launch. A more recent example is the launch of EA's Mass Effect 3, where we presold DLC alongside the game. We attached DLC to over 40% of the physical games at launch, resulting in a dominant market share for the first week of March. We are sharing this success with all of our publishing partners and are driving a maturation of the DLC business that is resulting in incremental customers and faster growth. In our online browser-based gaming space, we evolved Kongregate from a predominantly ad-based browser platform to a hybrid platform where most of our revenue is coming from in-game transactions. As a result, we more than doubled our revenue in 2011 and project that we will again double our revenue in 2012. We created a business development team focused on procuring the top free-to-play games, and we continue to evolve our platform to accommodate the needs both of core browser gamers, as well as developers of free-to-play games. Through Spawn, we have optimized our cloud-based gaming technology and are currently live nationwide in 6 data centers that are running a national beta for thousands of GameStop associates, some of the heaviest gamers in the world. The technology works, and publishers are excited about our progress. In the social gaming space, we continue to expand our assortment of POSA cards, as well as offering digital currency that we sell similarly to DLC. We are working with publishers to provide unique content to drive traffic to our stores and websites, and we will utilize our strong pre-sell and launch skills to activate these events. As in other parts of our business, the ability to use non-cash currency to drive this business is driving new lines of revenue, as well as additional traffic. In PC downloads, we continue to grow and integrate the PC app store into our stores and online, doubling our revenue in 2011. In addition, we are expanding our offerings to accommodate the needs of the hybrid customer. We now have over 1,500 games to offer customers digitally, and we will soon have all of these available for purchase in our stores. We will be launching this platform in our stores in April and expect to see a tripling of PC digital sales this year. In addition, we recently signed a deal with Blizzard Entertainment to sell digital games and in-game virtual goods and services via our PIN-on-receipt technology, similar to what we use with DLC. We now have the ability to sell, pre-order and pre-sell digital content that will be delivered at the same time that it is available online. The first game that will use this technology is Diablo III, but we are already pre-selling the digital version of the game in our stores. Again, this represents a strong partnership with Activision, as well as a corroboration of our ability to sell incremental digital content in our retail stores. In digital media, we have one of the world's largest paid digital magazines that currently boasts over 1 million paying subscribers. We continue to see growth at over 200,000 digital subscribers quarterly. And this is non-cannibalistic to our physical magazine, which is currently the fourth largest magazine at over 7.5 million paid subscribers. The credible content, coupled with an enthusiastic and knowledgeable sales force, provides us with a strong vehicle for educating and monetizing our consumer base. Finally, in mobile, we have several new initiatives that we have launched and will be launching this year. Paul will provide more detail on some of our new mobile offerings, but I do want to highlight that we've launched an Android mobile app store with in-game transaction capability this year. To pull all this together, we are executing a new assortment plan to highlight our new businesses. While video games are still the major focus, we will now have dedicated merchandising sections for DLC, digital PC, POSA cards with our expanded offerings, dedicated end caps for Blizzard digital products, gaming headsets, which represent a fast-growing, highly-profitable category and our new revenue sources of recommerce and new Android tablet sales. And we are more tightly integrating our e-commerce site to work with our stores. Our research shows that over 60% of GameStop customers visit us both in-store and on the Web. So we are investing in strategic growth areas such as mobile Web and PickUp@Store that better reflect how our customers wish to shop today. We expect strong double-digit growth in multi-channel revenue in 2012. In conclusion, we have the programs in place to grow our business, to continue to outpace the market's digital growth rate by nearly 4x and to add new sources of revenue. To further describe these new sources of revenue, I'll now turn the call back to Paul.

Thanks, Tony. At GameStop, we frequently get customer requests for adding products to our buy-sell-trade program. Given the frequency with which consumers upgrade their mobile devices and their use of mobile devices as gaming platforms, we saw an opportunity to add them to our buy-sell-trade model. During 2011, we launched trades and sales of iDevices and new tablets in a test group of stores. Customers reacted favorably to those tests, and we are announcing today the creation of a mobile business unit within GameStop to support this initiative. That mobile category in GameStop is comprised of 3 primary segments. The first is recommerce or a buy-sell-trade of mobile devices and electronics, the second is gaming-oriented tablets and the third is related services for those devices. In order to better understand our rationale for entering this category, we will share some of the work we have done to build our market model. The fast-growing recommerce category is currently composed of a highly fragmented group of players with little or no national branding or store footprint. Most of the industry today operates as websites, peer-to-peer marketplaces or white-label services inside big-box retailers. The largest product groups in the market are mobile phones, MP3 players and tablets. Most players in this space have little or no refurbishment capacity, while GameStop has a high-tech 200,000 square foot refurbishment facility with significant technical capabilities. At the same time, GameStop stores have developed the most effective trade process in the industry, last year handling 120 million customer trade transactions. We also have studied the amount of new consumer electronic devices that are shipped every year, and we estimate that over 200 million devices were shipped in 2011 in the mobile phone, MP3 player and tablet categories. Only this week, the new iPad was announced to have sold 3 million new units over the weekend. We estimate that those devices have an upgrade cycle of 12 to 18 months. And our growth model is built conservatively on an assumption of 5% trade-ins annually of the installed base. Over 21 million of those new devices shipped last year were tablets. And consumer research showed that gaming is the #1 activity on tablets. In fact, 4 of the top 10 paid apps are games. Now all of these new devices will become candidates for trade and refurbishment eventually in the recommerce market. Our market model estimates a current U.S. recommerce market of $800 million to $1 billion, with 50% growth projected for 2012. If you model a 10% share of that market, it would give GameStop a $140 million to $160 million business in 2012, and that would be a leading market share position. We are now accepting iDevice trades in all U.S. stores, and we are selling refurbished iDevices in 1,200 stores and gamestop.com in the United States. iDevice trades represent 7% of our total trades year-to-date in 2012. We have seen enough volume at this point to make some assumptions around unit level economics and the potential impact to our stores. We will expand our iDevice sales to over 2,000 stores by year end and new tablet sales to 1,400 stores. We estimate that GameStop will have sales in our mobile category of $150 million to $200 million in 2012, growing to $550 million to $600 million by 2014. This revenue ramp is based on our mobile model that assumes a trade-in ramp from our current run rate to an average of 7 units per store per week by the end of the year. It also projects that sales will expand to 13 units per store per week in those stores having mobile devices available for sale. Gross margins for this category will approximate 30%. As we grow the mobile category, we see opportunities to provide bundled services for customers who purchase at GameStop. As Tony mentioned earlier, we expect the launch of mobile app store this year, and we'll continue to explore other related mobile services related to customers' gaming needs. On a final note, we see a need to add technology resources to this emerging category. And we have asked our GameStop Digital Ventures unit to research acquisition targets over the last year. I am pleased to announce today the acquisition of BuyMyTronics.com, a Denver-based electronic marketplace focused on the buying and selling of electronic devices that will bring technology and category expansion to increase GameStop's capacity in the mobile space. So whether you want to trade your device online or in a store and convert your old mobile devices into cash or GameStop trade credits, we will provide consumers with a trusted brand and a convenient location. I have visited the BuyMyTronics team recently in Denver and would like to welcome them to the GameStop family. I will now turn the call over to Rob for his projections.

Thanks again, Paul. Now I'd like to cover guidance for 2012. Let me start by saying that for the video game market in the U.S. in 2012, we believe that hardware will decline between 5% and 10% due to the age of the consoles. We expect that software will also be down mid-single digits for the year. While not available in any market estimates, we see mid-single-digit growth in the preowned business and of course, we have a 50% growth target for digital receipts and a sizable goal, which you've just heard from Paul, for our mobile business. As we disclosed in the press release, we expect our revenues to decline between 7.5% and 9.5% in the first quarter and comp sales to decline 7.5% to 9%. As we face tough comparisons to the 3DS launch a year ago and to the title release slate, which included Pokémon and several other strong titles a year ago, we expect earnings per share to be between $0.52 and $0.55 using weighted average shares outstanding of 135.4 million based on share buybacks done to date. For the full year, we expect revenue to grow between 1% and 5% and comps to range from negative 1.5% to plus 2%. We expect gross margins to continue to increase in 2012 due to the growth of preowned, digital and our mobile business despite the launch of the Wii U in the fall. We expect our operating margins to return to in excess of 7% as we continue to find efficiencies in our business and are controlling our spend on technology and initiatives. We expect net income to grow between 4% and 10%. We expect earnings per share to range from $3.10 to $3.30, an increase ranging from 8% to 15% using weighted average shares outstanding of 135.4 million, again, based on share buybacks done to date. We intend to demonstrate in 2012 that the difficult restructuring decisions we made in 2011 and the investments we've made in the past 3 years have begun to pay off with increased operating margins and net earnings growth. Gross profit grew more than $400 million since 2008, while sales grew $745 million. As you know, we invested heavily in digital, loyalty and other strategic initiatives during the past 3 years, resulting in SG&A growth of $400 million as well. That level of investing, as a percentage of sales, will now diminish, and we will be able to leverage the investments we've made over the past 3 years. If you take the midpoint of our guidance for 2012, we expect to deliver approximately 40% of the gross profit improvement to the bottom line. In the next 3 years, we expect that we can grow gross profit another $400 million. By keeping SG&A growth in check, we can grow operating earnings by more than $200 million or more than 50% of the increase in gross profit. As you can see from this slide, GameStop continues to generate considerable free cash flow. For 2011, we generated free cash flow of $453 million, which was 5% above our plan of $430 million. We expect approximately $500 million in free cash flow for 2012, a 10% increase over 2011. One of the ways we will continue to generate strong and increasing free cash flow in the future is to control our capital expenditures. We told you a year ago that we thought we would spend $170 million in 2011. We actually spent a little less, $165 million or 18% less than 2010. In 2012, we will reduce this another 15% to about $140 million. We are reducing our spend on new stores. But as our stores age, we will invest in remodels and in fixtures for our new lines of business. For 2012, we will open about 100 stores in the U.S. and close about 150 using PowerUp Rewards to transfer sales and drive profits. And we will open about 50 stores internationally and close about 50 stores, holding square footage flat. The last thing I'd like to cover today is a review of our roadmap from the -- for the future. This slide should look familiar from last year. We expect sales to reach between $11 billion to $11.3 billion by the end of 2014. As Paul just covered, we expect mobile revenues of between $550 million and $600 million in 2014. As Tony shared, we are on our way to our target of $1.5 billion in digital receipts for 2014. We now expect PowerUp Rewards members to account for 75% of our sales transactions. We also expect operating income to grow to around $850 million and free cash flow to grow to over $600 million. In the next 3 years, we commit to continuing to exercise capital discipline through controlling our capital expenditures, paying our quarterly dividend to shareholders and continuing to buy back shares. And we remain focused on our ROIC target of 17% by the end of 2014. I'll turn it back over to Paul now for some closing remarks.

Thanks, Rob. In conclusion, our strategy includes the following 6 planks, which have been consistently driven over the last year and now include the addition of our mobile business. GameStop is a company whose history and DNA is filled with change. We have been engaged in a calculated transformation of the company, building on our brick-and-mortar strengths with digital and mobile assets. We are doing what we said we would do and executing along the lines of a strategic plan first built in 2009. Our primary assets continue to be the same ones that have produced our successful company, deep customer relationships built over time with excellence in customer service, a sharp focus on gaming and everything that means in terms of assortment and innovation, and lastly, a competency around buy-sell-trade and how that knowledge can be used to bring unrivaled value to delight customers. It is clear to us that our internal rate of change has been greater than the environment around us. And we have invested to intentionally become a company that is very different from any of our competitors in the world. Through the implementation of PowerUp Rewards, digital gaming, mobile businesses and a rationalized store footprint, we will accelerate leverage gained from our investments. Our reduced capital expenditures, flattening SG&A plan and expanding operating margin are signals of improving profitability. GameStop is a company that is building value for the long term. And with that, we will open up the meeting for questions.

[Operator Instructions] We'll take our first question from Gary Balter with Crédit Suisse. Gary Balter - Crédit Suisse AG, Research Division: It's refreshing to hear a company that's taking advantage of the opportunities facing them. So Paul, congratulations on everything you're doing first of all, and what you're doing on the -- I'm going to go -- I'm going to stay away from the digital because I know you're going to get a lot of questions on that. So I'm going to go back to the boring stuff like video, hardware and software. Obviously, you talked about Q1 being a challenge because of the comparisons. As you think about your confidence of getting the comps back to the guidance that you gave for the full year, what are the assumptions built into what you're thinking about for new hardware and new software? And I'm assuming you're accepting that there's not going to be a new platform this year because it looks like that's 2013.

Gary, thank you. Let me start that off and then I'll let Rob give you his assumptions that he put in the model. But I think we all know that there's a lot of unknowns around the console business right now. I mean, we read and hear all the rumors and everything that you guys read. We don't really have a lot more information than that. But we have tried to be clear eyed about this, and if you look at our plan, we really aren't expecting big growth in console or hardware this year. We're anticipating a year with some unknowns around the end of the cycle here. So what I'm pleased about, I think the team is pleased about is we've got lots of other growth initiatives. But Rob, maybe you want to talk about what your assumptions were on the model.

Sure. Gary, we wanted to be realistic about where we are in the cycle and where we see hardware and software in the market. But we also wanted to recognize that within our internal estimates, we anticipate that we can continue to gain share as we have in the past. So we spoke about hardware for the market being down 5% to 10%. We expect that we can gain some share. In software, we said mid-single digits decline. And we have certainly demonstrated strength at gaining share on the software side. So in terms of our comp guidance overall, I think that you see that it's share gains and the drivers of our digital business and the mobile business, which Paul spoke about that we're counting on for the future. Gary Balter - Crédit Suisse AG, Research Division: The question we get, so I'll ask you is, there's talk about the next platform coming out with flash drive instead of disk. How do you think about that and the impact that, that would have on your business?

A couple of things there, Gary. And I'll let Tony Bartel talk a little bit about our strength. We don't use the NPD metric a lot because we see that a little bit as an old economy metric. But if we do look at it, we are very dominant in the next gen software sales. So number one, I think we all have to understand GameStop has a very large business with our partners in the console business that changing that model is a large business put at risk. However, we like our process for selling digital businesses. We like what we've done with DLC. And candidly, the PC download business is growing well. So we think our ability to acquire customers and sell them digital content is really being well proven. But Tony, maybe you want to talk a little bit about that.

To that point, Gary, what we see is that we have an extremely dominant market share. Our highest market share of any product that we sell is on the 2 high definition platforms, Xbox 360 and PS3. So there's a very dominant market share that we have there, and that also happens to be our fastest growing, that's the place where our market share is growing fastest. So couple that with our impact on the launches, many of our presell opportunities, PowerUp Rewards, the presell DLC, all of those things are playing in to give us a ever-growing share of the marketplace of an already dominant market share. So we really see this as something that we will partner with both Microsoft and with Sony on as we see these rumors mature. And we'll continue to drive the business and drive our market share further.

We've sort of taken the view that whatever the form factor, we can be successful because of the deep relationships we have with those 17 million. Because Rob, you wanted to update your comment.

Yes, Gary. This is Rob. I did fail to mention in answering your first question that growing our used business mid-single digits is also a component of our comp estimates year-over-year. Gary Balter - Crédit Suisse AG, Research Division: Yes, I assumed that.

We'll take our next question from David Magee with SunTrust Robinson Humphrey.

A couple of questions. One is the -- how confident are you regarding the packaged goods business this year? I think I heard you say down 5%. Is there a chance you'd be down more than that? And if so, what would be -- what can cause that?

Want to take that, Rob?

Well, yes, David, we said down 5% to 10% we think for the market on hardware and down mid-single digits on software. So that mid-single digits implies some range on the software side. We see that the market, consoles are aging and that affects the consumer demand.

David, there is a strong title lineup, right, Tony? You've got...

Absolutely. I mean, you've got FIFA, obviously, and Madden. Then you've got NCAA, Halo 4 coming out. You got another Call of Duty offering coming out, as well as Assassin's Creed. So there's a lot. Resident Evil out there. So there's a -- we see a very strong title lineup that is out there. And so, we're very bullish especially on the back half of the year that -- on the title lineup.

David, we're not sitting here gloomy about console at all. I mean, we see some hot titles. We know that our strategy works around gaining share. We also like launching DLC. I mean, our team is having meetings almost every day with publishers creating hot DLC launches that come along with new titles. So while there's some unknowns, we think that there's some real strengths in that console business.

And just one quick second question, on the Spawn business, how widespread do you think that could be? You mentioned it was successful so far. Is that something that potentially is very big or is it just sort of a niche business for the future?

One thing we got to do right now is focus on the technology and wouldn't want to speculate. We, obviously, think it's a very interesting technology. But Tony, maybe you want to talk about where we're at?

Sure. Just to give a little more detail on Spawn, we have successfully evolved what we purchased from Spawn, from a peer-to-peer cloud architecture into this fully featured -- it's a highly scalable data center optimized cloud gaming service. So it's a full cloud service, and we have gone through that evolution. Currently, it’s deployed like I talked about earlier in 6 data centers which cover the entire U.S., and we have a lot of people playing it, and so it's a very well-tested system at this point. Also as you know, I believe, that we come at it from a very unique perspective, which the publishers really appreciate, in that we don't require them to change anything on their games. It's a patented virtualization technology that we bought, and it makes it very easy for them to bring their games to our platform. So the results so far have given us a really high degree of confidence that we have the right technology to attack the market that's presented by cloud gaming. And we're going to continue to work with our publishing partners, and we remain right on the development schedule that we shared with you last year.

We'll go next to Colin Sebastian with RW Baird. Gregor Schauer - Robert W. Baird & Co. Incorporated, Research Division: This is Gregor Schauer filling in for Colin who’s traveling at the moment. We’d just like to get a little bit more insight, if possible, into what some of the key titles are that you're expecting to generate the bulk of the revenue this year. And then, if you have any comments on Grand Theft Auto and whether that's factored into your guidance at all?

Go ahead, Tony.

Sure. I'll repeat that list. We look at -- Ghost Recon, we think it’s going to be strong. FIFA, NCAA, Madden, Borderlands, Halo 4, Assassin's Creed 3, another Just Dance title most likely, Call of Duty, Resident Evil 6. Those are all the titles right now. And Max Payne 3 also is going to be a big title that we have coming out. Prototype soon to come out. So those are the titles that we are banking on. In terms of GTA V, there's a -- we don't have solid information that we can share at this point around that. So we have not put that into our forecast. Gregor Schauer - Robert W. Baird & Co. Incorporated, Research Division: Okay, and presuming if it were it would -- you guys wouldn't -- would have a significantly higher estimate this year?

We would adjust our estimate if we had knowledge that GTA was...

It's highly likely we would have the leading share on it globally, Greg. So yes, it is. It's highly likely we would add if there is.

We'll go next to Tony Wible with Janney.

I had 2 questions. One is, I was hoping you could give us a little insight on the streaming platform and how exactly you plan to roll that out? Will the pricing be subscription or à la carte? And will you kind of phase roll it out or roll it out nationally? And the second question I had is, if you could address some of the speculation about the next gen Xbox potentially blocking you and just your general views about that and what that means for either the platform or for yourself?

Tony, good morning. I'll let Tony talk a little about the national footprint. We really -- we got a -- as you know, a lot of competitors watch us pretty closely these days. So we got to be careful about what we discuss for competitive reasons. I will just say that -- and Tony will tell you a little bit about where it stands, but we're trying to focus on what the technology is and really be guarded about what the plan is. Tony, do you want to talk about the national footprint?

Yes. As I shared, we have 6 data centers. They cover the entire U.S. So we right now are -- literally have gamers all throughout the U.S. that are GameStop associates that are playing this. So we know that the technology works. So we have a full national platform and everything is tied together. True, like I talked about it, it is a data center optimized legitimate cloud gaming service definitely.

And as far as the next gen console, the thing I would say, and I'll let Tony add to it because he's talking to publishers every day. We think it's unlikely that there would be that next gen console because the model simply hasn't been proven it works. Remember that used video games have a residual value. Remember that GameStop generates $1.2 billion of trade credits around the world with our used game model. So consider that taking used games out of that, you'd have to find new ways to sell the games. And our partners, our good partners at the console companies have great relationships with us. Tony, you want to comment?

Sure. And I think it's always important to remember as Paul pointed out, we generated $1.2 billion of credits, the large majority of which went right back into purchasing a video game. Same thing -- we're seeing the same exact thing as we now take in iDevices as Paul shared with earlier. So we are generating a large amount of products through our buy-sell and trade process to make the games more affordable. So as I shared earlier, we have a very dominant market position. Our highest market position of all is with Microsoft, Xbox 360 software. And so we have a very good partnership with them. Like Paul said, we talk with them nearly every day, and we'll continue to work with them. But at this point, we really feel like we have a very good partnership that we will continue to utilize.

It's also interesting to me, Tony, that this is the kind of news that gets out in the industry and it just gets people really worked up and hyperventilating and excited. We see today, GameStop's a very different company than we were 3 years ago. We look at different form factors of gaming today. And I just, the Sony guys were kind enough to send us some betas, and I'm in the middle -- I'm about, I don't know, 4 or 5 hours into Golden Abyss, Uncharted. And I look at that, there is a new form factor with new types of games. It includes some DLC. It really was an almost hybrid launch and we're dominating that. So...

And I think what we shared about DLC is a good proxy for this. That's obviously something that does not have a trade-in component per se with it. And yet we are significantly expanding that business by introducing people to DLC through our associates that they have no knowledge of before they walked into our stores.

Yes, one last note I would add, and this is something we try to educate publishers a lot on and that is that the preowned business is not a cannibalistic business. I mean, I think if you followed the popular conventional wisdom, you would think that preowned is replacing new. The truth is preowned is an opening price point category. The average price is $18. A lot of it is old generation. What it is, it's a category for the customer who's maybe not ready to invest in a new game, but wants to get into the console business and the console entertainment. And what we've done is we've created a way for that new leading edge consumer to dispose of their old games. And that's what creates this great Circle of Life that we talk about that so many try to imitate. So anyway, long answer to I think your question, Tony, but that's how we see it.

Well said, and I couldn't agree more on all the points. Going back real quickly to Spawn, it would be a good problem to have, but if theoretically 10 million people try to jump on that platform overnight, is the platform scalable enough to handle that much volume? Because I just looked at the PowerUp Rewards and then I'm just shocked at how fast that thing has grown. It's far exceeded what I thought it could be and certainly when you kind of think about Netflix and it took over a decade to hit some of these benchmarks. Could you guys scale a platform to see a massive amount of people moving to it in a quick period?

I don't think we're prepared at this point to address the scalability.

I don't think we have that problem.

Yes, that would be a nice problem to have.

I hope we have that problem.

But it's a highly scalable system, but I'm not going to speculate on how much.

Got you.

What you are right about, Tony, is PowerUp, remember that PowerUp has exceeded everybody's expectations including our own. We sat -- we're here in the boardroom at GameStop and we -- and you've been here, we sat around this table with some forecasts that were significant less members than what we have today. So we know that GameStop, the passion customers have around gaming and the relationships they have with their game advisor, there's a lot there. We've really found a way to serve their needs with PowerUp, and it is a customer acquisition platform for digital content.

And you are right that given the fact that it is an acquisition platform, you are right in assuming that there is -- whatever program we launch, especially digitally, we'll be able to leverage it through PowerUp Rewards.

Yes.

It certainly is going to be an interesting next year.

They've all kind of been interesting, Tony. I hope this one is, too.

We'll take our next question from Arvind Bhatia with Sterne Agee. Arvind Bhatia - Sterne Agee & Leach Inc., Research Division: I had a couple of questions going back to your iDevice business. I think, Rob, you mentioned that 30% gross margin number or maybe, Paul, you did. I was wondering what sort of costs are there below that, and what sort of unit contribution fully loaded should we be thinking of? And then in your $500 million to $600 million, I think a couple of years out, revenue projection, are you assuming that the trend continues where a majority of the trade-ins are converted into people using that for buying games and other things? Or are you assuming that mix changes?

Let me let Rob answer your cost question. The only point I would make, Arvind, to start this off though is, remember that why are we in this re-commerce mobile electronics business? We're in this business because as we saw trades coming in, we noticed that this business was uniquely almost tailor-made for our buy-sell-trade skill set. I've often drawn on white boards with you guys that we have a vertical competency around gaming. That's been clearly established for a long time. But as we looked at the business, it's also clear that we have a horizontal competency around buy-sell-trade. And customers kept bringing us in, these phones and tablets and iPods wanting to trade them, and we kept turning them down. So when you think about cost, and we'll see what Rob is willing to share with you on that because it's early. We have a refurbishment center that employs close to 1,700 people. It's 200,000 square feet. A lot of this fits right in, and when you go to our store and trade your iPhone, that transaction is the most efficient trade transaction anywhere, and that's because we've been at this a long time, and we’ve plugged it right in. Rob, do you want to share anything on the other parts of Arvind's question?

Sure. Paul talked about the 30% margin. Most of the costs associated with the, certainly the re-commerce side of the business are in that refurb category. One of the things -- so they're there. Our refurb cost are in gross margins. So they're in that 30%. But one of the things that you should consider with respect to that is that unlike our preowned business, every iDevice goes through our refurb facility. It's about 15% of the preowned video game product that go to our refurb facility. So there are costs in there, and that's a component of what gets us to the 30% overall margin we're looking for there. Beyond that, the mobile business works through the store base just like new software, new hardware and preowned. So the cost structure below the 30% is very similar. Arvind Bhatia - Sterne Agee & Leach Inc., Research Division: Got you. And then one unrelated question on the bankruptcy of one of your European competitors recently. Just wondering if that's having any impact on the marketplace there and how you guys are handling that?

Yes, Arvind, we read the papers and everything like everyone else. And we really don't care to comment on what's going on in that situation, and I would say that we've very focused on our game plan, and we're executing the plan that Mike Mauler shared with you during the remarks. So... Arvind Bhatia - Sterne Agee & Leach Inc., Research Division: I was just wondering if you’re creating any opportunities, particularly in France with Micromania, if there are new opportunities that you see there?

I would say that, we would stay away from saying anything about that. But I will ask Mike maybe to share with you what some of the things. I mean, if you look at operating margins in France, Mike's got a pretty good story there. Mike, do you want to talk about what you've done there to execute?

Yes. Sure. I wouldn't want to comment on what GAME has or hasn't done. We're watching the situation. We're really focused on managing our businesses. We've got a talented team of managing directors and they have strong teams. And we’ve really focused over the last 2 years in 3 main areas, primarily and most importantly a strong focus on tactics, the blocking and tackling of managing our business. So managing the inventory well, staying true to our buy-sell-trade model, a lot of effort in store training and providing outstanding customer service. Secondly, we've moved very quickly to stay ahead of the curve in terms of restructuring in underperforming markets, exiting Portugal, consolidating Northern Europe to make sure our costs are under control as the industry changes. And finally, building a strong foundation really allows us to execute our strategic initiatives. So we're growing our digital businesses. We've rolled out POSA. We've rolled out DLC. And with the loyalty we've taken, the learnings in the United States, in France, and for example, we rolled out loyalty less than 6 months ago in Australia and already by last week, we had 1,000 members per store. So what we're learning in the U.S., we're rolling these best practices out. And finally, partnering with the publishers in all markets for go-big exclusives on new releases where we've taken significant market share on new releases. And so I think you can see the results of us staying focused on our business. You can see the results in our year-over-year performance.

We'll take our next question from Brian Karimzad with Goldman Sachs.

A question first on the used business. Can you give us some hints on what you're baking in for the first quarter given some of the trends we saw in the fourth? And then as you look at the full year, the mid-single-digit growth you're expecting there, it's a little bit at odds in some ways with the expectation of a decelerating new software market. I know there's not a perfect relationship, but if the intuition is that people who are new to the category start with used, it seems that as we're getting aging on the console cycle that perhaps you'll have fewer folks who are new to the category taking a look. And the second question is on the iDevices, can you give a sense of the range of outcomes in there that are in the low versus high end of the guidance you've given. Is it simply the $150 million contribution at the low end and $200 million at the high?

I'll let Rob talk to you about both of those. The only thing I would say, Brian, is be cautious on old assumptions around used. GameStop came in, in January of last year. Remember that in 2010, what do we do, we had 1% growth. We had a very difficult challenging year. We came in and reinvented the preowned business. We changed our leadership there. We brought in some added resources to it. We put PowerUp integrated deeply. So I think your old assumptions around inventory and all that, those are interesting assumptions, but there's a lot of new things going on in preowned to separate it from the trajectory of new. Rob, I don't know what you care to share about the modeling?

Yes. I'm not sure I want to give much color on what we expect from used in the first quarter since I didn't point that earlier specifically. But I will say that I did want to clarify on the mobile business, you had said $150 million in contribution. We're looking for $150 million to $200 million in revenue on the mobile business this year. And I think that's the range that you can operate with.

Okay. So the low end of the guidance kind of implies $150 million and the high end of $200 million? Or is the high end of guidance kind of aspirational for something more?

I think that's fair to say.

We'll take our next question from Mike Olson with Piper Jaffray.

Just wondering if you could give us an update on kind of general sell-through of AAA titles today. I guess the direct question is, are those titles, are tails getting skinnier? And we saw kind of a front-end loaded holiday, and I'd just be interested in your thoughts on why industry sales a week or 2 out are falling versus prior years for some of those titles?

Tony, maybe you want to talk about the titles?

Sure. I would say that generally what we're seeing on the AAA titles are they're meeting our expectations at this point. Clearly, we have a good forecasting system given our reservation process, which is best in class. The other thing that's happening to really extend these titles is the downloadable content is extending these titles and making them bigger at launch. And especially, as we are evangelizing with our publishing partners, what Elite [ph] showed us is, when you have some really compelling content or an expectation of compelling content that you can sell at the time of launch, it's an amazingly powerful combination. And so, what we are seeing is that DLC is actually expanding the tail a bit. And so we're seeing those AAA games. They're doing very well at launch. Of course, our launch share continues to go up dramatically, somewhat because of the DLC. And then we are seeing those extended as new pieces of DLC come out also, we see a resurgence of those games. So kind of what you're seeing is, the tail will drop off a bit, you'll have DLC packs come out. It will increase and then both from a new and a preowned standpoint. And so we really like what DLC is doing to the marketplace right now.

Thanks for the update on the PowerUp Rewards number is 17 million. I'm not sure if you gave a target for the future. But would you be willing to give any thoughts on where you think this could be a year from now based on the trajectory that you've seen recently?

I think we gave a target on where we'd be at in your remarks, right, Rob?

I gave a target on percentage of sales that are made up by PowerUp members. But we did not give a target on membership numbers.

Okay. I think you can expect that if you go back and look at last year's growth, we're pretty happy with the growth rate. And we're going to continue focusing on driving membership.

We'll go next to Bill Armstrong with CL King & Associates. William R. Armstrong - CL King & Associates, Inc.: In France, sounds like business is going pretty well. I'm wondering then why you needed to take the impairment charge for Micromania?

Sure. Rob?

We bought Micromania in 2008, which was obviously the peak of the video game business. The way that you value a trade name is you look at projections of future sales rates and then essentially in the methodology that we used under the accounting rules, you apply a royalty rate. Estimates of future sales in video games in 2008 were obviously higher than estimates are today. So every year when we evaluate that trade name for impairment, we consider what those future estimates look like. And at this point in time, with the aging of the consoles and where the market went in 2011, and frankly, what we see in 2012 for the physical goods market, we needed to adjust our revenue assumptions. And as a result, we got that $38 million impairment. William R. Armstrong - CL King & Associates, Inc.: Okay, I got it. And on the digital sales outlook for this year, in one of your slides, that's projecting $675 million. And I thought I heard Paul say $800 million in his opening comments, did I get that right? And if so, what's the difference?

Yes, what I was talking about was the new categories that we brought in which is digital and re-commerce that we estimated that we would have new businesses that would generate that amount of revenue. But Tony, you want to talk about the digital piece of that?

Well, sure. We anticipate that we'll have another 50% growth. We told you that we would do that. We're right on track in 2011. We have plans in place that I outlined to get an additional 50% growth. So that combined number that Paul gave you was the digital business that we see plus the mobile business that he articulated kind of added on top of that. William R. Armstrong - CL King & Associates, Inc.: Got it. Okay. And finally just another point of clarification then, mobile devices are about 7% of trades, are we talking about 7% of units or 7% of dollars?

Dollars. Yes, you remember we used that metric at holiday, Bill, and gave you a number that was 4%, and what we're pointing out is that year-to-date, that number is now 7%. William R. Armstrong - CL King & Associates, Inc.: Okay, and that's dollars, okay.

Dollars.

We'll take our next question from Mike Hickey with National Alliance Security.

It looks like the beginning of 2012 has been weak across the board in terms of kind of traditional product. Do you kind of see that the -- when you look at the ratio of your holiday sales to total quarter sales, this is the highest that I can remember going many years back. And then it's certainly reflected in your guidance for the first quarter. Can you help us understand if there's somewhere, like in the year that you've seen an inflection point, where you can start to drive growth, whether it's -- seemingly it would be Q4 where you kind of get on track for your growth for the year and whether that's product specific or hardware? And then can you help us bridge between 2012 and your longer-term outlook on 2014 because seemingly, Microsoft came out and said they're not going to announce anything on an Xbox this year at E3. So seemingly that would put it at 2014. And traditionally, when you look at tie ratios for software and so forth into new console change, they show weakness, of course. I would expect hardware to decline, too. So I just have trouble understanding how you get growth, how you bridge that growth divide from 2012 to 2014 given the kind of market considerations I just talked about.

Rob, you want to take that?

Sure. I think Mike, in terms of 2012, you're asking about when quarterly we might start to see growth. I think the challenge for us in 2012 is in the first quarter with the overlaps. We expect that the remaining 3 quarters will show growth in profitability. As we look ahead, candidly, we've made some assumptions about a hardware launch that will come in 2014 and that is a component of the revenue driver for that period of time. That and our continued growth in the preowned part of our business, our digital revenues and the mobile business that Paul has spoken about.

We'll go next to Edward Williams from BMO Capital Markets.

Just a couple of quick questions. First of all, looking at Impulse. Can you talk a little bit about what the market share is like there? And how specifically with Impulse, how you see that kind of evolving this year, both in the U.S. and internationally?

Sure. Tony?

Sure. We don't provide market share information on that. So let me share with you our second part, as we shared, we do anticipate that, that will triple. A couple of things that are going to drive that are, we are integrating that more closely into our stores. And now you can walk into any of our stores in the U.S., and we will also be rolling that out in select international markets later in the year. But as I noted, we will be having a launch in our stores in April, where you can walk in and again, use all of those noncredit type of items to purchase this content directly in our stores and on receipt. So we expect that to be a huge driver, couple that with PowerUp Rewards, the ability to put additional forms of currency in it, and then we have international expansion. So we should see a tripling of that business this year.

Okay. And then as we look towards your 2014 targets and looking at digital, can you characterize how significant DLC is to that total number versus the other digital drivers?

As we shared when we talked about digital, we really see that as -- our market model sees that as a fast-growing category overall when you look at the global picture. We think that us getting into and having the high market shares that I articulated earlier on a couple of launches, we actually think we're bringing a quicker maturation to this process. So we've actually taken our market models and evolved them somewhat and put a greater emphasis on DLC than we had a year ago just simply looking at the success that we've had in the marketplace. And quite honestly as we've brought new customers into the marketplace, we actually see it accelerating faster than what our market model had assumed.

The thing I think that's new about DLC, Ed, is that we've turned this like many things we do, we've changed it into a launch business. If you look at Mass Effect, our good friends at EA have a nice hit with Mass Effect, and then our attach rate that Tony mentioned on the DLC was very high. That only happens because GameStop is in there developing with publishers their great content saying, "Hey, let's merchandise it at launch as part of the launch process." So that's sort of the change that's going on in addition to all the other things that we bring.

Okay, and then, Rob, can you comment a little bit about some other assumptions? What should we be thinking about for gross margins for the other category as the year progresses or looking at the current fiscal year versus the one that just ended? And then also what are your thoughts with regards to hardware pricing?

Let me start with the other category gross margin. We see that, that will continue to improve. One of the reasons for that is because we will continue to grow our digital revenues and those are obviously at a higher margin rate than the overall category. The other being that with the expectation that console -- that hardware will be down. You would expect then that accessories would be down as well. So a mix shift there is going to drive that. Repeat the second part of your question for me?

Hardware pricing assumptions.

Right off the top of my head, I can't tell you exactly what we have in there for price declines on the hardware category or console by console. So I'd have to get back to you on that.

And we have time for one final question. That will come from Scott Tilghman with Caris & Company. R. Scott Tilghman - Caris & Company, Inc., Research Division: Two quick things I wanted to ask about. First on the revenue disparity between total sales and comps, I assume part of that is the 53rd week which I didn't think was called out. I also was curious if you were going to be, on the acquisition, reporting that separate and outside of comps or not?

You're talking about the acquisition of BuyMyTronics? R. Scott Tilghman - Caris & Company, Inc., Research Division: Yes.

That would be outside of comps. One of the drivers of differences between comp and total revenue include our Game Informer, our PowerUp Pro membership, Kongregate. BuyMyTronics would be a part of that as would currency changes. R. Scott Tilghman - Caris & Company, Inc., Research Division: And isn't 2012 a 53-week year?

It is a 53-week year. R. Scott Tilghman - Caris & Company, Inc., Research Division: And then second on the iDevices, really 2 questions there. One, do you feel like you have plenty of capacity at the fulfillment center or the refurbishment center if that ramps faster than you anticipate?

Yes, Scott. We've invested in, and I think you visited, we've invested in, what, 3, 2.5 years ago, we significantly expanded our capacity thinking about the electronics category and so forth, so yes, the capacity is definitely there. And of course, with BuyMyTronics, one of the things we have to do now is look at the mix of online versus store and also the SKU assortment in that there are other leading-edge types of handsets and tablets that we don't currently carry. So we have to understand that and that's part of what they'll bring us. R. Scott Tilghman - Caris & Company, Inc., Research Division: Great. Just on the inventory and the rollout plans, you're getting to 2,000 stores after getting to 1,200 fairly quickly. It seems like that's a slowdown from where you've ramped over the past 12 months. Is that just a function of inventory? Or is there something else holding that back?

Well, inventory is definitely the main driver on anything we do in the preowned business. But I think we're just trying to be cautious about execution and customer service. And when you roll out, GameStop’s very good at this business, but we have investments in training we need to do and technology and so forth. So I would say that's just our early estimate on how fast it can take. Very good. Okay, with that we will wrap up the Q&A. I want to thank everyone on the phone for your support of GameStop. And we look forward to speaking with all of you as opportunities arise. Thanks very much.

This does conclude today's conference. We thank you for your participation.