Take-Two Interactive Software, Inc. (TTWO) Q4 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to Take-Two Interactive's Fiscal Fourth Quarter 2012 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. 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 2012 ended March 31, 2012. Today's call will be led by Strauss Zelnick, Take-Two's Chairman and Chief Executive Officer; Karl Slatoff, our Chief Operating Officer; 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'm obliged to review our Safe Harbor statement by reminding 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, 2011. These documents may be obtained from our website at www.take2games.com. And now, I'll turn the call over to Strauss.

Thanks, Hank. Good afternoon, everyone, and thanks for joining us. Take-Two's strategy is to develop the highest-quality, most compelling entertainment franchises in our business and deliver them on any platform that's relevant to our audience. We're actively investing in both our core console and PC businesses, as well as in offerings for online and mobile platforms. During fiscal 2012, we made significant progress in our creative, operational and strategic objectives, but we didn't achieve our revenue and profit goals. Our financial results for the year were affected by our decision to postpone the release of several titles in order to allow for additional development time. We believe that this unwavering commitment to quality is the right approach for maximizing shareholder value, even though income may occasionally be deferred in the short term. As we announced in today's press release, we expect to generate substantial revenue growth and profitability in this fiscal year. Turning to our key achievements during the past fiscal year, L.A. Noire and NBA 2K12 were creative and commercial highlights. L.A. Noire reinvented interactive storytelling. This groundbreaking title from Rockstar Games received excellent reviews, and according to NPD data for the U.S., it was the highest-selling new intellectual property in our industry during 2011, with over 5 million units sold in to date. The first video game ever selected for inclusion in the prestigious Tribeca Film Festival, L.A. Noire transcends the boundary between interactive entertainment and cinema. NBA 2K12 built upon the franchise's tradition of excellence by delivering the top-ranked and top-selling basketball video game for the 11th year in a row. The title received the highest Metacritic score in the history of 2K Sports, and it was the first in our basketball series to offer downloadable add-on content and a mobile version for iOS. Despite the challenge…

Thanks, Strauss. Take-Two currently has the most robust development pipeline in the company's history. On June 1, Rockstar will build upon the successful launch of Max Payne 3, with the release of the PC version, which will be followed by a dynamic lineup of innovative, downloadable content. Beginning in June and continuing throughout the summer and fall, new multiplayer maps, modes, items, playable characters and challenges will be available on Xbox LIVE, PlayStation Network and on PC platforms. Consumers can pre-order all of this upcoming content at a discount by purchasing the Max Payne 3 Rockstar Pass. For the first time, members of the Rockstar Games Social Club can create Max Payne 3 multiplayer crews, which they can use across other Rockstar games in the future, including Grand Theft Auto V. This is an incredibly innovative approach to making multiplayer gaming deeper, richer and easily accessible to newcomers and hardcore gamers. On June 19, Firaxis Games will release Sid Meier's Civilization V: Gods & Kings, a massive expansion pack for the award-winning strategy title. Spanning the breadth of human civilization, this quintessential add-on will make the Civilization V experience even more addictive. On June 26, 2K Games will launch Spec Ops: The Line, a military shooter that combines intense action with a riveting narrative. Players will blast their way through a sandstorm ravaged Dubai with a variety of weapons and explosives, including the strategic use of sand, which can be used to bury their enemies. In addition to the single-player campaign, Spec Ops: The Line features an expansive multiplayer experience that is fun for both casual and core gamers. Earlier this month, 2K released a demo for the game on Xbox LIVE and PlayStation Network. And be sure to watch the launch of our television ad campaign during the upcoming…

Thanks, Karl, and good afternoon, everyone. Today I'll review our results for the fourth quarter and full year fiscal 2012, then provide some details around our outlook for the first quarter and full year fiscal 2013. All of the numbers I'll be providing today are non-GAAP results from continuing operations unless otherwise stated. Our press release provides a reconciliation of our GAAP to non-GAAP measurements. Starting with our results for fiscal 2012, we delivered net revenue of $825.8 million, down 27% from the prior year. The decrease is primarily due to the tremendously successful release of Red Dead Redemption in fiscal 2011. The strongest contributors to revenue were the releases of L.A. Noire, NBA 2K12 and Duke Nukem Forever. Catalog sales accounted for approximately 32% of our net revenue, led by the Grand Theft Auto franchise and Red Dead Redemption. And revenue from digitally delivered content grew to a record $106.6 million, up 5% year-over-year, accounting for 13% of our total net revenue. The largest contributors were offerings from the Grand Theft Auto franchise, Red Dead Redemption and the Sid Meier's Civilization franchise, which included downloadable, add-on content, mobile games and full game downloads. Gross margin was 37%, down approximately 4 percentage points versus the prior year. The decrease resulted primarily from higher software development costs and royalties as a percentage of revenue due to the mix of titles released during the year. And non-GAAP net loss was $59.4 million, or $0.71 per share, as compared to non-GAAP net income of $94.3 million, or $1.02 per share, in fiscal 2011. GAAP net loss from continuing operations was $107.7 million, or $1.30 per share. Moving on to the fourth quarter. Our results were within the outlook range we provided in our third quarter earnings release. We delivered net revenue of $148.1…

Thanks, Karl and Lainie. We look forward to seeing many of you at E3 and sharing our progress with you in the coming months. I'd like to thank our colleagues for their continued dedication and hard work throughout this past year and our shareholders for their valued support. And now we'll take your questions. Operator?

[Operator Instructions] Our first question is from the line of Arvind Bhatia with Sterne Agee.

I wanted to see if you can shed some more light on how you're looking at the next generation and if you're starting to make some investments there, and if your fiscal '13 guidance incorporates any new investments for new technology, that's one. And just wondering if you can talk about the retail environment today and particularly in Europe, what you're seeing there.

In terms of next gen, we're going to leave it to our business partners to discuss that and make announcements when they feel the time is right. But I think you're right to ask the question because those transitions can actually make -- create challenges for certain companies and create opportunities for others. Typically, the companies that are best positioned through the hardware transitions have been those with strong technology, strong owned intellectual property, top talent and strong balance sheets. And we think that describes us and doesn't describe too many of our competitors. It will be a challenge for us. Frankly, we see it as an enormous opportunity, and we expect to be at the front of the line when the time comes. In terms of the retail environment, I think we've seen in the U.S. in the past quarter, has been a dearth of high-quality releases. Our strategy for the better part of 5 years has been a limited number of the highest-quality releases. We're proud of the track record we've developed in executing against that strategy. And I think what you've seen is just not that many releases, and some of the releases that have come out in the last quarter have not been of the same quality as some might have hoped. It doesn't just affect frontline, of course, it affects catalog, because floor traffic, foot traffic, affects catalog. And in terms Europe, we are witnessing some softness in Europe, and we're not immune from that. And hopefully that's something that will turn around, but right now we are seeing some of that.

Our next question is from the line of Justin Post with Bank of America Merrill Lynch.

I guess you're saying 60% of your revenue is from Rockstar, which implies about $1.1 billion of revenues this year. And of course, you had issues with titles slippage in the past. What gives you confidence that your Rockstar titles will indeed make the year and you don't have to lower numbers this year as we work through it? Are you more farther along in your titles this year than you were at this point last year? And then the second question is, we are seeing incremental share dilution from the convertible and other stock option issuances. What can the company do to really stop the stock dilution and keep the share count flat instead of keep growing?

Yes, I mean look, this past year, we've acknowledged that the financial results were meaningfully influenced negatively by slippage. And obviously, titles that slipped last year are farther along in their development cycles. So we feel quite confident about our upcoming release schedule. Not just Rockstar's release schedule, but 2K's as well. And in terms of share count, as you know, one does have the option to satisfy converts in cash or in stock. We do account as though those will be satisfied with equity. As you know, the share count changes depending whether you're reporting profits or losses. So it can appear to be more of a moving target than it is. But we felt that the right way to finance the organization has been the way that we've done it. We are not unmindful of the meltdown that occurred in the marketplace in 2008. And we think at the end of the day, the most important thing is to be a solid enterprise that can invest for the future. We have indeed taken some dilution. Look, when we compensate employees with equity, we take some dilution. The question is not the share count. The question is whether we're creating value at the same time because obviously, if our behavior is accretive, no one's concerned about the share count. So when we did the last convert, it was our goal that it would be accretive in the way that we spent that money. So far that money resides on our balance sheet. Now the good news is it's rather low-cost money.

And last one, do you think the market is it a difficult software market so far year-to-date? How receptive do you plan it to be for your titles? And what do you think will make your titles kind of stand out in what's looking to be a pretty competitive second half?

I agree with you. I think the second half is competitive. We are putting out titles that are anxiously anticipated by the market, and we've already discussed the lineup. But it includes Spec Ops, which is coming up, XCOM: Enemy Unknown, Borderlands 2 and NBA 2K13 and BioShock Infinite and other titles that we haven't announced yet. So these are immensely high-quality titles, and we feel great about them. Again, the strategy that we pursued for 5 years has proven to be a sound one, which is a limited number of the highest-quality releases. There is no question that the market is not accepting lower-quality releases. There's just no question about that. But our strategy is only to put out high-quality releases. We're seeing the benefit of that not just in our frontline. We're seeing benefit in catalog. And as the digitally distributed business grows, we're seeing that our catalog has a great deal of value there, most recently with the profitable launch of Grand Theft Auto: 10th Anniversary Edition for mobile iOS and Android. Extraordinarily successful release for us, and that intellectual property is 10 years old.

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

Two questions, if I might. The first, a version of which I asked on the last call, but given the relative success you've had with GTA on mobile and noting that it was one of the highest-selling games and a profitable game for you, are we kind of getting to the point where the iPad and other platforms are starting to offer you the ability to create a sort of a vast, what I would consider a AAA mobile experience from the ground up rather than taking the game you've had out before and repurposing it for iPad? Are there now opportunities, given the size of the platform, to create Take-Two level games, Rockstar level games, exclusively for the iPad and similar platforms? And then secondly, also kind of on digital, looking at the formidable lineup of games you have for digital, DLC you have for Max Payne. I know in the past you've talked about how that type of content was equally successful, if not more successful, when bundled in with retail, which a lot of your clients, your customers are used to buying. Are you also considering retail versions of that DLC for Max Payne?

Yes, in terms of tablets, we are incredibly bullish on tablets, because we believe tablets will be ubiquitous in the coming years. We've been saying that for several years pretty loudly. And tablets, once their processing power and storage power is equivalent to a PC and if you believe in Moore's Law as I do, or at least currently do, that will be the case in relatively short order. So it should be a great gaming platform. It's highly portable, very high quality, great display and add a controller and a pair of headphones and you're all set. The business model remains to be seen. And there's a lot of work that needs to be done on the business model, because it is somewhat hard to discover content for the platforms. And it has to become seamless. And you don't want to count out the consoles, because consoles relied on their success a couple of decades ago for the fact -- on the fact that they were much better game platforms than PCs. Today a PC is a terrifically good game platform, yet the lion's share of high-end AAA content is made available and sold through the consoles. So I don't mean to count them out at all. The tablets, I think, will give us a terrific opportunity. Will they be available for -- will they be a great opportunity for a frontline product? Again, when the processing power is there and when the storage is there, I see no reason why not. However, we do have to work on the business model and how we get our products in the hands of consumers. And in terms of Max Payne 3, we have a terrifically robust line of downloadable content coming. We -- our aim at this company is to make our product available to consumers however they want it, to be very flexible on how we do it, but I'm not going to announce any particular SKUs right now.

Our next question comes from the line of Mike Hickey with National Alliance Securities.

Strauss, just curious on Max. It looks like your initial selling came down from what you were thinking originally. And obviously, the market's been difficult. But can you give us any color as to -- if that is the case, and why you think it is, and maybe some insight into inventory levels? And I have a follow-up.

Mike, we've announced that we've sold in roughly 3 million units. That is a terrific number by any standard, including our own. So no, nothing came down, and we're really pleased with the way that's rolling out.

Okay. Fair enough. And then Rockstar experimented with adding some narrative elements in multiplayer experience on Max Payne. Just curious, can you give us any feedback on kind of the consumer response in terms of engagement and how important that might be in future releases? And I have one more question, if that's possible.

It's Karl. The multiplayer component of Max Payne is simply just fantastic. And obviously, there's been -- you can follow the buzz yourself when you look at chat rooms and what people are saying about it. And I think that the Rockstar guys have done a -- they have taken multiplayer to a different kind of level. It's a very different kind of multiplayer than they've tackled before and let alone anybody in the industry. So we're really pleased with how it's rolling out at this point. And frankly, we think it's going to be a very important component to this game on a go-forward basis and one of the reasons why people continue to buy and continue to play.

Okay. And last question is, I'm just curious how you guys are kind of -- and you've mentioned this a little bit, Strauss, but philosophically, how you're approaching the next gen market opportunity, maybe more on Sony and Microsoft. I know you said challenge, opportunities, and I think it balances more as an opportunity for you. And certainly, you still seem kind of bullish on consoles, while a few people think they may be dead. But thinking about how less development capacity is in the market today than when this cycle started and the potential maybe that the installed base to grow go faster if they change their sales model, just curious how that impacts your thoughts on IP creation, then maybe building dev capacity or potential M&A opportunities into the next gen systems for Microsoft and Sony?

It's Karl. So just speaking to development capacity, it's interesting the way you position that the development capacity is decreasing in the industry. I'm not sure that, that's how I would characterize it. That may be empirically the case, but I think what you're really seeing is fewer titles, but they're bigger titles. And that doesn't necessarily translate to decreased development capacity. You're just talking about bigger projects, just fewer releases. And I think you will see that -- you're seeing it now. And I think you're going to see it going forward further into this generation and for the next generation whenever that comes. And I think that's something that we're experiencing, and we've actually been strategically pursuing that strategy for the better part of the last 4 or 5 years. And you see the rest of the industry coming along. So I don't think that's really a change for us. So if it's a change for other folks, I think they're going to have to change very quickly because look, that ship has sailed. The number of titles that are out there in the market are going to be reduced, there's no question about that. But I still think there's an awful lot of development capacity out there and a lot of opportunity for us to continue to make great games, not only with existing franchises, that we carry over into the next generation, but also with new IP. And as we've always said before, we need to invest in both, and we always feel strongly that we have to always be investing in both new and existing IP because that's how we think that we keep the pipeline fresh and create the most value we can. I hope that answers your question. I'm not sure if it did or didn't, but I think that's how we look at the next generation.

Our next question is from the line of Douglas Creutz with Cowen and Company.

You guys have -- clearly the broadest and deepest lineup that you've ever had this year. And I guess, the question is -- and I think out to fiscal '14 and especially in the context of a potential console transition, do you feel like you have enough in the pipeline to extend profitability out into '14 and '15 and that you haven't sort of used up a lot of franchises this year?

Yes, I mean, we feel pretty good, if not very good, about the upcoming years, although obviously, we're not providing any guidance or any insight into them. But we do feel good about it. The time of transition will create challenges for everyone, whenever that occurs, because as you know, the tie ratios begin to decline meaningfully at the end of the cycle when announcements are being made, and the installed base is low at the launch of the new console. But I think all of the players in the industry are giving some thought to what that means. Historically, this business has had a sine curve element, and the end of a cycle and the beginning of a new one has been a time when people see their revenues reduced, and depending what their fixed costs are, could dip into losses, which is why challenges are created for the weaker companies. It is very important that we be strong enough to withstand any of the challenges that we find. Obviously, we think we're being very thoughtful about the future, whatever it might bring, and we see primarily opportunity. As I said earlier, there are 4 elements that really matter in the transition: technology, talent, owned intellectual property and your balance sheet. And we think we tick off all the boxes. So I'm a believer that arrogance is the enemy of continued success. We're taking this very seriously. There are going to be challenges, but we feel like we're well positioned.

Yes, and again, as we said before -- it's Karl, we also are making investments in certain things that really have nothing to do with console cycles at all, which, for example, the 3 projects we've got going on in Asia and our online initiatives. And if they are successful, we do expect that they could become meaningful contributors to us and smooth out that process, out that earning's curve.

[Operator Instructions] And our next question comes from the line of Ben Schachter with Macquarie Group.

A few questions. First one, housekeeping. Can you just remind us what that $15 million charge is for in 1Q? And then, when you think about the big AAA titles going forward, how does digital really change the revenue opportunity for those in terms of what's incremental, what can potentially continue to drive the life of some of those titles? How big can those be as a percentage of the overall sales? And then Strauss, if you have any thoughts, just in general. We talked a lot about tablets and mobile devices. It seems clear that the next phase is going to be Internet connectivity for more and more television screens. Any thoughts on how that impacts your business?

Yes, the one-time payment relates to a provision of a contract that's expected to be triggered in June. That was entered into several years ago. We have confidentiality agreement around it, so we can't give any more detail. But we have no other obligations under that contract after the one-time payment. So we're not happy about it, but it is what it is. In terms of digital revenue, look, if you posit the time when the whole world becomes ephemeral and physical distribution goes away, then obviously, not all that revenue is going to be incremental. A good deal of it will be replacement revenue. Right now, though, for us, a great deal of it is incremental revenue, because it's affecting our catalog that may not be on the shelves any longer. And obviously, downloadable content has a physical element for us in many occasions but also a digitally distributed element. So I think the answer is all of the above. It's a good thing, bringing content to people where they want, how they want it, on economic terms that they find appealing. Increases the size of the business, and it is a big win for us. Ultimately, we're ecumenical about how we get content into our consumers' hands. We don't care whether it's physical or digital. However, remember physical goods are still 87% of our business in the fourth quarter. It is the lion's share of our business. Retail is our partner in this business, and that's not changing so very rapidly. And on tablets, I'm sorry, could you just repeat your question on tablets?

It was actually more on television screens. It seems like we spend a lot of time on tablets and smartphones, but Internet now is going to be coming to television screens in a more meaningful way. How does that impact your business?

Well, you could imagine a situation where if you have a cloud gaming service and you have an Internet-enabled television that's easy use, then it would be somewhat easier for a consumer to play a game on a big screen without the intermediation of another device. But I'm not sure that's a difference or it makes a difference. Broader distribution is always a good thing for us. And if that occurs, look, we were a launch partner with OnLive, we're in business with Gaikai. We intend to be in business with anyone who speaks to consumers in the way they want to be addressed.

Our next question is from the line of Eric Handler with MKM Partners.

So let me ask, I guess, what appears to me is an obvious question. When I look at your guidance for the year, you're losing money in the first quarter. And then that means you're going to earn about $2.80, looking at the midpoints for the remaining 3 quarters of the year. I can't get there unless I assume there's Grand Theft Auto V. Am I thinking about this incorrectly or is there something else there that allows you to get to these numbers without Grand Theft Auto?

Yes, we've announced that Grand Theft Auto V is in full development. We haven't announced a release date yet. What we have said about the year is that we have some titles that we expect to release that are not announced yet, and we have a terrific slate coming up. And that's the guidance that we want to give you as of now.

Okay. And then as a quick follow-up, when you look at your EPS guidance for the year, how would you assume your free cash flow outlook shakes out from that EPS guidance? Is it similar to EPS or are there other factors, too?

We expect a strong -- from our strong slate of fiscal 2003 (sic) [2013] releases we expect to generate a significant amount of cash. But today, we're not going to provide a fiscal year end cash forecast right now.

Our next question is from the line of Edward Williams with BMO Capital Markets.

This is Tom Andrews standing in for Edward. Can you talk a little bit more about your initiatives in Asia, specifically how much has been, how much you guys are investing in over there and when -- the timing of when we might see these products begin to launch and maybe what the business models are like? And then also, with the DLC content for Max Payne, what kind of an attach rate are you expecting for that?

Yes, we set up our Asia projects so that -- we worked with really capable partners in Asia for a couple of reasons. The primary reason was we have a healthy respect for things that we don't know, and these are -- when we entered into these projects, markets we didn't know that well, and some formats we didn't have a great deal of experience in. And we were fortunate that we're working with the very best in the business, Tencent in China, Nexon and XLGAMES in Korea, and these are very robust markets that have enormous appetite for many games. So one of the reasons we chose not to, for example, invest a huge amount of money in the U.S. market is because the U.S. market is exceedingly challenging from an MMO point of view. It is a market that really has only accepted 2 MMOs in the history of the business here in a big way, one that's obviously exceedingly robust now, one that was very robust until relatively recently. And apart from that, there hasn't been a lot of consumer acceptance. You can juxtapose that against China, where at any given time, 10 to 20 MMOs are generating a lot of revenue and a lot of profitability in the market. That's pretty compelling to us, and that's why we chose to pursue those markets first. And because we worked with partners, we were also able to mitigate meaningfully our exposure in the case that things don't work out as planned. So we don't have a meaningful financial exposure. We do, however, have a very meaningful opportunity to make money in the market if things go well. We haven't announced launch dates. We do expect to be able to share some progress in the relatively near future. And on Max, we don't project tie ratios -- and I guess it goes without saying, but I'll say it anyhow, it's our aim to delight consumers. And if we give consumers what they want, they show up for. I have -- Max is an amazing game. The multiplayer is amazing. The reviews reflect that. The New York Times review was just extraordinary. The Guardian review was extraordinary. IGN review was extraordinary, and the word of mouth was extraordinary. I think the downloadable content will be incredible. It certainly was on Red Dead. I'm not sure you can look forward to any zombies, but you never know. And I think it's going to be phenomenally successful. We don't project tie ratios.

Our next question comes from the line of Michael Olson with Piper Jaffray.

This is Andrew Connor speaking on behalf of Mike. So far, it seems you all have been somewhat conservative in terms of expanding into mobile and social gaming. And as you guys look out into the new console transition period with lower installed bases, is it possible you will get more aggressive on those fronts to sort of fill the gap?

Well, as Karl said earlier, one of the reasons that we're excited about these projects that are ongoing is if they're successful, they have the opportunity to diversify and smooth our revenues and profits. So that would be a good thing in the case of a dip related to a console transition. But that's not our primary motivation, because in order for that to happen, we still have to deliver great titles that consumers love. And first and foremost, our mission is to serve consumers, is bring them incredibly great interactive entertainment where they want it, when they want it, how they want it. Have we been conservative? I think we've been mindful of where we came from and where our expertise lies. And we bet on our intellectual property, and we bet on our own expertise, and then we've worked with A+ partners where we can learn something from them and where they're also willing to share the risk with us. As we get more confident, as we have some success, which I feel strongly that we will, I assume we'll also be willing to move out along the risk spectrum.

Yes, I mean, I also think it's important because when you put -- when you group mobile and social together, I think it's important to make a distinction because an enormous part of the market for mobile and social to this point has been a very casual consumer. And while we do, do some casual games, that has not been our focus. So I wouldn't necessarily consider us being less aggressive when you take into consideration that we know who we are, we know who we're not. And I think we've been very aggressive in terms of using those platforms in the context of the type of games that we do. But for the most part, those platforms have been more casual.

Our next question is from the line of Joe Ziolkowski with Weintraub Capital Management.

I have a question about your digital revenue growth. And that is -- it seems to be an important part of the future of the company. And I'm wondering if the 5% growth that you exhibited this year is something you're happy with. And do you have any thoughts about further growth in the outcoming years?

Yes, again, there's no distinction between digitally delivered revenue and physical revenue, and we don't manage to a number there. We make our products available on whatever platforms we think will resonate with consumers. There's a cost to making product available on platforms, so we have to be mindful of the investment we make to bring a product to a different platform and make sure that we project to profitability. We're being as aggressive as we can possibly be in terms of being ubiquitous, while still being mindful that there's a cost to that ubiquity. But we're not managing to a particular number. And digitally distributed content is the identical content. Consumers don't care about how they get stuff. Consumers care about quality, convenience and price. And the whole notion of digitally delivered content is a red herring in our business. We need to be focused on how do you serve consumers? What are the costs to serve them? How much money can we make? What are the price points? What are the marketing costs? What are the margins? What other costs are there? And our goal and our strategy is to have ubiquitous distribution, and if we had to deliver our products by carrier pigeon and we could make a profit doing it, we'd do that, too. There's no magic in digitally distributed content. Equally, all digital is not created all the same. We have 0 interest in negative-margin businesses.

We have no further questions in queue at this time. I would like to turn the floor back over to management for any closing remarks.

Well, we'd like to thank you very much for joining us today. We have a -- we're awfully proud of the progress we've made. We have an extraordinary outlook for this year. I think we're guiding to $1.75 billion to $1.85 billion in revenue, a very big number for our company; $2 to $2.25 a share in non-GAAP profits are expected. We have an awful lot of work to do to deliver that, and we are bound and determined to do so. We thank you for your support, and thank you for joining us today.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.