GameStop CEO Discusses Q2 2010 Results - Earnings Call Transcript

 |  About: GameStop Corp. (GME)
by: SA Transcripts


Welcome to GameStop Corporation's Q2 2010 earnings conference 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 is the property of GameStop. It is not for rebroadcast or use by any other party without the prior written consent of GameStop.

At this time, I would like to turn the call over to the Executive Chairman of GameStop Corporation, Dan Dematteo.

Dan Dematteo

Good morning and thank you for attending today's conference call. With me today are Paul Raines, our CEO; Tony Bartel, our President; Rob Lloyd, EVP and CFO; and Mike Mauler, our EVP of International.

As you know, in early June, we announced these promotions as the next step in the succession plan that Dick Fontaine and I developed several years ago. The team, now led by Paul, is doing a great job of running the business and making significant progress on our strategic initiatives which you will be hearing about more today.

As you can see, we gained significant market share in a market that is struggling for growth. The data suggests that U.S. software sales slid 7% in the quarter. The GameStop's U.S. software sales grew significantly. We believe that the slate of new releases for the back-half is stronger than last year and the new console add-ons, Kinect and Move, will help grow the category and return to positive growth.

Also, new console sales and units grew an overall 43% in the quarter, and these new users to be very active buying games in the coming months. Whatever you believe, we are well positioned to continue market share and manage our business to create shareholder value.

Our portfolio of stores has very flexible lease terms and we can right-size for the market quickly. We have slowed our new stores footage and will continue to do so while taking advantage of real estate opportunities to grow share.

Our investments in alternative game distribution methods are well thought-out, have synergies with existing assets and give us a hedge on the future without a huge investment. Our investments in other initiatives, such as our new loyalty program, are working well and you will hear more on this later from Paul. And given the free cash flow we generate, you will hear on how we plan on using this cash to provide even greater shareholder returns in the near future.

With that, I'll turn it over to Paul for a thorough review of the quarter.

Paul Raines

Thank you, Dan. As we begin our comments this morning, we want to thank our team of over 50,000 associates worldwide. The GameStop teams in 17 countries continue to demonstrate our passion for serving video game customers everyday, and we appreciate them.

We saw strength in the core business this quarter, driven by new software titles. New software grew 5.3% as the GameStop model of providing unique content to drive reserves, exciting midnight launches and the best value proposition of buy-sell trade drove record market share at launch. Hardware growth was driven by exciting new SKUs from PS3, Black Wii and the new Xbox Slim.

The used business, which is overlapping 19% growth in 2Q of 2009, grew just under 1%. Next-generation used software continues to grow, while older generation continues to decline. On the hardware side, used hardware sales were impacted by the growth of new hardware.

As we have pointed out in the past, the used sales growth lagged that of new by three to six months, as customers purchased hot new titles and traded them once they're done playing them. We have built our used inventory levels this quarter through a 10.6% trade comp, and that inventory growth gives us confidence on back-half used growth.

We have seen no competitive impact from emerging competitors in the used business and also have not seen any impact from the first user codes in recent titles. We are watching carefully the latest round of competitor entries in the used business, but would remind investors of the extensive competitive barriers GameStop has built around the used business. Rob will give you details around our back-half forecast in his remarks.

Our customer service metrics continued to improve to record levels, as the GameStop team engages customers in-store with industry-leading knowledge and focus on only video games. Our consumers continue to tell us that we set the standard for the in-store experience, thanks to our trusted game advisors, and our record market share growth validates that consumer feedback.

Our International business continues to face pressure from the macroeconomic environment. Mike Mauler and his team have accelerated the rollout of best practices to drive operations improvement.

On the merchandizing side, we are making progress on integrating our go-big and launch process internationally, and we will launch our first title with unique content globally this fall.

As you know, we developed the strategy over the last two years to make GameStop a multi-channel aggregator of gaming. As part of that strategic work, we defined several technology initiatives, and they have been in pilot over the last year.

We announced this morning that we will be accelerating our successful strategic initiatives in the third quarter, and we would to like to give you some color on our thinking in that area.

The PowerUp Rewards program, which is the name of our new loyalty initiative, is now live in over 500 stores in multiple markets across the United States, and we have over 350,000 affiliated members. Our projections put us on a path to several million members in the first year. And in the lead markets, the program is already twice the size of our Edge program.

After only 10 weeks in pilot, members represent over 50% of all transactions in those markets, and we are seeing growth in consumer segments that we're not participating previously in our Edge program. PowerUp members are shopping at roughly twice the frequency of non-members, and 15% of members have shopped us five times or more in the last 10 weeks. We are also seeing a high level of trades in used sales from PowerUp members.

Publishers are showing strong interest in participating in the program, and our Epic Reward calendar already has a waiting list. 40% of our members have already completed their game libraries online, and we now have millions of games registered in the collective libraries of PowerUp members.

We believe the PowerUp Rewards program has struck accord with our customers, and we will accelerate the program to be live in all stores nationally during the third quarter. The costs associated with that rollout are one of the best investments we can make to increase purchase frequency and deepen consumers' relationships with GameStop ahead of holiday.

Now on to downloadable content. In partnership with Microsoft, we started our downloadable content initiative during the second quarter in 35 stores. Consumer acceptance has been strong, as gamers enjoy being able to buy add-on content while they are shopping with their trusted game advisor.

Our assortment continues to grow, and our proprietary Code Server technology continues to serve consumers shopping in-store and via our digital kiosk and very soon online. We will be rolling out that initiative nationally during August and will be adding DLC from Sony during the quarter.

As discovery of DLC in store increases, so do the number of transactions with the digital SKU. And that number is now 5% of total transactions during the second quarter, representing an 80% year-over-year increase.

We are also making very strong progress on our journey and added a major component of our strategy with the acquisition of during the quarter. Tony Bartel will give you color on both of these items and our digital aggregation strategy in his remarks.

We know that investors have been mixed on their view of GameStop's terminal value, and we have spent a lot of time looking at our capital allocation. As a team, we are committed to providing shareholders a return on their invested capital.

We have a framework to increase those returns through a multi-channel approach that leverages our brick and mortar footprint with emerging digital channels and have a filtering process that examines the ROIC of every major investment we make.

Our new stores consistently exceed their performance targets, and our strong cash flow allows for investments in the digital future while also returning cash to shareholders. Rob will give you more color on our approach in this area.

In conclusion, we told you a year ago that we were developing a multi-channel strategy enabled by technology innovation to be the gaming aggregator across physical and digital channels, and we are delivering on that commitment in a disciplined way.

I will now turn the call over to Rob for his remarks.

Rob Lloyd

Thanks, Paul. Good morning, everyone. This morning we announced our financial results for the second quarter of 2010.

Total sales increased 3.4% to $1.8 billion, driven by new software sales growth of 5.3% on the strength of Red Dead Redemption, Super Mario Galaxy 2, and NCAA Football 2011. Strong sales through new hardware, up 4% from the second quarter of 2009, also contributed to topline growth.

NPD reported a 43% increase in next-generation console units sold in the quarter compared to the same quarter of last year. GameStop had a 60% increase in net sales of next-gen consoles.

Comparable store sales were 0.9%, at the midpoint of guidance. We expect comps to be positive for the remainder for the fiscal year based on the strong line-up of new titles, new hardware, Sony Move and Microsoft Kinect.

Following impressive market share gains in the first quarter, GameStop continued to take share in the new video games software category. Our quarterly new software growth correlates to a 590 basis point increase in new software market share. Considering that the majority of the title launches in the third quarter appealed to the core gamer, we expect our new software market share to remain very healthy.

Based on year-to-date results, we are increasing the company's 2010 worldwide new video software sales growth forecast from 2% to 5% to 5% to 10%.

Net earnings were $40.3 million. Diluted earnings per share for the quarter were $0.26, a 13% increase over the prior-year quarter and in line with guidance of $0.25 to $0.27 per share. Consolidated gross margins expanded to 28.7% from 28.5% in the prior-year quarter as margins in each category improved.

SG&A expenses increased as a percentage of sales, in line with our previously anticipated increase of 30 to 40 basis points, as we invest in strategic initiatives. The FX impact in the second quarter reduced company sales by $13 million due to the European currencies, but the impact on operating earnings was immaterial.

Moving on to the balance sheet, GameStop closed the quarter with $289 million in cash. Total company inventory levels decreased 0.6% on a per store basis year-over-year. We continue to maintain tight inventory control during this uncertain economy. During the quarter, GameStop repurchased and retired $2.5 million shares of its common stock at an average cost of $20.93 per share.

Using the remaining $52.8 million available of the $300 million share repurchase plan. As Dan and Paul mentioned earlier, over the last few months we have projected our future cash needs in order to appropriately define our long term capital needs and build a capital allocation program which reflects our focus on return on invested capital.

We believe the business will continue to produce adequate cash flow from operations over the next four to five years, to fund our prudent vigilant store expansion and strategic digital investments and acquisitions, fund debt maturities and allow us to develop a plan to repurchase shares on an annual basis.

GameStop's return on invested capital as defined by Bloomberg, at 13% is in the top half of a peer group of more than 20 retailers and approximately 100 basis points above the average of that group. As we navigate through the remainder of this video game cycle, GameStop has committed to improving it's ROIC by at least 400 basis points.

This will be accomplished by measuring the returns of the aforementioned objectives, both individually and collectively to ensure that deploying cash between strategic and growth initiative and returning cash to shareholders, enhances our current rate of return while at the same time achieving our strategic and operational growth goals.

A few other items to highlight for you; year-to-date, the total store base has increased by 99 stores, or roughly one-third of our 2008 new store growth rate the effective tax rate for the second quarter was 33.2% compared to 35.2% in the second quarter of 2009. With the decrease due to the accounting funds certain tax positions.

Based on the success of the company's new power of rewards loyalty program, an in-store DLC sales pilot, these two initiatives will be rolled out nationally during the third quarter. GameStop is adjusting its third quarter diluted earnings per share guidance, to range from $0.35 to $0.38. To account for incremental expenses related to these programs as well as for the upfront expenses in the Kongregate acquisition and investments in e-commerce.

This earnings per share range represents a 9% to 19% increase over the prior year quarter. Internationally, our expectations from meaningful economic recovery, in the countries which we operate have not yet materialized. So we have tempered our second half growth estimates, which will offset the upside we expect to capture from the Sony Move launch and our efforts to drive operating margin.

Based on the used inventory and trade in comp improvements seen over the last few weeks, we project that the used products category will increase between 7% and 9% in the third quarter. This growth corresponds to the initial use growth forecast of 5% to 10% for the full year. We project that $0.03 of earnings per share can be realized in the forth quarter from the new customer initiative and the launch of Microsoft's Kinect. Therefore, we are maintaining our full year 2010 guidance of diluted earnings per share at the range from 258 to 268. Total sales growth of between 4% and 6%.

In comparable store sales ranging from flat to 2%, we continue to monitor foreign currency exchange rates very closely. At this time, we project that the impacts on the third quarter and for the full year will be immaterial when comparing current projected rates to the rates we projected at the beginning of the year.

Tony will now provide an update on our digital strategy.

Tony Bartel

I'd like to provide an update on two of our strategic initiatives; the evolution of our e-commerce site and the development of our digital aggregation site. During the quarter, we completed the staffing of our e-commerce development team and have begun to execute the road map we developed to drive significant e-commerce growth.

We've already made significant changes to the website including streamlining the check out process, updating our search engine and improving our merchandising features. From a marketing perspective, we increased our paid search and affiliate advertising and have tested several discount strategies to compete where necessary with aggressive price points on the web. Also, we are leveraging our growing database that has over 35 million customer records to drive growth through targeted emails.

And these efforts have paid off. In the first half of the year, our online market share has grown by 50% over last year according to MPD. During this time, we were the fastest growing dot com in the gaming segment. Much of this growth was driven by attracting female shoppers as our market share among females more than double over last year.

With our development team in place, we'll now increase the pace of changes to our website. During Q3, we will begin rolling out a buy online, pickup in store program, fully implement our royalty program on the web, incorporate the sale of Microsoft and Sony Digital add on content including STOA, full game downloads and launch our enhanced user abusing social commerce features.

In addition, we will launch in store programs that will incent our customers to leverage our website and will increase our advertising sales force to better monetize the quickly growing 15 million unique customers that we see on a monthly basis.

In late July, we announced the acquisition of Kongregate. Kongregate represents an integral part of our strategy to become the aggregator of choice in the online gaming space. We looked at many companies that offered an online gaming platform and we chose Kongregate due to its fit with our strategy. Kongregate has well-designed technologies that allows developers to quickly and easily offer their games on the Kongregate platform and on mobile phones running the Android operating system.

In today's advertising, the micro-transaction monetization method to a robust achievement system Kongregate provides developers with tools to maximize their revenue. This is evidenced by the fact that over 8,500 developers have lost over 30,000 games to-date on this platform.

Kongregate also syncs well with our existing customer base. While Kongregate has games that cover all genres, its base of over 10 million monthly users skews more mail and more core than most online gaming sites. This provides for a natural transition to leverage the $0.5 billion business that we see annually in our stores and the 15 million monthly users of to send traffic to Kongregate's site.

Kongregate will have no material impact on 2010 earnings. And we do anticipate that it will positively impact our ROs IC calculation in the coming years.

With that I'll turn it over to the moderator for Q&A.

Question-and-Answer Session


(Operator Instructions) At this time, we'll take our first question from Will Armstrong, C.L. King & Associates.

Will Armstrong - C.L. King & Associates

Your gross margins on used games were up only slightly against fairly depressed margins a year ago. I was wondering if you could discuss that in a little more detail. And was that possibly a result of the mix between used sales U.S. versus Europe?

Rob Lloyd

We're always more promotional in the second quarter of the year than we were in the first quarter of the year. So that's why you see that the rate was more comparable to last year. It is up slightly, we were promotional again in this second quarter. Not as promotional we were a year ago in the U.S., but slightly more so internationally. We are continuing to make the improvements that we've set out to make by rolling out best practices. And again, I think for the year you'll see that used margin in the range of 46% to 49%.


We'll take our next question from Arvind Bhatia with Sterne, Agee.

Arvind Bhatia - Sterne, Agee

Could you, Rob, talk about what you said on the 7% to 9% increase, that's I think your third quarter estimate, but is that also your full year estimate? And then can you also talk a little bit more about the inventory and the used side that you said I think was up 10% in the third quarter? Let's talk about that real quick.

Rob Lloyd

The inventory on the used side is up about 5% over last year. It's up considerably from the beginning of the second quarter. As Paul mentioned, our trade comps were very strong. Those trade comps and the inventory position are what gives us confidence in the 7% to 9% increase, which is what we expect for the third quarter.

For the year, we're still expecting that 5% to 10% range.

Arvind Bhatia - Sterne, Agee

And then you didn't touch on the hardware projection for the year. Before, I think you had said about negative 5 to negative 15 if I recall correctly for the year. Have you changed that projection?

Rob Lloyd

No, we haven't.

Arvind Bhatia - Sterne, Agee

So that stays the same. Okay. And then can you tell us what your projection is at this point for cash at the end of the year given, you've done your buyback, you've made a few acquisitions this year and you're putting in more CapEx on some of the digital initiatives. Can you talk about that?

Paul Raines

At this point, what we see at the end of the year in terms of cash is not much different than we had talked about earlier in the year, which is in that $900 million to $1 billion range.


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

David Magee - SunTrust Robinson Humphrey

Let's talk about the PowerUp stores and what happens with the sales, the margins, once those programs were put in place?

Paul Raines

We really aren't ready to disclose a lot of details around sales and margin. But we can give you some pretty good color around the program.

The first point is, we are seeing a tremendous participation. We called out the number of transactions that include a PowerUp number. That gives us great visibility when over 50% of the transactions have a PowerUp number associated with them. So we can look at that consumer behavior pretty well.

And 50% is not our goal. Remember that Micromania in France where we modeled some of this was significantly higher than that and they've been at it for 10 to 12 years. We also know that frequency is up significantly on PowerUp numbers versus non-PowerUp numbers, which means we're getting a lot more visits from the same customer, and getting also significantly more trades in used business.

That's going to drive lots of comp growth we think, in the markets where we roll this out. And candidly, David, we've been surprised by consumer acceptance. Everybody in our organization, we were optimistic about the program. But if you go to those markets where we're live today, which you'll see as a consumer, almost a frenzy to get into the program.

We also are very encouraged by our game libraries. The reason that is important is, we now know what consumers have bought from us, what they would like to have from us, and what they could potentially trade with us. So that is going to give an opportunity to market to them and drive sales and comps as well.

David Magee - SunTrust Robinson Humphrey

So this is more than just your best customer sort of signing up and staying with your behavior. You are actually seeing them change the behavior after becoming a member?

Paul Raines

We're seeing lots of interesting things, David. One is, we're seeing more frequency. So yes, there is a change in behavior. They visit us more frequently; want to know what's going on at GameStop today. We're also seeing more used and more trade activity. The program is also very incremental.

One of the things that we've been surprised by, we've had an Edge card program for many years at GameStop. There is a large amount of people who are not Edge members, who are signing up for the PowerUp paid program, which means we're getting a lot more non-core audience participating in the program, a lot more moms, a lot more female shoppers, casual shoppers, etcetera.

So all of that is rolling up into us; just about the best idea we've got to get in to hit a holiday and be ready for those consumers.


We'll take our next question from Mike Hickey with Janco Partners.

Mike Hickey - Janco Partners

Just a couple housekeeping; sales from new stores in the quarter, Rob, and the FX impact for the quarter?

Robert Lloyd

The FX impact we talked about was approximately $13 million on sales.

Mike Hickey - Janco Partners

I'm curious if your PowerUp program would have the opportunity to potentially accelerate the break for you?

Paul Raines

Honestly, we think it accelerates and improves stickiness with consumers; otherwise, we wouldn't be doing it. We're making a decision to go out and spend more on getting this program in ahead of holiday. So I think the two or three areas where you'll see it impact is, frequency of shop and shoppers coming in to see us, and also, our ability to know what they're looking for from their game libraries, will be an important factor.

We're also seeing a huge impact with our associates. Our associates are energized by the program. It's been a real positive around customer service, and been a positive around used and trade. So too soon for us to give you a projection on that, but internally, we're running a lot of numbers, and we believe we'll have a significant impact by moving the program up.

Robert Lloyd

Mike, the sales from new stores, so non-comping sales were about $56.5 million.


We'll take our next question from Tony Wible with Janney.

Tony Wible - Janney

I was wondering if you guys can give us an update on your overlap with Blockbuster stores, and if there's any opportunity in the event that Blockbuster ends up filing for some kind of prepackaged bankruptcy or restructuring. And then I had a follow up.

Dan Dematteo

Okay. Tony, this is Dan. I will tell you that over the last year-and-a-half or two years Blockbuster has closed a lot of stores, so has Hollywood. And that has given us real estate opportunities into centers that heretofore we could not get into because they had exclusives. So that has been a positive. So I would think that as they continue to close stores, again, it gives us opportunities, especially into highly dense urban areas. If you take like the LA area etcetera, for example, which is a very difficult real estate market, it gives us opportunities to get into centers that we've not gotten into.

And oftentimes what's happening is that we're actually taking a piece of the Blockbuster store as the landlords break up those stores into two or three smaller stores. It's a positive for us to get in to grow market share in markets that we heretofore couldn't get into.

Tony Wible - Janney

And on your guidance, I assume that you're still expecting 3DS to be a early next year launch as opposed to falling into this year?

Dan Dematteo

That's correct.


We will take our next question from Sean McGowan with Needham & Company.

Sean McGowan - Needham & Company

I'm curious about on your comments on competition in used games, as well as the embedding of codes that you need to pay for. How is it that you're measuring that, because you're confident that you are seeing an impact?

Paul Raines

Sean, we'll take it with the competition. So we know where all the competitor stores are. There have been several big-box competitors who have launched used business. And we measure the run rates and impacts of used sales of all the stores adjacent to them, and we simply have not seen an impact. Now, some of the big-box competitors have not really even begun yet. They've announced that they've not started, but we haven't seen that.

And then another of the big-box competitors began with the small amount of stores. We haven't seen any expansion there. So on the competitor side, we just don't see the impact yet in our stores, but of course we take them seriously, we watch them closely. Believe us, a lot of the traffic in those competitor stores are our guys testing the process etcetera. So we're all over that.

As far as the first used codes, we look at the title that have the first used codes and we look at the trade volume and the used inventories on those and just haven't seen an impact yet. Just a point on the first used codes; remember that only 25% of used buyers play online. So when we talk about those first used codes, it's not a large audience of gamers that you're talking about. That consumer is really not as much of an online player. They're moving that way some, but it's still not a very large audience.

Dan Dematteo

And if fact, Sean, given the fact that we now sell DLC in our stores, we actually can make it very easy for that consumer to act best at online task because of the sale of DLC.

Sean McGowan - Needham & Company

What should we expect going forward from P&L for the income attributable on the controlling interest?

Rob Lloyd

I wouldn't expect it to move much from what you've seen in the first couple of quarters. Just a couple of things in there are Irish operation on the retail side and Jolt or what's in there. I just don't expect a lot of movement on that, say, in the third quarter.


We'll take our next question from Robert Higginbotham with Goldman Sachs.

Robert Higginbotham - Goldman Sachs

I would like to revisit the used business for a moment. I want to try to better understand your confidence in the 7% to 9% growth 3Q for cash. You've talked to the business, seen a three-month to six-month lag versus the new business. This quarter, we saw significant deceleration in the new business. I want try to reconcile those two things.

And also, you talked your confidence in the forecast coming from your in-stock position, given the strong trades and inventory. When I look at total used growth up 1% versus inventories up 5%, it seems as if your (PL-throughs) didn't keep pace with your trade. And so I am trying to understand where the confidence in that number comes on those two fronts?

Paul Raines

As we said, there is a lag time from three to six months. So the first thing we would say is that inventory you saw us filled will sell through during the back half. So we called out the trade comp, because our trades, meaning our inventory coming in from customers, is up pretty significantly year-over-year. And we think that's going to increase our inventory position from where it's at even today.

The first initial two weeks of the quarter are also within our guidance. And we think that for those reasons, you are going to see that that inventory will sell through. We also saw that in this quarter, used hardware was pressured by the sell-through of new hardware. So that was another factor in the past quarter. But largely, inventory level driven, that's going to lag, but it's going to come through as it always has in the cycle through the back-half.

Paul Raines

Given the tremendous increase in traffic in Q3 and Q4, the inventory sales are always a function of the inventory. And so with the inventory being up, the sales have always been up, and we would expect that to continue.

Robert Higginbotham - Goldman Sachs

To help better understand that, could you tell us what your used inventory was up in one 1Q, for instance, to try to understand how 2Q used sales came through relative to that inventory position starting in the period?

Rob Lloyd

Sure. At the end of the first quarter, our inventory position was flat, which as Dan said there is a strong correlation between inventory levels and the sales growth that we've got.

Paul Raines

The coming off the end of the year, I think we were 3% or 3.5% down from the year before.

Rob Lloyd

So we've been holding through the first two quarters.

Tony Bartel

There's also a better quality level of inventory as well underneath that trade comp, because we've been bringing in a lot of the hot titles that were released through the first and second quarter. So that's also a good sign.

Robert Higginbotham - Goldman Sachs

I understand your capital allocation strategy in terms of comps. But I was wondering if you could clarify the timing of pursuing that strategy. In other words, should we expect you to resume share purchases in the near term to drive that improvement that you're looking for over time, or is that something that's more of a long-term target and maybe at this point you wait till you get us to holiday?

Paul Raines

As I stated in my remarks, we're developing a plan to return cash to shareholders through buybacks on an annual basis. And I think that's all I can speak to about that right now.


We do have time for one final question coming from Mike Hickey from Janco Partners.

Mike Hickey - Janco Partners

I was just curious if you guys have any special events planned for the Halo Reach release?

Tony Bartel

That's a great question. One of our key international strategies in 2010 is to drive market share gains on the watch of new titles by both expanding night openings, driving reservations, offering exclusive content and delivering value to our customers through a buy-sell trademark.

For the release of Halo Reach, we've partnered with Microsoft at a global level, and we are very excited to be able to offer our customers in all 17 countries the exclusive new Spartan armor that can be used in the game when they reserve their copy only with GameStop prior to the title's launch.

This is just one example of what we can accomplish when we coordinate our go big strategy globally, for our major new releases and deliver unique and compelling value to our customers worldwide.

Paul Raines

Mike, one of the things that's I think a great sign now is every time Tony and team have a merchandise discussions with our global partners. Mike and his merchant team now are more and more increasing at the table. So our ability to distribute these games on a global basis is really a weapon we have that really no other retailers have.

Dan Dematteo

And we should a lot more of that.

Paul Raines

Well, thank you for attending today's conference call, and I leave you with the couple of thoughts. One is that, video game hard console sales were up 43% in Q2 and that would have to translate of course to increased software sales, since hardware sales are up.

Software sales in the back half of the year. So we look forward to between that and a strong release scheduled to strengthening video game industry through this back half. And we also look forward to a continuation of our market share gain; thank you very much.


This concludes today's conference. Thank you for your participation.

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