GameStop Corp. (GME)

Investor Day 2014

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Apr 22, 2014

Revisiting our strategic plan with you to set the stage for the rest of the conversations today. As we look at our strategic plan from 2011, we can now add some updates and proof points from our latest fiscal years. We continue to use this foundational strategy as our guide and our finding that it continues to provide us a framework for thinking about the future of GameStop and driving innovation. If we start on brick and mortar stores, we continue to maximize our brick and mortar stores. Our store footprint has allowed us to have dominant market share in the recent console launch which we know will provide benefits for years to come. We utilized our stores to acquire customers for our digital and re commerce businesses as well. PowerUp Rewards gives us data insight that let us consolidate traffic into fewer stores and we've had a net consolidation of about 2% for the last 3 years of our GameStop footprint in the U. S. The skills we have developed in our stores give us opportunities beyond gaming as you see with our entrance into technology brands. But make no mistake, stores are the anchor to the the consumer engagement model with GameStop and we augment that model with online and digital properties. We have repositioned the pre owned business through the use of PowerUp Rewards. We are also adding value titles and an expanded assortment to continue bringing more and more value options to our customers. We expect the pre owned business to grow through the early stages of this new console cycle. Our new technology brands are becoming additional ingestion points as we accept customer trades on phones, tablets and soon wearable devices in all three technology brands and we sell refurbished Apple products at Simply Mac and refurbished phones at Cricket. We own the customer relationship through PowerUp Rewards and the highest customer service levels in the industry in our stores. Digital growth has been solid as we lead the market in DLC, are a major player in casual and PC gaming and own the largest digital magazine in the world. Disciplined capital allocation is at the heart of everything we do and our commitment to shareholders is proven. Let's look at the GameStop market model we've shown you in the past. As we've shared with you, the console gaming industry has a very healthy outlook driven by the strength of the next gen consoles of Xbox 1, PlayStation 4 and don't forget the Wii U, we expect continued growth of the console physical and digital industry for the foreseeable future. This model does not include our pre owned international or technology brands businesses, but includes our console and digital businesses. In thinking about our future, a market back approach is useful. Investors frequently ask the question, how will GameStop grow? So let's look at some of the addressable markets that we are participating in. First of all, our core business of physical and digital gaming will grow in the aggregate and we are uniquely positioned to succeed in that market. You see there the size and growth rates of those markets. Our motto on this subject is, which is Costa Rica slang for saying, we will not take one step back in the gaming business. Make no mistake. Looking beyond gaming though, the re commerce business, which continues to grow and evolve, fits very well into our competencies. As you remember, we were early on in seeing the potential for buy sell trade of phones and tablets and have by far the broadest physical store presence in this category and we expect to grow with the The Apple ecosystem is large and our share of it is growing. Simply Mac is the largest and fastest growing Apple specialist and we have opportunities to roll up dealers and build out white space stores. We have spent a lot of time in Cupertino with Apple leadership and we have their support to grow Simply Mac And the market size you'd see there is U. S. Opportunities only. We are exploring international opportunities as well. But the wireless market is perhaps the most exciting market in the consumer space. We have built a broad partnership with AT and T Leadership bridging across Spring Mobile postpaid stores, Cricket and AO prepaid stores and various technology initiatives. We are the 3rd largest and fastest growing AT and T dealer in the United States and we anticipate large growth in our cricket no contract prepaid business as well. Connected devices are forecast to go from 8,000,000,000 today to 50,000,000,000 in 5 years and many will be sold in a store and available for trade and refurbishment at GameStop. The wireless growth opportunity for GameStop is only beginning. Now if you add up these addressable markets, they add up to $280,000,000,000 10 to 15 times larger than our addressable market 5 years ago. The buy sell trade model has potential applications for all of these markets. We are successfully gaining share in all of these categories today. And you will meet extraordinary leaders today who have the management teams in place to win in those markets. After looking at markets, we asked ourselves the question, this sounds really tough, have other companies made the kind of transformation that we are undertaking? As it turns out, some have very successfully and we've chosen a couple to share with you. Williams Sonoma, a very successful multi channel retailer has developed adjacent brands to their core, skillfully leveraging core skills in design, operations and multi channel to create concepts for new customer segments very successfully. Another great example is VF Corp. VF Corp is a very well known transformational story. It's a great example that we have studied rigorously for the past few months. Believe it or not, they began as an underwear manufacturer. And believe it or not, I worked in one of their facilities in Te Patitlan, Mexico in the mid 90s as a production engineer. Interestingly, today that same company owns multiple brands and they've integrated forward into retail stores and new apparel and footwear categories. So we are students of extraordinary business transformation stories and these are just a couple that we've looked at. William Sonoma and VF are great examples to us of the potential of understanding your consumers and matching that insight to your own core competencies. So the next question would be, what are GameStop's core competencies that we can leverage? Well, first, we have deep real estate knowledge. With over 46 100 leases in the United States, it is rare for us to find a commercial center or a landlord where we don't have an existing relationship and that gives us leverage for the technology brand stores. 2nd, we are very good at attracting, hiring and training technology oriented store associates. Our net promoter scores are among the highest of any competitor set and that is a reflection of a superior talent model. Power Up Rewards has the potential to link across our brands to be the defining loyalty program for technology products. Let me say that one more time. PowerUp Rewards has the potential to link across our brands to be the defining loyalty program for technology products. We are using our deep data insights to drive store performance and customer loyalty. Buy, sell, trade is now implemented in our Simply Mac, Spring Mobile and Cricket stores, giving us margin enhancement opportunities and leveraging our refurbishment capacity. You saw today the kind of investment we have in refurbishment at our refurbishment operations center. And stay with me now because this is confusing, but right now you can trade an Apple Android phone or tablet at GameStop, at Simply Mac, at Spring Mobile, and at Cricket. And you can buy a refurbished Apple laptop or tablet at Simply Mac and all types of refurbished phones and tablets at Cricket and at GameStop with wearable devices arriving soon. What we have traditionally called the buy sell trade circle of life is getting bigger and bigger at GameStop. And of course, financially, we have the ability to efficiently deploy capital when we see opportunities to create shareholder value. So as we begin this meeting today, we want to introduce as we continue to transform our business, we're sharing today with you a perspective that we believe more clearly reflects our view and the future of GameStop 3.0 as we called it this morning. As we see it, GameStop is a family of specialty retailers that make your favorite technologies affordable and simple. In looking at both our gaming brands and our technology brands, we have great partnerships that that give us long term viability with our customers and we've tried to list most of them here. In fact, there's a few more, but our gaming brands are listed on the left side and you see those. If you don't know Micromania, it's the largest video game retailer in France. Our technology brands are listed in the middle and we went ahead and put our major partners on the right and those are partners that we have large and growing relationships with. All of those partners, we believe, are key to the future of technology. So we have a great agenda for you today as we bring on some more speakers. First of all, lead off hitter will be Tony Bartel, who runs our U. S. Stores, merchandising, supply chain and refurbishment. Tony is going to share his view of where the video game industry is headed and how we plan to continue our dominant position and not take one step back. Mike Mahler, who runs our broad international portfolio and I might say is a frequent frequent flyer, will share the successes we have had in turning around Europe and how we will continue growth overseas. Mike Hogan who runs our strategy portfolio, marketing and value business will share his thoughts on value and on PowerUp Rewards. Steve Bain, Founder of Simply Mac will share his unique story with you and the opportunities in the Apple ecosystem. Jason Ellis, founder of Spring Mobile, will give you insight into the AT and T postpaid space and how we will grow there. Joe Gorman, Vice President of Cricket will share the size of the market for our prepaid business. And last but of course not least will be Rob Lloyd, our long time CFO, who will give you a financial update. And with that, I will turn the discussion over to Tony Bartel. Thanks, Paul. As Paul mentioned, we are very excited to be at the start of another growth cycle in the video game industry. The technology is as powerful as advertised and it is good to see investment coming back into the development of games for the new consoles. We fully expect to see next generation software exceed current generation software in the Q4 of this year. While we have a lot of exciting things to share with you today, I want to be crystal clear about one thing. We are laser focused on driving video game sales here at GameStop. We believe that we are at the start of a multi line of a multi year growth cycle, and we are taking full advantage of our opportunities. In fact, 86% of our profit growth in 2014 will come from the video game business. We are very focused. Working with our partners of Microsoft and Sony, we developed operational plans to optimize the launch of the new consoles. After weathering a 39% decline in the gaming category, we knew that innovation would drive growth and that we had a unique opportunity to expand and deepen our relationship with our customers. So we trained and certified our passionate associates, leveraged PowerUp Rewards and used our unique buy sell trade business to drive market share that exceeded even our lofty expectations. All of you know that there were significantly more consoles available for this launch as compared to the previous launch. In fact, more than 12,000,000 Xbox 1 and PS4 consoles have been sold so far. But what is impressive is the market share gains that we achieved. Our next gen console hardware market share increased 38% versus a previous launch. Our next gen software market share increased 52% over the prior launch. So, our strategy to enhance our relationships with more people was successful. In fact, we were so successful that our market share for all of 2013 ended up at the highest level in our history. We are seeing a strong flow of new consoles and expect for them to be in high demand for the remainder of the year, especially during the critical holiday season. While driving market share during the critical launch timeframe was important, it was even more important that we drove our attach rate of more profitable software and digital offerings. For physical software, we attached 3.3 games per console sold since launch and this exceeded our competitors attach rate by 60% according to NPD. This was slightly less than the 3.9 games that we attached during the prior year launch. However, when you add on our digital attach rate of full games, DLC and console network cards, our attach rate per console increases to 4.3, a 10% increase in attach rate when including our digital attach. So 2 things are important here. 1, digital has grown and is an important part of the gaming ecosystem. And more importantly, too, GameStop is an active, valued and driving force in digital gaming. Clearly we've seen a lot of success in gaming and I'm going to spend the next few minutes talking about the unique way GameStop leverages our assets to develop and grow the video game market. We start by driving deep relationships with our vendor partners. While we have continued dialogue with all of our partners, we begin talking about specific launch plans about a year in advance. This gives us the opportunity to drive great exclusive content, coordinate marketing efforts, train our associates and fully understand the customer benefits of each game. We punctuate this process with our annual manager show where our partners interact directly with our store managers and field leaders to share ideas about upcoming game launches. We leverage our 34,000,000 global loyalty program members throughout the pre launch process with pre order informational campaigns. This was best seen in our first to know program that was live within minutes of each new consoles announcement and generated over 2 point 5,000,000 people who received relevant information, offers and notifications when their consoles were available. Many of these people who signed up were new members providing us with the opportunity to deepen our relationship with with them. Clearly, buy sell trade is at the heart of everything we do. This is not a program. This is part of our DNA. It's how we do business and our associates view it as a currency that helps gamers get what they want. We run trade offers on nearly every major launch and allow for people to prepay their product with unique trade currency during the pre launch phase. We also leverage our multi channel assets. Mike Hogan will provide more details on how important our multi channel efforts are to driving both in store and online sales, but each launch has a coordinated multi channel marketing effort. Finally, Game Informer which Paul referenced earlier, the number 3 physical magazine in America and the largest digital magazine in the world provides independent previews that we leverage in all of our channels to aid customers in making their best gaming choice. At launch, we provide customers with unique entertainment event. It is not uncommon for us to have 100 of gamers lined up at our stores interacting with our associates and other gamers about the upcoming games. This is where our associates shine. Their deep knowledge of the games, their passion for gaming and our efficient proprietary checkout process drives dominant market share. Our associates walk the line with franchise marketing flyers that show the gamers all of the ancillary products and digital content that is available we during this launch timeframe. After the launch, we continue our relationship with the customer by informing them of additional items that they can purchase for their games. We currently have over 515,000,000 games in our loyalty member libraries and we leverage this information to provide them with targeted emails that provide relevant offers again increasing our attach rate. We also have a structured program that provides gamers with relevant trade offers at predetermined dates to maximize the trade in value of all of their games. Finally, we again leverage our multi channel efforts including our web and store program to provide customers with information, relevant deals and convenient delivery options to optimize their shopping experience. The combination of these programs throughout the launch cycle is unique, defensible and enabled by our loyalty programs, a strong and tested buy cell trade DNA and a strong and passionate workforce. All competencies that our competitors cannot emulate. To ensure that we retain our edge over the competition, we invest heavily in our most valuable asset, our people. We have a proprietary training program called Level Up that each of our associates uses to understand GameStop's values, the core attributes needed to be successful at their job and it provides exclusive training on products and processes. This program has over 70 modules and we are able to track each associate's progress and understanding industry. Associates that are certified as the most knowledgeable in the gaming industry. We invest over $30,000,000 annually in training our associates through LevelUp. As an example, our store managers spend on average 150 hours per year in cultural, job specific product training. This helps drive our industry leading low store manager turnover which has averaged 28% for the last 3 years. In addition to Level Up, we also invest over $10,000,000 a year to bring all of our field leaders to our annual national training event and expo. This 4 day event allows each of our managers to have hands on learning with all of the new consoles, games and accessories and to provide our partners with candid and relevant feedback. The event culminates in an E3 like event where all of our managers play the upcoming games. Following best practices gleaned from our France and Australian partners, we then open up this expo, sends the exclusive GameStop content to thousands of happy gamers. In addition to investing in training, we also invest more in labor than our competitors. Our small footprint allows us to provide more intimate service as our associates cover only 1 tenth of the square feet that our big box competitors ask their associates to cover. This investment coupled with the extensive gaming knowledge of our associates provides us with an industry leading Net Promoter Score. It's higher than all of our competitors. The closest competitor is an online company, so we are more than double the net promoter score of our closest brick and mortar competitor. Our associates also drive our buy sell trade process. As mentioned earlier, buy sell trade is not a program, but an integral part of who we are. We see games that are on our customer shelves as a form of currency to help the gamers get the games that they really want. In short, this is the embodiment of our tagline, Power to the Players. We generated $1,200,000,000 of currency in the form of trade credits in 2013. 76% of this currency was used to purchase video games which clearly helped drive our new market share. And customers recognize the value of this currency as we are viewed as the best value for new games at double the rate of our competitors even though they discount new games and consoles far more aggressively than we do. We have consistent feedback that a physical new game has a perceived residual value of $20 It is important to note that this perceived value is significantly higher than the dollar margin that we make on each new game. In spite of our success in driving the buy sell trade model and putting currency in the hands of our customers, only 40% of the gamer population realizes that we accept trades on video games. So we view any campaigns that drive awareness of the ability to trade games as positive for our business. While gaming remains a central and core priority, we are also leveraging our stores to drive ancillary offerings such as digital and mobile products and we expect these to continue to outpace physical video game sales. Our digital offerings range from mobile games such as those sold by Congregate and other mobile publishers to full game digital downloads. Congregate has published 9 games so far and has over 10,000,000 game downloads on the iOS and Android platforms. One of these games, Tyrant Unleashed reached the status as one of the top 50 grossing games on the IOS platform. We also sold digital copy of Game Informer in all 15 countries making it the number one digital magazine in the world with nearly 3,300,000 subscribers worldwide. For our partnership with Kongregate and other free to play publishers, Microsoft, Steam, EA and Activision, we have a strong and growing digital PC business. In fact, our worldwide Steam Wallet business grew 160% in 2013. We also have an expanding selection of Posicars to participate in the growing free to play business. On the console side, we offer full game digital downloads, downloadable console expansion content that we call DLC, Xbox Live, Sony PlayStation Plus and other digital points. Collectively these grew 6.6% in 2013 as a reduction of video game software and the lack of digital content for GTA V impacted our business. It is important to note that over 70 percent of the currency used to purchase digital content is currency other than a credit card, again showing the strength of the buy, sell, trade model as a currency in the mind of our customers. As you saw in our stores, we have increased the size dedicated to digital and we are seeing strong growth generating $724,000,000 of global digital receipts in 2013. This represents a 26% CAGR over 2011 which is nearly double the digital growth CAGR of our publishing partners during the same timeframe. We anticipate that digital receipts will increase 12% to 15% in 2014. We have also expanded the space provided to our mobile offerings and we are seeing strong growth in this area as well. We accept over 1,000 SKUs of mobile devices in our stores. You saw the expansion of space that we have in our refurbishment center to data wipe, clean and repair the devices that we receive in our store. This business grew to $304,000,000 in 2013 and our technology brands will quickly accelerate our mobile business as Jason and Joe will share with you later. As a reminder, between digital and mobile, we built a $1,000,000,000 business in the last 3 years. As you also saw in our stores today, we have dedicated space to the growing category of ancillary gaming devices such as toys, headsets and other accessories. We are highlighting these offerings both at the time of launch and in subsequent marking elements and we are driving on average a $53 additional attach of these items to every new console sold. In summary, GameStop is laser focused on driving growth and strong customer engagement in the gaming space. We are excited to be at the starting line of a multi year growth cycle in our industry and we are embracing our role as product and gaming experts. We clearly understand and respect our position as market makers and product evangelists. 2nd, our investment in driving market share at the critical console launch is paying off as we are at our highest market share ever with a growing number of loyalty members at the beginning of an expansive run-in gaming. 3rd, we have unique buy, sell, trade and relational DNA and we are adding multi channel tools that will expand our presence and leverage our customers increasingly mobile habits while providing a similar GameStop experience regardless of how our customers want to access us. And finally, we continue to invest in our number one asset, our people, to ensure that we maintain our edge over the competition and continue to offer the ultimate experience in gaming. Power to the players is not just a sign on a wall. It is a promise that we intend to keep for a very, very long time. Thank you and I would like to turn it over to Mike Mahler to talk about our international business. Okay. Thanks Tony. Good afternoon everyone. We currently have 6,675 stores worldwide, of which a third of them are outside of the United States. With a solid store base in Canada, Europe and Australia, New Zealand, GameStop is one of very few specialty retailers that assess a broad global footprint and this makes us stronger and more competitive in many ways. Our philosophy of thinking globally and acting locally leverages our strengths across all regions while at the same time building strong relationships with our diverse customer base. This diversity of thought combined with organizational agility allows us to create, test and implement new concepts and best practices quickly around the globe and has been an integral part of building our dominant market share in most of the markets we serve. GameStop currently has businesses in 15 countries outside of the United States with 2,208 stores and approximately 8,000 passionate associates. In 2013, our international businesses generated $2,800,000,000 in sales driven by a same store sales increase of 5 0.6%. As a result, our international businesses generated approximately $108,000,000 in operating earnings during the year. There are several key strategies that we are focused on to drive international growth and profitability that are consistent with many of the concepts that Tony outlined in his overview of the U. S. Businesses. We continue to make investments and expand our multi channel capabilities around the globe to drive growth. Our digital product offerings and services continue to increase and have generated significant sales growth over the last year and we continue to find new ways to expand the buy sell trade model to increase the growth of pre owned sales and margin. And finally, we have made great strides in increasing customer engagement as we enhance our ecosystem of communication and services to develop deeper relationships with our millions of passionate customers worldwide. Over the last 4 years, we have made significant progress in building our multi channel capabilities to drive growth. Less than 3 years ago, outside of our Micromania business in France, there was no international e commerce. There were no loyalty programs and there was no method for customers to interact with us using their mobile devices. As Paul has quite often said, to be competitive, the internal rate of change must exceed the external rate of change. And wow, how things have changed. Today, not only have we built all of these capabilities in all major markets, but we continue to make major advancements in linking the variety of channels together to provide our customers with product, information and interaction across all channels at their convenience. GameStop currently has e commerce businesses in 9 countries including the UK where we do not have a store base. This is a model we are currently exploring for future expansion. Over the last 3 years, we have consistently achieved greater than 30% annual e commerce growth In fact, year to date, our e commerce sales have increased 50% over 2013. Our e commerce growth in 2013 was led by Italy with and 14% growth and Germany with 98% growth versus prior year. During 2013, we implemented a number of enhancements that differentiate our multi channel businesses including the launch of the GameStop Digital Wallet. This service allows customers to store trade credits on their loyalty card and use the credits to purchase products in store, on our e commerce sites and through our mobile apps. In 2013, we also launched our hugely popular web in store channel, which gives customers complete access to purchase products which might not be available from their specific store, but are available in our distribution centers and they can have it shipped directly to their home. With complete access to all products available in our distribution center, there is no reason why we should ever walk a sale due to an out of stock item and the service also allows us to greatly expand our product offerings without having to carry every item in every store. This will aid us in expanding our franchise marketing in loot and other accessories. Over last year, we also launched and expanded our mobile channel allowing customers to reserve and purchase products while on the go from any device. Purchases from mobile devices are currently our fastest growing e commerce segment. As we have consistently reiterated over the last few years, our strategy to grow our digital product sales is an important component of our future success. Over the last 3 years, we have continued to drive growth for international digital business with 2013 being a record year of 49% sales growth over 2012. This continued strong digital growth is driven by a number of initiatives that have been successfully implemented across our international markets. By partnering with publishers, digital content has become an important component of our franchise marketing plans in our stores, on our websites and through our customer communications as you will see later. This integrated planning of our digital offerings helps drive strong digital attach rates not only at launch, but also during a title's lifecycle. Using our proprietary AllSpark technology, we have also expanded our in store digital offerings to include back catalog PC titles which may no longer be available in a physical format. The number of digital titles that can be offered to customers through this technology is practically infinite and we will continue to partner with publishers to expand the range. In 2013, we partnered with Sony in Europe to better promote their vast digital offerings to our customers. With a dedicated in store section that can be seen on the far right of the slide, this Sony digital section highlights coming soon digital add ons, new release digital content and a large variety of back catalog consoles titles that are available. This dedicated digital marketing played a significant role increasing our console digital sales in the back half of twenty thirteen. In fact, through our partnership and a strong training program for our store associates, we greatly increased our digital attach rate for targeted new releases such as The Last of Us, where we achieved a digital attach rate at launch of over 30%. During the year, we experienced strong growth in Pozans Steam cards with 105% sales growth versus prior year. This growth was driven by a number of new titles that we added to our range such as League of Legends and Minecraft and as we move forward, we will continue to expand the range of Posa cards offered to include the hottest new titles. As we move forward in the next console cycle and continue to also add new product offerings for our customers, I'm sure it comes as no surprise that pre owned product and our buy, sell, trade model will continue to play a major role in driving market share gains. In 2013, pre owned sales grew 1.8% internationally and this growth trend has continued into 2014. We also experienced very strong 2013 as our buy sell trade model provided tremendous value to 2013 as our buy sell trade model provided tremendous value to customers as they upgraded to the next generation of consoles. Making the next generation of consoles and associated software more affordable at launch drove an unprecedented increase in reservation growth in 2013 and subsequent dominant market share. This trade increase also provided us with a healthy inventory position of pre owned product going into 2014. Over the last 3 years, we have remained focused on driving our pre owned business best practices across all of our international markets. From implementing best practices to drive trades in stores to fully launching our advanced pricing algorithms and refurbishment capabilities, we have significantly increased our pre owned margin over the last several years. And I'm pleased to say that in 2013, we achieved record international pre owned margin of 46 0.8%. So far, we have reviewed our progress our progress in expanding our multi channel capabilities, increasing the growth of digital product offerings and the major progress we have made in driving pre owned sales and margin internationally. The glue that pulls all of these efforts together and creates millions of evangelized video game customers are the major strides that we have made in engaging our customers. The foundation for these efforts begins with our global loyalty program. In 2013, we launched our loyalty program in 4 additional markets and we now have over 7,500,000 members across 11 countries. In 2014, we will complete the launch of this powerful program in our 4 remaining Nordic markets. Whether it's called PowerUp Rewards in the U. S, EB World in Australia, GameStop in Italy or Mega Card in France, our integrated loyalty program is the foundation for enhanced customer communication and engagement across our worldwide customer base. During 2013, we also completed the worldwide launch of Digital Game Informer in all markets and we now have over 700,000 international subscribers in 5 languages. Digital Game Informer's unique content, game reviews and frequent scoops further personalizes the world of video games for our passionate customers and creates excitement across the category. We expect the number of subscriptions to double over the next 12 to 18 months. One of the most important advancements that we have made to increase customer engagement and drive market share increases is the approach that we have taken to promote new title launches using all communication tools and it's an integrated and planned approach. 4 years ago, the primary marketing tool for building a new title launch was our passionate and knowledgeable store associates and point of sale marketing such as posters in a window. Today, we are now able to build customer demand months in advance by utilizing advanced CRM techniques through our loyalty program. Targeted communication through emails and SMS, utilizing social media such as Facebook and Twitter, promoting trailers and information on our websites, leveraging advertising and reviews in Digital Game Informer, and finally increasing launch events. While each component of customer engagement is important, when combined in a coordinated fashion, the benefits of an integrated communication program is incredibly powerful. These integrated efforts and the effect on customer engagement can best be seen in consumer expo that we hold each year in Australia. In 2013, the show was attended by 35,000 paying fans. In 2014, we were expecting 45,000 attendees. That's 0.2% of the population of Australia. So to put that in perspective, in the United States, there will be 634,000 people attending one event. I think you will find the following video says it all. This is the EV Games Expo 2013. Pretty amazing. The show is actually held at the Olympic Park in Sydney and the energy and excitement of the fans is incredible. At the last show, when we stopped by facilities the night before the event, there were customers actually lined up to camp out overnight in order to be the 1st to enter the show the following day. One surprise was the show's demographics. Obviously, there was a lot of hardcore gamers in attendance, but I was also very pleased to see the And ticket for prices up to $700 which sold out very quickly. So by the way, I would like to extend an invitation to any of you that might want to come to Sydney and attend the show in October. If there's anyone who's interested, please let Matt Hodges know and you'll experience the show you'll never forget. So with that said, I'd like to introduce Mike Hogan. Thanks, Mike. Good afternoon. I want to update you today on 3 key topics. The first is PowerUp Rewards. We'll take a look at the impact of the program and how are we using it to drive growth and support our new businesses outside of gaming. 2nd topic is our pre owned business, including our strategy of expanding our presence into the value category. The third is our multi channel business and its contribution to overall growth. So let's begin with PowerUp. As you know, PowerUp was launched in late 2010 and has quickly grown to become one of the most successful retail loyalty programs ever. We recently crossed the 27,000,000 member mark in the U. S. PowerUp continues to move the needle. As you can see on this chart, PowerUp member sales continue to grow year after year. Power Up represents the most valuable customers in gaming. Power Up members represent roughly 71 percent of GameStop U. S. Sales. On average, they're 5 times as profitable as the average customer on 3 times the average sales per person. But PowerUp's grown to the point where it represents much more than just the gaming category. Roughly 1 in 5 U. S. Households has a Power Up card. 1 in 12 mobile phone users in the U. S. Is a PowerUp member. PowerUp is a key component in our diversification strategy of expansion into technology brands. Our ability to build and manage relationships with heavy category users gives us strategic advantage in these new businesses. That makes PowerUp a key asset. In the chart on the left, you can see that 76 percent of PowerUp members own a smartphone. We know this from the member profiles, from surveys, and from e mail data. On the right, you can see tablet ownership. The The first thing you'll notice is 47 percent tablet penetration. You can see that PowerUp members are early technology adopters. These are just two examples of the kinds of data we have that can be used to bring new brands business. Let's take a look at a very specific example of just one way in which we are leveraging PowerUp to drive Map on the left shows the Dallas market. Specifically, the green pin represents the new Simply Mac store that opened in Cedar Hill, just south of the city. The purple dots represent approximately 96,000 Power Up members we were able to target who live within a 10 mile radius of the store. On the right, you can see the offer that we sent to these targeted Power Up members. We know that there are many existing GameStop customers who have a strong interest in products beyond gaming, we got on this offer were equal to well over a month's worth of we got on this offer were equal to well over a month's worth of transactions for the store. Our belief is that this type of programming can significantly accelerate the sales ramp up for new stores. Here are 2 more examples of how we plan to use PowerUp to accelerate our new businesses. In the center, you see a map of the U. S. Representing our 27,000,000 Power Up Rewards members. On the left is an example of an offer that we sent to Targeted Power Up members for a new AO store opening. This is similar to the Simply Mac example on the prior page. On the right is an example of an offer we use to promote the re commerce business within the existing GameStop store base. We've had strong success with these programs and as we continue to explore new ways to leverage the power of PowerUp. I'd like to move on now to my second topic, which is an update on the pre owned business and our expanded value strategy. First, let's take a quick look at our core pre owned business. The new console cycle will drive growth in our pre owned business. We know this for several reasons. The chart on the left looks at GameStop pre owned store comp sales for the years following the Xbox 360 and PS3 launches back in 2,006 and 2,007. In each case, we saw significant positive growth fueled by a new generation of hardware and software driving consumers to trade up their systems, and by a new generation of value warning consumers coming into the category at attractive price points. So history suggests strong growth. We're seeing that same behavior with the next generation consoles. The chart in the middle shows trade transaction penetration for next generation hardware and software. This is the percent of transactions that were partially or fully funded by trade credit. As you can see, nearly 30% of all of our next gen hardware and software to date has been purchased with the help of trade credits. This is a strong sign that consumers see trades as a way to get the new technology that they want and this provides the inventory to grow the pre owned business. Finally, there's a lot more to come. The chart on the right shows that 65 percent of PowerUp members indicate they still plan to purchase next generation systems in the next year or so. This represents a huge wave of trades coming in over the next year or so. Now let's transition to the broader value opportunity. As we discussed a few weeks ago on the earnings call, GameStop has identified another way to deliver value priced product to our consumers. Millions of consumers already associate GameStop with great value because of our trades in pre owned games. We're building on our core strengths as we expand focus to the broader value opportunity. We see at least 4 competencies that can be leveraged to be successful in this area. The first is our category knowledge. The value of a specific game changes over time and it can fluctuate significantly given market conditions at any given given time. We have years of experience keeping track of this and as a result, we know what to buy and we know when to buy it. 2nd competency is our customer relationships. Each of our 27,000,000 Power Up members has a game library with their historical to drive trades. To drive trades. The 3rd area is our buy sell trade expertise. Managing pre owned inventory is a complex task. We look daily at inventory thousands of items across all of our stores. We constantly rebalance inventory to ensure proper in stock levels for daily demand, for regional and local preferences, and promotions. Finally, our state of the art refurbishment facility that all of you saw today gives us a competitive advantage in getting high quality product to the market quickly. A good case study is our re commerce business. We expanded into re commerce of consumer electronics several years ago and we leveraged each of these key competencies on our way to building profitable and fast growing new business. Here are two examples of where we're going in 2014. According to NPD, new software under $20 is a $400,000,000 plus per year business in the U. S. Alone. A business in which GameStop can significantly increase share. The key to this opportunity is ensuring that everything we do here is incremental to our existing higher margin games business. It's worth taking a moment to explain the details of how we're going to do that. Historically, pre owned has always been a supply constrained business. There's been a lot of energy communicating to consumers to encourage trade ins. Despite our best efforts, there are always a number of pre owned games for which the consumer demand exceeds the available supply. On the left, you see three examples of current pre owned games for which the store out of stock rate exceeds 50 percent. The expanded value strategy allows us to go procure this inventory through other channels. In some cases dealing directly with publishers and close out products. The sales are incremental because we are replacing out of stocks. The margins are below traditional pre owned, but above the GameStop average, thus adding incremental profit dollars to the business. On the gaming side, our strategy focuses exclusively on games where we can demonstrate unmet demand in order to ensure incrementality. But the value strategy goes well beyond just video games. We see significant opportunity in emerging technology products as well. On the right, you can see a few examples of the kind of technology products we believe offer a future opportunity for buy, sell, trade. We are currently testing some of these products in our refurbishment center. Now I want to move on to my final topic, which is the role and growth of multi channel at Stop. Multi channel is increasingly important to all retailers and Game Stop is exception. As you can see in the chart on the left, 60% of our customers visit us on the web or mobile prior to making a transaction. This number continues to increase, particularly as our mobile traffic continues to explode. We can see the direct impact of multi channel customer engagement. Our data shows that 26 percent of web visitors who do not buy a given visit purchase in a physical GameStop store within 48 hours. Multi channel is driving growth at GameStop. For fiscal 2013, multi channel sales increased by 48%. We experienced record multi channel sales, profits, and growth. One key component of multi channel is our web and store business, which grew over 400% in 2013. Our mobile traffic is exploding, 76% growth in traffic and 61% growth in revenue. Once again, GameStop ranks in the top 25 retail websites according to Comscore. We know the future is bright for multi channel. 80% of surveyed customers say they plan to visit a store to purchase a product they saw on GameStep dotcom. Now, let's dive just a little deeper on mobile, a key component of multi channel. Our current mobile app has proven to be a big success with over 4,000,000 installs. We continue to see strong double digit growth in both traffic and revenue. Mobile app users spend significantly more and the app provides engagement areas like search, product information, and store locations. We continue to invest heavily in mobile and we are We're entire customer experience, here's a peek under the tent. 1st, we will have an all new user interface. We want to make it even easier to get what you want. Find a game. Find a store. Get to PowerUp Rewards benefits. And discover our new technology brand products. 2nd, we're adding a whole new trade center. Customers can learn about trades, look up values, and see current promotions. 3rd, we'll make the GameStop pre order experience even better. You can pre order or purchase in app, select pickup at store or home delivery, and have full visibility of all your reservations from your phone. These are just some of the enhancements including in the launch which will be in market in June. In summary, Power of Rewards is driving growth at GameStop and it will be a key strategic advantage as we expand into technology brands. The pre owned business is experiencing strong growth as consumers trade into the new consoles. We see an opportunity to significantly expand into a broader value business, both in GameStop. It's driving both our legacy business and our new business. Multi channel is a key priority at GameStop. It's driving both our legacy business and our new businesses. Thank you, and we will now take a 10 minute break. Okay. All right. We are on to the Technology Brands section of the session. As we turn the discussion over to the technology brands leaders, let me show you the markets just to remind everybody after we talked about video games for a while. The gentleman coming up here now to present will be talking about these addressable markets we discussed earlier, the Apple, the postpaid wireless, the prepaid wireless that are very large, very exciting categories with addressable markets in the 100 of 1,000,000,000 of dollars of potential. Let me give you a word on each of these 3 leaders before we bring them up. The first is Steve Bain and this is a little bit of inside baseball, but I think it's appropriate in this room. The first time any of us ever heard about Simply Mac was when an email crossed our desks in May of 2012 from an investment banker in Denver who was seeking buyers for a little Apple business in Utah. And of course, we pursued that opportunity and over the course the next 2 years we've all been blown away at GameStop by the resilience and persistence of founder Steve Bain not only completing our transaction with Apple Support, but by his build out of stores in places like Midland, Texas, Shreveport, Louisiana, Tyler, Texas, Lubbock, Texas, Springfield, Missouri, Lincoln, Nebraska and a few others. These are all places that are very, very far in many ways from Salt Lake City, Utah. Our second leader is Jason Ellison. Sometimes I like to say that the harder you work, the luckier you get, but when we were doing our strategic work last spring trying to look at adjacent markets and how to grow and profit from the core of GameStop, we were seeking an opportunity in the wireless dealer space. We were able to find another extraordinary leader named Jason Ellis at Spring Mobile. And as we got to know each other, Jason and his team chose to sell their business to GameStop to fulfill their vision of building the largest AT and T dealer in America. Now Jason is known at AT and T as one of the top young leaders in their network and he is a relentless deal maker. In fact, since we began our discussions, Jason has closed 12 acquisitions and added 101 stores. Most recently on March 31, a 24 store acquisition in the Northeast. 3rd is Joe Gorman. One of the things that has occurred is as we entered into our broad partnership with AT and T, that relationship led us to an invitation by AT and T to enter the prepaid business. And as they were launching that brand called AO at the time, now it's become Cricket through an acquisition, we saw an opportunity to build a larger business with them. Joe Gorman, a long time GameStop field leader and a buy sell trade expert runs that business for us today and you'll hear from him. Joe is no stranger to a challenge as he demonstrated his tenacity and innovation in the start up of our re commerce business in 2011. So all of these leaders are capable of running large businesses and that's why they're in the roles they're in. We believe each of these technology brands has the potential to become a $1,000,000,000 business within the next few years. With that, I'll ask Steve Bain to come to the podium. Thank you, Paul. Good afternoon, everyone. I'm excited to share a few brief details about Simply Mac, the largest Apple specialist and premium retailer in North America. As you know, GameStop made a simply a strategic investment in Simply Mac in November of 2012 through an equity investment and purchase of 49.9 percent of the company. In November of 2013, GameStop completed the acquisition of the remaining 50.1 percent of Simply Mac and we are extremely enthusiastic about the growth opportunities of 1 of the newest subsidiary companies of GameStop. Simply Mac was founded in Salt Lake City in 2000 and in August of 2006. Simply Mac currently operates 23 retail locations in 10 states all in the Western US. 14 of U. S. 14 of these 23 stores were open in a 5 month period from August 2013 to December 2013 as a direct result of the equity investment made from Stop. Each location offers a full service solution for Apple customers including sale of new and certified pre owned Apple products, warranty and non warranty repair services and personalized customer trainings through the company's proprietary training branded Simply Answers. And I know many of you were able to visit the Simply Mac store yesterday in Cedar Hill. Simply Mac leverages GameStop's extensive buy sell trade expertise and corporate resources and offers buy sell trade in each retail store for consumers in these markets. Simply Mac also has a business sales team based in Salt Lake City, servicing many small and medium sized companies for break fix repair, managed services, help desk support, and integrated server and desktop support. We're excited to announce that as of April 1, 2014 Simply Mac has also signed a contract with AT and T Mobility to offer an integrated sales and service solution to customers for Apple products like iPhone and iPad and offer them an integrated service solution with AT and T for these connected devices. This allows the customers to not only purchase all of the Apple Hero products directly in our stores, but also creates an opportunity to connect these devices with the AT and T network and realize additional revenue associated with signing contracts for each of these connected devices. Simply Mac currently employs 240 employees in these 10 states. Here are some examples of the exterior of our Simply Mac retail stores. Of our current 23 stores, 9 are located in malls and 14 are in pads and strip centers. Our stores are branded Simply Mac and have a very distinct and independent brand, but support the simplicity and innovation that's so key to Apple products. And again, many of you had that opportunity, last evening to witness what what what looks like inside of a Simply Mac store. Here are some examples of the interior Simply Mac retail stores across the country. The fixtures, colors and construction support the look and feel of the brand while also allowing the customer plenty of open space to experience the Apple products. Separate tables and areas are available in each of these stores for service and repair and personalized customer trainings. As Apple continues to innovate and manufacture these amazing consumer technology products, there exists not only a need to distribute these products, but also to provide warranty and non warranty service repair for each of these products. Simply Mac is one of a very few select partners that has the ability to provide authorized warranty and non warranty service on the iPhone, including the ability to swap the handset for the customer at the point of sale. This service is unique to Apple retail and to a select number of authorized service partners. The service of swapping handsets for customers in retail stores is not currently available in carrier owned retail stores. Through this program the opportunity to meet the needs of customers and repair and swap iPhones in our stores grew substantially in fiscal 2013 as noted in the graph. Next only to Apple retail stores, Simply Mac has the largest number of locations offering warranty service repair for these Apple products. Simply Mac launched the buy sell trade program for computers about 5 years ago and for iPads about 3 years ago. Facilitation of computer and iPad devices are managed internally at Simply Mac stores for trades. Through the recent partnership with GameStop, Simply Mac has expanded this to offer to operate to this expanded this offering to include iPhone, ipod and non Apple consumer technology devices including Kindle tablets, Windows tablets and Android and Windows smartphones. The facilitation of these additional devices are managed through the GameStop refurbishment center which many of you visited today. Simply Mac has also been able to leverage the pricing and quoting technology from GameStop that is now available to customers on the Simply Mac trade program web page that provides instant quotes for customers on these devices that they can redeem in our retail stores. Customers are able to receive instant quotes for these devices on the website that can be immediately used for store credit. Simply Mac, an authorized Apple specialist provides a complete solution for the sales and warranty service for the popular Apple devices. This specialty retail complete solution provides a competitive advantage for Simply Mac over many current national retail partners for Apple. Sales of all the Apple products and in store warranty and non warranty repair creates a community for Apple customers in areas that are not serviced by an Apple company owned retail store. Simply Mac not only has the ability to provide warranty and non warranty repair solutions for the devices purchased in Simply Mac stores, but also for all Apple devices independent of where these were purchased including those from national retailers. This slide currently shows the existing Apple company owned retail stores and represents about 250 stores based in the United States. These are traditionally in large markets with 52 of these stores in California and about a 100 in several of the Northeast states. So of those 252, about 150 of those are in the East Coast States, which which leaves a broad open geographic area for companies like Simply Mac to build retail stores. We're working closely with Apple to identify markets that are underserved by current distribution channels. The green dots on this map represent our current 23 Simply Mac stores. The red dots, 70 of those represent focus markets for us in 2014 and 2015. And the additional blue dots, fifty dots represents other markets identified by Apple and Simply Mac for future growth. As you can see there are several markets that are currently underserved by Apple Retail and other distribution partners for a complete solution of services offering sales, warranty and non warranty service repair and personalized customer trainings. We've also had key discussions with Apple leaders of international markets on our investing, investigating opportunities in those respective countries. In addition to identifying small and medium sized markets that are underserved and lack an Apple retail location, both Apple and Simply Mac believe that there are also a a retail stores. This graph shows the Kansas City, Missouri market. Based on the customer demographic that we've leveraged from Apple, GameStop and our real estate partners, we've also been able to identify areas in these larger cities that would support a new Simply Mac retail location. Our current plan is to build 20 new stores in 2014 and an additional 50 stores in 2015. This strategy will be complementary to the Apple company retail channel. Simply Mac is the only current Apple specialist in the country that has both a defined growth and capital partnership to be able to fund this type of growth. The ability to leverage key strengths of GameStop has been critical to our ability to grow with this type of scale into these new markets. During the last 8 years, we worked closely with Apple to develop a company and growth strategy that's focused on the customer experience, represents the strength of the Apple brand and is complementary to the current Apple retail stores. Apple supports the growth of Simply Mac for multiple reasons. Let me name 3. 1st, Simply Mac's current growth strategy is complementary to the growth strategy of Apple Company and Retail Stores and other partners. 2nd, Simply Mac provides a complete solution for customers that shop in our retail stores including access to all innovative Apple products and accessories, warranty and non warranty service repair and personalized customer trainings. And third, the partnership we now have with AT and T Mobility allows our sales associates to activate these devices in our stores and during the sales process address AT and T network, We're also selling and activating the popular MiFi and wireless home devices and products in our stores. Apple is very aware of the synergies and supports the Simply Mac and GameStop relationship primarily as a vehicle to support and drive this scalable business model to meet the needs of customers in these small and medium sized markets. I've spent many days inside of the walls at Apple and Cupertino working with the sales and distribution channels and teams as we've worked through our growth strategy. Paul and I have also spent considerable time with senior Apple executives in Cupertino, outlining the 2014 and subsequent year annual growth plans. Apple sees Simply Mac as a scalable solutions partner to their current distribution strategy. Branded opportunity for customers to purchase and exclusive dealer branded opportunity for customers to purchase and service their favorite Apple products in a local community location. Jason Ellis will now share some exciting details about the operations and growth of Spring Mobile. Jason. Thank you, Steve, and good afternoon, everyone. Based on the wide array of questions I received last night, I'm very excited to share some information with you about one of the newest companies to the GameStop family, Spring Mobile. Spring Mobile is an exclusive retailer of AT and T products and services. The company was founded in 2,001 and has 13 years of profitable wireless industry experience. In the Q4 of 2013, Spring Mobile became a wholly owned subsidiary of GameStop. Currently, the business operates 203 retail stores in 20 states and employs over 800 associates in the U. S. Many of our key employees have been with the company since its inception and have continued under the GameStop ownership structure. Spring has enjoyed a long 2. The company remains headquartered in Salt Lake City, Utah. These pictures are representative of the exterior branding and interior design of our retail stores. Please note that the stores use the AT and T brand as the primary brand on the exterior. Recently, Recently AT and T has made meaningful investments around store design and the total in store customer experience. All of the interior design is coordinated with AT and T and the fixtures are designed to offer all AT and T products and services, including mobile phones, tablets, U verse Television and digital life products were available. I will share more information about the future retail service opportunities later in the presentation. This slide is representative of the US footprint for Spring Mobile. We have grown this business through both organic white space growth as well as multiple acquisitions. Our success record in both high and low market share areas is something that we are proud of as an organization. Regardless of the size of the market that we are operating within, AT and T can count on Spring to be a highly productive retail partner. We have some of the industry's best and most highly trained associates helping customers in each of these stores. With their help, Spring Mobile has doubled in size during the last year. With an expanding footprint, we have not come near the potential for the business. There are still 30 states and many communities that could benefit from a local Spring Mobile store. Since this postpaid wireless business is new to the GameStop family, I wanted to share some industry statistics. These should be additive to the information that Paul has already shared about the size of the industry. At the end of 20 13, the U. S. Device penetration rate was 105% as compared to the U. S. Population, having 331,000,000 devices connected to a wireless network. Based on total subscribers, the largest carriers in the for all four of those companies as of last week was $440,000,000,000 Most of the leading technology companies in the world, including Microsoft, Google, Samsung and Apple to name a few, continue to develop consumer products for the wireless industry. Many of these organizations are relying on growth in mobile as they plan their future. The wireless industry has grown through 4 separate and distinct waves of revenue. The first wave was based on minutes of voice usage. So you may recall trying to figure out how many minutes you were going to use per month. The second revenue wave was text messaging. And similar to voice, you may recall a time when you had to decide how many messages you or your teenager were going to send per month. The 3rd and most recent wave was related to growth in data use from consumers and enterprises. This wave is still growing due to the continued adoption and increased functionality of smartphones. We believe that the next wave, the 4th wave, will be related to various new technologies that will be built and developed and then connected to the wireless network referred to as connected devices. On the screen are some of the larger categories that we believe will drive growth in the industry beyond the mobile phone category. We believe that mobile payment, mobile computing, the connected car, home security and wearable fitness will each be disruptive to current industries and additive to the wireless space. These technologies are not only very exciting, but many will be new to the consumer. The complexity of the products and high level of consumer interest will, in our opinion, drive greater need for retail distribution. We believe that customers will want to experience these products in a friendly retail environment. As these products are developed and launched, we anticipate that they will be heavily marketed by the wireless carriers. The consumer demand for the new products along with the carrier marketing will drive consumers to retail for product demonstration and education. This graph is representative of our best estimates of the AT and T branded retail store landscape. As you can see, there are approximately 4,900 total exclusive AT and T branded retail stores. The distribution is broken down into 3 categories, AT and T corporate locations, which are approximately 2,200, national dealers with approximately 985 locations and local dealers with 1679. Spring is a national dealer and is currently AT and T's 3rd largest dealer in the U. S. Even as the 3rd largest, Spring only represents 4% of the approximate 4,900 total exclusive branded stores, which provides a large opportunity for continued organic and acquisition growth. The exclusive dealer base is highly fragmented as demonstrated in this graph. Of the remaining 1679 local dealer locations, 86% of those operators have less than 10 retail locations. Capital, retail acumen or desire to make the next industry transition. The continued pressure for reinvestment in store design, employee training and delivering an extraordinary experience will continue to put pressure on smaller operators. At the same time, AT and T is working diligently to improve the customer experience inside of all AT and T branded retail locations. These industry dynamics will continue to create acquisition opportunities for Spring Mobile. Now we all know that good strategy is only as good as the execution behind it. So putting theory to practice, this is a chart of the activity that we have undertaken since signing a letter of intent to sell the business to GameStop. With GameStop's expertise paired with Spring's operating platform, we've been able to double the size of the business adding 103 retail locations in just 8 months. And this isn't just a story about store growth. In all 12 of these acquisitions, we have been able to improve the overall sales productivity of the retail stores. We have also been able to retain key sales employees and grow the culture of our company. We have an efficient acquisition integration platform. From the acquisition date to complete integration takes less than 120 days. In the last 8 months, we have duplicated what previously took us 12 years to build. This is a thrilling part of the opportunity and we plan to continue this role of strategy as part of our growth plan in 2014. As we have discussed, the next wave of wireless revenue is quickly approaching. We believe that AT and T is an excellent partner and will continue to be an industry leader in both market share and product innovation. We know that the existing distribution is highly fragmented, which will create further acquisition opportunities. GameStop provides tremendous value in allowing us to scale quickly by leveraging their knowledge in the critical areas of employee disciplined capital allocation, real estate store construction and general retail management. Spring has 13 years of operating experience in the wireless retail space and can provide an AT and T like experience in our existing and future retail stores. AT and T views Spring Mobile as an important distribution partner that fits their store growth strategy. We intentionally align around their key sales and customer experience initiatives and consistently deliver high quality results. We have a proprietary and industry leading training platform that allows us to create thousands of positive interactions with lifetime customers. It is fair to say that our sales associates are passionate about the industry and advocates of AT and T products and services. As Paul mentioned, I was one of the founders of Spring Mobile in 2,001. I have spent most of my adult life riding the various waves of wireless and digesting their impact on retailers. We have been through numerous industry cycles, carrier consolidations, compensation changes and other obstacles. The whole ride has been both challenging and thrilling. But on the backside of those 13 years, I can honestly say to you that I'm more excited about the future than I am the past. This is an exciting growth opportunity for all of us. Thank you for your time today. And now I'm going to turn the time over to Joe Gorman to discuss the cricket business. Thanks Jason. Good afternoon, everyone. I am very excited to be here to talk about our newest technology brand partnership with Cricket. Cricket is formerly known as AO Wireless. Looking beyond gaming, one of the largest markets for us to participate in as you've heard is a wireless industry of about $185,000,000,000 If you look at the market in terms of subscriber we estimate about 25% of the total connections are no contract or prepaid. The ASPs as you'd imagine are lower than the postpaid business, but even so, we estimate that the segment within wireless market is greater than $20,000,000,000 which in and of itself is larger than the U. S. Video game industry. We expect the total wireless market to grow about 3% over the next few years. We expect the no contract space of the market to between 5% 7%. So with Cricket, the newest addition to the partnership, we are very excited to be participating in a high growth segment of wireless. All the usual suspects are players in the segment and there's still consolidation occurring among the carriers. As you can see, with AT and T's acquisition of Leap Wireless, Cricket is the consumer brand under Leap. AT and T's share of the segment moves to about 17%. LEAP had about 4,500,000 customers at the time of the acquisition. When you consider the fact that the purchase including debt was close to $4,000,000,000 and the comparative share AT and T has in the postpaid segment, we're very excited about where this brand is headed. Additionally, AT and T has invested nearly $100,000,000,000 in the network over the past 5 years. They're focused on delivering top consumer experience across their network and we believe we can help them acquire the customers that they are looking for. The stores we operate currently are actually branded AO. AO was the no contract brand AT and T launched last year and was their 1st big standalone effort in the segment. During the Q2, GameStop along with the rest of the legacy AO dealer community will be changing over to the new Cricket brand. We believe that coming out of the acquisition the time is right for us to enter the segment with our partners at AT and T and Cricket. We love running gaming stores and we have for a long time and now we also love running wireless stores and the customers love shopping in them. In the no contract segment, 86% of the consumers buy through brick and mortar retail locations. We love that traffic and it presents great opportunities for us to apply some of our core service competencies. Customers shop for new devices and come in for new device launches. A portion of these customers actually come back to the stores every month and utilize the brick and mortar model to actually pay their bills. This frequency presents opportunities like upgrading devices, upgrading services or rate plans, but it also provides opportunities for us to introduce them to premium devices at value pricing through the re commerce program. So a brief history of GameStop Mobile. GameStop Mobile is really simply the name we use internally for the division within GameStop. We coined the name in 2011 when we began to test beyond gaming with the iDevice here in Dallas. It evolved into the re commerce program we now have in all the GameStop stores. During that time, we also got into tablets and a variety of prepaid handsets in some select stores. The quick AO history is that in May of 2013, during the spring acquisition, AT and T asked us if we'd be interested in being a dealer in the no contract space and testing some of the AO stores in a few markets. In November 2013, we began to open these stores and now in Q2 we are participating in converting all of our stores to the new Cricket brand. GameStop currently operates 35 stand alone stores in 4 markets and one store actually in New York City. We've been active in all those markets for just over 4 months. Additionally, we are selling AO Cricket service inside of about 100 GameStop stores in Dallas and Los Angeles. This is actually a branded section inside the GameStop stores generally to the re commerce phone area. In these stores, we can activate either a new device or one of our re commerce devices on the Cricket service. The in store program is very new, but we like the early results and we can see the potential of having this as an ongoing part of our mix. While the current 35 store base is not overwhelming, we did deploy these standalone stores very quickly to become one of the largest dealers in terms of store count in a very short period of time. We spoke a lot this morning about our retail core competencies. Those strengths clearly apply in this brick and mortar model. Our real estate team allowed us to analyze and deploy quickly and intelligently and of course enabled by our capital position. Adding the new store concepts gives us even more flexibility beyond gaming with the stores portfolio. In fact, when we opened the West Coast market, we converted 1 of the GameStop stores in Palmdale, California over to an AO where we had 2 GameStops in close proximity. Also, we just opened a new store in Irving, Texas last week that was previously a GameStop location. As we grow the technology brands and the technology stores, we will always look at options for white space builds or conversions of existing GameStop stores where it makes sense. Buy sell trade. Buy sell trade of electronics, specifically phones which began in GameStop stores a few years ago is even more relevant in this model. This customer is clearly in the market for a new device or service when they walk through our doors. Our Reef Commerce phone program in the Cricket stores offers great devices at value pricing as you saw this morning in the store. It also makes new device more affordable by giving the customer credit for their old phone through the trade program. Although it's fairly new, we really like the results of this program in Cricket stores. Recently, we are seeing upwards of 30% penetration on the sales of re commerce devices in these stand alone stores. We have another PowerUp slide. PowerUp Rewards has been an effective tool in the core business and we're also using it in the new stores. This slide shows an example of the PowerUp base around 2 of the AOPricket stores locally. PUR has been powerful for driving traffic and having successful grand openings for us. In fact, the 4 markets we just opened in Los Angeles, Cleveland, Seattle and Dallas, we messaged nearly a 1000000 members in those cities. On the right, you see example of another email to our members. Clearly, it can be used in a variety of ways for promotions, new device launches, and things like that. It is a very exciting program that we are fortunate to be able to take advantage of with the new technology brands. When you combine the network, advertising commitment and expertise, device and rate plans of AT and T with our core competencies of operating stores with great service, smart, rapid new store deployment, training and store management experience, we think the partnership is a great fit and we are really looking forward to growing with AT and T in the space. I have been involved with the original AO team. We call them the legacy AO team in Atlanta since we began the discussions of us being a dealer for them. We felt from beginning like we shared a DNA for growth and a passion for the business and especially for the new brand. Keep in mind, Cricket today has tremendous opportunity to grow since they are only in approximately half of the major U. S. Markets. We're looking forward to participating and bringing our unique value to the fast growing space. Thanks and at this time, I will bring up our CFO, Rob Loy. Alright. Thank you, Joe. Good afternoon. I hope We're to start by spending just a couple of minutes reviewing what's happened to our business since 2,008. We've talked a lot about fiscal 2013 on our call on March 27th, so I'll keep this brief. As you can see from this slide, the top line of our business has increased slightly since 2,008, about 3%. If you add the digital receipts that aren't reported as GAAP revenues, we showed an 8% increase from 2,008 to 2013. Meanwhile, as Paul and Tony mentioned, the physical games market declined 39% since 2008. Hopefully, you're very familiar now with the many ways in which we've protected our business during the last cycle. Our EPS has grown a total of 25% since 2008 on the strength of our buyback program. This slide sheds a little bit more light on our buyback program and our capital allocation. We announced the capital allocation plan and buying and began buying back stock heavily at the beginning of 2010. Since then, we bought back nearly 1,400,000,000 over a third of the company. If you had invested with us along the way, you'd be up about 80%. In 2010 2011, we retired our remaining debt of $450,000,000 After retiring debt at the beginning of 2012, we initiated a dividend and have raised the payout three times from an initial quarterly rate of $0.15 per share to $0.33 per share now. We made acquisitions in digital gaming in 20 10 2011 and made acquisitions outside of gaming with Spring Mobile and Simply Mac in 2013. As we've discussed today, you'll see us leverage some of our core competencies in those retail concepts to contribute to our growth over the next few years. We also reduced our capex annually from 2010 through 2013, a total of about 36%. As we reduced our store count and implemented a sales transfer process using our PowerUp Rewards platform. Thinking back to the comments I gave during our Investor Day 3 years ago, we laid out a roadmap to 2014. We've fallen short of the revenue and the earnings targets we laid out given the struggles of the last console cycle. However, if you recall, I made the comment that we could generate $2,000,000,000 in free cash flow over the 4 year period from 2011 through 2014. So how are we doing on that target? We generated 1,560,000,000 through the 1st 3 years and with the $450,000,000 to $500,000,000 in free cash flow we project for 2014, we fully expect to exceed that 2,000,000,000 dollars What did we do with that $1,560,000,000 in free cash flow? 75% of it went directly back to shareholders in the form of buybacks and dividends. 16% was used to pay off the last 250,000,000 of our senior notes back in 2011 and lastly, we used 7% for strategic acquisitions. Turning to the guidance we gave on call last month, we guided that sales would increase between 7% 10% for the Q1 and 8% to 14% for the year. These increases are driven primarily by Xbox 1 and PlayStation 4 hardware, but we see growth in each of our sales categories. We project that same store sales will increase a little less than revenues due to technology brand stores not being included in our comp calculations. Our full year sales growth of 8% to 14% is a little below the market model growth of 10% to 15%. Percent. Remember that the market model covers new digital and physical console gaming only. Our planned growth in those categories is offset by forecasted declines in handhelds and lower growth in sales in the other category. Our operating margins are forecast to be 5% to 5.5% for the Q1 compared to 4.7% in the Q1 of last year. For the full year, we expect operating margins to range from 6.5% to 7% compared to 6.3 percent in 2013. Net income for the Q1 should range from 64,000,000 to 70,000,000 dollars which is growth of 17 to 28 percent over the 54,600,000 in Q1 of last year. For the full year, we project net income growth to increase between 12% 22%. During our Q 4 earnings call, we made some effort to point out that we have given guidance on share count based on buybacks done to date as of the date of that call. Share count is still considerably higher than consensus. EPS for the Q1 is expected to range from $0.55 to $0.60 which is a range of increase of between 19% 30% over the $0.46 we earned in Q1 last year. For the full year, EPS is projected to increase between 13% 23% over the $3.01 we earned in fiscal 2013. This slide shows the primary drivers of the increase in EPS from 2013. The $3.55 we depict here is the midpoint of our guidance. No magic to that number. As you can see growth in the video game business is the primary driver while our investments in technology brands are also accretive. Lastly, you can see the effect of the buybacks we did in 2013 and up until we gave guidance in March. Again, this does not assume any buybacks going During our earnings call, I described 2 changes that impacted our gross margin and SG and A. One was in how we classified cooperative advertising funds we received from vendors and the other and loyalty costs and the other was the modification of our sales categories. You may be asking how to model margins by category going forward. This slide gives the projected margin ranges we expect for each of our sales categories. Hardware will range from 8% to 11%, which is higher than historical rates due to the classification change in co op. Software ranging from 20 to 23% margin also reflects the co op change. As we discussed on the earnings call pre owned and value should range from 42 to 48%. Accessories should range from 37 to 39 percent digital from 60 to 70% and other from 33% to 37%. We expect mobile and consumer electronics to range from 18% to 24%. However, given how new the technology brands businesses are to GameStop and the growth we see there, we will clarify guidance on the mix of sales than due to where the mix of sales than due to where we classify co op and loyalty costs. I think this might be the slide some of you have been waiting for. In 2014, we expect to close 2% of the video game store base and add between 304 100 stores to our technology brands business. This slide shows where we expect that store growth to come from within the Spring Mobile, Simply Mac, and Cricket brands. As you can see, we expect between 20250 new stores in Spring Mobile. That growth will come through acquisitions of smaller dealers and through opening new white space stores. Adding these numbers up you can easily see that Spring Mobile could be over 400 stores by the end of 2014. Jason is actively working toward that as his goal. We've targeted 20 openings for Simply Mac and could augment these through an acquisition or 2. We've targeted between 101150 openings for Cricket. With the Cricket acquisition now complete by AT and T and our stores being rebranded to Cricket as you heard Joe discuss, the roadmap for growing this business becomes much clearer. We've also given some clarity on this slide about the per unit economics for the technology brand stores compared to the typical Game store. Revenues for Spring Mobile stores run lower than a GameStop store and fluctuate based on the nature of the programs which AT and T runs. When AT and T runs a program like next, our revenues may be impacted, but our gross profit dollars are generally not impacted. Spring Mobile store is slightly less than a GameStop in dollars, but the operating margins are comparable, if not higher. The stores are larger than GameStop stores, but cost less to build because a portion of each store build out is paid for by AT and T. Simply max stores do considerably more revenues than a GameStop store with a range for new stores from $2,000,000 to $3,000,000 but with a tighter gross margin structure. Simply Mac has mature stores which perform at a much higher sales and profitability level than those shown here. As we grow the store count and expand geographically, we're using a model built with conservative assumptions. These stores are approximately twice the size of a GameStop store and cost more to build. In Simply Mac's case, a portion of the build out is funded by Apple. A mature cricket store is projected to do approximately half the revenues of a typical GameStop store with mature contribution of $50,000 to $70,000 Buildouts are less than a GameStop and again are funded in part by AT and T. We used historical operating data for Spring Mobile and for Simply Mac stores with comparable volume to build this slide to build our internal pro form a and IRR models for each store. Due to the new business models for cricket stores, we used estimates developed by AT and T and refined by us to build an IRR model for new cricket stores. In every case for both white space stores and acquisitions, the pro form a IRR exceeds our hurdle rates. As we look at the economics of the stores, the key competency that GameStop can bring to the table to increase profitability and drive the returns is the buy sell trade model, which is not yet much of a factor in any of these businesses. For fiscal 2014, we expect our technology brand stores to generate revenues ranging from 375 to 425,000,000 We project that we can have over 1,000 technology brand stores by the end of 2016. We believe that this new segment can exceed $1,000,000,000 in revenues by the end of 2016 with a contribution of approximately $75,000,000 in operating income. It's conceivable that technology brands could be 10% or so of revenues and operating income in 2016. For 2014, we see the following uses of our estimate of $450,000,000 to $500,000,000 in free cash flow. We expect that over $150,000,000 will be committed to the payment of dividends at $1.32 per share. The exact amount depends upon share buybacks. Our dividend currently yields over 3%. We project that the acquisitions we make in support of the technology brands growth will total between $50,000,000 $100,000,000 The remainder of our free cash flow generation will get put into buybacks. We expect to increase our capital expenditures from $125,000,000 in fiscal 'thirteen to approximately $160,000,000 dollars The increase will be driven by opening new Spring Mobile, Simply Mac and Cricket stores and providing infrastructure for those businesses. Our investments in the U. S. And international video game business will remain comparable and as we open fewer stores the spend will shift to technology investment and store remodels to optimize customer experience as we lead this new console cycle. As we evaluate investment in the technology brands businesses we want to make sure that we're driving a higher return for shareholders than simply operating the video game stores as we had in the past and returning all the cash to shareholders in the form of buybacks. We've created long term projections both with and without investment in growth in technology brand stores. We then evaluated the future return on invested capital and modeled the future stock prices using a free cash flow to equity model and a dividend discount model. In each case, investing in technology brands stores drove a higher ROIC and a 20% to 30% higher stock price than operating video game only stores. In summary, GameStop is increasing value as we continue to dominate the video games business and move into new areas beyond gaming. As a retailer, we have positive metrics compared to other retail peers with higher and our growth and our growth through diversification should answer the questions surrounding our terminal value. We believe combining trends with the core competencies we can extend into other retail categories will lead to continued strong and growing cash flow. We've got 1 year left on the $2,000,000,000 cash flow target we gave 3 years ago and as we look ahead to 2015 to 2018, we believe we can repeat that $2,000,000,000 in cash flow and add some growth to it. Again, as we see opportunities to invest in the growth of the business, we will do so. Beyond those transformational opportunities, we will continue to return cash to shareholders through our commitment to the dividend at $1.32 per share this year and through buybacks. Now I'll turn it back over to Paul for his concluding remarks. Thank you, Rob. Not quite 2 hours of financial models. Very good. Before we head into the question and answer section that will be coming up, you'll have an opportunity to get all of the speakers and leaders up here and we can have a discussion or anything that's on your mind. I want to share some key investor takeaways from this meeting with you. As we see them, these are the investor takeaways. 1st, we intend to maximize our leadership position in video gaming to drive sales and profits through the new cycle. We understand clearly that we are in the sweet spot of the executive talent that allows us to grow consumer electronics and mobile revenues and profits through technology brands. We will leverage buy sell trade, power up rewards and our other skills to enhance profitability in those businesses. Our models show, as you heard Rob say, that entering these businesses is accretive and will drive higher returns and shareholder value in the and expect to continue. And 4th, we and expect to continue. And 4th, we will grow the terminal value of GameStop through diversification. Although we are confident assign a terminal value to that segment. By leveraging our assign a terminal value to that segment. By leveraging our skills into technology brands, we will create incremental, diversified profit streams in new categories and will unlock terminal value and enhance the attractiveness of GameStop as an investment. Stop as an investment. And with that, I'd like to invite the speakers, to the stage and we will, do some Q and A. Go right ahead. Hi, it's Brian Nagel from Oppenheimer. So a question I guess, bigger picture question on the mobile rollout. It's clearly tied primarily to AT and T. So maybe just the decision of why to partner with AT and T, if there's any color you can give on sort of the financial relationship you have with AT and T and why them some other carrier? Thanks. It's a great question. And maybe I'll start off on how this got started and then Jason can tell us a little bit about his deep roots at AT and T. We've studied the wireless space and one of the challenges you have in that space in retail is multi carrier puts a lot of pressure on you. A, your associates don't understand the variety of plans. The rewards and incentives are reduced in many ways if you're not exclusive. We had the opportunity and a relationship that existed already with AT and T through our technology activities. We are a major customer of AT and T. And when the time came and we were able to meet Jason and his team, we saw a tremendous opportunity to be exclusive and really have a broad based relationship across prepaid, postpaid and some other technology initiatives. And then of course Jason will tell you how he sees maybe AT and T in the scheme of things with other carriers. Yes, absolutely. So in the space, really AT and T and Verizon are clearly the 2 market share leaders. AT and T has 32% share in the U. S, so over 100,000,000 customers today. So the real opportunities between for us for a large growth was between Verizon and AT and T. We already have an embedded relationship with AT and T for over 10 years. And we also think that if you go out and look at the Verizon distribution, we think that they've penetrated more of these markets than AT and T and there's a greater opportunity for us to continue with AT and T. Question for Steve, in particular on Simply Mac. It's like ARPAN, where are you? Oh, there you are. Yes. So I know Apple on average does about $50,000,000 per store. And I remember when GameStop first bought the 49.9%, the 8 stores were doing about $40,000,000 if I remember correctly. Just trying to understand the range of revenue that your stores might be doing. I saw the $2,000,000 to $3,000,000 per store projections. Just is that conservative? Or is that more realistic based on the new data that you have now? Before Steve gets started, let me just point out, Rob, I don't think we disclosed the volume what Simply Mac was doing. In terms of our modeling of 20 new stores, 2 to 3,000,000 And Steve, maybe you want to tell them about why if you've been to Salt Lake City, you'll know why Simply Mac is common. Do you want to talk about what you've done in Utah? Yes. So when we started Simply Mac 8 years ago, that was done through an acquisition of a single store in Orem, Utah that had been a legacy Apple dealer for a long period of time. The trust, when you think about making large purchases, many times at Apple, they'll talk about, you know, a computer being the 3rd largest largest purchase that customers make which that relationship of trust becomes very, very critical. Customer is going to buy a house, they're going to buy a car and then they're going to buy a computer. It's a 2 to 3,000 device that it's very meaningful. So the trusted relationship you have with a with a legacy business is very vital. So what we're seeing is the longer that our stores are open, the more customers obviously we have coming in and that the price point of those devices, it's critical to build that trust with consumers. So the longer that our stores are open, typically we'll see an escalating ramp in revenue. And as Rob said, the new stores, we forecasted those very conservatively. Yes. Hi. Mike Foss from Brand Advisory. I have 3 related questions. When you were talking about CapEx for your new tech brands, is that incremental to the M and A cost of acquiring those stores? Or is the $60, let's say, with Spring meant to be what you would pay per store in an acquisition? Related to that would be the new store growth for 2014. Is most of that grow this part of the business so fast? You haven't owned any of these brands for very long and right out of the box, you're more than doubling the store base. Yes. Before Rob starts, since we're not on a conference call, you can ask all the questions you want. You don't have to ask them all at once. We'll give you time to. Hodges isn't selecting you on the phone system. But yes, go ahead, Rob. In terms of the incremental CapEx of the 35,000,000 to 40,000,000 in support of Technology Brands, that's for the component of the growth that we see coming from opening white space stores. I outlined the $50,000,000 to $100,000,000 of use of free cash flow, which would be for the acquisition strategy that we outlined primarily on the Spring Mobile side. In terms of exactly what store count might come from white space versus acquisitions, I'm not sure we're ready to disclose that. And as you can imagine, as we're moving through an environment in which Jason did 12 deals for 100 stores in a span of 5 months. The numbers could move around on us a little bit. But clearly, as we move through the year, we will give directional guidance on how those things are coming to pass and how you might think differently if the shift happens there. The third question is an interesting one. Why the velocity? Why it grows so fast? I think our position is that we've always been a company that's driven a high rate of change, particularly when the console business was declining as fast as it did from 2008 to 2012. The opportunities that have presented themselves, we see as unique. The opportunity a partnership with Apple and AT and T, we see it as a unique opportunity. The competitor set, we see as uniquely in a situation of real weakness and restructuring and inflection points going on. So those are all the reasons. The other good news and we have a couple of our board members here, Dan DiMatteo, our Chairman and Founder is in the room as is Shane Kim. The other great advantage we have is we have a board that's tremendously aligned with our strategy and pushing us to be aggressive about some of this transformation. So those are the reasons. And just as a follow-up, what have you been paying for the stores you've acquired at Spring so far? For the 100 stores you bought, has that been disclosed how much you paid for that? Well, in part it would have been included in the numbers that were in our 10 ks in terms of use of cash last year. Some of it actually happened in 2014, hasn't been disclosed yet. But you'll be able to get some measure of that as we progress through the quarters and see the numbers reported in the 10 Q and on our calls. I'd prefer not to say what it is that we might be paying for these stores as it's a component of how Jason can negotiate them. Thanks. Just a quick follow-up question to that last question. So you basically showed on that growth slide, excluding the GameStop stores, I believe 6 month to 2 year payback on the different mobile store rollouts. Can you give us a sense as to how proven those metrics are in terms of each of the 3 divisions' existing experience as well as maybe the failure rate of some of those new concept stores? Thank you. Well, I think the easiest one to point to in terms of success is what Jason has done with Spring Mobile. Generally, as he's acquiring stores, their existing operations and that brings with them an EBITDA. And so far, we found that his performance when he goes and sources an opportunity, we typically know that there is the potential for him to drive the productivity higher than the small dealer may be currently doing. As Jason mentioned, some of these dealers may not have the appetite for operating in the new way that AT and T wants to. So we've been very pleased with the performance so far. We're very pleased with the performance of the Simply Mac stores that Steve has opened, again, with a proven and known model against which we can measure the ramp and the productivity. Things on the cricket side are a bit newer. And as Joe said, the oldest store we have opened in November. And so it's very early for us to state whether or not things are I wouldn't say there are any failures there. So we are tracking to where we want to be, but again, it's very early. The other thing to remember is that our shop, one of the debates is how do these compare to GameStop. We're always comparing these to the GameStop returns. And as you know, the GameStop returns are tremendously successful stores, very high sales per square foot among the highest in retail. The thing to keep in mind is these stores are in brand new markets that are additive to everything we're doing. It's all net new sales for us. And so when you start thinking about the models, they don't have to be Game Stop models to be successful. Thank you. Two questions. 1, what are the longer term synergies between the Spring Mobile and the Cricket stores, if any? Would there ever be combined locations at some point in time? And then secondly, with all the what seems to be better sales momentum overseas with international stores, is there a chance to close the gap with EBIT margin with those stores versus domestic stores? Sure. Let's start, maybe Mike and Rob will do the international question. I think spring and cricket synergies, I think it's a little early for that and those are 2 very different models and these guys will tell you on the cricket side, Joe's business, we really just have our toe in the water. All we have there is a very large prepaid market that's exciting and we sell a ton of pre owned phones. The spring model is very well defined. It is true, Jason, and maybe you can comment on this, that the movement with the next plan is towards sort of more of a no contract like situation, but I can't say we see an integration opportunity there. You guys want to comment on that? Yes. I mean, I think that if we just look up to our carrier partner, AT and T has these divisions that are completely segmented. So Cricket has its own brand, it has its own leadership team, its own precedent, its own distribution strategy. They've segmented the market completely differently. So we'll take their lead on how they want to talk to customers since it's their brand that we're using on the exterior of the stores. And I think for the foreseeable future, we will continue to have an AT and T branded store and a Cricket branded store. Great. Mike, you and Rob want to talk about international? Sure. We can answer that question. Internationally, it's hard to lump it all together. So from a store contribution perspective, we have some markets where the stores are actually more profitable than the U. S. And some markets where they're less profitable. One of our most profitable markets in the world is France, for example, in Necromania. One of the critical factors, I would say at this point, point, I talked a little bit about it in my presentation from a best practice perspective when it comes to digital, when it comes to used and refurbishment. Internationally, we're on par now where we are in the United States. One of the factors that affects the operating earnings by country is really the infrastructure required or the critical mass of each country. So you might have a market like France, where the profitability and the operating margin is the same as U. S. Or maybe even higher and you'll have other smaller countries where you still require the same infrastructure. So while the stores are as profitable, bottom line result is a little less so. For all our efforts, Mike has not been able to do what 1,000 of years of history have not done, which is integrate all the Europeans right into 1 store support center. So we're struggling as well. So yes, sir. Hi, John Taylor with Arcadia. So I got three questions. One, could you talk about I like Rob's slide up there with all those data on there, revenue per employee assumptions for each of the 4 kind of columns maybe for the number of employees per store, so we can calculate that. That's the first question. The second is, I'm a little unclear on the economics of the spring business as service contracts come in? You're selling over you're selling something that has month to month revenue generated. So how do you deal with that? And maybe if could you break down the revenues of one of those stores for us contracts versus new handsets versus pre owned handsets, of any rough guidance on that? And then the third question is, as you try to integrate the new store concepts loyalty program, what percentage of the customer base do you think is going to be overlapping there? Thank you. Great. Let's start. Number of employees per store guys, I'm going to let Jason I mean, 6 to 8 is coming up. What do you think? Yes. No, in our mobile phone stores, we have about 850 associates across 200 stores where we're going to be roughly 4 to 4.5 associates per store today. In our newer stores, there are more associates than there are in some of the legacy stores because we're building a slightly bigger footprint and we're seeing a little more traffic in those retail stores. So, we're I would say the new stores are 5 to 7, the old stores roughly 4. Yeah. Simply Mac, we have sales associates, then we have certified repair technicians. We typically will have 1 repair technician and a couple of certified trainers. So on the Simply Mac, our employees per store ranges anywhere from 6 to 12 in some of our larger stores. So it's maybe a little bit more. So, on the cricket side, we have store manager in every store at 5 to 7 associates on average. And then the larger volume stores like New York City will have maybe 10 or so. Our model is a little different. The traffic patterns are pretty defined in the space because of consumer. So we tend to have a lot of part time beside from the management staff. On the economics, I don't think we are ready to disclose sort of the mix, but maybe what we'll ask Jason to just talk them through what are the pieces of the business, there's handset sales or Absolutely. So we have a handful of different revenue items. We get handset sales, so we collect revenue at the point of sale from handsets. We get revenue from selling a contract, so commissionable revenue from AT and T. The nature of the business is that we have an ongoing revenue stream based on the subscriber base that we've signed up with AT and T. We also have accessory sales transactions that happen inside the retail stores. Great, great. Just and then maybe Mike Hogan on PowerUp. Sure. So I'll at least give you a couple of numbers that were up here. So I think the first one that's relevant was the I think it was 105% penetration. So theoretically everybody, right, is in the market. 72% or so of power up members who own smartphones. So we already know that there's a very high overlap in terms of what's called addressable market. And then the third number is probably that number Jason gave of AT and T's market share in the low to mid 30s somewhere. So the real question is given that with PowerUp we can address almost everyone we can address is theoretically in the market for wireless. And given that today AT and T has about a third of that, how much of that other 2 thirds can we put over can we push over? And then, and the second thing is on average, you saw that number there, it was around 96,000 people that was for a Simply Mac store. So if we can identify somewhere between 5,000,001,000 people per store within a radius of that store, that's a huge number in terms of if you think about the average number of transactions store goes. So we only have to move the point is we only have to move the needle a couple of points with PowerUp Rewards and we've got essentially our entire audience that we could address as it relates to wireless. Michael, Joe Feldman from Telsey Advisory Group. Hi, Joe. Hi. Can we actually, before I go to my main question, I wanted to follow-up on what you were just saying Mike. Do you guys worry about overloading the customer with all the promotion? If you have a PowerUp Rewards members and all of a sudden you're going to try to cross pollinate across your mobile brands, how will you know when it's too much or the pushback? It's a great question. Yes, sure. So, that's a fair question. And I think when we show you all these things we're doing, it would be a mistake to conclude that every single we offer, we show goes to every consumer. So CRM has been a big part of what we're doing and we use this concept called next best step for each customer. So think of it as essentially a giant matrix that says for each person, for each consumer, what's the best next step. So for example, if you are a customer who comes a about trading than it would be, for example, to message you about our e commerce device or another promotion. So we have very pretty strict standards in terms of the number of messages that will go to any given consumer in a given time period and there's essentially a priority order that ticks off. And then we're also we actually are also managing for each consumer their open rate and their response rate to that. So if you indicate to us that you want more, you will get more. And if you indicate by your behavior that you want less, then we'll only give you the most important offers. Mike has a pretty important role as a gatekeeper because, right Tony, if every bad week when Tony and I are talking about what we want to do with PowerUp, if he did all of them, we'd be in trouble. So well, we have aggressive weeks on Power Up, right? Yes. And then the other question I wanted to ask just about the video game business. Given this cycle seems it's certainly a little different than the last cycle. I mean you had both major manufacturers launch at the same time. We're seeing the older generation decelerate a little quicker. I know you guys have adjusted the model, you told us the new growth rates, but how does this play out over the next few years? Like do you I guess can you talk about some of the puts and takes in this business and where you're kind of most concerned? Will this just be a short burst because you have a lot right upfront? Sure. Tony, you want to take that? Well, I think first, we see tremendous uptake in there and the way that remember, the way that we change the market model was to update 2013 because of the now $12,000,000 has now come out, but we obviously saw that coming in. So there was we adjusted both $13,000,000 and $14,000,000 up based on what we saw coming in consumer demand. And Mike showed a chart earlier that 65 percent of PowerUp Rewards members still say they're going to go out and purchase this. So a lot of things have changed with us too. We didn't have PowerUp Rewards last time we launched this. So we have a lot more knowledge right now and everything that we're seeing is that there's tremendous demand. You can there's a lot of stores right now. You cannot go out and get a PS4 in our stores. We can probably send you one today off of Web and store, but it's there's still tremendous demand and there's been less supply for that product. Xbox 1, we've had a little bit stronger supply, so we do have those in almost all of our stores. So I'm not going to say that I have a crystal ball and I can totally predict what the future is going to be. But definitely from the start, what we're seeing is a very strong uptake of those products. And then what we're also seeing, which I think is going to make it more sticky, is we are seeing both of them this time have a strong ecosystem, which was not the case before. You had Xbox Live, which was an incredibly strong ecosystem, that was right with the Xbox 360. But as we reported earlier, on the PS 4, we're selling a lot of PlayStation Plus and that's where that 1.0 digital attach rate, a lot of that came from that PlayStation Plus. And so I think what you're going to see is both of these consoles now, you have more of a 2 horse race than I think you've ever had, where you have good consoles and obviously PS4 has gotten off to a different start than it did last time. But you also have ecosystems that are behind them. And I think it's going to be a really good race for and that's going to benefit the consumer and I think benefit us. Yes, it's interesting to us that no one is disputing that the hardware is selling through, but only a year ago, we would get asked all the time, will the consoles ever sell? What could be possibly new in a console? Why would anyone want a new console? I mean, what is there possibly you could have this new yet here we are outselling Yeah. Nordic and so forth. Yes. In Europe, what we've seen and we were still we still have countries where we were taking reservations. For example, in Germany right now, we have thousands of reservations and we're still waiting for PS4s. In this case, the market share we have on the hardware side in some markets has exceeded actually 50% on the new consoles. And what we're seeing from the customers is just incredible excitement. The attach rates on software, digital and accessories are better than we expected. It looks like it's going to have legs. So it doesn't seem to be something that's going to slow down anytime soon. Michael Bakker from Wedbush. Does your spring mobile contract with AT and T and your GameStop mobile contract with Cricket preclude you from dealing with other carriers? I mean, as a corporation, can GameStop once they develop this expertise, expand and start being Verizon resellers, Sprint resellers? Yes. We don't have any interest in doing that at the current time. I mean, we've made agreements, long term agreements with AT and T that will be an exclusive provider for the foreseeable future. I will tell you No, I don't mean in the same stores. I mean, could you open a Verizon store? Are you are you allowed to do it or are you I would say I would say we wouldn't have any interest in doing it, Michael. It would violate the spirit of what we're trying to do. And I would say no, our contracts would not. Here's the thing about this. I've been asked a lot, why would you and I've read some of the work that's been done, why would you get into a business that others are struggling in? And we've studied a lot of these retailers. And honestly, we were the last uncommitted footprint in America when you think about it that had the potential. So the benefits of exclusivity far outweigh the multichannel games that are played. It plays out when you get inside and under the covers of these relationships. Pricing, the benefits, the added incentives, the new services you can sells digital life. He's selling that home digital life product in a bunch of his stores. In many cases, if you're a multi carrier, you can't get access to some of that stuff. So we see exclusivity for GameStop as really the right solution and it's turned out that we've created now a prepaid business. Who knows what else we'll do? And then can you talk about real estate for the mobile effort for both prepaid, postpaid? It seems to me that we're pretty saturated in the U. S. In mobile locations, maybe not prepaid. But are you talking about more acquisition, roll up and conversion of existing mobile carrier stores or are you talking about a blend of brand new real estate? I mean, how are you guys approaching it? Maybe Jason, you and Joe can talk with this. Mark Summies here in the audience. Where are you at, Mark? He's our Senior VP of Real Estate. He can give us maybe a comment on real estate. I would say though generally, Michael, what's interesting to us is this AT and T opportunity is an interesting mix. Jason will acquire some stores and that will give him a presence in, say, now the Northeast, we just arrived. White space opportunities pop up that we didn't know about. No, I think it's a great question and we're seeing a fine balance of both. I mean, while it seems like the carriers may be over distributed, that's in fact not the case. And in fact, some of the very best stores that we have, are stores that we opened, new organic growth stores last year. AT and T has a real sophisticated data set of where their consumers are and where they're shopping. GameStop also has a very sophisticated data set of where the best real estate is. So we're able to kind of spend a lot of time with them and match up where we should be putting retail stores. I'd also say that the landscape in the carrier environment is changing some. So the way that the new Jump and Next programs, these device financing contracts, remember that they're driving customers to upgrade a device annually instead of every other year, which effectively, doubles the store traffic. So the existing store footprint may not be able to hold that volume of traffic. So we're also able to identify where there is existing high volume stores that may need overflow just based on the industry dynamic that's changing today. And Mark, can you comment if I don't know if we can give Mark a microphone. Just what do you hear sort of what do you hear from landlords when you go looking for real estate? Because Mark probably of all our executive team is spending the most time with Jason, Steve and Joe early on. But what are you hearing about mobile space from landlords? Well, I mean the opportunities really seem to be endless at this point and I think it's important to note also with AT and T as we are leading with acquisitions, part of that analysis in that acquisition is the finding tremendous opportunity for AT and T. Now you might say, finding tremendous opportunity for AT and T. Now you might say that there's a cell phone store on every corner, but I would tell you that there's not an AT and T store on every corner. So, I mean we feel like there's great opportunity out there. It's the other thing that's very he showed a slide of 4 waves of wireless and it's a little bit of what's happening to Steve and Joe. The amount of connected devices is the big bet here and we've been Mike and I, we're in Atlanta seeing what sort of is coming. When you think about the amount of connected devices, they're going to be distributed in stores and they're going to require a consultative sale. So while there may be a lot of stores, there may not be enough service to handle all that demand. We'll see. Yes, Ross? You included both acquisitions in the slide as well as organic. If we look just looking at the brand new stores, can you answer a couple of questions on that? How long do you expect it to take a brand new store to mature in each of the brands? How long to get to standalone breakeven and what percentage of target revenue do they get breakeven? And part of the follow through on this is, will these stores have a higher comp than the rest of the chain because they take a few years to mature? Yes. Yes. So maybe we'll let Rob see what he is comfortable with. I do think The success of in a 5 to 7 month period. In a 5 to 7 month period pretty well and then are really mature after about the first 12 months. Joe? Yes. So I think on the cricket side, we're really new at it. We've only been operating in the markets for a few months. It's probably a little early for us to forecast. I think combine that with the completion of the acquisitions probably going to bring a lot of change in the whole space altogether. So I think we're a little early on the cricket side. Joe is still trying to figure out what the name of the store is. It's like AO Cricket. Right, Daily Mass. Over here. Okay. Yes. Couple of questions. One on the video game side, could you just talk about what kinds of trends you've been seeing in terms of full video game downloads on the new platforms. What kind of implications for used demand you think increased availability of DLC will have? And then just one question on the wireless side. With the shift to the new financing of the phones, can you just talk about buy sell trade and frequency of use, the frequency with which consumers will be trading in their phones? Okay. Tony, you want to that? Sure. On the digital side, we've been selling full game digital downloads for, I think, 3 years now. It's a very small part of our business and our publishers business as well. We're open to the idea of selling it. We sell them in our stores. Many of them are day and date. So we can sell them when the customer wants it. And if the customer wants it in that factor, then we offer it. They route and it's typically priced at the same level. So we don't see that as a huge part of the digital business right now. On the other side, downloadable content has basically become a staple. If you have GTA V being really the only lone glaring exception last year, But if you're going to launch a game that used to be about 3 years ago, it was you don't launch a game and launch DLC along with the Now it's just the opposite. If you have a great game, you launch DLC at the time that you launch the game. And what we know is that when our associates are walking the lines at launch, that's the best time and the highest attach rate of selling downloadable content. So we've seen that really accelerate. We shared it as a best practice among the industry, which is something we do on a regular basis. And most people have taken that up. So DLC continues to be very strong. Digital game downloads, games are getting larger, and we'll see how that trend kind of takes off. But if it takes off, we're going to be there to sell. Yes. And then, Jason, you want to talk about the impact of NEX on trades or frequency of trade up? You bet. So part of the NEX device financing programs require a trade when you come back in to take advantage of the upgrade. And so these program this platform is relatively new. We've only been selling these contracts in our stores for about 5 months and they really didn't have a lot of marketing or take until the very early part of this year. So we in fact are not yet on the backside of a device trade for our next plant. We haven't seen an annualized contract yet. But currently, we're trading all of our devices. So through the normal postpaid business, we do offer trades of all mobile devices in our retail stores and those trades do come back through GameStop. And the trade of phones is interesting to us because as we mentioned in our remarks, we were early on in that trade of phones and at the taking trade. So it's good and that it has legitimized the buyselltrade model and you see competitors entering it anytime more people enter buy sell trade. Hey, guys. It's Mike Olson from Piper. So I think pre owned grew 20% in the 1st couple of years of the last cycle and guidance for this year doesn't suggest that kind of pre owned growth, but more just a suggestion of growth for pre owned. Other than the fact that you were growing stores during the kind of onset of the last cycle, what are the other differences that you would suggest kind of exist versus the last cycle that would prevent that kind of 20% pre owned growth? Sure. Thanks. I think initially, it's tough to discount the factor of what our growth rate was back in those days. Mike showed the slide that had 8% growth in pre owned comps in the year following the 360 launch and 15% growth in the year following the Wii and PlayStation 3 launches. And so the difference between that and the overall, I think the numbers we've given in the past 20% 27% of pre owned growth in the 1st couple of years. That's a factor of the store count increases. And so I think when you look at those comp growths of 8% 15% in line with where we are today with very little store growth on the video game side, I think that our pre owned growth estimates are in line with that. Paul, right over here. Colin Sebastian from Baird. Two quick questions. 1, if we continue to see this accelerated shift to next gen products and the ongoing significant declines in the old generation, is there any risk to the used margins given the concentration of software among fewer titles as just that transition takes place? And then secondly, if there are hardware harbor price cuts this year, how would that change your market model? Sure. Rob, you want to start us off on Yes. I'll answer the question about the margins and let either Mike or Tony answer the question about the impact of price cuts. We don't necessarily see the adoption of NextGen as within the pre owned side of the business and what's happening on the previous gen as an impact or to the margin rate on pre owned. So we're pretty confident in our pre owned margin rates. It really fundamentally comes down to who do we think is buying the pre owned and our position has always been, it's an expanded market customer. It's an opening price point customer who is brought into gaming because of the opportunity for value. And even now, I would say, these guys, we talk about this every week. Once consoles launched, a new set of customers came in and it's amazing because they're in the store looking for value because they know that the high end stuff is being sold to other people. So there is this expansion of GameStop's audience that happens when you have a console launch. That's why we want to advantage of that in the value section of adding products so that we can take advantage of all that increased traffic. And the market model did, Colin, assume some price cuts in it. So we've built those into it. Obviously, if you had price cuts, you would extend the life of current gen further. Sean Wagner with Longbow Research. Rob had mentioned that the forecast that you given the last major Investor Day, it's kind of fallen short of that with the guidance for 2014. Along those lines, there was a target for $1,500,000,000 in digital receipts. I'm just wondering what parts of that have kind of fallen short of expectations or outperformed expectations? And do you think that will ever get to that $1,500,000,000 Yes, Rob, you take that. Just one comment on the falling short, the entire industry fell short. In fact, the industry fell short of every model I think that was produced by people in this room. So the industry far, far underperformed, I think, what many of us thought. But you guys want to take that? I'll talk about the digital for a minute. And I think, obviously, digital is going to continue to be a growth, at 26% growth CAGR and it will continue to grow. And eventually, we think we'll exceed $1,000,000,000 I would say as we got into the category, we saw a couple of things. 1, valuations were incredibly high. Predictability of final results was lower than what we had seen. And so I think what we did was very prudent and what we say that we'll always do that if we can't find a great opportunity for the cash or return it to shareholders. So the main area that we fell short of that target was in the investments that we anticipate in making. And as we stepped in and Paul, how many we looked at probably 700 companies, I would say, at some point. Hundreds of companies spend a lot of time on the West Coast and simply found the predictability just was not there for us to feel comfortable investing. In terms of what has worked really well, I mean, downloadable content at that point was a very nascent business. Downloadable content now is a business that we dominate and really had to push hard to get that made a significant investment internally that has turned out incredibly well. So that's an example of something that was very predictable, had a very controllable investment. And so we went into and made that Congregate. As I said in the 4th quarter, doubled its revenues yet again, Congregate has been a great investment for us. Again, something that was more predictable and fairly priced. Yes. I think what would be interesting work to do and I don't think Mike, I don't know if your market model team has done this, but what would be interesting to see is where the shortfalls were. I can recall social gaming forecasts that were out of sight and of course, we've all seen that that didn't unfold the way. I can remember some browser game forecasts that we looked at were out of sight. So many of the categories that were forecast to have these enormous sales levels really didn't pan out. Now today, we see enormous forecast, for example, on mobile gaming. And we have a market model that has great forecasts on mobile gaming. Now unfortunately, many of these forecasts are with companies that don't disclose with complete transparency because they're private, etcetera. So it's hard on the digital side to really get a feel for what's really growing. And so I think what Tony is saying is we got into this and we did make some acquisitions and they weren't all great, most of them were great, but there were categories that you looked at that when you got to the table, the real wound up being very different from what we thought they'd be. So, yes. Just on the wireless side, so, spring and Cricket. I don't know the revenue model kind of down to a T, but maybe you could help us understand some of the sensitivities in the model. So if your carrier partners were to get very price aggressive or if there was to be a heightened level of churn in the end market, how does that affect your business, if at all? By the way, I will mention, we've studied a lot of there's a lot of great analyst work. I don't want to say a name because it's been one of the firms that's here and I don't want to diss the other guys, but there some great analyst work that models exactly the churn impacts and so forth. But what can you share? Yes, I guess what I can share is the greatest sensitivity to us is sales volume. It's the number of transactions, which is why it's imperative that we feel like we picked a partner like AT and T who is a market leader. We also think that the future revenue wave that's coming, we did an incredible amount of research and we think that it's also imperative that we find a partner that's the most innovative around bringing in those new innovations to the retail stores. I think if you look online, you'll find publicly disclosed that AT and T has been an innovator in that category. So it's really around transaction volume and market share for us and we really feel like we picked the right partner with AT and T. There are some sophisticated models though, you're exactly right, the churn, the impact of these new plans. I do think though we can't let that go miss. Look at what AT and T is doing with digital life, all publicly disclosed home security products, connected IP devices in the home, look at what they're doing on automotive. It's extraordinary how aggressive they're being and it positions us very well to be a major partner there. Ross? Turning to the full game download question from before, and let's just theoretically assume that it became a more meaningful part of the industry and if that happened, clearly there's other retailers who won't participate much in it. But there's makers and publishers who will participate more in trying to go direct. Realistically, what do you guys think your market share could be if it became meaningful and you put a real effort into it? Yes. I would say that if we put a real effort into it, I think we'd have a very strong market share in that business. I think the question is one of economics to the consumer that has to be answered in many ways. It has to be answered in terms of disc size. It has to be answered in terms of residual value. It has to be answered in terms of how big of a pipe do they actually have. I mean, it's easy. Most of you live in a place where you have access to very fast Internet. That's not necessarily the case everywhere. So there are a lot of factors that are there. But today, like I shared, on our digital goods, 70% of our digital goods are bought with non credit card. So we're going to compete. There is a whole category out there of people who don't want to put a credit card out there online, do want to come in and buy digital content from a GameStop. And so we're going to I think we'd compete be very well as to predictability of market share. I'm not exactly sure. It's hard. If you looked at if we could get data on our market share of DLC, Tony gets these numbers and Mike gives me these they give me these numbers from our launch. I mean, our share of DLC is very strong, but there isn't real transparent data around that. But you could easily go and link that to what your potential is on full game download because the dynamics are the same. You would sell it at launch, you would provide trade credits, you would give power of rewards points, you would help curate it. So we I think the danger zone here is the perception that somehow we don't like that business. We like it. It's not a big business. 5 years ago, we weren't in it. Today, we do DLC every launch, every title has a DLC item. We could launch it and we've launched digital copies of things as well. It just hasn't been a big business, but it could be interesting. Tony Weibel had a question. Thanks. A few questions. A straightforward easy one is the 65% that you indicated had purchased a tent for a next gen system. Is that the old survey prior to launch? No, actually it's not. We update that a couple of times a year. So, Tony was mentioning earlier, when we look at forecasted demand, so actually each quarter we're going to update we update that. And also we look at is how strong was demand prior, what did that translate into actual sales and what's the future demand. So the last time we updated that I believe was January, February of this year. Okay. The second thing is I was hoping you could talk a little bit about the competitive landscape around wireless. There's a lot of things happening. I landscape around wireless. There's a lot of things happening. I believe the government's going to be selling some spectrum. It might be earmarked to smaller WiFi product. You have mergers that have created kind of new entities, DISH. How do you see that market evolving and how would it affect Spring? You want to take that? Sure. So the current competitive landscape is like we talked about over 200,000,000 U. S. Consumers have chosen Verizon and AT and T as their lead products. And we think, we really believe that the technology platform will be agnostic in the next 18 to 24 months. So right today, you're gonna hear a lot of talk about who has more coverage. So you're gonna hear more coverage as one claim. You'll hear the fastest network as another claim. It seems like everybody takes a claim. We really believe that everybody's headed down this LTE path, the next iteration maybe voice over LTE. At some point, the technology platforms themselves and the coverage that you all would experience with the wireless product will be similar. And what that will then come down to, we believe, is the personal in store interaction, the distribution model, the product Many of you are probably on a mobile share value plan now. You probably are not just using your device, but maybe a tablet or multiple devices, family devices, all on a single plan. They may or may not all end at the same contract end date. It's not an easy thing to do to move. So we think consumers will become more and more brand loyal to their carrier partner. We also think that they'll use that brand loyalty when they choose where to shop. So for instance, because you have so many devices connected and possibly a wearable device, a car, whatever that might be in the future, you may not go someplace where somebody may adjust your rate plan that you don't have a lot of brand confidence in. And that's why we feel great about being able to use that AT and T brand on the outside of the store. Power up Rewards won't hurt either. But one comment, let me add a comment to this. When we first started working with these guys, Jason and Brett Bradshaw, who runs stores for him, who does an outstanding job, they've sent me a book, Wireless Revolution, right? Yes. I recommend if you want to understand this business, there's a book called The Wireless Revolution. It was written, I don't know when, 2,099. But what I learned from this was in the original spectrum auctions that the FTC had, half the spectrum was designated to the incumbent Ma Bells, baby bells, and half was given to entrepreneurs. And it was a free for all Wild West. Great fortunes were made. Huge amounts of leverage were put into this to try to buy by people like Craig McCall. 1 of our board members, Tom Kelly, was the CEO of Nextel and worked with Craig McCall and he will tell you that it was a land grab. And the thing that dawned on us, all of us, as we started working on this is that this wireless business, the share of wallet has gone one way since 1980. It's gone one way. You're spending more on connectivity every day, every year. Yes, there will be dips, but every day they're adding more services. And so you think about our business and you contemplate digital life and connected cars and consoles and the connectivity they require to us, it seems like there's no certainties in life, but it's certainly an interesting bet to make that the share of wallet will keep growing. And if we can augment that with great service, power for words, buy, sell and trade, etcetera, to us, it seems that it's a very interesting segment. So it's a very interesting book if you want to read about the wireless business. One final question here is, do you guys charge for the iPhone repair that you're doing at Simply Mac? If so, is that something that can be exported to the GameStop store footprint? Great question. Steve? So there's a couple of different ways that we service the iPhone. If the iPhone is under warranty, we provide that service at no charge to the customer pursuant to the Apple Care or the Apple Care Protection Plan for iPhone or if the phone is just under the original 1 year manufacturer warranty. We also provide non warranty service repair, which we do charge the customer for, which is similarly priced to what you'd find in an Apple retail store. As far as doing it against some store, I'd love to do it. Bruce Culp is here, who runs our rock. You guys met him. I'd love to do that in the rock. I'd be scared to do it in his store, right, Tony? I mean, it'd be a We'll keep it in the rock. Yes, we might have Super Mario playing on it or something, you never know. 2 more, all right. Yes, Barry. Yes, Paul, I just wanted to refer back to the slide that you put up when you showed retail transformations. I think it was Williams Sonoma and VF Corp. Yes. When you studied them, what were the 1 or 2 seminal takeaways for you in terms of the sort of guideposts that you're going to look to as you enact this? And then if you were to take the number of failed retail transformations and compare it to the number of successes, it probably outnumber 10 to 1. Presumably, you study those negative case studies as well. Were there any common takeaways there well? I think and it's not just me, right? This is the entire team. Remember that GameStop is a company that faced a 39% decline in our market. So we have a board and we have a management team that's aligned around transformation. Why? Because survival is a great motivator. So our burning platform was this console business is going to go through a severe cycle. So that helps clear the mind a little bit, I like to say. As far as what did we study, what are the hallmarks characteristics? I would say and I would ask Mike Hogan or Tony or Mike Rob, anybody to comment, competencies that are transferable, I think is important. Williams Sonoma, if you look at what they do with multichannel and design, the ability to merchandise, offshore sourcing, these are interesting things. Real estate for us is a huge competency, maybe not so much for them. VF Corp, I think there's an intellectual curiosity if you look at their case that they were not satisfied to only own the manufacturing or the brand, they actually integrate forward with a series of well timed acquisitions. So I guess I look for profiting and growth from the core as signs that you've got potential for success. The other thing I would say is aligned management teams generally make good decisions around growth. And I think by the way, I've been looking for the opportunity to say this, I think it's the most tenured management team in Electronics Retail at this point, right? We've been together 4 to 5 years. Our Board supports us. We're very aligned and we have a great process. We kick around with our founder and our Board. I think that's a sign and aligned team. When you talk about failures, if you look at all of the spectacular flame outs of transformations, many times there's not alignment on the team. There's one faction that wants it one way and another faction that wants it another way. Usually there's good reasons for that conflict and you see when that falls apart. 2nd item I would say debt, leverage in transformation to me feels like a bad thing. If you look at what we're doing, it's a very efficient. Rob gave you some capital numbers. We're basically replacing GameStop CapEx with Technology Brands CapEx to continue growth. We're not taking big risks. And candidly, if you try to understand what is the core of this business, the secret sauce of this business that we inherited from Dan DiMatteo and Dick Fontaine is buy sell trade. And so everywhere we can leverage buy sell trade is going to be a good thing for us. Yes, we're good at merchandising and real estate buy sell trade and that's at the core. There's buy sell trade implications for all of these. What else guys? What else would you add on? So I would add or maybe just amplify a couple of points. I think one is, particularly if you compare it to some of the things that have happened in digital over the last 4 or 5 years, sometimes what people want to do is sit in a room and say, what's hot? What's hot? What's growing? Let's make a big bet on it. Maybe it will work. And I think we're taking kind of an opposite approach. One is, we're religious about this whole competency thing. So yes, we want to know is it a big category, is it going to grow, but what we really want to know is can we make the case that we're bringing something transferable to that category? Regardless of how fast it's growing. Then the other thing I think is, we're sort of approved before you move. I know on the one hand, it looks like, depending on your perspective, it might look like we're moving really fast in some of these got a very good case that we bring transferable competencies. We've acquired got a very good case that we bring transferable competencies. We've acquired an existing business that already has a success model and leadership. So what we're really doing is scale in most cases is scaling a business that's already proven itself to be successful. I want to amplify what Mike said, which was it seems like we're really moving fast, but we're moving fast in execution. We spent months months and months looking at what our real core competencies, looking at all the different types of categories we could invest in and putting those two things together to find the best match. So while the planning process was long and thorough, now we have everything set where we really can execute quick. Yes. I think we see ourselves as stewards of the enterprise and maybe it comes from the fact that we in this digital category that is so frequently named as a disintermediation candidate. Maybe that's what causes it, but we see ourselves as stewards of an enterprise that we must continue to dig and find insights. So, I think that's how we got there. One more, we got time for one more, Matt. Just a quick follow-up on the Power program. It's a huge lever in just about every one of these businesses that you're in today. 27,000,000. Where do you think the ceiling is on that in terms of membership base? And then as a follow-up to the 65% believe they'll upgrade to the new gen consoles, so that's roughly $20,000,000 Based on your intelligence, what percentage of the other $7,000,000 have already upgraded? Mike, do you want to share the ceiling on PowerUp? Sure. So first of all, obviously, we clearly agree with you. We think it's a strategic asset and we think we're we have a long way to go before we will fully mind all the capabilities within PowerUp. Where it's north of 70% of sales right now is the way to think about it. And so the program will continue to grow. I'm probably less concerned about just the growth in numbers and more understanding how we can be a deeper part of people's lives. So we'll add however many more millions of members, but what I'm really interested in doing is increasingly building the depth of that relationship so that the relationship that we have with the GameStop ecosystem today will extend beyond the other to the other businesses. It may not be called PowerUp Rewards, right? But behind the curtain, everything will be the same. So I'll we'll know you as a customer regardless of what story you're in your behavior. And ultimately, what I'd like to be able to do is only present you with opportunities that you think make a lot of sense for you and which take advantage of the unique value proposition. So your points, your trade credits and even the things that you haven't traded yet. So you can get an offer to come to a Simply Mac or a Spring Mobile or whatever. And then your second question was about the research about how many are still purchasing and how many have purchased. So what have we said? We've said a few times, what's interesting to us is we used to talk about this, right Tony, is we've said people said, well, console gaming is over and so forth. And we always said, it's not that, it's the lack of innovation consumer is looking for innovation and the beauty of what we're doing now, we've The consumer is looking for innovation and the beauty of what we're doing now we believe is that we're tied to innovation in a bunch of cool categories and we're tied in a way that's very unique. So we think that's going to be very productive. So Matt, with that, I guess I will close the session. Thank you very much for attending and please let us know if we can help you in any way.

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