Good morning. Thank you for joining us today for our annual meeting. My name is Hank Diamond, and I'm Senior Vice President of Investor Relations and Corporate Communications for Take-Two. Please note that today's shareholder meeting is being broadcast via listen-only webcast that is available on our website at www.taketwogames.com. A replay of the webcast will also be available on our website later today. Before we begin, I'd like to remind everyone that the statements made during this meeting that are not historical facts are considered forward-looking statements under federal securities laws. These forward-looking statements are based on the beliefs of our management, as well as assumptions made by and information currently available to us. We have no obligation to update these forward-looking statements. Actual operating results may vary significantly from these forward-looking statements based on a variety of factors.
Other important factors and information are contained in the company's annual report on Form 10-K for the fiscal year ended March 31st, 2017, including any risks summarized in the section entitled Risk Factors. The company's quarterly report on Form 10-Q for the fiscal quarter ended June 30th, 2017, and the company's other periodic filings with the SEC, which can be accessed at www.taketwogames.com. I'd now like to introduce Strauss Zelnick, Chairman and CEO of Take-Two.
Thanks, Hank. Good morning, and welcome. The annual meeting with stockholders of Take-Two Interactive Software will please come to order. Today's agenda includes a review of the procedures for today's meeting and the proposals to be voted on, and a question and answer session. I'd like to introduce our officers. Karl Slatoff, who is apparently stuck in traffic, so he'll be the gentleman walking in a few minutes late, but he will be here. Lainie Goldstein, our Chief Financial Officer. Dan Emerson, our Executive Vice President and General Counsel. Matt Breitman, Deputy General Counsel and Corporate Secretary of the company. I'd also like to introduce our other board members who are present today. Is Mr. Bowman here? He's also on his way. J Moses. Michael Dornemann, our Lead Independent Director, Michael Sheresky, LaVerne Srinivasan, and Susan Tolson. I'll now turn the floor over to Dan Emerson. Thank you, Strauss.
Good morning. I will act as chair of this portion of the meeting, Mr. Breitman will act as secretary of the meeting. The meeting will be conducted in accordance with the agenda that was distributed at the start of the meeting. The seven proposals to be considered and voted upon at this annual meeting are set forth in Take-Two's proxy filing and will be described in detail shortly. Only stockholders of record at the close of business on July 21st, 2017, are entitled to vote on the proposals at this annual meeting or any adjournment thereof. This meeting will be conducted in accordance with the procedural rules that have been established and distributed today to ensure that stockholders have an opportunity to properly consider and vote upon the business to become before this meeting. I would like to take a moment to review several of the key rules.
Anyone wishing to address the meeting must be a stockholder of record as of the July 21st, 2017, record date, or a person holding a valid proxy from a stockholder of record. Stockholders of record should have a yellow-coded name tag and a yellow index card stating stockholder of record, which was provided at the registration area before the meeting. Following the presentation of the proposals on the agenda, and while the polls are deemed open for voting purposes, we will entertain questions directly related to the matters being voted upon. After we have concluded the business of the meeting, the meeting will be adjourned. Then we will open the floor to general questions. By your presence at this meeting, you acknowledge your understanding of and willingness to abide by the procedural rules that were provided to you today. Now let us continue with the business of the meeting.
Mr. Breitman, will you please present proof of notice of the meeting? Let the record reflect that I have been presented with a copy of the Notice of Annual Meeting of Stockholders dated July 27th, 2017, and the proxy materials dated July 27th, 2017, together with an affidavit of an authorized representative of Broadridge, the company responsible for mailing said materials, affirming as to the mailing on August 1st, 2017, with a notice of annual meeting and proxy materials to stockholders of record at the close of business on July 21st, 2017. I order the affidavit of mailing be filed with the minutes of this meeting. Mr. Breitman, will you please present a list of stockholders as of the close of business on July 21st, 2017, the record date fixed by the board of directors for purposes of determining the stockholders entitled to vote at this meeting.
Let the record reflect that I have been presented with a list of stockholders of record as of the close of business on July 21st, 2017, furnished by an authorized representative of the company's transfer agent. There are 105,877,198 shares of common stock entitled to vote at this meeting. The list of stockholders will be open for inspection by any stockholder of record for the duration of this meeting. I hereby appoint Tom Tighe of Broadridge to act as the Inspector of Elections to determine, one, the number of shares outstanding and entitled to vote, two, the number of shares represented at this meeting, the existence of a quorum, the validity and effect of proxies, and finally, to receive and tabulate the votes on the matters to be acted upon at the meeting. Mr. Tighe has executed an affidavit to faithfully execute his duties as the inspector.
The secretary will attach the affidavit to the minutes of this meeting. It is anticipated that the results will be reported as soon as practical. Is there any stockholder present who has not filled out the attendance sheet showing the name of the stockholder and the number of shares he or she owns? All stockholders of record who have not submitted proxy should do so now, unless they wish to vote in person. If you have previously executed a proxy and now wish to vote in person, the proxy will be turned upon your request. Mr. Tighe, please state the number of shares of common stock present in person or represented by proxy.
There are present in person or represented by proxy, a majority of the outstanding shares entitled to vote at this meeting.
Legal notice of the meeting having been given and a quorum being present, the meeting is lawfully convened and ready to transact business. The first order of business on the agenda is to elect seven directors to serve until the annual meeting of stockholders of the company to be held in 2018, and until their successors have been duly elected and qualified.
The board of directors, acting upon the recommendation of the Corporate Governance Committee, has nominated the following persons who are named in the company's proxy statement to serve as directors of the company until the annual meeting of stockholders to be held in 2018 and until their successors have been duly elected and qualified. Strauss Zelnick, Robert A. Bowman, Michael Dornemann, J Moses, Michael Sheresky, LaVerne Srinivasan, and Susan Tolson. I hereby present to this meeting the proposal set forth in the proxy statement that these nominees be elected as directors of the company for such annual term.
I second the proposal.
If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. Okay, the next order of business on the agenda is to cast an advisory vote to approve the compensation of the company's named executive officers.
I hereby present to this meeting the proposal set forth in the proxy statement that the stockholders approve, on a non-binding advisory basis, the compensation of the company's named executive officers.
I second the proposal.
If there is a stockholder of record who does not yet have a ballot and who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. Okay. The next order of business on the agenda is to cast an advisory vote to approve the frequency of the advisory vote on the compensation of the company's named executive officers.
I hereby present to this meeting the proposal set forth in the proxy statement that the stockholders approve, on a non-binding advisory basis, an annual vote on the compensation of the company's named executive officer.
I second the proposal.
If there is a stockholder of record who does not yet have a ballot who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. The next order of business on the agenda is to cast a vote to approve the adoption of the Take-Two Interactive Software 2017 Stock Incentive Plan.
I hereby present the proposal set forth in the proxy statement that the stockholders approve the adoption of the Take-Two Interactive Software Inc. 2017 Stock Incentive Plan.
I second the proposal.
If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. The next order of business on the agenda is to cast a vote to approve the adoption of the Take-Two Interactive Software 2017 Stock Incentive Plan qualified RSU subplan for France.
I hereby present the proposal set forth in the proxy statement that the stockholders approve the adoption of the Take-Two Interactive Software, Inc. 2017 Stock Incentive Plan qualified RSU subplan for France.
I second the proposal.
If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. The next order of business on the agenda is to cast a vote to approve the adoption of the Take-Two Interactive Software 2017 Global Employee Stock Purchase Plan.
I hereby present the proposal set forth in the proxy statement that the stockholders approve the adoption of the Take-Two Interactive Software, Inc. 2017 Global Employee Stock Purchase Plan.
I second the proposal.
If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the Inspector of Elections can deliver a ballot to you. The next order of business on the agenda is to vote upon the proposal to ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending March 31st, 2018. I would like to introduce Mark Moran and Christopher England, who are here today representing Ernst & Young, and will be available to answer questions after the meeting.
I hereby present the proposal set forth in the proxy statement that the stockholders approve the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending March 31, 2018.
I second the proposal.
If there is a stockholder who does not yet have a ballot who wishes to vote in person, please raise your hand so that the inspector of elections can deliver a ballot to you. Do any stockholders have any questions relating to the business of the meeting? Please make sure that you've completed all necessary information on your ballots and cast your votes as you have intended to for the four agenda items. Will the inspector of elections please collect the ballots, if any? There being no ballots, I now declare the polls closed. As I mentioned previously, the inspector of elections will tabulate the results of the voting, which will be reported to me as soon as practicable. There being no additional business to be conducted at the meeting, the business of the annual meeting is hereby concluded, and the meeting is adjourned.
We'll now open the floor to a question and answer period. Any stockholder that wants to ask a question must state their name and whether they are a personal stockholder or an authorized representative of a stockholder, in which case such stockholder must also be identified. At this point, I will turn the floor back over to Strauss Zelnick, Chairman and CEO of Take-Two.
Thanks, Dan. I'm here to answer any questions you may have. Yes, sir.
Yes. Good morning. My name is Howard Tenenbaum, shareholder. First of all, I'd like to commend you and the rest of the company for the stock performance. Based on my Fidelity statement as of yesterday, I understand within the last 52 weeks, the stock price is up about 125%, my portfolio thanks you as well in that regard.
We appreciate your kind words. Thanks.
Okay.
We're really pleased for the performance of the company.
Okay. My related question is related to our $1.4 billion cash position. Before I ask specifically about that, did we pay any taxes last year, or was it basically alleviated because of tax losses from the previous years? If so, what was the overall tax rate, if we paid any?
We do pay taxes. Lainie knows our overall tax rate.
It's 22% this year.
Roughly 22% this year.
Okay. It's related to my
We can address that. Investor relations can give you the exact numbers separately. If you like, we can get back to you after the meeting.
Okay. It's related to my final questions based on, I mentioned the $1.4 billion in the cash position. Now, I understand, based on page 10 of the annexed on 10-K report, that within the last three years, roughly about 45%, give or take a percentage or two from other years, is from our international operations. Now, would I safely presume that that's approximately about the same percentage of our cash position is also overseas?
No.
Okay.
I think roughly 10% of
23%.
23% is overseas.
Okay, because we-
We don't have a huge amount of trapped cash.
Okay, because my related question is this: If President Trump's proposed tax repatriation rate takes into effect down to 15%, hypothetically, would the company consider putting some of our overseas money back here in the U.S.? Would it affect our operations in any way?
It won't affect our operations, and if we had a cash use, we'd consider it.
Okay. Thank you very much at this point.
Thank you. Thanks for your questions. Any more questions? Yes, sir. Can you come to the microphone, please, sir, or we can bring you one.
Are you planning to-
Sir, can you state your name and if you're a shareholder, please?
Thank you. Are you planning to pay dividend?
Sir, can you state your name, please?
Arthur Ulrich, shareholder.
Thank you.
I've owned the stock for four years. I'm very impressed with the price. I'm surprised you don't pay a dividend.
Do you have a question, sir?
Yes. I wanted to ask if you're going to plan to pay a dividend.
We don't have any plans to pay a dividend right now. We think we have good solid use of our cash balance. For example, in January, we acquired Social Point for a total consideration of $250 million, $175 million of which was in cash. We've said is that we intend to deploy our cash in three possible ways. First, to support our organic growth, which has really been the story of this company. In the last 10 years, our net revenue has nearly tripled, depending on the year. That's been almost entirely driven by organic growth. We think we have a lot of great opportunities to invest. When we invest, for example, in creating a new console title, we can invest a great deal of money and then over a number of years and invest a good deal in marketing.
The second use of our cash is to support inorganic growth, so additional strategic acquisitions, for example, like the Social Point acquisition. The third is we have a willingness to return cash to shareholders. We've done two buybacks in the past years totaling roughly $300 million. That's something we'd consider on an ongoing basis as well. Because our earnings are variable year-to-year and because there is a risk profile associated with being a pure-play entertainment company, we don't think it's appropriate to pay a dividend at this time.
Thank you.
Thank you for your question. Yes, sir.
Hey, thanks again. My name is Howard Tenenbaum again.
Hi, Howard.
I just have a quick question to ask you.
Sure.
Is this a big problem for our company in terms of stealing any of our copyrights from any of our licensees, et cetera, especially from overseas like China, which is well-known to steal patents and copyrights from American companies. Has that been a problem? If so, how much would we be willing to spend in our future fiscal years as a result of that?
Well, we haven't had any issues with regard to patent or copyright theft. We do have some piracy of our products occasionally, although in the interactive entertainment business, it's not anywhere near as bad as it is, for example, in music because our file sizes are big. Also, since many of our products are connected online, it becomes very difficult to pirate. You could pirate a physical good, you can pirate a standalone digital game, but it's much more difficult to really enjoy the full experience of a connected game because it's exceedingly difficult to pirate that experience. You have to connect to our servers. Historically, in the entertainment business, and I've been in pretty much every form of the entertainment business, you lose 5%-10% of your revenue to piracy that you can't control.
I think in the interactive entertainment business, it's quite a bit less than that. It's hard to know. By definition, if we haven't shut it down, we're really not aware of what it is. The last time we had a really big piracy problem, it was with a handheld title in Germany, and that nearly was entirely pirated, and as a result, we didn't do any more titles for that platform. That was a relatively unique situation with a specific chip that you could crack. We don't see it as a huge problem. We're very vigilant. Security is of utmost importance to us across the board, but specific pirating of intellectual property doesn't appear to be a primary risk.
Okay. Thank you very much.
Any more questions? Thank you. Thank you all for joining us today.