Greetings, and welcome to the Take 2 Interactive Software Third Quarter Fiscal Year 20 16 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hank Dimid, Senior Vice President of Investor Relations And Corporate Communications for Take 2 Interactive. Thank you, Mr. Dimid, you may begin.
Good afternoon. Welcome and thank you for joining Take 2's conference call to discuss its results for the third quarter of fiscal year 2016 ended December 31, 2015. Today's call will be led by Strauss Zelnick, K2's Chairman and Chief Executive Sir, Carl Sladoff, our President and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your question during the Q and call that are not historical facts are considered forward looking statements under federal securities laws. These forward looking statements are based on the beliefs of our management as well as assumptions made by and information currently available to us.
We have no obligation to update these forward looking statements. Actual operating results may vary significantly from these forward looking statements based on a variety of factors. These important factors are described in our filings with the SEC, including the company's annual report on Form Ten K for the fiscal year ended March 31, 2015, and Form 10 Q for the fiscal quarter ended September 30, 2015, including the risks summarized in the section entitled Risk I'd also like to note that unless otherwise stated, all numbers we will be discussing today are non GAAP. Please refer to our earnings release for a GAAP to non GAAP reconciliation and further explanation. Our earnings release and filings with the SEC may be obtained from our website at www dot take to gains.com.
And now I'll turn the call over to Strauss.
Thanks, Hank. Good afternoon, and thank joining us today. Over the past few years, we've seen demand for Take 2's core offerings steadily accelerate. Enabling our company repeatedly to exceed expectations. And today, I'm pleased to report another quarter better than expected revenue and earnings which reflect immense consumer appetite for our products throughout the holiday season.
Our strong earnings converted into significant cash flow And as of December 31, we had over $1,200,000,000 in cash and short term investments. The largest contributors to our outstanding results were Grand Theft Auto NDA 2K16 and WWE 2K16, along with record revenue from recurrent consumer spending. Gran Theft Auto5 and Grand Theft Auto Online continue to captivate new audiences and have exceeded our expectations in every period since launch. Gran Theft Auto5 has now sold in over 60,000,000 units worldwide. In addition, consumers remain highly engaged with the vast Open World of Grand Theft Auto Online, which achieved its best week ever for both revenues and active players during this holiday season, more than 2 years after launch.
In the third quarter, the game was not only the single largest contributor to recurrent consumer spending, it also generated its highest revenue ever. Rockstar Games has driven sustained engagement with Grand Theft Auto Online by delighting audiences through the ongoing release of free additional content and regular in game events. During the holiday season, Rockstar Games supported Grand Theft Auto Online with a rich array of updates, including festive Surprise 2015, executives and other criminals, low riders and Halloween surprise, all of which were key contributors to the game's record results. Rockstar Games has continued to add new content in the current quarter with an update on January 28 that featured the new drop zone adversary mode, 2 new high end vehicles and additional improvements. As a result of its continued outperformance, we're now forecasting that revenues from Grand Theft Auto Online will be up year over year in fiscal 2016.
Series. To date, the title sold in more than 6 million units, which is up double digits versus the same period last year, and has exceeded our expectations. Revenues as we continue to drive increased player engagement 72% year over year, driven both by online in the fourth quarter with concurrent and daily active users both hitting new all time highs for the series in January. In addition, we're seeing a expanding interest in NBA 2k for mobile gamers, with sales of NBA 2k16 for iOS and Android, up more than 60 percent versus last year's release. The NBA 2K experiences expanded well beyond being a traditional sports simulation, And that evolution has been an important driver of the series growth.
Through features like the my career mode, NBA 2K has become a true sports role playing game that incorporates story lines infused with pop culture and music. In recent years, icons such as Spike Lee, JZ and Pharrell of attributed to the game and help broaden its mass appeal. WWE 2K16 has continued to build on its successful October 27th launch, achieving significantly improved review scores and sales growth versus last year's release. In addition, we've driven increased recurrent consumer spending on the title through the popularity downloadable add on content offerings, including the season pass. We believe a significant opportunity remains to grow 2K series further by leveraging the development and marketing expertise of visual concepts in 2K, who are responsible for the incredible success of NBA 2K.
We recently announced a long term extension of our thriving partnership with WWE and look forward to many more years of collaboration with A variety of other
titles from
of expansion pack Sid Meier's civilization beyond Earth Rising Tide, which earned rave reviews from top critics and enriched our iconic PC strategy series that has sold in nearly 33,000,000 units. We also continue to expand our offerings for mobile devices, highlighted by the release of Grand Theft Auto Liberty City Stories for iOS. Over the past few years, we've been able to generate meaningful high margin revenues by bringing many of our older Grand Theft Auto and other catalog titles to mobile platforms and to newer generation consoles. For example, The updated versions of the PlayStation 2, Xbox and PC classic Grand Theft Auto San Andreas that we released for PlayStation 3 and Xbox 360 alone have sold in more than 3,500,000 units. In addition, Grand Theft Auto and 2 titles on the PlayStation Network.
Our ability to expand audiences for our titles years after their original launches underscores the enduring appeal of quality entertainment and the durability of our brands We continue to benefit greatly from our industry's ongoing transition to digital distribution. During the third quarter, digitally delivered revenue exceeded our expectations accounted for 200
and
grew 45% year over year to its highest level ever and accounted for 24% of our total net revenue. In addition to virtual currency for Grand Theft Auto Online And NDA 2K, recurrent consumer spending was enhanced by a variety of offerings, These included add on content led by civilization beyond Earth Rising Tide, along with downloadable offerings for WWE 2K16, the Borderlands Series and evolve, WWE SuperCard, which has been downloaded more than 9,000,000 times, and NBA 2K Online, which in late December achieved record peak concurrent users of nearly Driving engagement and recurrent consumer spending is a key strategic priority of our organization and one of out to the year, we're once again able to raise our financial outlook. For Take 2, underscoring the successful transformation of our company into a consistently performing higher margin enterprise. Looking ahead, Take 2 has an extensive development pipeline and is better positioned than ever to deliver revenue growth, margin expansion, and returns for to delivering the Our strong balance sheet provides our company with the flexibility to explore opportunities to increase our scale and diversify our business. I'll now turn the call over to Carl.
Thanks, Strauss. I'd like to begin by discussing our recent releases and pipeline for the remainder of fiscal 2016. In December, 2K expanded its initiatives in Asia with the commercial launch of Civilization Online, our free to play massively multiplayer online game, which was developed in partnership with renowned South Korean studio XL games. In addition to Korea, we have plans to bring civilization online to Taiwan, Hong Kong, Macau and China through our publishing partnerships with GameFirst and Chihu 360. This Friday, 2K will launch Xcom II for PC, the sequel to the 2012 Game of the Year award winning strategy title Xcom enemy unknown.
Developed by Firaxis Games, Xcom 2 features deep replayability and a high level of modding support. Early review scores XCOM2 have been outstanding with Game Informa Magazine, Gamespot and IGN each scoring the title in the 9 According to IGM, Xcom II is an amazing game. While Game and former magazine called it 1 of the deepest most rewarding strategy games on the market. I'd like to congratulate the teams of 2K and for Access Games for once again delivering a stellar title and expanding this beloved series for company. The growing popularity of esports is an exciting trend for our industry.
And earlier this week, 2K announced a new Esports program featuring NBA 2K16. Beginning on February 15, players on PlayStation 4 and Xbox 1 can formed their own teams and compete in a series of in game events to qualify for the tournament to win a $250,000 grant prize and a trip to the NBA finals. The qualifying events will be featured on 2K TV, followed by playoffs and championship broadcast on Twitch for audiences to enjoy. We're thrilled to bring our flagship sports brand to the emerging world of these sports by offering this unique opportunity to our series most dedicated fans. I'll now turn to 2K's May 3rd launch of Battle Born, the new first person hero shooter from gearbox software, the creators of Borderlands.
This groundbreaking game features 25 innate characters, each with distinct weapons and skills, who fight for the dominance of their respective faction as all life in the universe teeters on the brink of extinction. Battleborn will include a story mode with a heroic narrative campaign, which can be enjoyed cooperatively, or as a single player experience as well as 3 different competitive 5 on 5 multiplayer modes full of intense team based action. Prior to its launch, Battleboy will have an open beta across all platforms to which PlayStation 4 owners will receive early access. In addition, the title will be prominently displayed at PAX East in Boston, up from April 22 to 24, where attendees can experience the game hands on. Those consumers who can't make it to PACS will still be able to enjoy all of the action at 2 Ks booth via live streams from some of our industry's most popular broadcaster.
In addition, which is currently in development at 2k Hanger13studio and plans for launch during calendar 2016. Situated in a reimagined New Orleans settings circa 1968, Mafia 3 features a new playable protagonist, Lincoln Clay, who is an African American Vietnam vet determined to take revenge on the Italian mob for betraying and murdering his cronies. Mafia Three promises to take the series in a bolder direction by combining the best of cinematic storytelling with a dynamic open world that responds to player choice. TUK and Hanger13 will reveal more details about this exciting new title in the coming months. Our robust long term development pipeline also features numerous unannounced projects including offerings from our renowned franchises and new intellectual properties that will complement our diverse portfolio.
And keeping with our strategy to promote consumer engagement with our brands, we will continue to support virtually all of our recent recent and upcoming titles with innovative offerings designed to drive recurrent consumer consumers by delivering the most immersive and engaging entertainment experiences wherever and however they choose to play. I'll now turn the call over to day.
Thanks, Carl, and good afternoon, everyone. Today, I'll review our results for fiscal third quarter and then discuss our outlook for the fourth quarter fiscal year 20 team. All of the numbers I'll be providing today are non GAAP and all comparisons for year over year, unless otherwise stated. Our press release provides a reconciliation of our GAAP to non GAAP measurements. And on our website, we have provided additional details regarding the non GAAP components of our cost of goods sold and operating expenses.
Starting with our results for the fiscal third quarter. Net revenue was 486 $8,000,000 as compared to $954,000,000 in last year's third quarter, which had benefited from a more extensive release slate. This result exceeded our out range of $400,000,000 to $400,000,000, due primarily to stronger than expected revenues from Grand Theft Auto5 and Grand Theft Auto Online. In addition, NBA 2K16 exceeded our expectations. Digitally delivered revenue was $213,600,000 accounted for 44% of our total net revenue.
54% of digitally delivered revenue was derived from recurrent consumer spending which increased 45% year over year. The largest contributors to digitally delivered revenue were Grand Theft Auto, NBA 2K and WWE 2K Catalog sales accounted for $235,300,000 of net revenue, led by Grand Theft Auto And Borderlands. Gross margin decreased slightly to 44.8 down by $37,000,000 due primarily to higher marketing expenses in last year's third quarter from the launch of Grand Theft Auto5 for PlayStation 4 and Xbox 1. And just another expense was $2,100,000. We recorded a tax benefit of 13 $4,000,000, which included $32,000,000 in tax benefits related to video game development costs.
These benefits were $12,000,000 higher than we forecasted. And non GAAP net income was $99,700,000 or $0.89 per share as compared to $211,600,000 or 1.87 per share in the prior higher than forecasted tax benefit and lower than expected research and development expense. On a GAAP basis, we reported net revenue of $414,200,000 and a net loss of $42,400,000 or $0.51 per share GAAP net loss was negatively impacted by $71,200,000 of business reorganization charges due to the reorganizing of One Development Studio and the closing of 2 development studios, which were partially offset by $25,000,000 in tax benefits. Turning to some key items from our balance sheet. 31, 2015, as compared to September 30, 2015.
Our cash and short term investments down increased to $1,210,000,000. This equates to net cash of $10.66 per share, which includes a potential dilution from our convertible note. Our accounts receivable balance increased to $263,700,000 and inventory decreased to $20,200,000 due to holiday sales. And software development costs and licenses increased to $181,900,000 before seen the development efforts around our pipeline of upcoming releases. Now I will review our financial outlook for the fourth quarter fiscal year 2016.
Which is provided on a non GAAP basis. Starting with the 4th quarter, we expect net revenue to range from $260,000,000 to $310,000,000 and net income to range from $0.15 to $0.25 per share. Revenue is expected to be driven primarily by Grand Theft Auto 5 and Grand Theft Auto Online, NBA 2K16 and XCOM 2. We expect less margins than low to mid-50s. Total operating expenses are expected to decrease by approximately 4%, due primarily to lower marketing expense.
Selling and marketing expense is expected to be about 15 of net revenue based on the midpoint of our outlook range. We project interest and other expense of approximately $2,000,000 and weighted average fully diluted time, including $2,000,000 in benefits related to video game development costs. Interest on the convertible notes, net of tax, is $1,400,000, which should be added back to net income to calculate net income per share. We expect to generate modest cash flow in the 4th quarter. Turning to the full year, we are raising our financial outlook to reflect a better than expected third quarter results and strong forecast for the balance of the fiscal year.
We now expect to deliver net revenue of $1,480,000,000 to $1,530,000,000, a net income of $1.65 to 1.75 per share. We expect the revenue breakdown from our labels to be roughly 50% 2K and 50% Rockstar Games. Expect our geographic revenue split to be about 55% United States and 45% international. We expect gross margins in the upper 40s. Total operating expenses are expected to be flat.
Selling and marketing expense is expected to be about 13% of net revenue based on the midpoint of our outlook range. We project interest and other expense of approximately $8,000,000 and weighted average fully diluted shares of approximately $114,000,000. And our effective tax rate is expected be 10% including $34,000,000 of benefits related to video game development costs in the second half of the year. Interest on convertible notes, net of tax is $5,500,000, which should be added back to net income to calculate net income per share. As a result of our consistent execution over the last three quarters, fiscal 2016 is poised to be another strong year for Take 2.
Our ability to balance accretive team's passions with a disciplined focus on profitability continues to enhance our results and bolster our foundation for long term success. Thank you. Now I'll turn the call back to Strauss.
Thanks, Carl and Lainie.
On behalf of our entire management team, I'd like to thank our colleagues for delivering another strong quarter for our company. And to our shareholders, I want to express our appreciation for your continued support. I will now take your questions.
Thank Our first question comes from the line of Arvind Batya from Stern AG. Please go ahead.
Thank you very much and congratulations guys on a very solid quarter. I have a couple of questions First one is just more housekeeping for Laney, just trying to get to an apples to apples EPS number. I know based on emails, a lot of people trying to do that. If you can just maybe parse out the tax benefit at the EPS level and just maybe give us an apples to apples versus your $0.40 to $0.50 And then secondly, obviously very strong. You mentioned the strongest, recurrent spending quarter for you in your history.
And you mentioned some numbers on, on GTA, or generally mentioned GTA. Is there any way to think about the year on year growth on GT online kind of like the way you talked about MBA? Those are my two questions. Thank you.
For the first question, Arvin, on the tax credit in the third quarter, we recorded $12,000,000 higher than what we had forecast, and that's about $0.11 of the beat for the quarter.
Arvin, it's Strauss. On the second question, what we've said and obviously, it's great news, is that the holiday season brought us the highest revenues yet on Grandtown auto online, and we have the highest level of engagement in terms of number of active users. Beyond that, we're not going into more detail on metrics, but it is good news.
Got it. Let me just try a slightly different one. On digital downloads, are you guys able to share what you're seeing on average percentages for your key titles, some companies have talked about 20% to 30% of the mix coming from downloads, digital downloads, you guys share some of that with us?
Yes. For consoles, front line is around 20% digital distribution. It can be higher depending on the title this past quarter looked to be about 20%. And for PC titles, so it's 90% plus is digitally distributed.
Great. Thank you so much and good luck.
Thank you. Our next question comes from the line of Eric Handler from MKM Partners. Please go ahead.
Yes, thanks for taking my question. First, when looking at Esports, now that you're getting involved with esports with NBA. Have you thought about how you can maybe transition this from being more of a marketing tool to with GTA Online and I don't know gangs versus gangs or what, but I'm sure you have people that are smart enough to figure that out, but is that something that's being considered with GTA. And then secondly, for Laney, just a little housekeeping question on the Can you talk about maybe which of those studios you were shuttering with the business reorganization? Does this streamline anything?
How does this impact the financials going forward?
Thanks, Eric. It's Carl. So I'll take the esports question. So in terms of the esports question, you got it right. I mean, so far, see it really as a great marketing tool.
And it's an additional way to gain exposure for our games and to expand our audience. So that really is has been and is continues to be our primary focus at this point. But obviously, there is an economy out there. There's been some the press talking about how big the economy is. I think the jury is still out at this point.
It remains to be seen whether or not it would be a real direct generator revenues for our company. But rest assured, we are certainly looking at it. And I think that our the announcement that 2 K just made around our NBA tournament, while it's not an enormous, it's not an enormous, what I expect it to be enormous contributor to our our economics, it certainly is making it think more and more what the opportunity economically might be for the company. So stay tuned.
And, Eric, in terms of these studios, all we're saying is that it was a reorganization of a development studio and closing of 2 studios in China. And the costs that are in this quarter are the majority of the costs, but there could be about $8,000,000 more to go forward.
And obviously, they're ongoing savings once we're through the one time costs.
Thank you. Our next question comes from the line of Brian Fitzgerald from Jefferies.
Tons of units that are downloaded digitally, does that plateau at a certain level? Do you see consoles eventually reaching that that 90% that are on PC And then maybe during the holiday season, do you see some shift to physical as people are gifting before it starts ratcheting back up Maybe a little
more color there would be great. Thanks.
Will continue to grow. That's been true ever since digital distribution began. It's been true for every other media business. We're pretty sure it'll be true for us. Hard for us to project what the percentage will be or the time will be.
It's worth emphasizing that physical distribution still is a lion's share of our console business and very important distribution channel for us, and we expect that to remain the case for some time. As we transition to digital, we do enjoy higher margin percentages. We enjoy higher margin dollars. It's a good thing. And so we're certainly happy about it.
But remember, we need to consumer where the consumer is. We can't tell the consumer where to go. Our job is to be where the consumer is. And we're acumenical about types of distribution, business models, channels and even territories. And I'm sorry, I think I lost your second question.
The second one was just around specifically around the Q4 and you have the holiday season DSC a shift to physical as people are gifting and then it starts ratcheting back towards
I'm not sure we have seen that actually. I suppose it's possible, intuitively, but we haven't seen it.
Great. Thanks.
Thank you. Our next question comes from the line of Ben Schachter from Macquarie. Please go ahead.
Hey guys, congratulations on another good quarter. A few questions. 1, on the pipeline, in the past, I believe you said that you try to have at one new AAA title annually? Is that something that we should still consider likely for Take 2? 2nd question, at a high level Strauss, given your media background, are the catalog and IP value is evolving for the game industry versus what you've seen in the past for some other media?
And then finally, my favorite subject VR I know it's early, but have you seen anything over the past few months that makes you more or less bullish on VR's potential for games and take you in the future? Thanks.
On average, we have indeed been able to launch 1 new successful IP since 2007. And today, we have 11 titles that have franchises that have each sold at least 5,000,000 units within the individual release and 45 that have sold several million units for an individual release. So this strategy seems to be working. The next new intellectual property that we're launching is Battle Born, and we have very high hopes for it. And that's obviously in the next fiscal year in this calendar year.
So, we, remain on track. We'll see how it all see it all pencils out, but it feels good. In terms of catalog, I think this is a point that's near and dear to my heart, and we've talked about this actually the notion that, successful, reliable entertainment businesses or businesses in which the catalog or library can be accounted for year in, year out to deliver a certain amount of revenue. And historically, the change in the technology for interactive entertainment meant that most companies didn't expect catalog to amount so much. And this last quarter, for example, for us, catalogs 48% of our non GAAP net revenue.
So clearly catalog really matters us. And I think it does matter to us, disproportionately because we seem to have the highest, unit per SKU count sales for catalog in the industry. And I think that is driven by quality. For great, unreliable media businesses, catalog or library can be well over 50 percent of revenue period in period out, even with strong front line releases. And I do think that's something that one can aspire to in our business, with a couple of key caveats.
First of all, obviously, if to continue to deliver quality. And secondly, we have to begin to see sort of a technological asymptote being reached on the hardware side. And very difficult for us to call the latter, very important for us to focus on the former. In terms of virtual reality, let's put personal opinions to decide. It's our job to the front lines of everything that goes on in the industry.
We've made no secret of the fact that we're doing some investigation and R and D. We don't have much more to say about that because our labels talk about the release schedules. And we try not to do that here. And of course, there is no real utilized hardware in the market yet. Will there be unquestionably, will it be an interesting platform for interactive entertainment challenge is notwithstanding.
I think most people feel it will be. And our personal opinions aren't really relevant. The key thing is that to the extent VR platforms become interesting and an important part of the interactive entertainment business will be there because we're always there for consumers. And I have zero doubt we'll be able to be there and be there in a competitive way. But it is early and perhaps irrelevant for me to state an opinion on how it's going to go.
Thank you. Our next question comes from the line of Neil Doshi from Mizuho. Please go ahead.
Great. Thanks guys. Congrats on the quarter again. Strauss, can you talk a little bit about the engagement on GTA Online? Does it is it fairly constant or does it kind of ebb and flow with the release of content?
And then secondly, any thoughts around, you know, DLC for GTA given the success that you've been having with online, does it necessarily even make sense to launch standalone DLC? Thanks.
Undoubtedly, engagement ebbs and flows with the nature content for GT Online, we do see enhanced engagement and virtual currency sales will reflect that enhanced engagement. But the the approach of our company broadly remains delight consumers first. And if you do that over and over again, if you delight them, if you engage them and if you think about delivering a great experience. Then the monetization, the revenues and the profitability won't be far behind. But what we don't do at our company totally important not to, is focus on monetization, leading to data, leading content.
We don't do it that way. We really do it the other way around. And I think that that's the nature of any true entertainment company. You have to focus on the experience of engaging with and entertaining your consumers. And frankly, that's what's most exciting about GT Online.
Yes, it's great to talk about the numbers. That's what we do in this call. But remember, those numbers are driven by record levels of consumer engagement over 2 years after the initial launch of the title. That's a, that's a sea change for us. It's a sea change for the industry.
It bodes well very well for the future. And as far as content, I can talk about what we've done so far. We've out this free content that I just described for GTAM line. It's driven great engagement. It's driven great results and it continues to to astonish us in a positive way.
And anything else that comes for the game will be announced by the label in due time.
Thank you. Our next question comes from the line of Mike Hickey from the Benchmark Company. Please go ahead.
Hey guys, great quarter and thanks for taking my questions. I'm sort of curious on the recent leadership turnover from Oxnard North if you could provide some color on Leslie's departure. And if you could speak maybe to the relative stability of other Rock leadership namely Sam and Dan perhaps the broader rock star developer base would be helpful. Thank you.
Thanks, Mike. We're really proud of the team approach that we have here at our company. And we have a very broad and deep team. I can confirm that lastly, Benzi's went on sabbatical in September of 2014. He's decided not to to Rockstar Games.
Since that time, Rockstar North is and will continue to be under the leadership of Aaron Garbert and Rob Nelson, We're so proud of the deep and broad pool of creative talent. It's our job to move ahead day and night without ever missing a beat. And that's what we're doing. In terms of, our colleagues here at every level, we enjoy longstanding relationships with all the people who make this organization tick, we aim to be the best place in the business to work at. We are imperfect, of course.
And especially imperfect. But our track record speaks for itself. And, we have extraordinarily long term relationship And I'm highly confident that they will continue. Thanks,
Strauss. One quick follow-up. Do you I guess, maybe hard to answer, but are you aware of Leslie plans to continue developing games? I guess, the presumed risk would be him potentially drawing out other rocks to have some from you in our studio? Thank you.
Yes. Listen, I have all the respect in the world Leslie and for everyone else here, but current and, and former colleagues. And of course, I wish him all the best. I can't comment on his plans.
Thanks guys.
Thank you. Our next question comes from the line of Justin Post from Merrill Lynch. Please go ahead.
Thank you. Strauss, a couple of questions. I think earlier this year, you commented this was kind of a light, release schedule for take 2 this year. So congrats on earnings above $1.50. Could you comment at all about the pipeline over the next few years?
How robust it is? You still can you still hoping to get 1 new Rockstar title out of the year? Any thoughts there would be helpful. And then just what drove you think the NDA 2K growth year over year? Thank you.
So we are excited about the pipeline. We've made some announcements, of course, about upcoming titles. We talked a bit about Xcom too, which is coming very soon and has gotten great reviews so far. We're really excited about that. That's coming from PRAXIS We have Battleborne coming in May, which will have powerful single player and multi player approach, this comes from gearbox, the people who brought us border lands.
And they're immensely talented folks, and we have high hopes We talked about mafia 3 coming in calendar 2016. And of course, we have basketball and wrestling in our catalog. We have NBA 2 can line in China. We've launched civilization online in Korea. We have GTA online ongoing and performing super well.
And we have our catalog. So The good news is we have a backdrop at this company, against which, to populate additional titles, we have not announced our full release we have not talked about the year after next. What we have been willing to say though is we have an enterprise now, which is solid well financed, highly creative, stable and rational, and that enterprise is yielding great results year in year out, results that generate high revenues, blazing trails in digital distribution and recurring consumer spending, high profitability and strong cash conversion. We have over $1,200,000,000 in cash because of the way we account for our convert, we have no debt in that context. So you have to give that background.
I know the market would love it if we would talk about titles coming up the next couple of years, but we make our announcements in an effort to market our titles most effectively, and that's proven to be a sound strategy. And one of the things that I do like saying is don't look at what I say. Look at what I do. I'm likely to do that again. We've described our strategy over and over again.
It's to be the most creative, the most efficient and the most innovative company in the business. It's to deliver a limited number of the highest quality releases from both of our labels entertainment titles, but not to annualize our action in adventure and other titles. That's a strategy we're pursuing and it's yielded not only great hits from franchises, but great new hits every year since 2007. I can't guarantee it'll keep happening, but certainly that's what we're aiming towards. And we're doing that while we build these new businesses.
These businesses that are free to play, these businesses take place in Asia, these businesses that are massive multi player businesses. So that's as much as I can say about the pipeline. But as you can tell from my voice, we're super excited about it. And specifically, with regard to any of the labels, they'll talk about their own plans. But what Rockstar has been able to achieve with GT Online, which even on the if you did look on a stand alone basis, you'd say my, that's an incredibly, extraordinary, powerful and profitable release.
Again, more than 2 years after the release, well, that's something to be very proud of, indeed.
Okay. Maybe one follow-up and from a 2K perspective, how much lead time do you need for the press and retail to formally announce title before launch. Do you think about 4 months, 6 months or longer? Thanks.
Historically, it's been somewhere between 4 9 months depending on the label and the release. And by the way, I know I skipped over your basketball, but I didn't mean to. I guess that the risk of sounding over promotional, which really is in my style, we sold in over 6,000,000 units. This is the industry leading title. And, the team of visual concepts have an amazing job that scores are up again this year.
And, we tend to be people who, the question we like to pose most frequently is, what are we missing? What can we do better? And I promise you the team visual concepts in 2K will only try to make that title better and better. And if we succeed, it'll continue to perform. That's also reflected in recurrent consumer spending for the title.
Our sale of virtual currency is up 72% year over year. So when and again, since we're not organized around those percentages, they're a reflection of what we're doing. I think it's a reflection specifically of just how much consumers love the title.
Our next question comes from the of Doug Crutze from Cowen And Company. Please go ahead.
Yes, thanks. Obviously, this business has changed a lot over the years in the sense that when a studio works in a game, when it ships, they're not done, that there's a lot more content that can be made that can be sold to consumers. And you've had a lot of that with GT online. When you think about resource allocation, how is your sort of philosophy towards that change over the last few years in terms of what what you want people working on, how to size the teams. And in the past, you talked about wanting to invest internally in your business.
Are you at a point where it makes sense to invest even more heavily in sort of ongoing live service teams so that you can maintain your ability to keep a steady pipeline? Or do you feel like you're in a good shape in that regard?
It's a really great question. And I think if you take a look at our headcount, our investment has been on the development side when we showed up here in I think we had about 1100 people who were involved with development and now it's about 2000 people, maybe even a bit more. You should expect that to continue to grow. What we try to keep as modest as possible is fixed overhead that is not responsible for either creating intellectual property or exploiting that intellectual property. And so, some of our competitors made a good deal of noise around building service centers, data centers, call centers and the like.
And we'd like nothing more than to have none of that infrastructure here, although we do have some You're right. We have had to build some expertise on the service side. I think we're proud of what we built pound for pound. I'm quite certain we have a much leaner service team than any of our competitors, and we wanna keep it that way. But it means we have to be smarter.
We have to innovate, but we're pretty well allergic to fixed costs and to non revenue generating overhead.
Thank you. Our next question comes from the line of Larry Haverty from GAMCO.
First question on e sports. If you look at it currently as marketing, could you give us perhaps dollars that likely to go into this you've got this alliance that you announced with folks in South Korea, and that is probably, intense economy in the world for these kinds of activities. Could that partnership materialize into, significant, e sports, commerce in South Korea or is that not even on the planning horizon?
Thanks, Larry. In terms of our, our financial commitment in the Esports space, it's not significant at all at the doesn't mean it won't be in the future. In fact, it's been a net contributor because we were an investor in Twitch early on, and we had a great return on that investment. So we bet very early on the space. And it worked out super well for us.
But no, this is not a meaningful commitment and there's the risk is de minimis, absolutely de minimis. That's how we like to do things unless and until we're convinced that an economic opportunity exists. Our view in the businesses since only we can exploit our intellectual property. We have the ability to, to be somewhat judicious as businesses are developing and then step in when there is an opportunity. I think there could well be an opportunity for eSports in Korea.
It remains to be seen. It's a very active market. We consider ourselves reasonably expert. We have a terrific partner there. We know the market well and we have an on the ground presence.
But it's a little early to say.
And then for Lainie, because she's not getting enough activity. Is there any plan to make the convertible debt disappear from the balance sheet?
Sure, Larry. So for the convert, our 1.75% convertible notes mature in December, And today, it hasn't made economic sense to take them out before the maturity date. But we definitely are going to keep an eye on it as it gets closer to the maturity and we have the option to settle it in either cash or stock. So when we get closer to the date, we'll see what the best option is for us at that time.
That's December this year, right?
Yes, it's December of this year.
Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to management for closing comments.
Thank you, everyone, for joining us. We are thrilled with the results that we've just reported. We appreciate your engagement and support. Once again, to all of our colleagues, thank you for all the great work.
Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time.