Greetings and welcome questions. As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Mr. Hank Diamond, Senior Vice President of Investor Relations And Corporate
Good afternoon. Welcome and thank you for joining Take conference call to discuss its results for the first quarter of fiscal year 2014 and to June 30, 2013. Today's call will be led by Strauss Zelnick, Take 2's chairman and chief executive officer Carl Sladoff, our President and Lainie Goldstein, our Chief Financial Officer. We will be available to answer your questions during the Q and A session following our prepared remarks. Before we begin, I'd like 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, 2013, and the company's registration statement on Form S3 dated June 12, 2013. These documents may be obtained from our web site at www.take2games.com.
I'd also like to note that unless otherwise stated, All numbers we will dotcom for a GAAP to non GAAP reconciliation and further explanation. And now, I'll turn the
call over to Strauss. Thanks, Hank. Good afternoon, and thanks for joining us today. During our fiscal first quarter, we continued to benefit from robust demand for our recent release evergreen catalog titles and expanding portfolio of unique digitally delivered offerings. This enabled our company deliver results that exceeded our outlook, marking the 4th consecutive quarter in which we've outperformed expectations.
These results confirmed that the market for the high quality current generation titles remain strong, even as anticipation builds for upcoming launches of next generation consoles, later this year. Accordingly, we've increased our revenue and earnings outlook Turning to the key drivers of our first quarter results. The enduring popularity of Borderlands 2 has enabled the title to sell in nearly 7,000,000 units. And it remains on track successful downloadable add on packs for the title, including the ultimate Vault Hunter upgrade pack, Psycho pack and teen tiny teen is assault on dragging keep. Add on content for Borderlands 2, including its season pass, was the single largest contributor to our first quarter results.
Our add on content provides incremental revenue and profits while also helping to deepen the engagement of existing fans and attract new ones. MDA 2K13 continues to grow its audience around the world and contributes significantly to our results. The title is now both the highest sell and most profitable sports released in the history of 2K with more than 6,000,000 units sold in worldwide. In addition of being the industry standard bearer, the success of NBA 2 13 has been enhanced by record digital sales for the franchise, including virtual goods, while our NBA 2k Everywhere offerings bring the brand to every screen where consumers want to experience the very best in basketball. BioShock Infinite is North America's best selling multi platform release so far this year, according to MPD.
The titles crossed the 4,000,000 units sell in mark, and we expect it to become the top selling release in the BioShock franchise. It's being supported with downloadable add on term, which Carl will discuss shortly. We had no temporal releases during the first quarter, and therefore, our industry leading catalog was particularly integral to our results. In addition to Borderlands, catalog sales were led by Rockstar Games iconic Grand Theft Auto franchise and Red Dead Redemption, which continue to attract new fans years after launch. Our strong catalog remains an important competitive advantage and provides a relatively stable and predictable profit stream to complement our new release schedule.
Revenue from digitally delivered content grew 128% in the 1st quarter and accounted for a record 50 of new and existing catalog titles. We also benefited from in game purchases of virtual goods On June 20th, we released XCOM and EMEA known for iOS, which is our first mobile version of a current generation non sports AAA title, also our first mobile offering carried a $20 price point. The game received an outstanding 92 average score in Metacritic and it was among the top 10 grossing apps on Ipad within the 1st week of its release. The success of Xcom and EMEA known for iOS illustrates that consumers are willing to pay a premium price for a premium entertainment experience on any platform. This bodes well for the opportunity to deliver profit our most immersive new
AAA titles
into our already solid balance sheet through the completion of a $287,500,000 offering of 1% convertible senior notes to 2018. This enabled our company to refinance its 4.357 percent, 3.375% convertible senior notes, to 2014 on substantially improved terms, while also increasing our cash. We're highly optimistic about our potential for growth over the long term This additional capital gives us even greater flexibility to take advantage of opportunities that we may see in the marketplace for studio or intellectual property acquisitions strategic investments, share repurchases and other initiatives to expand our business and create shareholder value. We're pleased with our start to the fiscal year, which promises to be one of Take 2's best ever, led by the eagerly anticipated launch of Rockstar Games grants F. O.5 on September 17th, and the fall releases of NBA 2K14 and WWE 2K14.
Looking ahead, we're well positioned to capitalize on the opportunities presented franchises 2015 and for the foreseeable future. I will now turn the call over to Carl.
Thanks, Ralph. Today, I'll give an update on our recent releases and development pipeline. Earlier this month, 2K successfully launched Sid Meier's Civilation Civilization 5 BRAVE New World, a massive expansion pack for Firaxis Games award winning strategy title. Providing new depth and replayability through the introduction of international trade and a focus on cultural and diplomacy. The pack has been uploaded by consumers and critics.
According to IGM, who gave the game 9.4 out of 10, brave new world is the best civilization expansion so far. In game informer, who scored at 9.25 out of 10, said this second expansion cements civilization as the marquee strategy title in all of gaming. Congratulations to the team of 2K and 4 axis for continuing to take this fantastic franchise to new levels. Turning to our online in China last October and continues to make positive strides. Usage and player engagement are gaining momentum and according to Q2 games, remains among the top 10 most played PC games at internet cafes in China.
We are actively exploring bringing a renowned NBA 2K brand to more markets and platforms around the world. Pro Baseball 2K developed in partnership with Nexon Corporation, launched commercially in Korea in May. The game offers an authentic Korean pro baseball simulation experience based on the MLB 2K engine, will incorporate significant new content features throughout the balance of the year. And civilization online, 2K's massively multiplayer online game continues in development with Excel games in Korea and our earned Jake Song and is one of the most exciting and ambitious online game development initiatives in the region. We continue to believe that our online project the potential to complement our core business with a relatively stable, higher margin revenue stream over time.
Looking ahead to our announced pipeline of releases, Tou kay Marin is gearing up for the August 20th launch of the Bureau XCOM Deflect to classified set in 1962 at the height of the cold war This third person tactical shooter tells the story of the founding of the top secret XCOM organization. In keeping with the spirit of the XCOM franchise, the Bureau fully embraces the challenges of permanent death and its calculated combat designing requires players to think and act tactically. We're confident that 2K Marin's narrative driven vision for this title will challenge players unlike any other third person shooter. Ken Levine and the team of irrational games have been hard at work on add on content for the critically acclaimed BioShock Infinite, and today marks the release of first downloadable content pack, BioShock Infinite Clash in the clouds. This pack presents players with a series of unique and intense challenges as well as many new combat opportunities set in 4 new areas inspired by the classic bioshock infinite environments.
Also announced today is bioshock infinite burial at sea, which is a 2 part add on campaign featuring an all new story for Booker and Elizabeth, set in the underwater city of rapture before its fall. All three packs were included as part of the BioShock Infinite season pass and can also be purchased individually. As Strauss mentioned earlier, Borderlands 2 continues to attract new audiences and solidify the series as one of our company's most important franchises. Given the overwhelming success of the title's downloadable add on content, 2k and gearbox software have announced plans to release even more offerings. This fall, 2 K will launch the ultimate Vault hunter upgrade pack 2, Digistrux peak challenge, which will raise the level cap for all six playable characters.
In addition, for the first time, new uniquely themed boss fights with additional bonus content will be available for individual purchase. And continue into Seth Auto Series, we released from Rockstar Games. Grand Theft Auto V will be the biggest, most dynamic and most diverse open world game the label has ever created. Focus around a series of major heists. Grand Theft Auto Five Blend's storytelling and game play in new ways by allowing players to drop in and out of the lives of the game's 3 lead characters to experience all such of an interwoven story.
With a strong pre order campaign, the title is lining up to be both the biggest launch in the history of the franchise and Take 2. Gran Theft Auto5 promises to be this year's must have entertainment experience. On October 1st, 2 k and visual concepts are poised to once again redefine the basketball genre for interactive entertainment with the release of NBA 2k14. We're thrilled that 2013 NBA MVP and LeBron James will make his video game cover debut on the title. As one of the greatest athletes of this generation, James will lead 2K's groundbreaking NBA 2K franchise into the future of sports video games with 2 dynamic and unique on the current generation of consoles and NBA 2K14 will continue that legacy on next generation consoles as our company's first offering for the PlayStation 4 and box 1.
On October 29th, gamers will step into the squared circle with some of the biggest names in sports entertainment with 2 Ks long of WWE 2K14 developed by YOOX for the Xbox 360 in PlayStation 3, WWE 2K14 will be the most electrifying, authentic and comprehensive WWE video game experience to date. Not only will the title feature WWE Superstar Duane the Rock Johnson on its cover, but 2K recently announced a special pre order campaign that will include a franchise debut of the legendary ultimate Warrior. We're confident that the addition of this pop culture phenomenon will attract both old and new members of the WWE Universe will finally be able to create dream matches with today's top superstars. I'll take 2 heads into the next generation of gaming. We do so in the strongest position in the history of our organization.
We firmly believe that we have the best portfolio of owned intellectual property in the business. Our world class creative teams raised the bar for innovation and excellence in the current console jet cycle. And as we enter the next cycle, we will leverage every facet of our new technology both to expand our leading franchises and to create new intellectual property that will once again change the way we experience and think about interactive entertainment. In support of these creative endeavors, we will capitalize on new business models for new platforms and expand geographically to capture an even larger global audience. In closing, I'd like to join Strauss in thanking all of our employees their dedication and hard work.
This year is poised to be one of our best and we remain highly optimistic about our long term outlook. Thanks. And I'd now like to turn the call over
Thanks, Carl, and good afternoon, everyone. Today, I'll review our results for the fiscal first quarter and then discuss our updated outlook for fiscal year 20 14 and our initial outlook for this fiscal second quarter. All of the numbers I'll be providing today are non GAAP results continuing operations and all comparisons are year over year, unless otherwise stated. Our press release provides reconciliation of our GAAP to non GAAP measurement. Starting with our results for the fiscal first quarter, net revenue decreased 36 percent to $144,300,000 as last year's first quarter benefited from the releases of Max Payne 3 and spec ops of the line, and we had no significant releases during this year's first quarter.
This is our outlook content for Borderlands 2. Catalog sales accounted for 60 percent of net revenue, led by the Borderlands franchise, the Grand Theft Auto franchise and Red Dead Redemption. Revenue from digitally delivered content grew 128% year over year and accounted for a record 22% of net revenue. The largest contributors were offering for Borderlands 2, the Grand Theft Auto franchise, NBA's 2K13 and BioShock Infinite. Gross margin increased 15.8 percentage points to 35.4 percent due primarily to lower development Royal and a higher mix of digital revenue during the quarter.
Gross margin was lower than expected as we recognized $29,000,000 impairment of capitalized software development costs during the quarter related to a 2K title in development. Operating expenses were approximately $94,000,000, down by about $45,000,000 due primarily to lower marketing expenses as we had no new major release during the quarter. In addition, G and A was lower due to the absence of the $15,000,000 one time contractual obligation that was recorded in the first quarter last year. Interest and other expense was $4,000,000, and non GAAP net loss was $47,100,000 or $0.54 per share as compared to a net loss of $98,800,000 or $1.16 per share in fiscal first quarter 2013. On a GAAP basis, we reported a net loss from continuing operations of $61,900,000 or $0.71 per share.
Both GAAP and non GAAP net loss include the impairment of capitalized software development costs of $29,600,000 or $0.34 per share, for GAAP and $29,000,000 or $0.33 per share for non GAAP. Our non GAAP net loss of $0.54 per share exceeded our outlook range of a sales, partially offset by the impairment of capitalized software development costs. Turning to some key items from our balance sheet, at June 30, 2013, as compared to March 31, 2013. Our cash balance increased to $646,300,000. Our accounts receivable balance decreased to $35,200,000, primarily reflecting collections on receivables associated with the release of BioShock Infinite near the end of the fourth quarter.
Inventory decreased to $27,900,000, and software development costs and licenses remained relatively flat at $293,600,000, reflecting the development efforts around our pipeline of upcoming releases, offset by the impairment of capitalized software recorded during the quarter. As mentioned by Strauss, we recently completed an offering of $287,500,000 of 1% convertible notes due 2018. At the same time, we issued a notice calling all of our outstanding 4.3 7 5 percent convertible notes due 2014 for redemption on August 29, 2013. It's important to raise money when market conditions are and this was a very rare and possibly shortlist window of opportunity to take advantage of very attractive terms. Essentially, we are refinancing the old convert, which has a coupon of 4.375 percent, an effective strike price of $14.95 at maturity for the new convert with a much lower coupon of 1% and a much higher strike price of $21.52.
At the same time, we've added additional cash to support our long term growth initiative we finance other indebtedness and or execute on our share repurchase authorization. From an income statement perspective, we expect to reduce our annual non GAAP interest expense by approximately $3,500,000 and modestly increase our fully diluted share count once the redemption is completed in August. Now I will review our financial outlook for the full year and second quarter fiscal 2014 which is all provided on a non GAAP. We are revising our financial outlook for fiscal 2014 to reflect our strong first quarter results and outlook for the remainder of the year. We now expect non GAAP net revenue to range from $1,775,000,000 to 1.8 $75,000,000,000 and non GAAP net income to range from $2.25 per share to $2.50 per share.
Turning to the details of our full year outlook, our expected revenue range assumes the on time release of the titles we have planned for launch during fiscal 2014. We expect the revenue breakdown from our labels to be roughly 65% from Roxar and 35% from 2 K. We expect our geographic revenue split to be about 50% United States and 50% international. We expect gross margins in the low four 30s. Total operating expenses are expected to decrease by approximately 4%, primarily due to lower sales and marketing expense.
Selling and marketing expense is expected to be about 13% of net revenue based on the midpoint of our outlook range. And we project interest and other expense of approximately $12,000,000, tax expense of about $9,000,000 and weighted average fully diluted shares of approximately 127,000,000. This reflects weighted average basic shares of approximately 90,000,000, which includes an estimated 1,500,000 shares to be issued to settle our 4.375 percent convertible notes. 10.5 and 26,500,000 shares, representing the potential dilution from our convertible notes under the if converted method of accounting. Turning to the outlook for the second quarter of fiscal 2014, we expect non GAAP net revenue to range from $750,000,000 to $800,000,000 and non to come from Grand Theft Auto Five.
We expect 2nd quarter gross margins in the low 40. Total operating expenses are expected to be reflects interest and other expense of approximately $3,500,000, tax expense of about $4,000,000 and weighted average fully diluted shares of approximately 124,000,000. This reflects weighted average basic shares of approximately 87,500,000 which includes an estimated 1,000,000 and 26,500,000 shares, representing the potential dilution from our convertible notes under the if converted method of accounting. In closing, our better than expected and ushers in what we believe will be a terrific year for Take 2 with numerous opportunities for growth and further diversification on the horizon, our organization has an incredibly strong balance sheet and the fiscal discipline to efficiently drive long term shareholder value. I'd also like to thank our employees for their continued hard work and dedication in helping take 2 achieve its goals today and building an even stronger company for tomorrow.
Thank you. Now I'll turn the call back to Jeff.
Thanks, Carl and Lainie. On behalf of the entire management team, I'd like to thank our colleagues for their effort in delivering a solid start to what we believe will be a fantastic year for the company. To our shareholders, I want to express continued interest and support.
Question and Our first question comes from the line of Justin Post with Merrill Lynch. Your question. Your line is live.
Thank you. I guess just two questions. You're raising revenues is still very early in the year. Just what gives you most confidence that you can achieve the higher revenue forecast for the year? What's kind of going right right now?
And then secondly, any thoughts on potentially keeping the share count in check now that you've kind of done all the convertible activity? And are there ways the company can actually start thinking about reducing the count? Thank you.
Thanks, Justin. We're increasing the financial outlook based on our better than results for the first quarter and our strong release schedule for the remainder of the year, including, obviously, Grant Theft Auto5, our MBA title, our WWE title and our catalog titles and the rest of our release schedules. So it's looking very sound. In terms of our share count, Remember, our share count is driven by GAAP accounting. That means we have to include things like unvested options.
It also, varies depending on whether we're a profit a loss quarter and also varies with regard to the accounting for our converts. And, and the answer is based on this most recent financing, our share count really hasn't changed very much at all. And we feel the small change is actually swamped by the reduction in the interest cost and the benefit of the incremental capital in our balance sheet. In terms of other steps to reduce the share count, I think the real question is, what steps are we taking to increase value per share and the value of the company overall. And then those steps have we outlined some years ago, and we've been trying to execute again primarily what we've tried to do is diversify the product offerings of the company, be a market leader in terms of the quality of our actual property and the quality of our individual leases for those franchises.
However, years since 2007, we've released a multimillion unit new intellectual property. We'd like to keep doing that. We've expanded our offerings around the world. We've gotten into mobile business and other businesses, including the MMO business in Asia. And we've really been a leader in the innovating for product offerings, whether that's in game payments or free to play games in Asia with partners.
We need to keep doing more of that. The fact is today, reported over $600,000,000 of cash on our balance sheet and an outlook for making $2.25 to $2.50 a share in non GAAP earnings. And we've also said importantly that we expect the following fiscal year to be profitable and to be profitable for the foreseeable future. If we're able to achieve that, we have a good deal of confidence that we can, then the value of the company and of all those shares will should increase. That's certainly our hope and expectations.
Great. Maybe a follow-up on the first point. Are you seeing a little bit better pre order activity than you saw maybe a couple months ago, or are you seeing, just more, more, demand from retailers for some of your big releases? Any update on the, on how you're looking at this slate right now?
We don't talk about specific preorders, but I will tell you that the outlook is great. And the feedback directly from retail is terrific. And obviously, the release that this whole company is focused on worldwide is Grand Theft Auto V. And we're very proud of the fact that we are one company, even though we have a relatively far front flung group of employees in multiple locations all over the world. We all pulled together to get behind all of our Tempo releases.
And retails our most important partner. It still represents the bulk of our revenues. Feedback, including the feedback driven by preorders has been nothing short of extraordinary However, we don't discuss the specific numbers.
Great. Appreciate it. Thank you. Thank you. Our next questions.
Thank you. Congratulations on putting up another good quarter. I know you don't want to get into any kind of numbers on GTA Five, but I thought maybe we talk about GTA 4. And if you could just remind us what, that title did in its 1st year and life to date, as you continue to see success with that product. And then also in terms of the digital strategy for GTF5, obviously a huge opportunity there.
You're doing some of that right at the start. That would be helpful to maybe understand, you know, how frequently you'll be introducing additional digital content? Thank you.
We've for Grand Theft Auto IV, we've sold in about 25,000,000 units, in South to date. I don't have the 1st year numbers at the, at the tip of my tongue. Although, I guess the answer is that hanked up. So we sold through about, $8,500,000. It's the 1st month at about 11,000,000 units within the 1st month of launch in 2008, just to put it in context.
But the more important point is that we've sold in 25,000,000 units of GTA4 inception to date and still selling now, this many years later. And the entire franchise is sold in, about 125 over 125,000,000. So, and I think it's also worth noting that the installed base today of, of the platforms for which we're releasing is roughly triple what it was when we launch GTA 4. That isn't to say that we'll see a straight line to results, but, this massive installed base at a time when we think consumers are hungry for Grand Theft Auto Five, is very good news indeed. In terms of digital content, we're going to let Rockstar Games talk about digital plans the title.
That's the appropriate place for us to talk about, to what we're doing for the product and what we're doing for marketing. But suffice it to say we've been a leader in digital add on content in the quarter that we just released. Our biggest contributor revenue was downloadable add on content for Borderlands 2. We think we really do have a point of view about how best to delight consumers, not just at the time of the initial release, but also on an ongoing base And what we've learned is that downloadable content does not work for every title in the market. It doesn't even work for all of our titles.
It works when we put out something really great, and then we put out more stuff that people really really like. And once again, it comes back to delighting consumers. That is Rockstar Game Specialty. That is what Grand Theft Auto V is all about a delightful consumer experience we think is going to amaze everyone who plays it. And, you'll stay tuned, but we feel really good about it.
Our next question comes from the line of Mike Olson with Piper Jaffray. Please proceed with your question. Your line is live.
Alright, thanks.
You mentioned just now triple the installed base today versus when GTA 4 shipped. And is there anything you can say about kind of what your expectations are for GTA5 attach rates in the current environment and with the much larger addressable market? And maybe if not specifics on attach rate, just kind of maybe how you're thinking about why attach rates, could be different from, when GTA Four shipped?
Well, we're at a different point in the console cycle, Mike, and there's no doubt that attach rates are lower at the tail end of the console cycle in general. Because if they weren't, then I'd be telling you that we're going to, I mean, I guess I'd extrapolate and sell that we'd expect we'd sell 75,000,000 units of GTA5, which would be lovely, but we're not saying today and our obviously, our financial outlook does not reflect that number. Why do attach rates decline because this is a sign curve business? And when people get new hardware, they over consume. As they get used to having the hardware, they under consume.
It's always been the nature of the business for nearly 30 years. And I don't really expect it to change. That said, we're putting out an extraordinary experience and we do think that avid players and even casual players who own these consoles and some who currently don't own the consoles will own this title. And we'll be there serve and meet their needs. All
right. Thanks. And then can you just talk about the new day and date release features of the gen consoles. Is that something that you guys are excited about or more neutral on? And I guess could you share what percent of your frontline titles tend to be downloaded directly today, I'm assuming it's, near 0%?
Oh, no, it's not near 0. We definitely have full game digital down loads, and they're they're meaningful to us. And, obviously, we'll companies talk about their own policies. They set them and, you know, and we adhere to them, because there are partners, and that's the business that they're in. But our own view is that meeting consumers where they are is the best way to run a business and that you want to make sure that your policies reflect the way people like consume product.
We've always been ecumenical about platforms, channels, geographies, and business models. We are not a rule based company. Our goal is delight consumers. And the way we do that is by being flexible, bringing them the best products wherever they are on whatever platform they want to consume it. So, we are we try to be good partners with the console makers.
They are our bread and butter. We support them as they do us. We recognize that they set these policies, and we encourage the policies to be as open minded as possible. But you can rest assured that, you know, we will always be, in our view, a leader in being flexible and consumer friendly within the purview of the policies the console makers set.
Our
next question comes from the line of Eric Handler with K. M. Partners. Please proceed with your question. Your line is live.
Yes. Thanks for taking my question. 2 digital items for you. 1, Can you give us a sense of how much of your digital business was mobile? And then secondly,
maybe you could give us a a sense
for the digital business, how much came from Asia?
We don't really break it out, but we did say that the biggest drivers were full game downloads and downloadable content. But apart from that, we don't break it out with more specificity.
Okay. Thanks. Our next question comes from the line of Daniel Ernst with Hudson Square Research.
Yes, good evening. Thanks for taking my call. Two questions if I might. First on the console cycle, can you talk about what your expectation are for the size of the installed base cycle on cycle and what your expectations are for the initial sell in. I think there's some expectations that the console makers will not repeat past mistakes and has supplied, if you have any view on that within the industry, whether the early part of the console cycle could be bigger than the early part of of the last one and whether this new console cycle could be as large or be smaller than the last one.
And then on digital, your commentary around the relative success that you had with a $20 tablet game I'm wondering if you could, apply into the future trials as to when we think we could have a tablet game that is as immersive as a console game. And, well, at that point, you'd be able to support console type prices? Can you get the $60 game when you deliver a game that's as immersive on a tablet as it is on a console or PC? Thanks.
Yes. I mean, the second question first, the console, the tablet still aren't powerful enough to to run our console titles, in their full experiences and the way they want. But that, we think that's just a moment in time. We think that, If you believe in Moore's Law and we do, it's a matter of just a couple of years before tablet will be a terrific entertainment platform. And it already is entertainment platform for watching a TV show or watching a movie.
You know, we do need, an outboard controller that becomes sort of an III standard that works for consumers. But I have every reason to believe that a tablet will be a great game platform, and we'll be right there. I do think we're years away. To your point about pricing, we don't tend to spend a lot of time talking about pricing. The truth is that consumers pay for what's of value to them.
And, obviously, we create a product that's very expensive to make and market. And its price point reflects the intersection of those two things. If there really is no reason why, if you deliver a great experience on tablet, we should be price limited. But if we were, we'd have to figure out a different business model and we're pretty flexible people. And and we I'm sure we'd be be able to do that.
So we'll listen to consumers, and we'll give them what they want. And, obviously, the experience that we current currently delivered calls has a certain price, and it also has a certain cost. And if consumers push back on the individual bite size of a price because it's on a tablet, wouldn't make very much sense. But if it happened, we could work within those parameters as well by altering and tailoring our product offering. In terms of the console cycle, we're quite optimistic.
We don't share our projections or expectations, and we've only announced one title so far. Which is the NBA title for NextGen. So we really haven't talked a whole lot about it, but yes, we are pretty optimistic, and we're going to leave projections you. Our next question
comes from the line of Ben Schachter with Macquarie. Please proceed with your question. Your line is live.
Yes, congratulations on some good momentum going into the launch. Couple of questions on GTA and then one for for Lainie. Strauss, can you talk about the marketing plan? How it's going to differ versus what it was for GTA 4. Any changes notably between international and domestic.
And then also, I know you can't talk about the digital, content plans do that, but can you just talk about from a pure financial point of view, what does the ARPU look like or what is the lifetime value of a GTA5 consumer look like versus GTA for consumer? And then, Lainie, could you just let us know what you think the net cash will be by the end of the fiscal year? Thanks.
Hi, Ben. It's Carl. In terms of G. K. Marketing again, this is really something that that Rockstar is a better versed to talk about it than we are.
But look, we have a lot more marketing tools at our disposal than we did back when GTA 4 launched. I mean, online is a much bigger component, of of most marketing budgets, not just hours, but across the industry. There's also other outlets. There's, that we use. I mean, we're very heavy in retail.
Preorders are a big part of our marketing strategy. So there are some differences. But rest assured, the rock star folks have put together an incredibly comprehensive marketing program, that ties in all of our marketing partners, including 3rd party media sources and retail as well. In terms of the digital content, place, that is something that we're just we're ultimately interested in lifetime value of consumer etcetera. That's something we just don't discuss.
And for the cash at the end of the year, we don't provide cash flow projections, but are gonna be cash flow positive for the remainder of this fiscal year.
Thank you. Our next question comes from the line of Doug Crutz with Cowen and
Company. You.
Thanks. It looks like
you beat your OpEx guidance about $30,000,000. And I was wondering if you could kind of talk about what's going on there. And then separately, the gain that you took the write down on, is that a gain that was canceled or one that remains in development? Thanks.
Oh, so for for the Apex, for specifically for this quarter, the beat over last quarter was due to the one time write off that or the one time contractual obligation that we had last year. And then, for the full year, it's just an overall mix of where we're seeing the business and bottoms up reforecasting for the remainder of the year.
Yes. And in terms of the write downs for, software cost, capitalized software cost. We're not providing more clarity on that. Okay. Thank you.
Our next question comes from the line of Edward Williams from BMO BMO Capital Markets. Please proceed with your question. Your line is live.
Hi. This is San Fannon for Edward Williams. Just two questions. One, can you tell us a bit more about, you know, what your, potentially growing cash balances, particularly after a GTA is released. And then 2, if you can share any thoughts on, you know, how you're allocating development dollars across legacy consoles or current chain consoles versus next spin.
Thank you.
I'll take the first part of the question, on the cash balance. We just mentioned that we don't provide cash flow projections, but we plan to be cash flow positive for the remainder of the year.
In terms of allocating to have across current gen, next gen, we're obviously not going to tell you that specifically, but we can tell you that we're supporting both next gen and current generation current gen consoles significantly.
Our Our next question comes from the line of Mike Hickey with The Benchmark Company. Please proceed with your question. Your line is live.
Hey guys, great to have
on your quarter. I'm just curious Strauss on kind of your philosophy of some of your bigger games over next gen platforms. If you're expecting these sort of change into how you kind of pace the iterations? I know historically you've always kind of left it up to your developers, but with new tech and maybe some more synergy in terms of, or less difficulty in terms of competing platforms, do you think you'd be able to iterate these any differently?
Look, it's possible that we are going to find the developing for this next gen will be more efficient. And it's possible we'll find that it's easier to develop multiple platforms, simultaneously. It remains to be seen. The bulk of our timing of releases, though, has been driven by making sure that we put out really great titles and making sure that we don't overwhelm audiences, and burn out our franchises. Our goal is to try to create permanent franchises That's a unique goal in the industry.
Our competitors do not see it that way. Our competitors view is, that our franchise have a certain life. And at the end of that life, you move on to the next thing. So you better make hay while the sun shines. Our view is to the contrary the best franchises, our permanent franchises outside of our business, you can look at, James Bond, for example.
And, it's been our goal not just to preserve and grow the Grand Theft Auto franchise, but also to build other franchises that we think can be permanent, whether that's the Red Dead franchise or the Borderlands or the BioShock franchise or others civilization, for example. So, I don't I think in certain instances, we'd like to see releases paced a little more closely together. I don't really think NextGen is going to change the production approach sufficiently that that'll be the difference that makes a difference.
Okay. Thank you. And just curious on your kind of view on your competitive profile. Obviously, see at E3 this year. There seemed to be a lot more representation within the open world experiences.
And of course, we're on the front end here of an emerging console cycle where there can be big share shifts. So just curious how you see your competition.
We have a healthy respect for our competition. We don't take anything for granted. We're fond of saying that we think arrogance is the enemy of continued success. We're always looking over our shoulders. And, and not because we're worried about someone eating our lunch, but because we're worried about making sure that we always provide experience to consumers that we're always known as the standard bearer for what is the very best in interactive entertainment.
And to do that, we have to be flow of what our competitors are doing and what our consumers want and always give them what they want and then some. And due to do so at a fair price, So we have the highest weighted average, metacritic ratings in the business. And yet, we know we can always do more. Our basketball title, for example, is the highest rated sports title in the business. It has been for 12 years, the number one basketball title.
And, yeah, we still want to do more. We're very self critical. We're always trying to push the envelope. So, are we worried about our competition?
Yes.
But what do we focus on? We focus on our own knitting, making sure that we do is the very best.
Thank you, guys. Good luck with GTA.
Thank you. Our next question comes from line of Brian Fitzgerald with Jefferies.
Driver for the quarter at 60% of net rev and digital is also growing nicely up 130% ish how much of the digital is catalog? Have you broken by that or how do you think about that or does it more shift around based on the release lineup?
And then maybe one follow on after that. Thanks. Hey, Brian. We don't break it out specifically, but we did say that border lands to downloadable add on packs was a big driver in the quarter. So it isn't all just catalog.
It's good that our catalog is doing Well, it's also good that digital is doing well. It's a mixture of both. You had another question?
Yes. Another quick one. So, briefly, how do free to play is driving digital also? Are the conversions trending better or how
do you think about that in terms of driving your digital We don't our free to play business is largely limited to Asia. And that business is developing nicely as Carl mentioned, we expect it to be a meaningful contributor going forward, but it's already turning into a profit contributor, which is awful nice. That business has really unfolded exactly as expected. We mitigated our risk and the risk didn't materialize and we're beginning to see the reward But, outside of Asia, we basically have business for, which people pay for. And, that's true pretty much across the board for us.
We're open minded about business models. Free to play as a business model in the states has been pretty checkered. If you take a look at how, some of our competitors have done that have tried to play in that space. There was a brief moment in the sun and that moment has clearly passed. We were highly skeptical that that business said so publicly.
And in any case, it was not an area in which we had great expertise. So we continue to play in the mobile space the bulk of those games are sold. And we continue to be open minded about business models as they develop.
Thank you. Our next question
Thanks. I'll have my congratulations on the quarter. Just a couple of follow ups. I think on NBA 2k14, wondering if there will be any shipments included in the September quarter? And related to that, can you talk about your expectations for that franchise or that title relative to last year's version?
And then secondly, does the pending investment and Activision, from Tencent have any impact on your relationship there.
I'll take the Activision piece first. The the I we don't hate this effect at all in our relationship with $0.10 based on their, investment in Activision. So that's that's a pretty easy one. In terms of NBA 2K14, could you repeat that question again? I think I missed it.
Sure. Will there be any shipments of that title included in the September quarter and then also your expectations for the game relative to last year's version?
Terms of September quarter, there wouldn't be because the game isn't released in September. And in terms of our expectations versus the last one, you know, that obviously we're very excited about. The great thing about 2K, the NBA, the VC team is that every single release, they're pushing themselves. Strauss talked about comp position and and always looking overall shoulder just to see who's behind us. And in fact, the team at Visual Concepts has always been, they're in competition to get themselves.
In every iteration, they try to take the game to the next level. And there's this NBA 2k14 is no exception. So obviously, we're very excited about the release. We've got a great marketing plan around, and we've got a great deal with LeBron. So we think we're going to generate a ton of consumer buzz, and we have very high expectations for the title.
In terms of specifics, I can't give you those.
Thank you. Our next question comes from the line of Arvind Bhatia with Sturnee G. Please proceed with your question. Your line live.
Thank you. Just a clarification question, guys. The full year guidance, does that include the impairment charge or or does not?
Yes, it does include the impairment charge, Arvin. There
are no further questions at
this time. I would like to
turn the floor back over to Schmidt for any closing comments you may have.
Just, we'd like to thank our shareholders and, everyone else for attending the call today. We appreciate the support We feel like we're off to a good start. We have a lot of wood to chop for the remainder of the year, but things are looking very positive and promising. So thank you very much.
Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you all for your participation. Good day.