Activision Blizzard, Inc.
Q2 2015 Earnings Call Transcript

Published: 5 Aug 2015

[Operator:]

Well, good day ladies and gentlemen and welcome to the Activision Blizzard Q2 2015 earnings conference call. Today's conference is being recorded. I will now turn today's call over to Ms. Amrita Ahuja. Please go ahead.

[Amrita Ahuja:]

Good afternoon and thank you for joining us today for Activision Blizzard's second quarter 2015 conference call. Speaking on the call today will be Bobby Kotick, CEO of Activision Blizzard; Thomas Tippl, COO of Activision Blizzard; Dennis Durkin, CFO of Activision Blizzard; Eric Hirshberg, CEO of Activision Publishing; and Mike Morhaime CEO of Blizzard Entertainment. I would like to remind everyone that during this call we will be making statements that are not historical facts. These are forward-looking statements that are based on current expectations and assumptions that are subject to risks and uncertainties. A number of important factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements, including the factors discussed in the risk factor sections of our SEC filings including our 2014 annual report on Form 10-K which is on the file with the SEC and those indicated on the slide that is showing. The forward-looking statements in the presentation are based on information available to the company as of the date of this presentation, and while we believe them to be true, they ultimately may prove to be incorrect. The company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after today, August 4, 2015, or to reflect the occurrence of unanticipated events. I would like to note that certain numbers we will be presenting today will be made on a non-GAAP basis, excluding the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games, expenses related to stock-based compensation, the amortization of intangible assets, expenses including legal fees, costs, expenses and accruals related to the purchase transaction and related debt financing, and the associated tax benefits. Please refer to our earnings release which is posted on www.activisionblizzard.com for a full GAAP to non-GAAP reconciliation and further explanation. There's also a PowerPoint overview which you can access with the webcast and which will be posted to the website following the call. In addition, we will also be posting a financial overview highlighting both GAAP and non-GAAP results and a one-page summary sheet. And now, I'd like to introduce our CEO, Bobby Kotick.

[Robert A. Kotick:]

Thanks very much, Amrita, and thank you all for joining us this afternoon. Q2 was another strong quarter and we have a lot of momentum going into the back half of this year. Our teams around the world continued to deliver the very best interactive entertainment and our franchises continue to be among the strongest in all of entertainment. On today's call, Thomas will discuss the key drivers of our over-performance, Dennis will review our financial results in detail, and then Mike and Eric will discuss the positive results in their respective operating units. Thomas.

[Thomas Tippl:]

Thanks, Bobby. Our strategic focus on expanding our franchise portfolio with captivating and original new intellectual property, innovating on new platforms, and expanding into new geographies is reflected in our results. We outperformed our Q2 targets and last year's results on revenues, digital growth, and earnings per share. These strong results and the excitement for upcoming launches have driven us to raise our full year outlook yet again. As we're successfully transitioning from a launch to a year-round engagement model, our audience base and the total amount of time people spend with our franchises continue to grow. In the second quarter, our monthly active users grew at 35% year-over-year. And in a world with so many entertainment choices from television to movies to social media and beyond, we are grateful that people are choosing to spend more and more of their time with us. In the second quarter, the amount of time our community spent playing Activision Blizzard games grew by 25% year-over-year. In fact, this past quarter, our player communities logged nearly 3.5 billion hours of game play with our key franchises, Heroes of the Storm, Hearthstone, World of Warcraft, Diablo, StarCraft, Skylanders, Destiny, and Call of Duty. And these numbers do not even include the rapidly increasing amount of time expected to spend watching content based on our games on channels like Twitch and YouTube. Our strategic investment in new franchises, platforms and geographies continue to pay off, and along with growing engagement and better monetization, set the stage for more growth ahead. We're well underway to expanding our franchise portfolio from 5 to over 10, with four new intellectual properties already launched and performing well. In addition, the beloved Guitar Hero franchise will return this fall with product innovation that we couldn't be more excited about, and Overwatch is on the horizon with a beta this fall. We have an increasing focus on mobile and tablet. Hearthstone's release on iOS and Android smartphones in April through the player base has been a key driver of our performance in Q2 and should benefit us for the foreseeable future. Guitar Hero Live fall release will also include mobile and tablet at launch, and we're redoubling our efforts to provide a great mobile experience for our Skylanders franchise, in addition to making the full game available on tablets. Finally, we are positioned for growth in new geographies, and in particular in large and fast-growing China. We now have six franchises in market in China up from two at the start of last year and we're already seeing strong results with our teams and partners in China delivering record revenues in MAUs in Q2. Before I hand it over to Dennis, I want to thank our talented teams who continue to execute very well. Our employees are extraordinarily committed and they create the most engaging entertainment experiences for our players and it shows in our results, which Dennis is now going to take you through in detail.

[Dennis M. Durkin:]

Thanks, Thomas. Good afternoon, everyone. Today I will review our better than expected Q2 financial results, our outlook for Q3, and our increased outlook for 2015. Unless otherwise indicated, I will be referencing non-GAAP measures, so please refer to our earnings release for full GAAP to non-GAAP reconciliations. For the quarter on a GAAP basis, we generated revenues of $1.04 billion, up 8% year-over-year and operating margin of 32% and GAAP EPS of $0.29 up $0.08 versus our May guidance. For the quarter on a non-GAAP basis we generated revenues of $759 million and operating margin of 23%, up more than 550 basis points year-over-year and EPS of $0.13. We outperformed last year's revenue and EPS by $101 million and $0.07 respectively. At constant FX for Q2, we outperformed last year's revenue by $188 million or 29%, operating income by $116 million or 103%, and EPS by $0.13. In addition, we outperformed our May guidance by $109 million on revenue and $0.06 on EPS. Revenue and EPS outperformance was primarily due to strong growth in recurring revenue from digital content across our broad franchise portfolio. Importantly, total digital revenues grew 27% year-over-year to a Q2 record of $611 million. The main franchise drivers of the quarter's performance were

[Eric Hirshberg:]

Thanks, Dennis. Activision Publishing significantly outperformed last year's result and delivered meaningfully higher digital revenues and operating income for the quarter and the first half of the year. Our Q2 and year-to-date revenues were each up 35% at a constant FX rate. We also continue to have 2 of the top 5 console franchises year-to-date in Skylanders and Call of Duty, and 3 of the top 5 next-gen games, life-to-date, including the number one slot. This revenue performance is due to our proven ability to create great games that turn into beloved long-term franchises. In recent years we have methodically and effectively expanded our portfolio to now include three innovative and industry-leading franchises, each of which gamers enjoy playing year-round. As a result, our monthly active users are up by more than 25% in Q2 year-over-year and each of these franchises contributed significantly to our overperformance year-to-date. Let me share some specifics by franchise, starting with Call of Duty. In Q2, revenue was up by double-digit percentage year-over-year due to strong sell-through on Advanced Warfare, strong momentum in digital monetization as well as strong sell-through on catalog titles. I want to highlight Advanced Warfare's strong season of digital content in particular. Season pass, DLC, microtransaction, and average revenue per user have all grown year-over-year. As we said on our last call, we introduced a new digital consumable mechanic called supply drops to which players have responded very positively. We maintained our already high engagement levels while monetization of that engagement significantly grew. We believe this approach will allow our average revenue per user to continue to grow in future years driving higher margins as more revenue is delivered digitally. Which brings me to Call of Duty

[Michael Morhaime:]

Thank you, Eric. Blizzard had another strong quarter in Q2, with multiple releases and more activity on more platforms than in any previous quarter. This new content led to incredible engagement across our player base. Monthly active users, the number of players who log into a game each month in the quarter, summed across our entire portfolio is a good indicator of the health of the Blizzard community. In Q2 the average MAU across Blizzard games was up more than 50% year-over-year, achieving its highest level ever. Moreover Battle.net ended the quarter at an all-time high for active accounts. Again, up double digits percentage-wise year-over-year. These important metrics reflect the strength of our portfolio with many more people around the world playing more Blizzard games than ever before. On the World of Warcraft front, in late June we launched one of our biggest non-expansion content updates ever, Patch 6.2, Fury of Hellfire. It added a new zone for players to explore, a new raid, and much more. This helped stabilize the subscriber base in the last part of the quarter. We're currently at work on a much anticipated update for the game that will bring flying to Draenor, add a new player versus player matchmaking feature and more. In addition, we're going to have exciting news at gamescom this week. We'll be announcing the next expansion for World of Warcraft. We've been listening closely to our players about their experience with Warlords of Draenor, and we think they'll be really excited when they hear our plans. You can tune into the announcement through the Battle.net desktop app or the World of Warcraft website. Hearthstone had a very good quarter, with multiple releases in quick succession. We launched the Blackrock Mountain adventure at the beginning of the quarter followed by the release of Hearthstone on mobile phones. We also added a popular new game mode called Tavern Brawl, which gives players a different way to play each week, for example, playing as a legendary monster from the game complete with a customized deck. As a result of the new platform and all the new content, engagement for Hearthstone which was already very strong, nearly doubled year-over-year in terms of active players and time spent. The game continues to perform well in all major regions and remains a top viewed title on Twitch. We recently announced our new card expansion, The Grand Tournament. Like our first expansion, Goblins vs Gnomes, The Grand Tournament will add new game mechanics and a ton of new cards that will have an impact on how Hearthstone is played, which ultimately supports longer-term engagement. The Grand Tournament is due out this month, and we're already seeing a lot of excitement about it from the community. In addition, like other Blizzard games, Hearthstone has developed into a premier fixture in the competitive gaming scene. That includes our formal tournaments as well as community-driven events. A big example of the latter are fireside gatherings where members of the community post local Hearthstone get-togethers. This year alone the community has already held more than 1,300 fireside gatherings globally. Many of these offer participants a chance to secure a spot in the Hearthstone World Championship competition culminating at BlizzCon. We look forward to seeing which of these players rise up and make a name for themselves and how they fare against the established pro players who have advanced through our official tournaments. Heroes of the Storm also had an exciting quarter with the team making solid progress in driving engagement. Following the June 2 game launch, the critical reception has been enthusiastic with many outlets giving Heroes of the Storm high marks for its innovations, accessibility, and depth. We've also seen consistently positive commentary from players and that's only increased as more try the game. One of the strengths of Heroes of the Storm is the fact that it draws on content from all of our franchises, giving our players familiar touch points in the game regardless of their familiarity with the genre. At the end of June, we started a series of updates that brought popular characters from Diablo, such as The Butcher and King Leoric, and the new Diablo-themed battleground, the Battlefield of Eternity to the game. Players have really enjoyed this event, which we're calling the Eternal Conflict, and it's still going on, so there is more to come. We plan to continue a rapid cadence of Heroes of the Storm updates for the foreseeable future. This will constantly give players new character and strategy options which will support the game's long-term appeal. Heroes of the Storm eSports is another avenue for engagement and growth of our audience. We kicked off the collegiate scene in April with Heroes of the Dorm, a March Madness style tournament which culminated in a live finals event on ESPN2 and resulted in a lot of excitement across the Blizzard community. On the professional side, the game has been added to our Road to BlizzCon program and major tournaments are underway globally. With the total prize pool of $1.2 million in cash and prizes and an opportunity to be crowned world champion at BlizzCon, the stakes are high and the competition has already been amazing. Q2 was also a very good quarter for Diablo III. We launched the game with a free model in China while offering two premium versions at $32 and $64. Despite the availability of the free option, the premium versions achieved record sell-through in China out the gate and it's continuing to perform well there. The take-up of Diablo III in China played a large part in driving Blizzard's record MAU globally, as well as in China specifically, for the quarter. In fact, Blizzard's total revenue in China this quarter reached a record high, driven in large part by the success of Diablo III there, as well as Hearthstone and Heroes of the Storm. I'm pleased to report that Diablo III as a whole has now sold through over 30 million copies globally. Players around the world are looking forward to the upcoming content patch, which will add the Ruins of the Barbarian City of Secheron for them to explore. It also adds a powerful item called Kanai's Cube which provides endless options for transmitting and upgrading their items. Blizzard gamers have always expected an outstanding level of entertainment from our games, and content updates such as this reflect our commitment to that standard. Moving on to StarCraft II, the Legacy of the Void beta test continues to go well and we're excited to get the game into players' hands later this year. We recently started offering pre-purchases and as part of that, we're providing beta access along with advanced access to a set of campaign missions, titled Whispers of Oblivion, to anyone who pre-purchases the game. We've seen a lot of anticipation for this final chapter of the trilogy and even higher demand at this point in pre-sales compared to Heart of the Storm. The Whispers of Oblivion content plus the multiplayer changes have been received very positively. This is gratifying because we're working hard to deliver a worthy finale to an epic story that's now been over 17 years in the making. One of the reasons we feel we can continue to expand our StarCraft II audience is that players no longer need to have the previous entries in the series in order to play Heart of the Storm or Legacy of the Void. This provides a great opportunity for players who might have missed one of the chapters in the trilogy to come back and jump right into the latest content. We are also excited to bring StarCraft II multiplayer into a whole new era with new play modes and other changes that increase accessibility. One of the new modes, Archon Mode allows two players to team up and share control of an army, making the game even more fun to play with a friend. We've seen a very enthusiastic response to this mode as well as a lot of anticipation about our other new co-op mode Allied Commanders, which we will be providing more detail about at gamescom. Looking back at the amount of content we delivered this quarter, and the player response, we're really pleased with the performance and engagement overall. For the second half of the year, we're driving towards the milestones I mentioned in addition to the global beta test for Overwatch. We're particularly excited to carry the momentum from the first half of the year forward to BlizzCon in November, where we will have more to share with our community. One of the biggest attractions there will be the culmination of this year's Road to BlizzCon eSports tournament, with the global champion for World of Warcraft, StarCraft II, Hearthstone, and Heroes of the Storm being crowned. This will be the most Blizzard eSports competitions ever contained under one roof, and we're really excited to see which of the world's top players make it to the main event and walk away with the grand prizes. The global Blizzard community is now as big and as vibrant as it's ever been, and we're thrilled to be able to serve players across a wider range of genres and platforms than ever before. Looking across our entire portfolio and all the upcoming content in our pipeline, it's a great time to be a Blizzard gamer. Thank you. And I'll turn the call back to Amrita.

[Amrita Ahuja:]

Thanks, Mike. Operator, we'll now take a few questions.

[Operator:]

Certainly. And we'll hear first from Drew Crum with Stifel.

[Drew E. Crum:]

Okay. Thanks. Good afternoon, everyone. So on Hearthstone, can you guys discuss the revenue mix you're seeing for the game and what you've observed in terms of monetization on smartphones and whether or not that's led to any cannibalization against PC revenue? Thanks.

[Michael Morhaime:]

Thanks for the question. So we don't provide per-platform breakouts, but the launch on phones and the new content that we've recently released combined have led to a step change in Hearthstone's results. We're very pleased to see substantial growth across the board. We saw almost double the amount of active players in time spent year-over-year, and an increase in more than 50% quarter-over-quarter. Revenue on the new platforms appear to be incremental to PC.

[Amrita Ahuja:]

Operator?

[Operator:]

And we'll now hear from Chris Merwin, Barclays.

[Chris Merwin:]

Great. Thank you. So I just had a question about eSports. I know this has been an area of focus for you, most recently with some of the new free-to-play titles like Heroes of the Storm, which, Mike, I think you mentioned in your prepared remarks. So could you please just talk about how eSports have helped in terms of driving player engagement and maybe what types of opportunities you see there over time? Thanks.

[Robert A. Kotick:]

Yeah, that's a great question. We've said over the last few years that we see competitive gaming as (32

[Chris Merwin:]

Great. Thank you.

[Operator:]

Our next question will come from Mike Olson with Piper Jaffray.

[Michael J. Olson:]

All right, thanks very much. So Activision pioneered the toys-to-life genre, but since then this space has become a bit more crowded with competitors, particularly with bigger brand IP, Disney, Star Wars, Marvel, et cetera, now LEGOs. Just curious about how you're thinking about Skylanders and how it can compete over the next couple of years and beyond to maintain the lead?

[Eric Hirshberg:]

Sure, I understand the question. It's inarguable that the category has become much more crowded since we invented it a few years ago, but to be fair, we've been being asked some form of this question, how can you hold onto your lead versus competitors that have much better established characters from other mediums, since the – before the launch of the first Disney game. We're now several games past that and we've managed to retain our sizable lead at every step of the way. We've already shown I think that established characters from other mediums are not the shortcut to leading this category. We believe we will continue to lead the category because we make the best games in the category, we consistently delivered the best innovations in the category, and our characters are built for interactive entertainment. And our creators have no constraints surrounding what those characters can and can't do in a video game. And we believe that's a key competitive advantage as well. On the category itself, we think that the toys-to-life genre will continue to grow, and more broadly that the idea of physical toys that have digital lives is definitely here to stay. Also thus far, we've only brought one form of toys-to-life with action figures. As I mentioned, with SuperChargers, we bring vehicles to life as well, and vehicle toys are an even bigger category than action figures are. So we're actually expanding the pie and the audience further. So we think the category is going to continue to grow and we're confident that we uniquely have the right strategy and capabilities to continue to lead it.

[Michael J. Olson:]

All right. Thank you.

[Operator:]

Moving on to Justin Post with Merrill Lynch.

[Justin Post:]

Thank you. I'd like to talk a little bit about World of Warcraft. Can you talk more about the kind of subscribers by geography? What's going on in the western markets? Any metrics you can share on players or player hours with that? And I guess you're going to have an expansion pack, but what's your kind of outlook for that franchise? Can you get expansion packs to kind of not ebb and flow or kind of sustain the subscriber levels going forward? Thank you.

[Michael Morhaime:]

Hi. Thanks for the question. So we don't disclose that level of detail on subscriber engagement. But, I mean, as with all of our franchises, we think great content is what draws players in, keeps them engaged, and brings them back. That's why we've been continuing to invest in growing the World of Warcraft development team. We have now more developers working on World of Warcraft than ever before. And that's so we can continue to release high-quality content for our community and hopefully increase the pace of which we're releasing that. The upcoming expansion announcement, I think is a great example, which we're planning to announce later this week at gamescom. Looking back at Warlords of Draenor, we were able to bring back more players than any previous expansion, taking the game back over to 10 million subscribers. So we definitely believe that there's potential to re-engage lapsed players with good new content. We also think that the Warcraft movie is a key inflection point. It's coming out next June. It's a chance to expose the Warcraft franchise's rich lore to new audiences and hopefully increase interest in World of Warcraft overall.

[Justin Post:]

Thank you.

[Operator:]

Cowen & Company's Doug Creutz has the next question.

[Douglas L. Creutz:]

Hey, thanks. I was wondering if you could talk a little about what you're seeing in terms of pre-order interest for Call of Duty. Thanks.

[Eric Hirshberg:]

Sure. First I want to reiterate what we've said a couple of times now in the past which is that, as the world moves more to digital, obviously pre-orders become really just one of the many metrics that we look at to determine momentum. So with that as a backdrop, I'll tell you that year-to-date, we're in fact significantly up on pre-orders with Black Ops III, and we expect Call of Duty to lead the industry in pre-orders again. But more important to us than that is the wide range of other metrics that we use to look at. And from trailer views to positive sentiment to social media engagements to unaided title awareness to purchase intent, these metrics are all also up year-on-year as well. Also, as I said, we now have over 11 million monthly active users playing Black Ops II, which is unprecedented three years past the release date of one of our titles, and it shows I think a lot of momentum and a lot of hunger for – as we head into the launch of Black Ops III. So we're optimistic.

[Douglas L. Creutz:]

Great. Thanks, Eric.

[Operator:]

We'll now hear from Brian Pitz with Jefferies.

[Brian J. Pitz:]

On Guitar Hero Live, in terms of sales expectations, is there any perspective you could provide for how we should think about this title? And looking at it from a profitability standpoint, how would you expect the game to compare to the overall corporate margin profile? Thanks.

[Eric Hirshberg:]

Sure, Brian. As I think you know, we don't provide specific forecasts, franchise-by-franchise, but I'll still try to answer the spirit of your question. We know we have a great game that has meaningful innovations, and everyone who's put their hands on it including both critics and fans, loves it. Guitar Hero Live makes you feel like more like a rock star than ever before, which is a big marketable innovation. But equally important is Guitar Hero TV, which gives us a real long-term engagement strategy on this franchise for the first time. We've learned a lot of lessons here from games like Call of Duty and Destiny, which are that fans appreciate a constant stream of new content, the ability to compete with their friends online, and for the game to constantly reward them for their engagement. So we've designed GHTV with all that in mind. So it's really about more than just how many units we sell. It's also about us driving that long-term engagement. And you know how powerful that can be for our business when we achieve that. And also we're expanding the addressable audience by making the game available on mobile. And we've made a significant investment in both the product development to make sure we have a great game. And we're making a significant investment in the marketing to make sure that we have a great launch. So those should be two good indicators for you. We believe that this can be a significant contributor to our business in the coming years.

[Brian J. Pitz:]

Great. Thanks.

[Operator:]

Moving on to Eric Handler with MKM Partners.

[Eric O. Handler:]

Yes. Thanks for taking my question. So recognizing what's still early in the launch, I was hoping you could discuss where you are with the players, and more specifically, the paying players for Heroes of the Storm. Also are there any regions of the world where player engagement is more significant than others and maybe you could draw any similarities, if possible, to what you saw in the early days of the release of Hearthstone?

[Michael Morhaime:]

Okay. It's tough to draw any meaningful comparison to Hearthstone just because the pricing model and game players are different. I think I would say that looking at the game's reception performance globally, we're very happy with the reaction and reception around the world. We did just launch the game in June, so you're right, it is still very early. I think if you look at other games in the genre, they all had more gradual growth of their player base so that is what we would expect to see with Heroes of the Storm. We think that, in this genre eSports is a big driver, and we've already started with our major eSports initiatives underway with our Road to BlizzCon, and so we would expect that eSports will continue to be a driver for us in terms of engagement and growth of the game. So right out the gate, we're very pleased with the positive reception from players and press. We're going to continue evolving the game, adding content on a frequent cadence, and we think we're well on the way towards Heroes becoming another key pillar in the portfolio.

[Eric O. Handler:]

Thanks a lot.

[Operator:]

Ladies and gentlemen, we have time for one additional question from Colin Sebastian with Robert Baird.

[Colin A. Sebastian:]

Hi. Thanks for taking the question and congrats on the quarter. Eric, on Destiny, you mentioned the engagement being very high with the game and pre-orders for the expansion seem to be quite strong as well. Can you help us, by putting into perspective how large this expansion could be relative to a typical games expansion pack and if you can compare the amount of content that comes in a certain game versus other packs? Thank you.

[Eric Hirshberg:]

Sure, Colin. It's hard to compare to other games expansion packs with Destiny in such an unusual game, but the short answer is compared to our own past expansion packs, it's significantly bigger than the other expansion packs we've had, but still smaller than an entirely new game. We're calling it a mega expansion for a reason. But that's just The Taken King and I want to emphasize that equally significant to our plans for Q4 is the legendary edition, which includes the original game, both the expansion packs thus far and The Taken King, and it's just $60. So this probably represents the most game play you can get for $60 anywhere in the industry this holiday and we're doing that very deliberately because – both because we want to bring in new fans and it's a great value for them, but it's also the right thing to do for the community, because it's a shared world game and we want to keep the largest number of players possible playing together with the same content, so both strategies are equally important to our launch this Q4.

[Colin A. Sebastian:]

Okay. And then maybe as a quick follow-up, obviously, a nice beat on digital revenue side. Can you talk a little bit more about trends on the digital side of the business and how we should expect that to track over the remainder of the year? Thanks.

[Michael Morhaime:]

Sure. Thanks, Colin. Thanks for the question. Yeah, obviously digital was a great – we had great momentum on digital in the first half of the year and we expect, obviously when you look forward for the first time, more than 50% of the company's sales will come through digital channels this year which is an important milestone and obviously with a great digital growth of 27% in Q2. We're well on our way of achieving that. There's a couple of buckets in terms of that that are really important. The first is obviously full game downloads, where on the Blizzard side of the business we already see most of – the majority of that volume being digital. Now we are starting to see on the console side more of our AAA share moving digitally. We've seen high teens in the past and that can sometimes spike in weeks depending upon how deep a title is in its catalog lifespan. So that's growing very, very nicely and we expect that to continue to grow this holiday. But, another important area for us, in that you really see reflected in our results so far this year is digital add-on content sales. So think of that as content and services that we sell to our players once they're already playing one of our games. And these are things like advanced supply drops or map packs in Call of Duty, or card packs in – or tokens in Hearthstone or paid character boost in World of Warcraft. And our teams are getting more and more creative about finding ways to use these tools to drive further engagement. And this is actually the largest and fastest growing segment of our digital business, which had sales in this area growing at over 56% year-over-year or 73% at constant currency, so very, very strong momentum there. And we think that these add-on content sales are super important, because they provide not only opportunities for ARPU expansion and nice margins, but can expand and deepen gameplay and engagement with all player base, so overall strong trends of momentum for this and heading into the back half of the year.

[Colin A. Sebastian:]

Great. Thank you.

[Michael Morhaime:]

Thanks, Colin.

[Operator:]

And, again...

[Amrita Ahuja:]

Operator...?

[Operator:]

I turn it back to the speakers for closing or additional remarks.

[Amrita Ahuja:]

Thank you very much, everyone for joining the call.

[Robert A. Kotick:]

Thank you.

[Operator:]

And, again, ladies and gentlemen that does conclude our conference for today. We thank you all for your participation.