Feb 7, 2007
TRANSCRIPT SPONSOR
Executives
Kristin Southey - Investor Relations Robert A. Kotick - Co-Chairman of the Board, Chief Executive Officer Thomas Tippl - Chief Financial Officer Michael J.
Griffith - Principal Executive Officer; President and Chief Executive Officer of Publishing Unit
Analysts
Tony Gikas - Piper Jaffray David Joseph - Morgan Stanley Elizabeth Osur - Citigroup Heath Terry - Credit Suisse Ralph Schackart - William Blair Jeetil Patel - Deutsche Bank Edward Williams - BMO Capital Markets Michael Savner - Banc of America Securities John Taylor - Arcadia Investments Arvind Bhatia - Sterne, Agee & Leach Daniel Ernst - Hudson Square Research
Operator
Good day, everyone, and welcome to this Activision Q3 2007 preliminary fiscal results conference call. Today’s call is being recorded.
At this time for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Kristin Southey. Please go ahead.
Kristin Southey
Good afternoon, and thank you for your patience and for joining us today for Activision's Q3 fiscal 2007 conference call. As always, I will start today’s call with a review of our Safe Harbor disclosure, followed by comments from Bobby Kotick, Chairman and CEO; Thomas Tippl, Chief Financial Officer; and Mike Griffith, President and CEO of Activision Publishing.
With regard to our Safe Harbor disclosure, I would like to remind everyone that statements will be made during this call that are not historical facts and are forward-looking statements. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties.
The company cautions that a number of important factors could cause Activision's actual future results and other future circumstances to differ materially from those expressed in any such forward-looking statements. Such factors include without limitation the adjustments and restatements for additional expenses that may be required in connection with the review of Activision's historical stock option grant practices, the finding of the special sub-committee reviewing the option practices, and the effect of that on the SEC’s informal inquiry and derivative litigation against certain current and former directors and officers of the company, direct and indirect expense and diversion of management time in attending relating to that review and related regulatory proceedings and litigation, the possibility that additional claims and proceedings will be commenced, the company’s ability to file timely required reports with the SEC, the possibility that the company will be de-listed, other non-option related litigation, sales of the company’s titles during fiscal year ’07, shifts in consumer spending trends, the seasonal and cyclical nature of the interactive game market, the company’s ability to predict consumer preferences and on competing hardware platforms, including next gen hardware, declines in software pricing, product returns and price protection, product delays, retail acceptance of our products, adoption rate of new hardware and related software, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, maintenance of relationships with key personnel, vendors and third-party developers, international economic and political conditions, natural disasters, integration of recently acquired subsidiaries, and identification of suitable future acquisition opportunities.
These important factors and other factors that potentially could affect the company’s financial results are described in our filings with the SEC, including the company’s most recent 10-K, most recent 10-Q and the recent forms 8-K and the cautionary statements there in and the exhibits there to. The company may change its intentions, belief or expectation at any time and without notice based upon any changes in such factors in the company’s assumptions or otherwise.
The company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Also, any comments made during this call with reference to our historical or current results or future outlook excludes the impact of any adjustments or additional expenses that may be required in connection with the previously announced ongoing review of Activision's historical stock option grant practice.
The current results also exclude any adjustments that may be required by the occurrence of an event subsequent to this call that affects the estimates inherent in the process of preparing those results and should be considered preliminary until Activision files all required periodic reports with the SEC. The sub-committee is working to complete its review in a timely manner and we will become current in our filings as soon as practical after the review has been completed.
Any comments made with reference to our historical results do not take into account any restatements that may be required in connection with that review or the determination of the company’s financial statements, earning releases and similar communications relating to the fiscal periods commencing with the company’s 1992 fiscal year should no longer be relied upon. Those results are presented for comparative purposes only.
Additionally, with regard to the status of the sub-committee’s review of our historical stock option grant practices or the letter of informal inquiry from the SEC regarding such practices or related legal matters, we refer you to our recent press releases and 8-K. Finally, unless otherwise noted, financial commentary will be made excluding the impact of equity-based compensation and therefore certain measures are not in accordance with GAAP, so please refer to our earnings press release for a full reconciliation.
Now, I would like to introduce Bobby Kotick, our Chairman and CEO.
TRANSCRIPT SPONSOR
Robert A. Kotick
Thank you, Kristin. Net revenues and earnings for the holiday quarter were the highest in Activision's history, well exceeding our prior outlook.
We ended the quarter with more than $800 million in cash and short-term investment and $1.4 billion in shareholder equity. In November, we were the number one U.S.
console and handheld publisher. For the quarter, we were the number two U.S.
publisher and four of the top 11 titles, more than any other publisher, according to NPD. Our success was driven by our highly rated holiday product line-up, improving market conditions and our strong sales and marketing execution.
As a company, we delivered against all of our core strategic initiatives. We grew our two largest established franchises, Call of Duty and Tony Hawk.
We elevated our two new properties, Guitar Hero and Marvel Ultimate Alliance into the top 10, and in the case of Guitar Hero, into the top five. Additionally, we continued our next generation leadership.
We ended the quarter as a top three publisher in the U.S. for the 360, PS3, and Wii, and we were the only publisher to achieve this status.
Activision recognized the Wii opportunity early on and we had one of the largest line-ups at launch. In fiscal ’08, we will double our product offerings on the Wii and DS as we plan to be even more successful on these platforms.
All four of our major holiday releases were well-received by consumers across all platforms, yielding the largest, most profitable quarter in our history. More importantly, the market successfully experienced this quarter should translate into greater shareholder value over the next few years.
Looking ahead, we remain focused on growing and diversifying our brand portfolio to deliver the very best entertainment experiences and making the organizational and infrastructure changes necessary to ensure our long-term leadership and capitalize on what we believe to be the highest barriers to entry our industry has ever seen. Fiscal 2008 will mark a new era in gaming with double-digit growth expected to return.
To date, there has been strong consumer response to all three next generation consoles, which truly are delivering new gaming experiences to broader, more diverse audiences than ever before. Having now engaged in sustained product development for each of the new platforms, we have far greater insight into the potential new product opportunities likely to emerge, as well as greater insight into production costs and ways to manage these costs more efficiently.
The growing popularity of handheld games continues among both traditional gamers and casual audiences. The new handhelds offer an opportunity to continue expanding the appeal and target demographic of gamers, which we intend to take full advantage of in the coming years.
Lastly, the launch of Microsoft’s new Vista operating system should continue to benefit the PC market by creating better standards among graphic card technologies for the first time and clearly games are the showcase application for consumers considering upgrading to Vista. Activision's business is built in part on our ability to turn trends into growth engines.
The Internet is enhancing the way consumers purchase and play games and the devices on which they play them. While we believe our traditional retail model will be the principal source of revenues and operating profit for many years to come, we believe there are great pathways for capturing new audiences, enhancing our retail product offerings, and increasing operating margins as the installed base of Internet connected device in the living room continues to grow.
Downloadable game content on the consoles is now a reality and we expect it will be a long-term growth driver. To date, we have generated almost $5 million in revenue from this new mechanism for enhancing our retail products.
In-game advertising is becoming increasingly popular, and as the Internet-enabled installed base of next generation hardware grows, the opportunities for both static and dynamic in-game advertising, sponsorship and product placement will grow as well. To take advantage of these opportunities, we remain focused on expanding our balanced product portfolio, strengthening our next generation development leadership, increasing our distribution reach, and furthering our initiatives to reduce development expense through organizational efficiencies.
We have learned a great deal over the past year that will help us continue to grow and manage our business into the future. And while that future is exciting, realizing our growth and financial goals is not without risk.
Development costs are higher. New operating models of distribution challenges will eventually emerge and competition for talented employees remains fierce.
While increasing production costs and the volatility of transitioning to new hardware remains a challenge, there is much to be enthusiastic about as the installed base of next generation hardware continues to grow. Our competitive position continues to strengthen, ancillary revenue streams are rapidly emerging, and the barriers to entry in our industry continue to rise.
We believe that over the long-term, we can provide superior returns to our shareholders as we have over the past 15 years. Later in the call, Mike will share more details with our increased revenue and earnings outlook for the fourth quarter and plans for next fiscal year.
Now, Thomas will provide a brief review of our operations during our successful third quarter and the progress we are making with respect to our cost optimization activities. Thomas.
Thomas Tippl
Thank you, Bobby, and good afternoon. Today we announced preliminary results for the second and third quarters of fiscal 2007.
Before going through these results, I would like to remind you again that the results do not take into account any adjustments for additional expenses that may be required in connection with the option review, and should be preliminary until Activision files its periodic reports with the SEC. I would also like to remind you again that any historical results discussed should not be relied upon and are provided for comparative purposes only as they do not take into account any restatements that may be required in connection with that review.
Now, to the results. As a quick recap, in the September quarter, we delivered better-than-expected performance, with revenues of $188 million and a loss per share of $0.06.
Excluding equity-based compensation, we had a loss per share of $0.05. For the December quarter, revenues reached an all-time high of $823 million.
This is significantly higher than our prior outlook and up versus the prior year, driven by the better-than-expected consumer response to our balanced product portfolio and strength in our distribution business. The fiscal third quarter traditionally represents over 50% of our business and this year marked our 14th consecutive year of quarterly revenue growth over the holiday season.
For the quarter, earnings per share reached a record $0.41 and $0.42 excluding equity-based compensation, almost double our earnings last year of $0.23. Earnings improved due to the success of our high-quality slate, which enabled us to command premium pricing and generate robust sell-through at retail.
In addition, we made significant progress in the execution of our cost optimization programs. Before I continue with our financial review, I would like to note that the numbers that I will be giving you for product creation costs, sales and marketing expense and G&A spending will be made excluding the impact of equity-based compensation and are not in accordance with GAAP.
Please refer to our earnings press release for a full reconciliation. In the December quarter, manufacturing and distribution expense was 46.5% of revenues, up versus 45% in the prior year due to an increase in distribution revenue and fewer PC releases than a year ago.
Product creation costs for the quarter were 16.4% of revenues versus 22.5% in the prior year. The decrease year over year was due to lower amortization of a smaller slate and, as you may recall, product write-downs we took in the base period when we streamlined our slate.
Sales and marketing expense for the quarter was 10.8% of revenues, down significantly versus the prior year as we were successful in reallocating our sales and marketing spend to more cost-effective programs in addition to product over-performance. G&A spending dollars were up significantly versus the prior year, as expected due to the costs associated with the acquisition of RedOctane and legal expenses and professional fees related to the options review.
We generated high investment income for the quarter due mainly to rising interest rates, and our effective tax rate for the quarter was as expected, approximately 30%. Turning to the balance sheet, on December 31st, we had $805 million in cash and short-term investments, an increase of $41 million versus the prior year and up $58 million versus the prior quarter.
The accounts receivable balance was $455 million, an increase of $40 million versus the prior year, due to lower deductions for price protection and returns. The AR reserve as a percentage of trailing nine months revenue was 10%.
On December 31st, Activision inventories were $86 million, in line with the prior year. Inventory for the publishing business was $55 million, down $8 million versus the prior year, despite the addition of RedOctane.
Distribution inventory was $31 million, up $9 million versus the prior year, due to a new customer we secured this year. In total, we feel very good about our inventory position in the channel and in the barn.
Moving further down the balance sheet, capitalized software development costs were $97 million, down $16 million versus last quarter, due to the amortization of our holiday releases. Capitalized intellectual property costs were $93 million, down $2 million versus last quarter.
In summary, our financial position continues to be very healthy as we enter the new year. Before turning to our financial outlook, I would like to begin by saying that our outlook represents our view as of today and there are a number of internal and external factors that could cause our actual results to differ materially, including but not limited to the effect of the special sub-committee’s review of our historical stock option grant practices and conclusion and developments on the informal inquiry opened by the SEC in July, 2006, dramatic shift in retail demand, a rapid decline in software pricing, and adoption of new hardware and related software.
I refer you to our financial filings with the SEC for a full review of our risk factors. Also, I would like to remind you again that our outlook excludes the impact of any adjustments or restatements that may be required once the sub-committee has concluded its option review.
Now, to the outlook. For the fourth quarter, we have only one mainline SKU releasing globally, Call of Duty for the PSP.
In addition, we expect to release for PlayStation 3 in Europe, Tony Hawk’s Project 8, Call of Duty 3, and Marvel Ultimate Alliance. For the fourth quarter, we are increasing our prior outlook given on January 25th.
We are increasing our revenue outlook by $30 million to $200 million and now expect a loss per share of $0.08, which excludes equity-based compensation expense of approximately $0.01. Our increased guidance is due mainly to better visibility regarding the allocation of PlayStation 3 hardware to our European distribution business.
As previously announced, our Q4 will also be impacted by legal expenses and professional fees and the movement of Enemy Territory Quake Wars into fiscal ’08. For the quarter, we expect manufacturing and distribution costs of approximately 55% of net revenues.
We expect operating expenses, including royalties and excluding equity-based compensation, of about 65%. We project a tax rate of approximately 30%, and for the quarter, we expect the basic share count of about 283 million.
For the fiscal year, we again are raising our revenue outlook to $1.4 billion, and raising our earnings per share outlook to $0.26, which excludes equity-based compensation expense of approximately $0.05. For the fiscal year, we expect manufacturing and distribution costs of approximately 2% of net revenues.
We expect operating expenses, including royalties and excluding equity-based compensation, of approximately 42%. This is significantly better than last year, as we continue to make progress on our cost optimization programs and generate leverage from better-than-expected product performance.
We project a tax rate of approximately 30%, and for the fiscal year, we expect the diluted share count of about 304 million shares. In summary, we continue to make progress with regard to our cost optimization programs, and I am encouraged that revenues have been tracking ahead of our outlook.
This demonstrates that we are getting better returns on our investments in a more receptive market. When we talk about our cost optimization programs, we typically break them down into three expense areas: sales and marketing, product creation costs, and G&A.
I will briefly update you on our progress to date and our expectations going forward. Starting with sales and marketing, this is without a doubt the area we have made the most progress.
At the beginning of the fiscal year, we said our goal was to bring sales and marketing spend back in line with our historical range of 14% to 16% of revenues. For the fiscal year, we are now expecting to come in at the low end of that range due to strong title performance and good progress on two fronts.
First, we launched our new Internet-based customer relationships marketing program, which targets a broad base of influences that help generate pre-release buzz for our titles. Second, we effectively lowered our TV expenditures per title.
In most cases, we use shorter TV spots while maintaining strong consumer purchase intent for our new releases. We are pleased with the progress in this area but we cannot get complacent.
Continuous improvement is required to ensure we keep our franchises fully supported and growing in what is anticipated to be a highly competitive market environment. Next, with regard to product creation costs, we said over the cycle we plan to return to our historical average of approximately 20% to 21%.
This year, we are benefiting from our early leadership on the next gen and the knowledge that has come from being the only company to be a top-three publisher on each respective next gen platform. Today, all of our next gen titles are utilizing proprietary tools that enable us to more easily develop games across multiple platforms, and we have gained efficiencies by increasing our development schedules to facilitate a longer pre-production phase and more predictable workflow timelines.
We also continue to increase the amount of game development that is being outsourced globally. For example, [inaudible] to China, cost efficient development resources in Canada, and quality assurance in India.
We have already achieved our goal of doubling the amount of work that is outsourced for our fiscal ’08 slate. Next, we plan to achieve the low-end of our long-term targets for sales and marketing and product creation costs this fiscal year, which is earlier than expected due to the success of our cost efficiency programs and title over-performance across the board.
However, for fiscal ’08, due to our publishing product line-up accounting for a larger share of our business and a significant number of titles launching on the next gen for the first time, sales and marketing as well as product creation cost expenses as a percentage of revenue, are expected to increase year over year. Lastly, with respect to G&A expenses, we are expecting them to come in higher than anticipated this year due to the acquisition of RedOctane and higher legal expenses and professional fees.
The good news is that this is an area where we should see a meaningful improvement in fiscal ’08. In summary, we are encouraged by the initial success we have had in changing the way we approach sales and marketing and developing relationships and partnerships worldwide to enhance our development capabilities, all while maintaining our very high quality standards.
Now I would like to turn things over to Mike Griffith, President and CEO of Activision Publishing, who will provide his thoughts on the balance of fiscal ’07 and fiscal ’08.
Michael J. Griffith
Thank you, Thomas. My comments will focus on three areas: our Q3 performance, our market expectations, and what the company plans to deliver in fiscal 2007 and 2008.
This holiday, our performance was strong across a broad number of fronts. Even though we had a more limited slate than last year, our average game quality was higher and our commercial execution was stronger.
So in summary, we did more with less. We made good progress driving top line as well as building the bottom line with our cost control initiatives.
In addition, from a market standpoint, we have now weathered most of the hardware launch risk and market fundamentals appear to be improving, double-digit software growth expected to return to the industry. This momentum will help set us up for continued growth through the next fiscal year as our slate broadens.
Our over-performance in Q3 came from strong execution on our games, our marketing and with our customers. This quarter, we focused on some of our most proven franchises and our newest addition, Guitar Hero.
Our product teams did a nice job of combining next generation capabilities with fun game play design, and the consumer responded. Also, the adjustments we made to our marketing approach and spend worked, as Thomas outlined earlier.
We doubled game pre-sell levels versus year ago, and we reached our consumer more efficiently. Our trade execution was also better, with strong merchandising and in-store support, particularly among our largest customers.
Pricing was also favorable, with the next generation continuing to solidify the $59 price point and some of our current generation titles still commanding $49, and Guitar Hero well above both. Now, turning to our market outlook, on December 31st, the installed base hardware in North America for current and next generation systems, including handheld, was approximately $121 million units, which is significantly higher than where the installed base was at this point in the last cycle.
The massive installed base of the PS2, combined with growing demand for all three next gen systems bodes well for continued acceleration in the installed base. Also, we believe growth will be fueled by continued strength in handheld platforms and eventually, lower-priced current gen hardware.
So in total, the hardware dynamics are coming together as expected. With respect to the hardware market, launch risk has now been minimized and it is the adoption rate and time ratio that become important metrics.
For now, although it is still very early, we expect the following approximate hardware increases in North America during the calendar year. We are estimating PlayStation 2 will be up 4 million units, building on robust demand it has experienced over the last few months.
And we are anticipating 4 million units of PS3. We expect X-Box 360 growth of about 5 million units.
We also expect 4 million units from Nintendo’s Wii. Finally, we expect handhelds, which include GBA, DS, and PSP, will grow by approximately 10 million units.
Moving to software, we define our market to include all major platforms in North America and Europe. In calendar 2006, the software market in the U.S.
and Europe grew 7%, reaching a record $14.6 billion of sales. We believe calendar 2007 will be even larger.
As of today, we expect a combined North America and European software markets for current and next gen consoles, handheld, and PC to grow in excess of 10% year over year. With respect to software pricing, this still remains one of the major risks to our operating plans.
We expect software launch pricing to the X-Box 360 and PlayStation 3 will hold at $59.99, and for the Wii at $49.99. Pricing decisions for front line current gen console titles will remain on a title-by-title basis, based on quality and other factors.
In Q3, for example, we launched three PlayStation 2 titles at $49 or above. This holiday, we achieved our goal to broaden our two established franchises, Call of Duty and Tony Hawk.
Additionally, we successfully launched two new games, Marvel Ultimate Alliance and Guitar Hero, each of which made the holiday top 10 and exceeded our revenue and profit expectations. This holiday marked the worldwide launch of Guitar Hero 2, our newest wholly-owned intellectual property.
Our team was able to overcome significant guitar supply challenges, nearly tripling available supply and executed well to make this the number two SKU in the U.S. for the quarter, and reaching number one in December.
We supported the title aggressively this holiday season with a full suite of marketing elements, including in-store demonstrations. As we said on our last call, we secured over 7,500 demo stations and kiosks in almost every major retailer.
This is a good example of the advantage we are realizing from our strategic focus behind building our go-to-market capability and in particular, the strengthening of our retail category management expertise. Also, we set out to strengthen our leadership position on next gen consoles, releasing 11 SKUs.
Activision was one of the first publishers to go deep on the Wii, and it paid off. We had three titles in the top 10 and ended the quarter as the number two independent publisher on the platform.
So in summary, our holiday execution was strong across all segments. For the balance of the fiscal year, we will launch Call of Duty Road to Victory for the PSP and a Call of Duty 3 downloadable map pack for the 360.
To date, the Call of Duty maps have been our best-selling and most profitable downloadable content. Rounding out the quarter will be the launch of our three PS3 titles in Europe.
Looking ahead to fiscal ’08, we expect to begin to reap the benefits of leveraging next gen development, a larger installed base of hardware, and our deep and growing franchise portfolio. On our next call, we will give detailed information regarding our fiscal ’08 annual operating plan, including financial guidance.
However, today I will touch on the drivers for the first quarter of fiscal ’08. Starting with our movie releases, in May, we have two movie supported blockbuster releases, Spider-man 3 and Shrek the Third.
The buzz these movies are generating is very strong. On the game side, Spider-man and Shrek are two of our largest, most successful franchises, having sold an excess of 35 million units to date.
Also, the excitement around the July 4th release of Transformers is also strong and continues to build. Also driving the quarter will be the anticipated April release of Guitar Hero 2 for the X-Box 360.
This game will feature over 70 songs, as well as a program of regular downloadable content through the rest of the year. This holiday, we had great success with our in-store kiosk program for the PlayStation 2 and we plan to have even more points of in-store demonstration for the X-Box 360 launch.
In total, these four Q1 games alone will create an early foundation that should continue to pay off throughout the year. For the quarter, we also plan to release Enemy Territory Quake Wars for the PC, but as you know, id makes the final decision on release date.
We will also release Tony Hawk’s Downhill Jam on the PlayStation 2, which is aimed at the younger, mass market consumer, building off our earlier Nintendo releases. On top of a strong Q1, we have an equally strong slate for the balance of the year.
Re-applying this year’s learning and focusing on our most successful franchises, Tony Hawk, Call of Duty, Marvel, and Guitar Hero, as we continue to broaden platform support throughout the year. We will also have a new intellectual property based on DreamWorks’ Bee Movie, starring Jerry Seinfeld, and an aggressive re-promote program of our Q1 movie games.
We are very excited about our strong fiscal 2008 lineup and our platform coverage. The key difference in our strategy versus the prior cycle is that in addition to full support on Sony and Microsoft platforms, we will aggressively target the Nintendo platform, as consistent with our multi-platform and Nintendo’s expected growth.
In fiscal 2008, we will double our offerings on the DS and the Wii, including Spider-man, Shrek, Transformers, and Guitar Hero. In addition, the ancillary revenue streams will become more meaningful with revenue from downloadable content and in-game advertising growing year over year.
In summary, our fiscal 2008 lineup is the strongest the company has fielded and we’ll share with you the specifics of our full lineup on our next call. But as of today, we continue to expect that fiscal 2008 revenues will exceed $1.6 billion and that we will continue to expand our operating margin.
We believe that our growth and results in fiscal 2008 will be driven by double-digit market growth, expanding the breadth and depth of our franchise portfolio, benefits of a more efficient cost structure, and continued successful on winning big with winning customers around the world. Thank you very much for your time and the opportunity to share our initiatives with you for the future.
I will now open the call up for your questions.
Operator
(Operator Instructions) We will take our first question from Tony Gikas with Piper Jaffray.
Tony Gikas - Piper Jaffray
Good afternoon, a couple of questions. Could you just give us your opinion on sales of PS3 hardware to date?
There has been some controversy around that. Do you have any concern that Sony might try to maintain price at the risk of near-term unit sales?
Second question, could you give us a little bit of an update, now that we are further through the R&D process on some of these new platforms, how R&D costs are trending? If you could give us any specific examples, that would be great.
I do have a follow-up.
Michael J. Griffith
Let me start with PS3. You know, we are certainly glad to have the bulk of the next generation launches behind us.
I would say it has gone about as we expected. The consumer demand has been there.
Obviously supply was constrained and there was the e-bay effect, limiting the tie ratio in the early days on PS3. But we have been pleased to see faster market pick-up in the last quarter than we originally anticipated, partly due to next gen but also due to strong PS2 and handhelds.
We expect once we get the PAL launches behind us as well that penetration and the tie ratio will continue to grow, so we are really not concerned about it. We think it looks like we have three solid contenders, including the PlayStation 3, and more differentiation than ever between the platforms, in both price point and feature set, and we think it is a real healthy dynamic.
We think PlayStation 3 is about where we expected it to be.
Thomas Tippl
Tony, on your question with regard to product creation costs, obviously we have been climbing the learning curve over the last 12 months and learned a lot, particularly in how we can be more efficient across the next generation platforms so we really have now a joint PS3/X-Box 360 development effort, and that has been going very well. We still have a number of titles that are still in their first iteration of the next gen platform launch, so therefore obviously in those areas, on those titles we do not see yet the same type of benefits that we would expect to see in following generations after the game engines have been built and we can leverage that initial investment, so we will see that coming in over time.
We have been encouraged with what we have seen on the outsourcing front and the fact that this has not had an adverse impact on our game quality and our ability to execute on time, so we are encouraged by that. So all that combined gives us confidence that we can get back to our target range of 20% to 21% over the course of the cycle.
Tony Gikas - Piper Jaffray
Have there been any surprises, positive or negative, in terms of R&D and the products that you have been developing thus far? Are they coming in below budget perhaps?
Then my last question, could you just review for us what platforms Spider-man will come out on? Will it be priced at $59.99 on the Wii?
Michael J. Griffith
Let me start with your last question, Tony, on Spider-man. We expect Spider-man across all major platforms.
As I think we said before, we expect on the 360 and PS3, for main line games to be priced at $59 and that price point seems to be holding. On the Wii, the price point that seems to be establishing is $49.
I think that is where we would expect to be.
Robert A. Kotick
Although we would certainly like to see it on -- as far as your other question, Tony, in terms of surprises, I cannot say that we have really been surprised. If anything, I think we have gotten much greater control of the production costs and have a pretty good sense of where things will be over the next couple of years.
Operator
Next we will hear from David Joseph with Morgan Stanley.
David Joseph - Morgan Stanley
Just two quick questions. One, you mentioned a little bit about the downloadable content for Call of Duty on the X-Box in December.
I am wondering if you could give us a little bit more color. Did you see stronger-than-expected downloads there?
When you think about it going forward, I know you think it might increase. How are you going to really capitalize on that channel perhaps in calendar ’07, but really even beyond?
What are you thinking there? Secondly, the PS2, was that stronger during the quarter than you expected?
How is that affecting your perspective on the next year or so in the cycle? Is that going to be still a pretty significant driver for you?
Michael J. Griffith
Let me start with the downloadable content. The map packs on Call of Duty were successful for us.
In fiscal ’07 in total, we will book in the neighborhood of $5 million to $10 million in revenue. It is still small, relative in the grand scheme, but it is accretive.
We do believe that is an opportunity that is going to continue to build over the cycle. It obviously requires full next generation penetration and continued growth in broadband usage to deliver its full promise.
So again, it is still a small opportunity today but we are getting a lot of good experience and learning on it. Our Call of Duty was the lion’s share of our downloadable content this year, along with some contributions from Doom and other titles.
Next year we think we will at least double revenue from downloadable transactions. Again, Call of Duty and also Guitar Hero will be contributors to that.
Again, we think it is going to see steady growth throughout the cycle. On your second question on PlayStation 2, yes, it had a more robust quarter than we were anticipating and I think we benefited from that with our cross-platform support.
We have not made any plans to give up on the PlayStation 2 platform at all. In fact, if anything, we continue to have all of our major titles represented on PlayStation 2.
This certainly benefited Guitar Hero and some would say Guitar Hero maybe benefited the PlayStation 2 platform as well. So that was a real strong performer for us overall in the quarter.
David Joseph - Morgan Stanley
But do you expect that to still remain strong in the face of I guess a higher price point for the PS3, or a fairly high price point for the PS3?
Michael J. Griffith
We think PlayStation 2 is going to serve an important need in the foreseeable future in the portfolio of hardware. We plan to continue aggressive support.
Robert A. Kotick
If you think back at PS1 and how long PS1 was, really when they got down to that $79 price point, that year they sold 2.5 million units, so there is a long way to go still on price point on PS2. Just to your remark about PS3 and pricing, I think one of the things we think right now is that pricing is not today an impediment.
There is still sufficient consumer demand with the price point where it is, but obviously we would expect to see a price decline over time and I think once you start to see that -- right now, you can buy a PlayStation 3 as a Blu-Ray player for less than you can buy a standalone Blu-Ray player. So just from the hobby enthusiast’s perspective, we do not see a lot of obstacles to consumption right now at that price point.
Operator
Next we will hear from Elizabeth Osur with Citigroup.
Elizabeth Osur - Citigroup
I was hoping first of all, you could give us a little bit more detail on your expectations for the number of titles, and maybe number of SKUs or just the weighting of SKUs. I know you mentioned doubling the number on Wii, but can you just give us a better sense of the number of titles that will be coming out and on what platform?
Michael J. Griffith
For fiscal ’08, in total we have about 60 SKUs that will launch throughout the year. As you know, our approach is multi-platform launches across our titles, so most of our titles will be represented in most of our major platforms.
As we said, we are doubling up on the Wii and NDS SKUs and really representing about evenly our major launches across all major platforms.
Elizabeth Osur - Citigroup
Thanks. There was also a mention of greater efficiency in your developing across platforms.
Could you just talk a little bit more about how you do that? I was under the impression that a single platform was chosen as a primary platform for development, and then [others] were sort of made kind of from there.
Can you talk about whether that is the case or whether this generation is different, and if so, if you would still expect -- it looks like from your hardware numbers, you would still expect 360 to be the dominant platform, at least for some time. Is that where you begin your development?
Michael J. Griffith
As we think of our development in buckets based on similar technology, then while all the platforms have their unique elements, the PlayStation 3, the X-Box 360 and the PC all have common elements of development, as do the Wii and PlayStation 2. We really take a common development strategy, starting with base technology and branching into the individual platforms over time.
I think our approach to find the most efficient way to deliver the desired feature set in that way is working for us and we are going to continue to build on that and learn how to do it more effectively and efficiently as we continue to develop over time.
Elizabeth Osur - Citigroup
One last housekeeping question, are you planning on breaking out a separate revenue line for downloads or online transactions?
Thomas Tippl
Not at this point. It is still not significant enough.
But as you know, this is a fast-evolving space and if it changes, I will certainly consider that.
Operator
Next we will hear from Heath Terry with Credit Suisse.
Heath Terry - Credit Suisse
I was wondering if you could talk a little bit about which games or which titles that you have planned for this calendar year will feature some kind of in-game advertising and to what extent, or what kind of revenue per title or per unit you think that can contribute this year?
Michael J. Griffith
For starters, we do believe that the in-game advertising opportunity will grow over the cycle. It continues to be a relatively small part of the revenue and requires, just like downloadable content, more penetration with next generation consoles and also further confidence by advertisers that the spend is an effective use.
I think you will see we in the past had advertising support behind Tony Hawk as well as a number of other titles. I think you will continue to see that in the next year on Tony, as well as Guitar Hero is one where we will place additional emphasis.
We will continue to learn and expand our approach in this area as we get further into the cycle.
Robert A. Kotick
The one thing we are seeing, Heath, is as you start to see monetization efforts underway for other places where video is located, whether it is a YouTube or something like that, you are starting to see comfort level on the part of the advertisers that monetization within games and the rate cards that we are trying to establish actually have some validity. Now, we need a bigger, always on Internet capability in terms of the installed base to justify any kind of meaningful increase in the revenues that we will generate from this activity, but you are seeing it.
As the penetrations grow and we get more sophisticated about measurement, I think you are starting to see advertisers pay more attention to the opportunity. As we said all along, while we do not think there is going to be a lot of near-term impact on our bottom line, over the next three years as the installed base grows and people start to get more comfortable with this as a new opportunity for marketing, I do think you are going to see the opportunity for us change dramatically.
Heath Terry - Credit Suisse
I appreciate that. It kind of leads into the second part of my question.
You mentioned the rate card. Can you give us an idea of where that rate card is now versus say some of the more established media, like online advertising, how you would compare those two?
Robert A. Kotick
Well, we are at really low CPMs, and mainly because we do not have the measurement capability. We have done some work with Nielsen and right now, the way the people meter works is you can get an aggressive audience of about 10,000 Nielsen households so you can know when the game system is on, but it is still early days in being able to say here is how the product that is incorporated or the service that is incorporated or the advertising that is incorporated, here is how it has been viewed, here is what the qualitative aspects of that viewing have been, here is how it has influenced purchase behavior.
We have done some studies, some mall-intercept studies and focus group testing to really get a better handle on what the influence is, but we are not at the point yet where we have a well-established, sophisticated rate card. So I think when you look at where we are in terms of what we are generating, it is sub-standard compared to where it is likely to be three years from now.
Operator
Next we will hear from Ralph Schackart with William Blair.
Ralph Schackart - William Blair
Good afternoon, two questions, one near-term, one longer term. First, can you give us an update perhaps on what the PS3 tie ratios did in January from your perspective?
Then, on the longer term front, there has been some early but accelerating movement for retailers with DVD burn. Just curious, Bobby, if you have had any discussions with the industry or retailers specifically on any long-term implications to have download and burn kiosks for video games.
Thanks.
Michael J. Griffith
Let me start with your PS3 question. No secret there was the shortage of hardware and the e-bay effect that kept the tie ratio down in the early days of launch.
January, it is still too early to say whether the tie ratio has improved. I think intuitively and anecdotally, we believe that demand is going to continue for both the hardware and software that is attached to it.
So we are really not concerned about the tie ratio on PS3, but it certainly, it got off to a slower start because of the limited supply.
Robert A. Kotick
As far as kiosk burning, again, as you move to the new formats, the idea that there will be accessible hardware to burn Blu-Ray and that the first parties are going to support those initiatives, we haven’t really heard anything from first parties that that is something that they are going to be willing to support, so it is not something that is on the radar screen for us right now.
Operator
Next we will hear from Jeetil Patel with Deutsche Bank.
Jeetil Patel - Deutsche Bank
A couple of questions. First of all, can you talk about, is there going to be any deferred revenue from PS3 online capabilities built into games for the upcoming year, and whether you are looking at kind of pushing out some revenue from a recognition standpoint?
Second, is there any way you can give us a sense of what the mix split looks like in the $1.6 billion between distribution and publishing? Lastly, you had about a 14% share on the Wii.
Do you think that is going to be more an anomaly in terms of not enough products in the market to kind of gauge yourself against, or do you think that is going to be more the norm of what kind of market share we should envision on the Wii, or maybe the Nintendo systems as we go forward into the upcoming several years?
Michael J. Griffith
Let me get to your last question first, and then I will turn it over to Thomas on the first. On the Wii, as I said, I think we have all been pleased with the strength of the Wii launch and the consumer acceptance.
We have been pleased with our product performance on the Wii. We are learning more about how to take advantage of the Wii controller and deliver the consumer an exciting and exceptional game performance.
I think we have a good, solid foundation to build on. Our strategy and I think our expectation is that we will map pretty well to the market across platforms, so we would expect going forward that we are going to have a fair share on the Wii platform compared to others.
Robert A. Kotick
I think if you think about the intellectual properties for our lineup this year, like Shrek and Spider-man and Transformers and Bee Movie, it is very well in line for the Wii consumer.
Thomas Tippl
On your other questions, with regard to the revenue split, we will provide you more details in May when we issue detailed guidance. But as I mentioned on the call, we expect that the publishing business is going to go grow disproportionately next year and as a result, will make up a significantly larger share compared to the current fiscal ’07.
With regard to our revenue recognition policies, in the past, deferred revenue was relatively small. The online component of our games were incidental.
We didn’t have really any ongoing commitment in that area. But as the business model is changing, we are evaluating our revenue recognition policies and should we come to a different answer going forward, we will certainly share that with you in due time.
Robert A. Kotick
I think you could feel comfortable knowing that the bulk of the revenues for fiscal ’08 are still going to be derived from the sales of product in retail.
Operator
We will move next to Edward Williams with BMO Capital Markets.
Edward Williams - BMO Capital Markets
Good afternoon, just a couple of questions for you on the next cycle as a whole. Bobby, when do you expect the new revenue opportunities to be material to the profitability of the business?
You mentioned three years out. Is that the timing that we should be thinking of?
Then I have a couple of other ones.
Robert A. Kotick
I think you can see, even with great emphasis that some of our competitors are placing on these categories, they are still very small opportunities. I think over the next three years, whether it is micro-transactions or the in-game advertising and sponsorship opportunities or moving to more of a subscription model, these things will take hold over time.
You have unique characteristics in markets like Korea and China that you do not really see in the markets that we typically operate in, like the U.S. and Europe, but I think over the next three years, they will start to contribute more significantly than they have over the last year.
Edward Williams - BMO Capital Markets
Okay, and as we look at the adoption of the new consoles, specifically looking at PlayStation 3 and the slower rate than what we saw with the PlayStation 2, do you see that as being an indication that the cycle could be longer than what we have seen in the past, this new one could be longer? What do you think is the implication of a slower adoption of new consolers?
Robert A. Kotick
First of all, you are looking at a materially higher price point. Three competitors with well-differentiated product offerings as compared to two, a smaller number of titles overall than what we saw in prior generations, and I think most importantly, that you have hardware that has the potential to be taken advantage of in terms of its technical capabilities much longer than we have seen in prior generations.
If you look at the underlying architecture, in particular on the PlayStation 3 or the X-Box, we are taking advantage of a very small percentage of the capability of the hardware and that should result in having a longer cycle.
Edward Williams - BMO Capital Markets
When do you think you will actually be able to harness the power of the PlayStation 3 and 360?
Robert A. Kotick
You mean all of it?
Edward Williams - BMO Capital Markets
To truly exploit it. Is it going to be the third generation games, do you think?
Robert A. Kotick
We are taking advantage of the capabilities today, but when you think about, for example, finding people with multi-thread programming experience, other than JPL there are not a lot of places to go. So we are building it from the ground up and really taking advantage of the multiprocessor architecture.
Truly taking advantage of all these co-processors is going to take some time. The good news there is I think it is going to allow for new genre development and then you are going to see new kinds of features that in prior cycles, we really haven’t had the same opportunities for the advancement of new features.
We are hard at work at looking at the hardware and trying to figure out what that is going to mean in future feature sets, but it is going to give us a lot of room for growth that we have not had in prior generations.
Edward Williams - BMO Capital Markets
The last question is the Nintendo platform: do you see the Wii as having a significant effect on expanding the demographics of the marketplace or do you think it is more of a second console, or the first console but it is already selling into a house with an existing console?
Robert A. Kotick
I think if you look at historical cross-ownership rates, I remember at one time I think Microsoft was saying that they thought that somewhere around 20%, 25% of the installed base of PlayStation 2 owners also owned an X-Box. I think you are going to see higher rates of cross-ownership this time around than we have ever seen, mainly because the Wii is such a well-differentiated product and also is at a lower price point.
I think as they move down the price curve, you will start to see dual box penetration in a lot more households than we have seen in prior generations.
Operator
Next we will hear from Michael Savner with Banc of America Securities.
Michael Savner - Banc of America Securities
Thanks very much. Can you maybe talk a little bit about the PS2 trends that you mentioned?
I think you said about 4 million were your expectations for the calendar year, and maybe ball-parking where you were a few months ago, if that is higher than what you first thought you would be this year. I think there have been some recent reports out of Japan that the PS2 is really significantly outselling the PS3.
What are the longer term economic implications to these high PS2 numbers? Is this something you see as just a pure positive because it is market expanding?
Or is there some potential that there is a cannibalization of your addressable next gen market? When you talk about the PS2 being so strong and the Wii being a market expander, it feels like there is a lot of market expanders, which is either going to be great in the long run or potentially kind of nip at the heels of the PS3 and the 360?
So maybe if you could comment on that, that would be helpful. Then I have one follow-up.
Michael J. Griffith
On the PS2, as we said, we experienced more robust growth on that platform during the last quarter than we expected and that was very nice to see. It helped reinvigorate the market overall.
The numbers that we said earlier over the course of this calendar year was about 4 million more PS2 units. It is slightly up from what we had expected before, but remember, we have expected PlayStation 2 to have a long tail and a long life into this cycle.
I think you are right. We see this, along with the Wii, to have a very positive impact on overall demand.
Again, as Bobby said, these platforms now are more differentiated than they have been in the past, with price points, feature sets, crossover ownership -- all of these things are positive elements for us, so we see this very favorably.
Robert A. Kotick
Michael, from our perspective, if we were to take each device individually and say why we think that they have unique market-expanding characteristics, I think if you look at X-Box 360 and the work that Microsoft has done in live, in facilitating a multi-player experience, in adding voice-over IP, in integrated instant messaging, in accessibility of tournaments and ladders and downloadable content, they clearly have created much more of a social dynamic in gaming than has existed previously over the Internet, and that is bringing new consumers into the market. We think as it becomes more accessible and there are more mass market casual oriented experiences over the Internet, that X-Box 360 will continue to have further penetration to a broader consumer base.
On PlayStation 3, you look at Blu-Ray and you look at production value there. Again, one of the limiting factors that we found in being able to have more story-based games or games that have well-developed characters and storylines, you are starting to see that the higher production value capabilities there will likely result in broader audience appeal.
I think on Wii, clearly this new physical experience, and we have seen it with Guitar Hero, but this new relationship between the physical experience that you have and the user interface and what is on the screen is showing that there is an opportunity for more casual gaming and for broader audience participation than we have probably seen in any prior generation. So you take all of those characteristics, those are market expanders.
I would say this is more anecdotal and we are doing some qualitative work in this area, but I think one of the reasons in addition to the shortage of next generation devices that you saw such high rates of sales, more than our expectation, of PS2, is Guitar Hero. We will have more qualitative data on that over the next few months, but I think you are starting to see these different types of applications that have much, much wider appeal than gaming has historically be catalysts for sales to new consumers.
Michael Savner - Banc of America Securities
That is helpful, thanks. If I could ask just one follow-up, maybe just to attempt to hit on the pink elephant in the room, because I do not think it was really disclosed or commented in the last press release, but that is just whether the ongoing options or view could ultimately lead to any type of management changes.
Is that something that you are comfortable at this point saying that no changes are imminent, or is it kind of still too early to address that at all? Thanks.
Michael J. Griffith
We really cannot comment beyond what has been in our filings and our press release, so we just cannot give any further comment on that.
Operator
(Operator Instructions) We will take our next question from John Taylor with Arcadia Investments.
John Taylor - Arcadia Investments
I want to poke around a little bit on the non-recurring costs of dealing with the options investigation. You mentioned -- you know, that is a pretty significant number and hopefully it is going to start to go away at some point.
Could you give us a ballpark sense of what that might make up of G&A this year, and maybe work that into a discussion about the major margin impactful things that would go into next year? I am thinking you have a mix change that is going to help gross margin, publishing over distribution.
I think you said your sales and marketing is going to be up, maybe your product development is going to be up, G&A down, but then licensing, of course, with all the movie stuff. I wonder if you could give us a sense of what the basis is and how much we do not need to worry about building on, how much might go away and then talk about those other factors.
Thanks.
Thomas Tippl
Let me tackle that one. G&A, as you know, as we have disclosed, is up significantly.
I think it is, just in dollar terms, about $20 million quarter over quarter. A significant portion of that is related to the legal expense and professional fees we are incurring to resolve the options review as expeditiously and thoroughly as possible.
The other significant factors in that increase include the acquisition of RedOctane and associated intangibles and liquidation, as well as, of course, the adoption of FAS-123R, so you have the option expense number in there as well. Then lastly, the dollar is somewhat weaker, so the international elements of G&A translate into higher dollar numbers this year.
So those are the four major factors, with I would say clearly legal expense and RedOctane being the two most significant ones.
Robert A. Kotick
And we are fairly confident that additional professional fees are not likely to continue next year.
John Taylor - Arcadia Investments
Can you put that into context for us though, in talking about movement on some of those other lines, in light of your sense that operating margin is still likely to increase next year? Maybe rank the big ups and the big downs, maybe something like that?
Thomas Tippl
I think actually you have done a pretty good job of looking at the drivers, so as I said earlier, we are going to provide details in our May call, but just to reiterate, publishing business is going to be a larger part. That will have a positive impact on gross margins.
We are going to grow the business significantly while at the same time hopefully not re-incurring some of these long-term expenses we had this year in G&A, so you will see some margin leverage there. Then, I think I gave already the perspective on sales and marketing and product creation costs in my prepared remarks.
Unknown Analyst
Okay, let me try one other one…
Michael J. Griffith
That is an important point, is that we have gotten a lot of leverage on the sales and marketing and product creation cost front. We are going to likely be spending more with these big releases next year.
Unknown Analyst
Then, the other interesting thing about next year is going to be how weighted it is in June with all the big stuff that is going out. So as you think about the $1.6 billion, can you give us maybe a ballpark range as to what percentage the first-half might represent, as opposed to the second-half?
I think there could be a shift there.
Thomas Tippl
You will hear about that in our fiscal year-end conference call.
Unknown Analyst
Thanks. It was worth a try.
Operator
Next we will hear from Arvind Bhatia with Sterne Agee.
Arvind Bhatia - Sterne, Agee & Leach
Good afternoon. Just a couple of questions.
First one is a housekeeping. What was catalogue for the quarter?
Then, my second quarter is just trying to get directionally a sense of what percentage of revenue next year coming from owned IP, internally developed products, et cetera. Just to get a better sense of the margin drivers.
Thomas Tippl
On the catalogue question, that was 18% of revenues in the December quarter and again, appreciate the attempt, but we are going to provide more specific breakouts on our revenue guidance at the fiscal year-end call.
Arvind Bhatia - Sterne, Agee & Leach
Okay, and then, what was the reason for the large allocation that you are getting on PS3 in Europe? Is that just there is more product and that is why you are able to get more PS3, or do you think just your market share is increasing there?
Thomas Tippl
I think planning previously was relatively conservative based on the limited information that we had at that point. We have now received more specific information and therefore have more visibility from Sony on how their units are going to break out across the markets and what we are going to receive in terms of our distribution business.
We have reflected that in our updated guidance.
Arvind Bhatia - Sterne, Agee & Leach
Got it. Last question, you mentioned all the consoles had launched, and most of the risks are behind us.
As you look out over the next 12 months, what are the major ones that you still think, outside of the ongoing one, are there any additional risks that you see for your business next year, whether it is competitive or others?
Robert A. Kotick
Yes, I think pricing, as we said, continues to be a very big risk. I think the macro risk that we continue to be concerned about is that leisure time is shifting to other activities and that it is not necessarily game play.
People are spending more time on the Internet and they are doing other things and there is always the risk that people will be gravitating towards activities that are not game play. Although all the signs of demographic expansion, everything that you see in terms of the changes taking place in this next generation of hardware would suggest that broader audiences are finding more appeal and deriving greater entertainment value from video game platforms than ever before.
I think there is the continued risk that comes from increased production expense as the demands for deeper, richer content from consumers changes the character of our production processes. Intellectual property prices continue to go up.
The risks that we continually identify remain.
Operator
We have time for one further question and that will come from Daniel Ernst with Hudson Square Research.
Daniel Ernst - Hudson Square Research
Thanks for taking the call. Two questions, if I might.
First, and I know that Downhill Jam made it into the Wii top ten and part of that effort was to expand the adjustable market for Tony Hawk. Could you talk about whether that met your expectations?
I know it didn’t get the best reviews. Maybe talk about how it did relative to your own internal forecasts, and what you might do elsewhere across your catalogue to come up with games that might expand the opportunity.
Then, just quickly on the download business. Could you talk about what opportunities you have in the near-term with PS3 and then Nintendo’s virtual console for the Wii?
Thanks.
Robert A. Kotick
Tony Hawk as a brand was up year over year, which we are really excited about. Clearly it is a direction we will continue to go as we stay focused on that brand.
As far as downloadable content, I am not exactly sure I understood the question.
Daniel Ernst - Hudson Square Research
The question is you have done a lot with the 360. Could you talk about what opportunities you have with the PS3 and then with Nintendo’s virtual console for the Wii?
Robert A. Kotick
We are going to continue to get experience on all those platforms as the platforms and the games become more established. Things like downloadable content capabilities will be broad across all next generation platforms.
Clearly the X-Box 360 has a large lead in that area and will continue to lead our revenue generation.
Michael J. Griffith
I think the way we have always tried to articulate downloadable content is that the analogy in the PC business is what we do with expansion packs. That has not been an opportunity that has been available to us.
The first parties have generally shied away from it for a combination of reasons. You have a higher cost of goods.
You have limited amounts of shelf space. You have approval processes that do not really allow for that type of business, and so what you are really seeing is that the downloadable content is a replacement for that expansion pack business.
That is where we have seen the opportunity. It continues to breathe new life into some of the products, keeps them selling successfully longer.
In the case of Call of Duty on the 360, one of the things that we noticed is that we actually were able to keep the retail price point higher longer as a result of having fresh downloadable content out there available to the consumer. I think Sony and Nintendo certainly are taking notice of the success that Microsoft has been having and you are likely to see that become an important part of what they do with respect to their platforms.
Daniel Ernst - Hudson Square Research
Thank you.
Kristin Southey
Okay, Operator. On behalf of everyone at Activision, we would like to thank you for your time and consideration today.
Operator
That does conclude today’s conference. We thank you for your participation.
Have a great day.
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