J. Paul Raines - Chief Executive Officer Robert A. Lloyd - Chief Financial Officer and Executive Vice President Michael K. Mauler - Executive Vice President of International Tony D. Bartel - President

Seth Basham - Crédit Suisse AG, Research Division Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division Anthony C. Chukumba - BB&T Capital Markets, Research Division Brian Karimzad - Goldman Sachs Group Inc., Research Division Edward S. Williams - BMO Capital Markets U.S. David G. Magee - SunTrust Robinson Humphrey, Inc., Research Division

Good morning, everyone. Welcome to GameStop Corporation's First Quarter 2012 Earnings Call. Today's call is being recorded. [Operator Instructions] I would like to remind you that this call is covered by the Safe Harbor disclosure contained in GameStop's public documents and is the property of GameStop. It is not for rebroadcast or for use by any other party without prior written consent of GameStop. At this time, I'd like to turn the call over to Mr. Paul Raines, Chief Executive Officer of GameStop Corporation. Please go ahead, sir. J. Paul Raines: Good morning, and thank you for joining us on the GameStop First Quarter Earnings Call and Update. As we begin our remarks today, we would like to once again thank all of our GameStop associates worldwide who strive everyday to deliver the best customer service and innovation in video gaming. As you saw in our press release of last Thursday, May 10, our earnings of $0.54 per share came in at the higher end of our original guidance, reflecting the margin expansion we are seeing from our preowned digital and mobile businesses. These margin enhancing businesses are filling the profitability gap in this environment of slower physical software and console sales. And the results they are generating are a direct result of the strategic transformation work we have undertaken since 2009. The first quarter was, however, weaker than we expected on the top line, with a negative 12.5% comp due primarily to the slower new physical software and console sales. It is clear that GameStop as well as those following our industry are struggling to forecast software and hardware sales during the late stages of the current console cycle. Our finance team is by far the most knowledgeable and experienced in the console gaming industry, but they are facing a different set of variables in this elongated cycle that make it increasingly difficult to predict consumer behaviors. I have asked Rob Lloyd to give you some insight into the details of how we have prepared a forecast, and you will see we are making some adjustments around comp sales forecasting to provide even more clarity around our assumptions. From a geographic perspective, Europe was by far our strongest segment with a negative 1% comp, reflecting some of the work we have done on execution, as well as a consolidating competitor set. The United States, Australia and Canada trailed the European segment, and Mike Mauler will provide some color on our continued focus on execution and consolidation of the Europe market. Combined, the preowned business was flat, excluding the impact of foreign exchange. Mike Hogan and his team continue to reinvent the preowned video game business through innovative use of PowerUp Rewards, assortment planning and inventory management. While the growth came in lower than our plan, we are pleased that the pre-owned business showed resilience in a quarter with low customer traffic. It is also important to note that all major competitors around the world have now either exited or reduced their efforts to enter the preowned business. This reduction in competitor focus gives us confidence about the continued success of our preowned model going forward. PowerUp Rewards continues to grow as we reached over 18 million members during the quarter. The program continues to win awards as the most innovative in retail, with PowerUp members representing 72% of all sales in the first quarter. PowerUp members transact with GameStop 5x more frequently than nonmembers and there are now 300 million games in their collective game library. The average annual spend per member is $358 and growing. As we have shared with you, the PowerUp community represents an estimated 35% to 40% of all video game consumption in the United States. In order to help our partners prepare for console launches, we have engaged our PowerUp community in a dialogue around what kind of features they would like to see in their next console. We have completed a broad survey of gamers between the ages of 13 and 60 who play a minimum of 1 to 4 hours per month, and those consumers tell us that they expect a new console and are optimistic that those new consoles will be worth the money spent on them. Those same consumers indicate that their purchase intent around the new console cycle is very sensitive to those consoles providing backward compatibility, ability to play preowned and shared games and the presence of a physical drive. We will share more of the data from our PowerUp community as we go forward. For a variety of reasons, GameStop is better positioned than ever before to be a driver of upcoming console launches. Only in the United States, the PowerUp community has an installed base of 24 million consoles in their game libraries. Using an average trade credit of $75 per console in the game library, there is an estimated $1.8 billion of currency available to trade towards new console launches. We are working closely with publishing partners and manufacturers now to create powerful launch promotions that will take advantage of this trade currency to drive their launch, and we are pleased to begin with the Wii U this year. Our partners understand the power of the buy-sell-trade model in launching new consoles, as evidenced by our strong share on all recent hardware launches, including 3DS and Vita that each had a significant portion of their launch volume at GameStop paid with trade credit. Our digital businesses grew at 23%, continuing strong growth around the world, but overlapping very significant DLC growth during the first quarter of last year. Our PC digital businesses continue their exciting growth stories with our Kongregate.com platform growing over 50%. Our PC download business grew 172% as we added over 1,600 new games to the platform. We also added an exciting relationship with Steam to our portfolio, bringing another leading offering for PC gamers into our stores to purchase digital currency for that large PC platform to add to our origin and GameStop options. Tony Bartel will provide you more color on our digital businesses. Our mobile business continues to exceed expectations. During the quarter, we expanded the store footprint of our iDevice business and trades of those items now represent 8% of trades year-to-date. We also expanded the tablet business to more stores and added exciting new SKUs from Toshiba, Asus and Acer to our assortment. As we think about the second quarter, we are projecting an expanded comp forecast range of negative 11% to negative 5%, reflecting challenges on new software and hardware, as well as preowned digital and mobile growth. Rob Lloyd will provide greater details on the second quarter and annual forecast. There is no question that we are at a transition point in console gaming, as the current generation of consoles gives way to the new Nintendo Wii U this fall and the next versions of Sony and Microsoft products in the coming years. At the end of this cycle, we see pressure on price points for hardware, as consumers seek out newer devices with fresher innovation and features. At the same time, the flexible business model that we have built transitions customers over to higher-margin businesses such as preowned video games, digital console and PC content and the emerging mobile business. Before I turn the call over to Rob, I'd like to summarize our view on the business and industry, particularly in light of the extended console cycle, as well as opportunities we see for GameStop. We remain highly confident in our company's long-term potential from long-term value in a new console cycle, coupled with a resilient preowned business and emerging digital and mobile businesses around the world. I'd like to note that we recognize there are perceived risks and threats to the business from digital disintermediation, preowned competition and global economic woes. However, in looking at the history of console gaming and understanding the impact and benefits of the 3 previous console cycles to GameStop and its predecessor companies, we continue to believe that we are better positioned than ever in our history to leverage a console cycle launch, as well as continue to take advantage of other opportunities in our industry. We encourage everyone to join us at E3 and see for themselves the level of innovation and excitement that is coming in the console industry. With that said, it is also important to note that our strategic plan launched in early 2009 envisioned the development of complementary businesses to the new hardware and software businesses that would allow for GameStop to transition to the next-generation of consoles under a variety of scenarios. I will now turn the call over to Rob. Robert A. Lloyd: Thanks, Paul. Good morning. Last week, following the release of the NPD data, we issued a press release preannouncing that our first quarter comps were down 12.5% and that our earnings per share were $0.54. While our comps did not meet our expectations, we continue to outperform the market and achieved our bottom line forecast as Paul noted. Today's release provides guidance on the second quarter, which projects a tougher sales environment than we anticipated last quarter. As you know, we are operating in an unprecedented video game market. This console cycle is already 2 years longer than the last console cycle and as you can tell from our precision in forecasting sales, this presents some challenges in predicting current consumer demand. We are not alone in this. Taking the current environment into consideration, we will continue to provide you with quarterly guidance on comps, but we are widening the range to reflect the uncertainty in the category. We believe we will continue to operate in this environment of volatility until the next console cycle arrive. As Paul mentioned earlier, I'd like to give you some color on our sales and comp forecasting methodology. Our forecasts are built from the ground up, developing estimates of hardware and software for each console and handheld product and developing estimates of sales for preowned video game accessories, PC software, digital by type and the mobile business. We consider the following factors in developing our forecasts: titles that we'll be launching in the upcoming quarters, reservation patterns for those titles, trends in reservation pickup rate, growth in the installed base, market and market share trends, baseline sales of the software catalog, recent trends in overall sales, previous year and current year holidays, known promotions and sales history as it affect each of these factors on both a macro and micro basis. The same general process is followed in each country. The challenge, obviously, comes in predicting the impact of consumer demand at this stage of the cycle on each of these factors. We are confident in our ability to execute on our strategic plans, our ability to deliver the earnings to which we have guided and our ability to generate strong cash flow and exercise discipline in our use of that cash. Let me provide some color on our first quarter results. Consolidated global sales were down -- were $2 billion, down 12.2% from last year, with comps down 12.5%. Comps were down 15% in the U.S. and down 1.1% in Europe. As we said going into the quarter, the new title releases of Mass Effect 3 and Prototype 2 in this quarter would not be enough to overcome the strong titles from the first quarter of last year in which we sold more than 500,000 units of 4 different titles. As a result, new software sales declined 20% compared to a 29% decrease in the U.S. market. Overall, we gained 160 basis points of new software share in the quarter. While we were pleased with our share performance on the PS Vita, sales were not enough to overcome the Nintendo 3DS launch from last year. We also outperformed the market in new hardware, as our decline of 19% was less than the U.S. market decline of 28%. As I mentioned, our comps in Europe were down 1.1%. The situation with Game Group is still very uncertain and while we can see a positive impact in certain markets in which we compete with Game, it is difficult to quantify the exact impact their struggles are having or to predict what future operations may look like for Game from country to country. Preowned sales during the quarter were down 1%. The U.S. was up about 1% and overall, we were flat, excluding currency, as Paul noted. Given currency impacts and the decline in traffic overall, we take some positives from our results as this category outperformed our new software results by 19%. Our digital business increased 23% over the first quarter of last year, with strong growth in PC digital. Our digital receipts or non-GAAP revenue totaled $118 million, with GAAP revenues totaling $46 million. Tony will share some of our successes on DLC launched during this past quarter. Consolidated global net earnings were $72.5 million and diluted earnings per share for the quarter were $0.54, in line with our guidance range. During the quarter, we continued to expand gross margins as we shifted sales towards preowned products, grew our digital businesses and expanded our mobile business. The effect of buybacks done during the quarter in excess of those factored into our guidance was less than $0.0025 per share. Gross margins for the quarter were 30%, up 280 basis points from last year. Margins in the preowned business increased 110 basis points during the quarter to 49.1% due primarily to improvements in margins in most countries. This increase, when coupled with the increase in preowned, as a percentage of sales, accounted for 200 basis points of the 280 basis point increase in margin overall. The margin rate in the other category grew 330 basis points from last year and other as a percentage of sales grew to 15.2% of sales. As a result, the other category accounted for 110 basis points of the 280 basis point improvement in overall margin rate. The dollar increase in gross profit for the other category was $7.6 million, with the growth coming from digital and mobile businesses, as well as the sale of products like Skylander toys. Digital gross margin grew 28% to $26.6 million and now accounts for over 20% of the other gross margin dollars. Mobile gross margins were $4.6 million. Total SG&A expense dollars declined slightly from last year, as we focused extensively on controlling our SG&A. As we told you in March, we are through with our heaviest investments and while we will continue to spend wisely to improve our digital, mobile and loyalty offerings, we are focused on making sure that as we increase gross profit in the future, we are positioned to grow operating profit. Depreciation and amortization was also about 4% less than last year. Operating margins improved slightly from last year due to the improvement in gross margin rate despite the deleveraging associated with negative comps. Total company inventory decreased 14.4% as we continue to focus on disciplined purchasing and inventory management. Turnover was down slightly from last year. We ended the quarter with 6,614 stores. We opened 18 and closed 87 in the U.S. and opened 24 and closed 24 internationally. As we indicated in the earnings release, the Board of Directors authorized dividend of $0.15 per share for this quarter to be paid on June 12. We repurchased 5.4 million shares in the first quarter at an average price of $22.70 for a total of $121.5 million. We have $455 million remaining on our current buyback authorization. Since January 2010, our stock and debt buyback have totaled just under $1.3 billion. We have repurchased almost 40 million shares at an average price of $20.70 for a total of over $823 million. Now for the second quarter outlook. We forecast same-store sales to range from down 11% to down 5%. While we have some strong titles during the month of May like Max Payne 3, Diablo III and Ghost Recon, we are cautious in our outlook given the overall traffic declines for the category and we had some titles slip out of the quarter, primarily Guild Wars 2. We expect diluted earnings per share to range from $0.10 to $0.18. We expect the tax rate for the second quarter to be approximately 100 basis points higher than last year when we benefited from the release of accruals for uncertain tax position. We are revising our full year comparable store sales guidance to range from down 5% to flat. This change reflects the top line results of the first quarter, the guidance for the second quarter and the uncertainty surrounding consumer demand. We are reiterating our previously announced full year 2012 earnings per share guidance range from $3.10 to $3.30. The second quarter EPS guidance fits within this range. The second quarter is the smallest quarter of the year and has little weight in terms of the entire year. We have confidence in the back half of the year due to the growth of our initiatives, the launch of the Wii U and the 53rd week. Our mobile business is set to ramp based on our existing buildup of inventory, the growth in the number of stores selling iDevices and tablets and the impact of selling iDevices has on trade volume. We started the quarter with selling iDevices in 460 stores and tablets in 150. We have now rolled iDevices out around the world and have increased the number of stores selling iDevices and tablets, which Tony will talk about. As you model full year revenues, keep in mind the effect of the 53rd week on sales -- it's estimated to be approximately 1.5% -- and the growth of revenues, which are not included in our comp calculation, including Kongregate, Impulse and PowerUp Pro, which are estimated to total 0.5%. Earnings guidance does not include the effect of additional buyback. Now I'll turn it over to Mike for his comments. Michael K. Mauler: Thanks, Rob. Good morning, everyone. As Paul mentioned, our European operations had a solid quarter, reducing operating losses by 67% versus Q1 of 2011 to a loss of $1.1 million. A strong focus on cost control and higher gross margins drove this improvement in operating earning, with the most significant improvements coming from Spain and Northern Europe as the results of their restructuring efforts were realized. As communicated over the last year, a key component of our international strategy is driving the implementation of best practices across all territories. These efforts generated significant improvements in a number of areas during the quarter. In Q1, we continue to leverage the technology investments and processes developed in the U.S. to drive growth in our console and PC digital businesses. We went live with Microsoft DLC in Germany and Italy, and are continuing that rollout in the digital market. We also entered into new publisher agreements to sell digital goods such as with Activision Blizzard where we began selling digital copies of Diablo III this week in most markets. I'm also pleased to announce that we have signed an agreement with Sony EMEA to begin offering Sony DLC in our international stores during the second quarter. Our efforts to expand refurbishment capabilities and improve inventory management continue to drive growth and profitability in our preowned business. European preowned sales grew 2.3%, excluding FX and we realized a 100 basis point improvement in preowned margin. Over the last 18 months, we've expanded our international e-commerce capabilities, investing in technology and optimizing business processes, which has helped us to continue to achieve strong growth in our international e-commerce sales. During the quarter, e-commerce sales increased 30% versus prior year. Strong progress continued to be made during the quarter in leveraging our global purchasing power to provide unique and exclusive content to our customers worldwide. Key exclusives included the preordered Mass Effect 3 N7 pack, the Prototype 2 Blackwatch Collector's Edition and the Star Wars Kinect Kit Fisto preorder exclusive. As a result of these and future exclusives, we entered Q2 with 53% more reservations than the prior year. In the first quarter, we successfully completed our restructuring in Northern Europe and Spain. In Northern Europe, the U.K., Ireland and Scandinavia, we executed the consolidation of all back-office operations to Dublin ahead of schedule. This consolidated operation also includes shared service functions for e-commerce and IT support, creating a center of excellence and reducing operating costs. The restructuring in the first quarter has helped build a strong foundation for the future, positioning GameStop to continue to increase market share, as the competition pulls back or consolidates in key markets. As mentioned on the last call, in 2012, we will be focused on 3 core strategic initiatives. We will continue to expand our console and PC digital businesses by completing our POSA rollout across all territories and by investing in DLC. We are working with our publishing partners to rapidly roll out DLC capabilities in all markets over the next quarters. During Q1, we leveraged best practices from the U.S. to launch our mobile businesses in all market. We are now accepting trades of iDevices in all countries and the volumes are increasing weekly. We have also just recently begun selling gaming tablets in Australia, and we will see this product line roll out to other key market during the year. Finally, after successful implementations of our loyalty program in Australia, New Zealand and Spain, we will accelerate our loyalty rollout to additional markets during 2012. Implementing a robust loyalty program in these markets is the glue that ties together our brick-and-mortar capabilities, services and digital offering into one cohesive value proposition to our hybrid customers. Our strong focus on managing the basics of our business and the rapid execution of our strategic transformation is driving profitability, not only during the bottom of the current cycle, but will ensure that GameStop is the global leader as we enter the next cycle of Gen 4 consoles. And now I will turn it over to Tony for his comments. Tony D. Bartel: Thanks, Mike. As Paul and Rob mentioned earlier, our digital receipts grew 23% over last year and are on track to achieve our annual goal of $675 million. In Q1, console digital grew 17% and PC digital grew 38%. In addition, our mobility efforts are ramping up as scheduled and generated $12 million of sales during the quarter. Our DLC business continued to expand as we are educating the publisher base on the power of the GameStop model to drive presales and preorders of DLC. As we did with the launch of Activision's Call of Duty ELITE DLC, we are driving well over 50% market share of DLC when it is launched in conjunction with a game. For example, we attached from Mass Effect DLC the 42% of the sales of EA's Mass Effect 3. More recently, we attached 46% of the Colossal Mayhem DLC to Activision's Prototype 2. As expected, we did see a reduction in the sale of specific map packs for the Call of Duty franchise, as we accelerated much of those receipts in the last quarter due to our successful launch of Activision's Call of Duty ELITE DLC. We will see a similar impact in the second quarter. In addition, the light Q1 traffic generated lower sales of PSNs and Xbox LIVE points cards. For the back half of the year, we expect to see a significant increase in DLC sales, as we are seeing more major titles providing sellable DLC content at the time of launch. And we are already offering preorders and presales of Activision's Call of Duty ELITE DLC for Black Ops 2 along with an integrated launch campaign. We expect this to provide a significantly higher attach rate of ELITE, resulting in a strong sales lift in our fourth quarter. We also relaunched our PC digital download business in our stores in the first quarter, and we saw a significant increase in this business as it grew 172% during the quarter. Since our acquisition a year ago, we have increased our catalog to over 1,600 games, and we are now selling these games digitally in our U.S. stores. Not only does this allow us to be in stock on all new releases, but it also allows us to provide a rich catalog of favorite games for the PC game enthusiast. We also started to sell Blizzard's Diablo III game digitally this week as a first installment of our digital relationship with Activision Blizzard. In addition, we recently announced that we partnered with Steam to fund their digital wallet in our stores to customers who prefer to use their platform. We see this as yet another way to tap into the $1 billion North American PC download business that our market model suggests is growing at 27% annually. These PC enthusiasts will now be able to fund their Steam wallet, while experiencing all of the great benefits of GameStop, such as associate knowledge, PowerUp Rewards points and non-credit card payment sources. This week, Steam informed the U.S. portion of their 40 million accounts of the GameStop option. Kongregate continues its transformation, growing in-game transaction revenue by 144% during the quarter, and growing total revenue by 50%. Kongregate currently has 136 games in its library that monetize through in-game transactions and another 60 games in the pipeline. So we expect to see the rate of growth accelerate in the back half of the year as these games come online. Traffic, as measured by Google Analytics, increased 22% on Kongregate.com during the quarter. Game Informer continues to drive both physical and digital transactions. We remain the fourth largest physical magazine in the nation, with 8 million physical subscribers and 1.5 million digital subscribers. On a weekly basis, nearly 1/2 of our new PowerUp Rewards Pro customers are choosing the digital version of our magazine over the physical version. We are rolling out digital Game Informer in the 14 international countries in which we do business. Spawn Labs completed its national close data, achieving all of its objectives and demonstrating its ability to execute ultra low-latency cloud gaming through 6 data centers to our associates throughout the nation. We continue to work with our publishing partners to bring a console-based service to market. We've also begun development of a PC-based solution to augment our PC digital service, as well as to provide an expanded cloud gaming offering that takes advantage of our patented virtualization process. In mobility, consumer demand for both our tablet offering, as well as our preowned iDevices, has prompted an acceleration of our rollout of these offering. As Paul mentioned earlier, we recognized $12 million of revenue in mobility during the first quarter and are on track to achieve our full year goals. We now sell new Android-based tablets in over 1,600 stores. As we have shared earlier, our tablets come pre-installed with several high-quality immersive games that utilize our proprietary Bluetooth controller and a copy of Digital Game Informer. As previously announced, we will be launching a cross-platform app to discover and purchase a curated list of immersive games later this year. Our iDevice business is resonating with the consumer and leveraging our trade heritage as trades of iDevices represented over 8% of all trades during the quarter. Trades are ramping up each week and they currently represent over 10% of the trade dollars that we receive each week. We have increased our capacity to test, clear and repair these devices in our refurbishment center in order to efficiently turn and redistribute the trades that we are receiving. Based on the increase in trades, we have expanded the number of stores selling iDevices to over 2,200 stores. Sales are steadily ramping as we expand to more stores, and we also see a significant lift in trade volume in the stores that are selling iDevices. We are pleased with the trade and sales volumes that we are seeing and expect to hit our full year projection of $150 million to $200 million of mobility revenue this year at a 30% margin. With that, I'll turn the call back to the moderator for any questions.

[Operator Instructions] We'll first go to Gary Balter with Crédit Suisse. Seth Basham - Crédit Suisse AG, Research Division: This is Seth. I guess to kick it off, a question on the next generation of consoles. I realized you discussed this on the last call. But over the last few weeks, we've heard a lot from the publisher community about this topic and I think it would be great to just get your updated views on the console cycle. J. Paul Raines: Thanks, Seth. This is Paul. I'll start it off and then I'll ask Tony to give us some color. Interesting stuff going on with the console cycle. We've been spending a fair amount of time with Nintendo, of course, because they're going to be the first out of the gate, and we're excited about what they're going to show at E3 and lots of plans around that. As I mentioned in the remarks, we have a very significant opportunity in launching that Wii U console, given the amount of consoles that are currently out there in the PowerUp Rewards community, and it's over $1 billion any way you model it to apply towards that. So we think there will be new features that are very exciting. I followed closely the EA remarks, and I think Ubisoft had a great call this week, where they talked about some of the social features and matching that they'll be able to do with the tethered tablet and so forth, but a lot of excitement. Our job, I think, Seth is to make sure that we leverage those advantages that we have. We are better positioned than ever in our history to launch these consoles because we have an enormous community now in PowerUp Rewards that would love to bring their old console in to buy a new console. Tony, any remarks on the publishers or anything else? Tony D. Bartel: Sure. A few things that I would say. The first out of the gate from a platform holder standpoint will be the Wii U, so we work very closely with Nintendo to have a full launch plan. It's an integrated launch plan and it will, obviously, start as soon as they announce some details of that, which we will hear at E3, then we will start our launch plan flowing. And as Paul talked about, it will have a very large dose of PowerUp Rewards and the trade credit component that he talked about. All of the publishers that we're talking about now, clearly, we're talking with them about the rest of the year because there are some exciting titles coming up. But every one of the publishers we're talking about is already investing in Gen 4 consoles and we see that everywhere that we go. So we share a lot of excitement and we see Wii U as just the kick-off to the next cycle. Seth Basham - Crédit Suisse AG, Research Division: All right. And then as you look at the guidance for the remainder of the year, obviously, the business is very dependent on the holiday. But can you maybe just drill down on Q4 and what some of the key industry and GameStop-specific drivers are that you expect to lead to better results over the holiday? J. Paul Raines: Sure. Rob, you want to start off on that? Robert A. Lloyd: Sure. Well, Wii U is important to Q4, obviously. We've got another Call of Duty title coming. We've seen growth in Call of Duty year-over-year for several years running. There's no reason to expect that to be any different. We're seeing -- we expect Halo 4 in the fourth quarter. We expect that to be big as well. Obviously, we're ramping our mobile business, as Tony talked about, expanding the number of stores that are selling it, expanding it around the world and we've got a growth plan for that that's modeled out basically week by week through the year, and we'll execute against that plan. And then not to be overlooked in the fourth quarter is the impact of the 53rd week of sales. As you can imagine, you pay rent once a month. In some countries, you pay people once a month, you pay them twice a month in the U.S. you get some leverage with that extra week of sales included in the numbers. J. Paul Raines: One thing to add, Seth, is I think for investors and this is the case on the mobile business, where I think the customers are ahead of the investors. When you think about GameStop, the reason we are in this mobile business is because we had a lot of customer demand to accept trades, the reason we acquired BuyMyTronics. As we watch what's happening in our stores and we've only just begun, as we watch it, we've modeled out what this will look like ramping through holiday. We're very -- we feel very good about target we've laid out there that will play a big role in the fourth quarter. So I think when you think about our fourth quarter, this mobile business in addition to all of the other things going on in console will be very important.

And next, we'll go to Colin Sebastian with Robert Baird. Colin A. Sebastian - Robert W. Baird & Co. Incorporated, Research Division: I have a couple of questions. Well, I guess, first off, I was wondering if you could somehow clarify for us how much of the impact on sales overall are secular in nature versus cyclical. Obviously, in different parts of the business, you're seeing the impact on both sides of that. And then secondly, in terms of the used sales decline, obviously, the used margins were the highest in more than 3 years, which is very positive. But is there an opportunity perhaps in the margins to be a little more promotional there in pricing to drive more store traffic and sales? And I guess related to that, given where the cycle is long in the tooth, should we expect ongoing declines in used software really until the next boxes are launched? J. Paul Raines: As far as the secular versus cyclical, maybe Rob, I don't know what you want to -- how you want to start that off, maybe give some color on what you see going on with the consoles. Some of this is tied up a little bit with the difficulty in forecasting, what's happening between hardware and software and then we can talk about used maybe after that. Robert A. Lloyd: Sure. I think, as we look at this, Colin, there is some element of what's going on in the market that as many of you have expressed and as we read about, as well as you guys do, is shift to other forms of gaming, whether that's on smartphones or tablets and other social sites. But a fundamental piece of it for us is where we are in the console cycle and in essence, how to measure that consumer demand for these products until we get to that next console cycle. Obviously, the console cycle will start with the Wii U in the fall, but we'll be anxiously looking forward to what the next products are from Sony and Microsoft as well. It's difficult to separate what's cyclical versus what's secular within that, and so our attempt is to try and understand the whole. And as we said earlier, the challenges in predicting the consumer demand. J. Paul Raines: I think we're all in that boat a little bit. When I listen to our partners discuss their forecasts, there's a little bit of all of us wanting to see where that's going to shake out. One thing we know, though, is if you look at the history and if you spend time looking at previous console cycles, this behavior is not dissimilar from previous console cycle. We see a decline in innovation. We see price point pressure on hardware. We actually see contraction in all of the companies' valuations who are in the sector, and then you get the big pop with the new innovation. So I would agree with Rob. Let's talk about the preowned a little bit because I think that's a good question as well. There's no question that we are improving margins in that business. And when you asked about growth versus promotion, one thing to keep in mind is a, we still see growth in the preowned business for 2012. I think we laid out, Rob, in our guidance mid-single digit growth in the guidance. We're still looking at growth. We feel good about that. We also have seen gross profit growth in this quarter and we'll see it in other quarters. So we don't believe that the preowned business is in a long-term decline. We do know that traffic declines put pressure on that. The other point I would make is don't forget that we've categorized it as mobile, but we have now added another engine of growth to our preowned business in that we have a preowned recommerce business inside our stores. Tony, anything you want to share in that? Tony D. Bartel: Yes. Well, that -- I was going to actually -- definitely the recommerce business is working and accelerating on that. And we're going to expand that dramatically throughout the rest of the year and that will, obviously, provide a lot of the Q4 impact that Paul -- excuse me, that Rob talked about earlier. The other thing I was going to address on the secular versus cyclical comment was, I think, sometimes that there's a tendency to divorce the DLC part of the business from the packaged good side. And actually, we're seeing tremendous growth in the DLC side of the business, which we're driving a lot of that growth. And so sometimes, people will only look at the packaged good side where when you combine those 2, it's a significantly different picture.

Next we'll go to Anthony Chukumba with BB&T Capital Markets. Anthony C. Chukumba - BB&T Capital Markets, Research Division: I had a question on mobile. Basically, you did $12 million in Q1. You're saying you can do $150 million to $200 million, and certainly a part of that's going to be expanding to other doors. But I guess, I think I will be more comfortable if I just had some -- a little bit more color just in terms of what you're assuming in mobile in terms -- to get you to the $150 million to $200 million. I mean, obviously, part of it's expanding doors, but I'm sure you're also assuming you'll ramp up in terms of trade-ins and also sales per doors. So if you could just give us a little color, that would be helpful. Robert A. Lloyd: Anthony, I might need to get back to you on that with some of the details, but we talked about it in March on our first quarter call, and we talked about it in terms of the number of trades, the number of sales per store that we've got to generate. Again, I don't have that -- those notes with me right now. But really, it's the ramping of the stores, coupled with that model for trades and the sales per store that helps us get confidence. It's the ramping of the stores that are selling tablets. And then as we talked about, the international rollout of trade and then sales coming on the heel of trade. Again, you got to build up the inventory. You got to put it through refurbishment, then you can put it out to stores and then start to sell it. So I can get back to you or have Matt get back to you with our detailed assumptions around the sales and trades by week. J. Paul Raines: Yes, we put out a model there. I think we put out a light version of the model for competitive reasons back in March. But I think the key things to look at is to verify for yourself if you think our assumptions are aggressive. We don't think they are. The wildcard here is international. We like where we're at in the U.S. Don't forget that BuyMyTronics is adding inventory now in a way we've never had. But Mike, maybe you want talk about the international rollout as well because we're fast there. Michael K. Mauler: We did. We had a very fast implementation of iDevice trades starting about 1.5 months ago. That is now fully implemented in all countries, but we really haven't started to sell the product yet. And as Rob mentioned, you have to build the inventory, then you have to refurbish it and repackage it. So in our first quarter numbers, there are really no international sales of iDevices yet, and that will ramp up throughout the year. Robert A. Lloyd: What we're looking for is to get -- we talked about in Q -- the last time that we talked at our year end, we talked about moving from 3 trades per store per week to 7 trades per store per week for iDevices. And we are well on the way to achieving that. And again, what that allows us to do is roll out to more stores. So we've been very aggressive on the rollout, which gives us a lot of confidence for our Q4. Well, really, the balance of the year, but specifically in Q4 that we'll have a very good sales run. Anthony C. Chukumba - BB&T Capital Markets, Research Division: Okay. And just one related follow-up. You mentioned that sales were on plan, so it sounds like you're happy with how sales came out. I mean, how about an [indiscernible] from gross margin. I know you're targeting about a 30% gross margin and I'm just wondering if that was on plan, a little bit better, a little bit worse in the first quarter. Robert A. Lloyd: Well, I gave you the margin number. It's $4.6 million. We talked about $12 million sales. I think the actual was like $12.5 million. So the margin rate at that is about 36.6%, I think, is running ahead of the 30% that we had talked about. We were -- we're not selling tablets in as many stores as we're selling iDevices in. The iDevices have a better margin. The tablet is more of a hardware-like margin. So at this stage of the game, we're ahead of that margin plan. And while we're not -- we're pleased with it, but we're not necessarily banking on it holding at 36-plus for the rest of the year. J. Paul Raines: Yes, I think, Anthony, one other thing on this is you'll get a good feel from stores now. If you go out and look at where we're at in stores, we're in a much broader footprint, as Tony mentioned earlier. And I think this business, which has been a little bit of a pilot for us, I would say, guys, for about the last 6 to 8 months since we launched it, it's now going very broad and you'll get a good feel for our execution out there in our stores. Tony D. Bartel: Over 2/3 of our U.S. stores currently have either iDevices or tablets or both.

And next we'll go to Brian Karimzad with Goldman Sachs. Brian Karimzad - Goldman Sachs Group Inc., Research Division: Just continuing on the used iDevice business, so in your guidance for the mobile sales, any sense on the mix of that, that you're banking on from international? And then can you also give us a sense for what is the time period that you build inventory? And kind of how long does it take once you've built that inventory before you refurbish that kind of first group of devices and start putting them out in the stores? And I have a follow-up for you. J. Paul Raines: Why don't we let Rob start with the assumptions around international and what you think our expectations are there. Robert A. Lloyd: Well, internationally, we're, call it, 6 to 8 months behind where the U.S. is. So it is not a significant component of our planning for the year. We're pleased that the business is out there, but at this point, I'm not ready to talk about what that split might look like between the U.S. and international. J. Paul Raines: In terms of the time, we've got to be careful here because competitors, this is one we're fairly disruptive to this channel now. I think Rob or Tony have said on previous calls, the one difference on this is that all of the devices are coming back here to Grapevine, to our high-tech facility. But other than that, I'm not sure there's much we want to disclose, right, guys? Brian Karimzad - Goldman Sachs Group Inc., Research Division: Okay. And to clarify just on the traditional used business, you're still expecting mid-single digit growth for that in your outlook today? J. Paul Raines: Yes. Rob, you want to address sort of what the components of what we've talked about? Robert A. Lloyd: Yes. Sorry, I was making some notes. We did talk about in the call in March mid-single digit on the used side. We are still projecting growth in used for the year. I think that's about all I'm willing to disclose about it at this stage. Brian Karimzad - Goldman Sachs Group Inc., Research Division: Okay. So not necessarily the same mid-single digit as we kind of back things out from the reduction in the same-store sales guide? Robert A. Lloyd: That's fair to say. Brian Karimzad - Goldman Sachs Group Inc., Research Division: Okay, that's helpful. And then for the Wii U launch, I understand that you do do a lot of work on historic cycles and understand that the behavior ahead of this cycle seems similar to the past, but are you guys banking on similar behavior when they launch, given that the innovation on some of these may not be quite what it was 6 or 7 years ago? J. Paul Raines: Yes, that's an interesting point. As far as the innovation on them, there's really not a lot known publicly about them. We certainly like what we see and I'll let Tony talk about his visits to the publishers. Are we banking on it? I mean, our model is not, and I'll let Rob talk about what's in our model. We certainly don't even -- but it's only launching in the fall of this year, so we don't have anywhere close to a full year, so we can't bank on a lot of the launch volume. But as far as innovation, I mentioned earlier that we're talking to the PowerUp Rewards community about what they expect in a new console, and there's a lot of innovation expected by consumers. So we suspect that our partners will be creating a lot of innovation. Tony, you want to talk about the game play publishers, that kind of thing? Tony D. Bartel: I can't say a whole lot because of the restrictions that we have. I can just say that what we -- I think what you will experience at E3, some of which we have seen, I think will be a very positive experience on the Wii U, and I think I should hold my comments at that until after E3. J. Paul Raines: Yes. The other thing about the historical, if you do the research on the historical console launch, as you can imagine, GameStop, we have people here who have been -- we have a museum downstairs that every console ever made. We've got merchants and buyers who saw every console launch. One of the other things that comes out of the history is that the new consoles are always dismissed as not being innovative, and expectations are always very low and there's always -- so this is a little bit of what you see in previous console launches. Tony D. Bartel: I will say we're seeing a high level of innovation [indiscernible]. J. Paul Raines: Yes. Brian Karimzad - Goldman Sachs Group Inc., Research Division: Okay. But Rob, when you're making your plan for like a Wii U in the fall, you're not taking on what happened in 2006? Robert A. Lloyd: I think what we're doing is looking at the history that Nintendo has in terms of delivering launch date quantities and quantities in the couple of months following the launch, so that we can model what we think is going to happen in fiscal 2012 conservatively based upon where we know the cycle is, what we believe the technology is, and what we know our share of launches to be. So it's important to our quarter, but we are certainly cognizant of what's going on in the industry and what typically happens with a Nintendo launch.

And next, we'll go to Edward Williams with BMO Capital Markets. Edward S. Williams - BMO Capital Markets U.S.: A couple of quick questions, looking at the current quarter. Obviously, it's a wide range of guidance. What are the key levers that are pushing you towards the high end or towards the low end of that guidance? Robert A. Lloyd: Ed, this is Rob. I think that as we frame the guidance, we look at where the traffic levels were in the first quarter. There were some things that drove traffic in February, primarily IRS refund checks that kind of ran their course. We looked at traffic pre- and post-Easter. We've looked at traffic thus far in May, and we've considered what typically would happen in the summertime when school lets out and how that impacts traffic. And from there, we built what you would typically expect any company to build, which is sort of an expected case or worst case and a best case. And I think for us, the news that we might hear at E3, we're not sure what that news is, but E3 can be an impetus for things. J. Paul Raines: Yes, the thing we've talked about is that it's important to share with you the challenges we're seeing, the variables that go into their forecast and just be transparent about that. It's -- some of this is harder to predict than it has been. So that's all what's going into this. Edward S. Williams - BMO Capital Markets U.S.: So as you look to the second half of the year, obviously, the Wii U can be a catalyst, Halo 4 can be a catalyst, all of which are presumably Q4. How does Q3 shakeout? What are the drivers that kick in for Q3 that can affect traffic? J. Paul Raines: On the title count. Robert A. Lloyd: In terms of titles, you've got Madden that typically is there, FIFA, Assassin's Creed, as I understand it, is in October. This is -- we expect big things from this Assassin's Creed. There's a number of other titles here as well. Tony, do you have any [indiscernible]? Tony D. Bartel: Resident Evil should be good as well. So I think that we're seeing from a title perspective that it should be good. Again, I think some of that is going to be clarified at E3. Certainly, and this -- we do not have any knowledge of this. But certainly, any pricing action on the hardware would be advantageous as well and we don't know what again, what is going to be announced in E3, but that would clearly be a catalyst for movement in the marketplace. Edward S. Williams - BMO Capital Markets U.S.: Okay. And there's one question as a follow-up on pricing. In your -- in the conversations that you're having with your customer base, how critical is price to the success of the new hardware consoles? J. Paul Raines: Well, we've discussed price and that's part of our survey panel. I want to save some of that. We're going to release some of this stuff post-E3. But I would say the comment about -- the first comment I said that consumers are expecting a console, and they'll expect that they'll be worth what they pay for them. We anticipate a high level of innovation in the devices, but we also anticipate that to command higher price points, they will have to be sensitive to those things consumers told us are important to them, backwards compatibility, preowned games, et cetera. So while we don't want to share a lot of the data on price points, we will be sharing it with our partners. But we do know that there is an expectation around innovation and use of the device for multi-uses.

And we have time for one last question, that will come from David Magee with SunTrust Robinson Humphrey. David G. Magee - SunTrust Robinson Humphrey, Inc., Research Division: A couple of questions. One is on the May numbers, just sort of hypothetically, given that we get better titles, we're still expecting the software to be down, though, right, for the sector year-over-year? Is that because the back list will be sort of more than offsetting that better title list year-to-year? Robert A. Lloyd: You're talking about the May NPD numbers? David G. Magee - SunTrust Robinson Humphrey, Inc., Research Division: Yes, May NPD, just -- or just the sector trends I mean, even with better titles, I guess, I'm just trying to get a sense for what that means in terms of what we might see there. Robert A. Lloyd: David, I'm hesitant to predict what NPD might look like, but I will point out that Diablo III is a PC title, and would not be in the NPD software numbers then. David G. Magee - SunTrust Robinson Humphrey, Inc., Research Division: Okay. Secondly, the -- Rob, what have you built in, in terms of ASP changes in the second half of the year? Is there the thought you could see additional price cuts on either the hardware or the software side? Robert A. Lloyd: As Tony mentioned, hardware cuts have the potential to drive things, but we're not necessarily at liberty to say all of what we might know about that. But to the extent we don't know of a price cut and we're not certain of a price cut coming, we don't build it into our forecast. David G. Magee - SunTrust Robinson Humphrey, Inc., Research Division: So it's not in the forecast? Okay. And then lastly, you mentioned consolidation benefits overseas, are there any thoughts that you could have some here at some point, given that the other players in the business here domestically must be really hurting with their trends? J. Paul Raines: Well, certainly, we see what's happening in the channel. We know that some of our competitors were closing big-box stores. We certainly have seen people exiting, as I mentioned, the preowned business. We think that is positive for GameStop. Tony, you want to talk about what you hear from publishers in terms of volumes of orders, that kind of thing? Tony D. Bartel: Sure. And you can just look at the share gains that we continue to pick up month-after-month as we continue to report here. But essentially, we're becoming more and more important each and every day, as our competitors order less and less and de-emphasize this category to a certain extent, some get out entirely, but what it allows us to do is work very closely, again executing what we call our circle of life, which is having preorder exclusives and having preorders and using our trade credits to fund this. So I think what all it does is bring people closer into our model and allow us to tie or integrate with the publishers, which exactly what you're seeing. Using PowerUp Rewards has been a tremendous weapon for us to use with a lot of our publishing partners because they love the stealthy element of it, where we can put out very unique and differentiated deals and they're very non-public. J. Paul Raines: One other thing we may say: Mike Mauler, maybe you want to comment on square footage that you're seeing around the world. I mean, it's a little early, but your thoughts on that? Michael K. Mauler: There's a number of different markets where there has been competitors that have closed stores, reduced the square footage in those markets. We've all read about some of the issues that Game Group has had. However, I will say that at this point, they haven't closed any stores outside of the U.K. They did enter administration on Monday in Australia. We're also seeing, as Tony mentioned, internationally some of the big boxes that have experimented in used or expanded the category when it was hot. They've started to pull back and in some cases, actually, just get out of the business all together. So while it's hard to predict for this year in terms of the impact, we expect at this point that to -- that trend to continue. J. Paul Raines: So with that, we'll wrap up the call. Thanks very much for your time and attention in supporting GameStop. We look forward to seeing all of you at E3 and talk to you soon. Thanks.

And again, that does conclude today's conference. We thank everyone again for their participation.