Operator:

Good afternoon. My name is Bhavish and I'll be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts' Fourth Quarter and Fiscal Year End 2024 Earnings Conference Call. I would like to turn the conference over to Mr. Andrew Uerkwitz, Vice President, Investor Relations. Please go ahead.

Andrew Wilson:

Thanks, Andrew. In FY 2024, we entertained and connected hundreds of millions of people around the world. I'm inspired by how our teams continue to create and deliver more innovative content and deeper experiences than ever. Before I dive into our results, I want to talk about the accelerating transformations across the entertainment landscape and how we have been navigating and leading through change. Firstly, consumer retention and spend are increasingly consolidated in top franchises. As live services deliver fresh content, players are going deeper and spending more time with their friends in blockbuster experiences. For example, in North America, engagement for the top 10 franchises have increased their market share since fiscal 2022. For a company that has some of the biggest IP in the world, this trend presents an incredible opportunity to evolve as an industry leader. It is against this backdrop that we have built our three strategic pillars around entertaining and engaging massive online communities, telling blockbuster stories and harnessing the power of community in and around our games. Secondly, players and fans are increasingly looking to us to deliver the entertainment they want today and tomorrow, bigger, bolder, more connected experiences where they can play, watch, create and connect like never before. As players needs and motivations expand, we continue to sharpen our focus. Across this past fiscal year, we took proactive steps to further empower our creative leaders by realigning our investments, organization and portfolio in support of our largest growth opportunities. As we have demonstrated several times in the past by building some of the world's largest franchises, when we rally behind a shared goal, EA delivers more creativity, more connection and more cutting edge experiences for players and fans. The most recent example of this is the incredible launch of our multi-platform experience, EA SPORTS FC, which was a truly profound moment for our players, our teams and our partners. This milestone as well as our execution across this fiscal year demonstrates how EA is leading the future of entertainment. I'm excited to share more details about our development pipeline, innovative experiences and new revenue streams at our Investor Day this September in New York. Our teams at EA Sports are the best in the business, delivering awesome gameplay, innovation and unmatched authenticity to fire the passion and imagination of hundreds of millions of players and fans. FY 2024 was the biggest EA SPORTS year in our history, a year in which we launched eight titles across the year, including the highly successful launch of our own brand, EA SPORTS FC. Players are connecting, competing and celebrating global football with their friends, driving strong engagement across FC's multi-platform experiences. In FY 2024, our global football franchise grew net bookings by high teens, a remarkable year considering the prior year benefited from significant tailwinds related to the World Cup. During calendar 2023, there were billions of matches played across FC experiences and the franchise's astounding success goes far beyond gameplay. Our massive global football community watch more than a billion hours of content in and around our game. Gameplay videos, pitch notes and e-sports in addition to content produced by our community. These many interactions on and off platform meaningfully increase in-game engagement, which drive stronger retention and ultimately greater levels of monetization. What we know when we look at play behavior in our games, as players spend more time with their friends, they play more, they play for longer, and this engagement leads to more in-game spend. With the successful launch of EA SPORTS FC, our focus was two-fold, delivering innovation in gameplay with HyperMotion V, new features and improvements across all modes of play for our core players, while continuing to expand the game's reach through the acquisition of new players and reengagement of lapsed players. Our go-forward strategy is anchored in building a platform that enables us to deepen our connection with players, lead the future of immersion by bringing the real world of sport and our experiences closer together and expanding the tools, modalities and partnerships to drive enhanced socialization, self-expression and creation for sports fans. We've engaged with partners like Nike, Pepsi, Uber Eats and Beats over the last year and we'll continue to do so, integrating them into matchday experiences and providing them with a platform to deeply connect with our global audience. We are also building to unlock new multifaceted sponsorship and advertising opportunities. FC is more than just a game, it's the world's leading digital football fan platform, and this is just the beginning. Year-after-year, Madden NFL unites fans and athletes through interactive experiences that fuel passion, connection and creativity. No one can match Madden's unparalleled authenticity in American football. Our talented teams pushed more innovation in the Madden NFL 24, more modalities of play and amazing content throughout the season, leading to the highest selling installment for Madden since the early 2000s and record overall net bookings. Further innovation in live service events has led to deep ongoing engagement well beyond the NFL season, especially with younger audiences as we've seen increases in weekly active users into and following the Super Bowl. Most recently, excitement has continued through the NFL draft as top picks were dropped into Ultimate Team in real time. We see this excitement leading us right into an incredible Madden NFL 25. To expand the American football experience, this summer we are launching the highly-anticipated EA SPORTS College Football 25, bringing new innovations, always on social connection and unrivaled immersion. This awesome experience will feature all 134 Football Bowl Subdivision schools, more than 11,000 college athletes, the iconic traditions and pageantry of the United States' biggest college sport and unparalleled gameplay to inspire the fandom of millions of fans. This is the next step in a multi-year plan to further evolve and grow our American football experiences into a connected ecosystem to more deeply engage and expand an already thriving community. We see incredible opportunities ahead for us across our sports business, as we continue to build ecosystems around our biggest communities, we are also prioritizing our owned IP in the rest of our broad portfolio, which are among the most deeply engaging and culturally relevant entertainment properties in the world. Since its surprise Smash Hit release in 2019, the HD title of Apex Legends has surpassed $3.4 billion in lifetime net bookings. In FY 2024, we focused on building features and improving quality of the experience to drive long-term engagement, positioning us for future revenue growth. For example, we finished the year with significant changes to the mechanics of our popular ranked mode. We engaged with the community, increased transparency and thoughtfully addressed their feedback, and as a result, saw dramatic improvements in player sentiment across the world improving 29 points. We have also prioritized expanding Apex's appeal, making it more approachable for new and more casual players with improved onboarding and simplified modes of play like 3 Strikes and Straight Shot. Looking to the future, we will continue to invest in broadening the audience by building upon the epic characters and storytelling of this world that go beyond the current Battle Royale. The passion for Sims Community remains strong as the franchise powers towards its 25th anniversary. Since its launch in 2014, the Sims 4 has surpassed 85 million players with FY 2024 up double-digits year-over-year. The Sims Online and the Sims Mobile combined have been downloaded over 500 million times. This is already one of the largest communities in the world and we believe this hugely successful franchise has the potential to become one of the largest creator platforms in entertainment. An early proof point of the platform's evolution is the hundreds of millions of user generated content items that were shared in this fiscal year. Looking ahead, we are committed to entertaining and inspiring our loyal and engaged Sims 4 fans through over 15 content updates over the coming year, while working on multiple experiences in the Sims universe to leverage user generated content to deepen our community and expand our audience. With each immersive action-packed season of Battlefield 2042, players have made it clear that they wanted an even deeper experience. Our teams have listened to the community, have learned valuable lessons and are driving to the future. Motive, armed with cutting edge frostbite technology and compelling storytelling is joining dice, criterion and ripple effect to build a Battlefield universe across connected multiplayer and single-player experiences. This is the largest Battlefield team in franchise history. A few weeks ago, I was visiting with the teams and I couldn't be more excited about what they showed and what we were able to play. Turning to mobile, we are heads down on bringing together mobile and HD franchise leadership for EA SPORTS FC, Madden NFL and the Sims, while also continuing to make strategic investments in standalone mobile titles. Mobile is the largest platform in our industry and with our teams aligned and more empowered than ever, we see growth opportunities in this part of our business over time. I will now turn it over to Stuart for more detail on FY 2024 with additional color on the near-term industry outlook and incremental detail and metrics around our confidence in FY 2026 and FY 2027.

Andrew Wilson:

Thank you, Stuart. 25 years ago, there were dozens of major independent publishers in the video game space. Today, there are only a handful, and we have an incredible competitive advantage with the excellence of our creative talent, our production strength, our broad portfolio of incredible IP, including EA SPORTS and our massive player network. With these enviable strengths, we are well positioned to grow the industry and increase our market share. As we leverage the capabilities of AI, we believe it will further supercharge these differentiators. Through decades of experience and leadership, we have led through multiple transformations in our industry. Now we have an incredible opportunity in service of our players, communities and shareholders to lead through the one taking place right now. Now Stuart and I are here for your questions.

Andrew Uerkwitz:

Bhavish, we're ready for your first question.

Unidentified Analyst:

Hi, team. This is Dave on for Matt. Just a quick housekeeping question. It looks like in the new non-GAAP guidance, you're providing us a better bridge to what we're already doing in our model. So if I'm following correctly, we can now take the new non-GAAP operating margin and add or subtract for the change in deferred. And so if I'm doing the math correctly, does that bring us to an operating margin on net bookings of 31.6% to 33.4%? And then I guess, just as a quick follow up, if you could speak more to why the change in disclosure? Thanks.

Unidentified Analyst:

Great. Thank you.

Chris Schoell:

Great. Thank you. I appreciate you've been facing very difficult comps, but can you give some color on what you're assuming for some of your larger franchises, including Apex and FC in fiscal 2025. And it appears the midpoint of the guidance is similar to your prior growth commentary, but anything you would flag that has changed relative to last earnings call in regard to your expectations for next year? Thank you.

Chris Schoell:

Awesome. Thank you for that. And if I can just fit in one more quick one. Just regarding the stock repurchase program, how did you think about accelerating the buyback versus other capital allocation opportunity -- opportunities you had at your disposal?

Chris Schoell:

Great. Thank you very much for the color.

Eric Handler:

Good afternoon. Thanks for the question. You have a big live services bucket. And yes, we can decipher how much is PC and console versus mobile. But I'm wondering if you could break it up between, let's say, sports, action shoot -- action shooter and casual, how would -- like how would that break down in terms of percentages?

Andrew Wilson:

Yes. I might just add, one of the great differentiators of our company is actually the breadth of our live services. So if you look at FY 2024 as we come into FY 2025, at the very center of our FY 2024 was this incredible rebranding of FC and the launching and growth of that even as we lapped a World Cup year. We had Madden, again, a live service that grew and reached record levels of revenue. We had our biggest EA SPORTS year, I would argue that EA SPORTS may be one of the greatest global multi-sport media brands in the world and certainly has greater fandom than most other brands that it competes with. We had double-digit growth in the community on the Sims, which again targets a very, very different demographic of players. And when we look at the many hundreds of millions of shared user-generated content items, you are seeing the evolution of that live service into a broader community creation platform. We continue to build resilience into Apex. And as a community sentiment of that grew 29 points over the last fiscal year. And as we're primed to continue to grow and expand that live service, we have great opportunity. And again, as I talked about in the prepared remarks, I've just spent a whole bunch of time with the collective Battlefield team, playing what they're building and it is going to be another tremendous live service. And if you really use FC as the blueprint and you think about across platforms, across modalities, across business models, across geographies and also branching fan beyond the bounds of the traditional game to create truly a football fan platform that really extends the magnitude of the live service. This really is at the very center of our strategy when we talk about building content and experiences that entertain and engage massive online communities. And so, as we think about this going forward, we believe this differentiates us from the marketplace in videogames and certainly in the marketplace in entertainment and really positions us for real growth against what these emerging generations are looking for in the context of their entertainment consumption.

Operator:

Thank you. Our next question comes from the line of Andrew Marok from Raymond James. Please go ahead.

Andrew Wilson:

Well, again, I think what the Respawn team has done and continues to do incredibly well is really work in a very transparent open way with the community. Again, this is an incredible community of hundreds of millions of players. Retention is very high. They're a very vocal community and the Respawn team may be better than many other teams in the industry works very closely with that community. And I think what we're starting to see is the evolution of both the player personality, the Apex player personality, Apex is a game and how Respawn serves that community broadly. And this will be one of those steps. But you shouldn't imagine that this is the sum total of those steps as we really think about both expansion of modalities at play for Apex when we think about deep culturalization on a geographic basis to attract new and more deeply engaged global communities. And as we think of -- as we look to what the Respawn team is doing over time, we believe that this will be a cornerstone of our live service business for many, many years to come.

Operator:

Thank you. Our next question comes from the line of Colin Sebastian from R.W. Baird. Please go ahead.

Andrew Wilson:

Yes. Great question. Let me start with kind of the mobile macro. As you've heard from us before, mobile is a very important platform to us. We've spent the last number of years really focusing our mobile business and driving meaningful profitability in that area of the business, which hasn't always been the traditional shape of the mobile business in the industry. As we look forward, our expectation is over the next 12 months or so, we probably have low-to-mid-single-digit growth in the mobile market overall. But it's still -- the mobile market remains a fairly high-risk opportunity that requires significant user acquisition cost to kind of ramp a new mobile game. And so, when we kind of couple what are increasingly longer development cycles in mobile, sometimes two to three years and we hear stories of five, six, seven years in the marketplace, meaningful user acquisition spend and long ramp times once you get to-market, mobile isn't an easy market to capitalize on. With that being said, we feel like our mobile businesses is in a very good position given its profitability. We'll be leaning into our massive online communities around FC, around Madden, around the Sims [indiscernible] will be mobile native and we'll also be looking at opportunities to invest in a very limited number of mobile native titles that we believe have breakout potential.

Colin Sebastian:

Okay. Thanks guys.

Michael Hickey:

Hey, Andrew, Stuart, Andrew, Katie, thanks for taking our questions. Andrew, you had some pretty interesting comments recently at a conference talking about sort of efficiency and expansion with AI. I think you gave one example where you're talking about building out game environments like stadiums, you said that process went from six months to six weeks. So pretty incredible efficiency step-up. Just curious how you're thinking about further deploying AI on other development processes, other games, other platforms like mobile. You talked about the duration of development on mobile, maybe there's some efficiencies there. And then as a follow-up, just curious on the generative AI NPC in key franchises like sports, Battlefield, Sims, the opportunity you see there over-time? Thanks, guys.

Michael Hickey:

Thank you.

Operator:

Thank you, sir. Our final question comes from the line of Eric Sheridan of Goldman Sachs. Please go ahead.

Andrew Wilson:

Let me start with the second part of your question, then I'll move into the first part of your question. Thinking about what you've heard from us for some time now is as we work with our global communities of players and we really listen to what they're looking for, what they hope to do is really interact and engage with their favorite IP, which as it turns out is the biggest IP in the world, many of which sit within our portfolio, they want to both play, create, watch and connect. And so our expectation on a go-forward basis is that even as we expand the definition of play and the types of things you can do in the context of these interactive worlds that as we bring in more creation opportunity in these worlds, that in and of itself will also spawn more watch. Watch traditionally, of course, is well, do we make a movie, do we make a television show and our expectation is that we will see more of that. But in addition to that, we expect that we'll see many, many billions of hours of content created by our communities, both in the context of what goes on inside the game and in the context of what goes on outside the game. And of course, the most important part of that will be out the ability for players to connect with each other in the context of play, create and watch. And so while we look at what's going in the industry right now, we see the fact that gaming IP is now manifesting inside of film and television and is topping those charts in addition to topping the interactive entertainment charts. Our expectation as we build out our portfolio is that we will get that benefit. That will be a tailwind for us. But in addition to that, we're really thinking about how we engage our players across the expansion of play, inviting them to connect and expand and extend and enhance the worlds that we create. The watch element that comes from that, we talked about billions of hours watched in FC alone, you should imagine that is also across Madden and the Sims and Battlefield and Apex, but really built on a deep sense of social connection. And that's something that a company like us has a unique ability to deliver for our players that maybe hasn't been the case with traditional entertainment companies. To answer your question on advertising broadly, again, I think it's still early on that front. And we have looked over the course of our history to be very thoughtful about advertising in the context of our play experiences. But again, as we think about the many, many billions of hours spent, both playing, creating, watching and connecting and where much of that engagement happens beyond the bounds of a traditional game experience. Our expectation is that advertising has an opportunity to be a meaningful driver of growth for us. We'll be very thoughtful as we move into that, but we have teams internally in the company right now looking at how do we do very thoughtful implementations inside of our game experiences, but more importantly, as we start to build community and harness the power of community beyond the bounds of our games, how do we think about advertising as a growth driver in those types of experiences.

Andrew Wilson:

Okay. Well, thank you all for being here, and thank you for the great questions. I want to extend my deepest appreciation to our teams for their passion, their hard work and commitment in delivering an incredible year. To close, I'm extremely excited about what our future holds. I look forward -- and look forward to sharing more about our pipeline and longer-term strategy to drive growth at our Investor Day in New York later in the year. Thank you so much.

Operator:

Good afternoon. My name is Brianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Third Quarter Fiscal Year 2024 Earnings Conference Call. I would now like to turn the conference over to Ms. Katie Burke, Director of Investor Relations. Please go ahead.

Andrew Wilson:

Thanks, Katie. It was a strong Q3, as we continue to entertain hundreds of millions of players and fans around the world. Our exceptional teams created high-quality games and experiences across our broad portfolio that, drove deep engagement and record live services. This quarter, two of the world's most celebrated interactive entertainment experiences EA SPORTS FC and EA SPORTS Madden NFL delivered phenomenal strength, as sizable drivers of long-term growth. We are launching amazing games and experiences that entertain massive online communities, create blockbuster interactive storytelling, and harness the power of community in and around our games. EA's Q3 results are a great example of our execution across our strategy. The FC platform is thriving at the center of the action, fandom, and culture of the world's game. The launch of EA SPORTS FC 24 has been a great success and has, once again, outperformed our expectations. Players are connecting, competing, and celebrating global football with their friends, driving strong engagement across FC's multi-experience ecosystem. In Q3, players dove into Ultimate Team, driving double-digit net bookings growth and delivering the franchise's biggest net bookings week ever. FC Mobile also generated deep engagement with daily active users up by 29% year-over-year, while FC Online grew new players by 20% year-over-year. In calendar 2023, Madden NFL was the best-selling sports game in North America and continues to grow. Madden NFL 24, is engaging more players year-over-year through new, innovative gameplay features and compelling live services. In Q3, net bookings grew and engagement with Ultimate Team increased 19%. Madden Mobile also saw an increase in players during the quarter, generating double-digit growth across the community. Our business is gaining momentum as our communities continue to grow and the definition of play rapidly expands, to include watching gameplay, creating user generated content, and connecting with friends and families in and around beloved IP. There are billions of players around the world and this number, is expected to increase as younger generations choose gaming as their number one form of entertainment, generating incredible opportunities, for us to engage and deliver new experiences. The evolving worlds, unfolding stories, and rich characters of our live services are deepening players' relationship with our IP and broadening the global appeal of our portfolio. To further entertain our communities, we are building more ways for them to play, watch, create, and connect to generate growth and longevity in our biggest franchises. The Sims franchise, is the definitive life for simulation experience, offering its multi-generational community incredible ways to connect, create, and express their individuality. During calendar 2023, players have spent an astounding 1.8 billion hours in the Sims 4, a nearly 30% increase from the prior year. We remain committed to the global growth and innovation of this franchise. We're focused on delivering what the community wants most, from ongoing, new content and game modes for the Sims 4, to the social innovation, expansion, and connection in our future Sims release. Millions of passionate fans continue to come together through the nonstop action of Battlefield. The Battlefield 2042 community continues to grow, with total players up 17% year-over-year, and Season 6 live services driving strong engagement with weekly average users up 37% year-over-year. Our team is working hard to deliver for the community with increasingly engaging live services, like the recent announcement of Season 7 with new maps, weekly missions, and much more. In addition, we are making investments in the future of the franchise. Our exceptional teams from multiple world class studios, working with cutting-edge Frostbite technology, are building an expansive, community-focused Battlefield universe for fans all over the world. As a category leader with millions of loyal fans, we are looking forward to celebrating the fifth anniversary of Apex Legends. Over the past few months, we have listened closely to our community, and have deployed new features, new styles of play, and new content. We have also implemented tools, to better understand day-to-day game performance. In Q3, our new modes drove improved engagement, and the early impact of our new content in the current quarter is promising. To generate future growth, we are focused on entertaining core players and engaging new players, by investing in geographic expansion, innovating in the game economy, and making it easier than ever, for players to jump into our gameplay. Turning to FY '25, we will deliver even more excitement and entertainment through an expanded portfolio of connected ecosystems. Industry-leader EA SPORTS will launch a strong core slate of titles and always-on live services, to grow our sports business as a global community and drive value, year-after-year. Our journey building FC, the world's largest interactive platform for global football fans will continue with accelerated gameplay innovation, more social connection, and new brand collaborations to deliver even more value for players. Our teams, working with an incredible roster of partners, are just getting started with FC. We are well positioned to grow this platform as a cultural phenomenon. The momentum in Madden NFL will continue with events and experiences, tied to the biggest moments in the sport, alongside deeper investments in this ecosystem, including leaps in gameplay and deeper fan immersion. In addition to the meaningful advancements in Madden, we are bringing back fan favorite EA SPORTS College Football for the first time in over a decade. Looking further ahead, as more people spend more time playing and connecting in and around our titles, we see incredible potential for growth. Within our online communities, we are expanding blockbuster storytelling through deep, rich characters and new story modes to deliver bigger, broader games and live services. Connected experiences offer new, cutting-edge ways to engage and inspire players, and can unlock future innovative growth opportunities. Over the coming years, we expect accelerated growth in our business. Our long-term outlook coupled with secular tailwinds, drives further conviction in our strategy. By aligning our priorities and investments with our greatest opportunities, we can make the biggest impact and drive long-term value in service of our people, our players, and our shareholders. Now, I’ll hand the call over to Stuart to provide additional details on our business.

Andrew Wilson:

Thanks, Stuart. I am inspired by the opportunities ahead, as we continue to execute our long-term strategy. Our mission to inspire the world to play is evolving and expanding beyond the traditional bounds of play. Technological advancements are powering creativity and innovation, transforming what we can deliver. We are positioned to bring bigger, broader games and experiences to an even larger global audience in the coming years. Our awesome teams, industry leading technology, world-class IP, and global network of players position EA as a leader of the future of entertainment. Now, Stuart and I are here for your questions.

Operator:

Thank you. [Operator Instructions] Your first question comes from the line of Andrew Uerkwitz with Jefferies. Please go ahead.

Stuart Canfield:

Andrew, this is Stuart. I'll take that. Yes, first of all, the range, as we look forward, we'll continue to be broader, in this case, in the quarter, in part for two reasons. One, it's a more dynamic quarter for us, as you referenced, on our core live services. And the range is that, it reflects the both strength and opportunity we see. So, we're slapping a record World Cup comp for FC, and also is a fiscal high quarter for Apex. The second part, I'd also flag is that, as a reminder on the prepared remarks, is that we have eight points of headwind as well from timing of content released in the prior year. So, hence, the spread between the top and the bottom, is based around the biggest dynamic services we have in the quarter, particularly FC and Apex.

Andrew Wilson:

Yes, let me start with this. Let's take a look at sort of the business over the longer term. We're laying out that overarching framework. It's kind of grounded in three pieces, accelerating growth on the top line, expanding leverage on the bottom and increasing cash flow. We're looking at that through a couple of different lenses. So one is, we do expect to continue to drive compounding growth across our core franchises. Plus, we expect to release from our pipeline that's been in development. And both of those will be bolstered, by expanded player acquisition, engagement and retention. As you know, our live services make up almost three quarters of our business, which highlights the evergreen nature of that business model and thus the ability to drive compounded growth, on those franchises through the future. New releases are the second part and they're an important lever for us, on that multi-year growth journey. And we're really flagging, through the long-term journey. They'll create some non-linearity in that growth, in terms of how we accelerate through the later years, depending on timing around that pipeline. Additional context would be that as we continue to drive through live service, and we see greater digital, we get far more accretion through that mix. We're also continuing to be really focused around getting leverage and scale out of OpEx in terms of our cost structure to drive growth. So, we think about those four pieces, core compounding growth across our current core business and live services, a more digital nature around that drives accretion and scale. Add to that the new releases that come through the pipeline, and ongoing management of costs, to ensure that we're investing for the future will ultimately provide leverage over the long-term for us.

Katie Burke:

Brianna, next question, please.

Matthew Cost:

Hi, everybody. Thanks for taking the question. One would just be on some recent changes we've seen on app store fees in Europe, for Apple specifically. I guess, any early learnings there, any reflection on the possibility that you could see outside to gross margins for your mobile game business, at least in Europe? Is that an option that you would be interested in? Since I know it's an opt-in thing for game publishers. That's point one, question one. Question two, just beyond college football, as we get a little bit closer to release, can you do anything to help scale the opportunity for everyone and sort of think through what is incremental versus, what might come from the existing Madden customer base? Thank you.

Stuart Canfield:

And on college football, our expectation is it will be additive. As we think about Madden, Madden is performing incredibly well this year. As we said in our prepared remarks, the biggest game, the biggest sports game in calendar year 2023, we're seeing increased engagement in the game and increased monetization in Ultimate Team as part of that. The team is continuing to invest meaningfully into the modes of Madden and the expansion of Madden as a product and certainly as we look at the NFL broadly and the fan base continue to grow and the incredible season we're having this year, our expectation is that we will invest behind Madden and grow Madden, and that what college football represents as a game that's been 10 years in the waiting for our fans. Is that there's incredible amount of pent up demand and we expect that to be additive to the ecosystem. And over the broad course of time, the way our team thinks about this, is how do we really expand the football community in this country and internationally through a combination of both Madden and college that, we think will be both complementary in gameplay, but overall additive to the ecosystem.

Katie Burke:

Thank you. Next question, please.

Unidentified Analyst:

Great, thanks for taking the questions. You mentioned in the press release that you're prioritizing investment in the largest opportunities for multi-year growth. I appreciate you're looking to drive growth across the portfolio, but which franchises in particular - do you see the most incremental opportunity, as you look out into fiscal '25 and beyond? And then we've also seen some new developments and announcements from your peers around subscription gaming. Can you just remind us how you're thinking, about the role of subscription gaming, to your business and what traction you're seeing with EA Play and how do you balance making content available on your platform versus third-parties? Thanks.

Stuart Canfield:

And then on subscription, remember we have been early in subscription as a company. We have EA Play as a subscription that exists across platforms. It is part of the Game Pass Ultimate service on Xbox Live as well. I think that we believe, as we look forward that subscription will be a meaningful part of our industry, over the course of time. It hasn't really translated in the same way that a linear television or movie subscription has or a music subscription, just because of the nature of engagement in our content relative to those other mediums. However, as we think about the future, we do believe there is an opportunity to fundamentally disrupt how households consume content broadly. As we look at leaders in a space like Netflix and them leaning into games, as we listen to the performance of Warner Brothers' games division and their conversation around how that might feed into their broader subscription over time. We think we are in an incredibly strong position to continue to lead on subscription, at least as it relates with interactive, because of both the depth and the breadth of our portfolio, which as we look at our portfolio, we believe it is unrivaled in the industry, and spans across many genres, including sport, which of course is a meaningful driver of entertainment value in the coming years.

Katie Burke:

Thank you, Chris. Briana, next question, please.

Eric Handler:

Good afternoon. Thank you for the question. Andrew, I wonder, if you have you ever thought about taking all of your essentially siloed sport communities and thinking about a way to bring them all together so that hockey fans, can talk to soccer fans, or football fans talk to UFC fans. And that way, you can build a huge community around that, where you could then layer in various highlight clips of real-world games and e-commerce, just sort of create, for lack of a better word, a metaverse, given how massive your community is?

Eric Handler:

Thanks. And just as a quick follow-up, I wonder if you could just give a little bit of an update about sort of the state of the mobile industry, sort of what you're seeing. Did mobile bookings were up modestly in the quarter. Do you think you've reached stabilization and you can expand from here? What are you seeing in the market?

Eric Handler:

Thank you very much.

Operator:

Our next question comes from Brian Pitz with BMO Capital Market.

Andrew Wilson:

Yes, again, great questions. I think the relationship between the NFL and the NBA and the likes of ESPN, is super interesting to us. I would think about this on two vectors. One, we have incredible relationships with our sports leagues. Many of them we've had for over 30 years and they have evolved with us, and we have evolved with them. A big part of what we have done through the rebrand of FC, is actually gotten significantly closer to our European Football League partners. And much of what we've done as we have renewed and bolstered those relationships for the next decade, and beyond is really think about, how we can come together in service of fans more broadly, not just fans in the context of interactive gameplay. And part of what you're seeing here as we start to bring highlights into our games and really think about FC as a platform, is kind of testament to that evolution of the nature of our relationship. I do believe that we have the opportunity to do the same, with the NFL and the NBA and you should imagine that we're working very closely with all of our league partners, NHL, UFC, F1, and we see a tremendous opportunity to really think about, EA SPORTS as a platform for engagement, and how we might grow in service of our fans, with our league partners. I would also highlight we've had a relationship with ESPN for the best part of 30 years and have worked very closely with them and continue to work very closely with ESPN and the Walt Disney Company as we think about the future of entertainment broadly. And so, we feel very good about our position in this future. We feel very good about the connection we have with the fans. We feel very good about our opportunity to grow our business as a result of this evolved service opportunity we have with them.

Katie Burke:

Operator, next question please.

Andrew Marok:

Thanks for taking my questions. I wanted to dig into a couple of things on the recent Apex event this last month with FINAL FANTASY. So commentary sounded really good in the prepared remarks, but with the dynamic that versus prior collection events, it was maybe less expensive for the first few items, but more expensive to complete. How did that affect payer dynamics and what are some of the key learnings coming out of that event for you guys?

Andrew Marok:

Great. Thank you. You kind of led into what was going to be the next part of my question. So, we've seen Apex do some smaller crossover events in the past, but how did the FINAL FANTASY partnership specifically kind of come about? And with the increasing intent kind of in the rest of the states, as you hinted at for a lot of these cross media partnerships, how much room and intent, is there for more of these more substantial crossovers within Apex?

Katie Burke:

Thank you. Operator, our last question, please.

Michael Hickey:

First question is kind of a challenge, Andrew, because it hasn't been announced that we obviously have a fair amount of evidence that the switch to, from Nintendo should come out this year. And from what we know, it's going to be a bigger display, more horsepower. It seems like it is something a platform that would better lend itself to your game. So in as much as you can sort of talk about an opportunity that's not beneficially announced. Just curious if you think you can have more success on that sort of platform that seems better geared towards your games? The second one is sort of, it looks like '25 is not calling an investment year, but most of the growth here is driven by your core games and Live Services. But you look at your longer-term pipeline, you think about Battlefield, Mass Effect, Star Wars, obviously, you've been great in the action genre. I think you're still developing a shooter from Respawn as well. [10 Street] to play maybe user-generated content, licensed properties like Ironman, Black Panther, I mean all of those seem feasible by fiscal '27. So just sort of curious, I know you kind of talked about your longer-term growth opportunity in near term, you focused on leverage, but do you think you're sort of in a position here in the next 2 years to sort of accelerate your top line growth just given how substantial your pipeline appears to be?

Stuart Canfield:

Mike, just to kind of tackle your second question. Let's take '25 first, a second, and I'll build it back into the longer-term answer I gave before, and we prepared remarks on as well. So first on '25. So I think the key here is we expect growth in our core business. We're 73% Live Service and obviously have a consistent Full Game Sports release slate, plus we've talked to College coming in the summer next year in 2024. Second, we do have a lighter release slate, which obviously comps to a Star Wars launch and a more expansive sports like where we saw 8 titles released this year. And we've called out also that Battlefield is not in our FY '25 outlook, third, we continue to drive leverage. And I'll just point you to your question around sort of an investment year. You can see sort of by the underlying profitability range that we are still getting scale and leverage by virtue of efficiencies in the business. But also continue to resource and reallocate against some of our bigger growth opportunities. The last one, obviously is just a reminder, we continue to expense costs. So we continue to build into that acceleration that flows into the longer term beyond FY '25 that will be highly beneficial we think of operating leverage to some of the questions we've had earlier. So you kind of put that together. So FY '25, obviously a core business growth. We'll talk more about the details in our Q4 call, lighter slate ongoing scale and leverage from the core business itself and obviously, we expense as we go from an investment perspective. We do expect to see for all the titles in terms of new releases, plus ongoing growth in our core business that we do believe we continue to get accretion and long-term growth and incremental cash flow that accelerates through those following years to the comments we laid out earlier.

Operator:

That concludes today's meeting. Thank you all for joining. You may now disconnect.

Operator:

Good afternoon. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Second Quarter Fiscal Year 2024 Earnings Conference Call. I would now like to turn the conference over to Ms. Katie Burke, Director of Investor Relations. Please go ahead.

Andrew Wilson:

Thanks, Katie. It’s great to be here with all of you. It was a strong Q2 for EA as we delivered results above our expectations. We are making great progress against our strategy to build massive online communities, tell blockbuster stories, and amplify the power of social connection to drive multi-year growth and unlock long-term value in service of our people, our players, and our shareholders. All our teams through passion and creativity continue to deliver interactive entertainment and experiences that engage and inspire hundreds of millions of people as part of our communities inside our global network. To everyone at EA, thank you. During the quarter, EA SPORTS continued to expand its position as a leader of the future of sports fandom as we launched two of the world’s most celebrated interactive experiences at the heart of sports culture, EA SPORTS Madden NFL 24 and EA SPORTS FC 24. These titles represent foundational drivers of growth in the biggest sports year in our company’s history. In Madden NFL, we have delivered the preeminent interactive American Football experience for decades. We know it’s essential for today’s fan as NFL broadcasts grow in popularity and reach to connect with their friends and celebrate their passion for the sport, beyond what happens on the field, each and every day. Through our Madden NFL franchise, we make this possible in ways no one else can, through awesome gameplay, deep social connection and a 365-day immersion in the sport for so many people, with so many different motivations and expressions of their fandom. On console and PC, Madden NFL 24 delivered an immersive experience with elevated realism, control, and gameplay. This has energized our core franchise players, while modes like Superstar are bringing new players to this already giant community. Madden NFL 24 is off to a strong start, with almost 10% more players in the title year-over-year and driving over 10% growth in weekly average users. During the quarter, Madden mobile had more players diving into the game year-over-year, growing the community over 20%, and delivering double-digit growth in weekly active users. As we continued to expand our American football ecosystem, our teams also ushered in a new era for global football at the end of the quarter. The successful launch of EA SPORTS FC represents a profound achievement. We have reimagined and expanded one of the largest franchises in the world, setting new standards of authenticity, innovation, and social interaction. This cutting-edge, multi-experience ecosystem spans console, PC, mobile, and free to play, with a ground-breaking game in FC 24; advancements of FC Mobile and FC Online in Asia; and a new global esports program in FC Pro. Fans, across geographies and generations, are playing, connecting and celebrating in and around these incredible, immersive experiences. Coming off a record-setting FIFA 23 performance amidst two World Cups, FC is set to deliver growth this year and beyond. Fan reception of FC has been extraordinary, expanding our already thriving global football community. Within the first four weeks after world-wide launch, over 14.5 million fans have played FC 24 on console and premium PC, including double-digit growth in new players. FC Mobile has established new franchise records, with over 2 million people installing the game on the first day, over 5 million in the first three days, and over 11 million in the first 10 days. FC Online continues to grow across all engagement metrics, while players have truly embraced FC Pro with a record number of registrations. FC represents a giant leap forward as we aspire to more deeply connect and grow the world’s largest football community to a billion fans and beyond. The successful launch of FC shows our portfolio strategy at work. We are now able to accelerate creativity and innovation across platforms, geographies, and business models; expand our football experiences across play, watch, create, and connect; and inspire and entertain even more fans around the world. We are in an extraordinary position to further collaborate with more amazing partners to grow FC as a cultural phenomenon. FC is more than just a game, and this is just the beginning. Halfway through the year, our sports teams, the very best in the business have delivered an unprecedented slate of amazing content. This story continues into Q3, as EA SPORTS NHL 24 and EA SPORTS UFC 5 have already launched to critical acclaim. The EA SPORTS WRC launch is also just two days away. Looking ahead, exciting updates tied to the biggest moments of the sports season will fuel momentum across our titles through the rest of the fiscal year and beyond, as we build out our multi-platform ecosystems with FC Tactical releasing in 2024 and EA SPORTS College Football coming next summer. As we continue to build ecosystems around our biggest IP, we are prioritizing the massive online communities of our always-on live services to lay a broad foundation for future launches and strong growth for the business. Through the expanding worlds, characters, and storylines that we deliver, people everywhere come together to celebrate their love of games, cherish community, and forge lifelong friendships. Apex Legends is a leader in its category with top game quality and gripping content. In Q2, Season 18 entertained and energized players, driving improvement in monetization over the prior season. We recognize the franchise exists in a competitive environment and, looking forward, our team at Respawn is focused on doing even more incredible things for players, engaging the community and deepening the franchise in exciting ways to drive growth starting with yesterday’s launch of Season 19, featuring dynamic game updates and content integration with music industry icon Post Malone. The Sims 4 community is celebrating creativity and culture and growing across generations. Maxis is using data insights and deep connections with the community to create fan favorite content. New players, as well as weekly average users, are up double digits year-over-year. The team is committed to entertaining and inspiring our Sims 4 community with an increasing amount of new content as they work on a parallel, expansive experience in the Sims universe. Just last month, we launched Season 6 for Battlefield 2042, and our community is responding positively, driving record engagement on Steam. This illustrates the strength today and long-term potential of the franchise. Through innovation and creativity, our teams continue to support this huge community of fans, while building towards the future of Battlefield. Live services are the foundation of our business. Through the first half of the year, we have delivered an impressive amount of content across new games and over 285 game updates. As our teams create even more incredible entertainment, players will find more joy, more inspiration, and deeper connection, powering engagement and expanding our communities. Across geographies and business models, we are driving growth today and over the long-term. While being mindful of current events and varying global macro consumer outlooks, our seasoned teams of leaders and world class teams are focused on doing what they do best, delivering amazing games and services for players everywhere. As we continue to invest in our vision to lead the future of entertainment, we remain thoughtful and deliberate, focusing on our largest opportunities. Over the next few years, our teams will innovate and expand our biggest IP, as we build platforms and ecosystems to connect massive online communities that celebrate fandom across the world; inspire and engage our players through blockbuster storytelling; and continue to create experiences that amplify our communities through social connection. Now, I’ll hand the call over to Stuart to provide additional details on our business.

Andrew Wilson:

Thanks, Stuart. Our industry is growing as more people around the world dive into the sports, brands, storytelling, and legendary IP they love most. The definition of a game is also expanding beyond play as fans are watching, creating content, and making deep social connections in and around interactive experiences. How games are being made is changing as well. Advancements in Generative AI are accelerating the speed of development, boosting creativity and innovation, transforming what we can deliver, bringing bigger, broader games and experiences to an even larger global audience. The value and opportunity of delivering deeply interactive entertainment has never been greater. Our talented teams, industry leading technology, world-class IP, and growing global network of players position EA as a leader of the future of entertainment. Now, Stuart and I are here for your questions.

Operator:

Thank you. [Operator Instructions] We'll take our first question from Matthew Cost with Morgan Stanley.

Andrew Wilson:

Thanks for the question. I would tell you, we are almost universally happy with the launch. Taking on this launch was a big challenge for us, was a challenge for the nature of the game that our teams had to make across platforms, across console, PC, mobile and our free-to-play game that's mostly in Asia. We wanted this to be a symbol of change, not just a change of symbol. And I think the teams have done an extraordinary job in delivering the most authentic, immersive socially connected football experience ever, certainly that we've ever made. I think our marketing teams have done a tremendous job in ensuring that the world's population of football fans understands the transition has happened, understands the benefits of that transition and understands why this represents not the end, but the very beginning of what is going to be an incredible journey of football fandom for our fans and for our partners globally. I think that, if you really sat down with our developers or our marketers or our partners, there are always things we can do better, and we're always learning, but on balance, I would say, we feel very, very proud of what we've achieved so far. It's only early, but certainly, all the signs are incredibly positive, and the feedback is also incredibly positive. And we feel good about where we think the franchise is going from a performance standpoint. Stuart, do you have some more?

Matthew Cost:

Thank you.

Operator:

Thank you. We'll take our next question from Benjamin Soff with Deutsche Bank.

Andrew Wilson:

Yes. I think Stuart can kind of talk about how we're playing that. I think what we're doing right now is we're planning for both of those potential outcomes. We feel very good about the launch so far. We've certainly brought in a meaningful amount of net new fans and net new players in the ecosystem, which is always an incredible sign and prediction for the future. We also know we still have a meaningful amount of people playing the previous game. And as we're starting to see, and it's less about the FC transition and more about our live service business in general, as we think about live services, we're seeing the transition from one launch to the next, be a little bit more organic. And certainly, as we have supported the live services right up until the new launch. There's often very good reason for people to continue playing the previous game. And so I do believe that we brought in new fans through an incredible game experience and incredible marketing, but we also recognize that we still have a meaningful population playing the previous game, and we're now working very deliberately and diligently to bring those over to FC and continue to grow the base of FC on a go-forward basis.

Benjamin Soff:

Got it. And then on Apex, can you just talk a little bit more about what resonated with players for Season 18 and some of the drivers you see to generate growth for this franchise over the long-term? Thanks.

Katie Burke:

Thank you. Our next question, please.

Eric Handler:

Andrew, now that you're not shackled with some of the FIFA restrictions that you have on EA FC. I wonder if you could give a little perspective on what the impact was on revenue for sponsorship and advertising or maybe the impact from promotions?

Eric Handler:

That's great. And then just as a follow-up, can you maybe talk a little bit about some of the real estate strategies that you're sort of working through right now?

Eric Handler:

Great. Thank you so much.

Operator:

Thank you. [Operator Instructions] We'll take our next question from David Karnovsky with JPMorgan.

Stuart Canfield:

Yes. Thanks, Dave, for the question. In short, yes, we've got a couple of one-off benefits we talked out in the script before. So we have obviously naturally have improved operating foundations and flow of cash benefit from interest we're seeing by virtue of the record cash flow we talked to in our narrative. And then secondly, yes, we're obviously seeing some onetime tax benefits that are flowing through giving us that lift you're talking about, which is $250 million. In addition, we're also obviously changing free cash flow as well to the question before from Eric as we pulled down some of our capital future strategy on investment to increase that up as well. So yes, onetime benefits tied around tax and obviously, some operating benefits picked up by having greater cash at hand that's driving greater interest for us.

Katie Burke:

Thank you. Operator, our next question, please.

Brian Fitzgerald:

Thanks, guys. When you think about FC seasonality of spend, has that dynamic shifted any when you look at annual cohorts. We just asked because FIFA engagement was surprisingly robust all the way up to FC launch and with these new FC play modalities, Pro, tactical mobile online, how do you see that impacting spend seasonality, maybe similar along with play styles, all these levers should just broaden out that engagement and spend as well, right?

Brian Fitzgerald:

Thank you, Andrew. Appreciate it.

Operator:

Thank you. We'll take our next question from Eric Sheridan with Goldman Sachs.

Andrew Wilson:

Well, Eric, two great questions. I will try and cover them as best as I can and Stuart, please add details as we go. I think that when we think about recessionary predictions and the industry broadly, typically as an industry we have. I don't want to say, be recession-proof, but we have been more resilient than many industries have been and that's really because of two key things. One entertainment is a fundamental human need. It's very important to us as a species. And two, the form of entertainment that we offer to our communities represents incredible value even where there is constrained spending. As we look at the market today and we look across our portfolio, I think it probably is pretty consistent with what we see across the industry, which is the big games where there is deep engagement and deep social connection continue to benefit across our portfolio. And we are – but we do see different kind of spend patterns on a geo basis. There are some markets that are showing a little more softness than others relative to some of the growth that we're seeing across the world. We've heard others speak to some of the softness in market in Europe. We've certainly seen some of that across our portfolio. But in aggregate, on a global basis, we're seeing growth. As we think about Madden broadly, again, I just – I think we have been partners with the NFL for the best part of 30 years. Our teams work very, very closely with the NFL and the NFL Players Association and more importantly, NFL fans, football fans in this country and beyond the boundaries of this country. And the NFL is growing globally, and we see the NFL doing an incredible job of growing the sport and what our teams have been doing is building out again, thinking about these game experiences not just as one-off onetime experiences, but mechanisms to fulfill many motivations of sports fans and football fans. And those might be core gaming moments. Those might be more play trade moments, there might be more casual moments, there might be more arcade-like moments or there might just be moments to connect with other fans of the community. And what you're seeing from our teams right now is a deep commitment to fulfilling the needs and motivations what is a growing fan community for American football in this country and beyond. And I expect that we'll continue to work with the NFL and the NFL Players Association, our partners and the community broadly to continue to grow the business.

Katie Burke:

Thank you. That ends our call. Andrew, do you have a few closing words?

Operator:

Thank you. That concludes today's meeting. Thank you all for joining, and you may now disconnect.

Operator:

Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts First Quarter Fiscal Year 2024 Conference Call. I would now like to turn the conference over to Ms. Katie Burke, Director, Investor Relations. Please go ahead.

Andrew Wilson:

Thanks Katie. It’s great to be here with all of you. To begin, I want to welcome Stuart Canfield, who most of you already know. I have worked with Stuart for nearly two decades. He has been a trusted partner and valuable leader through many of the biggest transformations at Electronic Arts. I am excited to be working with Stuart as our new Chief Financial Officer, driving multi-year growth and unlocking long-term value. It was a record Q1 for EA with net bookings of $1.6 billion, up 21% year-over-year, driven by sustained momentum across the entire EA SPORTS FIFA ecosystem and the launch of Star Wars Jedi

Andrew Wilson:

Thanks, Stuart. EA is set to launch some of the world’s most anticipated and celebrated games and experiences. At a time when our growing global community are choosing games as their first form of entertainment and primary way to stay connected with friends through shared fandom, the value and opportunity of creating interactive entertainment has never been greater. With our exceptional teams, an unrelenting commitment to execution, our world class IP, and technological advancements that will accelerate and expand our ability to deliver new levels of creativity and innovation, EA is building toward incredible growth in the years to come. Now, Stuart, Laura and I are here for your questions.

Eric Sheridan:

Thanks so much for taking the questions. When we look at the mobile performance in the quarter, I wanted to get your perspective on where we are in the cycle of recovery in mobile more broadly. Obviously, mobile was an area that struggled as we moved out of the pandemic and dealt with some of the challenges from the IDFA headwinds from Apple's privacy changes. And as we get deeper into 2023 and you think about growth and investing behind mobile into 2024 calendar, just more interested in how your perspectives have changed about mobile as part of the broader mix of the portfolio. Thanks.

Stuart Canfield:

Eric, just to add on a couple of points there on the financial side. Obviously, we talk to in Q1 outside of the Apex headwinds, which will be there for several quarters as we lap the sunset of the title. Obviously, we're up 3% and 5% at constant currency as we saw in the script. I think how do we preface that Q-over-Q, we're seeing, to the point in the script, overperforming expectations on some of our key titles we called out Galaxy of Heroes. We talked to FIFA. We continue to roll out on Lord of the Rings

Katie Burke:

Thank you. Operator, next question, please.

Clay Griffin:

Yes. Hey, good afternoon. Thanks for taking the question. I wondered if -- Andrew, I appreciate the context in terms of the pipeline. I guess, wanted to get perhaps an update on College Football. There's a lot of things going on in terms of licensing and just wondering if you could just give us a sense of where that title is, I suppose? And then on FIFA, I wanted to ask, the daily active number. Just wanted to get a sense to drill down if you might be able to give us some sense of monetization impacts in the quarter at Ultimate Team. Thanks.

Stuart Canfield:

And Clay, with regards to specifically your question on FIFA, I think I'll just frame up first. I think the second successive record quarter for us with the franchise, the growth was across all platforms. We alluded to mobile net bookings almost doubling Q-over-Q. We saw double-digit growth collectively across all forms, full game through Ultimate Team, Mobile and FO4 for one of our most successful quarters in FIFA.

Stuart Canfield:

On the daily side, that's really referencing a couple of pieces. One on the mobile side, in particular, as the team have continued to drive reoccurring frequency in content drops. We used to have a much larger spaced-out live service consideration. Now the teams are bringing much greater frequency and therefore greater engagement by virtue, and you're also seeing that evolve itself through the bookings and the overall performance of the mobile SKU.

Andrew Wilson:

One thing I would add there on mobile broadly and on live services broadly is that given that we have this broad portfolio of live services across console, across PC free-to-play, across mobile, we brought in some incredible mobile native talent with our Glu acquisition with Golf Clash. We're starting to really reconcile how to effectively drive these live services at scale. And that includes both how we build core game mechanics, how we build new modalities of play on top of those core game mechanics, how we drive user acquisition, and how we really build modalities of play and live events on a more regular basis to drive extraordinary retention in our franchises. And what you're seeing in our football franchise broadly across console, PC free-to-play and mobile and we're starting to see in the conduct of even the learnings that we've had with Apex coming out of Season 17, and what we're doing in and around mobile, really embedding this great learning that we've had as we brought new talent into the organization. And as we, as an organization, have learned to run these live services at scale, our expectation is this will continue to be a strong tailwind for us as the nature of the industry continues to change, and we operate in this new version of our industry at scale.

Katie Burke:

Thank you. Operator, next question, please.

Andrew Uerkwitz:

Thanks for taking the question. I just have one short-term, one long-term question. On the short-term side, you called out Apex weakness here quite substantially in your prepared remarks, but you kept your full year guide. Is something else kind of making up for it? Or is the weakness just not that bad? But just any comment there on how to reconcile the comments around Apex and the yearly guide.

Andrew Uerkwitz:

Got it. That's helpful.

Andrew Uerkwitz:

Got it. That's super helpful. Yes, go ahead.

Andrew Uerkwitz:

Got it. That's super helpful. And then just kind of a long-term question maybe for Laura and Stuart. Is -- Andrew did a great job of kind of outlining the pipeline, and I think it's safe to say we're deep enough in a post-COVID world where maybe development is getting back to normal. Where do we stand on that? And as you kind of think about the old, soft guidance, I think, was kind of -- the goal was every year, high single-digit growth, double-digit bottom line growth. Are we getting back to the point where that's going to be normal again? Or is there -- should we expect some still lingering impacts from game delays and COVID and work from home and whatnot? Thank you.

Stuart Canfield:

And Andrew, just to kind of look back on the long-term financial thinking. I think, as you know, obviously, we expensed versus capitalized, and we've been in an investment cycle as we build out the multi-year pipeline that Andrew referenced in his script. I think in terms of, is it going to be sort of normalized, I think we'll continue to map through sort of timing and sequencing for both those releases. You should expect us to start to talk to that towards the back-end of the calendar year early into the next calendar year. And we know we'll give more sort of credence to timing. We want to make sure that we are really clear with our development teams and get into the quarter levels we expect. But you should expect us to get to ultimately with that multi-year pipe sort of more step functional change in the future.

Katie Burke:

Operator, next question, please.

Matthew Cost:

Hi, everybody. Thanks for taking the question. I guess starting maybe with Andrew and Laura. Can you talk a little -- in a little more detail about the decision to reorganize the studios into the entertainment and the sports segments and what you'll be able to do differently and better now that you couldn't do before? And then I have one follow-up. Thanks.

Laura Miele:

Yes, very well said. And to layer on to what Andrew has outlined is that we are -- think about we are such a talent-centric company. And when you have the incredible talent and development leadership that we do, that we're lucky to have at Electronic Arts, oftentimes, as leaders we evaluate and look at how can we remove barriers, help the speed at which they develop and how they show it for our players. So we are incredibly focused on lifting up and removing friction for our talent so they can show up for our players every day. And we've talked about it a lot on this call about being a live service company and having content and updates in learning and turning and tweaking and using our levers to show up for our players and optimize that. That requires a vertical -- more vertical organization. And it requires as little friction and as much connection to go-to-market ideas, go-to-market strategies, commercial thinking around how we show up for players, as well as the game design, as well as technology. So the more we can integrate that, the faster we can accelerate the potential of our growth. And candidly, the more unleashed and untethered our talent feels, and it's a far more gratifying experience for them, we believe. And I will just tell you, too, on the entertainment side, we were just focused incredibly like lasers on execution. And so we know we have great talent. We know we have these incredible brands in skate, Sims, Apex, Battlefield, Marvel, Star Wars. We know we have the makings of incredible product experiences. Now we have to have heads down, execute, help the teams move as quickly as they can, accelerate that through technology and support and let them run, so we can get to this growth that we know we are capable of in the coming years.

Andrew Wilson:

I think right now, we feel very good about who we are as a company and the capabilities and talent and teams and IP we have across the organization. And we have a very clear strategy and an even clearer pipeline for growth across IP and across platforms. That being said, I think we're always looking for great opportunities to drive even more growth and entertain even more people through great games and experiences in IP. And we'll continue to work and look at that over the course of time. But it's not something right now that we're actively engaged in.

Katie Burke:

Thank you. Operator, next question, please.

Colin Sebastian:

Great. Thanks. Good afternoon and congrats again to Laura and Stuart. I guess, first, just following up on Apex. Maybe to put a finer point on some of the changes, Andrew and Laura, you talked about with the game. Is the expectation that we'll see in Season 18 some of that improvement in engagement given the game mechanics and the monetization there? And then secondly, just on Star Wars, just kind of curious to learn more about the plan and the expectations as we look to see that extend in terms of the lifetime of the franchise as well as live services. I think more detail there might be useful as well. Thank you.

Andrew Wilson:

And then on Star Wars, just for my clarity, were you referring to the Star Wars Jedi franchise or Star Wars broadly as we think about the future of the IP and our ability to tell these incredible blockbuster stories in the Galaxy of Star Wars?

Andrew Wilson:

Yes. We don't have anything to announce today, but we have an incredible partnership with Disney and Lucas. We've had incredible success in that partnership across the Battlefront and the Star Wars Jedi franchise and absolutely with Star Wars

Katie Burke:

Thank you. Operator, next question, please.

Matthew Thornton:

Hey, good afternoon, everyone. Thanks for taking the question. Maybe two if I could. I guess, first, anything you can say or talk about just in terms of what the early indicators are telling you around the FC launch. Obviously, I still know we have a lot of the marketing still in front of us. I think the title has a couple more early access days this quarter than it did last year. But just kind of anything that the early indicators are telling you? And then just secondly, as we think about the back half of the year, just curious like any ebbs and flows that you would call out. I think you were really helpful in the prepared comments around FIFA strength and Apex needing some work throughout the year. So I think that's pretty well understood. But you've also called out a bunch of other things, Star Wars Jedi coming to prior-gen consoles. I'm not sure if that's this year or further out. You talked about The Sims parallel experience. I think we've got a FIFA Mobile major update coming later this year. So I guess just outside the frontline release, like any other ebbs and flows that we should be cognizant of for the back half of the year? Thanks, everyone.

Stuart Canfield:

Matt, just to add on to Andrew. Just a couple of things to think about. I think are important as you think about the financial guidance. Note, obviously, we will have dynamics in timing between Q2, hence the guide, and later in the year, particularly to the investment around FC, obviously, heavily Q2 prelaunch-focused. Also, you should start to think about, to your point on FC, how we nuance the timing and recognition of revenue between Q2 and Q3. Worth noting that the licensing structure will transition back half of the year versus front half of the year. And obviously, we had a heavier launch slate last year in the back half of the year. So we can work through that with you all in the call downs, but just note there's definitely ebbs and flows in timing, and particularly point that to Q2, in particular, as you look at the EPS we put out and how that resonates year-on-year.

Operator:

Our next question comes from the line of Benjamin Soff with Deutsche Bank. Your line is open.

Stuart Canfield:

Ben, I'll tackle the second -- maybe the first one. I think, obviously, we're not going to create any guidance or direction on margin structure on a steady state go-forward. I think I'd just point you to the fact that, obviously, we've had depressed margins. We've continued to invest and expensed as we go. We do expect to get back to levels prior to a couple of years ago as we step that margin through. As you think about as we bring some of those titles to bear in the future, both from an owned IP perspective and some of the scale of Battlefield and we think about the business models that will come with other titles around Sims and skate, you should expect that to flow down and be accretive from a margin level as we step through in the future years.

Benjamin Soff:

Okay. That's helpful. Thanks, guys.

Operator:

Our last question comes from the line of David Karnovsky with JPMorgan. Your line is open.

Andrew Wilson:

Yes. So let me touch on the first part. I do think we continue to see big titles getting bigger and live services getting bigger. And certainly, as a company with a broad portfolio of large-scale IP and large-scale live services, we believe that we will be long-term beneficiaries of that trend. We do -- that doesn't mean that we won't build smaller titles over the course of time. There are these incredible stories that we believe should be told in the context of entertainment. We are focusing our investments so that we can build a cost base around those that's appropriate, but we're also really getting behind our biggest opportunities. And as we've talked about our strategy and building these experiences that entertain massive online communities, our expectation is that will be a large-scale growth driver for us. But, when thought about the right way, games like Dragon Age and Jedi can tell truly blockbuster stories and really break into that top category of games. I think what we see today is the mid-tier and lower games that maybe did pretty well through COVID, because people had a lot of spare time, they're the parts of the industry that really aren't doing and performing as well. And as we think about our future, you should expect we will continue to focus our investments and our energy and our resources against these big opportunities because we do believe that is where the industry is trending.

Andrew Wilson:

Okay. Thank you very much for being with us today, and thank you for all of your questions. Once again, I want to express my deepest appreciation to our incredible teams for delivering a record Q1. We look forward to updating you next quarter on November 1 after what I think is going to be our biggest EA Sports season ever, including Madden 24 and of course, our highly anticipated launch of EA SPORTS FC 24. Thank you so much. Have a great day.

Operator:

Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Fourth Quarter and Fiscal Year-end 2023 Conference Call. I would now like to turn the conference over to Mr. Stuart Canfield, Senior Vice President, Finance and Investor Relations. Please go ahead.

Andrew Wilson:

Thanks, Stuart. I hope all of you are well. I want to start by sharing how inspired and proud I am of our teams. Against macro uncertainty and constant change, we navigated the year with resilience and determination. Throughout fiscal year 2023, we showed the strength of our business, delivered for our players and lived up to the promise of our values. To every EA employee, thank you. Over the fiscal year, we executed across our business, delivering high-quality games, launching 7 new releases and providing over 450 content updates across 51 titles. Consumer appetite for interactive entertainment experiences is at an all-time high. And with our player network expanding to nearly 700 million, we delivered record engagement across some of our biggest franchises. EA is leading the future of interactive entertainment in a dynamic industry where new audiences, new technology and new media trends are reshaping the world around us. Consumption of sports and entertainment is accelerating, and media trends are evolving. We see these transformations as immense opportunities to do more amazing things for our people and our players. As we look to the future, we're focused on delivering against 3 key strategies

Andrew Wilson:

Thanks, Chris. Interactive entertainment is at an inflection point. The industry is expanding, the number of players expect to grow significantly over the coming years. The audience is becoming more diverse with cultural and generational trends accelerating content consumption. Engaging this expanding player base means reaching them on devices everywhere through disruptive technologies. For EA, these transformations represent opportunities to grow today and over the long term. We have the best talent in the industry to execute against our long-term strategy. It's through their passion and creativity that we will continue to deliver on our mission to inspire the world to play. We are focused on bringing more amazing games to more people around the world, inspiring them to build community, celebrate shared fandom and have joyful experiences. The future of entertainment is interactive, and no team is better equipped to lead this transformation than EA. Now Chris, Laura and I are here for your questions.

Andrew Uerkwitz:

I've got one kind of on June and then kind of a big picture question. Chris, could you help me reconcile a little bit the June guidance? I think a year ago, you had one title. In the June quarter, you have 5 this time. And then clearly, there's some strong momentum in live services. So is this cautious guide? Is this -- is there something in the live service momentum that slows down? Just a little bit more color you can give on June would be great.

Andrew Uerkwitz:

Q1, yes. Yes, sir.

Andrew Uerkwitz:

It seems like 5 games should drive more than a couple of hundred million dollars, right, if I'm doing my math right? Or is it just in -- go ahead.

Andrew Uerkwitz:

Got it. Okay. That's great. Yes. And then just kind of big picture, some of the trends that I think you saw in the previous quarters around kind of weakness in smaller titles, I think you guys or some of your peers called out this idea that gamers are kind of coalescing around the biggest titles. Are you still seeing that? And then secondarily, and maybe more importantly, how has that impacted where and how you invest in future titles?

Operator:

[Operator Instructions]. Our next question comes from the line of Benjamin Soff with Deutsche Bank.

Andrew Wilson:

I'll touch on this broadly, and I'll let Chris kind of talk a little bit more on the details of how we're forecasting and planning. First and foremost, we're coming off an extraordinary year. Football as a sport is growing globally. We think the World Cup did great things for continuing to grow the sport broadly and the fan ecosystem around the sport. I think what we've been able to do with our football franchise is really become central to the fabric of football culture, and the results that you are seeing is really demonstrative of that importance that we play in that fan football culture. My belief and my belief all along has been that as we move through this rebrand, and certainly as we talked about in the prepared remarks, this rebrand was probably the single biggest rebrand moment in the history of the company and almost certainly the most successful by a fairly wide margin. We've never seen this kind of consumer energy and this kind of positive consumer energy around a launch of this nature, particularly for a business that we've been in for 30 years. And so I continue to believe that moving through this rebrand actually presents us extraordinary opportunities for growth, and I've talked about this before and the context of what we can do for the player broadly, how we can extend the play, watch, create, connect, experience, how we can extend the relationships that we have with commercial brands that are equally valuable in football fan culture over time. And I think that as we move through this year, and you see what we're doing in the context of the game experience and what's going on around that, we feel very bullish and very confident around growth opportunities of our football business. But we're coming off a pretty big year, and it's a pretty big comp, and so I'll hand off to Chris to kind of talk you through how we're thinking about that.

Benjamin Soff:

Okay. Great. And then just one on the guidance. I think last quarter, you talked about mid-single-digit operating income growth. And if I'm doing my math right, I think the midpoint of your guide implies more of a low single-digit growth rate. So first of all, is that correct? And what changed? And is it FX or maybe something else?

Operator:

Your next question comes from the line of Matthew Thornton with Truist Securities.

Andrew Wilson:

Yes. On the Jedi piece, and I'll let Chris touch on Lord of The Rings, maybe Laura can give you a little bit more color on the launch of that and what we expect. On Jedi, again, we're overjoyed. We made the bold decision to move the title 6 weeks to give the team the opportunity to really get to the quality of games they wanted. And of course, as you heard in our prepared remarks, the quality has been very, very strong, and many are proclaiming is going to be a game of the year contender. And certainly, playing it and speaking to people who are playing it, it represents incredible storytelling in the Star Wars universe. And so I think we're building on where we were with Jedi

Operator:

Our next question will come from the line of Clay Griffin with MoffettNathanson.

Andrew Wilson:

Yes. I think what you've heard from us, and certainly the performance in Q4 is testament to this, is Apex is one of the strongest franchise in our industry and certainly one of our strongest franchise when we talk about content as a platform, a game experience as a platform, Apex is certainly front and center as we think about our business model. We have a substantial player base with incredible retention. And as is the nature of these free-to-play environment, there are ebbs and flows. And I think what is unique to Apex is its ability to engage and reengage through those ebbs and flows. We're going to continue to invest in the IP broadly, both geographically from a platform, extending play, extending story. And for what it's worth, I don't think anything is off the table. I think that as we think about game IP today, it's kind of like comic book IP of 20 or 30 years ago. This is the IP that Gen Z and Gen Alpha perhaps identify mostly with, and I think the opportunities for us to continue to grow and expand and stretch the nature of the experiences that we're able to offer to our global player base over the next decade and beyond is unfettered.

Unidentified Analyst:

This is [indiscernible] on for Mario. Two, if I can. So is there any color you can provide on your mobile revenue outlook in fiscal '24 that's embedded within the guide? And then separately, for EA SPORTS FC, I appreciate the call-out on the slides that fiscal '24 bookings anticipates low single-digit growth for the title. Are you expecting any margin benefit that will flow down to the bottom line now that the FIFA license has gone?

Unidentified Analyst:

Yes, yes. Got it. So are you guys just expecting any sort of margin benefit that will flow down to the bottom line without the FIFA license for EA SPORTS FC?

Laura Miele:

Mario, I'd just like to add some context -- a little bit more context maybe on how we're thinking about mobile -- our mobile growth and even our future beyond this coming year. I mean clearly, we've all have seen mobile grow in the past decade from $11 billion to $106 billion globally, which is massive and significant. But what we'd like to share is that the industry pursued that growth with the philosophy of user acquisition or development for that matter at any cost. And how we're looking at things now is that, that era is over. The economics didn't make sense, and we were really focused on -- the industry was kind of focused on the wrong things. How we are looking at it and how we -- what we're prioritizing and our new management kind of a refined approach is around profitable growth. So this means equal attention to top line and bottom line in the market and our business dynamics. It's easy, clearly, to focus on top line and just look at that growth area. But when we look at our business and our new management approach, we have seen mobile profitability across our portfolio in the last 2 to 3 years increase. And specifically, when we look at Glu, we've increased 3x from FY '22 to FY '23 and our profitability. So we're really pleased that under our management and how we're thinking about things that we are still focused on growing the overall business in a profitable way. Now a couple of things. Andrew mentioned and have outlined incredibly well about this connected ecosystem and our connected communities. Mobile is going to play a meaningful role in that. When we look at our FIFA success, which we've talked a lot about in this call already, but it's just so strong and it's been such a meaningful contributor to the overall ecosystem, players that play FIFA HD and mobile generate a far higher daily average revenue than FIFA players who only play on just one platform. So we know that there's a meaningful contribution that mobile can play in the overall ecosystem. The second area that we're spending a lot of time in is our existing live services. So we talked about earlier about that we launched The Lord of the Rings game clearly. And that has really modeled after our Star Wars

Eric Sheridan:

And maybe if I could go back to ask another big picture. One, obviously, there continues to be a lot of debate in the industry about distribution and content companies and vertical versus horizontal scale in the industry. Andrew, I want to know as we get deeper into 2023 and even against some of your longer-term thoughts, how are you thinking about scale, both from a distribution standpoint and from a content creation standpoint and how that factors back into possible capital allocation for the company over the medium term.

Operator:

Your next question comes from the line of Stephen Ju with Crédit Suisse.

Andrew Wilson:

Yes. I think it's a great question, and I go back to some of the comments we made earlier, which is as we think about the notion of a game, the definition is evolving pretty dramatically. And so when we think about time for development, it's not just the creation of a world or the development of characters or the telling of a story. It's really about how do we build this as a platform that drives long-term live service business over a 10-plus year period. And I think as we think about supporting and investing in and growing our creating capabilities, our development capabilities, our studio capabilities, that's really where we're investing meaningfully. And on balance, yes, we will give them more time, and we will let them evolve how they build and what they build and how they launch their games over time. But it's really not just about the complexity of games. It's really about the changing nature of what it is that we're building, but more importantly, the changing nature of how we derive value from that development over the long term. And so where we once built games in 1 year or 2 years and then monetize them over 5 weeks or 5 months, now games as a platform are taking longer, but the benefits are exponentially greater. And what we're seeing out of FC; and what we're seeing out of Apex; what we're seeing out of The Sims, which again launched in 2014, is meaningful return over a decade's long life cycle. And as we set ourselves up for the future, that's going to be a meaningful part of how we invest in our company, how we invest in the content and service that we provide to players and how we support our development teams to do that.

Michael Hickey:

Just two for me. First one, just how you're thinking about industry consolidation, assuming acquisition deal gets brought here, what you think the implications are for the broader industry and on consolidation, Andrew? Second question, not intended to be softball question here, but curious on AI and development, thinking about opportunities, challenges, winners, losers. It seems like you guys have been very proactive here. Already starting to see the success of AI on development, but just curious what you're doing today, the success you're finding, early learnings and how you think about a step-up growth opportunity over the long term.

Laura Miele:

Yes. Mike, great questions. And Andrew, you framed it, framed the AI picture incredibly well. There's a few things I can add. Clearly, AI has been a cornerstone of innovation for years, and we have a rich history at EA with AI. I mean as we look at this next wave of innovation and technology, we see it to be a powerful accelerator for key areas in our business. And as Andrew mentioned, we are incredibly optimistic actually about our unique competitive advantage given our scale, given our data. Inputs into AI models will create differentiation, protecting our data for having protected IP that we can create generative content from. We have a rich library and history of assets. So we really like how we're positioned. And also keep in mind that we have great partnerships, and we talked a lot about FC today. We are -- we did a partnership with La Liga, and there's Hawkeye data that we're able to use in our game that is not going to be available -- open -- in an open public marketplace. Again, we really like our position and the advantage that we have given our history and who we are. And we're thinking about the advantage of this next wave of technology as the accelerator in game development for players and player experience and then as we also think about truly live services at scale. So in game development, you would imagine the velocity of content, creative iteration is going to be advantaged greatly by having really smart content tools. Andrew mentioned the creator content life-like animation, real-time text to speech for players and what that will mean for them and the experiences they have. As we think about live game support at scale, there's going to be some really great imagery detection, issue detection, economic modeling that we're going to be able to apply as we continue to grow these connected ecosystem. So we are pretty optimistic and excited and inspired about this new wave of AI. Again, we have a rich history of it, and we're very optimistic about the years ahead and what it means to our business.

Douglas Creutz:

Just wondered if you could give an update on how the various projects that are associated with the Battlefield IP are progressing and maybe how that plays into some of the things you said earlier about giving your big franchises time to gestate so that they're great when they come out.

Operator:

And that concludes today's meeting. Thank you all for joining. You may now disconnect.

Company Representatives:

Andrew Wilson - Chief Executive Officer Chris Suh - Chief Financial Officer Laura Miele - Chief Operating Officer Chris Evenden - Vice President, Investor Relations

Chris Evenden:

Thank you. Welcome to EA’s third quarter fiscal 2023 earnings call. With me today are Andrew Wilson, our CEO; Chris Suh, our CFO; and Laura Miele, our COO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted detailed earnings slides to accompany our prepared remarks. Lastly, after the call, we will post our prepared remarks, an audio replay of this call, our financial model, and a transcript. With regards to our calendar

Chris Suh:

Thank you. As Andrew shared, we delivered strong engagement and high-quality titles again in Q3. Nevertheless, our results were mixed relative to our expectations. Based on Q2 trends and leading indicators, we had built our Q3 guidance on four key underlying assumptions

Operator:

[Operator Instructions]. Our first question will come from the line of Andrew Uerkwitz with Jefferies. Please go ahead.

Chris Suh :

Sure. Hi Andrew! This is Chris. I could take this one. So in my prepared commentaries I talked about what we saw in Q3 and the specific trend I point to is the fact that we talked about strong player engagement and high quality titles. But I also talked about the fact that the highly rated titles didn't perform to the level that we would expect it based on historical expectations for a title of that caliber. And so we're taking some of those learnings, and I do think that you know when we look at all the data and we analyze what we saw in terms of demand and results, we do believe that that's a reflection of the overall market conditions that we saw continued to mount throughout the quarter, and we've taken those learnings and we applied those into the Q4 guidance.

Andrew Wilson:

Yeah, great question, and I do believe we've learned a great deal as we've gone through this. Certainly, this game was in development for a long period of time as the expectation for the size and scale and complexity of mobile games continues to grow as the platform continues to mature over time. As we look at it, we really kind of compartmentalize into a few key categories. First, as you point out, this was a really good game built by really good teams, and it won game of year on both Apple and Android devices, which is an extraordinary achievement given the amount of games that are made. But a couple of things also were true inside of that

Operator:

Your next question will come from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Andrew Wilson :

Okay, that is two solid questions. Let me start and then maybe Chris and Laura can provide some color as we get in. First off on mobile, I think a few things that we start with, and certainly I think that we, you know we think through on a daily basis, which is while the mobile market continues to be a very challenging market to find success in, it also continues to be the world's largest gaming platform and certainly has the ability to attract more plays than any other platform. And so for us it will always be a very important part of our go forward franchise strategy. When we think about mobile broadly, we really think about the titles fitting into two key categories. The first category is what you speak to in the connective sports, but it's also true for Sims and Apex and Battlefield, and will be true for Skate, which is how is it part of a broader cross platform global community of play, and how do we unite and unify global communities of players around their core IP regardless of where they play on PC, mobile or console. This for us represents probably our strongest opportunity in mobile and certainly where you'll see us begin to really invest. When you look at what's been happening with FIFI up triple digits, it's really as we've started to bring the mobile title closer to the core franchise and start to operate it as a singular business with a unified play community around the world. It’s how we're building for Skate, it’s how we're going to build for the future of the Sims, and with these decisions around Apex and Battlefield, it’s also how we’ll build for those franchises. That represents an extraordinary opportunity for us to attract a much bigger global community to our biggest IP. It represents an opportunity to grow monetization on the mobile platform, but it also represents an opportunity to provide alternative ways for our existing core audiences who plan console and PC, to play when they are away from those core devices they have. And as we look at the mobile market on a go forward basis, we think that that will be where we’ll find real strength for that part of our business. The other part is, the stand alone mobile native titles, and we have a number of titles that continue to perform exceptionally well. Star Wars Galaxy of Heroes, The Sims, some of the titles that we got as part of our Glu acquisition, Golf Clash. We'll continue to invest in those as well, but you should expect that as we think about the future, we're going to really lay our investment into our bigger franchise play. We will continue to drive the long term value of our existing standalone mobile titles and will probably invest less in new startup standalone titles, just because we think that's probably not where we will find strength in the industry over time. To hit your second part around title launches, and certainly I think we're hearing more about that across the industry, and I just, I’d separate what you are hearing from us with everything that you're hearing around the industry broadly. While it might be – it might make sense to kind of draw a broader narrative, I think for us as we look at it, we launched a number of titles in Q3 and Q4 certainly with Dead Space and Need For Speed and NHL some of our smaller titles, and FIFA and Madden, we've launched an incredible amount of titles on time and at tremendous high quality. I think what we saw with Jedi, was this is an incredibly large game. It's you know both, immersive and creative and innovative, and the team just have come down the home stretch and really want to get to quality. And when we think about quality, quality is really a combination of three things

Operator:

Your next question will come from the line of Stephen Ju with Credit Suisse. Please go ahead.

Laura Miele :

Hi Stephen! This is Laura. I'm going to take the Glu mobile question. As Andrew framed earlier, we still perceive the mobile market to be significant. It's a $100 billion. It's where Gen Z and Gen Alpha play. It's the platforms they prefer. It's also a significant platform in growth geographies around the world where we are looking to expand our franchises, so incredibly important market. And as it relates to Glu, we see the genres and markets in the shooter category, the sports category, the casual creation category where females primarily play. So – and of course the Glu content fits very well into these genres and these categories in the mobile market that are still growing and where we still see a strong connection. Glu is fully integrated into EA and EA’s mobile teams now, and so as we think about our future of Sims, we of course consider Cabot Fashion Design Home as part of that ecosystem as Andrew has referenced. We think about tapped sports and the potential that we have globally around our sports business. Those are a meaningful part of our growth there. And we also have had some strong talent, some good tech have been integrated into our overall EA mobile business. So the integration and the transition has happened, and we really consider and look at the mobile business within EA in a very whole way.

Stephen Ju :

Thank you.

Omar Dessouky :

Hey guys! How are you doing? In the past you've given high level assumptions as to your expectations for the growth of the PC and console videogame software market, and I was wondering if you have assumptions for 2023 as to how much they might grow?

Omar Dessouky :

Okay, thank you. And for Chris, so if I just look at the full year guide of around maybe midpoint about $7.1 billion and about $7.750 billion, which is the guide you guys gave last quarter, I see a difference of 650. If I were to subtract this quarter you know versus your guide and you know I would get about $500,000 or $1 million of push out. You know that – and of course the Apex Legend. So if I subtract 130 for the under performance in the quarter, and then let's say 20 or so for under performance or cancellation of Apex Legends or sun setting of Apex Legends, I get about $500 million left and obviously that $500 million subtraction is not entirely Star Wars. So I was wondering if you could break that down for us. So how much of that roughly $500 million that I'm seeing is Star Wars versus FX impact versus the PC console titles that you think might be softer in Q4. And especially on FX, it looks like the British Pound and the Euro are up about 10 points versus when you guided in November, which would suggest that FX impacts should have been positive. Thanks.

Omar Dessouky :

Thanks a lot.

Benjamin Soff :

Hey! Thanks guys. I was wondering if we could dig a little bit deeper into the trends that you're seeing in Apex. And within that context, what's your view on whether or not the industry is getting more competitive as a whole, in addition to the macro environment getting a little bit weaker. And then I just wanted to see what you guys thought about, you know whether or not this is a franchise we should expect to continue to grow in the future, you know given your early color for fiscal ’24. Thanks.

Benjamin Soff :

Thanks, guys.

Eric Handler:

Good afternoon, and thanks for the question. So you still have a very deep development pipeline going on. So I'm curious, with the cost cuts that you've made, are these temporary cost cuts, are they permanent cost cuts. And as I think about what you said about an early read for next year, sort of mid-single digit revenue and bottom line growth. Does that mean with these cost cuts, maybe you can get to a flat operating margin year-over-year.

Eric Handler:

Thank you.

Mike Hickey :

Hey Andrew, Chris, Laura! Thanks guys for taking my questions. Just two from me. Thanks for the early look on your fiscal ’24 growth opportunity. Just curious if you could speak to sort of the degree perhaps and the longevity of the macro pressure you're seeing on your players, if you think it's going to get worse before it getter better or how you think about the potential for a recession in job losses, and how that plays into your ’24 guidance, the early look that you gave us. And then the second question, obviously you didn’t give the number, but I think the FIFA license was rumored to be around $150 million annually. Curious if all that money has been spent as you sort of budget ’24 in terms of right fees with the other partners and maybe incremental marketing spend. Or if you think there's some cushion there, in your forward fiscal in terms of potential savings. Thanks, guys.

Andrew Wilson:

The one piece I would add to that around that, and concur with Chris, it's not so much about what did we pay fee for or what won't we pay fee for the future. I think that we will invest meaningfully into the franchise to grow it through this phase. Again, we have really said this is not just about a change of the sign on the front of the game, but a real sign of change in terms of what we offer the players over time. And we do believe that we can offer a bigger, more comprehensive, more immersive global football fan experience within our games and beyond the bounds of our games, working with our great partners around the world. And as we think about investing in that in ’24 and maybe even deeply in ’25, we believe it will pay meaningful dividends over the course of time. This is a franchise that we've been investing in for 30 years. I couldn't be more excited about the next 30 years of the franchise, and what we'll be able to do. And so I think our focus right now is really how do we set ourselves up to realize the fullness of the potential of developing the preeminent interactive football fan community in the world.

Operator:

Your next question, you will come from the line of Matthew Cost with Morgan Stanley. Please go ahead.

Laura Miele :

Hi Matt! On the mobile sickness as you said, we measured certainly by engagement. And I would say it varies across the mobile experiences we have. As we've discussed our strategy and how we are thinking about the future, it’s really around how the mobile platform can contribute to the overall connected ecosystems of franchises and what we're seeing, as in Andrew mentioned, as players play on the go, as Gen Z and Gen Alpha market, you know addressable market expands as every year goes by, it’s going to be very important for us to show up on the right platforms for the right moments and right experiences. So we're seeing in some of our, as we discussed on FIFA Mobile is we've had we have significant engagement and significant acquisitions into this franchise, because of the mobile game that we have. And that's how we're really looking at the incredible assets that we have around casual creator games for our Sims products, our sports games and really dial that up to connect into the ecosystems, because they can be a meaningful contributor of new players, engagement and connection into a high def experience.

Matthew Cost:

Great! Thank you.

David Karnovsky :

Hey! Thank you for fitting me in. Chris, you noted your forward view is based on trends currently or where you exit in Q3, but wondering if maybe you could speak just to the phasing of kind of the economic impact through the fiscal third quarter. Did you see player engagement or monetization kind of change at all? Was there anything specific to call on the holiday period. And they're just given the news around Apex and Battlefield, any update on Lord of the Rings, that you still plan to launch this game, you know anything you could say around the soft launch? Thank you.

Laura Miele :

Hi David! To answer your question about Lord of the Rings Mobile. As a reminder, this is a team that created Star Wars Galaxy of Heroes, which has been one of our most successful mobile games, and we're over $1 billion in net bookings on that. They are currently actively working on Lord of the Rings and soft launch currently and so we expect a full launch on that mobile game this coming year.

Operator:

That will conclude today's meeting. Thank you all for joining. You may now disconnect.

Operator:

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Electronic Arts Second Quarter Fiscal Year 2023 Earnings Conference Call. Mr. Chris Evenden, Vice President, Investor Relations, you may begin your conference.

Andrew Wilson:

Thanks, Chris. It's great to be here with you all. We delivered solid performance across our business in Q2, driven by our EA Sports portfolio and our multi-platform live services business. our broad IP, exceptional talent and growing player network of more than $600 million are the foundation of strength and stability in an uneven macro environment. During Q2, we launched Premier Sports Games and provided over 120 content updates on 35 titles across our global catalog. Our teams are deeply committed to delivering amazing games and entertainment that inspire fans to play create, watch and forge enduring social connections. Our broad IP portfolio is unrivaled in the gaming industry. Foundational to our leadership is EA Sports with breadth and depth of partnerships that allow us to continue delivering deeply immersive experiences to fuel long-term growth. Our Global Football business demonstrates the power of a multi-platform ecosystem with a massive community engaging through multiple experiences. In Q2, we delivered our biggest EA Sports FIFA console and PC launch in history. In addition, in FIFA Mobile, daily, weekly and monthly active players were up more than 100% year-over-year. And our free-to-play FIFA Online service in Asia delivered record performance. Now the entire global football community across our ecosystem will benefit from the unique holiday timing of the World Cup. Next week, we'll launch new World Cup content into FIFA 23, FIFA Mobile and FIFA Online designed to attract, engage and entertain players throughout the tournament and beyond. For nearly 30 years, we've delivered the biggest and highest quality football games to fans all over the world. Across our ecosystem, we've built the world's largest football community with our players, 90,000 athletes, 700 teams, 30 leagues and federations, and more than 300 partners. As we now move into the future with EA Sports FC, we have even greater opportunity to engage the global audience of 3.5 billion football fans. Players will continue to experience everything they love about our games today. The modes, leagues, competitions, clubs, athlete, brands and more. We'll push the technical boundaries for even greater innovation, immersion and authenticity. And through more platforms and new modalities, we will reach new football fans all around the world, bringing them into our global community. This is what EA Sports FC is all about. In this unique year with our biggest ever console and PC title, a deeply engaging worldwide mobile experience, our online PC services in Asia and now with men's and women's World Cup content coming we are in an incredible position to unlock a truly extraordinary future with EA Sports FC. As the consumption of entertainment and sport converge and grow, EA Sports offers fans immersive experiences like no other, an ability to play, create, watch and connect with friends and the sports they love, 365 days a year. Now more than ever, Madden NFL is deeply ingrained into the fabric of NFL fandom, reaching broader entertainment audiences. With the sport of F1 continuing its growth trajectory, especially in the U.S., we are well positioned to expand the total addressable market for our F1 franchise. We have more than 200 million players engaged in our EA Sports games. As we look to the future of FC, Madden NFL, F1, NHL, UFC, PGA Tour and Mall, we will continue growing these ecosystems to reach new fans, expand in new experiences and create more social connectivity to fuel the enjoyment of sport. Our owned IP franchises continue to be among the most deeply engaging and culturally relevant entertainment properties in the world. Apex Legends is driving massive growth in emerging markets, and the team continues to build its content, universe, characters and storylines across multiple platforms and experiences. As we expand our console, PC and mobile experiences, Apex has captured the imagination of our global community beyond play. Not only are they playing, watching and competing, they're captivated by the law, the world's and storylines in and outside the game. We are just getting started and believe Apex will be one of the most important IPs in the world. Engagement in our Sims franchise continues to grow with millions of players unleashing their imaginations full of creativity, humor and individuality, both in-game and across the entire ecosystem. We expect engagement to grow with the Sims 4 base game recently becoming free to enter. Looking ahead, our team is working on a new creative platform for our Sims community giving them more collaborative ways to play, create, connect and share stories with their friends. In Q2, we also announced an exciting long-term multi-game collaboration with Marvel joining forces with a cultural defining powerhouse to expand our entertainment offerings. From our EA Sports League partners to Disney's Star Wars and Marvel Universes and more, we're partnering to grow our global communities, build value together and co-create the future of entertainment. Our player network of more than 600 million worldwide continues to grow. The unique value of this network is our ability to create new communities and meaningful connections that matter. In fact, more than 3/4 of EA players engage with gaming content beyond the game itself, reading, watching and creating content and engaging in social conversations through shared fandom. With EA Sports FC, Apex, the Sims, Skate and more, all poised to fuel fun and social connection, our growing network will continue adding long-term value. As we look ahead, our talent teams are focused on building extraordinary experiences that drive deep engagement to grow our communities and reach new audiences, particularly Gen Z and Gen Alpha, who are turning to games as their preferred choice for entertainment and social connection. Games continue to be one of the fastest-growing forms of entertainment and the social networks of the future. We're in the privileged position of creating what people love doing more than anything else with their friends and family. Through our broad IP, our creative talent and our growing network of players, we are well positioned to lead the future of entertainment and deliver long-term value. Now I'll turn the call over to Chris.

Andrew Wilson:

Thanks, Chris. In Q2, EA delivered strong engagement and deeply immersive experiences across our portfolio with new EA Sports titles and multi-platform live services powering the business. We have a deep slate of new titles set for the second half of the year. Entertainment is a fundamental human need. And in this dynamic environment, we are focusing on our strengths, providing amazing games and live services that inspire the world to play. With our incredible talent, our growing play network and more people than ever engaging and connecting through games, we are excited to lead and create the future of entertainment. Now Chris, Laura and I are here for your questions.

Matthew Cost:

I have two here. So in an environment where, Andrew, you mentioned, obviously, things are changing, consumers are under pressure. Are you observing any changes in the behavior of users. For example, are people perhaps prioritizing buying a copy of FIFA and maybe spending less on the Ultimate Team or is there anything that you've noticed that's starting to shift in the behavior of your users? And then secondly, on the pipeline, I think the fourth quarter is still showing a major title that doesn't have a specific name to it yet. Should we interpret that as there's a title that's tentatively slated for the fourth quarter, but it could potentially be pushed out? Just any color you can add there?

Operator:

Our next question comes from Benjamin Soff from Deutsche Bank.

Laura Miele:

Thanks, Benjamin. Great question. When we think about our growth potential in our portfolio, we certainly consider the games that we create, the world, the characters. We also look at the expansion of our player community and the diversity of players that we can bring in. When you think about the breadth of our portfolio from real-world sports to our original IP, including Sims, Apex, Battlefield, Skate, Need for Speed. We also have licensed IP. You think about Star Wars, Lord of the Rings and of course, now Marvel, as you mentioned. So we consider this licensed IP, an incredibly important component of expanding, diversifying and casting our net wider to bring new players in. And when we looked at our Star Wars business, as an example, we brought millions of players into our community and what we realized and have seen is that over 40% of those players have gone on to play other games in our portfolio. So we consider adding licensed IP as a pretty significant engagement model to our overall community as we grow. And we're just thrilled to welcome the Marvel partners into our creative teams, and we're incredibly confident that we're going to build meaningful content for our fans. We have generally approached these types of creative partnerships kind of away from the contract. We don't want it to be a transactional partner to really embrace a creative partnership and co-create together. And we've seen great success in our past, and we expect no difference for the future with Marvel.

Omar Dessouky:

I'd like to ask about your 4 objectives of play, create, watch and social and how they're going to affect your business long term? And then I have a follow-up. So the first question is, are these initiatives you need to undertake in order to keep pace with the growth in the video game industry or exceed growth in the video game industry? And as you build out these features around your core franchises, sort of 5 years out, by what factor could they help your core franchises grow? And then I have a follow-up.

Omar Dessouky:

Okay. A wonderful answer. So it sounds like you're really at the forefront of innovation rather than this just being table stakes for the video game industry of the future. My second -- correct me if I'm wrong. My second question is, in the past, like in 2017, you've said that you spend about 25% of your R&D budget on new IP. Things that may never see the light of day. So based on fiscal '22, that would be around $400 million to $500 million. First of all, is that kind of still the case? And second of all, as you build out the tool sets necessary to achieve play, create, watch and social, should we think about incremental R&D spend on top of that? Or will the kind of additional expenses to create out those tool sets and initiatives be part of that 25% or even the existing budgets within existing franchises?

Operator:

Our next question comes from Eric Sheridan from Goldman Sachs.

Laura Miele:

Thanks, Eric. Great question. We see mobile remaining one of the largest platforms in the games business, and it represents a pretty significant growth path for us, particularly with our large franchises. So there's a couple of parts have how to think about this. And we are looking at mobile as an expansion in multiplier on our big franchises such as FIFA, Apex. As an example, when we look at our FIFA mobile business, 75% of our FIFA mobile players exist outside of Europe and North America. So that's significant reach and global impact for our FIFA mobile game. So we continue to believe that the mobile business will be -- will contribute to these big online communities that Andrew has talked about and has discussed in our vision and strategy and be a multiplier for these gaming ecosystems for players. And when we think about a post-ATT world or post-IDFA world, what's most meaningful is having these large communities and well-known brands for strong reach. And so we are confident in our position to have an impact beyond some of the challenges that some are experiencing in a post-ATT world. As we think about our acquisitions and our stand-alone business, we continue to see strength in games such as Galaxy, Star Wars Galaxy of Heroes. And when we look at Glu, our Glu acquisition, that is some of those properties such as Design Home, Cabot fashion, we believe are going to be strong contributors to our lifestyle Sims sort of business. Then we also have the Tap Sports business that clearly we have big strength in sports. And so we continue to believe that those will contribute to our strategic growth path as we head into the future. So yes, there have been headwinds in the mobile market, and we continue to believe that mobile as a platform will provide the global player reach for our big franchises. And we believe with our big community, it will continue to help us with some of our stand-alone mobile games with our large communities and big brands.

Mario Lu:

The first one is on FIFA. Just wondering if you could help double quick on the main factors that attributed to the 10% unit growth year-on-year? Is it the new features such as cross-play? Is it the upcoming World Cup content? Anything you can add from today would be helpful.

Mario Lu:

Great. And then just a second one on mobile, specifically on Apex Mobile. Just curious how it's progressing versus your internal expectations? And are there any early learnings that could be applied to other franchises like Battlefield that will ultimately be brought to mobile as well?

Operator:

Our next question comes from Andrew Uerkwitz from Jefferies.

Andrew Wilson:

Yes. I mean it's a longer and more complicated question than I probably have time for today, but I would tell you the way we think about it is really around player motivations. And when we design for a game, we're really thinking about what motivations are we trying to fulfill. And you've got 1 group that -- and I kind of go with a crude kind of cohort grouping you got 1 group who simply want to fuel the motivation of escape. They want to be able to disappear from the world they live in day-to-day and immerse themselves in a new world, and that be the sum total of their experience. And that's a really important thing for them. And we have to think about that across the breadth of our portfolio. There might be another group who says, "Hey, I want to be able to -- I want to play -- I want to immerse myself in this world, but I want to do it with a core group of friends. And I want to bring them in. We call this an atomic unit. We see this amongst players in groups of kind of 4 or 5. These are the strongest connections we see in our network. And really, the experience they have is around doing things in the context of this group environment with 4 or 5 people. There's another group who says, "Hey, I want to do this thing. I might do it by myself or I might do it with other people, but I really want to very quickly be able to share everything I'm doing with the outside want to capture cool moves I do. I want to be able to capture cool things I build and we were to share that almost immediately with the outside world through social media and other platforms. And it's really kind of an ad hoc thing, and it's not very polished, but it's just like, look, what I'm doing, and it's think about it like a kid on the playground who just has a summer salt on the trend is no, watch me. And so we're fueling that motivation. And then we have a fourth group who really wants to create and curate and share their content in a highly polished format. And that we see in the context of The Sims. And we'll certainly see it in the context of Skate, and we're seeing that kind of start to rise up in things that people want out of our FC experience and our Madden experience and certainly has been and will continue to be part of our Battlefield experience over time. And so really, when we think about designing and building these things, we start with a player first, and we start with what are the motivations they're trying to fulfill. And then we look to build tools that seamlessly and without friction, fulfill those motivations for them in the best way possible. And what we are seeing is that we're able to fulfill motivations across that full spectrum of cohorts, and that's why our network is growing so rapidly. That's why our engagement is continuing to be strong, and that's why people are spending more time in our games and using this as a platform to build deep enduring connections with their friends.

Andrew Wilson:

Again, entertainment has been built on the creation of world, the development of character telling the story since time began, and we've experienced it in different forms over time, we had to go to the theater, then we would read about it, then we listened to it on the radio and then we watch it the movie, then we watch it in television. Now we experienced that through games. And it is how we entertain ourselves first and foremost, as we think about these great storytelling opportunities. And so again, as a publicly-traded company, we're always thinking about the financial return of the things that we do. But as we think about the full breadth of the consumption of sports and entertainment, these deep social experiences are very much about how we enjoy attainment, but the creation of world and development character and telling of stories is kind of the central life blood of entertainment more broadly. And as we think about this, it's not just about predictability because, again, there are being crappy worlds and crappy characters and story is being told. And so we work with our partners and we work with our own IP to do things in a truly compelling way, and we think it represents an extraordinary business opportunity as we don't believe humanity is going to turn it back on the nature of storytelling. As we look to the future, the nature of storytelling is almost certainly going to be interactive.

Eric Handler:

Wonder if you could talk a little bit about your decision to give the Lord of the Rings mobile gain a bit more time in soft launch given the current mobile market conditions. Right now, in this post-IDFA world, is it just too challenging to find good ROI channels to launch a new game on a mass market level? What is it you're seeing there? And then secondly, can you maybe talk about your decision to take The Sims to free-to-play model?

Andrew Wilson:

And on The Sims, again, it's nearly 10 years old now. I mean there are people who are going to want to play The Sims 4 -- yes it's nearly 10 years old now. When we think about -- there's a bunch of people who want to play that game who may not have even been born when we launch the game. And while we have a community of many tens of millions of people playing, we recognize the opportunity to really open up and bringing anyone who wants to experience The Sims 4. As we look to the last 12 months, about 90% of all revenue was from extra content, not the base game. And so as we think about the future, as we think about the evolution of The Sims experience and really bringing in more people to enjoy what The Sims offers the playing community. We felt that this was the right time. And I commend the team for really making this happen and really supporting their community. And what we've seen on balance is the community has been very thankful for this, very supportive of this and is looking forward to welcoming what we hope is many millions more into that ecosystem overall.

Stephen Ju:

Okay. And I think this is a topic that we've explored before, but with what looks like the sequel for Sims under development, I thought I'd bring this up again. And I think this, for lack of a better word, I guess, the lower and the body of work that exists in Sims 4 because, as you say, the game is like 10 years old now, and there's a lot of content that you've released over the years. And should we be thinking about how Sims 5 when it's released, may feel a little bit empty. And I think this is something that we worried about in the -- for Battlefield in the past. So what can we do as we think about sequels and follow-ups generally? Does this mean that things need to spend more time and development for that additional content? How should we think about that?

Operator:

This question comes from Doug Creutz from Cowen and Company.

Andrew Wilson:

Yes. So first thing I would say just to differentiate there. I think what we have had is EA Originals, which were lower-priced titles. This was an initiative that we developed some years ago really to support the India community and the industry growth opportunity overall. What we were seeing in the industry was these India developers were kind of building these very cool games. They didn't have the means to get into market in a big way and they didn't have the ability to continue on because the business model wasn't working for them at least for their first title. And what we did at that time was go into the community and say, "All right, let's handpick some really great teams who are building some really cool games around really cool IP. Let's help -- let's fund development for them. Let's get them distribution and let's give them the profits on the back end so that they can come together and build an even bigger game a second time around. Most of those have been smaller, lower-priced titles. However, in the history and -- I mean the company 22 years, we have a long and rich history of co-developing, co-publishing and distributing AAA full-priced IP, all the way back for as long as I can remember. We don't do as much of it anymore just because there's not as much of it out there that we think really fits the bill and is it a AAA quality bar that we believe can deliver against the expectations of these global communities at a full price point. We think Wild Heart is one. I mean I would tell you, it started with what felt like a pretty small idea for us internally. And every time we saw the product, we were wowed and mesmerized by what they were doing. The Monster Hunter genre is a relatively new genre. It exploded. It is ripe for innovation and creativity and expansion and what we see the team doing is all of the things that the community is asking for in the genre. And so -- and the response so far has been really, really strong. And so I don't want to get out over my skis on this one. But I would tell you, I saw it. I think it's incredible. The community has seen it, they think it's incredible. How big it can be. We don't quite know yet, but I think there's a path for this to be a really, really cool opportunity for us, for the development team and for the community at large.

Colin Sebastian:

I have a couple of follow-up questions. I guess first, Andrew, I just wanted to talk about the approach to World Cup this year, how that differs from the prior cup given some of the challenges last time around on the core franchise. And then on live services, if you wouldn't mind providing a little more color on engagement and monetization trends for Apex, just given this has been such a big part of the portfolio growth over the past few years. Are you satisfied with the trends there? And how do you expect those KPIs to trend with the launch of new content this quarter?

Christopher Suh:

Great. And I'll jump in, Colin, and talk a little bit about our engagement. As we've talked about on this call, we're seeing -- we're in this enviable position of seeing healthy engagement trends across the breadth of our business. We talked a lot about FIFA. But Apex is another one where we're very pleased with the state of player engagement with Apex. We've grown that business, as you know, in a very short period of time into a substantial business. As Andrew talked about, it's one of the great IPs and entertainment. We're seeing very stable engagement. We continue to grow the franchise. We feel great about upcoming releases of new innovation into the game. It continues to be an important franchise for us, and we'll continue to invest behind it as well as feed growth now and into the future.

Operator:

And that's all the time we have for questions. This does conclude today's conference call. Thank you for joining us. You may now disconnect.

Operator:

Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts First Quarter Fiscal Year 2023 Earnings Conference Call. Mr. Chris Evenden, Vice President, Investor Relations, you may begin your conference.

Andrew Wilson:

Thanks Chris. It’s great to be here with you all. We delivered a strong performance across our business in Q1. Our broad IP portfolio, our amazing talent, and our growing network of players deeply engaged in our live services all serve as unique structural advantages, especially as we navigate the fluidity of the macro environment. While we recognize there is more uncertainty in the market, our teams are focused on what they do best, delivering amazing games and services that keep our players engaged, connected, and inspired as we take entertainment and play to the next level. Our portfolio of sports and owned IP franchises continues to power resilience and longevity in our business. EA SPORTS & Racing is a growth center, with franchises that are at the heart of how sports fandom is becoming increasingly interactive. F1 22 sales are up double-digits launch to-date, as the sport continues to boom, especially with younger fans. Our EA SPORTS FIFA franchise is exceptionally strong on a global basis, with record business for Q1 in Asia, significant growth in mobile with DAUs up another 10% over last quarter, and FUT engagement growing nearly 40% year-over-year, which is well above the industry average. We’re going from strength-to-strength in EA SPORTS, including Madden NFL 23 just weeks away, and our most expansive FIFA game ever coming this fall. Sports is the ultimate evergreen form of entertainment, and our new cross-media partnership with LaLiga perfectly illustrates how we continue to innovate at the forefront of sport, media, and interactive content. With these multi-faceted collaborations, we are able bring the most authentic experiences to fans and expand into new ways to watch, create, compete, connect and participate in sport -- across platforms, business models, and geographies. Our owned IP franchises are some of the most deeply engaging and culturally relevant entertainment properties in the world. Apex Legends is a leading multi-platform franchise, with our live service on console and PC driving massive ongoing engagement and a new mobile game that is delivering on our early expectations. Engagement in our Sims franchise is also outperforming the market with content that resonates for a broad and diverse audience. We have a proven ability to grow successful long-term live services across our portfolio with ongoing engagement that drives resiliency, reoccurring revenue and lifetime value for our business. Through all of these experiences, our large global network has grown to nearly 600 million. Every day, our players are forging new friendships and social connections. And with the scale of our network and our team's ability to utilize our data, we can understand where, how and what our audiences are playing today and where they want to go next. We continue to see Gen Alpha and Gen Z turning to games as their primary form of entertainment, consuming more content than any generation of the past. They love playing with friends, they stay connected with family and they're creating content at every turn, both in and around their entire gaming experience, whether they play games from our expansive EA SPORTS portfolio to fuel their fandom, enjoy the intensity and competition of Apex Legends, or seek adventure in games such as Star Wars Jedi, the next generations of consumers use the power of play to fully immerse and express themselves, to build deeper, more meaningful connections with the communities they identify with and where they feel they belong. They're using games like the Sims to unleash their personal and creative autonomy, building characters and new stories with their friends. Delivering games that fuel creativity where players can join, compete and interact with each other through social and immersive experiences is an exciting growth lever for Electronic Arts, as we continue to expand and diversify our portfolio and build global online communities spanning more geographies. Games are the social networks of the future. Leading in this highly competitive market requires a strong focus on people. We continue to invest in our culture and in fueling our talent pipeline. The best character artists, animators, graphic designers, data scientists, engineers and many more talent creators are all joining our team to level up their careers with award winning franchises and studios. From career development and wellness programs to workplace experiences and technology that inspires collaboration and innovation, we strive to make Electronic Arts a great place to work and grow. Through our IP, our talent and our growing network of players, we are adding strength and long-term value to our business. Even with short-term uncertainties, interactive entertainment will continue to evolve and grow, and we are in a very strong position. Now, I'll turn the call over to Chris.

Andrew Wilson:

Thanks, Chris. It's been a good start to the year. While the macro outlook remains fluid, every one of us at Electronic Arts is focused on the things we can control. Even amidst market uncertainty, more people than ever before are turning to games as the primary choice for entertainment. This is what they love to do more than anything else, and it's how they want to connect and share experiences with people around the world. With gaming so central to our lives today, EA is uniquely well positioned with a broad demographic reach of our portfolio and the strongest content pipeline in our history. Leveraging the talent of the best teams in the industry, we are poised to lead this next chapter of entertainment and to continue building long-term value in our company. As we move into the Q&A portion of the call, I want to take a moment to welcome Laura Miele. As Chief Operating Officer, Laura has a deep connection to our business from game creation and our studios to revenue generation and our commercial organization. Laura will join us to add her strategic perspective and insights on the business. Now Chris, Laura and I are here for your questions.

Eric Sheridan:

Thanks so much for taking the question. Hope everyone in the team is well. Maybe two big picture questions, if I can, Andrew. First, with where we are in the console cycle and how there still continues to be a lot of supply chain and logistic challenges globally, can you talk a little bit about your current thinking on this console cycle versus historical precedents and how you plan on sort of building the organization on the content side to [line] (ph) when we get to sort of mass deployment of the next-generation of consoles? Would love your view on that first. And then obviously, on the mobile gaming side, we continue to see a lot of challenges on distribution and go-to-market and monetization. Can you talk a little bit about your efforts to realign the organization for this sort of new world order for mobile and how you think about capitalizing on that opportunity over the next couple of years? Thanks so much.

Laura Miele:

Yes. Thanks, Andrew, and thanks, Eric, for the question. We have successfully integrated Glu and Playdemic into business into one mobile organization that is actually seeing growth year-over-year, and we continue to expect to see that in the coming years. As Andrew mentioned, there's an outside strategic value that mobile brings to our portfolio. It has a significant contribution and impact on the ecosystems of our big franchises. So one example, we've discussed the success of FIFA Mobile. And when we look at our player profile, 46% of our FIFA mobile players were located in Asia Pacific and Latin America compared to just 28% for our HD players. So we see this as a significant expansion of the overall ecosystem for these big brands that we have. It's also an amazing entry point for one of the largest growth drivers for us with Gen Z and Gen Alpha players. And of course, as Andrew mentioned, it's a dominant engagement platform for emerging markets. And then as we think about cross-platform play also for our franchises. So we are optimistic, not just about the individual mobile business, but the strategic impact mobile brings to our overall growth plans that we have for the future.

David Karnovsky:

Hi. Thanks for taking the question. Just to follow up on Chris' commentary for a softer mobile market in the back half. I think that's how I heard it. Can you maybe just walk through some of the drivers of that? Is that something specifically in your pipeline or is that more related to broader factors like the economy or UA challenges at some of the platforms?

David Karnovsky:

Okay. Maybe I can just also follow up with one about economic risk more broadly. I think we've tended to think historically PC console games is kind of recession resistant just given the cup cost on a per hour basis of the content. But wondering, how you think that kind of dynamic holds up today, just given the industry has shifted so much towards live services, but then also increasing player engagement for things like subscription. Thanks.

David Karnovsky:

Thanks so much.

Andrew Uerkwitz:

Hey, great. Thanks for letting me ask a couple of questions here. The first one, probably for Laura, but just generally, COVID obviously impacted the way people played gains, but it also impacted greatly how games were being made. We've seen a ton of -- a lot of delays in the industry. Where do you think we're at? Are we to a point where delays will become fewer and fewer? Like how do you feel about making games today in the current environment?

Andrew Uerkwitz:

Got it. No, I really appreciate that color, Laura. Switching over to thinking about medium to long-term growth. You guys, I believe, I mean, you've announced or we've speculated that there's quite a few single player games coming. How should we think about growth from that vector? Should these be bigger in scale, so that they'll each kind of comp one after another nicely, or is it a quantity game where you launch one big one, and then we get a couple after that. How should we think about comping the single player games going forward as we build our models over the next couple of years? Thanks.

Chris Suh:

Yes, Andrew. And maybe if I could just add on top of that. Andrew, our Andrew here explained it well. But as we think about the model impact and the financial impact of that. I mean, I think the first thing to always keep in mind is that live services still encompasses on a trailing 12-month basis, over 70% of our business. And that has been a proven very reliable, highly reoccurring revenue stream, and that will still be the predominant driver in our P&L long term. Second, we've talked a lot about the areas of investment that we're making, and that's both in the live service as well as some of the single title launches that you've seen. And so over the course of time, we'll continue to invest in our long-term growth. We'll continue to invest in the ongoing stable performance of our live services business, and there'll be some puts and takes along the way.

Operator:

Your next question comes from the line of Omar Dessouky with Bank of America. Your line is open.

Laura Miele:

Hi, Mark. Well, first, yes, we are pleased with the launch of the game that met our expectations for the quarter. And what we saw with Apex Legends on console, as we all know, is it was a massive uptake in the beginning and then followed by stabilization and really steady growth over the life cycle of the game, and we expect the same of this title on mobile. And in fact, this is the pattern seen by many mobile shooters. There are many years of revenue and return generation to be had, particularly when you look at the shooter category and we expect the same thing to be true for Apex mobile. And keep in mind, we are currently in week eight. So many years ahead, and we are in week eight, just getting started. One thing we know is we're very good at listening to our community, and we know how to respond to the needs of players and then the game dynamics that are required to respond. And keep in mind as well, we have an incredible team on this. We have Respawn, who is just best-in-class in the business for shooters. We have a meaningful mobile infrastructure now to execute globally with the additions of Glu and Playdemic and our mobile organization. And we also have an exceptional partnership with Tencent. So we are -- we've met our expectations. We're encouraged and we also know we have a significant runway ahead of us on this title. As it relates to advertising, we are again, looking at advertising as a dimension of our mobile business, though this is one that is primarily going to be focused on the internal game monetization. And that's how we're looking at the optimization of return on our investment in Apex.

Laura Miele:

For Apex, we are -- it is -- we're holding it steady. So we are not changing our outlook on our investment or the return. So we're holding that for now. But again, as we -- the great thing about the mobile business is it's quite dynamic, and we're able to use multiple levers as it relates to game changes, evaluate engagement and evaluate the return that we're seeing. But at this time, we aren't changing our outlook on our investment or the revenue return that we get from that.

Andrew Wilson:

No. The way I would think about that, Omar, is that our guide takes into account what we view as the overall market conditions, Apex Legends had double-digit growth again in Q1. We're anticipating the full year to continue to grow on that very important franchise, and it does take into account both the things that we control from an execution standpoint as well as what we view as the market conditions, and that's all factored into the guidance that you heard.

Operator:

Your next question comes from the line of Mario Lu with Barclays. Your line is open.

Laura Miele:

Hi, Mario, thanks for the question. It's so early to be candid. But what we are seeing is we are seeing tens of millions of new players coming into Apex, and we're seeing a significant impact in geographies and growth in geographies as far as penetration of the brand and the experience that are expanding the Apex brand in places that the high def and PC console didn't necessarily. So it's, again, more expansion into emerging markets. and a lot of new players coming into the brand that we're optimistic about. But it's early days for us to understand to see how things will play out. We have a new season coming on the high def and PC game in about a few weeks here. And so we will study and understand the impact that mobile has had on that. So more to come in our next earnings potentially on the context around the impact on the overall business.

Andrew Wilson:

Yes. So I'll have Laura take the first part on just the performance in the quarter and then I'll talk a little bit more broadly about, how we think about the franchise going forward.

Andrew Wilson:

And more broadly, as we said, we're going to launch the most expensive FIFA ever this year. I think it's extraordinary in demand is really strong. I was I was just in Europe, but I was bumping into young kids, and they'd find out I was doing that already preordered FIFA, which was extraordinary. I think we're seeing growth in the sport. Of course, we've got a World Cup here. And so our belief is that this is going to be a very strong year for our FIFA business. What -- the way that -- and without going broadly into the mechanics of our relationship with FIFA contracts or what have you, what you should expect is that we will launch the most expansive FIFA ever, we will then continue to sell that in the market and we have the ability to continue to do that. And then, we will begin launching the EA SPORTS FC brand more deliberately and more broadly in the market, beyond, again, what we did earlier this year, where we had nearly 200 of our 300 partners came out and promoted the EA SPORTS FC brand as a brand that we all collectively own, the 300 partners, Electronic Arts and our community of many hundreds of millions of players around the world. And so, while the name of the game will change the nature of the experience and the connection that players have to the game, to the leagues and teams they love and to the players they play with and play against in the community, that's many hundreds of men strong. None of that changes. We'll invest strongly into that and we're very excited about what that future will bring. And again, we announced our new LaLiga partnership which is going to expand on the nature of things we can do. And you remember, as we've talked about this through, we have been deeply grateful for our partnership with FIFA, which has existed for nearly 30 years, and we've built a tremendous business together. But we've been very excited in every conversation we've had about the types of things we're going to be able to do with our partners and for our community in the context of the blurring of the lines of football fandom between linear and interactive, what we do in the virtual world, and what we do in the real world, what we watch on television, what we experience in game and what we've announced with LaLiga is just the first step of that. And you should imagine that we'll continue to build and expand on this opportunity to truly bring together, what is the largest global football community around a brand that we all own together EA SPORTS FC.

Operator:

Your next question comes from the line of Eric Handler with MKM Partners. Your line is open.

Laura Miele:

Sorry. Thanks, Eric. There's a question I was muted there. We remain incredibly bullish and excited about the F1 business. And I would say that the development teams have integrated well into Electronic Arts. And I think that they're seeing some of the benefits of our scale globally. And certainly, when you look at our marketing and commercial divisions, I mean, we've had some of the developers actually comment and note the global footprint and reach and impact they've been able to have through our presence that we have with our marketing teams, commercial teams and commercial partnerships that they just haven't been able to benefit from before. So we're seeing strong development impact from the leadership we have here probably mostly in this year's release, and we are very optimistic about some of the dimensions of the game that we're going to bring to market in the years ahead. And then just the strength EA SPORTS brand and the really strong marketing and commercial teams that we have. And for the Sims question, you mentioned, so we -- one of my favorite things about the Sims business is how healthy and strong it is. We actually released game packs, content and expansion packs several a year. So we are persistently connected to our players in that community. And we are pretty excited about how strong and the size of this business after about 10 years. We've had the Sims 4 brand out. So this is something that we persistently put content into the player community, and we'll continue to do that for the years to come.

Operator:

Your next question comes from Mike Hickey with The Benchmark Company. Your line is open.

Chris Suh:

Thanks Mike.

Andrew Wilson:

Yeah, great question. I'll start, and then I'll hand over to Laura, who's been working deeply with the team. The first thing, as I was saying earlier, we really see growth in our future built on two key vectors; one, the ability to create worlds and characters and tell stories and that was to build really large global online communities. When we look at Skate, I think what's happened is our ambitions have continued to grow. As you've seen what the team has been able to do around that experience, I think we continue to see opportunity. Skateboarding is kind of a cultural language for many generations. It transcends so many things, certainly geography and as we think about the ability to bring a global community of youth together through the language of skateboarding. We think this represents one of the biggest and strongest opportunities we have to build a global online community, deeply engaged in a world that involves creativity both from us and from them experiencing what starts out as skateboarding and almost certainly reaches more deeply into the cultural sensibilities of a generation. So as we thought about that, we really took a step back and evaluated how best we deliver that. And Laura has been working with the teams on how they've thought through that puzzle.

Mike Hickey:

Nice. Thanks, Andrew, Laura. A second question, Andrew, a bit awkward here, but bear with me. The sort of subsequent your last call, there was a media article that came out sort of related to consolidation and sort of frame you as persistently pursuing a sale, which was, I think, kind of somewhat unsettling or at least puzzling to the investment community, our clients and you get a lot of questions on it. So, just curious, if you can sort of provide some framework around that or clarification or sort of your motivation to run a stand-alone company or otherwise? Thanks.

Mike Hickey:

Thank you.

Doug Creutz:

Hey thanks. Since the last conference call, you guys announced Star Wars Jedi

Doug Creutz:

Okay. Thank you.

Operator:

That is all the time we have for questions. This does conclude today's conference call. Thank you for joining us. You may now disconnect.

Operator:

Good afternoon. My name is Charlie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Fourth Quarter 2022 Earnings Conference Call. Mr. Chris Evenden, Vice President, Investor Relations, you may begin your conference.

Andrew Wilson:

Thanks Chris. I hope all of you are well. I want to start by thanking our incredible teams at Electronic Arts. We have the most talented people in the industry who, every day, demonstrate passion, creativity, and determination. I'd also like to extend a warm welcome to Chris Suh. Chris joined us in March as our new Chief Financial Officer. He is an exceptionally qualified leader, and I am looking forward to our partnership as we drive our next phase of growth. EA delivered profitable growth in FY '22, a record year in every important measure of our business. Total players, engagement in our games and live services, net bookings, and underlying profit. We grew our global network of players to more than 580 million unique active accounts, fueled by new players joining titles including EA SPORTS FIFA, Apex Legends and The Sims, and new players that we welcomed from our acquisitions. The strength of our broad IP portfolio, our creative talent together with highly re-occurring revenue streams continues to super-charge growth in our business. We delivered $7.515 billion in net bookings and underlying profit grew more than 20%. It was a record year, and our talented teams rose to the challenge in a big way, to inspire and entertain hundreds of millions of engaged players worldwide. Games are now central to people's lives, and younger audiences have more power as consumers. Gen Alpha, Gen Z and Millennials are digital natives and they are gaming-first generations. They see gaming as their number one choice for entertainment. The consumption of entertainment and sport is deeply social, with players across our network using games to stay connected to friends, and to express themselves. The future of entertainment is interactive, and we derive strength from three structural advantages

Andrew Wilson:

Thanks, Chris. As we kick off FY '23, we are investing for growth from a position of strength. With a portfolio of amazing IP, the best talent, and a growing network of highly engaged players, we are scaling to deliver new experiences, on more platforms, across more geographies. Our total addressable market is expanding, and secular trends are driving more consumption of interactive entertainment. Our games are deeply social, and we will continue to build on our strengths as we invest to grow our biggest franchises to connect with more players in the future. We have a clear vision, a clear strategy, and we have a spectacular team ready to deliver in FY '23 for hundreds of millions of players, viewers, and creators around the world. Now Chris and I are here for your questions.

Omar Dessouky:

Hi, thank you for taking my question. It kind of looks like excluding the FX, you guys increased your guidance versus the mid- to high single digits, excluding the FX in Russia that is, versus the high mid-single digits that you had communicated on the third quarter call. First of all, is that the case? And second, has it become more clear since the third quarter call that the churn among gamers who joined during COVID lockdowns has run its course and that average revenue per paying user will remain near the highs seen during the pandemic as 2022 unfolds?

Andrew Wilson :

And as it relates to player engagement and the value that we see from that over the course of time, I think what you've heard from us throughout COVID is that players sort out our games in the beginning for entertainment reasons, but they stay deeply engaged in them beyond just entertainment. They really saw games as a means of deep social connection with their atomic unit of friends. And this is not four or five friends that you spend a great deal of your social time with. What we have seen even as we are moving past COVID and that people are returning to work and returning to live and returning to school is our engagement has continued to be very, very strong, and in many cases, across some of our franchises at record levels. Given the level of entertainment that we're developing and delivering, given the value of social interaction as part of those experiences, we think this is going to be a continued driver for growth for us.

Operator:

Thank you. Your next question comes from the line of David Karnovsky with JPMorgan. Please go ahead.

Andrew Wilson :

Yes. Great question. And as you will have seen from our press release today and certainly I think FIFA affirms some things on their own website, we've been working through this. We're very excited about the future of football. We have, as you heard in the prepared remarks, over 300 licenses that deliver the content and form the experience that we deliver to players that's most meaningful for them. We've got over 150 million players across unique accounts. And so when we think about the future of football right now, we've really made this decision on the basis of being able to deliver experiences that our players wanted. They told, they wanted more modalities of play. They told us they wanted to see more commercial partners in the game that are representative and authentic to the broad global world of football. They're telling us they wanted to move beyond just the core experience and really build out this digital football experience. And they tell us they want to move really, really fast. And so as we move through this, again, we are deeply grateful of our relationship with FIFA for nearly 30 years and deeply respectful for the partnership. And we've worked closely together as two organizations to ensure that we can deliver the biggest FIFA this year that we've ever delivered, featuring World Cup content from both the Men's World Cup and the Women's World Cup for the first time ever. And we work to do that because we believe that's important to our fans. And beyond that, we're excited to work with our 300-plus partners and all the new partners that we're going to have the opportunity to work with to deliver what we believe will be the greatest digital football experience available and sit at the very epicenter of football fandom globally.

Andrew Wilson :

Yes. I think it's a little early to tell yet. We're certainly being very thoughtful and deliberate about that. The important thing to understand though is that as you travel around the world and you meet with players who really are deeply engaged with our game, for a player in the U.K., the most important thing to them is the Premier League. For a player in Germany, the most important thing to them is the Bundesliga league. And Spain is La Liga and so on and so forth as you go around the world. What we're focused on right now is building very unique experiences for each of those fans in each of those markets. And what you've seen today is many of our partners come out in support of our ability to do this for our fans. And so certainly, any time you change the name of a product, you must be very thoughtful and we'll certainly have to think about marketing that front. But what gives us confidence as we move into this next phase of growth is that we are working with the partners and the content that our fans love and relate to most directly in the markets in which they do it.

Operator:

Your next question comes from the line of Benjamin Soff with Deutsche Bank. Please go ahead.

Andrew Wilson :

Yes, great question. I mean we remain very excited about the opportunity in mobile. It continues to be the single biggest gaming platform in the world with a TAM of 3.5 billion players. And so that's just -- to have that kind of TAM access is just extraordinary for us as game makers and delivering live services to that audience. We're seeing really good metrics around Apex Legends right now in test, and that will launch later this year. FIFA had its biggest quarter ever. They had a surge of 80% in users. And Lord of the Rings is coming from what has been our strongest mobile studio capital games who build these type of games and have done so well for us and have such an avid fan following. So as we think about moving forward in mobile, we think that the brands that we have, the expertise that we have, that we've built organically internally and that we've acquired through recent mobile acquisitions represents a really strong opportunity for us over the long term. Remember, when you launch these games, they last for 5-plus years as live services. And what you're seeing this year is three big launches for us in addition to our existing portfolio, which is incredibly strong, and we're going to invest behind that for the long term.

Andrew Wilson :

Yes. And that team is an extraordinary team and has always built an incredibly high-quality game, and that was really the impetus for the acquisition to bring that into the EA SPORTS brand portfolio. F1, as you may have seen, if you follow the sport is an all-time high in fandom we had, an extraordinary season last year between Hamilton and Verstappen. We're seeing an incredible season this year with Ferrari leading in the Constructor's Championship and Leclerc and others really pushing Verstappen. And so in our world, if you get to a place where sports fandom is high in engagement and the core sport is high, and then you couple that with an extraordinary development team who have a history and track record of building extremely high-quality products and then you layer in EA SPORTS marketing power and global reach, we think there's incredible opportunity there, and we think that business is going to go from strength to strength.

Eric Handler :

Good evening, and thanks for the question. I'm curious to think about the marketing investment that you're going to be spending on Apex Legends for mobile and then you got Lord of the Rings and you're still in the relatively early stages with FIFA for mobile. Should we be thinking about the investment sort of negating a lot of the revenue that comes in from these titles and really, you look to grow the player base in fiscal '23 and then you think about margin expansion in fiscal '24?

Chris Suh :

Yes. Maybe I could just add on to that, Eric. As you have a chance to go through your -- the model and the guidance that we gave, you'll see that is implied in that -- in the guidance and the cost structure, it is the points that -- to reiterate the points that Andrew made, we're excited about our opportunity in mobile. It represents an enormous TAM opportunity. We're excited about what we have in store for this year. It is a different margin profile, especially in the short term. But as Andrew pointed out, once we get to scale, we see great profit -- revenue and profit opportunity, and we're really excited about the opportunity you had.

Andrew Wilson :

So it's the cast of characters that you would expect from us, plus F1, so we would stretch our FIFA product, that's NHL, that's Madden NFL, that's F1. We've got a new golf game. I'm trying to think now, you've caught me off guard -- and super mega baseball, which was an acquired property. So yes, so -- and that's across console, PC and in some cases, mobile.

Operator:

Thank you. Your next question comes from the line of Drew Crum with Stifel. Please go ahead

Chris Suh :

Yes. No, it's a great question. Thank you for the question. As you rightly pointed out, Apex Legends had a terrific year in FY '22. We're across both financial metrics, but also all the player engagement data that Andrew spoke to. And so we're really excited about how we finished the year, coming out of that with a lot of momentum. We do have profitable growth planned again in FY '23. It's a large franchise for us. It's a big business. And so we'll see continued growth on that on the console and on the HD side. In addition to that, with the Apex mobile launch, we are anticipating this to be one of the most exciting launches that we've had on mobile ever. And so the combination of that indicates a lot of optimism and strength for the Apex mobile or Apex Legends business all up.

Drew Crum:

Thank you, guys.

Operator:

Thank you. Your next question comes from the line of Colin Sebastian with Baird. Please go ahead.

Andrew Wilson:

Yes. So let me touch on the first two and then I'll let Chris take the outlook piece. Again, I think that each time the team releases new content, new events, we see growing engagement and have demonstrated an extraordinary ability to really understand the things that are going to drive ongoing engagement for our community. So I wouldn't expect that we would see any decline in engagement with more content, quite the opposite. I think as we go to more platforms and we build out our engagement model over the course of time, I think that we'll see a growing audience, and I think we'll see growing engagement. And that has been our experience so far. In terms of supply chain shortages, again, we've just come off a record year. We beat on almost every measure, even in the face of what is almost certainly supply chain shortages around consoles and chipsets and graphics cards and these types of things. It's hard to know how much bigger that would be. I have to imagine with more consoles out there and more PCs and more graphics cards that our results may have been even better, but we're very happy with the results we had, and we look forward to as supply chain issues start to ease and more consoles end up in the marketplace and more graphics cards and more PC availability that more games have access to higher-quality machines, and that ultimately will drive engagement for us. If you go back through the course of time, at each platform transition, at each technology evolution, the gaming TAM and the gaming community broadly has grown. And so I think this only represents upside for us.

Colin Sebastian:

Thank you.

Andrew Wilson:

Charlie, I think he dropped off the line. So we can move to the next one.

Matthew Thornton:

Hi, good afternoon, Andrew and Chris. A couple of interrelated ones, if I could. I'm going to ask a question that was asked earlier but in a little bit of a different way. Since you guys talked about mid- to high single-digit bookings growth last quarter, as you've alluded to, there's a lot of incremental headwinds. So my first question is, is there anything that's changed in the fleet as you think about fiscal '23 versus kind of what you were thinking three months ago? That's question one. Question number two, the slate talked about a major IP in the fourth quarter. I'm just curious if there's a reason why that would fit better in fiscal 4Q as opposed to the traditional holiday quarter in 3Q where you typically might put a big piece of IP. Any thoughts there? And then just finally on -- maybe, Andrew, you could talk a little bit about just the work-from-home transition to back to office, how that's playing into productivity and how that maybe gives you confidence that you could kind of release these titles because you do have quite a few in the back half of the year, including in 4Q. So I'm just curious your level of comfort with that based on what you're seeing in the productivity trends. Thanks guys.

Chris Suh:

Three parts.

Chris Suh:

I think you got them.

Mike Hickey:

Hi, guys. Andrew, and Chris, and Chris, great result, guys. Thanks for taking my question. First question, I guess, just on the economy here. It's been a while, I think, Andrew, has been the business has sort of been captured with our recession. So whether or not we going recession, who knows? How do you think about [technical difficulty] player fee closing up now that pretty much service versus premium digital versus [technical difficulty]. Would you imagine a sort of mix shift, if we do have recession here or pullback in discretionary spend towards free-to-play? Just sort of guess the puts and takes on your clarity and then how you factor that into your guidance? And then I have a follow-up. Thank you, guys.

Mike Hickey:

Thank you.

Mike Hickey:

Whole day, okay. Sounds good. Second question, Microsoft, hope you can hear me. Microsoft and Sony were sort of flirting -- at least that was the rumor flirting with the idea of adding advertisements into free-to-play game experiences maybe as a way to sort of help developers monetize their player community. And of course, you guys -- you go way back to Burnout Paradise to sort of impetus for trying the idea on the billboards in that game. So obviously, this idea has created a lot of debate within the player community. But just sort of curious your thoughts on whether or not ad monetization and free-to-play games is something that you think can be meaningful and then how you sort of balance that with the player experience. Thanks, guys.

Mike Hickey:

Thank you.

Operator:

Thank you. The next question comes from the line of Mario Lu with Barclays. Please go ahead.

Andrew Wilson :

Let me start on the World Cup mode with FIFA. And again, in the context of live service, we're always balancing the investment of time and the investment of dollars from the community. And at any given point in time, based on what's going on in the world of that game and in this case, in the world of football and of the gameplay community, we will look to leverage new content and new events and new experiences either to drive greater engagement and provide new interesting things for players to do or it might be a monetization opportunity. You might recall the last time we did the World Cup, it was an extraordinary engagement opportunity. And I don't have the numbers at the tip of my fingers. But if I remember rightly, we brought 12 million or 13 million people back into the game who had lapsed out of the game through World Cup content and drove incredible engagement through the event and then, of course, as part of the ongoing live service, continue to grow the business over the course of time. We will think about it this year in the same context. We're always thinking about our player community and always thinking about the balance between the investment of time and the investment of dollars, all in service of a more positive and more immersive and a more entertaining player experience. In terms of the value of cross-play, I don't think we have any specific data on that yet out of FIFA. In other franchises is certainly where you get greater liquidity in the franchise and friends can play with each other across devices. That's always a good thing for players. But remember, in our FIFA experience, which has 30-plus million people playing across console and PC, it's already a highly liquid community and every platform already has more enough players to sustain the ongoing player experience. But certainly, as we think about the future of all of our franchises, we want to get to a place where the entire community can play together, and that will be part of our driver as we move forward.

Andrew Wilson :

No. And again, we take a long view here. This is one of the great franchises in our industry, built by one of the great teams in our industry. And our expectation is that we'll continue to grow and be a really important part of our portfolio for many, many years to come. We've got incredible leadership over that team now. They're rethinking the development process from the ground up and really using kind of the Vince Zampella/Respawn model of get to the fun as quickly as possible. They've been doing thousands of updates for the community working on quality of life and really getting the core game right. I think there's still more work for us to do there, and the team is committed to doing that work for the community. And beyond that, once we get to a place where we feel like we're in the right place with the core experience and with the core game, then you should expect us to invest and grow beyond where the game is at today.

Operator:

Thank you. Your next question comes from the line of Doug Creutz with Cowen. Please go ahead.

Andrew Wilson :

Yes. Right now, I think we're looking at going into further testing at the end of May and then subject to the metrics and the data that we've seen and the engagement they see, we might look toward the end of this year, beginning of next year for a global launch. Remember, in mobile, it all really comes down to the tuning and balancing once we go into kind of that Closed Beta phase. We don't have any money in FY '23 right now against that title. So if it was to launch in the year, that would be an upside potential for us. And we want to give ourselves the opportunity to ensure that we -- the game has all the soft launch and Closed Beta that it needs in order to tune and balance. But having played the game, I can tell you, I think that we're excited for the potential.

Operator:

Thank you. Your next question comes from the line of Jamie Bass with Berenberg. Please go ahead.

Andrew Wilson:

Maybe I'll start with the second one, and then we'll move back to the first one. Certainly, I think that competition for great talent has always been incredibly high in our industry, and that's no different now. When we think about hiring new talent and we talk to candidates, they really make employment decisions based on four key vectors

Chris Evenden:

And that brings us to the end of…

Chris Evenden:

Okay. Go ahead, sorry.

Chris Suh:

Thank you so much.

Operator:

And this concludes today's conference call. Thank you all for participating. You may now disconnect.

Operator:

Good afternoon. My name is Anita, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q3 2022 Earnings Conference Call. Mr. Chris Evenden, VP of Investor Relations. You may begin your conference.

Andrew Wilson:

Thanks, Chris. I hope all of you and your families and loved ones are staying healthy. Let me first say thank you to our talented teams at Electronic Arts, all 12,000 people putting so much energy every day into doing amazing things for our players. As we begin, I’d also like to say a few words about John passing. John’s passing was a tremendous loss for the American football community, for the sports world at large and for all of us at Electronic Arts. Through his years as a winning coach, as a beloved broadcaster, and as the pioneering namesake of our game, Coach Madden was football for tens of millions of fans. He taught us many things over nearly 35 years of partnership. Some of his most important lessons, including authenticity, are things we’ve held close to EA SPORTS ever since. We feel incredibly fortunate to have been part of Coach’s legacy and just as fortunate to be part of how it will live on through our future Madden NFL games. We will have more to share about how we are honoring Coach Madden in the weeks ahead and from all of us at Electronic Arts, our thoughts and sympathies continue to be with his family, friends and many, many fans. It has been a year of outstanding growth so far in FY 2022. Q3 was a record quarter, with our live services and mobile portfolio delivering strong recurring revenue and year-over-year growth. Our franchises like Apex Legends, our EA SPORTS titles, The Sims and more have universal appeal and as we expand to more ways to play across more platforms and business models, we are growing our total players, engagement, net bookings and underlying profitability. We did have a challenge in Q3 as the launch of Battlefield 2042 did not meet expectations. Battlefield 2042 was always an ambitious game and our teams pushed to innovate across many dimensions including massive scale and 128-player matches, new modes, new dynamic gameplay and more. Developing this game with our teams working from home for nearly two years ultimately proved to be challenging. Through our processes for testing and preparation, we believed the experience was ready to be put into our players’ hands. We launched with strong stability, however, as more players experienced the full game, it became clear that we are up and -- unanticipated performance issues that we would need to address. Some of the design choices we made with the game also did not resonate with everyone in our community. We are fully committed to realizing the full potential of this game and fully committed to our Battlefield fans. We have already implemented a series of major updates to the game, and there is more to be done. Players can expect meaningful updates to continue in the weeks ahead and we are shifting the first season of live service content to early summer as we work closely with our community to evolve and improve the core experience in Battlefield 2042. Despite Battlefield’s miss against our expectations, with the strength of our business we are continuing to deliver record growth and performance in FY 2022. With Battlefield’s performance to-date and our decision to move the first season of live service into Q1 FY 2023, so we can focus on the core experience, we have adjusted our full fiscal year net bookings guidance to $7.525 billion, which remains $225 million above our original net bookings guidance for FY 2022. On the strength of our live services, operational discipline and continuing digital transformation, we’re reaffirming our full-year expectations for underlying profitability. We expect strong growth to continue in FY 2023. Looking across our portfolio, we saw continuing year-over-year growth in total players, engagement, net bookings, cash flow and underlying profitability in Q3. I’ll touch on each of those pieces here. Beginning with total players, our games and experiences connect a global player network that continues to scale. Over the last year, our network has grown to more than 540 million unique active accounts, across more than 18 games and 25 live services, spanning all major platforms from consoles to PC to mobile and cloud. From an engagement standpoint, more players are spending more time in our titles. Looking across our portfolio on all platforms, we’ve had more than 180 million monthly active accounts on average in our games during FY 2022. Apex Legends monthly active players are up more than 30% year-over-year in Q3, and across our combined EA SPORTS portfolio, monthly active players are also growing year-over-year. Engagement is deepening as well, with players spending nearly 20% more time in games across our portfolio in FY 2022 compared to the previous year. Growth in our network and engagement continues to drive growth in our business. With our top franchises delivering strong recurring revenue, our net bookings for Q3 grew 7.4% year-over-year for the quarter and for the full year we project 22% growth in net bookings over last year. Performance across the business and operational discipline also continued to deliver strong cash flow and underlying profitability growth in Q3. This continuing growth is anchored by proven franchises where we have a strong track record for execution. Apex Legends is now one of the biggest and most successful ongoing live services in the industry and is built on our owned IP. With more than 28 million new players joining in the last year and new seasons and in-game events that continue to deliver new experiences to a deeply engaged community, FY 2022 is the biggest year yet for Apex. Average player investment in the game has grown significantly year-over-year and we expect to achieve -- and we continue to expect net bookings for Apex to approach $1 billion in FY 2022. We are expanding to reach more players and viewers, with new original content on the way, our growing Apex Legends esports ecosystem, and Apex Legends Mobile which will soon be moving into soft launch as we continue our worldwide rollout. We’ve had strong engagement and community feedback during closed beta testing and we’re excited for more players to experience Apex Legends Mobile soon. Mobile is a core growth engine for us, and it is accelerating. With new launches and acquired expertise and technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY 2023 with growth well into double digits. Led by Apex Mobile, our newly-updated FIFA Mobile game, Golf Clash and more unannounced projects, we are expanding our portfolio of more than 15 top mobile live services to reach new audiences and grow our recurring revenue. EA SPORTS is a powerhouse in the sports and entertainment world. We’ve driven hundreds of millions of dollars in net bookings growth year-to-date, with our EA SPORTS business up nearly 10% year-over-year. We continue to see incredible growth for the future of global soccer and our global soccer franchise was the number one title in the western world in calendar 2021. Madden NFL 22 was the number one sports title in the U.S. during the holiday period and it was the number three top selling game in the U.S. for all of last year. Under our leadership, F1 2021 also continues to perform well above expectations with unit sales nearly doubling year-over-year during the holiday period. In our mobile sports portfolio, we just launched the latest version of our EA SPORTS FIFA Mobile game around the world. This was the biggest update to the game ever and early performance has been exceptional. Engagement is up more than 50% over the previous season and retention in the first week is nearly double. With the added expertise of Playdemic and Glu, and a deep pipeline of new sports experiences in development, EA SPORTS continues to be an exceptional growth business, built on predictable and recurring revenue with outstanding opportunities ahead. Our pipeline further amplifies our strength. In addition to our core franchises, we are building new experiences in some of the biggest enduring IP in entertainment. Last week we announced a new agreement with Disney & Lucasfilm Games to develop new experiences in the Star Wars universe, continuing our collaboration of more than a decade. Respawn is leading development of the next game in our action-adventure Star Wars Jedi series, as well as two additional Star Wars titles. This adds to our deep pipeline of announced and unannounced projects with our wholly-owned IP, including Need for Speed, our BioWare franchises, The Sims, Skate, Dead Space and more. Looking forward, we are continuing to build on the structural advantages of our portfolio and accelerating growth by executing against our core strategy. We are focused on creating amazing games and content, providing creation tools for the community to engage more deeply with our experiences, aggregating and distributing our content and experiences to more players on more platforms, more geographies and business models, and harnessing the power of social ecosystems in and around our games. The demand for amazing games and new ways to play, watch, share and create has never been stronger. As one of the industry’s largest and most profitable businesses with strong recurring revenue, we are well-positioned to take advantage of this continued secular growth. We look forward to delivering against these opportunities through FY 2023 and beyond. Now I’ll hand the call over to Blake.

Andrew Wilson:

Thanks, Blake. These are exciting times in our industry. Interactive entertainment continues to grow by every measure and our audiences are expanding and diversifying, major franchises are at the center of culture and entertainment, and the world is recognizing how games have the power to connect global communities. Our focus continues to be on our people, our players, on our amazing portfolio of games, content and services, and extraordinary growth opportunities in the future. Thanks to our incredibly talented teams at Electronic Arts, we are delivering entertainment to hundreds of millions of people around the world and connecting them through some of the most powerful and enduring franchises. With the breadth and depth of our business that continues to expand our network, deepen engagement, and drive growth in our recurring net bookings and ongoing profitability, we are well-positioned and strategically -- well-positioned strategically to continue building on our success and delivering for our players. As we look ahead and Blake just referenced, we were excited to announce yesterday that Chris Suh is joining Electronic Arts as our next CFO. Chris is coming to us after more than 25 years at Microsoft, where he served as Corporate Vice President and Chief Financial Officer of the Cloud and AI group, which he led with incredible success during Microsoft’s transformation to a cloud-first company. We have a big vision for the future, and in addition to Chris’ financial leadership of our organization, I look forward to having him as a strategic partner with extensive experience driving scale and growth to help us achieve our goals. As we announced previously, Blake will be leaving our team after nearly a decade of leadership at EA. Blake has been an incredible leader, partner and advisor. But most importantly, he is a dear friend and I feel deeply grateful for our time working together. His expertise and the team he has built have been instrumental in our growth and financial achievements, and have positioned us well for continued success. Blake will remain with us until the summer to assist with the transition and special projects. Thank you, Blake, for everything you’ve done and continue to do for our company, and again, thank you for your friendship. Now, we are here for your questions.

Benjamin Soff:

Hey, guys. Just a quick thank you to Blake for being a great partner and looking forward to meeting Chris. Two questions. So, first, just around Battlefield, can you guys sort of frame for us how you think about the vision for the future of that franchise, and in particular, how the new leadership for the Battlefield you are just thinking about expanding and adapting that franchise over time? And I’ve got a second question.

Benjamin Soff:

Got it. And then, just in light of the announcement that you guys are working on those three new Star Wars games. Can you talk a little bit more about your vision for that IP? And is it fair to say that going forward, you’re planning to lean more towards investing in your own IP? And if so, what are the like some of the potential pros and cons of that as a strategy? Thanks.

Operator:

Your next question comes from the line of Andrew Uerkwitz from Jefferies. Your line is now open.

Andrew Wilson:

Yeah. Great question. And you should imagine we read this for some time as it turns out and part of the reason why we have built the strength in our broad and deep portfolio and why we have gone out in search of the best teams in the industry to bring them into our company and build great entertainment for our global player base, what is now well over 0.5 billion fans, is because we do believe in the power of entertainment. We just believe in the power of interactive entertainment. I think what we’re seeing now in the marketplace is the launching of the value of what we do in particular. And so, as I think about the attainment coming together, you’re seeing some other companies talk about this. But when we think about our players and we think about the things that they engage in, they play our games more than any other form of entertainment, but they also consume linear media and scripted entertainment and sports broadcasts, and music and other things. And so, as we look at the future, we are building strength in our whole ability to live interactive entertainment to our fans, which we think will continue to grow well north of a 1 billion fans over time. But we’re also aware that our fans are expecting us to find new and interesting ways for them to experience entertainment. And so, as our -- as we think about the future, you should think about it with IP at the center and engagement around play, watch, creep, social ecosystem that brings that they love. And when you look at our strategy of what we’re doing around in great -- creating great entertainment, around building tools, so that now community can engage more deeply, around the aggregation and distribution of content across platforms, across business models, across geographies, and really leaning into the social ecosystem to the board out of engagement in our games, I think you should imagine that’s what the world look [Technical Difficulty]

Operator:

Your next question comes from the line of Mike Hickey from Benchmark. Your line is now open.

Blake Jorgensen:

Sure. Let me -- Mike, thanks for your nice comment to the other analysts as well. Unfortunately, I’m sure I won’t get as much skin as I would like. But we’re going to refrain from trying to give updates there. Remember, Battlefield is less than 10% of our revenue. We sold less units than we thought we would. But what I would say is that, remember these [Technical Difficulty] and so our goal is to add new excitement to stretch this out. And in some ways, we hoped it benefits FY 2023 since we’ve had a pretty strong FY 2022 and so it helps us in the future. I’ll let Andrew address the second part of your question.

Operator:

Your next question comes from the line of Eric Handler from MKM Partners. Your line is now open.

Andrew Wilson:

Yeah. Great question. I will tell you, I started this industry over 20 years ago. At that point in time it was the fastest growing entertainment industry on the planet by a wide margin. I think it has been the fastest growing entertainment industry on the planet every year since then. But still people seem to be surprised by this. So we’re not surprised by it at all, and I think, as technology has continued to evolve, we have been able to deliver new and interesting and fun ways to engage with content. And what we’ve seen more recently is just how powerful the social ecosystem, the social networks bought out of engagement in our games truly are amazing. Now -- it’s not now just about ingesting entertainment the same way we do traditional scripted media or traditional broadcasters, usual music. This is about experiencing entertainment with your friends and that’s unbelievably powerful. I think that has been really the fuel that has driven the growth in recent time. As part of that, of course, the ability to create your own content and put it into that ecosystem has become a really valuable part of, of what our industry offers to our players and our fans. The traditional media just doesn’t and this is something that we hold true. Again, it’s been at the very center of The Sims for a long time. It’s at the very center of mode like FIFA Ultimate Team and Madden Ultimate Team, to the very center of the design of Skate, which we’ll be launching soon. And so this concept of UGC or user-generated content is really just an extension of the social interaction that I’m able to have with my friends in and around experiencing what is the best anytime on the planet. And so I believe that’s going to be a really important part of our future. Now, to the extent whether we want to build that out or buy out over time, right now we are building, we’re building technology, we’re building credit, we’re building assets with we’re offering that out to communities around the world and we’re seeing great uptake of that. If there was an acquisition opportunity in the future, we would openly look at that, but we don’t -- we’re not looking at anything at this juncture. Around the NFT and where VCs are investing, again we see this also happened our industry. We start with 3D, we start with AR/VR, we’re now seeing with MCs. There’s always something in and around our industry that is driving a lot of external investment. The way I look at this is, collectability is really built on four key metrics. It’s around high quality content, it’s around scarcity, it’s around proof-of-authenticity and it’s around a group of people that find value in that content. And we’ve seen that happen in the real world and we’ve seen that happen in a virtual world. We’ve certainly seen that happen in and around our games for some number of years. And I believe that collectability will continue to be an important part of our industry and the games and experiences that we offer our players. Whether that’s part of the NFT and the blockchain? Well, that remains to be seen. And I think the way we think about it, is we want to deliver the best possible player experience we can. And so we’re going to -- we will evaluate that over time. But right now, it’s not something that we’re driving audience.

Operator:

Your next question comes from the line of Matthew Thornton from Truist Securities. Your line is now open.

Blake Jorgensen:

So let me -- I’ll start on the live service piece and then I will let Andrew hit the second question. Live service growth in the quarter was 9% and trailing 12 months is 21%, and that’s across all of our live services. And so, if you look at something like Apex or FIFA, they’re clearly well north of that. And we feel -- continue to feel it is one of the cores of our business, because it is reoccurring and highly dependent on the social networks that we’ve created in our games, and particularly, on sports, those are evergreen networks that continue every year. And so the metrics we see are exceptional up well over last year. If you look at the Apex numbers, as we reported, the dramatic improvement year-over-year and everything they do is continuing to try to drive engagement with people that brought a large number of new players into the game or obtained players and continue to come up with amazing and unique ideas for ways to play. So we’re very excited about how that continues and it continues across all of our sports, and we’re looking as to how do we do that across more and more games going forward. So I’ll let Andrew talk about Glu a little bit.

Operator:

Your next question comes from the line of Drew Crum from Stifel. Your line is now open.

Blake Jorgensen:

Yeah. I can take the OpEx question quickly, Drew. I mean, clearly, most of that was driven by two things; one is, our acquisitions, probably, the biggest driver of it; but second is, driven by the fact that we’ve used this opportunity of some questions in the gamer community about which companies are going to be around and which aren’t, and we’ve been able to hire some amazing talent during that because of our stability. And so that doesn’t continue on forever. Obviously, the acquisition growth is a one-time component, sorry. So, I think, we’re -- remember our OpEx is really comes down on two things, headcount and marketing expense. So the marketing expense will swing by the titles that are in any one year, but we’re pretty good at managing that. And the headcount we’re also very good at managing and so I don’t think you’re going to see a jump like we’ve seen this past year. But remember, even with the OpEx growth that you see, look at the Q3 EPS number. I mean, clearly, we’ve been able to manage that even with a downdraft of $48 million in revenue that we didn’t originally plan. And so we’re a pretty flexible organization to be able to try to manage that to keep margins going and so I think you’ll see that going forward.

Operator:

Your next question comes from the line of Jason Bazinet from Citi. Your line is now open.

Andrew Wilson:

Yeah. I mean a great question and certainly another one of these things that is kind of a topic gives you at the moment and many people are talking about it in different contexts, quite frankly. At the end of the day, the metaverse is a three dimensional social space where you come together to experience things with your friends. And so now much of that happens in the two dimensional internet around the social networks that we see. But I will tell you, a lot of that happens in the context of our games. And as I look at the nature of our games, I look at the engagement that we’re seeing inside these 3D spaces that we create in and around sports and other worlds. What you see with our industry is the beginnings of what a metaverse might be. And over the course of time, you should expect us to continue to expand and extend the world that we have been creating for the last 30 years and deliver more experiences beyond the core consider the game. So what can you do in FIFA beyond playing football? What were you doing Need for Speed beyond driving the game? What will you do in The Sims as you come together with your friends beyond the creation of content? And you’ll see that continue to evolve for us over the course of time. And I don’t know ultimately what the metaverse will become. But what I do know is the games we create are becoming more important as social spaces and they are just as places to enjoy great entertainment as we continue to build out those experiences and as whatever the metaverse becomes it’s an almost certainty that we will play a very important role in it and that our players will be on the leading edge of the evolution of what these spaces might become.

Operator:

Your next question comes from the line of Mike Ng from Goldman Sachs. Your line is now open.

Andrew Wilson:

Yeah. Let me quickly hit on the EA Play component and then I’ll let Blake talk about the mid-to-high single-digit growth. EA Pay continues to grow for us. It continues to be a really, really positive consumer experience, getting access to some of the greatest content in the industry. What we see more broadly across entertainment is its subscription continues to be a core driver. And what we’re able to do is drive ongoing engagement, perhaps, in a way, even it -- the stronger than traditional linear or scripted entertainment. I think that you’ll -- we will continue to see consumers engage in our content through subscription and we will continue to provide our content that way and I think we’ll start to see more and more growth across platform. We continue to be the leading provider of a gaming subscription across platforms in our industry, and with the depth and breadth of our portfolio and the new experiences we have coming. We believe that we’re going to continue to drive growth. And over the course of time back to my earlier point around entertainment, you might expect us to do more things beyond just games in the context of that subscription around a broader service for our clients and we’re pretty excited about what that might become over the course of time.

Mike Ng:

Great. Thank you both. Sounds incredibly helpful. And Blake, best of luck in your next chapter.

Operator:

Your next question comes from the line of Mario Lu from Barclays. Your line is now open.

Blake Jorgensen:

I appreciate that.

Andrew Wilson:

Yeah. So let me start with Madden. Madden is also having a great year and we’re seeing tremendous growth. As you know and then for all of you who follow the season, this has been an unbelievably exciting season of football and what we know…

Andrew Wilson:

…and let’s -- well, and what’s exciting for a second, the playoff games and the season overall has been an unbelievably exciting game. The ratings for the NFL have been extremely strong through the year and that’s driving really strong engagement in and around our Madden franchise and it continues to go from strength-to-strength.

Andrew Wilson:

Yeah. And one thing, I just remind everybody, and we may have already said this, but I’ll say it again. We shipped last year order due to the pandemic. We delayed it three weeks to move it into the third [Tech Difficulty] this year and the second quarter. So when you look at the growth of the third quarter, knowing that that didn’t include the initial shift in a FIFA, it’s almost hard to believe the strength of the business. And so I just want our people not to forget that and we’re not going to provide numbers or details around that exactly, but just know that the situation we are having moved [Technical Difficulty] back to the second quarter. It’s pretty impressive.

Operator:

Your next question comes from the line of Andrew Marok from Raymond James. Your line is now open.

Andrew Wilson:

Well, some detailed questions and the great question. So thank you. On Apex, again, as we -- as the teams put together these seasons of content and they think about that new content, a new modality to play, a new ways to connect. Remember, Apex is now well over 100 million clients. So there’s no one size fits all component that really attracts new players or engages any broad group of players deeply. I think what the esports team and the Apex team in particular have been able to demonstrate is they work very close with their community. They deeply engage with their community and they are delivering content modalities, applying maps, these things that really speak to what the community are asking for and what we’ve seen since the very beginning of the launch of this game is them being able to work in a very calculated way around the delivery of really interesting new content, new maps and new models apply on a season by season basis that has continued to grow the overall player base, continue to grow the overall experience, continue to grow the engagement that play base has with the experience and the investment those players are making as part of their engagement. And so we’re very excited about that.

Andrew Marok:

Thank you.

Doug Creutz:

Hey. Thank you. Cloud+ dropped a pretty expensive looking halo trailer over the weekend and Netflix has had some success with The Witcher and League of Legends on their streaming service. There’s absolutely ravenous demand for content right now from 0.5 dozen or so streaming services. And you guys have some IP particularly within BioWare that I think would be pretty good as a basis for show. Are we finally at a point where video game IP has some meaningful transmedia opportunities or do you think that’s still more theory than a reality?

Doug Creutz:

Great. Thanks, Andrew, and best wishes, Blake.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator:

Good afternoon. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q2 Fiscal 2022 Earnings Conference Call. Mr. Chris Evenden, VP of Investor Relations. You may begin your conference.

Andrew Wilson:

Thanks, Chris. I hope all of you are well and staying healthy. Let me begin with a big thank you to our teams who continue to work from home and do amazing things for our players. I also want to extend a warm welcome to everyone at Playdemic who are now officially part about Electronic Ops team. We're thrilled to have them on board adding to our continued strength in sports and mobile. Q2 FY '22 was the strongest second quarter in the history of Electronic Arts. We're growing with our leading franchises, new launches, and large services all performing well during the quarter and our acquisition are driving additional growth beyond our core business. With more than 500 million unique active accounts, we're connecting players all over the world to each other, to a more about favorite content. As a result, net revenue, net bookings, and EPS were above our Q2 guidance. And we're now raising our full-year net revenue, net bookings, and EPS guidance for the second time this fiscal year. Our core strategy is built on full key opportunities. The creation of amazing games and content. Tools for the community to engage more deeply with our experiences. The aggregation and distribution of content and experiences to an aggregated audience across platforms, business models, and geographies. And harnessing the power of the social ecosystems in and around down gains. As part of this, we are executing against 3 growth drivers in FY '22, expanding our blockbuster franchises, building on our leadership in sports, and growing live services across our portfolio. I'll focus my comments on these today. With our talented creative teams, powerful IP and platform rates, we continue to grow leading blockbuster franchises. Experiences like EA sports FIFA, Apex Legends, Madden NFL, Battlefield, and The Sims, are some of the most prominent and powerful properties in all of entertainment. Apex Legends continues to grow as one of the top franchises in the industry. A brand-new IP that has scaled to more than a 100 million players and is closing in on a billion dollars in net bookings annually. Season 9 and season 10 introspectively set new marks for the highest active players of Season one. And Q2 was the biggest quarter of income spending in Apex that we've had to date. Apex is growing beyond the game as well. It was one of the most watched titles on Twitch during the quarter with more than a $130 million hours of season 10 content watched to-date, up nearly 40% from the previous season. As the success of Apex Legends continues, it demonstrates how we are building long-term ecosystems in and around our biggest franchises. At its core is outstanding gameplay. Embedded in an immersive world of law and characters that continues to expand. Seasons of new content and in-game events like the recent collection event, keep the experience fresh for new and returning players. We've introduced new experiences like the squad-based arenas and recently added a ranked mode. The Apex Legends eSports ecosystem is growing as well. With the second year of Apex Legends Global Series now on the way. Apex is moving from strength to strength. And we will add to that when we bring Apex Legends to mobile platforms later this year. Battlefield, another of our blockbuster properties in beloved by tens of millions of fans. Ahead of our upcoming Battlefield 2043 launch this month, 7.7 million players participated in the Battlefield 2042 open battle in October, including 3.1 million during the early access period, which is the largest early access event we've ever had. This is an opportunity to take an early version of the game still in development, bring in a large audience into the experience and test and learn ahead of launch. With a small squad for the game in our open beta, we brought players into the full scale, 128 player combats, and many of the only in Battlefield moments that make this franchise so special. The engagement and feedback from players also helped out teams with areas of the game play to polish and refine as we move towards launch. We've now revealed all three of the game’s pillars. [Indiscernible] 128 plan multi-play Income Quest and breakthrough modes. Battlefield portal, a new write-up play that has the community very excited to create their own Battlefield experiences and hazard zones with completely new squad focus combat and tactical gameplay that fans are going to love. We're looking forward to play as getting to all of these experiences when the full battle for 233 game launches on November 19. Europe 0.22, we're continuing to grow our leadership in sports through new gains, acquisitions, and new areas of expansion. Our global football, or soccer for us in the North America franchise continues to be one of the leading game properties in the world, with approximately a 100 million players across all platforms in the first 6 months of the fiscal year. EA Sports FIFA 22, which launched at the very end of Q2, is off to the strongest start in franchise history. The innovation and our new Hot promotion technology revolutionized gameplay and has inspired, engaged in growing the community. Total players were up 16%, and [Indiscernible] franchise players are up nearly 50% year-over-year from launch. With net bookings also up significantly year-over-year from launch. We're seeing growth across the game with Ultimate Team engagement up 15% year-over-year, and more players coming into Volta and career modes. There is strength in all areas of our global football franchise, including Mobile, will later this fiscal year, will bring new modes, new features, and improved gameplay that FIFA Mobile, creating our most rewarding mobile football experience today. For nearly 30-years, EA SPORTS has been driven to create the best global football franchise in the world. Moving forward, we're in a position to drive greater growth in line with the continued expansion and popularity of the sport. With the talent of our development teams, our robust portfolio of more than 300 license part including the Premier League, UEFA, CONMEBOL, the Bundesliga, LaLiga, Serie A, the MLS, [Indiscernible], and many more. And our expertise in growth areas including e-sports and mobile. EA sports are ready to activate across the full spectrum of the football world. We have opportunities of new modalities of play, and new social experiences that will bring more fans together. As the sport grows, we have opportunities to expand cultural and lifestyle experiences through brand partnerships and content that our fans want more of in and around the game. And we will continue to lead with the most innovative games on more platforms bringing the full breadth of the sport to the forefront from grassroots football to more of women's league teams and clients. We are more confident than ever about our broad future football and we will grow our franchises leadership with our partners around the world. We are continually investing in innovation, creativity, and all benches to bring EA SPORTS games close to the heart of real-world sporting fans. Engagement in Madden NFL '22 has grown each week of this NFL season as players jump into the refreshed Franchise Mode and Madden Ultimate Team to connect and compete with their friends. We've grown the implementing business year-over-year as F1 2021 when Codemasters continues to bring in more players and keep fans engaged in one of the most intense F1 [Indiscernible] in years. NHL 22 launched in October, just as the NHL season began. With a new next-generation console experience delivering a dramatic new visual and gameplay leap for hockey fans. With a portfolio that now spend global football, American football, basketball, hockey, baseball, golf, UFC Fighting, and racing. No other entertainment provider in the world has the reach across top-level leagues, teams, and partners as EA SPORTS. We have a unique opportunity to bring together these properties and passionate [Indiscernible] enabling social connections through more innovative experiences and content. Expanding a live service across our portfolio, particularly in mobile, is our third growth driver for FY 2022. In Q2, we closed the acquisition of Playdemic, creators of the massively successful Gulf clash mobile games. We're looking forward to combining our strength to continue the success of Gulf clash as a live service and bringing the clash mechanic to more of our sports franchises where our [Indiscernible] expertise will enable us to create some great new experiences. Our EA Mobile teams also continue to derive success in launch services, including Star Wars Galaxy of Heroes, which surpassed 100 million players last-to-date in Q2. Through the collective talent of the Glu Mobile, Playdemic, and EA Mobile teams. We have built a powerful mobile [Indiscernible] of organization within a year. This group is shortly for accelerating growth in our portfolio. More than 15 top mobile live services, as well as introducing new experiences that takeout powerful IP, including Battlefield in the expanding mobile audience. The opportunities in front of us are exciting. We feel great about the position we are in with strong leaders, including our new Chief Operating Officer, managing Company-wide operations, creative leaders joining our management team, and our new Chief Executive Officer leading our efforts to grow social ecosystems. All supporting our 19 games as we drive growth in the next year of interactive entertainment. Now, I will turn the call over to Blake.

Andrew Wilson:

Thanks, Blake. The holiday quarter is always an exciting time. We're looking forward to delivering amazing entertainment and connecting hundreds of millions of players around the world through each other throughout games and live services in the months ahead. I'm going to take the opportunity here to say thank you again to our incredible teams at electronic apps. Their commitment to creativity and innovation in service applies is second to none. And every day it is inspiring to work alongside such talented and dedicated people. It's been a strong year to date, and we're confident in our plans to drive continued growth in the years ahead. Now, Blake and I are here for your questions.

Mike Ng:

Hey, good afternoon. Thank you for the question. I just have two. First, I was just wondering if you could provide us an update on your outlook for some of your new Mobile titles like Apex Legends and Battlefield, and then second, I was just wondering if you could offer some thoughts on the FIFA license, how aggressively will you negotiate for that, and what are some of the contingencies that you have planned for that one. Thank you.

Andrew Wilson:

Yes. And I would just cover up. The metrics that we're getting out of those games continues to be very strong. And so, we continue to be confident about the opportunity around both of them. And with respect to license negotiations, I would start by saying, we have great relations with all of our partners, all 300 of them, including FIFA. As we think about the future of football, we think the future is very bright. We are positive and very fabric of the cultural football globally and important part of fandom for football, and when we got to interact with hundreds of millions of football fans, they tell us they want more cultural brand involvement from across the globe. They want more modalities of play inside the game, which go beyond just straight 11 on 11 football. They want more digital experiences outside the game, eSports, NFTs, broader sports consumption. And they want us to move really, really quickly. And so, I would tell you as we think about the future of football within is very bright, we're going to work with our global collection of partners that will still best enable us to do that. And we'll continue our conversations with each and every one of them to the extent that they are aligned with that objective.

Operator:

Next question is from Andrew Uerkwitz with Jefferies.

Andrew Wilson:

What I talked about in the prepared remarks is that the Apex Legends team has really been very thoughtful and deliberate about the development and the building of this live service and the community support since the very beginning. And it starts with core gameplay. And what we've seen them be out to do with bringing more players each and every season. And kind of our weekly active in our monthly active players is grown throughout the cycle so far. They add new models of play, to things like ranked mode and arenas. They add new events that are important and more deeply engage the community. And so, I think that as we think about live service on a go forward basis, you should expect that thing to continue to be thoughtful and deliberate. They'll continue to build out modalities of play, they'll continue to create more content, but also really work with the community-on-community level in events which really drive the most engagement over time. And we continue to be very confident this is going to be a really, really strong global franchise for us for at least a decade.

Andrew Wilson:

Anything that brings more people in and engages those people for more time in a context with the extent that I think it's a good thing over time. I think that is the very foundation of our live services. I think the play-to-earn or the NFC conversation is still really, really early. And there's a lot of conversation and is at some level a lot of hype about it. I do think it will be an important part about the future of our industry on a go-forward basis. But it's still early to figure out how that's going to work. I feel good about our position with respect to that. I mean, as a Company, we have been leaders in the creation of digital content that has real collectible value in the embedding of that content as part of large services and what we know about collection over time is that collectability is far more valuable to the collector, where the collected item has utility. And I think that in the context of the games that we create and the live services that we offer, Collectible digital content is going to play a meaningful part in our future. So still early to tell, but I think we're in a really good position and you should expect us to think more innovatively and creatively about that on a go-forward basis.

Operator:

Your next question is from Doug Creutz with Cowen.

Andrew Wilson:

I think when we -- sorry.

Andrew Wilson:

I was going to say I think that when we look at across our mobile portfolio, we feel like we're in a really good position on a go-forward basis. We've got strong teams, got a strong IP, we've got a huge network of players, and we've got global reach. And we're already seeing the value of that when you think about our ability to offer EA IP for Glu Mobile folks, or our Playdemic folks to start thinking about new and interesting experiences. I didn't think we've seen some softness in some of our games, particularly those that rely a little bit more needs acquisition. I think that will work through that over time. Again, creative talent, great IP, huge network applies in global reach allowance work through that and find a path through that. But net-net, I think that there is a little idea phase. But nothing that has us concerned about our ability to continue to grow our Mobile business overtime.

Doug Creutz:

Very helpful. Thanks for taking the question.

Mr. David:

Thank you. This is David on for Alexia. Just with Battlefield. Maybe you could discuss the key learnings from the data. How much should we read into participation for the early access period of indicator of demand. And I wonder if you just had a comment on the risk of if any, of releasing the game a week part of Black Friday? I think this was somewhat of a challenge for the game in 2018.

Blake Jorgensen:

Yeah. The other thing I would -- I'd remember about Black Friday is that in years past there may have been 5 times more games in the marketplaces that will be this year. We already know that many games have been postponed, and so the calendar is nowhere near as crowded. Which means the need for discounting is nowhere near as high. Second is, and more importantly is that, as we talked about, we're now running over 60 plus percent digital downloads and a game like Battlefield cues even more to PCs, which means the download numbers going to be even higher. And what that Allows us to do, is make short-term price changes if we need to, but we don't have to cut big deals with retailers like we used to do historically. And I think that will bode well for us from an ability to sell through a lot of games, as well as not have to discount those games dramatically.

Operator:

Your next question is from Colin Sebastian with Baird.

Andrew Wilson:

And I'll let Blake the second part.

Andrew Wilson:

We continue to believe. Again, I go back to respond as a team, have been very deliberate and thoughtful about developing and building this franchise and nurturing and growing the community and their engagement over time. And I actually -- I think we're just at the beginning, I think there's such tremendous upside, and all that we're doing both in the existing experience on existing platforms and as we expand the Mobile. But again, I have nothing to announce today. But when you think about the broader ecosystem of experiences, we plan to offer, I wouldn't discount the notion of adding more modalities of play or even more tradition modalities of play to that experience, overtime.

Colin Sebastian:

Thanks guys.

Martin Yan:

Hi, good afternoon. Thank you for taking my question, I have 2. Number 1 is on FIFA or sports games with collection elements. In general, how do you think about maybe maintaining the value of player investments and making their annually investments into the micro-transactions [Indiscernible] during over, perhaps on longer time? And I have a second question.

Martin Yan:

Sure.

Martin Yan:

So, the second question is on your -- maybe our detailed rationale of elevating the studio GMs to executive leadership team. I think that's quite unique for a AAA publisher, and maybe help us understand what are the benefits and what exactly they will do to, in their decision--making and how they are getting involved with the executive leadership team.

Martin Yan:

Got it. Thank you, Andrew.

Clay Griffin:

Thanks. Good afternoon. I wanted to come back to Battlefield. You've talked about there being a strong free-to-play component within Battlefield ultimately. So, I guess, putting aside the Mobile extension, do you have a better sense of what that might look like now or do you need to see the engagement with the various game modes, I guess post launch and [Indiscernible]?

Clay Griffin:

Great. And then I guess, if you look at Battlefield historically, I guess my sense is that the community has as a general rule, not always maybe embrace cosmetic customization to the extent we've seen in other games. I guess, the question is, is that a fair assessment? And if so, I guess how do you think about monetization without reverting back to a DLC type monetization mechanic that might fracture the player base?

Clay Griffin:

Great. Thanks for that.

Mario Lu:

Great, thanks for taking a question. My question is on previous pack. In the pack, I believe roughly 1/3 of Ultimate Team players for payers. So, any color you can share on how the payer conversion has improved via this new mechanism and secondly, do you think this method of monetization is specific to player pack or can it be transferred to other titles like into Apex packs for example?

Mario Lu:

Great. Thanks, Andrew.

Eric Handler:

Thank you, very much and good evening, 2 questions for you. First on Apex Legends. I'm curious, a little over a year or so ago, we -- you started to talk a little bit more about localization for the game. Wonder if you could give us a little update there and how that's impacted the engagement, or bookings, or whatever. And then secondly, I think it's been a couple of quarters since we've heard much about The Sims Franchise. Wonder if you could talk a little bit about what's happening with that franchise. Is it still on a growth trajectory and where are you seeing innovation there?

Andrew Wilson:

I thought you might grab that one, Blake, sorry,

Eric Handler:

Guys

Andrew Wilson:

Yeah, and on The Sims again, The Sims is one of the great franchises about industry and exists in a category where we have very little competition as lost doll category. The Sims continued to do well with all engagement metrics up year-over-year. with Q2 bookings were up 32% year-over-year. In July, we released colleagues leading our 11th expansion pack, which quickly became one of the most popular packs we've ever done, Android performance. Well above our internal focus to the franchisees. So, I guess I think this is a growing player base in the seams, the franchise's continued to grow. And I would tell you, again, we had a lot to talk about other than The Sims today. We'll come back and share more in the future, but that team continues to think about how to grow that franchise. Even more than this a -- in a category and with a player base that is very different from the rest of that portfolio.

Operator:

Next question is from Steven Chu with Credit Suisse.

Andrew Wilson:

Great question. Again, it's still relatively early for these integrations. And Playdemic is really, really early. But what I would tell you is, as we've thought about this, we really think about it across 3 vectors. Which is the core credit teams and how to best get value there and we have built a single Mobile organization out of our EA Mobile teams Playdemic and Glu on the Jeff Koppers, who is an industry veteran but has more than a decade in Mobile leadership. And is really rethinking and building a strong forward-looking strategy around Mobile for us. The second element is IP, and when we did these acquisitions, we talked about both sport and lifestyle. TAP Sports, baseball, Golf Clash, Design Home, Covet Fashion, FIFA, Madden, UFC, hockey, The Sims. And so, part of what was going that before is we start to think about the integration. We have gone through; we're working on seems to -- we were working on this thing. It probably doesn't make that much sense to build that game when you can take that engine on apply it to the FIFA business, the TAP Sports engine, or the Gulf clash engine to football -- European football or American football. And we're in that planning phase right now and I would say the teams themselves, they're are really excited to take that core underlying technology and really apply to franchises that have global reach and global strength. The third is just kind of our network at play and how we start to work across that. Glu has a tremendous advertising engine. And we're starting to think about how to tight that advertising engine across our client network into our other products. We're already starting to see the benefit. And then things like reach, we've already been able to launch TAP Sports, Baseball into Japan. And so, some early wins in what is still an early phase of integration. But I'm really encouraged by what Jeff is doing as the leader of this business, what I think we're going to get out of Mobile -first talent on global portfolio of IP, a network of half a billion players and global reach. And I think you should watch this space because there's lots of great things coming over the next 12, 24, 36 months in the place of Mobile.