Electronic Arts Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
August 4, 2021

There are 13 speakers on the call.

Operator

Good afternoon. My name is Christina, and I will be your conference operator today. At this time, I'd like to welcome everyone to Electronic Arts Q1 2022 Earnings Conference Call. Mr. Chris Evident, VP of Investor Relations, you may begin your conference.

Speaker 1

Thanks, Christina. Welcome to EA's Q1 fiscal 2022 earnings call. With me today from their homes quarter. Andrew Wilson, our CEO and Blake Jorgensen, our CFO and COO. Please note that our SEC filings and our earnings release are available at ir.ea.com.

Speaker 1

Fiscal 2018. In addition, we have posted detailed and insights to accompany our prepared remarks. Lastly, after the call, we'll post our prepared remarks, an audio replay of this call, fiscal financial model and the transcript. With regards to our calendar, our Q2 fiscal 2022 earnings call is scheduled for Wednesday, November 3. Fiscal year.

Speaker 1

And as a reminder, we posted a schedule of our entire fiscal year of upcoming earnings calls on our IR website. This presentation fiscal 2019. And our comments include forward looking statements regarding future events and the future financial performance of the company. Fiscal 2020. Actual events and results may differ materially from our expectations.

Speaker 1

We refer you to our most recent Form 10 ks for a discussion of risks that could cause results to differ materially from those discussed today. Electronic Arts makes these statements as of today, August 4, 2021, fiscal 2020. During this call, the financial metrics with the exception of free cash flow will be presented on a GAAP basis. Quarter. All comparisons made in the course of this call are against the same period in the prior year and as otherwise stated.

Speaker 1

Now, I'll turn the call over to Andrew.

Speaker 2

Thanks, Chris. I hope all of you are continuing to stay healthy. I want to start out today by thanking all of our amazing teams across Electronic Arts fiscal 2020. We continue to create and deliver so many great experiences for our players during this unprecedented period. It's been an exciting few months since our last call.

Speaker 2

We've unveiled Battlefield 2042. We've launched F1 2021. We've showed what is coming with our next Madden NFL and FIFA titles. Fiscal year. We had a fantastic EA PLAY live event with great fan response and we've announced the acquisition of Playdemic, which is another step fiscal 2019.

Speaker 2

In our strategy of continued leadership in sports and growing in mobile. Integration efforts with the teams at Codemasters, Glu Mobile and Metalhead are going well, and we're pleased to be building a lot of anticipation through the summer for our upcoming games and content. Fiscal 2018. Looking at our Q1 of fiscal 2022, we delivered very strong results. Even as the world took steps towards opening back up, quarter.

Speaker 2

Our talented teams are delivering experiences that hundreds of millions of players want to play and our new launches, leading games and live services Revenue, net bookings and EPS were all above our guidance for Q1. We are raising our full year net revenue, net bookings and EPS fiscal 2019 guidance today and we are also forecasting our biggest second quarter ever. Our long term strategy is focused on 4 key opportunities. Year. The continued creation of great games and content with a focus on mobile, tools for the community to drive deeper engagement with our content, fiscal 2019.

Speaker 2

As part of this, in FY 'twenty two, we continue to execute year. EA Sports continues to extend its leadership position through the global strength of our franchises and growing portfolio. More than 140,000,000 players have engaged with our EA SPORTS games over the last 12 months. Fiscal 2020. At the center of this, our FIFA franchise is growing around the world.

Speaker 2

Over 31,000,000 players have joined FIFA 21 on console and fiscal year. In China, FIFA Online 4 set all time records for monthly, weekly and peak daily active players, driving new records for our business there. Fiscal fiscal 2020. On a global basis, FIFA is growing as part of the social fabric of soccer, and we are connecting players to our games and live services on more

Speaker 3

platforms and more geographies

Speaker 2

than ever. We've also launched

Speaker 3

fiscal 2020.

Speaker 2

F1 2021 is bringing fans into the excitement of the sport during one of the most memorable seasons in recent history. Sales are up significantly year over year and total active players have grown by nearly 10% since launch over last year's game, demonstrating the Momentum continues to build for F1, which, like soccer, is one of the few truly global sports, and we see a major opportunity to continue growing the franchise to reach a larger audience of players and viewers. Later this summer, we will begin launching our strong next gen slate for EA Sports. That includes Madden NFL 'twenty two with new experiences in franchise mode and the yard FIFA 'twenty two, which is already showing very strong demand fiscal year 2019. And EA Sports PGA Tour, the only game where you can exclusively play all 4 of golf's major tournaments.

Speaker 2

The Masters at Augusta National, The Open Championship, the U. S. Open Championship and the PGA Championship. We're also thrilled to be back in the baseball business with Super Mega Baseball With the strength of our industry leading EA Sports teams, the addition of talent and expertise from Gloo, Codemasters, Metalhead and Soon Playdemic fiscal 2020. As well as partnerships with international developers, we have exciting plans to create more EA Sports experiences for fans around the world to play, watch and connect.

Speaker 2

Our second growth driver is building blockbuster entertainment properties around our IP. This year, this is led by Apex Legends and Battlefield, 2 of the leading franchises in their category. Apex Legends continues to accelerate as one of the top titles in the industry. During season 9, we've averaged more than 13,000,000 weekly active players. We've set a new record for peak daily players across all seasons And the 3 latest in game events have driven the highest player count for events to date.

Speaker 2

In every season and event, the Respawn team is constantly innovating, Respawn is now expanding the game beyond Battle Royale with new experiences like arenas, which has brought new and lapsed During Q1, we revealed Battlefield 2,000 and 42 and the energy and excitement from fans around the world has been incredible. Since our reveal on June 9, fiscal year. Our Battlefield trailers and content have cumulatively generated more than 210,000,000 views to date across all channels. Fiscal 2020. These record viewership levels contributed to Battle for 2,040 2 being the most talked about title in the industry during a busy fiscal 2019 and created record high sentiment among the Battlefield fan community.

Speaker 2

More recently, we introduced Battlefield Portal, year. This new pillar of the game puts the power in the hands of players to seamlessly create their own experiences 2020. We are poised to deliver a truly next gen Battlefield this holiday with unprecedented innovation, massive scale and amazing gameplay, and we have more to share about the game through the summer. There is enduring power to the franchises and IP that we are building. The launch of Mass Effect Legendary Edition, the remaster of the first three Mass Effect games fiscal quarter.

Speaker 2

The following order coming to the Xbox Series X and PlayStation 5 was also a moment for new and returning players to jump into that amazing game.

Speaker 3

Fiscal fiscal 2020.

Speaker 2

Our 3rd growth driver is live services, fiscal year 2019. A core strength and continuing growth opportunity for us and mobile is now a significant part of this. With the addition of our fiscal quarter now spans more than 15 top mobile live services, and we will add the top sports mobile title in the industry with Golf Clash fiscal year. The breadth and diversity of our mobile live services now spans multiple major genres, including casual, sports, year. We're also delivering our blockbuster franchises to mobile players, including Apex Legends and Battlefield experiences rolling out for mobile later this year.

Speaker 2

With the ability to bring new teams together with EA's powerful IP, fiscal year 2020. We are building mobile into a growth center for Electronic Arts with long running live services at the core of our strategy. Fiscal 2020. Underpinning these growth drivers is the fact that games and particularly our portfolio of experiences at Electronic Arts are creating social connection for more and more people around the world. More than 500,000,000 players are coming together through the social networks formed in and around our games, and we see this continuing to grow.

Speaker 2

With some of the most talented teams in the industry, a deep pipeline of innovative experiences and established a new IP, fiscal quarter. Now I'll turn the call over to Blake.

Speaker 3

Thanks, Andrew. We delivered a big beat this quarter, The second title from our partnership with Hazelight Studios. It takes 2 launch at the very end of the prior quarter and showed considerable strength through Q1. Live services also performed better than expected, led by continued growth in Apex Legends. Fiscal year.

Speaker 3

As a result, we delivered net revenue of $1,550,000,000 and net bookings of $1,340,000,000 Given the extraordinary engagement driven by the blockbuster, by the lockdown a year ago And the fact that last year's quarter had 14 weeks compared to this year's 13 to deliver results within 5% of last fiscal year. This year's record sales is an incredible testament to the strength of our game teams and our ability to deliver games and extra content fiscal year 2020. The extra week last year Q1 alone is worth more than the year on year difference. Notably, even against the unique circumstances of a year ago, Apex Legends grew strongly in the quarter Because of the impact of the pandemic on year on year over comparisons, it's helpful to compare this quarter with the pre COVID Q1 fiscal 2020 to better understand underlying growth. On that basis, FIFA Ultimate Team is up 47%.

Speaker 3

Madden Ultimate Team up 115%, fiscal year. Sales, including Codemasters from our broad portfolio of catalog titles are up 55%, a CAGR of 25%. Fiscal year. Mobile excluding our Glu acquisition is also up 16% organically over the same period 2 years ago. We have also made considerable progress on our strategic goals as we started to integrate CodeMasters, complete the acquisitions of Glu Mobile and Metalhead and announced our agreement to acquire Playdemic.

Speaker 3

These acquisitions substantially increase our sports and mobile footprint and offer the opportunity to bring new sports to formats pioneered by MLB Tap Sports Baseball, fiscal. We're already seeing sell through up more than 20% over last year's addition, thanks to another great game from the Codemasters team leveraged by our global commercial operation. We have created a historically strong strategic position for the company fiscal year. With the strong and growing core of live service supplementing by additional growth opportunities in sports opened up by the fiscal year. This acquisition plus blockbuster releases as demonstrated by the community reaction to our upcoming Battlefield 2042.

Speaker 3

Digital represents 58% of our full game units sold through on a trailing 12 month basis, up 6 percentage points from last year. Operating expenses, which include recent M and A costs, fiscal 2019. Now turning to guidance. We now expect fiscal 2022 GAAP revenue to be $6,850,000,000 cost of revenue to be 1.9 year. $1,000,000,000 and earnings per share of $1.58 up from $1.34 Our guidance does not include any estimate fiscal year 2019, given that that acquisition has not yet closed.

Speaker 3

And remember, this EPS calculation does not year. We're raising our net booking guidance for the year by $100,000,000 to $7,400,000,000 based on performance from full game sales this quarter, Despite the clear strength of player interest so far, it is too soon to raise our unit expectations for Battlefield 2,040 2. Fiscal year. As a result, the stronger product mix we are now anticipating for this year, we are raising our expectations for underwriting properly And more specifics are in the Dan Littleman model that we posted on our website. Underlying the strength of our strategic position, I would briefly note fiscal 2020.

Speaker 3

That even with the strength we expect for fiscal 2022, we expect growth in the mid to high single digits in fiscal 2023. We've also raised our guidance for operating cash flow by $100,000,000 to $1,850,000,000

Speaker 4

fiscal

Speaker 3

2020,000,000. That would deliver key free cash flow of about $1,600,000,000 See our earnings slides and press release for further cash flow information. For the Q2, we expect GAAP fiscal year 2019. Net revenue of $1,775,000,000 Cost of revenue to be $518,000,000 and operating expenses of $1,030,000,000 This results in an earnings per share of $0.36 for the 2nd quarter. We expect fiscal 2022 net bookings to be $1,725,000,000 which would make it our largest Q2 ever, quarter.

Speaker 3

With another great quarter under our belts, we're looking forward to the launches of our sports titles this quarter and Battlefield 2042 in time for the holidays. Our strategic position has never been stronger with growth drivers in place for this year, next year and beyond. I'd like to announce one thing, and that is our Chief Accounting Officer, as well as supporting 3 CEOs and the management team during his time with the company. In addition, 15 years in all of our key markets around the world, Europe, Asia, and North America. And he is We're lucky that Ken has agreed to assist in the transition over the next 9 months.

Speaker 3

So he'll be with us until after we close our fiscal year. And I thank Ken for his amazing commitment to EA and his fantastic partnership. So with that, I'll turn it back to Andrew.

Speaker 2

Thank you, Blake. I'd like to echo your thoughts and sentiments and say thank you, Ken, for all of your outstanding contributions year. As I started this call, I again want to thank our teams for everything they continue to do in service of our players around the world. Quarter. Thanks to their efforts, we're bringing hundreds of millions of players together through our games and live services like Apex Legends.

Speaker 3

Fiscal year 2020.

Speaker 2

We're delivering great new experiences like F1 2021 and Mass Effect Legendary Edition, and we have even more amazing content to come. It's been a strong start to our fiscal year. Our growth drivers, leadership in sports, building blockbuster franchises and growing live services, fiscal year, including mobile, are accelerating our business and we're well positioned for continued growth this year and beyond.

Operator

Your first question comes from the line of Eric Handler with MKM Partners.

Speaker 2

Good evening and thanks for the first question. Real quickly with F1, wonder if you could compare how marketing for the game has changed fiscal quarter. We have global reach. We have extraordinarily digital capabilities and kind of data driven players and potential new players. And I think what we've been able to do as an organization is take that strength, partner that with an fiscal year.

Speaker 2

Extraordinary game team at Codemasters and what is also a spectacular game in the middle of an F1 season that is More interesting than any season in recent history with the competition between Hamilton and Verstappen kind of hoarding up. And the combination of all those things together Has meant that we've seen growth in the franchise and expect to continue to grow that franchise over time. Great. And then I assume Should we assume this year there's going to be live services for F1 and was there any consequential live services with last year's team? This game is early in the partnership between Codemasters So a lot of how we think about the future live service of that business and sustaining that community and that fan base in Playbo's over time fiscal 2020.

Speaker 2

There is some this year, but not as extensive as certainly we think we will get to over the course of time.

Speaker 3

Fiscal year.

Operator

Your next question comes from the line of Andrew Urkowitz with Jefferies.

Speaker 5

Hey, Thanks for taking my question. Blake, I know you wanted to briefly mention it, but I wanted to see if you could go into a bit more color. Typically, you don't kind of give Plus 1 year guidance out or so when you're thinking about growing mid to double digits for next fiscal year. Could you give us any color on how that's going to be achieved? Is it more of the same?

Speaker 5

Any additional color to help us kind of piece together how we should think about that growth rate? Thank you.

Speaker 6

Sorry, I

Speaker 3

was on mute. Sorry about that. So what I was saying is, 1st and foremost, focus on the acquisitions that we've done. And those year. On their own, we'll create substantial uptick in both top line growth and bottom line growth fiscal 2019.

Speaker 3

As we look at continuing to fuel those acquisitions and then use those talent bases to start to build out new titles that we can add to our overall portfolio. 2nd, think about Apex Mobile. We've said that we have very little in this year. We're in test market, fiscal year. And we should be out in the global markets and China next year, if not earlier.

Speaker 3

That could be a huge driver fiscal year. We have the potential of live services around Battlefield as well as a Battlefield mobile game quarter. And we clearly have other games planned, such as Need for Speed fiscal quarter. Or others that are coming, which you'll hear more about in the future. But you can imagine, we try to operate the business on a 5 year cadence, If not longer, and we're thinking about how do we generate growth each year, both organic and through acquisitions.

Speaker 3

And quarter. I would tell you, I think we are in a better position than we've ever seen before.

Speaker 5

Got it. And I appreciate that, considering so far out. The next question, and I'll bring it back fiscal 2020. Could you walk us through the pushes and takes of how we should think about the impact FIFA has on this quarter Versus what it will have on the December quarter considering the shift in and launch date? Thank you.

Speaker 3

Yes. So I know not everyone on the street has seen this, quarter. And it's not clear for a lot of people. We'll ship FIFA on technically October 1, Which means we actually ship it a little earlier for people who are part of our subscription program, for example. But we will capture some revenue as we've shown in our guidance for this quarter in Q2.

Speaker 3

We'll also capture revenue in Q3. And usually, the first one to two quarters of FIFA are the biggest quarters because People are building their ultimate teams. And so we'll see strong growth both this quarter and next quarter off of FIFA fiscal year. With the shift being that it's dropping in Q2, which last year it only dropped in Q3 when we started it. But it shouldn't make a fiscal year.

Speaker 3

We weren't confident about FIFA as well as other products.

Operator

Year. Your next question comes from the line of Benjamin Haas with Deutsche Bank.

Speaker 7

Hey, guys. Thanks for the question. I was hoping you could provide a little bit more color on the Dead Space franchise and what you guys are expecting from the reboot there. Quarter. And secondly then on the name image likeness developments and maybe to what extent you think quarter.

Speaker 7

Including realized college athletes is something that you guys are focused on. And from a development perspective, how quickly Could

Speaker 3

you add that to one

Speaker 7

of your games versus using generic players? Thanks.

Speaker 2

Two great questions. Having just quarter. We've provided a very small trailer on dead space. There's or a sneak preview on dead space. Fiscal year.

Speaker 2

There's not a lot more I can share about that. It's a little way out yet, but the studio has taken it on. What I can say is it's one of the great gains from our catalog. There has been extraordinary demand to bring it back for existing players and next generation of players, quarter. And we're excited to kind of add that to the portfolio over time.

Speaker 2

And we'll be able to share more as development continues. But I would just I would close on that point by saying it was one of the most demanded titles for us, maybe just after Skate, which we've also announced we're bringing back. And the response was very positive To the announcement that we're back in development. Around name, image and likeness, again, we believe that we can build an extraordinary College football game in the absence of name, image and likeness, in partnership with the schools and in partnership with the conferences, And we're looking to do that. I also believe with what we have seen most recently in and around that image and likeness That is very plausible and likely very possible for us to integrate name, image and likeness with athletes according to One of the rulesets may emerge as to how they may engage with us in that context.

Speaker 2

And we are building the architecture of the game with a database structure

Operator

fiscal year. And your next question comes from the line of Mike Hickey with Benchmark.

Speaker 4

Hey, Andrew, Blake, Chris, great quarter guys. Awesome guide, Blake. That was exciting to see. Two questions. First one on FIFA Ultimate Team.

Speaker 4

Looked like in the quarter, maybe subsequent, you tested some preview packs, which was sort of an alternative to loot boxes. So just curious fiscal year. And the second question, just looking at the competitive landscape on Seesaw, Looks like PES is shifting to new football, state of play. So just curious how you're thinking about that

Speaker 2

Yes, 2 great questions. On preview packs, The short answer is it was very well received by the community. Our Ultimate Team team Football and Build Your Ultimate Team. Preview Pack, as I say, was well received. We saw an increase in engagement And we saw a higher rate of conversion of spenders.

Speaker 2

I would say it was coming down towards the end of the season. So some fiscal year 2019. And the programs that we put together for our players and believe that we can continue to grow that business over time. With respect to Provolutions Soccer changing its name to eFootball and going free to play, we've seen this happen before. I would tell you we're very committed to our soccer business.

Speaker 2

We're very committed to our player base. We continue to grow that player base. Fiscal year. We've listened to our community over the years and we've gone out and got much of the licensed content that underpins an authentic football game exclusively quarter. And what you heard me talk about in the prepared remarks is as a result of the innovation in and around HyperMotion, we're seeing extremely strong demand for the upcoming version of FIFA and engagement in that franchise continues to grow.

Speaker 2

So again, competition is always good. Fiscal 2020. We're always very closely cognizant of what competition is doing, but our commitment is to our player base and delivering the most comprehensive broad based year. Our

Operator

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

Speaker 8

Hey, Andrew. Hey, Blake. Good afternoon. Maybe 2, if I could, and these are actually things you hit on in earlier questions. I guess just coming back to Blake on the commentary for next year, I'm just If that guidance is dependent on any big frontline title, obviously, the issue you've got that, I feel I'm curious if that's dependent on any this Larger title for next year.

Speaker 8

Somewhat relatedly, I'm curious thoughts around Battlefield. Does that Franchise still aspire to be in every other year release type of a cadence in a normal world. Just curious if any updated thoughts there. And then just Finally around some of the collegiate sports. Given some of the changes going on there, I'm curious if there's any interest around basketball With NBA Live a little bit dormant here, I'm wondering if there's any pivot and any interest there.

Speaker 8

Thanks, guys.

Speaker 3

Yes. All good questions. I would say next year, and this is a testament to our business. Next year is a collection of great franchises all coming to play and new franchises. So new franchises in mobile, new franchises across our business in places like F1 and other driving games and new franchises or existing franchises that we will bring back Like NCAA or PGA Golf that we've talked about.

Speaker 3

And you know what, We've always tried to build the business on a collection of great titles, not one title, Because one title always poses risk. And so our view is a collection of titles with great live services associated with them, and you're going to see that over the next, Not just next year, but for the next many years to come. That's how we've tried to build our business. And I think you'll hear more about it. Fiscal year.

Speaker 3

We're not trying to give guidance right now on next year, but we did say in our prepared remarks that we're confident of growth going forward even after an incredible growth year this year and last year. And we feel like we're on a really good path to continue to try to grow this business, and we're seeing the great reception for our products in the marketplace. So more to come on that. Fiscal 2020. We'll give you guys more details as we get closer.

Speaker 3

We know that's what you want. But you should just trust that we're confident that we're seeing and we're planning both And now I don't remember your next two questions.

Speaker 2

Let me jump in. But more importantly, I think you should think about Battlefield as a service. What we're doing for the launch of this game is really revolution In addition to that, we've heard us announce Battlefield Portal, which really starts to lean into user generated content and will drive deep long term engagement fiscal year. And while we've announced Hazard Zone as a name, we haven't disclosed a lot about what's going on there and you'll hear more about that in the coming months. You should understand that this really quarter.

Speaker 2

The foundation for what we believe the future of a live service around Battlefield is, which over time will include a mobile launch, fiscal 2020. Will include some free to enter components and really change the nature of what happens from launch to launch. So that while and every other new launch probably makes sense as we think about it today, we're really focused on 365 day engagement in the franchise at a platform level across any device that consumers may want to play on. Then I think the other part of your question was name, image, likeness, college sports and does that open up an opportunity on basketball? I would tell you our focus right now is football, but what you've also heard us fiscal 2020.

Speaker 2

We believe this is a unique strength for us. We're We're the leading company when it comes to delivering multiple high quality sports across at global scale, And it would not be a match for us in a world where we start to develop more into college football to start expand that to other college sports as well.

Operator

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

Speaker 6

Great. Thanks for taking the question. First one is on Battlefield. So you mentioned you're not updating your unit sales estimate for the title, but the positive response to fiscal 2020. I just wanted to hear your thoughts on in terms of in app purchases within the upcoming title.

Speaker 6

How should we frame the opportunity

Speaker 3

Yes. What I would say is that, don't take our comment on not updating The guidance on Battlefield in any way is a negative. It is we ultimately Expose the world to Battlefield later than we normally would do. Normally, we do it through early June fiscal 2019. So we're trying to make sure we pace the Disclosure about what's in the game to people and then measure our demand off of that.

Speaker 3

But we're feeling year. Very, very positive about it. And we wouldn't have raised our full year guidance if we didn't feel that was a potential quarter. And I think it's an upside for the company longer term during the year. You're going to hear a lot more over the next couple of months About Battlefield Life Services, in game monetization and so forth, I can't tell you all that now, But trust that the team is working very hard on this, and they have some very unique ideas about what we can continue to do.

Speaker 3

As Andrew just said, To create this as a long term interaction with our consumers versus simply selling a game this year. We want to build a long term relationship as we have with Battlefield users for a long time. Portal is a perfect example of how that works, and you'll see more of that and more details about that over the next couple of months.

Speaker 6

Thanks, Blake. And just one on mobile. In terms of the acquisition of Pandemic, that makes a lot of strategic sense quarter. Given that you're doubling down on the board, can you talk about just the near and long term synergies we should expect

Speaker 3

Well, I would say with all of our acquisitions that we've done, we've done 4 now, if you You're going to see clearly some synergies, Most of these companies are smaller. They are exceptional in how they develop games. But as you've seen with F1 already, year. We've been able to drive more sales than what we've seen historically with that business, and we'll continue to do that across all of the portfolio companies. I would say in the case of Playdemic and in the case of Glu, Tap Sports Baseball and Metalhead with their baseball game and Playdemic's golf game, We are going to leverage their strengths as best as possible to try to find ways to create fiscal year 2020.

Speaker 3

More and better casual games in mobile on mobile than we have in the past. And that's not to say that we haven't done a good job on mobile. We have. But the potential that we have, if you look at what Playdemic's done, quarter. The potential we have was something like a global FIFA game or a global Madden game where we already have the licenses.

Speaker 3

There is huge upside. I can't give you what those numbers look like yet, but I will tell you that the reason we did these deals fiscal year 2020. Was to try to make sure we brought the talent in that could help us expand our capabilities on more casual sports games around the globe and more casual games in general around the globe. And we're pretty excited about it. And I'll tell you the mobile teams have worked very closely with the new teams at Playdemic or Glu or

Operator

Next question comes from the line of Jamie Bass with Berenberg.

Speaker 3

Yes. Two questions from me, please. Firstly, it looks like engagement

Speaker 9

is still holding up very well. Quarter. Are you

Speaker 3

seeing any sort of different trends in markets where restrictions

Speaker 9

are eased more versus markets where there's still more And then secondly, with the F1 game, that looks like

Speaker 3

it's been very well received through reviews and everything.

Speaker 9

Fiscal year. Is that so far going in terms of sales and engagement? Is that going broadly how you expected it? Or is there any outperformance versus your internal expectation?

Speaker 3

Yes. I'd say just on the F1 game, I think we've exceeded our expectations. There's no negative on the F1 team because they are exceptional. Quarter. It was could we quickly I mean, and we didn't own the business for that long.

Speaker 3

So could we quickly integrate The teams, our marketing and publishing efforts to try to drive that business as fast as we did, that's probably where we might have had some questions. And actually, we've well exceeded that. And it's a testament of an exceptional fiscal 2018. That was able to produce the right assets, to produce the right marketing materials, to help us drive this business and the And you know what? I think we don't get enough credit for this, but

Speaker 8

EA

Speaker 3

fiscal 2020. And when we bring in acquisitions, we work well with them. And I think the poster child there is you look at Respawn And you look at what's happened with Apex. This is a team effort. And Respawn's obviously driven the amazing development of Apex.

Speaker 3

But they've partnered with us extremely well to drive what is now It's coming up to almost $2,000,000,000 in business over 2 years. That's unheard of in our industry. And I'm not sure we get enough credit for it. I don't really care. But at the end of the day, it is amazing what our teams are able to do.

Speaker 3

I would tell you, to your earlier part of the question, We've tried to put together great marketing for all of the companies that we've acquired, And it doesn't it happens quick. And F1 has been a great example of that, and you have to have great products to do that. And so I would tell you The combination of great teams and great marketers is really powerful in this industry, and I think we've been able to prove that we can do that across all the acquisitions

Speaker 2

I would tell you, given the roller coaster nature of opening up and shutting down and Lockdowns and various restrictions that are happening in various geographies and territories globally. It's almost hard to track at this juncture Who is open and who is closed? What I would tell you though in aggregate is we have seen strength across our business across all territories, Regardless of being open or closed, I think performance this quarter is testament to that. And at some level, this is largely due to this quarter. Returning to school or returning to work or returning to kind of general life, it's about connections to friends, both that they had quarter.

Speaker 2

Prior to playing and they made during playing that people keep coming back to. And as we think about building ongoing interactive entertainment experiences, This is why you hear us leaning into the social ecosystems in and around our games because this is what drives longevity And it's what drives deepening engagement in our business. And so I think what we're seeing right now is the world is in different phases in different places. But on aggregate,

Operator

Your next question comes from the line of Brian Nowak with Morgan Stanley.

Speaker 10

Hi, guys. It's Matt on for Brian. Thanks for taking the question. 2, quarter. So just on the strength of Apex in the quarter, obviously, the comp was extremely hard, so that's a pretty impressive feat.

Speaker 10

Quarter. Are there any specific initiatives or pieces of content or geographies that you call out that have sort of been quarter. The source of that outperformance year on year for ATAX. And then just secondly, on the mobile side, we Tracking on iOS and others who said they've seen sort of an increase in UA spend being necessary. I'm wondering what experience you guys are having fiscal year.

Speaker 2

Let me jump in on Apex, and then maybe Blake could hit the kind of the mobile ad piece. On Apex, I would tell you it's not just any one thing. I think what I talked about in my prepared remarks is the very detailed nature that Respawn team and the Apex team takes the ongoing development of this experience and the support of their growing global community. Fiscal year. And it's really about on any given day, it's really thinking about what enhancements, extensions, innovations they can add to core game That moment to moment gameplay.

Speaker 2

There is how can they think about new modalities of play like arenas, which changes quarter. Kind of the broader rule set of how you engage in that moment to moment gameplay and how do they add content with the legend and with all of The extra stuff in and around that, that drives more interest. And I think what we're seeing now is that team Continue to enhance gameplay, continue to add modalities to play and continue to double down on really interesting unique content That the community really gravitates towards. And I think as you think about that in the context of now taking that to new geographies and new platforms,

Speaker 3

Right or wrong, we've never had a large advertising business. It hovers around $100,000,000 a year. Part of that is our strategy that we have not wanted people to leave our network. And if you look at most advertising on mobile, it's for other mobile games. And what that means is You're willing to allow people to leave your network to go play somewhere else.

Speaker 3

We're working with Glu right now and with We think it's important and in no way take my comments as saying we don't think it's a very profitable business and we should Stay close to it, but it has not been a huge part of our business historically, so it's upside for us down the road If that's where we want to go. And more to come on that. We're just we're still in the learning stage relative to how we managed advertising in the past. We know the current rules new rules make it even more challenging, and so we're trying to figure out what are the right ways fiscal 2020. In a free to play world where people are willing to And we'll see how that plays out over time.

Speaker 2

Yes. The one thing I would add there is, while it hasn't been a giant business for us, What we have seen is, as Glu has kind of joined us is they actually have been significantly better at monetizing through advertising than we have been. They come with some really strong underlying technology. They come with really strong underlying expertise. Fiscal year.

Speaker 2

And our sense is, while it's still early, our sense is the combination of that technology, that expertise, Our broader base of portfolio and the global reach it has likely means there's upside opportunity for us even in an IDK world.

Speaker 10

Great. Thank you.

Operator

Your next question comes from the line of Jerrick Johnson with BMO Capital Markets.

Speaker 11

Great. Thank you. Good afternoon. So last quarter, you said that guidance did not include potential synergies from Glu and Cove Masters and now you've had 3 months to integrate. And it sounds like you've identified fiscal Q1, for instance, not just cost synergies, but some revenue synergies there.

Speaker 11

So your guidance, you increased it by the 1 quarter beat So what synergies have you identified and are they now included in your guidance?

Speaker 3

Fiscal year. So no cost synergies are included in our guidance. Clearly, revenue synergies Are occurring as they occur. As you pointed out, we did better at F1 than we thought we would. Those are harder to predict.

Speaker 3

But we haven't yet Staffing changes, either positive or negative. You should assume that there are going to be some changes and we will What I would tell you is there are potential large synergies across all of the acquisitions we've made, which would normally happen, But we'll see more of those over the next few quarters, and we'll try to keep everyone appraised of that.

Speaker 11

Okay, great. And last year when you launched your sports games, there were cardboard cutouts in the stands. This year, we're going to have both stands with fans in the stands. How much of a lift do you think it provides your games with sports actually happening and people in the stands?

Speaker 1

I'll let Andrew answer that. But I

Speaker 3

hope we actually get to real people in the stands because we might go the other way

Speaker 2

That was going to be my point is that it's hard to understand exactly where the world is going to go. I think it's unlikely that we have events without fans in the stadiums and we may just see some protocols around masks And or testing and or vaccination. But our hope as sports fans is that we get fans back in the stadiums. I think what you saw us do last year That did in fact allow us to grow both the amount of people playing our games and the engagement they had. I don't know that we can quantify what that means when everyone really gets to live the fullest of sports on a day to day, week to week, month to month, season to season basis, but quarter.

Speaker 2

But it will inevitably have a positive uplift to just overall fan and player sentiment and will almost certainly drive deeper engagement in our games. Fiscal 2019. And our teams will look to build stronger connections between what is happening in the real world of sport and what is happening in our games. So net net, Notwithstanding any further challenges around the pandemic, it's almost certainly a positive for us.

Speaker 11

Great. Thank you, Blake, and thank you, Andrew.

Operator

Your next question comes from the line of Andrew Marak with Raymond James.

Speaker 12

Hey, thanks for taking my question. I wanted to drill down a bit on Ultimate Team. And is there anything to call out there maybe on newer players that have come into the ecosystem system over the last 12 to 18 months. How is that cohort's behavior compared to more established cohorts? And has there been any

Speaker 3

Yes. I would say that we always have newer players come in as the game grows. They don't get involved immediately on day 1. 1, because they got to understand how to play it. 2, they got to become part of a social network It's also playing it.

Speaker 3

And once that happens, we start to see growth. And so we see growth during the season. We haven't seen a lot of change in that pre COVID or post COVID Because it is a way for people to have a social interaction around something that they're really interested in doing. And so We know we've grown the overall franchise across all of Ultimate Teams. We've grown the overall franchises around the underlying games.

Speaker 3

And those are the 2 biggest drivers for us to continue to drive ultimate team year. And engagement, which ultimately results in ultimate team spending in some way or another. And so I think we're pretty confident that even during the COVID crisis, we year. We continue to see people get more and more engaged. Some of that's driven by the fact that people are simply Not at work and physical position.

Speaker 3

They may be working from home, but a lot of it is also the excitement around what we're seeing in the Global Soccer Seasons that we've seen over the last couple of years because there's been a lot of excitement, a lot of player movement, And that's what gets people really pumped up about playing Ultimate Team.

Speaker 2

Yeah. And just to some little detail I would Add in there, again, we think about Ultimate Team as a long term balanced way to connect with your friends in and around the sport. And it has become that and is certainly the most played mode in FIFA and very strong in our other franchises. As we think about this, 2 thirds of people who play Ultimate Team don't actually buy packs and only 9 out of 10 packs are opened with earned coins. And so we're always trying to ensure that constant balance of engagement and enjoyment of our player community.

Speaker 2

And what we saw with preview packs was we saw a fiscal quarter. Higher incidence of new players coming into Ultimate Team and looks for a higher conversion of those new players fiscal 2020. In and around buying packs and participating in the digital ecosystem. So again, long term, we think That mode will continue to grow. We think that is a means of connection to your friends and connection to the sport you love will continue to grow.

Speaker 2

And I think we're going to continue to look for Interesting and new and innovative and creative ways that allow people to really more deeply engage and preview packs is one of those examples.

Speaker 3

Chris, we got time for one more question or is that it?

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Earnings Conference Call
Electronic Arts Q1 2022
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