Electronic Arts Q3 2022 Earnings Call Transcript

Quartr
Provided by Quartr
February 1, 2022

There are 12 speakers on the call.

Operator

Good afternoon. My name is Sita, and I will be your conference operator today. At this time, I would like to welcome everyone to

Speaker 1

the Electronic Arts Q3

Operator

2022 Earnings Conference Call.

Speaker 2

Thank you, Nico. Welcome to EA's Q3 fiscal 2022 earnings call. With me on the call are Andrew Wilson, our CEO and Blake Jorgensen, With regard to our calendar, our Q4 fiscal 2022 earnings call is scheduled for Tuesday, May 10. And forward looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations.

Speaker 2

We refer you to our most recent Form 10 Q for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of today, February 1, 2022, and disclaims any duty to update. During this call, the financial metrics with the exception of free cash flow will be presented on a GAAP basis. All comparisons made in the course of this call are against the same period in prior year and

Speaker 3

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 Batten. John's passing was a tremendous loss for the American football community, to 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 LFT partnership.

Speaker 3

Some of these most important lessons, including authenticity, are things we've held close to EA Sports ever since. We feel incredibly fortunate To being part of Coach's legacy and just as fortunate to be part of how it will live on through the future of our Madden NFL games. We'll have more to share about how we are honoring Coach Martin in the weeks ahead. And from all of us at Electronic Arts, our thoughts and sympathies continue to be with family, friends and many, many fans. It has been a year of outstanding growth so far in FY 'twenty two.

Speaker 3

Q3 was a record quarter with our live services and mobile portfolio delivering strong reoccurring 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 platforms and business models, we are growing our total players, engagement, net bookings and underlying profitability. We didn't have a charge in Q3 As the launch of Battlefield 2,000 and forty two did not meet expectations. Battlefield 2,000 and forty two was always an ambitious game And our teams push to innovate across many dimensions, including massive scale and 128 player matches, new modes, new dynamic gameplay and more.

Speaker 3

Developing this game with our teams working from home for nearly 2 years ultimately proved to be challenging. Through our process For testing and preparation, we believe the experience is ready to be put in our players' hands. We launched with strong stability. However, as more players experience 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 I'm fully committed to our Battlefield fans.

Speaker 3

We've already implemented a series of major updates to the game and there is more to be done. Players can expect meaningful updates L. A. C. Despite Battlefield's miss against our expectations, with the strength of our business, we are continuing to deliver record growth and performance I'll touch on each of those pieces here.

Speaker 3

Beginning with total players, our games and experiences connect a global network that continues to scale. Over the last year, our network has grown to more than 540,000,000 unique active accounts across more than 18 games and 25 live spanning all major platforms from console to PC to mobile and cloud. From an engagement standpoint, more players are LFTs. 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.

Speaker 3

Engagement is deepening as well with players spending nearly 20% more time and games LFTs. With our top franchise delivering strong reoccurring revenue, our net bookings for Q3 grew 7.4% year over year for the quarter and the full year we project 22% growth in net bookings over last year. Performance across the business and operational discipline also continue to deliver strong cash flow and underlying profitability 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 28,000,000 new players joining 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 continue to expect net bookings for Apex to approach $1,000,000,000 in FY 2022.

Speaker 3

We are expanding to the to reach more players and viewers with new original content on the way. Our growing Apex Legends Esports ecosystem And Apex Legends Mobile will soon be moving into soft launch as we continue our worldwide rollout. We've had strong engagement and community feedback during closed beta LFTs 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 in technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY 'twenty three With growth well into the double digits.

Speaker 3

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 local 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 100 of 1,000,000 of dollars in net bookings growth year to date And the 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.

Speaker 3

LFT. During the holiday period, and it was the number 3 top selling game in the U. S. For all of last year. Under our leadership, F1 21 also continues to perform well above expectations with units out nearly doubling year over year during the holiday period.

Speaker 3

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 Our pipeline further amplifies our strength. In addition to our core franchise, we are building new experiences in some of the biggest Enduring IP in Entertainment. Last week, we announced a new agreement with Disney and Lucasfilm Games to develop new experiences in the Star Wars universe, continue 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 2 additional Star Wars titles.

Speaker 3

This adds to our deep pipeline of announced and unannounced LFTs with our wholly owned IP, including Need for Speed, our BioWare franchises, The Sims, Skate, Dead Space and more. Looking ahead, we continue 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 experiences to more players on more platforms in more geographies and more business models and harnessing the power of the social ecosystems The demand for amazing games and new ways to play, watch, share and create has never been stronger. And one of the industry's largest, most profitable businesses with strong recurring revenue, we are well positioned to take advantage of this continued secular growth. We look forward to delivering it against these opportunities through FY 'twenty three and beyond.

Speaker 3

Now I'll hand the call over to Blake.

Speaker 4

Thanks, Andrew. Q3 was a quarter that demonstrated the strength of our live services portfolio. Despite a tough Battlefield launch, we came within a underlying profitability and cash generation. Sales of Battlefield 2,040 2 were disappointing, delivered net revenue of $1,790,000,000 and net bookings of $2,580,000,000 VIVA 22's strong start continued into this quarter With unit sales now up double digits over last year launched to date and players continue to engage in FIFA Ultimate Apex Legends net bookings continues to grow at an extraordinary rate And we'll deliver close to $1,000,000,000 for the year. Digital represents 64% of our full game units sold Sales aided by growth in live services pushed underlying Q3 gross margins 2.3 percentage points above last year.

Speaker 4

Operating expenses, which include recent acquisition costs, came in below our expectations, $844,000,000,000 and earnings per share of $2.43 up from our original expectation of $1.34 We are taking our net bookings guidance for the year to $7,520,000,000 Although a $100,000,000 reduction on our position We're committed to turning Battlefield around and building a sustainable live service even if some of the actions we're taking, like moving the 1st season into FY 'twenty three, impact net bookings for the short term. Reflecting the strength of our portfolio, our operating cash flow guidance For the Q4, we expect GAAP net revenue of $1,759,000,000 This results in earnings per share of $0.46 for the 4th quarter. We expect Q4 fiscal 2022 net bookings to the We'll formally guide FY2023 in May when we report Q4. But we've heard that some of you are concerned that the Battlefield performance might impact next year's growth. Let me emphasize here again that we are LXX.

Speaker 4

The main drivers of growth next year remains FIFA on console, Apex Legends, Apex Mobile and FIFA Mobile. Gold class will also contribute to year on year growth since we acquired Playdemic halfway through the year. With regard LFT. To summarize, we just delivered the largest quarter in the company's history. FIFA goes from strength to strength.

Speaker 4

Apex Legends continues to show extraordinary growth. Battlefield disappointed, Our core portfolio approach enables us to deliver double digit organic growth this year and continue to deliver strong cash flow Andrew, you may have noticed that yesterday we announced a new CFO for the company. And I think The new CFO, Chris, is going to be a fabulous addition and will do a much better job probably than I've ever done. Thank you for the amazing partnership that I've had here for nine and a half years at EA. It has been the most enjoyable experience I also thank the buy side and sell side analysts Thank Chris Evident, Aaron Ream and Fabiola for their amazing IR

Speaker 3

Interactive entertainment continues to grow by every measure, and our audiences are expanding and diversifying. Major franchises are at the center of culture 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 and our amazing 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 As we look ahead and as Blake just referenced, we were excited to announce yesterday that Chris 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 Electronics 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' As we've announced previously, Blake will be leading our team after nearly a decade of leadership and partnership at EA.

Speaker 3

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.

Operator

Your first question comes from the line of Benjamin Soff from Deutsche Bank. Your line is now open.

Speaker 5

Hey, guys. Just a quick thank you to Blake for being a great partner and looking forward to meeting Chris. Two questions. So 1st just around Battlefield. Can you guys sort of frame for us how you think about the vision for the future of that franchise?

Speaker 5

And in particular, how the new leadership for the Battlefield LFT. And then I've got a second question.

Speaker 3

Yes, great question. Again, we have very bold vision for where this franchise goes. This franchise has always led the The category in creativity, innovation, scale, gameplay, community. And as we came in to launch, Again, we had a very bold vision for this game. As it turns out, we've had some challenges, not least of all trying to build this game Beyond that, we'll continue to invest and grow the franchise.

Speaker 3

We have great leadership with Vince and Byron and others with tremendous background From other great shooters in the industry kind of leading the future. I believe that we're going to see this game do really well over the course of I think we'll expand the more we'll expand to other new and interesting ways to play. But certainly, this is just a moment where we LFT. As you're working on those

Speaker 6

3 new Star Wars games, can you talk

Speaker 5

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?

Speaker 3

Yes. The very strength of our business is our balanced portfolio. We have both a deep and a broad portfolio. And what we've demonstrated over the course of our the best part of 4 years is to really develop both our own IP over time The Sims, Battlefield, Apex Legends, our BioWare franchises. We have SKATE in development now, Dead Space on the way.

Speaker 3

So an incredible portfolio of owned IP, that has an extraordinary following across the industry, Combined with other long term enduring IP, we have the power of our sports franchises. And They are true evergreen franchises and this is not just about licensing content. This is about working with over 300 partners across the various sports industries to deliver a true connection with the sports, the leagues, the teams, the players that our fans love. We've been doing that now for well over 30 years, and I think that we'll continue to do that for many, many years in the future. And things like the Star Wars franchise, again, a long term relationship universe, but really adding to that Star Wars universe and really delivering new opportunities for Star Wars fans to experience great Star Wars And so as you think about our strategy going forward and the strength of our company, it really comes down to our ability to Develop and build and publish industry leading owned IP, but also work with partners over decades to truly deliver fan

Operator

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

Speaker 7

Hey, thanks for taking the call. Just reiterate the positive sentiment from Blake. Blake is doing a great

Speaker 8

run. Really enjoyed it.

Speaker 7

I guess I just had really one question, no follow-up. Your one of your bigger competitors was just taken out. You guys have quite the portfolio, and have taken a portfolio approach for years. How do you think the industry will look in 3 or 4 years? Do you guys see yourself as a consolidator, A potential seller, how do you see this industry shaping out over the next 3 to 5 years?

Speaker 7

Thanks.

Speaker 3

Yes, great question. And LFT. You should imagine, we've been thinking about 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 Going 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 and what is now Well over half a 1000000000 fans is because we do believe in the power of entertainment. We do believe in the power of interactive entertainment.

Speaker 3

I think what we're seeing now in the marketplace I do believe that we will start to see entertainment coming together. You're seeing some other companies talk about this. But when we think about our players and and sports broadcast and music and other things. And so as we look out to the future, we are building strength in our core 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 we think about the You should think about it with IP at the center and engagement around play, watch, create and experience, all built on a deep social ecosystem that brings fans together around the content they love.

Speaker 3

And when you look at our strategy of what we're doing, creating great entertainment around building tools so that our 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, the board out of engagement now gains. I think you should imagine that's

Operator

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

Speaker 9

Hey, Andrew, Blake, Chris, thanks for taking my questions guys. And Blake, I'm going to

Speaker 2

miss you, but I'm sure

Speaker 9

you'll be getting A lot of skiing in those, so I'm not feeling sorry for you. But it's been great working with you. So, question is, I guess on Battlefield, obviously, disappointed. Can you give us key size of the units you sold in the quarter? I think you guided for 12

Speaker 6

or so, but just sort of curious where

Speaker 9

you ended up versus expectations. And then thinking about how you sort of reengage That audience, there's been some ideas around free to play, curious if that's a possibility. And then I didn't hear mobile. Did you drop mobile for Battlefield or is that just delayed? Thanks, guys.

Speaker 4

So let me Mike, thanks for your nice comment to the other analysts Well, unfortunately, I'm sure I won't get as much gain as I would like. But we're going to refrain from trying to give updates on because we know that there are remember Battlefield is less than 10% of our revenue. So I'm not sure what you would do with that. Clearly, we sold less units than we thought we would. FY 'twenty three since we've had a pretty strong FY 'twenty two and so it helps us in the future.

Speaker 4

I'll let Andrew address the The second part of your question.

Speaker 3

Yes. So I think that you remember coming Into the launch, the demand metrics were very high. And so that reaffirms for us the core underlying creative The game still has really strong demand around it. I think we as I mentioned, we had some challenges around stability, particularly on high end PC machines And there were some design decisions that not all the community really agreed with. And so our focus right now is to really go back LFT.

Speaker 3

And as much as I hate to admit it, Dice is a studio that has been able to do this a number of times now And really go back in, rebuild with the core and reengage the community as long as we do that in conjunction with the community. And that's what that studio is so great at doing. So I think the combination of Dice with the new leadership and a strong vision for the future, we will build out the core, we will reengage the community We will manifest that demand that we saw coming into launch over the course of time. Mobile is still Developer, the metrics are showing up really strong. I think right now, we're looking going to the next closed beta at the end of this month.

Speaker 3

And as is the case of mobile, we'll continue to tune and test in the environment. And then as it relates to free to play and other modalities at play, words of how it's played and how it's delivered. And you should expect that we will continue to work to deliver new and interesting ways to engage with this game over the course of time. And while I'm disappointed with how it launched, I'm still very excited for the future.

Operator

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

Speaker 6

Good afternoon and thanks for the question. Andrew, I wonder if you could just talk a little bit about when you think about the expansion that's going on in the MeduViant industry in the last We're seeing a lot of user generated content and platforms around that start to proliferate. We've seen a lot Those channels eventually and it's easier to build from within, is it better to buy once there's some established players Just want to get your minds up there.

Speaker 3

Yes, great question. I would tell you, I started this industry over 20 years ago. At that point in time, it was the fastest People seem to be surprised by this. So we're not surprised by it at all. And I think as technology has continued How for the social ecosystem, the social networks bought out of engagement in our games truly are.

Speaker 3

And the reason now is not now just about ingesting The same way you do traditional scripted media or traditional broadcast or traditional 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 what our industry offers to our players and our fans. The traditional media just doesn't.

Speaker 3

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 What is the best entertainment 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 that over time, right now, We are building technology.

Speaker 3

We're building creative. We're building assets and we're offering that out to communities around the world and we're seeing great uptake If there was an acquisition opportunity in the future, we would openly look at that, but we're not looking at anything at LFT. Around the NFT and where VCs are investing, again, we see this also happen in our industry. We saw it with 3 d. We saw it with ARVR.

Speaker 3

We're now sitting with AOCs. There's always something in key metrics. It's around high quality content. It's around electronic content. And we've seen that happen in the real world and we've seen that happen in and around our game.

Speaker 3

LFTs to deliver the best possible player experience we can. And so we're going to we'll evaluate that over

Speaker 6

Thank you very much.

Operator

Next question comes from the line of Matthew Alexey Thornton from Turist Securities. Your line is now open.

Speaker 10

LTV. With FIFA in particular, I guess, you talked a lot about kind of you felt about or are feeling about your ultimate team LFT and the live services component into the I guess is the first question. Second question, curious Coming back to mobile and maybe some of the recent acquisitions, kind of curious if you could talk a little bit about how you're thinking about advertising. I know it's come up a bit. Other companies might 10 to 20,000,000,000,000 of advertising.

Speaker 10

Glu brings some new capabilities to you. So I'm curious how you're thinking about advertising. I'm curious how almost a year into that deal. And then also, when we might start to hear a little more

Speaker 4

So let me I'll start on the live service piece and then I'll let Andrew 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 social networks that we've created in our games and particularly on sports, those are evergreen networks that continue every year. And is continuing to try to drive engagement with people. They've brought in large number of new players into the game, retained players and continue to come up with amazing and unique ideas for ways to play.

Speaker 4

How do we do that across more and more games going forward? So I'll let Andrew talk about Glu a little bit.

Speaker 3

Yes. Again, we are working closely with it. It's still relatively early days With the acquisition for both them and Playdemic, we're working both on bolstering our existing 15 live services And that includes Apex Mobile and the renewed FIFA Mobile and a full year of Golf Clash and ongoing growth across the portfolio. And we're excited about that. With respect to advertising specifically, we are taking the Gloop advertising stack And applying it across our games.

Speaker 3

And it's a little early to know just yet exactly how that will manifest. But based on what we're seeing across the industry, we expect that that LXT. So overall, Mobile Now really is a strength of ours. It's a very important part of how we drive growth in the business, both in our existing games, in our new launches

Operator

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

Speaker 11

Okay, thanks. Hey, guys. Good afternoon and Blake, best of luck. Curious as to your thoughts on where the business is in terms of engagement normalizing. Is the reopening headwind Behind you or is this something we should anticipate in calendar 2022?

Speaker 11

Is it contemplated in your fiscal 2023 net bookings forecast? And then separately, your OpEx growth year to date is approaching 30% year on year. Should we see that slow materially once you start to anniversary acquisitions? Elections. How should we be thinking about OpEx going forward?

Speaker 11

Thanks.

Speaker 4

Yes. I can take the OpEx question quickly, Drew. I mean clearly, most of that was 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 So I think we're remember, our OpEx really comes down to 2 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.

Speaker 4

And so I don't think you're going to see a jump like we've seen this past year. Well, 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 the downdraft of $48,000,000 in revenue that We didn't originally plan. And so we were 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.

Speaker 3

On engagement, through or post COVID, depending on how you think about it, I think we've been on a rolling situation around the world of kind of coming back and shutting down a little and coming back. Broadly speaking though, much of the world is out and about. They're at sporting events. They're going to theme parks. They're watching movies.

Speaker 3

They're going to dinner. So much of the orders returned mostly to normal at this juncture by LFT calculation. Even as part of that, we've seen not only number of players grow again over 540,000,000 people now in our network. We've also seen time spent in our games grow by over 20%. And I kind of look to that as not just about creating amazing games and entertainment, but it is the social interaction.

Operator

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

Speaker 6

Thanks. I think it's a little bit early to talk about this, But I would be very curious about how you're thinking about your business and strategy as it relates to the metaverse as that becomes more real. Is that something that you view as just another opportunity for you to engage your fans? Is it a battle about time spent? Is it potentially sort of change industry

Speaker 3

Yes. I mean, a great question and certainly another one of these things that is kind of a topic du jour at the moment. And many people are talking about it in different context, quite frankly. At the end of the day, the metaverse is a three-dimensional social Around the social networks that we see. But I would tell you a lot of that happens in the context of our games.

Speaker 3

As I look at the nature of our games, I look at the engagement that we're seeing inside these 3 d spaces that we create in and around What you see with our industry is the beginnings of what a metaverse might 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 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 that 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 whatever the members 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 LHC.

Speaker 6

That's super helpful. Thank you.

Operator

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

Speaker 8

Hi, good afternoon and thanks for the question. I just have 2. First, I was just wondering if you could talk a little bit about EA PLAY, where are we with EA PLAY subscribers today? And how do you see the outlook for Video game subscription services changing particularly with recent consolidation. And then second, it was encouraging to hear the reiteration of the mid to high single digit top line growth for next year.

Speaker 8

I was just wondering if you could go a little bit more in detail around some of the drivers, What do you see driving some of the FIFA strength? And are there new games or unannounced titles embedded in that outlook? Thank you very much.

Speaker 3

Yes. Let me quickly hit on the EA Play component, and then I'll let Blake talk about the mid to high single digit growth. Play continues to grow for us. It continues to be a really, really positive consumer experience. We're getting access to some of the greatest content in the industry.

Speaker 3

What we see more broadly across entertainment is that subscription continues to be a core driver. And what we're able to do is drive ongoing engagement perhaps in a way even stronger than traditional linear I think that you'll we will continue to see consumers engage in our content through subscription, and we'll continue to provide our 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 players, and we're pretty excited about what that might become over the course of time.

Speaker 4

And on the 23 question. Obviously, as we said, we're not yet ready to give guidance, which we normally don't do at this time of the year, but we did give some hints. And with the Madden Hockey, other sports. Apex Legends obviously has continued to evolve and We will have an Apex Legends mobile game in the market. We don't know exactly what time that will be, and there will Excited about that as a major growth driver.

Speaker 4

We will have more growth, we think, out of the FIFA Mobile game that we just put into the market. And remember that we only had or booked really a half of year of Playdemic's Golf Clash We'll have a full year of that next year, and we're working with Playdemic on how they can take that Clash mechanic into other sports areas where we have licenses already. And then we've got a Need for Speed game coming. To the to grow the portfolio year over year through new titles, new IP and expansion and as well acquisitions, which Right now, we're in the digest mode, but doesn't mean that we won't keep looking at everything going forward. So we're excited about next year.

Speaker 4

It looks like a strong year to come. And as Andrew said, we know that this is one of the greatest electronics and entertainment vehicles in the world right now. So we're really in the sweet spot and that's what gets us excited about

Speaker 7

it. Great.

Speaker 8

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

Speaker 4

Thank you.

Operator

Your next question comes from the line of Mario Lou from Barclays.

Speaker 5

Between growth and time spent and monetization. And then secondly, you guys didn't really talk about Madden as much Are things like preview packs and fees that are kind of driving the growth here? Anything I would imagine that you can talk about? Thanks.

Speaker 3

So let me start with Madden. Madden is also having a great year and we're seeing Trends growth, as you know, and for all of you who follow the season, this has been an unbelievably exciting season of football. 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.

Speaker 3

With respect to what drove engagement, again, we have this great portfolio. And while we certainly We saw extraordinary growth in Apex Legends. We saw great growth in FIFA. We also saw growth across the portfolio. And on Apex was 30%.

Speaker 3

FIFA was our Esports portfolio was up 10% on what is a very big number. But we've seen growth across the portfolio, and that speaks to the value of the breadth and the depth of our portfolio. In terms of lag between engagement And monetization growth, which I think was one part of your question there. I don't have exact numbers for you on that. What I would tell you is that teams work very closely with communities and ensure that they're always providing new and interesting content.

Speaker 3

And what we know about all of our communities they play They make a choice of do they want to invest more time or do they want to invest more money in the experience. And it's really the ability to build that balanced ecosystem That speaks to the strength of our live services over time. And so it's a very symbiotic relationship that happens between the investment of time and the investment of money over the course LFT experience and our teams have become very, very good at that and work very, very closely with their communities to drive it.

Speaker 4

Yes. And one thing I'd just remind everybody and We may have already said this, but I'll say it again. We shipped last year FIFA in the Q3 due to the pandemic. We delayed it 3 weeks and moved it into the Q3. We shifted this year in the second quarter.

Speaker 4

So when you look at the growth of the Q3, knowing that that didn't include the initial ship in of FIFA, It's almost hard to believe the strength of the business. And so I just want people not to forget that. And we're not going to provide numbers or details around that Exactly. But just know that to see the growth that we saw after having moved it back to the 2nd quarter, it's pretty

Speaker 7

LTC. Very helpful. Thank you.

Operator

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

Speaker 10

Thanks for taking my questions and wanted to pass my best wishes on to Blake as well. On Apex Legends, so Season 12 seems like a more substantial content drop than the typical season. So Whether it's amount of content or type of content, is there anything that particularly stands out as a driver for new player acquisition and LFT engagement, whether it's game modes, new maps or things like that. And then second on FIFA, around the growth in unit sales year over year, I guess at this point, who is interested in FIFA 22 that maybe wasn't in FIFA 21? Were there any particular markets or customer segments that saw solid unit growth?

Speaker 10

Thank

Speaker 3

you. Well, some detailed questions. And so great questions, so thank you. On Apex, Again, as we as the teams put together these seasons of content and I think about new content and new modalities of play and new ways to connect, Remember, Apex is now well over 100,000,000 players. And so there's no one size fits all component that really attracts LFT.

Speaker 3

Any broad group of players deeply. I think what the Respawn team and the Apex team in particular have been able to demonstrate They work very close with their community. They're deeply engaged with their community. And they're delivering content modalities and playing maps, These things that really speak to what the community are asking for in the year. And what we've seen since the very beginning of the launch of this game And then we are working in a very calculated way around the delivery of really interesting new content, new maps and new models of play On a season by season basis that has continued to grow the overall player base, continued to grow the overall experience, continued to grow the engagement that player base As for the experience and the investment those players are making as part of their engagement.

Speaker 3

And so we're very excited about that. And then with respect to FIFA, again, this is another team that has demonstrated the power of working very closely community in and around our live service. Football or soccer as we call it in this country continues to grow. The league, The teams, the players are going from strength to strength in popularity. We have over 300 licenses in the game and 300 And as the world of football grows, as we build our fan base, again, if you think about the fan base we have for our product or our service, It's the largest digital football club in the world with well over 100,000,000 fans and we work very close with that fan base around their ability to and around that franchise is because we do work very closely with our global community of fans and we are delivering them again content gameplay modalities of play that is most interesting and most exciting to them and

Operator

Your next question comes from the line of Doug Creutz from Cowen. Your line is now open.

Speaker 1

Hey, thank you. Paramount Plus 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 half a 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 a 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?

Speaker 3

No, I think what based on exactly what you just said and what we've experienced, there's Video game IP or interactive entertainment IP is now some of the most culturally relevant IP in all of entertainment. And I think that's going to continue to grow when you think about hundreds of millions of fans engaging in and around the IP we create like Apex, Like The Sims, like Need for Speed, like our BioWare franchises, like Dead Space, like Skate, It's not a natural for that to spawn kind of a scripted entertainment element. I think traditionally, the scripted entertainment elements in It's kind of a one two punch that drives growth in the business. I think as we think about our future, we do believe This thing that we do that is interactive entertainment is becoming more and more important on a daily basis to all fans and that our fans are going to want to experience in many different modalities and some of that might be scripted entertainment in nature. And you should expect that We're looking at any and all aspects that allow us to extend and expand our brands for our fan base.

Speaker 3

We're doing it very thoughtfully and again, as part of our strategy, doing it profitably.

Speaker 1

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

Speaker 4

Thanks, Doug. Look, everyone, that's the last question. I appreciate everyone's very kind of words. And I'll be around Everyone stay healthy, and we look forward to talking to you next quarter.

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Earnings Conference Call
Electronic Arts Q3 2022
00:00 / 00:00