Q3 2020 Earnings Call
Good afternoon. My name is Chantilly it'll be your conference operator today at this time I would like to welcome everyone to the electronic Arts Q3 fiscal 2020 earnings conference call.
Mr., Chris even though.
VP Investor Relations you may begin.
Thanks.
Welcome to <unk> third quarter fiscal 2020 , adding school with me on the call today, all Andrew Wilson see I like Jorgensen Aussie and CFO .
Please note that our FCC findings are running sort of these are available at <unk>. In addition, we posted earnings slides to accompany our prepared remarks.
Lastly offer the cool we will put some prepared remarks, an audio replay of this cool all financial model and a transcript.
That's what Canada, our Q4 fiscal 2020 earnings call is scheduled for Tuesday may the fifth 2020 .
This presentation comments include forward looking statements regarding future events in the future financial performance off the company actual events or results may differ materially from our expectations. 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.
That's what I call. It makes these statements as all today, Johnny said, yes, 2020, and disclaims any duty to update.
During this cool 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 cool or against the same period in the prior year unless otherwise stated now I'll turn the call that Andrew.
Thanks, Chris It was an excellent third quarter for electronic jobs with new games like the outstanding Star Wars, Jed I Foligno as well as out dynamic lot services for FIFA Madden NFL apex legends seems fall, we delivered unmatched depth and breadth supplies over the holiday season.
As a result, a revenue earnings for Q3 were above our guidance growing significantly year over year for the quarter, we're raising our full year guidance for the second time this fiscal year and we're on track to push the very strongly against our original projections for 20.
Well, we delivered to place in Q3 reflects the breadth and strength of our business I'll focus on quality experiences at a deep commitment to execution, we're growing our IP portfolio with more great New games a lot services are among the most popular at hospital in the industry and we're expanding to more distribution channels. So we can can.
<unk> more plays to the games they love.
As a result plays I deeply engaged in our top games sentiment schools are strong and we are building amended momentum in the growth areas about business I'll touch on a few highlights here.
Following up Star Wars games across all platforms has never been stronger Star Wars Gerrard full in auto was the action adventure game that fans were looking for this holiday season respond to live in expertly crafted high quality experience with outstanding gameplay that thrilled players might many of the game of the list and Selby owned out projections for the quarter.
In addition to Jed I for one or the quality of the Star Wars Battlefront to experience is shining through as well.
These and dozens of content updates like the spanning all three trial would use animal critics have reviewed the game to high schools plus sentiment is exceptional under celebration addition helped to drive performance of battlefront too that was significantly above Q3 expectations.
Communities about Star Wars Galaxy of heroes and start with the old Republic throbbing as well.
The power of the Star Wars franchise continues to in July and grow across generations and geographies and we look forward to continue around momentum with Disney and Lucasfilm.
It's really one used since we took the industry by storm with apex legend, and the strength and opportunity of this IP and lots of us continue to grow.
Capex is an outstanding example of the innovation across our portfolio seasons of new content coming out a regular cadence for the growing global community season, three was bigger than season to with high peaks in daily active users within those seasons in gum events are engaging plays with continental challenges that showed the imagination and creativity.
So we're continually pouring into the experience. We're also expanding the I picked universe with more ways to play and watch with plans to reach more platforms and that's what 21 and there's a lot of excitement in the east sports community for the apex Legends Global series that is now underway. We're pleased to have Lenovo as an official sponsor buybacks competitive gaming.
Joining gillette sneakers Pizza hut, and all the major brands and broadcast networks partnering with us on out he sports portfolio.
It's been a great Youve EA sports around the World Madden, NFL 20, and FIFA 20 about demonstrating how exciting and fresh sports games can be for new and establish fans alike. Madden NFL 20 is that most successful game ever in the franchise setting multiple records for player engagement and the hartnett booking through holiday quarter.
FIFA franchise also grew year over year in Q3 volt a football brought an all new dimension to feed for 20 and the updates the FIFA ultimate team had been deeply engaging for fans with fought matches up nearly 40% year over year from launched through Q3.
He for 20 is also the number one most engaged model in our subscription services.
We're now getting ready to launch two major additions to the fee for 20 experience with a prestigious South American club tournament, callable laboratories, and callable sudamericana as well as the E laboratories, a new expansion 12 fee for 20 Global series E Sports competitions. In addition to South America Asia isn't.
Now the growth market for FIFA franchise, with FIFA online up significantly year over year in Q3.
In other dimensions about portfolio, we now have more than 20 million unique players worldwide in the seems full life to date.
I'd expansion pack for the game discover University continue to demonstrate the creative ways. We can add to these parents for al Amazing seems community.
Did the surprise edition of the child and the main Delorean series on Disney plus just before the holidays. Meanwhile, PBC battle for Naperville, a need for speed. He both brought fun new experiences to fans around the world.
Our people our greatest resorts resource at electronic jobs and this year has been a demonstration of how the creativity and technical expertise of our teams working together around the world allows us to live an unmatched breadth of entertainment supplies.
From fee for the Star Wars apex demand and the seems the need for speed animal where the titles that fans around the world recognized I'd Love to play. The addition of great New games and experiences is also bottles of growth and we're excited to do that in a year ahead through more about IP with partner and Andy content and some more surprises to come.
Lots services are delivering value for plays and continuing growth for our business. Our teams are among the best in industry. It is constantly building on feedback to expand and enhance the experience for players with content updates and endgame event and ultimate team creative in original when you seasons that I picks legends that expand the game and its characters you called it.
The seamless for that continues to I'd play a choice and more content across our top mobile titles around the World Live services will continue to be a key focus and growth driver for us in Q4 and a year ahead.
The strength, so I'd be a lot of services were well positioned for growth as the audience expands and diversifies into new forms of content.
We are bringing out games and IP to new regions, including continued mobile growth in Asia and plans to launch apex legends in China without subscription service is now available on three major platforms and coming to steam and if what 21, we're expanding our leadership in high value low friction subscriptions for more players.
And with FIFA and Madden continued to grow as leading E sports properties, we're bringing apex legends competition. So the global stage and we have exciting plans for new content any sports as we move into the next fiscal year. We're looking forward to finishing this year strong delivering for players and continuing outgrowth into F. why 21, now I'll hand the.
All of it a blake thanks, Andrew you successfully launched three games last quarter need for speed heat plants versus arby's Bell for Naperville and of course Star Wars, Jed I follow on order that brings the total for calendar 2019 to eight launching eight major games a quality.
In a year as a substantial undertaking that number only tells part of the story for example, battlefield five we launched a whole new theater of war with maps vehicles weapons and more driving a major shifted engagement.
Star Wars Battlefront too we introduced game changing heroes fan favorite reinforcements exotic plants. It planets, an epic new ways to play across three cinematic errors for apex legends, we launched three seasons of content, including three new legends five and gave invents three town take.
<unk> and a whole new map of six new game modes, delivering quality entertainment at this level testifies to how well the teams are aligned across the company in a way in which we United to achieve our goals and it works we had another great quarter with record net bookings in life services as a whole.
And in FIFA and Madden ultimate teams in particular.
Next legends is having a fantastic season, and we delivered a new hit with the launch of Star Wars, Jed I follow on order as a result, we generated record operating cash flow over the last 12 months years net revenue was 1.593 billion.
Operating expenses were 724 million GAAP operating income was $361 million and resulted in earnings per share of $1.18 cents 26 cents better than our guidance the year on year increase in Opex was largely driven by variable compensation, which flex.
Up and down depending on company performance against plan remember that the true up in Q3 last year was negative that combined with a positive true up this year creates a 58 million dollar swing year on year.
There was also underlying growth in R&D as we continued to invest in game developer.
Operating cash flow for the quarter was 1.104 billion up 150 million from last year operating cash flow for the trailing 12 month was a record at 1.898 billion.
Capital expenditures for the quarter were 28 million, resulting in a free cash flow of 1.76 billion.
Our earnings slides for further details on this information.
During the quarter, we repurchased 3.1 million shares at a cost of 300 million dollar three and $5 million. We've now returned to shareholders over 2 billion of the 2.4 billion and our two year buyback program that we began in May 2018.
We will announce our future plans on our me earnings call, our cash and short term investments at the end of the quarter were $5.6 billion.
Total net bookings for the quarter were 1.978 billion up 23% on the prior year. Despite a 39 million dollar FX headwind.
Sales of Star Wars, Jed I follow on order significantly beat our expectations, we had forecast six to 8 million units for the fiscal year, but the hit the high end of that in the third quarter and now we anticipate selling around 10 million units in the fiscal year, a very strong result for a single player action game Madden NFL 20 is the.
During the best performance in Maddens more than 30 year history.
Average selling prices were strong across the portfolio with discount smaller and applied later in the year.
Diving into the digital net bookings.
Digital net bookings were 1.444 billion up 20% on a year ago period digital net bookings now represents 77% of our business on a trailing 12 month basis. This compares to 74% in the prior year.
Lives service net bookings were up 27% to $993 million nothing illustrates the changing nature of our business model like the growth of our life services and 993 million isn't all time high growth was led by apex legends, but closely followed by doubled.
Growth in FIFA, and Madden ultimate teams growth and FIFA online and Asia was also extremely strong.
Mode Mobile delivered net bookings of 134 million down 6% year over year, but above our expectations driven by titles across the breadth of our portfolio, particularly in Asia, including our IP license deals such as the one for command and conquer Red alert in China mobile is up.
Sure on your at constant currency.
With many many promising titles and incubation of D.A.. We are excited about the opportunities ahead for us in the mobile market.
Full game PC and consul downloads generated net bookings of 317 million, 16% higher than last year growth was driven by increased game sales plus the ongoing shift to digital overall, 49% of our units sold through were digital rather than physical measured on X. box warning on Playstation.
For over the last 12 months. This compares to 47% a year ago, we continue to model underlying annual growth of around five percentage points for digital.
Turning to guidance, we expect full year gap net revenue to be 5.475 billion and four diluted earnings per share to be $9.90.
We expect operating cash flow of about 1.7 to 5 billion.
We continue to anticipate capital expenditures of around 140 million, which would deliver free cash flow of about 1.58 5.135 billion above where our expectations were at the start of the year.
We now anticipate fiscal 2020 net bookings of $5.15 billion up 25 million over our prior guidance and a 50 million from where we started the year for the fourth quarter. We expect net revenue of 1.3 to 5 billion cost of revenue to be 200.
37 million and operating expenses of 724 million.
Opex is down year on year, reflecting the two new IP as we lap launched last year. This results in a diluted earnings per share of a dollar and five cents for the fourth quarter using the diluted share count of 293 million shares.
We anticipate net bookings for the quarter to be 1.152 billion. This is slightly down year on year with broad based strength. This year offset by the massive launch quarter for apex legends and anthem last year.
Looking forward to fiscal 2021, our goal is to continue to grow net bookings and underlying profitability, even as we invest in new platforms. We anticipate lives services to be the primary growth driver followed by the launch of new content across a broad range of genres Relaunching for sports titles.
Including new games in our blockbuster FIFA and Madden franchises for other titles to draw from the breadth of our IP and will also published for titles globally from smaller developers finally, we expect to new mobile titles to make it into soft launch.
We expect growth to accelerate in fiscal 2022, as we leverage the growing base of next generation consoles with a launch of a new battlefield. This is on top of the launches a fee for 22, and Madden NFL 22, plus new and ongoing lives services and other titles.
We create long term value by growing strong lives services launching new content and expanding our reach is broad based model reduces our dependency on individual titles decreases risks and enables us to the liver financial results for our shareholders shareholders through a constant.
Stream of high quality entertainment for our players.
Now I'll hand, the call back to Andrew to offer some final thoughts.
Thanks Blake.
We're delivering for our players at up business is growing our foundation is great IP that excites engages hundreds of millions of plays we've added to the breadth and depth that portfolio with great games like Star Wars, Jed I full in order and the innovation and FIFA Madden and our ongoing franchises is helping us reach new fans and grow out total.
Player base looking for delivering more amazing gains from at top franchises, New IP, New Potter many titles and some other surprises if why 21 and beyond.
Lobs extended enhance the experienced supplies in their favorite games and enable strong ongoing growth for our business, which is on experiences for longevity, creating communities where applies loved to connect share and compete with friends for a month and used to come a lot of services for apex Legends EA sports Ultimate team the seems full.
Star Wars in more continue to grow in player engagement and will bring more great creative content and you can get events to those communities throughout the year ahead right.
Great games, and strengthen loves also position us well in additional growth areas, new consoles are coming and we'll be ready to lead with them about top titles. Our E sports portfolio will expand to full franchises. This year with content designed for a wide audience and a growing range of sponsors.
We continue to add to the value of our subscription offerings, reaching more play through more distribution channels and expanding to audiences and more geographies with IP that they can't wait to fly.
It's an exciting time of growth in the interactive entertainment industry, and a great time to be making amazing games and bringing them to more players around the world.
Yeah, Blake and I.
Two questions.
As a reminder to ask a question you'll need to press star one on your telephone to withdraw your question to press the pound or housekeeper. Please standby heavily compiled acumen a roster.
Your first question comes from Andrew Uerkwitz with Oppenheimer and company. Please go ahead.
Thanks, gentlemen for taking my question.
Looking at these past two star were games, what was a massive multiplayer one was obviously a big single player seems like sales numbers initially or roughly the same but one's got life services, one dozen how's that shapes. The way you think about future game design.
As we head into the next console with a big focus on life services.
Hi, Great Great question and part of the reason why we have these breadth and depth and that portfolio. It's because as supply base continues to grow so do they motivations as we think about making games, we think about the motivation to watch people want to play inspiration Skype social connection creation self improvement.
All these types of things and as we start to look at the broad apply base and we think about each of the cohorts within that we're looking to build experiences that satisfy they need to motivations and what we what we've come to understand particularly with Star Wars is it's a really really big fan base and while social interaction competition and.
Multi player is really important for large posted that fan base. What we have seen through the last quarter is that also is that inspiration and escape model that living that the jet <unk> journey. The Jed I story as we think about this on a go forward basis, you should imagine that we will continue with the breadth and depth across the across the IP.
In order to meet the needs of motivations of that broad play Vice.
And if I could just that's one one follow up.
As we think about life services, but also you know more distribution channels more.
Easier hopefully cheaper marketing should we expect you expect you to launch more than eight games. When we look out 345 years or is kind of like the is eight had a good number.
Well I would start by saying you know I. There's a lot. If you think about the various game launches across the industry. There are not many companies that can come together and launch that kinda, Brett at that kind of quality or would that strength of execution and so we feel really good about that number the other thing it's important to understand.
Is this also has a layering effect so as we launch games have large services that last 123 and in some cost cut some cases, four and five years the build that we get over time, and the predictability and longevity and out revenue stream is really really strong and so I think it's probably a pretty good number some use at my.
Maybe a few most of that somewhat might be a few less than that but we feel really good. The other thing that we're starting to see is that with the reach and the network power that we have with subscriptions and our ability to reach plays in this high value load friction business model. We now have a lot about a third parties in India is coming to speak with us about.
Distribution of their content and so while I feel really good about how capacity to continue to execute and deliver a great high quality content and potentially more than many others in the industry. We're also going to have the opportunity to reach out player base with these very new and interesting titles from third party developers and what do what I would add to Andrews comment is.
Remember.
One of the major strengths of our business is a deep catalog. The deep catalog is based on not just this year's games, our last year's games with maybe even games from two or three or four years ago.
And we sometimes see north of $1 billion and catalog sales in the following year, that's very powerful to us it's very profitable.
And it is critical and continuing to maintain the brands that we have built and fans will come into games that many different levels, either through direct purchase or through subscriptions and that deep bench is.
Something that creates a lot of value, which I'm not sure people always think about as a thinking about the value of the overall business.
Got it thanks, gentlemen, congrats on the quarter.
Thanks.
Next question.
Your next question comes from Brian Nowak with Morgan Stanley . Your line is open.
Hi, guys, it's not on for Brian Congrats on the quarter and thanks for taking the question I'm. The first one is just on the mobile business.
It seems like you made some great progress obviously on a constant currency growing year on year can you can you talk about sort of what you're seeing in that business and maybe any thoughts you are having on potentially partnering with a with other mobile app developers and some of your competitors have seen some success recently following this strategy like that particularly in terms of going into markets like Asia and then.
If you could just quickly an update on that project Atlas. Thank you.
Yeah. So obviously, a rolling mobile out in China, you need to have a partner and we are quite as we've said in the prepared remarks today that we're working with a partner there.
And we're very excited about the opportunity that partner is also helping us.
Develop a mobile apex for the globe.
And you will more to come on that in terms of timing, but that's also a big upside for US we have not built a lot into our forecast for next year on that because of timing is always uncertain, but we do believe that there's a lot of opportunity. There I've. Obviously, we'll also do a PC version of apex in China.
Through that same a partner, but we will selectively use partners where possible. We have some great studios. We think we can continue to build great games, but where possible where a partner going either increase the time to market or help us in markets, where we don't necessarily have the ability.
To go to market ourselves like China, we will use partners and more to come on the on apex than any other titles that might fit in that.
Just a couple of other thoughts we've talked in previous calls about kind of a three pronged strategy around mobile Oh, the first pillar being a an underlying beliefs that we were not monetizing mobile games at a level that maybe some of the best of breed inside the industry had and we were going to have a real focus on that.
I would tell you Estudio leadership team has brought some really really high powered compelling leaders from the broader mobile industry into the company diack coming in and working without teams and just changing a philosophy around how we think about the creation of really compelling content on the monetization of that content and we started to see.
That pay out and you should expect that we'll continue to focus in that area and get more out of the existing mobile titles that have actually performed really well in the marketplace and we may be haven't been as focused on the second pillar has been we are game development company. We have spectacular IP that has a mobile appeal and mobile application.
And we have a number of mobile titles in development that I'm actually very excited about two of which as we said in the prepared remarks, we'll go into a soft launch in the next year also and they might be some others that getting a little earlier as well and then third we continue to look at opportunities for partnership and acquisition.
A lot of those out there was it turns out but we are we're trying to make sure that were in every conversation. So we do but mobile it continues to be a focus for us and we do believe there is a growth opportunity ahead.
On project Atlas the other part of your question, you'll continue to hear more from us about streaming and other components of Atlas were in.
Type connection and conversations with all the players that are doing streaming we're very excited about where it's going and the potential as well as how we can continue to improve the tools that people use inside of the subscription models that we put in place. So yes. We're civil reminder, our goal is to be.
On every platform and to offer our great products to consumers, where wherever they want to what I want to play them as long as we can play provide them at a quality level that we're comfortable with so you're going to here and see a lot more the next coming here.
Thank you.
Your next question comes from Raymond Startle with consumer Edge Research. Your line is open.
Great. Thanks, so much for taking my question.
Is there anything that you can discuss as far as folta can you give us an update on monetization for Volta and then any more details on FIFA ultimate team being up double digits. This call is that like for like.
As far as one first launch and then what would be driving that growth. Thanks.
We're very happy with Volte Volta abroad in a whole set of new players and engaged in the new and interesting wise as we've also talked about a lot in past calls as we think about building live services, we really think about building a engagement first and monetization to follow as I say.
I think that what the team did with voltage issue is really really strong they've taken some great learning from feedback that received from the community and we'll continue to build on that in the east to come and while we don't have any announcements yet on monetization.
There you know a lot apply feedback is that they would also like to see.
The opportunity to extend an enhanced that bolter experience in a why they do with other launch services. So we're excited about what that might bring it out what I would say on ultimate team and this is not just fever. This is madden and this is NHL and our other games to the thing you need to remember on ultimate team is.
As a we continue to refine and improve the weekly or monthly events that were running on ultimate team that bring people into play.
People won't play ultimate team as they are not having fun and so the key is how do you builds in event that they're going to have fun competing and interacting gets a social network and it's all about the design of the events and I think the team continues to get better and better every year either of finding existing.
Investor events are adding new events and that's what really drives the overall monetization in ultimate team across all of our sports and it's a it's the thing that people, sometimes don't understand when it comes to live services that it it's not about the monetization. It's about how do you create fun for people to be.
Able to come in and enjoy that social connection and that competition with others and that's what really drives that across all of our lives services.
Next question.
Great. Thanks.
Your next question comes from Eric Johnson with BMO capital markets. Your line is open.
Hey, good afternoon, two questions first gross margin maybe could to provide us with the puts and takes the bridge from last year to this year and then also on the other titles that you did have guides for any update.
To that guidance for those titles. Thank you.
Yeah, So a gross margins really simple we sold more.
Madden more FIFA and more star Wars Gendrive than we expected in all three of those are royalty property. So we had to pay royalty on him royalty gets booked and gross margin. That's a good problem to have I'd pick that all day long.
Because obviously is driving the overall business and the profitability of the business. So nothing more than that it's pretty straight forward I don't think we have any new news on guidance for anything else. Obviously, we've tried to give people some sense of what next year looks like as I said in my.
I prepared remarks, we would like to our goal is to drive both topline and bottom line guidance and we think we set up a slate of properties for next year to do that and.
We've also provided people the knowledge that battlefields coming into your after that which are also drive got drive growth. The following year and we see that has a big positive for as we've said the continued plan to try to have a strong growth top line bottom line cash flow as we go forward.
Okay. Thank you.
Your next question comes from.
With Jefferies. Your line is open.
Hey, guys. Thanks for taking the question, hoping to dig into apex aspirations a bit more.
Without getting too bogged down into the F 20, or 21 guide specifically, how should investors be thinking broadly about the growth aspirations for that franchise I think you've mentioned in the past that you view it as a 10 year franchise and it's obviously early but should we think about it sort of as a a modest straight line grow or moving forward or.
There is a bit more lumpy and then just given the free to play in nature of that game, hoping you can just update us on how the profitability of apex compares to the broader profitability of EA as a whole. Thanks, yeah. It's good good questions you know I mean.
Whereas a I think you Andrew said, we're just getting into our one year anniversary and the game, which is fantastic. We're been very pleased with where the game as the team has done an amazing job of continuing to innovate and add content and also leverage.
And incredibly engaged audience to try to feed them and give them things that they want it to continue to to playing the game and excitement and surprise.
We will.
Continue that journey no different than we've done with live services.
Your you know people, sometimes forget ultimate team was like an 8 million dollar business 12 years ago, and our goal is to always be innovating in improving over time to try to grow the business and that's how we're thinking about apex and we've continued to bolster the team with new talent.
New lives service talent, but also make sure that the existing team is very focused on how they are building out the business in rewarded for their for their great efforts. There I mean, it's just an incredible job they've done.
It's hard for us to predict.
If you would have asked US you know a month ago six months ago, we probably would have known and we still don't know, but our goal is to continue to grow that business and to maintain but.
Well, we come to our May guidance, we'll try to give some people you know some some sense of it. What we are you know we're going to stop talking about monthly or weekly or daily active users because I'm not sure what anyone can do with that information and if anyone.
Questions that I I'd say go back seven and a half years ago, but to my very first quarter at the company, where I said, we will take away metrics that don't make sense for investors and we're not necessarily trying to hold back any information we're not signaling anything we just realize that.
We want to make sure you're not doing something with numbers that don't make sense, we'll try to give you as best guidance as we can we want to grow the business. We think its I've got a long history to it but I'm more to come and we're very excited.
Very optimistic about where the where the opportunities can go as apex.
Just a small odd.
Game level as we look at you know the industry and the games that have actually lost a decade on mobile or things like league of legends things like see US go it seems like Dota two the continued.
To engage huge populations of players around the world.
It's really kind of three core pillars of those games really compelling and identifiable character is a truly compelling world and competitive skilled by highly social game play that continues to evolve and emerge over time as players continue to get better in the game they had a threeq.
Tent Poles of apex legend, as again and as we think about the next year in the year, often we add new geographies and we had new platforms. A again as we'd like said, it's hard to predict exactly how that will grow but our belief is that we have growth ahead and with very very encouraged and excited.
By the fact that the team gets better and better answering needs of the players season, three was bigger than season two weeks vacancies in full will grow again and we're excited about what we'll call. Yeah and you know you mentioned a you know our comments in the past around we're trying to build the long term franchise.
At the end of the day.
We would much rather have something that lasts for many many years doesn't is not a boom and bust.
And that's how we're trying to design the business. The team is very aligned with that and if it can turn into essentially an annual shooter for us as part of our franchises. We think that has huge value to the overall company. So that's how we're looking at it and how we're approaching it and we think everyone's aligned around that and more to come.
Thanks, guys.
Thanks next question.
Your next question comes from Jeff.
Your line is open.
Hey, guys. Thanks for taking the question could you talk about how big of a driver John I follow on order was for new subscriber subscribers. The origin access and then broadly just can you talk about how churn is trended within your subscription products.
Yeah, you know I'm, so remember that it's the.
The premier's subscription that gets frontline titles, which is only part of the overall origin access model and not in the Sony or Microsoft program.
Obviously, it added to it but it's early days. So it's hard to understand if you know people came in and then went out because they are still playing the game.
We have not seen big changes in churn you know its.
It's been a big question for us because we don't have titles coming in every single month from our portfolio. So you're always going to wonder about churn.
But it's a couple were continuing to grow the subscription business on origin as well as on our partners and we think anytime we've added new content that drives people than even we believe when we put a as Chad I end regular subscription which will be still months from now we're sure that.
That will also bring people in and the the most important part is what we what we found out as people actually come in for certain titles. We know this because we watch the data before they joined the subscription an after and we find out they play titles that they've never played before and then start playing them a lot.
So we've reduced the barrier up trial, they don't have to go and by the game they actually get a chance to just try it inside the subscription and that's a huge when as we start to build people into new either games are genres or sports that they've never played before because it only can increases the the growth of there.
Interest and playing great games.
Thanks, Mike Congrats on the quarter.
Thanks.
Your next question comes from Matthew Thornton of Suntrust. Your line is open.
Hey, guys. Thanks for taking the question you know without getting into maybe any any specific dates or even even titles specifically maybe to give us a little more update just on kind of how you're feeling about the pipeline maybe relative to where we were.
612 months ago at the projects that are out there across the various studios any color there would be helpful. And then just coming back to Sims and apex in particular, Blake I think you had talked about those franchise and doing well call. It 300, a 400 million for for the year are those still reasonable ending points for those for those franchises. Thanks, guys, Yeah I would.
Reasonable franchise or points for those franchises and both are doing continue to do well the Sims.
Had an expansion pack in the fall that has done extremely well and it is just an amazing business that continues to grow as more and more people come in and then those people.
Go backwards them by expansion packs for history as well as by the new expansion packs and it just builds on that social network that we've effectively effectively create an inside the Sims and we'll see similar behavior with apacs, even though it's not expansion packs more and more people come in each season and start to gain.
You know excitement around what they're seeing and build around the social network.
You know I know more color yet on the.
Forward looking obviously you can assume that the base set of sports games will be in every year. Obviously next year, we're going to most we've said, we'll most likely at at least one new sports game.
And we have some third party games, we will have in for next year.
And a couple of things that we haven't yet announced but as we said earlier, we're very focused on growing both topline and Bottomline. Both next year in the following year as well as future years, but I just want to give people a sense that we've got a fairly extensive set of titles that people.
You get pretty comfortable on going forward and obviously, we're also working on a lot of our you know famous franchises that will come in the future plus some continued new franchises that we'll continue to add and live services associated with all those.
Yes, just as a kind of an add to that again, we benefit from a large number of very well established studios with great teams are the track history of delivering really high quality content. So as we think about maxus and bioware and mode, even das a lion respawn and I'll be a sports studios, they're out there a titles in.
Very stages of development across all of those studios and more I also talked about you know a number of mobile titles, a couple of which will come into soft launch next year, but I would tell you have I'm more excited now about our mobile pipeline than I had been for a number of years and again I would say also that mobile is an unpredictable marketplace and it's very challenging and.
All companies have discovered that but I feel better about what I'm seeing coming out of that mobile. She goes now that I have for a number of years and so we feel very good about the long term trajectory.
Of where else do you guys are going and the amount of games, a new and creative IP that we have in the pipeline Yeah and you guys can imagine you and you've seen this historically in console transitions as new car rentals come out.
What I don't want to get ahead of our great partners, Microsoft and Sony, but you should assume that the power of those costs those are going to be a lot better than the power of existing councils, which means a really simple thing we can do a lot more.
And so you will start to see things over the next couple of years that we're doing with games that will blow People's minds and.
That's the fun part of this business because we're going to see so much innovation, not just with us but across the whole industry and that's why you've seen growth across the software business as part of this overall video game business in every single console cycle over the last what 20 plus years and.
So a that that's where people sometimes get hung up they say they get too focused on the short term and not think about what's transpired historically.
And the power of the new cancels is going to be substantially greater than the existing councils, which means we can just do a lot more and it's going to be fun and great to see how our existing games will evolve like a FIFO or madden, but also see how new games will evolve or be developed under that much higher power.
I appreciate the color guys.
Your next question comes from Reincke with Bank of America. Your line is open.
Hey, guys. Thanks for taking the questions a couple on life serves as a first very encouraged by the outperformance of Star Wars Jed I from respond. So you guys know how to large player base into which you can generate some additional revenue. So what does the opportunity ahead either for.
Year to generate life services revenue from non fiscal 22, and or maybe some sort of add on content pack for that game and then as it relates to live services from ultimate team.
The sequential acceleration to double digits last quarter are you guys able to see how much of that as a function of just easier year over year comps the ultimate team business versus execution getting players further down the conversion funnel and getting higher spend out of existing payers. Thanks, yeah yeah.
Let me hit the ultimate team when first and then maybe Andrew can address the.
Star Wars jet <unk> Ultimate team really has benefited from more people and a more engagement versus once again.
Trying to change the ARPU in some fashion, we're very conscious about not trying to get people to spend beyond what their.
Spend levels are and so the the best way to get people is to get people to spend in that is to engage them in better and more events that they're excited and and so as I said earlier team has been very good at trying to design to events add two events and keep people really excited about playing versus trying to get more.
Our money out of on any single event and I think that's been our biggest single driver plus growing the overall base of a FIFO overtime and the number of people that are into ultimate team. We're you know more and more people play ultimate team and we think that's very engaging forum, but it's fair.
So all that different than what you see in traditional sportswear people are highly engaged with the underlying sport. These are hardcore sports fans and this is what they want to do and that's why they engage an ultimate team.
On on Star was no announcements of anything at this point, but what I would say as you're right. We have a very very strong play advice and very engaged play advice.
Who feel like they're just had the ability to experience is one of the most compelling star wars experiences of the lots of any formal media I would also highlight it is a single play games or any kind of lives of us or additional content would be different than what we would see and an ultimate team on apex legends bought that this team.
Who is working on this.
As one of the most creative teams.
Company and certainly in the industry, we're thinking about where to take this journey next for plays that love. The stall apply we're excited by what they're going to come up with and in the meantime, I also think that this will be one of the strongest catalogs sell as for this company of the of the coming is and will almost certainly help continue to grow.
Option as it moves into a out their subscription offers across platforms.
Next question.
Your next question comes from Mario Live with Barclays. Your line is open.
Hey, guys two questions on my end, one on the switch and when I'm sense on the Nintendo today announced that the situation exceeded 52 million units shipped worldwide, which is similar or more than at the X. box. One. So therefore should we expect to publish more titles on the switch going forward as I understand currently there is only three EA titles on them.
Platform, including unravel say and legacy version of FIFA and then secondly on sends out the success of since boys very intriguing to me since the industry is filled with multi player experiences and Facebook recently actually now said, they're coming out with horizons, social experience NBR that kind of remain.
Engineered the since online, which helped launch 18 years ago. So any thoughts on Relaunching online version other franchise, giving its large popularity. Thanks.
So let me hit the switch question and then I'll give adelaar a question on Sims. So yes, we are very pleased with how well Nintendo has done a with switch I mean is.
People love the platform they enjoy it it's great and remember there are a lot of people that have both an x. box in a switch or at EQT ER, Playstation and switch because it in many ways is provides a different experience, particularly at a way to access a great intend, though software we are always looking and discuss.
Good thing within tend to what.
Let's we can put on the platform and as you can imagine as the platform grows our interests and adding content.
Gross for that platform, but we're also conscious of the fact that the top selling titles by a long shot or all Nintendo software, which is fabulous software, but it helps us balance sort of the reality is of how big are markets can be there, but trust that we're looking at that you will hear some more things in the future about what we're putting on the platform.
Form and we're very pleased with how it's grown alongside the growth of both Sony and Microsoft platforms.
Great question on the seems a little in fact, I guess that many the seems we 20 next week.
And that maxus team and the teams to being part of Max's over the years continue to deliver unbelievably innovative and creative content.
Well you know a constantly growing seems community globally.
As we think about the Sims again, I I referenced the motivations of why we play games Elliot inspiration Skype social interaction creation self-improvement competition.
Typically what the seems has done is really focused on fulfilling the motivations of inspiration Skype creation, self-improvement, destock and not necessarily focused as much on social interaction and competition, but a few things are in fact true over the years one is that the Sims community.
Continue to grow and with a broader social fluff platforms continue to connect with each other in share what they do in and around the game. They play and we've seen that manifest in games like Sims, Freeplay, which was a more social experience for us and we're also seeing that.
Competition nature of the Sims is also rising up and we're seeing people compare and contrast, what competition that regional sports sense, but but how they create and what they create and how they use their imaginations and what they're able to build inside of the Sims universes and so as maxus continues to think about.
The Sims for a new generation across platforms and a cloud enabled world you should imagine that wall, we will always stay true to our inspiration escaped creation self improvement motivations that this notion of social interaction and competition.
Like the kind of things that will actually present in the Sims Freeplay a sorry in the Sims online many many years ago that they will start to.
Become part of the ongoing seems experience than it used to come with very excited you know this is a game that it really doesn't have any competition in its category for delivering unfulfilling. These motivations for players and we think it's a tremendous growth opportunity for us for many many used to come and the one thing that we have with the.
Sims that we have with all of our games, but probably the most with assumes is.
Incredibly engaged community.
And the Sims team has done an amazing job interacting with the community and trying to understand what they want and so it allows us to develop.
Expansion packs additions whatever it is at four game approaches that is really coming from the community and we will continue to encourage that so as we see interest or demand that allows us to go chase that as we've developed product and I think that that's an amazing thing that you don't necessarily having.
All games and the Sims is a leader there for us and it makes it such a fabulous opportunity to continue to feed what the community wants.
Very helpful. Thank you.
Your next question comes from Mike <unk> with Goldman Sachs. Your line is open.
Hi, Thank you very much for the question I just had one on unit sales.
If you look at full game downloads plus package goods. It looked like there was up $168 million year on year.
And it seems like the key moving parts for Star Wars need for speed.
More than offsetting battlefield five I'm just wondering if there any other factors to consider.
Whether those are catalog sales being better or worse or pricing or the digital shift impacting unit sales that could help us think about things that may have impacted units for the quarter. Thank you.
Yeah, well clearly a digital sales continues to grow I would I'd.
I'd say remember star wars tends to skew a little lower digitally than that.
Our average titles just because a lot of the gifting that goes on.
Holidays.
And Yeah live services, obviously were was a big driver but.
If you thought if you think about sort of our expectations as we mentioned we over delivered on Star Wars.
We probably under deliver slightly on.
On plants versus zombies, but that's one that will sell well over a long period of time, so wood and relatively small title. So that wasn't a big driver and then you know need for speeds kind of as we expected.
We did as I mentioned in my prepared remarks that this year, we had stronger pricing than we'd have it in the past.
And we did discounts later in the season than we did in the past and.
That was part of our strategy, but it also helped across the board as we're looking as you look at overall revenue.
Great. Thank you very much.
Your next question comes from drew Crum with Stifel. Your line is open.
Okay. Thanks, guys.
Update us on the progress you've made with FIFA online poor in China. During the current fiscal year, and then how big of a role that please.
On growth for fiscal 21 and when.
Back to the 200 million dollar annual run rate.
And then separately with some of the management changes you've made at dice and I guess, specifically then becoming the director of the lay off this.
How involved will he and respond to you with the development of the next battlefield game.
Yeah, So oh quickly on the.
On a FIFA online, we're still running both FIFA online three and FIFA online for in China.
That has not impacted the business that much in fact, we're pretty close to getting back to our historical level. We've shut off FIFA online in Korea, and FIFA online worse for their has responded very well we had strong growth year over year in the quarter for that and that was mainly driven by Korea are we.
We'll play it over the next few quarters as to when and how we're going to shut it down in China.
What we're conscious that we don't want to disrupt the consumer there and right now both online for and only three are doing well in that marketplace. So more to come on that but you know, we're we're pretty close to back to where we were and we're really excited about the growth that's coming off of FIFA online for both in Southeast Asia and in Korea that were.
Thing and even in China, so more to come there but.
That's kind of the quick quick answer.
Good question on on Vince and battlefield five.
Recall that we announced that Vince was a leading a creative council for the organization I'm. What is creative Council dogs. It's kind of operates like a brain trust like was happening at a at peaks and really brings creative leaders across the company together to review when coal mine deconstruct, even help and providing.
Side across the broad set of creative initiatives that we have going on and Vince is very proactive in that and very involved in that and that's having a tremendous impact across the company and helping US drive this kind of a line focus push against both quality and execution.
Im taking on Das Allied traditionally das alive or have been supporting das dot com, but that a great creative team great creative leadership.
Levels have been incubating some other things.
And we're very excited about those things and Vince will be deeply involved in those as he takes on leadership of that and then with the leadership change that we made in stock on we've we've got really really strong traction and gets the next battlefield game I'm really I talked about is law school I'm really excited by what that team's doing.
David Radha who is leading the studios in Europe . Now is also having a really strong impact and the team is going to do some pretty amazing things.
Your next question comes from Mike Hickey with Benchmark Company. Your line is open.
Yes, Hey, Andrew play, Chris Congrats on the quarter. Thanks for taking my questions.
I had one on France.
Kind of flat.
But.
Maybe we can grow layer deeper obviously super talented guy and success shooter John is truly remarkable with metal water.
Call of duty Titanfall, Ipos legends, obviously sounded respond.
I guess.
Just your thoughts on respond X band.
Hi that studio continues to be a leadership there and then the new die studio sounds like they're going to re brand that are we met.
Mentioned that perhaps parenting.
Some some gains in development therapy development preproduction, but curious if you can look forward to sort of.
Total 18, some dance machinery genre merging two three years no I guess broadly speaking.
Our new consoles Blake great to hear your excitement on new concepts coming to market what that means a share that also seemingly a good time to come out with new IP, So thoughts I guess broadly.
How you think about new IP on the front end console cycle. Thank you.
Yeah, just just to be clear Vince hasn't stopped working it response is still running respond and we're asking him to do more and.
Part of what a lower Amelia has been doing is trying to make sure Vince has all the resources that he needs and so giving him the chance to oversee die sell a also gives them the opportunity to pull resources into.
The response team if he needs to so there are probably a I don't know how many new eve IP ideas worry incubating so more to come on all of that everyone's pretty excited but I don't want anyone to be mistaken that expanding vinces remit means in any way that he's not overseeing.
Respond he's got a great team there he's got a great management team. There we've continued to bolster that team, but he is still.
Very helpful everyday at respond as well as helpful across our entire portfolio. So we're very excited about he and the whole team as to how they've integrated into the company you know it's never easy to.
Small company and get acquired by a Big company and I think what the respond team hopefully as found out of that you know, we're we're actually not bad guys and were pretty fun to work with bad people, sorry, say bad guys because floor as a really good.
Right.
Lately, but but you know it's a I just want people to no I mean, we try to leverage.
No just Vince its people across our entire portfolio, we try to leverage our best sports experts are best.
Our best managers wherever they are and that we've got a collection of quite a few of those people and that's why we can continue to produce the games that we produce every year you don't put out the best and biggest sports games in the world year after year on time and on budget. If you don't have amazing people doing that so.
And Chris is telling me I got it shut it off because we're out of time, but a there was one last one part of your question Mike that.
I didn't get too.
No. We lost you alright, alright, good everyone. Thank you talk there next quarter.
This concludes today's conference call you may now disconnect.
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