Q4 2020 Earnings Call
Hi, I would like to welcome everyone to be electronic Q4 hundred 2042 conference calls.
I can do VP of Investor Relations you May begin your conference.
[music]. Thank you see that hi, everyone and welcome to <unk> fourth quarter fiscal Twentytwenty on school.
With me.
Today, our Andrew Wolf, Nazi young children send off yellow and see.
Please note.
We see findings or any sort of actual model. That's all I think slides are available at <unk> Dot com, we will pay said audio replay a copy of these prepared remarks on the transcript after the cool.
That's what kind of all Q1 fiscal 2021, adding school cool is scheduled for Thursday July the stats, yes twentytwenty.
Many of the our usual opportunities we have to meet with investors such as conferences on <unk> on available at this time, we're building out a program of virtual tools to reach as many of you as possible in the coming weeks months directly on three partnering with sell side analysts.
This presentation at all comments include forward looking statements regarding future events and the future financial performance off the company actual events or results may differ materially from our expectation.
I'm not in particular the these forward looking statements may be affected by risks relates to the 'cause it 19th.
We refer you to our most recent form 10-Q at all I think drugs for discussion of risks.
Pretty much relates to Cabot and I'd say that could cause actual results could differ materially from those discussed about.
Actual accounts makes these statements I will today makes its twentytwenty disclaims any duty to update them.
During this call the financial metrics with the exception of free cash flow will be presented on a GAAP basis.
Well what comparisons made in the course of this call out against the same period in the prior year unless otherwise stated.
Now I'll turn the call David to entry.
Thanks, Chris This is a challenge and talk to everyone has global citizens. We are all injuring appeared a great uncertainty and continuing to start to spread the corona bars pandemic.
Well you don't report on a quarterly results for the fourth quarter fiscal year, 2020, and black and I will speak to those how about how focused first and foremost who's been on the health well being about change and their families during the cold, but 19 situation.
By showing a little about all actions to support our employees around the world.
We have an internal covered 19 task force that he's been tracking and making decisions on a daily basis since January to keep out team site, including other decisions to restrict business travel cancer bench and close out Shang heart and soul facilities.
Well I need much we shifted nearly all of our global workforce to working hard in response to the growing threat the pandemic.
Through this transition we put a heavy focus on ensuring that people have everything I need to balance the challenges of work that whole life drink sprite onboarded and physical decision.
We continue to being a working hard status for older locations outside of Shanghai with DHL protocols to evaluate already readiness to return each officers. When the time is right accounting for guidance from health authorities in government the comfortable about employees and preparation about facilities. The continued physical distancing.
We're planning for the return to take place over an extended period and we make loans as we make longer term changers two out locations and practices in response to the pandemic.
We will continue to do everything we need to support our teams as we go forward.
Moving to all results. We finished strong use electronic health record fourth quarter and for revenue and earnings above our previously raised guidance.
The innovation that we are delivering it applies across the breadth about games and large services continues to drive strengthen our business.
Touching a few examples from the.
You know sports is a pillar about portfolio continues to bring more place together people is one of the biggest most engagement at the time a trend charges in the world with approximately 100 million implies engaging bleeding they'll pick a franchise more than 25 million unique place a joint peak or 20, so far with Volta opening up an entirely new dimension to the guy.
Entry the ultimate team continued to grow as the most popular about.
People, Oman and Asia also continues its momentum significantly outperforming expectations.
No that's always a cultural icon in football gaming and entertainment and I just had its biggest you ever.
We took a new approach to launching and rolling out new budget play in Madden NFL 20, and the result was the Haas engagement levels in franchise history.
I just like legends was the most downloaded free to play game on previous fall in 2019 and continues to grow as an innovative long term severstal players.
It's been continually recognize is one of the best multi player experiences the Bible with each new season of content respawn have been delivering more of what pies plays love from low to new legends Indem events.
Before colder Dawn Dream started home orders began season for was already outperforming each of the two price seasons and the old ways of enable has become the most successful.
Yes.
Oh apex easement storm, which have generated upholstery troops on the average viewing audience of other top E sports leagues.
Respawn have added more teams in our development organization to work on Brighton content and we continue to have a strong focus on a thriving apex legends community.
[noise] Star Wars Johnson order is one of the breakout college at the last several years more than 10 million unique plays have joined the game since launch a rail achievement for first toward an entirely new franchise. It's a meticulously wealth dropped again and it continues to give sense, a deeply engaging and original star Wars experience.
This in sport inspired to an entirely different gaming audience and one that continues to grow it provides a completely unique experience from everything else in the market and airport 20 was its biggest used since launch in every quarter. This year monthly average flies in the seems fall well higher than the previous you now seems communities to boroughs.
Hardly Craig and his success continues to be built on delivering a wide variety of content and ways to engage the players would get with very different interests.
With more people staying at home in the fourth quarter, we did see rising usage and engagement levels in many about games, where humbled to see people wanting to connect throughout games. During this time.
In pod is being made possible by the amazing work about teams and our technology investments across the company.
For more than five years, we've been investing in a single technology infrastructure architecture digital platform as we accelerate into digital world. That's enabled us to the bottom ability for employees and it's in barn and maintained strong productivity.
But the real stories the people of electronic jobs, we have such tremendously talented dedicated and determine teams did come together in the strongest most inspiring why to this pandemic response period in service of each other and service about plans.
And as a result, we've been able to adopt and skylanders changing environment, where engagement Algawise has reached new peaks and continues at elevated levels through the current quarter to date.
We've had a deep focus on that plays through this time I'll amazing studio teams have done with the grades lots of is content, while working from home, including FIFA Ultimate team events, not an ultimate <unk> gene content. The NFL draft, a new additions to Star Wars Galaxy of heroes.
We also launched I'll stay at home and play together and if you need to do some special things for applies a shelter in place orders began to take effect in March.
Thanks to the dedicated work about teams and our partners, we deliver dozens of stay in play four grams today from special community lot stringent giveaways, the athletes and celebrities playing out guns Hussein's a sports teams launched a fully cloud based broadcasting platform allows us to produce high quality E sports content with competitors host and production.
And so all sites at home.
Weve sits conducted major Oman tournament apex legends Madden NFL 20, FIFA online for entry for 20, including the cheapest stay in place <unk>, a 1 billion dollar charity tournament for Cobra dodging the leap that brought together top youre doing clubs and football is an area in more than 100 countries.
With no executed or plan to execute in the coming months, well, but 100 celebrity athlete community and charity online in sports events.
The global Cross it has also been heating local communities very hot and we've increased the funding it out troubled much program to support local organizations around the world. Our teams have also been doing extraordinary things to helping their communities from sourcing quantities of personal protective equipment to healthcare workers to food drives and much more I wish it.
All of them anyway, we can.
I want to say huge thanks again to the people of electronic out making all of this possible.
Because of that falls into telenovela we've responded well to his global challenge and we're in a good position to continue collecting more plays through great games and content and supporting our communities when and where they need at most.
Looking to airport 21, we're growing our portfolio of high quality, an innovative new games. We are planned to launch 14 taught us to play this fiscal year that includes four years sports titles fees are not in NHL and one more on announcements title all of which the liberal in the mix of creativity authenticity.
Okay, and quality that said EA sports Apollo.
Hey Sports will also lead for us on the next generation consoles issue and we're excited to share more about the breakthroughs in those experiences soon.
I was 21 plans also includes football games, drawing on the breadth of L.I.P. from command and conquer lemaster to announce gains for console and PC.
[noise], we'll have more guidance from indeed developers launching this new through yet partners and to mobile titles leveraging top IP that will bring to plants worldwide.
With our teams expertise in love services. We're also building some of the biggest ongoing experiences in the industry with a lot more for the growing I'd like to legends community. This you starting next week, but season phone.
Matches, what could easily bring since for content that empowers self expression and fuels the creativity of adverse playa audience.
In addition, new sports games will continue to living fans deadly connection to sports through a lot of services, even if the real world leagues and teams aren't Bakken actually yet.
We're also working to bring more content to feed for online and Iflix legendary danger that will excite alcohol plays and welcome new ones.
This year, we plan to grow communities across more platforms and ways to play building on our announcement with Google said, you last week, we plan to bring out games to more digital distribution channels will take out subscription service to a full platform in steam.
Also planes and we've got some more than 10 bucks and with multiple egain set to launch on agendas, which this year.
As we begin at 121 outlet to the he is strong. We also know there is uncertainty ahead as cobot 19 situation continues to unfold.
Just like macroeconomic challenges the status of sports seasons are known impacts to our business partners and long term impact your productivity in a global work in plumbing bartman, our money areas, we'll be watching closely and got a big boy play behavior, and our ability to deliver on airplanes timelines with thankful for the extraordinary people that we have electronic.
Gotcha and for their dedication to each other to apply as to how communities and our company.
Now I'll turn the call because like.
Thanks, Andrew we had a strong year.
But it is impossible for me to reflect on the past 12 months without acknowledging that we are all currently going through a very difficult time.
I hope that you and those close to you are healthy sunset.
I'd like to focus on the impacts were seeing in our business first and foremost we're concerned for the safety of well billing, but well being of our people.
Andrew is giving you a brief introduction to the measures we have taken to and continue to take teams across the company have shown extraordinary innovation in meeting the challenges of delivering games for coal.
Developing a game from home inevitably carries risks and we haven't yet solved all those problems, but for example, we just had a very successful FIFA ultimate team birthday of that.
Picks legend seasoned five is about to launch and we expect to see the next Sims expansion and command and conquer re master to both launch in June as scheduled learning from this period well for ever change the way we work for the year.
Secondly, there was a question as to how this might affect how players behave from Andrew you've heard the people are playing our games a lot more than we've seen a corresponding large ride rides in life service revenues the continues today.
Our results this quarter prove the value of lives to live service path that we've been on now for a decade.
The breadth and depth of our lives services give us tremendous flexibility at times like this to me player needs in a variety of ways.
The closure of physical retail has not yet affected the sales a full games with sales actually above where we would have expected them to be at this time of year. This suggests the people who want to game or finding a title and our catalog and downloading a digital coffee ordering of fizzle coffee online.
In addition, the shift to digital since the last Russia recession reduces both the impact of store closures and of inventory risk physical game sales comprised 84% of our annual net bookings in fiscal 2009 compared to only 20% last year.
Turning to our results our report them on a GAAP basis than use our operational measures of net bookings to discuss the business dynamics to compare results to historically reported non-GAAP measures. Please refer to the relevant tabs given our downloadable financial model.
Net revenue for the fiscal year was $5.54 billion cost of revenue $1.37 billion operating income was 1.4 or $5 billion delivery and EPS of $10 spent 30 cents, including onetime tax benefit of $5.97 that.
We preserved previously discussed.
These results enabled us to deliver free cash flow of $1.66 billion.
Total net bookings for the fiscal year were 5.21 billion up 5.4% year on year at constant currency growth would've been over 7%.
Digital net bookings accounted for $4.05 billion you go.
Life service net bookings were 2.78 billion up 15% year on year, driven by strength across our business.
Moving onto the details of our fourth quarter GAAP net revenues for the quarter were $1.39 billion above our guidance by $62 million operating expenses were 717 million slightly less than what we guided operating income was $401 million and resulted in earnings per share of.
Dollar 43 cents 38 cents better than our guidance.
Operating cash flow for the quarter was 498 million down 101 billion from last year, driven by increased royalties and cash taxes paid.
Capital expenditures for the quarter were 40 million, resulting in a free cash flow of $458 million you can see this in our earnings slides for further cash flow of information.
During the quarter, we repurchased 2.7 million shares at a cost of $291 million since quarter end, we've completed our two year 2.4 billion dollar repurchase program.
Due to the uncertainty in the markets and in the economy management and the board have chosen to postpone a review of our capital return plans until next quarter.
Let me emphasize that this is a caution our business today is extremely strong.
Our cash and short term investments to be ended the quarter were $5.74 billion. Our balance sheet is very strong with regards to death, we have $1 billion senior notes was 600 million maturing in March 2021, and 400 million due in 2026, our debt equates to signature.
Currently less than the fiscal 2020 free cash flow.
Now I'd like to turn to the key drivers of our business in the quarter net bookings were $1.21 billion well above our guidance of 1.15 billion driven by our digital business digital not because bookings were 1.12 billion with the beach versus expectations driven by the Sims four and apex legend.
Digital that bookings represent 78% of our business on a trailing 12 month basis, a new record. This compares to 75% in the prior year.
Life service net bookings were $789 million the year on year decrease was driven by the massive launch of apex legend, a year ago offset by growth across the rest of our lives services Ultimate team grew strongly throughout fiscal 2020.
Mobile delivered net bookings of $138 million up 2% year on year, driven by our sports titles in Asia.
All game PC and console downloads generated net bookings of $190 million Devils, 11% from last year, driven by the launch of anthem in a year ago quarter, partially offset by the ongoing shift to digital.
Overall, 49% of our units sold through were digital rather than physical measured on Xbox one and play station four over the last 12 months and we continue to model underlying growth at five percentage points per year.
Looking ahead to the next 12 months, we are focused first and foremost on supporting our people, helping them cope with the world given which we find ourselves second we are focused on enabling them to deliver the new content with providing to our players through life services and the new games, we have on our slate.
The market outlooks uncertain, but we're basing our modeling on bid gaming software market growing mid single digits in calendar 2020.
With mobile up 70% console up 5% MPC up 5% in dollar terms.
In addition, although our sports live services are continuing currently performing extremely well, it's not yet known when professional sports might resume nor what the impact on our business might be if that takes some time.
In the meantime, our E sports activities are providing to be popular competitive outlets for football soccer and hockey fan.
There are also risks associated with our ability to deliver new games and the guidance I'm about to provide these predicting are predicted on the title slate as outlined in the earnings presentation on our website.
Note that this slide only identifies those titles that are already announced as we have Preleased previously stated our flight 21 revenue forecast includes additional titles from both EA and third Party studios, which will be announced in the coming quarters, we're not seeing material impact on our for 21 title slate.
Right, but that could change and the risk is higher for third party titles, where we have less control.
Finally, with regard to potential impacts of a recession.
The video game market has historically proven resilient as players have seen games as a relatively inexpensive form of entertainment.
Nevertheless, future economic indicators are extremely weak and may affect our business.
Before I get to the numbers. Let me just also discuss three changes we are making with regards to our reporting.
First we will present GAAP net revenue in the income statement as one item rather than as product and service.
Secondly, we will report mobile bookings growth platform fees instead of net to align with industry practice. Finally, we're updating the presentation of net bookings by composition to focus on full game and live service sales in line with the direction, we continue to drive the business we've.
Publish more details on our IR website.
Guidance for fiscal 2021 is for GAAP net revenue of $5.5 billion to $5 billion.
Cost of revenue at 1.3, a $2 billion and GAAP EPS of $3 or 35 cents as you compare with last year remember fiscal twenties GAAP EPS included a onetime tax benefit of $5.97 per share.
We continue to forecast our management tax rate for the fiscal 2021 to be 18%.
With regards to cash flow for fiscal 2021, we expect operating cash flow to be approximately $1.575 billion.
We anticipate capital expenditures of around $125 million, which would deliver free cash flow of about 1.45 billion.
Free cash flow is down slightly year on year with higher underlying profits more than offset by higher cash taxes, and higher variable compensation and lower interest income.
Turning to business drivers, we anticipate net bookings for the year to be $5.55 billion up 3.3% year on year on a like for like basis. Gross is primarily driven by life services plus strong sports launches in a broad portfolio of partner titles.
Our projections assume a headwind from FX to net bookings of roughly $16 million. Although we notice that exchange rates are less likely to be more volatile in the near term as the result of market uncertainties induced by the pandemic.
Both of these these numbers are net of hedges our currency assumptions are disclosed in our earnings presentation on our website.
Drilling down further into the key drivers of our full year net bookings guidance, we expect life's services and other to be 3.85 billion in fiscal 2021 up 7% compared to fiscal 2020, and full game that bookings to be $1.7 billion down almost 5%.
Year on year.
Finally, with life services, we expect mobile to deliver Nick bookings of $721 million in fiscal 2001 up 1% on a like for like basis.
On on a management reporting basis operating expenses will grow 2% during fiscal 2021, reflecting tight expense controls in the face of macroeconomic uncertainties.
We expect Q1 that bookings to be $1 billion.
[noise], while we're seeing very strong engagement and bookings growth to date, we're only a month into the quarter and our current levels of engagement and monetization could subside as stay at home orders are used in lifted.
In addition, the swing factors discussed above in these pre needs unprecedented times are potentially huge impossible to forecast and beyond our control. Thus, we're taking a more cautious view the norm.
As usual, we have presented the quarterly phasing of our net bookings in our earnings presentation note that this year. The phasing includes the effect of revenue recognition from the games. We are launching for the current generation consoles that can also be upgraded free for the next generation.
We've made a preliminary estimated that impact in the season, but it should be noted that this will not affect net bookings for the full year, nor cash flow just the timing of recognition.
Oh finished I personally thinking everybody to company for rising to the challenge.
Every one of you have shown energy.
Ingenuity to enable us to deliver gains and content of the timeline players want them. The most thank you.
With that I'll hand, it back to enter.
Thanks Blake.
We feel very fortunate and electronic often have the opportunity to bring games and entertainment to people around the world.
That's true every day, but it's especially true during his unprecendented situation.
I believe it's also important motivations suppliers inspiration escape social connection competition creation and learning has brought more people to connect and spend Tom and our games in the recent weeks and months.
Coded 19 stay at home orders.
We've seen games Dsos of joint hundreds of millions of players we will now looks to be delivering to these plays for a long time to come.
Ill focus continues to be on delivering great games and content through the breadth and depth about portfolio, our ongoing launch services and by connecting more play throughout gains by a more distribution channels and platforms.
With the incredible determination about teams, we've been able to keep producing new experiences from our homes around the world and as we continue to work through this global challenge we plan to continue delivering a lot of new games, new experiences an exciting ways to play this year.
How we live work play will undoubtedly be change by the carbon 19 pandemic well mobile games have been part of how people are coming together, who continue to serve our people our players and local communities by helping them in any way that we can.
To everyone listening into this call please be sites and be well now blood Tonight, our here for your questions.
Thank you.
Good question.
Number one and your telephone keypad apart from just the model well the compliance.
And your first question comes from one of Matthew Thornton.
Your line is open.
Hey, Andrew Hey, Blake, Thanks for taking the questions.
Maybe two if I could.
You got to talk a little bit about battlefield being pushed out the physical 22 Wonder if you maybe just give us any other color our comments or.
Thoughts on other kind of pipeline projects as we look out in the out years.
Then secondly on the apex, just wondering if you give us any incremental fall circled around.
The launch on mobile progress in China, any minimum guarantees that might fall into this year in any color you could offer there would be helpful. Thanks guys.
I'll, let me, let me take the kinda out new projects and maybe apex in Asia.
First I would say battlefield is progressing very very well we're excited by what the team's doing and you know again in the context of a work in home environment that have been truly inspirational and how that continue to develop right independent the comments about battlefield universe and I'm excited for when next becomes.
In terms of specific announcements around what might be coming the out years.
I would tell you that you know what we've done that things are asked today.
More broadly you should I imagine that we're going to continue to invest heavily in out EA sports branded properties.
You know brings some some new properties back over the coming years.
We've talked.
Before about having new IP and development.
The console and PC and for mobile we're excited about that and I'd also say, we've got a number of incubation products that is starting to come together.
Looking exciting for the future as well so I don't think we've ever had as robust pipeline of content ahead of us as we have right now.
I don't think we've never had the level of execution that we're seeing a round the development of launch of content and the management of ongoing watch services than we have right now and while they were always challenges an interesting hurdles that we face delivering great interactive independent experiences I would tell you I'm very excited by what I see.
Most of that I have been frail pipeline for a long time.
With respect to ice X. I think it folds into that category I, we don't have been specific to announce beyond what we've already talked about other than to say I just saw.
Yeah.
The the results of al I see than five trailer biotechs nicely, we dropped it has a 99% approval right and.
Is the top trending video on mute your games today that in conjunction with some gameplay, we saw and I'd like mobile titles I feel very excited about that franchise overall.
Yeah, I'd just add trust that we are well along the way with our partner in Asia on apex mobile and PC.
So we're very excited about what's going on and we have a very very small number in there or are.
Our this fiscal year, so I don't see any risks if that takes longer but the partners working very hard to get it out as fast as possible.
And I Echo what Andrew just said if you check out the trailer on seasoning five I think what you'll see is we continue to evolve. This lives service and remember this is a live service or that's what's so exciting.
And we're adding interesting exciting new content and then as you look at the trailer remember the team did a huge part of this game from home.
I think that's an important message that shouldnt be ignored because it is not easy.
And what we've proven to ourselves we didn't think it was possible, but it's proving that at least so far we know there's risks going forward, but it's amazing what the teams have been able to do.
I'm working apart from each other from home and just check out the true.
Next question.
Next question comes might affect Sheraton, Yes. Your line is open.
Thanks, so much for taking the questions and I hope everyone of the achievements safe and well maybe two questions I think investors, who have struggled with sort of understanding maybe to read of change of engagement and monetization, it's sort of wait to sort of frame either specific titles were crusher portfolio, what you've seen in March and April versus what historical trends it didn't enjoy.
And when per worried before the new normal and then a bigger picture question are there any learnings you're getting from this period in March and April that are informing the way, you're thinking about either product development or ways in which to tie engagement and monetization more broadly together I should think about the long term future for gaming. Thanks, So much counts.
So let me start with the first part and then Andrew can probably talk a little bit about the development piece.
Yes, I think as most people know we are back half of this year. Unlike last year Didnt have any new titles.
We obviously benefited from follow on sales for jet I follow on order, which was strong but it was really alive service quarter for us and as you can see from the numbers.
It exceeded our expectations and our guidance or substantially.
The big drivers on that are a parrots the ultimate team businesses across the board and our catalog of great titles and people always underestimate.
The power of two things inside of the the catalog and live services.
And we continue to build more and more lives services that engage people socially.
And bringing people to.
Allow people to enjoy things a lot and a world where there was no sports we became sports for people and if you look at our business across and admin.
FIFA hockey.
It's incredible the level of engagement, we saw and obviously the level of revenue growth you saw during that timeframe maddening on its own was the biggest mad near we have ever seen.
And the biggest Madden ultimate team year, we've ever seen and much of that due to the amazing work. The game teams did in building.
Madden with incredible new.
Modes and components to it and a ton of fun.
And then really pushed pushing that into ultimate team as well, but I think people.
You always need to understand the stability of our business is driven by this incredible machine that we built around live services and the underlying strength of our portfolio and our along and large catalog.
Andrew I'll, let you a jump in developing and so I.
I would take it in three categories one at the rate any metrics that we could point just kind of speak to a level of elevation, we've seen I.
I would tell you that feeds the hours watch in April well up 135% over last April.
And our up 115% for Madden.
In sports TV broadcast news and I grew up 250% over last year and April alone was 30% bigger than all of calendar year 2019. So we're seeing no tremendous engagement in the unbelievable creativity and innovation that our teams are delivering.
As we think about these on a go forward basis I think about it in two buckets. One is just how do we think about building gains going forward and how do we think pleasantly engage a as things start to return to normal.
Again, I would take this opportunity to celebrate the creativity ingenuity about teams they have been truly inspirational and how they have come together and in how they work and build games and create games and deliver epic entertainment to our global audience appliance.
We had already over the last five knee started to move towards the distributor development model.
We utilize the best creative talent in a number of different regions around the world to come together and build build spectacle infotainment suppliers I think what we have learned through this process is that they're a new areas of innovation and creativity that we can unlock in a distribution model and some of the foundations that our teams had.
Building in the context of developing games of developing motion capture of developing commentary of fondling games I've got a really helpful for us on a go forward basis.
I also spoke to a in her prepared remarks about how our E. Sports teams have built a fully cloud based broadcast model again, we have a wonderful facility and our head office and we use origins facilities to brings people together and broadcast E sports events, but we've been able to deliver hundreds and hundreds.
So the al is all in sports content completely remotely.
With Whos broadcasters players and fans all safety at home.
I believe this will accelerate our ability to develop and deliver amazing E sports content to a global audience and continue to fulfill the insatiable appetite that there is absolutely there that we're seeing right now.
As it relates to game as again I think it's too early to tell but a few things we know what true.
One is the gains fulfill these pull motivations that we have the ones I talked about the prepared remarks, like inspiration and escape and social connection and competition and creation learning.
Other than just about any other forms of independent on the planet and there were there you know many many we place were coming in discovering just how wonderful games on the joy of games and how spectacularly. They can bring people together and I would expect Tyson is that people having invested this time and built relationships with.
Friends through new games that plane will continue to drive engagement over the long term and our objective of courses to fully support them as they move through this code the 19 plays.
Ensure that we're able to continue to fulfill their motivations that have even as we get on the other side of this.
Thanks, so much.
Next question.
Your next question comes why have more.
Your line is open.
Hello, there thanks for taking my questions. So.
Sounds younger from a lot of your comments that were getting nice Tam expansion, you said since for how to new and different audiences from your other games and then you said Hey talked legend is sports with up to called audiences. I guess my question is do you think that one of the unintended consequences. Akovaz 19 is we're going to get more gender diversity and fab.
After move out of sort of passive programming in to sort of more interactive or more lean forward programming that you guys benefit from and then Blake for you.
I was talking about these maybe more distributors pivot towards more distributed you've been working on the last five years could you talk through what the impact on the piano would be over maybe in 2021 little farther out maybe than the co the disruptive period and how much money that might save on the piano. If we did get moved to a distributed talent based system.
Thanks.
Yes, let me grab the first one and then I'll, then I'll hand off to Blake.
First and foremost what we've tried to do as a company is build a broad and deep portfolio.
Speaks to an end to times a diverse global population.
You see that across our sports titles.
And battlefield like titles and seems titles in apex titles that didnt different experiences across different platforms across different business models in different geographies and that has been at the very core of our strategy.
As electronic Arts.
And what we're seeing through this period of time is as more people come to recognize the true Joy of interactive entertainment the true Joy of gaming.
Even as I think linear media has also benefited through this time.
I do believe that engagement, we more consistent enter in the interact with the industry over time I do believe we're seeing new place come into maybe a heightened played before.
And who are experiencing the goodness that comes from connecting with friends in a truly interactive environment through games.
We're excited about that we're excited to deliver new and interesting an innovative and creative in attainment of fans.
And were very we're very happy to see that the core strategy of a broad and deep portfolio that speaks to an end attained a global diverse audience is answering the needs of the global community is time.
Yeah and in terms of the expense side, it's really still early to tell we know for the next at least two quarters the quarter. We're in now and following quarter, we will see virtually no travel and entertainment expenses that we would normally see we're obviously.
Both games Con and Eathree have been canceled or many of the industry events that typically we would bring people together or our own internal events, where we would have brought people together were cancelled. So obviously, we'll see some savings there we don't really have a full size.
Sense on what the future will bring a year from now.
But I know, we will think differently about how we operate.
How many people we haven't certain offices, what that looks like that could actually change expenses on in the negative way I hope not I don't think Thats what were focused on we hope that we're going to actually have more people working from home that changes expenses to a positive but its early days to say I know at least in the near.
Term.
We will see some savings and we've tried to reflect that in some of our.
Our guidance, but we don't really have a sense of how long. This will go. We're currently working on plans as to.
How we would bring people back into offices and what the pace would be we're not going to bring everybody back on day, one and I think most companies are going through the same thing, but I do think in this year, we're probably a better position for.
I'm not having.
A large opex, because we're not hiring as much and we're not spending as much on things like travel, but I do think.
No one is really the following years going forward.
Thanks, so much guys.
Next question.
Your next question comes like Nike of Benchmark. Your line is open.
[noise] Hanjin plant.
Okay. Thanks for taking my questions.
Two on M&A.
So just curious if you're.
I guess more interesting potential deals here, considering the current environment North Europe.
Seem more opportunities emerge.
Partner or acquire smaller game companies.
And then the second question.
Obviously the game business was already looking good.
Compared to the traditional media business.
But I guess, considering how you.
Your peers performing.
Player engagement strong.
Could you can create content from home as you said is significant.
On a cyclical the economic downturns.
So I.
I guess reshape the perception of your business.
Essentially lock in media companies or otherwise.
Catalysts for potential acquisitions over time.
Yeah, It's a Mike it's hard to say I mean right now.
Were working obviously as we've talked about with a lot of third party companies for.
Titles for the coming this year and then following years. So that's a you know for US we stay very close to him and we're doing everything possible.
We can to support those companies in a you know when it tough position.
But at the same time, you know companies that do have games in the market are obviously doing well similar to what you're seeing with us another public companies. So I don't know if it's turning a catalyst.
Two.
You know M&A, we do feel like this will continue longer term to emphasize the fact that scale is incredibly important in this business.
And maybe that turns into something in which helps us with M&A going forward.
Were you know our model right now just really simple, which is stay close to all the companies we know it's harder.
As you can't go meet with them face to face, but stay close to them on the phone on zoom whatever it is.
And make sure your supportive because we believe longer term that helps us potentially become a deeper partnership with them and that you know that's about all I can say now and we'll see how that plays out overtime.
Thanks.
And our next question comes from water Alexia Quadrani of JP Morgan Your line is open.
Hi, This is Pat on for Alexia. Thanks for taking your question.
Wondering if you can give us a sense of what you think spending might trend doctors that that home orders get lift at any pattern you might be seeing in countries that have already restriction and then just as a follow up.
Are there any concerns.
The sports games might get a little fail without live sports events.
Resuming.
For the fall release it thank you.
Yeah, you know its too early for us to be able to really assess how many places where.
Regulations have lifted because there's been I mean, Shanghai is probably China's probably the only place we're starting to see that.
So it's early I don't I think you should assume our costs won't change versus what they've been historically are real questions can be.
Do do we benefit from slower hiring and less travel during the coming few quarters and I think we will and I, that's built into our guidance, but I don't have a sense of does that last another year or more.
So so I think that that will take some time for us to really better understand that.
As both Andrew and I said on the call. Our focus is on how do we hold together our team.
We do not want to have to reduce what we believe is one of the greatest themes in the industry and that's our number one focus and I think everybody aligns with that and they understand okay. We will do everything we can to not spend to make sure that that happens.
In terms of the sports calendar I mean, the biggest unknown for US right now it's two things the economy.
What really happens to the economy over time today, we see our core audience spending because they're at home more but does that change overtime and then the second challenge is what's the impact if the sports calendar.
Does not start up at some period of time, we know today people are engaging with sports because that's what they love to do you view, our sports fan it doesn't stop and so the only way they're getting their sports engagement is through.
Through our games and that's a huge benefit of course, but we don't know because there's no precedent on this is what happens long term.
Any of the sports season was delayed even further but we do believe that.
Everything we're seeing now and everything we're seeing particularly E sports as we can be a huge factor in helping people.
Socialize excuse me and do what they love around the sport that love and don't forget the social part because remember.
People don't sit and watch a sports game alone they sit and watch sports game and interact with all their friends that they know engage in that sport and what we're doing is where we're enabling that to happen through our games and through through the watching of the sport.
Its online so we hope that that bodes for a great season going forward, but we've never been at a time like this before and so thats why you're hearing any caution from us.
Thanks.
I would I would I would echo Blake's caution.
But what I would also point to the amazing workout teams have have done a path and have been doing.
Over the last couple of months you know, we have a long history of creating spectacular sports content thats, not actually directly dependent or reliant on the real world of sports.
Ultimate screen team of the partial season in FIFA zero Chill in Madden ultimate freeze and not mobile.
[noise], a very close to the plane communities.
They they either racked within deeply on a daily basis, and have kind of being truly creative and innovative how they have put things together and delivered experiences supply is through the last last few months to ensure that those players remained committed to that players the teams the leagues.
And the fans that they love to spend time with I actually believe that there was an opportunity for us to continue to do that supply is even if it sports a delayed or don't make it back this year.
Thank you.
Your next question comes out of Jefferies. Your line is open.
Thanks for taking my question was hoping to just get a general update on your relationship with the NFL. We saw a a competitor you to publish non simulated NFL games I guess the question is do you think theres any risk that the NFL opens up it simulated license at some point and then.
Sticking score sorry, if I missed this earlier, but was there any update as to your plans with and be a lot franchise. Thanks guys.
I would.
I would point to the you would just had with bad NFL. The single biggest hearing a franchise a truly innovative developed game and an innovative we've launched gain in the context as of how the team to dealt and team came together and built new experiences.
Targeting you and younger plays in the context of NFL football.
And how our marketing team kind of launch those experiences in multiple launches and target those those multiple groups of different players and the result is.
The best year and not in history.
I would tell you about relation with the NFL was very very strong we look forward to building NFL games that many used to come and what you should expect from US over time is that we will continue to build out now NFL football offerings.
Both in the in the context of building on the Madden platform again, when you think about game as the biggest one of the most important things for them is extensive community and being part of such a big community like the Madden community, whether they're playing frontline see 11, 11 simulation football or that playing.
The fast knockout modes that we launch this year or what they start to play some of the new modes, we plan to deliver in the future on console on PC and mobile. So we're excited about affable future and believe that it will continue to be a strong part of our portfolio and a really strong offering for football fans that many used to come.
With respect and be a lot nothing more to announce at this time other than I would also tell you we have a great relationship with the India I would be partners with them for a very long time I've personally spent time with with the MBS. The most senior levels talking about innovative new ways to do with a new indirectly content to NBR sands that maybe aren't engage.
And in gains today.
And we'll have more to share on that in the coming months.
Thank you.
Our next question comes might have drew Crum with Stifel. Your line is open.
Okay. Thanks, guys good afternoon.
Blake wondered if you could deconstruct the performance of lives services during the quarter understanding that the apex comp was difficult.
What were some of the puts and takes on the southern percentage decline and I apologize if I missed any commentary on ultimate team.
And then separately can you just comment on your expectations for the your mobile business to be up 1%.
Fiscal 21 against the market you are forecasted to be up 7%. Thanks.
Yes, Sir thanks, good questions. So on live services almost all of the Delta was driven by apex legends and remember we came out of the gate last September or less February excuse me you know on fire like like you never would have.
I believe right and so.
Massive business and then we settled into a regular cadence and we've been able to grow that each quarter through all of the seasons that we've had and we're feeling very good about that of the second piece is we as has the sports calendar shot.
Down we made the decision to move the.
What is the what's called the spot birthday peoples and the team birthday of than.
From the end of March into the first two weeks of April.
And it was really driven by trying to pace out sports content, knowing that there was no sports content in the world and so but it's one of the biggest events a year and so you can imagine that also impacted the year as we went from Q4 compared to previous.
Your Q4 those are the two biggest drivers on the positive side you know Madden.
Both PRA.
Live service the ultimate team has been on fire, which you know in.
The February March timeframe is is rare because its post the Super Bowl, but it's been very strong FIFA online for in Korea was very strong remember we are I think we said in the last earnings call. We shut off FIFA online three in Korea, where.
Still running both FIFA online three and FIFA online core in China at this point, but as we shut off FIFA online three in Korea, we saw massive growth and FIFA online for and so that's kind of the puts and takes and on top of that I would say Sims.
For continues to be the you know the the the title that just doesn't stop.
And I think as Andrew mentioned in his previous comments you know it is continue to grow quarter after quarter. After quarter. This is incredible team an incredible product and amazing engagement and so you can say you know.
Put it all on the apex.
Last year unbelievable.
That's it and then the a the people move of the but birthday.
In the quarter.
Mobile you know the way we've approached mobile for the year in terms of our guidance is we basically have assumed that mobile titles will stay in soft launch much longer than they have historically and so we have relatively little new mobile growth.
For a from new products in the year.
Our hope is that we can exceed that but that's how we've built our guidance because we know the mobile industry continues to get harder and harder and that means people are keeping mobile titles in soft launch for longer longer to try to tune them.
The good news is that we still have a strong.
Set of mobile titles today that are highly profitable.
You look at Star Wars Galaxy of Heroes for example continues to perform extremely well.
Things like Sim city continue to perform extremely well and while we're not growing dramatically, we're still extremely profitable across those titles and our hope is the new titles that we have in the mix will get out of soft launch faster than we anticipate and possibly help us generate something above what weve.
Forecast for there.
Next question.
Our next question comes on line of Andrew.
Oppenheimer Your line is open.
Yes, Thanks for taking my question gentlemen.
No one one kind of big picture, one very near term the big picture question with so many different new platforms to launch on.
Yes, it should we expect sort of the cadence between titles to kind of linked then and and going forward kind of dig into the catalog and find things that either or could be brought back to life for re mastered.
Or.
How does the broader platform strategy affected.
How should we think about it affecting getting a future game development.
And then my second question probably is more for Blake.
Could you if you could give us some color on.
Sort of almost has has the sports titles seeing any sort of.
Any sort of deterioration at all.
Relative to other titles.
Through through the month of April at all or.
How should we think about the guidance go on an ongoing forward basis.
Hi, <unk>.
Putting sort of recession live sports lots of sports.
Maybe.
Dave anything sports are coming back.
Yeah, Andrew you want to start with the firstly.
Yes, absolutely I would say the strength of electronic arts weve built on our ability to be platform agnostic.
We've been able throughout our history valid to get to more platforms with more titles at high quality. The most everyone else in industry. It is it is a position were very proud, although we continue to drive against that.
You know six and seven years ago, we anticipated that should be many more new platforms, we would have to build on overtime and that ultimately the cloud would also emerge as its own platform across a number of different companies or portals.
And part of the reason we moved the organization to a single digital platform single IB single Columbus single Die in a single infrastructure single security and when the organization to a single engine in frostbite.
Was in anticipation of this so that as these new platforms come on line were able to get to them more quickly and more efficiently and at higher quality.
Then the maybe our competitors can who are working on multiple platforms and multiple engines and actually really use.
Our scale to our advantage in our ability to do that and what you're seeing from US now is our ability to get through console and new consoles, and PMC and cm and stadia and mobile and you should expect that we have and switch and you should expect that we will continue to look to deliver great content on.
Any and all new platforms, we think have the ability to reach critical mass of guidance.
In the context of overall time between games I think it's different by game, what we know it'd be true is that games are getting bigger and more complex in development.
But there also into tightening significantly more players on on each release basis and holding onto those players for much much longer through through ongoing engagement in lodged services and social interaction as always we think about our broader portfolio, you'll continue to see us launch games on an annualized basis.
Sports fans will be a good example, there.
You'll continue to see us.
Launch games on you know on a on a multi year basis things like battlefield, well some of that part of that of Dragon age would be a good example of that.
You will you continue to see US I think about gains on a five and six you time horizon, the savings, which launched the gang of over five years ago and continues to grow every year through extra content and large services would be an example of that I think you'll see us launch a true platform games like apex legends, which we expect.
Have continued to grow over the next decade, So again I would come back to I feel good about how we have moved the company on a technology basis that puts us in a position to reach as many players plays as possible across geographies across platforms across business models across genres as his global playing.
The Williams continues to expand.
Yeah, and I'll try to address your second part of your question first I would just.
To remind everybody, which I think you all know, but we just finished the year in which we raise guidance three times and delivered on that with beats every time.
We just put out guidance for next year, probably just this year coming here that we're in right now in probably the most.
Uncertain times that we've ever faced and yet we've cautioned everyone and we've put caveats and everything.
And I don't know, what's going to transpire, but we were still willing to come out and put out guidance that we thought would grow both topline and bottom line year over year.
Look at Q1.
The largest Q1 in the history of the company was 31 cents and yes, we.
And we just provided you guidance for 70 cents an ABS.
And that could we the business could fall off the Cliff Tomorrow, and we would be dead wrong.
But I think all you know how.
And all of our teams have been very conservative.
I would think about that as you're thinking about a year forward.
So with that it's a wonderful.
So look little bit we're lucky or however, you say that we will end the call and I appreciate everybody and most important.
Make sure your families are healthy you're spending time with them.
And you all stay.
Stay healthy as well because we need to have you guys around to.
Help us in the marketplace. So thank you.
B wells state stay healthy Stacey thank you.
And that concludes today's conference.
Yes.