Q1 2022 Electronic Arts Inc Earnings Call
Good afternoon, My name is Christina and I will be your conference operator today.
At this time I would like to welcome everyone to the electronic Arts Q1 fiscal 'twenty 'twenty 2 earnings conference call.
Mr Crush evidenced VP of Investor Relations you May begin your conference.
Thanks, Christy and well.
Welcome to Ea's first quarter fiscal 2022 earnings call with me today from the items are Andrew Wilson, our CEO and Blake Jorgensen, our CFO and CMO.
Please note that our SEC filings and earnings release are available at IR <unk> Com. In addition, we have posted detailed earnings slides to accompany our bedroom walls.
Lastly, after the call with lifestyle, and Petro mall and audio replay of this cool off and actually model and a transcript.
With regards to what Canada, and Q2 fiscal 2022 earnings call and scheduled for Wednesday November does that and as a reminder, we placed and schedule over an entire fiscal year of upcoming and on our website.
And this presentation includes and our comments include forward looking statements regarding future events and the future financial performance false accounts.
Actual events and results may differ materially from our expectations.
And we refer you to our most recent form 10-K for a discussion of risks that could cool actual results to differ materially from those discussed today and all that.
And also it makes these statements as of today and what was the <unk> 2021 and 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. All comparisons made and of course. This call are against the same period and prior yeah and other lifestyle.
Now I'll turn the call and it's Andrew.
Okay.
Thanks, Chris and I Hope all of you are continuing to stay healthy.
And I start out today by thanking all of our amazing teams across electronic Arts, who continue to create and deliver so many great experiences for our players during this unprecedented period.
It's been an exciting few months into law school, we've unveiled battlefield 2042, we've launched F..1 'twenty 'twenty..1 we've showed what is coming without next Madden NFL and FIFA titles, we had a fantastic E. I play live event with Great fan response, and we've announced the acquisition that play Demick, which is another step.
And our strategy of continued leadership and sports and growing and mobile.
Integration efforts with the teams at Codemasters Glu mobile and metal heads are going well and we're pleased to be building a lot of anticipation for the summer for our upcoming games and content.
Well, you know first quarter of fiscal 2020.2 we delivered very strong results, even as the world took steps towards opening back up we deepen engagement and connections with players in and around our games and we see this trending this trend going well into the future.
I would tell the teams are delivering and experiences that hundreds of millions of players want to play and that.
Launches and getting carriage and launch sensors, all performed very well during the quarter.
Execution against our long term strategy continues to power our growth and our business revenue net bookings and EPS were all above our guidance for Q1, we are raising our full year net revenue and net bookings and EPS guidance today and we are also forecasting our biggest second quarter and Bob.
Our long term strategy is focused on 4 key opportunities to continue and creation of great games and content with a focus on mobile tools for the community to drive deeper engagement with our content.
Allegation and distribution of content and services to more platforms business models, and geographies and harnessing the power of the social ecosystems in and around out games.
As part of this and FY 'twenty, 2 we continue to execute and execute against 3 key growth drivers building on our leadership and sports growing out blockbuster franchises and expanding and live services across our portfolio, including mobile.
E Sports continues to extend its leadership position to the global strength, all about franchises and growing portfolio moving 140 million players have engaged with our EA sports games over the last 12 months at the center of this our FIFA franchise is growing around the world.
And with 31 million players have joined FIFA 21 on console and PC since launch and FIFA Ultimate team continues to engage more soccer fans with spot matches up 48% year over year and Q1.
And China FIFA online 4 set all time records for monthly weekly and peak daily active players and driving New records for our business day.
On a global basis before is growing as part of the social fabric of soccer and weird connecting players through our games and live services on more platforms and more geographies snap up.
We've also launched <unk> 2021, but first F..1 experienced and be part of our EA sports portfolio and nearly 20 years with an incredibly high quality game that has 1 price from fans and critics FY 2021 is bringing fans and the excitement of the sport during 1 of the most memorable seasons in recent history.
Sales were up significantly year over year and total active players have grown by nearly 10% since launch over last year's GAAP, demonstrating the power of that coming from the amazing team at towards Masters, a great game and L E a distribution and marketing strength.
Momentum continues to build for F..1, which like silica is 1 of the few truly global sports and we see a major opportunity to continue growing the franchise to reach a larger audience of players and viewers.
Later this summer we will begin and launching a strong next year and slightly E sports and that includes Madden NFL 22, with new experiences and franchise boat and the yard FIFA 22, which is already showing very strong demand metrics and a new high promotion technology powers innovation throughout the game.
NHL coming to next Gen consoles for the first time and E Sports PGA tour and the only game, where you can exclusively fly all 4 of golf's major tournaments. The masters at Augusta National The open championship. The U S Open championship and the PGA Championship.
And also thrilled to be back in the Batesville business, which Supermajor baseball and MLB tap sports on mobile and we look forward.
And just sharing Moore from those teams in the future.
With the strength of our industry, leading E sports teams and the addition of talent and expertise from Glu, Codemasters and metal and soon and play dynamics as well as partnerships with international developers, we have exciting plans to create more EA sports experiences for fans around the world to play watch and connect.
And second growth drivers building blockbuster entertainment properties around our IP.
Nishu. This is led by apex legends and battlefield 2 of the leading franchises in that category.
Apex legends continues to accelerate and that's 1 of the top titles and the industry.
During the season now and with average more than 13 million weekly active players we've set a new record for peak daily players across all seasons and the 3 latest Indian events have driven the highest play accounts for events to date.
And every season and event the reasonable and team is constantly innovating trying new things and gathering feedback to our bold will launch service and as a result player engagement and investment continues to growth.
We spool and is now expanding the guy and beyond Battle Royale with new experiences like arenas, which has brought new and lapsed players into the game and opens the door for deeper esports opportunities.
And so much excitement and need in the community for the future of apex Legends, we see outstanding growth ahead for this powerful global franchise.
During Q1, we revealed battlefield, 'twenty and 42, and the energy and excitement from fans around the world has been incredible since arrow deal on June 9 and battlefield trailers and content accumulating generated more than 210 million views to date across all channels. These record viewership levels.
It's about 20 and 42 being the most talked about title in the industry. During the busy month of June and created record high sentiment among the battlefield fan community.
More recently, we introduced battlefield portal, a new community driven experience and battlefield 2042.
This new pillar of the Guy and puts the palette and the hands of players to seamlessly create their own experiences from all the things they love and battlefield easily mixing and matching era's maps weapons and unique gameplay scenarios that can then be shared with the community.
It's an entirely new level of freedom and battlefield and fans have been very energized with the possibilities to create discover and share things that are completely new and unexpected.
We are poised to deliver a truly nextgen battlefield. This holiday with unprecedented innovation massive scale and amazing gameplay, and we have more to share about the game through the summer.
There was enduring powder the franchises and IP that we are building the launch of massive ex legendary edition and the remodels throughout the first remastered games reignited, our passionate fans around the world driving south performance well above our expectations.
Star Wars, Jedi fallen order coming to the Xbox series X and Playstation 5 was also a moment for new and returning players to jump into that amazing games. We are continuing to invest in both of these franchises as well as more of our amazing IP.
And with good growth driver is live services, our core strength and continuing growth opportunity for us and mobile is now a significant part of this.
And the dishes.
And they're now spans more than 15 top mobile live services, and we will add the top sports mobile title and the industry with golf clash when played havoc joins yeah.
The breadth and diversity of about mobile live services now spans multiple major genres, including casual sports RPG lifestyle and racing.
Over the past year, we've expanded out mobile native talent and with their leadership. We are now growing these titles to reach new and broad audiences on a global scale and we're also delivering a blockbuster franchises to mobile players, including apex legends and battlefield experience is rolling out for mobile later this year.
With the ability to bring new teams together with E is powerful IP. We are building mobile Intuit growth centre for electronic Arts with long running live services at the core of our strategy.
Underpinning these growth drivers and the fact that games and particularly our portfolio of experiences and electronic arts are creating social connection for more and more people around the world.
More than half a billion players are coming together through the social networks formed in and around our games and we see this continuing to grow well.
And some of the most talented teams and the industry a deep pipeline of innovative experiences and established a new IP new content partnerships and more ways to connect and experienced play we are positioning our business for continued growth and leadership this year and beyond.
Now I'll turn the call over to Blake.
Thanks, Andrew.
We delivered a big beat this quarter.
Primarily driven by outperformance from 2 high quality, new games or mass effect legendary edition and it takes 2 the second title from our partnership with Haze like studios.
And it takes 2 launched at the very end of the prior quarter and showed considerable strength through Q1.
Life services also performed better than expected led by continued growth and apex legends and as a result, we delivered net revenue of $1.55 billion and net bookings of $1.34 billion.
Given the extraordinary engaged and driven by the blockbuster.
And by the locked down a year ago, and distract that last year's quarter had 14 weeks compared to this year's 13 to deliver results within 5% of last year's record sales.
His incredible Testament to the strength of our game teams and our ability to deliver games of extra content from our ongoing live services.
Extra week last year Q1 alone is worth more than a year on year difference, notably even against the unique circumstances of a year ago apex legends grew strongly in the quarter and remains on track to grow organically more than 20%. This year with the mobile launch is upside.
Because of the impact of the pandemic on year on year over comparisons it's helpful to compare this quarter with the pre Covid Q1 fiscal 2020 to better understand the underlying growth.
On that basis.
And for ultimate team is up 47%.
Madden ultimate team up 115%.
Equivalent to <unk> of 21, and 47% respectively.
Similarly sales, including Codemasters from our broad portfolio of catalog titles were up 55%.
A CAGR of 25%.
Mobile excluding our glue acquisition is also up 16% organically over the same period 2 years ago.
We have also made considerable progress on our strategic goals as we started to integrate codemasters and complete the acquisitions of Glu mobile and metal and and announced our agreement to acquire played havoc.
These acquisitions substantially increase our sports and mobile footprint and offer the opportunity to bring new sports to formats pioneered by MLB tap Sports Baseball Supermajor baseball and golf class.
We only launched F..1 and 2021, a few weeks ago, but we're already seeing sell through up more than 20% over last year's edition. Thanks to another great game from the Codemasters team leveraged by our global commercial operation.
We have created a historically strong strategic position for the company with a strong and growing core of live service supplemented by additional growth opportunities and sports opened up by the acquisition close blockbuster releases as demonstrated by the community reaction to our upcoming battlefield.
2042.
Digital represents 58% of our full game unit sold through on a trailing 12 month basis up 6 percentage points from last year.
Operating expenses <unk> expenses, which include recent M&A costs came in slightly below our expectations.
Now turning to guidance.
We now expect fiscal 2022, GAAP revenue to be $6.85 billion.
Cost of revenue to be $1.921 billion and earnings per share of $1.58 up from $1.34.
Our guidance does not include any estimate for play Denmark.
Given that that acquisition has not yet closed and remember this EPS calculation does not factor in future buybacks under our 2 year $2.6 billion share repurchase program.
We're raising our net bookings guidance for the year by $100 million to $7.4 billion.
Based on performance from full game sales this quarter.
Supported by ongoing confidence and our live services.
It's very rare that we raise guidance this early and a year and I would note that despite the clear strength of player interest. So far it is too soon to raise our union and expectations for battlefield 2042.
As a result, the stronger product mix. We are now anticipating for this year, we are raising our expectations for other raw commodity and more specifics are and the down little model that we posted on our website.
Underlying the strength of our strategic position I would briefly note that even with the strength, we expect for fiscal 2020, 2 we expect growth and the mid to high single digits and fiscal 2020.3.
We've also raised our guidance for operating cash flow by $100 billion to $125 billion with capital expenditures remaining around $250 million that would deliver key free cash flow of about $1.6 billion.
See our earnings slides and press release for further cash flow information.
For the second quarter, we expect GAAP net revenue of 1.77 and $5 billion.
Cost of revenue to be 518 million and operating expenses of 1.13 billion.
This resulted in earnings per share of 36 for the second quarter.
We expect Q2 fiscal 2002 net bookings to be 1.7, and $2.5 billion.
Which would make it our largest Q2 ever drew.
Driven by the launch and FIFA.
<unk> growth of apex legends, plus mobile F..1 Madden and shows this.
This is up 90% on a year ago quarter.
With another great quarter under our belts, we're looking forward to launches of our sports titles this quarter and battlefield 2042 and time for the holidays.
And our strategic positioning has never been stronger with growth drivers are in place for this year next year and beyond.
I'd like to announce 1 thing.
And that is our chief accounting officer.
Ken Barker.
And has decided to retire from here.
Many of you know John.
And he has interacted with investors and the buyer side and the sell side for years, Ken has done an amazing job as a chief accounting officer over the last 18 years as well as supporting 3 Ceos and the management team during his time with the company.
In addition.
He has been a fantastic business partner for me over the last night here.
He has developed and amazing team of people that support our business and exceptional leaders and they'll be able to carry on his strong support of the company Ken.
Ken's groomed a very strong person to take over the Chief accounting officer role, Eric Kelly, who I think many of you also know.
Eric also has been with E for 18 years.
And all of our key markets around the World Europe, Asia and North America.
And he is.
He has all the skills and strengths to fill the very large shoes that cash.
Kenneth worn for years.
Ah, we're lucky that Ken has agreed to assist and the transition over the next 9 months. So it would be with us until after we close our fiscal year and I. Thank him for his amazing commitment to each day and his fantastic partnership.
So with that I'll turn it back to Andrew.
Oh, we lost Andrew.
Sorry.
Mani glitch, Thank you Blake I'd like Oh.
Your thoughts and sentiments.
And so I think you can for all of your outstanding contributions to electronic Arts will Miss you.
As I started this call I again want to thank our teams for everything they continue to do and service that players around the world. Thanks.
And thanks to their efforts, we're bringing hundreds of millions of players together thrill games and live services like apex legends.
And we're delivering great new experiences like F..1 and 2021 and mass effect legendary edition and we have even more amazing content to come.
It's been a strong start to our fiscal year, our growth drivers leadership and sports building blockbuster franchises and growing live services, including mobile are accelerating our business and we're well positioned for continued growth this year and beyond.
And now Blake and I are here for your questions.
At this time, if you'd like to ask a question. Please press Star then the number 1 on your telephone keypad.
Or withdraw your question press the pound key and the interest of time, please limit yourself to 1 question and 1 follow up question. Thank you. Your first question comes from the line of Eric Handler with and Cam partners.
Good evening and thanks for that thanks to the first question.
Real quickly with with 1 wonder if you could compare how marketing for the game has changed on a year over year basis, and then I've got a follow up to that.
Yeah, I would tell you I just think that when when you think about how we go to market without games.
Our global reach we have.
Extraordinary digital capabilities and kind of data driven marketing processes that allows us to better target both existing players lapsed players and potential new players and I think what we've been able to do as an organization is take that strength partner that was an extraordinary.
And my Codemasters and what is also a spectacular game in the middle of and F..1 season and that is more interesting than than any season and in recent history, where the competition between adults and and the stop and kind of hoarding up and the combination and all those things together has meant that we've seen growth and the franchise and expect about it.
And you to grow that franchise over time.
Great and then I assume should we assume this year there is going to be live services for F..1 and was there any consequent to live services with last year's game.
What it was you know this game is early in the partnership between Cold Masters and EA sports. So a lot of how we think about the future live service net business and sustaining that that community and that that Fei and by some quite a buzz over time and you're going to continue to evolve.
And there is some this year, but not as extensive as certainly we think we will get to over the course of time.
Thank you very much.
Your next question comes from the line of Andrew <unk> with Jefferies.
Hey, Thanks for taking my question Blake and I know you wanted to briefly mentioned it but I wanted to see if you could go into a bit more color typically you don't kind of give you.
No.
Plus 1 year guidance out or.
So when you when you were thinking about.
Growing mid double digits for next fiscal year could you give us any color on on how that and how that's going to be achieved as it more and more of the same.
And any additional color to help us kind of piece together, how we should think about that growth rate. Thank you.
Blake.
And some China, Oh, sorry, I was on mute.
Sorry about that.
What I was saying is our.
First and foremost focus on the acquisitions that we've done.
And those on their own will create substantial uptick and both top line growth and bottom line growth as we look at continuing to fuel those acquisitions and and use those talent bases.
To start to build out new titles that we can add to our and.
Our overall portfolio.
Second think about apex mobile.
We've said that we have very little and this year, we're in test market and we should be out and the global markets and China next year if.
And if not earlier.
That could be a huge driver and profitability going forward.
We have the potential of live services around battlefield as well as a battlefield mobile game coming up.
And we clearly have other games clan, such as our need for speed or others that are coming which will you'll hear more about and our future.
But you can imagine we try to operate the business on a 5 year cadence if not longer and we're thinking about how do we generate growth each year, both organic and through acquisitions and I would tell you I think we were and are better positioned than we've ever seen before.
Got it and I appreciate that consider and so far out and the next question and I'll bring it back to current times could you walk us through the pushes and takes of how we should think about the impact FIFA has on this quarter.
And.
Versus what it will have on the December quarter, considering the shift and and launch day. Thank you.
Yeah, So and I know not everyone on the street.
As is.
And this.
And it's not clear for a lot of a lot of people will ship FIFA on technically October 1.
Which means we actually ship and a little earlier for people who are part of our subscription program for example.
But we will capture some revenue as we've shown and our guidance for this quarter and Q2.
We will also capture revenue in Q3, and usually the first 1 to 2 quarters and people are the biggest quarters because people are building their ultimate teams.
And so we'll see strong growth both this quarter and next quarter off of FIFA with the shifts being that it's dropping in Q2, which last year and only dropped in Q3, when we started but.
It should make a huge difference and for the full year. Obviously, we wouldn't have generated or said that we were gonna grow for full year and increase our guidance. If we werent confident about FIFA as well as other products.
Your next question comes from the line of Benjamin Hoff with Deutsche Bank.
Hey, guys. Thanks for the question.
I was hoping you could provide a little bit more color on the dead States franchise, and what you guys are expecting the reboot there.
And secondly, then on the main image lightness developments and maybe to what extent you think including realized college athletes is something that you guys are focused on and from a development perspective, how quickly could you add that to 1 of your games versus using generic players. Thanks.
And 2 great questions, having just provided a very small trailer on dead space, There's a or a sneak preview on dead space and no more I can share about that it's a it's a little ways out yet, but this is Judy always taken a dawn what I can say is it's 1 of the great games from our catalog.
Al.
There has been extraordinary demand to bring it back.
For for existing players and next generation of players and we're excited and kind of add that to the portfolio over time, and we'll be able to share more as development continues but I would just I would close on that point by saying it was 1 of the most demanded titles for US maybe just off the skate, which we've also announced we're bringing back and the response was very.
Positive to the announcement that went back and development.
Around that and maybe John likeness again, we believe that we can build and extraordinary college football game in the absence of name image and likeness and partnership with the schools and in partnership with the conferences and.
And we're looking to do that I also believe with what we have seen most recently in and around that and image and likeness that is very plausible and and likely very possible for us to integrate and image and lightness with athletes. According to what are the rules that may emerge as to how that may engage with us in that context.
And we are building the architecture of the game with a database structure, so that if and when that comes online we'll be able to add that to the game very seamlessly.
And your next question comes from the line of Mike Hickey with benchmark.
Yeah.
Hey, Andrew Blake, Chris Great quarter, guys Awesome Guide Blake.
Sighting to see.
2 questions first 1 on FIFA ultimate team.
It looked like in the quarter, maybe subsequent you tested some preview packs, which are sort of an alternative to loot boxes and so just curious sort of your learnings there from that test and measurement.
And the second question just looking at the competitive landscape on FIFA. It looks like peak, yes is shifting to eat football a free to play.
D C and so just curious how you're thinking about that sort of change and the competitive landscape and thanks guys.
Yes.
Great questions on preview packs.
No. The short answer is it was very well received by the community.
And I'll I'll FIFA ultimate team team are always working very closely with our community of players are free.
Ultimate team as you know the most played mode and that game by a wide margin and they're always working to offer new and innovative and creative ways to engage connect with your friends connect with the world of football and build your ultimate team preview.
Premium products as I said was well received we saw an.
And increase in engagement and.
And we saw.
Higher right and conversion of spenders.
And I would say you know it was coming down towards the end of the season and so some of this day to has to be taken in that context, but the team is committed to continue.
And to innovate in and around the office and the programs that we that we put together for our players and and believe that we can continue to grow that business over time.
With respect to troubleshoot and solve could change its name to a football and going free to play.
And we've seen this happen before I would tell you we're very committed to our soccer business with very committed to our player base will continue to grow that player base, we've listened to our community over the years and we've gone out and got much of the licensed content that underpins and authentic football game exclusively and continue to invest deep.
Billy not just and modes of play, but and cold game play to ensure that we're delivering the best possible experience for our global player base and what you heard me talk about in the prepared remarks, and as a result, and the innovation in and around high promotion, we're seeing extremely strong demand.
For the upcoming version of FIFA and.
And engagement and that in that franchise continues to grow. So again competition is always good and we're always very closely Congress and what competition is doing but our commitment is to our player base and delivering the most comprehensive broad based authentic football game on the planet and we believe we have the best team to do that and we'll look to continue to do.
Do that overtime.
Your next question comes from the line and Matthew Thornton with Trust Securities.
Hey, Andrew Hey, Blake good afternoon.
And maybe 2 if I could and these are actually things you hit on earlier questions I guess, just coming back to Blake on the other commentary for next year I'm just curious if if that guidance is.
Dependent on any big frontline title, obviously and issue you've got battlefield and curious if that's dependent on any larger title.
For next year somewhat relatedly.
And I'm curious thoughts around battlefield does that franchise still aspire to be and every other year release type of a cadence and a normal world and just just curious if and any updated thoughts there.
And then just finally around some of the collegiate sports given some of the changes going on there I'm curious if there's any interest around basketball with NBA live a little bit dorm and here I'm wondering if there's any any pivot and any any interest there. Thanks guys.
Yeah, all good questions.
I would say next year.
And this is this is a testament to our business.
And next year is a collection of great franchises, all coming to play.
And new franchises, so new franchises and mobile new franchises across our business and places like that for 1 and other driving games and.
And new franchises or existing franchises that we will bring them back.
And that like and see double a or PGA golf that we've talked about.
And you know what we've always tried to build the business on.
A collection of great titles, not 1 title.
Because 1 title always poses a risk.
And so our view is a collection of titles with great live services associated with them and you're going to see that over the next not just next year, but for the next many years to come.
We've tried to build our business and I think you'll hear more about it and.
And we're not trying to give guidance right now and next year.
We did say and are prepared remarks that we're confident of growth going forward, even after and incredible growth year, this year and last year and.
And we feel like we're on a really good path to continue to try and grow this business and we're seeing the great.
Reception for our products and the marketplace, so more to come on that.
We'll give you guys more details as we get closer and we know that's what you want.
But you should just trust that we're confident that we're seeing and we're planning both topline and bottom line growth going forward.
And now I don't remember your next 2 questions. So.
Let me jump in on and do we think battlefield will return to and every other year.
Launch.
I'd say you know I think that is our orientation, but more importantly, I think you should think about battlefield as a service and now what were announced what we're doing for the launch and this guy and he's really revolutionizing and reinventing what all.
And our epic scale warfare is in the context of game play and.
In addition to that we you've heard us announce battlefield portal, which really starts to lean into user generated content and will drive deep long term engagement and the game and what we've announced hazard zone and the name we haven't disclosed a lot about what's going on there and you'll hear more about that and the coming months you should you should understand that this really forms the foundation.
And what we believe the future of a live service around battlefield is which overtime will include a mobile launch will include some free to enter components.
And really change the nature of what happens from launch to launch so that wall and every other year launch probably makes sense as we think about it today, we're really focused on 365 day engagement in the franchise and a platform level.
And any device that consumers may want to play on.
And then I think.
The other part of your question was you know 90 and wage likeness College sports and does that open up an opportunity on basketball.
I would tell you our focus right now is football, but what you've also heard US talk about is really building on our strength and sports. We believe this is a unique strength for us.
We're the leading company when it comes to delivering multiple high quality sports.
Of course at global scale, and it would not be a natural for us and a world where we start to develop more into college football to start expanding that to other college sports as well.
Your next question comes from the line of Mario Lu with Barclays.
Great. Thanks for taking the question first 1 is on battlefield and.
So you mentioned and Youre not updating your net estimate for the title.
By deposit response to Sally and I just wanted to hear your thoughts on in terms of and have purchased.
And with an upcoming title.
How should we frame the opportunity.
That new <unk>.
<unk> channel as it historically was only monetize.
D.
Yeah, what I would say is that don't.
We don't take our.
Comment on not updating.
The guidance on battlefield and anyway as a negative.
And we ultimately.
Expose the world to battlefield later than we normally would do normally we'd do it through early June 3 or maybe even earlier than that and we do and early July.
So we're trying to make sure we pace the.
Disclosure about what's in the game to people and then measure our demand off of that but we're feeling very very positive about it and we wouldn't have raised our full year guidance.
If we didn't feel that was a potential for us and I think it's an upside for the company longer term during the year.
Youre going to hear a lot more over the next couple of months about battlefield live services and game.
Monetization and so forth I can't tell you all of that now but.
But trust that the team is working very hard on this and they have some very unique ideas.
What we can continue to do as Andrew just said to create this as a long term.
Interaction with our consumers versus simply selling a game.
This year.
And we want to build the long term.
Relationship, we have with battlefield users for a long time.
Portal is a perfect example of how that works and.
And you'll see more of that and more details about all of that over the last couple of months.
Okay. Thanks, Blake and just 1 on mobile and touch.
With the acquisition of dynamic.
Lots of physics, and giving them.
You're doubling down or can you talk about just the near and long term synergies.
We should expect from this.
Position.
Well I would say with all of our acquisitions.
We've done and we've done for now and if you include play Dammit, which has not yet closed.
Youre going to see clearly some synergies.
Synergies in terms of management teams synergies in terms of go to market strategies and marketing strategies and so forth.
Most of these companies are smaller.
They are exceptional and how they develop games, but as you've seen with F..1 already we've been able to drive more sales than what we've seen historically with that business and we'll continue to do that across all of the portfolio companies.
I would say and a case of play gimmick.
And in the case of Glu.
Tap sports baseball and metal head with their baseball game and play Gimmicks golf game, we are going to leverage their strengths as best as possible to try to find ways to create more and better casual games and mobile on <unk>.
Mobile and we have and the path.
And that's not to say that we haven't done a good job on mobile we have but the potential that we have if you look at what played havoc star and the potential we have with something like a global FIFA game or a global Mad and game, where we already have the licenses.
Huge upside and I can't give you what those numbers look like and yet but.
But I will tell you that the reason we did these deals was to try to make sure. We brought the talent and then that could help us expand our.
Our capabilities on more casual sports games around the globe and more casual games and general around the globe.
And we're pretty excited about it and and I'd tell you. The mobile teams have worked very closely with the new teams.
Hey, Derek or glue or metal had or.
Codemasters and they've come up with some amazing ideas on what we can do together.
Yeah.
Great. Thanks Blake.
Your next question comes from the line of Jami boss with Bayer and Bury Inc.
Yeah 2 questions from me please.
Firstly, it looks like engagement still holding up very well, but are you seeing any sort of differing trends and markets where restrictions have eased more buses markets, whether it's still Moore.
Walk down and element.
And then secondly, with the F..1 game that looks like it's been very well received and after he reviews and everything.
Is that so far going and tens of thousands and engagement is that going broadly how are you expected or was there any outperformance versus your internal expectations.
Yeah, I would say.
On the F..1 game I think we've exceeded our expectations.
There's no there's no negative on the F..1 team because they are exceptional.
It was could we quickly and and we didn't.
And on the business for that long so could we quickly integrate the teams our marketing and publishing efforts to try and drive that business as fast as we did that's probably where we might have had some questions and actually we well exceeded that and it is a testament.
And exceptional and.
And without team.
That was able to produce the right assets to produce the right marketing materials to help us drive this business and the teams working together.
And you know what.
But I think we don't get enough credit for us.
But.
There's a bunch of people, who really can work well together.
And we do a great job of working with other parts of our company and when we bring and acquisitions.
Work well with them.
And I think the poster child, there as you look at respawn.
And you look and what's happened with apex.
And this is a team effort and responds obviously driven the amazing development of apex.
But they partnered with us extremely well to drive what is now.
You know, it's coming up to almost $2 billion and business over 2 years.
That's unheard of and our.
Industry.
And I'm not sure we get enough credit for it and I don't really care what have you.
And of the day it is amazing what our teams are able to there.
You know I would tell you to your earlier part of the question.
We've tried to put together great marketing.
For all of the companies that we've acquired and it doesn't happen as quick.
And if 1 has been a great example of that and you have to have great products to do that and so I would tell you that the combination of great teams and great marketers is really powerful and this industry and I think we've been able to prove or we can do that across all the acquisitions that we've done and the last.
And 4 or 5 years.
Yeah, and I would jump in on your point around restrictions and are we seeing anything different I would tell you.
Given that the roller coaster and nature of opening up and shutting down and and Lockdowns and various restrictions that are happening and in various geographies and territories globally.
It's almost hard to track at this juncture.
Who is open and who was closed what I would tell you though in aggregate is we've seen strength across our business across all territories.
And regardless of them being open all closer I think performance. This quarter is testament to that and and at some level. This is largely due to.
What we see and our games and it's not just about a connection to content that people may be able to full go in the context of returning to school, we're returning to work or returning to your kind of general life is.
Connections to friends, but they had prior to playing and they made during playing that people keep coming back to and as we think about building ongoing indirectly anytime and experiences. This is why you hear Ross and leading into the social ecosystems in and around our games because this is what drives longevity.
And this is what drives deepening engagement and our business and so I think what we're seeing right now as the world is in different phases and different places, but on aggregate engagement in and around our games continues to be extremely strong.
Very clear thank you.
Your next question comes from the line of Brian Nowak with Morgan Stanley.
Hi, guys, it's Matt on for Brian. Thanks for taking the question 2 if I could so just on the strength of APAC and the quarter. Obviously, the comp was extremely hard and so that's a pretty pretty impressive feat.
Are there any specific initiatives or pieces of content or geographies that you would call out that has sort of been the source of that that outperformance year on year for APAC and then just secondly on the mobile side, we've heard from some peers and the mobile gaming space that they've seen very little impact to their ROI on.
Rising and after the recent changes to App tracking on iOS and others, who have said they've seen a sort of.
And increase and you know and UA spend being necessary I'm wondering what experience you guys are having on the mobile app and mobile side there. Thank you.
Let me jump in on apex.
And then maybe Blake and can hit the kind of the mobile and peace.
I would tell you it's not just any 1 thing I think what I talked about and my prepared remarks as it is the very detailed and nature that the reasonable and team and the apex team takes the ongoing development of this experience and the support and the growing global community and it's really about on any given day and it's really thinking about.
And what you know.
Enhancements extensions innovations they can add to core game play that moment to moment gameplay.
There is you know how can they think about new modalities of play like arenas, which changes kind of the broader rule set of how you engage in that moment to moment gameplay and how do I add content with the legend and with all of the the extra stuff in and around that.
And that drives more interest and I think what we're seeing now is that team really starting to deeply understand using data and using a close relationship. They have with the community continuing enhanced gameplay and continue to add modalities of play and continue to double down on a really inc.
There is a unique content that the community really gravitates towards and I think as you think about that and the context and now taking that to you.
And geography and new platforms.
This is why we're so confident and the ongoing strength of that franchise.
Yeah, and what I would say on the advertising side is.
Right and wrong and we've never had a large advertising business.
Hovers around $100 million a year.
Part of that is our strategy that we have not wanted people to leave our network.
And if you look at most advertising on mobile is for other mobile games and.
And what that means is you're willing to allow people believe your network to go play somewhere else.
We're working with Glu right now and with play demick on their views on advertising and we may change our views over time.
We think it's important.
And in no way take my comments as saying and we don't think that's a very profitable business and we should see.
Stay close to it but it has not been a huge part of our business. Historically, so it's upside for us down the road, if that's where we want to grow and.
And more to come on that we're just we're still and the learning stage relative to how we manage the advertising and the past.
We know the current rules and.
New rules make it even more challenging and so we're trying to figure out what are the right ways to do advertising.
And in a free to play World.
There are people who are.
We're willing to pay the and advertising app or and advertising video or whatever it is versus pay to play the game and we will see how that plays out over time.
Yeah. The 1 thing I would add there is while it hasn't been and John business for US what we have seen as you know as Glu was kind of joined US is they actually have been significantly better at monetizing through advertising and we have been day.
Come with some really strong underlying technology, they come with really strong underlying expertise and our sense is while it's still early our sense is the combination of that technology that expertise, our broad base of portfolio and our global reach and has likely means that upside opportunity for us even.
And and audited high World.
Great. Thank you.
Your next question comes from the line of Gerrick Johnson with BMO capital markets.
Great. Thank you and good afternoon. So last quarter, you said that guidance did not include potential synergies from glue and Codemasters and now you've had 3 months to integrate and it sounds like you've identified some F..1 for instance, not just cost synergies, but some revenue synergies there. So your guidance you increased it by the 1 quarter beat and and a penny.
So what synergies have you identified and are they now included in your guidance.
So.
No cost synergies are included in our guidance.
Clearly revenue synergies are occurring as they occur.
Pointed out we did better and to have 1 that we thought we would those are harder to predict.
But we haven't yet and.
Implant and cost synergies and our Opex line.
For example changes and.
And exactly as changes in staffing changes either positive or negative.
And you should assume that there are going to be some changes and we will layer those into guidance over the next.
3 to 6 months.
And we've been very focused on making sure we're bringing the company's name and as successful as possible.
And then determining what is the right way to drive synergies.
But I would tell you is there are.
Potential large synergies across all of the acquisitions, we've made which would normally happen, but we'll see more of those over the next.
A few quarters.
And we will try and keep everyone abreast and brings to that.
Okay, Great and last year, when you launched your sports games through a cardboard cutouts and stands this year, we're going to have a full stance with our fans and the stands and how much of a <unk>.
<unk> do you think it provides your games with.
Sports actually happening and people and our stance.
Well I think some of that.
But I hope that what I hope, we actually get to real people and stands because we might go the other way right now so who knows.
That was going to me and my point is that it's hard to understand exactly where the world is going to go I think it's unlikely that we have events without fans and the stadiums and we might just see.
And some some protocols around mosques and all testing and old vaccination, but our hope and sports fans and so we get things back and stadiums.
And you saw US do last year was really lean into the fact that so many people we were sport at a time, where it was really hard to engage with consumers more broadly and that did in fact allow us to grow both the amount and people playing our games and the engagement they had.
I don't know that we can quantify what that means when that when everyone really gets to live the force of sports on a day to day week to week month to month season to season basis, but it will inevitably have a positive uplift to just overall fan and player sentiment and will almost certainly drive deeper engagement and our games and our teams will look.
And build stronger connections between what is happening and the real world sport and what is happening and how games. So so net net.
Notwithstanding any further challenges around the pandemic it.
It's almost certainly a positive for us.
Great.
Thank you Blake and thank you Andrew.
Your next question comes from the line of Andrew <unk> with Raymond James.
Hey, Thanks for taking my question I wanted to drill down a bit on ultimate team and is there anything to call out there maybe on newer players that have come into the ecosystem over the last 12 to 18 months.
And that cohorts behavior compared to more established cohorts and has there been any notable difference in newer player behavior from things like reopening.
Yes, I would say that.
Okay.
We always have newer players coming in.
The game growth.
And newer players will take steps.
Towards getting more and more involved and ultimate team. They don't get involved so immediately on day 1.
Won because they got to understand how to play it to they've got to become part of a social network. That's also playing it.
And once that happens we.
Starting to see growth.
And so we see growth during the season, and we haven't seen a lot of change and that pre COVID-19 or post COVID-19.
Because it is a way for people to have a social interaction around something that they're really interested in doing.
And so we.
We know we've grown the overall franchise across all of ultimate teams.
We've grown the overall franchises around the underlying games and those are the 2 biggest drivers for us to continue to drive.
Ultimate team participation and engagement, which ultimately results in.
The team and spending and somewhere or another.
And so I think we're pretty confident.
And <unk>.
Even during the Covid crisis, we continued to see people get more and more engaged some of thats driven by the fact that people are simply.
Not at work and.
And physical position there may be working from home, but a lot of it is also the excitement around what we're seeing and the global soccer seasons that we've seen over the last couple of years, because theres been a lot of excitement a lot of player movement.
And that's what gets people really pumped up about playing ultimate team.
Yeah, and I'll just jump.
A little detail I would add and again, we think about ultimate team as it is our long term balanced wide and connect with friends in and around the sport.
And then has become that and.
It's certainly the most played mode in FIFA and very strong and I Wanna franchises as we think about this.
2 thirds of people, who play ultimate team don't actually bypass and only 9 out of 10 packs are opened with earned coins and so we're always trying to you know.
And sure that constant and balance all of engagement enjoyment about player community and what we saw with premium packs was we saw a higher incidence of new players coming into ultimate team and we saw a high conversion of those new players.
In and around buying packs and and.
And participating in the digital ecosystem. So again long term, we think that that that mode. We'll continue to grow we think of that as a means of connection to your friends and connections and sport your level and continue to grow and our teams are going to continue to look for interesting and new and innovative and creative ways that allow people to really more deeply.
And we engage and preview packages 1 of those examples.
Got it thank you for taking my question.
Growth, we got time for 1 more question or is that it no I think I think that's it. So if you just want to close the call now we're at a time yeah.
Well.
Thank you to everybody for your interest and good questions and we look forward to.
Interacting with you over the next couple of months and hopefully we all get to see each other and personal 1 of these days soon so but I appreciate it.
And we'll stay well.
This concludes today's conference call. Thank you for your participation you may now disconnect.
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