Q2 2022 Electronic Arts Inc Earnings Call

Good afternoon, My name is Ashley and I will be your conference operator today at this.

This time I would like to welcome everyone to the electronic Arts.

Q2 fiscal 2022 earnings conference call.

Mr. Chris <unk> VP of Investor Relations you May begin your conference.

Thanks Ashley.

Welcome to Ea's second quarter fiscal 2022 earnings call with me on the Cold today are Andrew Wilson, our CEO and Blake Jorgensen our CFO.

Please note that our SEC filings and earnings release are available at IR.

I'll call it.

In addition, we have posted detailed earnings slides to accompany our Petro marks.

And lastly, after the call we will post a petrol.

A replay of this call our financial model and a transcript.

Big Thank you to all teams, who continue to work from home and do amazing things for our players.

<unk>.

I also wanted to extend a warm welcome to everyone that play Dimmick, who are now officially part about electronic arts team.

We're thrilled to have them on board, adding to our continued strength in sports and mobile.

Q2 F Y 22 was a stronger second quarter in the history of electronic jobs, we are growing without leaving franchises new launches and lives services, all performing well during the quarter and they'll acquisitions are driving additional growth beyond a cool business with.

With more than 500 million unique active accounts were connecting plays all over the world through each other.

Through more about favorite content as.

As a result, net revenue net bookings and E. P. S. We're above out cuter guidance and we are now raising a full year net revenue net bookings N E. P. S guidance for the second time this fiscal year.

A cold strategy is built on four key opportunities the creation of amazing games and content.

Tools for the community to engage more deeply without experiences.

<unk> and distribution of content and experience it to an aggregated audience across platforms business models and geographies at harnessing the power of the social ecosystems, and and Ah Randall games.

As part of this we are executing against three growth drivers in F Y 22 <unk>.

Expanding a blockbuster franchises building on our leadership in sports and growing alive services across our portfolio.

I'll focus my comments on these today.

Without talented creative teams powerful IP and platform reach we continue to grow leading blockbuster franchisees experiences like E. A sports FIFA.

Thanks Legends Madden NFL battlefield, and the Sims and some of the most prominent and powerful properties and all of entertainment.

I played legends continues to grow as one of the top franchises in the industry a brand new I P that his scalp them over 100 million implies and is closing in on a billion dollars in net bookings annually.

These are nine and seasons and introspective reset new marks for the highs at this place in season, one and Q2 was the biggest quarter of Indiana, sending in apex that we've had to date.

I picks has grown beyond the game as well it was one of the most watched titles on Twitch during a quota with more than 140 million hours of season 10 content watch today's up nearly 40% from the previous season.

I was the success of apex legend continues it demonstrates how we are building a long term ecosystems in and around down biggest franchises.

At its core is outstanding game play.

Embedded in in the rest of the world of law and characters that continues to expand season.

The new content and in game events like the recent collection events keep the experience fresh for new and returning players.

We've introduced new experiences like the squad based arenas and recently added a ranked mode.

I. It takes legend esports ecosystem is growing as well with a second year of apex Legends Global series now underway apex.

<unk> is moving from strength to shrink and we will add to that when we bring I breaks legends to mobile platforms. Later this year.

<unk>.

Battlefield another about blockbuster properties is beloved by tens of millions of fans I heard about upcoming battlefield, 20th 40 to launch. This month 7.7 million players participated in the battlefield 2042 open by the end of October, including 3.1 million journey early access period, which is the law.

Just early access event, we've ever had.

Leaders or an opportunity to take an early version of the game still in development, bringing in a large audience into the experience and test and learn ahead of launch with a small slice of the game and now open by that we brought plays into the full scale of 120 night play a combat and many of the only in battlefield moments that make this franchise social.

Special <unk>.

The engagement and feedback from flies also helped out teams with areas of the game play to Polish and refine as we move towards launch.

We've now revealed all three of the games pillows, all out warfare with 128 play a multiplayer and conquest and breakthrough modes battlefield portal, a new white apply that has the community very excited to create their own battlefield experiences and hasn't done with completely new squad focus combat and tactical Guy and play that fans.

Going to love, we're looking forward to apply is getting to all of these experiences when the full battlefield 23, two game launches on November 19th.

Zero 422 will continue to grow at leadership in sports through new games acquisitions, and new areas of expansion.

A global football or soccer for Ultimate North America franchise continues to be one of the leading game properties in the world with approximately 100 billion applies across all platforms in the first six months of the fiscal year.

E a sports FIFA twenty-two which launched at the very end of Q2 is after the strongest dot in franchise history.

Innovation and a new heart promotion technology, revolutionize Gangplank energy spied engaged and grow in the community.

Total pleasure up 16% and use a franchise player dropped nearly 50% year over year from launch with net bookings also up significantly <unk> from lunch.

Satan growth across the game with ultimate team engagement up 15% year over year and more place coming into Volta and career modes.

There is strength in all areas of our global football franchise, including mobile with light of this fiscal year will bring new modes, new features and improve game play that FIFA mobile, creating our most rewarding multiple experience today.

Suddenly 30 U E. A sports is being driven to create the best global football franchise in the world move.

Moving forward, we are in a position to drive greater growth in line with the continued expansion and popularity of the sport with a town about development teams our boss portfolio of more than 300 license part is including a Premier League you Wipha Carnival, the Bundesliga La Liga Syria. The M. L S Chief Pro and many more.

And they'll expertise and grow the areas, including E sports and mobile E. A sports is ready to activate across the full spectrum of the football World.

We have opportunities and new modality, just play a new social experiences that will bring more things together.

As the sport grows with opportunities to expand cultural and lifestyle experiences through brand partnerships and content that out fans want morals in and around a game.

And we will continue to lead with the most innovative games on more platforms, bringing a full breath of the sport to the forefront from grassroots football to more women's league teams and players.

We are more confident than ever about a bright future football I will grow out franchises leadership without partners around the world.

We are continually investing in innovation creativity and authenticity of bring E. A sports games closer to the heart of real World Sports and fans.

Engagement in Madden NFL 22 has grown each week of this NFL season, I, just twice jumped into the refresh franchise mode and Madden ultimate team to connect and compete with their friends.

We've grown the F. One business year over year as F. 120, 21 room Codemasters continues to bring in more apply it and keep sending guys and one of the most intense F. One titled 510 years.

N H L 22 launched in October just at the N H L season again.

<unk> next generation console experienced living a dramatic new visual and game play late for hockey fans.

With a portfolio that now spend global football American football basketball Hockey Baseball golf, UFC fighting and racing.

No other entertainment, Nevada in the World has the reach across <unk> Liberal League teams and partners at E. A sports.

We have a unique opportunity to bring together these properties and passionate banking entity, enabling social connections through more innovative.

The experiences and content.

Explain your life service across our portfolio, particularly mobile kicked out third growth drive up the F Y 22 in queue to be closed the acquisition of play dammit creators of the massively successful golf Slash mobile game, we're looking forward to combining our strength to continue the success of golf clash as a life service and bring that clash mechanic to.

More about sports franchises were all licenses and expertise will enable us to create some great new experiences.

And mobile teams also continue to drive success enlarge services, including Star Wars Galaxy Heroes, which supports 100 million flies lots of diet and Q2.

Through the collective talent or the glue mobile play that make N E. T. Mobile teams, we've built a powerful mobile 90 of organization within.

This could be sharply focused on accelerating growth and I'll portfolio of bold or 15 top mobile labs services as well as introducing new experiences that takeout powerful IP, including battlefield and you'll be expanding mobile audience.

The opportunities in front of us are exciting we feel great about the position we are in with strong latest including a new chief operating officer, managing companywide operations Creative latest Julia management team and a new chief experience all of a sudden leading or if it's the grow social ecosystems. All supporting are amazing teams as we drive growth in the next year of indirectly.

At a time.

Now all clinical level of like.

Is there any family room, where you have a strong base this quarter, primarily driven by our lives services led by apex ledgers and feed.

<unk> to my team.

We closed our acquisition of play damage at the end of the quarter, having both a highly profitable mobile title and a blueprint for new sports titles are broad portfolio. We delivered net revenue of $1.83 billion in net bookings of $1.85 billion.

Okay.

$126 million above are gardeners, making if our largest Q2 forever and more than double the level of last year's <unk>.

Raising our gardens again for the second time this year.

On our confidence of our franchises alive services through the remainder of the year.

E. A sports FIFA 21 performed exceptionally well through its product cycle with your engagement candidates last couple of months <unk> very significantly on C for 20 keeping.

Keeping fans engaged drove strong retention from FIFA 21, and two feet for 22, we're off to the strongest stark ever with a new title full game sales and FIFA Ultimate team are both up double digits, you're an ear based on the first three weeks of sales.

[noise] apex legends net bookings were up over 150% year on year.

There was some benefit from having to collection events this quarter, but even so the underlying grocery it is clearly extremely strong.

Apex's delivered over $1.6 billion and get bookings like today, and we're well ahead of our expectations for the year to.

To launch an original IP steadily building into a franchise of this magnitude is exceptional and I'd like to recognize the response team for their creativity deep understanding of a player base and further excellent execution, which can be seen again this week with a successful launch of seasonal level.

Although we continue to watch closely we have not seen a slowdown in engagement or spend all our games as countries such as the UK emerged from locked it.

Digital represents 62% of full gaming units sold through on a trailing 12 month basis of six percentage points from last year.

A strong digital mix for full gang sales aided by growth in life services pushed underlying gross margins significantly above last year's.

Operating expenses, which include recent acquisition costs came in slightly below our expectations.

So now turning to guidance.

We now expect fiscal 2022 gap revenue to be $6.9 billion to $5 billion cost of revenue to be $1.848 billion in earnings per share of $2.03 up from our original expectations of one dollar and 34 cents.

Remember that this atheist calculation does not factor in future buybacks under our two year $2.6 billion share repurchase program.

We're raising our net booking guidance for the year by $225 million to $7.625 billion.

This is driven by outperformance so far this year plus ongoing strength from apex of chief and just under $100 million from six months of play dinner.

This is partially offset by pressure on some of our mobile titles.

Moving product changes and I D F. A in packs and some moves elsewhere in our portfolio.

Our expectations for battlefield of roughly unchanged from the time of our last call.

We started the year already forecasting strong organic growth and we're $325 million.

Having raised guidance twice.

More specifics or in the downloadable model, we post on our website.

We've also raised our guidance for operating cash flow by $100 million to $1.95 billion.

With capital expenditures reduced to around $200 million, this year, which would deliver free cash flow of about $1.75 billion.

C R, earning slides and press release for further cash flow information.

As noted last quarter Capex is at an elevated level for a couple of years cause we invested our employee work environment and new offices around the globe.

For the third quarter, we expect GAAP net revenue of $1.75 billion.

Cost of revenue would be $625 million and operating expenses of $1.1 billion. This resulted in earnings per share of two cents for the third quarter <unk>.

Remember gap E. P. S is driven by gap revenue deferrals, which is a very large number in queue through.

We expect Q3 financial 2022 in depth cookies to be 2.625 billion up over 9% on last year's Q3, which it should be noted included last year. The large a fee for 21 that was the largest quarter ever.

Four Q3 in the company's history.

The games in life service teams are driving continued growth in our franchises and.

And we are battlefields launching in just over a week.

A broad portfolio of games and large services position as well for a strong holiday season with gross drivers in place for this year next year and beyond.

Now I'll have to call back to Amber.

Thanks, Blake the hold a quota is always an exciting time, we're looking forward to delivering amazing entertainment and can I get hundreds of millions applied around the world to each other thrilled games and live services in the months ahead.

Take the opportunity to say, thank you again to our incredible teams at electronic arts, they commitment to creativity and innovation and seven that applies a second to none and every day. It is inspiring to work alongside such talented and dedicated people.

It's been a strong you the date and we're confident now plans to drive continued growth in the years ahead.

Blake and I I hate to your questions.

If you would like to ask a question at this time. Please press sorry, then one on your telephone.

My question <unk>.

Your first question I'm from Mike now with Goldman Sachs.

Hey, good afternoon. Thank you for the question I just have to first I was just wondering if you could provide us an update on your outlook for some of your new mobile titles like apex legends and battlefield and then second Uhm I was just wondering if you could offer some thoughts on the FIFA life.

Since how aggressively will you negotiate for that and what are some of the contingencies that you have planned for that one thank you.

Yeah, Let me start with a mobile and then I'll, let Andrew answered. The FIFA question, we have not put into our guidance virtually any revenue for either apex mobile or battlefield mobile this year apex mobile is currently and tested multiple countries around the world.

And we never quite know exactly when we're going to get out of test markets, but we're very pleased with the progress so far which means we could bring it out earlier, but I would say that most of it is really focused on next year, which we think is a positive since the sure. So strong it will continue to help them extra.

And I would put battlefield isn't that same category.

Yeah, and I would just cover up the metrics that we're getting out of those games continues to be very strong and and so we we can be confident about the opportunity around both of them.

And with <unk> with respect to license negotiations I would I would start by saying we have great relationships with all of our partners all 300 ultimate including FIFA Uhm as we think about the future of football. We we think the future is very bright because we are part of the very fabric of the cultural pit bull globally, an important part of <unk>.

Fandom for football.

We got to interact without hundreds of millions of football fans I tell us. They want you know more cultural brand involvement from across the globe. They won't more modality to play inside the game, which you know is gonna be oranges strike 11 on 11 football they want more digital experiences out so.

The game, you know sports N F. Ts brought a sports consumption and they want us to move really really quickly and so I would tell you as we think about the future. What we can get very bright we're gonna work without global collection of partners that we feel best and I'd love to do that and we'll <unk>.

See you all conversations with each and every one of them to the extent that you know there are lined with that objective.

Great. Thank you Andrew Thank you Blake.

So your next question is from Andrew Yeah, That's <unk> Jessie.

It takes swimming I just have to two questions for you. The first one is how should we think about.

Apex legends life services, and and maybe even a comment or two on on battlefields lives services as we kind of hit it through the holiday and into next year is it just a matter of <unk>.

More content better efficiency on monetization or or how should we think about the life services there.

Yeah, I think I know, what what I talked about in the prepared remarks is that the apex legends team has really been very thoughtful and deliberate about the development in the building all this large service and the community support since the very beginning and it starts with cool game play.

And you know, what we've seen and be able to do with bringing more fly is each and every season and L account on a weekly active in a monthly I think plays is is is grown throughout the the cycle sofa.

Like a new modality applies in things like right modes in arenas, they add new events that are important and kind of more deeply engage the community and so I think that as we think about you know lives. So it was on a go forward basis, you should expect that seemed to continue to be thoughtful and deliberate they'll continue to build out modality.

Play they'll continue to create more content, but also really work with the community on convenience level and events, which really drive the most engagement all the time and we can either be very confident this is going to be a really really strong global franchise for us, but you know at least a decade.

Got it and then just as a <unk>.

Second question, Andrew I'm, just kind of high level, you're pretty forward thinking C. O. When it comes to technology, how do you how do you see things like.

Played earn opportunities within within the video game space, there seems to be a bit of an argument on whether it's good or bad for gaming.

You know the anything that brings more people in and engages those people for more time in that context. The entertainment would create I think it's a good thing over time I think that is the very foundation of that large services I think the the the play to earn or the N. F. C. Conversation is still really really early and there's a lot of conversation is.

At some level a lot of hype about it I do think it will be an important part about you know the future out industry on a go forward vices, but it's still early to kind of figure out how that's gonna work I feel good about our position with respect to that I mean as a company we have the leaders in the creation of digital content that has real collect.

People value in the embedding of that content is part of life services and what we know about collection overtime is it collectibility is far more valuable to the collector, where the collected item has utility and I think that in the context of the games that we create an alive services that we offer uhm collectible digital content is gonna play a mood.

Part in our future so still early to tell but I think we're in a really good position and you should expect us to kind of think you know more innovative Lee and creatively about that I'm Gonna go for vices.

Awesome. Thank you so much as stinker.

Your next question from <unk> Creek Snake counting.

Hey, Thanks in your commentary you you you alluded to some softness in the mobile market I was I need to just talk with them more about what what you seen some of some of what your peers are sort of reported numbers that that would suggest there was some sequential softening in the market do you think it's do the idea fade you think there's.

Different dynamics and playing with you know kind of pandemic restrictions easing in mobile versus console any color you can give would be helpful.

So I started when we go sorry, let me go ahead and go to like North Korea.

[laughter], Yeah, I was gonna say I think that when we look at it closely I'm mobile portfolio, we feel like we're in a really good position on the go for advice as we've got strong teams. We've got strong I P. We've got a huge network of pliers and we've got you know global reach and we're already seeing a value of that when you think about our <unk>.

Alrighty to Kinda you know.

<unk> E I I P for Glu mobile folks or I'll play demick vote does not thinking about you and interesting experiences I do think we've seen some softness in some in some about games <unk>, you know, particularly those that that rely a little bit more news acquisition.

I think that will work through that over time again creative talent, great IP huge network applies in global reach will allow it's gonna work through that and find a path through that but net net I think that there is a little I D. F I, but nothing that has us concerned about our ability to continue to grow up mobile business all the time.

Yeah, <unk> I would say don't underestimate the than any you know what I mean, we did four acquisitions in one year.

There are always challenges to integration of acquisitions and sometimes those challenges are we change plans and five the businesses there are.

Things that you may not have anticipated or fully understood and so some of that is impacting none of it is troublesome none of it is long term in our mind and we're doing a great job and the integration of just happened also quickly to can't play on exactly what acquisitions are gonna happen.

We're very excited about for Glu team and I played demick team as Andrew mentioned in his combos and I think I'm going forward. We're at a really good position and I picked up for US the biggest opportunity is and this is an obvious one and that is how do we take our existing sports lives in themselves.

And the talent the for glues and to play Dimick's, having a sports side and drive new sports products through that talent base and or have them help our talent drive better products across those licenses and it's a huge opportunity for us obviously and FIFA.

But it also in Madden M. P. J other areas, where we can either augment their games after their games or add new games and so that's why we're so excited about the acquisitions and not all that worried about it any any short term softness in the business.

Very helpful. Thanks for taking my question.

Your next question is from Alexia quit shiny with my game.

Alright. Thank you. This is David on for like I say I, just you know with battlefield, maybe you can discuss the key learnings from the data how much should be read into participation for the early access period as an indicator of demand and I Wonder. If you just had any comment on the risks because you know if any of releasing the game part of Blackfly Black Friday I think this was.

Somewhat of a challenge for the game and 2018.

Yeah, So I think that on balance the the feedback from the beta was overwhelmingly positive I think there was some conversation around some elements of the beta which is not a natural in a biter <unk>.

And and we've we've been able to take that feedback around those those elements constructive elements I'm really implement that in the game and I think what we had talked about what the community is it was a it was an early or build of the game that we used for the beta as the team continue to work in tune and Polish the photo built for the game. So we feel really good about that I think when you think.

About the only access numbers and the and the engagement numbers overall, you should read that as you know tremendous demand you know the game is very appealing the setting is very appealing the modality apply to innovation and creativity that dies and the other things to work on that game have put into the game is something that the <unk>.

Movies, receiving very very well and is really really excited about it.

I wouldn't read too much into the week before Black Friday, I get that on a calendar basis. It looks the same as style for five I would tell you go leaving the battlefield five we did not see the level of demand. We are seeing now we did not have the level of innovation and again that we have now we didn't have a new platform taken on what are you driving a high fidelity.

Experienced that we have now and so you know net net coming out of the bite of we feel very good about quite a man and the team has been working very hard on tuning in Polish and finally, the game, where we feel really good about the game that the <unk>. The security is gonna get to play on day, one and the team also has wonderful plans for it.

The future Lodge service, let's start off with this notion of Portland, really engaging apply deeply and the ability to kind of create their own Donald field experiences and so we feel very good and confident about the future battlefield at this age.

Yeah. The other thing I would I'd remember about black Friday is that and in years past there may have been.

Five times more games in the market places there will be this year.

We already know that many games have been postponed until the calendar is nowhere near as as crowded.

Which means the need for discounting is nowhere near as high second has been more importantly is that because we talked about were now running over 60 plus percent digital downloads on a game like battlefields cues, even more to P. CS which means a download number's gonna be even higher and what that allows us to.

Do is make short term price changes, if we need to but we don't have to cut big deals with retailers like we used to do historically and I think that will bode well for us from <unk> ability to sell through a lot of games as well as not have to discount those games dramatically.

Thank you.

Your next questions from county to bashing the bank.

Thank you and good afternoon, a couple for me as well apex performance looks really strong this season updates or driving a lotta usage of monetization growth, but I'm curious beyond those updates in the mobile extensions is it fair to say that you don't really see a need still for a bigger refresh or sequel.

To either apex or the legacy franchise, and then and then secondly, I might've missed it but I didn't see commentary on physical twenty-three growth in the in the release, which I think he would include last quarter. Thanks.

Let me say that for all of that and I'll, let Blair I hate the second part.

Yeah, I was gonna say, we continue to believe I again, I I go back to respawn as a team had been very deliberate and thoughtful about developing and building this franchise and nurturing and growing the community and their engagement all the time and I actually I think we're just at the beginning I think they.

Such tremendous upsides in old that we're doing both in the existing experience on existing platforms and as we expand a mobile but again I you know I have nothing to announce he today, but when you think about the broader ecosystem of experiences we plan to Walter I wouldn't discount the notion of adding more and more down.

Apply or even more traditional my daughter's apply to that experienced overtime.

Yeah, and I would just note pollen you know the number of characters that are now in the game vs. On day, one are dramatically different and it just gives you a sense of how the game is continuing to evolve not to mention the ways to play the morality land the maps and so forth.

You know on the 23 question I think you know this cause we've been talking about you know if this business for a long time, we typically don't even start talking about twenty-three until our third quarter and we don't really give guidance until the end of our four four.

What I will tell you, where we are very optimistic about 23, and that's <unk>, possibly what we're trying to signal today of that optimism.

Add excitement and I think the thing to remember.

Is over 70% of our business is now alive services and that comprises of things.

Things like ultimate team apex mobile the Sims. It is it is the special sauce of what we do is bring people together make sure that they're part of a social network and then continue to serve them contact that keeps them engaged and what they love and that is different than.

Any other companies in the industry.

We've always tried to help people understand about the breadth of our French fries and when you think about life services in combination with our sports franchises, which have come out every year at the same time basically for <unk>, mainly the life of this company.

And we built incredible live services around those sports franchises, which makes it a much safer business model cause I'm, having to go build something from scratch and hope you get it out on time and when did you then broaden out across the Sims and mobile titles and then add life services to new titles.

[noise] like battlefield that don't have real life services today, you have a much more stable and growing business for the future. So we're very confident and grow for next year.

Independent of any one pile because of that life service component of our business and we're very excited about what that means going forward and the ability for us to continue to add and.

Of all those lives services to be even bigger overtime.

Thanks, guys.

Your next question is from my opinion would open highway.

Hi, Good afternoon. Thank you for taking my question I have two number one is home FIFA or sports games with collective collection elements in general how do you think about <unk>.

<unk>, maintaining the value planning investments and making their annual investment scheme Tschudy microtransactions more enduring all over perhaps on longer time.

And my second question.

You want to give us a second question that will that will add to them was sure we'll add to them both.

<unk>. So the second question is your maybe a detailed rationale of elevating the studio jams to executive leadership team and I think that's quite unique for a AAA publisher and maybe help US understand you know what are the benefits and what exactly they will do too.

It aimed at our decision, making and how they are getting involved with the executive leadership too.

Boy Boy, it's really good questions I think about you know as we think about digital collectibles uhm, particularly our sports games again, a different across different franchise and so collectability has different value over time and collectability in games like FIFA and not an in N. H L is.

Really built on on driving value through the traditional sports season. I think the question is is there an opportunity, particularly as we think about an F. T. As in other digital ecosystem to expand that value over time and then she wanted to that is yes, and just slightly longer answered that is we need to work and make sure we continue.

You the appropriately tune in balance the experience for our players and we're always looking to give applies more value any experiences I enjoy and you are seeing that based on the growing engagement and the guy I'm gonna growing spending they they they're getting that value, but we will continue as as we have a bold the ultimate.

Two weeks spirit over the last decade, we will continue to look for ways to add value for all players Uhm do you second glacier on elevating studio G. M. <unk> for me, it's a very pragmatic choice when I think about the the.

Grows vectors for us as a company inside about industry. There is you know.

Extraordinary games and content there were tools the more deeply engage the community the aggregation and distribution dot com. They do not go to the audience and there is you know the ecosystem born out of the engaged that content, but exist beyond the bounds of a traditional game experience at the end of the day every one of those value drive it stops.

With the games and the content that we create and so for me. It was really designed to a creative latest I want to make sure that you are in the strategic compensation is gonna help us drive growth as a company I think it is a very central strand of DNI of who we are they have demonstrated unbelievable leadership in our company.

In support of Al employees, and and supported our fans and and the creation of amazing games and content and there's a recognition that the next phase of growth of this company is going to be born out of innovation and creativity across those full vectors, but it will all Scott would that content and as leaders of the teams that grade that content I thought it was important to have them in the conversation.

Got it thank you Andrew.

Your next question is from <unk> Christian and it's my second name.

[noise]. Thanks, Good afternoon, I wanted to come back to to battlefield, you've talked about there being a strong free to play component within within battlefield ultimately so I guess.

Putting aside the mobile extension do you have a better sense of what that might look like now or do you need to see the engagement with the various game modes.

Post launch out the hall.

Yeah, when we when we think about all about games and how big blockbuster franchise is like apex like FIFA like Madden like battlefield like the Sims, we're always thinking about innovation.

Innovation and creativity at its cool how do we build that added a modality that play how do we think about that a cross platform. How do we think of that the extinction those experiences and business model is one piece of that puzzle I think when we look at a battlefield franchise. Today. We've acknowledged that you know it probably makes sense to have a free to play can.

Ponant to that old rule ecosystem in the future job number one was truly a reinvention all the action shoot a category I think that's what they have to <unk> you know so what to do and that's what they have achieved through this 128 Y a multi player John expansion more deep engagement and crew.

<unk> activity to report a mode, an innovative new modes in and around the gang I think the next phase of that is going to be the launch of the battlefield mobile <unk> and then as we continue to expand that you know and and that and number itself will will serve you know tens of millions appliances I think as we didn't think about further expanding.

Apply those all the time free to fly we will make sense for the franchise, but it's not the focus right now.

Great and then I guess.

You look at battlefield historically, I guess my sense is that the community has as a general rule not always maybe embraced cosmetic customization to the extent that we've seen in other games I guess the question is is that a fair assessment uhm and if so I guess, how do you think about uhm kind of monetization without kind of river.

Hurting back to kind of a DLC tight uhm monetization candidate my fracture the player base.

Yeah, I'm not sure the notion of not been engaged in cosmetic content is a fair assessment I think that but I don't feel premium some number of years ago was kind of and and and innovation in the category really extended the gaming experience at you know 12, 18 24 months I think we so deeply.

<unk> from the comedian that I think what we also soda was we didn't get ooh the community to engage deeply and that and some some policy community wanted to engage in kind of a.

Print profile and so we did away with premium and we've been kind of work with the community. Since then on different wives to extend and enhance an experienced <unk> large service uhm I feel good about what the team has plan now I feel I could get everybody in the community you know, which is probably bigger than 40 million pliers right now an opportunity to extend and enhance their.

Hearings and engage in a way that makes sense for them, but doesn't kind of bifurcate Otranto, Kate intercommunion anyway. So I think that this is a great can be I think they were called community I think the franchise and beloved amongst them I think what we're seeing you know either having being out of the market for yeah. Three years is demand an appeal continues to be.

Really high and you know I'm I'm excited about what we're going to launch with a game, but I'm even more excited by the plane. The team has that you need to grow and expand that experience for global fly Bys.

Great Thanks for that.

Your next questions from my <unk>.

<unk>.

Great. Thanks for taking my question.

My question is on the a premium package.

But in the past I I believe.

The ultimate team players for repairs, so any color you can share.

The pair conversion has been for Ya.

New mechanism and secondly, do you think this method of migration is specific to play a pack or Kennedy transferred to other titles like into apex pass for example.

Yeah, I don't I don't have specific metrics on pyatt conversion that I can share today other decide what we have seen in the combination of all of the new advancements we didn't ultimate team, including one element, which is the preview packs, we've seen hiring <unk> and high monetization overall and as we.

As we've kind of rolled out what we've seen is that we've converted a different level of spend or a different type of spending the Cornish the preview packs and so it you know what's clear to watch. This this is a really fun and new and innovative and creative why Israel outgrowing play community to engage with the most popular mode in the game Uhm I will continue.

You need to kind of a bold and offer new things and as I said earlier, we're always trying to figure out a way to open you you place a value for apply as a new reasons for them to engage and connect with a friend through the experience uhm. The notion of could you know a bold into other areas I think the shortage that is absolutely uhm I think what we're seeing is that it.

Surprise and delight all you know the <unk> the traditional surprised mechanic uhm continues to be something that is really fun and rewarding from big pond apply advice and then there's another group applies or you know what to think differently about how they extend and enhance their experience and you should expect that will take the learning from FIFA across the portfolio I'm learning from <unk>.

Elsewhere in the port for things like a mobile business and maybe like apex legend, I gotta bring that back into our sports franchises and so part of the benefit of having the breadth and depth of the portfolio that we have across sports in action and lifestyle.

And having half a billion implied in our network engaged deeply and the experiences that we offer it could we get tremendous learning across the portfolio and we're gonna look to continue to do great things around apply as as we learn from franchise the franchise.

Great. Thanks, Andrew.

Your next question from Eric handling that's M Cam apartment.

Thank you very much and good evening two questions for your first an apex legends I'm curious I think it was a year or so ago, referring to talk a little bit more about localization for the game Wonder if you could give us a little update there and how that's impacted engagement.

Winter bookings or whatever and then secondly, I think it's been a couple of quarters since you've heard much about the Sims franchise wondering if you could talk a little bit about what's happening with with that franchise is still on a growth trajectory and where where are you seeking innovation there.

Andrew.

No I I thought you might grab that one black sorry.

Oh no.

I found I found King S. Yeah, no no no normally I just pointed him across the February points with me you know the apex Buggins I'll start doing that Andrew can talk a little bit about the Sims.

We continue to work on how and why apex works in certain markets and there are certain Margaret.

It is unbelievable the strength of the franchise, where we haven't really done much other than localized the language. Japan's a great example of that and so the team has been working hard, particularly on the mobile build of the game to be able to localize it more too.

How people Wanna play the game in those markets and then you want to be careful that you don't bifurcate the game in too many ways, but there may be some ways cosmetically or beyond language adjustments to make the game more powerful in those markets and you should've seen assume that's an ongoing process. It is hard to see.

And hard for us to carve out out as part of the financials.

Trust the part.

Part of the reason that the business continues to grow is that we are doing that and you'll see much more of that as the mobile build starts to go abroad in in the world, where we're entering markets where people have not played the game on consular P. C cause those aren't available to them and so part of the market. So we're testing right now.

Those types of markets, where you know this.

This is a new game for them and so we're watching very closely as to how people play that are react to that do they have positive or negative reactions to certain characters. For example of certain types of game play and that's part of why we want to take our time to make sure we test.

Mobile build around the world cause that's where it's the most powerful and where are the most upside exists.

Yeah and on on the Sims again, the Sims is one of the great franchise about industry and exist in a category, where we have very little competition was lifestyle category. It seems continued to do well with all engagement matrix up year over year like Q2 bookings are up 32% year over year in July we released.

Cottage living al 11th expansion pack, which quickly became one of the most popular products we've ever done I enjoy performance you know well above I went to N O four goes to the frame jobs and so I. Just I think this is a growing play advice in the Sims I think the franchise, if you need to grow and I would tell you again, we had a lot to talk about all of this seems to be.

Day will come back and share more in the future, but that team continues to think about how to grow that franchise, even more than this guy in a category and with a playerbase. So it is very different from the rest of that portfolio.

Thank you very much.

Your next professions from Stephen to his credit Smith.

Okay. Thank you so high Andrew Blake, So it's kind of building on the apex mobile commentary just now just wondering if you can give us an update on a more granular level on the the cross pollination upon Ization I guess between your newly acquired mobile developments Judy.

He owes with T E. A brat, so I think.

We're all Raring to go to watch you know yea expand a FIFA audience to 2 billion plus you know given the footprint of you know football football Slash soccer. So just I understand to do no harm for the new way to acquire studios, but you have to be thinking about.

Multiple iterations FIFA or I guess, you know E. A F C. As it might be you know in the future. So just an update if you. If you can on you know what you might be doing in terms of the integration there. Thanks.

Yeah, Great Great question again, it's still relatively early so these integrations and play them. It gets really really early.

But you know what I would tell you is is as we've thought about this we really think about it across three vectors right, which is you know the the cool creative teams and how to best get value there and we we have built a single mobile organization out of that ear mobile teams play them make and blue on the Jeff Cop, whose you know who who's an industry veteran but.

Has more than a decade and mobile leadership and is really you know rethinking and and and building a strong forward looking strategy around mobile for US. The second element is is I P and when we did these acquisitions, we talked about both sport and lifestyle Uhm tap sports Baseball golf Clash design home covered.

Fashion FIFA Madden UFC Halki, the Sims and so you know part of what blight was doing that before as as we start to think about the integration we have gone through with working with always seemed to say Okay. You were working on this thing you know it probably doesn't make that much sense, you know to build that game. When you can take that agent and apply to the pizza business.

The top sports engine or or the the Gulf Clash engine to football you know European football American football and <unk> were in that planning phase right now and and I would say the teams themselves are really excited to type that core underlying technology and really apply to franchises have global reach and global strength.

The third is just kind of out of network applies and how do we start to work across that and you know blue has a tremendous advertising engine.

And we started being about how to type that advertising engine across out plan network into other products were already starting to see see that benefit and then things like reach you know, we we've already being able to launch tap sports baseball in Japan, and so some early wins and what is still an early phase of integration but.

I'm really encouraged by what Jeff is doing is the leader of this business. What I think we're going to get out of you know mobile first talent unbelievable portfolio of I P.

Ah network them half a billion pliers and global reach and I think you should you know watch this space because there's lots of great things coming you know over the next 12 24 36 months in the space of mobile.

Thank you.

Your next question is from Jamie Password Bang Bank.

Alright, thanks for the questions I was actually it was a couple of things about mobile cause I've been kind of been covered now. So one one question remaining when she stayed with a friend who was a commentary from results. When you say that about the potential for wage inflation. Among developers, maybe we're coming yeah could you just give me a bit of color on how you're thinking on the cost side of a war.

Worried about and Christian had kind of a potential cost associated with that.

Uhm I'm sorry.

Oh, Yeah, sorry, I was just gonna say you know, we always spend time thinking about that and I'm trying to manage it as best as possible I think there's no doubt that there's going to be some wage inflation. The bulk of what you if you're looking at our P&L. The bulk of what you see in terms of <unk>.

Creases in Opex are due to the fact that we brought new people and of the company through acquisitions as well as for new hires.

Uhm I don't see a substantial wage inflation pressure, but we are always conscious of it and trying to manage that.

Okay. Thank you.

And I would just say I think we are committed as an organization to be very thoughtful about compensation for all without people to ensure that you know that we keep pace with the market and they are fairly rewarded for the amazing work they do and so far we we have been able to do that you know really well and I think we can continue to do that in the future.

That's very clear thank you.

Okay last question is from Andrew Mac, My Dream and jeans.

Hi, Thanks for taking my question one on the content cadence for apex. So responds been clear about their intention to limit crunch and has settled into kind of a quarterly season releases is one season every three months kind of magic timeframe for players and for respond or is it the case, where staffing up could potentially increase nonetheless.

If you have season launches. Thank you.

Yeah, you know it it's an ongoing question I think that there's no straight answer to that I I think there's a <unk>. We've got a lot of questions of the respond to them since the very inception, all the apex legends launch as I can be decided that team is being very deliberate and very thoughtful of works very closely with the community.

They have in fact stuffed up dramatically they've got more people in L. I to go to another team in Vancouver and continues to work on the Diamond Rowan and develop more content I would say I think this thing more than just about any other team in our company and perhaps the industry. They have a very deep understanding of the apply advice in the community and they are building for the long term.

And so the short answer is could we could we develop the livable content, possibly does that makes sense, maybe but what I do is I trust that seem to be very close that convenient very thoughtful about how they build and develop that content. All the time and that will mean, sometimes it every three months, sometimes it'll be longer and sometimes it'll be showed up.

But what we have seen them do and demonstrate Nancy at the very inception is their ability to maintain player sentiment to continue to hide the best talent into their organization and can be to grow the business. All the time and I think that you know they will continue to do that for many many years in the future.

So with that will will wrap up the cold there. Thank you everyone for joining us and for the great questions be well and will speak with you again next <unk> have a great day bye bye.

He's going to reach these conference call. Thank you for for anticipating you may now disconnect.

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