Q3 2022 Electronic Arts Inc Earnings Call
Good afternoon, and I will be a conference operator today at this time I would like to welcome everyone to the electronic Arts Q3, 2022 earnings conference call Mr. Chris <unk>.
Then VP of Investor Relations you May begin your conference.
Thank you and again welcome to Ea's third quarter fiscal 2022.
With me on Nicole are Andrew Wilson, our CEO and Blake Jorgensen our CFO .
Please note that our SEC filings and earnings release are available at IR.
<unk> Dot dot com.
In addition, we have posted detailed detailed earnings slides to accompany our prepared remarks.
Lastly, after the call we will probably stop a pattern.
A replay of this call our financial model.
Right right.
With regards to walk out of that Q4 fiscal 2022 earnings call is scheduled for Tuesday may the tests.
As a reminder, we placed the schedule of our entire fiscal year of upcoming earnings calls on our IR website.
This presentation and our comments include forward looking statements regarding future events and the future financial performance for the company.
Actual events and results may differ materially from our expectations.
We refer you to our most recent Form 10-Q for a discussion of risks that could cause actual results to differ materially from those discussed today.
Electronic Arts makes these statements as of today.
I T and disclaims any duty to update.
During this call the financial metrics with the exception of free cash flow will be presented on a GAAP basis when comparisons made in the coastal call are against the same period prior year, unless otherwise stated now I will turn the call them to Andrey.
Thanks, Greg I hope all of you and your families and loved ones are staying healthy let me firstly, thank you to our talented team's electronic jobs, all 12000 people, putting so much energy every day into doing amazing things for our players.
As we begin I'd also like to say a few words about Jon Mott.
John's passing was a tremendous lofty American football community for the sports World at large and for all of US electronic House.
<unk> is a winning coach as a beloved broadcaster and pioneering namesake about game coach Madden was football for tens of millions of fans. He taught us many things of a nearly 35 years of partnership some of its most important lessons, including authenticity are things, we've held close to EA sports ever since we feeling.
Credibly fortunate to have been part of coaches legacy of Justice forced to be part of how it will live on through the future about Madden NFL games.
We'll have more to share about how we are all ranked <unk> in the weeks ahead and from all of US electronic Arts, our thoughts and sympathies continue to be with his family friends and many many fans.
And it's been a year of outstanding growth so far in FY 'twenty to Q3 was a record quarter with our live services and bulk portfolio delivering strong reoccurring revenues and year over year growth our franchises like apex legends, our EA sports titles, the Sims and ball have universal appeal.
And as we expand to more ways to play across more platforms and business models. We are growing our total players' engagement net bookings and underlying profitability.
Didn't have a charge in Q3 as the launch of battlefield 2042 did not meet expectations battlefield 2042 was always an ambitious game and our teams push to innovate across many dimensions, including massive scale at 128 planned matches, new modes, new dynamic game play and more.
Developing this game without teams working from home for nearly two years ultimately proved to be challenging.
Our process for testing in preparation, we believe the experience was ready to be putting out players' hands when launched with strong stability. However, as more players experienced a full game it become clear that we're on and on.
Unanticipated.
Performance issues that we would need to address some of the design choices. We made with the game also did not resonate with everyone. In our community. We are fully committed to realizing the full potential of this game and fully committed to our battlefield fans. We've already implemented a series of major updates to the game and there is more to be done Plaza.
Can expect meaningful updates to continue in the weeks ahead, and we are shifting the first season of live service content to early summer as we work closely with our community to evolve and improve the core experience and battlefield 2042.
Despite battlefields miss against our expectations with the strength of our business, we are continuing to deliver a record growth and performance in FY 'twenty two.
With battlefield performance to date and our decision to move the first season of live services into Q1, FY 'twenty three so we can focus on the core experience. We've adjusted our full year net bookings guidance to 752, 5 billion, which remains $225 million above our original net bookings guidance for FY 'twenty two.
On the strength of our live services operational discipline and continuing digital transformation, we're reaffirming our full year expectations underlying profitability, we expect strong growth to continue in FY 'twenty three.
Looking across our portfolio, we saw continuing year over year growth in total client engagement net bookings cash flow and underlying profitability in Q3.
Touch on each of those pieces here.
Beginning with total players our games and experienced disconnect a global network that continues to scale over the last year. Our network is growing to more than 540 million unique active accounts across more than 18 games and twenty-five live services spanning all major platforms from console to PC to mobile and cloud.
Good.
From an engagement standpoint, more players are spending more time and entitles looking across our portfolio on old platforms. We've had more than 180 million monthly active accounts on average in our games during FY 'twenty two.
Apex legends monthly active players are up more than 30% year over year in Q3 and across our combined EA sports portfolio monthly active players are also growing year over year.
Engagement is deepening as well with players spending nearly 20% more time in games across our portfolio in FY 'twenty, two compared to the previous year.
Growth in our network and engagement continues to drive growth in our business with our top franchises delivering strong recurring revenue a net bookings for Q3 grew seven 4% year over year for the quarter and the full year, we project, 22% growth in net bookings over last year.
Performance across the business and operational discipline also continued to deliver strong cash flow and underlying profitability growth in Q3.
The continued growth is anchored by proven franchises, where we have a strong track record for execution apex.
Apex legends is now one of the biggest and most successful ongoing live services in the industry and is built on our owned IP with more than 28 million new players joining in the last year and new seasons and in game events that continue to limit new experiences to a deeply engaged community.
'twenty two is the biggest year yet for apex.
Average player investment in the game has grown significantly year over year, and we expect to.
And we continue to expect net bookings for apex to approach $1 billion in FY 'twenty two.
We are expanding to reach more players and viewers with new original content on the way of growing apex legends esports ecosystem and apex legends mobile will soon be moving into soft launch as we continue our worldwide rollout we've had strong engagement and community feedback during closed beta testing and we're excited for more players to experience <unk>.
Legends mobile soon.
Mobile is a core growth engine for us and it is accelerating with new launches and acquired expertise and technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY 'twenty three with growth well into the double digits.
Led by apex mobile newly updated FIFA mobile game Gulf Clash and more unannounced projects, we are expanding our portfolio of more than 15 top mobile live services to reach new audiences and grow our recurring revenue.
EA sports is a powerhouse in the sports and entertainment World, We've driven hundreds of millions of dollars of net bookings growth year to date without EA sports business up nearly 10% year over year, we continue to see incredible growth for the future of global soccer and a global soccer franchise was the number one title in the Western World in calendar 2021.
NFL 22 was the number one sports title in the U S. During the holiday period and it was the number three top selling game in the U S for all of last year.
Unreal leadership F. 102021, also continues to perform well above expectations with units out nearly doubling year over year during the holiday period.
And our mobile sports portfolio, we just launched the latest version of our EA Sports FIFA mobile game around the World. This was the biggest update to the game ever and early performance has been exceptional engagement is up more than 50% over the previous season and retention in the first week is nearly double with the added expertise a play that make and glue and a deep.
Pipeline of new sports experiences in development.
It continues to be an exceptional growth business built on predictable and recurring revenue with outstanding.
Opportunities ahead.
Pipeline further amplifies our strength in addition to our coal franchise. We are building new experiences in some of the biggest enduring IP and entertainment last week, we announced a new agreement with Disney and Lucasfilm games to develop new experiences in the Star Wars unit for us continuing our collaboration of more than a decade.
Sport is leading development of the next game and out action Adventure Star Wars, Jedi series as well as two additional star Wars titles. This adds to our deep pipeline of announced and unannounced projects with a wholly owned IP, including need to speed, our bioware franchises, the Sims Sky dead space and more.
Looking ahead, we are continuing to build on our structural advantages of our portfolio and accelerating growth by executing against our core strategy. We are focused on creating amazing games and content, providing creation tools for the community to engage more deeply with our experiences aggregating and distributing our content experiences to more players on more platforms and more.
All geographies and more business models and harnessing the power of the social ecosystems in R&R guidance.
The demand for amazing games, and new ways to play watch share and create has never been stronger and one of the industry's largest most profitable businesses with strong recurring revenue we are well positioned to take advantage of this continued secular growth. We look forward to delivering against these opportunities through FY 'twenty three and beyond.
Now I'll hand, the call over to Blake.
Thanks, Andrew Q3 was a quarter that demonstrated the strength of our live services portfolio.
Despite a tough battlefield launch when we came within a couple of percent of our net bookings guidance and beat our expectations for underlying profitability.
The quarter was the largest in our company's history bookings underlying profitability and cash generation.
Sales of battlefield 2042 were disappointing, but they are offset by a strong showing from FIFA and continued strength from apex and our other franchises. We delivered net revenue of 179 billion in net bookings of 2.58 billion.
FIFA 20 true strong start continued into this quarter with unit sales now up double digits over last year launched to date and players continue to engage in FIFA ultimate team and invest in their teams. This has made it the strongest FIFA launch ever measured from launch to the end of Q2.
Great.
Apex legends, Nick Nick Nick excuse me net bookings continued to grow at an extraordinary rate.
Deliver close to $1 billion per year.
Digital represented 64% of our full game unit sold through on a trailing 12 month basis up two percentage points from last year.
The strong digital mix for full game sales aided by growth in live services pushed underlying Q3 gross margins to three percentage points above last year.
Operating expenses, which include recent acquisition costs came in below our expectations driven by variable compensation and savings and phasing of marketing step.
It's worth noting that we were able to hire more people than any other quarter in our history and were continuing to invest in our game changer.
We now expect fiscal 2022, GAAP net revenue to be 6.925 billion.
Cost of revenue to be 1.844 billion and earnings per share of $2 43 up from our original expectation of $1 34 steps.
We are taking our net bookings guidance for the year to 752 billion, although a $100 million reduction on our position at the end of Q2. It is still $225 million above our original guidance for the year.
The reduction is driven by battlefield 2042 in both Q3 and Q4, but offset by the strength in the rest of our business, particularly in FIFA and apex legends, we're committed to turning battlefield around and building a sustainable live service, even if some of the actions we're taking like moving the first season into FY 'twenty three.
<unk> impact next net bookings for the short term.
<unk> the strength of our portfolio, our operating cash flow guidance is now one 9 billion.
This won't be close to the largest full year operating cash flow in our company's history.
Nearly $200 million of one time tax payments related to acquisitions not sure.
When capital expenditures still around $200 million that would deliver free cash flow of $1 7 billion.
Note that this is a $200 million above our original expectations for FY 'twenty two free cash flow.
See our earnings slides and press release for from a cash flow information.
For the fourth quarter, we expect GAAP net revenue of 1.759 billion.
Cost of revenue to be $404 million and operating expenses of 1.086 billion.
This results in earnings per share of <unk> 46 for the fourth quarter.
We expect Q4 fiscal 2022 net bookings to be 1.761 billion. This would be our largest Q4 ever even if we only count the organic growth.
We will formally guide FY 'twenty three in May when we report Q4.
But we've heard that some of you are concerned that the battlefield performance might impact next year's growth.
Let me emphasize here again that we are a portfolio company as originally forecast for battlefield franchise would have accounted for significantly less than 10% of this year's net bookings and are well below 5% of next years.
We're revising those numbers, but you can see it has little impact on FY 'twenty three growth.
The main drivers of growth next year remained FIFA console apex legends apex mobile and FIFA mobile golf Clash will also contribute to year on year growth since we acquired play dammit halfway through the year.
With regard to new launches in FY 'twenty, three we had disclosed that need for speed is on the slate and we'll announce more titles closer to the time in total we still expect mid to high single digit growth next year.
To summarize we just delivered the largest quarter in the company's history.
FIFA goes from strength to strength apex legends continues to show extraordinary growth battlefield disappointed, but our broad portfolio of games and live services Insulates us from the impact of any one title.
Our portfolio approaches approach enables us to deliver double digit organic growth this year and continue to deliver strong cash flow and provide a strong foundation for growth as we look to the future.
Before I hand, the call Andrew you may have noticed that yesterday, we announced a new CFO for the company.
And I think the new CFO , Chris is going to be a Fabulous addition, and we will do a much better job problems that I've ever done.
I think Andrew and the team of our executives as well as the entire company for the amazing partnership that I've had here.
And a half years.
It has been the most enjoyable experience of my entire career.
I also think the bites.
Buy side and sell side analysts and partners for all of their support over the years and wonderful interaction.
And last but not least.
I think Chris evident.
Aaron rain and Fabiola for their amazing IR performance that interacts with all of you.
So now I'll hand, the call back to Andrew.
Thank you Blake.
These are exciting times that one industry indirectly by that time. It continues to grow by every measure and our audiences are expanding and diversifying major franchises over the center of culture and entertainment in the World is recognizing how games have the power to connect global communities.
Our focus continues to be on our people, our players and our amazing portfolio of games content and services and extraordinary growth opportunities in the future.
Thanks to our incredibly talented teams and electronic counts, we are delivering entertainment to hundreds of millions of people around the world and connecting them through some of the most powerful enduring franchises.
With the breadth and depth of our business that continues to expand our network deepen engagement and drive to drive growth in our recurring net bookings and ongoing profitability, we are well positioned strategically.
Well positioned strategically to continue building on our success and delivering for our clients.
As we look ahead and as Blake just referenced we were excited to announce yesterday that Chris is joining electronic costs as our next CFO , Chris is coming to us after more than 25 years at Microsoft where he served as corporate Vice President and Chief Financial Officer of the cloud and AI group, which he led with incredible success during Microsoft's transformation.
A cloud first company.
We have a big vision for the future and in addition to Crystal financial leadership of that organization I'll look forward to having him as a strategic partner with extensive experience driving scale and growth to help us achieve our goals.
As we've announced previously Blake will be leading our team after nearly a decade of leadership and partnership with Eni Blake.
Blake has been an incredible leader partner and advisor, but most importantly, he is a dear friend and I feel deeply grateful for our time working together.
His expertise and the team. He has built have been instrumental in our growth and financial achievements and have positioned us well for continued success Blake will remain with us until the summer to insist with with the transition and special projects. Thank you Blake for everything you've done and continue to do for our company and again. Thank you for your <unk>.
Chip that.
We are here for your questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw. Your question are you asking a question has been answered.
Your first question comes from the line of Benjamin.
From Deutsche Bank. Your line is now open.
Hey, guys just a quick thank you to Blake for being a great partner.
Looking forward to meeting Chris.
Two questions. So first just around battlefield can you guys sort of frame for us how you think about the vision for the future of that franchise and in particular, how the new leadership for the Battle field team is thinking about extending and adapting that franchise over time that I've got a second question.
Yes, Great question again, we are a very bold vision.
Where this franchise does this franchise has always led the category and creativity innovation scale game play community.
And as we kind of need to launch.
Again, we had a very bold vision for this game as it turns out we've had some challenges.
Not least of all trying to build this kind of an <unk> game from home and so our focus now is really making sure that core experience lives up to our fans with the community's expectations beyond that we'll continue to invest and grow the franchise, we have great leadership, with Vince and Byron and others with tremendous background.
From other great shooters in the industry kind of leading the future I believe that we're going to see this game do really well over the course of time I think we will expand our mobile and will expand to other new and interesting ways to play but certainly this is just a moment, where we take a pause and.
And do all that we can for the core game in the KOL community.
Got it and then just in light of the announcement that you guys are working on those three new Star Wars games can you talk a little bit more about your vision for that IP and is it fair to say that going forward, you're planning to lean more towards investing in your own IP and if so what are the.
Some of the potential pros and cons of that as a strategy.
The very strength of our basis is our balanced portfolio, we have booked a deepen our broad portfolio and what we've demonstrated over the course of that.
Best part of 40 years is to really develop both our own IP over time, the need for speed the Sims battlefield apex legends, our buy with franchises, we have Skype in development now dead space on the way so an incredible portfolio of owned IP.
Has an extraordinary following across the industry.
Combined with other long term enduring IP, we have the power of our sports franchises and Diana true Evergreen franchises and this is not just about licensing content. This is about working with over 300 partners across the various sports industries to deliver a true connection with the sport.
What's the league the teams suppliers that our fans love and we've been doing that now for well over 30 years and I think that we will continue to do that for many many years in the future and things like the Star Wars franchise again, a long term relationship we've had with Disney for more than a decade and this is not simply about building.
Revisiting things that already exist in the universe, but really adding to that star Wars universe, and really delivering new opportunities for star Wars fans to experience Great Star Wars content and so as you think about our strategy going forward and the strength of our company. It really comes down to our ability to develop and build on pumps.
<unk>.
Industry, leading owned IP, but also work with partners over decades to truly deliver fan favorites with long and enduring.
<unk> lockout sports franchises and like Disney.
Your next question comes from the line of Andrew <unk> from Jefferies. Your line is now open.
Hey, Thanks, Thanks for taking a call on just reiterate the positive sentiment from Blake click is being.
Great Ron.
Really enjoyed it.
I guess I just had really one question no follow up.
Your one of your bigger competitors, we've just taken out you guys have quite the portfolio.
And I've taken a portfolio approach for years.
How do you think the industry will look in three or four years do you guys see yourself as a consolidator.
Potential seller.
How do you see this industry shaking out over the next three to five years. Thanks, Yeah, Great question and you should imagine we've been talking about this for some time as it turns out.
Part of the reason why we have built the strength in our broad and deep portfolio on why we have gone out in search of the best teams in the industry to bring them into our company and build great Entertainment for a global player base of what is now well over half a billion fans is because we do believe in the power of our entertainment.
We do believe in the power of indirectly to entertainment I think what we're seeing now in the marketplace.
Is demonstrative of the value of what we do in particular and so as I think about the future of the industry I do believe that we will start to see entertainment coming together, you're seeing some other companies talk about this but when we think about our players and we think about the things that day engaging they play out.
<unk> more than any other form of entertainment, but they also consume linear media and scripted entertainment and sports broadcast and and music and other things and so.
As we look at the future we are building strength in our coal ability to Liberty Interactive entertainment to our fans, which we think will continue to grow well north of 1 billion fans over time, but we're also aware that our fans are expecting us to find new and interesting ways for them to experience entertainment and so as we think about the future.
So you should think about it with IP at the center and engagement around play watch create and experience all built on a deep social ecosystem that brings fans together around the content They love and when you look at our strategy of what we're doing in writing, creating great entertainment around building tools.
So that our community can engage more deeply around the aggregation and distribution of content across platforms across business models across geographies and really leaning into the social ecosystem. The born out of the engagement how games I think you should imagine that's what the world looks a lot more like four to five years from now.
Got it thanks, so much.
Your next question comes from the line of Mike Hickey from Benchmark. Your line is now open.
Hey, Andrew Blake, Chris Thanks for taking my questions guys, Blake I'm going to Miss you Buddy.
I'm sure you'll be getting a lot of skiing in now so I'm not feeling sorry for you.
It's been great.
So.
Question is.
I guess im battlefield, obviously disappointed can you give us can you size the units sold in the quarter.
Thank you guided for 12, or so, but just sort of curious where you ended up versus expectations and then thinking about how you sort of reengage.
That audience.
<unk> been some ideas around free to play curious if that's a possibility and then I did hear mobile did you drive mobile for battlefield or is that just delayed thanks Scott.
So Mike Thanks for your nice comments to the other analysts as well.
I'm sure I won't get as much as I would like but.
You know, where we're going to refrain from trying to give updates on units because we know that there are.
Remember battlefield is less than 10% of our revenue so I'm not sure. What you would do with that clearly we sold less units than we thought we would.
But what I would say is that I remember these games are long tails.
So our goal is to add new content, new ways to play new excitement to stretch this out and in some ways, we hope it benefits.
2023, since we've had a pretty strong FY 'twenty two.
So where it helps us in the future I'll, let Andrew address the second part of your question.
Yes.
You remember coming into it.
The launch the demand metrics were very high.
So as that reaffirms for us the call underlying created for the game.
Still has really strong demand around it I think.
I've mentioned, we had some challenges around stability, particularly on high end PC machines.
In performance and there was some design decisions, but not all of the community really agreed with and so our focus right now is to really go back in and make sure we get that stuff right.
As much as I hate to admit it.
Josh is a studio that has been able to do this a number of times now I'd really go back in rebuild of the call and re engaged the community as long as we do that in conjunction with the community and that's what that studio was so great at doing that so I think the.
You should have done with the new leadership and a strong vision for the future. We will build out the call. We will re engage the community and we will manifest that demand that we saw coming into launch over the course of time.
Mobile is still developing the metrics are showing really strong I think right now we're looking to go into the next closed beta at the end of this month.
As is the case with mobile as well continue to tune and test in the environment and then as it relates to free to play and other modality play again, we are a big bold vision for this franchise. This franchise since its inception has been a leader in creativity and innovation was it how it is played in house delivered and you should expect that we will.
To look to deliver new and interesting ways to engage with this game over the course of time and while.
I'm disappointed with how it how it launched I'm still very excited for the future.
Your next question comes from the line of Eric Handler from MKS Barclays. Your line is now open.
Good afternoon, and thanks for the question.
So I wonder if you could just talk a little bit about when you think about the expansion that's going on in the video games industry in the last year or so I mean, we're seeing a lot of user generated content.
And platforms around that.
It starts to proliferate, we've seen a lot of venture capital funding into blockchain and a T gaming wondering how youre thinking about.
Those channels eventually.
It's easier to build from within is it better to buy.
Once there is some established players there.
Just wanted to get your mindset there.
Yes, Great question I would tell you.
I started this industry over 20 years ago at that point in time. It was the fastest growing entertainment industry on the planet by a wide margin I think it has been the fastest growing entertainment industry on the planet every year. Since then but still people seem to be surprised by this so we're not surprised by it at all and I think as as technology.
<unk> has continued.
To evolve we have been able to deliver new and interesting and fun ways to engage with content and what we've seen more recently is just how powerful the social ecosystem for social networks born out of engagement now games truly and.
These are now it's now just about ingesting anytime in the same way you do traditional scripted media row traditional broadcast digital music. This about experiencing entertainment with your friends and that is unbelievably powerful I think that has been really the few that has driven the growth in recent time as part of that of course.
Ability to create your own content and put it into that ecosystem has become a really valuable part of what our industry offers to our players and our fans with traditional media just doesn't and this is something that we hold true again, it's been at the very center of the Siemens for a long time, it's at the very center of modes like FIFA Ultimate team and Madden Ultimate team.
So the very center of the design of state, which we'll be launching soon.
And so this concept of UGC or user generated content is really just an extension of the social interaction that I have with my friends in and around experiencing what is the best anytime on the planet and so I believe that's going to be a really important part of our future now to the extent, whether we want to build that out all by that over time right now we are building.
We're building technology, we're building creative we're building assets in which we're offering that out to communities around the world and we're seeing great uptake of that.
If there was an acquisition opportunity in the future.
Ultimately look at that but we don't we're not looking at anything at this juncture.
The NFC and Vcs are investing again, we see this also happened in our industry. We start with three D. We start with IRB wed have to sit with NFC is as always there is always something in and around our industry that is driving a lot of external investment.
The way I look at this is Collectability is really built on four key metrics that's around high quality content. That's around scarcity, that's around proof of authenticity and it's around.
A group of people that find value in that content.
And we've seen that happen in the real world and we've seen that happened in the virtual <unk> certainly seen that happen in and around our games for some number of years and I believe that twice ability will continue to be an important part of our industry and the games and experiences that we offer our clients whether that is part of the NFC and the blockchain will not.
Nice to be seen and I think the way we think about it is we want to deliver the best possible player experience, we can and so we're going to we'll evaluate that over time, but right now it's not something that we're driving hard against.
Thank you very much.
Your next question comes from the line of Matthew Thornton from tourists Securities. Your line is now open.
Hey, good afternoon, Andrew and Blake absolute best Best of luck to you in your future endeavors here, it's been a it's been a pleasure.
Two questions first for me you guys talked about.
In the back half of the fiscal year, obviously battlefield missed that's partially offset by strength in.
And FIFA apex, and others with FIFA in particular, I guess, you talked a lot about kind of unit strength year on year I'm, just kind of curious how you felt about or our feeling about.
Ultimate team in the live services component into the into the back half of the year.
I guess, that's the first question second question.
Curious coming back to mobile I mean, maybe some of the recent acquisitions kind of curious if you could talk a little bit about how youre thinking about advertising I know, it's come up a bit to your other companies might get 10% to 20% of their mobile bookings from from advertising Glu brings some new capabilities to so im curious how youre thinking about advertising I'm curious, how you're thinking about.
The glue pipeline, you're almost a year into the into that deal.
And then also when we might start to hear a little more about kind of what your plans are with with metal on metal on metal head end and Super Mega Baseball. Thanks.
Thanks, guys.
So let me I'll start on the left service piece and then I'll, let Andrew hit the second question.
So why are service growth in the quarter was 9% and.
And trailing 12 months is 21% and that's across all of our live services and so if you look at something like apex or fee further clearly well north of that.
And we feel continue to feel it as one of the cores of our business because it is reoccurring and highly dependent on the social networks that we've created in our games and particularly around sports those are.
Ever Green networks for continue every year.
Metrics, we see our exceptional up rollover last year.
You look at the apex numbers as we reported the dramatic improvement year over year.
Everything they do.
Continuing to try to drive.
Engagement with people they brought in a large number of new players into the game of retained players that continue to come up with amazing and unique ideas for ways to play.
So we're very excited about how that continues.
It continues across all of our sports and we're looking as to how do we do that across more and more games going forward.
So.
I'll, let Andrew talk about glue, a little bit yeah again.
Working closely with Glu is still it's still relatively early days.
With the acquisition for both them and play Demick, we're working both on bolstering our existing 15 live services and building out new ones that I put in my prepared remarks, we're projecting well into double digit growth next year.
And that includes apex mobile and a renewed FIFA mobile.
At a full year of Gulf clash and ongoing growth across the portfolio.
And we're excited about that with respect to advertising specifically we are taking.
The glue advertising stack and applying it across our games and it's a little early to know just yet exactly how that will manifest but based on what we're seeing across the industry. We expect that that represents some revenue growth. There also so overall mobile now really is a strength of ours, it's a very.
And part of how we drive growth in the business both in our existing games, and our new launches and with the potential of mobile advertising across the portfolio.
Yes.
Your next question comes from the line of drew Crum from Stifel. Your line is now open.
Okay. Thanks, Hey, guys. Good afternoon, Blake best of luck.
Curious as to your thoughts on where the businesses in terms of engagement normalizing.
As the reopening headwind behind you or is this something we should anticipate in calendar 'twenty two.
It contemplated in your fiscal 'twenty, three net bookings forecast.
And then separately your opex growth year to date is approaching 30% year on year should we see that slow materially once you start to anniversary acquisitions or how should we be thinking about opex going forward. Thanks.
Yes, I can take the Opex question quickly drew I mean, clearly most of that was driven by two things one as.
Our acquisitions, probably the biggest driver of it but second as.
Driven by the fact that we've used this opportunity.
Some.
No.
Questions.
The Gamer community about which companies are going to be around and which are and we've been able to hire some amazing talent.
Because of our stability.
And so that doesn't continue on forever, obviously the acquisition growth is a one time component.
Sorry, So I think were remember our Opex is really comes down to two things head count.
<unk> expense.
The marketing expense will swing by the titles that are in any one year.
But we're pretty good at managing that and our head count were also very good at managing and so I don't think youre going to see a jump like we've seen this past year, but remember even with the opex growth that you see look at the Q3 <unk>.
EPS number I mean, clearly we've been able to manage that even with a downdraft.
48.
$1 billion in revenue that we Didnt originally plan and so we were a pretty flexible organization.
Be able to try to manage that to keep margins growing and so I think you'll see that going forward.
On engagement.
Through we'll post COVID-19 , depending on how you think about it.
I think we've been on a rolling situation around the world.
<unk> kind of coming back and shut.
Shutting down a little and coming back.
Broadly speaking, though much of the world is out and about the rat sporting events that Gallagher to theme parks they are watching movies.
Going to deal with so much of the orders returned mostly to normal at this juncture by by our calculation even as part of that we've seen not only number of players grow again.
540 million people now in our network. We've also seen time spent email games grow by over 20%.
I kind of look to that as not just about creating amazing games and entertainment, but it is the social interaction.
What <unk> has taught us is that games, our great why not just to get our entertainment fixed to remain deeply connected with our friends and fans and rivals and what we're seeing now I believe is actually the long term effect of the discovery of not just the value of out of what we do in terms of entertainment, but also.
The value in maintaining connections with those we care most about and we would expect that to continue and actually create a flywheel for added growth.
Your next question comes from the line of Jason Bazinet from Citi. Your line is now open.
I think so I think it's a little bit early to talk about this but I would be very curious about how you're thinking about your business and strategy as it relates to the med adverse as that becomes more real is that is that something that you view as just another opportunity for you to engage your feet and this is a battle about Titans spend does it potentially sort of change industry.
Sort of shares or is it just sort of a non event.
Do you guys think you can sort of continue to focus on your IP and engagement and it's really not material.
Yeah, Great question and certainly another one of these things that is kind of the topic do sure at the moment.
And many people are talking about it in different context quite frankly.
At the end of the day the matter for US is a three dimensional social space, where you come together to experience things with your friends.
And for now much of that happens in the two dimensional internet.
Around the social networks that we see.
Tell you a lot of that happened in the context about games and as I look at the 90 about games and I look at the engagement that we're seeing inside these three spaces that we create in around sports and other.
Other worlds, what you see without industry is the beginnings of water metaverse might peak.
The course of time, you should expect us to continue to expand and extend the world that we have been creating for the last 30 years and deliver more experiences beyond the KOL conceded the game. So what can you do in FIFA beyond playing football what will you do a need for speed beyond driving game, what will you do it seems as you come together.
Youll friends beyond the creation of content and.
Youll see that continue to evolve for us over the course of time and I don't know ultimately what the net of those will become but what I do know is that the games we create.
Becoming more important as social spaces and they are just as places to enjoy great entertainment as we continue to build out those experiences.
Yes.
One of the net of those becomes.
Almost certainty that we will play a very important role in it and the out players will be on the leading edge of the evolution of what these spaces might account.
That's super helpful. Thank you.
Your next question comes from the line of Mike <unk> from Goldman Sachs. Your line is now open.
Hi, good afternoon, and thanks for the question I just have two first I was just wondering if you could talk a little bit about <unk>.
EA play where are we with play subscribers say and how do you see the outlook for video games subscription services changing particularly with recent consolidation and then second it was encouraging to hear the.
Reiteration of the mid to high single digit top line growth for next year. I was just wondering if you could go a little bit more in detail around some of the drivers.
What do you see driving some of the FIFA strength and are there new games are unannounced titles embedded in that outlook. Thank you very much.
Yes, let me quickly hit on the EA play component and then I'll, let Blake talked about.
The mid to high single digit growth.
Fly continues to grow for us and continues to be a really really positive consumer experience of getting access to some of the greatest content in the industry.
What what we see more broadly across entertainment is it subscription continues to be a core driver.
And what we're able to do is drive ongoing engagement, perhaps in Hawaii, even get stronger than traditional linear scripted entertainment I think that we will continue to see consumers engaging our content through subscription and we will continue to provide our content that why and I think we'll start to see more and more.
Growth across platform and we continue to be the leading provider of our gaming subscription cross platforms in our industry and with the depth and breadth of our portfolio and the new experiences. We have coming we believe that we're going to continue to drive growth it and over the course of time back to my earlier point around entertainment you might expect us.
To do more things beyond just games in the context of that subscription around a broader service for all players and we're pretty excited about what that might become over the course of time.
And on the 23 question, obviously as we said, we're not yet ready to give guidance, which we normally don't do at this time of the year, but we did give some hints.
The keys to driving growth, our obviously, our core portfolio things like FIFA for example in live services associated with it bad in hockey other sports.
Apex legends, obviously is continuing to evolve and ensure an amazing growth.
We will have an apex legends mobile game in the market. We don't know exactly what time that will be and there will be a global build for that game as well as the Chinese build for that game.
And we're working with a partner there and things are going very well in test, but we're excited about that as a major growth driver.
We will have more growth, we think out of the FIFA mobile game that we just put it into the market.
And remember that we only had our book really a half of year play denim X call clash game.
We will have a full year of that next year and we're working with play dynamic on how they can take that clash mechanic into other.
Sports areas, where we have licenses already.
And then we've got our need for speed game coming and there are three or four more things to that we haven't announced yet but you can imagine we are always trying to find ways to grow the portfolio year over year through new titles, new IP and expansion as well.
Acquisitions, which right now are in the digestion mode, but it doesn't mean that we.
Won't keep looking at everything going forward. So we're excited about next year it looks like a strong year to come and as Andrew said, we know that this is one of the greatest entertainment vehicles in the World right now and so we're really in the sweet spot and that's what gets us excited about it.
Great. Thank you both that was incredibly helpful and Blake best of luck in your next chapter.
Yes.
Your next question comes from the line of Mario Lu from Barclays. Your line is now open.
Great. Thanks for taking the questions.
Blake, it's been a pleasure interacting with you over the years and I appreciate it.
Yes, I guess the first question from a high level you guys fit in your slides spending.
Playing time.
Increased 20%.
This quarter compared to the year prior.
What was the largest driver of that and I don't know if you have this data, but what's the typical lag historically between growth and time spent.
Station.
And then secondly, you guys didn't really talk about Madden as much on this call. So just wondering what the delta is between your performance versus like a pizza.
Alright, alright things like maybe a passionate team so that's kind of driving the growth here.
I would imagine that you can talk about thanks.
Yeah.
So let me let me start with Madden Madden is also having a great year and we're seeing tremendous growth.
For all of you who've followed the season. This has been an unbelievably exciting season of football.
And what we noticed or 40, niners, unless well whats exciting for us and for a second.
And then it was a bit.
<unk> times in the season overall has been an unbelievably exciting game the ratings for the NFL had been.
Extremely strong through the year, and that's driving really strong engagement in and around Madden franchise in.
It continues to go from strength to strength.
With respect to.
What drove engagement again, we have this great portfolio and what we certainly saw extraordinary growth in apex legends, we saw great growth in FIFA. We also saw growth across the portfolio.
And on <unk>.
<unk> was 30% FIFA.
We have sports portfolio was up 10%.
On what is a very big number, but we've seen growth across the portfolio and that speaks to the value of the breadth and the depth of our portfolio.
In terms of lag between engagement and monetization growth, which I think was one part of your question. There I don't have exact numbers for you on that what I would tell you is our teams work very closely with our communities and ensure that they're always providing new and interesting content and what we know about all of that community as they fly.
As they make a choice do they want to invest more time, what do they want to invest more money in the experience and it's really the ability to build that balanced ecosystem that speaks to the strength of our live services over time and so it's a very symbiotic relationship that happens between the investment of time and the investment of money Obama over the course of the experience at our teams at.
Become very very good at that and work very very closely with the communities to try it yeah and.
One thing I would just remind everybody in alright, if we may have already answered this but I'll say it again.
We shipped last year fees in the third quarter.
The pandemic, we delayed it three weeks they moved it into the third quarter.
Shifted this year in the second quarter.
So when you look at the growth of the third quarter, knowing that that didn't include the initial ship in our FIFA.
It's almost hard to believe the strength of the business and so I just want people not to forget that we're not going to provide numbers or details around that exactly but just know that the.
The growth that we saw after having moved it back to the second quarter, it's pretty impressive.
Very helpful. Thank you.
Your next question comes from the line of Andrew <unk> from Raymond James Your line is now open.
Thanks for taking my questions and wanted to pass my best wishes on to Blake as well.
Apex legends so season, 12 seems like a more substantial content dropped in a typical season. So.
Whether it's amounts of content or type of content or is there anything that particularly stands out as a driver for new player acquisition and engagement, whether it's game modes, new maps or things like that and then second on FIFA.
Around the growth in unit sales year over year I guess at this point, who is interested in FIFA 22 that maybe wasn't in peak of 21 were there any particular markets or customer segments that saw solid unit growth. Thank you.
Well some detailed questions.
And the great questions I think on apex.
Again.
As we as the teams put together the seasons of content and I think about new content and new modalities of play a new and new ways to connect remember.
Capex is now well over 100 million players and so there is no one size fits all component that really attracts new players are engaged as any any any broad group of players deeply.
What the respawn team on the apex team in particular have been able to demonstrate is they work very close with their community. They are deeply engaged with the community and then delivering content modalities apply maps these things.
That really speak to what the community you are asking for and need and what we've seen since the very beginning of the launch of this game is then being able to work in a very calculated way around the delivery of really interesting new content, new maps and new mode as apply on a season by season basis that has continued to grow the overall player base continued.
To grow the overall experience continue to grow the engagement that player base has been the experience.
And the investment those players are making as part of their engagement and so we're very excited about that.
And then with respect to FIFA.
Again. This is another team that has demonstrated the power of working very closely with the community in and around our live service football software as we call. It in this country continues to grow the league. The teams the pliers that going from strength to strength and popularity.
We have over 300 licenses in the game and 300 partners that we work with in the provision of what is a growing broadening deepening experience for our player base and as the world of football grows as we build a fan base again, if you think about the same base, we have for our product.
Or our service, it's the largest digital football club in the world with well over 100 million fans and we work very closely with that fan base around their ability to experience football in a way that's most meaningful to them around their leagues around the teams around the place they love and the reason why I would continue to drive growth.
In and around that franchise is because we do work very closely with our global community of fans and we are delivering them again content gameplay modalities of play.
That is most interesting and most exciting to them and connect them most deeply with the sport they love and the fans they love it with.
Thank you.
Okay. Your next question comes from the line of Doug <unk> from Cowen. Your line is now open.
Hey, Thank you.
Paramount plus dropped a pretty expensive looking halo trailer over the weekend.
Alex has had some success with the witcher and legal legend on their streaming service Theres, absolutely ravenous demand for content right now from a half a dozen or so streaming services and you guys have some IP, particularly within bioware that I think would be pretty pretty pretty good.
As a basis for for so are we are we finally at a point where video game IP has some meaningful trans media opportunities or do you think thats still.
More theory that a reality.
No I think what based on exactly what you just said and what we've experienced this.
Video game IP or interactive entertainment IP is now some of the most culturally relevant IP and all of the entertainment.
And I think that's going to continue to grow when you think about.
Hundreds of millions of fans engaging in and around the IP, we create like apex.
Like the Sims like need for speed lockout, bioware franchises like dead space like Skype.
Natural for that to spool and kind of a scripted entertainment.
Element I think traditionally the scripted entertainment elements in our industry have not been big revenue drivers in and of themselves, but where that had been a high quality that have lifted the overall engagement the franchise more deeply so there's kind of a one two punch that drives growth in the business I think as we think about our future.
We do believe that this thing that we do that is interactive entertainment is becoming more and more important on a daily basis to old fans and that our fans are going to want to experience that in many different modalities and some of that might be scripted entertainment in nature and you should expect that that where we're looking at.
Any and all aspects that allow us to expand and expand our brands for our fan base, but we're doing it very thoughtfully.
And again as part of our strategy doing it profitably.
Great. Thanks, Andrew and best wishes Blake, Thanks, Doug look or whether that's the last question and I appreciate everyone's very kind words.
I'll be around for a while and make sure that we get our new CFO fully on board and as I said it will be much better than me. So.
Everyone stay healthy and we look forward to talking to you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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