Q4 2022 Electronic Arts Inc Earnings Call
[music].
My name is Charlie and I will be conference operator today at this time I would like to welcome everyone to the 'twenty Corp, fourth quarter 2022 earnings Conference call, Mr. Chris <unk>, Vice President Investor Relations you May begin your conference.
Thank you operator.
Welcome to Ea's fourth quarter fiscal 'twenty.
Earnings call when it makes today are Andrew Wilson, our CEO .
And Chris our CFO .
Please note that our SEC filings and earnings release.
Our available oil.
Yes.
In addition, we have posted earnings slides to accompany out Patrick.
Last night after the call we will pass on the patent box.
A replay of this call our financial model.
That's correct.
In regards to calendar Q1 fiscal 2023 earnings call.
The second.
I'll remind that we post a schedule of Rins high year of that coming on.
On our IR website.
This presentation and our comments include forward looking statements regarding future events and the future financial performance of the company actual events and results may differ materially from our expectations.
We refer you to IMAX recent Form 10-Q for a discussion of risks that could cause actual ultimate default metairie, sometimes discussed today.
Electronic Arts makes these statements as of today May 10, trying to titrate and disclaims any duty to update them.
During this call the financial metrics with the exception of free cash flow will be presented on a GAAP basis. All comparisons made in the course of this call are against the same period in the prior year.
<unk> stated.
I will turn the call over to Andrey.
Thanks, Chris I hope all of you out well I want to start by thanking our incredible teams at electronic Arts, we have the most talented people in the industry.
Every day demonstrate passion creativity and determination.
I'd also like to extend a warm welcome to Chris Chris.
Chris joined US in March at our New Chief Financial Officer, He's an exceptionally qualified leader and I'm looking forward to our partnership as we drive our next phase of growth.
Yeah. It was a profitable growth in FY 'twenty two a record heat in every important measure of our business total players' engagement in our games and what citizens net bookings and underlying profit.
We grew our global network and plans to more than 580 million unique.
Accounts fueled by new players join titles, including E Sports FIFA apex legends and the Sims and new players that we welcomed from our acquisitions.
The strength of our broad IP portfolio upgrading talent together with highly reoccurring revenue streams continues to supercharge growth in our business we.
We delivered 751 $5 billion of net bookings and underlying profit grew more than 20%. It was a record year and our talented teams Roche the challenge in a big way to inspire entertain hundreds of millions of engaged players worldwide.
Games are now central to People's lives and younger audiences have more power as consumers Gen Alpha Gen Z and millennials are digital natives and they are gaining first generations.
I see gaming as the number one choice for entertainment.
The consumption of entertainment and sport is deeply social with players across our network using games to stay connected to friends and to express themselves.
The future of entertainment is interactive and we derive strength from three structural advantages.
IP, our incredible talent and a growing network of players deeply engaged now live services.
First our IP everything begins with amazing games, and we continued to invest in one of the most powerful IP portfolios in all of entertainment.
Apex legends will expand in every dimension going from strength to strength.
New game players coming to the console and PC launch service and your mobile service launches globally. This month and the Grand finale of the 2022 apex legends Global series for esports is in July.
EA sports and racing are set to grow significantly in FY 'twenty three we have six new EA sports titles this year with more development.
Our pipeline for this year and future use features.
Love It the IP that we cannot wait for players to experience, including me to Spain Dead Space Star Wars, the Sims skate.
<unk> franchises and more of the rings.
Two new studios in Seattle are working on new projects are more industry has an unannounced titles in development and we have more underway across our global studio teams.
Next we have the best talent in the World, making amazing game starts with incredible game makers innovating across our business our people make electronic jobs, a great place to work from delivering safe and secure platforms, telling exciting stories are developing a next generation of creators.
We have a collective team of latest who together deliver one of the broadest portfolios in the industry.
We will continue to pioneer new experiences we are proud about distinctive talent from across the many parts of the game for continuing to deliver more exceptional games and content at scale.
Finally, we have a large growing network of players deeply engaged in our live services.
To provide a sense of scale, we have more daily weekly and monthly active players across our entire portfolio.
If a mobile recording its biggest quarter ever with unique new players surging nearly 80% year over year and apex legends is amongst the top live service games.
In the industry.
As we look ahead, we're investing in ways for fans to have amazing shared experiences together, whether that's by playing watching all creating.
Through our console PC and mobile live services through esports through other original content and the tools unleash the creative you've got players we will grow what are already some of the world's largest and most engaged entertainment communities.
Earlier today, we announced that starting next fiscal year, our football experiences will move under our new EA Sports UFC brand. This is such an exciting moment for us and for our fans. We've just had our biggest year ever for EA sports FIFA games building on nearly 30 years of connected experiences for our players across more than 150 million unique accounts.
With more than 300 license partners 30 leagues and federations 700 teams are 19000 athletes the future of global football is huge.
We're excited to grow EA sports UFC it will be the only place that fans can play in the UEFA Champions League called the ball Nabretta Torres The Premier League Bundesliga, Syria, La Liga MLS and many others.
Our global football franchise has long been at the forefront of innovation from the first isometric play angles to online play ultimate team in women's jeans, the flash narrowing story mode with the journey to Volta to high promotion, we've repeatedly the limit new ways to play the game.
Thankful for the many great use of partnership with FIFA and we're looking forward to delivering another full EA sports FIFA game later this year filled with great features and World Cup content.
Then the new era begins next year with EA sports UFC with a total addressable market of more than $3 5 billion football and soccer fans worldwide EA sports UFC will be deep authentic inclusive.
<unk> Global Entertainment property at the epicentre of football fandom.
We have amazing games, we built around powerful IP made by incredibly talented teams, we have a network of more than half a billion player accounts, we have outstanding engagement in our games and live services fueled by social connection and shared experiences with these strengths are alcohol FY 'twenty three.
<unk> is set to be a year of innovation growth and leadership for electronic out now I'll hand, the call over to Chris.
Thanks, Andrew and good afternoon, everyone.
Andrew said FY 'twenty two was a record year with net bookings exceeded seven $5 billion. This was more than $200 million ahead of our original guidance driven by growing player engagement across our broad portfolio of live services and games.
We grew both net bookings and underlying profit by over 20% for the full year operating cash flow for the year was $1 $9 billion nearly $150 million above our original guidance and we returned almost $1 5 billion to shareholders. These results speak to the power of our diverse portfolio.
Polio and to the durability and consistency of our live services business founded on deep player engagement.
For the fourth quarter net bookings were $1 $75 billion up 18% from the prior year and reaching a new Q4 high even with the action we took to see sales in Russia and Belarus during the quarter live services net bookings grew 14% year on year.
We delivered Q4 net revenue of over $1 $8 billion ahead of our expectations and up 36% year on year underlying profit was well above our expectations.
Q4 operating expenses came in lower than our expectation driven by the timing of some marketing and sales activities. We are continuing to prioritize our investments into our best long term growth opportunities. While also remaining agile to realize cost savings and implement efficiencies where appropriate.
We generated $444 million in operating cash flow during the quarter and returned a further 373 million to shareholders through dividend and our ongoing share repurchase program.
Now, let me talk about our full year performance.
Live services net bookings grew 17% year on year to nearly $5 $4 billion and made up over 71% of our total business.
Full game sales were up 34% to $2 1 billion.
Our healthy live services growth was driven by strength across our broad based portfolio, most notably by apex legends and FIFA apex legends is up over 40% for the year, taking it passed the $2 billion milestone and lifetime net bookings season, 12 finished yesterday and was.
Most successful ever and of course apex legends mobile performing well in test and as close to launch.
FIFA 22 is the most successful FIFA effort launch to date with net bookings up double digits.
Full game sales growth was similarly diverse with battlefield FIFA 22, Madden NFL. It takes two F. One and mass effect legendary edition all important contributors.
On console digital represented 65% of full game unit sold through up three percentage points from last year.
In mobile we passed the $1 billion milestone this year with nearly $1 2 billion in net bookings as a result of great work by our teams are return on advertising spend is now roughly back to where it was before the IBSA changes and now we're looking to maintain that ROE asked level as we scale spend back to the level it was before.
And as we continue to learn and to adapt to market changes.
Across our full portfolio 12 titles contributed $100 million or more to net bookings in FY 'twenty two.
Now, let me turn to FY 'twenty three.
Andrew laid out we're entering the year from a position of strength, we are experiencing strong engagement across our live services have great early indicators for our mobile launches. The continued momentum in our annual sports titles and having strong slate of console titles scheduled for the second half.
We expect fiscal 'twenty, three net bookings to be $7 9 billion to $8 1 billion.
Up five 8% versus FY 'twenty, two driven by growth in live services, particularly in mobile and supported by the strong launch late in the second half.
Three key drivers of our mobile growth in FY 'twenty three are the launch of apex legends mobile growth in FIFA mobile and the launch of Lord of the rings heroes of Middle Earth later in the year.
FX is a headwind of nearly three points net of hedges relative to last year for both net bookings and underlying profit, which puts our net bookings guidance in constant currency at 8% to 10%.
Additionally, the impact of the stoppage of Russia sales is one percentage point to net bookings and two points to underlying profit.
Adjusted for these factors, we continue to see healthy underlying performance, which illustrates the durability of our portfolio of live services.
We expect cost of revenue to be 2.0 to 2.065 billion.
In part, reflecting the anticipated strong growth of our mobile business.
We expect operating expenses to be four two to $4 $315 billion. This is driven by investment in user acquisition for our two major mobile launches and adding talent to our development teams to deliver our live services and title planes. We have in development for FY 'twenty for FY 'twenty five and beyond.
Also note that we've increased the management tax rate used by our long term model from 18% to 19% primarily due to U S tax rule published in January .
We expect operating cash flow of one six to $1 $65 billion.
Capital expenditures of around $200 million, which would deliver free cash flow of about one $4 billion to $145 billion.
Business continues to be a strong generator of cash although the year on year number is down slightly primarily due to timing as our biggest non sports launches coming in Q4 with collections in FY 'twenty four and also because our tax rate has increased.
We continue to be committed to growing our cash return program and announced today that we're increasing our dividend by 12% from 17.
The <unk> 19 per share payable each quarter.
We expect to continue to repurchase stock under our current authorization and we will revisit it closer to the exploration in November of 2022.
We expect fiscal 'twenty, three GAAP revenue to be seven 6% to seven $8 billion and earnings per share of $2 79.
To $2.87.
We anticipate net bookings for the first quarter to be one two to $1 $25 billion.
As a reminder, in the prior year, we had a number of new game launches in Q1, whereas this Q1 is primarily live services with only F 122, launching on console and PC later this quarter.
In contrast, this coming Q2 has a profile very similar to last year's Q2 with launches of Madden and FIFA plus some live services growth offset by some ultimate team net bookings phasing into Q3.
For the first quarter, we expect GAAP net revenue of $1 675 to $1 75 billion.
Cost of revenue to be $309 million to $321 million in operating.
<unk> expenses of approximately 1.013 billion.
This results in earnings per share up <unk> 76 to 85 for the quarter.
To conclude EAA delivered another record year, well ahead of our original guidance driven by strong player engagement across our diverse portfolio of titles looking forward. We are capitalizing on the strength to invest in our future. We expect to outgrow the market to show resilience through uncertain times.
Building on the foundation of live services, and our broad portfolio to deliver growth over the long term.
Now I'll hand, the phone back to Andrew.
Thanks, Chris as we kick off FY 'twenty three we're investing for growth from a position of strength with a portfolio of amazing IP, the best talent and a growing network of highly engaged players we are scaling to deliver new experiences on more platforms across more geographies.
Our total addressable market is expanding and secular trends driving more consumption of interactive entertainment.
Our games are deeply social and we will continue to build on our strengths as we invest to grow our biggest franchises to connect with more players in the future. We have a clear vision a clear strategy and we have a spectacular team ready to deliver in FY 'twenty three for hundreds of millions of players viewers and creators around the <unk>.
Now, Chris and I are here for.
Questions.
And ladies and gentlemen, if you'd had the question at this time. Please press star one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue Bradford County, again star one to ask a question.
Your first question comes from the line of Omar <unk>.
Keith.
Erica Please go ahead.
Hi, Thank you for taking my question.
It kind of looks like excluding the FX.
You guys increased your guidance versus the mid to high single digits.
Excluding the FX in Russia that is.
Versus the high mid single digits that you had communicated.
The third quarter call.
First of all is that the case and second has it become more clear since the third quarter call.
Is that the churn among gamers, who joined during Covid Lockdowns has run its course and that average revenue per paying user who will remain near the highs seen during the pandemic as 2022 unfolds.
Great. Thank you for the question I'll start with the first part first and then I'll turn it over to Andrew and he can comment as well on the second part of your question. So.
From a guidance perspective, we did your math is correct normalizing for the impact of the strengthening U S dollar, which we articulated was three points on on net bookings as well as the impact of the decision taken in Russia that effectively puts the equivalent guide more in the high <unk>.
Single digits.
Equivalents, which is slightly above the.
Signal that we gave in the last earnings call. So it is indicative of how we finished the quarter with strong player engagement and and we feel good about the outlook.
And as it relates to player engagement.
The value that we see from that over the course of time I think what you've heard from us throughout Covid is that players sold out games in the beginning for entertainment reasons, but they stay deeply engaged to them beyond just entertainment. They really saw games as a means of deep social connection with their atomic unit of friends.
This is at four or five friends that you spend a great deal of your social time with what we have seen even as we are moving past COVID-19.
And then people are returning to work in returning to life and returning to school is our engagement has continued to be very very strong and in many cases across all of our franchises at record levels.
Given the level of entertainment that we are developing and delivering given the value of social interaction as part of those experiences.
This is going to be.
Continued driver for growth for us.
Thank you. Thank you very much.
Thank you. Your next question comes from the line of David Karnofsky JP Morgan. Please go ahead.
Alright, thank you.
Just on the <unk>.
FIFA license I was wondering if you could just discuss a little bit for the decision to forgo that.
And how are you kind of thinking about potential risk given the brand shipped but then also the upside.
In terms of how ending the license kind of frees you up for revenue opportunities than in the past would have been restricted.
Yes, great question and as you will have seen.
From our press release today, and and sort of adding fee for influencing things of their own website. We've been working through this we're very excited about the future of football.
Yes.
As you heard in the prepared remarks.
Over 300 licenses that deliver the content in the end.
For the experience that we deliver it applies its most meaningful for them. We've got over 150 million players across unique accounts and so when we think about the future of football right. Now we've really made this decision on the basis of being able to deliver experiences that our players wanted.
They told us they wanted more modalities of play they told US they wanted to see more commercial partners in the game that a representative and authentic to the broad global world of football they are telling us they want us to move beyond just the core experience and really build out these digital football experience and they told US they wanted to move really fast and so as we move through.
This again, we are deeply grateful about relationship with FIFA for nearly 30 years and deeply respectful of the partnership and we've worked closely together two organizations to ensure that we can deliver the biggest FIFA. This year that we've ever delivered featuring World Cup content for both the men's World Cup and the women's World Cup for the first.
Time ever.
And we worked to do that because we believe that's important to our fans and beyond that we're excited to work without 300, plus partners and all the new partners that were going to have the opportunity to work with to deliver what we believe will be great.
The greatest digital football experience available I would say that the very epicentre of football fandom globally.
Okay, maybe just a follow up I know you touched on it a little bit, but how do you think specifically about marketing the esports FC brand and would there be initial bump in advertising costs or could you just mostly take advantage of that lack of the license fee. Thank you.
Yeah, I think it's a little early to tell yet, we're certainly being very thoughtful and deliberate about that the important thing to understand though is that as you travel around the world and you meet with players who really get deeply engage without game.
For a player in the U K. The most important thing to them is the Premier League's player in Germany. The most important thing to them is the Bundesliga in spine as La Liga right and so on and so forth as you go around the world.
We're focused on right now is building very unique experiences for each of those fans in each of those markets and what you've seen today is mainly about partners come out in support of our ability to do this for our fans and so certainly anytime you change the name of a product you must be very thoughtful and we will certainly have to.
Yeah I.
Think about marketing upfront, but what gives us.
Confidence as we move into this next phase of growth is that we are working with the partners and the content that our fans love and relate to most directly in the markets in which they do it.
Great. Thanks.
Thank you.
Your next question comes from the line of Benjamin.
Deutsche Bank. Please go ahead.
Hey, Thanks for the question guys.
Wanted to dig into the mobile business a bit you've got apex them mobile coming out.
FIFA mobile rebound seems to be doing really well you announced the new Lord of the rings game and doing some other stuff on the sports side. So really the question is how are you guys thinking about the mobile growth opportunity in general and how has your outlook changed if at all since.
Giving that longer term growth.
Target for the business last year.
Yeah, Great question I mean, we remain very.
Excited about the opportunity in mobile it continues to be the single biggest gaming platform in the world with it with a Tam of $3 5 billion players and so that just to have that kind of Tam access is just extraordinary for us as game makers.
Delivering live services to that audience.
Really good metrics around apex legends right now in tests that will launch later this year FIFA had its biggest quarter everything had a surge of of 80% in users and.
Lord of the rings is coming from what has been our strongest mobile studio capital games, who who.
Who build these type of games that have done so well for us and have such an avid fan following.
So as we think about moving forward in mobile we think that the brands that we have the expertise that we have.
That we built organically internally and that we've acquired through recent mobile acquisitions represents a really strong opportunity for us over the long term remember when you launch these games. They last for five plus years as live services and what you're seeing this year is three big launches for us in.
<unk> to our existing portfolio, which is incredibly strong.
<unk>.
Going to invest behind that for the long term.
Got it and then maybe just a quick follow up on the F. One I.
I believe this upcoming titles the first game in the series that you guys really were able to put your fingerprints on since the acquisition. So can you talk a little bit more about your plans for the franchise the types of innovation, you're bringing to the game.
Yes.
Yes.
That team has an extraordinary team and is always built an incredibly high quality game that was really the impetus for the acquisition to bring that into the EA sports brand portfolio.
One as you might have seen if you follow the sport.
He is an all time high and fandom, we had an extraordinary season last year between Hamilton and <unk>.
Being an incredible season, this year with Ferrari leading.
In the Constructors championship in which we're in all of those really pushing for staff and so in our world. If you get to a place where sports fandom is high and engagement Nicole sport is high.
That was an extraordinary development team, who have a history and track record of building extremely high quality products and then you layer in EAA EA sports is marketing power and global reach we think there's incredible opportunity there and we think that business is going to go from strength to strength.
Thank you. Your next question comes from the line of every gambler with MTN partners. Please go ahead.
Good evening and thanks for the question.
I'm curious.
About the marketing investment that you're going to be spending on apex legends for mobile and then you've got Lord of the rings and we're still relatively early stages with FIFA mobile.
Should we be thinking about the investment sort of negating a lot of the revenue that comes in from these titles and really you look to grow the player base in fiscal 'twenty three and then you think about margin expansion in fiscal 'twenty four.
I think that's it that's a good way to think about it.
The reality is.
Any time, we develop a game and launch again, there was a combination of development cost and marketing cost to kind of get to launch and get to that critical massive players.
Sequencing of that it's very different in mobile, but it is in traditional console experiences.
So all experienced because you couldnt you can spend in development for 234 and in some cases five years and there is an exceptional amount of.
Development spend upfront and then the marketing spend proportion of that is much lower than.
In mobile the cost of development is lower to get to launch.
The acquisition spend early on to Supercharge, our new launch is higher but remember these are live services and what we're doing with we're driving a golden cohort at the beginning of the launch and that cohort will continue to deliver a return that we build on over time for the course of the next five plus years and so.
Early on you see margin compression.
In the context of mobile over the course of time, you see margin accretion and margin expansion and these live services become global community of players that continue to play.
Five plus years in some cases as long as a decade.
Maybe I could just add on to that Eric.
Do you have a chance to go through your model and the guidance that we gave you will you will see that.
As implied in that in the guidance and the cost structure. It is the points that to reiterate the point that Andrew made were.
Excited about our opportunity in mobile it represents an enormous tam.
Cam opportunity we're.
We're excited about what we have in store for this year. It is a different margin profile, especially in the short term, but as Andrew pointed out once we get to scale, we see great profit revenue and profit opportunity and.
We're really excited about the opportunity ahead.
Great and then just as a follow up I believe you said.
Six new sports titles. This year wondering if you could give a little color on that or these mobile titles are these new PC console games, what can you tell us there.
So it's the cast of characters that you would expect from Us plus F. One.
So that's that's how FIFA product, that's NHL Madden NFL that's F. One.
A new golf game.
Trying to think now you've caught me off guard.
Yes.
And Superman Goodbye useful which was acquired property. So yes, so and that's across console PC and in some cases mobile.
Great. Thank you very much.
Thank you Harry next question comes from blinded to Crum with Stifel. Please go ahead.
Okay. Thanks, Hey, guys good afternoon.
When the drill down a little bit more on apex legends youre lapping a 40% plus comp, but also launching on mobile.
What are your expectations for franchise net bookings in fiscal 'twenty three.
Will you make any changes to the cadence of life services or content drops across the franchise now that youll be on mobile.
Yes, it's a great question. Thank you for the question as you rightly pointed out apex legends had a terrific year in FY 'twenty two.
We're across both financial metrics, but also all the player engagement.
Data that Andrew spoke to and so we're really excited about how we finished the year coming out of that with a lot of momentum. We do have profitable growth planned again in FY 'twenty three it's a large franchise for us it's a big business.
So we will see continued growth on that on the console and on the HVAC side.
In addition to that.
With the apex mobile launch we are anticipating this to be one of the most exciting launches that we've had on mobile ever and so the combination of that.
Indicates a lot of optimism and strength for the apex mobile or apex legends.
This all up.
And in terms of the cadence of content drops and experience updates and events.
Again, the respawn team and the apex team have demonstrated over the course of the last two plus years, an extraordinary connection with the community.
They have been I would figure out exactly when and how to make drops and things that the community wants and needs and so we don't have a hard and fast rule.
Zoe, which drops will happen when we really.
Allow the team to work with that with the community, but I think as you as the.
The franchise continues to grow and as we move on mobile and launch and grow on a global basis I think it's reasonably that over the course of time there'll be more and more content launched into the world and a new season, starting today, which off the back of a record season 12, we expect we'll continue to do well I know Newcastle is the new legend.
Is widely regarded as going to be one of one of the great legends inside the game experience.
Thanks, Kevin.
Thank you.
Thank you. Your next question comes from the line of Colin Sebastian with Baird. Please go ahead.
Oh, Thanks, everyone. Good afternoon welcome Chris.
Maybe just a quick follow up to the last question first off I guess, there may be some changes to the release of legend is going forward on apex.
Curious, how you think that might impact engagement or each each each of the contributions from from stories going forward and then.
And then the question. The other question is despite these results I Wonder Andrew what you think the impact has been on growth from the persistent short supplies of consoles and GPU chips et cetera.
And what's also factored in the outlook from that perspective.
Yeah. So let me let me let me touch on the first two and then I'll, let Chris take the outlook pace.
Again, I think that each time the team releases new content new events.
We see growing engagement and have demonstrated an extraordinary ability to really understand the things that are going to drive ongoing engagement for our community. So I wouldn't expect that we would see any decline in engagement with more content quite the opposite I think as we go to more platforms and.
And we build out our engagement model over the course of time I think we will see a growing audience and I think we will see growing engagement.
That has been our experience so far.
In terms of supply chain shortages again, we've just come off a record year.
We beat on.
Most every measure even in the face of what is almost certainly supply chain shortages around.
Consoles, and chipsets and graphics cards and these types of things, it's hard to know how much bigger.
That would be I have to imagine with more consoles out there and more Pcs and more graphics cards that our results may have been even better but we're very happy with the results. We had and we look forward to as supply chain issues start to ease and more consoles and up in the marketplace and more graphic Scott Maw PC availability.
More games.
Access to higher quality machines.
And that ultimately will drive engaged for us if you go back through the course of time with each platform transition at each technology evolution.
The gaming Tam in the gaming community broadly has grown and so I think this only represents upside for us.
I'll just add on to Andrew.
Andrew Good summation.
From a.
Market standpoint from the composition of our business I think this is one of the things that really sort of illustrates the.
Brazil answer the the life services business model, which was 71% of our business are over 71% of our business in FY 'twenty two.
And it will grow as a share of our business next year with especially with the launches of mobile and so from one standpoint.
We feel good about that and that's all that's all embedded into the guide that you heard us talk about at length specific to the console market. We are anticipating gen five console units to be up.
Year on year and that will also be an added tailwind to the business all at all.
Okay.
Thank you. Your next question comes from the line with Andrew Berg fleets. They kept please please go ahead.
Yes.
Pardon me. Your next question comes from the line of Andrew <unk> with Jefferies. Your line is now open.
Charlie I think he dropped off the line.
We can move to the next one.
No problem. Sir Your next question comes from the line of Matthew Thornton led to the Securities. Please go ahead.
Hey, good afternoon, Andrew and Chris.
A couple a couple of interrelated ones, if I could I'm going to ask a question that was asked earlier, but a little bit of a different way.
Since you guys talked about mid to high single digit bookings growth last quarter as you've alluded to there's a lot of incremental headwinds.
So my first question is is there anything that's changed in the slate as you think about fiscal 'twenty three versus kind of what you were thinking.
Three months ago that that's question one question number two.
He talks about our major IP in the fourth quarter I'm just curious if there's if there's a reason why that would fit better in fiscal <unk> as opposed to the traditional holiday quarter in <unk>, where you typically might put up a big piece of IP any any thoughts there.
And then just finally on maybe Andrew you could talk a little about just the work from home transition to back to office, how that's playing into productivity and how that maybe gives you confidence there.
You can kind of released these titles because you do have quite a few in the back half of the year, including at <unk>. So I'm just curious your level of comfort with that based on what youre seeing in the productivity trends. Thanks guys.
Okay.
There was a lot in the three part three pounds I think the first one is was do we anticipate slight change as an additional element as we kind of have got from third quarter through fourth quarter and the short answer that is no.
We continue to believe our slate is strong.
I think the second question was we've got a major IP in the fourth quarter.
Why not do that in the holiday quarter, and I would say two things to that one is we want to get to the Hajj quality games, we possibly can.
Committed to quality and are committed to giving out development teams.
All the time, they need to build great games and deliver those to a global audience underlying that I'd also highlight though that the nice rehab business is changing.
Chris pointed at 71% of our business is coming from live services and so these traditional launch windows that have been so important in our industry for the longest time.
Honest relevant now in a world where players are playing our games day in day out week in week out month in month out and so the combination of the changing nature of engagement and consumption about games and our deep desire to give our teams all the time they need to get the best possible gaming experience really is what's driving that.
That Q4 launch and then I think the last part of your question was around work from home and how is that looking and I would say.
It's still early we're seeing more and more people back into offices.
Again, there were there was still waves of Covid out there and we're seeing some rising numbers in certain geographies.
Good news is is the severity of infection or the severity of symptoms from infection seems to be much lower than the initial waves and face of Covid. So I think that's good just for humanity broadly.
And certainly we're seeing a return to office kind of moving through its general.
General iteration.
In terms of confidence that I have in launching the games through the year I have strong covenants largely because having done this for two years, we launched more content than any other developer and publisher of video games through this time.
And our teams have demonstrated unbelievable tenacity and unbelievable wherewithal and we've really harnessed the power of our platform technology to continue to deliver games, even while working from home. So as people come back together, we get to see more collaboration I think things get easier.
Even if that ends up being a little slower than we would hope.
Given the ingenuity of our teams I still have strong confidence in our ability to launch a full slate of high quality titles. This year.
I think that was all of them.
I think we got them.
Okay. Hearing next question comes from the line as Mike Hickey with benchmark. Thank you.
Please go ahead.
And you guys and your interest in core.
Great results guys. Thank for taking my question first question.
I guess just on the.
The economy here.
It's been a while.
Andrew.
It's sort of been captured.
With a recession, so whether or not we go on with Sachin who knows how do you think about doing.
A player.
Now that you've pretty much.
Premiums and fees.
Could you imagine sort of mix shift there.
Last year, our pull back discretionary.
Towards free to play just sort of I guess.
Paul.
And how you factor that into your guidance that Paul Thanks, Pat.
Yes.
It was a it was a little jumbo, Mike I'm, sorry, but I think that the gist of the question was with the macroeconomic climate out there and I think you mentioned the notion of recession, how do we think about that how do we think about building our plan and probably specifically youll youre thinking around opex.
I think.
Chris can weigh in here as well we've been very thoughtful about this as we're embarking on the year ahead, and certainly there are people wise smarter than us.
Who are kind of predicting what will be the macroeconomic outcome over the course of time, here's what we see we see we're coming out of a year with record performance.
We're seeing.
Our network grow dramatically and engagement grow dramatically and we're seeing how games used not just for entertainment, but also for social interaction and social connection.
So that gives us confidence in the underlying fundamentals of our business over the long term.
As we look back over previous times, where they may have been challenged consumer spending.
Our industry now games, specifically have actually done very very well for two reasons one at a time it really is a fundamental human need.
To the form of entertainment, we deliver is extremely high value to consumers given that.
You get thousands of hours of engagement when you play one about games and so our expectation is that even in an environment of macro challenge that our industry now games will continue to do well.
One of the other things that we have we've gone back and really looked at this though and you study. It as you discover that companies that can invest from a position of strength going into an environment like the one seemingly we're moving into actually benefit disproportionately as you come out of that and so I think if you've taken the fact that we have.
Our growing network growing engagement record performance our games fulfill both entertainment and social interaction that if you look back in history.
Our industry has performed very well at times like this and when you take the strength of our business and our ability to invest against new titles. This year as well as Todd as we developed for the out years, we feel like we've put ourselves in a really strong position, even if we were going into a challenging macro headwinds.
That being said, we have built flexibility into the plan you should know that we will be extraordinarily disciplined around cost as we move through this.
And that should there be something unforeseen to us that we have leave us in a model that will allow us to adjust but.
But we do believe it is it.
It is behest of us to invest from a position of strength as we go into this market.
Thank you Mike.
And I think Andrew.
That was good.
[laughter] called their okay sounds good second question.
Microsoft hopefully can Jeremy Microsoft and Sony.
We felt that was the room are flirting with the idea of adding advertisements.
In Q free to play game experiences, maybe as a way to sort of help developers.
Monetize.
Theyre player community and of course, you guys. You go way back there now Paradise, just sort of intimate tour.
Trying the idea.
On the Billboard in that game. So obviously this idea has created a lot of.
Debate within the player.
Just curious.
On whether or not AD monetization and free to play games and something that you think can be meaningful and then how you sort of balance that with.
The player experience thanks, guys.
And so for US I think you've finished there where we start which is the player experience we want to ensure the player experience is the best possible player experience that we can provide.
And that's why you've seen us kind of test various models over the course of time. Some have continued and some we have stopped on the basis of really upholding the best possible player experience we can.
What we've seen generally though.
Entertainment media and even in gains, particularly in mobile games right now.
You see that there is a place of advertising when done right and there was a portion of the community.
When given the choice.
Dissipate in advertising, where it benefits their gameplay experience and I think we've learned some of this from Glu as we brought glued to organization and we've and we've seen this across the industry and so you should expect that we would continue to kind of test different things, ensuring first and foremost that we uphold.
All the best possible player experience, but where there is an audience, but given the choice would like to engage with advertising and they have the ability to do so we want to make that available to them.
Thank you. Thank you.
Thank you for your next question comes from the line of Mario Lu with Barclays. Please go ahead.
Great. Thanks for taking the question. The first one is on that.
So this year.
I believe you guys are already testing cross play support.
Okay.
As in the E comm in 'twenty three.
What is the impact.
But potentially so that player engagement.
And then similarly.
Can you remind us what the magnitude of uplift was from <unk>.
Including our World Cup mode within Pizza.
Let me start on the World Cup mode.
Fee for it again.
The context of live service, we're always balancing the investment of time any investment of dollars from the community and at any given point in time based on what's going on in the world of that game and in this case in the world of football gameplay community, we will look to leverage new content and new events and you experience.
Is either to drive greater engagement and provide new interesting things to place to do or it might be a monetization opportunity you might recall the last time, we did the World Cup it.
It was an extraordinary engagement opportunity and I don't have the numbers at the tip of my fingers, but if I remember rightly, we brought 12 or 13 million people back into the game, who had lapsed out of the game through World Cup content.
And drove incredible engagement through the event and then of course as part of the ongoing live service continue to grow the business over the course of time.
We will think about it this year in the same context, we're always thinking about our player community and always thinking about the balance between the investment of time and the investment of dollars all in service of a more positive and more immersive animal entertaining player experience.
In terms of the value of cross play.
We think we have any specific data on that yet out of FIFA.
And in other franchises are certainly where you get greater liquidity in the franchise and friends can play with each other across devices. That's always a good thing for players, but remember in our FIFA experience, which has.
30, plus million people playing across console and PC, it's already a highly liquid community and every platform already has more than a place to sustain the ongoing player experience, but certainly as we think about the future of all of our franchises, we want to get to a place where the entire community.
<unk> can play together and that will be part of our drive as we move forward.
Great. Thanks, and then just one on a battlefield I was just curious if there's any update.
On that franchise I know you guys previously mentioned.
We're willing to kind of that's more into the franchise and the long term, but has that mindset changed in the past few weeks given the lack of resurgence of the latest update thank you.
No and again, we take the long view here. This is one of the great franchises in our industry built by one of the great teams in our industry.
Our expectation is that we'll continue to grow and be a really important part of our portfolio for many many used to come we've got.
Incredible leadership over that team now they're rethinking the development process from the ground up and really using kind of Vincent Hello, Slash respond more will get to the fun as quickly as possible.
Thousands.
Updates full the community working on quality of life and really getting the KOL game right. I think there is still more work for us to do there and the team is committed to doing that work for the community and beyond that once we get to a place where we feel like we're in the right place with the core experience and with the KOL game.
Then you should expect us to invest and grow beyond.
And the way the game is that today.
Great. Thank you.
Thank you. Your next question comes from the line of Doug quite sleep Cowen. Please go ahead.
Hey, thanks.
I think in the last call you'd indicated that the battlefield mobile game was close to going into closed beta.
And at least at one point you would you would seem to indicate it might be a fiscal 'twenty. Three launch can you just kind of update on where that is how the closed beta go.
And how youre feeling about timing for the title at this point.
Yeah right now I think we were looking at going into sort of testing at the end of May and then subject.
The metrics and the data that we've seen engagement C.
We might look towards the end of this year beginning of next year for a global launch will remember in mobile at all at all when it comes down to the tuning in balancing once we go into kind of that closed beta phase.
We don't have any money in FY 'twenty three right now against that title.
So that was the launch of the year that would be an upside potential for us and we wanted to give ourselves the opportunity to ensure that the game has all the soft launch in close beta that it needs in order to tune imbalanced, but having played the game I can tell you I think we're excited.
For the potential.
Great. Thank you.
Yeah.
Thank you. Your next question comes from blinded, Jamie bass with Darensbourg. Please go ahead.
Hello, guys. Thanks for taking my questions I've, just got a couple if that's okay.
Lastly, you were talking about the sort of positive.
We have metrics that are all coming back to the levels.
Hi.
Firstly could you give us sort of an indication of what your expectations are.
The key core franchises.
Bringing in apex mobile and desktop you already had.
Within the mobile crime choice.
And then second question is on.
<unk>.
The more boring topic on developed cost inflation and wage inflation do you have sort of an outlook for what you're expecting this year in terms of new hires whether youll.
<unk> percentage in terms of how much extra do you need to pay to bring in new development. Thank you.
Maybe I'll start with the second one and then we'll move back to the first one.
Certainly I think that competition for great talent has always been incredibly high.
Industry.
And that's no different now when we think about hiring new talent and we talk to candidates they really Mike employment decisions based on four key vectors.
What is the what are they going to do.
Who are the people that are going to do it with of course, what is going to be the compensation and the opportunity to learn and grow and as we lean into hiring we really lean into all four of those vectors and try and create a culture, where this is a great place to make games.
Hi, Rick record numbers in FY 'twenty to even amidst what was already a very competitive marketplace. We expect to continue hiring.
I think that.
We've been recognized by a number of surveys as an extraordinary place to work and we've really focused.
Focused on the culture of our company.
And ensuring that we are a great place to come and create games.
That doesn't mean, we won't be challenged.
In the marketplace I think there's going to be more and more challenge, but so far we have not had trouble hiring incredible talent and we brought in some amazing new creators and people across our business quite frankly through FY 'twenty two.
Okay.
And on your question specifically as I commented in my comments I'm not prepared remarks about the idea if it changes it is something we're still working through we have seen some positive.
Movement toward reaching a robust levels.
Pre IBSA and we feel optimistic that we're sort of through the tougher part of it and we feel good about the outlook from here.
And that brings us to the end.
Yes.
Okay go ahead I'm sorry.
I'll catch up with you after as Gerry So that was just because that that brings us to the end of the call. Today. So thanks, everyone for your time and we'll look forward to speaking to you in the next call. So thank you. So much. Thank you all.
And this concludes today's conference call. Thank you all for participating you may now disconnect.
Okay.
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Yes.
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Yeah.
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