Q2 2023 Electronic Arts Inc Earnings Call
Please wait the conference will begin shortly.
[music].
Good afternoon, My name is Julianne and I'll be your conference operator today.
At this time I'd like to welcome everyone to the electronic Arts second quarter fiscal year 2023 earnings conference call Mr.
Mr. Chris evident.
This president of Investor Relations you May begin your conference.
Thank you welcome to Ea's second quarter fiscal 2023 earnings call with me today are Andrew Wilson, our CEO , Chris <unk>, our CFO and Laura Matti.
Please note that our SEC filings and earnings release are available at IR EA.
Dot Com. In addition, we have posted detailed earnings slides to accompany our prepared remarks.
Lastly, after the call we will post our prepared remarks, an audio replay of this call our financial model and a transcript.
With regards to our calendar Q3 fiscal 2023 earnings call is scheduled for Tuesday January 31st.
As a reminder, we post a 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 of 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 November five 2022, 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, unless otherwise stated and now I'll turn the call over to Andrew.
Thanks, Chris it's great to be here with you all we delivered solid performance across our business in Q2, driven by our EA sports portfolio and a multi platform live services business.
Our broad IP exceptional talent and growing client network of more than $600 million are the foundation of strength and stability and an uneven macro environment.
During Q2, we launched Premier sports games and provided over 120 content updates on 35 titles across our global catalog.
Our teams are deeply committed to delivering amazing games and entertainment that inspire fans to play create watch and forged enduring social connections.
Our broad IP portfolio is unrivaled in the gaming industry foundational to our leadership is EA sports with breadth and depth of partnerships that allow us to continue delivering deeply immersive experiences to fuel long term growth.
Our global football business demonstrates the power of our multi platform ecosystem with a massive community engaging through multiple experiences in Q2, we delivered our biggest EA sports FIFA console and PC launch in history. In addition in FIFA Mobile Daily weekly and monthly active players were up more than 100% year.
For year, and a free to play FIFA online service in Asia delivered record performance.
Now the entire global football community across our ecosystem will benefit from the unique holiday timing of the World Cup next week, we will launch New World Cup content into FIFA, 23, FIFA mobile and FIFA online designed to attract engage and entertain players throughout the tournament and beyond.
For nearly 30 years, we've delivered the biggest and highest quality football games to fans all over the world are cross sell ecosystem. We've built the world's largest football community without players 19000 athletes 700 teams 30 leagues and federations and more than 300 partners.
As we now move into the future with EA sports UFC, we have even greater opportunity to engage the global audience of three and a half billion football fans.
<unk> will continue to experience everything they love about our games today, the modes leagues competitions clubs athlete brands and more will push the technical boundaries for even greater innovation immersion and authenticity.
And through more platforms and new modalities, we will reach new football fans all around the world, bringing them into our global community.
This is what EA sports UFC is all about.
And as unique year with our biggest ever console and PC title Ah.
Deeply engaging worldwide mobile experience our online PC services in Asia, and now with men's and women's World Cup content coming we are in an incredible position to unlock a truly extraordinary future with EA sports UFC.
As the consumption of entertainment and sport converge and grow EA sports office fans immersive experiences like Nevada and ability to apply create watch and connect with friends and the sports They love 365 days a year.
Now more than ever Madden NFL is deeply ingrained into the fabric of NFL fandom, reaching broader entertainment audiences.
With the support of F. One continuing its growth trajectory, especially in the U S. We are well positioned to expand the total addressable market for our F. One franchise, we have more than 200 million players engaged in our EA sports games as we look to the future of FC Madden NFL F. One NHL UFC PGE.
Sure and more we will continue growing these ecosystems to reach new fans expanded new experiences and create more social connectivity to fuel the enjoyment of sport.
Our owned IP franchises continue to be among the most deeply engaging and culturally relevant entertainment properties in the world apex legends is driving massive growth in emerging markets and the team continues to build its content universe characters and storylines across multiple platforms and experiences.
As we expand our console PC and mobile experiences apex has captured the imagination about global community beyond play not only are they playing watching and competing that captivated by the law the worlds and storylines.
And outside the game.
We are just getting started I believe apex will be one of the most important ips in the world.
Engagement in our Sims franchise continues to grow with millions of players unleashing their imaginations full of creativity, Schumer and individuality, both in game and across the entire ecosystem.
We expect engagement to grow with assumes full base game recently, becoming free to winter.
Looking ahead, our team is working on a new creative platform for our Sims community, giving them more collaborative ways to play create connect and share stories with their friends.
In Q2, we also announced an exciting long term multi game collaboration with Marvel joining forces with our culture defining powerhouse to expand our entertainment offerings.
Our EA Sports League partners to Disney Star Wars, and Marvel Universe is and more we're partnering to grow our global communities build value together and co create the future of entertainment.
I'll play a network of more than 600 million worldwide continues to grow.
Unique value of this network is our ability to create new communities and meaningful connections that matter in fact more than three quarters of EA players engage with gaming content beyond the game itself reading watching and creating content and engaging in social conversations through shared fandom.
With EA sports UFC apex, the Sims skate and more all poised to fuel fun and social connection our growing network will continue adding long term value.
As we look ahead, our talented teams are focused on building extraordinary experiences that drive deep engagement to grow communities and reach new audiences, particularly Gen Z and Gen Alpha to attorney to games as their preferred choice for entertainment and social connection.
Games continue to be one of the fastest growing forms of entertainment and the social networks of the future.
We're in the privileged position of creating what people love doing more than anything else with their friends and family through our broad IP, our creative talent and a growing network of players we are well positioned to lead the future of entertainment and deliver long term value now ill turn the call over to Chris.
Thanks, and Hello to everyone.
Andrew said, we had another solid quarter, driven by our EA sports portfolio, and our multiplatform life services business and importantly engagement from our players around the globe across both platforms and our broad portfolio of games continued to be strong fueling a resilient live services business and enabling us to deliver on our commitments.
Even as we navigate through an uneven environment.
Net bookings for the second quarter were $1 $75 billion and in line with our expectations down 5% or 2% in constant currency due to the timing of the F. One launch with the strength in console and PC offsetting mobile.
Our live services net bookings were also in line with our expectations down 3% year on year or flat in constant currency due to the timing of the FIFA launch offset by strength elsewhere in the business.
On a trailing 12 month basis life services were 73% of our business and with regard to full game sales digital sales accounted for 66% of units sold through up five percentage points from last year.
Our EA sports portfolio was the highlight and driver of Q2 net bookings we saw strength across the entire FIFA franchise in the quarter further demonstrating the power of our multi platform ecosystem.
Our net bookings grew 6% in constant currency and we saw engagement increased significantly across all platforms as Andrew mentioned, we delivered a record launch on FIFA 23 in.
In the first four weeks FIFA 23 sell through unit sales were up 10% versus the comparable period for FIFA 22, and foot players are up 6%.
With the launch of Madden 23, Madden Ultimate team players and net bookings are both up double digits year on year.
We delivered Q2 net revenue of $1 9 billion in line with our expectations and with a higher mix of console and PC based revenue gross margins and underlying profit were well above our expectations.
Operating expenses were up 2% on last year in line with our expectations as we continue to take a disciplined approach to investing in our development teams and new product launches.
Operating cash flow for the quarter was negative $112 million, and we returned $378 million to shareholders through dividends and our ongoing share repurchase program on.
On a trailing 12 month basis operating cash flow is up 26% year on year.
Now turning to guidance, we are providing an updated guidance range today, primarily due to the persistent FX rate environment just over half of our sales are generated outside of the U S and the U S dollar strengthened between 7% and 15% versus our largest foreign currencies when compared to rates at the time of our initial FY 'twenty three guidance.
As a result, we now expect an FX impact of approximately $200 million versus our initial full year net bookings guide as the impact will grow in our second half and into FY 'twenty four at current exchange rates.
Beyond FX, our business fundamentals remain healthy with strong player engagement trends across our platforms and franchises, we expect strength from our console and PC game franchises to offset most of the impact of the current mobile market softness.
In particular, we expect to see the momentum of the FIFA 23 launch carry into the second half aided by excitement surrounding the World Cup.
With these factors considered we are revising our full year net bookings guidance to 765 to 785 billion.
Up 2% to 4% year on year or 6% to 9% in constant currency.
We expect fiscal 'twenty III GAAP revenue to be 755 to $7 75 billion.
And expect cost of revenue to be one 845 to $1 $89 billion below our prior range, reflecting the gross margin benefit from the revenue mix shift due to the relative strength of our console and PC franchises.
We continue to be disciplined in our spend also carefully prioritizing investments to fuel our long term growth and we expect operating expenses to be four to four five to 4.2 95 billion.
Accordingly, our updated GAAP earnings per share guidance is now higher at $3 11 to $3 34.
Importantly, our expectations for underlying profitability for the year remain unchanged, even after accounting for the FX headwinds.
We are also reaffirming our guidance for operating cash flow at one six to $1 $65 billion with capital expenditures of about 200 million that results in free cash flow of about one four to $1 $45 billion. Please.
Please see our earnings slides and press release for further cash flow information.
Turning to the quarter, we expect Q3 23 net bookings to be $2 45 to $2 $5 5 billion driven.
Driven by our annualized franchises plus the launch of need for speed Unbound on December 2nd.
For the third quarter, we expect GAAP net revenue to be $1 85 to $1 $95 billion.
Cost of revenue to be $560 to $580 million and operating expenses of approximately $1.08 billion to $1.09 billion.
This results in earnings per share of <unk> 43 to <unk> 59 for the third quarter.
To summarize our solid second quarter results again demonstrate the power of the model.
Carrying momentum into the second half FIFA is often running with the World Cup set to accelerate engagement need for speed unbound is ready for launch and a strong slate is queued up for Q4, we've extended the apex franchise to mobile, enabling us to reach more people and more geographies than ever before and expect it to continue to grow over time.
And with the Sims four now for you to enter we look forward to welcoming more players than ever into this beloved franchise.
With our strong pipeline healthy engagement trends durable at highly reoccurring live services model and our continued focus on discipline and execution, we are well positioned for the future now.
Now I'll hand, it back over to Andrew.
Thanks, Chris in Q2, <unk> delivered strong engagement and deeply immersive experiences across our portfolio with new EA sports titles and multiplatform live services powering the business.
We have a deep slate of new titles set for the second half of the year.
Entertainment is a fundamental human need and in this dynamic environment, we are focusing on our strengths.
Dividing amazing games and live services that inspire the world to play with our incredible talent are growing play network and more people than ever engaging and connecting through games. We're excited to lead and create the future of entertainment now, Chris Laura and I are here for your questions.
Thank you I'd like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question. Please press star one again.
And the interest of time, we ask that you. Please limit yourself to one question and one follow up question.
Neil.
Our first question comes from Matthew cost from Morgan Stanley . Please go ahead. Your line is open.
Hi, everyone. Thanks for taking the questions I have two here.
In an environment, where Andrew you mentioned, obviously things are changing consumers are under pressure are you observing any changes in the behavior of users for example, our people, perhaps prioritizing buying a copy of FIFA than may be spending less on the ultimate team or is there anything that you've noticed thats starting to shift in the behavior.
Your users and then secondly on the pipeline I think for the fourth quarter, it's still showing a major title that doesn't have a specific name to it yet should we interpret that as there's a title that's tentatively slated for the fourth quarter, but it could potentially be pushed out just any color you can add there. Thank you.
Yes, great questions.
First one on user behavior I think the one thing to reinforce is we are seeing extraordinary engagement across our business, particularly in our key titles like FIFA and like apex and like the Sims.
And remember this extraordinary engagement of what was already extraordinary engagement coming through Covid and many had believed that we were going to see meaningful changes a meaningful drop off to our engagement post COVID-19 is the world kind of went mostly back to normal and we haven't seen that yet we've continued to see really strong engagement across our products.
And certainly with the launch of FIFA and Madden, both of which are up in.
And the ongoing strength in apex and assumes we feel really good about the future.
What we do want to say, though is that we're going to be very deliberate as we move through the back half of the year, we're going to extraordinary slight through the back half we feel very good about that slight but it's hard to ignore all of the narrative around us and some of the commentary around what might be challenging macroeconomic times, particularly.
In Europe , it seems to be dealing with that.
More dramatically so far in the U S.
As it stands right now we haven't seen meaningful shifts in behavior.
I expect that we will grow.
But we also want to be very thoughtful focused and deliberate as we move through this environment because if it gets really bad I don't think anybody whose immune but I think what we've demonstrated is that we are unbelievably resilient.
Why we are focused on building incredible games and driving deeper engagement with our community, which so far is working really really well for us on the second point around the title you Shouldnt read anything into that other than the nature of marketing in our industry has meaningfully changed over the past five or six years.
Remember when we launched apex legends, we didn't tell anybody about it until that 48 hours before the community to get to play it.
As we've continued to see the shift the big shift of course in the recent decade was a move from TV to digital we've moved into more targeted digital and now we're moving into more targeted timing around digital and so for each franchise development teams and marketing teams come together and think through what is the most appropriate time.
To begin meaningfully communicating without community around what titles are coming in so we feel really good about our slate we feel really good about that particular title as it turns out.
Actually really really good.
But it's just.
Our teams right now we're still working through the.
The appropriate timing for launch again marketing communicating around that title.
Great. Thank you.
Our next question comes from Benjamin <unk> from Deutsche Bank. Please go ahead. Your line is open.
Hey, guys. Thanks for the question, so pretty exciting stuff with the Marvel partnership I was wondering if you guys could maybe talk a little bit more about.
What that might mean for the long term growth for your business in the press release referenced at least three gains I believe so what do you think some of the things are that your partner might be looking for as they evaluate whether or not to extend this partnership to additional gains.
Thanks, Benjamin Great question.
When we think about our growth potential in our portfolio. We certainly consider the games that we create the world. The characters, but we also look at the expansion of our player community and the diversity of players that we can bring in and when you think about the breadth of our portfolio from real World sports to our original IP.
Including Sens apex battlefield.
Need for speed and we also have licensed IP, you think about Star Wars, Lord of the rings and of course now Marvel as you mentioned so we consider this licensed IP, an incredibly important component of expanding diversifying and casting our net wider to bring new players and when we looked at our Star Wars business as an example.
Brought millions of players into our community and what we realize and have seen is that over 40% of those players have gone on to play other games in our portfolio. So we consider adding licensed IP as a pretty significant engagement model to our overall community as we as we grow and we're just we're thrilled to welcome the Marvell partners into our creative teams.
And we're incredibly confident that we're going to build meaningful content for our fans and we have generally approached or could these types of creative partnerships.
And kind of away from the contract we don't want that to be a transactional partners really embrace a creative partnership and co create together and we've seen great success in our past and we expect no different for the future with Marvel.
Okay.
Hey, Joanne next question. Please our next question comes from Omar <unk> from Bank of America. Please go ahead. Your line is open.
Hi, Thanks for taking my question.
Like to ask about.
You have four objectives of play create watch and social and how theyre going to affect your business long term and then I have a follow up so the first question is.
These are these initiatives you need to undertake.
Undertake in order to keep pace with the growth in the video game industry or exceed growth in the video game industry.
<unk>.
As you build out these features around your core franchises sort of five years out by what factor could they help your core franchises grow and then I have a follow up.
Yes, great Great question. So as we think about the four key vectors of opportunity for US play create watch and connect the first thing to as we look at existing network implies over $600 million as we look at new Onboarding plays in the kind of Gen Z and Gen <unk>.
For populations, what we discover is the first thing that.
They are expecting from US is that we expand play so when I started building game since industry over 20 years ago. We were primarily playing single player games are on the Couch games. We then moved from.
Single player multiplayer offline to online one on one to one versus maintenance. We've seen these ongoing inflection points that have expanded the nature of play I think as we're looking now and as you look at what we're doing in and around our games like FIFA Madden liked assumes like apex and many others.
As we are expanding the modalities of play beyond what might have been a traditional mechanic within in a game and as we continue to drive. These franchises forward, we start asking ourselves what happens in FC when Youre not playing on the pitch what happens in the seams. When you leave your home and go to sell them.
One else's home what happens in apex, when you move beyond the existing map with the existing modality of play and so every time we offer.
An expanded play option, what we do see that attracts more people and it drives deeper engagement in the franchise.
Also as we look at these generations of course, you don't have to look very far to see that created such a big and important part.
Of all entertainment, particularly games and as you look at Youtube, and Tic, Toc and snap and others over the past five or 10 years. We've seen has become an even more important part of entertainment and social connection amongst these audiences and as we think now about even if we go back as far as.
Creating things and assumes an only in battlefield moments and sharing highlights from FIFA and now the ability for players to come in and move things around in the world as a first step create new things and put them into the world as a second step and really create new aspects of these worlds as a third step.
What we see again is that more than half of our community engages in player created content and so it attracts.
Onboard NUPLAZID whats my seven year old son get introduced to new games, because he is watching created content on Youtube for the games that we make and quite frankly some of the games that are competitors make and so this notion of creativity and the ability to engage the community to create is a really important part of our future both.
And the expansion of our worlds to fuel the insatiable appetite for content that our global community of players has but also to deepen engagement.
Again, and as part of that what she is becoming a really important part.
We get two or 3 billion hours of play in FIFA, and we get nearly as much as that watching FIFA game play. The same is true for apex were seeing this grow more and more across our ecosystem and then finally, we're seeing.
We're seeing connections that are formed amongst four and five and six people. These atomic units as part of these global communities that are the most meaningful connections. These players are spending 90 minutes two hours a day together playing the games together and sharing that content beyond the traditional boundaries of games and so as we think about our opportunities across these four.
Vectors, we really think about it which of these things are going to allow us to attract more people. We think its very reasonable believes that we can entertain 1 billion people in play and we think about these things that colleagues are driving deeper engagement in the overall ecosystem as we think it's very reasonable to believe that we can get that 1 billion people to engage with us for at least in.
Our day and what we know about our business is that people spend money, where they spend their time and provided we offer incredible innovation incredible creativity incredible quality and incredible value that that will ultimately.
Present extraordinary opportunities for.
Financial growth for us in the future.
Okay wonderful answer thank you so.
It sounds like.
You are really at the forefront of innovation rather than this just being table Stakes for the video game industry of the future.
My second correct me if I'm wrong. My second question is in the past.
In 2017, you've said that you spend about 25% of your R&D budget on new IP.
Things that may never see the light of day.
So based on fiscal 'twenty, two that would be around 4% to $500 million.
First of all is that kind of still the case and second of all as you build out the tool sets necessary to achieve play create watch and social.
Should we think about incremental R&D spend on top of that or will the <unk>.
It kind of additional expenses to create out those tool sets and initiatives.
Be part of that 25% or even.
The existing budgets within existing franchises.
Great Great question, the first thing to acknowledges and I've talked about 2025% in the past.
One it's not a static number changes over time based on what's going on in our various incubation in development and production pipelines as we think about investing.
The primary investment for US is always going to be building incredible games and for us that really falls in two key categories building out these global online gaming communities around our biggest IP FC battlefield apex, the Simms, Matt and <unk>.
<unk> is coming down the pipe and so that's one category of investment for us and a lot of that 2025% goes into new modalities of play and you create in and around those ecosystems that are very proven very stable and represent extraordinary opportunities for growth.
The second area is around building these worlds and creating these characters until he has amazing stories, both in our owned IP and the IP of our partners as we co create the future of entertainment and we really think about interactive storytelling as the future form.
Of storytelling that most consumers will choose as their first form of entertainment and a chunk of that 2025% goes into those things things that we do without part is a Disney across Star Wars, and Marvel will fall into that category.
Third category, which is a much smaller category, but probably represents one of the biggest long term upside opportunities.
How do we think about.
Deriving value from the power of our network beyond the bounds of Attritional game experience. We've got $600 million are going to go to $1 billion I hope that we get to 2 billion people in our network and they spend an hour and a half a day in our games and then they spend another 90 minutes a day doing things outside of our games, but that are deeply connected to the games that they play.
And what is our opportunity there in one such opportunity might be how do we disrupt the consumption of sports how do we really think about sport from an interactive viewpoint. If you start in one of our games, but you are a deep sports fan what other things might be able to do with you with our partners that would fuel Youll sports fandom.
And while that's a relatively small investment for us today.
It does represent a pretty significant upside to the expansion of what we're able to do without global network of players and fans around the world over the next three to five years as we think about investment more broadly you shouldn't imagine that this is deep incremental investment. This is about really focusing our existing investment in the <unk>.
<unk> areas and part of what we have to do as a company always has to be very deliberate very disciplined and very focused on how we invest and because we're in the entertainment business. We have to acknowledge that not everything we do will work or at least work exactly as we planned and we have to be very ready to move and shift.
And reshape our organization and the investment that we put into it to drive that future. So you shouldnt expect some giant new incremental spend but you should expect us to continue to move investment around our company, where we feel like they were really big upside opportunities in the area of global online communities in the area of <unk>.
Directive storytelling in the area of harnessing the power of our network beyond the bounds of Attritional game experience and where we believe that we have very strong likelihood of success and growth we will invest behind those things.
That's wonderful. Thank you. Thank you very much for sharing your vision I appreciate it.
Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead. Your line is open.
Thanks for taking the question I hope everyone on the team as well.
Maybe just focusing in on the mobile front, we've obviously got a lot of questions from investors is theres been sort of the last 12 months to 15 months of headwinds that have been created by apples privacy changes, but obviously theres a long tailed opportunity to get mobile right, especially AAA games on mobile over the medium to long term and there's been a lot of cash.
<unk> allocated towards M&A and mobile.
Are you thinking about investing behind mobile mobile continuing to grow as a percentage of the mix and how to navigate some of the maybe challenges in terms of growing the user base and monetizing in game mobile continues to face in this environment. Thanks, so much.
Thanks, Eric Great question.
You see mobile remaining one of the largest platforms in the games business and it represents a pretty significant growth path for us, particularly with our large franchises. So theres a couple of parts of how to think about this and we are looking at mobile as an expansion in multiplier on our big franchises.
Such as FIFA apex as an example, when we look at our FIFA mobile business, 75% of our FIFA mobile players.
Exist outside of Europe , and North America, So that's significant reach and global impact for our FIFA mobile game. So we continue to believe that the mobile business will be will contribute to these big online communities that Andrew has talked about and as discussed in our vision and strategy and be a multiplier for these gaming ecosystems.
For players and we think about a post <unk> World Post <unk> World Whats most meaningful is having these large communities and well known brands for strong reach and so we are confident in our position too.
Have an impact beyond some of the challenges that.
Some are experiencing in our post ATT world and as we think about.
Our acquisitions and our Standalone business, we continue to see strength in games, such as Galaxy start with Galaxy of heroes and when we look at Glu R. Glu acquisition that is.
Some of those properties such as design home Covet fashion week, we believe we're going to be strong contributors to our lifestyle Syn sort of business. Then we also have the tap sports business that clearly we have big strength in sports and so we continue to believe that those will contribute to our strategic growth path as we head into the future.
Yes, there have been headwinds in the mobile market and we continue to build.
We believe that mobile as a platform will provide the global player reached for our big franchises and we believe with our big community and it will continue to help us with some of our Standalone mobile games with our large communities and big brands.
Our next question comes from Mario Lu from Barclays. Please go ahead. Your line is open.
Great. Thanks for taking the questions. The first one is on FIFA I was.
Just wondering if you could help doubleclick on the main factors that attributed to that 10%.
Unit growth year on year.
At the new features such as cross play.
Is it the upcoming World Cup content anything you can point to that would be helpful.
Yes, I think the first one around our business. There is we live in a symbiotic relationship with the real world of football and the real World of football continues to grow. This is the world's game. It's the greatest game on the planet.
There might be some that would argue with you on that front, but certainly as you travel around the world. There are more fans of this sport than pretty much any other sport on the planet and it continues to grow and the engagement by virtue of technological advancements around access to content.
You can use to fuel growth in the sport itself. As you then think about what our teams do.
In the context of innovation and creativity in modes and this is our biggest FIFA yet.
And we are delivering across all of the key leagues and teams and competitions in the world and we're doing it at incredibly high quality and we're really working closely with our fan base to understand how they want to experience interactive football through our game around the content that they love the most and so as we.
Look through over the last nearly 30 years. This is what this team has continued to do year on year at it has continued to grow year over year and it really is the double multiplier of the growth of the sport itself combined with a team dedicated to innovation and creativity around that sport working.
Lock step with a growing global community and our expectation is that as we think forward to FC there's going to be able to do even more of this both in the context of immersion and authenticity of the very core of the sport as well as the expansion of what the overall experience can embody for football fans around the world.
Great. Thank you and then just a second one on mobile specifically on apex mobile just curious how it's progressing versus your internal expectations and are there any early learnings that can be applied to other franchises like battlefield that will ultimately be brought some mobile as well.
Thanks for the question.
As I mentioned in the mobile response earlier mobile continues to contribute to the overall growth of some of our biggest franchises and brands and that is certainly the case with apex mobile for the overall apex brand, we're seeing player and geographic expansion in Southeast Asia Middle East Latin America.
Exactly how we had hoped for and what we're expecting now we are at 24 weeks into our launch and and while we delivered a strong experience and the rating on the App store is quite strong and we're proud of the quality of the game and our core players have connected with it quite well. We are now focused on improving our retention for our more casual players and that is definitely in <unk>.
A focus for us and an area of improvement and this is very much a natural part of this cycle and process as we bring these games to market and we believe and we know that apex mobile will continue to help us drive the growth for the overall apex mobile brand and franchise in the coming years.
Great. Thank you.
Our next question comes from Andrew Markowitz from Jefferies. Please go ahead. Your line is open.
Hey, Thanks for letting me ask a couple of questions.
Okay.
Yes.
Drew and maybe Laura can chime in here when you talk about kind of the four big initiatives around social and whatnot. It seems like the Sims and maybe and maybe scale solidly solidly in in kind of all four of those categories could you talk a little bit about.
How that kind of gain design process goes as you.
As you try to figure out how to incorporate user generated content and maybe a marketplace and maybe some sort of social fabric that overlays those types of games versus maybe what expectations are going to be from from gamers who might.
I think they just want to play escape game or you just want to play kind of a house building game.
Yes, I mean, it's.
It's a longer and more complicated question than I, probably have time for today, but I would tell you. The way we think about it is really around player motivations.
We designed for a game we are really thinking about what motivations are we trying to fulfill and you've got one group.
And I kind of go where the crude kind of cohort grouping you got one group, who simply want to fuel the motivation of escape they want to be able to disappear from the world I live in day to day, and then moves themselves in a new world and that would be the sum total of their experience and thats, a really important thing for them and we have to think about that across the breadth of our portfolio.
There might be another group he says hey, I want to be able to I want to play I wanted to most of ourselves in these world, but I want to do it with a core group of friends and I want to bring them in we call. This an atomic unit and we see this amongst players in groups of kind of four or five these are the strongest connections we see in our network.
And really the experience that I have is around doing things in the context of this.
This group.
<unk> environment with four or five people.
There's another group, who says hi, I want to do this thing I might do a buy myself a module with other people, but I really want to very quickly out of share everything I'm doing with the outside world what a capture cool moves I do I want to be able to capture cool things I build I don't want to share that almost immediately with the outside world through social media and other plan.
It forms and it's in it's really kind of an AD hoc thing and it's not very Polish but it just like look what I'm doing and it's it's think about it like a kid on the playground, who just has a somersault on the trends I just love to watch me.
And so we're fueling that motivation and then we have a fourth group, who really wants to create and curate and share their content in a highly polished format.
And that we see in the context of the seams that we'll certainly see that in the context of Skype and we're seeing that kind of start to rise up in things that people want out of our FC experience in our Madden experience and certainly has been and will continue to be part of our battlefield experience over time, and so really when we think about designing and building. These things we start with a player.
And we start with one of the motivations that Toronto fulfill and then we look to build tools that seamlessly without friction fulfill those motivations for them in the best way possible and what we are seeing is that with <unk>.
To fulfill motivations across that full spectrum of cohorts and Thats why our network is growing so rapidly. That's why our engagement has continued to be strong and thats why people are spending more time in our games and using this as a platform to build deep enduring connections with their friends.
Got it that's helpful and then as I think about some of the.
And have less.
Some of the games and maybe have less of that when I think about the single player. The single player stuff Youre building is some of the motivation there at the end of the day somewhat financial.
Were probably my guess is the predictability of the success of <unk>.
Whether it's licensed IP or maybe there is some of the stuff out of the bioware.
Where you can where it's easier to kind of do the math on the ROI and it's more predictable and you feel there's a need for for for those types of games every single year.
Again entertainment has been built on the creation of world. The development of characters, telling a story since time began and we've experienced that in different forms over time, we had to go to the theater that we would read about it then we'd listen to it on the radio and then we watched the movie watching TV that we experienced that through games and it is how we.
We entertain ourselves.
First and foremost as we think about these great storytelling opportunities and so again as a public traded company. We're always thinking about the financial return of the things that we do but as we think about the full breadth of the consumption of sports and entertainment. These these deep social experiences are very much about how.
How we enjoined attainment, but the creation of world in development of carriers until they've stories is kind of the central lifeblood of entertainment more broadly and as we think about this it's not just about predictability because again, there are being crappy worlds and crappy characters and correctly stories being told and so we work with our partners and we work with our own IP.
To do things in a truly compelling way and we think it represents an extraordinary business opportunity as we don't believe that humanity is going to turn it back on on the nature of storytelling and as we look to the future of the nature of storytelling is almost certainly going to be interactive.
Got it thanks.
Thanks, so much for your answers appreciate it.
Our next question comes from Eric Handler from <unk> Partners. Please go ahead. Your line is open.
Good afternoon, and thanks for the question I Wonder if you could talk a little bit about your decision to give the award of the Rins mobile game a bit more time in soft launch given the current mobile market conditions.
Right now in this post <unk> World is it just too challenging to find good ROA ROI channels to launch a new game on a mass market level.
What is it you're seeing there and then secondly.
Can you maybe talk about your decision to take the Sims to free to play model.
Hi, Eric.
So we put the Lord of the rings mobile game in the market and soft launch a few months ago and it's being developed by the same team that created one of our most successful mobile games in Star Wars Galaxy of heroes and I would say, it's actually a very normal part of our process to go out to soft launch and allow our community.
And player feedback to inform how we're thinking about game development. So we consider this to be a pretty normal natural part of our cycle and there arent seeing anything necessarily unusual in the game and the game needs more time, we need more time to continue to flesh out our progression loops to simplify our.
Two our first time user experiences.
And we're confident that we will get to market.
Dealing with the game and you know as you mentioned, having a big brand like what are the rings in and a great creative partner and they are seeing good success in this franchise right now and it's going to help us in our post ATT world. So in partnership with our Big online community that we have in our big Lord of the rings brand and a healthy soft launch that we can get the game metrics.
And the game play right.
While we will come to market when the time is right for the game in for our players.
And on the Sims again, it's nearly 10 years old now I mean, there there are people who are going to want to play the Sims four yeah isn't only 10 years old now.
When we think about there is a there's a bunch of people who want to play that game, who may not have even been born when we launched the game and well while we have a community of many tens of millions of people playing we recognize the opportunity to really open up and bringing anyone who wants to experience. The Sims four as we as we look to the last 12 months.
About 90% of all revenue was from extra content not the base game and.
So as we think about the future and as we think about the evolution of the Sims experience and really bringing in more people.
To enjoy what the seams offers the playing community. We felt that this was the right time and I commend the team for really making this happen and really supporting that community and what we've seen on balances the community.
Been very thankful for this very supportive of this and is looking forward to welcoming what we hope is many millions more into that ecosystem overall.
Very helpful. Thank you very much.
Our next question comes from Stephen Ju from Credit Suisse. Please go ahead. Your line is open.
Okay, Hi, Andrew.
Thanks for let me ask the question and I think this is a topic that we've explored before but with what looks like the sequel for Simmons under development I thought I'd bring this up again.
This for lack of a better word I guess, the lore and the body of work that exists in Sims four.
Cause I should say the game is like 10 years old now and Theres a lot of content that you've released over the years.
Should we be thinking about how sims five when its released may feel a little bit empty and I think this is something that would be worried about in the for battlefield in the past so what can we do.
We think about sequels and follow ups generally does this mean that things need to spend more time in development for that additional content.
How should we think about that thanks.
Yes, it's a really good question.
I appreciate it using <unk> as an example, but I think the question is probably broader than just the Sims.
And I would say that theres not a one size fits all answer to this question.
Certainly as we think about some of our iterative titles that we do each and every year. Our objective is to build enough content in enough innovation in enough creativity that delivers extraordinary value for the amount that al community invest in each of those taller than we have been very successful in doing that and we commit.
Many hundreds of people on those franchises to ensure that we deliver all of those things, particularly value to our community.
To fulfill the expectations they have for water new title would bring.
We have other things like the titles that come out of Bioware that really is about giving them time to build out these worlds and create these characters and tell these stories and a new innovative and creative way.
Without using assumes an example, but using things like skate as a potential example than maybe others in our franchise. There's also an opportunity.
In some cases to have an existing experience continue.
While layering in a new.
New modality of that experience on top and certainly what we going to see with skate as youre going to be able to get in there and you're going to be at a scale and do all the things that we've been able to do in skate games of the past, but as a whole new modality around creation and social connection that is going to be a meaningful part of that game going forward and so to answer your question I think that.
We're looking at every franchise and its own stead, and we're asking ourselves what is the right thing to do with respect to this franchise sum eatery franchises about getting just the right amount of people into a team to deliver innovation and creativity for some like a bioware franchises back giving time to really build out these worlds.
Characters and storylines and for other for other franchises Lifescan <unk> and certainly as we think about the future of Sims. It's how do we hold onto all of the goodness of the existing franchise and layer in new modalities and extensions and how you play these games for a growing and changing and evolving.
Most community around the world.
Thank you.
Question comes from Doug <unk> from Cowen <unk> Company. Please go ahead. Your line is open.
Hey, thanks.
I was wondering if you'd talk about wild horse a little bit I think normally when you guys have partner titles, they tend to be lower priced indie titles, but this.
Correct me, if I'm wrong is coming to market at a $70 price point. So should we think of the opportunity set here the way that we would think about it for a AAA title sort of in general.
And is this a game you think has franchise potential down the line. Thanks, yes.
So firstly I would say I, just just to differentiate there I think what we have had as EA originals.
Which would lower priced titles. This was an initiative that we develop some years ago really to support the indie community and the industry growth opportunity overall, what we were seeing in the industry was these indie developers what kind of building these very cool games.
They didn't have the means to get them to market in a big way and they didn't have the ability to continue on because.
The business model wasn't working for them at least for their first title in what we did at that time was go into the community Sarah Let's hand pick some really great teams, who are building some really cool games around really cool IP, let's help let's fund development for them, let's get them distribution and let's give them the profits on the <unk>.
And so that they can come together and build an even big again, the second time round most of those are being smaller lower priced titles.
However, in the history and so I've been in this company 22 years, we have a long and rich history of co developing told publishing and distributing AAA full priced IP.
All the way back for as long as I can remember.
We don't do as much of it anymore, just because theres not as much of it out there that we think really fits the bill and.
And is it a AAA quality bar that we believe can can deliver against the expectations of these global communities out of full price point, we think <unk> is one.
I mean, I would tell you it started.
With what felt like a pretty small idea for us internally and every time, we sold a product we were wowed unmesmerized buoyed by what they were doing.
The mantra monster Hunter genre, as a relatively new genre it exploded.
It is ripe for innovation and creativity and expansion.
What we see the team doing is all of the things that the community is asking for in this genre.
And so and the response so far has been really really strong and so I don't want to get out over my skis on this one but I would tell you I saw it I think it's incredible.
<unk> seen it they think it's incredible.
How big it can be we don't quite know yet, but I think there's a path for this to be a really really cool opportunity for us for the development team and for the community at large.
Thanks, Andy that's very helpful.
Our last question will come from Colin Sebastian from Baird. Please go ahead. Your line is open.
Great. Thanks.
Couple of follow up questions.
First Andrew I, just wanted to talk about the approach to World Cup. This year, how that differs from the prior cup given some of the challenges last time around.
On the core franchise, and then and then on live services, if you wouldn't mind, providing a little more color on engagement and monetization trends for apex. Just given this has been such a big part of the portfolio growth over the past few years are you satisfied with the trends there and how do you expect those kpis to trend with the launch of new content in this quarter. Thanks.
Yeah, Let me grab the first part around World Cup, and then I'll, let Chris speak to kind of engagement trends and those types of things around apex.
First.
I might challenge the idea that we had troubles with the World Cup last time.
But I might be bought upfront again I think we brought we brought in and brought back about 12 million players back into the franchise with World Cup content. It was one of our highest engagement opportunities of that year.
I think there may have been externally some expectations on higher revenue at that time.
You might remember we talked about was we believed it was a really strong engagement opportunity we use it to bring people into the franchise and back to the franchise and we projected and predicted that it would drive growth in the out years beyond the World Cup and of course that has happened each and every year since that would comp.
So we feel really really bullish on what this what this world Cup can do for us what I would say without going abroad details.
Is it is more deeply integrated into the modes that was more kind of an add on adjunct to the product last time. It was very cool. It was great content. It was World Cup.
What we what the team has done this time is when we take that content and embed more deeply into the overall experience of the game and our expectation is that while it will bring people into the franchise and back to the franchise. It will also drive even deeper engagement over time, and we think that is good for the long term prospects.
The product, particularly as we launch FC next year to build and grow that community to its absolute greatest possible point at this juncture is a great opportunity for us.
Great.
Ill jump in Colin talk.
A little bit about our engagement.
As we've talked about on this call. We're seeing we're in this enviable enviable position seeing healthy engagement trends across the breadth of our business, we talked a lot about FIFA, but apex is another one where we are very pleased with the state of player engagement of apex.
<unk> grown that business as you know in a very short period of time into a substantial business as Andrew talked about it as one of the great Ips in entertainment, we're seeing very stable engagement, we continue to grow the franchise, we feel great about.
Coming releases of new innovation into the game. It continues to be an important franchise for us and will continue to invest behind it as well as our seat growth.
Now and into the future.
Great. Thanks, guys I appreciate it.
Okay.
Okay, I think that does but today.
I was going to say the same thing thank you to all for being with us today.
And that's all the time, we have for questions. This does conclude today's conference call. Thank you for joining US you may now disconnect.
Okay.
Please wait the conference will begin shortly.
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