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Electronic Arts Inc. (NASDAQ:EA)

Q4 2014 Results Earnings Conference Call

May 6, 2014; 05:00 p.m. ET

Executives

Andrew Wilson - Chief Executive Officer

Blake Jorgensen - Chief Financial Officer

Frank Gibeau - Executive Vice President at Mobile

Peter Moore - Chief Operating Officer

Rob Sison - Vice President of Investor Relations

Analysts

Edward Williams - BMO Capital Markets

Colin Sebastian - Robert W. Baird

Doug Creutz - Cowen and Co.

Ryan Gee - BofA Merrill Lynch

Stephen Ju - Credit Suisse

Mike Olson - Piper Jaffray

Ben Schachter - Macquarie

Brian Pitz - Jefferies

Mike Hickey - The Benchmark Company

John Taylor - Arcadia Investment Corp.

Operator

Welcome and thank you for standing by. At this time all participants are in a listen-only mode. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I'll turn the meeting over to Mr. Rob Sison, Vice President of Investor Relations. You may begin.

Rob Sison

Thank you. Welcome to EA's fiscal 2014, fourth quarter earnings call. With me on the call today are Andrew Wilson, our CEO; and Blake Jorgensen, our CFO. Frank Gibeau, our EVP at Mobile and Peter Moore, our COO will be joining us for the Q&A portion of the call.

Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted earnings slides to accompany our prepared remarks. Lastly, after the call, we will post our prepared remarks, an audio replay of this call and a transcript.

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 May 6, 2014 and disclaims any duty to update them.

During this call, unless otherwise stated, the financial metrics will be presented on a non-GAAP basis. Our earnings release and the earnings slides provide a reconciliation of our GAAP to non-GAAP measures. These non-GAAP measures are not intended to be considered in isolation from, as a substitute for or superior to our GAAP results. We encourage investors to consider all measures before making an investment decision. All comparisons made in the course of this call are against the same period in the prior year unless otherwise stated.

Now, I'll turn the call over to Andrew.

Andrew Wilson

Thanks Rob. I’m pleased to be here reporting on a great fourth quarter and capping up a strong fiscal 2014 for Electronic Arts. EAs performance in FY14 was above expectations. In the fourth quarter we delivered revenue an EPS above our guidance. We also exceeded our full year guidance by generating $4.02 billion in non-GAAP revenue and delivering a $1.69 in EPS, doubling our EPS from FY13.

The introduction of two new consoles, continued growth in the mobile gaming audience and new modalities of play across the world combined to make the last year one of the most dynamic periods in the history of interactive entertainment.

With our focus on producing a portfolio of hit games, increasing our shift to digital and building profitability, EA successfully navigated the transition and delivered transformative results.

First, we delivered on our commitment to lead the transition to new consoles with great new games. The PlayStation 4 and Xbox One have successfully established a new generation of console gaming, and our games are at the top of the charts. We immediately established EA as the early segment share leader on the new consoles, and today we continue to lead.

EA is the number one publisher on the new consoles with 40% segment share in calendar year 2014 across North America and Europe. The depth of our game line-up on the new consoles remains unmatched and was bolstered this quarter by the addition of Plants vs. Zombies Garden Warfare and the huge hit, Titanfall.

Second, we delivered on our plan to grow digital, powered by the extraordinary depth of play offered through our live services, mobile games and full game downloads. Our Ultimate Team game modes generated more than $380 million in FY14, including a breakout year for Madden Ultimate Team, which grew 90% year-over-year. In all, our full-year digital non-GAAP revenue of approximately $1.8 billion exceeded our guidance by almost $100 million and represented 45% of our total revenue.

Third, our objective was to increase profitability and keep our costs flat during a transition year. Not only did we do this, we exceeded our own expectations by reducing operating costs and doubling cash flow year-over-year, all while maintaining our investments in key IP.

These achievements were the result of strong execution. We began FY14 with an aggressive plan and a slate of incredible games. Through the hard work of the best and brightest teams in the industry, we delivered on our key objectives for the year.

Now we turn to FY15, where another exciting year is already underway. At the core of our company, we aim to deliver amazing and fun experiences to our players, but our concept of what makes an amazing game today has changed. The power and diversity of the platforms, innovation through digital content and services and a greater flow of feedback from the player community, means we are designing experiences for long-term entertainment.

Our plans for FY15 reflect this focus. We expect to launch awesome new games for console, PC and mobile, as well as introduce great new content for our existing live services. And now, let’s touch on our new games coming in FY15.

Global excitement for this summer’s World Cup is heating up, and we have just launched FIFA World Cup 14. We’ve included all 203 FIFA-sanctioned national teams, as well as 21 stadiums and 11 game modes in the most immersive version of our tournament game, ever.

Next up comes the much-anticipated arrival of EA SPORTS UFC, launching on June 17. The power of the EA SPORTS Ignite engine and the new consoles bring to life the athleticism, emotion and intensity of the sport like never before. You truly feel the fight in this game. The addition of Bruce Lee, the father of mixed martial arts, to this game last month has been a huge hit with fans around the world.

Over the summer we plan to deliver new editions of our major EA SPORTS franchises, Madden NFL 15, FIFA 15 and NHL 15. Madden NFL 15 will bring the deepest defensive game play in franchise history and a new Madden Ultimate Team that builds on last year’s success. NHL 15 will mark the game’s debut on PlayStation 4 and Xbox One and it is looking fantastic.

FIFA 15, the world’s most popular sports game will deliver breakthrough innovation that brings fans closer to the sport than ever before. Fall 2014, we’ll see the arrival of The Sims 4, our first all-new Sims experience in over five years. The team at Maxis has built an innovative technology base, which offers smarter, more relatable Sims with rich emotions; fluid, intuitive creative tools and vibrant and intimate play spaces. These all combine to create the most entertaining, surprising and personal Sims experience yet.

In October, BioWare is scheduled to release Dragon Age: Inquisition. Showcasing the vast capabilities of the Frostbite 3 engine, Dragon Age is an epic, character driven story in a visually stunning, living open world. It’s the most immersive RPG ever created in the rich history of Bioware.

Two more EA SPORTS titles are scheduled to launch in Q3 and Q4. NBA LIVE 15 returns from our Tiburon studio, where the teams have been working with community feedback to deliver a great game. We will also debut our new EA SPORTS golf game, the first on next-gen and something entirely new from our development teams in Florida.

And last but certainly not the least, we also have a major new game coming in our third quarter this year, powered by Frostbite 3 and developed by some of our most talented teams. We’re excited to unveil this game to our fans first, with a live reveal next month at the gaming industry’s marquee event in North America, E3 in Los Angeles.

We’re preparing a rich lineup of games for E3 this year that showcases our commitment to the player experience. This will include first looks, demos and other new announcements for many titles from this year’s slate. We also plan to unveil details on at least six new projects in development at EA. Over the next few years, we’ll deliver some epic new entertainment experiences to our players, built on a foundation of creativity and innovation. I’m looking forward to sharing a lot more with our gamers in just a few short weeks.

We will launch fewer titles in FY15 as we focus on delivering top-quality games and services and invest in new experiences. Previously, we announced that we will not release an NCAA Football game this year. We also decided not to ship Need for Speed game in FY15. Ghost Games in Gothenburg is working on an innovative new chapter of the storied franchise, and we’ve planned an extended development window to ensure we’re delivering a high-quality experience for Need for Speed players next year.

To keep the experience fresh for players in our live services, we expect to deliver more new content through the year than ever before. Three map packs are planned for Titanfall, two more expansion packs for Battlefield 4, and our EA SPORTS games received live daily updates, including Ultimate Team content and much more. Through hours of new game play and additional content, live services make our games truly dynamic entertainment, with rich new experiences for gamers every time they play.

Moving on to our mobile portfolio, we are now approaching a $500 million business with more than 130 million monthly active users. Our strongest titles, The Simpsons: Tapped Out, The Sims FreePlay, Real Racing 3 and FIFA 14, clearly demonstrate our approach for EA Mobile: engineered games as live services, designed to constantly evolve and keep players engaged long-term.

EA Mobile studios are preparing some exciting new experiences from our major brands this year, while also incubating and prototyping more new projects for the future. Through all of our plans for FY15, we will maintain our focus on building profitability across EA’s business for this year and beyond. Delivering quality experiences and executing on our plans are critical goals for us in FY15.

FY14 was an outstanding performance and an important year for EA and the gaming industry. We are proud to have emerged from a transition year as a clear leader on new consoles and positioned for growth across key platforms and regions. Our focus is now on executing in FY15 against three objectives that define a new EA; delivering amazing games and services to players around the world, driving innovation and creativity into new experiences, and building deeper relationships with our community.

Over to you, Blake.

Blake Jorgensen

Thanks Andrew. As Andrew mentioned, we had an extremely strong quarter and a phenomenal year. Before I get into the details, I’d like to provide you with some context, especially on the quarterly results. As you may remember, during our third quarter ending in December, we came in below our revenue guidance because of its steeper than anticipated decline in PS3 and Xbox 360 software demand, which was partially offset by next generation software sales.

We anticipated this was going to continue into the next period, which caused us to lower our FY14 revenue guidance; however, during the March quarter this weakness moderated and we continue to see strong demand for PlayStation 4 and Xbox One software. Additionally, we saw a robust pick up in our digital sales. These factors provided a significant boost to our revenue, gross margins and operating profits as we closed out our year.

We are encouraged by both new console hardware and software sales, but we continue to see risks associated with the decline of the previous generation software as the transition to the next generation continues. We are approaching fiscal ‘15 cautiously and we’ve attempted to factor this potential risk into our guidance. But before I walk you through our guidance, let me get into the details of our fourth quarter and full year results.

EA’s Q4 non-GAAP net revenue was $914 million, which was $114 million above our guidance and $126 million below last year. The decline over fiscal ‘13 was primarily due to the recognition of over $120 million in Battlefield 3 Premium revenue in last year’s Q4.

Relative to our guidance, the upside was driven by greater than anticipated demand for our digital offerings, primarily driven by full game downloads, as well as extra-content, specifically from Madden, FIFA and NHL Hockey Ultimate Teams. Additionally, we saw a strong showing from our console titles, most notably from Titanfall, Madden NFL 25, FIFA 14, Need for Speed Rivals and Plants vs. Zombies Garden Warfare.

Madden NFL 25 is a great example of our digital strategy. Due to the deep, immersive game play in Madden, combined with the engagement of Madden Ultimate Team, we exceeded our expectations both in full game revenue, as well as digital extra content. In addition, we have found that the Ultimate Team experience is engaging players in the game, long after the season has ended.

EA’s Q4 non-GAAP digital net revenue was $550 million, which exceeded our guidance by $93 million. This resulted in our fiscal full year digital revenue being nearly $1.8 billion. Breaking down our digital revenue into its key components highlights the performance of each business.

First, extra content and PC free-to-play contributed $243 million, up 8% over the prior year, led by continued growth in Ultimate Team services and FIFA Online 3. As Andrew had mentioned, our Ultimate Team services accounted for more than $380 million of our annual revenue.

Second, our mobile business generated $126 million for the quarter, up 21% over prior year. Smartphones and tablets continue to represent a majority of the revenue, accounting for $111 million of the total, and growing 41% year-over-year. Our mobile revenue has continued to set new records for us each year and we are closing out this year with nearly $460 million of mobile revenue.

Third, full game downloads added $112 million to the quarter, up 13% over the prior year. This was driven by full game downloads for Battlefield 4 and Titanfall, and strong demand from other catalog titles, both on consoles and PCs. Our Oregon service for PC gamers nearly doubled its monthly player engagement levels over the previous year, and continues to grow in revenue and users.

And finally, subscriptions, advertising and other digital revenue totaled $69 million, down $122 million or 64% over the same period last year. This significant decline is a result of how we accounted for Battlefield 3 Premium revenue. Last year, all of the fiscal 13 Battlefield 3 Premium revenue, which was over $120 million, was recognized in Q4. This year we are recording Battlefield 4 Premium subscription revenue on a ratable basis, smoothing out the revenue over the year.

Moving on to gross margin, our non-GAAP gross margin for the quarter was 77.4%, up over last year’s 74.3%. Gross margins also exceeded our guidance of 71% due to the pickup in our digital revenue, especially from direct downloads on consoles and PC downloads on Origin.

The new generation consoles are showing impressive growth in full game downloads. In North America we have seen two to three times greater downloads on the new consoles versus the prior generation. We expect this will continue to fuel growth of this part of our digital business.

Operating Expenses for the quarter were $503 million, down $37 million from last year, and $22 million lower than our guidance. This was driven by continued cost discipline and finding further efficiencies around contracted services and marketing efforts. For the full year operating expenses totaled $2.02 billion, which was $131 million below our initial guidance for the year.

The resulting non-GAAP diluted EPS for the quarter was $0.48 per share, which exceeded our guidance of $0.09 per share and naturally drove higher than anticipated cash flows.

Net cash provided by operating activities for the quarter was $281 million, compared to $233 million in the prior year. Operating cash flow for the full fiscal year hit its highest level in over a decade at $712 million, and it more than doubled last year’s cash flow of $324 million.

Fiscal ‘14 capital expenditures were $97 million, resulting in free cash flow of $615 million, exceeding our upward revised guidance of $500 million. Our cash and short-term investments at the end of the quarter were $2.37 billion or approximately $7.60 per share.

In addition to the stronger cash flow and operating results, we made a one-time repatriation of $700 million of foreign earnings from certain international subsidiaries. This bolstered our onshore cash balances. At the end of the quarter approximately 68% of our cash and short-term investment balances were held in the U.S. The tax impact of this repatriation was not material.

Related to the use of this increased cash balance, we are announcing a new $750 million stock repurchase program. This repurchase program has a 2-year time frame and replaces the remaining $222 million portion of our previous buyback program.

In summary, our fiscal year ‘14 was a great year for EA. Despite navigating through a year of tremendous change in the industry, which included a challenging console transition, we were able to exceed revenue guidance, drive higher gross margins, lower our operating expenses, improved non-GAAP operating profit margins to 18%, double operating cash flows and invest in new products and services for the future. On top of all these positive points, we are also implementing a new $750 million buyback program.

Throughout fiscal ‘14, we conveyed to you our goal to grow non-GAAP operating margins from 10% to 20% over a three-year period. As we demonstrated through our results, we are clearly ahead of this goal by at least one year.

Our improving operating leverage is a testament to our commitment to drive higher operating profits for EA’s shareholders and lays the foundation of possibly exceeding it. More important, it positions the company for profitable growth in the future.

Now turning to guidance. For fiscal year 2015 we’re forecasting growth of approximately 2% for our non-GAAP revenue. This estimate reflects fewer major launches this year, including new titles and the continued headwinds associated with the console transition.

Andrew laid out the new releases, and as he mentioned, we will not be releasing a Need for Speed or a college football game this year. However, we have included in our guidance a major new game that we expect to launch in our third quarter.

GAAP revenue for the fiscal year is expected to be $4.38 billion, and we expect GAAP earnings per share of $2.37. Non-GAAP revenue for the fiscal year is expected to be $4.1 billion, and we expect non-GAAP diluted EPS of $1.85 per share. Segmenting the sales provides further insight into the key drivers of our full year non-GAAP revenue guidance.

Packaged goods and distribution revenue was forecasted to be approximately $2 billion, down 10%, driven by fewer announced launches, greater shift to digital delivery, and a continued tempered view regarding PS3 and Xbox 360 titles.

Digital revenue is forecasted to generate nearly $2.1 billion, up 17%. Breaking down our digital revenue into its four primary categories, we see the contributions from each group, and the sustained growth in each area.

Our mobile revenue is expected to grow over 20%, as gamers’ engagement on smartphones and tablets continue to expand at a significant pace. In addition, we plan to expand our entertainment offering across these platforms.

Full game downloads are anticipated to continue to show growth based on early trends seen on the new consoles. Additionally, the release of The Sims 4 should also contribute to the growth in this category.

Extra-content and free-to-play is expected to continue to grow over 15% this year, fueled by our live services. It becomes more difficult to show significant percentage growth year-over-year, as this revenue base has hit a sizeable level, $0.75 billion dollars.

Lastly, subscription revenue is expected to grow approximately 30% this year, as a significant portion of the Battlefield 4 Premium revenue will be recognized during this fiscal year. Based on this segmentation, non-GAAP digital revenue is expected to represent over half of our total revenue, a significant milestone in the digital transformation of our business.

The increased digital revenue should help bolster our gross margins; however, this will be offset by the release of more royalty bearing titles this year, such as UFC, FIFA World Cup 14 and Titanfall catalog sales. Based on all of these factors, we are forecasting the non-GAAP gross margins to grow to 68.5% for the year.

GAAP operating expense for the fiscal year is expected to be around $2.17 billion. Non-GAAP operating expense for the fiscal year is expected to be approximately $2 billion, down 1% compared to fiscal ‘14. This will also result in an operating margin of approximately 20% for fiscal ’15, doubling our operating margin in just two years.

Focusing on Q1, GAAP revenue is expected to be $1.2 billion, as compared to $949 million in the prior year. GAAP diluted EPS is expected to be $1.26, as compared to $0.71 per share in the prior year. Non-GAAP revenue for the quarter is expected to be $700 million, a 41% increase over last year’s $495 million. This quarter will benefit from the launches of UFC, FIFA World Cup and Titanfall for Xbox 360.

Non-GAAP gross margin is forecasted to be approximately 67%. Non-GAAP operating expenses are expected to be $485 million, $8 million higher compared to last year, taking into account three launches in the quarter versus one title last year. For the quarter we expect a non-GAAP loss of $0.05 per share as compared to the loss of $0.40 per share last year.

Looking at the phasing for the year on a non-GAAP basis, as compared to the prior year, the first and second quarters are expected to represent a slightly larger portion of the revenue due to the timing of our launches.

Finally, cash flow will continue to be a key metric for us going forward. In fiscal year ‘15, we’re forecasting operating cash flows of approximately $800 million and capital expenses to be approximately $100 million, resulting in free cash flow of $700 million versus $615 million in fiscal 2014.

We remain focused on improving financial performance and driving profitable growth. To achieve those goals, we will continue to drive the digital transformation of our business and the efficient utilization of all of our assets.

Now, I’ll turn the call back to Andrew.

Andrew Wilson

Thanks Blake. It was a dynamic year for gaming and an outstanding year for Electronic Arts. Through the transition, I’m proud of what our teams accomplished in FY’14, and the position of our business today. We are the number one worldwide publisher on new consoles with great games like Battlefield 4, FIFA 15, Madden NFL 25, Need for Speed Rivals and Titanfall.

We have a portfolio of hit mobile games and a strong plan for expansion. We have exciting new PC free-to-play opportunities around the world. We are increasing profitability and investing in the future. Our digital products and services continue to grow and will account for more than 50% of our business in FY’15.

Looking at the opportunities in front of us, I’m even more excited about how EA is lining up for FY15 and the years ahead. At Electronic Arts, we are committed to putting our players first. This starts with creating amazing games and services’ fresh, fun experiences that connect, inspire, challenge and entertain players all over the world. In FY15, we’re planning new games for console and PC, new titles for mobile and new experiences through our live services.

Games and services built around fresh IP are a key part of EA’s future. Our teams are working on more exciting projects, including Star Wars, games and development at our DICE and Visceral studios, new titles from Bioware and Criterion, as well as new experiences from our EA Mobile studios.

We’re also excited to announce that EA is continuing its partnership with Vince Zampella and the Respawn Entertainment team, building on our success in delivering Titanfall, the biggest interactive entertainment event of the year so far. Through a new publishing agreement, we’ll be working with Respawn to bring new Titanfall experiences to players worldwide.

Amazing games and services must be built on a foundation of creativity and innovation, and we are committed to constantly involving not only the games we make, but the way that we make them. Our teams have a track record for driving innovation in games and they are pushing to achieve more. Across our studios today, we have teams rapidly prototyping ideas for compelling new experiences, and using shared technology stacks to quickly develop and test more creative concepts.

We’re also channeling innovation into our design processes, engineering new development and testing frameworks to enable each game we launch to perform at the scale of today’s gaming audience. With every game, every feature, every part of our live services, EA is innovating to pioneer the next generation of game experiences.

Finally, we are also committed to continually engaging with our players and taking action, to ensure we are delivering meaningful and positive EA experiences. Our gamers are at the very center of our focus and we’re transforming how we connect, engage and act on their feedback.

Across our games and platforms, more than five billion online game sessions played monthly deliver game data that helps us evolve game experiences based on play patents. Millions of conversations about our games are happening on social networks and we are there connecting with these growing communities through dialogue and interactive content. We continue to prioritize and expand our capabilities in support so that help is readily available to our players when needed.

Through these interactions and many others, we are constantly in dialogue with our community, acting on their feedback and building long-lasting relationships between our gamers and EA. Our commitments are clear, our position is strong and new opportunities are in front of us. We have a lot of hard work ahead, and it will be an exciting year for EA. I look forward to seeing many of you at E3 next month, but for now, Blake, Peter, Frank and I are here to take your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Edward Williams with BMO Capital Markets. Your line is open.

Edward Williams - BMO Capital Markets

Congratulations! That’s a great end to the year. Just a couple of quick questions. As we look to fiscal ’15 and that $2 billion OpEx number Blake that you just alluded to, can you give us a sense as to how it may break down between kind of our R&D and more specifically what we should expect out of sales and marketing.

Blake Jorgensen

I think what you’ll see is a continuation of what you saw this year. So moderation on R&D, trying to hold that flat and slight declines in marketing and sales as we continue along our path to become more efficient and shift towards more point-to-point marketing, social marketing, individual marketing versus Big TV campaign and I think the challenge that we have is we’re going to continue to try to manage down the OpEx where necessary, but balance that against investing in all the great titles we have coming in ’16 and ’17 and particularly the Star Wars franchise and some of the new franchises we have coming online. We don’t want to hold that back at all.

But I think we’re at a very good place and we worked hard over the last couple of years to really build a much more efficient structure. Efficient in a way we build games and the way we operate and we’re just now moving into the phase where we’re starting to just manage our business that way and continue to keep an eye on our costs along that fashion.

Edward Williams - BMO Capital Markets

Okay, and then just a couple of quick ones; can you give us a sense as to the percentage of games that are being downloaded now, full game downloads of consoles. And then Frank, if you can talk a little bit about what your expecting for the mobile space and kind of what’s been driving that growth going into fiscal ’15.

Andrew Wilson

I’ll let Peter answer the full game download question.

Peter Moore

Yes, I mean as Blake said in his prepared statements, we’re seeing two to three times multiplies on what we saw in the previous generation for PlayStation 4 and for Xbox One. Depending on the games, depending on the platform, you can put that anywhere between 12%and 15%. So it’s not yet material, but it’s becoming an important part of our business going forward here. So that as I say is about two to three times the rate that we saw on Xbox 360 and the PlayStation 3 and we expect that trend to continue and of course its good for the consumer, as well as being good for us from a margin perspective.

Frank Gibeau

Ed, this is Frank. Let me give you a quick overview on what we’re doing in mobile. Lets start by looking at how we finish up ’14. As Blake said, we’re rapidly approaching a $500 million business in mobile. We had a record year. We’ve been in the mobile business for a while, but this was our best year ever.

Across our titles, we’re reaching about 130 million people on a monthly basis and we’re seeing that number continuing to grow. In ’14 alone we installed over 620 million games on mobile devices, which creates an incredible network of players for us worldwide.

Our four biggest titles; The Simpsons, Sims FreePlay FIFA 14, Real Racing, we’re all reaching revenue and engagement piece long after launch. So we’re definitely seeing a sustainment in terms of these light services that we’re creating.

Overall revenues grew about 24%, but more importantly, on smart devices and tablets we grew up over 40%. So while we’re pleased with where we’re at, we know we can do better and we expect that we’re going to continue to do better going forward and it really is about putting the other plan that allows us to execute and get back into the top of the charts.

I think we’ve done a good job at the art of game making. Our properties are very high quality, very well reviewed and we have very strong engagement. But we frankly need to get more productivity out of our live services and how we operate these games and that’s been one of our key focuses.

Today EA Mobile is a group of frankly very talented development and publishing teams. That group’s sole focus is on mobile platforms and it’s really been about increasing the speed at which we’re developing and responding to the market. We’re really going a lot faster than we have in the past.

We’re building big new experiences on our major brands and they are designed from the ground up as premium slide services, and their goal is to evolve over time based on player input and how players are engaging with the services. This is alongside of building a big braded games. New IP is vitally important inside mobile. We created a group of small teams that are rapidly prototyping new concepts and new IPs and new game mechanics for the mobile space and exclusively for the mobile space.

Our PopCap studio is at the forefront of these efforts and just as importantly, we’ve been investing in new go to market capabilities and technologies for our live service teams to deliver the maximum value to our fans.

So ultimately our goal is to build a diverse mobile platform of sustainable long term IPs from our collection of proven brands and innovative new ones. We want to spread them across multiple genres and they will be available in all regions.

Speaking of regions, success in Asia is vital for EA in mobile. That’s why we’re building studio and publishing teams in each of these major Asian markets. We now have dedicated mobile teams in Shanghai, Tokyo and Seoul, who are all working on culturealized versions of our existing IPs, as well as some new ones. In fact we’re going to be launching our first internally developed new game from EA Tokyo, FIFA World Cup for iOS and Android just next month with the release of World Cup, powered with the hot event of the World Cup event.

So frankly, we couldn’t be more excited about the mobile opportunity at EA, which is totally complimentary to our existing console and PC businesses and we have great growth opportunities in front of us for years to come. We’re not going to go deep on what our slate is for the rest of the year for competitive reasons, but as we approach E3, we’ll be telling you more and more as we’re filling out and building out our mobile strategy at EA.

Edward Williams - BMO Capital Markets

Great, thank you.

Andrew Wilson

Next question.

Operator

Yes, that comes from Colin Sebastian with Robert Baird. Your line is open.

Colin Sebastian - Robert W. Baird

Great, thanks. I add my congratulations on the quarter and your continued progress in the goals. I have one clarification on the major new games. Is this from an existing franchise or is this new IP?

Andrew Wilson

We will be announcing that at E3 next month.

Colin Sebastian - Robert W. Baird

Okay, fair enough.

Andrew Wilson

But we are very, very excited about it.

Colin Sebastian - Robert W. Baird

Good. Secondly, Blake, now that your already poised to hit the 20% margin goal ahead of plan and as you look ahead to fiscal 2016 and beyond that, can you put a new range perhaps on the potential impacts from operating leverage on the model as the cycle progresses?

Blake Jorgensen

We set a new world record. So its only 35 minutes after we provided guidance and I’m already being asked for next year. No, we’re not prepared yet. I think we’re very focused on just continuing to execute and really drive great gains and we’ll start to give people over the next six to 12 months, some center view on the longer-term digital strategy for the company. We’re excited that we’re reaching the 50% mark in digital business and what we’re really focused on is how do we get closer to 100%.

We believe that there is a huge opportunity and that the business is indeed changing and we’ll start to help people understand what that might look like over time, but right now we’re focused on execution and its really making sure ’15 is a success and sets us up for a great ’16.

Colin Sebastian - Robert W. Baird

Okay, well tried. One with Peter then.

Peter Moore

Good luck Colin.

Colin Sebastian - Robert W. Baird

It sounds like with the Madden Online and then Ultimate Team that you’re seeing a lot of progress there. Is the engagement, is the monetization on Madden similar to levels that you’ve been seeing at FIFA already that’s trending in the right direction.

Andrew Wilson

I’d say its trending Colin. It’s a different game you’re primarily doing with Madden, a relatively smaller game. 32 teams in the NFL versus the 750 we have in FIFA, but the trends are great. One of the things that we have seen and as you’ve heard from the number, the 90% year-on-year growth is that traditionally we’d look at Madden and we’d look at engagement levels drop off precipitously post the Super Bowl, but reverse has happened here.

Because of Madden and Ultimate Team, because of the great work the team at Tiburon had done by providing fresh content, we’ve seen very low drop off post Super Bowl and it bodes well for us as we have this FIFA now, almost for 12 months a year and a NFL experience as we do a 12 month a year FIFA experience.

So engagement levels are high. The monetization will catch up, but consumers are loving it as they do with FIFA and obviously when we combine all of the Ultimate Team’s that you heard from Blake, $380 million in visual revenue, not only is it meaningful material margin rich, but also the engagement levels that drives is phenomenal for us.

Blake Jorgensen

Yes, I think to Peter’s point that we’re seeing a similar situation in the NHL business, while its small as well compared to FIFA, the same type of engagement is occurring and we’re very excited about that and trying to make sure we’re taking those learning’s and using those across the portfolio.

Colin Sebastian - Robert W. Baird

Thank you guys.

Andrew Wilson

Thanks Colin.

Operator

The next question is from Doug Creutz with Cowen and Co. Your line is open.

Doug Creutz - Cowen and Co.

Thanks. I’m wondering if you could talk about Titanfall a little bit. First, if you could just share how many units you’ve sold to-date, that would be great and then you’ve mentioned the three map packs. I was wondering, you talked about live services a lot. How often are you thinking about ways to keep engagement of that game strong? See what will likely be a multiple year development process or the sequel when you’ve got other big shooters coming to market over the next six to 12 months. Thanks.

Peter Moore

Hey Dough, its Peter. So the first question, we said standby for Titanfall and boy! did it land and landed phenomenally well. MTV has us at 925,000 units sold through, which is for the quarter; its unbelievable considering it only arrived on the Xbox One with PC with three weeks to go. I can also tell you that the Xbox 360 version is off to a great start as well.

As regard to the Map Pack, the first one me can be coming later this month called Expedition. We obviously have three planned. On top of that we’re doing the season pass as well, which is keeping the engagement levels there and our goal quite frankly is to keep this franchise as fresh as we do with our Ultimate Team and our sports, as well as we do in the Battlefield obviously with Premium and as Andrew mentioned, we have a new publishing agreement with the very talented folks at Respawn who have done a great job and Vince Zampella and his team need to be congratulated for what they’ve delivered so far.

So we’re feeling very good about the digital engagement levels and hopefully we can continue to drive this franchise forward.

Doug Creutz - Cowen and Co.

That’s great, thanks.

Andrew Wilson

Thanks Dough.

Operator

Next is from Justin Post with the Bank of America. Your line is open.

Ryan Gee - BofA Merrill Lynch

Yes hi, this is actually Ryan Gee calling in for Justin. The first question I guess for Blake is, to help us think about the gross margin expansion potential. It looks like with over half of the revenue next year coming from the non-packaged goods side, but gross margin is only expanding maybe a point or so. Is there much left in gross margin for you guys or levers to pull there?

Blake Jorgensen

The first part is, the key is we do see the continued gross margin expansion due to digital, but we also have a couple of titles that are now starting to bear royalties in the year, that we didn’t have in previous years. UFC is a royalty bearing title and as Titanfall grows, it will still infer to pay royalties to Respawn for example, as well as the royalties on our regular sports product and so that counter balance is some of the F1 trend and we’ll see continued growth, but we think it moderates.

I think we’ve already said that you know it will move closer to 70% over time, getting above 70% where we currently have the business mix as it is and it won’t be hard longer term possibly as we move to a much higher percentage of digital; we would most likely be able to move it above that, but for now we’re expecting somewhat muted growth in the year, primarily just because of the royalty issue.

Ryan Gee - BofA Merrill Lynch

Okay, that’s very helpful. And then the second question I guess for Peter is, I’m not sure if this is covered in the prepared remarks, on the sports business, could you guys provide an outlook either for franchises or maybe an aggregate on sports growth potential for this year. You guys did that last year and that was really helpful. Thanks.

Andrew Wilson

I don’t remember the last year Ryan. We’re obviously very bullish. I think the focus, the next few months is going to be the FIFA World Cup. As you’ve heard in the remarks, we’ve now shipped that in; a lot of anticipation to that title. As soon as the domestic leads finish around the world, the teams then will, the national teams would gather in Brazil and your going to see a great pick up of engagement levels on a global basis with that.

With regards to a broader sports portfolio, I’d have to go back and look at what we said last year, breaking it down either by franchise or cumulatively. I’m not too familiar with what we did last year. Blake.

Blake Jorgensen

I could probably give you a little help here. So last year and this coming year we’ll see similar trends. We’ll still see some muting in the growth of the core franchises back in the biz and full game business because of the Gen3, Gen4 headwinds. So I would assume that your core franchises are about the same size as they were this year, with a little bit of growth to the digital Ultimate Team.

We’ll see some growth we believe in NBA LIVE. We’ll obviously have FIFA World Cup, which adds more than 2.5 million units probably. We’ll have USP in there and we’ll have the golf game that Andrew mentioned. So net-net you’ll see growth of the total sports franchise, but the core’s fifth franchise is probably fairly flat and then remember, NCAA will not be in this year. Its on a huge title, but it will create a small headwind against some of the new growth.

Ryan Gee - BofA Merrill Lynch

Great, thanks guys.

Operator

Next question is from Stephen Ju with Credit Suisse. Your line is open.

Stephen Ju - Credit Suisse

Hi Andrew, so I guess its more of a big picture question, but there is a rising opportunity here to tether your business through user base that you can explicitly manage. Manage as opposed to being forced to tether your business to a hardware-installed base that somebody else manages. So how does that change your game development philosophy or resource management if at all? Thanks.

Andrew Wilson

I just want to make sure I’m answering the right question. There is about who we build for with respect to which platforms and eco systems and how that relates to our development contract.

Stephen Ju - Credit Suisse

That’s right.

Andrew Wilson

So, again we think about our world in a few key pieces. The first key piece is around the core platform that actually facilitates the engagement ID, commerce, data, infrastructure, security, game services and certainly what we are doing now is building towards a future that has great ubiquity of devices and great ubiquity of gaming and a platform that will allow us to move without game advice, wherever they might play, at any given time and any given geography or any different business model.

The next thing that we’re really starting to think about a lot is how do we build an engine that is scalable from a six-inch screen to a 60-inch screen over time. So again, irrespective of where gamers are engaging with us, they are getting the highest fidelity in entertainment and you’ve seen what we’ve been able to do with the Frostbite 3 engine and EA Spots Ignite and certainly we’re starting to figure about how we built a scalable mold there and we’re investing against that for the future, so that it can move, irrespective of what size window or portal our gamers are playing through.

And then lastly it comes down to our games themselves and understanding that the user base is expanding, the platforms in which they play are expanding and the business models in which they engage with our games is growing and we’re moving from a place where its simply two hour sessions or 20 minute sessions to scalable session times and game designs that can facilitate kind of two minutes to two hours.

And so what we end up with in a future of ubiquitous devices, ubiquity of gaming is a platform that goes with the gamer no matter where they are and in them that can deliver the fidelity of experience, irrespective of what size window they are looking at it through and games that are designed to be with them, whether its in a two minute experience or a two hour experience over time and we believe that if we can deliver that and invest against that now, then we’re in a very good position for the future.

Stephen Ju - Credit Suisse

Thank you.

Operator

Mike Olson with Piper Jaffray, your line is opened.

Mike Olson - Piper Jaffray

Good afternoon. If we look back at the last cycle we saw a few players loose share and some were on a business and we thought EA and a couple of competitors that actually drove share and maybe drive higher industry concentration. Does it feel like there’s still market share growth opportunities or is this a strategy during this next generation to effectively preserve share in the renewed growth phase of the cycle.

Peter Moore

Hey Mike, its Peter. I think there’s market share growth, but more importantly there’s market growth and as Andrew just so eloquently outlined, the ability for us to be able to deliver content on all of the new platforms, the ubiquitous broadband that we’re now seeing for connected devices, our ability to be there with the A-games and franchises I think is inherited even more so in this generation that we’ve seen in the last few years.

So as we continue geographic and platform expansion, our mobile business continues to grow, so the top of the funnel brings more and more people who want to play games into smartphone and tablet play.

The 32 Play PC browser business continues to grow and we’re seeing quite frankly stabilization in our console business. Xbox One and PlayStation 4 are showing some growth. We’re up 127% in hardware sell through over the five months as compared to where we saw the Xbox 360 and PlayStation 3 in the previous generation. So I think all of the key indicators are pointing backwards.

Mike Olson - Piper Jaffray

Okay, and then you mentioned the higher percentage of purchases or full team downloads for next gen to-date. Could that be a function of early adopters being more kind of committed to building a library and owning certain titles permanently in their library and as next gen consoles extend beyond the early adopter crowd, well downloads will be a higher percent of purchases in the last cycle that it might not maintain the same kind of I guess overall share purchases.

Peter Moore

It could be. I mean its fairly based. With the first few months in we don’t have a huge portfolio of titles as an industry yet that’s testing this. I think both Sony and Microsoft have made it more convenient for consumers to instantly hit the A button and start downloading.

From the perspective of what we’re seeing, it depends on the genre. I think the early adopters interestingly are as likely to one, a title on the shelf as they are to on that’s in their hard drives, but the technology is there. I think the gamer interest in direct downloads in going to be there and I think we’re going to see continued growth in this area.

Again, full game downloads is even more ubiquitous obviously in the world of PCs and we’re seeing that growth as well. So when we talk about full game downloads, we not only talk about consoles, but also the PC. But I think this percentage is going to grow, absolutely.

Mike Olson - Piper Jaffray

Thank you.

Peter Moore

Thanks Mike.

Operator

Next is from Ben Schachter with Macquarie. Your line is opened.

Ben Schachter - Macquarie

Hey guys, congratulations on your recent success. So I recently tried Oculus Rift and it was really just a phenomenal experience. So I’m just wondering, how far off is the Oculus Rift style with the reality from commercial deployment? Is that one year, three years, is it still more than five.

And then just quickly, separately on mobile, a couple of your competitors continue to dominate the top 10 grossing charts. So I’m wondering, what it is that they are doing so differently than others? Is it the game quality, the marketing, the network effects and all these kinds of things, are these replicable by folks like yourself? Thanks.

Andrew Wilson

So I’ll take the one and I’ll pass to Frank to speak about Mobile. Oculus VR has done an amazing job in the realm of virtual reality and we’re eager to see how their headset evolves over the coming years.

For us, we’re always cognizant of emerging technologies, new opportunities and with any new technology its important for us to ensure that there will be an attractive install base before investing heavily, but they are certainly making strong progress.

Its also important to note that there are new peripherals such as Oculus, run common operating systems and architectures, its implacable for us and you know as we go to more devices and so what we’re doing right now is really monitoring the market place, where as what Oculus is doing, what some of the other devices are doing there and really thinking about that scalable infrastructure architecture I referred to in an earlier question and how we would pivot to a virtual reality, modality of play, if and when that becomes in high demand from our gaming base.

Blake Jorgensen

And its right, we talked a little bit about mobile, probably the most fast moving dynamic, high growth sector gaming right now and there isn’t one established formula for how to be successful in that category. Clearly our aspiration and frankly track record is that when we go after a market and go to the top we deliver on that, and that’s going to be our mission in EA Mobile.

If you look at what is really setting apart some of the biggest hitters in mobile right now, its how they operate and how they deliver live services around their games. Their games are live, they are social, they are vibrant, they are constantly changing or adding new features. If you look at the top 10 charts, many of the games that have been there have been out for months and months and months, including our own games, The Simpsons. The Simpsons was in the top five. And so we learnt a lot from the symptoms experience that we are brining to bear on the rest of our products.

But it’s the mobile market that is dynamic, its fast moving, but at the same time its really all about how you prep the game to launch and how you approach the live services and each of the competitors out there, whether its King or Supercell or Dunhill or Electronics Art, each have different approaches on that, but there’s some fundamental points that are important.

One, is the frequency at which you release content. It’s the quality of the features that you put out, it’s the morality of the game play and the game loops and its frankly how you use your acquisition marketing, your network marketing to build your IPs and frankly to introduce some new IPs along the way.

So I don’t think the book is written for how to be successful in mobile yet. There’s still a lot of experimentation, its very dynamic, and what works in Asia can be very different from what works in the west. So we are excited to get into this category in a much more significantly focused way and that’s our mission, to getting in to the top of the charts.

Ben Schachter - Macquarie

Great, thanks.

Operator

The next question comes from Brian Pitz with Jefferies. Your line is open.

Brian Pitz – Jefferies

Great thanks. Blake, you may have covered this is the prepared remarks, but just wondering if you could give us a sense for what’s driving the decision to announce the $750 million buyback, any change in philosophy here. And then separately curiously, how your progressing with the Star Wars games and the developments specifically at Battlefront. Do you think that we could hear anything about this title or other Star Wars title at E3? Thanks.

Blake Jorgensen

I’ll let Andrew address the Start Wars title. But let me just hit on the buyback. I think we’ve at lease in the last few years we‘ve been committed to buying back stock. It’s a firm belief of this management team that we need to return cash to shareholders.

The biggest single driver was first driving returns. I think you got to make sure you can keep the horse before the cart so the heck whatever it is and in that case it was we needed to generate better returns and we doubled our cash flow this year and we plan to raise it again next year based on our outlook and we feel very confident that we are moving into a higher cash generation phase of our business.

In doing that, it builds confidence on our ability to be in the market buying back stock all time and that’s our goal; its to just be consistently up there buying and covering our dilution when we issue any new stock internally for employees.

I think the other piece of that puzzle which we mentioned in the prepared remarks was that we also repatriated some foreign earnings back to the U.S. at a very advantageous tax rate and that moved our balance of cash on shore tuna that would be greater than off shore, where historically its been the other way around, and that allows us to even fuel the buyback program that much more.

So overall really driven by the operations and we are going to continue to stay focused on that. Andrew, get the Start Wars question.

Andrew Wilson

Yes, okay. So the Star Wars battlefront, the best I can say is its coming along very, very well. Frostbite 3 and the associated development tool set that comes with that has met the team has been able to iterate and drive innovation very quickly and get to a high quality quickly and certainly. There’s lots and lots of work to go. But we do plan to show more about and other new projects in development at E3 this year.

Operator

Thank you. Our next question comes from Mike Hickey with The Benchmark Company. Your line is open.

Mike Hickey - The Benchmark Company

Hey guys, congratulations on an awesome quarter. I’m not sure if you covered this already, but there is a MediaOracle on potential relationships with Comcast and allowing basically a streaming solution of many of your games directly to the set-top box or the TV. So I’m curious if you could talk about that or maybe not the specifics of the deal. Perhaps how you fell that sort of solutions to be productivity for your guys in the future.

Andrew Wilson

So I can’t comment on that specifically at this time. But what I would say based on what I outlined of a future that I believe is coming to us, which is this ability for gamers is to interact with games across multiple devices, through multiple channels, multiple business models throughout the day. You can certainly see that that modality of play might be important to a large populating of gamers, certainly in North American and around the world.

Mike Hickey - The Benchmark Company

Okay, fair enough and then Blake on the, I realize you guys don’t want to talk about the unannounced game. I’m sure we’ ill see it at E3. But guessing its kind of first person obviously, any sense of the wait of this game as it relates to the guidance that you gave for the year and then perhaps under the assumption it is an FDS, the landscape here, you know for the holiday period looks to be pretty thick. Just maybe how you feel that games can differentiate themselves and still find success is that sort of competitive scenario.

Blake Jorgensen

Well, we can talk about it being that its not announced, that’s basically what we’ve been saying and that there’s a gain in our forecast. What I would is I would think about it. The hold that we had to fill this year was essentially Battlefield sales from last year, if you don’t have the Battlefield in the year and so you got a hole that you got to fill.

The way we’re filling that hole is essentially new titles along the lines of FIFA World Cup, UFC, the Golf Game, Sims and Dragon Age. I would say that there was about two thirds of the hole. The rest of the hole we would assume was being filed by this new unannounced game.

We are highly conscious of the crowded slate in the back half of the year and what that means is its got to be a great game and its got to do really well, particularly on the new generation, boxes and are going to have to be unique and I think you will see all that E3 when you get a change to see the game.

Mike Hickey - The Benchmark Company

That’s fair enough, that’s very helpful. And then last one on the digital sales, obviously it looks like initially good traction here two, three times what we had on prior gen, but it seems like there’s some levers still really to pull here to drive greater adopting of digital, whether its pre-downloading maybe a loyalty program or pricing flexibility, maybe initially its to change behavior. How do you guys think about maybe being more aggressive or leveraging to pull to drive digital adoption and expand your gross margin? Thank you.

Andrew Wilson

Yes. I mean what you’re going to continue to see and hear from us over the next couple of years, a lot of things around digital. I prefer we don’t hear that much about pricing, because I think that there’s lots of ways that we can create better content, more convenience without having to change our pricing structure.

But I do think what we’ll focus on is how do you deliver the gamer a much more enhanced experience and they can do that with far less friction; meaning, getting in the car or having to order a disk and we believe the market is shifting that way and we’re going to continue to focus on how we can help drive that shift by driving great game play.

Operator

Thank you. And that comes from John Taylor with Arcadia Investment Corp. Your line is open.

John Taylor - Arcadia Investment Corp.

Hey, congrats from me too. I got a couple of question. I don’t know if you said this specifically, but could you give us a sense of the percentage of Titanfall that was delivered digitally as opposed to retail?

Peter Moore

Hey, JT its Peter. I can’t break down the individual titles. As I said and as you’ve heard two to three times in the last generation, depending on the platform, depending on the genre, depending on the game, anywhere between 12% and 15% of our total sales at any given moment. It might be full game downloads on those consoles and of course it’s a great percentage on origin, which type of fall is also available for. So all in all a growing part of the business, I can’t break it down right now by individual titles.

John Taylor - Arcadia Investment Corp.

Okay, the 12% to 15% is really helpful. And the its been a while since we’ve heard any kind of dissertation shall I say on Origin. Feels like Origin is kind of now built into the tool set that everybody is using to reach customers through e-commerce, maximize revenue per lower user acquisition cost and so on. Are there any metrics you can kind of share from year-on-year kind of improvement or expansion or declines. Is there any way you can kind of characterize how that tool is working in terms of building efficiency into the business?

Andrew Wilson

Yes, you talk about engagement and that’s exactly what we’re doing. We’ve doubled our monthly engagement levels year-on-year and we continue to grow. Obviously this year with the Sims 4 year coming up as well, we’re excited about how Origin becomes part of that tool set.

Its important to my organization, so its part of the publishing organization and I think it does a phenomenal job in engaging consumers. It allows us to be able to of course directly, commercially transact with them in the PC space and the more PC content we have the more powerful its going to be for.

As Blake will tell you, it’s a margin enhancing part of our business and particularly when you think of the Sims year coming up as well and of course we’ve had Battlefield and more recently Titanfall. So it continues to grow, we continue to invest in it. Its going to be an incredibly important part of our digital strategy going forward.

John Taylor - Arcadia Investment Corp.

Are there any sort of major improvements that you expect to do, say in the next 12 months in Origin or is it …?

Andrew Wilson

Yes, I mean we’ll talk a little bit more when I see you at E3 and I can maybe be bring in our team and if you want to do a deeper dive, I’m more that happy to do that. A lot of feature sets, we got a roadman, we are continuing to build the features in there, make it even more user friendly than it is right now. But yes, we can dive into that E3 if you have interest.

Blake Jorgensen

A couple of things you saw just during this past year you know, we introduced the great game here and TV for example more recently have done a program called On The House where we’re giving away some of our catalog titles to our really dedicated users. We took part of the Humble Bundle fund raising and had the highest. I think Humble Bundle sold $10 million, yes and some of that is obviously to get people to try Origin or to make sure we’re build a great relationship with our Origin customers and some of its just to make sure people are getting access to our games and every pivot platform that they want to and we’re very encouraged by where its going and we’re trying to keep our heads down and just deliver versus spend too much time talking about stuff. So hopefully you’ll see it in the numbers.

John Taylor - Arcadia Investment Corp.

Okay, let me ask Frank one thing if I can and then I’m done. So on the mobile side, Frank could you give us any sense as to how much effort resources wherever are going into new IP creation as opposed to leveraging the brand portfolio this year, given you can do rapid iteration and kind of improve on the flying on that kind of thing.

It seems like this ought to be kind of a workshop and in terms of bringing on new IP and expanding the market for EA and getting a little bit away from the portfolio, nothing wrong with the portfolio but new, as good as well. So any way you can talk about any of that.

Andrew Wilson

I can talk a little bit about share; its sounds like you’ve been reading my email. We have an I mentioned in my remarks, we carved off a lot of very experienced and high quality teams to go and rapidly prototype and we are taking about multiple prototypes per week and burning through them quickly, getting them into test, both internally with all of our employees as well as externally. So we see that focus on new IP rapid prototyping is absolutely vital to how we are going to succeed in mobile.

The big brands are important and it’s a good part of the portfolio, but right along side your going to see new IPs from us that come from this rapid prototyping, rapid testing endeavor that we’re embarking on and we’re pretty excited about it, because we have a vast network of engaged players that we need to get into position to introduce new IPs to them and new games to them. We couldn’t be more excited about it.

John Taylor - Arcadia Investment Corp.

Is there any way you can sort of characterize what percentage of your folks or development budget or whatever is sort of working on those things as opposed to leveraging the portfolio.

Andrew Wilson

We don’t really announce percentages that way. I would say that its bigger than you think.

John Taylor - Arcadia Investment Corp.

Okay, thank you.

Andrew Wilson

Ally, I think we’ll end it there.

Operator

Thank you. This does conclude today’s conference call. You may disconnect at this time.

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