Electronic Arts Inc.'s (EA) CEO Andrew Wilson on Q3 2022 Results - Earnings Call Transcript

Feb. 01, 2022 9:24 PM ETElectronic Arts Inc. (EA)
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Electronic Arts Inc. (NASDAQ:EA) Q3 2022 Earnings Conference Call February 1, 2022 5:00 PM ET

Company Participants

Chris Evenden - Vice President, Investor Relations

Andrew Wilson - Chief Executive Officer

Blake Jorgensen - Chief Financial Officer

Conference Call Participants

Benjamin Soff - Deutsche Bank

Andrew Uerkwitz - Jefferies

Mike Hickey - Benchmark

Eric Handler - MKM Partners’

Matthew Thornton - Truist Securities

Drew Crum - Stifel

Jason Bazinet - Citi

Mike Ng - Goldman Sachs

Mario Lu - Barclays

Andrew Marok - Raymond James

Doug Creutz - Cowen


Good afternoon. My name is Anita, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q3 2022 Earnings Conference Call. Mr. Chris Evenden, VP of Investor Relations. You may begin your conference.

Chris Evenden

Thanks, Anita. Welcome to EA’s third quarter fiscal 2022 earnings call. With me on the call are Andrew Wilson, our CEO; and Blake Jorgensen, our CFO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted detailed earnings slides to accompany our prepared remarks. And 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, our Q4 Fiscal 2022 Earnings Call is scheduled for Tuesday, May the 10th. As a reminder, we’ll post the schedule of our entire fiscal year of upcoming earnings calls on our IR website.

This presentation and our comments include forward-looking statements regarding future events and the future financial performance 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, February 1, 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.

Now, I will turn the call over to Andrew.

Andrew Wilson

Thanks, Chris. I hope all of you and your families and loved ones are staying healthy. Let me first say thank you to our talented teams at Electronic Arts, all 12,000 people putting so much energy every day into doing amazing things for our players.

As we begin, I’d also like to say a few words about John passing. John’s passing was a tremendous loss for the American football community, for the sports world at large and for all of us at Electronic Arts. Through his years as a winning coach, as a beloved broadcaster, and as the pioneering namesake of our game, Coach Madden was football for tens of millions of fans.

He taught us many things over nearly 35 years of partnership. Some of his most important lessons, including authenticity, are things we’ve held close to EA SPORTS ever since. We feel incredibly fortunate to have been part of Coach’s legacy and just as fortunate to be part of how it will live on through our future Madden NFL games.

We will have more to share about how we are honoring Coach Madden in the weeks ahead and from all of us at Electronic Arts, our thoughts and sympathies continue to be with his family, friends and many, many fans.

It has been a year of outstanding growth so far in FY 2022. Q3 was a record quarter, with our live services and mobile portfolio delivering strong recurring revenue and year-over-year growth. Our franchises like Apex Legends, our EA SPORTS titles, The Sims and more have universal appeal and as we expand to more ways to play across more platforms and business models, we are growing our total players, engagement, net bookings and underlying profitability.

We did have a challenge in Q3 as the launch of Battlefield 2042 did not meet expectations. Battlefield 2042 was always an ambitious game and our teams pushed to innovate across many dimensions including massive scale and 128-player matches, new modes, new dynamic gameplay and more.

Developing this game with our teams working from home for nearly two years ultimately proved to be challenging. Through our processes for testing and preparation, we believed the experience was ready to be put into our players’ hands. We launched with strong stability, however, as more players experienced the full game, it became clear that we are up and -- unanticipated performance issues that we would need to address.

Some of the design choices we made with the game also did not resonate with everyone in our community. We are fully committed to realizing the full potential of this game and fully committed to our Battlefield fans. We have already implemented a series of major updates to the game, and there is more to be done.

Players can expect meaningful updates to continue in the weeks ahead and we are shifting the first season of live service content to early summer as we work closely with our community to evolve and improve the core experience in Battlefield 2042.

Despite Battlefield’s miss against our expectations, with the strength of our business we are continuing to deliver record growth and performance in FY 2022. With Battlefield’s performance to-date and our decision to move the first season of live service into Q1 FY 2023, so we can focus on the core experience, we have adjusted our full fiscal year net bookings guidance to $7.525 billion, which remains $225 million above our original net bookings guidance for FY 2022.

On the strength of our live services, operational discipline and continuing digital transformation, we’re reaffirming our full-year expectations for underlying profitability. We expect strong growth to continue in FY 2023.

Looking across our portfolio, we saw continuing year-over-year growth in total players, engagement, net bookings, cash flow and underlying profitability in Q3. I’ll touch on each of those pieces here.

Beginning with total players, our games and experiences connect a global player network that continues to scale. Over the last year, our network has grown to more than 540 million unique active accounts, across more than 18 games and 25 live services, spanning all major platforms from consoles to PC to mobile and cloud.

From an engagement standpoint, more players are spending more time in our titles. Looking across our portfolio on all platforms, we’ve had more than 180 million monthly active accounts on average in our games during FY 2022.

Apex Legends monthly active players are up more than 30% year-over-year in Q3, and across our combined EA SPORTS portfolio, monthly active players are also growing year-over-year. Engagement is deepening as well, with players spending nearly 20% more time in games across our portfolio in FY 2022 compared to the previous year.

Growth in our network and engagement continues to drive growth in our business. With our top franchises delivering strong recurring revenue, our net bookings for Q3 grew 7.4% year-over-year for the quarter and for the full year we project 22% growth in net bookings over last year. Performance across the business and operational discipline also continued to deliver strong cash flow and underlying profitability growth in Q3.

This continuing growth is anchored by proven franchises where we have a strong track record for execution. Apex Legends is now one of the biggest and most successful ongoing live services in the industry and is built on our owned IP.

With more than 28 million new players joining in the last year and new seasons and in-game events that continue to deliver new experiences to a deeply engaged community, FY 2022 is the biggest year yet for Apex. Average player investment in the game has grown significantly year-over-year and we expect to achieve -- and we continue to expect net bookings for Apex to approach $1 billion in FY 2022.

We are expanding to reach more players and viewers, with new original content on the way, our growing Apex Legends esports ecosystem, and Apex Legends Mobile which will soon be moving into soft launch as we continue our worldwide rollout. We’ve had strong engagement and community feedback during closed beta testing and we’re excited for more players to experience Apex Legends Mobile soon.

Mobile is a core growth engine for us, and it is accelerating. With new launches and acquired expertise and technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY 2023 with growth well into double digits.

Led by Apex Mobile, our newly-updated FIFA Mobile game, Golf Clash and more unannounced projects, we are expanding our portfolio of more than 15 top mobile live services to reach new audiences and grow our recurring revenue.

EA SPORTS is a powerhouse in the sports and entertainment world. We’ve driven hundreds of millions of dollars in net bookings growth year-to-date, with our EA SPORTS business up nearly 10% year-over-year. We continue to see incredible growth for the future of global soccer and our global soccer franchise was the number one title in the western world in calendar 2021.

Madden NFL 22 was the number one sports title in the U.S. during the holiday period and it was the number three top selling game in the U.S. for all of last year. Under our leadership, F1 2021 also continues to perform well above expectations with unit sales nearly doubling year-over-year during the holiday period.

In our mobile sports portfolio, we just launched the latest version of our EA SPORTS FIFA Mobile game around the world. This was the biggest update to the game ever and early performance has been exceptional.

Engagement is up more than 50% over the previous season and retention in the first week is nearly double. With the added expertise of Playdemic and Glu, and a deep pipeline of new sports experiences in development, EA SPORTS continues to be an exceptional growth business, built on predictable and recurring revenue with outstanding opportunities ahead.

Our pipeline further amplifies our strength. In addition to our core franchises, we are building new experiences in some of the biggest enduring IP in entertainment. Last week we announced a new agreement with Disney & Lucasfilm Games to develop new experiences in the Star Wars universe, continuing our collaboration of more than a decade.

Respawn is leading development of the next game in our action-adventure Star Wars Jedi series, as well as two additional Star Wars titles. This adds to our deep pipeline of announced and unannounced projects with our wholly-owned IP, including Need for Speed, our BioWare franchises, The Sims, Skate, Dead Space and more.

Looking forward, we are continuing to build on the structural advantages of our portfolio and accelerating growth by executing against our core strategy. We are focused on creating amazing games and content, providing creation tools for the community to engage more deeply with our experiences, aggregating and distributing our content and experiences to more players on more platforms, more geographies and business models, and harnessing the power of social ecosystems in and around our games.

The demand for amazing games and new ways to play, watch, share and create has never been stronger. As one of the industry’s largest and most profitable businesses with strong recurring revenue, we are well-positioned to take advantage of this continued secular growth. We look forward to delivering against these opportunities through FY 2023 and beyond.

Now I’ll hand the call over to Blake.

Blake Jorgensen

Thanks, Andrew. Q3 was a quarter that demonstrated the strength of our live services portfolio. Despite a tough Battlefield launch, we came within a couple of percent of our net bookings guidance and beat our expectations for underlying profitability. The quarter was the largest in our company’s history for net bookings, underlying profitability and cash generation.

Sales of Battlefield 2042 were disappointing, but they are offset by a strong showing from FIFA and continued strength from Apex and our other franchises. We delivered net revenue of $1.79 billion and net bookings of $2.58 billion.

FIFA 2022’s strong start continued into this quarter, with unit sales now up double-digits over last year, launch to-date and players continued to engage in FIFA Ultimate Team and invest in their teams. This has made it the strongest FIFA launch ever measured from launch to the end of Q3. Apex Legends that split net, excuse me, net bookings continue to grow at an extraordinary rate and will deliver close to a $1 billion for the year.

Digital represented 64% of full game units sold through on a trailing 12-month basis, up 2 percentage points from last year. The strong digital mix for full game sales, aided by growth in live services, pushed underlying Q3 gross margin 2.3 percentage points above last year.

Operating expenses, which include recent acquisition costs, came in below our expectations, driven by variable compensation and savings and phasing of marketing spend. It’s worth noting that we were able to hire more people than in any other quarter in our history and are continuing to invest in our games teams.

We now expect fiscal 2022 GAAP net revenue to be $6.925 billion, cost of revenue to be $1.844 billion and earnings per share of $2.43, up from our original expectation of $1.34. We are taking our net bookings guidance for the year to $7.525 billion. Although $100 million reduction on our position at the end of Q2, it is $225 million above our original guidance for the year. The reduction is driven by Battlefield 2042 in both Q3 and Q4, but offset by strength in the rest of the business, particularly in FIFA and Apex Legends.

We’re committed to turning Battlefield around and building a sustainable live service, even if some of the actions we’re taking, like moving the first Season into FY 2023, impact net bookings in the short-term.

Reflecting the strength of our portfolio, our operating cash flow guidance is now $1.900 billion. This would be close to the largest full year operating cash flow in the company’s history, despite nearly $200 million of one-time tax payments related to acquisitions this year.

With capital expenditures still around $200 million, that would deliver free cash flow of about $1.700 billion. Note that this is $200 million above our original expectations for FY 2022 free cash flow. See our earnings slides and press release for further cash flow information.

For the fourth quarter, we expect GAAP net revenue of $1.759 billion, cost of revenue to be $404 million and operating expenses of $1.086 billion. This results in earnings per share of $0.46 for the fourth quarter. We expect Q4 fiscal 2022 net bookings to be $1.761 billion. This would be our largest Q4 ever, even if we only count organic growth.

We’ll formally guide FY 2023 in May, when we report Q4, but we’ve heard that some of you are concerned that the Battlefield performance might impact next year’s growth. Let me emphasize here again that we are a portfolio company.

As originally forecast, the Battlefield franchise would have accounted for significantly less than 10% of this year’s net bookings and well below 5% of next year’s. We’re revising those numbers, but you can see it has little impact on FY 2023 growth.

The main drivers of growth next year remain FIFA on console, Apex Legends, Apex Mobile and FIFA Mobile. Golf Clash will also contribute to year-on-year growth, since we acquired Playdemic halfway through the year.

With regards to new launches in FY 2023, we’ve disclosed that Need for Speed is on the slate and we’ll announce more titles closer to the time. In total, we still expect mid-to-high single-digit growth next year.

To summarize, we just delivered the largest quarter in the company’s history. FIFA goes from strength-to-strength. Apex Legends continues to show extraordinary growth. Battlefield disappointed, but our broad portfolio of games and live services insulates us from the impact of any one title. Our portfolio approaches -- approach enables us to deliver double-digit organic growth this year and continue to deliver strong cash flow, and provides a strong foundation for growth as we look to the future.

Now before I hand the call to Andrew, you may have notice that yesterday we have a new CFO for the company and I think the new CFO, Chris is going to be a fabulous addition and will do a much better job, probably, than I have ever done.

I thank, Andrew and the team, our executive, as well as the entire company for the amazing partnership that I have had here for nine and a half years at EA. It has been the most enjoyable experience of my entire career.

I also thank the buying side and sell side analysts and partners for all of their support over the years and wonderful interaction. And last but not least, been Chris Evenden, Eric Green [ph] and Fabiola for their amazing IR performance that interacts with all of you.

So, now, I’ll hand the back to Andrew.

Andrew Wilson

Thanks, Blake. These are exciting times in our industry. Interactive entertainment continues to grow by every measure and our audiences are expanding and diversifying, major franchises are at the center of culture and entertainment, and the world is recognizing how games have the power to connect global communities.

Our focus continues to be on our people, our players, on our amazing portfolio of games, content and services, and extraordinary growth opportunities in the future. Thanks to our incredibly talented teams at Electronic Arts, we are delivering entertainment to hundreds of millions of people around the world and connecting them through some of the most powerful and enduring franchises.

With the breadth and depth of our business that continues to expand our network, deepen engagement, and drive growth in our recurring net bookings and ongoing profitability, we are well-positioned and strategically -- well-positioned strategically to continue building on our success and delivering for our players.

As we look ahead and Blake just referenced, we were excited to announce yesterday that Chris Suh is joining Electronic Arts as our next CFO. Chris is coming to us after more than 25 years at Microsoft, where he served as Corporate Vice President and Chief Financial Officer of the Cloud and AI group, which he led with incredible success during Microsoft’s transformation to a cloud-first company.

We have a big vision for the future, and in addition to Chris’ financial leadership of our organization, I look forward to having him as a strategic partner with extensive experience driving scale and growth to help us achieve our goals.

As we announced previously, Blake will be leaving our team after nearly a decade of leadership at EA. Blake has been an incredible leader, partner and advisor. But most importantly, he is a dear friend and I feel deeply grateful for our time working together.

His expertise and the team he has built have been instrumental in our growth and financial achievements, and have positioned us well for continued success. Blake will remain with us until the summer to assist with the transition and special projects. Thank you, Blake, for everything you’ve done and continue to do for our company, and again, thank you for your friendship.

Now, we are here for your questions.

Question-and-Answer Session


[Operator Instructions] Your first question comes from the line of Benjamin Soff from Deutsche Bank. Your line is now open.

Benjamin Soff

Hey, guys. Just a quick thank you to Blake for being a great partner and looking forward to meeting Chris. Two questions. So, first, just around Battlefield, can you guys sort of frame for us how you think about the vision for the future of that franchise, and in particular, how the new leadership for the Battlefield you are just thinking about expanding and adapting that franchise over time? And I’ve got a second question.

Andrew Wilson

Yeah. Great question. Again, we have a very bold vision for where this franchise go. This franchise has always led the category in creativity, innovation, scale, gameplay, community. And as we are coming to launch, again, we had a very bold vision for this game.

As it turns out, we’ve had some challenges, not least of all, trying to build this game and provide this game from home, and so our focus now is really making sure that core experience lives up to our fans, the community’s expectations.

Beyond that we’ll continue to invest and grow the franchise, we have great leadership with Vince and Byron, and others, with tremendous background from other great shooters in the industry, kind of leading the future.

I believe that we’re going to see this game do really well over the course of time. I think we’ll expand to mobile. We will expand to other new interesting ways to play. But certainly this is just a moment where we take a pause and do all we can for the core game and the core community.

Benjamin Soff

Got it. And then, just in light of the announcement that you guys are working on those three new Star Wars games. Can you talk a little bit more about your vision for that IP? And is it fair to say that going forward, you’re planning to lean more towards investing in your own IP? And if so, what are the like some of the potential pros and cons of that as a strategy? Thanks.

Andrew Wilson

Yeah. The very strength of our business is our balanced portfolio. We have both a deep and a broad portfolio. And what we’ve demonstrated over the course of our, the best part of 40 years is to really develop both our own IP over time, the Need for Speed, The Sims, Battlefield, Apex Legends, our BioWare franchises, we have Skate in development now, Dead Space on the way, so an incredible portfolio of own IP that has an extraordinary following across the industry.

Combined with other long-term enduring IP, we have the powerhouse sports franchises. And they are true evergreen franchises and this is not just about licensing content. This is about working with over 300 partners across the various sports industries to deliver a true connection with the sports, the leagues, the teams, the players that our fans love. And we’ve been doing that now for well over 30 years and I think that we will continue to do that for many, many years in the future.

And things like the Star Wars franchise, again, a long-term relationship we’ve had with Disney for more than a decade. And this is not simply about building or revisiting things that already exist in the universe, but really adding to that Star Wars universe and really delivering new opportunities for Star Wars fans to experience great Star Wars content.

And so as you think about our strategy going forward and the strength of our company, it really comes down to our ability to develop and build and publish industry-leading owned IP, but also work with partners over decades to truly deliver fan favorites with long and enduring fan bases, like, our Sports franchises and like Disney.


Your next question comes from the line of Andrew Uerkwitz from Jefferies. Your line is now open.

Andrew Uerkwitz

Hey. Thanks. Thanks for taking the call and just reiterate the positive sentiment from Blake. Blake is doing a great run. Really enjoyed it. I guess I just had really one question. No follow up. You’re -- one of your bigger competitors was just taken out. You guys have quite a good portfolio and have taken a portfolio approach for years. How do you think the industry will look in three years or four years? Do you guys see yourself as a consolidator of potential seller? How do you see this industry shaking out over the next three years to five years? Thanks.

Andrew Wilson

Yeah. Great question. And you should imagine we read this for some time as it turns out and part of the reason why we have built the strength in our broad and deep portfolio and why we have gone out in search of the best teams in the industry to bring them into our company and build great entertainment for our global player base, what is now well over 0.5 billion fans, is because we do believe in the power of entertainment. We just believe in the power of interactive entertainment.

I think what we’re seeing now in the marketplace is the launching of the value of what we do in particular. And so, as I think about the attainment coming together, you’re seeing some other companies talk about this. But when we think about our players and we think about the things that they engage in, they play our games more than any other form of entertainment, but they also consume linear media and scripted entertainment and sports broadcasts, and music and other things.

And so, as we look at the future, we are building strength in our whole ability to live interactive entertainment to our fans, which we think will continue to grow well north of a 1 billion fans over time. But we’re also aware that our fans are expecting us to find new and interesting ways for them to experience entertainment. And so, as our -- as we think about the future, you should think about it with IP at the center and engagement around play, watch, creep, social ecosystem that brings that they love.

And when you look at our strategy of what we’re doing around in great -- creating great entertainment, around building tools, so that now community can engage more deeply, around the aggregation and distribution of content across platforms, across business models, across geographies, and really leaning into the social ecosystem to the board out of engagement in our games, I think you should imagine that’s what the world look [Technical Difficulty]

Andrew Uerkwitz

Got it. Thanks so much.


Your next question comes from the line of Mike Hickey from Benchmark. Your line is now open.

Mike Hickey

Hey, Andrew, Blake, Chris. Thanks for taking my questions, guys. And Blake, I’m going to miss you buddy. I am sure you would be getting a lot of skin and so I’m not feeling sorry for you. But it’s been great working with you, so. Question is, I guess, on Battlefield, obviously, disappointed. Can you give us -- can you size the units you sold in the quarter? I think you’ve guided for 12 or so, but just sort of curious where you ended up versus expectations? And then thinking about how you sort of re-engage that audience. There’s been some ideas around beta play, curious about the possibility? And then I didn’t hear mobile, have you got mobile for Battlefield or is that just delayed? Thanks.

Blake Jorgensen

Sure. Let me -- Mike, thanks for your nice comment to the other analysts as well. Unfortunately, I’m sure I won’t get as much skin as I would like. But we’re going to refrain from trying to give updates there. Remember, Battlefield is less than 10% of our revenue. We sold less units than we thought we would. But what I would say is that, remember these [Technical Difficulty] and so our goal is to add new excitement to stretch this out. And in some ways, we hoped it benefits FY 2023 since we’ve had a pretty strong FY 2022 and so it helps us in the future. I’ll let Andrew address the second part of your question.

Andrew Wilson

Yeah. So, I think that, you remember coming into the launch, the demand measures were very high, influence for us. The core underlying created for the game still has really strong demand around it. And we -- as I mentioned, we had some challenges around stability, particularly on high end PC machines and performance and there were some design decisions, but not all the community really agreed with. And so our focus right now is to really go back in and make sure we get that stuff right.

And as much as I hate to admit it, DICE’s the studio that has been able to do this a number of times now and really go back and rebuild at the core and reengage the community, as long as we do that in conjunction with a committee. That’s what that studio was so great at doing.

So I think the combination of DICE with the new leadership and a strong vision for the future, we will build out the core, we will reengage the community and we will manifest that demand that we saw coming into launch over the course of time.

Mobile is still developing, the metrics are showing up really strong. I think, right now we’re looking at going into the next closed beta at the end of this month, and as is the case of mobile, we need to choose and test in the environment.

And then as it relates to free-to-play and other modes of play, again we have a big bold vision for this franchise. This franchise since its inception has been a leader in creativity and innovation was how it’s played and how it’s delivered. And you should expect that we will continue to work to deliver new and interesting ways to engage with this game over the course of time. And while I’m disappointed with how it launched, I’m still very excited for the future.


Your next question comes from the line of Eric Handler from MKM Partners. Your line is now open.

Eric Handler

Good afternoon and thanks for the question. Andrew, I wondered if you could just talk a little bit about when you think about the expansion that’s going on in the video games industry in the last year or so and we’re seeing a lot of user-generated content and platforms around that start to proliferate. We’ve seen a lot of venture capital funding into blockchain and NFT gaming, wondering how you’re thinking about those channels eventually and it’s easier to build from within? Is it better to buy once there’s some established players there? Just want to get your mindset there.

Andrew Wilson

Yeah. Great question. I will tell you, I started this industry over 20 years ago. At that point in time it was the fastest growing entertainment industry on the planet by a wide margin. I think it has been the fastest growing entertainment industry on the planet every year since then. But still people seem to be surprised by this. So we’re not surprised by it at all, and I think, as technology has continued to evolve, we have been able to deliver new and interesting and fun ways to engage with content.

And what we’ve seen more recently is just how powerful the social ecosystem, the social networks bought out of engagement in our games truly are amazing. Now -- it’s not now just about ingesting entertainment the same way we do traditional scripted media or traditional broadcasters, usual music. This is about experiencing entertainment with your friends and that’s unbelievably powerful. I think that has been really the fuel that has driven the growth in recent time.

As part of that, of course, the ability to create your own content and put it into that ecosystem has become a really valuable part of, of what our industry offers to our players and our fans. The traditional media just doesn’t and this is something that we hold true.

Again, it’s been at the very center of The Sims for a long time. It’s at the very center of mode like FIFA Ultimate Team and Madden Ultimate Team, to the very center of the design of Skate, which we’ll be launching soon.

And so this concept of UGC or user-generated content is really just an extension of the social interaction that I’m able to have with my friends in and around experiencing what is the best anytime on the planet. And so I believe that’s going to be a really important part of our future.

Now, to the extent whether we want to build that out or buy out over time, right now we are building, we’re building technology, we’re building credit, we’re building assets with we’re offering that out to communities around the world and we’re seeing great uptake of that. If there was an acquisition opportunity in the future, we would openly look at that, but we don’t -- we’re not looking at anything at this juncture.

Around the NFT and where VCs are investing, again we see this also happened our industry. We start with 3D, we start with AR/VR, we’re now seeing with MCs. There’s always something in and around our industry that is driving a lot of external investment.

The way I look at this is, collectability is really built on four key metrics. It’s around high quality content, it’s around scarcity, it’s around proof-of-authenticity and it’s around a group of people that find value in that content.

And we’ve seen that happen in the real world and we’ve seen that happen in a virtual world. We’ve certainly seen that happen in and around our games for some number of years. And I believe that collectability will continue to be an important part of our industry and the games and experiences that we offer our players.

Whether that’s part of the NFT and the blockchain? Well, that remains to be seen. And I think the way we think about it, is we want to deliver the best possible player experience we can. And so we’re going to -- we will evaluate that over time. But right now, it’s not something that we’re driving audience.

Eric Handler

Thank you very much.


Your next question comes from the line of Matthew Thornton from Truist Securities. Your line is now open.

Matthew Thornton

Hey. Good afternoon, Andrew and Blake absolute best of luck to you and your future endeavors here. It’s been a pleasure. I guess two questions. First for me, you got to talk about in the back half of the fiscal year, obviously, Battlefield missed. That’s partially offset by strengthen in FIFA, Apex and others. With FIFA, in particular, I guess, you talked a lot about kind of unit strength year-on-year? I’m just kind of curious how you felt about or are feeling about your Ultimate Team and the live services component into the back half of the year? I guess, it’s first question. Second question, I am curious, you are coming back to mobile, and maybe some of the recent acquisitions, kind of curious if you could talk a little bit about how you’re thinking about advertising, I know, it’s come up a bit, other companies might get 10% to 20% of their mobile bookings from advertising, Glu brings some new capabilities, I am curious how you are thinking about advertising, I am curious how you’re thinking about the Glu pipeline, you have almost a year into that deal. And then also, when we might start to hear a little more about kind of what your plans are with Metalhead and Super Mega baseball? Thanks guys.

Blake Jorgensen

So let me -- I’ll start on the live service piece and then I will let Andrew hit the second question. Live service growth in the quarter was 9% and trailing 12 months is 21%, and that’s across all of our live services.

And so, if you look at something like Apex or FIFA, they’re clearly well north of that. And we feel -- continue to feel it is one of the cores of our business, because it is reoccurring and highly dependent on the social networks that we’ve created in our games, and particularly, on sports, those are evergreen networks that continue every year.

And so the metrics we see are exceptional up well over last year. If you look at the Apex numbers, as we reported, the dramatic improvement year-over-year and everything they do is continuing to try to drive engagement with people that brought a large number of new players into the game or obtained players and continue to come up with amazing and unique ideas for ways to play.

So we’re very excited about how that continues and it continues across all of our sports, and we’re looking as to how do we do that across more and more games going forward. So I’ll let Andrew talk about Glu a little bit.

Andrew Wilson

Yeah. Again, we are working closely with Glu. It is still relatively early days with the acquisition for both them and Playdemic, and we are working both on bolstering our existing 15 live services and building out new ones. And as per my prepared remarks, we’re projecting well into double-digit growth next year and that includes Apex Mobile and renewed FIFA Mobile, and a full year of Golf Clash and ongoing growth across the portfolio and we’re excited about that.

With respect to advertising, specifically, we are taking the Glu advertising stack and applying it across our games. And it’s little early to know just yet exactly how that will manifest, but based on what we are seeing across the industry, we expect that that represents some revenue growth there also.

So, overall, mobile now really is a strength of ours. It’s a very important part of how we drive growth in the business, both in our existing games, in our new launches and with the potential of mobile advertising across the portfolio.


Your next question comes from the line of Drew Crum from Stifel. Your line is now open.

Drew Crum

Okay. Thanks. Hey, guys. Good afternoon, and Blake, best of luck. I am Curious as to your thoughts on where the businesses in terms of engagement normalizing? Is the reopening headwind behind you or is this something we should anticipate in calendar 2022? Is it contemplated in their fiscal 2023 net bookings forecast? And then, separately, your OpEx growth year-to-date is approaching 30% year-on-year? Should we see that slow materially once you start to anniversary acquisitions or how should we be thinking about OpEx going forward? Thanks.

Blake Jorgensen

Yeah. I can take the OpEx question quickly, Drew. I mean, clearly, most of that was driven by two things; one is, our acquisitions, probably, the biggest driver of it; but second is, driven by the fact that we’ve used this opportunity of some questions in the gamer community about which companies are going to be around and which aren’t, and we’ve been able to hire some amazing talent during that because of our stability. And so that doesn’t continue on forever. Obviously, the acquisition growth is a one-time component, sorry.

So, I think, we’re -- remember our OpEx is really comes down on two things, headcount and marketing expense. So the marketing expense will swing by the titles that are in any one year, but we’re pretty good at managing that. And the headcount we’re also very good at managing and so I don’t think you’re going to see a jump like we’ve seen this past year.

But remember, even with the OpEx growth that you see, look at the Q3 EPS number. I mean, clearly, we’ve been able to manage that even with a downdraft of $48 million in revenue that we didn’t originally plan. And so we’re a pretty flexible organization to be able to try to manage that to keep margins going and so I think you’ll see that going forward.

Andrew Wilson

On engagement through or post-COVID, depending on how you think about it, I think we’ve been on a rolling situation around the world of kind of coming back and shaved down a little and coming back.

Broadly speaking, though, much of the world is out and about, they’re at sporting events, they go into theme parks, they’re watching movies, they’re going to dinner. So much of the world has returned mostly to normal at this juncture by our calculation.

Even as part of that we’ve seen not only number of players grow, again, over 540 million people now on our network, we’ve also seen time spent in our games grow by over 20%. And I kind of look to that as not just about creating amazing games, entertainment, but it is the social interaction.

I think what COVID has taught us is that games are a great way not just to get our entertainment fixed, to remain deeply connected with our friends and fans and rivals. And what we’re seeing now, I believe, is actually the long-term effect of the discovery of not just the value of our of what we do in terms of entertainment, but also the value in maintaining connections with those we care most about and we would expect that to continue and actually create a flywheel for added growth.


Your next question comes from the line of Jason Bazinet from Citi. Your line is now open.

Jason Bazinet

Thanks. I think it’s a little bit early to talk about this. But I would be very curious about how you’re thinking about your business and strategies that relates to the metaverse as that becomes more real. Is that something that you view is just another opportunity for you to engage your fans? Is it a battle about time span? Is it potentially sort of change industry, sort of rev shares or is it just sort of a non-event and you guys think you can sort of continue to focus on your IP and engagement and it’s really sort of not material? Thanks.

Andrew Wilson

Yeah. I mean a great question and certainly another one of these things that is kind of a topic gives you at the moment and many people are talking about it in different contexts, quite frankly. At the end of the day, the metaverse is a three dimensional social space where you come together to experience things with your friends. And so now much of that happens in the two dimensional internet around the social networks that we see. But I will tell you, a lot of that happens in the context of our games.

And as I look at the nature of our games, I look at the engagement that we’re seeing inside these 3D spaces that we create in and around sports and other worlds. What you see with our industry is the beginnings of what a metaverse might be.

And over the course of time, you should expect us to continue to expand and extend the world that we have been creating for the last 30 years and deliver more experiences beyond the core consider the game. So what can you do in FIFA beyond playing football? What were you doing Need for Speed beyond driving the game? What will you do in The Sims as you come together with your friends beyond the creation of content? And you’ll see that continue to evolve for us over the course of time.

And I don’t know ultimately what the metaverse will become. But what I do know is the games we create are becoming more important as social spaces and they are just as places to enjoy great entertainment as we continue to build out those experiences and as whatever the metaverse becomes it’s an almost certainty that we will play a very important role in it and that our players will be on the leading edge of the evolution of what these spaces might become.

Jason Bazinet

That’s super helpful. Thank you.


Your next question comes from the line of Mike Ng from Goldman Sachs. Your line is now open.

Mike Ng

Hi. Good afternoon. Thanks for the question. I just have two. First, I was just wondering if you could talk a little bit about EA Play, where are we with EA Play subscriber today and how do you see the outlook for video games description services changing particularly with recent consolidation? And then, second, it was encouraging to hear the reiteration of the mid-to-high single-digit topline growth for next year? I was wondering if you could go a little bit more in detail around some of the drivers. What do you see driving some of the FIFA trends and are there new games or unannounced titles embedded in that outlook? Thank you very much.

Andrew Wilson

Yeah. Let me quickly hit on the EA Play component and then I’ll let Blake talk about the mid-to-high single-digit growth. EA Pay continues to grow for us. It continues to be a really, really positive consumer experience, getting access to some of the greatest content in the industry. What we see more broadly across entertainment is its subscription continues to be a core driver.

And what we’re able to do is drive ongoing engagement, perhaps, in a way, even it -- the stronger than traditional linear or scripted entertainment. I think that you’ll -- we will continue to see consumers engage in our content through subscription and we will continue to provide our content that way and I think we’ll start to see more and more growth across platform.

We continue to be the leading provider of a gaming subscription across platforms in our industry, and with the depth and breadth of our portfolio and the new experiences we have coming. We believe that we’re going to continue to drive growth.

And over the course of time back to my earlier point around entertainment, you might expect us to do more things beyond just games in the context of that subscription around a broader service for our clients and we’re pretty excited about what that might become over the course of time.

Blake Jorgensen

And on the 2023 question, obviously, as we said, we’re not yet ready to give guidance, which we normally don’t do at this time of the year, but we did give some hints. And the keys to driving growth are obviously our core portfolio, things like FIFA, for example, and live services is associated with it, bat and hockey and other sports.

Apex Legends, obviously, has continued to evolve and show an amazing growth. We will have an Apex Legends Mobile game in the market. We don’t know exactly what time that will be and there’ll be a global build for that game, as well as the Chinese build for that game. And we’re working with a partner there and things are going very well in test, but we’re excited about that as a major growth driver.

We will have more growth we think out of the FIFA Mobile game that we just put into the market. And remember that we only had our book, really a half of year of Playdemic Golf Clash game. We’ll have a full year event next year. And we’re working with Playdemic on how they can take that Clash mechanic into other sports areas where we have licenses already.

And then we’ve got a Need for Speed game coming and there are three or four more things to that we haven’t announced yet, but you can imagine we are always trying to find ways to grow the portfolio year-over-year through new titles, new IP and expansion. And as well, acquisitions, which right now we’re in the digest mode, but doesn’t mean that we won’t keep looking at everything going forward.

So we’re excited about next year. It looks like a strong year to come. And as Andrew said, we know that this is one of the greatest entertainment vehicles in the world right now until we’re really in the sweet spot and that’s what gets us excited about it.

Mike Ng

Great. Thank you both. Sounds incredibly helpful. And Blake, best of luck in your next chapter.

Blake Jorgensen

Thank you.


Your next question comes from the line of Mario Lu from Barclays. Your line is now open.

Mario Lu

Great. Thanks for taking the questions, and Blake, it’s been a pleasure interacting with you over the years.

Blake Jorgensen

I appreciate that.

Mario Lu

Yeah. I guess the first question is more high level. You guys said in your slides. Spending -- playing time is increased 20% this quarter compared to the year prior? What was the largest driver of that and I don’t know if you have this data, but what’s the typical lag historically between growth and time span and monetization? And then, secondly, you guys did not really talk about Madden as much on this call. So just wondering what the delta is between it performance versus like a FIFA. Are things, like, maybe unpack something what’s kind of driving the growth here, anything out of Madden that you can talk about? Thanks.

Andrew Wilson

Yeah. So let me start with Madden. Madden is also having a great year and we’re seeing tremendous growth. As you know and then for all of you who follow the season, this has been an unbelievably exciting season of football and what we know…

Blake Jorgensen

49ers. Yeah.

Andrew Wilson

…and let’s -- well, and what’s exciting for a second, the playoff games and the season overall has been an unbelievably exciting game. The ratings for the NFL have been extremely strong through the year and that’s driving really strong engagement in and around our Madden franchise and it continues to go from strength-to-strength.

Blake Jorgensen

With respect to what drove engagement, again, we have this great portfolio and while we certainly saw extraordinary growth in Apex Legends, we saw a great growth in FIFA. We also saw growth across the portfolio.

And on -- Apex was 30%, FIFA was our esports portfolio was up 10% on what is a very big number. But we’ve seen growth across the portfolio that speaks to the value of the breadth and the depth of our portfolios.

In terms of lag between engagement and monetization growth, which I think was one part of your question there. I don’t have exact numbers for you on that. What I would say is our teams work very closely with the communities and ensure that they’re always providing new and interesting content.

And what we know about all of our communities they play and they make a choice of do they want to invest more time or do they want to invest more money in the experience and it’s really the ability to build that balanced ecosystem that speaks to the strength of our live services over time.

And so it’s a very symbiotic relationship that happens between the investment of time and investment money over the course of the experience and our teams have become very, very good at that and work very, very closely with their communities to drive it.

Andrew Wilson

Yeah. And one thing, I just remind everybody, and we may have already said this, but I’ll say it again. We shipped last year order due to the pandemic. We delayed it three weeks to move it into the third [Tech Difficulty] this year and the second quarter.

So when you look at the growth of the third quarter, knowing that that didn’t include the initial shift in a FIFA, it’s almost hard to believe the strength of the business. And so I just want our people not to forget that and we’re not going to provide numbers or details around that exactly, but just know that the situation we are having moved [Technical Difficulty] back to the second quarter. It’s pretty impressive.

Mario Lu

Great. Okay. Thank you.


Your next question comes from the line of Andrew Marok from Raymond James. Your line is now open.

Andrew Marok

Thanks for taking my questions and wanted to pass my best wishes on to Blake as well. On Apex Legends, so season 12 seems like a more substantial content drop than the typical season. So whether it’s amount of content or type of content, is there anything that particularly stands out as a driver for new player acquisition and engagement, whether it’s game modes, new maps or things like that? And then second on FIFA, around the growth in unit sales year-over-year? I guess, at this point, who was interested in FIFA 2022 that maybe wasn’t in FIFA 2021? Are there any particular markets or customer segments that saw solid unit growth? Thank you.

Andrew Wilson

Well, some detailed questions and the great question. So thank you. On Apex, again, as we -- as the teams put together these seasons of content and they think about that new content, a new modality to play, a new ways to connect.

Remember, Apex is now well over 100 million clients. So there’s no one size fits all component that really attracts new players or engages any broad group of players deeply. I think what the esports team and the Apex team in particular have been able to demonstrate is they work very close with their community.

They deeply engage with their community and they are delivering content modalities, applying maps, these things that really speak to what the community are asking for and what we’ve seen since the very beginning of the launch of this game is them being able to work in a very calculated way around the delivery of really interesting new content, new maps and new models apply on a season by season basis that has continued to grow the overall player base, continue to grow the overall experience, continue to grow the engagement that play base has with the experience and the investment those players are making as part of their engagement. And so we’re very excited about that.

Blake Jorgensen

And then, with respect to FIFA, again, this is another team that has demonstrated the power of working very closely with the community in and around a live service. Football, soccer, as we call it in this country continues to grow the leagues, the teams, the players are going from strength-to-strength in popularity.

As -- we have over 300 licenses in the game and answering the partners that we work with in the provision of what is a growing, broadening, deepening experience for our player base. And as the world of football grows, as we build our fan base, again, if you think about the fan base we have for our product or our service, it’s the largest digital football club in the world with well over 100 million fans and we work very close with that fan base around their ability to experience football in a way that’s most meaningful to them, around their league, around their teams, around the plays and love.

And the reason we are always continued to drive growth in and around that franchise is because we do work very closely with our global community of fans and we are delivering them again, content gameplay modalities of play that is most interesting and most exciting to them, and connects them most deeply with the sport they love and the fans they love it with.

Andrew Marok

Thank you.


Your next -- okay. Your next question comes from the line of Doug Creutz from Cowen. Your line is now open.

Doug Creutz

Hey. Thank you. Cloud+ dropped a pretty expensive looking halo trailer over the weekend and Netflix has had some success with The Witcher and League of Legends on their streaming service. There’s absolutely ravenous demand for content right now from 0.5 dozen or so streaming services. And you guys have some IP particularly within BioWare that I think would be pretty good as a basis for show. Are we finally at a point where video game IP has some meaningful transmedia opportunities or do you think that’s still more theory than a reality?

Andrew Wilson

No. I think what -- based on exactly what you just said and what we’ve experienced, there is -- video game IP or interactive entertainment IP is now some of the most culturally relevant IP in all of entertainment and I think that’s going to continue to grow.

When you think about hundreds of millions of fans engaging in and around the IP we create, like, Apex, like, The Sims, like Need for Speed, like, our BioWare franchises, like, Dead Space, like, Skate. It’s not a natural to that to spawn kind of a scripted entertainment element.

I think traditionally, the scripted entertainment elements in our industry have not been big revenue drivers themselves. But where there have been a high quality, they’ve lifted the overall engagement the franchise more deeply, so there’s kind of a one, two punch that drives growth in the business.

I think as we think about our future, we do believe that this thing that we do that is interactive entertainment is becoming more and more important on a daily basis to all things, and that our fans are going to want to experience that in many different modalities and some of that might be scripted entertainment in nature.

And you should expect that the way we’re looking at any and all aspects that allow us to expand and expand our brands for our fan base. But we’re doing it very thoughtfully, and again, as part of our strategy doing it profitably.

Doug Creutz

Great. Thanks, Andrew, and best wishes, Blake.

Blake Jorgensen

Thanks, Doug. Look, I think, that’s the last question. I appreciate everyone’s [Technical Difficulty] support us and I’ll be around for a while and make sure that we get our new CFO fully on board, and as I said, he will be much better than me. So everyone stay healthy and we look forward to talking to you next quarter.


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