Electronic Arts (EA) 1 Nov 232024 Q2 Earnings call transcript

My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Second Quarter Fiscal Year 2024 Earnings Conference Call.

I would now like to turn the conference over to Ms. Katie Burke, Director of Investor Relations. Please go ahead.

you. Thank Second XXXX EA's Call. Fiscal Quarter to Earnings Year Welcome CEO; Andrew Canfield, With are our and me today Wilson, Stuart our CFO. Please our earnings SEC filings available our ir.ea.com. note at release that are and

slides we to posted addition, In detailed accompany prepared remarks. have our earnings

scheduled post quarter Lastly, prepared audio earnings fiscal and transcript. year remarks, call our to is our With after XXXX this we regards of for calendar, an XX. call, a the Tuesday, will January replay our call third

refer earnings forward-looking for calls of post to X, our the Form from could we update the you future the disclaims risks that those upcoming recent most events makes any a results of year presentation as schedule reminder, company. duty events today, performance the Arts actual a on Electronic and of for these of We may IR results and As differ XX-Q fiscal cause our our statements statements discussed and This November materially website. differ expectations. to financial our materially Actual and comments future them. include discussion regarding XXXX, to from today.

During this of presented cash see the year this of exception the a period with call, against metrics, same be All Please for unless will in our prior in financial GAAP basis. slides further the course the on earnings otherwise flow, information. free made the comparisons call stated. are

to over the I'll Now call Andrew. turn

delivered strong above to be for our great It's all we you. was Katie. with results QX Thanks, of It EA as here a expectations.

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Stuart Now details additional hand our the over to provide business. on I'll call to

Andrew, and everyone. Thank hello, you,

saw performance strong EA QX our in strength driving delivered our We XX. Our engagement network Madden FC successful SPORTS healthy XX results by portfolio, growth and of player NFL exceeding with EA EPS. highlighted launches bookings SPORTS net EA SPORTS expectations the our and across in

For the live constant game in currency, X% were services. quarter, full exceeded for second $X.XX year-over-year up expectations and or billion, both which X% our net bookings

SPORTS EA $X.XX XX% X% Our our driven releases. up full bookings X% X% million, currency. net by strength services in or year-over-year game up billion, net currency, in in QX were bookings or constant Live up year-over-year constant were $XXX

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growth of significantly Sports QX, of business our including EA and for demand by triple-digit access. bookings FIFA start FC tremendous total expectations. continued retention driven highlighted XX XX% acquisition of extra cohort, additions grew of XX, year-over-year release for reactivated momentum FC benefit of our bookings of a by In Football strong net exceeded Global XX. our of X Net early deluxe players, mobile launch healthy The new the demand greater had core and days and strong

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from Our GAAP year-over-year up was a XX% earnings $X.XX tax benefit. $X.XX, noncash onetime share including per

XX% On dividends in to and flow $X $XXX flow billion, was we our record taxes. trailing program. million, basis, a million a And cash through from benefit up shareholders Operating XX-month cash repurchase lower ongoing the returned including quarter year-over-year. free was cash $XXX share

our behind assumptions guidance. start, year guidance to To unchanged. full recap to turning the and like remain Now which net I'd bookings context range,

across to First, we portfolio, healthy a as and market player expect our highly macro engagement a even competitive continue backdrop. operate varying amidst

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expect to we bookings underlying to as X-point Third, unchanged, If volatile. last net to a remain remain X-point profitability FX year. headwind to continues rates headwind net relative and

to focused, we execute continue long-term we as finally, And opportunities. and against investments deliberate growth our be our disciplined on

net full Our to up unchanged or to currency. to constant million billion, outlook flat at year year-over-year roughly $X.X remains X% up up in bookings X% X% $X.X

remain net GAAP also revenue unchanged. outlook $X.X $X.XX billion billion Our $X.X $X.XX billion to of cost and of full year of our billion to revenue outlook

profitability. prioritize and we drive help As to to lowering for across to guidance X% we also our $X.XX expect manage billion up to billion to expenses our year-over-year, in we down which improvements $X.XX continue investments operating are underlying portfolio, our X%

share and our XX% to to per We GAAP operational guidance the $X.XX $X.XX, onetime benefit XX% reflecting noted are increasing savings up tax earnings to and year-over-year, earlier.

to our operating billion. $X.XX by raising flow guide $X.X to are cash million $XXX We billion

XX% billion we We our decisions $X.XX million flow year-over-year to capital up driven on expenditures by expect of are real $XXX to estate basis. XX% to billion, outlook to footprint. optimize $X.X our deliberate a now lowering And cash free

cash further flow earnings Please press slides see information. and for our release

outlook. to third the Turning quarter

bookings net X% $X.XX X% down be expect to year-over-year X% up up million constant currency. down We to billion, at to $X.XX to or

introduced comparable offerings. noted content For we Cup measured take approach our a in and teams FC play Legends, more modes we EA as new And growth World SPORTS expect of XX, modest more continue earlier. Apex the given to

to XX% $XXX X% We expect to to $X.XX of of This operating GAAP expenses billion of per to GAAP $X.XX billion $X.XX $X.XX revenue cost results $X.XX year-over-year. million and billion, billion. in approximately up $X.XX share revenue $XXX net of million, earnings to of

of of ahead expectations player and In engagement services. QX strong portfolio launches and driven our EA games delivered by a performance closing, our SPORTS strong across EA diverse

upon for players holiday as are teams and in period. delivering head Looking the we to forward, our our our the building especially momentum high-quality business, committed into experiences

our make We focused investments remain progress We deliver to to continue and in disciplined and proactive in strategic aligning multiyear around our opportunities. growth.

Now I'll Andrew. to it back hand

Thanks, Stuart.

of Advancements more as is been fans How to The growing games accelerating delivering and into never bringing transforming are the the sports, development creating an generative and in they what being game is and long social as are are industry The we broader love watching, also around around deeply well. speed people legendary can world boosting deliver, even Our play audience. made beyond creativity opportunity has content entertainment is the changing and interactive AI brand, greater. IP value as a games experiences definition interactive experiences. bigger, and of connections in of expanding innovation, most. making deep storytelling dive

Our growing world-class talent as entertainment. leader the IP network of position industry-leading global technology, team's future and EA a of players of

Now Stuart are I first here for ready for questions. Lisa, question. our we're your and

with [Operator from Morgan Stanley. Instructions]. Matthew our We'll first take question Cost

areas beginning at EA single-digit SPORTS most FC, with you to still pleased the growth room year?. were the year-on-year most what where the you And the areas where saw launch of about of are the for last year spoken launch the guess track were franchise low you you versus maybe The on the hit the that of the had improvement? I and

we you, across across challenge the for make to launch the of on tell PC, teams the authentic, a the just immersive for And and free-to-play a made. that us, this console, mobile would wanted our not for symbol. universally I certainly socially done game challenge in change connected almost delivering with happy big I change, experience of Taking football are launch. question. was Thanks platforms, job our teams game Asia. was symbol had the an ever a be this we've that that's mostly most have extraordinary to of We in ever, a think the nature

I our think fans has and to ensuring journey is globally. the be fans population our football transition the the a have done an marketing not job of the represents understands tremendous fandom teams that why understands partners understands the world's happened, of a transition incredible going for of in very benefits end, our but this What that beginning. for and

do down I on very, think but achieved proud so our what with our learning, sat and that you are marketers we're always or would if or developers we've of balance, there our really far. feel say partners, better, things we I we always can very

the franchise have we but And standpoint. It's feel we certainly, is about incredibly positive, good a also feedback from signs going only the more? the and think are incredibly positive. is all you do where early, Stuart, performance some

clarify. just Yes, just add Matt, to I'll

for low that track we growth yes, So the we single-digit represented.

to we're obviously first digits saw up a we're remain on service live in point obviously, And and Yes, Andrew's as importantly, head QX. important context. seeing to QX earlier, Caveat single high think -- being, we're the strength start great year-on-year prudent QX. weeks X through we pieces off into I our of X we business. we

the on you XX%, from but and for last the year. remember record our rest we confident we of single-digit As feel across low still for growth year, up business, track QX saw

We'll Deutsche Soff take our with next question Bank. from Benjamin

launch trend for if longer so to you of it some sales years. so some the will maybe that excitement or Another far, be because reach one game the to this FC might I'm prior of again, a loaded tail more wondering on really you'd strong that people. time pacing anticipate expect if for Or encouraging. rebrand, as that's because result to changes take marketing either any of the of front-end similar

Yes.

Stuart talk about I we're of can think how kind that. playing

meaningful future. brought we're which new doing for planning good feel what We've the those for outcomes. new is far. launch think in I prediction both incredible net We an certainly sign players potential always the so a the we're net is fans and now in very and right of about ecosystem, amount of

of still know have We meaningful a playing we previous the also amount people game.

the we the the more previous be and And about next, as for our to certainly, have very bit organic. playing right we're as transition launch less as a little starting new the about we live services, we're general, continue launch. and business seeing services from to the transition people in FC supported And see, it's service think There's until about to more reason the live one often game. up good live

incredible still fans also diligently population of and and basis. very believe new to deliberately continue on And we the we we're the that but and to experience in brought game a playing do and so recognize FC an marketing, now those I meaningful a game, over incredible previous through base we grow to have bring working that FC go-forward

phasing, start. on just seen a Ben, Yes, think I great you've

So part a first you've seen we pull FC. QX strategy of which the X naturally launched is little in and the weeks, bit natural through us forward as

We expect season as manner through QX real and world a holiday. to operate the both we similar broadly progress heading and into in

We pickup flow the part a will comp more players of because expect had through QX in into World tougher that Cup QX. from be we

yes, given flat on a and consistency QX more through macro, year. of the stronger start, around So QX the comp consistent prior

to on over then just with resonated . 'XX can Season generate the drivers a for term? growth long franchise little bit the for Apex, some of more see and Got it. And players this what you talk about you

application in different has deeply They're really it And different with drives community, Yes. community. a engaged content content deeply mechanics, started more ongoing their that is game. see The see these team continues to to across there's fan a content, and content. chase come legends develop versus committed and Again, mechanics what connected legend we've the incredible inside more very engagement. when community they deeply and being specific chase dynamic

will and continue and seen very and And what been we've expectations. more But so the positive my with to of to team community needs offers and is into community the nature innovate and the experience. learn in that expectation far to the line and demands pushing is community they've event test so continue the experience the dynamic evolve results

MKM. We'll our Eric with question from take ROTH Handler next

perspective could restrictions or if . advertising and the Andrew, was some of the FC. FIFA I now sponsorship a revenue give that little maybe you're shackled on have you from on what you not for EA impact the with that wonder impact on promotions?

Well, it's still future the of as about early really franchise. think we this

things start these around things We as will the partners. how over about coming we commercial a not that fan mobile really, for fan expand engagement years. are beyond have seasons game coming of game the how the with But how how before, console, play by deep work the the manifest have with and we new that's and partners now been competitions coming free-to-play platform, the with interesting quickly. football is the across the want and many PC, transitioning opportunities gaming a outside with that that to teams, do leagues, have over partner and the we that around we we they over ecosystem just we the entire development the we talked orientation was structure making and And move to We of FC growing we really a getting think really interactive more really just bounds our work in do as It and was and really investments with FC in started. inside How develop community experience an game? around months, connection the us. we've to the expand base, us partners world and players, the to do the both to do way that modalities about do

maybe that working That's right bit great. of you're estate And then of talk now? . just about the through can little strategies sort as a you follow-up, some real a

optimize And signed I'll QX of in restructuring forward in bit. the current both going to last here just we continue of sort year. about out, we Eric, how we this our heading We and both little chime our footprint build talked a today. out

future So continue we ongoing work. we exercise as us, work look through for to that of the at

question Instructions] take next [Operator from Karnovsky our we'll with David JPMorgan.

Stuart. for one just Maybe

in you up, that? or an On the flow operating the you're takes relatively think, . benefits on your at Are there this unchanged and one-off through of outlook. operating it walk just $XXX puts taking as outlook, should a I we conversion? cash improvement income look Can million underlying

for out yes, In Dave, Thanks, short, question. before. script the one-off we've a of in couple talked got benefits we the

operating interest then to from that have have and cash foundations of seeing which that narrative. flow benefits of talking record you're seeing we about, million. giving improved us onetime naturally tax cash yes, are we're is talked our we're And flow we So by obviously in virtue flowing $XXX benefit through the lift obviously some secondly,

free future as up well In well. increase addition, we're investment capital some flow to changing also that down Eric as cash to of our obviously from the as pulled strategy we before question on

and tax benefits driving hand for around tied greater benefits at onetime cash yes, up us. picked having by interest obviously, some that's So greater operating

question We'll take Fitzgerald Fargo. our from with Wells Brian next

Pro, FIFA all to dynamic the FC look launch FC you spend, as FC all seasonality robust impacting well, just these surprisingly see When way with about play asked you modalities, out right? spend spend seasonality, because that shifted along cohorts. that up was do mobile you at broaden annual styles, any engagement levers how play engagement these when and has think [indiscernible] We that maybe and of similar with new . online, just should

And of but also Yes. the of them growing continues into our the community this we kind country growing sport fan bunch football about think a as I biggest is opportunity I is globally, to world, mean in exponentially. mean, growing in vectors. that across and meaningfully being [indiscernible] we this it's different well, to the serve an it as grow. see It's assumption.

at it things. that doing, connections experiences we playing And of how across connect how One they deeply is elongated looking levers and And in with to strategy the as are X and about fans that time we that enjoy are with people FC engagement on models, the the context of business that they as many platforms, you so the to pull with much more they in those we and look the and network platform, meaningfully are those just modalities, across and has playing, an and everything down seasonality our community how year. roll of those them what we across been how give opportunity, have opportunities has the think expansion in are engage spend meant into both we the that are a that overall more in of to terms out the and deep more are broadly people throughout create with bring many comes geographies the is of community overall as the experiences friends play value as really with? that across they the

the is spend XXX because to love the connection that and consistent that it's so a season season about football. to not of connection love they deep more And a we're of friends football with, days of far year. the It's throughout year a about share the just

our more the portfolio global we across American that Giant other invest Sims And they of the to gamers that in SPORTS look their deeply in Apex, communities we love FC the engage EA enjoy this building give the as of this you IP, think the more the out meaningfully of should experiences context replicate context with these broader and deeper of so to bring about interest together them as context our in of in we opportunity to expect portfolio they Battlefield, will context and in and football, the with. friends connect both opportunities

from Sheridan our with We'll next take Goldman Sachs. question Eric

questions, can. if X Maybe I

And when an tells with about what of have consumer on in the you're the resilience portfolio spending potential in your gaming interactive habits volatility of was as entertainment it you the around that across sport size where number in of scale see some growth learnings new itself. the one. then from think time about of about franchise, years? to there's geographic Madden been I terms to spending IP into really because more and to equation what the sort the of over side curious resistance recession terms two, number building What the Madden think user versus resilience from a IP landscape, side continue component in term? industry. and interesting the a this versus it of consumer . seeing of long were a we the you do How over First, you debate audience of overall investors key job take future to

Well, great go. as them Eric, and we add best please cover and can questions. as will try X Stuart, I details I as

One two, we have constrained more many I I spending. say, to be broadly, we important where but predictions is value because when is been a needed. incredible the key there think about think communities form don't that species. It's resilient than been that's we of very recessionary and to that our industry we X represents have. recession-proof, things. and industries the entertainment And really industry even [indiscernible] have us in to want fundamental the as entertainment human a of offer

that different games As we but our see others see look portfolio. some -- heard the there global we market we're of basis, where speak of I basis. connection across But look do big We've seeing There social our and certainly it deep the consistent that engagement We've to seen at what some partners across deep aggregate, the a showing a we the across growth softness to geo Europe. are is some spend industry, are we're are a of that than in our markets pretty is continue market little across the today in we growth. across on relative with more some portfolio. benefit others softness and And in seeing the we world. on kind portfolio, which of probably to think is

NFL the -- broadly, again, we about I the have with think we partners of for XX just As years. think I Madden best part been

be closely fans, community and to and fan And expect growing Players of to moments, importantly, job Our more have beyond. or Association about our connect moments be to seeing from what moments, moments. and there teams as this deep out very, not broadly football growing the And that we'll business. is NFL our NFL those fulfill beyond what football of I just you're the a NFL more be commitment country and incredible fans. these the the community teams the and there and for be moments be more experiences, to American country. again, the thinking teams And is sports motivations very and Those and the to a NFL now this work motivations experiences arcade-like the work an Players NFL the fulfilling what needs fans continue growing NFL play right is in fans with continue boundaries to gaming the And casual in football globally, this and other doing grow NFL onetime with the one-off trade of might the there more doing with Association, country might but might see might of community. sport just partners been core might many and is building game fans mechanisms we our

. call. you do a That Andrew, have few closing ends our words?

express again, with teams strong want to really quarter look questions. to my a updating us forward great all I next the for being on January XX. for deepest and appreciation incredible for We QX. delivering our you to you Thank Once

may Thank now you. you concludes for and joining, today's Thank That all you meeting. disconnect.