Electronic Arts Inc.

Oh, my God. THE END THE END THE END Thank you. THE END Thank you. THE END Thank you. THE END Thank you. Thank you. Thank you. Good afternoon, my name is Mika 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 Evanson, VP of Investor Relations, you may begin your conference.

Thank you, Mika. Welcome to EA's third quarter fiscal 2022 earnings call. With me on the call are Andrew Wilson, our CEO, and Blake Jolvinson, our CFO. Please note that our SEC filings of 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. And as a reminder, we 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 the 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. During this call, the financial metrics, with the exception of free cash flow, will be presented on a gap basis. All comparisons made in the course of this call are against the same period and prior year, and that's otherwise stated. Now I'll turn the call over to Andrew. 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 Martin. John's passing was a tremendous loss to the American football community, for the sports world at large, and for all of us 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 the future of our Madden NFL games. We'll have more to share about how we are honoring Coach Madden in the weeks ahead. And from all of us 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 FY22. Q3 was a record quarter, with our live services and mobile portfolio delivering strong reoccurring 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 didn't have a challenging Q3, as the launch of Battlefield 2042 did not meet expectations. Battlefield 2042 was always an ambitious game, and our team's push to innovate across many dimensions, including massive scale and 128 player matches, new modes, new dynamic gameplay, and more. Developing this game without teams working from home for nearly two years ultimately proved to be challenging. Through our process for testing and preparation, we believe the experience is ready to be put in our players' hands. We launched with strong stability. However, as more players experienced the full game, it became clear that there were 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 realising the full potential of this game and fully committed to our battlefield fans. we've 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 mis-against-our-expectations, with the strength of our business, we are continuing to deliver record growth and performance in FY22. With Battlefield's performance to date and our decision to move the first season of live service into Q1 FY23 so we can focus on the core experience, we've adjusted our full year net bookings guidance to $7.525 billion, which remains $225 million above our original net bookings guidance for FY22. 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 FY23. 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 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 console 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 FY22. 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 FY22 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 the full year we project 22% growth in net bookings over the last year. Performance across the business and operational discipline also continue to deliver strong cash flow and underlying profitability growth in Q3. The continued 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 the last year and new seasons and in-game events that continue to deliver new experiences to a deeply engaged community, FY22 is the biggest year yet for Apex. Average player investment in the game has grown significantly year over year and we expect to expand and we continue to expect net bookings for Apex to approach 1 billion in FY22. 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 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 in technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY23 with growth well into the double digits. Led by Apex Mobile, a 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 US during the holiday period, and it was the number three top-selling game in the US 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 Gloob, 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 franchise, we are building new experiences in some of the biggest enduring IP in entertainment. Last week, we announced a new agreement with Disney and 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 ahead, we're 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 experiences to more players on more platforms in more geographies and more business models, and harnessing the power of the social ecosystem in and around our games. The demand for amazing games and new ways to play, watch, share, and create has never been stronger. And one of the industry's largest, 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 FY23 and beyond. Now, I'll hand the call over to Blake.