Electronic Arts Inc.

Good afternoon. My name is JL and I will be a conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Third Quarter Fiscal Year 2025 Earnings Conference Call. I would now like to turn the conference over to Mr. Andrew Urquitz, Vice President of Investor Relations. Please go ahead.

Thank you. Welcome to EA's Third Quarter Fiscal 2025 Earnings Call. With me today are Andrew Wilson, our CEO, and Stuart Canfield, 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. Lastly, after the call, we will post our prepared remarks, an audio replay of this call, and a transcript. With regards to our calendar, our fourth quarter fiscal 2025 earnings call is scheduled for May 6, 2025. As a reminder, we post a schedule of upcoming earnings calls for the fiscal year 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 4th, 2025, and disclaims any duty to update them. During this call, the financial metrics, with the exception of free cash flow and non-GAAP operating margin, 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'll turn the call over to Andrew Wilson.

Thanks, Andrew. Good afternoon. I want to start by thanking our teams. In Q3, they shared their creativity, dedication, and innovation with the world through high-quality games and experiences. Our relentless focus on execution and delivery ensures we continue to bring incredible sports experiences and blockbuster entertainment to hundreds of millions of players and fans around the world. However, Q3 was not the financial performance we wanted or expected. We know as a leader in global entertainment, great titles, even when built and delivered with polished execution, can sometimes miss our financial expectations. So let me provide more context on the quarter and share actions taken to build momentum as we head into the new fiscal year. Our blockbuster storytelling strategy is built on three strategic objectives. First, create an authentic story and experience for the core audience. Second, build innovative, groundbreaking features. And third, emphasize high-quality launches across both PC and console. In order to break out beyond the core audience, Games need to directly connect to the evolving demands of players who increasingly seek shared world features and deeper engagement alongside high-quality narratives in this beloved category. Dragon Age had a high-quality launch and was well-reviewed by critics and those who played. However, it did not resonate with a broad enough audience in this highly competitive market. Now let me dive deeper into the context around EA Sports FC's temporary underperformance and the immediate actions taken. FC started Q3 in a strong position. It had a high-quality and stable launch. It won Sports Game of the Year, and pre-orders, engagement, and player monetization were each up year-over-year, leading to net bookings in October that were up double digits year-over-year. However, this momentum did not sustain through the quarter. Two contributing factors to performance downside were Soft's top-of-final acquisition and elapsed engagement later in the quarter. While early acquisitions started out strong, post-launch acquisition cohorts waited longer in the cycle to acquire the new title as many stayed in prior iterations. Combined players in our full HD experiences were flat year over year. This mixed shift and slower new player acquisition accounted for about half of the title's underperformance versus expectations. Softer than expected engagement made up most of the rest. we're constantly tuning the game to drive a competitive and engaging experience. This year, after a number of key changes to gameplay, we started to hear more feedback than usual around specific issues with balance from one of our most competitive cohorts. This resulted in lower than expected engagement into the end of the quarter. We took the time to listen and validate what we were hearing and implemented some significant changes to both the gameplay experience and corresponding progression and rewards in a large update that went live for players on January the 16th, just before the launch of our Team of the Year event. These actions were a success, as we've seen a strong response to the title update and our event, as well as positive gameplay sentiment indicators from our community. Following the gameplay update and our popular Team of the Year event, we have reactivated over 2 million Ultimate Team players, with all acquisition cohorts experiencing positive trends. Player retention rates surpassed our expectations and saw record title weekly active users over the event's weekend. Together, these markers are leading net bookings to be up year over year for the two-week event. Our live service drives billions of hours of fan engagement annually, and we're constantly updating and fine-tuning both gameplay and our programs to meet ongoing feedback and evolving expectations from our community. Individually, these FC play dynamics would not have materially impacted our quarter. In fact, these are part of the normal course of managing and growing a live service business. However, the convergence of these dynamics became a material source of downside, requiring our immediate and comprehensive response. We consider this to be a temporary moment, not structural. Our global football franchise net bookings have grown over 70% over the last five fiscal years, making it one of the biggest sports entertainment properties in the world. To put this year in perspective, FY25 is still expected to be the second biggest year for the franchise. Given this context around our Q3 results, we remain confident that our strategy, focusing on entertaining massive online communities, telling blockbuster stories, and harnessing the power of community remains on track. Now let me provide more color on the rest of our portfolio. The power of EA Sports comes from our team's unique ability to create deep, rich, and highly valuable IP where our players fully immerse themselves in the action, fandom, and culture of their favorite sport. Nowhere else can fans experience the depth, authenticity, and quality that our sports titles deliver. With an incredible year, we're just beginning to unlock the immense opportunity within our growing American football ecosystem. The number of players is up double digits year over year, as our expanded offerings strengthen and build on the passion of our community. Our teams continue to deliver compelling content across the ecosystem, seamlessly introducing players to new experiences. This quarter, we saw players in Ultimate Team grow by double digits as we deepen player engagement and connection. We continue to build momentum into FY26 as we come off what we believe will be a record year for EA Sports. The real-life college season has culminated in its first 12-team national championship, and we have announced that College Football 26 will launch this summer. EA Sports, the NFL, and the NFLPA continue to partner to grow the sport and reach new fans around the world through our unrivaled Madden NFL franchise. Together with our partners, we are fully focused on our strategy to continue to forge our two American football titles into a massive online community where players can connect, celebrate their fandom, and harness powerful tools to create content. We are also building all new innovative modalities of social play with more access points to further engage and entertain core, new, and casual players. While we continue to invest and focus on our core FC business, we are also building towards a bold vision for the future, delivering for hundreds of millions of global fans through a connected ecosystem of experiences including new modalities of play. For example, we're developing an entirely new world within the FC platform built around groundbreaking gameplay and cutting edge tools for social connection and content creation. We are leaning into next level ways to engage fans of the world's biggest sport across the FC platform through play, create, watch, and connect. In service of our players and fans, we are also pushing beyond the bounds of our sports franchises. Yesterday, we shared that we reached an agreement to acquire TRACAB technologies. Data is at the center of every meaningful advancement in sports today, and this group has developed best-in-class optical sports tracking, real-time volumetric data capture technology, and analysis capabilities that can extend EA Sports' lead, accelerating how we do the more authentic, deeply immersive gameplay that mirrors the fluidity and excitement of real-world athletes and competition. Longer term, TRACAB's capabilities also help us accelerate against our bold vision for the EA Sports app to be the world's leading interactive sports platform following a successful initial regional trial in Q3. Through a culmination of TRACAB's real-time data technology and our proprietary game engine, we can enable completely new opportunities for fans to create and share real-world sports content in their own way, reimagining highlights, generating casual and complex game simulations, and watching broadcast alternatives on demand. We're working to make the EA Sports app the new frontier for interactive sports fandom beyond games, and we look forward to sharing more about our plans in the months ahead. This is one of several bold new steps in our ecosystem plans to engage players and fans across more geographies in, around, and beyond our games. That, together with our core experiences, gives us confidence in the future of EA Sports. As we look beyond sports, we've never had a stronger pipeline of entertainment experiences. We continue to execute across the portfolio and the next two years will prove to be an incredibly exciting time for EA and our players. Yesterday's announcement of Battlefield Labs is a key development in our ongoing expansion of massive online communities. Battlefield Labs is launching at a crucial moment in our development journey. at a scale that allows us to test and refine the game with our community in a way that's unprecedented for Battlefield. This is about embracing a modern, more dynamic approach to development, one that acknowledges how the market has shifted, how player expectations have evolved, and how we show up for our players in ways to deliver a truly next-level experience. This latest news from our teams is a crucial step towards Battlefield's release in FY26. These are exciting times for The Sims as well, with the cultural icon celebrating its 25th birthday this year. New updates and features are driving engagement across a massive community of players. A great proof point of our ongoing strategy at work is the launch of the first two creator kits ever designed by our top influencers and content creators. These kits mark the first time that a full collection of in-game assets have been crafted by creators and officially published by The Sims development team. This is a great step on a path to building a global creator platform in the Sims. Following the console playtest this month, Skate remains on track for launch this year across PC, console, and mobile, introducing a fresh community-driven model for gaming with native cross-platform and cross-progression. Additionally, as we continue to make progress across our strategy to use AI to transform how we deliver entertainment to the world, We recently made the strategic decision to unify our central technology functions under a single chief technology officer, Matt Tomlinson. This alignment reinforces our commitment to embedding technology at the core of our business strategies and operations, enabling us to drive innovation, expand our creative canvas, build bigger and bolder experiences, and deepen our connections as a community-driven entertainment company. Matt has been instrumental in shaping the technology strategies and infrastructure that empower our teams to create and collaborate. I greatly look forward to working with him as our CTO. We believe the fundamental long-term outlook of our business is strong as we further sharpen our focus on entertaining and connecting more people for more time across the world. EA's creative talent, production strength, broad IP, and technology leadership power the execution of a vision to deliver more excitement, creation, and connection for our global network of players and fans. Looking to FY26 and beyond, we are taking bold steps across our sports and entertainment portfolio to shape the future of interactive entertainment. And now I'll turn the call over to Stuart for a deeper look into the quarter and our business.