Good afternoon. My name is Robin. I will be your conference operator today. At this time, I'd like to welcome everyone to the Electronic Arts First Quarter Fiscal Year 2025 Earnings Conference Call. I would now like to turn the conference over to Mr. Andrew Uerkwitz, Vice President Investor Relations. Please go ahead..

Thank you. Welcome to EA's first 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 Investor Day is scheduled for Tuesday, September 17, and our second quarter fiscal year 2025 earnings call is scheduled for Tuesday, October 29.

As a reminder, we post the 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-K, 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, July 30, 2024, 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. For more information on our non-GAAP operating margin, please see our earnings slides and the FAQ document available on our Investor Relations website.

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..

The Veilguard an epic experience based in an expansive world, filled with arresting visuals, and introducing a cast of diverse, complex characters, and incredible combat all tied together by a rich singleplayer narrative.

We are committed to delivering more excitement, exploration, creation, and connection for more players and fans across generations, platforms and geographies.

And we will achieve this through our passionate and talented teams, our world-class IP, and our ability to drive innovation through our deep expertise in technology, which will accelerate our innovation and our development velocity. Now, I'd like to hand it off to Stuart for a deeper dive into our business..

The Veilguard. We remain focused on executing these title releases and delivering our core live services. As a result, we are reaffirming our fiscal year 2025 net bookings guidance range of $7.3 billion to $7.7 billion, down 2% to up 4% year-over-year. We are reaffirming our guidance for our other full year metrics.

Our first quarter results are a testament to our incredible brands and our talented teams, who are delivering experiences that continue to grow and engage our communities through innovative and interactive experiences.

We saw this execution in our ability to sustain EA SPORTS Madden NFL 24 momentum through the quarter, deliver healthy engagement in our global football business, and continue to improve our mobile business, which remains an important entry point for our largest franchises.

Looking forward, we expect to continue to invest with sharpened focus behind our three strategic pillars, as we position ourselves for accelerated growth in FY '26 and beyond. Our teams look forward to sharing more on our long-term growth opportunities and initiatives at our Investor Day on September 17. Now, I'll hand it back to Andrew..

Thanks, Stuart. Our strong Q1 demonstrated the determination of our teams and the resiliency of our business. Traditional entertainment is being challenged as consumer preferences change and technology continues to disrupt business models. We are in a fundamentally different position.

We have already navigated our shift in distribution, consumption is only growing and becoming more concentrated in our franchises, and we are unlocking new business models.

We have an incredible competitive advantage with the excellence of our creative talent, our production strength, our broad portfolio of incredible IP, including EA SPORTS, and a massive player network. With these enviable strengths, we are well-positioned to grow the industry and increase our market share.

And now Stuart and I will take your questions..

Thank you. [Operator Instructions] Your first question comes from the line of Eric Sheridan from Goldman Sachs. Your line is open..

Thanks so much for taking the questions. Maybe two bigger picture ones if I can. You've talked a lot in the last year about how Madden had become more global in scope.

Can you talk a little bit about how you plan on building in that momentum with Madden as a franchise, as we look out over the next 12 to 18 months to continue to build scale, from a global perspective? And the second question would be on EA, FC.

Obviously last year was an interesting year, because you were moving the brand around and having to execute against that.

What are some of the key learnings from the rebranding exercise you went through 12 months ago that are sort of informing how you also continue to build scale around EA, FC and how the product might change in the years ahead? Thanks so much..

Okay. There's a lot in there. Two great questions. First let me touch on Madden. I think as you reference global you think about international geographies and certainly we're pushing hard there. And the NFL is doing an incredible job of building a fan base internationally. They're doing more and more games internationally every year.

Athletes are leaning into their fan bases internationally every year. But as we think about Madden growth it's not just about geographic growth. It is about demographic growth. It is about platform growth. And ultimately it will be growth driven by new and interesting business models.

And so, as you look at our Madden experiences broadly, well we've continued to build out modalities for the core and to ensure that we continue to fulfill the needs and motivations of our core players who have been with us for many, many years.

A lot of what you're also starting to see including new modes that we've brought in in recent years, are attracting new younger players. You also see what we're doing with Madden Mobile, and the constant evolution of that franchise in its mobile incarnation. As we look forward, we do think about this.

We think that the combination of Madden plus College, will overall grow our football community. We're already seeing that this year, with the start of College football in Q2. We think that brings in both younger players and new players that either have never played Madden, or have not played Madden for a couple of years.

You'll see us invest meaningfully in new modalities of play that are really interesting, particularly in a social connection context for these new younger fans that are coming into our football experiences. You'll see us start to develop more and more modalities of play, across devices including mobile.

And over the course of time, you should also expect us to branch into new and different business models that, we expect will expand our audience. This is the biggest game in this country by a wide margin, i.e. American Football both in the context of College and the NFL.

We know the sport is growing internationally, by virtue of access that fans have to the sport now through cable and streaming.

And we know that our games, both EA Sports College Football '25 and the upcoming Madden '25 are a meaningful way that fans around the world get to come and experience their fandom, share their fandom with their friends and grow their fandom over time. And so our expectation is, that this is just the first step in how we grow our football community.

To get your second part on EA Sports FC, again, I just want to thank our teams again across development, marketing, our many licensed partners, the many athletes that form the recenter of that game. It was truly an extraordinary relaunch of that franchise and has put us in a position to grow.

And as we went through that transformation and we talked to you about that, we talked about our ability to expand gameplay into areas that, we were otherwise unable to do. We talked about expanding the commercial relationships, with big global sports brands that we're unable to work with.

We talked about expanding beyond the bounds of traditional play, i.e. doing things with our fans that are outside the 11-on-11 game. And certainly we've got five-on-five that's coming into FC this year. And we talked about moving much, much faster in the context of how we develop, and evolve the experience over time.

And so, many of those lessons were learned through that process. Our objective was to do more in-game. Our objective was to do more with commercial partners. Our objective was to do more beyond the bounds of the game. And our objective was to move really, really quickly at the speed of the cultural evolution that is happening in our world.

And I would say our teams did an extraordinary job in doing that. And much of the learning we got was that we're headed in exactly the right direction. So as you look at FC this year, we are expanding modalities of play.

As you look at the many things we're doing with new commercial partners that are expanding what people can do inside the game and outside the game. And later this year, you'll see us do more and more beyond the bounds of the game. We're going to talk more about that at our Investor Day in September.

But the biggest thing that we've been able to do since the rebrand is just move much, much faster. And I know that is great for our teams, but more importantly that's really, really good for our players globally.

We'll take our next question?.

Thank you. Your next question comes from the line of Matthew Cost from Morgan Stanley. Your line is open..

Hi everybody. Thanks for taking the questions. I guess sticking with American Football for a little bit here.

When we think about Ultimate Team for the College football game, is there any potential for cannibalization of Madden Ultimate Team just as a function of, how successful College football has been with those 5 million players in the game? Obviously you can buy a copy of each game relatively easily, but an hour spent in College football Ultimate Team is an hour that you can't spend in Madden Ultimate Team.

So how should we expect those two to interact? Is there potential for cannibalization? That's question one. And then question two is just you called out AI and ML efficiencies in the process of developing the College football game.

I'm wondering if there's anything that you'd call out in particular where you were able to speed up a process, or do something faster, higher level quality, because of some of those applications of AI? Thank you..

Great questions. First let me touch on the Madden Plus College. Again as we went into this as we look to reinvent and relaunch College football after over a decade, a few things are true. One is there's more football fans broadly in this country than there has ever been.

Two, College football in and of itself has grown dramatically, since we were in the marketplace with a game over 10 years ago. And the combination of those two things, led us to believe that these two products, or these two services would be complementary in nature.

And that in fact College would bring in new players to the overall community, and actually bring players back who hadn't been with us for some time. It's very early, but I would tell you our thesis is so far been proven correct. We have grown the community overall.

There's been a meaningful percentage of players, who have come in through the College experience are new to us, or haven't been with us for over two years. The second thing is that the MVP bundle, the combination of Madden and College as a pre-order performed ahead of our expectations and is doing really, really well.

And while pre-orders are in perfect metric, they are typically directionally sound. And that would suggest to us that the broad complementary nature of College plus Madden is proving out.

As it relates to ultimate team specifically, one of the things that our teams have done really well, is actually think through what does it mean for a player who plays both College and plays Madden? And how do we give them value across both of those gameplay experiences? And ultimately how do we make those experiences greater than the sum of their parts? Again, we're coming into the Madden season off the back of an incredibly strong Madden '24, incredibly strong engagement in the off season, in the traditional football off season, which for us typically is demonstrative of good forward progress against the next iteration.

Madden '25 is going to be the best Madden we've ever made. I know I say that every year, but the teams continue to out-do themselves, including a whole bunch of new modes and new ways to play, combined with a whole new set of players that have come into the community, through College football that will be providing a path.

If they haven't already bought the MVP bundle apart from College into Madden and building gameplay experiences that are not only complimentary from the ability to purchase both, but a complimentary from the ability to experience both.

And so again, it's early days now Q2, College is off to an incredible start, pre-orders in Madden are off to a really strong start. Our expectation that the two will be complimentary over time..

Your next question comes from the line of Chris Schoell from UBS. Your line is open..

Great. Thank you. So fiscal 1Q came in ahead of your expectations and fiscal 2Q guidance also seemed stronger than where the Street was prior to today.

Can you just help us think through why we didn't see that flow through, to the full year outlook? And is it fair to say you were trending toward the higher end of your prior range? And you also cited strong soccer performance, contributing to the fiscal 1Q beat recognized it was towards the end of the quarter.

But can you help us size uplift you think Copa and EURO provided and might not repeat as we look forward? Thank you..

Hi, Chris. Thanks for the questions. Stuart, just stepping back. I think I mean, yes, we're building great momentum. We think about the guidance coming out of Q1. We just talked a little bit at length around Q2 with Andrew's commentary a second ago and how we're thinking about framing up the quarter.

We've also reflected the continued progress we're seeing in the momentum we're building. And the return to growth by default of that guide range inside of Q2.

Also, I think it's reflective of the momentum that we're building, as we deliver on the long-term financial framework we're laying out, which accelerated growth, increasing operating levels and driving cash back to shareholders. We think inside of Q2. Obviously we reflected the combination of an aggregate growth in football.

We do believe FC although only having one week inside the quarter, does continue growing live services, and will assess where full game goes as we tackle the transition last year, and brought players into the game up front.

We are being prudent and pragmatic around how we see Apex over the first six weeks and the last six weeks of Season 21 as we head into Season 22. And that's the first time that we've seen two American Football tiles launch in the same quarter as you think about both the sales curve, of College over the next sort of two to five weeks.

And secondly, how we see players engage in time both between Madden and College as we were at the Q2 guide. As we think about the full year and reiterating obviously we're literally four months into the year. We have both Madden FC and Dragon Age still ahead of us.

We do expect by phasing to continue, to show growth and build growth out through the full year. Obviously, we'll look to come back in our next earnings once we get through those major releases at this point..

Your next question comes from the line of Cory Carpenter from JPMorgan. Your line is open..

Great. Thanks for the question. What did it ask about the video game after strike? How would you frame the potential risk of disruption into the business broadly in the near term? And then specifically at what point could this start to have an impact on your release schedule? Thank you..

So let me let me first say, we deeply value our talent actors who are an important part of the work we do, to deliver the incredible entertainment experiences that our players enjoy around the world. We're working very closely. This is not an EA specific situation.

This is an industry specific situation, and we're working diligently to negotiate at the table. The way it works now in terms of our product specifically, is that the strike is limited to games commencing production after September 2023, including live service games.

So we don't expect any near term disruption, to any of the games we haven't developed, or any of the live services we're currently running. That being said, we committed to continue to bargain in good faith, and are hopeful that the parties. Can expediently resolve our issues at the bargaining table.

But we're not, we're not anticipating any significant short-term impact at EA..

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

Thanks for taking my questions. Two, if I could please.

First, can you remind us of some of the factors that go into the decision to release, or not to release a game on both previous gen and current gen consoles and how those factors maybe are set up for your big five franchises? Maybe thinking of College football on Gen9 only and Madden on Gen8 and Gen9, but some features only on Gen9? Thanks..

It's not a perfect science, I would say on balance. It comes down to where we expect the player base to show up. You know, at a scale that makes supporting the platform make financial sense for us. It is not a zero cost to support each generation of platform.

And typically as we think about where the where the player communities are showing up at the greatest level. That's where we're supporting those platforms.

Typically what has happened is our larger franchises, have had more dispersed platform engagement by virtue of the fact that they are more geographically diverse and different geographies evolve at different rates across those platform generations. Many of the smaller franchise, or the franchises that don't represent our biggest.

Those players typically are migrating much more quickly to new platforms. And as you think about a property like College in particular, something that hasn't been on the platforms for the last 10 years. We really made a decision to be forward-looking on that, and really developing the team works incredibly hard on College.

And if you've read any of the reviews on College, what they've been able to do on these new platforms is truly extraordinary. And the uptake that we've seen across the new platforms would suggest that the platform decisions we made were the right ones. And there was a question earlier around AI as it related to College.

And the reality is, is we had an incredible team working on this, but we had to get 11,000 new star player heads into the game. For those that don't track our industry or track our sports games in particular, we typically in any given year will develop about 500 to 1000 star heads inside of one of our games.

And over the course of a platform generation, through the hand tooling of that, we ultimately fill out the full roster of star heads in our games. And of course there are ebbs and flows in that.

But as we were launching College on a new generation of platforms, to a new generation of fans with the world's largest single sport NIL deal, where image was a really important part of the process, getting 11,000 star heads into the game was a top priority for us.

The reality is our teams are incredible and built workflows to facilitate that, but they were amplified and accelerated through AI and machine learning. And we were able to take in a whole plethora of photo imagery across 11,000 players and build workflows out where AI and machine learning would generate heads.

And our very talented artists would be able to come in and touch up and enhance those heads, versus having to go through the full head development program. In the absence of AI, we simply would not have been able to deliver College football at the level we did, even though we'd given the team many, many years in development.

And so, to answer both of those questions, typically when we think about past gen versus future gen, it comes down to geographic dispersion and it comes down to community dispersion. And it comes down to where we think the greatest gameplay will happen.

And as it relates to College specifically, it was a decision that we made, because we were really building the franchise for the future.

It was the first time we had done it in 10 years, and the level of gameplay and the level of visual fidelity that we did, was a combination of many years of work of our incredible teams, amplified and accelerated by AI. Something that we just wouldn't have been able to do as little as two or three years ago..

Really helpful. Thank you for the detail. And if I could sneak one in, I got asked my quarterly Apex question. I wanted to touch on that player reception to the Apex battle pass changes.

I guess what does that reaction say about the Apex player's ability to bear further monetization, and how does it kind of inform your approach going forward? Thank you..

Yes, I mean, first I would say we're really excited for the upcoming season '22 and '23 of Apex. The Respawn team has been working diligently on all of the things that are going in, you know, profound improvements in gameplay and modalities of play and geographic culturalization. These seasons that will be bigger and more content rich than usual.

And we're giving our teams the time to create - develop those updates. And our expectation is that, our players will receive them incredibly well. As we think about battle pass specifically, so we just - take a step back. The team is always iterating and innovating, to bring about the best experience for our players.

Our intention this time round was really, to improve the overall value and experience across our battle pass offering for our players. And we wanted to kind of make sure that things were approachable realistic and accessible for our global community.

That being said, even as we iterate through that, our Respawn team listens and learns and is it is meaningfully connected with their community. And as it became apparent that the community had real feedback around how we're dealing with some of those aspects of battle pass. The team was able to react and make those changes dramatically.

I don't think this speaks to broader monetization overall for the franchise. I don't think this speaks to the community's propensity, to want to spend in the context of their ongoing live service experience that is Apex. I just think it was one of those moments where we made a series of really positive changes.

And in search of, ongoing iteration around how we deliver those changes, we did some things the community weren't aligned with. And we've been able to realign with them and our expectations, we moved towards '22 and '23, that the community will be incredibly receptive, to what we believe are going to be two seasons of incredible content..

Andrew, just to add on quickly to that, just to talk about sort of the financial framework we're using, just to kind of reiterate, although we saw those declines year-over-year, they were in line with our expectations for the foundation of Q1.

We have put in place, you think about the Q2 guide, given the strength I talked to in the whole framework for EA, a more measured outlook, particularly as we introduced new innovations and game mechanics. And Andrew just alluded to coming into Season 22 and 23.

We do think the comps obviously naturally get easier, through the second half and back into the year. It's a long way to go in the year, but know that we've been more moderating Q2 as we come through that guidance..

Your next question comes from a line of Colin Sebastian from Baird. Your line is open..

Great. Thanks for taking my questions. Andrew, maybe just to start off higher level, one question we get quite frequently from investors, really is trying to understand that an industry level, the relatively, I guess, sluggish growth trends in the past few years.

We talked a lot about competition for time and money, but are there other dynamics at work that you would highlight that are external TA that, could then turn into catalyst, or breathe some oxygen into the demand side of the market? And then my second question is on the Sims franchise, and I appreciate some of the updates there.

And as one of the 10 poll franchises and brands, hoping to hear a bit more about how you think about growth there, for example, reducing friction to bring in more players, or expanding on to other platforms, or other initiatives, that would be very helpful? Thank you..

Great, great questions. The macro, as we think about the industry broadly, and I speak to this more about the industry than I do around Electronic Arts specifically, is that we did see some pretty meaningful peaks coming through COVID around both play and watch in the context of our interactive entertainment industry.

As a company, we've continued to grow out of out of COVID. That hasn't been true for the whole industry. And so, certainly I think there's some impact there.

We also see and I've talked about this in past calls, we are seeing kind of a secular shift happening in the context of our industry and that is a movement towards the biggest franchises in the industry franchises that facilitate an expanded definition of play, the ability for the community to come and create content that extends and enhances their experience.

The ability to go and watch that content. What we see now is 25%, 30% of all engagement in our industry is actually watching content, not just playing content. Incidentally, that correlates to monetization at nearly the same levels as playing does, over the course of time. And connection is becoming a really, really important part.

As I watch our community play inside of our games. The modality of play that involves deep connection with their friends, is becoming more and more important. And so, I do think as we look at the industry broadly, not all of the industry has been making that transition at the same rate.

I do believe Electronic Arts has been working diligently against that transition. If you look at our three strategic pillars, two of the three are about massive online communities, and enhancing the power of communities beyond the bounds of games. And we've been investing meaningfully in those.

And you're starting to see that come about in the context of what you see inside of College football, what you'll see inside of Madden, what you'll see inside of FC. Certainly what we're building into the Sims. We've talked a little bit about that being at the very center of what Battlefield is doing.

And of course, with the many hundreds of people who play Apex, that sense of connection and community is important there as well. And so, I do believe as we as we continue to move through this transition and games fulfill motivations and needs of our players beyond play.

We will see more hours spent in the context of our broader communities, both playing more, creating more, watching more and connecting more. And our centers we look at the shifts now around broader entertainment, is our industry in particular.

And within our industry our franchises in particular will benefit disproportionately as Gen Z and Gen Alpha continue to grow and age up, and fulfill their entertainment needs through interactive games as their first form of entertainment.

Sims 4 specifically, again, we're, as we've talked about, we're committed to continually to evolve the Sims 4 experience with over 15 updates in the coming year. And we're already starting to see, new social things come into that new marketplace things come into that, and new user generated content opportunities come into the Sims 4.

And the Sims team is committed to continue to evolve that. Beyond that, and not a lot to talk about today, and we'll talk more about this at the earnings Investor Day in September is, we are looking to add to that universe and really build out that community globally.

And you should think about that in the context of more social interaction, across the Sims community and more platform expansion, and modality of play expansion.

And so, while the teams will continue to advance and expand Sims 4, we will also be adding new experiences that bring deep social connection, and broader platform expansion in key geographies around the world..

We have time for one more question. Your final question comes from the line of Clay Griffin from MoffettNathanson. Your line is open..

Thanks for taking the question. This is a follow-up to the conversation on industry. I guess, Andrew, how does your thinking evolved on free to play as a monetization strategy in this HD world versus the multi-modal monetization you've successfully value with EA Sports. I mean, just getting back to this, this topic of industry growth.

Do you feel like free to play as at least in some part been dilutive to industry pricing power, or maybe gamer's perception of value?.

The short answer is no. I mean, free to play games started in Asia, what is probably two decades ago now, or a little more and certainly started to take, form meaningfully in the West probably in the last decade. The industry has continued to grow broadly across both the traditional premium category, and the free to play category.

And certainly as you think about mobile coming into that ecosystem that is almost double the industry overall. And that's primarily a free to play mechanic.

So as we think about this when you, in the context of building massive online community, certainly right now there's about 3 billion people who consider themselves gamers or players around the world.

Many are looking to fulfill different needs and motivations as part of their play experience, depending on what platform and what geography they come from. Our orientation right now is to support all business models.

And if you look at our biggest franchises, FC being the biggest of course, we have modalities of play across premium, across free to play, across live service, across console, across PC, across mobile. And that franchise has grown every platform, every modality of play. And across every business model, since we brought that in.

So as we think about American Football, as we think about Apex, as we think about Battlefield, as we think about the Sims. Our belief is that if we're building out for a global player base of over 3 billion players, and we're looking to build communities in and around our biggest IP of many hundreds of millions of players.

Our ability to utilize free to play as a mechanism, to reach more people on console PC and mobile. And then offer different monetization opportunities, whether that's in small increments, whether that's in battle passes, or whether that's in full premium purchases, that will likely drive meaningful growth, not just the industry, but for our company..

So thank you for all - thank you for all being here and for all of your great questions. Again, I want to extend my deepest appreciation to our teams for their passion, their hard work and their commitment in delivering an incredible quarter.

And I must add, from College campuses and NFL fields across the U.S., to the hallowed soccer pitches around the world, football is back. This is going to be a big football quarter for us. In my humble opinion, this is the most exciting energizing time of the year for sports fandom.

With that, I'll close by saying I'm extremely excited about what our future holds, and look forward to sharing more about our pipeline and longer term strategy to deliver growth - to all of our shareholders at our Investor Day on September 17 in New York City. Thank you for being with us..

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