Good afternoon. My name is Bhavish and I'll be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts' Fourth Quarter and Fiscal Year End 2024 Earnings Conference Call. I would like to turn the conference over to Mr. Andrew Uerkwitz, Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to EA's fourth quarter and fiscal 2024 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 first quarter fiscal year 2025 earnings call is scheduled for Tuesday, July 30. 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, May 7, 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.

Thanks, Andrew. In FY 2024, we entertained and connected hundreds of millions of people around the world. I'm inspired by how our teams continue to create and deliver more innovative content and deeper experiences than ever. Before I dive into our results, I want to talk about the accelerating transformations across the entertainment landscape and how we have been navigating and leading through change. Firstly, consumer retention and spend are increasingly consolidated in top franchises. As live services deliver fresh content, players are going deeper and spending more time with their friends in blockbuster experiences. For example, in North America, engagement for the top 10 franchises have increased their market share since fiscal 2022. For a company that has some of the biggest IP in the world, this trend presents an incredible opportunity to evolve as an industry leader. It is against this backdrop that we have built our three strategic pillars around entertaining and engaging massive online communities, telling blockbuster stories and harnessing the power of community in and around our games. Secondly, players and fans are increasingly looking to us to deliver the entertainment they want today and tomorrow, bigger, bolder, more connected experiences where they can play, watch, create and connect like never before. As players needs and motivations expand, we continue to sharpen our focus. Across this past fiscal year, we took proactive steps to further empower our creative leaders by realigning our investments, organization and portfolio in support of our largest growth opportunities. As we have demonstrated several times in the past by building some of the world's largest franchises, when we rally behind a shared goal, EA delivers more creativity, more connection and more cutting edge experiences for players and fans. The most recent example of this is the incredible launch of our multi-platform…

Thanks, Andrew, and good afternoon, everyone. As Andrew spoke to earlier, we've been on a journey to transform our business to meet the needs of an evolving industry landscape, which has seen players develop new engagement behaviors and demands. To meet these changing player needs, we've been deliberate over the last fiscal year to prioritize our investments, streamline our portfolio and align our teams and organization behind our biggest strategic opportunities. Overall, these changes set us up to deliver accelerated growth from the core business, while building the foundational blocks to expand and deepen both engagement and monetization into the emerging interactive entertainment categories of create, watch and connect. Turning first of fiscal year 2024, EA delivered strong earnings growth and record cash flow in a highly competitive market. Our results were highlighted by the hugely successful rebrand for the EA SPORTS FC and growth across our largest sports franchises with both global football and Madden franchises delivering record net bookings results. For the fiscal year, we delivered total net bookings of $7.43 billion, up 1% year-over-year or up 3% in constant currency. Full game net bookings of $2.01 billion, up 11% year-over-year or 12% in constant currency was driven by the release of Star Wars Jedi: Survivor and our EA SPORTS portfolio. We launched four new non-annual sports titles in FY 2024, strengthening our EA SPORTS brand as it further expands fandom across one of the largest platforms in the world. Live services net bookings was $5.43 billion, down 2% year-over-year or down 1% in constant currency. Excluding the impact of the sunset of Apex Mobile, live service net bookings was about flat year-over-year. Strength in live services was driven by high teens growth year-over-year in our global football franchise, fueled by FC Ultimate Team and FC Mobile was…

Thank you, Stuart. 25 years ago, there were dozens of major independent publishers in the video game space. Today, there are only a handful, and 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 our massive player network. With these enviable strengths, we are well positioned to grow the industry and increase our market share. As we leverage the capabilities of AI, we believe it will further supercharge these differentiators. Through decades of experience and leadership, we have led through multiple transformations in our industry. Now we have an incredible opportunity in service of our players, communities and shareholders to lead through the one taking place right now. Now Stuart and I are here for your questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Bhavish, we're ready for your first question.

Thank you. Our first question comes from the line of Matthew Cost of Morgan Stanley. Please go ahead.

Hi, team. This is Dave on for Matt. Just a quick housekeeping question. It looks like in the new non-GAAP guidance, you're providing us a better bridge to what we're already doing in our model. So if I'm following correctly, we can now take the new non-GAAP operating margin and add or subtract for the change in deferred. And so if I'm doing the math correctly, does that bring us to an operating margin on net bookings of 31.6% to 33.4%? And then I guess, just as a quick follow up, if you could speak more to why the change in disclosure? Thanks.

Dave, many thanks for the question. This is Stuart. Let me just quickly step back and talk about why now and why the change. We know that video game companies take different approaches with regards to capitalizing software costs. As you know, we don't capitalize software costs and we expense as we go into the P&L. Thus, we felt it was important that by bringing this measure, it helps you better understand our business as we move forward, in particular, as we think about the pipeline in 2026 and 2027 and as a way for us to clearly demonstrate the conviction in the strategy and the direction that we see the business going forward into the future. Based on your assessment and using the adjustment for the change in deferred revenue, yes, you are correct. And what I would tell you is a couple of pieces. One is that, obviously, you see expansion FY 2025, which is suddenly driven by our licensing changes. Revenue mix through the year and the ongoing focus and discipline around cost as you look at the 2025 guide and the framework of OpEx around net bookings. And then secondly, as we outlined in the prepared remarks, you'll see FY 2026 and 2027 expansion driven by the pipeline as we start to bring to market through those later years and continue to enable us to drive return in the core business and importantly, still investing in the future. I'd also add that around all of that conviction and for using that metric, that would obviously have also announced the increased stock repurchase program, which is again another really meaningful signal in conjunction with this metric of where we see the business moving in the later years.

Great. Thank you.

Thank you. Our next question comes from the line of Chris Schoell of UBS. Please go ahead.

Great. Thank you. I appreciate you've been facing very difficult comps, but can you give some color on what you're assuming for some of your larger franchises, including Apex and FC in fiscal 2025. And it appears the midpoint of the guidance is similar to your prior growth commentary, but anything you would flag that has changed relative to last earnings call in regard to your expectations for next year? Thank you.

Thanks, Chris. Firstly, I'll take the last question first. No material expectation shift from the framework that we outlined back in January. To your second question, broader assumption, I think it would be important to think about the phasing of how we're thinking through the year. Obviously, we put out Q1 and you'll see the challenging sort of headwinds around the title comps and slate from last year, which is really driven around we had those extra titles from before. As you think through the rest of the year and how we build out the business, obviously we look to Q2 and we see obviously the addition of college football and we expect an overall aggregated growth around our American football business. You would expect that we continue to see growth in both our core live service business and we talked to in the prepared remarks that we see that outpacing the market and sort of mid-single-digit growth. You'd expect the FC that has grown for us, and again, we grew FC again last year in 2024 expect that FC 25 being both new innovations and we continue to grow that franchise through next year. In terms of Apex, we saw great engagement and retention from players in Q4. We continue to invest behind the franchise and expect to see some advancements innovations in new seasons over the next couple of seasons in front of us that we'd start to continue to believe we drive growth back into the franchise through FY 2025. That overall brings us to a -- the profile we've put out, which is again low-single digit bookings growth for the year in a lighter release slate, but offset by growth in that core life service business.

Awesome. Thank you for that. And if I can just fit in one more quick one. Just regarding the stock repurchase program, how did you think about accelerating the buyback versus other capital allocation opportunity -- opportunities you had at your disposal?

Yes, great question. I think the first thing I would just say is our dividend remains unchanged. The second part is you want to kind of reinforce from the stock repurchase program, sort of three validations through it. One is aligning the length of the program with the framework we're putting out in terms of the extended guidance we gave around the new disclosure metric. Secondly, I want to emphasize that the authorization obviously being bigger than our current one at $2.6 billion, rising to $5 billion. And basically something a signal we want to continue to scale that through the approach of a stock repurchase plan, which obviously gives us continued value in our mind back to shareholders and obviously flexibility as we scale through the next two or three years.

Great. Thank you very much for the color.

[Operator Instructions] We'll take our next question from Mr. Eric Handler of ROTH MKM. Please go ahead.

Good afternoon. Thanks for the question. You have a big live services bucket. And yes, we can decipher how much is PC and console versus mobile. But I'm wondering if you could break it up between, let's say, sports, action shoot -- action shooter and casual, how would -- like how would that break down in terms of percentages?

Hey, Eric. This is Stuart. We're not going to break down directly the splits across the live service businesses. As a reminder, the live service category encompasses not only sort of sports, also incorporates mobile, incorporates other parts of our business, whether it's our subscription business from EA Play and other parts that comprise live services. It's a heavily aggregated category across multiple levers we have by virtue of the portfolio and the strategy we carry today. Obviously, we think that through our massive online communities, they are our largest components as we come through that live service piece. When you think about FC, Sims and Apex as comprising the biggest three of those mass online communities, we look to add obviously college football this year and obviously, Madden accompanies that inside of that envelope. We also see naturally a mobile business that wraps inside of that live service number and we've talked to that we see outside of the portfolio rationalization, we see low single digit growth in that business through next year. That kind of the big compositions that we see around that service business that makes up 73% today and ultimately gives us the flexibility and agility to be convicted in the future as we layer on both the pipeline and our strategic objectives.

Yes. I might just add, one of the great differentiators of our company is actually the breadth of our live services. So if you look at FY 2024 as we come into FY 2025, at the very center of our FY 2024 was this incredible rebranding of FC and the launching and growth of that even as we lapped a World Cup year. We had Madden, again, a live service that grew and reached record levels of revenue. We had our biggest EA SPORTS year, I would argue that EA SPORTS may be one of the greatest global multi-sport media brands in the world and certainly has greater fandom than most other brands that it competes with. We had double-digit growth in the community on the Sims, which again targets a very, very different demographic of players. And when we look at the many hundreds of millions of shared user-generated content items, you are seeing the evolution of that live service into a broader community creation platform. We continue to build resilience into Apex. And as a community sentiment of that grew 29 points over the last fiscal year. And as we're primed to continue to grow and expand that live service, we have great opportunity. And again, as I talked about in the prepared remarks, I've just spent a whole bunch of time with the collective Battlefield team, playing what they're building and it is going to be another tremendous live service. And if you really use FC as the blueprint and you think about across platforms, across modalities, across business models, across geographies and also branching fan beyond the bounds of the traditional game to create truly a football fan platform that really extends the magnitude of the live service. This really is at the very center of our strategy when we talk about building content and experiences that entertain and engage massive online communities. And so, as we think about this going forward, we believe this differentiates us from the marketplace in videogames and certainly in the marketplace in entertainment and really positions us for real growth against what these emerging generations are looking for in the context of their entertainment consumption.

Thank you.

Thank you. Our next question comes from the line of Andrew Marok from Raymond James. Please go ahead.

Hi, thanks for taking my question. Maybe one on Apex, if I could. Since it was a limited-time mode back in 2020, Respawn has kind of always been pretty adamant that the solo mode was never going to come back to Apex despite players clamoring for it, because it didn't mesh with their view of player behavior. So with that mode coming back in season 21 for a long-time for a limited time mode, I guess what changed? Is that part of the easier onboarding that you were referring to in the prepared remarks or something you're leaning into based on player signals?

Well, again, I think what the Respawn team has done and continues to do incredibly well is really work in a very transparent open way with the community. Again, this is an incredible community of hundreds of millions of players. Retention is very high. They're a very vocal community and the Respawn team may be better than many other teams in the industry works very closely with that community. And I think what we're starting to see is the evolution of both the player personality, the Apex player personality, Apex is a game and how Respawn serves that community broadly. And this will be one of those steps. But you shouldn't imagine that this is the sum total of those steps as we really think about both expansion of modalities at play for Apex when we think about deep culturalization on a geographic basis to attract new and more deeply engaged global communities. And as we think of -- as we look to what the Respawn team is doing over time, we believe that this will be a cornerstone of our live service business for many, many years to come.

All right. Great. Thank you. I'll jump back in the queue.

Thank you. Our next question comes from the line of Colin Sebastian from R.W. Baird. Please go ahead.

Thanks. Good afternoon. I guess, first on the Mobile segment kind of broadly, I understand the different puts and takes on that with the pipeline. But also just trying to understand a little bit better, the underlying growth expectations for the Mobile segment of the industry, EA's market share expectations as you look out to fiscal 2026 and 2027 in that segment and what the key drivers are there? And then apologies if I missed the Stuart, but just in terms of that fiscal 2026, 2027 outlook, how should we think about the step-up between those years into 2026 and into 2027, if that contemplates any changing dynamics around the competitive landscape next year. Thanks.

Yes. Great question. Let me start with kind of the mobile macro. As you've heard from us before, mobile is a very important platform to us. We've spent the last number of years really focusing our mobile business and driving meaningful profitability in that area of the business, which hasn't always been the traditional shape of the mobile business in the industry. As we look forward, our expectation is over the next 12 months or so, we probably have low-to-mid-single-digit growth in the mobile market overall. But it's still -- the mobile market remains a fairly high-risk opportunity that requires significant user acquisition cost to kind of ramp a new mobile game. And so, when we kind of couple what are increasingly longer development cycles in mobile, sometimes two to three years and we hear stories of five, six, seven years in the marketplace, meaningful user acquisition spend and long ramp times once you get to-market, mobile isn't an easy market to capitalize on. With that being said, we feel like our mobile businesses is in a very good position given its profitability. We'll be leaning into our massive online communities around FC, around Madden, around the Sims [indiscernible] will be mobile native and we'll also be looking at opportunities to invest in a very limited number of mobile native titles that we believe have breakout potential.

Colin, with regard to your second question, we basically -- in my prepared remarks, we framed up the range of growth we expect to see through 2026 and 2027. So range through that entire period. But we referenced it through the new non-GAAP operating margin disclosure we made and we are referencing expanding 150 to 200 basis points on the 25 platform that we just put out. So intent there is to demonstrate the growth acceleration in both 2026 to 2027, as we think about growth through driven by sort of growth in a core business from team expand player acquisition, engagement retention. We know the live services to Andrew's answer on the call a second how we continue to expand both growth through the releases and our ongoing business. The new IP we've talked to in the pipeline that continues to give us lever and growth on-top in the later years. And as we see leverage from the cost structure and investment all relates down to that non-GAAP operating margin expansion through 2026 and 2027.

Okay. Thanks guys.

Thank you. Our next question comes from the line of Mike Hickey from Benchmark Company. Please go ahead.

Hey, Andrew, Stuart, Andrew, Katie, thanks for taking our questions. Andrew, you had some pretty interesting comments recently at a conference talking about sort of efficiency and expansion with AI. I think you gave one example where you're talking about building out game environments like stadiums, you said that process went from six months to six weeks. So pretty incredible efficiency step-up. Just curious how you're thinking about further deploying AI on other development processes, other games, other platforms like mobile. You talked about the duration of development on mobile, maybe there's some efficiencies there. And then as a follow-up, just curious on the generative AI NPC in key franchises like sports, Battlefield, Sims, the opportunity you see there over-time? Thanks, guys.

Yes, great question. First is, we're still very early in the AI evolution or at least the generative AI evolution. As a company, we've been deeply tied to AI since our inception. It has been the very center of all of the games that we create replicating human intelligence in the context of a gameplay experience. But certainly as we think about the wave of generative AI today and as it merges into artificial general intelligence broadly, we're still very early. But the things I talked about in the conference was really both two-fold. One, how do we get more efficient and the stat I used was we've moved from being able to create stadiums from six months-to six weeks. And my expectation is that will continue to shrink over time. Maybe even more profound than that was we went from -- when we build a game and we have animation and run cycles. So in FIFA 23, we had 36 run cycles, which gave you kind of believability of human performance inside of that game. When we launched FC 24, we had 1,200 run cycles. And so again, starting to add to the individuality and uniqueness of each player and delivering our players more immersion in the game, a more engaging experience that is more true to what they watch on television on a Sunday afternoon. And so, as we think about the first pillar of generative AI for us, we're really looking at, how can it make us more efficient, how can it give our developers more power, how can it give them back more time and allow them to get to the fund more quickly. When we think about that -- our expectation is that there is meaningful opportunity for us. We've done analysis across all of…

Thank you.

Operator, we have one more question.

Thank you, sir. Our final question comes from the line of Eric Sheridan of Goldman Sachs. Please go ahead.

Thanks so much for taking the questions. Maybe two parter, if I can to Andrew. From a big picture standpoint, if you take a step back, I'd love to get your take on two themes we continue to hear about across the gaming landscape. One, the market opportunity for more dynamic ad insertion across more traditional AAA games across different formats and how you think that might be a revenue opportunity over the medium to long term? And the second, we've seen some fairly successful examples recently of IT adaptation out of the gaming landscape into the broader media landscape. What's your current thinking about that IT adaptation landscape going forward and what that might sit as a market opportunity for EA? Thank you.

Let me start with the second part of your question, then I'll move into the first part of your question. Thinking about what you've heard from us for some time now is as we work with our global communities of players and we really listen to what they're looking for, what they hope to do is really interact and engage with their favorite IP, which as it turns out is the biggest IP in the world, many of which sit within our portfolio, they want to both play, create, watch and connect. And so our expectation on a go-forward basis is that even as we expand the definition of play and the types of things you can do in the context of these interactive worlds that as we bring in more creation opportunity in these worlds, that in and of itself will also spawn more watch. Watch traditionally, of course, is well, do we make a movie, do we make a television show and our expectation is that we will see more of that. But in addition to that, we expect that we'll see many, many billions of hours of content created by our communities, both in the context of what goes on inside the game and in the context of what goes on outside the game. And of course, the most important part of that will be out the ability for players to connect with each other in the context of play, create and watch. And so while we look at what's going in the industry right now, we see the fact that gaming IP is now manifesting inside of film and television and is topping those charts in addition to topping the interactive entertainment charts. Our expectation as we build out our portfolio is that we will get…

Thank you.

Okay. Well, thank you all for being here, and thank you for the great questions. I want to extend my deepest appreciation to our teams for their passion, their hard work and commitment in delivering an incredible year. To close, I'm extremely excited about what our future holds. I look forward -- and look forward to sharing more about our pipeline and longer-term strategy to drive growth at our Investor Day in New York later in the year. Thank you so much.

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