The conference call for Electronic Arts' third quarter fiscal year 2024 earnings has begun. The operator, Brianna, introduces Katie Burke, the Director of Investor Relations, who then introduces CEO Andrew Wilson and CFO Stuart Canfield. The company's SEC filings and earnings release are available online, along with detailed earnings slides. Burke reminds listeners of the upcoming fourth quarter earnings call and cautions that actual results may differ from expectations. Wilson begins by thanking Burke and discussing the company's strong performance in Q3, with millions of players and fans being entertained.

EA had a successful quarter with high-quality games and record live services, particularly in their EA SPORTS FC and EA SPORTS Madden NFL franchises. These games have strong engagement and are popular among online communities. The launch of EA SPORTS FC 24 exceeded expectations and Ultimate Team saw significant growth. Madden NFL remains the best-selling sports game in North America and also saw an increase in players. EA's business is growing as their communities expand and the definition of play evolves.

The gaming industry has billions of players worldwide, with a growing number of younger generations choosing gaming as their preferred form of entertainment. This provides opportunities for companies to create new and engaging experiences for their communities. EA is focused on expanding and innovating their biggest franchises, such as The Sims and Battlefield, to cater to the needs and desires of their passionate fan base. They are committed to delivering new content and game modes, as well as investing in the future of these franchises through advanced technology and community-focused initiatives.

Apex Legends is celebrating its fifth anniversary and has been listening to its community to implement new features and content. They are focused on engaging both current and new players through geographic expansion, game economy innovation, and easy gameplay. In the future, they plan to expand their portfolio of connected ecosystems, including EA SPORTS and FC, to drive value and growth. They will also continue to invest in Madden NFL and bring back EA SPORTS College Football. With more people spending time playing and connecting in their titles, they see great potential for growth.

In the online gaming community, EA is focusing on expanding their blockbuster storytelling and creating deep, rich characters. They are also investing in new story modes and connected experiences to engage players and drive future growth opportunities. In the third quarter, they delivered net bookings of $2.37 billion, with live services being a major contributor. The success of EA SPORTS FC Ultimate Team and FC Mobile contributed to double-digit net bookings growth, surpassing expectations.

In the third quarter, EA's global football business saw a 7% increase in net bookings due to strong retention of their core player base. EA SPORTS Madden NFL also had a successful quarter, with net bookings up 5% year-over-year. The release of new games, such as EA SPORTS UFC, NHL, and World Rally Championship, contributed to the overall growth of the EA SPORTS community. However, the highly competitive quarter saw Apex Legends not meeting expectations, but a recent cross-over promotion showed promising results. EA remains committed to the franchise and will continue to invest in opportunities for growth. On a GAAP basis, net revenue was $1.95 billion, up 3% year-over-year, and operating expenses were up 3% due to incremental marketing spend. GAAP earnings per share also saw a 47% increase, and operating cash flow was $1.26 billion, up 13% year-over-year.

In the trailing 12 months, the company had a record free cash flow of $2.16 billion and returned $376 million to shareholders. The company is well positioned to meet its commitments for the fiscal year, with strong business performance, a strong portfolio of IP, and consistent execution. Despite a competitive market, the company expects to see growth in net bookings and higher levels of profitability and free cash flow. In the fourth quarter, the company expects moderated growth in its EA SPORTS FC franchise and a measured approach to Apex Legends. The company also expects minimal impact from foreign exchange rates. As a result, the company expects net bookings of $1.625 billion to $1.925 billion, down 16% to down 1% year-over-year, with GAAP net revenue of $1.625 billion to $1.925 billion and cost of revenue of $360 million to $410 million.

EA expects operating expenses of $1.125 billion to $1.205 billion in the fourth quarter, resulting in GAAP earnings per share of $0.20 to $0.68. They also have a long-term financial framework focused on accelerating growth, delivering operating leverage, and increasing cash flow. They plan to achieve this through expanded player acquisition, digital and live services, blockbuster releases, and cost discipline. In the next fiscal year, they expect low-single-digit net bookings growth and mid-to-high single-digit growth in underlying profitability. In the following years, they anticipate accelerated net bookings growth due to their portfolio of industry-leading IP.

The paragraph discusses EA's expected growth and profitability in the coming years, driven by their core sports franchises, new content, and iconic releases. They also mention their focus on strategic objectives and their confidence in their ability to deliver long-term growth and value for players and shareholders. The company's mission to inspire the world to play is evolving and expanding, with advancements in technology allowing for bigger and broader games and experiences. The speakers, Stuart and Andrew, are available for questions. The first question from a Jefferies analyst asks about the wide guidance ranges for the fourth quarter and full year.

Stuart Canfield, speaking on behalf of EA, explains that the range of their projected earnings is broader due to a variety of factors, including a record World Cup comp for FC and a fiscal high quarter for Apex. He also mentions that there are eight points of headwind from timing of content releases in the prior year. Andrew Uerkwitz asks for more clarity on the projected operating leverage, and Andrew Wilson responds by outlining the company's long-term goals of accelerating growth, expanding leverage, and increasing cash flow through compounding growth and releasing games from their pipeline.

The speaker discusses recent changes in app store fees in Europe and asks if there have been any early learnings or if the company would consider opting out of gross margins for their mobile game business in Europe.

The speaker addresses two questions, one about the potential impact of Apple's app store updates on their business and the other about the potential for the upcoming college football game to add to their existing Madden customer base. They state that they are still reviewing the app store updates and cannot provide a clear update on the impact at this time. They also express confidence in the potential for the college football game to be additive to their business and expect it to be popular among fans.

EA is prioritizing investment in the largest opportunities for multi-year growth and is looking to expand the football community through Madden and college football. They see the most incremental opportunity for growth in their existing franchises that engage massive online communities. They also have a strong pipeline of new IP for future growth. Subscription gaming is an important aspect of their business, with the EA Play subscription service, but they also prioritize developing and investing in new IP.

The speaker discusses the potential for growth in their business through their FC branding and partnerships with core leagues. They also mention investing in their popular franchises such as Madden NFL, Sims, Apex, and Battlefield. The company is also exploring the potential of subscription services, although it has not yet translated to the same level as other media industries. They believe there is an opportunity to disrupt how households consume content and reference other companies, such as Netflix and Warner Brothers, who are also exploring the gaming subscription space.

The speaker believes that the company is well-positioned to continue leading in subscription services due to their diverse portfolio, including sports games. They mention the possibility of creating a larger community by connecting their various sports communities and incorporating highlights and e-commerce, creating a "metaverse." They also mention the large and recognizable brand of EA SPORTS, and the impact it has on younger generations' relationship with sports.

EA believes that there is a significant opportunity to harness the power of their sports gaming community, both inside and outside of their games. They see potential in expanding their reach through partnerships and bringing non-gaming content into their ecosystem. The company also hints at potential developments in the future. As for the mobile industry, EA saw a modest increase in bookings in the quarter and believes they have reached stability, allowing for potential growth in the future.

In the market, there has been a 5% increase in constant currency in Q3, with double-digit growth in the mobile portfolio. The company's strategy is focused on success in FC and other ecosystems, as well as looking for opportunities for standalone mobile hits. They are also prioritizing profitability. There have been reports of sports leagues considering ownership stakes in ESPN.

EA has valuable partnerships with sports leagues, and they are looking to strengthen their relationship with the NFL and NBA. They see the potential for EA SPORTS to become a platform for engagement and are working closely with their league partners to make it happen. They also have a longstanding relationship with ESPN and are working with them and the Walt Disney Company to shape the future of entertainment.

The speaker is optimistic about the company's position and connection with fans in the future. They are also pleased with the recent Apex event and its performance, despite competition in the market. The team is committed to the game and community and is constantly working to improve and test new content and mechanics. The speaker is encouraged by the results of the event.

The FINAL FANTASY partnership with Apex has opened up new possibilities for crossovers in the game, while also emphasizing the importance of protecting the core gameplay, characters, and lore. This event has shown that there is potential for more crossovers in the future.

Michael Hickey asks Andrew Wilson if the rumored new Nintendo console would benefit EA's portfolio and if their upcoming games, such as Battlefield and Mass Effect, could potentially accelerate their top line growth in the next 2 years. Wilson cannot comment on unannounced products.

The speaker discusses how new platforms with improved technology, such as the Nintendo Switch, can benefit their company's portfolio of games. They also mention their expectations for growth in their core business, a lighter release slate, and continued leverage and resource allocation for future growth opportunities. They end by reminding listeners that they continue to expense costs.

The speaker discusses their company's plans for future growth and increased cash flow, as well as their confidence in their teams and their upcoming fiscal year results. They also congratulate their local football team and wish them luck in the upcoming Super Bowl.

This summary was generated with AI and may contain some inaccuracies.