ELECTRONIC ARTS INC. Q2 FY2024 earnings call

• CEO Andrew Wilson noted Q2 was strong with results above expectations, and progress against the strategy to build massive online communities, tell blockbuster stories, and amplify social connection. - EA SPORTS launched Madden NFL 24 and FC 24, with Madden NFL 24 having almost 10% more players year-over-year and FC 24 seeing strong launch with over 14.5 million fans playing in first four weeks on console and premium PC. - Apex Legends Season 18 drove improvement in monetization, with Season 19 launched featuring Post Malone integration. - The Sims 4 community grew with double-digit year-over-year growth in new players and weekly average users. - Battlefield 2042 Season 6 launched with record engagement on Steam. - Live services delivered over 285 game updates in the first half of the year.

In the second quarter, net bookings were $1.82 billion, up 4% year-over-year, or 5% in constant currency. Full game net bookings were $691 million, up 9% year-over-year, or 10% in constant currency. Live services net bookings were $1.13 billion, up 1% year-over-year, or 2% in constant currency. On a trailing twelve-month basis, live services were 73% of the business. EA SPORTS Madden NFL 24 had net bookings up 6% year-over-year. Our total global football business saw net bookings grow 41% year-over-year, driven by FIFA 23's momentum and FC 24's launch. Apex Legends had net bookings above expectations despite year-over-year decline. The Sims 4 had double-digit growth in new players and weekly average users. Battlefield 2042 saw record engagement on Steam.

• Full-year net bookings outlook remains $7.3 billion to $7.7 billion, roughly flat to up 5% year-over-year or up 1% to up 7% in constant currency. - GAAP net revenue and cost of revenue outlooks remain $7.3 billion to $7.7 billion and $1.67 to $1.75 billion respectively. - Operating expenses guidance lowered to $4.21 billion to $4.33 billion. - GAAP earnings per share guidance increased to $4.10 to $4.66. - Operating cash flow guidance raised by $250 million to $1.95 billion to $2.1 billion. - Capital expenditures outlook lowered to $250 million. - Free cash flow expected to be $1.7 billion to $1.85 billion. - Third quarter net bookings expected $2.25 billion to $2.45 billion, GAAP net revenue $1.83 billion to $2.03 billion, cost of revenue $495 million to $535 million, operating expenses $1.05 billion to $1.11 billion, and GAAP earnings per share $0.75 to $1.01.

• Actual events and results may differ materially from expectations. - FX remains volatile which could impact net bookings and profitability. - Highly competitive market environment poses risks.

Q: On the launch of EA FC, what were the areas pleased with and room for improvement, and still on track for low single-digit growth?

A: Andrew Wilson said almost universally happy with launch, teams did extraordinary job, marketing did well, and Stuart Canfield added they remain on track for low single-digit growth with strong Q2 start and prudent approach into Q3/Q4.

Q: Anticipate pacing of sales for FC, similar to prior years or changes?

A: Andrew Wilson said planning for potential outcomes, brought in net new fans, and Stuart Canfield said saw great start with pull forward in Q2, expect Q3 to be similar, Q4 tougher comp due to prior year World Cup comp.

Q: Impact of not being shackled with FIFA restrictions on revenue for sponsorship and advertising?

A: Andrew Wilson said still early, transition to FC is about working with more partners, expanding play modalities, engagement opportunities outside game, developing FC as a football fan platform, and things will manifest over time.

Q: Real estate strategies?

A: Stuart Canfield said ongoing exercise to optimize real estate footprint as part of restructuring.

Q: On operating cash flow outlook, puts and takes?

A: Stuart Canfield said has one-off benefits like tax benefits and improved operating foundations, and changed free cash flow due to capital strategy changes.

Q: FC seasonality of spend and Madden audience scale?

A: Andrew Wilson said FC's seasonality of spend elongated due to 365-day fan connection, and on Madden, works closely with NFL and NFLPA, builds game experiences to fulfill fan motivations and will continue to grow the business.

Q: Consumer spending habits resilience and Madden long-term audience?

A: Andrew Wilson said entertainment is fundamental human need, big games with deep engagement are resilient, and on Madden, works with NFL and fans to fulfill needs and grow the business.