Good afternoon. My name is Christina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Electronic Arts Q1 Fiscal 2022 Earnings Conference Call. Mr. Chris Evenden, VP of Investor Relations, you may begin your conference.

Thanks, Christina. Welcome to EA's First Quarter Fiscal 2022 Earnings Call. With me today are Andrew Wilson, our CEO; and Blake Jorgensen, our CFO and COO. 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'll post our prepared remarks and audio replay of this call, our financial model and a transcript. Regarding our calendar, our Q2 fiscal 2022 earnings call is scheduled for Wednesday, November 3. As a reminder, we posted a schedule of our entire fiscal year of upcoming earnings calls on our IR website. This presentation includes forward-looking statements regarding future events and the 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, August 4, 2021, and disclaims any duty to update it. During this call, the financial metrics, with the exception of free cash flow, 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.

Thanks, Chris. I hope all of you are continuing to stay healthy. I want to start out today by thanking all of our amazing teams across Electronic Arts, who continue to create and deliver so many great experiences for our players during this unprecedented period. It's been an exciting few months since our last call. We've unveiled Battlefield 2042. We've launched F1 2021. We’ve shared what is coming with our next Madden NFL and FIFA titles. We had a fantastic EA Play Live event with great fan response and we announced the acquisition of Playdemic, which is another step in our strategy of continued leadership in sports and growth in mobile. Integration efforts with the teams at Codemasters, Blue Mobile and Metalhead are going well, and we're pleased to be building a lot of anticipation through the summer for our upcoming games and content. Looking at our first quarter of fiscal 2022, we delivered very strong results. Even as the world took steps towards opening back up, we deepened engagement and connection for players in and around our games. We see this trend continuing in the future. Our talented teams are delivering experiences that hundreds of millions of players want to play, and our new launches, leading games, and live services all performed very well during the quarter. Execution against our long-term strategy continues to power growth in our business. Revenue, net bookings and EPS were all above our guidance for Q1. We are raising our full-year net revenue, net bookings, and EPS guidance today, and we are forecasting our biggest second quarter ever. Our long-term strategy focuses on four key opportunities: the continued creation of great games and content with a focus on mobile; tools for the community to drive deeper engagement with our content; the aggregation and distribution of content and services to more platforms, business models, and geographies; and harnessing the power of the social ecosystems in and around our games. As part of this, in FY '22, we continue to execute against three key growth drivers: building on our leadership in sports; growing our blockbuster franchises; and expanding live services across our portfolio, including mobile. EA SPORTS continues to extend its leadership position through the global strength of our franchises and growing portfolio. More than 140 million players have engaged with our EA SPORTS games over the last 12 months. At the center of this, our FIFA franchise is growing around the world. Over 31 million players have joined FIFA 21 on console and PC since launch, and FIFA Ultimate Team continues to engage more soccer fans, with FUT matches up 48% year-over-year in Q1. In China, FIFA Online 4 set all-time records for monthly, weekly and peak daily active players, driving new records for our business there. On a global basis, FIFA is growing as part of the social fabric of soccer, and we are connecting players through our games and live services on more platforms and in more geographies than ever. We've also launched F1 2021, the first F1 experience to be part of our EA SPORTS portfolio in nearly 20 years. With an incredibly high-quality game that has won praise from fans and critics, F1 2021 is bringing fans into the excitement of the sport during one of the most memorable seasons in recent history. Sales were up significantly year-over-year, and total active players have grown by nearly 10% since launch over last year's game, demonstrating the power that comes from the amazing team at Codemasters, a great game, and our EA distribution and marketing strength. Momentum continues to build for F1, which like soccer is one of the few truly global sports, and we see a major opportunity to continue growing the franchise to reach a larger audience of players and viewers. Later this summer, we will begin launching our strong next-gen slate for EA SPORTS, that includes Madden NFL 22 with new experiences in franchise mode and The Yard; FIFA 22, which is already showing very strong demand metrics as our new hyper motion technology powers innovation throughout the game; NHL coming to next-gen consoles for the first time; and an EA SPORTS PGA Tour, the only game where you can exclusively play all four of golf's major tournaments, including the Masters at Augusta National, the Open Championship, the U.S. Open Championship, and the PGA Championship. We're also thrilled to be back in the baseball business with Super Mega Baseball and MLB Tap Sports on mobile, and we look forward to sharing more from those teams in the future. With the strength of our industry-leading EA SPORTS teams, the addition of talent and expertise from Glu, Codemasters, Metalhead, and soon Playdemic, as well as partnerships with international developers, we have exciting plans to create more EA SPORTS experiences for fans around the world to play, watch and connect. Our second growth driver is building blockbuster entertainment properties around our IP. This year, this is led by Apex Legends and Battlefield, two of the leading franchises in their category. Apex Legends continues to accelerate as one of the top titles in the industry. During Season 9, we've averaged more than 13 million weekly active players. We've set a new record for peak daily players across all seasons, and the three latest in-game events have driven the highest play accounts for events to date. In every season and event, the Respawn team is constantly innovating, trying new things, and gathering feedback to evolve the live service. As a result, player engagement and investment continues to grow. Respawn is now expanding the game beyond battle royale with new experiences like arenas, which has brought new and lapsed players into the game and opens the door for deeper esports opportunities. With so much excitement in the community for the future of Apex Legends, we see outstanding growth ahead for this powerful global franchise. During Q1, we revealed Battlefield 2042, and the energy and excitement from fans around the world has been incredible. Since the reveal on June 9, our Battlefield trailers and content have cumulatively generated more than 210 million views to date across all channels, contributing to Battlefield 2042 being the most talked about title in the industry during a busy month of June and creating a record high sentiment among the Battlefield fan community. More recently, we introduced Battlefield Portal, a new community-driven experience in Battlefield 2042. This new pillar of the game puts the power in the hands of players to seamlessly create their own experiences from all the things they love in Battlefield, easily mixing and matching eras, maps, weapons, and unique gameplay scenarios that can then be shared with the community. It's an entirely new level of freedom in Battlefield, and fans have been very energized by the possibilities to create, discover, and share things that are completely new and unexpected. We are poised to deliver a truly next-gen Battlefield this holiday with unprecedented innovation, massive scale, and amazing gameplay, and we have more to share about the game throughout the summer. There is enduring power in the franchises and IP that we are building. The launch of Mass Effect Legendary Edition, the remaster of the first three Mass Effect games, reignited the passion of fans around the world, driving sales performance well above our expectations. Star Wars Jedi Fallen Order coming to the Xbox Series X and PlayStation 5 was also a moment for new and returning players to jump into that amazing game. We're continuing to invest in both of these franchises as well as more of our amazing IP. Our third growth driver is live services, our core strength and continuing growth opportunity for us, and mobile is now a significant part of this. With the addition of Glu, our portfolio now spans more than 15 top mobile live services, and we will add the top sports mobile title in the industry with Golf Clash when Playdemic joins EA. The breadth and diversity of our mobile live services now spans multiple major genres, including casual, sports, RPG, lifestyle, and racing. Over the past year, we've expanded our mobile-native talent. And with their leadership, we are now growing these titles to reach new and broad audiences on a global scale. We're also delivering our blockbuster franchises to mobile players, including Apex Legends and Battlefield experiences rolling out for mobile later this year. With the ability to bring new teams together with EA's powerful IP, we are building mobile into a growth center for Electronic Arts with long-running live services at the core of our strategy. Underpinning these growth drivers is the fact that games, and particularly our portfolio experiences at Electronic Arts, are creating social connections for more and more people around the world. More than 0.5 billion players are coming together through the social networks formed in and around our games, and we see this continuing to grow. With some of the most talented teams in the industry, a deep pipeline of innovative experiences in established and new IP, new content partnerships and more ways to connect and experience play, we are positioning our business for continued growth and leadership this year and beyond. Now I'll turn the call over to Blake.

Thanks, Andrew. We delivered a big beat this quarter, primarily driven by outperformance from two high-quality new games: our Mass Effect Legendary Edition and It Takes Two, the second title from our partnership with Hazelight Studios. It Takes Two launched at the very end of the prior quarter and showed considerable strength through Q1. Live services also performed better than expected, led by continued growth in Apex Legends. As a result, we delivered net revenue of $1.55 billion and net bookings of $1.34 billion. Given the extraordinary engagement driven by the blockbuster lockdown a year ago and the fact that last year's quarter had 14 weeks compared to this year's 13, to deliver results within 5% of last year's record sales is an incredible testament to the strength of our game teams and our ability to deliver games and extra content from our ongoing live services. The extra week last year's Q1 alone is worth more than the year-on-year difference. Notably, even against the unique circumstances of a year ago, Apex Legends grew strongly in the quarter and remains on track to grow organically more than 20% this year with the mobile launch as an upside. Because of the impact of the pandemic on year-over-year comparisons, it's helpful to compare this quarter with the pre-COVID Q1 fiscal 2020 to better understand underlying growth. On that basis, FIFA Ultimate Team is up 47%; Madden Ultimate Team is up 115%, equivalent to CAGRs of 21% and 47%, respectively. Similarly, sales, including Codemasters from our broad portfolio of catalog titles, are up 55%, a CAGR of 25%. Mobile, excluding our Glu acquisition, is also up 16% organically over the same period two years ago. We have also made considerable progress on our strategic goals as we started to integrate Codemasters, completed the acquisitions of Glu Mobile and Metalhead, and announced our agreement to acquire Playdemic. These acquisitions substantially increase our sports and mobile footprint and offer the opportunity to bring new sports to formats pioneered by MLB Tap Sports Baseball, Super Mega Baseball, and Golf Clash. We only launched F1 2021 a few weeks ago, but we're already seeing sell-through up more than 20% over last year's addition, thanks to another great game from the Codemasters team leveraged by our global commercial operation. We've created a historically strong strategic position for the company with a strong and growing core of live service supplemented by additional growth opportunities in sports opened up by the acquisition plus blockbuster releases, as demonstrated by the community reaction to our upcoming Battlefield 2042. Digital represents 58% of our full game units sold over a trailing 12-month basis, up 6 percentage points from last year. Operating expenses, which include recent M&A costs, came in slightly below our expectations. Now turning to guidance. We now expect fiscal 2022 GAAP revenue to be $6.85 billion, cost of revenue to be $1.921 billion and earnings per share of $1.58, up from $1.34. Our guidance does not include any estimate for Playdemic given that the acquisition has not yet closed. Remember, this EPS calculation does not factor in future buybacks under our two-year $2.6 billion share repurchase program. We're raising our net booking guidance for the year by $100 million to $7.4 billion based on performance from full game sales this quarter, supported by ongoing confidence in our live services. It's very rare that we raise guidance this early in the year. And I would note that despite the clear strength of player interest so far, it is too soon to raise our unit expectations for Battlefield 2042. As a result, the stronger product mix we are now anticipating for this year, we're raising our expectations for underlying profit, and more specifics are in the downloadable model that we post on our website. Underlying the strength of our strategic position, I would briefly note that even with the strength we expect for fiscal 2022, we expect growth in the mid- to high single digits in fiscal 2023. We've also raised our guidance for operating cash flow by $100 million to $1.85 billion, with capital expenditures remaining around $250 million. This would deliver free cash flow of about $1.6 billion. See our earnings slides and press release for further cash flow information. For the second quarter, we expect GAAP net revenue of $1.775 billion, cost of revenue to be $518 million and operating expenses of $1.030 billion. This results in an earnings per share of $0.36 for the second quarter. We expect Q2 fiscal 2022 net bookings to be $1.725 billion, which would make it our largest Q2 ever, driven by the launch of FIFA, continued growth of Apex Legends plus Mobile, F1, Madden and The Sims. This is up 90% on the year-ago quarter. With another great quarter under our belts, we’re looking forward to the launches of our sports titles this quarter and Battlefield 2042 in time for the holidays. Our strategic position has never been stronger, with growth drivers in place for this year, next year, and beyond. I'd like to announce one thing, our Chief Accounting Officer, Ken Barker, has decided to retire from EA. Many of you know Ken. He's interacted with investors on the buy-side and sell-side for years. Ken has done an amazing job as Chief Accounting Officer over the last 18 years, supporting three CEOs and the management team during his time at the company. Additionally, he has been a fantastic business partner for me over the last nine years. He has developed an incredible team that supports our business and exceptional leaders that will be able to carry on his strong support of the company. Ken has groomed a very strong person to take over the Chief Accounting Officer role, Eric Kelly, who I think many of you also know. Eric has been with EA for 18 years in all of our key markets around the world, including Europe, Asia, and North America. He has all the skills and strengths to fill the very large shoes that Ken has worn for years. We're lucky that Ken has agreed to assist in the transition over the next nine months, so he'll be with us until after we close our fiscal year. I thank Ken for an amazing commitment to EA and his fantastic partnership. With that, I'll turn it back to Andrew. We lost, Andrew?

Sorry. Minor glitch. Thank you, Blake. I'd echo your thoughts and sentiments and say thank you, Ken, for all of your outstanding contributions to Electronic Arts. We'll miss you. As I started this call, I want to again thank our teams for everything they continue to do in service of our players around the world. Thanks to their efforts, we're bringing hundreds of millions of players together through our games and live services like Apex Legends. We're delivering great new experiences like F1 2021 and Mass Effect Legendary Edition, and we have even more amazing content to come. It's been a strong start to our fiscal year. Our growth drivers, leadership in sports, building blockbuster franchises and growing live services, including mobile, are accelerating our business, and we're well-positioned for continued growth this year and beyond. Now Blake and I are here for your questions.

Your first question comes from the line of Eric Handler with MKM Partners.

The first question, real quickly with F1. I wonder if you could compare how marketing for the game has changed on a year-over-year basis. And then I've got a follow-up to that.

Yes. I would tell you, I just think that when you think about how we go to market with our games, we have global reach. We have extraordinarily digital capabilities and kind of data-driven marketing processes that allow us to better target both existing players, lapsed players, and potential new players. And I think what we've been able to do as an organization is take that strength, partner that with an extraordinary game team at Codemasters, and what is also a spectacular game in the middle of an F1 season that is more interesting than any season in recent history with the competition between Hamilton and Verstappen heating up. The combination of all those things together has meant that we've seen growth in the franchise and expect to continue to grow that franchise over time.

Great. And then, I assume should we assume this year there's going to be live services for F1? And was there any consequential live services with last year's game?

This game is early in the partnership between Codemasters and EA SPORTS. A lot of how we think about the future live service of that business and sustaining that community and that fan base over time is going to continue to evolve. There is some this year but not as extensive as certainly we think we will get to over the course of time.

Your next question comes from the line of Andrew Uerkwitz with Jefferies.

Blake, I know you want to briefly mention it, but I want to see if you could go into a bit more color. Typically, you don't give plus one-year guidance out, so when you're thinking about growing mid-double digits for next fiscal year, could you give us any color on how that's going to be achieved? Is it more of the same? But any additional color to help us kind of piece together how we should think about that growth rate.

Sorry. I was on mute. Sorry about that. So what I was saying is, first and foremost, focus on the acquisitions that we've done. Those, on their own, will create substantial uptick in both top-line growth and bottom-line growth as we look at continuing to fuel those acquisitions and then use those talent bases to start to build out new titles that we can add to our overall portfolio. Second, think about Apex Mobile. We've said that we have very little in this year. We're in a test market, and we should be out in the global markets in China next year, if not earlier. That could be a huge driver in profitability going forward. We have the potential for live services around Battlefield, as well as a Battlefield mobile game coming up. We clearly have other games planned, such as a Need for Speed or others that are coming, which you'll hear more about in the future. You can imagine. We try to operate the business on a 5-year cadence if not longer, and we're thinking about how do we generate growth each year, both organic and through acquisitions. I would tell you I think we are in a better position than we've ever seen before.

Got it. I appreciate that, considering it's so far out. The next question - and I'll bring it back to current times. Could you walk us through the pushes and takes of how we should think about the impact FIFA has on this quarter versus what it will have on the December quarter considering the shift in launch date?

Yes. Not everyone on the street has seen this, and it's not clear for a lot of people. We'll ship FIFA on October 1, which means we actually ship it a little earlier for people who are part of our subscription program, for example. We will capture some revenue, as we've shown in our guidance for this quarter in Q2. We'll also capture revenue in Q3. Usually, the first one to two quarters of FIFA are the biggest quarters because people are building their ultimate teams. We'll see strong growth both this quarter and next quarter off of FIFA, the shift being that it's dropping in Q2, which last year, it only dropped in Q3 when we started it, but it should make a huge difference. For the full year, obviously, we wouldn't have generated or said that we were going to grow for a full year and increase our guidance if we weren't confident about FIFA as well as other products.

Your next question comes from the line of Bryan Kraft with Deutsche Bank.

Was hoping you could provide a little bit more color on the Dead Space franchise and what you guys are expecting from the reboot there. And secondly, then, on the name image likeness development? And maybe to what extent do you think including realized college athletes is something that you guys are focused on. From a development perspective, how quickly could you add that to one of your games versus using generic players?

Two great questions. Having just provided a very small trailer on Dead Space, there's not a lot more I can share about that. It's a little ways out yet, but the studio has taken it on. What I can say is it's one of the great games from our catalog. There has been extraordinary demand to bring it back for existing players and the next generation of players, and we're excited to add that to the portfolio over time. We'll be able to share more as development continues. I would just close on that point by saying it was one of the most demanded titles for us, maybe just after Skate, which we've also announced we're bringing back, and the response was very positive to the announcement that we're back in development. Around name, image, and likeness, we believe that we can build an extraordinary college football game in the absence of naming and likeness in partnership with the schools and in partnership with the conferences, and we're looking to do that. I also believe with what we have seen recently regarding image likeness, it is plausible and likely we can integrate name, image, and likeness with athletes according to whatever rule sets may emerge as they engage with us in that context. We're building the architecture of the game with a database structure, so if and when that comes online, we'll be able to add back to the game very seamlessly.

And your next question comes from the line of Mike Hickey with Benchmark.

Great quarter, guys. Awesome. Blake, that was exciting to see. Two questions. First one on FIFA Ultimate Team, looked like in the quarter, maybe subsequently, you tested some 3D packs, which was an alternative to loot boxes. So just curious of your learnings there from that test event. The second question, just looking at the competitive landscape on FIFA. It looks like you shifted to football free to play? So just curious how you're thinking about how that sort of changed in the competitive environment.

Yes, two great questions. On preview packs, the short answer is it was very well received by the community. Our FIFA Ultimate Team team is always working very closely with our community of players. FIFA Ultimate Team is the most played mode in that game by a wide margin. We're always working to offer new, innovative, and creative ways to engage, connect with your friends, connect with the world of football, and build your ultimate team. The premium pack, as I said, was well-received. We saw an increase in engagement, and we saw a higher rate of conversion of spenders. I would say it was coming down towards the end of the season, so some of this data has to be taken in that context. But the team is committed to continue to innovate in and around the offers and the programs that we put together for our players and believe that we can continue to grow that business over time. With respect to Pro Evolution Soccer changing names to eFootball and going free-to-play, we've seen this happen before. I would tell you we're very committed to our soccer business. We're very committed to our player base. We continue to grow that player base. We’ve listened to our community over the years, and we've gone out and obtained much of the licensed content that underpins an authentic football game exclusively and continue to invest deeply not just in modes of play, but in core gameplay to ensure that we're delivering the best possible experience for our global player base. What you heard me talk about in the prepared remarks is, as a result of the innovation in and around hyper motion, we're seeing extremely strong demand for the upcoming version of FIFA, and engagement in that franchise continues to grow. Again, competition is always good. We're always very closely cognizant of what competition is doing. But our commitment is to our player base and delivering the most comprehensive, broad-based, authentic football game on the planet. We believe we have the best team to do that, and we'll look to continue to do that over time.

Your next question comes from the line of Matthew Thornton with Truist Securities.

Maybe two, if I could, and these are actually things you hit on in earlier questions. I guess just coming back to, Blake, on the commentary for next year, I'm just curious if that guidance is dependent on any big, frontline title. Obviously, this year, you've got Battlefield. I'm curious if that's dependent on any larger title for next year. Somewhat relatedly, I'm curious thoughts around Battlefield. Does that franchise still aspire to be in every other year release type of a cadence in a normal world? Just curious if there have any updated thoughts there. And then just finally around some of the collegiate sports given some of the changes going on there, I'm curious if there's any interest around basketball with NBA Live, a little bit dormant here. I'm wondering if there's any pivot in any interest there?

Yes. All good questions. I would say next year - and this is a testament to our business. Next year is a collection of great franchises all coming to play and new franchises. So new franchises in mobile, new franchises across our business, in places like F1 and other driving games and new franchises or existing franchises that we will bring back, like NCAA or PGA Golf that we've talked about. We've always tried to build the business on a collection of great titles, not one title because one title always poses risk. Our view is a collection of the titles with great live services associated with them - and you're going to see that over the next - not just next year but for the next many years to come. That's how we've tried to build our business. I think you'll hear more about it. We're not trying to give guidance right now on next year. But we did say in our prepared remarks that we're confident of growth going forward even after an incredible growth this year and last year. We feel like we're on a really good path to continue to try to grow this business, and we're seeing the great reception for our products in the marketplace. More to come on that. We'll give you guys more details as we get closer. We know that's what you want. But you should just trust that we're confident that we're seeing and planning both top-line and bottom-line growth going forward. Now I don't remember your next two questions.

On whether we think Battlefield will return to an every-other-year launch, I would say that is our orientation. But more importantly, you should think about Battlefield as a service. What we've announced - what we're doing for the launch of this game is really revolutionizing and reinventing all our epic scale warfare in the context of gameplay. In addition to that, we've heard us announce Battlefield Portal, which leans into user-generated content and will drive deep long-term engagement in the game. While we believe an every-other-year launch probably makes sense as we think about it today, we're really focused on 365-day engagement in the franchise at a platform level across any device that consumers may want to play on. I think your other question was about naming likeness in college sports and whether it opens opportunities in basketball. Our focus right now is football. But we've talked about building on our strength in sports. We believe this is a unique strength for us. We're the leading company when it comes to delivering multiple high-quality sports across the globe, and it would make sense to start developing more into college football and expand into other college sports.

Your next question comes from the line of Mario Lu with Barclays.

First one is on Battlefield. You mentioned you're not updating your unit sales estimate for the title due to poor response to sales. I wanted to hear your thoughts on in-app purchases with an upcoming title. How should we frame the opportunity with that new monetization channel as historically we have monetized with CSD?

What I would say is that don't take our comments on not updating the guidance on Battlefield in any way as a negative. Ultimately, we exposed the world to Battlefield later than we normally would do. Normally, we do it through early June, E3 or maybe even earlier than that, and we did it in early July. So we're trying to make sure we pace the disclosure about what's in the game to people and then measure our demand from there. We're feeling very, very positive about it. We wouldn't have raised our full-year guidance if we didn't feel that was a potential for us, and I think it's an upside for the company longer-term during the year. You'll hear a lot more over the next couple of months about Battlefield live services, in-game monetization, and so forth. I can't tell you all that now, but trust that the team is working very hard on this, and they have some very unique ideas about what we can continue to do to create a long-term interaction with our consumers versus simply selling a game this year. We want to build a long-term relationship as we have with Battlefield users for a long time. Portal is a perfect example of how that works, and you'll see more of that and more details about that over the next couple of months.

Great. Thanks, Blake. And just one on mobile. In terms of the acquisition of Playdemic, that makes a lot of strategic sense given that you're building down in support. Can you talk about just the near- and long-term synergies we should expect from this acquisition?

With all of our acquisitions that we've done - we've done four now, if you include Playdemic, which is not yet closed, you're going to see clearly some synergies: synergies in terms of management teams, marketing strategies, and so forth. Most of these companies are smaller. They are exceptional in how they develop games. We've seen with F1 already, we've been able to drive more sales than what we've seen historically with that business, and we'll continue to do that across the entire portfolio of companies. In the case of Playdemic and in the case of Glu, we are going to leverage their strengths as best as we can to create more and better casual games in mobile than we have in the past. That's not to say that we haven't done a good job on mobile. We have, but the potential is huge. By looking at what Playdemic has done, the potential we have with something like a global FIFA game or a global Madden game where we already have the licenses has huge upside. I can't give you what those numbers look like yet, but I will tell you that the reason we did these deals was to ensure we brought in the talent that can help us expand our capabilities in more casual sports games around the globe.

Next question comes from the line of Jamie Bass with Berenberg.

Two questions from me, please. Firstly, it looks like engagement is still holding up very well. But are you seeing any sort of different trends in markets where restrictions eased more versus markets where there's still more of a lockdown at the moment? And then secondly, with the F1 game, that looks like it's been very well received through reviews and everything. Is that so far going in terms of sales and engagement? Is that how you expected it? Or is there any outperformance versus your internal expectations?

I would say just on the F1 game, I think we've exceeded our expectations. There's no negative on the F1 team because they are exceptional. It was could we quickly - I mean we didn't own the business for that long. So could we quickly integrate the teams, our marketing, and publishing efforts to drive that business as fast as we did? That’s probably where we might have had some questions. Actual execution exceeded our questions. It’s a testament to an exceptional game development team that was able to produce the right assets, to produce the right marketing materials to help us drive this business, and the teams working together. EA is made up of people who can really work well together. We do a great job of working with other parts of our company. When we bring in acquisitions, we work well with them. I think the poster child there is with Respawn and what’s happened with Apex. This is a team effort. Respawn has driven the amazing development of Apex and has partnered with us extremely well to drive what is now almost $2 billion in business over two years, which is unheard of in our industry.

On your point around restrictions and are we seeing anything different, I would tell you, given the rollercoaster nature of opening up and shutting down and lockdowns and various restrictions that are happening in various geographies and territories globally, it's almost hard to track at this juncture who is open and who is closed. What I would tell you though, in aggregate, is we have seen strength across our business, across all territories regardless of being open or closed. I think the performance this quarter is a testament to that. And at some level, this is largely due to what we see in our games because it’s not just about a connection to content that people may be able to forgo in the context of returning to school, returning to work, or returning to general life. It’s about connections to friends that they had prior to playing and they made during playing that keep people coming back. As we think about building ongoing interactive entertainment experiences, this is why you hear us leading into social ecosystems in and around our games. This drives longevity and deepens engagement in our business. What we’re seeing right now is the world being in different phases in different places. But overall, engagement in and around our games continues to be strong.

Your next question comes from the line of Brian Nowak with Morgan Stanley.

It's Matt on for Brian. Two, if I could. So just on the strength of Apex in the quarter, obviously, the comp was extremely hard. So that's a pretty impressive feat. Are there any specific initiatives, pieces of content or geographies that you would call out that have sort of been the source of that outperformance year-on-year for Apex? And then just secondly, on the mobile side, we've heard from some peers in the mobile gaming space that they've seen very little impact to their ROI on advertising after the recent changes to app tracking on iOS and others that they've seen, sort of an increase in user acquisition spend being necessary? I'm wondering what experience you guys are having on the mobile side there.

Let me jump in on Apex and then maybe Blake could address the mobile ad piece. The only thing I would tell you is it's not just any one thing. I think what I talked about in my prepared remarks is the detailed nature that the Respawn team and the Apex team takes in the ongoing development of this experience and the support of the growing global communities. It’s really thinking about what enhancements, extensions, and innovations they can add to core gameplay on any given day, how can they think about new modalities of play like arenas, which changes the broader rule set on engaging moment-to-moment gameplay. They are continuously adding content with new legends and everything else that drives more interest. I think our team has really started to deeply understand using data and maintaining a close relationship with the community to enhance gameplay, to add modalities of play and to double down on the interesting, unique content that the community gravitates toward. When considering that in the context of new geographies and new platforms, this is why we are so confident in the ongoing strength of that franchise.

What I would say on the advertising side is right or wrong, we've never had a large advertising business. It covers around $100 million a year. Part of that is our strategy that we have not wanted people to leave our network. If you look at most advertising on mobile, it's for other mobile games. What that means is you're willing to allow people to leave your network to go play somewhere else. We're working with Glu right now and with Playdemic on their views on advertising, and we may change our views over time. We think it's important - in no way take my comments that we don't think it’s a very profitable business and we should stay close to it, but it has not been a huge part of our business historically. So it's an upside for us down the road if that's where we want to go. We’re still in the learning stage relative to how we manage advertising. We know the current rules make it even more challenging, and we’re trying to figure out what are the right ways to do advertising for you to play a world where people are willing to pay via an advertising app or an advertising video versus paying to play the game. We’ll see how that plays out over time.

Yes. The one thing I would add there is while it hasn't been a giant business for us, what we have seen is that Glu has been significantly better at monetizing through advertising than we have. They come with some really strong underlying technology and expertise. Our sense is that while it’s still early, the combination of that technology, that expertise, our broader base of portfolio, and the global reach it has likely means there's upside opportunity for us even in today's world.

Your next question comes from the line of Gerrick Johnson with BMO Capital Markets.

So last quarter, you said that guidance did not include potential synergies from Glu and Codemasters, and now you've had three months to integrate. It sounds like you've identified some F1, for instance, not just cost synergies but some revenue synergies there. Your guidance increased about 1 quarter beat, and then $0.01. So what synergies have you identified? And are they now included in your guidance?

No cost synergies are included in our guidance. Clearly, revenue synergies are occurring as they occur. As you pointed out, we did better at F1 than we thought we would. Those are harder to predict. We haven't yet implanted cost synergies in our operating expense line. For example, changes in executives, staffing changes, either positive or negative. You should assume there will be some changes, and we will layer those into guidance over the next three to six months. We've been very focused on making sure we're bringing the company in as successful as possible and then determining the right way to drive synergies. I would tell you there are potentially large synergies across all of the acquisitions we've made, which would normally happen, but we will see more of those over the next few quarters, and we will keep everyone appraised of that.

Okay. Great. And last year, when you launched your sports games, there were cardboard cutouts in the stands. This year, we're going to have full stands with fans. How much of a lift do you think it provides your games with sports actually happening and people in the stands?

Well, I'll pull Andrew to answer that, but I hope we actually get to real people in the stands because we might go the other way right now. So who knows?

It's hard to understand exactly where the world is going to go. I think it’s unlikely that we have events without fans in the stadiums, and we may just see some protocols around masks and/or testing and/or vaccination. But our goal in sports is to get fans back in stadiums. What you saw us do last year was really lead into the fact that, for many people, we were sports at a time when it was hard to engage or consume support more broadly. That did allow us to grow both the amount of people playing our games and the engagement they had. I don't know we can quantify what that means when everyone can live the forms of sports on a day-to-day, week-to-week, month-to-month basis, but it will mean a positive uplift to overall fan and player sentiment and will almost certainly drive deeper engagement in our games. Our teams will look to build stronger connections between what happens in the real world of sport and what happens in our games. So net-net, notwithstanding any further challenges around the pandemic, it’s almost certainly a positive for us.

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

I wanted to drill down a bit on Ultimate Team. Is there anything to call out there maybe on newer players that have come into the ecosystem over the last 12 to 18 months? How is that cohort's behavior compared to more established cohorts? And has there been any notable difference in newer player behavior from things like reopening?

Yes. We always have newer players come in as the game grows. Newer players will take steps towards getting more involved in Ultimate Team. They don't get involved immediately on day one because they have to understand how to play it; two, they have to become part of a social network that's also playing it. Once that happens, we start to see growth. We see growth during the season. We haven't seen much change pre-COVID or post-COVID because it’s a way for people to have social interaction around something they’re really interested in. We've grown the overall franchise across all of Ultimate Teams; we’ve grown the overall franchises around the underlying games. Those are the two biggest drivers for us to continue driving Ultimate Team participation and engagement, which ultimately results in Ultimate Team spending in some way or another. We’re confident that even during the COVID crisis, we’ve continued to see people get more and more engaged. Some of that's driven by the fact that people are simply not at work and in a physical position. They may be working from home, but a lot of it is also the excitement surrounding what we're seeing in the global soccer seasons that we’ve seen over the last couple of years.

Yes. Just a little detail I would add. Again, when we think about Ultimate Team, it's a long-term balanced way to connect your friends in and around the sport. It has become that and is certainly the most played mode in FIFA and very strong in many franchises. As we think about this, two-thirds of people who play Ultimate Team don't actually buy packs, and only 9 out of 10 packs are opened with earned coins. We're always trying to ensure that constant balance of engagement and enjoyment of our player community. What we saw with premium packs was we noticed a higher incidence of new players coming into Ultimate Team, and we observed high conversion of those new players in and around buying packs and participating in the digital ecosystem. So again, in the long term, we believe that model will continue to grow, and we feel this remains a means of connection to your friends and connections to the sport you love. Our teams will continue to look for interesting, new, innovative and creative ways that allow people to engage, and premium packs is one example of that.

Chris, we got time for one more question? Or is that it?

Thank you, everybody, for your interest and good questions. We look forward to interacting with you over the next couple of months. Hopefully, we all get to see each other in person one of these days soon.

Thank you all. Stay well.

This concludes today's conference call. Thank you for your participation. You may now disconnect.