Earnings Call Transcript - EA Q3 2022

Operator, Operator

Good afternoon. My name is Anita, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Q3 2022 Earnings Conference Call. Mr. Chris Evenden, VP of Investor Relations. You may begin your conference.

Chris Evenden, VP of Investor Relations

Thanks, Anita. Welcome to EA’s third quarter fiscal 2022 earnings call. With me on the call are Andrew Wilson, our CEO; and Blake Jorgensen, 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. And lastly, after the call, we will post our prepared remarks, an audio replay of this call, our financial model and a transcript. With regards to our calendar, our Q4 Fiscal 2022 Earnings Call is scheduled for Tuesday, May the 10th. As a reminder, we’ll post the schedule of our entire fiscal year of upcoming earnings calls 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, February 1, 2022, and disclaims any duty to update them. 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 will turn the call over to Andrew.

Andrew Wilson, CEO

Thanks, Chris. I hope all of you and your families and loved ones are staying healthy. Let me first say thank you to our talented teams at Electronic Arts, all 12,000 people putting so much energy every day into doing amazing things for our players. As we begin, I’d also like to say a few words about John's passing. John’s passing was a tremendous loss for the American football community, for the sports world at large and for all of us at Electronic Arts. Through his years as a winning coach, as a beloved broadcaster, and as the pioneering namesake of our game, Coach Madden was football for tens of millions of fans. He taught us many things over nearly 35 years of partnership. Some of his most important lessons, including authenticity, are things we’ve held close to EA SPORTS ever since. We feel incredibly fortunate to have been part of Coach's legacy and just as fortunate to be part of how it will live on through our future Madden NFL games. We will have more to share about how we are honoring Coach Madden in the weeks ahead and from all of us at Electronic Arts, our thoughts and sympathies continue to be with his family, friends and many, many fans. It has been a year of outstanding growth so far in FY 2022. Q3 was a record quarter, with our live services and mobile portfolio delivering strong recurring revenue and year-over-year growth. Our franchises like Apex Legends, our EA SPORTS titles, The Sims and more have universal appeal and as we expand to more ways to play across more platforms and business models, we are growing our total players, engagement, net bookings and underlying profitability. We did have a challenge in Q3 as the launch of Battlefield 2042 did not meet expectations. Battlefield 2042 was always an ambitious game and our teams pushed to innovate across many dimensions including massive scale and 128-player matches, new modes, new dynamic gameplay and more. Developing this game with our teams working from home for nearly two years ultimately proved to be challenging. Through our processes for testing and preparation, we believed the experience was ready to be put into our players’ hands. We launched with strong stability, however, as more players experienced the full game, it became clear that we encountered unanticipated performance issues that we would need to address. Some of the design choices we made with the game also did not resonate with everyone in our community. We are fully committed to realizing the full potential of this game and fully committed to our Battlefield fans. We have already implemented a series of major updates to the game, and there is more to be done. Players can expect meaningful updates to continue in the weeks ahead and we are shifting the first season of live service content to early summer as we work closely with our community to evolve and improve the core experience in Battlefield 2042. Despite Battlefield’s miss against our expectations, with the strength of our business we are continuing to deliver record growth and performance in FY 2022. With Battlefield’s performance to date and our decision to move the first season of live service into Q1 FY 2023, so we can focus on the core experience, we have adjusted our full fiscal year net bookings guidance to $7.525 billion, which remains $225 million above our original net bookings guidance for FY 2022. On the strength of our live services, operational discipline and continuing digital transformation, we’re reaffirming our full-year expectations for underlying profitability. We expect strong growth to continue in FY 2023. Looking across our portfolio, we saw continuing year-over-year growth in total players, engagement, net bookings, cash flow and underlying profitability in Q3. I’ll touch on each of those pieces here. Beginning with total players, our games and experiences connect a global player network that continues to scale. Over the last year, our network has grown to more than 540 million unique active accounts, across more than 18 games and 25 live services, spanning all major platforms from consoles to PC to mobile and cloud. From an engagement standpoint, more players are spending more time in our titles. Looking across our portfolio on all platforms, we’ve had more than 180 million monthly active accounts on average in our games during FY 2022. Apex Legends monthly active players are up more than 30% year-over-year in Q3, and across our combined EA SPORTS portfolio, monthly active players are also growing year-over-year. Engagement is deepening as well, with players spending nearly 20% more time in games across our portfolio in FY 2022 compared to the previous year. Growth in our network and engagement continues to drive growth in our business. With our top franchises delivering strong recurring revenue, our net bookings for Q3 grew 7.4% year-over-year for the quarter and for the full year we project 22% growth in net bookings over last year. Performance across the business and operational discipline also continued to deliver strong cash flow and underlying profitability growth in Q3. This continuing growth is anchored by proven franchises where we have a strong track record for execution. Apex Legends is now one of the biggest and most successful ongoing live services in the industry and is built on our owned IP. With more than 28 million new players joining in the last year and new seasons and in-game events that continue to deliver new experiences to a deeply engaged community, FY 2022 is the biggest year yet for Apex. Average player investment in the game has grown significantly year-over-year, and we expect net bookings for Apex to approach $1 billion in FY 2022. We are expanding to reach more players and viewers, with new original content on the way, our growing Apex Legends esports ecosystem, and Apex Legends Mobile which will soon be moving into soft launch as we continue our worldwide rollout. We’ve had strong engagement and community feedback during closed beta testing, and we’re excited for more players to experience Apex Legends Mobile soon. Mobile is a core growth engine for us, and it is accelerating. With new launches and acquired expertise and technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY 2023 with growth well into double digits. Led by Apex Mobile, our newly-updated FIFA Mobile game, Golf Clash and more unannounced projects, we are expanding our portfolio of more than 15 top mobile live services to reach new audiences and grow our recurring revenue. EA SPORTS is a powerhouse in the sports and entertainment world. We’ve driven hundreds of millions of dollars in net bookings growth year-to-date, with our EA SPORTS business up nearly 10% year-over-year. We continue to see incredible growth for the future of global soccer, and our global soccer franchise was the number one title in the western world in calendar 2021. Madden NFL 22 was the number one sports title in the U.S. during the holiday period, and it was the number three top-selling game in the U.S. for all of last year. Under our leadership, F1 2021 also continues to perform well above expectations with unit sales nearly doubling year-over-year during the holiday period. In our mobile sports portfolio, we just launched the latest version of our EA SPORTS FIFA Mobile game around the world. This was the biggest update to the game ever, and early performance has been exceptional. Engagement is up more than 50% over the previous season, and retention in the first week is nearly double. With the added expertise of Playdemic and Glu, and a deep pipeline of new sports experiences in development, EA SPORTS continues to be an exceptional growth business, built on predictable and recurring revenue with outstanding opportunities ahead. Our pipeline further amplifies our strength. In addition to our core franchises, we are building new experiences in some of the biggest enduring IP in entertainment. Last week we announced a new agreement with Disney & Lucasfilm Games to develop new experiences in the Star Wars universe, continuing our collaboration of more than a decade. Respawn is leading development of the next game in our action-adventure Star Wars Jedi series, as well as two additional Star Wars titles. This adds to our deep pipeline of announced and unannounced projects with our wholly-owned IP, including Need for Speed, our BioWare franchises, The Sims, Skate, Dead Space and more. Looking forward, we are continuing to build on the structural advantages of our portfolio and accelerating growth by executing against our core strategy. We are focused on creating amazing games and content, providing creation tools for the community to engage more deeply with our experiences, aggregating and distributing our content and experiences to more players on more platforms, more geographies and business models, and harnessing the power of social ecosystems in and around our games. The demand for amazing games and new ways to play, watch, share and create has never been stronger. As one of the industry’s largest and most profitable businesses with strong recurring revenue, we are well-positioned to take advantage of this continued secular growth. We look forward to delivering against these opportunities through FY 2023 and beyond. Now I’ll hand the call over to Blake.

Blake Jorgensen, CFO

Thanks, Andrew. Q3 was a quarter that demonstrated the strength of our live services portfolio. Despite a tough Battlefield launch, we came within a couple of percent of our net bookings guidance and beat our expectations for underlying profitability. The quarter was the largest in our company’s history for net bookings, underlying profitability, and cash generation. Sales of Battlefield 2042 were disappointing, but they are offset by a strong showing from FIFA and continued strength from Apex and our other franchises. We delivered net revenue of $1.79 billion and net bookings of $2.58 billion. FIFA 2022’s strong start continued into this quarter, with unit sales now up double-digits over last year, launch to date and players continued to engage in FIFA Ultimate Team and invest in their teams. This has made it the strongest FIFA launch ever measured from launch to the end of Q3. Apex Legends that split net, excuse me, net bookings continue to grow at an extraordinary rate and will deliver close to a $1 billion for the year. Digital represented 64% of full game units sold through on a trailing 12-month basis, up 2 percentage points from last year. The strong digital mix for full game sales, aided by growth in live services, pushed underlying Q3 gross margin 2.3 percentage points above last year. Operating expenses, which include recent acquisition costs, came in below our expectations, driven by variable compensation savings and phasing of marketing spend. It’s worth noting that we were able to hire more people than in any other quarter in our history and are continuing to invest in our games teams. We now expect fiscal 2022 GAAP net revenue to be $6.925 billion, cost of revenue to be $1.844 billion and earnings per share of $2.43, up from our original expectation of $1.34. We are taking our net bookings guidance for the year to $7.525 billion. Although a $100 million reduction on our position at the end of Q2, it is $225 million above our original guidance for the year. The reduction is driven by Battlefield 2042 in both Q3 and Q4, but offset by strength in the rest of the business, particularly in FIFA and Apex Legends. We’re committed to turning Battlefield around and building a sustainable live service, even if some of the actions we’re taking, like moving the first Season into FY 2023, impact net bookings in the short-term. Reflecting the strength of our portfolio, our operating cash flow guidance is now $1.900 billion. This would be close to the largest full year operating cash flow in the company’s history, despite nearly $200 million of one-time tax payments related to acquisitions this year. With capital expenditures still around $200 million, that would deliver free cash flow of about $1.700 billion. Note that this is $200 million above our original expectations for FY 2022 free cash flow. See our earnings slides and press release for further cash flow information. For the fourth quarter, we expect GAAP net revenue of $1.759 billion, cost of revenue to be $404 million and operating expenses of $1.086 billion. This results in earnings per share of $0.46 for the fourth quarter. We expect Q4 fiscal 2022 net bookings to be $1.761 billion. This would be our largest Q4 ever, even if we only count organic growth. We’ll formally guide FY 2023 in May, when we report Q4, but we’ve heard that some of you are concerned that the Battlefield performance might impact next year’s growth. Let me emphasize here again that we are a portfolio company. As originally forecast, the Battlefield franchise would have accounted for significantly less than 10% of this year’s net bookings and well below 5% of next year’s. We’re revising those numbers, but you can see it has little impact on FY 2023 growth. The main drivers of growth next year remain FIFA on console, Apex Legends, Apex Mobile and FIFA Mobile. Golf Clash will also contribute to year-on-year growth, since we acquired Playdemic halfway through the year. With regards to new launches in FY 2023, we’ve disclosed that Need for Speed is on the slate and we’ll announce more titles closer to the time. In total, we still expect mid-to-high single-digit growth next year. To summarize, we just delivered the largest quarter in the company’s history. FIFA goes from strength to strength. Apex Legends continues to show extraordinary growth. Battlefield disappointed, but our broad portfolio of games and live services insulates us from the impact of any one title. Our portfolio approach enables us to deliver double-digit organic growth this year and continue to deliver strong cash flow, and provides a strong foundation for growth as we look to the future. Now before I hand the call to Andrew, you may have noticed that yesterday we have a new CFO for the company and I think the new CFO, Chris is going to be a fabulous addition and will do a much better job, probably, than I have ever done. I thank Andrew and the team, our executive, as well as the entire company for the amazing partnership that I have had here for nine and a half years at EA. It has been the most enjoyable experience of my entire career. I also thank the buying side and sell side analysts and partners for all of their support over the years and wonderful interaction. And last but not least, Chris Evenden, Eric Green and Fabiola for their amazing IR performance that interacts with all of you. So, now, I’ll hand it back to Andrew.

Andrew Wilson, CEO

Thanks, Blake. These are exciting times in our industry. Interactive entertainment continues to grow by every measure and our audiences are expanding and diversifying, major franchises are at the center of culture and entertainment, and the world is recognizing how games have the power to connect global communities. Our focus continues to be on our people, our players, on our amazing portfolio of games, content and services, and extraordinary growth opportunities in the future. Thanks to our incredibly talented teams at Electronic Arts, we are delivering entertainment to hundreds of millions of people around the world and connecting them through some of the most powerful and enduring franchises. With the breadth and depth of our business that continues to expand our network, deepen engagement, and drive growth in our recurring net bookings and ongoing profitability, we are well-positioned and strategically well-positioned to continue building on our success and delivering for our players. As we look ahead and Blake just referenced, we were excited to announce yesterday that Chris Suh is joining Electronic Arts as our next CFO. Chris is coming to us after more than 25 years at Microsoft, where he served as Corporate Vice President and Chief Financial Officer of the Cloud and AI group, which he led with incredible success during Microsoft’s transformation to a cloud-first company. We have a big vision for the future, and in addition to Chris’ financial leadership of our organization, I look forward to having him as a strategic partner with extensive experience driving scale and growth to help us achieve our goals. As we announced previously, Blake will be leaving our team after nearly a decade of leadership at EA. Blake has been an incredible leader, partner and advisor. But most importantly, he is a dear friend and I feel deeply grateful for our time working together. His expertise and the team he has built have been instrumental in our growth and financial achievements, and have positioned us well for continued success. Blake will remain with us until the summer to assist with the transition and special projects. Thank you, Blake, for everything you’ve done and continue to do for our company, and again, thank you for your friendship. Now, we are here for your questions.

Operator, Operator

Your first question comes from the line of Benjamin Soff from Deutsche Bank. Your line is now open.

Benjamin Soff, Analyst

Hey, guys. Just a quick thank you to Blake for being a great partner and looking forward to meeting Chris. Two questions. So, first, just around Battlefield, can you guys sort of frame for us how you think about the vision for the future of that franchise, and in particular, how the new leadership for the Battlefield you are just thinking about expanding and adapting that franchise over time? And I’ve got a second question.

Andrew Wilson, CEO

Yeah. Great question. Again, we have a very bold vision for where this franchise goes. This franchise has always led the category in creativity, innovation, scale, gameplay, community. And as we are coming to launch, again, we had a very bold vision for this game. As it turns out, we’ve had some challenges, not least of all, trying to build this game and provide this game from home, and so our focus now is really making sure that core experience lives up to our fans, the community’s expectations. Beyond that we’ll continue to invest and grow the franchise, we have great leadership with Vince and Byron, and others, with tremendous background from other great shooters in the industry, kind of leading the future. I believe that we’re going to see this game do really well over the course of time. I think we’ll expand to mobile. We will expand to other new interesting ways to play. But certainly this is just a moment where we take a pause and do all we can for the core game and the core community.

Benjamin Soff, Analyst

Got it. And then, just in light of the announcement that you guys are working on those three new Star Wars games. Can you talk a little bit more about your vision for that IP? And is it fair to say that going forward, you’re planning to lean more towards investing in your own IP? And if so, what are the like some of the potential pros and cons of that as a strategy? Thanks.

Andrew Wilson, CEO

Yeah. The very strength of our business is our balanced portfolio. We have both a deep and a broad portfolio. And what we’ve demonstrated over the course of our best part of 40 years is to really develop both our own IP over time, the Need for Speed, The Sims, Battlefield, Apex Legends, our BioWare franchises, we have Skate in development now, Dead Space on the way, so an incredible portfolio of owned IP that has an extraordinary following across the industry. Combined with other long-term enduring IP, we have the powerhouse sports franchises. And they are true evergreen franchises and this is not just about licensing content. This is about working with over 300 partners across the various sports industries to deliver a true connection with the sports, the leagues, the teams, the players that our fans love. And we’ve been doing that now for well over 30 years and I think that we will continue to do that for many, many years in the future. And things like the Star Wars franchise, again, a long-term relationship we’ve had with Disney for more than a decade. And this is not simply about building or revisiting things that already exist in the universe, but really adding to that Star Wars universe and really delivering new opportunities for Star Wars fans to experience great Star Wars content. And so as you think about our strategy going forward and the strength of our company, it really comes down to our ability to develop and build and publish industry-leading owned IP, but also work with partners over decades to truly deliver fan favorites with long and enduring fan bases, like, our Sports franchises and like Disney.

Operator, Operator

Your next question comes from the line of Andrew Uerkwitz from Jefferies. Your line is now open.

Andrew Uerkwitz, Analyst

Thank you for joining the call, and I appreciate the positive remarks from Blake. He's doing an excellent job, and I thoroughly enjoyed it. I have just one question with no follow-up. One of your major competitors has just been acquired, and you have a strong portfolio, which you have managed effectively for years. How do you envision the industry evolving in the next three to four years? Do you consider yourselves potential consolidators of sellers? What is your perspective on how this industry will develop over the next three to five years? Thank you.

Andrew Wilson, CEO

That's an excellent question. We've been considering this for some time. The strength of our extensive portfolio and our efforts to recruit top talent across the industry are driven by our belief in the power of interactive entertainment. Currently, we are witnessing the realization of our value in the marketplace. Other companies are starting to discuss this as well. Our players engage with our games more than any other entertainment form, but they also enjoy linear media, scripted content, sports broadcasts, and music. Looking ahead, we are focused on enhancing our capacity to deliver live interactive entertainment to our fanbase, which we believe will grow to over a billion fans in the long run. We recognize that our fans want new and exciting ways to experience entertainment. Therefore, as we strategize for the future, we envision intellectual property at the core, along with engagement through play, viewing, creation, and a social ecosystem that connects them with what they love. Our strategy involves creating outstanding entertainment, building tools for deeper community engagement, and distributing content across various platforms and geographies while actively fostering the social ecosystem within our games. This is the direction we foresee for the future.

Operator, Operator

Your next question comes from the line of Mike Hickey from Benchmark. Your line is now open.

Mike Hickey, Analyst

Hey, Andrew, Blake, Chris. Thanks for answering my questions. Blake, I’m really going to miss you. I know you’ll be busy, so I’m not feeling too sorry for you. It’s been a pleasure working with you. My question is about Battlefield; I’m obviously disappointed. Can you tell us how many units you sold in the quarter? I think you mentioned around 12, but I’m curious about how that compares to expectations. Also, how do you plan to re-engage that audience? There have been some ideas about a beta play; what do you think about that possibility? And regarding mobile, do you have plans for a mobile version of Battlefield, or is that delayed? Thanks.

Blake Jorgensen, CFO

Sure. Mike, I appreciate your positive remarks about the other analysts as well. Unfortunately, I won’t be able to share as much detail as I would prefer. However, we will avoid providing updates on that front. It's important to note that Battlefield constitutes less than 10% of our revenue. We sold fewer units than we anticipated. That said, it’s essential to remember that these franchises are developed over time, and our objective is to introduce new elements to keep the momentum going. In many ways, we hope this enhances our performance in fiscal year 2023, especially given our solid performance in fiscal year 2022, which will benefit us moving forward. I’ll let Andrew tackle the second part of your question.

Andrew Wilson, CEO

I believe that as we approached the launch, the demand indicators were very high. The core creative aspect of the game still shows strong demand. We've encountered some stability issues, especially on high-end PC systems, and there were design decisions that not everyone in the community agreed with. Right now, our priority is to address these concerns effectively. DICE has successfully navigated similar challenges in the past by revisiting the game’s core and reconnecting with the community, which is vital to our approach. With DICE’s new leadership and a clear vision going forward, we aim to enhance the core experience, reengage the community, and fulfill the demand we saw prior to launch over time. The mobile segment is also progressing well, with promising metrics. We're planning to enter the next closed beta by the end of this month, and as usual in mobile development, we need to test and adapt accordingly. Regarding free-to-play and other gameplay modes, we have ambitious plans for this franchise, which has always been known for its creativity and innovation in gameplay and delivery. You can expect us to keep introducing exciting new ways to engage with the game over time. Although I'm disappointed with the launch outcome, I'm still very hopeful about the future.

Operator, Operator

Your next question comes from the line of Eric Handler from MKM Partners. Your line is now open.

Eric Handler, Analyst

Good afternoon and thanks for the question. Andrew, I wondered if you could just talk a little bit about when you think about the expansion that’s going on in the video games industry in the last year or so and we’re seeing a lot of user-generated content and platforms around that start to proliferate. We’ve seen a lot of venture capital funding into blockchain and NFT gaming, wondering how you’re thinking about those channels eventually and is it easier to build from within? Is it better to buy once there are some established players there? Just want to get your mindset there.

Andrew Wilson, CEO

I started in this industry over 20 years ago, when it was the fastest growing entertainment sector in the world. It has maintained that status every year since, yet people often still seem surprised. We are not surprised at all. As technology evolves, we have found new and engaging ways to interact with content. Recently, we've seen the incredible impact of social networks on engagement in our games. It’s not just about consuming entertainment like we do with traditional media, but about experiencing it with friends, which is extremely powerful. This has fueled our recent growth. The ability to create and share your own content has become a valuable aspect of what our industry offers, unlike traditional media. This concept has long been central to The Sims, FIFA Ultimate Team, Madden Ultimate Team, and the upcoming Skate game. User-generated content extends the social interactions we have while enjoying top-notch entertainment. I believe this will be vital for our future. Right now, we are focused on building technology and creating valuable assets to share with communities worldwide, and we are seeing strong adoption. While we would consider acquisition opportunities down the line, we are not currently pursuing anything. Regarding NFTs and venture capital investments, we’ve consistently seen considerable external investment in our industry, including in 3D, AR/VR, and now NFTs. Collectability relies on four main factors: high-quality content, scarcity, proof of authenticity, and an audience that values that content. We’ve witnessed this in both the real and virtual worlds, especially within our games over the years. I believe collectability will remain crucial for our industry and the experiences we offer players. Whether that will involve NFTs and blockchain is still uncertain. Our primary focus is on delivering the best player experience possible, and we will assess this over time, but it’s not currently a priority for us.

Operator, Operator

Your next question comes from the line of Matthew Thornton from Truist Securities. Your line is now open.

Matthew Thornton, Analyst

Hey. Good afternoon, Andrew and Blake absolute best of luck to you and your future endeavors here. It’s been a pleasure. I guess two questions. First for me, you got to talk about in the back half of the fiscal year, obviously, Battlefield missed. That’s partially offset by strengthen in FIFA, Apex and others. With FIFA, in particular, I guess, you talked a lot about kind of unit strength year-on-year? I’m just kind of curious how you felt about or are feeling about your Ultimate Team and the live services component into the back half of the year? I guess, it’s first question. Second question, I am curious, you are coming back to mobile, and maybe some of the recent acquisitions, kind of curious if you could talk a little bit about how you’re thinking about advertising, I know, it’s come up a bit, other companies might get 10% to 20% of their mobile bookings from advertising, Glu brings some new capabilities, I am curious how you are thinking about advertising, I am curious how you’re thinking about the Glu pipeline, you have almost a year into that deal. And then also, when we might start to hear a little more about kind of what your plans are with Metalhead and Super Mega baseball? Thanks guys.

Blake Jorgensen, CFO

I will start with the live service aspect and then Andrew can address the second question. We saw a 9% growth in live services this quarter, and a 21% growth over the last twelve months across all our live services. For games like Apex and FIFA, the growth is significantly higher. We believe live services are a core part of our business because they generate recurring revenue and rely heavily on the social networks we've built within our games, especially in sports, where these communities are ongoing year after year. Our metrics are impressive, showing significant improvement over last year. In particular, Apex has demonstrated remarkable year-over-year growth, and the team is focused on enhancing player engagement, attracting a substantial number of new players, and consistently creating innovative ways for players to enjoy the game. We are very optimistic about this momentum across all our sports titles and are exploring how to extend this success to more games in the future. Now I'll pass it over to Andrew to discuss Glu.

Andrew Wilson, CEO

Yeah. Again, we are working closely with Glu. It is still relatively early days with the acquisition for both them and Playdemic, and we are working both on bolstering our existing 15 live services and building out new ones. And as per my prepared remarks, we’re projecting well into double-digit growth next year and that includes Apex Mobile and renewed FIFA Mobile, and a full year of Golf Clash and ongoing growth across the portfolio and we’re excited about that. With respect to advertising, specifically, we are taking the Glu advertising stack and applying it across our games. And it’s a little early to know just yet exactly how that will manifest, but based on what we are seeing across the industry, we expect that that represents some revenue growth there also. So, overall, mobile now really is a strength of ours. It’s a very important part of how we drive growth in the business, both in our existing games, in our new launches and with the potential of mobile advertising across the portfolio.

Operator, Operator

Your next question comes from the line of Drew Crum from Stifel. Your line is now open.

Drew Crum, Analyst

Okay. Thanks. Hey, guys. Good afternoon, and Blake, best of luck. I am curious as to your thoughts on where the businesses in terms of engagement normalizing? Is the reopening headwind behind you or is this something we should anticipate in calendar 2022? Is it contemplated in their fiscal 2023 net bookings forecast? And then, separately, your OpEx growth year-to-date is approaching 30% year-on-year? Should we see that slow materially once you start to anniversary acquisitions or how should we be thinking about OpEx going forward? Thanks.

Blake Jorgensen, CFO

I can address the OpEx question quickly, Drew. Most of the increase was driven by two main factors: our acquisitions, which are likely the biggest contributor, and the opportunity we've had to attract exceptional talent due to questions within the gamer community about which companies will succeed. This won't continue indefinitely. The growth from acquisitions is a one-time factor. Our OpEx mainly consists of headcount and marketing expenses. Marketing expenses will fluctuate based on the titles each year, but we manage that well. We're also adept at managing headcount, so I don't anticipate a significant jump like we experienced this past year. Despite the OpEx growth, if you look at the Q3 EPS number, we've managed to maintain it even with an unexpected revenue decline of $48 million. Our organization is quite flexible in handling these changes to maintain margins, and you can expect that to continue moving forward.

Andrew Wilson, CEO

On engagement through or post-COVID, depending on how you think about it, I think we’ve been on a rolling situation around the world of kind of coming back and shaved down a little and coming back. Broadly speaking, though, much of the world is out and about, they’re at sporting events, they go into theme parks, they’re watching movies, they’re going to dinner. So much of the world has returned mostly to normal at this juncture by our calculation. Even as part of that, we’ve seen not only number of players grow, again, over 540 million people now on our network, we’ve also seen time spent in our games grow by over 20%. And I kind of look to that as not just about creating amazing games, entertainment, but it is the social interaction. I think what COVID has taught us is that games are a great way not just to get our entertainment fixed, to remain deeply connected with our friends and fans and rivals. And what we’re seeing now, I believe, is actually the long-term effect of the discovery of not just the value of our of what we do in terms of entertainment, but also the value in maintaining connections with those we care most about and we would expect that to continue and actually create a flywheel for added growth.

Operator, Operator

Your next question comes from the line of Jason Bazinet from Citi. Your line is now open.

Jason Bazinet, Analyst

Thanks. I think it’s a little bit early to talk about this. But I would be very curious about how you’re thinking about your business and strategies that relate to the metaverse as that becomes more real. Is that something that you view as just another opportunity for you to engage your fans? Is it a battle about time span? Is it potentially sort of change the industry, sort of rev shares or is it just sort of a non-event and you guys think you can sort of continue to focus on your IP and engagement and it’s really sort of not material? Thanks.

Andrew Wilson, CEO

Yeah. I mean a great question and certainly another one of these things that is kind of a topic gives you at the moment and many people are talking about it in different contexts, quite frankly. At the end of the day, the metaverse is a three-dimensional social space where you come together to experience things with your friends. And so now much of that happens in the two dimensional internet around the social networks that we see. But I will tell you, a lot of that happens in the context of our games. And as I look at the nature of our games, I look at the engagement that we’re seeing inside these 3D spaces that we create in and around sports and other worlds. What you see with our industry is the beginnings of what a metaverse might be. And over the course of time, you should expect us to continue to expand and extend the world that we have been creating for the last 30 years and deliver more experiences beyond the core content of the game. So what can you do in FIFA beyond playing football? What will you do in Need for Speed beyond driving the game? What will you do in The Sims as you come together with your friends beyond the creation of content? And you’ll see that continue to evolve for us over the course of time. And I don’t know ultimately what the metaverse will become. But what I do know is that the games we create are becoming more important as social spaces, and they are just as places to enjoy great entertainment as we continue to build out those experiences, and as whatever the metaverse becomes, it’s almost certain that we will play a very important role in it and that our players will be on the leading edge of the evolution of what these spaces might become.

Operator, Operator

Your next question comes from the line of Mike Ng from Goldman Sachs. Your line is now open.

Mike Ng, Analyst

Hi. Good afternoon. Thanks for the question. I just have two. First, I was just wondering if you could talk a little bit about EA Play, where are we with EA Play subscriber today and how do you see the outlook for video games description services changing particularly with recent consolidation? And then, second, it was encouraging to hear the reiteration of the mid-to-high single-digit topline growth for next year? I was wondering if you could go a little bit more in detail around some of the drivers. What do you see driving some of the FIFA trends and are there new games or unannounced titles embedded in that outlook? Thank you very much.

Andrew Wilson, CEO

Let me touch on the EA Play component briefly before handing it over to Blake to discuss the expected mid-to-high single-digit growth. EA Play is continuing to expand for us and it remains a highly positive experience for consumers, offering access to some of the best content in the industry. More generally, subscriptions in the entertainment space are proving to be a significant driver, allowing us to boost ongoing engagement, potentially more effectively than traditional linear or scripted entertainment. We anticipate that consumers will keep engaging with our content through subscription, and we will keep providing it this way, which should lead to further growth across platforms. We are still the leading provider of gaming subscriptions in our industry, and with the extensive range of our portfolio and the new experiences we have lined up, we are confident in our ability to sustain growth. In time, as I mentioned earlier regarding entertainment, we might explore offering more than just games within our subscription service for our clients, and we are genuinely excited about the potential of that evolution in the future.

Blake Jorgensen, CFO

And on the 2023 question, obviously, as we said, we’re not yet ready to give guidance, which we normally don’t do at this time of the year, but we did give some hints. And the keys to driving growth are obviously our core portfolio, things like FIFA, for example, and live services associated with it, bat and hockey and other sports. Apex Legends, obviously, has continued to evolve and show an amazing growth. We will have an Apex Legends Mobile game in the market. We don’t know exactly what time that will be, and there’ll be a global build for that game, as well as the Chinese build for that game. And we’re working with a partner there and things are going very well in test, but we’re excited about that as a major growth driver. We will have more growth we think out of the FIFA Mobile game that we just put into the market. And remember that we only had our book, really half of a year of Playdemic Golf Clash game. We’ll have a full year event next year. And we’re working with Playdemic on how they can take that Clash mechanic into other sports areas where we have licenses already. And then we’ve got a Need for Speed game coming and there are three or four more things that we haven’t announced yet, but you can imagine we are always trying to find ways to grow the portfolio year-over-year through new titles, new IP, and expansion. And as well, acquisitions, which right now we’re in the digest mode but doesn’t mean that we won’t keep looking at everything going forward. So we’re excited about next year. It looks like a strong year to come. And as Andrew said, we know that this is one of the greatest entertainment vehicles in the world right now until we’re really in the sweet spot and that’s what gets us excited about it.

Mike Ng, Analyst

Great. Thank you both. Sounds incredibly helpful. And Blake, best of luck in your next chapter.

Blake Jorgensen, CFO

Thank you.

Operator, Operator

Your next question comes from the line of Mario Lu from Barclays. Your line is now open.

Mario Lu, Analyst

Great. Thanks for taking the questions, and Blake, it’s been a pleasure interacting with you over the years.

Blake Jorgensen, CFO

I appreciate that.

Mario Lu, Analyst

I have a high-level question. You mentioned in your slides that spending time has increased by 20% this quarter compared to last year. What were the main factors contributing to that growth? Also, do you have data on the historical lag between growth, time spent, and monetization? Additionally, I noticed you didn’t discuss Madden much during this call. Can you share how its performance compares to FIFA? What factors are driving growth in that area, and is there anything from Madden that you can elaborate on? Thank you.

Andrew Wilson, CEO

Yeah. So let me start with Madden. Madden is also having a great year and we’re seeing tremendous growth. As you know and then for all of you who follow the season, this has been an unbelievably exciting season of football and what we know…

Blake Jorgensen, CFO

49ers. Yeah.

Andrew Wilson, CEO

The playoff games and the overall season have been incredibly thrilling. NFL ratings have remained very strong throughout the year, which is boosting engagement with our Madden franchise, allowing it to continue growing successfully.

Blake Jorgensen, CFO

In terms of what drove engagement, we have a solid portfolio and while Apex Legends experienced remarkable growth, FIFA also saw significant increases. Overall, our portfolio thrived, with Apex growing by 30% and our esports portfolio, including FIFA, increasing by 10% from already large numbers. The growth across our offerings highlights the value of both the breadth and depth of our portfolio. Regarding the delay between engagement and monetization growth, I don't have specific figures to share. However, our teams closely collaborate with communities to ensure they offer fresh and engaging content. Community members play and decide whether to invest more time or money in the experience, and creating a balanced ecosystem is essential for the strength of our live services over time. There is a symbiotic relationship between the investment of time and money throughout the experience, and our teams excel at fostering this balance by working closely with their communities.

Andrew Wilson, CEO

I want to remind everyone that we shipped last year's order due to the pandemic. We postponed it by three weeks so it would be delivered in the third week of the second quarter. When considering the growth in the third quarter, it's surprising to see such strength in the business, especially since it didn't reflect the initial shift in FIFA. I just want to emphasize that as we move forward, the situation of pushing things back to the second quarter is quite impressive.

Mario Lu, Analyst

Great. Okay. Thank you.

Operator, Operator

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

Andrew Marok, Analyst

Thanks for taking my questions and wanted to pass my best wishes on to Blake as well. On Apex Legends, so season 12 seems like a more substantial content drop than the typical season. So whether it’s amount of content or type of content, is there anything that particularly stands out as a driver for new player acquisition and engagement, whether it’s game modes, new maps or things like that? And then second on FIFA, around the growth in unit sales year-over-year? I guess, at this point, who was interested in FIFA 2022 that maybe wasn’t in FIFA 2021? Are there any particular markets or customer segments that saw solid unit growth? Thank you.

Andrew Wilson, CEO

Thank you for the detailed question. Regarding Apex, as the teams develop new seasons of content, they are considering various new content types and engagement methods. Apex has now surpassed 100 million players, which means there is no single approach that effectively attracts or engages all players. The esports and Apex teams have shown they work closely with their community, deeply engaging with them and delivering content, maps, and features that align with what players are seeking. Since the game's launch, they have effectively and strategically introduced interesting new content, maps, and play modes on a seasonal basis, which has contributed to an increase in the overall player base, enhanced the gaming experience, and boosted player engagement and investment. We are very excited about this progress.

Blake Jorgensen, CFO

With respect to FIFA, this team has shown the importance of closely partnering with the community around a live service. Football, or soccer as we refer to it in this country, continues to gain popularity, with leagues, teams, and players all growing stronger. We have over 300 licenses in the game, responding to the demands of our partners while providing an ever-expanding experience for our players. As football continues to evolve, we are building a large fan base; in fact, our product is the largest digital football club worldwide, boasting over 100 million fans. We engage closely with this fan base to ensure they experience football in ways that matter to them, including their leagues, teams, and beloved players. Our commitment to driving growth within this franchise is due to our strong collaboration with our global community of fans, delivering content and gameplay modes that excite them and connect them deeply with the sport they love.

Andrew Marok, Analyst

Thank you.

Operator, Operator

Your next question comes from the line of Doug Creutz from Cowen. Your line is now open.

Doug Creutz, Analyst

Hey. Thank you. Cloud+ dropped a pretty expensive-looking halo trailer over the weekend and Netflix has had some success with The Witcher and League of Legends on their streaming service. There’s absolutely ravenous demand for content right now from half a dozen or so streaming services. And you guys have some IP particularly within BioWare that I think would be pretty good as a basis for a show. Are we finally at a point where video game IP has some meaningful transmedia opportunities or do you think that’s still more theory than a reality?

Andrew Wilson, CEO

No. Based on what you just mentioned and our experiences, video game IP or interactive entertainment IP has become some of the most culturally significant content in the entertainment sector, and I believe this trend will continue to grow. When considering the hundreds of millions of fans engaging with the IP we develop, like Apex, The Sims, Need for Speed, our BioWare franchises, Dead Space, and Skate, it naturally leads to opportunities for scripted entertainment. Traditionally, scripted entertainment in our industry hasn't generated significant revenue on its own. However, high-quality productions have enhanced overall engagement with the franchises, creating a powerful synergy that drives business growth. Looking towards the future, we believe our interactive entertainment offerings are becoming increasingly essential, and our fans will want to engage with them in various formats, including scripted content. You can expect us to explore all avenues for expanding our brands for our audience, and we are approaching this thoughtfully as part of our strategy, ensuring profitability.

Blake Jorgensen, CFO

Great. Thanks, Andrew, and best wishes, Blake. Thanks, Doug. I believe that concludes the questions. I appreciate everyone's support, and I will be around for a while to ensure our new CFO gets fully acclimated. As I mentioned, he will do a much better job than I have. So, everyone stay healthy and we look forward to speaking with you next quarter.

Operator, Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.