Earnings Call Transcript - EA Q1 2023

Operator, Operator

Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts First Quarter Fiscal Year 2023 Earnings Conference Call. Mr. Chris Evenden, Vice President, Investor Relations, you may begin your conference.

Chris Evenden, Vice President, Investor Relations

Thank you. Welcome to EA's first quarter fiscal 2023 earnings call. With me today are Andrew Wilson, our CEO; and Chris Suh, our CFO; and Laura Miele, our 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 will post our prepared remarks, an audio replay of this call, our financial model and a transcript. With regards to our calendar, our Q2 fiscal 2023 earnings call is scheduled for Tuesday, November 1st. As a reminder, we 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, May 10, 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'll turn the call over to Andrew.

Andrew Wilson, CEO

Thanks Chris. It’s great to be here with you all. We delivered a strong performance across our business in Q1. Our broad IP portfolio, our amazing talent, and our growing network of players deeply engaged in our live services all serve as unique structural advantages, especially as we navigate the fluidity of the macro environment. While we recognize there is more uncertainty in the market, our teams are focused on what they do best, delivering amazing games and services that keep our players engaged, connected, and inspired as we take entertainment and play to the next level. Our portfolio of sports and owned IP franchises continues to power resilience and longevity in our business. EA SPORTS & Racing is a growth center, with franchises that are at the heart of how sports fandom is becoming increasingly interactive. F1 22 sales are up double digits launch to date, as the sport continues to boom, especially with younger fans. Our EA SPORTS FIFA franchise is exceptionally strong on a global basis, with record business for Q1 in Asia, significant growth in mobile with DAUs up another 10% over last quarter, and FUT engagement growing nearly 40% year-over-year, which is well above the industry average. We’re going from strength to strength in EA SPORTS, including Madden NFL 23 just weeks away, and our most expansive FIFA game ever coming this fall. Sports is the ultimate evergreen form of entertainment, and our new cross-media partnership with LaLiga perfectly illustrates how we continue to innovate at the forefront of sport, media, and interactive content. With these multi-faceted collaborations, we are able to bring the most authentic experiences to fans and expand into new ways to watch, create, compete, connect and participate in sport across platforms, business models, and geographies. Our owned IP franchises are some of the most deeply engaging and culturally relevant entertainment properties in the world. Apex Legends is a leading multi-platform franchise, with our live service on console and PC driving massive ongoing engagement and a new mobile game that is delivering on our early expectations. Engagement in our Sims franchise is also outperforming the market with content that resonates for a broad and diverse audience. We have a proven ability to grow successful long-term live services across our portfolio with ongoing engagement that drives resilience, recurring revenue and lifetime value for our business. Through all of these experiences, our large global network has grown to nearly 600 million. Every day, our players are forging new friendships and social connections. And with the scale of our network and our team's ability to utilize our data, we can understand where, how and what our audiences are playing today and where they want to go next. We continue to see Gen Alpha and Gen Z turning to games as their primary form of entertainment, consuming more content than any generation of the past. They love playing with friends, they stay connected with family and they're creating content at every turn, both in and around their entire gaming experience, whether they play games from our expansive EA SPORTS portfolio to fuel their fandom, enjoy the intensity and competition of Apex Legends, or seek adventure in games such as Star Wars Jedi, the next generations of consumers use the power of play to fully immerse and express themselves, to build deeper, more meaningful connections with the communities they identify with and where they feel they belong. They're using games like the Sims to unleash their personal and creative autonomy, building characters and new stories with their friends. Delivering games that fuel creativity where players can join, compete and interact with each other through social and immersive experiences is an exciting growth lever for Electronic Arts, as we continue to expand and diversify our portfolio and build global online communities spanning more geographies. Games are the social networks of the future. Leading in this highly competitive market requires a strong focus on people. We continue to invest in our culture and in fueling our talent pipeline. The best character artists, animators, graphic designers, data scientists, engineers and many more talent creators are all joining our team to level up their careers with award-winning franchises and studios. From career development and wellness programs to workplace experiences and technology that inspires collaboration and innovation, we strive to make Electronic Arts a great place to work and grow. Through our IP, our talent and our growing network of players, we are adding strength and long-term value to our business. Even with short-term uncertainties, interactive entertainment will continue to evolve and grow, and we are in a very strong position. Now, I'll turn the call over to Chris.

Chris Suh, CFO

Thanks, Andrew. As Andrew said, we had another strong quarter driven by continued healthy engagement from our vast player network across our broad portfolio of live services and games. Net bookings for the first quarter exceeded our expectations, coming in at $1.3 billion, driven by our FIFA franchise and the F1 22 launch. Compared to the prior year, net bookings were down 3% or 1% in constant currency, driven by two game launches last year compared to one this year, offset by strength in the FIFA franchise, the acquisition of Playdemic and the launch of Apex Legends Mobile. Our live services net bookings grew 8% year-on-year or 10% in constant currency, again, demonstrating the resiliency of the highly recurring revenue stream. On a trailing 12-month basis, live services were 73% of our business. And with regard to full game sales, digital sales accounted for 65% of units sold through, up four percentage points from last year. We delivered Q1 net revenue of $1.77 billion, also above our expectations. And with the higher mix of console-based revenue, gross margins and underlying profit were also well above our expectations. We saw strength across the entire FIFA franchise during the quarter, particularly with FIFA Online 4 and FIFA Mobile. FIFA Online 4 hit new high engagement and FIFA Mobile delivered its biggest net bookings quarter ever. FIFA 22 is the largest FIFA ever, life to date with regard to net bookings. F1 2022 net bookings also materially outperformed our expectations, and the franchise has become a dependable driver of growth, having delivered double-digit growth for each of the last four years. Andrew highlighted the success of our owned-IP games, exemplified by Apex Legends, which saw double-digit net bookings growth again in Q1. Apex Legends Mobile had a successful launch during the quarter, making Apex Legends a leading multi-platform global franchise. Operating expenses were up 11% on last year, in line with our expectations, as we continue to invest in our development teams and new product launches. Operating cash flow for the quarter was negative $78 million, and we returned a further $373 million to shareholders through dividends and our ongoing share repurchase program. Turning now to guidance. We are maintaining our full year net bookings guidance of $7.9 billion to $8.1 billion, up 5% to 8% year-on-year, or 8% to 11% in constant currency. Let me give a bit more color within this range. First, based on current exchange rates, we see nearly $100 million of incremental net bookings headwind within our full year guidance, or about one point of growth, which mostly impacts the second half of our year. As rates remain quite volatile, we will provide a more current update in our Q2 earnings call about the expected half two impact. Second, we’re seeing some shifts within our business. We expect the strong Q1 results in our EA SPORTS and Racing portfolio to continue, offsetting the anticipated impact of an overall softer mobile market. This mix shift has a positive benefit to gross margins, and therefore minimizes the likely increased impact of FX on our underlying profitability. We expect fiscal 2023 GAAP revenue to be $7.6 billion to $7.8 billion and cost of revenue to be $2.02 billion to $2.065 billion. Our expectations for operating expenses are unchanged, at $4.2 billion to $4.315 billion, and we anticipate earnings per share of $2.79 to $2.87. Our guidance for operating cash flow also remains unchanged, at $1.6 billion to $1.65 billion. With capital expenditures of about $200 million, that would deliver free cash flow of about $1.4 billion to $1.45 billion. See our earnings slides and press release for further cash flow information. Turning to the quarter, we expect Q2 fiscal 2023 net bookings to be $1.725 to $1.775 billion, driven by the launch of Madden 23 on August 19 and FIFA 23 on September 30. Both Madden and FIFA benefit from having built decades-long relationships with their passionate player communities and broader sports ecosystems, and we’re seeing strong pre-launch momentum for these reliably well-performing titles. For the second quarter, we expect GAAP net revenue of $1.85 billion to $1.9 billion, cost of revenue to be $467 million to $480 million, and operating expenses of approximately $1.036 billion to $1.041 billion. This results in earnings per share of $0.78 to $0.86 for the quarter. Our strong first quarter reflects the continued healthy engagement from our vast player network across our broad portfolio. We're confident in our ability to execute with discipline, navigating through a more uneven market with a robust half two slate, and the durable power of our live services model to deliver continued growth in fiscal 2023. Now, I'll hand the call back over to Andrew.

Andrew Wilson, CEO

Thanks, Chris. It's been a good start to the year. While the macro outlook remains fluid, every one of us at Electronic Arts is focused on the things we can control. Even amidst market uncertainty, more people than ever before are turning to games as the primary choice for entertainment. This is what they love to do more than anything else, and it's how they want to connect and share experiences with people around the world. With gaming so central to our lives today, EA is uniquely well positioned with a broad demographic reach of our portfolio and the strongest content pipeline in our history. Leveraging the talent of the best teams in the industry, we are poised to lead this next chapter of entertainment and to continue building long-term value in our company. As we move into the Q&A portion of the call, I want to take a moment to welcome Laura Miele. As Chief Operating Officer, Laura has a deep connection to our business from game creation and our studios to revenue generation and our commercial organization. Laura will join us to add her strategic perspective and insights on the business. Now Chris, Laura and I are here for your questions.

Operator, Operator

Your first question comes from Eric Sheridan with Goldman Sachs. Your line is open.

Eric Sheridan, Analyst

Thanks so much for taking the question. Hope everyone in the team is well. Maybe two big picture questions, if I can, Andrew. First, with where we are in the console cycle and how there still continues to be a lot of supply chain and logistic challenges globally, can you talk a little bit about your current thinking on this console cycle versus historical precedents and how you plan on sort of building the organization on the content side to reinforce when we get to sort of mass deployment of the next-generation of consoles? Would love your view on that first. And then obviously, on the mobile gaming side, we continue to see a lot of challenges on distribution and go-to-market and monetization. Can you talk a little bit about your efforts to realign the organization for this sort of new world order for mobile and how you think about capitalizing on that opportunity over the next couple of years? Thanks so much.

Andrew Wilson, CEO

Thank you, Eric, for the questions. I'm going to pass it over to Laura in a moment to discuss mobile structure, as she has been closely working with the team on our future plans. Regarding the console cycle, we are still in the early stages, as our console partners typically view these cycles on a 10-year timeline. While there are some supply chain issues currently, we expect these to improve in the latter part of the year and into next year. Importantly, demand is soaring, as highlighted by Microsoft’s strong position in console sales and demand, and we also see significant demand for Sony consoles. As supply chains enhance, more consumers will likely adopt the next generation of consoles. Looking ahead to the next eight years, we plan to continue investing heavily in our established intellectual property within the EA SPORTS portfolio. Moreover, we intend to deepen our investments in our pipeline as we move through this cycle. The longer a cycle lasts and the more we can invest, the higher the quality of software and gaming experiences that we can provide year after year. Regarding mobile, it’s crucial to recognize its growing role alongside PC and the emerging importance of cloud gaming. We are developing additional platforms for the 3.5 billion gamers worldwide to engage with our content and services. Mobile remains the largest gaming platform with unparalleled reach, helping us penetrate markets where we previously faced challenges in monetization due to limited console access. Our FIFA mobile business has seen significant growth in these markets, which we believe presents a strong long-term opportunity. Currently, mobile represents about 17% of our business, while accounting for 50% of the gaming industry overall, indicating substantial potential for growth. Laura has been focusing on how to establish a unified mobile organization that is future-focused, emphasizing the importance of brands, networks, and talented teams. I'll let Laura provide more details now.

Laura Miele, COO

Yes. Thanks, Andrew, and thanks, Eric, for the question. We have successfully integrated Glu and Playdemic into business into one mobile organization that is actually seeing growth year-over-year, and we continue to expect to see that in the coming years. As Andrew mentioned, there's an outside strategic value that mobile brings to our portfolio. It has a significant contribution and impact on the ecosystems of our big franchises. So one example, we've discussed the success of FIFA Mobile. And when we look at our player profile, 46% of our FIFA mobile players were located in Asia Pacific and Latin America compared to just 28% for our HD players. So we see this as a significant expansion of the overall ecosystem for these big brands that we have. It's also an amazing entry point for one of the largest growth drivers for us with Gen Z and Gen Alpha players. And of course, as Andrew mentioned, it's a dominant engagement platform for emerging markets. And then as we think about cross-platform play also for our franchises. So we are optimistic, not just about the individual mobile business, but the strategic impact mobile brings to our overall growth plans that we have for the future.

Operator, Operator

Your next question comes from the line of David Karnovsky with JPMorgan. Your line is open.

David Karnovsky, Analyst

Hi. Thanks for taking the question. Just to follow up on Chris' commentary for a softer mobile market in the back half. I think that's how I heard it. Can you maybe just walk through some of the drivers of that? Is that something specifically in your pipeline or is that more related to broader factors like the economy or UA challenges at some of the platforms?

Andrew Wilson, CEO

Yes, we're noticing a slowdown in the macro mobile market, based on what we've been hearing. Our model is designed with the expectation of some deceleration in this sector. Overall, our mobile business is performing well, and we remain confident in our core operations and franchises, yet we are observing a general slowdown. There are several reasons for this. One reason is that the market is still adjusting to IDFA. However, with our strong brand presence, a robust network of players, and excellent technology, we believe we can navigate these changes effectively. Another factor is the challenging comparisons from the COVID period, during which the mobile market thrived. Additionally, travel has picked up significantly over the summer, and speaking with travel companies reveals they are experiencing record levels of activity, which may also affect the mobile market. Ultimately, this represents a vast base of 3.5 billion players and provides us with opportunities in markets where we haven't traditionally had access. We believe the future will favor substantial entertainment brands that span platforms, and that the overall ecosystem will remain healthy. While we don't want to approach the market with excessive confidence, we emphasize the importance of disciplined planning. We are assured in our business, but we acknowledge the current softness in the market as we prepare for the second half of the year.

David Karnovsky, Analyst

Okay. Maybe I can just also follow up with one about economic risk more broadly. I think we've tended to think historically that PC console games are somewhat recession-resistant just given the cost per hour basis of the content. But wondering how you think that kind of dynamic holds up today, just given the industry has shifted so much towards live services, but then also increasing player engagement on things like subscription. Thanks.

Andrew Wilson, CEO

Yeah. I think it's a great question. Typically, as we've looked through past macro challenges, our industry has done extremely well relative to everything else that's going on around it, even relative to other forms of entertainment. There's a few reasons for that. One, it's highly interactive and it's deeply engaging and represents extraordinary value for money. Two, entertainment is kind of a fundamental human need. And even as humanity has dealt with many challenges through its course, entertainment has always risen to the top as something that has brought us together. As we think about the business now versus the last macro challenges that we may have faced, I think the good news with live services is that we have more people engaging in our games for more time and more deeply connected to each other. All of those things speak to, I think, real strength of the nature of the live service business that we operate in today. I think there is one open question if we were to have one which is in a world where you can engage deeply without spending, how we will see spending through this period, in the context of live services. What I said in the prepared remarks is, what we're focused on is the things that we can really control, which is driving deep engagement, because what we know about engagement in our business, particularly in the context of our live services, is over the lifetime of an experience. If we can continue to drive really strong engagement across the portfolio and across our 600-million-strong community, that will protect us over time.

David Karnovsky, Analyst

Thanks so much.

Operator, Operator

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

Andrew Uerkwitz, Analyst

Hey, great. Thanks for letting me ask a couple of questions here. The first one, probably for Laura, but just generally, COVID obviously impacted the way people played games, but it also impacted greatly how games were being made. We've seen a ton of delays in the industry. Where do you think we're at? Are we at a point where delays will become fewer and fewer? Like how do you feel about making games today in the current environment?

Laura Miele, COO

Hi Andrew, thanks for the question, it's really great. A couple of things. Yes, we did experience some initial disruptions in how our teams create games. However, I’m continually impressed by the ingenuity and creativity of our teams and how they've adjusted to not only become more productive but also highly innovative in their game creation process. We've observed significant progress in the rhythm and operating systems our teams have developed for game creation. That said, we're noticing more people returning to the office. We're currently at our headquarters in person and have been traveling around visiting studios. Andrew visited our Racing teams in the UK last week. So, we are seeing more people come back, and individuals are adapting to environments that are more fulfilling and productive for their creativity. I've learned that having teams in place at the beginning of the production cycle is critical, and typically at the end as we finalize projects. Our teams have adapted remarkably well during production, appreciating both in-office collaboration and the ability to work from home. Thus, we believe we are finding our new rhythm, and we’ll continue to evolve as time progresses. Additionally, there has been strong demand for people wanting to join our company. Individuals prefer to work for companies they strongly value and feel a moral connection to, and while compensation is important, many seek an emotional and personal connection to their workplace. We've seen a strong interest and desire to work here, which presents us with great opportunities to attract new talent, and our teams and infrastructure are adapting well to this new work environment.

Andrew Uerkwitz, Analyst

Got it. No, I really appreciate that color, Laura. Switching over to thinking about medium to long-term growth. You guys, I believe, I mean, you've announced or we've speculated that there's quite a few single player games coming. How should we think about growth from that vector? Should these be bigger in scale, so that they'll each kind of comp one after another nicely, or is it a quantity game where you launch one big one, and then we get a couple after that? How should we think about coupling the single player games going forward as we build our models over the next couple of years? Thanks.

Andrew Wilson, CEO

Yeah. And maybe Chris could add some detail on the model. The way we think about this is really less about which game and more about which motivations these games fulfill. So we know about our players is on balance, they have these call motivations: inspiration, escape, social connection, competition, self-improvement, and creation—these things that bring us together as players of games. And the creation of worlds and the building of characters and the telling of stories is really important in the fulfillment of some of those motivations. So when we think about our portfolio and we think about building it out, we really think about it on two key vectors. One, how can we tell incredible stories and two, how can we build tremendous online communities and then how do we bring those two things together. So the way when you look at our portfolio, what you should be looking for is how are we doing that? How we build in these worlds and telling new stories, how we're developing global online communities, and how we're bringing those two things together for the fulfillment of motivations. And what we see when we get that is one, we grow network until we grow the amount of time that plays in our network spend in and around our games. And as we think about single-player games, we think it's a really, really important part of the overall portfolio that we deliver in the fulfillment of those core motivations. And the way we'll plan for it over time is really just looking at our community and looking at how they're spending their time and looking at where motivations may or may not be fulfilled and we'll look to supplement that with the addition of new online games, new multi-player games and new single-player games.

Chris Suh, CFO

Yes, Andrew. And maybe if I could just add on top of that. Andrew, our Andrew here explained it well. But as we think about the model impact and the financial impact of that. I mean, I think the first thing to always keep in mind is that live services still encompasses on a trailing 12-month basis, over 70% of our business. And that has been a proven very reliable, highly recurring revenue stream, and that will still be the predominant driver in our P&L long term. Second, we've talked a lot about the areas of investment that we're making, and that's both in live service as well as some of the single title launches that you've seen. And so over the course of time, we'll continue to invest in our long-term growth. We'll continue to invest in the ongoing stable performance of our live services business, and there'll be some puts and takes along the way.

Operator, Operator

Your next question comes from the line of Omar Dessouky with Bank of America. Your line is open.

Omar Dessouky, Analyst

Hi. Thanks so much for taking my question. You mentioned that Apex Legends Mobile was successful versus your expectations. And I wanted to double-click on that. By what measures would you consider the Apex Legends Mobile launch successful? And is bookings one of those measures? And then have you launched Apex Legends Mobile in all the geographies that you've intended? And how should we think about the second half advertising intensity of Apex Legends Mobile compared to what we've seen so far, especially in light of your comments on a weaker mobile environment in the second half. And then I have a follow-up.

Laura Miele, COO

Hi, Mark. We're pleased with the game launch that met our expectations for the quarter. We observed a significant initial uptake with Apex Legends on console, which later stabilized and showed steady growth throughout the game's lifecycle, and we anticipate a similar trajectory for this title on mobile. This pattern is typical for many mobile shooters, and there is considerable potential for revenue generation, especially within the shooter category, which we expect to see with Apex Mobile as well. We are currently in week eight, just getting starting, with many years ahead of us. We excel at listening to our community and responding to player needs and game dynamics. Our team is outstanding; Respawn is top-notch in the shooter market, and we now have a solid mobile infrastructure globally thanks to our acquisitions of Glu and Playdemic, along with our mobile organization. We also have a strong partnership with Tencent. We've met our expectations, and we are optimistic, knowing we have a significant runway ahead for this title. Regarding advertising, we view it as a component of our mobile business, primarily focused on internal game monetization, and that's the lens through which we are optimizing our return on investment in Apex.

Omar Dessouky, Analyst

Okay. I guess in the context of this weakening mobile macro environment for the second half, and kind of a stable expense guide. Does your stable expense guide assume more or less or the same investment in mobile user acquisition?

Laura Miele, COO

For Apex, we are holding it steady. We are not changing our outlook on our investment or the return. We are maintaining that for now. The great aspect of the mobile business is its dynamic nature, allowing us to utilize various strategies related to game changes, evaluate engagement, and assess the return we are experiencing. However, we are not altering our outlook on our investment or the revenue return at this time.

Omar Dessouky, Analyst

Okay. And just a quickie again on Apex Legends PC console this time. Does your guide for the full year include any kind of effect from competition of new shooters that may be launching this fall?

Andrew Wilson, CEO

No. The way I would think about that, Omar, is that our guide takes into account what we view as the overall market conditions. Apex Legends had double-digit growth again in Q1. We're anticipating the full year to continue to grow on that very important franchise, and it does take into account both the things that we control from an execution standpoint as well as what we view as the market conditions, and that's all factored into the guidance that you heard.

Omar Dessouky, Analyst

Wonderful. Thank you so much.

Operator, Operator

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

Mario Lu, Analyst

Great. Thanks for taking questions. Just a follow-up on Apex. With the mobile game coming out mid-quarter, did it have any impact, if any, on the console PC version in terms of bookings and users? In other words, the growth kind of pickup or slowdown post the mobile launch?

Laura Miele, COO

Hi, Mario, thanks for the question. It's so early to be candid. But what we are seeing is we are seeing tens of millions of new players coming into Apex, and we're seeing a significant impact in geographies and growth in geographies as far as penetration of the brand and the experience that are expanding the Apex brand in places that the high def and PC console didn't necessarily. So it's, again, more expansion into emerging markets. and a lot of new players coming into the brand that we're optimistic about. But it's early days for us to understand to see how things will play out. We have a new season coming on the high def and PC game in about a few weeks here. And so we will study and understand the impact that mobile has had on that. So more to come in our next earnings potentially on the context around the impact on the overall business.

Mario Lu, Analyst

Great. That's helpful. And just one on FIFA. You guys mentioned the whole franchise was strong during the quarter. Was there anything in particular that drove the strength in FIFA Online? And then, can you guys remind us, once the FIFA license rolls off, like what happens to these persistent games like FIFA Online and FIFA mobile? Is it just a simple kind of rename or how is that going to work? Thank you.

Andrew Wilson, CEO

Yes. So I'll have Laura take the first part on just the performance in the quarter and then I'll talk a little bit more broadly about how we think about the franchise going forward.

Laura Miele, COO

Yes. So on FIFA Online 4 performance, the studio has studied and strongly focused for the last few years on efforts to improve the gameplay feel. And this has really started to pay off in player sentiment. So we continue to deepen our relationship with our players, and we have strong partners as we go to market in Asia and we're factoring the feedback into the game development. We're also seeing improved marketing and the growth of popularity of Global Football in Korea, which has had a big impact on the business.

Andrew Wilson, CEO

We are set to launch the most expensive FIFA game ever this year, and the demand is incredibly strong. During my recent trip to Europe, I met young fans who had already preordered the game, which is quite remarkable. We anticipate a strong year for our FIFA business, especially with the World Cup happening. While I won't delve into the specifics of our FIFA contracts, you can expect us to launch a comprehensive FIFA experience and continue our sales efforts in the market. We will also begin to promote the EA SPORTS FC brand more broadly, building on earlier efforts this year where nearly 200 of our 300 partners helped promote the brand collectively. Although the game name is changing, the core experience and connection players have to their favorite teams, leagues, and fellow players will remain intact. We plan to invest significantly in this future, and we recently announced a partnership with LaLiga that will enhance our offerings. We have appreciated our nearly 30-year partnership with FIFA, which has allowed us to build a successful business together. We are enthusiastic about the opportunities ahead as we blend football fandom with interactive experiences, and our partnership with LaLiga is just the beginning. We aim to unite the global football community around the EA SPORTS FC brand that we all share.

Mario Lu, Analyst

Very helpful. Thank you.

Operator, Operator

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

Eric Handler, Analyst

Yes, good afternoon and thank you for the question. I would like to know about two franchises. First, with F1 showing year-over-year growth in your second year with the title, are you implementing any different strategies from a marketing or game perspective to drive these improved numbers? Secondly, regarding The Sims, you recently released your first expansion pack in about a year; could you share what has been happening in that area?

Laura Miele, COO

Thank you, Eric. I appreciate the question. We are very optimistic and excited about the F1 business. The development teams have integrated effectively into Electronic Arts, and they are beginning to reap the global benefits of our scale. Our marketing and commercial divisions have made a significant impact, with developers noting the enhanced global reach and influence enabled by our marketing and commercial partnerships, which they haven't benefited from previously. We're seeing a positive development impact from our leadership, especially evident in this year's release, and we have high hopes for various aspects of the game we plan to launch in the future. Additionally, the strength of the EA SPORTS brand, along with our robust marketing and commercial teams, plays a crucial role in this. Regarding the Sims, I'm very fond of how robust and successful that business is. We regularly release game packs, content, and expansion packs, keeping us consistently engaged with our players and the community. We're enthusiastic about the strong performance and growth of this business after nearly 10 years of The Sims 4 brand being on the market. We will continue to provide content for our player community in the years ahead.

Operator, Operator

Your next question comes from Mike Hickey with The Benchmark Company. Your line is open.

Mike Hickey, Analyst

Hi Andrew, Chris, Laura, Chris, congrats on the quarter. Thanks for taking my questions.

Chris Suh, CFO

Thanks Mike.

Mike Hickey, Analyst

Two questions. No problem. First question, sort of broad ranging here, but really exciting news, at least for me. And I think the community on state and your decision, your team's decision to move from a premium plus live service release to what it looks like a pure free play live service. So just curious, qualitative or quantitative, the decision-making process to move from what was, I think, kind of highly anticipated premium launch to a pure free-to-play there's a quality level or a unit expectation that is part of the process there to move to pure free-to-play. And if this is maybe the beginning of seeing this in other genres, those lower tier sports games that three million to five million units, whether it's auto racing or MMA then maybe better live services in this market versus premium? I have a follow-up. Thanks guys.

Andrew Wilson, CEO

Yeah, great question. I'll start, and then I'll hand over to Laura, who's been working deeply with the team. The first thing, as I was saying earlier, we really see growth in our future built on two key vectors; one, the ability to create worlds and characters and tell stories and that was to build really large global online communities. When we look at Skate, I think what's happened is our ambitions have continued to grow. As you've seen what the team has been able to do around that experience, I think we continue to see opportunity. Skateboarding is kind of a cultural language for many generations. It transcends so many things, certainly geography, and as we think about the ability to bring a global community of youth together through the language of skateboarding. We think this represents one of the biggest and strongest opportunities we have to build a global online community, deeply engaged in a world that involves creativity both from us and from them experiencing what starts out as skateboarding and almost certainly reaches more deeply into the cultural sensibilities of a generation. So as we thought about that, we really took a step back and evaluated how best we deliver that. And Laura has been working with the teams on how they've thought through that puzzle.

Laura Miele, COO

So, one of the most important growth potential that we have as a company is how we show up for Gen Z and Gen Alpha players, how they socially connect, how they consume content. So there's been a significant focus from the team on this. And I'll talk about the team for a minute. We have some of the original creative leaders from the original Skate franchise. So, much of the DNA and goodness that people loved about skate exists in the team. And then, we also brought in someone, Daniel McCulloch, who ran at the Xbox Live platform. So he deeply understands art and nuance of social connection, social engagement and how to nurture a community. And third, I think that Skate, back in the day, was a bit even ahead of its time. It was a lot of the core motivation around our Skate experience was around creative self-expression in social connection and competition. And we are bringing that to life in the biggest way we possibly can. So, more to come on this. We are in community testing now, we're very close to this skate community to get feedback, and we're pretty optimistic about how we're going to be coming to market soon.

Mike Hickey, Analyst

Nice. Thanks, Andrew, Laura. A second question, Andrew, a bit awkward here, but bear with me. The sort of subsequent to your last call, there was a media article that came out sort of related to consolidation and sort of frame you as persistently pursuing a sale, which was, I think, somewhat unsettling or at least puzzling to the investment community, our clients and you get a lot of questions on it. So, just curious, if you can sort of provide some framework around that or clarification or sort of your motivation to run a stand-alone company or otherwise? Thanks.

Andrew Wilson, CEO

First, I'm sure you don't expect me to comment on rumors and speculation from some small red media outlets, but be that as it may. I would tell you, I think we are in an incredible position. We're soon to be the largest stand-alone independent developer and publisher of interactive entertainment in the world. I think we have the most incredible teams in our industry and the plan, as Laura spoke to earlier. We're attracting more and more incredible creative talent. We have a community that's $600 million strong that is growing and certainly, we're well on our way to aspirations of being able to engage a billion people in play across the planet. I think we're growing across platforms. We're growing across business models, and we're growing across geographies. And in a world where gaming is becoming more important to the lives of Gen Z and Gen Alpha, who will be the leading generation in terms of consumption and entertainment for the future, I don't think we could be in a stronger position as a standalone company. Our objective always and my objective as CEO of this company is always to take care of our people, our players, and our shareholders. And should there ever be a way for us to do that differently the way we're doing it today, I, of course, have to be open to that. But I would tell you today, we feel very, very confident and excited for our future.

Mike Hickey, Analyst

Thank you.

Operator, Operator

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

Doug Creutz, Analyst

Thanks. Since the last conference call, you announced Star Wars Jedi: Survivor. Your fiscal Q4 major title is still not specified in your current guidance. I'm wondering if we should assume that the new Star Wars game isn't the one you're referring to, or should we not make any assumptions?

Andrew Wilson, CEO

I think the advice would be do not assume anything. We will name the titles and fill in the blanks at the appropriate time.

Operator, Operator

Okay. Thanks Doug. That is all the time we have for questions. This does conclude today's conference call. Thank you for joining us. You may now disconnect.