ELECTRONIC ARTS INC. Q4 FY2024 earnings call

• Strategic pillars around entertaining and engaging massive online communities, telling blockbuster stories, and harnessing community power in and around games. - EA SPORTS FC launched successfully with high teens growth in net bookings, Madden NFL 24 had record net bookings, and EA SPORTS College Football 25 to be launched this summer. - Apex Legends had lifetime net bookings over $3.4 billion, improved ranked mode in FY 2024 to boost player engagement and expanded audience. - Sims 4 had over 85 million players with double-digit growth in FY 2024, and will deepen community through content updates and user-generated content. - Battlefield team integrated with Motive using Frostbite technology and compelling storytelling to build a Battlefield universe. - Mobile business integrated franchises and had strategic investments in standalone mobile titles.

In FY 2024, total net bookings were $7.43 billion, up 1% year-over-year or 3% in constant currency. Full game net bookings were $2.01 billion, up 11% year-over-year or 12% in constant currency, driven by the release of Star Wars Jedi: Survivor and the EA SPORTS portfolio. Live services net bookings were $5.43 billion, down 2% year-over-year or 1% in constant currency. For the fourth quarter, total net bookings were $1.67 billion, down 14% year-over-year in actual and constant currency. EA SPORTS FC global football franchise saw high teens growth in net bookings in FY 2024. Madden NFL 24 was the highest-selling installment since the early 2000s with record net bookings. Apex Legends had lifetime net bookings exceeding $3.4 billion. Sims 4 had over 85 million players with double-digit year-over-year growth in FY 2024. Mobile continued to have strategic investments.

• FY 2025 expected net bookings $7.3 billion to $7.7 billion, down 2% to up 4% year-over-year, with mid-single-digit growth in core live services business offset by fewer title launches and mobile business optimization. - GAAP net revenue expected $7.1 billion to $7.5 billion, GAAP operating expenses $4.35 billion to $4.44 billion, GAAP operating margin 18% to 20.6%, non-GAAP operating margin 29.6% to 31.7%. - FY 2026 and FY 2027 expected non-GAAP operating margin to expand another 150 to 200 basis points, GAAP operating margin to expand 300 to 350 basis points. - $5 billion stock repurchase program authorized, with $1.5 billion expected to be returned in FY 2025.

• Actual events and results may differ materially from expectations, refer to most recent Form 10-Q for risks that could cause actual results to differ materially from those discussed today.

Q: Regarding the new non-GAAP guidance, how to understand the connection with the existing model and the reason for the disclosure change?

A: Stuart explained that since video game companies have different approaches to capitalizing software costs and EA expenses software costs as they go into the P&L, disclosing this metric helps better understand the business, especially the pipeline in 2026 and 2027, demonstrating confidence in the strategy. Based on the adjustment for the change in deferred revenue, the non-GAAP operating margin is between 31.6% and 33.4%.

Q: What are the assumptions for larger franchises like Apex and FC in fiscal 2025 and how does it differ from the last earnings call?

A: Andrew said there is no material expectation shift from the framework outlined in January. For FC 25, there are new innovations and growth expected. Apex had good engagement and retention in Q4, and expected growth in the coming seasons driven by innovations, with overall mid-single-digit growth in core live services business offsetting fewer title launches.

Q: How was the stock repurchase program considered compared to other capital allocation opportunities?

A: Stuart said the dividend remains unchanged. The stock repurchase program aligns with the extended guidance of the new disclosure metric, the authorization is larger at $5 billion, which is a signal to return value to shareholders and provide flexibility in the next two or three years.

Q: Can the live services business be broken down between sports, action shooter, and casual?

A: Stuart said they won't directly break down the splits. Live services encompass multiple parts including sports, mobile, and EA Play subscription, with the biggest components being large online communities like FC, Sims, and Apex. Mobile business is expected to have low single-digit growth after optimization.

Q: The reason for the return of the solo mode in Apex, is it related to easier onboarding?

A: Andrew said the Respawn team works closely with the community, and the return of the solo mode is a step in expanding Apex's modalities and attracting global communities, being a cornerstone of the live services business.

Q: What are the growth expectations, market share outlook for the mobile segment in 2026 and 2027?

A: Andrew said the mobile market is expected to have low to mid-single-digit growth in the next 12 months, and EA's mobile business is in a good position with profitability, leveraging large online communities and investing in limited mobile native titles with breakout potential. Stuart said non-GAAP operating margin is expected to expand 150 to 200 basis points in 2026 and 2027 driven by core business growth and new IP.

Q: How is AI deployed in development processes and the opportunity of generative AI NPC in key franchises?

A: Andrew said EA is early in the AI evolution. Generative AI can make development more efficient, such as reducing stadium creation time from 6 months to 6 weeks and increasing run cycles. More than 50% of development processes are expected to be positively impacted, with opportunities to build bigger and more immersive worlds in 3-5 years and offer tools to the community in the long term.

Q: What are the opportunities for dynamic ad insertion and IT adaptation to the media landscape?

A: Andrew said game IPs are manifesting in film and television, and EA's built worlds will promote player engagement in play, creation, watching, and connecting. Advertising has an opportunity to be a growth driver, with teams considering thoughtful implementations in game experiences and beyond.