All right. Good morning, everyone. Thanks so much for being here. My name is Matthew Cost from the Morgan Stanley U.S. Internet Team. Thrilled to be joined by Stuart Canfield, the CFO of EA. Thank you so much for being here.
Good morning. Thank you for having me.
Yeah. So this is your first fireside chat, so it's an honor to have you here. So maybe we can start with one on the broader industry, just to kick off. You know, obviously there are some other companies that have a clear interest in expanding into gaming.
We've seen some M&A this year, maybe more than some. How are you thinking about the competitive environment today? And what is your outlook for the industry, you know, as we head into the holiday season and into the second half of your fiscal year?
Sure. I think, I think, first of all, interactive entertainment has an incredible growth opportunity ahead of it, and EA is incredibly well positioned to take advantage of that. Maybe we'll split it into a few pieces. Let's talk a little bit about sort of the market context overall. We'll talk a little bit about the near-term macroeconomic considerations, maybe some of the structural shifts and tailwinds that are going on inside the gaming industry space, and then a little bit about EA and how we're positioned. If we think about the sort of macro market context first, I think there are three things that continue to emerge for us.
One is that the emergent generation of consumers, so Gen Z and Gen A, continue to push for interactive entertainment as their primary, medium, of entertainment. Secondly, the dimensions of gaming, and the ways of interacting with play, continue to engage a broader and more diverse audience.
From whether it's single player to one-on-one, multi, we have a, a myriad of dimensions of where you can interact and consume. And then last of all, I think one of the biggest ones that's happening in recent time is the media landscape continues to converge. So we're all competing effectively for time and entertainment dollars, across linear, streaming interactive. When we think about sort of the, the macro near term, as you think about the holiday season we're heading into, there's clearly some dimensions that we're watching incredibly closely.
One for us is international business. FX volatility remains. Consumer sentiment, as we think about inflation and purchase intent, will be something we watch very closely coming through the quarter. As we think about some of the more bigger industries inside of gaming itself, a couple of things are emerging that are really clear.
The big titles, AAAs, are getting even bigger. We're seeing more time spent than ever inside of games. And then what that means for us as EA is that we're by now the largest independent gaming company. We're a scaled player. We have some of the biggest, largest AAA IP in the industry, leading with titles like FC, Apex, Sims, Battlefield, and others. And overall, collectively, there's a huge opportunity for us as we go forward.
Great. I mean, kind of on, on the point of, you know, the broader media landscape converging, let's, let's talk about FC for a second. You know, it's great to see the game spin off to such a great start. What are the steps that you're taking to ensure that the rebranded franchise, now that it's, it's transitioned from FIFA to, to, to FC, what are you doing to ensure that it maintains the positive momentum you've seen so far? And then you talked a little bit on the earnings call about the growth rate that you've seen year-on-year since launch. You know, how is, how has that been trending inter-quarter?
Yeah, I mean, first of all, you know, congrats to the whole team on an incredible transition from FIFA to FC. We've had an incredibly successful launch, and it's actually beaten our expectations, which we're coming off of a record successive back-to-back years. In terms of the product itself, with the teams, we're basically seeing that we've continued to invest to support the game.
We continue to layer in to make sure the holiday season is successful with the newest cohort. We've continued to see meaningful momentum inside the business. We've talked about the first four weeks; we pulled in almost 14.5 million people inside the first four weeks. We saw high single-digit growth inside of our Live Services business.
We're still predicting this year, despite some really difficult comps with World Cup last year, that we'll see growth again this year.
Oh, great. I guess, talk about another major franchise with Apex Legends. During the last earnings call, you mentioned that engagement with the most recent season is coming in ahead of your expectations. How should we view the longer-term growth strategy for Apex? You know, can you speak to the magnitude of investment that's required in that franchise now to hit your desired level of long-term growth?
Yeah, I think first of all, I mean, Apex operates in one of the most competitive environments inside of interactive entertainment. It's also in one of the largest segments and genres of gaming. And it's also highly seasonal. We see incredibly competitive ebbs and flows inside of this business, particularly around our fourth quarter and obviously the holiday season we're about to enter. For us, Apex continues to be an investment choice for us.
We've talked to two lenses around investment at this stage. The short term, we continue to invest in building out around our current seasons. We talked to the last season being an AI-driven improvement around sort of characters and economy. And despite being down year-over-year, we saw us exceed expectations for Season 18.
We just brought out our latest Season 19, added a new character, changed dynamically some of the game and the modes, and we're building towards, if you can believe, the 5th year since we launched the game, coming up with Season 20. We have one of the most talented teams in the industry working on the game, and in terms of the longer-term growth factors, we believe the growth opportunities are clear for Apex in the future.
That build around a few pillars, continue to broaden the market and the engagement model we have, continue to build out new business models and ways to interact around the product, and then obviously continue to drive engagement and modalities of play inside the franchise. We continue to lean into a series of extending teams.
We've added multiple teams around the globe to continue to scale the franchise, and have high hopes for the future.
Got it. Yeah, I think it's easy to forget exactly how long that game has been around. I mean, it kind of came onto the scene with such a bang in 2019, I think it was.
2019, yeah.
It's been a while. Is mobile, you know, when we think about increasing modalities of play, is mobile still, you know, a big untapped opportunity, or is it something that is sort of maybe not a near-term focus for Apex?
I think longer term, mobile is one of the most important platforms in the industry, and a critical path for us as we think about building and engaging larger audiences and continuing to connect and engage a broader audience.
We continue to evaluate what that is for Apex, in the future. But there's no question that in order to continue to scale and reach, in certain geographies, which represent an under-penetration for us today, that's a path that will enable us to unlock some of those.
Got it. Got it. So maybe talking about broader growth opportunities, I mean, where are your key priorities when we think about new game development versus, versus Live Services? Like, what, what is your approach to new releases versus focusing on driving monetization across your existing online communities?
Yeah, we have three material strategies that we line up our capital allocation and resource against. One is we're building behind sort of what we call Massive Online Communities. Second, we're investing against sort of Blockbuster Storytelling.
And the last part is we're investing around sort of how do we harness a broader player community, and let's kind of go through some of those a little more. Massive Online Communities for us are sort of the AAA blockbuster titles. They represent the largest growth opportunity for us and we believe in the industry. And at the same time, they are driven by a few key facets for us. One is they're built around a dynamic, robust base game that is at high quality and scale, wrapped around sort of social and creative expression.
They're executed and delivered through sort of dynamic, ongoing Live Services, and they continue to operate at scale by creating and enabling sort of self-expression and User-Generated Content around Massive Online Communities. The second part is sort of Blockbuster Storytelling, and how we leverage and partner with many iconic brands.
As we think about some of the industry secular tailwinds that are going on today, we know that the risk-reward in this space continues to grow. Expectations from players continue to increase, and the risk-reward of that return is differing today. So we're really focused on making sure we're making appropriate choices that enable us to invest appropriately behind to create a breakout innovation inside of Blockbuster Storytelling.
Star Wars Jedi is probably the obvious, product and title that reflects that, and we continue to have long-term partnerships, both with Marvel and Star Wars into the future. The last pillar is sort of around harnessing our player community, and what we really mean by that is how do we continue to tap into all the interactive and social experiences that, players have with us today?
And more importantly, how do we extend that, beyond the game? What we really mean by that is how do we, how do we continue to advance, and scale social connection, through either platform abilities that continue to integrate, different forms of engagement models, not necessarily directed to play.
So think about that, whether that could be news, it could be fantasy, it could be highlights, short-form video, and the ability for people to interact and engage beyond the play core component itself. And then the second one is how do we continue to increase in and around the community to drive longer-term engagement, reward mechanisms?
And the last part would be, how do we think through a continued advance, how we drive stronger digital D2C currency beyond the traditional microtransactional full game model that we have today? So think through broader paradigms like advertising, as one example of how we continue to extend the fabric of digital currency in our D2C model.
How does user-generated content fit into that? I think, you know, people forget how early The Sims is in the, you know, evolution of that type of gaming, but it, it's become so topical now, I guess. Is it, is it an increased focus? How does it fit into that paradigm for you?
I think ultimately, as we think how we continue to engage audiences over time, I think one thing we see today is that games look more and more like the social networks of the future. What we mean by that is that people continue to engage both socially, both their experiences and their connections, and they put all three together.
When we think about the time and retention of players inside of games today, it's natural that people want to personalize how they are inside of that game and how they play. The content they want to create, and equally, how they're rewarded for that content becomes a key path in terms of how we think about user-generated content.
There are many examples today, Sims for us, where you can continue to create content for both yourself and for others that both enriches the engagement in a community and, by default, creates economic and monetization opportunities for us, by default, of creating that economy.
Got it. Let's talk about the business reorganization, if that's the right word, of organizing into the sports business and then, and the non-sports business. It's been a couple of quarters, you know, since you announced that. Can you walk through how that process has been going, any of the benefits that you've seen? And, and as you think about driving further efficiencies in the business, how are you thinking about cost management more broadly?
There's a lot in that.
Split it in half.
We'll take it two pieces. I think first of all, the reorganization, you know, is ongoing and still a journey. The intent was clear. We split the studio organizations into two big verticals, EA Sports and then EA Entertainment. And then we have sort of two other organizations, one being a meaningful pillar we're calling EA Experiences, and the last part we think about as more as the infrastructure and the functions that serve like finance, in terms of delivering both those three.
We focus on those three pillars: EA Sports, EA Entertainment, EA Experiences. What we're trying to do is enable greater agility and greater empowerment for those leaders who run those businesses.
EA Sports today is predominantly an annual live service, almost an ongoing subscription model that provides a, you know, a reliable, durable stream of revenue and drives high touch point, high frequency, and high engagement across that business. EA Entertainment has a mix of both. It has products like Apex and Sims that are materially large-scale live services, while also building out sort of the interactive Blockbuster Storytelling experiences through franchises like Star Wars, and Marvel.
The experiences organization, however, is aggregating everything together when we think about go-to-market. It brings together the commercial organizations, the marketing organizations, brand, customer experience, to ensure that we're creating an end-to-end player experience that is fully connected. So everything from design, development of a brand to execution, go-to-market, to post-service.
What we found is that by putting them into verticals, we get greater efficiencies, autonomy, we can move much faster, and we empower those leaders to make financial decisions inside of that remit that aren't necessarily part of a collective aggregation at the total EA level. In terms of your second question, how we think about cost, we have a two-pronged approach.
One is we continue to make sure that we're carefully watching and learning from some of the secular trends we're seeing today. We're very focused on return on profitability in the core business, but at the same time making sure that we're investing to drive the growth opportunities of the future. It's an and statement.
We continue to make rationalization and realignment, as we see pressure and squeeze on some of the mid-tier titles, and we continue to invest further behind our biggest triple-A titles per the structure. At the same time, we're also building and investing for the future, as we think about sort of harnessing the power of our community and really connecting and engaging that ecosystem.
I want to go back to one thing that you said about the three different segments of the business. Are you budgeting separately for Sports and for Entertainment? How does the, you know, cost and budget approval process go now that they're, you want them to be more agile, but you want to exercise control at the same time. How are you striking that balance?
Yeah. First of all, we're not, we're not calling them segments. We're calling them sort of, you know, organization designs, 'cause the materiality of the third experience organization is a pretty significant number inside the organization. In terms of how we set frameworks, we're really setting multi-year goals-
Mm-hmm.
For both, Cam Weber, who heads up sports, and Laura Miele, who heads up entertainment. I'm really giving them empowerment to figure out inside of their framework, whether it's top and bottom goals, they have the autonomy to decide on investment capabilities inside of their group, resource location. So we try and keep it that they are pretty self-contained. There is an overall company mix we work through, but we're largely empowering them to run and decipher how best to invest against certain growth targets, both top and bottom.
Got it. Very helpful. I guess on capital allocation, how should we think about your priorities now? I mean, how are you balancing investment versus shareholder return? And where does M&A fit into that strategy for you now?
Yeah, I think it's like the topic of the day. I think we have two words. We try and be balanced and productive.
Mm-hmm.
What we mean by that is we want to make sure that we're investing appropriately back into the business to drive the growth opportunities we see in front of us. We also want to be balanced, in that we always want to return cash where it makes sense to investors, and we continue to have a pretty programmatic buyback program that at least always wants to cover dilution, and normally actually is driving accretion for us on the bottom.
We also want to make sure that as we scale and drive cash, that we continue to return that back to shareholders, but at the same time, making sure that we have the ability to continue to pursue M&A where it makes sense for us. In terms of our sort of M&A strategy, we have a couple of focuses.
We're really happy, first of all, with the sort of the IP and breadth and talent we have, but if an opportunity were to surface, we'd obviously want to pursue that. There'd be very specific criteria for us on the IP lens. We're probably more likely focused today on sort of how do we continue to accelerate tools and technology inside of our company versus build organically, and how we think that accelerates into some of the spaces in that third pillar of harnessing our player community, and/or drives capabilities to think around UGC, that really can robustly move us and accelerate multiple years ahead.
We're also looking at sort of ongoing partnerships in different formats as we think about how do we continue to engage, reward, and recognize sort of player loyalty and engagement.
So you will see us continue to operate through sort of industry-wide in terms of IP and opportunities for talent, tech tools and partnership in terms of accelerating the capabilities we have as we move from service to platform. The last part is how we think about opening eyes to sort of more broader partnerships as we see this kind of media ecosystem merging over time.
Mm-hmm. So would it be fair to summarize that by saying that, you know, you're taking a pretty broad view, you know, across both potentially tools and also IP and, and, and game studios of things that you're open to considering?
Yeah, I think we're taking an incredibly broad view. I think the benefit we have is we have an incredible balance sheet.
Mm-hmm.
We have minimal debt. We have increasingly high free cash flow every year. So it gives us the flexibility to make sure that in the near term, we can be assertive and move quickly if we want to, as we push through those three strategic pillars.
Massive Online Communities and ensuring those and making sure we grow. Blockbuster Storytelling, how we think through that IP in the lens of, of driving characters and story, and how we continue to drive more expansive thoughts around sort of platform, digital currency, and scaled social connection through the power of our community.
So let's talk about, let's talk about AI, my, my favorite topic. Obviously, it's still very early days, you know, to the technology's proliferation and in the game industry. But do you have any updates on your thinking about how AI is gonna impact AAA publishers like like EA and the gaming ecosystem?
Yeah, it's definitely topic of the day. I think it's almost every question. I think first of all, I think maybe people don't appreciate AI is really native for us in gaming, interactive entertainment. We've had AI in Madden, for example, as far back as the early days of sort of late 1980s. So it's been very prevalent for us on the way through.
We do have a belief that AI is naturally gonna transform and accelerate, not only interactive entertainment, but obviously beyond at the same time. We kinda see it down three pillars. One is that naturally, AI will accelerate the ability for game content production. It should enable and ultimately, likely efficiencies over time.
But in the short term, it's really about how do we accelerate the ability to drive more content. One thing we've seen in the success of FC Mobile for us is the game change in leveling up that product has been about frequency of content and keeping it fresh and relatable and connected to the real world. And we've seen that shift come from once a week to five times a week, to three times to and we scale it almost to a daily.
So the ability for AI to help through that journey. AI to create more innovative engagement models inside of the game, how we think about building character lines or story arcs. We expect AI to fundamentally change the game content work.
The second part is we also expect AI will empower through human tools and the human element of a game design, which enables our creative teams to spend more time doing what they do best: create amazing immersive experiences.
And I think the third one for us is that we do believe that AI will fundamentally sort of transform the game development framework over time, that continues to accelerate and only, only enhance the industry on the way through.
So you've been getting a lot of questions about it. Are there any things that come up that you think are either wrong, that the media or investors are missing about this topic? And is there anything you think is underappreciated that you wish would come up more on the topic of how AI could be a positive?
I don't think wrong or underappreciated per se. I think underappreciated is just how much AI has been a part of our-
Mm
...our journey across interactive entertainment for a long time. I think the assertion is that there naturally will be efficiencies over time, but the focus right now for us is how do we leverage it to enhance and scale more in the near term versus become an immediate cost lever in the short term? I think that would be the juxtaposition I'd put.
Got it. Yeah, it's funny thinking back to the AI and Maddens from the late 1980s. I thought I was great at those games until I played another human being, so hopefully AI has improved since then.
Listen, I need AI in every shooter game possible.
So let's talk about, let's talk about the mobile market for a minute. Obviously, you know, mobile gaming has been slowly recovering, but, but growth at the market level, frankly, remains somewhat challenged. So what is your view on where the market goes from here, and, and how are you approaching the strategy around, you know, EA's mobile game footprint in, in light of that?
Yeah, and I think I saw something yesterday saying that the mobile market might end up being sort of flat this year or maybe slightly up, versus many prior years of sort of seeing exponential double-digit growth. I think, first of all, I think the mobile market remains a critical, preeminent part of the industry, and obviously has the largest install base and will continue to grow through time as we see emerging markets come online.
Mobile, for us, will continue to be a preeminent acquisition model. It's an amazing way to bring people into our brands, through a, you know, freemium entry price point or a low price point, in markets where consoles and infrastructure doesn't enable people to engage that product.
How we push and connect people from mobile and uplevel them like we've done in FC, the power of bringing someone to a mobile product connected to a high-definition console product. When we combine both those two, the players who play both have an exponentially bigger return for us and monetization capability by virtue of more time spent and the more engagement in the model. Mobile feels like a platform that's in transition.
Mm.
You know, post-IDFA is a long way in the rearview mirror at this point. Obviously, Android may make changes as well as we go forth. But it feels like there's a fundamental shift going on inside of the market, given where we stand today. Maturity, you know, title, accessibility coming into the store every day. For us, our strategy shifted to focus on sort of three things.
One is the foundation and example of FC, how we continue to accelerate mobile as part of our AAA Massive Online Communities and the part that plays in that journey. And you've seen enormous success for us in FC and the growth and scale we're seeing, and we talked to triple-digit growth, you know, only a year ago, and sort of, you know, triple-digit quarters, for this title as we move forward.
So we're very focused on how does mobile enhance through our biggest properties? Second part is we continue to evaluate and make decisions around what it looks like for standalone experiences on mobile. They're not necessarily part of a broader ecosystem, but have the ability to standalone as a play component.
We'll leverage larger brands like our games like PvZ, and we have Star Wars: Galaxy of Heroes that leverage big, iconic brands that can actually enable us to scale. I think the third part is we continue to drive and be really focused on sort of prioritization around resource and how we think about new IP, how we think about partnership models in Asia, but being really focused on profitability.
We've really made that a part of this strategy as we move forward to ensure that across the three, we continue to scale, both from a bottom-line perspective and obviously build growth back into mobile in the future for us.
Got it. I guess, quickly, just following up on FC Mobile, what has gone so right in that franchise? You know, or specifically in the mobile offering for FC recently, because it's been a big opportunity for a long time, but it feels like it's really inflected.
Yeah. The team's made some really important shifts in both the platform that the game was founded upon, and how they went about building the game. And we touched a little bit on it earlier. FC, I think, has an enormous opportunity, even beyond and even further than it is today, and we've probably been under-delivering on that promise over the last few years. It really comes about they've taken an approach where we've positioned a team out in Asia, who have inherent understanding of what it takes to run a real-time service.
They've brought about a very much localized and culturalized approach, where we're investing in territories and geography to ensure that the content is relevant to that territory, versus one global program, that one size fits all.
The personalization aspect, culturalization, localization, continues to drive penetration for us in markets, and we'll continue to leverage that, and be more specific and intentful around that. I think also the world of global football continues to scale.
And it obviously, it's the preeminent game in terms of scale and size, and the reach of Premier League, La Liga, and others, into emerging markets continues to scale and grow. So all of those pieces between global world of football, intentful change in design and resource allocation for us, and a more sort of cultural, local, relevant, scaled live service that operates more on a daily or twice-a-day process, has really accelerated that engagement model for us.
Got it. Maybe I'll close on kind of a really high-level point. When you look out over the next three to five years, what are you the most excited about for the future of EA? What opportunities do you see, and what do you want investors to come away most focused on and excited about?
Yeah. In one minute, I think three things that really excite me. One, this industry is completely expanding. It's gonna continue to grow, and it has a huge opportunity in front of us. We've talked about Gen Z and Gen A. They're gonna be the largest generations in history. They're the most socially expressive. They're the most engaged, and they take entertainment as their primary form.
That's a huge opportunity alone in that subset, part one, industry expanding. Part two, games are clearly becoming a social network. They're social, expressive. They enable people to connect and share experiences, and you only have to think about social media a couple of years ago, or three or four years ago, and how games are slowly navigating to that path. I think the last one is play, watch, create, connect. We talk about that a lot.
Right now, gaming has been heavily lent through play, and you're seeing an incredible opportunity to expand through those other three things: watch, create, connect. Seventy-five percent of our audience today engage outside of play.
They're either watching, reading, writing, commenting, creating. All that opportunity enables us to continue to open up economic vectors for us, that build out over time. So expanding industry, ongoing. Games are clearly social networks and more immersive and taking people's time, and we have other vectors in play, watch, create, connect beyond play that are incredibly powerful as we move forward.
Right on the buzzer. Stuart, thank you so much for being here.
Thank you. Good to see you. Thank you.
All right. Welcome, everybody. We'll get started, as people transition out of the room. We're delighted to have Amdocs here today, and Shuky Sheffer, CEO of Amdocs. Shuky, maybe you could just start while people are getting situated, just on a little bit of an overview of Amdocs, just for the audience.
Okay. So we are servicing the telecom industry, the service provider, you know, the Vodafone, T-Mobile, AT&T of the world. And I think, we are the market leader by far, and I think we are pretty much, doing everything, all the, information technology, IT, stack, BSS, OSS, billing system, CRM, all the network system.
And we have a very unique business model. If you see, some of our competitors are either, you know, system integrators, some of them are product companies. We are what we called product-led services company, meaning that, we develop the products which are tailored for the industry, we deploy the product, and we operate the product. So it's a very unique, accountability model-
Mm-hmm.
-that we can give our customers, and a very high success rate in transformation. And then, as I said, we are the market leader in the industry, definitely, you know, supporting all the new trends like generative AI and others.
All right, so we'll dive into that, 'cause I think many investors that we talk to kind of focus a lot on the managed services portion of the business. But can you just remind everybody about kind of the four growth drivers of the company and, you know, how those have evolved over the past couple of years?
So you're right, everyone likes the managed services portion, which is a, you know—it's highly mission-critical system, very stable, recurring revenue. And we have done a change in our strategy roughly five years ago. This is pre-COVID. Mainly, we're focusing at the time on the main growth engine was digital transformation.
Everyone talking about digital transformation. And at the time, we changed our strategy for different pillars. Obviously, digital transformation, by the way, which was accelerated by the COVID, actually. All the 5G monetization, we knew all our customers are going to invest heavily in 5G. Journey to the cloud-