Electronic Arts Inc. (EA) Q4 2022 Earnings Call Transcript

Electronic Arts Inc.  (NASDAQ: EA) Q4 2022 earnings call dated May. 10, 2022

Corporate Participants:

Chris Evenden — Vice President, Investor Relations

Andrew Wilson — Chief Executive Officer and Chairman

Chris Suh — Executive Vice President, Chief Financial Officer

Analysts:

Omar Dessouky — Bank of America — Analyst

David Karnovsky — J.P. Morgan — Analyst

Benjamin Soff — Deutsche Bank — Analyst

Eric Handler — MKM Partners — Analyst

Drew Crum — Stifel Financial Corp. — Analyst

Colin Sebastian — Robert W. Baird & Co. — Analyst

Matthew Thornton — Truist Securities — Analyst

Mike Hickey — The Benchmark Company — Analyst

Mario Lu — Barclays — Analyst

Doug Creutz — Cowen Inc. — Analyst

Jamie Bass — Joh. Berenberg, Gossler & Co. — Analyst

Presentation:

Operator

Good afternoon, my name is Charlie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Electronic Arts Fourth Quarter 2022 Earnings Conference Call.

Mr. Chris Evenden, Vice President, Investor Relations, you may begin your conference.

Chris Evenden — Vice President, Investor Relations

Thank you, operator. Welcome to EA’s full quarter fiscal 2022 earnings call. With me today are Andrew Wilson, our CEO; and Chris Suh, our CFO. Please note that our SEC filings and our earnings release are available at ir.ea.com. In addition, we have posted 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 Q1 fiscal 2023 earnings call is scheduled for Tuesday, August the 2nd. And as a reminder, we post the schedule of our entire year of upcoming 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 — Chief Executive Officer and Chairman

Thanks, Chris. I hope all of you are well. I want to start by thanking our incredible teams at Electronic Arts. We have the most talented people in the industry who every day demonstrate passion, creativity and determination. I’d also like to extend a warm welcome to Chris Suh. Chris joined us in March as our new Chief Financial Officer. He is an exceptionally qualified leader and I’m looking forward to our partnership as we drive our next phase of growth.

EA delivered profitable growth in FY ’22, a record year in every important measure of our business, total players, engagement in our games and live services, net bookings and underlying profit. We grew our global network of players to more than 580 million unique active accounts fueled by new players joining titles including EA SPORTS FIFA, Apex Legends and The Sims, and new players that we welcomed from our acquisitions.

The strength of our broad IP portfolio, our creative talent, together with highly recurring revenue streams continues to supercharge growth in our business. We delivered $7.515 billion in net bookings and underlying profit grew more than 20%. It was a record year and our talented teams rose to the challenge in a big way to inspire and entertain hundreds of modes of engaged players worldwide.

Games are now essential to people’s lives, and younger audiences have more power as consumers. Gen Alpha, Gen Z and millennials are digital natives and by a gaming-first generations. They see gaming as their number 1 choice for entertainment. The consumption of entertainment and sport is deeply social with players that come to our network using games to stay connected to friends and to express themselves.

The future of entertainment is interactive and we derive strength from three structural advantages, our IP, our incredible talent and our growing network of players deeply engaged in our live services. First, our IP. Everything begins with amazing games and we continue to invest in one of the most powerful IP portfolios in all of entertainment. Apex Legends will expand in every dimension going from strength to strength. New game play is coming to the console and PC live service and new mobile service launches globally this month and the grand finale of the 2022 Apex Legends Global Series for esports is in July. EA SPORTS and racing are set to grow significantly in FY ’23.

We have six new EA SPORTS titles this year with more development. Our pipeline for this year and future years features big beloved IP that we cannot wait for players to experience, including Need for Speed, Dead Space, STAR WARS, The Sims, Skate, our BioWare franchises and Lord of the Rings. Our two new studios in Seattle are working on new projects, our more interesting and unannounced title in development and we have more underway across our global studio teams.

Next, we have the best talent in the world making amazing game starts with incredible game-makers. Innovating across our business, our people make Electronic Arts a great place to work from delivering safe and secure platforms to telling exciting stories and developing our next generation of creators. We have a collective team of leaders who together deliver one of the broadest portfolios in the industry. Every year, we’ll continue to pioneer new experiences. We are proud of our distinctive talent from across the many parts of EA for continuing to deliver more exceptional games and content at scale.

Finally, we have a large growing network of players deeply engaged in our live services. To provide a sense of scale, we have more daily, weekly and monthly active players across our entire portfolio. FIFA Mobile recorded its biggest quarter ever with unique new players surging nearly 80% year-over-year and Apex Legends is amongst the top live service games in the industry.

As we look ahead, we’re investing in ways for fans to have amazing shared experiences together whether that’s by playing, watching or creating. For our console, PC and mobile live services through esports, through other original content and with the tools that unleash the creativity of our players, we will grow what are already some of the world’s largest and most engaged entertainment communities.

Earlier today, we announced that starting next fiscal year, our football experiences will move under a new EA SPORTS FC brand. This is such an exciting moment for us and for our fans. We’ve just hit our biggest year ever for EA SPORTS FIFA games building on nearly 30 years of connected experiences for players across more than 150 million unique accounts. With more than 300 license partners, 30 leagues and federations, 700 teams and 19,000 athletes. The future of global football is huge. We’re excited to grow EA SPORTS FC. It will be the only place that fans can play in the UEFA Champions League, CONMEBOL Libertadores, the Premier League, Bundesliga, Serie A, LaLiga, MLS and many others.

Our global football franchise has long been at the forefront of innovation from the first isometric play angles to online play, Ultimate Teams and women’s teams. The first narrative story mode with The Journey to vower, to have emotion. We have repeatedly delivered new ways to play the game. We are thankful for the many great users partnered with FIFA and we are looking forward to delivering another full EA SPORTS FIFA game later this year, filled with the great features and World Cup content. Then the new era begins next year with EA SPORTS FC with a total addressable market of more than 3.5 billion football and soccer fans worldwide EA SPORTS FC will be authentic, inclusive, and immersive global entertainment property at the epicenter of football fandom.

We have amazing games, we’ve built around powerful IP, made by incredibly talented teams, we have a network of more than 0.5 billion player accounts. We have outstanding engagement in our games analog services fueled by social connection and shared experiences. With these strengths at our core, FY ’23 is said to be a year of innovation, growth, and leadership for Electronic Arts. Now I’ll hand the call over to Chris.

Chris Suh — Executive Vice President, Chief Financial Officer

Thanks, Andrew, and good afternoon everyone. As Andrew said, FY22 was a record year of net bookings that exceeded $7.5 billion. This is where the $200 million ahead of our original guidance driven by growing player engagement across our broad portfolio of live services and games. We grew both the net bookings and underlying profit by over 20% for the full year, operating cash flow for the year was $1.9 billion nearly $150 million above our original guidance and we returned almost $1.5 billion to shareholders. These results speak to the power of our diverse portfolio and to the durability and consistency of a Live Services business founded on deep player engagement.

For the fourth quarter net bookings were $1.75 billion, up 18% in the prior year and reaching a new Q4 hight even with the action we took to cease sales in Russia and Belarus during the quarter. Live services net bookings grew 14% year-on-year, we delivered Q4 net revenue of over $1.8 billion ahead of our expectations and up 36% year-on-year. Underlying profit was well above our expectations, Q4 operating expenses came in the lower than our expectations, driven by the timing of the marketing-sales activities. We are continuing to prioritize our investments into our best long-term growth opportunities while also remaining agile to realize cost savings and implement efficiencies where appropriate.

We generated $444 million in operating cash flow during the quarter and returned a further $373 million to shareholders through dividends and our ongoing share repurchase program. Now let me talk about our full year performance. Live services net bookings grew 17% year-on-year to nearly $5.4 billion and made up over 71% of our total business. Full game sales were up 34% to $2.1 billion. Our healthy live services growth was driven by strength across our broad-based portfolio, most notably by Apex Legends and FIFA. Apex Legends is up over 40% for the year, taking it after $2 billion milestone in lifetime net bookings. Season 12 finished yesterday and it was the most successful ever and of course, Apex Legends Mobile is performing well in tests and is close to launch.

FIFA 22 is the most successful FIFA ever launched to date with net bookings up double digits. Full game sales growth was similarly diverse with Battlefield, FIFA 22, Madden NFL, It Takes Two, F1, and Mass Effect Legendary Edition all important contributors. On console, digital represented 65% of full game units sold through up 3 percentage points from last year. In mobile, we passed the $1 billion milestone this year with nearly $1.2 billion in net bookings. As a result of great work by our team, our return on advertising spend is now roughly back to where it was before the IDFA changed and now we’re looking to maintain that rollout model as we scale spend back to the level it was before and as we continue to learn and adapt to market changes. Across our full portfolio, 12 titles contributed $100 million or more to net bookings and FY ’22.

Now let me turn to FY ’23 as Andrew laid out, we’re entering the year from a position of strength. We’re experiencing strong engagement across our live services, have great early indicators for our global launches, seek continued momentum in our annual sports titles and have a strong slate of console title scheduled for the second half. We expect fiscal ’23 net bookings to be $7.9 billion to $8.1 billion, up 5% to 8% versus FY ’22 driven by growth in live services, particularly in mobile, and supported by the strong launch late in the second half. Three key drivers of our mobile growth in FY ’23 are the launch of Apex Legends Mobile, growth in FIFA Mobile, and the launch of Lord Of The Rings: Heroes Of Middle-Earth or later in the year.

FX is a headwind of nearly 3 points native hedges relative to last year for both net bookings and underlying profit, which puts our net bookings guidance in constant currency at 8% to 10% additionally, the impact of the stoppage of Russia sales is 1 percentage point to net bookings and 2 points to underlying profit. Adjusted for these factors, we continue to see healthy underlying performance, which illustrates the durability of our portfolio of live services we expect cost of revenue to be $2.02 billion to $2.065 billion in part reflecting the anticipated strong growth of our Mobile business. We expect operating expenses to be $4.2 billion to $4.315 billion.

This is driven by investment in user acquisition for our two major mobile launches and adding talent to our development team to deliver live services and title frames We have in development for FY ’24, FY ’25, and beyond. Also, note that we increased the management tax rate used by our long-term model from 18% to 19% primarily due to U.S. tax rules published in January. We expect operating cash flow of $1.6 billion, $1.65 billion in capital expenditures of around $200 million, which we’ve delivered free cash flow of about $1.4 billion to $1.45 billion. The business continues to be a strong generator of cash. Although the year-on-year number is down slightly, primarily due to timing as a biggest non-sports launch of coming in Q4 with collections in FY ’24 and also because our tax rate has increased. We continue to be committed to growing our cash return program and announced today that we’re increasing our dividend by 12%, from $0.17 to $0.19 per share payable each quarter.

We expect to continue to repurchase stock under our current authorization and we will revisit it closer to the exploration in November of 2022. We expect fiscal ’23 GAAP revenue to be $7.6 billion to $7.8 billion and earnings per share of $2.79 to $2.87. We anticipate net bookings for the first quarter to be $1.2 billion to $1.25 billion dollars. As a reminder, in the prior year we had a number of new game launches in Q1, whereas this Q1 is primarily live services with only F1 22 launching on console and PC later this quarter. In contrast, coming Q2 has a profile, very similar to last year’s Q2 with launch of the Madden and FIFA, plus some live services growth offset by some Ultimate Team net bookings phasing into Q3. For the first quarter, we expect GAAP net revenue of $1.675 billion to $1.725 billion cost of revenue to be $309 million to $321 million and operating expenses of approximately $1.013 billion. This results in earnings per share of $0.76 to $0.85 for the quarter.

To conclude, EA delivered another record year well ahead of our original guidance, driven by strong player engagement across our diverse portfolio of title. Looking forward, we are capitalizing on the strength to invest in our future. We expect to outgrow the market to show resilience through uncertain times building on the foundation of live services in our broad portfolio to deliver growth over the long term. Now, I’ll hand the phone back to Andrew.

Andrew Wilson — Chief Executive Officer and Chairman

Thanks, Chris. As we kick off FY ’23. We are inviting the growth from a position of strength. With a portfolio of amazing IP the best talent and a growing network of highly engaged planners, we are scaling to deliver new experiences on more platforms across more geographies. Our total addressable market is expanding and secular trends are driving more consumption of the interactive entertainment. Our games are deeply social and will continue to build on our strengths as we invest to grow our biggest franchises to connect with more players in the future. We have a clear vision, a clear strategy and we have a spectacular team ready to deliver in FY ’23 for hundreds of millions of players, viewers and creators around the world.

Now, Chris and I are here for your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Omar Dessouky with Bank America. Please go ahead.

Omar Dessouky — Bank of America — Analyst

Hi, thank you for taking my question. It kind of looks like excluding the FX, you guys increased your guidance versus the mid-to-high single digits, excluding the FX in Russia that is versus the high-mid single digits that you had communicated on the third quarter call. First of all, is that the case? And second, has it become more clear since the third quarter call that’s a churn among gamers who joined during COVID lockdowns has run its course and that average revenue per paying user will remain near the highs seen during the pandemic as 2022 unfolds?

Chris Suh — Executive Vice President, Chief Financial Officer

Great. Thank you for the question. I’ll start with the first part first and then, I’ll turn it over to Andrew and he can comment as well on the second part of your question. So, from a guidance perspective, we did — your math is correct. Normalizing for the impact of the strengthening U.S. dollar, which we articulated was 3 points on net bookings as well as the impact of the decision taken in Russia. That effectively puts the equivalent guide more in the high single-digits equivalency, which is slightly above the signal that we gave in the last earnings call. So, it is indicative of how we finished the quarter with strong player engagement and we feel good about the outlook.

Andrew Wilson — Chief Executive Officer and Chairman

And as it relates to player engagement and the value that we see for now and over the course of time, I think what you’ve heard from us throughout COVID is that players sold out our games in the beginning for entertainment reasons, but they stayed deeply engaged to them beyond just entertainment. They really saw games as a means of deep social connection with their atomic unit of friends, and this is that four or five friends that you spend a great deal of your social time with. What we have seen even as we are moving past COVID and that people are returning to work, and returning to life, and returning to school is how engagement has continued to be very, very strong, and in many cases across all of our franchises at record levels. Given the level of entertainment that we’re developing and delivering, given the value of social interaction as part of those experiences, we think this is going to be a continued driver for growth for us.

Omar Dessouky — Bank of America — Analyst

Thank you. Thank you very much.

Operator

Thank you. Your next question comes from the line of David Karnovsky with J.P. Morgan. Please go ahead.

David Karnovsky — J.P. Morgan — Analyst

Hi. Thank you. Andrew, just on the FIFA license, was wondering if you could just discuss a little bit how long has it taken to forego that and how are you kind of thinking about potential risk given the brandship, but then also, for the upside, in terms of how ending the license kind of frees you up for certain revenue, opportunities done in the past would have been restricted.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. Great question. And as you will have seen from our press release today, and so letting FIFA return some things that are on our own website. We’ve been working through this. We are very excited about the future of football. We have, as you heard in the prepared remarks, over 300 licenses that deliver the content and form the experience that we do and apply. It’s most meaningful for them. We got over 150 million players across unique accounts. And so, when we think about the future of football right now, we’ve really made this decision on the basis of being able to deliver experiences that our players wanted. They told us they wanted more models of play, they told us they wanted to see more commercial partners in the game that are representative and authentic to the broad global world of football. They’re telling us they want us to move beyond just the core experience and really build out this digital football experience. And they tell us they want us to move really, really fast.

And so, as we move through this, again, we are deeply grateful of our relation with FIFA for nearly 30 years and deeply respectful of the partnership. And we worked closely together as two organizations to ensure that we can deliver the biggest FIFA this year that we’ve ever delivered, featuring World Cup content for both the Men’s World Cup and the Women’s World Cup for the first time ever. And we want to do that because we believe that’s important to our fans. And beyond that, we’re excited to work with our 300-plus partners and all the new partners that we’re going to have the opportunity to work with to deliver what we believe will be the greatest digital football experience available and sit at the very epicenter of football fandom globally.

David Karnovsky — J.P. Morgan — Analyst

Okay. Maybe just a follow-up, I know you touched on it a little bit, but how do you think specifically about marketing the EA SPORTS FC brand and will there be an initial bump in advertising cost or could you just mostly take advantage of that lack of a license fee? Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. I think it’s a little early to tell yet. We’re certainly being very thoughtful and deliberate about that. The important thing to understand, though, is as you travel around the world and you meet with players who really and deeply engage with our game. For a player in the U.K., the most important thing to them is the Premier League. For a player in Germany, the most important thing to them is the Bundesliga. And then, in Spain, it’s LaLiga and so on and so forth as you go around the world. What we’re focused on right now is building very unique experiences for each of those fans in each of those markets. And what you’ve seen today is many of our partners come out and support our ability to do this for our fans.

And so, certainly anytime you change the name of a product, you must be very thoughtful and we’ll certainly have to think about marketing on that front, but what gives us confidence as we move in this next phase of growth is that we are working with the partners and the content that our fans love and relate to most directly in the markets in which they do it.

David Karnovsky — J.P. Morgan — Analyst

Great. Thanks.

Andrew Wilson — Chief Executive Officer and Chairman

Thank you.

Operator

Thank you. Your next question comes from the line of Benjamin Soff with Deutsche Bank. Please go ahead.

Benjamin Soff — Deutsche Bank — Analyst

Hey. Thanks for the question, guys. I wanted to dig into the mobile businesses that you’ve got. Apex the mobile coming out soon, FIFA Mobile rebound seems to be doing really well, you announced the new Lord of the Rings game and you’re doing some other stuff on the sports side. So, really the question is, how are you guys thinking about the mobile growth opportunity in general and how has your outlook changed, if at all, since giving that longer term growth target for the business last year? Thanks.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. Great question. I mean, we remain very excited about the opportunity in mobile. It continues to be the single biggest gaming platform in the world with a TAM of 3.5 billion players. And so, that’s just — to have that kind of TAM access is just extraordinary for us as game-makers, and delivering live services to that audience. We’re seeing really good metrics around Apex Legends right now in test that will launch later this year. FIFA had its biggest quarter ever. They had a surge of 80% in users. And Lord of the Rings is coming from what has been our strongest mobile studio, Capital Games, who build these type of games and have done so well for us and have such an avid fan following.

So, as we think about moving forward in mobile, we think that the brands that we have, the expertise that we have — that we’ve built organically internally and that we’ve acquired through recent mobile acquisitions represents a really strong opportunity for us over the long term. Remember, when you launch these games, they last for five-plus years as live services and what you’re seeing this year is three big launches for us in addition to our existing portfolio, which is incredibly strong. And we’re going to invest behind that for the long term.

Benjamin Soff — Deutsche Bank — Analyst

Got it. And then, maybe just a quick follow-up on F1. I believe, this upcoming title is the first game in the series that you guys really were able to put your fingerprints on since the acquisition. So, can you talk a little bit more about your plans for the franchise, the types of innovation you’re bringing to the game? Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. And that team is an extraordinary team and has always built an incredibly high-quality game. That was really the impetus for the acquisition to bring that into the EA SPORTS brand portfolio. F1, as you might have seen, if you follow the sport, is an all-time high in fandom. We had an extraordinary season last year between Hamilton and Verstappen. We’re seeing an incredible season this year with Ferrari leading in the Constructors’ Championship and Leclerc and others really pushing Verstappen.

And so, in our world, if you get to a place where sports fandom is high in engagement, and of course, sport is high, and you couple that with an extraordinary development team who have a history and track record of building extremely high-quality products and then you layer in EA SPORTS’ marketing power and global reach. We think there’s incredible opportunity there and we think that business is going to go from strength to strength.

Operator

Thank you. Your next question comes from the line of Eric Handler with MKM Partners. Please go ahead.

Eric Handler — MKM Partners — Analyst

Good evening, and thanks for the question. I’m curious to think about the marketing investment that you’re going to be spending on Apex Legends for mobile and then you’ve got Lord of the Rings and we’re still in the relatively early stages, in FIFA for mobile, should we be thinking about the investment sort of mitigating a lot of the revenue that comes in from these titles and really you look to grow the player base in fiscal ’23 and then you think about margin expansion in fiscal ’24?

Andrew Wilson — Chief Executive Officer and Chairman

I think that’s it. That’s a good way to think about it. The reality is, any time we develop a game and launch a game, there is a combination of development cost and marketing cost to kind of get to launch and get to that critical mass of players and then sequencing of that. It’s very different in mobile, whether is in traditional console experiences. Traditional consoles experience, of course, you can spend in development for two, three, four in some cases five years and there is an exceptional amount of development spend upfront and then the marketing spend proportion of that is much lower.

In mobile, the cost of development is lower to get to launch the acquisition spend early on to supercharge a new launch is higher but remember these are live services and what we’re doing is we’re driving a golden cohort at the beginning of the launch and that cohort will continue to deliver return that we build on over-time for the course of the next five plus years and so early on, you see margin compression in the connected mobile over the course of time you see margin accretion and margin expansion and these live services become global committees of players, they continue to play for five plus years in some cases, as long as a decade.

Chris Suh — Executive Vice President, Chief Financial Officer

Yeah, then maybe I could just add on to that there as you have a chance to go through your the model in the guidance that we gave you will see that is implied in that in the guidance and the cost structure. It is the points that to reiterate the points that Andrew made. We’re excited about our opportunity in mobile, it represents an enormous TAM opportunity. We’re excited about what we have in store for this year. It is a different margin profile, especially in the short term, but as Andrew pointed out once we get to scale, we see great profit operating revenue and profit opportunity and we’re really excited about the opportunity there.

Eric Handler — MKM Partners — Analyst

Great. And then just as a follow-up, I believe you said anything six new sports titles this year. Wondering if you could give a little color, are these mobile titles? Are these new PC console games? What can you tell us there?

Andrew Wilson — Chief Executive Officer and Chairman

So it’s the cast of characters, you would expect from us, plus F1 so it’s like our FIFA product that’s NHL, that’s Madden NFL, that’s F1. We’ve got a new golf game trying to think now you’ve caught me off guard. And Super Mega Baseball, which was an acquired properties so yes, so and that’s across console PC and in some cases mobile.

Eric Handler — MKM Partners — Analyst

Great, thank you very much.

Operator

Thank you. Your next question comes from the line of Drew Crum with Stifel. Please go ahead.

Drew Crum — Stifel Financial Corp. — Analyst

Thanks guys, good afternoon. Wanted to drill down a little bit more on Apex Legends, you’re lapping our 40% plus comp, but also launching on mobile, what are your expectations for franchise net bookings in fiscal ’23 and will you make any changes to the cadence of live services or content drops across the franchise, now, which will be on mobile. Thanks.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah, no, it’s a great question. Thank you for the question. As you rightly pointed out, Apex Legends had a terrific year in FY ’22 we’re across both financial metrics, but also all the player engagement data that Andrew spoke to and so we’re really excited about how we finished the year coming out of that with a lot of momentum. We do have profitable growth planned again in FY ’23. It’s a large franchise for us, it’s a big business. And so, we’ll see continued growth on that, on the console and on the HV side.

In addition to that with the Apex mobile launch, we’re anticipating this to be one of the most exciting launches that we’ve had on mobile ever and so the combination of that indicates a lot of optimism and strength for Apex mobile or Apex Legends business all up and in terms of the cadence of content drops and experience updates and events, again the Respawn team and the Apex team have demonstrated over the course of the last two-plus years an extraordinary connection with the community.

And then them being able to figure out exactly when and how to make drops and things of the community wants and needs, and so we don’t have a hard and fast rule in terms of which drops will happen when. We really allow the team to work deep with that with the community. But I think as you — as the franchise continues to grow and as we move on mobile and launch and grow on a global basis. I think it’s reasonably there over the course of time there will be more and more content launched into the world and a new season starting today which off the back of a record Season 12, we expect will continue to do well, I know, Newcastle as the new legend is why is there are guys going to be one of the great legends inside the game experience.

Drew Crum — Stifel Financial Corp. — Analyst

Thanks guys.

Andrew Wilson — Chief Executive Officer and Chairman

Thank you.

Operator

Thank you. Your next question comes from the line of Colin Sebastian with Baird. Please go ahead.

Colin Sebastian — Robert W. Baird & Co. — Analyst

Hi, thanks everyone, good afternoon and welcome, Chris. Maybe just a quick follow-up to the last question. First off, I guess, there will be some changes to the release of legends going forward on Apex. So I’m curious how you think that might impact in engagement or each of the contributions from stories going forward. And then, and then the question, the other question is despite these results, I wonder, Andrew. What you think the impact has been on growth from the persistent short supply consoles and GPU chips, etc., and what’s also factored in the outlook from that perspective? Thanks.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah, so let me, let me touch on the first two and then I’ll let Chris take the outlook piece. Again, I think that each time the team releases new content, new events we see growing engagement as they’ve demonstrated an extraordinary ability to really understand the things that are going to drive ongoing engagement for our community. So I wouldn’t expect that we would see any decline in engagement with more content, quite the opposite. I think as we go global platforms and we build out our engagement model over the course of time. I think that we will see a growing audience and I think we’ll see growing engagement and that has been our experience so far.

In terms of supply chain shortages again we’ve just come off a record year we’d be on almost every measure, even in the face of what is almost certainly supply chain shortages around consoles and chipsets and graphics cards and these types of things. It’s hard to know how much bigger. That would be, I have to imagine with more consoles they are more PCs and more graphics cards. But, our results may have been even better, but we’re very happy with the results we had and we look forward to as supply chain issues start to ease and more consoles end up in the marketplace and more graphics card the more PC availability, but more gamers have access to higher quality machines and then ultimately will drive engagement to us. If you go back through the course of time, each platform transition and each technology evolution, the gaming community broadly has grown and so I think this only represents upside for us.

Chris Suh — Executive Vice President, Chief Financial Officer

I’ll just add on to Andrew’s good summation. From a market standpoint, from the composition of our business. I think this is one of the things that really sort of illustrates the resilience of the live services business model which 71% of our business are over 71% of our business in FY ’22 and it will grow as a share of our business next year with, especially with the launches of mobile and so from one standpoint we feel good about — and that’s all and probably that’s all embedded into the guide that you heard us talk about at length. Specific to the console market, we are anticipating Gen-5 console units to be up year-on-year and that will also be an added tailwind to the business all in all.

Operator

Thank you for your next question comes from the line of Andrew Uerkwitz with Jefferies. Please go ahead. Pardon me. Your next question comes from the line of Andrew Uerkwitz with Jefferies. Your line is now open.

Andrew Wilson — Chief Executive Officer and Chairman

Charlie, I think he dropped off the line. So, who is the next one?

Operator

Certainly. Your next question comes from the line of Matthew Thornton with Truist Securities. Please go ahead.

Matthew Thornton — Truist Securities — Analyst

Hey, good afternoon, Andrew and Chris. A couple of interrelated ones, if I could. I’m going to ask a question that was asked earlier, but in a little bit of a different way. Since you guys talked about mid-to-high single digit bookings growth last quarter, but as you’ve alluded to, there’s a lot of incremental headwinds. So, my first question is, everything has changed in the fleet as you think about fiscal ’23 versus kind of what you were thinking three months ago? That’s question one.

Question number two, the slate talks about a major IP in the fourth quarter. I’m just curious if there is a reason why that would fit better in fiscal 4Q as opposed to the traditional holiday quarter in 3Q, where you typically might put a big piece of IP. Any thoughts there? And then, just finally on maybe, Andrew, if you could talk a little bit about just the work from home transition to back to office, how that’s playing into productivity and how that maybe gives you confidence that you can kind of release these titles because you do have quite a few at the back half of the year, including in 4Q. So, I’m just curious, your level of comfort with that based on what you’re seeing in the productivity trends. Thanks, guys.

Andrew Wilson — Chief Executive Officer and Chairman

Okay. So, there was a lot in there. Three parts. I think the first one is — was do we anticipate slight change as an additional element as we got to — have got from third quarter through the fourth quarter? And the short answer to that is no. We continue to believe our slate is strong.

I think the second question was, we’ve got a major IP in the fourth quarter and why not do that in the holiday quarter. I would say two things to that. One is we want to get to the highest quality games we possibly can. We’re committed to quality, we’re committed to giving our development teams all the time they need to build great games and deliver those to a global audience. Underlying that, I’d also highlight though that the nature of our business is changing. As Chris pointed out, 71% of our business is coming from live services and so these traditional launch windows that have been so important in our industry for the longest time are as relevant now in a world where players are playing our games day in, day out, week in, week out, month in, month out. And so, the combination of the changing nature of engagement and consumption of our games and our deep desire to give our teams all the time they need to get the best possible game experience really is what’s driving that Q4 launch.

And then, I think the last part of your question was around work from home and how is that looking. I would say, it’s still early. We are seeing more and more people back into offices. Again, there were still waves of COVID out there and we’re seeing some rising numbers in certain geographies. And good news is the severity of infection or the severity of symptoms from infection seem to be much lower than the initial waves and phases of COVID. So, I think that’s good just for humanity broadly. And certainly, we’re seeing a return to office kind of moving through its general iteration.

In terms of confidence that I have in launching the games through the year, I have strong confidence largely because having done this for two years, we launched more content than any other developer and publisher of video games through this time and our teams have demonstrated unbelievable tenacity and unbelievable wherewithal and we’ve really harnessed the power of our platform technology to continue to deliver games even while working from home. So, as people come back together, we get to see more collaboration. I think things get easier. We believe that ends up being a little slower than we would hope given the ingenuity of our teams. I still have strong confidence in our ability to launch our full slate of high-quality titles this year.

I think that was all, though.

Matthew Thornton — Truist Securities — Analyst

Exactly, exactly. You got them.

Operator

Thank you. Your next question comes from the line of Mike Hickey with Benchmark Company. Please go ahead.

Mike Hickey — The Benchmark Company — Analyst

Hey, guys. Hey, Andrew. Hey, Chris. Hey, Chris. Great results, guys. Thanks for taking my questions. First question, I guess, is just on the economy here. It’s been a while I think Andrew since there’s been some sort of cash rate with the resurgence. So, whether or not because of resurgence, if you know — how do you think about turning your plans, you’re holding up not, I guess, so much pure-play versus premium, digital versus physical. Did you imagine in sort of next year you do get a recession here or pull back in discretionary spend towards key to fight? Just sort of I guess the puts and takes on your first 3D EA and how you factor them each time? That’s a follow-up. Thank you very much.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. It was a little jumbled, Mike, I’m sorry, but I think that the gist of the question was, with the macroeconomic climate out there and I think you mentioned the notion of recession, how do we think about that, how do we think about building out plan and probably specifically you’re thinking around OpEx. I think — and Chris can weigh in here as well. We’re being very thoughtful about this as we are embarking on the year ahead and certainly there are people way smarter than us. So, we’re kind of predicting what will be the macroeconomic outcome over the course of time.

Here’s what we see. We see we’re coming out of a year with record performance. We’re seeing our network grow dramatically and engagement grow dramatically. And we’re seeing our games used not just for entertainment, but also for social interaction and social connection. We — so that gives us confidence in the underlying fundamentals of our business over the long term. As we look back over previous times where they may have been challenged consumer spending, our industry now again, specifically have actually done very, very well for two reasons. One, entertainment really is a fundamental human need and two, the form of entertainment that we deliver is extremely high value to consumers given that you get thousands of hours of engagement when you play one of our games.

And so, our expectation is that even in an environment of macro-challenge, that our industry and our games will continue to do well. One of the other things that we have here. When we go back and really look at this though and you study it, as you discover that companies that can invest from a position of strength going into an environment like the one soon we’re moving into, actually benefit disproportionately as you come out of that. And so, I think if you take in the fact that we have a growing network, growing engagement, record performance, our games fulfill both entertainment and social interaction, but if you look back in history, our industry has performed very well at times like this. And when you take the strength of our business and our ability to invest against new titles this year as well as titles we developed for the out years, we feel like we’ve put ourselves in a really strong position even if we were going into a challenging macro headwind.

With that being said, we have built flexibility into the plan. You should know that we will be extraordinarily disciplined around costs as we move through this and that should there be something unforeseen to us that we have leaned in in our model that will allow us to adjust. But we do believe it is the hest of us to invest from a position of strength as we go into this market.

Mike Hickey — The Benchmark Company — Analyst

Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

I think — well, everything — sounds good.

Mike Hickey — The Benchmark Company — Analyst

Hold there. Okay, sounds good. Second question, Microsoft — hope you can hear me. Microsoft and Sony were sort of flirting. So, that was the Luna flirting with the idea of adding advertisements into free-to-play game experiences maybe as a way to sort of help developers monetize their player community. And, of course, you guys you build way back, the Burnout Paradise to sort of infamous for trying the idea on the billboard in that game. So, obviously this idea has created a lot of debate within the player community, but just sort of curious, your thoughts on whether or not ad monetization in free-to-play games is something that you think will be meaningful. And then, how you sort of balance that with the player experience? Thanks, guys.

Andrew Wilson — Chief Executive Officer and Chairman

Yeah. And so, for us, I think you’ve finished there where we start, which is the player experience. We want to ensure that the player experience is the best possible player experience that we can provide and that’s why you’ve seen us kind of hest various models over the course of time. Some have continued and some we have stopped on the basis of really upholding the best possible player experience we can.

What we’ve seen generally though in entertainment, media and even in games, particularly in mobile games right now, you see that there is a place for advertising when done right, and there is a portion of the community that when given the choice to participate in advertising where it benefits their gameplay experience. I think we’ve learned some of this from Glu as we brought Glu to our organization and we’ve seen this across the industry and so you should expect that we would continue to kind of test different things ensuring first and foremost that we uphold the best possible player experience but where there is an audience that given a choice would like to engage with advertising, may have the ability to do so, we want to make that available through them.

Mike Hickey — The Benchmark Company — Analyst

Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

Thank you.

Operator

Thank you. The next question comes from the line of Mario Lu with Barclays. Please go ahead.

Mario Lu — Barclays — Analyst

Great, thanks for taking the question. The first ones are on FIFA title this year. I believe you guys are already testing cross-play support in Q2 ’22 and offers in — that may come in ’23, so what is the impact of that actually is of player engagement and then similarly, can you remind us of the diluted uplift was from, including a World Cup mode within FIFA.

Andrew Wilson — Chief Executive Officer and Chairman

Let me start on the World Cup mode with different again in the context of live service, we’re always balancing the investment of time and the investment of dollars from a community and I think given point in time, based on what’s going on in the world of that game and in this case in the world of football and in the gameplay community.

We will look to leverage new content and new events and new experiences either to drive greater engagement and provide new interesting things for players to do or it might be a monetization opportunity. You might recall the last time in the World Cup. It was an extraordinary engagement opportunity and I don’t have the numbers at the tip of my fingers, but if I remember right that we brought 12 million or 13 million people back into the game, who would left out of the game through World Cup content and drove incredible engagement through the event and then of course as part of the ongoing live service continue to grow the business over the course of time and we will think about it this year in the same context, we’re always thinking about our player community and always thinking about the balance between investment, at the time the investment dollars.

All-in-service of a more positive and more immersive and a more entertaining player experience. In terms of the value of cross-play. I don’t think we have any specific data on that yet out of FIFA, in and other franchises is certainly where you get greater liquidity in the franchise and friends can play with each other across devices. That’s always a good thing for players and remember in our free experience, which has 30 plus million people applying across console and PC, it’s already a highly liquid community and every platform already has more of that players to sustain the ongoing player experience. But certainly, as we think about the future of all of our franchises. We want to get to a place where the entire community can play together and that will be part of our drive as we move forward.

Mario Lu — Barclays — Analyst

Great, thanks. And then just one on the Battlefield. I’m just curious if there’s any update on that franchise. I know you guys previously mentioned you’re willing to kind of that’s more into the franchise in the long term, but has that mindset changed in the past few weeks given the lack of resurgence in the latest update? Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

No, and again, we take a long view here. This is one of the great franchises in our industry built by one of the great teams in our industry and our expectation is that we’ll continue to grow and be a really important part of our portfolio for many, many years to come. We’ve got incredible leadership over that team now they’re rethinking the development process from the ground up and really using kind of the Vince Zampella/Respawn model of get to the form as quickly as possible.

They’ve been doing thousands of updates for the community, working on quality of life, and really getting the core game right. I think there is still more work for us to do there and the team is committed to doing that work for the community and beyond that, once we get to a place where we feel like we’re in the right place with the core experience and with the core game, then that you should expect us to invest and grow beyond where the game is at today.

Mario Lu — Barclays — Analyst

Okay, thank you.

Operator

Thank you. Your next question comes from the line of Doug Creutz with Cowen. Please go ahead.

Doug Creutz — Cowen Inc. — Analyst

Hey, thanks. I think in the last call, you indicated that the Battlefield Mobile game was close to going in the closed beta at least at one point you tend to indicate it might be a fiscal ’22 launch, can you just kind of update on where that is, how did the close beta go and how you’re feeling about timing for the title at this point?

Andrew Wilson — Chief Executive Officer and Chairman

Yeah, right now I think we — we’re looking at going into further the testing at the end of May and then subject to the metrics and the data that we’ve seen engagement to see. We might look towards the end of this year, beginning of next year for a global launch, but remember in mobile it all, it all really comes down of a tuning and balancing once we go into closed beta phase. We don’t have any money in FY ’23 right now against that title. So that was the launch of the year, that would be an upside potential for us and we want to give ourselves the opportunity to ensure that we — the game has all the soft launch in closed-beta that it needs in order to tune and balance. But having played the game. I can tell you, I think that we’re excited for the potential.

Doug Creutz — Cowen Inc. — Analyst

Great, thank you.

Andrew Wilson — Chief Executive Officer and Chairman

Thank you. Here the next question comes from the line of Jamie Bass with Berenberg. Please go ahead.

Jamie Bass — Joh. Berenberg, Gossler & Co. — Analyst

Hello, guys and thanks for taking my questions. I just got a couple of those, Okay? Firstly you’re talking about positive, all the metrics for the NBA coming back to the levels they were up, three IDSA. Three things on that. So could you sort of an indication of what your expectations are for the key core franchises are they not not bringing in Apex Mobile in that you already had in the mobile franchise and then second question is on the more boring topic on develop cost inflation, wage inflation, do you have sort of an outlook for what you’re expecting this year in terms of new hires whether you’re expecting a certain percentage in terms of how much actually going to pay to bring new developers? Thank you.

Andrew Wilson — Chief Executive Officer and Chairman

Maybe I’ll start with the second one and then we’ll move back to the first one. Certainly, I think the competition for great talent has always been incredibly high in our industry and that’s no different now. When we think about hiring new talent and we talk to candidates, they really employment decisions based on four key vectors, what is the, what are they going to do?

Who the people they going to do it with of course? What is going into the conversation and the opportunity to learn and grow and as we lean into hiring we’re really leaning to all four of those vectors and try and create a culture where this is a great place to make gains and we will ever hire at record numbers in FY ’22 even means what was already a very competitive marketplace. We expect to continue hiring. I think that we’ve been recognized by a number of surveys as an extraordinary place to work and we’ve really focused on the culture of our company and ensuring that we are a great place to come and create games. That doesn’t mean we won’t be challenged in the marketplace.

I think it’s going to be more and more challenge but so far we have not had trouble hiring incredible talent and we brought in some amazing new creators and people across our business quite frankly through FY ’22.

Chris Suh — Executive Vice President, Chief Financial Officer

And then on your question specifically, as I commented in my comments in the prepared remarks about IDSA changes. It is something we’re still working through. We have seen some positive movement toward reaching rollout levels pre IDSA and we feel optimistic that we’re sort of through the tougher part of it and we feel good about the outlook from here.

Andrew Wilson — Chief Executive Officer and Chairman

And that brings us to the…

Jamie Bass — Joh. Berenberg, Gossler & Co. — Analyst

Could I just ballpark I got? Sorry.

Andrew Wilson — Chief Executive Officer and Chairman

I’ll catch up with you after adjourning. So that brings us the end of the call today, so thanks everyone for your time and we’ll look forward to speaki+ng to you in the next quarter.

Chris Suh — Executive Vice President, Chief Financial Officer

Thank you so much.

Chris Evenden — Vice President, Investor Relations

Thank you all.

Operator

[Operator Closing Remarks]