EA Earnings (Q1 FY20): Fiscal Year ’20 to be “Biggest Year Yet” of Content for The Sims 4

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Electronic Arts has released Q1 FY20 financials, stating that during the quarter, The Sims 4 expansion packs and game pack downloads increased 55% year-over-year. Additionally, the free base game promotion brought in over 7 Million downloads, and EA CEO Andrew Wilson tells players that Fiscal Year 20 will be the “biggest year yet” for Sims 4.

  • Our Sims 4 live service also continues to be a rich and rewarding experience for our players and a strong platform for growth. The Sims 4 continues to be one of the great owned IP success stories of our portfolio and we are planning for FY ’20 to be our biggest year yet of new content. Knowing that, we gave more fans a chance to get into the game through a 1-week promotion in May to download the base game for free. Almost 7 million players downloaded the game during that time. In addition to the base game promotion, total expansion and game pack downloads also increased 55% year-over-year in Q1. We launched our seventh expansion pack, Island Living, in late June and has already become one of the best selling packs for The Sims 4. We are fortunate to have an incredibly vibrant and creative Sims community on console, PC and mobile, and we are continuing to double down on this amazing franchise to reach new players and open up exciting new dimensions of The Sims this year.
  • Mobile continues to be a growth opportunity for us. Live services are a key aspect of our mobile business with franchises like Madden Mobile, FIFA Mobile and The Sims continuing to drive strong ongoing engagement.
  • Looking at each of the components of this quarter’s digital bookings in turn. First, live service net bookings were up 12% year-on-year to $504 million, led by Apex Legends and The Sims 4. FIFA Ultimate Team was up 11% year-on-year at a constant currency or 5% at actual exchange rates
  • Finally, as Andrew mentioned, The Sims 4 base game promotion delivered nearly 7 million new installs, and we remain on track to have the fifth consecutive year of growth in The Sims 4 following its launch in 2014.
  • Now turning to guidance. Except for the increase of our tax benefit of $200 million or $0.66 a share on GAAP EPS, we are reiterating our guidance for the full year. We continue to expect The Sims 4 and Apex Legends to each deliver net bookings in the $300 million to $400 million range. We are holding our operating cash flow guidance at approximately $1.575 billion, with CapEx still expected to be $125 million and free cash flow of around $1.45 billion.
  • People will only engage with our games if they have fun playing them, and we continue to invest in keeping them fun, whether it’s in major innovations such as VOLTA FOOTBALL in FIFA or new modes, events and legends in Apex Legends or even adding laundry to The Sims 4. We aim to give players content they want to play. If we’re successful in that, we’re successful as a business.

Q&A Session

Michael Ng – Goldman Sachs Group Inc., Research Division – Research Analyst
I’d like to better understand how you’re tracking against your $300 million to $400 million bookings guidance for Apex Legends and The Sims. How much did you realize in the quarter? Are you about 25% of the way there? And how should we think about the phasing throughout the rest of the year?


Blake J. Jorgensen – Electronic Arts Inc. – COO & CFO
Well, the — I think as we said last quarter, you should expect that the first quarter was smaller. Remaining 3 quarters, Q2 through Q4, because we were still, one, experimenting; and 2, we didn’t have as much content. Clearly, quarter 2 has more content in it. We talked today about a major event that’s coming in a few weeks in August that will clearly continue to drive the engagement and content, which tends to drive monetization. And you should assume — Andrew mentioned that Q3 will have even more than Q2, so we’re going to continue to build that.

I would assume that the back 3 quarters of the year are probably all about the same size based on what we know today and larger than the first quarter. That’s all I can really tell you because it’s just early days and we’re only 1 month into — or less than 1 month
into Season 2 right now. But everything’s tracking to plan or better for us, and so we’re very confident on the $300 million to $400 million on Apex.

Obviously, Sims, we’ve called out that it’s in the same range of $300 million to $400 million. We didn’t do that before, but we wanted to remind people that our business is not based on Apex Legends alone. It’s very important to us, but it’s still a relatively small part of our overall business. And franchises like The Sims have been continually producing that range of revenues because we run them as a live service.


And we want to make sure people understand, we have confidence in building a live service around Apex and that will continue to grow over time and we’ll continue to update you as we learn more. But we know we’ve got amazing engagement. We have 8 million to 10 million people on a weekly basis playing the game. That’s huge for us on almost any game that we see. And we’ll continue to take advantage of that, keep them engaged and playing everyday.

Jeffrey A. Cohen – Stephens Inc., Research Division – Analyst
Thanks for the incremental color on The Sims. It feels like that franchise would be one that would do really well on the Nintendo Switch. So I’m curious how you guys determine which platforms you’d bring the game to or games to? And is there any reason why you wouldn’t want to bring that one on there?

Andrew Wilson – Electronic Arts Inc. – CEO & Director
Any time we’re evaluating platform conversations, we are really looking at a couple of things. One, does the game really fit the profile of that platform in terms of the control or the community ecosystem? Two, do we think the community playing on that platform would appreciate the game to go there? Or would they prefer to play it somewhere else?


We have a lot of data that would suggest a great many Switch owners also own a PlayStation 4 or an Xbox One or a PC and very often choose to play the games that we make on those platforms even though they have a Switch and they enjoy a lot of great content on the Switch. And so there’s always an evaluation process that goes on a case-by-case basis. And I wouldn’t say that The Sims would never go to the Switch, but I think we’re doing really, really well attracting Sims players. As we said, we did the promotion in the last couple of months and brought in 7 million new Sims players that we expect will engage in that community on a platform that is really tailored to user-generated content, creativity and customization.