Good wow cheap gold day, everyone and welcome to the Electronic Arts third quarter fiscal year 2008 earnings conference. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Ms. Tricia Gugler, Director of Investor Relations. Please go ahead.
Welcome to our third quarter fiscal 2008 earnings call. Today on the call we have John Riccitiello, our Chief Executive Officer and Warren Jenson, our Chief Financial and Administrative Officer. Shortly after the call, we will post a copy of our prepared remarks on our website.
Throughout this call we will present both GAAP and non GAAP financial measures. Non GAAP measures exclude charges and related income tax effects associated with acquired in process technology, amortization of intangibles, certain litigation expenses, losses on strategic investments, restructuring charges, stock based compensation and the impact of the change in deferred net revenue related to packaged goods and digital content.
In addition, the Company's non GAAP results exclude the impact of certain one time income tax adjustments.
Our earnings release provides a reconciliation of our GAAP to non GAAP measures. In addition, we include a detailed GAAP to non GAAP reconciliation on our website.
These non GAAP measures are not intended to be considered in isolation from, a substitute for, or superior to our GAAP results and we encourage all investors to consider measures before making an investment decision.
All comparisons made in the course of this call are against the same period for the prior year unless otherwise stated.
All references to "current generation systems" include the Xbox 360, the PlayStation 3, and the Wii. We are now referring to the PS2, Xbox and GameCube as "legacy systems".
We have also included our industry hardware estimates and trailing twelve month platform shares in a supplemental schedule on our website.
During the course of this call, we may make forward looking statements regarding future events and the future financial performance of the Company. We caution you that actual events and results may differ materially. We refer you to our most recent Form 10 K and 10 Q for a discussion of risk factors that could cause our actual results to differ materially from those discussed today. We make these statements as of January 31, 2008 and disclaim any duty to update them.
Now I would like to turn the call over to John.
Thanks, Tricia. Before I turn the call over to Warren, let me take a few minutes and comment on our holiday quarter and our fiscal fourth quarter. I would categorize our Q3 performance as solid but mixed.
On the positive side, we delivered on the top and bottom line guidance we provided for the quarter. Our top line revenue of $1.73 billion excluding deferral was the highest in EA's history and represents the single biggest revenue quarter for any third party publisher in our industry.
We were very pleased with our European results, which came in stronger than
expected even excluding the impact of foreign exchange. Titles like FIFA, Need for
Speed, and The Simpsons all charted in the Top 10 in Europe.
Our co publishing and distribution business delivered big. Revenue in the quarter was $372 million ex deferral, up more than seven times that of last year. Rockband, Orange Box and Crysis all exceeded expectations. EA Partners is a core part of building our business and segment shares.
We closed 2007 as the number one third party publisher on quality as measured by metacritic and we were pleased with the progress on several titles, including FIFA 08, NBA Live 08, NHL 08 and SKATE, and the recently published and launched Burnout Paradise.
Finally, we closed calendar 2007 as the number one publisher across all platforms with an 18% share in North America and 19% in Europe.
On the downside, while we are the third party quality leader, we are not satisfied with where we are. We did not have any internally developed breakaway titles and no one of EA's internally developed titles reached a metacritic rating of 90 or greater.
This hit us particularly hard in North America where EA faced tough competition on a number of fronts. In North America, excluding EA Partners, our business was essentially flat in a very robust market.
As anticipated, our calendar year shares were down. In both North America and Europe we lost three points. Although we hit our numbers and had anticipated our share losses, losing share is just not acceptable. Rebuilding share is a top priority.
Lastly, while we made progress in arresting our headcount growth in our internal studios, we are still not quite where we want to be in terms of operating leverage.
Now looking ahead to Q4, when I came back to Electronic Arts I made a commitment to invest in quality both because I believe it is the right decision for the long term financial health of the company and because it is what our consumers have a right to expect. This is an important principle, even if it results in short term pain.
We have made the decision to move Battlefield Bad Company and Mercenaries 2 into fiscal 2009. Both titles are looking great and we believe with additional polish, we will build a better consumer experience and thereby maximize our economics. However, our Q4 bottom line guidance will be negatively impacted.
Finally, I look forward to seeing you in two weeks at our analyst day. We will discuss our long term strategies focusing on the four priorities we have shared with you during each of our calls this fiscal year. First, segment shares we will outline our strategies to expand our shares; two, cost efficiency and productivity we will share our goals for operating profitability at the peak of this cycle; three, expanding our digital revenue streams we will outline plans for expanding our many digital revenue streams and the impact these new revenue sources can have on our operating margins; and fourth, smart M we will outline our strategic priorities and focus.
