Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record net bookings for global football and Madden franchises, demonstrating strong performance in core sports offerings.
- Launch of EA SPORTS FC, marking a significant rebranding and successful entry into multi-platform experiences.
- Strategic realignment and investment focusing on major franchises and online communities, enhancing long-term growth potential.
- Significant growth in live services, driven by popular franchises like FC Ultimate Team, contributing to a robust revenue stream.
- Introduction of new non-GAAP operating margin guidance through FY '27, reflecting confidence in future growth and operational efficiency.
Negative Points
- Decline in live services net bookings by 2% year-over-year, indicating challenges in some areas of the portfolio.
- High dependency on the performance of key franchises, which could pose risks if any major titles underperform.
- Challenges in the mobile segment with a need for strategic investments and innovation to capture growth.
- Facing tough comparables from previous fiscal years, especially with the impact of the World Cup tailwinds.
- Potential market risks and competition intensifying in the gaming industry, requiring continuous innovation and market adaptation.
Q & A Highlights
Q: Can you provide clarity on the new non-GAAP guidance and its implications for operating margin on net bookings?
A: Stuart Canfield, EVP & CFO of EA, explained that the new non-GAAP guidance helps in understanding the business better, especially as they think about future pipelines. The adjustment for the change in deferred revenue aligns with the operating margin on net bookings of 31.6% to 33.4%. This change also reflects EA's confidence in its strategic direction and future growth.
Q: What are your expectations for major franchises like Apex and FC in fiscal '25, and have there been any changes in expectations since the last earnings call?
A: Andrew Wilson, CEO of EA, stated that there have been no material changes in expectations since the last earnings call. For fiscal '25, EA anticipates growth in core live services and innovations in franchises like FC, contributing to low single-digit bookings growth despite a lighter release slate.
Q: How are you thinking about accelerating the buyback program versus other capital allocation opportunities?
A: Stuart Canfield mentioned that the decision to accelerate the buyback program aligns with the extended guidance framework and reflects confidence in the business's future. The increase from $2.6 billion to $5 billion in the stock repurchase program signals a commitment to returning value to shareholders while maintaining flexibility.
Q: Could you break down the live services revenue by category such as sports, action shooter, and casual?
A: Stuart Canfield responded that EA does not provide detailed breakdowns of live service revenues by category. He highlighted that live services encompass various segments including sports, mobile, and subscription services, contributing to a diversified and robust portfolio.
Q: With the reintroduction of the solo mode in Apex Legends, what has changed in the game's strategy?
A: Andrew Wilson explained that the reintroduction is part of EA's ongoing strategy to adapt to player feedback and expand game modalities. This approach is intended to enhance player engagement and retention by diversifying the gameplay experiences available in Apex Legends.
Q: Can you discuss the potential for dynamic ad insertion in games and the adaptation of gaming IP into broader media?
A: Andrew Wilson discussed the evolving landscape where gaming IP is increasingly being adapted into film and TV, enhancing engagement across play, watch, and connect experiences. He also sees potential growth in dynamic ad insertion, particularly as community-driven content outside traditional gameplay continues to expand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
