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Electronic Arts(EA) - 2024 Q4 - Earnings Call Transcript
EAElectronic Arts(EA)2024-05-08 00:34
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Financial Data and Key Metrics - Total net bookings for FY 2024 were 7.43billion,up17.43 billion, up 1% YoY or 3% in constant currency [22] - Full game net bookings were 2.01 billion, up 11% YoY or 12% in constant currency, driven by Star Wars Jedi: Survivor and EA SPORTS portfolio [22] - Live services net bookings were 5.43billion,down25.43 billion, down 2% YoY or 1% in constant currency, with strength in global football franchise offset by declines in Apex Legends [22] - GAAP net revenue was 7.56 billion, up 2% YoY, with a gross margin of 77.4%, an improvement of 150 basis points [23] - GAAP EPS was 4.68,growing634.68, growing 63% YoY, with operating cash flow of 2.32 billion, a record for the fiscal year [23] - Free cash flow reached 2.12billion,up582.12 billion, up 58% YoY, including a one-time cash tax savings of approximately 150 million [24] Business Line Performance - EA SPORTS FC grew net bookings by high teens YoY, with billions of matches played and over a billion hours of content watched globally [10][11] - Madden NFL 24 achieved record net bookings and was the highest-selling installment since the early 2000s [13] - Apex Legends surpassed 3.4billioninlifetimenetbookings,withplayersentimentimprovingby29pointsYoY[16][17]−TheSims4surpassed85millionplayers,withdouble−digitYoYgrowth,andcombineddownloadsofSimsOnlineandSimsMobileexceeded500million[18]MarketPerformance−NorthAmericasawincreasedengagementforthetop10franchises,withmarketsharegrowthsinceFY2022[6]−EASPORTSFCMobileandOnlinedeclinedYoYduetorecordcomparablesfromtheprioryear′sWorldCuptailwinds,butFCUltimateTeamgrewlow−singledigits[25]−MaddenNFLsawincreasedweeklyactiveusersduringandaftertheSuperBowl,withexcitementcontinuingthroughtheNFLdraft[14]StrategicDirectionandIndustryCompetition−Thecompanyisfocusedonthreestrategicpillars:entertainingmassiveonlinecommunities,tellingblockbusterstories,andharnessingthepowerofcommunity[7]−EAisleveragingpartnershipswithbrandslikeNike,Pepsi,UberEats,andBeatstodeepenconnectionswithplayersandunlocknewsponsorshipopportunities[12]−ThecompanyisinvestinginAItoimprovedevelopmentefficiencyandexpandgameexperiences,withover503.4 billion in lifetime net bookings, with player sentiment improving by 29 points YoY [16][17] - The Sims 4 surpassed 85 million players, with double-digit YoY growth, and combined downloads of Sims Online and Sims Mobile exceeded 500 million [18] Market Performance - North America saw increased engagement for the top 10 franchises, with market share growth since FY 2022 [6] - EA SPORTS FC Mobile and Online declined YoY due to record comparables from the prior year's World Cup tailwinds, but FC Ultimate Team grew low-single digits [25] - Madden NFL saw increased weekly active users during and after the Super Bowl, with excitement continuing through the NFL draft [14] Strategic Direction and Industry Competition - The company is focused on three strategic pillars: entertaining massive online communities, telling blockbuster stories, and harnessing the power of community [7] - EA is leveraging partnerships with brands like Nike, Pepsi, Uber Eats, and Beats to deepen connections with players and unlock new sponsorship opportunities [12] - The company is investing in AI to improve development efficiency and expand game experiences, with over 50% of development processes expected to be positively impacted by generative AI [65][66] Management Commentary on Operating Environment and Future Outlook - Management highlighted the success of EA SPORTS FC and Madden NFL, with expectations for continued growth in core live services and new releases like EA SPORTS College Football 25 [14][27] - FY 2025 guidance includes net bookings of 7.3 billion to 7.7billion,withmid−single−digitgrowthincoreliveservicesandlow−single−digitgrowthinmobile[29]−ThecompanyexpectsGAAPoperatingmargintoexpandby300to350basispointsbyFY2027,withnon−GAAPoperatingmarginexpandingby150to200basispoints[31]OtherImportantInformation−Thecompanyannounceda7.7 billion, with mid-single-digit growth in core live services and low-single-digit growth in mobile [29] - The company expects GAAP operating margin to expand by 300 to 350 basis points by FY 2027, with non-GAAP operating margin expanding by 150 to 200 basis points [31] Other Important Information - The company announced a 5 billion stock repurchase program over the next three years, with 1.5 billion expected to be returned in FY 2025 [31] - EA plans to share more details about its development pipeline and strategic priorities at its Investor Day in September 2024 [32] Q&A Session Summary Question: Non-GAAP Operating Margin Guidance - The company introduced non-GAAP operating margin guidance to provide better transparency and align with its long-term financial framework [36][37] Question: Expectations for Major Franchises in FY 2025 - Management expects mid-single-digit growth in core live services, with continued growth in EA SPORTS FC and advancements in Apex Legends [42] Question: Stock Repurchase Program - The 5 billion stock repurchase program aligns with the company's long-term financial framework and signals confidence in future growth [44] Question: Mobile Segment Growth - The company expects low-to-mid-single-digit growth in the mobile market, with a focus on leveraging massive online communities and investing in breakout mobile titles [57][58] Question: AI in Game Development - AI is expected to significantly improve development efficiency, with over 50% of processes impacted, and expand game experiences over the next three to five years [65][66] Question: Advertising and IP Adaptation Opportunities - Advertising is seen as a potential growth driver, particularly in community-driven experiences beyond traditional gameplay, while IP adaptation into broader media is expected to benefit from the company's portfolio [73][72]