Electronic Arts (EA) CEO Andrew Wilson on Q1 2015 Results – Earnings Call Transcript

July 23, 2014 5:42 pm | By More

Source: Seeking Alpha

 

Electronic Arts (NASDAQ:EA)

Q1 2015 Results Earnings Conference Call

July 22, 2014, 5:00 p.m. ET

Executives

Andrew Wilson – Chief Executive Officer

Blake Jorgensen – Chief Financial Officer

Frank Gibeau – Executive Vice President at Mobile

Peter Moore – Chief Operating Officer

Rob Sison – Vice President of Investor Relations

Patrick Soderlund – EVP, EA Studios

Analysts

Colin Sebastian – Robert Baird

Edward Williams – BMO Capital

Doug Creutz – Cowen & Company

Justin Post – Bank of America Merrill Lynch

Stephen Ju – Credit Suisse

Arvind Bhatia – Sterne Agee

Mike Olson – Piper Jaffray

Brian Pitz – Jefferies & Company

Drew Crum – Stifel

Ben Schachter – Macquarie

James Hardiman – Longbow Research

Mike Hickey – The Benchmark Company

Sean McGowan – Needham & Company

Operator

Welcome and thank you for standing by. [Operator instructions.] Now, I’ll turn the meeting over to Mr. Rob Sison, Vice President of Investor Relations. You may begin.

Rob Sison – Vice President of Investor Relations

Thank you, operator. Welcome to EA’s fiscal 2015 first quarter earnings call. With me on the call today are Andrew Wilson, our CEO; and Blake Jorgensen, our CFO. Frank Gibeau, our EVP of mobile; Peter Moore, our COO; and Patrick Soderlund, our EVP of EA Studios, will be joining us for the Q&A portion of the call.

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, and a transcript.

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-K for a discussion of risks that could cause actual results to differ materially from those discussed today. Electronic Arts makes these statements as of July 22, 2014 and disclaims any duty to update them.

During this call, unless otherwise stated, the financial metrics will be presented on a non-GAAP basis. Our earnings release and the earnings slides provide a reconciliation of our GAAP to non-GAAP measures. These non-GAAP measures are not intended to be considered in isolation from, as a substitute for, or superior to our GAAP results.

We encourage investors to consider all measures before making an investment decision. 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

Thanks, Rob. Earlier this afternoon, we released our Q1 earnings report detailing a strong start to fiscal year 2015 for Electronic Arts. At EA, we have a commitment to put our players first, holding at our core that every game, every live service, every EA experience will deliver the entertainment, innovation, creativity and value that our players want.

With a strong slate of exciting new titles and fresh content served to players in our live services, we are well-positioned to deliver on that commitment in FY15. Around the world, more than 300 million registered players are engaging with the long-lasting entertainment provided by EA’s games and services today.

In the last quarter, gamers played more than 13.6 billion online sessions of EA games, for a total of nearly 2.4 billion hours played across console, mobile and PC experiences. To put that in context, that’s more than 3,000 years of gameplay every single day. On screens from six inches to 60 inches, for sessions of two minutes to two hours or more, EA continues to deliver outstanding entertainment to players.

Our global FIFA soccer franchise had a standout quarter as the World Cup drama began to unfold on the pitches in Brazil. More than 53 million matches were played in FIFA Ultimate Team World Cup mode alone, during the quarter. That’s the equivalent of more than 830,000 World Cup tournaments. The World Cup update to FIFA 14 on mobile drove engagement to a franchise record high, and in Korea, FIFA Online 3 had the highest peak concurrent player levels ever for FIFA Online since it was launched in 2006.

Fight fans drove sales of EA SPORTS UFC to exceed our expectations for the quarter, and the in-game action has been intense: more than 65 million fights have been played since the game launched. With EA SPORTS UFC joining our other great games for the new consoles, EA continues to hold the #1 segment share on PlayStation 4 and Xbox One calendar year to date.

Our live services and digital content are reshaping the gaming experience today, helping players enjoy the games they love for longer. During the quarter, “Naval Strike,” the third expansion pack for Battlefield 4 launched to players in April, while Titanfall’s first content pack “Expedition” was released to players in May. Our EA SPORTS Ultimate Team modes continue to feed players’ insatiable appetites for their favorite sports, with live updates, new content and competitions daily.

Players also continue to get new and fresh experiences in live services for our top EA Mobile games, where we drew more than 140 million monthly active players in Q1. Titles like The Simpsons: Tapped Out, Real Racing 3, The Sims FreePlay and FIFA 14 demonstrate the success in the approach of our mobile development teams – build top-quality experiences around fun and entertaining IP that can grow over years of play. With innovative new content like the Real Racing 3 Le Mans update, which drew 2 million entrants, players keep coming back to their favorite games.

All of these factors contributed to a strong fiscal first quarter for EA as we delivered revenue and EPS above our non-GAAP guidance. Our focus is now on the work ahead of us for FY15 as we prepare to launch a slate of new games and live services to our players. As I said at the top, our commitment to players and the quality of our games is paramount with every game we make. We have some amazing new experiences coming this year – games that will connect, inspire, challenge and entertain players. Games that are packed with creativity, innovation and emotion. Games with vibrant communities giving us feedback to make them even better.

Dragon Age: Inquisition is the biggest RPG that BioWare has ever created in its rich history. It will deliver an epic open-world experience, powered by Frostbite 3 and combining combat, compelling characters and rich storytelling.

The game was a huge hit with fans and critics at E3, taking home 25 awards, including Best RPG from the E3 Game Critics. The team has crafted an absolutely amazing game for players. They want this to be the best Dragon Age experience ever delivered, so they are taking a little more time to put the final touches on the game. Dragon Age: Inquisition now launches on November 18.

The live multiplayer beta for Battlefield Hardline that launched at E3 was a powerful opportunity to bring our players into the game earlier than ever before. With 1.7 million players joining the beta on PS4 and PC and logging more than 4.2 million session hours over two weeks, the beta delivered a very stable experience that also helped the Visceral Games team gather valuable player feedback.

Additional player testing has shown great excitement for this new world of cops and criminals inside the Battlefield franchise. It also showed us how, with more time, we could go deeper and innovate more. Visceral is testing and implementing several new features that will help to make Battlefield Hardline a game that players can enjoy for many years to come. We are moving the release of Battlefield Hardline out to Q4 FY15, and the team will be keeping players regularly updated on progress. We’ll also have an all-new beta opportunity in the months ahead for players to experience more of Battlefield Hardline.

Of course, Battlefield fans don’t need to wait until then, as Battlefield 4 continues to provide a dynamic live service today. Many more hours of new Battlefield 4 content and gameplay are yet to come, including the expansion packs “Dragon’s Teeth,” launching worldwide on July 29, and “Final Stand” coming in Q3. The DICE team continues to deliver new updates and features for Battlefield 4 players, and recently introduced a Community Test Environment for players to provide feedback on new additions to the game before they launch.

With breakthrough gameplay innovation, stunning visuals, and immersive depth and detail, this year’s EA SPORTS lineup will capture an unprecedented level of excitement and emotion. Madden NFL 15, FIFA 15 and NBA LIVE 15 are all making big strides in the second year of the new console generation, while the NHL and PGA TOUR franchises will make their next gen debuts this year. NHL 15 took home Best Sports Game from the E3 Game Critics, and EA SPORTS PGA TOUR takes golf to places it has never been as the first sports game to be powered by Frostbite 3.

Maxis will launch The Sims 4 in early September to an eager fan base ready to get their hands on this rich new Sims experience. Everything about The Sims 4 is exciting, from the massive technical innovation that gives these new Sims emotions and unique personalities, to the beautiful and vibrant new neighborhoods in which they live, to the weird and fun stories that players will tell. For both veteran fans and newcomers alike, The Sims 4 will open up a whole new world of gameplay possibilities. Players can pre-load The Sims 4 on Origin and be the first to play.

We will deliver entertaining new experiences from some of EA’s biggest brands to players on mobile devices. New FIFA and Madden NFL experiences are set to launch during Q2, as well as a big and really fun new update for The Simpsons: Tapped Out. A much-anticipated new Peggle game from PopCap is moving through a test period in preparation for launch, and our EA Mobile studios have four more exciting new experiences from other major franchises in development. We’re excited to share more about all of these new titles for iOS and Android players in the coming months.

EA enters our second quarter in a strong position. We are committed to delivering top-quality games and services to our players throughout the year. I’ll now hand the call over to Blake for a deeper look at our Q1 financial performance and FY15 outlook.

Blake Jorgensen – Chief Financial Officer

Thanks, Andrew. Starting with our Q1 results, EA’s non-GAAP net revenue was $775 million, which was 57% higher than prior year’s results and 11% above our guidance. Digital continues to be a major contributor, but this quarter also saw three new launches – EA Sports UFC, FIFA World Cup 2014, and the Xbox 360 version of Titanfall. In addition, FIFA 2014, Battlefield 4, Madden NFL25, and the rest of our catalog titles had solid performances.

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