EA delivered strong earnings growth and record cash flow in FY ‘24 in a competitive market.
Total net bookings for FY ‘24 were $7.43 billion, a 1% increase year-over-year.
Net revenue for FY ‘24 was $7.56 billion, up 2% year-over-year.
GAAP earnings per share (EPS) for FY ‘24 was $4.68, growing 63% year-over-year.
Record free cash flow of $2.12 billion for FY ‘24, up 58% year-over-year.
$1.51 billion returned to shareholders through buybacks and dividends in FY ‘24.
Q4 total net bookings were $1.67 billion, down 14% year-over-year.
Q4 GAAP EPS was $0.67 with operating cash flow of $580 million and free cash flow of $529 million.
Business Performance and Strategy
EA SPORTS FC and Madden franchises drove record net bookings results.
Live services net bookings were $5.43 billion, slightly down by 2% year-over-year.
Apex Legends saw elevated engagement and monetization early in Q4 but returned to prior norms as the quarter progressed.
The global football franchise grew net bookings by high teens in FY ‘24.
EA is focusing on building ecosystems around their biggest communities and prioritizing owned IP.
Apex Legends surpassed $3.4 billion in lifetime net bookings.
The Sims 4 surpassed 85 million players, with the franchise up double digits year-over-year.
Future Outlook
FY ‘25 net bookings are expected to be between $7.3 billion to $7.7 billion.
GAAP net revenue for FY ‘25 is projected between $7.1 billion to $7.5 billion.
FY ‘25 GAAP operating expenses are expected to be between $4.35 billion to $4.44 billion.
FY ‘25 GAAP operating margin is expected to be between 18% to 20.6%.
FY ‘25 GAAP EPS is projected to be between $3.34 to $4.
Operating cash flow for FY ‘25 is expected to range from $2.05 billion to $2.25 billion.
A new stock repurchase program of $5 billion over the next 3 years has been authorized.
Key Takeaways
EA is capitalizing on its strong franchises and live services to drive growth and cash flow.
The company is adapting to changing player behaviors and industry dynamics to sustain its market position.
Strategic investments and operational efficiencies are expected to continue delivering shareholder value.
Question and Answer
Change in Non-GAAP Operating Margin Disclosure
Question
Can you elaborate on the change in non-GAAP operating margin disclosure and why it was implemented?
Answer
The change was made to provide a clearer understanding of the business, particularly regarding the pipeline in 2026 and 2027 and to demonstrate confidence in the company’s strategy and direction.
The new disclosure allows for a better comparison with other video game companies that capitalize software costs, as EA expenses them as incurred.
Implications of New Non-GAAP Operating Margin
Question
Does the new non-GAAP operating margin, adjusted for the change in deferred revenue, result in an operating margin on net bookings of 31.6% to 33.4%?
Answer
Yes, the correct calculation based on the adjustment for the change in deferred revenue results in an operating margin on net bookings within the specified range.
Franchise Assumptions and Growth Outlook
Question
Can you provide insight into the assumptions for larger franchises like Apex and FIFA in fiscal year 2025 (FY ‘25), and have there been any changes in growth expectations compared to the previous earnings call?
Answer
There have been no material shifts in growth expectations compared to the framework outlined in January.
The company anticipates growth in its core live service business, with a particular focus on American football, FIFA, and Apex Legends.
Stock Repurchase Program Rationale
Question
How did the company decide to accelerate the stock repurchase program compared to other capital allocation opportunities?
Answer
The decision to accelerate the buyback was based on several factors:
The dividend remains unchanged, demonstrating a balanced approach to capital allocation.
The program’s length aligns with the extended guidance provided through the new disclosure metric.
The increased authorization signals a commitment to scaling the program in the coming years, providing value and flexibility to shareholders.
Breakdown of Live Services by Genre
Question
Can you provide a rough breakdown of the live services bucket by genre, such as sports, action shooter, and casual games?
Answer
The company does not disclose specific genre splits within the live service category, as it encompasses various aspects of the business, including sports, mobile, and subscription services like EA Play.
However, it is highlighted that massive online communities, such as those for FIFA, The Sims, and Apex Legends, are significant components of the live service business.
Differentiation Through Live Services
Question
How does EA’s approach to live services differentiate the company and position it for growth compared to the broader market?
Answer
EA’s strength lies in the breadth and depth of its live services, encompassing a diverse range of franchises and genres, from sports to simulation and first-person shooters.
The company’s focus on building resilient and engaging live services, such as Apex Legends and FIFA, while also investing in new IP and expanding into new platforms and geographies, sets it apart and positions it for growth.
Apex Legends Solo Mode
Question
What led to the decision to bring back the solo mode in Apex Legends after initially stating it would not return due to player behavior concerns?
Answer
The decision reflects the evolving nature of the Apex Legends community and player preferences.
Respawn Entertainment, the development team behind Apex Legends, works closely with the community and believes that introducing the solo mode is a step towards serving the player base more effectively.
Mobile Segment Growth and Competitive Landscape
Question
Can you elaborate on the underlying growth expectations for the mobile segment, EA’s market share outlook, and the key drivers in fiscal years 2026 and 2027? Additionally, how should we think about the step-up between those years and any changing dynamics in the competitive landscape?
Answer
The mobile market is expected to see low to mid-single-digit growth over the next 12 months, but it remains a high-risk opportunity due to significant user acquisition costs and long development cycles.
EA’s mobile business is well-positioned, with a focus on leveraging its existing massive online communities and investing in a limited number of mobile-native titles with breakout potential.
The company’s growth outlook for FY ‘26 and ‘27 is demonstrated through the new non-GAAP operating margin disclosure, with an expected expansion of 150 to 200 basis points from the FY ‘25 platform.
AI Deployment in Development Processes
Question
How is EA thinking about further deploying AI in development processes, including on other games and platforms like mobile, and the opportunities presented by generative AI in key franchises?
Answer
The company is in the early stages of exploring the potential of generative AI and its applications in game development.
The focus is on two primary pillars: improving efficiency and expanding game content.
EA believes that more than 50% of its development processes will be positively impacted by advances in generative AI, and teams are actively exploring its implementation.
AI’s Role in Game Expansion and Transformation
Question
How does EA see generative AI contributing to game expansion and transformation over the medium to long term, and what role does it play in building bigger, more immersive worlds and engaging more players?
Answer
Over a 3to 5-year time horizon, generative AI is expected to enable the company to build larger and more immersive worlds, create more engaging experiences, and reach a broader player base.
EA envisions a future where these tools are made available to the community, further enhancing the diversity and innovation in interactive entertainment experiences.
The company’s extensive data and experience in AI development provide a significant advantage and may accelerate the timeline for these advancements.
Market Opportunities for Dynamic Ad Insertion and IP Adaptation
Question
What are your thoughts on the market opportunity for dynamic ad insertion in traditional AAA games and the potential revenue it offers over the medium to long term? Additionally, what is your current perspective on the IP adaptation landscape and its potential as a market opportunity for EA?
Answer
EA’s focus is on expanding the definition of player engagement within its interactive worlds, encompassing play, creation, watching, and connecting.
The company anticipates a growing demand for content creation within its communities, both within and outside of games, as well as increased opportunities for players to connect with each other.
While gaming IP is successfully transitioning into film and television, EA aims to leverage this trend while prioritizing the expansion of play, creation, and social connections within its own ecosystem.
EA recognizes the potential for advertising to be a significant growth driver, particularly as engagement extends beyond traditional game experiences and into community-based platforms.
