Webcast Notes - I'll try and update as it goes along...
- Consumers are behaving in a way reflective of a console transition
- Console transitions are difficult, initiate periods of strong growth, represent significant opportunity
- Working on new Battlefield and FIFA titles
- Medal of Honor performed well below our expectations
- Strong performance from FIFA, Need for Speed
- NHL performance down
- Packaged goods up $16 million, following FIFA/Battlefield 3
- Strong Digital Performance
- Deferring Battlefield Premium revenue of 15% to following quarter
- 44 million full-game downloads
- Majority of Q3 digital revenue came from FIFA, Medal of Honor, and Need for Speed
- Full game download performance will increase in the future
- 100 million in mobile games, 36 YOY growth
- Majority of mobile success from 'The Simpsons: Tapped Out'
- Subscriptions, advertising, Digital Revenue - 79 million (excl. Battlefield Premium)
- Digital momentum continues to build and we see this as the future.
- Q4 predictions: Battlefield Premium, FIFA Ultimate Team, Crysis 3, Sim City, Dead Space 3.
- Q4 challenges: following Holiday softness, significant volatility due to 'console transition'.
- FUSE delayed to Q1 of fiscal 2014.
Peter Moore...
- Distinction between HD consoles vs. SD consoles — both trending down, HD 13% down.
- EA console titles focused fully on HD.
- EA had 6 of the top 20 hits of 2012.
- Clear distinction between winners and losers — in Q3, EA had both.
- Global revenue for digital services grew 25%.
- We struggled with slowdown of sector, and poor critical and commercial performance of MOH.
- Critics polarised.
- MOH scores "lower than deserved".
- Consumers didn't respond to 'authenticity' proposition.
- MOH no longer part of our shooter rotation.
- FIFA 13 No. 1 in Europe in 2012, outselling Call of Duty.
- Need for Speed: Most Wanted, up 30% YOY, outperformed other racing titles. Now an annualised blockbuster.
- Battlefield in a position to become a top franchise in the industry.
- Bejeweled Blitz, Simpsons Tapped Out coming to Android.
- Dead Space 3, demo generated 44% more downloads than Dead Space 2 demo on Xbox 360.
- Crysis 3 pre-orders 40% higher than Crysis 2.
- SimCity critical reception shaping up well.
- Real Racing 3 launches Feb 28
- Tiger Woods March 28, Army of Two March 29, FUSE Q1 Spring
- Origin 2 million users registered in January.
- Fiscal 14 ushering in a new era of gaming.
Q&A - John Riccitiello, Frank Gibeau, Peter Moore
Q: Medal of Honor: what drove performance, what steps can you take to prevent a repeat, comment on YOY continuity of FPS titles.
A: In a hit driven business, about what you can build, we missed on MOH and take responsibility. We released 11 games scoring 80+, delivered 90% titles on time. MOH overshadows this, but we're proud of our teams overall. As for shooters, Battlefield is coming.
Q: Marketing expense increased, is this sustainable thinking of things going forward? Also, you talk about recurring franchises (now that Medal of Honor is out of the picture) — FIFA and Battlefield make up the majority of profits, as you move into next-gen, what changes?
A: Trend driven by titles and activity in the quarter. A lot of work is done to get the most out of each marketing dollar, conscious of what to spend and when. Hold off on putting trends in your models going forward, but we're working to drive it down. We want to maintain a smaller selection of titles going forward.
We want to build around franchises, like Battlefield and FIFA. We try to build profitability by developing a long digital life, e.g. Battlefield Premium, FIFA Ultimate Team, across multiple devices. All of that can be monetized and helps drive profitability as opposed to a single boxed title.
We believe that FIFA and Battlefield can remain in the top 5, possibly 1 and 2, as we move into the technology transition we see coming. They will help lead this transition and continue to get bigger. They are vitally important to us, but not at the expense of our other franchises.
Q: You're facing headwind following late state of console cycle, a lot is out of your control at the moment, people are expecting well selling new consoles. If new consoles are not competitive, what is your 'Plan B'? Does it involve other platforms that are gaining penetration? Are you preparing for this?
A: The data on game usage is clear. We have added gamers to the universe of paying game customers. There is no slowdown. Substantial digital growth — 37% growth in last 12 months. Digital is a valuable part of our business. Driven by a great talent base. We have great talent and a great business. We know exactly what's coming and we know more than what's disclosed to consumers and investors. Plan A: explode with opportunities we see on console. We have high confidence.
Q: What is driving digital growth?
A: Full game downloads are PC centric, like Battlefield, a substantial title, bigger than anything else in this quarter — drove full game downloads in this quarter. See the slides for further illustration on this. Almost all of this is driven by Battlefield and Star Wars.
Q: Should we assume next quarter to be bigger?
A: Take Battlefield Premium. 108 million will drop into 4Q, minimum. Down to last expansion pack in the series, so it might trend down a little bit. One thing to keep in mind, most cost for developing product were incurred as quarters went along, so that revenue will be at a high gross margin as it comes into 4Q.
Q: Wii U — you're not pursing aggressively. What does this say about consumers adopting next-generation consoles in the future?
A: Never count Nintendo out. They have great IP. You will see a bounce when they bring these IPs out. We see no correlation between Wii U sales and what we expect from other next-gen consoles, can't talk a lot about that though. What we describe as "Gen 4" is yet to come. We're excited and investing in it.
Q: Any softness around FPS/M-rated games/Gun Club following recent events? View on media/political focus?
A: We didn't want to answer this question. We're not seeing softness in FPS sector. We have an advantage at EA, sharing with ESRB and ESA, being exposed to Washington. We're a responsible industry and confident in our content not having a link to violence. We were stunned and horrified by the violence in Connecticut and Colorado. There's been an enormous amount of research into links, nobody's found anything. Supreme Court concluded that we deserve all 1st Amended Right freedoms, following agreement with evidence in multiple studies. We understand that there may not be an actual problem, there is a perception to wrestle with. We want to be part of the solution. Our media reaches many Americans and can be used as a voice for good. We don't want to be the butt of the joke. We're ready to step up.
Q: Mid-core genre for Mobile. Where you guys at?
A: Real Racing is coming, other titles planned going forward. Big believers in audience.
Q: Plants vs Zombies 2?
A: Nothing to announce, great plan for Pop Cap going forward to expand franchise.
Q: Valve introduced Steam Box at CES, uncertainty around Sony and Microsoft. Could Valve be a player?
A: John is "in the Gabe Newell fan club". He's a big fan of their content, Portal is his all time favourite. Having said that, Valve hasn't said much about their plans. Large scale success usually goes with multiple billions of investment in development, online relationships, retail, manufacturing, supply, etc... Based on what Valve has said so far, it could be a nice niche product for Valve fans. They need to reveal more about their plans.
Q: Learnings from Simpsons: Tapped Out? What techniques can you apply to other IP?
A: Simpsons IP great opportunity for us, in regard to episodic content, e.g. Treehouse of Horrors. At its core, it's a hilarious game.
Q: What is driving Q4 predictions?
A: Most analysts expecting big quarter, following Assassin's Creed 3, Call of Duty: Black Ops 2, Halo 4, Need for Speed, Madden, FIFA. Despite great games well marketed, quarter was weaker than we anticipated going in. Often happens when consumers expect a console transition. Sales are down and erratic. We're about to launch the 1st of 3 packaged goods title that will define our quarter. We know we've got a fast boat, we just don't know how deep the water is. We think the content's great, we're anxious about the sector a bit.
Q: Battlefield. Are you dropping Medal of Honor and annualising Battlefield?
A: We're not announcing an annualisation of Battlefield today. We're releasing a new Battlefield title next year and we'll talk more about it soon.
Q: Digital: What's working and what's not working? Are there areas you're rethinking?
A: Mobile is working for us in addition to digital downloads for full games and PDLC, like Battlefield Premium and FIFA Ultimate Team. Bunch of F2P models are working well for us. FIFA in Korea and Japan are F2P and are working well. Premium and F2P across mobile, PC and console are working well for us. Absent is social. Social has not down well for us. We have the IP we need and the channel access we need. We can lead digital with great execution in Asia, following western success. Added strength following PopCap acquisition. We have a great hand. We like what we've got and we're not looking to drop.
And we're done!
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I'll update this as the call happens.
EA said:Electronic Arts Reports Q3 FY13 Financial Results
Q3 Non-GAAP EPS In Line with Guidance and Consensus
Trailing Twelve-Month Non-GAAP Digital Net Revenue Up 37% to $1.5 Billion
FIFA 13 Sold Over 12 Million Units Through Q3 FY2013
Battlefield 3 Premium Has 2.9 Million Subscribers To Date
REDWOOD CITY, Calif.--(BUSINESS WIRE)--Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2012.
“Despite a challenging quarter, we were able to deliver non-GAAP EPS at the high end of our guidance range,” said Chief Executive Officer John Riccitiello. “We are investing for the future wave of growth that we foresee in digital and console.”
“We delivered on non-GAAP EPS by driving high-margin digital revenue and through disciplined expense management,” said Chief Financial Officer Blake Jorgensen.
“EA had six of the top twenty titles in Western markets in 2012, compared to four in 2011,” said Chief Operating Officer Peter Moore. “EA was also the #1 publisher on iOS worldwide for the year.”
Selected Operating Highlights and Metrics:
*On a non-GAAP basis
FIFA 13 sold through over 12 million units through the third quarter, a 23% increase versus FIFA 12 in the prior year.
FIFA 13 digital net revenue topped $100 million* in the quarter, a 98% increase versus FIFA 12 in the prior year.
Total FIFA digital net revenue generated over $230 million* in the first three quarters of fiscal 13, including EA SPORTS FIFA Online 2 and FIFA World Class Soccer that together contributed over $60 million*.
Battlefield 3™ Premium generated over $108 million in sales through the third quarter, and has 2.9 million subscriptions to date.
EA had six of the top twenty titles in Western World retail markets in 2012, compared to four in 2011, and was the #1 global publisher in the iOS game market for 2012.
The Simpsons™: Tapped Out was a top grossing iOS game for the quarter, generating over $23 million* in digital net revenue.
EA’s games and services for mobile, including handhelds, have generated approximately $100 million* in the quarter, an 18%* year-over-year increase in digital net revenue.
EA’s Origin™ platform for downloading digital games and services has registered over 39 million users, including 17 million mobile users. EA has signed agreements with 86 independent developers for Origin.
Trailing twelve-month non-GAAP digital net revenue was up 37% to a record $1.5 billion*.
Trailing twelve-month operating cash flow was $378 million, a $135 million improvement versus the prior year.
EA repurchased 12.2 million shares at a cost of $157 million in the third fiscal quarter, pursuant to a $500 million Share Repurchase Program announced on July 31, 2012, bringing the total shares repurchased under the current program to 20.6 million shares at a total cost of $265 million.
Dead Space™ 3 pre-sells are outpacing Dead Space 2, and Crysis® 3 pre-orders are tracking 40% ahead of Crysis 2.
Q3 Financial Highlights:
For the quarter, non-GAAP net revenue of $1,182 million was below our guidance of $1,250 million to $1,350 million. Non-GAAP diluted earnings per share of $0.57 was above the midpoint of our guidance of $0.50 to $0.60.
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(in millions)
GAAP Net Loss This year: $(45) | Last Year: $(205)
Non-GAAP Net Income This year: $176 | Last Year: $334
Source: http://news.ea.com/press-release/company-news/electronic-arts-reports-q3-fy13-financial-results
