How to prepare for Electronic Arts Inc Earnings Call on May 7, 2019

Electronic Arts Inc.(EA) reported its third fiscal quarter earnings on Tuesday, Feb 5, 2019, after the market closing bell. Here is a paraphrase of the key highlights from the call and our take below.

Key Highlights from Third Fiscal Quarter Earnings Calls for Electronic Arts Inc.

Call Presenter	Key Points
CEO Andrew Wilson	The gaming industry continues to see growth. Due to increased competition pressure Electronic Arts did not perform as expected. Challenges will impact Q4 performance. The game "Battlefield V" ship date was moved in November, a competitive holiday and did not perform. EA plans to kick off newer updates for the game in March 2019. Harder to penetrate the growing mobile gaming market. Doubling down best and efforts on this segment. Lackluster performance in Asia in general. FIFA titles performing strongly in Korea and Europe. Organization reshaping over the past 6 months and focus on newer go-to-market strategy. Apex Legends from Respawn rose to number 1 rank on twitch. Bigger plans for keeping gamers engaged. Plan to launch a new premium game this year, a twist on Titalfall universe. Launching a new Bioware game, Anthem, in the month of February. Another Respawn title "Star Wars Jedi" Launches in Fall of 2019. Sims franchise banked $1 billion in revenue. Additional plans for 2020.
CFO Blake J. Jorgensen	FIFA remained bright spot. EA's net revenue and expenses below guidance. EPS was $0.25 better than guidance. Opportunity in live services content. The business continues to be profitable but growth remains unpredictable. Guidance modeled Anthem bookings of 5 to 6 million but excluded Apex Legends estimates.

Call Presenter

Key Points

CEO
Andrew Wilson

The gaming industry continues to see growth. Due to increased competition pressure Electronic Arts did not perform as expected. Challenges will impact Q4 performance.
The game "Battlefield V" ship date was moved in November, a competitive holiday and did not perform. EA plans to kick off newer updates for the game in March 2019.
Harder to penetrate the growing mobile gaming market. Doubling down best and efforts on this segment.
Lackluster performance in Asia in general.
FIFA titles performing strongly in Korea and Europe.
Organization reshaping over the past 6 months and focus on newer go-to-market strategy.
Apex Legends from Respawn rose to number 1 rank on twitch. Bigger plans for keeping gamers engaged.
Plan to launch a new premium game this year, a twist on Titalfall universe.
Launching a new Bioware game, Anthem, in the month of February.
Another Respawn title "Star Wars Jedi" Launches in Fall of 2019.
Sims franchise banked $1 billion in revenue. Additional plans for 2020.

CFO
Blake J. Jorgensen

FIFA remained bright spot.
EA's net revenue and expenses below guidance.
EPS was $0.25 better than guidance.
Opportunity in live services content.
The business continues to be profitable but growth remains unpredictable.
Guidance modeled Anthem bookings of 5 to 6 million but excluded Apex Legends estimates.

Questions by Audience:

What areas of business EA is pulling back on? (Goldman Sachs Group).
Comment on the EA execution vs competitive dynamics behind the lackluster performance of Battlefield titles? (BofA Merrill Lynch)
What is changing about the marketing strategy and mobile strategy? (MKM Partners)
How EA thinks about cross-play, cross-progress, and using M&A to ease of competition pressure ? (Oppenheimer)
How new streaming platforms impact the cost of distribution? (Crédit Suisse)
What type of operating margins to expect from Apex Legends? (Stephens Inc)
Can EA provide more clarity about the CASH on hand, buybacks and the opportunities in China? (Macquarie Research)
What is EA's take on Live services going forward? (Stifel Inc)
What is the in-game monetization strategy for Apex Legends? (BMO Capital Markets Equity Research)
How does Battlefield Battle Royale stack against Apex legends in the long term? (The Benchmark Company LLC)
Between streaming, subscription and free-to-play games, what is the right mix of business going forward for Electronic Arts? ( Jefferies LLC)

Links to the Electronic Arts Inc Q1 2019 Earnings call

Audio Transcript

Next Quarter Earning Call - May 7, 2019, after Closing Bell

What is my take on Q2 2019 earnings call for Electronic Arts?

From the EA call in Q1 2019, I heard the weakness in EA's execution on the Battlefield titles. However, I also heard that the company has restructured and reorganized to deliver new era business capabilities in the "free-to-play" gaming segment. Seeing how Apex Legends performed after its launch in February, I think EA's strategy in embracing free-to-play and the mobile gameplay segment is working.

Key highlights for me were:

1) Apex revenues were not included in the guidance.

2) Doubling down investments on the mobile gaming segment.

3) Restructured marketing efforts.

After listening to call I researched on Anthem and Apex Legend and benchmarked the twitch stats below:

Fortnite: 43+ million followers · 218+ thousand Viewers

Apex Legend: 4+ million followers · 30+ thousand Viewers

Anthem: 292k follower, 193 viewers

Battlefield V: 1.1+ million followers · 1,700 Viewers

FIFA 19: 4.6+ million followers · 12+ thousand Viewers

I believe, the EA guidance is going to be up this quarter given that APEX legend revenues were not included in the forecast model in the last earnings call. Twitch stats indicate Apex Legends is the top performing title as compared to other EA games.

Disclosure:

I own Electronic Arts Inc.(EA) stocks.

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