I am returning from a 4 training day three city trip through Europe. I started in Stockholm Sweden to work with a development group. Then it was on to Cologne Germany for a session with the EA German marketing group. I wrapped up the trip with two days with the language conversion teams at EA located in Madrid, Spain. Lots of miles, some good food, and many great days of finance.
It was still a bit cold in Stockholm for our visit but that didn’t stop me from getting in two great runs along the water. Stockholm is a really great city with friendly people and great landscapes. The class went well. EA just closed its fiscal year ending March 31. They beat their profit forecast on a GAAP and Non-GAAP basis. As a consequence of that EA is enjoying significant increases in its stock price. So most of the EA family is feeling pretty good about its financials after several tough years.
This group was very interested in what drives the stock price. I like to say there are five metrics that investors look at. They are focused around revenue growth, profit, and cash flow. EA has always had good cash flow. Now profit is coming around. The last area needed for improvement is revenue growth which is still a work in progress at EA. The Stockholm group is largely responsible for one of the EA key products, Battlefield. This group was very interested in understanding where they can continue the positive trend of EA’s fortunes. I say to all of these groups right now it’s all about revenue growth at EA now.
The Cologne group was very inquisitive and lively. It was fun to work with this key European marketing group. The day was sunny and beautiful in Germany. The office was right on the Rhine River, great views from the office and perfect finance weather.
In this group we had a lot of discussion on the impact of marketing on the business. I like to say to students that sometimes it’s hard to connect what they do to affect the profit that a business makes. This is not so with a sales and marketing group like this one. This team is tasked with selling the EA products to the German market. So we can easily see the impact in terms of profit and margin derived from this group. I think it’s important for employees and mangers in a business to connect what they do to the bottom line profit. As any good businessperson knows at the end of the day it’s all about profit. We had some great discussion around this issue in class.
My final stop was in Madrid. What a great city. I was able to get in Saturday and meet my son Jordan and go to the final Real Madrid football game with EA VIP tickets. What a cool experience. Those Real Madrid boys play a little faster than my Real Salt Lake boys back home. Plus the 90,000 seat stadium is impressive. It was good fun and good food.
The classes were great too. We worked largely with the localization groups. These are teams that translate and modify EA games into languages for all of their markets. I was told they work with over 20 languages there. In these classes we really focused on the new internal management metric at EA that is called operating contribution. This is a new metric just introduced by EA CFO Blake Jorgensen. It is really a variation on contribution margin that is so commonly used by many of BLI clients like GE. Operating contribution is simply contribution margin with all corporate marketing and product support added by allocation. The metric does not include corporate general and administrative expenses such as HR, IT, legal, and finance.
This newer metric looks like a great way to evaluate EA products and studios. I expect the metric to be a benefit to the business as it is rolled out.
So all together the trip included some good football, a Segway tour through Madrid, a new favorite restaurant in Europe…Los Porfiados in Madrid, and some great days for finance!