Starting June 20th I flew to Stockholm Sweden, to start a five country 7 day financial statements training stint with Andy Billings, my colleague from EA. Over the years Andy and I have done several European trips but this one was the biggest yet.
So I left for Stockholm on June 20th because Father’s Day was the 19th and I missed it last year. This meant that I arrived in Stockholm at 6:30am and then went to the hotel for a quick shower and then directly to my training session. Yep not a great idea. The only other time I trained right off the plane was when I landed on the wrong date in Paris and therefore had to just ‘gut it out’. This was a planned gut it out day.
While it was not ideal, I think the day went just fine. One things about working with EA is we do about a 2 and 1/2 hour financial simulation game called Duality that Andy takes the lead on. The group was small but responded well. In this group there was a lot of interest and questions on the future of the stock price. We learned about what I call the big 5 metrics of Wall Street, then looked at how EA has performed. They are year over year revenue growth, earnings per share or EPS, EBITDA or earnings before interest, taxes, depreciation, and amortization, free cash flow, and return on equity. In my opinion they are the reason why EA stock has appreciated so much in the last 6 years. In reality, 4 of these five ratios have improved dramatically with the star being free cash flow (a Wall Street favorite). The one number that needs to get better is revenue growth. Since I have been working with EA I’ve seen the stock move from as low as $12 to the mid $70’s. That’s got to be due to some quality financial training.
The Stockholm session had great reviews for a Swedish group, so I’m told by Andy, and I got a great run in along the river before it was on to Bucharest, Romania.
We did two great training days in Bucharest. Still a little jet lagged but not bad. I treated it with Coke Zero. The groups were bigger these two days and I was really impressed with the English of the attendees. Considering it is a second language the group did great. It was in Bucharest where Andy and I perfected the rocket p & l model. We used it as a class closer from Bucharest on through the trip. It was a smashing success.
The rocket illustrates the EA story in terms of profitability. When I showed up at EA in late 2008 the company was losing money on about $4 billion of revenue. Over the last 6-7 years as the business has shifted from a packaged goods business to a digital business, made some key acquisitions which lowered its licensing fees, the gross profit margin (that’s gross profit/net sales) has gone from 49% in FY 2009 to 71.4% in FY 2016. Over the course of that time the business has become very profitable and generated billions of dollars of cash. So maybe that helped drive up that stock price along with my quality training. Over this time the percent of revenue going digital at EA has gone from 9% to 55%.
The rocket model is a spreadsheet showing how much more margin can be made in the business by modeling more digital revenue while growing revenue and keeping key expenses like research and development, marketing and sales, and general and administrative expenses fairly constant. It’s really interesting for the attendees to play with the model and see how much more profitable EA can become.
While in Bucharest we discovered a really good French restaurant. So for me the highlight was eating there the first night and the last night. The sessions went great and we had even better reviews than in Stockholm.
We then did a weekend in Madrid ahead of two days of training with the Madrid group. Madrid is always a great place to visit and this visit was no exception. We traveled to Madrid on Saturday and it there that my daughter Jessica joined us for the second week of the trip. We did not train until Tuesday so we had two days Sunday and Monday to wipe out the jet lag and see Madrid. Jessie and I went to church on Sunday and enjoyed the spirit there in a small chapel. Although it was all in Spanish we still really enjoyed the meeting. Then that night we joined Andy for a tapas tour. It was a great time with great food and great company. We hit five different places starting with high end Spanish ham and ending with churros with a dark chocolate dip. Nice meal not the best for a diet…glad I don’t diet.
On Monday we took a train to Segovia, Spain. That was the tourist highlight of the trip for me. The cool aqueduct and the castle were awesome. The village was great, we also probably had our best sit down meal in Spain there for lunch.
Tuesday and Wednesday was EA training in Madrid. We had two full sessions there. This group has a lot of interest in the stock like the Stockholm group. The game Duality was a hit with this group and the winners loved my graphic novel Financial Intelligence which was the prize for the winning team. This group had me sign the book with my favorite phrase ‘Every day is a Great Day for Finance’.
From Madrid we flew on the night of the last day directly to Cologne, Germany. We arrived well after midnight and hit it hard the next day. The German group was a lot quieter than the others but they also asked some very detailed and thoughtful questions. They too really liked the rocket spreadsheet exercise. We had 23 attendees for this session and in spite of the late night the reviews were great. In fact, I think we might have hit a record with the largest EA class to give us a 100% net promoter score.
After our short time in Cologne we moved on that night to Lyon France. Yep country number 5. We did our last training there for the Lyon group and several attendees who had come over from the Geneva office. This group was a more senior group and was really interested in learning about the quarterly reports and the company financial town halls. We had a lot of discussion around these topics and how they can impact company performance. The duality game was interesting. Many of these senior managers were marketing types and they were able to simulate games that generated hundreds of millions in profits. While most teams barely make it to 100 million in the simulation I think the winner in this group did over 400 million. I guess creative marketing can drive revenue.
On our final night in Europe we did a nice traditional French dinner in downtown Lyon. A great way to close things out. My daughter Jessica and I had a great trip bringing financial intelligence to the EA team.