I just finished three days of exciting finance training for my friends at Electronic Arts (EA) in Vancouver, BC, Canada. I had a great time spending the week up north in one of the most beautiful cities in North America. You can always count on great food and stunning views in Vancouver.
The classes went well, EA is really starting to make progress financially. I’ve talked about this before but when I started at EA in 2009 the company lost $1 billion dollars on $4 billion in revenue. Their operating cash flow was still slightly positive in that year because many of the losses were non-cash losses for asset impairment charges. The company was reeling from the losses and decided it was time to educate key managers on the tough financial situation they were facing. Remember 2009 was tough for a lot of companies.
I like to say EA hired the Business Literacy Institute (BLI) because they wanted management to better understand finance in a tough environment and they had a little cash to pay us. We have had a great partnership with EA ever since. The company looks a bit different than it did in 2009. This year the company is projecting $4.9 billion in revenue, $1.3 billion in operating profit, and $1.3 billion in operating cash flow. The stock dipped to a low of $12 dollars a share but closed yesterday at $75.58. I like to tell my friends at EA that just shows what quality finance training can do for company. 🙂 I like to tease my EA partners that BLI should have negotiated a percentage of improvement in value rather than our normal fees.
All kidding aside it has been very interesting to watch the transformation of EA financially. They pursued a straight forward strategy and made some great games along the way. It was about controlling costs and moving the business from a packaged good/console gaming company to a digital gaming company. Without the cost of goods sold associated with packaged goods, the gross margins moved from 49% in 2009 to a target of 72% in the current fiscal year. With a little growth in revenue and an effort to hold costs constant. EA is targeting an operating profit margin of 30% this year. EA has shown what can be done when management finds a winning strategy and really sticks to it. It’s been fun to watch what EA calls the digital transformation.
Oh yes while in town I was able to eat at Vij’s. The best Indian restaurant I’ve ever experienced. Not to be missed if you visit Vancouver. Order the lamb popsicles, you won’t be disappointed. I also had a great veal parmesan dish at the Italian Kitchen, a new restaurant for me that is now on my Vancouver list. I was able to catch a Vancouver Canucks hockey game. You know I was in Canada ‘eh. The home team lost 3-1 to the Anaheim Ducks but it was fun to check out the action.