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Electronic Arts reported strong gains for its first fiscal quarter ended June 30 as both digital and packaged-good games saw good results. EA beat earnings estimates slightly in the quarter.
The big publisher of video games is pursuing a multi-pronged strategy to beat rivals such as Activision Blizzard and Zynga. Aiming to be a leader in both console games and social/mobile games, EA recently bought PopCap Games for at least $750 million. Based on what EA emphasized in its press release, the company’s focus going forward is heavily weighted toward digital games.
“We saw strong digital revenue growth over the prior year,” said John Riccitiello, chief executive of EA, in a statement. “NCAA is off to a great start and pre-orders for Battlefield 3 are tracking extremely well.”
GAAP revenue for the quarter was $999 million, up from $815 million a year ago. GAAP net income was $221 million, or 66 cents a share, up from $96 million, or 29 cents a share a year earlier. On a non-GAAP basis, revenue was $524 million, down from $539 million a year ago. Non-GAAP loss was $123 million, compared with a non-GAAP loss of $78 million a year ago. Non-GAAP loss per share was 37 cents, compared to a 24 cent loss a year ago. Analysts had expected a non-GAAP loss of 40 cents a share.
In after-hours trading, EA’s stock was up 19 cents to $24.00 a share. The stock’s market capitalization is $7.92 billion, several billion above just a few months ago. By comparison, Activision Blizzard is valued at $13.9 billion, and Zynga is reportedly going to go public at anywhere from $10 billion to $20 billion in market value.
EA said that its NCAA football game was off to a strong start, with sales up 17 percent from a year ago based on the first two weeks of sales. So far, EA has sold 700,000 units of NCAA Football 12. The company also said one of its most important titles for the year, Battlefield 3, is seeing pre-orders more than 10 times higher than EA’s previous game, Battlefield Bad Company 2, which has sold more than 9 million units to date.
EA reaffirmed its earnings guidance for the full fiscal year and increased its estimates for non-GAAP digital game revenue — which includes online games, Facebook games, downloadable games and mobile games. EA now expects that its digital game revenue for the fiscal year ending March 31, 2012 will be $1.1 billion to $1.15 billion. Previously, EA had projected $1.05 billion to $1.1 billion earlier, but now EA is adding the expected increase related to the PopCap acquisition. (PopCap generated more than $100 million in revenues last year). PopCap is expected to add $50 million to $75 million in revenues.
For the trailing 12 months, EA said its non-GAAP digital revenue was $854 million, up 35 percent from a year ago. In the first fiscal quarter, digital revenue was $209 million, up 11 percent. Trailing 12-month console revenue was up 91 percent from a year ago. Downloadable content on the consoles and free-to-play games was up 32 percent from a year ago at $70 million.
EA said it had five of the top 10 paid games on Verizon, two of the top ten paid games on the iPhone, and two of the top ten paid games on the iPad in June. In mobile, EA’s revenues were $59 million, up 9 percent from a year ago. Smartphone games saw gains, offset by a slowdown in feature phone games. First quarter smartphone non-GAAP revenue was up 75 percent from a year ago. EA said it sold 32 million paid downloads of mobile games in the quarter, up 39 percent. Subscription revenues was $48 million, down 17 percent. That number will likely change a lot when EA launches Star Wars: The Old Republic.
On Facebook, EA has 32 million monthly active users and 5 million daily active users. Eric Brown, chief financial officer, said EA’s Playfish division saw better monetization because of improved revenues from existing users of its Pet Society, Restaurant City, FIFA Superstars and Madden Superstars games. Non-GAAP revenue was up 75 percent from a year ago, when EA had more Facebook users.
EA’s Origin digital game distribution service has 125 million registered users, up from 67 million a year ago.
Portal 2 sold more than 2 million units in the first quarter on consoles and PC’s. Crysis 2 has sold more than 3 million units to date, while Dead Space 2 and Dragon Age 2 have sold more than 2 million units to date. EA said it was the No. 1 publisher in Western markets with 16% market share in the quarter.
In the second fiscal quarter ending Sept. 30, EA expects non-GAAP revenue of $925 million to $975 million. Non-GAAP loss per share is expected to be 3 cents to 13 cents. For the year, EA expects non-GAAP revenue to be $3.9 billion to $4.1 billion for the fiscal year ending March 31, 2012.
In a conference call, EA Sports chief Peter Moore expressed relief that the NFL football players have reached an agreement with league owners, preventing a strike that could have hurt sales of EA’s Madden NFL 12 game debuting in the current quarter. EA also has big titles like a new Harry Potter game, NCAA Football 12, FIFA 12, and NHL 12 out this quarter.
Battlefield 3 debuts on Oct. 26 and it will go up against Activision Blizzard’s Call of Duty Modern Warfare 3. EA ended the quarter with $2.3 billion in current assets. Only about 54 percent of EA’s cash is onshore in the U.S., so that explains why EA borrowed $550 million to purchase PopCap (with the purchase price ranging from $750 million to $1.3 billion). EA also has 7,758 employees, compared to 7,953 a year ago.