Electronic Arts reported slightly lower-than-expected financial results for the fourth fiscal quarter ended March 31.
EA’s non-GAAP revenues were $1.04 billion, compared to $977 million a year ago. Non-GAAP (generally accepted accounting principles) earnings per share were 55 cents, compared to 17 cents a year ago. Revenues were on target, but earnings were slightly below EA’s revised earnings target. Full-year fiscal revenues were $3.79 billion on a non-GAAP basis, compared to $4.18 billion a year before. EA expects a loss in the fiscal first quarter ending June 30.
The results are the first since the gaming giant parted ways in March with former chief executive John Riccitiello, whose big acquisitions of firms like PopCap and charge into digital games failed to produce a long-promised turnaround in EA’s fortunes and its stock price. Since Riccitiello left , EA has cut about 10 percent of its staff in two rounds of layoffs. Larry Probst, a former EA CEO, is acting boss.
“As we enter a new fiscal year, EA is well-positioned for dynamic growth on next generation consoles, PCs, and mobile platforms” said Probst in a statement. “With world-class games, a rapidly growing digital business, and top-notch creative talent, we are excited about EA’s strategy for FY 2014 and beyond.”
During the quarter, EA sold 1.6 million copies of SimCity, the remake of the classic PC game whose demand was probably hurt due to server connectivity issues that angered fans.
“EA has a solid operating plan with disciplined R&D spending and a sharp focus on delivering the best games and services,” said chief financial officer Blake Jorgensen. “We are holding our FY 2014 operating expenses flat to the prior year – a significant achievement in a console transition year.”
EA expects revenues of $450 million and a loss per share of 62 cents on a non-GAAP basis for the first fiscal quarter ending June 30. For the full year ending March 31, 2014, EA expects non-GAAP revenue of $4 billion and earnings per share of $1.20.
Ahead of its earnings, EA announced yesterday that it had secured a long-term license with Disney to make games based on the Star Wars franchise. The company also revealed that its next big simulation game, The Sims 4, will be published in 2014.
“EA and Disney have signed an agreement to create a number of games on the Star Wars franchise,” said EA president of labels Frank Gibeau. “Our agreement unlocks a whole new future of Star Wars games that will span consoles, PCs, tablets, mobile, and more.”
Analysts expected non-GAAP revenues of $1.03 billion and earnings per share of 57 cents. EA already preannounced fourth fiscal quarter results would be at or below the low end of its previous guidance of $1.025 billion to $1.125 billion, on a non-GAAP basis, and earnings per share of 57 cents to 72 cents.
Michael Pachter, an analyst at Wedbush Securities, estimated before the earnings were released that EA’s earnings would be hurt by weak Medal of Honor: Warfighter sales, the lack of an NBA title, the delay of Fuse (coming May 28 now), and the decline of EA’s social games (EA canceled three of them on Facebook).
EA has generated a lot of revenues in digital games — online, social, and mobile titles — but that hasn’t completely offset the decline in the core console game business. Riccitiello, who was appointed CEO in 2007, tried to adapt to the changes, but the aging of the game consoles also hurt. Nintendo’s Wii U console hasn’t taken off as hoped, and Sony and Microsoft aren’t launching their new machines until the fall. Sony has announced the PlayStation 4, but EA hasn’t revealed any games for it. EA is expected to have a bigger presence, including an exclusive in the form of Respawn Entertainment’s first game (made by the cofounders of Infinity Ward, which popularized Call of Duty) at Microsoft’s upcoming revelation of the next Xbox on May 21.
Pachter believes that EA’s upcoming Battlefield 4, expected to be released this fall, will generate strong sales of 8 million units. It will also have UFC and NBA games coming in the fiscal year ending March 31, 2014. For the full fiscal year, analysts were expecting a consensus of $1.10 a share in non-GAAP earnings.
In after-hours trading, EA shares rose 6 percent. Before the market closed, EA was trading at $18.37 a share (not exactly the bump some expected after the announcement of the Star Wars licensing deal), with a market capitalization of $5.6 billion. Activision Blizzard, EA’s chief rival in the video game business, reports earnings on Wednesday.
Non-GAAP mobile revenue was $104 million in the quarter, up 21 percent from $86 million a year ago. Non-GAAP digital revenue was $618 million, up from $425 million a year ago. For the full fiscal year ended March 31, 2013, digital revenue was $1.7 billion, up 36 percent from a year ago.
EA said it was the No. 1 publisher in Western retail markets in the March quarter, and the No. 1 global publisher on iOS for the fiscal year ended March 31, 2013.
EA also disclosed that Battlefield 3 Premium generated $120 million in revenue through March quarter and it has more than 3.5 million subscriptions to date. Half of SimCity’s 1.6 million copies sold were from digital downloads. FIFA 13 sold through 14.5 million units in the fiscal year, up 30 percent from a year earlier. Total FIFA digital net revenue was $350 million in the fiscal year.
EA said The Simpsons: Tapped Out was a top-five grossing iOS game in the March quarter, generating almost $10 million in digital net revenue in the month of March. That game has generated almost $50 million since its launch in August.
Real Racing 3 has had more than 30 million downloads on iOS and averaged 2.5 million daily active users since the launch in March. EA said that it has 47 million users for its Origin game downloading platform.
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