Electronic Arts reported financial results today that beat Wall Street’s expectations, with revenue falling 14% to $1.15 billion for the second fiscal quarter (third calendar quarter) ended September 30.
While revenues were down compared to a year ago, EA outperformed expectations in the quarter. But EA’s forecast for the third fiscal quarter (fourth calendar quarter) came in below analysts’ expectations. As a result, EA’s stock price is down 7.6% to $118.53 a share in after-hours trading.
This raises questions about how strong and lasting the pandemic bump for gaming will be. EA reiterated how tough it is to predict things with the pandemic and the launch of a new console cycle.
In a call with analysts, chief financial officer Blake Jorgensen said, “It is a world in which we have never been before. We want to be careful [with forecasts] because it is a world that we don’t have a lot of history in.”
EA reported earnings per share of 63 cents, compared to $2.89 a share a year ago. GAAP revenues were $1.15 billion, compared to $1.35 billion a year earlier. Analysts had expected earnings of 35 cents a share on revenue of $9.59 billion.
One reason the revenues are lower this year is that FIFA 21 is launching in the third fiscal quarter (the fourth calendar quarter ending December 31) instead of one quarter earlier. But that’s probably why analysts were bullish on the fourth calendar quarter.
EA forecast earnings of 61 cents a share on revenue of $1.68 billion for the third fiscal quarter (fourth calendar quarter) ended December 31 and $3.15 a share on revenue of $5.63 billion for the year. Analysts had expected third fiscal quarter earnings per share of $1.21 on revenue of $2.36 billion and $3.48 a share on revenue of $6 billion a year.
The game publisher released some big games during the quarter, including UFC 4, Madden NFL 21, Rocket Arena, and Star Wars: Squadrons.
Madden NFL 21 has nearly 30% more players this year compared to a year ago. Life-to-date, FIFA 20 has reached nearly 35 million players on console and PC. And EA has launched more than 125 games and content packs on Steam.
EA will spend some of its extra cash — $2.6 billion — on a stock repurchase program and a first-ever quarterly cash dividend of 17 cents a share.
“Thanks to the incredible work of our teams and everything they continue to do for players while working from home, we’re delivering more fan-favorite games, growing our leading live services, and engaging more players across more platforms than ever before,” EA CEO Andrew Wilson said in a statement. “Our business has grown significantly this year, and we are projecting continued expansion into FY22 and beyond.”
Wilson said in a call with analysts that EA’s network has grown to 330 million unique accounts, with tens of millions joining (he did not provide a time frame for this). He said Apex Legends is having great success in Asia with every new season of content, and EA just launched Season 7 of the battle royale game from Respawn Entertainment. Jorgensen said that Apex Legends has gone from zero to $1 billion in less than two years.
EA Play has more than 6.5 million paid subscribers, and Wilson said the company believes it can double its subscriber base over the next 12 months. EA is also adding games to Microsoft Game Pass, and Jorgensen said EA is generating revenue from that deal.
Jorgensen added, “We delivered a quarter well above our guidance, driven by our live services, particularly Madden and FIFA. This resulted in a new record trailing 12-month cash flow of $2.04 billion. We are pleased to announce a new share repurchase program and also to initiate a dividend for the first time in EA history. We are on track to deliver strong growth this year and expect continued growth in fiscal 2022 and in the years to come. Apex Legends is on track to become our latest billion-dollar franchise by the end of the fiscal year. All of our studios continue to execute amazingly well and have enabled us to launch an industry-leading eight games since the beginning of the fiscal year while continuing to deliver live services content and expand onto new platforms.”
By December 31, EA expects to launch FIFA 21, Medal of Honor: Above and Beyond, Need for Speed: Hot Pursuit Remastered, and NHL 21. Medal of Honor: Above and Beyond will launch on Oculus VR in December. The next Battlefield game is set to launch in the 2021 holiday period.
EA said net bookings for the past 12 months were $5.58 billion, up 8% from a year ago. Net bookings for the quarter were $910 million, compared with $1.31 billion a year earlier.
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