Interested in learning what's next for the gaming industry? Join gaming executives to discuss emerging parts of the industry this October at GamesBeat Summit Next. Learn more.
Electronic Arts met expected earnings today for the third fiscal quarter ended December 31, as the game publisher saw big engagement with its existing games. But it lowered its annual adjusted sales forecast for the fiscal year that ends March 31.
Net bookings for the quarter were $2.577 billion, compared to $2.4 billion a year ago.
The Redwood City, California-based video game giant reported GAAP net income of $66 million, or 23 cents a share, on revenues of $1.789 billion, compared with net income of $211 million, or 72 cents a share, on revenue of $1.673 billion a year ago.
In after-hours trading, the stock is down 5% to $123 a share.
EA’s stock price determines its value in the market, and it has to be wary about letting that slip, as Microsoft acquired Activision Blizzard for $68.7 billion after Activision Blizzard’s stock price slipped last fall. EA doesn’t want to get scooped up as a bargain basement deal because it missed a quarter or had one bad game.
Bookings reflect actual cash coming into the company, while revenues don’t include numbers that are yet to be realized, such as virtual goods that have been purchased but not used yet in games.
Analysts expected EA’s adjusted earnings per share for the quarter to be $3.23 a share, based on a consensus from analysts, on revenues of $2.67 billion.
For the trailing 12 months, EA reported net bookings of $7.254 billion, up from 22% from the prior year.
Andrew Wilson, the CEO of Electronic Arts, in a statement that EA ended the quarter with 540 million unique active accounts. EA has more than 180 million monthly active accounts across all platforms. MAUs are growing year over year, he said in an analyst call.
“FY22 has been a year of outstanding growth for Electronic Arts, and we’re proud that our franchises were among the most-downloaded, most-played, and most popular titles over the last year and the holiday quarter,” Wilson. “Our network of more than 540 million unique active accounts continues to expand, players are spending more time in our games, and with our amazing IP we are well-positioned for continued growth.”
Both Call of Duty: Mobile and Call of Duty: Warzone have served as free-to-play games that garner a massive audience and funnel the users toward a premium product like Call of Duty: Black Ops — Cold War. These keep players glued to the Call of Duty franchise year-round, and they can help stave off competitors.
With Battlefield 2042, EA’s approach was different. EA launched a multiplayer-only game with three modes, including Battlefield: Portal, where players can mod their own battles and create zany and anachronistic competitions, such as World War II infantry swarming a modern tank. The game also had all-out warfare with 128 players in a multiplayer match. And it had a team-based competition dubbed Hazard Zone where teams compete against each other to recover data from crashed satellites.
Did this design pay off, along with the multi-year development cycle? EA didn’t say much in the earnings itself.
In an earnings call, Wilson said that Battlefield 2042’s launch did not meet expectations. He noted it was always an ambitious effort, and he said it was challenging to develop in the last two years with remote teams. They faced unanticipated issues and some design choices didn’t resonate with fans, he said. He said major updates have already been done and more are coming.
EA announced today that it was delaying its first season for Battlefield 2042 until the summer as it adds features like voice chat and fixes bugs. Many observers said the release was pretty buggy, and EA has been trying hard to squash the bugs. During the past quarter, Respawn cofounder Vince Zampella assumed responsibility for Battlefield studio DICE. Wilson said the company is rebuilding the core of DICE as a studio and is reengaging with the community.
“Through our processes for testing and preparation, we believed the experience was ready to be put into our players’ hands,” Wilson said. “We launched with strong stability, however, as more players experienced the full game, it became clear that there were unanticipated performance issues that we would need to address.”
“Q3 was the largest quarter in the company’s history for net bookings, underlying profitability and cash generation,” said outgoing chief financial officer Blake Jorgensen, in a statement. “Our portfolio approach will enable us to deliver organic growth in the double digits this year, continue to deliver strong cash flow, and provides a strong foundation for growth as we look to the future.”
EA said this morning that Microsoft executive Chris Suh would become EA’s new CFO. He formerly was corporate vice president and CFO of Microsoft’s Cloud and AI Group.
“They missed on revenue by $50 million, lowered the full year guide by $100 million. They hit their earnings guidance and maintained full year, but not particularly impressive,” said Michael Pachter, an analyst at Wedbush Securities. “The surprising thing is that they missed because Battlefield was terrible, but they didn’t even mention it in the press release.”
EA is working on a Battlefield mobile game for limited release in test markets in 2021 and in global markets in 2022. That is being built by the Industrial Toys team.
“Mobile is a core growth engine for us, and it is accelerating. With new launches and acquired expertise and technologies leveraged across our portfolio, we expect mobile to be a major catalyst in FY23 with growth well into double digits,” Wilson said. “Led by Apex Mobile, our newly-updated FIFA Mobile game, Golf Clash and more unannounced projects, we are expanding our portfolio of more than 15 top mobile live services to reach new audiences and grow our recurring revenue.”
Wilson said EA Sports was up 10% as a business from a year ago.
Last quarter, Wilson said that Apple’s changes on the Identifier for Advertisers had created some concern for its mobile game business.
EA said that Apex Legends monthly active players were up 30% year-over-year. And players are spending nearly 20% more time in games in fiscal year 2022 compared to the previous year. Apex Legends had 28 million new players in the past year.
Overall, Wilson said on the call EA expect strong growth to continue in FY 2023, which ends March 31, 2023. The company has 18 live games and 23 live services. He mentioned three Star Wars titles are in the works, including Star Wars Jedi: Fallen Order’s sequel.
Digital is 64% of sales, up two percentage points from a year ago. EA’s Jorgensen said on the analyst call that EA was able to hire more people than at any other period in its history in the quarter. EA has about 12,000 employees.
“We are committed to turning Battlefield around,” Jorgensen said.
He noted that while Battlefield disappointed, all the other titles were strong and he said the company still managed to deliver the best revenues for a quarter in its history. Jorgensen said that Battlefield was less than 10% of overall revenues in the quarter.
Jorgensen said his past 9.5 years at EA has been the “most enjoyable experience” of his career.
Regarding NFTs and the blockchain, Wilson said, “That remains to be seen. We will evaluate that over time. Right now, it’s not anything we are driving on.”
And regarding the metaverse, Wilson said the metaverse will be a 3D social space where you come together to meet with friends. He said a lot of that already happens in the context of our games. EA will expand its games as social spaces, and, “We will almost certainly play a very important role in it.”
A look ahead
EA has been on an acquisition spree in the past year with the acquisitions of Codemasters, Glu, Metalhead, and Playdemic.
For the upcoming fourth fiscal quarter ending March 31, EA expects net revenue of $6.925 billion and net income of $694 million, or $2.43 a share.
For the full fiscal year ending March 31, 2022, analysts expected EA to report earnings per share of $7.46 on revenues of $8.13 billion.
In the fourth fiscal quarter ending March 31, EA expects net revenue to be $1.759 billion and net income to be $130 million, or 46 cents a share. Jorgensen said the company has Need for Speed on the slate for the future.
A note on Madden
At the start of the call, Wilson said a few words about John Madden’s passing:
“As we begin, I’d also like to say a few words about John Madden. John’s passing was a tremendous loss for the American football community, for the sports world at large, and for all of us at Electronic Arts. Through his years as a winning coach, as a beloved broadcaster, and as the pioneering namesake of our game, Coach Madden was football for tens of millions of fans.
He taught us many things over nearly 35 years of partnership. Some of his most important lessons, including authenticity, are things we’ve held close to EA Sports ever since. We feel incredibly fortunate to have been part of Coach’s legacy, and just as fortunate to be part of how it will live on through our future Madden NFL games. We will have more to share about how we are honoring Coach Madden in the weeks ahead, and from all of us at Electronic Arts, our thoughts and sympathies continue to be with his family, friends, and many, many fans.”
GamesBeat's creed when covering the game industry is "where passion meets business." What does this mean? We want to tell you how the news matters to you -- not just as a decision-maker at a game studio, but also as a fan of games. Whether you read our articles, listen to our podcasts, or watch our videos, GamesBeat will help you learn about the industry and enjoy engaging with it. Learn more about membership.