Electronic Arts reported third fiscal quarter results today that were in line with the reduced expectations analysts had.
For the third fiscal quarter ended Dec. 31, EA reported revenue of $1.24 billion, down from $1.64 billion a year ago. Net loss was $82 million, compared to a net loss of $641 million a year ago. Loss per share was 25 cents compared to a loss of $2 per share a year ago. On a non-GAAP basis, earnings per share were 33 cents, compared with 56 cents a share a year ago. Non-GAAP revenues were $1.35 billion, down 23 percent from $1.74 billion a year ago.
Analysts had expected non-GAAP revenues of $1.34 billion and non-GAAP earnings per share of 31 cents. EA had set its own guidance at $1.33 billion to $1.35 billion and EPS of 29 cents to 33 cents. EA had warned that it was going to have another tough quarter last month.
The good thing is that EA’s fourth fiscal quarter line-up looks good. The company has already released Mass Effect 2, which generated more than 2 million unit sales in its first week and high review scores, including a 9 out of 10 review rating by me. EA also released Army of Two: The 40th day in January. Still to come are Command & Conquer 4: Tiberian Twilight, Battlefield: Bad Company 2, and Dante’s Inferno (pictured), which debuts tomorrow.
Michael Pachter, an analyst at Wedbush Morgan, said in a note released last week that investors are likely to stay skeptical about EA until the fourth fiscal quarter is finished. EA is focusing on quality titles in its core console games business, but it has been forced to cut back on staff a couple of times due to weak sales in the past year.
Even as it lays off staff, it acquired Playfish, a maker of social games on Facebook, for as much as $400 million last fall. It is also investing heavily in free-to-play online games, the iPhone, and other new game platforms. EA said recently it will launch its NFL Madden football property on Facebook.
During the third fiscal quarter, EA’s big sellers were Dragon Age: Origins, which sold 2.7 million units on the PC, PlayStation 3, and Xbox 360; and Left 4 Dead 2, which sold 2.9 million units on the PC and Xbox 360. EA said such titles helped it gain market share during 2009 in the core packaged goods — games sold in physical stores — business.
Packaged good sales for EA was down 9 percent in the third fiscal quarter. The business is becoming more focused on major hits. The top 20 games in all of the console game industry were 48 percent of sales, compared to 38 percent back in 2006.
EA said it has sold 9.7 million copies of its latest Fifa soccer game. Digital revenue, such as money from free-to-play online games, was an all-time high at $152 million in the quarter, up 30 percent from a year ago and at about $500 million on an annual basis. The digital business is profitable and it has a pro forma operating margin of about 20 percent. And EA said it has cut more than $100 million in operating expenses compared to a year ago. EA has a total of 1.9 million online game subscribers, and EA Mobile’s revenue this quarter was $57 million, up 14 percent from a year ago.
For its fourth fiscal quarter, EA forecasts it will have revenue of $925 million to $1 billion, on a GAAP basis. Non-GAAP revenue is expected to be $800 – $850 million. Non-GAAP earnings per share are expected to be 2 – 6 cents. For the first fiscal quarter ending June 30, EA expects a loss of 35 – 40 cents per share on a non-GAAP basis. Revenues are expected to be $710 – $750 million on a GAAP basis and $460 – $500 million on a non-GAAP basis.
For the fiscal year ended March 31, 2011, EA expects GAAP revenues of $3.45 – $3.70 billion and non-GAAP revenues of $3.65 – $3.9 billion. It expects non-GAAP earnings per share of 50 – 70 cents. EA said that in 2009, it shipped 19 games with 80 or better ratings on Metacritic, a review aggregator. The next-closest rival had only six such titles.
EA said it had closed five locations and was about two-thirds of the way through cutting 1,500 jobs that EA said earlier it would eliminate. It expects to end the fiscal year in March with about 8,120 employees and it expects to stay about that level during the next fiscal year.