Electronic Arts beats expectations with 3% drop in bookings to $1.34B

Electronic Arts reported better-than-expected earnings today for the first fiscal quarter ended June 30, as live operations for existing games like FIFA 21 and Apex Legends helped it through a quarter with smaller releases.

Net bookings for the quarter were $1.34 billion, down 3% from $1.39 billion a year ago and above both EA’s guidance of $1.25 billion and the analyst consensus expectations of $1.27 billion. The slight decline compared to a year ago isn’t unusual, given the pandemic’s huge effect on games last year, as more people stayed inside and played more. Now that things have loosened somewhat, that effect has been muted.

The Redwood City, California-based video game giant reported net income of $204 million, or 71 cents a share, on revenues of $1.55 billion, compared with net income of $365 million, or $1.25 a share, on revenue of $1.46 billion a year ago.

Above: Apex Legends on Switch.

Image Credit: Respawn Entertainment

Michael Pachter, an analyst at Wedbush Securities, said in an email to GamesBeat that EA beat revenue expectations by $86 million and raised guidance for the full year by $100 million. EA also beat earnings-per-share estimates by 24 cents and raised guidance by 25 cents.

“Nice beat, fully passed through the upside,” Pachter said.

In after-hours trading, the stock is up at $146.04 a share, up 4%. 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 game.

Analysts expected EA’s adjusted earnings per share for the quarter to be 62 cents, based on a consensus from analysts, on revenues of $1.27 billion. EA itself had forecast that net income would be $70 million, or 24 cents a share, on revenues of $1.25 billion.

For the trailing 12 months, EA reported net bookings of $6.14 billion, up 3% from the prior year.

In the quarter, EA launched Mass Effect: Legendary Edition on May 14. This RPG series is a fan-favorite, and Wilson said it was well above expectations in sales. Wilson said that the company continues to invest in the Star Wars: Jedi Fallen Order franchise from its Respawn Entertainment division, and BioWare continues to invest in Mass Effect.

It Takes Two launched at the very end of the prior quarter on March 26, and it showed considerable strength through the June 30 quarter, Jorgensen said.

Above: Mass Effect: Legendary Edition launches May 14.

Image Credit: Electronic Arts

“We’ve had a very strong start to the fiscal year with our incredible teams delivering experiences that continue to bring hundreds of millions of players together,” said Andrew Wilson, the CEO of Electronic Arts, in a statement. “Our new launches, leading games, and live services all had an outstanding quarter. With our expanding EA Sports portfolio, more amazing experiences in Apex Legends, the groundbreaking new Battlefield 2042, and our leading live services including mobile, we’re set to deliver more great games and content to players this year.”

In an analyst call, Wilson said, “We are forecasting our biggest second (fiscal) quarter ever.”

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, EA’s approach will be different. During the quarter, EA also revealed its ambitious plans for Battlefield 2042, 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 has all-out warfare with 128 players in a multiplayer match.

“We’re really focused on 365-day engagement for the franchise,” Wilson said.

That game debuts October 22, during the third fiscal quarter.

“We delivered a big beat this quarter, primarily driven by outperformance from our recent launches coupled with continued strong execution in our live services,” said chief financial officer Blake Jorgensen in a statement. “We’re looking forward to the launches of our sports titles this quarter and Battlefield 2042 in time for the holidays. Based on our strong performance this quarter and supported by our ongoing confidence in our live services, we are raising our outlook for the full year. Our strategic position has never been stronger, with growth drivers in place for this year, next year, and beyond.”

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. EA did a big reveal for Battlefield in June, and Wilson said it saw record sentiment and it was the most talked about game of the month. Since the reveal on June 9, Battlefield trailers and content have cumulatively generated more than 210 million views to date across all channels.

Jorgensen said that next year will see new franchises debut or existing franchises that EA will bring back.

“We try to build a business on a collection of titles, not just one title,” he said.

Game user numbers

More than 140 million players engaged with EA Sports over the trailing 12 months. More than 31 million players have joined FIFA 21 on console and PC since the launch.

FIFA Ultimate Team matches are up 48% for the quarter ended June 30, compared to a year earlier. Madden Ultimate Team matches are up 115%. Mobile games, excluding Glu results, are up 16% from a year ago.

“FIFA is growing as the social fabric of soccer,” Wilson said.

And Apex Legends Season 9 averaged more than 13 million weekly active players.

Digital game sales represented 58% of full game units sold through on a trailing twelve-month basis, up 6 percentage points from last year.

A look ahead

Above: Battlefield: Portal is a time-bending sandbox mode.

Image Credit: EA/Ripple Effect

EA has been on an acquisition spree this year with the acquisitions of Codemasters, Glu, Metalhead, and the pending Playdemic deal. Some of those results are not yet built into the projections for the future.

For the upcoming second fiscal quarter ending September 30, EA forecast that net income will be $1.05 million, or 36 cents a share, on revenues of $1.775 billion. Net bookings are expected to be $1.725 billion in the second fiscal quarter. Madden NFL is debuting shortly on August 20 and its results will show up in that quarter. The second fiscal quarter results will also include revenues from Codemasters’ F1 2021, which launched in July.

“It’s very rare for us raise guidance this early in the year,” Jorgensen said in an analyst call.

He noted EA has not built in any expectation of higher Battlefield results for the year, but he said that EA doesn’t want anyone to interpret that as a negative.

Analysts estimated that EA would report non-GAAP earnings per share of $1.07 for the second fiscal quarter ending September 30.

And analysts estimated that EA would report non-GAAP earnings per share of $6.38 on revenue of $7.39 billion for the fiscal year ending March 31, 2022. Today, EA said it expects revenues of $6.85 billion, net income of $456 million, net bookings of $7.4 billion. Overall, EA now has 11,000 employees. The results from EA’s pending acquisition of Golf Clash creator Playdemic are not included in the results.

“We are growing mobile into a growth center for Electronic Arts,” Wilson said.

EA dropped a teaser trailer at its July 22 EA Play event about its Dead Space sci-fi horror game in the works. Wilson said he couldn’t say more but the reception was very good.

The long view

It’s probably worth noting that we’ve come a long way from the days when games were just “hit-driven” businesses that investors stay away from. As Take-Two Interactive CEO Strauss Zelnick pointed out in an interview, it’s still a hit-driven business. But for the companies that have franchises that have lasted a long time, results can be more predictable. That’s because free-to-play games ushered in the notion of live updates that can re-engage players and get them to continue putting money into games. In the past quarter, EA saw $1.05 billion in revenue generated from live services.

That means that games last longer than they did in the past, easing the pressure for lots of new game launches. They can produce predictable revenue for a longer time than in the past. The companies are also no longer at the mercy of the console cycle. They have multiple consoles to make games for, and they can also make games for the PC and mobile devices. There are more platforms where games can make money.

The financial results look smoother, and public company investors can feel more comfortable investing in such businesses. And with the predictable revenue, the game companies can take more time investing in the next big hit.

“We’re in a better position than we’ve ever seen before,” Jorgensen said.