Electronic Arts beats estimates after World Cup, but still cautious
Company's first-quarter profit blew past Wall Street's expectations, due in part to FIFA titles. But it's delaying two highly-anticipated games to ensure success.
Electronic Arts's profits and revenue surged in its fiscal first quarter on strong sales of its sports-related games, including its FIFA soccer titles. But the company also said it is delaying two of its biggest titles so that it can deliver on its promise of offering higher quality games.
The moves, which postpone the releases of its action adventure game Dragon Age Inquisition and cops-and-robbers shooter title Battlefield Hardline, are sure to upset excited fans. But EA said it needs the extra time to add more polish. Dragon Age is being delayed several weeks to November 18, while Battlefield will be released sometime in early 2015, during the company's fourth fiscal quarter.
In reference to Battlefield Hardline, Blake Jorgensen, EA's chief financial officer, said the company is responding to customers' reactions after it offered access to a preliminary version of the game earlier this summer. EA is also crafting the game to avoid nagging bugs and performance problems that plagued last year's war simulation shooter, Battlefield 4. "As you know we've had stability issues in the past," he said. "We're trying to make sure it's really strong."
Despite the delays, EA's estimates were in line with analyst estimates. For the second fiscal quarter, ending September 30, EA said it expects profits of 50 cents per share on sales of $1.14 billion, after adjusting for items such as stock-based compensation and deferred revenue. Analysts on average were expecting the company to report profits of 51 cents per share on $1.14 billion, according to surveys by Thomson Reuters.
The results are illustrative of EA's efforts to remake itself amid criticism from gamers who were stung by buggy releases and lackluster products. Investors too have been frustrated, pushing the company's shares down until last year. Under new CEO Andrew Wilson, the company has pledged to connect better with gamers, both by offering more insight into how games are made and by giving earlier access to titles. On the financial side, the company is attempting to be more prudent with its costs, a historical sore spot.
Investors appear pleased, pushing shares up nearly 40 percent since Wilson was named CEO in September last year, and despite sagging sales of games for older consoles across the industry. On Tuesday, the company's shares rose more than 4 percent in after-hours trading after closing flat at $38.42.
Jorgensen said the company's FIFA soccer titles performed particularly well during the World Cup, which was held in June and July in Brazil. Sales for EA's "ultimate team" fantasy soccer league service grew 80 percent during the quarter from an already large base, he added. The company also bolstered its fantasy sports service for its smaller hockey and American football offerings, leading their sales to grow 50 percent and 350 percent respectively.
EA expects sales of games for new consoles to make up for the shortfall by the end of this year, and touted its position as the top publisher on Sony's PlayStation 4 and Microsoft's Xbox One in western countries so far this year.
For its first fiscal quarter ended June 30, EA said profits surged nearly 51 percent to $335 million, or $1.04 per share, up from $222 million, or 71 cents per share. Sales rose nearly 28 percent to $1.2 billion.
When adjusted for items such as stock-based compensation and deferred revenue, the company reported profits of 19 cents per share, swinging from a loss of 40 cents per share a year earlier. Sales jumped 57 percent to $775 million. Analysts on average had expected the company to report a loss of 4 cents per share on sales of $713 million.