The lights are on
Electronic Arts is coming off a tough third quarter, during which the company experienced lower increases in digital sales, but diminished retail revenue. Retail was down year-over-year from $568 million in December 2012 to $370 million in December 2013.
Digital revenue didn’t rise enough to cover the decrease in retail sales, growing from $321 million to $410 million. EA experienced a GAAP net loss of $308 million in comparison to a net loss at this time last year of $45 million, and lower net revenue from $922 million to $808 million year over year.
EA is lowering its revenue projections for the current fiscal year (ending March 31, 2014) from $3.55 billion to $3.52 billion. The publisher cites softness in the Xbox 360 and PlayStation 3 segment of the market. It has however increased earnings per share due to reduced expenses yielding higher profits.
EA is bolstering non-GAAP revenue due to a change in how it recognizes revenue, extending that spread over an additional quarter. The non-GAAP accounting selectively excludes the $40 million NCAA settlement and tax expenses among other items. The total exclusions amount to $385 million.
EA’s earnings release also indicates significant growth in Ultimate Team revenues, touting a non-audited increase of 60 percent over this time last year. EA also boasts 35 percent of next-generation software sales, inclusive of Madden NFL 25, FIFA 14, Battlefield 4, and Need for Speed: Rivals on Xbox One and PlayStation 4. This makes EA the top publisher on the new console platforms.
EA will be holding a conference call to offer additional detail on its performance this afternoon. Stay tuned for more information. For additional context, you can read up on EA's second quarter performance.
Our TakeDespite the qualitative assessments leading the earnings release, EA underperformed on its non-GAAP revenue projections. I’m eager to hear from EA respond to investor inquiries about the ongoing troubles with Battlefield 4. I also expect that we’ll be hearing Titanfall’s name come up a number of times as a way to orient investors to the future.