By Rip Empson
Electronic Arts has just reported lower-than-expected third-quarter fiscal year 2013 earnings today, missing on revenue but just squeaking out a win on EPS. Revenue came in at $1.18 billion for the quarter, down from $1.6 billion in the same quarter last year, while non-GAAP diluted EPS was $0.57. Non-GAAP net income was $176 million from the quarter, down from $334 million in Q3 2011.
Trailing twelve-month non-GAAP net revenue was $3.73 billion, down from $4.20 billion in 2011, and non-GAAP net income dropped to $151 million from $311 million. Digital was a silver lining for EA, however, with non-GAAP digital net revenue for the year up 37 percent to $1.5 billion.
So, how did EA do? The consensus estimate from analysts for EA was $0.56 earnings per share on $1.29 billion in revenue, near the midpoint of EA’s guidance, which ranged from $0.50 to $0.60 EPS and $1.25 billion to $1.35 billion in revenue, respectively. All in all, estimates have been bearish for EA, coming down from an EPS of $0.63 over the last three months. While EA was able to beat estimates by $0.01 for EPS, it missed by a fairly large margin on revenue projections of $1.29 billion.
“Despite a challenging quarter, we were able to deliver non-GAAP EPS at the high end of our guidance range,” said Chief Executive Officer John Riccitiello. “We are investing for the future wave of growth that we foresee in digital and console.”
The expectation that EA would show lower profits this quarter has been attributed to what was forecast to be declining sales of its console titles — in spite of the fact that the fourth quarter (EA’s Q3) includes holiday sales, usually a prosperous time for the gaming industry. And in spite of the fact that EA has beat estimates consistently over the last four quarters. However, holiday sales for the end of the year were slow across the industry, the company reported today, especially for console makers, which are still in the process of launching new lines.
Nonetheless, EA is still a fairly good bellweather for the games industry thanks to its diversification — the fact that it has a hand in so many different segments of the gaming space. What’s more, it remains one of the largest players in the space, even as a veteran, and one of the better-known independent game makers.
The industry itself, especially incumbents like EA, are still struggling overall to make a difficult transition to digital and mobile. To its credit, however, EA continues to increase its growth in digital, thanks to an impressive showing from Battlefield 3, which saw $108 million in sales through the third quarter, and has 2.9 million subscriptions to date.
In turn, the company’s growth in mobile continues to improve, with games and services for mobile, including handhelds, generating approximately $100 million in the quarter, an 18 percent year-over-year increase in digital net revenue. On mobile, the company saw the biggest performance boost from The Simpsons: Tapped Out, which was a top grossing game on iOS for Q3, generating $23 million in digital revenue.
“EA had six of the top twenty titles in Western markets in 2012, compared to four in 2011,” EA COO Peter Moore said in a statement. “It was also the #1 publisher on iOS worldwide for the year.”
The company had a number of sizable releases in the quarter, including FIFA Soccer 13 and Madden 13 and Need For Speed: Most Wanted, and many were expecting EA to show strong international growth thanks to the sales of these titles. However, along with Battlefield 3, it seems that FIFA 13 was the stand-out, selling over 12 million units in the third quarter, a 23 percent increase over FIFA 12, and digital net revenues for the title topped $100 million in Q3, a 98 percent increase from its predecessor.
All in all, total FIFA digital net revenue was over $230 million for the first three quarters of FY2013, including FIFA Online 2 and World Class Soccer, which contributed $60 million, EA said. Meanwhile, the company’s downloading service, Origin, now has more than 39 million registered users, including 17 million on mobile.
As to the next quarter, EA is lowering expectations, with non-GAAP net revenue expected to be between $1.025 billion to $1.125 billion, with non-GAAP diluted EPS between $0.57 to $0.72. For the fiscal year, the company expects to see non-GAAP net revenue between $3.77 billion and $3.87 billion, with non-GAAP EPS for the year between $0.86 and $1.00.
The company does have a number of new titles in the pipeline, however, which could be a positive addition to its catalog and generate some buzz, including Crysis 3, Army of Two: Devil’s Cartel, Dead Space 3 and Sim City, especially considering that Dead Space 3 and Crysis 3 preorders are up compared to their previous iterations, according to the company.
For more, find EA’s Q3 earnings report here.