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Electronic Arts (EA) Up 1.7% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have added about 1.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Electronic Arts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts reported first-quarter fiscal 2021 earnings of $1.25 per share, which declined 73.7% year over year.
Revenues however rose 20.7% year over year to $1.45 billion. At the beginning of fiscal 2021, EA changed the way in which it reports net bookings. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. Net bookings increased 77.7% year over year to $1.39 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at 82 cents per share and $1.07 billion, respectively.
Quarter Details
EA’s full game revenues (24.6% of total revenues) grew 37% year over year to $359 million. Net bookings from full games increased 202% year over year to $287 million.
Moreover, live services and other revenues (75.4% of total revenues) rose 16.2% year over year to $1.1 billion. Net bookings from live services increased 61% year over year to $1.1 billion.
Further segregating full-game revenues, full-game download revenues increased 68% year over year to $233 million. Revenues from packaged goods increased 5% year over year to $136 million.
Based on its platforms, revenues from console increased 23% year over year to $932 million. Net bookings from console increased 98% year over year to $824 million.
Revenues from PC/browser were up 28% year over year to $325 million. Net bookings from PC/browser increased 74% year over year to $340 million.
Revenues from mobile platform increased 3% year over year to $202 million. Net bookings from mobile increased 32% year over year to $226 million driven by strong popularity of sports titles in Asia.
Important Game & Player Metrics
The company launched two games during the quarter namely Command & Conquer Remastered, which became a top-selling title on Origin and Steam, and Burnout Paradise Remastered on Nintendo Switch.
Additionally, EA delivered more than 30 new content updates for console and PC titles, including two major game expansions, as well as more than 50 updates to mobile games.
Moreover, during the quarter, EA launched nearly 30 titles on the Steam platform. Origin business grew 75% year over year by opening up the ability for Steam and Origin players to play together.
Moreover, Madden NFL 20 is delivering the highest engagement levels with player acquisition growth of nearly 140% year over year.
Further, FIFA grew year over year in the fiscal first quarter. Acquisition of new and returning players in FIFA grew more than 100% year over year with more than 7 million joining during the quarter.
Moreover, FIFA Online continued to perform strongly, engaging nearly 30 million players to date especially in Asia amid coronavirus lockdown.
Notably, fiscal first quarter 2021 saw the most game sessions played and highest revenue total since the launch quarter for Apex Legends. Engagement in Season 5 reached the highest levels since its first new season of content. The in-game event, Lost Treasures had more than 96 million hours played in the first two weeks. Apex Legends Season 5 outperformed in each of the two prior seasons, even before COVID-19 stay-at-home orders were rolled out.
The Sims 4 now has more than 30 million players life-to-date across all platforms, and daily, weekly and monthly active player totals in the game reached record highs in the first quarter.
Operating Details
EA’s GAAP gross profit increased 14.6% from the year-ago quarter to $1.17 billion. However, gross margin contracted 430 basis points (bps) on a year-over-year basis to 80.3%.
Operating expenses increased 15.3% from the year-ago quarter to $700 million. As a percentage of revenues, operating expenses contracted 220 bps on a year-over-year basis to 48%.
As a percentage of revenues, marketing & sales (M&S) and research & development (R&D) expenses shrank 80 bps and 1500 bps, respectively. Meanwhile, general & administrative (G&A) expenses expanded 20 bps in the reported quarter.
Operating income on a GAAP basis increased 13.5% year over year to $471 million. As a percentage of revenues, operating margin contracted 200 bps on a year-over-year basis to 32.3%.
Balance Sheet and Cash Flow
As of Jun 30, 2020, EA had $5.9 billion in cash and short-term investments compared with $5.7 billion as of Mar 31, 2020.
Net cash from operating activities in the reported quarter was $$378 million compared with $1.79 billion in the previous quarter.
EA repurchased 747K shares for $78 million in the reported quarter completing its $2.4 billion, two-year repurchase program.
Guidance
For the second quarter of fiscal 2021, EA expects GAAP revenues of $1.2125 billion. Net bookings are expected to be $875 million.
EA anticipates earnings to be 21 cents per share.
For fiscal 2021, EA expects GAAP revenues of $5.625 billion and net bookings of $5.95 billion.
Additionally, earnings are expected to be $2.97 per share.
Operating cash flow is estimated to be $1.85 billion.
Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -157.4% due to these changes.
VGM Scores
At this time, Electronic Arts has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Electronic Arts (EA) Up 1.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Electronic Arts (EA - Free Report) . Shares have added about 1.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Electronic Arts due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Electronic Arts (EA - Free Report) Q1 Earnings Decline Y/Y, Revenues Rise
Electronic Arts reported first-quarter fiscal 2021 earnings of $1.25 per share, which declined 73.7% year over year.
Revenues however rose 20.7% year over year to $1.45 billion. At the beginning of fiscal 2021, EA changed the way in which it reports net bookings. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. Net bookings increased 77.7% year over year to $1.39 billion.
The Zacks Consensus Estimate for earnings and revenues was pegged at 82 cents per share and $1.07 billion, respectively.
Quarter Details
EA’s full game revenues (24.6% of total revenues) grew 37% year over year to $359 million. Net bookings from full games increased 202% year over year to $287 million.
Moreover, live services and other revenues (75.4% of total revenues) rose 16.2% year over year to $1.1 billion. Net bookings from live services increased 61% year over year to $1.1 billion.
Further segregating full-game revenues, full-game download revenues increased 68% year over year to $233 million. Revenues from packaged goods increased 5% year over year to $136 million.
Based on its platforms, revenues from console increased 23% year over year to $932 million. Net bookings from console increased 98% year over year to $824 million.
Revenues from PC/browser were up 28% year over year to $325 million. Net bookings from PC/browser increased 74% year over year to $340 million.
Revenues from mobile platform increased 3% year over year to $202 million. Net bookings from mobile increased 32% year over year to $226 million driven by strong popularity of sports titles in Asia.
Important Game & Player Metrics
The company launched two games during the quarter namely Command & Conquer Remastered, which became a top-selling title on Origin and Steam, and Burnout Paradise Remastered on Nintendo Switch.
Additionally, EA delivered more than 30 new content updates for console and PC titles, including two major game expansions, as well as more than 50 updates to mobile games.
Moreover, during the quarter, EA launched nearly 30 titles on the Steam platform. Origin business grew 75% year over year by opening up the ability for Steam and Origin players to play together.
Moreover, Madden NFL 20 is delivering the highest engagement levels with player acquisition growth of nearly 140% year over year.
Further, FIFA grew year over year in the fiscal first quarter. Acquisition of new and returning players in FIFA grew more than 100% year over year with more than 7 million joining during the quarter.
Moreover, FIFA Online continued to perform strongly, engaging nearly 30 million players to date especially in Asia amid coronavirus lockdown.
Notably, fiscal first quarter 2021 saw the most game sessions played and highest revenue total since the launch quarter for Apex Legends. Engagement in Season 5 reached the highest levels since its first new season of content. The in-game event, Lost Treasures had more than 96 million hours played in the first two weeks. Apex Legends Season 5 outperformed in each of the two prior seasons, even before COVID-19 stay-at-home orders were rolled out.
The Sims 4 now has more than 30 million players life-to-date across all platforms, and daily, weekly and monthly active player totals in the game reached record highs in the first quarter.
Operating Details
EA’s GAAP gross profit increased 14.6% from the year-ago quarter to $1.17 billion. However, gross margin contracted 430 basis points (bps) on a year-over-year basis to 80.3%.
Operating expenses increased 15.3% from the year-ago quarter to $700 million. As a percentage of revenues, operating expenses contracted 220 bps on a year-over-year basis to 48%.
As a percentage of revenues, marketing & sales (M&S) and research & development (R&D) expenses shrank 80 bps and 1500 bps, respectively. Meanwhile, general & administrative (G&A) expenses expanded 20 bps in the reported quarter.
Operating income on a GAAP basis increased 13.5% year over year to $471 million. As a percentage of revenues, operating margin contracted 200 bps on a year-over-year basis to 32.3%.
Balance Sheet and Cash Flow
As of Jun 30, 2020, EA had $5.9 billion in cash and short-term investments compared with $5.7 billion as of Mar 31, 2020.
Net cash from operating activities in the reported quarter was $$378 million compared with $1.79 billion in the previous quarter.
EA repurchased 747K shares for $78 million in the reported quarter completing its $2.4 billion, two-year repurchase program.
Guidance
For the second quarter of fiscal 2021, EA expects GAAP revenues of $1.2125 billion. Net bookings are expected to be $875 million.
EA anticipates earnings to be 21 cents per share.
For fiscal 2021, EA expects GAAP revenues of $5.625 billion and net bookings of $5.95 billion.
Additionally, earnings are expected to be $2.97 per share.
Operating cash flow is estimated to be $1.85 billion.
Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -157.4% due to these changes.
VGM Scores
At this time, Electronic Arts has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Electronic Arts has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.