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Electronic Arts (EA) Posts Better-than-Expected Q2 Earnings
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Electronic Arts Inc. (EA - Free Report) reported better-than-expected second-quarter fiscal 2017 results. Adjusted earnings per share (including stock based but excluding deferred revenue and other onetime items adjusted for taxes) of 43 cents were way ahead of the Zacks Consensus Estimate of 29 cents. Revenues (including deferred revenues) were $1.098 billion, much ahead of $1.091 billion.
It is to be noted that EA and a host of other video game companies have changed the way they report their non GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online enabled products.
Per EA, excluding deferred net revenues, total revenue came in at $898 million, up 10% year over year. Continued increases in digital revenues and strength in EA Sports titles and mobile games like Star Wars: Galaxy of Heroes and FIFA Live, NBA Live were the driving factors.
On a GAAP basis, the company reported loss per share of 13 cents a share, narrower than the prior-year quarter’s loss of 45 cents a share.
EA’s (on GAAP basis) digital revenues (73% of revenues) jumped 13% to $566 million while revenues from EA’s Packaging goods and other segment (37% of total revenue) increased 6% to $332 million.
Further segregating digital revenues, full game downloads revenues were up 15% to $94 million while EA mobile games increased 21% year over year to $149 million backed by Star Wars: Galaxy of Heroes and NBA live. Revenues from subscriptions, advertising and other were down1% to $83 million. Extra content revenues grew 13% to $240 million.
Margins
EA reported gross margin of 55.3%, down 550 basis points (bps) year over year.
Operating loss was $49 million, much narrower than $119 million reported in the prior-year quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2016, EA had $3.266 billion in cash and short-term investments compared with $3.834 billion as of Mar 31, 2016. For the first six months of fiscal 2017, cash used in operating activities was $139 million compared with $62 million a year ago.
During the quarter, the company repurchased 1.6 million shares for $127 million. It still has $282 million worth of shares remaining in the buyback authorization.
EA provided guidance for the third quarter and upped its fiscal 2017 guidance given anticipation of strong demand for new Battlefield and Titanfall games and strength in mobile games.
For the third quarter, the company expects GAAP revenues of $1.125 billion. Change in deferred revenues will be to the tune of $910 million. The company projects loss per share of 17 cents.
For fiscal 2017, EA now expects to generate GAAP revenues of approximately $4.775, ahead of $4.750 billion projected earlier. Change in deferred revenues will be to the tune of $150 million. GAAP earnings are expected to be $2.69, much ahead of $2.56 per share projected earlier. Cash flow is expected to be $1.3 billion while free cash flow is likely to be $1.2 billion.
Our take
We believe that EA’s popular franchises, and strength in digital business, especially mobile, are key growth catalysts. Moreover, cost optimization initiatives will be beneficial going forward.
However, the hit driven nature of the video game industry and stiff competition from other game makers such as Activision , Zynga Inc and Glu Mobile Inc. remains concerns.
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Electronic Arts (EA) Posts Better-than-Expected Q2 Earnings
Electronic Arts Inc. (EA - Free Report) reported better-than-expected second-quarter fiscal 2017 results. Adjusted earnings per share (including stock based but excluding deferred revenue and other onetime items adjusted for taxes) of 43 cents were way ahead of the Zacks Consensus Estimate of 29 cents. Revenues (including deferred revenues) were $1.098 billion, much ahead of $1.091 billion.
It is to be noted that EA and a host of other video game companies have changed the way they report their non GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online enabled products.
Per EA, excluding deferred net revenues, total revenue came in at $898 million, up 10% year over year. Continued increases in digital revenues and strength in EA Sports titles and mobile games like Star Wars: Galaxy of Heroes and FIFA Live, NBA Live were the driving factors.
On a GAAP basis, the company reported loss per share of 13 cents a share, narrower than the prior-year quarter’s loss of 45 cents a share.
EA’s (on GAAP basis) digital revenues (73% of revenues) jumped 13% to $566 million while revenues from EA’s Packaging goods and other segment (37% of total revenue) increased 6% to $332 million.
Further segregating digital revenues, full game downloads revenues were up 15% to $94 million while EA mobile games increased 21% year over year to $149 million backed by Star Wars: Galaxy of Heroes and NBA live. Revenues from subscriptions, advertising and other were down1% to $83 million. Extra content revenues grew 13% to $240 million.
Margins
EA reported gross margin of 55.3%, down 550 basis points (bps) year over year.
Operating loss was $49 million, much narrower than $119 million reported in the prior-year quarter.
Balance Sheet and Cash Flow
As of Sep 30, 2016, EA had $3.266 billion in cash and short-term investments compared with $3.834 billion as of Mar 31, 2016. For the first six months of fiscal 2017, cash used in operating activities was $139 million compared with $62 million a year ago.
During the quarter, the company repurchased 1.6 million shares for $127 million. It still has $282 million worth of shares remaining in the buyback authorization.
ELECTR ARTS INC Price, Consensus and EPS Surprise
ELECTR ARTS INC Price, Consensus and EPS Surprise | ELECTR ARTS INC Quote
Outlook
EA provided guidance for the third quarter and upped its fiscal 2017 guidance given anticipation of strong demand for new Battlefield and Titanfall games and strength in mobile games.
For the third quarter, the company expects GAAP revenues of $1.125 billion. Change in deferred revenues will be to the tune of $910 million. The company projects loss per share of 17 cents.
For fiscal 2017, EA now expects to generate GAAP revenues of approximately $4.775, ahead of $4.750 billion projected earlier. Change in deferred revenues will be to the tune of $150 million. GAAP earnings are expected to be $2.69, much ahead of $2.56 per share projected earlier. Cash flow is expected to be $1.3 billion while free cash flow is likely to be $1.2 billion.
Our take
We believe that EA’s popular franchises, and strength in digital business, especially mobile, are key growth catalysts. Moreover, cost optimization initiatives will be beneficial going forward.
However, the hit driven nature of the video game industry and stiff competition from other game makers such as Activision , Zynga Inc and Glu Mobile Inc. remains concerns.
Currently, Electronic Arts has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
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Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand.Click to see them now>>