A month has gone by since the last earnings report for Electronic Arts (
EA Quick Quote EA - Free Report) . Shares have added about 4.4% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.
Electronic Arts Q4 Earnings and Revenues Decline Y/Y
Electronic Arts reported fourth-quarter fiscal 2021 earnings of 26 cents per share, which plunged 81.8% year over year.
Revenues decreased 3% year over year to $1.34 billion. The Zacks Consensus Estimate for earnings and revenues was pegged at $1.04 per share and $1.39 billion, respectively. Net bookings increased 18.6% year over year to $1.40 billion, better than management’s guidance of $1.37 billion, driven by robust live services performance. Apex Legends delivered its largest net bookings quarter on record. Moreover, Apex Legends launched Season 8 and averaged over 12 million weekly average users, which aided net bookings growth. During the fiscal fourth quarter, EA completed the acquisition of Codemasters Group Holdings plc. Codemasters was integrated into EA for financial reporting purposes and EA’s financial results for the fiscal fourth quarter and fiscal 2021 include Codemasters’ financial results from and after Feb 18, 2021, the closing date of the Codemasters acquisition. Quarter Details
EA’s full-game revenues (18.6% of total revenues) decreased 29.8% year over year to $250 million. Net bookings from full games decreased 30% year over year to $187 million.
Further segregating full-game revenues, full-game download revenues decreased 12% year over year to $187 million. Revenues from packaged goods plunged 55% year over year to $65 million. Live services and other revenues (81.4% of total revenues) rose 6.3% year over year to $1.09 billion. Net bookings from live services increased 32% year over year to $1.3 billion. Live services performance was primarily driven by FIFA Ultimate Team and Apex Legends. Based on platforms, revenues from console decreased 5% year over year to $879 million in the reported quarter. Net bookings from console increased 21% year over year to $950 million. Revenues from PC/browser increased 8% year over year to $295 million. Net bookings from PC/browser increased 23% year over year to $346 million. Revenues from mobile platform declined 7% year over year to $172 million. Net bookings from mobile increased 2% year over year to $194 million. Important Game & Player Metrics
In the fiscal fourth quarter, average daily active
FIFA players were up 10% year over year, demonstrating continued engagement late into the season. During the fiscal year, FIFA Ultimate Team players grew 16% and FUT matches were up 180%. Mobile showed its fourth consecutive quarter of year-on-year growth, with outperformance led by Star Wars: Galaxy of Heroes and The Sims. Apex Legends has more than 100 million players life to date on console/PC. Meanwhile, The Sims 4 delivered its sixth consecutive year of growth and has almost 36 million players life to date. Markedly, the company added 42 million new players to the EA network during the fiscal year 2021. Operating Details
EA’s GAAP gross profit decreased 8.1% from the year-ago quarter to $1.02 billion. Gross margin contracted 430 basis points (bps) on a year-over-year basis to 76.3%.
Operating expenses increased 18.8% from the year-ago quarter to $521 million. As a percentage of revenues, operating expenses expanded from 51.7% in the year-ago quarter to 63.3% in the reported quarter. As a percentage of revenues, marketing & sales (M&S), research & development (R&D) and general & administrative (G&A) expenses expanded 250 bps, 580 bps and 270 bps respectively. Operating income on a GAAP basis decreased 56.4% year over year to $175 million. Operating margin contracted from 28.9% in the year-ago quarter to 13% in the reported quarter. Balance Sheet and Cash Flow
As of Mar 31, 2021, EA had $6.36 billion in cash and short-term investments compared with $6.71 billion as of Dec 31, 2020.
Net cash from operating activities in the reported quarter was $371 million compared with $1.12 billion in the previous quarter and $498 million in the year-ago quarter. EA repurchased 2.4 million shares for $325 million during the quarter, bringing the total for the fiscal year to 5.6 million shares for $729 million. The company also declared a quarterly cash dividend of 17 cents per share. The dividend will be paid out on Jun 23, 2021 to shareholders of record as of the close of business on Jun 2, 2021. Guidance
For the first quarter of fiscal 2022, EA expects GAAP revenues of $1.475 billion, cost of revenues to be $287 million, and operating expenses of $955 million. EA anticipates earnings per share of 24 cents for the fiscal first quarter. Net bookings are expected to be $1.25 billion.
For fiscal 2022, EA expects revenues of $6.8 billion, cost of revenues to be $1.828 billion, and earnings per share of $1.34. The company raised net bookings expectations for the year to be $7.3 billion, up around 18% year over year, which includes the impact of acquisitions of Glu Mobile, Codemasters and Metalhead Software. This is driven by continued strength in its live services, particularly Ultimate Team and Apex Legends. The Apex Legends franchise is expected to deliver well over $750 million in net bookings this fiscal year, up around 20% year over year. Operating cash flow is estimated to be $1.75 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?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -63.05% due to these changes.
Currently, Electronic Arts has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
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.