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Electronic Arts (EA) Incurs Lower-than-Expected Loss in Q1
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Electronic Arts Inc. (EA - Free Report) reported better-than-expected first quarter fiscal 2017 results. Adjusted loss per share of 8 cents was narrower than the Zacks Consensus Estimate of a loss of 14 cents while non-GAAP revenues of $682 million easily topped the consensus mark of $651.3 million. Continued increases in digital revenues and strength in titles like FIFA Ultimate Team, and mobile games like Star Wars: Galaxy of Heroes and NBA Live were the driving factors.
However, shares fell 2.5% in aftermarket trading as the guidance for the second quarter came in below market expectations. Also, the company reiterated guidance for fiscal 2017.
Back to numbers, on a non-GAAP basis, the company reported earnings per share of 7 cents a share, down from the prior-year quarter’s earnings of 15 cents a share.
Non-GAAP Digital revenues (83.3% of revenues) jumped 6.7% to $568 million while revenues from EA’s Packaging goods and other segment (16.7% of total revenue) decreased 29.2% to $114 million.
Further segregating digital revenues, Full game downloads revenues were flat at $84 million while EA mobile games increased 16% year over year to $141 million backed by Star Wars: Galaxy of Heroes and NBA. Revenues from subscriptions, advertising and other were up 20% to $85 million. Extra content revenues grew 1% to $258 million driven by FIFA Ultimate Team.
EA reported non-GAAP gross margin of 75.8%, down 90 basis points (bps) year over year. Non GAAP operating profit was $34 million compared with $60 million reported in the prior year quarter.
Balance Sheet and Cash Flow
EA exited the quarter with $3.427 billion in cash and short-term investments compared with $3.834 billion as of Mar 31, 2016. Cash used in operating activities was $248 million at the end of the quarter compared with $71 million in the year-ago quarter.
During the quarter, the company repurchased 1.9 million shares for $129 million. It still has $410 million worth of shares remaining in the buyback authorization.
Outlook
EA provided guidance for the second quarter and fiscal 2017. For the second quarter, the company expects GAAP revenues of $915 million. It is to be noted that the company will no longer provide guidance on non-GAAP measures following the stricter guidelines issued by the SEC. Revenues will be dampened due to a change in deferred revenues to the tune of $160 million. Also, FIFA 17 will be launched just four days before the second quarter ends, so most of the benefit to digital revenues will be realized in the third quarter. The company projected GAAP loss per share of 17 cents.
For fiscal 2017, EA expects to generate GAAP revenues of approximately $4.750 billion, driven by a strong pipeline of new releases namely Battlefield 1, Titanfall 2 and Mass Effect: Andromeda. GAAP earnings are expected to be $2.56 per share. Cash flow is expected to be $1.3 billion while free cash flow is likely to be $1.2 billion.
Zacks Rank &Stocks to Consider
Currently, EA has a Zacks Rank #3 (Hold). Better-ranked stocks in the tech space are Facebook Inc , Quantum Corporation and Seagate Technology plc (STX - Free Report) . While Facebook and Quantum Corporation sport a Zacks Rank #1 (Strong Buy), Seagate carries a Zacks Rank #2 (Buy).
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Electronic Arts (EA) Incurs Lower-than-Expected Loss in Q1
Electronic Arts Inc. (EA - Free Report) reported better-than-expected first quarter fiscal 2017 results. Adjusted loss per share of 8 cents was narrower than the Zacks Consensus Estimate of a loss of 14 cents while non-GAAP revenues of $682 million easily topped the consensus mark of $651.3 million. Continued increases in digital revenues and strength in titles like FIFA Ultimate Team, and mobile games like Star Wars: Galaxy of Heroes and NBA Live were the driving factors.
However, shares fell 2.5% in aftermarket trading as the guidance for the second quarter came in below market expectations. Also, the company reiterated guidance for fiscal 2017.
Back to numbers, on a non-GAAP basis, the company reported earnings per share of 7 cents a share, down from the prior-year quarter’s earnings of 15 cents a share.
Non-GAAP Digital revenues (83.3% of revenues) jumped 6.7% to $568 million while revenues from EA’s Packaging goods and other segment (16.7% of total revenue) decreased 29.2% to $114 million.
Further segregating digital revenues, Full game downloads revenues were flat at $84 million while EA mobile games increased 16% year over year to $141 million backed by Star Wars: Galaxy of Heroes and NBA. Revenues from subscriptions, advertising and other were up 20% to $85 million. Extra content revenues grew 1% to $258 million driven by FIFA Ultimate Team.
ELECTR ARTS INC Price, Consensus and EPS Surprise
ELECTR ARTS INC Price, Consensus and EPS Surprise | ELECTR ARTS INC Quote
Margins
EA reported non-GAAP gross margin of 75.8%, down 90 basis points (bps) year over year. Non GAAP operating profit was $34 million compared with $60 million reported in the prior year quarter.
Balance Sheet and Cash Flow
EA exited the quarter with $3.427 billion in cash and short-term investments compared with $3.834 billion as of Mar 31, 2016. Cash used in operating activities was $248 million at the end of the quarter compared with $71 million in the year-ago quarter.
During the quarter, the company repurchased 1.9 million shares for $129 million. It still has $410 million worth of shares remaining in the buyback authorization.
Outlook
EA provided guidance for the second quarter and fiscal 2017. For the second quarter, the company expects GAAP revenues of $915 million. It is to be noted that the company will no longer provide guidance on non-GAAP measures following the stricter guidelines issued by the SEC. Revenues will be dampened due to a change in deferred revenues to the tune of $160 million. Also, FIFA 17 will be launched just four days before the second quarter ends, so most of the benefit to digital revenues will be realized in the third quarter. The company projected GAAP loss per share of 17 cents.
For fiscal 2017, EA expects to generate GAAP revenues of approximately $4.750 billion, driven by a strong pipeline of new releases namely Battlefield 1, Titanfall 2 and Mass Effect: Andromeda. GAAP earnings are expected to be $2.56 per share. Cash flow is expected to be $1.3 billion while free cash flow is likely to be $1.2 billion.
Zacks Rank &Stocks to Consider
Currently, EA has a Zacks Rank #3 (Hold). Better-ranked stocks in the tech space are Facebook Inc , Quantum Corporation and Seagate Technology plc (STX - Free Report) . While Facebook and Quantum Corporation sport a Zacks Rank #1 (Strong Buy), Seagate carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>