Electronic Arts Reports Q3 FY19 Financial Results: underperformed to expectations ; BFV 7.3M ; Fifa 19 flat ; PvZ & NFS in the works

Oct 25, 2017
9,498
#1
https://ir.ea.com/press-releases/pr...eports-Q3-FY19-Financial-Results/default.aspx

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2018.

News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.

“The video game industry continues to grow through a year of intense competition and transformational change,” said CEO Andrew Wilson. “Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations. We are now applying the strengths of our company to sharpen our execution and focus on delivering great new games and long-term live services for our players. We’re very excited about Apex Legends, the upcoming launch of Anthem, and a deep line-up of new experiences that we’ll bring to our global communities next fiscal year.”

“FIFA stands out as a robust franchise through a tumultuous year in the video game industry,” said COO and CFO Blake Jorgensen. “Elsewhere in the business, we’re making adjustments to improve execution and we’re refocusing R&D. Looking forward, we’re delighted to launch Anthem, our new IP, to grow Apex Legends and related Titanfall experiences, to deliver new Plants vs. Zombies and Need for Speed titles, and to add Star Wars Jedi: Fallen Order to our sports titles in the fall.”
Selected Operating Highlights and Metrics

  • Digital net bookings* for the trailing twelve months was $3.577 billion, up 6% year-over-year and represents 74% of total net bookings.
  • During the quarter, launched Battlefield™ V and Command & Conquer™: Rivals.
  • On February 4, 2019, launched Apex Legends™, a new battle royale experience from Respawn.
  • During the quarter, FIFA Ultimate Team™ matches played increased 15% year-over-year.
  • During calendar 2018, FIFA 19 was the highest-selling console game in Europe.
Selected Financial Highlights and Metrics

All financial measures are presented on a GAAP basis.

  • Net cash from operating activities was $954 million for the quarter and $1.563 billion for the trailing twelve months, a record third quarter trailing twelve months.
  • EA repurchased 3.2 million shares for $292 million during the quarter and 9.0 million shares for $1.039 billion during the trailing twelve months.
https://seekingalpha.com/news/3429897-electronic-arts-minus-10_6-percent-q3-miss-trimmed-guidance

While digital revenues of $1.2B were mostly in line, packaged goods and other revenues of $410M fell well short of consensus for $527.7M.

Gross profit rose to $876M, up 33% Y/Y. Gross margin came in at 77.4%.

Net revenue breakout: Product, $552M (up 0.9%); Service and other, $737M (up 20.2%).
For Q4 it's guiding to net bookings of about $1.17B, below consensus for $1.75B.

It expects 2019 adjusted revenue of about $4.875B, down from a previous forecast for $5.2B, and sees adjusted EPS coming in at $3.85 vs. a prior $4.57.

Conference call to come at 5 p.m. ET.
This chart here compares 2018's guidances versus the actual results + comparison with Q4 CY2017.



EA is currently trading -10.6% following those reports.

Bullet points of the conference call:

- Battlefield V was pushed to November and focused on adding a single player campaign over a battle royale mode at launch. Did not meet sales expectations during the holiday quarter. 27 million have played Battlefield games in the past fiscal year.
- Command and Conquer mobile games did not drive high installs and revenue, thus underperforming. FIFA Online 4 performing well in Korea. Performing better than FIFA Online 3 when launch aligned. The game did not perform in China in the same way.
- 47% of full EA game sales on PS4/XB1 were digital over the past 12 months. It was 37% during the 12 months prior to the period above. Battlefield V had a high digital ratio, more so than Battlefront 2.
- Now that Apex Legends is out, Respawn also plans to launch another "premium game" with a unique twist on the Titanfall universe, this year.
- FIFA 19 unit sales are flat compared to FIFA 18, and have not met internal expectations. Still, calendar year 2018 the company sold more units of FIFA franchise than any before. This implies that prior year games especially FIFA 18 are still tracking well.
- Anthem expected to sell around 5 to 6 million units before the end of the fiscal year (which ends March 31st 2019). The game launches this month.
- EA Access is coming to "a major platform" (PS4).
- Respawn now has two fully staffed teams + access to EA scale and resources. One team working on Shooters, other working on Action Adventure.
- Is developing technology that can accelerate cloud/streaming games.
- Can increase potential addressable market to 2.5b to 3b
- Has an advantage with its already existing subscription service.
- Apex Legends stats: 2.5 million unique users in the game after 24 hours. Trending towards 3 million users. 600K peak concurrent users.
- EA says Apex Legends built from the ground up. Will be operated as a live service with content updates and changes. Opportunities to take the game in different directions. Esports will be part of that. New game modes, legends etc... Looking at mobile ver. and crossplay

(Sources: https://twitter.com/ZhugeEX and https://twitter.com/DomsPlaying)

EA's end remarks and transcript:

https://s22.q4cdn.com/894350492/files/doc_financials/2019/q3/Q3-FY19-Prepared-Remarks-FINAL.pdf

In addition to Apex Legends, another team at Respawn is set to deliver Star Wars Jedi: Fallen Order this fall. The game’s development is led by the former director of the God of War series, with a team of veterans from some of the industry’s biggest action-adventure games. It’s very far along in development, and having spent time with it recently myself, it plays spectacularly well. This game truly captures the fantasy of becoming a Jedi, and we will have a lot more to share soon.
Our plans for FIFA 18 were aggressive in a World Cup year, and we ended up selling an additional 2.4 million units of FIFA 18 throughout the year, with the intention of converting those players to FIFA 19 when it launched.
Fiscal year to date sales for FIFA 19 are approximately 20 million units, and we’ve also sold over 3 million units of FIFA 18 this fiscal year. And, as Andrew said, FIFA 19 was the bestselling console game in Europe in calendar 2018.
As Andrew discussed, the desire to make changes to Battlefield V led us to move its launch into a more difficult window, and prioritizing the single-player campaign over battle royale also hurt sales. As a result, we sold 7.3 million units, about 1 million less than comprehended by our Q3 guidance.
We will launch Star Wars Jedi: Fallen Order, a new Plants vs. Zombies shooter and a new Need for Speed. We have modest expectations for Battlefield and Anthem live services, given that they are not yet proven. We continue to refine mobile live services and work on new games. Overall, we expect net bookings to grow low single digits and for underlying profitability to grow in line with that.
 
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Oct 25, 2017
274
NJ & NYC
#5
Confirmation that BFV really under-performed. Normally after a Battlefield game, EA touts the number of players or how the launch went. Like with BF1 in 2017Q3:

Battlefield™ 1 was our biggest Battlefield launch ever and has a player base more than 50% larger than that of Battlefield 4™ in its comparable launch quarter.

https://s22.q4cdn.com/894350492/fil...3_Earnings_Release_vFINAL_WithPressTables.pdf

Here there's absolutely no mention at all. Unfortunate.
 

Strafer

The Flagpole is Wider
Member
Oct 25, 2017
16,259
Sweden
#6
I know what could make you some easy money EA.

Remaster the Mass Effect Trilogy and Dead Space Trilogy.
 
Oct 25, 2017
5,349
Los Angeles
#9
Looking forward, we’re delighted to launch Anthem, our new IP, to grow Apex Legends and related Titanfall experiences, to deliver new Plants vs. Zombies and Need for Speed titles, and to add Star Wars Jedi: Fallen Order to our sports titles in the fall.
Yikes at them not even mentioning BFV BR launching this spring & "will believe it when i see it" that Fallen Order launches this year
 
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LordKano
Oct 25, 2017
9,498
#19
EA's conference call is in less than ten minutes. Watch out for journalist twitter accounts as they'll report what is said.
 
Oct 13, 2018
440
#20
only $4.875B instead of $5.2B. Completely doomed.
I would agree mostly except we live in a capitalist world where companies like Electronic Arts are required to show growth above all else, and if not, are cut, trimmed, sliced till results reflect that outcome and the result is usually negative for the people working for them, their products and consumers.

So for EA to announce before BFV even launched, a decline in predicted Q3 earnings, and then to announce today they missed that reduced prediction is in my opinion, a horrible misjudgement and bungling of BFV. This also will affect consumers and developers as EA could undertake any sort of actions to either cut costs, regain revenue, move or restructure development teams, etc.
 
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LordKano
Oct 25, 2017
9,498
#21

$EA Conference Call: Battlefield V was pushed to November and focused on adding a single player campaign over a battle royale mode at launch. Did not meet sales expectations during the holiday quarter. 27 million have played Battlefield games in the past fiscal year.

EA notes that its Command and Conquer mobile games did not drive high installs and revenue, thus underperforming. FIFA Online 4 performing well in Korea. Performing better than FIFA Online 3 when launch aligned. The game did not perform in China in the same way.
 

Claven

Game Localization
Verified
Aug 22, 2018
1,899
#29
I honestly can't see Anthem performing up to their expectations. Firstly because they will almost certainly have crazy unrealistic expectations (in the words of Jim Sterling, "they want ALL THE MONEY"), and secondly because the recent demos were rough as fuck and the word of mouth is far from overwhelmingly positive.

That is to say, Anthem will probably sell very well regardless, but almost certainly not according to their expectations.
 
Oct 26, 2017
600
#30
EA and "focusing on Anthem" basically has me worried that Anthem will have microtransactions the minute EA feels the game underperformed in the first two months.
 
Jul 25, 2018
3,261
#31
Since July, EA's revenue forecast for the fiscal year has dropped 11.4% from $5.5BN to $4.875BN. In that same time frame, the stock is down 46%. That just goes to show the amount of hot air built into most stock prices, and how far they can fall before people start thinking they're cheap.

I think this sell-off will be brief and they'll have a good few weeks on Apex and Anthem hype.
 
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LordKano
Oct 25, 2017
9,498
#32
Actually, even Fifa 19 underperformed.


Electronic Arts $EA FIFA 19 unit sales are flat compared to FIFA 18, and have not met internal expectations. Still, calendar year 2018 the company sold more units of FIFA franchise than any before. This implies that prior year games especially FIFA 18 are still tracking well.
 
Oct 27, 2017
6,948
#35
Been listening to Disney’s investor call today and when asked about gaming, Iger continued to show no interest in self-publishing and to continue licensing plans.

He also mentioned EA positively as a partnership(but it was a pretty surface response with no nuance or connection to external controversy, so don’t take it to mean anything beyond they will continue to outsource their licensing in that market).
 
Oct 28, 2017
3,359
#36
If Fifa ever starts to underperform EA is fucked.

Creatively andrew wilsons time as CEO has been a disaster.
 
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LordKano
Oct 25, 2017
9,498
#37

EA says that 47% of its full game sales on PS4/XB1 were digital over the past 12 months. It was 37% during the 12 months prior to the period above. Battlefield V had a high digital ratio, more so than Battlefront 2.

EA says that they expect Anthem to sell around 5 to 6 million units before the end of the fiscal year (which ends March 31st 2019). The game launches this month.
 
Oct 25, 2017
2,836
#38
I honestly can't see Anthem performing up to their expectations. Firstly because they will almost certainly have crazy unrealistic expectations (in the words of Jim Sterling, "they want ALL THE MONEY"), and secondly because the recent demos were rough as fuck and the word of mouth is far from overwhelmingly positive.

That is to say, Anthem will probably sell very well regardless, but almost certainly not according to their expectations.
This is my feeling as well on Anthem. It will do fine enough to continue on for awhile, but I don't see it becoming The Next Big Thing.
 
Oct 13, 2018
440
#39
If a company states expectations that always never come true, aside from being required to not lie to investors, the company runs into a problem like when they ask for more money, or better debt terms or to buy other companies, and all their lying/misleading statements come back to slap them in the face as investors will be less willing to believe or trust the company.

So for EA to miss their projections, isn't just the stock market saying EA fucked up, it's EA themselves saying they fucked up. The CEO statement is the most obvious example. That's a problem.
 
Oct 25, 2017
5,540
#44
I really wonder if Anthem will reach those goals cause honestly it isn’t even a crazy amount. The demo probably hurt it a ton cause I went from a buy to wait for a deep discount and more polish.
 
Oct 27, 2017
751
#45
The stock market is so crazy. They still made a shit ton of money but not "enough" money.
Stocks are priced based on past/present performance and future expectations. The Stock was priced with an expectation of hitting a certain target revenue/profit that EA said they would get. If a result/news impacts any of these there is a price correction. They missed their target so the price corrects. This is normal.
 
Apr 6, 2018
1,863
#46
I hope there aren't any people celebrating in here, cos this sends all the messages that you guys hate.

Microtransactions carried them in difficult times, FIFA was the one thing that succeeded.

Obviously the main reason is the flop of BF5. For some idiotic reason they prioritised a SP campaign in BF5? What? How the hell did they decide that would be worth it over a battle royale mode? Just confirms again (to them and to us) that SP isn't worth it for FPS, especially on top of the Respawn news.

Despite protests to the contrary one of the main reasons for this was the blowback from the reveal. Again, do you want to celebrate the message that sends out?
 
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LordKano
Oct 25, 2017
9,498
#50

- Is developing technology that can accelerate cloud/streaming games.
- Can increase potential addressable market to 2.5b to 3b
- Has an advantage with its already existing subscription service.

Apex Legends stats: 2.5 million unique users in the game after 24 hours. Trending towards 3 million users. 600K peak concurrent users.