Electronic Arts (EA 0.79%) reported fiscal third-quarter financial results on Feb. 5. Despite double-digit revenue gains, lower-than-expected sales of a major game title and difficulties in the mobile market drove the digital entertainment giant to slash its full-year revenue forecast.
Electronic Arts results: The raw numbers
|
Metric |
Q3 2019 |
Q3 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Net revenue |
$1.289 billion |
$1.160 billion |
11% |
|
Net income |
$262 million |
($186 million) |
N/A |
|
Earnings per share |
$0.86 |
($0.60) |
N/A |
Data source: Electronic Arts Q3 2019 earnings release.
What happened with Electronic Arts this quarter?
Digital net bookings -- essentially, the dollar amount of products and services Electronic Arts sold via digital channels -- fell 3% year over year to $1.199 billion.
The game maker's live services net bookings, which include its subscription services and in-game sales, decreased 0.4% to $784 million. Mobile net bookings, meanwhile, fell 22% to $142 million.
"The video game industry continues to grow through a year of intense competition and transformational change," CEO Andrew Wilson said in a press release. "Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations."
The shortfall was due in part to weaker-than-expected sales of Battlefield V, which were negatively impacted by development delays that forced EA to postpone its launch until November. "Unfortunately, the later release date meant the game launched deeper into a competitive holiday window where heavy price discounting was a big factor," Wilson said during a conference call with analysts.
Launching Battlefield V primarily as a single-player experience -- rather than a multiplayer battle royale format made popular by Epic Games' incredibly successful Fortnite -- also hurt sales. Consequently, EA sold 7.3 million copies of Battlefield V in the third quarter -- about 1 million less than the company expected.
In all, EA's net revenue rose 11% to $1.289 billion. That fell short of the company's guidance by $86 million. Lower-than-anticipated operating expenses, however, helped EA's earnings per share -- which came in a $0.86 -- exceed its guidance by $0.25.
Check out the latest earnings call transcript for Electronic Arts.
Image sources: Getty Images.
Looking forward
Wilson said that "significant" competitive challenges would continue to weigh on Electronic Arts' results in the fourth quarter. In response, the company cut its full-year net bookings guidance to $4.75 billion, down from a prior estimate of $5.2 billion. It also lowered its revenue forecast to $4.875 billion from $5.15 billion.
Management, however, remains optimistic that a slate of new game launches can help it right the ship. The company recently launched Apex Legends, a new free-to-play battle royale game that quickly became the No. 1 title on popular gaming platform Twitch. Electronic Arts plans to release its highly anticipated Anthem game on Feb. 22 and a promising Star Wars Jedi: Fallen Order game this fall.
"As we take action to address our challenges, our underlying business is strong, our pipeline is robust, our teams have amazing talent, and we're confident for the future," Wilson said.
