For the fiscal third quarter ending December 31st, Electronic Arts has released its financial results for the period. Need for Speed Unbound and NHL 23 were both triple-A releases for the firm, and both have received positive feedback about player participation. But quarterly net bookings were down 9 percent from the prior year. It also put Apex Legends and Battlefield Mobile on hold and postponed the release of a future Star Wars game called Jedi: Survivor.
For the three months ending December 31st, EA recorded a net income of $204m based on GAAP and total net revenue of $1.881b based on net revenue. For the same period last year, it earned $66 million in profit and had revenues of $1.789 billion.
The quarterly net bookings came in at $2.342 billion, down 9 percent from the same period in fiscal year 2022’s $2.577 billion. Last quarter, it was predicted that net bookings would range from $2.425 billion to $2.5 billion, therefore this result is below expectations. After-hours trading saw a 10% drop in EA shares as investors reacted to the company’s earnings report (at the time of this writing).
During the third quarter, “EA provided high-quality experiences,” said EA CEO Andrew Wilson in a statement, “generating record engagement across some of our largest brands and extending our player network.” The present macro climate had an effect on Q3 performance, despite the fact that our teams performed for our players. We’re not worried about the here and now because we’re so busy planning for the future.
Not just Electronic Arts, but other companies as well have reported suffering the effects of the macro environment’s difficulties. Ubisoft has lowered its sales projections for the year 2023, citing “worsening macroeconomic circumstances” as one of the contributing factors.
Wilson remarked on the high levels of participation, claiming that EA now has a network of 650 million players. He also mentioned the new Dead Space game and FIFA 23, both of which were released recently and have been met with critical acclaim. He continued by saying that the game’s publisher saw an increase of more than 10 million players in the third quarter after making The Sims free to play.
For the last twelve months, net bookings were $7.146 billion, a decline of 1% from the prior year. The business said that Apex Legends’ performance often drops during this quarter. Furthermore, it coincided with Battlefield 2042’s anniversary, which led to less advertising.
A Wedbush Securities analyst named Michael Pachter explained the move by saying, “The key takeaway is that they pushed Star Wars out of the March quarter and to April 28, 2023, so they decided to ‘kitchen sink’ this year and push as much revenue into next year as they can.” This was reported in an email to GamesBeat. “Mobile remains behind, dropping year over year and at a $1.2 billion run rate, compared to $700 million before the success of Gluu and Golf Clash. Together, those two missed opportunities cost us $800 million ($1.5 billion run rate), and mobile is running roughly 20% behind schedule.
Pachter anticipates EA’s adjusted non-GAAP profits at $2.80 per share, behind the $3.15 per share predicted by Wedbush, the $3.05 per share predicted by analysts on average, and the $2.90 to $3.10 per share predicted by EA itself in its earnings guidance.
A new fiscal year has begun
While the company had previously predicted net sales of $7.55 billion to $7.75 billion for the fiscal year ending March 31, 2023, EA has lowered its forecast to a more conservative range of $7.252 billion to $7.352 billion. Nearly $182 million is estimated to be the shift in delayed net revenue from online-enabled games.
A net profit of $828 million to $869 million and diluted profits per share of $2.97 to $3.11 are also anticipated. The range of $1.4 billion and $1.5 billion in operating cash flow is projected.
As a whole, the company anticipates a range of $7.070–$7.170 billion in net bookings for the year. This would be much lower than the $7.515 billion in net bookings made in the previous fiscal year.
Forecasts for the fourth quarter
Considering the postponement of Star Wars Jedi: Survivor, Electronic Arts has revised their forecast for the last quarter of fiscal year 23. There will be a shift in deferred net revenue (online-enabled games) of about $25 million, bringing the total revenue forecast for the firm to between $1.700 billion and $1.800 billion.
Earnings per share are predicted to be between five cents and twenty cents, with a net profit between $14 million and $55 million.
Bookings-to-pay-out ratio is anticipated to be between 96.5% and 97.5%. The following quarter will see the release of many titles from the developer, including a remake of Dead Space, Wild Hearts, and EA Sports PGA Tour.
Throughout the results call, EA’s CFO Chris Suh emphasised the company’s efforts to cut operating costs, saying, “The steps we’ve taken during Q3 will lower our overall H2 operating expenditures by roughly $140 million.” We also plan to keep working toward our goals of prioritising spending across the board, assessing our real estate footprint, and investing in our greatest long-term growth possibilities.
As market volatility increased throughout the quarter, we took steps to safeguard underlying profitability,” Suh said in a statement. We are putting the needs of our players first, allocating resources where we expect to see the most return in terms of both player satisfaction and company expansion.
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