EA Third Quarter Results Reported

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Electronic Arts Inc. (NASDAQ:ERTS) today announced preliminary financial results for its fiscal third quarter ended December 31, 2008.

Fiscal Third Quarter Results (comparisons are to the quarter ended December 31, 2007)

GAAP net revenue for the third quarter was $1.65 billion, up $151 million as compared with $1.50 billion for the prior year. During the quarter, EA had a net deferral of $88 million of net revenue related to certain online-enabled packaged goods games and digital content as compared with $231 million in the prior year.

Non-GAAP net revenue was $1.74 billion, as compared with $1.73 billion for the prior year. Sales were driven by FIFA 09, Rock Band 2, Need for Speed Undercover, Rock Band, Left 4 Dead, Dead Space, Madden NFL 09, LITTLEST PET SHOP, NBA Live 09 and Mirror’s Edge.

GAAP net loss for the quarter was $641 million, including certain charges, as compared with a net loss of $33 million for the prior year. Diluted loss per share was $2.00 as compared with diluted loss per share of $0.10 for the prior year. During the quarter, the Company recorded an estimated pre-tax goodwill impairment charge of $368 million related to its wireless business and a $244 million charge for a valuation allowance reserve on certain deferred tax assets.

Non-GAAP net income was $179 million as compared with non-GAAP net income of $290 million a year ago. Non-GAAP diluted earnings per share were $0.56 as compared with non-GAAP diluted earnings per share of $0.90 for the prior year.

Trailing-twelve-month operating cash flow was $82 million as compared with $267 million a year ago. The Company ended the quarter with cash and short-term investments of $2.0 billion.

“Our holiday quarter came in below our expectations and we have significantly reduced our financial outlook for fiscal 2009, a clear disappointment,” said John Riccitiello, Chief Executive Officer. “We delivered on game quality and innovation in calendar 2008, with 13 titles rated 80 or above -- more than any third-party publisher. We expect to build on this great quality record in the year ahead while delivering more profitability.”

As a part of an overall cost reduction program, the Company is reducing its workforce by approximately 11%, or 1,100 people, closing 12 facilities, narrowing its product portfolio and cutting other variable costs. The Company expects to incur total restructuring charges, including severance and facility closures, of $65 to $75 million, which will be recorded over the next twelve months.

“Given our recent performance and the current economic environment, we are aligning our cost structure with a lower projection of revenue, resulting in approximately $500 million of operating expense reductions in fiscal 2010 as compared with our previous plans,” said Eric Brown, Chief Financial Officer.

Highlights

  • EA was the leading publisher in North America with approximately 20 percent segment share according to NPD. In Europe, EA was number two behind Nintendo with an estimated 16 percent segment share.
  • EA had 13 titles rated 80 or above in calendar 2008 – up from seven a year ago.
  • FIFA 09 was EA’s best selling title with 7.8 million copies and charted at number one across all platforms in Europe in the holiday quarter.
  • Rock Band was the number one title across all platforms in North America for calendar 2008, based on NPD data.
  • Need for Speed Undercover sold 5.2M copies. For fiscal year 2010, the Company will launch three separate versions of Need For Speed (NFS), NFS Shift for the PLAYSTATION3 computer entertainment system and Xbox 360 video game and entertainment system, NFS Nitro for the Wii and Nintendo DS and NFS World Online for the PC.
  • LITTLEST PET SHOP sold 2.8 million copies on the Nintendo DS, Wii and PC. In the holiday quarter, it was a top-five title on the Nintendo DS in Europe and North America, based on NPD data.
  • Warhammer Online: Age of Reckoning, an MMO from EA’s Mythic Entertainment studio, ended the quarter with over 300K paying subscribers in North America and Europe.
  • EA’s digital direct-to-consumer revenue, which includes online and wireless, was $313 million year-to-date, up 27 percent year-over-year.
  • Pogo achieved an all-time high of 1.7M paying subscribers in the quarter.
  • EA Mobile is the world’s leading publisher of games for phones – with revenue of $50 million in the quarter – up 28 percent year-over-year.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of February 3, 2009. Results may be materially different and are affected by many factors, including: development delays on EA’s products; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; expected savings and impact on EA’s operations of the Company’s cost reduction plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; changes in foreign exchange rates; the financial impact of potential future acquisitions by EA; the popular appeal of EA’s products; EA’s effective tax rate; and other factors detailed in this release and in EA’s annual and quarterly SEC filings.

The Company updated its fiscal year 2009 guidance and provided initial guidance for fiscal year 2010.
 

In : PC

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