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Electronic Arts (EA) Q1 Earnings Down Y/Y, Top Line Rises

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Electronic Arts EA reported first-quarter fiscal 2022 earnings of 71 cents per share, which declined 43.2% year over year.

Revenues increased 6.3% year over year to $1.55 billion, driven by strong performance of Mass Effect Legendary Edition, and It Takes Two.

The Zacks Consensus Estimate for earnings and revenues was pegged at 63 cents per share and $1.33 billion, respectively.

Net bookings decreased 3.9% year over year to $1.34 billion, better than management’s guidance of $1.25 billion, driven by robust live services performance.

Quarter Details

EA’s full-game revenues (20.8% of total revenues) decreased 10.3% year over year to $322 million. Net bookings from full games decreased 30% year over year to $187 million.

Electronic Arts Inc. Price, Consensus and EPS Surprise

Electronic Arts Inc. Price, Consensus and EPS Surprise
Electronic Arts Inc. Price, Consensus and EPS Surprise

Electronic Arts Inc. price-consensus-eps-surprise-chart | Electronic Arts Inc. Quote

Further segregating full-game revenues, full-game download revenues increased 4% year over year to $233 million. Revenues from packaged goods plunged 35% year over year to $89 million.

Live services and other revenues (79.2% of total revenues) rose 11.7% year over year to $1.23 billion. Net bookings from live services increased 12% year over year to $1.23 billion.

EA’s portfolio now spans more than 15 top mobile live services.

Based on platforms, revenues from console increased 4% year over year to $972 million in the reported quarter. Net bookings from console decreased 16% year over year to $694 million.

Revenues from PC/browser increased 11% year over year to $361 million. Net bookings from PC/browser increased 9% year over year to $370 million.

Revenues from mobile platform climbed up 8% year over year to $218 million. Net bookings from mobile increased 20% year over year to $272 million.

During the reported quarter, EA revealed Battlefield 2042. Apex Legends grew strongly in the reported quarter and remains on track to grow organically more than 20% this year, with the mobile launch as an upside.

Apex Legends Season 9 averaged more than 13 million weekly active users.

Operating Details

EA’s GAAP gross profit increased 5.6% from the year-ago quarter to $1.24 billion. Gross margin contracted 60 basis points (bps) on a year-over-year basis to 79.7%.

Operating expenses increased 30.6% from the year-ago quarter to $914 million. As a percentage of revenues, operating expenses expanded from 48% in the year-ago quarter to 58.9% in the reported quarter.

As a percentage of revenues, marketing & sales (M&S), research & development (R&D) and general & administrative (G&A) expenses expanded 400 bps, 320 bps and 160 bps, respectively.

Operating income on a GAAP basis decreased 31.6% year over year to $322 million. Operating margin contracted from 32.3% in the year-ago quarter to 20.8% in the reported quarter.

Balance Sheet and Cash Flow

As of Jun 30, 2021, EA had $3.72 billion in cash and short-term investments compared with $6.36 billion as of Mar 31, 2021.

Net cash used in operating activities in the reported quarter was $143 million compared to net cash from operating activities of $371 million in the previous quarter.

EA repurchased 2.3 million shares for $325 million during the quarter, bringing the total share count for the fiscal year to 7.2 million for $976 million.

The company also declared a quarterly cash dividend of 17 cents per share. The dividend will be paid out on Sep 22, 2021 to shareholders of record as of the close of business on Sep 1, 2021.

Guidance

For the second quarter of fiscal 2022, EA expects GAAP revenues of $1.775 billion and earnings of 36 cents per share. Net bookings are expected to be $1.725 billion.

For fiscal 2022, EA expects revenues of $6.850 billion and earnings of $1.58 per share. The company raised net bookings expectations for the year to be $7.400 billion.

Operating cash flow is estimated to be $1.85 billion.

Zacks Rank & Stocks to Consider

EA currently carries a Zacks Rank #2 (Buy).

Similarly-ranked stocks in the broader Consumer Discretionary sector are BJ’s Wholesale Club BJ and CuriosityStream CURI.

A better-ranked stock in the same sector is Century Casinos CNTY, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Century Casinos, CuriosityStream and BJ’s Wholesale are set to report their earnings results on Aug 6, 10 and 19, respectively.


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