EA meets Q2 predictions

EA meets Q2 predictions
Seth Tipps

By Seth Tipps

October 31st 2012 at 6:38AM

Company claims non-GAAP profit of $49m, but GAAP figures paint a darker picture

EA has met its financial benchmark for the second quarter of FY 2013, but the report to investors contains equal cause for distress and celebration.

The company is one of many plagued by rising costs as industry change erodes the financial foundations of mianstream publishing.

While EA claims a 40 percent growth in digital revenues, the cost of this achievement is hidden by the more publicly touted non-GAAP figures.

These numbers don't have to include all the costs the company incurs in the getting of revenue, and the difference is telling.

While non-GAAP revenues of $1.08 billion amounts to a quarterly profit of $49 million as opposed to $17 million last year, GAAP revenues of $711 million means a loss of $381 million compared with $340 million last year.

EA is somewhat vindicated by the relative decline of cash losses.

Cash flow from operations more than quadrupled from last year's figures to $490 million, leading to a cash loss of $28 million - a drastic improvement from a corresponding loss of $211.

“EA is performing well, once again beating street consensus in fiscal Q2,” said Chief Executive Officer John Riccitiello.

“We delivered yet another quarter of sharp digital growth, with digital revenue up 40% compared to the same period last year, reflecting our strength across multiple brands and channels.”

Chief Financial Officer Blake Jorgensen emphasised the success of EA Sports as essential to meeting Q2 predictions.

He has a point.

EA Sports titles like Madden and FIFA all have additional content available for digital download, and if Battlefield premium figures in to the equation, this cannot be called anything other than found profit for titles that formerly catered to an almost exclusively annual audience.

“Record numbers of players have engaged in the online features and content downloads for FIFA 13, Madden NFL 13, and Battlefield,” said EA President Frank Gibeau. “On the strength of our digital extensions, FIFA and Battlefield are the two biggest revenue events in our company’s history. Both are well on their way to becoming billion dollar annual franchises.”

But while the company is meeting with success in the digital sector, the outlook may not be so good in the casual and social sector.

In just one year, monthly active users dropped from 101 to 42 million, compared with a growth in registered users from 140 to 250 million.

Though this looks bad for player retention, those who do stay are quite willing to part with their cash, and mobile revenue for the quarter rose by $20 million from last year.

EA has definitely disappointed in terms of its outlook for the holiday season.

While analysts expected earnings of $1.39 billion, the publisher forecasts revenue to fall between $1.25 billion and $1.35 billion.