Electronic Arts profit fell by 66% at the end of the fourth fiscal quarter
In March, Electronic Arts ended its financial year. And his last quarter was not easy for the company. Despite the growth of digital sales, EA’s profit has fallen several times.
And now in order.
Last night, on May 7, EA published the results of its financial year. According to the official press release, the company’s management has had enough of them.
“We ended the fiscal year with significant growth, driven by our games services business, which remains a source of large, stable and profitable net revenues,” said Blake Jorgensen, COO and CFO of the company.
And here it is necessary to dwell on the terminology.
EA, like many other public companies, has its own financial metric, which does not comply with generally accepted international accounting standards (GAAP). In the case of EA, it is called net bookings, which we have translated as “net receipts”.
The latter refers to “the amount of sales of products and services sold during the reporting period in figures and in physical retail”. Net receipts also take into account deferred payments from online games for future periods.
As we wrote earlier, public companies introduce similar metrics to show investors that the actual earnings are higher than at the checkout (money from subscriptions or from IAP does not come to companies immediately).
We do not take such metrics into account and give data only according to the GAAP standard.
At the end of the entire financial year EA:
- revenue amounted to $4.9 billion ($200 million less than a year earlier);
- the profit amounted to $1 billion (remained approximately at the same level).
As we can see, there is no growth. Only if we do not count the growth of revenue from digital distribution (by $ 260 million).
EA Financial Results (2018 and 2019)
As for other annual totals:
- the user base of all the company’s games has reached 500 million;
- 45 million of them are players in FIFA projects on PC and consoles (the total audience of all games in the series, taking into account mobile, is already in the hundreds of millions);
- The Sims 4’s active audience has grown by 35%.
As a result of the fourth quarter , the financial situation for EA was as follows:
- revenue amounted to $1.2 billion ($37 million less than a year earlier);
- the profit amounted to $209 million ($398 million less than a year earlier).
EA does not focus on the last digit. Neither in the framework of a conference call, nor in presentations, it is not. It can be found only in the reporting tables.
EA Financial Results (fourth quarters of 2018 and 2019)
The drop in profits can be partly explained by Anthem’s low sales.
According to the company’s CEO Andrew Wilson, the game did not achieve the expected results after launch. Recall that the company planned that Anthem would sell 5-6 million copies by the end of the quarter.
However, EA does not seem to be planning to close the project. On the contrary, Wilson stated that he believes in BioWare, and also noted that the developers will fix the game and will release updates for it in the future.
Another reason for the drop in profits was an unplanned increase in marketing costs. EA has overspent $51 million on advertising.
The main result of the fourth quarter for EA was the release of Apex Legends. The project turned out to be the fastest growing game in the history of the company.
As part of his speech to investors, Wilson said that the audience of the game reached 50 million. The nuance is that the company has already shared this figure earlier (based on the results of the first month of sales).
Now EA is preparing the game for release in new markets, including South Korea and China. The game will also appear on mobile devices.
By the way, the high performance of Apex Legends has become the main driver of the growth of net revenues from game services. In the fourth quarter, they rose by 24% and became a record in the history of the company.
In general, the positive tone of the company’s management can be associated with this.
EA was also pleased with the launch of a new mode for Battlefield — Firestorm. In the first week since its release, the number of active players in the project increased by 60%. But EA did not tell how significantly this affected sales and whether it helped in retaining the audience.
By the end of the next financial year, the company plans to earn $ 5.3 billion, while the profit will be $2.5 billion. EA associates such optimistic expectations with three factors:
- revenue growth from current game services (among which she mentions Apex Legends and Anthem);
- the release of a new sports line;
- the emergence of games such as Sea of Solitude, Need for Speed, Plants vs. Zombies and Star Wars Jedi: Fallen Order.
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