EA Predicts Digital Games Will Make Up 40 Percent of Revenue Next Year
Electronic Arts beat analyst expectations for both revenue and profits today for the fourth quarter, driven by strong digital revenues and sales from its latest game, Mass Effect 3.
But the company reported fewer than expected users for Star Wars: The Old Republic, which had 1.3 million subscribers at the end of the year, falling short of analysts’ expectations, who were estimating that the company would report roughly 1.6 million subscribers for the online game.
In response, the company’s stock was down more than 10 percent in after-hours trading at $13.60 a share. The drop is especially harsh given that the company’s stock has fallen 20 percent over the past few months.
As part of the financial release issued today, the company tried to paint a rosy picture of the company’s digital future.
In the fiscal year 2012, it generated $1.2 billion in digital revenues, exceeding its goal of $1 billion this year, and representing a 47 percent increase year over year.
In an interview, EA’s interim CFO Ken Barker said the company is forecasting digital revenues in fiscal 2013 of $1.7 billion, representing a growth rate of 40 percent. At those levels, he said digital will now comprise 40 percent of the company’s overall revenues, breaking away from its reliance on traditional packaged goods.
Barker noted that in the past six months alone, FIFA 12 was able to break $100 million in digital revenues, a first for one of its packaged goods titles.
The company said mobile revenues totaled $87 million in Q4, up from $70 million in the same period a year earlier. It also said the number of users who played a social game at least once in a given month was up, totaling 49 million in Q4, up from 36 million in the year-ago period.
For the fourth quarter, the company reported non-GAAP earnings per share of 17 cents on revenue of $977 million. Analysts were expecting EA to earn 16 cents a share on revenues of $960 million. EA’s own estimates were calling for a profit of 10 to 20 cents a share on revenues of $925 to $975 million.
When applying strict accounting rules, the company’s earned GAAP net income of $400 million, or $1.20 a share, on revenues of $1.4 billion. The same quarter a year earlier, the company recorded a profit of $151 million, or 45 cents a share, on revenues of $1.09 billion.
The first quarter, which has only one retail game but 11 digital games scheduled to launch, will be predictably softer. The company expects revenue of $950 million and profit of 40 to 48 cents a share.