Electronic Arts Inc. EA reported earnings of 1 cent per share in the first quarter of fiscal 2016 as against the Zacks Consensus Estimate of a loss of 9 cents per share. Following the news, the company’s shares rose 3.6% in yesterday’s trading session to close at $59.16.
Electronic Arts Inc. Ticker: EA Revenues
Quarterly revenues of $693 million surpassed the Zacks Consensus Estimate of $684 million. The company’s revenues came above the guided figure of $640 million but declined 10.6% year over year.
Non-GAAP Digital revenues (76.8% of revenues) jumped to $532 million from $482 million reported in the year-ago quarter. However, EA’s Packaging goods and other segment (23.2% of total revenue) revenues decreased to $161 million from $293 million reported in the year-ago quarter.
EA mobile games drew 150 million monthly active users during the reported quarter.
During the first quarter, EA titles won 132 awards. In addition, in the first quarter, gamers played about 170 million game sessions of Battlefield Hardline and Battlefield 4.
Further, during Electronic Entertainment Expo (E3) gameplay and livestreams, EA's games were viewed over 53 million times.
Margins
EA reported non-GAAP operating income of $60 million, lower than $85 million earned in the first quarter of fiscal 2015. However, operating margin was 73.9%, up 370 basis points.
Balance Sheet and Cash Flow
EA exited the quarter with $2.9 billion in cash, short-term investments compared with $3 billion at the end of Dec 31 2014. Operating cash flow was $992 million in the reported quarter compared with $964 million in the year-ago quarter
During the quarter, the company repurchased 2.2 million shares for $132 million.
Outlook
For fiscal 2016, EA expects to generate non-GAAP revenues of approximately $4.450 billion, up from the previous guidance of $4.400 billion. Non-GAAP earnings are expected to be $2.85 per share, higher than the previous forecast of $2.75.
Our Take
EA delivered encouraging first quarter fiscal 2016 results. We believe that EA’s strong games portfolio, strength in new consoles and continuing growth in the mobile market are key growth catalysts. Also better-than-expected sales of Battlefield Hardline are contributing to the top line. Moreover, strong growth in digital sales coupled with cost optimization initiatives will be beneficial going forward.
However, the company faces a number of headwinds that include significant competition from other game makers such as Activision ATVI, Glu Mobile Inc. GLUU and Take-Two Interactive TTWO. Additionally, higher consumer spending on new consoles may cannibalize software sales in the near term.
Currently, EA has a Zacks Rank #2 (Buy).
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