EA Q2 Report: Titanfall Exclusive To Microsoft, Strong Digital Sales
On the heels of the only somewhat surprising news that the Command & Conquer relaunch has been cancelled and along with it, subsidiary Victory Studios, Electronic Arts has released its Q2 2014 investor report, and its outlook is positive.
First and foremost, during the investor call accompanying the investor report, Titanfall was confirmed to be exclusive to PC, Xbox 360 and PC during its lifetime, dashing hopes it might make its way to PS4 at some point. Not a giant surprise, especially given how much the original version of the Xbox One jibed with EA’s stated philosophy regarding digital and multiplayer games, but nonetheless finally addresses the frequent question.
But for now, Electronic Arts fully expects that the remarkable stock market rebound, which started earlier this year with the elimination of 10% of its workforce, will continue unabated into next year.
“We exceeded our revenue and EPS guidance in the second quarter,” Chief Financial Officer Blake Jorgensen said in a press release. “We are reaffirming our annual non-GAAP net revenue guidance of $4 billion, and raising our non-GAAP EPS guidance from $1.20 to $1.25 per share.”1
As we’ve seen all year, digital earnings were a strong driver of company profits. Digital sales brought in a solid $695 million for EA during the first two quarters, an increase of 22 percent. This tracks with the company’s plans to ultimately increase digital sales to a full 40% of total company earnings, and is is due in large part to the strength of EA sports. NCAA Football Ultimate Team, Madden NFL Ultimate Team, NHL Hockey Ultimate Team, and FIFA Ultimate Team all saw solid growth. The FIFA franchise was particularly strong, bringing in $145 million during the first two quarters of the current fiscal year.
Similarly, hand-held and mobile games saw a 19 percent increase year over year, bringing in a modest but healthy $105 million. Plants vs. Zombies 2 has already eclipsed the first game’s lifetime earnings despite having launched two months ago, while Real Racing 3 has been downloaded 70 million times, with monthly users hovering around 18 million. The Simpsons: Tap Out is also going strong, surpassing $100 million in sales since launching in August of 2012.
Despite these successes, EA’s earnings through Q2 2014 are still slightly behind last year’s totals. GAAP net revenue during 2013 is $3,775 billion, compared to $4,095 billion last year, while non GAAP earnings are $3,757 billion, compared to last year’s $4,199. However, thanks to cost-cutting measures including the aforementioned layoffs, the company’s actual income is significantly higher. GAAP net income through Q2 2014 was $227 million, while non GAAP net income was $329 million, compared to $15 million and $309 million last year.
This has Electronic Arts in a significantly optimistic mood for its 2014 outlook. It expects to earn 40% of its yearly take from the third quarter, on the strength of titles like Battlefield 4, as well as new releases launching on current and next gen platforms. The company now expects to earn $3.55 billion in GAAP revenues by the end of fiscal year 2014, with non GAAP earnings topping out at the $4.0 billion mark.
1) A note: GAAP is short for Generally Accepted Accounting Principles. These are a standard framework for accounting set in coordination with the SEC and numerous private organizations. Non-GAAP estimates are often provided along with GAAP estimates because the company feels they more accurately reflect the true state of the company’s finances.
EPS is short for Earnings Per Share.