Video-game publisher Electronic Arts Inc. (ERTS) said Monday after the markets closed that its third quarter loss narrowed from last year, when results were weighed down by hefty charges. The company's quarterly earnings per share, excluding items, also came in above analysts' expectations. However, the company forecast fourth quarter earnings below analysts' current consensus estimate, sending its shares down by more than 9% in after hours trading.
The Redwood City, California-based company reported a GAAP net loss for the third quarter of $82 million or $0.25 per share, compared to a GAAP net loss of $641 million or $2.00 per share for the year-ago quarter.
Excluding the impact of the change in deferred revenue and other items, non-GAAP net income for the third quarter was $109 million or $0.33 per share, compared to $179 million or $0.56 per share in the prior year quarter.
On average, 26 analysts polled by Thomson Reuters expected the company to earn $0.31 per share for the third quarter. Analysts' estimates typically exclude special items.
GAAP net revenue for the third quarter, which includes the impact of deferred revenue adjustments, fell 25% to $1.24 billion from $1.65 billion in the year-ago quarter.
EA had a net revenue deferral of $103 million in the third quarter related to certain online-enabled packaged goods games and digital content, as compared to $88 million in the third quarter of last year.
Non-GAAP net revenue for the quarter fell 23% to $1.35 billion from $1.74 billion a year earlier due to several factors, including fewer titles this holiday quarter than the previous year holiday quarter and a weak overall packaged goods sector in Europe. Twenty-six analysts had a consensus revenue estimate of $1.34 billion for the third quarter.
The company said second quarter sales were driven by the launches of Dragon Age: Origins, Left 4 Dead 2, and NBA Live, and catalog sales of FIFA 10, Madden NFL 10, and The Sims 3. FIFA 10 has sold over 9.7 million copies since launch.
"EA is growing share in our packaged goods business and our digital businesses continue to grow rapidly," said John Riccitiello, EA Chief Executive Officer. "Mass Effect 2 is the first blockbuster of 2010 and we are looking forward to the launch of Dante's Inferno and Battlefield Bad Company 2."
For the first nine months of its fiscal year, the company reported a GAAP net loss of $707 million or $2.18 per share, compared to a GAAP net loss of $1.0 billion or $3.28 per share for the same period last year.
Non-GAAP net income for the nine-month period was $122 million or $0.37 per share, compared to $24 million or $0.07 per share in the prior year quarter.
GAAP revenue for the nine-month fell to $2.68 billion from $3.35 billion in the corresponding year-ago period.
Looking forward to the fourth quarter, the company said it expects GAAP net revenue of $925 million to $1.0 billion, non-GAAP net revenue of $800 to $850 million, GAAP earnings of $0.05 to $0.23 per share and non-GAAP earnings of $0.02 to $0.06 per share. Analysts currently expect the company to earn $0.13 per share on revenue of $850.97 million for the fourth quarter.
Last month, EA warned that its fiscal 2010 earnings would be lower than previously expected because of weak holiday sales.
For the first quarter of fiscal 2011, the company on Monday forecast GAAP net revenue of $710 to $750 million, non-GAAP net revenue of $460 to $500 million and a non-GAAP loss of $0.35 to $0.40 per share. The company expects first quarter GAAP results to range between a loss of $0.05 per share to a profit of $0.05 per share.
For the fiscal year 2011, the company said it expects GAAP net revenue of $3.45 to $3.70 billion, non-GAAP net revenue of $3.65 to $3.90 billion, GAAP loss of $0.60 to $0.90 and non-GAAP earnings of $0.50 to $0.70. Analysts currently expect the company to earn $0.74 per share on revenue of $4.07 billion for the fiscal year 2011.
"We are expecting an increase in FY11 full year non-GAAP earnings per share on the basis of strong cost controls and growth in our digital businesses," said Eric Brown, EA Chief Financial Officer.
EA said it has reduced operating costs and that it projects fiscal year 2011 non-GAAP costs down $100 million compared to fiscal year 2010.
In November, the company said it would close several facilities and cut about 1500 jobs as part of a plan to narrow its product portfolio to provide greater focus on titles with higher margin opportunities. EA had said in February last year that it would reduce workforce by about 1,100 people, close 12 facilities, narrow its product portfolio and cut other variable costs.
Activision Blizzard Inc. (ATVI), the world's largest video-game publisher, is scheduled to report fourth quarter earnings Wednesday. Analysts currently expect the company to earn $0.44 per share on revenue of $2.23 billion for he fourth quarter.
EA shares, which have traded in a range of $14.75 to $23.76 over the past year, closed Monday's regular trading session at $17.49, up 23 cents or 1.33%. The stock is currently losing $1.69 or 9.78% in after hours trading.
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