EA Posts Q1 2012 Profits, Slightly Down from Q1 2011

Electronic Arts Electronic Arts posted their Q1 financial results on Tuesday, and the result was $491 million USD in revenue, slightly less than the expected income of $500 million and lower than last year’s $524 million.

Sales were also down from $999 million to $951 million, and consequently, profits dropped from $221 million to $201 million.

 

Digital and mobile game sales strongly influenced EA’s Q1 performance, as President of EA Labels Frank Gibeau states:

“Over the last twelve months, we generated over $1.3 billion in non-GAAP digital net revenue, and approximately two-thirds of our non-GAAP net revenue in the first fiscal quarter was in digital.”

The company underlined this with examples of digital revenue successes, such as the 1.3 million Battlefield 3 Premium subscriptions sold, partnering with Nexon to release FIFA Online 3 in Korea, and the 21 million registered users on their online content delivery program.

However, EA was positive about the future and signaled that by repurchasing over $500 million worth of stock.

EA’s Q1 financial results are embedded at the end of the article.


Analysis: EA’s situation doesn’t look that bad. In fact, they’re still rolling in the black even with a small decrease in profits, but that’s a misleading number.

The 1.3 million sales of Battlefield 3 Premium, which costs about $50, are deferred to the fiscal Q4 results much later in the year. Why? Because Battlefield 3 Premium is a service that provides content over a long period of time. Said content is currently still in development as the final Battlefield 3 expansion pack, “End Game,” is set for a release date all the way in March 2013. So according to the Generally Accepted Accounting Principles (GAAP), specifically the principle of periodicity, EA cannot place the revenue for a subscription or pre-paid service on their earnings report in full at the beginning but rather over the entire time period of the subscription.

This makes judging the actual performance of Electronic Arts rather difficult since they mix and match GAAP and non-GAAP figures quite liberally.

But I digress. We’re not discussing if EA is doing well or tanking, we’re discussing how well they’re doing. All the figures look quite impressive, and the increase in growth of social and mobile gaming is something that EA has taken full advantage of, considering their success with The Sims Social and SimCity Social. Origin is looking good, but the 21 million registered users is a bit misleading. How many of those people use Origin only because they’re forced to register for it to play Mass Effect 3 or Battlefield 3 and nothing else?

Still, 21 million is not a small number that can be ignored. It seems the Electronic Arts juggernaut will continue to consume gamer’s money, and early signs are that it’s going to be another good year: EA’s title, Madden ’13, is tracking at 25% higher pre-orders over that of Madden ’12.

Q1FY13 Earnings Release w/ PressTables FINAL

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Mohamed Al Saadoon

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