[ACCESSWIRE]
Upcoming AWS Coverage on Activision Blizzard Post-Earnings Results
LONDON, UK / ACCESSWIRE / November 10, 2016 / Active Wall St. announces its post-earnings coverage on Electronic Arts Inc. (NASDAQ: EA). The company released its financial results for the second quarter fiscal 2017 (Q2 FY17) on November 01st, 2016. The video game publisher posted better-than-expected earnings and increased its revenue guidance for the full year. Register with us now for your free membership at: http://www.activewallst.com/register/.
One of Electronic Arts' competitors within the Multimedia & Graphics Software space, Activision Blizzard, Inc. (NASDAQ: ATVI), announced on November 03rd, 2016, better-than-expected financial results for the third quarter of 2016. AWS will be initiating a research report on Activision Blizzard in the coming days.
Today, AWS is promoting its earnings coverage on EA; touching on ATVI. Get our free coverage by signing up to:
http://www.activewallst.com/registration-3/?symbol=EA
http://www.activewallst.com/registration-3/?symbol=ATVI
Earnings Reviewed
Earnings Figures
In the quarter ended on September 30, 2016, EA reported a loss of $0.13 per share. Analysts expected EA to report a loss of $0.14 per share. The company's adjusted earnings rose to $0.53 per share compared to a loss of $0.7 per share in the year ago period. Adjusted earnings results beat market estimates of $0.43 per share. For Q2 FY17, net revenue was $898 million which does not include a change in deferred revenue of $200 million. Of the total net revenue, 63%, or $566 million, was digital. The company's adjusted revenue was $1.10 billion in the reported quarter, which came in above analysts' expectations of $1.09 billion.
Segment Performance
During the earnings conference call, EA's management noted that its FIFA 17 game was launched only four days from the end of Q2 FY17, hence almost no digital sales, whether downloads or Ultimate Team, were captured in the quarter. In comparison FIFA 16 was launched 11 days before the end of Q2 FY16, allowing a whole week of digital sales to be captured. The company noted that using the first four weeks of sales to make a true like-for-like comparison reflected that FIFA sell-through is up 13% on a y-o-y basis.
During Q2 FY17 Digital net sales were $486 million, up $6 million from Q2 FY16. The increase reflects strong growth in mobile and in digital downloads, offset by the FIFA 17 timing. The long-term trend towards digital is clear in net sales for the last 12 months, which were $2.57 billion, or 57% of the total. For digital net sales in turn, extra content and freemium net sales were down nearly 12% on y-o-y basis to $172 million.
For the reported quarter, EA's generated Mobile net sales of $138 million, up 22% from Q2 FY16, with growth load by Star Wars Galaxy of Heroes. Net sales for full game PC and console downloads were $93 million in Q2 FY17, up 4.5% over the prior year's quarter and in-line with the company's expectations. Subscription, advertising, and other digital purchases contributed $83 million to net sales, yet were flat on a y-o-y basis.
Margin Matters
EA's cost of revenue during Q2 FY17 came in at $401 million, including acquisition-related expenses of $12 million, and $1 million worth of stock-based compensation. Gross margin for the reported quarter was 55.3%, up 5.5% over the comparable year ago quarter.
Financials
EA's net cash generated by operating activities for Q2 FY17 was $109 million, up $100 million on last year. For the trailing 12 months, it was $1.1 billion. With capital expenditures of $120 million, free cash flow was $1 billion in the same period. During Q2 FY17, the company settled the remaining $136 million of its convertible notes. EA also re-purchased 1.6 million shares, during the reported quarter, at a cost of $127 million, leaving $282 million in its two-year, $1 billion buy-back program introduced in May 2015. The company's cash and short-term investments at the end of Q2 FY17 were $3.27 billion; with 43% of this balance is held on-shore.
Outlook
EA raised its FY17 guidance to $4.78 billion in net revenue and $150 million increase in deferred net revenue. The company anticipates cost of revenue to be $1.39 billion, including $31 million of acquisition-related costs and $2 million of stock-based compensation. It has also increased its earnings per share to $2.69 for the year compared to its prior guidance. For FY17, EA is projecting to clock net sales of approximately $4.925 billion.
EA is forecasting Q3 FY17 to be its biggest cash flow quarter ever. Guidance for Q3 FY17 is for net revenue of $1.125 billion, including $910 million in deferred net revenue. We anticipate cost of revenue to be $532 million, including $3 million of acquisition-related expenses. The company expects net sales for Q3 FY17 to be $2.035 billion.
Stock Performance
On Wednesday, the stock closed the trading session at $79.44, slipping by 2.52% from its previous closing price of $81.49. A total volume of 4.45 million shares have exchanged hands, which was higher than the 3-month average volume of 3.02 million shares. Electronic Arts' stock price advanced 2.04% in the past three months, 5.91% in the last six months, and 12.16% in the previous twelve months. Furthermore, on a year to date basis, the stock gained 15.60%. Shares of the company have a PE ratio of 20.23.
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