Electronic Arts (NASDAQ: EA) reported today that its first quarter earnings for the fiscal year 2020 “significantly exceeded” projections.

Net income for the quarter ending July 30 was $1.42 billion. This result was thanks largely to a one-off tax benefit the company claimed by transferring ownership of some of its intellectual properties to a Swiss subsidiary. EA recorded $1.08 billion of the credit in Q1, and is expected to post the remaining $620 million in Q2. Operating income for the quarter was $415 million, an improvement over last quarter’s $196 million.

At the end of the trading day July 30, EA stock stood at $88.57. This represents an improvement from its nadir of $74.72 in December 2018, but a far cry from last July’s $148.73. The calendar year 2018 saw EA stock slide considerably due to the delay of a major title and international legal battles surrounding “loot box” mechanics, which multiple governments declared constituted illegal gambling.

Revenue from live services — such as EA Access, which recently debuted on the Sony PlayStation 4 — grew 20% last quarter. EA CEO Andrew Wilson repeatedly stressed the importance of live and subscription services in the changing gaming marketplace. By contrast, revenue from mobile games was down 19% despite the large player bases for titles bearing the lucrative Star Wars license.

EA tentpoles demonstrating high player retention

EA reported particularly strong performances this quarter from free-to-play battle royale game Apex Legends, annual-release sports titles Madden NFL 19 and FIFA 19, and social simulator The Sims 4.

Apex Legends performed well in part due to the launch of its second “season,” which saw significant new content added to the game. EA continues to invest in the title, including supporting its burgeoning eSports scene. The company will sponsor the first official Apex Legends eSports event, which takes place in Krakow, Poland in September. Plans are still underway to release Apex Legends in China, possibly through a publishing deal with Tencent (HKG: 0700).

Madden NFL 19 and FIFA 19 were reported to be strong eSports contenders as well, with the FIFA eWorld Cup beginning next week. EA’s Madden and FIFA titles, including the mobile title FIFA Online, performed especially well in Korea and Southeast Asia this past quarter. Madden NFL 20 will be released August 2, with FIFA 20 expected to be released in September.

The Sims 4 saw a dramatic increase in persistent users thanks to a promotional event in May which saw the base game being given away for free. During that period, 7 million new users downloaded the game. EA reports that fiscal year 2020 has already been the “biggest year” for new Sims content, the most recent being the Island Living expansion pack from June.

Further growth projected for FY 2020

EA anticipates its Q2 revenue to be $1.3 billion, with EPS of $2.60. The company is expecting revenue of $5.375 billion for the full fiscal year 2020, above analyst predictions of $5.18 billion.

Major EA releases scheduled for fiscal year 2020 include Need For Speed, Plants vs. Zombies: Garden Warfare 3, and Star Wars Jedi: Fallen Order.

Patrick Lee
Patrick Lee is a contributing editor at Escapist Magazine and managing news editor at Gaming Street.

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