SAN FRANCISCO (Reuters) - Video game publisher Electronic Arts Inc (EA.O) said its first quarter loss was narrower than Wall Street expected because of strong cost controls and digital sales that offset weak revenue from packaged games.
Shares of the company, which usually has a light schedule in the first quarter for the release of its core console games, were 6 percent higher in after hours trading on Tuesday, at $25.35 from the close of $23.83.
Adjusted revenue rose about 1 percent to $495 million from a year ago, exceeding Wall Street analysts’ estimates of $453.8 million, according to Thomson-Reuters I/B/E/S. The company reported an adjusted loss of 40 cents per share compared with analysts’ expectations of a loss of 60 cents per share.
Investors gave the company credit for delivering on top line growth and margin expansion, while keeping costs in check, Sterne Agee analyst Arvind Bhatia said.
“But it’s a small quarter, so I wouldn’t read too much into it,” he said.
Mobile games, online offerings and new digital sales streams accounted for more than 76 percent of first quarter revenue, Chief Financial Officer Blake Jorgensen said in an interview. Aggressive management of operating expenses also helped.
“We still have a substantial amount of risk in the forward quarters as we lean into our biggest titles, but we’re confident that our action plan for the year in going forward is starting to fall into place,” Jorgensen said.
Electronic Arts has a long lineup of games, including shooter “Battlefield 4” and a new sci-fi battle game “Titanfall” for Microsoft Corp’s (MSFT.O) new Xbox One and Sony Corp’s (6758.T) PlayStation 4 consoles that will be released this holiday season.
Analysts expect that the launch of new consoles will boost video game hardware and software sales that have been shrinking month to month since 2012.
“It was a pretty solid quarter driven by digital sales that tend to carry higher margins,” and the company is being “appropriately conservative” by maintaining its guidance as the game industry awaits new consoles from Sony and Microsoft, Bhatia said.
For the three months ended June 30, the company posted total revenue of $949 million compared with $955 million a year ago. It reported a net profit of $222 million, or 71 cents per share, compared with $201 million, or 63 cents per share a year ago.
The search for EA’s next CEO is continuing after John Riccitiello stepped down as chief executive on March 30, taking responsibility for missed operational targets. Jorgensen said the company looking at external and internal candidates.
Reporting by Malathi Nayak. Editing by Andre Grenon and Ken Wills