Election Arts posted weaker-than-expected revenue on Thursday.
Patrick T. Fallon/BloombergInvestors reacted poorly to the surprising announcement from Electronic Arts late Thursday that it has decided to begin paying out a quarterly dividend, amid weaker-than-expected results.
Joining the ranks of rival Activision Blizzard (ticker: ATVI), which has paid out an annual dividend since 2010, Electronic Arts (EA) has entered into a new phase of its public life, as a more mature company.
As news of the announcement sunk in along with earnings, shares of EA had retreated 7% at 5:07 p.m. Eastern time. The stock closed the regular session up 2.4% at $128.33.
EA reported a nonstandard second-quarter sales number that missed consensus estimates, and issued a forecast that also came in below expectations.
The videogame maker reported a fiscal second-quarter net income of $185 million, which amounts to 63 cents a share, compared with a net profit of $854 million, or $2.89 a share, a year ago. Revenue fell to $1.15 billion from $1.35 billion a year ago. Analysts had modeled earnings of 29 cents a share and revenue of $1.16 billion.
EA reported that its net bookings fell to $910 million from $1.31 billion, when analysts expected bookings of $965.3 million. Bookings are a common nonstandard measure videogame companies use to capture digital sales and physical in-store sales.
EA said it expected third-quarter bookings of $2.35 billion, below the consensus estimate of $2.4 billion. For the full year, EA expects bookings for $5.95 billion, as Wall Street expected $6 billion in bookings.
The company highlighted its EA Play subscription service, saying that it has more than 6.5 million paid subscribers. EA Play may get a boost once Microsoft’s (MSFT) new consoles go on sale next week, as consumers have the option to finance it over two years with a monthly bundle that includes a subscription.
As part of the earnings release, EA said it planned to buy back $2.6 billion worth of the company’s stock within the next two years. The company also said it would pay out a quarterly cash dividend of 17 cents a share.
“We delivered a quarter well above our guidance, driven by our live services, particularly Madden and FIFA,” EA CFO Blake Jorgensen said. “This resulted in a record trailing 12-month cash flow of $2.04 billion. We are pleased to announce a new share repurchase program and to initiate a dividend for the first time in EA history.”
Write to Max A. Cherney at max.cherney@barrons.com
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