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Trump and Brexit are messing with EA's financial projections


 

EA’s Q1 2019 earnings call wasn’t the most exciting. Besides the reveal that the publisher is “interested in experimenting” with making a free-to-play battle royale game like Fortnite, most of the call was dedicated to topics like FIFA Mobile launching in China and the fact that next quarter will see the release of all its EA Sports titles, as well as Battlefield V.

Personally, the most interesting bit of information was buried deep in the middle of the section of the call where analysts ask CEO Andrew Wilson and CFO Blake Jorgensen questions, and it revealed that President Donald Trump’s threats of a “trade war” with our European allies and Brexit are having an interesting impact on EA’s potential future.

A big takeaway from this earnings call (PDF link) was that EA did surprisingly well for a quarter that generally only makes up 15 percent of its yearly business, outperforming its projections by $57 million. Despite that, however, EA hasn’t raised its “guidance” (a fancy financial term for an estimate of future earnings as stated to investors) for the rest of the year, and one analyst asked why EA was being so conservative.

Jorgensen’s answer was pretty interesting, at least to a financial naif like me:

We came into the quarter and gave guidance thinking we finally have a tailwind on FX [foreign exchange]. And due to, I believe, much of the trade war chatter and maybe further chatter on Brexit, we’ve seen a dramatic change in both the pound and the euro as well as other underlying currencies, and that’s created a headwind for us versus a tailwind. Now I think—we’re not changing our guidance because we’re not certain how long that will last, but it’s the overall view on the market versus a fundamental view on any specific title or business.

In other words, Trump’s chest-pounding approach to trade and the U.K.’s jingoistic efforts to leave the European Union are potentially bigger issues in the world of video games than maybe some of us realized. Hopefully, Trump’s “truce” with the EU Trade Commission will mean that EA won’t require a a $12 billion relief package like the one the administration plans to give farmers after the U.S.’s trade partners hit them with hardcore retaliatory tariffs.

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About Michael Goroff

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Michael Goroff has been gaming for almost three decades. He's a lover of all games and systems, but he mostly plays Xbox. That being said, if he's a fanboy, he's a fanboy for the game industry as a whole. Spit white-hot fanboy hate at him, trash talk his Gold II rank on Rocket League, or maybe just send him a cordial hello on Twitter @gogogoroff.

Trump and Brexit are messing with EA’s financial projections

Last quarter was surprisingly great for EA, but its executives are citing the current political climate as a reason to be cautious.

By Michael Goroff | 07/27/2018 02:00 PM PT

News

EA’s Q1 2019 earnings call wasn’t the most exciting. Besides the reveal that the publisher is “interested in experimenting” with making a free-to-play battle royale game like Fortnite, most of the call was dedicated to topics like FIFA Mobile launching in China and the fact that next quarter will see the release of all its EA Sports titles, as well as Battlefield V.

Personally, the most interesting bit of information was buried deep in the middle of the section of the call where analysts ask CEO Andrew Wilson and CFO Blake Jorgensen questions, and it revealed that President Donald Trump’s threats of a “trade war” with our European allies and Brexit are having an interesting impact on EA’s potential future.

A big takeaway from this earnings call (PDF link) was that EA did surprisingly well for a quarter that generally only makes up 15 percent of its yearly business, outperforming its projections by $57 million. Despite that, however, EA hasn’t raised its “guidance” (a fancy financial term for an estimate of future earnings as stated to investors) for the rest of the year, and one analyst asked why EA was being so conservative.

Jorgensen’s answer was pretty interesting, at least to a financial naif like me:

We came into the quarter and gave guidance thinking we finally have a tailwind on FX [foreign exchange]. And due to, I believe, much of the trade war chatter and maybe further chatter on Brexit, we’ve seen a dramatic change in both the pound and the euro as well as other underlying currencies, and that’s created a headwind for us versus a tailwind. Now I think—we’re not changing our guidance because we’re not certain how long that will last, but it’s the overall view on the market versus a fundamental view on any specific title or business.

In other words, Trump’s chest-pounding approach to trade and the U.K.’s jingoistic efforts to leave the European Union are potentially bigger issues in the world of video games than maybe some of us realized. Hopefully, Trump’s “truce” with the EU Trade Commission will mean that EA won’t require a a $12 billion relief package like the one the administration plans to give farmers after the U.S.’s trade partners hit them with hardcore retaliatory tariffs.

0   POINTS
0   POINTS



About Michael Goroff

view all posts

Michael Goroff has been gaming for almost three decades. He's a lover of all games and systems, but he mostly plays Xbox. That being said, if he's a fanboy, he's a fanboy for the game industry as a whole. Spit white-hot fanboy hate at him, trash talk his Gold II rank on Rocket League, or maybe just send him a cordial hello on Twitter @gogogoroff.