REDWOOD CITY, Calif.--(BUSINESS WIRE)--Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2018.
News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.
“The video game industry continues to grow through a year of intense competition and transformational change,” said CEO Andrew Wilson. “Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations. We are now applying the strengths of our company to sharpen our execution and focus on delivering great new games and long-term live services for our players. We’re very excited about Apex Legends, the upcoming launch of Anthem, and a deep line-up of new experiences that we’ll bring to our global communities next fiscal year.”
“FIFA stands out as a robust franchise through a tumultuous year in the video game industry,” said COO and CFO Blake Jorgensen. “Elsewhere in the business, we’re making adjustments to improve execution and we’re refocusing R&D. Looking forward, we’re delighted to launch Anthem, our new IP, to grow Apex Legends and related Titanfall experiences, to deliver new Plants vs. Zombies and Need for Speed titles, and to add Star Wars Jedi: Fallen Order to our sports titles in the fall.”
Selected Operating Highlights and Metrics
- Digital net bookings* for the trailing twelve months was $3.577 billion, up 6% year-over-year and represents 74% of total net bookings.
- During the quarter, launched Battlefield™ V and Command & Conquer™: Rivals.
- On February 4, 2019, launched Apex Legends™, a new battle royale experience from Respawn.
- During the quarter, FIFA Ultimate Team™ matches played increased 15% year-over-year.
- During calendar 2018, FIFA 19 was the highest-selling console game in Europe.
* Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games and, for periods after the fourth quarter of fiscal 2018, mobile platform fees.
Selected Financial Highlights and Metrics
All financial measures are presented on a GAAP basis.
- Net cash from operating activities was $954 million for the quarter and $1.563 billion for the trailing twelve months, a record third quarter trailing twelve months.
- EA repurchased 3.2 million shares for $292 million during the quarter and 9.0 million shares for $1.039 billion during the trailing twelve months.
Impact of Recently Adopted Accounting Standard
At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. For more information about the adoption of Topic 606, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.
Quarterly Financial Highlights
| Three Months Ended | |||||
| December 31, | |||||
| 2018 | 2017 | ||||
| (in $ millions, except per share amounts) | |||||
| Digital net revenue | 908 | 780 | |||
| Packaged goods and other net revenue | 381 | 380 | |||
| Total net revenue | 1,289 | 1,160 | |||
| Net income (loss)* | 262 | (186 | ) | ||
| Earnings (loss) per share* | 0.86 | (0.60 | ) | ||
| Operating cash flow | 954 | 849 | |||
| Value of shares repurchased | 292 | 150 | |||
| Number of shares repurchased | 3.2 | 1.4 | |||
*During the three months ended December 31, 2017, EA recognized $176 million of incremental income tax expense, or approximately $0.57 per share, due to the application of the Tax Cuts and Jobs Act.
The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its fiscal 2019 GAAP results in order to assess EA’s operating results:
| Three Months Ended December 31, 2018 | |||||||||||||
| GAAP-Based Financial Data | |||||||||||||
| (in $ millions) |
Statement |
Acquisition- |
Change in |
Mobile |
Stock-based |
||||||||
| Total net revenue | 1,289 | - | 368 | (48 | ) | - | |||||||
| Cost of revenue | 413 | (1 | ) | - | (48 | ) | (1 | ) | |||||
| Gross profit | 876 | 1 | 368 | - | 1 | ||||||||
| Total operating expenses | 634 | (7 | ) | - | - | (74 | ) | ||||||
| Operating income | 242 | 8 | 368 | - | 75 | ||||||||
| Interest and other income, net | 23 | - | - | - | - | ||||||||
| Income before provision for income taxes | 265 | 8 | 368 | - | 75 | ||||||||
| Number of shares used in computation: | |||||||||||||
| Diluted | 304 | ||||||||||||
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.
TTM Financial Highlights
| Twelve Months Ended | ||||
| December 31, | ||||
| 2018 | 2017 | |||
| (in $ millions) | ||||
| Digital net revenue | 3,747 | 3,282 | ||
| Packaged goods and other net revenue | 1,547 | 1,813 | ||
| Total net revenue | 5,294 | 5,095 | ||
| Net income* | 1,417 | 1,002 | ||
| Operating cash flow | 1,563 | 1,514 | ||
| Value of shares repurchased | 1,039 | 578 | ||
| Number of shares repurchased | 9.0 | 5.6 | ||
*Due to the application of the Tax Cuts and Jobs Act, EA recognized incremental income tax expense of $59 million for the twelve months ended December 31, 2018 and $176 million for the twelve months ended December 31, 2017.
The following GAAP-based financial data and tax rate of 18% in fiscal year 2019 and 21% in fiscal year 2018 was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
| Twelve Months Ended December 31, 2018 | ||||||||||||||
| GAAP-Based Financial Data | ||||||||||||||
| (in $ millions) |
Statement |
Acquisition- |
Change in |
Mobile |
Stock-based |
|||||||||
| Total net revenue | 5,294 | - | (318 | ) | (141 | ) | - | |||||||
| Cost of revenue | 1,279 | (4 | ) | - | (141 | ) | (4 | ) | ||||||
| Gross profit | 4,015 | 4 | (318 | ) | - | 4 | ||||||||
| Total operating expenses | 2,462 | (26 | ) | - | - | (276 | ) | |||||||
| Operating income | 1,553 | 30 | (318 | ) | - | 280 | ||||||||
| Interest and other income, net | 61 | - | - | - | - | |||||||||
| Income before provision for income taxes | 1,614 | 30 | (318 | ) | - | 280 | ||||||||
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.
Operating Metric
The following is a calculation of our total net bookings for the periods presented:
| Three Months Ended | TTM Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| (in $ millions) | |||||||||||
| Total net revenue | 1,289 | 1,160 | 5,294 | 5,095 | |||||||
| Change in deferred net revenue (online-enabled games) | 368 | 811 | (318 | ) | (78 | ) | |||||
| Mobile platform fees | (48 | ) | - | (141 | ) | - | |||||
| Net bookings | 1,609 | 1,971 | 4,835 | 5,017 | |||||||
Business Outlook as of February 5, 2019
The following forward-looking statements reflect expectations as of February 5, 2019. Electronic Arts assumes no obligation to update these statements, except as required by law. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.
Fiscal Year 2019 Expectations – Ending March 31, 2019
Financial metrics:
-
Net revenue is expected to be approximately $4.875 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $65 million.
- Mobile platform fees are expected to be approximately $(190) million.
- Net income is expected to be approximately $980 million.
- Diluted earnings per share is expected to be approximately $3.20.
- Operating cash flow is expected to be approximately $1.350 billion.
- The Company estimates a share count of 306 million for purposes of calculating fiscal year 2019 diluted earnings per share.
Operational metric:
- Net bookings is expected to be approximately $4.750 billion.
In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:
| Twelve Months Ending March 31, 2019 | |||||||||||||
| GAAP-Based Financial Data | |||||||||||||
|
GAAP |
Acquisition- |
Change in |
Mobile |
Stock-based |
|||||||||
| (in $ millions) | |||||||||||||
| Digital net revenue | 3,615 | - | 50 | (190 | ) | - | |||||||
| Packaged goods & other net revenue | 1,260 | - | 15 | - | - | ||||||||
| Total net revenue | 4,875 | - | 65 | (190 | ) | - | |||||||
| Cost of revenue | 1,311 | (3 | ) | - | (190 | ) | (3 | ) | |||||
| Operating expense | 2,581 | (27 | ) | - | - | (284 | ) | ||||||
| Income before provision for income taxes | 1,055 | 30 | 65 | - | 287 | ||||||||
| Net income | 980 | ||||||||||||
| Number of shares used in computation: | |||||||||||||
| Diluted shares | 306 | ||||||||||||
Fourth Quarter Fiscal Year 2019 Expectations – Ending March 31, 2019
Financial metrics:
-
Net revenue is expected to be approximately $1.163 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $56 million.
- Mobile platform fees are expected to be approximately $(49) million.
- Net income is expected to be approximately $170 million.
- Diluted earnings per share is expected to be approximately $0.56.
- The Company estimates a share count of 303 million for purposes of calculating fourth quarter fiscal year 2019 diluted earnings per share.
Operational metric:
- Net bookings is expected to be approximately $1.170 billion.
In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:
| Three Months Ending March 31, 2019 | |||||||||||||
| GAAP-Based Financial Data | |||||||||||||
|
GAAP |
Acquisition- |
Change in |
Mobile |
Stock-based |
|||||||||
| (in $ millions) | |||||||||||||
| Total net revenue | 1,163 | - | 56 | (49 | ) | - | |||||||
| Cost of revenue | 265 | - | - | (49 | ) | - | |||||||
| Operating expense | 715 | (6 | ) | - | - | (76 | ) | ||||||
| Income before provision for income taxes | 195 | 6 | 56 | - | 76 | ||||||||
| Net income | 170 | ||||||||||||
| Number of shares used in computation: | |||||||||||||
| Diluted shares | 303 | ||||||||||||
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.
Conference Call and Supporting Documents
Electronic Arts will host a conference call on Tuesday, February 5, 2019 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal third quarter ended December 31, 2018 and its outlook for the future. During the course of the call, Electronic Arts may disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number (866) 393-4306 (domestic) or (734) 385-2616 (international), using the Conference ID 7589409 or via webcast at EA’s IR Website at http://ir.ea.com.
EA has posted a slide presentation, a financial model of EA’s historical results and guidance, and an Investor Accounting FAQ on EA’s IR Website. After the conference call, EA will also post the prepared remarks and a transcript from the conference call on EA’s IR Website.
A dial-in replay of the conference call will be available until February 19, 2019 at (855) 859-2056 (domestic) or (404) 537-3406 (international) using pin code 7589409. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.
Forward-Looking Statements
Some statements set forth in this release, including the information relating to EA’s fiscal 2019 expectations under the heading “Business Outlook as of February 5, 2019,” and other information regarding EA's fiscal 2019 and fiscal 2020 expectations contain forward-looking statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate”, “plan”, “predict”, “seek”, “goal”, “will”, “may”, “likely”, “should”, “could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed in the forward-looking statements.
Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: sales of the Company’s titles; the Company’s ability to develop and support digital products and services, including managing online security and privacy; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products; the Company’s ability to realize the anticipated benefits of acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences among competing platforms; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; general economic conditions; and other factors described in Part II, Item 1A of Electronic Arts’ latest Quarterly Report on Form 10-Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.
These forward-looking statements are current as of February 5, 2019. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.
While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2018. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended December 31, 2018.
About Electronic Arts
Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers. EA has more than 300 million registered players around the world.
In fiscal year 2018, EA posted GAAP net revenue of $5.15 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as The Sims™, Madden NFL, EA SPORTS™ FIFA, Battlefield™, Need for Speed™, Dragon Age™ and Plants vs. Zombies™. More information about EA is available at www.ea.com/news.
EA SPORTS, Battlefield, The Sims, Need for Speed, Dragon Age, Apex Legends, Respawn, Command & Conquer, Ultimate Team and Plants vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL and FIFA are the property of their respective owners and used with permission.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |||||||||||
| Unaudited Condensed Consolidated Statements of Operations | |||||||||||
| (in $ millions, except per share data) | |||||||||||
|
Three Months Ended |
Nine Months Ended |
||||||||||
|
2018 1 |
2017 |
2018 1 |
2017 | ||||||||
| Net revenue | |||||||||||
| Product | 552 | 547 | 1,377 | 1,829 | |||||||
| Service and other | 737 | 613 | 2,335 | 1,739 | |||||||
| Total net revenue | 1,289 | 1,160 | 3,712 | 3,568 | |||||||
| Cost of revenue | |||||||||||
| Product | 175 | 352 | 465 | 716 | |||||||
| Service and other | 238 | 149 | 581 | 328 | |||||||
| Total cost of revenue | 413 | 501 | 1,046 | 1,044 | |||||||
| Gross profit | 876 | 659 | 2,666 | 2,524 | |||||||
| Operating expenses: | |||||||||||
| Research and development | 334 | 329 | 1,035 | 985 | |||||||
| Marketing and sales | 187 | 230 | 473 | 511 | |||||||
| General and administrative | 106 | 120 | 337 | 343 | |||||||
| Acquisition-related contingent consideration | 1 | — | 3 | — | |||||||
| Amortization of intangibles | 6 | 1 | 18 | 4 | |||||||
| Total operating expenses | 634 | 680 | 1,866 | 1,843 | |||||||
| Operating income (loss) | 242 | (21 | ) | 800 | 681 | ||||||
| Interest and other income (expense), net | 23 | 5 | 60 | 14 | |||||||
| Income (loss) before provision for income taxes | 265 | (16 | ) | 860 | 695 | ||||||
| Provision for income taxes | 3 | 170 | 50 | 259 | |||||||
| Net income (loss) | 262 | (186 | ) | 810 | 436 | ||||||
| Earnings (loss) per share | |||||||||||
| Basic | 0.87 | (0.60 | ) | 2.66 | 1.41 | ||||||
| Diluted | 0.86 | (0.60 | ) | 2.64 | 1.40 | ||||||
| Number of shares used in computation | |||||||||||
| Basic | 302 | 308 | 304 | 309 | |||||||
| Diluted | 304 | 308 | 307 | 312 | |||||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on October 30, 2018 for the three months ended December 31, 2018 plus a comparison to the actuals for the three months ended December 31, 2017.
| Three Months Ended December 31, | ||||||||||||
| 2018 1 | 2018 1 | 2017 | ||||||||||
| Guidance | Variance | Actuals | Actuals | |||||||||
| Net revenue | ||||||||||||
| Net revenue | 1,375 | (86 | ) | 1,289 | 1,160 | |||||||
| GAAP-based financial data | ||||||||||||
| Change in deferred net revenue (online-enabled games) | 405 | (37 | ) | 368 | 811 | |||||||
| Mobile platform fees | (55 | ) | 7 | (48 | ) | — | ||||||
| Cost of revenue | ||||||||||||
| Cost of revenue | 446 | (33 | ) | 413 | 501 | |||||||
| GAAP-based financial data | ||||||||||||
| Acquisition-related expenses | (1 | ) | — | (1 | ) | (1 | ) | |||||
| Stock-based compensation | — | (1 | ) | (1 | ) | — | ||||||
| Mobile platform fees | (55 | ) | 7 | (48 | ) | — | ||||||
| Operating expenses | ||||||||||||
| Operating expenses | 730 | (96 | ) | 634 | 680 | |||||||
| GAAP-based financial data | ||||||||||||
| Acquisition-related expenses | (10 | ) | 3 | (7 | ) | (1 | ) | |||||
| Stock-based compensation | (80 | ) | 6 | (74 | ) | (63 | ) | |||||
| Income (loss) before tax | ||||||||||||
| Income (loss) before tax | 212 | 53 | 265 | (16 | ) | |||||||
| GAAP-based financial data | ||||||||||||
| Acquisition-related expenses | 11 | (3 | ) | 8 | 2 | |||||||
| Change in deferred net revenue (online-enabled games) | 405 | (37 | ) | 368 | 811 | |||||||
| Mobile platform fees | — | — | — | — | ||||||||
| Stock-based compensation | 80 | (5 | ) | 75 | 63 | |||||||
| Tax rate used for management reporting | 18 | % | 18 | % | 21 | % | ||||||
| Earnings (loss) per share | ||||||||||||
| Basic | 0.62 | 0.25 | 0.87 | (0.60 | ) | |||||||
| Diluted | 0.61 | 0.25 | 0.86 | (0.60 | ) | |||||||
| Number of shares | ||||||||||||
| Basic | 304 | (2 | ) | 302 | 308 | |||||||
| Diluted | 306 | (2 | ) | 304 | 308 | |||||||
| Anti-dilutive shares excluded for loss position2 | — | — | — | 3 | ||||||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.
2Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable through stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||
| (in $ millions) | ||||||
| December 31, 20181 | March 31, 20183 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | 3,887 | 4,258 | ||||
| Short-term investments | 1,274 | 1,073 | ||||
| Receivables, net of allowances of $8 and $165, respectively | 806 | 385 | ||||
| Other current assets | 280 | 288 | ||||
| Total current assets | 6,247 | 6,004 | ||||
| Property and equipment, net | 426 | 453 | ||||
| Goodwill | 1,891 | 1,883 | ||||
| Acquisition-related intangibles, net | 93 | 71 | ||||
| Deferred income taxes, net | 106 | 84 | ||||
| Other assets | 94 | 89 | ||||
| TOTAL ASSETS | 8,857 | 8,584 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | 70 | 48 | ||||
| Accrued and other current liabilities | 1,092 | 821 | ||||
| Deferred net revenue (online-enabled games) | 928 | 1,622 | ||||
| Total current liabilities | 2,090 | 2,491 | ||||
| Senior notes, net | 994 | 992 | ||||
| Income tax obligations | 264 | 250 | ||||
| Deferred income taxes, net | 1 | 1 | ||||
| Other liabilities | 164 | 255 | ||||
| Total liabilities | 3,513 | 3,989 | ||||
| Stockholders’ equity: | ||||||
| Common stock | 3 | 3 | ||||
| Additional paid-in capital | — | 657 | ||||
| Retained earnings | 5,358 | 4,062 | ||||
| Accumulated other comprehensive loss | (17 | ) | (127 | ) | ||
| Total stockholders’ equity | 5,344 | 4,595 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 8,857 | 8,584 | ||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. EA’s Q3 FY19 Unaudited Condensed Consolidated Balance Sheet reflects the effect of the adoption as of April 1, 2018, which had an impact on the following: receivables, net of allowances, accrued and other current liabilities, deferred net revenue (online-enabled games), deferred income taxes, net, retained earnings and accumulated other comprehensive loss. Financial data for periods prior to April 1, 2018 has not been restated.
3Derived from audited consolidated financial statements.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||
| (in $ millions) | ||||||||||||
|
Three Months Ended |
Nine Months Ended |
|||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Net income (loss) | 262 | (186 | ) | 810 | 436 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
| Depreciation, amortization and accretion | 34 | 34 | 108 | 97 | ||||||||
| Stock-based compensation | 75 | 63 | 211 | 173 | ||||||||
| Change in assets and liabilities | ||||||||||||
| Receivables, net | 151 | (73 | ) | (271 | ) | (527 | ) | |||||
| Other assets | 21 | 13 | 41 | 79 | ||||||||
| Accounts payable | (97 | ) | (88 | ) | 35 | 16 | ||||||
| Accrued and other liabilities | 148 | 165 | 123 | 265 | ||||||||
| Deferred income taxes, net | 5 | 90 | (89 | ) | 130 | |||||||
| Deferred net revenue (online-enabled games) | 355 | 831 | (20 | ) | 408 | |||||||
| Net cash provided by operating activities | 954 | 849 | 948 | 1,077 | ||||||||
| INVESTING ACTIVITIES | ||||||||||||
| Capital expenditures | (21 | ) | (24 | ) | (84 | ) | (87 | ) | ||||
| Proceeds from maturities and sales of short-term investments | 509 | 606 | 955 | 1,656 | ||||||||
| Purchase of short-term investments | (115 | ) | (617 | ) | (1,144 | ) | (2,012 | ) | ||||
| Acquisitions, net of cash acquired | — | (150 | ) | (58 | ) | (150 | ) | |||||
| Net cash provided by (used in) investing activities | 373 | (185 | ) | (331 | ) | (593 | ) | |||||
| FINANCING ACTIVITIES | ||||||||||||
| Proceeds from issuance of common stock | — | — | 36 | 57 | ||||||||
| Cash paid to taxing authorities for shares withheld from employees | (20 | ) | (7 | ) | (116 | ) | (112 | ) | ||||
| Repurchase and retirement of common stock | (292 | ) | (150 | ) | (891 | ) | (453 | ) | ||||
| Net cash used in financing activities | (312 | ) | (157 | ) | (971 | ) | (508 | ) | ||||
| Effect of foreign exchange on cash and cash equivalents | (9 | ) | (8 | ) | (17 | ) | 25 | |||||
| Increase (decrease) in cash and cash equivalents | 1,006 | 499 | (371 | ) | 1 | |||||||
| Beginning cash and cash equivalents | 2,881 | 2,067 | 4,258 | 2,565 | ||||||||
| Ending cash and cash equivalents | 3,887 | 2,566 | 3,887 | 2,566 | ||||||||
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||||||||||||||
| Unaudited Supplemental Financial Information and Business Metrics | ||||||||||||||||||
| (in $ millions, except per share data) | ||||||||||||||||||
| Q3 | Q4 | Q11 | Q21 | Q31 | YOY % | |||||||||||||
| FY18 | FY18 | FY19 | FY19 | FY19 | Change | |||||||||||||
| Net revenue | ||||||||||||||||||
| Net revenue | 1,160 | 1,582 | 1,137 | 1,286 | 1,289 | 11 | % | |||||||||||
| GAAP-based financial data | ||||||||||||||||||
| Change in deferred net revenue (online-enabled games)4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Mobile platform fees | — | — | (49 | ) | (44 | ) | (48 | ) | ||||||||||
| Gross profit | ||||||||||||||||||
| Gross profit | 659 | 1,349 | 922 | 868 | 876 | 33 | % | |||||||||||
| GAAP-based financial data | ||||||||||||||||||
| Acquisition-related expenses | 1 | 1 | 1 | 1 | 1 | |||||||||||||
| Change in deferred net revenue (online-enabled games)4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Mobile platform fees | — | — | — | — | — | |||||||||||||
| Stock-based compensation | — | 1 | 1 | 1 | 1 | |||||||||||||
| Gross profit (as a % of net revenue) | 57 | % | 85 | % | 81 | % | 67 | % | 68 | % | ||||||||
| Operating income (loss) | ||||||||||||||||||
| Operating income (loss) | (21 | ) | 753 | 300 | 258 | 242 | 1,252 | % | ||||||||||
| GAAP-based financial data | ||||||||||||||||||
| Acquisition-related expenses | 2 | 6 | 7 | 9 | 8 | |||||||||||||
| Change in deferred net revenue (online-enabled games)4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Stock-based compensation | 63 | 69 | 70 | 66 | 75 | |||||||||||||
| Operating income (loss) (as a % of net revenue) | (2 | %) | 48 | % | 26 | % | 20 | % | 19 | % | ||||||||
| Net income (loss) | ||||||||||||||||||
| Net income (loss) | (186 | ) | 607 | 293 | 255 | 262 | 241 | % | ||||||||||
| GAAP-based financial data | ||||||||||||||||||
| Acquisition-related expenses | 2 | 6 | 7 | 9 | 8 | |||||||||||||
| Change in deferred net revenue (online-enabled games)4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Stock-based compensation | 63 | 69 | 70 | 66 | 75 | |||||||||||||
| Tax rate used for management reporting | 21 | % | 21 | % | 18 | % | 18 | % | 18 | % | ||||||||
| Net income (loss) (as a % of net revenue) | (16 | %) | 38 | % | 26 | % | 20 | % | 20 | % | ||||||||
| Diluted earnings (loss) per share | (0.60 | ) | 1.95 | 0.95 | 0.83 | 0.86 | 243 | % | ||||||||||
| Number of diluted shares used in computation | ||||||||||||||||||
| Basic | 308 | 307 | 306 | 305 | 302 | |||||||||||||
| Diluted | 308 | 311 | 310 | 307 | 304 | |||||||||||||
| Anti-dilutive shares excluded for loss position2 | 3 | — | — | — | — | |||||||||||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.
2Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable through stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.
4The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||||||||||||||
| Unaudited Supplemental Financial Information and Business Metrics | ||||||||||||||||||
| (in $ millions) | ||||||||||||||||||
| Q3 | Q4 | Q11 | Q21 | Q31 | YOY % | |||||||||||||
| FY18 | FY18 | FY19 | FY19 | FY19 | Change | |||||||||||||
| QUARTERLY NET REVENUE PRESENTATIONS | ||||||||||||||||||
| Net revenue by composition | ||||||||||||||||||
| Full game downloads | 143 | 232 | 116 | 148 | 247 | 73 | % | |||||||||||
| Live services | 476 | 698 | 610 | 412 | 480 | 1 | % | |||||||||||
| Mobile | 161 | 172 | 231 | 220 | 181 | 12 | % | |||||||||||
| Total digital | 780 | 1,102 | 957 | 780 | 908 | 16 | % | |||||||||||
| Packaged goods and other | 380 | 480 | 180 | 506 | 381 | — | ||||||||||||
|
Total net revenue |
1,160 | 1,582 | 1,137 | 1,286 | 1,289 | 11 | % | |||||||||||
| Total digital | 67 | % | 70 | % | 84 | % | 61 | % | 70 | % | ||||||||
| Packaged goods and other | 33 | % | 30 | % | 16 | % | 39 | % | 30 | % | ||||||||
| Total net revenue % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
| GAAP-based financial data | ||||||||||||||||||
| Full game downloads | 117 | (39 | ) | (20 | ) | 9 | 26 | |||||||||||
| Live services | 311 | (19 | ) | (160 | ) | (84 | ) | 304 | ||||||||||
| Mobile | 22 | 4 | (35 | ) | (24 | ) | 9 | |||||||||||
| Total digital | 450 | (54 | ) | (215 | ) | (99 | ) | 339 | ||||||||||
| Packaged goods and other | 361 | (273 | ) | (124 | ) | 79 | 29 | |||||||||||
| Total change in deferred net revenue (online-enabled games) by composition4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Mobile platform fees | — | — | (49 | ) | (44 | ) | (48 | ) | ||||||||||
| Net revenue by platform | ||||||||||||||||||
| Console | 810 | 1,196 | 705 | 917 | 885 | 9 | % | |||||||||||
| PC/Browser | 181 | 210 | 197 | 149 | 217 | 20 | % | |||||||||||
| Mobile | 166 | 173 | 233 | 220 | 181 | 9 | % | |||||||||||
| Other | 3 | 3 | 2 | — | 6 | 100 | % | |||||||||||
| Total net revenue | 1,160 | 1,582 | 1,137 | 1,286 | 1,289 | 11 | % | |||||||||||
| GAAP-based financial data | ||||||||||||||||||
| Console | 710 | (313 | ) | (288 | ) | 8 | 323 | |||||||||||
| PC/Browser | 83 | (20 | ) | (9 | ) | (4 | ) | 33 | ||||||||||
| Mobile | 21 | 5 | (42 | ) | (24 | ) | 11 | |||||||||||
| Other | (3 | ) | 1 | — | — | 1 | ||||||||||||
| Total change in deferred net revenue (online-enabled games) by platform4 | 811 | (327 | ) | (339 | ) | (20 | ) | 368 | ||||||||||
| Mobile platform fees | — | — | (49 | ) | (44 | ) | (48 | ) | ||||||||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.
4The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||||||||||
| Unaudited Supplemental Financial Information and Business Metrics | ||||||||||||||
| (in $ millions) | ||||||||||||||
| Q3 | Q4 | Q1 | Q2 | Q3 | YOY % | |||||||||
| FY18 | FY18 | FY19 | FY19 | FY19 | Change | |||||||||
| CASH FLOW DATA | ||||||||||||||
| Operating cash flow | 849 | 615 | 120 | (126 | ) | 954 | 12 | % | ||||||
| Operating cash flow - TTM | 1,514 | 1,692 | 1,636 | 1,458 | 1,563 | 3 | % | |||||||
| Capital expenditures | 24 | 20 | 32 | 31 | 21 | (13 | %) | |||||||
| Capital expenditures - TTM | 116 | 107 | 106 | 107 | 104 | (10 | %) | |||||||
| Repurchase and retirement of common stock | 150 | 148 | 300 | 299 | 292 | 95 | % | |||||||
| DEPRECIATION | ||||||||||||||
| Depreciation expense | 30 | 31 | 30 | 30 | 30 | — | ||||||||
| BALANCE SHEET DATA | ||||||||||||||
| Cash and cash equivalents | 2,566 | 4,258 | 3,876 | 2,881 | 3,887 | |||||||||
| Short-term investments | 2,318 | 1,073 | 1,095 | 1,664 | 1,274 | |||||||||
| Cash and cash equivalents, and short-term investments | 4,884 | 5,331 | 4,971 | 4,545 | 5,161 | 6 | % | |||||||
| Receivables, net 1 | 886 | 385 | 371 | 966 | 806 | (9 | %) | |||||||
| STOCK-BASED COMPENSATION | ||||||||||||||
| Cost of revenue | — | 1 | 1 | 1 | 1 | |||||||||
| Research and development | 38 | 44 | 47 | 39 | 49 | |||||||||
| Marketing and sales | 8 | 8 | 7 | 9 | 8 | |||||||||
| General and administrative | 17 | 16 | 15 | 17 | 17 | |||||||||
| Total stock-based compensation | 63 | 69 | 70 | 66 | 75 | |||||||||
1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. EA’s FY19 Unaudited Condensed Consolidated Balance Sheets reflect the effect of the adoption as of April 1, 2018, which had an impact on receivables, net of allowances. Financial data for periods prior to April 1, 2018 has not been restated.
