0000712515-19-000040.txt : 20190730 0000712515-19-000040.hdr.sgml : 20190730 20190730160521 ACCESSION NUMBER: 0000712515-19-000040 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190730 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190730 DATE AS OF CHANGE: 20190730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRONIC ARTS INC. CENTRAL INDEX KEY: 0000712515 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 942838567 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17948 FILM NUMBER: 19985520 BUSINESS ADDRESS: STREET 1: 209 REDWOOD SHORES PARKWAY CITY: REDWOOD CITY STATE: CA ZIP: 94065 BUSINESS PHONE: 650-628-1500 MAIL ADDRESS: STREET 1: 209 REDWOOD SHORES PARKWAY CITY: REDWOOD CITY STATE: CA ZIP: 94065 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC ARTS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC ARTS DATE OF NAME CHANGE: 19911211 8-K 1 form8-k73019.htm FORM 8-K Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported) July 30, 2019

 ELECTRONIC ARTS INC.
(Exact Name of Registrant as Specified in Its Charter)

 
Delaware
 
0-17948
 
94-2838567
 
 
(State or Other Jurisdiction of Incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
 
 
 
 
 
 
209 Redwood Shores Parkway, Redwood City, California 94065-1175
(Address of Principal Executive Offices) (Zip Code)
 
(650) 628-1500
(Registrant’s Telephone Number, Including Area Code)
 
 
Former Name or Former Address, if Changed Since Last Report)
 
 
 
 
 
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company  ¨
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ¨
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
 
 
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value
 
EA
 
NASDAQ Global Select Market





Item 2.02    Result of Operations and Financial Condition.

On July 30, 2019, Electronic Arts Inc. (“EA”) issued a press release announcing its financial results for the fiscal quarter ended June 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1.

Neither the information in this Form 8-K nor the information in the press release attached hereto as Exhibit 99.1 shall be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01    Financial Statements and Exhibits.

(d) Exhibits.
Exhibit No.
 
Description
99.1
 
Press release dated July 30, 2019, relating to Electronic Arts Inc.’s financial results for the fiscal quarter ended June 30, 2019.






INDEX TO EXHIBITS







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
            

 
 
 ELECTRONIC ARTS INC.
 
 
 
 
Dated:
July 30, 2019
By:
/s/ Blake Jorgensen
 
 
 
Blake Jorgensen
 
 
 
Chief Operating Officer and Chief Financial Officer





 EX-99.1 2 earningsrelease73019.htm PRESS RELEASE Exhibit


Exhibit 99.1
 
Electronic Arts Reports Q1 FY20 Financial Results
graphic050614a09.jpg
 
 
 
 
 
REDWOOD CITY, CA - July 30, 2019 — Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its first fiscal quarter ended June 30, 2019.

“We had a strong start to FY20, bringing rich new experiences to our growing communities for Apex Legends, EA SPORTS, The Sims and more,” said CEO Andrew Wilson. “From great new games to live services with longevity, subscriptions on more platforms and competitive gaming for more franchises, we’re pushing to lead with innovation, quality and choice for our players.”

“We delivered operating results significantly above our expectations, driven by broad strength across our core franchises. This quarter shows how the power of our portfolio strategy, combined with live services, delivers strong results,” said COO and CFO Blake Jorgensen. “We believe we have the right ingredients in place to deliver fun for our players and success for our business.”

News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.

Selected Operating Highlights and Metrics

•
Digital net bookings* for the trailing twelve months was $3.730 billion, up 5% year-over-year and represents 76% of total net bookings.
•
During the quarter, FIFA Ultimate TeamTM had more than three million players logging in daily during the Team of the Season in-game event.
•
During the quarter, The Sims 4TM expansion packs and game pack downloads increased 55% year-over-year.
•
At quarter end, Star Wars TM: Galaxy of Heroes had nearly 80 million players life-to-date.
•
Season 2 in Apex Legends TM began on July 2.
•
On July 24, EA Access launched on PlayStation® 4.

* 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 mobile platform fees.

Selected Financial Highlights and Metrics

•
Net cash provided by operating activities was $158 million for the quarter and $1.585 billion for the trailing twelve months.
•
EA repurchased 3.2 million shares for $305 million during the quarter, bringing the total to 11.9 million shares for $1.197 billion during the trailing twelve months.

Impact of Certain Tax Matters

During the three months ended June 30, 2019, three separate tax events occurred:

1.
EA completed an internal transfer of some of its intellectual property rights to its Swiss subsidiary, where EA’s international business is headquartered;





2.
A decision by the Ninth Circuit Court of Appeals in Altera Corp. v. Commissioner regarding stock-based compensation expenses required EA to record a tax accrual; and
3.
A referendum was passed in Switzerland, which will change the Swiss income tax rates once enacted.

As a result of these events, EA expects to recognize an income tax benefit of $1.700 billion, or $5.61 of earnings per share, during the fiscal year ending March 31, 2020. EA recognized $1.080 billion of this income tax benefit during the three months ended June 30, 2019 and expects to recognize the remaining $620 million once the referendum is enacted, which we expect during the three months ending September 30, 2019.

Quarterly Financial Highlights
 
Three Months Ended
 
June 30,
 
2019
 
2018
(in $ millions, except per share amounts)
 
 
 
Digital net revenue
1,049

 
957

Packaged goods and other net revenue
160

 
180

          Total net revenue
1,209

 
1,137

 
 
 
 
Net income
1,421*

 
293

Diluted earnings per share
4.75*

 
0.95

 
 
 
 
Operating cash flow
158

 
120

 
 
 
 
Value of shares repurchased
305

 
300

Number of shares repurchased
3.2

 
2.3

 
 
 
 
 
*Refer to the above section titled “Impact of Certain Tax Matters” for additional details.


The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
 
Three Months Ended June 30, 2019
 
 
 
GAAP-Based Financial Data
(in $ millions)
Statement of Operations
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Mobile platform fees
 
Stock-based compensation
Total net revenue
1,209

 
—

 
(427
)
 
(39
)
 
—

          Cost of revenue
187

 
(2
)
 
—

 
(39
)
 
(1
)
Gross profit
1,022

 
2

 
(427
)
 
—

 
1

          Total operating expenses
607

 
(6
)
 
—

 
—

 
(72
)
Operating income
415

 
8

 
(427
)
 
—

 
73

Interest and other income, net
21

 
—

 
—

 
—

 
—

Income before provision for (benefit from) income taxes
436

 
8

 
(427
)
 
—

 
73

Number of shares used in computation:
 
 
 
 
 
 
 
 
 
          Diluted
299

 
 
 
 
 
 
 
 






For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2019.
Trailing Twelve Months Financial Highlights
 
Twelve Months Ended
 
June 30,
 
2019
 
2018
(in $ millions)
 
 
 
Digital net revenue
3,802

 
3,528

Packaged goods and other net revenue
1,220

 
1,310

          Total net revenue
5,022

 
4,838*

 
 
 
 
Net income
2,147**

 
692

 
 
 
 
Operating cash flow
1,585

 
1,636

 
 
 
 
Value of shares repurchased
1,197

 
751

Number of shares repurchased
11.9

 
6.2

 
 
 
 
 
*EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers on April 1, 2018. For more information about the adoption of Topic 606 please refer to the Investor Accounting FAQ on our IR website and our SEC filings. Financial data from prior periods has not been restated.
**Refer to the above section titled “Impact of Certain Tax Matters” for additional details.


The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
 
Twelve Months Ended June 30, 2019
 
 
 
GAAP-Based Financial Data
(in $ millions)
Statement of Operations
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Mobile platform fees
 
Stock-based compensation
Total net revenue
5,022

 
—

 
94

 
(178
)
 
—

          Cost of revenue
1,294

 
(5
)
 
—

 
(178
)
 
(4
)
Gross profit
3,728

 
5

 
94

 
—

 
4

          Total operating expenses
2,617

 
(37
)
 
—

 
—

 
(283
)
Operating income
1,111

 
42

 
94

 
—

 
287

Interest and other income, net
85

 
—

 
—

 
—

 
—

Income before provision for (benefit from) income taxes
1,196

 
42

 
94

 
—

 
287


For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2019.





Operating Metric

The following is a calculation of our total net bookings for the periods presented:
 
Three Months Ended
June 30,
 
Twelve Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
(in $ millions)
 
 
 
 
 
 
 
Total net revenue
1,209

 
1,137

 
5,022

 
4,838

Change in deferred net revenue (online-enabled games)
(427
)
 
(339
)
 
94

 
365

Mobile platform fees
(39
)
 
(49
)
 
(178
)
 
(49
)
Net bookings
743

 
749

 
4,938

 
5,154



Business Outlook as of July 30, 2019

The following forward-looking statements reflect expectations as of July 30, 2019. Electronic Arts assumes no obligation to update these statements. 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 2020 Expectations — Ending March 31, 2020
    
Financial metrics:
•
Net revenue is expected to be approximately $5.375 billion.
◦
Change in deferred net revenue (online-enabled games) is expected to be approximately $(125) million.
◦
Mobile platform fees are expected to be approximately $(150) million.
•
Net income is expected to be approximately $2.795 billion, approximately $1.700 billion of which is related to the income tax benefits discussed above.
•
Diluted earnings per share is expected to be approximately $9.22, approximately $5.61 of which is related to the income tax benefits discussed above.
•
Operating cash flow is expected to be approximately $1.575 billion.
•
The Company estimates a share count of 303 million for purposes of calculating fiscal year 2020 diluted earnings per share.


Operational metric:
•
Net bookings is expected to be approximately $5.100 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, 2020
 
 
 
GAAP-Based Financial Data
 
GAAP Guidance
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Mobile platform fees
 
Stock-based compensation
(in $ millions)
 
 
 
 
 
 
 
 
 
Digital net revenue
4,175

 
—

 
(75
)
 
(150
)
 
—

Packaged goods & other net revenue
1,200

 
—

 
(50
)
 
—

 
—

Total net revenue
5,375

 
—

 
(125
)
 
(150
)
 
—

Cost of revenue
1,327

 
(12
)
 
—

 
(150
)
 
(2
)
Operating expense
2,746

 
(23
)
 
—

 
—

 
(353
)
Income before provision for (benefit from) income taxes
1,361

 
35

 
(125
)
 
—

 
355

Net income
2,795

 
 
 
 
 
 
 
 
Number of shares used in computation:
 
 
 
 
 
 
 
 
 
Diluted shares
303

 
 
 
 
 
 
 
 


Second Quarter Fiscal Year 2020 Expectations — Ending September 30, 2019

Financial metrics:
•
Net revenue is expected to be approximately $1.315 billion.
◦
Change in deferred net revenue (online-enabled games) is expected to be approximately $(50) million.
◦
Mobile platform fees are expected to be approximately $(35) million.
•
Net income is expected to be approximately $776 million, approximately $620 million of which is related to the income tax benefits discussed above.
•
Diluted earnings per share is expected to be approximately $2.60, approximately $2.08 of which is related to the income tax benefits discussed above.
•
The Company estimates a share count of 298 million for purposes of calculating second quarter fiscal year 2020 diluted earnings per share.


Operational metric:
•
Net bookings is expected to be approximately $1.230 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 September 30, 2019
 
 
 
GAAP-Based Financial Data
 
GAAP Guidance
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Mobile platform fees
 
Stock-based compensation
(in $ millions)
 
 
 
 
 
 
 
 
 
Total net revenue
1,315

 
—

 
(50
)
 
(35
)
 
—

Cost of revenue
407

 
(2
)
 
—

 
(35
)
 
(1
)
Operating expense
679

 
(5
)
 
—

 
—

 
(89
)
Income before provision for (benefit from) income taxes
243

 
7

 
(50
)
 
—

 
90

Net Income
776

 
 
 
 
 
 
 
 
Number of shares used in computation:
 
 


 
 
 
 
 
 
Diluted shares
298

 
 
 
 
 
 
 
 

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2019.


Conference Call and Supporting Documents

Electronic Arts will host a conference call on July 30, 2019 at 2:00 pm PT (5:00 pm ET) to review its results for the first fiscal quarter ended June 30, 2019 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 code 9998462 or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation with a financial model of EA’s historical results and guidance and an Investor Accounting FAQ document on EA’s IR Website. 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 August 13, 2019 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 9998462. 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 2020 expectations under the heading “Business Outlook as of July 30, 2019,” and other information regarding EA's 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 products and services; the Company’s ability to develop and support digital products and services, including managing online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the





competition in the interactive entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products and services; 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; changes in our tax rates or tax laws; and other factors described in Part I, Item 1A of Electronic Arts’ latest Annual Report on Form 10-K under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission.

These forward-looking statements are current as of July 30, 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 June 30, 2019. 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 June 30, 2019.

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.
 
In fiscal year 2019, EA posted GAAP net revenue of $4.95 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS™ FIFA, Battlefield™, Apex Legends™, The Sims™, Madden NFL, Need for Speed™, Titanfall™ and Plants vs. Zombies™. More information about EA is available at www.ea.com/news.

EA SPORTS, Ultimate Team, Battlefield, Need for Speed, Apex Legends, The Sims 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. STAR WARS © & TM 2015 Lucasfilm Ltd. All rights reserved. 

For additional information, please contact:
Chris Evenden
John Reseburg
Vice President, Investor Relations
Vice President, Corporate Communications
650-628-0255
650-628-3601
cevenden@ea.com
jreseburg@ea.com





    
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in $ millions, except per share data)
 
 
 
 
 
Three Months Ended June 30,
 
2019
 
2018
Net revenue
 
 
 
Product
166

 
202

Service and other
1,043

 
935

Total net revenue
1,209

 
1,137

Cost of revenue
 
 
 
Product
35

 
68

Service and other
152

 
147

Total cost of revenue
187

 
215

Gross profit
1,022

 
922

Operating expenses:
 
 
 
Research and development
381

 
362

Marketing and sales
110

 
140

General and administrative
110

 
114

Acquisition-related contingent consideration
1

 
—

Amortization of intangibles
5

 
6

Total operating expenses
607

 
622

Operating income
415

 
300

Interest and other income (expense), net
21

 
19

Income before provision for (benefit from) income taxes
436

 
319

Provision for (benefit from) income taxes
(985
)
 
26

Net income
1,421

 
293

Earnings per share
 
 
 
Basic
4.78

 
0.96

Diluted
4.75

 
0.95

Number of shares used in computation
 
 
 
Basic
297

 
306

Diluted
299

 
310
























Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on May 7, 2019 for the three months ended June 30, 2019 plus a comparison to the actuals for the three months ended June 30, 2018.


 
Three Months Ended June 30,
 
2019
 
 
 
2019
 
2018
 
Guidance
 
Variance
 
Actuals
 
Actuals
Net revenue
 
 
 
 
 
 
 
Net revenue
1,130

 
79

 
1,209

 
1,137

GAAP-based financial data
 
 
 
 
 
 
 
Change in deferred net revenue (online-enabled games)
(405
)
 
(22
)
 
(427
)
 
(339
)
Mobile platform fees
(35
)
 
(4
)
 
(39
)
 
(49
)
Cost of revenue
 
 


 
 
 
 
Cost of revenue
188

 
(1
)
 
187

 
215

GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses
(2
)
 
—

 
(2
)
 
(1
)
Stock-based compensation
—

 
(1
)
 
(1
)
 
(1
)
Mobile platform fees
(35
)
 
(4
)
 
(39
)
 
(49
)
Operating expenses
 
 


 
 
 
 
Operating expenses
650

 
(43
)
 
607

 
622

GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses
(5
)
 
(1
)
 
(6
)
 
(6
)
Stock-based compensation
(70
)
 
(2
)
 
(72
)
 
(69
)
Income before tax
 
 


 
 
 
 
Income before tax
310

 
126

 
436

 
319

GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses
7

 
1

 
8

 
7

Change in deferred net revenue (online-enabled games)
(405
)
 
(22
)
 
(427
)
 
(339
)
Mobile platform fees
—

 
—

 
—

 
—

Stock-based compensation
70

 
3

 
73

 
70

Tax rate used for management reporting
18
%
 


 
18
%
 
18
%
Earnings per share
 
 
 
 
 
 
 
Basic
5.90

 
(1.12
)
 
4.78

 
0.96

Diluted
5.84

 
(1.09
)
 
4.75

 
0.95

Number of shares
 
 
 
 
 
 
 
Basic
299

 
(2
)
 
297

 
306

Diluted
302

 
(3
)
 
299

 
310

















ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
 
 
 
 
 
June 30, 2019
 
March 31, 20191
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
3,533

 
4,708

Short-term investments
1,654

 
737

Receivables, net
329

 
623

Other current assets
284

 
313

Total current assets
5,800

 
6,381

Property and equipment, net
446

 
448

Goodwill
1,892

 
1,892

Acquisition-related intangibles, net
80

 
87

Deferred income taxes, net
1,208

 
35

Other assets
323

 
114

TOTAL ASSETS
9,749

 
8,957

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
56

 
113

Accrued and other current liabilities
915

 
1,052

Deferred net revenue (online-enabled games)
679

 
1,100

Total current liabilities
1,650

 
2,265

Senior notes, net
995

 
994

Income tax obligations
345

 
233

Deferred income taxes, net
2

 
2

Other liabilities
272

 
132

Total liabilities
3,264

 
3,626

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
3

 
3

Retained earnings
6,499

 
5,358

Accumulated other comprehensive loss
(17
)
 
(30
)
Total stockholders’ equity
6,485

 
5,331

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
9,749

 
8,957




1Derived from audited consolidated financial statements.






ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
 
 
 
 
 
Three Months Ended June 30,
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
Net income
1,421

 
293

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
37

 
38

Stock-based compensation
73

 
70

Change in assets and liabilities
 
 
 
Receivables, net
294

 
169

Other assets
24

 
48

Accounts payable
(40
)
 
8

Accrued and other liabilities
(56
)
 
(85
)
Deferred income taxes, net
(1,174
)
 
(74
)
Deferred net revenue (online-enabled games)
(421
)
 
(347
)
Net cash provided by operating activities
158

 
120

INVESTING ACTIVITIES
 
 
 
Capital expenditures
(45
)
 
(32
)
Proceeds from maturities and sales of short-term investments
358

 
207

Purchase of short-term investments
(1,263
)
 
(228
)
Acquisitions, net of cash acquired
—

 
(50
)
Net cash used in investing activities
(950
)
 
(103
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of common stock
3

 
1

Cash paid to taxing authorities for shares withheld from employees
(51
)
 
(89
)
Repurchase and retirement of common stock
(305
)
 
(300
)
Payment of contingent consideration
(32
)
 
—

Net cash used in financing activities
(385
)
 
(388
)
Effect of foreign exchange on cash and cash equivalents
2

 
(11
)
Change in cash and cash equivalents
(1,175
)
 
(382
)
Beginning cash and cash equivalents
4,708

 
4,258

Ending cash and cash equivalents
3,533

 
3,876




















ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1
 
Q2
 
Q3
 
Q4
 
Q1
 
YOY %
 
FY19
 
FY19
 
FY19
 
FY19
 
FY20
 
Change
Net revenue
 
 
 
 
 
 
 
 
 
 
 
 Net revenue
1,137

 
1,286

 
1,289

 
1,238

 
1,209

 
6
%
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Change in deferred net revenue (online-enabled games)2
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Mobile platform fees
(49
)
 
(44
)
 
(48
)
 
(47
)
 
(39
)
 
 
Gross profit
 
 
 
 
 
 
 
 
 
 
 
Gross profit
922

 
868

 
876

 
962

 
1,022

 
11
%
Gross profit (as a % of net revenue)
81
%
 
67
%
 
68
%
 
78
%
 
85
%
 
 
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
1

 
1

 
1

 
1

 
2

 
 
Change in deferred net revenue (online-enabled games)2
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Mobile platform fees
—

 
—

 
—

 
—

 
—

 
 
Stock-based compensation
1

 
1

 
1

 
1

 
1

 
 
Operating income
 
 
 
 
 
 
 
 
 
 
 
Operating income
300

 
258

 
242

 
196

 
415

 
38
%
Operating income (as a % of net revenue)
26
%
 
20
%
 
19
%
 
16
%
 
34
%
 
 
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
7

 
9

 
8

 
17

 
8

 
 
Change in deferred net revenue (online-enabled games)2
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Stock-based compensation
70

 
66

 
75

 
73

 
73

 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
Net income
293

 
255

 
262

 
209

 
1,421

 
385
%
Net income (as a % of net revenue)
26
%
 
20
%
 
20
%
 
17
%
 
118
%
 
 
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
7

 
9

 
8

 
17

 
8

 
 
Change in deferred net revenue (online-enabled games)2
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Stock-based compensation
70

 
66

 
75

 
73

 
73

 
 
Tax rate used for management reporting
18
%
 
18
%
 
18
%
 
18
%
 
18
%
 


Diluted earnings per share
0.95

 
0.83

 
0.86

 
0.69

 
4.75

 
400
%
Number of diluted shares used in computation
 
 
 
 
 
 
 
 
 
 
 
Basic
306

 
305

 
302

 
299

 
297

 
 
Diluted
310

 
307

 
304

 
301

 
299

 
 



2The 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)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1
 
Q2
 
Q3
 
Q4
 
Q1
 
YOY %
 
 
FY19
 
FY19
 
FY19
 
FY19
 
FY20
 
Change
QUARTERLY NET REVENUE PRESENTATIONS
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue by composition
 
 
 
 
 
 
 
 
 
 
 
 
Full game downloads
 
116

 
148

 
247

 
169

 
132

 
14
%
Live services
 
610

 
412

 
480

 
714

 
731

 
20
%
Mobile
 
231

 
220

 
181

 
182

 
186

 
(19
%)
Total digital
 
957

 
780

 
908

 
1,065

 
1,049

 
10
%
Packaged goods and other
 
180

 
506

 
381

 
173

 
160

 
(11
%)
Total net revenue
 
1,137

 
1,286

 
1,289

 
1,238

 
1,209

 
6
%
Total digital
 
84
%
 
61
%
 
70
%
 
86
%
 
87
%
 
 
Packaged goods and other
 
16
%
 
39
%
 
30
%
 
14
%
 
13
%
 
 
Total net revenue %
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
 
GAAP-based financial data
 
 
 
 
 
 
Full game downloads
 
(20
)
 
9

 
26

 
44

 
(57
)
 
 
Live services
 
(160
)
 
(84
)
 
304

 
131

 
(227
)
 
 
Mobile
 
(35
)
 
(24
)
 
9

 
—

 
(25
)
 
 
Total digital
 
(215
)
 
(99
)
 
339

 
175

 
(309
)
 
 
Packaged goods and other
 
(124
)
 
79

 
29

 
(2
)
 
(118
)
 
 
Total change in deferred net revenue (online-enabled games) by composition2
 
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Mobile platform fees
 
(49
)
 
(44
)
 
(48
)
 
(47
)
 
(39
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue by platform
 
 
 
 
 
 
 
 
 
 
 
 
Console
 
705

 
917

 
885

 
826

 
760

 
8
%
PC/Browser
 
197

 
149

 
217

 
217

 
249

 
26
%
Mobile
 
233

 
220

 
181

 
190

 
196

 
(16
%)
Other
 
2

 
—

 
6

 
5

 
4

 
100
%
Total net revenue
 
1,137

 
1,286

 
1,289

 
1,238

 
1,209

 
6
%
GAAP-based financial data
 
 
 
 
 


Console
 
(288
)
 
8

 
323

 
87

 
(344
)
 
 
PC/Browser
 
(9
)
 
(4
)
 
33

 
88

 
(59
)
 
 
Mobile
 
(42
)
 
(24
)
 
11

 
(2
)
 
(25
)
 
 
Other
 
—

 
—

 
1

 
—

 
1

 
 
Total change in deferred net revenue (online-enabled games) by platform2
 
(339
)
 
(20
)
 
368

 
173

 
(427
)
 
 
Mobile platform fees
 
(49
)
 
(44
)
 
(48
)
 
(47
)
 
(39
)
 
 




2The 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)
 
 
 
 
 
 
 
 
 
 
 
 
 
Q1
 
Q2
 
Q3
 
Q4
 
Q1
 
YOY %
 
FY19
 
FY19
 
FY19
 
FY19
 
FY20
 
Change
CASH FLOW DATA
 
 
 
 
 
 
 
 
 
 
 
Operating cash flow
120

 
(126
)
 
954

 
599

 
158

 
32
%
Operating cash flow - TTM
1,636

 
1,458

 
1,563

 
1,547

 
1,585

 
(3
%)
Capital expenditures
32

 
31

 
21

 
35

 
45

 
41
%
Capital expenditures - TTM
106

 
107

 
104

 
119

 
132

 
25
%
Repurchase and retirement of common stock
300

 
299

 
292

 
301

 
305

 
2
%
DEPRECIATION
 
 
 
 
 
 
 
 
 
 
 
Depreciation expense
30

 
30

 
30

 
31

 
30

 
—

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
3,876

 
2,881

 
3,887

 
4,708

 
3,533

 


Short-term investments
1,095

 
1,664

 
1,274

 
737

 
1,654

 


Cash and cash equivalents, and short-term investments
4,971

 
4,545

 
5,161

 
5,445

 
5,187

 
4
%
Receivables, net
371

 
966

 
806

 
623

 
329

 
(11
%)
STOCK-BASED COMPENSATION
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
1

 
1

 
1

 
1

 
1

 
 
Research and development
47

 
39

 
49

 
49

 
49

 
 
Marketing and sales
7

 
9

 
8

 
9

 
7

 
 
General and administrative
15

 
17

 
17

 
14

 
16

 
 
Total stock-based compensation
70

 
66

 
75

 
73

 
73

 
 




























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