EX-99.1 2 d344959dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

 

ELECTRONIC ARTS REPORTS

Q4 FY12 AND FY12 FINANCIAL RESULTS

      LOGO   
         
         

All-Time High Non-GAAP Net Revenue of $4.2 Billion in Fiscal 12

Annual Digital Non-GAAP Revenue – Up 47% to $1.2 Billion

Digital Revenue Driving Margin Expansion

Mass Effect 3 Sales Exceed $200 Million at Retail

FIFA 12 Non-GAAP Digital Revenue Tops $100 Million

REDWOOD CITY, CA – May 7, 2012 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its fourth fiscal quarter and fiscal year ended March 31, 2012.

“We are proud to report a strong quarter and a fiscal year highlighted with $1.2 billion of digital revenue,” said Chief Executive Officer John Riccitiello. “In the coming year, we break away from the pack, with a very different profile than the traditional game companies and capabilities that none of our new digital competitors can match.”

“Digital growth drove our margins in fiscal 12 and we project this trend will continue in fiscal 13,” said Interim Chief Financial Officer Ken Barker. “We saw more than 20 percent non-GAAP diluted EPS growth in fiscal 12, and are guiding to more than 30 percent growth in fiscal 13 based on the midpoint of our guidance.”

Selected Operating Highlights and Metrics:

 

* On a non-GAAP basis

 

  •  

Strong results driven by the successful launches of Mass Effect™ 3, FIFA, Street 4, SSX™ and Kingdoms of Amalur: Reckoning™.

 

  •  

FIFA 12 established the best year in franchise history - with downloads and micro-transactions totaling $108 million*. FIFA Ultimate Team – a pure digital companion to recent FIFA titles was the second best-selling EA offering in the UK in fiscal 12.

 

  •  

Battlefield 3™ had a record year, establishing itself as one of EA’s premier game services and in the process successfully took share in the growing First-Person-Shooter market.

 

  •  

Battlefield 3 players are still deeply engaged – 6.3 million MAUs in March. New content downloads available in May and June.

 

  •  

Q4 full-game downloads were up 76 percent* year-over-year, contributing $60 million* in the quarter, driven in part by Mass Effect 3 and STAR WARS®: The Old Republic™.

 

  •  

STAR WARS®: The Old Republic™ active subscribers are 1.3 million. Two new content packs – Legacy and Allies, available in Q1.

 

  •  

EA’s Play4Free brands are generating an average of nearly $2 million* per week. Several more EA brands will be introduced in the Play4Free portal in fiscal 13.

 

  •  

EA shattered its goal for digital revenue growth – generating more than $1.2 billion* in fiscal 12 for a 47 percent year-over-year growth, and driving operating margin to 10%. Another 40 percent increase in digital non-GAAP revenue and continued operating margin expansion is forecasted for fiscal 13.

  •  

EA’s Origin™ platform for games and services has registered 11 million players and generated approximately $150 million* in just ten months. EA’s Nucleus database has registered 220 million consumers.

 

  •  

Casual game leader PopCap™ – acquired by EA in August – is growing on mobile and social platforms with new games like Solitaire Blitz™ and Lucky Gem Casino™. A new version of Bejeweled™ is EA’s top grossing game on the Apple® App StoreSM.

 

  •  

EA repurchased 27.7 million shares for $529 million through March 31, 2012, and as of the call, the $600 million share repurchase program has been completed.

 

  •  

In fiscal 13, EA will invest $80 million in development of games for Gen4 console systems.

Q4 and Full-Year FY12 Financial Highlights:

For the quarter, non-GAAP net revenue of $977 million was slightly ahead of our guidance of $925 million to $975 million. Non-GAAP diluted earnings per share of $0.17 was in line with our guidance of $0.10 to $0.20. Non-GAAP net revenue in Q4 fiscal 2012 was slightly lower as compared to Q4 fiscal 2011 due to a reduction in the number of package goods titles in the quarter.

 

(in millions of $ except per share amounts)    Quarter
Ended
3/31/12		      Quarter
Ended
3/31/11		  

Net Digital Revenue

    $ 419       $ 211   

Net Publishing Packaged Goods and Other Revenue

      926         838   

Net Distribution Packaged Goods Revenue

      23         41   
  

 

 

     

 

 

  

GAAP Total Net Revenue

      1,368         1,090   
  

 

 

     

 

 

  

Non-GAAP Net Digital Revenue

    $ 425       $ 268   

Non-GAAP Net Publishing Packaged Goods and Other Revenue

      529         686   

Non-GAAP Net Distribution Packaged Goods Revenue

      23         41   
  

 

 

     

 

 

  

Non-GAAP Total Net Revenue

      977         995   
  

 

 

     

 

 

  

GAAP Net Income

      400         151   

Non-GAAP Net Income

      56         83   

GAAP Diluted Earnings Per Share

      1.20         0.45   

Non-GAAP Diluted Earnings Per Share

      0.17         0.25   

Cash Flow from Operations

      287         253   

Trailing Twelve Month (TTM) Financial Highlights:

 

(in millions of $ except per share data)    TTM
Ended
3/31/12		      TTM
Ended
3/31/11		  

GAAP Net Revenue

    $ 4,143       $ 3,589   

GAAP Net Income (Loss)

      76         (276 ) 

GAAP Diluted Earnings (Loss) Per Share

      0.23         (0.84 ) 

Non-GAAP Net Revenue

      4,186         3,828   

Non-GAAP Net Income

      284         233   

Non-GAAP Diluted Earnings Per Share

      0.85         0.70   

Cash Flow from Operations

      277         320   

Q4 FY12 Digital Metrics:

 

(in millions)    Quarter
Ended
3/31/12		      Quarter
Ended
3/31/11		  

GAAP Net Mobile Revenue

    $ 87       $ 70   

Non-GAAP Net Mobile Revenue

    $ 84       $ 67   

Monthly Active Users (MAU) in Social Games

      49         36   

Core Registered Users

      220         112   

Business Outlook as of May 7, 2012

The following forward-looking statements, as well as those made above, reflect expectations as of May 7, 2012. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors, including: product development delays; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; the financial impact of acquisitions by EA; the popular appeal of EA’s products; EA’s effective tax rate; and other factors detailed in this release and in EA’s annual and quarterly SEC filings.

Fiscal Year 2013 Expectations – Ending March 31, 2013

 

  •  

GAAP net revenue is expected to be approximately $4.075 billion.

 

  •  

Non-GAAP net revenue is expected to be approximately $4.300 billion.

 

  •  

GAAP loss per share is expected to be approximately ($0.36) to ($0.16).

 

  •  

Non-GAAP diluted earnings per share is expected to be approximately $1.05 to $1.20.

 

  •  

For purposes of calculating fiscal year 2013 diluted earnings per share, the Company estimates a share count of 327 million, and 321 million shares for calculating loss per share.

 

  •  

Expected non-GAAP net income excludes the following from expected GAAP net loss:

 

  •  

Non-GAAP net revenue is expected to be approximately $225 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);

 

  •  

Approximately $175 million of estimated stock-based compensation;

 

  •  

Approximately $80 million of acquisition-related expenses;

 

  •  

Approximately $45 million of restructuring charges;

 

  •  

Approximately $20 million from the amortization of debt discount; and

 

  •  

Non-GAAP tax expense is expected to be $84 million to $102 million higher than GAAP tax expense.

First Quarter Fiscal Year 2013 Expectations – Ending June 30, 2012

 

  •  

GAAP net revenue is expected to be approximately $950 million.

 

  •  

Non-GAAP net revenue is expected to be approximately $500 million.

 

  •  

GAAP diluted earnings per share is expected to be approximately $0.40 to $0.48.

 

  •  

Non-GAAP loss per share is expected to be approximately ($0.45) to ($0.40).

 

  •  

For purposes of calculating first quarter fiscal year 2013 diluted earnings per share, the Company estimates a share count of 322 million, and 318 million shares for calculating loss per share.

 

  •  

Expected non-GAAP net loss excludes the following from expected GAAP net income:

 

  •  

Non-GAAP net revenue is expected to be approximately $450 million lower than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);

 

  •  

Approximately $45 million of estimated stock-based compensation;

 

  •  

Approximately $20 million of acquisition-related expenses;

 

  •  

Approximately $40 million of restructuring charges;

 

  •  

Approximately $5 million from the amortization of debt discount; and

 

  •  

Non-GAAP tax expense is expected to be $60 million to $66 million lower than GAAP tax expense.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on May 7, 2012 at 2:00 pm PT (5:00 pm ET) to review its results for the fourth quarter ended March 31, 2012 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: 773-799-3213 (domestic) or 888-677-1083 (international), using the password “EA” or via webcast at http://ir.ea.com.

EA will also post a slide presentation that accompanies the call at http://ir.ea.com.

A dial-in replay of the conference call will be provided until May 15, 2012 at the following number: 203-369-0099 (domestic) or 866-356-3373 (international). A webcast replay of the conference call will be available for one year at http://ir.ea.com.

Non-GAAP Financial Measures

To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, as applicable in a given reporting period, from the Company’s unaudited condensed consolidated statements of operations:

 

  •  

Acquisition-related expenses

 

  •  

Amortization of debt discount

 

  •  

Certain non-recurring litigation expenses

 

  •  

Change in deferred net revenue (packaged goods and digital content)

 

  •  

Gain (loss) on strategic investments

 

  •  

Loss on licensed intellectual property commitment

 

  •  

Restructuring charges

 

  •  

Stock-based compensation

 

  •  

Income tax adjustments

Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information

regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Electronic Arts’ management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company’s operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons:

Acquisition-Related Expenses. GAAP requires expenses to be recognized for various types of events associated with a business acquisition. These events include, expensing acquired intangible assets, including acquired in-process technology, post-closing adjustments associated with changes in the estimated amount of contingent consideration to be paid in an acquisition, and the impairment of accounting goodwill created as a result of an acquisition when future events indicated there has been a decline in its value. When analyzing the operating performance of an acquired entity, Electronic Arts’ management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid including the final amounts paid for contingent consideration) without taking into consideration any allocations made for accounting purposes. Because the final purchase price paid for an acquisition necessarily reflects the accounting value assigned to both contingent consideration and to the intangible assets (including goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company’s management excludes the GAAP impact of any adjustments to the fair value of these acquisition-related balances to its financial results.

Amortization of Debt Discount on the Convertible Senior Notes. Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize as a debt discount an amount equal to the fair value of the conversion option as interest expense on the Company’s $632.5 million of 0.75% convertible senior notes that were issued in a private placement in July 2011 over the term of the notes. Electronic Arts’ management will exclude the effect of this amortization when evaluating the Company’s operating performance and the performance of its management team during this period and will continue to do so, when it plans, forecasts and analyzes future periods.

Certain non-recurring litigation expenses. During the fourth quarter of fiscal 2012, Electronic Arts recognized a $27 million expense related to a potential settlement of an on-going litigation matter. This significant non-recurring litigation expense is excluded from our non-GAAP financial measures in order to provide comparability between periods. Further, the Company excluded this expense when evaluating its operating performance and the performance of its management team during this period and will continue to do so when it plans, forecasts and analyzes future periods.

Change in Deferred Net Revenue (Packaged Goods and Digital Content). Electronic Arts is not able to objectively determine the fair value of the online service included in certain of its packaged goods and digital content. As a result, the Company recognizes the revenue from the sale of these games and content over the estimated online service period. In other transactions, at the date we sell the software product we have an obligation to provide incremental unspecified digital content in the future without an additional fee. In these cases, we account for the sale of the software product as a multiple element arrangement and recognize the revenue on a straight-line basis over the estimated period of game play. Internally, Electronic Arts’ management excludes the impact of the change in deferred net revenue related to packaged goods games and digital content in its non-GAAP financial measures when evaluating the Company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The Company believes that excluding the impact of the change in deferred net revenue from its operating results is important to (1) facilitate comparisons to prior periods during which the Company was able to objectively determine the fair value of the online service and not delay the recognition of significant amounts of net revenue related to online-enabled packaged goods and (2) understanding our operations because all related costs are expensed as incurred instead of deferred and recognized ratably.

Gain (loss) on Strategic Investments. From time to time, the Company makes strategic investments. Electronic Arts’ management excludes the impact of any gains (losses) on such investments when evaluating the Company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. In addition, the Company believes that excluding the impact of such gains (losses) on these investments from its operating results is important to facilitate comparisons to prior periods.

Loss on Licensed Intellectual Property Commitment. During the fourth quarter of fiscal 2009, Electronic Arts amended an agreement with a content licensor. This amendment resulted in the termination of our rights to use the licensor’s intellectual property in certain products and we incurred a related estimated loss of $38 million. This significant non-recurring loss is excluded from our non-GAAP financial measures in order to provide comparability between periods. Further, the Company excluded this loss when evaluating its operating performance and the performance of its management team during this period and will continue to do so when it plans, forecasts and analyzes future periods.

Restructuring Charges. Although Electronic Arts has engaged in various restructuring activities in the past, each has been a discrete, extraordinary event based on a unique set of business objectives. Each of these restructurings has been unlike its predecessors in terms of its operational implementation, business impact and scope. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures.

Stock-Based Compensation. When evaluating the performance of its individual business units, the Company does not consider stock-based compensation charges. Likewise, the Company’s management teams exclude stock-based compensation expense from their short and long-term operating plans. In contrast, the Company’s management teams are held accountable for cash-based compensation and such amounts are included in their operating plans. Further, when considering the impact of equity award grants, Electronic Arts places a greater emphasis on overall shareholder dilution rather than the accounting charges associated with such grants.

Income Tax Adjustments. The Company uses a fixed, long-term projected tax rate of 28 percent internally to evaluate its operating performance, to forecast, plan and analyze future periods, and to assess the performance of its management team. Accordingly, the Company has applied the same 28 percent tax rate to its non-GAAP financial results.

In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this press release.

Forward-Looking Statements

Some statements set forth in this release, including the information relating to EA’s fiscal 2013 guidance information under the heading “Business Outlook”, contain forward-looking statements that are subject to change. Statements including words such as “anticipate”, “believe”, “estimate” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are preliminary estimates and expectations based on current information and are subject to business and economic risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth 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 manage expenses; the competition in the interactive entertainment industry; the effectiveness of the Company’s sales and marketing programs; timely development and release of Electronic Arts’ products; the Company’s ability to realize the anticipated benefits of acquisitions, including the PopCap acquisition; 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 service and support digital product offerings, including managing online security; general economic conditions; and other factors described in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2011.

These forward-looking statements are current as of May 7, 2012. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements. 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2012. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 31, 2012.

About Electronic Arts

Electronic Arts (NASDAQ:EA) is a global leader in digital interactive entertainment. The Company’s game franchises are offered as both packaged goods products and online services delivered through Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 100 million registered players and operates in 75 countries. In fiscal year 2012, EA posted GAAP net revenue of $4.1 billion. Headquartered in Redwood City, California, EA is recognized for critically acclaimed, high-quality blockbuster franchises such as The Sims™, Madden NFL, FIFA Soccer, Need for Speed™, Battlefield™, and Mass Effect™. More information about EA is available at http://info.ea.com.

For additional information, please contact:

 

Rob Sison    Jeff Brown
Vice President, Investor Relations    Senior Vice President, Corporate Communications
650-628-7787    650-628-7922

rsison@ea.com

   

jbrown@ea.com

Origin, SSX, PopCap, Lucky Gem Casino, Bejeweled, Solitaire Blitz, The Sims and Need for Speed are trademarks of Electronic Arts Inc. Mass Effect is a trademark of EA International (Studio and Publishing) Ltd. Battlefield 3 and Battlefield are trademarks of EA Digital Illusions CE AB. LucasArts, the LucasArts logo, and STAR WARS are registered trademarks of Lucasfilm Ltd. © 2011 Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. & ® or TM as indicated. All rights reserved. John Madden, NFL and FIFA are the property of their respective owners and used with permission. Apple is a trademark and App Store is a service mark of Apple Inc. All other trademarks are the property of their respective owners.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in millions, except per share data)

 

     Three Months Ended
March 31,		     Twelve Months Ended
March 31,		  
     2012     2011     2012     2011  

Net revenue

    $ 1,368      $ 1,090      $ 4,143      $ 3,589   

Cost of goods sold

      374        328        1,598        1,499   
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross profit

      994        762        2,545        2,090   

Operating expenses:

         

Marketing and sales

      222        194        853        747   

General and administrative

      115        75        375        301   

Research and development

      284        328        1,212        1,153   

Acquisition-related contingent consideration

      3        8        11        (17 ) 

Amortization of intangibles

      6        13        43        57   

Restructuring and other

      (1 )      (1 )      16        161   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating expenses

      629        617        2,510        2,402   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

      365        145        35        (312 ) 

Gain on strategic investments, net

      —          —          —          23   

Interest and other income (expense), net

      (4 )      4        (17 )      10   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before benefit from income taxes

      361        149        18        (279 ) 

Benefit from income taxes

      (39 )      (2 )      (58 )      (3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 400      $ 151      $ 76      $ (276 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Earnings (loss) per share

         

Basic

    $ 1.22      $ 0.45      $ 0.23      $ (0.84 ) 

Diluted

    $ 1.20      $ 0.45      $ 0.23      $ (0.84 ) 

Number of shares used in computation

        

Basic

     329        333        331        330   

Diluted

     332        336        336        330   

Non-GAAP Results (in millions, except per share data)

The following tables reconcile the Company’s net income (loss) and earnings (loss) per share as presented in its Unaudited Condensed Consolidated Statements of Operations and prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) to its non-GAAP net income and non-GAAP earnings per share.

 

     Three Months Ended
March 31,		     Twelve Months Ended
March 31,		  
     2012     2011     2012     2011  

Net income (loss)

    $ 400      $ 151      $ 76      $ (276 ) 

Acquisition-related expenses

      36        24        106        52   

Amortization of debt discount

      5        —          14        —     

Certain non-recurring litigation expenses

      27        —          27        —     

Change in deferred net revenue (packaged goods and digital content)

      (391 )      (95 )      43        239   

Gain on strategic investments, net

      —          —          —          (23 ) 

Loss on licensed intellectual property commitment (COGS)

      —          —          —          (1 ) 

Restructuring and other

      (1 )      (1 )      16        161   

Stock-based compensation

      41        38        170        174   

Income tax adjustments

      (61 )      (34 )      (168 )      (93 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP net income

    $ 56      $ 83      $ 284      $ 233   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP earnings per share

         

Basic

    $ 0.17      $ 0.25      $ 0.86      $ 0.71   

Diluted

   $ 0.17      $ 0.25      $ 0.85      $ 0.70   

Number of shares used in Non-GAAP computation

         

Basic

     329        333        331        330   

Diluted

     332        336        336        334   

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in millions)

 

     March 31,
2012		     March 31,
2011 (a)		  

ASSETS

    

Current assets:

     

Cash and cash equivalents

    $ 1,293      $ 1,579   

Short-term investments

      437        497   

Marketable equity securities

      119        161   

Receivables, net of allowances of $252 and $304, respectively

      366        335   

Inventories

      59        77   

Deferred income taxes, net

      67        56   

Other current assets

      268        327   
  

 

 

    

 

 

  

Total current assets

      2,609        3,032   

Property and equipment, net

      568        513   

Goodwill

      1,718        1,110   

Acquisition-related intangibles, net

      369        144   

Deferred income taxes, net

      42        49   

Other assets

      185        80   
  

 

 

    

 

 

  

TOTAL ASSETS

    $ 5,491      $ 4,928   
  

 

 

    

 

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

     

Accounts payable

    $ 215      $ 228   

Accrued and other current liabilities

      857        768   

Deferred net revenue (packaged goods and digital content)

      1,048        1,005   
  

 

 

    

 

 

  

Total current liabilities

      2,120        2,001   

0.75% convertible senior notes due 2016, net

      539        —     

Income tax obligations

      189        192   

Deferred income taxes, net

      8        37   

Other liabilities

      177        134   
  

 

 

    

 

 

  

Total liabilities

      3,033        2,364   

Common stock

      3        3   

Paid-in capital

      2,359        2,495   

Accumulated deficit

      (77 )      (153 ) 

Accumulated other comprehensive income

      173        219   
  

 

 

    

 

 

  

Total stockholders’ equity

      2,458        2,564   
  

 

 

    

 

 

  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

    $ 5,491      $ 4,928   
  

 

 

    

 

 

  

 

(a) 

Derived from audited consolidated financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions)

 

     Three Months Ended
March 31,		     Twelve Months Ended
March 31,		  
     2012     2011     2012     2011  

OPERATING ACTIVITIES

        

Net income (loss)

    $ 400      $ 151      $ 76      $ (276 ) 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

         

Acquisition-related contingent consideration

      3        8        11        (17 ) 

Depreciation, amortization and accretion, net

      68        42        216        180   

Net gains on investments and sale of property and equipment

      —          (1 )      (12 )      (25 ) 

Other non-cash restructuring charges

      (3 )      —          (6 )      1   

Stock-based compensation

      41        38        170        176   

Change in assets and liabilities:

         

Receivables, net

      162        58        (14 )      (122 ) 

Inventories

      10        29        21        25   

Other assets

      (20 )      14        (101 )      5   

Accounts payable

      100        55        (50 )      114   

Accrued and other liabilities

      (37 )      (38 )      13        (4 ) 

Deferred income taxes, net

      (46 )      (8 )      (90 )      24   

Deferred net revenue (packaged goods and digital content)

      (391 )      (95 )      43        239   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by operating activities

      287        253        277        320   
  

 

 

    

 

 

    

 

 

    

 

 

  

INVESTING ACTIVITIES

         

Capital expenditures

     (44 )      (21 )      (172 )      (59 ) 

Proceeds from sale of property

     —          —          26        —     

Proceeds from sale of marketable equity securities

     —          —          —          132   

Proceeds from maturities and sales of short-term investments

     63        160        526        442   

Purchase of short-term investments

     (94 )      (147 )      (468 )      (514 ) 

Acquisition-related restricted cash

     75        —          75        —     

Acquisition of subsidiaries, net of cash acquired

     —          —          (676 )      (16 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash used in investing activities

      —          (8 )      (689 )      (15 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

FINANCING ACTIVITIES

         

Proceeds from borrowings on convertible senior notes, net of issuance costs

     —          —          617        —     

Proceeds from issuance of warrants

     —          —          65        —     

Purchase of convertible note hedge

     —          —          (107 )      —     

Proceeds from issuance of common stock

     18        17        57        34   

Excess tax benefit from stock-based compensation

     —          1        4        1   

Repurchase and retirement of common stock

     (241 )      (58 )      (471 )      (58 ) 

Acquisition-related contingent consideration payment

     (25 )      —          (25 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      (248 )      (40 )      140        (23 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Effect of foreign exchange on cash and cash equivalents

      12        21        (14 )      24   
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) in cash and cash equivalents

      51        226        (286 )      306   

Beginning cash and cash equivalents

      1,242        1,353        1,579        1,273   
  

 

 

    

 

 

    

 

 

    

 

 

  

Ending cash and cash equivalents

    $ 1,293      $ 1,579      $ 1,293      $ 1,579   
  

 

 

    

 

 

    

 

 

    

 

 

  

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data, SKU count and headcount)

 

     Q4     Q1     Q2     Q3     Q4     YOY %  
     FY11     FY12     FY12     FY12     FY12     Change  

QUARTERLY RECONCILIATION OF RESULTS

             

Net Revenue

             

GAAP net revenue

    $ 1,090      $ 999      $ 715      $ 1,061      $ 1,368        26 % 

Change in deferred net revenue (packaged goods and digital content)

      (95 )      (475 )      319        590        (391 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP net revenue

    $ 995      $ 524      $ 1,034      $ 1,651      $ 977        (2 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross Profit

             

GAAP gross profit

    $ 762      $ 759      $ 283      $ 509      $ 994        30 % 

Acquisition-related expenses

      3        3        8        14        27     

Change in deferred net revenue (packaged goods and digital content)

      (95 )      (475 )      319        590        (391 )   

Stock-based compensation

      —          1        —          —          1     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP gross profit

    $ 670      $ 288      $ 610      $ 1,113      $ 631        (6 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

GAAP gross profit % (as a % of GAAP net revenue)

      70 %      76 %      40 %      48 %      73 %   

Non-GAAP gross profit % (as a % of non-GAAP net revenue)

      67 %      55 %      59 %      67 %      65 %   

Operating Income (Loss)

             

GAAP operating income (loss)

    $ 145      $ 227      $ (374 )    $ (183 )    $ 365        152 % 

Acquisition-related expenses

      24        18        38        14        36     

Certain non-recurring litigation expenses

      —          —          —          —          27     

Change in deferred net revenue (packaged goods and digital content)

      (95 )      (475 )      319        590        (391 )   

Restructuring and other

      (1 )      18        (1 )      —          (1 )   

Stock-based compensation

      38        38        43        48        41     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP operating income (loss)

    $ 111      $ (174 )    $ 25      $ 469      $ 77        (31 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

GAAP operating income (loss) % (as a % of GAAP net revenue)

      13 %      23 %      (52 %)      (17 %)      27 %   

Non-GAAP operating income (loss) % (as a % of non-GAAP net revenue)

      11 %      (33 %)      2 %      28 %      8 %   

Net Income (Loss)

             

GAAP net income (loss)

    $ 151      $ 221      $ (340 )    $ (205 )    $ 400        165 % 

Acquisition-related expenses

      24        18        38        14        36     

Amortization of debt discount

      —          —          4        5        5     

Certain non-recurring litigation expenses

      —          —          —          —          27     

Change in deferred net revenue (packaged goods and digital content)

      (95 )      (475 )      319        590        (391 )   

Restructuring and other

      (1 )      18        (1 )      —          (1 )   

Stock-based compensation

      38        38        43        48        41     

Income tax adjustments

      (34 )      57        (46 )      (118 )      (61 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP net income (loss)

    $ 83      $ (123 )    $ 17      $ 334      $ 56        (33 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

GAAP net income (loss) % (as a % of GAAP net revenue)

      14 %      22 %      (48 %)      (19 %)      29 %   

Non-GAAP net income (loss) % (as a % of non-GAAP net revenue)

      8 %      (23 %)      2 %      20 %      6 %   

Diluted Earnings (Loss) Per Share

             

GAAP earnings (loss) per share

    $ 0.45      $ 0.66      $ (1.03 )    $ (0.62 )    $ 1.20        167 % 

Non-GAAP earnings (loss) per share

    $ 0.25      $ (0.37 )    $ 0.05      $ 0.99      $ 0.17        (32 %) 

Number of diluted shares used in computation

             

GAAP

      336        337        331        332        332     

Non-GAAP

      336        331        337        338        332     

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data, SKU count and headcount)

 

     Q4     Q1     Q2     Q3     Q4     YOY %  
     FY11     FY12     FY12     FY12     FY12     Change  

QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP

             

Geography Net Revenue

             

North America

      530        501        337        500        653        23 % 

Europe

      507        438        328        505        627        24 % 

Asia

     53        60        50        56        88        66 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

      1,090        999        715        1,061        1,368        26 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

      (56 )      (240 )      144        310        (188 )   

Europe

      (45 )      (215 )      174        235        (187 )   

Asia

     6        (20 )      1        45        (16 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change In Deferred Net Revenue (Packaged Goods and Digital Content)

      (95 )      (475 )      319        590        (391 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

      474        261        481        810        465        (2 %) 

Europe

      462        223        502        740        440        (5 %) 

Asia

      59        40        51        101        72        22 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

      995        524        1,034        1,651        977        (2 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

      49 %      50 %      47 %      47 %      48 %   

Europe

      46 %      44 %      46 %      48 %      46 %   

Asia

      5 %      6 %      7 %      5 %      6 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

      48 %      50 %      46 %      49 %      48 %   

Europe

      46 %      42 %      49 %      45 %      45 %   

Asia

      6 %      8 %      5 %      6 %      7 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Net Revenue Composition

             

Publishing and Other

      838        647        450        738        926        11 % 

Wireless, Internet-derived, and Advertising (Digital)

      211        232        234        274        419        99 % 

Distribution

      41        120        31        49        23        (44 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

      1,090        999        715        1,061        1,368        26 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

      (152 )      (452 )      337        487        (397 )   

Wireless, Internet-derived, and Advertising (Digital)

      57        (23 )      (18 )      103        6     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change In Deferred Net Revenue (Packaged Goods and Digital Content)

      (95 )      (475 )      319        590        (391 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

      686        195        787        1,225        529        (23 %) 

Wireless, Internet-derived, and Advertising (Digital)

      268        209        216        377        425        59 % 

Distribution

      41        120        31        49        23        (44 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

      995        524        1,034        1,651        977        (2 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

      77 %      65 %      63 %      69 %      68 %   

Wireless, Internet-derived, and Advertising (Digital)

      19 %      23 %      33 %      26 %      30 %   

Distribution

      4 %      12 %      4 %      5 %      2 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

      69 %      37 %      76 %      74 %      54 %   

Wireless, Internet-derived, and Advertising (Digital)

      27 %      40 %      21 %      23 %      44 %   

Distribution

      4 %      23 %      3 %      3 %      2 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data, SKU count and headcount)

 

     Q4     Q1     Q2     Q3     Q4     YOY %  
     FY11     FY12     FY12     FY12     FY12     Change  

QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP

             

Platform Net Revenue

             

Xbox 360

      336        345        213        331        454        35 % 

PLAYSTATION 3

      357        308        169        314        432        21 % 

Wii

      71        42        35        49        20        (72 %) 

PlayStation 2

      4        3        15        7        3        (25 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

      768        698        432        701        909        18 % 

Mobile

      70        57        55        70        87        24 % 

PlayStation Handhelds

      16        11        17        14        6        (63 %) 

Nintendo Handhelds

      28        8        7        15        5        (82 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

      114        76        79        99        98        (14 %) 

PC

      171        205        178        214        334        95 % 

Other

      37        20        26        47        27        (27 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

      1,090        999        715        1,061        1,368        26 % 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

      (12 )      (193 )      140        174        (128 )   

PLAYSTATION 3

      (75 )      (197 )      205        179        (210 )   

Wii

      (44 )      (26 )      (1 )      3        (7 )   

Mobile

      (3 )      —          —          13        (3 )   

PlayStation Handhelds

      (6 )      (6 )      —          (2 )      10     

Nintendo Handhelds

      (6 )      (2 )      —          9        (5 )   

PC

      51        (51 )      (25 )      214        (48 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change in Deferred Net Revenue (Packaged Goods and Digital Content)

      (95 )      (475 )      319        590        (391 )   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

      324        152        353        505        326        1 % 

PLAYSTATION 3

      282        111        374        493        222        (21 %) 

Wii

      27        16        34        52        13        (52 %) 

PlayStation 2

      4        3        15        7        3        (25 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

      637        282        776        1,057        564        (11 %) 

Mobile

      67        57        55        83        84        25 % 

PlayStation Handhelds

      10        5        17        12        16        60 % 

Nintendo Handhelds

      22        6        7        24        —          (100 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

      99        68        79        119        100        1 % 

PC

      222        154        153        428        286        29 % 

Other

      37        20        26        47        27        (27 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

      995        524        1,034        1,651        977        (2 %) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

      31 %      35 %      30 %      31 %      33 %   

PLAYSTATION 3

      33 %      31 %      23 %      29 %      32 %   

Wii

      6 %      4 %      5 %      5 %      1 %   

PlayStation 2

      —          —          2 %      1 %      —       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

      70 %      70 %      60 %      66 %      66 %   

Mobile

      6 %      6 %      8 %      7 %      6 %   

PlayStation Handhelds

      1 %      1 %      2 %      1 %      1 %   

Nintendo Handhelds

      3 %      1 %      1 %      1 %      —       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

      10 %      8 %      11 %      9 %      7 %   

PC

      16 %      20 %      25 %      20 %      25 %   

Other

      4 %      2 %      4 %      5 %      2 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

      33 %      29 %      34 %      31 %      34 %   

PLAYSTATION 3

      28 %      21 %      36 %      30 %      23 %   

Wii

      3 %      3 %      4 %      3 %      1 %   

PlayStation 2

      —          1 %      1 %      —          —       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

      64 %      54 %      75 %      64 %      58 %   

Mobile

      7 %      11 %      5 %      5 %      8 %   

PlayStation Handhelds

      1 %      1 %      2 %      1 %      2 %   

Nintendo Handhelds

      2 %      1 %      1 %      1 %      —       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

      10 %      13 %      8 %      7 %      10 %   

PC

      22 %      29 %      15 %      26 %      29 %   

Other

      4 %      4 %      2 %      3 %      3 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue %

      100 %      100 %      100 %      100 %      100 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data, SKU count and headcount)

 

     Q4     Q1     Q2     Q3      Q4     YOY %  
     FY11     FY12     FY12     FY12      FY12     Change  

CASH FLOW DATA

              

Operating cash flow

      253        (274 )      (211 )      475         287        13 % 

Operating cash flow – TTM

      320        194        117        243         277        (13 %) 

Capital expenditures

      21        32        52        44         44        110 % 

Capital expenditures – TTM

      59        80        120        149         172        192 % 

BALANCE SHEET DATA

              

Cash and cash equivalents

      1,579        1,173        930        1,242         1,293        (18 %) 

Short-term investments

      497        503        355        406         437        (12 %) 

Marketable equity securities

      161        172        214        143         119        (26 %) 

Receivables, net

      335        30        562        526         366        9 % 

Inventories

      77        75        90        69         59        (23 %) 

Deferred net revenue (packaged goods and digital content)

              

End of the quarter

      1,005        530        849        1,439         1,048     

Less: Beginning of the quarter

      1,100        1,005        530        849         1,439     
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

Change in deferred net revenue (packaged goods and digital content)

      (95 )      (475 )      319        590         (391 )   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

STOCK-BASED COMPENSATION

              

Cost of goods sold

      —          1        —          —           1     

Marketing and sales

      5        5        6        7         8     

General and administrative

      8        9        9        11         7     

Research and development

      25        23        28        30         25     
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

Total Stock-Based Compensation

      38        38        43        48         41     
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

EMPLOYEES

      7,645        7,973        8,687        9,043         9,158        20 %