EX-99.1 2 d387427dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

ELECTRONIC ARTS REPORTS

   LOGO  

Q1 FY13 FINANCIAL RESULTS

  

Q1 Non-GAAP Net Revenue and EPS In-Line with Guidance, EPS Beats Consensus

Trailing Twelve Month Non-GAAP Digital Net Revenue a Record $1.3 Billion

EA announces $500 Million Share Repurchase

Battlefield 3 Premium Service Sold Over 1.3M Subscriptions To Date

Pre-Orders for Madden NFL 13 Up 25% Year-Over-Year

EA Signs Publishing Agreement with Nexon for FIFA Online 3 in Korea

REDWOOD CITY, CA – July 31, 2012 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its first fiscal quarter ended June 30, 2012.

“We have established an unmatched diversity in our business with multiple brands performing across several channels, business models and geographies,” said Chief Executive Officer John Riccitiello. “This allows us to drive profitable growth in a rapidly transforming marketplace for games.”

“We had a solid first quarter and are reconfirming non-GAAP guidance of annual earnings per share growth of 30% at the midpoint of our guidance,” said Interim Chief Financial Officer Ken Barker. “The $500 million stock buyback demonstrates our confidence in EA’s future.”

“We continue to make progress in our goal of becoming the leading digital entertainment company,” said President of EA Labels Frank Gibeau. “Over the last twelve months, we generated over $1.3 billion in non-GAAP digital net revenue, and approximately two-thirds of our non-GAAP net revenue in the first fiscal quarter was in digital.”

Selected Operating Highlights and Metrics:

*On a non-GAAP basis

 

   

EA and Nexon signed a publishing agreement for EA SPORTS™ FIFA Online 3, expected to debut in Korea later this fiscal year. FIFA World Class Soccer and EA SPORTS FIFA Online 2 generated more than $25 million* in digital net revenue in Asia in Q1.

 

   

FIFA Ultimate Team contributed over $30 million* in net digital revenue in the first quarter.

 

   

Battlefield 3™ Premium service sold over 1.3 million subscriptions to date, with all of the revenue deferred and set to be recognized in fiscal Q4.

 

   

SimCity™ Social launched on Facebook and currently has over ten million MAUs.

 

   

STAR WARS®: The Old Republic™ will move to a more accessible two-tiered pricing model in November. Players can chose between a $14.99 premium monthly subscription and a free-to-play model with some restrictions on content and advanced features. Players will be able to purchase upgrades with in-game currency.


   

EA’s games and services for mobile phones and tablets have generated a 37% year-over-year increase in digital net revenue*.

 

   

Catalog continues to outperform expectations with Battlefield 3 and FIFA 12 together selling through over 2 million units in the first quarter.

 

   

Trailing twelve month non-GAAP digital net revenue a record $1.342 billion*.

 

   

Trailing twelve month operating cash flow of $307 million, a $30 million improvement from the prior quarter.

 

   

EA’s Origin™ platform for downloading digital games and services has registered over 21 million users, including 9 million mobile users. Origin has signed agreements with 57 independent developers.

 

   

EA’s new Executive Vice President, Chief Financial Officer Blake Jorgensen will join the Company in early September 2012.

Q1 Financial Highlights:

For the quarter, non-GAAP net revenue of $491 million was in line with our guidance of approximately $500 million. Non-GAAP diluted loss per share of ($0.41) was above the midpoint of our guidance of ($0.45) to ($0.40). Non-GAAP net revenue in Q1 fiscal 2013 was slightly lower compared to Q1 fiscal 2012 due to a reduction in distribution revenue in the quarter.

 

(in millions of $ except per share amounts)   

Quarter

Ended
6/30/12

   

Quarter

Ended
6/30/11

 

Net Digital Revenue

   $ 342      $ 232   

Net Publishing Packaged Goods and Other Revenue

     592        647   

Net Distribution Packaged Goods Revenue

     21        120   
  

 

 

   

 

 

 

GAAP Total Net Revenue

     955        999   
  

 

 

   

 

 

 

Non-GAAP Net Digital Revenue

   $ 324      $ 209   

Non-GAAP Net Publishing Packaged Goods and Other Revenue

     146        195   

Non-GAAP Net Distribution Packaged Goods Revenue

     21        120   
  

 

 

   

 

 

 

Non-GAAP Total Net Revenue

     491        524   
  

 

 

   

 

 

 

GAAP Net Income

   $ 201      $ 221   

Non-GAAP Net Loss

     (130     (123

GAAP Diluted Earnings Per Share

     0.63        0.66   

Non-GAAP Diluted Loss Per Share

     (0.41     (0.37

Cash Used in Operations

   $ (244   $ (274


Trailing Twelve Month (TTM) Financial Highlights:

 

(in millions of $ except per share amounts)   

TTM

Ended
6/30/12

    

TTM

Ended

6/30/11

 

GAAP Net Revenue

   $ 4,099       $ 3,773   

GAAP Net Income (Loss)

     56         (151

GAAP Diluted Earnings (Loss) Per Share

     0.18         (0.47

Non-GAAP Net Revenue

   $ 4,153       $ 3,813   

Non-GAAP Net Income

     277         188   

Non-GAAP Diluted Earnings Per Share

     0.80         0.57   

Cash Flow from Operations

   $ 307       $ 194   

Q1 FY13 Digital Metrics:

 

(in millions)   

Quarter

Ended

6/30/12

    

Quarter

Ended

6/30/11

 

GAAP Net Mobile Revenue

   $ 69       $ 57   

Non-GAAP Net Mobile Revenue

   $ 78       $ 57   

Monthly Active Users (MAU) in Social Games

     41         32   

Core Registered Users

     234         125   

Stock Repurchase Program

EA has announced that its Board of Directors has authorized a program to repurchase up to $500 million of EA’s common stock.

Under the program, EA may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. EA is not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time.


Business Outlook as of July 31, 2012

The following forward-looking statements, as well as those made above, reflect expectations as of July 31, 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 $3.90 to $4.05 billion.

 

   

Non-GAAP net revenue is expected to be approximately $4.10 to $4.25 billion.

 

   

GAAP basic loss and diluted earnings per share is expected to be approximately ($0.17) to $0.05.

 

   

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 323 million, and 320 million shares for calculating loss per share.

 

   

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

 

   

Non-GAAP net revenue is expected to be approximately $200 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);

 

   

Approximately $160 million of estimated stock-based compensation;

 

   

Approximately $60 million of acquisition-related expenses;

 

   

Approximately $35 million of restructuring charges;

 

   

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

 

   

Non-GAAP tax expense is expected to be approximately $80 million to $100 million higher than GAAP tax expense.

Second Quarter Fiscal Year 2013 Expectations – Ending September 30, 2012

 

   

GAAP net revenue is expected to be approximately $650 to $700 million.

 

   

Non-GAAP net revenue is expected to be approximately $1.05 to $1.10 billion.

 

   

GAAP diluted loss or earnings per share is expected to be approximately ($1.43) to ($1.36).

 

   

Non-GAAP diluted earnings per share is expected to be approximately $0.07 to $0.12.

 

   

For purposes of calculating first quarter fiscal year 2013 diluted earnings per share, the Company estimates a share count of 322 million, and 319 million shares for calculating loss per share.

 

   

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

 

   

Non-GAAP net revenue is expected to be approximately $400 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);

 

   

Approximately $40 million of estimated stock-based compensation;

 

   

Approximately $20 million of acquisition-related expenses;

 

   

Approximately $5 million of restructuring charges;

 

   

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


   

Non-GAAP tax expense is expected to be $2 million to $7 million lower than GAAP tax expense.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on July 31, 2012 at 2:00 pm PT (5:00 pm ET) to review its results for the first quarter ended June 30, 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 August 30, 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)

 

   

Loss (gain) on strategic investments

 

   

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.

Loss (gain) on Strategic Investments. From time to time, the Company makes strategic investments. Electronic Arts’ management excludes the impact of any losses and gains 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 losses and gains on these investments from its operating results is important to facilitate comparisons to prior 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

These forward-looking statements are current as of July 31, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012. 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, 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 230 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

EA, EA SPORTS, Origin, PopCap, The Sims, SimCity 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, STAR WARS and related properties are trademarks in the United States and/or in other countries of Lucasfilm Ltd and/or its affiliates. © 2011 Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. All rights reserved. John Madden, NFL and FIFA are the property of their respective owners and used with permission. 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  
     June 30,  
     2012     2011  

Net revenue

    

Product

   $ 702      $ 894   

Service and other

     253        105   
  

 

 

   

 

 

 

Total net revenue

     955        999   

Cost of revenue

    

Product

     132        212   

Service and other

     73        28   
  

 

 

   

 

 

 

Total cost of revenue

     205        240   
  

 

 

   

 

 

 

Gross profit

     750        759   

Operating expenses:

    

Marketing and sales

     145        140   

General and administrative

     86        74   

Research and development

     290        285   

Acquisition-related contingent consideration

     (20     2   

Amortization of intangibles

     7        13   

Restructuring and other

     27        18   
  

 

 

   

 

 

 

Total operating expenses

     535        532   
  

 

 

   

 

 

 

Operating income

     215        227   

Interest and other income (expense), net

     (5     3   
  

 

 

   

 

 

 

Income before provision for income taxes

     210        230   

Provision for income taxes

     9        9   
  

 

 

   

 

 

 

Net income

   $ 201      $ 221   
  

 

 

   

 

 

 

Earnings per share

    

Basic

   $ 0.63      $ 0.67   

Diluted

   $ 0.63      $ 0.66   

Number of shares used in computation

    

Basic

     317        331   

Diluted

     320        337   

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

The following tables reconcile the Company’s net income and earnings 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 loss and non-GAAP loss per share.

 

     Three Months Ended  
     June 30,  
     2012     2011  

Net income

   $ 201      $ 221   

Acquisition-related expenses

     2        18   

Amortization of debt discount

     5        —     

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

     (464     (475

Restructuring and other

     27        18   

Stock-based compensation

     39        38   

Income tax adjustments

     60        57   
  

 

 

   

 

 

 

Non-GAAP net loss

   $ (130   $ (123
  

 

 

   

 

 

 

Non-GAAP loss per share

    

Basic and diluted

   $ (0.41   $ (0.37

Number of shares used in Non-GAAP computation

    

Basic and diluted

     317        331   


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in millions)

 

     June 30,      March 31,  
     2012      2012 (a)  

ASSETS

     

Current assets:

     

Cash and cash equivalents

   $ 919       $ 1,293   

Short-term investments

     444         437   

Marketable equity securities

     76         119   

Receivables, net of allowances of $226 and $252, respectively

     111         366   

Inventories

     60         59   

Deferred income taxes, net

     68         67   

Other current assets

     273         268   
  

 

 

    

 

 

 

Total current assets

     1,951         2,609   

Property and equipment, net

     558         568   

Goodwill

     1,716         1,718   

Acquisition-related intangibles, net

     347         369   

Deferred income taxes, net

     44         42   

Other assets

     209         185   
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 4,825       $ 5,491   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 50       $ 215   

Accrued and other current liabilities

     702         857   

Deferred net revenue (packaged goods and digital content)

     584         1,048   
  

 

 

    

 

 

 

Total current liabilities

     1,336         2,120   

0.75% convertible senior notes due 2016, net

     544         539   

Income tax obligations

     198         189   

Deferred income taxes, net

     2         8   

Other liabilities

     193         177   
  

 

 

    

 

 

 

Total liabilities

     2,273         3,033   

Common stock

     3         3   

Paid-in capital

     2,310         2,359   

Retained earnings (accumulated deficit)

     124         (77

Accumulated other comprehensive income

     115         173   
  

 

 

    

 

 

 

Total stockholders’ equity

     2,552         2,458   
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 4,825       $ 5,491   
  

 

 

    

 

 

 

 

(a) 

Derived from audited consolidated financial statements.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions)

 

     Three Months Ended  
     June 30,  
     2012     2011  

OPERATING ACTIVITIES

    

Net income

   $ 201      $ 221   

Adjustments to reconcile net income to net cash used in operating activities:

    

Acquisition-related contingent consideration

     (20     2   

Depreciation, amortization and accretion, net

     56        43   

Non-cash restructuring charges

     7        —     

Stock-based compensation

     39        38   

Change in assets and liabilities:

    

Receivables, net

     254        307   

Inventories

     (2     4   

Other assets

     (29     (101

Accounts payable

     (157     (133

Accrued and other liabilities

     (119     (181

Deferred income taxes, net

     (10     1   

Deferred net revenue (packaged goods and digital content)

     (464     (475
  

 

 

   

 

 

 

Net cash used in operating activities

     (244     (274
  

 

 

   

 

 

 

INVESTING ACTIVITIES

    

Capital expenditures

     (31     (32

Proceeds from maturities and sales of short-term investments

     128        83   

Purchase of short-term investments

     (137     (90

Acquisition of subsidiaries, net of cash acquired

     —          (25
  

 

 

   

 

 

 

Net cash used in investing activities

     (40     (64
  

 

 

   

 

 

 

FINANCING ACTIVITIES

    

Proceeds from issuance of common stock

     —          14   

Excess tax benefit from stock-based compensation

     —          2   

Repurchase and retirement of common stock

     (71     (91

Acquisition-related contingent consideration payment

     (1     —     
  

 

 

   

 

 

 

Net cash used in financing activities

     (72     (75
  

 

 

   

 

 

 

Effect of foreign exchange on cash and cash equivalents

     (18     7   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (374     (406

Beginning cash and cash equivalents

     1,293        1,579   
  

 

 

   

 

 

 

Ending cash and cash equivalents

   $ 919      $ 1,173   
  

 

 

   

 

 

 


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

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

 

     Q1
FY12
    Q2
FY12
    Q3
FY12
    Q4
FY12
    Q1
FY13
    YOY %
Change
 

QUARTERLY RECONCILIATION OF RESULTS

            

Net Revenue

            

GAAP net revenue

   $ 999      $ 715      $ 1,061      $ 1,368      $ 955        (4 %) 

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

     (475     319        590        (391     (464  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Non-GAAP net revenue

   $ 524      $ 1,034      $ 1,651      $ 977      $ 491        (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Gross Profit

            

GAAP gross profit

   $ 759      $ 283      $ 509      $ 994      $ 750        (1 %) 

Acquisition-related expenses

     3        8        14        27        15     

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

     (475     319        590        (391     (464  

Stock-based compensation

     1        —          —          1        1     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Non-GAAP gross profit

   $ 288      $ 610      $ 1,113      $ 631      $ 302        5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     76     40     48     73     79  

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

     55     59     67     65     62  

Operating Income (Loss)

            

GAAP operating income (loss)

   $ 227      $ (374   $ (183   $ 365      $ 215        (5 %) 

Acquisition-related expenses

     18        38        14        36        2     

Certain non-recurring litigation expenses

     —          —          —          27        —       

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

     (475     319        590        (391     (464  

Restructuring and other

     18        (1     —          (1     27     

Stock-based compensation

     38        43        48        41        39     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Non-GAAP operating income (loss)

   $ (174   $ 25      $ 469      $ 77      $ (181     (4 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     23     (52 %)      (17 %)      27     23  

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

     (33 %)      2     28     8     (37 %)   

Net Income (Loss)

            

GAAP net income (loss)

   $ 221      $ (340   $ (205   $ 400      $ 201        (9 %) 

Acquisition-related expenses

     18        38        14        36        2     

Amortization of debt discount

     —          4        5        5        5     

Certain non-recurring litigation expenses

     —          —          —          27        —       

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

     (475     319        590        (391     (464  

Restructuring and other

     18        (1     —          (1     27     

Stock-based compensation

     38        43        48        41        39     

Income tax adjustments

     57        (46     (118     (61     60     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Non-GAAP net income (loss)

   $ (123   $ 17      $ 334      $ 56      $ (130     (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     22     (48 %)      (19 %)      29     21  

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

     (23 %)      2     20     6     (26 %)   

Diluted Earnings (Loss) Per Share

            

GAAP earnings (loss) per share

   $ 0.66      $ (1.03   $ (0.62   $ 1.20      $ 0.63        (5 %) 

Non-GAAP earnings (loss) per share

   $ (0.37   $ 0.05      $ 0.99      $ 0.17      $ (0.41     (11 %) 

Number of diluted shares used in computation

            

GAAP

     337        331        332        332        320     

Non-GAAP

     331        337        338        332        317     


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

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

 

     Q1
FY12
    Q2
FY12
    Q3
FY12
    Q4
FY12
    Q1
FY13
    YOY
% Change
 
            

QUARTERLY NET REVENUE PRESENTATIONS—GAAP AND NON-GAAP

            

Geography Net Revenue

            

North America

     501        337        500        653        450        (10 %) 

Europe

     438        328        505        627        435        (1 %) 

Asia

     60        50        56        88        70        17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue

     999        715        1,061        1,368        955        (4 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

North America

     (240     144        310        (188     (265  

Europe

     (215     174        235        (187     (174  

Asia

     (20     1        45        (16     (25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     (475     319        590        (391     (464  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

North America

     261        481        810        465        185        (29 %) 

Europe

     223        502        740        440        261        17

Asia

     40        51        101        72        45        13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Non-GAAP Net Revenue

     524        1,034        1,651        977        491        (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

North America

     50     47     47     48     47  

Europe

     44     46     48     46     46  

Asia

     6     7     5     6     7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue %

     100     100     100     100     100  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

North America

     50     46     49     48     38  

Europe

     42     49     45     45     53  

Asia

     8     5     6     7     9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Non-GAAP Net Revenue %

     100     100     100     100     100  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Net Revenue Composition

            

Publishing and Other

     647        450        738        926        592        (9 %) 

Wireless, Internet-derived, and Advertising (Digital)

     232        234        274        419        342        47

Distribution

     120        31        49        23        21        (83 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue

     999        715        1,061        1,368        955        (4 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Publishing and Other

     (452     337        487        (397     (446  

Wireless, Internet-derived, and Advertising (Digital)

     (23     (18     103        6        (18  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     (475     319        590        (391     (464  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Publishing and Other

     195        787        1,225        529        146        (25 %) 

Wireless, Internet-derived, and Advertising (Digital)

     209        216        377        425        324        55

Distribution

     120        31        49        23        21        (83 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Non-GAAP Net Revenue

     524        1,034        1,651        977        491        (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Publishing and Other

     65     63     69     68     62  

Wireless, Internet-derived, and Advertising (Digital)

     23     33     26     30     36  

Distribution

     12     4     5     2     2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue %

     100     100     100     100     100  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Publishing and Other

     37     76     74     54     30  

Wireless, Internet-derived, and Advertising (Digital)

     40     21     23     44     66  

Distribution

     23     3     3     2     4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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)

 

     Q1
FY12
    Q2
FY12
    Q3
FY12
    Q4
FY12
    Q1
FY13
    YOY %
Change
 

QUARTERLY NET REVENUE PRESENTATIONS—GAAP AND NON-GAAP

            

Platform Net Revenue

            

Xbox 360

     345        213        331        454        292        (15 %) 

PLAYSTATION 3

     308        169        314        432        267        (13 %) 

Wii

     42        35        49        20        8        (81 %) 

PlayStation 2

     3        15        7        3        2        (33 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Consoles

     698        432        701        909        569        (18 %) 

Mobile

     57        55        70        87        69        21

PlayStation Handhelds

     11        17        14        6        10        (9 %) 

Nintendo Handhelds

     8        7        15        5        9        13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Mobile and Handhelds

     76        79        99        98        88        16

PC

     205        178        214        334        276        35

Other

     20        26        47        27        22        10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue

     999        715        1,061        1,368        955        (4 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Xbox 360

     (193     140        174        (128     (186  

PLAYSTATION 3

     (197     205        179        (210     (183  

Wii

     (26     (1     3        (7     (5  

PlayStation 2

     —          —          —          —          (1  

Mobile

     —          —          13        (3     9     

PlayStation Handhelds

     (6     —          (2     10        (4  

Nintendo Handhelds

     (2     —          9        (5     (4  

PC

     (51     (25     214        (48     (90  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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

     (475     319        590        (391     (464  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Xbox 360

     152        353        505        326        106        (30 %) 

PLAYSTATION 3

     111        374        493        222        84        (24 %) 

Wii

     16        34        52        13        3        (81 %) 

PlayStation 2

     3        15        7        3        1        (67 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Consoles

     282        776        1,057        564        194        (31 %) 

Mobile

     57        55        83        84        78        37

PlayStation Handhelds

     5        17        12        16        6        20

Nintendo Handhelds

     6        7        24        —          5        (17 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Mobile and Handhelds

     68        79        119        100        89        31

PC

     154        153        428        286        186        21

Other

     20        26        47        27        22        10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Non-GAAP Net Revenue

     524        1,034        1,651        977        491        (6 %) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Xbox 360

     35     30     31     33     31  

PLAYSTATION 3

     31     23     29     32     28  

Wii

     4     5     5     1     1  

PlayStation 2

     —          2     1     —          —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Consoles

     70     60     66     66     60  

Mobile

     6     8     7     6     7  

PlayStation Handhelds

     1     2     1     1     1  

Nintendo Handhelds

     1     1     1     —          1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Mobile and Handhelds

     8     11     9     7     9  

PC

     20     25     20     25     29  

Other

     2     4     5     2     2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total GAAP Net Revenue %

     100     100     100     100     100  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Xbox 360

     29     34     31     34     22  

PLAYSTATION 3

     21     36     30     23     17  

Wii

     3     4     3     1     1  

PlayStation 2

     1     1     —          —          —       
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Consoles

     54     75     64     58     40  

Mobile

     11     5     5     8     16  

PlayStation Handhelds

     1     2     1     2     1  

Nintendo Handhelds

     1     1     1     —          1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total Mobile and Handhelds

     13     8     7     10     18  

PC

     29     15     26     29     38  

Other

     4     2     3     3     4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

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)

 

     Q1
FY12
    Q2
FY12
    Q3
FY12
     Q4
FY12
    Q1
FY13
    YOY %
Change
 

CASH FLOW DATA

             

Operating cash flow

     (274     (211     475         287        (244     11

Operating cash flow—TTM

     194        117        243         277        307        58

Capital expenditures

     32        52        44         44        31        (3 %) 

Capital expenditures—TTM

     80        120        149         172        171        114

BALANCE SHEET DATA

             

Cash and cash equivalents

     1,173        930        1,242         1,293        919        (22 %) 

Short-term investments

     503        355        406         437        444        (12 %) 

Marketable equity securities

     172        214        143         119        76        (56 %) 

Receivables, net

     30        562        526         366        111        270

Inventories

     75        90        69         59        60        (20 %) 

Deferred net revenue (packaged goods and digital content)

             

End of the quarter

     530        849        1,439         1,048        584     

Less: Beginning of the quarter

     1,005        530        849         1,439        1,048     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

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

     (475     319        590         (391     (464  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

STOCK-BASED COMPENSATION

             

Cost of goods sold

     1        —          —           1        1     

Marketing and sales

     5        6        7         8        7     

General and administrative

     9        9        11         7        9     

Research and development

     23        28        30         25        22     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

Total Stock-Based Compensation

     38        43        48         41        39     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

EMPLOYEES

     7,973        8,687        9,043         9,158        9,225        16 %