EX-99.1 2 d616248dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

ELECTRONIC ARTS REPORTS

Q2 FY14 FINANCIAL RESULTS

  LOGO

Q2 Non-GAAP Net Revenue and EPS Results Exceed Guidance

Fiscal Year 2014 Non-GAAP EPS Guidance Raised to $1.25 Per Share

REDWOOD CITY, CA – October 29, 2013 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2013.

“EA’s strong second quarter was driven by great title launches, continued digital growth, and financial discipline,” said Chief Executive Officer Andrew Wilson. “While we have made good progress in the first half of the year, we remain focused on executing our FY14 plan and delivering a full slate of amazing games and services to players on current and next-generation consoles, mobile, and PC.”

“We exceeded our revenue and EPS guidance in the second quarter through a combination of delivering on revenue, and managing our costs,” said Chief Financial Officer Blake Jorgensen. “We are reaffirming our annual non-GAAP net revenue guidance of $4 billion, and raising our non-GAAP EPS guidance from $1.20 to $1.25 per share.”

This release, along with ongoing updates regarding EA’s business, is available on EA’s blog at http://ea.com/news.

Selected Operating Highlights and Metrics:

*On a non-GAAP basis

 

    EA raised its fiscal year earnings per share guidance from $1.20 to $1.25 per share*.

 

    Trailing twelve-month non-GAAP digital net revenue was up 22% versus the prior year to a record $1.75 billion*.

 

    On a year-to-date basis, EA SPORTS™ NCAA® Football Ultimate Team, Madden NFL Ultimate Team, NHL® Hockey Ultimate Team, and FIFA Ultimate Team each grew year over year and drove digital net revenue* growth.

 

    EA’s mobile and handheld non-GAAP digital net revenue generated $105 million* in Q2 FY14, a 19% year-over-year increase over Q2 FY13.

 

    The Simpsons™: Tapped Out eclipsed $100 million* in life-to-date digital net revenue, and has been in the top 20 iPhone grossing games in the U.S. for all but 12 days, since launching in August 2012.

 

    Plants vs. Zombies™ 2 has been installed over 25 million times on iOS devices since launching in August 2013, more than the lifetime total of the original Plants vs. Zombies.

 

    Real Racing™ 3 continued its revenue growth* since launching in February 2013, has been downloaded over 70 million times, and is currently averaging 18 million monthly active users.

 

    FIFA digital net revenue generated over $145 million* in the first half of fiscal 14, an increase of over 25% compared to the first half of fiscal 13.


Q2 Financial Highlights:

For the quarter, non-GAAP net revenue of $1,040 million was above our guidance of $975 million. Non-GAAP diluted earnings per share of $0.33 was above our guidance of $0.12.

 

(in millions of $, except per share amounts)   

Quarter

Ended
9/30/13

   

Quarter

Ended
9/30/12

 

GAAP Digital Net Revenue

   $ 450      $ 324   

GAAP Publishing Packaged Goods and Other Net Revenue

     223        365   

GAAP Distribution Packaged Goods Net Revenue

     22        22   
  

 

 

   

 

 

 

GAAP Total Net Revenue

   $ 695      $ 711   
  

 

 

   

 

 

 

Non-GAAP Digital Net Revenue

   $ 348      $ 314   

Non-GAAP Publishing Packaged Goods and Other Net Revenue

     670        744   

Non-GAAP Distribution Packaged Goods Net Revenue

     22        22   
  

 

 

   

 

 

 

Non-GAAP Total Net Revenue

   $ 1,040      $ 1,080   
  

 

 

   

 

 

 

GAAP Net Loss

   $ (273   $ (381

Non-GAAP Net Income

     105        49   

GAAP Loss Per Share

     (0.89     (1.21

Non-GAAP Diluted Earnings Per Share

     0.33        0.15   

Cash Used in Operations

   $ (6   $ (28

Trailing Twelve Month (TTM) Financial Highlights:

 

(in millions of $)   

TTM

Ended
9/30/13

    

TTM

Ended

9/30/12

 

GAAP Net Revenue

   $ 3,775       $ 4,095   

GAAP Net Income

     227         15   

Non-GAAP Net Revenue

     3,757         4,199   

Non-GAAP Net Income

     329         309   

Cash Provided by Operations

   $ 342       $ 490   


Business Outlook as of October 29, 2013

The following forward-looking statements, as well as those made above, reflect expectations as of October 29, 2013. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.

Fiscal Year 2014 Expectations – Ending March 31, 2014

 

    GAAP net revenue is expected to be approximately $3.55 billion.

 

    Non-GAAP net revenue is expected to be approximately $4.00 billion.

 

    GAAP diluted loss per share is expected to be approximately $(0.72).

 

    Non-GAAP diluted earnings per share is expected to be approximately $1.25.

 

    The Company estimates a share count of 317 million for purposes of calculating fiscal year 2014 diluted earnings per share, and 308 million for diluted 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 $450 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (online-enabled games);

 

  ¡    Approximately $150 million of stock-based compensation;

 

  ¡    Approximately $38 million of acquisition-related expenses;

 

  ¡    Approximately $1 million of restructuring charges;

 

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

 

  ¡    Approximately $40 million of college football settlement expenses; and

 

  ¡    Non-GAAP tax expense is expected to be approximately $82 million higher than GAAP tax expense.

Third Quarter Fiscal Year 2014 Expectations – Ending December 31, 2013

 

    GAAP net revenue is expected to be approximately $775 million.

 

    Non-GAAP net revenue is expected to be approximately $1,650 million.

 

    GAAP diluted loss per share is expected to be approximately $(1.42).

 

    Non-GAAP diluted earnings per share is expected to be approximately $1.22.

 

    The Company estimates a share count of 318 million for purposes of calculating third quarter fiscal year 2014 diluted earnings per share, and 309 million for diluted 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 $875 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (online-enabled games);

 

  ¡    Approximately $40 million of stock-based compensation;

 

  ¡    Approximately $20 million of acquisition-related expenses;

 

  ¡    Approximately $1 million of restructuring charges;

 

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

 

  ¡    Non-GAAP tax expense is expected to be $114 million higher than GAAP tax expense.


Conference Call and Supporting Documents

Electronic Arts will host a conference call on October 29, 2013 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal quarter ended September 30, 2013 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 November 12, 2013 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 (online-enabled games)

 

  ¡ College football settlement expenses

 

  ¡ 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 indicate 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 settlement of a 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 (Online-enabled Games). The majority of our software games can be connected to the Internet whereby a consumer may be able to download unspecified content or updates on a when-and-if-available basis (“unspecified updates”) for use with the original game software. In addition, we may also offer an online matchmaking service that permits consumers to play against each other via the Internet. GAAP requires us to account for the consumer’s right to receive unspecified updates or the matchmaking service for no additional fee as a “bundled” sale, or multiple-element arrangement. Electronic Arts is not

able to objectively determine the fair value of these unspecified updates or online services included in certain of its online-enabled games. As a result, the Company recognizes the revenue from the sale of these online-enabled games on a straight-line basis over the estimated offering period. Internally, Electronic Arts’ management excludes the impact of the change in deferred net revenue related to online-enabled games 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 between periods in understanding our underlying sales performance for the period, and (2) understanding our operations because all related costs of revenue are expensed as incurred instead of deferred and recognized ratably.

College Football Settlement Expenses. During the second quarter of fiscal 2014, Electronic Arts recognized a $40 million charge for expected litigation settlement and license expenses related to our college football business. This 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.

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 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 internally to evaluate its operating performance, to forecast, plan and analyze future periods, and to assess the performance of its management team. Prior to April 1, 2013, a 28 percent tax rate was applied to its non-GAAP financial results. Based on a re-evaluation of its fixed, long-term projected tax rate, beginning in fiscal year 2014, the Company has applied a tax rate of 25 percent to its non-GAAP financial results.


In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measures to 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 2014 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; 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 June 30, 2013.

These forward-looking statements are current as of October 29, 2013. 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 September 30, 2013. 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 September 30, 2013.


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 300 million registered players in over 200 countries. In fiscal year 2013, EA posted GAAP net revenue of $3.8 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

  John Reseburg

Vice President, Investor Relations

  Senior Director, Corporate Communications

650-628-7787

  650-628-3601

rsison@ea.com

  jreseburg@ea.com

EA SPORTS, Plants vs. Zombies, The Sims, Real Racing, Need for Speed, Mass Effect and Battlefield, are trademarks of Electronic Arts Inc. and its subsidiaries. The Simpsons TM & © 2012 Twentieth Century Fox Film Corporation. All Rights Reserved. NCAA, John Madden, NFL, NHL and FIFA are the property of their respective owners and used with permission.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in millions, except per share data)

 

     Three Months Ended
September 30,
     Six Months Ended
September 30,
 
     2013      2012      2013      2012  

Net revenue

           

Product

   $ 350        $ 481        $ 893        $ 1,183    

Service and other

     345          230          751          483    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net revenue

     695          711          1,644          1,666    

Cost of revenue

           

Product

     341          371          471          503    

Service and other

     72          74          136          147    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenue

     413          445          607          650    
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     282          266          1,037          1,016    

Operating expenses:

           

Marketing and sales

     164          219          311          370    

General and administrative

     129          100          214          188    

Research and development

     283          306          561          588    

Acquisition-related contingent consideration

     (44)         —           (37)         (20)   

Amortization of intangibles

                             14    

Restructuring and other

     (2)         (2)         (1)         25    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     534          630          1,056          1,165    
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating loss

     (252)         (364)         (19)         (149)   

Interest and other income (expense), net

     (8)         (4)         (13)         (9)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss before provision for income taxes

     (260)         (368)         (32)         (158)   

Provision for income taxes

     13          13          19          22    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss

   $ (273)       $ (381)       $ (51)       $ (180)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Loss per share

           

Basic and Diluted

   $ (0.89)       $ (1.21)       $ (0.17)       $ (0.57)   

Number of shares used in computation

           

Basic and Diulted

     308          316          306          317   

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

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

 

     Three Months Ended
September 30,
     Six Months Ended
September 30,
 
     2013      2012      2013      2012  

Net loss

   $ (273)       $ (381)       $ (51)       $ (180)   

Acquisition-related expenses

     (26)         21          —           23    

Amortization of debt discount

                     10          10    

Change in deferred net revenue (online-enabled games)

     345          369          (109)         (95)   

College football settlement expenses

     40          —           40          —     

Restructuring and other

     (2)         (2)         (1)         25    

Stock-based compensation

     38          44          71          83    

Income tax adjustments

     (22)         (7)         24          53    
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP net income (loss)

   $ 105        $ 49        $ (16)       $ (81)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP earnings (loss) per share

           

Basic

   $ 0.34        $ 0.16        $ (0.05)       $ (0.26)   

Diluted

   $ 0.33        $ 0.15        $ (0.05)       $ (0.26)   

Number of shares used in Non-GAAP computation

           

Basic

     308          316          306          317    

Diluted

     316          318          306          317    


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in millions)

 

     September 30,      March 31,  
     2013      2013 (a)  

ASSETS

  

Current assets:

  

Cash and cash equivalents

   $ 1,090        $ 1,292    

Short-term investments

     328          388    

Receivables, net of allowances of $117 and $200, respectively

     594          312    

Inventories

     58          42    

Deferred income taxes, net

     51          52    

Other current assets

     219          239    
  

 

 

    

 

 

 

Total current assets

     2,340          2,325    

Property and equipment, net

     532          548    

Goodwill

     1,726          1,721    

Acquisition-related intangibles, net

     216          253    

Deferred income taxes, net

     48          53    

Other assets

     174          170    
  

 

 

    

 

 

 

TOTAL ASSETS

   $ 5,036        $ 5,070    
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities:

     

Accounts payable

   $ 208        $ 136    

Accrued and other current liabilities

     708          737    

Deferred net revenue (online-enabled games)

     935          1,044    
  

 

 

    

 

 

 

Total current liabilities

     1,851          1,917    

0.75% convertible senior notes due 2016, net

     570          559    

Income tax obligations

     207          205    

Deferred income taxes, net

               

Other liabilities

     121          121    
  

 

 

    

 

 

 

Total liabilities

     2,750          2,803    

Common stock

               

Paid-in capital

     2,251          2,174    

Retained earnings (accumulated deficit)

     (30)         21    

Accumulated other comprehensive income

     62          69    
  

 

 

    

 

 

 

Total stockholders’ equity

     2,286          2,267    
  

 

 

    

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 5,036        $ 5,070    
  

 

 

    

 

 

 

 

(a)  Derived from audited consolidated financial statements.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions)

 

     Three Months Ended      Six Months Ended  
     September 30,      September 30,  
     2013      2012      2013      2012  

OPERATING ACTIVITIES

           

Net loss

   $ (273)       $ (381)       $ (51)       $ (180)   

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

           

Acquisition-related contingent consideration

     (44)         —           (37)         (20)   

Depreciation, amortization and accretion, net

     56          56          112          112    

Non-cash restructuring charges

     —           —           —             

Stock-based compensation

     38          44          71          83    

Change in assets and liabilities:

           

Receivables, net

     (470)         (528)         (278)         (274)   

Inventories

     (16)         (11)         (15)         (13)   

Other assets

     38          29                  —     

Accounts payable

     159          166          76            

Accrued and other liabilities

     158          228          (36)         109    

Deferred income taxes, net

             —                   (10)   

Deferred net revenue (online-enabled games)

     345          369          (109)         (95)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash used in operating activities

     (6)         (28)         (254)         (272)   
  

 

 

    

 

 

    

 

 

    

 

 

 

INVESTING ACTIVITIES

           

Capital expenditures

     (24)         (25)         (53)         (56)   

Proceeds from maturities and sales of short-term investments

     117          152          250          280    

Purchase of short-term investments

     (90)         (60)         (191)         (197)   

Acquisition-related restricted cash

     —           25          —           25    

Acquisition of subsidiaries, net of cash acquired

     —           (10)         (5)         (10)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by investing activities

             82                  42    
  

 

 

    

 

 

    

 

 

    

 

 

 

FINANCING ACTIVITIES

           

Payment of debt issuance costs

     —           (2)         —           (2)   

Proceeds from issuance of common stock

     28          18          50          18   

Repurchase and retirement of common stock

     —           (108)         —           (179)   

Acquisition-related contingent consideration payment

     —           (25)         (1)         (26)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net cash provided by (used in) financing activities

     28          (117)         49          (189)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Effect of foreign exchange on cash and cash equivalents

             15                  (3)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Increase (decrease) in cash and cash equivalents

     34          (48)         (202)         (422)   

Beginning cash and cash equivalents

     1,056          919          1,292          1,293    
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending cash and cash equivalents

   $ 1,090        $ 871        $ 1,090        $ 871    
  

 

 

    

 

 

    

 

 

    

 

 

 


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data)

 

     Q2      Q3      Q4      Q1      Q2      YOY %  
     FY13      FY13      FY13      FY14      FY14      Change  

QUARTERLY RECONCILIATION OF RESULTS

                 

Net Revenue

                 

GAAP net revenue

   $ 711        $ 922        $ 1,209        $ 949        $ 695          (2%)   

Change in deferred net revenue (online-enabled games)

     369          260          (169)         (454)         345       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP net revenue

   $ 1,080        $ 1,182        $ 1,040        $ 495        $ 1,040          (4%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Gross Profit

                 

GAAP gross profit

   $ 266        $ 493        $ 900        $ 755        $ 282          6%    

Acquisition-related expenses

     14          23          41          15          14       

Change in deferred net revenue (online-enabled games)

     369          260          (169)         (454)         345       

Stock-based compensation

     —           —                   —                
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP gross profit

   $ 649        $ 776        $ 773        $ 316        $ 642          (1%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

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

     37%          53%          74%          80%          41%       

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

     60%          66%          74%          64%          62%       

Operating Income (Loss)

                 

GAAP operating income (loss)

   $ (364)       $ (39)       $ 309        $ 233        $ (252)         31%    

Acquisition-related expenses

     21          (15)         51          26          (26)      

Change in deferred net revenue (online-enabled games)

     369          260          (169)         (454)         345       

College football settlement expenses

     —           —           —           —           40       

Restructuring and other

     (2)                 —                   (2)      

Stock-based compensation

     44          39          42          33          38       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP operating income (loss)

   $ 68        $ 247        $ 233        $ (161)       $ 143          110%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

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

     (51%)         (4%)         26%          25%          (36%)      

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

     6%          21%          22%          (33%)         14%       

Net Income (Loss)

                 

GAAP net income (loss)

   $ (381)       $ (45)       $ 323        $ 222        $ (273)         28%    

Acquisition-related expenses

     21          (15)         51          26          (26)      

Amortization of debt discount

                                          

Change in deferred net revenue (online-enabled games)

     369          260          (169)         (454)         345       

College football settlement expenses

     —           —           —           —           40       

Gain on strategic investments

     —           (14)         (25)         —           —        

Restructuring and other

     (2)                 —                   (2)      

Stock-based compensation

     44          39          42          33          38       

Income tax adjustments

     (7)         (56)         (58)         46          (22)      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Non-GAAP net income (loss)

   $ 49        $ 176        $ 169        $ (121)       $ 105          114%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

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

     (54%)         (5%)         27%          23%          (39%)      

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

     5%          15%          16%          (24%)         10%       

Diluted Earnings (Loss) Per Share

                 

GAAP earnings (loss) per share

   $ (1.21)       $ (0.15)       $ 1.05        $ 0.71        $ (0.89)         26%    

Non-GAAP earnings (loss) per share

   $ 0.15        $ 0.57        $ 0.55        $ (0.40)       $ 0.33          120%    
                 

Number of diluted shares used in computation

                 

GAAP

     316          304          307          312          308       

Non-GAAP

     318          308          307          304          316       


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in millions, except per share data)

 

     Q2      Q3      Q4      Q1      Q2      YOY %  
     FY13      FY13      FY13      FY14      FY14      Change  

QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP

                 

Geography Net Revenue

                 

North America

     329          409          513          395          303          (8%)   

International

     382          513          696          554          392          3%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

     711          922          1,209          949          695          (2%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

     179          80          (76)         (190)         136       

International

     190          180          (93)         (264)         209       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change In Deferred Net Revenue (Online-Enabled Games)

     369          260          (169)         (454)         345       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

     508          489          437          205          439          (14%)   

International

     572          693          603          290          601          5%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

     1,080          1,182          1,040          495          1,040          (4%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

     46%         44%         42%         42%         44%      

International

     54%         56%         58%         58%         56%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

     100%         100%         100%         100%         100%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

North America

     47%         41%         42%         41%         42%      

International

     53%         59%         58%         59%         58%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue %

     100%         100%         100%         100%         100%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Net Revenue Composition

                 

Publishing and Other

     365          568          730          452          223          (39%)   

Wireless, Internet-derived, and Advertising (Digital)

     324          321          453          482          450          39%    

Distribution

     22          33          26          15          22          -       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

     711          922          1,209          949          695          (2%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

     379          174          (334)         (350)         447       

Wireless, Internet-derived, and Advertising (Digital)

     (10)         86          165          (104)         (102)      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change In Deferred Net Revenue (Online-Enabled Games)

     369          260          (169)         (454)         345       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

     744          742          396          102          670          (10%)   

Wireless, Internet-derived, and Advertising (Digital)

     314          407          618          378          348          11%    

Distribution

     22          33          26          15          22          -       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

     1,080          1,182          1,040          495          1,040          (4%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

     51%         62%         60%         48%         32%      

Wireless, Internet-derived, and Advertising (Digital)

     46%         35%         38%         51%         65%      

Distribution

     3%         3%         2%         1%         3%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

     100%         100%         100%         100%         100%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Publishing and Other

     69%         63%         38%         21%         64%      

Wireless, Internet-derived, and Advertising (Digital)

     29%         34%         59%         76%         34%      

Distribution

     2%         3%         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)

 

     Q2      Q3      Q4      Q1      Q2      YOY %  
     FY13      FY13      FY13      FY14      FY14      Change  

QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP

                 

Platform Net Revenue

                 

Xbox 360

     204          277          379          256          167          (18%)   

PLAYSTATION 3

     150          289          404          238          131          (13%)   

Wii

     17          20                                  (47%)   

PlayStation 2

                                             (67%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

     377          589          790          498          309          (18%)   

Mobile

     75          86          109          113          75          -       

PlayStation Handhelds

     14          15          20          12                  (50%)   

Nintendo Handhelds

                                             (38%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

     97          110          138          134          87          (10%)   

PC

     214          186          252          298          274          28%   

Other

     23          37          29          19          25          9%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue

     711          922          1,209          949          695          (2%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

     144          72          (105)         (148)         157       

PLAYSTATION 3

     222          95          (170)         (159)         232       

Wii

     —           —           (1)         —           (1)      

PlayStation 2

             —           —           —           —        

Mobile

     13          13          (4)         (9)         28       

PlayStation Handhelds

             11          (13)         (8)              

Nintendo Handhelds

     (2)         13          (3)         (7)         —        

PC

     (16)         56          127          (123)         (76)      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change In Deferred Net Revenue (Online-Enabled Games)

     369          260          (169)         (454)         345       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

     348          349          274          108          324          (7%)   

PLAYSTATION 3

     372          384          234          79          363          (2%)   

Wii

     17          20                                  (53%)   

PlayStation 2

                                             (71%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

     744          756          514          191          697          (6%)   

Mobile

     88          99          105          104          103          17%   

PlayStation Handhelds

     21          26                          12          (43%)   

Nintendo Handhelds

             22                                  (17%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

     115          147          118          110          120          4%   

PC

     198          242          379          175          198          -       

Other

     23          37          29          19          25          9%   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Non-GAAP Net Revenue

     1,080          1,182          1,040          495          1,040          (4%)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

     29%         30%         31%         27%         24%      

PLAYSTATION 3

     21%         32%         34%         25%         19%      

Wii

     2%         2%                         1%      

PlayStation 2

     1%                                      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

     53%         64%         65%         52%         44%      

Mobile

     11%         9%         9%         12%         11%      

PlayStation Handhelds

     2%         2%         2%         1%         1%      

Nintendo Handhelds

     1%         1%         1%         1%         1%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

     14%         12%         12%         14%         13%      

PC

     30%         20%         21%         32%         39%      

Other

     3%         4%         2%         2%         4%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total GAAP Net Revenue %

     100%         100%         100%         100%         100%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Xbox 360

     32%         30%         26%         22%         31%      

PLAYSTATION 3

     34%         32%         23%         16%         35%      

Wii

     2%         2%                 1%         1%      

PlayStation 2

     1%                                      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Consoles

     69%         64%         49%         39%         67%      

Mobile

     8%         8%         10%         21%         10%      

PlayStation Handhelds

     2%         2%         1%         1%         1%      

Nintendo Handhelds

     1%         2%         1%                 1%      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Mobile and Handhelds

     11%         12%         12%         22%         12%      

PC

     18%         21%         36%         35%         19%      

Other

     2%         3%         3%         4%         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)

 

     Q2      Q3      Q4      Q1      Q2      YOY %  
     FY13      FY13      FY13      FY14      FY14      Change  

CASH FLOW DATA

                 

Operating cash flow

     (28)         363          233          (248)         (6)         79%    

Operating cash flow - TTM

     490          378          324          320          342          (30%)   

Capital expenditures

     25          25          25         29          24          (4%)   

Capital expenditures - TTM

     144          125          106          104          103          (28%)   

BALANCE SHEET DATA

                 

Cash and cash equivalents

     871          1,158          1,292          1,056          1,090          25%    

Short-term investments

     351          275          388          355          328          (7%)   

Marketable equity securities

     93          59          —          —          —          (100%)   

Receivables, net

     643          382          312          120          594          (8%)   

Inventories

     71          59          42          41          58          (18%)   

Deferred net revenue (online-enabled games)

                 

End of the quarter

     953          1,213          1,044          590          935       

Less: Beginning of the quarter

     584          953          1,213          1,044          590       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Change in deferred net revenue (online-enabled games)

     369          260          (169)         (454)         345       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

STOCK-BASED COMPENSATION

                 

Cost of goods sold

     —          —                  —               

Marketing and sales

                                          

General and administrative

                     12                       

Research and development

     26          25          22          20          23       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total Stock-Based Compensation

     44          39          42          33          38