EX-99.1 2 d700952dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

 

Electronic Arts Reports Q3 FY19

Financial Results

  LOGO

REDWOOD CITY, CA - February 5, 2019 - Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2018.

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

“The video game industry continues to grow through a year of intense competition and transformational change,” said CEO Andrew Wilson. “Q3 was a difficult quarter for Electronic Arts and we did not perform to our expectations. We are now applying the strengths of our company to sharpen our execution and focus on delivering great new games and long-term live services for our players. We’re very excited about Apex Legends, the upcoming launch of Anthem, and a deep line-up of new experiences that we’ll bring to our global communities next fiscal year.”

“FIFA stands out as a robust franchise through a tumultuous year in the video game industry,” said COO and CFO Blake Jorgensen. “Elsewhere in the business, we’re making adjustments to improve execution and we’re refocusing R&D. Looking forward, we’re delighted to launch Anthem, our new IP, to grow Apex Legends and related Titanfall experiences, to deliver new Plants vs. Zombies and Need for Speed titles, and to add Star Wars Jedi: Fallen Order to our sports titles in the fall.”

Selected Operating Highlights and Metrics

   

Digital net bookings* for the trailing twelve months was $3.577 billion, up 6% year-over-year and represents 74% of total net bookings.

 

   

During the quarter, launched BattlefieldTM V and Command & ConquerTM: Rivals.

 

   

On February 4, 2019, launched Apex LegendsTM, a new battle royale experience from Respawn.

 

   

During the quarter, FIFA Ultimate TeamTM matches played increased 15% year-over-year.

 

   

During calendar 2018, FIFA 19 was the highest-selling console game in Europe.

* Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games and, for periods after the fourth quarter of fiscal 2018, mobile platform fees.

Selected Financial Highlights and Metrics

All financial measures are presented on a GAAP basis.

   

Net cash from operating activities was $954 million for the quarter and $1.563 billion for the trailing twelve months, a record third quarter trailing twelve months.

 

   

EA repurchased 3.2 million shares for $292 million during the quarter and 9.0 million shares for $1.039 billion during the trailing twelve months.


Impact of Recently Adopted Accounting Standard

At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. For more information about the adoption of Topic 606, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

Quarterly Financial Highlights

 

     Three Months Ended
December 31,
 
     2018      2017  
(in $ millions, except per share amounts)              

Digital net revenue

     908        780  

Packaged goods and other net revenue

     381        380  
  

 

 

    

 

 

 

Total net revenue

     1,289        1,160  
  

 

 

    

 

 

 
     

Net income (loss)*

     262        (186

Earnings (loss) per share*

     0.86        (0.60
     

Operating cash flow

     954        849  
     

Value of shares repurchased

     292        150  

Number of shares repurchased

     3.2        1.4  

 

 

*During the three months ended December 31, 2017, EA recognized $176 million of incremental income tax expense, or approximately $0.57 per share, due to the application of the Tax Cuts and Jobs Act.

The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its fiscal 2019 GAAP results in order to assess EA’s operating results:

 

    Three Months Ended December 31, 2018  
          GAAP-Based Financial Data  
(in $ millions)   Statement
of
Operations
    Acquisition- related
expenses
    Change in
deferred net
revenue
(online-
enabled

games)
    Mobile
platform
fees
    Stock-based
compensation
 

Total net revenue

    1,289             368       (48      

Cost of revenue

    413       (1           (48     (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    876       1       368             1  

Total operating expenses

    634       (7                 (74
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    242       8       368             75  

Interest and other income, net

    23                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

    265       8       368             75  

Number of shares used in computation:

         

Diluted

    304          

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.

 

2


TTM Financial Highlights

 

     Twelve Months Ended
December 31,
 
     2018      2017  
(in $ millions)              

Digital net revenue

     3,747        3,282  

Packaged goods and other net revenue

     1,547        1,813  
  

 

 

    

 

 

 

Total net revenue

     5,294        5,095  
  

 

 

    

 

 

 
     

Net income*

     1,417        1,002  
     

Operating cash flow

     1,563        1,514  
     

Value of shares repurchased

     1,039        578  

Number of shares repurchased

     9.0        5.6  

 

*Due to the application of the Tax Cuts and Jobs Act, EA recognized incremental income tax expense of $59 million for the twelve months ended December 31, 2018 and $176 million for the twelve months ended December 31, 2017.

The following GAAP-based financial data and tax rate of 18% in fiscal year 2019 and 21% in fiscal year 2018 was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

 

    Twelve Months Ended December 31, 2018  
          GAAP-Based Financial Data  
(in $ millions)   Statement
of
Operations
    Acquisition- related
expenses
    Change in
deferred net

revenue
(online-
enabled
games)
    Mobile
platform
fees
    Stock-based
compensation
 

Total net revenue

    5,294             (318     (141      

Cost of revenue

    1,279       (4           (141     (4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    4,015       4       (318           4  

Total operating expenses

    2,462       (26                 (276
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    1,553       30       (318           280  

Interest and other income, net

    61                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

    1,614       30       (318           280  

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.

Operating Metric

The following is a calculation of our total net bookings for the periods presented:

 

     Three Months Ended
December 31,
     TTM Ended
December 31,
 
     2018     2017      2018     2017  
(in $ millions)                          

Total net revenue

     1,289       1,160        5,294       5,095  

Change in deferred net revenue (online-enabled games)

     368       811        (318     (78

Mobile platform fees

     (48            (141      
  

 

 

   

 

 

    

 

 

   

 

 

 

Net bookings

     1,609       1,971        4,835       5,017  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

3


Business Outlook as of February 5, 2019

The following forward-looking statements reflect expectations as of February 5, 2019. Electronic Arts assumes no obligation to update these statements, except as required by law. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.

Fiscal Year 2019 Expectations – Ending March 31, 2019

Financial metrics:

   

Net revenue is expected to be approximately $4.875 billion.

     

Change in deferred net revenue (online-enabled games) is expected to be approximately $65 million.

     

Mobile platform fees are expected to be approximately $(190) million.

   

Net income is expected to be approximately $980 million.

   

Diluted earnings per share is expected to be approximately $3.20.

   

Operating cash flow is expected to be approximately $1.350 billion.

   

The Company estimates a share count of 306 million for purposes of calculating fiscal year 2019 diluted earnings per share.

Operational metric:

   

Net bookings is expected to be approximately $4.750 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

 

     Twelve Months Ending March 31, 2019  
            GAAP-Based Financial Data  
     GAAP
Guidance
     Acquisition-
related
expenses
    Change in
deferred net
revenue
(online-
enabled
games)
     Mobile
platform fees
    Stock-based
compensation
 
(in $ millions)                                 

Digital net revenue

     3,615              50        (190      

Packaged goods & other net revenue

     1,260              15               

 

 

Total net revenue

     4,875              65        (190      

 

 

Cost of revenue

     1,311        (3            (190     (3

Operating expense

     2,581        (27                  (284

Income before provision for income taxes

     1,055        30       65              287  

Net income

     980            

Number of shares used in computation:

            

Diluted shares

     306            

 

4


Fourth Quarter Fiscal Year 2019 Expectations – Ending March 31, 2019

Financial metrics:

   

Net revenue is expected to be approximately $1.163 billion.

     

Change in deferred net revenue (online-enabled games) is expected to be approximately $56 million.

     

Mobile platform fees are expected to be approximately $(49) million.

   

Net income is expected to be approximately $170 million.

   

Diluted earnings per share is expected to be approximately $0.56.

   

The Company estimates a share count of 303 million for purposes of calculating fourth quarter fiscal year 2019 diluted earnings per share.

Operational metric:

   

Net bookings is expected to be approximately $1.170 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

 

     Three Months Ending March 31, 2019  
            GAAP-Based Financial Data  
     GAAP
Guidance
     Acquisition-
related
expenses
    Change in
deferred net
revenue
(online-
enabled
games)
     Mobile
platform
fees
    Stock-based
compensation
 
(in $ millions)                                 

 

 

Total net revenue

     1,163              56        (49      

 

 

Cost of revenue

     265                     (49      

Operating expense

     715        (6                  (76

Income before provision for income taxes

     195        6       56              76  

Net income

     170            

Number of shares used in computation:

            

Diluted shares

     303            

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2018.

 

5


Conference Call and Supporting Documents

Electronic Arts will host a conference call on Tuesday, February 5, 2019 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal third quarter ended December 31, 2018 and its outlook for the future. During the course of the call, Electronic Arts may disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number (866) 393-4306 (domestic) or (734) 385-2616 (international), using the Conference ID 7589409 or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation, a financial model of EA’s historical results and guidance, and an Investor Accounting FAQ on EA’s IR Website. After the conference call, EA will also post the prepared remarks and a transcript from the conference call on EA’s IR Website.

A dial-in replay of the conference call will be available until February 19, 2019 at (855) 859-2056 (domestic) or (404) 537-3406 (international) using pin code 7589409. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.

Forward-Looking Statements

Some statements set forth in this release, including the information relating to EA’s fiscal 2019 expectations under the heading “Business Outlook as of February 5, 2019,” and other information regarding EA’s fiscal 2019 and fiscal 2020 expectations contain forward-looking statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate”, “plan”, “predict”, “seek”, “goal”, “will”, “may”, “likely”, “should”, “could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed in the forward-looking statements.

Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: sales of the Company’s titles; the Company’s ability to develop and support digital products and services, including managing online security and privacy; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products; the Company’s ability to realize the anticipated benefits of acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences among competing platforms; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; general economic conditions; and other factors described in Part II, Item 1A of Electronic Arts’ latest Quarterly Report on Form 10-Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

These forward-looking statements are current as of February 5, 2019. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

 

6


While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2018. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended December 31, 2018.

About Electronic Arts

Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers. EA has more than 300 million registered players around the world.

In fiscal year 2018, EA posted GAAP net revenue of $5.15 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as The Sims™, Madden NFL, EA SPORTS™ FIFA, Battlefield™, Need for Speed™, Dragon Age™ and Plants vs. Zombies™. More information about EA is available at www.ea.com/news.

EA SPORTS, Battlefield, The Sims, Need for Speed, Dragon Age, Apex Legends, Respawn, Command & Conquer, Ultimate Team and Plants vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL and FIFA are the property of their respective owners and used with permission.

For additional information, please contact:

 

Chris Evenden    John Reseburg
Vice President, Investor Relations    Vice President, Corporate Communications
650-628-0255    650-628-3601
cevenden@ea.com    jreseburg@ea.com

 

7


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in $ millions, except per share data)

 

     Three Months Ended
December 31,
     Nine Months Ended
December 31,
 
     2018 1      2017      2018 1      2017  

Net revenue

           

Product

     552        547        1,377        1,829  

Service and other

     737        613        2,335        1,739  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net revenue

     1,289        1,160        3,712        3,568  

Cost of revenue

           

Product

     175        352        465        716  

Service and other

     238        149        581        328  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cost of revenue

     413        501        1,046        1,044  
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit

     876        659        2,666        2,524  

Operating expenses:

           

Research and development

     334        329        1,035        985  

Marketing and sales

     187        230        473        511  

General and administrative

     106        120        337        343  

Acquisition-related contingent consideration

     1               3         

Amortization of intangibles

     6        1        18        4  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     634        680        1,866        1,843  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income (loss)

     242        (21      800        681  

Interest and other income (expense), net

     23        5        60        14  
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before provision for income taxes

     265        (16      860        695  

Provision for income taxes

     3        170        50        259  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

     262        (186      810        436  
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings (loss) per share

           

Basic

     0.87        (0.60      2.66        1.41  

Diluted

     0.86        (0.60      2.64        1.40  

Number of shares used in computation

           

Basic

     302        308        304        309  

Diluted

     304        308        307        312  

1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.


Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on October 30, 2018 for the three months ended December 31, 2018 plus a comparison to the actuals for the three months ended December 31, 2017.

 

     Three Months Ended December 31,  
    

2018 1

 

          

2018 1

 

   

2017

 

 
     Guidance     Variance      Actuals     Actuals  

Net revenue

         

Net revenue

     1,375       (86      1,289       1,160  

GAAP-based financial data

         

Change in deferred net revenue (online-enabled games)

     405       (37      368       811  

Mobile platform fees

     (55     7        (48      

Cost of revenue

         

Cost of revenue

     446       (33      413       501  

GAAP-based financial data

         

Acquisition-related expenses

     (1            (1     (1

Stock-based compensation

           (1      (1      

Mobile platform fees

     (55     7        (48      

Operating expenses

         

Operating expenses

     730       (96      634       680  

GAAP-based financial data

         

Acquisition-related expenses

     (10     3        (7     (1

Stock-based compensation

     (80     6        (74     (63

Income (loss) before tax

         

Income (loss) before tax

     212       53        265       (16

GAAP-based financial data

         

Acquisition-related expenses

     11       (3      8       2  

Change in deferred net revenue (online-enabled games)

     405       (37      368       811  

Mobile platform fees

                         

Stock-based compensation

     80       (5      75       63  

Tax rate used for management reporting

     18        18     21

Earnings (loss) per share

         

Basic

     0.62       0.25        0.87       (0.60

Diluted

     0.61       0.25        0.86       (0.60

Number of shares

         

Basic

     304       (2      302       308  

Diluted

     306       (2      304       308  

Anti-dilutive shares excluded for loss position2

                        3  

1 At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

2 Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable through stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in $ millions)

 

             December 31, 20181                      March 31, 20183           

ASSETS

    

Current assets:

    

Cash and cash equivalents

     3,887       4,258  

Short-term investments

     1,274       1,073  

Receivables, net of allowances of $8 and $165, respectively

     806       385  

Other current assets

     280       288  
  

 

 

   

 

 

 

Total current assets

     6,247       6,004  

Property and equipment, net

     426       453  

Goodwill

     1,891       1,883  

Acquisition-related intangibles, net

     93       71  

Deferred income taxes, net

     106       84  

Other assets

     94       89  
  

 

 

   

 

 

 

TOTAL ASSETS

     8,857       8,584  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

     70       48  

Accrued and other current liabilities

     1,092       821  

Deferred net revenue (online-enabled games)

     928       1,622  
  

 

 

   

 

 

 

Total current liabilities

     2,090       2,491  

Senior notes, net

     994       992  

Income tax obligations

     264       250  

Deferred income taxes, net

     1       1  

Other liabilities

     164       255  
  

 

 

   

 

 

 

Total liabilities

     3,513       3,989  

Stockholders’ equity:

    

Common stock

     3       3  

Additional paid-in capital

           657  

Retained earnings

     5,358       4,062  

Accumulated other comprehensive loss

     (17     (127
  

 

 

   

 

 

 

Total stockholders’ equity

     5,344       4,595  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

     8,857       8,584  
  

 

 

   

 

 

 

1 At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. EA’s Q3 FY19 Unaudited Condensed Consolidated Balance Sheet reflects the effect of the adoption as of April 1, 2018, which had an impact on the following: receivables, net of allowances, accrued and other current liabilities, deferred net revenue (online-enabled games), deferred income taxes, net, retained earnings and accumulated other comprehensive loss. Financial data for periods prior to April 1, 2018 has not been restated.

3 Derived from audited consolidated financial statements.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in $ millions)

 

             Three Months Ended,        
December 31,
            Nine Months Ended        
December  31,
 
     2018     2017     2018     2017  

OPERATING ACTIVITIES

        

Net income (loss)

     262       (186     810       436  

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

        

Depreciation, amortization and accretion

     34       34       108       97  

Stock-based compensation

     75       63       211       173  

Change in assets and liabilities

        

Receivables, net

     151       (73     (271     (527

Other assets

     21       13       41       79  

Accounts payable

     (97     (88     35       16  

Accrued and other liabilities

     148       165       123       265  

Deferred income taxes, net

     5       90       (89     130  

Deferred net revenue (online-enabled games)

     355       831       (20     408  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     954       849       948       1,077  
  

 

 

   

 

 

   

 

 

   

 

 

 

INVESTING ACTIVITIES

        

Capital expenditures

     (21     (24     (84     (87

Proceeds from maturities and sales of short-term investments

     509       606       955       1,656  

Purchase of short-term investments

     (115     (617     (1,144     (2,012

Acquisitions, net of cash acquired

           (150     (58     (150
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     373       (185     (331     (593
  

 

 

   

 

 

   

 

 

   

 

 

 

FINANCING ACTIVITIES

        

Proceeds from issuance of common stock

                 36       57  

Cash paid to taxing authorities for shares withheld from employees

     (20     (7     (116     (112

Repurchase and retirement of common stock

     (292     (150     (891     (453
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (312     (157     (971     (508
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of foreign exchange on cash and cash equivalents

     (9     (8     (17     25  
  

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     1,006       499       (371     1  

Beginning cash and cash equivalents

     2,881       2,067       4,258       2,565  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending cash and cash equivalents

     3,887       2,566       3,887       2,566  
  

 

 

   

 

 

   

 

 

   

 

 

 


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except per share data)

 

     Q3     Q4     Q11     Q21     Q31     YOY %  
     FY18     FY18     FY19     FY19     FY19     Change  

Net revenue

            

Net revenue

     1,160       1,582       1,137       1,286       1,289       11

GAAP-based financial data

            

Change in deferred net revenue (online-enabled games)4

     811       (327     (339     (20     368    

Mobile platform fees

                 (49     (44     (48  

Gross profit

            

Gross profit

     659       1,349       922       868       876       33

GAAP-based financial data

            

Acquisition-related expenses

     1       1       1       1       1    

Change in deferred net revenue (online-enabled games)4

     811       (327     (339     (20     368    

Mobile platform fees

                                

Stock-based compensation

           1       1       1       1    

Gross profit (as a % of net revenue)

     57     85     81     67     68  

Operating income (loss)

            

Operating income (loss)

     (21     753       300       258       242       1,252

GAAP-based financial data

            

Acquisition-related expenses

     2       6       7       9       8    

Change in deferred net revenue (online-enabled games)4

     811       (327     (339     (20     368    

Stock-based compensation

     63       69       70       66       75    

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

     (2 %)      48     26     20     19  

Net income (loss)

            

Net income (loss)

     (186     607       293       255       262       241

GAAP-based financial data

            

Acquisition-related expenses

     2       6       7       9       8    

Change in deferred net revenue (online-enabled games)4

     811       (327     (339     (20     368    

Stock-based compensation

     63       69       70       66       75    

Tax rate used for management reporting

     21     21     18     18     18  

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

     (16 %)      38     26     20     20  

Diluted earnings (loss) per share

     (0.60     1.95       0.95       0.83       0.86       243

Number of diluted shares used in computation

            

Basic

     308       307       306       305       302    

Diluted

     308       311       310       307       304    

Anti-dilutive shares excluded for loss position2

     3                            

1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

2Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable through stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.

4The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

 

     Q3     Q4     Q11     Q21     Q31     YOY %  
     FY18     FY18     FY19     FY19     FY19     Change  

QUARTERLY NET REVENUE PRESENTATIONS

            

Net revenue by composition

            

Full game downloads

     143       232       116       148       247       73

Live services

     476       698       610       412       480       1

Mobile

     161       172       231       220       181       12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total digital

     780       1,102       957       780       908       16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Packaged goods and other

     380       480       180       506       381        
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total net revenue

     1,160       1,582       1,137       1,286       1,289       11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total digital

     67     70     84     61     70  

Packaged goods and other

     33     30     16     39     30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total net revenue %

     100     100     100     100     100  

GAAP-based financial data

 

     

Full game downloads

     117       (39     (20     9       26    

Live services

     311       (19     (160     (84     304    

Mobile

     22       4       (35     (24     9    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total digital

     450       (54     (215     (99     339    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Packaged goods and other

     361       (273     (124     79       29    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total change in deferred net revenue (online-enabled games) by composition4

     811       (327     (339     (20     368    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Mobile platform fees

                 (49     (44     (48  

Net revenue by platform

            

Console

     810       1,196       705       917       885       9

PC/Browser

     181       210       197       149       217       20

Mobile

     166       173       233       220       181       9

Other

     3       3       2             6       100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total net revenue

     1,160       1,582       1,137       1,286       1,289       11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

GAAP-based financial data

 

     

Console

     710       (313     (288     8       323    

PC/Browser

     83       (20     (9     (4     33    

Mobile

     21       5       (42     (24     11    

Other

     (3     1                   1    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total change in deferred net revenue (online-enabled games) by platform4

     811       (327     (339     (20     368    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Mobile platform fees

                 (49     (44     (48  

1 At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

4 The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.


ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

 

     Q3      Q4      Q1      Q2      Q3      YOY %  
     FY18      FY18      FY19      FY19      FY19      Change  

CASH FLOW DATA

                 

Operating cash flow

     849        615        120        (126      954        12

Operating cash flow - TTM

     1,514        1,692        1,636        1,458        1,563        3

Capital expenditures

     24        20        32        31        21        (13 %) 

Capital expenditures - TTM

     116        107        106        107        104        (10 %) 

Repurchase and retirement of common stock

     150        148        300        299        292        95

DEPRECIATION

                 

Depreciation expense

     30        31        30        30        30         

BALANCE SHEET DATA

                 

Cash and cash equivalents

     2,566        4,258        3,876        2,881        3,887     

Short-term investments

     2,318        1,073        1,095        1,664        1,274     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Cash and cash equivalents, and short-term investments

     4,884        5,331        4,971        4,545        5,161        6

Receivables, net 1

     886        385        371        966        806        (9 %) 

STOCK-BASED COMPENSATION

                 

Cost of revenue

            1        1        1        1     

Research and development

     38        44        47        39        49     

Marketing and sales

     8        8        7        9        8     

General and administrative

     17        16        15        17        17     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total stock-based compensation

     63        69        70        66        75     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

1 At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. EA’s FY19 Unaudited Condensed Consolidated Balance Sheets reflect the effect of the adoption as of April 1, 2018, which had an impact on receivables, net of allowances. Financial data for periods prior to April 1, 2018 has not been restated.