REDWOOD CITY, Calif.–(BUSINESS WIRE)–Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2019.
News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.
“It was an excellent third quarter, with our new games and live services delighting more players around the world,” said CEO Andrew Wilson. “Our amazing creative teams at Electronic Arts continue to deliver some of the most high-quality, innovative and engaging experiences and content to a growing global audience.”
“Over the last twelve months, we have delivered record live services revenue, live services net bookings and operating cash flow,” said COO and CFO Blake Jorgensen. “Our broad-based business model reduces our dependence on individual titles and enables us to deliver financial results for our shareholders by providing a constant stream of high-quality entertainment for our players. We expect live services to continue to drive growth in fiscal 2021 and for growth to accelerate in fiscal 2022, led by a new Battlefield.”
Selected Operating Highlights and Metrics
- Digital net bookings* for the trailing twelve months was $4.128 billion, up 15% year-over-year and now represents 77% of total net bookings.
- During the quarter, EA launched Plants vs. Zombies: Battle for NeighborvilleTM, Need for SpeedTM Heat and Star Wars Jedi: Fallen OrderTM.
- FIFA Ultimate TeamTM matches were up nearly 40% year-over-year from launch through Q3.
- During the quarter, The SimsTM 4 surpassed 20 million unique players worldwide life-to-date.
* Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games and mobile platform fees.
Selected Financial Highlights and Metrics
All financial measures are presented on a GAAP basis.
- Net cash from operating activities was $1.104 billion for the quarter and a record $1.898 billion for the trailing twelve months.
- EA repurchased 3.1 million shares for $305 million during the quarter, bringing the total for the last twelve months to 12.8 million shares for $1.217 billion.
Quarterly Financial Highlights
Three Months Ended December 31, 2019
2018
(in $ millions, except per share amounts) Digital net revenue 1,124
908
Packaged goods and other net revenue 469
381
Total net revenue 1,593
1,289
Net income 346
262
Earnings per share 1.18
0.86
Operating cash flow 1,104
954
Value of shares repurchased 305
292
Number of shares repurchased 3.1
3.2
The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
Three Months Ended December 31, 2019 GAAP-Based Financial Data (in $ millions) Statement of
OperationsAcquisition-
related
expensesChange in
deferred net
revenue
(online-
enabled
games)Mobile
platform feesStock-based
compensationTotal net revenue 1,593
–
428
(43
)
–
Cost of revenue 508
(5
)
–
(43
)
(1
)
Gross profit 1,085
5
428
–
1
Total operating expenses 724
(7
)
–
–
(90
)
Operating income 361
12
428
–
91
Interest and other income, net 13
–
–
–
–
Income before provision for income taxes 374
12
428
–
91
Number of shares used in computation: Diluted 294
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, 2019.
TTM Financial Highlights
Twelve Months Ended December 31, 2019
2018
(in $ millions) Digital net revenue 4,160
3,747
Packaged goods and other net revenue 1,228
1,547
Total net revenue 5,388
5,294
Net income 2,830* 1,417
Operating cash flow 1,898
1,563
Value of shares repurchased 1,217
1,039
Number of shares repurchased 12.8
9.0
*Includes the impact of one-time tax benefits recognized in the fiscal quarters ended June 30 and September 30, 2019. The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
Twelve Months Ended December 31, 2019 GAAP-Based Financial Data (in $ millions) Statement of
OperationsAcquisition-
related
expensesChange in
deferred net
revenue
(online-
enabled
games)Mobile
platform feesStock-based
compensationTotal net revenue 5,388
–
139
(165
)
–
Cost of revenue 1,376
(10
)
–
(165
)
(4
)
Gross profit 4,012
10
139
–
4
Total operating expenses 2,772
(37
)
–
–
(325
)
Operating income 1,240
47
139
–
329
Interest and other income, net 73
–
–
–
–
Income before provision for income taxes 1,313
47
139
–
329
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, 2019.
Operating Metric
The following is a calculation of our total net bookings for the periods presented:
Three Months Ended TTM Ended December 31, December 31, 2019
2018
2019
2018
(in $ millions) Total net revenue 1,593
1,289
5,388
5,294
Change in deferred net revenue (online-enabled games) 428
368
139
(318)
Mobile platform fees (43)
(48)
(165)
(141)
Net bookings 1,978
1,609
5,362
4,835
Business Outlook as of January 30, 2020
The following forward-looking statements reflect expectations as of January 30, 2020. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.
Fiscal Year 2020 Expectations – Ending March 31, 2020
Financial metrics:
- Net revenue is expected to be approximately $5.475 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $(165) million.
- Mobile platform fees are expected to be approximately $(160) million.
- Net income is expected to be approximately $2.929 billion.
- Diluted earnings per share is expected to be approximately $9.90.
- Operating cash flow is expected to be approximately $1.725 billion.
- The Company estimates a share count of 296 million for purposes of calculating fiscal year 2020 diluted earnings per share.
Operational metric:
- Net bookings is expected to be approximately $5.150 billion.
In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:
Twelve Months Ending March 31, 2020 GAAP-Based Financial Data GAAP
GuidanceAcquisition-
related
expensesChange in
deferred net
revenue
(online-
enabled
games)Mobile
platform feesStock-based
compensation(in $ millions) Digital net revenue 4,255
–
(95
)
(160
)
–
Packaged goods & other net revenue 1,220
–
(70
)
–
–
Total net revenue 5,475
–
(165
)
(160
)
–
Cost of revenue 1,357
(12
)
–
(160
)
(3
)
Operating expense 2,730
(28
)
–
–
(347
)
Income before provision for income taxes 1,453
40
(165
)
–
350
Net income 2,929
Number of shares used in computation: Diluted shares 296
Fourth Quarter Fiscal Year 2020 Expectations – Ending March 31, 2020
Financial metrics:
- Net revenue is expected to be approximately $1.325 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $(131) million.
- Mobile platform fees are expected to be approximately $(42) million.
- Net income is expected to be approximately $308 million.
- Diluted earnings per share is expected to be approximately $1.05.
- The Company estimates a share count of 293 million for purposes of calculating fourth quarter fiscal year 2020 diluted earnings per share.
Operational metric:
- Net bookings is expected to be approximately $1.152 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, 2020 GAAP-Based Financial Data GAAP
GuidanceAcquisition-
related
expensesChange in
deferred net
revenue (online-
enabled games)Mobile
platform
feesStock-based
compensation(in $ millions) Total net revenue 1,325
–
(131
)
(42
)
–
Cost of revenue 257
(3
)
–
(42
)
–
Operating expense 724
(7
)
–
–
(94
)
Income before provision for income taxes 359
10
(131
)
–
94
Net income 308
Number of shares used in computation: Diluted shares 293
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, 2019.
Conference Call and Supporting Documents
Electronic Arts will host a conference call on Thursday, January 30, 2020 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal third quarter ended December 31, 2019 and its outlook for the future. During the course of the call, Electronic Arts may disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number (866) 393-4306 (domestic) or (734) 385-2616 (international), using the Conference ID 4098898 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 13, 2020 at (855) 859-2056 (domestic) or (404) 537-3406 (international) using pin code 4098898. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.
Forward-Looking Statements
Some statements set forth in this release, including the information relating to EA’s fiscal 2020 expectations under the heading “Business Outlook as of January 30, 2020,” and other information regarding EA’s fiscal 2020, fiscal 2021 and fiscal 2022 expectations contain forward-looking statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “plan,” “predict,” “seek,” “goal,” “will,” “may,” “likely,” “should,” “could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed in the forward-looking statements.
Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: sales of the Company’s products and services; the Company’s ability to develop and support digital products and services, including managing online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products and services; the Company’s ability to realize the anticipated benefits of acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences among competing platforms; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; general economic conditions; changes in our tax rates or tax laws; and other factors described in Part 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, 2019.
These forward-looking statements are current as of January 30, 2020. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.
While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2019. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended December 31, 2019.
About Electronic Arts
Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers.
In fiscal year 2019, EA posted GAAP net revenue of $4.95 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS(TM) FIFA, Battlefield(TM), Apex Legends(TM), The Sims(TM), Madden NFL, Need for Speed(TM), Titanfall(TM) and Plants vs. Zombies(TM). More information about EA is available at www.ea.com/news.
EA SPORTS, Battlefield, The Sims, Need for Speed, Apex Legends, Ultimate Team, Plants vs. Zombies and Plants vs. Zombies: Battle for Neighborville are trademarks of Electronic Arts Inc. STAR WARS (C) & TM 2019 Lucasfilm Ltd. All rights reserved. John Madden, NFL 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
December 31,
Nine Months Ended
December 31,
2019
2018
2019
2018
Net revenue
Product
701
552
1,435
1,377
Service and other
892
737
2,715
2,335
Total net revenue
1,593
1,289
4,150
3,712
Cost of revenue
Product
216
175
444
465
Service and other
292
238
656
581
Total cost of revenue
508
413
1,100
1,046
Gross profit
1,085
876
3,050
2,666
Operating expenses:
Research and development
389
334
1,157
1,035
Marketing and sales
202
187
464
473
General and administrative
126
106
364
337
Acquisition-related contingent consideration
2
1
5
3
Amortization of intangibles
5
6
16
18
Total operating expenses
724
634
2,006
1,866
Operating income
361
242
1,044
800
Interest and other income (expense), net
13
23
50
60
Income before provision for (benefit from) income taxes
374
265
1,094
860
Provision for (benefit from) income taxes
28
3
(1,527)
50
Net income
346
262
2,621
810
Earnings per share
Basic
1.18
0.87
8.91
2.66
Diluted
1.18
0.86
8.85
2.64
Number of shares used in computation
Basic
292
302
294
304
Diluted
294
304
296
307
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on October 29, 2019 for the three months ended December 31, 2019 plus a comparison to the actuals for the three months ended December 31, 2018.
Three Months Ended December 31,
2019
2019
2018
Guidance
Variance
Actuals
Actuals
Net revenue
Net revenue
1,510
83
1,593
1,289
GAAP-based financial data
Change in deferred net revenue (online-enabled games)
470
(42
)
428
368
Mobile platform fees
(40
)
(3
)
(43
)
(48
)
Cost of revenue
Cost of revenue
482
26
508
413
GAAP-based financial data
Acquisition-related expenses
(6
)
1
(5
)
(1
)
Stock-based compensation
—
(1
)
(1
)
(1
)
Mobile platform fees
(40
)
(3
)
(43
)
(48
)
Operating expenses
Operating expenses
733
(9
)
724
634
GAAP-based financial data
Acquisition-related expenses
(5
)
(2
)
(7
)
(7
)
Stock-based compensation
(95
)
5
(90
)
(74
)
Income before tax
Income before tax
306
68
374
265
GAAP-based financial data
Acquisition-related expenses
11
1
12
8
Change in deferred net revenue (online-enabled games)
470
(42
)
428
368
Mobile platform fees
—
—
—
—
Stock-based compensation
95
(4
)
91
75
Tax rate used for management reporting
18
%
18
%
18
%
Earnings per share
Basic
0.93
0.25
1.18
0.87
Diluted
0.92
0.26
1.18
0.86
Number of shares
Basic
294
(2
)
292
302
Diluted
295
(1
)
294
304
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
December 31, 2019
March 31, 20191
ASSETS
Current assets:
Cash and cash equivalents
3,603
4,708
Short-term investments
1,999
737
Receivables, net
798
623
Other current assets
229
313
Total current assets
6,629
6,381
Property and equipment, net
439
448
Goodwill
1,892
1,892
Acquisition-related intangibles, net
62
87
Deferred income taxes, net
1,828
35
Other assets
311
114
TOTAL ASSETS
11,161
8,957
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
61
113
Accrued and other current liabilities
1,204
1,052
Deferred net revenue (online-enabled games)
1,073
1,100
Total current liabilities
2,338
2,265
Senior notes, net
995
994
Income tax obligations
352
233
Deferred income taxes, net
2
2
Other liabilities
237
132
Total liabilities
3,924
3,626
Stockholders’ equity:
Common stock
3
3
Retained earnings
7,267
5,358
Accumulated other comprehensive loss
(33
)
(30
)
Total stockholders’ equity
7,237
5,331
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
11,161
8,957
1Derived from audited consolidated financial statements.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
Three Months Ended
December 31,
Nine Months Ended
December 31,
2019
2018
2019
2018
OPERATING ACTIVITIES
Net income
346
262
2,621
810
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
39
34
111
108
Stock-based compensation
91
75
256
211
Change in assets and liabilities
Receivables, net
59
151
(176
)
(271
)
Other assets
43
21
76
41
Accounts payable
(84
)
(97
)
(33
)
35
Accrued and other liabilities
176
148
264
123
Deferred income taxes, net
7
5
(1,793
)
(89
)
Deferred net revenue (online-enabled games)
427
355
(27
)
(20
)
Net cash provided by operating activities
1,104
954
1,299
948
INVESTING ACTIVITIES
Capital expenditures
(28
)
(21
)
(100
)
(84
)
Proceeds from maturities and sales of short-term investments
582
509
1,375
955
Purchase of short-term investments
(637
)
(115
)
(2,621
)
(1,144
)
Acquisitions, net of cash acquired
—
—
—
(58
)
Net cash provided by (used in) investing activities
(83
)
373
(1,346
)
(331
)
FINANCING ACTIVITIES
Proceeds from issuance of common stock
1
—
34
36
Cash paid to taxing authorities for shares withheld from employees
(31
)
(20
)
(86
)
(116
)
Repurchase and retirement of common stock
(305
)
(292
)
(916
)
(891
)
Payment of contingent consideration
(26
)
—
(90
)
—
Net cash used in financing activities
(361
)
(312
)
(1,058
)
(971
)
Effect of foreign exchange on cash and cash equivalents
3
(9
)
—
(17
)
Change in cash and cash equivalents
663
1,006
(1,105
)
(371
)
Beginning cash and cash equivalents
2,940
2,881
4,708
4,258
Ending cash and cash equivalents
3,603
3,887
3,603
3,887
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q3
Q4
Q1
Q2
Q3
YOY %
FY19
FY19
FY20
FY20
FY20
Change
Net revenue
Net revenue
1,289
1,238
1,209
1,348
1,593
24
%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)2
368
173
(427
)
(35
)
428
Mobile platform fees
(48
)
(47
)
(39
)
(36
)
(43
)
Gross profit
Gross profit
876
962
1,022
943
1,085
24
%
Gross profit (as a % of net revenue)
68
%
78
%
85
%
70
%
68
%
GAAP-based financial data
Acquisition-related expenses
1
1
2
2
5
Change in deferred net revenue (online-enabled games)2
368
173
(427
)
(35
)
428
Mobile platform fees
—
—
—
—
—
Stock-based compensation
1
1
1
1
1
Operating income
Operating income
242
196
415
268
361
49
%
Operating income (as a % of net revenue)
19
%
16
%
34
%
20
%
23
%
GAAP-based financial data
Acquisition-related expenses
8
17
8
10
12
Change in deferred net revenue (online-enabled games)2
368
173
(427
)
(35
)
428
Stock-based compensation
75
73
73
92
91
Net income
Net income
262
209
1,421
854
346
32
%
Net income (as a % of net revenue)
20
%
17
%
118
%
63
%
22
%
GAAP-based financial data
Acquisition-related expenses
8
17
8
10
12
Change in deferred net revenue (online-enabled games)2
368
173
(427
)
(35
)
428
Stock-based compensation
75
73
73
92
91
Tax rate used for management reporting
18
%
18
%
18
%
18
%
18
%
Diluted earnings per share
0.86
0.69
4.75
2.89
1.18
37
%
Number of diluted shares used in computation
Basic
302
299
297
295
292
Diluted
304
301
299
296
294
2The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
Q3
Q4
Q1
Q2
Q3
YOY %
FY19
FY19
FY20
FY20
FY20
Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads
247
169
132
180
286
16
%
Live services
480
714
731
573
677
41
%
Mobile3
181
182
186
169
161
(11
%)
Total digital
908
1,065
1,049
922
1,124
24
%
Packaged goods and other
381
173
160
426
469
23
%
Total net revenue
1,289
1,238
1,209
1,348
1,593
24
%
Total digital
70
%
86
%
87
%
68
%
71
%
Packaged goods and other
30
%
14
%
13
%
32
%
29
%
Total net revenue %
100
%
100
%
100
%
100
%
100
%
GAAP-based financial data
Full game downloads
26
44
(57
)
(5
)
31
Live services
304
131
(227
)
(80
)
316
Mobile
9
—
(25
)
(11
)
16
Total digital
339
175
(309
)
(96
)
363
Packaged goods and other
29
(2
)
(118
)
61
65
Total change in deferred net revenue (online-enabled games) by composition2
368
173
(427
)
(35
)
428
Mobile platform fees
(48
)
(47
)
(39
)
(36
)
(43
)
Net revenue by platform
Console
885
826
760
923
1,163
31
%
PC/Browser
217
217
249
242
257
18
%
Mobile
181
190
196
177
169
(7
%)
Other
6
5
4
6
4
(33
%)
Total net revenue
1,289
1,238
1,209
1,348
1,593
24
%
GAAP-based financial data
Console
323
87
(344
)
8
388
PC/Browser
33
88
(59
)
(31
)
24
Mobile
11
(2
)
(25
)
(11
)
16
Other
1
—
1
(1
)
—
Total change in deferred net revenue (online-enabled games) by platform2
368
173
(427
)
(35
)
428
Mobile platform fees
(48
)
(47
)
(39
)
(36
)
(43
)
2The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
3Mobile Digital only: excludes non-Digital mobile items such as licensing
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
Q3
Q4
Q1
Q2
Q3
YOY %
FY19
FY19
FY20
FY20
FY20
Change
CASH FLOW DATA
Operating cash flow
954
599
158
37
1,104
16
%
Operating cash flow – TTM
1,563
1,547
1,585
1,748
1,898
21
%
Capital expenditures
21
35
45
27
28
33
%
Capital expenditures – TTM
104
119
132
128
135
30
%
Repurchase and retirement of common stock
292
301
305
306
305
4
%
DEPRECIATION
Depreciation expense
30
31
30
30
29
(3
%)
BALANCE SHEET DATA
Cash and cash equivalents
3,887
4,708
3,533
2,940
3,603
Short-term investments
1,274
737
1,654
1,943
1,999
Cash and cash equivalents, and short-term investments
5,161
5,445
5,187
4,883
5,602
9
%
Receivables, net
806
623
329
856
798
(1
%)
STOCK-BASED COMPENSATION
Cost of revenue
1
1
1
1
1
Research and development
49
49
49
61
60
Marketing and sales
8
9
7
10
10
General and administrative
17
14
16
20
20
Total stock-based compensation
75
73
73
92
91