REDWOOD CITY, Calif.–(BUSINESS WIRE)–Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2020.
“We’re bringing great entertainment to hundreds of millions of people all over the world,” said CEO Andrew Wilson. “Our amazing teams continue to deliver exceptional, high-quality experiences as more players connect with their friends and engage deeply with our games. With our expansion plans for EA SPORTS, strong catalogue of owned IP, leading live services, and ability to span every platform, we are growing to reach an even larger audience.”
“We delivered another strong quarter, driven by live services outperformance in Ultimate Team and Apex Legends,” said COO and CFO Blake Jorgensen. “We are raising our net bookings outlook for the full year on the strength we continue to see in our business. Looking further ahead, even with the upside this year, we anticipate delivering growth in fiscal 2022, driven by the next Battlefield.”
EA has posted a slide presentation and a financial model of EA’s historical results and guidance on EA’s IR website at www.ir.ea.com. EA will also post the prepared remarks and a transcript from the conference call on EA’s IR website. News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.
Selected Operating Highlights and Metrics
- Net bookings* for the trailing twelve months was $5.956 billion, up 8% year-over-year.
- Launched FIFA 21, Medal of HonorTM: Above and Beyond, Need for SpeedTM Hot Pursuit Remastered, and NHL 21 during the quarter.
- Launched FIFA 21 and Madden NFL 21 on next generation consoles during the quarter.
- Over the past fiscal year, EA SPORTSTM franchises have engaged more than 230 million people.
- FIFA Ultimate TeamTM had a record of nearly 6 million daily active players in December.
- Apex LegendsTM had 30% growth in new players, year-over-year.
- The SimsTM 4, life to date, has more than 33 million players and reached record daily, weekly, and monthly average players in December.
* 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.
Selected Financial Highlights and Metrics
- Net cash provided by operating activities was $1.124 billion for the quarter and a record $2.061 billion for the trailing twelve months.
- EA repurchased 2.5 million shares for $326 million during the quarter, bringing the total for the last twelve months to 5.9 million shares for $695 million.
- EA paid a cash dividend of $0.17 per share during the quarter.
Dividend
EA has declared a quarterly cash dividend of $0.17 per share of the Company’s common stock. The dividend is payable on March 24, 2021 to shareholders of record as of the close of business on March 3, 2021.
Quarterly Financial Highlights
Three Months Ended December 31, 2020
2019
(in $ millions, except per share amounts) Full game 722
689
Live services and other 951
904
Total net revenue 1,673
1,593
Net income 211
346
Diluted earnings per share 0.72
1.18
Operating cash flow 1,124
1,104
Value of shares repurchased 326
305
Number of shares repurchased 2.5
3.1
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, 2020 GAAP-Based Financial Data (in $ millions) Statement of
OperationsAcquisition-
related
expensesChange in
deferred net
revenue
(online-
enabled
games)Stock-based
compensationTotal net revenue 1,673
–
727
–
Cost of revenue 601
–
–
(1
)
Gross profit 1,072
–
727
1
Total operating expenses 821
(5
)
–
(110
)
Operating income 251
5
727
111
Interest and other income, net (6
)
–
–
–
Income before provision for income taxes 245
5
727
111
Number of shares used in computation: Diluted 292
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2020.
Financial Highlights for the Trailing Twelve Months
Twelve Months Ended December 31, 2020
2019
(in $ millions) Full game 1,719
1,838
Live services and other 3,951
3,550
Total net revenue 5,670
5,388
Net income 1,179
*2,830 Operating cash flow 2,061
1,898
Value of shares repurchased 695
1,217
Number of shares repurchased 5.9
12.8
*Includes the impact of one-time tax benefits recognized during the period. 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, 2020 GAAP-Based Financial Data (in $ millions) Statement of
OperationsAcquisition-
related
expensesChange in
deferred net
revenue
(online-
enabled
games)Stock-based
compensationTotal net revenue 5,670
–
286
–
Cost of revenue 1,444
(3
)
–
(5
)
Gross profit 4,226
3
286
5
Total operating expenses 2,954
(22
)
–
(412
)
Operating income 1,272
25
286
417
Interest and other income, net (6
)
–
–
–
Income before provision for income taxes 1,266
25
286
417
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2020.
Operating Metric
The following is a calculation of our total net bookings for the periods presented:
Three Months Ended Twelve Months Ended December 31, December 31, 2020
2019* 2020* 2019* (in $ millions) Total net revenue 1,673
1,593
5,670
5,388
Change in deferred net revenue (online-enabled games) 727
428
286
139
Net bookings 2,400
2,021
5,956
5,527
*At the beginning of FY21, EA changed the way in which it presents net bookings. Periods prior to the first quarter of FY21 have been recast for comparability to align with these changes. For more information, please see the Financial Reporting FAQ on our IR website. Business Outlook as of February 2, 2021
The following forward-looking statements reflect expectations as of February 2, 2021. 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 2021 Expectations – Ending March 31, 2021
Financial metrics:
- Net revenue is expected to be approximately $5.600 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $475 million.
- Net income is expected to be approximately $742 million.
- Diluted earnings per share is expected to be approximately $2.54.
- Operating cash flow is expected to be approximately $1.850 billion.
- The Company estimates a share count of 292 million for purposes of calculating fiscal year 2021 diluted earnings per share.
Operational metric:
- Net bookings is expected to be approximately $6.075 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, 2021 GAAP-Based Financial Data GAAP
GuidanceAcquisition-
related
expensesChange in
deferred net
revenue (online-
enabled games)Stock-based
compensation(in $ millions) Total net revenue 5,600
–
475
–
Cost of revenue 1,477
–
–
(4
)
Operating expense 3,074
(20
)
–
(436
)
Income before provision for income taxes 1,024
20
475
440
Net income 742
Number of shares used in computation: Diluted shares 292
Fourth Quarter Fiscal Year 2021 Expectations – Ending March 31, 2021
Financial metrics:
- Net revenue is expected to be approximately $1.317 billion.
- Change in deferred net revenue (online-enabled games) is expected to be approximately $58 million.
- Net loss is expected to be approximately ($19) million; this forecast includes the impact of an incremental tax accounting charge of ($152) million.
- Loss per share is expected to be approximately ($0.07), which includes ($0.52) per share from the tax accounting charge.
- The Company estimates a GAAP basic and diluted share count of 289 million shares due to a forecasted net loss. If the Company reports net income instead of a net loss, diluted share count for calculating diluted earnings per share would be 292 million shares.
Operational metric:
- Net bookings is expected to be approximately $1.375 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, 2021 GAAP-Based Financial Data GAAP
GuidanceAcquisition-
related
expensesChange in
deferred net
revenue (online-
enabled games)Stock-based
compensation(in $ millions) Total net revenue 1,317
–
58
–
Cost of revenue 302
–
–
–
Operating expense 837
(4
)
–
(114
)
Income before provision for income taxes 172
4
58
114
Net loss (19
)
Number of shares used in computation: Basic shares 289
Diluted shares 292
For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2020.
Conference Call and Supporting Documents
Electronic Arts will host a conference call on February 2, 2021 at 2:00 pm PT (5:00 pm ET) to review its results for the third fiscal quarter ended December 31, 2020 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) 324-3683 (domestic) or (509) 844-0959 (international), using the conference code 3695237 or via webcast at EA’s IR Website at http://ir.ea.com.
EA has posted a slide presentation with a financial model of EA’s historical results and guidance on EA’s IR Website. 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 16, 2021 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 3695237. 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 2021 expectations under the heading “Business Outlook as of February 2, 2021,” and other information regarding EA’s 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: the impact of the COVID-19 pandemic, 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, 2020.
These forward-looking statements are current as of February 2, 2021. 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, 2020. 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, 2020.
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 2020, EA posted GAAP net revenue of $5.5 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, Medal of Honor, Ultimate Team, Battlefield, Need for Speed, Apex Legends, The Sims, Titanfall 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.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in $ millions, except per share data)
Three Months Ended
Nine Months Ended
December 31,
December 31,
2020
2019
2020
2019
Net revenue
1,673
1,593
4,283
4,150
Cost of revenue
601
508
1,175
1,100
Gross profit
1,072
1,085
3,108
3,050
Operating expenses:
Research and development
451
389
1,310
1,157
Marketing and sales
216
202
493
464
General and administrative
149
126
418
364
Acquisition-related contingent consideration
—
2
—
5
Amortization of intangibles
5
5
16
16
Total operating expenses
821
724
2,237
2,006
Operating income
251
361
871
1,044
Interest and other income (expense), net
(6
)
13
(19
)
50
Income before provision for (benefit from) income taxes
245
374
852
1,094
Provision for (benefit from) income taxes
34
28
91
(1,527
)
Net income
211
346
761
2,621
Earnings per share
Basic
0.73
1.18
2.63
8.91
Diluted
0.72
1.18
2.61
8.85
Number of shares used in computation
Basic
290
292
289
294
Diluted
292
294
292
296
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on November 5, 2020 for the three months ended December 31, 2020 plus a comparison to the actuals for the three months ended December 31, 2019.
Three Months Ended December 31,
2020
2020
2019
Guidance
Variance
Actuals
Actuals
Net revenue
Net revenue
1,675
(2
)
1,673
1,593
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
675
52
727
428
Cost of revenue
Cost of revenue
599
2
601
508
GAAP-based financial data
Acquisition-related expenses
—
—
—
(5
)
Stock-based compensation
—
(1
)
(1
)
(1
)
Operating expenses
Operating expenses
840
(19
)
821
724
GAAP-based financial data
Acquisition-related expenses
(5
)
—
(5
)
(7
)
Stock-based compensation
(115
)
5
(110
)
(90
)
Income before tax
Income before tax
227
18
245
374
GAAP-based financial data
Acquisition-related expenses
5
—
5
12
Change in deferred net revenue (online-enabled games)1
675
52
727
428
Stock-based compensation
115
(4
)
111
91
Tax rate used for management reporting
18
%
18
%
18
%
Earnings per share
Basic
0.62
0.11
0.73
1.18
Diluted
0.61
0.11
0.72
1.18
Number of shares
Basic
290
—
290
292
Diluted
294
(2
)
292
294
1The 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.
In fiscal 2021, EA changed the way in which it presents net revenue. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. For more information please see the Financial Reporting FAQ on our Investor Relations Website.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
December 31, 2020
March 31, 20202
ASSETS
Current assets:
Cash and cash equivalents
4,772
3,768
Short-term investments
1,938
1,967
Receivables, net
778
461
Other current assets
233
321
Total current assets
7,721
6,517
Property and equipment, net
467
449
Goodwill
1,896
1,885
Acquisition-related intangibles, net
37
53
Deferred income taxes, net
1,924
1,903
Other assets
375
305
TOTAL ASSETS
12,420
11,112
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
89
68
Accrued and other current liabilities
1,423
1,052
Deferred net revenue (online-enabled games)
1,380
945
Senior notes, current, net
600
599
Total current liabilities
3,492
2,664
Senior notes, net
397
397
Income tax obligations
296
373
Deferred income taxes, net
1
1
Other liabilities
271
216
Total liabilities
4,457
3,651
Stockholders’ equity:
Common stock
3
3
Retained earnings
8,054
7,508
Accumulated other comprehensive loss
(94
)
(50
)
Total stockholders’ equity
7,963
7,461
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
12,420
11,112
2Derived 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,
2020
2019
2020
2019
OPERATING ACTIVITIES
Net income
211
346
761
2,621
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
46
39
123
111
Stock-based compensation
111
91
326
256
Change in assets and liabilities
Receivables, net
(348
)
59
(309
)
(176
)
Other assets
85
43
(28
)
76
Accounts payable
(77
)
(84
)
29
(33
)
Accrued and other liabilities
341
176
245
264
Deferred income taxes, net
14
7
(18
)
(1,793
)
Deferred net revenue (online-enabled games)
741
427
434
(27
)
Net cash provided by operating activities
1,124
1,104
1,563
1,299
INVESTING ACTIVITIES
Capital expenditures
(30
)
(28
)
(93
)
(100
)
Proceeds from maturities and sales of short-term investments
670
582
2,088
1,375
Purchase of short-term investments
(640
)
(637
)
(2,056
)
(2,621
)
Net cash used in investing activities
—
(83
)
(61
)
(1,346
)
FINANCING ACTIVITIES
Proceeds from issuance of common stock
13
1
56
34
Cash dividends paid
(49
)
—
(49
)
—
Cash paid to taxing authorities for shares withheld from employees
(67
)
(31
)
(144
)
(86
)
Repurchase and retirement of common stock
(326
)
(305
)
(404
)
(916
)
Payment of contingent consideration
—
(26
)
—
(90
)
Net cash used in financing activities
(429
)
(361
)
(541
)
(1,058
)
Effect of foreign exchange on cash and cash equivalents
18
3
43
—
Change in cash and cash equivalents
713
663
1,004
(1,105
)
Beginning cash and cash equivalents
4,059
2,940
3,768
4,708
Ending cash and cash equivalents
4,772
3,603
4,772
3,603
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q3
Q4
Q1
Q2
Q3
YOY %
FY20
FY20
FY21
FY21
FY21
Change
Net revenue
Net revenue
1,593
1,387
1,459
1,151
1,673
5
%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
428
(131
)
(69
)
(241
)
727
Gross profit
Gross profit
1,085
1,118
1,171
865
1,072
(1
%)
Gross profit (as a % of net revenue)
68
%
81
%
80
%
75
%
64
%
GAAP-based financial data
Acquisition-related expenses
5
3
—
—
—
Change in deferred net revenue (online-enabled games)1
428
(131
)
(69
)
(241
)
727
Stock-based compensation
1
1
1
2
1
Operating income
Operating income
361
401
471
149
251
(30
%)
Operating income (as a % of net revenue)
23
%
29
%
32
%
13
%
15
%
GAAP-based financial data
Acquisition-related expenses
12
9
5
6
5
Change in deferred net revenue (online-enabled games)1
428
(131
)
(69
)
(241
)
727
Stock-based compensation
91
91
102
113
111
Net income
Net income
346
418
365
185
211
(39
%)
Net income (as a % of net revenue)
22
%
30
%
25
%
16
%
13
%
GAAP-based financial data
Acquisition-related expenses
12
9
5
6
5
Change in deferred net revenue (online-enabled games)1
428
(131
)
(69
)
(241
)
727
Stock-based compensation
91
91
102
113
111
Tax rate used for management reporting
18
%
18
%
18
%
18
%
18
%
Diluted earnings per share
1.18
1.43
1.25
0.63
0.72
(39
%)
Number of diluted shares used in computation
Basic
292
290
288
289
290
Diluted
294
292
292
293
292
1The 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.
In fiscal 2021, EA changed the way in which it presents net revenue. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. For more information please see the Financial Reporting FAQ on our Investor Relations Website.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
Q3
Q4
Q1
Q2
Q3
YOY %
FY20
FY20
FY21
FY21
FY21
Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads
286
211
223
163
347
21
%
Packaged goods
403
145
136
119
375
(7
%)
Full game
689
356
359
282
722
5
%
Live services and other
904
1,031
1,100
869
951
5
%
Total net revenue
1,593
1,387
1,459
1,151
1,673
5
%
Full game
43
%
26
%
25
%
25
%
43
%
Live services and other
57
%
74
%
75
%
75
%
57
%
Total net revenue %
100
%
100
%
100
%
100
%
100
%
GAAP-based financial data
Full game downloads
31
(21
)
(5
)
(2
)
53
Packaged goods
60
(67
)
(67
)
(14
)
83
Full game
91
(88
)
(72
)
(16
)
136
Live services and other
337
(43
)
3
(225
)
591
Total change in deferred net revenue (online-enabled games) by composition1
428
(131
)
(69
)
(241
)
727
Net revenue by platform
Console
1,163
928
932
714
1,191
2
%
PC & Other
261
274
325
249
326
25
%
Mobile
169
185
202
188
156
(8
%)
Total net revenue
1,593
1,387
1,459
1,151
1,673
5
%
GAAP-based financial data
Console
388
(143
)
(108
)
(201
)
619
PC & Other
24
7
15
(24
)
73
Mobile
16
5
24
(16
)
35
Total change in deferred net revenue (online-enabled games) by platform1
428
(131
)
(69
)
(241
)
727
1The 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.
In fiscal 2021, EA changed the way in which it presents net revenue. Periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. For more information please see the Financial Reporting FAQ on our Investor Relations Website.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
Q3
Q4
Q1
Q2
Q3
YOY %
FY20
FY20
FY21
FY21
FY21
Change
CASH FLOW DATA
Operating cash flow
1,104
498
378
61
1,124
2
%
Operating cash flow – TTM
1,898
1,797
2,017
2,041
2,061
9
%
Capital expenditures
28
40
38
25
30
7
%
Capital expenditures – TTM
135
140
133
131
133
(1
%)
Repurchase and retirement of common stock
305
291
78
—
326
7
%
Cash dividends paid
—
—
—
—
49
100
%
DEPRECIATION
Depreciation expense
29
31
31
32
37
28
%
BALANCE SHEET DATA
Cash and cash equivalents
3,603
3,768
4,013
4,059
4,772
Short-term investments
1,999
1,967
1,947
1,972
1,938
Cash and cash equivalents, and short-term investments
5,602
5,735
5,960
6,031
6,710
20
%
Receivables, net
798
461
507
423
778
(3
%)
STOCK-BASED COMPENSATION
Cost of revenue
1
1
1
2
1
Research and development
60
59
66
74
74
Marketing and sales
10
10
11
12
11
General and administrative
20
21
24
25
25
Total stock-based compensation
91
91
102
113
111
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