Electronic Arts Reports Q2 FY13 Financial Results

  Electronic Arts Reports Q2 FY13 Financial Results

                Q2 Non-GAAP Net Revenue and EPS Beat Consensus

   Trailing Twelve Month Non-GAAP Digital Net Revenue a Record $1.4 Billion

        FIFA 13 Sold Through 7.4 Million Units in Its First Four Weeks

         Battlefield 3 Premium Has Sold Over 2 Million Subscriptions

          The Simpsons: Tapped Out Top Grossing iOS Game in October

           Need For Speed Most Wanted Launches with Strong Reviews

Business Wire

REDWOOD CITY, Calif. -- October 30, 2012

Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial
results for its second fiscal quarter ended September 30, 2012.

“EA is performing well, once again beating street consensus in fiscal Q2,”
said Chief Executive Officer John Riccitiello. “We delivered yet another
quarter of sharp digital growth, with digital revenue up 40% compared to the
same period last year, reflecting our strength across multiple brands and
channels.”

“We delivered a very strong performance in the second quarter, backed by great
performances from our EA SPORTS titles,” said Chief Financial Officer Blake
Jorgensen. “We are forecasting annual non-GAAP EPS growth of at least 25% at
the midpoint of our guidance, and Operating Cash Flow of over $400 million.”

“Record numbers of players have engaged in the online features and content
downloads for FIFA 13, Madden NFL 13, and Battlefield,” said EA President
Frank Gibeau. “On the strength of our digital extensions, FIFA and Battlefield
are the two biggest revenue events in our company’s history. Both are well on
their way to becoming billion dollar annual franchises.”

Selected Operating Highlights and Metrics:

*On a non-GAAP basis

  *Need for Speed™ Most Wanted launches this week with great reviews. IGN and
    Game Informer awarded Need for Speed a 9 out of 10.
  *FIFA 13 and Madden NFL 13 debuted as the two top-selling titles in
    September in the Western World.
  *EA was the #1 publisher in the Western World in calendar year 2012 to
    date, with five of the top seven titles.
  *FIFA 13 sold through 7.4 million units, excluding mobile downloads, in its
    first four weeks to become the biggest sports launch of all-time.
  *FIFA digital net revenue generated over $115 million* in the first half of
    fiscal 13, including FIFA Online 2 and FIFA World Class Soccer that
    together contributed over $50 million*.
  *Madden NFL 13 launched to critical acclaim, logged record fan engagement
    with nearly 30% year over year increase in total online game sessions, and
    increased units sold through by 9% in fiscal Q2 as compared to Madden NFL
    12.
  *Battlefield 3™ Premium service has sold over 2 million subscriptions to
    date.
  *Medal of Honor™ Warfighter topped the charts in the UK in its first week
    of sales.
  *The Simpsons™: Tapped Out has been a top grossing iOS game for the past
    four weeks, was the #1 application in 54 countries, including the US, UK
    and Germany, and recently logged a record-high of 2.8 million daily active
    users.
  *EA’s games and services for mobile have generated a 60% year-over-year
    increase in digital net revenue*.
  *Catalog continues to outperform with Battlefield 3 and FIFA 12 together
    selling through nearly 4 million units in the first half of the fiscal
    year.
  *Trailing twelve month non-GAAP digital net revenue was a record $1.44
    billion.
  *Trailing twelve month operating cash flow was $490 million, a $183 million
    improvement from the prior quarter.
  *EA repurchased $108 million of shares in the second fiscal quarter
    pursuant to a $500 million Share Repurchase Program announced on July 31,
    2012.
  *EA’s Origin™ platform for downloading digital games and services has
    registered over 30 million users, including 13 million mobile users.
    Origin has signed agreements with 71 independent developers.

Q2 Financial Highlights:

For the quarter, non-GAAP net revenue of $1,080 million was in line with our
guidance of $1,050 million to $1,100 million. Non-GAAP diluted earnings per
share of $0.15 was above our guidance of $0.07 to $0.12. Non-GAAP net revenue
in Q2 fiscal 2013 was higher compared to Q2 fiscal 2012 due to our strong
performance in digital net revenue in the quarter.

                                                          Quarter   Quarter

                                                         Ended    Ended
                                                           9/30/12   9/30/11
(in millions of $ except per share amounts)
                                                                     
Digital Net Revenue                                        $324      $234
Publishing Packaged Goods and Other Net Revenue            365       450
Distribution Packaged Goods Net Revenue                    22       31
GAAP Total Net Revenue                                     $711     $715
                                                                     
Non-GAAP Digital Net Revenue                               $314      $216
Non-GAAP Publishing Packaged Goods and Other Net Revenue   744       787
Non-GAAP Distribution Packaged Goods Net Revenue           22       31
Non-GAAP Total Net Revenue                                 $1,080   $1,034
                                                                     
GAAP Net Loss                                              $(381)    $(340)
Non-GAAP Net Income                                        49        17
GAAP Loss Per Share                                        (1.21)    (1.03)
Non-GAAP Earnings Per Share                                0.15      0.05
                                                                     
Cash Used in Operations                                    $(28)     $(211)
                                                                     

Trailing Twelve Month (TTM) Financial Highlights:

                                             TTM       TTM
                                                     
(in millions of $ except per share amounts)   Ended     Ended
                                              9/30/12   9/30/11
                                                        
GAAP Net Revenue                              $4,095    $3,857
GAAP Net Income (Loss)                        15        (290)
GAAP Diluted Earnings (Loss) Per Share        0.00      (0.89)
                                                        
Non-GAAP Net Revenue                          $4,199    $3,963
Non-GAAP Net Income                           309       173
Non-GAAP Diluted Earnings Per Share           0.90      0.52
                                                        
Cash Flow from Operations                     $490      $117
                                                        

Q2 FY13 Digital Metrics:

                                             Quarter   Quarter
(in millions)                                       
                                             Ended     Ended
                                             9/30/12   9/30/11
                                                       
GAAP Mobile Net Revenue                      $75       $55

Non-GAAP Mobile Net Revenue                  $88       $55
Monthly Active Users (MAU) in Social Games   42        101
Core Registered Users                        250       140
                                                       

Business Outlook as of October 30, 2012

The following forward-looking statements, as well as those made above, reflect
expectations as of October 30, 2012. Electronic Arts assumes no obligation to
update these statements. Results may be materially different and are affected
by many factors, including: product development delays; competition in the
industry; the health of the economy in the U.S. and abroad and the related
impact on discretionary consumer spending; changes in anticipated costs; the
financial impact of acquisitions by EA; the popular appeal of EA’s products;
EA’s effective tax rate; and other factors detailed in this release and in
EA’s annual and quarterly SEC filings.

Fiscal Year 2013 Expectations – Ending March 31, 2013

  *GAAP net revenue is expected to be approximately $3.85 to $4.00 billion.

  *Non-GAAP net revenue is expected to be approximately $4.05 to $4.20
    billion.

  *GAAP loss per share is expected to be approximately ($0.27) to ($0.06).

  *Non-GAAP diluted earnings per share is expected to be approximately $1.00
    to $1.15.

  *For purposes of calculating fiscal year 2013 diluted earnings per share,
    the Company estimates a share count of 317 million, and 315 million shares
    for calculating loss per share.
  *Expected non-GAAP net income excludes the following from expected GAAP net
    income (loss):

       *Non-GAAP net revenue is expected to be approximately $200 million
         higher than GAAP net revenue due to the impact of the change in
         deferred net revenue (packaged goods and digital content);
       *Approximately $165 million of estimated stock-based compensation;
       *Approximately $60 million of acquisition-related expenses;
       *Approximately $30 million of restructuring charges;
       *Approximately $20 million from the amortization of debt discount; and
       *Non-GAAP tax expense is expected to be approximately $73 million to
         $92 million higher than GAAP tax expense.

Third Quarter Fiscal Year 2013 Expectations – Ending December 31, 2012

  *GAAP net revenue is expected to be approximately $0.90 to $1.00 billion.
  *Non-GAAP net revenue is expected to be approximately $1.25 to $1.35
    billion.
  *GAAP loss per share is expected to be approximately ($0.71) to ($0.57).
  *Non-GAAP diluted earnings per share is expected to be approximately $0.50
    to $0.60.
  *For purposes of calculating third quarter fiscal year 2013 diluted
    earnings per share, the Company estimates a share count of 315 million,
    and 312 million for calculating loss per share.
  *Expected non-GAAP net income excludes the following from expected GAAP net
    income (loss):

       *Non-GAAP net revenue is expected to be approximately $350 million
         higher than GAAP net revenue due to the impact of the change in
         deferred net revenue (packaged goods and digital content);
       *Approximately $45 million of estimated stock-based compensation;
       *Approximately $20 million of acquisition-related expenses;
       *Approximately $5 million of restructuring charges;
       *Approximately $5 million from the amortization of debt discount; and
       *Non-GAAP tax expense is expected to be $46 million to $58 million
         higher than GAAP tax expense.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on October 30, 2012 at 2:00 pm PT
(5:00 pm ET) to review its results for the first quarter ended September 30,
2012 and its outlook for the future. During the course of the call, Electronic
Arts may disclose material developments affecting its business and/or
financial performance. Listeners may access the conference call live through
the following dial-in number: 773-799-3213 (domestic) or 888-677-1083
(international), using the password “EA” or via webcast at http://ir.ea.com.

EA will also post a slide presentation that accompanies the call at
http://ir.ea.com.

A dial-in replay of the conference call will be provided until November 14,
2012 at the following number: 203-369-0099 (domestic) or 866-356-3373
(international). A webcast replay of the conference call will be available for
one year at http://ir.ea.com.

Non-GAAP Financial Measures

To supplement the Company’s unaudited condensed consolidated financial
statements presented in accordance with GAAP, Electronic Arts uses certain
non-GAAP measures of financial performance. The presentation of these non-GAAP
financial measures is not intended to be considered in isolation from, as a
substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP, and may be different from non-GAAP
financial measures used by other companies. In addition, these non-GAAP
measures have limitations in that they do not reflect all of the amounts
associated with the Company’s results of operations as determined in
accordance with GAAP. The non-GAAP financial measures used by Electronic Arts
include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating
income (loss), non-GAAP net income (loss) and historical and estimated
non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures
exclude the following items, as applicable in a given reporting period, from
the Company’s unaudited condensed consolidated statements of operations:

  *Acquisition-related expenses
  *Amortization of debt discount
  *Certain non-recurring litigation expenses
  *Change in deferred net revenue (packaged goods and digital content)
  *Loss (gain) on strategic investments
  *Restructuring charges
  *Stock-based compensation
  *Income tax adjustments

Electronic Arts may consider whether other significant non-recurring items
that arise in the future should also be excluded in calculating the non-GAAP
financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken
together with the corresponding GAAP financial measures, provide meaningful
supplemental information regarding the Company’s performance by excluding
certain items that may not be indicative of the Company’s core business,
operating results or future outlook. Electronic Arts’ management uses, and
believes that investors benefit from referring to, these non-GAAP financial
measures in assessing the Company’s operating results both as a consolidated
entity and at the business unit level, as well as when planning, forecasting
and analyzing future periods. These non-GAAP financial measures also
facilitate comparisons of the Company’s performance to prior periods.

In addition to the reasons stated above, which are generally applicable to
each of the items Electronic Arts excludes from its non-GAAP financial
measures, the Company believes it is appropriate to exclude certain items for
the following reasons:

Acquisition-Related Expenses. GAAP requires expenses to be recognized for
various types of events associated with a business acquisition. These events
include, expensing acquired intangible assets, including acquired in-process
technology, post-closing adjustments associated with changes in the estimated
amount of contingent consideration to be paid in an acquisition, and the
impairment of accounting goodwill created as a result of an acquisition when
future events indicated there has been a decline in its value. When analyzing
the operating performance of an acquired entity, Electronic Arts’ management
focuses on the total return provided by the investment (i.e., operating profit
generated from the acquired entity as compared to the purchase price paid
including the final amounts paid for contingent consideration) without taking
into consideration any allocations made for accounting purposes. Because the
final purchase price paid for an acquisition necessarily reflects the
accounting value assigned to both contingent consideration and to the
intangible assets (including goodwill), when analyzing the operating
performance of an acquisition in subsequent periods, the Company’s management
excludes the GAAP impact of any adjustments to the fair value of these
acquisition-related balances to its financial results.

Amortization of Debt Discount on the Convertible Senior Notes. Under GAAP,
certain convertible debt instruments that may be settled in cash on conversion
are required to be separately accounted for as liability (debt) and equity
(conversion option) components of the instrument in a manner that reflects the
issuer’s non-convertible debt borrowing rate. Accordingly, for GAAP purposes,
we are required to amortize as a debt discount an amount equal to the fair
value of the conversion option as interest expense on the Company’s $632.5
million of 0.75% convertible senior notes that were issued in a private
placement in July 2011 over the term of the notes. Electronic Arts’ management
will exclude the effect of this amortization when evaluating the Company’s
operating performance and the performance of its management team during this
period and will continue to do so, when it plans, forecasts and analyzes
future periods.

Certain non-recurring litigation expenses. During the fourth quarter of fiscal
2012, Electronic Arts recognized a $27 million expense related to a 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 (Packaged Goods and Digital Content).
Electronic Arts is not able to objectively determine the fair value of the
online service included in certain of its packaged goods and digital content.
As a result, the Company recognizes the revenue from the sale of these games
and content over the estimated online service period. In other transactions,
at the date we sell the software product we have an obligation to provide
incremental unspecified digital content in the future without an additional
fee. In these cases, we account for the sale of the software product as a
multiple element arrangement and recognize the revenue on a straight-line
basis over the estimated period of game play. Internally, Electronic Arts’
management excludes the impact of the change in deferred net revenue related
to packaged goods games and digital content in its non-GAAP financial measures
when evaluating the Company’s operating performance, when planning,
forecasting and analyzing future periods, and when assessing the performance
of its management team. The Company believes that excluding the impact of the
change in deferred net revenue from its operating results is important to (1)
facilitate comparisons to prior periods during which the Company was able to
objectively determine the fair value of the online service and not delay the
recognition of significant amounts of net revenue related to online-enabled
packaged goods and (2) understanding our operations because all related costs
are expensed as incurred instead of deferred and recognized ratably.

Loss (gain) on Strategic Investments. From time to time, the Company makes
strategic investments. Electronic Arts’ management excludes the impact of any
losses and gains on such investments when evaluating the Company’s operating
performance, when planning, forecasting and analyzing future periods, and when
assessing the performance of its management team. In addition, the Company
believes that excluding the impact of such losses and gains on these
investments from its operating results is important to facilitate comparisons
to prior periods.

Restructuring Charges. Although Electronic Arts has engaged in various
restructuring activities in the past, each has been a discrete, extraordinary
event based on a unique set of business objectives. Each of these
restructurings has been unlike its predecessors in terms of its operational
implementation, business impact and scope. As such, the Company believes it is
appropriate to exclude restructuring charges from its non-GAAP financial
measures.

Stock-Based Compensation. When evaluating the performance of its individual
business units, the Company does not consider stock-based compensation
charges. Likewise, the Company’s management teams exclude stock-based
compensation expense from their short and long-term operating plans. In
contrast, the Company’s management teams are held accountable for cash-based
compensation and such amounts are included in their operating plans. Further,
when considering the impact of equity award grants, Electronic Arts places a
greater emphasis on overall shareholder dilution rather than the accounting
charges associated with such grants.

Income Tax Adjustments. The Company uses a fixed, long-term projected tax rate
of 28 percent internally to evaluate its operating performance, to forecast,
plan and analyze future periods, and to assess the performance of its
management team. Accordingly, the Company has applied the same 28 percent tax
rate to its non-GAAP financial results.

In the financial tables below, Electronic Arts has provided a reconciliation
of the most comparable GAAP financial measure to the historical non-GAAP
financial measures used in this press release.

Forward-Looking Statements

Some statements set forth in this release, including the information relating
to EA’s fiscal 2013 guidance information under the heading “Business Outlook”,
contain forward-looking statements that are subject to change. Statements
including words such as "anticipate", "believe", “estimate” or "expect" and
statements in the future tense are forward-looking statements. These
forward-looking statements are preliminary estimates and expectations based on
current information and are subject to business and economic risks and
uncertainties that could cause actual events or actual future results to
differ materially from the expectations set forth in the forward-looking
statements.

Some of the factors which could cause the Company’s results to differ
materially from its expectations include the following: sales of the Company’s
titles; the Company’s ability to manage expenses; the competition in the
interactive entertainment industry; the effectiveness of the Company’s sales
and marketing programs; timely development and release of Electronic Arts’
products; the Company’s ability to realize the anticipated benefits of
acquisitions, including the PopCap acquisition; the consumer demand for, and
the availability of an adequate supply of console hardware units; the
Company’s ability to predict consumer preferences among competing platforms;
the Company’s ability to service and support digital product offerings,
including managing online security; general economic conditions; and other
factors described in the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2012.

These forward-looking statements are current as of October 30, 2012.
Electronic Arts assumes no obligation and does not intend to update these
forward-looking statements. In addition, the preliminary financial results set
forth in this release are estimates based on information currently available
to Electronic Arts.

While Electronic Arts believes these estimates are meaningful, they could
differ from the actual amounts that Electronic Arts ultimately reports in its
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012.
Electronic Arts assumes no obligation and does not intend to update these
estimates prior to filing its Form 10-Q for the fiscal quarter ended September
30, 2012.

About Electronic Arts

Electronic Arts (NASDAQ:EA) is a global leader in digital interactive
entertainment. The Company’s game franchises are offered as both packaged
goods products and online services delivered through Internet-connected
consoles, personal computers, mobile phones and tablets. EA has more than 230
million registered players and operates in 75 countries. In fiscal year 2012,
EA posted GAAP net revenue of $4.1 billion. Headquartered in Redwood City,
California, EA is recognized for critically acclaimed, high-quality
blockbuster franchises such as The Sims™, Madden NFL, FIFA Soccer, Need for
Speed™, Battlefield™, and Mass Effect™. More information about EA is available
at http://info.ea.com.

EA, EA SPORTS, Origin, Medal of Honor, The Sims and Need for Speed are
trademarks of Electronic Arts Inc. Mass Effect is a trademark of EA
International (Studio and Publishing) Ltd. Battlefield 3 and Battlefield are
trademarks of EA Digital Illusions CE AB. The Simpsons TM & © 2012 Twentieth
Century Fox Film Corporation. All Rights Reserved. All rights reserved. John
Madden, NFL and FIFA are the property of their respective owners and used with
permission. All other trademarks are the property of their respective owners.

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
                                                             
                           Three Months Ended          Six Months Ended
                           September 30,               September 30,
                           2012          2011          2012          2011
                                                                     
Net revenue
Product                    $ 481         $ 592         $ 1,183       $ 1,486
Service and other           230         123         483         228   
Total net revenue            711           715           1,666         1,714
Cost of revenue
Product                      371           399           503           611
Service and other           74          33          147         61    
Total cost of revenue       445         432         650         672   
Gross profit                 266           283           1,016         1,042
                                                                     
Operating expenses:
Marketing and sales          212           222           357           362
General and                  99            88            185           162
administrative
Research and development     314           318           604           603
Acquisition-related          -             17            (20   )       19
contingent consideration
Amortization of              7             13            14            26
intangibles
Restructuring and other     (2    )      (1    )      25          17    
Total operating expenses    630         657         1,165       1,189 
                                                                     
Operating loss               (364  )       (374  )       (149  )       (147  )
                                                                     
Interest and other          (4    )      (6    )      (9    )      (3    )
expense, net
                                                                     
Loss before provision
for (benefit from)           (368  )       (380  )       (158  )       (150  )
income taxes
                                                                     
Provision for (benefit      13          (40   )      22          (31   )
from) income taxes
                                                                     
Net loss                   $ (381  )     $ (340  )     $ (180  )     $ (119  )
                                                                     
Loss per share
Basic and Diluted          $ (1.21 )     $ (1.03 )     $ (0.57 )     $ (0.36 )
                                                                     
Number of shares used in
computation
Basic and Diluted            316           331           317           331
                                                                     

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      Six Months Ended
                              September 30,           September 30,
                              2012       2011        2012        2011
                                                                     
Net loss                      $ (381 )     $ (340 )    $ (180  )     $ (119  )
                                                                     
Acquisition-related             21           38          23            56
expenses
Amortization of debt            5            4           10            4
discount
Change in deferred net
revenue (packaged goods and     369          319         (95   )       (156  )
digital content)
Restructuring and other         (2   )       (1   )      25            17
Stock-based compensation        44           43          83            81
Income tax adjustments         (7   )      (46  )     53          11    
                                                                     
Non-GAAP net income (loss)    $ 49        $ 17       $ (81   )     $ (106  )
                                                                     
Non-GAAP earnings (loss)
per share
Basic                         $ 0.16       $ 0.05      $ (0.26 )     $ (0.32 )
Diluted                       $ 0.15       $ 0.05      $ (0.26 )     $ (0.32 )
                                                                     
Number of shares used in
Non-GAAP computation
Basic                           316          331         317           331
Diluted                         318          337         317           331
                                                                     

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
                                                                 
                                                   September 30,     March 31,
                                                   2012              2012 ^(a)
                                                                     
ASSETS
                                                                     
Current assets:
Cash and cash equivalents                          $   871           $ 1,293
Short-term investments                                 351             437
Marketable equity securities                           93              119
Receivables, net of allowances of $182 and $252,       643             366
respectively
Inventories                                            71              59
Deferred income taxes, net                             64              67
Other current assets                                  239           268   
Total current assets                                   2,332           2,609
                                                                     
Property and equipment, net                            561             568
Goodwill                                               1,723           1,718
Acquisition-related intangibles, net                   334             369
Deferred income taxes, net                             49              42
Other assets                                          192           185   
                                                                     
TOTAL ASSETS                                       $   5,191        $ 5,491 
                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                     
Current liabilities:
Accounts payable                                   $   219           $ 215
Accrued and other current liabilities                  874             857
Deferred net revenue (packaged goods and digital      953           1,048 
content)
Total current liabilities                              2,046           2,120
                                                                     
0.75% convertible senior notes due 2016, net           549             539
Income tax obligations                                 209             189
Deferred income taxes, net                             2               8
Other liabilities                                     231           177   
Total liabilities                                      3,037           3,033
                                                                     
Common stock                                           3               3
Paid-in capital                                        2,259           2,359
Accumulated deficit                                    (257   )        (77   )
Accumulated other comprehensive income                149           173   
Total stockholders' equity                            2,154         2,458 
                                                                     
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $   5,191        $ 5,491 
                                                                     
^(a) Derived from audited consolidated financial statements.


ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
                                                   
                            Three Months Ended         Six Months Ended
                            September 30,              September 30,
                            2012       2011          2012        2011
                                                                     
OPERATING ACTIVITIES
                                                                     
Net loss                    $ (381 )     $ (340  )     $ (180  )     $ (119  )
Adjustments to reconcile
net loss to net cash used
in operating activities:
Acquisition-related           -            17            (20   )       19
contingent consideration
Depreciation,
amortization and              56           51            112           94
accretion, net
Net gains on investments
and sale of property and      -            (12   )       -             (12   )
equipment
Non-cash restructuring        -            -             7             -
charges
Stock-based compensation      44           43            83            81
Change in assets and
liabilities:
Receivables, net              (528 )       (522  )       (274  )       (215  )
Inventories                   (11  )       (15   )       (13   )       (11   )
Other assets                  29           38            -             (63   )
Accounts payable              166          76            9             (57   )
Accrued and other             228          183           109           2
liabilities
Deferred income taxes,        -            (49   )       (10   )       (48   )
net
Deferred net revenue
(packaged goods and          369        319         (95   )      (156  )
digital content)
Net cash used in             (28  )      (211  )      (272  )      (485  )
operating activities
                                                                     
INVESTING ACTIVITIES
                                                                     
Capital expenditures          (25  )       (52   )       (56   )       (84   )
Proceeds from sale of         -            26            -             26
property
Proceeds from maturities
and sales of short-term       152          236           280           319
investments
Purchase of short-term        (60  )       (89   )       (197  )       (179  )
investments
Acquisition-related           25           -             25            -
restricted cash
Acquisition of
subsidiaries, net of cash    (10  )      (632  )      (10   )      (657  )
acquired
Net cash provided by
(used in) investing          82         (511  )      42          (575  )
activities
                                                                     
FINANCING ACTIVITIES
                                                                     
Payment of debt issuance      (2   )       -             (2    )       -
costs
Proceeds from borrowings
on convertible senior         -            617           -             617
notes, net of issuance
costs
Proceeds from issuance of     -            65            -             65
warrants
Purchase of convertible       -            (107  )       -             (107  )
note hedge
Proceeds from issuance of     18           21            18            35
common stock
Excess tax benefit from       -            1             -             3
stock-based compensation
Repurchase and retirement     (108 )       (98   )       (179  )       (189  )
of common stock
Acquisition-related
contingent consideration     (25  )      -           (26   )      -     
payment
                                                                     
Net cash provided by
(used in) financing          (117 )      499         (189  )      424   
activities
                                                                     
Effect of foreign
exchange on cash and cash    15         (20   )      (3    )      (13   )
equivalents
Decrease in cash and cash     (48  )       (243  )       (422  )       (649  )
equivalents
Beginning cash and cash      919        1,173       1,293       1,579 
equivalents
Ending cash and cash        $ 871       $ 930        $ 871        $ 930   
equivalents
                                                                             

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                                                                    
                      Q2             Q3             Q4            Q1             Q2             YOY %
                      FY12           FY12           FY12          FY13           FY13           Change
                                                                                                
QUARTERLY
RECONCILIATION OF
RESULTS
                                                                                                
Net Revenue
GAAP net revenue      $ 715          $ 1,061        $ 1,368       $ 955          $ 711          (1  %)
Change in deferred
net revenue            319          590          (391  )      (464  )       369   
(packaged goods and
digital content)
Non-GAAP net          $ 1,034       $ 1,651       $ 977        $ 491         $ 1,080       4   %
revenue
                                                                                                
Gross Profit
GAAP gross profit     $ 283          $ 509          $ 994         $ 750          $ 266          (6  %)
Acquisition-related     8              14             27            15             14
expenses
Change in deferred
net revenue             319            590            (391  )       (464  )        369
(packaged goods and
digital content)
Stock-based            -            -            1           1            -     
compensation
Non-GAAP gross        $ 610         $ 1,113       $ 631        $ 302         $ 649         6   %
profit
GAAP gross profit %
(as a % of GAAP net     40    %        48    %        73    %       79    %        37    %
revenue)
Non-GAAP gross
profit % (as a % of     59    %        67    %        65    %       62    %        60    %
non-GAAP net
revenue)
                                                                                                
Operating Income
(Loss)
GAAP operating        $ (374  )      $ (183  )      $ 365         $ 215          $ (364  )      3   %
income (loss)
Acquisition-related     38             14             36            2              21
expenses
Certain
non-recurring           -              -              27            -              -
litigation expenses
Change in deferred
net revenue             319            590            (391  )       (464  )        369
(packaged goods and
digital content)
Restructuring and       (1    )        -              (1    )       27             (2    )
other
Stock-based            43           48           41          39           44    
compensation
Non-GAAP operating    $ 25          $ 469         $ 77         $ (181  )      $ 68          172 %
income (loss)
GAAP operating
income (loss) % (as     (52   %)       (17   %)       27    %       23    %        (51   %)
a % of GAAP net
revenue)
Non-GAAP operating
income (loss) % (as     2     %        28    %        8     %       (37   %)       6     %
a % of non-GAAP net
revenue)
                                                                                                
Net Income (Loss)
GAAP net income       $ (340  )      $ (205  )      $ 400         $ 201          $ (381  )      (12 %)
(loss)
Acquisition-related     38             14             36            2              21
expenses
Amortization of         4              5              5             5              5
debt discount
Certain
non-recurring           -              -              27            -              -
litigation expenses
Change in deferred
net revenue             319            590            (391  )       (464  )        369
(packaged goods and
digital content)
Restructuring and       (1    )        -              (1    )       27             (2    )
other
Stock-based             43             48             41            39             44
compensation
Income tax             (46   )       (118  )       (61   )      60           (7    )
adjustments
Non-GAAP net income   $ 17          $ 334         $ 56         $ (130  )      $ 49          188 %
(loss)
GAAP net income
(loss) % (as a % of     (48   %)       (19   %)       29    %       21    %        (54   %)
GAAP net revenue)
Non-GAAP net income
(loss) % (as a % of     2     %        20    %        6     %       (26   %)       5     %
non-GAAP net
revenue)
                                                                                                
Diluted Earnings
(Loss) Per Share
GAAP earnings         $ (1.03 )      $ (0.62 )      $ 1.20        $ 0.63         $ (1.21 )      (17 %)
(loss) per share
Non-GAAP earnings     $ 0.05         $ 0.99         $ 0.17        $ (0.41 )      $ 0.15         200 %
(loss) per share
                                                                                                
Number of diluted
shares used in
computation
GAAP                    331            332            332           320            316
Non-GAAP                337            338            332           317            318
                                                                                                
                                                                                                
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                                                                                
                      Q2             Q3             Q4            Q1             Q2             YOY %
                      FY12           FY12           FY12          FY13           FY13           Change
                                                                                                
QUARTERLY NET REVENUE
PRESENTATIONS - GAAP AND
NON-GAAP
                                                                                                
Geography Net
Revenue
North America           337            500            653           450            329          (2  %)
Europe                  328            505            627           435            332          1   %
Asia                   50           56           88          70           50          -
Total GAAP Net         715          1,061        1,368       955          711         (1  %)
Revenue
North America           144            310            (188  )       (265  )        179
Europe                  174            235            (187  )       (174  )        171
Asia                   1            45           (16   )      (25   )       19    
Change In Deferred
Net Revenue            319          590          (391  )      (464  )       369   
(Packaged Goods and
Digital Content)
North America           481            810            465           185            508          6   %
Europe                  502            740            440           261            503          -
Asia                   51           101          72          45           69          35  %
Total Non-GAAP Net     1,034        1,651        977         491          1,080       4   %
Revenue
                                                                                                
North America           47    %        47    %        48    %       47    %        46    %
Europe                  46    %        48    %        46    %       46    %        47    %
Asia                   7     %       5     %       6     %      7     %       7     %
Total GAAP Net         100   %       100   %       100   %      100   %       100   %
Revenue %
North America           46    %        49    %        48    %       38    %        47    %
Europe                  49    %        45    %        45    %       53    %        47    %
Asia                   5     %       6     %       7     %      9     %       6     %
Total Non-GAAP Net     100   %       100   %       100   %      100   %       100   %
Revenue %
                                                                                                
Net Revenue
Composition
Publishing and          450            738            926           592            365          (19 %)
Other
Wireless,
Internet-derived,       234            274            419           342            324          38  %
and Advertising
(Digital)
Distribution           31           49           23          21           22          (29 %)
Total GAAP Net         715          1,061        1,368       955          711         (1  %)
Revenue
Publishing and          337            487            (397  )       (446  )        379
Other
Wireless,
Internet-derived,      (18   )       103          6           (18   )       (10   )
and Advertising
(Digital)
Change In Deferred
Net Revenue            319          590          (391  )      (464  )       369   
(Packaged Goods and
Digital Content)
Publishing and          787            1,225          529           146            744          (5  %)
Other
Wireless,
Internet-derived,       216            377            425           324            314          45  %
and Advertising
(Digital)
Distribution           31           49           23          21           22          (29 %)
Total Non-GAAP Net     1,034        1,651        977         491          1,080       4   %
Revenue
                                                                                                
Publishing and          63    %        69    %        68    %       62    %        51    %
Other
Wireless,
Internet-derived,       33    %        26    %        30    %       36    %        46    %
and Advertising
(Digital)
Distribution           4     %       5     %       2     %      2     %       3     %
Total GAAP Net         100   %       100   %       100   %      100   %       100   %
Revenue %
Publishing and          76    %        74    %        54    %       30    %        69    %
Other
Wireless,
Internet-derived,       21    %        23    %        44    %       66    %        29    %
and Advertising
(Digital)
Distribution           3     %       3     %       2     %      4     %       2     %
Total Non-GAAP Net     100   %       100   %       100   %      100   %       100   %
Revenue %
                                                                                                
                                                                                                
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                                                                                
                      Q2             Q3             Q4            Q1             Q2             YOY %
                      FY12           FY12           FY12          FY13           FY13           Change
                                                                                                
QUARTERLY NET REVENUE
PRESENTATIONS - GAAP AND
NON-GAAP
                                                                                                
Platform Net
Revenue
Xbox 360                213            331            454           292            204          (4  %)
PLAYSTATION 3           169            314            432           267            150          (11 %)
Wii                     35             49             20            8              17           (51 %)
PlayStation 2          15           7            3           2            6           (60 %)
Total Consoles          432            701            909           569            377          (13 %)
Mobile                  55             70             87            69             75           36  %
PlayStation             17             14             6             10             14           (18 %)
Handhelds
Nintendo Handhelds     7            15           5           9            8           14  %
Total Mobile and        79             99             98            88             97           23  %
Handhelds
PC                      178            214            334           276            214          20  %
Other                  26           47           27          22           23          (12 %)
Total GAAP Net         715          1,061        1,368       955          711         (1  %)
Revenue
Xbox 360                140            174            (128  )       (186  )        144
PLAYSTATION 3           205            179            (210  )       (183  )        222
Wii                     (1    )        3              (7    )       (5    )        -
PlayStation 2           -              -              -             (1    )        1
Mobile                  -              13             (3    )       9              13
PlayStation             -              (2    )        10            (4    )        7
Handhelds
Nintendo Handhelds      -              9              (5    )       (4    )        (2    )
PC                     (25   )       214          (48   )      (90   )       (16   )
Change in Deferred
Net Revenue            319          590          (391  )      (464  )       369   
(Packaged Goods and
Digital Content)
Xbox 360                353            505            326           106            348          (1  %)
PLAYSTATION 3           374            493            222           84             372          (1  %)
Wii                     34             52             13            3              17           (50 %)
PlayStation 2          15           7            3           1            7           (53 %)
Total Consoles          776            1,057          564           194            744          (4  %)
Mobile                  55             83             84            78             88           60  %
PlayStation             17             12             16            6              21           24  %
Handhelds
Nintendo Handhelds     7            24           -           5            6           (14 %)
Total Mobile and        79             119            100           89             115          46  %
Handhelds
PC                      153            428            286           186            198          29  %
Other                  26           47           27          22           23          (12 %)
Total Non-GAAP Net     1,034        1,651        977         491          1,080       4   %
Revenue
                                                                                                
Xbox 360                30    %        31    %        33    %       31    %        29    %
PLAYSTATION 3           23    %        29    %        32    %       28    %        21    %
Wii                     5     %        5     %        1     %       1     %        2     %
PlayStation 2          2     %       1     %       -           -            1     %
Total Consoles          60    %        66    %        66    %       60    %        53    %
Mobile                  8     %        7     %        6     %       7     %        11    %
PlayStation             2     %        1     %        1     %       1     %        2     %
Handhelds
Nintendo Handhelds     1     %       1     %       -           1     %       1     %
Total Mobile and        11    %        9     %        7     %       9     %        14    %
Handhelds
PC                      25    %        20    %        25    %       29    %        30    %
Other                  4     %       5     %       2     %      2     %       3     %
Total GAAP Net         100   %       100   %       100   %      100   %       100   %
Revenue %
Xbox 360                34    %        31    %        34    %       22    %        32    %
PLAYSTATION 3           36    %        30    %        23    %       17    %        34    %
Wii                     4     %        3     %        1     %       1     %        2     %
PlayStation 2          1     %       -            -           -            1     %
Total Consoles          75    %        64    %        58    %       40    %        69    %
Mobile                  5     %        5     %        8     %       16    %        8     %
PlayStation             2     %        1     %        2     %       1     %        2     %
Handhelds
Nintendo Handhelds     1     %       1     %       -           1     %       1     %
Total Mobile and        8     %        7     %        10    %       18    %        11    %
Handhelds
PC                      15    %        26    %        29    %       38    %        18    %
Other                  2     %       3     %       3     %      4     %       2     %
Total Non-GAAP Net     100   %       100   %       100   %      100   %       100   %
Revenue %
                                                                                                
                                                                                                
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                                                                                
                      Q2             Q3             Q4            Q1             Q2             YOY %
                      FY12           FY12           FY12          FY13           FY13           Change
                                                                                                
CASH FLOW DATA
                                                                                                
Operating cash flow     (211  )        475            287           (244  )        (28   )      87  %
Operating cash flow     117            243            277           307            490          319 %
- TTM
Capital                 52             44             44            31             25           (52 %)
expenditures
Capital                 120            149            172           171            144          20  %
expenditures - TTM
                                                                                                
BALANCE SHEET DATA
                                                                                                
Cash and cash           930            1,242          1,293         919            871          (6  %)
equivalents
Short-term              355            406            437           444            351          (1  %)
investments
Marketable equity       214            143            119           76             93           (56 %)
securities
Receivables, net        562            526            366           111            643          14  %
Inventories             90             69             59            60             71           (21 %)
Deferred net
revenue (packaged
goods and digital
content)
End of the quarter      849            1,439          1,048         584            953
Less: Beginning of     530          849          1,439       1,048        584   
the quarter
Change in deferred
net revenue            319          590          (391  )      (464  )       369   
(packaged goods and
digital content)
                                                                                                
STOCK-BASED
COMPENSATION
                                                                                                
Cost of goods sold      -              -              1             1              -
Marketing and sales     6              7              8             7              8
General and             9              11             7             9              9
administrative
Research and           28           30           25          22           27    
development
Total Stock-Based      43           48           41          39           44    
Compensation
                                                                                                
EMPLOYEES               8,687          9,043          9,158         9,225          9,224        6   %

Contact:

Electronic Arts Inc.
Rob Sison, 650-628-7787
Vice President, Investor Relations
rsison@ea.com
Jeff Brown, 650-628-7922
Senior Vice President, Corporate Communications
jbrown@ea.com
 
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