Electronic Arts Reports Q3 FY13 Financial Results
Electronic Arts Reports Q3 FY13 Financial Results
Q3 Non-GAAP EPS In Line with Guidance and Consensus
Trailing Twelve-Month Non-GAAP Digital Net Revenue Up 37% to $1.5 Billion
FIFA 13 Sold Over 12 Million Units Through Q3 FY2013
Battlefield 3 Premium Has 2.9 Million Subscribers To Date
Business Wire
REDWOOD CITY, Calif. -- January 30, 2013
Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial
results for its third fiscal quarter ended December 31, 2012.
“Despite a challenging quarter, we were able to deliver non-GAAP EPS at the
high end of our guidance range,” said Chief Executive Officer John
Riccitiello. “We are investing for the future wave of growth that we foresee
in digital and console.”
“We delivered on non-GAAP EPS by driving high-margin digital revenue and
through disciplined expense management,” said Chief Financial Officer Blake
Jorgensen.
“EA had six of the top twenty titles in Western markets in 2012, compared to
four in 2011,” said Chief Operating Officer Peter Moore. “EA was also the #1
publisher on iOS worldwide for the year.”
Selected Operating Highlights and Metrics:
*On a non-GAAP basis
* FIFA 13 sold through over 12 million units through the third quarter, a
23% increase versus FIFA 12 in the prior year.
* FIFA 13 digital net revenue topped $100 million* in the quarter, a 98%
increase versus FIFA 12 in the prior year.
* Total FIFA digital net revenue generated over $230 million* in the first
three quarters of fiscal 13, including EA SPORTS FIFA Online 2 and FIFA
World Class Soccer that together contributed over $60 million*.
* Battlefield 3™ Premium generated over $108 million in sales through the
third quarter, and has 2.9 million subscriptions to date.
* EA had six of the top twenty titles in Western World retail markets in
2012, compared to four in 2011, and was the #1 global publisher in the iOS
game market for 2012.
* The Simpsons™: Tapped Out was a top grossing iOS game for the quarter,
generating over $23 million* in digital net revenue.
* EA’s games and services for mobile, including handhelds, have generated
approximately $100 million* in the quarter, an 18%* year-over-year
increase in digital net revenue.
* EA’s Origin™ platform for downloading digital games and services has
registered over 39 million users, including 17 million mobile users. EA
has signed agreements with 86 independent developers for Origin.
* Trailing twelve-month non-GAAP digital net revenue was up 37% to a record
$1.5 billion*.
* Trailing twelve-month operating cash flow was $378 million, a $135 million
improvement versus the prior year.
* EA repurchased 12.2 million shares at a cost of $157 million in the third
fiscal quarter, pursuant to a $500 million Share Repurchase Program
announced on July 31, 2012, bringing the total shares repurchased under
the current program to 20.6 million shares at a total cost of $265
million.
* Dead Space™ 3 pre-sells are outpacing Dead Space 2, and Crysis® 3
pre-orders are tracking 40% ahead of Crysis 2.
Q3 Financial Highlights:
For the quarter, non-GAAP net revenue of $1,182 million was below our guidance
of $1,250 million to $1,350 million. Non-GAAP diluted earnings per share of
$0.57 was above the midpoint of our guidance of $0.50 to $0.60.
Quarter Quarter
Ended Ended
12/31/12 12/31/11
(in millions of $, except per share amounts)
Digital Net Revenue $ 321 $ 274
Publishing Packaged Goods and Other Net Revenue 568 738
Distribution Packaged Goods Net Revenue 33 49
GAAP Total Net Revenue $ 922 $ 1,061
Non-GAAP Digital Net Revenue $ 407 $ 377
Non-GAAP Publishing Packaged Goods and Other Net 742 1,225
Revenue
Non-GAAP Distribution Packaged Goods Net Revenue 33 49
Non-GAAP Total Net Revenue $ 1,182 $ 1,651
GAAP Net Loss $ (45 ) $ (205 )
Non-GAAP Net Income 176 334
GAAP Diluted Loss Per Share (0.15 ) (0.62 )
Non-GAAP Diluted Earnings Per Share 0.57 0.99
Cash Provided by Operations $ 363 $ 475
Trailing Twelve Month (TTM) Financial Highlights:
TTM TTM
(in millions of $) Ended Ended
12/31/12 12/31/11
GAAP Net Revenue $ 3,956 $ 3,865
GAAP Net Income (Loss) 175 (173 )
Non-GAAP Net Revenue $ 3,730 $ 4,204
Non-GAAP Net Income 151 311
Cash Provided by Operations $ 378 $ 243
Q3 FY13 Digital Metrics:
Quarter Quarter
(in millions) Ended Ended
12/31/12 12/31/11
GAAP Mobile Net Revenue $ 86 $ 70
Non-GAAP Mobile Net Revenue $ 99 $ 83
Business Outlook as of January 30, 2013
The following forward-looking statements, as well as those made above, reflect
expectations as of January 30, 2013. 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.
Fourth Quarter Fiscal Year 2013 Expectations – Ending March 31, 2013
* GAAP net revenue is expected to be approximately $1.115 to $1.215 billion.
* Non-GAAP net revenue is expected to be approximately $1.025 to $1.125
billion.
* GAAP diluted earnings per share is expected to be approximately $0.92 to
$1.12.
* Non-GAAP diluted earnings per share is expected to be approximately $0.57
to $0.72.
* For purposes of calculating fourth quarter fiscal year 2013 diluted
earnings per share, the Company estimates a share count of 305 million.
* Expected non-GAAP net income excludes the following from expected GAAP net
income (loss):
* Non-GAAP net revenue is expected to be approximately $90 million
lower than GAAP net revenue due to the impact of the change in
deferred net revenue (packaged goods and digital content);
* Approximately $40 million of estimated stock-based compensation;
* Approximately $25 million of gain on strategic investments;
* 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 $62 million to $79 million
higher than GAAP tax expense.
Fiscal Year 2013 Expectations – Ending March 31, 2013
* GAAP net revenue is expected to be approximately $3.703 to $3.803 billion.
* Non-GAAP net revenue is expected to be approximately $3.778 to $3.878
billion.
* GAAP diluted earnings per share is expected to be approximately $0.18 to
$0.38.
* Non-GAAP diluted earnings per share is expected to be approximately $0.86
to $1.00.
* For purposes of calculating fiscal year 2013 diluted earnings per share,
the Company estimates a share count of 313 million.
* Expected non-GAAP net income excludes the following from expected GAAP net
income (loss):
* Non-GAAP net revenue is expected to be approximately $75 million
higher than GAAP net revenue due to the impact of the change in
deferred net revenue (packaged goods and digital content);
* Approximately $162 million of estimated stock-based compensation;
* Approximately $39 million of gain on strategic investments;
* Approximately $28 million of acquisition-related expenses;
* Approximately $32 million of restructuring charges;
* Approximately $20 million from the amortization of debt discount; and
* Non-GAAP tax expense is expected to be approximately $65 million to
$82 million higher than GAAP tax expense.
Conference Call and Supporting Documents
Electronic Arts will host a conference call on January 30, 2013 at 2:00 pm PT
(5:00 pm ET) to review its results for the third quarter ended December 31,
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 February 14,
2013 at the following number: 203-369-0099 (domestic) or 866-356-3373
(international). A webcast replay of the conference call will be available for
one year at http://ir.ea.com.
Non-GAAP Financial Measures
To supplement the Company’s unaudited condensed consolidated financial
statements presented in accordance with GAAP, Electronic Arts uses certain
non-GAAP measures of financial performance. The presentation of these non-GAAP
financial measures is not intended to be considered in isolation from, as a
substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP, and may be different from non-GAAP
financial measures used by other companies. In addition, these non-GAAP
measures have limitations in that they do not reflect all of the amounts
associated with the Company’s results of operations as determined in
accordance with GAAP. The non-GAAP financial measures used by Electronic Arts
include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating
income (loss), non-GAAP net income (loss) and historical and estimated
non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures
exclude the following items, as applicable in a given reporting period, from
the Company’s unaudited condensed consolidated statements of operations:
* Acquisition-related expenses
* Amortization of debt discount
* Certain non-recurring litigation expenses
* Change in deferred net revenue (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 and the
right to receive either an online service or incremental unspecified digital
content in the future as a multiple element arrangement and recognize the
revenue on a straight-line basis over the period we expect the consumer to
play the game. 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 September 30, 2012.
These forward-looking statements are current as of January 30, 2013.
Electronic Arts assumes no obligation and does not intend to update these
forward-looking statements. In addition, the preliminary financial results set
forth in this release are estimates based on information currently available
to Electronic Arts.
While Electronic Arts believes these estimates are meaningful, they could
differ from the actual amounts that Electronic Arts ultimately reports in its
Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 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 December
31, 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 250
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 SPORTS, Origin, Dead Space, 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. Crysis is a trademark of GmbH. The Simpsons TM & ©
2012 Twentieth Century Fox Film Corporation. 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 Nine Months Ended
December 31, December 31,
2012 2011 2012 2011
Net revenue
Product $ 703 $ 884 $ 1,886 $ 2,370
Service and other 219 177 702 405
Total net revenue 922 1,061 2,588 2,775
Cost of revenue
Product 363 477 866 1,088
Service and other 66 75 213 136
Total cost of revenue 429 552 1,079 1,224
Gross profit 493 509 1,509 1,551
Operating expenses:
Marketing and sales 214 269 571 631
General and administrative 68 98 253 260
Research and development 286 325 890 928
Acquisition-related contingent (45 ) (11 ) (65 ) 8
consideration
Amortization of intangibles 7 11 21 37
Restructuring and other 2 — 27 17
Total operating expenses 532 692 1,697 1,881
Operating loss (39 ) (183 ) (188 ) (330 )
Gain on strategic investments 14 — 14 —
Interest and other income (8 ) (10 ) (17 ) (13 )
(expense), net
Loss before provision for (33 ) (193 ) (191 ) (343 )
(benefit from) income taxes
Provision for (benefit from) 12 12 34 (19 )
income taxes
Net loss $ (45 ) $ (205 ) $ (225 ) $ (324 )
Loss per share
Basic and Diluted $ (0.15 ) $ (0.62 ) $ (0.72 ) $ (0.98 )
Number of shares used in
computation
Basic and Diluted 304 332 313 331
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 and non-GAAP earnings per share.
Three Months Ended Nine Months Ended
December 31, December 31,
2012 2011 2012 2011
Net loss $ (45 ) $ (205 ) $ (225 ) $ (324 )
Acquisition-related expenses (15 ) 14 8 70
Amortization of debt discount 5 5 15 9
Change in deferred net revenue
(packaged goods and digital 260 590 165 434
content)
Gain on strategic investments (14 ) — (14 ) —
Restructuring and other 2 — 27 17
Stock-based compensation 39 48 122 129
Income tax adjustments (56 ) (118 ) (3 ) (107 )
Non-GAAP net income $ 176 $ 334 $ 95 $ 228
Non-GAAP earnings per share
Basic $ 0.58 $ 1.01 $ 0.30 $ 0.69
Diluted $ 0.57 $ 0.99 $ 0.30 $ 0.67
Number of shares used in Non-GAAP
computation
Basic 304 332 313 331
Diluted 308 338 315 338
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
December 31, March 31,
2012 2012 (a)
ASSETS
Current assets:
Cash and cash equivalents $ 1,158 $ 1,293
Short-term investments 275 437
Marketable equity securities 59 119
Receivables, net of allowances of $284 and $252, 382 366
respectively
Inventories 59 59
Deferred income taxes, net 67 67
Other current assets 229 268
Total current assets 2,229 2,609
Property and equipment, net 550 568
Goodwill 1,724 1,718
Acquisition-related intangibles, net 304 369
Deferred income taxes, net 47 42
Other assets 185 185
TOTAL ASSETS $ 5,039 $ 5,491
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 93 $ 215
Accrued and other current liabilities 840 857
Deferred net revenue (packaged goods and digital 1,213 1,048
content)
Total current liabilities 2,146 2,120
0.75% convertible senior notes due 2016, net 554 539
Income tax obligations 211 189
Deferred income taxes, net 2 8
Other liabilities 168 177
Total liabilities 3,081 3,033
Common stock 3 3
Paid-in capital 2,138 2,359
Accumulated deficit (302 ) (77 )
Accumulated other comprehensive income 119 173
Total stockholders’ equity 1,958 2,458
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 5,039 $ 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 Nine Months Ended
December 31, December 31,
2012 2011 2012 2011
OPERATING ACTIVITIES
Net loss $ (45 ) $ (205 ) $ (225 ) $ (324 )
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Acquisition-related contingent (45 ) (11 ) (65 ) 8
consideration
Depreciation, amortization and 66 54 178 148
accretion, net
Net gains on investments and (12 ) — (12 ) (12 )
sale of property and equipment
Non-cash restructuring charges — (3 ) 7 (3 )
Stock-based compensation 39 48 122 129
Change in assets and
liabilities:
Receivables, net 256 39 (18 ) (176 )
Inventories 13 22 — 11
Other assets 14 (18 ) 14 (81 )
Accounts payable (124 ) (93 ) (115 ) (150 )
Accrued and other liabilities (56 ) 48 53 50
Deferred income taxes, net (3 ) 4 (13 ) (44 )
Deferred net revenue (packaged 260 590 165 434
goods and digital content)
Net cash provided by (used in) 363 475 91 (10 )
operating activities
INVESTING ACTIVITIES
Capital expenditures (25 ) (44 ) (81 ) (128 )
Proceeds from sale of property — — — 26
and equipment
Proceeds from sale of 25 — 25 —
marketable equity securities
Proceeds from maturities and
sales of short-term 124 144 404 463
investments
Purchase of short-term (47 ) (195 ) (244 ) (374 )
investments
Acquisition-related restricted — — 25 —
cash
Acquisition of subsidiaries, — (19 ) (10 ) (676 )
net of cash acquired
Net cash provided by (used in) 77 (114 ) 119 (689 )
investing activities
FINANCING ACTIVITIES
Payment of debt issuance costs — — (2 ) —
Proceeds from borrowings on
convertible senior notes, net — — — 617
of issuance costs
Proceeds from issuance of — — — 65
warrants
Purchase of convertible note — — — (107 )
hedge
Proceeds from issuance of 1 4 19 39
common stock
Excess tax benefit from — 1 — 4
stock-based compensation
Repurchase and retirement of (157 ) (41 ) (336 ) (230 )
common stock
Acquisition-related contingent (2 ) — (28 ) —
consideration payment
Net cash provided by (used in) (158 ) (36 ) (347 ) 388
financing activities
Effect of foreign exchange on 5 (13 ) 2 (26 )
cash and cash equivalents
Increase (decrease) in cash 287 312 (135 ) (337 )
and cash equivalents
Beginning cash and cash 871 930 1,293 1,579
equivalents
Ending cash and cash $ 1,158 $ 1,242 $ 1,158 $ 1,242
equivalents
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data and headcount)
Q3 Q4 Q1 Q2 Q3 YOY %
FY12 FY12 FY13 FY13 FY13 Change
QUARTERLY
RECONCILIATION OF
RESULTS
Net Revenue
GAAP net revenue $ 1,061 $ 1,368 $ 955 $ 711 $ 922 (13 %)
Change in deferred
net revenue 590 (391 ) (464 ) 369 260
(packaged goods and
digital content)
Non-GAAP net $ 1,651 $ 977 $ 491 $ 1,080 $ 1,182 (28 %)
revenue
Gross Profit
GAAP gross profit $ 509 $ 994 $ 750 $ 266 $ 493 (3 %)
Acquisition-related 14 27 15 14 23
expenses
Change in deferred
net revenue 590 (391 ) (464 ) 369 260
(packaged goods and
digital content)
Stock-based — 1 1 — —
compensation
Non-GAAP gross $ 1,113 $ 631 $ 302 $ 649 $ 776 (30 %)
profit
GAAP gross profit %
(as a % of GAAP net 48% 73% 79% 37% 53%
revenue)
Non-GAAP gross
profit % (as a % of 67% 65% 62% 60% 66%
non-GAAP net
revenue)
Operating Income
(Loss)
GAAP operating $ (183 ) $ 365 $ 215 $ (364 ) $ (39 ) 79 %
income (loss)
Acquisition-related 14 36 2 21 (15 )
expenses
Certain
non-recurring — 27 — — —
litigation expenses
Change in deferred
net revenue 590 (391 ) (464 ) 369 260
(packaged goods and
digital content)
Restructuring and — (1 ) 27 (2 ) 2
other
Stock-based 48 41 39 44 39
compensation
Non-GAAP operating $ 469 $ 77 $ (181 ) $ 68 $ 247 (47 %)
income (loss)
GAAP operating
income (loss) % (as (17%) 27% 23% (51%) (4%)
a % of GAAP net
revenue)
Non-GAAP operating
income (loss) % (as 28% 8% (37%) 6% 21%
a % of non-GAAP net
revenue)
Net Income (Loss)
GAAP net income $ (205 ) $ 400 $ 201 $ (381 ) $ (45 ) 78 %
(loss)
Acquisition-related 14 36 2 21 (15 )
expenses
Amortization of 5 5 5 5 5
debt discount
Certain
non-recurring — 27 — — —
litigation expenses
Change in deferred
net revenue 590 (391 ) (464 ) 369 260
(packaged goods and
digital content)
Gain on strategic — — — — (14 )
investments
Restructuring and — (1 ) 27 (2 ) 2
other
Stock-based 48 41 39 44 39
compensation
Income tax (118 ) (61 ) 60 (7 ) (56 )
adjustments
Non-GAAP net income $ 334 $ 56 $ (130 ) $ 49 $ 176 (47 %)
(loss)
GAAP net income
(loss) % (as a % of (19%) 29% 21% (54%) (5%)
GAAP net revenue)
Non-GAAP net income
(loss) % (as a % of 20% 6% (26%) 5% 15%
non-GAAP net
revenue)
Diluted Earnings
(Loss) Per Share
GAAP earnings $ (0.62 ) $ 1.20 $ 0.63 $ (1.21 ) $ (0.15 ) 76 %
(loss) per share
Non-GAAP earnings $ 0.99 $ 0.17 $ (0.41 ) $ 0.15 $ 0.57 (42 %)
(loss) per share
Number of diluted
shares used in
computation
GAAP 332 332 320 316 304
Non-GAAP 338 332 317 318 308
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data and headcount)
Q3 Q4 Q1 Q2 Q3 YOY %
FY12 FY12 FY13 FY13 FY13 Change
QUARTERLY NET
REVENUE
PRESENTATIONS - GAAP
AND NON-GAAP
Geography Net
Revenue
North America 500 653 450 329 409 (18 %)
Europe 505 627 435 332 464 (8 %)
Asia 56 88 70 50 49 (13 %)
Total GAAP Net 1,061 1,368 955 711 922 (13 %)
Revenue
North America 310 (188 ) (265 ) 179 80
Europe 235 (187 ) (174 ) 171 166
Asia 45 (16 ) (25 ) 19 14
Change In Deferred
Net Revenue 590 (391 ) (464 ) 369 260
(Packaged Goods and
Digital Content)
North America 810 465 185 508 489 (40 %)
Europe 740 440 261 503 630 (15 %)
Asia 101 72 45 69 63 (38 %)
Total Non-GAAP Net 1,651 977 491 1,080 1,182 (28 %)
Revenue
North America 47% 48% 47% 46% 44%
Europe 48% 46% 46% 47% 51%
Asia 5% 6% 7% 7% 5%
Total GAAP Net 100% 100% 100% 100% 100%
Revenue %
North America 49% 48% 38% 47% 42%
Europe 45% 45% 53% 47% 53%
Asia 6% 7% 9% 6% 5%
Total Non-GAAP Net 100% 100% 100% 100% 100%
Revenue %
Net Revenue
Composition
Publishing and Other 738 926 592 365 568 (23 %)
Wireless,
Internet-derived, 274 419 342 324 321 17 %
and Advertising
(Digital)
Distribution 49 23 21 22 33 (33 %)
Total GAAP Net 1,061 1,368 955 711 922 (13 %)
Revenue
Publishing and Other 487 (397 ) (446 ) 379 174
Wireless,
Internet-derived, 103 6 (18 ) (10 ) 86
and Advertising
(Digital)
Change In Deferred
Net Revenue 590 (391 ) (464 ) 369 260
(Packaged Goods and
Digital Content)
Publishing and Other 1,225 529 146 744 742 (39 %)
Wireless,
Internet-derived, 377 425 324 314 407 8 %
and Advertising
(Digital)
Distribution 49 23 21 22 33 (33 %)
Total Non-GAAP Net 1,651 977 491 1,080 1,182 (28 %)
Revenue
Publishing and Other 69% 68% 62% 51% 62%
Wireless,
Internet-derived, 26% 30% 36% 46% 35%
and Advertising
(Digital)
Distribution 5% 2% 2% 3% 3%
Total GAAP Net 100% 100% 100% 100% 100%
Revenue %
Publishing and Other 74% 54% 30% 69% 63%
Wireless,
Internet-derived, 23% 44% 66% 29% 34%
and Advertising
(Digital)
Distribution 3% 2% 4% 2% 3%
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 and headcount)
Q3 Q4 Q1 Q2 Q3 YOY %
FY12 FY12 FY13 FY13 FY13 Change
QUARTERLY NET
REVENUE
PRESENTATIONS - GAAP
AND NON-GAAP
Platform Net Revenue
Xbox 360 331 454 292 204 277 (16 %)
PLAYSTATION 3 314 432 267 150 289 (8 %)
Wii 49 20 8 17 20 (59 %)
PlayStation 2 7 3 2 6 3 (57 %)
Total Consoles 701 909 569 377 589 (16 %)
Mobile 70 87 69 75 86 23 %
PlayStation 14 6 10 14 15 7 %
Handhelds
Nintendo Handhelds 15 5 9 8 9 (40 %)
Total Mobile and 99 98 88 97 110 11 %
Handhelds
PC 214 334 276 214 186 (13 %)
Other 47 27 22 23 37 (21 %)
Total GAAP Net 1,061 1,368 955 711 922 (13 %)
Revenue
Xbox 360 174 (128 ) (186 ) 144 72
PLAYSTATION 3 179 (210 ) (183 ) 222 95
Wii 3 (7 ) (5 ) — —
PlayStation 2 — — (1 ) 1 —
Mobile 13 (3 ) 9 13 13
PlayStation (2 ) 10 (4 ) 7 11
Handhelds
Nintendo Handhelds 9 (5 ) (4 ) (2 ) 13
PC 214 (48 ) (90 ) (16 ) 56
Change in Deferred
Net Revenue 590 (391 ) (464 ) 369 260
(Packaged Goods and
Digital Content)
Xbox 360 505 326 106 348 349 (31 %)
PLAYSTATION 3 493 222 84 372 384 (22 %)
Wii 52 13 3 17 20 (62 %)
PlayStation 2 7 3 1 7 3 (57 %)
Total Consoles 1,057 564 194 744 756 (28 %)
Mobile 83 84 78 88 99 19 %
PlayStation 12 16 6 21 26 117 %
Handhelds
Nintendo Handhelds 24 — 5 6 22 (8 %)
Total Mobile and 119 100 89 115 147 24 %
Handhelds
PC 428 286 186 198 242 (43 %)
Other 47 27 22 23 37 (21 %)
Total Non-GAAP Net 1,651 977 491 1,080 1,182 (28 %)
Revenue
Xbox 360 31% 33% 31% 29% 30%
PLAYSTATION 3 29% 32% 28% 21% 32%
Wii 5% 1% 1% 2% 2%
PlayStation 2 1% — — 1% —
Total Consoles 66% 66% 60% 53% 64%
Mobile 7% 6% 7% 11% 9%
PlayStation 1% 1% 1% 2% 2%
Handhelds
Nintendo Handhelds 1% — 1% 1% 1%
Total Mobile and 9% 7% 9% 14% 12%
Handhelds
PC 20% 25% 29% 30% 20%
Other 5% 2% 2% 3% 4%
Total GAAP Net 100% 100% 100% 100% 100%
Revenue %
Xbox 360 31% 34% 22% 32% 30%
PLAYSTATION 3 30% 23% 17% 34% 32%
Wii 3% 1% 1% 2% 2%
PlayStation 2 — — — 1% —
Total Consoles 64% 58% 40% 69% 64%
Mobile 5% 8% 16% 8% 8%
PlayStation 1% 2% 1% 2% 2%
Handhelds
Nintendo Handhelds 1% — 1% 1% 2%
Total Mobile and 7% 10% 18% 11% 12%
Handhelds
PC 26% 29% 38% 18% 21%
Other 3% 3% 4% 2% 3%
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 and headcount)
Q3 Q4 Q1 Q2 Q3 YOY %
FY12 FY12 FY13 FY13 FY13 Change
CASH FLOW DATA
Operating cash flow 475 287 (244 ) (28 ) 363 (24 %)
Operating cash flow 243 277 307 490 378 56 %
- TTM
Capital 44 44 31 25 25 (43 %)
expenditures
Capital 149 172 171 144 125 (16 %)
expenditures - TTM
BALANCE SHEET DATA
Cash and cash 1,242 1,293 919 871 1,158 (7 %)
equivalents
Short-term 406 437 444 351 275 (32 %)
investments
Marketable equity 143 119 76 93 59 (59 %)
securities
Receivables, net 526 366 111 643 382 (27 %)
Inventories 69 59 60 71 59 (14 %)
Deferred net
revenue (packaged
goods and digital
content)
End of the quarter 1,439 1,048 584 953 1,213
Less: Beginning of 849 1,439 1,048 584 953
the quarter
Change in deferred
net revenue 590 (391 ) (464 ) 369 260
(packaged goods and
digital content)
STOCK-BASED
COMPENSATION
Cost of goods sold — 1 1 — —
Marketing and sales 7 8 7 8 7
General and 11 7 9 9 7
administrative
Research and 30 25 22 27 25
development
Total Stock-Based 48 41 39 44 39
Compensation
EMPLOYEES 9,043 9,158 9,225 9,224 9,370 4 %
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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