February 8, 2010

EA Reports Third Quarter Fiscal Year 2010 Results

#1 Packaged Goods Publisher in North America and Europe Fiscal Year-to-Date
Digital Direct Revenue Increases 30%
FIFA 10 Sells Over 9.7 Million Copies Since Launch

REDWOOD CITY, Calif., Feb 08, 2010 (BUSINESS WIRE) -- Electronic Arts Inc. (NASDAQ: ERTS) today announced preliminary financial results for its third quarter ended December 31, 2009.

Fiscal Third Quarter Results (comparisons are to the quarter ended December 31, 2008)

GAAP net revenue for the quarter, which includes the impact of deferred net revenue adjustments, was $1.243 billion as compared with $1.654 billion for the prior year. During the quarter, EA had a net revenue deferral of $103 million related to certain online-enabled packaged goods and digital content as compared with $88 million in the third quarter of the prior year. This $103 million deferral will be recognized in future quarters.

Non-GAAP net revenue for the quarter was $1.346 billion, down 23 percent as compared with $1.742 billion for the prior year. The decline is due to several factors, including fewer titles this holiday quarter versus the 2008 holiday quarter, and a weak overall packaged goods sector in Europe. Sales were driven by the launches of Dragon Age(TM): Origins, Left 4 Dead 2, and NBA Live, and catalog sales of FIFA 10, Madden NFL 10, and The Sims(TM) 3.

GAAP net loss for the quarter, including the impact of deferred net revenue, was $82 million as compared with a net loss of $641 million for the prior year. GAAP diluted loss per share was $0.25 as compared with GAAP diluted loss per share of $2.00 for the prior year.

Non-GAAP net income was $109 million as compared with a non-GAAP net income of $179 million a year ago. Non-GAAP diluted earnings per share was $0.33 as compared with a non-GAAP diluted earnings per share of $0.56 for the prior year.

"EA is growing share in our packaged goods business and our digital businesses continue to grow rapidly," said John Riccitiello, Chief Executive Officer. "Mass Effect 2 is the first blockbuster of 2010 and we are looking forward to the launch of Dante's Inferno and Battlefield Bad Company 2."

"We are expecting an increase in FY11 full year non-GAAP earnings per share on the basis of strong cost controls and growth in our digital businesses," said Eric Brown, Chief Financial Officer.

Highlights:

  • Fiscal year-to-date, EA was the #1 packaged goods publisher in North America and Europe - #1 publisher on the PlayStation(R) 3, PC, and PSP(R); #2 publisher on Xbox 360(R) and Wii(TM) from Nintendo.
  • Digital non-GAAP net revenue was an all time quarter high at $152 million - up 30 percent fiscal year-to-date versus last year.
  • EA has reduced operating costs and projects fiscal year 2011 non-GAAP costs down $100 million versus fiscal year 2010.
  • Five titles launched this quarter with a Metacritic rating of 80 or above - including: Dragon Age: Origins, EA SPORTS Active(TM) More Workouts, The Sims 3 World Adventures, BrĂ¼tal Legend(TM), and Left 4 Dead 2. EA has 19 titles rated at 80 or above in calendar 2009.
  • FIFA 10 has sold over 9.7 million copies since launch.
  • EA's Pogo(TM) is the #1 online game site worldwide measured by user engagement.
  • EA's online games subscribers totaled 1.9 million in the quarter - this includes Pogo, as well as massively multiplayer online (MMO) subscribers.
  • EA Mobile(TM), the world's leading publisher of games for phones, generated $57 million of non-GAAP net revenue in the quarter, an increase of 14 percent year-over-year. EA mobile had seven of the top eleven games on the iPhone(R)/iPod touch(TM) in December and seven of the top ten games on Verizon for the quarter.
  • Playfish had two of the top ten Facebook games for the quarter.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of February 8, 2010. Results may be materially different and are affected by many factors, including: development delays on EA's products; 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; expected savings and impact on EA's operations of the Company's cost reduction plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; changes in foreign exchange rates; the financial impact of the Playfish acquisition and potential future 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.

EA is providing updated guidance for fiscal year 2010 and initial guidance for fiscal year 2011.

Fourth Quarter Fiscal Year 2010 Expectations - Ending March 31, 2010

  • GAAP net revenue is expected to be approximately $925 million to $1.0 billion.
  • Non-GAAP net revenue is expected to be approximately $800 to $850 million.
  • The Company expects GAAP diluted earnings per share to be approximately $0.05 to $0.23.
  • Non-GAAP diluted earnings per share is expected to be approximately $0.02 to $0.06.
  • For purposes of calculating fourth quarter fiscal year 2010 earnings per share, the Company estimates a share count of 328 million to compute both GAAP and non-GAAP earnings per share.
  • Expected non-GAAP net income excludes the following items from expected GAAP net income:

* Non-GAAP net revenue is expected to be $125 to $150 million lower due to the impact of the change in deferred net revenue (packaged goods and digital content);

* Approximately $50 million of estimated stock-based compensation;

* Approximately $20 million of amortization of intangible assets;

* Approximately $35 million of restructuring charges; and

* ($10) to $10 million in the difference between the Company's GAAP and non-GAAP tax expenses, excluding the impact of tax-related charges that may arise in connection with the Playfish integration.

First Quarter Fiscal Year 2011 Expectations - Ending June 30, 2010

  • GAAP net revenue is expected to be approximately $710 to $750 million.
  • Non-GAAP net revenue is expected to be approximately $460 to $500 million.
  • GAAP diluted earnings/(loss) per share is expected to be approximately a ($0.05) loss to a $0.05 profit.
  • Non-GAAP diluted loss per share is expected to be approximately ($0.35) to ($0.40).
  • For purposes of calculating first quarter fiscal year 2011 earnings/(loss) per share, the Company estimates a share count of 327 million for GAAP losses and 329 million for GAAP profits; for non-GAAP loss per share, the Company estimates a share count of 327 million.
  • Expected non-GAAP net income excludes the following items from expected GAAP net income:

* Non-GAAP net revenue is expected to be approximately $250 million lower due to the impact of the change in deferred net revenue (packaged goods and digital content);

* Approximately $50 million of estimated stock-based compensation;

* Approximately $15-20 million of amortization of intangible assets;

* Approximately $5 million of restructuring charges; and

* $50 to $60 million in the difference between the Company's GAAP and non-GAAP tax expenses.

Fiscal Year 2011 Expectations - Ending March 31, 2011

  • GAAP net revenue is expected to be approximately $3.45 to $3.70 billion.
  • Non-GAAP net revenue is expected to be approximately $3.65 to $3.90 billion.
  • GAAP diluted loss per share is expected to be approximately ($0.60) to ($0.90).
  • Non-GAAP diluted earnings per share is expected to be approximately $0.50 to $0.70.
  • For purposes of calculating fiscal year 2011 GAAP loss per share, the Company estimates a share count of 328 million and for non-GAAP earnings per share, the Company estimates a share count of 330 million.
  • Expected non-GAAP net income excludes the following items from expected GAAP net income:

* Non-GAAP net revenue is expected to be approximately $200 million higher due to the impact of the change in deferred net revenue (packaged goods and digital content);

* Approximately $195 million of estimated stock-based compensation;

* Approximately $75 million of amortization of intangible assets;

* $10 to $15 million of restructuring charges; and

* ($24) to ($54) million in the difference between the Company's GAAP and non-GAAP tax expenses.

  • The fiscal year 2011 launch schedule is expected to be more consistent with years prior to fiscal year 2010, with non-GAAP revenue to be allocated as follows during the fiscal year:

* Q1: approximately 13%

* Q2: approximately 25%

* Q3: approximately 40% and

* Q4: approximately 20% to 25%

Key Titles - Fiscal Year 2011:

Quarter Label Title Console Handheld (1)

PC

Q1
Games Skate 3 X
Need for Speed World X
SPORTS 2010 FIFA World Cup South Africa X X
Tiger Woods PGA TOUR 11 X X
Q2
Games APB/All Points Bulletin (2) X
Medal of Honor Title TBA X X X
SPORTS NCAA Football 11 X X
EA SPORTS FIFA Online X
Madden NFL 11 X X
FIFA 11 X X X
NHL 11 X
Play Monopoly Title TBA X X
MySims Title TBA X X
Q3
Games Crysis 2 (3) X X
Need For Speed Title TBA X X X
DTC Game For Console Online (4) X
SPORTS FIFA Manager 11 X
NBA Jam X
NBA LIVE 11 X X
EA SPORTS Active Title TBA X
EA SPORTS Active Title TBA X
EA SPORTS MMA X X
Play Hasbro Family Game Night Title TBA X
Hasbro Littlest Pet Shop Title TBA X
Harry Potter Title TBA X X X
The Sims 3 on Console Title TBA X X
TBA X X X
Q4

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