May 7, 2012

Electronic Arts Reports Q4 FY12 and FY12 Financial Results

All-Time High Non-GAAP Net Revenue of $4.2 Billion in Fiscal 12

Annual Digital Non-GAAP Revenue — Up 47% to $1.2 Billion

Digital Revenue Driving Margin Expansion

Mass Effect 3 Sales Exceed $200 Million at Retail

FIFA 12 Non-GAAP Digital Revenue Tops $100 Million

Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its fourth fiscal quarter and fiscal year ended March 31, 2012.

"We are proud to report a strong quarter and a fiscal year highlighted with $1.2 billion of digital revenue," said Chief Executive Officer John Riccitiello. "In the coming year, we break away from the pack, with a very different profile than the traditional game companies and capabilities that none of our new digital competitors can match."

"Digital growth drove our margins in fiscal 12 and we project this trend will continue in fiscal 13," said Interim Chief Financial Officer Ken Barker. "We saw more than 20 percent non-GAAP diluted EPS growth in fiscal 12, and are guiding to more than 30 percent growth in fiscal 13 based on the midpoint of our guidance."

Selected Operating Highlights and Metrics:

*On a non-GAAP basis

  • Strong results driven by the successful launches of Mass Effect™ 3, FIFA Street 4, SSX™ and Kingdoms of Amalur: Reckoning™.
  • FIFA 12 established the best year in franchise history - with downloads and micro-transactions totaling $108 million*. FIFA Ultimate Team — a pure digital companion to recent FIFA titles was the second best-selling EA offering in the UK in fiscal 12.
  • Battlefield 3™ had a record year, establishing itself as one of EA's premier game services and in the process successfully took share in the growing First-Person-Shooter market.
  • Battlefield 3 players are still deeply engaged — 6.3 million MAUs in March. New content downloads available in May and June.
  • Q4 full-game downloads were up 76 percent* year-over-year, contributing $60 million* in the quarter, driven in part by Mass Effect 3 and STAR WARS®: The Old Republic™.
  • STAR WARS®: The Old Republic™ active subscribers are 1.3 million. Two new content packs — Legacy and Allies, available in Q1.
  • EA's Play4Free brands are generating an average of nearly $2 million* per week. Several more EA brands will be introduced in the Play4Free portal in fiscal 13.
  • EA shattered its goal for digital revenue growth — generating more than $1.2 billion* in fiscal 12 for a 47 percent year-over-year growth, and driving operating margin to 10%. Another 40 percent increase in digital non-GAAP revenue and continued operating margin expansion is forecasted for fiscal 13.
  • EA's Origin™ platform for games and services has registered 11 million players and generated approximately $150 million* in just ten months. EA's Nucleus database has registered 220 million consumers.
  • Casual game leader PopCap™ — acquired by EA in August — is growing on mobile and social platforms with new games like Solitaire Blitz™ and Lucky Gem Casino™. A new version of Bejeweled™ is EA's top grossing game on the Apple® App StoreSM.
  • EA repurchased 27.7 million shares for $529 million through March 31, 2012, and as of the call, the $600 million share repurchase program has been completed.
  • In fiscal 13, EA will invest $80 million in development of games for Gen4 console systems.

Q4 and Full-Year FY12 Financial Highlights:

For the quarter, non-GAAP net revenue of $977 million was slightly ahead of our guidance of $925 million to $975 million. Non-GAAP diluted earnings per share of $0.17 was in line with our guidance of $0.10 to $0.20. Non-GAAP net revenue in Q4 fiscal 2012 was slightly lower as compared to Q4 fiscal 2011 due to a reduction in the number of package goods titles in the quarter.

 

 

(in millions of $ except per share amounts)

 

Quarter
Ended
3/31/12

     

Quarter
Ended
3/31/11

             

Net Digital Revenue

  $419       $211
Net Publishing Packaged Goods and Other Revenue   926       838
Net Distribution Packaged Goods Revenue   23       41
GAAP Total Net Revenue   1,368       1,090
             
Non-GAAP Net Digital Revenue   $425       $268
Non-GAAP Net Publishing Packaged Goods and Other Revenue   529       686
Non-GAAP Net Distribution Packaged Goods Revenue   23       41
Non-GAAP Total Net Revenue   977       995
             
GAAP Net Income   400       151
Non-GAAP Net Income   56       83
GAAP Diluted Earnings Per Share   1.20       0.45
Non-GAAP Diluted Earnings Per Share   0.17       0.25
             
Cash Flow from Operations   287       253

Trailing Twelve Month (TTM) Financial Highlights:

 

(in millions of $ except per share data)

   

TTM
Ended
3/31/12

 

     

TTM
Ended
3/31/11

GAAP Net Revenue     $4,143       $3,589
GAAP Net Income (Loss)     76       (276)
GAAP Diluted Earnings (Loss) Per Share     0.23       (0.84)
               
Non-GAAP Net Revenue     4,186       3,828
Non-GAAP Net Income     284       233
Non-GAAP Diluted Earnings Per Share     0.85       0.70
               
Cash Flow from Operations     277       320
               

Q4 FY12 Digital Metrics:

             

(in millions)

   

Quarter
Ended
3/31/12

 

     

Quarter
Ended
3/31/11

GAAP Net Mobile Revenue

Non-GAAP Net Mobile Revenue

    $87

$84

      $70

$67

Monthly Active Users (MAU) in Social Games     49       36
Core Registered Users     220       112

Business Outlook as of May 7, 2012

The following forward-looking statements, as well as those made above, reflect expectations as of May 7, 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 $4.075 billion.
  • Non-GAAP net revenue is expected to be approximately $4.300 billion.
  • GAAP loss per share is expected to be approximately ($0.36) to ($0.16).
  • Non-GAAP diluted earnings per share is expected to be approximately $1.05 to $1.20.
  • For purposes of calculating fiscal year 2013 diluted earnings per share, the Company estimates a share count of 327 million, and 321 million shares for calculating loss per share.
  • Expected non-GAAP net income excludes the following from expected GAAP net loss:
    • Non-GAAP net revenue is expected to be approximately $225 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
    • Approximately $175 million of estimated stock-based compensation;
    • Approximately $80 million of acquisition-related expenses;
    • Approximately $45 million of restructuring charges;
    • Approximately $20 million from the amortization of debt discount; and
    • Non-GAAP tax expense is expected to be $84 million to $102 million higher than GAAP tax expense.

First Quarter Fiscal Year 2013 Expectations — Ending June 30, 2012

  • GAAP net revenue is expected to be approximately $950 million.
  • Non-GAAP net revenue is expected to be approximately $500 million.
  • GAAP diluted earnings per share is expected to be approximately $0.40 to $0.48.
  • Non-GAAP loss per share is expected to be approximately ($0.45) to ($0.40).
  • For purposes of calculating first quarter fiscal year 2013 diluted earnings per share, the Company estimates a share count of 322 million, and 318 million shares for calculating loss per share.
  • Expected non-GAAP net loss excludes the following from expected GAAP net income:
    • Non-GAAP net revenue is expected to be approximately $450 million lower 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 $40 million of restructuring charges;
    • Approximately $5 million from the amortization of debt discount; and
    • Non-GAAP tax expense is expected to be $60 million to $66 million lower than GAAP tax expense.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on May 7, 2012 at 2:00 pm PT (5:00 pm ET) to review its results for the fourth quarter ended March 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 May 15, 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)
  • Gain (loss) on strategic investments
  • Loss on licensed intellectual property commitment
  • 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 potential settlement of an on-going 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.

Gain (loss) on Strategic Investments. From time to time, the Company makes strategic investments. Electronic Arts' management excludes the impact of any gains (losses) 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 gains (losses) on these investments from its operating results is important to facilitate comparisons to prior periods.

Loss on Licensed Intellectual Property Commitment. During the fourth quarter of fiscal 2009, Electronic Arts amended an agreement with a content licensor. This amendment resulted in the termination of our rights to use the licensor's intellectual property in certain products and we incurred a related estimated loss of $38 million. This significant non-recurring loss is excluded from our non-GAAP financial measures in order to provide comparability between periods. Further, the Company excluded this loss 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.

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 December 31, 2011.

These forward-looking statements are current as of May 7, 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2012. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 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 100 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.

For additional information, please contact:

Rob Sison             Jeff Brown
Vice President, Investor Relations             Senior Vice President, Corporate Communications
650-628-7787             650-628-7922

rsison@ea.com

           

jbrown@ea.com

Origin, SSX, PopCap, Lucky Gem Casino, Bejeweled, Solitaire Blitz, 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. LucasArts, the LucasArts logo, and STAR WARS are registered trademarks of Lucasfilm Ltd. © 2011 Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. & ® or TM as indicated. All rights reserved. John Madden, NFL and FIFA are the property of their respective owners and used with permission. Apple is a trademark and App Store is a service mark of Apple Inc. 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     Twelve Months Ended
      March 31,     March 31,
      2012     2011     2012     2011
                         
Net revenue     $ 1,368       $ 1,090       $ 4,143       $ 3,589  
Cost of goods sold       374         328         1,598         1,499  
Gross profit       994         762         2,545         2,090  
                         
Operating expenses:                        
Marketing and sales       222         194         853         747  
General and administrative      

115

        75        

375

        301  
Research and development       284         328         1,212         1,153  
Acquisition-related contingent consideration       3         8         11         (17 )
Amortization of intangibles       6         13         43         57  
Restructuring and other       (1 )       (1 )       16         161  
Total operating expenses      

629

        617        

2,510

        2,402  
                         
Operating income (loss)      

365

        145        

35

        (312 )
                         
Gain on strategic investments, net       -         -         -         23  
Interest and other income (expense), net       (4 )       4         (17 )       10  
                         
Income (loss) before benefit from income taxes      

361

        149        

18

        (279 )
                         
Benefit from income taxes       (39 )       (2 )       (58 )       (3 )
                         
Net income (loss)     $

400

      $ 151       $

76

      $ (276 )
                         
Earnings (loss) per share                        
Basic     $

1.22

      $ 0.45       $

0.23

      $ (0.84 )
Diluted     $

1.20

      $ 0.45       $

0.23

      $ (0.84 )
                         
Number of shares used in computation                        
Basic      

329

        333        

331

        330  
Diluted      

332

        336         336         330  
                         
                         
Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net income (loss) and earnings (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     Twelve Months Ended
      March 31,     March 31,
      2012     2011     2012     2011
                         
Net income (loss)     $

400

      $ 151       $

76

      $ (276 )
                         
Acquisition-related expenses       36         24         106         52  
Amortization of debt discount       5         -         14         -  

Certain non-recurring litigation expenses

     

27

       

-

       

27

       

-

 
Change in deferred net revenue (packaged goods and digital content)       (391 )       (95 )       43         239  
Gain on strategic investments, net       -         -         -         (23 )
Loss on licensed intellectual property commitment (COGS)       -         -         -         (1 )
Restructuring and other       (1 )       (1 )       16         161  
Stock-based compensation       41         38         170         174  
Income tax adjustments       (61 )       (34 )       (168 )       (93 )
                         
Non-GAAP net income     $ 56       $ 83       $ 284       $ 233  
                         
Non-GAAP earnings per share                        
Basic     $ 0.17       $ 0.25       $ 0.86       $ 0.71  
Diluted     $ 0.17       $ 0.25       $ 0.85       $ 0.70  
                         
Number of shares used in Non-GAAP computation                        
Basic      

329

        333        

331

        330  
Diluted      

332

        336         336         334  
                                         
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
             
      March 31,     March 31,
      2012    

2011 (a)

             
ASSETS            
             
Current assets:            
Cash and cash equivalents     $ 1,293       $ 1,579  
Short-term investments       437         497  
Marketable equity securities       119         161  
Receivables, net of allowances of $252 and $304, respectively       366         335  
Inventories       59         77  
Deferred income taxes, net       67         56  
Other current assets       268         327  
Total current assets       2,609         3,032  
             
Property and equipment, net       568         513  
Goodwill       1,718         1,110  
Acquisition-related intangibles, net       369         144  
Deferred income taxes, net       42         49  
Other assets       185         80  
             
TOTAL ASSETS     $ 5,491       $ 4,928  
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
Accounts payable     $ 215       $ 228  
Accrued and other current liabilities      

857

        768  
Deferred net revenue (packaged goods and digital content)       1,048         1,005  
Total current liabilities      

2,120

        2,001  
             
0.75% convertible senior notes due 2016, net       539         -  
Income tax obligations       189         192  
Deferred income taxes, net       8         37  
Other liabilities       177         134  
Total liabilities      

3,033

        2,364  
             
Common stock       3         3  
Paid-in capital       2,359         2,495  
Accumulated deficit      

(77

)       (153 )
Accumulated other comprehensive income       173         219  
Total stockholders' equity      

2,458

        2,564  
             
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 5,491       $ 4,928  
             

(a) Derived from audited consolidated financial statements.

 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
             
      Three Months Ended   Twelve Months Ended
      March 31,     March 31,
      2012     2011     2012     2011
                         
OPERATING ACTIVITIES                        
                         
Net income (loss)     $

400

      $ 151       $

76

      $ (276 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
Acquisition-related contingent consideration       3         8         11         (17 )
Depreciation, amortization and accretion, net       68         42         216         180  
Net gains on investments and sale of property and equipment       -         (1 )       (12 )       (25 )
Other non-cash restructuring charges       (3 )       -         (6 )       1  
Stock-based compensation       41         38         170         176  
Change in assets and liabilities:                        
Receivables, net       162         58         (14 )       (122 )
Inventories       10         29         21         25  
Other assets       (20 )       14         (101 )       5  
Accounts payable       100         55         (50 )       114  
Accrued and other liabilities      

(37

)       (38 )      

13

 

      (4 )
Deferred income taxes, net       (46 )       (8 )       (90 )       24  
Deferred net revenue (packaged goods and digital content)       (391 )       (95 )       43         239  
Net cash provided by operating activities       287         253         277         320  
                         
INVESTING ACTIVITIES                        
                         
Capital expenditures       (44 )       (21 )       (172 )       (59 )
Proceeds from sale of property       -         -         26         -  
Proceeds from sale of marketable equity securities       -         -         -         132  
Proceeds from maturities and sales of short-term investments       63         160         526         442  
Purchase of short-term investments       (94 )       (147 )       (468 )       (514 )
Acquisition-related restricted cash       75         -         75         -  
Acquisition of subsidiaries, net of cash acquired       -         -         (676 )       (16 )
Net cash used in investing activities       -         (8 )       (689 )       (15 )
                         
FINANCING ACTIVITIES                        
                         
Proceeds from borrowings on convertible senior notes, net of issuance costs       -         -         617         -  
Proceeds from issuance of warrants       -         -         65         -  
Purchase of convertible note hedge       -         -         (107 )       -  
Proceeds from issuance of common stock       18         17         57         34  
Excess tax benefit from stock-based compensation       -         1         4         1  
Repurchase and retirement of common stock       (241 )       (58 )       (471 )       (58 )
Acquisition-related contingent consideration payment       (25 )       -         (25 )       -  
                         
Net cash provided by (used in) financing activities       (248 )       (40 )       140         (23 )
                         
Effect of foreign exchange on cash and cash equivalents       12         21         (14 )       24  
Increase (decrease) in cash and cash equivalents       51         226         (286 )       306  
Beginning cash and cash equivalents       1,242         1,353         1,579         1,273  
Ending cash and cash equivalents     $ 1,293       $ 1,579       $ 1,293       $ 1,579  
                                         
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                     
      Q4     Q1     Q2     Q3     Q4     YOY %
     

FY11

   

FY12

   

FY12

   

FY12

   

FY12

   

Change

                                     
QUARTERLY RECONCILIATION OF RESULTS                                    
                                     
Net Revenue                                    
GAAP net revenue     $ 1,090       $ 999       $ 715       $ 1,061       $ 1,368       26 %
Change in deferred net revenue (packaged goods and digital content)       (95 )       (475 )       319         590         (391 )      
Non-GAAP net revenue     $ 995       $ 524       $ 1,034       $ 1,651       $ 977       (2 %)
                                     
Gross Profit                                    
GAAP gross profit     $ 762       $ 759       $ 283       $ 509       $ 994       30 %
Acquisition-related expenses       3         3         8         14         27        
Change in deferred net revenue (packaged goods and digital content)       (95 )       (475 )       319         590         (391 )      
Stock-based compensation       -         1         -         -         1        
Non-GAAP gross profit     $ 670       $ 288       $ 610       $ 1,113       $ 631       (6 %)
GAAP gross profit % (as a % of GAAP net revenue)       70 %       76 %       40 %       48 %       73 %      
Non-GAAP gross profit % (as a % of non-GAAP net revenue)       67 %       55 %       59 %       67 %       65 %      
                                     
Operating Income (Loss)                                    
GAAP operating income (loss)     $ 145       $ 227       $ (374 )     $ (183 )     $

365

     

152

%
Acquisition-related expenses       24         18         38         14         36        

Certain non-recurring litigation expenses

     

-

       

-

       

-

       

-

       

27

       
Change in deferred net revenue (packaged goods and digital content)       (95 )       (475 )       319         590         (391 )      
Restructuring and other       (1 )       18         (1 )       -         (1 )      
Stock-based compensation       38         38         43         48         41        
Non-GAAP operating income (loss)     $ 111       $ (174 )     $ 25       $ 469       $ 77       (31 %)
GAAP operating income (loss) % (as a % of GAAP net revenue)       13 %       23 %       (52 %)       (17 %)      

27

%      
Non-GAAP operating income (loss) % (as a % of non-GAAP net revenue)       11 %       (33 %)       2 %       28 %       8 %      
                                     
Net Income (Loss)                                    
GAAP net income (loss)     $ 151       $ 221       $ (340 )     $ (205 )     $

400

     

165

%
Acquisition-related expenses       24         18         38         14         36        
Amortization of debt discount       -         -         4         5         5        

Certain non-recurring litigation expenses

     

-

       

-

       

-

       

-

       

27

       
Change in deferred net revenue (packaged goods and digital content)       (95 )       (475 )       319         590         (391 )      
Restructuring and other       (1 )       18         (1 )       -         (1 )      
Stock-based compensation       38         38         43         48         41        
Income tax adjustments       (34 )       57         (46 )       (118 )       (61 )      
Non-GAAP net income (loss)     $ 83       $ (123 )     $ 17       $ 334       $ 56      

(33

%)
GAAP net income (loss) % (as a % of GAAP net revenue)       14 %       22 %       (48 %)       (19 %)      

29

%      
Non-GAAP net income (loss) % (as a % of non-GAAP net revenue)       8 %       (23 %)       2 %       20 %       6 %      
                                     
Diluted Earnings (Loss) Per Share                                    
GAAP earnings (loss) per share     $ 0.45       $ 0.66       $ (1.03 )     $ (0.62 )     $

1.20

     

167

%
Non-GAAP earnings (loss) per share     $ 0.25       $ (0.37 )     $ 0.05       $ 0.99       $ 0.17       (32 %)
                                     
Number of diluted shares used in computation                                    
GAAP       336         337         331         332        

332

       
Non-GAAP       336         331         337         338        

332

       
                                                         
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                     
      Q4     Q1     Q2     Q3     Q4     YOY %
     

FY11

   

FY12

   

FY12

   

FY12

   

FY12

   

Change

                                     
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP                                    
                                     
Geography Net Revenue                                    
North America     530       501       337       500       653       23 %
Europe     507       438       328       505       627       24 %
Asia     53       60       50       56       88       66 %
Total GAAP Net Revenue     1,090       999       715       1,061       1,368       26 %
North America     (56 )     (240 )     144       310       (188 )      
Europe     (45 )     (215 )     174       235       (187 )      
Asia     6       (20 )     1       45       (16 )      
Change In Deferred Net Revenue (Packaged Goods and Digital Content)     (95 )     (475 )     319       590       (391 )      
North America     474       261       481       810       465       (2 %)
Europe     462       223       502       740       440       (5 %)
Asia     59       40       51       101       72       22 %
Total Non-GAAP Net Revenue     995       524       1,034       1,651       977       (2 %)
                                     
North America     49 %     50 %     47 %     47 %     48 %      
Europe     46 %     44 %     46 %     48 %     46 %      
Asia     5 %     6 %     7 %     5 %     6 %      
Total GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
North America     48 %     50 %     46 %     49 %     48 %      
Europe     46 %     42 %     49 %     45 %     45 %      
Asia     6 %     8 %     5 %     6 %     7 %      
Total Non-GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
                                     
Net Revenue Composition                                    
Publishing and Other     838       647       450       738       926       11 %
Wireless, Internet-derived, and Advertising (Digital)     211       232       234       274       419       99 %
Distribution     41       120       31       49       23       (44 %)
Total GAAP Net Revenue     1,090       999       715       1,061       1,368       26 %
Publishing and Other     (152 )     (452 )     337       487       (397 )      
Wireless, Internet-derived, and Advertising (Digital)     57       (23 )     (18 )     103       6        
Change In Deferred Net Revenue (Packaged Goods and Digital Content)     (95 )     (475 )     319       590       (391 )      
Publishing and Other     686       195       787       1,225       529       (23 %)
Wireless, Internet-derived, and Advertising (Digital)     268       209       216       377       425       59 %
Distribution     41       120       31       49       23       (44 %)
Total Non-GAAP Net Revenue     995       524       1,034       1,651       977       (2 %)
                                     
Publishing and Other     77 %     65 %     63 %     69 %     68 %      
Wireless, Internet-derived, and Advertising (Digital)     19 %     23 %     33 %     26 %     30 %      
Distribution     4 %     12 %     4 %     5 %     2 %      
Total GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
Publishing and Other     69 %     37 %     76 %     74 %     54 %      
Wireless, Internet-derived, and Advertising (Digital)     27 %     40 %     21 %     23 %     44 %      
Distribution     4 %     23 %     3 %     3 %     2 %      
Total Non-GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
                                               
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                     
      Q4     Q1     Q2     Q3     Q4     YOY %
     

FY11

   

FY12

   

FY12

   

FY12

   

FY12

   

Change

                                     
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP                                    
                                     
Platform Net Revenue                                    
Xbox 360     336       345       213       331       454       35 %
PLAYSTATION 3     357       308       169       314       432       21 %
Wii     71       42       35       49       20       (72 %)
PlayStation 2     4       3       15       7       3       (25 %)
Total Consoles     768       698       432       701       909       18 %
Mobile     70       57       55       70       87       24 %
PlayStation Handhelds     16       11       17       14       6       (63 %)
Nintendo Handhelds     28       8       7       15       5       (82 %)
Total Mobile and Handhelds     114       76       79       99       98       (14 %)
PC     171       205       178       214       334       95 %
Other     37       20       26       47       27       (27 %)
Total GAAP Net Revenue     1,090       999       715       1,061       1,368       26 %
Xbox 360     (12 )     (193 )     140       174       (128 )      
PLAYSTATION 3     (75 )     (197 )     205       179       (210 )      
Wii     (44 )     (26 )     (1 )     3       (7 )      
Mobile     (3 )     -       -       13       (3 )      
PlayStation Handhelds     (6 )     (6 )     -       (2 )     10        
Nintendo Handhelds     (6 )     (2 )     -       9       (5 )      
PC     51       (51 )     (25 )     214       (48 )      
Change in Deferred Net Revenue (Packaged Goods and Digital Content)     (95 )     (475 )     319       590       (391 )      
Xbox 360     324       152       353       505       326       1 %
PLAYSTATION 3     282       111       374       493       222       (21 %)
Wii     27       16       34       52       13       (52 %)
PlayStation 2     4       3       15       7       3       (25 %)
Total Consoles     637       282       776       1,057       564       (11 %)
Mobile     67       57       55       83       84       25 %
PlayStation Handhelds     10       5       17       12       16       60 %
Nintendo Handhelds     22       6       7       24       -       (100 %)
Total Mobile and Handhelds     99       68       79       119       100       1 %
PC     222       154       153       428       286       29 %
Other     37       20       26       47       27       (27 %)
Total Non-GAAP Net Revenue     995       524       1,034       1,651       977       (2 %)
                                     
Xbox 360     31 %     35 %     30 %     31 %     33 %      
PLAYSTATION 3     33 %     31 %     23 %     29 %     32 %      
Wii     6 %     4 %     5 %     5 %     1 %      
PlayStation 2     -       -       2 %     1 %     -        
Total Consoles     70 %     70 %     60 %     66 %     66 %      
Mobile     6 %     6 %     8 %     7 %     6 %      
PlayStation Handhelds     1 %     1 %     2 %     1 %     1 %      
Nintendo Handhelds     3 %     1 %     1 %     1 %     -        
Total Mobile and Handhelds     10 %     8 %     11 %     9 %     7 %      
PC     16 %     20 %     25 %     20 %     25 %      
Other     4 %     2 %     4 %     5 %     2 %      
Total GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
Xbox 360     33 %     29 %     34 %     31 %     34 %      
PLAYSTATION 3     28 %     21 %     36 %     30 %     23 %      
Wii     3 %     3 %     4 %     3 %     1 %      
PlayStation 2     -       1 %     1 %     -       -        
Total Consoles     64 %     54 %     75 %     64 %     58 %      
Mobile     7 %     11 %     5 %     5 %     8 %      
PlayStation Handhelds     1 %     1 %     2 %     1 %     2 %      
Nintendo Handhelds     2 %     1 %     1 %     1 %     -        
Total Mobile and Handhelds     10 %     13 %     8 %     7 %     10 %      
PC     22 %     29 %     15 %     26 %     29 %      
Other     4 %     4 %     2 %     3 %     3 %      
Total Non-GAAP Net Revenue %     100 %     100 %     100 %     100 %     100 %      
                                               
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                                     
      Q4     Q1     Q2     Q3     Q4     YOY %
     

FY11

   

FY12

   

FY12

   

FY12

   

FY12

   

Change

                                     
CASH FLOW DATA                                    
                                     
Operating cash flow     253       (274 )     (211 )     475     287       13 %
Operating cash flow - TTM     320       194       117       243     277       (13 %)
Capital expenditures     21       32       52       44     44       110 %
Capital expenditures - TTM     59       80       120       149     172       192 %
                                     
BALANCE SHEET DATA                                    
                                     
Cash and cash equivalents     1,579       1,173       930       1,242     1,293       (18 %)
Short-term investments     497       503       355       406     437       (12 %)
Marketable equity securities     161       172       214       143     119       (26 %)
Receivables, net     335       30       562       526     366       9 %
Inventories     77       75       90       69     59       (23 %)
Deferred net revenue (packaged goods and digital content)                                    
End of the quarter     1,005       530       849       1,439     1,048        
Less: Beginning of the quarter     1,100       1,005       530       849     1,439        
Change in deferred net revenue (packaged goods and digital content)     (95 )     (475 )     319       590     (391 )      
                                     
STOCK-BASED COMPENSATION                                    
                                     
Cost of goods sold     -       1       -       -     1        
Marketing and sales     5       5       6       7     8        
General and administrative     8       9       9       11     7        
Research and development     25       23       28       30     25        
Total Stock-Based Compensation     38       38       43       48     41        
                                     
EMPLOYEES     7,645       7,973       8,687       9,043     9,158       20 %

 

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

 

Source: Electronic Arts Inc.

 

 

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