July 31, 2012

Electronic Arts Reports Q1 FY13 Financial Results

Q1 Non-GAAP Net Revenue and EPS In-Line with Guidance, EPS Beats Consensus

Trailing Twelve Month Non-GAAP Digital Net Revenue a Record $1.3 Billion

EA announces $500 Million Share Repurchase

Battlefield 3 Premium Service Sold Over 1.3M Subscriptions To Date

Pre-Orders for Madden NFL 13 Up 25% Year-Over-Year

EA Signs Publishing Agreement with Nexon for FIFA Online 3 in Korea

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its first fiscal quarter ended June 30, 2012.

"We have established an unmatched diversity in our business with multiple brands performing across several channels, business models and geographies," said Chief Executive Officer John Riccitiello. "This allows us to drive profitable growth in a rapidly transforming marketplace for games."

"We had a solid first quarter and are reconfirming non-GAAP guidance of annual earnings per share growth of 30% at the midpoint of our guidance," said Interim Chief Financial Officer Ken Barker. "The $500 million stock buyback demonstrates our confidence in EA's future."

"We continue to make progress in our goal of becoming the leading digital entertainment company," said President of EA Labels Frank Gibeau. "Over the last twelve months, we generated over $1.3 billion in non-GAAP digital net revenue, and approximately two-thirds of our non-GAAP net revenue in the first fiscal quarter was in digital."

Selected Operating Highlights and Metrics:
*On a non-GAAP basis

  • EA and Nexon signed a publishing agreement for EA SPORTS™ FIFA Online 3, expected to debut in Korea later this fiscal year. FIFA World Class Soccer and EA SPORTS FIFA Online 2 generated more than $25 million* in digital net revenue in Asia in Q1.
  • FIFA Ultimate Team contributed over $30 million* in net digital revenue in the first quarter.
  • Battlefield 3™ Premium service sold over 1.3 million subscriptions to date, with all of the revenue deferred and set to be recognized in fiscal Q4.
  • SimCity™ Social launched on Facebook and currently has over ten million MAUs.
  • STAR WARS®: The Old Republic™ will move to a more accessible two-tiered pricing model in November. Players can chose between a $14.99 premium monthly subscription and a free-to-play model with some restrictions on content and advanced features. Players will be able to purchase upgrades with in-game currency.
  • EA's games and services for mobile phones and tablets have generated a 37% year-over-year increase in digital net revenue*.
  • Catalog continues to outperform expectations with Battlefield 3 and FIFA 12 together selling through over 2 million units in the first quarter.
  • Trailing twelve month non-GAAP digital net revenue a record $1.342 billion*.
  • Trailing twelve month operating cash flow of $307 million, a $30 million improvement from the prior quarter.
  • EA's Origin™ platform for downloading digital games and services has registered over 21 million users, including 9 million mobile users. Origin has signed agreements with 57 independent developers.
  • EA's new Executive Vice President, Chief Financial Officer Blake Jorgensen will join the Company in early September 2012.

Q1 Financial Highlights:

For the quarter, non-GAAP net revenue of $491 million was in line with our guidance of approximately $500 million. Non-GAAP diluted loss per share of ($0.41) was above the midpoint of our guidance of ($0.45) to ($0.40). Non-GAAP net revenue in Q1 fiscal 2013 was slightly lower compared to Q1 fiscal 2012 due to a reduction in distribution revenue in the quarter.

         

 

 

(in millions of $ except per share amounts)

Quarter

Ended 6/30/12

Quarter

Ended 6/30/11

 
Net Digital Revenue $ 342 $ 232
Net Publishing Packaged Goods and Other Revenue 592 647
Net Distribution Packaged Goods Revenue   21     120  
GAAP Total Net Revenue   955     999  
 
Non-GAAP Net Digital Revenue $ 324 $ 209
Non-GAAP Net Publishing Packaged Goods and Other Revenue 146 195
Non-GAAP Net Distribution Packaged Goods Revenue   21     120  
Non-GAAP Total Net Revenue   491     524  
 
GAAP Net Income $ 201 $ 221
Non-GAAP Net Loss (130 ) (123 )
GAAP Diluted Earnings Per Share 0.63 0.66
Non-GAAP Diluted Loss Per Share (0.41 ) (0.37 )
 
Cash Used in Operations $ (244 ) $ (274 )
 

Trailing Twelve Month (TTM) Financial Highlights:

           

 

(in millions of $ except per share amounts)

TTM

Ended 6/30/12

TTM

Ended 6/30/11

 

 
GAAP Net Revenue $ 4,099 $ 3,773
GAAP Net Income (Loss) 56 (151 )
GAAP Diluted Earnings (Loss) Per Share 0.18 (0.47 )
 
Non-GAAP Net Revenue $ 4,153 $ 3,813
Non-GAAP Net Income 277 188
Non-GAAP Diluted Earnings Per Share 0.80 0.57
 
Cash Flow from Operations $ 307 $ 194
 

Q1 FY13 Digital Metrics:

(in millions)

      Quarter

Ended

6/30/12

     

Quarter

Ended

6/30/11

 

 

GAAP Net Mobile Revenue

$69

$57

Non-GAAP Net Mobile Revenue

$78

$57

Monthly Active Users (MAU) in Social Games 41 32
Core Registered Users 234 125
 

Stock Repurchase Program

EA has announced that its Board of Directors has authorized a program to repurchase up to $500 million of EA's common stock.

Under the program, EA may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. EA is not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time.

Business Outlook as of July 31, 2012

The following forward-looking statements, as well as those made above, reflect expectations as of July 31, 2012. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors, including: product development delays; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; the financial impact of acquisitions by EA; the popular appeal of EA's products; EA's effective tax rate; and other factors detailed in this release and in EA's annual and quarterly SEC filings.

Fiscal Year 2013 Expectations — Ending March 31, 2013

  • GAAP net revenue is expected to be approximately $3.90 to $4.05 billion.
  • Non-GAAP net revenue is expected to be approximately $4.10 to $4.25 billion.
  • GAAP basic loss and diluted earnings per share is expected to be approximately ($0.17) to $0.05.
  • 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 323 million, and 320 million shares for calculating loss per share.
  • Expected non-GAAP net income excludes the following from expected GAAP net income (loss):
    • Non-GAAP net revenue is expected to be approximately $200 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
    • Approximately $160 million of estimated stock-based compensation;
    • Approximately $60 million of acquisition-related expenses;
    • Approximately $35 million of restructuring charges;
    • Approximately $20 million from the amortization of debt discount; and
    • Non-GAAP tax expense is expected to be approximately $80 million to $100 million higher than GAAP tax expense.

Second Quarter Fiscal Year 2013 Expectations — Ending September 30, 2012

  • GAAP net revenue is expected to be approximately $650 to $700 million.
  • Non-GAAP net revenue is expected to be approximately $1.05 to $1.10 billion.
  • GAAP diluted loss or earnings per share is expected to be approximately ($1.43) to ($1.36).
  • Non-GAAP diluted earnings per share is expected to be approximately $0.07 to $0.12.
  • For purposes of calculating first quarter fiscal year 2013 diluted earnings per share, the Company estimates a share count of 322 million, and 319 million shares for calculating loss per share.
  • Expected non-GAAP net income excludes the following from expected GAAP net income (loss):
    • Non-GAAP net revenue is expected to be approximately $400 million higher 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 $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 $2 million to $7 million lower than GAAP tax expense.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on July 31, 2012 at 2:00 pm PT (5:00 pm ET) to review its results for the first quarter ended June 30, 2012 and its outlook for the future. During the course of the call, Electronic Arts may disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: 773-799-3213 (domestic) or 888-677-1083 (international), using the password "EA" or via webcast at http://ir.ea.com.

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

A dial-in replay of the conference call will be provided until August 30, 2012 at the following number: 203-369-0099 (domestic) or 866-356-3373 (international). A webcast replay of the conference call will be available for one year at http://ir.ea.com.

Non-GAAP Financial Measures

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

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

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

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

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

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

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

Certain non-recurring litigation expenses. During the fourth quarter of fiscal 2012, Electronic Arts recognized a $27 million expense related to a 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.

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 Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

These forward-looking statements are current as of July 31, 2012. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

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

About Electronic Arts

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

EA, EA SPORTS, Origin, PopCap, The Sims, SimCity 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, STAR WARS and related properties are trademarks in the United States and/or in other countries of Lucasfilm Ltd and/or its affiliates. © 2011 Lucasfilm Entertainment Company Ltd. or Lucasfilm Ltd. 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
June 30,
  2012     2011
 
Net revenue
Product $ 702 $ 894
Service and other   253     105
Total net revenue 955 999
Cost of revenue
Product 132 212
Service and other   73     28
Total cost of revenue   205     240
Gross profit 750 759
 
Operating expenses:
Marketing and sales 145 140
General and administrative 86 74
Research and development 290 285
Acquisition-related contingent consideration (20 ) 2
Amortization of intangibles 7 13
Restructuring and other   27     18
Total operating expenses   535     532
 
Operating income 215 227
 
Interest and other income (expense), net   (5 )   3
 
Income before provision for income taxes 210 230
 
Provision for income taxes   9     9
 
Net income $ 201   $ 221
 
Earnings per share
Basic $ 0.63 $ 0.67
Diluted $ 0.63 $ 0.66
 
Number of shares used in computation
Basic 317 331
Diluted 320 337
 
  Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net income and earnings 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 loss and non-GAAP loss per share.
         
Three Months Ended
June 30,
  2012         2011  
 
Net income $ 201 $ 221
 
Acquisition-related expenses 2 18
Amortization of debt discount 5 -
Change in deferred net revenue (packaged goods and digital content) (464 ) (475 )
Restructuring and other 27 18
Stock-based compensation 39 38
Income tax adjustments   60     57  
 
Non-GAAP net loss $ (130 ) $ (123 )
 
Non-GAAP loss per share
Basic and diluted $ (0.41 ) $ (0.37 )
 
Number of shares used in Non-GAAP computation
Basic and diluted 317 331
 
           
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
 
June 30, March 31,
  2012

2012 (a)

 

 
ASSETS
 
Current assets:

Cash and cash equivalents

$ 919 $ 1,293
Short-term investments 444 437
Marketable equity securities 76 119
Receivables, net of allowances of $226 and $252, respectively 111 366
Inventories 60 59
Deferred income taxes, net 68 67
Other current assets   273   268  
Total current assets 1,951 2,609
 
Property and equipment, net 558 568
Goodwill 1,716 1,718
Acquisition-related intangibles, net 347 369
Deferred income taxes, net 44 42
Other assets   209   185  
 
TOTAL ASSETS $ 4,825 $ 5,491  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 50 $ 215
Accrued and other current liabilities 702 857
Deferred net revenue (packaged goods and digital content)   584   1,048  
Total current liabilities 1,336 2,120
 
0.75% convertible senior notes due 2016, net 544 539
Income tax obligations 198 189
Deferred income taxes, net 2 8
Other liabilities   193   177  
Total liabilities 2,273 3,033
 
Common stock 3 3
Paid-in capital 2,310 2,359
Retained earnings (accumulated deficit) 124 (77 )
Accumulated other comprehensive income   115   173  
Total stockholders' equity   2,552   2,458  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,825 $ 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
June 30,
  2012     2011  
 
OPERATING ACTIVITIES
 
Net income $ 201 $ 221
Adjustments to reconcile net income to net cash used in operating activities:
Acquisition-related contingent consideration (20 ) 2
Depreciation, amortization and accretion, net 56 43
Non-cash restructuring charges 7 -
Stock-based compensation 39 38
Change in assets and liabilities:
Receivables, net 254 307
Inventories (2 ) 4
Other assets (29 ) (101 )
Accounts payable (157 ) (133 )
Accrued and other liabilities (119 ) (181 )
Deferred income taxes, net (10 ) 1
Deferred net revenue (packaged goods and digital content)   (464 )   (475 )
Net cash used in operating activities   (244 )   (274 )
 
INVESTING ACTIVITIES
 
Capital expenditures (31 ) (32 )
Proceeds from maturities and sales of short-term investments 128 83
Purchase of short-term investments (137 ) (90 )
Acquisition of subsidiaries, net of cash acquired   -     (25 )
Net cash used in investing activities   (40 )   (64 )
 
FINANCING ACTIVITIES
 
Proceeds from issuance of common stock - 14
Excess tax benefit from stock-based compensation - 2
Repurchase and retirement of common stock (71 ) (91 )
Acquisition-related contingent consideration payment   (1 )   -  
 
Net cash used in financing activities   (72 )   (75 )
 
Effect of foreign exchange on cash and cash equivalents   (18 )   7  
Decrease in cash and cash equivalents (374 ) (406 )
Beginning cash and cash equivalents   1,293     1,579  
Ending cash and cash equivalents $ 919   $ 1,173  
 
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                           
Q1 Q2 Q3 Q4 Q1 YOY %
FY12 FY12 FY12 FY12 FY13 Change
 
QUARTERLY RECONCILIATION OF RESULTS
 
Net Revenue
GAAP net revenue $ 999 $ 715 $ 1,061 $ 1,368 $ 955 (4 %)
Change in deferred net revenue (packaged goods and digital content)   (475 )   319     590     (391 )   (464 )
Non-GAAP net revenue $ 524   $ 1,034   $ 1,651   $ 977   $ 491   (6 %)
 
Gross Profit
GAAP gross profit $ 759 $ 283 $ 509 $ 994 $ 750 (1 %)
Acquisition-related expenses 3 8 14 27 15
Change in deferred net revenue (packaged goods and digital content) (475 ) 319 590 (391 ) (464 )
Stock-based compensation   1     -     -     1     1  
Non-GAAP gross profit $ 288   $ 610   $ 1,113   $ 631   $ 302   5 %
GAAP gross profit % (as a % of GAAP net revenue) 76 % 40 % 48 % 73 % 79 %
Non-GAAP gross profit % (as a % of non-GAAP net revenue) 55 % 59 % 67 % 65 % 62 %
 
Operating Income (Loss)
GAAP operating income (loss) $ 227 $ (374 ) $ (183 ) $ 365 $ 215 (5 %)
Acquisition-related expenses 18 38 14 36 2
Certain non-recurring litigation expenses - - - 27 -
Change in deferred net revenue (packaged goods and digital content) (475 ) 319 590 (391 ) (464 )
Restructuring and other 18 (1 ) - (1 ) 27
Stock-based compensation   38     43     48     41     39  
Non-GAAP operating income (loss) $ (174 ) $ 25   $ 469   $ 77   $ (181 ) (4 %)
GAAP operating income (loss) % (as a % of GAAP net revenue) 23 % (52 %) (17 %) 27 % 23 %
Non-GAAP operating income (loss) % (as a % of non-GAAP net revenue) (33 %) 2 % 28 % 8 % (37 %)
 
Net Income (Loss)
GAAP net income (loss) $ 221 $ (340 ) $ (205 ) $ 400 $ 201 (9 %)
Acquisition-related expenses 18 38 14 36 2
Amortization of debt discount - 4 5 5 5
Certain non-recurring litigation expenses - - - 27 -
Change in deferred net revenue (packaged goods and digital content) (475 ) 319 590 (391 ) (464 )
Restructuring and other 18 (1 ) - (1 ) 27
Stock-based compensation 38 43 48 41 39
Income tax adjustments   57     (46 )   (118 )   (61 )   60  
Non-GAAP net income (loss) $ (123 ) $ 17   $ 334   $ 56   $ (130 ) (6 %)
GAAP net income (loss) % (as a % of GAAP net revenue) 22 % (48 %) (19 %) 29 % 21 %
Non-GAAP net income (loss) % (as a % of non-GAAP net revenue) (23 %) 2 % 20 % 6 % (26 %)
 
Diluted Earnings (Loss) Per Share
GAAP earnings (loss) per share $ 0.66 $ (1.03 ) $ (0.62 ) $ 1.20 $ 0.63 (5 %)
Non-GAAP earnings (loss) per share $ (0.37 ) $ 0.05 $ 0.99 $ 0.17 $ (0.41 ) (11 %)
 
Number of diluted shares used in computation
GAAP 337 331 332 332 320
Non-GAAP 331 337 338 332 317
 
                       
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
 
Q1 Q2 Q3 Q4 Q1 YOY %
FY12 FY12 FY12 FY12 FY13 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Geography Net Revenue
North America 501 337 500 653 450 (10 %)
Europe 438 328 505 627 435 (1 %)
Asia 60   50   56   88   70   17 %
Total GAAP Net Revenue 999   715   1,061   1,368   955   (4 %)
North America (240 ) 144 310 (188 ) (265 )
Europe (215 ) 174 235 (187 ) (174 )
Asia (20 ) 1   45   (16 ) (25 )
Change In Deferred Net Revenue (Packaged Goods and Digital Content) (475 ) 319   590   (391 ) (464 )
North America 261 481 810 465 185 (29 %)
Europe 223 502 740 440 261 17 %
Asia 40   51   101   72   45   13 %
Total Non-GAAP Net Revenue 524   1,034   1,651   977   491   (6 %)
 
North America 50 % 47 % 47 % 48 % 47 %
Europe 44 % 46 % 48 % 46 % 46 %
Asia 6 % 7 % 5 % 6 % 7 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
North America 50 % 46 % 49 % 48 % 38 %
Europe 42 % 49 % 45 % 45 % 53 %
Asia 8 % 5 % 6 % 7 % 9 %
Total Non-GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
 
Net Revenue Composition
Publishing and Other 647 450 738 926 592 (9 %)
Wireless, Internet-derived, and Advertising (Digital) 232 234 274 419 342 47 %
Distribution 120   31   49   23   21   (83 %)
Total GAAP Net Revenue 999   715   1,061   1,368   955   (4 %)
Publishing and Other (452 ) 337 487 (397 ) (446 )
Wireless, Internet-derived, and Advertising (Digital) (23 ) (18 ) 103   6   (18 )
Change In Deferred Net Revenue (Packaged Goods and Digital Content) (475 ) 319   590   (391 ) (464 )
Publishing and Other 195 787 1,225 529 146 (25 %)
Wireless, Internet-derived, and Advertising (Digital) 209 216 377 425 324 55 %
Distribution 120   31   49   23   21   (83 %)
Total Non-GAAP Net Revenue 524   1,034   1,651   977   491   (6 %)
 
Publishing and Other 65 % 63 % 69 % 68 % 62 %
Wireless, Internet-derived, and Advertising (Digital) 23 % 33 % 26 % 30 % 36 %
Distribution 12 % 4 % 5 % 2 % 2 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
Publishing and Other 37 % 76 % 74 % 54 % 30 %
Wireless, Internet-derived, and Advertising (Digital) 40 % 21 % 23 % 44 % 66 %
Distribution 23 % 3 % 3 % 2 % 4 %
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)
   
Q1 Q2 Q3 Q4 Q1 YOY %
FY12 FY12 FY12 FY12 FY13 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Platform Net Revenue
Xbox 360 345 213 331 454 292 (15 %)
PLAYSTATION 3 308 169 314 432 267 (13 %)
Wii 42 35 49 20 8 (81 %)
PlayStation 2 3   15   7   3   2   (33 %)
Total Consoles 698 432 701 909 569 (18 %)
Mobile 57 55 70 87 69 21 %
PlayStation Handhelds 11 17 14 6 10 (9 %)
Nintendo Handhelds 8   7   15   5   9   13 %
Total Mobile and Handhelds 76 79 99 98 88 16 %
PC 205 178 214 334 276 35 %
Other 20   26   47   27   22   10 %
Total GAAP Net Revenue 999   715   1,061   1,368   955   (4 %)
Xbox 360 (193 ) 140 174 (128 ) (186 )
PLAYSTATION 3 (197 ) 205 179 (210 ) (183 )
Wii (26 ) (1 ) 3 (7 ) (5 )
PlayStation 2 - - - - (1 )
Mobile - - 13 (3 ) 9
PlayStation Handhelds (6 ) - (2 ) 10 (4 )
Nintendo Handhelds (2 ) - 9 (5 ) (4 )
PC (51 ) (25 ) 214   (48 ) (90 )
Change in Deferred Net Revenue (Packaged Goods and Digital Content) (475 ) 319   590   (391 ) (464 )
Xbox 360 152 353 505 326 106 (30 %)
PLAYSTATION 3 111 374 493 222 84 (24 %)
Wii 16 34 52 13 3 (81 %)
PlayStation 2 3   15   7   3   1   (67 %)
Total Consoles 282 776 1,057 564 194 (31 %)
Mobile 57 55 83 84 78 37 %
PlayStation Handhelds 5 17 12 16 6 20 %
Nintendo Handhelds 6   7   24   -   5   (17 %)
Total Mobile and Handhelds 68 79 119 100 89 31 %
PC 154 153 428 286 186 21 %
Other 20   26   47   27   22   10 %
Total Non-GAAP Net Revenue 524   1,034   1,651   977   491   (6 %)
 
Xbox 360 35 % 30 % 31 % 33 % 31 %
PLAYSTATION 3 31 % 23 % 29 % 32 % 28 %
Wii 4 % 5 % 5 % 1 % 1 %
PlayStation 2 -   2 % 1 % -   -  
Total Consoles 70 % 60 % 66 % 66 % 60 %
Mobile 6 % 8 % 7 % 6 % 7 %
PlayStation Handhelds 1 % 2 % 1 % 1 % 1 %
Nintendo Handhelds 1 % 1 % 1 % -   1 %
Total Mobile and Handhelds 8 % 11 % 9 % 7 % 9 %
PC 20 % 25 % 20 % 25 % 29 %
Other 2 % 4 % 5 % 2 % 2 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
Xbox 360 29 % 34 % 31 % 34 % 22 %
PLAYSTATION 3 21 % 36 % 30 % 23 % 17 %
Wii 3 % 4 % 3 % 1 % 1 %
PlayStation 2 1 % 1 % -   -   -  
Total Consoles 54 % 75 % 64 % 58 % 40 %
Mobile 11 % 5 % 5 % 8 % 16 %
PlayStation Handhelds 1 % 2 % 1 % 2 % 1 %
Nintendo Handhelds 1 % 1 % 1 % -   1 %
Total Mobile and Handhelds 13 % 8 % 7 % 10 % 18 %
PC 29 % 15 % 26 % 29 % 38 %
Other 4 % 2 % 3 % 3 % 4 %
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)
 
Q1 Q2 Q3 Q4 Q1 YOY %
FY12 FY12 FY12 FY12 FY13 Change
 
CASH FLOW DATA
 
Operating cash flow (274 ) (211 ) 475 287 (244 ) 11 %
Operating cash flow - TTM 194 117 243 277 307 58 %
Capital expenditures 32 52 44 44 31 (3 %)
Capital expenditures - TTM 80 120 149 172 171 114 %
 
BALANCE SHEET DATA
 
Cash and cash equivalents 1,173 930 1,242 1,293 919 (22 %)
Short-term investments 503 355 406 437 444 (12 %)
Marketable equity securities 172 214 143 119 76 (56 %)
Receivables, net 30 562 526 366 111 270 %
Inventories 75 90 69 59 60 (20 %)
Deferred net revenue (packaged goods and digital content)
End of the quarter 530 849 1,439 1,048 584
Less: Beginning of the quarter 1,005   530   849 1,439   1,048  
Change in deferred net revenue (packaged goods and digital content) (475 ) 319   590 (391 ) (464 )
 
STOCK-BASED COMPENSATION
 
Cost of goods sold 1 - - 1 1
Marketing and sales 5 6 7 8 7
General and administrative 9 9 11 7 9
Research and development 23   28   30 25   22  
Total Stock-Based Compensation 38   43   48 41   39  
 
EMPLOYEES 7,973 8,687 9,043 9,158 9,225 16 %
 

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

Source: Electronic Arts Inc.

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