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REDWOOD CITY, Calif.--(BUSINESS WIRE)--Aug. 1, 2007--Electronic Arts (NASDAQ: ERTS) today announced preliminary financial results for its fiscal first quarter ended June 30, 2007.
Fiscal First Quarter Results (comparisons are to the quarter ended June 30, 2006)
Net revenue for the quarter was $395 million, down four percent as compared with $413 million for the prior year. Beginning this quarter, EA no longer charges for hosting services related to certain online-enabled packaged goods games. As a result, the Company recognizes revenue from the sale of these games over the estimated hosting service period. This change resulted in a $36 million sequential increase in deferred net revenue as of June 30, 2007, which will be recognized in future periods.
Sales were driven by Harry Potter and the Order of the Phoenix™, Command & Conquer 3 Tiberium Wars™, The Sims™ 2 Pets, Need for Speed™ Carbon and The Sims 2.
Gross profit for the quarter was $229 million, down seven percent year-over-year. Net loss for the quarter was $132 million as compared with a net loss of $81 million for the prior year. Diluted loss per share was $0.42 as compared with $0.26 for the prior year.
Non-GAAP diluted loss per share was $0.22 as compared with a non-GAAP loss per share of $0.12 for the prior year. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)
Trailing twelve month operating cash flow was $243 million as compared with $589 million a year ago. The Company ended the quarter with cash and short term investments of $2.2 billion.
"In the last three months we announced the reorganization of our business into four Labels and welcomed Kathy Vrabeck and Peter Moore to EA," said John Riccitiello, Chief Executive Officer. "I'm pleased that our team, structure and strategy are coming together quickly."
"Looking ahead, we have a strong slate," said Warren Jenson, Chief Financial and Administrative Officer. "In the balance of the fiscal year, we plan to launch our full EA SPORTS lineup, Need for Speed Pro Street, MySims, Medal of Honor Airborne and ten new properties, including Army of Two, The Simpsons, SKATE, Boogie and Rock Band."
Highlights
-- EA to launch 10 new properties this fiscal year - Boogie™,
EA Playground™, Army of Two™, SKATE, Warhammer®
Online, The Simpsons™ Game, Smarty Pants, a Wii™ title
jointly developed with Steven Spielberg, Rock Band™ and
Crysis™.
-- At the E3 Summit - EA won six Best of E3 Awards for Madden NFL
08, Burnout™ Paradise, Crysis and Rock Band.
-- EA announced the reorganization of its business into four
Labels: EA SPORTS™, EA Games, EA Casual Entertainment and
The Sims; each Label to operate with dedicated studio and
marketing teams focused on consumer-driven priorities.
-- Kathy Vrabeck joined EA as president of the newly announced EA
Casual Entertainment Label to focus on casual and family
oriented games.
-- Peter Moore is joining EA in September as president of the EA
SPORTS Label.
-- EA continued its expansion in Asia with a 15 percent equity
investment in Chinese online game operator The9 Limited and an
agreement to bring EA SPORTS FIFA Online to China. In
addition, the Company completed its 19 percent equity
investment in Korea-based online gaming company, Neowiz
Corporation.
Business Outlook
The following forward-looking statements, as well as those made above, reflect expectations as of August 1, 2007. Results may be materially different and are affected by many factors, such as: consumer demand for next-generation consoles and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; consumer demand for games for prior-generation consoles, particularly the PlayStation®2 computer entertainment system; the popular appeal of EA's products; development delays on EA's products; changes in foreign exchange rates; the impact of EA's reorganization on its operations; the overall global economy; competition in the industry; EA's effective tax rate and other factors detailed in this release and in EA's annual and quarterly SEC filings.
Fiscal Year Expectations - Ending March 31, 2008
-- Net revenue is expected to be between $3.2 and $3.5 billion -
up $100 million from the Company's previous guidance.
-- Net revenue excluding the impact of the change in deferred net
revenue (packaged goods and digital content) is expected to be
between $3.65 and $3.85 billion - up $50 million from the
Company's previous guidance.
-- GAAP diluted loss per share is expected to be between ($0.63)
and ($0.10) - up from the Company's previous guidance of
($0.77) to ($0.23).
-- Non-GAAP diluted earnings per share are expected to be between
$0.90 and $1.20 - consistent with the Company's previous
guidance. Expected non-GAAP diluted earnings per share exclude
the following items from expected GAAP diluted loss per share:
approximately $0.82 to $1.05 for the impact of the change in
deferred net revenue (packaged goods and digital content);
approximately $0.31 of estimated stock-based compensation;
approximately $0.13 of amortization of intangible assets; and
approximately $0.04 of estimated restructuring charges related
to the reorganization and establishment of an international
publishing headquarters in Geneva.
Fiscal Second Quarter Expectations - Ending September 30, 2007
-- Net revenue is expected to be between $465 and $570 million.
-- Net revenue excluding the impact of the change in deferred net
revenue (packaged goods and digital content) is expected to be
between $825 and $910 million.
-- GAAP diluted loss per share is expected to be between ($0.92)
and ($0.76).
-- Non-GAAP diluted earnings per share are expected to be between
$0.10 and $0.20. Expected non-GAAP earnings per share excludes
the following items from expected GAAP diluted loss per share:
approximately $0.84 to $0.90 for the impact of the change in
deferred net revenue (packaged goods and digital content);
approximately $0.08 of estimated stock-based compensation;
approximately $0.03 of amortization of intangible assets; and
approximately $0.01 of restructuring charges related to the
reorganization and establishment of an international
publishing headquarters in Geneva.
Conference Call
Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the first quarter fiscal 2008 ended June 30, 2007 and its outlook for the future. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: (800) 946-0742, access code 220497, or via webcast: http://investor.ea.com.
A dial-in replay of the conference call will be provided until August 8, 2007 at (719) 457-0820, access code 220497. A webcast archive of the conference call will be available for one year at http://investor.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 from the Company's unaudited condensed consolidated statements of operations:
-- The impact of the change in deferred net revenue (packaged
goods and digital content)
-- Acquired in-process technology
-- Amortization of intangibles
-- Certain litigation expenses
-- Restructuring charges
-- Stock-based compensation
-- Income tax adjustments (consisting of the income tax effect of
the items listed above and certain one-time 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:
Amortization of Intangibles. 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) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of acquired intangible assets to its financial results. Electronic Arts believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets.
In addition, in accordance with GAAP, Electronic Arts generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired in-process technology, which is expensed immediately, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, Electronic Arts believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that excludes the amortization of acquired intangibles.
Stock-Based Compensation. Electronic Arts adopted SFAS 123®, "Share-Based Payment" beginning in its fiscal year 2007. 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.
Video game platforms have historically had a life cycle of four to six years, which causes the video game software market to be cyclical. The Company's management analyzes its business and operating performance in the context of these business cycles, comparing Electronic Arts' performance at similar stages of different cycles. For comparability purposes, Electronic Arts believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its core business.
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. The Company does not engage in restructuring activities on a regular basis or in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures.
Change in Deferred Net Revenue (Packaged Goods and Digital Content). Beginning in fiscal 2008, Electronic Arts is no longer able to objectively determine the fair value of the online hosting services included in certain of its packaged goods games and online content. As a result, the Company recognizes the revenue from the sale of these games and content over the estimated online service period. Although Electronic Arts will defer the recognition of a significant portion of its net revenue as a result of this change, there will be no adverse impact to its operating cash flow. 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 facilitate an understanding of the cash characteristics of its business, as well as comparisons to prior periods during which the Company was able to objectively determine the fair value of online hosting services and not delay the recognition of significant amounts of net revenue related to online-enabled packaged goods.
In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to each of the historical non-GAAP financial measures used in this press release.
Forward-Looking Statements
Some statements set forth in this release, including the estimates under the headings "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 subject to 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: timely development and release of Electronic Arts' products; competition in the interactive entertainment industry; the Company's ability to successfully implement its reorganization; the consumer demand for, and the availability of an adequate supply of next-generation hardware units (including the Xbox 360™ video game and entertainment system, the PLAYSTATION®3 computer entertainment system and the Wii™); consumer demand for software for prior-generation consoles, particularly the PlayStation 2; the Company's ability to predict consumer preferences among competing hardware platforms; consumer spending trends; the seasonal and cyclical nature of the interactive game segment; the Company's ability to manage expenses during fiscal year 2008; the Company's ability to attract and retain key personnel; changes in the Company's effective tax rates; adoption of new accounting regulations and standards; potential regulation of the Company's products in key territories; developments in the law regarding protection of the Company's products; fluctuations in foreign exchange rates; the Company's ability to secure licenses to valuable entertainment properties on favorable terms; and other factors described in the Company's Annual Report on Form 10-K for the year ended March 31, 2007. These forward-looking statements speak only as of August 1, 2007. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements, including those made under the heading "Business Outlook". In addition, the 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, 2007. 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, 2007.
About Electronic Arts
Electronic Arts Inc. (EA), headquartered in Redwood City, California, is the world's leading interactive entertainment software company. Founded in 1982, the company develops, publishes, and distributes interactive software worldwide for video game systems, personal computers, cellular handsets and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS™, EA™, EA SPORTS BIG™ and POGO™. In fiscal 2007, EA posted revenue of $3.09 billion and had 24 titles that sold more than one million copies. EA's homepage and online game site is www.ea.com. More information about EA's products and full text of press releases can be found on the Internet at http://info.ea.com.
EA, EA SPORTS, EA SPORTS BIG, POGO, Army of Two, Boogie, Burnout, Command & Conquer 3 Tiberium Wars, EA Playground, Medal of Honor Airborne and The Sims are trademarks or registered trademarks of Electronic Arts Inc. in the U.S. and/or other countries. Crysis is a trademark of Crytek. Warhammer is a trademark of Games Workshop Ltd. Rock Band is a trademark of Harmonix Music Systems, Inc., a division of MTV Networks. The Simpsons is a trademark of Twentieth Century Fox Film Corporation. The mark "John Madden" is a trademark or other intellectual property of Red Bear, Inc. or John Madden, and are subject to license to Electronic Arts Inc., NFL is a trademark of the National Football League. HARRY POTTER characters, names and related indicia are trademarks of and © Warner Bros. Entertainment Inc. Harry Potter Publishing Rights © JKR. "PlayStation" and "PLAYSTATION" are registered trademark of Sony Computer Entertainment Inc. Xbox and Xbox 360 are trademarks of the Microsoft group of companies. Wii is a trademark of Nintendo.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
Three Months
Ended
June 30,
---------------
2007 2006
------- -------
Net revenue $ 395 $ 413
Cost of goods sold 166 168
------- -------
Gross profit 229 245
Operating expenses:
Marketing and sales 82 77
General and administrative 71 59
Research and development 250 216
Amortization of intangibles 7 6
Restructuring charges 2 6
------- -------
Total operating expenses 412 364
------- -------
Operating loss (183) (119)
Interest and other income, net 27 21
------- -------
Loss before benefit from income taxes (156) (98)
Benefit from income taxes (24) (17)
------- -------
Net loss $ (132) $ (81)
======= =======
Loss per share:
Basic and Diluted $(0.42) $(0.26)
Number of shares used in computation:
Basic and Diluted 311 306
Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net loss and loss per
share as presented in its Unaudited Condensed Consolidated Statements
of Operations as prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") to its non-GAAP net loss and non-GAAP
loss per share. The Company's non-GAAP results exclude the following,
if any: the impact of the change in deferred net revenue (packaged
goods and digital content), acquisition-related expenses (such as
acquired in-process technology and amortization of intangibles),
certain litigation expenses, restructuring charges, and stock-based
compensation. In addition, the Company's non-GAAP results exclude
income tax adjustments consisting of the income tax expense
associated with the foregoing excluded items and the impact of
certain one-time income tax adjustments.
Three Months
Ended
June 30,
---------------
2007 2006
------- -------
Net loss $ (132) $ (81)
Change in deferred net revenue (packaged goods and
digital content) (a) 36 -
Amortization of intangibles 7 6
COGS amortization of intangibles 7 6
Restructuring charges 2 6
Stock-based compensation 28 37
Income tax adjustments (17) (12)
------- -------
Non-GAAP net loss $ (69) $ (38)
======= =======
Non-GAAP loss per share $(0.22) $(0.12)
Number of shares used in non-GAAP loss per share
computation 311 306
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
June 30, March 31,
2007 2007 (a)
-------- ---------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $ 2,189 $ 2,635
Marketable equity securities 660 341
Receivables, net of allowances of $176 and
$214, respectively 123 256
Inventories 74 62
Deferred income taxes, net 97 84
Other current assets 252 219
-------- ---------
Total current assets 3,395 3,597
Property and equipment, net 494 484
Investment in affiliates 33 6
Goodwill 736 734
Other intangibles, net 196 210
Deferred income taxes, net 66 25
Other assets 105 90
-------- ---------
TOTAL ASSETS $ 5,025 $ 5,146
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 119 $ 180
Accrued and other current liabilities 415 814
Deferred net revenue (packaged goods and
digital content) 68 32
-------- ---------
Total current liabilities 602 1,026
Income tax obligations 283 -
Deferred income taxes, net 7 8
Other liabilities 80 80
-------- ---------
Total liabilities 972 1,114
Stockholders' equity:
Common stock 3 3
Paid-in capital 1,480 1,412
Retained earnings 2,209 2,323
Accumulated other comprehensive income 361 294
-------- ---------
Total stockholders' equity 4,053 4,032
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,025 $ 5,146
======== =========
(a) Derived from audited financial statements.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
Three Months Ended
June 30,
--------------------
2007 2006
--------- ---------
OPERATING ACTIVITIES
Net loss $ (132) $ (81)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, amortization and accretion 36 35
Stock-based compensation 28 37
Change in assets and liabilities:
Receivables, net 138 159
Inventories (10) 3
Other assets (45) 12
Accounts payable (74) (50)
Accrued and other liabilities (133) (142)
Deferred income taxes, net (36) (11)
Deferred net revenue (packaged goods and
digital content) 36 -
--------- ---------
Net cash used in operating activities (192) (38)
--------- ---------
INVESTING ACTIVITIES
Capital expenditures (14) (38)
Purchase of marketable equity securities and
investments in affiliates (277) -
Proceeds from maturities and sales of short-
term investments 641 196
Purchase of short-term investments (897) (147)
--------- ---------
Net cash provided by (used in) investing
activities (547) 11
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 18 37
Excess tax benefit from stock-based
compensation 8 4
Repayment of note assumed in connection with
acquisition - (14)
--------- ---------
Net cash provided by financing activities 26 27
--------- ---------
Effect of foreign exchange on cash and cash
equivalents 5 6
--------- ---------
Increase (decrease) in cash and cash equivalents (708) 6
Beginning cash and cash equivalents 1,371 1,242
--------- ---------
Ending cash and cash equivalents 663 1,248
Short-term investments 1,526 983
--------- ---------
Ending cash, cash equivalents and short-term
investments $ 2,189 $ 2,231
========= =========
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 %
FY07 FY07 FY07 FY07 FY08 Change
--------- ------- ------- --------- --------- ------
CONSOLIDATED
FINANCIAL DATA
Net revenue 413 784 1,281 613 395 (4%)
Net revenue -
trailing
twelve months
("TTM") 2,999 3,108 3,119 3,091 3,073 2%
Gross profit 245 445 811 378 229 (7%)
Gross
margin - %
of net
revenue 59% 57% 63% 62% 58%
Gross profit -
TTM 1,801 1,855 1,898 1,879 1,863 3%
Gross
margin -
TTM % of
net
revenue 60% 60% 61% 61% 61%
Operating
income (loss) (119) 14 215 (71) (183) (54%)
Operating
income
(loss)
margin - %
of net
revenue (29%) 2% 17% (12%) (46%)
Operating
income (loss)
- TTM 302 267 135 39 (25) (108%)
Operating
income
(loss)
margin -
TTM % of
net
revenue 10% 9% 4% 1% (1%)
Net income
(loss) (81) 22 160 (25) (132) (63%)
Diluted
earnings
(loss) per
share ($0.26) $0.07 $0.50 ($0.08) ($0.42) (62%)
Net income -
TTM 213 184 85 76 25 (88%)
Diluted
earnings
per share
- TTM $0.68 $0.59 $0.26 $0.24 $0.07 (90%)
CASH FLOW DATA
Operating cash
flow (38) (6) 227 214 (192) (405%)
Operating cash
flow - TTM 589 571 520 397 243 (59%)
Capital
expenditures 38 48 32 60 14 (63%)
Capital
expenditures -
TTM 128 153 154 178 154 20%
BALANCE SHEET
DATA
Cash, cash
equivalents
and short-term
investments 2,231 2,172 2,411 2,635 2,189 (2%)
Marketable
equity
securities 166 204 235 341 660 298%
Receivables,
net 41 267 551 256 123 200%
Inventories 59 67 72 62 74 25%
Deferred net
revenue
(packaged
goods and
digital
content) (a) 32 68 N/M
STOCK-BASED
COMPENSATION
Cost of goods
sold - 1 - 1 -
Marketing and
sales 5 4 5 3 4
General and
administrative 11 9 10 7 8
Research and
development 21 19 20 17 16
--------- ------- ------- --------- ---------
Total Stock-
Based
Compensation 37 33 35 28 28
STOCK-BASED
COMPENSATION -
as a % of Net
Revenue
Cost of goods
sold - - - - -
Marketing and
sales 1% 1% - 1% 1%
General and
administrative 3% 1% 1% 1% 2%
Research and
development 5% 2% 2% 3% 4%
--------- ------- ------- --------- ---------
Total Stock-
Based
Compensation 9% 4% 3% 5% 7%
OTHER
Employees 7,116 7,517 7,761 7,893 8,101 14%
Diluted
weighted-
average shares 306 315 319 310 311
GEOGRAPHIC NET
REVENUE MIX
North America 209 512 637 307 163 (22%)
International 204 272 644 306 232 14%
Europe 169 245 583 264 204 21%
Asia 35 27 61 42 28 (20%)
--------- ------- ------- --------- ---------
Net
Revenue 413 784 1,281 613 395 (4%)
GEOGRAPHIC NET
REVENUE MIX -
as a % of Net
Revenue
North America 51% 65% 50% 50% 41%
International 49% 35% 50% 50% 59%
Europe 41% 31% 45% 43% 52%
Asia 8% 4% 5% 7% 7%
--------- ------- ------- --------- ---------
Net
Revenue 100% 100% 100% 100% 100%
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
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 %
FY07 FY07 FY07 FY07 FY08 Change
--------- ------- ------- --------- --------- ------
PLATFORM NET
REVENUE MIX
PlayStation 2 99 269 400 117 61 (38%)
Xbox 360 61 166 172 82 47 (23%)
Wii - - 29 36 29 N/M
PLAYSTATION 3 - - 41 52 13 N/M
Xbox 23 65 62 7 3 (87%)
Nintendo
GameCube 11 14 32 4 1 (91%)
--------- ------- ------- --------- ---------
Total
Consoles 194 514 736 298 154 (21%)
PC 66 86 218 128 89 35%
Cellular
Handsets 33 35 35 36 33 -
Nintendo DS 8 14 55 27 25 213%
PSP 37 64 118 39 21 (43%)
Game Boy
Advance 7 8 21 3 2 (71%)
--------- ------- ------- --------- ---------
Total Mobility 85 121 229 105 81 (5%)
Co-publishing
and
Distribution 42 39 49 45 39 (7%)
Subscription
Services 16 15 24 24 23 44%
Licensing,
Advertising &
Other 10 9 25 13 9 (10%)
--------- ------- ------- --------- ---------
Total
Internet
Services,
Licensing &
Other 26 24 49 37 32 23%
--------- ------- ------- --------- ---------
Net
Revenue 413 784 1,281 613 395 (4%)
--------- ------- ------- --------- ---------
PLATFORM NET
REVENUE MIX -
as a % of Net
Revenue
PlayStation 2 24% 35% 31% 19% 16%
Xbox 360 15% 21% 13% 13% 12%
Wii - - 2% 6% 7%
PLAYSTATION 3 - - 3% 9% 3%
Xbox 5% 8% 5% 1% 1%
Nintendo
GameCube 3% 2% 3% 1% -
--------- ------- ------- --------- ---------
Total
Consoles 47% 66% 57% 49% 39%
PC 16% 11% 17% 21% 23%
Cellular
Handsets 8% 4% 3% 6% 8%
Nintendo DS 2% 2% 4% 5% 6%
PSP 9% 8% 9% 6% 5%
Game Boy
Advance 2% 1% 2% - 1%
--------- ------- ------- --------- ---------
Total Mobility 21% 15% 18% 17% 20%
Co-publishing
and
Distribution 10% 5% 4% 7% 10%
Subscription
Services 4% 2% 2% 4% 6%
Licensing,
Advertising &
Other 2% 1% 2% 2% 2%
--------- ------- ------- --------- ---------
Total
Internet
Services,
Licensing &
Other 6% 3% 4% 6% 8%
--------- ------- ------- --------- ---------
Net Revenue 100% 100% 100% 100% 100%
--------- ------- ------- --------- ---------
PLATFORM SKU
RELEASE MIX (a)
PlayStation 2 2 8 6 6 1 (50%)
Xbox 360 2 7 5 4 2 -
PLAYSTATION 3 - - 4 3 1 N/M
Wii - - 2 4 2 N/M
Xbox 2 7 2 - - (100%)
Nintendo
GameCube 1 2 2 - - (100%)
--------- ------- ------- --------- ---------
Total
Consoles 7 24 21 17 6 (14%)
PC 5 6 9 6 5 -
Nintendo DS 1 2 3 2 2 100%
PSP 2 9 5 2 1 (50%)
Game Boy
Advance 1 2 3 - - (100%)
--------- ------- ------- --------- ---------
Total
Mobility 4 13 11 4 3 (25%)
--------- ------- ------- --------- ---------
Total SKUs 16 43 41 27 14 (13%)
--------- ------- ------- --------- ---------
(a) Cellular handsets are not included in SKU count.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Fact Sheet for Q1 Fiscal 2008
Q1 Product Releases (i) Platform
-- Harry Potter AND THE ORDER OF THE PHOENIX(TM) PlayStation(R)2
-- Command & Conquer 3 Tiberium Wars(TM) Xbox 360(TM)
-- Harry Potter AND THE ORDER OF THE PHOENIX Xbox 360
-- Harry Potter AND THE ORDER OF THE PHOENIX Wii(TM)
-- The Sims(TM) 2 Pets Wii
-- Harry Potter AND THE ORDER OF THE PHOENIX PLAYSTATION(R)3
-- Harry Potter AND THE ORDER OF THE PHOENIX PC
-- The Sims(TM) 2 Celebration! Stuff PC
-- The Sims(TM) 2 Deluxe Edition PC
-- The Sims(TM) 2 H&M(R) Fashion Stuff PC
-- The Sims(TM) Pet Stories PC
-- Harry Potter AND THE ORDER OF THE PHOENIX Cellular Handsets
-- The Sims(TM )Bowling Cellular Handsets
-- ESPN(R) Bassmaster(R) Cellular Handsets
-- NCAA(R) Football 08 Cellular Handsets
-- Bejeweled(R) Cellular Handsets
-- Harry Potter AND THE ORDER OF THE PHOENIX PSP(R)
-- Harry Potter AND THE ORDER OF THE PHOENIX Nintendo DS(TM)
-- SimCity(TM) DS Nintendo DS
Co-publishing, Distribution, and International
only (ii)
-- Boom Boom Rocket(TM) (iii) Xbox 360
(i) Cellular handsets are not included in SKU count.
(ii) Co-publishing, distribution, and international only are not
included in SKU count.
(iii) Xbox Live casual game
All trademarks are the property of their respective owners.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Results
(in millions, except per share data)
The following tables reconcile the Company's net revenue, gross
profit, operating income (loss), net income (loss) and diluted
earnings (loss) per share as presented in its Unaudited Condensed
Consolidated Statements of Operations as prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") with its non-GAAP
net revenue, non-GAAP gross profit, non-GAAP operating income (loss),
non-GAAP net income (loss), and non-GAAP diluted earnings (loss) per
share. The Company's non-GAAP net revenue excludes the impact of the
change in deferred net revenue (packaged goods and digital content).
The Company's non-GAAP gross profit excludes the impact of the change
in deferred net revenue (packaged goods and digital content), COGS
amortization of intangibles, and stock-based compensation. The
Company's non-GAAP operating income (loss), non-GAAP net income
(loss), and non-GAAP diluted earnings (loss) per share exclude the
impact of the change in deferred net revenue (packaged goods and
digital content), acquired in-process technology, amortization of
intangibles, restructuring charges, and stock-based compensation. In
addition, the Company's non-GAAP net income (loss) and non-GAAP
diluted earnings (loss) per share exclude income tax adjustments
consisting of the income tax expense associated with the foregoing
excluded items and the impact of certain one-time income tax
adjustments.
Q1 Q2 Q3 Q4 Q1 YOY %
FY07 FY07 FY07 FY07 FY08 Change
--------- ------- ------- --------- --------- ------
QUARTERLY
RECONCILIATION
OF RESULTS
GAAP net
revenue $ 413 $ 784 $1,281 $ 613 $ 395 (4%)
Change in
deferred net
revenue
(packaged
goods and
digital
content) (a)
36
--------- ------- ------- --------- ---------
Non-GAAP net
revenue (a) $ 413 $ 784 $1,281 $ 613 $ 431 4%
========= ======= ======= ========= =========
GAAP gross
profit $ 245 $ 445 $ 811 $ 378 $ 229 (7%)
Change in
deferred net
revenue
(packaged
goods and
digital
content) (a) 36
COGS
amortization
of
intangibles 6 7 7 7 7
Stock-based
compensation - 1 - 1 -
--------- ------- ------- --------- ---------
Non-GAAP gross
profit $ 251 $ 453 $ 818 $ 386 $ 272 8%
========= ======= ======= ========= =========
Non-GAAP
gross margin
- % of non-
GAAP net
revenue 61% 58% 64% 63% 63%
GAAP operating
income (loss) $ (119) $ 14 $ 215 $ (71) $ (183) (54%)
Change in
deferred net
revenue
(packaged
goods and
digital
content) (a) 36
Acquired in-
process
technology - 2 1 - -
Amortization
of
intangibles 6 7 7 7 7
COGS
amortization
of
intangibles 6 7 7 7 7
Restructuring
charges 6 4 2 3 2
Stock-based
compensation 37 33 35 28 28
--------- ------- ------- --------- ---------
Non-GAAP
operating
income (loss) $ (64) $ 67 $ 267 $ (26) $ (103) (61%)
========= ======= ======= ========= =========
Non-GAAP
operating
income
(loss)
margin - %
of non-GAAP
net revenue (15%) 9% 21% (4%) (24%)
GAAP net income
(loss) $ (81) $ 22 $ 160 $ (25) $ (132) (63%)
Change in
deferred net
revenue
(packaged
goods and
digital
content) (a) 36
Acquired in-
process
technology - 2 1 - -
Amortization
of
intangibles 6 7 7 7 7
COGS
amortization
of
intangibles 6 7 7 7 7
Restructuring
charges 6 4 2 3 2
Stock-based
compensation 37 33 35 28 28
Income tax
adjustments (12) (10) (11) (1) (17)
--------- ------- ------- --------- ---------
Non-GAAP net
income (loss) $ (38) $ 65 $ 201 $ 19 $ (69) (82%)
========= ======= ======= ========= =========
Non-GAAP net
income
(loss)
margin - %
of non-GAAP
net revenue (9%) 8% 16% 3% (16%)
GAAP diluted
earnings
(loss) per
share ($0.26) $ 0.07 $ 0.50 ($0.08) ($0.42) (62%)
Non-GAAP
diluted
earnings
(loss) per
share ($0.12) $0.21 $0.63 $0.06 ($0.22) (83%)
Shares used
in non-GAAP
diluted
earnings
(loss) per
share
computation 306 315 319 319 311
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Results
(in millions, except per share data)
The following tables reconcile the Company's net revenue, gross
profit, operating income (loss), net income and diluted earnings per
share as presented in its Unaudited Condensed Consolidated Statements
of Operations as prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") with its non-GAAP net revenue, non-
GAAP gross profit, non-GAAP operating income, non-GAAP net income,
and non-GAAP diluted earnings per share. The Company's non-GAAP net
revenue excludes the impact of the change in deferred net revenue
(packaged goods and digital content). The Company's non-GAAP gross
profit excludes the impact of the change in deferred net revenue
(packaged goods and digital content), COGS amortization of
intangibles, and stock-based compensation. The Company's non-GAAP
operating income, non-GAAP net income, and non-GAAP diluted earnings
per share exclude the impact of the change in deferred net revenue
(packaged goods and digital content), acquired in-process technology,
amortization of intangibles, certain litigation expenses,
restructuring charges, and stock-based compensation. In addition, the
Company's non-GAAP net income and non-GAAP diluted earnings per share
exclude income tax adjustments consisting of the income tax expense
associated with the foregoing excluded items and the impact of
certain one-time income tax adjustments.
Q1 Q2 Q3 Q4 Q1 YOY %
FY07 FY07 FY07 FY07 FY08 Change
------- ------- ------- ------- ------- ------
TRAILING TWELVE MONTH
RECONCILIATION OF
RESULTS
GAAP net revenue $2,999 $3,108 $3,119 $3,091 $3,073 2%
Change in deferred
net revenue
(packaged goods
and digital
content) (a) 36
Non-GAAP net revenue
(a) $2,999 $3,108 $3,119 $3,091 $3,109 4%
======= ======= ======= ======= =======
GAAP gross profit $1,801 $1,855 $1,898 $1,879 $1,863 3%
Change in deferred
net revenue
(packaged goods
and digital
content) (a) 36
COGS amortization
of intangibles 14 19 24 27 28
Stock-based
compensation - 1 1 2 2
------- ------- ------- ------- -------
Non-GAAP gross
profit $1,815 $1,875 $1,923 $1,908 $1,929 6%
======= ======= ======= ======= =======
Non-GAAP gross
profit - % of non-
GAAP net revenue
61% 60% 62% 62% 62%
GAAP operating
income (loss) $ 302 $ 267 $ 135 $ 39 $ (25) (108%)
Change in deferred
net revenue
(packaged goods
and digital
content) (a) 36
Acquired in-process
technology 7 9 10 3 3
Amortization of
intangibles 12 18 24 27 28
Certain litigation
expenses - (1) (1) - -
COGS amortization
of intangibles 14 19 24 27 28
Restructuring
charges 32 36 29 15 11
Stock-based
compensation 40 72 107 133 124
------- ------- ------- ------- -------
Non-GAAP operating
income $ 407 $ 420 $ 328 $ 244 $ 205 (50%)
======= ======= ======= ======= =======
Non-GAAP operating
income margin - %
of non-GAAP net
revenue 14% 14% 11% 8% 7%
GAAP net income $ 213 $ 184 $ 85 $ 76 $ 25 (88%)
Change in deferred
net revenue
(packaged goods
and digital
content) (a) 36
Acquired in-process
technology 7 9 10 3 3
Amortization of
intangibles 12 18 24 27 28
Certain litigation
expenses - (1) (1) - -
COGS amortization
of intangibles 14 19 24 27 28
Restructuring
charges 32 36 29 15 11
Stock-based
compensation 40 72 107 133 124
Income tax
adjustments 1 1 (7) (34) (39)
------- ------- ------- ------- -------
Non-GAAP net income $ 319 $ 338 $ 271 $ 247 $ 216 (32%)
======= ======= ======= ======= =======
Non-GAAP net income
margin - % of non-
GAAP net revenue
11% 11% 9% 8% 7%
GAAP diluted
earnings per share $0.68 $0.59 $0.26 $0.24 $0.07 (90%)
Non-GAAP diluted
earnings per share $1.03 $1.09 $0.86 $0.78 $0.68 (34%)
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Non-GAAP Financial Information and Non-GAAP
Business Metrics
(in millions, except per share data)
Q1 Q2 Q3 Q4 Q1 YOY %
FY07 FY07 FY07 FY07 FY08 Change
--------- ------- ------- -------- --------- ------
CONSOLIDATED NON-
GAAP FINANCIAL
DATA (b)
Non-GAAP net
revenue 413 784 1,281 613 431 4%
Non-GAAP net
revenue - TTM 2,999 3,108 3,119 3,091 3,109 4%
Non-GAAP gross
profit 251 453 818 386 272 8%
Non-GAAP
gross
margin -
% of non-
GAAP net
revenue 61% 58% 64% 63% 63%
Non-GAAP gross
profit - TTM 1,815 1,875 1,923 1,908 1,929 6%
Non-GAAP
gross
margin -
TTM % of
non-GAAP
net
revenue 61% 60% 62% 62% 62%
Non-GAAP
operating
income (loss) (64) 67 267 (26) (103) (61%)
Non-GAAP
operating
income
(loss)
margin - %
of non-
GAAP net
revenue
(15%) 9% 21% (4%) (24%)
Non-GAAP
operating
income - TTM 407 420 328 244 205 (50%)
Non-GAAP
operating
income
margin -
TTM % of
non-GAAP
net revenue
14% 14% 11% 8% 7%
Non-GAAP net
income (loss) (38) 65 201 19 (69) (82%)
Non-GAAP
diluted
earnings
(loss)
per share ($0.12) $0.21 $0.63 $0.06 ($0.22) (83%)
Non-GAAP net
income - TTM 319 338 271 247 216 (32%)
Non-GAAP
diluted
earnings
per share
- TTM $1.03 $1.09 $0.86 $0.78 $0.68 (34%)
GAAP GEOGRAPHIC
NET REVENUE MIX
North America 209 512 637 307 163 (22%)
International 204 272 644 306 232 14%
Europe 169 245 583 264 204 21%
Asia 35 27 61 42 28 (20%)
--------- ------- ------- -------- ---------
Net Revenue 413 784 1,281 613 395 (4%)
CHANGE IN
DEFERRED NET
REVENUE
(PACKAGED GOODS
AND DIGITAL
CONTENT)
GEOGRAPHIC
MIX(a)
North America 8
International 28
Europe 21
Asia 7
--------- ------- ------- -------- ---------
Change In
Deferred Net
Revenue
(Packaged
Goods and
Digital
Content) 36
NON-GAAP
GEOGRAPHIC NET
REVENUE MIX
North America 209 512 637 307 171 (18%)
International 204 272 644 306 260 27%
Europe 169 245 583 264 225 33%
Asia 35 27 61 42 35 -
--------- ------- ------- -------- ---------
Non-GAAP Net
Revenue 413 784 1,281 613 431 4%
NON-GAAP
GEOGRAPHIC NET
REVENUE
MIX - as a % of
Non-GAAP Net
Revenue
North America 51% 65% 50% 50% 40%
International 49% 35% 50% 50% 60%
Europe 41% 31% 45% 43% 52%
Asia 8% 4% 5% 7% 8%
--------- ------- ------- -------- ---------
Non-GAAP Net
Revenue 100% 100% 100% 100% 100%
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
(b) Refer to Unaudited Reconciliation of GAAP to Non-GAAP Results.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Non-GAAP Financial Information and Non-GAAP
Business Metrics
(in millions)
Q1 Q2 Q3 Q4 Q1 YOY %
FY07 FY07 FY07 FY07 FY08 Change
--------- ------- ------- --------- --------- ------
PLATFORM NON-
GAAP NET
REVENUE MIX
PlayStation 2 99 269 400 117 69 (30%)
Xbox 360 61 166 172 82 47 (23%)
Wii - - 29 36 29 N/M
PLAYSTATION 3 - - 41 52 20 N/M
Xbox 23 65 62 7 3 (87%)
Nintendo
GameCube 11 14 32 4 1 (91%)
--------- ------- ------- --------- ---------
Total
Consoles 194 514 736 298 169 (13%)
PC 66 86 218 128 96 45%
Cellular
Handsets 33 35 35 36 34 3%
PSP 37 64 118 39 30 (19%)
Nintendo DS 8 14 55 27 25 213%
Game Boy
Advance 7 8 21 3 2 (71%)
--------- ------- ------- --------- ---------
Total
Mobility 85 121 229 105 91 7%
Co-publishing
and
Distribution 42 39 49 45 39 (7%)
Subscription
Services 16 15 24 24 23 44%
Licensing,
Advertising &
Other 10 9 25 13 13 30%
--------- ------- ------- --------- ---------
Total
Internet
Services,
Licensing &
Other 26 24 49 37 36 38%
--------- ------- ------- --------- ---------
Non-GAAP
Net
Revenue 413 784 1,281 613 431 4%
--------- ------- ------- --------- ---------
Change in
Deferred Net
Revenue
(Packaged Goods
and Digital
Content) (a)
PlayStation 2 (8) N/M
PLAYSTATION 3 (7) N/M
PC (7) N/M
Cellular
Handsets (1) N/M
PSP (9) N/M
Licensing,
Advertising &
Other (4) N/M
--------- ------- ------- --------- ---------
Change in
Deferred Net
Revenue
(Packaged
Goods and
Digital
Content) (a)
(36) N/M
--------- ------- ------- --------- ---------
GAAP Net
Revenue 395 N/M
--------- ------- ------- --------- ---------
PLATFORM NON-
GAAP NET
REVENUE MIX
- as a % of Non-
GAAP Net
Revenue
PlayStation 2 24% 35% 31% 19% 16%
Xbox 360 15% 21% 13% 13% 11%
Wii - - 2% 6% 7%
PLAYSTATION 3 - - 3% 9% 5%
Xbox 5% 8% 5% 1% 1%
Nintendo
GameCube 3% 2% 3% 1% -
--------- ------- ------- --------- ---------
Total
Consoles 47% 66% 57% 49% 40%
PC 16% 11% 17% 21% 22%
Cellular
Handsets 8% 4% 3% 6% 8%
PSP 9% 8% 9% 6% 7%
Nintendo DS 2% 2% 4% 5% 6%
Game Boy
Advance 2% 1% 2% - -
--------- ------- ------- --------- ---------
Total
Mobility 21% 15% 18% 17% 21%
Co-publishing
and
Distribution 10% 5% 4% 7% 9%
Subscription
Services 4% 2% 2% 4% 5%
Licensing,
Advertising &
Other 2% 1% 2% 2% 3%
--------- ------- ------- --------- ---------
Total
Internet
Services,
Licensing
& Other 6% 3% 4% 6% 8%
--------- ------- ------- --------- ---------
Non-GAAP
Net
Revenue 100% 100% 100% 100% 100%
--------- ------- ------- --------- ---------
(a) Effective April 1, 2007, the Company is excluding the impact of
the change in deferred net revenue (packaged goods and digital
content) in its fiscal 2008 non-GAAP financial measures.
CONTACT: Electronic Arts Inc.
Tricia Gugler, 650-628-7327
Director, Investor Relations
Jeff Brown, 650-628-7922
Vice President, Corporate Communications
SOURCE: Electronic Arts Inc.
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