8-K
Electronic Arts Inc. (EA)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 29, 2024
ELECTRONIC ARTS INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 0-17948 | 94-2838567 | |||||
|---|---|---|---|---|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | 209 Redwood Shores Parkway, | Redwood City, | California | 94065-1175 | |
| --- | --- | --- | --- | ||||
| (Address of Principal Executive Offices) | (Zip Code) | (650) | 628-1500 | ||||
| --- | --- | --- | |||||
| (Registrant’s Telephone Number, Including Area Code) | (Former Name or Former Address, if Changed Since Last Report) | ||||||
| --- | Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | ||||||
| --- | --- | --- | |||||
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | Securities registered pursuant to Section 12(b) of the Act: | |||||
| --- | --- | --- | |||||
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | |||||
| Common Stock, $0.01 par value | EA | NASDAQ Global Select Market | |||||
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). | |||||||
| --- | --- | ||||||
| Emerging growth company | ☐ | ||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ |
Item 2.02 Result of Operations and Financial Condition.
On July 30, 2024, Electronic Arts Inc. ("Electronic Arts" or “EA”) issued a press release announcing its financial results for the first fiscal quarter ended June 30, 2024. A copy of the press release is attached hereto as Exhibit 99.1.
Neither the information in this Form 8-K nor the information in the press release attached hereto as Exhibit 99.1 shall be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 Other Events.
On July 29, 2024, the Audit Committee of EA, on behalf of EA’s full Board of Directors declared a cash dividend of $0.19 per share of EA's common stock. The dividend is payable on September 18, 2024 to stockholders of record as of the close of business on August 28, 2024.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release dated July 30, 2024, relating to Electronic Arts Inc.’s financial results for its first fiscal quarter ended June 30, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
INDEX TO EXHIBITS
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release dated July 30, 2024, relating to Electronic Arts Inc.’s financial results for its first fiscal quarter ended June 30, 2024. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ELECTRONIC ARTS INC. | |||
|---|---|---|---|
| Dated: | July 30, 2024 | By: | /s/ Stuart Canfield |
| Stuart Canfield | |||
| Chief Financial Officer |
Document
Exhibit 99.1
| Electronic Arts Reports Strong Q1 FY25 Results |
|---|
Live services drive Q1 expectation beat and builds momentum for FY25
REDWOOD CITY, CA – July 30, 2024 – (NASDAQ: EA) today announced preliminary financial results for its first quarter ended June 30, 2024.
“EA delivered a strong start to FY25, beating net bookings guidance as we continue to execute across our business,” said Andrew Wilson, CEO of EA. “Our focus on delivering bigger, bolder, and more connected experiences for our players has never been sharper and is illustrated by the record-breaking launch of EA SPORTS College Football 25 as we head into another historic Q2 sports season at EA.”
“Strong execution, live events and continued player engagement across our experiences, delivered Q1 results above expectations,” said Stuart Canfield, CFO of EA. “Looking ahead, the remarkable success of our launch week for College Football, combined with the upcoming launches for EA SPORTS Madden NFL, EA SPORTS FC and Dragon Age: The Veilguard, is building momentum for FY25 and beyond. We are well positioned to deliver our multi-year financial objectives.”
Selected Operating Highlights and Metrics
•Net bookings1 for the quarter totaled $1.262 billion, exceeding the high end of the guidance range of $1.250 billion. This was driven by stronger performance across Madden NFL 24, FC Online and FC Mobile.
•EA SPORTS FC™ celebrated real-world tournaments and events during Q1, attracting tens of millions of new fans and driving engagement across the franchise during the quarter.
•EA SPORTS™ Madden NFL delivered sustained momentum through the quarter, with weekly average users in Ultimate Team and total net bookings up double digits year-over-year.
•During the quarter, EA revealed Dragon Age: The Veilguard gameplay, which trended #1 on YouTube Gaming and received millions of views.
•After the quarter ended, EA SPORTS™ College Football 25 welcomed 5 million unique players into the game through its first week, with over 500,000 more playing via the EA Play trial.
Selected Financial Highlights and Metrics
•Net revenue was $1.660 billion for the quarter.
•Net cash provided by operating activities was $120 million for the quarter and $2.076 billion for the trailing twelve months.
•EA repurchased 2.8 million shares for $375 million during the quarter under the new stock repurchase program, bringing the total for the trailing twelve months to 10.2 million shares for $1.350 billion.
Dividend
EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on September 18, 2024 to stockholders of record as of the close of business on August 28, 2024.
Quarterly Financial Highlights
| Three Months Ended | ||
|---|---|---|
| June 30, | ||
| (in $ millions, except per share amounts) | 2024 | 2023 |
| Full game | 250 | 443 |
| Live services and other | 1,410 | 1,481 |
| Total net revenue | 1,660 | 1,924 |
| Net income | 280 | 402 |
| Diluted earnings per share | 1.04 | 1.47 |
| Operating cash flow | 120 | 359 |
| Value of shares repurchased | 375 | 325 |
| Number of shares repurchased | 2.8 | 2.6 |
| Cash dividend paid | 50 | 52 |
Trailing Twelve Months Financial Highlights
| Twelve Months Ended | ||
|---|---|---|
| June 30, | ||
| (in $ millions) | 2024 | 2023 |
| Full game | 1,822 | 2,039 |
| Live services and other | 5,476 | 5,544 |
| Total net revenue | 7,298 | 7,583 |
| Net income | 1,151 | 893 |
| Operating cash flow | 2,076 | 1,987 |
| Value of shares repurchased | 1,350 | 1,300 |
| Number of shares repurchased | 10.2 | 10.5 |
Operating Metric
The following is a calculation of our total net bookings1 for the periods presented:
| Three Months Ended <br>June 30, | Twelve Months Ended<br>June 30, | |||
|---|---|---|---|---|
| (in $ millions) | 2024 | 2023 | 2024 | 2023 |
| Total net revenue | 1,660 | 1,924 | 7,298 | 7,583 |
| Change in deferred net revenue (online-enabled games) | (398) | (346) | (184) | 37 |
| Total net bookings | 1,262 | 1,578 | 7,114 | 7,620 |
Business Outlook as of July 30, 2024
Fiscal Year 2025 Expectations – Ending March 31, 2025
Financial outlook metrics:
•Net revenue is expected to be approximately $7.100 billion to $7.500 billion.
◦Change in deferred net revenue (online-enabled games) is expected to be approximately $200 million.
•Net income is expected to be approximately $904 million to $1.085 billion.
•Diluted earnings per share is expected to be approximately $3.34 to $4.00.
•Operating cash flow is expected to be approximately $2.050 billion to $2.250 billion.
•The Company estimates a share count of 271 million for purposes of calculating diluted earnings per share.
Operational outlook metric:
•Net bookings1 is expected to be approximately $7.300 billion to $7.700 billion.
Second Quarter Fiscal Year 2025 Expectations – Ending September 30, 2024
Financial outlook metrics:
•Net revenue is expected to be approximately $1.900 billion to $2.000 billion.
◦Change in deferred net revenue (online-enabled games) is expected to be approximately $50 million.
•Net income is expected to be approximately $204 million to $248 million.
•Diluted earnings per share is expected to be approximately $0.76 to $0.93.
•The Company estimates a share count of 267 million for purposes of calculating diluted earnings per share.
Operational outlook metric:
•Net bookings1 is expected to be approximately $1.950 billion to $2.050 billion.
Conference Call and Supporting Documents
Electronic Arts will host a conference call on July 30, 2024 at 2:00 pm PT (5:00 pm ET) to review its results for the first fiscal quarter ended June 30, 2024 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 (888) 330-2446 (domestic) or (240) 789-2732 (international), using the conference code 5939891 or via webcast at EA’s IR Website at http://ir.ea.com.
EA has posted a slide presentation with a financial model of EA’s historical results and guidance on EA’s IR Website. EA will also post the prepared remarks and a transcript from the conference call on EA’s IR Website.
A dial-in replay of the conference call will be available until August 14, 2024 at (800) 770-2030 (domestic) or (647) 362-9199 (international) using conference code 5939891. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.
Forward-Looking Statements
Some statements set forth in this release, including the information relating to EA’s expectations under the heading “Business Outlook as of July 30, 2024” and other information regarding EA's expectations contain forward-looking statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “plan,” “predict,” “seek,” “goal,” “will,” “may,” “likely,” “should,” “could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed 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 products and services; the Company’s ability to develop and support digital products and services, including managing online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products and services; the Company’s ability to realize the anticipated benefits of, and integrate, acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences and trends; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; economic and geopolitical conditions; changes in our tax rates or tax laws; and other factors described in Part I, Item 1A of Electronic Arts’ latest Annual Report on Form 10-K under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission.
These forward-looking statements are current as of July 30, 2024. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. 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, 2024. 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, 2024.
About Electronic Arts
Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers.
In fiscal year 2024, EA posted GAAP net revenue of approximately $7.6 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS FC™, Battlefield™, Apex Legends™, The Sims™, EA SPORTS™ Madden NFL, EA SPORTS™ College Football, Need for Speed™, Dragon Age™, Titanfall™, Plants vs. Zombies™ and EA SPORTS F1®. More information about EA is available at www.ea.com/news.
EA, EA SPORTS, EA SPORTS FC, Battlefield, Need for Speed, Apex Legends, The Sims, Dragon Age, Titanfall, and Plants vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL, FIFA and F1 are the property of their respective owners and used with permission.
For additional information, please contact:
| Andrew Uerkwitz | Erin Rheaume |
|---|---|
| Vice President, Investor Relations | Director, Financial Communications |
| 650-674-7191 | 650-628-7978 |
| auerkwitz@ea.com | erheaume@ea.com |
1 Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period. Net bookings is calculated by adding total net revenue to the change in deferred net revenue for online-enabled games.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |
|---|---|
| Unaudited Condensed Consolidated Statements of Operations | |
| (in millions, except per share data) | |
| 2023 | |
| Net revenue | 1,924 |
| Cost of revenue | 368 |
| Gross profit | 1,556 |
| Operating expenses: | |
| Research and development | 596 |
| Marketing and sales | 229 |
| General and administrative | 163 |
| Amortization of intangibles | 25 |
| Restructuring | 1 |
| Total operating expenses | 1,014 |
| Operating income | 542 |
| Interest and other income (expense), net | 14 |
| Income before provision for income taxes | 556 |
| Provision for income taxes | 154 |
| Net income | 402 |
| Earnings per share | |
| Basic | 1.48 |
| Diluted | 1.47 |
| Number of shares used in computation | |
| Basic | 272 |
| Diluted | 274 |
All values are in US Dollars.
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on May 7, 2024 for the three months ended June 30, 2024 plus a comparison to the actuals for the three months ended June 30, 2023.
| Three Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2024 Guidance (Mid-Point) | 2024 Actuals | 2023 Actuals | ||||||
| Variance | ||||||||
| Net revenue | ||||||||
| Net revenue | 1,625 | 35 | 1,660 | 1,924 | ||||
| GAAP-based financial data | ||||||||
| Change in deferred net revenue (online-enabled games)1 | (425) | 27 | (398) | (346) | ||||
| Cost of revenue | ||||||||
| Cost of revenue | 245 | 18 | 263 | 368 | ||||
| GAAP-based financial data | ||||||||
| Acquisition-related expenses | (10) | — | (10) | (16) | ||||
| Stock-based compensation | (5) | 1 | (4) | (2) | ||||
| Operating expenses | ||||||||
| Operating expenses | 1,075 | (42) | 1,033 | 1,014 | ||||
| GAAP-based financial data | ||||||||
| Acquisition-related expenses | (20) | 3 | (17) | (25) | ||||
| Restructuring and related charges | (65) | 59 | (6) | (3) | ||||
| Stock-based compensation | (135) | (4) | (139) | (128) | ||||
| Income before tax | ||||||||
| Income before tax | 324 | 70 | 394 | 556 | ||||
| GAAP-based financial data | ||||||||
| Acquisition-related expenses | 30 | (3) | 27 | 41 | ||||
| Change in deferred net revenue (online-enabled games)1 | (425) | 27 | (398) | (346) | ||||
| Restructuring and related charges | 65 | (59) | 6 | 3 | ||||
| Stock-based compensation | 140 | 3 | 143 | 130 | ||||
| Tax rate used for management reporting | 19 | % | 19 | % | 19 | % | ||
| Earnings per share | ||||||||
| Basic | 0.83 | 0.22 | 1.05 | 1.48 | ||||
| Diluted | 0.82 | 0.22 | 1.04 | 1.47 | ||||
| Number of shares used in computation | ||||||||
| Basic | 268 | (2) | 266 | 272 | ||||
| Diluted | 270 | (2) | 268 | 274 |
1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |
|---|---|
| Unaudited Condensed Consolidated Balance Sheets | |
| (in millions) | |
| March 31, 20242 | |
| ASSETS | |
| Current assets: | |
| Cash and cash equivalents | 2,900 |
| Short-term investments | 362 |
| Receivables, net | 565 |
| Other current assets | 420 |
| Total current assets | 4,247 |
| Property and equipment, net | 578 |
| Goodwill | 5,379 |
| Acquisition-related intangibles, net | 400 |
| Deferred income taxes, net | 2,380 |
| Other assets | 436 |
| TOTAL ASSETS | 13,420 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| Current liabilities: | |
| Accounts payable | 110 |
| Accrued and other current liabilities | 1,166 |
| Deferred net revenue (online-enabled games) | 1,814 |
| Total current liabilities | 3,090 |
| Senior notes, net | 1,882 |
| Income tax obligations | 497 |
| Deferred income taxes, net | 1 |
| Other liabilities | 437 |
| Total liabilities | 5,907 |
| Stockholders’ equity: | |
| Common stock | 3 |
| Retained earnings | 7,582 |
| Accumulated other comprehensive loss | (72) |
| Total stockholders’ equity | 7,513 |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | 13,420 |
All values are in US Dollars.
2Derived from audited consolidated financial statements.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |
|---|---|
| Unaudited Condensed Consolidated Statements of Cash Flows | |
| (in millions) | |
| 2023 | |
| OPERATING ACTIVITIES | |
| Net income | 402 |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation, amortization, accretion and impairment | 88 |
| Stock-based compensation | 130 |
| Change in assets and liabilities | |
| Receivables, net | 167 |
| Other assets | 96 |
| Accounts payable | (18) |
| Accrued and other liabilities | (92) |
| Deferred income taxes, net | (93) |
| Deferred net revenue (online-enabled games) | (321) |
| Net cash provided by operating activities | 359 |
| INVESTING ACTIVITIES | |
| Capital expenditures | (45) |
| Proceeds from maturities and sales of short-term investments | 151 |
| Purchase of short-term investments | (150) |
| Net cash used in investing activities | (44) |
| FINANCING ACTIVITIES | |
| Cash dividends paid | (52) |
| Cash paid to taxing authorities for shares withheld from employees | (105) |
| Common stock repurchases | (325) |
| Net cash used in financing activities | (482) |
| Effect of foreign exchange on cash and cash equivalents | 2 |
| Change in cash and cash equivalents | (165) |
| Beginning cash and cash equivalents | 2,424 |
| Ending cash and cash equivalents | 2,259 |
All values are in US Dollars.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited Supplemental Financial Information and Business Metrics | |||||||||||
| (in millions, except per share data) | |||||||||||
| Q2 | Q3 | Q4 | Q1 | YOY % | |||||||
| FY24 | FY24 | FY24 | FY25 | Change | |||||||
| Net revenue | |||||||||||
| Net revenue | 1,914 | 1,945 | 1,779 | 1,660 | (14 | %) | |||||
| GAAP-based financial data | |||||||||||
| Change in deferred net revenue (online-enabled games)1 | (94) | 421 | (113) | (398) | |||||||
| Gross profit | |||||||||||
| Gross profit | 1,458 | 1,416 | 1,422 | 1,397 | (10 | %) | |||||
| Gross profit (as a % of net revenue) | % | 76 | % | 73 | % | 80 | % | 84 | % | ||
| GAAP-based financial data | |||||||||||
| Acquisition-related expenses | 15 | 16 | 29 | 10 | |||||||
| Change in deferred net revenue (online-enabled games)1 | (94) | 421 | (113) | (398) | |||||||
| Stock-based compensation | 2 | 2 | 2 | 4 | |||||||
| Operating income | |||||||||||
| Operating income | 377 | 365 | 234 | 364 | (33 | %) | |||||
| Operating income (as a % of net revenue) | % | 20 | % | 19 | % | 13 | % | 22 | % | ||
| GAAP-based financial data | |||||||||||
| Acquisition-related expenses | 39 | 37 | 101 | 27 | |||||||
| Change in deferred net revenue (online-enabled games)1 | (94) | 421 | (113) | (398) | |||||||
| Restructuring and related charges | — | — | 61 | 6 | |||||||
| Stock-based compensation | 155 | 151 | 148 | 143 | |||||||
| Net income | |||||||||||
| Net income | 399 | 290 | 182 | 280 | (30 | %) | |||||
| Net income (as a % of net revenue) | % | 21 | % | 15 | % | 10 | % | 17 | % | ||
| GAAP-based financial data | |||||||||||
| Acquisition-related expenses | 39 | 37 | 101 | 27 | |||||||
| Change in deferred net revenue (online-enabled games)1 | (94) | 421 | (113) | (398) | |||||||
| Restructuring and related charges | — | — | 61 | 6 | |||||||
| Stock-based compensation | 155 | 151 | 148 | 143 | |||||||
| Tax rate used for management reporting | % | 19 | % | 19 | % | 19 | % | 19 | % | ||
| Diluted earnings per share | 1.47 | 1.07 | 0.67 | 1.04 | (29 | %) | |||||
| Number of shares used in computation | |||||||||||
| Basic | 271 | 269 | 267 | 266 | |||||||
| Diluted | 272 | 271 | 270 | 268 |
All values are in US Dollars.
1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited Supplemental Financial Information and Business Metrics | |||||||||||
| (in millions) | |||||||||||
| Q2 | Q3 | Q4 | Q1 | YOY % | |||||||
| FY24 | FY24 | FY24 | FY25 | Change | |||||||
| QUARTERLY NET REVENUE PRESENTATIONS | |||||||||||
| Net revenue by composition | |||||||||||
| Full game downloads | 346 | 431 | 265 | 190 | (37 | %) | |||||
| Packaged goods | 275 | 187 | 68 | 60 | (58 | %) | |||||
| Full game | 621 | 618 | 333 | 250 | (44 | %) | |||||
| Live services and other | 1,293 | 1,327 | 1,446 | 1,410 | (5 | %) | |||||
| Total net revenue | 1,914 | 1,945 | 1,779 | 1,660 | (14 | %) | |||||
| Full game | % | 32 | % | 32 | % | 19 | % | 15 | % | ||
| Live services and other | % | 68 | % | 68 | % | 81 | % | 85 | % | ||
| Total net revenue % | % | 100 | % | 100 | % | 100 | % | 100 | % | ||
| GAAP-based financial data | |||||||||||
| Full game downloads | 24 | 32 | (37) | (47) | |||||||
| Packaged goods | 46 | 4 | (37) | (35) | |||||||
| Full game | 70 | 36 | (74) | (82) | |||||||
| Live services and other | (164) | 385 | (39) | (316) | |||||||
| Total change in deferred net revenue (online-enabled games) by composition1 | (94) | 421 | (113) | (398) | |||||||
| Net revenue by platform | |||||||||||
| Console | 1,187 | 1,229 | 1,049 | 1,005 | (14 | %) | |||||
| PC & Other | 423 | 420 | 423 | 365 | (19 | %) | |||||
| Mobile | 304 | 296 | 307 | 290 | (5 | %) | |||||
| Total net revenue | 1,914 | 1,945 | 1,779 | 1,660 | (14 | %) | |||||
| GAAP-based financial data | |||||||||||
| Console | (35) | 377 | (94) | (328) | |||||||
| PC & Other | (34) | 33 | (10) | (70) | |||||||
| Mobile | (25) | 11 | (9) | — | |||||||
| Total change in deferred net revenue (online-enabled games) by platform1 | (94) | 421 | (113) | (398) |
All values are in US Dollars.
1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||||||
|---|---|---|---|---|---|---|
| Unaudited Supplemental Financial Information and Business Metrics | ||||||
| (in millions) | ||||||
| Q2 | Q3 | Q4 | Q1 | YOY % | ||
| FY24 | FY24 | FY24 | FY25 | Change | ||
| CASH FLOW DATA | ||||||
| Investing cash flow | (63) | (51) | (49) | (69) | ||
| Investing cash flow - TTM | (205) | (195) | (207) | (232) | (18 | %) |
| Financing cash flow | (351) | (431) | (360) | (546) | ||
| Financing cash flow - TTM | (1,609) | (1,622) | (1,624) | (1,688) | (5 | %) |
| Operating cash flow | 112 | 1,264 | 580 | 120 | ||
| Operating cash flow - TTM | 2,211 | 2,352 | 2,315 | 2,076 | 4 | % |
| Capital expenditures | 51 | 52 | 51 | 67 | ||
| Capital expenditures - TTM | 191 | 195 | 199 | 221 | 15 | % |
| Free cash flow3 | 61 | 1,212 | 529 | 53 | ||
| Free cash flow3 - TTM | 2,020 | 2,157 | 2,116 | 1,855 | 3 | % |
| Common stock repurchases | 325 | 325 | 325 | 375 | 15 | % |
| Cash dividends paid | 51 | 51 | 51 | 50 | (4 | %) |
| DEPRECIATION | ||||||
| Depreciation expense | 49 | 48 | 50 | 51 | 4 | % |
| BALANCE SHEET DATA | ||||||
| Cash and cash equivalents | 1,946 | 2,742 | 2,900 | 2,400 | ||
| Short-term investments | 359 | 362 | 362 | 366 | ||
| Cash and cash equivalents, and short-term investments | 2,305 | 3,104 | 3,262 | 2,766 | 6 | % |
| Receivables, net | 1,047 | 867 | 565 | 433 | (16 | %) |
| STOCK-BASED COMPENSATION | ||||||
| Cost of revenue | 2 | 2 | 2 | 4 | ||
| Research and development | 113 | 108 | 104 | 101 | ||
| Marketing and sales | 13 | 14 | 14 | 12 | ||
| General and administrative | 27 | 27 | 28 | 26 | ||
| Total stock-based compensation | 155 | 151 | 148 | 143 | ||
| RESTRUCTURING AND RELATED CHARGES | ||||||
| Restructuring | 2 | — | 59 | 2 | ||
| Office space reductions | (2) | — | 2 | 4 | ||
| Total restructuring and related charges | — | — | 61 | 6 |
All values are in US Dollars.
3Free cash flow is defined as Operating cash flow less Capital expenditures.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | ||
|---|---|---|
| Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures | ||
| (in millions) | ||
| The following table provides a reconciliation of non-GAAP operating income and margin to their most directly comparable GAAP financial measure for the three months ended June 30, 2024 plus a comparison to the actuals for the three months ended June 30, 2023. | ||
| 2023 | YOY % Change | |
| Net revenue | 1,924 | (14%) |
| GAAP operating income | 542 | (33%) |
| Acquisition-related expenses | 41 | |
| Restructuring and related charges | 3 | |
| Stock-based compensation | 130 | |
| Non-GAAP operating income | 716 | (25%) |
| GAAP operating margin | 28.2% | |
| Non-GAAP operating margin | 37.2% | |
| Impact from change in deferred net revenue (online-enabled games) | (1,380) bps |
All values are in US Dollars.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| GAAP Guidance to Non-GAAP Guidance | |||||||||
| (in millions) | |||||||||
| The following table provides GAAP to Non-GAAP reconciliation of the Company’s FY25 guidance. | |||||||||
| GAAP-Based Financial Data | |||||||||
| A | B | C | D | ||||||
| Acquisition-related expenses2 | Restructuring and related charges2 | Stock-based compensation2 | Non-GAAP Guidance Range = A + B +C + D | Change in deferred net revenue (online-enabled games)2 | |||||
| Net revenue | to | 7,500 | — | — | — | 7,100 | to | 7,500 | 200 |
| Cost of revenue | to | 1,520 | (40) | — | (10) | 1,430 | to | 1,470 | — |
| Operating expense | to | 4,435 | (70) | (95) | (615) | 3,565 | to | 3,655 | — |
| Operating margin | to | 20.6% | 150 bps | 130 bps | 860 bps | 29.6% | to | 31.7% | 200 bps to 170 bps |
| Income before provision for income taxes | to | 1,596 | 110 | 95 | 625 | 2,159 | to | 2,426 | 200 |
| Net income1 | to | 1,085 | |||||||
| Number of shares used in computation: | |||||||||
| Diluted |
All values are in US Dollars.
1 The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future periods.
2 The mid-point of the range has been used for purposes of presenting reconciling items to operating margin.
| ELECTRONIC ARTS INC. AND SUBSIDIARIES | |||||||
|---|---|---|---|---|---|---|---|
| GAAP-Based Financial Data for Guidance | |||||||
| (in millions) | |||||||
| The following table provides supplemental information to the Company’s Q2 FY25 guidance. | |||||||
| Acquisition-related expenses | Restructuring and related charges | Stock-based compensation | Change in deferred net revenue (online-enabled games) | ||||
| Net revenue | to | 2,000 | — | — | — | 50 | |
| Cost of revenue | to | 450 | (10) | — | (5) | — | |
| Operating expense | to | 1,200 | (20) | (65) | (160) | — | |
| Income before provision for income taxes | to | 365 | 30 | 65 | 165 | 50 | |
| Net income1 | to | 248 | |||||
| Number of shares used in computation: | |||||||
| Diluted |
All values are in US Dollars.
1 The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future periods.
Non-GAAP Financial Measures
As a supplement to the Company’s financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company presents certain non-GAAP measures of financial performance, including non-GAAP operating margin and free cash flow. These non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the Company’s results of operations as determined in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting and differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.
The non-GAAP financial measures exclude acquisition-related expenses, stock-based compensation, restructuring and related charges, and capital expenditures, as applicable in any given reporting period and our outlook. The Company may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures. Management believes that these non-GAAP financial measures provide investors with additional useful information to better understand and evaluate the Company’s operating results and future prospects because they exclude certain items that may not be indicative of the Company’s core business, operating results, or future outlook. These non-GAAP financial measures, with further adjustments are used by management to understand ongoing financial and business performance.
The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan, and analyze future periods. Accordingly, the Company applies the same tax rate to its management reporting financial results.
Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measure.