Current Report




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) October 31, 2017

  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):

 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
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   o
 
 
 
 
 
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.           o






Item 2.02    Result of Operations and Financial Condition.

On October 31, 2017, Electronic Arts Inc. (“EA”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2017. 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 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 9.01    Financial Statements and Exhibits.

(d) Exhibits.
Exhibit No.
 
Description
99.1
 
Press release dated October 31, 2017, relating to Electronic Arts Inc.’s financial results for the fiscal quarter ended September 30, 2017.






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:
October 31, 2017
By:
/s/ Blake Jorgensen
 
 
 
Blake Jorgensen
 
 
 
Executive Vice President, Chief Financial Officer









INDEX TO EXHIBITS







Exhibit 99.1
 
Electronic Arts Reports Q2 FY18
GRAPHIC050614A05.JPG
 
 
 
 
Financial Results
 
REDWOOD CITY, CA - October 31, 2017 - Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2017.

“It was a strong second quarter for Electronic Arts, with players around the world captivated by our new EA SPORTS titles, top-performing mobile games, and expanding esports competitions,” said Chief Executive Officer Andrew Wilson. “The digital transformation is accelerating across our industry, and we are well-positioned for continued growth with more stunning new titles, thriving event-driven live services including competitive gaming, and continuing innovation for our players on all platforms.”
“We saw a notable shift to digital in our sports titles and remarkable growth in Ultimate Team,” said Chief Financial Officer Blake Jorgensen. “Our sports titles have once again shown their value in delivering a stable and dependable performance. This quarter demonstrates how they can drive our business and offers a window into how our games will evolve over the months and years to come.”
News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.

Selected Operating Highlights and Metrics

Digital net bookings* for the trailing twelve months was $3.240 billion, up 26% year-over-year, and now represents 63% of total net bookings for the same period.
More than 50% of Madden NFL 18 players engaged in the “Longshot” story mode through Q2 and Madden Ultimate Team™ players are up 25% year-over-year.
FIFA Mobile unique player base grew to more than 113 million.
The Battlefield TM 1 community grew to more than 23.5 million players worldwide.
Monthly active players for The Sims TM 4 on PC increased more than 40% year-over-year.

* Net bookings, previously referred to as net sales, 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.

Selected Financial Highlights and Metrics
All financial measures are presented on a GAAP basis.

Net cash provided by operating activities was $52 million.
Net cash provided by operating activities for the trailing twelve months was $1.802 billion, a record measured at the end of the second quarter.
In Q2, EA repurchased 1.3 million shares for $153 million.










Quarterly Financial Highlights
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
2017
 
2016
(in $ millions, except per share amounts)
 
 
 
Digital net revenue
689

 
566

Packaged goods and other net revenue
270

 
332

          Total net revenue
959

 
898

 
 
 
 
Net loss
(22
)
 
(38
)
Loss per share
(0.07
)
 
(0.13
)
 
 
 
 
Operating cash flow
52

 
122*

 
 
 
 
Value of shares repurchased
153

 
127

Number of shares repurchased
1.3

 
1.6

 
*At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow for the three months ended September 30, 2016 has been recast to reflect the impact of this standard.


While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

 
Three Months Ended September 30, 2017
 
 
 
GAAP-Based Financial Data
(in $ millions)
Statement of Operations
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Stock-based compensation
Total net revenue
959

 

 
220

 

          Cost of revenue
389

 

 

 
(1
)
Gross profit
570

 

 
220

 
1

          Total operating expenses
611

 
(2
)
 

 
(61
)
Operating income (loss)
(41
)
 
2

 
220

 
62

Interest and other income, net
3

 

 

 

Income (loss) before provision for (benefit from) income taxes
(38
)
 
2

 
220

 
62

Number of shares used in computation:
 
 
 
 
 
 
 
          Basic and diluted
309

 
 
 
 
 
 

EA's GAAP loss per share for the three months ended September 30, 2017 was calculated using the basic share count of 309 million. Had EA reported a profit, the diluted share count would have been 312 million shares.

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended June 30, 2017.







TTM Financial Highlights
 
 
 
 
TTM Ended September 30,
 
2017
 
2016
(in $ millions)
 
 
 
Digital net revenue
3,187

 
2,539

Packaged goods and other net revenue
1,897

 
2,008

          Total net revenue
5,084

 
4,547

 
 
 
 
Net income
1,187

 
1,256

 
 
 
 
Operating cash flow*
1,802

 
1,323

 
 
 
 
Value of shares repurchased
555

 
1,016

Number of shares repurchased
5.7

 
15.2

 
*At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow has been recast to reflect the impact of this standard.


While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

 
TTM Ended September 30, 2017
 
 
 
GAAP-Based Financial Data
(in $ millions)
Statement of Operations
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Stock-based compensation
Total net revenue
5,084

 

 
32

 

          Cost of revenue
1,261

 
(18
)
 

 
(3
)
Gross profit
3,823

 
18

 
32

 
3

          Total operating expenses
2,408

 
(6
)
 

 
(207
)
Operating income
1,415

 
24

 
32

 
210

Interest and other income, net
6

 

 

 

Income before provision for income taxes
1,421

 
24

 
32

 
210


For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended June 30, 2017.







Operating Metric

EA has renamed the operating metric “net sales” to “net bookings”. The following is a calculation of our total net bookings for the periods presented:
 
Three Months Ended
September 30,
 
TTM Ended
September 30,
 
2017
 
2016
 
2017
 
2016
(in $ millions)
 
 
 
 
 
 
 
Total net revenue
959

 
898

 
5,084

 
4,547

Change in deferred net revenue (online-enabled games)
220

 
200

 
32

 
(40
)
Net bookings
1,179

 
1,098

 
5,116

 
4,507








Business Outlook as of October 31, 2017

The following forward-looking statements reflect expectations as of October 31, 2017. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors detailed in this release and in EA’s annual and quarterly SEC filings.

Fiscal Year 2018 Expectations - Ending March 31, 2018

Financial metrics:
Net revenue is expected to be approximately $5.075 billion.
Change in deferred net revenue (online-enabled games) is expected to be approximately $75 million.
Net income is expected to be approximately $1.136 billion.
Diluted earnings per share is expected to be approximately $3.63.
Operating cash flow, reflecting the recently adopted accounting standard related to stock-based compensation discussed below, is expected to be approximately $1.600 billion.
The Company estimates a share count of 313 million for purposes of calculating fiscal year 2018 diluted earnings per share.

Operational metric:
Net bookings is expected to be approximately $5.150 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

 
Twelve Months Ending March 31, 2018
 
 
 
GAAP-Based Financial Data
 
GAAP Guidance
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Stock-based compensation
(in $ millions)
 
 
 
 
 
 
 
Digital net revenue
3,295

 

 
115

 

Packaged goods & other net revenue
1,780

 

 
(40
)
 

Total net revenue
5,075

 

 
75

 

Cost of revenue
1,290

 

 

 
(3
)
Operating expense
2,443

 
(6
)
 

 
(237
)
Income before provision for income taxes
1,344

 
6

 
75

 
240

Net income
1,136

 
 
 
 
 
 
Number of shares used in computation:
 
 
 
 
 
 
 
Diluted shares
313

 
 
 
 
 
 






Third Quarter Fiscal Year 2018 Expectations - Ending December 31, 2017

Financial metrics:
Net revenue is expected to be approximately $1.135 billion.
Change in deferred net revenue (online-enabled games) is expected to be approximately $865 million.
Net loss is expected to be approximately ($64) million.
Loss per share is expected to be approximately ($0.21).
The Company estimates a GAAP basic and diluted share count of 309 million shares due to a forecasted net loss. If the Company reports net income instead of a net loss, diluted share count for calculating diluted earnings per share would be 313 million shares.

Operational metric:
Net bookings is expected to be approximately $2.000 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:
 
Three Months Ending December 31, 2017
 
 
 
GAAP-Based Financial Data
 
GAAP Guidance
 
Acquisition-related expenses
 
Change in deferred net revenue (online-enabled games)
 
Stock-based compensation
(in $ millions)
 
 
 
 
 
 
 
Total net revenue
1,135

 

 
865

 

Cost of revenue
521

 

 

 
(1
)
Operating expense
690

 
(1
)
 

 
(64
)
Income/(loss) before provision for (benefit from) income taxes
(79
)
 
1

 
865

 
65

Net loss
(64
)
 
 
 
 
 
 
Number of shares used in computation:
 
 


 
 
 
 
Basic shares
309

 
 
 
 
 
 







Impact of Recently Adopted Accounting Standard
At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. This pronouncement required EA to change how it reports the cash effects of stock-based compensation in the Consolidated Statement of Cash Flow. It does not impact total cash and cash flow, but it does increase operating cash flow and decrease cash flow from financing activities. The following table reflects the impact of this standard on operating cash flow for the periods presented:
 
 
Three Months Ended September 30,
(in $ millions)
 
2017
 
2016
Operating cash flow under historical GAAP
 
39

 
109

 
 
 
 
 
Operating cash flow under ASU 2016-09
 
52

 
122

Impact of ASU 2016-09 on operating cash flow
 
13

 
13


Conference Call and Supporting Documents
    
Electronic Arts will host a conference call on October 31, 2017 at 2:00 pm PT (5:00 pm ET) to review its results for the second fiscal quarter ended September 30, 2017 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 844-215-4106 (domestic) or 918-534-8313 (international), using the password “EA” or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation and 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 November 14, 2017 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 90760245. 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 fiscal 2018 expectations under the heading “Business Outlook as of October 31, 2017,” 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 develop and support digital products and services, including managing online security and privacy; 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; 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 develop and implement new technology; foreign currency exchange rate fluctuations; general economic conditions; and other factors described in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017. 







These forward-looking statements are current as of October 31, 2017. 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 September 30, 2017.  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 September 30, 2017.

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. EA has more than 300 million registered players around the world.
 
In fiscal year 2017, EA posted GAAP net revenue of $4.8 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as The Sims™, Madden NFL, EA SPORTS™ FIFA, Battlefield™, Need for Speed™, Dragon Age™ and Plants vs. Zombies™. More information about EA is available at www.ea.com/news.
 
Ultimate Team, EA SPORTS, Battlefield, Battlefield 1, The Sims, Need for Speed, Dragon Age, and Plants vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL and FIFA are the property of their respective owners and used with permission.

For additional information, please contact:

Chris Evenden
John Reseburg
Vice President, Investor Relations
Vice President, Corporate Communications
650-628-0255
650-628-3601
cevenden@ea.com
jreseburg@ea.com






    
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Operations
(in $ millions, except share per data)
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Six Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Net revenue
 
 
 
 
 
 
 
Product
454

 
420

 
1,282

 
1,104

Service and other
505

 
478

 
1,126

 
1,065

Total net revenue
959

 
898

 
2,408

 
2,169

Cost of revenue
 
 
 
 
 
 
 
Product
300

 
317

 
364

 
407

Service and other
89

 
84

 
179

 
173

Total cost of revenue
389

 
401

 
543

 
580

Gross profit
570

 
497

 
1,865

 
1,589

Operating expenses:
 
 
 
 
 
 
 
Research and development
331

 
291

 
656

 
585

Marketing and sales
160

 
143

 
281

 
271

General and administrative
118

 
111

 
223

 
219

Amortization of intangibles
2

 
1

 
3

 
3

Total operating expenses
611

 
546

 
1,163

 
1,078

Operating income (loss)
(41
)
 
(49
)
 
702

 
511

Interest and other income (expense), net
3

 
(3
)
 
9

 
(11
)
Income (loss) before provision for (benefit from) income taxes
(38
)
 
(52
)
 
711

 
500

Provision for (benefit from) income taxes
(16
)
 
(14
)
 
89

 
98

Net income (loss)
(22
)
 
(38
)
 
622

 
402

Earnings (loss) per share
 
 
 
 
 
 
 
Basic
(0.07
)
 
(0.13
)
 
2.01

 
1.34

Diluted
(0.07
)
 
(0.13
)
 
1.99

 
1.28

Number of shares used in computation
 
 
 
 
 
 
 
Basic
309

 
301

 
309

 
301

Diluted
309

 
301

 
313

 
315
























Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance for the three months ended September 30, 2017 plus a comparison to the actuals for the three months ended September 30, 2016.


 
Three Months Ended September 30,
 
2017
 
 
 
2017
 
2016
 
Guidance
 
Variance
 
Actuals
 
Actuals
Net revenue
 
 
 
 
 
 
 
Net revenue
955

 
4

 
959

 
898

GAAP-based financial data
 
 
 
 
 
 
 
Change in deferred net revenue (online-enabled games)
205

 
15

 
220

 
200

Cost of revenue
 
 


 
 
 
 
Cost of revenue
389

 

 
389

 
401

GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses

 

 

 
(12
)
Stock-based compensation

 
(1
)
 
(1
)
 
(1
)
Operating expenses
 
 


 
 
 
 
Operating expenses
638

 
(27
)
 
611

 
546

GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses
(2
)
 

 
(2
)
 
(1
)
Stock-based compensation
(61
)
 

 
(61
)
 
(47
)
Loss before tax
 
 


 
 
 
 
Loss before tax
(69
)
 
31

 
(38
)
 
(52
)
GAAP-based financial data
 
 
 
 
 
 
 
Acquisition-related expenses
2

 

 
2

 
13

Change in deferred net revenue (online-enabled games)
205

 
15

 
220

 
200

Stock-based compensation
61

 
1

 
62

 
48

Tax rate used for management reporting
21
%
 


 
21
%
 
21
%
Loss per share
 
 
 
 
 
 
 
Basic
(0.18
)
 
0.11

 
(0.07
)
 
(0.13
)
Diluted
(0.18
)
 
0.11

 
(0.07
)
 
(0.13
)
Number of shares
 
 
 
 
 
 
 
Basic
310

 
(1
)
 
309

 
301

Diluted
310

 
(1
)
 
309

 
301




























ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
 
 
 
 
 
September 30, 2017
 
March 31, 2017 1
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
2,067

 
2,565

Short-term investments
2,288

 
1,967

Receivables, net of allowances of $116 and $145, respectively
812

 
359

Other current assets
248

 
308

Total current assets
5,415

 
5,199

Property and equipment, net
444

 
434

Goodwill
1,711

 
1,707

Acquisition-related intangibles, net
5

 
8

Deferred income taxes, net
248

 
286

Other assets
99

 
84

TOTAL ASSETS
7,922

 
7,718

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
187

 
87

Accrued and other current liabilities
969

 
789

Deferred net revenue (online-enabled games)
1,116

 
1,539

Total current liabilities
2,272

 
2,415

Senior notes, net
991

 
990

Income tax obligations
122

 
104

Deferred income taxes, net
1

 
1

Other liabilities
148

 
148

Total liabilities
3,534

 
3,658

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
3

 
3

Additional paid-in capital
817

 
1,049

Retained earnings
3,641

 
3,027

Accumulated other comprehensive loss
(73
)
 
(19
)
Total stockholders’ equity
4,388

 
4,060

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
7,922

 
7,718










1 Derived from audited consolidated financial statements.







ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Six Months Ended
September 30,
 
2017
 
2016 2
 
2017
 
2016  2
OPERATING ACTIVITIES
 
 
 
 
 
 
 
Net income (loss)
(22
)
 
(38
)
 
622

 
402

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation, amortization and accretion
32

 
45

 
63

 
91

Stock-based compensation
62

 
48

 
110

 
96

Change in assets and liabilities
 
 
 
 
 
 
 
Receivables, net
(589
)
 
(481
)
 
(454
)
 
(493
)
Other assets
(14
)
 
31

 
66

 
37

Accounts payable
148

 
165

 
104

 
133

Accrued and other liabilities
216

 
181

 
100

 
109

Deferred income taxes, net
(15
)
 
(23
)
 
40

 
20

Deferred net revenue (online-enabled games)
234

 
194

 
(423
)
 
(391
)
Net cash provided by operating activities
52

 
122

 
228

 
4

INVESTING ACTIVITIES
 
 
 
 
 
 
 
Capital expenditures
(30
)
 
(29
)
 
(63
)
 
(69
)
Proceeds from maturities and sales of short-term investments
612

 
368

 
1,050

 
644

Purchase of short-term investments
(702
)
 
(507
)
 
(1,395
)
 
(824
)
Net cash used in investing activities
(120
)
 
(168
)
 
(408
)
 
(249
)
FINANCING ACTIVITIES
 
 
 
 
 
 
 
Payment of convertible notes

 
(136
)
 

 
(163
)
Proceeds from issuance of common stock
27

 
27

 
57

 
31

Cash paid to taxing authorities for shares withheld from employees
(10
)
 
(9
)
 
(105
)
 
(106
)
Repurchase and retirement of common stock
(153
)
 
(127
)
 
(303
)
 
(256
)
Net cash used in financing activities
(136
)
 
(245
)
 
(351
)
 
(494
)
Effect of foreign exchange on cash and cash equivalents
23

 
(5
)
 
33

 
(8
)
Decrease in cash and cash equivalents
(181
)
 
(296
)
 
(498
)
 
(747
)
Beginning cash and cash equivalents
2,248

 
2,042

 
2,565

 
2,493

Ending cash and cash equivalents
2,067

 
1,746

 
2,067

 
1,746





2 Operating and financing cash flow figures for the three and six months ended September 30, 2016 have been recast to reflect the impact of ASU 2016-09 which EA adopted at the beginning of FY18














ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2
 
Q3
 
Q4
 
Q1
 
Q2
 
YOY %
 
FY17
 
FY17
 
FY17
 
FY18
 
FY18
 
Change
Net revenue
 
 
 
 
 
 
 
 
 
 
 
 Net revenue
898
 
1,149
 
1,527
 
1,449
 
959
 
7
%
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Change in deferred net revenue (online-enabled games) 3
200
 
921
 
(435)
 
(674)
 
220
 
 
Gross profit
 
 
 
 
 
 
 
 
 
 
 
Gross profit
497

 
633

 
1,325

 
1,295

 
570

 
15
%
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
12

 
18

 

 

 

 
 
Change in deferred net revenue (online-enabled games) 3
200

 
921

 
(435
)
 
(674
)
 
220

 
 
Stock-based compensation
1

 

 
1

 
1

 
1

 
 
Gross profit (as a % of net revenue)
55
%
 
55
%
 
87
%
 
89
%
 
59
%
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
(49
)
 
(4
)
 
717

 
743

 
(41
)
 
16
%
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
13

 
20

 
1

 
1

 
2

 
 
Change in deferred net revenue (online-enabled games) 3
200

 
921

 
(435
)
 
(674
)
 
220

 
 
Stock-based compensation
48

 
48

 
52

 
48

 
62

 
 
Operating income (loss) (as a % of net revenue)
(5
%)
 

 
47
%
 
51
%
 
(4
%)
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
(38
)
 
(1
)
 
566

 
644

 
(22
)
 
42
%
GAAP-based financial data
 
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
13

 
20

 
1

 
1

 
2

 
 
Change in deferred net revenue (online-enabled games) 3
200

 
921

 
(435
)
 
(674
)
 
220

 
 
Stock-based compensation
48

 
48

 
52

 
48

 
62

 
 
Tax rate used for management reporting
21
%
 
21
%
 
21
%
 
21
%
 
21
%
 


Net income (loss) (as a % of net revenue)
(4
%)
 

 
37
%
 
44
%
 
(2
%)
 


Diluted earnings (loss) per share
(0.13
)
 
(0.00)

 
1.81

 
2.06

 
(0.07
)
 
46
%
Number of diluted shares used in computation
 
 
 
 
 
 
 
 
 
 
 
Basic
301

 
303

 
308

 
309

 
309

 
 
Diluted
301

 
303

 
312

 
313

 
309

 
 
Anti-dilutive shares excluded for loss position 4
13

 
10

 

 

 
3

 
 



3 The difference between the balances of deferred net revenue (online-enabled games) in the unaudited condensed consolidated balance sheets does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows due to the impact of unrecognized gains/losses on cash flow hedges.


4 Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable through stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.









ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2
 
Q3
 
Q4
 
Q1
 
Q2
 
YOY %
 
 
FY17
 
FY17
 
FY17
 
FY18
 
FY18
 
Change
QUARTERLY NET REVENUE PRESENTATIONS
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue by geography
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
389

 
561

 
644

 
611

 
427

 
10
%
International
 
509

 
588

 
883

 
838

 
532

 
5
%
Total net revenue
 
898

 
1,149

 
1,527

 
1,449

 
959

 
7
%
North America
 
58

 
370

 
(198
)
 
(287
)
 
59

 
 
International
 
142

 
551

 
(237
)
 
(387
)
 
161

 
 
Change in deferred net revenue (online-enabled games) 3
 
200

 
921

 
(435
)
 
(674
)
 
220

 
 
North America
 
43
%
 
49
%
 
42
%
 
42
%
 
45
%
 
 
International
 
57
%
 
51
%
 
58
%
 
58
%
 
55
%
 
 
Total net revenue %
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue by composition
 
 
 
 
 
 
 
 
 
 
 
 
Full game downloads
 
94

 
169

 
259

 
209

 
123

 
31
%
Live services 5
 
323

 
369

 
510

 
501

 
408

 
26
%
Mobile
 
149

 
147

 
165

 
169

 
158

 
6
%
Total digital
 
566

 
685

 
934

 
879

 
689

 
22
%
Packaged goods and other
 
332

 
464

 
593

 
570

 
270

 
(19
%)
Total net revenue
 
898

 
1,149

 
1,527

 
1,449

 
959

 
7
%
Full game downloads
 
(1
)
 
186

 
(67
)
 
(98
)
 
(4
)
 
 
Live services 5
 
(68
)
 
197

 
8

 
(81
)
 
(98
)
 
 
Mobile
 
(11
)
 
27

 
10

 
(19
)
 
(8
)
 
 
Total digital
 
(80
)
 
410

 
(49
)
 
(198
)
 
(110
)
 
 
Packaged goods and other
 
280

 
511

 
(386
)
 
(476
)
 
330

 
 
Change in deferred net revenue (online-enabled games) 3
 
200

 
921

 
(435
)
 
(674
)
 
220

 
 
Full game downloads
 
10
%
 
15
%
 
17
%
 
14
%
 
13
%
 
 
Live services 5
 
36
%
 
32
%
 
33
%
 
35
%
 
43
%
 
 
Mobile
 
17
%
 
13
%
 
11
%
 
12
%
 
16
%
 
 
Total digital
 
63
%
 
60
%
 
61
%
 
61
%
 
72
%
 
 
Packaged goods and other
 
37
%
 
40
%
 
39
%
 
39
%
 
28
%
 
 
Total net revenue %
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
 


3 The difference between the balances of deferred net revenue (online-enabled games) in the unaudited condensed consolidated balance sheets does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows due to the impact of unrecognized gains/losses on cash flow hedges.

5 Live services includes net revenue previously presented as “Extra Content” and “Subscriptions, Advertising and Other” through Q4 FY17.












ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q2
 
Q3
 
Q4
 
Q1
 
Q2
 
YOY %
 
 
FY17
 
FY17
 
FY17
 
FY18
 
FY18
 
Change
QUARTERLY NET REVENUE PRESENTATIONS
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue by platform
 
 
 
 
 
 
 
 
 
 
 
 
Xbox One, PLAYSTATION 4, Switch
 
513

 
728

 
1,039

 
974

 
569

 
11
%
Other consoles
 
65

 
65

 
70

 
60

 
26

 
(60
%)
Total consoles
 
578

 
793

 
1,109

 
1,034

 
595

 
3
%
PC / Browser
 
158

 
190

 
246

 
240

 
196

 
24
%
Mobile
 
149

 
148

 
165

 
171

 
162

 
9
%
Other
 
13

 
18

 
7

 
4

 
6

 
(54
%)
Total net revenue
 
898

 
1,149

 
1,527

 
1,449

 
959

 
7
%
Xbox One, PLAYSTATION 4, Switch
 
177

 
762

 
(375
)
 
(548
)
 
244

 
 
Other consoles
 
43

 
3

 
(40
)
 
(42
)
 
14

 
 
Total consoles
 
220

 
765

 
(415
)
 
(590
)
 
258

 
 
PC / Browser
 
(9
)
 
127

 
(30
)
 
(61
)
 
(30
)
 
 
Mobile
 
(11
)
 
27

 
9

 
(20
)
 
(7
)
 
 
Other
 

 
2

 
1

 
(3
)
 
(1
)
 
 
Change in deferred net revenue (online-enabled games) 3
 
200

 
921

 
(435
)
 
(674
)
 
220

 
 
Xbox One, PLAYSTATION 4, Switch
 
57
%
 
63
%
 
68
%
 
67
%
 
59
%
 
 
Other consoles
 
7
%
 
6
%
 
5
%
 
4
%
 
3
%
 
 
Total consoles
 
64
%
 
69
%
 
73
%
 
71
%
 
62
%
 
 
PC / Browser
 
18
%
 
17
%
 
16
%
 
17
%
 
20
%
 
 
Mobile
 
17
%
 
13
%
 
11
%
 
12
%
 
17
%
 
 
Other
 
1
%
 
1
%
 

 

 
1
%
 
 
Total net revenue %
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
 


3 The difference between the balances of deferred net revenue (online-enabled games) in the unaudited condensed consolidated balance sheets does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows 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
 
Q2
 
YOY %
 
FY17
 
FY17
 
FY17
 
FY18
 
FY18
 
Change
CASH FLOW DATA
 
 
 
 
 
 
 
 
 
 
 
Operating cash flow 6
122

 
1,137

 
437

 
176

 
52

 
(57
%)
Operating cash flow 6  - TTM
1,323

 
1,555

 
1,578

 
1,872

 
1,802

 
36
%
Capital expenditures
29

 
25

 
29

 
33

 
30

 
3
%
Capital expenditures - TTM
120

 
124

 
123

 
116

 
117

 
(3
%)
Repurchase and retirement of common stock
127

 
127

 
125

 
150

 
153

 
20
%
DEPRECIATION
 
 
 
 
 
 
 
 
 
 
 
Depreciation expense
28

 
29

 
29

 
29

 
30

 
7
%
BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
1,746

 
2,483

 
2,565

 
2,248

 
2,067

 


Short-term investments
1,520

 
1,736

 
1,967

 
2,222

 
2,288

 


Cash and cash equivalents, and short-term investments
3,266

 
4,219

 
4,532

 
4,470

 
4,355

 
33
%
Receivables, net
723

 
587

 
359

 
222

 
812

 
12
%
STOCK-BASED COMPENSATION
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
1

 

 
1

 
1

 
1

 
 
Research and development
27

 
27

 
28

 
28

 
36

 
 
Marketing and sales
8

 
8

 
8

 
7

 
9

 
 
General and administrative
12

 
13

 
15

 
12

 
16

 
 
Total stock-based compensation
48

 
48

 
52

 
48

 
62

 
 






6 Operating cash flow has been recast to reflect the impact of ASU 2016-09 which EA adopted at the beginning of FY18