REDWOOD CITY, Calif.–(BUSINESS WIRE)–Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its fourth fiscal quarter and fiscal year ended March 31, 2019.

News and ongoing updates regarding EA and its games are available on EA’s blog at www.ea.com/news.

“FY20 will be a year of continued growth for our industry, and we’re excited to bring more great entertainment to the expanding audience around the world,” said CEO Andrew Wilson. “Players are engaging with games in more ways than ever before. We’re committed to meeting them where they are with a broad portfolio of amazing new games and live services, choice of engagement models including free-to-play and subscriptions, and new opportunities to play, compete and watch.”

“We ended our fiscal year with strong growth, driven by our live services business which continued to provide a very large, stable and profitable source of net bookings,” said COO and CFO Blake Jorgensen. “Looking ahead, we will bring games to an extraordinary variety of players in fiscal 2020 and deliver on our commitment to players with deep live services content for Ultimate Team, Apex Legends, The Sims 4, Anthem and Battlefield V.”

Selected Operating Highlights and Metrics

  • Digital net bookings* for the trailing twelve months was $3.722 billion, up 5% year-over-year and represents 75% of total net bookings.
  • During the quarter, launched two new original IP titles, Apex LegendsTM and AnthemTM.
  • During the quarter, launched Firestorm battle royale in Battlefield TM V, the biggest BattlefieldTM live service event ever.
  • In FY19, more than 45 million unique players engaged in FIFA 19 and FIFA 18 on console and PC.
  • In FY19, active players in The Sims TM 4 increased by 35% year-over-year.

* 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 and, for periods after the fourth quarter of fiscal 2018, mobile platform fees.

Selected Financial Highlights and Metrics

All financial measures are presented on a GAAP basis.

  • Net cash from operating activities was $599 million for the quarter and $1.547 billion for the trailing twelve months.
  • EA repurchased 3.2 million shares for $301 million during the quarter and 11.0 million shares for $1.192 billion during the trailing twelve months.

Impact of Recently Adopted Accounting Standard

At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. For more information about the adoption of Topic 606, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

Quarterly Financial Highlights

   

Three Months Ended

March 31,
2019 2018
(in $ millions, except per share amounts)
Digital net revenue 1,065 1,102
Packaged goods and other net revenue 173 480

Total net revenue

1,238 1,582
 
Net income 209 607
Diluted earnings per share 0.69 1.95
 
Operating cash flow 599 615
 
Value of shares repurchased 301 148
Number of shares repurchased 3.2 1.2
 

The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its fiscal 2019 GAAP results in order to assess EA’s operating results:

         
Three Months Ended March 31, 2019
GAAP-Based Financial Data
(in $ millions)

Statement
of
Operations

Acquisition-
related
expenses

Change in
deferred
net revenue
(online-
enabled
games)

Mobile
platform
fees

Stock-based
compensation

Total net revenue 1,238 173 (47 )
Cost of revenue 276 (1 ) (47 ) (1 )
Gross profit 962 1 173 1
Total operating expenses 766 (16 )   (72 )
Operating income 196 17 173 73
Interest and other income, net 23      
Income before provision for income taxes 219 17 173 73
Number of shares used in computation:
Diluted 301
 

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 December 31, 2018.

TTM Financial Highlights

   
Twelve Months Ended
March 31,
2019 2018
(in $ millions, except per share amounts)
Digital net revenue 3,710 3,450
Packaged goods and other net revenue 1,240 1,700
Total net revenue 4,950 5,150
 
Net income 1,019 1,043*
Diluted earnings per share 3.33 3.34*
 
Operating cash flow 1,547 1,692
 
Value of shares repurchased 1,192 601
Number of shares repurchased 11.0 5.3

 

*During the twelve months ended March 31, 2018, EA recognized $235 million of incremental income tax expense, or approximately $0.75 per share, due to the application of the Tax Cuts and Jobs Act.

The following GAAP-based financial data and tax rate of 18% was used internally by company management to adjust its fiscal 2019 GAAP results in order to assess EA’s operating results:

         
Twelve Months Ended March 31, 2019
GAAP-Based Financial Data
(in $ millions)

Statement
of
Operations

Acquisition-
related
expenses

Change in
deferred net
revenue
(online-
enabled
games)

Mobile
platform
fees

Stock-based
compensation

Total net revenue 4,950 182 (188 )
Cost of revenue 1,322 (4 ) (188 ) (4 )
Gross profit 3,628 4 182 4
Total operating expenses 2,632 (37 )   (280 )
Operating income 996 41 182 284
Interest and other income, net 83      
Income before provision for income taxes 1,079 41 182 284
Number of shares used in computation:
Diluted 306
 

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 December 31, 2018.

Operating Metric

The following is a calculation of our total net bookings for the periods presented:

       
Three Months Ended TTM Ended
March 31, March 31,
2019 2018 2019 2018
(in $ millions)
Total net revenue 1,238 1,582 4,950 5,150
Change in deferred net revenue (online-enabled games) 173 (327) 182 30
Mobile platform fees (47) (188)
Net bookings 1,364 1,255 4,944 5,180
 

Business Outlook as of May 7, 2019

The following forward-looking statements reflect expectations as of May 7, 2019. Electronic Arts assumes no obligation to update these statements, except as required by law. 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 2020 Expectations – Ending March 31, 2020

Financial metrics:

  • Net revenue is expected to be approximately $5.375 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $(125) million.
    • Mobile platform fees are expected to be approximately $(150) million.
  • Net income is expected to be approximately $2.595 billion. This includes a one-time tax benefit of approximately $1.5 billion (see below).
  • Diluted earnings per share is expected to be approximately $8.56. This includes a one-time tax benefit of approximately $5 per share (see below).
  • Operating cash flow is expected to be approximately $1.575 billion.
  • The Company estimates a share count of 303 million for purposes of calculating fiscal year 2020 diluted earnings per share.

Subsequent to the fiscal year ended March 31, 2019, EA completed an internal transfer of some of its intellectual property rights to its Swiss subsidiary, where EA’s international business is headquartered. This transfer will result in a one-time tax benefit of between $1.5 billion and $3.9 billion, which will be recognized as a deferred tax asset in EA’s consolidated financial statements for the three months ending June 30, 2019. The recognition of the deferred tax asset will add between $5 to $13 per share to GAAP EPS and the low end of this range has been reflected above in EA’s forecast. The forecast of this one-time tax benefit is preliminary and is dependent on the results of Swiss referendums to be voted on later this month.

Operational metric:

  • Net bookings is expected to be approximately $5.100 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% 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, 2020
GAAP-Based Financial Data

GAAP
Guidance

Acquisition-
related
expenses

Change in
deferred net
revenue
(online-
enabled
games)

Mobile
platform fees

Stock-based
compensation

(in $ millions)
Digital net revenue 4,175 (75 ) (150 )
Packaged goods & other net revenue   1,200       (50 )        
Total net revenue   5,375       (125 )   (150 )    
Cost of revenue 1,327 (12 ) (150 ) (2 )
Operating expense 2,746 (23 ) (353 )
Income before provision for income taxes 1,361 35 (125 ) 355
Net income 2,595
Number of shares used in computation:
Diluted shares 303
 

First Quarter Fiscal Year 2020 Expectations – Ending June 30, 2019

Financial metrics:

  • Net revenue is expected to be approximately $1.130 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $(405) million.
    • Mobile platform fees are expected to be approximately $(35) million.
  • Net income is expected to be approximately $1.765 billion. This includes a one-time tax benefit of approximately $1.5 billion (see above).
  • Diluted earnings per share is expected to be approximately $5.84. This includes a one-time tax benefit of approximately $5 per share (see above).
  • The Company estimates a share count of 302 million for purposes of calculating first quarter fiscal year 2020 diluted earnings per share. Should the first quarter be a loss, the Company will use the basic share count of 299 million for purposes of calculating first quarter fiscal year 2020 earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $690 million.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 18% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

         
Three Months Ending June 30, 2019
GAAP-Based Financial Data

GAAP
Guidance

Acquisition-
related
expenses

Change in
deferred net
revenue
(online-
enabled
games)

Mobile
platform
fees

Stock-based
compensation

(in $ millions)                    
Total net revenue   1,130       (405 )   (35 )    
Cost of revenue 188 (2 ) (35 )
Operating expense 650 (5 ) (70 )
Income before provision for income taxes 310 7 (405 ) 70

Net income

1,765
Number of shares used in computation:
Diluted shares 302
 

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 December 31, 2018.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on Tuesday, May 7, 2019 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal fourth quarter and fiscal year ended March 31, 2019 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 (866) 393-4306 (domestic) or (734) 385-2616 (international), using the Conference ID 2997759 or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation, a financial model of EA’s historical results and guidance, and an Investor Accounting FAQ on EA’s IR Website. After the conference call, 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 May 21, 2019 at (855) 859-2056 (domestic) or (404) 537-3406 (international) using pin code 2997759. 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 2020 expectations under the heading “Business Outlook as of May 7, 2019,” and other information regarding EA’s fiscal 2020 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 or 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 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; changes in our tax rates or tax laws; and other factors described in Part II, Item 1A of Electronic Arts’ latest Quarterly Report on Form 10-Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

These forward-looking statements are valid as of May 7, 2019. 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2019. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 31, 2019.

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 2019, EA posted GAAP net revenue of $4.95 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.

Apex Legends, Anthem, Battlefield, The Sims, EA SPORTS, 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.

 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in $ millions, except per share data)
       

Three Months Ended
March 31,

Twelve Months Ended
March 31,

2019 1

2018

2019 1

2018
Net revenue
Product 216 757 1,593 2,586
Service and other 1,022   825   3,357   2,564
Total net revenue 1,238 1,582 4,950 5,150
Cost of revenue
Product 52 106 517 822
Service and other 224   127   805   455
Total cost of revenue 276   233   1,322   1,277
Gross profit 962 1,349 3,628 3,873
Operating expenses:
Research and development 398 335 1,433 1,320
Marketing and sales 229 130 702 641
General and administrative 123 126 460 469
Acquisition-related contingent consideration 11 14
Amortization of intangibles 5   5   23   9
Total operating expenses 766   596   2,632   2,439
Operating income 196 753 996 1,434
Interest and other income (expense), net 23   1   83   15
Income before provision for income taxes 219 754 1,079 1,449
Provision for income taxes 10   147   60   406
Net income 209   607   1,019   1,043
Earnings per share
Basic 0.70 1.98 3.36 3.39
Diluted 0.69 1.95 3.33 3.34
Number of shares used in computation
Basic 299 307 303 308
Diluted 301 311 306 312
 

1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on February 5, 2019 for the three months ended March 31, 2019 plus a comparison to the actuals for the three months ended March 31, 2018.

 
  Three Months Ended March 31,

2019 1

   

2019 1

  2018
Guidance Variance Actuals Actuals
Net revenue
Net revenue 1,163 75 1,238 1,582
GAAP-based financial data
Change in deferred net revenue (online-enabled games) 56 117 173 (327 )
Mobile platform fees (49 ) 2 (47 )
Cost of revenue
Cost of revenue 265 11 276 233
GAAP-based financial data
Acquisition-related expenses (1 ) (1 ) (1 )
Stock-based compensation (1 ) (1 ) (1 )
Mobile platform fees (49 ) 2 (47 )
Operating expenses
Operating expenses 715 51 766 596
GAAP-based financial data
Acquisition-related expenses (6 ) (10 ) (16 ) (5 )
Stock-based compensation (76 ) 4 (72 ) (68 )
Income before tax
Income before tax 195 24 219 754
GAAP-based financial data
Acquisition-related expenses 6 11 17 6
Change in deferred net revenue (online-enabled games) 56 117 173 (327 )
Mobile platform fees
Stock-based compensation 76 (3 ) 73 69
Tax rate used for management reporting 18 % 18 % 21 %
Earnings per share
Basic 0.56 0.14 0.70 1.98
Diluted 0.56 0.13 0.69 1.95
Number of shares
Basic 301 (2 ) 299 307
Diluted 303 (2 ) 301 311
 

1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers. Topic 606 significantly changes how EA recognizes and reports revenue and diluted earnings per share. For more information about the adoption of Topic 606, including information with respect to mobile platform fees, please refer to the Investor Accounting FAQ on our IR website. Financial data for periods prior to April 1, 2018 has not been restated.

 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
   
March 31, 20191 March 31, 20182
ASSETS
Current assets:
Cash and cash equivalents 4,708 4,258
Short-term investments 737 1,073
Receivables, net of allowances of $7 and $165, respectively 623 385
Other current assets 313   288  
Total current assets 6,381 6,004
Property and equipment, net 448 453
Goodwill 1,892 1,883
Acquisition-related intangibles, net 87 71
Deferred income taxes, net 35 84
Other assets 114   89  
TOTAL ASSETS 8,957   8,584  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable 113 48
Accrued and other current liabilities 1,052 821
Deferred net revenue (online-enabled games) 1,100   1,622  
Total current liabilities 2,265 2,491
Senior notes, net 994 992
Income tax obligations 233 250
Deferred income taxes, net 2 1
Other liabilities 132   255  
Total liabilities 3,626 3,989
 
Stockholders’ equity:
Common stock 3 3
Additional paid-in capital 657
Retained earnings 5,358 4,062
Accumulated other comprehensive loss (30 ) (127 )
Total stockholders’ equity 5,331   4,595  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 8,957   8,584  
 

1At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with Customers. EA’s FY19 Unaudited Condensed Consolidated Balance Sheet reflects the effect of the adoption as of April 1, 2018, which had an impact on the following: receivables, net of allowances, accrued and other current liabilities, deferred net revenue (online-enabled games), deferred income taxes, net, retained earnings and accumulated other comprehensive loss. Financial data for periods prior to April 1, 2018 has not been restated.

2Derived from audited consolidated financial statements

 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
       

Three Months Ended
March 31,

 

Twelve Months Ended
March 31,

2019 2018 2019 2018
OPERATING ACTIVITIES
Net income 209 607 1,019 1,043
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 37 39 145 136
Acquisition-related contingent consideration 14 14
Stock-based compensation 73 69 284 242
Change in assets and liabilities
Receivables, net 183 502 (88 ) (25 )
Other assets (65 ) (69 ) (24 ) 10
Accounts payable 24 (60 ) 59 (44 )
Accrued and other liabilities (120 ) (222 ) 3 43
Deferred income taxes, net 73 74 (16 ) 204
Deferred net revenue (online-enabled games) 171   (325 ) 151   83  
Net cash provided by operating activities 599   615   1,547   1,692  
INVESTING ACTIVITIES
Capital expenditures (35 ) (20 ) (119 ) (107 )
Proceeds from maturities and sales of short-term investments 733 1,510 1,688 3,166
Purchase of short-term investments (198 ) (275 ) (1,342 ) (2,287 )
Acquisitions, net of cash acquired     (58 ) (150 )
Net cash provided by investing activities 500   1,215   169   622  
FINANCING ACTIVITIES
Proceeds from issuance of common stock 25 21 61 78
Cash paid to taxing authorities for shares withheld from employees (6 ) (8 ) (122 ) (120 )
Repurchase and retirement of common stock (301 ) (148 ) (1,192 ) (601 )
Net cash used in financing activities (282 ) (135 ) (1,253 ) (643 )
Effect of foreign exchange on cash and cash equivalents 4   (3 ) (13 ) 22  
Increase in cash and cash equivalents 821 1,692 450 1,693
Beginning cash and cash equivalents 3,887   2,566   4,258   2,565  
Ending cash and cash equivalents 4,708   4,258   4,708   4,258  
 
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
           
Q4 Q11 Q21 Q31 Q41 YOY %
FY18 FY19 FY19 FY19 FY19 Change
Net revenue
Net revenue 1,582 1,137 1,286 1,289 1,238 (22 %)
GAAP-based financial data
Change in deferred net revenue (online-enabled games)3 (327 ) (339 ) (20 ) 368 173
Mobile platform fees (49 ) (44 ) (48 ) (47 )
Gross profit
Gross profit 1,349 922 868 876 962 (29 %)
GAAP-based financial data
Acquisition-related expenses 1 1 1 1 1
Change in deferred net revenue (online-enabled games)3 (327 ) (339 ) (20 ) 368 173
Mobile platform fees
Stock-based compensation 1 1 1 1 1
Gross profit (as a % of net revenue) 85 % 81 % 67 % 68 % 78 %
Operating income
Operating income 753 300 258 242 196 (74 %)
GAAP-based financial data
Acquisition-related expenses 6 7 9 8 17
Change in deferred net revenue (online-enabled games)3 (327 ) (339 ) (20 ) 368 173
Stock-based compensation 69 70 66 75 73
Operating income (as a % of net revenue) 48 % 26 % 20 % 19 % 16 %
Net income
Net income 607 293 255 262 209 (66 %)
GAAP-based financial data
Acquisition-related expenses 6 7 9 8 17
Change in deferred net revenue (online-enabled games)3 (327 ) (339 ) (20 ) 368 173
Stock-based compensation 69 70 66 75 73
Tax rate used for management reporting 21 % 18 % 18 % 18 % 18 %
Net income (as a % of net revenue) 38 % 26 % 20 % 20 % 17 %
Diluted earnings per share 1.95 0.95 0.83 0.86 0.69 (65 %)
Number of diluted shares used in computation
Basic 307 306 305 302 299
Diluted 311 310 307 304 301
 

Contacts

For additional information, please contact:

Chris Evenden
Vice President, Investor Relations
650-628-0255
cevenden@ea.com

John Reseburg
Vice President, Corporate Communications
650-628-3601
jreseburg@ea.com

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