Electronic Arts Reports Q2 FY22 Financial Results
Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2021.
“This was the strongest second quarter in the history of Electronic Arts, with more players around the world joining and engaging in our leading franchises, new launches and live services,” said Andrew Wilson, CEO of Electronic Arts. “Thanks to our incredibly talented teams, we’re excited to deliver more amazing experiences this holiday season, and connect hundreds of millions of players around the world through our EA SPORTS games, Apex Legends, Battlefield 2042 and more.”
“EA delivered another strong quarter, primarily driven by our EA SPORTS titles and Apex Legends,” said CFO Blake Jorgensen. “Based on our confidence in our franchises and live services, we are again raising guidance this quarter. We’re positioned for a strong holiday season driven by our exciting Battlefield 2042 game, with growth drivers in place for this year, next year, and beyond.”
Selected Operating Highlights and Metrics
Net bookings1 for the trailing twelve months was $7.077 billion, up 27% year-over-year. In the first six months of the fiscal year, approximately 100 million players have engaged with our EA SPORTS™ global football franchise across all platforms. Apex Legends™ Season 9 and Season 10 each respectively set new marks for the highest active players since Season 1. The Battlefield™ 2042 Open Beta had 7.7 million players. Star Wars™: Galaxy of Heroes surpassed 100 million players life to date.Selected Financial Highlights and Metrics
Net cash provided by operating activities was $64 million for the quarter and $1.416 billion for the trailing twelve months. EA repurchased 2.3 million shares for $325 million during the quarter, bringing the total for the last twelve months to 9.5 million shares for $1.301 billion. EA paid a cash dividend of $0.17 per share during the quarter.Dividend
EA has declared a quarterly cash dividend of $0.17 per share of the Company’s common stock. The dividend is payable on December 22, 2021 to shareholders of record as of the close of business on December 8, 2021.
Quarterly Financial Highlights
Three Months Ended September 30,2021
2020
(in $ millions, except per share amounts) Full game617
282
Live services and other1,209
869
Total net revenue1,826
1,151
Net income294
185
Diluted earnings per share1.02
0.63
Operating cash flow64
61
Value of shares repurchased325
-
Number of shares repurchased2.3
-
The following GAAP-based financial data2 and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
Three Months Ended September 30, 2021 GAAP-Based Financial Data (in $ millions) Statement of Operations Acquisition-related expenses Change in deferred net revenue (online-enabled games) Stock-basedcompensation Total net revenue
1,826
-
25
-
Cost of revenue
494
(22
)
-
(2
)
Gross profit1,332
22
25
2
Total operating expenses
992
(30
)
-
(147
)
Operating income340
52
25
149
Interest and other income (expense), net
(14
)
-
-
-
Income before provision for income taxes
326
52
25
149
Number of shares used in computation: Diluted
287
Trailing Twelve Months Financial Highlights
Twelve Months Ended September 30,2021
2020
(in $ millions) Full game1,911
1,686
Live services and other4,485
3,904
Total net revenue6,396
5,590
Net income785
1,314
Operating cash flow1,416
2,041
Value of shares repurchased1,301
674
Number of shares repurchased9.5
6.5
The following GAAP-based financial data2 and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:
Twelve Months Ended September 30, 2021 GAAP-Based Financial Data (in $ millions) Statement of Operations Acquisition-related expenses Change in deferred net revenue (online-enabled games) Stock-basedcompensation Total net revenue
6,396
-
681
-
Cost of revenue
1,729
(48
)
-
(5
)
Gross profit4,667
48
681
5
Total operating expenses
3,579
(89
)
-
(489
)
Operating income1,088
137
681
494
Interest and other income (expense), net
(44
)
-
-
-
Income before provision for income taxes
1,044
137
681
494
Operating Metric
The following is a calculation of our total net bookings1 for the periods presented:
Three Months Ended
Twelve Months Ended September 30, September 30,2021
2020
2021
2020
(in $ millions) Total net revenue1,826
1,151
6,396
5,590
Change in deferred net revenue (online-enabled games)
25
(241
)
681
(13
)
Net bookings1,851
910
7,077
5,577
Business Outlook as of November 3, 2021
Our financial expectations for the quarter ending December 31, 2021 and the fiscal year ending March 31, 2022 include estimates of the impact of our completed acquisitions on consolidated results and could be materially impacted as we integrate these acquisitions.
Fiscal Year 2022 Expectations – Ending March 31, 2022
Financial metrics:
Net revenue is expected to be approximately $6.925 billion. Change in deferred net revenue (online-enabled games) is expected to be approximately $700 million. Net income is expected to be approximately $583 million. Diluted earnings per share is expected to be approximately $2.03. Operating cash flow is expected to be approximately $1.950 billion. The Company estimates a share count of 287 million for purposes of calculating fiscal year 2022 diluted earnings per share.Operational metric:
Net bookings1 is expected to be approximately $7.625 billion.In addition, the following outlook for GAAP-based financial data2 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, 2022
GAAP-Based Financial DataGAAP Guidance
Acquisition-related expenses
Change in deferred net revenue (online-enabled games)
Stock-based compensation
(in $ millions) Total net revenue6,925
-
700
-
Cost of revenue
1,848
(130
)
-
(5
)
Operating expense4,110
(145
)
-
(545
)
Income before provision for income taxes908
275
700
550
Net income
583
Number of shares used in computation: Diluted shares287
Third Quarter Fiscal Year 2022 Expectations – Ending December 31, 2021
Financial metrics:
Net revenue is expected to be approximately $1.750 billion. Change in deferred net revenue (online-enabled games) is expected to be approximately $875 million. Net income is expected to be approximately $5 million. Diluted earnings per share is expected to be approximately $0.02. The Company estimates a share count of 287 million for purposes of calculating third quarter fiscal 2022 diluted earnings per share.Operational metric:
Net bookings1 is expected to be approximately $2.625 billion.In addition, the following outlook for GAAP-based financial data2 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 December 31, 2021 GAAP-Based Financial Data GAAP Guidance Acquisition-related expenses Change in deferred net revenue (online-enabled games) Stock-based compensation (in $ millions) Total net revenue1,750
-
875
-
Cost of revenue
625
(50
)
-
-
Operating expense
1,100
(35
)
-
(135
)
Income before provision for income taxes8
85
875
135
Net income
5
Number of shares used in computation: Diluted shares287
Conference Call and Supporting Documents
Electronic Arts will host a conference call on November 3, 2021 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal quarter ended September 30, 2021 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) 324-3683 (domestic) or (509) 844-0959 (international), using the conference code 3697115 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 November 17, 2021 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 3697115. 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 November 3, 2021,” and other information regarding EA's fiscal 2022 and other future 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: the impact of the COVID-19 pandemic, 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 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, 2021.
These forward-looking statements are current as of November 3, 2021. 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 September 30, 2021. 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, 2021.
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 2021, EA posted GAAP net revenue of $5.6 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS™ FIFA, Battlefield™, Apex Legends™, The Sims™, Madden NFL, Need for Speed™, Titanfall™, Plants vs. Zombies™ and F1®. More information about EA is available at www.ea.com/news.
EA SPORTS, Battlefield, Need for Speed, Apex Legends, The Sims, Titanfall and Plants vs. Zombies are trademarks of Electronic Arts Inc. STAR WARS © & TM 2015 Lucasfilm Ltd. All rights reserved. John Madden, NFL, FIFA and F1 are the property of their respective owners and used with permission.
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.
2 For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-K for the fiscal year ended March 31, 2021.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in $ millions, except per share data)
Three Months Ended
September 30,
Six Months Ended
September 30,
2021
2020
2021
2020
Net revenue
1,826
1,151
3,377
2,610
Cost of revenue
494
286
809
574
Gross profit
1,332
865
2,568
2,036
Operating expenses:
Research and development
553
421
1,068
859
Marketing and sales
233
156
423
277
General and administrative
176
133
345
269
Amortization of intangibles
30
6
70
11
Total operating expenses
992
716
1,906
1,416
Operating income
340
149
662
620
Interest and other income (expense), net
(14
)
(10
)
(28
)
(13
)
Income before provision for (benefit from) income taxes
326
139
634
607
Provision for (benefit from) income taxes
32
(46
)
136
57
Net income
294
185
498
550
Earnings per share
Basic
1.03
0.64
1.75
1.90
Diluted
1.02
0.63
1.73
1.88
Number of shares used in computation
Basic
285
289
285
289
Diluted
287
293
288
292
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on August 4, 2021 for the three months ended September 30, 2021 plus a comparison to the actuals for the three months ended September 30, 2020.
Three Months Ended September 30,
2021
2021
2020
Guidance
Variance
Actuals
Actuals
Net revenue
Net revenue
1,775
51
1,826
1,151
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
(50
)
75
25
(241
)
Cost of revenue
Cost of revenue
518
(24
)
494
286
GAAP-based financial data
Acquisition-related expenses
(35
)
13
(22
)
—
Stock-based compensation
—
(2
)
(2
)
(2
)
Operating expenses
Operating expenses
1,030
(38
)
992
716
GAAP-based financial data
Acquisition-related expenses
(40
)
10
(30
)
(6
)
Stock-based compensation
(150
)
3
(147
)
(111
)
Income before tax
Income before tax
212
114
326
139
GAAP-based financial data
Acquisition-related expenses
75
(23
)
52
6
Change in deferred net revenue (online-enabled games)1
(50
)
75
25
(241
)
Stock-based compensation
150
(1
)
149
113
Tax rate used for management reporting
18
%
18
%
18
%
Earnings per share
Basic
0.37
0.66
1.03
0.64
Diluted
0.36
0.66
1.02
0.63
Number of shares
Basic
286
(1
)
285
289
Diluted
288
(1
)
287
293
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)
September 30, 2021
March 31, 20212
ASSETS
Current assets:
Cash and cash equivalents
1,630
5,260
Short-term investments
342
1,106
Receivables, net
1,031
521
Other current assets
387
326
Total current assets
3,390
7,213
Property and equipment, net
516
491
Goodwill
5,459
2,868
Acquisition-related intangibles, net
1,080
309
Deferred income taxes, net
2,139
2,045
Other assets
435
362
TOTAL ASSETS
13,019
13,288
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
136
96
Accrued and other current liabilities
1,119
1,341
Deferred net revenue (online-enabled games)
1,322
1,527
Total current liabilities
2,577
2,964
Senior notes, net
1,877
1,876
Income tax obligations
318
315
Deferred income taxes, net
68
43
Other liabilities
323
250
Total liabilities
5,163
5,448
Stockholders’ equity:
Common stock
3
3
Retained earnings
7,855
7,887
Accumulated other comprehensive loss
(2
)
(50
)
Total stockholders’ equity
7,856
7,840
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
13,019
13,288
2Derived 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,
2021
2020
2021
2020
OPERATING ACTIVITIES
Net income
294
185
498
550
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion
94
40
199
77
Stock-based compensation
149
113
274
215
Change in assets and liabilities
Receivables, net
(458
)
83
(446
)
39
Other assets
23
(157
)
(51
)
(113
)
Accounts payable
61
109
42
106
Accrued and other liabilities
52
(30
)
(250
)
(96
)
Deferred income taxes, net
(168
)
(42
)
(140
)
(32
)
Deferred net revenue (online-enabled games)
17
(240
)
(205
)
(307
)
Net cash provided by (used in) operating activities
64
61
(79
)
439
INVESTING ACTIVITIES
Capital expenditures
(43
)
(25
)
(87
)
(63
)
Proceeds from maturities and sales of short-term investments
621
724
1,128
1,418
Purchase of short-term investments
(84
)
(752
)
(369
)
(1,416
)
Acquisitions, net of cash acquired
(1,405
)
—
(3,394
)
—
Net cash used in investing activities
(911
)
(53
)
(2,722
)
(61
)
FINANCING ACTIVITIES
Proceeds from issuance of common stock
41
40
41
43
Cash dividends paid
(48
)
—
(97
)
—
Cash paid to taxing authorities for shares withheld from employees
(16
)
(8
)
(121
)
(77
)
Repurchase and retirement of common stock
(325
)
—
(650
)
(78
)
Net cash provided by (used in) financing activities
(348
)
32
(827
)
(112
)
Effect of foreign exchange on cash and cash equivalents
(13
)
6
(2
)
25
Change in cash and cash equivalents
(1,208
)
46
(3,630
)
291
Beginning cash and cash equivalents
2,838
4,013
5,260
3,768
Ending cash and cash equivalents
1,630
4,059
1,630
4,059
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q2
Q3
Q4
Q1
Q2
YOY %
FY21
FY21
FY21
FY22
FY22
Change
Net revenue
Net revenue
1,151
1,673
1,346
1,551
1,826
59
%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
(241
)
727
144
(215
)
25
Gross profit
Gross profit
865
1,072
1,027
1,236
1,332
54
%
Gross profit (as a % of net revenue)
75
%
64
%
76
%
80
%
73
%
GAAP-based financial data
Acquisition-related expenses
—
—
4
22
22
Change in deferred net revenue (online-enabled games)1
(241
)
727
144
(215
)
25
Stock-based compensation
2
1
1
1
2
Operating income
Operating income
149
251
175
322
340
128
%
Operating income (as a % of net revenue)
13
%
15
%
13
%
21
%
19
%
GAAP-based financial data
Acquisition-related expenses
6
5
18
62
52
Change in deferred net revenue (online-enabled games)1
(241
)
727
144
(215
)
25
Stock-based compensation
113
111
109
125
149
Net income
Net income
185
211
76
204
294
59
%
Net income (as a % of net revenue)
16
%
13
%
6
%
13
%
16
%
GAAP-based financial data
Acquisition-related expenses
6
5
18
62
52
Change in deferred net revenue (online-enabled games)1
(241
)
727
144
(215
)
25
Stock-based compensation
113
111
109
125
149
Tax rate used for management reporting
18
%
18
%
18
%
18
%
18
%
Diluted earnings per share
0.63
0.72
0.26
0.71
1.02
62
%
Number of diluted shares used in computation
Basic
289
290
288
286
285
Diluted
293
292
290
289
287
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
Q2
YOY %
FY21
FY21
FY21
FY22
FY22
Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads
163
347
185
233
337
107
%
Packaged goods
119
375
65
89
280
135
%
Full game
282
722
250
322
617
119
%
Live services and other
869
951
1,096
1,229
1,209
39
%
Total net revenue
1,151
1,673
1,346
1,551
1,826
59
%
Full game
25
%
43
%
19
%
21
%
34
%
Live services and other
75
%
57
%
81
%
79
%
66
%
Total net revenue %
100
%
100
%
100
%
100
%
100
%
GAAP-based financial data
Full game downloads
(2
)
53
(19
)
(5
)
35
Packaged goods
(14
)
83
(44
)
(35
)
44
Full game
(16
)
136
(63
)
(40
)
79
Live services and other
(225
)
591
207
(175
)
(54
)
Total change in deferred net revenue (online-enabled games) by composition1
(241
)
727
144
(215
)
25
Net revenue by platform
Console
714
1,191
879
972
1,198
68
%
PC & Other
249
326
295
361
377
51
%
Mobile
188
156
172
218
251
34
%
Total net revenue
1,151
1,673
1,346
1,551
1,826
59
%
GAAP-based financial data
Console
(201
)
619
71
(278
)
(29
)
PC & Other
(24
)
73
51
9
26
Mobile
(16
)
35
22
54
28
Total change in deferred net revenue (online-enabled games) by platform1
(241
)
727
144
(215
)
25
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
Q2
YOY %
FY21
FY21
FY21
FY22
FY22
Change
CASH FLOW DATA
Operating cash flow
61
1,124
371
(143
)
64
5
%
Operating cash flow - TTM
2,041
2,061
1,934
1,413
1,416
(31
%)
Capital expenditures
25
30
31
44
43
72
%
Capital expenditures - TTM
131
133
124
130
148
13
%
Repurchase and retirement of common stock
—
326
325
325
325
100
%
Cash dividends paid
—
49
49
49
48
100
%
DEPRECIATION
Depreciation expense
32
37
38
40
39
22
%
BALANCE SHEET DATA
Cash and cash equivalents
4,059
4,772
5,260
2,838
1,630
Short-term investments
1,972
1,938
1,106
881
342
Cash and cash equivalents, and short-term investments
6,031
6,710
6,366
3,719
1,972
(67
%)
Receivables, net
423
778
521
557
1,031
144
%
STOCK-BASED COMPENSATION
Cost of revenue
2
1
1
1
2
Research and development
74
74
71
85
101
Marketing and sales
12
11
12
12
15
General and administrative
25
25
25
27
31
Total stock-based compensation
113
111
109
125
149
Category: Company News
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