Electronic Arts Reports Q3 FY22 Financial Results
Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2021.
“FY22 has been a year of outstanding growth for Electronic Arts, and we’re proud that our franchises were among the most-downloaded, most-played, and most popular titles over the last year and the holiday quarter,” said Andrew Wilson, CEO of Electronic Arts. “Our network of more than 540 million unique active accounts continues to expand, players are spending more time in our games, and with our amazing IP we are well-positioned for continued growth.”
“Q3 was the largest quarter in the company’s history for net bookings, underlying profitability and cash generation,” said CFO Blake Jorgensen. “Our portfolio approach will enable us to deliver organic growth in the double digits this year, continue to deliver strong cash flow, and provides a strong foundation for growth as we look to the future.”
Selected Operating Highlights and Metrics
Net bookings1 for the trailing twelve months was $7.254 billion, up 22% year-over-year. Over the last year, the EA player network has grown to more than 540 million unique active accounts. During FY22 to date, more than 180 million monthly active accounts on average engaged in our games across all platforms. At quarter end, Apex Legends™ monthly active players were up more than 30% year-over-year. Players are spending nearly 20% more time in our games in FY22 compared to the previous year.Selected Financial Highlights and Metrics
Net cash provided by operating activities was a record $1.534 billion for the quarter and $1.826 billion for the trailing twelve months. EA repurchased 2.4 million shares for $325 million during the quarter, bringing the total for the last twelve months to 9.4 million shares for $1.300 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 March 23, 2022 to shareholders of record as of the close of business on March 9, 2022.
Quarterly Financial Highlights
Three Months Ended
December 31,
2021
2020
(in $ millions, except per share amounts) Full game616
722
Live services and other1,173
951
Total net revenue1,789
1,673
Net income66
211
Diluted earnings per share0.23
0.72
Operating cash flow1,534
1,124
Value of shares repurchased325
326
Number of shares repurchased2.4
2.5
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:
Three Months Ended December 31, 2021
GAAP-Based Financial Data
(in $ millions)
Statement of
Operations
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-enabled
games)
Stock-based
compensation
1,789
-
788
-
Cost of revenue
631
(44
)
-
(1
)
Gross profit1,158
44
788
1
Total operating expenses
1,056
(61
)
-
(128
)
Operating income102
105
788
129
Interest and other income (expense), net
(11
)
-
-
-
Income before provision for income taxes
91
105
788
129
Number of shares used in computation: Diluted
285
Trailing Twelve Months Financial Highlights
Twelve Months Ended
December 31,
2021
2020
(in $ millions) Full game1,805
1,719
Live services and other4,707
3,951
Total net revenue6,512
5,670
Net income640
1,179
Operating cash flow1,826
2,061
Value of shares repurchased1,300
695
Number of shares repurchased9.4
5.9
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 December 31, 2021
GAAP-Based Financial Data
(in $ millions)
Statement of
Operations
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-enabled
games)
Stock-based
compensation
6,512
-
742
-
Cost of revenue
1,759
(92
)
-
(5
)
Gross profit4,753
92
742
5
Total operating expenses
3,814
(145
)
-
(507
)
Operating income939
237
742
512
Interest and other income (expense), net
(49
)
-
-
-
Income before provision for income taxes
890
237
742
512
Operating Metric
The following is a calculation of our total net bookings1 for the periods presented:
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2021
2020
2021
2020
(in $ millions) Total net revenue1,789
1,673
6,512
5,670
Change in deferred net revenue (online-enabled games)788
727
742
286
Net bookings2,577
2,400
7,254
5,956
Business Outlook as of February 1, 2022
Our financial expectations for the quarter and 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 $600 million. Net income is expected to be approximately $694 million. Diluted earnings per share is expected to be approximately $2.43. Operating cash flow is expected to be approximately $1.900 billion. The Company estimates a share count of 286 million for purposes of calculating fiscal year 2022 diluted earnings per share.Operational metric:
Net bookings1 is expected to be approximately $7.525 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 Data
GAAP
Guidance
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-enabled
games)
Stock-based
compensation
6,925
-
600
-
Cost of revenue
1,844
(130
)
-
(5
)
Operating expense4,048
(180
)
-
(525
)
Income before provision for income taxes984
310
600
530
Net income
694
Number of shares used in computation: Diluted shares
286
Fourth Quarter Fiscal Year 2022 Expectations – Ending March 31, 2022
Financial metrics:
Net revenue is expected to be approximately $1.759 billion. Change in deferred net revenue (online-enabled games) is expected to be approximately $2 million. Net income is expected to be approximately $130 million. Diluted earnings per share is expected to be approximately $0.46. The Company estimates a share count of 284 million for purposes of calculating fourth quarter fiscal 2022 diluted earnings per share.Operational metric:
Net bookings1 is expected to be approximately $1.761 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 March 31, 2022
GAAP-Based Financial Data
GAAP
Guidance
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-enabled
games)
Stock-based
compensation
1,759
-
2
-
Cost of revenue
404
(42
)
-
(1
)
Operating expense1,086
(49
)
-
(126
)
Income before provision for income taxes259
91
2
127
Net income
130
Number of shares used in computation: Diluted shares
284
Conference Call and Supporting Documents
Electronic Arts will host a conference call on February 1, 2022 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal quarter ended December 31, 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 4063695 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 February 15, 2022 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 4063695. 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 February 1, 2022” 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 February 1, 2022. 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 December 31, 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 December 31, 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
December 31,
Nine Months Ended
December 31,
2021
2020
2021
2020
Net revenue
1,789
1,673
5,166
4,283
Cost of revenue
631
601
1,440
1,175
Gross profit
1,158
1,072
3,726
3,108
Operating expenses:
Research and development
539
451
1,607
1,310
Marketing and sales
293
216
716
493
General and administrative
163
149
508
418
Amortization of intangibles
61
5
131
16
Total operating expenses
1,056
821
2,962
2,237
Operating income
102
251
764
871
Interest and other income (expense), net
(11
)
(6
)
(39
)
(19
)
Income before provision for income taxes
91
245
725
852
Provision for income taxes
25
34
161
91
Net income
66
211
564
761
Earnings per share
Basic
0.23
0.73
1.99
2.63
Diluted
0.23
0.72
1.97
2.61
Number of shares used in computation
Basic
283
290
284
289
Diluted
285
292
287
292
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on November 3, 2021 for the three months ended December 31, 2021 plus a comparison to the actuals for the three months ended December 31, 2020.
Three Months Ended December 31,
2021
2021
2020
Guidance
Variance
Actuals
Actuals
Net revenue
Net revenue
1,750
39
1,789
1,673
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
875
(87
)
788
727
Cost of revenue
Cost of revenue
625
6
631
601
GAAP-based financial data
Acquisition-related expenses
(50
)
6
(44
)
—
Stock-based compensation
—
(1
)
(1
)
(1
)
Operating expenses
Operating expenses
1,100
(44
)
1,056
821
GAAP-based financial data
Acquisition-related expenses
(35
)
(26
)
(61
)
(5
)
Stock-based compensation
(135
)
7
(128
)
(110
)
Income before tax
Income before tax
8
83
91
245
GAAP-based financial data
Acquisition-related expenses
85
20
105
5
Change in deferred net revenue (online-enabled games)1
875
(87
)
788
727
Stock-based compensation
135
(6
)
129
111
Tax rate used for management reporting
18
%
18
%
18
%
Earnings per share
Basic
0.02
0.21
0.23
0.73
Diluted
0.02
0.21
0.23
0.72
Number of shares
Basic
284
(1
)
283
290
Diluted
287
(2
)
285
292
1
The 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)
December 31, 2021
March 31, 20212
ASSETS
Current assets:
Cash and cash equivalents
2,670
5,260
Short-term investments
346
1,106
Receivables, net
965
521
Other current assets
377
326
Total current assets
4,358
7,213
Property and equipment, net
522
491
Goodwill
5,389
2,868
Acquisition-related intangibles, net
1,052
309
Deferred income taxes, net
2,130
2,045
Other assets
479
362
TOTAL ASSETS
13,930
13,288
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
86
96
Accrued and other current liabilities
1,443
1,341
Deferred net revenue (online-enabled games)
2,101
1,527
Total current liabilities
3,630
2,964
Senior notes, net
1,878
1,876
Income tax obligations
326
315
Deferred income taxes, net
75
43
Other liabilities
404
250
Total liabilities
6,313
5,448
Stockholders’ equity:
Common stock
3
3
Retained earnings
7,608
7,887
Accumulated other comprehensive income (loss)
6
(50
)
Total stockholders’ equity
7,617
7,840
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
13,930
13,288
2
Derived from audited consolidated financial statements.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
Three Months Ended
December 31,
Nine Months Ended
December 31,
2021
2020
2021
2020
OPERATING ACTIVITIES
Net income
66
211
564
761
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion
146
46
345
123
Stock-based compensation
129
111
403
326
Change in assets and liabilities
Receivables, net
56
(348
)
(390
)
(309
)
Other assets
(24
)
85
(75
)
(28
)
Accounts payable
(51
)
(77
)
(9
)
29
Accrued and other liabilities
433
341
183
245
Deferred income taxes, net
—
14
(140
)
(18
)
Deferred net revenue (online-enabled games)
779
741
574
434
Net cash provided by operating activities
1,534
1,124
1,455
1,563
INVESTING ACTIVITIES
Capital expenditures
(48
)
(30
)
(135
)
(93
)
Proceeds from maturities and sales of short-term investments
65
670
1,193
2,088
Purchase of short-term investments
(69
)
(640
)
(438
)
(2,056
)
Acquisitions, net of cash acquired
3
—
(3,391
)
—
Net cash used in investing activities
(49
)
—
(2,771
)
(61
)
FINANCING ACTIVITIES
Proceeds from issuance of common stock
3
13
44
56
Cash dividends paid
(48
)
(49
)
(145
)
(49
)
Cash paid to taxing authorities for shares withheld from employees
(72
)
(67
)
(193
)
(144
)
Repurchase and retirement of common stock
(325
)
(326
)
(975
)
(404
)
Net cash used in financing activities
(442
)
(429
)
(1,269
)
(541
)
Effect of foreign exchange on cash and cash equivalents
(3
)
18
(5
)
43
Change in cash and cash equivalents
1,040
713
(2,590
)
1,004
Beginning cash and cash equivalents
1,630
4,059
5,260
3,768
Ending cash and cash equivalents
2,670
4,772
2,670
4,772
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q3
Q4
Q1
Q2
Q3
YOY %
FY21
FY21
FY22
FY22
FY22
Change
Net revenue
Net revenue
1,673
1,346
1,551
1,826
1,789
7
%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
727
144
(215
)
25
788
Gross profit
Gross profit
1,072
1,027
1,236
1,332
1,158
8
%
Gross profit (as a % of net revenue)
64
%
76
%
80
%
73
%
65
%
GAAP-based financial data
Acquisition-related expenses
—
4
22
22
44
Change in deferred net revenue (online-enabled games)1
727
144
(215
)
25
788
Stock-based compensation
1
1
1
2
1
Operating income
Operating income
251
175
322
340
102
(59
%)
Operating income (as a % of net revenue)
15
%
13
%
21
%
19
%
6
%
GAAP-based financial data
Acquisition-related expenses
5
18
62
52
105
Change in deferred net revenue (online-enabled games)1
727
144
(215
)
25
788
Stock-based compensation
111
109
125
149
129
Net income
Net income
211
76
204
294
66
(69
%)
Net income (as a % of net revenue)
13
%
6
%
13
%
16
%
4
%
GAAP-based financial data
Acquisition-related expenses
5
18
62
52
105
Change in deferred net revenue (online-enabled games)1
727
144
(215
)
25
788
Stock-based compensation
111
109
125
149
129
Tax rate used for management reporting
18
%
18
%
18
%
18
%
18
%
Diluted earnings per share
0.72
0.26
0.71
1.02
0.23
(68
%)
Number of diluted shares used in computation
Basic
290
288
286
285
283
Diluted
292
290
289
287
285
1
The 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)
Q3
Q4
Q1
Q2
Q3
YOY %
FY21
FY21
FY22
FY22
FY22
Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads
347
185
233
337
400
15
%
Packaged goods
375
65
89
280
216
(42
%)
Full game
722
250
322
617
616
(15
%)
Live services and other
951
1,096
1,229
1,209
1,173
23
%
Total net revenue
1,673
1,346
1,551
1,826
1,789
7
%
Full game
43
%
19
%
21
%
34
%
34
%
Live services and other
57
%
81
%
79
%
66
%
66
%
Total net revenue %
100
%
100
%
100
%
100
%
100
%
GAAP-based financial data
Full game downloads
53
(19
)
(5
)
35
179
Packaged goods
83
(44
)
(35
)
44
105
Full game
136
(63
)
(40
)
79
284
Live services and other
591
207
(175
)
(54
)
504
Total change in deferred net revenue (online-enabled games) by composition1
727
144
(215
)
25
788
Net revenue by platform
Console
1,191
879
972
1,198
1,138
(4
%)
PC & Other
326
295
361
377
374
15
%
Mobile
156
172
218
251
277
78
%
Total net revenue
1,673
1,346
1,551
1,826
1,789
7
%
GAAP-based financial data
Console
619
71
(278
)
(29
)
608
PC & Other
73
51
9
26
137
Mobile
35
22
54
28
43
Total change in deferred net revenue (online-enabled games) by platform1
727
144
(215
)
25
788
1
The 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)
Q3
Q4
Q1
Q2
Q3
YOY %
FY21
FY21
FY22
FY22
FY22
Change
CASH FLOW DATA
Operating cash flow
1,124
371
(143
)
64
1,534
36
%
Operating cash flow - TTM
2,061
1,934
1,413
1,416
1,826
(11
%)
Capital expenditures
30
31
44
43
48
60
%
Capital expenditures - TTM
133
124
130
148
166
25
%
Repurchase and retirement of common stock
326
325
325
325
325
—
%
Cash dividends paid
49
49
49
48
48
(2
%)
DEPRECIATION
Depreciation expense
37
38
40
39
41
11
%
BALANCE SHEET DATA
Cash and cash equivalents
4,772
5,260
2,838
1,630
2,670
Short-term investments
1,938
1,106
881
342
346
Cash and cash equivalents, and short-term investments
6,710
6,366
3,719
1,972
3,016
(55
%)
Receivables, net
778
521
557
1,031
965
24
%
STOCK-BASED COMPENSATION
Cost of revenue
1
1
1
2
1
Research and development
74
71
85
101
86
Marketing and sales
11
12
12
15
14
General and administrative
25
25
27
31
28
Total stock-based compensation
111
109
125
149
129
Category: Company News
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