Electronic Arts Reports

Q2 FY18 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™ 1 community grew to more than 23.5 million players worldwide.
  • Monthly active players for The Sims™ 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

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:

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

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:

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:

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:

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: 

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: 

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
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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