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Electronic Arts Reports Q1 FY23 Financial Results image

Electronic Arts Reports Q1 FY23 Financial Results

Redwood City, CA — Electronic Arts announced preliminary financial results for its first fiscal quarter ended June 30, 2022.

“EA delivered strong results in Q1 with our growing player network deeply engaged in new games and live services,” said CEO Andrew Wilson. “Our expanding EA SPORTS portfolio and owned IP franchises continue to power resilience and longevity in our business. Our teams remain focused on what they do best – making amazing experiences that inspire new generations to play, watch, create, compete and connect.”

“Our FIFA franchise and the successful launch of F1 drove our net bookings outperformance, delivering another quarter ahead of expectations,” said CFO Chris Suh. “Looking ahead, our focus on execution and disciplined investment across our broad portfolio of games and live services will fuel our long-term growth.”

Selected Operating Highlights and Metrics

  • Net bookings1 for the trailing twelve months was $7.478 billion, up 22% year-over-year.
  • Live services and other net bookings for the trailing twelve months were up 20% year-over-year and represent 73% of total net bookings.
  • The EA player network grew to nearly 600 million active accounts at quarter end.
  • FIFA Ultimate Team™ engagement during the quarter was up nearly 40% year-over-year in weekly and daily average players.
  • In Q1, FIFA Mobile delivered the highest net bookings quarter in history, with record high DAUs, up 10% from last quarter.

Selected Financial Highlights and Metrics

  • Net cash (used in)/provided by operating activities was $(78) million for the quarter and $1.964 billion for the trailing twelve months.
  • EA repurchased 2.5 million shares for $320 million during the quarter, bringing the total for the trailing twelve months to 9.7 million shares for $1.295 billion.
  • EA paid a cash dividend of $0.19 per share during the quarter, for a total of $53 million.

Dividend

EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on September 21, 2022 to shareholders of record as of the close of business on August 31, 2022.

Quarterly Financial Highlights

Three Months Ended
June 30,
2022 2021
(in $ millions, except per share amounts)
Full game 341 322
Live services and other 1,426 1,229
Total net revenue 1,767 1,551
Net income 311 204
Diluted earnings per share 1.11 0.71
Operating cash flow (78 ) (143 )
Value of shares repurchased 320 325
Number of shares repurchased 2.5 2.3

The following GAAP-based financial data2 and tax rate of 19% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

Three Months Ended June 30, 2022
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 1,767 (468 )
Cost of revenue 314 (30 ) (2 )
Gross profit 1,453 30 (468 ) 2
Total operating expenses 1,012 (39 ) (123 )
Operating income 441 69 (468 ) 125
Interest and other income (expense), net (5 )
Income before provision for income taxes 436 69 (468 ) 125
Number of shares used in computation:
Diluted 281

Trailing Twelve Months Financial Highlights

Twelve Months Ended
June 30,
2022 2021
(in $ millions)
Full game 2,012 1,576
Live services and other 5,195 4,145
Total net revenue 7,207 5,721
Net income 896 676
Operating cash flow 1,964 1,413
Value of shares repurchased 1,295 976
Number of shares repurchased 9.7 7.2

The following GAAP-based financial data2 was used internally by company management to adjust its GAAP results in order to assess EA’s operating results. During fiscal 2022, management used a tax rate of 18% and in fiscal 2023 a tax rate of 19%.

Twelve Months Ended June 30, 2022
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 7,207 271
Cost of revenue 1,858 (141 ) (7 )
Gross profit 5,349 141 271 7
Total operating expenses 4,101 (182 ) (521 )
Operating income 1,248 323 271 528
Interest and other income (expense), net (39 )
Income before provision for income taxes 1,209 323 271 528

Operating Metric

The following is a calculation of our total net bookings1 for the periods presented:

Three Months Ended Twelve Months Ended
June 30, June 30,
2022 2021 2022 2021
(in $ millions)
Total net revenue 1,767 1,551 7,207 5,721
Change in deferred net revenue (online-enabled games) (468 ) (215 ) 271 415
Net bookings 1,299 1,336 7,478 6,136

Business Outlook as of August 2, 2022

Fiscal Year 2023 Expectations – Ending March 31, 2023

Financial metrics:

  • Net revenue is expected to be approximately $7.600 to $7.800 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $300 million.
  • Net income is expected to be approximately $793 to $815 million.
  • Diluted earnings per share is expected to be approximately $2.79 to $2.87.
  • Operating cash flow is expected to be approximately $1.600 to $1.650 billion.
  • The Company estimates a share count of 284 million for purposes of calculating fiscal year 2023 diluted earnings per share.

Operational metric:

  • Net bookings1 is expected to be approximately $7.900 to $8.100 billion.

In addition, the following outlook for GAAP-based financial data2 and updated long-term tax rate of 19% 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, 2023
GAAP-Based Financial Data
GAAP

Guidance

Range

Acquisition-

related

expenses

Change in

deferred net

revenue (online-

enabled games)

Stock-based

compensation

(in $ millions)
Total net revenue 7,600 to 7,800 300
Cost of revenue 2,020 to 2,065 (110 ) (5 )
Operating expense 4,200 to 4,315 (140 ) (595 )
Income before provision for income taxes 1,321 to 1,358 250 300 600
Net income 793 to 815
Number of shares used in computation:
Diluted shares 284
* The mid-point of the range has been used for purposes of presenting the reconciling items.

Second Quarter Fiscal Year 2023 Expectations – Ending September 30, 2022

Financial metrics:

  • Net revenue is expected to be approximately $1.850 to $1.900 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $(125) million.
  • Net income is expected to be approximately $220 to $242 million.
  • Diluted earnings per share is expected to be approximately $0.78 to $0.86.
  • The Company estimates a share count of 281 million for purposes of calculating second quarter fiscal 2023 diluted earnings per share.

Operational metric:

  • Net bookings1 is expected to be approximately $1.725 to $1.775 billion.

In addition, the following outlook for GAAP-based financial data2 and updated long-term tax rate of 19% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

Three Months Ending September 30, 2022
GAAP-Based Financial Data*
GAAP

Guidance

Range

Acquisition-

related

expenses

Change in

deferred net

revenue (online-

enabled games)

Stock-based

compensation

(in $ millions)
Total net revenue 1,850 to 1,900 (125 )
Cost of revenue 467 to 480 (30 ) (2 )
Operating expense 1,036 to 1,041 (40 ) (148 )
Income before provision for income taxes 338 to 373 70 (125 ) 150
Net income 220 to 242
Number of shares used in computation:
Diluted shares 281
* The mid-point of the range has been used for purposes of presenting the reconciling items.

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on May 10, 2022 for the three months ended June 30, 2022 plus a comparison to the actuals for the three months ended June 30, 2021.

Three Months Ended June 30,
2022 Guidance

(Mid-Point)

2022

Actuals

2021

Actuals

Variance
Net revenue
Net revenue 1,700 67 1,767 1,551
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1 (475 ) 7 (468 ) (215 )
Cost of revenue
Cost of revenue 315 (1 ) 314 315
GAAP-based financial data
Acquisition-related expenses (30 ) (30 ) (22 )
Stock-based compensation (2 ) (2 ) (1 )
Operating expenses
Operating expenses 1,013 (1 ) 1,012 914
GAAP-based financial data
Acquisition-related expenses (40 ) 1 (39 ) (40 )
Stock-based compensation (123 ) (123 ) (124 )
Income before tax
Income before tax 356 80 436 308
GAAP-based financial data
Acquisition-related expenses 70 (1 ) 69 62
Change in deferred net revenue (online-enabled games)1 (475 ) 7 (468 ) (215 )
Stock-based compensation 125 125 125
Tax rate used for management reporting 19 % 19 % 18 %
Earnings per share
Basic 0.81 0.30 1.11 0.71
Diluted 0.81 0.30 1.11 0.71
Number of shares used in computation
Basic 281 (2 ) 279 286
Diluted 283 (2 ) 281 289

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)
June 30, 2022 March 31, 20222
ASSETS
Current assets:
Cash and cash equivalents 2,082 2,732
Short-term investments 334 330
Receivables, net 579 650
Other current assets 522 439
Total current assets 3,517 4,151
Property and equipment, net 545 550
Goodwill 5,382 5,387
Acquisition-related intangibles, net 893 962
Deferred income taxes, net 2,327 2,243
Other assets 528 507
TOTAL ASSETS 13,192 13,800
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable 70 101
Accrued and other current liabilities 1,215 1,388
Deferred net revenue (online-enabled games) 1,548 2,024
Total current liabilities 2,833 3,513
Senior notes, net 1,878 1,878
Income tax obligations 438 386
Deferred income taxes, net 1 1
Other liabilities 401 397
Total liabilities 5,551 6,175
Stockholders’ equity:
Common stock 3 3
Retained earnings 7,567 7,607
Accumulated other comprehensive income 71 15
Total stockholders’ equity 7,641 7,625
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 13,192 13,800

2Derived from audited consolidated financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in $ millions)
Three Months Ended June 30,
2022 2021
OPERATING ACTIVITIES
Net income 311 204
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, amortization, accretion and impairment 114 105
Stock-based compensation 125 125
Change in assets and liabilities
Receivables, net 70 12
Other assets (15 ) (74 )
Accounts payable (16 ) (19 )
Accrued and other liabilities (105 ) (302 )
Deferred income taxes, net (86 ) 28
Deferred net revenue (online-enabled games) (476 ) (222 )
Net cash used in operating activities (78 ) (143 )
INVESTING ACTIVITIES
Capital expenditures (59 ) (44 )
Proceeds from maturities and sales of short-term investments 87 507
Purchase of short-term investments (93 ) (285 )
Acquisitions, net of cash acquired (1,989 )
Net cash used in investing activities (65 ) (1,811 )
FINANCING ACTIVITIES
Proceeds from issuance of common stock 1
Cash dividends paid (53 ) (49 )
Cash paid to taxing authorities for shares withheld from employees (104 ) (105 )
Repurchase and retirement of common stock (320 ) (325 )
Net cash used in financing activities (476 ) (479 )
Effect of foreign exchange on cash and cash equivalents (31 ) 11
Change in cash and cash equivalents (650 ) (2,422 )
Beginning cash and cash equivalents 2,732 5,260
Ending cash and cash equivalents 2,082 2,838
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q1 Q2 Q3 Q4 Q1 YOY %
FY22 FY22 FY22 FY22 FY23 Change
Net revenue
Net revenue 1,551 1,826 1,789 1,825 1,767 14 %
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1 (215 ) 25 788 (74 ) (468 )
Gross profit
Gross profit 1,236 1,332 1,158 1,406 1,453 18 %
Gross profit (as a % of net revenue) 80 % 73 % 65 % 77 % 82 %
GAAP-based financial data
Acquisition-related expenses 22 22 44 45 30
Change in deferred net revenue (online-enabled games)1 (215 ) 25 788 (74 ) (468 )
Stock-based compensation 1 2 1 2 2
Operating income
Operating income 322 340 102 365 441 37 %
Operating income (as a % of net revenue) 21 % 19 % 6 % 20 % 25 %
GAAP-based financial data
Acquisition-related expenses 62 52 105 97 69
Change in deferred net revenue (online-enabled games)1 (215 ) 25 788 (74 ) (468 )
Stock-based compensation 125 149 129 125 125
Net income
Net income 204 294 66 225 311 52 %
Net income (as a % of net revenue) 13 % 16 % 4 % 12 % 18 %
GAAP-based financial data
Acquisition-related expenses 62 52 105 97 69
Change in deferred net revenue (online-enabled games)1 (215 ) 25 788 (74 ) (468 )
Stock-based compensation 125 149 129 125 125
Tax rate used for management reporting 18 % 18 % 18 % 18 % 19 %
Diluted earnings per share 0.71 1.02 0.23 0.80 1.11 56 %
Number of shares used in computation
Basic 286 285 283 281 279
Diluted 289 287 285 283 281

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)
Q1 Q2 Q3 Q4 Q1 YOY %
FY22 FY22 FY22 FY22 FY23 Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads 233 337 400 312 237 2 %
Packaged goods 89 280 216 126 104 17 %
Full game 322 617 616 438 341 6 %
Live services and other 1,229 1,209 1,173 1,387 1,426 16 %
Total net revenue 1,551 1,826 1,789 1,825 1,767 14 %
Full game 21 % 34 % 34 % 24 % 19 %
Live services and other 79 % 66 % 66 % 76 % 81 %
Total net revenue % 100 % 100 % 100 % 100 % 100 %
GAAP-based financial data
Full game downloads (5 ) 35 179 (103 ) (111 )
Packaged goods (35 ) 44 105 (68 ) (65 )
Full game (40 ) 79 284 (171 ) (176 )
Live services and other (175 ) (54 ) 504 97 (292 )
Total change in deferred net revenue (online-enabled games) by composition1 (215 ) 25 788 (74 ) (468 )
Net revenue by platform
Console 972 1,198 1,138 1,092 1,042 7 %
PC & Other 361 377 374 420 402 11 %
Mobile 218 251 277 313 323 48 %
Total net revenue 1,551 1,826 1,789 1,825 1,767 14 %
GAAP-based financial data
Console (278 ) (29 ) 608 (86 ) (405 )
PC & Other 9 26 137 3 (54 )
Mobile 54 28 43 9 (9 )
Total change in deferred net revenue (online-enabled games) by platform1 (215 ) 25 788 (74 ) (468 )

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)
Q1 Q2 Q3 Q4 Q1 YOY %
FY22 FY22 FY22 FY22 FY23 Change
CASH FLOW DATA
Operating cash flow (143 ) 64 1,534 444 (78 ) 45 %
Operating cash flow – TTM 1,413 1,416 1,826 1,899 1,964 39 %
Capital expenditures 44 43 48 53 59 34 %
Capital expenditures – TTM 130 148 166 188 203 56 %
Repurchase and retirement of common stock 325 325 325 325 320 (2 %)
Cash dividends paid 49 48 48 48 53 8 %
DEPRECIATION
Depreciation expense 40 39 41 42 44 10 %
BALANCE SHEET DATA
Cash and cash equivalents 2,838 1,630 2,670 2,732 2,082
Short-term investments 881 342 346 330 334
Cash and cash equivalents, and short-term investments 3,719 1,972 3,016 3,062 2,416 (35 %)
Receivables, net 557 1,031 965 650 579 4 %
STOCK-BASED COMPENSATION
Cost of revenue 1 2 1 2 2
Research and development 85 101 86 84 81
Marketing and sales 12 15 14 13 13
General and administrative 27 31 28 26 29
Total stock-based compensation 125 149 129 125 125

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