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Electronic Arts Reports Q4 and FY23 Results image

Electronic Arts Reports Q4 and FY23 Results

Record Q4 net bookings driven by all-time high EA SPORTS FIFA franchise performance;

Company carries strong momentum into brand launch of EA SPORTS FC

Redwood City, CA —Electronic Arts Inc. announced preliminary financial results for its fourth quarter and fiscal year ended March 31, 2023.

“Looking ahead, our teams remain disciplined in prioritizing the player experience as we continue to focus our investments on long-term growth.”

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“EA delivered a strong Q4 with record net bookings, up 11 percent year-over-year, demonstrating the strength of our business. Our teams continue to create high quality entertainment, fueled by amazing games and deeply engaging live services,” said Andrew Wilson, CEO of Electronic Arts. “We’re excited to continue our momentum, including the highly anticipated launch of EA SPORTS FC later this year.”

“Record live services performance and increased engagement, particularly from our EA SPORTS FIFA franchise, drove better-than-expected Q4 net bookings, capping a strong finish to the fiscal year,” said Chris Suh, CFO. “Looking ahead, our teams remain disciplined in prioritizing the player experience as we continue to focus our investments on long-term growth.”

Selected Operating Highlights and Metrics1

  • Net bookings2 for Q4 was $1.946 billion, up 11% year-over-year (up 15% in constant currency).
  • Live services and other net bookings for Q4 was $1.622 billion, a record for the quarter, up 9% year-over-year (up 13% in constant currency) and represented 83% of total net bookings.
  • The EA SPORTS FIFA franchise Q4 net bookings grew 31% year-over-year (up 37% in constant currency).
  • In the six months since launch, EA SPORTS FIFA 23 has surpassed life-time sales of EA SPORTS FIFA 22, becoming the most successful launch in franchise history.
  • Apex Legends delivered net bookings growth in Q4 year-over-year at constant currency, driven by a successful Season 16 with peak weekly active users up over 20% from the previous season.
  • Life-to-date, The Sims 4 player network has grown to more than 70 million worldwide.

Selected Financial Highlights and Metrics

  • Net revenue was $1.874 billion for the quarter and $7.426 billion for the fiscal year.
  • Net cash provided by operating activities was $617 million for the quarter and $1.550 billion for the fiscal year.
  • EA repurchased 2.7 million shares for $325 million during the quarter, bringing the total for the fiscal year to 10.4 million shares for $1.295 billion.

Dividend

EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on June 21, 2023 to shareholders of record as of the close of business on May 31, 2023.

Quarterly Financial Highlights

Three Months Ended
March 31,

2023

2022

(in $ millions, except per share amounts)
Full game

372

438

Live services and other

1,502

1,387

Total net revenue

1,874

1,825

Net income (loss)

(12

)

225

Diluted earnings (loss) per share

(0.04

)

0.80

Operating cash flow

617

444

Value of shares repurchased

325

325

Number of shares repurchased

2.7

2.5

Cash dividend paid

52

48

The following GAAP-based financial data3,4 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 March 31, 2023

GAAP-Based Financial Data

(in $ millions) Statement of
Operations
Acquisition-
related
expenses
Change in
deferred
net revenue
(online-
enabled
games)
Restructuring
and related
charges
Stock-based
compensation
Total net revenue

1,874

72

Cost of revenue

448

(25

)

(2

)

Gross profit

1,426

25

72

2

Total operating expenses

1,251

(26

)

(155

)

(140

)

Operating income

175

51

72

155

142

Interest and other income (expense), net

6

Income before provision for income taxes

181

51

72

155

142

Number of shares used in computation:
Diluted

274

Fiscal Year Financial Highlights

Twelve Months Ended
March 31,

2023

2022

(in $ millions)
Full game

1,937

1,993

Live services and other

5,489

4,998

Total net revenue

7,426

6,991

Net income

802

789

Diluted earnings per share

2.88

2.76

Operating cash flow

1,550

1,899

Value of shares repurchased

1,295

1,300

Number of shares repurchased

10.4

9.5

Cash dividend paid

210

193

The following GAAP-based financial data3,4 and a tax rate of 19% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results.

Twelve Months Ended March 31, 2023
GAAP-Based Financial Data
(in $ millions) Statement of
Operations
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-
enabled
games)
Restructuring
and related
charges
Stock-based
compensation
Total net revenue

7,426

(85

)

Cost of revenue

1,792

(120

)

(7

)

Gross profit

5,634

120

(85

)

7

Total operating expenses

4,302

(158

)

(155

)

(541

)

Operating income

1,332

278

(85

)

155

548

Interest and other income (expense), net

(6

)

Income before provision for income taxes

1,326

278

(85

)

155

548

Number of shares used in computation:
Diluted

278

Operating Metric

The following is a calculation of our total net bookings2 for the periods presented:

Three Months Ended

Twelve Months Ended

March 31,

March 31,

2023

2022

2023

2022

(in $ millions)
Total net revenue

1,874

1,825

7,426

6,991

Change in deferred net revenue (online-enabled games)

72

(74

)

(85

)

524

Total net bookings

1,946

1,751

7,341

7,515

Business Outlook as of May 9, 2023

Fiscal Year 2024 Expectations – Ending March 31, 2024

Financial metrics:

  • Net revenue is expected to be approximately $7.300 billion to $7.700 billion.
    • No change in deferred net revenue (online-enabled games) is expected.
  • Net income is expected to be approximately $915 million to $1.055 billion.
  • Diluted earnings per share is expected to be approximately $3.30 to $3.81.
  • Operating cash flow is expected to be approximately $1.700 billion to $1.850 billion.
  • The Company estimates a share count of 277 million for purposes of calculating fiscal year 2024 diluted earnings per share.

Operational metric:

  • Net bookings2 is expected to be approximately $7.300 billion to $7.700 billion.

In addition, the following outlook for GAAP-based financial data3,4 and long-term tax rate of 19% are used internally by EA to adjust GAAP expectations to assess EA’s operating results and plan for future periods:

Twelve Months Ending March 31, 2024
GAAP-Based Financial Data*
GAAP
Guidance
Range
Acquisition-
related
expenses
Change in
deferred net
revenue (online-
enabled games)
Restructuring
and related
charges
Stock-based
compensation
(in $ millions)
Total net revenue 7,300 to 7,700

Cost of revenue 1,670 to 1,750

(65

)

(5

)

Operating expense 4,295 to 4,415

(95

)

(25

)

(635

)

Income before provision for income taxes 1,346 to 1,551

160

25

640

Net income 915 to 1,055
Number of shares used in computation:
Diluted shares

277

* The mid-point of the range has been used for purposes of presenting the reconciling items.

First Quarter Fiscal Year 2024 Expectations – Ending June 30, 2023

Financial metrics:

  • Net revenue is expected to be approximately $1.825 billion to $1.925 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately ($325) million.
  • Net income is expected to be approximately $271 million to $316 million.
  • Diluted earnings per share is expected to be approximately $0.98 to $1.14.
  • The Company estimates a share count of 277 million for purposes of calculating first quarter fiscal 2024 diluted earnings per share.

Operational metric:

  • Net bookings2 is expected to be approximately $1.500 billion to $1.600 billion.

In addition, the following outlook for GAAP-based financial data3,4 and long-term tax rate of 19% are used internally by EA to adjust GAAP expectations to assess EA’s operating results and plan for future periods:

Three Months Ending June 30, 2023
GAAP-Based Financial Data*
GAAP
Guidance
Range
Acquisition-
related
expenses
Change in
deferred net
revenue (online-
enabled games)
Restructuring
and related
charges
Stock-based
compensation
(in $ millions)
Total net revenue 1,825 to 1,925

(325

)

Cost of revenue 350 to 370

(20

)

Operating expense 1,065 to 1,085

(25

)

(20

)

(140

)

Income before provision for income taxes 410 to 479

45

(325

)

20

140

Net income 271 to 316
Number of shares used in computation:
Diluted shares

277

* The mid-point of the range has been used for purposes of presenting the reconciling items.

 

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 2023, EA posted GAAP net revenue of approximately $7.4 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS™ FC, 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 For more information on constant currency, please refer to the earnings slides available on EA’s IR Website.

2 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.

3 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, 2022.

4 On March 29, 2023, EA announced a restructuring plan focused on prioritizing investments aligned with the Company’s growth opportunities and optimizing its real estate portfolio.

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,

2023

2022

2023

2022

Net revenue

1,874

1,825

7,426

6,991

Cost of revenue

448

419

1,792

1,859

Gross profit

1,426

1,406

5,634

5,132

Operating expenses:

Research and development

635

579

2,328

2,186

Marketing and sales

255

245

978

961

General and administrative

224

165

727

673

Amortization and impairment of intangibles

26

52

158

183

Restructuring

111

111

Total operating expenses

1,251

1,041

4,302

4,003

Operating income

175

365

1,332

1,129

Interest and other income (expense), net

6

(9

)

(6

)

(48

)

Income before provision for income taxes

181

356

1,326

1,081

Provision for income taxes

193

131

524

292

Net income (loss)

(12

)

225

802

789

Earnings (loss) per share

Basic

(0.04

)

0.80

2.90

2.78

Diluted

(0.04

)

0.80

2.88

2.76

Number of shares used in computation

Basic

274

281

277

284

Diluted

274

283

278

286

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on January 31, 2023 for the three months ended March 31, 2023 plus a comparison to the actuals for the three months ended March 31, 2022.

Three Months Ended March 31,

2023 Guidance (Mid-Point)

2023 Actuals

2022 Actuals

Variance

Net revenue

Net revenue

1,750

124

1,874

1,825

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

(25

)

97

72

(74

)

Cost of revenue

Cost of revenue

405

43

448

419

GAAP-based financial data

Acquisition-related expenses

(25

)

(25

)

(45

)

Stock-based compensation

(2

)

(2

)

(2

)

Operating expenses

Operating expenses

1,080

171

1,251

1,041

GAAP-based financial data

Acquisition-related expenses

(35

)

9

(26

)

(52

)

Restructuring and related charges

(155

)

(155

)

Stock-based compensation

(140

)

(140

)

(123

)

Income before tax

Income before tax

270

(89

)

181

356

GAAP-based financial data

Acquisition-related expenses

60

(9

)

51

97

Change in deferred net revenue (online-enabled games)1

(25

)

97

72

(74

)

Restructuring and related charges

155

155

Stock-based compensation

140

2

142

125

Tax rate used for management reporting

19

%

19

%

18

%

Earnings (loss) per share

Basic

0.13

(0.17

)

(0.04

)

0.80

Diluted

0.13

(0.17

)

(0.04

)

0.80

Number of shares used in computation

Basic

275

(1

)

274

281

Diluted

277

(3

)

274

283

Anti-dilutive shares excluded for loss position2

1

1

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.

2 Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable though stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in $ millions)

March 31, 2023

March 31, 20223

ASSETS

Current assets:

Cash and cash equivalents

2,424

2,732

Short-term investments

343

330

Receivables, net

684

650

Other current assets

518

439

Total current assets

3,969

4,151

Property and equipment, net

549

550

Goodwill

5,380

5,387

Acquisition-related intangibles, net

618

962

Deferred income taxes, net

2,462

2,243

Other assets

481

507

TOTAL ASSETS

13,459

13,800

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

99

101

Accrued and other current liabilities

1,285

1,388

Deferred net revenue (online-enabled games)

1,901

2,024

Total current liabilities

3,285

3,513

Senior notes, net

1,880

1,878

Income tax obligations

607

386

Deferred income taxes, net

1

1

Other liabilities

393

397

Total liabilities

6,166

6,175

Stockholders’ equity:

Common stock

3

3

Retained earnings

7,357

7,607

Accumulated other comprehensive income (loss)

(67

)

15

Total stockholders’ equity

7,293

7,625

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

13,459

13,800

3Derived 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,

2023

2022

2023

2022

OPERATING ACTIVITIES

Net income (loss)

(12

)

225

802

789

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, amortization, accretion and impairment

173

141

536

486

Stock-based compensation

142

125

548

528

Change in assets and liabilities

Receivables, net

152

313

(34

)

(77

)

Other assets

(50

)

(82

)

(103

)

(157

)

Accounts payable

31

2

10

(7

)

Accrued and other liabilities

106

(14

)

134

169

Deferred income taxes, net

(18

)

(189

)

(221

)

(329

)

Deferred net revenue (online-enabled games)

93

(77

)

(122

)

497

Net cash provided by operating activities

617

444

1,550

1,899

INVESTING ACTIVITIES

Capital expenditures

(47

)

(53

)

(207

)

(188

)

Proceeds from maturities and sales of short-term investments

152

136

395

1,329

Purchase of short-term investments

(142

)

(116

)

(405

)

(554

)

Acquisitions, net of cash acquired

(3,391

)

Net cash used in investing activities

(37

)

(33

)

(217

)

(2,804

)

FINANCING ACTIVITIES

Proceeds from issuance of common stock

33

33

80

77

Cash dividends paid

(52

)

(48

)

(210

)

(193

)

Cash paid to taxing authorities for shares withheld from employees

(14

)

(11

)

(175

)

(204

)

Repurchase and retirement of common stock

(325

)

(325

)

(1,295

)

(1,300

)

Net cash used in financing activities

(358

)

(351

)

(1,600

)

(1,620

)

Effect of foreign exchange on cash and cash equivalents

2

(41

)

(3

)

Change in cash and cash equivalents

222

62

(308

)

(2,528

)

Beginning cash and cash equivalents

2,202

2,670

2,732

5,260

Ending cash and cash equivalents

2,424

2,732

2,424

2,732

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except per share data)

Q4

Q1

Q2

Q3

Q4

YOY %

FY22

FY23

FY23

FY23

FY23

Change

Net revenue

Net revenue

1,825

1,767

1,904

1,881

1,874

3

%

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

(74

)

(468

)

(150

)

461

72

Gross profit

Gross profit

1,406

1,453

1,442

1,313

1,426

1

%

Gross profit (as a % of net revenue)

77

%

82

%

76

%

70

%

76

%

GAAP-based financial data

Acquisition-related expenses

45

30

39

26

25

Change in deferred net revenue (online-enabled games)1

(74

)

(468

)

(150

)

461

72

Stock-based compensation

2

2

1

2

2

Operating income

Operating income

365

441

427

289

175

(52

%)

Operating income (as a % of net revenue)

20

%

25

%

22

%

15

%

9

%

GAAP-based financial data

Acquisition-related expenses

97

69

82

76

51

Change in deferred net revenue (online-enabled games)1

(74

)

(468

)

(150

)

461

72

Restructuring and related charges

155

Stock-based compensation

125

125

140

141

142

Net income (loss)

Net income (loss)

225

311

299

204

(12

)

(105

%)

Net income (loss) (as a % of net revenue)

12

%

18

%

16

%

11

%

(1

%)

GAAP-based financial data

Acquisition-related expenses

97

69

82

76

51

Change in deferred net revenue (online-enabled games)1

(74

)

(468

)

(150

)

461

72

Restructuring and related charges

155

Stock-based compensation

125

125

140

141

142

Tax rate used for management reporting

18

%

19

%

19

%

19

%

19

%

Diluted earnings (loss) per share

0.80

1.11

1.07

0.73

(0.04

)

(105

%)

Number of shares used in computation

Basic

281

279

278

276

274

Diluted

283

281

279

278

274

Anti-dilutive shares excluded for loss position2

1

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.

2 Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable though stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

Q4

Q1

Q2

Q3

Q4

YOY %

FY22

FY23

FY23

FY23

FY23

Change

QUARTERLY NET REVENUE PRESENTATIONS

Net revenue by composition

Full game downloads

312

237

328

423

274

(12

%)

Packaged goods

126

104

274

199

98

(22

%)

Full game

438

341

602

622

372

(15

%)

Live services and other

1,387

1,426

1,302

1,259

1,502

8

%

Total net revenue

1,825

1,767

1,904

1,881

1,874

3

%

Full game

24

%

19

%

32

%

33

%

20

%

Live services and other

76

%

81

%

68

%

67

%

80

%

Total net revenue %

100

%

100

%

100

%

100

%

100

%

GAAP-based financial data

Full game downloads

(103

)

(111

)

17

45

(24

)

Packaged goods

(68

)

(65

)

16

20

(24

)

Full game

(171

)

(176

)

33

65

(48

)

Live services and other

97

(292

)

(183

)

396

120

Total change in deferred net revenue (online-enabled games) by composition1

(74

)

(468

)

(150

)

461

72

Net revenue by platform

Console

1,092

1,042

1,161

1,152

1,088

PC & Other

420

402

423

435

469

12

%

Mobile

313

323

320

294

317

1

%

Total net revenue

1,825

1,767

1,904

1,881

1,874

3

%

GAAP-based financial data

Console

(86

)

(405

)

(134

)

423

11

PC & Other

3

(54

)

8

29

47

Mobile

9

(9

)

(24

)

9

14

Total change in deferred net revenue (online-enabled games) by platform1

(74

)

(468

)

(150

)

461

72

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)

Q4

Q1

Q2

Q3

Q4

YOY %

FY22

FY23

FY23

FY23

FY23

Change

CASH FLOW DATA

Operating cash flow

444

(78

)

(112

)

1,123

617

39

%

Operating cash flow – TTM

1,899

1,964

1,788

1,377

1,550

(18

%)

Capital expenditures

53

59

53

48

47

(11

%)

Capital expenditures – TTM

188

203

213

213

207

10

%

Repurchase and retirement of common stock

325

320

325

325

325

Cash dividends paid

48

53

53

52

52

8

%

DEPRECIATION

Depreciation expense

42

44

45

46

58

38

%

BALANCE SHEET DATA

Cash and cash equivalents

2,732

2,082

1,539

2,202

2,424

Short-term investments

330

334

335

351

343

Cash and cash equivalents, and short-term investments

3,062

2,416

1,874

2,553

2,767

(10

%)

Receivables, net

650

579

919

836

684

5

%

STOCK-BASED COMPENSATION

Cost of revenue

2

2

1

2

2

Research and development

84

81

95

95

96

Marketing and sales

13

13

16

15

15

General and administrative

26

29

28

29

29

Total stock-based compensation

125

125

140

141

142

RESTRUCTURING AND RELATED CHARGES

Restructuring

111

Office space reductions

44

Total restructuring and related charges

155

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