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May 4, 2011

Electronic Arts Reports Q4 FY11 and FY11 Financial Results

Reports Q4 GAAP Profit, Guides to Full-Year GAAP Profit in FY12

Record-Breaking Year for Non-GAAP Digital Revenue — Up 46% to $833 Million

Battlefield 3 Pre-Orders Up More Than 700% Vs. Battlefield: Bad Company 2 in 2010

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Electronic Arts Inc. (NASDAQ: ERTS) today announced preliminary financial results for its fourth fiscal quarter and fiscal year ended March 31, 2011.

"We're happy to report another strong quarter, top and bottom line. We're particularly proud of the scale and growth rate of our digital business," said John Riccitiello, CEO. "EA is building its digital business in a way only EA can, with key brands performing well cross-platform from mobile, to social to console."

"Our fourth quarter and full year non-GAAP EPS hit the top of our guidance range," said Eric Brown, Chief Financial Officer. "Digital revenue exceeded our $750 million full year non-GAAP target, driving higher profitability."

Selected Operating Highlights and Metrics:

  • EA was the #1 publisher in the Western World in Q4 on high definition consoles and #1 on the PC. EA was the #1 publisher in Europe and increased segment share by three points to 20%.
  • EA delivered 15 titles rated 80 or above by Metacritic in fiscal 2011. Mass Effect™ 2 won more than 150 quality awards including Game of the Year at both the Academy of Interactive Arts and Sciences and the British Academy of Film and Television Arts.
  • EA held 15 of the top 25 paid games on the iPhone® Easter Weekend. Revenue from iOS devices and from our Playfish social gaming site both increased by more than 100% in the fourth quarter as compared to the same period fiscal 2010.
  • EA shipped seven titles in the fourth quarter that have already sold in over 1 million units each, life to date. Crysis® 2, Dragon Age™ 2, and Dead Space™ 2 each sold in more than two million units.
  • Life to date, including digital, FIFA 11 sold in 12 million units; Battlefield: Bad Company™ 2 sold in over seven million units; and Medal of Honor™, Need for Speed™ Hot Pursuit, and Madden NFL 11 each sold in over five million units.
  • Cumulative sales of Dead Space 2 are currently 40% higher than sales of the original Dead Space game over a comparable period.
  • The EA SPORTS™ FIFA franchise generated over $100 million in non-GAAP digital revenue in fiscal 2011.

Q4 FY11 Financial Highlights:

Non-GAAP net revenue was $995 million, exceeding guidance of $850 million to $950 million. Non-GAAP EPS was $0.25, at the high end of guidance of $0.15 to $0.25.

 

 

(in millions of $ except per share amounts)

Quarter

Ended
3/31/11

   

Quarter

Ended
3/31/10

 
Net Digital Revenue $211 $144
Net Publishing Packaged Goods and Other Revenue 838 794
Net Distribution Packaged Goods Revenue 41     41
GAAP Total Net Revenue 1,090     979
 
Non-GAAP Net Digital Revenue $268 $156
Non-GAAP Net Publishing Packaged Goods and Other Revenue 686 653
Non-GAAP Net Distribution Packaged Goods Revenue 41     41
Non-GAAP Total Net Revenue 995     850
 
GAAP Net Income 151 30
Non-GAAP Net Income 83 23
GAAP Diluted Earnings Per Share 0.45 0.09
Non-GAAP Diluted Earnings Per Share 0.25 0.07
 
Cash Flow from Operations 253 253

Trailing Twelve Month (TTM) Financial Highlights:

 

(in millions of $ except per share data)

Year

Ended

3/31/11

   

Year

Ended

3/31/10

 
GAAP Net Revenue $3,589 $3,654
GAAP Net Loss (276) (677)
GAAP Diluted Loss Per Share (0.84) (2.08)
 
Non-GAAP Net Revenue 3,828 4,159
Non-GAAP Net Income 233 145
Non-GAAP Diluted Earnings Per Share 0.70 0.44
 
Cash Flow from Operations 320 152

Q4 FY11 Digital Metrics:

(in millions)

Quarter

Ended

3/31/11

    Quarter

Ended

3/31/10

 
GAAP Net Mobile Revenue $70 $55
Monthly Active Users (MAU) in Social Games 36 51
Core Registered Users 112 61

Business Outlook as of May 4, 2011

The following forward-looking statements, as well as those made above, reflect expectations as of May 4, 2011. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors, including: product development delays; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; expected savings and impact on EA's operations of the Company's cost reduction initiatives; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; changes in foreign exchange rates; the financial impact of acquisitions by EA; the popular appeal of EA's products; EA's effective tax rate; and other factors detailed in this release and in EA's annual and quarterly SEC filings.

First Quarter Fiscal Year 2012 Expectations — Ending June 30, 2011

  • GAAP net revenue is expected to be approximately $910 to $950 million.
  • Non-GAAP net revenue is expected to be approximately $460 to $500 million.
  • GAAP diluted earnings per share is expected to be approximately $0.44 to $0.53.
  • Non-GAAP diluted loss per share is expected to be approximately $(0.49) to $(0.44).
  • For purposes of calculating first quarter fiscal year 2012 earnings/loss per share, the Company estimates a diluted share count of 334 million for GAAP earnings per share and 330 million for non-GAAP loss per share.
  • Expected non-GAAP net income excludes the following items from expected GAAP net income:
    • Non-GAAP net revenue is expected to be approximately $450 million lower than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
    • Approximately $40 to 45 million of estimated stock-based compensation;
    • Approximately $16 million of acquisition-related expenses;
    • Approximately $5 million of restructuring charges; and
    • Non-GAAP tax expenses are expected to be $68 to $75 million lower than GAAP tax expenses.

Fiscal Year 2012 Expectations — Ending March 31, 2012

  • GAAP net revenue is expected to be approximately $3.7 to $3.9 billion.
  • Non-GAAP net revenue is expected to be approximately $3.75 to $3.95 billion.
  • GAAP diluted earnings per share is expected to be between break-even and $0.28.
  • Non-GAAP diluted earnings per share is expected to be approximately $0.70 to $0.90.
  • For purposes of calculating fiscal year 2012 earnings per share, the Company estimates a diluted share count of 329 million.
  • Expected non-GAAP net income excludes the following items from expected GAAP net income:
    • Non-GAAP net revenue is expected to be approximately $50 million higher than GAAP net revenue due to the impact of the change in deferred net revenue (packaged goods and digital content);
    • Approximately $160 million of estimated stock-based compensation;
    • Approximately $50 million of acquisition-related expenses;
    • Approximately $10 million of restructuring charges; and
    • Non-GAAP tax expenses are expected to be $40 to $65 million higher than GAAP tax expenses.

Fiscal Year 2012 Key Titles by Label and Platform — this list excludes Star Wars®: The Old Republic™, which is scheduled to launch in the second half of calendar 2011.

 
Q1 Games Alice: Madness Returns(2) Console   PC
    Portal 2(1) Console   PC
    Shadows of the Damned(2) Console    
           
  Play Darkspore     PC
           
Q2 Sports FIFA 12 Console Handheld/Mobile PC
    Madden NFL 12 Console Handheld/Mobile  
    NCAA Football 12 Console    
    NHL 12 Console    
           
  Play Harry Potter And The Deathly Hallows Part 2 Console Handheld/Mobile PC
           
Q3 Games Battlefield 3 Console Handheld/Mobile PC
    Need for Speed The Run Console Handheld/Mobile PC
           
  Sports FIFA Manager 12     PC
           
  Play The Sims Game TBA Console Handheld/Mobile  
  EAi Hasbro Family Game Night 4 Console    
           
Q4 Games Kingdoms of Amalur: Reckoning(2) Console   PC
    Mass Effect 3 Console Handheld/Mobile PC
           
  Sports SSX Console    
    Sports Game TBA Console    
    Sports Game TBA Console    
    Sports Game TBA Console    
    Sports Game TBA Console   PC

Note: (1) Distribution Title, (2) Co-Published Title.

This Key Titles Schedule is current as of May 4, 2011 and is subject to change. Electronic Arts assumes no obligation to update this schedule.

Conference Call and Supporting Documents

Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the fourth quarter ended March 31, 2011 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: (877) 418-3422; (706) 643-3915, access code: 59719140, or via webcast at http://ir.ea.com.

EA will also post a slide presentation that accompanies the call at http://ir.ea.com.

A dial-in replay of the conference call will be provided until May 11, 2011 at (706) 645-9291, access code 59719140. A webcast archive of the conference call will be available for one year at http://ir.ea.com.

Non-GAAP Financial Measures

To supplement the Company's unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, as applicable in a given reporting period, from the Company's unaudited condensed consolidated statements of operations:

  • Acquisition-related expenses
  • Change in deferred net revenue (packaged goods and digital content)
  • Gain (loss) on strategic investments
  • Loss on lease obligation and facilities acquisition
  • Loss on licensed intellectual property commitment
  • Restructuring charges
  • Stock-based compensation
  • Income tax adjustments

Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.

Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company's performance by excluding certain items that may not be indicative of the Company's core business, operating results or future outlook. Electronic Arts' management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company's operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company's performance to prior periods.

In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons:

Acquisition-Related Expenses. GAAP requires expenses to be recognized for various types of events associated with a business acquisition. These events include, expensing acquired intangible assets, including acquired in-process technology, post-closing adjustments associated with changes in the estimated amount of contingent consideration to be paid in an acquisition, and the impairment of accounting goodwill created as a result of an acquisition when future events indicated there has been a decline in its value. When analyzing the operating performance of an acquired entity, Electronic Arts' management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid including the final amounts paid for contingent consideration) without taking into consideration any allocations made for accounting purposes. Because the final purchase price paid for an acquisition necessarily reflects the accounting value assigned to both contingent consideration and to the intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of any adjustments to the fair value of these acquisition-related balances to its financial results. Electronic Arts believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense.

Change in Deferred Net Revenue (Packaged Goods and Digital Content). Electronic Arts is not able to objectively determine the fair value of the online service included in certain of its packaged goods and digital content. As a result, the Company recognizes the revenue from the sale of these games and content over the estimated online service period. In other transactions, at the date we sell the software product we have an obligation to provide incremental unspecified digital content in the future without an additional fee. In these cases, we account for the sale of the software product as a multiple element arrangement and recognize the revenue on a straight-line basis over the estimated life of the game. Internally, Electronic Arts' management excludes the impact of the change in deferred net revenue related to packaged goods games and digital content in its non-GAAP financial measures when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The Company believes that excluding the impact of the change in deferred net revenue from its operating results is important to (1) facilitate comparisons to prior periods during which the Company was able to objectively determine the fair value of the online service and not delay the recognition of significant amounts of net revenue related to online-enabled packaged goods and (2) understanding our operations because all related costs are expensed as incurred instead of deferred and recognized ratably.

Gain (Loss) on Strategic Investments. From time to time, the Company makes strategic investments. Electronic Arts' management excludes the impact of any losses and gains on such investments when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. In addition, the Company believes that excluding the impact of such losses and gains on these investments from its operating results is important to facilitate comparisons to prior periods.

Loss on Lease Obligation and Facilities Acquisition. During the second quarter of fiscal 2010, Electronic Arts completed the acquisition of its headquarters facilities in Redwood City, California pursuant to the terms of the loan financing agreements underlying the build-to-suit leases for the facilities. These leases expired in July 2009, and had previously been accounted for as operating leases. The total amount paid under the terms of the leases was $247 million, of which $233 million related to the purchase price of the facilities and $14 million was for the loss on our lease obligation. In addition, Electronic Arts recorded a tax benefit of approximately $31 million, consisting of approximately $6 million related to the loss on our lease obligation, and a $25 million reduction in our valuation allowance due to the acquisition. As a result of this lease obligation and facility acquisition, on an after-tax basis, Electronic Arts incurred a positive net income effect of $17 million. Electronic Arts' management excluded the effect of this transaction when evaluating the Company's operating performance and when assessing the performance of its management team during this period and will continue to do so, when it plans, forecasts and analyzes future periods.

Loss on Licensed Intellectual Property Commitment. During the fourth quarter of fiscal 2009, Electronic Arts amended an agreement with a content licensor. This amendment resulted in the termination of our rights to use the licensor's intellectual property in certain products and we incurred a related estimated loss of $38 million. This significant non-recurring loss is excluded from our non-GAAP financial measures in order to provide comparability between periods. Further, the Company excluded this loss when evaluating its operating performance and the performance of its management team during this period and will continue to do so when it plans, forecasts and analyzes future periods.

Restructuring Charges. Although Electronic Arts has engaged in various restructuring activities in the past, each has been a discrete, extraordinary event based on a unique set of business objectives. Each of these restructurings has been unlike its predecessors in terms of its operational implementation, business impact and scope. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures.

Stock-Based Compensation. When evaluating the performance of its individual business units, the Company does not consider stock-based compensation charges. Likewise, the Company's management teams exclude stock-based compensation expense from their short and long-term operating plans. In contrast, the Company's management teams are held accountable for cash-based compensation and such amounts are included in their operating plans. Further, when considering the impact of equity award grants, Electronic Arts places a greater emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Accordingly, Electronic Arts believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation.

Income Tax Adjustments. The Company uses a fixed, long-term projected tax rate of 28 percent internally to evaluate its operating performance, to forecast, plan and analyze future periods, and to assess the performance of its management team. Accordingly, the Company has applied the same 28 percent tax rate to its non-GAAP financial results.

In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to the historical non-GAAP financial measures used in this press release.

Forward-Looking Statements

Some statements set forth in this release, including the estimates relating to EA's fiscal year 2012 guidance information under the heading "Business Outlook", and the fiscal year 2012 key title slate, 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 general health of the U.S. and global economy and the related impact on discretionary consumer spending; fluctuations in foreign exchange rates; consumer spending trends; 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 consumer demand for, and the availability of an adequate supply of console hardware units (including the Xbox 360® video game and entertainment system, the PlayStation®3 computer entertainment system and the Wii™); the Company's ability to predict consumer preferences among competing platforms; the financial impact of acquisitions by EA; the Company's ability to realize the anticipated benefits of acquisitions; the seasonal and cyclical nature of the interactive game segment; the Company's ability to attract and retain key personnel; changes in the Company's effective tax rates; the performance of strategic investments; the impact of certain accounting requirements, such as the Company's ability to estimate and recognize goodwill impairment charges and determine deferred tax valuation allowances; adoption of new accounting regulations and standards; potential regulation of the Company's products in key territories; developments in the law regarding protection of the Company's products; the Company's ability to secure licenses to valuable entertainment properties on favorable terms; the stability of the Company's key customers, and other factors described in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2010.

These forward-looking statements are current as of May 4, 2011. 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2011. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-K for the fiscal year ended March 31, 2011.

About Electronic Arts

Electronic Arts (NASDAQ:ERTS) is a global leader in digital interactive entertainment. The Company's game franchises are offered as both packaged goods products and online services delivered through Internet-connected consoles, personal computers, mobile phones and tablets. EA has more than 100 million registered players and operates in 75 countries.

In fiscal 2011, EA posted GAAP net revenue of $3.6 billion. Headquartered in Redwood City, California, EA is recognized for critically acclaimed, high-quality blockbuster franchises such as The Sims™, Madden NFL, FIFA Soccer, Need for Speed, Battlefield, and Mass Effect. More information about EA is available at http://info.ea.com.

EA, EA SPORTS, Dead Space, Medal of Honor, Need for Speed, Alice: Madness Returns, SSX, Darkspore and The Sims are trademarks of Electronic Arts Inc. Dragon Age is a trademark of EA International (Studio and Publishing) Ltd. Battlefield: Bad Company is a trademark of EA Digital Illusions CE AB. FAMILY GAME NIGHT is a trademark of Hasbro and used with permission. Crysis is a registered trademark of Crytek. HARRY POTTER characters, names and related indicia are trademarks of and © Warner Bros. Entertainment Inc. STAR WARS and related properties are trademarks in the United States and/or other countries of Lucasfilm Ltd. and/or its affiliates. Shadows of the Damned is a trademark of GRASSHOPPER MANUFACTURE INC. John Madden is a trademark or other intellectual property of Red Bear, Inc. or John Madden. NFL is a trademark of the National Football League. NCAA is a registered trademark of the National Collegiate Athletic Association. FIFA is a trademark of FIFA. NHL is a registered trademark of National Hockey League. Xbox 360 is a trademark of the Microsoft group of companies. "PlayStation" is a registered trademark of Sony Computer Entertainment Inc. Wii is a trademark of Nintendo. iPhone is a trademark of Apple Inc. All other trademarks are the property of their respective owners.

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
       
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
 
Net revenue $ 1,090 $ 979 $ 3,589 $ 3,654
Cost of goods sold   328     298     1,499     1,866  
Gross profit 762 681 2,090 1,788
 
Operating expenses:
Marketing and sales 194 171 747 730
General and administrative 75 79 301 320
Research and development 328 311 1,153 1,229
Acquisition-related contingent consideration 8 2 (17 ) 2
Amortization of intangibles 13 15 57 53
Restructuring and other   (1 )   20     161     140  
Total operating expenses   617     598     2,402     2,474  
 
Operating income (loss) 145 83 (312 ) (686 )
 
Gain (loss) on strategic investments - (1 ) 23 (26 )
Interest and other income (expense), net   4     (2 )   10     6  
 
Income (loss) before provision for (benefit from) income taxes 149 80 (279 ) (706 )
 
Provision for (benefit from) income taxes   (2 )   50     (3 )   (29 )
 
Net income (loss) $ 151   $ 30   $ (276 ) $ (677 )
 
Earnings (loss) per share
Basic $ 0.45 $ 0.09 $ (0.84 ) $ (2.08 )
Diluted $ 0.45 $ 0.09 $ (0.84 ) $ (2.08 )
 
Number of shares used in computation
Basic 333 327 330 325
Diluted 336 330 330 325
 
 
Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net income (loss) and earnings (loss) per share as presented in its Unaudited Condensed Consolidated Statements of Operations and prepared in accordance with Generally Accepted Accounting Principles ("GAAP") to its non-GAAP net income and non-GAAP diluted earnings per share.
 
Three Months Ended Twelve Months Ended
March 31, March 31,
2011 2010 2011 2010
 
Net income (loss) $ 151 $ 30 $ (276 ) $ (677 )
 
Acquisition-related expenses 24 19 52 65
Change in deferred net revenue (packaged goods and digital content) (95 ) (129 ) 239 505
Loss on lease obligation (G&A) - - - 14
Loss on licensed intellectual property commitment (COGS) - (1 ) (1 ) (3 )
Loss (gain) on strategic investments - 1 (23 ) 26
Restructuring and other (1 ) 20 161 140
Stock-based compensation 38 42 174 161
Income tax adjustments   (34 )   41     (93 )   (86 )
 
Non-GAAP net income $ 83   $ 23   $ 233   $ 145  
 
Non-GAAP diluted earnings per share $ 0.25 $ 0.07 $ 0.70 $ 0.44
 
Number of shares used in Non-GAAP computation
Diluted 336 330 334 327
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
     
March 31, March 31,
2011

2010 (a)

 
ASSETS
 
Current assets:
Cash and cash equivalents $ 1,579 $ 1,273
Short-term investments 497 432
Marketable equity securities 161 291
Receivables, net of allowances of $304 and $217, respectively 335 206
Inventories 77 100
Deferred income taxes, net 56 44
Other current assets   327     239  
Total current assets 3,032 2,585
 
Property and equipment, net 513 537
Goodwill 1,110 1,093
Acquisition-related intangibles, net 144 204
Deferred income taxes, net 49 52
Other assets   80     175  
 
TOTAL ASSETS $ 4,928   $ 4,646  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 228 $ 91
Accrued and other current liabilities 768 717
Deferred net revenue (packaged goods and digital content)   1,005     766  
Total current liabilities 2,001 1,574
 
Income tax obligations 192 242
Deferred income taxes, net 37 2
Other liabilities   134     99  
Total liabilities 2,364 1,917
 
Common stock 3 3
Paid-in capital 2,495 2,375
Retained earnings (accumulated deficit) (153 ) 123
Accumulated other comprehensive income   219     228  
Total stockholders' equity   2,564     2,729  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,928   $ 4,646  
 
(a) Derived from audited consolidated financial statements.
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
   
Three Months Ended Twelve Months Ended
March 31, March 31,
2011   2010 2011   2010
 
OPERATING ACTIVITIES
 
Net income (loss) $ 151 $ 30 $ (276 ) $ (677 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Acquisition-related contingent consideration 8 2 (17 ) 2
Depreciation, amortization and accretion, net 42 50 180 192
Net (gains) losses on investments and sale of property and equipment (1 ) 2 (25 ) 22
Other non-cash restructuring charges - 11 1 39
Stock-based compensation 38 42 176 187
Change in assets and liabilities:
Receivables, net 58 290 (122 ) (66 )
Inventories 29 46 25 123
Other assets 14 71 5 18
Accounts payable 55 (93 ) 114 (57 )
Accrued and other liabilities (38 ) (95 ) (4 ) (138 )
Deferred income taxes, net (8 ) 26 24 2
Deferred net revenue (packaged goods and digital content)   (95 )   (129 )   239     505  
Net cash provided by operating activities   253     253     320     152  
 
INVESTING ACTIVITIES
 
Purchase of headquarters facilities - - - (233 )
Capital expenditures (21 ) (22 ) (59 ) (72 )
Proceeds from sale of marketable equity securities - 7 132 17
Proceeds from maturities and sales of short-term investments 160 53 442 710
Purchase of short-term investments (147 ) (135 ) (514 ) (611 )
Acquisition-related restricted cash - - - (100 )
Acquisition of subsidiaries, net of cash acquired   -     (4 )   (16 )   (283 )
Net cash used in investing activities   (8 )   (101 )   (15 )   (572 )
 
FINANCING ACTIVITIES
 
Proceeds from issuance of common stock 17 14 34 39
Excess tax benefit from stock-based compensation 1 1 1 14
Repurchase and retirement of common stock   (58 )   -     (58 )   -  
Net cash provided by (used in) financing activities   (40 )   15     (23 )   53  
 
Effect of foreign exchange on cash and cash equivalents   21     (8 )   24     19  
Increase (decrease) in cash and cash equivalents 226 159 306 (348 )
Beginning cash and cash equivalents   1,353     1,114     1,273     1,621  
Ending cash and cash equivalents   1,579     1,273     1,579     1,273  
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
           
Q4 Q1 Q2 Q3 Q4 YOY %
FY10 FY11 FY11 FY11 FY11 Change
 
QUARTERLY RECONCILIATION OF RESULTS
 
Net Revenue
GAAP net revenue $ 979 $ 815 $ 631 $ 1,053 $ 1,090 11 %
Change in deferred net revenue (packaged goods and digital content)   (129 )   (276 )   253     357     (95 )
Non-GAAP net revenue $ 850   $ 539   $ 884   $ 1,410   $ 995   17 %
 
Gross Profit
GAAP gross profit $ 681 $ 593 $ 268 $ 467 $ 762 12 %

Change in deferred net revenue (packaged goods and digital content)

(129 ) (276 ) 253 357 (95 )
Acquisition-related expenses 2 3 3 3 3
Loss on licensed intellectual property commitment (COGS) (1 ) - (1 ) - -
Stock-based compensation   1     1     -     1     -  
Non-GAAP gross profit $ 554   $ 321   $ 523   $ 828   $ 670   21 %
GAAP gross profit % (as a % of GAAP net revenue) 70 % 73 % 42 % 44 % 70 %
Non-GAAP gross profit % (as a % of non-GAAP net revenue) 65 % 60 % 59 % 59 % 67 %
 
Operating Income (Loss)
GAAP operating income (loss) $ 83 $ 98 $ (252 ) $ (303 ) $ 145 75 %
Acquisition-related expenses 19 20 (10 ) 18 24
Change in deferred net revenue (packaged goods and digital content) (129 ) (276 ) 253 357 (95 )
Loss on licensed intellectual property commitment (COGS) (1 ) - (1 ) - -
Restructuring and other 20 2 6 154 (1 )
Stock-based compensation   42     47     43     46     38  
Non-GAAP operating income (loss) $ 34   $ (109 ) $ 39   $ 272   $ 111   226 %
GAAP operating income (loss) % (as a % of GAAP net revenue) 8 % 12 % (40 %) (29 %) 13 %
Non-GAAP operating income (loss) % (as a % of non-GAAP net revenue) 4 % (20 %) 4 % 19 % 11 %
 
Net Income (Loss)
GAAP net income (loss) $ 30 $ 96 $ (201 ) $ (322 ) $ 151 403 %
Acquisition-related expenses 19 20 (10 ) 18 24
Change in deferred net revenue (packaged goods and digital content) (129 ) (276 ) 253 357 (95 )
Loss on licensed intellectual property commitment (COGS) (1 ) - (1 ) - -
Loss (gain) on strategic investments 1 5 (28 ) - -
Restructuring and other 20 2 6 154 (1 )
Stock-based compensation 42 47 43 46 38
Income tax adjustments   41     28     (30 )   (57 )   (34 )
Non-GAAP net income (loss) $ 23   $ (78 ) $ 32   $ 196   $ 83   261 %
GAAP net income (loss) % (as a % of GAAP net revenue) 3 % 12 % (32 %) (31 %) 14 %
Non-GAAP net income (loss) % (as a % of non-GAAP net revenue) 3 % (14 %) 4 % 14 % 8 %
 
Diluted Earnings (Loss) Per Share
GAAP earnings (loss) per share $ 0.09 $ 0.29 $ (0.61 ) $ (0.97 ) $ 0.45 400 %
Non-GAAP earnings (loss) per share $ 0.07 $ (0.24 ) $ 0.10 $ 0.59 $ 0.25 257 %
 
Number of diluted shares used in computation
GAAP 330 332 329 332 336
Non-GAAP 330 328 333 335 336
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
           
Q4 Q1 Q2 Q3 Q4 YOY %
FY10 FY11 FY11 FY11 FY11 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Geography Net Revenue
North America 510 451 327 528 530 4 %
Europe 418 317 262 477 507 21 %
Asia 51   47   42   48   53   4 %
Total GAAP Net Revenue 979   815   631   1,053   1,090   11 %
North America (55 ) (184 ) 142 169 (56 )
Europe (78 ) (81 ) 122 163 (45 )
Asia 4   (11 ) (11 ) 25   6  
Change In Deferred Net Revenue (Packaged Goods and Digital Content) (129 ) (276 ) 253   357   (95 )
North America 455 267 469 697 474 4 %
Europe 340 236 384 640 462 36 %
Asia 55   36   31   73   59   7 %
Total Non-GAAP Net Revenue 850   539   884   1,410   995   17 %
 
North America 52 % 55 % 52 % 50 % 49 %
Europe 43 % 39 % 41 % 45 % 46 %
Asia 5 % 6 % 7 % 5 % 5 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
North America 54 % 49 % 53 % 50 % 48 %
Europe 40 % 44 % 43 % 45 % 46 %
Asia 6 % 7 % 4 % 5 % 6 %
Total Non-GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
 
Net Revenue Composition
Publishing and Other 794 586 441 767 838 6 %
Wireless, Internet-derived, and Advertising (Digital) 144 176 161 195 211 47 %
Distribution 41   53   29   91   41   -
Total GAAP Net Revenue 979   815   631   1,053   1,090   11 %
Publishing and Other (141 ) (288 ) 248 341 (152 )
Wireless, Internet-derived, and Advertising (Digital) 12 12 5 16 57
Distribution -   -   -   -   -  
Change In Deferred Net Revenue (Packaged Goods and Digital Content) (129 ) (276 ) 253   357   (95 )
Publishing and Other 653 298 689 1,108 686 5 %
Wireless, Internet-derived, and Advertising (Digital) 156 188 166 211 268 72 %
Distribution 41   53   29   91   41   -
Total Non-GAAP Net Revenue 850   539   884   1,410   995   17 %
 
Publishing and Other 81 % 72 % 70 % 73 % 77 %
Wireless, Internet-derived, and Advertising (Digital) 15 % 21 % 26 % 18 % 19 %
Distribution 4 % 7 % 4 % 9 % 4 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
Publishing and Other 77 % 55 % 78 % 79 % 69 %
Wireless, Internet-derived, and Advertising (Digital) 18 % 35 % 19 % 15 % 27 %
Distribution 5 % 10 % 3 % 6 % 4 %
Total Non-GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
           
Q4 Q1 Q2 Q3 Q4 YOY %
FY10 FY11 FY11 FY11 FY11 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Platform Net Revenue
Xbox 360 276 262 172 285 336 22 %
PLAYSTATION 3 272 209 152 282 357 31 %
Wii 71 40 25 130 71 -
PlayStation 2 22   11   29   20   4   (82 %)
Total Consoles 641 522 378 717 768 20 %
Mobile 55 52 49 59 70 27 %
PSP 37 19 17 22 16 (57 %)
Nintendo DS 22   11   8   49   28   27 %
Total Mobile and Handhelds 114 82 74 130 114 -
PC 178 186 157 155 171 (4 %)
Other 46   25   22   51   37   (20 %)
Total GAAP Net Revenue 979   815   631   1,053   1,090   11 %
Xbox 360 6 (121 ) 96 126 (12 )
PLAYSTATION 3 (83 ) (89 ) 150 131 (75 )
Wii (31 ) (5 ) 24 39 (44 )
PlayStation 2 (11 ) (5 ) 1 (1 ) -
Mobile - - - 5 (3 )
PSP (20 ) (1 ) 4 - (6 )
Nintendo DS (6 ) (4 ) 1 8 (6 )
PC 16   (51 ) (23 ) 49   51  
Change in Deferred Net Revenue (Packaged Goods and Digital Content) (129 ) (276 ) 253   357   (95 )
Xbox 360 282 141 268 411 324 15 %
PLAYSTATION 3 189 120 302 413 282 49 %
Wii 40 35 49 169 27 (33 %)
PlayStation 2 11   6   30   19   4   (64 %)
Total Consoles 522 302 649 1,012 637 22 %
Mobile 55 52 49 64 67 22 %
PSP 17 18 21 22 10 (41 %)
Nintendo DS 16   7   9   57   22   38 %
Total Mobile and Handhelds 88 77 79 143 99 13 %
PC 194 135 134 204 222 14 %
Other 46   25   22   51   37   (20 %)
Total Non-GAAP Net Revenue 850   539   884   1,410   995   17 %
 
Xbox 360 28 % 32 % 27 % 27 % 31 %
PLAYSTATION 3 28 % 26 % 24 % 27 % 33 %
Wii 7 % 5 % 4 % 12 % 6 %
PlayStation 2 2 % 1 % 5 % 2 % -  
Total Consoles 65 % 64 % 60 % 68 % 70 %
Mobile 6 % 7 % 8 % 5 % 6 %
PSP 4 % 2 % 3 % 2 % 1 %
Nintendo DS 2 % 1 % 1 % 5 % 3 %
Total Mobile and Handhelds 12 % 10 % 12 % 12 % 10 %
PC 18 % 23 % 25 % 15 % 16 %
Other 5 % 3 % 3 % 5 % 4 %
Total GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
Xbox 360 33 % 26 % 30 % 29 % 33 %
PLAYSTATION 3 22 % 22 % 34 % 30 % 28 %
Wii 5 % 7 % 6 % 12 % 3 %
PlayStation 2 1 % 1 % 3 % 1 % -  
Total Consoles 61 % 56 % 73 % 72 % 64 %
Mobile 6 % 10 % 6 % 4 % 7 %
PSP 2 % 3 % 2 % 2 % 1 %
Nintendo DS 2 % 1 % 1 % 4 % 2 %
Total Mobile and Handhelds 10 % 14 % 9 % 10 % 10 %
PC 24 % 25 % 15 % 14 % 22 %
Other 5 % 5 % 3 % 4 % 4 %
Total Non-GAAP Net Revenue % 100 % 100 % 100 % 100 % 100 %
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
           
Q4 Q1 Q2 Q3 Q4 YOY %
FY10 FY11 FY11 FY11 FY11 Change
 
CASH FLOW DATA
 
Operating cash flow 253 (148 ) (134 ) 349 253 -
Operating cash flow - TTM 152 332 192 320 320 111 %
Capital expenditures 22 11 12 15 21 (5 %)
Capital expenditures - TTM 72 75 61 60 59 (18 %)
 
BALANCE SHEET DATA
 
Cash and cash equivalents 1,273 1,057 1,056 1,353 1,579 24 %
Short-term investments 432 480 495 511 497 15 %
Marketable equity securities 291 193 106 107 161 (45 %)
Receivables, net 206 103 444 390 335 63 %
Inventories 100 82 155 105 77 (23 %)
Deferred net revenue (packaged goods and digital content)
End of the quarter 766 490 743 1,100 1,005
Less: Beginning of the quarter 895   766   490   743 1,100  
Change in deferred net revenue (packaged goods and digital content) (129 ) (276 ) 253   357 (95 )
 
STOCK-BASED COMPENSATION
 
Cost of goods sold 1 1 - 1 -
Marketing and sales 4 4 6 6 5
General and administrative 9 12 10 10 8
Research and development 28   30   27   29 25  
Total Stock-Based Compensation (excluding restructuring and other) 42 47 43 46 38
Restructuring and other -   -   -   2 -  
Total Stock-Based Compensation (including restructuring and other) 42   47   43   48 38  
 
EMPLOYEES 7,842 7,758 7,820 7,742 7,645 (3 %)

Electronic Arts Inc.
Peter Ausnit
Vice President, Investor Relations
650-628-7327
pausnit@ea.com
Jeff Brown
Vice President, Corporate Communications
650-628-7922
jbrown@ea.com

Source: Electronic Arts Inc.

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