This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Electronic Arts Reports Q2 FY13 Financial Results

Stocks in this article: EA

About Electronic Arts

Electronic Arts (NASDAQ:EA) 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 230 million registered players and operates in 75 countries. In fiscal year 2012, EA posted GAAP net revenue of $4.1 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, Origin, Medal of Honor, The Sims and Need for Speed are trademarks of Electronic Arts Inc. Mass Effect is a trademark of EA International (Studio and Publishing) Ltd. Battlefield 3 and Battlefield are trademarks of EA Digital Illusions CE AB. The Simpsons TM & © 2012 Twentieth Century Fox Film Corporation. All Rights Reserved . All rights reserved. John Madden, NFL and FIFA are the property of their respective owners and used with permission. 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 Six Months Ended
September 30, September 30,
2012 2011 2012 2011
 
Net revenue
Product $ 481 $ 592 $ 1,183 $ 1,486
Service and other   230     123     483     228  
Total net revenue 711 715 1,666 1,714
Cost of revenue
Product 371 399 503 611
Service and other   74     33     147     61  
Total cost of revenue   445     432     650     672  
Gross profit 266 283 1,016 1,042
 
Operating expenses:
Marketing and sales 212 222 357 362
General and administrative 99 88 185 162
Research and development 314 318 604 603
Acquisition-related contingent consideration - 17 (20 ) 19
Amortization of intangibles 7 13 14 26
Restructuring and other   (2 )   (1 )   25     17  
Total operating expenses   630     657     1,165     1,189  
 
Operating loss (364 ) (374 ) (149 ) (147 )
 
Interest and other expense, net   (4 )   (6 )   (9 )   (3 )
 
Loss before provision for (benefit from) income taxes (368 ) (380 ) (158 ) (150 )
 
Provision for (benefit from) income taxes   13     (40 )   22     (31 )
 
Net loss $ (381 ) $ (340 ) $ (180 ) $ (119 )
 
Loss per share
Basic and Diluted $ (1.21 ) $ (1.03 ) $ (0.57 ) $ (0.36 )
 
Number of shares used in computation

Basic and Diluted

316 331 317 331
 
Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net loss and 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 (loss) and non-GAAP earnings (loss) per share.
 
  Three Months Ended   Six Months Ended
September 30,   September 30,
2012     2011 2012     2011
 
Net loss $ (381 ) $ (340 ) $ (180 ) $ (119 )
 
Acquisition-related expenses 21 38 23 56
Amortization of debt discount 5 4 10 4
Change in deferred net revenue (packaged goods and digital content) 369 319 (95 ) (156 )
Restructuring and other (2 ) (1 ) 25 17
Stock-based compensation 44 43 83 81
Income tax adjustments   (7 )   (46 )   53     11  
 
Non-GAAP net income (loss) $ 49   $ 17   $ (81 ) $ (106 )
 
Non-GAAP earnings (loss) per share
Basic $ 0.16 $ 0.05 $ (0.26 ) $ (0.32 )
Diluted $ 0.15 $ 0.05 $ (0.26 ) $ (0.32 )
 
Number of shares used in Non-GAAP computation
Basic 316 331 317 331
Diluted 318 337 317 331
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
     
September 30, March 31,
2012

2012 (a)

 
ASSETS
 
Current assets:
Cash and cash equivalents $ 871 $ 1,293
Short-term investments 351 437
Marketable equity securities 93 119
Receivables, net of allowances of $182 and $252, respectively 643 366
Inventories 71 59
Deferred income taxes, net 64 67
Other current assets   239     268  
Total current assets 2,332 2,609
 
Property and equipment, net 561 568
Goodwill 1,723 1,718
Acquisition-related intangibles, net 334 369
Deferred income taxes, net 49 42
Other assets   192     185  
 
TOTAL ASSETS $ 5,191   $ 5,491  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 219 $ 215
Accrued and other current liabilities 874 857
Deferred net revenue (packaged goods and digital content)   953     1,048  
Total current liabilities 2,046 2,120
 
0.75% convertible senior notes due 2016, net 549 539
Income tax obligations 209 189
Deferred income taxes, net 2 8
Other liabilities   231     177  
Total liabilities 3,037 3,033
 
Common stock 3 3
Paid-in capital 2,259 2,359
Accumulated deficit (257 ) (77 )
Accumulated other comprehensive income   149     173  
Total stockholders' equity   2,154     2,458  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,191   $ 5,491  
 

(a) Derived from audited consolidated financial statements.

 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
     
Three Months Ended Six Months Ended
September 30, September 30,
2012     2011 2012     2011
 
OPERATING ACTIVITIES
 
Net loss $ (381 ) $ (340 ) $ (180 ) $ (119 )
Adjustments to reconcile net loss to net cash used in operating activities:
Acquisition-related contingent consideration - 17 (20 ) 19
Depreciation, amortization and accretion, net 56 51 112 94
Net gains on investments and sale of property and equipment - (12 ) - (12 )
Non-cash restructuring charges - - 7 -
Stock-based compensation 44 43 83 81
Change in assets and liabilities:
Receivables, net (528 ) (522 ) (274 ) (215 )
Inventories (11 ) (15 ) (13 ) (11 )
Other assets 29 38 - (63 )
Accounts payable 166 76 9 (57 )
Accrued and other liabilities 228 183 109 2
Deferred income taxes, net - (49 ) (10 ) (48 )
Deferred net revenue (packaged goods and digital content)   369     319     (95 )   (156 )
Net cash used in operating activities   (28 )   (211 )   (272 )   (485 )
 
INVESTING ACTIVITIES
 
Capital expenditures (25 ) (52 ) (56 ) (84 )
Proceeds from sale of property - 26 - 26
Proceeds from maturities and sales of short-term investments 152 236 280 319
Purchase of short-term investments (60 ) (89 ) (197 ) (179 )
Acquisition-related restricted cash 25 - 25 -
Acquisition of subsidiaries, net of cash acquired   (10 )   (632 )   (10 )   (657 )
Net cash provided by (used in) investing activities   82     (511 )   42     (575 )
 
FINANCING ACTIVITIES
 
Payment of debt issuance costs (2 ) - (2 ) -
Proceeds from borrowings on convertible senior notes, net of issuance costs - 617 - 617
Proceeds from issuance of warrants - 65 - 65
Purchase of convertible note hedge - (107 ) - (107 )
Proceeds from issuance of common stock 18 21 18 35
Excess tax benefit from stock-based compensation - 1 - 3
Repurchase and retirement of common stock (108 ) (98 ) (179 ) (189 )
Acquisition-related contingent consideration payment   (25 )   -     (26 )   -  
 
Net cash provided by (used in) financing activities   (117 )   499     (189 )   424  
 
Effect of foreign exchange on cash and cash equivalents   15     (20 )   (3 )   (13 )
Decrease in cash and cash equivalents (48 ) (243 ) (422 ) (649 )
Beginning cash and cash equivalents   919     1,173     1,293     1,579  
Ending cash and cash equivalents $ 871   $ 930   $ 871   $ 930  
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
                     
Q2 Q3 Q4 Q1 Q2 YOY %
FY12 FY12 FY12 FY13 FY13 Change
 
QUARTERLY RECONCILIATION OF RESULTS
 
Net Revenue
GAAP net revenue $ 715 $ 1,061 $ 1,368 $ 955 $ 711 (1 %)
Change in deferred net revenue (packaged goods and digital content)   319     590     (391 )   (464 )   369  
Non-GAAP net revenue $ 1,034   $ 1,651   $ 977   $ 491   $ 1,080   4 %
 
Gross Profit
GAAP gross profit $ 283 $ 509 $ 994 $ 750 $ 266 (6 %)
Acquisition-related expenses 8 14 27 15 14
Change in deferred net revenue (packaged goods and digital content) 319 590 (391 ) (464 ) 369
Stock-based compensation   -     -     1     1     -  
Non-GAAP gross profit $ 610   $ 1,113   $ 631   $ 302   $ 649   6 %
GAAP gross profit % (as a % of GAAP net revenue) 40 % 48 % 73 % 79 % 37 %
Non-GAAP gross profit % (as a % of non-GAAP net revenue) 59 % 67 % 65 % 62 % 60 %
 
Operating Income (Loss)
GAAP operating income (loss) $ (374 ) $ (183 ) $ 365 $ 215 $ (364 ) 3 %
Acquisition-related expenses 38 14 36 2 21
Certain non-recurring litigation expenses - - 27 - -
Change in deferred net revenue (packaged goods and digital content) 319 590 (391 ) (464 ) 369
Restructuring and other (1 ) - (1 ) 27 (2 )
Stock-based compensation   43     48     41     39     44  
Non-GAAP operating income (loss) $ 25   $ 469   $ 77   $ (181 ) $ 68   172 %
GAAP operating income (loss) % (as a % of GAAP net revenue) (52 %) (17 %) 27 %

23

% (51 %)
Non-GAAP operating income (loss) % (as a % of non-GAAP net revenue) 2 % 28 % 8 % (37 %) 6 %
 
Net Income (Loss)
GAAP net income (loss) $ (340 ) $ (205 ) $ 400 $ 201 $ (381 ) (12 %)
Acquisition-related expenses 38 14 36 2 21
Amortization of debt discount 4 5 5 5 5
Certain non-recurring litigation expenses - - 27 - -
Change in deferred net revenue (packaged goods and digital content) 319 590 (391 ) (464 ) 369
Restructuring and other (1 ) - (1 ) 27 (2 )
Stock-based compensation 43 48 41 39 44
Income tax adjustments   (46 )   (118 )   (61 )   60     (7 )
Non-GAAP net income (loss) $ 17   $ 334   $ 56   $ (130 ) $ 49   188 %
GAAP net income (loss) % (as a % of GAAP net revenue) (48 %) (19 %) 29 %

21

% (54 %)
Non-GAAP net income (loss) % (as a % of non-GAAP net revenue) 2 % 20 % 6 % (26 %) 5 %
 
Diluted Earnings (Loss) Per Share
GAAP earnings (loss) per share $ (1.03 ) $ (0.62 ) $ 1.20 $ 0.63 $ (1.21 ) (17 %)
Non-GAAP earnings (loss) per share $ 0.05 $ 0.99 $ 0.17 $ (0.41 ) $ 0.15 200 %
 
Number of diluted shares used in computation
GAAP 331 332 332 320 316
Non-GAAP 337 338 332 317 318
 
 
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and headcount)
 
Q2 Q3 Q4 Q1 Q2 YOY %
FY12 FY12 FY12 FY13 FY13 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Geography Net Revenue
North America 337 500 653 450 329 (2 %)
Europe 328 505 627 435 332 1 %
Asia   50     56     88     70     50   -
Total GAAP Net Revenue   715     1,061     1,368     955     711   (1 %)
North America 144 310 (188 ) (265 ) 179
Europe 174 235 (187 ) (174 ) 171
Asia   1     45     (16 )   (25 )   19  
Change In Deferred Net Revenue (Packaged Goods and Digital Content)   319     590     (391 )   (464 )   369  
North America 481 810 465 185 508 6 %
Europe 502 740 440 261 503 -
Asia   51     101     72     45     69   35 %
Total Non-GAAP Net Revenue   1,034     1,651     977     491     1,080   4 %
 
North America 47 % 47 % 48 % 47 % 46 %
Europe 46 % 48 % 46 % 46 % 47 %
Asia   7 %   5 %   6 %   7 %   7 %
Total GAAP Net Revenue %   100 %   100 %   100 %   100 %   100 %
North America 46 % 49 % 48 % 38 % 47 %
Europe 49 % 45 % 45 % 53 % 47 %
Asia   5 %   6 %   7 %   9 %   6 %
Total Non-GAAP Net Revenue %   100 %   100 %   100 %   100 %   100 %
 
Net Revenue Composition
Publishing and Other 450 738 926 592 365 (19 %)
Wireless, Internet-derived, and Advertising (Digital) 234 274 419 342 324 38 %
Distribution   31     49     23     21     22   (29 %)
Total GAAP Net Revenue   715     1,061     1,368     955     711   (1 %)
Publishing and Other 337 487 (397 ) (446 ) 379
Wireless, Internet-derived, and Advertising (Digital)   (18 )   103     6     (18 )   (10 )
Change In Deferred Net Revenue (Packaged Goods and Digital Content)   319     590     (391 )   (464 )   369  
Publishing and Other 787 1,225 529 146 744 (5 %)
Wireless, Internet-derived, and Advertising (Digital) 216 377 425 324 314 45 %
Distribution   31     49     23     21     22   (29 %)
Total Non-GAAP Net Revenue   1,034     1,651     977     491     1,080   4 %
 
Publishing and Other 63 % 69 % 68 % 62 % 51 %
Wireless, Internet-derived, and Advertising (Digital) 33 % 26 % 30 % 36 % 46 %
Distribution   4 %   5 %   2 %   2 %   3 %
Total GAAP Net Revenue %   100 %   100 %   100 %   100 %   100 %
Publishing and Other 76 % 74 % 54 % 30 % 69 %
Wireless, Internet-derived, and Advertising (Digital) 21 % 23 % 44 % 66 % 29 %
Distribution   3 %   3 %   2 %   4 %   2 %
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)
 
Q2 Q3 Q4 Q1 Q2 YOY %
FY12 FY12 FY12 FY13 FY13 Change
 
QUARTERLY NET REVENUE PRESENTATIONS - GAAP AND NON-GAAP
 
Platform Net Revenue
Xbox 360 213 331 454 292 204 (4 %)
PLAYSTATION 3 169 314 432 267 150 (11 %)
Wii 35 49 20 8 17 (51 %)
PlayStation 2   15     7     3     2     6   (60 %)
Total Consoles 432 701 909 569 377 (13 %)
Mobile 55 70 87 69 75 36 %
PlayStation Handhelds 17 14 6 10 14 (18 %)
Nintendo Handhelds   7     15     5     9     8   14 %
Total Mobile and Handhelds 79 99 98 88 97 23 %
PC 178 214 334 276 214 20 %
Other   26     47     27     22     23   (12 %)
Total GAAP Net Revenue   715     1,061     1,368     955     711   (1 %)
Xbox 360 140 174 (128 ) (186 ) 144
PLAYSTATION 3 205 179 (210 ) (183 ) 222
Wii (1 ) 3 (7 ) (5 ) -
PlayStation 2 - - - (1 ) 1
Mobile - 13 (3 ) 9 13
PlayStation Handhelds - (2 ) 10 (4 ) 7
Nintendo Handhelds - 9 (5 ) (4 ) (2 )
PC   (25 )   214     (48 )   (90 )   (16 )
Change in Deferred Net Revenue (Packaged Goods and Digital Content)   319     590     (391 )   (464 )   369  
Xbox 360 353 505 326 106 348 (1 %)
PLAYSTATION 3 374 493 222 84 372 (1 %)
Wii 34 52 13 3 17 (50 %)
PlayStation 2   15     7     3     1     7   (53 %)
Total Consoles 776 1,057 564 194 744 (4 %)
Mobile 55 83 84 78 88 60 %
PlayStation Handhelds 17 12 16 6 21 24 %
Nintendo Handhelds   7     24     -     5     6   (14 %)
Total Mobile and Handhelds 79 119 100 89 115 46 %
PC 153 428 286 186 198 29 %
Other   26     47     27     22     23   (12 %)
Total Non-GAAP Net Revenue   1,034     1,651     977     491     1,080   4 %
 
Xbox 360 30 % 31 % 33 % 31 % 29 %
PLAYSTATION 3 23 % 29 % 32 % 28 % 21 %
Wii 5 % 5 % 1 % 1 % 2 %
PlayStation 2   2 %   1 %   -     -     1 %
Total Consoles 60 % 66 % 66 % 60 % 53 %
Mobile 8 % 7 % 6 % 7 % 11 %
PlayStation Handhelds 2 % 1 % 1 % 1 % 2 %
Nintendo Handhelds   1 %   1 %   -     1 %   1 %
Total Mobile and Handhelds 11 % 9 % 7 % 9 % 14 %
PC 25 % 20 % 25 % 29 % 30 %
Other   4 %   5 %   2 %   2 %   3 %
Total GAAP Net Revenue %   100 %   100 %   100 %   100 %   100 %
Xbox 360 34 % 31 % 34 % 22 % 32 %
PLAYSTATION 3 36 % 30 % 23 % 17 % 34 %
Wii 4 % 3 % 1 % 1 % 2 %
PlayStation 2   1 %   -     -     -     1 %
Total Consoles 75 % 64 % 58 % 40 % 69 %
Mobile 5 % 5 % 8 % 16 % 8 %
PlayStation Handhelds 2 % 1 % 2 % 1 % 2 %
Nintendo Handhelds   1 %   1 %   -     1 %   1 %
Total Mobile and Handhelds 8 % 7 % 10 % 18 % 11 %
PC 15 % 26 % 29 % 38 % 18 %
Other   2 %   3 %   3 %   4 %   2 %
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)
 
Q2 Q3 Q4 Q1 Q2 YOY %
FY12 FY12 FY12 FY13 FY13 Change
 
CASH FLOW DATA
 
Operating cash flow (211 ) 475 287 (244 ) (28 ) 87 %
Operating cash flow - TTM 117 243 277 307 490 319 %
Capital expenditures 52 44 44 31 25 (52 %)
Capital expenditures - TTM 120 149 172 171 144 20 %
 
BALANCE SHEET DATA
 
Cash and cash equivalents 930 1,242 1,293 919 871 (6 %)
Short-term investments 355 406 437 444 351 (1 %)
Marketable equity securities 214 143 119 76 93 (56 %)
Receivables, net 562 526 366 111 643 14 %
Inventories 90 69 59 60 71 (21 %)
Deferred net revenue (packaged goods and digital content)
End of the quarter 849 1,439 1,048 584 953
Less: Beginning of the quarter   530     849     1,439     1,048     584  
Change in deferred net revenue (packaged goods and digital content)   319     590     (391 )   (464 )   369  
 
STOCK-BASED COMPENSATION
 
Cost of goods sold - - 1 1 -
Marketing and sales 6 7 8 7 8
General and administrative 9 11 7 9 9
Research and development   28     30     25     22     27  
Total Stock-Based Compensation   43     48     41     39     44  
 
EMPLOYEES 8,687 9,043 9,158 9,225 9,224 6 %




5 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,719.00 +33.27 0.19%
S&P 500 2,052.75 +4.03 0.20%
NASDAQ 4,701.8670 +26.1550 0.56%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs