ELECTRONIC ARTS INC Stock Forecasts | EA EPS & Price Predictions

EX-99.1 2 d292234dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO

Electronic Arts Reports Q3 FY22 Financial Results

REDWOOD CITY, CA – February 1, 2022 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2021.

“FY22 has been a year of outstanding growth for Electronic Arts, and we’re proud that our franchises were among the most-downloaded, most-played, and most popular titles over the last year and the holiday quarter,” said Andrew Wilson, CEO of Electronic Arts. “Our network of more than 540 million unique active accounts continues to expand, players are spending more time in our games, and with our amazing IP we are well-positioned for continued growth.”

“Q3 was the largest quarter in the company’s history for net bookings, underlying profitability and cash generation,” said CFO Blake Jorgensen. “Our portfolio approach will enable us to deliver organic growth in the double digits this year, continue to deliver strong cash flow, and provides a strong foundation for growth as we look to the future.”

Selected Operating Highlights and Metrics

•

Net bookings¹ for the trailing twelve months was $7.254 billion, up 22% year-over-year.

•

Over the last year, the EA player network has grown to more than 540 million unique active accounts.

•

During FY22 to date, more than 180 million monthly active accounts on average engaged in our games across all platforms.

•

At quarter end, Apex Legends^TM monthly active players were up more than 30% year-over-year.

•

Players are spending nearly 20% more time in our games in FY22 compared to the previous year.

Selected Financial Highlights and Metrics

•

Net cash provided by operating activities was a record $1.534 billion for the quarter and $1.826 billion for the trailing twelve months.

•

EA repurchased 2.4 million shares for $325 million during the quarter, bringing the total for the last twelve months to 9.4 million shares for $1.300 billion.

•

EA paid a cash dividend of $0.17 per share during the quarter.

Dividend

EA has declared a quarterly cash dividend of $0.17 per share of the Company’s common stock. The dividend is payable on March 23, 2022 to shareholders of record as of the close of business on March 9, 2022.

Quarterly Financial Highlights


	Three Months Ended December 31,
	2021		2020
(in $ millions, except per share amounts)
Full game		616		722
Live services and other		1,173		951

Total net revenue		1,789		1,673


Net income		66		211
Diluted earnings per share		0.23		0.72

Operating cash flow		1,534		1,124

Value of shares repurchased		325		326
Number of shares repurchased		2.4		2.5

The following GAAP-based financial data² and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:


	Three Months Ended December 31, 2021
				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		1,789			—			788		—
Cost of revenue		631			(44	)		—		(1	)

Gross profit		1,158			44			788		1
Total operating expenses		1,056			(61	)		—		(128	)

Operating income		102			105			788		129
Interest and other income (expense), net		(11	)		—			—		—

Income before provision for income taxes		91			105			788		129
Number of shares used in computation:
Diluted		285

Trailing Twelve Months Financial Highlights


	Twelve Months Ended December 31,
	2021		2020
(in $ millions)
Full game		1,805		1,719
Live services and other		4,707		3,951

Total net revenue		6,512		5,670


Net income		640		1,179

Operating cash flow		1,826		2,061

Value of shares repurchased		1,300		695
Number of shares repurchased		9.4		5.9

The following GAAP-based financial data² and tax rate of 18% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:


	Twelve Months Ended December 31, 2021
				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		6,512			—			742		—
Cost of revenue		1,759			(92	)		—		(5	)

Gross profit		4,753			92			742		5
Total operating expenses		3,814			(145	)		—		(507	)

Operating income		939			237			742		512
Interest and other income (expense), net		(49	)		—			—		—

Income before provision for income taxes		890			237			742		512

Operating Metric

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


	Three Months Ended December 31,				Twelve Months Ended December 31,
	2021		2020		2021		2020
(in $ millions)
Total net revenue		1,789		1,673		6,512		5,670
Change in deferred net revenue (online-enabled games)		788		727		742		286

Net bookings		2,577		2,400		7,254		5,956

Business Outlook as of February 1, 2022

Our financial expectations for the quarter and fiscal year ending March 31, 2022 include estimates of the impact of our completed acquisitions on consolidated results and could be materially impacted as we integrate these acquisitions.

Fiscal Year 2022 Expectations – Ending March 31, 2022

Financial metrics:

•

Net revenue is expected to be approximately $6.925 billion.

•

Change in deferred net revenue (online-enabled games) is expected to be approximately $600 million.

•

Net income is expected to be approximately $694 million.

•

Diluted earnings per share is expected to be approximately $2.43.

•

Operating cash flow is expected to be approximately $1.900 billion.

•

The Company estimates a share count of 286 million for purposes of calculating fiscal year 2022 diluted earnings per share.

Operational metric:

•

Net bookings¹ is expected to be approximately $7.525 billion.

In addition, the following outlook for GAAP-based financial data² and a long-term tax rate of 18% 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, 2022
			GAAP-Based Financial Data
	GAAP Guidance		Acquisition- related expenses			Change in deferred net revenue (online- enabled games)		Stock-based compensation
(in $ millions)
Total net revenue		6,925		—			600		—
Cost of revenue		1,844		(130	)		—		(5	)
Operating expense		4,048		(180	)		—		(525	)
Income before provision for income taxes		984		310			600		530
Net income		694
Number of shares used in computation:
Diluted shares		286

Fourth Quarter Fiscal Year 2022 Expectations – Ending March 31, 2022

Financial metrics:

•

Net revenue is expected to be approximately $1.759 billion.

•

Change in deferred net revenue (online-enabled games) is expected to be approximately $2 million.

•

Net income is expected to be approximately $130 million.

•

Diluted earnings per share is expected to be approximately $0.46.

•

The Company estimates a share count of 284 million for purposes of calculating fourth quarter fiscal 2022 diluted earnings per share.

Operational metric:

•

Net bookings¹ is expected to be approximately $1.761 billion.


	Three Months Ending March 31, 2022
			GAAP-Based Financial Data
	GAAP Guidance		Acquisition- related expenses			Change in deferred net revenue (online- enabled games)		Stock-based compensation
(in $ millions)
Total net revenue		1,759		—			2		—
Cost of revenue		404		(42	)		—		(1	)
Operating expense		1,086		(49	)		—		(126	)
Income before provision for income taxes		259		91			2		127
Net income		130
Number of shares used in computation:
Diluted shares		284

Conference Call and Supporting Documents

Electronic Arts will host a conference call on February 1, 2022 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal quarter ended December 31, 2021 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 (866) 324-3683 (domestic) or (509) 844-0959 (international), using the conference code 4063695 or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation with a financial model of EA’s historical results and guidance on EA’s IR Website. EA will also post the prepared remarks and a transcript from the conference call on EA’s IR Website.

A dial-in replay of the conference call will be available until February 15, 2022 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 4063695. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.

Forward-Looking Statements

Some statements set forth in this release, including the information relating to EA’s expectations under the heading “Business Outlook as of February 1, 2022” and other information regarding EA’s fiscal 2022 and other future expectations contain forward-looking statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “plan,” “predict,” “seek,” “goal,” “will,” “may,” “likely,” “should,” “could” (and the negative of any of these terms), “future” and similar expressions also identify forward-looking statements. These forward-looking statements are not guarantees of future performance and reflect management’s current expectations. Our actual results could differ materially from those discussed 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: the impact of the COVID-19 pandemic, sales of the Company’s products and services; the Company’s ability to develop and support digital products and services, including managing online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products and services; the Company’s ability to realize the anticipated benefits of, and integrate, acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences among competing platforms; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; general economic conditions; changes in our tax rates or tax laws; and other factors described in Part II, Item 1A of Electronic Arts’ latest Quarterly Report on Form 10-Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

These forward-looking statements are current as of February 1, 2022. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2021. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended December 31, 2021.

About Electronic Arts

Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers.

In fiscal year 2021, EA posted GAAP net revenue of $5.6 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS^™ FIFA, 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.

For additional information, please contact:


Chris Evenden		John Reseburg
Vice President, Investor Relations		Vice President, Global Communications
650-628-0255		650-628-3601
cevenden@ea.com		jreseburg@ea.com

¹	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.

²	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, 2021.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in $ millions, except per share data)

Three Months Ended
December 31,

Nine Months Ended
December 31,

2021

2020

2021

2020

Net revenue

1,789

1,673

5,166

4,283

Cost of revenue

631

601

1,440

1,175

Gross profit

1,158

1,072

3,726

3,108

Operating expenses:

Research and development

539

451

1,607

1,310

Marketing and sales

293

216

716

493

General and administrative

163

149

508

418

Amortization of intangibles

131

Total operating expenses

1,056

821

2,962

2,237

Operating income

102

251

764

871

Interest and other income (expense), net

(11

)

(39

)

(19

)

Income before provision for income taxes

245

725

852

Provision for income taxes

161

Net income

211

564

761

Earnings per share

Basic

0.23

0.73

1.99

2.63

Diluted

0.23

0.72

1.97

2.61

Number of shares used in computation

Basic

283

290

284

289

Diluted

285

292

287

292

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on November 3, 2021 for the three months ended December 31, 2021 plus a comparison to the actuals for the three months ended December 31, 2020.


	Three Months Ended December 31,
	2021						2021			2020
	Guidance			Variance			Actuals			Actuals
Net revenue
Net revenue		1,750			39			1,789			1,673
GAAP-based financial data
Change in deferred net revenue (online-enabled games)¹		875			(87	)		788			727
Cost of revenue
Cost of revenue		625			6			631			601
GAAP-based financial data
Acquisition-related expenses		(50	)		6			(44	)		—
Stock-based compensation		—			(1	)		(1	)		(1	)
Operating expenses
Operating expenses		1,100			(44	)		1,056			821
GAAP-based financial data
Acquisition-related expenses		(35	)		(26	)		(61	)		(5	)
Stock-based compensation		(135	)		7			(128	)		(110	)
Income before tax
Income before tax		8			83			91			245
GAAP-based financial data
Acquisition-related expenses		85			20			105			5
Change in deferred net revenue (online-enabled games)¹		875			(87	)		788			727
Stock-based compensation		135			(6	)		129			111
Tax rate used for management reporting		18	%					18	%		18	%
Earnings per share
Basic		0.02			0.21			0.23			0.73
Diluted		0.02			0.21			0.23			0.72
Number of shares
Basic		284			(1	)		283			290
Diluted		287			(2	)		285			292

The 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)


	December 31, 2021		March 31, 2021²
ASSETS
Current assets:
Cash and cash equivalents		2,670		5,260
Short-term investments		346		1,106
Receivables, net		965		521
Other current assets		377		326

Total current assets		4,358		7,213
Property and equipment, net		522		491
Goodwill		5,389		2,868
Acquisition-related intangibles, net		1,052		309
Deferred income taxes, net		2,130		2,045
Other assets		479		362

TOTAL ASSETS		13,930		13,288

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		86		96
Accrued and other current liabilities		1,443		1,341
Deferred net revenue (online-enabled games)		2,101		1,527

Total current liabilities		3,630		2,964
Senior notes, net		1,878		1,876
Income tax obligations		326		315
Deferred income taxes, net		75		43
Other liabilities		404		250

Total liabilities		6,313		5,448
Stockholders’ equity:
Common stock		3		3
Retained earnings		7,608		7,887
Accumulated other comprehensive income (loss)		6		(50	)

Total stockholders’ equity		7,617		7,840

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		13,930		13,288

²	Derived from audited consolidated financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in $ millions)


	Three Months Ended December 31,						Nine Months Ended December 31,
	2021			2020			2021			2020
OPERATING ACTIVITIES
Net income		66			211			564			761
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion		146			46			345			123
Stock-based compensation		129			111			403			326
Change in assets and liabilities
Receivables, net		56			(348	)		(390	)		(309	)
Other assets		(24	)		85			(75	)		(28	)
Accounts payable		(51	)		(77	)		(9	)		29
Accrued and other liabilities		433			341			183			245
Deferred income taxes, net		—			14			(140	)		(18	)
Deferred net revenue (online-enabled games)		779			741			574			434

Net cash provided by operating activities		1,534			1,124			1,455			1,563

INVESTING ACTIVITIES
Capital expenditures		(48	)		(30	)		(135	)		(93	)
Proceeds from maturities and sales of short-term investments		65			670			1,193			2,088
Purchase of short-term investments		(69	)		(640	)		(438	)		(2,056	)
Acquisitions, net of cash acquired		3			—			(3,391	)		—

Net cash used in investing activities		(49	)		—			(2,771	)		(61	)

FINANCING ACTIVITIES
Proceeds from issuance of common stock		3			13			44			56
Cash dividends paid		(48	)		(49	)		(145	)		(49	)
Cash paid to taxing authorities for shares withheld from employees		(72	)		(67	)		(193	)		(144	)
Repurchase and retirement of common stock		(325	)		(326	)		(975	)		(404	)

Net cash used in financing activities		(442	)		(429	)		(1,269	)		(541	)

Effect of foreign exchange on cash and cash equivalents		(3	)		18			(5	)		43

Change in cash and cash equivalents		1,040			713			(2,590	)		1,004
Beginning cash and cash equivalents		1,630			4,059			5,260			3,768

Ending cash and cash equivalents		2,670			4,772			2,670			4,772

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except per share data)


	Q3			Q4			Q1			Q2			Q3			YOY%
	FY21			FY21			FY22			FY22			FY22			Change
Net revenue
Net revenue		1,673			1,346			1,551			1,826			1,789			7	%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)¹		727			144			(215	)		25			788
Gross profit
Gross profit		1,072			1,027			1,236			1,332			1,158			8	%
Gross profit (as a % of net revenue)		64	%		76	%		80	%		73	%		65	%
GAAP-based financial data
Acquisition-related expenses		—			4			22			22			44
Change in deferred net revenue (online-enabled games)¹		727			144			(215	)		25			788
Stock-based compensation		1			1			1			2			1
Operating income
Operating income		251			175			322			340			102			*(59*	%)
Operating income (as a % of net revenue)		15	%		13	%		21	%		19	%		6	%
GAAP-based financial data
Acquisition-related expenses		5			18			62			52			105
Change in deferred net revenue (online-enabled games)¹		727			144			(215	)		25			788
Stock-based compensation		111			109			125			149			129
Net income
Net income		211			76			204			294			66			*(69*	%)
Net income (as a % of net revenue)		13	%		6	%		13	%		16	%		4	%
GAAP-based financial data
Acquisition-related expenses		5			18			62			52			105
Change in deferred net revenue (online-enabled games)¹		727			144			(215	)		25			788
Stock-based compensation		111			109			125			149			129
Tax rate used for management reporting		18	%		18	%		18	%		18	%		18	%
Diluted earnings per share		0.72			0.26			0.71			1.02			0.23			*(68*	%)
Number of diluted shares used in computation
Basic		290			288			286			285			283
Diluted		292			290			289			287			285

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)


	Q3			Q4			Q1			Q2			Q3			YOY %
	FY21			FY21			FY22			FY22			FY22			Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads		347			185			233			337			400			15	%
Packaged goods		375			65			89			280			216			(42	%)

Full game		722			250			322			617			616			(15	%)

Live services and other		951			1,096			1,229			1,209			1,173			23	%

Total net revenue		1,673			1,346			1,551			1,826			1,789			7	%
Full game		43	%		19	%		21	%		34	%		34	%
Live services and other		57	%		81	%		79	%		66	%		66	%

*Total net revenue %*		*100*	%		*100*	%		*100*	%		*100*	%		*100*	%
GAAP-based financial data
Full game downloads		53			(19	)		(5	)		35			179
Packaged goods		83			(44	)		(35	)		44			105

Full game		136			(63	)		(40	)		79			284

Live services and other		591			207			(175	)		(54	)		504

Total change in deferred net revenue (online-enabled games) by composition		727			144			(215	)		25			788
Net revenue by platform
Console		1,191			879			972			1,198			1,138			(4	%)
PC & Other		326			295			361			377			374			15	%
Mobile		156			172			218			251			277			78	%

Total net revenue		1,673			1,346			1,551			1,826			1,789			7	%

GAAP-based financial data
Console		619			71			(278	)		(29	)		608
PC & Other		73			51			9			26			137
Mobile		35			22			54			28			43

Total change in deferred net revenue (online-enabled games) by platform¹		727			144			(215	)		25			788

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)


	Q3 FY21		Q4 FY21		Q1 FY22			Q2 FY22		Q3 FY22		YOY % Change
CASH FLOW DATA
Operating cash flow		1,124		371		(143	)		64		1,534		36	%
Operating cash flow—TTM		2,061		1,934		1,413			1,416		1,826		(11	%)
Capital expenditures		30		31		44			43		48		60	%
Capital expenditures—TTM		133		124		130			148		166		25	%
Repurchase and retirement of common stock		326		325		325			325		325		—	%
Cash dividends paid		49		49		49			48		48		(2	%)
DEPRECIATION
Depreciation expense		37		38		40			39		41		11	%
BALANCE SHEET DATA
Cash and cash equivalents		4,772		5,260		2,838			1,630		2,670
Short-term investments		1,938		1,106		881			342		346

Cash and cash equivalents, and short-term investments		6,710		6,366		3,719			1,972		3,016		(55	%)
Receivables, net		778		521		557			1,031		965		24	%
STOCK-BASED COMPENSATION
Cost of revenue		1		1		1			2		1
Research and development		74		71		85			101		86
Marketing and sales		11		12		12			15		14
General and administrative		25		25		27			31		28

Total stock-based compensation		111		109		125			149		129