Electronic arts reports q1 fy22 financial results
Redwood city, calif.--(business wire)--electronic arts inc. (nasdaq: ea) today announced preliminary financial results for its first fiscal quarter ended june 30, 2021. “we’ve had a very strong start to the fiscal year with our incredible teams delivering experiences that continue to bring hundreds of millions of players together,” said andrew wilson, ceo of electronic arts. “our new launches, leading games, and live services all had an outstanding quarter. with our expanding ea sports portfolio, more amazing experiences in apex legends, the groundbreaking new battlefield 2042, and our leading live services including mobile, we’re set to deliver more great games and content to players this year.” “we delivered a big beat this quarter, primarily driven by outperformance from our recent launches coupled with continued strong execution in our live services,” said coo and cfo blake jorgensen. “we’re looking forward to the launches of our sports titles this quarter and battlefield 2042 in time for the holidays. based on our strong performance this quarter and supported by our ongoing confidence in our live services, we are raising our outlook for the full year. our strategic position has never been stronger, with growth drivers in place for this year, next year, and beyond.” selected operating highlights and metrics net bookings1 for the trailing twelve months was $6.136 billion, up 3% year-over-year. more than 140 million players engaged with ea sportstm games over the trailing twelve months. over 31 million players joined fifa 21 on console and pc since launch. fifa ultimate teamtm matches are up 48% year-over-year for the quarter. season 9 for apex legendstm averaged more than 13 million weekly active players and set a new record for peak daily players across all seasons. selected financial highlights and metrics net cash (used in)/provided by operating activities was $(143) million for the quarter and $1.413 billion for the trailing twelve months. ea repurchased 2.3 million shares for $325 million during the quarter, bringing the total for the last twelve months to 7.2 million shares for $976 million. 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 september 22, 2021 to shareholders of record as of the close of business on september 1, 2021. quarterly financial highlights 2021 2020 322 359 1,229 1,100 1,551 1,459 204 365 0.71 1.25 (143 ) 378 325 78 2.3 0.7 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 june 30, 2021 1,551 - (215 ) - 315 (22 ) - (1 ) 1,236 22 (215 ) 1 914 (40 ) - (124 ) 322 62 (215 ) 125 (14 ) - - - 308 62 (215 ) 125 289 trailing twelve months financial highlights 2021 2020 1,576 1,984 4,145 3,803 5,721 5,787 676 1,413 2,017 976 980 7.2 9.8 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: 5,721 - 415 - 1,521 (26 ) - (5 ) 4,200 26 415 5 3,303 (65 ) - (453 ) 897 91 415 458 (40 ) - - - 857 91 415 458 operating metric the following is a calculation of our total net bookings1 for the periods presented: 2021 2020 2021 2020 1,551 1,459 5,721 5,787 (215 ) (69 ) 415 193 1,336 1,390 6,136 5,980 business outlook as of august 4, 2021 our financial expectations for the second fiscal quarter ending september 30, 2021 and the fiscal year ending march 31, 2022 include estimates of the impact of our completed acquisitions on consolidated results. the gaap and operating cash flow estimates could be materially impacted as we integrate these recent acquisitions. fiscal year 2022 expectations – ending march 31, 2022 financial metrics: net revenue is expected to be approximately $6.850 billion. change in deferred net revenue (online-enabled games) is expected to be approximately $550 million. change in deferred net revenue (online-enabled games) is expected to be approximately $550 million. net income is expected to be approximately $456 million. diluted earnings per share is expected to be approximately $1.58. operating cash flow is expected to be approximately $1.850 billion. the company estimates a share count of 289 million for purposes of calculating fiscal year 2022 diluted earnings per share. operational metric: net bookings1 is expected to be approximately $7.400 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: 6,850 - 550 - 1,921 (140 ) - (5 ) 4,015 (160 ) - (545 ) 856 300 550 550 456 289 second quarter fiscal year 2022 expectations – ending september 30, 2021 financial metrics: net revenue is expected to be approximately $1.775 billion. change in deferred net revenue (online-enabled games) is expected to be approximately $(50) million. change in deferred net revenue (online-enabled games) is expected to be approximately $(50) million. net income is expected to be approximately $105 million. diluted earnings per share is expected to be approximately $0.36. the company estimates a share count of 288 million for purposes of calculating second quarter fiscal 2022 diluted earnings per share. operational metric: net bookings1 is expected to be approximately $1.725 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: 1,775 - (50 ) - 518 (35 ) - - 1,030 (40 ) - (150 ) 212 75 (50 ) 150 105 288 conference call and supporting documents electronic arts will host a conference call on august 4, 2021 at 2:00 pm pt (5:00 pm et) to review its results for the fiscal quarter ended june 30, 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 1183378 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 august 18, 2021 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 1183378. 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 august 4, 2021,” and other information regarding ea's fiscal 2022 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 i, item 1a of electronic arts’ latest annual report on form 10-k under the heading “risk factors”, as well as in other documents we have filed with the securities and exchange commission. these forward-looking statements are current as of august 4, 2021. 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 june 30, 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 june 30, 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, ultimate team, battlefield, need for speed, apex legends, the sims, titanfall and plants vs. zombies are trademarks of electronic arts inc. john madden, nfl, fifa and f1 are the property of their respective owners and used with permission. 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 june 30, 2021 2020 net revenue 1,551 1,459 cost of revenue 315 288 gross profit 1,236 1,171 operating expenses: research and development 515 438 marketing and sales 190 121 general and administrative 169 136 amortization of intangibles 40 5 total operating expenses 914 700 operating income 322 471 interest and other income (expense), net (14 ) (3 ) income before provision for income taxes 308 468 provision for income taxes 104 103 net income 204 365 earnings per share basic 0.71 1.27 diluted 0.71 1.25 number of shares used in computation basic 286 288 diluted 289 292 results (in $ millions, except per share data) the following table reports the variance of the actuals versus our guidance provided on may 11, 2021 for the three months ended june 30, 2021 plus a comparison to the actuals for the three months ended june 30, 2020. three months ended june 30, 2021 2021 2020 guidance variance actuals actuals net revenue net revenue 1,475 76 1,551 1,459 gaap-based financial data change in deferred net revenue (online-enabled games)1 (225 ) 10 (215 ) (69 ) cost of revenue cost of revenue 287 28 315 288 gaap-based financial data acquisition-related expenses (5 ) (17 ) (22 ) — stock-based compensation — (1 ) (1 ) (1 ) operating expenses operating expenses 955 (41 ) 914 700 gaap-based financial data acquisition-related expenses (70 ) 30 (40 ) (5 ) stock-based compensation (125 ) 1 (124 ) (101 ) income before tax income before tax 220 88 308 468 gaap-based financial data acquisition-related expenses 75 (13 ) 62 5 change in deferred net revenue (online-enabled games)1 (225 ) 10 (215 ) (69 ) stock-based compensation 125 — 125 102 tax rate used for management reporting 18 % 18 % 18 % earnings per share basic 0.24 0.47 0.71 1.27 diluted 0.24 0.47 0.71 1.25 number of shares basic 287 (1 ) 286 288 diluted 291 (2 ) 289 292 1the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges. electronic arts inc. and subsidiaries unaudited condensed consolidated balance sheets (in $ millions) june 30, 2021 march 31, 20212 assets current assets: cash and cash equivalents 2,838 5,260 short-term investments 881 1,106 receivables, net 557 521 other current assets 401 326 total current assets 4,677 7,213 property and equipment, net 510 491 goodwill 4,256 2,868 acquisition-related intangibles, net 909 309 deferred income taxes, net 1,960 2,045 other assets 422 362 total assets 12,734 13,288 liabilities and stockholders’ equity current liabilities: accounts payable 73 96 accrued and other current liabilities 1,093 1,341 deferred net revenue (online-enabled games) 1,305 1,527 total current liabilities 2,471 2,964 senior notes, net 1,877 1,876 income tax obligations 321 315 deferred income taxes, net 24 43 other liabilities 313 250 total liabilities 5,006 5,448 stockholders’ equity: common stock 3 3 retained earnings 7,760 7,887 accumulated other comprehensive loss (35 ) (50 ) total stockholders’ equity 7,728 7,840 total liabilities and stockholders’ equity 12,734 13,288 2derived from audited consolidated financial statements. electronic arts inc. and subsidiaries unaudited condensed consolidated statements of cash flows (in $ millions) three months ended june 30, 2021 2020 operating activities net income 204 365 adjustments to reconcile net income to net cash provided by (used in) operating activities: depreciation, amortization and accretion 105 37 stock-based compensation 125 102 change in assets and liabilities receivables, net 12 (44 ) other assets (74 ) 44 accounts payable (19 ) (3 ) accrued and other liabilities (302 ) (66 ) deferred income taxes, net 28 10 deferred net revenue (online-enabled games) (222 ) (67 ) net cash provided by (used in) operating activities (143 ) 378 investing activities capital expenditures (44 ) (38 ) proceeds from maturities and sales of short-term investments 507 694 purchase of short-term investments (285 ) (664 ) acquisitions, net of cash acquired (1,989 ) — net cash used in investing activities (1,811 ) (8 ) financing activities proceeds from issuance of common stock — 3 cash dividends paid (49 ) — cash paid to taxing authorities for shares withheld from employees (105 ) (69 ) repurchase and retirement of common stock (325 ) (78 ) net cash used in financing activities (479 ) (144 ) effect of foreign exchange on cash and cash equivalents 11 19 change in cash and cash equivalents (2,422 ) 245 beginning cash and cash equivalents 5,260 3,768 ending cash and cash equivalents 2,838 4,013 electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions, except per share data) q1 q2 q3 q4 q1 yoy % fy21 fy21 fy21 fy21 fy22 change net revenue net revenue 1,459 1,151 1,673 1,346 1,551 6 % gaap-based financial data change in deferred net revenue (online-enabled games)1 (69 ) (241 ) 727 144 (215 ) gross profit gross profit 1,171 865 1,072 1,027 1,236 6 % gross profit (as a % of net revenue) 80 % 75 % 64 % 76 % 80 % gaap-based financial data acquisition-related expenses — — — 4 22 change in deferred net revenue (online-enabled games)1 (69 ) (241 ) 727 144 (215 ) stock-based compensation 1 2 1 1 1 operating income operating income 471 149 251 175 322 (32 %) operating income (as a % of net revenue) 32 % 13 % 15 % 13 % 21 % gaap-based financial data acquisition-related expenses 5 6 5 18 62 change in deferred net revenue (online-enabled games)1 (69 ) (241 ) 727 144 (215 ) stock-based compensation 102 113 111 109 125 net income net income 365 185 211 76 204 (44 %) net income (as a % of net revenue) 25 % 16 % 13 % 6 % 13 % gaap-based financial data acquisition-related expenses 5 6 5 18 62 change in deferred net revenue (online-enabled games)1 (69 ) (241 ) 727 144 (215 ) stock-based compensation 102 113 111 109 125 tax rate used for management reporting 18 % 18 % 18 % 18 % 18 % diluted earnings per share 1.25 0.63 0.72 0.26 0.71 (43 %) number of diluted shares used in computation basic 288 289 290 288 286 diluted 292 293 292 290 289 1the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges. electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions) q1 q2 q3 q4 q1 yoy % fy21 fy21 fy21 fy21 fy22 change quarterly net revenue presentations net revenue by composition full game downloads 223 163 347 185 233 4 % packaged goods 136 119 375 65 89 (35 %) full game 359 282 722 250 322 (10 %) live services and other 1,100 869 951 1,096 1,229 12 % total net revenue 1,459 1,151 1,673 1,346 1,551 6 % full game 25 % 25 % 43 % 19 % 21 % live services and other 75 % 75 % 57 % 81 % 79 % total net revenue % 100 % 100 % 100 % 100 % 100 % gaap-based financial data full game downloads (5 ) (2 ) 53 (19 ) (5 ) packaged goods (67 ) (14 ) 83 (44 ) (35 ) full game (72 ) (16 ) 136 (63 ) (40 ) live services and other 3 (225 ) 591 207 (175 ) total change in deferred net revenue (online-enabled games) by composition1 (69 ) (241 ) 727 144 (215 ) net revenue by platform console 932 714 1,191 879 972 4 % pc & other 325 249 326 295 361 11 % mobile 202 188 156 172 218 8 % total net revenue 1,459 1,151 1,673 1,346 1,551 6 % gaap-based financial data console (108 ) (201 ) 619 71 (278 ) pc & other 15 (24 ) 73 51 9 mobile 24 (16 ) 35 22 54 total change in deferred net revenue (online-enabled games) by platform1 (69 ) (241 ) 727 144 (215 ) 1the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges. electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions) q1 q2 q3 q4 q1 yoy % fy21 fy21 fy21 fy21 fy22 change cash flow data operating cash flow 378 61 1,124 371 (143 ) (138 %) operating cash flow - ttm 2,017 2,041 2,061 1,934 1,413 (30 %) capital expenditures 38 25 30 31 44 16 % capital expenditures - ttm 133 131 133 124 130 (2 %) repurchase and retirement of common stock 78 — 326 325 325 317 % cash dividends paid — — 49 49 49 100 % depreciation depreciation expense 31 32 37 38 40 29 % balance sheet data cash and cash equivalents 4,013 4,059 4,772 5,260 2,838 short-term investments 1,947 1,972 1,938 1,106 881 cash and cash equivalents, and short-term investments 5,960 6,031 6,710 6,366 3,719 (38 %) receivables, net 507 423 778 521 557 10 % stock-based compensation cost of revenue 1 2 1 1 1 research and development 66 74 74 71 85 marketing and sales 11 12 11 12 12 general and administrative 24 25 25 25 27 total stock-based compensation 102 113 111 109 125 category: company news
