Electronic arts reports strong q2 fy21 financial results
Redwood city, calif.--(business wire)--electronic arts inc. (nasdaq: ea) today announced preliminary financial results for its second fiscal quarter ended september 30, 2020. “thanks to the incredible work of our teams and everything they continue to do for players while working from home, we’re delivering more fan-favorite games, growing our leading live services, and engaging more players across more platforms than ever before,” said ceo andrew wilson. “our business has grown significantly this year, and we are projecting continued expansion into fy22 and beyond.” “we delivered a quarter well above our guidance, driven by our live services, particularly madden and fifa. this resulted in a new record trailing twelve-month cash flow of $2.04 billion. we are pleased to announce a new share repurchase program and also to initiate a dividend for the first time in ea history,” said coo and cfo blake jorgensen. “we are on track to deliver strong growth this year and expect continued growth in fiscal 2022 and in the years to come. apex legends is on track to become our latest billion-dollar franchise by the end of the fiscal year. all of our studios continue to execute amazingly well and have enabled us to launch an industry-leading eight games since the beginning of the fiscal year, while continuing to deliver live services content and expand onto new platforms.” ea has posted a refreshed slide presentation and a financial model of ea’s historical results and guidance on ea’s ir website at www.ir.ea.com. ea will also post the prepared remarks and a transcript from the conference call on ea’s ir website. news and ongoing updates regarding ea and its games are available on ea’s blog at www.ea.com/news. selected operating highlights and metrics net bookings* for the trailing twelve months was $5.577 billion, up 8% year-over-year. launched ea sports™ ufc® 4, madden nfl 21, rocket arena, and star wars™: squadrons during the quarter. madden nfl 21 has nearly 30% more players year-over-year. life to date, fifa 20 has reached nearly 35 million players on console and pc. ea play now has more than 6.5 million paid subscribers. during the fiscal year, ea launched more than 125 games and content packs on the steam platform. * 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. selected financial highlights and metrics net cash provided by operating activities was $61 million for the quarter and a record $2.041 billion for the trailing twelve months. ea announced a new $2.6 billion, two-year stock repurchase program and declared a quarterly cash dividend of $0.17 per share. quarterly financial highlights three months ended september 30, 2020 2019 282 580 869 768 1,151 1,348 185 0.63 61 37 - 306 - 3.3 the following gaap-based financial data and tax rate of 18% was used internally by company management to adjust its gaap results in order to assess ea’s operating results: statement of operations acquisition- related expenses change in deferred net revenue (online- enabled games) stock-based compensation 1,151 - (241 ) - 286 - - (2 ) 865 - (241 ) 2 716 (6 ) - (111 ) 149 6 (241 ) 113 (10 ) - - - 139 6 (241 ) 113 293 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, 2020. financial highlights for the trailing twelve months twelve months ended september 30, 2020 2019 1,686 1,726 3,904 3,358 5,590 5,084 1,314 2,041 1,748 674 1,204 6.5 12.9 the following gaap-based financial data and tax rate of 18% was used internally by company management to adjust its gaap results in order to assess ea’s operating results: statement of operations acquisition- related expenses change in deferred net revenue (online- enabled games) stock-based compensation 5,590 - (13 ) - 1,351 (8 ) - (5 ) 4,239 8 (13 ) 5 2,857 (24 ) - (392 ) 1,382 32 (13 ) 397 13 - - - 1,395 32 (13 ) 397 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, 2020. operating metric the following is a calculation of our total net bookings for the periods presented: three months ended twelve months ended september 30, september 30, 2020 2019* 2020* 2019* 1,151 1,348 5,590 5,084 (241 ) (35 ) (13 ) 79 910 1,313 5,577 5,163 stock repurchase program and dividend ea’s board of directors has approved a new two-year program to repurchase up to $2.6 billion of ea's common stock. under the program, ea may purchase stock in the open market or through privately negotiated transactions in accordance with applicable securities laws, including pursuant to pre-arranged stock trading plans. the timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. ea is not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time. in addition, ea’s board of directors initiated a quarterly dividend and declared a cash dividend of $0.17 per share of ea’s common stock. the dividend is payable on december 23, 2020 to stockholders of record as of the close of business on december 2, 2020. business outlook as of november 5, 2020 the following forward-looking statements reflect expectations as of november 5, 2020. electronic arts assumes no obligation to update these statements. results may be materially different and are affected by many factors detailed in this release and in ea’s annual and quarterly sec filings. fiscal year 2021 expectations – ending march 31, 2021 financial metrics: net revenue is expected to be approximately $5.625 billion. change in deferred net revenue (online-enabled games) is expected to be approximately $325 million. change in deferred net revenue (online-enabled games) is expected to be approximately $325 million. net income is expected to be approximately $924 million. diluted earnings per share is expected to be approximately $3.15. operating cash flow is expected to be approximately $1.850 billion. the company estimates a share count of 293 million for purposes of calculating fiscal year 2021 diluted earnings per share. operational metric: net bookings is expected to be approximately $5.950 billion. in addition, the following outlook for gaap-based financial data 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, 2021 gaap-based financial data gaap guidance acquisition- related expenses change in deferred net revenue (online- enabled games) stock-based compensation 5,625 - 325 - 1,485 - - (3 ) 3,022 (20 ) - (442 ) 1,086 20 325 445 924 293 third quarter fiscal year 2021 expectations – ending december 31, 2020 financial metrics: net revenue is expected to be approximately $1.675 billion. change in deferred net revenue (online-enabled games) is expected to be approximately $675 million. change in deferred net revenue (online-enabled games) is expected to be approximately $675 million. net income is expected to be approximately $180 million. diluted earnings per share is expected to be approximately $0.61. the company estimates a share count of 294 million for purposes of calculating third quarter fiscal year 2021 diluted earnings per share. operational metric: net bookings is expected to be approximately $2.350 billion. in addition, the following outlook for gaap-based financial data 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: three months ending december 31, 2020 gaap-based financial data gaap guidance acquisition- related expenses change in deferred net revenue (online- enabled games) stock-based compensation 1,675 - 675 - 599 - - - 840 (5 ) - (115 ) 227 5 675 115 180 294 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, 2020. conference call and supporting documents electronic arts will host a conference call on november 5, 2020 at 2:00 pm pt (5:00 pm et) to review its results for the second fiscal quarter ended september 30, 2020 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 6481848 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 november 19, 2020 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 6481848. 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 fiscal 2021 expectations under the heading “business outlook as of november 5, 2020,” and other information regarding ea's fiscal 2021 and 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 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, 2020. these forward-looking statements are current as of november 5, 2020. 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 september 30, 2020. 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 september 30, 2020. 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 2020, ea posted gaap net revenue of $5.5 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™ and plants vs. zombies™. 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 2020 lucasfilm ltd. all rights reserved. john madden, nfl, ufc and fifa are the property of their respective owners and used with permission. 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, 2020 2019 2020 2019 net revenue 1,151 1,348 2,610 2,557 cost of revenue 286 405 574 592 gross profit 865 943 2,036 1,965 operating expenses: research and development 421 387 859 768 marketing and sales 156 152 277 262 general and administrative 133 128 269 238 acquisition-related contingent consideration — 2 — 3 amortization of intangibles 6 6 11 11 total operating expenses 716 675 1,416 1,282 operating income 149 268 620 683 interest and other income (expense), net (10 ) 16 (13 ) 37 income before provision for (benefit from) income taxes 139 284 607 720 provision for (benefit from) income taxes (46 ) (570 ) 57 (1,555 ) net income 185 854 550 2,275 earnings per share basic 0.64 2.89 1.90 7.69 diluted 0.63 2.89 1.88 7.66 number of shares used in computation basic 289 295 289 296 diluted 293 296 292 297 results (in $ millions, except per share data) the following table reports the variance of the actuals versus our guidance provided on july 30, 2020 for the three months ended september 30, 2020 plus a comparison to the actuals for the three months ended september 30, 2019. three months ended september 30, 2020 2020 2019 guidance variance actuals actuals net revenue net revenue 1,125 26 1,151 1,348 gaap-based financial data change in deferred net revenue (online-enabled games)1 (250 ) 9 (241 ) (35 ) cost of revenue cost of revenue 280 6 286 405 gaap-based financial data acquisition-related expenses — — — (2 ) stock-based compensation — (2 ) (2 ) (1 ) operating expenses operating expenses 755 (39 ) 716 675 gaap-based financial data acquisition-related expenses (5 ) (1 ) (6 ) (8 ) stock-based compensation (110 ) (1 ) (111 ) (91 ) income before tax income before tax 83 56 139 284 gaap-based financial data acquisition-related expenses 5 1 6 10 change in deferred net revenue (online-enabled games)1 (250 ) 9 (241 ) (35 ) stock-based compensation 110 3 113 92 tax rate used for management reporting 18 % 18 % 18 % earnings per share basic 0.21 0.43 0.64 2.89 diluted 0.21 0.42 0.63 2.89 number of shares basic 289 — 289 295 diluted 293 — 293 296 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. in fiscal 2021, ea changed the way in which it presents net revenue. periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. for more information please see the financial reporting faq on our investor relations website. electronic arts inc. and subsidiaries unaudited condensed consolidated balance sheets (in $ millions) september 30, 2020 march 31, 20202 assets current assets: cash and cash equivalents 4,059 3,768 short-term investments 1,972 1,967 receivables, net 423 461 other current assets 376 321 total current assets 6,830 6,517 property and equipment, net 458 449 goodwill 1,891 1,885 acquisition-related intangibles, net 42 53 deferred income taxes, net 1,937 1,903 other assets 312 305 total assets 11,470 11,112 liabilities and stockholders’ equity current liabilities: accounts payable 164 68 accrued and other current liabilities 1,083 1,052 deferred net revenue (online-enabled games) 639 945 senior notes, current, net 599 599 total current liabilities 2,485 2,664 senior notes, net 397 397 income tax obligations 301 373 deferred income taxes, net 1 1 other liabilities 211 216 total liabilities 3,395 3,651 stockholders’ equity: common stock 3 3 additional paid-in capital 145 — retained earnings 8,016 7,508 accumulated other comprehensive loss (89 ) (50 ) total stockholders’ equity 8,075 7,461 total liabilities and stockholders’ equity 11,470 11,112 2derived from audited consolidated financial statements. electronic arts inc. and subsidiaries unaudited condensed consolidated statements of cash flows (in $ millions) three months ended september 30, six months ended september 30, 2020 2019 2020 2019 operating activities net income 185 854 550 2,275 adjustments to reconcile net income to net cash provided by operating activities: depreciation, amortization and accretion 40 35 77 72 stock-based compensation 113 92 215 165 change in assets and liabilities receivables, net 83 (529 ) 39 (235 ) other assets (157 ) 9 (113 ) 33 accounts payable 109 91 106 51 accrued and other liabilities (30 ) 144 (96 ) 88 deferred income taxes, net (42 ) (626 ) (32 ) (1,800 ) deferred net revenue (online-enabled games) (240 ) (33 ) (307 ) (454 ) net cash provided by operating activities 61 37 439 195 investing activities capital expenditures (25 ) (27 ) (63 ) (72 ) proceeds from maturities and sales of short-term investments 724 435 1,418 793 purchase of short-term investments (752 ) (721 ) (1,416 ) (1,984 ) net cash used in investing activities (53 ) (313 ) (61 ) (1,263 ) financing activities proceeds from issuance of common stock 40 30 43 33 cash paid to taxing authorities for shares withheld from employees (8 ) (4 ) (77 ) (55 ) repurchase and retirement of common stock — (306 ) (78 ) (611 ) payment of contingent consideration — (32 ) — (64 ) net cash provided by (used in) financing activities 32 (312 ) (112 ) (697 ) effect of foreign exchange on cash and cash equivalents 6 (5 ) 25 (3 ) change in cash and cash equivalents 46 (593 ) 291 (1,768 ) beginning cash and cash equivalents 4,013 3,533 3,768 4,708 ending cash and cash equivalents 4,059 2,940 4,059 2,940 electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions, except per share data) q2 q3 q4 q1 q2 yoy % fy20 fy20 fy20 fy21 fy21 change net revenue net revenue 1,348 1,593 1,387 1,459 1,151 (15 %) gaap-based financial data change in deferred net revenue (online-enabled games)1 (35 ) 428 (131 ) (69 ) (241 ) gross profit gross profit 943 1,085 1,118 1,171 865 (8 %) gross profit (as a % of net revenue) 70 % 68 % 81 % 80 % 75 % gaap-based financial data acquisition-related expenses 2 5 3 — — change in deferred net revenue (online-enabled games)1 (35 ) 428 (131 ) (69 ) (241 ) stock-based compensation 1 1 1 1 2 operating income operating income 268 361 401 471 149 (44 %) operating income (as a % of net revenue) 20 % 23 % 29 % 32 % 13 % gaap-based financial data acquisition-related expenses 10 12 9 5 6 change in deferred net revenue (online-enabled games)1 (35 ) 428 (131 ) (69 ) (241 ) stock-based compensation 92 91 91 102 113 net income net income 854 346 418 365 185 (78 %) net income (as a % of net revenue) 63 % 22 % 30 % 25 % 16 % gaap-based financial data acquisition-related expenses 10 12 9 5 6 change in deferred net revenue (online-enabled games)1 (35 ) 428 (131 ) (69 ) (241 ) stock-based compensation 92 91 91 102 113 tax rate used for management reporting 18 % 18 % 18 % 18 % 18 % diluted earnings per share 2.89 1.18 1.43 1.25 0.63 (78 %) number of diluted shares used in computation basic 295 292 290 288 289 diluted 296 294 292 292 293 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. in fiscal 2021, ea changed the way in which it presents net revenue. periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. for more information please see the financial reporting faq on our investor relations website. electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions) q2 q3 q4 q1 q2 yoy % fy20 fy20 fy20 fy21 fy21 change quarterly net revenue presentations net revenue by composition full game downloads 181 286 211 223 163 (10 %) packaged goods 399 403 145 136 119 (70 %) full game 580 689 356 359 282 (51 %) live services and other 768 904 1,031 1,100 869 13 % total net revenue 1,348 1,593 1,387 1,459 1,151 (15 %) full game 43 % 43 % 26 % 25 % 25 % live services and other 57 % 57 % 74 % 75 % 75 % total net revenue % 100 % 100 % 100 % 100 % 100 % gaap-based financial data full game downloads (5 ) 31 (21 ) (5 ) (2 ) packaged goods 62 60 (67 ) (67 ) (14 ) full game 57 91 (88 ) (72 ) (16 ) live services and other (92 ) 337 (43 ) 3 (225 ) total change in deferred net revenue (online-enabled games) by composition1 (35 ) 428 (131 ) (69 ) (241 ) net revenue by platform console 923 1,163 928 932 714 (23 %) pc & other 248 261 274 325 249 — mobile 177 169 185 202 188 6 % total net revenue 1,348 1,593 1,387 1,459 1,151 (15 %) gaap-based financial data console 8 388 (143 ) (108 ) (201 ) pc & other (32 ) 24 7 15 (24 ) mobile (11 ) 16 5 24 (16 ) total change in deferred net revenue (online-enabled games) by platform1 (35 ) 428 (131 ) (69 ) (241 ) 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. in fiscal 2021, ea changed the way in which it presents net revenue. periods prior to the first quarter of fiscal 2021 have been recast for comparability to align with these changes. for more information please see the financial reporting faq on our investor relations website. electronic arts inc. and subsidiaries unaudited supplemental financial information and business metrics (in $ millions) q2 q3 q4 q1 q2 yoy % fy20 fy20 fy20 fy21 fy21 change cash flow data operating cash flow 37 1,104 498 378 61 65 % operating cash flow - ttm 1,748 1,898 1,797 2,017 2,041 17 % capital expenditures 27 28 40 38 25 (7 %) capital expenditures - ttm 128 135 140 133 131 2 % repurchase and retirement of common stock 306 305 291 78 — (100 %) depreciation depreciation expense 30 29 31 31 32 7 % balance sheet data cash and cash equivalents 2,940 3,603 3,768 4,013 4,059 short-term investments 1,943 1,999 1,967 1,947 1,972 cash and cash equivalents, and short-term investments 4,883 5,602 5,735 5,960 6,031 24 % receivables, net 856 798 461 507 423 (51 %) stock-based compensation cost of revenue 1 1 1 1 2 research and development 61 60 59 66 74 marketing and sales 10 10 10 11 12 general and administrative 20 20 21 24 25 total stock-based compensation 92 91 91 102 113 category: company news
