Electronic Arts (EA) has just reported its quarterly earnings. Here are the numbers

Selected Operating Highlights and Metrics

  • Digital net bookings* for the trailing twelve months was a record $3.375 billion, up 18% year-over-year, and represents 67% of total net bookings for the same period.
  • The FIFA community grew to nearly 42 million players, on console alone, during the calendar year.
  • FIFA Mobile added 26 million players to its total player base in the quarter.
  • FIFA Ultimate Team™ player base grew 12% year-over-year, from launch to the end of the quarter.
  • In Star Wars™ Battlefront™ II, nearly 70% of players engaged in the single-player campaign.
  • Battlefield™ 1 now has more than 25 million unique players life to date.
  • The Sims™ 4 player base grew more than 35% year-over-year and delivered the highest-performing expansion pack to date during the quarter.
  • The Madden Challenge entertainment special on The CW Network was the #1 esports television broadcast in the U.S. for 2017.

* 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

All financial measures are presented on a GAAP basis.

  • Net cash provided by operating activities was $849 million.
  • Net cash provided by operating activities for the trailing twelve months was $1.514 billion.
  • During the quarter, EA repurchased 1.4 million shares for $150 million.
  • For the trailing twelve months, EA repurchased 5.6 million shares for $578 million.

Quarterly Financial Highlights

Three Months Ended
December 31,
2017 2016
(in $ millions, except per share amounts)
Digital net revenue 780 685
Packaged goods and other net revenue 380 464
Total net revenue 1,160 1,149
Net loss (186)* (1 )
Loss per share (0.60)* (0.00 )
Operating cash flow 849 1,137**
Value of shares repurchased 150 127
Number of shares repurchased 1.4 1.5
*During the three months ended December 31, 2017, EA recognized $176 million of incremental income tax expense, or approximately $0.57 per share, due to the application of the Tax Cuts and Jobs Act, enacted on December 22, 2017. This amount is a reasonable estimate provided in accordance with Securities and Exchange Commission guidance. EA will provide additional information about these reasonable estimates in its forthcoming Form 10-Q for the fiscal quarter ending December 31, 2017.
**At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow for the three months ended December 31, 2016 has been recast to reflect the impact of this standard.

While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

Three Months Ended December 31, 2017
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 1,160 811
Cost of revenue 501 (1 )
Gross profit 659 1 811
Total operating expenses 680 (1 ) (63 )
Operating income (loss) (21 ) 2 811 63
Interest and other income, net 5
Income (loss) before provision for (benefit from) income taxes (16 ) 2 811 63
Number of shares used in computation:
Basic and diluted 308

EA’s GAAP loss per share for the three months ended December 31, 2017 was calculated using the basic share count of 308 million. Had EA reported a profit, the diluted share count would have been 311 million shares.

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2017.

TTM Financial Highlights

TTM Ended December 31,
2017 2016
(in $ millions)
Digital net revenue 3,282 2,655
Packaged goods and other net revenue 1,813 1,971
Total net revenue 5,095 4,626
Net income 1,002* 1,300
Operating cash flow** 1,514 1,555
Value of shares repurchased 578 1,017
Number of shares repurchased 5.6 14.9
*During the trailing twelve months ended December 31, 2017, EA recognized $176 million of incremental income tax expense due to the application of the Tax Cuts and Jobs Act, enacted on December 22, 2017. This amount is a reasonable estimate provided in accordance with Securities and Exchange Commission guidance. EA will provide additional information about these reasonable estimates in its forthcoming Form 10-Q for the fiscal quarter ending December 31, 2017.
**At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow has been recast to reflect the impact of this standard.

While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

TTM Ended December 31, 2017
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 5,095 (78 )
Cost of revenue 1,246 (1 ) (3 )
Gross profit 3,849 1 (78 ) 3
Total operating expenses 2,451 (5 ) (222 )
Operating income 1,398 6 (78 ) 225
Interest and other income, net 13
Income before provision for income taxes 1,411 6 (78 ) 225

For more information about the nature of the GAAP-based financial data, please refer to EA’s Form 10-Q for the fiscal quarter ended September 30, 2017.

Operating Metric

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

Three Months Ended TTM Ended
December 31, December 31,
2017 2016 2017 2016
(in $ millions)
Total net revenue 1,160 1,149 5,095 4,626
Change in deferred net revenue (online-enabled games) 811 921 (78 ) 148
Net bookings 1,971 2,070 5,017 4,774

Business Outlook as of January 30, 2018

The following forward-looking statements reflect expectations as of January 30, 2018. 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 2018 Expectations – Ending March 31, 2018

Financial metrics:

  • Net revenue is expected to be approximately $5.100 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $50 million.
  • Net income is expected to be approximately $1.015 billion.
  • Diluted earnings per share is expected to be approximately $3.25.
    • Includes the net impact of approximately ($0.48) per share due to the application of the Tax Cuts and Jobs Act.
  • Operating cash flow is expected to be approximately $1.600 billion.
  • The Company estimates a share count of 312 million for purposes of calculating fiscal year 2018 diluted earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $5.150 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% 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, 2018
GAAP-Based Financial Data
GAAP
Guidance
Acquisition-
related expenses
Change in
deferred net
revenue
(online-enabled
games)
Stock-based
compensation
(in $ millions)
Digital net revenue 3,405 120
Packaged goods & other net revenue 1,695 (70 )
Total net revenue 5,100 50
Cost of revenue 1,278 (2 ) (3 )
Operating expense 2,462 (7 ) (245 )
Income before provision for income taxes 1,372 9 50 248
Net income 1,015
Number of shares used in computation:
Diluted shares 312

Fourth Quarter Fiscal Year 2018 Expectations – Ending March 31, 2018

Financial metrics:

  • Net revenue is expected to be approximately $1.532 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately ($307) million.
  • Net income is expected to be approximately $579 million.
  • Diluted earnings per share is expected to be approximately $1.86.
  • The Company estimates a share count of 311 million for purposes of calculating fourth quarter fiscal year 2018 diluted earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $1.225 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods:

Three Months Ending March 31, 2018
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 1,532 (307 )
Cost of revenue 234 (1 ) (1 )
Operating expense 619 (3 ) (74 )
Income before provision for income taxes 677 4 (307 ) 75
Net income 579
Number of shares used in computation:
Diluted shares 311

Conference Call and Supporting Documents

Electronic Arts will host a conference call on January 30, 2018 at 2:00 pm PT (5:00 pm ET) to review its results for the third fiscal quarter ended December 31, 2017 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 844-215-4106 (domestic) or 918-534-8313 (international), using the password “EA” or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation and 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 13, 2018 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 6194018. 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 2018 expectations under the heading “Business Outlook as of January 30, 2018,” and information regarding EA’s fiscal 2019 expectations 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 Company’s ability to develop and support digital products and services, including managing online security and privacy; 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 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; and other factors described in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2017.

These forward-looking statements are current as of January 30, 2018. 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 Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2017. 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, 2017.

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