TechDogs-"Electronic Arts Reports Strong Q2 FY24 Results"

Gaming Technology

Electronic Arts Reports Strong Q2 FY24 Results

By Business Wire

Business Wire
Overall Rating

Company exceeds expectations on the strength of EA SPORTS portfolio; Successfully launches EA SPORTS FC 24

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second quarter ended September 30, 2023.

“We delivered a strong Q2 and successfully launched EA SPORTS FC, transforming one of the largest franchises in the world into a powerful, interactive platform for the future of football fandom,” said Andrew Wilson, CEO of EA. “Looking ahead, our incredible teams will continue to innovate and expand across our world-class IP, building experiences that entertain our massive online communities, celebrate fandom, and increase connection for our growing global player base.”

“EA SPORTS strength, driven by new releases and ongoing live services, delivered Q2 results ahead of expectations,” said Stuart Canfield, CFO of EA. “We remain focused on delivering for our growing player communities and building upon the momentum across our portfolio, while prioritizing investments that execute against our largest opportunities to drive long term growth.”

Selected Operating Highlights and Metrics1

  • Net bookings2 for Q2 was $1.820 billion, up 4% year-over-year (up 5% in constant currency).
  • Live services and other net bookings for Q2 was $1.129 billion, up 1% year-over-year (up 2% in constant currency). On a trailing twelve-month basis, live services were 73% of our business.
  • EA SPORTS Madden NFL franchise outperformed Q2 expectations, delivering net bookings growth of 6% year-over-year.
  • EA SPORTS global football franchise outperformed Q2 expectations driven by the continued strength of EA SPORTS FIFA 23 and demand for the release of EA SPORTS FC 24.
  • EA SPORTS FC 24, within the first four weeks of global launch, had over 14.5 million active accounts.

Selected Financial Highlights and Metrics

  • Net revenue was $1.914 billion for the quarter.
  • Net cash provided by operating activities was $112 million for the quarter and $2.211 billion for the trailing twelve months.
  • EA repurchased 2.6 million shares for $325 million during the quarter, bringing the total for the trailing twelve months to 10.5 million shares for $1.300 billion.

Dividend

EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on December 20, 2023 to shareholders of record as of the close of business on November 29, 2023.

Quarterly Financial Highlights

Three Months Ended

September 30,

2023

2022

(in $ millions, except per share amounts)

Full game

621

602

Live services and other

1,293

1,302

Total net revenue

1,914

1,904

Net income

399

299

Diluted earnings per share*

1.47

1.07

Operating cash flow

112

(112)

Value of shares repurchased

325

325

Number of shares repurchased

2.6

2.6

Cash dividend paid

51

53

* Diluted earnings per share includes $0.34 from a one-time non-cash tax benefit.

The following GAAP-based financial data3 and tax rate of 19% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results:

Three Months Ended September 30, 2023

GAAP-Based Financial Data

(in $ millions)

Statement of
Operations

Acquisition-related
expenses

Change in deferred
net revenue

(online-enabled
games)

Restructuring
and related
charges

Stock-based
compensation

Total net revenue

1,914

-

(94

)

-

-

Cost of revenue

456

(15

)

-

-

(2

)

Gross profit

1,458

15

(94

)

-

2

Total operating expenses

1,081

(24

)

-

-

(153

)

Operating income

377

39

(94

)

-

155

Interest and other income (expense), net

14

-

-

-

-

Income before provision for income taxes

391

39

(94

)

-

155

Number of shares used in computation:

Diluted

272

Trailing Twelve Months Financial Highlights

Twelve Months Ended
September 30,

2023

2022

(in $ millions)

Full game

2,058

1,997

Live services and other

5,535

5,288

Total net revenue

7,593

7,285

Net income

993

901

Operating cash flow

2,211

1,788

Value of shares repurchased

1,300

1,295

Number of shares repurchased

10.5

10.0

The following GAAP-based financial data3 and a tax rate of 19% was used internally by company management to adjust its GAAP results in order to assess EA’s operating results.

Twelve Months Ended September 30, 2023

GAAP-Based Financial Data

(in $ millions)

Statement of
Operations

Acquisition-related
expenses

Change in deferred
net revenue
(online-enabled
games)

Restructuring
and related
charges

Stock-based
compensation

Total net revenue

7,593

-

93

-

-

Cost of revenue

1,840

(82

)

-

-

(8

)

Gross profit

5,753

82

93

-

8

Total operating expenses

4,370

(125

)

-

(158

)

(560

)

Operating income

1,383

207

93

158

568

Interest and other income (expense), net

27

-

-

-

-

Income before provision for income taxes

1,410

207

93

158

568

Operating Metric

The following is a calculation of our total net bookings2 for the periods presented:

Three Months Ended
September 30,

Twelve Months Ended
September 30,

2023

2022

2023

2022

(in $ millions)

Total net revenue

1,914

1,904

7,593

7,285

Change in deferred net revenue (online-enabled games)

(94

)

(150

)

93

96

Total net bookings

1,820

1,754

7,686

7,381

Business Outlook as of November 1, 2023

Fiscal Year 2024 Expectations – Ending March 31, 2024

Financial outlook metrics:

  • Net revenue is expected to be approximately $7.300 billion to $7.700 billion.
    • No change in deferred net revenue (online-enabled games) is expected.
  • Net income is expected to be approximately $1.118 billion to $1.273 billion.
  • Diluted earnings per share is expected to be approximately $4.10 to $4.66.
  • Operating cash flow is expected to be approximately $1.950 billion to $2.100 billion.
  • The Company estimates a share count of 273 million for purposes of calculating fiscal year 2024 diluted earnings per share.

Operational outlook metric:

  • Net bookings2 is expected to be approximately $7.300 billion to $7.700 billion.

In addition, the following outlook for GAAP-based financial data3 and long-term tax rate of 19% are used internally by EA to adjust GAAP expectations to assess EA’s operating results and plan for future periods:

Twelve Months Ended March 31, 2024

GAAP-Based Financial Data*

(in $ millions)

GAAP
Guidance
Range

Acquisition-related
expenses

Change in deferred
net revenue
(online-enabled
games)

Restructuring
and related
charges

Stock-based
compensation

Total net revenue

7,300 to 7,700

-

-

-

-

Cost of revenue

1,670 to 1,750

(65

)

-

-

(5

)

Operating expense

4,213 to 4,333

(95

)

-

(3

)

(595

)

Income before provision for income taxes

1,462 to 1,664

160

-

3

600

Net income

1,118 to 1,273

Number of shares used in computation:

Diluted shares

273

*The mid-point of the range has been used for purposes of presenting the reconciling items.

Third Quarter Fiscal Year 2024 Expectations – Ending December 31, 2023

Financial outlook metrics:

  • Net revenue is expected to be approximately $1.825 billion to $2.025 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $425 million.
  • Net income is expected to be approximately $203 million to $275 million.
  • Diluted earnings per share is expected to be approximately $0.75 to $1.01.
  • The Company estimates a share count of 272 million for purposes of calculating third quarter fiscal 2024 diluted earnings per share.

Operational outlook metric:

  • Net bookings2 is expected to be approximately $2.250 billion to $2.450 billion.

In addition, the following outlook for GAAP-based financial data3 and long-term tax rate of 19% are used internally by EA to adjust GAAP expectations to assess EA’s operating results and plan for future periods:

Three Months Ended December 31, 2023

GAAP-Based Financial Data*

(in $ millions)

GAAP
Guidance
Range

Acquisition-related
expenses

Change in deferred
net revenue
(online-enabled
games)

Restructuring
and related
charges

Stock-based
compensation

Total net revenue

1,825 to 2,025

-

425

-

-

Cost of revenue

495 to 535

(15

)

-

-

-

Operating expense

1,050 to 1,110

(25

)

-

-

(155

)

Income before provision for income taxes

286 to 387

40

425

-

155

Net income

203 to 275

Number of shares used in computation:

Diluted shares

272

*The mid-point of the range has been used for purposes of presenting the reconciling items.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on November 1, 2023 at 2:00 pm PT (5:00 pm ET) to review its results for the second quarter ended September 30, 2023 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 (888) 330-2446 (domestic) or (240) 789-2732 (international), using the conference code 5939891 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 15, 2023 at (800) 770-2030 (domestic) or (647) 362-9199 (international) using pin code 5939891. 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 November 1, 2023” and other information regarding EA's 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: 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; economic and geopolitical 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, 2023.

These forward-looking statements are current as of November 1, 2023. 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, 2023. 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, 2023.

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 2023, EA posted GAAP net revenue of approximately $7.4 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS FC™, Battlefield™, Apex Legends™, The Sims™, EA SPORTS Madden NFL, Need for Speed™, Titanfall™, Plants vs. Zombies™ and EA SPORTS F1®. More information about EA is available at www.ea.com/news.

EA, EA SPORTS, EA SPORTS FC, 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 For more information on constant currency, please refer to the earnings slides available on EA’s IR Website.

2 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.

3 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, 2023.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in $ millions, except per share data)

Three Months Ended
September 30,

Six Months Ended
September 30,

2023

2022

2023

2022

Net revenue

1,914

1,904

3,838

3,671

Cost of revenue

456

462

824

776

Gross profit

1,458

1,442

3,014

2,895

Operating expenses:

Research and development

602

565

1,198

1,137

Marketing and sales

280

233

509

467

General and administrative

173

174

336

341

Amortization and impairment of intangibles

24

43

49

82

Restructuring

2

3

Total operating expenses

1,081

1,015

2,095

2,027

Operating income

377

427

919

868

Interest and other income (expense), net

14

28

(5

)

Income before provision for (benefit from) income taxes

391

427

947

863

Provision for income taxes

(8)

128

146

253

Net income

399

299

801

610

Earnings per share

Basic

1.47

1.08

2.94

2.19

Diluted

1.47

1.07

2.93

2.18

Number of shares used in computation

Basic

271

278

272

279

Diluted

272

279

273

280

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on August 1, 2023 for the three months ended September 30, 2023 plus a comparison to the actuals for the three months ended September 30, 2022.

Three Months Ended September 30,

2023 Guidance

(Mid-Point)

2023 Actuals

2022 Actuals

Variance

Net revenue

Net revenue

1,875

39

1,914

1,904

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

(125

)

31

(94

)

(150

)

Cost of revenue

Cost of revenue

440

16

456

462

GAAP-based financial data

Acquisition-related expenses

(15

)

(15

)

(39

)

Stock-based compensation

(2

)

(2

)

(1

)

Operating expenses

Operating expenses

1,115

(34

)

1,081

1,015

GAAP-based financial data

Acquisition-related expenses

(25

)

1

(24

)

(43

)

Restructuring and related charges

(10

)

10

Stock-based compensation

(155

)

2

(153

)

(139

)

Income before tax

Income before tax

324

67

391

427

GAAP-based financial data

Acquisition-related expenses

40

(1

)

39

82

Change in deferred net revenue (online-enabled games)1

(125

)

31

(94

)

(150

)

Restructuring and related charges

10

(10

)

Stock-based compensation

155

155

140

Tax rate used for management reporting

19

%

19

%

19

%

Earnings per share

Basic

0.81

0.66

1.47

1.08

Diluted

0.81

0.66

1.47

1.07

Number of shares used in computation

Basic

272

(1

)

271

278

Diluted

273

(1

)

272

279

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)

September 30, 2023

March 31, 20232

ASSETS

Current assets:

Cash and cash equivalents

1,946

2,424

Short-term investments

359

343

Receivables, net

1,047

684

Other current assets

492

518

Total current assets

3,844

3,969

Property and equipment, net

542

549

Goodwill

5,378

5,380

Acquisition-related intangibles, net

538

618

Deferred income taxes, net

2,353

2,462

Other assets

484

481

TOTAL ASSETS

13,139

13,459

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

152

99

Accrued and other current liabilities

1,138

1,285

Deferred net revenue (online-enabled games)

1,498

1,901

Total current liabilities

2,788

3,285

Senior notes, net

1,881

1,880

Income tax obligations

458

607

Deferred income taxes, net

1

1

Other liabilities

436

393

Total liabilities

5,564

6,166

Stockholders’ equity:

Common stock

3

3

Retained earnings

7,606

7,357

Accumulated other comprehensive loss

(34

)

(67

)

Total stockholders’ equity

7,575

7,293

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

13,139

13,459

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,

2023

2022

2023

2022

OPERATING ACTIVITIES

Net income

399

299

801

610

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation, amortization, accretion and impairment

85

127

173

241

Stock-based compensation

155

140

285

265

Change in assets and liabilities

Receivables, net

(534

)

(346

)

(367

)

(276

)

Other assets

(22

)

(10

)

74

(25

)

Accounts payable

75

69

57

53

Accrued and other liabilities

(165

)

(164

)

(257

)

(269

)

Deferred income taxes, net

201

(70

)

108

(156

)

Deferred net revenue (online-enabled games)

(82

)

(157

)

(403

)

(633

)

Net cash provided by (used in) operating activities

112

(112

)

471

(190

)

INVESTING ACTIVITIES

Capital expenditures

(51

)

(53

)

(96

)

(112

)

Proceeds from maturities and sales of short-term investments

151

79

302

166

Purchase of short-term investments

(163

)

(80

)

(313

)

(173

)

Net cash used in investing activities

(63

)

(54

)

(107

)

(119

)

FINANCING ACTIVITIES

Proceeds from issuance of common stock

40

43

40

44

Cash dividends paid

(51

)

(53

)

(103

)

(106

)

Cash paid to taxing authorities for shares withheld from employees

(15

)

(13

)

(120

)

(117

)

Repurchase and retirement of common stock

(325

)

(325

)

(650

)

(645

)

Net cash used in financing activities

(351

)

(348

)

(833

)

(824

)

Effect of foreign exchange on cash and cash equivalents

(11

)

(29

)

(9

)

(60

)

Change in cash and cash equivalents

(313

)

(543

)

(478

)

(1,193

)

Beginning cash and cash equivalents

2,259

2,082

2,424

2,732

Ending cash and cash equivalents

1,946

1,539

1,946

1,539

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except per share data)

Q2

Q3

Q4

Q1

Q2

YOY %

FY23

FY23

FY23

FY24

FY24

Change

Net revenue

Net revenue

1,904

1,881

1,874

1,924

1,914

1

%

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

(150

)

461

72

(346

)

(94

)

Gross profit

Gross profit

1,442

1,313

1,426

1,556

1,458

1

%

Gross profit (as a % of net revenue)

76

%

70

%

76

%

81

%

76

%

GAAP-based financial data

Acquisition-related expenses

39

26

25

16

15

Change in deferred net revenue (online-enabled games)1

(150

)

461

72

(346

)

(94

)

Stock-based compensation

1

2

2

2

2

Operating income

Operating income

427

289

175

542

377

(12

%)

Operating income (as a % of net revenue)

22

%

15

%

9

%

28

%

20

%

GAAP-based financial data

Acquisition-related expenses

82

76

51

41

39

Change in deferred net revenue (online-enabled games)1

(150

)

461

72

(346

)

(94

)

Restructuring and related charges

155

3

Stock-based compensation

140

141

142

130

155

Net income (loss)

Net income (loss)

299

204

(12

)

402

399

33

%

Net income (loss) (as a % of net revenue)

16

%

11

%

(1

%)

21

%

21

%

GAAP-based financial data

Acquisition-related expenses

82

76

51

41

39

Change in deferred net revenue (online-enabled games)1

(150

)

461

72

(346

)

(94

)

Restructuring and related charges

155

3

Stock-based compensation

140

141

142

130

155

Tax rate used for management reporting

19

%

19

%

19

%

19

%

19

%

Diluted earnings (loss) per share

1.07

0.73

(0.04

)

1.47

1.47

37

%

Number of shares used in computation

Basic

278

276

274

272

271

Diluted

279

278

274

274

272

Anti-dilutive shares excluded for loss position3

1

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.

3 Diluted earnings per share reflects the potential dilution from common shares (calculated using the treasury stock method), issuable through stock-based compensation plans. When the company incurs a loss, shares issuable though stock-based compensation plans are excluded from the diluted loss per share calculation as inclusion would be anti-dilutive.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

Q2

Q3

Q4

Q1

Q2

YOY %

FY23

FY23

FY23

FY24

FY24

Change

QUARTERLY NET REVENUE PRESENTATIONS

Net revenue by composition

Full game downloads

328

423

274

301

346

5

%

Packaged goods

274

199

98

142

275

Full game

602

622

372

443

621

3

%

Live services and other

1,302

1,259

1,502

1,481

1,293

(1

%)

Total net revenue

1,904

1,881

1,874

1,924

1,914

1

%

Full game

32

%

33

%

20

%

23

%

32

%

Live services and other

68

%

67

%

80

%

77

%

68

%

Total net revenue %

100

%

100

%

100

%

100

%

100

%

GAAP-based financial data

Full game downloads

17

45

(24

)

(21

)

24

Packaged goods

16

20

(24

)

(21

)

46

Full game

33

65

(48

)

(42

)

70

Live services and other

(183

)

396

120

(304

)

(164

)

Total change in deferred net revenue (online-enabled games) by composition1

(150

)

461

72

(346

)

(94

)

Net revenue by platform

Console

1,161

1,152

1,088

1,167

1,187

2

%

PC & Other

423

435

469

451

423

Mobile

320

294

317

306

304

(5

%)

Total net revenue

1,904

1,881

1,874

1,924

1,914

1

%

GAAP-based financial data

Console

(134

)

423

11

(266

)

(35

)

PC & Other

8

29

47

(77

)

(34

)

Mobile

(24

)

9

14

(3

)

(25

)

Total change in deferred net revenue (online-enabled games) by platform1

(150

)

461

72

(346

)

(94

)


Contacts

Katie Burke
Director, Investor Relations
650-628-7605
katieburke@ea.com

Erin Rheaume
Director,
Financial Communications
650-628-7978
erheaume@ea.com

Read full story here

First published on Thu, Nov 2, 2023

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