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Electronic Arts Reports Q3 FY22 Financial Results

·14 min read

REDWOOD CITY, Calif., February 01, 2022--(BUSINESS WIRE)--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™ 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

Twelve Months Ended

December 31,

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.

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:

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.

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

61

5

131

16

Total operating expenses

1,056

821

2,962

2,237

Operating income

102

251

764

871

Interest and other income (expense), net

(11

)

(6

)

(39

)

(19

)

Income before provision for income taxes

91

245

725

852

Provision for income taxes

25

34

161

91

Net income

66

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

1

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