REDWOOD CITY, CA – January 31, 2023 – Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its third fiscal quarter ended December 31, 2022.
“In Q3, EA delivered high-quality experiences, driving record engagement across some of our biggest franchises and growing our player network. While our teams delivered for our players, the current macro environment impacted Q3 results,” said Andrew Wilson, CEO of Electronic Arts. “As we navigate the short-term, we're focused on building for the long-term and remain confident about our future. With amazing talent, proven IP and growing player network, EA is operating from a position of strength.”
“As market uncertainty mounted during the quarter, we took measures to protect underlying profitability,” said Chris Suh, CFO. “We are prioritizing the player experience, directing investment to where it can have the most positive impact for our players and on growth.”
Selected Operating Highlights and Metrics
•Net bookings1 for the trailing twelve months was $7.146 billion, down 1% year-over-year.
•Live services and other net bookings for the trailing twelve months were up 4% year-over-year and represent 75% of total net bookings.
•The EA player network grew to more than 650 million at quarter end.
•EA SPORTS™ FIFA 23 is pacing to be the biggest title in franchise history and delivered record engagement in Q3.
•Our teams delivered two AAA titles, NHL 23 and Need for Speed Unbound, at quality, and provided 128 content updates across 36 titles.
•The Sims welcomed over 10 million new players into the community during the quarter, with daily active users, weekly active users and monthly active users all up double digits year-over-year.
Selected Financial Highlights and Metrics
•Net cash provided by operating activities was $1.123 billion for the quarter and $1.377 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 10.2 million shares for $1.295 billion.
•EA paid a cash dividend of $0.19 per share during the quarter, for a total of $52 million.
Dividend
EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on March 22, 2023 to shareholders of record as of the close of business on March 1, 2023.
Quarterly Financial Highlights
Three Months Ended
December 31,
2022
2021
(in $ millions, except per share amounts)
Full game
622
616
Live services and other
1,259
1,173
Total net revenue
1,881
1,789
Net income
204
66
Diluted earnings per share
0.73
0.23
Operating cash flow
1,123
1,534
Value of shares repurchased
325
325
Number of shares repurchased
2.6
2.4
The following GAAP-based financial data2 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 December 31, 2022
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
1,881
—
461
—
Cost of revenue
568
(26)
—
(2)
Gross profit
1,313
26
461
2
Total operating expenses
1,024
(50)
—
(139)
Operating income
289
76
461
141
Interest and other income (expense), net
(7)
—
—
—
Income before provision for income taxes
282
76
461
141
Number of shares used in computation:
Diluted
278
Trailing Twelve Months Financial Highlights
Twelve Months Ended
December 31,
2022
2021
(in $ millions)
Full game
2,003
1,805
Live services and other
5,374
4,707
Total net revenue
7,377
6,512
Net income
1,039
640
Operating cash flow
1,377
1,826
Value of shares repurchased
1,295
1,300
Number of shares repurchased
10.2
9.4
The following GAAP-based financial data2 was used internally by company management to adjust its GAAP results in order to assess EA’s operating results. During fiscal 2022, management used a tax rate of 18% and in fiscal 2023 a tax rate of 19%.
Twelve Months Ended December 31, 2022
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
7,377
—
(231)
—
Cost of revenue
1,763
(140)
—
(7)
Gross profit
5,614
140
(231)
7
Total operating expenses
4,092
(184)
—
(524)
Operating income
1,522
324
(231)
531
Interest and other income (expense), net
(21)
—
—
—
Income before provision for income taxes
1,501
324
(231)
531
Operating Metric
The following is a calculation of our total net bookings1 for the periods presented:
Three Months Ended December 31,
Twelve Months Ended December 31,
2022
2021
2022
2021
(in $ millions)
Total net revenue
1,881
1,789
7,377
6,512
Change in deferred net revenue (online-enabled games)
461
788
(231)
742
Net bookings
2,342
2,577
7,146
7,254
Business Outlook as of January 31, 2023
EA announced a new release date for Star Wars Jedi: Survivor, which will launch globally on April 28th. More information is provided on EA’s blog at www.ea.com/news.
Fourth Quarter Fiscal Year 2023 Expectations – Ending March 31, 2023
Financial metrics:
•Net revenue is expected to be approximately $1.700 billion to $1.800 billion.
◦Change in deferred net revenue (online-enabled games) is expected to be approximately ($25) million.
•Net income is expected to be approximately $14 million to $55 million.
•Diluted earnings per share is expected to be approximately $0.05 to $0.20.
•The Company estimates a share count of 277 million for purposes of calculating fourth quarter fiscal 2023 diluted earnings per share.
Operational metric:
•Net bookings1 is expected to be approximately $1.675 billion to $1.775 billion
◦This guidance includes the shift of Star Wars Jedi: Survivor to Q1 FY24.
In addition, the following outlook for GAAP-based financial data2 and updated 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 Ending March 31, 2023
GAAP-Based Financial Data*
GAAP Guidance Range
Acquisition-related expenses
Change in deferred net revenue (online-enabled games)
Stock-based compensation
(in $ millions)
Total net revenue
1,700 to 1,800
—
(25)
—
Cost of revenue
395 to 415
(25)
—
—
Operating expense
1,075 to 1,085
(35)
—
(140)
Income before provision for income taxes
235 to 304
60
(25)
140
Net income
14 to 55
Number of shares used in computation:
Diluted shares
277
*The mid-point of the range has been used for purposes of presenting the reconciling items.
Fiscal Year 2023 Expectations – Ending March 31, 2023
Financial metrics:
•Net revenue is expected to be approximately $7.252 billion to $7.352 billion.
◦Change in deferred net revenue (online-enabled games) is expected to be approximately ($182) million.
•Net income is expected to be approximately $828 million to $869 million.
•Diluted earnings per share is expected to be approximately $2.97 to $3.11.
•Operating cash flow is expected to be approximately $1.400 billion to $1.450 billion.
•The Company estimates a share count of 279 million for purposes of calculating fiscal year 2023 diluted earnings per share.
Operational metric:
•Net bookings1 is expected to be approximately $7.070 billion to $7.170 billion.
In addition, the following outlook for GAAP-based financial data2 and updated 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 Ending March 31, 2023
GAAP-Based Financial Data*
GAAP Guidance Range
Acquisition-related expenses
Change in deferred net revenue (online-enabled games)
Stock-based compensation
(in $ millions)
Total net revenue
7,252 to 7,352
—
(182)
—
Cost of revenue
1,739 to 1,759
(120)
—
(5)
Operating expense
4,126 to 4,136
(167)
—
(541)
Income before provision for income taxes
1,380 to 1,449
287
(182)
546
Net income
828 to 869
Number of shares used in computation:
Diluted shares
279
*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 January 31, 2023 at 2:00 pm PT (5:00 pm ET) to review its results for the third quarter ended December 31, 2022 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 February 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 January 31, 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, 2022.
These forward-looking statements are current as of January 31, 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 December 31, 2022. 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, 2022.
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 2022, EA posted GAAP net revenue of approximately $7 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.
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, 2022.
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,
2022
2021
2022
2021
Net revenue
1,881
1,789
5,552
5,166
Cost of revenue
568
631
1,344
1,440
Gross profit
1,313
1,158
4,208
3,726
Operating expenses:
Research and development
556
539
1,693
1,607
Marketing and sales
256
293
723
716
General and administrative
162
163
503
508
Amortization and impairment of intangibles
50
61
132
131
Total operating expenses
1,024
1,056
3,051
2,962
Operating income
289
102
1,157
764
Interest and other income (expense), net
(7)
(11)
(12)
(39)
Income before provision for income taxes
282
91
1,145
725
Provision for income taxes
78
25
331
161
Net income
204
66
814
564
Earnings per share
Basic
0.74
0.23
2.93
1.99
Diluted
0.73
0.23
2.92
1.97
Number of shares used in computation
Basic
276
283
278
284
Diluted
278
285
279
287
Results (in $ millions, except per share data)
The following table reports the variance of the actuals versus our guidance provided on November 1, 2022 for the three months ended December 31, 2022 plus a comparison to the actuals for the three months ended December 31, 2021.
Three Months Ended December 31,
2022 Guidance (Mid-Point)
2022 Actuals
2021 Actuals
Variance
Net revenue
Net revenue
1,875
6
1,881
1,789
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
600
(139)
461
788
Cost of revenue
Cost of revenue
570
(2)
568
631
GAAP-based financial data
Acquisition-related expenses
(30)
4
(26)
(44)
Stock-based compensation
—
(2)
(2)
(1)
Operating expenses
Operating expenses
1,085
(61)
1,024
1,056
GAAP-based financial data
Acquisition-related expenses
(35)
(15)
(50)
(61)
Stock-based compensation
(150)
11
(139)
(128)
Income before tax
Income before tax
219
63
282
91
GAAP-based financial data
Acquisition-related expenses
65
11
76
105
Change in deferred net revenue (online-enabled games)1
600
(139)
461
788
Stock-based compensation
150
(9)
141
129
Tax rate used for management reporting
19
%
19
%
18
%
Earnings per share
Basic
0.51
0.23
0.74
0.23
Diluted
0.51
0.22
0.73
0.23
Number of shares used in computation
Basic
277
(1)
276
283
Diluted
279
(1)
278
285
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)
December 31, 2022
March 31, 20222
ASSETS
Current assets:
Cash and cash equivalents
2,202
2,732
Short-term investments
351
330
Receivables, net
836
650
Other current assets
453
439
Total current assets
3,842
4,151
Property and equipment, net
553
550
Goodwill
5,380
5,387
Acquisition-related intangibles, net
735
962
Deferred income taxes, net
2,443
2,243
Other assets
517
507
TOTAL ASSETS
13,470
13,800
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
62
101
Accrued and other current liabilities
1,243
1,388
Deferred net revenue (online-enabled games)
1,808
2,024
Total current liabilities
3,113
3,513
Senior notes, net
1,879
1,878
Income tax obligations
525
386
Deferred income taxes, net
1
1
Other liabilities
401
397
Total liabilities
5,919
6,175
Stockholders’ equity:
Common stock
3
3
Retained earnings
7,585
7,607
Accumulated other comprehensive income (loss)
(37)
15
Total stockholders’ equity
7,551
7,625
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
13,470
13,800
2Derived 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,
2022
2021
2022
2021
OPERATING ACTIVITIES
Net income
204
66
814
564
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, accretion and impairment
122
146
363
345
Stock-based compensation
141
129
406
403
Change in assets and liabilities
Receivables, net
90
56
(186)
(390)
Other assets
(28)
(24)
(53)
(75)
Accounts payable
(74)
(51)
(21)
(9)
Accrued and other liabilities
297
433
28
183
Deferred income taxes, net
(47)
—
(203)
(140)
Deferred net revenue (online-enabled games)
418
779
(215)
574
Net cash provided by operating activities
1,123
1,534
933
1,455
INVESTING ACTIVITIES
Capital expenditures
(48)
(48)
(160)
(135)
Proceeds from maturities and sales of short-term investments
77
65
243
1,193
Purchase of short-term investments
(90)
(69)
(263)
(438)
Acquisitions, net of cash acquired
—
3
—
(3,391)
Net cash used in investing activities
(61)
(49)
(180)
(2,771)
FINANCING ACTIVITIES
Proceeds from issuance of common stock
3
3
47
44
Cash dividends paid
(52)
(48)
(158)
(145)
Cash paid to taxing authorities for shares withheld from employees
(44)
(72)
(161)
(193)
Repurchase and retirement of common stock
(325)
(325)
(970)
(975)
Net cash used in financing activities
(418)
(442)
(1,242)
(1,269)
Effect of foreign exchange on cash and cash equivalents
19
(3)
(41)
(5)
Change in cash and cash equivalents
663
1,040
(530)
(2,590)
Beginning cash and cash equivalents
1,539
1,630
2,732
5,260
Ending cash and cash equivalents
2,202
2,670
2,202
2,670
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
Q3
Q4
Q1
Q2
Q3
YOY %
FY22
FY22
FY23
FY23
FY23
Change
Net revenue
Net revenue
1,789
1,825
1,767
1,904
1,881
5
%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1
788
(74)
(468)
(150)
461
Gross profit
Gross profit
1,158
1,406
1,453
1,442
1,313
13
%
Gross profit (as a % of net revenue)
65
%
77
%
82
%
76
%
70
%
GAAP-based financial data
Acquisition-related expenses
44
45
30
39
26
Change in deferred net revenue (online-enabled games)1
788
(74)
(468)
(150)
461
Stock-based compensation
1
2
2
1
2
Operating income
Operating income
102
365
441
427
289
183
%
Operating income (as a % of net revenue)
6
%
20
%
25
%
22
%
15
%
GAAP-based financial data
Acquisition-related expenses
105
97
69
82
76
Change in deferred net revenue (online-enabled games)1
788
(74)
(468)
(150)
461
Stock-based compensation
129
125
125
140
141
Net income
Net income
66
225
311
299
204
209
%
Net income (as a % of net revenue)
4
%
12
%
18
%
16
%
11
%
GAAP-based financial data
Acquisition-related expenses
105
97
69
82
76
Change in deferred net revenue (online-enabled games)1
788
(74)
(468)
(150)
461
Stock-based compensation
129
125
125
140
141
Tax rate used for management reporting
18
%
18
%
19
%
19
%
19
%
Diluted earnings per share
0.23
0.80
1.11
1.07
0.73
217
%
Number of shares used in computation
Basic
283
281
279
278
276
Diluted
285
283
281
279
278
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)
Q3
Q4
Q1
Q2
Q3
YOY %
FY22
FY22
FY23
FY23
FY23
Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads
400
312
237
328
423
6
%
Packaged goods
216
126
104
274
199
(8
%)
Full game
616
438
341
602
622
1
%
Live services and other
1,173
1,387
1,426
1,302
1,259
7
%
Total net revenue
1,789
1,825
1,767
1,904
1,881
5
%
Full game
34
%
24
%
19
%
32
%
33
%
Live services and other
66
%
76
%
81
%
68
%
67
%
Total net revenue %
100
%
100
%
100
%
100
%
100
%
GAAP-based financial data
Full game downloads
179
(103)
(111)
17
45
Packaged goods
105
(68)
(65)
16
20
Full game
284
(171)
(176)
33
65
Live services and other
504
97
(292)
(183)
396
Total change in deferred net revenue (online-enabled games) by composition1
788
(74)
(468)
(150)
461
Net revenue by platform
Console
1,138
1,092
1,042
1,161
1,152
1
%
PC & Other
374
420
402
423
435
16
%
Mobile
277
313
323
320
294
6
%
Total net revenue
1,789
1,825
1,767
1,904
1,881
5
%
GAAP-based financial data
Console
608
(86)
(405)
(134)
423
PC & Other
137
3
(54)
8
29
Mobile
43
9
(9)
(24)
9
Total change in deferred net revenue (online-enabled games) by platform1
788
(74)
(468)
(150)
461
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)
Q3
Q4
Q1
Q2
Q3
YOY %
FY22
FY22
FY23
FY23
FY23
Change
CASH FLOW DATA
Operating cash flow
1,534
444
(78)
(112)
1,123
(27
%)
Operating cash flow - TTM
1,826
1,899
1,964
1,788
1,377
(25
%)
Capital expenditures
48
53
59
53
48
—
Capital expenditures - TTM
166
188
203
213
213
28
%
Repurchase and retirement of common stock
325
325
320
325
325
—
Cash dividends paid
48
48
53
53
52
8
%
DEPRECIATION
Depreciation expense
41
42
44
45
46
12
%
BALANCE SHEET DATA
Cash and cash equivalents
2,670
2,732
2,082
1,539
2,202
Short-term investments
346
330
334
335
351
Cash and cash equivalents, and short-term investments
