Electronic Arts Reports Q2 FY22 Financial Results

Rhea-AI Summary

Electronic Arts (EA) reported outstanding preliminary financial results for Q2 of FY2022, with total net revenue reaching $1.826 billion, up 58% year-over-year. Net bookings for the trailing twelve months increased 27% to $7.077 billion. EA's strong performance was driven primarily by its EA SPORTS titles and Apex Legends, leading to an increase in guidance for the full fiscal year. The company expects full-year net revenue of approximately $6.925 billion. Additionally, EA declared a quarterly cash dividend of $0.17 per share, payable on December 22, 2021.

Positive

• Total net revenue of $1.826 billion, a 58% increase year-over-year.
• Net bookings increased 27% year-over-year to $7.077 billion.
• EA's strong performance led to an increase in full-year revenue guidance to approximately $6.925 billion.
• Quarterly cash dividend of $0.17 per share declared.

Negative

• Net income decreased from $1.314 billion in the prior year to $785 million over the twelve months.

Results Above Expectations, Raised Outlook for the Full Year

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2021.

“This was the strongest second quarter in the history of Electronic Arts, with more players around the world joining and engaging in our leading franchises, new launches and live services,” said Andrew Wilson, CEO of Electronic Arts. “Thanks to our incredibly talented teams, we’re excited to deliver more amazing experiences this holiday season, and connect hundreds of millions of players around the world through our EA SPORTS games, Apex Legends, Battlefield 2042 and more.”

“EA delivered another strong quarter, primarily driven by our EA SPORTS titles and Apex Legends,” said CFO Blake Jorgensen. “Based on our confidence in our franchises and live services, we are again raising guidance this quarter. We’re positioned for a strong holiday season driven by our exciting Battlefield 2042 game, with growth drivers in place for this year, next year, and beyond.”

Selected Operating Highlights and Metrics

• Net bookings¹ for the trailing twelve months was $7.077 billion, up 27% year-over-year.
• In the first six months of the fiscal year, approximately 100 million players have engaged with our EA SPORTS™ global football franchise across all platforms.
• Apex Legends™ Season 9 and Season 10 each respectively set new marks for the highest active players since Season 1.
• The Battlefield™ 2042 Open Beta had 7.7 million players.
• Star Wars™: Galaxy of Heroes surpassed 100 million players life to date.

Selected Financial Highlights and Metrics

• Net cash provided by operating activities was $64 million for the quarter and $1.416 billion for the trailing twelve months.
• EA repurchased 2.3 million shares for $325 million during the quarter, bringing the total for the last twelve months to 9.5 million shares for $1.301 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 December 22, 2021 to shareholders of record as of the close of business on December 8, 2021.

Quarterly Financial Highlights

		Three Months Ended
		September 30,
		2021		2020
(in $ millions, except per share amounts)
Full game		617		282
Live services and other		1,209		869
Total net revenue		1,826		1,151
Net income		294		185
Diluted earnings per share		1.02		0.63
Operating cash flow		64		61
Value of shares repurchased		325		-
Number of shares repurchased		2.3		-

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 September 30, 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	1,826			-			25			-
Cost of revenue	494			(22	)		-			(2	)
Gross profit	1,332			22			25			2
Total operating expenses	992			(30	)		-			(147	)
Operating income	340			52			25			149
Interest and other income (expense), net	(14	)		-			-			-
Income before provision for income taxes	326			52			25			149
Number of shares used in computation:
Diluted	287

Trailing Twelve Months Financial Highlights

		Twelve Months Ended
		September 30,
		2021		2020
(in $ millions)
Full game		1,911		1,686
Live services and other		4,485		3,904
Total net revenue		6,396		5,590
Net income		785		1,314
Operating cash flow		1,416		2,041
Value of shares repurchased		1,301		674
Number of shares repurchased		9.5		6.5

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:

	Twelve Months Ended September 30, 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	6,396			-			681			-
Cost of revenue	1,729			(48	)		-			(5	)
Gross profit	4,667			48			681			5
Total operating expenses	3,579			(89	)		-			(489	)
Operating income	1,088			137			681			494
Interest and other income (expense), net	(44	)		-			-			-
Income before provision for income taxes	1,044			137			681			494

Operating Metric

The following is a calculation of our total net bookings¹ for the periods presented:

		Three Months Ended					Twelve Months Ended
		September 30,					September 30,
		2021		2020			2021		2020
(in $ millions)
Total net revenue		1,826		1,151			6,396		5,590
Change in deferred net revenue (online-enabled games)		25		(241	)		681		(13	)
Net bookings		1,851		910			7,077		5,577

Business Outlook as of November 3, 2021

Our financial expectations for the quarter ending December 31, 2021 and the 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 $700 million.
• Net income is expected to be approximately $583 million.
• Diluted earnings per share is expected to be approximately $2.03.
• Operating cash flow is expected to be approximately $1.950 billion.
• The Company estimates a share count of 287 million for purposes of calculating fiscal year 2022 diluted earnings per share.

Operational metric:

• Net bookings¹ is expected to be approximately $7.625 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			-			700			-
Cost of revenue	1,848			(130	)		-			(5	)
Operating expense	4,110			(145	)		-			(545	)
Income before provision for income taxes	908			275			700			550
Net income	583
Number of shares used in computation:
Diluted shares	287

Third Quarter Fiscal Year 2022 Expectations – Ending December 31, 2021

Financial metrics:

• Net revenue is expected to be approximately $1.750 billion.
  • Change in deferred net revenue (online-enabled games) is expected to be approximately $875 million.

• Net income is expected to be approximately $5 million.
• Diluted earnings per share is expected to be approximately $0.02.
• The Company estimates a share count of 287 million for purposes of calculating third quarter fiscal 2022 diluted earnings per share.

Operational metric:

• Net bookings¹ is expected to be approximately $2.625 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 December 31, 2021
					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		1,750			-			875			-
Cost of revenue		625			(50	)		-			-
Operating expense		1,100			(35	)		-			(135	)
Income before provision for income taxes		8			85			875			135
Net income		5
Number of shares used in computation:
Diluted shares		287

Conference Call and Supporting Documents

Electronic Arts will host a conference call on November 3, 2021 at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal quarter ended September 30, 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 3697115 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 17, 2021 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 3697115. 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 3, 2021,” 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 November 3, 2021. 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, 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 September 30, 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 September 30,						Six Months Ended September 30,
		2021			2020			2021			2020
Net revenue		1,826			1,151			3,377			2,610
Cost of revenue		494			286			809			574
Gross profit		1,332			865			2,568			2,036
Operating expenses:
Research and development		553			421			1,068			859
Marketing and sales		233			156			423			277
General and administrative		176			133			345			269
Amortization of intangibles		30			6			70			11
Total operating expenses		992			716			1,906			1,416
Operating income		340			149			662			620
Interest and other income (expense), net		(14	)		(10	)		(28	)		(13	)
Income before provision for (benefit from) income taxes		326			139			634			607
Provision for (benefit from) income taxes		32			(46	)		136			57
Net income		294			185			498			550
Earnings per share
Basic		1.03			0.64			1.75			1.90
Diluted		1.02			0.63			1.73			1.88
Number of shares used in computation
Basic		285			289			285			289
Diluted		287			293			288			292

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on August 4, 2021 for the three months ended September 30, 2021 plus a comparison to the actuals for the three months ended September 30, 2020.

		Three Months Ended September 30,
		2021						2021			2020
		Guidance			Variance			Actuals			Actuals
Net revenue
Net revenue		1,775			51			1,826			1,151
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1		(50	)		75			25			(241	)
Cost of revenue
Cost of revenue		518			(24	)		494			286
GAAP-based financial data
Acquisition-related expenses		(35	)		13			(22	)		—
Stock-based compensation		—			(2	)		(2	)		(2	)
Operating expenses
Operating expenses		1,030			(38	)		992			716
GAAP-based financial data
Acquisition-related expenses		(40	)		10			(30	)		(6	)
Stock-based compensation		(150	)		3			(147	)		(111	)
Income before tax
Income before tax		212			114			326			139
GAAP-based financial data
Acquisition-related expenses		75			(23	)		52			6
Change in deferred net revenue (online-enabled games)1		(50	)		75			25			(241	)
Stock-based compensation		150			(1	)		149			113
Tax rate used for management reporting		18	%					18	%		18	%
Earnings per share
Basic		0.37			0.66			1.03			0.64
Diluted		0.36			0.66			1.02			0.63
Number of shares
Basic		286			(1	)		285			289
Diluted		288			(1	)		287			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.

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in $ millions)
		September 30, 2021			March 31, 20212
ASSETS
Current assets:
Cash and cash equivalents		1,630			5,260
Short-term investments		342			1,106
Receivables, net		1,031			521
Other current assets		387			326
Total current assets		3,390			7,213
Property and equipment, net		516			491
Goodwill		5,459			2,868
Acquisition-related intangibles, net		1,080			309
Deferred income taxes, net		2,139			2,045
Other assets		435			362
TOTAL ASSETS		13,019			13,288
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		136			96
Accrued and other current liabilities		1,119			1,341
Deferred net revenue (online-enabled games)		1,322			1,527
Total current liabilities		2,577			2,964
Senior notes, net		1,877			1,876
Income tax obligations		318			315
Deferred income taxes, net		68			43
Other liabilities		323			250
Total liabilities		5,163			5,448
Stockholders’ equity:
Common stock		3			3
Retained earnings		7,855			7,887
Accumulated other comprehensive loss		(2	)		(50	)
Total stockholders’ equity		7,856			7,840
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		13,019			13,288

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,
		2021			2020			2021			2020
OPERATING ACTIVITIES
Net income		294			185			498			550
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion		94			40			199			77
Stock-based compensation		149			113			274			215
Change in assets and liabilities
Receivables, net		(458	)		83			(446	)		39
Other assets		23			(157	)		(51	)		(113	)
Accounts payable		61			109			42			106
Accrued and other liabilities		52			(30	)		(250	)		(96	)
Deferred income taxes, net		(168	)		(42	)		(140	)		(32	)
Deferred net revenue (online-enabled games)		17			(240	)		(205	)		(307	)
Net cash provided by (used in) operating activities		64			61			(79	)		439
INVESTING ACTIVITIES
Capital expenditures		(43	)		(25	)		(87	)		(63	)
Proceeds from maturities and sales of short-term investments		621			724			1,128			1,418
Purchase of short-term investments		(84	)		(752	)		(369	)		(1,416	)
Acquisitions, net of cash acquired		(1,405	)		—			(3,394	)		—
Net cash used in investing activities		(911	)		(53	)		(2,722	)		(61	)
FINANCING ACTIVITIES
Proceeds from issuance of common stock		41			40			41			43
Cash dividends paid		(48	)		—			(97	)		—
Cash paid to taxing authorities for shares withheld from employees		(16	)		(8	)		(121	)		(77	)
Repurchase and retirement of common stock		(325	)		—			(650	)		(78	)
Net cash provided by (used in) financing activities		(348	)		32			(827	)		(112	)
Effect of foreign exchange on cash and cash equivalents		(13	)		6			(2	)		25
Change in cash and cash equivalents		(1,208	)		46			(3,630	)		291
Beginning cash and cash equivalents		2,838			4,013			5,260			3,768
Ending cash and cash equivalents		1,630			4,059			1,630			4,059

ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in $ millions, except per share data)
		Q2			Q3			Q4			Q1			Q2			YOY %
		FY21			FY21			FY21			FY22			FY22			Change
Net revenue
Net revenue		1,151			1,673			1,346			1,551			1,826			59	%
GAAP-based financial data
Change in deferred net revenue (online-enabled games)1		(241	)		727			144			(215	)		25
Gross profit
Gross profit		865			1,072			1,027			1,236			1,332			54	%
Gross profit (as a % of net revenue)		75	%		64	%		76	%		80	%		73	%
GAAP-based financial data
Acquisition-related expenses		—			—			4			22			22
Change in deferred net revenue (online-enabled games)1		(241	)		727			144			(215	)		25
Stock-based compensation		2			1			1			1			2
Operating income
Operating income		149			251			175			322			340			128	%
Operating income (as a % of net revenue)		13	%		15	%		13	%		21	%		19	%
GAAP-based financial data
Acquisition-related expenses		6			5			18			62			52
Change in deferred net revenue (online-enabled games)1		(241	)		727			144			(215	)		25
Stock-based compensation		113			111			109			125			149
Net income
Net income		185			211			76			204			294			59	%
Net income (as a % of net revenue)		16	%		13	%		6	%		13	%		16	%
GAAP-based financial data
Acquisition-related expenses		6			5			18			62			52
Change in deferred net revenue (online-enabled games)1		(241	)		727			144			(215	)		25
Stock-based compensation		113			111			109			125			149
Tax rate used for management reporting		18	%		18	%		18	%		18	%		18	%
Diluted earnings per share		0.63			0.72			0.26			0.71			1.02			62	%
Number of diluted shares used in computation
Basic		289			290			288			286			285
Diluted		293			292			290			289			287

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)
		Q2			Q3			Q4			Q1			Q2			YOY %
		FY21			FY21			FY21			FY22			FY22			Change
QUARTERLY NET REVENUE PRESENTATIONS
Net revenue by composition
Full game downloads		163			347			185			233			337			107	%
Packaged goods		119			375			65			89			280			135	%
Full game		282			722			250			322			617			119	%
Live services and other		869			951			1,096			1,229			1,209			39	%
Total net revenue		1,151			1,673			1,346			1,551			1,826			59	%
Full game		25	%		43	%		19	%		21	%		34	%
Live services and other		75	%		57	%		81	%		79	%		66	%
Total net revenue %		100	%		100	%		100	%		100	%		100	%
GAAP-based financial data
Full game downloads		(2	)		53			(19	)		(5	)		35
Packaged goods		(14	)		83			(44	)		(35	)		44
Full game		(16	)		136			(63	)		(40	)		79
Live services and other		(225	)		591			207			(175	)		(54	)
Total change in deferred net revenue (online-enabled games) by composition1		(241	)		727			144			(215	)		25
Net revenue by platform
Console		714			1,191			879			972			1,198			68	%
PC & Other		249			326			295			361			377			51	%
Mobile		188			156			172			218			251			34	%
Total net revenue		1,151			1,673			1,346			1,551			1,826			59	%
GAAP-based financial data
Console		(201	)		619			71			(278	)		(29	)
PC & Other		(24	)		73			51			9			26
Mobile		(16	)		35			22			54			28
Total change in deferred net revenue (online-enabled games) by platform1		(241	)		727			144			(215	)		25

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)
		Q2			Q3			Q4			Q1			Q2			YOY %
		FY21			FY21			FY21			FY22			FY22			Change
CASH FLOW DATA
Operating cash flow		61			1,124			371			(143	)		64			5	%
Operating cash flow - TTM		2,041			2,061			1,934			1,413			1,416			(31	%)
Capital expenditures		25			30			31			44			43			72	%
Capital expenditures - TTM		131			133			124			130			148			13	%
Repurchase and retirement of common stock		—			326			325			325			325			100	%
Cash dividends paid		—			49			49			49			48			100	%
DEPRECIATION
Depreciation expense		32			37			38			40			39			22	%
BALANCE SHEET DATA
Cash and cash equivalents		4,059			4,772			5,260			2,838			1,630
Short-term investments		1,972			1,938			1,106			881			342
Cash and cash equivalents, and short-term investments		6,031			6,710			6,366			3,719			1,972			(67	%)
Receivables, net		423			778			521			557			1,031			144	%
STOCK-BASED COMPENSATION
Cost of revenue		2			1			1			1			2
Research and development		74			74			71			85			101
Marketing and sales		12			11			12			12			15
General and administrative		25			25			25			27			31
Total stock-based compensation		113			111			109			125			149

Category: Company News

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103005997/en/

Chris Evenden

Vice President, Investor Relations

650-628-0255

cevenden@ea.com

John Reseburg

Vice President, Global Communications

650-628-3601

jreseburg@ea.com

Source: Electronic Arts Inc.

FAQ

What were Electronic Arts' financial results for Q2 FY2022?

EA reported total net revenue of $1.826 billion for Q2 FY2022, a 58% increase compared to the previous year.

What is EA's outlook for the fiscal year 2022?

EA expects full-year net revenue of approximately $6.925 billion.

How much did Electronic Arts' net bookings increase year-over-year?

Net bookings increased by 27% year-over-year to $7.077 billion.

What is Electronic Arts' cash dividend for Q2 FY2022?

EA declared a quarterly cash dividend of $0.17 per share.