REDWOOD CITY, Calif .– (BUSINESS WIRE) -Electronic Arts Inc.. (NASDAQ: EA) June 30, 2019 announced preliminary financial results for its first fiscal quarter.

"We had a strong start to FY20, bringing new experiences to our growing communities for Apex Legends, EA SPORTS, The Sims and more," said CEO Andrew Wilson. "From great new games to live services with longevity, subscriptions to more platforms and competitive gaming for more franchises, we're pushing to lead with innovation, quality and choice for our players."

“We have delivered results significantly above our expectations, driven by broad strength across our core franchises. "This quarter shows how the power of our portfolio strategy, combined with live services, delivers strong results," said COO and CFO Blake Jorgensen. "We believe we have the right ingredients in place to deliver our players and successes for our business."

News and ongoing updates about EA and its games are available on EA's blog at www.ea.com/news.

Selected Operating Highlights and Metrics

  • Digital net bookings * for the trailing twelve months was $ 3.730 billion, up 5% year-over-year and represents 76% of total net bookings.
  • During the quarter, FIFA Ultimate TeamTM had more than three million players logging in during the Team's in-game event.
  • During the quarter, The Sims 4TM expansion packs and game pack downloads increased 55% year-over-year.
  • At quarter end, Star Wars TM: Galaxy of Heroes had nearly 80 million life-to-date players.
  • Season 2 in Apex Legends TM began on July 2.
  • On July 24, EA Access launched on PlayStation® 4.

* 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 online payments and mobile platform fees.

Selected Financial Highlights and Metrics

  • Net cash provided by operating activities was $ 158 million for the quarter and $ 1.585 billion for the trailing twelve months.
  • EA repurchased 3.2 million shares for $ 305 million during the quarter, $ 11.9 billion during the trailing twelve months.

Impact of Certain Tax Matters

During the three months ended June 30, 2019, three separate tax events occurred:

  1. EA's international business is headquartered;
  2. A decision by the Ninth Circuit Court of Appeals in Altera Corp. v. Commissioner regarding stock-based compensation expenses required EA to record a tax accrual; and
  3. A referendum was passed in Switzerland, which will change the Swiss income tax rates once enacted.

As a result of these events, $ 1.700 billion, or $ 5.61 of earnings per share, during the fiscal year ending March 31, 2020. EA recognized $ 1.080 billion of this income tax benefit during the three months ended June 30, 2019 and expects to recognize the remaining $ 620 million once the referendum is enacted, which we expect during the three months ending September 30, 2019.

Quarterly Financial Highlights

Three Months Ended

June 30,

2019

2018

(in $ millions, except for share amounts)
Digital net revenue

1,049

957

Packaged goods and other net revenue

160

180

Total net revenue

1,209

1,137

Net income

1,421 *

293

Diluted earnings per share

4.75 *

0.95

Operating cash flow

158

120

Value of shares repurchased

305

300

Number of shares repurchased

3.2

2.3

* Refer to the above section titled "Impact of Certain Tax Matters" for additional details.

The following GAAP-based financial data and tax rate of 18

Three Months Ended June 30, 2019

GAAP-Based Financial Data

(in $ millions)

statement
of
Operations

Acquisition-
related
expenses

Change in
deferred
net revenue
(online-
enabled
games)

mobile
platform
fees

Stock-based
compensation

Total net revenue

1,209

(427

)

(39

)

Cost of revenue

187

(2

)

(39

)

(1

)

Gross profit

1,022

2

(427

)

1

Total operating expenses

607

(6

)

(72

)

Operating income

415

8

(427

)

73

Interest and other income, net

21

Income before provision for (benefit from) income taxes

436

8

(427

)

73

Number of shares used in computation:
diluted

299

10-K for the fiscal year ended March 31, 2019.

Trailing Twelve Months Financial Highlights

Twelve Months Ended

June 30,

2019

2018

(in $ millions)
Digital net revenue

3,802

3,528

Packaged goods and other net revenue

1,220

1,310

Total net revenue

5,022

4,838 *

Net income

2,147 **

692

Operating cash flow

1,585

1,636

Value of shares repurchased

1,197

751

Number of shares repurchased

11.9

6.2

* EA adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with Customers on April 1, 2018. For more information on the adoption of Topic 606 please refer to the Investor Accounting FAQ on our IR website and our SEC filings. Financial data from prior periods has not been restated.
** Refer to the above section titled "Impact of Certain Tax Matters" for additional details.

The following GAAP-based financial data and tax rate of 18

Twelve Months Ended June 30, 2019
GAAP-Based Financial Data
(in $ millions) statement
of
Operations
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-
enabled
games)
mobile
platform
fees
Stock-based
compensation
Total net revenue

5,022

94

(178

)

Cost of revenue

1,294

(5

)

(178

)

(4

)

Gross profit

3,728

5

94

4

Total operating expenses

2,617

(37

)

(283

)

Operating income

1,111

42

94

287

Interest and other income, net

85

Income before provision for (benefit from) income taxes

1,196

42

94

287

10-K for the fiscal year ended March 31, 2019.

Operating Metric

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

Three Months Ended

Twelve Months Ended

June 30,

June 30,

2019

2018

2019

2018

(in $ millions)
Total net revenue

1,209

1,137

5,022

4,838

Change in deferred net revenue (online-enabled games)

(427

)

(339

)

94

365

Mobile platform fees

(39

)

(49

)

(178

)

(49

)

Net bookings

743

749

4,938

5,154

Business Outlook as of July 30, 2019

The following forward-looking statements reflect expectations as of July 30, 2019. Electronic Arts assumes no obligation to update these statements. Results may be materially different and are affected by many factors.

Fiscal Year 2020 Expectations - Ending March 31, 2020

Financial metrics:

  • Net revenue is expected to be approximately $ 5.375 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $ (125) million.
    • Mobile platform fees are expected to be approximately $ (150) million.
  • Net income is expected to be approximately $ 2.795 billion, approximately $ 1.700 billion of which is related to the income tax benefits discussed above.
  • Diluted earnings for share is expected to be approximately $ 9.22, approximately $ 5.61 of which is related to the income tax benefits discussed above.
  • Operating cash flow is expected to be approximately $ 1.575 billion.
  • 303 diluted earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $ 5.100 billion.

In addition, the following outlook for GAAP-based financial data 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, 2020
GAAP-Based Financial Data
GAAP
Guidance
Acquisition-
related
expenses
Change in
deferred net
revenue
(online-
enabled
games)
mobile
platform fees
Stock-based
compensation
(in $ millions)
Digital net revenue

4,175

(75

)

(150

)

Packaged goods & other net revenue

1,200

(50

)

Total net revenue

5,375

(125

)

(150

)

Cost of revenue

1,327

(12

)

(150

)

(2

)

Operating expense

2,746

(23

)

(353

)

Income before provision for (benefit from) income taxes

1,361

35

(125

)

355

Net income

2,795

Number of shares used in computation:
Diluted shares

303

Second Quarter Fiscal Year 2020 Expectations - Ending September 30, 2019

Financial metrics:

  • Net revenue is expected to be approximately $ 1.315 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $ (50) million.
    • Mobile platform fees are expected to be approximately $ (35) million.
  • Net income is expected to be approximately $ 776 million, approximately $ 620 million of which is related to the income tax benefits discussed above.
  • Diluted earnings for share is expected to be approximately $ 2.60, approximately $ 2.08 of which is related to the income tax benefits discussed above.
  • 298 diluted earnings per share, The Company estimates a share of 2020 million for purposes of calculating second quarter.

Operational metric:

  • Net bookings is expected to be approximately $ 1.230 billion.

In addition, the following outlook for GAAP-based financial data 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 September 30, 2019

GAAP-Based Financial Data

GAAP
Guidance

Acquisition-
related
expenses

Change in
deferred net
revenue (online-
enabled games)

mobile
platform
fees

Stock-based
compensation

(in $ millions)
Total net revenue

1,315

(50

)

(35

)

Cost of revenue

407

(2

)

(35

)

(1

)

Operating expense

679

(5

)

(89

)

Income before provision for (benefit from) income taxes

243

7

(50

)

90

Net income

776

Number of shares used in computation:
Diluted shares

298

10-K for the fiscal year ended March 31, 2019.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on July 30, 2019 at 2: 00 pm PT (5: 00 pm ET) to review its results for the first fiscal quarter June 30, 2019 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) 393-4306 (domestic) or (734) 385-2616 (international), using the conference code 9998462 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 and an Investor Accounting FAQ document on EA's IR Website. EA will also be able to post transcripts and transcripts from the conference call on EA's IR Website.

A dial-in replay of the conference call will be available until August 13, 2019 at 855-859-2056 (domestic) or 404-537-3406 (international) using pin code 9998462. 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 information relating to EA's fiscal 2020 expectations under the heading “Business Outlook as of July 30, 2019,” and other information regarding EA's fiscal 2020 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 guarantees of future performance and reflect management expectations. Our results could differ materially from those discussed in the forward-looking statements.

Company's products and services include the following: 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 acquisitions; 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 I, Item 1A of Electronic Arts' latest Annual Report on Form 10-K under the heading "Risk Factors", as well as in other documents we have filed with the Securities and Exchange Commission.

These forward-looking statements are current as of July 30, 2019. Electronic Arts assumed no obligation to revise or update any forward-looking statements 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 June 30, 2019. 10-Q for the fiscal quarter ended June 30, 2019.

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 2019, EA posted GAAP net revenue of $ 4.95 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 ™ and Plants vs. Zombies ™. More information about EA is available at www.ea.com/news.

EA SPORTS, Ultimate Team, Battlefield, Need for Speed, Apex Legends, The Sims and Plants Vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL and FIFA are the owners of their respective owners and used with permission. STAR WARS © & TM 2015 Lucasfilm Ltd. All rights reserved.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in $ millions, except for share data)

Three Months Ended
June 30,

2019

2018

Net revenue

Product

166

202

Service and other

1,043

935

Total net revenue

1,209

1,137

Cost of revenue

Product

35

68

Service and other

152

147

Total cost of revenue

187

215

Gross profit

1,022

922

Operating expenses:

Research and development

381

362

Marketing and sales

110

140

General and administrative

110

114

Acquisition-related contingent consideration

1

-

Amortization of intangibles

5

6

Total operating expenses

607

622

Operating income

415

300

Interest and other income (expense), net

21

19

Income before provision for (benefit from) income taxes

436

319

Provision for (benefit from) income taxes

(985

)

26

Net income

1,421

293

Earnings per share

Basic

4.78

0.96

diluted

4.75

0.95

Number of shares used in computation

Basic

297

306

diluted

299

310

Results (in $ millions, except per share data)

The following table reports the 7, 2019 plus 30, 2019 plus 30, 2018.

Three Months Ended June 30,

2019

2019

2018

Guidance

variance

Actuals

Actuals

Net revenue

Net revenue

1,130

79

1,209

1,137

GAAP-based financial data

Change in deferred net revenue (online-enabled games)

(405

)

(22

)

(427

)

(339

)

Mobile platform fees

(35

)

(4

)

(39

)

(49

)

Cost of revenue

Cost of revenue

188

(1

)

187

215

GAAP-based financial data

Acquisition-related expenses

(2

)

-

(2

)

(1

)

Stock-based compensation

-

(1

)

(1

)

(1

)

Mobile platform fees

(35

)

(4

)

(39

)

(49

)

Operating expenses

Operating expenses

650

(43

)

607

622

GAAP-based financial data

Acquisition-related expenses

(5

)

(1

)

(6

)

(6

)

Stock-based compensation

(70

)

(2

)

(72

)

(69

)

Income before tax

Income before tax

310

126

436

319

GAAP-based financial data

Acquisition-related expenses

7

1

8

7

Change in deferred net revenue (online-enabled games)

(405

)

(22

)

(427

)

(339

)

Mobile platform fees

-

-

-

-

Stock-based compensation

70

3

73

70

Tax rate used for management reporting

18

%

18

%

18

%

Earnings per share

Basic

5.90

(1.12

)

4.78

0.96

diluted

5.84

(1.09

)

4.75

0.95

Number of shares

Basic

299

(2

)

297

306

diluted

302

(3

)

299

310

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in $ millions)

June 30, 2019

March 31th 20191

ASSETS

Current assets:

Cash and cash equivalents

3,533

4,708

Short-term investments

1,654

737

Receivables, net

329

623

Other current assets

284

313

Total current assets

5,800

6,381

Property and equipment, net

446

448

Goodwill

1,892

1,892

Acquisition-related intangibles, net

80

87

Deferred income taxes, net

1,208

35

Other assets

323

114

TOTAL ASSETS

9,749

8,957

LIABILITIES AND STOCKHOLDERS 'EQUITY

Current liabilities:

Payable accounts

56

113

Accrued and other current liabilities

915

1,052

Deferred net revenue (online-enabled games)

679

1,100

Total current liabilities

1,650

2,265

Senior notes, net

995

994

Income tax obligations

345

233

Deferred income taxes, net

2

2

Other liabilities

272

132

Total liabilities

3,264

3,626

Stockholders' equity:

Common stock

3

3

Retained earnings

6,499

5,358

Accumulated other comprehensive loss

17

30

Total stockholders' equity

6,485

5,331

TOTAL LIABILITIES AND STOCKHOLDERS 'EQUITY

9,749

8,957

1Derived from audited consolidated financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in $ millions)

Three Months Ended
June 30,

2019

2018

OPERATING ACTIVITIES

Net income

1,421

293

Adjustments to reconcile net income to net cash

Depreciation, amortization and accretion

37

38

Stock-based compensation

73

70

Change in assets and liabilities

Receivables, net

294

169

Other assets

24

48

Payable accounts

(40

)

8

Accrued and other liabilities

(56

)

(85

)

Deferred income taxes, net

(1,174

)

(74

)

Deferred net revenue (online-enabled games)

(421

)

(347

)

Net cash provided by operating activities

158

120

INVESTING ACTIVITIES

Capital expenditures

(45

)

(32

)

Proceeds from maturity and sales of short-term investments

358

207

Purchase of short-term investments

(1,263

)

(228

)

Acquisitions, net of cash acquired

-

(50

)

Net cash used in investing activities

(950

)

(103

)

FINANCING ACTIVITIES

Proceeds from issuance of common stock

3

1

Cash paid to taxing authorities for shares withheld from employees

(51

)

(89

)

Repurchase and retirement of common stock

(305

)

(300

)

Payment of contingent consideration

(32

)

-

Net cash used in financing activities

(385

)

(388

)

Effect of foreign exchange on cash and cash equivalents

2

(11

)

Change in cash and cash equivalents

(1,175

)

(382

)

Beginning cash and cash equivalents

4,708

4,258

Ending cash and cash equivalents

3,533

3,876

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except for share data)

Q1

Q2

Q3

Q4

Q1

YOY%

FY19

FY19

FY19

FY19

FY20

Change

Net revenue

Net revenue

1,137

1,286

1,289

1,238

1,209

6

%

GAAP-based financial data

Change in deferred net revenue (online-enabled games)2

(339

)

(20

)

368

173

(427

)

Mobile platform fees

(49

)

(44

)

(48

)

(47

)

(39

)

Gross profit

Gross profit

922

868

876

962

1,022

11

%

Gross profit (as a% of net revenue)

81

%

67

%

68

%

78

%

85

%

GAAP-based financial data

Acquisition-related expenses

1

1

1

1

2

Change in deferred net revenue (online-enabled games)2

(339

)

(20

)

368

173

(427

)

Mobile platform fees

-

-

-

-

-

Stock-based compensation

1

1

1

1

1

Operating income

Operating income

300

258

242

196

415

38

%

Operating income (as a% of net revenue)

26

%

20

%

19

%

16

%

34

%

GAAP-based financial data

Acquisition-related expenses

7

9

8

17

8

Change in deferred net revenue (online-enabled games)2

(339

)

(20

)

368

173

(427

)

Stock-based compensation

70

66

75

73

73

Net income

Net income

293

255

262

209

1,421

385

%

Net income (as a% of net revenue)

26

%

20

%

20

%

17

%

118

%

GAAP-based financial data

Acquisition-related expenses

7

9

8

17

8

Change in deferred net revenue (online-enabled games)2

(339

)

(20

)

368

173

(427

)

Stock-based compensation

70

66

75

73

73

Tax rate used for management reporting

18

%

18

%

18

%

18

%

18

%

Diluted earnings per share

0.95

0.83

0.86

0.69

4.75

400

%

Number of diluted shares used in computation

Basic

306

305

302

299

297

diluted

310

307

304

301

299

2The 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) of unrecognized gains / losses on cash flow hedges.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

Q1

Q2

Q3

Q4

Q1

YOY%

FY19

FY19

FY19

FY19

FY20

Change

QUARTERLY NET REVENUE PRESENTATIONS

Net revenue by composition

Full game downloads

116

148

247

169

132

14%

Live services

610

412

480

714

731

20%

mobile

231

220

181

182

186

(19%)

Total digital

957

780

908

1,065

1,049

10%

Packaged goods and other

180

506

381

173

160

(11%)

Total net revenue

1,137

1,286

1,289

1,238

1,209

6%

Total digital

84

%

61

%

70

%

86

%

87

%

Packaged goods and other

16

%

39

%

30

%

14

%

13

%

Total net revenue%

100

%

100

%

100

%

100

%

100

%

GAAP-based financial data

Full game downloads

(20

)

9

26

44

(57

)

Live services

(160

)

(84

)

304

131

(227

)

mobile

(35

)

(24

)

9

-

(25

)

Total digital

(215

)

(99

)

339

175

(309

)

Packaged goods and other

(124

)

79

29

(2

)

(118

)

Total change in deferred net revenue (online-enabled games) by composition2

(339

)

(20

)

368

173

(427

)

Mobile platform fees

(49

)

(44

)

(48

)

(47

)

(39

)

Net revenue by platform

consul

705

917

885

826

760

8%

PC / Browser

197

149

217

217

249

26%

mobile

233

220

181

190

196

(16%)

Other

2

-

6

5

4

100%

Total net revenue

1,137

1,286

1,289

1,238

1,209

6%

GAAP-based financial data

consul

(288

)

8

323

87

(344

)

PC / Browser

(9

)

(4

)

33

88

(59

)

mobile

(42

)

(24

)

11

(2

)

(25

)

Other

-

-

1

-

1

Total change in deferred net revenue (online-enabled games) by platform2

(339

)

(20

)

368

173

(427

)

Mobile platform fees

(49

)

(44

)

(48

)

(47

)

(39

)

Contacts

For additional information, please contact:

Chris Evenden
Vice President, Investor Relations
650-628-0255
cevenden@ea.com

John Reseburg
Vice President, Corporate Communications
650-628-3601
jreseburg@ea.com

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