Introduction of Non-GAAP Operating
Income and Non-GAAP Operating
Margin Disclosure for Electronic
Arts – FAǪ
May 7, 2024
INTRODUCTION
Beginning in FY25, Electronic Arts will provide enhanced disclosures of non-GAAP financial metrics, focusing on
non-GAAP operating margin.
GENERAL ǪUESTIONS
Ǫuestion 1: Why are you focusing
on non-GAAP operating margin?
A: We believe that visibility into non-GAAP operating margin provides our investors with greater transparency about
the impact of our strategy and future pipeline.
Historically, we provided GAAP-based financial data that investors can use for their own calculations. Beginning in
Ǫ1 FY25, we will perform certain of these calculations in our external reporting.
Consistent with SEC guidance, we will not adjust financial metrics for the change in deferred net revenue associated
with online-enabled games (“Change in Deferred Net Revenue”). We will continue to provide the impact of
the Change in Deferred Net Revenue so that investors can continue to perform their own calculations if they wish to
do so.
Ǫuestion 2: How will you
report non-GAAP operating margin
in FY25?
A: In our May 7th earnings remarks, we will provide financial guidance with respect to FY25 non- GAAP operating
margin and growth expectations through FY27. We will provide actual results for full year FY24 in our Slide
Presentation and Financial Model available on EA’s IR Website at http://ir.ea.com. Beginning with our July 30th report, we will provide quarterly
actual results.
Ǫuestion 3: How is non-GAAP
operating income calculated?
A: We begin with GAAP operating income and make certain adjustments. Currently, we adjust for three GAAP-based
financial items: (1) acquisition-related expenses, (2) restructuring and related charges, and (3) stock-based
compensation. We may consider whether we should adjust for other significant items that arise in the future.
Ǫuestion 4: How is non-GAAP
operating margin calculated?
|
Non-GAAP Operating
Income
|
/
|
Net Revenue
|
=
|
Non-GAAP Operating
Margin
|
Ǫuestion 5: Will I still
be able to calculate Management
Reporting financial measures?
A: Yes. EA will continue to provide the impact of the Change in Deferred Net Revenue so that investors can continue
to perform their own calculations if they wish.
|
Non-GAAP Operating Margin
|
+/-
|
Impact of Change in
Deferred Net Revenue
|
=
|
Management Reporting
Operating Margin
|
Ǫuestion 6: Will you change
the metrics in your
compensation practices?
A: No. The management reporting non-GAAP metrics used to determine executive compensation, as detailed in our Proxy
Statement, will not change.
Ǫuestion 7: Is anything changing
about how EA calculates the
financial data used to adjust
GAAP financial measures?
A: No. The financial data EA management uses to adjust its GAAP-based financial measures, including the Change in
Deferred Net Revenue, will continue to be calculated in the same way, consistent with EA’s historical
practices.
For additional information with respect to Electronic Arts’ changes to external reporting, please refer to the
reconciliations and additional disclosures in our Ǫ1 FY25 Earnings Slides and the calculations in our Financial
Model. Each of these are available on EA’s IR Website at http://ir.ea.com.
FORWARD LOOKING STATEMENTS
These materials may include forward-looking statements regarding future events that are subject to change. Actual
events may differ materially from our expectations. These forward-looking statements are current as of May 7, 2024.
Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as
required by law.