We Inspire the World to Play

The purpose of this document is to highlight our recent financial reporting changes.

What changes are you making?

We are making three changes: One for GAAP reporting and two for net bookings, our operational metric.

GAAP reporting:

  1. We are now the presenting our Consolidated Statement of Operations as a single line item for Total Net Revenue and Total Cost of Revenue. Historically, we had disaggregated GAAP revenue as two line items, “product” and “service and other”.  We will continue to disclose in the notes to our Consolidated Financial Statements the amount of revenue recognized at a point in time (i.e., product revenue) and the amount recognized over time (i.e., service revenue).

While the MD&A in our annual and periodic reports will no longer provide separate revenue analysis on the basis of “product” and “service and other” revenue, if one of these categories is a significant contributor to a variance to our year over year gross margin, it will be disclosed. 

Net bookings:

  1. We will update the presentation of net bookings by composition to align with how management views and operates our business. EA’s management is focusing less on the differentiation between our packaged goods business and our digital business and more on our full game sales and live services. The updated format will categorize net bookings into “Full-Game” and “Live Services and Other”.  In addition, we will further disaggregate “Full-Game” net bookings to show net bookings attributable to full game sales of packaged goods and full game sales via digital download.

Refer to the example below.

We will continue to provide a similar level of disclosure by reporting net bookings from our mobile business in our earnings slides, under Net Bookings by Platform.

This category, Net Bookings by Platform, will be updated to disclose all bookings from mobile (full game, live services and licensing fees).

In addition, the MD&A in our periodic and annual reports will continue to provide an analysis of revenue that is consistent with how management views and operates the business.  Accordingly, we will change the MD&A in the first quarter of fiscal 2021 to conform to this new management reporting view.  In addition, given the current trend of our growing Extra Content within Live Services and Other, we will provide investors a view into the pattern of those sales by providing in our MD&A a trailing twelve months quantification of Extra Content revenue as well as a qualitative analysis of trends affecting this part of our business.  

 

  1. We will report net bookings from Apple App Store, Google Play and Nintendo eShop gross of platform provider fees and book the related fees in cost of bookings. Historically, we reported net bookings from these partners net of platforms fees.

This change aligns our reporting with industry practice as well as increases our comparability with our peers. 

Will transparency be reduced?

For GAAP reporting:

We will disclose revenue recognized at a point in time and revenue recognized over time in accordance with ASC 606 in our financial statements. Furthermore, we will provide revenue disclosures in the MD&A that align with how management views and operates our business. Refer to our SEC filings for additional disclosures on ASC 606 and our related revenue recognition policies.

For Management reporting:

Mobile bookings will continue to be disclosed within Net Bookings by Platform in our quarterly earnings deck on our IR website.

When will you make the changes?

GAAP reporting

This change will be reflected in the FY20 10K, scheduled to be filed in May.

Net bookings:

The changes will go into effect starting in Fiscal 2021 (April 1, 2020). FY21 guidance is presented under the new reporting structure and Q1 Fiscal 2021 financial results (and thereafter) will reflect this new reporting structure.

We will recast relevant FY20 financial results for comparability.