Harry Potter to Launch Worldwide on Seven Platforms on June 25, 2007 Fifteen Games Based on Wholly Owned Properties Planned for Fiscal 2008
REDWOOD CITY, Calif., May 08, 2007 (BUSINESS WIRE) -- Electronic Arts (NASDAQ:ERTS) today announced preliminary
financial results for its fiscal fourth quarter and fiscal year ended
March 31, 2007.
Fiscal Fourth Quarter Results (comparisons are to the quarter
ended March 31, 2006)
Net revenue for the fourth quarter was $613 million, down four
percent as compared with $641 million for the prior year primarily due
to the transition to next generation systems. Sales were driven by
Command & Conquer 3 Tiberium Wars™, Need for Speed™ Carbon, DEF
JAM: ICON™ and The Sims™ 2 Seasons.
Gross profit for the quarter was $378 million, down five percent
year-over-year. Net loss for the quarter was $25 million as compared
with a net loss of $16 million for the prior year. The Company adopted
Statement of Financial Accounting Standards (SFAS) No. 123R
"Share-Based Payment" at the beginning of its fiscal year resulting in
an after-tax stock-based compensation charge of $24 million, or $0.08
per share, in the fourth quarter. Diluted loss per share was $0.08 as
compared with $0.05 for the prior year.
Non-GAAP net income was $19 million as compared with $43 million a
year ago. Non-GAAP diluted earnings per share were $0.06 as compared
with $0.14 for the prior year. (Please see Non-GAAP Financial Measures
and reconciliation information included in this release.)
Full Year Results
Net revenue for the fiscal year ended March 31, 2007 was $3.091
billion, up five percent as compared with $2.951 billion for the prior
year. Seven titles sold more than three million copies: Madden NFL 07,
Need for Speed Carbon, FIFA 07, The Sims™ 2 Pets, The Sims™ 2,
Need for Speed™ Most Wanted and 2006 FIFA World Cup™.
Gross profit for the year was $1.879 billion, up six percent
year-over-year. Net income for the year was $76 million as compared
with $236 million for the prior year. The Company incurred an
after-tax stock-based compensation charge of $107 million, or $0.34
per share, for the year. Diluted earnings per share were $0.24 as
compared with $0.75 for the prior year.
Non-GAAP net income was $247 million as compared with $301 million
a year ago. Non-GAAP diluted earnings per share were $0.78 as compared
with $0.96 for the prior year. (Please see Non-GAAP Financial Measures
and reconciliation information included in this release.)
Trailing-twelve-month operating cash flow was $397 million as
compared with $596 million a year ago. The Company ended the quarter
with cash, short-term investments and marketable equity securities of
$2.976 billion.
"EA has a powerful set of franchises, strong brands and great
talent," said John Riccitiello, Chief Executive Officer. "It is a
great honor to rejoin this team and have the opportunity to build on
its success."
"We have a strong lineup for the year ahead," said Warren Jenson,
Chief Financial and Administrative Officer. "We expect to launch more
than fifteen games based on wholly owned properties - including Medal
of Honor Airborne™, Army of Two™, Boogie™, MySims™,
Battlefield Bad Company*, SKATE and Need for Speed™."
Highlights for the Year (comparisons are to the fiscal year ended
March 31, 2006)
-- Net revenue: North America - up five percent to $1.666
billion; Europe - up seven percent to $1.261 billion; Asia -
down 15 percent to $164 million. Movements in foreign currency
rates positively impacted net revenue by $53 million, or two
percent.
-- Mobility-based revenue, which includes handhelds and cellular
handsets, was $540 million - up 37 percent. The increase is
primarily a result of a full year of cellular handset revenue
from the acquisition of JAMDAT Mobile™ and sales growth on
the Nintendo DS™.
-- Digital revenue was a record $127 million - up 47 percent
year-over-year.
-- Club Pogo™ surpassed 1.5 million paying subscribers - up 23
percent year-over-year.
-- Madden NFL 07 was the industry's most popular game of 2006 in
North America and was EA's top seller for the fiscal year.
Need for Speed Carbon sold over 8.5 million copies - making it
EA's second-best-performing title.
-- Titles from The Sims™ franchise sold 22 million copies in
the year - with The Sims 2 Pets selling 5.6 million copies and
The Sims 2 selling 3.9 million copies.
-- EA completed five acquisitions during the year - Digital
Illusions, Mythic Entertainment, Headgate Studios, Phenomic
and SingShot.
-- EA Partners signed agreements to bring Rock Band, Mercenaries
2: World in Flames™ and Hellgate™: London to consumers.
-- EA made a 19 percent equity investment in Neowiz which closed
in April, 2007.
Deferred Net Revenue Recognition For Certain Online-Enabled
Packaged Goods
The Company reiterated that starting in fiscal year 2008, it will
begin recognizing net revenue associated with certain online-enabled
packaged goods games over the estimated hosting service period. As a
result, the Company anticipates that a significant amount of net
revenue that otherwise would have been recognized in fiscal 2008 will
be recognized in fiscal 2009.
Business Outlook
The following forward-looking statements, as well as those made
above, reflect expectations as of May 8, 2007. Results may be
materially different and are affected by many factors, such as:
consumer demand for next-generation consoles and the ability of the
console manufacturers to produce an adequate supply of consoles to
meet that demand; the popular appeal of EA's products; development
delays on EA's products; changes in foreign exchange rates; the
overall global economy; competition in the industry; EA's effective
tax rate and other factors detailed in this release and in EA's annual
and quarterly SEC filings.
Fiscal Year Expectations - Ending March 31, 2008
-- Net revenue is expected to be between $3.1 and $3.4 billion.
-- Non-GAAP net revenue is expected to be between $3.6 and $3.8
billion.
-- GAAP diluted loss per share is expected to be between ($0.77)
and ($0.23).
-- Non-GAAP diluted earnings per share are expected to be between
$0.90 and $1.20. Expected non-GAAP diluted earnings per share
exclude the following items from expected GAAP diluted loss
per share: approximately $0.98 to $1.23 for changes in
deferred net revenue related to packaged goods and digital
content; approximately $0.31 of estimated stock-based
compensation; approximately $0.13 of amortization of
intangible assets; and approximately $0.02 of estimated
restructuring charges.
Fiscal First Quarter Expectations - Ending June 30, 2007
-- Net revenue is expected to be between $300 and $360 million.
-- Non-GAAP net revenue is expected to be between $350 and $400
million.
-- GAAP diluted loss per share is expected to be between ($0.66)
and ($0.56).
-- Non-GAAP diluted loss per share is expected to be between
($0.40) and ($0.34). Expected non-GAAP loss per share excludes
the following items from expected GAAP diluted loss per share:
approximately $0.10 to $0.14 for changes in deferred net
revenue related to packaged goods and digital content;
approximately $0.08 of estimated stock-based compensation; and
approximately $0.04 of amortization of intangible assets.
Conference Call
Electronic Arts will host a conference call today at 2:00 pm PT
(5:00 pm ET) to review its results for the fourth quarter and fiscal
year ended March 31, 2007 and its outlook for the future. During the
course of the call, Electronic Arts may also disclose material
developments affecting its business and/or financial performance.
Listeners may access the conference call live through the following
dial-in number: (800) 946-0742, access code 220497, or via webcast:
http://investor.ea.com.
A dial-in replay of the conference call will be provided until May
15, 2007 at (719) 457-0820, access code 220497. A webcast archive of
the conference call will be available for one year at
http://investor.ea.com.
Non-GAAP Financial Measures
To supplement the Company's unaudited condensed consolidated
financial statements presented in accordance with GAAP, Electronic
Arts uses certain non-GAAP measures of financial performance. The
presentation of these non-GAAP financial measures is not intended to
be considered in isolation from, as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP, and may be different from non-GAAP financial measures used by
other companies. In addition, these non-GAAP measures have limitations
in that they do not reflect all of the amounts associated with the
Company's results of operations as determined in accordance with GAAP.
The non-GAAP financial measures used by Electronic Arts include
non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net
income (loss) and historical and estimated non-GAAP diluted earnings
(loss) per share. These non-GAAP financial measures exclude the
following items from the Company's consolidated statement of
operations:
-- Acquired in-process technology
-- Amortization of intangibles
-- Certain litigation expenses
-- Restructuring charges
-- Stock-based compensation
-- Income tax adjustments (consisting of the income tax effect of
the items listed above and certain one-time income tax
adjustments)
Electronic Arts may consider whether other significant
non-recurring items that arise in the future should also be excluded
in calculating the non-GAAP financial measures it uses.
Beginning with the release of its first quarter results for fiscal
2008, Electronic Arts intends, on a prospective basis, to reflect the
change in its deferred net revenue related to certain online-enabled
packaged goods games and digital content in its non-GAAP financial
measures, including non-GAAP net revenue.
Electronic Arts believes that these non-GAAP financial measures,
when taken together with the corresponding GAAP financial measures,
provide meaningful supplemental information regarding the Company's
performance by excluding certain items that may not be indicative of
the Company's core business, operating results or future outlook.
Electronic Arts' management uses, and believes that investors benefit
from referring to, these non-GAAP financial measures in assessing the
Company's operating results both as a consolidated entity and at the
business unit level, as well as when planning, forecasting and
analyzing future periods. These non-GAAP financial measures also
facilitate comparisons of the Company's performance to prior periods.
In addition to the reasons stated above, which are generally
applicable to each of the items Electronic Arts excludes from its
non-GAAP financial measures, the Company believes it is appropriate to
exclude certain items for the following reasons:
Amortization of Intangibles. When analyzing the operating
performance of an acquired entity, Electronic Arts' management focuses
on the total return provided by the investment (i.e., operating profit
generated from the acquired entity as compared to the purchase price
paid) without taking into consideration any allocations made for
accounting purposes. Because the purchase price for an acquisition
necessarily reflects the accounting value assigned to intangible
assets (including acquired in-process technology and goodwill), when
analyzing the operating performance of an acquisition in subsequent
periods, the Company's management excludes the GAAP impact of acquired
intangible assets to its financial results. Electronic Arts believes
that such an approach is useful in understanding the long-term return
provided by an acquisition and that investors benefit from a
supplemental non-GAAP financial measure that excludes the accounting
expense associated with acquired intangible assets.
In addition, in accordance with GAAP, Electronic Arts generally
recognizes expenses for internally-developed intangible assets as they
are incurred, notwithstanding the potential future benefit such assets
may provide. Unlike internally-developed intangible assets, however,
and also in accordance with GAAP, the Company generally capitalizes
the cost of acquired intangible assets and recognizes that cost as an
expense over the useful lives of the assets acquired (other than
goodwill, which is not amortized, and acquired in-process technology,
which is expensed immediately, as required under GAAP). As a result of
their GAAP treatment, there is an inherent lack of comparability
between the financial performance of internally-developed intangible
assets and acquired intangible assets. Accordingly, Electronic Arts
believes it is useful to provide, as a supplement to its GAAP
operating results, a non-GAAP financial measure that excludes the
amortization of acquired intangibles.
Stock-Based Compensation. Electronic Arts adopted SFAS 123R,
"Share-Based Payment" beginning in its fiscal year 2007. When
evaluating the performance of its individual business units, the
Company does not consider stock-based compensation charges. Likewise,
the Company's management teams exclude stock-based compensation
expense from their short and long-term operating plans. In contrast,
the Company's management teams are held accountable for cash-based
compensation and such amounts are included in their operating plans.
Further, when considering the impact of equity award grants,
Electronic Arts places a greater emphasis on overall shareholder
dilution rather than the accounting charges associated with such
grants.
Video game platforms have historically had a life cycle of four to
six years, which causes the video game software market to be cyclical.
The Company's management analyzes its business and operating
performance in the context of these business cycles, comparing
Electronic Arts' performance at similar stages of different cycles.
For comparability purposes, Electronic Arts believes it is useful to
provide a non-GAAP financial measure that excludes stock-based
compensation in order to better understand the long-term performance
of its core business. In addition, given the Company's adoption of
SFAS 123®, "Share-Based Payment" beginning with its fiscal year
ending March 31, 2007, Electronic Arts believes that a non-GAAP
financial measure that excludes stock-based compensation will
facilitate the comparison of its year-over-year results.
Restructuring Charges. Although Electronic Arts has engaged in
various restructuring activities over the past several years, each has
been a discrete, extraordinary event based on a unique set of business
objectives. Each of these restructurings has been unlike its
predecessors in terms of its operational implementation, business
impact and scope. The Company does not engage in restructuring
activities on a regular basis or in the ordinary course of business.
As such, the Company believes it is appropriate to exclude
restructuring charges from its non-GAAP financial measures.
Change in Deferred Net Revenue - Packaged Goods and Digital
Content. Beginning in fiscal 2008, Electronic Arts will no longer be
able to objectively determine the fair value of the online hosting
services included in certain of its packaged goods games. As a result,
the Company will recognize the revenue from the sale of these games
over the estimated online service period. Although Electronic Arts
will defer the recognition of a significant portion of its net revenue
as a result of this change, there will be no adverse impact to its
operating cash flow. Internally, Electronic Arts' management intends
to reflect the change in its deferred net revenue related to packaged
goods games and digital content in its non-GAAP financial measures
when evaluating the Company's operating performance, when planning,
forecasting and analyzing future periods, and when assessing the
performance of its management team. The Company believes that
reflecting the change in deferred net revenue in its operating results
is important to facilitate an understanding of the cash
characteristics of its business, as well as comparisons to prior
periods during which the Company's accounting policies did not result
in the deferral of significant amounts of net revenue related to
online-enabled packaged goods.
In the financial tables below, Electronic Arts has provided a
reconciliation of the most comparable GAAP financial measure to each
of the historical non-GAAP financial measures used in this press
release.
Forward-Looking Statements
Some statements set forth in this release, including the estimates
under the headings "Business Outlook" and "Deferred Revenue
Recognition For Certain Online-Enabled Packaged Goods" contain
forward-looking statements that are subject to change. Statements
including words such as "anticipate", "believe", "estimate" or
"expect" and statements in the future tense are forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual events or actual future results
to differ materially from the expectations set forth 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 consumer demand for, and the availability of an
adequate supply of next-generation hardware units (including the Xbox
360™ video game and entertainment system, the PLAYSTATION®3
computer entertainment system and the Wii™); the Company's ability
to predict consumer preferences among competing hardware platforms;
consumer spending trends; the seasonal and cyclical nature of the
interactive game segment; timely development and release of Electronic
Arts' products; competition in the interactive entertainment industry;
the Company's ability to manage expenses during fiscal year 2008; the
Company's ability to attract and retain key personnel; changes in the
Company's effective tax rates; adoption of new accounting regulations
and standards; potential regulation of the Company's products in key
territories; developments in the law regarding protection of the
Company's products; fluctuations in foreign exchange rates; the
Company's ability to secure licenses to valuable entertainment
properties on favorable terms; and other factors described in the
Company's Annual Report on Form 10-K for the year ended March 31, 2006
and Quarterly Report on Form 10-Q for the quarter ended December 31,
2006. These forward-looking statements speak only as of May 8, 2007.
Electronic Arts assumes no obligation and does not intend to update
these forward-looking statements, including those made under the
"Business Outlook" and "Deferred Revenue Recognition For Certain
Online-Enabled Packaged Goods" headings. In addition, the 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 Annual Report
on Form 10-K for the fiscal year ended March 31, 2007. Electronic Arts
assumes no obligation and does not intend to update these estimates
prior to filing its Form 10-K for the fiscal year ended March 31,
2007.
About Electronic Arts
Electronic Arts Inc. (EA), headquartered in Redwood City,
California, is the world's leading interactive entertainment software
company. Founded in 1982, the company develops, publishes, and
distributes interactive software worldwide for video game systems,
personal computers, cellular handsets and the Internet. Electronic
Arts markets its products under four brand names: EA SPORTS™,
EA™, EA SPORTS BIG™ and POGO™. In fiscal 2007, EA posted
revenue of $3.09 billion and had 24 titles that sold more than one
million copies. EA's homepage and online game site is www.ea.com. More
information about EA's products and full text of press releases can be
found on the Internet at http://info.ea.com.
*Battlefield Bad Company is a working title. All trademarks are
the property of their respective owners.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
2007 2006 2007 2006 (a)
---------- ------- ---------- --------
Net revenue $ 613 $ 641 $3,091 $2,951
Cost of goods sold 235 244 1,212 1,181
---------- ------- ---------- --------
Gross profit 378 397 1,879 1,770
Operating expenses:
Marketing and sales 116 102 466 431
General and administrative 66 54 288 215
Research and development 257 188 1,041 758
Amortization of intangibles 7 4 27 7
Acquired in-process
technology - 7 3 8
Restructuring charges 3 17 15 26
---------- ------- ---------- --------
Total operating expenses 449 372 1,840 1,445
---------- ------- ---------- --------
Operating income (loss) (71) 25 39 325
Interest and other income, net 30 14 99 64
---------- ------- ---------- --------
Income (loss) before provision
for (benefit from) income
taxes and minority interest (41) 39 138 389
Provision for (benefit from)
income taxes (16) 54 66 147
---------- ------- ---------- --------
Income (loss) before minority
interest (25) (15) 72 242
Minority interest - (1) 4 (6)
---------- ------- ---------- --------
Net income (loss) $ (25) $ (16) $ 76 $ 236
========== ======= ========== ========
Earnings (loss) per share:
Basic $(0.08) $(0.05) $ 0.25 $ 0.78
Diluted $(0.08) $(0.05) $ 0.24 $ 0.75
Number of shares used in
computation:
Basic 310 304 308 304
Diluted 310 304 317 314
Non-GAAP Results (in millions, except per share data)
The following tables reconcile the Company's net income (loss) and
diluted earnings (loss) per share as presented in its Unaudited
Condensed Consolidated Statements of Operations as prepared in
accordance with Generally Accepted Accounting Principles ("GAAP")
with its non-GAAP net income and non-GAAP diluted earnings per share.
The Company's non-GAAP net income and non-GAAP diluted earnings per
share exclude acquired in-process technology, amortization of
intangibles, certain litigation expenses, restructuring charges, and
stock-based compensation. In addition, the Company's non-GAAP net
income and non-GAAP diluted earnings per share exclude income tax
adjustments consisting of the income tax expense associated with the
foregoing excluded items and the impact of certain one-time income
tax adjustments.
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
2007 2006 2007 2006
---------- ------- ---------- --------
Net income (loss) $ (25) $ (16) $ 76 $ 236
Change in deferred net
revenue - packaged goods
and digital content (b)
Acquired in-process
technology - 7 3 8
Amortization of intangibles 7 4 27 7
Certain litigation expenses - (1) - -
COGS amortization of
intangibles 7 4 27 9
Restructuring charges 3 17 15 26
Stock-based compensation 28 2 133 3
Income tax adjustments (1) 26 (34) 12
---------- ------- ---------- --------
Non-GAAP net income $ 19 $ 43 $ 247 $ 301
========== ======= ========== ========
Non-GAAP diluted earnings per
share $ 0.06 $ 0.14 $ 0.78 $ 0.96
Number of shares used in non-
GAAP diluted earnings per
share computation 319 312 317 314
(a) Derived from audited financial statements.
(b) Effective April 1, 2007, the Company intends, on a prospective
basis, to reflect the change in deferred net revenue - packaged goods
and digital content in its non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
March 31, March 31,
2007 2006 (a)
--------- ---------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $2,635 $2,272
Marketable equity securities 341 160
Receivables, net of allowances of $214 and
$232, respectively 256 199
Inventories 62 61
Deferred income taxes, net 84 86
Other current assets 219 234
--------- ---------
Total current assets 3,597 3,012
Property and equipment, net 484 392
Investment in affiliates 6 11
Goodwill 734 647
Other intangibles, net 210 232
Deferred income taxes, net 25 -
Other assets 90 92
--------- ---------
TOTAL ASSETS $5,146 $4,386
========= =========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 180 $ 163
Accrued and other current liabilities 823 697
Deferred net revenue - packaged goods and
digital content 23 9
--------- ---------
Total current liabilities 1,026 869
Deferred income taxes, net 8 29
Other liabilities 80 68
--------- ---------
Total liabilities 1,114 966
Minority interest - 12
Stockholders' equity:
Common stock 3 3
Paid-in capital 1,412 1,081
Retained earnings 2,323 2,241
Accumulated other comprehensive income 294 83
--------- ---------
Total stockholders' equity 4,032 3,408
--------- ---------
TOTAL LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY $5,146 $4,386
========= =========
(a) Derived from audited financial statements.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
2007 2006 2007 2006 (a)
---------- ------- ---------- --------
OPERATING ACTIVITIES
Net income (loss) $ (25) $ (16) $ 76 $ 236
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation, amortization
and accretion 37 27 147 95
Stock-based compensation 28 2 133 3
Minority interest - 1 (4) 6
Realized net losses on
investments and sale of
property and equipment - 7 1 7
Tax benefit from exercise of
stock options - 16 - 133
Acquired in-process
technology - 7 3 8
Change in assets and
liabilities:
Receivables, net 320 347 (18) 104
Inventories 19 8 12 (3)
Other assets (17) (36) 46 (71)
Accounts payable (3) (18) (2) 31
Accrued and other
liabilities (135) (11) 43 30
Deferred income taxes, net (19) 5 (54) 8
Deferred net revenue -
packaged goods and
digital content 9 (2) 14 9
---------- ------- ---------- --------
Net cash provided by operating
activities 214 337 397 596
---------- ------- ---------- --------
INVESTING ACTIVITIES
Capital expenditures (60) (36) (178) (123)
Proceeds from sale of
property and equipment - 2 2 2
Proceeds from sale of
marketable equity
securities - - - 4
Purchase of investment in
affiliates - - (1) (2)
Proceeds from sale of
investment in affiliate - - - 2
Proceeds from maturities and
sales of short-term
investments 404 479 1,315 1,427
Purchase of short-term
investments (434) (408) (1,522) (755)
Acquisition of subsidiaries,
net of cash acquired (9) (658) (103) (661)
Other investing activities - - - (2)
---------- ------- ---------- --------
Net cash used in investing
activities (99) (621) (487) (108)
---------- ------- ---------- --------
FINANCING ACTIVITIES
Proceeds from issuance of
common stock 35 55 168 206
Excess tax benefit from
stock-based compensation 9 - 36 -
Repayment of note assumed in
connection with acquisition - - (14) -
Repurchase and retirement of
common stock - - - (709)
---------- ------- ---------- --------
Net cash provided by (used in)
financing activities 44 55 190 (503)
---------- ------- ---------- --------
Effect of foreign exchange on
cash and cash equivalents 13 9 29 (13)
---------- ------- ---------- --------
Increase (decrease) in cash and
cash equivalents 172 (220) 129 (28)
Beginning cash and cash
equivalents 1,199 1,462 1,242 1,270
---------- ------- ---------- --------
Ending cash and cash
equivalents 1,371 1,242 1,371 1,242
Short-term investments 1,264 1,030 1,264 1,030
---------- ------- ---------- --------
Ending cash, cash equivalents
and short-term investments $2,635 $2,272 $ 2,635 $2,272
========== ======= ========== ========
(a) Derived from audited financial statements.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and Headcount)
Q4 Q1 Q2 Q3 Q4 YOY %
FY06 FY07 FY07 FY07 FY07 Change
------- ------- ------ ------ ------- ------
CONSOLIDATED FINANCIAL
DATA
Net revenue 641 413 784 1,281 613 (4%)
Net revenue - trailing
twelve months ("TTM") 2,951 2,999 3,108 3,119 3,091 5%
Gross profit 397 245 445 811 378 (5%)
Gross margin - % of
net revenue 62% 59% 57% 63% 62%
Gross profit - TTM 1,770 1,801 1,855 1,898 1,879 6%
Gross margin - TTM %
of net revenue 60% 60% 60% 61% 61%
Operating income (loss) 25 (119) 14 215 (71) (384%)
Operating income
(loss) margin - % of
net revenue 4% (29%) 2% 17% (12%)
Operating income - TTM 325 302 267 135 39 (88%)
Operating income
margin - TTM % of
net revenue 11% 10% 9% 4% 1%
Net income (loss) (16) (81) 22 160 (25) (56%)
Diluted earnings
(loss) per share ($0.05) ($0.26) $0.07 $0.50 ($0.08) (60%)
Net income - TTM 236 213 184 85 76 (68%)
Diluted earnings per
share - TTM $0.75 $0.68 $0.59 $0.26 $0.24 (68%)
CASH FLOW DATA
Operating cash flow 337 (38) (6) 227 214 (36%)
Operating cash flow -
TTM 596 589 571 520 397 (33%)
Capital expenditures 36 38 48 32 60 67%
Capital expenditures -
TTM 123 128 153 154 178 45%
BALANCE SHEET DATA
Cash, cash equivalents
and short-term
investments 2,272 2,231 2,172 2,411 2,635 16%
Marketable equity
securities 160 166 204 235 341 113%
Receivables, net 199 41 267 551 256 29%
Inventories 61 59 67 72 62 2%
Deferred net revenue -
packaged goods and
digital content 9 6 6 14 23 156%
STOCK-BASED COMPENSATION
Cost of goods sold - - 1 - 1
Marketing and sales - 5 4 5 3
General and
administrative 1 11 9 10 7
Research and
development 1 21 19 20 17
------- ------- ------ ------ -------
Total Stock-Based
Compensation 2 37 33 35 28
STOCK-BASED COMPENSATION
- as a % of Net Revenue
Cost of goods sold - - - - -
Marketing and sales - 1% 1% - 1%
General and
administrative - 3% 1% 1% 1%
Research and
development - 5% 2% 2% 3%
------- ------- ------ ------ -------
Total Stock-Based
Compensation - 9% 4% 3% 5%
OTHER
Employees 7,175 7,116 7,517 7,761 7,893 10%
Diluted weighted-
average shares 304 306 315 319 310
GEOGRAPHIC REVENUE MIX
North America 340 209 512 637 307 (10%)
International 301 204 272 644 306 2%
Europe 262 169 245 583 264 1%
Asia 39 35 27 61 42 8%
------- ------- ------ ------ -------
Net Revenue 641 413 784 1,281 613 (4%)
GEOGRAPHIC REVENUE MIX -
as a % of Net Revenue
North America 53% 51% 65% 50% 50%
International 47% 49% 35% 50% 50%
Europe 41% 41% 31% 45% 43%
Asia 6% 8% 4% 5% 7%
------- ------- ------ ------ -------
Net Revenue 100% 100% 100% 100% 100%
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and Headcount)
Q4 Q1 Q2 Q3 Q4 YOY %
FY06 FY07 FY07 FY07 FY07 Change
------- ------- ------ ------ ------- ------
PLATFORM REVENUE MIX
PlayStation 2 211 99 269 400 117 (45%)
Xbox 360 64 61 166 172 82 28%
PLAYSTATION 3 - - - 41 52 N/M
Wii - - - 29 36 N/M
Xbox 68 23 65 62 7 (90%)
Nintendo GameCube 17 11 14 32 4 (76%)
------- ------- ------ ------ -------
Total Consoles 360 194 514 736 298 (17%)
PC 104 66 86 218 128 23%
PSP 54 37 64 118 39 (28%)
Cellular Handsets 15 33 35 35 36 140%
Nintendo DS 11 8 14 55 27 145%
Game Boy Advance 8 7 8 21 3 (63%)
------- ------- ------ ------ -------
Total Mobility 88 85 121 229 105 19%
Co-publishing and
Distribution 52 42 39 49 45 (13%)
Subscription Services 17 16 15 24 24 41%
Licensing, Advertising
& Other 20 10 9 25 13 (35%)
------- ------- ------ ------ -------
Total Internet
Services, Licensing
& Other 37 26 24 49 37 -
------- ------- ------ ------ -------
Net Revenue 641 413 784 1,281 613 (4%)
======= ======= ====== ====== =======
PLATFORM REVENUE MIX - as
a % of Net Revenue
PlayStation 2 33% 24% 35% 31% 19%
Xbox 360 10% 15% 21% 13% 13%
PLAYSTATION 3 - - - 3% 9%
Wii - - - 2% 6%
Xbox 10% 5% 8% 5% 1%
Nintendo GameCube 3% 3% 2% 3% 1%
------- ------- ------ ------ -------
Total Consoles 56% 47% 66% 57% 49%
PC 16% 16% 11% 17% 21%
PSP 9% 9% 8% 9% 6%
Cellular Handsets 2% 8% 4% 3% 6%
Nintendo DS 2% 2% 2% 4% 5%
Game Boy Advance 1% 2% 1% 2% -
------- ------- ------ ------ -------
Total Mobility 14% 21% 15% 18% 17%
Co-publishing and
Distribution 8% 10% 5% 4% 7%
Subscription Services 3% 4% 2% 2% 4%
Licensing, Advertising
& Other 3% 2% 1% 2% 2%
------- ------- ------ ------ -------
Total Internet
Services, Licensing
& Other 6% 6% 3% 4% 6%
------- ------- ------ ------ -------
Net Revenue 100% 100% 100% 100% 100%
======= ======= ====== ====== =======
Platform SKU Release Mix
PlayStation 2 8 2 8 6 6 (25%)
Xbox 360 2 2 7 5 4 100%
PLAYSTATION 3 - - - 4 3 N/M
Wii - - - 2 4 N/M
Xbox 8 2 7 2 - (100%)
Nintendo GameCube 1 1 2 2 - (100%)
------- ------- ------ ------ -------
Total Consoles 19 7 24 21 17 (11%)
PC 7 5 6 9 6 (14%)
PSP 2 2 9 5 2 -
Nintendo DS 1 1 2 3 2 100%
Game Boy Advance - 1 2 3 - N/M
------- ------- ------ ------ -------
Total Mobility 3 4 13 11 4 33%
------- ------- ------ ------ -------
Total SKUs 29 16 43 41 27 (7%)
======= ======= ====== ====== =======
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Fact Sheet for Q4 Fiscal 2007
Q4 Product Releases (i) Platform
-- Arena Football(TM): Road to Glory PlayStation(R)2
-- Burnout(TM) Dominator PlayStation 2
-- UEFA Champions League(TM) 2006-2007 PlayStation 2
-- Medal of Honor Vanguard(TM) PlayStation 2
-- MVP(TM) 07 NCAA(R) Baseball PlayStation 2
-- NCAA(R) March Madness(R) 07 PlayStation 2
-- UEFA Champions League 2006-2007 Xbox 360(TM)
-- DEF JAM: ICON(TM) Xbox 360
-- NBA STREET Homecourt Xbox 360
-- NCAA March Madness 07 Xbox 360
-- DEF JAM: ICON PLAYSTATION(R)3
-- NBA STREET Homecourt PLAYSTATION 3
-- The Godfather(R) The Don's Edition PLAYSTATION 3
-- Medal of Honor Vanguard Wii(TM)
-- SSX(TM) Blur Wii
-- The Godfather BlackHand Edition Wii
-- Tiger Woods PGA TOUR(R) 07 Wii
-- Battlefield 2142(TM): Northern Strike PC
-- UEFA Champions League 2006-2007 PC
-- Command & Conquer 3 Tiberium Wars(TM) PC
-- Command & Conquer 3 Tiberium Wars: Kane Edition PC
-- The Sims(TM) 2 Seasons PC
-- The Sims Life Stories PC
-- Burnout Dominator PSP(R)
-- UEFA Champions League 2006-2007 PSP
-- Bejeweled(R) Cellular
Handsets
-- EA SPORTS(TM) MVP Baseball(TM) 07 Cellular
Handsets
-- EA(TM) Pool Cellular
Handsets
-- NASCAR(R) 07 Cellular
Handsets
-- Pictionary(R) Cellular
Handsets
-- Tetris(R) Cellular
Handsets
-- Tiger Woods PGA TOUR 07 Cellular
Handsets
-- UEFA Champions League 2006-2007 Cellular
Handsets
-- Pogo(TM) Island Nintendo DS(TM)
-- Theme Park(TM) Nintendo DS
Co-publishing, Distribution, and International
only (ii)
-- FIFA Manager 07 Extra Time (iii) PC
-- SimCity(TM) (iii) Nintendo DS
(i) Cellular handsets are not included in SKU count.
(ii) Co-publishing, distribution, and international only are not
included in SKU count.
(iii) International only
All trademarks are the property of their respective owners.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Results
(in millions, except per share data)
The following tables reconcile the Company's gross profit, operating
income (loss), net income (loss) and diluted earnings (loss) per
share as presented in its Unaudited Condensed Consolidated Statements
of Operations as prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") with its non-GAAP gross profit, non-
GAAP operating income (loss), non-GAAP net income (loss), and non-
GAAP earnings (loss) per share. The Company's non-GAAP gross profit
excludes COGS amortization of intangibles and stock-based
compensation. The Company's non-GAAP operating income (loss), non-
GAAP net income (loss), and non-GAAP diluted earnings (loss) per
share exclude acquired in-process technology, amortization of
intangibles, certain litigation expenses, restructuring charges, and
stock-based compensation. In addition, the Company's non-GAAP net
income (loss) and non-GAAP diluted earnings (loss) per share exclude
income tax adjustments consisting of the income tax expense
associated with the foregoing excluded items and the impact of
certain one-time income tax adjustments.
Q4 Q1 Q2 Q3 Q4 YOY %
FY06 FY07 FY07 FY07 FY07 Change
------- ------- ------- ------- ------- ------
QUARTERLY
RECONCILIATION OF
RESULTS
GAAP net revenue $641 $413 $784 $1,281 $613 (4%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
------- ------- ------- ------- -------
Non-GAAP net revenue
(a) $641 $413 $784 $1,281 $613 (4%)
======= ======= ======= ======= =======
GAAP gross profit $397 $245 $445 $811 $378 (5%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
COGS amortization
of intangibles 4 6 7 7 7
Stock-based
compensation - - 1 - 1
------- ------- ------- ------- -------
Non-GAAP gross profit $401 $251 $453 $818 $386 (4%)
======= ======= ======= ======= =======
Non-GAAP gross
margin - % of non-
GAAP net revenue 63% 61% 58% 64% 63%
GAAP operating income
(loss) $25 $(119) $14 $215 $(71) (384%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
Acquired in-process
technology 7 - 2 1 -
Amortization of
intangibles 4 6 7 7 7
Certain litigation
expenses (1) - - - -
COGS amortization
of intangibles 4 6 7 7 7
Restructuring
charges 17 6 4 2 3
Stock-based
compensation 2 37 33 35 28
------- ------- ------- ------- -------
Non-GAAP operating
income (loss) $58 $(64) $67 $267 $(26) (145%)
======= ======= ======= ======= =======
Non-GAAP operating
income (loss)
margin - % of non-
GAAP net revenue 9% (15%) 9% 21% (4%)
GAAP net income
(loss) $(16) $(81) $22 $160 $(25) (56%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
Acquired in-process
technology 7 - 2 1 -
Amortization of
intangibles 4 6 7 7 7
Certain litigation
expenses (1) - - - -
COGS amortization
of intangibles 4 6 7 7 7
Restructuring
charges 17 6 4 2 3
Stock-based
compensation 2 37 33 35 28
Income tax
adjustments 26 (12) (10) (11) (1)
------- ------- ------- ------- -------
Non-GAAP net income
(loss) $43 $(38) $65 $201 $19 (56%)
======= ======= ======= ======= =======
Non-GAAP net income
(loss) margin - %
of non-GAAP net
revenue 7% (9%) 8% 16% 3%
GAAP diluted earnings
(loss) per share ($0.05) ($0.26) $0.07 $0.50 ($0.08) (60%)
Non-GAAP diluted
earnings (loss) per
share $0.14 ($0.12) $0.21 $0.63 $0.06 (57%)
Shares used in non-
GAAP diluted
earnings (loss)
per share
computation 312 306 315 319 319
(a) Effective April 1, 2007, the Company intends, on a prospective
basis, to reflect the change in deferred net revenue - packaged goods
and digital content in its non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Results
(in millions, except per share data)
The following tables reconcile the Company's gross profit, operating
income (loss), net income (loss) and diluted earnings (loss) per
share as presented in its Unaudited Condensed Consolidated Statements
of Operations as prepared in accordance with Generally Accepted
Accounting Principles ("GAAP") with its non-GAAP gross profit, non-
GAAP operating income (loss), non-GAAP net income (loss), and non-
GAAP earnings (loss) per share. The Company's non-GAAP gross profit
excludes COGS amortization of intangibles and stock-based
compensation. The Company's non-GAAP operating income (loss), non-
GAAP net income (loss), and non-GAAP diluted earnings (loss) per
share exclude acquired in-process technology, amortization of
intangibles, certain litigation expenses, restructuring charges, and
stock-based compensation. In addition, the Company's non-GAAP net
income (loss) and non-GAAP diluted earnings (loss) per share exclude
income tax adjustments consisting of the income tax expense
associated with the foregoing excluded items and the impact of
certain one-time income tax adjustments.
Q4 Q1 Q2 Q3 Q4 YOY %
FY06 FY07 FY07 FY07 FY07 Change
------- ------- ------- ------- ------- ------
TRAILING TWELVE MONTH
RECONCILIATION OF
RESULTS
GAAP net revenue $2,951 $2,999 $3,108 $3,119 $3,091 5%
Change in deferred
net revenue -
packaged goods and
digital content
(a)
------- ------- ------- ------- -------
Non-GAAP net revenue
(a) $2,951 $2,999 $3,108 $3,119 $3,091 5%
======= ======= ======= ======= =======
GAAP gross profit $1,770 $1,801 $1,855 $1,898 $1,879 6%
Change in deferred
net revenue -
packaged goods and
digital content
(a)
COGS amortization
of intangibles 9 14 19 24 27
Stock-based
compensation - - 1 1 2
------- ------- ------- ------- -------
Non-GAAP gross profit $1,779 $1,815 $1,875 $1,923 $1,908 7%
======= ======= ======= ======= =======
Non-GAAP gross
profit - % of non-
GAAP net revenue 60% 61% 60% 62% 62%
GAAP operating income $325 $302 $267 $135 $39 (88%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
Acquired in-process
technology 8 7 9 10 3
Amortization of
intangibles 7 12 18 24 27
Certain litigation
expenses - - (1) (1) -
COGS amortization
of intangibles 9 14 19 24 27
Restructuring
charges 26 32 36 29 15
Stock-based
compensation 3 40 72 107 133
------- ------- ------- ------- -------
Non-GAAP operating
income $378 $407 $420 $328 $244 (35%)
======= ======= ======= ======= =======
Non-GAAP operating
income margin - %
of non-GAAP net
revenue 13% 14% 14% 11% 8%
GAAP net income $236 $213 $184 $85 $76 (68%)
Change in deferred
net revenue -
packaged goods and
digital content
(a)
Acquired in-process
technology 8 7 9 10 3
Amortization of
intangibles 7 12 18 24 27
Certain litigation
expenses - - (1) (1) -
COGS amortization
of intangibles 9 14 19 24 27
Restructuring
charges 26 32 36 29 15
Stock-based
compensation 3 40 72 107 133
Income tax
adjustments 12 1 1 (7) (34)
------- ------- ------- ------- -------
Non-GAAP net income $301 $319 $338 $271 $247 (18%)
======= ======= ======= ======= =======
Non-GAAP net income
margin - % of non-
GAAP net revenue 10% 11% 11% 9% 8%
GAAP diluted earnings
per share $0.75 $0.68 $0.59 $0.26 $0.24 (68%)
Non-GAAP diluted
earnings per share $0.96 $1.03 $1.09 $0.86 $0.78 (19%)
(a) Effective April 1, 2007, the Company intends, on a prospective
basis, to reflect the change in deferred net revenue - packaged goods
and digital content in its non-GAAP financial measures.
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Non-GAAP Financial Information and Non-GAAP
Business Metrics
(in millions, except per share data)
Q4 Q1 Q2 Q3 Q4 YOY %
FY06 FY07 FY07 FY07 FY07 Change
------- ------- ------- ------- ------- ------
CONSOLIDATED NON-GAAP
FINANCIAL DATA (b)
Non-GAAP net revenue 641 413 784 1,281 613 (4%)
Non-GAAP net revenue
- TTM 2,951 2,999 3,108 3,119 3,091 5%
Non-GAAP gross profit 401 251 453 818 386 (4%)
Non-GAAP gross
margin - % of non-
GAAP net revenue 63% 61% 58% 64% 63%
Non-GAAP gross profit
- TTM 1,779 1,815 1,875 1,923 1,908 7%
Non-GAAP gross
margin - TTM % of
non-GAAP net
revenue 60% 61% 60% 62% 62%
Non-GAAP operating
income (loss) 58 (64) 67 267 (26) (145%)
Non-GAAP operating
income (loss)
margin - % of non-
GAAP net revenue 9% (15%) 9% 21% (4%)
Non-GAAP operating
income - TTM 378 407 420 328 244 (35%)
Non-GAAP operating
income margin -
TTM % of non-GAAP
net revenue 13% 14% 14% 11% 8%
Non-GAAP net income
(loss) 43 (38) 65 201 19 (56%)
Non-GAAP diluted
earnings (loss)
per share $0.14 ($0.12) $0.21 $0.63 $0.06 (57%)
Non-GAAP net income -
TTM 301 319 338 271 247 (18%)
Non-GAAP diluted
earnings per share
- TTM $0.96 $1.03 $1.09 $0.86 $0.78 (19%)
GAAP GEOGRAPHIC REVENUE
MIX
North America 340 209 512 637 307 (10%)
International 301 204 272 644 306 2%
Europe 262 169 245 583 264 1%
Asia 39 35 27 61 42 8%
---------------------------------------
Net Revenue 641 413 784 1,281 613 (4%)
CHANGE IN DEFERRED NET
REVENUE - PACKAGED
GOODS AND DIGITAL
CONTENT GEOGRAPHIC MIX
(a)
North America
International
Europe
Asia
---------------------------------------
Change In Deferred
Net Revenue -
Packaged Goods and
Digital Content
NON-GAAP GEOGRAPHIC
REVENUE MIX
North America 340 209 512 637 307 (10%)
International 301 204 272 644 306 2%
Europe 262 169 245 583 264 1%
Asia 39 35 27 61 42 8%
---------------------------------------
Non-GAAP Net
Revenue 641 413 784 1,281 613 (4%)
NON-GAAP GEOGRAPHIC
REVENUE MIX
- as a % of Non-GAAP
Net Revenue
North America 53% 51% 65% 50% 50%
International 47% 49% 35% 50% 50%
Europe 41% 41% 31% 45% 43%
Asia 6% 8% 4% 5% 7%
---------------------------------------
Non-GAAP Net
Revenue 100% 100% 100% 100% 100%
(a) Effective April 1, 2007, the Company intends, on a prospective
basis, to reflect the change in deferred net revenue - packaged goods
and digital content in its non-GAAP financial measures.
(b) Refer to Unaudited Reconciliation of GAAP to Non-GAAP Results.
SOURCE: Electronic Arts Inc.