10-KPeriod: FY2009

ELECTRONIC ARTS INC. Annual Report, Year Ended Mar 31, 2009

Filed May 22, 2009For Securities:EA

Summary

Electronic Arts Inc. (EA) reported a challenging fiscal year ending March 31, 2009, marked by a significant net loss of $1,088 million, a substantial increase from the prior year's net loss of $454 million. This downturn was largely attributed to a $368 million goodwill impairment charge related to its EA Mobile reporting unit and a $362 million increase in the valuation allowance for deferred tax assets. Revenue, however, saw an increase of 15% to $4.21 billion, driven by strong performances from titles like Rock Band 2 and Spore. The company also initiated a cost reduction plan in fiscal year 2009, which included workforce reductions and facility closures, aiming to improve efficiency and focus the product portfolio amidst a weakening global economy. Despite the financial setbacks, EA continues to invest in its key franchises and explore growth opportunities in digitally delivered content and services.

Financial Highlights

43 data points
Beta

Revenue

$4.21B

49.5% Gross Margin

Net Income

-$1.09B

-25.8% Net Margin

Total Assets

$4.68B

Cash & Equivalents

$1.62B

Free Cash Flow

$12.00M

Financial Statements
Beta
Revenue$4.21B
Cost of Revenue$2.13B
Gross Profit$2.08B
Operating Expenses$2.91B
Operating Income-$827.00M
Net Income-$1.09B

Key Highlights

  • 1Reported a significant net loss of $1,088 million for the fiscal year ended March 31, 2009, a notable increase from a $454 million net loss in the prior year.
  • 2Net revenue increased by 15% year-over-year to $4.21 billion, driven by popular titles such as Rock Band 2 and Spore.
  • 3Recorded a substantial goodwill impairment charge of $368 million related to the EA Mobile reporting unit.
  • 4Implemented a cost reduction plan in fiscal year 2009, involving an approximately 11% workforce reduction (1,100 employees) and facility closures.
  • 5North American revenue grew by 24% to $2.41 billion, representing 57% of total net revenue.
  • 6International revenue increased by 4% to $1.80 billion, accounting for 43% of total net revenue.
  • 7The company did not pay any cash dividends and does not anticipate paying them in the foreseeable future.

Frequently Asked Questions

The primary drivers were a significant increase in net revenue to $4.21 billion, boosted by strong sales of titles like Rock Band 2 and Spore. However, the company also incurred a substantial goodwill impairment charge of $368 million related to its EA Mobile business and a significant increase in its deferred tax asset valuation allowance, both of which contributed to a large net loss of $1,088 million.

EA initiated a cost reduction plan in fiscal year 2009, which included a narrowing of its product portfolio, a workforce reduction of approximately 11% (1,100 employees), and the closure of 10 facilities. The company also consolidated its business units into three primary Labels: EA Games, EA SPORTS, and EA Play.

The report indicates that the national and global economic downturn led to a general decline in consumer spending. This resulted in retailers adopting a more conservative approach to inventory ordering, which contributed to a decrease in anticipated demand for EA's products during the critical 2008 holiday selling season.

EA views electronically delivered products and services as an increasingly important part of its business. This includes direct electronic downloads, add-on content for existing games, and online-only games and services. The company has made significant investments in this area, anticipating future growth.