01—Abstract
Summary
Summary of the 10-K filed May 22, 2009. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) reported a challenging fiscal year ending March 31, 2009, marked by a significant net loss of $1,088 milliona, a substantial increase from the prior year's net loss of $454 million.
This downturn was largely attributed to a $368 millionb 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.
02—Key points
Key Highlights
- Reported 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.
- Net revenue increased by 15% year-over-year to $4.21 billion, driven by popular titles such as Rock Band 2 and Spore.
- Recorded a substantial goodwill impairment charge of $368 million related to the EA Mobile reporting unit.
- Implemented a cost reduction plan in fiscal year 2009, involving an approximately 11% workforce reduction (1,100 employees) and facility closures.
- North American revenue grew by 24% to $2.41 billion, representing 57% of total net revenue.
- International revenue increased by 4% to $1.80 billion, accounting for 43% of total net revenue.
- The company did not pay any cash dividends and does not anticipate paying them in the foreseeable future.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Electronic Arts lost $0.26.
- Revenue$4.21B100.0%
- Cost of revenue−$2.13B50.5%
- Gross profit$2.08B49.5%
- Operating costs−$2.91B69.1%
- Operating income−$827.0M19.6%
- Interest, other & tax−$261.0M6.2%
- Net income−$1.09B25.8%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed May 22, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $4.21B$3.67B | +14.9% |
| Cost of Revenue | $2.13B$1.80B | +17.8% |
| Gross Profit | $2.08B$1.86B | +12.1% |
| Operating Expenses | $2.91B$2.35B | +24.1% |
| Operating Income | -$827.00M-$487.00M | −69.8% |
| Net Income | -$1.09B-$454.00M | −139.6% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Electronic Arts' financial performance in FY2009?
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.
What actions did Electronic Arts take to address its financial performance?
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.
How did the economic downturn affect Electronic Arts?
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.
What is the company's strategy regarding online and digital content?
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.
06—Continue