01—Abstract
Summary
Summary of the 10-K filed May 24, 2011. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) reported its annual results for the fiscal year ending March 31, 2011.
The company experienced a slight decline in overall net revenue to $3.59 billiona, a decrease from $3.65 billion in the previous year. This revenue dip was primarily attributed to a strategic decision to reduce the number of games published, focusing on higher-margin opportunities and established franchises like FIFA, Battlefield, and Madden NFL. Despite the revenue decrease, EA significantly narrowed its net loss to $276 million from $677 million in the prior year, driven by improved gross profit margins and cost reduction initiatives, including a decrease in research and development expenses.
Key developments during the fiscal year included the announcement of a $600 millionb stock repurchase program and continued strategic investments in digital content distribution and mobile platforms, highlighted by the acquisition of Chillingo. The company is also preparing for the launch of highly anticipated titles such as "Star Wars: The Old Republic." EA's international revenue showed growth, now representing 49% of total net revenue, indicating a strong performance outside of North America. Investors should note the ongoing shift towards digital distribution and services as a key growth driver.
02—Key points
Key Highlights
- Net revenue decreased slightly to $3.59 billion from $3.65 billion in the prior fiscal year.
- Net loss narrowed significantly to $276 million from $677 million in the prior fiscal year, demonstrating improved profitability.
- The company reduced its total published titles from 54 in FY2010 to 36 in FY2011, focusing on higher-margin opportunities and key franchises.
- Digital content distribution and services revenue increased to $743 million, a significant growth from $522 million in FY2010.
- Announced a $600 million stock repurchase program, signaling confidence and a commitment to shareholder returns.
- International net revenue grew by 8% to $1.75 billion, representing 49% of total net revenue.
- Acquired Chillingo Limited, a key player in the mobile games market, to strengthen its digital and mobile offerings.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2011, Electronic Arts lost $0.08.
- Revenue$3.59B100.0%
- Cost of revenue−$1.50B41.8%
- Gross profit$2.09B58.2%
- Operating costs−$2.40B66.9%
- Operating income−$312.0M8.7%
- Interest, other & tax$36.0M1.0%
- Net income−$276.0M7.7%
04—Financials
Financial Highlights
Figures from 10-KFY2011filed May 24, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $3.59B$3.65B | −1.8% |
| Cost of Revenue | $1.50B$1.87B | −19.7% |
| Gross Profit | $2.09B$1.79B | +16.9% |
| Operating Expenses | $2.40B$2.47B | −2.9% |
| Operating Income | -$312.00M-$686.00M | +54.5% |
| Interest Expense | $1.00M$2.00M | −50.0% |
| Net Income | -$276.00M-$677.00M | +59.2% |
| EPS (Basic) | $-0.84$-2.08 | +59.6% |
| EPS (Diluted) | $-0.84$-2.08 | +59.6% |
| Shares Outstanding (Basic) | 330.00M325.00M | +1.5% |
| Shares Outstanding (Diluted) | 330.00M325.00M | +1.5% |
05—Questions
Frequently Asked Questions
What was EA's overall financial performance in fiscal year 2011?
For the fiscal year ending March 31, 2011, Electronic Arts Inc. reported a net revenue of $3.59 billion, a slight decrease from the prior year's $3.65 billion. The company significantly reduced its net loss to $276 million from $677 million in the previous year, reflecting improved cost management and a strategic focus on higher-margin products.
What are the key strategic shifts EA is making?
EA is strategically shifting its focus towards digital content distribution and services, as well as mobile gaming platforms. This is evidenced by revenue growth in these segments and the acquisition of mobile game publisher Chillingo. The company is also reducing the number of titles it publishes to concentrate on its most promising intellectual properties and franchises.
How is EA managing its product portfolio and R&D expenses?
EA has strategically reduced the number of games it develops and publishes, moving from 54 primary titles in FY2010 to 36 in FY2011, with plans for about 22 primary titles in FY2012. This strategy aims to concentrate development spending on fewer, higher-potential titles. Research and development expenses also decreased by 6% to $1.15 billion, reflecting these cost-reduction initiatives.
What is EA's approach to shareholder returns and capital allocation?
EA announced a $600 million stock repurchase program in February 2011, indicating a commitment to returning capital to shareholders. The company has not paid dividends historically and does not anticipate doing so in the near future, prioritizing reinvestment in the business and share repurchases.
06—Continue