01—Abstract
Summary
Summary of the 10-K filed May 22, 2013. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) reported net revenue of $3.8 billiona for the fiscal year ended March 31, 2013, a decrease of 8% from the prior year.
While packaged goods revenue declined, this was partially offset by a significant increase in digital and service-based revenue, which grew 36% to $1.66 billionb, demonstrating the company's ongoing shift towards digital distribution and content. Net income improved to $98 million from $76 million in the prior year, driven by a substantial reduction in operating expenses and a gain on strategic investments, though this was partially offset by lower gross profit. EA is strategically investing in products and services for upcoming next-generation consoles while continuing to leverage its strong portfolio of brands across multiple platforms.
02—Key points
Key Highlights
- Net revenue for FY2013 was $3.8 billion, a decrease of 8% year-over-year, driven by a decline in packaged goods sales.
- Digital and service revenue showed strong growth, increasing by 36% to $1.66 billion, highlighting the company's successful transition to digital distribution models.
- Net income increased to $98 million from $76 million in the prior fiscal year, attributed to cost reductions and a gain on a strategic investment.
- The company is actively preparing for the launch of new console generation systems from Microsoft and Sony, investing in products and services for these platforms.
- EA continues to reduce its number of major titles released, focusing on building additional online features, content, and services around each title, with 13 major console/PC titles planned for FY2013 compared to 22 in FY2012.
- The company repurchased approximately $278 million of its common stock under its $500 million repurchase program authorized in July 2012.
- Key franchises driving revenue in FY2013 included FIFA, Battlefield, and Mass Effect, with FIFA 13 alone representing 17% of total net revenue.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Electronic Arts kept $0.03.
- Revenue$3.80B100.0%
- Cost of revenue−$1.39B36.6%
- Gross profit$2.41B63.4%
- Operating costs−$2.29B60.3%
- Operating income$121.0M3.2%
- Interest, other & tax−$23.0M0.6%
- Net income$98.0M2.6%
Where FY2013 revenue went
$3.80B- Operating costs: $2.29B, 60% of revenue
- Cost of revenue: $1.39B, 37% of revenue
- Net income: $98.0M, 2.6% of revenue
- Interest, other & tax: $23.0M, 0.6% of revenue
Kept 2.6% as net incomeNet income $98.0M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed May 22, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $3.80B$4.14B | −8.4% |
| Cost of Revenue | $1.39B$1.60B | −13.1% |
| Gross Profit | $2.41B$2.54B | −5.3% |
| Operating Expenses | $2.29B$2.51B | −8.8% |
| Operating Income | $121.00M$35.00M | +245.7% |
| Interest Expense | $29.00M$20.00M | +45.0% |
| Net Income | $98.00M$76.00M | +28.9% |
| EPS (Basic) | $0.32$0.23 | +39.1% |
| EPS (Diluted) | $0.31$0.23 | +34.8% |
| Shares Outstanding (Basic) | 310.00M331.00M | −6.3% |
| Shares Outstanding (Diluted) | 313.00M336.00M | −6.8% |
05—Questions
Frequently Asked Questions
What is EA's strategy regarding digital content and distribution?
EA's strategy is to transform its business by focusing on direct-to-consumer sales through online and wireless networks. This includes offering online-delivered content and services as add-ons to games, direct downloads through platforms like Origin, and free-to-play or subscription-based games for mobile and internet platforms. The company has seen substantial growth in these digital revenue streams.
How is EA preparing for the next generation of gaming consoles?
EA is investing in products and services for the new console systems announced by Microsoft and Sony, as well as the recently released Wii U. The company acknowledges that its success with these next-generation platforms depends on their commercial adoption, availability, and EA's ability to develop successful titles for them.
What is the impact of EA's reduced title release strategy?
EA has significantly reduced the number of major titles released annually, down from over 60 in FY2009 to 13 major console/PC titles in FY2013. This strategy allows EA to concentrate development spending on fewer, more promising intellectual properties and build out online features, content, and services around each core title.
How does EA manage its reliance on key platform partners like Sony and Microsoft?
EA's business is significantly reliant on console manufacturers like Sony and Microsoft, which control the approval, manufacturing, and distribution of games for their platforms. EA has agreements with these partners that grant them significant control over product distribution and terms, which could impact EA's ability to bring products to market.
What are the main risks highlighted by EA in its 2013 10-K filing?
Key risks highlighted include intense industry competition and the 'hit-driven' nature of the business, dependence on the success of new console hardware, the need to consistently meet product development schedules, rapid technological changes, potential disruptions to online services, and the concentration of sales among a few key customers.
06—Continue