01—Abstract
Summary
Summary of the 10-K filed May 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) demonstrated robust financial performance in fiscal year 2018, with total net revenue reaching $5.15 billiona, a 6% increase year-over-year.
A significant driver of this growth was the digital segment, which surged 20% to $3.45 billionb, now representing 67% of total net revenue. This shift towards digital, including live services which contributed 40% of total revenue and particularly the Ultimate Team modes, indicates a successful transition in the company's business model. The company also reported strong operating income of $1.43 billion and net income of $1.04 billion, with diluted earnings per share at $3.34, reflecting improved profitability.
EA's strategic focus on its "Players First," "Commitment to Digital," and "One EA" pillars appears to be resonating, as evidenced by the growth in digital revenue and engagement through live services. The company also continues to invest in research and development, with expenses increasing 10% to $1.32 billionc, supporting the development of its diverse game portfolio. Despite the competitive landscape, EA's strong performance and strategic direction position it well for continued growth in the interactive entertainment market.
02—Key points
Key Highlights
- Total net revenue grew 6% year-over-year to $5.15 billion.
- Digital revenue increased significantly by 20% to $3.45 billion, making up 67% of total revenue.
- Live services revenue constituted 40% of total revenue, highlighting the importance of ongoing player engagement.
- Operating income rose 17% to $1.43 billion, indicating strong operational efficiency.
- Net income increased 8% to $1.04 billion, with diluted EPS at $3.34.
- Research and development expenses increased by 10% to $1.32 billion, supporting future game development.
- The company actively repurchased shares, repurchasing approximately $570 million under its $1.2 billion repurchase program authorized in May 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Electronic Arts kept $0.20.
- Revenue$5.15B100.0%
- Cost of revenue−$1.28B24.8%
- Gross profit$3.87B75.2%
- Operating costs−$2.44B47.4%
- Operating income$1.43B27.8%
- Interest, other & tax−$391.0M7.6%
- Net income$1.04B20.3%
Where FY2018 revenue went
$5.15B- Operating costs: $2.44B, 47% of revenue
- Cost of revenue: $1.28B, 25% of revenue
- Net income: $1.04B, 20% of revenue
- Interest, other & tax: $391.0M, 7.6% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed May 23, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $5.15B$4.84B | +6.3% |
| Cost of Revenue | $1.28B$1.30B | −1.6% |
| Gross Profit | $3.87B$3.55B | +9.2% |
| Operating Expenses | $2.44B$2.32B | +5.0% |
| Operating Income | $1.43B$1.22B | +17.2% |
| Interest Expense | $44.00M$47.00M | −6.4% |
| Net Income | $1.04B$967.00M | +7.9% |
| EPS (Basic) | $3.39$3.19 | +6.3% |
| EPS (Diluted) | $3.34$3.08 | +8.4% |
| Shares Outstanding (Basic) | 308.00M303.00M | +1.7% |
| Shares Outstanding (Diluted) | 312.00M314.00M | −0.6% |
05—Questions
Frequently Asked Questions
What is the primary driver of Electronic Arts' revenue growth as of fiscal year 2018?
The primary driver of Electronic Arts' revenue growth in fiscal year 2018 was its digital segment, which saw a 20% year-over-year increase, driven by live services like the Ultimate Team modes in its sports franchises and increased full-game downloads. Digital revenue now represents 67% of the company's total net revenue.
How is Electronic Arts investing in its future growth?
Electronic Arts is investing in its future growth through increased spending on research and development, which rose 10% to $1.32 billion in fiscal year 2018. This investment supports the development of new games and the enhancement of live services. The company is also strategically focused on expanding its digital offerings and strengthening its player network through consistent cross-company methodologies.
What is Electronic Arts' approach to returning capital to shareholders?
Electronic Arts demonstrates a commitment to returning capital to shareholders primarily through its stock repurchase programs. In fiscal year 2018, the company repurchased approximately $570 million of its common stock under a program authorized in May 2017. A new, larger repurchase program of up to $2.4 billion was authorized in May 2018, indicating a continued focus on share buybacks.
How does the company manage risks related to its intellectual property and licensing?
EA relies on a combination of copyrights, trademarks, patents, trade secrets, and contractual provisions to protect its intellectual property. The company actively engages in enforcement activities. For licensed IP, such as FIFA, Madden NFL, and Star Wars, EA faces competition for these licenses and may see increased costs due to high demand, but its diverse portfolio helps mitigate some of the risk associated with any single license.
06—Continue