10-KPeriod: FY2018

ELECTRONIC ARTS INC. Annual Report, Year Ended Mar 31, 2018

Filed May 23, 2018For Securities:EA

Summary

Electronic Arts Inc. (EA) demonstrated robust financial performance in fiscal year 2018, with total net revenue reaching $5.15 billion, a 6% increase year-over-year. A significant driver of this growth was the digital segment, which surged 20% to $3.45 billion, 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 billion, 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.

Financial Highlights

49 data points
Beta

Revenue

$5.15B

75.2% Gross Margin

Net Income

$1.04B

20.3% Net Margin

EPS (Diluted)

$3.34

Total Assets

$8.58B

Cash & Equivalents

$4.26B

Free Cash Flow

$1.69B

Financial Statements
Beta
Revenue$5.15B
Cost of Revenue$1.28B
Gross Profit$3.87B
Operating Expenses$2.44B
Operating Income$1.43B
Interest Expense$44.00M
Net Income$1.04B
EPS (Basic)$3.39
EPS (Diluted)$3.34
Shares Outstanding (Basic)308.00M
Shares Outstanding (Diluted)312.00M

Key Highlights

  • 1Total net revenue grew 6% year-over-year to $5.15 billion.
  • 2Digital revenue increased significantly by 20% to $3.45 billion, making up 67% of total revenue.
  • 3Live services revenue constituted 40% of total revenue, highlighting the importance of ongoing player engagement.
  • 4Operating income rose 17% to $1.43 billion, indicating strong operational efficiency.
  • 5Net income increased 8% to $1.04 billion, with diluted EPS at $3.34.
  • 6Research and development expenses increased by 10% to $1.32 billion, supporting future game development.
  • 7The company actively repurchased shares, repurchasing approximately $570 million under its $1.2 billion repurchase program authorized in May 2017.

Frequently Asked Questions

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.

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.

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.

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.