01—Abstract
Summary
Summary of the 10-K filed May 20, 2020. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) demonstrated robust growth in its fiscal year ended March 31, 2020, with total net revenue increasing by 12% year-over-year to $5.537 billiona.
This growth was primarily fueled by strong performance in digital net revenue, which rose 16% to $4.314 billionb, highlighting the company's successful shift towards digital distribution and live services. Live services, in particular, saw a significant 27% increase, driven by in-game content purchases, especially within popular modes like FIFA Ultimate Team and Apex Legends. The company's strategic pillars focus on creating engaging games and content, supported by live services, and delivering them to a broad global audience.
EA's portfolio includes well-known franchises like FIFA, Madden NFL, Apex Legends, and The Sims, contributing to its market leadership. Despite the increasing importance of live services, the company also faces intense competition and the ongoing challenge of adapting to rapidly evolving industry trends and technologies. Management expressed confidence in the company's liquidity and ability to meet its operating requirements, even as it navigates the uncertainties presented by the COVID-19 pandemic.
02—Key points
Key Highlights
- Total net revenue increased by 12% to $5.537 billion for the fiscal year ended March 31, 2020.
- Digital net revenue grew by 16% to $4.314 billion, indicating a strong shift towards digital sales and services.
- Live services revenue increased by 27% to $2.813 billion, driven by extra content sales, notably in Ultimate Team modes.
- The company repurchased $1.207 billion of its common stock during the fiscal year.
- Operating income saw a substantial increase of 45% to $1.445 billion.
- Despite a significant one-time tax benefit of $1.760 billion impacting net income, underlying business performance showed strong year-over-year growth.
- Key franchises like FIFA, Apex Legends, and Star Wars Jedi: Fallen Order were significant revenue drivers.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Electronic Arts kept $0.55.
- Revenue$5.54B100.0%
- Cost of revenue−$1.37B24.7%
- Gross profit$4.17B75.3%
- Operating costs−$2.72B49.2%
- Operating income$1.45B26.1%
- Interest, other & tax$1.59B28.8%
- Net income$3.04B54.9%
Where FY2020 revenue went
$5.54B- Operating costs: $2.72B, 49% of revenue
- Operating income: $1.45B, 26% of revenue
- Cost of revenue: $1.37B, 25% of revenue
Kept 26% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed May 20, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $5.54B$4.95B | +11.9% |
| Cost of Revenue | $1.37B$1.32B | +3.6% |
| Gross Profit | $4.17B$3.63B | +14.9% |
| Operating Expenses | $2.72B$2.63B | +3.5% |
| Operating Income | $1.45B$996.00M | +45.1% |
| Interest Expense | $44.00M$45.00M | −2.2% |
| Net Income | $3.04B$1.02B | +198.2% |
| EPS (Basic) | $10.37$3.36 | +208.6% |
| EPS (Diluted) | $10.30$3.33 | +209.3% |
| Shares Outstanding (Basic) | 293.00M303.00M | −3.3% |
| Shares Outstanding (Diluted) | 295.00M306.00M | −3.6% |
05—Questions
Frequently Asked Questions
What is the primary driver of Electronic Arts' revenue growth?
Electronic Arts' primary revenue driver is its digital segment, particularly live services which include in-game purchases and subscriptions. This segment experienced significant growth, exceeding $2.8 billion in fiscal year 2020, demonstrating the success of its ongoing content and service offerings for popular titles like FIFA and Apex Legends.
How is Electronic Arts managing the shift from physical game sales to digital downloads?
Electronic Arts is actively managing the shift to digital by investing in and growing its digital offerings. The company has seen a consistent increase in digital net revenue, which now represents a larger portion of its total revenue. While packaged goods revenue has seen a slight decline, the overall growth in digital, including full game downloads and live services, compensates for this trend and generally leads to higher gross margins.
What are the major risks facing Electronic Arts according to the filing?
Key risks identified include intense competition within the gaming industry, the company's reliance on a few popular franchises (like FIFA), potential delays or failures in product development and launch schedules, the impact of economic conditions on consumer spending, cybersecurity threats, evolving government regulations (especially concerning in-game purchases and data privacy), and disruptions caused by global events such as the COVID-19 pandemic.
How did the COVID-19 pandemic impact Electronic Arts' business?
The company noted heightened levels of player engagement and live services bookings growth during the initial phases of the pandemic as people stayed home. EA implemented a 'Stay Home, Play Together' initiative. However, management also highlighted that the full impact remains uncertain and dependent on evolving factors like the duration of stay-at-home orders, ability to deliver games in a distributed workforce, and potential macroeconomic challenges.
06—Continue