Summary
Electronic Arts Inc. (EA) reported net revenue of $715 million for the three months ended September 30, 2011, an increase of 13% compared to the same period last year. This growth was primarily driven by strong performance from franchises like FIFA, Crysis, and Dragon Age, and an increase in revenue recognized from prior period deferrals, particularly for titles released in fiscal year 2011. However, the company also reported a net loss of $340 million for the quarter, a significant increase from the $201 million net loss in the prior year's comparable quarter. This widening loss is attributed to higher operating expenses, including increased marketing and sales, acquisition-related contingent consideration (largely due to the Playfish acquisition), and research and development costs. During the period, EA also made significant strategic moves, including the acquisition of PopCap Games for approximately $732 million and the issuance of $632.5 million in 0.75% Convertible Senior Notes due 2016. The company is also actively repurchasing its stock under an authorized $600 million program. While revenue showed year-over-year growth, driven by key franchises and the shift towards digital distribution and emerging platforms, the increased operating expenses and a notable rise in cash used in operating activities present challenges for profitability in the short term. Investors should monitor the integration of PopCap and the impact of increasing R&D and marketing spend against the backdrop of a competitive and evolving industry landscape.
Financial Highlights
48 data points| Revenue | $715.00M |
| Cost of Revenue | $432.00M |
| Gross Profit | $283.00M |
| Operating Expenses | $657.00M |
| Operating Income | -$374.00M |
| Net Income | -$340.00M |
| EPS (Basic) | $-1.03 |
| EPS (Diluted) | $-1.03 |
| Shares Outstanding (Basic) | 331.00M |
Key Highlights
- 1Net revenue for the three months ended September 30, 2011, increased by 13% to $715 million compared to the prior year, driven by strong franchise performance and recognition of deferred revenue.
- 2Net loss for the quarter widened to $340 million, up from $201 million in the prior year, primarily due to increased operating expenses.
- 3Acquisition of PopCap Games completed in August 2011 for approximately $732 million, strengthening EA's casual gaming and digital business.
- 4Issued $632.5 million in 0.75% Convertible Senior Notes due 2016 to fund general corporate purposes and potential strategic opportunities.
- 5Cash used in operating activities increased significantly by $203 million for the six months ended September 30, 2011, compared to the same period in 2010.
- 6Digital content distribution and services revenue grew significantly, indicating a successful strategic shift towards online and mobile platforms.
- 7The company continued its stock repurchase program, buying back $247 million of its common stock as of September 30, 2011.