10-QPeriod: Q3 FY2015

ELECTRONIC ARTS INC. Quarterly Report for Q3 Ended Dec 31, 2014

Filed February 4, 2015For Securities:EA

Summary

Electronic Arts Inc. (EA) reported a strong third quarter for fiscal year 2015, with total net revenue increasing by 39% year-over-year to $1.126 billion. This growth was primarily driven by the success of its FIFA and Madden franchises, as well as strong performance in digital sales, which increased by 34% to $693 million. The company also saw a significant improvement in profitability, reporting a net income of $142 million, a substantial turnaround from a net loss of $308 million in the same quarter last year. This improvement is attributed to increased net revenue, decreased cost of revenue, and lower operating expenses. Key financial highlights include a healthy increase in cash and cash equivalents to $2.166 billion, up from $1.782 billion at the start of the fiscal year, reflecting robust operating cash flow. The company's strategic shift towards digital content and services continues to show positive results, with digital revenue playing an increasingly important role. Management expressed confidence in the company's liquidity and ability to meet its operational needs and strategic objectives.

Financial Highlights

50 data points
Beta

Revenue

$1.13B

64.4% Gross Margin

Net Income

$142.00M

12.6% Net Margin

EPS (Diluted)

$0.44

Total Assets

$6.17B

Cash & Equivalents

$2.17B

Free Cash Flow

$682.00M

Financial Statements
Beta
Revenue$1.13B
Cost of Revenue$300.00M
Gross Profit$725.00M
Operating Expenses$563.00M
Operating Income$162.00M
Interest Expense-$8.00M
Net Income$142.00M
EPS (Basic)$0.46
EPS (Diluted)$0.44
Shares Outstanding (Basic)311.00M
Shares Outstanding (Diluted)323.00M

Key Highlights

  • 1Total net revenue increased by 39% to $1.126 billion for the three months ended December 31, 2014, compared to the prior year period.
  • 2Net income improved significantly to $142 million, a substantial recovery from a net loss of $308 million in the same period last year.
  • 3Digital revenue grew by 34% to $693 million, highlighting the company's successful transition to digital business models.
  • 4Operating cash flow was strong, with $869 million generated in the nine months ended December 31, 2014.
  • 5Cash and cash equivalents increased by $384 million to $2.166 billion as of December 31, 2014.
  • 6The company repurchased approximately $97 million of its common stock during the quarter under its $750 million repurchase program.
  • 7The company's 0.75% Convertible Senior Notes due 2016 became convertible at the holder's option during the quarter.

Frequently Asked Questions

Electronic Arts (EA) reported a significant increase in net revenue for the three months ended December 31, 2014, with total net revenue reaching $1.126 billion, a 39% increase compared to the same period in the previous year. This growth was driven by strong sales in franchises like FIFA and Madden, and a 34% increase in digital revenue.

EA demonstrated a substantial improvement in profitability, reporting a net income of $142 million for the three months ended December 31, 2014. This is a significant turnaround from a net loss of $308 million recorded in the corresponding quarter of the prior fiscal year. The improvement was attributed to higher revenues and reduced costs.

EA's financial health appears strong. Cash and cash equivalents increased to $2.166 billion as of December 31, 2014. The company generated $869 million in cash from operating activities during the first nine months of the fiscal year. Management believes its current cash, investments, and operating cash flow are sufficient to meet its needs for at least the next 12 months.

EA has outstanding 0.75% Convertible Senior Notes due 2016, with a principal amount of $633 million. Notably, during this quarter, the conditions were met for these notes to become convertible at the holder's option through March 27, 2015. The company also has a $500 million revolving credit facility, under which no amounts were outstanding as of December 31, 2014.