10-QPeriod: Q2 FY2017

ELECTRONIC ARTS INC. Quarterly Report for Q2 Ended Sep 30, 2016

Filed November 8, 2016For Securities:EA

Summary

Electronic Arts Inc. (EA) reported its fiscal second quarter and first half results for the period ending September 30, 2016. The company saw a 10% year-over-year increase in total net revenue to $898 million for the quarter, driven by a strong performance in 'Service and other' revenue, which grew 25%. Digital net revenue also showed robust growth, increasing 13% to $566 million for the quarter. Despite top-line growth, EA reported a net loss of $38 million for the quarter, compared to a net loss of $140 million in the prior year period. The first half of the fiscal year, however, resulted in a net income of $402 million, a significant improvement from $302 million in the prior year. The company's liquidity position remains strong, with total cash, cash equivalents, and short-term investments at $3.27 billion as of September 30, 2016.

Financial Highlights

48 data points
Beta

Revenue

$898.00M

55.3% Gross Margin

Net Income

-$38.00M

-4.2% Net Margin

EPS (Diluted)

$-0.13

Total Assets

$6.89B

Cash & Equivalents

$1.75B

Free Cash Flow

$122.00M

Financial Statements
Beta
Revenue$898.00M
Cost of Revenue$401.00M
Gross Profit$497.00M
Operating Expenses$546.00M
Operating Income-$49.00M
Interest Expense-$11.00M
Net Income-$38.00M
EPS (Basic)$-0.13
EPS (Diluted)$-0.13
Shares Outstanding (Basic)301.00M
Shares Outstanding (Diluted)301.00M

Key Highlights

  • 1Total net revenue for the three months ended September 30, 2016, increased by 10% year-over-year to $898 million.
  • 2Service and other revenue saw a significant 25% increase year-over-year, reaching $478 million for the quarter.
  • 3Digital net revenue grew 13% to $566 million for the quarter, indicating a successful digital transformation.
  • 4EA reported a net loss of $38 million for the three months ended September 30, 2016, compared to a net loss of $140 million in the prior year.
  • 5For the six months ended September 30, 2016, net income was $402 million, a substantial increase from $302 million in the same period last year.
  • 6Total cash, cash equivalents, and short-term investments stood at $3.27 billion as of September 30, 2016, demonstrating a strong liquidity position.
  • 7The company actively repurchased shares, with approximately $127 million spent on repurchases during the quarter.

Frequently Asked Questions

For the quarter ended September 30, 2016, Electronic Arts reported a 10% increase in total net revenue to $898 million, driven by growth in service and other revenue and digital sales. However, the company posted a net loss of $38 million, an improvement from the $140 million net loss in the same quarter last year. For the first half of the fiscal year, net income was $402 million, up from $302 million year-over-year.

Revenue from 'Service and other' increased by 25% year-over-year to $478 million for the quarter, highlighting the success of their digital offerings and ongoing services. Digital net revenue also grew by 13% to $566 million for the quarter. Product revenue saw a slight decrease of 3% to $420 million.

EA maintained a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $3.27 billion as of September 30, 2016. The company stated that it believes its current cash reserves, operational cash flow, and available financing facilities will be sufficient to meet its operating requirements for at least the next 12 months.

During the quarter, EA repurchased approximately $127 million of its common stock under its ongoing share repurchase program. The company also completed the maturity and repayment of its 0.75% Convertible Senior Notes due 2016.