10-QPeriod: Q2 FY2018

ELECTRONIC ARTS INC. Quarterly Report for Q2 Ended Sep 30, 2017

Filed November 7, 2017For Securities:EA

Summary

Electronic Arts Inc. (EA) reported total net revenue of $959 million for the third quarter of fiscal year 2018, a 7% increase year-over-year, driven by strong performance in its digital segment. Digital net revenue saw a significant 22% increase, reaching $689 million, fueled by growth in full game downloads and live services, particularly from popular franchises like FIFA and Battlefield. Despite revenue growth, the company reported a net loss of $22 million for the quarter, compared to a loss of $38 million in the prior year's comparable quarter. Operating expenses increased by 12% year-over-year, impacting profitability. The company ended the quarter with a strong liquidity position, holding $4.355 billion in cash, cash equivalents, and short-term investments. EA also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders.

Financial Highlights

48 data points
Beta

Revenue

$959.00M

59.4% Gross Margin

Net Income

-$22.00M

-2.3% Net Margin

EPS (Diluted)

$-0.07

Total Assets

$7.92B

Cash & Equivalents

$2.07B

Free Cash Flow

$52.00M

Financial Statements
Beta
Revenue$959.00M
Cost of Revenue$389.00M
Gross Profit$570.00M
Operating Expenses$611.00M
Operating Income-$41.00M
Interest Expense-$11.00M
Net Income-$22.00M
EPS (Basic)$-0.07
EPS (Diluted)$-0.07
Shares Outstanding (Basic)309.00M
Shares Outstanding (Diluted)309.00M

Key Highlights

  • 1Total net revenue increased by 7% year-over-year to $959 million, driven by a 22% increase in digital net revenue to $689 million.
  • 2Live services and full game downloads were key drivers of digital revenue growth.
  • 3Despite revenue growth, EA reported a net loss of $22 million for the quarter, a slight improvement from the $38 million net loss in the prior year.
  • 4Operating expenses increased by 12% year-over-year, impacting profitability.
  • 5The company maintained a strong liquidity position with $4.355 billion in cash, cash equivalents, and short-term investments.
  • 6EA actively repurchased approximately $153 million worth of its common stock during the quarter under its new $1.2 billion repurchase program.

Frequently Asked Questions

The primary driver of revenue growth was the significant increase in digital net revenue, which rose by 22% year-over-year to $689 million. This growth was largely attributable to strong performance in full game downloads and live services, particularly from franchises like FIFA and Battlefield.

While revenue increased, operating expenses also grew by 12% year-over-year. This increase in expenses, which included research and development and marketing costs, outpaced revenue growth, leading to a net loss for the quarter. The company also experienced a higher effective tax rate in the current quarter.

EA maintains a strong financial position, ending the quarter with $4.355 billion in cash, cash equivalents, and short-term investments. The company generated $228 million in net cash from operating activities during the first six months of the fiscal year, indicating healthy cash flow generation. Management believes its current resources are sufficient to meet operating requirements for at least the next 12 months.

Yes, EA is actively returning value to shareholders through its share repurchase program. The company repurchased approximately $153 million of its common stock during the quarter under its new $1.2 billion authorization. This demonstrates a commitment to managing capital effectively and rewarding investors.