Summary
Electronic Arts Inc. (EA) reported its financial results for the fiscal quarter ended June 30, 2018, showing a notable shift in revenue recognition due to the adoption of ASC 606, Revenue From Contracts with Customers. While total net revenue decreased by 22% to $1.137 billion compared to the prior year, a significant portion of this decline is attributed to the new accounting standard which reclassified revenue, particularly shifting revenue from product sales to services and other categories. Digital net revenue, however, showed resilience, growing 9% year-over-year to $957 million, indicating continued strength in the digital segment. Despite the revenue decline under the new standard, the company's operational performance, when considered under the old revenue standard, indicated a much smaller year-over-year decrease of 2%. This highlights the impact of accounting changes rather than a fundamental decline in sales. Profitability also saw a significant decrease, with net income falling to $293 million from $644 million in the prior year, largely influenced by the revenue recognition changes. The company continues to return capital to shareholders through an active stock repurchase program, highlighting a commitment to shareholder value.
Financial Highlights
48 data points| Revenue | $1.14B |
| Cost of Revenue | $215.00M |
| Gross Profit | $922.00M |
| Operating Expenses | $622.00M |
| Operating Income | $300.00M |
| Interest Expense | $11.00M |
| Net Income | $293.00M |
| EPS (Basic) | $0.96 |
| EPS (Diluted) | $0.95 |
| Shares Outstanding (Basic) | 306.00M |
| Shares Outstanding (Diluted) | 310.00M |
Key Highlights
- 1Total net revenue decreased by 22% to $1.137 billion due to the adoption of ASC 606, which reclassified revenue recognition, primarily shifting revenue from product to service categories.
- 2Digital net revenue grew by 9% year-over-year to $957 million, demonstrating continued strength in the company's digital offerings.
- 3Net income significantly decreased to $293 million compared to $644 million in the prior year, largely influenced by the changes in revenue recognition under ASC 606.
- 4Operating expenses increased by 13% year-over-year to $622 million, driven by investments in R&D and increased stock-based compensation.
- 5The company repurchased approximately $224 million of its common stock during the quarter under its new $2.4 billion share repurchase program.
- 6Cash and cash equivalents, along with short-term investments, stood at $4.971 billion, indicating a solid liquidity position.
- 7The adoption of ASC 606 significantly impacted the balance sheet, particularly by reducing deferred net revenue and increasing retained earnings, reflecting a shift in revenue timing.