ELECTRONIC ARTS INC. Quarterly Report for Q1 Ended Jun 30, 2019

Summary

Electronic Arts Inc. (EA) reported strong performance for the first quarter of fiscal year 2020, ending June 30, 2019. Total net revenue increased by 6% year-over-year to $1.209 billion, primarily driven by a significant 12% increase in 'Service and other' revenue, which reached $1.043 billion. This growth was substantially fueled by strong performance in live services, particularly from titles like Apex Legends and The Sims 4, showcasing the company's successful shift towards recurring revenue models. Despite a slight decrease in 'Product' revenue, the overall increase in net revenue and a 3.4 percentage point improvement in gross margin to 84.5% led to a 38% surge in operating income to $415 million. Net income more than quadrupled year-over-year to $1.421 billion, resulting in a diluted EPS of $4.75. The company also demonstrated healthy operating cash flow of $158 million and maintained a robust cash position of $5.187 billion in cash and short-term investments. EA continued its capital return program by repurchasing $305 million of its common stock.

Key Highlights

• 1Total net revenue grew 6% year-over-year to $1.209 billion, driven by a strong 'Service and other' segment.
• 2Net income increased significantly to $1.421 billion, a substantial rise from $293 million in the prior year period.
• 3Diluted earnings per share (EPS) reached $4.75, up from $0.95 in the comparable prior year quarter.
• 4Gross margin improved to 84.5% from 81.1% in the prior year quarter.
• 5Operating cash flow was $158 million, up 32% year-over-year.
• 6The company repurchased $305 million of its common stock during the quarter.
• 7Digital net revenue increased by 10% to $1.049 billion, indicating a continued shift towards digital distribution.

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