10-QPeriod: Q1 FY2021

ELECTRONIC ARTS INC. Quarterly Report for Q1 Ended Jun 30, 2020

Filed August 7, 2020For Securities:EA

Summary

Electronic Arts Inc. (EA) reported a strong first quarter for fiscal year 2021, with net revenue increasing by 21% year-over-year to $1.46 billion. This growth was primarily driven by robust performance in live services, which saw a 16% increase, and a significant 37% rise in full game sales. The company highlighted the impact of increased player engagement due to the COVID-19 pandemic, which led to record-breaking operating cash flow and net bookings for a fiscal first quarter. Despite the revenue growth, net income decreased by 74% to $365 million, largely due to a significant one-time tax benefit recognized in the prior year's comparable quarter. EA's balance sheet remains strong, with $4.01 billion in cash and cash equivalents and $1.95 billion in short-term investments, providing ample liquidity. The company continued its share repurchase program, though at a reduced pace compared to the previous year. Management expressed confidence in the company's ability to meet its operating requirements and strategic objectives, supported by its diverse portfolio, strong live services, and digital delivery model.

Financial Statements
Beta
Revenue$1.46B
Cost of Revenue$288.00M
Gross Profit$1.17B
Operating Expenses$700.00M
Operating Income$471.00M
Interest Expense$11.00M
Net Income$365.00M
EPS (Basic)$1.27
EPS (Diluted)$1.25
Shares Outstanding (Basic)288.00M
Shares Outstanding (Diluted)292.00M

Key Highlights

  • 1Net revenue grew 21% year-over-year to $1.46 billion, driven by strong performance across full game downloads and live services.
  • 2Live services and other net revenue increased by 16% to $1.1 billion, highlighting continued player engagement with ongoing content and subscriptions.
  • 3Full game net revenue saw a substantial increase of 37% to $359 million, boosted by titles like FIFA 20, The Sims 4, and Star Wars Jedi: Fallen Order.
  • 4Operating cash flow significantly improved, increasing by 139% year-over-year to $378 million, demonstrating strong operational efficiency and cash generation.
  • 5The company ended the quarter with a healthy liquidity position, holding $4.01 billion in cash and cash equivalents and $1.95 billion in short-term investments.
  • 6Net income decreased by 74% to $365 million, primarily due to a large one-time tax benefit recorded in the prior year's quarter, masking underlying operational improvements.
  • 7Net bookings increased significantly by 78% to $1.39 billion, driven by broad-based strength across key franchises and the positive impact of increased player engagement.

Frequently Asked Questions

Net revenue increased by 21% to $1.46 billion due to strong performance in both live services and full game sales. The company benefited from increased player engagement, particularly as more people stayed home due to the COVID-19 pandemic, leading to higher sales of its popular titles and in-game content.

The decrease in net income of 74% to $365 million was primarily due to a one-time net tax benefit of $1.08 billion that was recognized in the same quarter of the prior fiscal year. Excluding this benefit, the underlying operational performance showed strength.

EA maintains a strong financial position with $4.01 billion in cash and cash equivalents and $1.95 billion in short-term investments as of June 30, 2020. The company's operating cash flow also saw a substantial increase, indicating healthy liquidity and financial stability.

Live services and other revenue, which includes extra content, subscriptions, and other services, continues to be a material and growing part of EA's business. This segment increased by 16% year-over-year, driven by strong player engagement with titles like FIFA Ultimate Team, The Sims 4, and Apex Legends, and is expected to remain a key revenue driver.