10-QPeriod: Q3 FY2021

ELECTRONIC ARTS INC. Quarterly Report for Q3 Ended Dec 31, 2020

Filed February 8, 2021For Securities:EA

Summary

Electronic Arts Inc. (EA) reported its financial results for the third quarter of fiscal year 2021, ending December 31, 2020. The company demonstrated revenue growth, with net revenue reaching $1.67 billion, a 5% increase year-over-year, driven by strong performance in live services and other revenue streams, which grew 5% to $951 million. Despite increased operating expenses, EA maintained a healthy gross margin of 64.1% for the quarter. Operationally, EA highlighted the resilience of digital sales, noting a significant increase potentially driven by pandemic-related behavioral shifts. The company also announced significant strategic moves, including the pending acquisition of Codemasters and the recently announced agreement to acquire Glu Mobile Inc., signaling aggressive expansion plans. EA also initiated a quarterly cash dividend, underscoring a commitment to returning value to shareholders alongside growth initiatives.

Financial Highlights

50 data points
Beta

Revenue

$1.67B

64.1% Gross Margin

Net Income

$211.00M

12.6% Net Margin

EPS (Diluted)

$0.72

Total Assets

$12.42B

Cash & Equivalents

$4.77B

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$1.67B
Cost of Revenue$601.00M
Gross Profit$1.07B
Operating Expenses$821.00M
Operating Income$251.00M
Interest Expense$11.00M
Net Income$211.00M
EPS (Basic)$0.73
EPS (Diluted)$0.72
Shares Outstanding (Basic)290.00M
Shares Outstanding (Diluted)292.00M

Key Highlights

  • 1Net revenue increased by 5% year-over-year to $1.67 billion for the third quarter.
  • 2Live services and other net revenue grew by 5% to $951 million, demonstrating continued strength in recurring revenue streams.
  • 3Gross margin remained strong at 64.1%, although down 4 percentage points year-over-year.
  • 4Operating income saw a decrease of 30% year-over-year to $251 million, impacted by increased operating expenses.
  • 5Net income was $211 million, with diluted earnings per share of $0.72.
  • 6The company repurchased $326 million of its common stock during the quarter and initiated a quarterly cash dividend of $0.17 per share.
  • 7EA announced significant acquisitions: Codemasters (expected to close February 2021) and Glu Mobile (expected to close Q1 FY2022), signaling a strategic push for growth.

Frequently Asked Questions

Electronic Arts Inc. (EA) reported net revenue of $1.67 billion for the third quarter ended December 31, 2020, representing a 5% increase compared to $1.59 billion in the same period of the prior year. This growth was primarily driven by increases in full game downloads and live services and other revenue.

EA is pursuing a dual strategy of organic growth and strategic acquisitions. The company announced the pending acquisition of Codemasters for approximately $1.3 billion and entered into a definitive agreement to acquire Glu Mobile Inc. for approximately $2.4 billion. These acquisitions are expected to expand EA's portfolio and market reach, particularly in mobile gaming with Glu Mobile.

During the three months ended December 31, 2020, the change in the Estimated Offering Period resulted in an estimated decrease of $125 million in net revenue and $105 million in net income, leading to a $0.36 decrease in diluted earnings per share. This change reflects a shift towards recognizing revenue over a longer period due to longer consumer engagement with games and services.

Electronic Arts demonstrated a commitment to shareholder returns by initiating a quarterly cash dividend of $0.17 per share, which totaled $49 million in cash dividends paid during the quarter ended December 31, 2020. Additionally, the company actively engaged in its stock repurchase program, buying back approximately 2.5 million shares for $326 million during the quarter.