01—Abstract
Summary
Summary of the 10-Q filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
Electronic Arts Inc. (EA) reported a decrease in net revenue for the first quarter of fiscal year 2025, with net revenue reaching $1.66 billiona, a 14% decline compared to the same period last year.
This was primarily driven by lower full game sales, down 44%b, impacted by the absence of a major title release like Star Wars Jedi: Survivor from the prior year. Live services and other revenue, which forms the larger portion of EA's revenue, saw a more modest 5% decrease, indicating continued resilience in its recurring revenue streams. Despite the revenue dip, gross margin improved to 84.2%, reflecting a more favorable revenue mix and cost efficiencies.
However, operating expenses increased slightly, leading to a significant 33% decrease in operating income and a 30% drop in net income to $280 millionc. The company continues to actively manage its capital structure, repurchasing $375 million of stock and paying $50 million in dividends during the quarter. Cash and cash equivalents decreased to $2.4 billion, impacted by these capital returns and lower operating cash flow, which was down 67% year-over-year.
02—Key points
Key Highlights
- Net revenue decreased by 14% year-over-year to $1.66 billion, primarily due to a significant drop in full game sales.
- Live services and other revenue showed greater resilience, declining by a more modest 5% to $1.41 billion, highlighting the strength of recurring revenue streams.
- Gross margin improved by 3 percentage points to 84.2%, indicating better cost management or a more favorable revenue mix.
- Operating income saw a substantial decrease of 33% to $364 million, while net income fell 30% to $280 million.
- Net cash provided by operating activities significantly decreased by 67% to $120 million, reflecting lower cash collections and the impact of capital allocation.
- The company repurchased $375 million of its common stock and paid $50 million in dividends, returning capital to shareholders.
- Cash and cash equivalents and short-term investments decreased by $496 million to $2.77 billion, primarily due to capital returns and lower operating cash flow.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2025, Electronic Arts kept $0.17.
- Revenue$1.66B100.0%
- Cost of revenue−$263.0M15.8%
- Gross profit$1.40B84.2%
- Operating costs−$1.03B62.2%
- Operating income$364.0M21.9%
- Interest, other & tax−$84.0M5.1%
- Net income$280.0M16.9%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed August 2, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $1.66B$1.92B | −13.7% |
| Cost of Revenue | $263.00M$368.00M | −28.5% |
| Gross Profit | $1.40B$1.56B | −10.2% |
| Operating Expenses | $1.03B$1.01B | +1.9% |
| Operating Income | $364.00M$542.00M | −32.8% |
| Interest Expense | $14.00M$15.00M | −6.7% |
| Net Income | $280.00M$402.00M | −30.3% |
| EPS (Basic) | $1.05$1.48 | −29.1% |
| EPS (Diluted) | $1.04$1.47 | −29.3% |
| Shares Outstanding (Basic) | 266.00M272.00M | −2.2% |
| Shares Outstanding (Diluted) | 268.00M274.00M | −2.2% |
05—Questions
Frequently Asked Questions
What is the primary driver behind the decrease in Electronic Arts' net revenue?
The primary driver behind the 14% year-over-year decrease in net revenue was a significant 44% decline in full game sales. This was largely attributed to the absence of a major title release in the current quarter compared to the prior year, which included the release of Star Wars Jedi: Survivor.
How is Electronic Arts managing its capital and returning value to shareholders?
Electronic Arts demonstrated its commitment to returning capital to shareholders by repurchasing $375 million of its common stock and paying $50 million in cash dividends during the quarter. The company also has a new $5.0 billion stock repurchase program authorized.
What is the outlook for Electronic Arts' live services business?
The live services and other revenue segment, which represents the larger portion of EA's revenue, experienced a more modest 5% decline, indicating its relative resilience. This segment, including extra content, subscriptions, and other services, is expected to remain material to the company's business and has shown an increase in extra content revenue over the trailing twelve months.
Has Electronic Arts experienced any significant changes in its financial position, such as cash levels?
Yes, Electronic Arts saw a decrease in its total cash and cash equivalents and short-term investments by $496 million, bringing the total to $2.77 billion as of June 30, 2024. This decrease was primarily driven by the capital returns to shareholders (stock repurchases and dividends) and a significant reduction in cash provided by operating activities.
06—Continue