Did EA beat its own guidance for the quarter?

Yes, on both key measures. Net bookings of $1.262 billion exceeded the top of the $1.250 billion guidance range, and net revenue of $1.660 billion was $35 million above the $1.625 billion guidance midpoint.

Why did revenue and profits decline so much year-over-year?

Full game revenue fell from $443 million to $250 million (down 44%), as the prior-year period benefited from a stronger release slate. Live services and other revenue declined 5% to $1.410 billion. Operating margin on a GAAP basis contracted from 28.2% to 21.9%, and non-GAAP operating margin fell from 37.2% to 32.5%, largely due to the deferred revenue impact.

Is the dividend safe, and how much capital is EA returning to shareholders?

The $0.19 quarterly dividend costs about $50 million per quarter, which is covered by operating cash flow over the trailing twelve months ($2.076 billion). Trailing twelve-month buybacks were $1.35 billion, so total shareholder returns were well above the dividend. Note that quarterly operating cash flow was weak at $120 million, and cash and short-term investments declined to $2.766 billion.

What drives the FY25 outlook, and how credible is it?

Management attributes the outlook to the College Football 25 launch (5 million unique players in its first week), upcoming Madden NFL, EA SPORTS FC, and Dragon Age: The Veilguard releases, and live services engagement. The guidance is preliminary, and the company notes the figures could change in its Form 10-Q. The forward-looking statements carry standard risk factors, including competition, consumer demand, and geopolitical conditions.

Are there any balance sheet or cash flow concerns?

Deferred net revenue fell from $1.814 billion to $1.412 billion, reflecting the seasonal pattern of online-enabled game sales and the timing of bookings. Receivables dropped to $433 million from $565 million, and cash and short-term investments fell $496 million in the quarter. Long-term senior notes of $1.882 billion remained unchanged. Total stockholders' equity declined to $7.4 billion, partly because of share repurchases.

EA 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 30, 2024. Cited figures are marked; the original filing is the authoritative source.

Electronic Arts reported preliminary Q1 FY25 results (quarter ended June 30, 2024) that beat the high end of its net bookings guidance, with net bookings of $1.262 billion^a versus guidance of $1.250 billion at the top of the range.

However, the top line declined sharply: net revenue fell 14% year-over-year to $1.660 billion^b, GAAP operating income dropped 33% to $364 million, and GAAP diluted EPS fell 29% to $1.04 from $1.47. Operating cash flow was weak at $120 million (versus $359 million a year earlier), leaving free cash flow of only $53 million for the quarter. Net revenue of $1.66 billion did come in above the $1.625 billion guidance midpoint, which management attributes to strong live services performance, the Madden NFL 24 and FC franchises, and the early launch of EA SPORTS College Football 25.

The company reaffirmed a constructive outlook for FY25, guiding to net revenue of $7.1 to $7.5 billion^c, net bookings of $7.3 to $7.7 billion, and diluted EPS of $3.34 to $4.00. Management pointed to the College Football 25 launch (5 million unique players in its first week), upcoming Madden NFL, EA SPORTS FC, and Dragon Age: The Veilguard releases, and its multi-year financial objectives as drivers. Guidance for Q2 FY25 is more modest, with net revenue of $1.9 to $2.0 billion and diluted EPS of $0.76 to $0.93.

Investors should note that the company's deferred revenue balance fell from $1.814 billion to $1.412 billion^d over the quarter, and that cash and short-term investments declined to $2.766 billion. The filing also disclosed a quarterly cash dividend of $0.19 per share, payable September 18, 2024 to holders of record as of August 28, 2024.

Repurchases totaled 2.8 million shares for $375 million in the quarter, bringing trailing-twelve-month buybacks to 10.2 million shares for $1.35 billion. These results are preliminary and unaudited; the figures may change when EA files its Form 10-Q.

02—Key points

Key Highlights

Net bookings of $1.262 billion beat the high end of the $1.250 billion guidance range, driven by Madden NFL 24, FC Online, and FC Mobile.
Net revenue fell 14% year-over-year to $1.660 billion, though it exceeded the $1.625 billion guidance midpoint by $35 million.
GAAP operating income declined 33% to $364 million, and GAAP net income fell 30% to $280 million; diluted EPS was $1.04 versus $1.47 a year earlier.
Operating cash flow dropped to $120 million from $359 million, and free cash flow fell to $53 million, reflecting a $398 million reduction in deferred net revenue.
FY25 guidance calls for net revenue of $7.1–7.5 billion, net bookings of $7.3–7.7 billion, and diluted EPS of $3.34–4.00, with operating cash flow of $2.05–2.25 billion.
Q2 FY25 guidance is for net revenue of $1.9–2.0 billion and diluted EPS of $0.76–0.93, with management highlighting College Football 25's strong launch.
Declared a quarterly dividend of $0.19 per share (payable September 18, 2024) and repurchased $375 million of stock in the quarter.

03—Questions

Frequently Asked Questions

Did EA beat its own guidance for the quarter?
Yes, on both key measures. Net bookings of $1.262 billion exceeded the top of the $1.250 billion guidance range, and net revenue of $1.660 billion was $35 million above the $1.625 billion guidance midpoint.
Why did revenue and profits decline so much year-over-year?
Full game revenue fell from $443 million to $250 million (down 44%), as the prior-year period benefited from a stronger release slate. Live services and other revenue declined 5% to $1.410 billion. Operating margin on a GAAP basis contracted from 28.2% to 21.9%, and non-GAAP operating margin fell from 37.2% to 32.5%, largely due to the deferred revenue impact.
Is the dividend safe, and how much capital is EA returning to shareholders?
The $0.19 quarterly dividend costs about $50 million per quarter, which is covered by operating cash flow over the trailing twelve months ($2.076 billion). Trailing twelve-month buybacks were $1.35 billion, so total shareholder returns were well above the dividend. Note that quarterly operating cash flow was weak at $120 million, and cash and short-term investments declined to $2.766 billion.
What drives the FY25 outlook, and how credible is it?
Management attributes the outlook to the College Football 25 launch (5 million unique players in its first week), upcoming Madden NFL, EA SPORTS FC, and Dragon Age: The Veilguard releases, and live services engagement. The guidance is preliminary, and the company notes the figures could change in its Form 10-Q. The forward-looking statements carry standard risk factors, including competition, consumer demand, and geopolitical conditions.
Are there any balance sheet or cash flow concerns?
Deferred net revenue fell from $1.814 billion to $1.412 billion, reflecting the seasonal pattern of online-enabled game sales and the timing of bookings. Receivables dropped to $433 million from $565 million, and cash and short-term investments fell $496 million in the quarter. Long-term senior notes of $1.882 billion remained unchanged. Total stockholders' equity declined to $7.4 billion, partly because of share repurchases.

04—Continue

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