Exhibit 99.1
EA REPORTS SECOND QUARTER RESULTS
Madden NFL 06 Number One Title in North America
Five Titles Ready for Xbox 360 Launch
REDWOOD CITY, CA – November 1, 2005 – Electronic Arts (NASDAQ: ERTS) today announced financial results for the second quarter ended September 30, 2005.
Net revenue for the second quarter was $675 million, down 6 percent as compared with $716 million for the prior year. Sales were driven byMadden NFL 06,NCAA® Football06, Burnout™ Revenge,FIFA06,NBA Live 06and The Sims™ 2 Nightlife–each reaching platinum status (over one million copies sold) in the quarter – and to a lesser extent, TigerWoods PGA TOUR®06,NHL® 06 andNASCAR® 06: Total Team Control, each selling over 500 thousand copies.
Net income for the quarter was $51 million as compared with $97 million for the prior year. Diluted earnings per share were $0.16 as compared with $0.31 for the prior year.
Non-GAAP net income for the quarter, excluding certain items, was $46 million as compared with $98 million for the prior year. Non-GAAP diluted earnings per share were $0.15 as compared with $0.31 for the prior year. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.)
Trailing twelve month operating cash flow was $592 million as compared with $664 million for the same period a year ago.
“We are well prepared for the launch of Xbox 360,” said Larry Probst, Chairman and Chief Executive Officer. “We plan to release five blockbuster games –FIFA 06, Madden NFL 06, NBA Live 06, Need for Speed Most WantedandTiger Woods PGA TOUR 06 on this exciting new platform. These titles will demonstrate to consumers the amazing capabilities of next-generation hardware.”
“This will be a great holiday for gamers,” said Warren Jenson, Chief Financial and Administrative Officer. “This quarter we plan to launch more than twelve titles, includingNeed for Speed Most Wanted,Harry Potter and the Goblet of Fire, The Sims 2on consoles and handhelds,Battlefield 2 Modern Combatand James BondFrom Russia with Love.”
Current Highlights(comparisons are to the quarter ended September 30, 2004)
| | • | | Year to date,Madden NFL 06 is the number one title on current generation consoles in North America. |
| | • | | FIFA 06 sales at retail are up over 30 percent year-over-year in the first four weeks since launch. |
| | • | | The NBA Live franchise has generated over one billion dollars in life-to-date revenue. |
| | • | | EA has two of the top-ten-rated games for the year –Battlefield 2™ andBurnout Revenge. |
| | • | | EA’s revenue share hit a record 75 percent in the sports category in North America – up seven points year-over-year. |
| | • | | EA has 26 percent revenue share on the PSP™ (PlayStation® Portable) system in North America since launch and 16 percent revenue share in Europe. EA had two of the top-ten titles in Europe for September. |
| | • | | EA signed a deal with Steven Spielberg to create three new video game franchises out of its LA studio. |
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| | • | | A distribution agreement was signed with Vodafone to deliver games to mobile phones in Europe, Egypt, South Africa, Australia and New Zealand. |
| | • | | The Company completed its $750 million stock repurchase program during the quarter. |
Business Outlook
The following forward-looking statements reflect expectations as of November 1, 2005. Results may be materially different and are affected by many factors, such as consumer spending trends, the popular appeal of EA’s products, development delays, current-generation and next-generation hardware availability, the seasonal and cyclical nature of the interactive entertainment industry, the overall economy, competition, changes in foreign exchange rates, EA’s effective tax rate, and other factors detailed in this release and EA’s annual and quarterly SEC filings.
Fiscal Third Quarter Expectations – Ending December 31, 2005
| | • | | Net revenue is expected to be between $1.475 and $1.575 billion. |
| | • | | Non-GAAP diluted earnings per share are expected to be between $1.18 and $1.28. |
| | • | | GAAP diluted earnings per share are expected to be between $1.15 and $1.25. This range includes up to $0.03 of estimated charges related principally to the Company’s European reorganization and establishment of an International Publishing Headquarters in Geneva. |
Fiscal Year Expectations – Ending March 31, 2006
| | • | | Net revenue is expected to be between $3.250 and $3.400 billion. |
| | • | | Non-GAAP diluted earnings per share are expected to be between $1.45 and $1.60. |
| | • | | GAAP diluted earnings per share are expected to be between $1.40 and $1.55. This range includes up to $0.05 of estimated charges related principally to the Company’s European reorganization and establishment of an International Publishing Headquarters in Geneva. |
Non-GAAP Financial Measures
Electronic Arts uses non-GAAP measures of operating income, net income and diluted earnings per share. These non-GAAP measures exclude the following items, including any related tax effect, from the Company’s statement of operations:
| | • | | Amortization of intangibles |
| | • | | Employee stock-based compensation |
| | • | | Restructuring and asset impairment charges |
| | • | | Acquired in-process technology |
| | • | | Certain non-recurring litigation expenses |
| | • | | Other-than-temporary impairment of investments in affiliates |
In addition, the Company’s non-GAAP results exclude the impact of one-time tax adjustments.
Other significant non-recurring items may occur from time to time that require an adjustment to these non-GAAP measures. When these items occur, the accounting impact will become a reconciling item between the GAAP results and these non-GAAP measures.
The Company believes that excluding these items is useful for illustrating and explaining operating results and comparisons to prior periods. Management considers these non-GAAP measures in its decision-making to facilitate more relevant operating comparisons.
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A reconciliation of GAAP operating income to non-GAAP operating income; GAAP net income to non-GAAP net income; and GAAP diluted earnings per share to non-GAAP diluted earnings per share is included as part of the supplemental disclosures to this release.
Conference Call
Electronic Arts will host a conference call on November 1, 2005 at 2:00 pm PT (5:00 pm ET) to review the results for the Company’s second quarter ended September 30, 2005. Listeners may access the conference call live via webcast (http://investor.ea.com). A webcast archive of the conference call will be available for one year at http://investor.ea.com.
Some statements set forth in this release, including the estimates under the heading “Business Outlook,” contain forward-looking statements that are subject to change. Statements including words such as “anticipate”, “believe”, “estimate” or “expect” and statements in the future tense are forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth in the forward-looking statements. Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: consumer spending trends; the seasonal and cyclical nature of the interactive game segment; timely development and release of Electronic Arts’ products; competition in the interactive entertainment industry; the Company’s ability to manage expenses during fiscal year 2006; the timely release of next-generation hardware; the availability of an adequate supply of current-generation and next-generation hardware units; the Company’s ability to predict consumer preferences among competing hardware platforms; the Company’s ability to secure licenses to valuable entertainment properties on favorable terms; the Company’s ability to attract and retain key personnel; changes in the Company’s effective tax rates; adoption of new accounting regulations and standards; potential regulation of the Company’s products in key territories; developments in the law regarding protection of the Company’s products; fluctuations in foreign exchange rates; and other factors described in the Company’s annual report on Form 10-K for the year ended March 31, 2005 and Form 10-Q for the quarter ended June 30, 2005. Electronic Arts does not intend to update these forward-looking statements, including those made under the “Business Outlook” heading.
For additional information, please contact:
| | |
Tricia Gugler | | Jeff Brown |
Director, Investor Relations | | Vice President, Corporate Communications |
650-628-7327 | | 650-628-7922 |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data)
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| | | Three Months Ended
September 30,
| | Six Months Ended
September 30,
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| | | 2005
| | | 2004
| | 2005
| | | 2004
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Net revenue | | $ | 675 | | | $ | 716 | | $ | 1,040 | | | $ | 1,147 |
Cost of goods sold | | | 284 | | | | 284 | | | 434 | | | | 460 |
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Gross profit | | | 391 | | | | 432 | | | 606 | | | | 687 |
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Operating expenses: | | | | | | | | | | | | | | |
Marketing and sales | | | 107 | | | | 107 | | | 182 | | | | 171 |
General and administrative | | | 52 | | | | 42 | | | 103 | | | | 77 |
Research and development | | | 182 | | | | 157 | | | 365 | | | | 288 |
Amortization of intangibles | | | 1 | | | | 1 | | | 2 | | | | 1 |
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Total operating expenses | | | 342 | | | | 307 | | | 652 | | | | 537 |
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Operating income (loss) | | | 49 | | | | 125 | | | (46 | ) | | | 150 |
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Interest and other income, net | | | 13 | | | | 12 | | | 30 | | | | 21 |
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Income (loss) before provision for (benefit from) income taxes and minority interest | | | 62 | | | | 137 | | | (16 | ) | | | 171 |
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Provision for (benefit from) income taxes | | | 9 | | | | 40 | | | (13 | ) | | | 50 |
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Income (loss) before minority interest | | | 53 | | | | 97 | | | (3 | ) | | | 121 |
Minority interest | | | (2 | ) | | | — | | | (4 | ) | | | — |
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Net income (loss) | | $ | 51 | | | $ | 97 | | $ | (7 | ) | | $ | 121 |
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Earnings (loss) per share: | | | | | | | | | | | | | | |
Basic | | $ | 0.17 | | | $ | 0.32 | | $ | (0.02 | ) | | $ | 0.40 |
Diluted | | $ | 0.16 | | | $ | 0.31 | | $ | (0.02 | ) | | $ | 0.38 |
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Number of shares used in computation: | | | | | | | | | | | | | | |
Basic | | | 302 | | | | 304 | | | 305 | | | | 303 |
Diluted | | | 314 | | | | 316 | | | 305 | | | | 316 |
Non-GAAP Results (in millions, except per share data)
The following table shows the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Condensed Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, employee stock-based compensation, acquired in-process technology, restructuring charges, asset impairment charges, certain litigation expense and other-than-temporary impairment of investments in affiliates and their related income tax effect. In addition, the Company’s non-GAAP results also exclude the impact of one-time income tax adjustments.
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| | | Three Months Ended
September 30,
| | Six Months Ended
September 30,
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| | | 2005
| | | 2004
| | 2005
| | | 2004
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Net income (loss) | | $ | 51 | | | $ | 97 | | $ | (7 | ) | | $ | 121 |
Amortization of intangibles | | | 1 | | | | 1 | | | 2 | | | | 1 |
COGS amortization of intangibles | | | 2 | | | | — | | | 4 | | | | — |
Employee stock-based compensation | | | 1 | | | | — | | | 1 | | | | — |
Certain litigation expense | | | 1 | | | | — | | | 1 | | | | — |
Other | | | — | | | | — | | | 1 | | | | 1 |
Income tax effect on the above items | | | (1 | ) | | | — | | | (2 | ) | | | 0 |
Income tax adjustments | | | (9 | ) | | | — | | | (9 | ) | | | — |
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Non-GAAP net income (loss) | | $ | 46 | | | $ | 98 | | $ | (9 | ) | | $ | 123 |
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Non-GAAP diluted earnings (loss) per share | | $ | 0.15 | | | $ | 0.31 | | $ | (0.03 | ) | | $ | 0.39 |
Number of shares used in diluted earnings (loss) per share computation | | | 314 | | | | 316 | | | 305 | | | | 316 |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Balance Sheets
(in millions)
| | | | | | |
| | | September 30,
2005
| | March 31,
2005(a)
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ASSETS | | | | | | |
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Current assets: | | | | | | |
Cash, cash equivalents and short-term investments | | $ | 2,230 | | $ | 2,958 |
Marketable equity securities | | | 182 | | | 140 |
Receivables, net of allowances of $137 million and $162 million, respectively | | | 328 | | | 296 |
Inventories | | | 74 | | | 62 |
Deferred income taxes | | | 85 | | | 86 |
Other current assets | | | 208 | | | 164 |
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Total current assets | | | 3,107 | | | 3,706 |
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Property and equipment, net | | | 364 | | | 353 |
Investment in affiliates | | | 10 | | | 10 |
Goodwill | | | 155 | | | 153 |
Other intangibles, net | | | 30 | | | 36 |
Deferred income taxes | | | 16 | | | 19 |
Other assets | | | 72 | | | 93 |
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Total Assets | | $ | 3,754 | | $ | 4,370 |
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LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | | | | | | |
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Current liabilities: | | | | | | |
Accounts payable | | $ | 171 | | $ | 134 |
Accrued and other liabilities | | | 558 | | | 694 |
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Total current liabilities | | | 729 | | | 828 |
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Other liabilities | | | 29 | | | 33 |
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Total liabilities | | | 758 | | | 861 |
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Minority interest | | | 12 | | | 11 |
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Stockholders’ equity: | | | | | | |
Common stock | | | 3 | | | 3 |
Paid-in capital | | | 877 | | | 1,434 |
Retained earnings | | | 1,998 | | | 2,005 |
Accumulated other comprehensive income | | | 106 | | | 56 |
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Total stockholders’ equity | | | 2,984 | | | 3,498 |
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Total Liabilities, Minority Interest and Stockholders’ Equity | | $ | 3,754 | | $ | 4,370 |
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| (a) | Derived from audited financial statements. |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
(in millions)
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| | | Three Months Ended
September 30,
| | | Six Months Ended
September 30,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
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OPERATING ACTIVITIES | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 51 | | | $ | 97 | | | $ | (7 | ) | | $ | 121 | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 23 | | | | 17 | | | | 46 | | | | 33 | |
Minority interest | | | 2 | | | | — | | | | 4 | | | | — | |
Realized losses (gains) on investments and sale of property and equipment | | | 1 | | | | (2 | ) | | | 2 | | | | (4 | ) |
Tax benefit from exercise of stock options | | | 87 | | | | 12 | | | | 92 | | | | 25 | |
Other operating activities | | | — | | | | 1 | | | | — | | | | — | |
Change in assets and liabilities: | | | | | | | | | | | | | | | | |
Receivables, net | | | (162 | ) | | | (205 | ) | | | (20 | ) | | | (168 | ) |
Inventories | | | (10 | ) | | | (25 | ) | | | (9 | ) | | | (24 | ) |
Other assets | | | (4 | ) | | | 27 | | | | (16 | ) | | | 27 | |
Accounts payable | | | 59 | | | | 106 | | | | 34 | | | | 58 | |
Accrued and other liabilities | | | (35 | ) | | | 61 | | | | (145 | ) | | | (45 | ) |
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Net cash provided by (used in) operating activities | | | 12 | | | | 89 | | | | (19 | ) | | | 23 | |
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INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
Capital expenditures | | | (23 | ) | | | (19 | ) | | | (56 | ) | | | (45 | ) |
Proceeds from sale of property and equipment | | | — | | | | — | | | | — | | | | 15 | |
Proceeds from sale of marketable equity securities | | | — | | | | 3 | | | | 4 | | | | 3 | |
Proceeds from maturities and sales of short-term investments | | | 187 | | | | 240 | | | | 321 | | | | 812 | |
Purchase of short-term investments | | | (143 | ) | | | (101 | ) | | | (281 | ) | | | (1,658 | ) |
Acquisition of subsidiary, net of cash acquired | | | — | | | | — | | | | (3 | ) | | | — | |
Other investing activities | | | — | | | | — | | | | (1 | ) | | | — | |
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Net cash provided by (used in) investing activities | | | 21 | | | | 123 | | | | (16 | ) | | | (873 | ) |
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FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
Proceeds from sale of common stock through employee stock plans and other plans | | | 41 | | | | 42 | | | | 60 | | | | 86 | |
Repurchase and retirement of common stock | | | (372 | ) | | | — | | | | (709 | ) | | | — | |
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Net cash provided by (used in) financing activities | | | (331 | ) | | | 42 | | | | (649 | ) | | | 86 | |
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Effect of foreign exchange on cash and cash equivalents | | | (1 | ) | | | (1 | ) | | | (11 | ) | | | — | |
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Increase (decrease) in cash and cash equivalents | | | (299 | ) | | | 253 | | | | (695 | ) | | | (764 | ) |
Beginning cash and cash equivalents | | | 874 | | | | 1,133 | | | | 1,270 | | | | 2,150 | |
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Ending cash and cash equivalents | | | 575 | | | | 1,386 | | | | 575 | | | | 1,386 | |
Short-term investments | | | 1,655 | | | | 1,104 | | | | 1,655 | | | | 1,104 | |
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Ending cash, cash equivalents and short-term investments | | $ | 2,230 | | | $ | 2,490 | | | $ | 2,230 | | | $ | 2,490 | |
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ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(in millions, except per share data)
The following tables show the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Condensed Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, employee stock-based compensation, acquired-in-process technology, restructuring charges, asset impairment charges, certain litigation expense, and other-than-temporary impairment of investments in affiliates, and their related income tax effect. In addition, the Company’s non-GAAP results also exclude the impact of one-time income tax adjustments.
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| | | Q2
FY05
| | | Q3
FY05
| | | Q4
FY05
| | | Q1
FY06
| | | Q2
FY06
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QUARTERLY RESULTS | | | | | | | | | | | | | | | | | | | | |
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Operating Income (loss) | | | | | | | | | | | | | | | | | | | | |
GAAP operating income (loss) | | $ | 125 | | | $ | 519 | | | $ | — | | | $ | (96 | ) | | $ | 49 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | — | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
COGS amortization of intangibles | | | — | | | | 1 | | | | 2 | | | | 2 | | | | 2 | |
Employee stock-based compensation | | | — | | | | 4 | | | | 2 | | | | — | | | | 1 | |
Acquired-in-process technology | | | — | | | | 10 | | | | 4 | | | | 1 | | | | — | |
Restructuring charges | | | — | | | | — | | | | 1 | | | | — | | | | — | |
Certain litigation expense | | | — | | | | — | | | | 21 | | | | — | | | | 1 | |
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Total adjustments | | | — | | | | 16 | | | | 31 | | | | 4 | | | | 5 | |
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Non-GAAP operating income (loss) | | $ | 125 | | | $ | 535 | | | $ | 31 | | | $ | (92 | ) | | $ | 54 | |
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Non-GAAP operating income (loss) margin - % of net revenue | | | 18 | % | | | 37 | % | | | 6 | % | | | (25 | )% | | | 8 | % |
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Net Income (loss) | | | | | | | | | | | | | | | | | | | | |
GAAP net income (loss) | | $ | 97 | | | $ | 375 | | | $ | 8 | | | $ | (58 | ) | | $ | 51 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 1 | | | | 1 | | | | 1 | | | | 1 | | | | 1 | |
COGS amortization of intangibles | | | — | | | | 1 | | | | 2 | | | | 2 | | | | 2 | |
Employee stock-based compensation | | | — | | | | 4 | | | | 2 | | | | — | | | | 1 | |
Acquired-in-process technology | | | — | | | | 10 | | | | 3 | | | | 1 | | | | — | |
Restructuring charges | | | — | | | | — | | | | 1 | | | | — | | | | — | |
Certain litigation expense | | | — | | | | — | | | | 21 | | | | — | | | | 1 | |
Income tax effect on the above items | | | — | | | | — | | | | (8 | ) | | | (1 | ) | | | (1 | ) |
Income tax adjustments | | | — | | | | — | | | | — | | | | — | | | | (9 | ) |
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Total adjustments | | | 1 | | | | 16 | | | | 22 | | | | 3 | | | | (5 | ) |
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Non-GAAP net income (loss) | | $ | 98 | | | $ | 391 | | | $ | 30 | | | $ | (55 | ) | | $ | 46 | |
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Non-GAAP net income (loss) margin - % of net revenue | | | 14 | % | | | 27 | % | | | 5 | % | | | (15 | )% | | | 7 | % |
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GAAP diluted earnings (loss) per share | | $ | 0.31 | | | $ | 1.18 | | | $ | 0.02 | | | $ | (0.19 | ) | | $ | 0.16 | |
Non-GAAP diluted earnings (loss) per share | | $ | 0.31 | | | $ | 1.23 | | | $ | 0.09 | | | $ | (0.18 | ) | | $ | 0.15 | |
Shares used in diluted earnings (loss) per share computation | | | 316 | | | | 317 | | | | 322 | | | | 308 | | | | 314 | |
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TRAILING TWELVE MONTH RESULTS | | | | | | | | | | | | | | | | | | | | |
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Operating Income | | | | | | | | | | | | | | | | | | | | |
GAAP operating income | | $ | 802 | | | $ | 763 | | | $ | 669 | | | $ | 548 | | | $ | 472 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 3 | | | | 3 | | | | 3 | | | | 3 | | | | 4 | |
COGS amortization of intangibles | | | — | | | | 1 | | | | 3 | | | | 5 | | | | 7 | |
Employee stock-based compensation | | | — | | | | 4 | | | | 6 | | | | 6 | | | | 7 | |
Acquired-in-process technology | | | — | | | | 10 | | | | 14 | | | | 15 | | | | 15 | |
Restructuring charges | | | 9 | | | | 9 | | | | 1 | | | | 1 | | | | 1 | |
Certain litigation expense | | | — | | | | — | | | | 21 | | | | 21 | | | | 22 | |
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|
| |
|
|
| |
|
|
| |
|
|
|
Total adjustments | | | 12 | | | | 27 | | | | 48 | | | | 51 | | | | 56 | |
| | | | | |
Non-GAAP operating income | | $ | 814 | | | $ | 790 | | | $ | 717 | | | $ | 599 | | | $ | 528 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Non-GAAP operating income margin - % of net revenue | | | 25 | % | | | 25 | % | | | 23 | % | | | 20 | % | | | 17 | % |
7
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations
(in millions, except per share data)
The following tables show the Company’s non-GAAP results reconciled to the Generally Accepted Accounting Principles (“GAAP”) Condensed Consolidated Statements of Operations. The Company’s non-GAAP results do not include amortization of intangibles, employee stock-based compensation, acquired-in-process technology, restructuring charges, asset impairment charges, certain litigation expense , and other-than-temporary impairment of investments in affiliates, and their related income tax effect. In addition, the Company’s non-GAAP results also exclude the impact of one-time income tax adjustments.
| | | | | | | | | | | | | | | | | | | | |
| | | Q2
FY05
| | | Q3
FY05
| | | Q4
FY05
| | | Q1
FY06
| | | Q2
FY06
| |
TRAILING TWELVE MONTH RESULTS | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net Income | | | | | | | | | | | | | | | | | | | | |
GAAP net income | | $ | 604 | | | $ | 587 | | | $ | 504 | | | $ | 422 | | | $ | 376 | |
Adjustments: | | | | | | | | | | | | | | | | | | | | |
Amortization of intangibles | | | 4 | | | | 3 | | | | 3 | | | | 4 | | | | 4 | |
COGS amortization of intangibles | | | — | | | | 1 | | | | 3 | | | | 5 | | | | 7 | |
Employee stock-based compensation | | | — | | | | 4 | | | | 6 | | | | 6 | | | | 7 | |
Acquired-in-process technology | | | — | | | | 10 | | | | 13 | | | | 14 | | | | 14 | |
Restructuring charges | | | 9 | | | | 9 | | | | 1 | | | | 1 | | | | 1 | |
Certain litigation expense | | | — | | | | — | | | | 21 | | | | 21 | | | | 22 | |
Income tax effect on the above items | | | (4 | ) | | | (4 | ) | | | (8 | ) | | | (9 | ) | | | (10 | ) |
Income tax adjustments | | | (20 | ) | | | (20 | ) | | | — | | | | — | | | | (9 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Total adjustments | | | (11 | ) | | | 3 | | | | 39 | | | | 42 | | | | 36 | |
| | | | | |
Non-GAAP net income | | $ | 593 | | | $ | 590 | | | $ | 543 | | | $ | 464 | | | $ | 412 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Non-GAAP net income margin - % of net revenue | | | 18 | % | | | 19 | % | | | 17 | % | | | 15 | % | | | 14 | % |
| | | | | |
GAAP diluted earnings per share | | $ | 1.94 | | | $ | 1.86 | | | $ | 1.59 | | | $ | 1.32 | | | $ | 1.17 | |
Non-GAAP diluted earnings per share | | $ | 1.90 | | | $ | 1.87 | | | $ | 1.71 | | | $ | 1.45 | | | $ | 1.29 | |
8
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and Headcount)
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Q2
FY05
| | | Q3
FY05
| | | Q4
FY05
| | | Q1
FY06
| | | Q2
FY06
| | | YOY %
Growth
| |
CONSOLIDATED FINANCIAL DATA | | | | | | | | | | | | | | | | | | | | | | | |
Net revenue | | | 716 | | | | 1,428 | | | | 553 | | | | 365 | | | | 675 | | | (6 | )% |
Net revenue - trailing twelve months (“TTM”) | | | 3,221 | | | | 3,174 | | | | 3,129 | | | | 3,062 | | | | 3,021 | | | (6 | )% |
| | | | | | |
Gross profit | | | 432 | | | | 925 | | | | 320 | | | | 214 | | | | 391 | | | (9 | )% |
Gross margin - % of net revenue | | | 60 | % | | | 65 | % | | | 58 | % | | | 59 | % | | | 58 | % | | | |
Gross profit - TTM | | | 2,021 | | | | 1,984 | | | | 1,932 | | | | 1,891 | | | | 1,850 | | | (8 | )% |
Gross margin - TTM % of net revenue | | | 63 | % | | | 63 | % | | | 62 | % | | | 62 | % | | | 61 | % | | | |
| | | | | | |
Operating income (loss) | | | 125 | | | | 519 | | | | — | | | | (96 | ) | | | 49 | | | (61 | )% |
Operating income (loss) margin - % of net revenue | | | 17 | % | | | 36 | % | | | 0 | % | | | (26 | )% | | | 7 | % | | | |
Operating income - TTM | | | 802 | | | | 763 | | | | 669 | | | | 548 | | | | 472 | | | (41 | )% |
Operating income margin - TTM % of net revenue | | | 25 | % | | | 24 | % | | | 21 | % | | | 18 | % | | | 16 | % | | | |
| | | | | | |
Net income (loss) | | | 97 | | | | 375 | | | | 8 | | | | (58 | ) | | | 51 | | | (47 | )% |
Diluted earnings (loss) per share | | $ | 0.31 | | | $ | 1.18 | | | $ | 0.02 | | | $ | (0.19 | ) | | $ | 0.16 | | | (48 | )% |
Net income - TTM | | | 604 | | | | 587 | | | | 504 | | | | 422 | | | | 376 | | | (38 | )% |
Diluted earnings per share - TTM | | $ | 1.94 | | | $ | 1.86 | | | $ | 1.59 | | | $ | 1.32 | | | $ | 1.17 | | | (40 | )% |
| | | | | | |
Non-GAAP operating income (loss) (a) | | | 125 | | | | 535 | | | | 31 | | | | (92 | ) | | | 54 | | | (57 | )% |
Non-GAAP operating income (loss) margin - % of net revenue | | | 18 | % | | | 37 | % | | | 6 | % | | | (25 | )% | | | 8 | % | | | |
Non-GAAP operating income - TTM(a) | | | 814 | | | | 790 | | | | 717 | | | | 599 | | | | 528 | | | (35 | )% |
Non-GAAP operating income margin - TTM % of net revenue | | | 25 | % | | | 25 | % | | | 23 | % | | | 20 | % | | | 17 | % | | | |
| | | | | | |
Non-GAAP net income (loss) (a) | | | 98 | | | | 391 | | | | 30 | | | | (55 | ) | | | 46 | | | (53 | )% |
Non-GAAP diluted earnings (loss) per share(a) | | $ | 0.31 | | | $ | 1.23 | | | $ | 0.09 | | | $ | (0.18 | ) | | $ | 0.15 | | | (52 | )% |
Non-GAAP net income - TTM(a) | | | 593 | | | | 590 | | | | 543 | | | | 464 | | | | 412 | | | (31 | )% |
Non-GAAP diluted earnings per share - TTM (a) | | $ | 1.90 | | | $ | 1.87 | | | $ | 1.71 | | | $ | 1.45 | | | $ | 1.29 | | | (32 | )% |
| | | | | | |
CASH FLOW DATA | | | | | | | | | | | | | | | | | | | | | | | |
Operating cash flow | | | 89 | | | | 137 | | | | 474 | | | | (31 | ) | | | 12 | | | (87 | )% |
Operating cash flow - TTM | | | 664 | | | | 722 | | | | 634 | | | | 669 | | | | 592 | | | (11 | )% |
| | | | | | |
Capital expenditures | | | 19 | | | | 37 | | | | 44 | | | | 33 | | | | 23 | | | 21 | % |
Capital expenditures - TTM | | | 106 | | | | 116 | | | | 126 | | | | 133 | | | | 137 | | | 29 | % |
| | | | | | |
BALANCE SHEET DATA | | | | | | | | | | | | | | | | | | | | | | | |
Cash, cash equivalents and short term investments | | | 2,490 | | | | 2,565 | | | | 2,958 | | | | 2,573 | | | | 2,230 | | | (10 | )% |
Marketable equity securities | | | — | | | | 4 | | | | 140 | | | | 176 | | | | 182 | | | N/M | |
Receivables, net | | | 379 | | | | 892 | | | | 296 | | | | 167 | | | | 328 | | | (13 | )% |
Inventories | | | 79 | | | | 84 | | | | 62 | | | | 66 | | | | 74 | | | (6 | )% |
| | | | | | |
OTHER | | | | | | | | | | | | | | | | | | | | | | | |
Employees | | | 5,104 | | | | 5,669 | | | | 6,122 | | | | 6,365 | | | | 6,608 | | | 29 | % |
Diluted weighted-average shares | | | 316 | | | | 317 | | | | 322 | | | | 308 | | | | 314 | | | | |
| (a) | Please see attached Unaudited Reconciliation of GAAP to Non-GAAP Condensed Consolidated Statements of Operations. |
9
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and Headcount)
| | | | | | | | | | | | | | | | | | |
| | | Q2
FY05
| | | Q3
FY05
| | | Q4
FY05
| | | Q1
FY06
| | | Q2
FY06
| | | YOY %
Growth
| |
GEOGRAPHIC REVENUE MIX | | | | | | | | | | | | | | | | | | |
North America Revenue | | 473 | | | 692 | | | 288 | | | 184 | | | 443 | | | (6 | )% |
International Revenue | | 243 | | | 736 | | | 265 | | | 181 | | | 232 | | | (5 | )% |
| | | | | | |
Europe Revenue | | 210 | | | 666 | | | 218 | | | 144 | | | 191 | | | (9 | )% |
Asia Revenue | | 33 | | | 70 | | | 47 | | | 37 | | | 41 | | | 24 | % |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Net Revenue | | 716 | | | 1,428 | | | 553 | | | 365 | | | 675 | | | (6 | )% |
| | | | | | |
GEOGRAPHIC REVENUE MIX - as a % of Net Revenue | | | | | | | | | | | | | | | | | | |
North America Revenue | | 66 | % | | 48 | % | | 52 | % | | 50 | % | | 66 | % | | | |
International Revenue | | 34 | % | | 52 | % | | 48 | % | | 50 | % | | 34 | % | | | |
| | | | | | |
Europe Revenue | | 29 | % | | 47 | % | | 40 | % | | 40 | % | | 28 | % | | | |
Asia Revenue | | 5 | % | | 5 | % | | 8 | % | | 10 | % | | 6 | % | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Net Revenue | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | | |
| | | | | | |
PLATFORM REVENUE MIX | | | | | | | | | | | | | | | | | | |
Sony PlayStation 2 | | 312 | | | 661 | | | 196 | | | 117 | | | 304 | | | (3 | )% |
Xbox | | 142 | | | 233 | | | 83 | | | 44 | | | 136 | | | (4 | )% |
Nintendo GameCube | | 38 | | | 109 | | | 37 | | | 22 | | | 27 | | | (29 | )% |
Other consoles | | 1 | | | 6 | | | 1 | | | — | | | — | | | (100 | )% |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Consoles | | 493 | | | 1,009 | | | 317 | | | 183 | | | 467 | | | (5 | )% |
| | | | | | |
PC | | 141 | | | 239 | | | 85 | | | 74 | | | 91 | | | (35 | )% |
| | | | | | |
PSP | | — | | | — | | | 18 | | | 33 | | | 45 | | | N/M | |
Nintendo DS | | — | | | 16 | | | 7 | | | 12 | | | 8 | | | N/M | |
Game Boy Advance | | 10 | | | 39 | | | 9 | | | 6 | | | 7 | | | (30 | )% |
Cellular Handsets | | — | | | — | | | — | | | 1 | | | 2 | | | N/M | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Mobility | | 10 | | | 55 | | | 34 | | | 52 | | | 62 | | | 520 | % |
| | | | | | |
Co-publishing and Distribution | | 49 | | | 79 | | | 89 | | | 30 | | | 32 | | | (35 | )% |
| | | | | | |
Subscription Services | | 13 | | | 14 | | | 16 | | | 15 | | | 14 | | | 8 | % |
Licensing, Advertising & Other | | 10 | | | 32 | | | 12 | | | 11 | | | 9 | | | (10 | )% |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Internet Services, Licensing & Other | | 23 | | | 46 | | | 28 | | | 26 | | | 23 | | | 0 | % |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Net Revenue | | 716 | | | 1,428 | | | 553 | | | 365 | | | 675 | | | (6 | )% |
| | | | | | |
PLATFORM REVENUE MIX - as a % of Net Revenue | | | | | | | | | | | | | | | | | | |
Sony PlayStation 2 | | 44 | % | | 46 | % | | 36 | % | | 32 | % | | 45 | % | | | |
Xbox | | 20 | % | | 16 | % | | 15 | % | | 12 | % | | 20 | % | | | |
Nintendo GameCube | | 5 | % | | 8 | % | | 7 | % | | 6 | % | | 4 | % | | | |
Other consoles | | 0 | % | | 1 | % | | 0 | % | | 0 | % | | 0 | % | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Consoles | | 69 | % | | 71 | % | | 58 | % | | 50 | % | | 69 | % | | | |
| | | | | | |
PC | | 20 | % | | 17 | % | | 15 | % | | 21 | % | | 14 | % | | | |
| | | | | | |
PSP | | 0 | % | | 0 | % | | 3 | % | | 9 | % | | 7 | % | | | |
Nintendo DS | | 0 | % | | 1 | % | | 1 | % | | 3 | % | | 1 | % | | | |
Game Boy Advance | | 1 | % | | 3 | % | | 2 | % | | 2 | % | | 1 | % | | | |
Cellular Handsets | | 0 | % | | 0 | % | | 0 | % | | 0 | % | | 0 | % | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Mobility | | 1 | % | | 4 | % | | 6 | % | | 14 | % | | 9 | % | | | |
| | | | | | |
Co-publishing and Distribution | | 7 | % | | 5 | % | | 16 | % | | 8 | % | | 5 | % | | | |
| | | | | | |
Subscription Services | | 2 | % | | 1 | % | | 3 | % | | 4 | % | | 2 | % | | | |
Licensing, Advertising & Other | | 1 | % | | 2 | % | | 2 | % | | 3 | % | | 1 | % | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Total Internet Services, Licensing & Other | | 3 | % | | 3 | % | | 5 | % | | 7 | % | | 3 | % | | | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| | | |
Net Revenue | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | | | |
10
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Financial Information and Business Metrics
(in millions, except per share data, SKU count and Headcount)
| | | | | | | | | | | | | |
| | | Q2
FY05
| | Q3
FY05
| | Q4
FY05
| | Q1
FY06
| | Q2
FY06
| | YOY %
Growth
| |
Platform SKU Release Mix | | | | | | | | | | | | | |
Sony PlayStation 2 | | 9 | | 9 | | 6 | | 3 | | 9 | | 0 | % |
Xbox | | 8 | | 9 | | 6 | | 3 | | 9 | | 13 | % |
Nintendo GameCube | | 7 | | 7 | | 5 | | 2 | | 6 | | (14 | )% |
Other consoles | | 1 | | 1 | | — | | — | | — | | (100 | )% |
| | |
| |
| |
| |
| |
| | | |
Total Consoles | | 25 | | 26 | | 17 | | 8 | | 24 | | (4 | )% |
| | | | | | |
PC | | 6 | | 7 | | 5 | | 2 | | 6 | | 0 | % |
| | | | | | |
PSP | | — | | — | | 3 | | 3 | | 3 | | N/M | |
Nintendo DS | | — | | 3 | | — | | 2 | | 2 | | N/M | |
Game Boy Advance | | 2 | | 4 | | — | | 1 | | 2 | | 0 | % |
| | |
| |
| |
| |
| |
| | | |
Total Mobility | | 2 | | 7 | | 3 | | 6 | | 7 | | 250 | % |
| | |
| |
| |
| |
| |
| | | |
Total SKUs | | 33 | | 40 | | 25 | | 16 | | 37 | | 12 | % |
| | |
| |
| |
| |
| |
| | | |
11
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Fact Sheet for Q2 Fiscal 2006
| | |
Q2 Product Releases | | Platform |
· BurnoutTM Revenge | | PlayStation® 2 |
· FIFA 06 | | PlayStation 2 |
· Madden NFL 06 | | PlayStation 2 |
· Marvel NemesisTM: Rise of the ImperfectsTM | | PlayStation 2 |
· NASCAR® 06: Total Team Control | | PlayStation 2 |
· NBA Live 06 | | PlayStation 2 |
· NCAA® FOOTBALL 06 | | PlayStation 2 |
· NHL® 06 | | PlayStation 2 |
· Tiger Woods PGA TOUR® 06 | | PlayStation 2 |
· Burnout Revenge | | Xbox® |
· FIFA 06 | | Xbox |
· Madden NFL 06 | | Xbox |
· Marvel Nemesis: Rise of the Imperfects | | Xbox |
· NASCAR 06: Total Team Control | | Xbox |
· NBA Live 06 | | Xbox |
· NCAA FOOTBALL 06 | | Xbox |
· NHL 06 | | Xbox |
· Tiger Woods PGA TOUR 06 | | Xbox |
· FIFA 06 | | Nintendo GameCube™ |
· Madden NFL 06 | | Nintendo GameCube |
· Marvel Nemesis: Rise of the Imperfects | | Nintendo GameCube |
· NBA Live 06 | | Nintendo GameCube |
· NHL 06 | | Nintendo GameCube |
· Tiger Woods PGA TOUR 06 | | Nintendo GameCube |
· FIFA 06 | | PC |
· Madden NFL 06 | | PC |
· NBA Live 06 | | PC |
· NHL 06 | | PC |
· The SimsTM 2 Nightlife | | PC |
· Tiger Woods PGA TOUR 06 | | PC |
· FIFA 06 | | Game Boy® Advance |
· Madden NFL 06 | | Game Boy Advance |
· FIFA 06 | | Nintendo DSTM |
· Madden NFL 06 | | Nintendo DS |
· BurnoutTM Legends | | PSP™ |
· Madden NFL 06 | | PSP |
· Tiger Woods PGA TOUR 06 | | PSP |
| |
Co-pub, Distribution, International only and Others (not in SKU count) | | |
| |
· Counter-StrikeTM : SourceTM | | PC |
· Counter-StrikeTM1 Anthology | | PC |
· Half-Life® 1 Anthology | | PC |
· Half-Life® 2: Game of the Year Edition | | PC |
All trademarks are the property of their respective owners.
12
ELECTRONIC ARTS INC. AND SUBSIDIARIES
Unaudited Supplemental Schedule of Earnings Adjusted for Stock-Based Compensation
(in millions, except per share data)
Had the Company’s stock-based compensation plans been measured on the estimated fair value at the grant dates inaccordance with the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, we estimate that our reported net income (loss) and net earnings (loss) per share would have been the pro forma amounts indicated below:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30,
| | | Six Months Ended
September 30,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
| |
Net income (loss) - as reported | | $ | 51 | | | $ | 97 | | | $ | (7 | ) | | $ | 121 | |
| | | | |
Stock-based compensation | | | (26 | ) | | | (23 | ) | | | (51 | ) | | | (42 | ) |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net income (loss) - pro forma | | $ | 25 | | | $ | 74 | | | $ | (58 | ) | | $ | 79 | |
| | |
|
|
| |
|
|
| |
|
|
| |
|
|
|
Net earnings (loss) per share: | | | | | | | | | | | | | | | | |
As reported - basic | | $ | 0.17 | | | $ | 0.32 | | | $ | (0.02 | ) | | $ | 0.40 | |
| | | | |
Pro forma - basic | | $ | 0.08 | | | $ | 0.24 | | | $ | 0.19 | | | $ | 0.26 | |
| | | | |
As reported - diluted | | $ | 0.16 | | | $ | 0.31 | | | $ | (0.02 | ) | | $ | 0.38 | |
| | | | |
Pro forma - diluted | | $ | 0.08 | | | $ | 0.24 | | | $ | (0.19 | ) | | $ | 0.25 | |
13
