Electronic Arts Inc. Acquisition Announcement July 12 th , 2011 Exhibit 99.2 |
Some statements set forth in this presentation regarding EA’s acquisition of PopCap and the expected impact of the acquisition on EA’s strategic and operational plans, contain forward-looking statements that are subject to change. 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 results to differ materially from the expectations expressed in these forward-looking statements include the following: the effect of the announcement of the acquisition on EA’s and PopCap’s strategic relationships, operating results and business generally, including the ability to retain key employees; EA’s ability to successfully integrate PopCap’s operations and employees; the timing of the completions of the acquisition; general economic conditions; and other factors described in EA’s SEC filings (including EA’s Annual Report on Form 10-K for the year ended March 31, 2011). If any of these risks or uncertainties materializes, the potential benefits of the acquisition may not be realized, EA’s and/or PopCap’s operating results and financial performance could suffer, and actual results could differ materially from the expectations described in these forward-looking statements. These forward-looking statements speak only as of the date of this presentation. EA assumes no obligation to update these forward-looking statements. The preliminary financial results set forth in this presentation, including EA’s preliminary results for the first quarter of fiscal 2012 and business outlook for future periods are estimates based on information currently available to Electronic Arts. While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Annual Report on Form 10-Q for the fiscal quarter ended June 30, 2011 and in subsequent filings. Furthermore, the financial information included in this presentation regarding PopCap is based on information currently available to Electronic Arts as of the date of this presentation and is subject to change. In addition, following the acquisition, the accounting policies of PopCap will be reconciled with those of Electronic Arts, which may cause reported revenue and profits of PopCap to be lower than currently presented. These forward-looking statements are valid as of July 12, 2011 only. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements. In addition, this presentation includes various third party estimates regarding the total available segment and other measures, which have not been independently verified by us. Further, Electronic Arts does not guarantee the accuracy or reliability of any such information or forecast. Safe Harbor Statement 1 |
Summary 2 PopCap accelerates EA’s winning digital strategy PopCap strengthens EA’s position as a leader in casual gaming and accelerates EA toward a $1 billion digital business Casual gaming is the industry’s fastest growing segment PopCap is a leader on the fastest growing digital gaming platforms, with five very strong casual IPs Acquisition price is $650 M cash, plus $100 M EA stock and a non- GAAP EBIT-based earn-out, resulting in a CY12 EBIT multiple range of 10X to 20X This transaction is expected to be at least $0.10 non-GAAP EPS accretive in fiscal 2013 EA intends to drive further EPS accretion through ongoing share repurchase program |
PopCap At A Glance 3 IP has been strong for many years Franchise revenue has continued to grow over time Franchise Years in Release # of Titles Major Platforms Bejeweled 11 5 Facebook, iOS, Android, XBLA, DS, PSN, Wii, WP7, PC PvZ 2 1 iOS, Android, XBLA, DS, PSN, Mac, PC Zuma 7 3 Facebook, XBLA, DS, PSN, Mac, PC Bookworm 7 3 iOS, XBLA, DS, Mac, PC Peggle 4 2 iOS, XBLA, DS, PSN, Mac, PC Games Well Suited to Emerging Platforms Ideal for touch / simple controls Strong characters Mass appeal Flexible monetization Success across mobile devices Fun & approachable gameplay Overview of PopCap Founded in 2000. Headquartered in Seattle, WA ~475 employees Award-winning and durable IP 80% of PopCap revenue is digital PopCap has strong IP and a proven ability to create new hits |
PopCap Strategic Overview PopCap accelerates EA’s ongoing digital transformation 4 Long-term game sector growth is led by digital Smartphones, smartpads/tablet, social, PC, IPTV are key platforms Casual gaming is driving growth with new consumer demographic Asia is an important opportunity in digital 80% of revenue in CY2010 was digital; > 40% revenue growth rate in March 2011 quarter IP expected to gain more distribution on the highest growth platforms Well positioned for social games in Asia Owns five strong evergreen franchises with the unique ability to create compelling future casual IP across all platforms PopCap maps well to the digital opportunity |
Financial Summary of Transaction Deal is expected to be non-GAAP EPS neutral in FY12 and highly accretive in FY13: Up-front $650 M cash, $100 M EA stock, with potential of up to $550 M earn-out Up to $50 M in long-term equity retention awards Effective PopCap purchase price multiples will decline to the degree the earn-out amount increases: 10x PopCap CY12 non-GAAP EBIT in Upper-End Earn-out Scenario 20x PopCap CY12 non-GAAP EBIT in Low-End/No Earn-out Scenario 5 EPS Impact FY2012 FY2013 Non-GAAP ~$0.00 ~$0.10 GAAP ~$0.00 ~ ($0.10) Note: These forward-looking statements are valid as of July 12, 2011 only and are subject to change. |
- 5 10 15 20 25 -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% Worldwide Industry Growth Segments Casual/Social/ Mobile/Tablet/ Browser/Free-to-Play MMO Subs + Full Game Downloads Core Packaged - Related Digital Core Packaged CY09 – CY11 CAGR Source: EA estimates 6 PopCap enhances EA’s position in one of gaming’s most important segments |
Sector Analysis – Game Market Mobile & Social growth outpacing other video game sectors 7 Worldwide Video Game Market Size Estimates by Platform (in $ billions) |
Sector Analysis – Mobile/Social Casual games are driving platform growth on smart phones and social network sites 8 |
PopCap Maps Well to New Platform Opportunities PopCap delivers proven best sellers on multiple platforms with recent breakout success on iOS 9 Top Grossing iOS Games for 2010 iTunes Rewind 2010 # iPhone Game Publisher 1 Angry Birds Electronic Arts 2 Call of Duty: Zombies Activision 3 Bejeweled 2+Blitz PopCap Games 4 Zombie Farm PlayForge 5 Tetris Electronic Arts 6 Plants vs Zombies PopCap Games 7 Doodle Jump Lima Sky 8 Monopoly Electronic Arts 9 The Sims 3 Electronic Arts 10 Words With Friends Zynga EA & PopCap Games in Top 10: 6 Top PC Retail Game Publishers for 2010 NPD PC Games $000s # Publisher 2008 2009 2010 1 Activision Blizzard $165,467 $118,905 $279,616 2 Electronic Arts 194,288 210,510 139,706 3 Take 2 Interactive 29,568 28,903 38,223 4 THQ 41,895 40,733 20,003 5 Square Enix 21,025 6,600 18,013 6 Encore 14,862 16,170 17,193 7 Atari 16,528 17,268 14,859 8 PopCap Games 5,899 10,528 13,838 9 Bethesda SoftWorks 13,077 12,117 13,760 10 Microsoft 32,586 25,242 13,371 Total $704,982 $682,046 $701,252 EA & PopCap Share 28% 32% 22% |
1. PopCap has the highest player engagement of any Top 5 Facebook Game Publisher at 25% (DAU/MAU) 2. PopCap has achieved Top 5 success through only two evergreen franchises: Bejeweled and Zuma 3. After 18+ months in the market, Bejeweled Blitz is #6 in terms of DAUs and #1 in player engagement (out of the Top 10) Success on Facebook – Winning Combination 10 EA + PopCap = Solid #2 Games Publisher with Big Brands Coming Soon 4. Future outlook is strong with top IP from both EA and PopCap to come DAUs in MMs (Q2 CY11) Rank Developer DAUs 1 Zynga 53.6 2 EA + PopCap 10.0 3 Wooga 4.5 4 Playdom 3.7 5 Digital Chocolate 3.0 Source: Appdata.com as of July 8th, 2011 |
Full Year Pro Forma Annualized Pro Forma Q4 FY11 Q4 FY11 Pro Forma PopCap - Console PopCap - PC PopCap - Mobile EA - Total Digital PopCap Further Accelerates EA’s Digital Growth 11 Pro Forma Non-GAAP Digital Net Revenue * Note: EA’s Digital non-GAAP net revenue excludes one-time events Preliminary PopCap estimates as of July 12, 2011, subject to change $267 M $1,068 M EA & PopCap deliver a >$1 billion digital non-GAAP revenue run rate * * |
EA Financial Update 1 12 Revenue Guidance Update: Share Repurchase Program Update: 2 Repurchase program remains intact As of July 1, 2011, EA has repurchased a total of 7.1 million shares for $149 million Notes: 1. Preliminary estimates as of July 12, 2011, subject to change 2. Repurchase data shown on a shares settled basis. EA is not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time FY12 Non-GAAP Revenue Guidance ($ Millions) Low End High End FY12 GAAP Revenue Guidance ($ Millions) Low End High End Reaffirmed EA Standalone $3,750 $3,950 Reaffirmed EA Standalone $3,700 $3,900 PopCap Partial Year Contribution $50 $75 PopCap Partial Year Contribution $25 $50 Revised Combined Guidance $3,800 $4,025 Revised Combined Guidance $3,725 $3,950 |
GAAP to Non-GAAP Reconciliation In its press release dated July 12, 2011 announcing the PopCap acquisition, Electronic Arts has provided its preliminary estimates for the first quarter of fiscal 2012 and business outlook for the second quarter of fiscal 2012 and the full fiscal year 2012. The following table provides a reconciliation of the non-GAAP financial measures for the periods presented to the nearest comparable GAAP financial measures. These are preliminary estimates and expectations based on current information as of July 12, 2011 and are subject to business and economic risks and uncertainties that could cause actual events or actual future results to differ materially from the expectations set forth herein. The reconciliation provided below reflects rounding and other approximations. (in millions except for EPS) Low High Low High Low High GAAP Net Income (Loss) 212 $ 222 $ (364) $ (320) $ (14) $ 88 $ Acquisition-related expenses 18 18 30 25 95 85 Change in deferred net revenue (packaged goods and digital content (475) (475) 275 275 75 75 Restructuring and other 18 18 5 5 23 23 Stock-based compensation 38 38 50 50 175 175 Income tax adjustments 57 57 (46) (52) (120) (145) Non-GAAP Net Income (Loss) (132) $ (122) $ (50) $ (17) $ 234 $ 301 $ GAAP EPS 0.63 $ 0.66 $ (1.10) $ (0.97) $ (0.04) $ 0.26 $ Shares used for GAAP EPS 337 337 331 331 330 334 Non-GAAP EPS (0.40) $ (0.37) $ (0.15) $ (0.05) $ 0.70 $ 0.90 $ Shares used for non-GAAP EPS 331 331 331 331 334 334 GAAP Revenue 975 $ 1,000 $ 3,725 $ 3,950 $ Change in deferred net revenue (packaged goods and digital content (475) (475) 75 75 Non-GAAP Revenue 500 $ 525 $ 3,800 $ 4,025 $ Q1 FY12 Q2 FY12 FY12 13 |
To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue and non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, as applicable in a given reporting period, from the Company’s unaudited condensed consolidated statements of operations: Acquisition-related expenses Change in deferred net revenue (packaged goods and digital content) Gain (loss) on strategic investments Loss on lease obligation and facilities acquisition Loss on licensed intellectual property commitment Restructuring charges Stock-based compensation Income tax adjustments Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses. Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Non-GAAP Financial Measures 14 |