Electronic Arts FY2024 Q3 Earnings Release
Download PDFJan, 2024 January 30, 2024
Electronic Arts Inc. Q3 FY24 Results
Table of
Contents
Safe Harbor Statement
Select Q3 FY24 Highlights
Net Bookings Results
Existing Live Services and FY24 Title Slate
Guidance
2023: Year in Gaming
Appendix
Safe Harbor Statement
Some statements set forth in this document, including the information relating to EA’s fiscal 2024 guidance information and t itle slate contain forward -looking
statements that are subject to change. Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estim ate ,” “plan,” “predict,” “seek,”
“goal,” “will,” “may,” “likely,” “should,” “could” (and the negative of any of these terms), “future” and similar expressions also identify forward -looking
statements. These forward -looking statements are not guarantees of future performance and reflect management’s current expectati ons. Our actual results
could differ materially from those discussed in the forward -looking statements. Some of the factors which could cause the Compan y’s results to differ
materially from its expectations include the following: sales of the Company’s products and services; the Company’s ability to d evelop and support digital
products and services, including managing online security and privacy; outages of our products, services and technological in fra structure; the Company’s
ability to manage expenses; the competition in the interactive entertainment industry; governmental regulations; the effectiv ene ss of the Company’s sales
and marketing programs; timely development and release of the Company’s products and services; the Company’s ability to reali ze the anticipated benefits
of, and integrate, acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware unit s; the Company’s ability to
predict consumer preferences among competing platforms; the Company’s ability to develop and implement new technology; foreig n c urrency exchange rate
fluctuations; economic and geopolitical conditions; changes in our tax rates or tax laws; and other factors described in Part II , Item 1A of Electronic Arts’ latest
Quarterly Report on Form 10 -Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange
Commission, including our Annual Report on Form 10 -K for the fiscal year ended March 31, 2023.
These forward -looking statements are current as of January 30 ,2024 . Electronic Arts assumes no obligation to revise or update any forward -looking
statement for any reason, except as required by law .Inaddition, the preliminary financial results set forth herein 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 inits Quarterly
Report on Form 10-Qfor the fiscal quarter ended December 31,2023 .Electronic Arts assumes no obligation and does not intend to update these estimates
prior to filing its Form 10-Qfor the fiscal quarter ended December 31,2023 .
Refer to Appendix for additional disclosures
Please review our risk factors on Form 10 -Q filed with the SEC
Select Q3 FY24 Highlights
Refer to Appendix for additional disclosures
$7.7B
Total TTM Net Bookings
+8% year over year
$1.7B
Record Live Services
Net Bookings in Q3
$2.2B
Record TTM Free Cash Flow
Live Services represented
73% of total TTM
Net Bookings
EA SPORTS TM Madden NFL
grew Net Bookings +5%
year over year in Q3
EA SPORTS FC TM
grew Net Bookings +7%
year over year in Q3
Refer to Appendix for additional disclosures, including constant currency (“CC”)
Net Bookings by Composition
(in $ millions)
1,677 1,655 1,712
900 687 654
Q3 FY22 Q3 FY23 Q3 FY24
2,577
2,342 2,366
+3%
Quarterly
+1%
(5%)
YoY YoY CC
+2%
(4%)
+5% 5,189 5,392 5,640
2,065 1,754 2,070
Q3 FY22 Q3 FY23 Q3 FY24
7,254
Trailing 12 Months
+18%
+5%
+8%
YoY
7,146
7,710
Live services and other Full game
320 303 307
511 464 453
1,746 1,575 1,606
Q3 FY22 Q3 FY23 Q3 FY24
2,577
2,342 2,366
Net Bookings by Platform
(in $ millions)
+2%
Quarterly
+1%
(2%)
YoY YoY CC
+2%
0%
+3%
Trailing 12 Months
+12%
+4%
+8%
YoY
+1% +2% 1,065 1,235 1,220
1,630 1,666 1,732
4,559 4,245 4,758
Q3 FY22 Q3 FY23 Q3 FY24
7,254 7,146
7,710
(1%)
Refer to Appendix for additional disclosures, including constant currency (“CC”)
Console Mobile PC & Other
FY24: Announced Titles
Massive Online
Communities
EA SPORTS PGA Tour (launched Apr 7) Star Wars Jedi: Survivor (launched Apr 28) The Lord of the Rings: Heroes of Middle Earth (launched May 10) EA SPORTS Super Mega Baseball 4 (launched Jun 2) EA SPORTS F1 23 ©(launched Jun 16)
Blockbusters &
Original IP
EA SPORTS Madden NFL 24 (launched Aug 18) Immortals of Aveum (launched Aug 22) EA SPORTS FC 24 (launched Sep 29)
EA SPORTS
EA SPORTS NHL 24 (launched Oct 6) EA SPORTS UFC 5 (launched Oct 27) EA SPORTS WRC 23 (launched Nov 3)
Existing Live Services and FY24 Title Slate
Denotes annual full game release
Denotes new title release in FY24
Refer to Appendix for additional disclosures
Q4 and FY24 Guidance
(in $ millions, except EPS)
Refer to Appendix for additional disclosures
Q4 FY24E FY24E
Net Revenue 1,625 to 1,925 7,408 to 7,708
Cost of Revenue 360 to 410 1,713 to 1,763
GAAP EPS* $0.20 to $0.68 $4.21 to $4.68
Operating Cash Flow n/a 1,950 to 2,100
Net Bookings 1,625 to 1,925 7,389 to 7,689
Note: Our EPS guidance calculation does not factor in future share repurchases.*Subsequent to December 31, 2023, we impaired certain acquisition -related intangible assets totaling approximately $70 million t hat will be recorded in the fourth quarter of fiscal year 2024.
Refer to Appendix for additional disclosures. Read more about 2023: Year in Gaming . *Apex Legends Esports
2023: Year in Gaming
Reflecting on the games that engaged and inspired our global player communities this year.
Engagement Highlights
1.7 billion total cross -play matches 1.8 billion hours played
EA SPORTS FC Sims 4
47.9 million hours watched of ALGS* 6.4 million Super Bowls won
Apex Legends EA SPORTS Madden NFL
763 million total matches played 4.8 billion enemies defeated
Battlefield 2042 Star Wars Jedi: Survivor
Appendix
Guidance Details
Cash Flow Selected Data
Currency Assumptions
Constant Currency Reconciliation
Additional Disclosures
Guidance Details: Q4 FY24
Three Months Ending March 31, 2024
GAAP -Based Financial Data*
(in $ millions) GAAP Guidance Range
Acquisition – related experiences**
Change in deferred net revenue (online -enabled games) Restructuring and related charges Stock -based compensation
Total net revenue 1,625 to 1,925 – – – –
Cost of revenue 360 to 410 (30) – – (5)
Operating expense 1,125 to 1,205 (75) – – (150)
Income before provision for income taxes 158 to 325 105 – – 155
Net income 54 to 183
Number of shares used in computation:
Diluted shares 271
*The mid -point of the range has been used for purposes of presenting the reconciling items. **Subsequent to December 31, 2023, we impaired certain acquisition -related intangible assets totaling approximately $70 million that will be recorded in the fourth quarter of fiscal year 2024.
The following provides guidance for EA’s Q4Fiscal 2024 financial performance as of January 30 ,2024 .The following outlook for GAAP -based financial data
and along -term tax rate of 19%are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods .
For more information about the nature of the GAAP -based financial data, please refer to EA’s Form 10-Kfor the fiscal year ended March 31,2023 .
This information isalso available inExcel format inour financial model at ir.ea .com .
Guidance Details: FY24
Twelve Months Ending March 31, 2024
GAAP -Based Financial Data*
(in $ millions) GAAP Guidance Range
Acquisition – related experiences**
Change in deferred net revenue (online -enabled games) Restructuring and related charges Stock -based compensation
Total net revenue 7,408 to 7,708 – (19) – –
Cost of revenue 1,713 to 1,763 (77) – – (11)
Operating expense 4,271 to 4,351 (145) – (3) (580)
Income before provision for income taxes 1,487 to 1,654 222 (19) 3 591
Net income 1,145 to 1,274
Number of shares used in computation:
Diluted shares 272
*The mid -point of the range has been used for purposes of presenting the reconciling items. ** Includes Q4 impairment of acquisition -related intangible assets as per previous table.
The following provides guidance for EA’s Fiscal 2024 financial performance as of January 30 ,2024 .The following outlook for GAAP -based financial data and a
long -term tax rate of 19%are used internally by EA to adjust our GAAP expectations to assess EA’s operating results and plan for future periods .
For more information about the nature of the GAAP -based financial data, please refer to EA’s Form 10-Kfor the fiscal year ended March 31,2023 .
This information isalso available inExcel format inour financial model at ir.ea .com .
Cash Flow Selected Data
(in $ millions)
Actuals
Q3 2024 Q3 2023 TTM Q3 2024 TTM Q3 2023
Operating Cash Flow 1,264 1,123 2,352 1,377
Capital Expenditures 52 48 195 213
Free Cash Flow 1,212 1,075 2,157 1,164
Investing Cash Flow (51) (61) (195) (213)
Financing Cash Flow (431) (418) (1,622) (1,593)
Free cash flow is defined as operating cash flow minus capital expenditures. Management believes free cash flow is a useful mea sure of the company’s ability to generate cash.
Currency Assumptions
Current FX assumptions 1,2 USD/ Q3 2023 Q3 2024 Q4E 2024
Net Bookings
EUR 1.00 1.07 1.11
GBP 1.14 1.23 1.28
Operating Expenses
CAD 1.36 1.37 1.32
SEK 10.94 10.89 10.00
If the U.S. dollar strengthens 10% against the Euro and British pound sterling:
• With hedging, total net bookings decrease ~2.0%
• Total cost of revenue and operating expenses decrease ~2.0%
Note: Our financial guidance includes the forecasted impact of the FX cash flow hedging program.1 For FY23 Q3A and FY24 Q3A, FX rates are a simple average of EA’s actual monthly P&L rates. For FY24 Q4E, the same FX rates are used for all forecast periods.2 For all periods, FX rates are quoted using market convention.
Rule of thumb
If the U.S. dollar strengthens 10% against the Canadian dollar and Swedish
krona:
• Total net bookings decrease ~0.5%
• With hedging, total cost of revenue and operating expenses decrease
~0.5%
Constant Currency Reconciliation – Net Bookings Guidance
(in $ millions)
2024
As Guidance
2023
As Reported
Percentage
Change YoY Currency Impact
Percentage
Change YoY
Constant Currency
Low 7,389 7,341 +1% +91 +2%
High 7,689 7,341 +5% +91 +6%
Q4 2024
As Guidance
Q4 2023
As Reported
Percentage
Change YoY Currency Impact
Percentage
Change YoY
Constant Currency
Low 1,625 1,946 (16%) +11 (16%)
High 1,925 1,946 (1%) +11 (1%)
Numbers above may not foot due to rounding and calculation methodologies
Constant Currency Reconciliation – Net Bookings
(in $ millions)
Q3 2024
As Reported
Q3 2023
As Reported
Percentage
Change YoY
Q3 2024
Currency Impact
Percentage
Change YoY
Constant Currency
Console 1,606 1,575 +2% 14 +3%
PC & other 453 464 (2%) 7 0%
Mobile 307 303 +1% 1 +2%
Net Bookings 2,366 2,342 +1% 22 +2%
Q3 2024
As Reported
Q3 2023
As Reported
Percentage
Change YoY
Q3 2024
Currency Impact
Percentage
Change YoY
Constant Currency
Full game 654 687 (5%) 7 (4%)
Live services & other 1,712 1,655 +3% 15 +5%
Net Bookings 2,366 2,342 +1% 22 +2%
Numbers above may not foot due to rounding and calculation methodologies
Additional Disclosures
Net revenue, gross profit and operating cash flow are presented on aGAAP basis .
Net bookings isan operating metric that EA defines as the net amount of products and services sold digitally or sold -inphysically inthe period .Net bookings
iscalculated by adding total net revenue to the change indeferred net revenue for online -enabled games .Acalculation of net bookings can be found inthe
“Net Bookings” tab of the Financial Model provided on our IRwebsite .
We define EA’s player network as the number of active accounts used to play EA games and services on any platform over the preceding 12 months .We
determine these operating metrics by using internal company data .We also use information provided by third parties, including third party network logins
provided by platform providers .While we believe that the operating metrics we report are reasonable estimates for the applicable period of measurement,
there are inherent challenges in measuring how our games and services are played across large global populations .For example, while we seek to remove
duplicate accounts inthese metrics, we do not require players to use acommon identifier or to link their accounts to play an EA game on console/PC and an
EA game on their mobile device, or to play two or more EA games on asingle mobile device .Therefore, aplayer that plays two of our games on asingle mobile
device or plays two of our games (or the same game) across different devices may be counted as two accounts .In addition, we evaluate our systems for
false accounts, which represent user profiles that we believe are intended to be used for purposes that violate our terms of service, and remove them from
our player network .From time to time, our actions may impact the period -by -period comparability of these metrics .For example, we may change our
methodology or we may implement strategic decisions with respect to certain games and services, including sunsetting titles .
From time to time, we make comparisons of current periods to prior periods with reference to constant currency .We evaluate our performance on aconstant
currency basis in order to facilitate period -to-period comparisons without regard to the impact of changing foreign currency exchange rates .To present
constant currency information (both historical and forward -looking), the current period results are converted into United States dollars using the weighted
average exchange rates from the comparative period rather than the rates in effect .Constant currency information is presented net of the impact of our
foreign exchange hedging programs .
EA, EA SPORTS, EA SPORTS FC, Battlefield, Need for Speed, Apex Legends, The Sims, Titanfall, and Plants vs.Zombies are trademarks of Electronic Arts
Inc .STAR WARS© isthe property of Lucasfilm Ltd and used with their permission .
Forward -looking statements are valid as of January 30 ,2024 only .Electronic Arts assumes no obligation to update these forward -looking statements, except
required by law .