Electronic Arts FY2025 Q1 Earnings Release

Jul, 2024 July 30, 2024
Electronic Arts Inc. Q1 FY25 Results

Table of
Contents
Safe Harbor Statement
Select Q1 FY25 Highlights
Net Bookings Results
Core Business and FY25 Title Slate
Q1 FY25 Actuals & Guidance
GAAP to Non -GAAP Reconciliation
Appendix
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Safe Harbor Statement
Some statements set forth inthis document, including the information relating to EA’s fiscal 2025 guidance information and title slate contain forward -looking
statements that are subject to change .Statements including words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “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 expectations .Our actual results
could differ materially from those discussed 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 :sales of the Company’s products and services ;the Company’s ability to develop and support digital
products and services, including managing online security and privacy ;outages of our products, services and technological infrastructure ;the Company’s
ability to manage expenses ;the competition in the interactive entertainment industry ;governmental regulations ;the effectiveness of the Company’s sales
and marketing programs ;timely development and release of the Company’s products and services ;the Company’s ability to realize the anticipated benefits
of, and integrate, acquisitions ;the consumer demand for, and the availability of an adequate supply of console hardware units ;the Company’s ability to
predict consumer preferences and trends ;the Company’s ability to develop and implement new technology ;foreign currency exchange rate
fluctuations ;economic and geopolitical conditions ;changes inour tax rates or tax laws ;and other factors described inPart I,Item 1Aof Electronic Arts’ latest
Annual Report on Form 10-Kunder the heading “Risk Factors”, as well as inother documents we have filed with the Securities and Exchange Commission .
These forward -looking statements are current as of July 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 June 30 ,2024 .Electronic Arts assumes no obligation and does not intend to update these estimates prior
to filing its Form 10-Qfor the fiscal quarter ended June 30 ,2024 .
Refer to Appendix for additional disclosures.
Please review our risk factors on Form 10 -K filed with the SEC
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Select Q1 FY25 Highlights
Refer to Appendix for additional disclosures.
$7.1B
Total TTM net bookings
$5.3B
Live Services TTM
net bookings
$1.9B
TTM Free Cash Flow
Live Services represented
75% of total TTM
net bookings
EA SPORTS FC TM Mobile
reported record net
bookings for Q1
EA SPORTS TM Madden NFL
grew net bookings by double
digits year over year in Q1
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Refer to Appendix for additional disclosures, including constant currency (“CC”).
Net Bookings by Composition
(in $ millions)
1,134 1,177 1,094
165
401
168
Q1 FY23 Q1 FY24 Q1 FY25
1,299
1,578
1,262
(7%)
Quarterly
(20%)
(58%)
YoY YoY CC
(20%)
(58%)
(7%) 5,450 5,573 5,342
2,028 2,047 1,772
Q1 FY23 Q1 FY24 Q1 FY25
7,478
Trailing 12 Months
(13%)
(4%)
(7%)
YoY
7,620
7,114
Live services and other Full game
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314 303 290
348 374 295
637
901
677
Q1 FY23 Q1 FY24 Q1 FY25
1,299
1,578
1,262
Net Bookings by Platform
(in $ millions)
(25%)
Quarterly
(20%)
(21%)
YoY YoY CC
(20%)
(21%)
(25%)
Trailing 12 Months
(5%)
(13%)
(7%)
YoY
(4%) (4%) 1,235 1,233 1,174
1,685 1,785 1,550
4,558 4,602 4,390
Q1 FY23 Q1 FY24 Q1 FY25
7,478 7,620
7,114
(5%)
Refer to Appendix for additional disclosures, including constant currency (“CC”).
Console Mobile PC & Other
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Refer to Appendix for additional disclosures.
Ecosystems
New Releases in FY25
Tales of Kenzera : ZAU (Apr 23)
EA SPORTS F1 24 ©(May 31)
EA SPORTS College Football 25 (Jul 19)
EA SPORTS Madden NFL 25 (Aug 16)
EA SPORTS FC 25 (Sep 27)
EA SPORTS NHL 25
Dragon Age : The Veilguard Unannounced partner title
Core Business and FY25 Title Slate
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Q1 FY25 Actuals, FY25 & Q2 Guidance
(in $ millions, except EPS)
Refer to Appendix for additional disclosures. For additional information please refer to our Non -GAAP Operating Margin FAQ.
Q1 FY25A FY25E Q2 FY25E
Net Revenue 1,660 7,100 to 7,500 1,900 to 2,000
Cost of Revenue 263 1,480 to 1,520 420 to 450
GAAP EPS $1.04 $3.34 to $4.00 $0.76 to $0.93
Operating Cash Flow 120 2,050 to 2,250
GAAP Operating Margin 21.9% 18.0% to 20.6%
Non -GAAP Operating Margin 32.5% 29.6% to 31.7%
Impact of GAAP Deferrals (2,120) bps 200 bps to 170 bps
Note: Our EPS guidance calculation does not factor in future share repurchases.Non -GAAP Operating Margin calculated as a % of GAAP Net Revenue.
Net Bookings 1,262 7,300 to 7,700 1,950 to 2,050
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GAAP to Non – GAAP Reconciliation: Q1 FY25 Actuals
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Three Months Ended June 30, 2024
GAAP -Based Financial Data GAAP -Based Financial Data
(in $ millions)
A
Statement of Operations
B
Acquisition – related expenses
C
Restructuring and related charges
D
Stock -based compensation
=A+B+C+D
Non -GAAP Change in deferred net revenue (online -enabled games)
Net revenue 1,660 – – – 1,660 (398)
Cost of revenue 263 (10) – (4) 249 –
Operating expense 1,033 (17) (6) (139) 871 –
Operating margin 21.9% 160 bps 40 bps 860 bps 32.5% (2,120) Bps
Income before provision for income taxes 394 27 6 143 570 (398)
Net income 1 280
Number of shares used in computation:
Diluted shares 268
1The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future per iods.

GAAP to Non – GAAP Reconciliation: FY25 Guidance
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Refer to Appendix for additional disclosures.
Twelve Months Ending March 31, 2025
GAAP -Based Financial Data GAAP -Based Financial Data
(in $ millions)
A
GAAP Guidance Range
B
Acquisition – related expenses
C
Restructuring and related charges
D
Stock -based compensation
=A+B+C+D
Non -GAAP GuidanceRange
Change in deferred net revenue (online -enabled games)
Net revenue 7,100 to 7,500 – – – 7,100 to 7,500 200
Cost of revenue 1,480 to 1,520 (40) – (10) 1,430 to 1,470 –
Operating expense 4,345 to 4,435 (70) (95) (615) 3,565 to 3,655 –
Operating margin 1 18.0% to 20.6% 150 bps 130 bps 860 bps 29.6% to 31.7% 200 bps to 170 bps
Income before provision for income taxes 1,329 to 1,596 110 95 625 2,159 to 2,426 200
Net income 2 904 to 1,085
Number of shares used in computation:
Diluted shares 271
1The mid -point of the range has been used for purposes of presenting reconciling items to operating margin . 2 The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future peri ods .

Q2 FY25 Guidance
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Refer to Appendix for additional disclosures.
Three Months Ending September 30, 2024
GAAP -Based Financial Data
(in $ millions)
GAAP Guidance Range Acquisition – related expenses
Restructuring and related charges Stock -based compensation Change in deferred net revenue (online -enabled games)
Net revenue 1,900 to 2,000 – – – 50
Cost of revenue 420 to 450 (10) – (5) –
Operating expense 1,190 to 1,200 (20) (65) (160) –
Income before provision for income taxes 300 to 365 30 65 165 50
Net income 1 204 to 248
Number of shares used in computation:
Diluted shares 267
1The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future per iods.

Appendix
Cash Flow Selected Data
Currency Assumptions
Constant Currency Reconciliation
Additional Disclosures
Non -GAAP Financial Measures
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Cash Flow Selected Data
(in $ millions)
Actuals
Q1 2025 Q1 2024 TTM Q1 2025 TTM Q1 2024
Operating Cash Flow 120 359 2,076 1,987
Capital Expenditures 67 45 221 193
Free Cash Flow 53 314 1,855 1,794
Investing Cash Flow (69) (44) (232) (196)
Financing Cash Flow (546) (482) (1,688) (1,606)
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.
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Currency Assumptions
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 FY24 Q1A and FY25 Q1A, FX rates are a simple average of EA’s actual monthly P&L rates. For FY25 Q2 -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%
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Current FX assumptions 1,2 USD/ Q1 2024 Q1 2025 Q2 -Q4E 2025
Net Bookings
EUR 1.09 1.08 1.07
GBP 1.24 1.26 1.26
Operating Expenses
CAD 1.36 1.37 1.37
SEK 10.47 10.75 10.56

Constant Currency Reconciliation – Net Bookings Guidance
(in $ millions)
Q2 2025
As Guidance
Q2 2024
As Reported
Percentage
Change YoY Currency Impact
Percentage
Change YoY
Constant Currency
Low 1,950 1,820 +7% 7 +8%
High 2,050 1,820 +13% 7 +13%
2025
As Guidance
2024
As Reported
Percentage
Change YoY Currency Impact
Percentage
Change YoY
Constant Currency
Low 7,300 7,430 (2%) 17 (2%)
High 7,700 7,430 +4% 17 +4%
Numbers above may not foot due to rounding and calculation methodologies.
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Constant Currency Reconciliation – Net Bookings (Q1)
(in $ millions)
Q1 2025
As Reported
Q1 2024
As Reported
Percentage
Change YoY
Q1 2025
Currency Impact
Percentage
Change YoY
Constant Currency
Console 677 901 (25%) (1) (25%)
PC & other 295 374 (21%) 3 (21%)
Mobile 290 303 (4%) 1 (4%)
Net Bookings 1,262 1,578 (20%) 3 (20%)
Q1 2025
As Reported
Q1 2024
As Reported
Percentage
Change YoY
Q1 2025
Currency Impact
Percentage
Change YoY
Constant Currency
Full game 168 401 (58%) 2 (58%)
Live services & other 1,094 1,177 (7%) 1 (7%)
Net Bookings 1,262 1,578 (20%) 3 (20%)
Numbers above may not foot due to rounding and calculation methodologies.
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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, Dragon Age, Titanfall, and Plants vs.Zombies are trademarks of Electronic
Arts Inc .John Madden, NFL, FIFA and F1are the property of their respective owners and used with permission .
Forward -looking statements are valid as of July 30 ,2024 only .Electronic Arts assumes no obligation to update these forward -looking statements, except
required by law .
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Non – GAAP Financial Measures
As asupplement to the Company’s financial measures presented in accordance with U.S.Generally Accepted Accounting Principles (“GAAP”), the Company
presents certain non -GAAP measures of financial performance, including non -GAAP operating margin, and free cash flow . These non -GAAP financial
measures should not be considered as asubstitute for, or superior to, measures of financial performance prepared in accordance with GAAP .In addition,
these non -GAAP measures have limitations in that they do not reflect all of the items associated with the Company’s results of operations as determined in
accordance with GAAP .These non -GAAP financial measures do not reflect acomprehensive system of accounting and differ from GAAP measures with the
same names and may differ from non -GAAP financial measures with the same or similar names that are used by other companies .
The non -GAAP financial measures exclude acquisition -related expenses, stock -based compensation, restructuring and related charges, and capital
expenditures as applicable inany given reporting period and our outlook .The Company may consider whether other significant items that arise in the future
should be excluded from our non -GAAP financial measures .Management believes that these non -GAAP financial measures provide investors with additional
useful information to better understand and evaluate the Company’s operating results and future prospects because they exclude certain items that may not
be indicative of the Company’s core business, operating results, or future outlook .These non -GAAP financial measures, with further adjustments, are used by
management to understand ongoing financial and business performance .
The Company uses atax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future periods .Accordingly, the
Company applies the same tax rate to its management reporting financial results .
Investors are encouraged to review the related GAAP financial measures and the reconciliation of non -GAAP financial measures to their most directly
comparable GAAP financial measure .
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