EA Reports Third Quarter Fiscal 2007 Results.Q3 Net Revenue of $1.28 Billion Digital Revenue Hits Record $115 Million Over Last Twelve Months REDWOOD CITY Redwood City, city (1990 pop. 66,072), seat of San Mateo co., W Calif., on San Francisco Bay; inc. 1868. Manufactures include commmunications, electrical, electronic, and medical equipment. , Calif. -- Electronic Arts (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ERTS ERTS Electronic Arts, Inc. (stock symbol) ERTS Earth Resources Technology Satellite (US NASA) ERTS Embedded Real Time Systems ERTS Enhanced Remote Transit Shed ) today announced preliminary financial results for its fiscal third quarter ended December 31, 2006. Fiscal Third Quarter Results (comparisons are to the quarter ended December 31, 2005) Net revenue for the third quarter was $1.281 billion, up one percent as compared with $1.270 billion for the prior year. Sales were driven by Need for Speed[TM] Carbon, FIFA FIFA International Association Football Federation [French Fédération Internationale de Football Association] FIFA n abbr (= Fédération Internationale de Football Association) → FIFA f 07, The Sims[TM] 2 Pets and Madden NFL Madden NFL is an American football video game series developed by Electronic Arts Tiburon for EA Sports. The game is named after Pro Football Hall of Famer John Madden, a well-known color commentator for NBC Sports and formerly a successful Super Bowl-winning coach during 07 - each selling over three million copies in the quarter. Gross profit for the quarter was $811 million, up six percent year-over-year. Net income for the quarter was $160 million as compared with $259 million for the prior year. The Company adopted Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 123(R) "Share-Based Payment" at the beginning of its fiscal year resulting in an after-tax stock-based compensation charge of $28 million or $0.09 per share in the third quarter. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.50 as compared with $0.83 for the prior year. Non-GAAP net income was $201 million as compared with $268 million a year ago. Non-GAAP diluted earnings per share were $0.63 as compared with $0.86 for the prior year. (Please see Non-GAAP Financial Measures and reconciliation information included in this release.) Trailing twelve month operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. was $520 million as compared with $733 million a year ago. The Company ended the quarter with cash, short-term investments and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $2.6 billion. "We are pleased with the performance of our products on next-generation consoles," said Larry Probst Larry Probst (Lawrence F. Probst III) was previously the CEO of the world's largest video game publisher, Electronic Arts (EA). He was succeeded by John Riccitiello on April 2, 2007. , Chairman and Chief Executive Officer. "In the year ahead, we plan to build on our leadership position on both the Xbox 360 and the PLAYSTATION 3, and to significantly increase our support for the Nintendo platforms." "The past several years have been about investment. The coming years are about growth and reward," said Warren Jenson, Chief Financial and Administrative Officer. "Our digital revenue hit a record $115 million over the last twelve months and our mobile revenue reached $100 million in the past nine months alone." Highlights (comparisons are to the quarter ended December 31, 2005) * Net revenue: North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. - up three percent to $637 million; Europe - up one percent to $583 million; Asia - down 19 percent to $61 million. Movements in foreign currency rates positively impacted net revenue by $33 million, or three percent. * Need for Speed Carbon sold over eight million copies in the quarter and was a top-five title in North America and Europe. * Madden NFL 07 was the most popular game of 2006 in North America, selling over eight million copies since launch. * FIFA 07 was EA's top-selling European title with over six million copies sold globally since launch. * Titles from The Sims 2 franchise sold over 10 million copies in the quarter - with The Sims 2 Pets selling over five million copies. * EA launched four PLAYSTATION[R]3 titles in the quarter resulting in 32 percent revenue share in North America. * In calendar year 2006, EA was the number one publisher on the Xbox 360[TM], PLAYSTATION 3, PlayStation[R]2, Xbox[R], PC and PSP (PlayStation Portable) See PlayStation. (PlayStation[R]Portable) in both North America and Europe. EA was the number two publisher on the Nintendo DS “NDS” redirects here. For other uses, see NDS (disambiguation). The Nintendo DS (sometimes abbreviated NDS or DS) is a handheld game console developed and manufactured by Nintendo, which was released in 2004 in Canada, U.S., and Japan. [TM] in Europe. * EA had two of the top-five titles in North America and four of the top-five titles in Europe across all platforms in calendar year 2006. * EA completed its acquisition of Digital Illusions in the quarter - bringing the critically acclaimed ac·claim v. ac·claimed, ac·claim·ing, ac·claims v.tr. 1. To praise enthusiastically and often publicly; applaud. See Synonyms at praise. 2. Battlefield franchise to EA. * EA acquired Headgate Studios, a talented development team focused exclusively on the Wii. * EA Partners signed an agreement to publish Pandemic pandemic /pan·dem·ic/ (pan-dem´ik) 1. a widespread epidemic of a disease. 2. widely epidemic. pan·dem·ic adj. Epidemic over a wide geographic area. n. Studios' Mercenaries 2: World in Flames World in Flames is a board wargame designed by Harry Rowland and released in 1985 by the Australian Design Group. It is currently in its 7th edition, World in Flames - Final Edition, each new edition featuring changes to the rules, maps and counters provided with the game. for the 2007 holiday season. Business Outlook The following forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , as well as those made above, reflect expectations as of February 1, 2007. Results may be materially different and are affected by many factors, such as: consumer demand for next-generation consoles and the ability of the console manufacturers A console manufacturer is a company that manufactures and distributes video game consoles. It is also known as a first-party video game publisher. Historically, some of the most recognized console manufacturers include: Fiscal Fourth Quarter Expectations - Ending March 31, 2007 * Net revenue is expected to be between $550 and $600 million. * GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share is expected to be between ($0.17) and ($0.12). * Non-GAAP diluted earnings per share are expected to be between roughly breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations and $0.03. Expected non-GAAP diluted earnings per share exclude the following items from expected GAAP diluted loss per share: approximately $0.08 of estimated stock-based compensation; approximately $0.03 of amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ; approximately $0.02 of estimated restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ; and approximately $0.02 related to the Company's acquisition of Mythic myth·i·cal also myth·ic adj. 1. Of or existing in myth: the mythical unicorn. 2. Imaginary; fictitious. 3. Entertainment. Fiscal Year Expectations - Ending March 31, 2007 * Net revenue is expected to be between $3.025 and $3.075 billion - as compared to previous expectations of $2.950 to 3.125 billion. * GAAP diluted earnings per share are expected to be between $0.15 and $0.20 - up from previous expectations of breakeven to $0.15. * Non-GAAP diluted earnings per share are expected to be between $0.70 and $0.74 - up from previous expectations of $0.55 to $0.70. Expected non-GAAP diluted earnings per share exclude the following items from expected GAAP diluted earnings per share: approximately $0.34 of estimated stock-based compensation; approximately $0.13 of amortization of intangible assets; approximately $0.05 of estimated restructuring charges; approximately $0.03 related to our acquisition of Mythic Entertainment. Deferred Revenue Recognition For Certain Online-Enabled Packaged Goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one The Company also announced today that, starting in fiscal 2008, the Company will begin recognizing revenue associated with certain online-enabled packaged goods games over the estimated hosting service period. As a result, the Company anticipates that a significant amount of net revenue that otherwise would have been recognized in fiscal 2008 will be recognized in fiscal 2009. Conference Call Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the third quarter of fiscal 2007, its outlook for the future, and to discuss the impact of its revenue recognition policies on its fiscal 2008 results. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: (800) 479-9001, access code 220497, or via webcast: http://investor.ea.com. A dial-in replay of the conference call will be provided until February 8, 2007 at (719) 457-0820, access code 220497. A webcast archive of the conference call will be available for one year at http://investor.ea.com. Non-GAAP Financial Measures To supplement the Company's unaudited condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge 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 gross profit, non-GAAP operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items from the Company's statement of operations See Income statement. : * Acquired in-process technology * Amortization of intangibles * Certain litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. expenses * Restructuring charges * Stock-based compensation * Income tax adjustments (consisting of the income tax effect of the items listed above and certain one-time 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. Beginning with the release of its first quarter results in fiscal 2008, Electronic Arts intends, on a prospective basis, to reflect the change in its deferred net revenue balance in its non-GAAP financial measures, including non-GAAP net revenue. 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. Electronic Arts' management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company's operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company's performance to prior periods. In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons: Amortization of Intangibles. When analyzing the operating performance of an acquired entity, Electronic Arts' management focuses on the total return provided by the investment (i.e., operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company's management excludes the GAAP impact of acquired intangible assets to its financial results. Electronic Arts believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense associated with acquired intangible assets. In addition, in accordance with GAAP, Electronic Arts generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired in-process technology, which is expensed immediately, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, Electronic Arts believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that excludes the amortization of acquired intangibles. Stock-Based Compensation. Electronic Arts adopted SFAS 123(R), "Share-Based Payment" beginning in its fiscal year 2007. When evaluating the performance of its individual business units, the Company does not consider stock-based compensation charges. Likewise, the Company's management teams exclude stock-based compensation expense from their short and long-term operating plans. In contrast, the Company's management teams are held accountable for cash-based compensation and such amounts are included in their operating plans. Further, when considering the impact of equity award grants, Electronic Arts places a greater emphasis on overall shareholder dilution rather than the accounting charges associated with such grants. Video game platforms have historically had a life cycle of four to six years, which causes the video game software market to be cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. . The Company's management analyzes its business and operating performance in the context of these business cycles, comparing Electronic Arts' performance at similar stages of different cycles. For comparability purposes, Electronic Arts believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its core business. In addition, given the Company's adoption of SFAS 123(R), "Share-Based Payment" beginning with its fiscal year ending March 31, 2007, Electronic Arts believes that a non-GAAP financial measure that excludes stock-based compensation will facilitate the comparison of its year-over-year results. Restructuring Charges. Although Electronic Arts has engaged in various restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities over the past several years, each has been a discrete, extraordinary event based on a unique set of business objectives. Each of these restructurings has been unlike its predecessors in terms of its operational implementation, business impact and scope. The Company does not engage in restructuring activities on a regular basis or in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures. Change in Deferred Net Revenue Balance. Beginning in fiscal 2008, Electronic Arts will no longer be able to objectively determine the fair value of the online hosting services included in certain of its packaged goods games. As a result, the Company will recognize the revenue from the sale of these games over the estimated online service period. Although Electronic Arts will defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. the recognition of a significant portion of its net revenue as a result of this change, there will be no adverse impact to its operating cash flow. Internally, Electronic Arts' management intends to reflect the change in its deferred net revenue in its non-GAAP financial measures when evaluating the Company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. The Company believes that reflecting the change in deferred net revenue in its operating results is important to facilitate an understanding of the cash characteristics of its business, as well as comparisons to prior periods during which the Company's accounting policies did not result in the deferral deferral - Waiting for quiet on the Ethernet. of significant amounts of similar net revenue. In the financial tables below, Electronic Arts has provided a reconciliation of the most comparable GAAP financial measure to each of the historical non-GAAP financial measures used in this press release. Forward-Looking Statements Some statements set forth in this release, including the estimates under the headings "Business Outlook" and "Deferred Revenue Recognition For Certain Online-Enabled Packaged Goods" 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 future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future 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: the consumer demand for, and the availability of an adequate supply of, current-generation and next-generation hardware units (including the Xbox 360[TM] video game and entertainment system, the PLAYSTATION[R]3 computer entertainment system and the Wii[TM]); the Company's ability to predict consumer preferences among competing hardware platforms Each hardware platform, or CPU family, has a unique machine language. All software presented to the computer for execution must be in the binary coded machine language of that CPU. Following is a list of the major hardware platforms in existence today. See platform. ; consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. 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 the remainder of fiscal year 2007; 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; the Company's ability to secure licenses to valuable entertainment properties on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms; and other factors described in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended March 31, 2006 and Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 2006. These forward-looking statements speak only as of February 1, 2007. Electronic Arts assumes no obligation and does not intend to update these forward-looking statements, including those made under the "Business Outlook" and "Deferred Revenue Recognition For Certain Online-Enabled Packaged Goods" headings. In addition, the financial results set forth in this release 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 Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2006. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended December 31, 2006. About Electronic Arts Electronic Arts Inc. (EA), headquartered in Redwood City, California Redwood City is a suburb located on the San Francisco Peninsula in the San Francisco Bay Area of California. Redwood City is the county seat of San Mateo County. As of the 2005 census, the city had a total population of 76,000. , is the world's leading interactive entertainment software company. Founded in 1982, the company develops, publishes, and distributes interactive software worldwide for videogame systems, personal computers, cellular handsets and the Internet. Electronic Arts markets its products under four brand names: EA SPORTS(TM), EA(TM), EA SPORTS BIG(TM) and POGO Pogo comic strip rife with political satire. [Comics: Berger, 172] See : Satire POGO - Early system on G-15. Listed in CACM 2(5):16 (May 1959). (TM). In fiscal 2006, EA posted revenue of $2.95 billion and had 27 titles that sold more than one million copies. EA's homepage and online game site is www.ea.com. More information about EA's products and full text of press releases can be found on the Internet at http://info.ea.com. All trademarks are the property of their respective owners. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion