Electronic Arts Reports Q3 FY19 Financial Results

REDWOOD CITY, Calif.–(BUSINESS WIRE)–Electronic
Arts Inc. (NASDAQ: EA) today announced preliminary financial results
for its third fiscal quarter ended December 31, 2018.

News and ongoing updates regarding EA and its games are available on
EA’s blog at www.ea.com/news.

“The video game industry continues to grow through a year of intense
competition and transformational change,” said CEO Andrew Wilson. “Q3
was a difficult quarter for Electronic Arts and we did not perform to
our expectations. We are now applying the strengths of our company to
sharpen our execution and focus on delivering great new games and
long-term live services for our players. We’re very excited about Apex
Legends, the upcoming launch of Anthem, and a deep line-up of new
experiences that we’ll bring to our global communities next fiscal year.”

“FIFA stands out as a robust franchise through a tumultuous year in the
video game industry,” said COO and CFO Blake Jorgensen. “Elsewhere in
the business, we’re making adjustments to improve execution and we’re
refocusing R&D. Looking forward, we’re delighted to launch Anthem, our
new IP, to grow Apex Legends and related Titanfall experiences, to
deliver new Plants vs. Zombies and Need for Speed titles, and to add
Star Wars Jedi: Fallen Order to our sports titles in the fall.”

Selected Operating Highlights and Metrics

• Digital net bookings* for the trailing twelve months was $3.577
  billion, up 6% year-over-year and represents 74% of total net bookings.
• During the quarter, launched Battlefield™ V and Command & Conquer™:
  Rivals.
• On February 4, 2019, launched Apex Legends™, a new battle royale
  experience from Respawn.
• During the quarter, FIFA Ultimate Team™ matches played increased 15%
  year-over-year.
• During calendar 2018, FIFA 19 was the highest-selling console game in
  Europe.

* Net bookings is defined as the net amount of products and services
sold digitally or sold-in physically in the period. Net bookings is
calculated by adding total net revenue to the change in deferred net
revenue for online-enabled games and, for periods after the fourth
quarter of fiscal 2018, mobile platform fees.

Selected Financial Highlights and Metrics

All financial measures are presented on a GAAP basis.

• Net cash from operating activities was $954 million for the quarter
  and $1.563 billion for the trailing twelve months, a record third
  quarter trailing twelve months.
• EA repurchased 3.2 million shares for $292 million during the quarter
  and 9.0 million shares for $1.039 billion during the trailing twelve
  months.

Impact of Recently Adopted Accounting Standard

At the beginning of fiscal year 2019, April 1, 2018, EA adopted FASB ASU
2014-09 (Topic 606), Revenue from Contracts with Customers. For more
information about the adoption of Topic 606, please refer to the
Investor Accounting FAQ on our IR website. Financial data for periods
prior to April 1, 2018 has not been restated.

Quarterly Financial Highlights

*During the three months ended December 31, 2017, EA recognized $176
million of incremental income tax expense, or approximately $0.57 per
share, due to the application of the Tax Cuts and Jobs Act.

The following GAAP-based financial data and tax rate of 18% was used
internally by company management to adjust its fiscal 2019 GAAP results
in order to assess EA’s operating results:

For more information about the nature of the GAAP-based financial data,
please refer to EA’s Form 10-Q for the fiscal quarter ended September
30, 2018.

TTM Financial Highlights

*Due to the application of the Tax Cuts and Jobs Act, EA recognized
incremental income tax expense of $59 million for the twelve months
ended December 31, 2018 and $176 million for the twelve months ended
December 31, 2017.

The following GAAP-based financial data and tax rate of 18% in fiscal
year 2019 and 21% in fiscal year 2018 was used internally by company
management to adjust its GAAP results in order to assess EA’s operating
results:

For more information about the nature of the GAAP-based financial data,
please refer to EA’s Form 10-Q for the fiscal quarter ended September
30, 2018.

Operating Metric

The following is a calculation of our total net bookings for the periods
presented:

Business Outlook as of February 5, 2019

The following forward-looking statements reflect expectations as of
February 5, 2019. Electronic Arts assumes no obligation to update these
statements, except as required by law. Results may be materially
different and are affected by many factors detailed in this release and
in EA’s annual and quarterly SEC filings.

Fiscal Year 2019 Expectations – Ending March 31, 2019

Financial metrics:

• Net revenue is expected to be approximately $4.875 billion.
  • Change in deferred net revenue (online-enabled games) is expected
    to be approximately $65 million.
  • Mobile platform fees are expected to be approximately $(190)
    million.
• Net income is expected to be approximately $980 million.
• Diluted earnings per share is expected to be approximately $3.20.
• Operating cash flow is expected to be approximately $1.350 billion.
• The Company estimates a share count of 306 million for purposes of
  calculating fiscal year 2019 diluted earnings per share.

Operational metric:

• Net bookings is expected to be approximately $4.750 billion.

In addition, the following outlook for GAAP-based financial data and a
long-term tax rate of 18% are used internally by EA to adjust our GAAP
expectations to assess EA’s operating results and plan for future
periods:

Fourth Quarter Fiscal Year 2019 Expectations – Ending March 31, 2019

Financial metrics:

• Net revenue is expected to be approximately $1.163 billion.
  • Change in deferred net revenue (online-enabled games) is expected
    to be approximately $56 million.
  • Mobile platform fees are expected to be approximately $(49)
    million.
• Net income is expected to be approximately $170 million.
• Diluted earnings per share is expected to be approximately $0.56.
• The Company estimates a share count of 303 million for purposes of
  calculating fourth quarter fiscal year 2019 diluted earnings per share.

Operational metric:

• Net bookings is expected to be approximately $1.170 billion.

In addition, the following outlook for GAAP-based financial data and a
long-term tax rate of 18% 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-Q for the fiscal quarter ended September
30, 2018.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on Tuesday, February 5, 2019
at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal third
quarter ended December 31, 2018 and its outlook for the future. During
the course of the call, Electronic Arts may disclose material
developments affecting its business and/or financial performance.
Listeners may access the conference call live through the following
dial-in number (866) 393-4306 (domestic) or (734) 385-2616
(international), using the Conference ID 7589409 or via webcast at EA’s
IR Website at http://ir.ea.com.

EA has posted a slide presentation, a financial model of EA’s historical
results and guidance, and an Investor Accounting FAQ on EA’s
IR Website. After the conference call, EA will also post the prepared
remarks and a transcript from the conference call on EA’s IR Website.

A dial-in replay of the conference call will be available until February
19, 2019 at (855) 859-2056 (domestic) or (404) 537-3406 (international)
using pin code 7589409. An audio webcast replay of the conference call
will be available for one year on EA’s
IR Website.

Forward-Looking Statements

Some statements set forth in this release, including the information
relating to EA’s fiscal 2019 expectations under the heading “Business
Outlook as of February 5, 2019,” and other information regarding EA’s
fiscal 2019 and fiscal 2020 expectations 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 titles; the Company’s ability to develop and support digital
products and services, including managing online security and privacy;
the Company’s ability to manage expenses; the competition in the
interactive entertainment industry; the effectiveness of the Company’s
sales and marketing programs; timely development and release of the
Company’s products; the Company’s ability to realize the anticipated
benefits of acquisitions; the consumer demand for, and the availability
of an adequate supply of console hardware units; the Company’s ability
to predict consumer preferences among competing platforms; the Company’s
ability to develop and implement new technology; foreign currency
exchange rate fluctuations; general economic conditions; 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, 2018.

These forward-looking statements are current as of February 5, 2019.
Electronic Arts assumes no obligation to revise or update any
forward-looking statement for any reason, except as required by law. In
addition, the preliminary 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, 2018. 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, 2018.

About Electronic Arts

Electronic Arts (NASDAQ: EA) is a global leader in digital interactive
entertainment. The Company develops and delivers games, content and
online services for Internet-connected consoles, mobile devices and
personal computers. EA has more than 300 million registered players
around the world.

In fiscal year 2018, EA posted GAAP net revenue of $5.15 billion.
Headquartered in Redwood City, California, EA is recognized for a
portfolio of critically acclaimed, high-quality brands such as The
Sims™, Madden NFL, EA SPORTS™ FIFA, Battlefield™, Need for Speed™,
Dragon Age™ and Plants vs. Zombies™. More information about EA is
available at www.ea.com/news.

EA SPORTS, Battlefield, The Sims, Need for Speed, Dragon Age, Apex
Legends, Respawn, Command & Conquer, Ultimate Team and Plants vs.
Zombies are trademarks of Electronic Arts Inc. John Madden, NFL and FIFA
are the property of their respective owners and used with permission.

¹At the beginning of fiscal year 2019, April 1, 2018, EA
adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with
Customers. Topic 606 significantly changes how EA recognizes and reports
revenue and diluted earnings per share. For more information about the
adoption of Topic 606, including information with respect to mobile
platform fees, please refer to the Investor Accounting FAQ on our IR
website. Financial data for periods prior to April 1, 2018 has not been
restated.

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our
guidance provided on October 30, 2018 for the three months ended
December 31, 2018 plus a comparison to the actuals for the three months
ended December 31, 2017.

¹At the beginning of fiscal year 2019, April 1, 2018, EA
adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with
Customers. Topic 606 significantly changes how EA recognizes and reports
revenue and diluted earnings per share. For more information about the
adoption of Topic 606, including information with respect to mobile
platform fees, please refer to the Investor Accounting FAQ on our IR
website. Financial data for periods prior to April 1, 2018 has not been
restated.

²Diluted earnings per share reflects the potential dilution
from common shares (calculated using the treasury stock method),
issuable through stock-based compensation plans. When the company incurs
a loss, shares issuable through stock-based compensation plans are
excluded from the diluted loss per share calculation as inclusion would
be anti-dilutive.

¹At the beginning of fiscal year 2019, April 1, 2018, EA
adopted FASB ASU 2014-09 (Topic 606) Revenue from Contracts with
Customers. EA’s Q3 FY19 Unaudited Condensed Consolidated Balance Sheet
reflects the effect of the adoption as of April 1, 2018, which had an
impact on the following: receivables, net of allowances, accrued and
other current liabilities, deferred net revenue (online-enabled games),
deferred income taxes, net, retained earnings and accumulated other
comprehensive loss. Financial data for periods prior to April 1, 2018
has not been restated.

³Derived from audited consolidated financial statements.

¹At the beginning of fiscal year 2019, April 1, 2018, EA
adopted FASB ASU 2014-09 (Topic 606), Revenue from Contracts with
Customers.

Contacts

Chris Evenden
Vice President, Investor Relations
650-628-0255
cevenden@ea.com

John Reseburg
Vice President, Corporate Communications
650-628-3601
jreseburg@ea.com

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