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Electronic Arts(EA) - 2025 Q1 - Quarterly Report
EAElectronic Arts(EA)2024-08-02 21:28
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Financial Performance - Total net revenue for the fiscal quarter ended June 30, 2024, was 1,660million,adecreaseof14percentyear−over−year[128]−Liveservicesandothernetrevenuewas1,660 million, a decrease of 14 percent year-over-year[128] - Live services and other net revenue was 1,410 million, down 5 percent year-over-year[128] - Operating income decreased by 33 percent year-over-year to 364million[128]−Netincomewas364 million[128] - Net income was 280 million, with diluted earnings per share of 1.04[128]−NetbookingsforthethreemonthsendedJune30,2024,were1.04[128] - Net bookings for the three months ended June 30, 2024, were 1,262 million, a decrease of 20 percent compared to the same period in 2023[138] - Live services and other net bookings were 1,094million,down7percentyear−over−year[138]−Digitalfullgamedownloadsgeneratednetrevenueof1,094 million, down 7 percent year-over-year[138] - Digital full game downloads generated net revenue of 1,343 million, an increase from 1,262millionin2023[131]−FullgamenetrevenueforthethreemonthsendedJune30,2024,was1,262 million in 2023[131] - Full game net revenue for the three months ended June 30, 2024, was 250 million, down 193millionor44193 million or 44% from the prior year, primarily due to the previous year's release of Star Wars Jedi: Survivor[164] - The decrease in net revenue was primarily driven by a 368 million decline due to the prior year release of Star Wars Jedi: Survivor and decreased sales of extra content for Apex Legends[162] Cost and Expenses - Cost of revenue decreased by 105million,or29105 million, or 29%, from 368 million in Q2 2023 to 263millioninQ22024,representing16263 million in Q2 2024, representing 16% of net revenue[168] - Research and development expenses increased by 33 million, or 6%, from 596millioninQ22023to596 million in Q2 2023 to 629 million in Q2 2024, representing 38% of net revenue[169] - Marketing and sales expenses decreased by 24million,or1024 million, or 10%, from 229 million in Q2 2023 to 205millioninQ22024,maintaining12205 million in Q2 2024, maintaining 12% of net revenue[170] - General and administrative expenses increased by 17 million, or 10%, from 163millioninQ22023to163 million in Q2 2023 to 180 million in Q2 2024, representing 11% of net revenue[172] Cash Flow and Shareholder Returns - Net cash provided by operating activities decreased by 239million,from239 million, from 359 million in Q2 2023 to 120millioninQ22024[176]−Netcashusedininvestingactivitiesincreasedby120 million in Q2 2024[176] - Net cash used in investing activities increased by 25 million, from 44millioninQ22023to44 million in Q2 2023 to 69 million in Q2 2024, primarily due to a 22millionincreaseincapitalexpenditures[177]−Netcashusedinfinancingactivitiesincreasedby22 million increase in capital expenditures[177] - Net cash used in financing activities increased by 64 million, from 482millioninQ22023to482 million in Q2 2023 to 546 million in Q2 2024, driven by a 50millionincreaseincommonstockrepurchases[177]−Thecompanyreturned50 million increase in common stock repurchases[177] - The company returned 425 million to stockholders during the three months ended June 30, 2024, including 375millioninsharerepurchasesand375 million in share repurchases and 50 million in dividends[182] Tax and Currency Risks - The effective tax rate increased from 28% in Q2 2023 to 29% in Q2 2024, primarily due to a partial release of valuation allowance in the prior year[173] - As of June 30, 2024, a hypothetical adverse foreign currency exchange rate movement of 10% would have resulted in potential declines in the fair value of cash flow hedging foreign currency forward contracts of 219million[193]−Ahypotheticaladverseforeigncurrencyexchangeratemovementof20219 million[193] - A hypothetical adverse foreign currency exchange rate movement of 20% would have resulted in potential declines of 439 million on cash flow hedging contracts[193] - For balance sheet hedging, a 10% adverse foreign currency exchange rate movement would lead to potential losses of 72million,whilea2072 million, while a 20% movement would result in losses of 143 million[193] - As of June 30, 2024, a hypothetical 150 basis point increase in interest rates would have resulted in a $4 million, or 1% decrease in the fair market value of short-term investments[197] Investment and Hedging Strategies - The company uses foreign currency forward contracts to hedge a portion of foreign currency risk related to forecasted sales and expenses, with maturities generally of 18 months or less[191] - The company maintains a short-term investment portfolio primarily consisting of high credit quality debt instruments, which are subject to market fluctuations[195] - As of June 30, 2024, short-term investments were classified as available-for-sale securities and recorded at fair value, with changes reported in accumulated other comprehensive income[196] - The company does not hedge its short-term investment portfolio against interest rate risks, but manages exposure through established policies[189] Internal Controls and Governance - The effectiveness of the company's disclosure controls and procedures was evaluated as effective by the CEO and CFO as of the end of the reporting period[199] - There were no changes in internal controls over financial reporting that materially affected the company's reporting during the fiscal quarter ended June 30, 2024[200] Restructuring and Strategic Plans - The restructuring plan approved in February 2024 aims to align the portfolio and resources with strategic priorities, expected to be completed by December 31, 2024[137]