Electronic Arts(US:EA)2024-08-02 21:28Financial Performance - Total net revenue for the fiscal quarter ended June 30, 2024, was $1,660 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 $364 million[128] - Net income was $280 million, with diluted earnings per share of $1.04[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 $1,094 million, down 7 percent year-over-year[138] - Digital full game downloads generated net revenue of $1,343 million, an increase from $1,262 million in 2023[131] - Full game net revenue for the three months ended June 30, 2024, was $250 million, down $193 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 $105 million, or 29%, from $368 million in Q2 2023 to $263 million in Q2 2024, representing 16% of net revenue[168] - Research and development expenses increased by $33 million, or 6%, from $596 million in Q2 2023 to $629 million in Q2 2024, representing 38% of net revenue[169] - Marketing and sales expenses decreased by $24 million, or 10%, from $229 million in Q2 2023 to $205 million in Q2 2024, maintaining 12% of net revenue[170] - General and administrative expenses increased by $17 million, or 10%, from $163 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 $239 million, from $359 million in Q2 2023 to $120 million in Q2 2024[176] - Net cash used in investing activities increased by $25 million, from $44 million in Q2 2023 to $69 million in Q2 2024, primarily due to a $22 million increase in capital expenditures[177] - Net cash used in financing activities increased by $64 million, from $482 million in Q2 2023 to $546 million in Q2 2024, driven by a $50 million increase in common stock repurchases[177] - The company returned $425 million to stockholders during the three months ended June 30, 2024, including $375 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 $219 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 $72 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]