Electronic Arts(EA) - 2025 Q3 - Quarterly Report

Financial Performance - Total net revenue for the fiscal quarter ended December 31, 2024, was $1,883 million, down 3% year-over-year[118] - Live services and other net revenue was $1,284 million, also down 3% year-over-year[118] - Net income was $293 million with diluted earnings per share of $1.11[118] - Net bookings for the three months ended December 31, 2024, were $2,215 million, a decrease of $151 million, or 6% year-over-year[124] - Digital full game downloads generated net revenue of $1,343 million, up from $1,262 million in 2023[116] - The gross margin increased to 75.8%, up 3 percentage points year-over-year[118] - Net revenue for the three months ended December 31, 2024 was $1,883 million, a decrease of $62 million compared to the same period in 2023[149] - Full game net revenue for the nine months ended December 31, 2024 was $1,565 million, down $117 million or 7% year-over-year[158] - Live services and other net revenue for the nine months ended December 31, 2024 was $4,003 million, a decrease of $98 million or 2% compared to the same period in 2023[159] Revenue Breakdown - Live services net revenue attributable to extra content was $4,379 million for the trailing twelve months ended December 31, 2024[114] - Full game downloads generated $446 million in revenue, an increase of 3% from $431 million in the prior year[150] - Packaged goods revenue decreased by 18%, from $187 million in 2023 to $153 million in 2024[150] - Live services and other revenue decreased by 3%, from $1,327 million in 2023 to $1,284 million in 2024[150] - The decrease in net revenue was primarily driven by a $232 million decline in extra content sales for Apex Legends and other titles[149] - A $170 million increase in revenue was noted from American football franchises, particularly from EA SPORTS College Football 25 and Dragon Age: The Veilguard[149] Expenses and Costs - Cost of revenue for the three months ended December 31, 2024 was $456 million, a decrease of $73 million compared to $529 million in the same period in 2023[161] - Research and development expenses for the three months ended December 31, 2024 were $606 million, an increase of $22 million or 4% year-over-year[168] - Marketing and sales expenses for the three months ended December 31, 2024 decreased by $25 million or 9% compared to the same period in 2023[170] - General and administrative expenses for the three months ended December 31, 2024 were $176 million, an increase of $6 million or 4% year-over-year[173] Cash Flow and Liquidity - As of December 31, 2024, cash and cash equivalents decreased by $124 million to $2,776 million, while total liquidity decreased to $3,155 million, representing 23% of total assets[178] - Net cash provided by operating activities decreased by $205 million to $1,530 million for the nine months ended December 31, 2024, primarily due to lower cash collections and higher tax payments[179] - Net cash used in investing activities increased by $19 million to $177 million, driven by an $84 million decrease in proceeds from short-term investments and a $19 million increase in capital expenditures[180] - Net cash used in financing activities increased by $188 million to $1,452 million, primarily due to a $158 million increase in common stock repurchases and excise tax payments[181] - During the nine months ended December 31, 2024, the company returned $1,276 million to stockholders, repurchasing 7.9 million shares for approximately $1,125 million[187] Strategic Initiatives - The restructuring plan approved in February 2024 aims to align the portfolio and resources with strategic priorities, expected to be completed by March 31, 2025[122] - The transition to the EA SPORTS FC brand is expected to expand global football experiences and engage more fans[119] Market Risks - The company is exposed to significant market risks, including foreign currency exchange rates, interest rates, and market prices, which have experienced notable volatility[194] - As of December 31, 2024, a hypothetical adverse foreign currency exchange rate movement of 10% could result in potential declines of $194 million in cash flow hedging and $155 million in balance sheet hedging[199] - A hypothetical 150 basis point increase in interest rates would lead to a $4 million, or 1%, decrease in the fair market value of the company's short-term investments as of December 31, 2024[203] - The company employs foreign currency forward contracts to hedge against foreign currency risks, with maturities generally of 18 months or less for sales and 3 months or less for balance sheet hedging[196][197] - The strengthening of the U.S. dollar negatively impacts reported international net revenue while positively affecting international operating expenses due to lower translation rates[195] Internal Controls and Compliance - There have been no changes in internal controls over financial reporting that materially affect the company's reporting as of the end of the fiscal quarter[206] - The company acknowledges inherent limitations in its disclosure controls and procedures, including the possibility of human error and resource constraints[207]