Electronic Arts(EA)2025-05-13 20:05Revenue and Financial Performance - Total net revenue for fiscal year 2025 was $7,463 million, down 1 percent year-over-year[126]. - Live services and other net revenue was $5,461 million, down 2 percent year-over-year[126]. - Net revenue from digital full game downloads was $1,478 million, an increase of 10 percent compared to $1,343 million in fiscal year 2024[126]. - Net bookings for fiscal year 2025 were $7,355 million, a decrease of $75 million or 1 percent compared to fiscal year 2024[132]. - Live services and other net bookings were $5,338 million for fiscal year 2025, down $87 million or 2 percent year-over-year[132]. - Gross margin improved to 79.3 percent, up 2 percentage points year-over-year[126]. - Operating expenses increased to $4,400 million, up 2 percent year-over-year[126]. - Net income for fiscal year 2025 was $1,121 million, with diluted earnings per share of $4.25[126]. - Digital sales accounted for 78 percent of total units sold in fiscal year 2025, up from 73 percent in fiscal year 2024[127]. - The company paid aggregate cash dividends of $199 million during the fiscal year ended March 31, 2025, with a quarterly cash dividend of $0.19 per share[112]. - A new stock repurchase program was authorized to repurchase up to $5.0 billion of common stock, expiring on May 9, 2027[113]. - The company repurchased a total of 9,752,621 shares in the fourth quarter of the fiscal year ended March 31, 2025, at an average price of $135.05[115]. Market and Competitive Landscape - Digital live services and other net revenue accounted for 73% of total net revenue during fiscal year 2025[18]. - Revenue from the EA SPORTS FC franchise and American football franchise is material to the business and will continue to be so[19]. - Direct sales to Sony and Microsoft represented approximately 39% and 17% of total net revenue, respectively, in fiscal year 2025[22]. - The company faces intense competition in the interactive entertainment market, requiring anticipation of market changes years in advance[26]. - The competitive landscape is evolving rapidly, with advancements in artificial intelligence technology expected to impact market dynamics, requiring the company to adapt quickly to maintain competitiveness[54]. - The company faces intense competition for licenses to use intellectual property, which is critical for developing successful products; failure to secure these licenses could significantly impact revenue[67]. Research and Development - The company is investing in research and development to incorporate artificial intelligence into its products and services[30]. - Research and development expenses for fiscal year 2025 were $2,569 million, an increase of $149 million or 6% compared to fiscal year 2024[169]. - The company focuses on building games and experiences that enhance player engagement and grow online communities around key franchises[123]. - Electronic Arts is focusing on enhancing player engagement through live services and innovative game experiences, aiming to grow global online communities around key franchises[214]. Operational Risks and Challenges - The company has experienced development delays in the past, which have led to postponed release dates, potentially resulting in significant revenue shortfalls and increased expenses[53]. - The company may face operational disruptions due to catastrophic events, including natural disasters and cyber threats, which could materially affect its business operations and financial condition[69][70]. - The company has experienced past cyber-attacks and expects future incidents, which could lead to significant costs and reputational damage[72]. - Cybersecurity risks are integrated into the overall enterprise-risk assessment, with dedicated teams managing and monitoring these risks[106]. - The reliability of the company's products and services is dependent on the performance of its IT systems and those of external service providers[74]. - The company may face claims of intellectual property infringement, which could divert resources and incur significant costs[86]. Financial Position and Cash Flow - As of March 31, 2025, cash and cash equivalents decreased by $764 million to $2,136 million compared to $2,900 million in 2024, representing a decline of 26.3%[180]. - Net cash provided by operating activities decreased by $236 million to $2,079 million in fiscal year 2025, primarily due to lower cash collections from sales and higher cash payments for income taxes[181]. - Net cash provided by investing activities increased by $244 million to $37 million in fiscal year 2025, driven by a $203 million decrease in the purchase of short-term investments[182]. - Net cash used in financing activities increased by $1,239 million to $2,863 million in fiscal year 2025, primarily due to a $1,208 million increase in common stock repurchases[183]. - The company has senior unsecured notes and an unsecured revolving credit facility, which could impact financial condition and results[92]. - The revolving credit facility requires compliance with a debt to EBITDA ratio, and breaches could lead to immediate repayment of indebtedness[93]. Taxation and Compliance - The effective tax rate for fiscal year 2025 was 30.2%, an increase from 19.9% in fiscal year 2024[175]. - A $51 million tax charge was recognized to increase the valuation allowance on Swiss deferred tax assets during fiscal year 2025[176]. - Changes in international tax laws, such as the global minimum taxes proposed by the OECD, could affect the company's effective tax rates and cash taxes[95]. - Compliance with evolving global data privacy laws is costly and could result in penalties or harm to the company's reputation[84]. International Operations - International net revenue accounted for 59% of total net revenue for the fiscal year ended March 31, 2025[91]. - The company is exposed to fluctuations in foreign currency exchange rates due to international sales and foreign investments[91]. - A hypothetical adverse foreign currency exchange rate movement of 10% could result in potential declines of $241 million in the fair value of foreign currency forward contracts used in cash flow hedging[200]. - A hypothetical 150 basis point increase in interest rates would result in a $1 million, or 1% decrease in the fair market value of the company's short-term investments[203].