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Electronic Arts Officially Pushes 'Anthem' Into 2019 In Favor Of New 'Battlefield' Game

by Rainier on Jan. 30, 2018 @ 5:30 p.m. PST

Electronic Arts have released their Q3 FY18 Financial Results, but as usual the interesting information comes in the follow up investor call.

Electronic Arts have released their Q3 FY18 Financial Results, but the interesting information usually comes in the follow up investor call.

No doubt fueled by the loot crate controversy and the numerous progression adjustments, sales of Star Wars Battlefront II fell short, but at the same time it was also revealed that the loot crates would be returning in the coming months, but remained vague as to in what form by saying, "the teams are working on how that context will apply to the Battlefront universe."

"Net bookings for the quarter were $29 million below our guidance, driven by lower-than-expected sales of Star Wars Battlefront II. For Q3, we had expected to sell in about 8 million units, but we fell short of that by less than 1 million units," said EA CFO Blake Jorgensen.

Anthem was initially expected in 2018, but recent rumors claimed that Bioware's new IP would be getting delayed to 2019. EA CFO Blake Jorgensen did confirm that to investors although stated that it was not so much a delay as a strategic move to give Anthem a less crowded launch period. Instead Electronic Arts confirmed that it will be releasing a new Battlefield game in October 2018.

"The Battlefield universe will grow this year with our next Battlefield title, captivating longtime fans and new players alike, and adding to our Battlefield service where players can move seamlessly with their friends. Our new IP, Anthem, is a stunning project from BioWare that will blend genres with a shared-world experience that evolves around its players. Excitement for Anthem is building, and we’re deeply invested in delivering a great new experience with this game when it launches in Q4 FY19," said EA CEO Andrew Wilson.

"Our DICE studio will deliver the next Battlefield, with innovation at every level, incredible stories at the core, astonishing visuals and gameplay that will captivate every Battlefield fan," he continued.

Electronic Arts Q3 2018 Earning Report

"Players enjoyed hundreds of millions of hours in our games across console, mobile and PC during the holiday quarter, and we're thrilled to see our titles driving excitement for more fans around the world," said Chief Executive Officer Andrew Wilson. "We're expanding the reach of our top franchises across more geographies, our competitions are growing in participation and viewership, and we're continuing to grow our network with more amazing games and content coming this quarter and beyond."

"Our diversity in portfolio, platforms, geographies, and business models is the foundation of a robust business that enables us to deliver dependable cash flow," said Chief Financial Officer Blake Jorgensen. "Through the fourth quarter and fiscal 2019, we'll be launching games across five different genres, on three different platforms, and to players around the world. We expect growth in full-game downloads, subscriptions, extra content, and in our mobile business."

Selected Operating Highlights and Metrics

  • Digital net bookings* for the trailing twelve months was a record $3.375 billion, up 18% year-over-year, and represents 67% of total net bookings for the same period.
  • The FIFA community grew to nearly 42 million players, on console alone, during the calendar year.
  • FIFA Mobile added 26 million players to its total player base in the quarter.
  • FIFA Ultimate Team player base grew 12% year-over-year, from launch to the end of the quarter.
  • In Star Wars Battlefront II, nearly 70% of players engaged in the single-player campaign.
  • Battlefield 1 now has more than 25 million unique players life to date.
  • The Sims 4 player base grew more than 35% year-over-year and delivered the highest-performing expansion pack to date during the quarter.
  • The Madden Challenge entertainment special on The CW Network was the #1 esports television broadcast in the U.S. for 2017.

* 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.

Selected Financial Highlights and Metrics

All financial measures are presented on a GAAP basis.

  • Net cash provided by operating activities was $849 million.
  • Net cash provided by operating activities for the trailing twelve months was $1.514 billion.
  • During the quarter, EA repurchased 1.4 million shares for $150 million.
  • For the trailing twelve months, EA repurchased 5.6 million shares for $578 million.

Quarterly Financial Highlights

        
     

Three Months Ended
December 31,

     2017 2016 
(in $ millions, except per share amounts)       
Digital net revenue    780 685 
Packaged goods and other net revenue    380 464 
Total net revenue    1,160 1,149 
        
Net loss    (186)* (1)
Loss per share    (0.60)* (0.00)
        
Operating cash flow    849 1,137**
        
Value of shares repurchased    150 127 
Number of shares repurchased    1.4 1.5 
        
*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, enacted on December 22, 2017. This amount is a reasonable estimate provided in accordance with Securities and Exchange Commission guidance. EA will provide additional information about these reasonable estimates in its forthcoming Form 10-Q for the fiscal quarter ending December 31, 2017.
 
**At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow for the three months ended December 31, 2016 has been recast to reflect the impact of this standard.

While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA's operating results:

    

Three Months Ended December 31, 2017

    GAAP-Based Financial Data
(in $ millions)

Statement of
Operations

 

Acquisition-
related expenses

 

Change in
deferred net
revenue
(online-enabled
games)

 

Stock-based
compensation

 

Total net revenue1,160   -   811  - 
Cost of revenue501   (1)  -  - 
Gross profit659   1   811  - 
Total operating expenses680   (1)  -  (63)
Operating income (loss)(21)  2   811  63 
Interest and other income, net5   -   -  - 
Income (loss) before provision for (benefit from) income taxes(16)  2   811  63 
Number of shares used in computation:          
Basic and diluted308          

EA's GAAP loss per share for the three months ended December 31, 2017 was calculated using the basic share count of 308 million. Had EA reported a profit, the diluted share count would have been 311 million shares.

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, 2017.

TTM Financial Highlights

  TTM Ended December 31,
  2017 2016
(in $ millions)    
Digital net revenue 3,282 2,655
Packaged goods and other net revenue 1,813 1,971
Total net revenue 5,095 4,626
     
Net income 1,002* 1,300
     
Operating cash flow** 1,514 1,555
     
Value of shares repurchased 578 1,017
Number of shares repurchased 5.6 14.9
     
*During the trailing twelve months ended December 31, 2017, EA recognized $176 million of incremental income tax expense due to the application of the Tax Cuts and Jobs Act, enacted on December 22, 2017. This amount is a reasonable estimate provided in accordance with Securities and Exchange Commission guidance. EA will provide additional information about these reasonable estimates in its forthcoming Form 10-Q for the fiscal quarter ending December 31, 2017.
 
**At the beginning of fiscal 2018, EA adopted FASB ASU 2016-09, related to stock-based compensation. Operating cash flow has been recast to reflect the impact of this standard.

While EA no longer reports certain non-GAAP financial measures, the following GAAP-based financial data and a long-term tax rate of 21% are used internally by company management to adjust its GAAP results in order to assess EA's operating results:

 TTM Ended December 31, 2017
    GAAP-Based Financial Data
(in $ millions)

Statement of
Operations

 

Acquisition-
related expenses

 

Change in
deferred net
revenue
(online-enabled
games)

 

Stock-based
compensation

 

Total net revenue5,095  -   (78)  - 
Cost of revenue1,246  (1)  -   (3)
Gross profit3,849  1   (78)  3 
Total operating expenses2,451  (5)  -   (222)
Operating income1,398  6   (78)  225 
Interest and other income, net13  -   -   - 
Income before provision for income taxes1,411  6   (78)  225 

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, 2017.

Operating Metric

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

  Three Months Ended TTM Ended
  December 31, December 31,
  2017 2016 2017  2016
(in $ millions)        
Total net revenue 1,160 1,149 5,095  4,626
Change in deferred net revenue (online-enabled games) 811 921 (78) 148
Net bookings 1,971 2,070 5,017  4,774

Business Outlook as of January 30, 2018

The following forward-looking statements reflect expectations as of January 30, 2018. Electronic Arts assumes no obligation to update these statements. 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 2018 Expectations - Ending March 31, 2018

Financial metrics:

  • Net revenue is expected to be approximately$5.100 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $50 million.
  • Net income is expected to be approximately $1.015 billion.
  • Diluted earnings per share is expected to be approximately$3.25.
    • Includes the net impact of approximately ($0.48) per share due to the application of the Tax Cuts and Jobs Act.
  • Operating cash flow is expected to be approximately $1.600 billion.
  • The Company estimates a share count of 312 million for purposes of calculating fiscal year 2018 diluted earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $5.150 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% are used internally by EA to adjust our GAAP expectations to assess EA's operating results and plan for future periods:

              
    Twelve Months Ending March 31, 2018
       GAAP-Based Financial Data
        
    

GAAP
Guidance

 

Acquisition-
related expenses

 

Change in
deferred net
revenue
(online-enabled
games)

 

Stock-based
compensation

(in $ millions)             
Digital net revenue   3,405  -   120   - 
Packaged goods & other net revenue 1,695  -   (70)  - 
Total net revenue   5,100  -   50   - 
Cost of revenue   1,278  (2)  -   (3)
Operating expense   2,462  (7)  -   (245)
Income before provision for income taxes 1,372  9   50   248 
Net income   1,015         
Number of shares used in computation:         
Diluted shares   312         

Fourth Quarter Fiscal Year 2018 Expectations - Ending March 31, 2018

Financial metrics:

  • Net revenue is expected to be approximately$1.532 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately ($307) million.
  • Net income is expected to be approximately $579 million.
  • Diluted earnings per share is expected to be approximately $1.86.
  • The Company estimates a share count of 311 million for purposes of calculating fourth quarter fiscal year 2018 diluted earnings per share.

Operational metric:

  • Net bookings is expected to be approximately $1.225 billion.

In addition, the following outlook for GAAP-based financial data and a long-term tax rate of 21% are used internally by EA to adjust our GAAP expectations to assess EA's operating results and plan for future periods:

             
   Three Months Ending March 31, 2018
      GAAP-Based Financial Data
       
   

GAAP
Guidance

 

Acquisition-
related expenses

 

Change in
deferred net
revenue
(online-enabled
games)

 

Stock-based
compensation

(in $ millions)            
Total net revenue  1,532  -   (307)  - 
Cost of revenue  234  (1)  -   (1)
Operating expense  619  (3)  -   (74)
Income before provision for income taxes677  4   (307)  75 
Net income  579         
Number of shares used in computation:          
Diluted shares  311   
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