The Wargamer

EA Q4 Financials Released

INDUSTRY NEWS posted on 14 MAY 2008 by Jim Zabek

EA has announced its financial results for the end of the fiscal year.

Electronic Arts (NASDAQ:ERTS) today announced preliminary financial results for its fiscal fourth quarter and fiscal year ended March 31, 2008.

Full Year Results

Net revenue for the fiscal year ended March 31, 2008 was $3.665 billion, up 19 percent as compared with $3.091 billion for the prior year. Beginning in fiscal 2008, EA no longer charges for its service related to certain online-enabled packaged goods games. As a result, the Company recognizes revenue from the sale of these games over the estimated service period. The Company ended the year with $387 million in deferred net revenue related to its service for certain online-enabled packaged goods games, which will be recognized in future periods.

Non-GAAP net revenue1 was $4.020 billion, up 30 percent as compared with $3.091 billion for the prior year.

EA had 27 titles that sold more than one million copies in the year as compared with 24 titles in the prior year.

Net loss for the year was $454 million as compared with net income of $76 million for the prior year. Diluted loss per share was $1.45 as compared with diluted earnings per share of $0.24 for the prior year.

Non-GAAP net income1 was $339 million as compared with $247 million a year ago, up 37 percent year-over-year. Non-GAAP diluted earnings per share were $1.06 as compared with $0.78 for the prior year.

Trailing-twelve-month operating cash flow was $338 million as compared with $397 million a year ago. The Company ended the year with cash and short-term investments of $2.287 billion.

Fiscal Fourth Quarter Results (comparisons are to the quarter ended March 31, 2007)

Net revenue for the fourth quarter was $1.127 billion, up 84 percent as compared with $613 million for the prior year. During the quarter, EA had a net benefit of $208 million related to the recognition of deferred net revenue for certain online enabled packaged goods games.

Non-GAAP net revenue1 was $919 million, up 50 percent as compared with $613 million for the prior year. Sales were driven by the launches of ARMY OF TWO™ and Burnout™ Paradise as well as the continued strength of Rock Band™.

Net loss for the quarter was $94 million as compared with a net loss of $25 million for the prior year. Diluted loss per share was $0.30 as compared with diluted loss per share of $0.08 for the prior year.

Non-GAAP net income1 was $30 million as compared with $19 million a year ago. Non-GAAP diluted earnings per share were $0.09 as compared with $0.06 for the prior year.

“A year ago, we committed to an aggressive change agenda at EA. Our employees stepped up to the challenge and we finished fiscal year 2008 with non-GAAP revenue up 30% to $4 billion – a record for any third-party publisher. Our operating margins were flat to our prior year. On balance, we’re very pleased with our revenue growth, but not yet happy with our profit margins,” said John Riccitiello, Chief Executive Officer. “In fiscal 2009, we expect to deliver another $1 billion in revenue growth and to double our operating profit on the strength of our slate of titles.”

Highlights for the Year (comparisons are to the fiscal year ended March 31, 2007)

• In fiscal 2008, EA was the number one publisher across all platforms in North America with 19 percent share and in Europe with 20 percent share.
  
• On the Wii™, EA was the number one third-party publisher in Europe in fiscal 2008 with 15 percent share – up eight points from a year ago; in North America, EA had 11 percent share – up one point from a year ago.
  
• EA Partners posted its strongest year ever driven by Rock Band and Half Life® 2: Orange Box.
  
• EA had 15 double platinum (sold over 2 million copies) titles in the year – up from ten a year ago.
  
• The Sims™ franchise sold over 100 million copies life to date.
  
• EA strengthened its wholly-owned portfolio – by launching six new games – MySims™, ARMY OF TWO, SKATE, Boogie™, EA Playground™ and Smarty Pants™.
  
• Burnout Paradise, ARMY OF TWO and the recently launched Boom Blox™ debuted with strong quality ratings from critics.
  
• Pogo™ has surpassed the $100 million mark in revenue – growing 41 percent year-over-year.
  
• EA signed an agreement with Hasbro for the exclusive rights to create digital games based upon intellectual properties including MONOPOLY, SCRABBLE, YAHTZEE, NERF, TONKA and LITTLEST PET SHOP.
  
• EA acquired BioWare Corp.™ and Pandemic™ Studios in January 2008, adding strong development talent and ten new franchises.
  
• EA’s December 2007 employee satisfaction survey showed significant improvement over the last appraisal in 2004. Results included a double-digit gain in employee engagement.

Business Outlook

The following forward-looking statements, as well as those made above, reflect expectations as of May 13, 2008. Results may be materially different and are affected by many factors, including: development delays on EA’s products; competition in the industry; changes in anticipated costs, expected savings and impact on EA’s operations of the Company’s reorganization plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; consumer demand for games for legacy consoles, particularly the PlayStation®2; the financial impact of potential future acquisitions by EA, including the potential acquisition of Take-Two Interactive Software, Inc.; the popular appeal of EA’s products; changes in foreign exchange rates; the overall global economy; EA’s effective tax rate; and other factors detailed in this release and in EA’s annual and quarterly SEC filings.

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