Electronic Arts Inc

EA REPORTS FIRST QUARTER FISCAL YEAR 2010 RESULTS The Sims 3 Sold 3.7 Million Copies Wii Sales Doubled with Launch of EA SPORTS Active Madden NFL 10 Available on August 14 REDWOOD CITY, CA – August 4, 2009 – Electronic Arts Inc. (NASDAQ: ERTS) today announced preliminary financial results for its fiscal first quarter ended June 30, 2009. Fiscal First Quarter Results (comparisons are to the quarter ended June 30, 2008) GAAP net revenue for the quarter, which includes the impact of deferred revenue adjustments, was $644 million, as compared with $804 million for the prior year. During the quarter, EA had a net revenue deferral of $172 million related to certain online-enabled packaged goods games and digital content as compared with a net benefit of $195 million in the first quarter of the prior year. Non-GAAP net revenue was $816 million, up 34 percent as compared with $609 million for the prior year. Sales were driven by launches of The Sims™ 3, EA SPORTS Active™, and Fight Night Round 4. GAAP net loss for the quarter, including the impact of deferred revenue, was $234 million as compared with a net loss of $95 million for the prior year. GAAP diluted loss per share was $0.72 as compared with GAAP diluted loss per share of $0.30 for the prior year. Non-GAAP net loss was $6 million as compared with a non-GAAP net loss of $135 million a year ago. Non-GAAP diluted loss per share was $0.02 as compared with a non-GAAP diluted loss per share of $0.42 for the prior year. Trailing-twelve-month cash flow used in operations was $25 million as compared with cash flow generated from operations of $239 million a year ago. The Company ended the quarter with cash, cash equivalents and short-term investments of $1.8 billion. “Good execution delivered better-than-expected financial results in the first quarter,” said John Riccitiello, Chief Executive Officer. We are very pleased with the success of both The Sims 3 and EA SPORTS Active.” “Our Q1 performance was driven by our previously announced cost-cutting initiatives and a strong frontline slate,” said Eric Brown, Chief Financial Officer. “We had a solid Q1 both top and bottom line and we are focused on delivering the balance of the year.” Highlights (comparisons are to the quarter ended June 30, 2008) . EA was the #1 publisher in North America and Europe in the June quarter. EA had four of the top-ten games in North America and Europe. EA launched five titles in the quarter that received a Metacritic rating of 80 or above, including: Fight Night Round 4, BOOM BLOX™ Bash Party, The Sims 3, Tiger Woods PGA TOUR® 10 and EA SPORTS Active. Calendar year-to-date, EA has nine titles rated at 80 or above. Four titles won Best of E3 awards: Mass Effect™ 2 won Best RPG; Fight Night Round 4 won Best Sports Game; Star Wars®: The Old Republic™ won Best PC Game; Left 4 Dead 2 won Best Online Multiplayer. The Sims 3 was the #1 selling title at retail in Europe and North America combined for the quarter. EA SPORTS Active sold over 1.8 million copies in the quarter – making it EA’s best- selling Wii title ever. EA’s Wii share hit a record 21 percent in North America and was 13 percent in Europe – driven by EA SPORTS Active, Tiger Woods PGA TOUR 10, EA SPORTS Grand Slam® Tennis and Rock Band® 2 in partnership with MTV Games. EA Digital non-GAAP revenue $124 million – up 38 percent year-over-year. EA Mobile™, the world’s leading publisher of games for phones, delivered $50 million of non-GAAP revenue in the quarter – up 14 percent year-over-year. EA acquired J2Play, a leading social gaming company. Business Outlook The following forward-looking statements, as well as those made above, reflect expectations as of August 4, 2009. Results may be materially different and are affected by many factors, including: development delays on EA’s products; competition in the industry; the health of the economy in the U.S. and abroad and the related impact on discretionary consumer spending; changes in anticipated costs; expected savings and impact on EA’s operations of the Company’s cost reduction plan; consumer demand for console hardware and the ability of the console manufacturers to produce an adequate supply of consoles to meet that demand; changes in foreign exchange rates; the financial impact of potential future acquisitions by EA; the popular appeal of EA’s products; EA’s effective tax rate; and other factors detailed in this release and in EA’s annual and quarterly SEC filings. Fiscal Year Expectations – Ending March 31, 2010 . GAAP net revenue is expected to be between $3.7 and $3.85 billion – consistent with the Company’s previously provided guidance. Non-GAAP net revenue is expected to be approximately $4.3 billion – consistent with the Company’s previously provided guidance. GAAP diluted loss per share is expected to be between $0.85 and $1.35 – adjusted from the Company’s previously provided guidance of $0.85 and $1.45. Non-GAAP diluted earnings per share are expected to be approximately $1.00 – consistent with the Company’s previously provided guidance. For purposes of calculating fiscal year 2010 GAAP loss per share, the Company estimates a share count of 323 million and for non-GAAP EPS, the Company estimates a share count of 325 million. Expected non-GAAP net income excludes the following items from expected GAAP net income: $450 to $600 million for the impact of the change in deferred net revenue (packaged goods and digital content), $210 million of estimated stock-based compensation, $55 million of amortization of intangible assets, $25 to $35 million of restructuring charges, $14M loss on lease termination and facilities acquisition, and ($152) million in the difference between the Company’s GAAP and non-GAAP tax expenses. Conference Call Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET) to review its results for the fiscal first quarter ended June 30, 2009 and its outlook for the future. During the course of the call, Electronic Arts may also disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial- in number: (877) 627-6511, access code 220497, or via webcast: http://investor.ea.com. A dial-in replay of the conference call will be provided until August 11, 2009 at (719) 457-0820, access code 220497. A webcast archive of the conference call will be available for one year at http://investor.ea.com. *Non-GAAP Financial Measures To supplement the Company’s unaudited condensed consolidated financial statements presented in accordance with GAAP, Electronic Arts uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Electronic Arts include: non-GAAP net revenue, non-GAAP gross profit, non-GAAP operating income (loss), non-GAAP net income (loss) and historical and estimated non-GAAP diluted earnings (loss) per share. These non-GAAP financial measures exclude the following items, as applicable in a given reporting period, from the Company’s unaudited condensed consolidated statements of operations: . Acquired in-process technology . Amortization of intangibles . Certain abandoned acquisition-related costs . Change in deferred net revenue (packaged goods and digital content) . Goodwill impairment . Income tax adjustments . Losses (gains) on strategic investments . Loss on lease termination and facilities acquisition . Loss on licensed intellectual property commitment . Restructuring charges . Stock-based compensation Electronic Arts may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses. Electronic Arts believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s core business, operating results or future outlook. Electronic Arts’ management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing the Company’s operating results both as a consolidated entity and at the business unit level, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of the Company’s performance to prior periods. In addition to the reasons stated above, which are generally applicable to each of the items Electronic Arts excludes from its non-GAAP financial measures, the Company believes it is appropriate to exclude certain items for the following reasons: Amortization of Intangibles. When analyzing the operating performance of an acquired entity, Electronic Arts’ management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, the Company’s management excludes the GAAP impact of acquired intangible assets to its financial results.

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