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Electronic Arts Reports Q2 Fy16 FINANCIAL RESULTS

The following excerpt is from the company's SEC filing.

Q2 Non-GAAP Net Revenue, Margins and EPS Exceed Guidance; Raising Full Year Guidance Again

Delivers Record Trailing Twelve Month Digital Non-GAAP Revenue of $2.3 billion

REDWOOD CITY, CA - October 29, 2015 - Electronic Arts Inc. (NASDAQ: EA) today announced preliminary financial results for its second fiscal quarter ended September 30, 2015.

“It’s been a great quarter. Our EA SPORTS titles are connecting millions of passionate fans around the world to each other and the sports they love, we have new mobile experiences for our players, and deeply-engaged communities in our live services,” said Chief Executive Officer Andrew Wilson. “With Star Wars Battlefront launching in less than three weeks, and a stunning new Need for Speed just days away, we’re excited for the holiday season and the remainder of the fiscal year for Electronic Arts.”

“Results exceeded our expectations again,” said Chief Financial Officer Blake Jorgensen. “Based on the ongoing strength of our business and reception of Star Wars Battlefront, we are raising our full-year outlook for the second time. Our markets are very healthy, the digital transition continues to drive margins, and engagement in our live services and excitement for our upcoming launches is exceptional.”

News and ongoing updates regarding EA and our games are available on EA’s blog at www.ea.com/news

Selected Operating Highlights and Metrics:

EA is the #1 publisher on PlayStation

4 and Xbox One consoles in the Western World calendar year to date and for Q2 FY16, led by the strength of the

EA SPORTS™ FIFA

Madden NFL

franchises.

Across our annual EA SPORTS franchises that launched new titles in Q2 -

Madden NFL 16

NHL 16

FIFA 16

- monthly average players increased 30% year-over-year.

Star Wars™: The Old Republic™

subscribers increased 33% since the announcement of the latest expansion at E3,

Knights of the Fallen Empire.

EA’s live services for

Battlefield™ Hardline

Battlefield 4™

continue to engage players with more than 6 million monthly average players across the two experiences.

Game sessions for

Madden NFL Mobile

up more than 300% over last year.

Over 9.5 million players joined the

Battlefront™

open beta, the largest beta in EA’s history. The game will launch worldwide starting November 17, 2015.

Selected Financial Highlights

For the quarter, non-GAAP net revenue of $1.146 billion was above guidance of $1.075 billion. Diluted non-GAAP EPS of $0.65 was above guidance of $0.40.

Non-GAAP net revenue for EA’s

Hockey Ultimate Team™

live services continue to perform well, collectively up 64% year-over-year.

EA repurchased 1.8 million shares in Q2 for $126 million.

On a trailing twelve month basis, EA had non-GAAP net revenue of $4.163 billion (of which a record $2.307 billion was digital), non-GAAP net income of $774 million and operating cash flow of $818 million.

EA increased fiscal 2016 non-GAAP net revenue guidance by $50 million to $4.500 billion, diluted non-GAAP EPS guidance by $0.15 to $3.00 per share and operating cash flow by $50 million to $1.200 billion.

(in millions of $, except per share amounts)

Quarter Ended

9/30/15

GAAP Digital Net Revenue

GAAP Packaged Goods and Other Net Revenue

GAAP Total Net Revenue

Non-GAAP Digital Net Revenue

Non-GAAP Packaged Goods and Other Net Revenue

Non-GAAP Total Net Revenue

GAAP Net Income (Loss)

Non-GAAP Net Income

GAAP Diluted Earnings (Loss) Per Share

Non-GAAP Diluted Earnings Per Share

Operating Cash Flow

TTM Financial Highlights:

(in millions of $)

TTM Ended

Operating Cash Flow

Business Outlook as of October 29, 2015

The following forward-looking statements, as well as those made above, reflect expectations as of October 29, 2015. 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 2016 Expectations - Ending March 31, 2016

GAAP net revenue is expected to be approximately $4.400 billion.

Non-GAAP net revenue is expected to be approximately $4.500 billion.

GAAP diluted earnings per share is expected to be approximately $2.32.

Non-GAAP diluted earnings per share is expected to be approximately $3.00.

The Company estimates a share count of 334 million for purposes of calculating fiscal year 2016 GAAP diluted earnings per share and 327 million for purposes of calculating fiscal year 2016 non-GAAP diluted earnings per share. Non-GAAP shares used for computing diluted earnings per share differs from GAAP due to the inclusion of the anti-dilutive effect of the Convertible Bond Hedge.

Expected non-GAAP net income excludes the impact of the following items (estimate in millions) from expected GAAP net income:

Acquisition-related expenses

Amortization of debt discount and loss on conversion

Change in deferred net revenue (online-enabled games)

Stock-based compensation

Income tax adjustments

Expected Impact on Non-GAAP Net Income (net)

Third Quarter Fiscal Year 2016 Expectations - Ending December 31, 2015

GAAP net revenue is expected to be approximately $1.075 billion.

Non-GAAP net revenue is expected to be approximately $1.775 billion.

GAAP diluted loss per share is expected to be approximately ($0.17).

Non-GAAP diluted earnings per share is expected to be approximately $1.75.

The Company estimates a share count of 312 million for purposes of calculating third quarter fiscal year 2016 GAAP diluted loss per share, and 327 million for non-GAAP diluted earnings per share. Non-GAAP shares used for computing diluted earnings per share includes potentially dilutive equity instruments and the anti-dilutive effect of the Convertible Bond Hedge.

Expected non-GAAP net income excludes the impact of the following items (estimate in millions) from expected GAAP net loss:

Conference Call and Supporting Documents

Electronic Arts will host a conference call on October 29, 2015 at 2:00 pm PT (5:00 pm ET) to review its results for the second quarter ended September 30, 2015 and its outlook for the future. During the course of the call, Electronic Arts may disclose material developments affecting its business and/or financial performance. Listeners may access the conference call live through the following dial-in number: 888-469-0955 (domestic) or 312-470-7475 (international), using the password “EA” or via webcast at http://ir.ea.com.

EA will also post a slide presentation that accompanies the call at http://ir.ea.com.

A dial-in replay of the conference call will be available until November 12, 2015 at 800-867-1928 (domestic) or 203-369-3838 (international). An audio webcast replay of the conference call will be available for one year at http://ir.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, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP diluted shares. These non-GAAP financial measures exclude the following items (other than Shares from Convertible Bond Hedge, which are included), as applicable in a given reporting period, from the Company’s unaudited condensed consolidated statements of operations:

Amortization of debt discount and loss on conversion of notes

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