Leading Provider of Casual Games for Digital Platforms
Accelerates EA’s Digital Transformation
Acquisition Price of $650 Million Plus $100 Million Stock & Multi-year Earn-Out
Plants vs. Zombies, Bejeweled and Zuma Headed to New Platforms and Markets
EA Reaffirms Non-GAAP Q1 FY12 and Full Year FY12 Financial Guidance
REDWOOD CITY, Calif., July 12, 2011 – Electronic Arts Inc. (NASDAQ:
ERTS) today announced an agreement to acquire PopCap Games, a leading
provider of games for mobile phones, tablets, PCs and social network sites.
With blockbuster titles like Plants vs. Zombies, Bejeweled, and Zuma, and a
proven ability to create new hits, PopCap is a leader in the fast growing
market for casual digital games.
“EA and PopCap are a compelling combination,” said EA CEO John
Riccitiello. “PopCap’s great studio talent and powerful IP add to EA’s
momentum and accelerate our drive towards a $1 billion digital business. EA’s
global studio and publishing network will help PopCap rapidly expand their
business to more digital devices, more countries, and more channels.”
"We picked EA because they have recast their culture around making great
digital games," said David Roberts, CEO of PopCap. "By working with EA,
we'll scale our games and services to deliver more social, mobile, casual fun
to an even bigger, global audience."
“PopCap has a proven financial trajectory with sustained revenue growth and
double-digit operating margins,” said EA CFO Eric Brown. “On a non-GAAP
basis, this deal is expected to be at least ten-cents accretive in fiscal year
2013.”
PopCap is one of the largest and most respected digital and social gaming
companies with more than 150 million games installed and played worldwide
on platforms such as Facebook®, RenRen, Google™, iPhone™, iPad™ and
Android. In calendar year 2010, approximately 80% of PopCap’s revenue was
on high growth digital platforms.
EA will pay approximately $650 million in cash and $100 million in shares of
EA common stock to be issued to certain stockholders of PopCap. In addition,
the PopCap sellers are entitled to additional variable cash consideration,
contingent upon the achievement of certain non-GAAP earnings before
income and tax (“EBIT”) performance milestones through December 2013,
EA’s third fiscal quarter end.
Approximate
Two-Year
Cumulative EBIT
($ millions)
Approximate
Total
Earn-out
($ millions)
91 or less 0
110 100
200 275
343 or more 550
At the upper end of the earn-out, the performance targets for EBIT are
approximately $343 million in total PopCap standalone EBIT generated over
the two-year period through December 2013. The exact earn-out calculation is
subject to adjustments. EA will also provide up to $50 million in long-term
equity retention awards to PopCap employees to be granted over the next
four years.
Transaction and Financial Highlights
The transaction is expected to close in August 2011, subject to
customary closing conditions, including regulatory approvals.
On a non-GAAP basis, the acquisition is expected to be EPS neutral to
EA’s fiscal year 2012 results, as a result of one-time transaction costs,
and at least $0.10 accretive to EA’s FY 2013 non-GAAP EPS.
For the first quarter of fiscal year 2012, EA is announcing preliminary
results of approximately:
o $500 million to $525 million in non-GAAP revenue versus
guidance of $460 million to $500 million of non-GAAP revenue.
o ($0.40) to ($0.37) in non-GAAP diluted loss per share versus
guidance of ($0.49) to ($0.44) in non-GAAP diluted loss per
share.
EA is reaffirming its full year fiscal year 2012 non-GAAP guidance of
$0.70 to $0.90 diluted earnings per share. EA is also increasing its full
year non-GAAP revenue guidance to a range of $3,800 million to
$4,025 million to account for the inclusion of PopCap for a portion of
FY12.
EA is announcing preliminary guidance for the second quarter of fiscal
year 2012 of non-GAAP diluted loss per share ranging from ($0.15) to
($0.05).
EA has executed a commitment letter for a $550 million senior
unsecured bridge facility with Morgan Stanley Senior Funding, Inc.,
J.P. Morgan Securities LLC, J.P. Morgan Chase Bank, N.A., UBS
Securities LLC, and UBS Loan Finance LLC, that EA may choose to
draw upon prior to closing the acquisition. EA expects to explore
permanent financing options in connection with the funding of this
acquisition. Morgan Stanley & Co. LLC provided EA’s board of
directors valuation advice in connection with the transaction. EA was
also assisted by UBS Investment Bank.
In addition, the $600 million share repurchase program that EA announced in
February, 2011 remains in effect. As of July 1, 2011, EA has repurchased 7.1
million shares for a total of $149 million under this program. EA is not
obligated to repurchase any specific number of shares under the program and
the repurchase program may be modified, suspended or discontinued at any
time.
Business Outlook as of July 12, 2011
The following forward-looking statements, as well as those made above,
reflect expectations as of July 12, 2011. Electronic Arts assumes no obligation
to update these statements. Results may be materially different and are
affected by many factors, including: product development delays; 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; the financial impact of acquisitions by EA, including the PopCap
acquisition; 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.
First Quarter Fiscal Year 2012 Preliminary Results – Ended June 30,
2011
Non-GAAP net revenue is approximately $500 to $525 million versus
guidance of $460 to $500 million.
GAAP net revenue is approximately $975 million to $1.00 billion versus
guidance of $910 to $950 million.
Non-GAAP diluted loss per share is approximately $(0.40) to $(0.37)
versus guidance of $(0.49) to $(0.44).
GAAP diluted earnings per share is approximately $0.63 to $0.66
versus guidance of $0.44 to $0.53.
For purposes of calculating first quarter fiscal year 2012 earnings/loss
per share, the Company used a diluted share count of 331 million for
non-GAAP loss per share and 337 million for GAAP earnings per
share.
Expected non-GAAP net loss excludes the following items from
expected GAAP net income:
o Non-GAAP net revenue is approximately $475 million lower than
GAAP net revenue due to the impact of the change in deferred
net revenue (packaged goods and digital content);
o Approximately $38 million of stock-based compensation;
o Approximately $18 million of acquisition-related expenses;
o Approximately $18 million of restructuring charges; and
o Non-GAAP tax expenses are $57 million lower than GAAP tax
expenses.
Second Quarter Fiscal Year 2012 Expectations – Ending September 30,
2011
Non-GAAP diluted loss per share is expected to be approximately
($0.15) to ($0.05).
GAAP diluted loss per share is expected to be approximately ($1.10) to
($0.97).
For purposes of calculating second quarter fiscal year 2012 loss per
share, the Company estimates a diluted share count of 331 million.
Expected non-GAAP net loss excludes the following items from
expected GAAP net loss:
o Non-GAAP net revenue is expected to be approximately $275
million higher than GAAP net revenue due to the impact of the
change in deferred net revenue (packaged goods and digital
content);
o Approximately $50 million of estimated stock-based
compensation;
o Approximately $25 to $30 million of acquisition-related
expenses;
o Approximately $5 million of restructuring charges; and
o Non-GAAP tax expenses are expected to be $46 to $52 million
higher than GAAP tax expenses.
Fiscal Year 2012 Expectations – Ending March 31, 2012
Non-GAAP net revenue is expected to be approximately $3.8 to $4.025
billion as compared to previous guidance of $3.75 to $3.95 billion.
GAAP net revenue is expected to be approximately $3.725 to $3.95
billion as compared to previous guidance of $3.7 to $3.9 billion.
Non-GAAP diluted earnings per share is expected to be approximately
$0.70 to $0.90 consistent with previous guidance.
GAAP diluted earnings per share is expected to be a loss per share of
($0.04) to earnings per share of $0.26 as compared to previous
guidance of break-even to $0.28 earnings per share.
For purposes of calculating fiscal year 2012 earnings per share, the
Company estimates a diluted share count of 334 million and a basic
share count of 330 million.
Expected non-GAAP net income excludes the following items from
expected GAAP net income/(loss):
o Non-GAAP net revenue is expected to be approximately $75
million higher than GAAP net revenue due to the impact of the
change in deferred net revenue (packaged goods and digital
content);
o Approximately $175 million of estimated stock-based
compensation;
o Approximately $85 to $95 million of acquisition-related
expenses;
o Approximately $23 million of restructuring charges; and
o Non-GAAP tax expenses are expected to be $120 to $145
million higher than GAAP tax expenses.
Acquisition Conference Call
Electronic Arts will host a conference call today at 2:00 pm PT (5:00 pm ET)
to discuss the transaction. During the course of the call, Electronic Arts may
also disclose material developments affecting its business and/or financial
performance.
EA will also post a slide presentation that accompanies the call at
http://www.investor.ea.com.
Listeners may access the conference call live through the following dial-in
number: domestic: 773-799-3213 (domestic) or 888-677-1083 (international),
using the password “EA” or via webcast at http://www.investor.ea.com.
A dial-in replay of the conference call will be provided until July 19, 2011 at
the following number: 402-280-9972 (domestic) or 800-860-4708
(international). A webcast replay of the conference call will be available for
one year at http://www.investor.ea.com.
First Quarter Conference Call
Electronic Arts will host a conference call on July 26, 2011 at 2:00 pm PT
(5:00 pm ET) to review its results for the first quarter ended June 30, 2011
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: 773-799-3213 (domestic) or 888-677-1083
(international), using the password “EA” or via webcast at
http://www.investor.ea.com.
EA will also post a slide presentation that accompanies the call at
http://www.investor.ea.com.
A dial-in replay of the conference call will be provided until August 2, 2011 at
the following number: 203-369-0099 (domestic) or 866-356-3373
(international). A webcast replay of the conference call will be available for
one year at http://www.investor.ea.com.
About Electronic Arts
Electronic Arts (NASDAQ:ERTS) is a global leader in digital interactive
entertainment. The Company’s game franchises are offered as both packaged
goods products and online services delivered through Internet-connected
consoles, personal computers, mobile phones and tablets. EA has more than
100 million registered players and operates in 75 countries. In fiscal year
2011, EA posted GAAP net revenue of $3.6 billion. Headquartered in
Redwood City, California, EA is recognized for critically acclaimed, highquality
blockbuster franchises such as The Sims™, Madden NFL, FIFA
Soccer, Need for Speed™, Battlefield, and Mass Effect™. More information
about EA is available at http://info.ea.com.
About PopCap
PopCap is the leading global developer, publisher and operator of casual
video games: fun, easy-to-learn, captivating games that appeal to all ages
across mobile, social, PC and other platforms. Based in Seattle, Washington,
PopCap was founded in 2000 and has a worldwide staff of approximately 475
people in Seattle, San Francisco, Vancouver, B.C., Dublin, Seoul, Shanghai
and Tokyo. PopCap’s games have been downloaded over 1.5 billion times by
consumers worldwide, and its flagship franchise, Bejeweled®, has sold more
than 50 million units.