Electronic Arts Critiqued: Fool by Numbers

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On May 8, Motley Fool Stock Advisor pick and video game maker Electronic Arts (Nasdaq: ERTS) released fourth-quarter earnings for the period ended March 31.

• Revenue dropped by 4.4%, mostly because of gamers' transition to next-generation systems.
  
  
  
• For Q1 2008, EA expects revenue between $300 million and $360 million, and a GAAP loss between $0.56 and $0.66 per share.
  
  
  
• For FY 2008, EA predicts revenue between $3.1 billion to $3.4 billion, and a GAAP loss of $0.23 to $0.77 per share.
  
  
• Electronic Arts currently earns three stars from our Motley Fool CAPS community, lagging behind fierce competitor Activision (Nasdaq: ATVI) but still beating Take-Two Interactive (Nasdaq: TTWO) and THQ (Nasdaq: THQI).

(Figures in millions, except per-share data.)

Income Statement Highlights

	Q4 2007	Q4 2006	Change
Sales	$613.0	$641.0	(4.4%)
Net Profit	($25.0)	($16.0)	N/A
EPS	($0.08)	($0.05)	N/A
Diluted Shares	310.0	304.0	2%

Get back to basics with the income statement.

Margin Checkup

	Q4 2007	Q4 2006	Change*
Gross Margin	61.7%	61.9%	(0.3)
Operating Margin	(11.6%)	3.9%	(15.5)
Net Margin	(4.1%)	(2.5%)	(1.6)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q4 2007	Q4 2006	Change
Cash + ST Invest.	$2,976.0	$2,432.0	22.4%
Accounts Rec.	$256.0	$199.0	28.6%
Inventory	$62.0	$61.0	1.6%

Liabilities	Q4 2007	Q4 2006	Change
Accounts Payable	$180.0	$163.0	10.4%

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q4 2007	Q4 2006	Change
Cash From Ops.	$214.0	$337.0	(36.5%)
Capital Expenditures	$60.0	$36.0	66.7%
Free Cash Flow	$154.0	$301.0	(48.8%)

Free cash flow is a Fool's best friend.

Related Foolishness:

• EA Wants to Be a Rock Star
• EA's Not Big in Japan?
• Fool on Call: Electronic Arts' Dominating Dynasty

Activision and Electronic Arts are both Motley Fool Stock Advisor recommendations. To see what other stocks are helping subscribers crush the market, take a free 30-day trial to the newsletter service today.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.