CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS



This Quarterly Report on Form 10-Q contains forward-looking statements. We use
words such as "anticipate," "believe," "expect," "intend," "estimate", "plan",
"predict", "seek", "goal", "will", "may", "likely", "should", "could" (and the
negative of any of these terms), "future" and similar expressions to identify
forward-looking statements. In addition, any statements that refer to
projections of our future financial performance, trends in our business,
projections of markets relevant to our business, uncertain events and
assumptions and other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements consist of, among other
things, statements related to the impact of the COVID-19 pandemic to our
business, industry prospects, our future financial performance, and our business
plans and objectives, and may include certain assumptions that underlie the
forward-looking statements. These forward-looking statements are not guarantees
of future performance and reflect management's current expectations. Our actual
results could differ materially from those discussed in the forward-looking
statements. Factors that might cause or contribute to such differences include
those discussed in Part II, Item 1A of this Quarterly Report under the heading
"Risk Factors" in, as well as in other documents we have filed with the
Securities and Exchange Commission ("SEC"), including our Annual Report on Form
10-K for the fiscal year ended March 31, 2020. We assume no obligation to revise
or update any forward-looking statement for any reason, except as required by
law.


OVERVIEW
The following overview is a high-level discussion of our operating results, as
well as some of the trends and drivers that affect our business. Management
believes that an understanding of these trends and drivers provides important
context for our results for the three months ended December 31, 2020, as well as
our future prospects. This summary is not intended to be exhaustive, nor is it
intended to be a substitute for the detailed discussion and analysis provided
elsewhere in this Form 10-Q, including in the remainder of "Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A")," "Risk Factors," and the Condensed Consolidated Financial Statements
and related Notes. Additional information can be found in the "Business" section
of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 as
filed with the SEC on May 20, 2020 and in other documents we have filed with the
SEC.
About Electronic Arts
Electronic Arts is a global leader in digital interactive entertainment. We
develop, market, publish and deliver games, content and services that can be
played and watched on game consoles, PCs, mobile phones and tablets. We believe
that the breadth and depth of our portfolio, live services offerings, and our
use of multiple business models and distribution channels provide us with
strategic advantages. Our foundation is a collection of intellectual property
from which we create innovative games and content that enables us to build
on-going and meaningful relationships with a community of players, creators and
viewers. Our portfolio includes brands that we either wholly own (such as
Battlefield, The Sims, Apex Legends, Need for Speed and Plants v. Zombies) or
license from others (such as FIFA, Madden NFL, UFC, NHL and Star Wars). We also
offer our players high-quality experiences designed to provide value to players
and extend and enhance gameplay. Our live services experiences include extra
content, subscription offerings and other revenue generated outside of the sale
of our base games. In addition, we are focused on reaching more players whenever
and wherever they want to play. We believe that we can add value to our network
by making it easier for players to connect to a world of play by offering choice
of business model, distribution channel and device.
                                       30

--------------------------------------------------------------------------------
  Table of Contents
Financial Results
Our key financial results for our fiscal quarter ended December 31, 2020 were as
follows:
•Total net revenue was $1,673 million, up 5 percent year-over-year.
•Live services and other net revenue was $951 million, up 5 percent
year-over-year.
•Gross margin was 64.1 percent, down 4 percentage points year-over-year.
•Operating expenses were $821 million, up 13 percent year-over-year.
•Operating income was $251 million, down 30 percent year-over-year.
•Net income was $211 million with diluted earnings per share of $0.72.
•Operating cash flow was $1,124 million, up 2 percent year-over-year.
•Total cash, cash equivalents and short-term investments were $6,710 million.
•We repurchased 2.5 million shares of our common stock for $326 million.
•In November 2020, we initiated and declared a quarterly cash dividend of $0.17
per share of common stock. We paid cash dividends of $49 million during the
quarter ended December 31, 2020.
•On February 1, 2021, we declared a quarterly cash dividend of $0.17 per share
of our common stock, payable March 24, 2021 to shareholders of record as of the
close of business on March 3, 2021.
From time to time, we make comparisons of current periods to prior periods with
reference to constant currency. For the fiscal quarter ended December 31, 2020,
foreign currency exchange rates did not have a material impact on our net
revenue and operating expenses.
Trends in Our Business
COVID-19 Impact. We are closely monitoring the impact of the COVID-19 pandemic
to our people and our business. Since the outbreak of COVID-19, we have focused
on actions to support our people, our players, and communities around the world
that have been affected by the COVID-19 pandemic.
Our People: The wellbeing of our people is our top priority, and to keep
everyone as safe as possible, the vast majority of our workforce will be working
from home at least through September 2021. We are offering support and resources
to our people, including payments to assist with work from home costs and care
needs, a pandemic care leave program, and additional services for mental and
physical health. We have developed a detailed protocol for how we will evaluate
the readiness to return to work for each of our offices around the world,
accounting for guidance from health authorities and government, vaccine
availability and effectiveness, the comfort level of our employees, and
preparation of our facilities for continued physical distancing.
Our Business: With more people staying home, we have seen growth in our business
and across the industry. We have continued to execute against our plans,
delivering ten new games so far in fiscal 2021, bringing our games to new
platforms and adding tens of millions of new players to our network. We have
seen a significant increase in digital sales that appears resilient. Live
services net bookings for the nine months ended December 31, 2020 increased more
than 26 percent year-over-year. We have also experienced a significant increase
in the percentage of our games purchased digitally, and we believe this step-up
is likely a permanent structural change driven by shelter-in-place orders
resulting from the COVID-19 pandemic.
Future Outlook: The full extent of the impact of the COVID-19 pandemic to our
business, operations and financial results will depend on numerous evolving
factors that we may not be able to predict. For example, we do not know how our
products and services will be impacted as the response to the COVID-19 pandemic
evolves. Engagement and net bookings could subside as a result of macroeconomic
deterioration or other challenges. Additional factors that could impact our
business include: our ability to continue to deliver new games and services in a
distributed work environment, impacts to our key business partners, foreign
exchange rate fluctuations, and other factors included in Part II, Item 1A of
this Quarterly Report under the heading "Risk Factors".
                                       31

--------------------------------------------------------------------------------
  Table of Contents
Live Services Business. We offer our players high-quality experiences designed
to provide value to players and to extend and enhance gameplay. These live
services include extra content, subscription offerings and other revenue
generated outside of the sale of our base games. Our net revenue attributable to
live services and other was $3,951 million, $3,550 million and $3,133 million
for the trailing twelve months ended December 31, 2020, 2019 and 2018,
respectively, and we expect that live services net revenue will continue to be
material to our business. Within live services and other, net revenue
attributable to extra content was $3,073 million, $2,728 million and $2,268
million for the trailing twelve months ended December 31, 2020, 2019 and 2018,
respectively. Extra content net revenue has increased as players engage with our
games and services over longer periods of time, and purchase additional content
designed to provide value to players and extend and enhance gameplay. Our most
popular live service is the extra content purchased for the Ultimate Team mode
associated with our sports franchises. Ultimate Team allows players to collect
current and former professional players in order to build and compete as a
personalized team. Net revenue from extra content sales for Ultimate Team was
$1,491 million, $1,369 million and $1,180 million during fiscal years 2020, 2019
and 2018, respectively, a substantial portion of which was derived from FIFA
Ultimate Team.
Digital Delivery of Games. In our industry, players increasingly purchase games
digitally as opposed to purchasing physical discs. While this trend, as applied
to our business, may not be linear because of product mix during a fiscal year,
consumer buying patterns and other factors, over time we expect players to
purchase an increasingly higher proportion of our games digitally; therefore we
expect net revenue attributable to digital full game downloads to increase over
time and net revenue attributable to sales of packaged goods to decrease.
Our net revenue attributable to digital full game downloads was $811 million,
$681 million and $714 million during fiscal years 2020, 2019 and 2018,
respectively; while our net revenue attributable to packaged goods sales
decreased from $1,542 million in fiscal year 2018 to $1,112 million in fiscal
year 2019 and $1,076 million in fiscal year 2020. In addition, as measured based
on total units sold on Microsoft's Xbox One and Sony's PlayStation 4 rather than
by net revenue, we estimate that 49 percent, 49 percent, and 39 percent of our
total units sold during fiscal years 2020, 2019 and 2018 were sold digitally.
Digital full game units are based on sales information provided by Microsoft and
Sony; packaged goods units sold through are estimated by obtaining data from
significant retail partners in North America, Europe and Asia, and applying
internal sales estimates with respect to retail partners from which we do not
obtain data. We believe that these percentages are reasonable estimates of the
proportion of our games that are digitally downloaded in relation to our total
number of units sold for the applicable period of measurement.
We expect the long-term trends in revenue and in the percentage of games
digitally downloaded to continue. During fiscal year 2021, the percentage of our
games purchased digitally has increased significantly and we believe this
step-up is likely a permanent structural change driven by shelter-in-place
orders resulting from the COVID-19 pandemic. Increases in consumer adoption of
digital purchase of games combined with increases in our live services revenue
generally results in expansion of our gross margin, as costs associated with
selling a game digitally is generally less than selling the same game through
traditional retail and distribution channels.
Free-to-Play Games. The global adoption of mobile devices and a business model
for those devices that allows consumers to try new games with no up-front cost,
and that are monetized through a live service associated with the game,
particularly extra content sales, has led to significant sales growth in the
mobile gaming industry. Similarly, sales of extra content are the primary driver
of our mobile business. We expect the mobile gaming industry to continue to grow
during our 2021 fiscal year. Likewise, the consumer acceptance of free-to-play,
live service-based, online PC games has broadened our consumer base and has
begun to expand into the console market. For example, within our business, we
offer Apex Legends as a free-to-play, live service-based PC and console game. We
expect extra content revenue generated from mobile, PC and console free-to-play
games to remain an important part of our business.
Concentration of Sales Among the Most Popular Games. In all major segments of
our industry, we see a large portion of games sales concentrated on the most
popular titles. Similarly, a significant portion of our revenue historically has
been derived from games based on a few popular franchises, several of which we
have released on an annual or bi-annual basis. In particular, we have
historically derived a significant portion of our net revenue from our largest
and most popular game, FIFA, the annualized version of which is consistently one
of the best-selling games in the marketplace.
Recurring Revenue Sources. Our business model includes revenue that we deem
recurring in nature, such as revenue from our annualized sports franchises
(e.g., FIFA, Madden NFL), our console, PC and mobile catalog titles (i.e.,
titles that did not launch in the current fiscal year), and our live services.
We have been able to forecast revenue from these areas of our business with
greater relative confidence than for new games, services and business models. As
we continue to incorporate new business models and modalities of play into our
games, our goal is to continue to look for opportunities to expand the recurring
portion of our business.
                                       32

--------------------------------------------------------------------------------
  Table of Contents
Net Bookings. In order to improve transparency into our business, we disclose an
operating performance metric, net bookings. Net bookings is defined as the net
amount of products and services sold digitally or sold-in physically in the
period. Net bookings is calculated by adding total net revenue to the change in
deferred net revenue for online-enabled games.
The following is a calculation of our total net bookings for the periods
presented:
                                                        Three Months Ended                      Nine Months Ended
                                                           December 31,                           December 31,
(In millions)                                         2020                2019               2020               2019
Total net revenue                               $    1,673             $  1,593          $    4,283          $  4,150
Change in deferred net revenue (online-enabled
games)                                                 727                  428                 417               (34)
Net bookings (a)                                $    2,400             $  2,021          $    4,700          $  4,116


(a) At the beginning of fiscal year 2021, we changed the way in which we present
net bookings to align with GAAP net revenue measures. Net bookings from mobile
platform partners are now presented gross of platform provider fees.
Historically, we presented net bookings from these partners net of platform
fees. Net bookings for the three and nine months ended December 31, 2019 has
been recast for comparability.
Net bookings were $2,400 million for the three months ended December 31, 2020
driven by sales related to FIFA 21, Madden NFL 21, Apex Legends, and The Sims 4.
Net bookings increased $379 million or 19 percent as compared to the three
months ended December 31, 2019 primarily driven by the FIFA franchise due to
year-over-year change in the launch date of our FIFA console title from the
second quarter in fiscal year 2020 to the third quarter in fiscal year 2021,
Apex Legends, Star Wars: Squadrons, and the Madden franchise, partially offset
by Star Wars Jedi: Fallen Order and Need for Speed Heat. Live services and other
net bookings were $1,542 million for the three months ended December 31, 2020,
and increased $301 million or 24 percent as compared to the three months ended
December 31, 2019. The increase in live services and other net bookings was due
primarily to an increase in sales of extra content for Ultimate Team and Apex
Legends. Full game net bookings were $858 million for the three months ended
December 31, 2020, and increased $78 million or 10 percent as compared to the
three months ended December 31, 2019 due to FIFA 21, Star Wars: Squadrons, and
NHL 21, partially offset by Star Wars Jedi: Fallen Order and Need for Speed
Heat.
Recent Developments
Acquisition of Codemasters. On December 14, 2020, we issued an announcement
pursuant to Rule 2.7 of the United Kingdom City Code on Takeovers and Mergers
disclosing the terms of an all-cash offer to acquire the entire issued and to be
issued ordinary shares of Codemasters. Under the terms of the offer,
Codemasters' shareholders will receive 604 pence in cash for each ordinary share
of Codemasters (implying an equity value of approximately £945 million, or $1.3
billion using the latest practicable exchange rate).
On February 3, 2021, the requisite majority of Codemasters' shareholders voted
to approve the Codemasters acquisition. The transaction remains subject to,
among other things, satisfaction or waiver of customary closing conditions. The
acquisition is anticipated to close in February 2021. We intend to fund this
acquisition with existing cash on hand.
Codemasters is a UK-based game developer and publisher of high-quality racing
games across console, PC and mobile. Its franchises include DiRT®, GRID®,
Project CARS and the official F1® series of videogames.
Acquisition of Glu Mobile. On February 8, 2021, we announced that we entered
into a definitive merger agreement to acquire Glu Mobile Inc., a leading global
developer and publisher of mobile games ("Glu"), (the "Glu acquisition"). Under
the terms of the merger agreement, Glu shareholders will receive $12.50 in cash
for each outstanding share of Glu common stock, representing an equity value of
approximately $2.4 billion, and a total enterprise value of approximately $2.1
billion including Glu's net cash of $364 million. The merger agreement also
provides that we will assume all outstanding unvested equity awards held by Glu
employees. The consummation of the Glu acquisition is subject to certain
customary closing conditions, including antitrust clearances. The Glu
acquisition is expected to close in the first quarter of fiscal 2022. We intend
to fund this acquisition with existing cash on hand and any financing we may do
from time to time.

                                       33


--------------------------------------------------------------------------------
  Table of Contents
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Consolidated Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP"). The
preparation of these Consolidated Financial Statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, contingent assets and liabilities, and revenue and expenses during
the reporting periods. The policies discussed below are considered by management
to be critical because they are not only important to the portrayal of our
financial condition and results of operations, but also because application and
interpretation of these policies requires both management judgment and estimates
of matters that are inherently uncertain and unknown, including uncertainty in
the current economic environment due to the COVID-19 pandemic. As a result,
actual results may differ materially from our estimates.
Revenue Recognition
We derive revenue principally from sales of our games, and related extra content
and services that can be played on game consoles, PCs, mobile phones and
tablets. Our product and service offerings include, but are not limited to, the
following:
•full games with both online and offline functionality ("Games with Services"),
which generally includes (1) the initial game delivered digitally or via
physical disc at the time of sale and typically provide access to offline core
game content ("software license"); (2) updates on a when-and-if-available basis,
such as software patches or updates, and/or additional free content to be
delivered in the future ("future update rights"); and (3) a hosted connection
for online playability ("online hosting");
•full games with online-only functionality which require an Internet connection
to access all gameplay and functionality ("Online-Hosted Service Games");
•extra content related to Games with Services and Online-Hosted Service Games
which provides access to additional in-game content;
•subscriptions, such as EA Play and EA Play Pro, that generally offers access to
a selection of full games, in-game content, online services and other benefits
typically for a recurring monthly or annual fee; and
•licensing to third parties to distribute and host our games and content.
We evaluate and recognize revenue by:
•identifying the contract(s) with the customer;
•identifying the performance obligations in the contract;
•determining the transaction price;
•allocating the transaction price to performance obligations in the contract;
and
•recognizing revenue as each performance obligation is satisfied through the
transfer of a promised good or service to a customer (i.e., "transfer of
control").
Certain of our full game and/or extra content are sold to resellers with a
contingency that the full game and/or extra content cannot be resold prior to a
specific date ("Street Date Contingency"). We recognize revenue for transactions
that have a Street Date Contingency when the Street Date Contingency is removed
and the full game and/or extra content can be resold by the reseller. For
digital full game and/or extra content downloads sold to customers, we recognize
revenue when the full game and/or extra content is made available for download
to the customer.
Online-Enabled Games
Games with Services. Our sales of Games with Services are evaluated to determine
whether the software license, future update rights and the online hosting are
distinct and separable. Sales of Games with Services are generally determined to
have three distinct performance obligations: software license, future update
rights, and the online hosting.
Since we do not sell the performance obligations on a stand-alone basis, we
consider market conditions and other observable inputs to estimate the
stand-alone selling price for each performance obligation. For Games with
Services, generally 75 percent of the sales price is allocated to the software
license performance obligation and recognized at a point in time when control of
the license has been transferred to the customer (which is usually at or near
the same time as the booking of the transaction). The remaining 25 percent is
allocated to the future update rights and the online hosting performance
obligations and recognized ratably as the service is provided (over the
Estimated Offering Period).
                                       34

--------------------------------------------------------------------------------
  Table of Contents
Online-Hosted Service Games. Sales of our Online-Hosted Service Games are
determined to have one distinct performance obligation: the online hosting. We
recognize revenue from these arrangements as the service is provided.
Extra Content. Revenue received from sales of downloadable content are derived
primarily from the sale of virtual currencies and digital in-game content that
enhance players' game experience. Sales of extra content are accounted for in a
manner consistent with the treatment for our Games with Services and
Online-Hosted Service Games as discussed above, depending upon whether or not
the extra content has offline functionality. That is, if the extra content has
offline functionality, then the extra content is accounted for similarly to
Games with Services (generally determined to have three distinct performance
obligations: software license, future update rights, and the online hosting). If
the extra content does not have offline functionality, then the extra content is
determined to have one distinct performance obligation: the online-hosted
service offering.
Subscriptions
Sales of our subscriptions are deemed to be one performance obligation and we
recognize revenue from these arrangements ratably over the subscription term as
the performance obligation is satisfied.
Licensing Revenue
In certain countries, we utilize third-party licensees to distribute and host
our games and content in accordance with license agreements, for which the
licensees typically pay us a fixed minimum guarantee and/or sales-based
royalties. These arrangements typically include multiple performance
obligations, such as a time-based license of software and future update rights.
We recognize as revenue a portion of the minimum guarantee when we transfer
control of the license of software (generally upon commercial launch) and the
remaining portion ratably over the contractual term in which we provide the
licensee with future update rights. Any sales-based royalties are generally
recognized as the related sales occur by the licensee.
Significant Judgments around Revenue Arrangements
Identifying performance obligations. Performance obligations promised in a
contract are identified based on the goods and services that will be transferred
to the customer that are both capable of being distinct, (i.e., the customer can
benefit from the goods or services either on its own or together with other
resources that are readily available), and are distinct in the context of the
contract (i.e., it is separately identifiable from other goods or services in
the contract). To the extent a contract includes multiple promises, we must
apply judgment to determine whether those promises are separate and distinct
performance obligations. If these criteria are not met, the promises are
accounted for as a combined performance obligation.
Determining the transaction price. The transaction price is determined based on
the consideration that we will be entitled to receive in exchange for
transferring our goods and services to the customer. Determining the transaction
price often requires judgment, based on an assessment of contractual terms and
business practices. It further includes review of variable consideration such as
discounts, sales returns, price protection, and rebates, which is estimated at
the time of the transaction. In addition, the transaction price does not include
an estimate of the variable consideration related to sales-based royalties.
Sales-based royalties are recognized as the sales occur.
Allocating the transaction price. Allocating the transaction price requires that
we determine an estimate of the relative stand-alone selling price for each
distinct performance obligation. Determining the relative stand-alone selling
price is inherently subjective, especially in situations where we do not sell
the performance obligation on a stand-alone basis (which occurs in the majority
of our transactions). In those situations, we determine the relative stand-alone
selling price based on various observable inputs using all information that is
reasonably available. Examples of observable inputs and information include:
historical internal pricing data, cost plus margin analyses, third-party
external pricing of similar or same products and services such as software
licenses and maintenance support within the enterprise software industry. The
results of our analysis resulted in a specific percentage of the transaction
price being allocated to each performance obligation.
                                       35

--------------------------------------------------------------------------------
  Table of Contents
Determining the Estimated Offering Period. The offering period is the period in
which we offer to provide the future update rights and/or online hosting for the
game and related extra content sold. Because the offering period is not an
explicitly defined period, we must make an estimate of the offering period for
the service related performance obligations (i.e., future update rights and
online hosting). Determining the Estimated Offering Period is inherently
subjective and is subject to regular revision. Generally, we consider the
average period of time customers are online when estimating the offering period.
We also consider the estimated period of time between the date a game unit is
sold to a reseller and the date the reseller sells the game unit to the customer
(i.e., time in channel). Based on these two factors, we then consider the method
of distribution. For example, games and extra content sold at retail would have
a composite offering period equal to the online gameplay period plus time in
channel as opposed to digitally-distributed games and extra content which are
delivered immediately via digital download and therefore, the offering period is
estimated to be only the online gameplay period.
Additionally, we consider results from prior analyses, known and expected online
gameplay trends, as well as disclosed service periods for competitors' games in
determining the Estimated Offering Period for future sales. We believe this
provides a reasonable depiction of the transfer of future update rights and
online hosting to our customers, as it is the best representation of the time
period during which our games and extra content are played. We recognize revenue
for future update rights and online hosting performance obligations ratably on a
straight-line basis over this period as there is a consistent pattern of
delivery for these performance obligations. Prior to July 1, 2020, these
performance obligations were generally recognized over an estimated nine-month
period beginning in the month after shipment for games and extra content sold
through retail and an estimated six-month period for digitally-distributed games
and extra content beginning in the month of sale.
During the three months ended September 30, 2020, we completed our annual
evaluation of the Estimated Offering Period, and noted that generally, consumers
were playing our games for longer periods of time as players engage with
services we provide that are designed to enhance and extend gameplay. Based on
this, we concluded that the Estimated Offering Period applied to sales made
after June 30, 2020 should be lengthened. Revenues for service related
performance obligations for games and extra content sold through retail are now
recognized over an estimated ten-month period beginning in the month of sale,
and revenues for service related performance obligations for
digitally-distributed games and extra content are now recognized over an
estimated eight-month period beginning in the month of sale, which results in
revenue being recognized over a longer period of time. This change in Estimated
Offering Period did not impact the amount of net bookings or the operating cash
flows that we report. We expect that this change will move the recognition of
approximately $300 million in net revenue from fiscal year 2021 into fiscal year
2022. During the three months ended December 31, 2020, this change to our
Estimated Offering Period resulted in an estimated decrease in net revenue of
$125 million and net income of $105 million, and a decrease of $0.36 diluted
earnings per share. During the nine months ended December 31, 2020, this change
to our Estimated Offering Period resulted in an estimated decrease in net
revenue of $151 million and net income of $125 million, and a decrease of $0.43
diluted earnings per share.
Principal Agent Considerations
We evaluate sales to end customers of our full games and related content via
third-party storefronts, including digital storefronts such as Microsoft's Xbox
Store, Sony's PlayStation Store, Apple App Store, and Google Play Store, in
order to determine whether or not we are acting as the principal in the sale to
the end customer, which we consider in determining if revenue should be reported
gross or net of fees retained by the third-party storefront. An entity is the
principal if it controls a good or service before it is transferred to the end
customer. Key indicators that we evaluate in determining gross versus net
treatment include but are not limited to the following:
•the underlying contract terms and conditions between the various parties to the
transaction;
•which party is primarily responsible for fulfilling the promise to provide the
specified good or service to the end customer;
•which party has inventory risk before the specified good or service has been
transferred to the end customer; and
•which party has discretion in establishing the price for the specified good or
service.
Based on an evaluation of the above indicators, except as discussed below, we
have determined that generally the third party is considered the principal to
end customers for the sale of our full games and related content. We therefore
report revenue related to these arrangements net of the fees retained by the
storefront. However, for sales arrangements via Apple App Store and Google Play
Store, EA is considered the principal to the end customer and thus, we report
revenue on a gross basis and mobile platform fees are reported within cost of
revenue.
                                       36

--------------------------------------------------------------------------------
  Table of Contents
Income Taxes
We recognize deferred tax assets and liabilities for both (1) the expected
impact of differences between the financial statement amount and the tax basis
of assets and liabilities and (2) the expected future tax benefit to be derived
from tax losses and tax credit carryforwards. We record a valuation allowance
against deferred tax assets when it is considered more likely than not that all
or a portion of our deferred tax assets will not be realized. In making this
determination, we are required to give significant weight to evidence that can
be objectively verified. It is generally difficult to conclude that a valuation
allowance is not needed when there is significant negative evidence, such as
cumulative losses in recent years. Forecasts of future taxable income are
considered to be less objective than past results. Therefore, cumulative losses
weigh heavily in the overall assessment.
In addition to considering forecasts of future taxable income, we are also
required to evaluate and quantify other possible sources of taxable income in
order to assess the realization of our deferred tax assets, namely the reversal
of existing deferred tax liabilities, the carryback of losses and credits as
allowed under current tax law, and the implementation of tax planning
strategies. Evaluating and quantifying these amounts involves significant
judgments. Each source of income must be evaluated based on all positive and
negative evidence and; this evaluation may involve assumptions about future
activity. Certain taxable temporary differences that are not expected to reverse
during the carry forward periods permitted by tax law cannot be considered as a
source of future taxable income that may be available to realize the benefit of
deferred tax assets.
Every quarter, we perform a realizability analysis to evaluate whether it is
more likely than not that all or a portion of our deferred tax assets will not
be realized. Our Swiss deferred tax assets realizability analysis relies upon
future Swiss taxable income as the primary source of taxable income but
considers all available sources of Swiss income based on the positive and
negative evidence. We give more weight to evidence that can be objectively
verified. However, there is significant judgment involved in estimating future
Swiss taxable income over the 20-year period over which the Swiss deferred tax
assets will reverse, specifically related to assumptions about expected growth
rates of future Swiss taxable income, which are based primarily on third party
market and industry growth data. Actual results that differ materially from
those estimates could have a material impact on our valuation allowance
assessment. Although objectively verifiable, Swiss interest rates have an impact
on the valuation allowance and are based on published Swiss guidance. Any
significant changes to such interest rates could result in a material impact to
the valuation allowance. Switzerland has a seven-year carryforward period and
does not permit the carry back of losses. Changes in Estimated Offering Period
could also impact the utilization of our Swiss deferred tax assets. We do not
recognize any deferred taxes related to the U.S. taxes on foreign earnings as we
recognize these taxes as a period cost.
As part of the process of preparing our Consolidated Financial Statements, we
are required to estimate our income taxes in each jurisdiction in which we
operate prior to the completion and filing of tax returns for such periods. This
process requires estimating both our geographic mix of income and our uncertain
tax positions in each jurisdiction where we operate. These estimates involve
complex issues and require us to make judgments about the likely application of
the tax law to our situation, as well as with respect to other matters, such as
anticipating the positions that we will take on tax returns prior to our
preparing the returns and the outcomes of disputes with tax authorities. The
ultimate resolution of these issues may take extended periods of time due to
examinations by tax authorities and statutes of limitations. In addition,
changes in our business, including acquisitions, changes in our international
corporate structure, changes in the geographic location of business functions or
assets, changes in the geographic mix and amount of income, as well as changes
in our agreements with tax authorities, valuation allowances, applicable
accounting rules, applicable tax laws and regulations, rulings and
interpretations thereof, developments in tax audit and other matters, and
variations in the estimated and actual level of annual pre-tax income can affect
the overall effective tax rate.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS The information under the subheading "Other Recently Issued Accounting Standards" in Note 1 - Description of Business and Basis of Presentation

to

the Condensed Consolidated Financial Statements in this Form 10-Q is incorporated by reference into this Item 2.


                                       37

--------------------------------------------------------------------------------
  Table of Contents
RESULTS OF OPERATIONS
Our fiscal year is reported on a 52- or 53-week period that ends on the Saturday
nearest March 31. Our results of operations for the fiscal year ending March 31,
2021 contains 53 weeks and ends on April 3, 2021. Our results of operations for
the fiscal year ended March 31, 2020 contained 52 weeks and ended on March 28,
2020. Our results of operations for the three and nine months ended December 31,
2020 contained 13 weeks and 40 weeks, respectively, and ended on January 2,
2021. Our results of operations for the three and nine months ended December 31,
2019 contained 13 weeks and 39 weeks, respectively, and ended on December 28,
2019. For simplicity of disclosure, all fiscal periods are referred to as ending
on a calendar month end.
Net Revenue
Net revenue consists of sales generated from (1) full games sold as digital
downloads or as packaged goods and designed for play on game consoles, PCs and
mobile phones and tablets (2) live services associated with these games, such as
extra-content, (3) subscriptions that generally offer access to a selection of
full games, in-game content, online services and other benefits, and (4)
licensing our games to third parties to distribute and host our games.
Net Revenue Quarterly Analysis
Net Revenue
Net revenue for the three months ended December 31, 2020 was $1,673 million,
primarily driven by FIFA 21, Madden NFL 21, FIFA 20, The Sims 4, and Apex
Legends. Net revenue for the three months ended December 31, 2020 increased $80
million, as compared to the three months ended December 31, 2019. This increase
was driven by a $373 million increase in net revenue primarily from FIFA 21 due
to year-over-year change in the launch date of our FIFA console title from the
second quarter in fiscal year 2020 to the third quarter in fiscal year 2021 and
Medal of Honor: Above and Beyond, partially offset by a $293 million decrease in
net revenue primarily from Star Wars Jedi: Fallen Order and the Need for Speed
franchise.

Net Revenue by Composition

As our business has evolved and management focuses less on the differentiation
between our packaged goods business and our digital business and more on our
full game sales and live services that extend and enhance gameplay, we have
updated our presentation of net revenue by composition to align with this
management view.

Our net revenue by composition for the three months ended December 31, 2020 and 2019 was as follows (in millions):


                                            Three Months Ended December 31,
                                     2020                 2019        $ Change      % Change
Net revenue:
Full game downloads       $        347                  $   286      $     61           21  %
Packaged goods                     375                      403           (28)          (7) %
Full game                 $        722                  $   689      $     33            5  %

Live services and other   $        951                  $   904      $     47            5  %
Total net revenue         $      1,673                  $ 1,593      $     80            5  %


Full Game Net Revenue
Full game net revenue includes full game downloads and packaged goods. Full game
downloads includes revenue from digital sales of full games on console, PC, and
mobile. Packaged goods includes revenue from software that is sold physically.
This includes (1) net revenue from game software sold physically through
traditional channels such as brick and mortar retailers, and (2) software
licensing revenue from third parties (for example, makers of console platforms,
personal computers or computer accessories) who include certain of our full
games for sale with their products (for example, OEM bundles).
                                       38

--------------------------------------------------------------------------------
  Table of Contents
For the three months ended December 31, 2020, full game net revenue was $722
million, primarily driven by FIFA 21, Madden NFL 21, and Star Wars: Squadrons.
Full game net revenue for the three months ended December 31, 2020 increased $33
million, or 5 percent, as compared to the three months ended December 31, 2019.
This increase was driven by a $61 million increase in full game downloads net
revenue primarily from the FIFA franchise due to year-over-year change in the
launch date of our FIFA console title from the second quarter in fiscal year
2020 to the third quarter in fiscal year 2021 and the Madden franchise, and Star
Wars: Squadrons, offset by Star Wars Jedi: Fallen Order. This increase was
offset by a $28 million decrease in packaged goods net revenue primarily driven
by Star Wars Jedi: Fallen Order and the Need for Speed franchise, partially
offset by the FIFA franchise.


Live Services and Other Net Revenue
Live services and other net revenue includes revenue from sales of extra content
for console, PC and mobile games, licensing revenue from third-party publishing
partners who distribute our games digitally, subscriptions, advertising, and
non-software licensing.
For the three months ended December 31, 2020, live services and other net
revenue was $951 million primarily driven by sales of extra content for FIFA
Ultimate Team, Apex Legends, and The Sims 4. Live services and other net revenue
for the three months ended December 31, 2020 increased $47 million, or 5
percent, as compared to the three months ended December 31, 2019. This increase
was driven by Medal of Honor: Above and Beyond and sales of extra content for
Apex Legends.
Net Revenue Year-to-Date Analysis
Net Revenue
Net revenue for the nine months ended December 31, 2020 was $4,283 million,
primarily driven by FIFA 20, FIFA 21, The Sims 4, Apex Legends, Madden NFL 20,
and Madden NFL 21. Net revenue for the nine months ended December 31, 2020
increased $133 million, as compared to the nine months ended December 31, 2019.
This increase was driven by a $478 million increase in net revenue primarily
from The Sims, FIFA, and Madden franchises. This increase was partially offset
by a $345 million decrease in net revenue primarily from Anthem, Star Wars Jedi:
Fallen Order, and the Battlefield franchise.

Net Revenue by Composition

Our net revenue by composition for the nine months ended December 31, 2020 and 2019 was as follows (in millions):


                                           Nine Months Ended December 31,
                                   2020               2019        $ Change       % Change
Net revenue:
Full game downloads       $       733               $   600      $     133           22  %
Packaged goods                    630                   931           (301)         (32) %
Full game                 $     1,363               $ 1,531      $    (168)         (11) %

Live services and other   $     2,920               $ 2,619      $     301           11  %
Total net revenue         $     4,283               $ 4,150      $     133            3  %


Full Game Net Revenue
For the nine months ended December 31, 2020, full game net revenue was $1,363
million, primarily driven by FIFA 21, Madden NFL 21, FIFA 20, Star Wars Jedi:
Fallen Order, and Need for Speed Heat. Full game net revenue for the nine months
ended December 31, 2020 decreased $168 million, or 11 percent, as compared to
the nine months ended December 31, 2019. This decrease was driven by a $301
million decrease in packaged goods net revenue primarily driven by Star Wars
Jedi: Fallen Order, the FIFA franchise, and Anthem. This decrease was partially
offset by a $133 million increase in full game downloads net revenue primarily
driven by the FIFA franchise, Star Wars: Squadrons, and UFC 4, partially offset
by Anthem.
                                       39

--------------------------------------------------------------------------------
  Table of Contents
Live Services and Other Net Revenue
For the nine months ended December 31, 2020, live services and other net revenue
was $2,920 million primarily driven by sales of extra content for FIFA Ultimate
Team, The Sims 4, Apex Legends, and Madden Ultimate Team. Live services and
other net revenue for the nine months ended December 31, 2020 increased $301
million, or 11 percent, as compared to the nine months ended December 31, 2019.
This increase was driven by sales of extra content for FIFA Ultimate Team, The
Sims 4, and Madden Ultimate Team.
Cost of Revenue Quarterly Analysis
Cost of revenue consists of (1) manufacturing royalties, net of volume discounts
and other vendor reimbursements, (2) certain royalty expenses for celebrities,
professional sports leagues, movie studios and other organizations, and
independent software developers, (3) data center, bandwidth and server costs
associated with hosting our online games and websites, (4) inventory costs, (5)
payment processing fees, (6) mobile platform fees associated with our mobile
revenue (for transactions in which we are acting as the principal in the sale to
the end customer), (7) expenses for defective products, (8) write-offs of post
launch prepaid royalty costs and losses on previously unrecognized licensed
intellectual property commitments, (9) amortization of certain intangible
assets, (10) personnel-related costs, and (11) warehousing and distribution
costs. We generally recognize volume discounts when they are earned from the
manufacturer (typically in connection with the achievement of unit-based
milestones); whereas other vendor reimbursements are generally recognized as the
related revenue is recognized.
Cost of revenue for the three months ended December 31, 2020 and 2019 was as
follows (in millions):
  December 31,                                          December 31,                                                             Change as a % of
      2020                    % of Net Revenue              2019              % of Net Revenue             % Change                Net Revenue
$         601                             36  %       $         508                       32  %                     18  %                     4  %


Cost of Revenue
Cost of revenue increased by $93 million, or 18 percent during the three months
ended December 31, 2020, as compared to the three months ended December 31,
2019. This increase was primarily due to an increase in royalty and inventory
costs driven by higher sales of the FIFA franchise, and an increase in platform
fees and hosting fees driven by higher sales of Star Wars: Galaxy of Heroes and
Apex Legends. These increases were partially offset by a decrease in royalty and
inventory costs driven by the Star Wars franchise.
Cost of revenue as a percentage of total net revenue increased by 4 percent
during the three months ended December 31, 2020, as compared to the three months
ended December 31, 2019. This increase was primarily due to an increase in
deferred net revenue, royalty costs due to product mix, platform fees, and
hosting fees, partially offset by lower product costs due to the favorable mix
of lower packaged goods net revenue in proportion of digital net revenue.
Cost of Revenue Year-to-Date Analysis
Cost of revenue for the nine months ended December 31, 2020 and 2019 was as
follows (in millions):
  December 31,                                          December 31,                                                             Change as a % of
      2020                    % of Net Revenue              2019              % of Net Revenue             % Change                Net Revenue
$       1,175                             27  %       $       1,100                       26  %                      7  %                     1  %


Cost of Revenue
Cost of revenue increased by $75 million, or 7 percent during the nine months
ended December 31, 2020, as compared to the nine months ended December 31, 2019.
This increase was primarily due to an increase in royalty costs driven by higher
sales associated with the FIFA and Madden franchises, and an increase in
platform fees and hosting fees driven by higher sales of Star Wars: Galaxy of
Heroes and Apex Legends, partially offset by a decrease in inventory costs
driven by the Star Wars, FIFA, and Need for Speed franchises, and a decrease in
royalty costs driven by the Star Wars franchise.
Cost of revenue as a percentage of total net revenue remained relatively
consistent during the nine months ended December 31, 2020, as compared to the
nine months ended December 31, 2019.

                                       40

--------------------------------------------------------------------------------
  Table of Contents
Research and Development
Research and development expenses consist of expenses incurred by our production
studios for personnel-related costs, related overhead costs, external
third-party development costs, contracted services, depreciation and any
impairment of prepaid royalties for pre-launch products. Research and
development expenses for our online products include expenses incurred by our
studios consisting of direct development and related overhead costs in
connection with the development and production of our online games. Research and
development expenses also include expenses associated with our digital platform,
software licenses and maintenance, and management overhead.
Research and development expenses for the three and nine months ended December
31, 2020 and 2019 were as follows (in millions):
                      December 31,       % of Net      December 31,       % of Net
                          2020           Revenue           2019           Revenue       $ Change       % Change
Three months ended   $         451           27  %    $         389           24  %    $      62           16  %
Nine months ended    $       1,310           31  %    $       1,157           28  %    $     153           13  %



Research and development expenses increased by $62 million, or 16 percent,
during the three months ended December 31, 2020, as compared to the three months
ended December 31, 2019. This increase was primarily due to a $48 million
increase in personnel-related costs primarily resulting from an increase in
headcount due to our continued investment in our studios and an increase in
variable compensation and related expenses, and a $14 million increase in
stock-based compensation.
Research and development expenses increased by $153 million, or 13 percent,
during the nine months ended December 31, 2020, as compared to the nine months
ended December 31, 2019. This increase was primarily due to a $121 million
increase in personnel-related costs primarily resulting from an increase in
headcount due to our continued investment in our studios and an increase in
variable compensation and related expenses, and a $44 million increase in
stock-based compensation. These increases were partially offset by a $20 million
decrease in travel and entertainment expense.
Marketing and Sales
Marketing and sales expenses consist of personnel-related costs, related
overhead costs, advertising, marketing and promotional expenses, net of
qualified advertising cost reimbursements from third parties.
Marketing and sales expenses for the three and nine months ended December 31,
2020 and 2019 were as follows (in millions):
                      December 31,       % of Net      December 31,       % of Net
                          2020           Revenue           2019           Revenue       $ Change      % Change
Three months ended   $         216           13  %    $         202           13  %    $     14            7  %
Nine months ended    $         493           12  %    $         464           11  %    $     29            6  %


Marketing and sales expenses increased by $14 million, or 7 percent during the
three months ended December 31, 2020, as compared to the three months ended
December 31, 2019. This increase was primarily due to a $7 million increase in
advertising and promotional spending on the FIFA franchise, and a $7 million
increase in personnel-related costs primarily resulting from an increase in
variable compensation and related expenses.
Marketing and sales expenses increased by $29 million, or 6 percent, during the
nine months ended December 31, 2020, as compared to the nine months ended
December 31, 2019. This increase was primarily due to a $20 million increase in
personnel-related costs primarily resulting from an increase in variable
compensation and related expenses, and a $7 million increase in stock-based
compensation, and a $7 million increase in advertising and promotional spending
on the FIFA franchise. These increases were partially offset by a $5 million
decrease in travel and entertainment expense.
General and Administrative
General and administrative expenses consist of personnel and related expenses of
executive and administrative staff, corporate functions such as finance, legal,
human resources, and information technology, related overhead costs, fees for
professional services such as legal and accounting, and allowances for doubtful
accounts.
                                       41

--------------------------------------------------------------------------------
  Table of Contents
General and administrative expenses for the three and nine months ended December
31, 2020 and 2019 were as follows (in millions):
                      December 31,       % of Net      December 31,       % of Net
                          2020           Revenue           2019           Revenue       $ Change      % Change
Three months ended   $         149            9  %    $         126            8  %    $     23           18  %
Nine months ended    $         418           10  %    $         364            9  %    $     54           15  %



General and administrative expenses increased by $23 million, or 18 percent,
during the three months ended December 31, 2020, as compared to the three months
ended December 31, 2019. This increase was primarily due to a $12 million
increase in personnel-related costs driven by an increase in variable
compensation and related expenses, a $5 million increase in stock-based
compensation, and a $5 million increase in facility related costs.
General and administrative expenses increased by $54 million, or 15 percent,
during the nine months ended December 31, 2020, as compared to the nine months
ended December 31, 2019. This increase was primarily due to a $38 million
increase in personnel-related costs driven by an increase in variable
compensation and related expenses, an $18 million increase in stock-based
compensation, and a $6 million increase in facility related costs. These
increases were partially offset by a $15 million decrease in travel and
entertainment expense.

Income Taxes
Provision for (benefit from) income taxes for the three and nine months ended
December 31, 2020 and 2019 were as follows (in millions):
                              December 31, 2020           Effective Tax Rate            December 31, 2019           Effective Tax Rate
Three months ended          $               34                            14  %       $               28                             8  %
Nine months ended           $               91                            11  %       $           (1,527)                         (140) %


The provision for income taxes for the three and nine months ended December 31,
2020 is based on our projected annual effective tax rate for fiscal year 2021,
adjusted for specific items that are required to be recognized in the period in
which they are incurred.
Our effective tax rates for the three and nine months ended December 31, 2020
were 14 percent and 11 percent, respectively, as compared to 8 percent and
negative 140 percent, respectively, for the same periods in fiscal year 2020.
During the three months ended June 30, 2019, we completed an intra-entity sale
of some of our intellectual property rights to our Swiss subsidiary, where our
international business is headquartered (the "Swiss intra-entity sale"),
resulting in the recognition of a $1.17 billion net Swiss deferred tax asset,
which will reverse over a 20-year period. Separately, during the three months
ended September 30, 2019, Switzerland enacted a new statutory tax rate. As a
result of the enactment, we remeasured our Swiss deferred tax asset and
recognized an additional net tax benefit of $630 million through continuing
operations ("Swiss rate change benefit"). In addition, the opinion of the Ninth
Circuit Court of Appeals in Altera Corp. v Commissioner (the "Altera opinion")
resulted in the recognition of $90 million of unrecognized tax benefits related
to U.S. uncertain tax positions during the three months ended June 30, 2019.
Excluding the Swiss intra-entity sale, Swiss rate change benefit and Altera
opinion, the effective tax rate for the three and nine months ended December 31,
2019 would have been 16 percent and 14 percent, respectively.
When compared to the U.S. federal statutory rate of 21 percent, the effective
tax rates for the three and nine months ended December 31, 2020 were lower
primarily due to the decreases in unrecognized tax benefits related to prior
year tax positions, net of a partial valuation allowance, and excess tax
benefits on stock-based compensation.

Every quarter, we perform a realizability analysis to evaluate whether it is
more likely than not that all or a portion of our deferred tax assets will not
be realized. During the nine months ended December 31, 2020, we recognized an
additional $41 million of valuation allowance against our deferred tax assets
primarily due to the recognition of previously unrecognized tax benefits related
to prior year tax positions and a change in current year estimated ordinary
income.
We expect our full year fiscal year 2021 effective tax rate to increase to
approximately 28% in the fourth quarter due to an election to capitalize and
amortize certain research and development expenses for U.S. income tax purposes.
                                       42

--------------------------------------------------------------------------------
  Table of Contents
LIQUIDITY AND CAPITAL RESOURCES
                                     As of                As of
(In millions)                  December 31, 2020      March 31, 2020      Increase/(Decrease)
Cash and cash equivalents     $          4,772       $       3,768       $              1,004
Short-term investments                   1,938               1,967                        (29)
Total                         $          6,710       $       5,735       $                975
Percentage of total assets                  54  %               52  %



                                                    Nine Months Ended December 31,
(In millions)                                        2020                    2019                  Change

Net cash provided by operating activities $ 1,563 $ 

    1,299          $         264
Net cash used in investing activities                     (61)                (1,346)                 1,285
Net cash used in financing activities                    (541)                (1,058)                   517
Effect of foreign exchange on cash and cash
equivalents                                                43                      -                     43
Net increase (decrease) in cash and cash
equivalents                                    $        1,004          $

(1,105) $ 2,109




Changes in Cash Flow
Operating Activities. Net cash provided by operating activities increased by
$264 million during the nine months ended December 31, 2020, as compared to the
nine months ended December 31, 2019, primarily driven by higher collections due
to improved performance as we saw extraordinary levels of engagement during the
three months ended June 30, 2020 as players spent more time at home as a result
of the COVID-19 pandemic and lower marketing and advertising payments. This
increase is partially offset by higher cash outflow from hedging activities,
higher variable compensation payments related to fiscal year 2020 performance,
higher personnel-related costs, and higher cash payments for income taxes and
royalties.
Investing Activities. Net cash used in investing activities decreased by $1,285
million during the nine months ended December 31, 2020, as compared to the nine
months ended December 31, 2019, primarily driven by a $713 million increase in
proceeds from maturities and sales of short-term investments and a $565 million
decrease in the purchase of short-term investments.
Financing Activities. Net cash used in financing activities decreased by $517
million during the nine months ended December 31, 2020, as compared to the nine
months ended December 31, 2019, primarily driven by a $512 million decrease in
the repurchase and retirement of our common stock and a $90 million of
contingent consideration payment in connection with our acquisition of Respawn
Entertainment, LLC during the nine months ended December 31, 2019. These
decreases were partially offset by a $58 million increase in cash paid to taxing
authorities in connection with withholding taxes for stock-based compensation
and $49 million of cash dividends payments in the current year.
Short-term Investments
Due to our mix of fixed and variable rate securities, our short-term investment
portfolio is susceptible to changes in short-term interest rates. As of
December 31, 2020, our short-term investments had gross unrealized gains of $3
million, or less than 1 percent of the total in short-term investments. From
time to time, we may liquidate some or all of our short-term investments to fund
operational needs or other activities, such as capital expenditures, business
acquisitions or stock repurchase programs.
Senior Notes
In February 2016, we issued $600 million aggregate principal amount of the 2021
Notes and $400 million aggregate principal amount of the 2026 Notes. The
effective interest rate is 3.94% for the 2021 Notes and 4.97% for the 2026
Notes. Interest is payable semiannually in arrears, on March 1 and September 1
of each year. We redeemed $600 million aggregate principal amount of the 2021
Notes on February 1, 2021 plus accrued and unpaid interest of $9 million.
See   Note 11 - Financing Arrangements   to the Condensed Consolidated Financial
Statements in this Form 10-Q as it relates to our Senior Notes, which is
incorporated by reference into this Item 2.
                                       43

--------------------------------------------------------------------------------
  Table of Contents
Credit Facility
On August 29, 2019, we entered into a $500 million unsecured revolving credit
facility ("Credit Facility") with a syndicate of banks. The Credit Facility
terminates on August 29, 2024 unless the maturity is extended in accordance with
its terms. As of December 31, 2020, no amounts were outstanding under the Credit
Facility. See   Note 11 - Financing Arrangements   to the Condensed Consolidated
Financial Statements in this Form 10-Q as it relates to our Credit Facility,
which is incorporated by reference into this Item 2.
Financial Condition
We believe that our cash, cash equivalents, short-term investments, cash
generated from operations and available financing facilities will be sufficient
to meet our operating requirements for at least the next 12 months, including
working capital requirements, capital expenditures, debt repayment obligations,
dividends, and potentially, future acquisitions, stock repurchases, or strategic
investments. We may choose at any time to raise additional capital to repay
debt, strengthen our financial position, facilitate expansion, repurchase our
stock, pursue strategic acquisitions and investments, and/or to take advantage
of business opportunities as they arise. There can be no assurance, however,
that such additional capital will be available to us on favorable terms, if at
all, or that it will not result in substantial dilution to our existing
stockholders.
In November 2020, our Board of Directors authorized a program to repurchase up
to $2.6 billion of our common stock. This stock repurchase program expires on
November 4, 2022. Under this program, we may purchase stock in the open market
or through privately negotiated transactions in accordance with applicable
securities laws, including pursuant to pre-arranged stock trading plans. The
timing and actual amount of the stock repurchases will depend on several factors
including price, capital availability, regulatory requirements, alternative
investment opportunities and other market conditions. We are not obligated to
repurchase a specific number of shares under this program and it may be
modified, suspended or discontinued at any time. During the three months ended
December 31, 2020, we repurchased approximately 2.5 million shares for
approximately $326 million under this program. We are actively repurchasing
shares under this program.
In November 2020, our Board of Directors initiated a quarterly cash dividend on
the Company's common stock. Our current quarterly cash dividend is $0.17 per
share of common stock, subject to declaration by our Board of Directors or a
designated Committee of the Board of Directors.
On December 14, 2020, we announced the pending acquisition of Codemasters for
approximately £945 million, or $1.3 billion using the latest practicable
exchange rate. On February 3, 2021, the requisite majority of Codemasters'
shareholders voted to approve the Codemasters acquisition. The transaction
remains subject to, among other things, satisfaction or waiver of customary
closing conditions. The acquisition is anticipated to close in February 2021. We
intend to fund this acquisition with existing cash on hand.
On February 8, 2020, we announced that we entered into a definitive merger
agreement to acquire Glu for $12.50 in cash for each outstanding common share of
Glu. This represents an equity value of approximately $2.4 billion and a total
enterprise value of approximately $2.1 billion. The transaction remains subject
to certain customary closing conditions, including antitrust clearances. The Glu
acquisition is expected to close in the first quarter of fiscal 2022. We intend
to fund this acquisition with existing cash on hand and any financing we may do
from time to time.
Our foreign subsidiaries will generally be subject to U.S. tax, and to the
extent earnings from these subsidiaries can be repatriated without a material
tax cost, such earnings will not be indefinitely reinvested. As of December 31,
2020, approximately $3.3 billion of our cash, cash equivalents, and short-term
investments were domiciled in foreign tax jurisdictions. All of our foreign cash
is available for repatriation without a material tax cost.
We have a "shelf" registration statement on Form S-3 on file with the SEC. This
shelf registration statement, which includes a base prospectus, allows us at any
time to offer any combination of securities described in the prospectus in one
or more offerings. Unless otherwise specified in a prospectus supplement
accompanying the base prospectus, we would use the net proceeds from the sale of
any securities offered pursuant to the shelf registration statement for general
corporate purposes, which may include funding for working capital, financing
capital expenditures, research and development, marketing and distribution
efforts, and if opportunities arise, for acquisitions or strategic alliances.
Pending such uses, we may invest the net proceeds in interest-bearing
securities. In addition, we may conduct concurrent or other financings at any
time.
                                       44

--------------------------------------------------------------------------------
  Table of Contents
Our ability to maintain sufficient liquidity could be affected by various risks
and uncertainties including, but not limited to, customer demand and acceptance
of our products, our ability to collect our accounts receivable as they become
due, successfully achieving our product release schedules and attaining our
forecasted sales objectives, economic conditions in the United States and
abroad, the impact of acquisitions and other strategic transactions in which we
may engage, the impact of competition, the seasonal and cyclical nature of our
business and operating results, and the other risks described in the "  Risk
Factors  " section, included in Part II, Item 1A of this report.
Contractual Obligations and Commercial Commitments

Note 12 - Commitments and Contingencies to the Condensed Consolidated Financial Statements in this Form 10-Q as it relates to our contractual obligations and commercial commitments, which is incorporated by reference into this Item 2.



OFF-BALANCE SHEET COMMITMENTS
As of December 31, 2020, we did not have any off-balance sheet arrangements, as
defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC, that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues and expenses,
results of operations, liquidity, capital expenditures, or capital resources
that are material to investors.

                                       45

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses