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Electronic Arts Reports Strong Q2 FY25 Results

EA

Record Q2 net bookings driven by performance across EA SPORTS™ portfolio resulting in a raised full-year outlook

Electronic Arts (NASDAQ: EA) today announced preliminary financial results for its second quarter ended September 30, 2024.

“EA delivered another strong quarter with record Q2 net bookings, driven by our incredible teams, broad portfolio and technology leadership,” said Andrew Wilson, CEO of EA. “The momentum in our business reinforces our strategic vision to deliver innovative experiences and interactive entertainment that deepens and expands engagement across our global communities.”

“Q2 was another successful quarter for EA, exceeding the high end of our guidance range. As a result, we are also raising our FY25 outlook,” said Stuart Canfield, CFO of EA. “We remain confident in our ability to drive long-term value creation through increased scale, driving top-line growth, improved margins, and greater cash flow as shared at our Investor Day.”

Selected Operating Highlights and Metrics

  • Net bookings1 for the quarter totaled $2.079 billion, setting a Q2 record and exceeding the high end of guidance range of $2.050 billion.
  • American Football is on track to exceed $1 billion in net bookings for FY25, with total hours played in Q2 up over 140% year over year, and we also saw new players in the community more than double year over year.
  • Through September, College Football 25 was the best-selling HD title in North America and gives EA three of the top ten HD bestsellers in North America.
  • Global Football saw live service growth across all platforms in Q2, and total franchise net bookings in FY25 are on track to grow over a record FY24.
  • The Sims™ 4 continues to expand, with more than 15 million players joining the game over the past year. Increased engagement led to higher-than-expected net bookings for the franchise in Q2.

Selected Financial Highlights and Metrics

  • Net revenue was $2.025 billion for the quarter.
  • Net cash provided by operating activities was $234 million for the quarter and $2.198 billion for the trailing twelve months.
  • EA repurchased 2.6 million shares for $375 million during the quarter under the stock repurchase program, bringing the total for the trailing twelve months to 10.2 million shares for $1.400 billion.

Dividend

EA has declared a quarterly cash dividend of $0.19 per share of the Company’s common stock. The dividend is payable on December 18, 2024 to stockholders of record as of the close of business on November 27, 2024.

Quarterly Financial Highlights

Three Months Ended

September 30,

(in $ millions, except per share amounts)

2024

2023

Full game

716

621

Live services and other

1,309

1,293

Total net revenue

2,025

1,914

Net income

294

399

Diluted earnings per share

1.11

1.47*

Operating cash flow

234

112

Value of shares repurchased

375

325

Number of shares repurchased

2.6

2.6

Cash dividend paid

51

51

* Diluted earnings per share includes $0.34 from a one-time non-cash tax benefit in second quarter ended September 30, 2023.

Trailing Twelve Months Financial Highlights

Twelve Months Ended

September 30,

(in $ millions)

2024

2023

Full game

1,917

2,058

Live services and other

5,492

5,535

Total net revenue

7,409

7,593

Net income

1,046

993

Operating cash flow

2,198

2,211

Value of shares repurchased

1,400

1,300

Number of shares repurchased

10.2

10.5

Operating Metric

The following is a calculation of our total net bookings1 for the periods presented:

Three Months Ended
September 30,

Twelve Months Ended
September 30,

(in $ millions)

2024

2023

2024

2023

Total net revenue

2,025

1,914

7,409

7,593

Change in deferred net revenue (online-enabled games)

54

(94

)

(36

)

93

Total net bookings

2,079

1,820

7,373

7,686

Business Outlook as of October 29, 2024

Fiscal Year 2025 Expectations – Ending March 31, 2025

Financial outlook metrics:

  • Net revenue is expected to be approximately $7.400 billion to $7.700 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $100 million.
  • Net income is expected to be approximately $1.019 billion to $1.156 billion.
  • Diluted earnings per share is expected to be approximately $3.82 to $4.33.
  • Operating cash flow is expected to be approximately $2.075 billion to $2.275 billion.
  • The Company estimates a share count of 267 million for purposes of calculating diluted earnings per share.

Operational outlook metric:

  • Net bookings1 is expected to be approximately $7.500 billion to $7.800 billion.

Third Quarter Fiscal Year 2025 Expectations – Ending December 31, 2024

Financial outlook metrics:

  • Net revenue is expected to be approximately $1.875 billion to $2.025 billion.
    • Change in deferred net revenue (online-enabled games) is expected to be approximately $525 million.
  • Net income is expected to be approximately $226 million to $270 million.
  • Diluted earnings per share is expected to be approximately $0.85 to $1.02.
  • The Company estimates a share count of 266 million for purposes of calculating diluted earnings per share.

Operational outlook metric:

  • Net bookings1 is expected to be approximately $2.400 billion to $2.550 billion.

Conference Call and Supporting Documents

Electronic Arts will host a conference call on October 29, 2024 at 2:00 pm PT (5:00 pm ET) to review its results for the second fiscal quarter ended September 30, 2024 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) 330-2446 (domestic) or (240) 789-2732 (international), using the conference code 5939891 or via webcast at EA’s IR Website at http://ir.ea.com.

EA has posted a slide presentation with a financial model of EA’s historical results and guidance on EA’s IR Website. EA will also post the prepared remarks and a transcript from the conference call on EA’s IR Website.

A dial-in replay of the conference call will be available until November 5, 2024 at (800) 770-2030 (domestic) or (647) 362-9199 (international) using conference code 5939891. An audio webcast replay of the conference call will be available for one year on EA’s IR Website.

Forward-Looking Statements

Some statements set forth in this release, including the information relating to EA’s expectations under the heading “Business Outlook as of October 29, 2024” and other information regarding EA's expectations contain forward-looking statements that are subject to change. Statements including 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 also identify 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.

Some of the factors which could cause the Company’s results to differ materially from its expectations include the following: sales of the Company’s products and services; the Company’s ability to develop and support digital products and services, including managing online security and privacy; outages of our products, services and technological infrastructure; the Company’s ability to manage expenses; the competition in the interactive entertainment industry; governmental regulations; the effectiveness of the Company’s sales and marketing programs; timely development and release of the Company’s products and services; the Company’s ability to realize the anticipated benefits of, and integrate, acquisitions; the consumer demand for, and the availability of an adequate supply of console hardware units; the Company’s ability to predict consumer preferences and trends; the Company’s ability to develop and implement new technology; foreign currency exchange rate fluctuations; economic and geopolitical conditions; changes in our tax rates or tax laws; and other factors described in Part II, Item 1A of Electronic Arts’ latest Quarterly Report on Form 10-Q under the heading “Risk Factors”, as well as in other documents we have filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.

These forward-looking statements are current as of October 29, 2024. Electronic Arts assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law. In addition, the preliminary financial results set forth in this release are estimates based on information currently available to Electronic Arts.

While Electronic Arts believes these estimates are meaningful, they could differ from the actual amounts that Electronic Arts ultimately reports in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024. Electronic Arts assumes no obligation and does not intend to update these estimates prior to filing its Form 10-Q for the fiscal quarter ended September 30, 2024.

About Electronic Arts

Electronic Arts (NASDAQ: EA) is a global leader in digital interactive entertainment. The Company develops and delivers games, content and online services for Internet-connected consoles, mobile devices and personal computers.

In fiscal year 2024, EA posted GAAP net revenue of approximately $7.6 billion. Headquartered in Redwood City, California, EA is recognized for a portfolio of critically acclaimed, high-quality brands such as EA SPORTS FC™, Battlefield™, Apex Legends™, The Sims™, EA SPORTS™ Madden NFL, EA SPORTS™ College Football, Need for Speed™, Dragon Age™, Titanfall™, Plants vs. Zombies™ and EA SPORTS F1®. More information about EA is available at www.ea.com/news.

EA, EA SPORTS, EA SPORTS FC, Battlefield, Need for Speed, Apex Legends, The Sims, Dragon Age, Titanfall, and Plants vs. Zombies are trademarks of Electronic Arts Inc. John Madden, NFL, FIFA and F1 are the property of their respective owners and used with permission.

1 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.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in $ millions, except per share data)

Three Months Ended
September 30,

Six Months Ended
September 30,

2024

2023

2024

2023

Net revenue

2,025

1,914

3,685

3,838

Cost of revenue

456

456

719

824

Gross profit

1,569

1,458

2,966

3,014

Operating expenses:

Research and development

648

602

1,277

1,198

Marketing and sales

272

280

477

509

General and administrative

197

173

377

336

Amortization of intangibles

17

24

34

49

Restructuring

51

2

53

3

Total operating expenses

1,185

1,081

2,218

2,095

Operating income

384

377

748

919

Interest and other income (expense), net

15

14

45

28

Income before provision for (benefit from) income taxes

399

391

793

947

Provision for (benefit from) income taxes

105

(8

)

219

146

Net income

294

399

574

801

Earnings per share

Basic

1.11

1.47

2.17

2.94

Diluted

1.11

1.47

2.15

2.93

Number of shares used in computation

Basic

264

271

265

272

Diluted

266

272

267

273

Results (in $ millions, except per share data)

The following table reports the variance of the actuals versus our guidance provided on July 30, 2024 for the three months ended September 30, 2024 plus a comparison to the actuals for the three months ended September 30, 2023.

Three Months Ended September 30,

2024 Guidance
(Mid-Point)

2024 Actuals

2023 Actuals

Variance

Net revenue

Net revenue

1,950

75

2,025

1,914

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

50

4

54

(94

)

Cost of revenue

Cost of revenue

435

21

456

456

GAAP-based financial data

Acquisition-related expenses

(10

)

(10

)

(15

)

Stock-based compensation

(5

)

1

(4

)

(2

)

Operating expenses

Operating expenses

1,195

(10

)

1,185

1,081

GAAP-based financial data

Acquisition-related expenses

(20

)

3

(17

)

(24

)

Restructuring and related charges

(65

)

13

(52

)

Stock-based compensation

(160

)

(10

)

(170

)

(153

)

Income before tax

Income before tax

333

66

399

391

GAAP-based financial data

Acquisition-related expenses

30

(3

)

27

39

Change in deferred net revenue (online-enabled games)1

50

4

54

(94

)

Restructuring and related charges

65

(13

)

52

Stock-based compensation

165

9

174

155

Tax rate used for management reporting

19

%

19

%

19

%

Earnings per share

Basic

0.86

0.25

1.11

1.47

Diluted

0.85

0.26

1.11

1.47

Number of shares used in computation

Basic

265

(1

)

264

271

Diluted

267

(1

)

266

272

1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in $ millions)

September 30, 2024

March 31, 20242

ASSETS

Current assets:

Cash and cash equivalents

2,197

2,900

Short-term investments

366

362

Receivables, net

1,012

565

Other current assets

397

420

Total current assets

3,972

4,247

Property and equipment, net

578

578

Goodwill

5,381

5,379

Acquisition-related intangibles, net

346

400

Deferred income taxes, net

2,431

2,380

Other assets

428

436

TOTAL ASSETS

13,136

13,420

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable, accrued, and other current liabilities

1,312

1,276

Deferred net revenue (online-enabled games)

1,475

1,814

Total current liabilities

2,787

3,090

Senior notes, net

1,883

1,882

Income tax obligations

552

497

Other liabilities

506

438

Total liabilities

5,728

5,907

Stockholders’ equity:

Common stock

3

3

Retained earnings

7,520

7,582

Accumulated other comprehensive loss

(115

)

(72

)

Total stockholders’ equity

7,408

7,513

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

13,136

13,420

2Derived from audited consolidated financial statements.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in $ millions)

Three Months Ended
September 30,

Six Months Ended
September 30,

2024

2023

2024

2023

OPERATING ACTIVITIES

Net income

294

399

574

801

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization, accretion and impairment

122

85

202

173

Stock-based compensation

174

155

317

285

Change in assets and liabilities

Receivables, net

(579

)

(534

)

(447

)

(367

)

Other assets

(78

)

(22

)

(20

)

74

Accounts payable, accrued, and other liabilities

275

(90

)

117

(200

)

Deferred income taxes, net

(37

)

201

(50

)

108

Deferred net revenue (online-enabled games)

63

(82

)

(339

)

(403

)

Net cash provided by operating activities

234

112

354

471

INVESTING ACTIVITIES

Capital expenditures

(50

)

(51

)

(117

)

(96

)

Proceeds from maturities and sales of short-term investments

111

151

239

302

Purchase of short-term investments

(107

)

(163

)

(237

)

(313

)

Net cash used in investing activities

(46

)

(63

)

(115

)

(107

)

FINANCING ACTIVITIES

Proceeds from issuance of common stock

42

40

42

40

Cash dividends paid

(51

)

(51

)

(101

)

(103

)

Cash paid to taxing authorities for shares withheld from employees

(18

)

(15

)

(139

)

(120

)

Common stock repurchases

(375

)

(325

)

(750

)

(650

)

Net cash used in financing activities

(402

)

(351

)

(948

)

(833

)

Effect of foreign exchange on cash and cash equivalents

11

(11

)

6

(9

)

Change in cash and cash equivalents

(203

)

(313

)

(703

)

(478

)

Beginning cash and cash equivalents

2,400

2,259

2,900

2,424

Ending cash and cash equivalents

2,197

1,946

2,197

1,946

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions, except per share data)

Q2

Q3

Q4

Q1

Q2

YOY %

FY24

FY24

FY24

FY25

FY25

Change

Net revenue

Net revenue

1,914

1,945

1,779

1,660

2,025

6

%

GAAP-based financial data

Change in deferred net revenue (online-enabled games)1

(94

)

421

(113

)

(398

)

54

Gross profit

Gross profit

1,458

1,416

1,422

1,397

1,569

8

%

Gross profit (as a % of net revenue)

76

%

73

%

80

%

84

%

78

%

GAAP-based financial data

Acquisition-related expenses

15

16

29

10

10

Change in deferred net revenue (online-enabled games)1

(94

)

421

(113

)

(398

)

54

Stock-based compensation

2

2

2

4

4

Operating income

Operating income

377

365

234

364

384

2

%

Operating income (as a % of net revenue)

20

%

19

%

13

%

22

%

19

%

GAAP-based financial data

Acquisition-related expenses

39

37

101

27

27

Change in deferred net revenue (online-enabled games)1

(94

)

421

(113

)

(398

)

54

Restructuring and related charges

61

6

52

Stock-based compensation

155

151

148

143

174

Net income

Net income

399

290

182

280

294

(26

%)

Net income (as a % of net revenue)

21

%

15

%

10

%

17

%

15

%

GAAP-based financial data

Acquisition-related expenses

39

37

101

27

27

Change in deferred net revenue (online-enabled games)1

(94

)

421

(113

)

(398

)

54

Restructuring and related charges

61

6

52

Stock-based compensation

155

151

148

143

174

Tax rate used for management reporting

19

%

19

%

19

%

19

%

19

%

Diluted earnings per share

1.47

1.07

0.67

1.04

1.11

(24

%)

Number of shares used in computation

Basic

271

269

267

266

264

Diluted

272

271

270

268

266

1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

Q2

Q3

Q4

Q1

Q2

YOY %

FY24

FY24

FY24

FY25

FY25

Change

QUARTERLY NET REVENUE PRESENTATIONS

Net revenue by composition

Full game downloads

346

431

265

190

475

37

%

Packaged goods

275

187

68

60

241

(12

%)

Full game

621

618

333

250

716

15

%

Live services and other

1,293

1,327

1,446

1,410

1,309

1

%

Total net revenue

1,914

1,945

1,779

1,660

2,025

6

%

Full game

32

%

32

%

19

%

15

%

35

%

Live services and other

68

%

68

%

81

%

85

%

65

%

Total net revenue %

100

%

100

%

100

%

100

%

100

%

GAAP-based financial data

Full game downloads

24

32

(37

)

(47

)

70

Packaged goods

46

4

(37

)

(35

)

46

Full game

70

36

(74

)

(82

)

116

Live services and other

(164

)

385

(39

)

(316

)

(62

)

Total change in deferred net revenue (online-enabled games) by composition1

(94

)

421

(113

)

(398

)

54

Net revenue by platform

Console

1,187

1,229

1,049

1,005

1,374

16

%

PC & Other

423

420

423

365

364

(14

%)

Mobile

304

296

307

290

287

(6

%)

Total net revenue

1,914

1,945

1,779

1,660

2,025

6

%

GAAP-based financial data

Console

(35

)

377

(94

)

(328

)

108

PC & Other

(34

)

33

(10

)

(70

)

(37

)

Mobile

(25

)

11

(9

)

(17

)

Total change in deferred net revenue (online-enabled games) by platform1

(94

)

421

(113

)

(398

)

54

1The change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of cash flows does not necessarily equal the change in deferred net revenue (online-enabled games) in the unaudited condensed consolidated statements of operations primarily due to the impact of unrecognized gains/losses on cash flow hedges.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Supplemental Financial Information and Business Metrics

(in $ millions)

Q2

Q3

Q4

Q1

Q2

YOY %

FY24

FY24

FY24

FY25

FY25

Change

CASH FLOW DATA

Investing cash flow

(63

)

(51

)

(49

)

(69

)

(46

)

Investing cash flow - TTM

(205

)

(195

)

(207

)

(232

)

(215

)

(5

%)

Financing cash flow

(351

)

(431

)

(360

)

(546

)

(402

)

Financing cash flow - TTM

(1,609

)

(1,622

)

(1,624

)

(1,688

)

(1,739

)

(8

%)

Operating cash flow

112

1,264

580

120

234

Operating cash flow - TTM

2,211

2,352

2,315

2,076

2,198

(1

%)

Capital expenditures

51

52

51

67

50

Capital expenditures - TTM

191

195

199

221

220

15

%

Free cash flow3

61

1,212

529

53

184

Free cash flow3 - TTM

2,020

2,157

2,116

1,855

1,978

(2

%)

Common stock repurchases

325

325

325

375

375

15

%

Cash dividends paid

51

51

51

50

51

DEPRECIATION

Depreciation expense

49

48

50

51

51

4

%

BALANCE SHEET DATA

Cash and cash equivalents

1,946

2,742

2,900

2,400

2,197

Short-term investments

359

362

362

366

366

Cash and cash equivalents, and short-term investments

2,305

3,104

3,262

2,766

2,563

11

%

Receivables, net

1,047

867

565

433

1,012

(3

%)

STOCK-BASED COMPENSATION

Cost of revenue

2

2

2

4

4

Research and development

113

108

104

101

122

Marketing and sales

13

14

14

12

16

General and administrative

27

27

28

26

32

Total stock-based compensation

155

151

148

143

174

RESTRUCTURING AND RELATED CHARGES

Restructuring

2

59

2

51

Office space reductions

(2

)

2

4

1

Total restructuring and related charges

61

6

52

3Free cash flow is defined as Operating cash flow less Capital expenditures.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures

(in $ millions)

The following table provides a reconciliation of non-GAAP operating income and margin to their most directly comparable GAAP financial measure for the three months ended September 30, 2024 plus a comparison to the actuals for the three months ended September 30, 2023.

Three Months Ended

September 30,

2024

2023

YOY % Change

Net revenue

2,025

1,914

6%

GAAP operating income

384

377

2%

Acquisition-related expenses

27

39

Restructuring and related charges

52

Stock-based compensation

174

155

Non-GAAP operating income

637

571

12%

GAAP operating margin

19.0%

19.7%

Non-GAAP operating margin

31.5%

29.8%

Impact from change in deferred net revenue (online-enabled games)

170 bps

(360) bps

ELECTRONIC ARTS INC. AND SUBSIDIARIES

GAAP Guidance to Non-GAAP Guidance

(in $ millions)

The following table provides GAAP to Non-GAAP reconciliation of the Company’s FY25 guidance.

Twelve Months Ending March 31, 2025

GAAP-Based Financial Data

GAAP-Based Financial Data

A

B

C

D

GAAP Guidance Range

Acquisition-related expenses5

Restructuring and related charges5

Stock-based compensation5

Non-GAAP Guidance Range
= A + B +C + D

Change in deferred net revenue (online-enabled games)5

Net revenue

7,400

to

7,700

7,400

to

7,700

100

Cost of revenue

1,530

to

1,560

(40)

(15)

1,475

to

1,505

Operating expense

4,445

to

4,515

(70)

(80)

(640)

3,655

to

3,725

Operating margin

19.3%

to

21.1%

150 bps

110 bps

870 bps

30.7%

to

32.1%

90 bps to 80 bps

Income before provision for income taxes

1,477

to

1,676

110

80

655

2,322

to

2,521

100

Net income4

1,019

to

1,156

Number of shares used in computation:

Diluted

267

4 The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future periods.

5 The mid-point of the range has been used for purposes of presenting reconciling items to operating margin.

ELECTRONIC ARTS INC. AND SUBSIDIARIES

GAAP-Based Financial Data for Guidance

(in $ millions)

The following table provides supplemental information to the Company’s Q3 FY25 guidance.

Three Months Ending December 31, 2024

GAAP-Based Financial Data

GAAP Guidance Range

Acquisition-related expenses

Restructuring and related charges

Stock-based compensation

Change in deferred net revenue (online-enabled games)

Net revenue

1,875

to

2,025

525

Cost of revenue

450

to

480

(10)

(5)

Operating expense

1,100

to

1,150

(20)

(5)

(165)

Income before provision for income taxes

338

to

403

30

5

170

525

Net income4

226

to

270

Number of shares used in computation:

Diluted

266

4 The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan and analyze future periods.

Non-GAAP Financial Measures

As a supplement to the Company’s financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company presents certain non-GAAP measures of financial performance, including non-GAAP operating margin and free cash flow. These non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the Company’s results of operations as determined in accordance with GAAP. These non-GAAP financial measures do not reflect a comprehensive system of accounting and differ from GAAP measures with the same names and may differ from non-GAAP financial measures with the same or similar names that are used by other companies.

The non-GAAP financial measures exclude acquisition-related expenses, stock-based compensation, restructuring and related charges, and capital expenditures, as applicable in any given reporting period and our outlook. The Company may consider whether other significant items that arise in the future should be excluded from our non-GAAP financial measures. Management believes that these non-GAAP financial measures provide investors with additional useful information to better understand and evaluate the Company’s operating results and future prospects because they exclude certain items that may not be indicative of the Company’s core business, operating results, or future outlook. These non-GAAP financial measures, with further adjustments are used by management to understand ongoing financial and business performance.

The Company uses a tax rate of 19% internally to evaluate its operating performance and to forecast, plan, and analyze future periods. Accordingly, the Company applies the same tax rate to its management reporting financial results.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measure.