1. Cashflow Assumptions Summary (EA)
Category
Input Values
Comments
FY2014
EBITDA Margin
23.5% | $944m
23-25%
2014: Improvement in margins due to management dedication to cost reduction (cost of revenues declined from 34% to 32% of sales and shift towards higher digital mix in distributing product (digital revenue increased from 44% to 46% of sales)
: Management guidance ~20-22% but 2015 limited due to titles that will start to bear royalties
Cost of Revenues
32% | $1.3bn
30-32%
Management guidance to decline due to increased cost discipline, increased efficiencies and a stronger focus on fewer products
Marketing & Sales
16% | $680m
~16%
More efficient marketing schemes with a focus on point-to-point marketing and social marketing individual marketing vs. TV campaigns
General & Admin
2.6% | $183m
~2.5%
Expected decrease as a percentage of sales due to scale
R&D
25.7% | $1.1bn
~24%
As a result of fewer titles being released each fiscal year due to a focus on major AAA titles, R&D growth is forecasted to slow slightly
Management guidance for moderate spending on R&D, trying to hold flat
Capital Expenditure
2.4% | $103m
3.5%
Management guidance for fiscal $100m forecasted
Working Capital
20.9% | $748m
18-20%
Inline with analyst reports
Cash balance forecasted to be maintained at ~60% for deal flexibility (FY2014: 66%)
Leverage
0.6x Debt/EBITDA
6.1% Debt/EV
0.6x
6.0%
Mgmt guidance to maintain in line with historical figures
Effective Tax Rate
25%
25% is inline with analyst reports