S&P Assigns 'BBB-' Rating to Electronic Arts (EA); Outlook Stable

Standard & Poor's Ratings Services said that it assigned its 'BBB-' corporate credit rating to Electronic Arts Inc. (Nasdaq: EA) (EA). The rating outlook is stable.

Our 'BBB-' corporate credit rating on EA reflects our expectation for good operating performance (subject to changes in its video games release slate) and the continued strength of the company's key video game franchises, offset by revenue concentration risk with FIFA, heightened competition for leisure time activity from other electronic media, intense rivalry between video game publishers, increasing development and marketing costs for new video games, and conservative financial policy.

"The stable rating outlook is based on our expectation that EA's operating performance will be stable over the next several years, with mid-single-digit revenue and EBITDA growth," said Standard & Poor's credit analyst Andy Liu. "These expectations are subject to changes in EA's release slate because the acceleration or postponement of a major release can have a significant impact on year-over-year revenue and EBITDA growth."

We could raise our corporate credit rating on EA over time if the company develops new key franchise titles and sustains its existing franchise titles. This would imply that the structural changes the management team made have not meaningfully curtailed EA's ability to develop new and compelling video games.

We could lower the rating if EA's operating performance deteriorates significantly (likely in conjunction with the underperformance of several key franchise titles). Additionally, we could lower the rating if a shift in the company's financial policy causes its adjusted debt leverage to increase to greater than 1.5x.

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