Key Highlights for the Fiscal Year Included:
Drove strong financial performance and executed on our key strategic objectives |
◼Generated net revenue of $6.991 billion, up 24% year-over, and diluted earnings per share of $2.76
◼Returned nearly $1.5 billion to stockholders through share repurchases and dividends
◼Delivered on our fiscal year 2022 title slate, launching 9 major new games, all during the challenges of the COVID-19 pandemic
◼Achieved 24% growth in live services and other net revenue year-over-year
◼Grew our EA player network 16% year-over-year to more than 580 million unique active accounts |
Continued to strengthen our ESG programs and practices, particularly with respect to diversity, equity, and inclusion |
◼Added two highly-qualified, skilled, and diverse members to our Board of Directors
◼Hired a Chief Diversity Officer to continue building on our strong foundational efforts; and strengthened our progress on supporting a safe and healthy culture
◼Increased transparency regarding our workforce representation data by voluntarily disclosing our 2021 EEO-1 diversity data
◼Maintained base pay equity on the basis of gender globally and on the basis of race/ethnicity in the United States, inclusive of the workforces of recently acquired companies; expanded our analysis to include annual bonus and equity compensation, identifying areas of focus, while working to correct them and eliminate bias across our elements of pay
◼Strengthened our commitment to accessibility and inclusion in our games and experiences, including by launching an industry-first patent pledge to help make games more accessible to players of all abilities |
Engaged with top institutional stockholders and further enhanced our executive compensation program and governance |
◼Leading up to and following our 2021 annual meeting, we reached out to stockholders collectively holding approximately 75% of our outstanding stock and held over 41 calls to understand stockholders’ views on executive compensation, governance and ESG issues
◼Considered stockholder feedback and made additional enhancements to our executive compensation program for fiscal year 2023
◼Continued to bring fresh perspectives to support an enhanced approach to executive compensation, appointing Ms. Talbott Roche as Chair of the Compensation Committee in November 2021 |
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COMPENSATION DISCUSSION & ANALYSIS
Fiscal Year 2022 Performance Highlights
Fiscal year 2022 was a record year for Electronic Arts, with our highest-ever net revenue and net bookings driven by strong engagement across our broad portfolio of titles that span console, PC and mobile. Live services and other net revenue grew 24% to almost $5 billion, a record, driven by strength across our portfolio, most notably Apex Legends and FIFA. Our mobile business continues to grow and generated over $1 billion in net revenue during fiscal year 2022. In addition, we continued to return capital to stockholders, repurchasing 9.5 million shares during fiscal year 2022 and continuing to pay a quarterly dividend.
Our executive compensation program is designed to reward our NEOs for the achievement of Company-wide financial, operating, and strategic objectives and the creation of long-term stockholder value. As highlighted below, our financial performance, operating achievements, and execution on our strategic objectives provide context for the fiscal year 2022 executive compensation decisions made by the Compensation Committee and Board of Directors.
Fiscal Year 2022 GAAP Financial Results and Operating Highlights
$6.991B net revenue
$2.76 diluted earnings per share
$7.515B net bookings
Live services and other net revenue $4.998B representing 71% of total net revenue
$1.899B operating cash flow |
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Repurchased 9.5M shares during fiscal year 2022 for $1.3 billion
Quarterly cash dividend of $0.17 per share
It Takes Two won over 90 awards during fiscal year 2022
FIFA 22 was the biggest and most successful game in franchise history, launch to fiscal year end |
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Apex Legends Season 12 set records for the highest engagement since launch
Launched 9 New Games while our teams continued to work primarily from home
The EA player network has more than 580M unique active accounts |
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COMPENSATION DISCUSSION & ANALYSIS
Fiscal Year 2022 Executive Leadership Changes
We announced several key leadership changes to a subset of our NEOs in
fiscal year 2022 that we believe position us to drive continued transformation for our players, and growth for EA.
In September 2021, Blake Jorgensen, formerly EA’s Executive Vice President, Chief Financial and Operating Officer, announced his decision to begin transitioning from EA, with an expected departure in 2022. In connection with Mr. Jorgensen’s announcement, Laura Miele, formerly our Chief Studios Officer, was promoted to Chief Operating Officer, effective November 1, 2021. As Chief Operating Officer, Ms. Miele is responsible for managing company-wide operations.
On March 1, 2022, Chris Suh joined EA as our Chief Financial Officer. Mr. Suh joined EA from Microsoft Corporation where he served in various roles for nearly 25 years, most recently as Corporate Vice President and Chief Financial Officer of Microsoft’s Cloud + AI group. Mr. Suh’s deep experience in a rapidly growing and in-demand technology sector, particularly in the areas of cloud services, AI and advanced technology development, his extensive investor relations background, together with his leadership in all core financial aspects of a large public company made him the best candidate to help us deliver our long-term strategy. For a discussion of Mr. Suh’s new hire compensation arrangements for fiscal year 2022, please see the discussion under the heading “—Our NEOs’ Fiscal Year 2022 Compensation—Fiscal Year 2022 Compensation for Our New CFO” below.
As part of our efforts to engage players beyond the boundaries of the traditional gaming experience, Chris Bruzzo, formerly our Executive Vice President, Marketing, Commercial and Positive Play, assumed the role of Chief Experience Officer on September 30, 2021. In his new role, Mr. Bruzzo is responsible for building social ecosystems that forge stronger connections and create amazing player experiences in and around our games.
Stockholder Engagement
We have a robust year-round stockholder outreach program, with formal engagement efforts occurring in two phases during the summer and winter.
JUNE - AUGUST Ahead of our annual meeting, we engage with investors to answer questions and understand their views on matters relating to our annual proxy statement |
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SEPTEMBER - NOVEMBER Review stockholder votes at our most recent annual meeting, identify potential areas of concern, and evaluate our governance and executive compensation practices |
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APRIL - MAY Review feedback from winter engagement, and consider any enhancements to our executive compensation program, governance and ESG |
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DECEMBER - MARCH Conduct meetings with stockholders and proxy advisors to consider any issues raised and to solicit feedback on governance, executive compensation, and other topics of interest |
2021 Say-on-Pay Vote
At our 2021 annual meeting, we were disappointed that the advisory say-on-pay proposal received 42% support, especially given the substantive changes we made to our executive compensation program in response to our 2020 say-on-pay vote and our strong fiscal year 2021 financial performance. We learned through direct engagement leading up to the 2021 annual meeting that the primary objection to our 2021 say-on-pay proposal was the enhanced annual equity award to our CEO, which was granted in the beginning of fiscal year 2021 (June 2020).
Following the 2021 annual meeting, we continued our extensive engagement with stockholders. We specifically requested feedback from stockholders on our executive compensation program to consider ways to further evolve our program, and we also solicited feedback on governance and ESG matters to better understand stockholders’ views on these issues.
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Winter 2022 Stockholder Engagement: After Our 2021 Annual Meeting
Offered Meetings ~54% of our outstanding common stock |
Engaged in Discussions ~35% of our outstanding common stock |
Director-Led Discussions ~32% of our outstanding common stock |
During our winter engagement, we received positive feedback from nearly all stockholders with whom we engaged. Investors expressed appreciation for the substantive changes we made to our executive compensation program for fiscal year 2022 and the Compensation Committee’s commitment to responsiveness.
Despite the positive investor feedback regarding these changes, many investors reiterated that they did not support our 2021 say-on-pay vote primarily because of the quantum of the one-time enhanced fiscal year 2021 annual equity award we made to our CEO in June 2020. Although this was disappointing to us, we were encouraged by the positive feedback from our investors regarding the evolution of our executive compensation program and the Compensation Committee’s commitment to responsiveness.
What We Heard / Our Actions and Perspective
Below is a summary of the feedback we heard during our winter 2022 engagement and our actions and perspective in response.
WHAT WE HEARD FROM STOCKHOLDERS |
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OUR ACTIONS AND PERSPECTIVE |
Quantum of Pay
Concerns with the overall quantum of pay in fiscal year 2021, particularly the enhanced annual equity award granted to our CEO. |
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Action:
We reiterated our commitment to not grant any special equity awards to NEOs through at least the end of fiscal year 2026 and confirmed that this commitment applies to enhanced annual equity awards. Our stockholders were pleased with this action and did not raise any concerns regarding this commitment during our calls, including with respect to the length of the time commitment.
With respect to quantum of pay, the target value of Mr. Wilson’s fiscal year 2022 equity award was 40% lower than the target value of his fiscal year 2021 equity award, and there was no increase to the target value of his fiscal year 2023 equity award from his fiscal year 2022 target value. |
Fiscal Year 2023 Peer Group
Consider our peer group to ensure it is appropriately scaled. |
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Action:
We reviewed our compensation peer group and removed companies we deemed to no longer be a good fit due to their outsized market capitalization (e.g., Adobe Inc., NVIDIA Corporation and Salesforce, Inc.) or business (Hasbro, Inc.) and added companies in the consumer-oriented technology, software, and media/entertainment industries that we deemed to be a better fit based on the quantitative and qualitative factors we consider when selecting our peer group.
Perspective:
We operate in a highly competitive market and industry, and in a geographic region that is exceptionally competitive for executive talent. As we experienced this past year with the recent hire of our Chief Financial Officer, we compete against larger, well-funded technology companies that are pursuing and strengthening their interactive entertainment capabilities. However, we heard the stockholder feedback regarding the quantum of pay and we took appropriate steps to adjust our peer group so that it is appropriately scaled based on the quantitative and qualitative factors we consider. |
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WHAT WE HEARD FROM STOCKHOLDERS |
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OUR ACTIONS AND PERSPECTIVE |
Annual Performance Cash Bonus Program
Would like to see a more formulaic approach to the annual bonus payouts. |
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Action:
For fiscal year 2022, added an assessment for each strategic and operating objective of the Company business performance component of our bonus pool funding formula to show attainment relative to target.
Beginning with fiscal year 2023, we enhanced the rigor of our Company bonus pool funding formula:
◼Increased the financial performance weighting of Company bonus pool funding to 70% for our CEO and 60% for our CFO and COO, with the remaining portion of Company bonus pool funding based on business performance, including ESG goals (instead of the 50/50 funding split that applies to all other employees).
◼Implemented an enterprise-level scorecard for the strategic and operating objectives that drive funding of the business performance component of the Company bonus pool. The scorecard will measure our performance against goals across six key strategic objectives established for the fiscal year: Strategy; Amazing Content and Experiences; Social Ecosystems and Creative Autonomy; Aggregation and Distribution; Talent; and Culture and Work. Each key objective is weighted at 20% of the business performance component of the Company bonus pool funding formula, except that Talent and Culture and Work (our ESG goals relating to HCM) are together weighted at 20%. |
Fiscal Year 2023 ESG Goals
Would like ESG goals to feature more prominently in our compensation program. |
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Action:
ESG goals are included in the fiscal year 2023 enterprise-level scorecard, and our achievement against them will impact funding of the business performance component of the Company bonus pool funding formula.
Perspective:
HCM is a focus for our executives. A diverse and inclusive workforce is key to our success and our global reach requires a workforce that reflects and respects the different identities and experiences of our players. Moreover, we believe that fostering an inclusive, diverse, safe, and respectful workplace sets us apart from our competitors and will enhance our ability to attract and retain diverse talent. |
Long-Term Equity Incentives: PRSU Program
Some stockholders would like to see the weighting of long-term equity incentives to be more heavily weighted towards PRSUs.
Stockholders appreciated that we moved to three-year vesting, but some would ideally like to see a three-year measurement period for the portion of the annual PRSU award tied to net bookings and operating income. |
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Action:
We increased the portion of performance-based equity for our top executives—beginning in fiscal year 2023 the annual equity award for our CFO and COO will consist of 60% performance-based restricted stock units, consistent with the award mix put in place for our CEO, effective for fiscal year 2022.
Perspective:
After thoroughly considering the factors below, the Compensation Committee determined that it was appropriate to retain one-year measurement periods for the portion of the PRSU award tied to net bookings and operating income to properly incentivize and reward our executives’ performance. We shared these considerations with stockholders during our engagement, and the vast majority of stockholders with whom we spoke understood and appreciated the Compensation Committee’s perspective.
◼Three-Year Cliff Vesting: PRSUs earned after the end of an annual measurement period do not vest until after the end of the three-year performance period. This promotes retention and encourages our executives to continue to drive long-term performance.
◼Relative TSR PRSU Performance Measured Over Three Years: One-third of each annual PRSU award is tied to our relative TSR performance measured over a full three-year performance period, which aligns the interests of our NEOs with our stockholders and incentivizes long-term stockholder value creation.
◼Our Business Supports Annual Operating Metrics: Due to the rapidly changing nature of our business and industry, the multi-year long development cycles, and the significant investment and resources required to produce games, it is challenging to predict our net bookings and operating income over a three-year time horizon. We believe that utilizing a three-year measurement period for net bookings and operating income could require us to be more conservative in setting targets that would be viewed as reasonably achievable by our executives to compensate for this uncertainty.
◼Our Practice Aligns with Peer and Technology Industry Practice: Setting one-year measurement periods for operational metrics is in line with peer and technology industry practices and, as described above, enables us to set more rigorous targets for each year. |
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COMPENSATION DISCUSSION & ANALYSIS
Summer 2021 Stockholder Engagement: Before Our 2021 Annual Meeting
The actions described above build on the prior responsive enhancements that we made to our executive compensation program following our 2020 annual meeting and 2021 winter engagement with stockholders. Prior to our 2021 annual meeting, we continued our investor outreach contacting stockholders representing approximately 75% of our outstanding common stock and offering meetings to discuss the changes we made to our executive compensation program. Stockholders representing approximately 46% of our outstanding common stock accepted our offer to engage, and members of our Board of Directors led discussions with stockholders representing approximately 36% of our outstanding common stock. During these meetings, we discussed the substantial enhancements we made to our executive compensation program, as summarized below. We implemented these enhancements after careful consideration of investor feedback and input from management and the Compensation Committee’s independent compensation consultant.
Substantial Enhancements to Our Executive Compensation Program Following Our 2020 Annual Meeting
ELEMENT/ PRACTICE |
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ACTIONS TAKEN IN RESPONSE TO OUR 2020 SAY-ON-PAY VOTE |
Special Equity Awards |
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◼Committed to not grant any further special equity awards to NEOs through at least the end of fiscal year 2026
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Performance- Based Long- Term Equity Incentives |
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◼Added two additional performance metrics, net bookings and operating income, for fiscal year 2022 PRSUs
◼Increased vesting to three-year cliff vesting beginning with fiscal year 2022
◼Eliminated the lookback feature from the relative TSR component of PRSUs
◼Increased the threshold and adjusted the relative TSR payout scale, with no vesting for performance below the 25th percentile and above median performance required for target payout
◼Determined that the CEO’s annual equity award will consist of 60% PRSUs
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Annual Performance Bonus |
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◼Enhanced disclosure of our program structure, non-financial goals, and how payouts are determined
◼Capped NEO bonuses at 2x target bonus percentage, beginning in fiscal year 2022
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Stock Ownership |
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◼Increased stock ownership guidelines, including from 5x to 10x salary for CEO
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Clawback |
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◼Expanded our Clawback Policy to cover cash as well as equity incentives
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Compensation Principles
Philosophy and Objectives
EA is a global leader in digital interactive entertainment. We believe that the skills, expertise, and experience of our employees, including our NEOs, are the critical factors that contribute to our overall performance and enhance stockholder value. To drive continued successful operational and financial performance, we must attract, motivate, reward, and retain top executive talent. Accordingly, our executive compensation program is designed to:
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Provide highly competitive compensation to attract and retain top executive talent; |
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Create direct alignment with our stockholders by providing equity ownership in the Company; |
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Pay for performance by creating incentives tied to our business results; |
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Reward and motivate strong individual performance and leadership; and |
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Avoid undue compensation-related risk. |
Recruiting and Retention Challenges and Considerations
We operate in a highly competitive market and industry, and in a geographic region that is exceptionally competitive for executive talent. As the gaming, technology/internet, and entertainment industries have converged in recent years, competition for talent in our space has intensified. Larger, well-funded technology companies such as Microsoft, Alphabet, Amazon, Apple, Netflix and Meta Platforms are aggressively pursuing and strengthening their interactive entertainment capabilities and new entrants continue to emerge. Our executives, seasoned leaders with deep industry experience and expertise, are prime targets for recruiting from large technology companies as well as emerging growth companies. This intensely competitive market for talent is one of the ongoing key challenges we face as we balance (1) our desire to offer a market competitive executive compensation program, (2) the need to continue to attract top talent and retain and incentivize our NEOs, and (3) the need to maintain a competitive pay-for-performance compensation philosophy in the long-term best interests of our stockholders. The Compensation Committee considers these additional challenges when reviewing and making executive compensation decisions.
Compensation and Governance Practices
The Compensation Committee regularly reviews our executive compensation program to ensure that we maintain strong governance standards in our executive compensation program. Below is a summary of our key compensation and governance practices.
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What We Do |
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What We Don’t Do |
✓Structure executive compensation to link pay and performance
✓Provide a high percentage of variable, at-risk pay; approximately 93% of NEO compensation is variable and at-risk*
✓Cap performance-based annual bonus and long-term equity incentive payouts for NEOs
✓Require our executives to satisfy robust stock holding requirements
✓Conduct regular stockholder outreach
✓Perform an annual risk assessment of our executive compensation program
✓Maintain a clawback policy covering cash and equity incentives
✓Evaluate our compensation peer group at least annually
✓Engage an independent compensation consultant to advise the Compensation Committee
✓Conduct formal executive succession planning |
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✕No “single-trigger” change in control arrangements
✕No excise tax gross-ups upon a change in control
✕No executive employment contracts (other than as required by local jurisdictions)
✕No repricing of options without stockholder approval
✕No hedging or pledging of EA stock
✕No excessive perquisites
✕No payment of dividends or dividend equivalents on unearned or unvested equity awards |
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Excludes Mr. Suh, who became our Chief Financial Officer on March 1, 2022. |
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COMPENSATION DISCUSSION & ANALYSIS
The Process for Determining Our NEOs’ Compensation
PARTICIPANT |
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ROLE IN THE EXECUTIVE COMPENSATION DETERMINATION PROCESS |
Board of Directors |
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◼Approves the target total direct compensation for our CEO, in consultation with the Compensation Committee and the Compensation Committee’s independent compensation consultant. |
Compensation Committee |
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◼Approves the target total direct compensation for our NEOs (other than our CEO) after receiving input, at the Compensation Committee’s request, from our CEO, our Chief People Officer, and the Compensation Committee’s independent compensation consultant.
◼Reviews, approves, and recommends to the Board of Directors, CEO pay. |
Independent Compensation Consultant |
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◼Semler Brossy advises on our executive compensation program, our broad-based compensation programs, and advises on changes to our compensation program and other executive compensation-related developments and trends.
◼Semler Brossy also assisted the Compensation Committee with its review of our non-employee director compensation in fiscal year 2022.
◼Attended all meetings held by the Compensation Committee.
◼The Compensation Committee has reviewed the independence of Semler Brossy and determined that Semler Brossy’s engagement did not raise any conflicts of interest. |
Management |
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◼Our CEO and Chief People Officer assist the Compensation Committee by providing information on corporate and individual performance, market compensation data and practices, and other executive compensation matters.
◼At the beginning of each fiscal year, our CEO and Chief People Officer review the performance of our other NEOs for the prior fiscal year and make recommendations to the Compensation Committee regarding the annual base salary, bonus targets, and annual equity awards for our NEOs (other than with respect to themselves). |
Executive Compensation Decision-Making Approach
The Board of Directors and the Compensation Committee believe that executive compensation should be evaluated holistically. They consider a variety of factors to guide their compensation decision-making process for our NEOs. These include an evaluation of market trends and the competitive landscape for executive talent, which includes a review of the market practices of our peer group and other larger technology companies with which we compete for talent. In addition, the Board of Directors and Compensation Committee consider corporate performance; individual performance, including the NEO’s level of responsibilities, scope and complexity of the role, experience, and tenure, as well as other factors unique to each NEO; and internal compensation alignment.
Peer Group
Each year, the Compensation Committee, with the independent compensation consultant’s advice and input, reviews and selects a group of peer companies (“peer group”) to use as a reference to better understand the competitive market for executive talent in our industry sectors and geographic region. The purpose of the annual review is to validate our current peers and identify potential changes, based on characteristics such as size, scope, business fit, M&A activity, and the pool for executive talent. The Compensation Committee believes that the ideal peer group should be comprised of companies of similar-size and with similar economics as EA, reflect the market for executive-level talent, provide reasonable guidelines for pay levels and practices, and be robust enough to avoid distortions.
Based on these guiding principles, the Compensation Committee annually engages in a quantitative and qualitative assessment to identify companies for the peer group that are similar to us, based on a combination of factors including: revenue and market capitalization; whether they are in relevant industry pillars or are companies with which we compete for executive talent; and other relevant factors, including the number of current peer companies that identify EA as a peer. Where some companies may not be similar in size to us based on quantitative factors, they still may be included in our peer group based on the qualitative factors described above.
Fiscal Year 2022 Peer Group
The Compensation Committee approved a peer group of 18 companies for fiscal year 2022 executive compensation decisions. For each member of our peer group, one or more of the factors listed above was an appropriate reason for inclusion in our peer group. This peer group was the same as the fiscal year 2021 peer group, except that the Compensation Committee removed AMC Networks (due to size) and added ServiceNow and Workday to replace CBS Corporation and Symantec Corporation (companies that the Compensation Committee had previously determined to remove due to M&A activity once predecessor executive compensation data was no longer available for these companies). Based on public filings through June 1, 2021, EA was at the 44th percentile with respect to annual revenues and at the 35th percentile with respect to market capitalization compared to our fiscal year 2022 peers.
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Gaming |
Consumer-Oriented Technology / Software |
Media / Entertainment |
Activision Blizzard, Inc. Take-Two Interactive Software, Inc. Zynga Inc. |
Adobe Inc.* Autodesk, Inc. Booking Holdings Inc. eBay, Inc. Expedia Group, Inc. Intuit Inc. |
NVIDIA Corporation* Salesforce, Inc.* ServiceNow, Inc. Workday, Inc. VMware, Inc. |
Warner Bros. Discovery, Inc. Hasbro, Inc.* IAC/InteractiveCorp Netflix, Inc. |
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Removed from our fiscal year 2023 peer group. |
Looking Ahead to Fiscal Year 2023
In February 2022, with stockholder feedback regarding the quantum of pay in mind, we reviewed our peer group with a more critical lens. After undergoing a quantitative and qualitative analysis of our peer group utilizing the factors described above, the Compensation Committee approved a peer group of 19 companies for fiscal year 2023 executive compensation decisions. As described above, the Compensation Committee, in consultation with its independent compensation consultant, reviewed the factors above to validate current peer companies and identify potential new peers. As a result of this review, the Compensation Committee removed Adobe Inc., Salesforce, Inc., and NVIDIA Corporation due to their outsized market capitalization, and Hasbro, Inc. due to it no longer being deemed a relevant business fit. To replace these companies and ensure the peer group was of sufficient size to provide meaningful insight regarding the competitive market for executive talent, the Compensation Committee added Airbnb, Inc., Block, Inc., Snap Inc., Synopsys, Inc., and Sirius XM Holdings, Inc., companies that met all or some of the quantitative and qualitative factors described above, including size, whether the company is in a relevant industry pillar and/or has a similar business model, and whether we compete with the company for executive talent.
Gaming |
Consumer-Oriented Technology / Software |
Media / Entertainment |
Activision Blizzard, Inc.* Take-Two Interactive Software, Inc. Zynga Inc.* |
Airbnb, Inc. Autodesk, Inc. Block, Inc. Booking Holdings Inc. eBay, Inc. Expedia Group, Inc. |
Intuit Inc. ServiceNow, Inc. Synopsys, Inc. Workday, Inc. VMware, Inc. |
Warner Bros. Discovery, Inc. IAC/InteractiveCorp Netflix, Inc. Sirius XM Holdings, Inc. Snap Inc. |
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Activision Blizzard, Inc. and Zynga Inc. will be removed from the peer group upon the later of the closing of the pending acquisitions by Microsoft Corporation and Take-Two Interactive Software, Inc., respectively, and the date that relevant executive compensation data for these companies is no longer available. |
Comparative Market Data
As part of its decision-making process, the Board of Directors and the Compensation Committee review peer group data when assessing the appropriateness and reasonableness of compensation levels and mix to determine if our compensation program aligns pay with performance, fairly rewards our executives for individual performance and contributions to our corporate performance and provides adequate retention and incentive value. The independent compensation consultant conducts a comprehensive analysis of our executive compensation program using publicly available compensation information on our peer group. The analysis includes a comparison of the base salary, target total cash compensation, long-term incentives, and target total direct compensation of each of our NEOs against executives holding similar positions in our peer group. The Compensation Committee and the Board of Directors use the peer group data provided by the independent compensation consultant as a reference rather than as a strict guide for compensation decisions and retain flexibility in determining NEO compensation.
Fiscal Year 2022 Compensation for Our New CFO
In connection with Mr. Suh’s appointment as Chief Financial Officer, we entered into an offer letter with him that sets forth the terms of his employment and compensation.
Annual Base Salary and Target Bonus Opportunity
Under the terms of his offer letter, Mr. Suh’s annual base salary is $700,000 and he will be eligible for an annual cash bonus with a target bonus opportunity of 100% of annual base salary. Due to his start date, Mr. Suh did not participate in our annual bonus program for fiscal year 2022 but he is a participant in our fiscal year 2023 annual bonus program.
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Looking ahead to fiscal year 2023:
As described above under “—Stockholder Engagement—Winter 2022 Engagement: After Our 2021 Annual Meeting—What We Heard / Our Actions and Perspective,” the Company bonus pool funding for Mr. Suh’s annual cash bonus for fiscal year 2023 will be based 60% on our financial performance and 40% on our business performance. |
New Hire Compensation
We offered Mr. Suh a one-time new hire sign-on bonus and new hire equity award to induce him to assume the role of Chief Financial Officer at EA, make him whole for the estimated value of compensation he would forfeit upon joining EA, incentivize long-term performance, and align his interests with our stockholders. In determining the structure and value of Mr. Suh’s new-hire compensation package, the Compensation Committee, in consultation with its independent compensation consultant, considered the following factors:
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The estimated value of Mr. Suh’s compensation with his prior employer that he would forfeit if he joined EA; |
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The compensation paid to chief financial officers among our peer group of companies; |
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The highly competitive landscape in order to induce Mr. Suh to join EA in light of opportunities with his prior employer and with other public companies, including alternative public company CFO opportunities that he was considering prior to accepting our offer of employment; and |
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The importance of creating immediate alignment with our stockholders through long-term equity incentives. |
New Hire Sign-On Bonus
Mr. Suh received a one-time cash sign-on bonus of $4,000,000 in March 2022. The sign-on bonus is subject to full repayment if Mr. Suh voluntarily resigns from EA prior to March 1, 2023, and pro-rata repayment if he voluntarily resigns between March 1, 2023 and February 29, 2024. The Compensation Committee, in consultation with its independent compensation consultant, determined that the amount of the sign-on bonus was necessary to induce Mr. Suh to join EA by making him whole for:
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the estimated value of unvested equity awards that were due to vest over the next 12 months that he would forfeit upon his departure from his prior employer; and |
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the lost opportunity to receive his annual cash bonus from his prior employer given the timing of his departure. |
As described above, due to the timing of his start date, Mr. Suh was not eligible to participate in our annual cash bonus program for fiscal year 2022 and payments of fiscal year 2023 annual cash bonuses, if earned, will not be made until June 2023.
New Hire Equity Award
The Compensation Committee approved the grant of a new hire equity award consisting of RSUs with a grant date value of $3,000,000, and PRSUs with a target grant date value of $3,000,000. The new hire equity award was granted on March 16, 2022 and was structured to put a significant portion of Mr. Suh’s compensation at risk, align his interests with those of our stockholders, and promote long-term retention. The target grant date value of the award was determined in consideration of:
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the estimated value of the unvested equity awards that would have vested in years after 2022 that Mr. Suh would forfeit when he joined EA; |
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the market compensation paid to chief financial officers among our peer group; and |
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the competitive landscape to induce Mr. Suh to join EA in light of alternative opportunities that he was considering prior to accepting our offer. |
Mr. Suh’s new hire RSU award vests over three years, with 1/3rd vesting on the first anniversary of the grant date, and 1/6th vesting every six months thereafter until the award is fully vested. The terms of Mr. Suh’s new hire PRSU award are the same as the fiscal year 2022 PRSU awards for our other NEOs (as described below under “—Long-Term Equity Incentives—Fiscal Year 2022 Annual Equity Awards—Performance-Based Restricted Stock Units”), except that the three-year performance period covers fiscal years 2023 through 2025 and the award cliff vests on May 20, 2025.
Looking ahead to fiscal year 2023:
As described above under “—Stockholder Engagement—Winter 2022 Engagement: After Our 2021 Annual Meeting—What We Heard / Our Actions and Perspective,” beginning in fiscal year 2023, the annual equity award mix for Mr. Suh will consist of 60% PRSUs and 40% RSUs. |
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COMPENSATION DISCUSSION & ANALYSIS
Our NEOs’ Fiscal Year 2022 Compensation
Target Total Direct Compensation for Fiscal Year 2022
Our executive compensation program is designed to motivate and reward performance and consists of three main components: annual base salary, annual performance cash bonuses, and long-term equity incentives. Our pay-for-performance approach rewards the achievement of Company-wide financial and business objectives, individual performance, and the creation of long-term value for stockholders, while also recognizing the dynamic and highly competitive nature of our business and the market for top executive talent.
For fiscal year 2022, 94% of our CEO’s target total direct compensation opportunity and nearly 93% of the average of our NEOs’ (excluding our CEO and Mr. Suh, who joined in March 2022) target total direct compensation opportunity was at-risk in the form of an annual performance cash bonus opportunity, and long-term equity awards comprised of PRSUs and RSUs, as set forth below.
CEO |
NEOs (Excluding CEO and CFO) |
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COMPENSATION DISCUSSION & ANALYSIS
Our Elements of Pay
The Compensation Committee believes that the target total direct compensation for each NEO should be consistent with market practices for executive talent, allow us to attract and retain the highest caliber of executive talent in our industry, and reflect each NEO’s individual experience, responsibilities, and performance. There are three main elements of NEO compensation: (1) annual base salary, (2) annual performance cash bonuses, and (3) long-term equity incentive awards.
|
PROGRAM DESIGN |
PURPOSE |
FISCAL YEAR 2022 ACTIONS/RESULTS |
Annual Base Salary |
Fixed cash component |
Base salary serves to attract and retain high-performing executives. |
Our NEOs received base salary increases ranging between 2.8% and 4.6% based on an evaluation of their performance and contributions during fiscal year 2021. |
Annual Performance Cash Bonus Awards |
Annual payout based on:
1.Company bonus pool funding—based 50% on Company financial performance and 50% on Company business performance; and
2.NEO individual performance, based on an individual performance modifier (IPM).
NEW Cap bonuses at 2x target bonus percentages.
NEW Looking ahead to fiscal year 2023: We increased the financial performance weighting of the Company bonus pool funding formula for our CEO, CFO and COO. Company financial performance will be weighted at 70% for our CEO and 60% for our CFO and COO, and Company business performance will be weighted at 30% and 40%, respectively.
Implemented an enterprise-level scorecard for the business performance component of our bonus pool funding formula. The scorecard will measure our performance against specific goals for six key strategic objectives established for fiscal year 2023 and includes ESG goals. |
Our annual performance cash bonus program is designed to motivate our executives to achieve challenging short-term performance goals that are important to the Company’s long-term growth. |
Our annual bonus pool was funded at 126.25% of target based on our financial and business performance, with NEO IPMs ranging between 110% and 140%.
This resulted in fiscal year 2022 NEO bonus payouts between 138% and 177% of target. |
Long-Term Equity Incentive Awards |
RSUs
35-month vesting schedule.
PRSUs
NEW Redesigned fiscal year 2022 PRSU program.
For our CEO, PRSUs are weighted at 60% of the annual equity award.
Payouts are tied to our three-year TSR performance relative to the Nasdaq-100 Index, and our net bookings and operating income performance, measured annually.
All fiscal year 2022 PRSUs vest at the end of a 3-year performance period.
Eliminated the lookback feature for the relative TSR component of fiscal year 2022 PRSUs and strengthened the rigor of the payout scale.
RSU / PRSU Mix
Consistent with fiscal year 2021, 60% of the CEO’s fiscal year 2022 annual equity award consisted of PRSUs.
NEW Looking ahead to fiscal year 2023: We increased the weighting of annual performance-based equity awards to 60% for our CFO and COO, consistent with the current award mix in place for our CEO. |
The majority of each NEO’s target total direct compensation should be provided in the form of long-term equity incentives to align NEO interests with stockholders, incentivize performance that creates stockholder value and promote long-term retention.
Our new PRSU program structure incentivizes our NEOs to drive top-line and bottom-line growth, ties a portion of PRSU payouts to our relative TSR performance against the Nasdaq-100 Index, and promotes long-term retention. |
Fiscal Year 2022 PRSUs: Based on our net bookings and operating income performance for fiscal year 2022, the payout percentage for the first sub-tranches of the fiscal year 2022 net bookings and operating income PRSUs was 114% and 180% of target, respectively. Any earned net bookings and operating income PRSUs will vest on May 16, 2024, subject to continued employment with us on this date.
The relative TSR PRSUs are measured over a three-year performance period ending in fiscal year 2024.
Fiscal Year 2021 PRSUs: The second tranche of our fiscal year 2021 relative TSR PRSUs was earned at 18% of target, based on our two-year relative TSR performance. Earned PRSUs vested in May 2022.
Fiscal Year 2020 PRSUs: The third tranche of our fiscal year 2020 relative TSR PRSUs was earned at 66% of target, based on our three-year relative TSR performance. Earned PRSUs vested in May 2022. |
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COMPENSATION DISCUSSION & ANALYSIS
Base Salary
Key features
◼Fixed cash component that is market competitive for the role to attract and retain high-performing executives
◼The following factors are considered when determining NEO salaries: individual performance; the market for similar positions, including the pay practices for comparable positions at the companies in our peer group; level of responsibilities; complexity of role; experience; and internal compensation alignment |
As part of its May 2021 annual compensation review, the Compensation Committee, and the Board of Directors, in the case of Mr. Wilson, approved fiscal year 2022 base salary increases, effective June 1, 2021, as set forth below. The increases for Messrs. Wilson, Jorgensen, Moss and Bruzzo were between 2.8% and 4.2% of base salary (as shown in the table below). These increases were made in recognition of their performance and contributions during the previous year and were in line with Company-wide base salary merit increases for strong performers. Ms. Miele received a 4.6% increase in base salary in recognition of her increased scope of responsibilities, as well as her exceptional performance and contributions during the previous year. In determining a market competitive annual base salary for Mr. Suh, the Compensation Committee, with assistance from its independent compensation consultant, reviewed the base salaries paid to chief financial officers among our peer group and considered additional factors including the competitive landscape and competing offers that Mr. Suh was considering prior to accepting EA’s offer.
NEO |
|
ANNUAL BASE SALARY FOR FISCAL YEAR 2021 ($) |
|
ANNUAL BASE SALARY FOR FISCAL YEAR 2022 ($) |
|
% INCREASE |
Mr. Wilson |
|
1,260,000 |
|
1,300,000 |
|
3.2 |
Mr. Suh(1) |
|
N/A |
|
700,000 |
|
N/A |
Ms. Miele |
|
765,000 |
|
800,000 |
|
4.6 |
Mr. Moss |
|
720,000 |
|
750,000 |
|
4.2 |
Mr. Bruzzo |
|
720,000 |
|
750,000 |
|
4.2 |
Mr. Jorgensen |
|
900,000 |
|
925,000 |
|
2.8 |
(1) Mr. Suh assumed the role of Chief Financial Officer on March 1, 2022.
Annual Performance Cash Bonus Awards
Key features
◼Designed to motivate our executives to achieve challenging annual performance goals important to our long-term growth
◼Capped at 2x target bonus percentages
◼Payouts based on (1) Company Bonus Pool Funding, which is based 50% on Company financial performance and 50% on Company business performance to balance our annual financial performance with our execution against strategic and operating objectives, and (2) individual performance
◼A threshold level of Company financial performance must be achieved to fund that portion of the Company bonus pool |
Our NEOs participate in the Executive Bonus Plan, which governs bonuses paid to our Section 16 officers and operates in conjunction with the EA Bonus Plan, our Company-wide bonus plan. The structure of the annual performance cash bonus program for our NEOs is described below.
BASE SALARY |
X |
TARGET BONUS PERCENTAGE (% OF BASE SALARY) |
X |
COMPANY PERFORMANCE (COMPANY BONUS POOL FUNDING) |
X |
INDIVIDUAL PERFORMANCE MODIFIER (IPM) |
= |
NEO BONUS PAYOUT |
50% Company Financial Performance |
|
50% Company Business Performance |
Looking ahead to fiscal year 2023:
We increased the financial performance weighting of the Company Bonus Pool funding formula for our CEO, CFO, and COO. Company financial performance will be weighted at 70% for our CEO and 60% for our CFO and COO, and Company business performance will be weighted at 30% and 40%, respectively. |
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Process to Determine Performance Cash Bonus Awards
During the first quarter of each fiscal year, the Compensation Committee selects the Executive Bonus Plan participants, performance period, and performance measures. All NEOs at the time were selected to participate in the Executive Bonus Plan for fiscal year 2022. Mr. Suh became our Chief Financial Officer on March 1, 2022 and therefore was not eligible to participate in our fiscal year 2022 annual bonus program.
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|
|
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Approve target bonus percentages and maximum award amounts |
Set performance goals |
Determine Company bonus pool funding |
Conduct individual performance assessments and determine individual performance modifiers (IPMs) |
Step 1: Approve Target Bonus Percentages and Maximum Award Amounts
APPROVE TARGET BONUS PERCENTAGES
Each fiscal year, the Compensation Committee, and the Board of Directors for Mr. Wilson, sets the amounts of the target annual performance cash bonus awards as a percentage of each NEO’s base salary (“target bonus”) based on factors including individual performance, the market for similar positions, level of responsibilities, complexity of role, pay practices at our peer group for comparable positions, and internal compensation alignment. For fiscal year 2022, the Board of Directors, in the case of Mr. Wilson, and the Compensation Committee, in the case of the other NEOs then serving, determined that there would be no increases in the target bonus percentages for any NEOs.
Fiscal Year 2022 Target Bonus Percentages
|
|
BONUS ELIGIBLE SALARY FOR FISCAL YEAR 2022 ($) |
|
TARGET BONUS PERCENTAGE FOR FISCAL YEAR 2022 (%) |
Mr. Wilson |
|
1,293,333 |
|
200% |
Ms. Miele |
|
794,167 |
|
110% |
Mr. Moss |
|
745,000 |
|
100% |
Mr. Bruzzo |
|
745,000 |
|
100% |
Mr. Jorgensen |
|
920,833 |
|
125% |
Performance cash bonus awards represented approximately 9% of the average of our NEOs’ (other than Mr. Suh, who was not eligible for a fiscal year 2022 annual bonus) annual target total direct compensation for fiscal year 2022.
MAXIMUM AWARD AMOUNTS
Our Compensation Committee believes that annual bonus awards should be capped to ensure that we maintain strong governance standards in our executive compensation program and to mitigate incentives for undue risk taking. Effective for fiscal year 2022, we amended our Executive Bonus Plan to cap NEO bonuses at two times the target bonus percentage for each NEO to better align to market practice.
As in previous years, no bonus payout is made to our CEO if our net income is less than 80% of our fiscal year 2022 financial plan.
Step 2: Set Performance Goals
Each NEO’s annual performance cash bonus award is tied to the bonus funding percentage applied to our overall Company bonus pool. Funding of the Company bonus pool is based 50% on our financial performance, and 50% on our business performance, tied to pre-established goals based on our financial and strategic plan for fiscal year 2022 that our Board of Directors and Compensation Committee reviewed with management in April 2021 and approved in May 2021. The Compensation Committee believes that this mixed funding formula is appropriate because it balances our annual financial performance with our execution against strategic and operating objectives, which are critical drivers of our long-term success.
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COMPENSATION DISCUSSION & ANALYSIS
Looking ahead to fiscal year 2023:
We enhanced the rigor of our Company bonus pool funding formula. Effective for fiscal year 2023, we:
◼Increased the financial performance weighting of Company bonus pool funding to 70% for our CEO and 60% for our CFO and COO; and
◼Implemented an enterprise-level scorecard regarding the strategic and operational performance objectives that drive funding of the Company bonus pool. The scorecard will measure our performance against specific goals for six key strategic objectives established for fiscal year 2023, with ESG goals relating to HCM weighted at 20%.
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COMPANY FINANCIAL PERFORMANCE
For the financial performance component of our fiscal year 2022 Company bonus pool funding, the Compensation Committee approved the following two equally weighted Company financial performance goals: non-GAAP net revenue and non-GAAP diluted earnings per share. We believe these objective financial measures serve as clear goals for management to drive top-line growth and profitability with responsible cost management. A threshold level of performance must be met for each of the relevant metrics in order to fund that component of the bonus pool.
Fiscal Year 2022 Targets
The fiscal year 2022 non-GAAP net revenue and non-GAAP diluted earnings per share bonus funding targets were each set higher than our fiscal year 2021 actuals and are set forth below.
Non-GAAP Net Revenue of $7.325 billion (50% weighting) |
Non-GAAP Diluted Earnings Per Share of $6.80 (50% weighting) |
Bonus pool funding is tied to our achievement of threshold, target, and maximum levels of performance for the relevant metric, with no funding if the threshold levels of performance are not achieved.
When making compensation decisions for our NEOs, we use non-GAAP financial measures to evaluate the Company’s financial performance and the performance of our management team against non-GAAP targets. These measures adjust for certain items that may not be indicative of the Company’s core business, operating results, or future outlook.
For more information regarding our use of non-GAAP financial measures for our compensation programs, please refer to the information provided under the heading “About Non-GAAP Financial Measures” in Appendix A below.
COMPANY BUSINESS PERFORMANCE
For the Company business performance component of our bonus pool funding, the Compensation Committee assesses performance against the Company’s strategic priorities and objectives established for the fiscal year and approved by our Board of Directors. Our fiscal year 2022 strategic and operating objectives map to four key focus areas that align with our three strategic pillars as well as objectives relating to our people, as highlighted below. The Compensation Committee reviews Company attainment against these goals and objectives periodically during the fiscal year. See “Step 3: Determine Company Bonus Pool Funding” below, for more information on these goals and objectives.
Amazing games and content |
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Powered by services |
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Delivered to a global audience |
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Support, develop, and inspire our people |
Games Create the greatest and most innovative games and content that surprise and amaze our players, creators, and viewers. |
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Services Offer the services players want that extend gameplay and enhance how they interact with and connect to their games and friends, across games and platforms. |
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Audience Expand frictionless access to a connected world of play, by helping more players discover, buy, and enjoy amazing game experiences. |
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People Maintain the health and productivity of our global workforce as we navigate the Company through a series of unprecedented crises. |
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Step 3: Determine Company Bonus Pool Funding
In May 2022, the Compensation Committee approved an overall Company bonus pool funding percentage of 126.25% of aggregate employee target bonuses. This funding percentage was based on equally weighted funding percentages of 133.0% for our Company financial performance and 119.5% for our Company business performance, as described below.
COMPANY FINANCIAL PERFORMANCE
For purposes of measuring attainment against our fiscal year 2022 financial targets for bonus funding, our non-GAAP net revenue was $7.430 billion and our non-GAAP diluted earnings per share was $7.76. Our fiscal year 2022 attainment against plan funding targets reflected an increase over our fiscal year 2021 actuals. Based on our attainment against our non-GAAP net revenue and diluted earnings per share targets, the Compensation Committee approved a combined funding percentage of 133.0% for the Company financial performance component.
|
|
THRESHOLD |
TARGET |
MAXIMUM |
Non-GAAP Net Revenue (in billions) |
|
|
Non-GAAP Diluted EPS |
|
|
Funding Percentage(1) |
|
|
(1) |
The funding percentage for achievement between the percentages designated above is interpolated on a straight-line basis. |
Appendix A to this Proxy Statement provides a reconciliation between our non-GAAP financial measures and our audited financial statements.
COMPANY BUSINESS PERFORMANCE
For fiscal year 2022, the Compensation Committee approved a funding percentage of 119.5% for the business performance component, based on its evaluation of our achievements against the strategic and operating objectives highlighted below.
STRATEGIC AND OPERATING OBJECTIVES |
|
KEY MEASURES |
|
KEY PERFORMANCE HIGHLIGHTS |
|
ASSESSMENT |
Games:
Create the greatest and most innovative games and content that surprise and amaze our players, creators, and viewers |
|
◼Release 100% of fiscal year 2022 SKU plan |
|
◼Launched 9 major new games, achieving our fiscal year 2022 title offerings, while our global game development teams continued to work remotely
◼FIFA 22 was the strongest FIFA ever, launch to fiscal year end; grew Apex Legends into one of the most successful live services in the industry, with monthly active players up more than 35% year-over-year; offset by Battlefield 2042 performance
|
|
◼Achieved Target |
|
◼Growth in Mobile net bookings year-over-year |
|
◼Achieved growth in mobile net bookings, although results were slightly below our fiscal year 2022 growth target |
|
◼Slightly Below Target |
|
◼Number of Mobile titles soft launched |
|
◼Soft launched UFC Mobile, Apex Mobile, and FIFA Mobile |
|
◼Achieved Target |
|
◼Integrate and onboard recently acquired companies |
|
◼Integrated Codemasters, Metalhead Software, Glu Mobile, and Playdemic |
|
◼Achieved Target |
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Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
STRATEGIC AND OPERATING OBJECTIVES |
|
KEY MEASURES |
|
KEY PERFORMANCE HIGHLIGHTS |
|
ASSESSMENT |
Services:
Offer the services players want that extend gameplay and enhance how they interact with and connect to their games and friends, across games and platforms |
|
◼Total service availability to players |
|
◼Achieved over 99.65% service availability for fiscal year 2022, while our global workforce remained predominately distributed |
|
◼Achieved Target |
|
◼Year-over-year growth in live services and other net bookings |
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◼Delivered $5.370 billion in net bookings in live services and other net bookings |
|
◼Exceeded Target |
Audience:
Expand frictionless access to a connected world of play, by helping more players discover, buy, and enjoy amazing game experiences |
|
◼Grow our player base, measured by the number of player accounts and EA Play quarterly active users |
|
◼Achieved 6% year-over-year growth in unique HD player accounts year-to-date
◼Reached quarterly active users target in Q3
|
|
◼Exceeded Target |
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◼Increase engagement, retention, and viewership in competitive gaming |
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◼Year-over-year growth targets in total content views slightly below target; average minute audience delivered on target
|
|
◼Slightly Below Target |
People:
Maintain the health and productivity of our global workforce as we navigate the Company through a series of unprecedented crises |
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◼Maintain employee engagement eSat scores |
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◼Achieved employee engagement eSat scores greater than target |
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◼Exceeded Target |
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◼Strengthen workforce diversity representation year-over-year |
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◼Achieved year-over-year growth for women across all categories
◼Achieved year-over-year growth for underrepresented minorities as percentage of total employees and within people management roles |
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◼Achieved Target |
Step 4: Conduct Individual Performance Assessments and Determine IPMs
Individual performance is a key factor in determining the amount of each NEO’s annual bonus. Each year, the Board of Directors for Mr. Wilson, and the Compensation Committee, in consultation with Mr. Wilson and our Chief People Officer, for all NEOs except Mr. Wilson, review and approve the individual performance objectives for the NEOs. Mr. Wilson’s individual performance objectives for fiscal year 2022 are based on non-GAAP financial objectives and strategic and operating objectives. For all other NEOs, the individual objectives are based on strategic and operating objectives tailored to the functions led by each NEO and aligned to the achievement of our overall fiscal year 2022 plan approved by the Board of Directors, as well as qualitative factors including leadership and talent development.
At the end of each fiscal year, the Board of Directors for Mr. Wilson, and the Compensation Committee, in consultation with Mr. Wilson and our Chief People Officer, assess the individual performance of our NEOs and determine each NEO’s individual performance modifier, or IPM, at a percentage between 0% and 200% (subject to the overall cap of 2x target bonus for the annual cash bonus award). Consistent with our pay-for-performance philosophy, a higher individual performance assessment would result in a higher IPM, and vice-versa, so that an executive with a lower assessment could receive less than his or her target bonus. If an executive meets a high level of performance expectations, he or she would receive an IPM of 100%. To receive an IPM of 200%, the NEO must demonstrate sustained, truly extraordinary performance, and the Board of Directors and Compensation Committee expect that assigning an IPM at this level would occur in rare circumstances only.
With the exception of our CEO, the performance assessment for each of our NEOs is based on a qualitative assessment of each executive’s performance, considering his or her overall performance for the year; impact on our business and culture; demonstrated results; the executive’s strong leadership; and execution of key objectives. No single factor is determinative. For Mr. Wilson, the Board of Directors considers achievement of the financial and strategic objectives that were established for him for the fiscal year.
Determination of Fiscal Year 2022 Performance Cash Bonus Awards for our NEOs
FISCAL YEAR 2022 PERFORMANCE CASH BONUS AWARD FOR OUR CEO
The key results that influenced the Board of Directors’ decisions regarding Mr. Wilson’s performance are listed below. The Board of Directors takes a holistic approach to evaluating the achievement of the CEO’s financial and strategic and operating objectives and does not assign a specific weighting to any one factor within each of these two categories.
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
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Mr. Wilson Chief Executive Officer |
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|
|
Individual Performance Modifier
After reviewing his achievements for fiscal year 2022, the Board of Directors approved an IPM of 140% for Mr. Wilson.
Key Highlights for Fiscal Year 2022
The Board of Directors considered Mr. Wilson’s performance against the financial and strategic and operating objectives for fiscal year 2022, as highlighted below. Non-GAAP Financial Objectives: |
|
(IN MILLIONS, EXCEPT EARNINGS PER SHARE) |
|
TARGET |
|
ACTUAL(1) |
|
|
Net Revenue |
|
$ |
7,325 |
|
$ |
7,515 |
|
|
Gross Profit |
|
$ |
5,530 |
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$ |
5,795 |
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Operating Expenses |
|
$ |
3,278 |
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$ |
3,298 |
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|
Diluted Earnings Per Share(2) |
|
$ |
6.15 |
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$ |
7.02 |
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Operating Cash Flow |
|
$ |
1,750 |
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$ |
1,899 |
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(1) |
Appendix A to this Proxy Statement provides a reconciliation between our non-GAAP financial measures and our audited financial statements. |
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(2) |
For purpose of measuring achievement of Mr. Wilson’s diluted earnings per share objective, a share count of 286 million was used. |
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Strategic and Operating Objectives:
Under Mr. Wilson’s leadership, the Company executed on key strategic and operating objectives that were established for fiscal year 2022 and that our CEO is responsible for delivering. As described above, these objectives were designed to position Electronic Arts as a leading digital interactive entertainment platform by, among other things, investing in the next generation of gaming, growing our portfolio, and enabling more players to connect with and engage with each other and our games. In addition to these overarching strategic and operating objectives, the Board of Directors considered the following key achievements when evaluating Mr. Wilson’s performance for fiscal year 2022.
Growth in Live Services and Player Network
Under Mr. Wilson’s leadership we delivered exceptional growth in live services and expanded our audience by: |
◼ |
launching FIFA 22, which was the strongest FIFA ever, launch to fiscal year end; |
◼ |
growing Apex Legends into one of the most successful ongoing live services in the industry, with more than 25 million new players joining in the last year and monthly active players up more than 35% year-over-year; |
◼ |
continuing to grow EA SPORTS with Madden NFL 22 being the #3 top-selling game in the U.S. for calendar year 2021, F1 2021 continuing to perform well above expectations, and the successful launch of the latest version of our EA SPORTS FIFA Mobile game around the world; |
◼ |
expanding our portfolio via the acquisitions of Codemasters, Glu Mobile, Metalhead Software, and Playdemic, building strength in sports, racing and mobile; and |
◼ |
expanding our player network to more than 580 million unique active accounts. |
Evolution of Our Leadership Team to Position EA for Continued Success
Under Mr. Wilson’s leadership we made key changes to our leadership team to enable us to continue to innovate, evolve, and drive transformation for our players by appointing: |
◼ |
Chris Suh, a 25-year veteran of Microsoft, where he served as Corporate Vice President and Chief Financial Officer of the Cloud + AI group, as our Chief Financial Officer, following Blake Jorgensen’s decision to transition from EA; |
◼ |
Laura Miele as our Chief Operating Officer to oversee our company-wide operations; and |
◼ |
Chris Bruzzo as our Chief Experience Officer to oversee our efforts to build social ecosystems to forge stronger connections and create amazing player experiences in and around our games. |
Commitments and Progress Across Our People, Players, and Communities
Under Mr. Wilson’s leadership we: |
◼ |
continued to foster an inclusive, diverse, safe, and respectful workplace culture by strengthening our processes that enable our people to raise concerns about the work environment, with a People Relations team dedicated to investigating reports of misconduct, including those related to discrimination, harassment and bullying, as well as recommending enforcement actions; |
◼ |
accelerated our investments in organizations working to advance equality and social justice, and |
◼ |
continued to build on our commitments to ESG, publishing our second annual Impact Report in November 2021; and continued to navigate the challenges of the pandemic by supporting the health, safety, and wellbeing of our global workforce, including by providing pandemic care leave and additional mental health and wellbeing services; and evolving our work models. |
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COMPENSATION DISCUSSION & ANALYSIS
Fiscal Year 2022 Performance Cash Bonus Awards for Our Other NEOs
In determining the actual performance cash bonus awards for our other NEOs, Mr. Wilson and our Chief People Officer reviewed each NEO’s achievements against the individual performance objectives for fiscal year 2022 and provided their recommendations to the Compensation Committee for review and approval. The key results that influenced the Compensation Committee’s decisions regarding each NEO’s individual performance are listed below.
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Ms. Miele Chief Operating Officer |
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|
Ms. Miele manages company-wide operations. Before assuming the role of Chief Operating Officer, she served as Chief Studios Officer, where she oversaw 25+ studios, bringing her expertise to empower transformative innovation at the creative heart of EA to deliver amazing experiences for players around the world.
Individual Performance Modifier
After reviewing her achievements for fiscal year 2022, the Compensation Committee approved an IPM of 130% for Ms. Miele.
Key Highlights for Fiscal Year 2022
During fiscal year 2022, Ms. Miele: |
◼assumed increased responsibility upon her promotion to Chief Operating Officer, with responsibility for managing company-wide operations;
◼oversaw the delivery of new games, services, and content, generating revenue and platform growth, including:
◼launching 9 major new games during fiscal year 2022, while our teams continue to work primarily from home: Knockout City, Mass Effect Legendary Edition, F1 2021, FIFA 22, Lost in Random, Madden NFL 22, Battlefield 2042, NHL 22, and GRID Legends;
◼growing Apex Legends into one of the most successful ongoing live services in the industry, with more than 25 million new players joining in the last year and monthly active players up more than 35% year-over-year;
◼launching FIFA 22, which was the strongest FIFA ever, launch to fiscal year end; |
◼integrating teams and products from our acquisitions of Codemasters, Glu Mobile, Metalhead Software, and Playdemic, with notable successes including F1 2021 performing well above expectations;
◼the announcement of a new agreement with Disney & Lucasfilm Games to develop new experiences in the Star Wars universe, with Respawn leading development of the next game in our action-adventure Star Wars Jedi series, as well as two additional Star Wars titles;
◼developing a deep pipeline of announced and unannounced projects with our wholly-owned IP, including Need for Speed, The Sims, Skate, Dead Space, and more; and
◼recruited new leaders into our EA Studios organization, and further developed our talent pipeline. |
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
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Mr. Moss Chief Technology Officer |
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|
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Mr. Moss leads the strategy and vision behind EA’s Digital Platform, Frostbite Engine, and Information Technology organizations. He oversees mechanisms to ensure the most seamless experience for players, including Identity & Fraud, Security, Data, Games Services, Infrastructure, Mobile Platform and Frostbite Engine to drive the future of the gameplay experience.
Individual Performance Modifier
After reviewing his achievements for fiscal year 2022, the Compensation Committee approved an IPM of 110% for Mr. Moss.
Key Highlights for Fiscal Year 2022
During fiscal year 2022, Mr. Moss: |
◼enhanced infrastructure performance, security, stability, and availability to support on time delivery and ongoing operations of EA’s games and services;
◼advanced EA’s security posture against increasingly sophisticated cybersecurity threats;
◼enabled our evolving operational response to the pandemic and supported workforce productivity as our workforce transitions from a distributed workforce to new work models at our global locations; |
◼expanded EA’s proprietary game engine technology, Frostbite, to support more EA Sports games (added support for NHL, UFC) as well as more platforms like Nintendo Switch and Android, and enhanced content creator workflows; and
◼achieved critical technology integrations for four newly acquired organizations. |
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Mr. Bruzzo Chief Experience Officer |
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|
|
Mr. Bruzzo oversees EA’s marketing team, the Worldwide Customer Experience team, and the Positive Play Group as a collection of functions that create unified and rewarding experiences for our players. The Experience organization leads the Company’s efforts to build a social ecosystem in and around our games to deepen engagement and build stronger connections between our players and fans.
Individual Performance Modifier
After reviewing his achievements for fiscal year 2022, the Compensation Committee approved an IPM of 130% for Mr. Bruzzo.
Key Highlights for Fiscal Year 2022
During fiscal year 2022, Mr. Bruzzo: |
◼assumed increased responsibility upon his promotion to Chief Experience Officer, with responsibility for overseeing Worldwide Customer Experience and our efforts to build a social ecosystem in and around our games;
◼launched successful multichannel global marketing campaigns for EA’s major titles, including FIFA 22 and Apex Legends, to help increase sales across EA’s broad portfolio and diverse business models, including live services;
◼developed marketing campaigns to broaden the reach of EA’s subscription services; |
◼scaled our social impact efforts around volunteerism and philanthropy, including relief efforts for Ukraine and our global celebration honoring Juneteenth; and
◼continued to strengthen EA’s Positive Play mandate, which is focused on building better, healthier communities inside and outside of our games. |
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COMPENSATION DISCUSSION & ANALYSIS
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Mr. Jorgensen Executive Vice President, Strategic Projects, and former Chief Financial and Operating Officer |
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As EA’s Chief Operating Officer through October 2021 and Chief Financial Officer through February 2022, Mr. Jorgensen was responsible for EA’s financial management, operational effectiveness, and development of business strategies and opportunities for EA’s long-term growth. Mr. Jorgensen currently serves as EVP, Strategic Projects and is assisting with the CFO transition and special projects.
Individual Performance Modifier
After reviewing his achievements for fiscal year 2022, the Compensation Committee approved an IPM of 110% for Mr. Jorgensen.
Key Highlights for Fiscal Year 2022
Under Mr. Jorgensen’s leadership during fiscal year 2022, the Company: |
◼generated net revenue of $6.991 billion, a 24% increase over fiscal year 2021;
◼achieved cash flow provided by operations of $1.899 billion, while continuing to efficiently manage our operating expenses;
◼saw growth across EA’s broad portfolio and diverse business models, including live services, for which we achieved net bookings of $7.515 billion for the fiscal year; |
◼returned nearly $1.5 billion to stockholders through share repurchases and quarterly dividends;
◼completed the acquisitions of Glu Mobile, Metalhead Software, and Playdemic, further accelerating the growth of our mobile and sports business, while also adding valuable IP to our portfolio and strengthening our global talent pool; and
◼assisted with the CFO transition and special projects. |
Fiscal Year 2022 Performance Cash Bonus Awards
The Board of Directors for Mr. Wilson, and the Compensation Committee, in consultation with Mr. Wilson and our Chief People Officer, for all other NEOs, approved actual performance cash bonus payouts for the NEOs for fiscal year 2022, as set forth below. Mr. Suh became our Chief Financial Officer on March 1, 2022, and therefore was not eligible for a fiscal year 2022 performance cash bonus award.
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TARGET ANNUAL BONUS AWARD |
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COMPANY BONUS POOL FUNDING PERCENTAGE (126.25%) |
|
INDIVIDUAL PERFORMANCE MODIFIER |
|
ACTUAL FISCAL YEAR 2022 PERFORMANCE CASH BONUS |
Mr. Wilson |
|
$ |
2,586,667 |
|
$ |
3,265,667 |
|
140% |
|
$ |
4,571,933 |
Ms. Miele |
|
$ |
873,583 |
|
$ |
1,102,899 |
|
130% |
|
$ |
1,433,769 |
Mr. Moss |
|
$ |
745,000 |
|
$ |
940,563 |
|
110% |
|
$ |
1,034,619 |
Mr. Bruzzo |
|
$ |
745,000 |
|
$ |
940,563 |
|
130% |
|
$ |
1,222,731 |
Mr. Jorgensen |
|
$ |
1,151,042 |
|
$ |
1,453,190 |
|
110% |
|
$ |
1,598,509 |
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Long-Term Equity Incentives
Key features |
◼Approximately 84%(1) of our NEOs’ aggregate annual target total direct compensation is delivered in the form of long-term equity incentives
◼Long-term equity incentives reward absolute long-term stock price appreciation, promote long-term retention, provide incentives based on the attainment of performance objectives that are key indicators of our growth and long-term success, and align our NEOs’ interests with those of our stockholders
◼Long-term equity incentives consist of performance-based restricted stock units (PRSUs) and time-based restricted stock units (RSUs). The award mix consists of 60% PRSUs and 40% RSUs for our CEO, and 50% PRSUs and 50% RSUs for all other NEOs
◼Redesigned our PRSU program for fiscal year 2022—PRSUs pay out after the end of a three-year performance period, based on our three-year relative TSR performance, and our net bookings and operating income performance measured annually over the three-year performance period
◼Target vesting of relative TSR PRSUs is tied to above-median performance (55th percentile)
◼RSUs vest over thirty-five months and PRSUs cliff vest at the end of the three-year performance period |
(1) |
Excluding Mr. Suh, who joined EA on March 1, 2022. |
Fiscal Year 2022 Annual Equity Awards
Annual equity awards for fiscal year 2022 were granted in June 2021 to our NEOs at the time and consisted of a mix of performance-based and time-based RSUs. Mr. Suh joined EA in March 2022 and did not receive a fiscal year 2022 annual equity award. The terms of Mr. Suh’s fiscal year 2022 new hire equity award are described under the heading “—Fiscal Year 2022 Compensation for Our New CFO” above. The award mix serves to align the interests of our NEOs and our stockholders and to promote long-term retention of a strong leadership team in an industry and geographic area that is highly competitive for executive talent.
CEO Mix |
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All Other NEOs’ Equity Mix(1) |
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|
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(1) |
Excluding Mr. Suh, who joined EA on March 1, 2022. |
Looking ahead to fiscal year 2023: |
Beginning in fiscal year 2023, the annual equity award for our CFO and COO will consist of 60% PRSUs and 40% RSUs, consistent with the current annual equity award mix for our CEO. |
50 |
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Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Target Value of Fiscal Year 2022 Annual Equity Awards
In May 2021, the Compensation Committee, and the Board of Directors for Mr. Wilson, approved fiscal year 2022 annual equity awards for our NEOs at the time based on their evaluation of Company performance; each NEO’s role and responsibilities; individual performance; retention considerations; competitive market practices, including comparative market data; and internal compensation alignment among our executive officers. In determining award size, the Compensation Committee and the Board of Directors also considered competitive recruiting pressures and the NEOs’ leadership in response to the ongoing challenges of the COVID-19 pandemic.
The following table shows the target value of the annual equity awards granted to our NEOs on June 16, 2021, as approved by the Compensation Committee on May 19, 2021, and the Board of Directors on May 20, 2021, for Mr. Wilson. The values set forth below were converted into a number of PRSUs or RSUs, as applicable, based on the June 16, 2021 closing price of our common stock of $142.60, rounded down to the nearest whole unit. Mr. Suh joined EA in March 2022 and did not receive a fiscal year 2022 annual equity award. The terms of Mr. Suh’s fiscal year 2022 new hire equity award are described under the heading “—Fiscal Year 2022 Compensation for Our New CFO” above.
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TARGET PRSUs ($) |
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RSUs ($) |
Mr. Wilson |
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10,800,000 |
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7,200,000 |
Ms. Miele |
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5,000,000 |
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5,000,000 |
Mr. Moss |
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4,200,000 |
|
4,200,000 |
Mr. Bruzzo |
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4,200,000 |
|
4,200,000 |
Mr. Jorgensen |
|
4,800,000 |
|
4,800,000 |
Performance-Based Restricted Stock Units
In May 2021, the Compensation Committee approved substantive changes to our fiscal year 2022 PRSU program. These changes were made after considering feedback from stockholders. As described in our fiscal year 2021 proxy statement, two common themes we heard from stockholders were that (1) our PRSU program should incorporate financial and operating metrics in addition to relative TSR, and (2) the annual vesting feature of our PRSU program was contrary to the long-term nature of the program.
The key changes and features of our fiscal year 2022 PRSU program are highlighted below.
◼ |
Added two operating metrics—net bookings and operating income: We transitioned from a program that pays out annually based solely on our Relative TSR performance measured over one-, two-, and three-year measurement periods, to a program that pays out after the end of a three-year performance period, based on our three-year Relative TSR performance, and our net bookings and operating income performance measured annually over the three-year performance period. |
◼ |
Three-year cliff vesting: PRSU awards cliff vest after the end of the three-year performance period to encourage our executives to focus on long-term stock price performance and to promote long-term retention. |
We selected net bookings and operating income as the operating metrics for the reasons below.
◼ |
Net bookings and operating income are key indicators of our top-line and bottom-line performance and balance growth and investment spending to deliver long-term results and generate stockholder return. These metrics provide our NEOs and management team with increased control over performance as compared to relative TSR and align our long-term incentive program with our broader business strategy, while maintaining strong alignment to results for our stockholders. |
◼ |
Attainment of annual metrics is based on organic growth: Contributions from mergers and acquisitions do not count towards achievement of net bookings and operating income metrics unless they already were included in the targets set forth for the relevant measurement period. |
Fiscal Year 2022 PRSU Program Structure
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EARNED PRSUs VEST MAY 16, 2024 |
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
TRANCHES AND VEST DATE
Each tranche of the PRSU award is eligible to vest based on the achievement of:
◼ |
Relative TSR performance over a three-year performance period covering fiscal years 2022 through 2024; |
◼ |
Annual net bookings performance for each fiscal year during the three-year performance period; and |
◼ |
Annual operating income performance for each fiscal year during the three-year performance period. |
Any earned PRSUs are eligible to cliff vest after the end of the three-year performance period on May 16, 2024 (the “Vest Date”), subject to the NEO’s continued employment on this date.
NET BOOKINGS PRSUs AND OPERATING INCOME PRSUs:
◼ |
Payout Scale: The number of Net Bookings PRSUs and Operating Income PRSUs that are earned and eligible to vest will range from 0% to 200% of the target number of PRSUs for the applicable sub-tranche, in accordance with the payout scale below. |
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BELOW THRESHOLD |
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THRESHOLD |
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TARGET |
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MAXIMUM |
Net Bookings (as a % of Financial Plan(1)) |
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< 90% |
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≥ 90% |
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≥ 100% |
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≥ 110% |
Operating Income (as a % of Financial Plan(1)) |
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< 88% |
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≥ 88% |
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≥ 100% |
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≥ 112% |
Payout Percentage(2) (as a % of Target) |
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0% |
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50% |
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100% |
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200% |
(1) |
Financial Plan is the Company’s Board-approved financial plan for each relevant fiscal year. |
(2) |
The payout percentage is expressed as a % of target for each sub-tranche; the payout percentage for achievement between the percentages designated above will be interpolated on a straight-line basis. |
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◼ |
Fiscal Year 2022 Performance: Based on achievement of the fiscal year 2022 net bookings and operating income performance goals relative to target, the payout percentage for these PRSUs will be 114% and 180%, respectively. These PRSUs will vest on May 16, 2024, subject to the NEO’s continued employment on this date, and will be reflected in the applicable compensation tables included in our fiscal year 2025 proxy statement. |
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THRESHOLD |
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TARGET |
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MAXIMUM |
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ACTUAL RESULTS |
Net Bookings (in billions) |
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$ |
6.593 |
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|
$ |
7.325 |
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|
|
$ |
8.058 |
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|
|
$ |
7.430 |
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Non-GAAP Operating Income (in billions) |
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$ |
1.982 |
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|
|
$ |
2.252 |
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|
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$ |
2.522 |
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|
|
$ |
2.467 |
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Payout Percentage (as % of target) |
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50% |
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|
|
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100% |
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|
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200% |
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|
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147% |
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Appendix A to this Proxy Statement provides a reconciliation between our non-GAAP financial measures and our audited financial statements.
RELATIVE TSR PRSUs:
◼ |
Payout Scale: The number of Relative TSR PRSUs that are earned and eligible to vest on May 16, 2024 will range from 0% to 200% of target. Target vesting of Relative TSR PRSUs is tied to above-median performance compared to the Nasdaq-100 Index. No Relative TSR PRSUs will be earned if our Relative TSR percentile is below the 25th percentile and payouts are capped at 200% of target, subject to the negative TSR cap described below. |
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PERFORMANCE |
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PAYOUT(1) (AS % OF TARGET PRSUs) |
Below Threshold |
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0-24th percentile |
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0% |
Threshold |
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25th percentile |
|
30% |
Target |
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55th percentile |
|
100% |
Maximum |
|
90th percentile |
|
200% |
(1) |
The payout percentage for performance between the 25th and 90th percentiles will be interpolated on a straight-line basis. |
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◼ |
Negative TSR Cap: If our TSR is negative on an absolute basis at the end of the three-year performance period, the number of Relative TSR PRSUs that can be earned is capped at 100% of target, regardless of whether the Company’s Relative TSR percentile is ranked above the 55th percentile at the end of the three-year performance period. |
Restricted Stock Units
RSUs reward absolute long-term stock price appreciation, promote retention, facilitate stock ownership, and align our NEOs’ interests with those of our stockholders.
◼ |
RSU awards granted to our NEOs as part of their fiscal year 2022 annual equity awards cliff vest as to 50% of the award eleven months following the grant date, with 12.5% of the award vesting every six months thereafter until the award is fully vested. |
◼ |
40% of the total target value of our CEO’s annual equity award was made in the form of RSUs, and 50% of the total target value of each of our other NEOs’ annual equity awards was made in the form of RSUs. |
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Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Vesting of Performance Awards with Performance Periods Ending in Fiscal Year 2022
The following disclosure is with respect to PRSUs granted in fiscal years 2020 and 2021 that were earned at the end of fiscal year 2022 based on our Relative TSR performance. Although the relevant performance goals were satisfied, the awards discussed below did not vest until May 2022 and, as a result, the vesting will be reflected in the applicable compensation tables included in our fiscal year 2023 proxy statement. See our fiscal year 2021 proxy statement for a description of the awards included in this year’s compensation tables.
As described in our fiscal year 2021 and fiscal year 2020 proxy statements, our fiscal year 2021 and fiscal year 2020 PRSUs vest based solely on our relative TSR performance. Each of the fiscal year 2020 and 2021 PRSU awards is comprised of three tranches. The first, second, and third tranches of each award are eligible to vest after the conclusion of 12-month, 24-month and 36-month measurement periods, respectively, that correspond to our fiscal year or years (each, a “Vesting Measurement Period”), based on our Relative TSR percentile over the applicable Vesting Measurement Period. Target vesting is tied to above-median performance compared to the Nasdaq-100 Index. If our Relative TSR percentile is at the 60th percentile at the end of a Vesting Measurement Period, 100% of the target PRSUs for the applicable tranche will be earned. The percentage of PRSUs earned will be adjusted upward by 3% or downward by 2% for each percentile above or below the 60th percentile, respectively, with the percentage of PRSUs earned ranging from 0% to 200% of target, with no PRSUs earned if our Relative TSR percentile is below the 11th percentile. Earned PRSUs generally will vest and be converted into shares one month prior to the first, second, and third anniversaries of the date of grant (which we call “Vesting Opportunities”).
The graphic below illustrates the percentage of target PRSUs for the (1) second tranche of the fiscal year 2021 PRSU awards, and (2) third tranche of the fiscal year 2020 PRSU awards, in each case, that were earned for the 24-month and 36-month measurement periods ending April 2, 2022, respectively, and that vested in May 2022.
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MEASUREMENT PERIOD |
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BEGINNING AVERAGE STOCK PRICE (90 DAY AVERAGE) |
|
ENDING AVERAGE STOCK PRICE (90 DAY AVERAGE) |
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EA TSR |
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RELATIVE TSR PERCENTILE |
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VEST DATE |
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PERCENTAGE OF TARGET PRSUs VESTED MAY 2022 |
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|
|
FY 2021 Award (FY 2021 - FY 2023) Granted June 2020 |
|
Tranche Two: 24-month measurement period ending April 2, 2022 |
|
$117.12 |
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$130.93 |
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11.8% |
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19th |
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May 2022 (Second Vesting Opportunity) |
|
18% |
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|
|
|
|
|
|
|
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|
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|
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|
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FY 2020 Award (FY 2020 - FY 2022) Granted June 2019 |
|
Tranche Three: 36-month measurement period ending April 2, 2022 |
|
$95.27 |
|
$130.93 |
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37.4% |
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43rd |
|
May 2022 (Third Vesting Opportunity) |
|
66% |
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|
|
|
|
|
|
|
|
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|
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As an incentive to keep our executives focused on long-term TSR performance and to balance the overall payout opportunity, our PRSU program for fiscal years 2020 and 2021 provided an opportunity for our executives to earn PRSUs at the second and third Vesting Opportunities that were not earned at the first and second Vesting Opportunities, respectively, in an amount capped at 100% of the target number of PRSUs unearned from the previous Vesting Opportunities (“Remaining Award Units”). Shares subject to any Remaining Award Units are earned only if our Relative TSR percentile improves over the subsequent cumulative 24-month and/or 36-month Vesting Measurement Periods for the award. Under this scenario, all unearned PRSUs in excess of the target number of PRSUs eligible to be earned are forfeited. We eliminated this lookback feature from our equity program beginning with our fiscal year 2022 PRSU awards.
Appendix A to this Proxy Statement provides a reconciliation between our non-GAAP financial measures and our audited financial statements. For more information regarding our use of non-GAAP financial measures for our compensation programs, please refer to the information provided under the heading “About Non-GAAP Financial Measures” in Appendix A below.
Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Benefits and Retirement Plans
We provide a wide array of employee benefit programs to our regular employees, including our NEOs, based upon their country of employment. In the United States, our employee benefit programs for eligible employees include medical, dental, prescription drug, vision care, disability insurance, life insurance, accidental death, and dismemberment (“AD&D”) insurance, flexible spending accounts, business travel accident insurance, an educational reimbursement program, an adoption assistance program, an employee assistance program, an employee stock purchase plan, paid time off, and relocation assistance.
We offer retirement plans to our employees based upon their country of employment. In the United States, our employees, including our NEOs, are eligible to participate in a tax-qualified 401(k) plan, with a Company discretionary matching contribution of up to 6% of eligible compensation. The amount of the total matching contribution is determined based on the Company’s fiscal year performance. We also maintain a nonqualified deferred compensation plan in which executive-level employees, including our NEOs and our directors, are eligible to participate. None of our NEOs participated in the deferred compensation plan during fiscal year 2022.
Perquisites and Other Personal Benefits
While our NEOs generally receive the same benefits that are available to our other regular employees, they also receive certain additional benefits, including access to a Company-paid physical examination program, and greater maximum benefit levels for life insurance, AD&D, and long-term disability coverage. We consider these benefits to be standard components of a competitive executive compensation package. Our officers with a ranking of vice president and above and certain worldwide studio organization employees are also eligible to participate in the EA Executive and Studio Leadership Digital Game Benefit program. We also offer our NEOs the opportunity to receive cybersecurity services to protect their privacy, home networks, and devices, where they may conduct EA business. Company reimbursed or provided air and ground transportation generally is limited to business travel.
Other Compensation Practices and Policies
Change in Control Arrangements and Severance
Our executives with a ranking of senior vice president and above are eligible to participate in the Electronic Arts Inc. Amended and Restated Change in Control Severance Plan (the “CIC Plan”). The CIC Plan was last amended in November 2021 and provides “double-trigger” severance benefits if participants incur a qualifying termination of employment in connection with a change in control. As part of the plan review, the Compensation Committee’s independent consultant undertook a market check of the severance benefits and noted that they were in line with the practices of our peer group. For more information on the CIC Plan, please refer to the information included under “Executive Compensation Tables—Potential Payments Upon Termination or Change in Control” below.
We also maintain a severance plan (the “Severance Plan”) that applies generally to our regular full-time U.S.-based employees. Under the Severance Plan, eligible employees (including our executive officers) whose employment is involuntarily terminated in connection with a reduction in force may receive a cash severance payment and premiums for continued health benefits, if such benefits are continued pursuant to COBRA. Any severance arrangements with our NEOs, whether paid pursuant to the Severance Plan or otherwise, require the prior approval of the Compensation Committee. In the event of a change in control of the Company, any cash severance payable under the Severance Plan may be reduced, in whole or in part, by any amount paid under the CIC Plan.
Stock Ownership Holding Requirements for Section 16 Officers
Section 16 officers must maintain stock ownership equal to the minimum ownership requirements in our stock ownership guidelines. Please see the section of this Proxy Statement under “Stock Ownership Information—Stock Ownership Requirements—Section 16 Officers” below for additional information on these requirements.
Compensation Recovery (Clawbacks)
Our Board of Directors adopted an expanded Clawback Policy in February 2021. The expanded Clawback Policy applies to current and former Section 16 officers of the Company. Under the expanded Clawback Policy, if the Company is required to restate its financial results and the Board of Directors (or a committee thereof) determines that a covered officer engaged in an act of misconduct that resulted in the restatement, the Board of Directors (or a committee thereof) has the authority to recoup any excess incentive compensation (including cash and equity incentives) paid to a covered officer during the three years before the restatement.
In addition, our equity award agreements provide that if an employee engages in fraud or other misconduct that contributes to an obligation to restate the Company’s financial statements, the Compensation Committee may terminate the equity award and recapture any equity award proceeds received by the employee within the 12-month period following the public issuance or filing of the financial statements required to be restated.
Risk Considerations
The Compensation Committee considers, in establishing and reviewing our compensation programs, whether the programs encourage unnecessary or excessive risk taking and has concluded that they do not. See the section of this Proxy Statement entitled “Board’s Role and Responsibilities–Oversight of Risk Issues—Compensation Risk Assessment” above for an additional discussion of risk considerations.
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Table of Contents
COMPENSATION DISCUSSION & ANALYSIS
Impact of Tax Treatment
The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) amended Section 162(m) of the Internal Revenue Code by removing the exception for qualified performance-based compensation and expanding it to cover the chief financial officer, thereby reducing the potential for deductible executive compensation for 2017 and later years. Further, once any of our employees is considered a “covered employee” under Section 162(m) of the Internal Revenue Code, that person will remain a “covered employee” so long as the individual receives compensation from us.
We have not changed our pay-for-performance approach to awarding executive pay even though the Tax Act effectively eliminated the tax benefits of awarding qualifying performance-based compensation. The Compensation Committee believes it is important to retain discretion and maximum flexibility in designing appropriate executive compensation programs and establishing competitive forms and levels of executive compensation that are in the best interests of the Company and our stockholders.
Section 409A of the Internal Revenue Code imposes additional significant taxes and penalties on the individual if an executive officer, director, or other service provider is entitled to “deferred compensation” that does not comply with the requirements of Section 409A of the Internal Revenue Code. We have structured deferred compensation in a manner intended to comply with or be exempt from Section 409A of the Code, and the regulations and other guidance promulgated thereunder. We do not provide any executive officer, including any NEO, with any excise tax “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code.