Company Increases CY 2015 Revenues and EPS
Outlook
Company Delivered Record Q1 Non-GAAP Digital
Revenues of Over $500 Million, Representing an All-Time Record
Percentage of Total Revenues
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced
better-than-expected financial results for the first quarter of
2015.
First Quarter Prior (in
millions, except EPS)
2015
Outlook*
2014
GAAP
Net Revenues $ 1,278 $ 1,140
$ 1,111 EPS $ 0.53
$ 0.37 $ 0.40
Non-GAAP
Net Revenues $ 703 $ 640
$ 772 EPS $ 0.16
$ 0.05 $ 0.19
*Prior outlook was provided by the
company on February 5, 2015 in its earnings release.
For the quarter ended March 31, 2015, Activision Blizzard’s GAAP
net revenues were $1.28 billion, as compared with $1.11 billion for
the first quarter of 2014. On a non-GAAP basis, the company’s net
revenues were $703 million, as compared with $772 million for the
first quarter of 2014. For the first quarter, GAAP net revenues
from digital channels were a record $581 million and represented a
Q1 record 45% of the company’s total revenues. On a non-GAAP basis,
net revenues from digital channels were a Q1 record $538 million
and represented a record 76% of the company’s total revenues.
For the quarter ended March 31, 2015, Activision Blizzard’s GAAP
earnings per diluted share were a record $0.53, as compared with
$0.40 for the first quarter of 2014. On a non-GAAP basis, the
company’s earnings per diluted share were $0.16, as compared with
$0.19 for the first quarter of 2014.
On a constant FX basis, non-GAAP revenues and EPS were flat
year-over-year, despite a lighter Q1 slate this year, given strong
trends with ongoing monetization.
Please refer to the tables at the back of this press release for
a reconciliation of the company’s GAAP and non-GAAP results.
Bobby Kotick, Chief Executive Officer of Activision Blizzard,
said, “This quarter, we were recognized by FORTUNE as one of the
‘100 Best Companies to Work For®.’ Our biggest accomplishment
remains our ability to attract and retain so many talented,
capable, driven and hard-working people with an unyielding
commitment to excellence.”
Kotick added, “Our talented teams around the world continue to
create experiences that inspire our audiences. In the last 12
months, we had over 150 million active users around the world who
played our games for more than 12 billion hours and spectators who
watched over a billion hours of linear programming based on our
games. In the past year, Activision Blizzard’s communities grew by
more than 25%.”
Kotick continued, “This deepening level of engagement with a
widening base of players across our franchises is what drove
another successful quarter. We delivered better-than-expected Q1
results, increased our 2015 non-GAAP revenue outlook to $4.425
billion and earnings per share outlook to $1.20. Last quarter, on a
non-GAAP basis, we delivered record higher-margin digital revenues
of over half a billion dollars – a Q1 record on an absolute basis
and an all-time high on a percentage basis.”
Selected Business Highlights:
- Activision Publishing’s Destiny
and Blizzard Entertainment’s Hearthstone®: Heroes
of Warcraft™ combined now have more than 50 million
registered players and nearly $1 billion in non-GAAP revenues1
life-to-date.
- Activision Publishing had the biggest
Q1 online player community in its history, up a double digit
percentage year over year. Activision Publishing also had 2 of the
top 5 videogame franchises in North America and Europe year-to-date
and continues to have 3 of the top 5 next generation games
life-to-date – with Call of Duty: Advanced Warfare remaining
the No. 1 title, as it has since its launch six months ago.2
Including toys, Skylanders was also the No. 1 console
franchise and title globally in Q1, outsold the No. 1 action figure
line globally, and was the No. 1 kids console franchise and title
globally.3
- Activision Publishing’s Call of
Duty franchise Q1 sales increased by a double-digit percentage
year-over-year due to the strong sell-through of Call of
Duty: Advanced Warfare and growing online revenues per
user across the franchise. There has been early success of the new
micro-transaction offerings which have helped drive increased
engagement and monetization.
- On March 29, 2015, the company held its
third annual Call of Duty® Championship, presented by Xbox,
the biggest eSports first-person action tournament of the year
where 32 professional teams competed for $1 million.
- In January, Activision Publishing’s
Call of Duty Online entered open beta in China, in
partnership with Tencent. The open beta marks an historic first for
the Call of Duty franchise as it expands into the world’s
largest gaming market.
- Activision Publishing’s Destiny
continues to have strong engagement, with active players playing
about 3 hours per day, along with strong digital sales and
expansion attach rates. Additionally, Destiny was awarded
Game of the Year by the British Academy of Film and Television
Arts, a prestigious addition to the 31 Game of the Year awards that
Destiny has been honored with to date.
- Blizzard Entertainment had the largest
Q1 online player community in its history, up a double digit
percentage year over year despite no major launches in the quarter.
As expected and consistent with our experience following prior
expansions, we saw a decline in the World of Warcraft
subscriber number. Subscribers ended the quarter at 7.1 million.
World of Warcraft’s revenue performance at constant FX has
been more stable, driven by continued strong uptake on value added
services, and price increases in select regions, which partially
offset subscriber declines, particularly in the East. World of
Warcraft remains the No. 1 subscription-based MMORPG in the
world.
- Blizzard Entertainment’s Heroes of
the Storm™, which has had over 11 million beta sign-ups,
entered closed beta in January. The Founder’s Pack, released in the
quarter for $39.99, granted immediate access to the beta, along
with a selection of heroes, skins and more.
- Blizzard Entertainment’s
Hearthstone: Heroes of Warcraft had steady engagement and
revenues quarter over quarter, despite no new content releases this
quarter. This was driven by sustained pickup of the Goblins vs
Gnomes™ expansion content, which was released in the
previous quarter.
- On March 31, 2015, Blizzard
Entertainment kicked off closed beta testing for
StarCraft® II: Legacy of the Void™, the third
installment of the company’s real-time strategy sequel. Legacy
of the Void will be a standalone product that doesn’t require
any prior releases, so it will be easier than ever for players to
get into the game and experience all of the latest content.
Company Outlook:
- On April 14, 2015, Activision
Publishing unveiled Guitar Hero® Live, bringing back
the pop culture phenomenon that previously reached over 40 million
players in North America and Europe, and was the fastest console
franchise to reach $1 billion.4 The re-imagined experience will be
available on consoles, tablets, and mobile phones this fall.
- On April 26, 2015, Activision
Publishing and Treyarch revealed the highly anticipated Call of
Duty: Black Ops III. The sequel to the most played series in
Call of Duty history will be available on November 6. The
company also announced an upcoming multiplayer Beta, a first for
Call of Duty on next generation consoles. Fans who pre-order
the game now will get access to the Beta.
- On April 2, 2015, Blizzard
Entertainment released Blackrock Mountain, the second
Hearthstone: Heroes of Warcraft Adventure. Additionally, on
April 14, the game was released on iOS® and Android™ mobile phones.
The smartphone release helped propel the franchise to over 30
million registered players and the #1 download spot for mobile
games in more than 25 countries.
- On April 7, 2015, Blizzard
Entertainment launched the WoW Token System, which enables World
of Warcraft players to exchange game-time Tokens, purchased at
$20, to other players for in-game gold. This serves the dual
purpose of enabling players to pay for their subscriptions with
their gold and providing players with a secure method for
purchasing gold in-game.
- On April 23, 2015, Blizzard
Entertainment and NetEase, Inc. announced that Sanctuary’s gates
have been thrown open to all Chinese heroes, as open beta testing
for Blizzard Entertainment's award-winning action role-playing game
Diablo® III: Reaper of Souls™ has gone live in China.
Approximately 3 million people signed up to play the beta in China,
and the game has already sold 1 million units across two offerings:
the Premium Package for approximately $32 (RMB198) and the Digital
Deluxe Package for approximately $64 (RMB388).
- On June 2, 2015, Blizzard Entertainment
expects to launch Heroes of the Storm after an open beta
testing period commencing May 19. The release follows on the heels
of the epic finale of the Heroes of the Dorm™ collegiate
eSports tournament, which was aired live during primetime on April
26 on ESPN2, the network’s first-ever live telecast of a collegiate
eSports event. Students from more than 460 schools across the U.S.
and Canada competed for hundreds of thousands of dollars in tuition
and other prizes.
- Blizzard Entertainment expects to begin
beta testing for Overwatch™ in fall 2015.
- Blizzard Entertainment announced that
its ninth BlizzCon® will be returning to the Anaheim Convention
Center on Friday, November 6 and Saturday, November 7. Tickets went
on sale in two batches in April and quickly sold out.
- Given the weakening of foreign
currencies versus the U.S. dollar, the company’s 2015 international
revenues and earnings are expected to be translated at lower rates
than in 2014. This impacts the company’s 2015 outlook as compared
to 2014 actual results given approximately 50% of the company’s
revenues, and a higher percentage of profits, are generated outside
the U.S. See comparison table, below.
Activision Blizzard’s second quarter and calendar year 2015
outlook is, as follows:
Prior Outlook* Current Outlook
GAAP Non-GAAP GAAP
Non-GAAP (in millions, except EPS) Outlook
Outlook Outlook Outlook
CY
2015
Net Revenues $ 4,140 $ 4,400 $ 4,250 $ 4,425
EPS $
0.89 $ 1.15 $ 0.98 $ 1.20
Fully Diluted Shares** 750 750 750
750
Q2
2015
Net Revenues N/A N/A $ 930 $ 650
EPS N/A N/A $ 0.21 $
0.07
Fully Diluted Shares** N/A N/A 745 745
The following table compares our CY14 actual earnings per share
to CY15 outlook earnings per share.
Comparison Feb 5. Non-GAAP
Current Non-GAAP EPS Outlook* Outlook
Change CY14 - Actuals $ 1.42 $ 1.42 –
Slate / Operations
(0.05) 0.01 0.06
Foreign Currency (0.14) (0.15) (0.01)
Tax Rate & Share Count (0.08) (0.08) –
CY15 - Outlook $ 1.15 $ 1.20 0.05
Currency Assumptions for 2015 Outlook (Q2-Q4):
- $1.11 USD/Euro for current outlook (vs.
$1.13 for prior outlook and a $1.33 average for 2014)
- $1.54 USD/British Pound Sterling for
current outlook (vs. $1.51 for prior outlook and a $1.65 average
for 2014)
- Note: Revenue and EPS increase if the
Euro or British Pound Sterling strengthen vs. USD
*
Prior outlook was provided by the company on February 5,
2015 in its earnings release
**
Fully diluted weighted average shares include participating
securities and dilutive options on a weighted average basis.
Debt Repayment and Cash Dividend
Activision Blizzard repaid $250 million of its outstanding Term
Loan B on February 11, 2015. Additionally, the company plans to pay
a cash dividend of $0.23 per common share on May 13th to
shareholders of record at the close of business on March 30, 2015.
The company did not make any share repurchases during the first
quarter under its $750 million share repurchase authorization
ending February 2017.
Conference Call
Today at 4:30 p.m. EDT, Activision Blizzard’s management will
host a conference call and Webcast to discuss the company’s results
for the quarter ended March 31, 2015 and management’s outlook for
the remainder of the calendar year. The company welcomes all
members of the financial and media communities and other interested
parties to visit the “Investor Relations” area of
www.activisionblizzard.com to listen to the conference call via
live Webcast or to listen to the call live by dialing into
877-419-6594 in the U.S. with passcode 3922518.
About Activision Blizzard
Activision Blizzard, Inc. is the largest and most profitable
western interactive entertainment publishing company. It develops
and publishes some of the most successful and beloved entertainment
franchises in any medium, including Call of Duty, Call of Duty
Online, Destiny, Skylanders, World of Warcraft, StarCraft, Diablo,
and Hearthstone: Heroes of Warcraft. The company is one of the
FORTUNE “100 Best Companies To Work For®” 2015.
Headquartered in Santa Monica, California, it maintains
operations throughout the United States, Europe, and Asia.
Activision Blizzard develops and publishes games on all leading
interactive platforms and its games are available in most countries
around the world. More information about Activision Blizzard and
its products can be found on the company's website,
www.activisionblizzard.com.
1
Life to date, combined GAAP revenues from Hearthstone:
Heroes of Warcraft and Destiny were more than $760 million.
2
The NPD Group and GfK Chart-Track, including toys and accessories
3
The NPD Group and GfK Chart-Track and Activision Blizzard internal
estimates, including toys and accessories
4
The NPD Group and GfK Chart-Track
Subscriber Definition: World of Warcraft subscribers
include individuals who have paid a subscription fee or have an
active prepaid card to play World of Warcraft, as well as those who
have purchased the game and are within their free month of access.
Internet Game Room players who have accessed the game over the last
thirty days are also counted as subscribers. The above definition
excludes all players under free promotional subscriptions, expired
or cancelled subscriptions, and expired prepaid cards. Subscribers
in licensees' territories are defined along the same rules.
Non-GAAP Financial Measures: As a supplement to our
financial measures presented in accordance with Generally Accepted
Accounting Principles (“GAAP”), Activision Blizzard presents
certain non-GAAP measures of financial performance. These non-GAAP
financial measures are not intended to be considered in isolation
from, as a substitute for, or as more important than, the financial
information prepared and presented in accordance with GAAP. In
addition, these non-GAAP measures have limitations in that they do
not reflect all of the items associated with the company’s results
of operations as determined in accordance with GAAP.
Activision Blizzard provides net revenues, net income (loss),
earnings (loss) per share and operating margin data and guidance
both including (in accordance with GAAP) and excluding (non-GAAP)
certain items. In addition, Activision Blizzard provides EBITDA
(defined as GAAP net income (loss) before interest (income)
expense, income taxes, depreciation and amortization) and adjusted
EBITDA (defined as non-GAAP operating margin (see non-GAAP
financial measure below) before depreciation). The non-GAAP
financial measures exclude the following items, as applicable in
any given reporting period:
- the change in deferred revenues and
related cost of sales with respect to certain of the company’s
online-enabled games;
- expenses related to stock-based
compensation;
- the amortization of intangibles from
purchase price accounting;
- fees and other expenses (including
legal fees, costs, expenses and accruals) related to the
acquisition of 429 million shares of our common stock on October
11, 2013 from Vivendi, pursuant to the stock purchase agreement
dated July 25, 2013 and the $4.75 billion debt financings related
thereto; and
- the income tax adjustments associated
with any of the above items.
In the future, Activision Blizzard may also consider whether
other significant non-recurring items should also be excluded in
calculating the non-GAAP financial measures used by the company.
Management believes that the presentation of these non-GAAP
financial measures provides investors with additional useful
information to measure Activision Blizzard’s financial and
operating performance. In particular, the measures facilitate
comparison of operating performance between periods and help
investors to better understand the operating results of Activision
Blizzard by excluding certain items that may not be indicative of
the company’s core business, operating results or future outlook.
Internally, management uses these non-GAAP financial measures in
assessing the company’s operating results, and measuring compliance
with the requirements of the company’s debt financing agreements,
as well as in planning and forecasting.
Activision Blizzard’s non-GAAP financial measures are not based
on a comprehensive set of accounting rules or principles, and the
terms non-GAAP net revenues, non-GAAP net income, non-GAAP earnings
per share, non-GAAP operating margin, and non-GAAP or adjusted
EBITDA do not have a standardized meaning. Therefore, other
companies may use the same or similarly named measures, but exclude
different items, which may not provide investors a comparable view
of Activision Blizzard’s performance in relation to other
companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering Activision Blizzard’s GAAP, as well
as non-GAAP, results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
In addition to the reasons stated above, which are generally
applicable to each of the items Activision Blizzard excludes from
its non-GAAP financial measures, there are additional specific
reasons why the company believes it is appropriate to exclude the
change in deferred revenues and related cost of sales with respect
to certain of the company’s online-enabled games.
Since Activision Blizzard has determined that some of our games’
online functionality represents an essential component of gameplay
and, as a result, a more-than-inconsequential separate deliverable,
we recognize revenues attributed to these game titles over their
estimated service periods, which may range from five months to a
maximum of less than a year. The related cost of sales is deferred
and recognized as the related revenues are recognized. Internally,
management excludes the impact of this change in deferred revenues
and related cost of sales in its non-GAAP financial measures when
evaluating the company’s operating performance, when planning,
forecasting and analyzing future periods, and when assessing the
performance of its management team. Management believes this is
appropriate because doing so enables an analysis of performance
based on the timing of actual transactions with our customers,
which is consistent with the way the company is measured by
investment analysts and industry data sources. In addition,
excluding the change in deferred revenues and the related cost of
sales provides a much more timely indication of trends in our
operating results.
Cautionary Note Regarding Forward-looking Statements: The
statements contained in this press release that are not historical
facts are forward-looking statements, including, but not limited
to, statements about (1) projections of revenues, expenses, income
or loss, earnings or loss per share, cash flow or other financial
items; (2) statements of our plans and objectives, including those
related to product releases; (3) statements of future financial or
operating performance; and (4) statements of assumptions underlying
such statements. The company generally uses words such as
“outlook,” “forecast,” “will,” “could,” “should,” “would,” “to be,”
“plan,” “plans,” “believes,” “may,” “might,” “expects,” “intends,”
“intends as,” “anticipates,” “estimate,” “future,” “positioned,”
“potential,” “project,” “remain,” “scheduled,” “set to,” “subject
to,” “upcoming” and other similar expressions to help identify
forward-looking statements. Forward-looking statements are subject
to business and economic risk, reflect management’s current
expectations, estimates and projections about our business, and are
inherently uncertain and difficult to predict.
The Company cautions that a number of important factors could
cause Activision Blizzard's actual future results and other future
circumstances to differ materially from those expressed in any
forward looking statements. Such factors include, but are not
limited to: sales levels of Activision Blizzard’s titles;
increasing concentration of revenue among a small number of titles;
Activision Blizzard’s ability to predict consumer preferences,
including interest in specific genres, and preferences among
hardware platforms; the amount of our debt and the limitations
imposed by the covenants in the agreements governing our debt;
adoption rate and availability of new hardware (including
peripherals) and related software, particularly during the console
transitions; counterparty risks relating to customers, licensees,
licensors and manufacturers; maintenance of relationships with key
personnel, customers, financing providers, licensees, licensors,
manufacturers, vendors, and third-party developers, including the
ability to attract, retain and develop key personnel and developers
that can create high quality titles; changing business models,
including digital delivery of content and the increased prevalence
of free-to-play games; product delays or defects; competition
including from used games and other forms of entertainment; rapid
changes in technology and industry standards; possible declines in
software pricing; product returns and price protection; the
identification of suitable future acquisition opportunities and
potential challenges associated with geographic expansion; the
seasonal and cyclical nature of the interactive game market;
litigation risks and associated costs; protection of proprietary
rights; shifts in consumer spending trends; capital market risks;
applicable regulations; domestic and international economic,
financial and political conditions and policies; tax rates and
foreign exchange rates; the impact of the current macroeconomic
environment; and the other factors identified in “Risk Factors”
included in Part I, Item 1A of Activision Blizzard’s most recent
annual report on Form 10-K.
The forward-looking statements in this presentation are based on
information available to the Company as of the date of this press
release and, while believed to be true when made, may ultimately
prove to be incorrect. The Company may change its intention, belief
or expectation, at any time and without notice, based upon any
changes in such factors, in the Company’s assumptions or otherwise.
The Company undertakes no obligation to release publicly any
revisions to any forward-looking statements to reflect events or
circumstances after the original date of this press release, May 6,
2015, or to reflect the occurrence of unanticipated events.
(Tables to Follow)
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (Amounts in millions, except per share
data)
Three Months Ended March 31,
2015 2014 Net revenues: Product
sales $ 784 $ 769 Subscription, licensing and other revenues
1 494 342 Total net revenues
1,278 1,111 Costs and expenses:
Cost of sales - product costs 209 225 Cost of sales - online 53 58
Cost of sales - software royalties and amortization 148 57 Cost of
sales - intellectual property licenses 3 2 Product development 145
143 Sales and marketing 92 104 General and administrative
86 95 Total costs and expenses
736 684 Operating income 542 427
Interest and other expense, net 50 51
Income before income tax expense 492 376 Income tax expense
98 83 Net income $ 394 $ 293
Basic earnings per common share 2 $ 0.54 $ 0.40 Weighted average
common shares outstanding 723 709
Diluted earnings per common share 2 $ 0.53 $ 0.40 Weighted average
common shares outstanding assuming dilution 731
720 1 Subscription, licensing and other
revenues represents revenues from World of Warcraft subscriptions,
licensing royalties from our products and franchises, value-added
services, downloadable content, and other miscellaneous revenues.
2 The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income
between common shareholders and participating security holders. We
had, on a weighted-average basis, participating securities of
approximately 10 million and 17 million for the three months ended
March 31, 2015 and 2014, respectively. Net income attributable to
Activision Blizzard Inc. common shareholders used to calculate
earnings per common share assuming dilution was $387 million for
the three months ended March 31, 2015 as compared to total net
income of $394 million for the same period. Net income attributable
to Activision Blizzard Inc. common shareholders used to calculate
earnings per common share assuming dilution was $285 million for
the three months ended March 31, 2014 as compared to total net
income of $293 million for the same period.
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in millions)
March 31,
December 31, 2015
2014
ASSETS
Current assets: Cash and cash equivalents $ 4,465 $ 4,848
Short-term investments 5 10 Accounts receivable, net 208 659
Inventories, net 102 123 Software development 358 452 Intellectual
property licenses 5 5 Deferred income taxes, net 365 368
Other current assets 355
444 Total current assets 5,863
6,909 Long-term investments 9 9
Software development 46 20 Intellectual property licenses 18 18
Property and equipment, net 158 157 Other assets 138 85 Intangible
assets, net 28 29 Trademark and trade names 433 433
Goodwill 7,084 7,086
Total assets $ 13,777 $ 14,746
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $
123 $ 325 Deferred revenues 1,161 1,797 Accrued
expenses and other liabilities 615
592 Total current liabilities
1,899 2,714 Long-term debt, net
4,075 4,324 Deferred income taxes, net 124 114 Other
liabilities 441 361
Total liabilities 6,539
7,513 Shareholders’ equity: Common stock --- ---
Additional paid-in capital 9,968 9,924 Treasury stock (5,709 )
(5,762 ) Retained earnings 3,598 3,374 Accumulated
other comprehensive income (loss) (619 )
(303 ) Total shareholders’ equity
7,238 7,233 Total
liabilities and shareholders’ equity $ 13,777
$ 14,746
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO NON-GAAP
MEASURES (Amounts in millions, except earnings per share
data)
Three Months Ended March 31, 2015
Net Revenues Cost of Sales - Product
Costs Cost of Sales - Online Cost of
Sales - Software Royalties and Amortization Cost of
Sales - Intellectual Property Licenses Product
Development Sales and Marketing General
and Administrative Total Costs and Expenses GAAP
Measurement $ 1,278 $ 209 $ 53 $ 148
$ 3 $ 145 $ 92 $ 86 $ 736
Less: Net effect from deferral of net revenues and related cost of
sales (a) (575 ) (113 ) - (100 ) - - - - (213 ) Less: Stock-based
compensation (b) - - - (4 ) - (7 ) (2 ) (10 ) (23 ) Less:
Amortization of intangible assets (c) -
- - -
(1 ) - -
- (1 ) Non-GAAP Measurement
$ 703 $ 96 $ 53 $
44 $ 2 $ 138 $ 90
$ 76 $ 499
Three Months Ended March
31, 2015
Operating Income Net
Income Basic Earnings per Share Diluted
Earnings per Share GAAP Measurement $ 542 $ 394 $ 0.54 $ 0.53
Less: Net effect from deferral of net revenues and related cost of
sales (a) (362 ) (295 ) (0.40 ) (0.40 ) Less: Stock-based
compensation (b) 23 16 0.02 0.02 Less: Amortization of intangible
assets (c) 1 1 -
- Non-GAAP Measurement $
204 $ 116 $ 0.16 $ 0.16
Three Months Ended March 31, 2014
Net Revenues
Cost of Sales - Product Costs Cost of Sales -
Online Cost of Sales - Software Royalties and
Amortization Cost of Sales - Intellectual Property
Licenses Product Development Sales and
Marketing General and Administrative
Total Costs and Expenses GAAP Measurement $ 1,111
$ 225 $ 58 $ 57 $ 2 $ 143
$ 104 $ 95 $ 684 Less: Net effect from
deferral of net revenues and related cost of sales (a) (339 ) (95 )
- (25 ) - - - - (120 ) Less: Stock-based compensation (b) - - - (7
) - (8 ) (2 ) (13 ) (30 ) Less: Amortization of intangible assets
(c) - - -
- (2 ) -
- - (2 )
Non-GAAP Measurement $ 772 $ 130 $ 58
$ 25 $ - $ 135
$ 102 $ 82 $ 532
Three Months Ended March 31, 2014
Operating Income
Net Income Basic Earnings per Share
Diluted Earnings per Share GAAP Measurement $ 427 $ 293 $
0.40 $ 0.40 Less: Net effect from deferral of net revenues and
related cost of sales (a) (219 ) (171 ) (0.24 ) (0.23 ) Less:
Stock-based compensation (b) 30 18 0.03 0.02 Less: Amortization of
intangible assets (c) 2 1
- - Non-GAAP Measurement $ 240
$ 141 $ 0.19 $ 0.19
(a) Reflects the net change in deferred revenues and
related cost of sales. (b) Includes expense related to stock-based
compensation. (c) Reflects amortization of intangible assets from
purchase price accounting. The company calculates earnings
per share pursuant to the two-class method which requires the
allocation of net income between common shareholders and
participating security holders. Net income attributable to
Activision Blizzard Inc. common shareholders used to calculate
non-GAAP earnings per common share assuming dilution was $113
million for the three months ended March 31, 2015 as compared to
total non-GAAP net income of $116 million for the same period. Net
income attributable to Activision Blizzard Inc. common shareholders
used to calculate non-GAAP earnings per common share assuming
dilution was $136 million for the three months ended March 31, 2014
as compared to total non-GAAP net income of $141 million for the
same period. For purposes of calculating earnings per share,
we had, on a weighted-average basis, common shares outstanding of
723 million, participating securities of approximately 10 million,
and dilutive shares of 8 million during the three months ended
March 31, 2015. For purposes of calculating earnings per share, we
had, on a weighted-average basis, common shares outstanding of 709
million, participating securities of approximately 17 million, and
dilutive shares of 11 million during the three months ended March
31, 2014. The per share adjustments are presented as
calculated, and the GAAP and non-GAAP earnings per share
information is also presented as calculated. The sum of these
measures, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION For the Three Months Ended March
31, 2015 and 2014 (Amounts in millions)
Three Months Ended
March 31, 2015 March 31, 2014 $ Increase %
Increase Amount % of Total4
Amount % of
Total4
(Decrease) (Decrease) GAAP Net Revenues
by Distribution Channel Retail channels $ 649 51 % $ 659 59 % $
(10 ) (2 ) % Digital online channels1 581 45
379 34 202 53 Total Activision and Blizzard
1,230 96 1,038 93 192 18 Distribution 48 4
73 7 (25 ) (34 ) Total consolidated GAAP net
revenues 1,278 100 1,111 100 167
15
Change in Deferred Revenues2 Retail
channels (532 ) (487 ) Digital online channels1 (43 )
148 Total changes in deferred revenues (575 )
(339 )
Non-GAAP Net Revenues by Distribution Channel
Retail channels 117 17 172 22 (55 ) (32 ) Digital online channels1
538 76 527 68 11 2 Total
Activision and Blizzard 655 93 699 91 (44 ) (6 )
Distribution 48 7 73 9 (25 ) (34
) Total non-GAAP net revenues3 $ 703 100 % $ 772 100
% $ (69 ) (9 ) % 1 Net revenues from digital online
channels represent revenues from subscriptions, licensing
royalties, value-added services, downloadable content, digitally
distributed products, and wireless devices. 2 We provide net
revenues including (in accordance with GAAP) and excluding
(non-GAAP) the impact of changes in deferred revenues. 3 Total
non-GAAP net revenues presented also represents our total operating
segment net revenues. 4 The percentages of total are presented as
calculated. Therefore the sum of these percentages, as presented,
may differ due to the impact of rounding.
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL
INFORMATION For the Three Months Ended March 31, 2015
and 2014 (Amounts in millions)
Three Months Ended March 31, 2015 March 31,
2014 $ Increase % Increase
Amount % of Total6
Amount %
of Total6
(Decrease) (Decrease) GAAP Net
Revenues by Segment/Platform Mix Activision and Blizzard:
Online1 $ 272 21 % $ 201 18 % $ 71 35 % PC 114 9 100 9 14 14
Next-generation (PS4, Xbox One, Wii U) 434 34 108 10 326 NM
Prior-generation (PS3, Xbox 360, Wii) 324 25
546 49 (222 ) (41 ) Total console2 758
59 654 59 104 16 Mobile and
other5 86 7 83 7 3 4
Total Activision and Blizzard 1,230 96
1,038 93 192 18 Distribution:
Total Distribution 48 4 73 7 (25
) (34 ) Total consolidated GAAP net revenues 1,278
100 1,111 100 167 15
Change
in Deferred Revenues3 Activision and Blizzard: Online1 (63 ) 26
PC 13 139 Next-generation (PS4, Xbox One, Wii U) (301 ) (76
) Prior-generation (PS3, Xbox 360, Wii) (225 ) (428 )
Total console2 (526 ) (504 ) Mobile and other5
1 --- Total changes in deferred
revenues (575 ) (339 )
Non-GAAP Net
Revenues by Segment/Platform Mix Activision and Blizzard:
Online1 209 30 227 29 (18 ) (8 ) PC 127 18 239 31 (112 ) (47 )
Next-generation (PS4, Xbox One, Wii U) 133 19 32 4 101 NM
Prior-generation (PS3, Xbox 360, Wii) 99 14
118 15 (19 ) (16 ) Total console2 232
33 150 19 82 55 Mobile and
other5 87 12 83 11 4 5
Total Activision and Blizzard 655 93
699 91 (44 ) (6 ) Distribution: Total
Distribution 48 7 73 9 (25 ) (34
) Total consolidated non-GAAP net revenues4 $ 703 100 % $
772 100 % $ (69 ) (9 ) %
1 Revenues from online consist of revenues
from all World of Warcraft products, including subscriptions, boxed
products, expansion packs, licensing royalties, and value-added
services.
2 Downloadable content and their related revenues are
included in each respective console platforms and total console.
3 We provide net revenues including (in accordance with
GAAP) and excluding (non-GAAP) the impact of changes in deferred
revenues. 4 Total non-GAAP net revenues presented also
represent our total operating segment net revenues. 5
Revenues from mobile and other include revenues from handheld and
mobile devices, as well as non-platform specific game related
revenues such as standalone sales of toys and accessories products
from the Skylanders franchise and other physical merchandise and
accessories. 6 The percentages of total are presented as
calculated. Therefore the sum of these percentages, as presented,
may differ due to the impact of rounding.
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES FINANCIAL INFORMATION
For the Three Months Ended March 31, 2015 and 2014 (Amounts
in millions)
Three Months Ended March 31, 2015 March 31,
2014 $ Increase % Increase Amount % of
Total3
Amount % of Total3
(Decrease)
(Decrease) GAAP Net Revenues by Geographic Region
North America $ 704 55 % $ 563 51 % $ 141 25 % Europe 464 36 462 42
2 --- Asia Pacific 110 9 86 8 24 28 Total
consolidated GAAP net revenues 1,278 100 1,111 100
167 15
Change in Deferred Revenues1 North
America (350) (233) Europe (196) (125) Asia Pacific (29)
19 Total changes in net revenues (575) (339)
Non-GAAP Net Revenues by Geographic Region North
America 354 50 330 43 24 7 Europe 268 38 337 44 (69) (20) Asia
Pacific 81 12 105 14 (24) (23) Total non-GAAP
net revenues2 $ 703 100 % $ 772 100 % $ (69) (9) % 1 We provide net
revenues including (in accordance with GAAP) and excluding
(non-GAAP) the impact of changes in deferred revenues. 2 Total
non-GAAP net revenues presented also represents our total operating
segment net revenues. 3 The percentages of total are presented as
calculated. Therefore the sum of these percentages, as presented,
may differ due to the impact of rounding.
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES SEGMENT INFORMATION
For the Three Months Ended March 31, 2015 and 2014 (Amounts
in millions)
Three Months Ended March 31, 2015
March 31, 2014 $ Increase % Increase
Amount % of Total4 Amount % of
Total4 (Decrease) (Decrease) Segment
net revenues: Activision1 $ 303 43 % $ 237 31 % $ 66 28 %
Blizzard2 352 50 462 60 (110) (24) Distribution3 48 7
73 9 (25) (34) Operating segment total 703 100 % 772 100 %
(69) (9)
Reconciliation to consolidated net revenues:
Net effect from deferral of revenues 575 339
Consolidated net revenues $ 1,278 $ 1,111 $ 167 15 %
Segment income from operations: Activision1 $ 66 32 % $ 2 1
% $ 64 NM Blizzard2 139 68 239 100 (100) (42) Distribution3
(1)
---
(1)
---
--- --- Operating segment total 204 100 % 240 100 % (36)
(15)
Reconciliation to consolidated
operating income and consolidated income before income tax
expense:
Net effect from deferral of net revenues and related cost of sales
362 219 Stock-based compensation expense (23) (30) Amortization of
intangible assets (1) (2) Consolidated operating
income 542 427 115 27 Interest and other expense, net 50
51 Consolidated income before income tax expense $ 492 $ 376
$ 116 31 % Operating margin from total operating segments
29.0% 31.1% 1 Activision Publishing
(“Activision”) — publishes interactive entertainment products and
contents. 2 Blizzard Entertainment, Inc. (“Blizzard”) — publishes
PC games and online subscription-based games in the MMORPG
category. 3 Activision Blizzard Distribution (“Distribution”) —
distributes interactive entertainment software and hardware
products. 4 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
ACTIVISION BLIZZARD, INC.
AND SUBSIDIARIES For the Trailing Twelve Months Ended March
31, 2015 EBITDA and Adjusted EBITDA (Amounts in
millions)
Trailing Twelve Months Ended June 30, 2014
September 30, 2014 December 31, 2014 March 31,
2015 March 31, 2015 GAAP Net Income (Loss)
$ 204
$ (23 )
$ 361
$ 394
$ 936
Interest Expense, net 50 51 51 50 202 Provision (Benefit) for
income taxes 56 (20 ) 27 98 161 Depreciation and amortization
19 22 29 20
90
EBITDA 329 30 468 562
1,389 Deferral of net revenues and related cost of
sales (a) (220 ) 180 475 (362 ) 71 Stock-based compensation expense
(b) 22 22 29 23 97 Fees and other expenses related to the Purchase
Transaction and related debt financings (c) ---
48 (36 ) --- 13
Adjusted EBITDA $ 131 $
280 $ 936 $ 223
$ 1,570 (a) Reflects the net change in
deferred revenues and related cost of sales. (b) Includes expense
related to stock-based compensation. (c)
Reflects fees and other expenses
(including legal fees, costs, expenses and accruals) related to the
repurchase of 429 million shares of our common stock from Vivendi
(the "Purchase Transaction") completed on October 11, 2013 and
related debt financings.
Trailing twelve months amounts are presented as calculated.
Therefore, the sum of the four quarters, as presented, may differ
due to the impact of rounding.
ACTIVISION BLIZZARD, INC.
AND SUBSIDIARIES Outlook for the Quarter Ending June 30,
2015 and Year Ending December 31, 2015 GAAP to
Non-GAAP Reconciliation (Amounts in millions, except per
share data) Outlook for Outlook for
Three Months Ending Year Ending
June 30,
2015
December 31,
2015
Net Revenues (GAAP) $ 930 $
4,250
Excluding the
impact of:
Change in deferred net revenues (a) (280 ) 175
Net Revenues (Non-GAAP) $ 650 $
4,425 Earnings Per Diluted Share (GAAP)
$ 0.21 $ 0.98
Excluding the
impact of:
Net effect from deferral in net revenues and related cost of sales
(b) (0.17 ) 0.12 Stock-based compensation (c) 0.02 0.09
Amortization of intangible assets (d) - 0.01
Earnings Per Diluted Share (Non-GAAP) $
0.07 $ 1.20 (a) Reflects the net change in
deferred net revenues. (b) Reflects the net change in deferred net
revenues and related cost of sales. (c) Reflects expense related to
stock-based compensation. (d) Reflects amortization of intangible
assets from purchase price accounting. The per share
adjustments are presented as calculated, and the GAAP and non-GAAP
earnings (loss) per share information is also presented as
calculated. The sum of these measures, as presented, may differ due
to the impact of rounding.
Activision Blizzard, Inc.Amrita AhujaSVP,
Investor Relations(310)
255-2075Amrita.Ahuja@Activision.comorMary
OsakoSVP, Global Communications(424)
322-5166Mary.Osako@Activision.com
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