Record Digital Revenues in the Quarter and
Full Year, Grew 32% Year-Over-Year for GAAP and 20% for Non-GAAP,
Represented More Than 50% of Revenues for the First Time
Monthly Active UsersA in 2015 Grew
25% Year-Over-Year, Reached an All-Time High
Upon Close of King Acquisition, Company Will
Have More Than a Half Billion Monthly Active UsersA
Full Year 2015 GAAP Earnings Per Share Grew
5% from 2014, and at Constant FXB, Full Year 2015 Non-GAAP
Earnings Per Share Grew 13% Above 2014’s Record
Generated Operating Cash Flow of $1.2
Billion in 2015
2016 Cash Dividend Increased By 13% to $0.26
Per Common Share
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced fourth
quarter and full year results.
This Smart News Release features multimedia.
View the full release here:
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Fourth Quarter Calendar Year
Prior (in millions, except EPS)
2015 Outlook* 2014
2015 2014
GAAP
Net Revenues $ 1,353 $ 1,218
$ 1,575 $ 4,664 $ 4,408
EPS $ 0.21 $ 0.09
$ 0.49 $ 1.19
$ 1.13
Non-GAAP
Net Revenues $ 2,118 $ 2,148
$ 2,213 $ 4,621 $ 4,813
EPS $ 0.83 $ 0.82
$ 0.94 $ 1.32
$ 1.42
*Prior outlook was provided by the company on November 2,
2015 in its earnings release.
For calendar year 2015, Activision Blizzard delivered GAAP net
revenues of $4.66 billion, as compared with $4.41 billion for 2014.
GAAP net revenues from digital channels were $2.50 billion and
represented a record 54% of the company’s total net revenues. The
company delivered record GAAP earnings per diluted share of $1.19,
as compared with $1.13 per diluted share for 2014.
On a non-GAAP basis, for the calendar year 2015, the company
delivered net revenues of $4.62 billion, as compared with $4.81
billion for 2014. Non-GAAP net revenues from digital channels were
a record $2.63 billion and represented a record 57% of the
company’s total non-GAAP net revenues. Non-GAAP earnings per share
were $1.32, as compared with $1.42 per diluted share for 2014.
For the quarter ended December 31, 2015, Activision Blizzard’s
GAAP net revenues were $1.35 billion, as compared with $1.58
billion for the fourth quarter of 2014. GAAP net revenues from
digital channels were a record $724 million and represented a Q4
record 54% of the company’s total revenues, growing 34%
year-over-year. GAAP earnings per diluted share for the fourth
quarter of 2015 were $0.21, as compared with $0.49 for the fourth
quarter of 2014.
On a non-GAAP basis, for the quarter ended December 31, 2015,
the company’s net revenues were $2.12 billion, as compared with
$2.21 billion for the fourth quarter of 2014. Non-GAAP net revenues
from digital channels were a record $780 million and represented a
Q4 record 37% of the company’s total non-GAAP net revenues, growing
14% year-over-year. Non-GAAP earnings per diluted share for the
fourth quarter of 2015 were $0.83, as compared with $0.94 for the
fourth quarter of 2014.
At constant FXB, calendar year 2015 non-GAAP net revenues and
EPS were up 4% and 13%, respectively, year-over-year, driven by
strong engagement and recurring digital trends on our year-round
monetizing franchises. Operating margin at constant FXB was also
ahead of 2012’s all-time high of 34%. Non-GAAP net revenues and EPS
for the quarter were roughly flat versus prior year at constant
FXB.
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, “With our expected closing of the acquisition of King Digital
later this month, we will have the largest game network in the
world, with over 500 million users playing our games every month.A
Our entertainment franchises, including Call of Duty, World of
Warcraft and soon Candy Crush, will reach people on mobile, console
and desktop devices in almost every country in the world. This
gives us the opportunity to engage our global audiences and create
revenue streams from content and services. Our esports initiatives,
enhanced by our recent acquisition of Major League Gaming, allow us
to reward our players around the world for their dedication and
investment in our games. We expect to generate approximately $6.25
billion in revenues and over $2.0 billion of operating income in
2016 and we will have over 9,000 of the most talented people
making, marketing and selling great games around the world.”
Selected Business Highlights:
- At constant FXB, Activision
Publishing’s 2015 non-GAAP operating income grew 30%, and revenues
grew 7%. Average MAUsA for the year were up 20% year-over-year,
reaching an all-time high, and digital revenues grew over 65%.
Activision Publishing now has 4 of the top 10 games on
next-generation consoles life-to-date, including Call of
Duty®: Black Ops III at number one.1
- Activision Publishing’s Call of
Duty franchise revenues grew double digits year-over-year both
for the full year and in Q4, ending the quarter with the highest
MAUsA in franchise history. The strong performance was driven by
Call of Duty: Black Ops III, which had the biggest
entertainment opening weekend of 2015, and was the #1 console game
globally for the calendar year.2 Call of Duty was the #1
franchise in North America for the seventh year in a row.1 Black
Ops III also has the highest season pass attach rate for
downloadable content in franchise history. The Call of Duty
franchise has now surpassed 250 million units sold life-to-date
worldwide with over $15 billion in total sales, including in-game
content, since it first launched in 2003.2
- Activision Publishing’s Destiny
achieved record digital attach rates on its critically acclaimed Q3
expansion, The Taken King. Destiny’s 25+ million registered
users have logged nearly 3 billion hours playing the game.
- Activision Publishing’s casual titles,
namely Q3 release Skylanders® SuperChargers
and Q4 release Guitar Hero® Live, performed weaker
than expected, we believe largely due to greater competition in the
toys to life genre and due to the casual audience’s shift to mobile
devices.
- Blizzard Entertainment reached an
all-time high for MAUsA in 2015. Fourth quarter MAUsA were up
nearly 25% year-over-year, reflecting strong engagement with the
online player community. At constant FXB, Blizzard’s 2015
revenues are above 2014’s record results.
- On November 6, 2015, Blizzard
Entertainment revealed that Hearthstone®: Heroes
of Warcraft™ had surpassed the 40
million-registered-player milestone. On November 12, 2015, Blizzard
launched The League of Explorers™, the third adventure for
the franchise, with 45 new cards. This Adventure sold over 20% more
units as of the first 6 weeks after launch than the prior Adventure
in the same time frame. As a result of this new content, and
continued strength across platforms and geographies,
Hearthstone hit all-time franchise highs in multiple
categories, including MAUsA, at the end of Q4.
- On November 6, 2015, Blizzard
Entertainment kicked off presales for Legion™, the
upcoming expansion for World of Warcraft®. Pre-purchasers
will receive the expansion’s level-100 character boost, as well as
early access to the Demon Hunter class when available. World of
Warcraft remains the #1 subscription‐based MMORPG in the
world.
- On November 10, 2015, Blizzard
Entertainment launched Legacy of the Void™, the
standalone third chapter of StarCraft® II,
selling through over 1 million copies in the first 24 hours of
launch. Legacy of the Void received multiple Strategy Game
of the Year awards. At BlizzCon® on November 6, 2015, Blizzard
announced plans for a series of standalone mission packs.
- At BlizzCon, Blizzard Entertainment
announced Heroes of the Storm’s™ upcoming Arena mode,
planned for release in 2016, featuring smaller maps and shorter
sessions. Heroes of the Storm ended the year taking home
multiple awards, including Best Competitive Multiplayer and Best
MOBA from Game Informer.
Company Outlook:
- On November 2, 2015, the company
announced its agreement to acquire King Digital Entertainment for
approximately $5.9 billion in equity value ($4.8 billion in
enterprise value). Following the closing of the transaction, the
addition of King’s business is expected to further position
Activision Blizzard for growth across platforms, audiences, genres,
and business models. Our outlook for 2016 includes King, assuming
we receive the necessary regulatory approvals to allow us to
complete the transaction, which is currently expected to close
later this month.
- On December 22, 2015, Activision
Publishing announced that the field is set for the inaugural
Call of Duty World League Pro Division, with 800
professional esports teams across the world vying for more than $3
million in cash prizes playing Call of Duty: Black Ops III,
culminating with the Call of Duty Championship presented by
PlayStation 4 in the fall of 2016.
- On February 2, 2016, Activision
Publishing launched the first of four map packs for Call of
Duty: Black Ops III, delivering four new, epic multiplayer maps
in addition to an all-new Zombies experience, available first on
PlayStation 4.
- In Q4 2016, Activision Publishing plans
to release an innovative new Call of Duty game from its
studio, Infinity Ward, the makers of the Modern Warfare
series.
- Activision Publishing, along with its
partners at Bungie, expects to bring a large new expansion to
Destiny in 2016 and to release a full game sequel in
2017.
- Activision Publishing expects a new
Skylanders game to launch in 2016 along with Skylanders
Academy, a new TV series celebrating the beloved kids
franchise.
- On January 28, 2016, Blizzard
Entertainment announced the 2016 Heroes of the Dorm™
competition, featuring online team brawler Heroes of the
Storm, with more than $500,000 in tuition and other prizes on
the line as part of this year's event. Esports fans will be able to
follow the action on ESPN networks, who will once again deliver
live coverage of the events on television and digital
platforms.
- Blizzard Entertainment’s team-based
shooter, Overwatch™, will be coming to PC, PlayStation 4,
and Xbox One in spring of 2016. An initial closed beta test ran
from October 27, 2015 to December 10, 2015, and the game reached
top-viewed status on Twitch. Closed beta testing resumed on
February 9, 2016.
- Blizzard’s World of Warcraft is
expected to launch its highly anticipated expansion, Legion,
this summer, following the June release of the Warcraft film
by Legendary Pictures.
- On January 4, 2016, Activision Blizzard
announced the acquisition of Major League Gaming, a leader in
creating and streaming premium live gaming events, organizing
professional competitions and running competitive gaming leagues.
The acquisition expands Activision Blizzard's reach across the
rapidly-growing esports ecosystem by adding proven live streaming
capabilities and technologies to the Activision Blizzard Media
Networks division, led by former ESPN CEO Steve Bornstein and Major
League Gaming co-founder Mike Sepso.
- Activision Blizzard’s first quarter and
calendar year 2016 outlook is as follows. Please note that this
outlook includes King Digital Entertainment in our results based on
an assumed transaction close later this month.
GAAP
Non-GAAP
(in millions, except EPS) Outlook**
Outlook**
CY
2016
Net Revenues
$ 6,100 $ 6,250
EPS $ 0.45 $ 1.75
Fully Diluted
Shares* 767 767
Q1
2016
Net Revenues
$
1,260
$
800
EPS $ 0.21 $ 0.11
Fully Diluted Shares* 756 756
* Fully diluted weighted average shares include
participating securities and dilutive options on a weighted average
basis.
** Outlook includes King Digital Entertainment based on
an assumed transaction close later this month. The outlook includes
certain estimates and assumptions associated with the King
transaction based on the data currently available to us considering
the transaction has not closed. Additionally, our GAAP outlook
includes estimates and assumptions that may be materially different
from those at the transaction close, including our stock price at
and around the transaction close date, market inputs and
assumptions in our stock option expenses, allocation of the
purchase consideration to the acquired assets, and related tax
impact from the transaction, among others.
Currency Assumptions for 2016 Outlook:
- $1.11 USD/Euro for current outlook (vs.
a $1.11 average for 2015 and a $1.33 average for 2014)
- $1.45 USD/British Pound Sterling for
current outlook (vs. a $1.53 average for 2015 and a $1.65 average
for 2014)
- Note: Revenue and EPS increase if the
Euro or British Pound Sterling strengthen vs. USD.
Board Declares Cash Dividend and Authorizes Debt
Repayment
The company also announced that its Board of Directors declared
a cash dividend of $0.26 per common share, payable on May 11, 2016
to shareholders of record at the close of business on March 30,
2016, which represents a 13% increase from the cash dividend paid
in 2015.
The Board of Directors also approved a repayment of up to $1.5
billion of the company’s outstanding debt during 2016.
Conference Call
Today at 4:30 p.m. EST, Activision Blizzard’s management will
host a conference call and Webcast to discuss the company’s results
for the quarter ended December 31, 2015 and management’s outlook
for 2016. 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 888-239-5257 in the U.S. with passcode
1448926.
About Activision Blizzard
Activision Blizzard, Inc., a member of the S&P 500, is the
world's most successful standalone interactive entertainment
company. Activision Blizzard develops and publishes games based on
some of the most beloved entertainment franchises, including Call
of Duty®, 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, Activision Blizzard has
operations throughout the world, and its games are played in 196
countries. More information about Activision Blizzard and its
products can be found on the company's website,
www.activisionblizzard.com.
1 The NPD Group
2 The NPD Group, GfK Chart-Track and Activision Blizzard
internal estimates
A Monthly Active User (MAU) Definition: We monitor
MAUs as a key measure of the overall size of our user base and
their regular engagement with our portfolio of games. MAUs are the
number of individuals who played a particular game in a given
month. We calculate average MAUs in a period by adding the total
number of MAUs in each of the months in a given period and dividing
by the number of months in the period. An individual who plays two
of our games would be counted as two users. For Activision and King
MAUs, an individual who plays the same game on two platforms or
devices in the relevant period would be counted as two users due to
technical limitations. For Blizzard MAUs, an individual who plays
the same game on two platforms or devices in the relevant period
would be counted as one user.
B Constant FX Definition: Constant FX
provides current period results converted into USD using the
average exchange rates from the comparative prior periods rather
than the actual exchange rates in effect during the respective
current periods. We have provided various measurements at constant
FX. Refer to the tables at the back of this press release for a
reconciliation of the company’s GAAP and non-GAAP results. For the
full year and fourth quarter of 2015, we estimated $364 million and
$125 million exchange rate impacts on non-GAAP revenues,
respectively, and $0.28 and $0.11 on non-GAAP EPS, respectively.
Exchange rates impact our non-GAAP operating margins by
approximately 240 basis points for the full year 2015. For the full
year 2015, we estimated $169 million and $111 million exchange rate
impacts on Activision Publishing’s non-GAAP revenues and operating
income. For the full year 2015, we estimated $170 million exchange
rate impacts on Blizzard’s non-GAAP revenues.
No Profit Forecasts: Other than the specific information
relating to the combined outlook for Activision Blizzard and King
Digital Entertainment for 2016 set out in this press release, no
statement in this press release is intended to constitute a profit
forecast for any period, nor should any statements be interpreted
to mean that earnings or earnings per share will necessarily be
greater or lesser than those for the relevant preceding financial
periods for Activision Blizzard and/or King Digital Entertainment,
as appropriate.
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. When relevant, the Company also provides constant FX
information to provide a framework for assessing how our underlying
businesses performed excluding the effect of foreign currency rate
fluctuations. 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;
- fees and other expenses related to
acquisitions, including the acquisition of King Digital
Entertainment, and the 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 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.
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; (4) statements relating to the agreement to
acquire King Digital Entertainment and the timing and expected
impact of that proposed transaction, including without limitation,
the expected impact on Activision Blizzard’s future financial
results; and (5) 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: uncertainties as to whether and when the proposed
acquisition of King Digital Entertainment will close; uncertainties
as to whether and when Activision Blizzard will be able to realize
the anticipated financial results of such acquisition; the
integration of King Digital Entertainment being more difficult,
time-consuming or costly than expected; the diversion of management
time and attention to issues relating to the proposed acquisition
and integration of King Digital Entertainment; sales levels of
Activision Blizzard’s titles including, following completion of the
proposed acquisition, King Digital Entertainment 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 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 entertainment
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 and subsequent quarterly
reports on Form 10-Q.
The forward-looking statements in this press release are based
on information available to the Company, including information
provided to the Company by King Digital Entertainment and our
preliminary assessment on the impact to our financial information
of purchase price accounting, 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,
February 11, 2016.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in millions, except per share
data)
Three Months Ended December 31, Year Ended
December 31, 2015 2014 2015 2014
Net
revenues Product sales $ 711 $ 1,094 $ 2,447 $ 2,786
Subscription, licensing and other revenues1 642 481
2,217 1,622 Total net revenues 1,353 1,575 4,664 4,408
Costs and expenses Cost of sales - product costs 361
432 921 999 Cost of sales - online 63 61 224 232 Cost of sales -
software royalties and amortization 98 124 412 260 Cost of sales -
intellectual property licenses 16 14 28 34 Product development 193
184 646 571 Sales and marketing 289 247 734 712 General and
administrative 83 75 380 417 Total costs and
expenses 1,103 1,137 3,345 3,225
Operating income 250 438 1,319 1,183 Interest and other
expense, net 49 50 198 202 Income
before income tax expense 201 388 1,121 981 Income tax
expense 42 27 229 146 Net income $ 159
$ 361 $ 892 $ 835 Basic earnings per
common share 2 $ 0.22 $ 0.49 $ 1.21 $ 1.14 Weighted average common
shares outstanding 733 720 728 716 Diluted earnings per
common share 2 $ 0.21 $ 0.49 $ 1.19 $ 1.13 Weighted average common
shares outstanding assuming dilution 744 729 739 726
1 Subscription, licensing and other revenues represent
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 6 million and 8 million for the three months and year
ended December 31, 2015, respectively, and 12 million and 15
million for the three months and year ended December 31, 2014,
respectively. For the three months and year ended December 31,
2015, net income attributable to Activision Blizzard, Inc. common
shareholders used to calculate earnings per common share, assuming
dilution, was $158 million and $881 million, respectively, as
compared to total net income of $159 million and $892 million,
respectively, for the same periods. For the three months and year
ended December 31, 2014, net income attributable to Activision
Blizzard, Inc. common shareholders used to calculate earnings per
common share, assuming dilution, was $355 million and $817 million,
respectively, as compared to total net income of $361 million and
$835 million, respectively, for the same periods.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in millions) December 31,
2015 December 31, 2014 Assets Current
assets Cash and cash equivalents $ 1,823 $ 4,848 Cash in escrow
3,561 — Short-term investments 8 10 Accounts receivable, net 679
659 Inventories, net 128 123 Software development 336 452
Intellectual property licenses 30 5 Other current assets 383
444 Total current assets 6,948 6,541 Long-term investments 9
9 Software development 80 20 Intellectual property licenses — 18
Property and equipment, net 189 157 Deferred income taxes, net 268
258 Other assets 173 85 Intangible assets, net 49 29 Trademark and
trade names 433 433 Goodwill 7,095 7,086 Total assets
$ 15,244 $ 14,636
Liabilities and
Shareholders' Equity Current liabilities Accounts payable $ 284
$ 325 Deferred revenues 1,702 1,797 Accrued expenses and other
liabilities 625 592 Total current liabilities 2,611
2,714 Long-term debt, net 4,079 4,324 Deferred income taxes, net 3
4 Other liabilities 483 361 Total liabilities 7,176
7,403 Shareholders' equity Common stock — —
Additional paid-in capital 10,242 9,924 Treasury stock (5,637 )
(5,762 ) Retained earnings 4,096 3,374 Accumulated other
comprehensive loss (633 ) (303 ) Total shareholders’ equity 8,068
7,233 Total liabilities and shareholders’ equity $
15,244 $ 14,636
ACTIVISION BLIZZARD,
INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (Amounts in millions)
Year Ended December 31,
2015
2014
Cash flows from operating activities: Net income $ 892 $ 835
Adjustments to reconcile net income to net cash provided by
operating activities: Deferred income taxes (27 ) (44 ) Provision
for inventories 43 39 Depreciation and amortization 95 90 Loss on
disposal of property and equipment — 1 Amortization of capitalized
software development costs and intellectual property licenses1 399
256 Amortization of debt discount and debt financing costs 7 7
Stock-based compensation expense2 92 104 Excess tax benefits from
stock awards (67 ) (39 ) Changes in operating assets and
liabilities: Accounts receivable, net (40 ) (177 ) Inventories (54
) (2 ) Software development and intellectual property licenses (350
) (349 ) Other assets 21 18 Deferred revenues (27 ) 475 Accounts
payable (25 ) (12 ) Accrued expenses and other liabilities 233
90 Net cash provided by operating activities 1,192
1,292 Cash flows from investing activities:
Proceeds from maturities of available-for-sale investments 145 21
Purchases of available-for-sale investments (145 ) — Acquisition of
business (46 ) — Cash in escrow (3,561 ) — Capital expenditures
(111 ) (107 ) Decrease in restricted cash 2 2 Net
cash used in investing activities (3,716 ) (84 ) Cash flows
from financing activities: Proceeds from issuance of common stock
to employees 106 175 Tax payment related to net share settlements
on restricted stock rights (83 ) (66 ) Excess tax benefits from
stock awards 67 39 Dividends paid (170 ) (147 ) Repayment of
long-term debt (250 ) (375 ) Payment of debt financing costs (7 ) —
Proceeds received from shareholder settlement 202 —
Net cash used in financing activities (135 ) (374 ) Effect
of foreign exchange rate changes on cash and cash equivalents (366
) (396 )
Net (decrease) increase in cash and cash
equivalents
(3,025 ) 438 Cash and cash equivalents at beginning
of period 4,848 4,410 Cash and cash equivalents at
end of period 1,823 $ 4,848
1 Excludes deferral and amortization of stock-based compensation
expense.
2 Includes the net effects of capitalization, deferral, and
amortization of stock-based compensation expense.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION (Amounts in
millions)
Three Months Ended
Year over Year
Three Months Ended
Year over Year
December 31,
March 31,
June 30,
September 30,
December 31,
% Increase
March 31,
June 30,
September 30,
December 31,
% Increase
2013
2014
2014
2014
2014
(Decrease)
2015
2015
2015
2015
(Decrease)
Cash Flow Data Operating Cash Flow $ 880 $ 136 $ 106 $ (145
) $ 1,195 36 % $ 209 $ 135 $ (181 ) $ 1,029 (14 )% Capital
Expenditures 16 37 25 28 17 6 21 28 46
16
(6
)
Non-GAAP Free Cash Flow1 864 99 81 (173 ) 1,178 36 188 107 (227 )
1,013
(14
) Operating Cash Flow - TTM2 1,264 1,075 1,072 977 1,292 2
1,365 1,394 1,358 1,192 (8 ) Capital Expenditures - TTM2 74 94 100
106 107 45 91 94 112
111
4
Non-GAAP Free Cash Flow - TTM2 $ 1,190 $ 981 $ 972 $ 871 $ 1,185 —
% $ 1,274 $ 1,300 $ 1,246 $
1,081
(9
)%
1 Non-GAAP free cash flow represents operating cash flow minus
capital expenditures.
2 TTM represents trailing twelve months. Operating Cash Flow for
the three months ended December 31, 2013, three months ended
September 30, 2013, three months ended June 30, 2013, and three
months ended March 31, 2013 was $880 million, $(50) million, $109
million, and $325 million, respectively. Capital Expenditures for
the three months ended December 31, 2013, three months ended
September 30, 2013, three months ended June 30, 2013, and three
months ended March 31, 2013 was $16 million, $22 million, $19
million, and $17 million, respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION
OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 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 $ 1,353 $ 361 $ 63 $
98 $ 16 $ 193 $ 289 $ 83 $ 1,103
Less: Net effect from deferral of net revenues and related cost of
sales1 765 133 — 74 4 — — — 211 Less: Stock-based compensation2 — —
— (5 ) — (5 ) (2 ) (10 ) (22 ) Less: Amortization of intangible
assets3 — — — — (7 ) — — — (7 ) Less: Fees and other expenses
related to acquisitions4 — — —
— — — —
(5 ) (5 ) Non-GAAP Measurement $ 2,118
$ 494 $ 63 $ 167 $ 13
$ 188 $ 287 $ 68
$ 1,280
Operating Income
Net Income Basic Earnings per Share
Diluted Earnings per Share GAAP
Measurement $ 250 $ 159 $ 0.22 $ 0.21 Less: Net effect from
deferral of net revenues and related cost of sales1 554 438 0.59
0.58
Less: Stock-based compensation2 22 15 0.02 0.02 Less: Amortization
of intangible assets3 7 5 0.01 0.01 Less: Fees and other expenses
related to acquisitions4 5 $ 5 0.01
0.01 Non-GAAP Measurement $ 838
$ 622 $ 0.84 $ 0.83
Year Ended December 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 $ 4,664 $
921 $ 224 $ 412 $ 28 $ 646 $ 734 $ 380 $ 3,345 Less: Net effect
from deferral of net revenues and related cost of sales1 (43 ) (32
) —
(55
) 5 — — —
(82
) Less: Stock-based compensation2 — — — (15 ) — (25 ) (9 ) (43 )
(92 ) Less: Amortization of intangible assets3 — — — — (11 ) — — —
(11 ) Less: Fees and other expenses related to acquisitions4 —
— — — —
— —
(5
)
(5
) Non-GAAP Measurement $ 4,621 $ 889 $
224 $
342
$ 22 $ 621 $ 725
$
332
$ 3,155
Operating Income
Net Income Basic Earnings per
Share Diluted Earnings per Share
GAAP Measurement $ 1,319 $ 892 $ 1.21 $ 1.19 Less: Net effect from
deferral of net revenues and related cost of sales1
39
19
0.02 0.02 Less: Stock-based compensation2 92 65 0.09 0.09 Less:
Amortization of intangible assets3 11 8 0.01 0.01 Less: Fees and
other expenses related to acquisitions4
5
5
0.01 0.01 Non-GAAP Measurement $
1,466 $ 989 $ 1.34 $ 1.32
1 Reflects the net change in deferred revenues and related cost
of sales.
2 Includes expenses related to stock-based compensation.
3 Reflects amortization of intangible assets from purchase price
accounting.
4 Reflects fees and other expenses related to acquisitions,
including the acquisition of King Digital Entertainment, and the
debt financings related thereto.
The per share adjustments and the GAAP and non-GAAP earnings per
share information are presented as calculated. The sum of these
measures, as presented, may differ due to the impact of
rounding.
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. For
the three months and year ended December 31, 2015, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate non-GAAP earnings per common share, assuming dilution,
was $617 million and $977 million, respectively, as compared to
total net income of $622 million and $989 million, respectively,
for the same periods. For purposes of calculating earnings per
share, we had, on a weighted-average basis, common shares
outstanding of 733 million, participating securities of
approximately 6 million, and dilutive shares of 11 million during
the three months ended December 31, 2015. For purposes of
calculating earnings per share, we had, on a weighted-average
basis, common shares outstanding of 728 million, participating
securities of approximately 8 million, and dilutive shares of 11
million during the year ended December 31, 2015.
Refer to Note B in the earnings release for information about
the reconciliation of constant FX non-GAAP measures.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 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 $ 1,575 $
432 $ 61 $ 124 $ 14 $ 184 $ 247 $ 75 $ 1,137 Less: Net effect from
deferral of net revenues and related cost of sales1 638 112 — 52 (1
) — — — 163 Less: Stock-based compensation2 — — — (5 ) — (5 ) (2 )
(17 ) (29 ) Less: Amortization of intangible assets3 — — — — (8 ) —
— — (8 )
Less: Fees and other expenses related to
the Purchase Transaction and related debt financings4
— — — — —
— — 36 36
Non-GAAP Measurement $ 2,213 $ 544
$ 61 $ 171 $ 5 $
179 $ 245 $ 94 $ 1,299
Operating Income Net
Income Basic Earnings per Share
Diluted Earnings per Share GAAP Measurement $
438 $ 361 $ 0.49 $ 0.49 Less: Net effect from deferral of net
revenues and related cost of sales1 475 349 0.48 0.47 Less:
Stock-based compensation2 29 19 0.03 0.03 Less: Amortization of
intangible assets3 8 5 0.01 0.01
Less: Fees and other expenses related to
the Purchase Transaction and related debt financings4
(36 ) (36 ) (0.05 ) (0.05 ) Non-GAAP
Measurement $ 914 $ 698 $ 0.95
$ 0.94
Year Ended December 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 $ 4,408 $ 999 $ 232 $ 260 $ 34
$ 571 $ 712 $ 417 $ 3,225 Less: Net effect from deferral of net
revenues and related cost of sales1 405 29 — 161 — — — — 190 Less:
Stock-based compensation2 — — (1 ) (17 ) — (22 ) (8 ) (56 ) (104 )
Less: Amortization of intangible assets3 — — — — (12 ) — — — (12 )
Less: Fees and other expenses related to
the Purchase Transaction and related debt financings4
— — — — —
— — (13 ) (13 )
Non-GAAP Measurement $ 4,813 $ 1,028 $
231 $ 404 $ 22 $ 549
$ 704 $ 348 $ 3,286
Operating Income Net
Income Basic Earnings per Share
Diluted Earnings per Share GAAP Measurement $
1,183 $ 835 $ 1.14 $ 1.13 Less: Net effect from deferral of net
revenues and related cost of sales1 215 136 0.19 0.18 Less:
Stock-based compensation2 104 65 0.09 0.09 Less: Amortization of
intangible assets3 12 8 0.01 0.01
Less: Fees and other expenses related to
the Purchase Transaction and related debt financings4
13 13 0.02 0.02
Non-GAAP Measurement $ 1,527 $ 1,057 $
1.44 $ 1.42
1 Reflects the net change in deferred revenues and related cost
of sales.
2 Includes expenses related to stock-based compensation.
3 Reflects amortization of intangible assets from purchase price
accounting.
4 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.
The per share adjustments and the GAAP and non-GAAP earnings per
share information are presented as calculated. The sum of these
measures, as presented, may differ due to the impact of
rounding.
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. For
the three months and year ended December 31, 2014, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate non-GAAP earnings per common share, assuming dilution,
was $686 million and $1,034 million, respectively, as compared to
total net income of $698 million and $1,057 million, respectively,
for the same periods. For purposes of calculating earnings per
share, we had, on a weighted-average basis, common shares
outstanding of 720 million, participating securities of
approximately 12 million, and dilutive shares of 9 million during
the three months ended December 31, 2014. For purposes of
calculating earnings per share, we had, on a weighted-average
basis, common shares outstanding of 716 million, participating
securities of approximately 15 million, and dilutive shares of 10
million during the year ended December 31, 2014.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION For the Three Months and Year Ended
December 31, 2015 and 2014 (Amounts in millions)
Three Months Ended December 31, 2015
December 31, 2014 $ Increase (Decrease)
% Increase (Decrease) Amount
% of Total1
Amount
% of Total1
GAAP Net Revenues by Distribution
Channel Retail channels $ 462 34 % $ 846
54 % $ (384 ) (45 )% Digital online channels2 724 54
539 34 185 34 Total Activision and
Blizzard 1,186 88 1,385 88 (199 ) (14 ) Other3 167 12
190 12 (23 ) (12 ) Total consolidated GAAP net
revenues 1,353 100 1,575 100
(222 ) (14 )
Change in Deferred
Revenues4
Retail channels 709 492 Digital online channels2 56 146
Total changes in deferred revenues 765 638
Non-GAAP Net Revenues by Distribution Channel Retail
channels 1,171 55 1,338 60 (167 ) (12 ) Digital online channels2
780 37 685 31 95
14 Total Activision and Blizzard 1,951 92 2,023 91 (72 ) (4 )
Other3 167 8 190 9 (23 )
(12 ) Total non-GAAP net revenues5 $ 2,118 100 % $
2,213 100 % $ (95 ) (4 )%
Year
Ended December 31, 2015 December 31, 2014
$ Increase (Decrease) % Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
GAAP Net Revenues by Distribution
Channel Retail channels $ 1,806 39 % $ 2,104 48 % $ (298 ) (14
)% Digital online channels2 2,502 54 1,897
43 605 32 Total Activision and Blizzard
4,308 92 4,001 91 307 8 Other3 356 8 407
9 (51 ) (13 ) Total consolidated GAAP net
revenues 4,664 100 4,408 100
256 6
Change in Deferred
Revenues4
Retail channels
(169 ) 104 Digital online channels2 126 301 Total
changes in deferred revenues (43 ) 405
Non-GAAP Net Revenues by Distribution Channel Retail
channels 1,637 35 2,208 46 (571 ) (26 ) Digital online channels2
2,628 57 2,198 46 430
20 Total Activision and Blizzard 4,265 92 4,406 92 (141 ) (3
) Other3 356 8 407 8 (51
) (13 ) Total non-GAAP net revenues5 $ 4,621 100 % $
4,813 100 % $ (192 ) (4 )%
1 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
2 Net revenues from digital online channels represent revenues
from digitally distributed subscriptions, licensing royalties,
value-added services, downloadable content, micro-transactions, and
products.
3 Net revenues from Other include revenues from our film and tv
studio and media network businesses, along with revenues that were
historically shown as “Distribution.”
4 We provide net revenues including (in accordance with GAAP)
and excluding (non-GAAP) the impact of changes in deferred
revenues.
5 Total non-GAAP net revenues presented also represents our
total operating segment net revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months Ended December 31, 2015 and 2014
(Amounts in millions) Three Months Ended
December 31, 2015 December 31, 2014
$ Increase (Decrease) % Increase (Decrease)
Amount % of Total1
Amount % of Total1
GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard: Online2 $ 164 12 % $
266 17 % $ (102 ) (38 )% PC 221 16 104 7 117 113
Next-generation (PS4, Xbox One, Wii U) 497 37 367 23 130 35
Prior-generation (PS3, Xbox 360, Wii) 158 12
380 24 (222 ) (58 ) Total console3 655
48 747 47 (92 ) (12 )
Mobile and ancillary4 146 11 268
17 (122 ) (46 ) Total Activision and Blizzard 1,186
88 1,385 88 (199 ) (14 ) Other5
167 12 190 12 (23 ) (12 )
Total consolidated GAAP net revenues 1,353 100
1,575 100 (222 ) (14 )
Change in
Deferred Revenues6 Activision and Blizzard: Online2 27
132 PC 30 23 Next-generation (PS4, Xbox One, Wii U) 616 263
Prior-generation (PS3, Xbox 360, Wii) 89 219 Total
console3 705 482 Mobile and ancillary4 3
1 Total changes in deferred revenues 765 638
Non-GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard: Online2 191 9 398 18 (207 ) (52 ) PC 251
12 127 6 124 98 Next-generation (PS4, Xbox One, Wii U) 1,113
53 630 28 483 77 Prior-generation (PS3, Xbox 360, Wii) 247
12 599 27 (352 ) (59 ) Total
console3 1,360 64 1,229 56
131 11 Mobile and ancillary4 149
7 269 12 (120 ) (45 ) Total Activision
and Blizzard 1,951 92 2,023 91
(72 ) (4 ) Other5 167 8 190
9 (23 ) (12 ) Total consolidated non-GAAP net
revenues7 $ 2,118 100 % $ 2,213 100 % $
(95 ) (4 )%
1 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
2 Revenues from online consists of revenues from all World of
Warcraft products, including subscriptions, boxed products,
expansion packs, licensing royalties, and value-added services.
3 Downloadable content and their related revenues are included
in each respective console platforms and total console.
4 Revenues from mobile and ancillary include revenues from
handheld, mobile and tablet 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.
5 Net revenues from Other include revenues from our film and tv
studio and media network businesses, along with revenues that were
historically shown as “Distribution.”
6 We provide net revenues including (in accordance with GAAP)
and excluding (non-GAAP) the impact of changes in deferred net
revenues.
7 Total non-GAAP net revenues presented also represents our
total operating segment net revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
FINANCIAL INFORMATION
For the Year Ended December 31, 2015 and 2014
(Amounts in millions) Year Ended
December 31, 2015 December 31, 2014
$ Increase (Decrease) % Increase (Decrease)
Amount % of Total1
Amount % of Total1
GAAP Net Revenues by Segment/Platform Mix Activision
and Blizzard: Online2 $ 851 18 % $ 867 20 % $ (16 ) (2 )% PC 648 14
551 13 97 18 Next-generation (PS4, Xbox One, Wii U) 1,492 32
720 16 772 107 Prior-generation (PS3, Xbox 360, Wii) 899
19 1,430 32 (531 ) (37 ) Total
console3 2,391 51 2,150 49
241 11 Mobile and ancillary4 418
9 433 10 (15 ) (3 ) Total Activision
and Blizzard 4,308 92 4,001 91
307 8 Other5 356 8 407
9 (51 ) (13 ) Total consolidated GAAP net revenues
4,664 100 4,408 100 256
6
Change in Deferred Revenues6
Activision and Blizzard: Online2 (138 ) 168 PC 82 41
Next-generation (PS4, Xbox One, Wii U) 252 477 Prior-generation
(PS3, Xbox 360, Wii) (274 ) (295 ) Total console3 (22 ) 182
Mobile and ancillary4 35 14 Total changes in
deferred revenues (43 ) 405
Non-GAAP Net Revenues
by Segment/Platform Mix Activision and Blizzard: Online2 713 15
1,035 22 (322 ) (31 ) PC 730 16 592 12 138 23
Next-generation (PS4, Xbox One, Wii U) 1,744 38 1,197 25 547 46
Prior-generation (PS3, Xbox 360, Wii) 625 14
1,135 24 (510 ) (45 ) Total console3 2,369
51 2,332 48 37 2
Mobile and ancillary4 453 10 447
9 6 1 Total Activision and Blizzard 4,265
92 4,406 92 (141 ) (3 )
Other5
356 8 407 8 (51 ) (13 )
Total consolidated non-GAAP net revenues7 $ 4,621 100
% $ 4,813 100 % $ (192 ) (4 )%
1 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
2 Revenues from online consists of revenues from all World of
Warcraft products, including subscriptions, boxed products,
expansion packs, licensing royalties, and value-added services.
3 Downloadable content and their related revenues are included
in each respective console platforms and total console.
4 Revenues from mobile and ancillary include revenues from
handheld, mobile and tablet 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.
5 Net revenues from Other include revenues from our film and tv
studio and media network businesses, along with revenues that were
historically shown as “Distribution.”
6 We provide net revenues including (in accordance with GAAP)
and excluding (non-GAAP) the impact of changes in deferred net
revenues.
7 Total non-GAAP net revenues presented also represents our
total operating segment net revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months and Year Ended
December 31, 2015 and 2014
(Amounts in millions) Three Months Ended
December 31, 2015 December 31, 2014
$ Increase (Decrease) % Increase (Decrease)
Amount % of Total1
Amount % of Total1
GAAP Net Revenues by Geographic Region North America
$ 659 49 % $ 806 51 % $ (147 ) (18 )% Europe 522 39 653 41 (131 )
(20 ) Asia Pacific 172 13 116 7
56 48 Total consolidated GAAP net revenues 1,353
100 1,575 100 (222 ) (14
)
Change in Deferred Revenues2 North America
447 342 Europe 277 254 Asia Pacific 41 42 Total
changes in net revenues 765 638
Non-GAAP
Net Revenues by Geographic Region North America 1,106 52 1,148
52 (42 ) (4 ) Europe 799 38 907 41 (108 ) (12 ) Asia Pacific 213
10 158 7 55 35
Total non-GAAP net revenues3 $ 2,118 100 % $ 2,213
100 % $ (95 ) (4 )%
Year Ended
December 31, 2015 December 31, 2014
$ Increase (Decrease) % Increase (Decrease)
Amount % of Total1
Amount % of Total1
GAAP Net Revenues by Geographic Region North America
$ 2,409 52 % $ 2,190 50 % $ 219 10 % Europe 1,741 37 1,824 41 (83 )
(5 ) Asia Pacific 514 11 394 9
120 30 Total consolidated GAAP net revenues 4,664
100 4,408 100 256
6
Change in Deferred Revenues2 North America
(55 ) 206 Europe (20 ) 153 Asia Pacific 32 46 Total
changes in net revenues (43 ) 405
Non-GAAP Net
Revenues by Geographic Region North America 2,354 51 2,396 50
(42 ) (2 ) Europe 1,721 37 1,977 41 (256 ) (13 ) Asia Pacific 546
12 440 9 106 24
Total non-GAAP net revenues3 $ 4,621 100 % $ 4,813
100 % $ (192 ) (4 )%
1 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
2 We provide net revenues including (in accordance with GAAP)
and excluding (non-GAAP) the impact of changes in deferred net
revenues.
3 Total non-GAAP net revenues presented also represents our
total operating segment net revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
FINANCIAL INFORMATION For the Three Months and
Year Ended December 31, 2015 and 2014
(Amounts in millions)
Three Months Ended December 31, 2015
December 31, 2014 $ Increase (Decrease)
% Increase (Decrease) Amount % of
Total1 Amount % of
Total1 Segment net revenues:
Activision2 $ 1,492 70 % $ 1,492 67 % $ — — % Blizzard3 459
22 531 24 (72 ) (14 ) Activision
and Blizzard total 1,951 92 2,023 91 (72 ) (4 ) Other4 167
8 190 9 (23 ) (12 ) Segments
total 2,118 100 % 2,213 100 % (95 ) (4 )
Reconciliation to
consolidated net revenues: Net effect from deferral of net
revenues (765 ) (638 ) Consolidated net revenues $ 1,353 $
1,575 (222 ) (14 )%
Segment income from
operations: Activision2 $ 626 $ 696 $ (70 ) (10 )% Blizzard3
177 208 (31 ) (15 ) Activision and Blizzard total 803
904 (101 ) (11 ) Other4 35 10 25 NM Segments
total 838 914 (76 ) (8 )
Reconciliation to consolidated
operating income and consolidated income before income tax
expense: Net effect from deferral of net revenues and related
cost of sales (554 ) (475 ) Stock-based compensation expense (22 )
(29 ) Amortization of intangible assets (7 ) (8 )
Fees and other expenses related to
acquisitions and the Purchase Transaction and related debt
financings5
(5 ) 36 Consolidated operating income 250 438 (188 ) (43 )
Interest and other expense, net 49 50 Consolidated
income before income tax expense $ 201 $ 388 (187 )
(48 )% Operating margin from total operating segments 39.6 %
41.3 %
Year Ended December 31, 2015
December 31, 2014 $ Increase (Decrease) % Increase
(Decrease) Amount % of
Total1 Amount % of
Total1 Segment net revenues:
Activision2 $ 2,700 58 % $ 2,686 56 % $ 14 1 % Blizzard3 1,565
34 1,720 36 (155 ) (9 )
Activision and Blizzard total 4,265 92 4,406 92 (141 ) (3 ) Other4
356 8 407 8 (51 ) (13 )
Segments total 4,621 100 % 4,813 100 % (192 ) (4 )
Reconciliation to consolidated net revenues: Net effect from
deferral of net revenues 43 (405 ) Consolidated net revenues
$ 4,664 $ 4,408 256 6 %
Segment income from
operations: Activision2 $ 868 $ 762 $ 106 14 % Blizzard3 561
756 (195 ) (26 ) Activision and Blizzard total 1,429
1,518 (89 ) (6 ) Other4 37 9 28 NM Operating
segment total 1,466 1,527 (61 ) (4 )
Reconciliation to
consolidated operating income and consolidated income before income
tax expense: Net effect from deferral of net revenues and
related cost of sales
(39
) (215 ) Stock-based compensation expense (92 ) (104 ) Amortization
of intangible assets (11 ) (12 )
Fees and other expenses related to
acquisitions and the Purchase Transaction and related debt
financings5
(5
) (13 ) Consolidated operating income 1,319 1,183 136 11 Interest
and other expense, net 198 202 Consolidated income
before income tax expense $ 1,121 $ 981 140 14 %
Operating margin from total operating segments 31.7 % 31.7 %
1 The percentages of total are presented as calculated.
Therefore the sum of these percentages, as presented, may differ
due to the impact of rounding.
2 Activision Publishing (“Activision”) — publishes interactive
entertainment products and content.
3 Blizzard Entertainment, Inc. (“Blizzard”) — publishes PC games
and online subscription-based games in the MMORPG category.
4 Other includes other income and expenses from operating
segments managed outside the reportable segments, including our
distribution, film and tv studio, and media network businesses, as
well as other unallocated corporate income and expenses.
5 Reflects fees and other expenses related to the Purchase
Transaction and acquisitions, including the acquisition of King
Digital Entertainment and the debt financings related thereto.
Refer to Note B in the earnings release for information about
the reconciliation of constant FX non-GAAP measures.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES EBITDA
and Adjusted EBITDA For the Trailing Twelve Months
Ended December 31, 2015 (Amounts in millions)
Trailing Twelve Months Ended
March 31, 2015
June 30, 2015
September 30, 2015
December 31,2015
December 31,2015
GAAP Net Income $ 394 $ 212 $ 127 $ 159 $ 892
Interest Expense, net 50 50 51 50 200 Provision for income taxes 98
70 18 42 229 Depreciation and amortization 20 21 25
30 95
EBITDA 562 353 221
281 1,416 Deferral of net revenues and related
cost of sales1 (362 ) (181 ) 26 554
39
Stock-based compensation expense2 23 21 28 22 92 Fees and other
expenses related to acquisitions3 — — — 5
5
Adjusted EBITDA $ 223 $
193 $ 275 $ 862
$ 1,552
1 Reflects the net change in deferred revenues and related cost
of sales.
2 Includes expenses related to stock-based compensation.
3 Reflects fees and other expenses related to acquisitions,
including the acquisition of King Digital Entertainment, and the
debt financings related thereto.
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 Three Months Ending
March 31, 2016 and Year Ending December 31, 2016
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share
data)
Outlook for the Outlook for the
Three Months Ending Year Ending March 31, 2016
December 31, 2016
Net Revenues (GAAP)
$
1,260
$ 6,100 Excluding the impact of: Change in
deferred revenues1 (460 ) 150
Net Revenues
(Non-GAAP) $ 800 $ 6,250
Operating Income (GAAP) $ 265
$ 705 Excluding the impact of: Deferral of net
revenues and related cost of sales2 (300 ) 176 Stock-based
compensation3 40 197 Amortization of intangible assets4 110 892
Fees and other expenses related to acquisitions5 45
50
Operating Income (Non-GAAP) $ 160
$ 2,020 Earnings Per Diluted
Share (GAAP) $ 0.21 $ 0.45
Excluding the impact of: Deferral of net revenues and
related cost of sales2 (0.30 ) 0.15 Stock-based compensation3 0.04
0.18 Amortization of intangible assets4 0.11 0.91 Fees and other
expenses related to acquisitions5 0.05 0.07
Earnings Per Diluted Share (Non-GAAP) $ 0.11
$ 1.75
1 Reflects the net change in deferred revenues.
2 Reflects the net change in deferred revenues and related cost
of sales.
3 Reflects expenses related to stock-based compensation.
4 Reflects amortization of intangible assets from purchase price
accounting, including the acquisition of King Digital
Entertainment.
5 Reflects fees and other expenses related to acquisitions,
including the acquisition of King Digital Entertainment, and the
debt financings related thereto.
Outlook includes King Digital Entertainment based on an assumed
transaction close later this month. The outlook includes certain
estimates and assumptions associated with the King transaction
based on the data currently available to us considering the
transaction has not closed. Additionally, our GAAP outlook includes
estimates and assumptions that may be materially different from
those at the transaction close, including our stock price at and
around the transaction close date, market inputs and assumptions in
our stock option expenses, allocation of the purchase consideration
to the acquired assets, and related tax impact from the
transaction, among others.
The per share adjustments and the GAAP and non-GAAP earnings
(loss) per share information are presented as calculated. Therefore
the sum of these measures, as presented, may differ due to the
impact of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160211006451/en/
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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