Upgrade to SI Premium - Free Trial

Activision Blizzard Announces Better-Than-Expected First Quarter 2015 Financial Results

May 6, 2015 4:05 PM

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

SANTA MONICA, Calif.--(BUSINESS WIRE)-- 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:

Company Outlook:

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):

*

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:

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 Ahuja

SVP, Investor Relations

(310) 255-2075

[email protected]

or

Mary Osako

SVP, Global Communications

(424) 322-5166

[email protected]

Source: Activision Blizzard, Inc.

Categories

Press Releases

Next Articles