Exceeds Outlook for Fourth Quarter and Full
Year 2014
Achieved More Than 50% Non-GAAP Earnings Per
Share Growth and Double-Digit Non-GAAP Revenue Growth in
2014
Digital Revenues At All-Time High,
Representing 46% of Full Year Non-GAAP Revenues
Generated Operating Cash Flow of $1.3
Billion in 2014
Announces Two-Year Stock Repurchase Plan of
$750 Million and Debt Paydown of $250 Million
Increases Cash Dividend By 15% to $0.23 Per
Common Share
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced record
fourth quarter and full year earnings per share.
Fourth Quarter Calendar Year
(in millions, except EPS)
2014 Prior
Outlook*
2013
2014 2013
GAAP
Net Revenues $ 1,575
$ 1,492 $ 1,518 $ 4,408
$ 4,583 EPS $ 0.49
$ 0.28 $ 0.22
$ 1.13 $ 0.95
Non-GAAP
Net Revenues $ 2,213 $ 2,200
$ 2,272 $ 4,813 $ 4,342
EPS $ 0.94 $ 0.86
$ 0.79 $ 1.42
$ 0.94
*Prior outlook was provided by the company on November 4,
2014 in its earnings release
For calendar year 2014, Activision Blizzard delivered record
non-GAAP earnings per diluted share of $1.42, as compared with
$0.94 per diluted share for 2013. On a GAAP basis, the company
delivered record earnings per diluted share of $1.13, as compared
with $0.95 per diluted share for 2013.
For calendar year 2014, Activision Blizzard delivered non-GAAP
net revenues of $4.81 billion, as compared with $4.34 billion for
2013. On a GAAP basis, the company delivered net revenues of $4.41
billion, as compared with $4.58 billion for 2013. For the calendar
year, non-GAAP net revenues from digital channels were $2.20
billion and represented a record 46% of the company’s total net
revenues. On a GAAP basis, for the calendar year 2014, net revenues
from digital channels were $1.90 billion and represented 43% of the
company’s total revenues.
For the quarter ended December 31, 2014, Activision Blizzard’s
non-GAAP earnings per diluted share were a record $0.94, as
compared with $0.79 for the fourth quarter of 2013. On a GAAP
basis, the company’s earnings per diluted share were a record
$0.49, more than double the earnings per diluted share of $0.22 for
the fourth quarter of 2013.
For the quarter ended December 31, 2014, the company delivered
non-GAAP net revenues of $2.21 billion, as compared with $2.27
billion for the fourth quarter of 2013. On a GAAP basis, the
company’s net revenues were $1.58 billion, as compared with $1.52
billion for the fourth quarter of 2013.
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, “2014 was another successful year as we achieved record
results and introduced new franchises with outstanding gameplay,
expanded on exciting new business models and continued investing in
some of the world’s most important entertainment franchises. We
delivered record earnings per share which increased more than 50%
from the previous year, double-digit revenue growth, and record
high-margin digital revenues that represent an all-time high of 46%
of total revenues (all non-GAAP).”
Kotick, added, “We expanded our franchise portfolio by launching
two of the industry’s most successful new brands, Blizzard’s
Hearthstone®: Heroes of Warcraft™, and the biggest
new IP launch in industry history, Destiny®. Combined, these
franchises attracted over 40 million registered players worldwide
and generated more than $850 million in non-GAAP revenue.1 This
year, we expect to expand our franchise portfolio to 10
blockbusters, up from five franchises at the beginning of 2014. Our
amazingly talented teams will continue to produce the world’s best
content for gamers.”
Kotick, continued, “We have a growing portfolio of the very best
franchises and great confidence in our future. Our Board has once
again increased our dividend, authorized a $750 million share
repurchase program and the repayment of another $250 million of our
debt, and we have returned nearly $10 billion to our shareholders
in dividends and repurchases since 2008.”
Selected Business Highlights:
- In North America and Europe combined,
Activision Publishing was the #1 retail publisher and had three of
the top five best-selling new releases for the calendar year — #1
Call of Duty®: Advanced Warfare, #3 Destiny, and #5
Skylanders® Trap Team.2
- Activision Publishing’s Call of
Duty: Advanced Warfare was the #1 top-selling console game
globally for the calendar year.3 Additionally, in 2014, Call of
Duty was the #1 franchise in North America for the sixth year in a
row.4 Call of Duty franchise revenues now exceed $11 billion in
retail sales worldwide since it first launched in 2003.5
- Activision Publishing’s Destiny
was the most successful launch of a new video game franchise in
history.2 Destiny was also the #1 top-selling new video game
IP and the #3 top-selling new release in North America and Europe,
combined, for the calendar year.2 To date, Destiny has more
than 16 million registered users and active players are playing the
game an average of over three hours per day.
- Activision Publishing’s
Skylanders Trap Team was the #1 top-selling kids
console game globally for the calendar year. For the third
consecutive year, Skylanders was the #1 kids video game franchise
of the year in the U.S., and globally.3
- At BlizzCon® on November 7, 2014,
Blizzard Entertainment announced a new intellectual property,
Overwatch™ — a highly accessible multi-player game
featuring an amazing cast of heroes and set in an all-new Blizzard
game universe.
- On November 13, 2014, Blizzard
Entertainment launched Warlords of Draenor™,
the fifth expansion for the #1 subscription-based MMORPG in the
world, World of Warcraft®. The expansion sold-through
more than 3.3 million copies as of the first 24 hours of its
availability and helped drive World of Warcraft to more than
10 million global subscribers at the end of 2014.
- On December 8, 2014, Blizzard
Entertainment launched Goblins vs Gnomes™, the first
expansion for Hearthstone: Heroes of Warcraft. The release
of Hearthstone: Heroes of Warcraft on Android tablets
followed on December 15, 2014.
Company Outlook:
On January 11, 2015, Activision Publishing and Tencent launched
a public open beta for Call of Duty® Online, making
the game available to millions of Chinese gamers. The open beta
marks a historic first for the Call of Duty series as it expands
into the world’s largest gaming market.
On January 13, 2015, Blizzard Entertainment began the closed
beta test for Heroes of the Storm™, its
upcoming free-to-play online team brawler featuring iconic heroes
from more than 20 years of Blizzard gaming history. To date, more
than nine million players have signed up to beta test the game.
On January 27, 2015, Activision Publishing launched the first
DLC for Call of Duty®: Advanced Warfare – Havoc, available
first on the Xbox Live online entertainment network from Microsoft
for Xbox One and Xbox 360. The DLC offers four new
multi-player maps, exclusive weapon, custom weapon variant and a
new zombies cooperative mode called Exo Zombies.
In January 2015, Blizzard Entertainment’s Hearthstone: Heroes
of Warcraft reached more than 25 million registered
players.
Additionally, in 2015, Blizzard Entertainment expects to begin
beta testing Overwatch.
Given the significant weakening of foreign currencies versus the
U.S. dollar, the company’s 2015 international revenues and earnings
are expected to be translated at much lower rates than in 2014.
This will impact the company’s 2015 outlook as compared to 2014
actual results given approximately 50% of the company’s revenues,
and a higher percentage of profits, are generated outside the U.S.
See reconciliation table, below.
Activision Blizzard’s first quarter and calendar year 2015
outlook is, as follows:
(in millions, except EPS)
GAAP Outlook
Non-GAAP Outlook
CY
2015
Net Revenues
$ 4,140 $ 4,400
EPS $ 0.89 $ 1.15
Fully Diluted
Shares** 750 750
Q1
2015
Net Revenues
$ 1,140 $ 640
EPS $ 0.37 $ 0.05
Fully Diluted
Shares** 745 745
The following table reconciles our CY14 actual earnings per
share to CY15 outlook earnings per share.
EPS GAAP
Non-GAAP CY14 – Actuals $ 1.13 $ 1.42
Slate
/ Operations*** 0.01 (0.05 )
Foreign Currency (0.17 )
(0.14 )
Tax Rate & Share Count (0.08 )
(0.08 )
CY15 – Outlook $ 0.89 $ 1.15
Currency Assumptions for 2015 Outlook:
- $1.13 USD/Euro (vs. a $1.33 average for
2014)
- $1.51 USD/British Pound Sterling (vs. a
$1.65 average for 2014)
- Revenue and EPS increase if the Euro or
British Pound Sterling strengthens vs. USD
** Fully diluted weighted average shares include
participating securities and dilutive options on a weighted average
basis.*** For GAAP purpose, it includes the net change in deferred
net revenues and related cost of sales.
Board Authorizes Stock Repurchase Program and Debt Repayment
and Declares Cash Dividend
The company also announced that its Board of Directors
authorized a new two-year stock repurchase program under which the
company is authorized to repurchase up to $750 million of its
outstanding common stock during the period from February 9, 2015
through February 8, 2017.
Additionally, the company announced that its Board of Directors
has approved a repayment of $250 million of the company’s
outstanding “Term Loan B,” which is expected to occur during the
first quarter of 2015.
The Board of Directors also declared a cash dividend of $0.23
per common share, payable on May 13, 2015 to shareholders of record
at the close of business on March 30, 2015, which represents a 15%
increase from 2014.
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, 2014 and management’s outlook
for 2015. 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 877-741-4239 in the U.S. with passcode
3638929.
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.
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 During calendar year 2014, combined GAAP revenues from
Hearthstone: Heroes of Warcraft and Destiny were more than $450
million. The difference in GAAP and non-GAAP revenues represents
the net change in deferrals of revenues of approximately $400
million.2 The NPD Group and GfK Chart-Track, including toys and
accessories3 The NPD Group and GfK Chart-Track and Activision
Blizzard internal estimates, including toys and accessories4 The
NPD Group5 The NPD Group and GfK Chart-Track
Subscriber Definition: World of Warcraft subscribers
include individuals who have paid a subscription fee or have an
active prepaid card to play World of Warcraft, as well as those who
have purchased the game and are within their free month of access.
Internet Game Room players who have accessed the game over the last
thirty days are also counted as subscribers. The above definition
excludes all players under free promotional subscriptions, expired
or cancelled subscriptions, and expired prepaid cards. Subscribers
in licensees' territories are defined along the same rules.
Non-GAAP Financial Measures: As a supplement to our
financial measures presented in accordance with Generally Accepted
Accounting Principles (“GAAP”), Activision Blizzard presents
certain non-GAAP measures of financial performance. These non-GAAP
financial measures are not intended to be considered in isolation
from, as a substitute for, or as more important than, the financial
information prepared and presented in accordance with GAAP. In
addition, these non-GAAP measures have limitations in that they do
not reflect all of the items associated with the company’s results
of operations as determined in accordance with GAAP.
Activision Blizzard provides net revenues, net income (loss),
earnings (loss) per share and operating margin data and guidance
both including (in accordance with GAAP) and excluding (non-GAAP)
certain items. In addition, Activision Blizzard provides EBITDA
(defined as GAAP net income (loss) before interest (income)
expense, income taxes, depreciation and amortization) and adjusted
EBITDA (defined as non-GAAP operating margin (see non-GAAP
financial measure below) before depreciation). The non-GAAP
financial measures exclude the following items, as applicable in
any given reporting period:
- the change in deferred revenues and
related cost of sales with respect to certain of the company’s
online-enabled games;
- expenses related to stock-based
compensation;
- the amortization of intangibles from
purchase price accounting;
- fees and other expenses (including
legal fees, costs, expenses and accruals) related to the
acquisition of 429 million shares of our common stock on October
11, 2013 from Vivendi, pursuant to the stock purchase agreement
dated July 25, 2013 and the $4.75 billion debt financings related
thereto; and
- the income tax adjustments associated
with any of the above items.
In the future, Activision Blizzard may also consider whether
other significant non-recurring items should also be excluded in
calculating the non-GAAP financial measures used by the company.
Management believes that the presentation of these non-GAAP
financial measures provides investors with additional useful
information to measure Activision Blizzard’s financial and
operating performance. In particular, the measures facilitate
comparison of operating performance between periods and help
investors to better understand the operating results of Activision
Blizzard by excluding certain items that may not be indicative of
the company’s core business, operating results or future outlook.
Internally, management uses these non-GAAP financial measures in
assessing the company’s operating results, and measuring compliance
with the requirements of the company’s debt financing agreements,
as well as in planning and forecasting.
Activision Blizzard’s non-GAAP financial measures are not based
on a comprehensive set of accounting rules or principles, and the
terms non-GAAP net revenues, non-GAAP net income, non-GAAP earnings
per share, non-GAAP operating margin, and non-GAAP or adjusted
EBITDA do not have a standardized meaning. Therefore, other
companies may use the same or similarly named measures, but exclude
different items, which may not provide investors a comparable view
of Activision Blizzard’s performance in relation to other
companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering Activision Blizzard’s GAAP, as well
as non-GAAP, results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
In addition to the reasons stated above, which are generally
applicable to each of the items Activision Blizzard excludes from
its non-GAAP financial measures, there are additional specific
reasons why the company believes it is appropriate to exclude the
change in deferred revenues and related cost of sales with respect
to certain of the company’s online-enabled games.
Since Activision Blizzard has determined that some of our games’
online functionality represents an essential component of gameplay
and, as a result, a more-than-inconsequential separate deliverable,
we recognize revenues attributed to these game titles over their
estimated service periods, which may range from five months to a
maximum of less than a year. The related cost of sales is deferred
and recognized as the related revenues are recognized. Internally,
management excludes the impact of this change in deferred revenues
and related cost of sales in its non-GAAP financial measures when
evaluating the company’s operating performance, when planning,
forecasting and analyzing future periods, and when assessing the
performance of its management team. Management believes this is
appropriate because doing so enables an analysis of performance
based on the timing of actual transactions with our customers,
which is consistent with the way the company is measured by
investment analysts and industry data sources. In addition,
excluding the change in deferred revenues and the related cost of
sales provides a much more timely indication of trends in our
operating results.
Cautionary Note Regarding Forward-looking Statements:
Information in this press release that involves Activision
Blizzard’s expectations, plans, intentions or strategies regarding
the future, including statements under the heading “Company
Outlook,” are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
consist of any statement other than a recitation of historical
facts and include, but are not limited to: (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 relating to product releases; and (3)
statements of future financial or operating performance.
Activision Blizzard 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. Activision
Blizzard’s actual future results could differ materially from those
expressed in the forward-looking statements set forth in this
release. Risks and uncertainties that may affect our future results
include, but are not limited to, sales levels of Activision
Blizzard’s titles, increasing concentration of titles, shifts in
consumer spending trends, the impact of the current macroeconomic
environment, Activision Blizzard’s ability to predict consumer
preferences, including interest in specific genres, such as
first-person action, massively multiplayer online and “toys to
life” games, and preferences among hardware platforms, the seasonal
and cyclical nature of the interactive game market, changing
business models, including digital delivery of content, competition
including from used games and other forms of entertainment,
possible declines in software pricing, product returns and price
protection, product delays, adoption rate and availability of new
hardware (including peripherals) and related software, particularly
during the ongoing console transition, rapid changes in technology
and industry standards, the current regulatory environment,
litigation risks and associated costs, protection of proprietary
rights, maintenance of relationships with key personnel, customers,
financing providers, licensees, licensors, vendors, and third-party
developers, including the ability to attract, retain and develop
key personnel and developers that can create high quality titles,
counterparty risks relating to customers, licensees, licensors and
manufacturers, domestic and international economic, financial and
political conditions and policies, foreign exchange rates and tax
rates, the identification of suitable future acquisition
opportunities and potential challenges associated with geographic
expansion, capital market risks, the possibility that expected
benefits related to the transactions involving the repurchase of
shares from Vivendi S.A. may not materialize as expected, the
amount of our debt and the limitations imposed by the covenants in
the agreements governing our debt, 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 release are based upon
information available to Activision Blizzard as of the date of this
release, and Activision Blizzard assumes no obligation to update
any such forward-looking statements. Although these forward-looking
statements are believed to be true when made, they may ultimately
prove to be incorrect. These statements are not guarantees of the
future performance of Activision Blizzard and are subject to risks,
uncertainties and other factors, some of which are beyond its
control and may cause actual results to differ materially from
current expectations.
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, 2014 2013 2014
2013 Net revenues: Product sales $ 1,094 $
1,152 $ 2,786 $ 3,201 Subscription, licensing and other
revenues 1 481 366 1,622
1,382 Total net revenues 1,575
1,518 4,408 4,583
Costs and expenses: Cost of sales - product costs 432 502 999 1,053
Cost of sales - online 61 50 232 204 Cost of sales - software
royalties and amortization 124 72 260 187 Cost of sales -
intellectual property licenses 14 31 34 87 Product development 184
197 571 584 Sales and marketing 247 239 712 606 General and
administrative 75 143 417
490 Total costs and expenses 1,137
1,234 3,225 3,211
Operating income 438 284 1,183 1,372 Interest and other investment
income (expense), net (50 ) (51
)
(202 ) (53 ) Income before income tax expense 388 233
981 1,319 Income tax expense 27 59
146 309 Net income $ 361 $ 174
$ 835 $ 1,010
Basic earnings per
common share 2 $ 0.49 $ 0.23 $ 1.14 $ 0.96 Weighted average common
shares outstanding 720 745 716
1,024
Diluted earnings per
common share 2 $ 0.49 $ 0.22 $ 1.13 $ 0.95 Weighted average common
shares outstanding assuming dilution 729 757
726 1,035
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 12 million and 15
million for the three months and year ended December 31, 2014,
respectively. We had, on a weighted-average basis, participating
securities of approximately 23 million and 24 million for the three
months and year ended December 31, 2013, respectively. Net income
attributable to Activision Blizzard Inc. common shareholders used
to calculate earnings per common share assuming dilution was $355
million and $817 million for the three months and year ended
December 31, 2014 as compared to total net income of $361 million
and $835 million for the same periods, respectively. Net income
attributable to Activision Blizzard Inc. common shareholders used
to calculate earnings per common share assuming dilution was $168
million and $987 million for the three months and year ended
December 31, 2013 as compared to total net income of $174 million
and $1,010 million for the same periods, respectively.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in
millions)
December 31, December 31,
2014 2013
ASSETS
Current assets: Cash and cash equivalents $ 4,848 $ 4,410
Short-term investments 10 33 Accounts receivable, net 659 510
Inventories, net 123 171 Software development 452 367 Intellectual
property licenses 5 11 Deferred income taxes, net 368 321
Other current assets 444 418
Total current assets 6,909 6,241
Long-term investments 9 9 Software development 20 21
Intellectual property licenses 18 --- Property and equipment, net
157 138 Other assets 85 35 Intangible assets, net 29 43 Trademark
and trade names 433 433 Goodwill 7,086
7,092 Total assets $ 14,746 $
14,012
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 325 $ 355 Deferred
revenues 1,797 1,389 Accrued expenses and other liabilities 592 636
Current portion of long-term debt ---
25 Total current liabilities
2,714 2,405 Long-term debt, net 4,324 4,668
Deferred income taxes, net 114 66 Other liabilities
361 251 Total liabilities
7,513 7,390 Shareholders’ equity:
Common stock --- --- Additional paid-in capital 9,924 9,682
Treasury stock (5,762 ) (5,814 ) Retained earnings 3,374 2,686
Accumulated other comprehensive income (loss)
(303 ) 68 Total shareholders’ equity
7,233 6,622 Total
liabilities and shareholders’ equity $ 14,746 $ 14,012
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Amounts in millions)
Year Ended December 31, 2014
2013 Cash flows from operating
activities: Net income $ 835 $ 1,010 Adjustments to reconcile net
income to net cash provided by operating activities: Deferred
income taxes (44 ) 161 Provision for inventories 39 33 Depreciation
and amortization 90 108 Loss on disposal of property and equipment
1 --- Amortization and write-off of capitalized software
development costs and intellectual property licenses (1) 256 207
Amortization of debt discount and debt financing costs 7 1
Stock-based compensation expense (2) 104 108 Excess tax benefits
from stock awards (39 ) (29 ) Changes in operating assets and
liabilities: Accounts receivable, net (177 ) 198 Inventories (2 ) 6
Software development and intellectual property licenses (349 ) (268
) Other assets 18 (67 ) Deferred revenues 475 (275 ) Accounts
payable (12 ) 7 Accrued expenses and other
liabilities 90 64 Net cash
provided by operating activities 1,292 1,264
Cash flows from investing activities: Proceeds from
maturities of available-for-sale investments 21 304 Proceeds from
sales of available-for-sale investments --- 98 Purchases of
available-for-sale investments --- (26 ) Capital expenditures (107
) (74 ) Decrease (increase) in restricted cash 2
6 Net cash provided by (used in)
investing activities (84 ) 308 Cash
flows from financing activities: Proceeds from issuance of common
stock to employees 175 158 Tax payment related to net share
settlements on restricted stock rights (66 ) (49 ) Repurchase of
common stock --- (5,830 ) Dividends paid (147 ) (216 ) Proceeds
from issuance of long-term debt --- 4,750 Repayment of long-term
debt (375 ) (6 ) Payment of debt discount and financing costs ---
(59 ) Excess tax benefits from stock awards 39
29 Net cash used in financing activities
(374 ) (1,223 ) Effect of foreign exchange
rate changes on cash and cash equivalents (396 ) 102
Net increase in cash and cash equivalents 438 451
Cash and cash equivalents at beginning of period 4,410
3,959 Cash and cash equivalents at end
of period $ 4,848 $ 4,410
(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 2012 2013 2013 2013
2013 (Decrease) 2014 2014
2014 2014 (Decrease) Cash Flow
Data Operating Cash Flow $ 976 $ 325 $ 109 $ (50 ) $ 880 (10 )%
$ 136 $ 106 $ (145 ) $ 1,195 36 % Capital Expenditures 27 17 19 22
16 (41 ) 37 25 28 17 6 Non-GAAP Free Cash Flow2 949 308 90 (72 )
864 (9 ) 99 81 (173 ) 1,178 36 Operating Cash Flow - TTM1
1,345 1,516 1,532 1,360 1,264 (6 ) 1,075 1,072 977 1,292 2 Capital
Expenditures - TTM1 73 82 84 85 74 1 94 100 106 107 45 Non-GAAP
Free Cash Flow - TTM1 $ 1,272 $ 1,434 $ 1,448 $ 1,275 $ 1,190 (6 )%
$ 981 $ 972 $ 871 $ 1,185 (0 )%
1
TTM represents trailing twelve months. Operating Cash Flow for the
three months ended December 31, 2012, three months ended September
30, 2012, three months ended June 30, 2012, and three months ended
March 31, 2012 was $976 million, $122 million, $93 million, and
$154 million, respectively. Capital expenditures for the three
months ended December 31, 2012, three months ended September 30,
2012, three months ended June 30, 2012, and three months ended
March 31, 2012 was $27 million, $21 million, $17 million, and $8
million, respectively.
2
Non-GAAP free cash flow represents operating cash flow minus
capital expenditures (which includes payment for acquisition of
intangible assets).
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 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 sales (a) 638 112 - 52 (1 ) - - - 163 Less:
Stock-based compensation (b) - - - (5 ) - (5 ) (2 ) (17 ) (29 )
Less: Amortization of intangible assets (c) - - - - (8 ) - - - (8 )
Less: Fees and other expenses related to the Purchase Transaction
and related debt financings (d) - -
- - - -
- 36 36 Non-GAAP
Measurement $ 2,213 $ 544 $ 61 $ 171
$ 5 $ 179 $ 245 $ 94 $ 1,299
Three Months Ended December 31,
2014
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 sales (a) 475 349 0.48
0.47 Less: Stock-based compensation (b) 29 19 0.03 0.03 Less:
Amortization of intangible assets (c) 8 5 0.01 0.01 Less: Fees and
other expenses related to the Purchase Transaction and related debt
financings (d) (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 sales (a) 405 29 - 161 - - - - 190 Less:
Stock-based compensation (b) - - (1 ) (17 ) - (22 ) (8 ) (56 ) (104
) Less: Amortization of intangible assets (c) - - - - (12 ) - - -
(12 ) Less: Fees and other expenses related to the Purchase
Transaction and related debt financings (d) - -
- - - -
- (13 ) (13 ) Non-GAAP Measurement
$ 4,813 $ 1,028 $ 231 $ 404 $ 22 $ 549
$ 704 $ 348 $ 3,286
Year Ended December 31, 2014
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 sales (a) 215 136 0.19
0.18 Less: Stock-based compensation (b) 104 65 0.09 0.09 Less:
Amortization of intangible assets (c) 12 8 0.01 0.01 Less: Fees and
other expenses related to the Purchase Transaction and related debt
financings (d) 13 13 0.02 0.02
Non-GAAP Measurement $ 1,527 $ 1,057 $ 1.44 $
1.42
(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. (d) 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 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 common shareholders used to calculate non-GAAP
earnings per common share assuming dilution was $686 million and
$1,034 million for the three months and year ended December 31,
2014 as compared to total non-GAAP net income of $698 million and
$1,057 million for the same periods, respectively. For
purpose of calculation of 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 purpose of calculation of 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.
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 RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP MEASURES (Amounts in millions, except
earnings per share data)
Three Months Ended
December 31, 2013
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 $ 1,518 $ 502 $ 50 $ 72 $ 31 $ 197 $
239 $ 143 $ 1,234 Less: Net effect from deferral of net
revenues and related cost of sales (a) 754 181 - 64 - - - - 245
Less: Stock-based compensation (b) - - - (7 ) - (10 ) (2 ) (15 )
(34 ) Less: Amortization of intangible assets (c) - - - - (15 ) - -
- (15 ) Less: Fees and other expenses related to the Purchase
Transaction and related debt financings (d) - -
- - - - -
(18 ) (18 ) Non-GAAP Measurement $ 2,272 $ 683
$ 50 $ 129 $ 16 $ 187 $ 237 $ 110
$ 1,412
Three Months Ended December 31, 2013
Operating Income Net
Income Basic Earnings per Share
Diluted Earnings per
Share
GAAP Measurement $ 284 $ 174 $ 0.23 $ 0.22 Less: Net effect from
deferral of net revenues and related cost of sales (a) 509 401 0.52
0.51 Less: Stock-based compensation (b) 34 23 0.03 0.03 Less:
Amortization of intangible assets (c) 15 9 0.01 0.01 Less: Fees and
other expenses related to the Purchase Transaction and related debt
financings (d) 18 14 0.02 0.02
Non-GAAP Measurement $ 860 $ 621 $ 0.81 $ 0.79 Year Ended
December 31, 2013
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 $ 4,583 $ 1,053 $ 204 $ 187 $ 87 $
584 $ 606 $ 490 $ 3,211 Less: Net effect from deferral of
net revenues and related cost of sales (a) (241 ) (10 ) - 2 (4 ) -
- - (12 ) Less: Stock-based compensation (b) - - - (17 ) - (33 ) (7
) (53 ) (110 ) Less: Amortization of intangible assets (c) - - - -
(23 ) - - - (23 ) Less: Fees and other expenses related to the
Purchase Transaction and related debt financings (d) -
- - - -
- - (79 ) (79 )
Non-GAAP Measurement $ 4,342 $ 1,043 $ 204 $
172 $ 60 $ 551 $ 599 $ 358 $
2,987
Year Ended
December 31, 2013
Operating Income Net Income
Basic Earnings per Share
Diluted Earnings per
Share
GAAP Measurement $ 1,372 $ 1,010 $ 0.96 $ 0.95 Less: Net effect
from deferral of net revenues and related cost of sales (a) (229 )
(150 ) (0.14 ) (0.14 ) Less: Stock-based compensation (b) 110 71
0.07 0.07 Less: Amortization of intangible assets (c) 23 14 0.01
0.01 Less: Fees and other expenses related to the Purchase
Transaction and related debt financings (d) 79
54 0.05 0.05 Non-GAAP
Measurement $ 1,355 $ 999 $ 0.95 $ 0.94
(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. (d) 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 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 $602
million and $976 million for the three months and year ended
December 31, 2013 as compared to total non-GAAP net income of $621
million and $999 million for the same periods, respectively.
For purpose of calculation of earnings per share, we had, on a
weighted-average basis, common shares outstanding of 745 million,
participating securities of approximately 23 million, and dilutive
shares of 12 million during the three months ended December 31,
2013. For purpose of calculation of earnings per share, we had, on
a weighted-average basis, common shares outstanding of 1,024
million, participating securities of approximately 24 million, and
dilutive shares of 11 million during the year ended December 31,
2013. 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 and Year Ended December 31, 2014 and
2013 (Amounts in millions)
Three Months Ended December 31, 2014
December 31, 2013 $ Increase % Increase
Amount % of Total4
Amount % of Total4
(Decrease) (Decrease) GAAP Net Revenues by
Distribution Channel Retail channels $ 846 54 % $ 953 63 % $
(107 ) (11 )% Digital online channels1 539 34 385
25 154 40 Total Activision and Blizzard 1,385
88 1,338 88 47 4 Distribution 190 12 180
12 10 6 Total consolidated GAAP net revenues
1,575 100 1,518 100 57 4
Change in Deferred Revenues2 Retail channels 492 786 Digital
online channels1 146 (32 ) Total changes in deferred
revenues 638 754
Non-GAAP Net
Revenues by Distribution Channel Retail channels 1,338 60 1,739
77 (401 ) (23 ) Digital online channels1 685 31 353
16 332 94 Total Activision and Blizzard 2,023
91 2,092 92 (69 ) (3 ) Distribution 190 9 180
8 10 6 Total non-GAAP net revenues3 $ 2,213
100 % $ 2,272 100 % $ (59 ) (3 )%
Year
Ended December 31, 2014 December 31, 2013 $
Increase % Increase Amount % of Total4
Amount % of Total4
(Decrease)
(Decrease) GAAP Net Revenues by Distribution Channel
Retail channels $ 2,104 48 % $ 2,701 59 % $ (597 ) (22 )% Digital
online channels1 1,897 43 1,559 34 338
22 Total Activision and Blizzard 4,001 91 4,260 93 (259 ) (6
) Distribution 407 9 323 7 84
26 Total consolidated GAAP net revenues 4,408 100
4,583 100 (175 ) (4 )
Change in
Deferred Revenues2 Retail channels 104 (247 ) Digital online
channels1 301 6 Total changes in deferred
revenues 405 (241 )
Non-GAAP Net Revenues
by Distribution Channel Retail channels 2,208 46 2,454 57 (246
) (10 ) Digital online channels1 2,198 46 1,565
36 633 40 Total Activision and Blizzard 4,406
92 4,019 93 387 10 Distribution 407 8 323
7 84 26 Total non-GAAP net revenues3 $ 4,813
100 % $ 4,342 100 % $ 471 11 % 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 December
31, 2014 and 2013 (Amounts in millions)
Three
Months Ended December 31, 2014 December 31,
2013 $ Increase % Increase
Amount % of Total6
Amount %
of Total6
(Decrease) (Decrease) GAAP Net
Revenues by Segment/Platform Mix Activision and Blizzard:
Online1 $ 266 17 % $ 198 13 % $ 68 34 % PC 104 7 66 4 38 58
Next-generation (PS4, Xbox One, Wii U) 367 23 79 5 288 NM
Prior-generation (PS3, Xbox 360, Wii) 380 24 666 44
(286) (43) Total console2 747 47 745 49
2 --- Mobile and other5 268 17 329 22 (61) (19)
Total Activision
and Blizzard 1,385 88 1,338 88 47 4
Distribution: Total Distribution 190 12 180 12
10 6 Total consolidated GAAP net revenues 1,575 100
1,518 100 57 4
Change in Deferred Revenues3
Activision and Blizzard: Online1 132 3 PC 23 45
Next-generation (PS4, Xbox One, Wii U) 263 222 Prior-generation
(PS3, Xbox 360, Wii) 219 484 Total console2
482 706 Mobile and other5 1 --- Total
changes in deferred revenues 638 754
Non-GAAP Net Revenues by Segment/Platform Mix Activision and
Blizzard: Online1 398 18 201 9 197 98 PC 127 6 111 5 16 14
Next-generation (PS4, Xbox One, Wii U) 630 28 301 13 329
NM
Prior-generation (PS3, Xbox 360, Wii) 599 27 1,150 51
(551) (48) Total console2 1,229 56 1,451 64
(222) (15) Mobile and other5 269 12 329 14 (60) (18)
Total
Activision and Blizzard 2,023 91 2,092 92 (69)
(3) Distribution: Total Distribution 190 9 180
8 10 6 Total consolidated non-GAAP net revenues4 $ 2,213 100
% $ 2,272 100 % $ (59) (3) % 1 Revenues from online consists
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 net revenues. 4 Total non-GAAP net revenues
presented also represents our total operating segment net revenues.
5 Revenues from mobile and other includes 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 Year Ended December 31,
2014 and 2013 (Amounts in millions)
Year
Ended December 31, 2014 December 31, 2013
$ Increase % Increase Amount
% of Total6
Amount % of Total6
(Decrease) (Decrease) GAAP Net Revenues by
Segment/Platform Mix Activision and Blizzard: Online1 $ 867 20
% $ 912 20 % $ (45 ) (5 ) % PC 551 13 340 7 211 62
Next-generation (PS4, Xbox One, Wii U) 720 16 92 2 628 NM
Prior-generation (PS3, Xbox 360, Wii) 1,430 32
2,287 50 (857 ) (37 ) Total console2 2,150
49 2,379 52 (229 ) (10 ) Mobile
and other5 433 10 629 14 (196 ) (31 )
Total Activision and Blizzard
4,001 91 4,260 93 (259 ) (6 )
Distribution: Total Distribution 407 9 323
7 84 26 Total consolidated GAAP net revenues
4,408 100 4,583 100 (175 ) (4 )
Change in Deferred Revenues3 Activision and Blizzard:
Online1 168 (107 ) PC 41 (22 ) Next-generation (PS4, Xbox
One, Wii U) 477 213 Prior-generation (PS3, Xbox 360, Wii)
(295 ) (324 ) Total console2 182 (111 )
Mobile and other5 14 (1 ) Total changes
in deferred revenues 405 (241 )
Non-GAAP Net Revenues by Segment/Platform Mix Activision and
Blizzard: Online1 1,035 22 805 19 230 29 PC 592 12 318 7 274 86
Next-generation (PS4, Xbox One, Wii U) 1,197 25 305 7 892 NM
Prior-generation (PS3, Xbox 360, Wii) 1,135 24
1,963 45 (828 ) (42 ) Total console2 2,332
48 2,268 52 64 3 Mobile
and other5 447 9 628 14 (181 ) (29 )
Total Activision and Blizzard
4,406 92 4,019 93 387 10
Distribution: Total Distribution 407 8 323
7 84 26 Total consolidated non-GAAP net
revenues4 $ 4,813 100 % $ 4,342 100 % $ 471 11
% 1 Revenues from online consists 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 net revenues. 4 Total
non-GAAP net revenues presented also represents our total operating
segment net revenues. 5 Revenues from mobile and other includes
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 and Year Ended
December 31, 2014 and 2013 (Amounts in millions)
Three Months Ended
December 31, 2014 December 31, 2013 $
Increase % Increase Amount % of Total3
Amount % of Total3
(Decrease)
(Decrease) GAAP Net Revenues by Geographic Region
North America $ 806 51 % $ 770 51 % $ 36 5 % Europe 653 41 647 43 6
1 Asia Pacific 116 7 101 7 15 15 Total
consolidated GAAP net revenues 1,575 100 1,518 100
57 4
Change in Deferred Revenues1 North
America 342 457 Europe 254 247 Asia Pacific 42 50
Total changes in net revenues 638 754
Non-GAAP Net Revenues by Geographic Region North America
1,148 52 1,227 54 (79) (6) Europe 907 41 894 39 13 1 Asia Pacific
158 7 151 7 7 5 Total non-GAAP net revenues2 $
2,213 100 % $ 2,272 100 % $ (59) (3) %
Year
Ended December 31, 2014 December 31,
2013 $ Increase % Increase Amount
% of Total3
Amount % of Total3
(Decrease) (Decrease) GAAP Net Revenues by
Geographic Region North America $ 2,190 50 % $ 2,414 53 % $
(224) (9) % Europe 1,824 41 1,826 40 (2) --- Asia Pacific
394 9 343 7 51 15 Total consolidated GAAP net
revenues 4,408 100 4,583 100 (175) (4)
Change in Deferred Revenues1 North America 206 (108) Europe
153 (107) Asia Pacific 46 (26) Total changes in net
revenues 405 (241)
Non-GAAP Net Revenues by
Geographic Region North America 2,396 50 2,306 53 90 4 Europe
1,977 41 1,719 40 258 15 Asia Pacific 440 9 317 7
123 39 Total non-GAAP net revenues2 $ 4,813 100 % $ 4,342
100 % $ 471 11 % 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
and Year Ended December 31, 2014 and 2013 (Amounts in millions)
Three
Months Ended December 31, 2014 December 31, 2013
$ Increase % Increase Amount % of
Total5 Amount % of Total5
(Decrease) (Decrease) Segment net revenues:
Activision1 $ 1,492 67 % $ 1,805 79 % $ (313 ) (17 ) % Blizzard2
531 24 287 13 244 85 Distribution3 190 9 180
8 10 6 Operating segment total 2,213 100 %
2,272 100 % (59 ) (3 )
Reconciliation to consolidated net
revenues: Net effect from deferral of net revenues (638
) (754 ) Consolidated net revenues $ 1,575 $ 1,518
$ 57 4 %
Segment income from operations:
Activision1 $ 696 $ 758 $ (62 ) (8 ) % Blizzard2 208 93 115 124
Distribution3 10 9 1 11
Operating segment total 914 860 54 6
Reconciliation to
consolidated operating income and consolidated income before
income tax expense: Net effect from deferral of net revenues
and related cost of sales (475 ) (509 ) Stock-based compensation
expense (29 ) (34 ) Amortization of intangible assets (8 ) (15 )
Fees and other expenses related to the Purchase Transaction and
related debt financings4 36 (18 ) Consolidated
operating income 438 284 154 54 Interest and other investment
income (expense), net (50 ) (51 ) Consolidated income
before income tax expense $ 388 $ 233 $ 155 67 %
Operating margin from total operating segments 41.3 % 37.9 %
Year Ended December 31, 2014
December 31, 2013 $ Increase % Increase
Amount % of Total5 Amount % of
Total5 (Decrease) (Decrease) Segment
net revenues: Activision1 $ 2,686 56 % $ 2,895 67 % $ (209 ) (7
) % Blizzard2 1,720 36 1,124 26 596 53 Distribution3 407
8 323 7 84 26 Operating segment
total 4,813 100 % 4,342 100 % 471 11
Reconciliation to
consolidated net revenues: Net effect from deferral of net
revenues (405 ) 241 Consolidated net revenues
$ 4,408 $ 4,583 $ (175 ) (4 ) %
Segment
income from operations: Activision1 $ 762 $ 971 $ (209 ) (22 )
% Blizzard2 756 376 380 101 Distribution3 9 8
1 13 Operating segment total 1,527 1,355 172
13
Reconciliation to consolidated operating income
and consolidated income before income tax expense: Net
effect from deferral of net revenues and related cost of sales (215
) 229 Stock-based compensation expense (104 ) (110 ) Amortization
of intangible assets (12 ) (23 ) Fees and other expenses related to
the Purchase Transaction and related debt financings4 (13 )
(79 ) Consolidated operating income 1,183 1,372 (189 ) (14 )
Interest and other investment income (expense), net (202 )
(53 ) Consolidated income before income tax expense $ 981
$ 1,319 $ (338 ) (26 ) % Operating margin from
total operating segments 31.7 % 31.2 % 1 Activision
Publishing (“Activision”) — publishes interactive entertainment
products and contents. 2 Blizzard — Blizzard Entertainment, Inc.
and its subsidiaries (“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 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. 5 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 Ending December 31, 2014 EBITDA and
Adjusted EBITDA (Amounts in millions)
Trailing Twelve Months
Ending March 31, 2014 June 30, 2014 September
30, 2014 December 31, 2014 December 31, 2014
GAAP Net Income (Loss) $ 293
$ 204
$ (23 )
$ 361
$ 835 Interest (Income) /
Expense, net 51 50 51 51 203 Provision (Benefit) for income taxes
83 56 (20 ) 27 146 Depreciation and amortization 19
19 22 29 90
EBITDA 446 329 30 468
1,274 Deferral of net revenues and related cost of
sales (a) (219 ) (220 ) 180 475 215 Stock-based compensation
expense (b) 30 22 22 29 104 Fees and other expenses related to the
Purchase Transaction and related debt financings (c) ---
--- 48 (36 ) 13
Adjusted EBITDA $ 257 $
131 $ 280 $ 936
$ 1,606 (a) Reflects the net change in
deferred net 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 March 31,
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 March 31,
2015 December 31, 2015 Net
Revenues (GAAP) $
1,140
$ 4,140
Excluding the
impact of:
Change in deferred net revenues (a) (500 ) 260
Net Revenues (Non-GAAP) $
640
$ 4,400 Earnings Per Diluted Share
(GAAP) $
0.37
$ 0.89
Excluding the
impact of:
Net effect from deferral in net revenues and related cost of sales
(b) (0.35 ) 0.15 Stock-based compensation (c) 0.03 0.10
Amortization of intangible assets (d) - 0.01
Earnings Per Diluted Share (Non-GAAP) $
0.05
$ 1.15 (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. AND SUBSIDIARIES
Reconciliation of 2014 Actual Earnings Per Share to 2015 Outlook
Earnings Per Share
GAAP Non-GAAP CY14 Actuals $
1.13 $ 1.42
Slate / Operations (a)
0.01 (0.05 )
Foreign Currency (b)
(0.17 ) (0.14 )
Tax Rate and share count (c)
(0.08
)
(0.08
)
CY15 Outlook $ 0.89 $ 1.15 (a)
Reflects changes in operations and, for GAAP purpose, includes the
net change in deferred net revenues and related cost of sales.
(b) Reflects changes in foreign currency
on operating results.
● Currency assumptions for 2015
outlook:
- $1.13 USD / Euro (vs. a $1.33 average
for 2014)
- $1.51 USD / British Pound Sterling (vs.
a $1.65 average for 2014)
- Revenue and EPS increase if the Euro or
British Pound Sterling strengthens vs. USD
(c) Reflects changes in tax rate and share
count.
Activision Blizzard, Inc.Kristin SoutheySVP, Investor
Relations(310) 255-2635ksouthey@activision.comorMary OsakoSVP,
Global Communications(424) 322-5166mary.osako@activision.com
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