Record First-Half Total Revenues and Digital
Revenues
Company Increases CY 2017 Revenues and EPS
Outlook
Announced Team Sales for the Overwatch
League™, First Major Global, City-Based Professional Esports
League
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced
better-than-expected second-quarter 2017 results.
Second Quarter Prior (in
millions, except EPS)
2017
Outlook*
2016
GAAP Net Revenues $ 1,631 $
1,425 $ 1,570 Impact of GAAP
deferralsA $ (213) $ (225)
$ 39 GAAP EPS $ 0.32
$ 0.15 $ 0.20 Non-GAAP (redefined)
EPS** $ 0.55 $ 0.38 $
0.45 Impact of GAAP deferralsA $
(0.12) $ (0.11) $ 0.08
* Prior outlook was provided by the company on May 4, 2017 in
its earnings release.** “Non-GAAP (redefined)” includes the net
effect of revenue deferrals accounting treatment on certain of our
online enabled products. Please refer to our July 29, 2016 call and
materials for additional information.
For the quarter ended June 30, 2017, Activision Blizzard’s net
revenues presented in accordance with GAAP were $1.63 billion, as
compared with $1.57 billion for the second quarter of 2016, an
increase of 4%. GAAP net revenues from digital channels were $1.31
billion, growing 15% year-over-year. GAAP operating margin was 21%.
GAAP earnings per diluted share were a Q2 record of $0.32, as
compared with $0.20 for the second quarter of 2016, an increase of
60%.
For the quarter ended June 30, 2017, on a non-GAAP (redefined)
basis, Activision Blizzard’s operating margin was 35% and earnings
per diluted share were a Q2 record of $0.55, as compared with $0.45
for the second quarter of 2016, an increase of 22%.
For the quarter, operating cash flows were $265 million.
Please refer to the tables at the back of this press release for
a reconciliation of the company’s GAAP and non-GAAP (redefined)
results.
Bobby Kotick, Chief Executive Officer of Activision Blizzard,
said, “This was another strong quarter for Activision Blizzard. We
exceeded our outlook and delivered record revenues for the first
half of 2017.”
Kotick added, “Celebrating players and audiences is the
foundation for our success. This quarter we announced the first
team owners in the Overwatch League™, the first major global,
city-based professional esports league. With hundreds of hours of
broadcast content ahead of us, as well as significant sponsorship
and media opportunities, the Overwatch League will provide new ways
for us to highlight and support the passion of esports fans and the
skill of some of the world’s top Overwatch® players.”
Selected Business Highlights:
- Regular content and feature updates
across the portfolio enabled deeper player engagement and therefore
player investment.
Audience Reach
- Activision Blizzard had 407 million
Monthly Active Users (MAUs)B in the quarter.
- Blizzard had the biggest quarterly
online player community in its history with a record 46 million
MAUsB, up 38% year-over-year. The Overwatch community
continued to grow more than a year after launch, setting another
all-time MAUB record with the release of two seasonal events in the
quarter. Hearthstone® MAUsB grew year-over-year and
quarter-over-quarter to an all-time record, driven by its
expansion, Journey to Un’Goro™.
- Activision had 47 million MAUsB in the
second quarter, down slightly year-over-year. The launch of
Zombies Chronicles led to a MAUB increase
quarter-over-quarter in Call of Duty®: Black Ops
III. Activision also released Crash Bandicoot™ N.
Sane Trilogy for PS4, a collection of remastered Crash
Bandicoot™ classic titles. Despite only two days of
sales on a single platform, it was the number one console title
globally in June based on units.1
- Activision and its partners at Bungie
expect to release Destiny 2 on September 6, 2017 for
consoles and on October 24, 2017 for PC. The Destiny 2
console Beta had more total players than the 2014 Destiny
Beta, and Destiny 2 pre-orders are now above the first
Destiny. Activision expects to release Call of Duty:
WWII on November 3, 2017. Momentum on pre-orders and hands-on
feedback have been strong.
- King had 314 million MAUsB for the
quarter, down year-over-year, but with better gross bookingsC per
paying user. King had two of the top-10 highest-grossing titles in
the U.S. mobile app stores for the fifteenth quarter in a
row.2
Deep Engagement
- Blizzard had Q2-record time spent. In
April, Blizzard launched Uprising, an Overwatch
seasonal event that included a player-versus-environment mode that
drew record play time. Overwatch’s Anniversary event
in May and June also drove strong engagement with record
participation in customization items. Time spent in World of
Warcraft® grew year-over-year in the second quarter, and
the Legion™ expansion continued to perform ahead of
the prior expansion.
- King’s live operations and new content
continue to drive strong engagement with steady time spent at 35
minutes per day and players engaging more frequently.
- Blizzard announced the first seven team
sales for the Overwatch League, the first major global
professional esports league with city-based teams, and the league
is set to begin its inaugural competitive season later this
year.
- Blizzard announced a live-streaming
media rights partnership for esports and in-game content across a
number of franchises, but excluding Overwatch League
content.
- Activision’s Call of Duty World
League will culminate in its Championships held in Orlando in
August.
Player Investment
- Activision Blizzard delivered nearly $1
billion of in-game revenues in the quarter with record performance
in the first half of 2017.
- King’s gross bookingsC per paying user
grew for the 8th quarter in a row to a new record. Strong
engagement and player investment led to an increase in mobile gross
bookingsC year-over-year and quarter-over-quarter.
- Call of Duty: Black Ops III’s
Zombies Chronicles, Activision’s first large content drop in
year two after a game launch, not only drove purchases of that
specific piece of content, but also led to higher engagement and to
add-on revenues for that game.
- Blizzard’s Overwatch,
Hearthstone, World of Warcraft, and
Diablo® III, which debuted new content during
the quarter, drove strong in-game participation.
Company Outlook:
(in millions, except EPS) GAAP Outlook
Non-GAAP Outlook
(redefined)
Impact of GAAP
deferralsA
CY
2017
Net Revenues $ 6,400 6,400 175
EPS $
1.05 1.94 0.06
Fully Diluted Shares* 767 767
Q3
2017
Net Revenues $ 1,385 1,385 315
EPS $ 0.09 0.34 0.11
Fully Diluted Shares* 766 766
* Fully diluted weighted average shares include participating
securities and dilutive options on a weighted average basis.
As referenced on our July 29, 2016 call, if you would like to
calculate Non-GAAP metrics as previously defined, you would add the
impact of GAAP deferrals to the Non-GAAP (redefined) metrics.
Currency Assumptions for 2017 Outlook:
- $1.12 USD/Euro for current outlook (vs.
average of $1.11 for 2016 and $1.11 for 2015); and
- $1.30 USD/British Pound Sterling for
current outlook (vs. average of $1.36 for 2016 and $1.53 for
2015).
- Note: Our financial guidance includes
the forecasted impact of the FX cash flow hedging program.
Cash Dividend:
The company paid a cash dividend of $0.30 per common share, up
15% year-over-year, in May 2017 to shareholders of record at the
close of business on March 30, 2017, totaling $226 million.
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 June 30, 2017 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
888-364-3108 in the U.S. with passcode 1183538.
About Activision Blizzard:
Activision Blizzard, Inc., a member of the S&P 500, is the
world's most successful standalone interactive entertainment
company. We delight hundreds of millions of monthly active users
around the world through franchises including Activision's Call of
Duty®, Destiny and Skylanders®, Blizzard's World of Warcraft®,
Overwatch®, Hearthstone®, Diablo®, StarCraft®, and Heroes of the
Storm®, and King's Candy Crush™, Pet Rescue™, Bubble Witch™ and
Farm Heroes™. The company is one of the Fortune "100 Best Companies
To Work For®". 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 and services can be found on
the company's website, www.activisionblizzard.com.
1 Per NPD, GfK, GSD, and internal estimates2 U.S. ranking for
Apple App Store and Google Play Store combined, per App Annie
Intelligence for second quarter 2017.
A Net effect of accounting treatment from revenue deferrals on
certain of our online enabled products. Some of our games’ online
functionality represents an essential component of gameplay and, as
a result, a more-than-inconsequential separate deliverable. As a
result, we recognize revenues attributed to these game titles over
their estimated service periods, which is generally less than a
year. The related cost of revenues is deferred and recognized as an
expense as the related revenues are recognized. Impact from changes
in deferrals refers to the net effect from revenue deferrals
accounting treatment for the purposes of revenues, along with, for
the purposes of EPS, the related cost of revenues deferrals
treatment and the related tax impacts. Internally, management
excludes the impact of this change in deferred revenues and related
cost of revenues 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. In addition, management believes excluding the
change in deferred revenues and the related cost of revenues
provides a much more timely indication of trends in our operating
results.
B Monthly Active User (“MAU”) Definition: We monitor MAUs as a
key measure of the overall size of our user base. 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
that total by the number of months in the period. An individual who
plays two of our games would be counted as two users. In addition,
due to technical limitations, for Activision and King, an
individual who plays the same game on two platforms or devices in
the relevant period would be counted as two users. For Blizzard, an
individual who plays the same game on two platforms or devices in
the relevant period would generally be counted as a single
user.
C Gross bookings is an operating metric that represents the
total cash spent by players in the period for the purchase of
virtual items. King uses gross bookings to evaluate its results of
operations, generate future operating plans and assess performance.
Gross bookings is the total price paid by players, which includes
indirect taxes (sales tax or value added tax etc.), platform
providers fees, and King’s share of revenues.
Non-GAAP (as previously defined) and Non-GAAP (redefined)
Financial Measures: In accordance with the updated Compliance
and Disclosure Interpretations issued by the SEC staff on May 17,
2016, beginning with the reporting of our second-quarter 2016
results, we have reported our financial results and provided our
outlook using GAAP and non-GAAP (redefined). We have historically
provided Non-GAAP (as previously defined) financial measures. The
only difference between the two measures is the inclusion (Non-GAAP
(redefined)) or exclusion (Non-GAAP (as previously defined)) of the
impact from revenue deferrals accounting treatment on certain of
our online enabled products. Please see materials from July 29,
2016 call for further details.
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 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 and our outlook:
- expenses related to stock-based
compensation;
- the amortization of intangibles from
purchase price accounting;
- fees and other expenses related to the
King acquisition, inclusive of related debt financings, and
refinancing of long-term debt, including penalties and the write
off of unamortized discount and deferred financing costs;
- restructuring charges;
- other non-cash charges from
reclassification of certain cumulative translation adjustments into
earnings as required by GAAP; and
- the income tax adjustments associated
with any of the above items (tax impact on non-GAAP pre-tax income
is calculated under the same accounting principles applied to the
GAAP pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results).
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, along with others, 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 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.
Cautionary Note Regarding Forward-looking Statements: The
statements contained herein 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 releases of products and services; (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, products
and services; 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 platforms; the diversion of management time and attention to
issues relating to the operations of our acquired or newly started
businesses; the amount of our debt and the limitations imposed by
the covenants in the agreements governing our debt; the adoption
rate and availability of new hardware (including peripherals) and
related software; 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,
products and services; risks relating to the expansion into new
businesses, including the potential impact on our existing
businesses; changing business models within the video game
industry, including digital delivery of content and the increased
prevalence of free-to-play games; product delays or defects;
competition, including from 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; the outcome of current or future tax disputes; the impact
of 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 our Annual Report on Form 10-K for
the year ended December 31, 2016.
The forward-looking statements in this press release are based
on information available to the company at this time and we assume
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 our future performance and are
subject to risks, uncertainties and other factors, some of which
are beyond our 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 June 30,
Six Months Ended June 30, 2017
2016 2017 2016 Net
revenues Product sales $ 481 $ 501 $ 989 $ 1,145 Subscription,
licensing, and other revenues 1 1,150 1,069
2,367 1,880 Total net revenues 1,631 1,570 3,356 3,025
Costs and expenses Cost of revenues—product sales:
Product costs 130 149 273 318 Software royalties, amortization, and
intellectual property licenses 75 80 163 208 Cost of
revenues—subscription, licensing, and other: Game operations and
distribution costs 236 241 468 383 Software royalties,
amortization, and intellectual property licenses 120 128 242 180
Product development 252 249 478 424 Sales and marketing 308 322 554
490 General and administrative 171 169 347
329 Total costs and expenses 1,292 1,338
2,525 2,332 Operating income 339 232 831 693
Interest and other expense (income), net 46 65
85 117 Income before income tax expense 293 167 746 576
Income tax expense 50 16 77 62
Net income $ 243 $ 151 $ 669 $ 514 Basic earnings per common
share 2 $ 0.32 $ 0.20 $ 0.89 $ 0.69 Weighted average common shares
outstanding 754 739 752 737 Diluted earnings per common
share 2 $ 0.32 $ 0.20 $ 0.88 $ 0.68 Weighted average common shares
outstanding assuming dilution 764 753 763 751 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, microtransactions, 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 less than 1 million for both the three and six months
ended June 30, 2017, and approximately 3 million for both the three
and six months ended June 30, 2016. For the three and six months
ended June 30, 2017, net income attributable to Activision
Blizzard, Inc. common shareholders used to calculate earnings per
common share, assuming dilution, was $243 million and $669 million,
respectively, as compared to total net income of $243 million and
$669 million, respectively, for the same period. For the three and
six months ended June 30, 2016, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
earnings per common share, assuming dilution, was $150 million and
$511 million, respectively, as compared to total net income of $151
million and $514 million, respectively, for the same period.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Amounts in millions) June
30, 2017 December 31, 2016 Assets
Current assets Cash and cash equivalents $ 3,278 $ 3,245 Accounts
receivable, net 360 732 Inventories, net 51 49 Software development
349 412 Other current assets 314 392
Total current assets 4,352 4,830 Software development 104 54
Property and equipment, net 246 258 Deferred income taxes, net 398
283 Other assets 466 401 Intangible assets, net 1,479 1,858
Goodwill 9,763 9,768 Total assets $
16,808 $ 17,452
Liabilities and
Shareholders' Equity Current liabilities Accounts payable $ 163
$ 222 Deferred revenues 940 1,628 Accrued expenses and other
liabilities 662 806 Total current
liabilities 1,765 2,656 Long-term debt, net 4,387 4,887 Deferred
income taxes, net 38 44 Other liabilities 903
746 Total liabilities 7,093 8,333
Shareholders' equity Common stock — — Additional
paid-in capital 10,606 10,442 Treasury stock (5,563 ) (5,563 )
Retained earnings 5,312 4,869 Accumulated other comprehensive loss
(640 ) (629 ) Total shareholders’ equity 9,715
9,119 Total liabilities and shareholders’
equity $ 16,808 $ 17,452
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET
INCOME TO NON-GAAP MEASURES (Amounts in millions, except per
share data) Three Months Ended June 30, 2017
Net Revenues Cost of Revenues -
Product Sales: Product Costs
Cost of Revenues - Product Sales:
Software Royalties and Amortization
Cost of Revenues - Subs/Lic/Other: Game Operations and
Distribution Costs Cost of Revenues - Subs/Lic/Other:
Software Royalties and Amortization Product
Development Sales and Marketing General
and Administrative Total Costs and Expenses GAAP
Measurement $ 1,631 $ 130 $ 75 $ 236 $ 120 $ 252 $ 308 $ 171 $
1,292 Share-based compensation1 — — (3 ) — — (14 ) (4 ) (18 ) (39 )
Amortization of intangible assets2 — — — — (114 ) — (78 ) (2 ) (194
) Fees and other expenses related to the King Acquisition3 — — — —
— — — (5 ) (5 ) Other non-cash charges4 —
— — —
— — —
1 1 Non-GAAP
(redefined) Measurement $ 1,631 $ 130 $
72 $ 236 $ 6 $ 238
$ 226 $ 147 $ 1,055
Net effect of deferred revenues and related cost of
revenues5 $ (213 ) $ (44 ) $ (68 ) $ 1 $ 3 $ — $ — $ — $ (108 )
Operating
Income Net Income Basic Earnings per
Share Diluted Earnings per Share GAAP Measurement
$ 339 $ 243 $ 0.32 $ 0.32 Share-based compensation1 39 39 0.05 0.05
Amortization of intangible assets2 194 194 0.26 0.25 Fees and other
expenses related to the King Acquisition3 5 6 0.01 0.01 Other
non-cash charges4 (1 ) (1 ) — — Loss on extinguishment of debt6 —
12 0.02 0.02 Income tax impacts from items above7 —
(75 ) (0.10 ) (0.10 )
Non-GAAP (redefined) Measurement $ 576 $ 418
$ 0.55 $ 0.55 Net effect of
deferred revenues and related cost of revenues5 $ (105 ) $ (86 ) $
(0.11 ) $ (0.12 ) 1 Includes expenses related to
share-based compensation. 2 Reflects amortization of intangible
assets from purchase price accounting. 3 Reflects fees and other
expenses related to the acquisition of King Digital Entertainment
("King Acquisition"), inclusive of related debt financings and
integration costs. 4 Reflects a non-cash accounting charge to
reclassify certain cumulative translation (gains) losses into
earnings due to the substantial liquidation of certain of our
foreign entities. 5 Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online enabled products,
including the effects of taxes. 6 Reflects the loss on
extinguishment of debt from refinancing activities. 7 Reflects the
income tax impact associated with the above items. Tax impact on
non-GAAP (redefined) pre-tax income is calculated under the same
accounting principles applied to the GAAP pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results. The GAAP and non-GAAP (redefined) earnings per
share information is presented as calculated. The sum of these
measures, as presented, may differ due to the impact of rounding.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 754 million,
participating securities of less than 1 million, and dilutive
shares of 10 million during the three months ended June 30, 2017.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data) Six
Months Ended June 30, 2017 Net Revenues
Cost of Revenues - Product Sales: Product Costs
Cost of Revenues - Product Sales: Software Royalties and
Amortization Cost of Revenues - Subs/Lic/Other: Game
Operations and Distribution Costs Cost of Revenues -
Subs/Lic/Other: Software Royalties and Amortization
Product Development Sales and Marketing
General and Administrative Total Costs and
Expenses GAAP Measurement $ 3,356 $ 273 $ 163 $ 468 $ 242 $ 478
$ 554 $ 347 $ 2,525 Share-based compensation1 — — (7 ) (1 ) — (27 )
(7 ) (31 ) (73 ) Amortization of intangible assets2 — — (1 ) — (224
) — (155 ) (4 ) (384 ) Fees and other expenses related to the King
Acquisition3 — — — — — — — (9 ) (9 ) Restructuring costs4 — — — — —
— — (11 ) (11 ) Other non-cash charges5 —
— — —
— — —
(15 ) (15 ) Non-GAAP (redefined)
Measurement $ 3,356 $ 273 $ 155
$ 467 $ 18 $ 451 $
392 $ 277 $ 2,033 Net
effect of deferred revenues and related cost of revenues6 $ (742 )
$ (101 ) $ (137 ) $ (3 ) $ — $ — $ — $ — $ (241 )
Operating Income
Net Income Basic Earnings per Share
Diluted Earnings per Share GAAP Measurement $ 831 $ 669 $
0.89 $ 0.88 Share-based compensation1 73 73 0.10 0.10 Amortization
of intangible assets2 384 384 0.51 0.50 Fees and other expenses
related to the King Acquisition3 9 15 0.02 0.02 Restructuring
costs4 11 11 0.01 0.01 Other non-cash charges5 15 15 0.02 0.02 Loss
on extinguishment of debt7 — 12 0.02 0.02 Income tax impacts from
items above8 — (215 )
(0.28 ) (0.28 ) Non-GAAP (redefined) Measurement $
1,323 $ 964 $ 1.28 $ 1.26
Net effect of deferred revenues and related cost of
revenues6 $ (501 ) $ (395 ) $ (0.52 ) $ (0.51 ) 1
Includes expenses related to share-based compensation. 2 Reflects
amortization of intangible assets from purchase price accounting. 3
Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs. 4
Reflects restructuring charges incurred, primarily severance costs.
5 Reflects a non-cash accounting charge to reclassify certain
cumulative translation (gains) losses into earnings due to the
substantial liquidation of certain of our foreign entities. 6
Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes. 7 Reflects the loss on extinguishment of debt from
refinancing activities. 8 Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP (redefined) pre-tax
income is calculated under the same accounting principles applied
to the GAAP pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results. The GAAP and
non-GAAP (redefined) earnings per share information is presented as
calculated. The sum of these measures, as presented, may differ due
to the impact of rounding. For purposes of calculating
earnings per share, we had, on a weighted-average basis, common
shares outstanding of 752 million, participating securities of less
than 1 million, and dilutive shares of 11 million during the six
months ended June 30, 2017.
ACTIVISION BLIZZARD,
INC. AND SUBSIDIARIES RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES (Amounts in millions, except per share
data) Three Months Ended June 30, 2016
Net Revenues Cost of Revenues - Product
Sales: Product Costs Cost of Revenues - Product
Sales: Software Royalties and Amortization Cost of
Revenues - Subs/Lic/Other: Game Operations and Distribution
Costs Cost of Revenues - Subs/Lic/Other: Software
Royalties and Amortization Product Development
Sales and Marketing General and
Administrative Total Costs and Expenses GAAP
Measurement $ 1,570 $ 149 $ 80 $ 241 $ 128 $ 249 $ 322 $ 169 $
1,338 Share-based compensation1 — — (6 ) — (1 ) (13 ) (4 ) (17 )
(41 ) Amortization of intangible assets2 — — (1 ) — (122 ) — (78 )
(2 ) (203 ) Fees and other expenses related to the King
Acquisition3 — — —
— — —
— (4 ) (4 )
Non-GAAP (redefined) Measurement $ 1,570 $ 149
$ 73 $ 241 $ 5 $ 236
$ 240 $ 146 $ 1,090
Net effect of deferred revenues and related cost of
revenues4 $ 39 $ (44 ) $ (34 ) $ 7 $ 2 $ — $ — $ — $ (69 )
Operating Income
Net Income Basic Earnings per Share
Diluted Earnings per Share GAAP Measurement $ 232 $
151 $ 0.20 $ 0.20 Share-based compensation1 41 41 0.06 0.05
Amortization of intangible assets2 203 203 0.27 0.27 Fees and other
expenses related to the King Acquisition3 4 5 0.01 0.01 Income tax
impacts from items above5 — (59 )
(0.08 ) (0.08 ) Non-GAAP (redefined)
Measurement $ 480 $ 341 $ 0.46 $
0.45 Net effect of deferred revenues and related cost
of revenues4 $ 108 $ 63 $ 0.08 $ 0.08 1 Includes
expenses related to share-based compensation. 2 Reflects
amortization of intangible assets from purchase price accounting. 3
Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs. 4
Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes. 5 Reflects the income tax impact associated with the above
items. Tax impact on non-GAAP (redefined) pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results. The GAAP and non-GAAP
(redefined) earnings per share information is 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 ended June 30,
2016, net income attributable to Activision Blizzard, Inc. common
shareholders used to calculate non-GAAP (redefined) earnings per
common share, assuming dilution, was $340 million, as compared to
total net income of $341 million, for the same period. For
purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 739 million,
participating securities of approximately 3 million, and dilutive
shares of 14 million during the three months ended June 30, 2016.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data) Six
Months Ended June 30, 2016 Net Revenues
Cost of Revenues - Product Sales: Product Costs
Cost of Revenues - Product Sales: Software Royalties and
Amortization Cost of Revenues - Subs/Lic/Other: Game
Operations and Distribution Costs Cost of Revenues -
Subs/Lic/Other: Software Royalties and Amortization
Product Development Sales and Marketing
General and Administrative Total Costs and
Expenses GAAP Measurement $ 3,025 $ 318 $ 208 $ 383 $ 180 $ 424
$ 490 $ 329 $ 2,332 Share-based compensation1 — — (14 ) — (1 ) (23
) (7 ) (40 ) (85 ) Amortization of intangible assets2 — — (2 ) (1 )
(168 ) — (111 ) (3 ) (285 ) Fees and other expenses related to the
King Acquisition3 — —
— — —
— — (38 )
(38 ) Non-GAAP (redefined) Measurement $ 3,025
$ 318 $ 192 $ 382
$ 11 $ 401 $ 372 $ 248
$ 1,924 Net effect of deferred revenues
and related cost of revenues4 $ (508 ) $ (127 ) $ (122 ) $ 3 $ (1 )
$ — $ — $ — $ (247 )
Operating Income Net Income
Basic Earnings per Share Diluted Earnings per
Share GAAP Measurement $ 693 $ 514 $ 0.69 $ 0.68 Share-based
compensation1 85 85 0.12 0.11 Amortization of intangible assets2
285 285 0.38 0.38 Fees and other expenses related to the King
Acquisition3 38 41 0.06 0.05 Income tax impacts from items above5
— (143 ) (0.19 )
(0.19 ) Non-GAAP (redefined) Measurement $ 1,101
$ 782 $ 1.06 $ 1.04
Net effect of deferred revenues and related cost of
revenues4 $ (261 ) $ (205 ) $ (0.28 ) $ (0.28 ) 1
Includes expenses related to share-based compensation. 2 Reflects
amortization of intangible assets from purchase price accounting. 3
Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs. 4
Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues, along with related cost of revenues, on
certain of our online enabled products, including the effects of
taxes. 5 Reflects the income tax impact associated with the above
items. Tax impact on non-GAAP (redefined) pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results. The GAAP and non-GAAP
(redefined) earnings per share information is 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 six months ended June 30, 2016, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate non-GAAP (redefined) earnings per common share,
assuming dilution, was $778 million, as compared to total net
income of $782 million, for the same period.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 737 million,
participating securities of approximately 3 million, and dilutive
shares of 14 million during the six months ended June 30, 2016.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES FINANCIAL INFORMATION For the Three and
Six Months Ended June 30, 2017 and 2016 (Amounts in
millions) Three Months Ended June 30, 2017
June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Distribution
Channel Digital online channels2 $ 1,309 80 % $ 1,141 73 % $
168 15 % Retail channels 260 16 374 24 (114 ) (30 ) Other3
62 4 55 4 7 13
Total consolidated net revenues $ 1,631 100 % $ 1,570
100 % $ 61 4
Change in deferred
revenues4 Digital online channels2 $ (31 ) $ 261 Retail
channels (180 ) (222 ) Other3 (2 ) — Total
changes in deferred revenues $ (213 ) $ 39
Six
Months Ended June 30, 2017 June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Distribution
Channel Digital online channels2 $ 2,694 80 % $ 2,067 68 % $
627 30 % Retail channels 529 16 856 28 (327 ) (38 ) Other3
133 4 102 3
31 30 Total consolidated net revenues $ 3,356
100 % $ 3,025 100 % $ 331 11
Change
in deferred revenues4 Digital online channels2 $ (350 )
$ 132 Retail channels (385 ) (640 ) Other3 (7 ) —
Total changes in deferred revenues $ (742 ) $ (508 )
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, microtransactions, and products. 3 Net
revenues from Other include revenues from our studios and
distribution businesses, as well as revenues from Major League
Gaming. 4 Reflects the net effect from deferral of revenues and
(recognition) of deferred revenues on certain of our online enabled
products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES FINANCIAL INFORMATION For the Three and
Six Months Ended June 30, 2017 and 2016 (Amounts in
millions) Three Months Ended June 30, 2017
June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Platform Console $
568 35 % $ 650 41 % $ (82 ) (13 )% PC 508 31 411 26 97 24 Mobile
and ancillary2 493 30 454 29 39 9 Other3 62 4
55 4 7 13 Total consolidated net
revenues $ 1,631 100 % $ 1,570 100 % $ 61 4
Change in deferred revenues4 Console $ (203 )
$ (210 ) PC (15 ) 219 Mobile and ancillary2 7 30 Other3 (2 )
— Total changes in deferred revenues $ (213 ) $ 39
Six Months Ended June 30, 2017 June
30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Platform Console $
1,182 35 % $ 1,415 47 % $ (233 ) (16 )% PC 1,072 32 811 27 261 32
Mobile and ancillary2 969 29 697 23 272 39 Other3 133
4 102 3 31
30 Total consolidated net revenues $ 3,356 100 % $
3,025 100 % $ 331 11
Change in
deferred revenues4 Console $ (577 ) $ (648 ) PC (161 )
121 Mobile and ancillary2 3 19 Other3 (7 ) —
Total changes in deferred revenues $ (742 ) $ (508 ) 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 Mobile and
ancillary include revenues from mobile devices, as well as
non-platform specific game related revenues, such as standalone
sales of toys and accessories from the Skylanders franchise and
other physical merchandise and accessories. 3 Net revenues from
Other include revenues from our studios and distribution
businesses, as well as revenues from Major League Gaming. 4
Reflects the net effect from deferral of revenues and (recognition)
of deferred revenues on certain of our online enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES FINANCIAL INFORMATION For the Three and
Six Months Ended June 30, 2017 and 2016 (Amounts in
millions) Three Months Ended June 30, 2017
June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Geographic Region
Americas $ 858 53 % $ 860 55 % $ (2 ) — % EMEA2 538 33 507 32 31 6
Asia Pacific 235 14 203 13
32 16 Total consolidated net revenues $ 1,631
100 % $ 1,570 100 % $ 61 4
Change in
deferred revenues3 Americas $ (129 ) $ (24 ) EMEA2 (72 )
(17 ) Asia Pacific (12 ) 80 Total changes in
deferred revenues $ (213 ) $ 39
Six Months
Ended June 30, 2017 June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by Geographic Region
Americas $ 1,787 53 % $ 1,613 53 % $ 174 11 % EMEA2 1,092 33 1,028
34 64 6 Asia Pacific 477 14 384
13 93 24 Total consolidated GAAP
net revenues $ 3,356 100 % $ 3,025 100
% $ 331 11
Change in deferred revenues3
Americas $ (438 ) $ (317 ) EMEA2 (234 ) (211 ) Asia Pacific
(70 ) 20 Total changes in net revenues $ (742 ) $
(508 ) 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 EMEA consists of the
Europe, Middle East, and Africa geographic regions. 3 Reflects the
net effect from deferral of revenues and (recognition) of deferred
revenues on certain of our online enabled products.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION For the Three Months Ended June 30,
2017 and 2016 (Amounts in millions) Three
Months Ended June 30, 2017 June 30,
2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Segment net revenues: Activision2
$ 316 23 % $ 332 21 % $ (16 ) (5 )% Blizzard3 566 42 741 48 (175 )
(24 ) King4 480 35 484 31
(4 ) (1 ) Reportable segments total 1,362 100 % 1,557 100 %
(195 ) (13 )
Reconciliation to consolidated net revenues:
Other segments5 56 52 Net effect from deferral of net revenues6
213 (39 ) Consolidated net revenues $ 1,631
$ 1,570 $ 61 4 %
Segment income (loss) from
operations: Activision2 $ 87 $ 88 $ (1 ) (1 )% Blizzard3 225
329 (104 ) (32 ) King4 164 176
(12 ) (7 ) Reportable segments total 476 593 (117 ) (20 )
Reconciliation to consolidated operating income and consolidated
income before income tax expense: Other segments5 (5 ) (5 )
Net effect from certain revenues deferrals
accounting treatment6
105 (108 ) Share-based compensation expense (39 ) (41 )
Amortization of intangible assets (194 ) (203 ) Fees and other
expenses related to the King Acquisition7 (5 ) (4 ) Other non-cash
charges8 1 — Consolidated operating
income 339 232 107 46 Interest and other expense (income), net
46 65 Consolidated income before income
tax expense $ 293 $ 167 $ 126 75 % Operating
margin from total reportable segments 34.9 % 38.1 % 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 interactive
entertainment products and online subscription-based games. 4 King
Digital Entertainment plc (“King”) — publishes interactive mobile
entertainment products. 5 Other includes other income and expenses
from operating segments managed outside the reportable segments,
including our studios and distribution businesses. Other also
includes unallocated corporate income and expenses. 6 Reflects the
net effect from (deferral) of revenues and recognition of deferred
revenues, along with related cost of revenues, on certain of our
online enabled products. 7 Reflects fees and other expenses related
to the King Acquisition, inclusive of related debt financings and
integration costs. 8 Reflects a non-cash accounting charge to
reclassify certain cumulative translation gains (losses) into
earnings due to the substantial liquidation of certain of our
foreign entities. Our operating segments are consistent with
the manner in which our operations are reviewed and managed by our
Chief Executive Officer, who is our chief operating decision maker
(“CODM”). The CODM reviews segment performance exclusive of: the
impact of the change in deferred revenues and related cost of
revenues with respect to certain of our online-enabled games;
share-based compensation expense; amortization of intangible assets
as a result of purchase price accounting; fees and other expenses
(including legal fees, costs, expenses and accruals) related to
acquisitions, associated integration activities, and financings;
certain restructuring costs; and other non-cash charges. Our
operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. Due to change in our internal organization and
reporting structure and how we manage the business, commencing with
the second quarter of 2017, our Major League Gaming business, which
was previously included in Other segments, is now included in the
Blizzard segment. We have also revised prior periods to reflect
this change. We do not aggregate operating segments.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION For the Six Months Ended June 30,
2017 and 2016 (Amounts in millions) Six Months
Ended June 30, 2017 June 30, 2016
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Segment net revenues:
Activision2 $ 532 21 % $ 692 29 % $ (160 ) (23 )% Blizzard3
1,009 40 1,038 43 (29 ) (3 ) King4 954 38
691 29 263 38 Reportable
segments total 2,495 100 % 2,421 100 % 74 3
Reconciliation to
consolidated net revenues: Other segments5 119 96 Net effect
from deferral of net revenues6 742 508
Consolidated net revenues $ 3,356 $ 3,025 $ 331 11 %
Segment income (loss) from operations: Activision2 $
111 $ 187 $ (76 ) (41 )% Blizzard3 384 413 (29 ) (7 ) King4
330 243 87 36 Reportable
segments total 825 843 (18 ) (2 )
Reconciliation to consolidated
operating income and consolidated income before income tax
expense Other segments5 (3 ) (3 ) Net effect from certain
revenues deferrals accounting treatment6 501 261 Share-based
compensation expense (73 ) (85 ) Amortization of intangible assets
(384 ) (285 ) Fees and other expenses related to the King
Acquisition7 (9 ) (38 ) Restructuring costs8 (11 ) — Other non-cash
charges9 (15 ) — Consolidated operating income
831 693 138 20 Interest and other expense (income), net 85
117 Consolidated income before income tax
expense $ 746 $ 576 $ 170 30 % Operating
margin from total reportable segments 33.1 % 34.8 % 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 interactive
entertainment products and online subscription-based games. 4 King
Digital Entertainment plc (“King”) — publishes interactive mobile
entertainment products. 5 Other includes other income and expenses
from operating segments managed outside the reportable segments,
including our studios and distribution businesses. Other also
includes unallocated corporate income and expenses. 6 Reflects the
net effect from (deferral) of revenues and recognition of deferred
revenues, along with related cost of revenues, on certain of our
online enabled products. 7 Reflects fees and other expenses related
to the King Acquisition, inclusive of related debt financings and
integration costs. 8 Reflects restructuring charges incurred,
primarily severance costs. 9 Reflects a non-cash accounting charge
to reclassify certain cumulative translation gains (losses) into
earnings due to the substantial liquidation of certain of our
foreign entities. Our operating segments are consistent with
the manner in which our operations are reviewed and managed by our
Chief Executive Officer, who is our chief operating decision maker
(“CODM”). The CODM reviews segment performance exclusive of: the
impact of the change in deferred revenues and related cost of
revenues with respect to certain of our online-enabled games;
share-based compensation expense; amortization of intangible assets
as a result of purchase price accounting; fees and other expenses
(including legal fees, costs, expenses and accruals) related to
acquisitions, associated integration activities, and financings;
certain restructuring costs; and other non-cash charges. Our
operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. Due to change in our internal organization and
reporting structure and how we manage the business, commencing with
the second quarter of 2017, our Major League Gaming business, which
was previously included in Other segments, is now included in the
Blizzard segment. We have also revised prior periods to reflect
this change. We do not aggregate operating segments.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES EBITDA and
Adjusted EBITDA For the Trailing Twelve Months Ended June
30, 2017 (Amounts in millions)
Trailing TwelveMonths
Ended
September 30,2016
December 31,2016 March 31,2017 June
30, 2017 June 30, 2017 GAAP Net
Income1 $ 199 $ 254 $ 426 $ 243 $ 1,122 Interest and
other expense (income), net 53 43 40 34 170 Loss on extinguishment
of debt 10 82 — 12 104 Provision for income taxes1 32 46 27 50 155
Depreciation and amortization 243 246 224
226 939
EBITDA 537
671 717 565 2,490 Share-based
compensation expense2 33 40 33 39 145 Fees and other expenses
related to the King Acquisition3 4 4 4 5 17 Restructuring costs4 —
— 11 — 11 Other non-cash charges5 — — 16
(1 ) 15
Adjusted EBITDA
(redefined) $ 574 $ 715 $
781 $ 608 $ 2,678
Change in deferred net revenues and related cost of
revenues6 $ 33 $ 238 $ (396 ) $ (105 ) $ (230 ) 1 We
recognized $12 million, $18 million, $69 million, and $13 million
of excess tax benefits from share-based payments as an income tax
benefit in the provision for income taxes for the three months
ended September 30, 2016, December 31, 2016, March 31, 2017, and
June 30, 2017, respectively. 2 Includes expenses related to
share-based compensation. 3 Reflects fees and other expenses
related to the King Acquisition, inclusive of related debt
financings and integration costs. 4 Reflects restructuring charges
incurred, primarily severance costs. 5 Reflects a non-cash
accounting charge to reclassify certain cumulative translation
(gains) losses into earnings due to the substantial liquidation of
certain of our foreign entities. 6 Reflects the net effect from
deferral of revenues and (recognition) of deferred revenues, along
with related cost of revenues, on certain of our online enabled
products.
ACTIVISION
BLIZZARD, INC. AND SUBSIDIARIES SUPPLEMENTAL FINANCIAL
INFORMATION (Amounts in millions) Three Months
Ended June 30, September 30,
December 31, March 31,
June 30,
Year over Year
%Increase(Decrease)
2016 2016 2016 2017 2017 Cash
Flow Data Operating Cash Flow $ 503 $ 456 $ 859 $ 411 $ 265 (47
)% Capital Expenditures 44 28 37 21
31 (30 ) Non-GAAP Free Cash Flow1 459 428 822 390 234 (49 )
Operating Cash Flow - TTM2 1,732 2,359 2,155 2,229 1,991 15
Capital Expenditures - TTM2 133 115 136
130 117 (12 ) Non-GAAP Free Cash Flow - TTM2 $ 1,599 $ 2,244
$ 2,019 $ 2,099 $ 1,874 17 % 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 September 30, 2015,
three months ended December 31, 2015, and three months ended March
31, 2016, was $(171) million, $1,063 million, and $337 million,
respectively. Capital Expenditures for the three months ended
September 30, 2015, three months ended December 31, 2015, and three
months ended March 31, 2016, were $46 million, $16 million, and $27
million, respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES Outlook for the Three Months Ending September
30, 2017 and Year Ending December 31, 2017 GAAP to Non-GAAP
(redefined) Reconciliation (Amounts in millions, except per
share data) Outlook for the Outlook for
the Three Months Ending Year Ending September
30, 2017 December 31, 2017 Net
Revenues1 $ 1,385 $ 6,400
Change in deferred revenues2 $ 315
$ 175 Earnings Per Diluted Share
(GAAP) $ 0.09 $ 1.05 Excluding the
impact of: Share-based compensation3 0.06 0.23 Amortization of
intangible assets4 0.24 0.99 Fees and other expenses related to the
King Acquisition5 0.01 0.05 Restructuring costs6 — 0.03 Other
non-cash charges7 — 0.02 Income tax impacts from items above8
(0.07 ) (0.42 )
Earnings Per Diluted Share
(Non-GAAP redefined) $ 0.34 $
1.94 Net effect of deferred net
revenues and related cost of revenues on Earnings Per Diluted
Share9 $ 0.11 $ 0.06
1 Net Revenues represents the revenue outlook for both GAAP
and Non-GAAP (redefined) as they are measured the same. 2 Reflects
the net effect from deferral of revenues and (recognition) of
deferred revenues on certain of our online enabled products. 3
Reflects expenses related to share-based compensation. 4 Reflects
amortization of intangible assets from purchase price accounting,
including intangible assets from the King Acquisition. 5 Reflects
fees and other expenses related to the King Acquisition, inclusive
of related debt financings and integration costs, as well as a loss
on extinguishment of debt of $12 million incurred during the three
months ended June 30, 2017 related to the refinancing of our
long-term debt. 6 Reflects restructuring charges, primarily
severance costs. 7 Reflects a non-cash accounting charge incurred
to reclassify certain cumulative translation losses into earnings
due to the substantial liquidation of certain of our foreign
entities. 8 Reflects the income tax impacts associated with the
above items. Due to the inherent uncertainties in share price and
option exercise behavior, we do not generally forecast excess tax
benefits or tax shortfalls. 9 Reflects the net effect from deferral
of revenues and (recognition) of deferred revenues, along with
related cost of revenues, on certain of our online enabled
products, including the effect of taxes.
The per share adjustments and the GAAP and
Non-GAAP (redefined) earnings 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/20170803006228/en/
Activision Blizzard, Inc.Amrita AhujaSVP,
Investor Relations(310) 255-2075Amrita.Ahuja@ActivisionBlizzard.comorMary
OsakoSVP, Global Communications(424)
322-5166Mary.Osako@Activision.com
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