Better-Than-Expected Q4 Results
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced
fourth-quarter and full year 2019 results.
“Our fourth quarter results exceeded our prior outlook for both
revenue and earnings per share,” said Bobby Kotick, Chief Executive
Officer of Activision Blizzard. “Our recent Call of Duty®
success illustrates the scale of our growth potential, as we
expanded the community to more players in more countries on more
platforms than ever before. With our strong content pipeline across
our franchises and momentum in mobile, esports, and advertising, we
look forward to continuing to delight our players, fans and
stakeholders in 2020 and beyond.”
Financial Metrics
Q4
CY
(in millions, except EPS)
2019
Prior Outlook*
2018
2019
2018
GAAP Net Revenues
$1,986
$1,812
$2,381
$6,489
$7,500
Impact of GAAP deferralsA
$722
$834
$454
($101)
($238)
GAAP EPS
$0.68
$0.29
$0.89
$1.95
$2.40
Non-GAAP EPS
$0.62
$0.43
$0.90
$2.31
$2.72
Impact of GAAP deferralsA
$0.61
$0.72
$0.39
($0.06)
($0.12)
* Prior outlook was provided by the
company on November 7, 2019 in its earnings release.
For the year ended December 31, 2019, Activision Blizzard’s net
revenues presented in accordance with GAAP were $6.49 billion, as
compared with $7.50 billion for 2018. GAAP net revenues from
digital channels were $4.93 billion. GAAP operating margin was 25%.
GAAP earnings per diluted share were $1.95, as compared with $2.40
for 2018. On a non-GAAP basis, Activision Blizzard’s operating
margin was 33% and earnings per diluted share were $2.31, as
compared with $2.72 for 2018.
For the quarter ended December 31, 2019, Activision Blizzard’s
net revenues presented in accordance with GAAP were $1.99 billion,
as compared with $2.38 billion for the fourth quarter of 2018. GAAP
net revenues from digital channels were $1.44 billion. GAAP
operating margin was 23%. GAAP earnings per diluted share were
$0.68, as compared with $0.89 for the fourth quarter of 2018. On a
non-GAAP basis, Activision Blizzard’s operating margin was 30% and
earnings per diluted share were $0.62, as compared with $0.90 for
the fourth quarter of 2018.
Activision Blizzard generated $1.83 billion in operating cash
flow for the year ended December 31, 2019, as compared with $1.79
billion for 2018. For the quarter, operating cash flow was $918
million, as compared with $999 million for the fourth quarter of
2018.
Please refer to the tables at the back of this press release for
a reconciliation of the company’s GAAP and non-GAAP results.
Operating Metrics
For the year ended December 31, 2019, Activision Blizzard’s net
bookingsB were $6.39 billion, as compared with $7.26 billion for
2018. Net bookingsB from digital channels were $4.93 billion, as
compared with $5.72 billion for 2018, and in-game net bookingsC
were $3.37 billion.
For the quarter ended December 31, 2019, Activision Blizzard’s
net bookingsB were $2.71 billion, as compared with $2.84 billion
for the fourth quarter of 2018. Net bookingsB from digital channels
were $1.88 billion, as compared with $1.88 billion for the fourth
quarter of 2018. In-game net bookingsC were $1.09 billion.
For the quarter ended December 31, 2019, overall Activision
Blizzard Monthly Active Users (MAUs)D were 409 million.
Selected Business Highlights
Strong execution against our strategy enabled Activision
Blizzard to exceed its fourth quarter outlook and enter 2020 with
momentum. Our increased investment and focus on the creative and
commercial resources of our biggest franchises is delivering
results, enabling us to accelerate the delivery of content in our
pipeline, pursue new business models, broaden our communities, and
delight our players.
Activision
- Activision had 128 million MAUsD.
- Call of Duty® Mobile installs exceeded 150 million, with
the game reaching the top of the download charts in more than 150
countries and regions, and ending the fourth quarter in the top-15
grossing games in U.S. app stores.2
- Call of Duty®: Modern Warfare® unit sell-through
increased by a double-digit percentage versus Call of Duty®:
Black Ops 4, with growth across both PC and console. PC
sell-through on Battle.net grew 50% year-over-year. Modern
Warfare saw strong growth in full-game downloads with console
digital mix at nearly 50%. In-game net bookingsC grew by a
double-digit percentage versus Black Ops 4.
- In 2019, Call of Duty again generated more upfront
console sales than any other franchise worldwide, a feat
accomplished for 10 of the last 11 years.1
- In January, the Call of Duty LeagueTM debuted with 12
city-based teams competing at its launch weekend in Minnesota. The
league launched with deeply experienced team owners, high profile
sponsors, and streaming distribution through YouTube, Activision
Blizzard’s new broadcasting partner for esports leagues and
events.
Blizzard
- Blizzard had 32 million MAUsD.
- World of Warcraft® exited 2019 with an active player
community3 more than twice the size of its Q2-ending level.
- Hearthstone® launched the Descent of DragonsTM
expansion and rolled out the new Battlegrounds game mode in the
fourth quarter, which drove sequential growth in engagement. Net
bookingsB also grew sequentially for the franchise.
- Overwatch® launched on the Nintendo Switch, further
expanding a community that has surpassed 50 million players
globally since launch.
- In February, the Overwatch LeagueTM will return with 20
established teams from around the world competing in a homestand
format with matches broadcast live on YouTube.
King
- King had 249 million MAUsD.
- Candy Crush SagaTM mobile reach grew year-over-year and
it was the top-grossing title in the U.S. app stores.4
- Candy CrushTM was once again the top-grossing franchise
in the U.S. mobile app stores in the fourth quarter and 2019.4
- Advertising net bookingsB grew over 80% year-over-year in the
fourth quarter, and exceeded $150 million dollars in 2019.
Company Outlook
(in millions, except EPS)
GAAP Outlook
Non-GAAP Outlook
Impact of GAAP
deferralsA
CY
2020
Net Revenues
$6,450
$6,450
$275
EPS
$1.85
$2.22
$0.13
Fully Diluted Shares
778
778
Q1
2020
Net Revenues
$1,640
$1,640
($365)
EPS
$0.55
$0.66
($0.31)
Fully Diluted Shares
775
775
Net bookingsB are expected to be $6.725 billion for 2020 and
$1.275 billion for the first quarter of 2020.
Capital Allocation
The Board of Directors declared a cash dividend of $0.41 per
common share, payable on May 6, 2020 to shareholders of record at
the close of business on April 15, 2020, which represents an 11%
increase from 2019.
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, 2019 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 https://investor.activision.com to listen to the
conference call via live Webcast or to listen to the call live by
dialing into 800-367-2403 in the U.S. with passcode 2945091. A
replay of the call will also be available after the call's
conclusion and archived for one year at
https://investor.activision.com/events.cfm.
About Activision Blizzard
Activision Blizzard, Inc. connects and engages the world through
epic entertainment. A member of the Fortune 500 and S&P 500,
Activision Blizzard is a leading interactive entertainment company.
We delight hundreds of millions of monthly active users around the
world through franchises including Activision’s Call of Duty®,
Spyro®, and Crash Bandicoot™, Blizzard Entertainment's World of
Warcraft®, Overwatch®, Hearthstone®, Diablo®, StarCraft®, and
Heroes of the Storm®, and King's Candy Crush™, 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. More
information about Activision Blizzard and its products can be found
on the company's website, www.activisionblizzard.com.
1 Per the NPD Group, GfK, GSD and internal estimates, based on
dollar sales of front-line games. 2 Per App Annie Intelligence and
internal estimates for respective regions, app stores, and periods.
3 Defined as players with monthly or longer-term subscriptions. 4
Per App Annie Intelligence for respective regions, app stores, and
periods.
A Net effect of accounting treatment from revenue deferrals on
certain of our online-enabled products. Since certain of our games
are hosted online or include significant online functionality that
represents a separate performance obligation, we defer the
transaction price allocable to the online functionality from the
sale of these games and then recognize the attributable revenues
over the relevant estimated service periods, which are 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 Net bookings is an operating metric that is defined as the net
amount of products and services sold digitally or sold-in
physically in the period, and includes license fees, merchandise,
and publisher incentives, among others, and is equal to net
revenues excluding the impact from deferrals.
C In-game net bookings primarily includes the net amount of
downloadable content and microtransactions sold during the period,
and is equal to in-game net revenues excluding the impact from
deferrals.
D 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 accessed 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
accesses two of our games would be counted as two users. In
addition, due to technical limitations, for Activision and King, an
individual who accesses the same game on two platforms or devices
in the relevant period would be counted as two users. For Blizzard,
an individual who accesses the same game on two platforms or
devices in the relevant period would generally be counted as a
single user. In certain instances, we rely on third parties to
publish our games. In these instances, MAU data is based on
information provided to us by those third parties, or, if final
data is not available, reasonable estimates of MAUs for these
third-party published games.
Non-GAAP Financial Measures: As a supplement to our
financial measures presented in accordance with U.S. 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 share-based compensation;
- the amortization of intangibles from purchase price
accounting;
- fees and other expenses related to acquisitions, including
related debt financings, and refinancing of long-term debt,
including penalties and the write off of unamortized discount and
deferred financing costs;
- restructuring and related charges;
- other non-cash charges from reclassification of certain
cumulative translation adjustments into earnings as required by
GAAP;
- 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); and
- significant discrete tax-related items, including amounts
related to changes in tax laws (including the Tax Cuts and Jobs Act
enacted in December 2017), amounts related to the potential or
final resolution of tax positions, and other unusual or unique
tax-related items and activities.
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. Additionally, we consider quantitative
and qualitative factors in assessing whether to adjust for the
impact of items that may be significant or that could affect an
understanding of our ongoing financial and business performance or
trends. 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 and restructuring
activities; (3) statements of future financial or operating
performance, including the impact of tax items thereon; 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 risks, reflect management’s current expectations,
estimates, and projections about our business, and are inherently
uncertain and difficult to predict.
We caution that a number of important factors could cause our
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: our ability to
consistently deliver popular, high-quality titles in a timely
manner; our ability to satisfy the expectations of consumers with
respect to our brands, games, services, and/or business practices;
concentration of revenue among a small number of titles; the
continued growth in the scope and complexity of our business,
including the diversion of management time and attention to issues
relating to the operations of our newly acquired or started
businesses and the potential impact of our expansion into new
businesses on our existing businesses; our ability to realize the
expected financial and operational benefits of, and effectively
manage, our recently announced restructuring plans; increasing
importance of revenues derived from digital distribution channels;
risks associated with the retail sales business model; substantial
influence of third-party platform providers over our products and
costs; success and availability of video game consoles manufactured
by third parties; risks associated with the free-to-play business
model, including dependence on a relatively small number of
consumers for a significant portion of revenues and profits from
any given game; risks and costs associated with legal proceedings;
changes in tax rates or exposure to additional tax liabilities, as
well as the outcome of current or future tax disputes; rapid
changes in technology and industry standards; competition,
including from other forms of entertainment; our ability to sell
products at assumed pricing levels; our ability to attract, retain,
and motivate skilled personnel; reliance on external developers for
development of some of our software products; the amount of our
debt and the limitations imposed by the covenants in the agreements
governing our debt; counterparty risks relating to customers,
licensees, licensors, and manufacturers; intellectual property
claims; piracy and unauthorized copying of our products; risks and
uncertainties of conducting business outside the U.S.; fluctuations
in currency exchange rates; increasing regulation of our business,
products, and distribution in key territories; compliance with
continually evolving laws and regulations concerning data privacy;
potential data breaches and other cybersecurity risks; 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, 2018.
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 December
31,
Year Ended December
31,
2019
2018 1
2019
2018 1
Net revenues
Product sales
$
699
$
808
$
1,975
$
2,255
Subscription, licensing, and other
revenues2
1,287
1,573
4,514
5,245
Total net revenues
1,986
2,381
6,489
7,500
Costs and expenses
Cost of revenues—product sales:
Product costs
268
303
656
719
Software royalties, amortization, and
intellectual property licenses
69
157
240
371
Cost of revenues—subscription, licensing,
and other:
Game operations and distribution costs
251
251
965
1,028
Software royalties, amortization, and
intellectual property licenses
68
121
233
399
Product development
296
325
998
1,101
Sales and marketing
346
321
926
1,062
General and administrative
205
199
732
822
Restructuring and related costs
29
10
132
10
Total costs and expenses
1,532
1,687
4,882
5,512
Operating income
454
694
1,607
1,988
Interest and other expense (income),
net
7
4
(26
)
71
Loss on extinguishment of debt
—
—
—
40
Income before income tax expense
(benefit)
447
690
1,633
1,877
Income tax expense (benefit)
(78
)
5
130
29
Net income
$
525
$
685
$
1,503
$
1,848
Basic earnings per common share
$
0.68
$
0.90
$
1.96
$
2.43
Weighted average common shares
outstanding
768
763
767
762
Diluted earnings per common share
$
0.68
$
0.89
$
1.95
$
2.40
Weighted average common shares outstanding
assuming dilution
773
771
771
771
1
During the three months ended March 31,
2019, we identified an amount which should have been recorded in
the fourth quarter of 2018 to reduce income tax expense by $35
million. Our statement of operations for the three months and year
ended December 31, 2018, as presented above, has been revised to
reflect the correction. Refer to our forthcoming Annual Report on
Form 10-K for the year ended December 31, 2019, for additional
information.
2
Subscription, licensing, and other
revenues represent revenues from World of Warcraft subscriptions,
licensing royalties from our products and franchises, downloadable
content, microtransactions, and other miscellaneous revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Amounts in millions)
December 31, 2019 1
December 31, 2018 2
Assets
Current assets
Cash and cash equivalents
$
5,794
$
4,225
Accounts receivable, net
848
1,035
Inventories, net
32
43
Software development
322
264
Other current assets
296
539
Total current assets
7,292
6,106
Software development
54
65
Property and equipment, net
253
282
Deferred income taxes, net
1,293
458
Other assets
658
482
Intangible assets, net
531
735
Goodwill
9,764
9,762
Total assets
$
19,845
$
17,890
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable
$
292
$
253
Deferred revenues
1,375
1,493
Accrued expenses and other liabilities
1,248
896
Total current liabilities
2,915
2,642
Long-term debt, net
2,675
2,671
Deferred income taxes, net
505
18
Other liabilities
945
1,167
Total liabilities
7,040
6,498
Shareholders' equity
Common stock
—
—
Additional paid-in capital
11,174
10,963
Treasury stock
(5,563
)
(5,563
)
Retained earnings
7,813
6,593
Accumulated other comprehensive loss
(619
)
(601
)
Total shareholders’ equity
12,805
11,392
Total liabilities and shareholders’
equity
$
19,845
$
17,890
1
We adopted a new lease accounting standard
in the first quarter of 2019. The new lease accounting standard
increased our “Other assets,” “Accrued expenses and other
liabilities,” and “Other liabilities” as of December 31, 2019.
Refer to our forthcoming Annual Report on Form 10-K for the year
ended December 31, 2019 for additional information.
2
During the three months ended March 31,
2019, we identified an amount which should have been recorded in
the fourth quarter of 2018 to reduce income tax expense by $35
million. Our balance sheet as of December 31, 2018, as presented
above, has been revised to reflect the correction. Refer to our
forthcoming Annual Report on Form 10-K for the year ended December
31, 2019, for additional information.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Amounts in millions)
Year Ended December
31,
2019
2018 1
Cash flows from operating activities:
Net income
$
1,503
$
1,848
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes
(352
)
(35
)
Provision for inventories
6
6
Non-cash operating lease cost
64
—
Depreciation and amortization
328
509
Amortization of capitalized software
development costs and intellectual property licenses2
225
489
Loss on extinguishment of debt
—
40
Share-based compensation expense3
166
209
Unrealized gain on equity investment
(38
)
—
Other
51
7
Changes in operating assets and
liabilities, net of effect from business acquisitions:
Accounts receivable, net
182
(114
)
Inventories
7
(5
)
Software development and intellectual
property licenses
(275
)
(372
)
Other assets
164
(51
)
Deferred revenues
(154
)
(122
)
Accounts payable
31
(65
)
Accrued expenses and other liabilities
(77
)
(554
)
Net cash provided by operating
activities
1,831
1,790
Cash flows from investing activities:
Proceeds from maturities of
available-for-sale investments
153
116
Purchases of available-for-sale
investments
(65
)
(209
)
Capital expenditures
(116
)
(131
)
Other investing activities
6
(6
)
Net cash used in investing activities
(22
)
(230
)
Cash flows from financing activities:
Proceeds from issuance of common stock to
employees
105
99
Tax payment related to net share
settlements on restricted stock units
(59
)
(94
)
Dividends paid
(283
)
(259
)
Repayment of long-term debt
—
(1,740
)
Premium payment for early redemption of
note
—
(25
)
Other financing activities
—
(1
)
Net cash used in financing activities
(237
)
(2,020
)
Effect of foreign exchange rate changes on
cash and cash equivalents
(3
)
(31
)
Net increase (decrease) in cash and cash
equivalents and restricted cash
1,569
(491
)
Cash and cash equivalents and restricted
cash at beginning of period
4,229
4,720
Cash and cash equivalents and restricted
cash at end of period
$
5,798
$
4,229
1
Our statement of cash flows for the year
ended December 31, 2018, as presented above, has been revised to
reflect the reduction in income tax expense for Q4 2018 that was
identified in Q1 2019, as previously discussed. The correction did
not change our total operating, investing, or financing cash
flows.
2
Excludes deferral and amortization of
share-based compensation expense.
3
Includes the net effects of
capitalization, deferral, and amortization of share-based
compensation expense.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL CASH FLOW
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
2017
2018
2018
2018
2018
(Decrease)
2019
2019
2019
2019
(Decrease)
Cash Flow Data
Operating Cash Flow
$
1,158
$
529
$
9
$
253
$
999
(14
)%
$
450
$
154
$
309
$
918
(8
)%
Capital Expenditures
69
31
30
36
34
(51
)
18
27
34
37
9
Non-GAAP Free Cash Flow1
$
1,089
$
498
$
(21
)
$
217
$
965
(11
)
$
432
$
127
$
275
$
881
(9
)
Operating Cash Flow - TTM2
$
2,213
$
2,331
$
2,075
$
1,949
$
1,790
(19
)
$
1,711
$
1,856
$
1,912
$
1,831
2
Capital Expenditures - TTM2
155
165
164
166
131
(15
)
118
115
113
116
(11
)
Non-GAAP Free Cash Flow - TTM2
$
2,058
$
2,166
$
1,911
$
1,783
$
1,659
(19
)%
$
1,593
$
1,741
$
1,799
$
1,715
3
%
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 March 31, 2017,
three months ended June 30, 2017, and three months ended September
30, 2017 was $411 million, $265 million, and $379 million,
respectively. Capital Expenditures for the three months ended March
31, 2017, three months ended June 30, 2017, and three months ended
September 30, 2017, was $21 million, $31 million, and $34 million,
respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 31,
2019
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
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
1,986
$
268
$
69
$
251
$
68
$
296
$
346
$
205
$
29
$
1,532
Share-based compensation1
—
—
(4
)
—
—
(10
)
(2
)
(23
)
—
(39
)
Amortization of intangible assets2
—
—
—
—
(49
)
—
—
(2
)
—
(51
)
Restructuring and related costs3
—
(1
)
—
—
—
—
—
—
(29
)
(30
)
Discrete tax-related items4
—
—
—
(5
)
—
(3
)
(5
)
(4
)
—
(17
)
Non-GAAP Measurement
$
1,986
$
267
$
65
$
246
$
19
$
283
$
339
$
176
$
—
$
1,395
Net effect of deferred revenues and
related cost of revenues5
$
722
$
59
$
81
$
3
$
2
$
—
$
—
$
—
$
—
$
145
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
454
$
525
$
0.68
$
0.68
Share-based compensation1
39
39
0.05
0.05
Amortization of intangible assets2
51
51
0.07
0.07
Restructuring and related costs3
30
30
0.04
0.04
Income tax impacts from items above6
—
(45
)
(0.06
)
(0.06
)
Discrete tax-related items4
17
(123
)
(0.16
)
(0.16
)
Non-GAAP Measurement
$
591
$
477
$
0.62
$
0.62
Net effect of deferred revenues and
related cost of revenues5
$
577
$
476
$
0.62
$
0.61
1
Includes expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects the impact of significant
discrete tax-related items, including amounts related to changes in
tax laws, amounts related to the potential or final resolution of
tax positions, and/or other unusual or unique tax-related items and
activities. Activision Blizzard will provide additional information
in our forthcoming Form 10-K for the year ending December 31,
2019.
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 income tax impact associated
with 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.
The GAAP and non-GAAP earnings per share
information is 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 per share
data)
Year Ended December 31, 2019
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
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
6,489
$
656
$
240
$
965
$
233
$
998
$
926
$
732
$
132
$
4,882
Share-based compensation1
—
—
(19
)
(1
)
(1
)
(53
)
(10
)
(82
)
—
(166
)
Amortization of intangible assets2
—
—
—
—
(196
)
—
—
(7
)
—
(203
)
Restructuring and related costs3
—
(5
)
—
—
—
—
—
—
(132
)
(137
)
Discrete tax-related items4
—
—
—
(5
)
—
(3
)
(5
)
(4
)
—
(17
)
Non-GAAP Measurement
$
6,489
$
651
$
221
$
959
$
36
$
942
$
911
$
639
$
—
$
4,359
Net effect of deferred revenues and
related cost of revenues5
$
(101
)
$
(23
)
$
(25
)
$
(2
)
$
1
$
—
$
—
$
—
$
—
$
(49
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
1,607
$
1,503
$
1.96
$
1.95
Share-based compensation1
166
166
0.22
0.22
Amortization of intangible assets2
203
203
0.26
0.26
Restructuring and related costs3
137
137
0.18
0.18
Income tax impacts from items above6
—
(95
)
(0.13
)
(0.12
)
Discrete tax-related items4
17
(131
)
(0.17
)
(0.17
)
Non-GAAP Measurement
$
2,130
$
1,783
$
2.33
$
2.31
Net effect of deferred revenues and
related cost of revenues5
$
(52
)
$
(47
)
$
(0.07
)
$
(0.06
)
1
Includes expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects the impact of significant
discrete tax-related items, including amounts related to changes in
tax laws, amounts related to the potential or final resolution of
tax positions, and/or other unusual or unique tax-related items and
activities. Activision Blizzard will provide additional information
in our forthcoming Form 10-K for the year ending December 31,
2019.
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 income tax impact associated
with 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.
The GAAP and non-GAAP earnings per share
information is 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 per share
data)
Three Months Ended December 31,
2018
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
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
2,381
$
303
$
157
$
251
$
121
$
325
$
321
$
199
$
10
$
1,687
Share-based compensation1
—
—
(7
)
—
(1
)
(12
)
(2
)
(21
)
—
(43
)
Amortization of intangible assets2
—
—
—
—
(88
)
—
—
(3
)
—
(91
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(10
)
(10
)
Non-GAAP Measurement
$
2,381
$
303
$
150
$
251
$
32
$
313
$
319
$
175
$
—
$
1,543
Net effect of deferred revenues and
related cost of revenues4
$
454
$
74
$
26
$
(1
)
$
(13
)
$
—
$
—
$
—
$
—
$
86
Operating Income
Net Income7
Basic Earnings per
Share7
Diluted Earnings per
Share7
GAAP Measurement
$
694
$
685
$
0.90
$
0.89
Share-based compensation1
43
43
0.06
0.06
Amortization of intangible assets2
91
91
0.12
0.12
Restructuring and related costs3
10
10
0.01
0.01
Income tax impacts from items above5
—
(19
)
(0.03
)
(0.03
)
Discrete tax-related items6
—
(114
)
(0.15
)
(0.15
)
Non-GAAP Measurement
$
838
$
696
$
0.91
$
0.90
Net effect of deferred revenues and
related cost of revenues4
$
368
$
298
$
0.39
$
0.39
1
Includes expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related 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 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.
6
Reflects the impact of significant
discrete tax-related items, including amounts related to changes in
tax laws, amounts related to the potential or final resolution of
tax positions, and/or other unusual or unique tax-related items and
activities. Activision Blizzard provided additional information in
our Form 10-K for the year ended December 31, 2018.
7
GAAP Net Income, GAAP EPS, and Discrete
tax-related items, as presented above, have been revised to reflect
the reduction in income tax expense for Q4 2018 that was identified
in Q1 2019, as previously discussed.
The GAAP and non-GAAP earnings per share
information is 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 per share
data)
Year Ended December 31, 2018
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
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
7,500
$
719
$
371
$
1,028
$
399
$
1,101
$
1,062
$
822
$
10
$
5,512
Share-based compensation1
—
—
(13
)
(2
)
(3
)
(61
)
(15
)
(115
)
—
(209
)
Amortization of intangible assets2
—
—
—
—
(318
)
—
(44
)
(8
)
—
(370
)
Restructuring and related costs3
—
—
—
—
—
—
—
(10
)
(10
)
Non-GAAP Measurement
$
7,500
$
719
$
358
$
1,026
$
78
$
1,040
$
1,003
$
699
$
—
$
4,923
Net effect of deferred revenues and
related cost of revenues4
$
(238
)
$
(48
)
$
(76
)
$
(2
)
$
(12
)
$
—
$
—
$
—
$
—
$
(138
)
Operating Income
Net Income8
Basic Earnings per
Share8
Diluted Earnings per
Share8
GAAP Measurement
$
1,988
$
1,848
$
2.43
$
2.40
Share-based compensation1
209
209
0.27
0.27
Amortization of intangible assets2
370
370
0.48
0.48
Restructuring and related costs3
10
10
0.01
0.01
Loss on extinguishment of debt5
—
40
0.05
0.05
Income tax impacts from items above6
—
(167
)
(0.22
)
(0.22
)
Discrete tax-related items7
—
(211
)
(0.27
)
(0.27
)
Non-GAAP Measurement
$
2,577
$
2,099
$
2.76
$
2.72
Net effect of deferred revenues and
related cost of revenues4
$
(100
)
$
(96
)
$
(0.13
)
$
(0.12
)
1
Includes expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related 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 loss on extinguishment of
debt from redemption activities.
6
Reflects the income tax impact associated
with 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.
7
Reflects the impact of significant
discrete tax-related items, including amounts related to changes in
tax laws, amounts related to the potential or final resolution of
tax positions, and/or other unusual or unique tax-related items and
activities. Activision Blizzard provided additional information in
our Form 10-K for the year ended December 31, 2018.
8
GAAP Net Income, GAAP EPS, and Discrete
tax-related items, as presented above, have been revised to reflect
the reduction in income tax expense for Q4 2018 that was identified
in Q1 2019, as previously discussed.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
For the Three Months and Years Ended
December 31, 2019 and 2018
(Amounts in millions)
Three Months Ended:
December 31, 2019
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
1,426
$
562
$
503
$
2,491
$
15
$
(85
)
$
(40
)
$
(110
)
Intersegment net revenues1
—
33
—
33
—
(6
)
—
(6
)
Segment net revenues
$
1,426
$
595
$
503
$
2,524
$
15
$
(91
)
$
(40
)
$
(116
)
Segment operating income
$
696
$
260
$
197
$
1,153
$
(27
)
$
19
$
(10
)
$
(18
)
Operating Margin
45.7
%
December 31, 2018
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
1,411
$
647
$
543
$
2,601
Intersegment net revenues1
—
39
—
39
Segment net revenues
$
1,411
$
686
$
543
$
2,640
Segment operating income
$
723
$
241
$
207
$
1,171
Operating Margin
44.4
%
Years Ended:
December 31, 2019
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
2,219
$
1,676
$
2,031
$
5,926
$
(239
)
$
(562
)
$
(55
)
$
(856
)
Intersegment net revenues1
—
43
—
43
—
(10
)
—
(10
)
Segment net revenues
$
2,219
$
1,719
$
2,031
$
5,969
$
(239
)
$
(572
)
$
(55
)
$
(866
)
Segment operating income
$
850
$
464
$
740
$
2,054
$
(161
)
$
(221
)
$
(10
)
$
(392
)
Operating Margin
34.4
%
December 31, 2018
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
2,458
$
2,238
$
2,086
$
6,782
Intersegment net revenues1
—
53
—
53
Segment net revenues
$
2,458
$
2,291
$
2,086
$
6,835
Segment operating income
$
1,011
$
685
$
750
$
2,446
Operating Margin
35.8
%
1
Intersegment revenues reflect licensing
and service fees charged between segments.
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 and related costs; and other non-cash charges. See
the following page for the reconciliation tables of segment
revenues and operating income to consolidated net revenues and
consolidated operating income.
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. We do not aggregate operating segments.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
For the Three Months and Years Ended
December 31, 2019 and 2018
(Amounts in millions)
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Reconciliation to consolidated net
revenues:
Segment net revenues
$
2,524
$
2,640
$
5,969
$
6,835
Revenues from non-reportable segments1
217
234
462
480
Net effect from recognition (deferral) of
deferred net revenues2
(722
)
(454
)
101
238
Elimination of intersegment revenues3
(33
)
(39
)
(43
)
(53
)
Consolidated net revenues
$
1,986
$
2,381
$
6,489
$
7,500
Reconciliation to consolidated income
before income tax expense:
Segment operating income
$
1,153
$
1,171
$
2,054
$
2,446
Operating income (loss) from
non-reportable segments1
15
35
24
31
Net effect from recognition (deferral) of
deferred net revenues and related cost of revenues2
(577
)
(368
)
52
100
Share-based compensation expense
(39
)
(43
)
(166
)
(209
)
Amortization of intangible assets
(51
)
(91
)
(203
)
(370
)
Restructuring and related costs4
(30
)
(10
)
(137
)
(10
)
Discrete tax-related items5
(17
)
—
(17
)
—
Consolidated operating income
454
694
1,607
1,988
Interest and other expense (income),
net
7
4
(26
)
71
Loss on extinguishment of debt
—
—
—
40
Consolidated income before income tax
expense (benefit)
$
447
$
690
$
1,633
$
1,877
1
Includes other income and expenses from
operating segments managed outside the reportable segments,
including our distribution business. Also includes unallocated
corporate income and expenses.
2
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.
3
Intersegment revenues reflect licensing
and service fees charged between segments.
4
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
5
Reflects the impact of other unusual or
unique tax-related items and activities.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY DISTRIBUTION
CHANNEL
For the Three Months and Years Ended
December 31, 2019 and 2018
(Amounts in millions)
Three Months Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
1,439
72
%
$
1,788
75
%
$
(349
)
(20
)%
Retail channels
310
16
343
14
(33
)
(10
)
Other3
237
12
250
10
(13
)
(5
)
Total consolidated net revenues
$
1,986
100
%
$
2,381
100
%
$
(395
)
(17
)
Change in deferred revenues4
Digital online channels2
$
439
$
92
Retail channels
278
356
Other3
5
6
Total changes in deferred revenues
$
722
$
454
Years Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
4,932
76
%
$
5,786
77
%
$
(854
)
(15
)%
Retail channels
909
14
1,107
15
(198
)
(18
)
Other3
648
10
607
8
41
7
Total consolidated net revenues
$
6,489
100
%
$
7,500
100
%
$
(1,011
)
(13
)
Change in deferred revenues4
Digital online channels2
$
(4
)
$
(68
)
Retail channels
(95
)
(191
)
Other3
(2
)
21
Total changes in deferred revenues
$
(101
)
$
(238
)
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,
downloadable content, microtransactions, and products, as well as
licensing royalties.
3
Net revenues from Other primarily includes
revenues from our distribution business and the Overwatch
League.
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
NET REVENUES BY PLATFORM
For the Three Months and Years Ended
December 31, 2019 and 2018
(Amounts in millions)
Three Months Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
595
30
%
$
808
34
%
$
(213
)
(26
)%
PC
521
26
727
31
(206
)
(28
)
Mobile and ancillary2
633
32
596
25
37
6
Other3
237
12
250
10
(13
)
(5
)
Total consolidated net revenues
$
1,986
100
%
$
2,381
100
%
$
(395
)
(17
)
Change in deferred revenues4
Console
$
536
$
455
PC
165
(10
)
Mobile and ancillary2
16
3
Other3
5
6
Total changes in deferred revenues
$
722
$
454
Years Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
1,920
30
%
$
2,538
34
%
$
(618
)
(24
)%
PC
1,718
26
2,180
29
(462
)
(21
)
Mobile and ancillary2
2,203
34
2,175
29
28
1
Other3
648
10
607
8
41
7
Total consolidated net revenues
$
6,489
100
%
$
7,500
100
%
$
(1,011
)
(13
)
Change in deferred revenues4
Console
$
(54
)
$
(265
)
PC
(53
)
9
Mobile and ancillary2
8
(3
)
Other3
(2
)
21
Total changes in deferred revenues
$
(101
)
$
(238
)
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
physical merchandise and accessories.
3
Net revenues from Other primarily includes
revenues from our distribution business and the Overwatch
League.
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
NET REVENUES BY GEOGRAPHIC
REGION
For the Three Months and Years Ended
December 31, 2019 and 2018
(Amounts in millions)
Three Months Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
935
47
%
$
1,140
48
%
$
(205
)
(18
)%
EMEA2
713
36
844
35
(131
)
(16
)
Asia Pacific
338
17
397
17
(59
)
(15
)
Total consolidated net revenues
$
1,986
100
%
$
2,381
100
%
$
(395
)
(17
)
Change in deferred revenues3
Americas
$
425
$
248
EMEA2
238
151
Asia Pacific
59
55
Total changes in deferred revenues
$
722
$
454
Years Ended
December 31, 2019
December 31, 2018
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
3,341
51
%
$
3,880
52
%
$
(539
)
(14
)%
EMEA2
2,239
35
2,618
35
(379
)
(14
)
Asia Pacific
909
14
1,002
13
(93
)
(9
)
Total consolidated net revenues
$
6,489
100
%
$
7,500
100
%
$
(1,011
)
(13
)
Change in deferred revenues3
Americas
$
(44
)
$
(151
)
EMEA2
(47
)
(91
)
Asia Pacific
(10
)
4
Total changes in deferred revenues
$
(101
)
$
(238
)
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 EMEA consist 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
EBITDA AND ADJUSTED EBITDA
For the Trailing Twelve Months Ended
December 31, 2019
(Amounts in millions)
Trailing Twelve Months
Ended
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
December 31, 2019
GAAP Net Income
$
447
$
328
$
204
$
525
$
1,503
Interest and other expense (income),
net
3
(34
)
(2
)
7
(26
)
Provision for income taxes1
120
42
45
(78
)
130
Depreciation and amortization
87
79
80
81
328
EBITDA
657
415
327
535
1,935
Share-based compensation expense2
63
38
27
39
166
Restructuring and related costs3
57
22
28
30
137
Discrete tax-related items5
—
—
—
17
17
Adjusted EBITDA
$
777
$
475
$
382
$
621
$
2,255
Change in deferred net revenues and
related cost of revenues4
$
(441
)
$
(135
)
$
(53
)
$
577
$
(52
)
1
Provision for income taxes for the three
months ended June 30, 2019 and December 31, 2019 also include
impacts from significant discrete tax-related items, including
amounts related to changes in tax laws, amounts related to the
potential or final resolution of tax positions, and/or other
unusual or unique tax-related items and activities.
2
Includes expenses related to share-based
compensation.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related 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.
5
Reflects the impact of other unusual or
unique tax-related items and activities.
Trailing twelve months amounts are
presented as calculated. Therefore, the sum of the four quarters,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
Outlook for the Three Months Ending
March 31, 2020 and Year Ending December 31, 2020
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share
data)
Outlook for the
Outlook for the
Three Months Ending
Year Ending
March 31, 2020
December 31, 2020
Net Revenues1
1,640
6,450
Change in deferred revenues2
(365)
275
Earnings Per Diluted Share
(GAAP)
0.55
1.85
Excluding the impact of:
Share-based compensation3
0.06
0.30
Amortization of intangible assets4
0.04
0.10
Restructuring and related costs5
0.04
0.07
Income tax impacts from items above6
(0.03)
(0.09)
Earnings Per Diluted Share
(Non-GAAP)
0.66
2.22
Net effect of deferred net revenues and
related cost of revenues on Earnings Per Diluted Share7
(0.31)
0.13
1
Net Revenues represents the revenue
outlook for both GAAP and Non-GAAP 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 acquisition of King.
5
Reflects our restructuring initiatives,
primarily severance, facilities, and other restructuring-related
costs we expect to incur as we continue to execute against our
previously disclosed restructuring plan.
6
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.
7
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 earnings per share information are presented as
calculated. Therefore, the sum of these measures, as presented, may
differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING METRICS
(Amounts in millions)
Net Bookings1
Three Months Ended December
31,
Year Ended December
31,
2019
2018
$ Increase (Decrease)
% Increase (Decrease)
2019
2018
$ Increase (Decrease)
% Increase (Decrease)
Net bookings1
$
2,708
$
2,835
$
(127
)
(4
)%
$
6,388
$
7,262
$
(874
)
(12
)%
In-game net bookings2
1,085
1,204
(119
)
(10
)
3,366
4,203
(837
)
(20
)
1
We monitor net bookings as a key operating
metric in evaluating the performance of our business as it enables
an analysis of performance based on the timing of actual
transactions with our customers, along with providing a more timely
indication of trends in our operating results. Net bookings is the
net amount of products and services sold digitally or sold-in
physically in the period, and includes license fees, merchandise,
and publisher incentives, among others, and is equal to net
revenues excluding the impact from deferrals.
2
In-game net bookings primarily includes
the net amount of downloadable content and microtransactions sold
during the period, and is equal to in-game net revenues excluding
the impact from deferrals.
Monthly Active Users3
December 31, 2018
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
Activision
53
41
37
36
128
Blizzard
35
32
32
33
32
King
268
272
258
247
249
Total MAUs
356
345
327
316
409
3
We monitor our average monthly
active users (“MAUs”) as a key measure of the overall size of our
user base. MAUs are the number of individuals who accessed 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 accesses two of our games would be
counted as two users. In addition, due to technical limitations,
for Activision and King, an individual who accesses the same game
on two platforms or devices in the relevant period would be counted
as two users. For Blizzard, an individual who accesses the same
game on two platforms or devices in the relevant period would
generally be counted as a single user. In certain instances, we
rely on third parties to publish our games. In these instances, MAU
data is based on information provided to us by those third parties,
or, if final data is not available, reasonable estimates of MAUs
for these third-party published games.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200206005933/en/
Activision Blizzard, Inc. Investors and Analysts:
ir@activisionblizzard.com or Press: pr@activisionblizzard.com
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