Better-Than-Expected and Record Q1
Results
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced
first-quarter 2021 results.
“Our employees continue to demonstrate exceptional performance
under challenging circumstances,” said Bobby Kotick, CEO of
Activision Blizzard. “That relentless drive across our franchises
produced strong first quarter results that were well ahead of
expectations. Our continued overperformance enables us to raise our
outlook for the full year.”
Financial Metrics
Q1
(in millions, except EPS)
2021
Prior Outlook*
2020
GAAP Net Revenues
$2,275
$2,015
$1,788
Impact of GAAP deferralsA
($209)
($265)
($266)
GAAP EPS
$0.79
$0.59
$0.65
Non-GAAP EPS
$0.98
$0.84
$0.76
Impact of GAAP deferralsA
($0.14)
($0.19)
($0.18)
* Prior outlook was provided by the company on February 4, 2021
in its earnings release.
Please refer to the tables at the back of this earnings release
for a reconciliation of the company’s GAAP and non-GAAP
results.
For the quarter ended March 31, 2021, Activision Blizzard’s net
revenues presented in accordance with GAAP were $2.28 billion, as
compared with $1.79 billion for the first quarter of 2020. GAAP net
revenues from digital channels were $2.01 billion. GAAP operating
margin was 35%. GAAP earnings per diluted share were $0.79, as
compared with $0.65 for the first quarter of 2020. On a non-GAAP
basis, Activision Blizzard’s operating margin was 43% and earnings
per diluted share were $0.98, as compared with $0.76 for the first
quarter of 2020.
For the quarter, operating cash flow was $844 million, as
compared with $148 million for the first quarter of 2020. For the
trailing twelve-month period, operating cash flow was $2.95
billion.
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 quarter ended March 31, 2021, Activision Blizzard’s net
bookingsB were $2.07 billion, as compared with $1.52 billion for
the first quarter of 2020. In-game net bookingsC were $1.34 billion
as compared with $0.96 billion for the first quarter of 2020.
For the quarter ended March 31, 2021, overall Activision
Blizzard Monthly Active Users (MAUs)D were 435 million.
Selected Business Highlights
Activision Blizzard significantly exceeded its prior outlook for
the first quarter, delivering very strong growth across our largest
franchises. Our increased investment in our largest franchises is
enabling us to connect and engage people in more ways than ever
before. Despite ongoing challenges from working from home, our
creative and commercial teams are executing strongly. Their work
drove another quarter of fantastic results for Call of
Duty®, World of Warcraft®, and Candy CrushTM, and
we continue to make great progress on our pipeline, positioning us
for ongoing strong results through the remainder of this year and
into 2022 and beyond.
Activision
- Activision segment revenue grew 72% year-over-year, driven by
Call of Duty: Black Ops Cold War and WarzoneTM
in-game revenues, strong premium sales, and Call of Duty
Mobile. Segment operating income more than doubled
year-over-year.
- The introduction of Call of Duty free-to-play and mobile
experiences has transformed the franchise, more than tripling
franchise MAUsD over the last two years, and leading Activision to
a new record of 150 million MAUsD in the first quarter.
- Call of Duty franchise MAUsD increased sequentially and
grew over 40% year-over-year in the first quarter.
- Following its integration with Warzone, Call of Duty:
Black Ops Cold War saw premium sales well above the levels
typically seen in the first quarter.
- Call of Duty in-game net bookingsC on console and PC
grew more than 60% year-over-year. The first two seasons of
Black Ops Cold War and Warzone content were both in
the top-three seasons in Call of Duty history for in-game
net bookingsC. The third season, launched in April, is sustaining
this strong run-rate, tracking in-line with the first two
seasons.
- Call of Duty Mobile saw strong year-over-year growth in
reach, engagement, and player investment in the first quarter,
benefiting from ongoing enhancements in the West and the launch of
the title in China. In the West, the March season concluded as the
highest for player investment yet. Momentum has continued into the
second quarter, with the April season now the top-grossing to date
at this point after launch. In China, Call of Duty Mobile
brought tens of millions of new players to the franchise, with
player investment in the first quarter on par with the rest of the
world combined.
- The 2021 season of the professional Call of Duty LeagueTM is
off to a great start, enjoying strong year-over-year growth in
average minute audience through the first two stages of
competition.
Blizzard
- Blizzard segment revenue grew 7% year-over-year, led by strong
growth in the Warcraft® franchise, with World of
Warcraft’s Shadowlands expansion building on the
substantial increase in scale seen since the launch of World of
Warcraft Classic in 2019. Blizzard had 27 million MAUsD in the
first quarter.
- World of Warcraft’s Shadowlands expansion continued to
drive strong results following its record-setting release in
November, with first quarter franchise net bookingsB growing
sharply year-over-year. World of Warcraft saw strong reach,
engagement and participation in value added services, along with a
particularly high number of new players joining the community for
the first time, boosted by initiatives to enhance the onboarding
experience.
- Hearthstone®’s latest expansion, Forged in the
BarrensTM, launched on March 30 and is on track to deliver
expansion-over-expansion net bookingsB growth for the second
consecutive release.
- Ahead of its launch later this year, Diablo® II:
Resurrected saw very positive feedback during early testing in
April and online viewership of the alpha test was the highest ever
for a Blizzard game test.
- On mobile, Diablo® ImmortalTM entered its second phase
of testing and is on track for global release later this year.
- April saw Overwatch® fans around the world return to
celebrate players and city-based teams in the opening weekend of
the 2021 season of Overwatch LeagueTM. The league signed a
multi-year partnership with Bilibili Esports for exclusive rights
to broadcast league games to the platform’s passionate and growing
Overwatch League fanbase in China.
King
- King segment revenue reached a new record, growing 22%
year-over-year, driven by strong growth for Candy Crush.
King had 258 million MAUsD in the first quarter.
- King’s initiatives to broaden the payer base, deliver more
frequent seasonal events and introduce compelling new features into
Candy Crush and other portfolio titles drove in-game net
bookingsC growth in the high-teens percentage year-over-year.
- Candy Crush grew in-game net bookingsC very strongly
year-over-year and was once again the top grossing franchise in the
U.S. app stores1.
- In-game net bookingsC for Farm HeroesTM, King’s
second-largest franchise, also grew sharply year-over-year.
- King’s in-game net bookingsC have remained strong into the
second quarter, continuing to grow well year-over-year.
- Crash Bandicoot: On The Run!TM launched on March 25 and
has seen over 30 million downloads to-date.
- King delivered 70% year-over-year growth in advertising net
bookingsB in the first quarter, with significant increases across
both direct brand advertisers and partner networks.
Company Outlook
(in millions, except EPS)
GAAP Outlook
Non-GAAP Outlook
Impact of GAAP
deferralsA
CY
2021
Net Revenues
$8,370
$8,370
$230
EPS
$2.91
$3.42
$0.28
Fully Diluted Shares
787
787
Q2
2021
Net Revenues
$2,135
$2,135
($285)
EPS
$0.81
$0.91
($0.21)
Fully Diluted Shares
785
785
Net bookingsB are expected to be $8.60 billion for 2021 and
$1.85 billion for the second quarter of 2021.
Capital Allocation
The Board of Directors declared a cash dividend of $0.47 per
common share, payable on May 6, 2021 to shareholders of record at
the close of business on April 15, 2021, which represents a 15%
increase from 2020.
Conference Call
Today at 4:30 p.m. EDT, Activision Blizzard’s management will
host a conference call and webcast to discuss the company’s results
for the quarter ended March 31, 2021 and management’s outlook for
the remainder of 2021. 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
866-777-2509 in the U.S. We encourage participants to pre-register
for the conference call using the following link
https://dpregister.com/sreg/10153825/e5b8c12052. 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
Our mission, to connect and engage the world through epic
entertainment has never been more important. Through communities
rooted in our video game franchises we enable hundreds of millions
of people to experience joy, thrill and achievement. We enable
social connections through the lens of fun, and we foster purpose
and a sense of accomplishment through healthy competition. Like
sport, but with greater accessibility, our players can find purpose
and meaning through competitive gaming. Video games, unlike any
other social or entertainment media, have the ability to break down
the barriers that can inhibit tolerance and understanding.
Celebrating differences is at the core of our culture and ensures
we can create games for players of diverse backgrounds in the 190
countries our games are played.
As a member of the Fortune 500 and as a component company of the
S&P 500, we have an extraordinary track record of delivering
superior shareholder returns for over 30 years.
Our enduring franchises are some of the world’s most popular,
including Call of Duty®, Crash Bandicoot™, World of Warcraft®,
Overwatch®, Hearthstone®, Diablo®, StarCraft®, Candy Crush™, Bubble
Witch™, Pet Rescue™ and Farm Heroes™. Our sustained success has
enabled the company to support corporate social responsibility
initiatives that are directly tied to our franchises. As an
example, our Call of Duty Endowment has helped find employment for
over 80,000 veterans.
Learn more information about Activision Blizzard and how we
connect and engage the world through epic entertainment on the
company's website, www.activisionblizzard.com.
1 Based on App Annie Intelligence.
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, 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 or 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. Activision
Blizzard, Inc. generally uses words such as “outlook,” “forecast,”
“will,” “could,” “should,” “would,” “to be,” “plan,” “aims,”
“believes,” “may,” “might,” “expects,” “intends,” “seeks,”
“anticipates,” “estimate,” “future,” “positioned,” “potential,”
“project,” “remain,” “scheduled,” “set to,” “subject to,”
“upcoming,” and other similar words and 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, many of which are
beyond our control, 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: the ongoing global impact of a novel strain of
coronavirus which emerged in December 2019 (“COVID-19”) (including,
without limitation, the potential for significant short- and
long-term global unemployment and economic weakness and a resulting
impact on global discretionary spending; potential strain on the
retailers and distributors who sell our physical product to
customers; effects on our ability to release our content in a
timely manner; the impact of large-scale intervention by the
Federal Reserve and other central banks around the world, including
the impact on interest rates; and volatility in foreign exchange
rates); our ability to consistently deliver popular, high-quality
titles in a timely manner, which has been made more difficult as a
result of the COVID-19 pandemic; concentration of revenue among a
small number of franchises; our ability to satisfy the expectations
of consumers with respect to our brands, games, services, and/or
business practices; our ability to attract, retain and motivate
skilled personnel; rapid changes in technology and industry
standards; competition, including from other forms of
entertainment; increasing importance of revenues derived from
digital distribution channels; risks associated with the retail
sales business model; 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;
substantial influence of third-party platform providers over our
products and costs; risks associated with transitions to
next-generation consoles; 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; our ability to realize the expected
financial and operational benefits of, and effectively implement
and manage, our previously-announced restructuring actions; our
ability to quickly adjust our cost structure in response to sudden
changes in demand; risks and costs associated with legal
proceedings; intellectual property claims; changes in tax rates or
exposure to additional tax liabilities, as well as the outcome of
current or future tax disputes; our ability to sell products at
assumed pricing levels; 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; the seasonality in the sale of our products;
counterparty risks relating to customers, licensees, licensors, and
manufacturers, which have been magnified as a result of the
COVID-19 pandemic; risks associated with our use of open source
software; piracy and unauthorized copying of our products;
insolvency or business failure of any of our partners, which has
been magnified as a result of the COVID-19 pandemic; risks and
uncertainties of conducting business outside the United States;
increasing regulation of our business, products, and distribution
in key territories; compliance with continually evolving laws and
regulations concerning data privacy; reliance on servers and
networks to operate our games and our proprietary online gaming
service; 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, 2020.
The forward-looking statements contained herein are based on
information available to Activision Blizzard, Inc. as of the date
of this filing 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 March
31,
2021
2020
Net revenues
Product sales
$
675
$
543
In-game, subscription, and other
revenues1
1,600
1,245
Total net revenues
2,275
1,788
Costs and expenses
Cost of revenues—product sales:
Product costs
140
119
Software royalties, amortization, and
intellectual property licenses
112
82
Cost of revenues—in-game, subscription,
and other:
Game operations and distribution costs
296
258
Software royalties, amortization, and
intellectual property licenses
30
46
Product development
353
238
Sales and marketing
237
243
General and administrative
282
167
Restructuring and related costs
30
23
Total costs and expenses
1,480
1,176
Operating income
795
612
Interest and other expense (income),
net
30
8
Income before income tax expense
765
604
Income tax expense
146
99
Net income
$
619
$
505
Basic earnings per common share
$
0.80
$
0.66
Weighted average common shares
outstanding
775
769
Diluted earnings per common share
$
0.79
$
0.65
Weighted average common shares outstanding
assuming dilution
783
774
1
In-game, subscription, and other
revenues represent revenues from microtransactions and downloadable
content, World of Warcraft subscriptions, licensing royalties from
our products and franchises, and other miscellaneous revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Amounts in millions)
March 31, 2021
December 31, 2020
Assets
Current assets
Cash and cash equivalents
$
9,281
$
8,647
Accounts receivable, net
773
1,052
Software development
283
352
Other current assets
585
514
Total current assets
10,922
10,565
Software development
207
160
Property and equipment, net
192
209
Deferred income taxes, net
1,250
1,318
Other assets
643
641
Intangible assets, net
446
451
Goodwill
9,765
9,765
Total assets
$
23,425
$
23,109
Liabilities and Shareholders’
Equity
Current liabilities
Accounts payable
$
225
$
295
Deferred revenues
1,459
1,689
Accrued expenses and other liabilities
1,497
1,116
Total current liabilities
3,181
3,100
Long-term debt, net
3,606
3,605
Deferred income taxes, net
365
418
Other liabilities
942
949
Total liabilities
8,094
8,072
Shareholders’ equity
Common stock
—
—
Additional paid-in capital
11,549
11,531
Treasury stock
(5,563
)
(5,563
)
Retained earnings
9,945
9,691
Accumulated other comprehensive loss
(600
)
(622
)
Total shareholders’ equity
15,331
15,037
Total liabilities and shareholders’
equity
$
23,425
$
23,109
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL CASH FLOW
INFORMATION
(Amounts in millions)
Three Months Ended
March 31,
June 30,
September 30,
December 31,
March 31,
Year over Year % Increase
(Decrease)
2020
2020
2020
2020
2021
Cash Flow Data
Operating Cash Flow
$
148
$
768
$
196
$
1,140
$
844
470
%
Capital Expenditures
19
13
24
22
22
16
Non-GAAP Free Cash Flow1
129
755
172
1,118
822
537
Operating Cash Flow - TTM2
1,529
2,143
2,030
2,252
2,948
93
%
Capital Expenditures - TTM2
117
103
93
78
81
(31
)
Non-GAAP Free Cash Flow1 - TTM2
$
1,412
$
2,040
$
1,937
$
2,174
$
2,867
103
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 June 30,
2019, three months ended September 30, 2019, and three months ended
December 31, 2019 were $154 million, $309 million, and $918
million, respectively. Capital Expenditures for the three months
ended June 30, 2019, three months ended September 30, 2019, and
three months ended December 31, 2019 were $27 million, $34 million,
and $37 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 March 31,
2021
Net Revenues
Cost of Revenues - Product
Sales: Product Costs
Cost of Revenues - Product
Sales: Software Royalties and Amortization
Cost of Revenues -
In-game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues -
In-game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
2,275
$
140
$
112
$
296
$
30
$
353
$
237
$
282
$
30
$
1,480
Share-based compensation1
—
—
(6
)
—
—
(16
)
(5
)
(124
)
—
(151
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(2
)
—
(5
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(30
)
(30
)
Non-GAAP Measurement
$
2,275
$
140
$
106
$
296
$
27
$
337
$
232
$
156
$
—
$
1,294
Net effect of deferred revenues and
related cost of revenues4
$
(209
)
$
(13
)
$
(64
)
$
—
$
—
$
—
$
—
$
—
$
—
$
(77
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
795
$
619
$
0.80
$
0.79
Share-based compensation1
151
151
0.20
0.19
Amortization of intangible assets2
5
5
0.01
0.01
Restructuring and related costs3
30
30
0.04
0.04
Income tax impacts from items above5
—
(37
)
(0.05
)
(0.05
)
Non-GAAP Measurement
$
981
$
768
$
0.99
$
0.98
Net effect of deferred revenues and
related cost of revenues4
$
(132
)
$
(107
)
$
(0.14
)
$
(0.14
)
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.
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 March 31,
2020
Net Revenues
Cost of Revenues - Product
Sales: Product Costs
Cost of Revenues - Product
Sales: Software Royalties and Amortization
Cost of Revenues -
In-game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues -
In-game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
1,788
$
119
$
82
$
258
$
46
$
238
$
243
$
167
$
23
$
1,176
Share-based compensation1
—
—
(5
)
—
—
(8
)
(7
)
(23
)
—
(43
)
Amortization of intangible assets2
—
—
—
—
(31
)
—
—
(2
)
—
(33
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(23
)
(23
)
Non-GAAP Measurement
$
1,788
$
119
$
77
$
258
$
15
$
230
$
236
$
142
$
—
$
1,077
Net effect of deferred revenues and
related cost of revenues4
$
(266
)
$
(39
)
$
(52
)
$
(4
)
$
—
$
—
$
—
$
—
$
—
$
(95
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
612
$
505
$
0.66
$
0.65
Share-based compensation1
43
43
0.06
0.06
Amortization of intangible assets2
33
33
0.04
0.04
Restructuring and related costs3
23
23
0.03
0.03
Income tax impacts from items above5
—
(13
)
(0.02
)
(0.02
)
Non-GAAP Measurement
$
711
$
591
$
0.77
$
0.76
Net effect of deferred revenues and
related cost of revenues4
$
(171
)
$
(141
)
$
(0.19
)
$
(0.18
)
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.
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
(Amounts in millions)
Three Months Ended:
March 31, 2021
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
891
$
458
$
609
$
1,958
$
372
$
21
$
111
$
504
Intersegment net revenues1
—
25
—
25
—
10
—
10
Segment net revenues
$
891
$
483
$
609
$
1,983
$
372
$
31
$
111
$
514
Segment operating income
$
442
$
208
$
203
$
853
$
258
$
11
$
47
$
316
Operating Margin
43.0
%
March 31, 2020
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
519
$
437
$
498
$
1,454
Intersegment net revenues1
—
15
—
15
Segment net revenues
$
519
$
452
$
498
$
1,469
Segment operating income
$
184
$
197
$
156
$
537
Operating Margin
36.6
%
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 income before income tax expense.
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
(Amounts in millions)
Three Months Ended March
31,
2021
2020
Reconciliation to consolidated net
revenues:
Segment net revenues
$
1,983
$
1,469
Revenues from non-reportable segments1
108
68
Net effect from recognition (deferral) of
deferred net revenues2
209
266
Elimination of intersegment revenues3
(25
)
(15
)
Consolidated net revenues
$
2,275
$
1,788
Reconciliation to consolidated income
before income tax expense:
Segment operating income
$
853
$
537
Operating income (loss) from
non-reportable segments1
(4
)
3
Net effect from recognition (deferral) of
deferred net revenues and related cost of revenues2
132
171
Share-based compensation expense
(151
)
(43
)
Amortization of intangible assets
(5
)
(33
)
Restructuring and related costs4
(30
)
(23
)
Consolidated operating income
795
612
Interest and other expense (income),
net
30
8
Consolidated income before income tax
expense
$
765
$
604
1
Includes other income and
expenses outside of our reportable segments, including our
distribution business and 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.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY DISTRIBUTION
CHANNEL
(Amounts in millions)
Three Months Ended
March 31, 2021
March 31, 2020
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
2,006
88
%
$
1,441
81
%
$
565
39
%
Retail channels
149
7
221
12
(72
)
(33
)
Other3
120
5
126
7
(6
)
(5
)
Total consolidated net revenues
$
2,275
100
%
$
1,788
100
%
$
487
27
Change in deferred revenues4
Digital online channels2
$
(141
)
$
(86
)
Retail channels
(74
)
(172
)
Other3
6
(8
)
Total changes in deferred revenues
$
(209
)
$
(266
)
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 downloadable
content, microtransactions, subscriptions, and products, as well as
licensing royalties.
3
Net revenues from Other primarily
includes revenues from our distribution business, the Overwatch
League, and the Call of Duty 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
(Amounts in millions)
Three Months Ended
March 31, 2021
March 31, 2020
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
799
35
%
$
594
33
%
$
205
35
%
PC
622
27
498
28
124
25
Mobile and ancillary2
734
32
570
32
164
29
Other3
120
5
126
7
(6
)
(5
)
Total consolidated net revenues
$
2,275
100
%
$
1,788
100
%
$
487
27
Change in deferred revenues4
Console
$
(173
)
$
(231
)
PC
(45
)
(19
)
Mobile and ancillary2
3
(8
)
Other3
6
(8
)
Total changes in deferred revenues
$
(209
)
$
(266
)
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, the Overwatch
League, and the Call of Duty 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
(Amounts in millions)
Three Months Ended
March 31, 2021
March 31, 2020
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
1,307
57
%
$
948
53
%
$
359
38
%
EMEA2
731
32
566
32
165
29
Asia Pacific
237
10
274
15
(37
)
(14
)
Total consolidated net revenues
$
2,275
100
%
$
1,788
100
%
$
487
27
Change in deferred revenues3
Americas
$
(121
)
$
(143
)
EMEA2
(65
)
(101
)
Asia Pacific
(23
)
(22
)
Total changes in deferred revenues
$
(209
)
$
(266
)
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
(Amounts in millions)
Trailing Twelve Months
Ended
June 30, 2020
September 30, 2020
December 31, 2020
March 31, 2021
March 31, 2021
GAAP Net Income
$
580
$
604
$
508
$
619
$
2,311
Interest and other expense (income),
net
22
25
31
30
108
Loss on extinguishment of debt
—
31
—
—
31
Provision for income taxes
147
118
55
146
466
Depreciation and amortization
43
46
45
33
167
EBITDA
792
824
639
828
3,083
Share-based compensation expense1
42
53
80
151
326
Restructuring and related costs2
6
9
55
30
100
Adjusted EBITDA
$
840
$
886
$
774
$
1,009
$
3,509
Change in deferred net revenues and
related cost of revenues3
$
152
$
(150
)
$
407
$
(132
)
$
277
1
Includes expenses related to
share-based compensation.
2
Reflects restructuring
initiatives, primarily severance and other restructuring-related
costs.
3
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
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share
data)
Outlook for the
Outlook for the
Three Months Ending
Year Ending
June 30, 2021
December 31, 2021
Net Revenues1
$
2,135
$
8,370
Change in deferred revenues2
$
(285
)
$
230
Earnings Per Diluted Share
(GAAP)
$
0.81
$
2.91
Excluding the impact of:
Share-based compensation3
0.07
0.43
Amortization of intangible assets4
—
0.01
Restructuring and related costs5
0.03
0.13
Income tax impacts from items above6
0.01
(0.06
)
Earnings Per Diluted Share
(Non-GAAP)
$
0.91
$
3.42
Net effect of deferred net revenues and
related cost of revenues on Earnings Per Diluted Share7
$
(0.21
)
$
0.28
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.
5
Reflects restructuring
initiatives, primarily severance and other restructuring-related
costs.
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 March
31,
2021
2020
$ Increase (Decrease)
% Increase (Decrease)
Net bookings1
$
2,066
$
1,522
$
544
36
%
In-game net bookings2
1,343
956
387
40
1
We monitor net bookings as a key
operating metric in evaluating the performance of our business
because it enables an analysis of performance based on the timing
of actual transactions with our customers and provides more timely
indications 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. Net bookings 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
March 31, 2020
June 30, 2020
September 30, 2020
December 31, 2020
March 31, 2021
Activision
102
125
111
128
150
Blizzard
32
32
30
29
27
King
273
271
249
240
258
Total MAUs
407
428
390
397
435
3
We monitor 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/20210504006243/en/
Activision Blizzard, Inc. Investors and Analysts:
ir@activisionblizzard.com or Press: pr@activisionblizzard.com
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