Activision Blizzard, Inc.
Activision Blizzard, Inc. (Form: 8-K, Received: 11/03/2016 16:19:32)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

 

Date of report (Date of earliest event reported):  November 3, 2016

 

 

                    ACTIVISION BLIZZARD, INC.                     

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware

 

001-15839

 

95-4803544

(State or Other Jurisdiction of
Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

 

3100 Ocean Park Boulevard,
Santa Monica, CA

 

 

 

90405

(Address of Principal Executive
Offices)

 

 

 

(Zip Code)

 

 

 

Registrant’s telephone number, including area code:  (310) 255-2000

 

 

 

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



 

Certain Information Not Filed .  The information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such Item 2.02 or such Exhibit 99.1 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

Item 2.02.                               Results of Operations and Financial Condition.

 

On November 3, 2016, Activision Blizzard, Inc. (the “Company”) issued a press release announcing results for the Company for the fiscal quarter ended September 30, 2016. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company is hosting a conference call and webcast in conjunction with that release.

 

Item 9.01.                               Financial Statements and Exhibits.

 

(d)  Exhibits

 

99.1                     Press Release dated November 3, 2016 (furnished not filed)

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:  November 3, 2016

ACTIVISION BLIZZARD, INC.

 

 

 

 

 

By:

/s/ Dennis Durkin

 

 

 

 Dennis Durkin

 

 

 

 Chief Financial Officer

 

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated November 3, 2016 (furnished not filed)

 

4


Exhibit 99.1

 

ACTIVISION BLIZZARD ANNOUNCES BETTER-THAN-EXPECTED

AND RECORD THIRD QUARTER 2016 FINANCIAL RESULTS

 

 

Company Increases CY 2016 Revenues and EPS Outlook

 

Record Third Quarter Revenues, Operating Income, EPS and Operating Cash Flow

 

Record Quarterly GAAP Digital Revenues of Over $1.3 Billion, Up 114% Year-over-Year

 

Company Had 482 Million Monthly Active Users, and More Than 10 Billion Hours of Play Time During the Third Quarter

 

Santa Monica, CA – November 3, 2016 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the third quarter of 2016.

 

 

 

 

Third Quarter

(in millions, except EPS)

 

2016

 

 

Prior   
Outlook*

 

2015

 

 

GAAP Net Revenues

 

$

1,568

 

$

1,490

 

$

990

 

 

Impact of GAAP deferrals

 

$

62

 

$

45

 

$

50

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP EPS

 

$

0.26

 

$

0.06

 

$

0.17

 

 

Non-GAAP (redefined) EPS*

 

$

0.49

 

$

0.39

 

$

0.20

 

 

Impact of GAAP deferrals

 

$

0.03

 

$

0.01

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

* “Non-GAAP (redefined)” includes the net effect of revenue deferrals accounting treatment on certain of our online enabled products. Please refer to our July 29, 2016 call and materials for additional information.

 

For the quarter ended September 30, 2016, Activision Blizzard’s net revenues presented in accordance with Generally Accepted Accounting Principles (“GAAP”) were a third-quarter record $1.57 b illion, as compared with $990 million for the third quarter of 2015, an increase of 58%. GAAP net revenues from digital channels were an all-time quarterly record of $1.34 billion, growing 18% quarter-over-quarter and 114% year-over-year. GAAP earnings per diluted share were a third-quarter record $0.26, as compared with $0.17 for the third quarter of 2015, an increase of 53%. On a non-GAAP (redefined) basis, the company’s earnings per diluted share were a third-quarter record $0.49, as compared with $0.20 for the third quarter of 2015, an increase of 145%.

 

The Activision and Blizzard segments had record combined third-quarter performance with $1.10B in net revenues, a 15% increase year-over-year, and $444M in operating income, a 78% increase year-over-year. Year-to-date, the combined segments generated record revenue of $2.83B, a 22% increase year-over-year, and record operating income of $1.05B, a 67% increase year-over-year.

 

1



 

Activision Blizzard Announces Q3 2016 Financial Results

 

Activision Blizzard generated a third-quarter record $456 million in operating cash flow for the quarter ended September 30, 2016. For the trailing twelve months ended September 30, 2016, operating cash flow totaled $2.36 billion, a 68% increase year-over-year.

 

Please refer to the tables at the back of this press release for a reconciliation of the company’s GAAP and non-GAAP (redefined) results.

 

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, “This quarter we again over-performed our plan, delivering record third-quarter revenues of $1.57 billion, up almost 60% and earnings per share of $0.49, more than doubling year-over-year on a non-GAAP basis (as redefined).

 

Kotick added, “We continue to see enthusiasm from our global audiences for our key franchises including Call of Duty, Destiny, Candy Crush and World of Warcraft, plus our newest franchise – Overwatch, which after only about four months had already reached over 20 million players and has incredible player engagement. Looking forward, we expect continued momentum from all of our growth strategies, especially our esports initiatives and our integration of in-game advertising.”

 

Selected Business Highlights:

 

Audience Reach

 

·                  Activision Blizzard had 482 million Monthly Active Users (MAUs) A  in the quarter.

 

·                  Blizzard had the biggest quarterly online player community in its history, with 42 million MAUs A , up 25% quarter-over-quarter and 50% year-over-year. This reflects the continued success of Overwatch ®  and the launch of World of Warcraft ® : Legion . Blizzard has more than doubled its MAUs A  in just two years.

 

·                  On August 30, 2016, Blizzard launched World of Warcraft : Legion , which sold-through 3.3 million copies on day one, matching all-time records achieved by previous expansions, and ranking amongst the fastest-selling PC games ever. The new expansion grew franchise MAUs A  by nearly 30% quarter-over-quarter.

 

·                  Overwatch became Blizzard’s fastest game ever to reach over 20 million players globally, with a roughly even player base split between east and west. Overwatch also held the number one position in share of play time in Korean Internet Game Rooms from launch all the way through the third-quarter. 1

 

·                  Blizzard’s Hearthstone ® : Heroes of Warcraft had record quarterly MAUs A , which grew a double-digit percentage year-over-year.

 

·                  Activision had the biggest third quarter online player community in its history with 46 million MAUs A . Over the last two years, Activision has grown its MAUs A  by 18%. Activision continues to

 

2



 

Activision Blizzard Announces Q3 2016 Financial Results

 

have four of the top ten games on current-generation consoles life-to-date, including Call of Duty ® : Black Ops III at No. 1. 2  The Call of Duty franchise reached record third quarter MAUs A .

 

·                  On September 20, 2016, Activision and Bungie released Rise of Iron , a large new expansion for the Destiny universe. The expansion included fresh new content in the form of a new location, a new Raid, a new Strike, additional quests, gear, and a new game mode, which drove an increase in MAUs A  quarter-over-quarter.

 

·                  King MAUs A  of 394 million were down slightly this quarter . King had three of the top-20-grossing titles in the U.S. mobile app stores for the eleventh quarter in a row. 3

 

Deep Engagement

 

·                  Activision Blizzard’s compelling in-game experiences drove over 10 billion hours of play time during the third-quarter.

 

·                  Blizzard had all-time engagement records with record weekly and daily active users, unique users and play time, driven by an expanding player base and strong engagement across a number of franchises.

 

·                  In September, Blizzard released the World of Warcraft: Legion Companion App, and for the first time ever, players can engage with select in-game activities and continue gameplay even when away from their PCs. Millions of players have already used the app and are logging in an average of 4 to 5 times every day.

 

·                  King’s time spent per MAU A  was up year-over-year.

 

·                  Activision Blizzard’s esports network, Major League Gaming, in partnership with Facebook, recorded about 50 million views, growing 67% quarter-over-quarter 4 . At peak, a record 11 million users were reached in a single day 4 .

 

·                  From September 2 through 4, 2016, Activision hosted Call of Duty XP , its largest fan event ever which included the culmination of the Call of Duty World League Championship , presented by PlayStation ®  4. More than 1,000 teams participated in the Call of Duty World League during the 2016 season, which recorded 121 million views.

 

Player Investment

 

·                  Activision Blizzard GAAP revenues from in-game content reached records of nearly $1 billion this quarter.

 

·                  Blizzard’s World of Warcraft: Legion expansion drove record monthly participation in value-added services.

 

·                  Summer Games content for Blizzard’s Overwatch drove record engagement and participation in in-game customization items.

 

3



 

Activision Blizzard Announces Q3 2016 Financial Results

 

·                  On August 11 th , 2016, Blizzard launched One Night in Karazhan™ , a new Adventure for Hearthstone: Heroes of Warcraft, which performed even better than its predecessor.

 

·                  King’s overall mobile gross bookings B  and average revenue per paying user increased year-over-year. In addition, gross bookings B  for King’s Candy Crush franchise grew year-over-year, and King’s Farm Heroes franchise increased mobile gross bookings B  quarter-over-quarter and year-over-year.

 

·                  Activision’s Call of Duty continues to deliver record performance. The number of in-game content purchasers in Call of Duty more than doubled year-to-date and, along with robust participation in Season Pass and a-la-carte map packs, drove an increase in average revenue per user as well.

 

Company Outlook:

 

·                  On October 5, 2016, Activision launched the Call of Duty: Modern Warfare ®  Remastered campaign mode for pre-purchasers of Legacy or Digital Deluxe Editions on PlayStation 4 console systems 30 days in advance of the broader launch. On November 4, 2016, Activision is expected to launch the highly anticipated Call of Duty: Infinite Warfare™ .

 

·                  On October 11, 2016, Blizzard launched its Halloween Terror event for Overwatch . The event included Overwatch’s first-ever player versus environment game mode and a variety of new Halloween-themed customization items. The event drove even higher engagement and participation than the Summer Games event.

 

·                  On October 12, 2016, King launched Shuffle Cats , a free-to-play live multiplayer card game set in the 1920s. The title is available on the Apple App Store, Google Play, and Facebook.

 

·                  On October 16, 2016, Activision released Skylanders ® : Imaginators , and for the first time in toys-to-life history, fans are able to create their own digital Skylanders from scratch. On October 28, 2016, Activision Blizzard Studios, in partnership with Netflix, debuted Skylanders Academy , a new TV series celebrating the beloved kids franchise.

 

·                  On October 18, 2016, CBS, in collaboration with King and Lionsgate Television, announced Candy Crush , a new one-hour live action game show, based on the world-renowned mobile franchise.

 

·      Blizzard’s tenth BlizzCon ®  will be returning to the Anaheim Convention Center this Friday, November 4, and Saturday, November 5. Thousands of tickets again sold out in a matter of minutes, but millions more will be able to join through live-streaming or virtual tickets. BlizzCon will feature a number of events including the finals of several Blizzard esports tournaments, with global champions across a number of franchises crowned.

 

4



 

Activision Blizzard Announces Q3 2016 Financial Results

 

·                  From December 16 through December 18, 2016, Major League Gaming will host its first MLG Vegas event, an esports and digital culture festival at the Mandalay Bay in Las Vegas. The 3 day event will feature the first competition of the Call of Duty World League 2017 and an Overwatch Invitational .

 

·      Based on its year-to-date results, Activision Blizzard is raising its full-year net revenues and earnings per share outlook. The company’s fourth-quarter and full-year net revenues and earnings per share outlook are as follows:

 

 

(in millions, except
EPS)

 

GAAP
Outlook

 

Non-GAAP
Outlook
(redefined)

 

Impact of GAAP
deferrals
C

 

 

 

 

 

 

 

 

 

CY 2016

 

 

 

 

 

 

 

Net Revenues

 

$

6,450

 

$

6,450

 

$

75

 

EPS

 

$

0.98

 

$

1.92

 

$

0.10

 

Fully Diluted Shares*

 

762

 

762

 

 

 

 

 

 

 

 

 

 

 

Q4 2016

 

 

 

 

 

 

 

Net Revenues

 

$

1,856

 

$

1,856

 

$

522

 

EPS

 

$

0.05

 

$

0.40

 

$

0.34

 

Fully Diluted Shares*

 

765

 

765

 

 

 

 

* Fully diluted weighted average shares include participating securities and dilutive options on a weighted average basis.

 

As referenced on our July 29, 2016 call, if you would like to calculate Non-GAAP metrics as previously defined, in order to do year-over-year comparisons, you would add the impact of GAAP deferrals to the Non-GAAP (redefined) metrics.

 

Currency Assumptions for 2016 Outlook:

 

·                  $1.09 USD/Euro for current outlook (vs. average of $1.11 for 2015 and $1.33 for 2014)

·                  $1.22 USD/British Pound Sterling for current outlook (vs. average of $1.53 for 2015 and $1.65 for 2014)

 

Debt Repayment

 

In the quarter ended September 30, 2016, we made repayments to reduce our total outstanding term loans by $185 million. This brings our total prepayments in 2016 to $1.5 billion.

 

5



 

Activision Blizzard Announces Q3 2016 Financial Results

 

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 September 30, 2016 and management’s outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-395-3239 in the U.S. with passcode 5137988 .

 

About Activision Blizzard

 

Activision Blizzard, Inc., a member of the S&P 500, is the world’s most successful standalone interactive entertainment company. We delight nearly 500 million monthly active users around the world through franchises including Activision’s Call of Duty ® , Destiny and Skylanders ® , Blizzard Entertainment’s World of Warcraft ® , StarCraft ® , Diablo ® , Hearthstone ® : Heroes of Warcraft™ and Overwatch ® , and King’s Candy Crush , Bubble Witch ™, Pet Rescue and Farm Heroes . The company is one of the Fortune “100 Best Companies To Work For ® ”. Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world, and its games are played in 196 countries. More information about Activision Blizzard and its products can be found on the company’s website, www.activisionblizzard.com .

 

1  Gametrics.com

2  Based on data from the NPD Group and GfK Chart-Track

3  U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for third quarter 2016

4  Per MLGPRO Facebook Insights Portal

 

A  Monthly Active User (“MAU”) Definition: We monitor MAUs as a key measure of the overall size of our user base and their regular engagement with our portfolio of games. MAUs are the number of individuals who played a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who plays two of our games would be counted as two users. In addition, due to technical limitations with respect to Activision Publishing and King MAUs, an individual who plays the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard MAUs, an individual who plays the same game on two platforms or devices in the relevant period would generally be counted as a single user.

 

B  Gross bookings is an operating metric that represents the total cash spent by players in the period for the purchase of virtual items. King uses gross bookings to evaluate its results of operations, generate future operating plans and assess performance. Gross bookings is the total price paid by players, which includes indirect taxes (sales tax or value added tax etc.), platform providers fees, and King’s share of revenues.

 

C Net effect of accounting treatment from revenue deferrals on certain of our online enabled products. Some of our games’ online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable. As a result, we recognize revenues attributed to these game titles over their estimated service periods, which is generally less than a year. The related cost of revenues is deferred and recognized as an expense as the related revenues are recognized. Impact from changes in deferrals refers to the net effect from revenue deferrals accounting treatment for the purposes of revenues, and together with the related cost of revenues deferrals treatment and the related tax impacts for the purposes of EPS. 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.

 

Non-GAAP (as previously defined) and Non-GAAP (redefined) Financial Measures: In accordance with the updated Compliance and Disclosure Interpretations issued by the SEC staff on May 17, 2016, we reported our third quarter of 2016 results, and provided our outlook, using GAAP and non-GAAP (redefined). We have historically provided Non-GAAP (as previously defined) financial measures. The only difference between the two measures is the inclusion (Non-GAAP (redefined)) or exclusion (Non-GAAP (as previously defined)) of the impact from revenue deferrals accounting treatment on certain of our online enabled products. Please see materials from July 29, 2016 call for further details.

 

Non-GAAP (redefined) Financial Measures: As a supplement to our financial measures presented in accordance with Generally Accepted Accounting Principles (“GAAP”), Activision Blizzard presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the company’s results of

 

6



 

Activision Blizzard Announces Q3 2016 Financial Results

 

operations as determined in accordance with GAAP.

 

Activision Blizzard provides net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. When relevant, the company also provides constant FX information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. In addition, Activision Blizzard provides EBITDA (defined as GAAP net income (loss) before interest (income) expense, income taxes, depreciation and amortization) and adjusted EBITDA (defined as non-GAAP operating margin (see non-GAAP financial measure below) before depreciation).  The non-GAAP financial measures exclude the following items, as applicable in any given reporting period and our outlook:

 

·                   expenses related to stock-based compensation;

·                   the amortization of intangibles from purchase price accounting;

·                   fees and other expenses related to the King acquisition, inclusive of related debt financings, and future refinancing of long-term debt, including penalties and the write off of unamortized discount and deferred financing costs; and

·                   the income tax adjustments associated with any of the above items. Tax impact on Non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

In the future, Activision Blizzard may also consider whether other items should also be excluded in calculating the non-GAAP financial measures used by the company. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance. In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the company’s core business, operating results or future outlook. Internally, management uses these non-GAAP financial measures, along with others, in assessing the company’s operating results, and measuring compliance with the requirements of the company’s debt financing agreements, as well as in planning and forecasting.

 

Activision Blizzard’s non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net income, non-GAAP earnings per share, non-GAAP operating margin, and non-GAAP or adjusted EBITDA do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard’s performance in relation to other companies.

 

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering Activision Blizzard’s GAAP, as well as non-GAAP, results and outlook, and by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

 

Cautionary Note Regarding Forward-looking Statements: The statements contained in this press release that are not historical facts are forward-looking statements, including, but not limited to, statements about (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow or other financial items; (2) statements of our plans and objectives, including those related to releases of products and services; (3) statements of future financial or operating performance; (4) statements relating to the acquisition of King and expected impact of that transaction, including without limitation, the expected impact on Activision Blizzard, Inc.’s future financial results; and (5) statements of assumptions underlying such statements. The company generally uses words such as “outlook,” “forecast,” “will,” “could,” “should,” “would,” “to be,” “plan,” “plans,” “believes,” “may,” “might,” “expects,” “intends,” “intends as,” “anticipates,” “estimate,” “future,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming” and other similar expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risk, reflect management’s current expectations, estimates and projections about our business, and are inherently uncertain and difficult to predict.

 

The company cautions that a number of important factors could cause Activision Blizzard’s actual future results and other future circumstances to differ materially from those expressed in any forward looking statements. Such factors include, but

 

7



 

Activision Blizzard Announces Q3 2016 Financial Results

 

are not limited to: uncertainties as to whether and when Activision Blizzard will be able to realize the anticipated financial benefits from the acquisition of King; the integration of King being more difficult, time-consuming or costly than expected; the diversion of management time and attention to issues relating to the operations and integration of King and Major League Gaming; sales levels of Activision Blizzard’s titles, products and services; concentration of revenue among a small number of titles; Activision Blizzard’s ability to predict consumer preferences, including interest in specific genres, and preferences among hardware platforms; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; adoption rate and availability of new hardware (including peripherals) and related software; counterparty risks relating to customers, licensees, licensors and manufacturers; maintenance of relationships with key personnel, customers, financing providers, licensees, licensors, manufacturers, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high-quality titles, products and services; risks relating to the expansion into new businesses, including the potential impact on our existing businesses; changing business models within the video game industry, including digital delivery of content and the increased prevalence of free-to-play games; product delays or defects; competition, including from used games and other forms of entertainment; rapid changes in technology and industry standards; possible declines in software pricing; product returns and price protection; the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion; the seasonal and cyclical nature of the interactive entertainment market; the outcome of current or future tax disputes; litigation risks and associated costs; protection of proprietary rights; shifts in consumer spending trends; capital market risks; applicable regulations; domestic and international economic, financial and political conditions and policies; tax rates and foreign exchange rates; the impact of the current macroeconomic environment; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.

 

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.

 

###

 

(Tables to Follow)

 

For Information Contact:

 

 

 

Colin Roussil

Mary Osako

Sr. Director, Investor Relations

SVP, Global Communications

(424) 272-3164

(424) 322-5166

Colin.Roussil@Activision.com

Mary.Osako@Activision.com

 

8



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

1

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

(Amounts in millions, except per share data)

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

 

 

 

 

 

 

 

 

Product sales

 

  $

355

 

  $

425

 

  $

1,501

 

  $

1,736

 

Subscription, licensing and other revenues 1

 

1,213

 

565

 

3,093

 

1,576

 

Net revenues

 

1,568

 

990

 

4,594

 

3,312

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

Cost of revenues - product sales:

 

 

 

 

 

 

 

 

 

Product costs

 

111

 

179

 

429

 

528

 

Software royalties, amortization, and intellectual property licenses

 

42

 

62

 

250

 

273

 

Cost of revenues - subscription, licensing, and other:

 

 

 

 

 

 

 

 

 

Game operations and distribution costs

 

237

 

71

 

620

 

192

 

Software royalties, amortization, and intellectual property licenses

 

139

 

25

 

319

 

54

 

Product development

 

249

 

159

 

673

 

453

 

Sales and marketing

 

340

 

189

 

830

 

445

 

General and administrative

 

156

 

109

 

486

 

297

 

Total costs and expenses

 

1,274

 

794

 

3,607

 

2,242

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

294

 

196

 

987

 

1,070

 

 

 

 

 

 

 

 

 

 

 

Interest and other expense (income), net

 

63

 

51

 

181

 

151

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

231

 

145

 

806

 

919

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

32

 

18

 

93

 

186

 

 

 

 

 

 

 

 

 

 

 

Net income

 

  $

199

 

  $

127

 

  $

713

 

  $

733

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share 2

 

  $

0.27

 

  $

0.17

 

  $

0.96

 

  $

0.99

 

Weighted average common shares outstanding

 

742

 

730

 

739

 

727

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share 2

 

  $

0.26

 

  $

0.17

 

  $

0.94

 

  $

0.98

 

Weighted average common shares outstanding assuming dilution

 

756

 

739

 

753

 

736

 

 

 

1                     Subscription, licensing and other revenues represent revenues from World of Warcraft subscriptions, licensing royalties from our products and franchises, value-added services, downloadable content, microtransactions, and other miscellaneous revenues.

 

2                     The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. We had, on a weighted-average basis, participating securities of approximately 2 million and 3 million for the three and nine months ended September 30, 2016 respectively, and 8 million and 9 million for the three and nine months ended September 30, 2015 respectively.  For the three and nine months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $198 million and $709 million, respectively, as compared to total net income of $199 million and $713 million, respectively, for the same period. For the three and nine months ended September 30, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $125 million and $723 million, respectively, as compared to total net income of $127 million and $733 million, respectively, for the same period.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

2

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

 

(Amounts in millions)

 

 

 

 

September 30,
2016

 

 

December 31,
2015

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

  $

4,029

 

 

  $

1,823

 

Accounts receivable, net

 

446

 

 

679

 

Inventories, net

 

131

 

 

128

 

Software development

 

414

 

 

336

 

Other current assets

 

314

 

 

421

 

Total current assets

 

5,334

 

 

3,387

 

Cash in escrow

 

 

 

3,561

 

Software development

 

64

 

 

80

 

Property and equipment, net

 

258

 

 

189

 

Deferred income taxes, net

 

485

 

 

275

 

Other assets

 

382

 

 

177

 

Intangible assets, net

 

2,070

 

 

482

 

Goodwill

 

9,787

 

 

7,095

 

Total assets

 

  $

18,380

 

 

  $

15,246

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

  $

211

 

 

  $

284

 

Deferred revenues

 

1,320

 

 

1,702

 

Accrued expenses and other liabilities

 

689

 

 

625

 

Current portion of long-term debt, net

 

1,481

 

 

 

Total current liabilities

 

3,701

 

 

2,611

 

Long-term debt, net

 

4,881

 

 

4,074

 

Deferred income taxes, net

 

43

 

 

10

 

Other liabilities

 

937

 

 

483

 

Total liabilities

 

9,562

 

 

7,178

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock

 

 

 

 

Additional paid-in capital

 

10,427

 

 

10,242

 

Treasury stock

 

(5,572)

 

 

(5,637)

 

Retained earnings

 

4,616

 

 

4,096

 

Accumulated other comprehensive loss

 

(653

)

 

(633

)

Total shareholders’ equity

 

8,818

 

 

8,068

 

Total liabilities and shareholders’ equity

 

  $

18,380

 

 

  $

15,246

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

3

 

 

Three Months Ended September 30, 2016

 

Net Revenues

 

Cost of Revenues
- Product Sales:
Product Costs

 

Cost of Revenues
- Product Sales:
Software
Royalties and
Amortization

 

Cost of Revenues
- Subs/Lic/Other:
Game Operations
and Distribution
Costs

 

Cost of Revenues
- Subs/Lic/Other:
Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

 $

1,568

 

 $

111

 

 $

42

 

 $

237

 

 $

139

 

 $

249

 

 $

340

 

 $

156

 

$

1,274

 

Stock-based compensation 1

 

 

 

(2

 )

 

(1

 )

(11

 )

(5

 )

(14

 )

(33

 )

Amortization of intangible assets 2

 

 

 

(1

 )

 

(129

 )

 

(78

 )

(3

 )

(211

 )

Fees and other expenses related to acquisitions 3

 

 

 

 

 

 

 

 

(4

 )

(4

 )

Non-GAAP (redefined) Measurement

 

 $

1,568

 

 $

111

 

 $

39

 

 $

237

 

 $

9

 

 $

238

 

 $

257

 

 $

135

 

$

1,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 4

 

 $

62

 

 $

(16

 )

 $

28

 

 $

5

 

 $

12

 

 $

 

 $

 

 $

 

$

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 $

294

 

 $

199

 

 $

0.27

 

 $

0.26

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation 1

 

33

 

33

 

0.04

 

0.04

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets 2

 

211

 

211

 

0.28

 

0.28

 

 

 

 

 

 

 

 

 

 

 

 

Fees and other expenses related to acquisitions 3

 

4

 

6

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt 5

 

 

10

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

Income tax impacts from items above 6

 

 

(88

 )

(0.12

 )

(0.12

 )

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (redefined) Measurement

 

 $

542

 

 $

371

 

 $

0.50

 

 $

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 4

 

 $

33

 

 $

26

 

 $

0.03

 

 $

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

1                      Includes expenses related to stock-based compensation.

2                      Reflects amortization of intangible assets from purchase price accounting.

3                      Reflects fees and other expenses related to the acquisition of King Digital Entertainment (“King Acquisition”), inclusive of related debt financings and integration costs.

4                      Reflects 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.

6                      Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

 

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated.  The sum of these measures, as presented, may differ due to the impact of rounding.

 

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the three months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $370 million, as compared to total net income of $371 million, for the same period.

 

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 742 million, participating securities of approximately 2 million, and dilutive shares of 14 million during the three months ended September 30, 2016.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

4

 

 

Nine Months Ended September 30, 2016

 

Net Revenues

 

Cost of Revenues
- Product Sales:
Product Costs

 

Cost of Revenues
- Product Sales:
Software
Royalties and
Amortization

 

Cost of Revenues
- Subs/Lic/Other:
Game Operations
and Distribution
Costs

 

 

Cost of Revenues
- Subs/Lic/Other:
Software
Royalties and

Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

 $

4,594

 

 $

429

 

 $

250

 

 $

620

 

 

 $

319

 

 $

673

 

 $

830

 

$

486

 

$

3,607

 

Stock-based compensation 1

 

 

 

(16

 )

 

 

(1

 )

(34

 )

(12

 )

(55

 )

(118

 )

Amortization of intangible assets 2

 

 

 

(2

 )

(2

 )

 

(297

 )

 

(188

 )

(6

 )

(495

 )

Fees and other expenses related to acquisitions 3

 

 

 

 

 

 

 

 

 

(43

 )

(43

 )

Non-GAAP (redefined) Measurement

 

 $

4,594

 

 $

429

 

 $

232

 

 $

618

 

 

 $

21

 

 $

639

 

 $

630

 

$

382

 

$

2,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 4

 

 $

(447

 )

 $

(143

 )

 $

(96

 )

 $

8

 

 

 $

12

 

 $

 

 $

 

$

 

$

(219

 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 $

987

 

 $

713

 

 $

0.96

 

 $

0.94

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation 1

 

118

 

118

 

0.16

 

0.16

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets 2

 

495

 

495

 

0.67

 

0.65

 

 

 

 

 

 

 

 

 

 

 

 

Fees and other expenses related to acquisitions 3

 

43

 

48

 

0.06

 

0.06

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt 5

 

 

10

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

Income tax impacts from items above 6

 

 

(230

 )

(0.31

 )

(0.30

 )

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (redefined) Measurement

 

 $

1,643

 

 $

1,154

 

 $

1.55

 

 $

1.52

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 4

 

 $

(228

 )

 $

(180

 )

 $

(0.24

 )

 $

(0.23

 )

 

 

 

 

 

 

 

 

 

 

 

 

1                      Includes expenses related to stock-based compensation.

2                      Reflects amortization of intangible assets from purchase price accounting.

3                      Reflects fees and other expenses related to the acquisition of King Digital Entertainment (“King Acquisition”), inclusive of related debt financings and integration costs.

4                      Reflects 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.

6                      Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

 

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated.  The sum of these measures, as presented, may differ due to the impact of rounding.

 

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the nine months ended September 30, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $1,148 million, as compared to total net income of $1,154 million, for the same period.

 

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 739 million, participating securities of approximately 3 million, and dilutive shares of 14 million during the nine months ended September 30, 2016.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

 

5

 

 

Three Months Ended September 30, 2015

 

Net Revenues

 

Cost of Revenues
- Product Sales:
Product Costs

 

Cost of Revenues
- Product Sales:
Software
Royalties and
Amortization

 

Cost of Revenues
- Subs/Lic/Other:
Game Operations
and Distribution
Costs

 

Cost of Revenues
- Subs/Lic/Other:
Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

  $

990

 

  $

179

 

  $

62

 

  $

71

 

  $

25

 

  $

159

 

  $

189

 

  $

109

 

  $

794

 

Stock-based compensation 1

 

 

 

(3

 )

 

(2

 )

(6

 )

(2

 )

(15

 )

(28

 )

Amortization of intangible assets 2

 

 

 

(1

 )

 

 

 

 

 

(1

 )

Non-GAAP (redefined) Measurement

 

  $

990

 

  $

179

 

  $

58

 

  $

71

 

  $

23

 

  $

153

 

  $

187

 

  $

94

 

  $

765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 3

 

  $

50

 

  $

(4

 )

  $

36

 

  $

10

 

  $

(18

 )

  $

 

  $

 

  $

 

  $

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

  $

196

 

  $

127

 

  $

0.17

 

  $

0.17

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation 1

 

28

 

28

 

0.04

 

0.04

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets 2

 

1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax impacts from items above 4

 

 

(9

 )

(0.01

 )

(0.01

 )

 

 

 

 

 

 

 

 

 

 

Non-GAAP (redefined ) Measurement

 

  $

225

 

  $

147

 

  $

0.20

 

  $

0.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 3

 

  $

26

 

  $

11

 

  $

0.01

 

  $

0.01

 

 

 

 

 

 

 

 

 

 

 

 

1

Includes expenses related to stock-based compensation.

2

Reflects amortization of intangible assets from purchase price accounting.

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, including the effects of taxes.

4

Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

 

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the three months ended September 30, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $146 million, as compared to total net income of $147 million, for the same period.

 

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 730 million, participating securities of approximately 8 million, and dilutive shares of 9 million during the three months ended September 30, 2015.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

 

6

 

 

Nine Months Ended September 30, 2015

 

Net Revenues

 

Cost of Revenues
- Product Sales:
Product Costs

 

Cost of Revenues
- Product Sales:
Software
Royalties and
Amortization

 

Cost of Revenues
- Subs/Lic/Other:
Game Operations
and Distribution
Costs

 

Cost of Revenues
- Subs/Lic/Other:
Software
Royalties and
Amortization

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

 

GAAP Measurement

 

  $

3,312

 

  $

528

 

  $

273

 

  $

192

 

  $

54

 

  $

453

 

  $

445

 

  $

297

 

  $

2,242

 

Stock-based compensation 1

 

 

 

(7

 )

 

(3

 )

(20

 )

(7

 )

(33

 )

(70

 )

Amortization of intangible assets 2

 

 

 

(4

 )

 

 

 

 

 

(4

 )

Non-GAAP (redefined) Measurement

 

  $

3,312

 

  $

528

 

  $

262

 

  $

192

 

  $

51

 

  $

433

 

  $

438

 

  $

264

 

  $

2,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 3

 

  $

(809

 )

  $

(181

 )

  $

(137

 )

  $

17

 

  $

9

 

  $

 

  $

 

  $

 

  $

(292

 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

  $

1,070

 

  $

733

 

  $

0.99

 

  $

0.98

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation 1

 

70

 

70

 

0.10

 

0.09

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangible assets 2

 

4

 

4

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

Income tax impacts from items above 4

 

 

(21

 )

(0.03

 )

(0.03

 )

 

 

 

 

 

 

 

 

 

 

Non-GAAP (redefined ) Measurement

 

  $

1,144

 

  $

786

 

  $

1.07

 

  $

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect of deferred revenues and related cost of revenues 3

 

  $

(517

 )

  $

(419

 )

  $

(0.57

 )

  $

(0.56

 )

 

 

 

 

 

 

 

 

 

 

 

1

Includes expenses related to stock-based compensation.

2

Reflects amortization of intangible assets from purchase price accounting.

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, including the effects of taxes.

4

Reflects the income tax impact associated with the above items. Tax impact on non-GAAP (redefined) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

 

 

The GAAP and non-GAAP (redefined) earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

 

The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. For the nine months ended September 30, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP (redefined) earnings per common share, assuming dilution, was $776 million, as compared to total net income of $786 million, for the same period.

 

For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 727 million, participating securities of approximately 9 million, and dilutive shares of 9 million during the nine months ended September 30, 2015.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

7

FINANCIAL INFORMATION

 

For the Three and Nine Months Ended September 30, 2016 and 2015

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1

 

(Decrease)

 

(Decrease)

 

Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital online channels 2

 

$

1,344

 

86%

 

$

629

 

64%

 

$

715

 

114%

 

Retail channels

 

157

 

10

 

281

 

28

 

(124)

 

(44 )  

 

Other 3

 

67

 

4

 

80

 

8

 

(13)

 

(16)  

 

Total consolidated net revenues

 

$

1,568

 

100%

 

$

990

 

$

100%

 

$

578

 

58   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in deferred revenues 4

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital online channels 2

 

$

158

 

 

 

$

68

 

 

 

 

 

 

 

Retail channels

 

(96)

 

 

 

(18)

 

 

 

 

 

 

 

Total changes in deferred revenues

 

$

62

 

 

 

$

50

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1

 

(Decrease)

 

(Decrease)

 

Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital online channels 2

 

$

3,412

 

74%

 

$

1,779

 

54%

 

$

1,633

 

92%

 

Retail channels

 

1,013

 

22

 

1,344

 

41

 

(331)

 

(25 )  

 

Other 3

 

169

 

4

 

189

 

6

 

(20)

 

(11)  

 

Total consolidated net revenues

 

$

4,594

 

100%

 

$

3,312

 

100%

 

$

1,282

 

39   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in deferred revenues 4

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital online channels 2

 

$

288

 

 

 

$

67

 

 

 

 

 

 

 

Retail channels

 

(735)

 

 

 

(876)

 

 

 

 

 

 

 

Total changes in deferred revenues

 

$

(447)

 

 

 

$

(809)

 

 

 

 

 

 

 

 

1        The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.

2        Net revenues from digital online channels represent revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, microtransactions, and products.

3        Net revenues from Other include revenues from our Major League Gaming, studios, and distribution businesses.

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

8

FINANCIAL INFORMATION

 

For the Three and Nine Months Ended September 30, 2016 and 2015

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1

 

(Decrease)

 

(Decrease)

 

Net Revenues by Platform

 

 

 

 

 

 

 

 

 

 

 

 

 

Console

 

 $

452

 

29%

 

 $

420

 

42%

 

 $

32

 

8%

 

PC 2

 

609

 

39

 

359

 

36

 

250

 

70

 

Mobile and ancillary 3

 

440

 

28

 

131

 

13

 

309

 

NM

 

Other 4

 

67

 

4

 

80

 

8

 

(13)

 

(16)

 

Total consolidated net revenues

 

 $

1,568

 

100%

 

 $

990

 

100%

 

 $

578

 

58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in deferred revenues 5

 

 

 

 

 

 

 

 

 

 

 

 

 

Console

 

 $

(35)

 

 

 

 $

80

 

 

 

 

 

 

 

PC 2

 

82

 

 

 

(36)

 

 

 

 

 

 

 

Mobile and ancillary 3

 

15

 

 

 

6

 

 

 

 

 

 

 

Total changes in deferred revenues

 

 $

62

 

 

 

 $

50

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1

 

(Decrease)

 

(Decrease)

 

Net Revenues by Platform

 

 

 

 

 

 

 

 

 

 

 

 

 

Console

 

 $

1,867

 

41%

 

 $

1,737

 

52%

 

 $

130

 

7%

 

PC 2

 

1,421

 

31

 

1,114

 

34

 

307

 

28

 

Mobile and ancillary 3

 

1,137

 

25

 

272

 

8

 

865

 

NM

 

Other 4

 

169

 

4

 

189

 

6

 

(20)

 

(11)

 

Total consolidated net revenues

 

 $

4,594

 

100%

 

 $

3,312

 

100%

 

 $

1,282

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in deferred revenues 5

 

 

 

 

 

 

 

 

 

 

 

 

 

Console

 

 $

(683)

 

 

 

 $

(728)

 

 

 

 

 

 

 

PC 2

 

202

 

 

 

(113)

 

 

 

 

 

 

 

Mobile and ancillary 3

 

34

 

 

 

32

 

 

 

 

 

 

 

Total changes in deferred revenues

 

 $

(447)

 

 

 

 $

(809)

 

 

 

 

 

 

 

 

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 PC include revenues that were historically shown as Online.

3

Net revenues from mobile and ancillary include revenues from handheld, mobile and tablet devices, as well as non-platform specific game related revenues such as standalone sales of toys and accessories from the Skylanders franchise and other physical merchandise and accessories.

4

Net revenues from Other include revenues from our Major League Gaming, studios, and distribution businesses.

5

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

9

FINANCIAL INFORMATION

 

 

For the Three and Nine Months Ended September 30, 2016 and 2015

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1

 

(Decrease)

 

(Decrease)

 

Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

  $

796

 

51

%

  $

495

 

50

%

  $

301

 

 

61

%

EMEA 2

 

499

 

32

 

 

367

 

37

 

132

 

 

36

 

Asia Pacific

 

273

 

17

 

 

128

 

13

 

 

145

 

 

113

 

Total consolidated GAAP net revenues

 

  $

1,568

 

100

%

 

  $

990

 

100

%

 

  $

578

 

 

58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in deferred revenues 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

  $

14

 

 

 

 

 

  $

45

 

 

 

 

 

 

 

 

 

 

EMEA 2

 

34

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

Asia Pacific

 

14

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

Total changes in net revenues

 

  $

62

 

 

 

 

 

  $

50

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2016

 

September 30, 2015

 

$ Increase

 

% Increase 

 

 

 

Amount

 

% of Total 1

 

Amount

 

% of Total 1