Record 2016 Revenues, Digital Revenues and
Earnings Per Share
Record Fourth-Quarter Revenues and Digital
Revenues; GAAP Earnings Per Share Grew 57% and Non-GAAP (redefined)
Earnings Per Share Grew 160% Year-Over-Year to Record
Levels
Generated Record Operating Cash Flow of $2.2
Billion in 2016, up 71% Year-Over-Year
Announces 2-Year Stock Repurchase Plan of $1
Billion
2017 Cash Dividend Increased By 15% to $0.30
Per Common Share
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced
better-than-expected and record fourth-quarter and full-year 2016
results.
Fourth Quarter Calendar Year
Prior (in millions, except EPS)
2016
Outlook*
2015
2016
2015
GAAP Net Revenues $ 2,014 $
1,856 $ 1,353 $6,608 $
4,664 Impact of GAAP deferrals $ 438
$ 522 $ 765 $(9) $
(43) GAAP EPS $ 0.33 $
0.05 $ 0.21 $1.28 $ 1.19
Non-GAAP (redefined) EPS** $ 0.65 $
0.40 $ 0.25 $2.18 $ 1.30
Impact of GAAP deferrals $ 0.27
$ 0.34 $ 0.58
$0.02 $ 0.02
* Prior outlook was provided by the
company on November 3, 2016 in its earnings release.
** “Non-GAAP (redefined)” includes the net
effect of revenue deferrals accounting treatment on certain of our
online enabled products. Please refer to our July 29, 2016 call and
materials for additional information.
For the year ended December 31, 2016, Activision Blizzard’s net
revenues presented in accordance with Generally Accepted Accounting
Principles (“GAAP”) were a record $6.61 billion, as compared with
$4.66 billion for 2015, an increase of 42%. GAAP net revenues from
digital channels were a record $4.87 billion, growing 94%
year-over-year. GAAP operating margin was 21%. GAAP earnings per
diluted share were a record $1.28, as compared with $1.19 for 2015,
an increase of 8%. On a non-GAAP (redefined) basis, the company’s
operating margin was a record 35% and earnings per diluted share
were a record $2.18, as compared with $1.30 for 2015, an increase
of 68%.
For the quarter ended December 31, 2016, Activision Blizzard’s
net revenues presented in accordance with GAAP were an all-time
record of $2.01 billion, as compared with $1.35 billion for the
fourth quarter of 2015, an increase of 49%. GAAP net revenues from
digital channels were an all-time record of $1.45 billion, growing
101% year-over-year. GAAP operating margin for the fourth quarter
was 21%. GAAP earnings per diluted share were $0.33, as compared
with $0.21 for the fourth quarter of 2015, an increase of 57%.
Non-GAAP (redefined) operating margin was a fourth-quarter record
34%. On a non-GAAP (redefined) basis, the company’s earnings per
diluted share were an all-time record $0.65, as compared with $0.25
for the fourth quarter of 2015, an increase of 160%.
Activision Blizzard generated a record $2.16 billion in
operating cash flow for the year ended December 31, 2016, an
increase of 71% year-over-year. For the quarter, operating cash
flows were $859 million.
Please refer to the tables at the back of this press release for
a reconciliation of the company’s GAAP and non-GAAP (redefined)
results.
Bobby Kotick, Chief Executive Officer of Activision Blizzard,
said, “Our record performance in 2016 further strengthened our
position as the world’s leading standalone interactive
entertainment company. For the quarter and the year, we delivered
our highest revenues, non-GAAP redefined operating margins and
earnings per share, well surpassing our own expectations.”
Kotick added, “The launch of Blizzard’s Overwatch®
created a major new franchise, while King’s mobile advertising
tests are very promising as the basis for meaningful new revenue
streams. We accelerated our efforts in esports and consumer
products, enabling more ways to celebrate and connect to our
communities. Thanks to the strength of our established franchises
and the vitality of our new initiatives, we are well positioned for
growth in the years ahead.”
Selected Business Highlights:
Audience Reach
- Activision Blizzard had 447 million
Monthly Active Users (MAUs)A in the quarter.
- Blizzard had its highest annual MAUsA
in 2016 at 36 million, up 37% from 2015 and up 87% since 2014.
Additionally, Blizzard achieved record fourth-quarter MAUsA of 41
million. Overwatch became Blizzard’s fastest game ever to
reach over 25 million players globally. The title broke the
previous launch year record for unit sales set by
Diablo® III in 2012 and received 55 “Game of
the Year” awards. World of Warcraft® MAUsA grew 10%
in 2016 and over 20% year-over-year in the fourth quarter on the
back of the successful third-quarter launch of the expansion,
Legion™. Also, Hearthstone® had its highest
annual MAUsA in 2016, growing more than 20%, in part due to the
fourth-quarter expansion, Mean Streets of Gadgetzan™.
- Activision had the biggest online
player community in its history in 2016, with annual MAUsA of 50
million for the year, up 3% from 2015 and up 23% since 2014.
Fourth-quarter MAUsA were 51 million. Call of Duty®
was the number one console franchise globally in 2016, and in North
America for the 8th year in a row.1 Life-to-date on
current-generation consoles, the Call of Duty franchise had
3 of the top 10 games.1
- On October 28, 2016, Activision
Blizzard Studios, in partnership with Netflix, debuted
Skylanders™ Academy, a new TV series celebrating the
beloved kids franchise. The second season will be delivered in
2017, and a third season has been ordered by Netflix.
- King had 405 million MAUsA for the year
and 355 million MAUsA for the quarter, both of which were down
year-over-year, but with better per user engagement and investment.
King had two of the top 10 highest-grossing titles in the U.S.
mobile app stores for the thirteenth quarter in a row.2
Deep Engagement
- In 2016, consumers spent approximately
43 billion hours playing and watching Activision Blizzard content,
on par with Netflix and over one-and-a-half times Snapchat.
- Blizzard’s fourth-quarter play time
surpassed the previous record set in the third quarter.
Overwatch had its second and third seasonal events,
Halloween Terror and Winter Wonderland, each one driving new
records for engagement with the game. World of Warcraft saw
an increase in total play time for the quarter, surpassing the Q3
expansion launch quarter and all non-launch quarters in the last
four years.
- King’s time spent per daily active user
is now 34 minutes a day, up quarter-over-quarter and
year-over-year.
- In 2016, Activision Blizzard’s esports
network, Major League Gaming, extended its viewer reach on social
platforms like Facebook and Instagram by 50% year-over-year.3
- In 2016, Activision hosted a successful
Call of Duty World League season, which had a $3.5 million
prize pool across 16 hosted events. The 2016 season had 120 million
video views and more than twice the time spent viewing compared to
last year’s season.
- In November, Blizzard held its 10th
BlizzCon® with over 25 thousand attendees, over 10 million
people around the world tuning in to the event and a record number
of pay-per-view tickets sold through DirecTV. Blizzard also
announced the formation of the Overwatch League™ at
BlizzCon.
Player Investment
- Activision Blizzard revenues from
in-game content reached a record $3.6 billion in 2016, more than
double the $1.6 billion in 2015. Excluding King, revenues from
in-game content grew 30% year-over-year.
- Blizzard had record levels of quarterly
and full-year in-game revenues, driven by World of Warcraft
in-game content and continued strength of Overwatch
customization items.
- Activision had record levels of Q4 and
full-year in-game revenues. Call of Duty: Black Ops III
add-on revenues outperformed Season Pass and à la carte map packs
combined, even with record Season Pass participation.
- King’s fourth-quarter gross bookingsB
per paying user increased quarter-over-quarter and year-over-year
to record levels. The Candy Crush™ franchise
continued its momentum, with increased mobile gross bookings for
the quarter and the year compared with 2015.
Company Outlook:
Non-GAAP GAAP Outlook
Impact of GAAP (in millions, except EPS)
Outlook (redefined)
deferralsC
CY
2017
Net Revenues $ 6,000 6,000 300
EPS $ 0.72 1.70 0.15
Fully Diluted Shares* 765 765
Q1
2017
Net Revenues $ 1,550 1,550 (500)
EPS $ 0.25 0.51
(0.33)
Fully Diluted Shares* 760 760
* 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 2017 Outlook:
- $1.08 USD/Euro for current outlook (vs.
average of $1.11 for 2016 and $1.11 for 2015)
- $1.25 USD/British Pound Sterling for
current outlook (vs. average of $1.36 for 2016 and $1.53 for
2015)
Capital Allocation:
The company also announced that its Board of Directors
authorized a new 2-year stock repurchase program under which the
company is authorized to repurchase up to $1 billion of its
outstanding common stock during the period from February 13, 2017
through February 12, 2019.
The Board of Directors also approved a repayment of up to $500
million of the company’s outstanding debt during 2017, of which
$139 million has already been repaid during the first quarter.
The Board of Directors also declared a cash dividend of $0.30
per common share, payable on May 10, 2017 to shareholders of record
at the close of business on March 30, 2017, which represents a 15%
increase from 2016.
Conference Call:
Today at 4:30 p.m. EST, Activision Blizzard’s management will
host a conference call and Webcast to discuss the company’s results
for the quarter ended December 31, 2016 and management’s outlook
for 2017. 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 888-395-3237 in the U.S. with passcode
9509569.
About Activision Blizzard:
Activision Blizzard, Inc., a member of the S&P 500, is the
world's most successful standalone interactive entertainment
company. We delight hundreds of millions monthly active users
around the world through franchises including Activision's Call of
Duty®, Destiny and Skylanders®, Blizzard Entertainment's World of
Warcraft®, Overwatch®, Hearthstone®, Diablo®, StarCraft®, and
Heroes of the Storm®, and King's Candy Crush™, Pet Rescue™, Bubble
Witch™ and Farm Heroes™. The company is one of the Fortune "100
Best Companies To Work For®". Headquartered in Santa Monica,
California, Activision Blizzard has operations throughout the
world, and its games are played in 196 countries. More information
about Activision Blizzard and its products can be found on the
company's website, www.activisionblizzard.com.
1 Based on data from the NPD Group and GfK Chart-Track2 U.S.
ranking for Apple App Store and Google Play Store combined, per App
Annie Intelligence for fourth quarter 20163 Per internal
tracking
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, for Activision Publishing and King,
an individual who plays the same game on two platforms or devices
in the relevant period would be counted as two users. For Blizzard,
an individual who plays the same game on two platforms or devices
in the relevant period would generally be counted as a single
user.
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, beginning with the reporting of our second-quarter 2016
results, we have reported our financial results and provided our
outlook using GAAP and non-GAAP (redefined). We have historically
provided Non-GAAP (as previously defined) financial measures. The
only difference between the two measures is the inclusion (Non-GAAP
(redefined)) or exclusion (Non-GAAP (as previously defined)) of the
impact from revenue deferrals accounting treatment on certain of
our online enabled products. Please see materials from July 29,
2016 call for further details.
Non-GAAP Financial Measures: As a supplement to our
financial measures presented in accordance with Generally Accepted
Accounting Principles (“GAAP”), Activision Blizzard presents
certain non-GAAP measures of financial performance. These non-GAAP
financial measures are not intended to be considered in isolation
from, as a substitute for, or as more important than, the financial
information prepared and presented in accordance with GAAP. In
addition, these non-GAAP measures have limitations in that they do
not reflect all of the items associated with the company’s results
of operations as determined in accordance with GAAP.
Activision Blizzard provides net income (loss), earnings (loss)
per share and operating margin data and guidance both including (in
accordance with GAAP) and excluding (non-GAAP) certain items. When
relevant, the company also provides constant FX information to
provide a framework for assessing how our underlying businesses
performed excluding the effect of foreign currency rate
fluctuations. In addition, Activision Blizzard provides EBITDA
(defined as GAAP net income (loss) before interest (income)
expense, income taxes, depreciation and amortization) and adjusted
EBITDA (defined as non-GAAP operating margin (see non-GAAP
financial measure below) before depreciation). The non-GAAP
financial measures exclude the following items, as applicable in
any given reporting period and our outlook:
- expenses related to stock-based
compensation;
- the amortization of intangibles from
purchase price accounting;
- fees and other expenses related to the
King acquisition, inclusive of related debt financings, and
refinancing of long-term debt, including penalties and the write
off of unamortized discount and deferred financing costs;
- restructuring charges;
- other non-cash charges from
reclassification of certain cumulative translation adjustments into
earnings as required by GAAP; and
- the income tax adjustments associated
with any of the above items (tax impact on Non-GAAP pre-tax income
is calculated under the same accounting principles applied to the
GAAP pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results).
In the future, Activision Blizzard may also consider whether
other items should also be excluded in calculating the non-GAAP
financial measures used by the company. Management believes that
the presentation of these non-GAAP financial measures provides
investors with additional useful information to measure Activision
Blizzard’s financial and operating performance. In particular, the
measures facilitate comparison of operating performance between
periods and help investors to better understand the operating
results of Activision Blizzard by excluding certain items that may
not be indicative of the company’s core business, operating results
or future outlook. Internally, management uses these non-GAAP
financial measures, along with others, in assessing the company’s
operating results, and measuring compliance with the requirements
of the company’s debt financing agreements, as well as in planning
and forecasting.
Activision Blizzard’s non-GAAP financial measures are not based
on a comprehensive set of accounting rules or principles, and the
terms non-GAAP net income, non-GAAP earnings per share, non-GAAP
operating margin, and non-GAAP or adjusted EBITDA do not have a
standardized meaning. Therefore, other companies may use the same
or similarly named measures, but exclude different items, which may
not provide investors a comparable view of Activision Blizzard’s
performance in relation to other companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering Activision Blizzard’s GAAP, as well
as non-GAAP, results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
Cautionary Note Regarding Forward-looking Statements: The
statements contained 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 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 diversion of management time and
attention to issues relating to the operations of our acquired or
newly started businesses; 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 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.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(Amounts in millions, except per
share data)
Three Months Ended December 31, Year
Ended December 31, 2016 2015 2016
2015 Net revenues Product sales $ 696 $
711 $ 2,196 $ 2,447 Subscription, licensing and other revenues1
1,318 642 4,412 2,217 Total net revenues 2,014 1,353 6,608 4,664
Costs and expenses Cost of revenues—product sales:
Product costs 313 343 741 872 Software royalties, amortization, and
intellectual property licenses 80 98 331 370 Cost of
revenues—subscription, licensing, and other: Game operations and
distribution costs 230 82 851 274 Software royalties, amortization,
and intellectual property licenses 153 15 471 69 Product
development 285 193 958 646 Sales and marketing 380 289 1,210 734
General and administrative 148 83 634 380 Total costs and expenses
1,589 1,103 5,196 3,345 Operating
income 425 250 1,412 1,319 Interest and other expense
(income), net 43 49 214 198 Loss on extinguishment of debt 82 — 92
— Income before income tax expense 300
201 1,106 1,121 Income tax expense 46 42 140 229
Net income $ 254 $ 159 $ 966 $ 892
Basic earnings per common share 2 $ 0.34 $ 0.22 $ 1.30 $ 1.21
Weighted average common shares outstanding 744 733 740 728
Diluted earnings per common share 2 $ 0.33 $ 0.21 $ 1.28 $ 1.19
Weighted average common shares outstanding assuming dilution 757
744 754 739 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 1
million and 3 million for the three months and year ended December
31, 2016 respectively, and 6 million and 8 million for the three
months and year ended December 31, 2015 respectively. For the three
months and year ended December 31, 2016, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
earnings per common share, assuming dilution, was $253 million and
$962 million, respectively, as compared to total net income of $254
million and $966 million, respectively, for the same period. For
the three months and year ended December 31, 2015, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate earnings per common share, assuming dilution, was $158
million and $881 million, respectively, as compared to total net
income of $159 million and $892 million, respectively, for the same
period.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)(Amounts in millions)
December 31,
2016 December 31, 2015 Assets
Current assets Cash and cash equivalents $ 3,245 $ 1,823 Accounts
receivable, net 732 679 Inventories, net 49 128 Software
development 412 336 Other current assets 392 421
Total current assets 4,830 3,387 Cash in escrow — 3,561 Software
development 54 80 Property and equipment, net 258 189 Deferred
income taxes, net 283 275 Other assets 401 177 Intangible assets,
net 1,858 482 Goodwill 9,768 7,095 Total assets $
17,452 $ 15,246
Liabilities and
Shareholders' Equity Current liabilities Accounts payable $ 222
$ 284 Deferred revenues 1,628 1,702 Accrued expenses and other
liabilities 806 625 Total current liabilities 2,656
2,611 Long-term debt, net 4,887 4,074 Deferred income taxes, net 44
10 Other liabilities 746 483 Total liabilities 8,333
7,178 Shareholders' equity Common stock — —
Additional paid-in capital 10,442 10,242 Treasury stock (5,563 )
(5,637 ) Retained earnings 4,869 4,096 Accumulated other
comprehensive loss (629 ) (633 ) Total shareholders’ equity 9,119
8,068 Total liabilities and shareholders’ equity $
17,452 $ 15,246
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(Amounts in millions)
Year Ended December 31, 2016
2015 Cash flows from operating activities: Net income $ 966
$ 892 Adjustments to reconcile net income to net cash provided by
operating activities: Deferred income taxes (9 ) (27 ) Provision
for inventories 42 43 Depreciation and amortization 829 95
Amortization of capitalized software development costs and
intellectual property licenses1 321 399 Premium payment for early
redemption of note 63 — Amortization of debt discount, financing
costs, and non-cash write-off due to extinguishment of debt 50 7
Stock-based compensation expense2 147 92 Other 4 — Changes in
operating assets and liabilities, net of effect from business
acquisitions: Accounts receivable, net 84 (40 ) Inventories 32 (54
) Software development and intellectual property licenses (362 )
(350 ) Other assets (10 ) 21 Deferred revenues (35 ) (27 ) Accounts
payable (50 ) (25 ) Accrued expenses and other liabilities
83 233 Net cash provided by operating
activities 2,155 1,259 Cash
flows from investing activities: Proceeds from maturities of
available-for-sale investments — 145 Purchases of
available-for-sale investments — (145 ) Acquisition of business,
net of cash acquired (4,588 ) (46 ) Release (deposit) of cash in
escrow 3,561 (3,561 ) Capital expenditures (136 ) (111 ) Other
investing activities (14 ) 2 Net cash used in
investing activities (1,177 ) (3,716 ) Cash
flows from financing activities: Proceeds from issuance of common
stock to employees 106 106 Tax payment related to net share
settlements on restricted stock rights (115 ) (83 ) Dividends paid
(195 ) (170 ) Proceeds from debt financing 6,925 — Repayment of
long-term debt (6,104 ) (250 ) Payment of debt discount and
financing costs (54 ) (7 ) Premium payment for early redemption of
note (63 ) — Proceeds received from shareholder settlement —
202 Net cash provided by (used in) financing
activities 500 (202 ) Effect of foreign
exchange rate changes on cash and cash equivalents (56 ) (366 )
Net increase (decrease) in cash and cash equivalents
1,422 (3,025 ) Cash and cash
equivalents at beginning of period 1,823 4,848 Cash
and cash equivalents at end of period
$
3,245
$ 1,823
1 Excludes deferral and amortization of
stock-based compensation expense.
2 Includes the net effects of
capitalization, deferral, and amortization of stock-based
compensation expense.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL FINANCIAL
INFORMATION
(Amounts in millions)
Three Months Ended Year over Year
Three Months Ended Year over Year
December 31, March 31, June 30,
September 30, December 31,
% Increase
March 31, June 30, September 30,
December 31, % Increase 2014
2015 2015 2015 2015 (Decrease)
2016 2016 2016 2016 (Decrease)
Cash Flow Data Operating Cash Flow $ 1,205 $ 223 $ 144 $
(171 ) $ 1,063 (12 )% $ 337 $ 503 $ 456 $ 859 (19 )% Capital
Expenditures 17 21 28 46 16 (6 ) 27 44 28 37 131 Non-GAAP Free Cash
Flow1 1,188 202 116 (217 ) 1,047 (12 ) 310 459 428 822 (21 )
Operating Cash Flow - TTM2 1,331 1,401 1,433 1,401 1,259 (5 ) 1,373
1,732 2,359 2,155 71 Capital Expenditures - TTM2 107 91 94 112 111
4 117 133 115 136 23 Non-GAAP Free Cash Flow - TTM2 $ 1,224 $ 1,310
$ 1,339 $ 1,289 $ 1,148 (6 )% $ 1,256 $ 1,599 $ 2,244 $ 2,019 76 %
1 Non-GAAP free cash flow represents operating cash
flow minus capital expenditures. 2 TTM represents trailing twelve
months. Operating Cash Flow for the three months ended March 31,
2014, three months ended June 30, 2014, and three months ended
September 30, 2014 was $153 million, $112 million, and $(139)
million, respectively. Capital Expenditures for the three months
ended March 31, 2014, three months ended June 30, 2014, and three
months ended September 30, 2014, was $37 million, $25 million, and
$28 million, respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 31, 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 $ 2,014 $ 313 $
80 $ 230 $ 153 $ 285 $ 380 $ 148
$ 1,589 Stock-based compensation1 — — (4 ) — (2 ) (13 ) (3 )
(18 ) (40 ) Amortization of intangible assets2 — — (5 ) — (127 ) —
(78 ) (2 ) (212 ) Fees and other expenses related to acquisitions3
— — —
— — — —
(4
)
(4 ) Non-GAAP (redefined) Measurement $ 2,014
$ 313 $ 71 $ 230 $ 24
$ 272 $ 299 $ 124
$ 1,333 Net effect of deferred revenues and
related cost of revenues4 $ 438 $ 102 $ 99 $ 5 $ (6 ) $ — $ — $ — $
200
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per
Share
GAAP Measurement $ 425 $ 254 $ 0.34 $ 0.33 Stock-based
compensation1 40 40 0.05 0.05 Amortization of intangible assets2
212 212 0.28 0.28 Fees and other expenses related to acquisitions3
4 6 0.01 0.01 Loss on extinguishment of debt5 — 82 0.11 0.11
Income tax impacts from items above6 — (98 )
(0.13 ) (0.13 ) Non-GAAP (redefined) Measurement $ 681
$ 496 $ 0.66 $ 0.65
Net effect of deferred revenues and related cost of
revenues4 $ 238 $ 200 $ 0.27 $ 0.27 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 December 31, 2016, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate non-GAAP (redefined) earnings per common share,
assuming dilution, was $495 million, as compared to total net
income of $496 million, for the same period.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 744 million,
participating securities of approximately 1 million, and dilutive
shares of 13 million during the three months ended
December 31, 2016.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Year Ended December 31, 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 $ 6,608 $ 741 $
331 $ 851 $ 471 $ 958 $ 1,210 $
634 $ 5,196 Stock-based compensation1 — — (20 ) (2 ) (2 )
(47 ) (15 ) (73 ) (159 ) Amortization of intangible assets2 — — (8
) — (424 ) — (266 ) (8 ) (706 ) Fees and other expenses related to
acquisitions3 — — — —
— — — (47 )
(47 ) Non-GAAP (redefined) Measurement $ 6,608
$ 741 $ 303 $ 849 $ 45
$ 911 $ 929 $ 506
$ 4,284 Net effect of deferred revenues and
related cost of revenues4 $ (9 ) $ (39 ) $ 3 $ 12 $ 5 $ — $ — $ — $
(19 )
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per
Share
GAAP Measurement $ 1,412 $ 966 $ 1.30 $ 1.28 Stock-based
compensation1 159 159 0.21 0.21 Amortization of intangible assets2
706 706 0.95 0.93 Fees and other expenses related to acquisitions3
47 54 0.07 0.07 Loss on extinguishment of debt5 — 92 0.12 0.12
Income tax impacts from items above6 — (327 )
(0.44 ) (0.43 ) Non-GAAP (redefined) Measurement $ 2,324
$ 1,650 $ 2.22 $ 2.18
Net effect of deferred revenues and related cost of
revenues4 $ 10 $ 20 $ 0.03 $ 0.02 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 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 year ended December 31, 2016, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
non-GAAP (redefined) earnings per common share, assuming dilution,
was $1,643 million, as compared to total net income of $1,650
million, for the same period.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 740 million,
participating securities of approximately 3 million, and dilutive
shares of 14 million during the year ended December 31,
2016.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME TO NON-GAAP
MEASURES(Amounts in millions, except per share data)
Three Months Ended December 31, 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 $ 1,353 $ 343 $ 98 $ 82 $ 15 $ 193 $ 289 $ 83 $
1,103 Stock-based compensation1 — — (5 ) — — (5 ) (2 ) (10 ) (22 )
Amortization of intangible assets2 — — (7 ) — — — — — (7 ) Fees and
other expenses related to acquisitions3 — —
— — — —
— (5 ) (5 ) Non-GAAP (redefined)
Measurement $ 1,353 $ 343 $ 86
$ 82 $ 15 $ 188 $
287 $ 68 $ 1,069 Net
effect of deferred revenues and related cost of revenues4 $ 765 $
131 $ 86 $ 1 $ (7 ) $ — $ — $ — $ 211
Operating Income
Net Income
Basic Earnings per Share
Diluted Earnings per
Share
GAAP Measurement $ 250 $ 159 $ 0.22 $ 0.21 Stock-based
compensation1 22 22 0.03 0.03 Amortization of intangible assets2 7
7 0.01 0.01 Fees and other expenses related to acquisitions3 5 5
0.01 0.01 Income tax impacts from items above5 — (9 )
(0.02 ) (0.01 ) Non-GAAP (redefined) Measurement $
284 $ 184 $ 0.25 $ 0.25
Net effect of deferred revenues and related cost of
revenues4 $ 554 $ 438 $ 0.59 $ 0.58 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 King Acquisition, inclusive of related debt financings and
integration costs.
4 Reflects the net effect from deferral of revenues and
(recognition) of deferred revenues, along with related cost of
revenues, on certain of our online enabled products, including the
effects of taxes. 5 Reflects the income tax impact associated with
the above items. Tax impact on non-GAAP (redefined) pre-tax income
is calculated under the same accounting principles applied to the
GAAP pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results.
The GAAP and non-GAAP (redefined) earnings per share information
is presented as calculated. The sum of these measures, as
presented, may differ due to the impact of rounding.
The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income
between common shareholders and participating security holders. For
the three months ended December 31, 2015, net income
attributable to Activision Blizzard, Inc. common shareholders used
to calculate non-GAAP (redefined) earnings per common share,
assuming dilution, was $183 million, as compared to total net
income of $184 million, for the same period.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 733 million,
participating securities of approximately 6 million, and dilutive
shares of 11 million during the three months ended
December 31, 2015.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME TO NON-GAAP
MEASURES(Amounts in millions, except per share data)
Year Ended December 31, 2015
Net Revenues
Cost of Revenues—Product
Sales:Product Costs
Cost ofRevenues—Product
Sales:SoftwareRoyalties
andAmortization
Cost
ofRevenues—Subs/Lic/Other:Game
Operationsand DistributionCosts
Cost
ofRevenues—Subs/Lic/Other:SoftwareRoyalties
andAmortization
ProductDevelopment
Sales andMarketing
General
andAdministrative
Total Costs andExpenses
GAAP Measurement $ 4,664 $ 872 $ 370 $ 274 $ 69 $ 646 $ 734 $ 380 $
3,345 Stock-based compensation1 — — (12 ) — (3 ) (25 ) (9 ) (43 )
(92 ) Amortization of intangible assets2 — — (11 ) — — — — — (11 )
Fees and other expenses related to acquisitions3 — —
— — — —
— (5 ) (5 ) Non-GAAP (redefined)
Measurement $ 4,664 $ 872 $ 347
$ 274 $ 66 $ 621 $
725 $ 332 $ 3,237 Net
effect of deferred revenues and related cost of revenues4 $ (43 ) $
(51 ) $ (50 ) $ 17 $ 2 $ — $ — $ — $ (82 )
OperatingIncome
Net Income
Basic Earningsper Share
Diluted Earningsper
Share
GAAP Measurement $ 1,319 $ 892 $ 1.21 $ 1.19 Stock-based
compensation1 92 92 0.13 0.12 Amortization of intangible assets2 11
11 0.02 0.02 Fees and other expenses related to acquisitions3 5
5 0.01 0.01 Income tax impacts from items above5 —
(30 ) (0.05 ) (0.04 ) Non-GAAP (redefined)
Measurement $ 1,427 $ 970 $ 1.32
$ 1.30
Net effect of deferred revenues and
related cost of revenues4
$ 39 $ 19 $ 0.02 $ 0.02
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 King Acquisition, inclusive of related debt financings and
integration costs.
4 Reflects the net effect from deferral of revenues and
(recognition) of deferred revenues, along with related cost of
revenues, on certain of our online enabled products, including the
effects of taxes. 5 Reflects the income tax impact associated with
the above items. Tax impact on non-GAAP (redefined) pre-tax income
is calculated under the same accounting principles applied to the
GAAP pre-tax income under ASC 740, which employs an annual
effective tax rate method to the results.
The GAAP and non-GAAP (redefined) earnings per share information
is presented as calculated. The sum of these measures, as
presented, may differ due to the impact of rounding.
The company calculates earnings per share pursuant to the
two-class method which requires the allocation of net income
between common shareholders and participating security holders. For
the year ended December 31, 2015, net income attributable to
Activision Blizzard, Inc. common shareholders used to calculate
non-GAAP (redefined) earnings per common share, assuming dilution,
was $958 million, as compared to total net income of $970 million,
for the same period.
For purposes of calculating earnings per share, we had, on a
weighted-average basis, common shares outstanding of 728 million,
participating securities of approximately 8 million, and dilutive
shares of 11 million during the year ended December 31,
2015.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESFINANCIAL INFORMATION
For the Three Months and Year Ended
December 31, 2016 and 2015(Amounts in millions)
Three Months Ended
December 31, 2016
December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by
Distribution Channel Digital online
channels2 $ 1,454 72 % $ 724 54 % $ 730 101 % Retail channels 372
18 462 34 (90 ) (19 ) Other3 188 9 167
12 21 13 Total consolidated net
revenues $ 2,014 100 % $ 1,353
100 % $ 661 49
Change in deferred
revenues4 Digital online channels2 $ 61 $ 56 Retail
channels 369 709 Other3 8 — Total changes in deferred
revenues $ 438 $ 765
Year Ended
December 31, 2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by
Distribution Channel Digital online channels2 $ 4,865 74 % $
2,502 54 % $ 2,363 94 % Retail channels 1,386 21 1,806 39 (420 )
(23 ) Other3 357 5 356
8 1 — Total consolidated net revenues $ 6,608
100 % $ 4,664 100 % $
1,944 42
Change in deferred revenues4
Digital online channels2 $ 351 $ 126 Retail channels (368 ) (169 )
Other3 8 — Total changes in deferred revenues $ (9 )
$ (43 ) 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
SUBSIDIARIESFINANCIAL INFORMATION
For the Three Months and Year Ended
December 31, 2016 and 2015(Amounts in millions)
Three Months Ended
December 31, 2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by
Platform Console $ 586 29 % $ 655
48 % $ (69 ) (11 )%
PC2
704 35 385 28 319 83 Mobile and ancillary3 536 27 146 11 390 NM
Other4 188 9 167
12 21 13 Total consolidated net revenues $ 2,014
100 % $ 1,353 100 % $ 661
49
Change in deferred revenues5 Console
$ 499 $ 705
PC2
(68 ) 57 Mobile and ancillary3 (1 ) 3 Other4 8 —
Total changes in deferred revenues $ 438 $ 765
Year Ended December 31, 2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by
Platform Console $ 2,453 37 % $ 2,391 51 % $ 62 3 %
PC2
2,124 32 1,499 32 625 42 Mobile and ancillary3 1,674 25 418 9 1,256
NM Other4 357 5 356
8 1 — Total consolidated net revenues $ 6,608
100 % $ 4,664 100 % $
1,944 42
Change in deferred revenues5
Console $ (184 ) $ (22 )
PC2
135 (56 ) Mobile and ancillary3 32 35 Other4 8 —
Total changes in deferred revenues $ (9 ) $ (43 )
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
SUBSIDIARIESFINANCIAL INFORMATION
For the Three Months and Year Ended
December 31, 2016 and 2015(Amounts in millions)
Three Months Ended
December 31, 2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1
Net Revenues by Geographic
Region
Americas $ 1,012 50 % $ 659 49 % $ 353
54 % EMEA2 693 34 522 39 171 33 Asia Pacific 309
15 172 13 137 80
Total consolidated GAAP net revenues $ 2,014
100 % $ 1,353 100 % $ 661 49
Change in deferred revenues3 Americas $ 275 $ 447
EMEA2 163 277 Asia Pacific — 41 Total changes in net
revenues $ 438 $ 765
Year Ended
December 31, 2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Net Revenues by
Geographic Region Americas $ 3,423 52 % $ 2,409 52 % $ 1,014 42
% EMEA2 2,221 34 1,741 37 480 28 Asia Pacific 964
15 514 11 450 88
Total consolidated GAAP net revenues
$ 6,608 100 % $ 4,664 100
% $ 1,944 42
Change in deferred
revenues3 Americas $ (32 ) $ (55 ) EMEA2 (13 ) (20 )
Asia Pacific 36 32 Total changes in net revenues $ (9
) $ (43 ) 1 The percentages of total
are presented as calculated. Therefore, the sum of these
percentages, as presented, may differ due to the impact of
rounding. 2 EMEA consists of the Europe, Middle East, and Africa
geographic regions. 3 Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIESFINANCIAL INFORMATION
For the Three Months and Year Ended
December 31, 2016 and 2015(Amounts in millions)
Three Months Ended December 31,
2016 December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Segment net
revenues: Activision2 $ 1,151 51 %
$ 1,492 76 % $ (341 ) (23 )% Blizzard3 669 30 459 24 210 46 King4
436 19 — —
436 NM Reportable segments total 2,256 100 % 1,951 100 % 305
16
Reconciliation to consolidated net revenues: Other
segments5 196 167 Net effect from deferral of net revenues6 (438 )
(765 ) Consolidated net revenues $ 2,014 $ 1,353 $
661 49 %
Segment income from operations: Activision2
$ 479 $ 626 $ (147 ) (23 )% Blizzard3 273 177 96 54 King4 156
— 156 NM Reportable segments total 908 803 105
13
Reconciliation to consolidated operating income and
consolidated income before income tax expense Other segments5
11 35 Net effect from certain revenues deferrals accounting
treatment6 (238 ) (554 ) Stock-based compensation expense (40 ) (22
) Amortization of intangible assets (212 ) (7 ) Fees and other
expenses related to acquisitions7 (4 ) (5 ) Consolidated operating
income 425 250 175 70 Interest and other expense (income), net 43
49 Loss on extinguishment of debt 82 — Consolidated
income before income tax expense $ 300 $ 201 $ 99 49
% Operating margin from total reportable segments 40.2 %
41.2 %
Year Ended December 31, 2016
December 31, 2015
$ Increase(Decrease)
% Increase(Decrease)
Amount % of Total1 Amount
% of Total1 Segment net
revenues: Activision2 $ 2,220 36 % $ 2,700 63 % $ (480 ) (18 )%
Blizzard3 2,428 39 1,565 37 863 55 King4 1,586
25 — — 1,586 NM
Reportable segments total 6,234 100 % 4,265 100 % 1,969 46
Reconciliation to consolidated net revenues: Other segments5
365 356 Net effect from deferral of net revenues6 9 43
Consolidated net revenues $ 6,608 $ 4,664 $
1,944 42 %
Segment income from operations:
Activision2 $ 788 $ 868 $ (80 ) (9 )% Blizzard3 1,013 561 452 81
King4 537 — 537 NM Reportable segments total
2,338 1,429 909 64
Reconciliation to consolidated operating
income and consolidated income before income tax expense Other
segments5 (4 ) 37 Net effect from certain revenues deferrals
accounting treatment6 (10 ) (39 ) Stock-based compensation expense
(159 ) (92 ) Amortization of intangible assets (706 ) (11 ) Fees
and other expenses related to acquisitions7 (47 ) (5 ) Consolidated
operating income 1,412 1,319 93 7 Interest and other expense
(income), net 214 198 Loss on extinguishment of debt 92 —
Consolidated income before income tax expense $ 1,106
$ 1,121 $ (15 ) (1 )% Operating margin from total
reportable segments 37.5 % 33.5 % 1 The
percentages of total are presented as calculated. Therefore, the
sum of these percentages, as presented, may differ due to the
impact of rounding. 2 Activision Publishing (“Activision”) —
publishes interactive entertainment products and content. 3
Blizzard Entertainment, Inc. (“Blizzard”) — publishes interactive
entertainment products and online subscription-based games. 4 King
Digital Entertainment plc (“King”) — publishes interactive mobile
entertainment products. 5 Other includes other income and expenses
from operating segments managed outside the reportable segments,
including our Major League Gaming, studios, and distribution
businesses. Other also includes unallocated corporate income and
expenses. 6 Reflects the net effect from deferral of revenues and
(recognition) of deferred revenues, along with related cost of
revenues, on certain of our online enabled products. 7 Reflects
fees and other expenses related to the King Acquisition, inclusive
of related debt financings and integration costs.
Our operating segments are consistent with the manner 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; stock-based compensation
expense; amortization of intangible assets as a result of purchase
price accounting; and fees and other expenses (including legal
fees, costs, expenses and accruals) related to acquisitions and
financings.
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
SUBSIDIARIESEBITDA and Adjusted EBITDA
For the Trailing Twelve Months Ended
December 31, 2016(Amounts in millions)
Trailing TwelveMonths Ended
March 31,2016
June 30,2016
September 30,2016
December 31,2016
December 31,2016
GAAP Net Income1 $ 363 $ 151 $ 199 $ 254 $ 966
Interest and other expense (income), net 52 66 53 43 214 Loss on
extinguishment of debt — — 10 82 92 Provision for income taxes1 46
16 32 46 140 Depreciation and amortization 107 233
243 246 829
EBITDA 568 466
537 671 2,241 Stock-based compensation
expense2 44 41 33 40 159 Fees and other expenses related to
acquisitions3 34 4 4 4 47
Adjusted
EBITDA (redefined) $ 646 $
511 $ 574 $ 715
$ 2,447 Change in deferred net revenues
and related cost of revenues4 $ (369 ) $ 108 $ 33 $ 238 $ 10
1 We recognized $27 million, $24 million, $12
million, and $18 million of excess tax benefits from share-based
payments as an income tax benefit in the provision for income taxes
for the three months ended March 31, June 30, September 30, and
December 31, 2016, respectively. 2 Includes expenses related to
stock-based compensation. 3 Reflects fees and other expenses
related to the King Acquisition, inclusive of related debt
financings and integration costs. 4 Reflects the net effect from
deferral of revenues and (recognition) of deferred revenues, along
with related cost of revenues, on certain of our online enabled
products.
Trailing twelve months are presented as calculated. Therefore
the sum of the four quarters, as presented, may differ due to the
impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
Outlook for the Three Months Ending
March 31, 2017 and Year Ending December 31, 2017GAAP to
Non-GAAP (redefined) Reconciliation(Amounts in millions,
except per share data)
Outlook for theThree Months
EndingMarch 31, 2017
Outlook for theYear
EndingDecember 31, 2017
Net Revenues1 $
1,550
$ 6,000 Change in deferred revenues2
$
(500
) $
300
Earnings Per Diluted Share (GAAP) $
0.25
$
0.72
Excluding the impact of: Stock-based compensation3 0.06 0.25
Amortization of intangible assets4 0.24 0.99 Fees and other
expenses related to acquisitions5 0.02 0.03 Restructuring costs6
0.02 0.05 Other non-cash charges7 0.02 0.02 Income tax impacts from
items above8
(0.10
)
(0.35
)
Earnings Per Diluted Share (Non-GAAP redefined) $
0.51
$
1.70
Net effect of deferred net revenues and
related cost of revenues on Earnings Per Diluted Share9
$
(0.33
) $
0.15
1
Net Revenues represent the revenue outlook
for both GAAP and Non-GAAP (redefined) as they are measured the
same.
2 Reflects the net effect from deferral of revenues and
(recognition) of deferred revenues on certain of our online enabled
products. 3 Reflects expenses related to stock-based compensation.
4 Reflects amortization of intangible assets from purchase price
accounting, including intangible assets from the King Acquisition.
5 Reflects fees and other expenses related to the King Acquisition,
inclusive of related debt financings and integration costs. 6
Reflects our planned restructuring
charges, primarily severance costs, related to our continued
transition to digital.
7 Reflects non-cash accounting charges of $14 million to reclassify
certain amounts included in our cumulative translation adjustments
into earnings as required by GAAP for the three months ending March
31, 2017 and for the year ending December 31, 2017. 8 Reflects the
income tax impacts associated with the above items. Due to the
inherent uncertainties in share price and option exercise behavior,
we do not generally forecast excess tax benefits or tax shortfalls,
with the exception of certain outstanding equity grants which are
set to expire this year if not exercised. 9 Reflects the net effect
from deferral of revenues and (recognition) of deferred revenues,
along with related cost of revenues, on certain of our online
enabled products, including the effect of taxes.
The per share adjustments and the GAAP and Non-GAAP (redefined)
earnings per share information are presented as calculated.
Therefore the sum of these measures, as presented, may differ due
to the impact of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170209006277/en/
Activision Blizzard, Inc.Amrita AhujaSVP,
Investor Relations(310) 255-2075Amrita.Ahuja@ActivisionBlizzard.comorMary
OsakoSVP, Global Communications(424)
322-5166Mary.Osako@Activision.com
Activision Blizzard (NASDAQ:ATVI)
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Activision Blizzard (NASDAQ:ATVI)
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From May 2023 to May 2024