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): August 8, 2019
ACTIVISION BLIZZARD, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware |
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001-15839 |
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95-4803544 | |
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3100 Ocean Park Boulevard, |
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Santa Monica, CA |
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90405 | ||
(Address of Principal Executive |
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Registrants telephone number, including area code: (310) 255-2000
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(Former Name or Former Address, if Changed Since Last Report)
Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on |
Common Stock, par value $.000001 per share |
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ATVI |
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The Nasdaq Global Select Market |
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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 August 8, 2019, Activision Blizzard, Inc. (the Company) issued a press release announcing results for the Company for the fiscal quarter ended June 30, 2019. 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 |
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: August 8, 2019 |
ACTIVISION BLIZZARD, INC. | |
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By: |
/s/ Dennis Durkin |
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Dennis Durkin |
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Chief Financial Officer |
ACTIVISION BLIZZARD ANNOUNCES SECOND-QUARTER 2019 FINANCIAL RESULTS
Better-Than-Expected Q2 Results
Santa Monica, CA August 8, 2019 Activision Blizzard, Inc. (Nasdaq: ATVI) today announced second-quarter 2019 results.
Our second quarter results exceeded our prior outlook for both revenue and earnings per share, said Bobby Kotick, Chief Executive Officer of Activision Blizzard. In the first half of 2019 we have prioritized investments in our key franchises and, beginning in the second half of this year our audiences will have a chance to see and experience the initial results of these efforts.
Financial Metrics
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Q2 |
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(in millions, except EPS) |
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2019 |
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Prior Outlook* |
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2018 |
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GAAP Net Revenues |
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$ |
1,396 |
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$ |
1,315 |
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$ |
1,641 |
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Impact of GAAP deferralsA |
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$ |
(189) |
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$ |
(165) |
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$ |
(256) |
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GAAP EPS |
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$ |
0.43 |
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$ |
0.21 |
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$ |
0.52 |
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Non-GAAP EPS |
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$ |
0.53 |
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$ |
0.35 |
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$ |
0.62 |
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Impact of GAAP deferralsA |
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$ |
(0.15) |
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$ |
(0.12) |
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$ |
(0.21) |
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* Prior outlook was provided by the company on May 2, 2019 in its earnings release.
For the quarter ended June 30, 2019, Activision Blizzards net revenues presented in accordance with GAAP were $1.40 billion, as compared with $1.64 billion for the second quarter of 2018. GAAP net revenues from digital channels were $1.09 billion. GAAP operating margin was 24%. GAAP earnings per diluted share were $0.43, as compared with $0.52 for the second quarter of 2018.
For the quarter ended June 30, 2019, on a non-GAAP basis, Activision Blizzards operating margin was 32% and earnings per diluted share were $0.53, as compared with $0.62 for the second quarter of 2018.
For the quarter ended June 30, 2019, operating cash flow was $154 million. For the trailing twelve-month period, operating cash flow was $1.86 billion.
Please refer to the tables at the back of this press release for a reconciliation of the companys GAAP and non-GAAP results.
Activision Blizzard Announces Q2 2019 Financial Results
Operating Metrics
For the quarter ended June 30, 2019, Activision Blizzards net bookingsB were $1.21 billion, compared with $1.38 billion for the second quarter of 2018. Net bookingsB from digital channels were $1.01 billion, as compared with $1.20 billion for the second quarter of 2018.
Selected Business Highlights
Activision Blizzard outperformed our second quarter outlook, reflecting strong creative and commercial execution as we continued to reposition the business for future growth. Across Call of Duty®, Candy Crush, Warcraft®, Hearthstone®, Overwatch®, and Diablo®, we are expanding our development teams so that we can accelerate the delivery of content in our pipeline, pursue new business models, broaden our communities, and delight our players.
Audience Reach
· Activision Blizzard had 327 million Monthly Active Users (MAUs)C in the quarter.
· King had 258 million MAUsC. Candy Crush franchise MAUsC grew year-over-year, driven by growth in Candy Crush Saga and the addition of Candy Crush Friends Saga.
· Activision had 37 million MAUsC. Call of Duty: Black Ops 4 MAUsC grew year-over-year versus Call of Duty: WWII, and hours played increased by more than 50%. Crash Team Racing: Nitro-Fueled enjoyed positive critical reviews and strong sales, particularly through digital channels.
· Blizzard had 32 million MAUsC. Hearthstone MAUsC grew quarter-over-quarter following the release of the Rise of Shadows expansion and The Dalaran Heist single-player Adventure. Overwatch MAUsC were relatively stable quarter-over-quarter, with engagement increasing following the release of the Workshop. Subscribers in World of Warcraft® increased since mid-May, following the release date announcement and beta for World of Warcraft Classic and the Rise of Azshara content update.
Deep Engagement
· Total time spent in Kings Candy Crush franchise grew strongly year-over-year.
· Total hours played in Activisions Call of Duty franchise rose double-digits year-over-year.
· Daily time spent per player in Blizzards franchises again increased year-over-year.
· Overwatch League hours viewed continued to grow robustly year-over-year in the two stages held during the second quarter. Season-to-date, viewership and average minute audience have grown double-digits year-over-year.
Player Investment
· Activision Blizzard delivered approximately $800 million of in-game net bookingsB in the second quarter.
· Kings Candy Crush was the top-grossing franchise in the U.S. mobile app stores, a lead position it has held for the last two years1.
Activision Blizzard Announces Q2 2019 Financial Results
· Advertising in the King network continued to ramp, with net bookingsB growing sequentially and doubling year-over-year.
· For Call of Duty: Black Ops 4, net bookingsB from in-game items grew year-over-year versus Call of Duty: WWII and are ahead of WWII on a comparable life-to-date basis.
· Hearthstone net bookingsB grew sequentially in Q2 following the release of Rise of Shadows and the introduction of the paid single-player Adventure, with the expansion also outperforming last Q4s Rastakhans Rumble.
Company Outlook
(in millions, except EPS) |
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GAAP |
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Non-GAAP |
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Impact of GAAP | |||
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CY 2019 |
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Net Revenues |
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$ |
6,190 |
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$ |
6,190 |
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$ |
110 |
EPS |
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$ |
1.41 |
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$ |
2.02 |
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$ |
0.13 |
Fully Diluted Shares |
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774 |
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774 |
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Q3 2019 |
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Net Revenues |
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$ |
1,105 |
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$ |
1,105 |
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$ |
(5) |
EPS |
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$ |
0.05 |
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$ |
0.20 |
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- |
Fully Diluted Shares |
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772 |
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772 |
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Net bookingsB are expected to be $6.30 billion for 2019 and $1.10 billion for the third quarter of 2019.
Currency Assumptions for 2019 Outlook:
· $1.15 USD/Euro for current outlook (vs. average of $1.12 for 2018, $1.12 for 2017, and $1.11 for 2016); and
· $1.24 USD/British Pound Sterling for current outlook (vs. average of $1.30 for 2018, $1.30 for 2017 and $1.36 for 2016).
· Note: Our financial guidance includes the forecasted impact of our FX hedging program.
Capital Allocation
The company paid a cash dividend of $0.37 per common share, up 9% year-over-year, in May 2019 to shareholders as of record at the close of business on March 28, 2019. Cash payments totaled $283 million.
Activision Blizzard Announces Q2 2019 Financial Results
Conference Call
Today at 4:30 p.m. EDT, Activision Blizzards management will host a conference call and webcast to discuss the companys results for the quarter ended June 30, 2019 and managements outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit https://investor.activision.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 800-239-9838 in the U.S. with passcode 3325605. A replay of the call will also be available after the calls conclusion and archived for one year at https://investor.activision.com/events.cfm.
About Activision Blizzard
Activision Blizzard, Inc., a member of the Fortune 500 and S&P 500, is a leading standalone interactive entertainment company. We delight hundreds of millions of monthly active users around the world through franchises including Activisions Call of Duty®, Spyro®, and Crash, Blizzard Entertainments World of Warcraft®, Overwatch®, Hearthstone®, Diablo®, StarCraft®, and Heroes of the Storm®, and Kings Candy Crush, Bubble Witch, and Farm Heroes. The company is one of the Fortune 100 Best Companies To Work For®. Headquartered in Santa Monica, California, Activision Blizzard has operations throughout the world. More information about Activision Blizzard and its products can be found on the companys website, www.activisionblizzard.com.
1 U.S. ranking for Apple App Store and Google Play Store combined, per App Annie Intelligence for second quarter of 2019.
A Net effect of accounting treatment from revenue deferrals on certain of our online-enabled products. Since certain of our games are hosted online or include significant online functionality that represents a separate performance obligation, we defer the transaction price allocable to the online functionality from the sale of these games and then recognize the attributable revenues over the relevant estimated service periods, which are generally less than a year. The related cost of revenues is deferred and recognized as an expense as the related revenues are recognized. Impact from changes in deferrals refers to the net effect from revenue deferrals accounting treatment for the purposes of revenues, along with, for the purposes of EPS, the related cost of revenues deferrals treatment and the related tax impacts. Internally, management excludes the impact of this change in deferred revenues and related cost of revenues when evaluating the companys operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers. In addition, management believes excluding the change in deferred revenues and the related cost of revenues provides a much more timely indication of trends in our operating results.
B Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others, and is equal to net revenues excluding the impact from deferrals.
C Monthly Active User (MAU) Definition: We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user.
Non-GAAP Financial Measures: As a supplement to our financial measures presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Activision Blizzard presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, the financial information prepared and presented in accordance with GAAP. In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the companys results of operations as determined in accordance with GAAP.
Activision Blizzard Announces Q2 2019 Financial Results
Activision Blizzard provides net income (loss), earnings (loss) per share, and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. When relevant, the company also provides constant FX information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. In addition, Activision Blizzard provides EBITDA (defined as GAAP net income (loss) before interest (income) expense, income taxes, depreciation, and amortization) and adjusted EBITDA (defined as non-GAAP operating margin (see non-GAAP financial measure below) before depreciation). The non-GAAP financial measures exclude the following items, as applicable in any given reporting period and our outlook:
· expenses related to share-based compensation;
· the amortization of intangibles from purchase price accounting;
· fees and other expenses related to the King acquisition, including related debt financings, and refinancing of long-term debt, including penalties and the write off of unamortized discount and deferred financing costs;
· restructuring and related charges;
· other non-cash charges from reclassification of certain cumulative translation adjustments into earnings as required by GAAP;
· the income tax adjustments associated with any of the above items (tax impact on non-GAAP pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results); and
· significant discrete tax-related items, including amounts related to changes in tax laws (including the Tax Cuts and Jobs Act enacted in December 2017), amounts related to the potential or final resolution of tax positions, and other unusual or unique tax-related items and activities.
In the future, Activision Blizzard may also consider whether other items should also be excluded in calculating the non-GAAP financial measures used by the company. Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzards 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 companys core business, operating results, or future outlook. Additionally, we consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Internally, management uses these non-GAAP financial measures, along with others, in assessing the companys operating results, and measuring compliance with the requirements of the companys debt financing agreements, as well as in planning and forecasting.
Activision Blizzards 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 Blizzards 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 Blizzards GAAP, as well as non-GAAP, results and outlook, and by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.
Cautionary Note Regarding Forward-looking Statements: The statements contained herein that are not historical facts are forward-looking statements, including, but not limited to, statements about: (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow or other financial items; (2) statements of our plans and objectives, including those related to releases of products and services and restructuring activities; (3) statements of future financial or operating performance, including the impact of tax items thereon; and (4) statements of assumptions underlying such statements. The company generally uses words such as outlook, forecast, will, could, should, would, to be, plan, plans, believes, may, might, expects, intends, intends as, anticipates, estimate, future, positioned, potential, project, remain, scheduled, set to, subject to, upcoming, and other similar expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risks, reflect managements current expectations, estimates, and projections about our business, and are inherently uncertain and difficult to predict.
We caution that a number of important factors could cause our actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. Such factors include, but are not limited to: our ability to consistently deliver popular, high-quality titles in a timely manner; our ability to satisfy the expectations of consumers with respect to our brands, games, services, and/or business practices; concentration of revenue among a small number of titles; the continued growth in the scope and complexity of our business, including the diversion of management time and attention to issues relating to the operations of our newly acquired or started businesses and the potential impact of our expansion into new businesses on our existing businesses; our ability to realize the expected financial and operational benefits of, and effectively manage, our recently announced restructuring plans; increasing importance of revenues derived from digital distribution channels; risks associated with the retail sales business model; substantial influence of third-party platform providers over our products and costs; success and availability of video game consoles manufactured by third parties; risks
Activision Blizzard Announces Q2 2019 Financial Results
associated with the free-to-play business model, including dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game; risks and costs associated with legal proceedings; changes in tax rates or exposure to additional tax liabilities, as well as the outcome of current or future tax disputes; rapid changes in technology and industry standards; competition, including from other forms of entertainment; our ability to sell products at assumed pricing levels; our ability to attract, retain, and motivate skilled personnel; reliance on external developers for development of some of our software products; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; counterparty risks relating to customers, licensees, licensors, and manufacturers; intellectual property claims; piracy and unauthorized copying of our products; risks and uncertainties of conducting business outside the U.S.; fluctuations in currency exchange rates; increasing regulation of our business, products, and distribution in key territories; compliance with continually evolving laws and regulations concerning data privacy; potential data breaches and other cybersecurity risks; and the other factors identified in Risk Factors included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018.
The forward-looking statements in this press release are based on information available to the company at this time and we assume no obligation to update any such forward-looking statements. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and may cause actual results to differ materially from current expectations.
Activision Blizzard, Inc.
Investors and Analysts:
ir@activisionblizzard.com
or
Press:
pr@activisionblizzard.com
###
(Tables to Follow)
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in millions, except per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Net revenues |
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Product sales |
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$ |
359 |
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$ |
464 |
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$ |
1,015 |
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$ |
1,184 |
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Subscription, licensing, and other revenues 1 |
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1,037 |
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1,177 |
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2,205 |
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2,423 |
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Total net revenues |
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1,396 |
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1,641 |
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3,220 |
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3,607 |
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Costs and expenses |
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Cost of revenuesproduct sales: |
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Product costs |
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99 |
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126 |
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251 |
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289 |
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Software royalties, amortization, and intellectual property licenses |
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51 |
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49 |
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162 |
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194 |
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Cost of revenuessubscription, licensing, and other: |
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Game operations and distribution costs |
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230 |
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250 |
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469 |
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521 |
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Software royalties, amortization, and intellectual property licenses |
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53 |
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85 |
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114 |
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169 |
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Product development |
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244 |
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255 |
|
492 |
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513 |
| ||||
Sales and marketing |
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191 |
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226 |
|
397 |
|
477 |
| ||||
General and administrative |
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170 |
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216 |
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350 |
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415 |
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Restructuring and related costs |
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22 |
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|
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79 |
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|
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Total costs and expenses |
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1,060 |
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1,207 |
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2,314 |
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2,578 |
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|
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Operating income |
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336 |
|
434 |
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906 |
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1,029 |
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Interest and other expense (income), net |
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(34) |
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26 |
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(31) |
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54 |
| ||||
Income before income tax expense |
|
370 |
|
408 |
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937 |
|
975 |
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|
|
|
|
|
|
|
|
| ||||
Income tax expense |
|
42 |
|
6 |
|
163 |
|
73 |
| ||||
|
|
|
|
|
|
|
|
|
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Net income |
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$ |
328 |
|
$ |
402 |
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$ |
774 |
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$ |
902 |
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|
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Basic earnings per common share |
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$ |
0.43 |
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$ |
0.53 |
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$ |
1.01 |
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$ |
1.19 |
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Weighted average common shares outstanding |
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766 |
|
761 |
|
765 |
|
760 |
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|
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|
|
|
|
|
|
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Diluted earnings per common share |
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$ |
0.43 |
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$ |
0.52 |
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$ |
1.01 |
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$ |
1.17 |
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Weighted average common shares outstanding assuming dilution |
|
770 |
|
770 |
|
770 |
|
770 |
|
1 Subscription, licensing, and other revenues represent revenues from World of Warcraft subscriptions, licensing royalties from our products and franchises, downloadable content, microtransactions, and other miscellaneous revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
|
|
June 30, 2019 1 |
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December 31, 2018 2 |
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Assets |
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|
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Current assets |
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| ||
Cash and cash equivalents |
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$ |
4,592 |
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$ |
4,225 |
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Accounts receivable, net |
|
455 |
|
1,035 |
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Inventories, net |
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46 |
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43 |
| ||
Software development |
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184 |
|
264 |
| ||
Other current assets |
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386 |
|
539 |
| ||
Total current assets |
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5,663 |
|
6,106 |
| ||
Software development |
|
90 |
|
65 |
| ||
Property and equipment, net |
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259 |
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282 |
| ||
Deferred income taxes, net |
|
366 |
|
458 |
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Other assets |
|
721 |
|
482 |
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Intangible assets, net |
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633 |
|
735 |
| ||
Goodwill |
|
9,763 |
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9,762 |
| ||
Total assets |
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$ |
17,495 |
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$ |
17,890 |
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Liabilities and Shareholders Equity |
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Current liabilities |
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|
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Accounts payable |
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$ |
180 |
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$ |
253 |
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Deferred revenues |
|
728 |
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1,493 |
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Accrued expenses and other liabilities |
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731 |
|
896 |
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Total current liabilities |
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1,639 |
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2,642 |
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Long-term debt, net |
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2,673 |
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2,671 |
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Deferred income taxes, net |
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20 |
|
18 |
| ||
Other liabilities |
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1,186 |
|
1,167 |
| ||
Total liabilities |
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5,518 |
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6,498 |
| ||
|
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|
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| ||
Shareholders equity |
|
|
|
|
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Common stock |
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|
|
|
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Additional paid-in capital |
|
11,063 |
|
10,963 |
| ||
Treasury stock |
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(5,563) |
|
(5,563) |
| ||
Retained earnings |
|
7,085 |
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6,593 |
| ||
Accumulated other comprehensive loss |
|
(608) |
|
(601) |
| ||
Total shareholders equity |
|
11,977 |
|
11,392 |
| ||
Total liabilities and shareholders equity |
|
$ |
17,495 |
|
$ |
17,890 |
|
1 We adopted a new lease accounting standard in the first quarter of 2019. The new lease accounting standard increased our Other assets, Accrued expenses and other liabilities, and Other liabilities as of June 30, 2019. Refer to our Form 10-Q for the three and six months ended June 30, 2019 for additional information.
2 During the three months ended March 31, 2019, we identified an amount which should have been recorded in the fourth quarter of 2018 to reduce income tax expense by $35 million. We will revise our 2018 financial statements to correct this matter in our Annual Report on Form 10-K for the year ending December 31, 2019. Our balance sheet as of December 31, 2018, as presented above has been revised to reflect the correction. Refer to our Form 10-Q for the three and six months ended June 30, 2019, for additional information.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data)
Three Months Ended June 30, 2019 |
|
Net Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Product |
|
Sales and |
|
General and |
|
Restructuring |
|
Total Costs and |
| ||||||||||
GAAP Measurement |
|
$ |
1,396 |
|
$ |
99 |
|
$ |
51 |
|
$ |
230 |
|
$ |
53 |
|
$ |
244 |
|
$ |
191 |
|
$ |
170 |
|
$ |
22 |
|
$ |
1,060 |
|
Share-based compensation1 |
|
|
|
|
|
(4) |
|
|
|
|
|
(16) |
|
(3) |
|
(15) |
|
|
|
(38) |
| ||||||||||
Amortization of intangible assets2 |
|
|
|
|
|
|
|
|
|
(46) |
|
|
|
|
|
(1) |
|
|
|
(47) |
| ||||||||||
Restructuring and related costs3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22) |
|
(22) |
| ||||||||||
Non-GAAP Measurement |
|
$ |
1,396 |
|
$ |
99 |
|
$ |
47 |
|
$ |
230 |
|
$ |
7 |
|
$ |
228 |
|
$ |
188 |
|
$ |
154 |
|
$ |
|
|
$ |
953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net effect of deferred revenues and related cost of revenues4 |
|
$ |
(189) |
|
$ |
(20) |
|
$ |
(34) |
|
$ |
1 |
|
$ |
(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(54) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
Operating |
|
Net Income |
|
Basic Earnings |
|
Diluted Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
GAAP Measurement |
|
$ |
336 |
|
$ |
328 |
|
$ |
0.43 |
|
$ |
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Share-based compensation1 |
|
38 |
|
38 |
|
0.05 |
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Amortization of intangible assets2 |
|
47 |
|
47 |
|
0.06 |
|
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Restructuring and related costs3 |
|
22 |
|
22 |
|
0.03 |
|
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Income tax impacts from items above5 |
|
|
|
(18) |
|
(0.02) |
|
(0.02) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Discrete tax-related items6 |
|
|
|
(8) |
|
(0.01) |
|
(0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Non-GAAP Measurement |
|
$ |
443 |
|
$ |
409 |
|
$ |
0.53 |
|
$ |
0.53 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net effect of deferred revenues and related cost of revenues4 |
|
$ |
(135) |
|
$ |
(115) |
|
$ |
(0.15) |
|
$ |
(0.15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Includes expenses related to share-based compensation.
2 Reflects amortization of intangible assets from purchase price accounting.
3 Reflects restructuring initiatives, primarily severance and other restructuring-related costs.
4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online-enabled products, including the effects of taxes.
5 Reflects the income tax impact associated with the above items. Tax impact on non-GAAP pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.
6 Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
The GAAP and non-GAAP earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data)
Six Months Ended June 30, 2019 |
|
Net Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Product |
|
Sales and |
|
General and |
|
Restructuring |
|
Total Costs and |
| ||||||||||
GAAP Measurement |
|
$ |
3,220 |
|
$ |
251 |
|
$ |
162 |
|
$ |
469 |
|
$ |
114 |
|
$ |
492 |
|
$ |
397 |
|
$ |
350 |
|
$ |
79 |
|
$ |
2,314 |
|
Share-based compensation1 |
|
|
|
|
|
(14) |
|
(1) |
|
(1) |
|
(36) |
|
(5) |
|
(43) |
|
|
|
(100) |
| ||||||||||
Amortization of intangible assets2 |
|
|
|
|
|
|
|
|
|
(99) |
|
|
|
|
|
(3) |
|
|
|
(102) |
| ||||||||||
Restructuring and related costs3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79) |
|
(79) |
| ||||||||||
Non-GAAP Measurement |
|
$ |
3,220 |
|
$ |
251 |
|
$ |
148 |
|
$ |
468 |
|
$ |
14 |
|
$ |
456 |
|
$ |
392 |
|
$ |
304 |
|
$ |
|
|
$ |
2,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net effect of deferred revenues and related cost of revenues4 |
|
$ |
(755) |
|
$ |
(73) |
|
$ |
(100) |
|
$ |
(4) |
|
$ |
(2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(179) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
Operating |
|
Net Income |
|
Basic Earnings |
|
Diluted Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
GAAP Measurement |
|
$ |
906 |
|
$ |
774 |
|
$ |
1.01 |
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Share-based compensation1 |
|
100 |
|
100 |
|
0.13 |
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Amortization of intangible assets2 |
|
102 |
|
102 |
|
0.13 |
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Restructuring and related costs3 |
|
79 |
|
79 |
|
0.10 |
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Income tax impacts from items above5 |
|
|
|
(36) |
|
(0.05) |
|
(0.05) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Discrete tax-related items6 |
|
|
|
(8) |
|
(0.01) |
|
(0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Non-GAAP Measurement |
|
$ |
1,187 |
|
$ |
1,011 |
|
$ |
1.32 |
|
$ |
1.31 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net effect of deferred revenues and related cost of revenues4 |
|
$ |
(576) |
|
$ |
(475) |
|
$ |
(0.62) |
|
$ |
(0.61) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Includes expenses related to share-based compensation.
2 Reflects amortization of intangible assets from purchase price accounting.
3 Reflects restructuring initiatives, primarily severance and other restructuring-related costs.
4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online-enabled products, including the effects of taxes.
5 Reflects the income tax impact associated with the above items. Tax impact on non-GAAP pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.
6 Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
The GAAP and non-GAAP earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data)
Three Months Ended June 30, 2018 |
|
Net Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Product |
|
Sales and |
|
General and |
|
Total Costs and |
| |||||||||
GAAP Measurement |
|
$ |
1,641 |
|
$ |
126 |
|
$ |
49 |
|
$ |
250 |
|
$ |
85 |
|
$ |
255 |
|
$ |
226 |
|
$ |
216 |
|
$ |
1,207 |
|
Share-based compensation1 |
|
|
|
|
|
(2) |
|
|
|
|
|
(18) |
|
(5) |
|
(32) |
|
(57) |
| |||||||||
Amortization of intangible assets2 |
|
|
|
|
|
|
|
|
|
(75) |
|
|
|
|
|
(2) |
|
(77) |
| |||||||||
Non-GAAP Measurement |
|
$ |
1,641 |
|
$ |
126 |
|
$ |
47 |
|
$ |
250 |
|
$ |
10 |
|
$ |
237 |
|
$ |
221 |
|
$ |
182 |
|
$ |
1,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net effect of deferred revenues and related cost of revenues3 |
|
$ |
(256) |
|
$ |
(44) |
|
$ |
(46) |
|
$ |
(1) |
|
$ |
17 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(74) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Net Income |
|
|
Basic Earnings |
|
|
Diluted Earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Measurement |
|
$ |
434 |
|
$ |
402 |
|
$ |
0.53 |
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation1 |
|
|
57 |
|
|
57 |
|
|
0.07 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets2 |
|
|
77 |
|
|
77 |
|
|
0.10 |
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax impacts from items above4 |
|
|
|
|
|
(37) |
|
|
(0.05) |
|
|
(0.05) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discrete tax-related items5 |
|
|
|
|
|
(25) |
|
|
(0.03) |
|
|
(0.03) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measurement |
|
$ |
568 |
|
$ |
474 |
|
$ |
0.62 |
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of deferred revenues and related cost of revenues3 |
|
$ |
(182) |
|
$ |
(159) |
|
$ |
(0.21) |
|
$ |
(0.21) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Includes expenses related to share-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 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.
5 Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
The GAAP and non-GAAP earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except per share data)
Six Months Ended June 30, 2018 |
|
Net Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Cost of Revenues |
|
Product |
|
Sales and |
|
General and |
|
Total Costs and |
| |||||||||
GAAP Measurement |
|
$ |
3,607 |
|
$ |
289 |
|
$ |
194 |
|
$ |
521 |
|
$ |
169 |
|
$ |
513 |
|
$ |
477 |
|
$ |
415 |
|
$ |
2,578 |
|
Share-based compensation1 |
|
|
|
|
|
(5) |
|
(1) |
|
|
|
(32) |
|
(9) |
|
(64) |
|
(111) |
| |||||||||
Amortization of intangible assets2 |
|
|
|
|
|
|
|
|
|
(148) |
|
|
|
(44) |
|
(4) |
|
(196) |
| |||||||||
Non-GAAP Measurement |
|
$ |
3,607 |
|
$ |
289 |
|
$ |
189 |
|
$ |
520 |
|
$ |
21 |
|
$ |
481 |
|
$ |
424 |
|
$ |
347 |
|
$ |
2,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net effect of deferred revenues and related cost of revenues3 |
|
$ |
(838) |
|
$ |
(120) |
|
$ |
(165) |
|
$ |
(5) |
|
$ |
9 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(281) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
Operating |
|
Net Income |
|
Basic Earnings |
|
Diluted Earnings |
|
|
|
|
|
|
|
|
|
|
| |||||||||
GAAP Measurement |
|
$ |
1,029 |
|
$ |
902 |
|
$ |
1.19 |
|
$ |
1.17 |
|
|
|
|
|
|
|
|
|
|
| |||||
Share-based compensation1 |
|
111 |
|
111 |
|
0.15 |
|
0.14 |
|
|
|
|
|
|
|
|
|
|
| |||||||||
Amortization of intangible assets2 |
|
196 |
|
196 |
|
0.26 |
|
0.25 |
|
|
|
|
|
|
|
|
|
|
| |||||||||
Income tax impacts from items above4 |
|
|
|
(106) |
|
(0.14) |
|
(0.14) |
|
|
|
|
|
|
|
|
|
|
| |||||||||
Discrete tax-related items5 |
|
|
|
(25) |
|
(0.03) |
|
(0.03) |
|
|
|
|
|
|
|
|
|
|
| |||||||||
Non-GAAP Measurement |
|
$ |
1,336 |
|
$ |
1,078 |
|
$ |
1.42 |
|
$ |
1.40 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net effect of deferred revenues and related cost of revenues3 |
|
$ |
(557) |
|
$ |
(469) |
|
$ |
(0.62) |
|
$ |
(0.61) |
|
|
|
|
|
|
|
|
|
|
|
1 Includes expenses related to share-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 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.
5 Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
The GAAP and non-GAAP earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
For the Three and Six Months Ended June 30, 2019 and 2018
(Amounts in millions)
Three Months Ended: |
|
June 30, 2019 |
|
$ Increase / (Decrease) |
| ||||||||||||||||||||
|
|
Activision |
|
Blizzard |
|
King |
|
Total |
|
Activision |
|
Blizzard |
|
King |
|
Total |
| ||||||||
Segment Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net revenues from external customers |
|
$ |
268 |
|
$ |
381 |
|
$ |
499 |
|
$ |
1,148 |
|
$ |
(70) |
|
$ |
(104) |
|
$ |
(3) |
|
$ |
(177) |
|
Intersegment net revenues1 |
|
|
|
3 |
|
|
|
3 |
|
|
|
(1) |
|
|
|
(1) |
| ||||||||
Segment net revenues |
|
$ |
268 |
|
$ |
384 |
|
$ |
499 |
|
$ |
1,151 |
|
$ |
(70) |
|
$ |
(105) |
|
$ |
(3) |
|
$ |
(178) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Segment operating income |
|
$ |
55 |
|
$ |
75 |
|
$ |
171 |
|
$ |
301 |
|
$ |
(29) |
|
$ |
(58) |
|
$ |
2 |
|
$ |
(85) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Margin |
|
|
|
|
|
|
|
26.2% |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
June 30, 2018 |
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
Activision |
|
Blizzard |
|
King |
|
Total |
|
|
|
|
|
|
|
|
| ||||||||
Segment Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net revenues from external customers |
|
$ |
338 |
|
$ |
485 |
|
$ |
502 |
|
$ |
1,325 |
|
|
|
|
|
|
|
|
| ||||
Intersegment net revenues1 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
|
|
|
| ||||||||
Segment net revenues |
|
$ |
338 |
|
$ |
489 |
|
$ |
502 |
|
$ |
1,329 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Segment operating income |
|
$ |
84 |
|
$ |
133 |
|
$ |
169 |
|
$ |
386 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Margin |
|
|
|
|
|
|
|
29.0% |
|
|
|
|
|
|
|
|
|
Six Months Ended: |
|
June 30, 2019 |
|
$ Increase / (Decrease) |
| ||||||||||||||||||||
|
|
Activision |
|
Blizzard |
|
King |
|
Total |
|
Activision |
|
Blizzard |
|
King |
|
Total |
| ||||||||
Segment Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net revenues from external customers |
|
$ |
585 |
|
$ |
720 |
|
$ |
1,028 |
|
$ |
2,333 |
|
$ |
(66) |
|
$ |
(244) |
|
$ |
(8) |
|
$ |
(318) |
|
Intersegment net revenues1 |
|
|
|
8 |
|
|
|
8 |
|
|
|
2 |
|
|
|
2 |
| ||||||||
Segment net revenues |
|
$ |
585 |
|
$ |
728 |
|
$ |
1,028 |
|
$ |
2,341 |
|
$ |
(66) |
|
$ |
(242) |
|
$ |
(8) |
|
$ |
(316) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Segment operating income |
|
$ |
128 |
|
$ |
130 |
|
$ |
349 |
|
$ |
607 |
|
$ |
(47) |
|
$ |
(125) |
|
$ |
(11) |
|
$ |
(183) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Margin |
|
|
|
|
|
|
|
25.9% |
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
June 30, 2018 |
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
Activision |
|
Blizzard |
|
King |
|
Total |
|
|
|
|
|
|
|
|
| ||||||||
Segment Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net revenues from external customers |
|
$ |
651 |
|
$ |
964 |
|
$ |
1,036 |
|
$ |
2,651 |
|
|
|
|
|
|
|
|
| ||||
Intersegment net revenues1 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
| ||||||||
Segment net revenues |
|
$ |
651 |
|
$ |
970 |
|
$ |
1,036 |
|
$ |
2,657 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Segment operating income |
|
$ |
175 |
|
$ |
255 |
|
$ |
360 |
|
$ |
790 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Margin |
|
|
|
|
|
|
|
29.7% |
|
|
|
|
|
|
|
|
|
1 Intersegment revenues reflect licensing and service fees charged between segments.
Our operating segments are consistent with the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker (CODM). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, costs, expenses and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; and other non-cash charges. See the following page for the reconciliation tables of segment revenues and operating income to consolidated net revenues and consolidated operating income.
Our operating segments are also consistent with our internal organization structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
For the Three and Six Months Ended June 30, 2019 and 2018
(Amounts in millions)
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| ||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
| ||||
Reconciliation to consolidated net revenues: |
|
|
|
|
|
|
|
|
| ||||
Segment net revenues |
|
$ |
1,151 |
|
$ |
1,329 |
|
$ |
2,341 |
|
$ |
2,657 |
|
Revenues from non-reportable segments1 |
|
59 |
|
60 |
|
132 |
|
118 |
| ||||
Net effect from recognition (deferral) of deferred net revenues2 |
|
189 |
|
256 |
|
755 |
|
838 |
| ||||
Elimination of intersegment revenues3 |
|
(3) |
|
(4) |
|
(8) |
|
(6) |
| ||||
Consolidated net revenues |
|
$ |
1,396 |
|
$ |
1,641 |
|
$ |
3,220 |
|
$ |
3,607 |
|
|
|
|
|
|
|
|
|
|
| ||||
Reconciliation to consolidated income before income tax expense: |
|
|
|
|
|
|
|
|
| ||||
Segment operating income |
|
$ |
301 |
|
$ |
386 |
|
$ |
607 |
|
$ |
790 |
|
Operating income (loss) from non-reportable segments1 |
|
7 |
|
|
|
4 |
|
(11) |
| ||||
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues2 |
|
135 |
|
182 |
|
576 |
|
557 |
| ||||
Share-based compensation expense |
|
(38) |
|
(57) |
|
(100) |
|
(111) |
| ||||
Amortization of intangible assets |
|
(47) |
|
(77) |
|
(102) |
|
(196) |
| ||||
Restructuring and related costs4 |
|
(22) |
|
|
|
(79) |
|
|
| ||||
Consolidated operating income |
|
336 |
|
434 |
|
906 |
|
1,029 |
| ||||
Interest and other expense (income), net |
|
(34) |
|
26 |
|
(31) |
|
54 |
| ||||
Consolidated income before income tax expense |
|
$ |
370 |
|
$ |
408 |
|
$ |
937 |
|
$ |
975 |
|
1 Includes other income and expenses from operating segments managed outside the reportable segments, including our studios and distribution businesses. Also includes unallocated corporate income and expenses.
2 Reflects the net effect from (deferral) of revenues and recognition of deferred revenues, along with related cost of revenues, on certain of our online-enabled products.
3 Intersegment revenues reflect licensing and service fees charged between segments.
4 Reflects restructuring initiatives, primarily severance and other restructuring-related costs.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
NET REVENUES BY DISTRIBUTION CHANNEL
For the Three and Six Months Ended June 30, 2019 and 2018
(Amounts in millions)
|
|
Three Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Distribution Channel |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Digital online channels2 |
|
$ |
1,086 |
|
78% |
|
$ |
1,259 |
|
77% |
|
$ |
(173) |
|
(14)% |
|
Retail channels |
|
193 |
|
14 |
|
278 |
|
17 |
|
(85) |
|
(31) |
| |||
Other3 |
|
117 |
|
8 |
|
104 |
|
6 |
|
13 |
|
13 |
| |||
Total consolidated net revenues |
|
$ |
1,396 |
|
100% |
|
$ |
1,641 |
|
100% |
|
$ |
(245) |
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues4 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Digital online channels2 |
|
$ |
(76) |
|
|
|
$ |
(62) |
|
|
|
|
|
|
| |
Retail channels |
|
(112) |
|
|
|
(202) |
|
|
|
|
|
|
| |||
Other3 |
|
(1) |
|
|
|
8 |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(189) |
|
|
|
$ |
(256) |
|
|
|
|
|
|
|
|
|
Six Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Distribution Channel |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Digital online channels2 |
|
$ |
2,479 |
|
77% |
|
$ |
2,720 |
|
75% |
|
$ |
(241) |
|
(9)% |
|
Retail channels |
|
505 |
|
16 |
|
690 |
|
19 |
|
(185) |
|
(27) |
| |||
Other3 |
|
236 |
|
7 |
|
197 |
|
5 |
|
39 |
|
20 |
| |||
Total consolidated net revenues |
|
$ |
3,220 |
|
100% |
|
$ |
3,607 |
|
100% |
|
$ |
(387) |
|
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues4 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Digital online channels2 |
|
$ |
(404) |
|
|
|
$ |
(319) |
|
|
|
|
|
|
| |
Retail channels |
|
(344) |
|
|
|
(533) |
|
|
|
|
|
|
| |||
Other3 |
|
(7) |
|
|
|
14 |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(755) |
|
|
|
$ |
(838) |
|
|
|
|
|
|
|
1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding.
2 Net revenues from Digital online channels represent revenues from digitally-distributed subscriptions, downloadable content, microtransactions, and products, as well as licensing royalties.
3 Net revenues from Other include revenues from our studios and distribution businesses, as well as revenues from Major League Gaming and the Overwatch League.
4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online-enabled products.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
NET REVENUES BY PLATFORM
For the Three and Six Months Ended June 30, 2019 and 2018
(Amounts in millions)
|
|
Three Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Platform |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Console |
|
$ |
407 |
|
29% |
|
$ |
565 |
|
34% |
|
$ |
(158) |
|
(28)% |
|
PC |
|
361 |
|
26 |
|
451 |
|
27 |
|
(90) |
|
(20) |
| |||
Mobile and ancillary2 |
|
511 |
|
37 |
|
521 |
|
32 |
|
(10) |
|
(2) |
| |||
Other3 |
|
117 |
|
8 |
|
104 |
|
6 |
|
13 |
|
13 |
| |||
Total consolidated net revenues |
|
$ |
1,396 |
|
100% |
|
$ |
1,641 |
|
100% |
|
$ |
(245) |
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues4 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Console |
|
$ |
(146) |
|
|
|
$ |
(232) |
|
|
|
|
|
|
| |
PC |
|
(50) |
|
|
|
(28) |
|
|
|
|
|
|
| |||
Mobile and ancillary2 |
|
8 |
|
|
|
(4) |
|
|
|
|
|
|
| |||
Other3 |
|
(1) |
|
|
|
8 |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(189) |
|
|
|
$ |
(256) |
|
|
|
|
|
|
|
|
|
Six Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Platform |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Console |
|
$ |
1,083 |
|
34% |
|
$ |
1,382 |
|
38% |
|
$ |
(299) |
|
(22)% |
|
PC |
|
855 |
|
27 |
|
971 |
|
27 |
|
(116) |
|
(12) |
| |||
Mobile and ancillary2 |
|
1,046 |
|
32 |
|
1,057 |
|
29 |
|
(11) |
|
(1) |
| |||
Other3 |
|
236 |
|
7 |
|
197 |
|
5 |
|
39 |
|
20 |
| |||
Total consolidated net revenues |
|
$ |
3,220 |
|
100% |
|
$ |
3,607 |
|
100% |
|
$ |
(387) |
|
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues4 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Console |
|
$ |
(544) |
|
|
|
$ |
(740) |
|
|
|
|
|
|
| |
PC |
|
(196) |
|
|
|
(97) |
|
|
|
|
|
|
| |||
Mobile and ancillary2 |
|
(8) |
|
|
|
(15) |
|
|
|
|
|
|
| |||
Other3 |
|
(7) |
|
|
|
14 |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(755) |
|
|
|
$ |
(838) |
|
|
|
|
|
|
|
1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding.
2 Net revenues from Mobile and ancillary include revenues from mobile devices, as well as non-platform specific game related revenues, such as standalone sales of physical merchandise and accessories.
3 Net revenues from Other include revenues from our studios and distribution businesses, as well as revenues from Major League Gaming and the Overwatch League.
4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online-enabled products.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
NET REVENUES BY GEOGRAPHIC REGION
For the Three and Six Months Ended June 30, 2019 and 2018
(Amounts in millions)
|
|
Three Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Geographic Region |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Americas |
|
$ |
764 |
|
55% |
|
$ |
900 |
|
55% |
|
$ |
(136) |
|
(15)% |
|
EMEA2 |
|
459 |
|
33 |
|
552 |
|
34 |
|
(93) |
|
(17) |
| |||
Asia Pacific |
|
173 |
|
12 |
|
189 |
|
12 |
|
(16) |
|
(8) |
| |||
Total consolidated net revenues |
|
$ |
1,396 |
|
100% |
|
$ |
1,641 |
|
100% |
|
$ |
(245) |
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues3 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Americas |
|
$ |
(120) |
|
|
|
$ |
(141) |
|
|
|
|
|
|
| |
EMEA2 |
|
(58) |
|
|
|
(100) |
|
|
|
|
|
|
| |||
Asia Pacific |
|
(11) |
|
|
|
(15) |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(189) |
|
|
|
$ |
(256) |
|
|
|
|
|
|
|
|
|
Six Months Ended |
| |||||||||||||
|
|
June 30, 2019 |
|
June 30, 2018 |
|
$ Increase |
|
% Increase |
| |||||||
|
|
Amount |
|
% of Total1 |
|
Amount |
|
% of Total1 |
|
(Decrease) |
|
(Decrease) |
| |||
Net Revenues by Geographic Region |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Americas |
|
$ |
1,751 |
|
54% |
|
$ |
1,966 |
|
55% |
|
$ |
(215) |
|
(11)% |
|
EMEA2 |
|
1,073 |
|
33 |
|
1,239 |
|
34 |
|
(166) |
|
(13) |
| |||
Asia Pacific |
|
396 |
|
12 |
|
402 |
|
11 |
|
(6) |
|
(1) |
| |||
Total consolidated net revenues |
|
$ |
3,220 |
|
100% |
|
$ |
3,607 |
|
100% |
|
$ |
(387) |
|
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Change in deferred revenues3 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Americas |
|
$ |
(437) |
|
|
|
$ |
(474) |
|
|
|
|
|
|
| |
EMEA2 |
|
(259) |
|
|
|
(302) |
|
|
|
|
|
|
| |||
Asia Pacific |
|
(59) |
|
|
|
(62) |
|
|
|
|
|
|
| |||
Total changes in deferred revenues |
|
$ |
(755) |
|
|
|
$ |
(838) |
|
|
|
|
|
|
|
1 The percentages of total are presented as calculated. Therefore, the sum of these percentages, as presented, may differ due to the impact of rounding.
2 Net revenues from EMEA consist of the Europe, Middle East, and Africa geographic regions.
3 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online-enabled products.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
EBITDA and ADJUSTED EBITDA
For the Trailing Twelve Months Ended June 30, 2019
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
Trailing Twelve |
| |||||
|
|
September 30, 2018 |
|
December 31, 2018 5 |
|
March 31, 2019 |
|
June 30, 2019 |
|
June 30, 2019 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
GAAP Net Income |
|
$ |
260 |
|
$ |
685 |
|
$ |
447 |
|
$ |
328 |
|
$ |
1,720 |
|
Interest and other expense (income), net |
|
13 |
|
4 |
|
3 |
|
(34) |
|
(14) |
| |||||
Loss on extinguishment of debt |
|
40 |
|
|
|
|
|
|
|
40 |
| |||||
Provision for income taxes1 |
|
(48) |
|
5 |
|
120 |
|
42 |
|
119 |
| |||||
Depreciation and amortization |
|
118 |
|
124 |
|
87 |
|
79 |
|
408 |
| |||||
EBITDA |
|
383 |
|
818 |
|
657 |
|
415 |
|
2,273 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Share-based compensation expense2 |
|
55 |
|
43 |
|
63 |
|
38 |
|
199 |
| |||||
Restructuring and related costs3 |
|
|
|
10 |
|
57 |
|
22 |
|
89 |
| |||||
Adjusted EBITDA |
|
$ |
438 |
|
$ |
871 |
|
$ |
777 |
|
$ |
475 |
|
$ |
2,561 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Change in deferred net revenues and related cost of revenues4 |
|
$ |
89 |
|
$ |
368 |
|
$ |
(441) |
|
$ |
(135) |
|
$ |
(119) |
|
1 Provision for income taxes for the three months ended September 30, 2018, December 31, 2018, and June 30, 2019 also include impacts from significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
2 Includes expenses related to share-based compensation.
3 Reflects restructuring initiatives, primarily severance and other restructuring-related costs.
4 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online-enabled products.
5 Includes a revision to our GAAP Net Income and Provision for income taxes for the three months ended December 31, 2018. Refer to our Form 10-Q for the three and six months ended June 30, 2019, for additional information.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CASH FLOW INFORMATION
(Amounts in millions)
|
|
Three Months Ended |
|
|
| |||||||||||||
|
|
June 30, |
|
September 30, |
|
December 31, |
|
March 31, |
|
June 30, |
|
Year over Year % |
| |||||
|
|
2018 |
|
2018 |
|
2018 |
|
2019 |
|
2019 |
|
(Decrease) |
| |||||
Cash Flow Data |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating Cash Flow |
|
$ |
9 |
|
$ |
253 |
|
$ |
999 |
|
$ |
450 |
|
$ |
154 |
|
NM |
|
Capital Expenditures |
|
30 |
|
36 |
|
34 |
|
18 |
|
27 |
|
(10) |
| |||||
Non-GAAP Free Cash Flow1 |
|
(21) |
|
217 |
|
965 |
|
432 |
|
127 |
|
NM |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating Cash Flow - TTM2 |
|
2,075 |
|
1,949 |
|
1,790 |
|
1,711 |
|
1,856 |
|
(11)% |
| |||||
Capital Expenditures - TTM2 |
|
164 |
|
166 |
|
131 |
|
118 |
|
115 |
|
(30) |
| |||||
Non-GAAP Free Cash Flow - TTM2 |
|
$ |
1,911 |
|
$ |
1,783 |
|
$ |
1,659 |
|
$ |
1,593 |
|
$ |
1,741 |
|
(9) |
|
1 Non-GAAP free cash flow represents operating cash flow minus capital expenditures.
2 TTM represents trailing twelve months. Operating Cash Flow for the three months ended September 30, 2017, three months ended December 31, 2017, and three months ended March 31, 2018, were $379 million, $1,158 million, and $529 million, respectively. Capital Expenditures for the three months ended September 30, 2017, three months ended December 31, 2017, and three months ended March 31, 2018, were $34 million, $69 million, and $31 million, respectively.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Outlook for the Three Months Ending September 30, 2019 and Year Ending December 31, 2019
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share data)
|
|
Outlook for the |
|
Outlook for the |
| ||
|
|
Three Months Ending |
|
Year Ending |
| ||
|
|
September 30, 2019 |
|
December 31, 2019 |
| ||
Net Revenues1 |
|
$ |
1,105 |
|
$ |
6,190 |
|
Change in deferred revenues2 |
|
$ |
(5) |
|
$ |
110 |
|
|
|
|
|
|
| ||
Earnings Per Diluted Share (GAAP) |
|
$ |
0.05 |
|
$ |
1.41 |
|
Excluding the impact of: |
|
|
|
|
| ||
Share-based compensation3 |
|
0.06 |
|
0.26 |
| ||
Amortization of intangible assets4 |
|
0.06 |
|
0.26 |
| ||
Restructuring and related costs5 |
|
0.06 |
|
0.19 |
| ||
Income tax impacts from items above6 |
|
(0.04) |
|
(0.11) |
| ||
Discrete tax-related items7 |
|
|
|
(0.01) |
| ||
Earnings Per Diluted Share (Non-GAAP) |
|
$ |
0.20 |
|
$ |
2.02 |
|
|
|
|
|
|
| ||
Net effect of deferred net revenues and related cost of revenues on Earnings Per Diluted Share8 |
|
$ |
|
|
$ |
0.13 |
|
1 Net Revenues represents the revenue outlook for both GAAP and Non-GAAP as they are measured the same.
2 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues on certain of our online-enabled products.
3 Reflects expenses related to share-based compensation.
4 Reflects amortization of intangible assets from purchase price accounting, including intangible assets from the King Acquisition.
5 Reflects our restructuring initiatives, primarily severance, facilities, and other restructuring-related costs.
6 Reflects the income tax impacts associated with the above items. Due to the inherent uncertainties in share price and option exercise behavior, we do not generally forecast excess tax benefits or tax shortfalls.
7 Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities.
8 Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online-enabled products, including the effect of taxes.
The per share adjustments and the GAAP and Non-GAAP earnings per share information are presented as calculated. Therefore, the sum of these measures, as presented, may differ due to the impact of rounding.