New Skylanders Game and Skylanders Academy TV Show confirmed for 2016

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The first-quarter financial results for Activison-Blizzard are in and there are quite a few interesting details to be found if you look.

One said piece of information is the confirmation that a new Skylanders Game and Skylanders Academy TV Show are on the way later this year.

A new Skylanders game isn’t much of a surprise at all, however the TV series is. With sales of the last installment in the franchise suffering somewhat, perhaps this TV series may reinvigorate interest in the franchise once again.

Activision expects a new Skylanders game to launch in 2016 along with Skylanders Academy, a new TV series celebrating the beloved kids franchise.

Here is the full first-quarter financial results for Activison-Blizzard:

May 5, 2016

Company Increases CY 2016 Revenues and EPS Outlook

Company’s Network is More Than Half a Billion Monthly Active UsersA

Record Q1 Non-GAAP Revenues and EPS, Growing 29% and 44% Respectively Year-over-Year

Record Quarterly Digital Revenues

SANTA MONICA, Calif.–(BUSINESS WIRE)– Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the first quarter of 2016.

First Quarter
(in millions, except EPS)2016PriorOutlook*2015
GAAP
Net Revenues$1,455$1,260$1,278
EPS$0.45$0.21$0.53
Non-GAAP
Net Revenues$908$800$703
EPS$0.23$0.11$0.16

*Prior outlook was provided by the company on February 11, 2016 in its earnings release.

For the quarter ended March 31, 2016, Activision Blizzard’s GAAP net revenues were a Q1 record $1.46 billion, as compared with $1.28 billion for the first quarter of 2015. On a non-GAAP basis, the company’s net revenues were a Q1 record $908 million, as compared with $703 million for the first quarter of 2015. For the first quarter, GAAP net revenues from digital channels were an all-time quarterly record of $926 million, up 59% year-over-year, and represented a Q1 record 64% of the company’s total revenues. On a non-GAAP basis, net revenues from digital channels were an all-time quarterly record of $797 million, up 48% year-over-year, and represented an all-time quarterly record of 88% of the company’s total revenues.

For the quarter ended March 31, 2016, Activision Blizzard’s GAAP earnings per diluted share were $0.45, as compared with $0.53 for the first quarter of 2015, down year-over-year primarily due to purchase price accounting related to the acquisition of King Digital Entertainment. On a non-GAAP basis, the company’s earnings per diluted share were a Q1 record $0.23, as compared with $0.16 for the first quarter of 2015.

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

Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, “This quarter we over-performed our non-GAAP February guidance by $108 million in revenue and $0.12 in earnings per share. We have a strong core business and more opportunities ahead of us than ever before, and talent continues to be our greatest asset.”

Kotick added, “We are grateful to be honored again by FORTUNE as one of the ‘100 Best Companies to Work For®,’ moving up 19 spots in the ranking from last year.”

Kotick continued, “Our long-term growth prospects have never been more exciting and we are fortunate to have the most able, capable people to pursue them.”

Selected Business Highlights:

Expanding Audience Reach

  • On February 23, 2016, Activision Blizzard completed the acquisition of King. The company now has 544 million MAUsA.
  • Activision had the biggest Q1 online player community in its history, with MAUsA of 55 million, up 10% year-over-year. Activision continues to have four of the top 10 games on next-generation consoles life-to-date, including Call of Duty®: Black Ops III at No. 1.1 Call of Duty MAUsA were up quarter-over-quarter and year-over-year, setting another all-time record for the franchise.
  • Blizzard had the biggest Q1 online player community in its history, with MAUsA of 26 million, up 23% year-over-year, reflecting strong engagement with the broader portfolio. Hearthstone®: Heroes of Warcraft surpassed the 50 million registered player milestone.
  • King’s 463 million MAUsA were up 3% quarter-over-quarter. King had three of the top-15-grossing titles in the U.S. mobile app stores for the 9th quarter in a row.2

Deepening Engagement

  • Activision Blizzard, including King, had about 42 billion hours of played and watched time spent over the past twelve months. This is in-line with or above video viewing on some of the largest entertainment networks in the world, including Netflix, Facebook and the major professional US sports leagues on national TV combined (including the NFL, NBA, MLB, NHL, and MLS).

Player Investment

  • Activision Blizzard non-GAAP revenues from in-game content increased 20% year-over-year on the base Activision and Blizzard businesses, and increased 80% with the inclusion of King’s stub quarter results.
  • Activision’s first quarter non-GAAP revenues and operating income grew substantially year-over-year, with non-GAAP digital revenues achieving a Q1 record. Call of Duty is setting new records for in-game content sales. The franchise more than doubled the number of players who chose to purchase in-game content while maintaining average revenue per paying user.
  • Blizzard’s Hearthstone: Heroes of Warcraft delivered 20% non-GAAP revenue growth, compared to the prior-year quarter.
  • King’s metrics improved quarter-over-quarter, in terms of the number of monthly unique payers, gross bookings per paying player, as well as overall gross bookings when these metrics are measured on the same basis as in 2015. The Candy Crush™ franchise returned to growth as well, driven by the Q1 launch of Candy Crush Jelly Saga™ and continued strong performance of the first two Candy Crush games.

Company Outlook:

  • From March 30-April 3, 2016, Activision Blizzard Media Networks broadcasted Major League Gaming’s Major Championship for Valve’s Counter-Strike: Global Offensive, which set new viewership records for the game.
  • On April 4, 2016, Activision concluded the Stage 1 Pro Division Finals of The Call of Duty World League. The 2016 Call of Duty Championships will take place this fall, where teams will compete for a $3 million prize pool.
  • From April 9-10, 2016, Blizzard’s Heroes of the Dorm™ collegiate tournament, featuring online team brawler Heroes of the Storm®, was live telecast on ESPN networks during prime time. The audience for the telecast grew 17% versus the 2015 championship.
  • On April 12, 2016, Activision and its partners at Bungie launched an update for Destiny, adding content and gameplay improvements which drove engagement increases. Destiny now has nearly 30 million registered players. Later this year, Activision and Bungie plan to release a large new expansion for the Destiny universe.
  • On April 19, 2016, Activision released the second of four map packs for Call of Duty: Black Ops III, delivering four new, epic multiplayer maps in addition to an all-new Zombies experience, available first on PlayStation 4.
  • On April 26, 2016, Blizzard released the third expansion for Hearthstone: Heroes of Warcraft, Whispers of the Old Gods™, which has 134 new collectible cards. Following the launch of the expansion, the game reached a record number of daily active users and hours per daily active user.
  • On May 2, 2016, Activision revealed the highly-anticipated Call of Duty: Infinite Warfare, set in space and releasing on November 4. This is the first release on a 3-year development cycle from award-winning studio, Infinity Ward. The Legacy and Digital Deluxe Editions come with a next-generation remastered copy of Call of Duty: Modern Warfare®, one of the most beloved games for the franchise.
  • On May 24, 2016, Blizzard’s team-based shooter, Overwatch™, will be coming to PlayStation 4, Xbox One, and PC. Early access to the open beta on all platforms began on May 3rd; the open beta test will run through May 9th and already has millions of people playing.
  • On August 30, 2016, Blizzard is expected to launch its highly anticipated World of Warcraft® expansion, Legion, following the Q2 release of the Warcraft film, produced by Legendary Pictures, in theaters worldwide. World of Warcraft remains the No. 1 subscription‐based MMORPG in the world.
  • Blizzard Entertainment announced that its tenth BlizzCon® will be returning to the Anaheim Convention Center on Friday, November 4, and Saturday, November 5. Thousands of tickets again sold out in a matter of minutes.
  • Activision expects a new Skylanders® game to launch in 2016 along with Skylanders Academy, a new TV series celebrating the beloved kids franchise.
  • Based on its first quarter results, Activision Blizzard is raising its full-year net revenues and earnings per share outlook. The company’s second-quarter and full-year net revenues and earnings per share outlook are as follows:
(in millions, except EPS)GAAP
Outlook
Non-GAAP
Outlook
CY 2016
Net Revenues$6,130$6,275
EPS$ 0.69$ 1.78
Fully Diluted Shares*765765
Q2 2016
Net Revenues$1,425$1,375
EPS$ 0.10$ 0.38
Fully Diluted Shares*755755

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

Currency Assumptions for 2016 Outlook:

  • $1.12 USD/Euro for current outlook (vs. average of $1.11 for 2015 and $1.33 for 2014)
  • $1.45 USD/British Pound Sterling for current outlook (vs. average of $1.53 for 2015 and $1.65 for 2014)

Debt Repayment and Cash Dividend

On February 2, 2016, the Board of Directors authorized repayments of up to $1.5 billion of our outstanding debt during 2016. As of March 31, 2016, we have made prepayments to reduce our total outstanding term loans by $500 million. Furthermore, the company declared a cash dividend of $0.26 per common share to be paid on May 11th to shareholders of record at the close of business on March 30, 2016.

Conference Call

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended March 31, 2016 and management’s outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-631-5930 FREE in the U.S. with passcode 3541786.

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 over 500 million monthly active users around the world through franchises including Activision’s Call of Duty®, Destiny and Skylanders®, Blizzard Entertainment’s World of Warcraft®, StarCraft®, Diablo® and Hearthstone®: Heroes of Warcraft™, and King’s Candy Crush™, Pet Rescue™ and Farm Heroes™. The company is one of the Fortune ʺ100 Best Companies To Work For®ʺ. 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 companyʹs website, www.activisionblizzard.com.

1 Based on data from the NPD Group and GfK Chart-Track
2 U.S. ranking for Apple App Store and Google Play Store, per App Annie Intelligence for first quarter 2015

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 by the number of months in the period. An individual who plays two of our games would be counted as two users. For Activision Publishing and King MAUs, an individual who plays the same game on two platforms or devices in the relevant period would be counted as two users due to technical limitations. For Blizzard MAUs, an individual who plays the same game on two platforms or devices in the relevant period would be counted as one user.

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 revenues, 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:

  • the change in deferred revenues and related cost of sales with respect to certain of the company’s online-enabled games;
  • 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
  • the income tax adjustments associated with any of the above items.

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 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 revenues, 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.

In addition to the reasons stated above, which are generally applicable to each of the items Activision Blizzard excludes from its non-GAAP financial measures, there are additional specific reasons why the company believes it is appropriate to exclude the change in deferred revenues and related cost of sales with respect to certain of the company’s online-enabled games.

Since Activision Blizzard has determined that some of our games’ online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable, we recognize revenues attributed to these game titles over their estimated service periods, which is generally less than a year. The related cost of sales is deferred and recognized as the related revenues are recognized. Internally, management excludes the impact of this change in deferred revenues and related cost of sales in its non-GAAP financial measures 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, which is consistent with the way the company is measured by investment analysts and industry data sources. In addition, excluding the change in deferred revenues and the related cost of sales provides a much more timely indication of trends in our operating results.

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 product releases; (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 results from the acquisition of King; the integration of King being more difficult, time-consuming or costly than expected; the diversion of management time and attention to issues relating to the operations and integration of King; sales levels of Activision Blizzard’s titles; increasing 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; changing business models, including digital delivery of content and the increased prevalence of free-to-play games; product delays or defects; competition, including from used games and other forms of entertainment; rapid changes in technology and industry standards; possible declines in software pricing; product returns and price protection; the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion; the seasonal and cyclical nature of the interactive entertainment market; 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 and subsequent quarterly reports on Form 10-Q.

The forward-looking statements in this press release are based on information available to the Company and we assume no obligation to update any such forward-looking statements. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from current expectations.

(Tables to Follow)

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

Three Months Ended March 31,
20162015
Net revenues
Product sales$645$784
Subscription, licensing and other revenues1810494
Net revenues1,4551,278
Costs and expenses
Cost of sales – product costs247209
Cost of sales – online6453
Cost of sales – software royalties and amortization144148
Cost of sales – intellectual property licenses363
Product development175145
Sales and marketing16892
General and administrative16086
Total costs and expenses994736
Operating income461542
Interest and other expense (income), net5250
Income before income tax expense409492
Income tax expense7398
Net income$336$394
Basic earnings per common share 2$0.45$0.54
Weighted average common shares outstanding735723
Diluted earnings per common share 2$0.45$0.53
Weighted average common shares outstanding assuming dilution746731
1Subscription, licensing and other revenues represent revenues from World of Warcraft subscriptions, licensing royalties from our products and franchises, value-added services, downloadable content, micro-transactions, and other miscellaneous revenues.
2The 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 4 million and 10 million for the three months ended March 31, 2016 and 2015, respectively. For the three months ended March 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $333 million, as compared to total net income of $336 million, for the same period. For the three months ended March 31, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate earnings per common share, assuming dilution, was $387 million, as compared to total net income of $394 million, for the same period.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

March 31,
2016
December 31,
2015
Assets
Current assets
Cash and cash equivalents$2,872$1,823
Accounts receivable, net383679
Inventories, net103128
Software development296336
Other current assets354421
Total current assets4,0083,387
Cash in escrow3,561
Software development11480
Property and equipment, net246189
Deferred income taxes, net362275
Other assets316177
Intangible assets, net2,484482
Goodwill9,7727,095
Total assets$17,302$15,246
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable$150$284
Deferred revenues1,2071,702
Accrued expenses and other liabilities901625
Current portion of long-term debt64
Total current liabilities2,3222,611
Long-term debt, net5,7774,074
Deferred income taxes, net5710
Other liabilities798483
Total liabilities8,9547,178
Shareholders’ equity
Common stock
Additional paid-in capital10,34310,242
Treasury stock(5,591)(5,637)
Retained earnings4,2394,096
Accumulated other comprehensive loss(643)(633)
Total shareholders’ equity8,3488,068
Total liabilities and shareholders’ equity$17,302$15,246
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except per share data)

Three Months Ended March 31, 2016Net RevenuesCost of Sales –
Product Costs
Cost of Sales –
Online
Cost of Sales –
Software
Royalties and
Amortization
Cost of Sales –
Intellectual
Property Licenses
Product
Development
Sales and
Marketing
General and
Administrative
Total Costs and
Expenses
GAAP Measurement$1,455$247$64$144$36$175$168$160$994
Less: Net effect from deferral of net revenues and related cost of sales1(547)(88)(88)(2)(178)
Less: Stock-based compensation2(8)(10)(3)(23)(44)
Less: Amortization of intangible assets3(1)(16)(31)(33)(1)(82)
Less: Fees and other expenses related to acquisitions4(34)(34)
Non-GAAP Measurement$908$158$64$32$3$165$132$102$656
Operating
Income
Net IncomeBasic Earnings
per Share
Diluted Earnings
per Share
GAAP Measurement$461$336$0.45$0.45
Less: Net effect from deferral of net revenues and related cost of sales1(369)(268)(0.36)(0.36)
Less: Stock-based compensation244310.040.04
Less: Amortization of intangible assets382650.090.09
Less: Fees and other expenses related to acquisitions43490.010.01
Non-GAAP Measurement$252$173$0.23$0.23
Three Months Ended March 31, 2015Net RevenuesCost of Sales –
Product Costs
Cost of Sales –
Online
Cost of Sales –
Software
Royalties and
Amortization
Cost of Sales –
Intellectual
Property Licenses
Product
Development
Sales and
Marketing
General and
Administrative
Total Costs
and Expenses
GAAP Measurement$1,278$209$53$148$3$145$92$86$736
Less: Net effect from deferral of net revenues and related cost of sales1(575)(113)(100)(213)
Less: Stock-based compensation2(4)(7)(2)(10)(23)
Less: Amortization of intangible assets3(1)(1)
Non-GAAP Measurement$703$96$53$44$2$138$90$76$499
Operating
Income
Net IncomeBasic Earnings
per Share
Diluted Earnings
per Share
GAAP Measurement$542$394$0.54$0.53
Less: Net effect from deferral of net revenues and related cost of sales1(362)(295)(0.40)(0.40)
Less: Stock-based compensation223160.020.02
Less: Amortization of intangible assets311
Non-GAAP Measurement$204$116$0.16$0.16
1Reflects the net change in deferred revenues and related cost of sales.
2Includes expenses related to stock-based compensation.
3Reflects amortization of intangible assets from purchase price accounting.
4Reflects fees and other expenses related to the acquisition of King Digital Entertainment (“King Acquisition”), inclusive of related debt financings.
The per share adjustments and the GAAP and non-GAAP earnings per share information are 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 March 31, 2016, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP earnings per common share, assuming dilution, was $171 million, as compared to total net income of $173 million, for the same period. For the three months ended March 31, 2015, net income attributable to Activision Blizzard, Inc. common shareholders used to calculate non-GAAP earnings per common share, assuming dilution, was $113 million, as compared to total net income of $116 million, for the same period.
For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 735 million, participating securities of approximately 4 million, and dilutive shares of 11 million during the three months ended March 31, 2016.
For purposes of calculating earnings per share, we had, on a weighted-average basis, common shares outstanding of 723 million, participating securities of approximately 10 million, and dilutive shares of 8 million during the three months ended March 31, 2015.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended March 31, 2016 and 2015

(Amounts in millions)

Three Months Ended
March 31, 2016March 31, 2015$ Increase
(Decrease)
% Increase
(Decrease)
Amount% of Total1Amount% of Total1
GAAP Net Revenues by Distribution Channel
Digital online channels2$92664%$58145%$34559%
Retail channels4823364951(167)(26)
Other3473484(1)(2)
Total consolidated GAAP net revenues1,4551001,27810017714
Change in Deferred Revenues4
Digital online channels2(129)(43)
Retail channels(418)(532)
Total changes in deferred revenues(547)(575)
Non-GAAP Net Revenues by Distribution Channel
Digital online channels2797885387625948
Retail channels64711717(53)(45)
Other3475487(1)(2)
Total non-GAAP net revenues5$908100%$703100%$20529%
1The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
2Net revenues from digital online channels represent revenues from digitally distributed subscriptions, licensing royalties, value-added services, downloadable content, micro-transactions, and products.
3Net revenues from Other include revenues from our media networks, studios, and distribution businesses.
4We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred revenues.
5Total non-GAAP net revenues presented also represent our total segment net revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION

 

For the Three Months Ended March 31, 2016 and 2015

(Amounts in millions)

Three Months Ended
March 31, 2016March 31, 2015$ Increase
(Decrease)
% Increase
(Decrease)
Amount% of Total1Amount% of Total1
GAAP Net Revenues by Platform
Console$76553%$75859%$71%
PC24002738630144
Mobile and ancillary324317867157NM
Other4473484(1)(2)
Total consolidated GAAP net revenues1,4551001,27810017714
Change in Deferred Revenues5
Console(437)(526)
PC2(99)(50)
Mobile and ancillary3(11)1
Total changes in deferred revenues(547)(575)
Non-GAAP Net Revenues by Platform
Console32836232339641
PC23013333648(35)(10)
Mobile and ancillary3232268712145NM
Other4475487(1)(2)
Total consolidated non-GAAP net revenues6$908100%$703100%$20529%
1The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
2Net revenues from PC include revenues that were historically shown as “Online.”
3Net 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 products from the Skylanders franchise and other physical merchandise and accessories.
4Net revenues from Other include revenues from our media networks, studios, and distribution businesses.
5We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.
6Total non-GAAP net revenues presented also represents our total segment net revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION

 

For the Three Months Ended March 31, 2016 and 2015

(Amounts in millions)

Three Months Ended
March 31, 2016March 31, 2015$ Increase
(Decrease)
% Increase
(Decrease)
Amount% of Total1Amount% of Total1
GAAP Net Revenues by Geographic Region
Americas$75352%$70455%$497%
Europe52136464365712
Asia Pacific1811211097165
Total consolidated GAAP net revenues1,4551001,27810017714
Change in Deferred Revenues2
Americas(293)(350)
Europe(194)(196)
Asia Pacific(60)(29)
Total changes in net revenues(547)(575)
Non-GAAP Net Revenues by Geographic Region
Americas460513545010630
Europe32736268385922
Asia Pacific1211381124049
Total non-GAAP net revenues3$908100%$703100%$20529%
1The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
2We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.
3Total non-GAAP net revenues presented also represents our total segment net revenues.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION

 

For the Three Months Ended March 31, 2016 and 2015

(Amounts in millions)

Three Months Ended
March 31, 2016March 31, 2015$ Increase
(Decrease)
% Increase
(Decrease)
Amount% of Total1Amount% of Total1
Segment net revenues:
Activision2$36040%$30343%$5719%
Blizzard32943235250(58)(16)
King420723207NM
Other5475487(1)(2)
Segments total908100%703100%20529
Reconciliation to consolidated net revenues:
Net effect from deferral of net revenues547575
Consolidated net revenues$1,455$1,27817714%
Segment income (loss) from operations:
Activision2$99$66$3350%
Blizzard386139(53)(38)
King46767NM
Other5(1)1(100)
Segments total2522044824
Reconciliation to consolidated operating income and consolidated income before income tax expense
Net effect from deferral of net revenues and related cost of sales369362
Stock-based compensation expense(44)(23)
Amortization of intangible assets(82)(1)
Fees and other expenses related to acquisitions6(34)
Consolidated operating income461542(81)(15)
Interest and other expense (income), net5250
Consolidated income before income tax expense$409$492(83)(17)%
Operating margin from total operating segments27.8%29.0%
1The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
2Activision Publishing (“Activision”) — publishes interactive entertainment products and content.
3Blizzard Entertainment, Inc. (“Blizzard”) — publishes PC games and online subscription-based games in the MMORPG category.
4King Digital Entertainment plc (“King”) – publishes interactive mobile entertainment products.
5Other includes other income and expenses from operating segments managed outside the reportable segments, including our media networks, studios, and distribution businesses. Other also includes unallocated corporate income and expenses.
6Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

EBITDA and Adjusted EBITDA

 

For the Trailing Twelve Months Ended March 31, 2016

(Amounts in millions)

Trailing Twelve
Months Ended
June 30,
2015
September 30,
2015
December 31,
2015
March 31,
2016
March 31,
2016
GAAP Net Income$212$127$159$336$834
Interest Expense, net50515052203
Provision for income taxes70184273203
Depreciation and amortization212530107183
EBITDA3532212815681,423
Deferral of net revenues and related cost of sales1(181)26554(369)30
Stock-based compensation expense221282244115
Fees and other expenses related to acquisitions353439
Adjusted EBITDA$193$275$862$277$1,607
1Reflects the net change in deferred revenues and related cost of sales.
2Includes expenses related to stock-based compensation.
3Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings.
Trailing twelve months amounts are presented as calculated. Therefore the sum of the four quarters, as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES 

Outlook for the Three Months Ending June 30, 2016 and Year Ending December 31, 2016

GAAP to Non-GAAP Reconciliation

(Amounts in millions, except per share data)

Outlook for theOutlook for the
Three Months EndingYear Ending
June 30, 2016December 31, 2016
Net Revenues (GAAP)$1,425$6,130
Excluding the impact of:
Change in deferred revenues1(50)145
Net Revenues (Non-GAAP)$1,375$6,275
Operating Income (GAAP)$160$932
Excluding the impact of:
Deferral of net revenues and related cost of sales211150
Stock-based compensation351187
Amortization of intangible assets4201705
Fees and other expenses related to acquisitions5652
Operating Income (Non-GAAP)$429$2,026
Earnings Per Diluted Share (GAAP)$0.10$0.69
Excluding the impact of:
Deferral of net revenues and related cost of sales20.020.14
Stock-based compensation30.040.16
Amortization of intangible assets40.210.72
Fees and other expenses related to acquisitions50.010.07
Earnings Per Diluted Share (Non-GAAP)$0.38$1.78
1Reflects the net change in deferred revenues.
2Reflects the net change in deferred revenues and related cost of sales.
3Reflects expenses related to stock-based compensation.
4Reflects amortization of intangible assets from purchase price accounting, including intangible assets from the King Acquisition.
5Reflects fees and other expenses related to the King Acquisition, inclusive of related debt financings.
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.

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