SANTA MONICA, Calif .– (BUSINESS WIRE) –Activision Blizzard, Inc. (Nasdaq: ATVI) today announced third-quarter 2020 results.

"Our teams continue to execute our growth plans with excellence during incredibly challenging circumstances, ”said Bobby Kotick, Chief Executive Officer of Activision Blizzard. "We are on a path to deliver sustained long-term growth across our fully-owned franchises. With confidence in our ability to continue to execute, we are raising our outlook for the year and remain enthusiastic for our growth prospects next year. "

Financial Metrics

 

Q3

(in millions, except EPS)

2020

Prior Outlook *

2019

GAAP Net Revenues

$ 1,954

$ 1,800

$ 1,282

Impact of GAAP deferralsA

($ 187)

($ 150)

($ 68)

 

 

 

 

GAAP EPS

$ 0.78

$ 0.64

$ 0.26

Non-GAAP EPS

$ 0.88

$ 0.75

$ 0.38

Impact of GAAP deferralsA

($ 0.17)

($ 0.15)

($ 0.06)

 

 

 

* Prior outlook was provided by the company on August 4, 2020 in its earnings release.

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

For the quarter ended September 30, 2020, Activision Blizzard's net revenues presented in accordance with GAAP were $ 1.95 billion, as compared with $ 1.28 billion for the third quarter of 2019. GAAP net revenues from digital channels were $ 1.75 billion, as compared with $ 1.01 billion for the third quarter of 2019. GAAP operating margin was 40%. GAAP earnings per diluted share were $ 0.78, as compared with $ 0.26 for the third quarter of 2019.

For the quarter ended September 30, 2020, on a non-GAAP basis, Activision Blizzard's operating margin was 44% and earnings per diluted share were

For the quarter ended September 30, 2020, operating cash flow was $ 196 million. For the trailing twelve-month period, operating cash flow was $ 2.03 billion.

Operating Metrics

For the quarter ended September 30, 2020, Activision Blizzard's net bookingsB were $ 1.77 billion, as compared with $ 1.21 billion for the third quarter of 2019. Net bookingsB from digital channels were $ 1.61 billion, as compared with $ 975 million for the third quarter of 2019. In-game net bookingsC were $ 1.2 billion, as compared with $ 709 million for the third quarter of 2019.

For the quarter ended September 30, 2020, overall Activision Blizzard Monthly Active Users (MAUs)D were 390 million.

Selected Business Highlights

Activision Blizzard exceeded its third quarter outlook, with strong execution across our three strategic growth drivers: audience reach, engagement and player investment. Successful execution across major content launches, live operations and in our new approaches to engagement and business models in key franchises was the primary driver of our results. Our continued investments and successful initiatives for our largest franchises position the business for ongoing strong results into the future.

Activision

  • Activision had 111 million MAUsD in the third quarter.
  • Call of Duty®: Modern Warfare® and Warzone ™ saw more than three times as many MAUsD as the prior title in the year-ago quarter. MAUs consoleD grew strongly and PC MAUsD grew over ten-fold year-over-year. Across PC and console combined, hours played were approximately seven times higher year-over-year.
  • We again saw substantial year-over-year growth in premium game sales as Warzone players chose to upgrade to the full Call of Duty Experience. Modern Warfare first-year premium sales are the highest in Call of Duty's history, with two-thirds of units sold digitally.
  • Call of Duty console and PC in-game net bookingsC were four times the year-ago level.
  • Call of Duty: Black Ops Cold War will release on November 13 into the largest and most engaged community in franchise history at the time of launch, and will support cross-platform play across PC, current-generation, and next-generation consoles. Anticipation for the release is high, with far more players engaged in the game's public testing than for the year-ago title.
  • Call of Duty Mobile sustained the impressive levels of reach and engagement from the prior quarter, as the title crossed its one year anniversary. The title was the highest grossing new game in US app stores since its launch last October1 and is now in final large-scale testing in China, where over 50 million players have pre-registered to date.
  • The inaugural season of the Call of Duty League ™ concluded with the September Champs Weekend breaking viewership records for a Call of Duty esports event.

Blizzard

  • Blizzard had 30 million MAUsD in the third quarter.
  • World of Warcraft®MAUsD were stable year-over-year. Anticipation continues to build for Shadowlands, the next expansion for modern World of Warcraft, ahead of its November 23 launch. World of Warcraft franchise engagement is at its highest level for this stage ahead of an expansion in a decade, with Shadowlands presales well ahead of any prior expansion.
  • Hours played in Hearthstone® grew year-over-year in the third quarter, with the Battlegrounds mode seeing sustained strong engagement since its release last November. This November will see the broad release of Duels, a new player-versus-player mode, alongside a new in-game progression system and the latest expansion, Madness at the Darkmoon Faire ™.
  • Overwatch®continues to have a large and dedicated community, with 10 million MAUsDin the quarter, over four years since launch.
  • Millions of Overwatch fans have engaged through the 2020 season of the Overwatch League ™, with the October Grand Finals being the most-watched event in the league's history.

King

  • King had 249 million MAUsD in the third quarter, with Candy Crush ™ MAUsD growing year-over-year.
  • King in-game net bookingsC grew year-over-year and Candy Crush was once again the top grossing franchise in the US app stores1.
  • The Farm Heroes ™ and Bubble Witch ™ franchises grew net bookingsB year-over-year as the teams delivered a higher frequency of in-game content.
  • King again delivered robust double-digit year-over-year growth in advertising net bookingsB, with strength across both direct brand advertisers and partner networks.

Company Outlook

(in millions, except EPS)

GAAP
Outlook

Non-GAAP
Outlook

Impact of GAAP
deferralsA

CY 2020

 

Net Revenues

$ 7,675

$ 7,675

$ 425

EPS

$ 2.61

$ 3.08

$ 0.27

Fully Diluted Shares

779

779

 

 

 

 

 

Q4 2020

 

 

 

Net Revenues

$ 2,001

$ 2,001

$ 731

EPS

$ 0.44

$ 0.63

$ 0.46

Fully Diluted Shares

782

782

 

Net bookingsB are expected to be $ 8.10 billion for 2020 and $ 2.73 billion for the fourth quarter of 2020.

Conference Call

Today at 4:30 pm EDT, Activision Blizzard's management will host a conference call and webcast to discuss the company's results for the quarter ended September 30, 2020 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 https://investor.activision.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 866-777-2509 in the US We encourage participants to pre-register for the conference call using the following link https://dpregister.com/sreg/10148877/dad94a3f28. A replay of the call will also be available after the call's conclusion https://investor.activision.com/events.cfm.

About Activision Blizzard

Activision Blizzard, Inc. connects and engages the world through epic entertainment. A member of the Fortune 500 and S&P 500, Activision Blizzard is a leading interactive entertainment company. We delight hundreds of millions of monthly active users around the world through franchises including Activision's Call of Duty® and Crash Bandicoot ™, Blizzard Entertainment's World of Warcraft®, Overwatch®, Hearthstone®, Diablo®, and StarCraft®, and King's Candy Crush ™ , Bubble Witch ™, and Farm Heroes ™. 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 company's website, www.activisionblizzard.com.

1 Based on App Annie Intelligence.

A Net effect of accounting treatment from revenue deferrals on certain of our online-enabled products. We have been able to provide online services and / or services. are generally less than a year. The related cost of revenues is recognized and recognized as an expense. Impact of changes in deferrals refers to the net effect of revenue deferrals of the treatment of revenues, of the purposes of EPS, of the related deferrals of treatment and of the related tax impacts. Internationally, management excludes the impact of this change in revenues from revenues and related revenues when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers. In addition, management believes in the reduction of revenues and in the revenues of our operating system.

B Net bookings is a network of products and services. impact from deferrals.

C In-game net bookings primarily includes the net amount of downloadable content and microtransactions sold during the period, and is equal to in-game revenues.

D Monthly Active User ("MAU") Definition: We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games.

Non-GAAP Financial Measures: As a supplement to our financial measures in accordance with US 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 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 the items associated with the company's results of operations as determined in accordance with GAAP.

Activision Blizzard provides net income (loss), earnings (loss) per share, operating margin and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. The following is an example of foreign currency rate fluctuations. In addition, Activision Blizzard provides EBITDA (defined as GAAP net income (loss) before interest (income) expense, income tax, 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 appropriate in any given reporting period:

  • expenses related to share-based compensation;
  • the amortization of intangibles from purchase price accounting;
  • fees and other expenses related to acquisitions, including related debt financings, and refinancing of long-term debt, including penalties and the write off of unamortized discount and deferred financing costs;
  • restructuring and related charges;
  • other non-cash charges from reclassification of certain cumulative translation adjustments into earnings as required by GAAP;
  • the income tax adjustments associated with the above items (non-GAAP tax on income tax is calculated on the basis of the GAAP pre-tax income under ASC 740, which uses an annual effective tax rate method to the results); and
  • significant discrete tax-related items, including the Tax Cuts and Jobs Act, enacted in December 2017, 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 Activation Blizzard's financial and operating performance. In particular, the measures facilitated comparisons of operating performance with periods of time and with the help of investors to better understand the operating results of Activision Blizzard by excluding certain items that may be indicative of the company's core business, operating results, or future outlook. Additionally, we consider quantitative and qualitative factors in assessing the impact of items that may be significant or that could affect an ongoing financial and business performance or trends. Internationally, management uses these non-GAAP financial measures, assessing the company's operating results, and measuring compliance with the company's debt-financing concept, as well as in planning and forecasting.

Activision Blizzard's non-GAAP financial measures, 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 similar named measures, but exclude different items, which may provide investors with comparable views of Activision's performance in relation to other companies.

Blizzard's GAAP, as well as non-GAAP, results and outlook - ADAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

Cautionary Note Regarding Forward-looking Statements: The statements contained herein that are not historical facts are forward-looking statements including, but not limited to, statements about: (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow, or other financial items ; (2) statements of our plans and objectives, including those related to releases of products or services and restructuring activities; (3) statements of future financial or operating performance, including the impact of tax items thereon; and (4) statements of assumptions underlying such statements. Activision Blizzard, Inc. generally uses words such as "outlook," "forecast," "will," "could," "should," "would," "to be," "plan," "aims," ​​"believes, "" May, "" might, "" expects, "" intends, "" seeks, "" anticipates, "" estimate, "" future, "" positioned, "" potential, "" project, "" remain, "" scheduled, "" set to, "" subject to, "" upcoming, "and other similar words and expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risks, reflect management's current expectations, estimates, and projections about our business, and are inherently uncertain and difficult to predict.

We caution that a number of important factors, many of which are beyond our control, could cause our actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements.

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

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except for share data)

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2020

2019

2020

2019

Net revenues

 

 

 

 

Product sales

$

408

$

260

 

$

1,484

$

1,276

 

Subscription, licensing, and other revenues1

 

1,546

 

1,022

 

 

4,190

 

3,227

 

Total net revenues

 

1,954

 

1,282

 

 

5,674

 

4,503

 

 

 

 

 

 

Costs and expenses

 

 

 

 

Cost of revenues — product sales:

 

 

 

 

Product costs

 

101

 

137

 

 

357

 

388

 

Software royalties, amortization, and intellectual property licenses

 

37

 

9

 

 

152

 

171

 

Cost of revenues — subscription, licensing, and other:

 

 

 

 

Game operations and distribution costs

 

290

 

246

 

 

819

 

714

 

Software royalties, amortization, and intellectual property licenses

 

41

 

50

 

 

115

 

164

 

Product development

 

274

 

210

 

 

802

 

702

 

Sales and marketing

 

238

 

182

 

 

722

 

580

 

General and administrative

 

186

 

177

 

 

529

 

527

 

Restructuring and related costs

 

9

 

24

 

 

39

 

104

 

Total costs and expenses

 

1,176

 

1,035

 

 

3,535

 

3,350

 

 

 

 

 

 

Operating income

 

778

 

247

 

 

2,139

 

1,153

 

Interest and other expense (income), net

 

25

 

(2

)

 

55

 

(33

)

Loss on extinguishment of debt

 

31

 

 

 

31

 

 

Income before income tax expense

 

722

 

249

 

 

2,053

 

1,186

 

 

 

 

 

 

Income tax expense

 

118

 

45

 

 

365

 

208

 

 

 

 

 

 

Net income

$

604

$

204

 

$

1,688

$

978

 

 

 

 

 

 

Basic earnings for common share

$

0.78

$

0.27

 

$

2.19

$

1.28

 

Weighted average common shares outstanding

 

772

 

767

 

 

771

 

766

 

 

 

 

 

 

Diluted earnings for common share

$

0.78

$

0.26

 

$

2.17

$

1.27

 

Weighted average common shares outstanding assuming dilution

 

779

 

771

 

 

777

 

770

 

 

1

Subscription, licensing, and other revenues from revenues of our products and franchises, downloadable content, microtransactions, and other miscellaneous revenues.

 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

 

September 30, 2020

December 31, 2019

Assets

 

 

Current assets

 

 

Cash and cash equivalents

$

7,415

 

$

5,794

 

Accounts receivable, net

 

619

 

 

848

 

Software development

 

398

 

 

322

 

Other current assets

 

570

 

 

328

 

Total current assets

 

9,002

 

 

7,292

 

Software development

 

145

 

 

54

 

Property and equipment, net

 

211

 

 

253

 

Deferred income taxes, net

 

1,287

 

 

1,293

 

Other assets

 

699

 

 

658

 

Intangible assets, net

 

469

 

 

531

 

Goodwill

 

9,764

 

 

9,764

 

Total assets

$

21,577

 

$

19,845

 

 

 

 

Liabilities and Shareholders Equity

 

 

Current liabilities

 

 

Payable accounts

$

224

 

$

292

 

Deferred revenues

 

1,108

 

 

1,375

 

Accrued expenses and other liabilities

 

855

 

 

1,248

 

Total current liabilities

 

2,187

 

 

2,915

 

Long-term debt, net

 

3,604

 

 

2,675

 

Deferred income taxes, net

 

480

 

 

505

 

Other liabilities

 

924

 

 

945

 

Total liabilities

 

7,195

 

 

7,040

 

 

 

 

Shareholders equity

 

 

Common stock

 

 

 

 

Additional paid-in capital

 

11,395

 

 

11,174

 

Treasury stock

 

(5,563

)

 

(5,563

)

Retained earnings

 

9,183

 

 

7,813

 

Accumulated other comprehensive loss

 

(633

)

 

(619

)

Total shareholders' equity

 

14,382

 

 

12,805

 

Total liabilities and shareholders' equity

$

21,577

 

$

19,845

 

 

Contacts

Activision Blizzard, Inc.

Investors and Analysts:
ir@activisionblizzard.com
or
Press:
pr@activisionblizzard.com

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