Company Update (NASDAQ:ATVI): Activision Blizzard, Inc. Reports Fourth Quarter and Full Year 2015 Financial Results

Activision Blizzard, Inc. (NASDAQ:ATVI) announced fourth quarter and full year results.

For calendar year 2015, Activision Blizzard delivered GAAP net revenues of $4.66 billion, as compared with $4.41 billion for 2014. GAAP net revenues from digital channels were $2.50 billion and represented a record 54% of the company’s total net revenues. The company delivered record GAAP earnings per diluted share of $1.19, as compared with $1.13 per diluted share for 2014.

On a non-GAAP basis, for the calendar year 2015, the company delivered net revenues of $4.62 billion, as compared with $4.81 billion for 2014. Non-GAAP net revenues from digital channels were a record $2.63 billion and represented a record 57% of the company’s total non-GAAP net revenues. Non-GAAP earnings per share were $1.32, as compared with $1.42 per diluted share for 2014.

For the quarter ended December 31, 2015, Activision Blizzard’s GAAP net revenues were $1.35 billion, as compared with $1.58 billion for the fourth quarter of 2014. GAAP net revenues from digital channels were a record $724 million and represented a Q4 record 54% of the company’s total revenues, growing 34% year-over-year. GAAP earnings per diluted share for the fourth quarter of 2015 were $0.21, as compared with $0.49 for the fourth quarter of 2014.

On a non-GAAP basis, for the quarter ended December 31, 2015, the company’s net revenues were $2.12 billion, as compared with $2.21 billion for the fourth quarter of 2014. Non-GAAP net revenues from digital channels were a record $780 million and represented a Q4 record 37% of the company’s total non-GAAP net revenues, growing 14% year-over-year. Non-GAAP earnings per diluted share for the fourth quarter of 2015 were $0.83, as compared with$0.94 for the fourth quarter of 2014.

At constant FXB, calendar year 2015 non-GAAP net revenues and EPS were up 4% and 13%, respectively, year-over-year, driven by strong engagement and recurring digital trends on our year-round monetizing franchises. Operating margin at constant FXB was also ahead of 2012’s all-time high of 34%. Non-GAAP net revenues and EPS for the quarter were roughly flat versus prior year at constant FXB.

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, “With our expected closing of the acquisition of King Digital later this month, we will have the largest game network in the world, with over 500 million users playing our games every month.A Our entertainment franchises, including Call of Duty, World of Warcraft and soon Candy Crush, will reach people on mobile, console and desktop devices in almost every country in the world. This gives us the opportunity to engage our global audiences and create revenue streams from content and services. Our esports initiatives, enhanced by our recent acquisition of Major League Gaming, allow us to reward our players around the world for their dedication and investment in our games. We expect to generate approximately $6.25 billion in revenues and over $2.0 billion of operating income in 2016 and we will have over 9,000 of the most talented people making, marketing and selling great games around the world.”

Selected Business Highlights:

  • At constant FXB, Activision Publishing’s 2015 non-GAAP operating income grew 30%, and revenues grew 7%. Average MAUsA for the year were up 20% year-over-year, reaching an all-time high, and digital revenues grew over 65%. Activision Publishing now has 4 of the top 10 games on next-generation consoles life-to-date, including Call of Duty®: Black Ops III at number one.1
  • Activision Publishing’s Call of Duty franchise revenues grew double digits year-over-year both for the full year and in Q4, ending the quarter with the highest MAUsA in franchise history. The strong performance was driven by Call of Duty: Black Ops III, which had the biggest entertainment opening weekend of 2015, and was the #1 console game globally for the calendar year.2 Call of Duty was the #1 franchise in North America for the seventh year in a row.1 Black Ops III also has the highest season pass attach rate for downloadable content in franchise history. The Call of Duty franchise has now surpassed 250 million units sold life-to-date worldwide with over $15 billion in total sales, including in-game content, since it first launched in 2003.2
  • Activision Publishing’s Destiny achieved record digital attach rates on its critically acclaimed Q3 expansion, The Taken King. Destiny’s 25+ million registered users have logged nearly 3 billion hours playing the game.
  • Activision Publishing’s casual titles, namely Q3 release Skylanders® SuperChargers and Q4 release Guitar Hero® Live, performed weaker than expected, we believe largely due to greater competition in the toys to life genre and due to the casual audience’s shift to mobile devices.
  • Blizzard Entertainment reached an all-time high for MAUsA in 2015. Fourth quarter MAUsA were up nearly 25% year-over-year, reflecting strong engagement with the online player community. At constant FXB, Blizzard’s 2015 revenues are above 2014’s record results.
  • On November 6, 2015, Blizzard Entertainment revealed that Hearthstone®: Heroes of Warcraft had surpassed the 40 million-registered-player milestone. On November 12, 2015, Blizzard launched The League of Explorers™, the third adventure for the franchise, with 45 new cards. This Adventure sold over 20% more units as of the first 6 weeks after launch than the prior Adventure in the same time frame. As a result of this new content, and continued strength across platforms and geographies, Hearthstone hit all-time franchise highs in multiple categories, including MAUsA, at the end of Q4.
  • On November 6, 2015, Blizzard Entertainment kicked off presales for Legion, the upcoming expansion for World of Warcraft®. Pre-purchasers will receive the expansion’s level-100 character boost, as well as early access to the Demon Hunter class when available. World of Warcraft remains the #1 subscription‐based MMORPG in the world.
  • On November 10, 2015, Blizzard Entertainment launched Legacy of the Void, the standalone third chapter of StarCraft® II, selling through over 1 million copies in the first 24 hours of launch. Legacy of the Void received multiple Strategy Game of the Year awards. At BlizzCon® on November 6, 2015, Blizzard announced plans for a series of standalone mission packs.
  • At BlizzCon, Blizzard Entertainment announced Heroes of the Storm’s upcoming Arena mode, planned for release in 2016, featuring smaller maps and shorter sessions. Heroes of the Storm ended the year taking home multiple awards, including Best Competitive Multiplayer and Best MOBA fromGame Informer.

Company Outlook:

  • On November 2, 2015, the company announced its agreement to acquire King Digital Entertainment for approximately $5.9 billion in equity value ($4.8 billion in enterprise value). Following the closing of the transaction, the addition of King’s business is expected to further position Activision Blizzard for growth across platforms, audiences, genres, and business models. Our outlook for 2016 includes King, assuming we receive the necessary regulatory approvals to allow us to complete the transaction, which is currently expected to close later this month.
  • On December 22, 2015, Activision Publishing announced that the field is set for the inaugural Call of Duty World League Pro Division, with 800 professional esports teams across the world vying for more than $3 million in cash prizes playing Call of Duty: Black Ops III, culminating with the Call of Duty Championship presented by PlayStation 4 in the fall of 2016.
  • On February 2, 2016, Activision Publishing launched the first 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.
  • In Q4 2016, Activision Publishing plans to release an innovative new Call of Duty game from its studio, Infinity Ward, the makers of the Modern Warfare series.
  • Activision Publishing, along with its partners at Bungie, expects to bring a large new expansion to Destiny in 2016 and to release a full game sequel in 2017.
  • Activision Publishing expects a new Skylanders game to launch in 2016 along with Skylanders Academy, a new TV series celebrating the beloved kids franchise.
  • On January 28, 2016, Blizzard Entertainment announced the 2016 Heroes of the Dorm™ competition, featuring online team brawler Heroes of the Storm, with more than $500,000 in tuition and other prizes on the line as part of this year’s event. Esports fans will be able to follow the action on ESPN networks, who will once again deliver live coverage of the events on television and digital platforms.
  • Blizzard Entertainment’s team-based shooter, Overwatch™, will be coming to PC, PlayStation 4, and Xbox One in spring of 2016. An initial closed beta test ran from October 27, 2015 to December 10, 2015, and the game reached top-viewed status on Twitch. Closed beta testing resumed on February 9, 2016.
  • Blizzard’s World of Warcraft is expected to launch its highly anticipated expansion, Legion, this summer, following the June release of the Warcraftfilm by Legendary Pictures.
  • On January 4, 2016, Activision Blizzard announced the acquisition of Major League Gaming, a leader in creating and streaming premium live gaming events, organizing professional competitions and running competitive gaming leagues. The acquisition expands Activision Blizzard’s reach across the rapidly-growing esports ecosystem by adding proven live streaming capabilities and technologies to the Activision Blizzard Media Networks division, led by former ESPN CEO Steve Bornstein and Major League Gaming co-founder Mike Sepso.
  • Activision Blizzard’s first quarter and calendar year 2016 outlook is as follows. Please note that this outlook includes King Digital Entertainment in our results based on an assumed transaction close later this month.
    GAAP   Non-GAAP
(in millions, except EPS)   Outlook**   Outlook**
CY 2016            
Net Revenues   $ 6,100   $ 6,250
EPS   $ 0.45   $ 1.75
Fully Diluted Shares*     767     767
Q1 2016        
Net Revenues   $ 1,260   $ 800
EPS   $ 0.21   $ 0.11
Fully Diluted Shares*     756     756

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

** Outlook includes King Digital Entertainment based on an assumed transaction close later this month. The outlook includes certain estimates and assumptions associated with the King transaction based on the data currently available to us considering the transaction has not closed. Additionally, our GAAP outlook includes estimates and assumptions that may be materially different from those at the transaction close, including our stock price at and around the transaction close date, market inputs and assumptions in our stock option expenses, allocation of the purchase consideration to the acquired assets, and related tax impact from the transaction, among others.

Currency Assumptions for 2016 Outlook:

  • $1.11 USD/Euro for current outlook (vs. a $1.11 average for 2015 and a $1.33 average for 2014)
  • $1.45 USD/British Pound Sterling for current outlook (vs. a $1.53 average for 2015 and a $1.65 average for 2014)
  • Note: Revenue and EPS increase if the Euro or British Pound Sterling strengthen vs. USD.

Board Declares Cash Dividend and Authorizes Debt Repayment

The company also announced that its Board of Directors declared a cash dividend of $0.26 per common share, payable on May 11, 2016 to shareholders of record at the close of business on March 30, 2016, which represents a 13% increase from the cash dividend paid in 2015.

The Board of Directors also approved a repayment of up to $1.5 billion of the company’s outstanding debt during 2016. (Original Source)

Shares of Activision Blizzard are falling nearly 15% in after-hours trading. ATVI has a 1-year high of $39.93 and a 1-year low of $22.20. The stock’s 50-day moving average is $35.18 and its 200-day moving average is $33.20.

On the ratings front, Activision has been the subject of a number of recent research reports. In a report issued on February 5, Wedbush analyst Michael Pachter maintained a Buy rating on ATVI, with a price target of $47, which represents a potential upside of 54.0% from where the stock is currently trading. Separately, on January 27, Robert W. Baird’s Colin Sebastian maintained a Buy rating on the stock and has a price target of $38.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Pachter and Colin Sebastian have a total average return of -11.3% and 11.4% respectively. Pachter has a success rate of 32.5% and is ranked #3515 out of 3569 analysts, while Sebastian has a success rate of 53.5% and is ranked #101.

The street is mostly Bullish on ATVI stock. Out of 6 analysts who cover the stock, 6 suggest a Buy rating . The 12-month average price target assigned to the stock is $39.00, which implies an upside of 27.8% from current levels.

Activision Blizzard Inc is an online, personal computer, video game console, tablet, handheld, and mobile game publisher. It has three operating segments: – Activision Publishing, Inc., Blizzard Entertainment, Inc. and Activision Blizzard Distribution.


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