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Activision announces better-than-expected Q1 2016 results

by rawmeatcowboy
05 May 2016
GN Version 5.0

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

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.

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