For the quarter ended March 31, 2015, Activision Blizzards GAAP net revenues were $1.28 billion, as compared with $1.11 billion for the first quarter of 2014. On a non-GAAP basis, the companys net revenues were $703 million, as compared with $772 million for the first quarter of 2014. For the first quarter, GAAP net revenues from digital channels were a record $581 million and represented a Q1 record 45% of the companys total revenues. On a non-GAAP basis, net revenues from digital channels were a Q1 record $538 million and represented a record 76% of the companys total revenues.
For the quarter ended March 31, 2015, Activision Blizzards GAAP earnings per diluted share were a record $0.53, as compared with $0.40 for the first quarter of 2014. On a non-GAAP basis, the companys earnings per diluted share were $0.16, as compared with $0.19 for the first quarter of 2014.
On a constant FX basis, non-GAAP revenues and EPS were flat year-over-year, despite a lighter Q1 slate this year, given strong trends with ongoing monetization.
Please refer to the tables at the back of this press release for a reconciliation of the companys GAAP and non-GAAP results.
Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, This quarter, we were recognized by FORTUNE as one of the 100 Best Companies to Work For®. Our biggest accomplishment remains our ability to attract and retain so many talented, capable, driven and hard-working people with an unyielding commitment to excellence.
Kotick added, Our talented teams around the world continue to create experiences that inspire our audiences. In the last 12 months, we had over 150 million active users around the world who played our games for more than 12 billion hours and spectators who watched over a billion hours of linear programming based on our games. In the past year, Activision Blizzards communities grew by more than 25%.
Kotick continued, This deepening level of engagement with a widening base of players across our franchises is what drove another successful quarter. We delivered better-than-expected Q1 results, increased our 2015 non-GAAP revenue outlook to $4.425 billion and earnings per share outlook to $1.20. Last quarter, on a non-GAAP basis, we delivered record higher-margin digital revenues of over half a billion dollars a Q1 record on an absolute basis and an all-time high on a percentage basis.
Selected Business Highlights:
Activision Publishings Destiny and Blizzard Entertainments Hearthstone®: Heroes of Warcraft combined now have more than 50 million registered players and nearly $1 billion in non-GAAP revenues1 life-to-date.
Activision Publishing had the biggest Q1 online player community in its history, up a double digit percentage year over year. Activision Publishing also had 2 of the top 5 videogame franchises in North America and Europe year-to-date and continues to have 3 of the top 5 next generation games life-to-date with Call of Duty: Advanced Warfare remaining the No. 1 title, as it has since its launch six months ago.2 Including toys, Skylanders was also the No. 1 console franchise and title globally in Q1, outsold the No. 1 action figure line globally, and was the No. 1 kids console franchise and title globally.
Activision Publishings Call of Duty franchise Q1 sales increased by a double-digit percentage year-over-year due to the strong sell-through of Call of Duty: Advanced Warfare and growing online revenues per user across the franchise. There has been early success of the new micro-transaction offerings which have helped drive increased engagement and monetization.
On March 29, 2015, the company held its third annual Call of Duty® Championship, presented by Xbox, the biggest eSports first-person action tournament of the year where 32 professional teams competed for $1 million.
In January, Activision Publishings Call of Duty Online entered open beta in China, in partnership with Tencent. The open beta marks an historic first for the Call of Duty franchise as it expands into the worlds largest gaming market.
Activision Publishings Destiny continues to have strong engagement, with active players playing about 3 hours per day, along with strong digital sales and expansion attach rates. Additionally, Destiny was awarded Game of the Year by the British Academy of Film and Television Arts, a prestigious addition to the 31 Game of the Year awards that Destiny has been honored with to date.
Blizzard Entertainment had the largest Q1 online player community in its history, up a double digit percentage year over year despite no major launches in the quarter. As expected and consistent with our experience following prior expansions, we saw a decline in the World of Warcraft subscriber number. Subscribers ended the quarter at 7.1 million. World of Warcrafts revenue performance at constant FX has been more stable, driven by continued strong uptake on value added services, and price increases in select regions, which partially offset subscriber declines, particularly in the East. World of Warcraft remains the No. 1 subscription-based MMORPG in the world.
Blizzard Entertainments Heroes of the Storm, which has had over 11 million beta sign-ups, entered closed beta in January. The Founders Pack, released in the quarter for $39.99, granted immediate access to the beta, along with a selection of heroes, skins and more.
Blizzard Entertainments Hearthstone: Heroes of Warcraft had steady engagement and revenues quarter over quarter, despite no new content releases this quarter. This was driven by sustained pickup of the Goblins vs Gnomes expansion content, which was released in the previous quarter.
On March 31, 2015, Blizzard Entertainment kicked off closed beta testing for StarCraft® II: Legacy of the Void, the third installment of the companys real-time strategy sequel. Legacy of the Void will be a standalone product that doesnt require any prior releases, so it will be easier than ever for players to get into the game and experience all of the latest content.
Company Outlook:
On April 14, 2015, Activision Publishing unveiled Guitar Hero® Live, bringing back the pop culture phenomenon that previously reached over 40 million players in North America and Europe, and was the fastest console franchise to reach $1 billion.4 The re-imagined experience will be available on consoles, tablets, and mobile phones this fall.
On April 26, 2015, Activision Publishing and Treyarch revealed the highly anticipated Call of Duty: Black Ops III. The sequel to the most played series in Call of Duty history will be available on November 6. The company also announced an upcoming multiplayer Beta, a first for Call of Duty on next generation consoles. Fans who pre-order the game now will get access to the Beta.
On April 2, 2015, Blizzard Entertainment released Blackrock Mountain, the second Hearthstone: Heroes of Warcraft Adventure. Additionally, on April 14, the game was released on iOS® and Android mobile phones. The smartphone release helped propel the franchise to over 30 million registered players and the #1 download spot for mobile games in more than 25 countries.
On April 7, 2015, Blizzard Entertainment launched the WoW Token System, which enables World of Warcraft players to exchange game-time Tokens, purchased at $20, to other players for in-game gold. This serves the dual purpose of enabling players to pay for their subscriptions with their gold and providing players with a secure method for purchasing gold in-game.
On April 23, 2015, Blizzard Entertainment and NetEase, Inc. announced that Sanctuarys gates have been thrown open to all Chinese heroes, as open beta testing for Blizzard Entertainment's award-winning action role-playing game Diablo® III: Reaper of Souls has gone live in China. Approximately 3 million people signed up to play the beta in China, and the game has already sold 1 million units across two offerings: the Premium Package for approximately $32 (RMB198) and the Digital Deluxe Package for approximately $64 (RMB388).
On June 2, 2015, Blizzard Entertainment expects to launch Heroes of the Storm after an open beta testing period commencing May 19. The release follows on the heels of the epic finale of the Heroes of the Dorm collegiate eSports tournament, which was aired live during primetime on April 26 on ESPN2, the networks first-ever live telecast of a collegiate eSports event. Students from more than 460 schools across the U.S. and Canada competed for hundreds of thousands of dollars in tuition and other prizes.
Blizzard Entertainment expects to begin beta testing for Overwatch in fall 2015.
Blizzard Entertainment announced that its ninth BlizzCon® will be returning to the Anaheim Convention Center on Friday, November 6 and Saturday, November 7. Tickets went on sale in two batches in April and quickly sold out.
Given the weakening of foreign currencies versus the U.S. dollar, the companys 2015 international revenues and earnings are expected to be translated at lower rates than in 2014. This impacts the companys 2015 outlook as compared to 2014 actual results given approximately 50% of the companys revenues, and a higher percentage of profits, are generated outside the U.S. See comparison table, below.
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