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Press Release: Activision Blizzard Announces -7-

· 02/04/2021 16:14
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OPERATING SEGMENTS INFORMATION For the Three Months and Years Ended December 31, 2020 and 2019 (Amounts in millions) Three Months Ended Years Ended December December 31, 31, ---------------------- ---------------------- 2020 2019 2020 2019 ---------- ---------- --------- ----------- Reconciliation to consolidated net revenues: Segment net revenues $ 2,813 $ 2,524 $ 8,011 $ 5,969 Revenues from non-reportable segments(1) 287 217 519 462 Net effect from recognition (deferral) of deferred net revenues(2) (638) (722) (333) 101 Elimination of intersegment revenues(3) (49) (33) (111) (43) ---------- ---------- --------- --------- Consolidated net revenues $ 2,413 $ 1,986 $ 8,086 $ 6,489 === ===== === ===== ===== ===== Reconciliation to consolidated income before income tax expense: Segment operating income $ 1,182 $ 1,153 $ 3,418 $ 2,054 Operating income (loss) from non-reportable segments(1) (28) 15 (55) 24 Net effect from recognition (deferral) of deferred net revenues and related cost of revenues(2) (407) (577) (238) 52 Share-based compensation expense (80) (39) (218) (166) Amortization of intangible assets (18) (51) (79) (203) Restructuring and related costs(4) (55) (30) (94) (137) Discrete tax-related items(5) -- (17) -- (17) ---------- ---------- --------- --------- Consolidated operating income 594 454 2,734 1,607 Interest andACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OPERATING SEGMENTS INFORMATION For the Three Months and Years Ended December 31, 2020 and 2019 (Amounts in millions) Three Months Ended: December 31, 2020 $ Increase / (Decrease) --------------- -------------------------------------------- ---------------------------------------- Activision Blizzard King Total Activision Blizzard King Total ------------ ---------- ------ ---------- ------------ ---------- ---- -------- Segment Net Revenues Net revenues from external customers $ 1,657 $ 530 $ 577 $2,764 $ 231 $ (32) $ 74 $ 273 Intersegment net revenues(1) -- 49 -- 49 -- 16 -- 16 ------------ ---------- ------ ------ ------------ ---------- ---- ------ Segment net revenues $ 1,657 $ 579 $ 577 $2,813 $ 231 $ (16) $ 74 $ 289 === ======= ====== ===== ===== === ======= ====== === ===== Segment operating income $ 780 $ 160 $ 242 $1,182 $ 84 $ (100) $ 45 $ 29 Operating Margin 42.0% December 31, 2019 -------------------------------------------- Activision Blizzard King Total ------------ ---------- ------ ---------- Segment Net Revenues Net revenues from external customers $ 1,426 $ 562 $ 503 $2,491 Intersegment net revenues(1) -- 33 -- 33 ------------ ---------- ------ ------ Segment net revenues $ 1,426 $ 595 $ 503 $2,524 === ======= ====== ===== ===== Segment operating income $ 696 $ 260 $ 197 $1,153 Operating Margin 45.7% Years Ended: December 31, 2020 $ Increase / (Decrease) --------------- -------------------------------------------- ---------------------------------------- Activision Blizzard King Total Activision Blizzard King Total ------------ ---------- ------ ---------- ------------ ---------- ---- -------- Segment Net Revenues Net revenues from external customers $ 3,942 $ 1,794 $2,164 $7,900 $ 1,723 $ 118 $133 $1,974 Intersegment net revenues(1) -- 111 -- 111 -- 68 -- 68 ------------ ---------- ------ ------ ------------ ---------- ---- ------ Segment net revenues $ 3,942 $ 1,905 $2,164 $8,011 $ 1,723 $ 186 $133 $2,042 === ======= ====== ===== ===== === ======= ====== === ===== Segment operating income $ 1,868 $ 693 $ 857 $3,418 $ 1,018 $ 229 $117 $1,364 Operating Margin 42.7% December 31, 2019 -------------------------------------------- Activision Blizzard King Total ------------ ---------- ------ ---------- Segment Net Revenues Net revenues from external customers $ 2,219 $ 1,676 $2,031 $5,926 Intersegment net revenues(1) -- 43 -- 43 ------------ ---------- ------ ------ Segment net revenues $ 2,219 $ 1,719 $2,031 $5,969 === ======= ====== ===== ===== Segment operating income $ 850 $ 464 $ 740 $2,054 Operating Margin 34.4% (1) Intersegment revenues reflect licensing and service fees charged between segments.GAAP Measurement $ 1,607 $ 1,503 $ 1.96 $ 1.95 Share-based compensation(1) 166 166 0.22 0.22 Amortization of intangible assets(2) 203 203 0.26 0.26 Restructuring and related costs(3) 137 137 0.18 0.18 Income tax impacts from items above(6) -- (95) (0.13) (0.12) Discrete tax-related items(4) 17 (131) (0.17) (0.17) ----------- ------------------- ------------------- ------------------------------- Non-GAAP Measurement $ 2,130 $ 1,783 $ 2.33 $ 2.31 === ====== ====== =========== ====== =========== ============ ================= Net effect of deferred revenues and related cost of revenues(5) $ (52) $ (47) $ (0.07) $ (0.06) (1) Includes expenses related to share-based compensation. (2) Reflects amortization of intangible assets from purchase price accounting. (3) Reflects restructuring initiatives, primarily severance and other restructuring-related costs. (4) Reflects the impact of significant discrete tax-related items, including amounts related to changes in tax laws, amounts related to the potential or final resolution of tax positions, and/or other unusual or unique tax-related items and activities. Activision Blizzard provided additional information in our Form 10-K for the year ended December 31, 2019. (5) Reflects the net effect from deferral of revenues and (recognition) of deferred revenues, along with related cost of revenues, on certain of our online enabled products, including the effects of taxes. (6) Reflects the income tax impact associated with the above items. Tax impact on non-GAAP pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

The GAAP and non-GAAP earnings per share information is presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.

Our operating segments are consistent with the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker ("CODM"). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, costs, expenses and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; and other non-cash charges. See the following page for the reconciliation tables of segment revenues and operating income to consolidated net revenues and consolidated income before income tax expense.

Our operating segments are also consistent with our internal organization structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.

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February 04, 2021 16:14 ET (21:14 GMT)