Activision Blizzard CEO Bobby Kotick delivered the following remarks during the company’s Q4 2020 earnings call on Thursday, February 4, 2021:
“Through incredibly challenging circumstances, our focused execution and increased investment in people and new content enabled us to achieve record results during 2020. On a GAAP basis, revenues increased year-over-year by 25%. Operating income increased 70% to $2.7 billion, and earnings per share increased by 45%. Since present management assumed control of the company 30 years ago, our returns to shareholders have been four times greater than the returns generated by the S&P 500 during the same period of time.
Our shareholders had the benefit of our strong financial performance in 2020, and our 400 million players had the benefit of the connection and joy our games delivered each and every day.
In a year filled with adversity, our mission, connecting and engaging the world through epic entertainment, has never been more important. I'm incredibly proud of our employees and the way they responded with resilience, compassion and dedication to support each other and our communities.
And with almost 400 million players in 190 countries, our games welcomed some of the most diverse audiences in the world. We have long understood that we simply cannot create broad appeal entertainment without diverse views, voices and talents. To that end, we continue to invest in initiatives to identify and develop emerging leaders and exceptional talent, both within our company and throughout our industry and other sectors.
Our company and our employees remain committed to the communities in which we operate. One important example of our community commitment is the Call of Duty Endowment. Our efforts to place veterans in high-quality jobs provide our company as well as thousands of other employers with the most dedicated, ambitious, disciplined and hard-working talent. We resolutely believe the heroes who serve their countries to protect freedom and liberty deserve special opportunities as a result of their service. With unemployment rates skyrocketing, we still managed to achieve our most successful year ever, placing over 15,000 veterans into high-quality jobs in 2020.
Of those we helped place last year, 21% were women and 28% were black, metrics in which we take great pride, considering that women veterans and black veterans compose just 10% and 12% respectively of the US veteran community. Since 2009, we've funded the placement of 81,000 veterans into new jobs. But now, more than ever, we must ensure that our dedicated public servants have access to the very best employment opportunities.
We've also sought to create career pathways for talented young people, especially from backgrounds that have been historically underrepresented in tech and entertainment. Our investment in Management Leadership for Tomorrow has allowed that organization to grow its extraordinary career preparation program, doubling the number of participants and equipping high-achieving black, Latinx and indigenous Americans with skills and coaching to accelerate their careers. Our support for the United Negro College Fund has funded scholarships for some of our nation's most promising youth. These initiatives further remind the 10,000 people who work at Activision Blizzard that purpose and meaning is the most powerful way to broaden the connection and engagement that our games offer to so many.
Our employees around the world are determined to serve our audiences and deliver exhilaration through accomplishment, provide welcome and necessary distraction during turbulent times and enable moments of solace and comfort throughout the day. We create safe venues that reward unity and celebrate our differences; differences that sometimes unnecessarily divide our society. Gaming connects people more deeply than any other form of media, and video games are redefining what it means to interact socially.
In 2020, we introduced even more ways for players to connect and find community, particularly in Call of Duty. Our approach to the franchise has become the roadmap we are now applying in many of our other games. Within Call of Duty, we have meaningfully expanded social connections and improved engagement through free-to-play experiences on mobile phones, computers and game consoles. These initiatives expanded franchise reach, with over 250 million people playing Call of Duty last year, more than tripling the 70 million people who played Call of Duty in 2018.
Our approach has made the franchise more social than ever, benefiting both our players and our business performance. Call of Duty players who play in groups with friends spend over three times more hours in the game and invest around three times more on in-game content compared to other players. And we've really only just started to scratch the surface of what's possible for social interaction within our franchises. And we have initiatives underway to enhance the social nature of all of our key franchises.
Call of Duty has also established a clear blueprint for franchise-based innovation and we're applying this strategy across our other core franchises to grow reach, engagement and player investment.
As I mentioned, we had roughly 400 million monthly active players in 2020 and we're accelerating our path to reach 1 billion players as we apply the Call of Duty framework across our other wholly owned franchises. Of course, we always begin the process with inspiration and creativity. We then offer great game play through free-to-play access to all consumers, availability on mobile phones and continuous regular delivery of in-game content and premium content.
In Call of Duty, we expect further growth both in our traditional regions and new countries as we continue to enhance the player experience across all platforms.
In the Diablo franchise, Diablo Immortal, our upcoming free-to-play mobile title, was extremely well-received during its regional testing and this has set the stage for the franchise to meaningfully expand its global reach. In addition to launching new Diablo content this year, our highly anticipated Diablo IV is on the horizon. As we execute on our Diablo pipeline, we expect the franchise to contribute meaningfully to our reach, engagement and player investment growth in the coming quarters and years ahead.
In our Warcraft franchise, we intend to deliver more frequent premium content to sustain and expand the World of Warcraft community and we've made multiple mobile free-to-play Warcraft experiences and they're now in advanced development, based on our franchise's beloved IP. This will create opportunities for both existing players and new fans to experience the Warcraft universe in entirely new ways.
For Overwatch, we intend to not only reinvigorate the franchise for the existing community with the launch of Overwatch 2 but also substantially broaden the community through business model and growth initiatives across platforms.
And in Candy Crush which more than half a billion people have already played since launch, we have a clear opportunity to continue winning back players as we execute against the pipeline of social and competitive features that current, lapsed and future players will find compelling.
As we expand the opportunities for fans to engage with our games and our intellectual property overall, we expect our strong financial performance to continue. Three franchises generated over $1 billion in net bookings in 2020, and we're on a clear path to further increase their growth, engagement and monetization. We expect at least two additional franchises will reach similar scale over the next couple of years.
We plan to grow earnings per share again this year, given the structural expansion we've driven in our largest franchises and we'll maintain our focus and further increase our investment in creative talent while continuing to reposition our business to leverage our direct digital relationships with players and to take advantage of the increasing demand around the world for our games.
And 2022 should see even more significant growth given our planned release of new content across multiple platforms. We're confident that executing against our plans will allow us to realize the full potential of our portfolio of fully-owned intellectual property and deliver superior shareholder returns, as we have for three decades. Of course, none of this would be achievable without the unwavering commitment of our employees and our players around the world. And of course, thank you to our shareholders for your ongoing support.”
Our earnings release and a full transcript from the call can be found here.
Use of Non-GAAP Financial Statements
As a supplement to our financial measures presented in accordance with U.S. 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 as 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 all of the items associated with the company’s results of operations as determined in accordance with GAAP.
Please refer to the tables at the back of our earnings release for a reconciliation of the company’s GAAP and non-GAAP results.
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. Such factors include, but are not limited to: the ongoing global impact of a novel strain of coronavirus which emerged in December 2019 (“COVID-19”) (including, without limitation, the potential for significant short- and long-term global unemployment and economic weakness and a resulting impact on global discretionary spending; potential strain on the retailers and distributors who sell our physical product to customers; effects on our ability to release our content in a timely manner; the impact of large-scale intervention by the Federal Reserve and other central banks around the world, including the impact on interest rates; and volatility in foreign exchange rates); our ability to consistently deliver popular, high-quality titles in a timely manner, which has been made more difficult as a result of the COVID-19 pandemic; concentration of revenue among a small number of franchises; our ability to satisfy the expectations of consumers with respect to our brands, games, services, and/or business practices; our ability to attract, retain and motivate skilled personnel; rapid changes in technology and industry standards; competition, including from other forms of entertainment; increasing importance of revenues derived from digital distribution channels; risks associated with the retail sales business model; the continued growth in the scope and complexity of our business, including the diversion of management time and attention to issues relating to the operations of our newly acquired or started businesses and the potential impact of our expansion into new businesses on our existing businesses; substantial influence of third-party platform providers over our products and costs; risks associated with transitions to next-generation consoles; success and availability of video game consoles manufactured by third parties; risks associated with the free-to-play business model, including dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game; our ability to realize the expected financial and operational benefits of, and effectively implement and manage, our previously-announced restructuring actions; our ability to quickly adjust our cost structure in response to sudden changes in demand; risks and costs associated with legal proceedings; intellectual property claims; changes in tax rates or exposure to additional tax liabilities, as well as the outcome of current or future tax disputes; our ability to sell products at assumed pricing levels; reliance on external developers for development of some of our software products; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; the seasonality in the sale of our products; counterparty risks relating to customers, licensees, licensors, and manufacturers, which have been magnified as a result of the COVID-19 pandemic; risks associated with our use of open source software; piracy and unauthorized copying of our products; insolvency or business failure of any of our partners, which has been magnified as a result of the COVID-19 pandemic; risks and uncertainties of conducting business outside the United States; increasing regulation of our business, products, and distribution in key territories; compliance with continually evolving laws and regulations concerning data privacy; reliance on servers and networks to operate our games and our proprietary online gaming service; potential data breaches and other cybersecurity risks; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 30, 2020, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
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.