The company reported adjusted earnings of $2.2 billion in sales and $361 million in net income during the peak holiday season, when most publishers generate a majority of their revenue. That compares to nearly $2.3 billion and net income of $174 million during the same frame in 2013.
During the fourth quarter, adjusted earnings per share came in at a record $0.94, compared with $0.79 during the same year-ago frame.
For the full year, Activision posted record adjusted earnings of $4.8 billion, up from $4.3 billion in 2013, and net income of $835 million, compared to $1 billion.
Activision Blizzard CEO Bobby Kotick called 2014 “another successful year as we achieved record results and introduced new franchises with outstanding gameplay, expanded on exciting new business models and continued investing in some of the world’s most important entertainment franchises. We delivered record earnings per share, which increased more than 50% from the previous year, double-digit revenue growth, and record high-margin digital revenues that represent an all-time high of 46% of total revenues (all non-GAAP).”
Activision reports non-GAAP results as adjusted earnings, given that it reflects when it has been paid — mostly digitally — for expansion packs that it will deliver when a game is launched. That factored in heavily with “Destiny” and “Call of Duty” this year and “World of Warcraft” last year.
“Call of Duty: Advanced Warfare” was the top-selling game around the globe in 2014, with “Call of Duty” the No. 1 franchise in North America for a sixth straight year. It has now exceeded $11 billion in retail sales worldwide since the franchise launched in 2003.
“Destiny” also became the game industry’s biggest new title that wasn’t based on an existing property. To date, “Destiny” has more than 16 million registered users, and active players are playing the game an average of over three hours per day.
While its “Skylanders” franchise faced competition from Disney’s “Infinity,” “Skylanders” remained the bigger seller in the kid’s game market in North America and the rest of the world for a third straight year.
The release of “Warlords of Draenor” expansion pack also boosted subscriptions for “World of Warcraft,” lifting it up from 7 million in early 2014 to more than 10 million through the end of the year.
“We expanded our franchise portfolio by launching two of the industry’s most successful new brands, Blizzard’s ‘Hearthstone: Heroes of Warcraft,’ and the biggest new IP launch in industry history, ‘Destiny,'” Kotick said. “Combined, these franchises attracted over 40 million registered players worldwide and generated more than $850 million in non-GAAP revenue. This year, we expect to expand our franchise portfolio to 10 blockbusters, up from five franchises at the beginning of 2014.”
During the year, around 46% of its sales, or $2.2 billion, came from digital platforms, another all-time high for Activision. That’s largely due to how publishers are enabling gamers to expand their videogames through new levels while also purchasing upgrades for characters.
In January “Call of Duty Online” officially launched in China, where it’s expected to generate considerable coin for the company.
During its earnings report, Activision also announced a two-year plan to repurchase $750 million of stock and pay down $250 million in debt.
In December, Blizzard launched “Hearthstone: Heroes of Warcraft” as one of its first major expansions of a game for mobile devices — a platform that Activision sees as a considerable growth engine and business model it hasn’t yet fully pursued until now.
Looking ahead, Blizzard will begin beta testing “Overwatch” for a launch this year; it’s s expected to become another major franchise for the company.Activision is keeping a close eye on foreign currencies, which could greatly impact future revenues. It believes the decline in the Euro could reduce the value of the U.S. dollar to $1.13 compared to an average of $1.33 in Europe in 2014, while it will fall to $1.51 versus $1.65 when it comes to the British pound sterling.
“Given the significant weakening of foreign currencies versus the U.S. dollar, the company’s 2015 international revenues and earnings are expected to be translated at much lower rates than in 2014. This will impact the company’s 2015 outlook as compared to 2014 actual results given approximately 50% of the company’s revenues, and a higher percentage of profits, are generated outside the U.S.,” the company said in its earnings report.