Activision Blizzard, Inc

Good day and welcome to the Activision Blizzard fourth quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Chris Hickey, Senior Vice President of Investor Relations. Please go ahead, sir.

Good afternoon, and thank you for joining us today for Activision Blizzard's fourth quarter 2020 conference call. With us are Bobby Kotick, CEO, Daniel Allegre, President and COO, and Dennis Durkin, CFO. And for Q&A, Rob Costage, President of Activision, Jay Allen Brack, President of Blizzard Entertainment, and Homan Sakhnini, President of King, will also join us. I would like to remind everyone during this call we will be making statements that are not historical facts. The forward-looking statements in this presentation are based on information available to the company as of the date of this presentation. And while we believe them to be true, they ultimately may prove to be incorrect. A number of factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. These include the impact of the COVID-19 pandemic, the risk factors discussed in our SEC filings, including our 2019 annual report on Form 10-K, our third quarter 2020 10Q, and those on the slide that is shown. The company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after today, February the 4th, 2021. We will present both GAAP and non-GAAP financial measures during this call. We provide non-GAAP financial measures which exclude the impact of expenses related to stock-based compensation, the amortization of intangible assets and expenses related to acquisitions, including legal fees, costs, expenses, and accruals, expenses related to debt financings and refinancings, restructuring and related charges, the associated tax benefits of these excluded items, and 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 other unusual or unique tax-related items and activities. These are to be considered in isolation from, as a substitute for, or superior to our gap results. We encourage investors to consider all measures before making an investment decision. Please refer to our earnings release, which is posted on www.activisionblizzard.com, for a full gap to non-gap reconciliation and further explanation with respect to our non-gap measures. There's also an earnings presentation, which you can access with a webcast, and which will be posted to the website following the call. And now, I'd like to introduce our CEO, Bobby Kotick.

Thank you, Chris, and thank you all for joining us today. 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 gap 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 welcome 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 hardworking 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 composed just 10% and 12% respectively of the US veteran community. Since 2009, we 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 to 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 is 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 gameplay 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 recent 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. Daniel will now review the highlights of our record year with you.