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King Digital: King Reports Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Reported total gross bookings of $502 million, above high end of previously provided guidance range

Generates adjusted EBITDA of $180 million for third quarter 2015 representing 38% adjusted EBITDA margin

Operating activities provide net cash of $150 million; ends quarter with $920 million of cash and cash equivalents

Two King games were top 5 grossing games on both the Apple App Store and Google Play Store in the U.S. for the third consecutive quarter

Continued to diversify and expand mobile game portfolio with launch of

Blossom Blast Saga

, King’s first linker game fo r mobile

Entered into agreement to be acquired by Activision Blizzard for $18.00 in cash per share, representing $5.9 billion total equity value and 27% premium over three month volume weighted average price per share

– King Digital Entertainment plc (“King” or the “Company”) (NYSE: KING), a leading interactive entertainment company for the mobile world, today reported financial results for the third quarter ended September 30, 2015.

King CEO Riccardo Zacconi said, “Our third quarter 2015 gross bookings exceeded the high end of our guidance range, and for the third consecutive quarter Candy Crush Saga and Candy Crush Soda Saga ranked within the top 5 grossing games in the Apple App Store and Google Play Store in the U.S. These results reflect our continued execution of our franchise strategy and the longevity of our brands. We are also pleased to have recently launched Blossom Blast Saga, our first game with a linker mechanic, and look forward to introducing this new game play to players around the globe.”

Zacconi added, “We are excited about the transaction with Activision Blizzard. We believe the transaction will position us very well for the next phase of our company’s evolution and will bring clear benefits to our players and employees, while providing a return to our shareholders through the share price premium and the immediate liquidity it will provide to all shareholders upon completion.”

Financial Summary and Key Performance Metrics

(in millions, except per share and per user data)

Three Months Ended

Non-GAAP and Other Financial Results

Gross bookings

Adjusted revenue

Adjusted EBITDA

Adjusted EBITDA margin

Capital expenditures

Adjusted profit

Adjusted EPS

GAAP Results

Revenue

Profit

Diluted EPS

Net cash provided by operating activities

Cash and cash equivalents at end of period

Monthly active users (MAUs)

Daily active users (DAUs)

Monthly unique users (MUUs)

Monthly unique payers (MUPs)

Monthly gross average bookings per paying user (MGABPPU)

Recent Highlights

Maintained two King games in top 5 grossing games for three consecutive quarters, and at least three King games in top 15 grossing games for seven consecutive quarters on both the Apple App Store and Google Play Store in the U.S.

Gross bookings from non-

titles increased 14% year over year to $301 million, or 60% of total gross bookings in third quarter 2015

Launched

, King’s first linker game for mobile, on the Apple App Store

and Google Play Store, expanding the global game portfolio to a total of 14 titles

Paradise Bay

on both the Google Play Store and Amazon Appstore, and

for Windows 10 and Windows Phone 8.1 on the Windows Store

Executed on the franchise strategy introducing new live ops formats in all four franchises and increasing the frequency of events during third quarter 2015

Broadened the game portfolio in Asia launching localized versions of

Bubble Witch 2 Saga

in Korea and China

Third Quarter 2015 Results Summary

Gross Bookings and Revenue

Gross bookings were $502 million for third quarter 2015, representing a sequential decrease of $27 million, or 5%, and a year over year decrease of $42 million, or 8%. Excluding the impact of changes in foreign exchange rates, gross bookings would have decreased by approximately 5% sequentially, and increased slightly year over year.

In third quarter 2015, 82% or $414 million of gross bookings, were derived from our mobile audience. This represented 4% sequential and 1% year over year decreases in mobile gross bookings. Gross bookings from web platforms were $87 million in third quarter 2015, representing 11% sequential and 31% year over year decreases.

Gross bookings from games other than

were $301 million for third quarter 2015, representing a sequential decrease of $23 million, or 7%, and a year over year increase of $37 million, or 14%.

Revenue was $480 million for third quarter 2015, representing a sequential decrease of $10 million, or 2%, and a year over year decrease of $35 million, or 7%.

The decreases in both gross bookings and revenue from second quarter 2015 to third quarter 2015 were primarily driven by our largest franchise,

Candy Crush,

as it continues to mature

Third quarter 2015 revenue also reflects the change in deferred revenue primarily from breakage revenue related to inactive players’ unused virtual currency balances.

The decreases in both gross bookings and revenue from third quarter 2014 to third quarter 2015 were primarily due to lower gross bookings from our more mature games, in particular

, partially offset by increased gross bookings from our newer games, in particular

. Additionally, no new franchise games were launched in the first nine months of 2015, as compared to two franchise game launches during the same period in the prior year. Franchise games tend to offset declines in our more mature games. The decrease in revenue also reflects a higher sales tax related to the new value added tax legislation in the European Union effective in 2015 and sales tax provision reductions in other jurisdictions in 2014, partially offset by the change in deferred revenue primarily resulting from the recognition of breakage revenue described above.

Third quarter 2015 adjusted EBITDA was $180 million, representing a decrease of $27 million, or 13%, compared to second quarter 2015. The sequential decrease was primarily due to lower gross bookings and revenue and higher general and administrative expenses, which were partially offset by lower platform fees.

Compared to third quarter 2014, adjusted EBITDA decreased $36 million, or 17%. The year over year decrease was primarily due to lower gross bookings and revenue and higher research and development and general and administrative expenses, which were partially offset by lower platform fees and sales and marketing expenses.

According to App Annie.

gross bookings” or “gross bookings from games other than

” represents total gross bookings (including

) less gross bookings from

Candy Crush Saga.

Profit was $143 million for third quarter 2015, increasing by $23 million, or 20%, compared to second quarter 2015. The increase was primarily due to change in deferred revenue, acquisition-related benefit, lower income tax expense and lower share-based and other equity-related compensation expenses, which were partially offset by lower adjusted EBITDA.

Third quarter 2015 profit increased by $1 million, or 1%, compared to third quarter 2014. The increase was primarily due to change in deferred revenue, acquisition-related benefit, lower income tax expense and lower share-based and other equity-related compensation expenses, which were partially offset by lower adjusted EBITDA and foreign exchange gain.

Cash and Cash Equivalents

Cash and cash equivalents were $920 million at September 30, 2015, up $134 million since June 30, 2015.

Network Reach

MAUs were 474 million in third quarter 2015, down 27 million, or 5%, from second quarter 2015, and down 21 million, or 4%, from third quarter 2014.

DAUs were 133 million in third quarter 2015, down 9 million, or 6%, from second quarter 2015, and down 4 million, or 3%, from third quarter 2014.

The sequential decreases in MAUs and DAUs were due to a decrease in game activity, primarily in

Candy Crush Saga,

as well as in most of our other mature games. The rate of decline was higher on web, which we believe is primarily due to a continuing decline in overall Facebook desktop users.

The year over year decreases in MAUs and DAUs were due to declines in our more mature games, particularly

partially offset by the introduction of additional games, notably

. The year over year decreases continue to reflect growth in activity from our mobile players, which were more than offset by the continued decrease in activity from our Facebook players.

MUUs were 330 million in third quarter 2015, down 10 million, or 3%, from second quarter 2015, and down 18 million, or 5%, from third quarter 2014.

The sequential decrease in MUUs was reflected in both web and mobile, but at a greater rate of decline on web, which we believe is primarily due to a continuing decline in overall Facebook desktop users. In addition, we observed that the sequential decline in overall MUUs was primarily from our less engaged players, which we define as players who play in only one game, most of whom played

. MUUs declined at a slower rate than in second quarter 2015, which we believe reflects our efforts to...


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