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Activision Blizzard Announces Better-Than-Expected Third Quarter 2010 Financial Results

-Third Quarter Net Revenues and EPS Exceed Prior Outlook and Prior Year-
-Company Increases 2010 Net Revenue and EPS Outlook-

SANTA MONICA, Calif., Nov. 4, 2010 /PRNewswire-FirstCall/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the third quarter of 2010.  

For the quarter ended September 30, 2010, Activision Blizzard's GAAP net revenues were $745 million, as compared to its prior third-quarter outlook of $600 million.  On a non-GAAP basis, the company's net revenues were $857 million, as compared to its prior third-quarter outlook of $725 million.  

For the quarter ended September 30, 2010, Activision Blizzard's GAAP earnings per diluted share were $0.04, as compared to its prior third-quarter outlook of break even GAAP earnings per share.  On a non-GAAP basis, the company's earnings per diluted share were $0.12, as compared to its prior third-quarter outlook of $0.08.  

The company reports results on both a GAAP and a non-GAAP basis.  Please refer to the tables at the back of this press release for a reconciliation of the company's GAAP and non-GAAP results.

Robert Kotick, CEO of Activision Blizzard, stated, "For the third quarter, we exceeded our net revenues and earnings per share outlook and delivered strong year-over-year growth.  Our better-than-expected results are due to our leadership in online entertainment, including strong performance from Activision Publishing's Call of Duty® franchise, and Blizzard Entertainment's World of Warcraft® and StarCraft® II: Wings of Liberty™.  For the nine months ending September 30, 2010, our digital offerings contributed close to half of our total non-GAAP net revenues and our digital revenues have increased more than 15% over the prior year.  Most importantly, we continue to deliver some of the world's best games."  

Kotick continued, "Activision Publishing is about to introduce what is likely to be the biggest entertainment launch of the year with Call of Duty®: Black Ops, followed by Blizzard Entertainment's World of Warcraft: Cataclysm, which we believe will deliver an incredible breadth of new content to the world's largest massively multiplayer online role playing game (MMORPG) community.  As a result of our over-performance, we are raising our calendar year 2010 net revenue and earnings outlook.  We expect to deliver the most profitable year in our history with record operating margins."

Business Highlights

For the first nine months of the calendar year, Activision Publishing's Call of Duty was the #1 third-party franchise in the U.S. and Europe, and Blizzard Entertainment's StarCraft II: Wings of Liberty was the #1 PC title overall, according to The NPD Group, Charttrack and Gfk.  Additionally, for the third quarter of the calendar year, Activision Blizzard was the #1 PC publisher in the U.S. and Europe, according to The NPD Group, Charttrack and Gfk.  

Other highlights are as follows:

  • During the third quarter of 2010, Call of Duty remained a top-10 franchise overall in the U.S. and Europe, according to The NPD Group, Charttrack and Gfk.
  • On August 3, Blizzard Entertainment announced that StarCraft II: Wings of Liberty sold more than one million copies within the first 24 hours of its release, instantly making it the best-selling PC game of 2010, and more than 1.5 million copies within the first 48 hours of its release, making it the fastest-selling strategy game of all time.
  • On August 31, Blizzard Entertainment and NetEase.com Inc. launched World of Warcraft: Wrath of the Lich King™, the second expansion for Blizzard Entertainment's award-winning subscription-based MMORPG, in mainland China.
  • On September 1, Blizzard Entertainment announced that StarCraft II: Wings of Liberty sold more than three million copies worldwide in the first month of its release.
  • On October 4, Blizzard Entertainment announced that World of Warcraft: Cataclysm, the highly anticipated third expansion for the world's most popular subscription-based MMORPG, will be released on December 7.
  • On October 5, Activision Publishing announced that Treyarch's Call of Duty: Black Ops will be playable in stereoscopic 3D when the game launches at retail outlets worldwide on November 9.
  • On October 7,  Blizzard Entertainment announced that the subscriber base for World of Warcraft has exceeded 12 million players worldwide.
  • As of September 30, Activision Blizzard had purchased approximately 55 million shares of its common stock, for approximately $600 million, under the $1 billion stock repurchase program authorized by its Board of Directors on February 10.

Additionally, on September 7, advertising industry veteran Eric Hirshberg joined Activision Publishing as Chief Executive Officer, to oversee operational management of the publishing division's studio, product development and consumer marketing functions.  

Company Outlook

In the fourth quarter of 2010, Activision Publishing expects to release six new titles including Bakugan: Defenders of the Core, a highly anticipated kids title based on the award-winning toy line and television show;  DJ Hero 2®, which delivers an exciting social multiplayer music experience where two virtual DJs can mix together while a vocalist sings along to lyrics from today's biggest hits; Goldeneye 007™, which was designed to make full use of the Nintendo Wii'sunique interactive capabilities and allows players to channel Daniel Craig's lethal and gritty James Bond in a new take on the legendary Bond adventure;  James Bond 007: Bloodstone, a cinematic action game that allows players to experience the brutal and dangerous style of Daniel Craig's Bond as they engage in hand-to-hand fighting, cover-based shooting, and aggressive driving through dynamic environments; and Tony Hawk®: SHRED, which lets kids "GO BIG" and feel the exhilaration of skate and snowboarding like the pros using the game's motion-sensing board controller.

Activision Publishing also plans to release Treyarch's highly anticipated first-person action game Call of Duty: Black Ops globally on November 9.  The company expects the title will be one of the top entertainment properties of the holiday season and we expect that pre-orders for the game will set an industry record.  

Additionally, on December 7, Blizzard Entertainment expects to release World of Warcraft: Cataclysm, the highly anticipated third expansion for the world's most popular subscription-based MMORPG, World of Warcraft.  

Activision Blizzard's outlook is based on assumptions about sell through rates for its products and the launch timing, success and pricing of its new slate of products which are subject to significant risks and uncertainties, including possible declines in the overall demand for video games and in the demand for the company's products, the dependence in the interactive software industry and by the company on an increasingly limited number of popular franchises for a disproportionately high percentage of revenues and profits, the company's ability to predict shifts in consumer preferences among genres, such as music and casual games, and competition.  Current macroeconomic conditions and market conditions within the video game industry increase those risks and uncertainties.  

The company's outlook is also subject to other risks and uncertainties,  including litigation and associated costs, fluctuations in foreign exchange and tax rates, counterparty risks relating to customers, licensees, licensors and manufacturers.  As a result of these and other factors, actual results may deviate materially from the outlook presented below.

For the full year 2010, Activision Blizzard is raising its outlook for GAAP net revenues to $4.28 billion and GAAP earnings per diluted share to $0.51, as compared to its prior GAAP outlook of $4.18 billion in net revenues and $0.49 in earnings per diluted share.  On a non-GAAP basis, the company now expects net revenues of $4.45 billion and $0.74 earnings per diluted share, as compared to its prior non-GAAP net revenue outlook of $4.4 billion and $0.72 in earnings per diluted share.

For the fourth quarter of 2010, Activision Blizzard expects GAAP net revenues of $1.26 billion, and a GAAP loss per share of $0.01. On a non-GAAP basis, the company expects net revenues of $2.2 billion and $0.47 earnings per diluted share for the fourth quarter.

Conference Call

Today at 4:30 p.m. EDT, Activision Blizzard's management will host a conference call and Webcast to discuss the company's results for the quarter ended September 30, 2010 and management's outlook for the remainder of the calendar year.

The company welcomes all members of the financial and media communities and other interested parties to visit the "Investor Relations" area of www.activisionblizzard.com to listen to the conference call via live Webcast, or to listen to the call live by dialing into 877-397-0297 in the U.S. with the passcode 5382478.

Non-GAAP Financial Measures

Activision Blizzard provides net revenues, net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) the following items: the impact of the change in deferred net revenues and related cost of sales with respect to certain of the company's online-enabled games; expenses related to share-based payments; Activision Blizzard's non-core exit operations (which are the operating results of products and operations of the historical Vivendi Games, Inc. businesses that the company has exited or substantially wound down); costs related to the business combination between Activision, Inc. and Vivendi Games, Inc. (including transaction costs, integration costs, and restructuring activities); the amortization of intangibles and impairment of intangible assets; and the associated tax benefits.

Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard's financial and operating performance because they facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard. Internally, management uses these non-GAAP financial measures in assessing the company's operating results, as well as in planning and forecasting.

Non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP.  Activision Blizzard recognizes that there are limitations associated with the use of these non-GAAP financial measures.

Activision Blizzard's non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles, and the terms non-GAAP net revenues, non-GAAP net income, non-GAAP earnings per share, and non-GAAP operating margin do not have a standardized meaning. Therefore, other companies may use the same or similarly named measures, but exclude different items, which may not provide investors a comparable view of Activision Blizzard's performance in relation to other companies.  

Management compensates for the limitations resulting from the exclusion of these items by considering the impact of the items separately and by considering Activision Blizzard's GAAP as well as non-GAAP results and outlook and, in this release, by presenting the most comparable GAAP measures directly ahead of non-GAAP measures, and by providing a reconciliation that indicates and describes the adjustments made.

About Activision Blizzard

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide online, PC, console, handheld and mobile game publisher with leading positions across every major category of the rapidly growing interactive entertainment software industry.

Activision Blizzard maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China.  More information about Activision Blizzard and its products can be found on the company's website, www.activisionblizzard.com.

Cautionary Note Regarding Forward-looking Statements:  Information in this press release that involves Activision Blizzard's expectations, plans, intentions or strategies regarding the future, including statements under the heading "Company Outlook," are forward-looking statements that are not facts and involve a number of risks and uncertainties.    Activision Blizzard generally uses words such as "outlook," "will," "could," "would," "might," "remains," "to be," "plans," "believes," "may," "expects," "intends," "anticipates," "estimate," "future," "plan," "positioned," "potential," "project," "remain," "scheduled," "set to," "subject to," "upcoming" and similar expressions to identify forward-looking statements.  Factors that could cause Activision Blizzard's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, but are not limited to, sales levels of Activision Blizzard's titles, increasing concentration of titles, shifts in consumer spending trends, the impact of the current macroeconomic environment and market conditions within the video game industry, the seasonal and cyclical nature of the interactive game market, Activision Blizzard's ability to predict consumer preferences among competing hardware platforms, possible declines in software pricing, product returns and price protection, product delays, retail acceptance of Activision Blizzard's products,  adoption rate and availability of new hardware (including peripherals) and related software, industry competition including from used games and other forms of entertainment, litigation risks and associated costs, rapid changes in technology, industry standards, business models including online and used games, and consumer preferences including interest in specific genres such as music, first-person action and massively multiplayer online games, protection of proprietary rights, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high quality "hit" titles, counterparty risks relating to customers, licensees, licensors and manufacturers, domestic and international economic, financial and political conditions and policies, foreign exchange rates and tax rates, and the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion, and the other  factors  identified in the risk factors sections of Activision Blizzard's most recent annual report on Form 10-K.   The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes 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 the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

(Tables to Follow)


ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES










CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS










(Unaudited)










(Amounts in millions, except per share data)























Three Months Ended September 30,

Nine Months Ended September 30,




2010


2009

2010


2009













Net revenues:











Product sales

$

397

$

411

$

2,025

$

1,848



Subscription, licensing and other revenues


348


292


994


874



    Total net revenues


745


703


3,019


2,722













Costs and expenses:











Cost of sales - product costs


194


185


765


762



Cost of sales - software royalties and amortization


61


54


211


212



Cost of sales - intellectual property licenses


33


45


105


163



Cost of sales - massively multi-player online role playing game ("MMORPG")


61


55


168


158



Product development


119


122


366


362



Sales and marketing


111


128


294


329



General and administrative


111


106


245


301



Restructuring


---


(1)


---


29



    Total costs and expenses


690


694


2,154


2,316


Operating income


55


9


865


406


Investment and other income, net


14


11


15


21


Income before income tax expense


69


20


880


427


Income tax expense


18


5


229


28


Net income

$

51

$

15

$

651

$

399
























Basic earnings per common share

$

0.04

$

0.01

$

0.53

$

0.31


Weighted average common shares outstanding


1,212


1,271


1,230


1,289
























Diluted earnings per common share

$

0.04

$

0.01

$

0.52

$

0.30


Weighted average common shares outstanding assuming dilution


1,227


1,297


1,245


1,320




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)


(Amounts in millions)





September 30,

December 31,





2010

2009


ASSETS








Current assets:








Cash and cash equivalents

$

2,123

$

2,768




Short-term investments


726


477




Accounts receivable, net


246


739




Inventories


258


241




Software development


248


224




Intellectual property licenses


26


55




Deferred income taxes, net


419


498




Other current assets


102


327




    Total current assets


4,148


5,329



Long-term investments


23


23



Software development


37


10



Intellectual property licenses


36


28



Property and equipment, net


169


138



Other assets


14


9



Intangible assets, net


566


618



Trademark and trade names


433


433



Goodwill


7,144


7,154




Total assets

$

12,570

$

13,742










LIABILITIES AND SHAREHOLDERS' EQUITY







Current liabilities:








Accounts payable

$

238

$

302




Deferred revenues


622


1,426




Accrued expenses and other liabilities


533


779




     Total current liabilities


1,393


2,507




Deferred income taxes, net


231


270




Other liabilities


200


209




Total liabilities


1,824


2,986











Shareholders' equity:








Common stock


---


---




Additional paid-in capital


12,313


12,376




Treasury stock


(1,848)


(1,235)




Retained earnings (accumulated deficit)


290


(361)




Accumulated other comprehensive loss


(9)


(24)




     Total shareholders' equity


10,746


10,756




         Total liabilities and shareholders' equity

$

12,570

$

13,742




















ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES


(Amounts in millions, except earnings per share data)
























Three Months Ended September 30, 2010


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales - Software
Royalties and
Amortization

Cost of Sales -
Intellectual Property
Licenses

Cost of Sales -
MMORPG

Product
Development

Sales and
Marketing

General and
Administrative

Total Costs and
Expenses


GAAP Measurement


$

745

$

194

$

61

$

33

$

61

$

119

$

111

$

111

$

690



Less:  Net effect from deferral in net revenues and related cost of sales

(a)


112


3


8


4


-


-


-


-


15



Less:  Stock-based compensation

(b)


-


-


(11)


-


-


(6)


(2)


(15)


(34)



Less:  Amortization of intangible assets and purchase price accounting related adjustments

(d)


-


(1)


(5)


(12)


-


-


-


-


(18)


Non-GAAP Measurement


$

857

$

196

$

53

$

25

$

61

$

113

$

109

$

96

$

653




































































Three Months Ended September 30, 2010


Operating Income

Net Income

Basic Earnings

per Share

Diluted Earnings
per Share












GAAP Measurement


$

55

$

51

$

0.04

$

0.04













Less:  Net effect from deferral in net revenues and related cost of sales

(a)


97


81


0.07


0.07













Less:  Stock-based compensation

(b)


34


21


0.02


0.02













Less:  Amortization of intangible assets and purchase price accounting related adjustments

(d)


18


(5)


-


-












Non-GAAP Measurement


$

204

$

148

$

0.12

$

0.12














































































Nine Months Ended September 30, 2010


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales - Software
Royalties and
Amortization

Cost of Sales -
Intellectual Property
Licenses

Cost of Sales -
MMORPG

Product
Development

Sales and
Marketing

General and
Administrative

Total Costs and
Expenses


GAAP Measurement


$

3,019

$

765

$

211

$

105

$

168

$

366

$

294

$

245

$

2,154



Less:  Net effect from deferral in net revenues and related cost of sales

(a)


(765)


(198)


(16)


(12)


-


-


-


-


(226)



Less:  Stock-based compensation

(b)


-


-


(51)


-


-


(4)


(6)


(33)


(94)



Less:  Restructuring (included in general and administrative)

(c)


-


-


-


-


-


-


-


(3)


(3)



Less:  Amortization of intangible assets and purchase price accounting related adjustments

(d)


-


(3)


(10)


(33)


-


-


-


(1)


(47)


Non-GAAP Measurement


$

2,254

$

564

$

134

$

60

$

168

$

362

$

288

$

208

$

1,784




































































Nine Months Ended September 30, 2010


Operating Income

Net Income

Basic Earnings

per Share

Diluted Earnings
per Share












GAAP Measurement


$

865

$

651

$

0.53

$

0.52













Less:  Net effect from deferral in net revenues and related cost of sales

(a)


(539)


(392)


(0.32)


(0.31)













Less:  Stock-based compensation

(b)


94


64


0.05


0.05













Less:  Restructuring (included in general and administrative)

(c)


3


2


0.00


0.00













Less:  Amortization of intangible assets and purchase price accounting related adjustments

(d)


47


12


0.01


0.01












Non-GAAP Measurement


$

470

$

337

$

0.27

$

0.27

























































(a) Reflects the net change in deferred net revenues and related cost of sales.



(b) Includes expense related to stock-based compensation.  



(c) Reflects restructuring related to the Business Combination with Vivendi Games. Restructuring activities includes severance costs, facility exit costs and balance sheet write down and exit costs from the cancellation of projects.



(d) Reflects amortization of intangible assets, and the change in the fair value of assets and liabilities from purchase price accounting related adjustments.






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




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES


RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES


(Amounts in millions, except earnings per share data)


























Three Months Ended September 30, 2009


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales -
Software
Royalties and
Amortization

Cost of Sales - Intellectual Property Licenses

Cost of Sales -
MMORPG

Product
Development

Sales and
Marketing

General and
Administrative

Restructuring

Total Costs
and Expenses


GAAP Measurement


$

703

$

185

$

54

$

45

$

55

$

122

$

128

$

106

$

(1)

$

694



Less:  Net effect from deferral in net revenues and related cost of sales

(a)


52


20


31


5


-


-


5


-


-


61



Less:  Stock-based compensation

(b)


-


-


(3)


-


-


(11)


(2)


(20)


-


(36)



Less:  Costs related to the Business Combination, integration and restructuring

(d)


-


-


-


-


-


-


-


(7)


1


(6)



Less:  Amortization of intangible assets and purchase price accounting related adjustments

(e)


-


(1)


(8)


(24)


-


-


-


-


-


(33)


Non-GAAP Measurement


$

755

$

204

$

74

$

26

$

55

$

111

$

131

$

79

$

-

$

680










































































Three Months Ended September 30, 2009


Operating
Income

Net Income

Basic Earnings
per Share

Diluted
Earnings per
Share














GAAP Measurement


$

9

$

15

$

0.01

$

0.01















Less:  Net effect from deferral in net revenues and related cost of sales

(a)


(9)


5


0.00


0.00















Less:  Stock-based compensation

(b)


36


23


0.02


0.02















Less:  Costs related to the Business Combination, integration and restructuring

(d)


6


3


0.00


0.00















Less:  Amortization of intangible assets and purchase price accounting related adjustments

(e)


33


9


0.01


0.01














Non-GAAP Measurement


$

75

$

55

$

0.04

$

0.04






















































































Nine Months Ended September 30, 2009


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales -
Software
Royalties and
Amortization

Cost of Sales - Intellectual Property Licenses

Cost of Sales -
MMORPG

Product
Development

Sales and
Marketing

General and
Administrative

Restructuring

Total Costs
and Expenses


GAAP Measurement


$

2,722

$

762

$

212

$

163

$

158

$

362

$

329

$

301

$

29

$

2,316



Less:  Net effect from deferral in net revenues and related cost of sales

(a)


(441)


(79)


(20)


(6)


-


-


5


-


-


(100)



Less:  Stock-based compensation

(b)


-


-


(19)


-


-


(28)


(9)


(51)


-


(107)



Less:  Results of Activision Blizzard's non-core exit operations

(c)


(1)


-


-


-


-


4


(3)


(10)


-


(9)



Less:  Costs related to the Business Combination, integration and restructuring

(d)


-


-


-


-


-


-


-


(24)


(29)


(53)



Less:  Amortization of intangible assets and purchase price accounting related adjustments

(e)


-


(4)


(36)


(75)


-


-


-


(2)


-


(117)


Non-GAAP Measurement


$

2,280

$

679

$

137

$

82

$

158

$

338

$

322

$

214

$

-

$

1,930










































































Nine Months Ended September 30, 2009


Operating
Income

Net Income

Basic Earnings
per Share

Diluted
Earnings
per Share














GAAP Measurement


$

406

$

399

$

0.31

$

0.30















Less:  Net effect from deferral in net revenues and related cost of sales

(a)


(341)


(274)


(0.21)


(0.21)















Less:  Stock-based compensation

(b)


107


67


0.05


0.05















Less:  Results of Activision Blizzard's non-core exit operations

(c)


8


5


0.00


0.00















Less:  Costs related to the Business Combination, integration and restructuring

(d)


53


32


0.02


0.02















Less:  Amortization of intangible assets and purchase price accounting related adjustments

(e)


117


49


0.05


0.05














Non-GAAP Measurement


$

350

$

278

$

0.21

$

0.21































































(a) Reflects the net change in deferred net revenues and related cost of sales.



(b) Includes expense related to stock-based compensation.



(c) Reflects the results of products and operations from the historical Vivendi Games businesses that the company has exited, divested or wound down.



(d) Reflects costs related to the Business Combination with Vivendi Games (including transaction costs, integration costs and restructuring activities). Restructuring activities includes severance costs, facility exit costs and balance sheet write down and exit costs from the cancellation of projects.



(e) Reflects amortization of intangible assets, and the change in the fair value of assets and liabilities from purchase price accounting related adjustments.






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




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES


FINANCIAL INFORMATION


For the Three Months Ended September 30, 2010 and 2009


(Amounts in millions)




























Three Months Ended






September 30, 2010



September 30, 2009



$Increase


% Increase







Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)



GAAP Net Revenues by Segment/Platform Mix




















Activision and Blizzard:





















MMORPG


$

289


39

%


$

306


44

%


$

(17)


(6)

%



PC and other



73


10




27


4




46


170





Sony PlayStation  3



109


15




73


10




36


49





Sony PlayStation  2



6


1




37


5




(31)


(84)





Microsoft Xbox 360



127


16




104


15




23


22





Nintendo Wii



56


8




72


10




(16)


(22)




Total console



298


40




286


40




12


4





Sony PlayStation Portable



3


-




9


1




(6)


(67)





Nintendo Dual Screen



20


3




21


3




(1)


(5)




Total handheld



23


3




30


4




(7)


(23)




Total Activision and Blizzard



683


92




649


92




34


5

























Distribution:





















Total Distribution



62


8




54


8




8


15




Total consolidated GAAP net revenues



745


100




703


100




42


6

























Change in Deferred Net Revenues(1)




















Activision and Blizzard:





















MMORPG



(7)






(31)












PC and other



141






3













Sony PlayStation  3



(5)






34













Microsoft Xbox 360



(26)






38













Nintendo Wii



9






8












Total console



(22)






80












Total changes in deferred net revenues



112






52

































Non-GAAP Net Revenues by Segment/Platform Mix




















Activision and Blizzard:





















MMORPG



282


33




275


36




7


3




PC and other



214


25




30


4




184


NM





Sony PlayStation  3



104


12




107


14




(3)


(3)





Sony PlayStation  2



6


1




37


5




(31)


(84)





Microsoft Xbox 360



101


12




142


19




(41)


(29)





Nintendo Wii



65


8




80


11




(15)


(19)




Total console



276


33




366


49




(90)


(25)





Sony PlayStation Portable



3


-




9


1




(6)


(67)





Nintendo Dual Screen



20


2




21


3




(1)


(5)




Total handheld



23


2




30


4




(7)


(23)




Total Activision and Blizzard



795


93




701


93




94


13


























Total Distribution



62


7




54


7




8


15




Total non-GAAP net revenues(2)


$

857


100

%


$

755


100

%


$

102


14

%

























(1)  We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.



(2)  Total non-GAAP net revenues presented also represents our total operating segment net revenues.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Nine Months Ended September 30, 2010 and 2009

(Amounts in millions)


























Nine Months Ended






September 30, 2010



September 30, 2009


$Increase

% Increase






Amount


% of Total



Amount


% of Total


(Decrease)

(Decrease)


GAAP Net Revenues by Segment/Platform Mix



















Activision and Blizzard:




















MMORPG


$

890


29

%


$

952


35

%

$

(62)


(7)

%


PC and other



201


7




106


4




95


90




Sony PlayStation  3



595


20




356


13




239


67




Sony PlayStation  2



29


1




121


4




(92)


(76)




Microsoft Xbox 360



751


25




533


20




218


41




Nintendo Wii



267


9




324


12




(57)


(18)



Total console



1,642


55




1,334


49




308


23




Sony PlayStation Portable



11


-




32


1




(21)


(66)




Nintendo Dual Screen



90


3




95


4




(5)


(5)



Total handheld



101


3




127


5




(26)


(20)



Total Activision and Blizzard



2,834


94




2,519


93




315


13























Distribution:




















Total Distribution



185


6




202


7




(17)


(8)



Total platform mix net revenues



3,019


100




2,721


100




298


11
























Other(1)



-


-




1


-




(1)


NM



Total consolidated GAAP net revenues



3,019


100




2,722


100




297


11























Change in Deferred Net Revenues(1)



















Activision and Blizzard:




















MMORPG



(13)






(106)











PC and other



81






(26)












Sony PlayStation  3



(317)






(84)












Microsoft Xbox 360



(425)






(145)












Nintendo Wii



(91)






(80)











Total console



(833)






(309)











Total changes in deferred net revenues



(765)






(441)































Other(1)



-






(1)































Non-GAAP Net Revenues by Segment/Platform Mix



















Activision and Blizzard:




















MMORPG



877


39




846


37




31


4



PC and other



282


13




80


4




202


NM




Sony PlayStation  3



278


12




272


12




6


2




Sony PlayStation  2



29


1




121


5




(92)


(76)




Microsoft Xbox 360



326


14




388


17




(62)


(16)




Nintendo Wii



176


8




244


11




(68)


(28)



Total console



809


35




1,025


45




(216)


(21)




Sony PlayStation Portable



11


1




32


1




(21)


(66)




Nintendo Dual Screen



90


4




95


4




(5)


(5)



Total handheld



101


5




127


5




(26)


(20)



Total Activision and Blizzard



2,069


92




2,078


91




(9)


-
























Total Distribution



185


8




202


9




(17)


(8)



Total non-GAAP net revenues(2)


$

2,254


100

%


$

2,280


100

%

$

(26)


(1)

%























(1)  We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues and other.


(2)  Total non-GAAP net revenues presented also represents our total operating segment net revenues.




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES



FINANCIAL INFORMATION



For the Three And Nine Months Ended September 30, 2010 and 2009



(Amounts in millions)















































Three Months Ended







September 30, 2010



September 30, 2009



$Increase


% Increase







Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)



GAAP Net Revenues by Geographic Region






















North America



$

406


54

%


$

378


54

%


$

28


7

%



Europe




281


38




287


41




(6)


(2)




Asia Pacific




58


8




38


5




20


53




Total consolidated GAAP net revenues




745


100




703


100




42


6

























Change in Deferred Net Revenues(1)






















North America




41






26












Europe




53






22












Asia Pacific




18






4












Total changes in net revenues




112






52

































Non-GAAP Net Revenues by Geographic Region






















North America




447


52




404


54




43


11




Europe




334


39




309


41




25


8




Asia Pacific




76


9




42


5




34


81




Total non-GAAP net revenues(2)



$

857


100

%


$

755


100

%


$

102


14

%

















































Nine Months Ended







September 30, 2010



September 30, 2009



$Increase


% Increase







Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)



GAAP Net Revenues by Geographic Region






















North America



$

1,675


55

%


$

1,458


54

%


$

217


15

%



Europe




1,142


38




1,088


40




54


5




Asia Pacific




202


7




175


6




27


15




Total geographic region net revenues




3,019


100




2,721


100




298


11


























Other(1)




-


-




1


-




(1)


NM




Total consolidated GAAP net revenues




3,019


100




2,722


100




297


11

























Change in Deferred Net Revenues(1)






















North America




(462)






(287)












Europe




(280)






(147)












Asia Pacific




(23)






(7)












Total changes in net revenues




(765)






(441)

































Other(1)




-






(1)

































Non-GAAP Net Revenues by Geographic Region






















North America




1,213


54




1,171


52




42


4




Europe




862


38




941


41




(79)


(8)




Asia Pacific




179


8




168


7




11


7




Total non-GAAP net revenues(2)



$

2,254


100

%


$

2,280


100

%


$

(26)


(1)

%

























(1)  We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.



(2)  Total non-GAAP net revenues presented also represents our total operating segment net revenues.




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES



SEGMENT INFORMATION



For the Three And Nine Months Ended September 30, 2010 and 2009



(Amounts in millions)

















































Three Months Ended








September 30, 2010



September 30, 2009



$Increase


% Increase








Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)



Segment net revenues:






















Activision(i)



$

314


42

%


$

415


59

%


$

(101)


(24)

%



Blizzard(ii)




481


65




286


40




195


68




Distribution(iii)




62


8




54


8




8


15




Operating segment total




857


115




755


107




102


14


























Reconciliation to consolidated net revenues:






















Net effect from deferral of net revenues




(112)


(15)




(52)


(7)










Consolidated net revenues



$

745


100

%


$

703


100

%



42


6


























Segment income (loss) from operations:






















Activision(i)



$

(43)





$

(43)






-


NM




Blizzard(ii)




246






116






130


112




Distribution(iii)




1






2






(1)


NM




Operating segment total




204






75






129


172


























Reconciliation to consolidated operating income:






















Net effect from deferral of net revenues and related cost of sales




(97)






9












Stock-based compensation expense




(34)






(36)












Restructuring




-






1












Amortization of intangible assets and purchase price accounting related adjustments




(18)






(33)












Integration and transactions costs




-






(7)












Consolidated operating income



$

55





$

9





$

46


NM




























Operating margin from total operating segments




24%






10%






























































Nine Months Ended








September 30, 2010



September 30, 2009



$Increase


% Increase








Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)



Segment net revenues:






















Activision(i)



$

983


33

%


$

1,211


44

%


$

(228)


(19)

%



Blizzard(ii)




1,086


36




867


33




219


25




Distribution(iii)




185


6




202


7




(17)


(8)




Operating segment total




2,254


75




2,280


84




(26)


(1)


























Reconciliation to consolidated net revenues:






















Net effect from deferral of net revenues




765


25




441


16










Other(iv)




-


-




1


-










Consolidated net revenues



$

3,019


100

%


$

2,722


100

%



297


11


























Segment income (loss) from operations:






















Activision(i)



$

(88)





$

(49)






(39)


NM




Blizzard(ii)




559






393






166


42




Distribution(iii)




(1)






6






(7)


NM




Operating segment total




470






350






120


34


























Reconciliation to consolidated operating income:






















Net effect from deferral of net revenues and related cost of sales




539






341












Stock-based compensation expense




(94)






(107)












Restructuring




(3)






(29)












Amortization of intangible assets and purchase price accounting























related adjustments




(47)






(117)












Integration and transactions costs




-






(24)












Other(iv)




-






(8)












Consolidated operating income



$

865





$

406





$

459


113

%



























Operating margin from total operating segments




21%






15%




































(i) Activision Publishing ("Activision") -  publishes interactive entertainment software and peripherals.




(ii) Blizzard -  Blizzard Entertainment, Inc. and its subsidiaries ("Blizzard") publishes games and online subscription-based games in the MMORPG category.




(iii) Activision Blizzard Distribution ("Distribution") - distributes interactive entertainment software and hardware products.


(iv) Other represents Non-Core activities, which are legacy Vivendi Games' divisions or business units that we have exited, divested or wound down as part of our restructuring and integration efforts as a result of the Business Combination. Prior to July 1, 2009, Non-Core activities were managed as a stand alone operating segment; however, in light of the minimal activities and insignificance of Non-Core activities, as of that date we ceased their management as a separate operating segment and consequently, we are no longer providing separate operating segment disclosure.  




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK


For the Quarter Ending December 31, 2010 and


Year Ending December 31, 2010


GAAP to Non-GAAP Reconciliation


(Amounts in millions, except per share data)












Outlook for


Outlook for




Three Months Ending


Year Ending




December 31, 2010


December 31, 2010










Net Revenues (GAAP)


$

1,260


$

4,280










Excluding the impact of:








Change in deferred net revenues

(a)


940



170










Non-GAAP Net Revenues


$

2,200


$

4,450










(Loss)/Earnings Per Diluted Share (GAAP)


$

(0.01)


$

0.51










Excluding the impact of:








Net effect from deferral in net revenues and related cost of sales

(b)


0.44



0.12


Stock-based compensation

(c)


0.01



0.06


Amortization of intangible assets

(d)


0.03



0.05










Non-GAAP Earnings Per Diluted Share


$

0.47


$

0.74


















(a) Reflects the net change in deferred net revenues.


(b) Reflects the net change in deferred net revenues and related cost of sales.


(c) Reflects expense related to stock-based compensation.


(d) Reflects amortization of intangible assets.










The per share adjustments are presented as calculated, and the GAAP and non-GAAP earnings (loss) per share information


is also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.



SOURCE Activision Blizzard, Inc.

News Provided by Acquire Media

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