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Activision Blizzard Announces Better-Than-Expected Second Quarter 2011 Financial Results

- Q2 Net Revenues Up Year Over Year; Record EPS Increases Over 66% Year Over Year -
- For Six-Month Period Net Revenues Up; Record EPS Increases Over 50% Year Over Year -
- For Six-Month Period Net Revenues from Digital Channels Grow More Than 20% Year Over Year -
- Company Increases Full Year Outlook for Net Revenues and EPS -

SANTA MONICA, Calif., Aug. 3, 2011 /PRNewswire/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the second quarter of 2011.

In the quarter, the company delivered record GAAP net revenues of $1.1 billion, as compared with $967 million for the second quarter of 2010.  On a non-GAAP basis, the company's net revenues were $699 million, as compared with $683 million for the second quarter of 2010.  For the second quarter, the company delivered record GAAP net revenues from digital channels, representing a 27% increase year over year, and accounting for 37% of the company's total net revenues.  On a non-GAAP basis, record net revenues from digital channels increased 13% year over year, accounting for more than 60% of the quarter's total net revenues.  

For the second quarter of 2011, Activision Blizzard's GAAP earnings per diluted share were $0.29, as compared with $0.17 for the second quarter of 2010.  On a non-GAAP basis, the company's earnings per diluted share were $0.10, as compared with $0.06 for the second quarter of 2010.  

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, "Our better-than-expected second-quarter performance was driven by record digital sales of our online-enabled franchises.  For the six month period, net revenues from digital channels grew more than 20%, driving record operating margin and EPS growth of more than 50%."

Kotick continued, "Looking to the balance of the year, while we have numerous releases we believe our audiences will be especially excited by three key properties -- Call of Duty: Modern Warfare 3™, our new online service Call of Duty Elite and Skylanders Spyro's Adventure™ -- all of which are shaping up to be incredible.  To date, pre-orders for Modern Warfare 3 have significantly exceeded the pre-orders for Black Ops at this time last year.  In addition, we believe that Call of Duty Elite, which was built for Modern Warfare 3 and is expected to launch with the game on November 8, should redefine social connectivity for multiplayer gaming.   Additionally, we expect that Skylanders Spyro's Adventure will change the way we look at toys and video games by bringing the world of toys, video games and the Internet together in an unprecedented way."

Kotick added, "Today, there are more ways than ever for players to access entertainment online and play games which have truly become one of the most compelling forms of entertainment in the world."

Business Highlights

  • Call of Duty: Black Ops was the #1 game in the U.S. and Europe for the first half of 2011.(1)
  • For the second quarter, Blizzard Entertainment had two top-10 PC titles with World of Warcraft®: Cataclysm and StarCraft® II: Wings of Liberty.(2)
  • To date, Call of Duty: Black Ops players have logged more than 2.2 billion hours of online gameplay.(3)
  • Total unique online gamers playing Call of Duty: Black Ops were more than 30% greater than the total unique online gamers who played Call of Duty: Modern Warfare® 2 during the first eight months after each game's release.(4)
  • On May 11, 2011, Activision Blizzard paid a cash dividend of $0.165 per common share to shareholders of record as of March 16, 2011.
  • As of June 30, 2011, Activision Blizzard had purchased approximately 43 million shares of its common stock, for an aggregate price of approximately $479 million, under the $1.5 billion stock repurchase program authorized by its Board of Directors in February 2011.

Company Outlook

On July 28, 2011, Activision Publishing released the Call of Duty: Black Ops Annihilation content pack for Sony's PlayStation3 computer entertainment system and the PC.  During the quarter, Activision Publishing also expects to release the Call of Duty: Black Ops Resurrection™ content pack for the Xbox 360 video game and entertainment system from Microsoft, Sony's PlayStation3 computer entertainment system and the PC, as well as X-Men™ Destiny, Cabela's Big Game Hunter 2012 and a Kinect-ready title for the Xbox 360, Cabela's Hunting Party.  Additionally, Blizzard Entertainment's World of Warcraft: Cataclysm was launched in China on July 12, 2011.

Activision Blizzard plans to allocate the majority of its resources and focus toward opportunities which it expects will afford it the greatest competitive advantages and the greatest potential for best-in-class quality, high-margin digital growth, and long-term success.  These opportunities include new content for Blizzard Entertainment's World of Warcraft, StarCraft and Diablo franchises, and Blizzard Entertainment's next-generation MMO; robust investment in Activision Publishing's forthcoming Call of Duty titles, including a micro-transaction game for China; the development of a best-in-class digital platform, Call of Duty Elite; a new property from Bungie; and Skylander's Spyro's Adventure, an innovative new universe bringing the world of toys, video games and the Internet together in an unprecedented way.  These investments should better position Activision Blizzard for long-term growth and enable it to continue expanding its position as the largest digital video-game publisher. 

For calendar year 2011, Activision Blizzard is raising its outlook from the estimates it provided on May 9, 2011.  Since Blizzard Entertainment has not confirmed a launch date for its next global release, the company's calendar year outlook at this time does not include a new game from Blizzard in 2011.



GAAP Outlook


Prior*

GAAP Outlook


Non-GAAP Outlook


Prior*

Non-GAAP Outlook

CY 2011
 Net Revenues

  (in billions)


$

4.18


$

4.05


$

4.05


$

3.95

 EPS


$

0.68


$

0.61


$

0.77


$

0.73

Q3 2011
 Net Revenues

  (in millions)


$

650



n/a


$

530



n/a

 EPS


$

0.05



n/a


$

0.01



n/a















*Prior outlook was provided on May 9, 2011



Activision Blizzard's financial outlook is subject to significant risks and uncertainties, including declines in demand for its products, competition, the effectiveness of the company's restructuring efforts, fluctuations in foreign exchange and tax rates, and counterparty risks relating to customers, licensees, licensors and manufacturers.  The company's outlook is also based on assumptions about sell-through rates for its products, and the launch timing, success and pricing of its new slate of products.  Current macroeconomic conditions increase those risks and uncertainties.  As a result of these and other factors, actual results may deviate materially from the outlook presented above.

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 second quarter and management's outlook for the remainder of the 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 888-500-6973 in the U.S. with passcode 1853254.

Non-GAAP Financial Measures

In order to supplement our financial measures that are presented in accordance with GAAP, Activision Blizzard presents certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, 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.  

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) certain items. The non-GAAP financial measures exclude the following items, as applicable in any given reporting period:

  • the change in deferred net revenue and related cost of sales with respect to certain of the company's online-enabled games;
  • expenses related to stock-based compensation;
  • expenses related to the restructuring of our Activision Publishing operations;
  • the amortization of intangibles and impairment of intangible assets; and
  • the income tax adjustments associated with any of the above items.

In the future, Activision Blizzard may also consider whether other significant non-recurring items should also be excluded in calculating the non-GAAP financial measures used by the company.

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.  In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the company's core business, operating results or future outlook.  Internally, management uses these non-GAAP financial measures in assessing the company's operating results, as well as in planning and forecasting.

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.

In addition to the reasons stated above, which are generally applicable to each of the items Activision Blizzard excludes from its non-GAAP financial measures, there are additional specific reasons why the company believes it is appropriate to exclude the change in deferred net revenue and related cost of sales with respect to certain of the company's online-enabled games. Since Activision Blizzard has determined that some of our games' online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable, we recognize revenue attributed to these game titles over their estimated service periods, which may range from five months to a maximum of less than a year. The related cost of sales is deferred and recognized as the related revenues are recognized. Internally, management excludes the impact of this change in deferred net revenue and related cost of sales in its non-GAAP financial measures when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.

Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers, which is consistent with the way the company is measured by investment analysts and industry data sources. In addition, excluding the change in deferred net revenue and the related cost of sales provides a much more timely indication of trends in our operating results.

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 the major categories 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," "should," "would," "might," "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, Activision Blizzard's ability to predict consumer preferences, including interest in specific genres such as first-person action and massively multiplayer online games and preferences among competing hardware platforms, the seasonal and cyclical nature of the interactive game market, changing business models including digital delivery of content, competition, including from used games and other forms of entertainment, possible declines in software pricing, product returns and price protection, product delays, adoption rate and availability of new hardware (including peripherals) and related software, rapid changes in technology and industry standards, litigation risks and associated costs, the effectiveness of Activision Blizzard's restructuring efforts, 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 section 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.

(1) According to The NPD Group, Charttrack and Gfk

(2) According to The NPD Group, Charttrack and Gfk

(3) According to Microsoft, Sony and Activision Blizzard internal estimates

(4) According to Microsoft, Sony and Activision Blizzard internal estimates


ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)



Three Months Ended June 30,

Six Months Ended June 30,



2011

2010

2011

2010

Net revenues:










Product sales

$

768

$

643

$

1,829

$

1,629


Subscription, licensing and other
revenues


378


324


766


646


    Total net revenues


1,146


967


2,595


2,275











Costs and expenses:










Cost of sales - product costs


213


235


512


572


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


59


53


122


109


Cost of sales - software royalties and
amortization


47


51


109


150


Cost of sales - intellectual property
licenses


24


29


53


72


Product development


116


100


258


237


Sales and marketing


90


125


150


181


General and administrative


127


74


228


143


Restructuring


3


---


22


-


    Total costs and expenses


679


667


1,454


1,464

Operating income


467


300


1,141


811

Investment and other income, net


2


1


5


1

Income before income tax expense


469


301


1,146


812

Income tax expense


134


82


308


212

Net income

$

335

$

219

$

838

$

600





















Basic earnings per common share

$

0.29

$

0.18

$

0.71

$

0.48

Weighted average common shares
outstanding


1,141


1,232


1,157


1,239





















Diluted earnings per common share (1)

$

0.29

$

0.17

$

0.71

$

0.47

Weighted average common shares
outstanding assuming dilution


1,150


1,248


1,166


1,254












    (1) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $330 million and $826 million for the three and six months ended June 30, 2011 as compared to the total net income of $335 million and $838 million for the same periods, respectively. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $217 million and $595 million for the three and six months ended June 30, 2010 as compared to total net income of $219 million and $600 million for the same periods, respectively.





ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)





June 30,


December 31,





2011


2010

ASSETS






Current assets:







Cash and cash equivalents

$

2,334

$

2,812



Short-term investments


610


696



Accounts receivable, net


140


640



Inventories


93


112



Software development


126


147



Intellectual property licenses


43


45



Deferred income taxes, net


511


648



Other current assets


97


299



    Total current assets


3,954


5,399


Long-term investments


25


23


Software development


90


55


Intellectual property licenses


16


28


Property and equipment, net


163


169


Other assets


17


15


Intangible assets, net


144


160


Trademark and trade names


433


433


Goodwill


7,130


7,132



Total assets

$

11,972

$

13,414








LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:







Accounts payable

$

156

$

363



Deferred revenues


601


1,726



Accrued expenses and other liabilities


489


838



     Total current liabilities


1,246


2,927



Deferred income taxes, net


97


120



Other liabilities


164


164



Total liabilities


1,507


3,211









Shareholders' equity:







Common stock


---


---



Additional paid-in capital


9,735


12,353



Treasury stock


---


(2,194)



Retained earnings


701


57



Accumulated other comprehensive income (loss)


29


(13)



     Total shareholders' equity


10,465


10,203



         Total liabilities and shareholders' equity

$

11,972

$

13,414












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 June 30, 2011




Net Revenues


Cost of Sales - Product Costs


Cost of Sales -
 MMORPG

Cost of Sales - 
Software Royalties
 and Amortization

Cost of Sales - 
Intellectual 
Property Licenses


Product 
Development


Sales and 
Marketing


General and 
Administrative



Restructuring


Total Costs and 
Expenses

GAAP Measurement


$

1,146

$

213

$

59

$

47

$

24

$

116

$

90

$

127

$

3

$

679


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

(a)


(447)


(78)


-


(32)


(5)


-


-


-


-


(115)


Less:  Stock-based compensation

(b)


-


-


-


(3)


-


(5)


(1)


(11)


-


(20)


Less:  Restructuring

(c)


-


-


-


-


-


-


-


-


(3)


(3)


Less:  Amortization of intangible assets

(d)


-


-


-


-


(7)


-


-


-


-


(7)

Non-GAAP Measurement


$

699

$

135

$

59

$

12

$

12

$

111

$

89

$

116

$

-

$

534

















































Three months ended June 30, 2011


Operating 
Income


Net Income

Basic Earnings 
per Share

Diluted Earnings
 per Share

GAAP Measurement


$

467

$

335

$

0.29

$

0.29


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

(a)


(332)


(238)


(0.21)


(0.20)


Less:  Stock-based compensation

(b)


20


15


0.01


0.01


Less:  Restructuring

(c)


3


2


-


-


Less:  Amortization of intangible assets

(d)


7


4


-


-

Non-GAAP Measurement


$

165

$

118

$

0.10

$

0.10



























Six months ended June 30, 2011




Net Revenues


Cost of Sales - Product Costs


Cost of Sales - MMORPG

Cost of Sales - 
Software Royalties 
and Amortization

Cost of Sales - 
Intellectual 
Property Licenses


Product 
Development


Sales and 
Marketing


General and 
Administrative



Restructuring


Total Costs and 
Expenses

GAAP Measurement


$

2,595

$

512

$

122

$

109

$

53

$

258

$

150

$

228

$

22

$

1,454


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

(a)


(1,141)


(209)


-


(75)


(19)


-


-


-


-


(303)


Less:  Stock-based compensation

(b)


-


-


-


(6)


-


(11)


(3)


(23)


-


(43)


Less:  Restructuring

(c)


-


-


-


-


-


-


-


-


(22)


(22)


Less:  Amortization of intangible assets

(d)


-


-


-


(1)


(15)


-


-


-


-


(16)

Non-GAAP Measurement


$

1,454

$

303

$

122

$

27

$

19

$

247

$

147

$

205

$

-

$

1,070


















































Six months ended June 30, 2011


Operating 
Income


Net Income

Basic Earnings 
per Share

Diluted Earnings 
per Share

GAAP Measurement


$

1,141

$

838

$

0.71

$

0.71


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

(a)


(838)


(619)


(0.53)


(0.52)


Less:  Stock-based compensation

(b)


43


30


0.03


0.03


Less:  Restructuring

(c)


22


16


0.01


0.01


Less:  Amortization of intangible assets

(d)


16


10


0.01


0.01

Non-GAAP Measurement


$

384

$

275

$

0.23

$

0.23


























(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 our Activision Publishing operations.


(d) Reflects amortization of intangible assets from purchase price accounting.




The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $117 million and $270 million for the three and six months ended June 30, 2011 as compared to the total non-GAAP net income of $118 million and $275 million for the same periods, respectively.




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 June 30, 2010



Net Revenues


Cost of Sales -
 Product Costs


Cost of Sales - MMORPG

Cost of Sales -
 Software Royalties 
and Amortization

Cost of Sales -
 Intellectual
 Property Licenses


Product
 Development


Sales and
 Marketing


General and
 Administrative


Total Costs and
 Expenses

GAAP Measurement


$

967

$

235

$

53

$

51

$

29

$

100

$

125

$

74

$

667


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

(a)


(284)


(68)


-


13


(2)


-


-


-


(57)


Less:  Stock-based compensation

(b)


-


-


-


(12)


-


6


(2)


(9)


(17)


Less:  Restructuring (included in general and administrative)

(c)


-


-


-


-


-


-


-


(1)


(1)


Less:  Amortization of intangible assets

(d)


-


(1)


-


-


(9)


-


-


-


(10)

Non-GAAP Measurement


$

683

$

166

$

53

$

52

$

18

$

106

$

123

$

64

$

582














































Three months ended June 30, 2010

Operating
 Income


Net Income

Basic Earnings
 per Share

Diluted Earnings
 per Share

GAAP Measurement


$

300

$

219

$

0.18

$

0.17


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

(a)


(227)


(165)


(0.13)


(0.13)


Less:  Stock-based compensation

(b)


17


12


0.01


0.01


Less:  Restructuring (included in general and administrative)

(c)


1


-


-


-


Less:  Amortization of intangible assets

(d)


10


6


-


-

Non-GAAP Measurement


$

101

$

72

$

0.06

$

0.06
















Six months ended June 30, 2010



Net Revenues


Cost of Sales -
 Product Costs


Cost of Sales - MMORPG

Cost of Sales -
 Software Royalties 
and Amortization

Cost of Sales -
 Intellectual
Property Licenses


Product
 Development


Sales and
 Marketing


General and
 Administrative


Total Costs and
 Expenses

GAAP Measurement


$

2,275

$

572

$

109

$

150

$

72

$

237

$

181

$

143

$

1,464


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

(a)


(878)


(201)


-


(24)


(16)


-


-


-


(241)


Less:  Stock-based compensation

(b)


-


-


-


(41)


-


2


(3)


(18)


(60)


Less:  Restructuring (included in general and administrative)

(c)


-


-


-


-


-


-


-


(4)


(4)


Less:  Amortization of intangible assets

(d)


-


(2)


-


(4)


(21)


-


-


(1)


(28)

Non-GAAP Measurement


$

1,397

$

369

$

109

$

81

$

35

$

239

$

178

$

120

$

1,131














































Six months ended June 30, 2010

Operating
 Income

Net Income

Basic Earnings
 per Share

Diluted Earnings
 per Share

GAAP Measurement


$

811

$

600

$

0.48

$

0.47


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

(a)


(637)


(473)


(0.38)


(0.37)


Less:  Stock-based compensation

(b)


60


42


0.03


0.03


Less:  Restructuring (included in general and administrative)

(c)


4


2


-


-


Less:  Amortization of intangible assets

(d)


28


17


0.01


0.01

Non-GAAP Measurement


$

266

$

188

$

0.15

$

0.15















(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 from purchase price accounting.




The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $72 million and $187 million for the three and six months ended June 30, 2010 as compared to total non-GAAP net income of $72 million and $188 million for the same periods, respectively.




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 and Six Months Ended June 30, 2011 and 2010

(Amounts in millions)
























Three Months Ended





June 30, 2011



June 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Distribution Channel                     



















Retail channels

$

660 


58 

%


$

584 


61 

%


$

76 


13 

%


Digital online channels*


423 


37 




332 


34 




91 


27 



Total Activision and Blizzard


1,083 


95 




916 


95 




167 


18 























Distribution


63 





51 





12 


24 



Total consolidated GAAP net revenues  


1,146 


100 




967 


100 




179 


19 






















Change in Deferred Net Revenues (1) 



















Retail channels


(448)






(326)











Digital online channels*







42 











Total changes in deferred net revenues


(447)






(284)






























Non-GAAP Net Revenues by Distribution Channel



















Retail channels


212 


30 




258 


38 




(46)


(18)



Digital online channels*


424 


61 




374 


55 




50 


13 



Total Activision and Blizzard


636 


91 




632 


93 



























Distribution


63 





51 





12 


24 



Total non-GAAP net revenues (2) 

$

699 


100 

%


$

683 


100 

%


$

16 


%












































Six Months Ended





June 30, 2011



June 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Distribution Channel



















Retail channels

$

1,607 


62 

%


$

1,490 


66 

%


$

117 


%


Digital online channels*


851 


33 




663 


29 




188 


28 



Total Activision and Blizzard


2,458 


95 




2,153 


95 




305 


14 























Distribution


137 





122 





15 


12 



Total consolidated GAAP net revenues  


2,595 


100 




2,275 


100 




320 


14 






















Change in Deferred Net Revenues (1) 



















Retail channels


(1,154)






(928)











Digital online channels*


13 






50 











Total changes in deferred net revenues


(1,141)






(878)






























Non-GAAP Net Revenues by Distribution Channel



















Retail channels


453 


31 




562 


40 




(109)


(19)



Digital online channels*


864 


59 




713 


51 




151 


21 



Total Activision and Blizzard


1,317 


90 




1,275 


91 




42 
























Distribution


137 


10 




122 





15 


12 



Total non-GAAP net revenues (2) 

$

1,454 


100 

%


$

1,397 


100 

%


$

57 


%






















(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.


* Represents revenues from subscriptions and licensing royalties, value-added services, downloadable content, digitally distributed products, and wireless devices.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended June 30, 2011 and 2010

(Amounts in millions)









Three Months Ended





June 30, 2011



June 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Segment/Platform Mix               


















Activision and Blizzard:



















Online subscriptions*

$

359 


31 

%


$

291 


30 

%


$

68 


23 

%


PC and Other


80 





79 









Sony PlayStation  3


239 


21 




182 


19 




57 


31 




Sony PlayStation  2



--- 








(7)


(78)




Microsoft Xbox 360


300 


26 




240 


24 




60 


25 




Nintendo Wii


70 





76 





(6)


(8)



Total console^


611 


53 




507 


52 




104 


21 




Sony PlayStation Portable



--- 





--- 





33 




Nintendo Dual Screen


29 





36 





(7)


(19)



Total handheld


33 





39 





(6)


(15)



Total Activision and Blizzard


1,083 


94 




916 


95 




167 


18 






















Distribution:



















Total Distribution


63 





51 





12 


24 



Total consolidated GAAP net revenues


1,146 


100 




967 


100 




179 


19 






















Change in Deferred Net Revenues (1) 


















Activision and Blizzard:



















Online subscriptions*


(67)
















PC and Other


(35)






(37)












Sony PlayStation  3


(156)






(90)












Microsoft Xbox 360


(146)






(119)












Nintendo Wii


(39)






(40)











Total console^


(341)






(249)












Nintendo Dual Screen


(4)






--- 











Total changes in deferred net revenues


(447)






(284)






























Non-GAAP Net Revenues by Segment/Platform Mix


















Activision and Blizzard:



















Online subscriptions*


292 


42 




293 


43 




(1)




PC and Other


45 





42 









Sony PlayStation  3


83 


12 




92 


14 




(9)


(10)




Sony PlayStation  2



--- 








(7)


(78)




Microsoft Xbox 360


154 


22 




121 


18 




33 


27 




Nintendo Wii


31 





36 





(5)


(14)



Total console^


270 


38 




258 


38 




12 





Sony PlayStation Portable











33 




Nintendo Dual Screen


25 





36 





(11)


(31)



Total handheld


29 





39 





(10)


(26)



Total Activision and Blizzard  


636 


91 




632 


93 


























Distribution:



















Total Distribution


63 





51 





12 


24 



Total non-GAAP net revenues (2) 

$

699 


100 

%


$

683 


100 

%


$

16 


%






















(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.



* Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.


^ Downloadable content and its related revenues are included in each respective console platforms, hence, total console.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Six Months Ended June 30, 2011 and 2010

(Amounts in millions)
























Six Months Ended






June 30, 2011




June 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Segment/Platform Mix           


















Activision and Blizzard:



















Online subscriptions*

$

754 


29 

%


$

602 


26 

%


$

152 


25 

%


PC and Other


205 





127 





78 


61 




Sony PlayStation  3


581 


22 




486 


22 




95 


20 




Sony PlayStation  2



--- 




24 





(18)


(75)




Microsoft Xbox 360


697 


27 




624 


27 




73 


12 




Nintendo Wii


152 





212 





(60)


(28)



Total console^


1,436 


55 




1,346 


59 




90 





Sony PlayStation Portable



--- 





--- 




--- 


--- 




Nintendo Dual Screen


55 





70 





(15)


(21)



Total handheld


63 





78 





(15)


(19)



Total Activision and Blizzard


2,458 


95 




2,153 


95 




305 


14 






















Distribution:



















Total Distribution


137 





122 





15 


12 



Total consolidated GAAP net revenues


2,595 


100 




2,275 


100 




320 


14 






















Change in Deferred Net Revenues(1) 


















Activision and Blizzard:



















Online subscriptions*


(123)






(7)











PC and Other


(123)






(60)












Sony PlayStation  3


(400)






(312)












Microsoft Xbox 360


(405)






(399)












Nintendo Wii


(84)






(100)











Total console^


(889)






(811)












Nintendo Dual Screen


(6)






--- 











Total changes in deferred net revenues


(1,141)






(878)






























Non-GAAP Net Revenues by Segment/Platform Mix


















Activision and Blizzard:



















Online subscriptions*


631 


43 




595 


42 




36 




PC and Other


82 





67 





15 


22 




Sony PlayStation  3


181 


12 




174 


12 








Sony PlayStation  2



--- 




24 





(18)


(75)




Microsoft Xbox 360


292 


20 




225 


16 




67 


30 




Nintendo Wii


68 





112 





(44)


(39)



Total console^


547 


37 




535 


38 




12 





Sony PlayStation Portable










--- 


--- 




Nintendo Dual Screen


49 





70 





(21)


(30)



Total handheld


57 





78 





(21)


(27)



Total Activision and Blizzard  


1,317 


91 




1,275 


91 




42 























Distribution:



















Total Distribution


137 





122 





15 


12 



Total non-GAAP net revenues(2) 

$

1,454 


100 

%


$

1,397 


100 

%


$

57 


%






















(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.


* Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.


^ Downloadable content and its related revenues are included in each respective console platforms, hence, total console.




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three and Six Months Ended June 30, 2011 and 2010

(Amounts in millions)
























Three Months Ended






June 30, 2011




June 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Geographic Region           




















North America


$

580


50

%


$

567


59

%


$

13


2

%


Europe



467


41




337


35




130


39



Asia Pacific



99


9




63


6




36


57



Total consolidated GAAP net revenues  



1,146


100




967


100




179


19






















Change in Deferred Net Revenues (1)




















North America



(249)






(192)











Europe



(181)






(79)











Asia Pacific



(17)






(13)











Total changes in net revenues



(447)






(284)






























Non-GAAP Net Revenues by Geographic Region




















North America



331


47




375


55




(44)


(12)



Europe



286


41




258


38




28


11



Asia Pacific



82


12




50


7




32


64



Total non-GAAP net revenues (2)


$

699


100

%


$

683


100

%


$

16


2

%













































Six Months Ended






June 30, 2011




June 30, 2010




$ Increase


% Increase






Amount


% of Total




Amount


% of Total




(Decrease)


(Decrease)


GAAP Net Revenues by Geographic Region




















North America


$

1,328


51

%


$

1,270


56

%


$

58


5

%


Europe



1,061


41




861


38




200


23



Asia Pacific



206


8




144


6




62


43



Total consolidated GAAP net revenues



2,595


100




2,275


100




320


14






















Change in Deferred Net Revenues (1)




















North America



(632)






(504)











Europe



(452)






(333)











Asia Pacific



(57)






(41)











Total changes in net revenues



(1,141)






(878)






























Non-GAAP Net Revenues by Geographic Region




















North America



696


48




766


55




(70)


(9)



Europe



609


42




528


38




81


15



Asia Pacific



149


10




103


7




46


45



Total non-GAAP net revenues (2)


$

1,454


100

%


$

1,397


100

%


$

57


4

%






















(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 Six Months Ended 2011 and 2010

(Amounts in millions)


























Three Months Ended






June 30, 2011



June 30, 2010



$ Increase


% Increase






Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


Segment net revenues:



















Activision(i)

$

323 


28 

%


$

333 


34 

%


$

(10)


(3)

%


Blizzard(ii)


313 


27 




299 


31 




14 




Distribution(iii)


63 





51 





12 


24 



Operating segment total


699 


61 




683 


71 




16 
























Reconciliation to consolidated net revenues:



















Net effect from deferral of net revenues


447 


39 




284 


29 









Consolidated net revenues

$

1,146 


100 

%


$

967 


100 

%


$

179 


19 

%






















Segment income from operations:



















Activision(i)

$

31 





$

(53)





$

84 


NM

%


Blizzard(ii)


135 






155 






(20)


(13)



Distribution(iii)


(1)






(1)






--- 


NM



Operating segment total


165 






101 






64 


63 























Reconciliation to consolidated operating income and



















consolidated income before income tax expense:



















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


332 






227 











Stock-based compensation expense


(20)






(17)











Restructuring  


(3)






(1)











Amortization of intangible assets


(7)






(10)











Consolidated operating income


467 






300 






167 


56 



Investment and other income, net













NM



Consolidated income before income tax expense

$

469 





$

301 





$

168 


56 

%
























Operating margin from total operating segments


24%






15%
























































Six Months Ended






June 30, 2011



June 30, 2010



$ Increase


% Increase






Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


Segment net revenues:



















Activision(i)

$

646 


25 

%


$

670 


29 

%


$

(24)


(4)

%


Blizzard(ii)


671 


26 




605 


27 




66 


11 



Distribution(iii)


137 





122 





15 


12 



Operating segment total


1,454 


56 




1,397 


61 




57 
























Reconciliation to consolidated net revenues:



















Net effect from deferral of net revenues


1,141 


44 




878 


39 









Consolidated net revenues

$

2,595 


100 

%


$

2,275 


100 

%


$

320 


14 

%






















Segment income (loss) from operations:



















Activision(i)

$

78 





$

(46)





$

124 


NM

%


Blizzard(ii)


306 






313 






(7)


(2)



Distribution(iii)


--- 






(1)







NM



Operating segment total


384 






266 






118 


44 























Reconciliation to consolidated operating income and



















consolidated income before income tax expense:



















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


838 






637 











Stock-based compensation expense


(43)






(60)











Restructuring  


(22)






(4)











Amortization of intangible assets


(16)






(28)











Consolidated operating income


1,141 






811 






330 


41 



Investment and other income, net













NM



Consolidated income before income tax expense

$

1,146 





$

812 





$

334 


41 

%
























Operating margin from total operating segments 


26%






19%

































(i) Activision Publishing ("Activision") — publishes interactive software products and content.



(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.




ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK

For the Quarter Ending September 30, 2011 and

Year Ending December 31, 2011

GAAP to Non-GAAP Reconciliation

(Amounts in millions, except per share data)










Outlook for


Outlook for



Three Months Ending


Year Ending



September 30, 2011


December 31, 2011








Net Revenues (GAAP)


$

650


$

4,180








Excluding the impact of:







Change in deferred net revenues

(a)


(120)



(130)








Non-GAAP Net Revenues


$

530


$

4,050








Earnings Per Diluted Share (GAAP)


$

0.05


$

0.68








Excluding the impact of:







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

(b)


(0.06)



(0.02)

Stock-based compensation

(c)


0.02



0.06

Amortization of intangible assets

(d)


-



0.04

Restructuring expenses

(e)


-



0.02








Non-GAAP Earnings Per Diluted Share


$

0.01


$

0.77















(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.

(e) Reflects expenses relating to the restructuring of our Activision Publishing operations.








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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