Activision Blizzard, Inc.
Activision Blizzard, Inc. (Form: 8-K, Received: 05/09/2011 16:21:45)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported):  May 9, 2011

 

ACTIVISION BLIZZARD, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

001-15839

 

95-4803544

(State or Other Jurisdiction of
Incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

3100 Ocean Park Boulevard, Santa
Monica, CA

 

90405

(Address of Principal Executive
Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (310) 255-2000

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Certain Information Not Filed .  The information in Item 2.02 of this Form 8-K and Exhibit 99.1 attached to this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such Item 2.02 or such Exhibit 99.1 or any of the information contained therein be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

Item 2.02.                                           Results of Operations and Financial Condition.

 

On May 9, 2011, Activision Blizzard, Inc. (the “Company”) issued a press release announcing results for the Company for the fiscal quarter ended March 31, 2011. A copy of the press release is attached hereto as Exhibit 99.1.  As previously announced, the Company is hosting a conference call and Webcast in conjunction with that release.

 

Item 9.01.                                           Financial Statements and Exhibits.

 

(d)  Exhibits

 

99.1                            Press Release dated May 9, 2011 (furnished not filed)

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date:  May 9, 2011

ACTIVISION BLIZZARD, INC.

 

 

 

 

 

 

 

By:

/s/ Thomas Tippl

 

 

Thomas Tippl

 

 

Chief Operating Officer and
Chief Financial Officer

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

99.1

 

Press Release dated May 9, 2011 (furnished not filed)

 

4


Exhibit 99.1

 

Contacts:

Kristin Southey

 

SVP, Investor Relations

 

(310) 255-2635

 

ksouthey@activision.com

 

 

 

Maryanne Lataif

 

SVP, Corporate Communications

 

(310) 255-2704

 

mlataif@activision.com

 

FOR IMMEDIATE RELEASE

 

ACTIVISION BLIZZARD ANNOUNCES RECORD

FIRST QUARTER FINANCIAL RESULTS

 

- Q1 Net Revenues and EPS Ahead of Prior Year and Prior Outlook –

 

-    Q1 GAAP EPS Increased 40% and Non-GAAP EPS Up 44% Over Prior Year -

 

- Q1 Net Revenues from Digital Channels Grow 30% -

 

- Company Increases Full Year Outlook for Net Revenues and EPS -

 

Santa Monica, CA – May 9, 2011 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the first quarter of 2011.

 

For the quarter ended March 31, 2011, Activision Blizzard’s GAAP net revenues increased to $1.4 billion, as compared with $1.3 billion for the first quarter of 2010.   On a non-GAAP basis, the company’s net revenues were $755 million, as compared with $714 million for the first quarter of 2010.  For the first quarter, GAAP net revenues from digital channels increased 30% year over year, accounting for 30% of the company’s total net revenues.  On a non-GAAP basis, net revenues from digital channels also increased 30% year over year, accounting for more than 50% of total net revenues.

 

For the quarter ended March 31, 2011, Activision Blizzard’s GAAP earnings per diluted share increased to $0.42, as compared with $0.30 for the first quarter of 2010.  On a non-GAAP basis, the company’s earnings per diluted share were $0.13, as compared with $0.09 for the first 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.

 

1



 

Robert Kotick, CEO of Activision Blizzard, stated, “With over $1.4 billion of GAAP net revenues and $0.42 of GAAP EPS our record first-quarter performance was driven by digital sales and the continued strength of Activision Publishing’s Call of Duty® and Blizzard Entertainment ’s World of Warcraft® franchises.  Digital content continues to represent a significant portion of our revenues and increased by about $100 million year over year, enabling us to deliver record first-quarter operating margins and earnings per share.   The Call of Duty: Black Ops ® First Strike content pack shattered Xbox LIVE ® launch records, surpassing 1.4 million downloads in the first 24 hours alone,(1) and Blizzard’s Battle.net ® service continues to grow its service offerings.    To date, Call of Duty: Black Ops players have logged more than 1.2 billion online hours of online gameplay.(2)”

 

Kotick continued, “Interactive entertainment continues to see broader audience appeal and powerful positive trends in online gameplay and online distribution. Our incredibly talented people continue to lead in innovation and we continue to deliver the world’s best games combined with strong financial performance.”

 

Business Highlights

 

·                   During the first quarter, Call of Duty: Black Ops became the best-selling game of all time in dollars across the Xbox 360® video game and entertainment system from Microsoft, the PlayStation®3 computer entertainment system and the PC in the U.S. and Europe and was also the #1 game in the U.S. and Europe for the quarter.(3)

 

·                   For the first quarter, Activision Blizzard had three top-10 PC titles with Blizzard Entertainment’s World of Warcraft: Cataclysm and StarCraft II: Wings of Liberty a nd Activision Publishing’s Call of Duty: Black Ops .(3)

 

·                   Total unique online gamers playing Call of Duty: Black Ops were more than 33% greater than the total unique online gamers who played Call of Duty: Modern Warfare ® 2 for the first five months after each game’s release.(4)

 

2



 

·                   During the quarter, digital downloads of the Call of Duty: Black Ops First Strike content pack were more than 20% higher than digital downloads of the Call of Duty: Modern Warfare 2 Stimulus Pack during the comparable period in 2010.(4)

 


(1) According to Microsoft

(2) According to Activision Blizzard internal estimates

(3) According to The NPD Group, Charttrack and Gfk.

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

 

·                   Since Call of Duty: Black Ops First Strike launched on February 1, players have spent an average of 58 minutes per day playing online, exceeding the 55 minutes the average user spends per day on Facebook.(5)

 

·                   As of March 31, 2011, Activision Blizzard had purchased approximately 31 million shares of its common stock, for approximately $344 million, under the $1.5 billion stock repurchase program authorized by its Board of Directors on February 9, 2011.

 

·                   Activision Blizzard will pay a cash dividend of $0.165 per common share on May 11, 2011 to shareholders of record as of March 16, 2011.  The dividend represents a 10% increase over the dividend that was issued in 2010.

 

Company Outlook

 

On May 3, 2011, Activision Publishing released the Call of Duty: Black Ops Escalation content pack on the Xbox 360 video game and entertainment system from Microsoft.  The pack also is expected to be available during the second quarter on Sony’s PlayStation3 computer entertainment system and the PC.   During the quarter, Activision Publishing also expects to release Transformers: Dark of the Moon, which will launch in connection with the release of the upcoming feature film of the same name; and Wipeout In The Zone , a Kinect-ready title for the Xbox 360 which is expected to be available in conjunction with the premier of Wipeout’s summer television season.

 

The company 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 its next-generation MMO; robust investment in forthcoming Call of Duty titles, including a micro-transaction game for China; the development of a best-in-class digital platform surrounding the Call of Duty franchise; 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 publisher.

 


(5) According to Microsoft, Sony, Activision Blizzard internal estimates and Digitalbuzzblog.com

 

3



 

For calendar year 2011, Activision Blizzard is raising its outlook from the estimates it provided on February 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)

 

$

4.05

 

$

3.95

 

$

3.95

 

$

3.90

 

EPS

 

$

0.61

 

$

0.56

 

$

0.73

 

$

0.70

 

Q2 2011

 

 

 

 

 

 

 

 

 

Net Revenues (in millions)

 

$

985

 

n/a

 

$

575

 

n/a

 

EPS

 

$

0.19

 

n/a

 

$

0.04

 

n/a

 

 


*Prior outlook was provided on February 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 first-quarter 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 877-719-9796 in the U.S. with passcode 7833192.

 

4



 

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.

 

5



 

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.

 

6



 

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 and used games, 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.

 

###

 

(Tables to Follow)

 

7



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Net revenues:

 

 

 

 

 

Product sales

 

$

1,061

 

$

986

 

Subscription, licensing and other revenues

 

388

 

322

 

Total net revenues

 

1,449

 

1,308

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of sales - product costs

 

299

 

337

 

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

 

63

 

54

 

Cost of sales - software royalties and amortization

 

61

 

99

 

Cost of sales - intellectual property licenses

 

29

 

43

 

Product development

 

142

 

143

 

Sales and marketing

 

64

 

56

 

General and administrative

 

98

 

65

 

Restructuring

 

19

 

 

Total costs and expenses

 

775

 

797

 

Operating income

 

674

 

511

 

Investment and other income, net

 

2

 

 

Income before income tax expense

 

676

 

511

 

Income tax expense

 

173

 

130

 

Net income

 

$

503

 

$

381

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.42

 

$

0.30

 

Weighted average common shares outstanding

 

1,173

 

1,248

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.42

 

$

0.30

 

Weighted average common shares outstanding assuming dilution

 

1,182

 

1,264

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

 

 

 

March 31,

 

December 31,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

2,658

 

$

2,812

 

Short-term investments

 

701

 

696

 

Accounts receivable, net

 

95

 

640

 

Inventories

 

103

 

112

 

Software development

 

129

 

147

 

Intellectual property licenses

 

32

 

45

 

Deferred income taxes, net

 

464

 

620

 

Other current assets

 

167

 

293

 

Total current assets

 

4,349

 

5,365

 

Long-term investments

 

25

 

23

 

Software development

 

65

 

55

 

Intellectual property licenses

 

29

 

28

 

Property and equipment, net

 

165

 

169

 

Other assets

 

25

 

21

 

Intangible assets, net

 

152

 

160

 

Trademark and trade names

 

433

 

433

 

Goodwill

 

7,134

 

7,132

 

Total assets

 

$

12,377

 

$

13,386

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

172

 

$

363

 

Deferred revenues

 

1,043

 

1,726

 

Accrued expenses and other liabilities

 

676

 

838

 

Total current liabilities

 

1,891

 

2,927

 

Deferred income taxes, net

 

83

 

92

 

Other liabilities

 

166

 

164

 

Total liabilities

 

2,140

 

3,183

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

 

 

Additional paid-in capital

 

12,382

 

12,353

 

Treasury stock

 

(2,537

)

(2,194

)

Retained earnings

 

366

 

57

 

Accumulated other comprehensive income (loss)

 

26

 

(13

)

Total shareholders’ equity

 

10,237

 

10,203

 

Total liabilities and shareholders’ equity

 

$

12,377

 

$

13,386

 

 



 

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 March 31, 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

 

 

$

1,449

 

$

299

 

$

63

 

$

61

 

$

29

 

$

142

 

$

64

 

$

98

 

$

19

 

$

775

 

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

(a)

 

(694

)

(132

)

 

(42

)

(14

)

 

 

 

 

(188

)

Less: Stock-based compensation

(b)

 

 

 

 

(4

)

 

(6

)

(1

)

(12

)

 

(23

)

Less: Restructuring

(c)

 

 

 

 

 

 

 

 

 

(19

)

(19

)

Less: Amortization of intangible assets

(e)

 

 

 

 

 

(8

)

 

 

 

 

(8

)

Non-GAAP Measurement

 

 

$

755

 

$

167

 

$

63

 

$

15

 

$

7

 

$

136

 

$

63

 

$

86

 

$

 

$

537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2011

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

674

 

$

503

 

$

0.42

 

$

0.42

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

(506

)

(381

)

(0.32

)

(0.32

)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

23

 

15

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring

(c)

 

19

 

14

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets

(e)

 

8

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

218

 

$

156

 

$

0.13

 

$

0.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 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

 

 

$

1,308

 

$

337

 

$

54

 

$

99

 

$

43

 

$

143

 

$

56

 

$

65

 

$

797

 

 

 

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

(a)

 

(594

)

(133

)

 

(37

)

(14

)

 

 

 

(184

)

 

 

Less: Stock-based compensation

(b)

 

 

 

 

(29

)

 

(4

)

(2

)

(9

)

(44

)

 

 

Less: Restructuring (included in general and administrative)

(d)

 

 

 

 

 

 

 

 

(3

)

(3

)

 

 

Less: Amortization of intangible assets

(e)

 

 

(1

)

 

(4

)

(12

)

 

 

 

(17

)

 

 

Non-GAAP Measurement

 

 

$

714

 

$

203

 

$

54

 

$

29

 

$

17

 

$

139

 

$

54

 

$

53

 

$

549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2010

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings
per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

511

 

$

381

 

$

0.30

 

$

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

(410

)

(308

)

(0.24

)

(0.24

)

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

44

 

30

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring (included in general and administrative)

(d)

 

3

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Amortization of intangible assets

(e)

 

17

 

11

 

0.01

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

165

 

$

116

 

$

0.09

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(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 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.

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

 

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 March 31, 2011 and 2010

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channels

 

$

946

 

65

%

$

907

 

70

%

$

39

 

4

%

Digital online channels*

 

428

 

30

 

330

 

25

 

98

 

30

 

Total Activision and Blizzard

 

1,374

 

95

 

1,237

 

95

 

137

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

75

 

5

 

71

 

5

 

4

 

6

 

Total consolidated GAAP net revenues

 

1,449

 

100

 

1,308

 

100

 

141

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channels

 

(706

)

 

 

(603

)

 

 

 

 

 

 

Digital online channels*

 

12

 

 

 

9

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

(694

)

 

 

(594

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channels

 

240

 

32

 

304

 

43

 

(64

)

(21

)

Digital online channels*

 

440

 

58

 

339

 

47

 

101

 

30

 

Total Activision and Blizzard

 

680

 

90

 

643

 

90

 

37

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

75

 

10

 

71

 

10

 

4

 

6

 

Total non-GAAP net revenues (2)

 

$

755

 

100

%

$

714

 

100

%

$

41

 

6

%

 


(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 March 31, 2011 and 2010

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

Online subscriptions*

 

$

395

 

27

%

$

310

 

24

%

$

85

 

27

%

PC and Other

 

124

 

9

 

49

 

4

 

75

 

153

 

Sony PlayStation 3

 

342

 

24

 

304

 

23

 

38

 

13

 

Sony PlayStation 2

 

4

 

 

15

 

1

 

(11

)

(73

)

Microsoft Xbox 360

 

396

 

27

 

384

 

30

 

12

 

3

 

Nintendo Wii

 

82

 

6

 

136

 

10

 

(54

)

(40

)

Total console^

 

824

 

57

 

839

 

64

 

(15

)

(2

)

Sony PlayStation Portable

 

5

 

 

5

 

 

 

 

Nintendo 3DS

 

4

 

 

 

 

4

 

NM

 

Nintendo Dual Screen

 

22

 

2

 

34

 

3

 

(12

)

(35

)

Total handheld

 

31

 

2

 

39

 

3

 

(8

)

(21

)

Total Activision and Blizzard

 

1,374

 

95

 

1,237

 

95

 

137

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

75

 

5

 

71

 

5

 

4

 

6

 

Total consolidated GAAP net revenues

 

1,449

 

100

 

1,308

 

100

 

141

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

Online subscriptions*

 

(56

)

 

 

(8

)

 

 

 

 

 

 

PC and Other

 

(87

)

 

 

(24

)

 

 

 

 

 

 

Sony PlayStation 3

 

(244

)

 

 

(222

)

 

 

 

 

 

 

Microsoft Xbox 360

 

(259

)

 

 

(280

)

 

 

 

 

 

 

Nintendo Wii

 

(46

)

 

 

(60

)

 

 

 

 

 

 

Total console^

 

(549

)

 

 

(562

)

 

 

 

 

 

 

Nintendo Dual Screen

 

(2

)

 

 

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

(694

)

 

 

(594

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

Online subscriptions*

 

339

 

45

 

302

 

42

 

37

 

12

 

PC and Other

 

37

 

4

 

25

 

3

 

12

 

48

 

Sony PlayStation 3

 

98

 

13

 

82

 

11

 

16

 

20

 

Sony PlayStation 2

 

4

 

1

 

15

 

2

 

(11

)

(73

)

Microsoft Xbox 360

 

137

 

18

 

104

 

15

 

33

 

32

 

Nintendo Wii

 

36

 

4

 

76

 

11

 

(40

)

(53

)

Total console^

 

275

 

36

 

277

 

39

 

(2

)

(1

)

Sony PlayStation Portable

 

5

 

1

 

5

 

1

 

 

 

Nintendo 3DS

 

4

 

1

 

 

 

4

 

NM

 

Nintendo Dual Screen

 

20

 

3

 

34

 

5

 

(14

)

(41

)

Total handheld

 

29

 

5

 

39

 

6

 

(10

)

(26

)

Total Activision and Blizzard

 

680

 

90

 

643

 

90

 

37

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

75

 

10

 

71

 

10

 

4

 

6

 

Total non-GAAP net revenues(2)

 

$

755

 

100

%

$

714

 

100

%

$

41

 

6

%

 


(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 are included in each respective console platforms, hence, total console.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended March 31, 2011 and 2010

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

748

 

52

%

$

703

 

54

%

$

45

 

6

%

Europe

 

594

 

41

 

524

 

40

 

70

 

13

 

Asia Pacific

 

107

 

7

 

81

 

6

 

26

 

32

 

Total consolidated GAAP net revenues

 

1,449

 

100

 

1,308

 

100

 

141

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

(383

)

 

 

(312

)

 

 

 

 

 

 

Europe

 

(271

)

 

 

(254

)

 

 

 

 

 

 

Asia Pacific

 

(40

)

 

 

(28

)

 

 

 

 

 

 

Total changes in net revenues

 

(694

)

 

 

(594

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

365

 

48

 

391

 

55

 

(26

)

(7

)

Europe

 

323

 

43

 

270

 

38

 

53

 

20

 

Asia Pacific

 

67

 

9

 

53

 

7

 

14

 

26

 

Total non-GAAP net revenues(2)

 

$

755

 

100

%

$

714

 

100

%

$

41

 

6

%

 


(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 Months Ended March 31, 2011 and 2010

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

Segment net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

323

 

22

%

$

337

 

26

%

$

(14

)

(4

)%

Blizzard(ii)

 

357

 

25

 

306

 

23

 

51

 

17

 

Distribution(iii)

 

75

 

5

 

71

 

6

 

4

 

6

 

Operating segment total

 

755

 

52

 

714

 

55

 

41

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect from deferral of net revenues

 

694

 

48

 

594

 

45

 

 

 

 

 

Consolidated net revenues

 

$

1,449

 

100

%

$

1,308

 

100

%

$

141

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

48

 

 

 

$

7

 

 

 

$

41

 

NM

%

Blizzard(ii)

 

170

 

 

 

158

 

 

 

12

 

8

 

Distribution(iii)

 

 

 

 

 

 

 

 

NM

 

Operating segment total

 

218

 

 

 

165

 

 

 

53

 

32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated operating income and consolidated income before income tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

506

 

 

 

410

 

 

 

 

 

 

 

Stock-based compensation expense

 

(23

)

 

 

(44

)

 

 

 

 

 

 

Restructuring

 

(19

)

 

 

(3

)

 

 

 

 

 

 

Amortization of intangible assets

 

(8

)

 

 

(17

)

 

 

 

 

 

 

Consolidated operating income

 

 

674

 

 

 

 

511

 

 

 

 

163

 

32

 

Investment and other income, net

 

2

 

 

 

 

 

 

2

 

NM

 

Consolidated income before income tax expense

 

$

676

 

 

 

$

511

 

 

 

$

165

 

32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin from total operating segments

 

29

%

 

 

23

%

 

 

 

 

 

 

 


(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 June 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

 

 

 

 

June 30, 2011

 

December 31, 2011

 

 

 

 

 

 

 

 

Net Revenues (GAAP)

 

 

$

985

 

$

4,050

 

 

 

 

 

 

 

 

Excluding the impact of:

 

 

 

 

 

 

Change in deferred net revenues

(a)

 

(410

)

(100

)

 

 

 

 

 

 

 

Non-GAAP Net Revenues

 

 

$

575

 

$

3,950

 

 

 

 

 

 

 

 

Earnings Per Diluted Share (GAAP)

 

 

$

0.19

 

$

0.61

 

 

 

 

 

 

 

 

Excluding the impact of:

 

 

 

 

 

 

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

(b)

 

(0.18

)

 

Stock-based compensation

(c)

 

0.02

 

0.07

 

Amortization of intangible assets

(d)

 

 

0.04

 

Restructuring expenses

(e)

 

0.01

 

0.02

 

 

 

 

 

 

 

 

Non-GAAP Earnings Per Diluted Share

 

 

$

0.04

 

$

0.73

 

 


(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.