- 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.
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
©
-
-
-
-
-
-
-
-
(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
©
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
©
-
-
-
-
-
-
-
-
(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
©
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.
© 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)
©
-
-
-
-
-
-
-
(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)
©
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)
©
-
-
-
-
-
-
-
(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)
©
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.
© 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
5
51
5
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*
1
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
4
1
Distribution
63
9
51
7
12
24
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 Distribution Channel
Retail channels
$
1,607
62
%
$
1,490
66
%
$
117
8
%
Digital online channels*
851
33
663
29
188
28
Total Activision and Blizzard
2,458
95
2,153
95
305
14
Distribution
137
5
122
5
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
3
Distribution
137
10
122
9
15
12
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.
- 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
7
79
8
1
1
Sony PlayStation 3
239
21
182
19
57
31
Sony PlayStation 2
2
---
9
1
(7)
(78)
Microsoft Xbox 360
300
26
240
24
60
25
Nintendo Wii
70
6
76
8
(6)
(8)
Total console^
611
53
507
52
104
21
Sony PlayStation Portable
4
---
3
---
1
33
Nintendo Dual Screen
29
3
36
5
(7)
(19)
Total handheld
33
3
39
5
(6)
(15)
Total Activision and Blizzard
1,083
94
916
95
167
18
Distribution:
Total Distribution
63
6
51
5
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)
2
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
6
42
6
3
7
Sony PlayStation 3
83
12
92
14
(9)
(10)
Sony PlayStation 2
2
---
9
1
(7)
(78)
Microsoft Xbox 360
154
22
121
18
33
27
Nintendo Wii
31
4
36
5
(5)
(14)
Total console^
270
38
258
38
12
5
Sony PlayStation Portable
4
1
3
1
1
33
Nintendo Dual Screen
25
4
36
5
(11)
(31)
Total handheld
29
5
39
6
(10)
(26)
Total Activision and Blizzard
636
91
632
93
4
1
Distribution:
Total Distribution
63
9
51
7
12
24
Total non-GAAP net revenues (2)
$
699
100
%
$
683
100
%
$
16
2
%
(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
8
127
7
78
61
Sony PlayStation 3
581
22
486
22
95
20
Sony PlayStation 2
6
---
24
1
(18)
(75)
Microsoft Xbox 360
697
27
624
27
73
12
Nintendo Wii
152
6
212
9
(60)
(28)
Total console^
1,436
55
1,346
59
90
7
Sony PlayStation Portable
8
---
8
---
---
---
Nintendo Dual Screen
55
3
70
3
(15)
(21)
Total handheld
63
3
78
3
(15)
(19)
Total Activision and Blizzard
2,458
95
2,153
95
305
14
Distribution:
Total Distribution
137
5
122
5
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
6
PC and Other
82
6
67
5
15
22
Sony PlayStation 3
181
12
174
12
7
4
Sony PlayStation 2
6
---
24
2
(18)
(75)
Microsoft Xbox 360
292
20
225
16
67
30
Nintendo Wii
68
5
112
8
(44)
(39)
Total console^
547
37
535
38
12
2
Sony PlayStation Portable
8
1
8
1
---
---
Nintendo Dual Screen
49
4
70
5
(21)
(30)
Total handheld
57
5
78
6
(21)
(27)
Total Activision and Blizzard
1,317
91
1,275
91
42
3
Distribution:
Total Distribution
137
9
122
9
15
12
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.
- 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
5
Distribution(iii)
63
6
51
6
12
24
Operating segment total
699
61
683
71
16
2
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
2
1
1
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
5
122
5
15
12
Operating segment total
1,454
56
1,397
61
57
4
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)
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
5
1
4
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
©
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.
© 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
