EX-99.1 2 a11-5488_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

 

Contacts:

Kristin Southey

 

 

Senior Vice President, Investor Relations

 

 

(310) 255-2635

 

 

ksouthey@activision.com

 

 

 

 

 

Maryanne Lataif

 

 

Senior Vice President, Corporate Communications

 

 

(310) 255-2704

 

 

mlataif@activision.com

 

FOR IMMEDIATE RELEASE

 

ACTIVISION BLIZZARD REPORTS DECEMBER QUARTER AND

CALENDAR YEAR 2010 FINANCIAL RESULTS

 

-    Company Achieves Record CY 2010 Operating Cash Flow of $1.4 Billion –

 

-    CY 2010 GAAP Net Revenues Increase Year Over Year to $4.45 Billion -

 

-    Company Delivers Record CY 2010 EPS –

 

-    2010 Revenues From Digital Channels Grow Over 20% to More Than $1.5 Billion -

 

-    Company Announces New $1.5 Billion Stock Repurchase Program -

 

-    Company Announces 10% Increase in Cash Dividend to $0.165 per Common Share –

 

Santa Monica, CA – February 9, 2011 – Activision Blizzard, Inc. (Nasdaq: ATVI) today announced financial results for the calendar year and quarter ending December 31, 2010.    Activision Blizzard reports results on both a GAAP and a non-GAAP basis.  A reconciliation of the company’s GAAP and non-GAAP results can be found in the attached tables.

 

For calendar year 2010, Activision Blizzard’s GAAP net revenues increased to $4.45 billion, as compared with $4.28 billion for 2009.  On a non-GAAP basis, the company’s net revenues were $4.80 billion, as compared with $4.78 billion for 2009.   Revenues from digital channels for the calendar year were more than $1.5 billion, an increase of more than 20% year over year.

 

For calendar year 2010, Activision Blizzard’s GAAP earnings per diluted share increased to $0.33, as compared with $0.09 per diluted share for 2009.  The 2010 results include a $0.16 per share non-cash reduction in the valuation of intangible assets reflecting weaker retail sales in the casual and music genres, while the 2009 results included a similar non-cash charge of $0.19 per share.  On a non-GAAP basis, the company’s earnings per diluted share grew 14.5% to $0.79, as compared with $0.69 per diluted share for 2009.

 

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For the quarter ended December 31, 2010, Activision Blizzard’s GAAP net revenues were $1.43 billion as compared with fourth-quarter 2009 net revenues of $1.56 billion.  On a non-GAAP basis, the company’s net revenues for the quarter were $2.55 billion, as compared with fourth-quarter 2009 non-GAAP net revenues of $2.50 billion.  Revenues from digital channels for the quarter were more than $470 million, an increase of 40% year over year.

 

For the quarter ended December 31, 2010, Activision Blizzard had a GAAP loss per share of $0.20, inclusive of the $0.16 per share non-cash charge mentioned above.  On a non-GAAP basis, the company’s earnings per diluted share grew to $0.53. For the comparable quarter in 2009, the company had a GAAP loss per share of $0.23, inclusive of the $0.19 per share non-cash charge mentioned above, and non-GAAP earnings per diluted share of $0.49.

 

Robert Kotick, CEO of Activision Blizzard, stated, “Because of focus and disciplined execution, 2010 was another extraordinary year for Activision Blizzard.  We made some of the best games we have ever made in over 30 years of being in the interactive entertainment business.  We benefited from new content releases for two of the world’s most successful online entertainment franchises:  Activision Publishing’s Call of Duty®: Black Ops and Blizzard Entertainment’s World of Warcraft®: Cataclysm™, a new installment in the world’s largest subscription-based massively multiplayer online role-playing game.  During the year, we grew our net revenues, delivered record earnings, achieved record GAAP and non-GAAP operating margins of 11% and 29%, respectively, and generated $1.4 billion in operating cash flow.”

 

Kotick added, “Activision Blizzard’s key franchises have larger audience bases than ever before and we continue to see significantly enhanced user activity and engagement for our expanding online communities.   Our revenues from digital channels, which now account for over 30% of our overall revenues, were driven by increased sales of Activision Publishing’s Call of Duty map packs and value-added services for Blizzard Entertainment’s World of Warcraft.  Blizzard significantly evolved its direct digital distribution capabilities with the launch of its new Battle.net® service and saw players embrace its service offerings in record numbers.  Notably, since Call of Duty: Black Ops was launched in November players have spent an average of 52 minutes per day playing online, roughly equivalent to the 55 minutes that the average user spends each day on Facebook.(1)   As of February 2, 2011, more than 27 million gamers have played Call of Duty games online, logging more than 2 billion hours, or the equivalent of more than 229,000 years of gameplay.(2)”

 


(1)According to Microsoft, Sony, Activision Blizzard internal estimates and digitalbuzzblog.com

(2)According to Activision Blizzard internal estimates

 

(more)

 



 

Kotick concluded, “Online gaming continues to broaden its appeal.  Our shareholders continue to be well positioned to benefit from these trends and the focus of our incredibly talented employees around the world continues to allow us to lead our industry.  We expect to continue to drive long-term growth, increase our return on invested capital and generate strong cash flow as we have over the last few years.  Our strong balance sheet affords us the financial flexibility to invest in games that few companies have the ability to create and allows us to provide our shareholders with value through dividends and share repurchases.”

 

Business Highlights

 

·                  Activision Blizzard was the #1 publisher overall in North America and Europe for the calendar year.(3)

 

·                  Activision Blizzard was the #1 publisher in North America on the Xbox® 360, PlayStation® 3 and PC collectively for the calendar year.(4)

 

·                  Blizzard Entertainment’s World of Warcraft: Cataclysm, which was launched on December 7, 2010, sold through more than 3.3 million copies worldwide during its first 24 hours of release, making it the fastest-selling PC game of all time.  It continued to sell through more than 4.7 million copies in its first month.(5)

 

·                  As of December 31, 2010, more than 12 million gamers worldwide are subscribed to play Blizzard Entertainment’s World of Warcraft.(6)

 

·                  For the December quarter, in North America and Europe, Call of Duty: Black Ops was the #1 best-selling console title in dollars ever during a single quarter and the Call of Duty franchise was the #1 franchise overall.(3)

 

·                  In November 2010, Call of Duty: Black Ops became the first video game ever to surpass $650 million in retail sales in its first five days of release.(2)  To date, the game has achieved more than $1 billion in retail sales worldwide.(3)

 

·                  As of January 31, 2011, total unique gamers playing Activision Publishing’s Call of Duty: Black Ops increased by more than 49% over the number of total unique gamers that played Call of Duty®: Modern Warfare® for the first three months after each game’s release.(7)

 


(3)According to The NPD Group - Charttrack and Gfk

(4)According to The NPD Group

(5) According to internal company records from Blizzard Entertainment and reports from key distribution partners

(6)According to Blizzard Entertainment internal data

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

 

(more)

 



 

·                  On February 1, 2011, Activision Publishing released Call of Duty: Black Ops First Strike, the first add-on pack for Call of Duty: Black Ops, on Xbox LIVE®.   The map pack set new Xbox LIVE records with more than 1.4 million downloads in the first 24 hours, an increase of more than 25% over last year’s Call of Duty: Modern Warfare 2 Stimulus Package.(7) The map pack also will be available on the PlayStation® 3 computer entertainment system on March 3, 2011 and on the PC later in the quarter.

 

Company Outlook

 

Activision Blizzard will continue to invest its capital and resources in the significant opportunities afforded by online gaming worldwide and will reduce its exposure to low-margin and low-potential businesses.  In 2011, the company will allocate the majority of its resources and focus toward opportunities which we expect will afford us the greatest competitive advantages and the greatest potential for best-in-class quality, high-margin digital growth, and long-term success.  These opportunities include Blizzard Entertainment’s games currently in development, robust investment in forthcoming Call of Duty titles, the development of a best-in-class digital community surrounding the Call of Duty franchise, a new property from Bungie and an innovative new universe with broad appeal that will be revealed at Toy Fair later this week and will bring 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.

 

At the same time, due to continued declines in the music genre, the company will disband Activision Publishing’s Guitar Hero business unit and discontinue development on its Guitar Hero game for 2011.  The company also will stop development on True Crime: Hong Kong™.  These decisions are based on the desire to focus on the greatest opportunities that the company currently has to create the world’s best interactive entertainment experiences.

 

For calendar year 2011, Activision Blizzard expects GAAP net revenues to be $3.95 billion and GAAP earnings per diluted share to be $0.56.  On a non-GAAP basis, the company expects net revenues of $3.9 billion and non-GAAP earnings per diluted share to be $0.70 for the calendar year.  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 yet include a new game from Blizzard in 2011.

 

For the first quarter of 2011, Activision Blizzard expects GAAP net revenues of $1.28 billion, and GAAP earnings per diluted share of $0.28. The company’s first quarter GAAP earnings per diluted share outlook includes the impact of between $0.02 - $0.03 of expenses related to the restructuring.  On a non-GAAP basis, the company expects net revenues of $640 million and $0.07 earnings per diluted share for the first quarter.

 


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

 

(more)

 



 

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.

 

Board Authorizes Stock Repurchase Program and Declares Cash Dividend

 

Activision Blizzard today announced that its Board of Directors has authorized a new stock repurchase program under which the company can repurchase up to $1.5 billion of the company’s outstanding common stock.  This program replaces the company’s $1 billion stock repurchase plan program authorized in February 2010, which expired on December 31, 2010.  As of December 31, 2010, Activision Blizzard had purchased an aggregate of 86 million shares of its common stock for approximately $966 million under the 2010 program.

 

The Board of Directors also declared a cash dividend of $0.165 per common share payable on May 11, 2011 to shareholders of record at the close of business on March 16, 2011.  This is the company’s second-ever cash dividend and it represents a 10% increase over its first-ever dividend that was issued in 2010.

 

Conference Call

 

Today at 4:30 p.m. EST, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter and year ended December 31, 2010 and management’s outlook for 2011. 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 and view a brief supporting slide presentation via live Webcast or to listen to the call live by dialing into 877-397-0292 in the U.S. with passcode 8890647.

 

(more)

 



 

Non-GAAP Financial Measures

 

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

 

Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard’s financial and operating performance because they facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard.

 

Internally, management uses these non-GAAP financial measures in assessing the company’s operating results, as well as in planning and forecasting.

 

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

 

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

 

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

 

(more)

 



 

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 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 sections of Activision Blizzard’s most recent annual report on Form 10-K.   The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes no obligation to update any such forward-looking statements.  Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

 

###

 

(Tables to Follow)

 

(more)

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net revenues:

 

 

 

 

 

 

 

 

 

Product sales

 

$

1,061

 

$

1,232

 

$

3,087

 

$

3,080

 

Subscription, licensing and other revenues

 

366

 

325

 

1,360

 

1,199

 

Total net revenues

 

1,427

 

1,557

 

4,447

 

4,279

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales - product costs

 

585

 

670

 

1,350

 

1,432

 

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

 

73

 

54

 

241

 

212

 

Cost of sales - software royalties and amortization

 

128

 

136

 

338

 

348

 

Cost of sales - intellectual property licenses

 

92

 

152

 

197

 

315

 

Product development

 

275

 

265

 

642

 

627

 

Sales and marketing

 

226

 

215

 

520

 

544

 

General and administrative

 

119

 

94

 

364

 

395

 

Impairment of intangible assets

 

326

 

409

 

326

 

409

 

Restructuring

 

 

(6

)

 

23

 

Total costs and expenses

 

1,824

 

1,989

 

3,978

 

4,305

 

Operating income (loss)

 

(397

)

(432

)

469

 

(26

)

Investment and other income, net

 

8

 

(3

)

23

 

18

 

Income (loss) before income tax expense

 

(389

)

(435

)

492

 

(8

)

Income tax (benefit) expense

 

(156

)

(149

)

74

 

(121

)

Net income (loss)

 

$

(233

)

$

(286

)

$

418

 

$

113

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share

 

$

(0.20

)

$

(0.23

)

$

0.34

 

$

0.09

 

Weighted average common shares outstanding

 

1,198

 

1,265

 

1,222

 

1,283

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share

 

$

(0.20

)

$

(0.23

)

$

0.33

 

$

0.09

 

Weighted average common shares outstanding assuming dilution

 

1,198

 

1,265

 

1,236

 

1,311

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)

 

 

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

2,812

 

$

2,768

 

Short-term investments

 

696

 

477

 

Accounts receivable, net

 

640

 

739

 

Inventories

 

112

 

241

 

Software development

 

147

 

224

 

Intellectual property licenses

 

45

 

55

 

Deferred income taxes, net

 

640

 

498

 

Other current assets

 

293

 

327

 

Total current assets

 

5,385

 

5,329

 

Long-term investments

 

23

 

23

 

Software development

 

55

 

10

 

Intellectual property licenses

 

28

 

28

 

Property and equipment, net

 

169

 

138

 

Other assets

 

21

 

9

 

Intangible assets, net

 

160

 

618

 

Trademark and trade names

 

433

 

433

 

Goodwill

 

7,132

 

7,154

 

Total assets

 

$

13,406

 

$

13,742

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

363

 

$

302

 

Deferred revenues

 

1,726

 

1,426

 

Accrued expenses and other liabilities

 

818

 

779

 

Total current liabilities

 

2,907

 

2,507

 

Deferred income taxes, net

 

112

 

270

 

Other liabilities

 

184

 

209

 

Total liabilities

 

3,203

 

2,986

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common stock

 

 

 

Additional paid-in capital

 

12,353

 

12,376

 

Treasury stock

 

(2,194

)

(1,235

)

Retained earnings (accumulated deficit)

 

57

 

(361

)

Accumulated other comprehensive loss

 

(13

)

(24

)

Total shareholders’ equity

 

10,203

 

10,756

 

Total liabilities and shareholders’ equity

 

$

13,406

 

$

13,742

 

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in millions)

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(233

)

$

(286

)

$

418

 

$

113

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

(329

)

(185

)

(278

)

(256

)

Impairment of intangible assets

 

326

 

409

 

326

 

409

 

Depreciation and amortization

 

101

 

160

 

198

 

347

 

Loss on disposal of property and equipment

 

1

 

2

 

1

 

2

 

Amortization and write-off of capitalized software development costs and intellectual property licenses (1)

 

137

 

89

 

319

 

281

 

Stock-based compensation expense (2)

 

37

 

47

 

131

 

156

 

Excess tax benefits from stock options exercises

 

(11

)

(11

)

(22

)

(79

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(395

)

(513

)

76

 

235

 

Inventories

 

143

 

110

 

124

 

21

 

Software development and intellectual property

 

(75

)

(79

)

(313

)

(308

)

Other assets

 

(201

)

(163

)

17

 

(110

)

Deferred revenues

 

1,103

 

955

 

293

 

503

 

Accounts payable

 

130

 

21

 

70

 

(18

)

Accrued expenses and other liabilities

 

259

 

257

 

16

 

(113

)

Net cash provided by operating activities

 

993

 

813

 

1,376

 

1,183

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Proceeds from maturities of investments

 

107

 

35

 

580

 

44

 

Proceeds from sale of available-for-sale investments

 

 

 

 

2

 

Payment of contingent consideration

 

 

 

(4

)

 

Purchases of available-for-sale investments

 

(119

)

(197

)

(800

)

(425

)

Capital expenditures

 

(21

)

(28

)

(97

)

(69

)

Decrease in restricted cash

 

44

 

45

 

9

 

5

 

Net cash provided by (used in) investing activities

 

11

 

(145

)

(312

)

(443

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock to employees

 

19

 

18

 

73

 

81

 

Repurchase of common stock

 

(346

)

(275

)

(959

)

(1,109

)

Dividends paid

 

(2

)

 

(189

)

 

Excess tax benefits from stock option exercises

 

11

 

11

 

22

 

79

 

Net cash used in financing activities

 

(318

)

(246

)

(1,053

)

(949

)

 

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

3

 

(14

)

33

 

19

 

Net increase (decrease) in cash and cash equivalents

 

689

 

408

 

44

 

(190

)

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

2,123

 

2,360

 

2,768

 

2,958

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

2,812

 

$

2,768

 

$

2,812

 

$

2,768

 

 


(1) Excludes deferral and amortization of stock-based compensation expense.

(2) Includes the net effects of capitalization, deferral, and amortization of stock-based compensation expense.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

(Amounts in millions)

 

 

 

Three Months Ended

 

Year over Year

 

 

 

December 31,

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

% Increase

 

 

 

2009

 

2010

 

2010

 

2010

 

2010

 

(Decrease)

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

$

813

 

$

227

 

$

(26

)

$

182

 

$

993

 

22

%

Operating Cash Flow - TTM

 

1,183

 

1,083

 

1,175

 

1,196

 

1,376

 

16

 

Capital Expenditures

 

28

 

12

 

27

 

37

 

21

 

(25

)

Capital Expenditures - TTM

 

69

 

71

 

84

 

104

 

97

 

41

 

Non-GAAP Free Cash Flow

 

785

 

215

 

(53

)

145

 

972

 

24

 

Non-GAAP Free Cash Flow - TTM

 

$

1,114

 

$

1,012

 

$

1,091

 

$

1,092

 

$

1,279

 

15

%

 

TTM represents trailing twelve months.

Non-GAAP free cash flow represents operating cash flow minus capital expenditures.

 


 

 


 

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 December 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

 

Impairment of
Intangible Assets

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

1,427

 

$

585

 

$

73

 

$

128

 

$

92

 

$

275

 

$

226

 

$

119

 

$

326

 

$

1,824

 

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

(a)

 

1,121

 

200

 

 

45

 

17

 

 

 

 

 

262

 

Less: Stock-based compensation

(b)

 

 

 

 

(14

)

 

(8

)

(2

)

(13

)

 

(37

)

Less: Restructuring (included in general and administrative)

(c)

 

 

 

 

 

 

 

 

1

 

 

1

 

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

(d)

 

 

(2

)

 

(6

)

(69

)

 

 

 

 

(77

)

Less: Impairment of intangible assets

(e)

 

 

 

 

 

 

 

 

 

(326

)

(326

)

Non-GAAP Measurement

 

 

$

2,548

 

$

783

 

$

73

 

$

153

 

$

40

 

$

267

 

$

224

 

$

107

 

$

 

$

1,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2010

 

 

Operating
Income (Loss)

 

Net Income
(Loss)

 

Basic Earnings
(Loss) per Share

 

Diluted Earnings
(Loss) per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

(397

)

$

(233

)

$

(0.20

)

$

(0.20

)

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

859

 

628

 

0.52

 

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

37

 

24

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring (included in general and administrative)

(c)

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(d)

 

77

 

38

 

0.03

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Impairment of intangible assets

(e)

 

326

 

198

 

0.16

 

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

901

 

$

655

 

$

0.54

 

$

0.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 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

 

Impairment of
Intangible Assets

 

Total Costs and
Expenses

 

GAAP Measurement

 

 

$

4,447

 

$

1,350

 

$

241

 

$

338

 

$

197

 

$

642

 

$

520

 

$

364

 

326

 

$

3,978

 

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

(a)

 

356

 

3

 

 

29

 

5

 

 

 

 

 

37

 

Less: Stock-based compensation

(b)

 

 

 

 

(65

)

 

(12

)

(8

)

(46

)

 

(131

)

Less: Restructuring (included in general and administrative)

(c)

 

 

 

 

 

 

 

 

(3

)

 

(3

)

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

(d)

 

 

(5

)

 

(15

)

(102

)

 

 

(1

)

 

(123

)

Less: Impairment of intangible assets

(e)

 

 

 

 

 

 

 

 

 

(326

)

(326

)

Non-GAAP Measurement

 

 

$

4,803

 

$

1,348

 

$

241

 

$

287

 

$

100

 

$

630

 

$

512

 

$

314

 

$

 

$

3,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2010

 

 

Operating
Income

 

Net Income

 

Basic Earnings
per Share

 

Diluted Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

469

 

$

418

 

$

0.34

 

$

0.33

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

319

 

232

 

0.19

 

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

131

 

88

 

0.07

 

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Restructuring (included in general and administrative)

(c)

 

3

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(d)

 

123

 

53

 

0.04

 

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Impairment of intangible assets

(e)

 

326

 

198

 

0.16

 

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

1,371

 

$

991

 

$

0.81

 

$

0.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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

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

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

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

(e)     Reflects impairment of intangible assets acquired as a result of 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

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except earnings per share data)

 

Three Months Ended December 31, 2009

 

 

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

 

Impairment of
Intangible Assets

 

Restructuring

 

Total Costs
and Expenses

 

GAAP Measurement

 

 

$

1,557

 

$

670

 

$

54

 

$

136

 

$

152

 

$

265

 

$

215

 

$

94

 

$

409

 

$

(6

)

$

1,989

 

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

(a)

 

938

 

194

 

 

16

 

4

 

 

 

 

 

 

214

 

Less: Stock-based compensation

(b)

 

 

 

 

(16

)

 

(12

)

1

 

(20

)

 

 

(47

)

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

(c)

 

 

 

 

 

 

 

 

 

 

6

 

6

 

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

(d)

 

 

(1

)

 

(29

)

(112

)

 

 

 

 

 

(142

)

Less: Impairment of intangible assets

(e)

 

 

 

 

 

 

 

 

 

(409

)

 

(409

)

Non-GAAP Measurement

 

 

$

2,495

 

$

863

 

$

54

 

$

107

 

$

44

 

$

253

 

$

216

 

$

74

 

$

 

$

 

$

1,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2009

 

 

Operating
Income (Loss)

 

Net Income
(Loss)

 

Basic
Earnings
(Loss) per
Share

 

Diluted
Earnings
(Loss) per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

(432

)

$

(286

)

$

(0.23

)

$

(0.23

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

724

 

552

 

0.43

 

0.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

47

 

29

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(c)

 

(6

)

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(d)

 

142

 

92

 

0.07

 

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Impairment of intangible assets

(e)

 

409

 

249

 

0.19

 

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

884

 

$

632

 

$

0.50

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2009

 

 

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

 

Impairment of
Intangible Assets

 

Restructuring

 

Total Costs
and Expenses

 

GAAP Measurement

 

 

$

4,279

 

$

1,432

 

$

212

 

$

348

 

$

315

 

$

627

 

$

544

 

$

395

 

$

409

 

$

23

 

$

4,305

 

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

(a)

 

497

 

115

 

 

(4

)

(2

)

 

5

 

 

 

 

114

 

Less: Stock-based compensation

(b)

 

 

 

 

(34

)

 

(40

)

(9

)

(71

)

 

 

(154

)

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

(f)

 

(1

)

 

 

 

 

4

 

(3

)

(10

)

 

 

(9

)

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

(c)

 

 

 

 

 

 

 

 

(24

)

 

(23

)

(47

)

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

(d)

 

 

(5

)

 

(66

)

(186

)

 

 

(2

)

 

 

(259

)

Less: Impairment of intangible assets

(e)

 

 

 

 

 

 

 

 

 

(409

)

 

(409

)

Non-GAAP Measurement

 

 

$

4,775

 

$

1,542

 

$

212

 

$

244

 

$

127

 

$

591

 

$

537

 

$

288

 

$

 

$

 

$

3,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2009

 

 

Operating
Income (Loss)

 

Net Income

 

Basic
Earnings per
Share

 

Diluted
Earnings per
Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Measurement

 

 

$

(26

)

$

113

 

$

0.09

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(a)

 

383

 

279

 

0.22

 

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Stock-based compensation

(b)

 

154

 

96

 

0.07

 

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(f)

 

8

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(c)

 

47

 

28

 

0.02

 

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

(d)

 

259

 

141

 

0.11

 

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Impairment of intangible assets

(e)

 

409

 

249

 

0.19

 

0.19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Measurement

 

 

$

1,234

 

$

910

 

$

0.70

 

$

0.69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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

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

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

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

(e)     Reflects impairment of intangible assets acquired as a result of purchase accounting.

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

 

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 and Year Ended December 31, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

$

820

 

57

%

$

1,000

 

64

%

$

(180

)

(18

)%

Digital online channel*

 

414

 

29

 

336

 

22

 

78

 

23

 

Total Activision and Blizzard

 

1,234

 

86

 

1,336

 

86

 

(102

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

193

 

14

 

221

 

14

 

(28

)

(13

)

Total consolidated GAAP net revenues

 

1,427

 

100

 

1,557

 

100

 

(130

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

1,059

 

 

 

933

 

 

 

 

 

 

 

Digital online channel*

 

62

 

 

 

5

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

1,121

 

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

1,879

 

73

 

1,933

 

77

 

(54

)

(3

)

Digital online channel*

 

476

 

19

 

341

 

14

 

135

 

40

 

Total Activision and Blizzard

 

2,355

 

92

 

2,274

 

91

 

81

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

193

 

8

 

221

 

9

 

(28

)

(13

)

Total non-GAAP net revenues (2)

 

$

2,548

 

100

%

$

2,495

 

100

%

$

53

 

2

%

 

 

 

Year Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

$

2,629

 

59

%

$

2,622

 

61

%

$

7

 

%

Digital online channel*

 

1,440

 

32

 

1,234

 

29

 

206

 

17

 

Total Activision and Blizzard

 

4,069

 

91

 

3,856

 

90

 

213

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

378

 

9

 

423

 

10

 

(45

)

(11

)

Total consolidated GAAP net revenues

 

4,447

 

100

 

4,279

 

100

 

168

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

243

 

 

 

457

 

 

 

 

 

 

 

Digital online channel*

 

113

 

 

 

39

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

356

 

 

 

496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Distribution Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail channel

 

2,872

 

60

 

3,079

 

64

 

(207

)

(7

)

Digital online channel*

 

1,553

 

32

 

1,273

 

27

 

280

 

22

 

Total Activision and Blizzard

 

4,425

 

92

 

4,352

 

91

 

73

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution

 

378

 

8

 

423

 

9

 

(45

)

(11

)

Total non-GAAP net revenues (2)

 

$

4,803

 

100

%

$

4,775

 

100

%

$

28

 

1

%

 


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

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

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

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended December 31, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

$

340

 

24

%

$

309

 

20

%

$

31

 

10

%

PC and other

 

124

 

9

 

45

 

3

 

79

 

176

 

Sony PlayStation 3

 

259

 

18

 

228

 

15

 

31

 

14

 

Sony PlayStation 2

 

6

 

 

53

 

3

 

(47

)

(89

)

Microsoft Xbox 360

 

281

 

20

 

324

 

21

 

(43

)

(13

)

Nintendo Wii

 

141

 

10

 

260

 

17

 

(119

)

(46

)

Total console

 

687

 

48

 

865

 

56

 

(178

)

(21

)

Sony PlayStation Portable

 

6

 

 

16

 

1

 

(10

)

(63

)

Nintendo Dual Screen

 

77

 

5

 

101

 

6

 

(24

)

(24

)

Total handheld

 

83

 

5

 

117

 

7

 

(34

)

(29

)

Total Activision and Blizzard

 

1,234

 

86

 

1,336

 

86

 

(102

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

193

 

14

 

221

 

14

 

(28

)

(13

)

Total consolidated GAAP net revenues

 

1,427

 

100

 

1,557

 

100

 

(130

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

204

 

 

 

12

 

 

 

 

 

 

 

PC and other

 

 

 

 

76

 

 

 

 

 

 

 

Sony PlayStation 3

 

393

 

 

 

343

 

 

 

 

 

 

 

Microsoft Xbox 360

 

441

 

 

 

429

 

 

 

 

 

 

 

Nintendo Wii

 

75

 

 

 

78

 

 

 

 

 

 

 

Total console

 

909

 

 

 

850

 

 

 

 

 

 

 

Nintendo Dual Screen

 

8

 

 

 

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

1,121

 

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

544

 

21

 

321

 

12

 

223

 

69

 

PC and other

 

124

 

5

 

121

 

5

 

3

 

2

 

Sony PlayStation 3

 

652

 

26

 

571

 

23

 

81

 

14

 

Sony PlayStation 2

 

6

 

 

53

 

2

 

(47

)

(89

)

Microsoft Xbox 360

 

722

 

28

 

753

 

30

 

(31

)

(4

)

Nintendo Wii

 

216

 

8

 

338

 

14

 

(122

)

(36

)

Total console

 

1,596

 

62

 

1,715

 

69

 

(119

)

(7

)

Sony PlayStation Portable

 

6

 

 

16

 

1

 

(10

)

(63

)

Nintendo Dual Screen

 

85

 

4

 

101

 

4

 

(16

)

(16

)

Total handheld

 

91

 

4

 

117

 

5

 

(26

)

(22

)

Total Activision and Blizzard

 

2,355

 

92

 

2,274

 

91

 

81

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

193

 

8

 

221

 

9

 

(28

)

(13

)

Total non-GAAP net revenues(2)

 

$

2,548

 

100

%

$

2,495

 

100

%

$

53

 

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.

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Year Ended December 31, 2010 and 2009

(Amounts in millions)

 

 

 

Year Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

$

1,230

 

28

%

$

1,248

 

29

%

$

(18

)

(1

)%

PC and other

 

325

 

7

 

164

 

4

 

161

 

98

 

Sony PlayStation 3

 

854

 

19

 

584

 

14

 

270

 

46

 

Sony PlayStation 2

 

35

 

1

 

174

 

4

 

(139

)

(80

)

Microsoft Xbox 360

 

1,033

 

23

 

857

 

19

 

176

 

21

 

Nintendo Wii

 

408

 

9

 

584

 

14

 

(176

)

(30

)

Total console

 

2,330

 

52

 

2,199

 

51

 

131

 

6

 

Sony PlayStation Portable

 

16

 

 

48

 

1

 

(32

)

(67

)

Nintendo Dual Screen

 

168

 

4

 

196

 

5

 

(28

)

(14

)

Total handheld

 

184

 

4

 

244

 

6

 

(60

)

(25

)

Total Activision and Blizzard

 

4,069

 

91

 

3,855

 

90

 

214

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

378

 

9

 

423

 

10

 

(45

)

(11

)

Total platform mix net revenues

 

4,447

 

100

 

4,278

 

100

 

169

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other(1)

 

 

 

1

 

 

(1

)

NM

 

Total consolidated GAAP net revenues

 

4,447

 

100

 

4,279

 

100

 

168

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

191

 

 

 

(93

)

 

 

 

 

 

 

PC and other

 

81

 

 

 

49

 

 

 

 

 

 

 

Sony PlayStation 3

 

77

 

 

 

259

 

 

 

 

 

 

 

Microsoft Xbox 360

 

15

 

 

 

284

 

 

 

 

 

 

 

Nintendo Wii

 

(16

)

 

 

(2

)

 

 

 

 

 

 

Total console

 

76

 

 

 

541

 

 

 

 

 

 

 

Nintendo Dual Screen

 

8

 

 

 

 

 

 

 

 

 

 

Total changes in deferred net revenues

 

356

 

 

 

497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other(1)

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Segment/Platform Mix

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision and Blizzard:

 

 

 

 

 

 

 

 

 

 

 

 

 

MMORPG

 

1,421

 

30

 

1,155

 

24

 

266

 

23

 

PC and other

 

406

 

8

 

213

 

4

 

193

 

91

 

Sony PlayStation 3

 

931

 

19

 

843

 

18

 

88

 

10

 

Sony PlayStation 2

 

35

 

1

 

174

 

4

 

(139

)

(80

)

Microsoft Xbox 360

 

1,048

 

22

 

1,141

 

24

 

(93

)

(8

)

Nintendo Wii

 

392

 

8

 

582

 

12

 

(190

)

(33

)

Total console

 

2,406

 

50

 

2,740

 

58

 

(334

)

(12

)

Sony PlayStation Portable

 

16

 

 

48

 

1

 

(32

)

(67

)

Nintendo Dual Screen

 

176

 

4

 

196

 

4

 

(20

)

(10

)

Total handheld

 

192

 

4

 

244

 

5

 

(52

)

(21

)

Total Activision and Blizzard

 

4,425

 

92

 

4,352

 

91

 

73

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Distribution

 

378

 

8

 

423

 

9

 

(45

)

(11

)

Total non-GAAP net revenues(2)

 

$

4,803

 

100

%

$

4,775

 

100

%

$

28

 

1

%

 


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

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

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months And Year Ended December 31, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

734

 

51

%

$

759

 

49

%

$

(25

)

(3

)%

Europe

 

600

 

42

 

710

 

46

 

(110

)

(15

)

Asia Pacific

 

93

 

7

 

88

 

5

 

5

 

6

 

Total consolidated GAAP net revenues

 

1,427

 

100

 

1,557

 

100

 

(130

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

627

 

 

 

528

 

 

 

 

 

 

 

Europe

 

440

 

 

 

371

 

 

 

 

 

 

 

Asia Pacific

 

54

 

 

 

39

 

 

 

 

 

 

 

Total changes in net revenues

 

1,121

 

 

 

938

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

1,361

 

53

 

1,287

 

52

 

74

 

6

 

Europe

 

1,040

 

41

 

1,081

 

43

 

(41

)

(4

)

Asia Pacific

 

147

 

6

 

127

 

5

 

20

 

16

 

Total non-GAAP net revenues(2)

 

$

2,548

 

100

%

$

2,495

 

100

%

$

53

 

2

%

 

 

 

Year Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

$

2,409

 

54

%

$

2,217

 

52

%

$

192

 

9

%

Europe

 

1,743

 

39

 

1,798

 

42

 

(55

)

(3

)

Asia Pacific

 

295

 

7

 

263

 

6

 

32

 

12

 

Total geographic region net revenues

 

4,447

 

100

 

4,278

 

100

 

169

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other(1)

 

 

 

1

 

 

(1

)

NM

 

Total consolidated GAAP net revenues

 

4,447

 

100

 

4,279

 

100

 

168

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Deferred Net Revenues(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

166

 

 

 

241

 

 

 

 

 

 

 

Europe

 

159

 

 

 

224

 

 

 

 

 

 

 

Asia Pacific

 

31

 

 

 

32

 

 

 

 

 

 

 

Total changes in net revenues

 

356

 

 

 

497

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other(1)

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues by Geographic Region

 

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

2,575

 

54

 

2,458

 

52

 

117

 

5

 

Europe

 

1,902

 

39

 

2,022

 

42

 

(120

)

(6

)

Asia Pacific

 

326

 

7

 

295

 

6

 

31

 

11

 

Total non-GAAP net revenues(2)

 

$

4,803

 

100

%

$

4,775

 

100

%

$

28

 

1

%

 


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

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

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

SEGMENT INFORMATION

For the Three Months And Year Ended December 31, 2010 and 2009

(Amounts in millions)

 

 

 

Three Months Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

Segment net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

1,785

 

125

%

$

1,945

 

125

%

$

(160

)

(8

)%

Blizzard(ii)

 

570

 

40

 

329

 

21

 

241

 

73

 

Distribution(iii)

 

193

 

14

 

221

 

14

 

(28

)

(13

)

Operating segment total

 

2,548

 

179

 

2,495

 

160

 

53

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect from deferral of net revenues

 

(1,121

)

(79

)

(938

)

(60

)

 

 

 

 

Consolidated net revenues

 

$

1,427

 

100

%

$

1,557

 

100

%

(130

)

(8

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

599

 

 

 

$

712

 

 

 

(113

)

(16

)

Blizzard(ii)

 

291

 

 

 

162

 

 

 

129

 

80

 

Distribution(iii)

 

11

 

 

 

10

 

 

 

1

 

10

 

Operating segment total

 

901

 

 

 

884

 

 

 

17

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(859

)

 

 

(724

)

 

 

 

 

 

 

Stock-based compensation expense

 

(37

)

 

 

(47

)

 

 

 

 

 

 

Restructuring

 

1

 

 

 

6

 

 

 

 

 

 

 

Amortization of intangible assets and purchase price accounting related adjustments

 

(77

)

 

 

(142

)

 

 

 

 

 

 

Impairment of intangible assets

 

(326

)

 

 

(409

)

 

 

 

 

 

 

Consolidated operating (loss)

 

$

(397

)

 

 

$

(432

)

 

 

$

35

 

(8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin from total operating segments

 

35

%

 

 

35

%

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

December 31, 2010

 

December 31, 2009

 

$ Increase

 

% Increase

 

 

 

Amount

 

% of Total

 

Amount

 

% of Total

 

(Decrease)

 

(Decrease)

 

Segment net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

2,769

 

62

%

$

3,156

 

74

%

$

(387

)

(12

)%

Blizzard(ii)

 

1,656

 

37

 

1,196

 

28

 

460

 

38

 

Distribution(iii)

 

378

 

9

 

423

 

10

 

(45

)

(11

)

Operating segment total

 

4,803

 

108

 

4,775

 

112

 

28

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net effect from deferral of net revenues

 

(356

)

(8

)

(497

)

(12

)

 

 

 

 

Other(iv)

 

 

 

1

 

 

 

 

 

 

Consolidated net revenues

 

$

4,447

 

100

%

$

4,279

 

100

%

168

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Activision(i)

 

$

511

 

 

 

$

663

 

 

 

(152

)

(23

)

Blizzard(ii)

 

850

 

 

 

555

 

 

 

295

 

53

 

Distribution(iii)

 

10

 

 

 

16

 

 

 

(6

)

(38

)

Operating segment total

 

1,371

 

 

 

1,234

 

 

 

137

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation to consolidated operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(319

)

 

 

(383

)

 

 

 

 

 

 

Stock-based compensation expense

 

(131

)

 

 

(154

)

 

 

 

 

 

 

Restructuring

 

(3

)

 

 

(23

)

 

 

 

 

 

 

Amortization of intangible assets and purchase price accounting related adjustments

 

(123

)

 

 

(259

)

 

 

 

 

 

 

Impairment of intangible assets

 

(326

)

 

 

(409

)

 

 

 

 

 

 

Integration and transactions costs

 

 

 

 

(24

)

 

 

 

 

 

 

Other(iv)

 

 

 

 

(8

)

 

 

 

 

 

 

Consolidated operating income (loss)

 

$

469

 

 

 

$

(26

)

 

 

$

495

 

NM

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating margin from total operating segments

 

29

%

 

 

26

%

 

 

 

 

 

 

 


(i) Activision Publishing (“Activision”) —  publishes interactive entertainment products and contents.

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

(iii) Activision Blizzard Distribution (“Distribution”) — distributes interactive entertainment software and hardware products.

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

 



 

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK

For the Quarter Ending March 31, 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

 

 

 

 

 

March 31, 2011

 

December 31, 2011

 

 

 

 

 

 

 

 

 

Net Revenues (GAAP)

 

 

 

$

1,280

 

$

3,950

 

 

 

 

 

 

 

 

 

Excluding the impact of:

 

 

 

 

 

 

 

Change in deferred net revenues

 

(a)

 

(640

)

(50

)

 

 

 

 

 

 

 

 

Non-GAAP Net Revenues

 

 

 

$

640

 

$

3,900

 

 

 

 

 

 

 

 

 

Earnings Per Diluted Share (GAAP)

 

 

 

$

0.28

 

$

0.56

 

 

 

 

 

 

 

 

 

Excluding the impact of:

 

 

 

 

 

 

 

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

 

(b)

 

(0.26

)

0.01

 

Stock-based compensation

 

(c)

 

0.02

 

0.07

 

Amortization of intangible assets

 

(d)

 

 

0.03

 

Restructuring expenses

 

(e)

 

0.03

 

0.03

 

 

 

 

 

 

 

 

 

Non-GAAP Earnings Per Diluted Share

 

 

 

$

0.07

 

$

0.70

 

 


(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.