Activision Blizzard Announces Better-Than-Expected First Quarter 2013 Financial Results

Company Increases CY 2013 Net Revenue and Earnings Per Share Outlook

SANTA MONICA, Calif.--()--Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the first quarter of 2013.

     
First Quarter
    Prior    
(in millions, except EPS)       2013     Outlook*     2012

GAAP

Net Revenues $ 1,324 $ 1,160 $ 1,172
EPS       $ 0.40     $ 0.29     $ 0.33

Non-GAAP

Net Revenues $ 804 $ 690 $ 587
EPS       $ 0.17     $ 0.10     $ 0.06
 

*Prior Outlook was provided by the company on February 7, 2013 in its earnings release

For the quarter ended March 31, 2013, Activision Blizzard’s GAAP net revenues were $1.32 billion, as compared with $1.17 billion for the first quarter of 2012. On a non-GAAP basis, the company’s net revenues were $804 million, as compared with $587 million for the first quarter of 2012. For the first quarter, GAAP net revenues from digital channels represented 28% of the company’s total revenues. On a non-GAAP basis, net revenues from digital channels were 53%.

For the quarter ended March 31, 2013, Activision Blizzard’s GAAP earnings per diluted share were $0.40, as compared with $0.33 for the first quarter of 2012. On a non-GAAP basis, the company’s earnings per diluted share were $0.17, as compared with $0.06 for the first quarter of 2012.

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.

Bobby Kotick, Chief Executive Officer, Activision Blizzard, said, “Our first-quarter performance was driven by continued consumer interest in all of our key franchises. Blizzard Entertainment’s StarCraft® II: Heart of the Swarm™ was the #1 PC game for the quarter.¹ Additionally, during the quarter, Blizzard’s World of Warcraft® remained the #1 subscription-based MMORPG in the world with more than eight million subscribers, although the game saw declines of approximately 1.3 million subscribers, mainly from the East, but in the West as well.²”

Kotick added, “While we have had a solid start to the year, we now believe that the risks and uncertainties in the back half of 2013 are more challenging than our earlier view, especially in the holiday quarter. The shift in release dates of competing products, the disappointing launch of the Wii U™, uncertainties regarding next-generation hardware, and subscriber declines in our World of Warcraft business all raise concerns, as do continued challenges in the global economy. For these reasons, we remain cautious. However, our focused and disciplined approach to our business has served us well in the past, and through continued investment and careful management of our costs, we expect to continue delivering shareholder value over the long term as we have for the last 20 years.”

Selected Business Highlights:

  • As of March 31, 2013, Blizzard Entertainment’s World of Warcraft remains the #1 subscription-based MMORPG, with 8.3 million subscribers.²
  • For the first quarter, Blizzard Entertainment had two top-10 PC titles in both North America and Europe with Blizzard Entertainment’s StarCraft II: Heart of the Swarm and Diablo® III
  • As of March 31, 2013, in North America and Europe combined, Activision Publishing was the #1 publisher overall for the quarter, including accessory packs and figures, with the #1 and #2 best-selling franchises – Skylanders and Call of Duty®
  • In both North America and Europe, including accessory packs and figures, Activision Publishing’s Skylanders Giants™ was the #1 best-selling game overall in dollars for the first quarter of 2013.³
  • For the quarter, in North America and Europe combined, Activision Publishing’s Call of Duty: Black Ops II was the #2 best-selling title in dollars.¹
  • During the quarter, non-GAAP digital revenues from Activision Publishing’s Call of Duty franchise increased more than 100% year over year.²
  • On May 1, 2013, Activision Publishing announced that it will release its new Call of Duty game, Call of Duty: Ghosts, on November 5, 2013.
  • On April 29, 2013, Blizzard Entertainment announced that it will release Diablo III for the Sony PlayStation® 3 computer entertainment system later this year. As announced previously, Blizzard also plans to adapt the game for the Sony PlayStation 4.
  • On March 22, 2013, Blizzard Entertainment announced Hearthstone™: Heroes of Warcraft™, a new cross-platform free-to-play game for Windows®, Macintosh®, and iPad®.
  • On March 12, 2013, Blizzard Entertainment launched StarCraft II: Heart of the Swarm. As of the end of its first two days of sales, Heart of the Swarm had sold through approximately 1.1 million copies worldwide, including both retail and digital sales.²
  • On February 5, 2013, Activision Publishing announced Skylanders SWAP Force™, the newest installment in the popular Skylanders franchise.

Company Outlook

On April 16, 2013, Activision Publishing released Call of Duty: Black Ops II Uprising, a downloadable content map pack for the Xbox 360® video game and entertainment system from Microsoft. The company expects to release Uprising for other platforms later in the quarter.

Based on its first-quarter results, Activision Blizzard is slightly raising its outlook for calendar year 2013, as follows:

 
    Prior*     Prior*
GAAP GAAP Non-GAAP Non-GAAP
(in millions, except EPS) Outlook Outlook Outlook Outlook
 

CY 2013

Net Revenues $ 4,220 $ 4,085 $ 4,250 $ 4,175
EPS $ 0.73 $ 0.68 $ 0.82 $ 0.80

 

Q2 2013

Net Revenues $ 980 n/a $ 590 n/a
EPS $ 0.21 n/a $ 0.05 n/a
 

* Prior Outlook was provided by the company on February 7, 2013 in its earnings release

Cash Dividend

As announced on February 7, 2013, Activision Blizzard will pay a cash dividend of $0.19 per common share on May 15, 2013 to shareholders of record at the close of business on March 20, 2013.

Conference Call

Today at 4:30 p.m. EDT, Activision Blizzard’s management will host a conference call and Webcast to discuss the company’s results for the quarter ended March 31, 2013 and management’s outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the “Investor Relations” area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 800-316-8317 in the U.S. with passcode 9157412.

About Activision Blizzard

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide online, PC, console, handheld and mobile device game publisher with leading positions across the major categories of the 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.

¹According to The NPD Group, GfK Chart-Track

²According to Activision Blizzard internal estimates

³According to The NPD Group, Gfk Chart-Track and Activision Blizzard internal estimates, including accessory packs and figures

Subscriber Definition: World of Warcraft subscribers include individuals who have paid a subscription fee or have an active prepaid card to play World of Warcraft, as well as those who have purchased the game and are within their free month of access. Internet Game Room players who have accessed the game over the last thirty days are also counted as subscribers. The above definition excludes all players under free promotional subscriptions, expired or cancelled subscriptions, and expired prepaid cards. Subscribers in licensees' territories are defined along the same rules.

Non-GAAP Financial Measures: As a supplement to our financial measures presented in accordance with Generally Accepted Accounting Principles (“GAAP”), Activision Blizzard presents certain non-GAAP measures of financial performance. These non-GAAP financial measures are not intended to be considered in isolation from, as a substitute for, or as more important than, 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;
  • the amortization of intangibles from purchase price accounting; 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 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.

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, 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, particularly during the expected console transition, rapid changes in technology and industry standards, the current regulatory environment, litigation risks and associated costs, 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, as amended. 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.

 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in millions, except per share data)
                   
 

 

    Three Months Ended March 31,
    2013     2012
 
Net revenues:
Product sales $ 990 $ 874
  Subscription, licensing and other revenues 1   334   298
  Total net revenues   1,324   1,172
 
Costs and expenses:
Cost of sales - product costs 260 257
Cost of sales - online subscriptions 57 69
Cost of sales - software royalties and amortization 61 31
Cost of sales - intellectual property licenses 38 7
Product development 125 114
Sales and marketing 107 79
  General and administrative   89   102
  Total costs and expenses   737   659
Operating income 587 513
Investment and other income (expense), net   2   1
Income before income tax expense 589 514
Income tax expense   133   130
Net income $ 456 $ 384
 
           
Basic earnings per common share $ 0.40 $ 0.34
Weighted average common shares outstanding   1,113   1,120
 
           
Diluted earnings per common share 2 $ 0.40 $ 0.33
Weighted average common shares outstanding assuming dilution   1,120   1,127
                   
 
1 Subscription, licensing and other revenues represents revenues from World of Warcraft subscriptions, Call of Duty Elite memberships, licensing royalties from our products and franchises, value-added services, downloadable content, and other miscellaneous revenues.
2 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. We had, on a weighted-average basis, participating securities of approximately 26 million and 19 million for the three months ended March 31, 2013 and 2012, respectively. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $446 million for the three months ended March 31, 2013 as compared to the total net income of $456 million for the same period. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $377 million for the three months ended March 31, 2012 as compared to total net income of $384 million for the same period.
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
                     
        March 31,     December 31,
        2013   2012
ASSETS        
Current assets:
Cash and cash equivalents $ 4,299 $ 3,959
Short-term investments 319 416
Accounts receivable, net 237 707
Inventories, net 159 209
Software development 143 164
Intellectual property licenses 11 11
Deferred income taxes, net 409 487
    Other current assets   226   321
    Total current assets   5,803   6,274
Long-term investments 9 8
Software development 160 129
Intellectual property licenses 10 30
Property and equipment, net 133 141
Other assets 10 11
Intangible assets, net 64 68
Trademark and trade names 433 433
    Goodwill   7,103   7,106
    Total assets $ 13,725 $ 14,200
             
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:
Accounts payable $ 186 $ 343
Deferred revenues 1,125 1,657
    Accrued expenses and other liabilities   588   652
    Total current liabilities   1,899   2,652
Deferred income taxes, net 83 25
    Other liabilities   208   206
    Total liabilities   2,190   2,883
 
Shareholders’ equity:
Common stock --- ---
Additional paid-in capital 9,498 9,450
Retained earnings 2,132 1,893
    Accumulated other comprehensive income (loss)   (95)   (26)
    Total shareholders’ equity   11,535   11,317
    Total liabilities and shareholders’ equity $ 13,725 $ 14,200
                     
 
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except earnings per share data)
                                                           
Three months ended March 31, 2013    

Net Revenues

 

Cost of Sales -
Product Costs

 

Cost of Sales -
Online
Subscriptions

 

Cost of Sales -
Software Royalties
and Amortization

 

Cost of Sales -
Intellectual
Property Licenses

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

GAAP Measurement $ 1,324 $ 260 $ 57 $ 61 $ 38 $ 125 $ 107 $ 89 $ 737
  Less: Net effect from deferral in net revenues and related cost of sales (a) (520) (115) - (33) (3) - - - (151)
Less: Stock-based compensation (b) - - - (5) - (7) (2) (12) (26)
Less: Amortization of intangible assets (c)   -   -   -   -   (3)   -   -   -   (3)
Non-GAAP Measurement   $ 804 $ 145 $ 57 $ 23 $ 32 $ 118 $ 105 $ 77 $ 557
                                                           
 
                             
Three months ended March 31, 2013  

Operating
Income

Net Income

Basic
Earnings per
Share

Diluted Earnings
per Share

GAAP Measurement $ 587 $ 456 $ 0.40 $ 0.40
Less: Net effect from deferral in net revenues and related cost of sales (a) (369) (277) (0.24) (0.24)
Less: Stock-based compensation (b) 26 18 0.02 0.02
Less: Amortization of intangible assets (c)   3   2   -   -
Non-GAAP Measurement   $ 247 $ 199 $ 0.17 $ 0.17
                           
 
                                     
Three months ended March 31, 2012   Net Revenues  

Cost of Sales -
Product Costs

 

Cost of Sales -
Online
Subscriptions

 

Cost of Sales -
Software Royalties
and Amortization

 

Cost of Sales -
Intellectual
Property Licenses

 

Product
Development

 

Sales and
Marketing

 

General and
Administrative

 

Total Costs and
Expenses

GAAP Measurement $ 1,172 $ 257 $ 69 $ 31 $ 7 $ 114 $ 79 $ 102 $ 659
  Less: Net effect from deferral in net revenues and related cost of sales (a) (585) (119) - (18) (1) - - - (138)
Less: Stock-based compensation (b) - - - (3) - (4) (2) (12) (21)
Less: Amortization of intangible assets

(c)

  -   -   -   -   (3)   -   -   -   (3)
Non-GAAP Measurement $ 587 $ 138 $ 69 $ 10 $ 3 $ 110 $ 77 $ 90 $ 497
                                                           
 
                     

 

     
Three months ended March 31, 2012

Operating
Income

Net Income

Basic Earnings
per Share

Diluted Earnings
per Share

GAAP Measurement $ 513 $ 384 $ 0.34 $ 0.33
Less: Net effect from deferral in net revenues and related cost of sales (a) (447) (335) (0.29) (0.29)
Less: Stock-based compensation (b) 21 16 0.01 0.01
Less: Amortization of intangible assets (c)   3   2   -   -
Non-GAAP Measurement $ 90 $ 67 $ 0.06 $ 0.06
                           
 
  (a) Reflects the net change in deferred net revenues and related cost of sales.
(b) Includes expense related to stock-based compensation.
(c) 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 Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $194 million for the three months ended March 31, 2013 as compared to total non-GAAP net income of $199 million for the same period. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $65 million for the three months ended March 31, 2012 as compared to total non-GAAP net income of $67 million for the same period.

 

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

 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months Ended March 31, 2013 and 2012
(Amounts in millions)
                           
Three Months Ended
March 31, 2013 March 31, 2012 $ Increase % Increase
Amount % of Total4 Amount % of Total4 (Decrease) (Decrease)
GAAP Net Revenues by Distribution Channel
Retail channels $ 896 68 % $ 793 68 % $ 103 13 %
Digital online channels1   377 28   314 27   63 20
Total Activision and Blizzard 1,273 96 1,107 94 166 15
 
Distribution   51 4   65 6   (14) (22)
Total consolidated GAAP net revenues   1,324 100   1,172 100   152 13
 
Change in Deferred Net Revenues2
Retail channels (572) (569)
Digital online channels1   52   (16)
Total changes in deferred net revenues   (520)   (585)
 
Non-GAAP Net Revenues by Distribution Channel
Retail channels 324 40 224 38 100 45
Digital online channels1   429 53   298 51   131 44
Total Activision and Blizzard 753 94 522 89 231 44
 
Distribution   51 6   65 11   (14) (22)
Total non-GAAP net revenues3 $ 804 100 % $ 587 100 % $ 217 37 %
 
  1 Net revenues from digital online channel represent revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, digitally distributed products, and wireless devices.
2 We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.
3 Total non-GAAP net revenues presented also represents our total operating segment net revenues.
4 The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months Ended March 31, 2013 and 2012
(Amounts in millions)
       
Three Months Ended
March 31, 2013     March 31, 2012     $ Increase     % Increase
Amount     % of Total6 Amount   % of Total6 (Decrease) (Decrease)
GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard:
Online subscriptions1 $ 275 21 % $ 256 22 % $ 19 7 %
PC 93 7 47 4 46 98
Sony PlayStation 3 343 26 302 26 41 14
Microsoft Xbox 360 383 29 335 29 48 14
Nintendo Wii and Wii U   23 2   51 4   (28) (55)
Total console2   749 57   688 59   61 9
Other5   156 12   116 10   40 34
Total Activision and Blizzard   1,273 96   1,107 94   166 15
 
Distribution:
Total Distribution   51 4   65 6   (14) (22)
Total consolidated GAAP net revenues   1,324 100   1,172 100   152 13
 
Change in Deferred Net Revenues3
Activision and Blizzard:
Online subscriptions1 (47) (6)
PC 28 (22)
Sony PlayStation 3 (249) (263)
Microsoft Xbox 360 (247) (277)
Nintendo Wii and Wii U   (5)   (14)
Total console2   (501)   (554)
Other5   ---   (3)
Total changes in deferred net revenues   (520)   (585)
 
Non-GAAP Net Revenues by Segment/Platform Mix
Activision and Blizzard:
Online subscriptions1 228 28 250 43 (22) (9)
PC 121 15 25 4 96 384
Sony PlayStation 3 94 12 39 7 55 141
Microsoft Xbox 360 136 17 58 10 78 134
Nintendo Wii and Wii U   18 2   37 6   (19) (51)
Total console2   248 31   134 23   114 85
Other5   156 19   113 19   43 38
Total Activision and Blizzard   753 94   522 89   231 44
 
Distribution:
Total Distribution   51 6   65 11   (14) (22)
Total non-GAAP net revenues4 $ 804 100 % $ 587 100 % $ 217 37 %
 
  1 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. It also includes revenues from Call of Duty Elite memberships.
2 Downloadable content and their related revenues are included in each respective console platforms and total console.
3 We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.
4 Total non-GAAP net revenues presented also represents our total operating segment net revenues.
5 Revenue from other includes revenues from handheld and mobile devices, as well as non-platform specific game related revenues such as standalone sales of toys and accessories products from the Skylanders franchise and other physical merchandise and accessories.
6 The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months Ended March 31, 2013 and 2012
(Amounts in millions)
                         
Three Months Ended
  March 31, 2013   March 31, 2012 $ Increase % Increase
Amount % of Total3 Amount % of Total3 (Decrease) (Decrease)
GAAP Net Revenues by Geographic Region
North America $ 738 56 % $ 601 51 % $ 137 23 %
Europe 487 37 485 41 2 ---
Asia Pacific   99 7   86 7   13 15
Total consolidated GAAP net revenues   1,324 100   1,172 100   152 13
 
Change in Deferred Net Revenues1
North America (315) (331)
Europe (169) (225)
Asia Pacific   (36)   (29)
Total changes in net revenues   (520)   (585)
 
Non-GAAP Net Revenues by Geographic Region
North America 423 53 270 46 153 57
Europe 318 40 260 44 58 22
Asia Pacific   63 8   57 10   6 11
Total non-GAAP net revenues2 $ 804 100 % $ 587 100 % $ 217 37 %
 
  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.
3 The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
For the Three Months Ended March 31, 2013 and 2012
(Amounts in millions)
                             
Three Months Ended
March 31, 2013 March 31, 2012 $ Increase % Increase
Amount % of Total4 Amount % of Total4 (Decrease) (Decrease)
Segment net revenues:
Activision1 $ 423 32 % $ 271 23 % $ 152 56 %
Blizzard2 330 25 251 21 79 31
Distribution3   51 4   65 6   (14) (22)
Operating segment total 804 61 587 50 217 37
 
Reconciliation to consolidated net revenues:
Net effect from deferral of net revenues   520 39   585 50
Consolidated net revenues $ 1,324 100 % $ 1,172 100 % $ 152 13 %
 
Segment income from operations:
Activision1 $ 112 $ --- $ 112 --- %
Blizzard2 135 89 46 52
Distribution3   ---   1   (1) ---
Operating segment total 247 90 157 174
 

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

Net effect from deferral of net revenues and related cost of sales 369 447
Stock-based compensation expense (26) (21)
Amortization of intangible assets   (3)   (3)
Consolidated operating income 587 513 74 14
Investment and other income (expense), net   2   1
Consolidated income before income tax expense $ 589 $ 514 $ 75 15 %
 
Operating margin from total operating segments 31% 15%
 
  1 Activision Publishing (“Activision”) — publishes interactive entertainment products and contents.
2 Blizzard — Blizzard Entertainment, Inc. and its subsidiaries (“Blizzard”) publishes PC games and online subscription-based games in the MMORPG category.
3 Activision Blizzard Distribution (“Distribution”) — distributes interactive entertainment software and hardware products.
4 The percentages of total are presented as calculated. Therefore the sum of these percentages, as presented, may differ due to the impact of rounding.
 
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK
For the Quarter Ending June 30, 2013 and
Year Ending December 31, 2013
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share data)
         
Outlook for Outlook for
Three Months Ending Year Ending
June 30, 2013 December 31, 2013
 
Net Revenues (GAAP) $ 980 $

4,220

 

Excluding the impact of:

Change in deferred net revenues (a)   (390)  

30

 
Non-GAAP Net Revenues $ 590 $

4,250

 
Earnings Per Diluted Share (GAAP) $ 0.21 $ 0.73
 

Excluding the impact of:

Net effect from deferral in net revenues and related cost of sales (b) (0.18) -
Stock-based compensation (c) 0.02 0.08
Amortization of intangible assets (d) - 0.01
       
Non-GAAP Earnings Per Diluted Share $ 0.05 $ 0.82
 
(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 from purchase price accounting.
 

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.

Contacts

Activision Blizzard, Inc.
Kristin Southey, 310-255-2635
SVP, Investor Relations
ksouthey@activision.com
or
Maryanne Lataif, 310-255-2704
SVP, Corporate Communications
mlataif@activision.com

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Contacts

Activision Blizzard, Inc.
Kristin Southey, 310-255-2635
SVP, Investor Relations
ksouthey@activision.com
or
Maryanne Lataif, 310-255-2704
SVP, Corporate Communications
mlataif@activision.com