Activision Blizzard Announces Better-Than-Expected Third Quarter 2012 Financial Results

    Activision Blizzard Announces Better-Than-Expected Third Quarter 2012
                              Financial Results

Company Had Three of the Top Four Best-Selling Games in North America and
Europe for the First Nine Months of 2012¹

Company Raises 2012 Net Revenues and EPS Outlook

PR Newswire

SANTA MONICA, Calif., Nov. 7, 2012

SANTA MONICA, Calif., Nov. 7, 2012 /PRNewswire/ -- Activision Blizzard, Inc.
(Nasdaq: ATVI) today announced better-than-expected financial results for the
third quarter of 2012.

                           Third Quarter                      Nine Months
                                      Prior
(in millions, except EPS)  2012                    2011        2012      2011
                                      Outlook*
GAAP                                                                  
Net Revenues              $  841     $   740      $  754
                                                            $  3,088  $  3,348
EPS                       $  0.20    $   0.06     $  0.13  $  0.70   $  0.84
Non-GAAP                                                              
Net Revenues              $  751     $   690      $  627
                                                            $  2,393  $  2,080
EPS                       $  0.15    $   0.07     $  0.07  $  0.40   $  0.31
*Prior Outlook was provided by the company in its August 2, 2012 earnings
release

For the quarter ended September 30, 2012, the company delivered record GAAP
net revenues of $841 million, as compared with $754 million for the third
quarter of 2011. On a non-GAAP basis, the company's net revenues were $751
million, as compared with $627 million for the third quarter of 2011. For the
third-quarter, GAAP net revenues from digital channels were $430 million and
represented 51% of the company's total net revenues. On a non-GAAP basis, net
revenues from digital channels were $427 million and represented 57% of the
quarter's total net revenues.

For the quarter ended September 30, 2012, Activision Blizzard delivered record
GAAP earnings per diluted share of $0.20, as compared with $0.13 for the third
quarter of 2011. On a non-GAAP basis, the company also delivered record
earnings per diluted share of $0.15, as compared with $0.07 for the third
quarter of 2011. Both GAAP and non-GAAP earnings include a one-time tax
benefit of $46 million, or $0.04 per diluted share, resulting from the closure
of an IRS audit related to pre-merger net operating losses from Vivendi Games.

The company reports results on both a GAAP and a non-GAAP basis. Please refer
to the tables at the back of this press release for a reconciliation of the
company's GAAP and non-GAAP results.

Robert Kotick, Chief Executive Officer, Activision Blizzard, said, "Our
unyielding commitment to excellence, the strength of our employees around the
globe and our focus on creating great entertainment experiences have enabled
us to once again deliver better-than-expected financial results. We have, for
the third straight year, generated over $1 billion of operating cash flow for
the trailing twelve month period ending September 30. Our performance was
driven by the launch of Blizzard Entertainment's World of Warcraft®: Mists of
Pandaria™ and continued sales of its top-selling PC game, Diablo® III™, as
well as Activision Publishing's new entertainment property, Skylanders Spyro's
Adventure®, and sales of titles in the Call of Duty® franchise. Based on our
strong third-quarter performance and increased visibility into the remainder
of the year, we are raising our full-year financial outlook and expect to
deliver record non-GAAP operating margins and the highest non-GAAP earnings
per share in our company's history. We now expect non-GAAP earnings per share
will increase more than 18% year over year."

Kotick added, "Skylanders Giants™ is off to a great start and next week the
company will release Call of Duty®: Black Ops II, which we believe will be one
of the most successful launches of any form of entertainment in history."

Kotick continued, "As we look to 2013, we are cautious about business
prospects given a continuingly challenged global economy, the ongoing console
transition and very difficult year-over-year comparables due to Blizzard's
record-shattering Diablo III sales in 2012. We expect that over the
long-term, we will maintain our leadership position as the world's leading
interactive entertainment company and continue to provide strong returns to
our shareholders by delivering great games to audiences around the world."

Selected Business Highlights

  oActivision Publishing's Skylanders Spyro's Adventure has been the #1
    best-selling console and handheld game overall in dollars, including
    accessory packs and figures, in North America and Europe for the first
    nine months of 2012.¹ Additionally, Skylanders Spyro's Adventure was the
    #1 action-figure line in the U.S., outselling all other action–figure
    lines for the first nine months of 2012.²
  oFor the first nine months, Activision Blizzard was the #1 PC publisher in
    the U.S. and Europe. Additionally, for the third quarter, Blizzard
    Entertainment had two of the top five PC games with Diablo III™ and World
    of Warcraft: Mists of Pandaria™.¹
  oSince its release in May 2012, Blizzard Entertainment's Diablo III™ was
    the #1 best-selling game in dollars and units on the PC in the U.S. and
    Europe.¹
  oOn September 25, 2012, Blizzard Entertainment released World of Warcraft:
    Mists of Pandaria™, and sold through approximately 2.7 million copies of
    the game as of its first week of release.³ Additionally, on October, 2,
    2012, World of Warcraft: Mists of Pandaria was released in China, marking
    what the company believes to be the first time any game has officially
    released in China as part of a global launch.
  oAs of September 30, 2012, Blizzard Entertainment's World of Warcraft
    remains the #1 subscription-based MMORPG, with more than 10 million
    subscribers.³

Company Outlook

During October, Activision Publishing released several new titles including:
007™ Legends on October 16, 2012; Skylanders Giants™  on October 22, 2012;
Cabela's Dangerous Hunts 2013 and Cabela's Hunting Expeditions on October 23,
2012; and Transformers Prime™ on October 30, 2012. 

On November 13, 2012, Activision Publishing expects to release its highly
anticipated game, Call of Duty: Black Ops II, the most ambitious Call of Duty
game ever. Additionally, Activision Publishing expects to release Wipeout 3
on November 18, 2012 and Family Guy: Back to the Multiverse on November 20,
2012.

Based on better-than-expected third-quarter results,  Activision Blizzard is
raising its outlook for calendar year 2012 from the estimates it provided on
August 2, 2012, as follows:

                                   Prior*                         Prior*
                    GAAP                          Non-GAAP
                    Outlook        GAAP           Outlook         Non-GAAP
                                   Outlook                        Outlook
CY 2012
 Net Revenues      $   4,574      $   4,330      $    4,805      $    4,630

 (in millions)
 EPS               $   0.88       $   0.69       $    1.10       $    0.99
Q4 2012
 Net Revenues      $   1,485      $   n/a       $    2,412      $    n/a

 (in millions)
 EPS               $   0.19       $   n/a       $    0.70       $    n/a
*Prior outlook was provided by the company in its August 2, 2012 earnings
release.

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
ended September 30, 2012 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 888-455-2265 in the U.S.
with passcode 7041557.

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.

Subscriber Definition: Consistent with past practice, 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:

  othe change in deferred net revenue and related cost of sales with respect
    to certain of the company's online-enabled games;
  oexpenses related to stock-based compensation;
  oexpenses related to restructuring;
  othe amortization of intangibles, and impairment of intangible assets and
    goodwill; and
  othe 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, the impact of the current macroeconomic environment and market
conditions within the video game industry, increasing concentration of titles,
shifts in consumer spending trends, 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, 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, the seasonal and
cyclical nature of the interactive entertainment market, changing business
models including digital delivery of content, competition, including from used
games and other forms of entertainment, possible declines in software pricing,
product returns and price protection, product delays, adoption rate and
availability of new hardware (including peripherals) and related software,
rapid changes in technology and industry standards, litigation risks and
associated costs, protection of proprietary rights, 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, 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 and
other filings with the Securities and Exchange Commission. 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.

¹According to The NPD Group, Chart-Track and GfK
²According to The NPD Group
³According to Activision Blizzard internal estimates

(Tables to Follow)



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in millions, except per share data)
                              Three Months Ended       Nine Months Ended
                              September 30,            September 30,
                              2012          2011       2012        2011
Net revenues:
      Product sales           $  536       $  369    $  2,208   $  2,197
      Subscription, licensing 305           385        880         1,151
      and other revenues ^1
       Total net revenues 841           754        3,088       3,348
Costs and expenses:
      Cost of sales - product 146           138        633         650
      costs
      Cost of sales - online  56            59         178         181
      subscriptions
      Cost of sales -
      software royalties and  19            24         107         133
      amortization
      Cost of sales -
      intellectual property   10            16         37          69
      licenses
      Product development     131           133        407         390
      Sales and marketing     131           115        346         264
      General and             121           104        413         333
      administrative
      Restructuring           -             3          -           24
       Total costs and    614           592        2,121       2,044
      expenses
Operating income              227           162        967         1,304
Investment and other income   1             3          4           7
(expense), net
Income before income tax      228           165        971         1,311
expense
Income tax expense            2             17         176         325
Net income                    $  226       $  148    $  795     $  986
Basic earnings per common     $  0.20      $  0.13   $  0.70    $  0.84
share
Weighted average common       1,109         1,140      1,113       1,151
shares outstanding
Diluted earnings per common   $  0.20      $  0.13   $  0.70    $  0.84
share ^2
Weighted average common
shares outstanding assuming   1,114         1,148      1,118       1,160
dilution
^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 27 million and 23 million for the
three and nine months ended September 30, 2012, respectively, and we had, on a
weighted-average basis, participating securities of approximately 17 million
for the three and nine months ended September 30, 2011. Net income
attributable to Activision Blizzard Inc. common shareholders used to calculate
earnings per common share assuming dilution was $221 million and $779 million
for the three and nine months ended September 30, 2012, as compared to the
total net income of $226 million and $795 million for the same periods,
respectively. Net income attributable to Activision Blizzard Inc. common
shareholders used to calculate earnings per common share assuming dilution was
$146 million and $972 million for the three and nine months ended September
30, 2011, as compared to total net income of $148 million and $986 million for
the same periods, respectively.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
                                                    September 30, December 31,
                                                    2012          2011
ASSETS
 Current assets:
  Cash and cash equivalents                         $  2,909    $  3,165
  Short-term investments                            455           360
  Accounts receivable, net                          200           649
  Inventories, net                                  291           144
  Software development                              164           137
  Intellectual property licenses                    13            22
  Deferred income taxes, net                        497           507
  Other current assets                              173           396
   Total current assets                         4,702         5,380
 Long-term investments                              19            16
 Software development                               156           62
 Intellectual property licenses                     4             12
 Property and equipment, net                        148           163
 Other assets                                       12            12
 Intangible assets, net                             80            88
 Trademark and trade names                          433           433
 Goodwill                                           7,107         7,111
  Total assets                                      $  12,661    $  13,277
LIABILITIES AND SHAREHOLDERS' EQUITY
 Current liabilities:
  Accounts payable                                  $   253    $   390
  Deferred revenues                                 847           1,472
  Accrued expenses and other liabilities            455           694
   Total current liabilities                   1,555         2,556
  Deferred income taxes, net                        60            55
  Other liabilities                                 163           174
  Total liabilities                                 1,778         2,785
 Shareholders' equity:
  Common stock                                      ---           ---
  Additional paid-in capital                        9,418         9,616
  Retained earnings                                 1,539         948
  Accumulated other comprehensive income (loss)     (74)          (72)
   Total shareholders' equity                  10,883        10,492
   Total liabilities and shareholders'     $  12,661    $  13,277
  equity

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except earnings per share data)
                                                  Cost of      Cost of
Three months                Cost of Cost of Sales Sales -      Sales -                                           Total
ended             Net       Sales - - Online      Software     Intellectual Product     Sales and General and    Costs
September 30,     Revenues  Product Subscriptions Royalties    Property     Development Marketing Administrative and
2012                        Costs                 and          Licenses                                          Expenses
                                                  Amortization
GAAP              $  841   $  146 $  56       $  19      $  10      $  131     $  131   $  121        $  614
Measurement
 Less: Net
 effect from
 deferral in
 net revenues (a)    (90)     (5)       -             23            2            -          -           -           20
 and related
 cost of
 sales
 Less:
 Stock-based  (b)    -        -         -             (1)           -            (5)        (2)         (26)        (34)
 compensation
 Less:
 Amortization
 of           (c)    -        -         -             -             (3)          -          -           -           (3)
 intangible
 assets
Non-GAAP          $  751   $  141 $  56       $  41      $   9      $  126     $  129   $  95        $  597
Measurement
Three months                        Basic         Diluted
ended             Operating Net     Earnings per  Earnings per
September 30,     Income    Income  Share         Share
2012
GAAP              $  227   $  226 $ 0.20       $ 0.20
Measurement
 Less: Net
 effect from
 deferral in
 net revenues (a)    (110)    (83)      (0.07)        (0.07)
 and related
 cost of
 sales
 Less:
 Stock-based  (b)    34       23        0.02          0.02
 compensation
 Less:
 Amortization
 of           (c)    3        2         -             -
 intangible
 assets
Non-GAAP          $  154   $  168 $ 0.15       $ 0.15
Measurement



                                                  Cost of      Cost of
Nine months                 Cost of Cost of Sales Sales -      Sales -                                           Total
ended             Net       Sales - - Online      Software     Intellectual Product     Sales and General and    Costs
September 30,     Revenues  Product Subscriptions Royalties    Property     Development Marketing Administrative and
2012                        Costs                 and          Licenses                                          Expenses
                                                  Amortization
GAAP              $  3,088 $     $   178     $   107    $   37    $   407   $   346 $   413      $ 
Measurement                 633                                                                                  2,121
 Less: Net
 effect from
 deferral in
 net revenues (a)    (695)    (186)     -             5             -           -           -           -          (181)
 and related
 cost of
 sales
 Less:
 Stock-based  (b)    -        -         -             (6)           -           (14)        (5)         (60)       (85)
 compensation
 Less:
 Amortization
 of           (c)    -        -         -             -             (7)         -           -           -          (7)
 intangible
 assets
Non-GAAP          $  2,393 $     $   178     $   106    $   30    $   393   $   341 $   353      $ 
Measurement                 447                                                                                  1,848
Nine months                         Basic         Diluted
ended             Operating Net     Earnings per  Earnings per
September 30,     Income    Income  Share         Share
2012
GAAP              $   967 $     $  0.70     $  0.70
Measurement                 795
 Less: Net
 effect from
 deferral in
 net revenues (a)    (514)    (401)     (0.35)        (0.35)
 and related
 cost of
 sales
 Less:
 Stock-based  (b)    85       60        0.05          0.05
 compensation
 Less:
 Amortization
 of           (c)    7        5         -             -
 intangible
 assets
Non-GAAP          $   545 $     $  0.40     $  0.40
Measurement                 459

 (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.
 The company calculates earnings per share pursuant to the two-class method
 which requires the allocation of net income between common shareholders and
 participating security holders. Net income attributable to Activision
 Blizzard common shareholders used to calculate non-GAAP earnings per common
 share assuming dilution was $164 million and $449 million for the three and
 nine months ended September 30, 2012 as compared to the total non-GAAP net
 income of $168 million and $459 million for the same periods, respectively.
 The per share adjustments are presented as calculated, and the GAAP and
 non-GAAP earnings per share information is also presented as calculated.
 The sum of these measures, as presented, may differ due to the impact of
 rounding.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES
(Amounts in millions, except earnings per share data)
                                                   Cost of      Cost of
                             Cost of Cost of Sales Sales -      Sales -                                                         Total
Three months ended Net       Sales - - Online      Software     Intellectual Product     Sales and General and    Restructuring Costs
September 30, 2011 Revenues  Product Subscriptions Royalties    Property     Development Marketing Administrative               and
                             Costs                 and          Licenses                                                        Expenses
                                                   Amortization
GAAP               $  754   $  138 $  59       $  24      $  16      $  133     $  115   $  104        $   3       $  592
Measurement
 Less: Net
 effect from
 deferral in   (a)    (127)    (10)       -            (10)           (2)          -         -           -              -           (22)
 net revenues
 and related
 cost of sales
 Less:
 Stock-based   (b)    -        -          -            -              -            (5)       (2)         (11)           -           (18)
 compensation
 Less:        (c)    -        -          -            -              -            -         -           -              (3)         (3)
 Restructuring
 Less:
 Amortization  (d)    -        -          -            -              (7)          -         -           -              -           (7)
 of intangible
 assets
Non-GAAP           $  627   $  128 $  59       $  14      $   7      $  128     $  113   $  93        $   -       $  542
Measurement
Three months ended Operating Net     Basic         Diluted
September 30, 2011 Income    Income  Earnings per  Earnings per
                                     Share         Share
GAAP               $  162   $  148 $ 0.13       $ 0.13
Measurement
 Less: Net
 effect from
 deferral in   (a)    (105)    (81)       (0.07)       (0.07)
 net revenues
 and related
 cost of sales
 Less:
 Stock-based   (b)    18       13         0.01         0.01
 compensation
 Less:        (c)    3        2          -            -
 Restructuring
 Less:
 Amortization  (d)    7        5          -            -
 of intangible
 assets
Non-GAAP           $  85   $  87 $ 0.07       $ 0.07
Measurement

                                                   Cost of      Cost of
                             Cost of Cost of Sales Sales -      Sales -                                                         Total
Nine months ended  Net       Sales - - Online      Software     Intellectual Product     Sales and General and    Restructuring Costs
September 30, 2011 Revenues  Product Subscriptions Royalties    Property     Development Marketing Administrative               and
                             Costs                 and          Licenses                                                        Expenses
                                                   Amortization
GAAP               $ 3,348  $      $  181      $  133     $   69     $  390    $  264  $  333       $   24      $ 2,044
Measurement                  650
 Less: Net
 effect from
 deferral in   (a)   (1,268)   (220)     -             (84)          (21)        -           -           -             -          (325)
 net revenues
 and related
 cost of sales
 Less:
 Stock-based   (b)   -         -         -             (8)           -           (15)        (4)         (34)          -          (61)
 compensation
 Less:        (c)   -         -         -             -             -           -           -           -             (24)       (24)
 Restructuring
 Less:
 Amortization  (d)   -         -         -             (1)           (21)        -           -           -             -          (22)
 of intangible
 assets
Non-GAAP           $ 2,080  $      $  181      $   40     $   27     $  375    $  260  $  299       $   -       $ 1,612
Measurement                  430
Nine months ended  Operating Net     Basic         Diluted
September 30, 2011 Income    Income  Earnings per  Earnings per
                                     Share         Share
GAAP               $ 1,304  $      $  0.84      $  0.84
Measurement                  986
 Less: Net
 effect from
 deferral in   (a)   (943)     (699)     (0.60)        (0.59)
 net revenues
 and related
 cost of sales
 Less:
 Stock-based   (b)   61        43        0.04          0.04
 compensation
 Less:        (c)   24        18        0.02          0.02
 Restructuring
 Less:
 Amortization  (d)   22        14        0.01          0.01
 of intangible
 assets
Non-GAAP           $  468   $  362 $  0.31      $  0.31
Measurement

 (a) Reflects the net change in deferred net revenues and related cost of
 sales.
 (b) Includes expense related to stock-based compensation.
 (c) Reflects restructuring related to our Activision Publishing operations.
 (d) Reflects amortization of intangible assets.
 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 $85 million and $357 million for the three
 and nine months ended September 30, 2011 as compared to total non-GAAP net
 income of $87 million and $362 million for the same periods, respectively.
 The per share adjustments are presented as calculated, and the GAAP and
 non-GAAP earnings per share information is also presented as calculated. The
 sum of these measures, as presented, may differ due to the impact of
 rounding.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three And Nine Months Ended September 30, 2012 and 2011
(Amounts in millions)
                   Three Months Ended
                   September 30, 2012  September 30,    $ Increase  % Increase
                                       2011
                   Amount       % of   Amount    % of   (Decrease)  (Decrease)
                                Total            Total
GAAP Net Revenues
by Distribution
Channel
 Retail channel    $  357      43 %   $  250   33 %   $  107     43 %
 Digital online    430          51     427       57     3           1
 channels^1
 Total Activision  787          94     677       90     110         16
 and Blizzard
 Distribution      54           6      77        10     (23)        (30)
 Total
 consolidated GAAP 841          100    754       100    87          12
 net revenues
Change in Deferred
Net Revenues^2
 Retail channel    (87)                (86)
 Digital online    (3)                 (41)
 channels^1
 Total changes in
 deferred net      (90)                (127)
 revenues
Non-GAAP Net
Revenues by
Distribution
Channel
 Retail channel    270          36     164       26     106         65
 Digital online    427          57     386       62     41          11
 channels^1
 Total Activision  697          93     550       88     147         27
 and Blizzard
 Distribution      54           7      77        12     (23)        (30)
 Total non-GAAP    $  751      100 %  $  627   100 %  $  124     20 %
 net revenues ^3
                   Nine Months Ended
                   September 30, 2012  September 30,    $ Increase  % Increase
                                       2011
                   Amount       % of   Amount    % of   (Decrease)  (Decrease)
                                Total            Total
GAAP Net Revenues
by Distribution
Channel
 Retail channel    $ 1,837     60 %   $ 1,856  56 %   $  (19)    (1) %
 Digital online    1,085        35     1,278     38     (193)       (15)
 channels^1
 Total Activision  2,922        95     3,134     94     (212)       (7)
 and Blizzard
 Distribution      166          5      214       6      (48)        (22)
 Total
 consolidated GAAP 3,088        100    3,348     100    (260)       (8)
 net revenues
Change in Deferred
Net Revenues^2
 Retail channel    (832)               (1,240)
 Digital online    137                 (28)
 channels^1
 Total changes in  
 deferred net                          (1,268)
 revenues          (695)
Non-GAAP Net
Revenues by
Distribution
Channel
 Retail channel    1,005        42     616       30     389         63
 Digital online    1,222        51     1,250     60     (28)        (2)
 channels^1
 Total Activision  2,227        93     1,866     90     361         19
 and Blizzard
 Distribution      166          7      214       10     (48)        (22)
 Total non-GAAP    $ 2,393     100 %  $ 2,080  100 %  $  313     15 %
 net revenues ^3
 ^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.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months Ended September 30, 2012 and 2011
(Amounts in millions)
                     Three Months Ended
                     September 30, 2012  September 30,  $ Increase  % Increase
                                         2011
                     Amount      % of    Amount  % of   (Decrease)  (Decrease)
                                 Total           Total
GAAP Net Revenues by
Segment/Platform Mix
Activision and
Blizzard:
  Online             $  226     27 %    $      44 %   $ (110)    (33) %
  subscriptions^1                       336
  PC and Other^5    314         37      45      6      269         598
     Sony            81          10      100     14     (19)        (19)
     PlayStation 3
     Microsoft Xbox  121         14      144     19     (23)        (16)
     360
     Nintendo Wii    25          3       33      4      (8)         (24)
  Total console^2   227         27      277     37     (50)        (18)
     Sony
     PlayStation     2           ---     4       1      (2)         (50)
     Portable
     Nintendo 3DS    18          2       15      2      3           20
     and DS
  Total handheld     20          2       19      3      1           5
  Total Activision   787         93      677     90     110         16
  and Blizzard
Distribution:
  Total Distribution 54          7       77      10     (23)        (30)
  Total consolidated 841         100     754     100    87          12
  GAAP net revenues
Change in Deferred
Net Revenues^3
Activision and
Blizzard:
  Online             119                 (62)
  subscriptions^1
  PC and Other^5    (165)               (5)
     Sony            (12)                (18)
     PlayStation 3
     Microsoft Xbox  (30)                (36)
     360
     Nintendo Wii    (2)                 (5)
  Total console^2   (44)                (59)
     Nintendo 3DS    ---                 (1)
     and DS
  Total changes in
  deferred net       (90)                (127)
  revenues
Non-GAAP Net
Revenues by
Segment/Platform Mix
Activision and
Blizzard:
  Online             345         46      274     44     71          26
  subscriptions^1
  PC and Other^5    149         20      40      6      109         273
     Sony            69          9       82      13     (13)        (16)
     PlayStation 3
     Microsoft Xbox  91          12      108     17     (17)        (16)
     360
     Nintendo Wii    23          3       28      5      (5)         (18)
  Total console^2   183         24      218     35     (35)        (16)
     Sony
     PlayStation     2           ---     4       1      (2)         (50)
     Portable
     Nintendo 3DS    18          3       14      2      4           29
     and DS
  Total handheld     20          3       18      3      2           11
  Total Activision   697         93      550     88     147         27
  and Blizzard
Distribution:
  Total Distribution 54          7       77      12     (23)        (30)
  Total non-GAAP net $  751     100 %   $      100 %  $  124     20 %
  revenues^4                            627
  ^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 Other includes standalone sales of toys and accessories products from
  Skylanders franchise, mobile sales and other physical merchandise and
  accessories.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Nine Months Ended September 30, 2012 and 2011
(Amounts in millions)
                       Nine Months Ended
                       September 30,    September 30,   $ Increase  % Increase
                       2012             2011
                       Amount    % of   Amount   % of   (Decrease)  (Decrease)
                                 Total           Total
GAAP Net Revenues by
Segment/Platform Mix
Activision and
Blizzard:
  Online               $  701   23 %   $        33 %   $ (389)    (36) %
  subscriptions^1                      1,090
  PC and Other^5      727       24     251      8      476         190
      Sony             617       20     686      20     (69)        (10)
      PlayStation 3
      Microsoft Xbox   705       23     840      25     (135)       (16)
      360
      Nintendo Wii     108       3      185      6      (77)        (42)
  Total console^2     1,430     46     1,711    51     (281)       (16)
      Sony PlayStation 5         ---    12       ---    (7)         (58)
      Portable
      Nintendo 3DS and 59        2      70       2      (11)        (16)
      DS
  Total handheld       64        2      82       2      (18)        (22)
  Total Activision and 2,922     95     3,134    94     (212)       (7)
  Blizzard
Distribution:
  Total Distribution   166       5      214      6      (48)        (22)
  Total consolidated   3,088     100    3,348    100    (260)       (8)
  GAAP net revenues
Change in Deferred Net
Revenues^3
Activision and
Blizzard:
  Online               92               (185)
  subscriptions^1
  PC and Other^5      126              (129)
      Sony             (412)            (417)
      PlayStation 3
      Microsoft Xbox   (469)            (440)
      360
      Nintendo Wii     (27)             (90)
  Total console^2     (908)            (947)
      Nintendo 3DS and (5)              (7)
      DS
  Total changes in
  deferred net         (695)            (1,268)
  revenues
Non-GAAP Net Revenues
by Segment/Platform
Mix
Activision and
Blizzard:
  Online               793       33     905      44     (112)       (12)
  subscriptions^1
  PC and Other^5      853       36     122      6      731         599
      Sony             205       9      269      12     (64)        (24)
      PlayStation 3
      Microsoft Xbox   236       10     400      19     (164)       (41)
      360
      Nintendo Wii     81        3      95       5      (14)        (15)
  Total console^2     522       22     764      36     (242)       (32)
      Sony PlayStation 5         ---    12       1      (7)         (58)
      Portable
      Nintendo 3DS and 54        2      63       3      (9)         (14)
      DS
  Total handheld       59        2      75       4      (16)        (21)
  Total Activision and 2,227     93     1,866    90     361         19
  Blizzard
Distribution:
  Total Distribution   166       7      214      10     (48)        (22)
  Total non-GAAP net   $ 2,393  100 %  $        100 %  $  313     15 %
  revenues^4                           2,080
  ^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 Other includes standalone sales of toys and accessories products from
  Skylanders franchise, mobile sales and other physical merchandise and
  accessories.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three and Nine Months Ended September 30, 2012 and 2011
(Amounts in millions)
                   Three Months Ended
                   September 30, 2012  September 30,    $ Increase  % Increase
                                       2011
                   Amount       % of   Amount    % of   (Decrease)  (Decrease)
                                Total            Total
GAAP Net
Revenues by
Geographic
Region
 North America     $  403      48 %   $  360   48 %   $  43     12 %
 Europe            333          40     323       43     10          3
 Asia Pacific      105          12     71        9      34          48
 Total
 consolidated      841          100    754       100    87          12
 GAAP net
 revenues
Change in
Deferred Net
Revenues^1
 North America     (49)                (72)
 Europe            (9)                 (45)
 Asia Pacific      (32)                (10)
 Total changes     (90)                (127)
 in net revenues
Non-GAAP Net
Revenues by
Geographic
Region
                                       
 North America     354          47               46     66          23
                                       288
 Europe            324          43     278       44     46          17
 Asia Pacific      73           10     61        10     12          20
 Total non-GAAP    $  751      100 %  $  627   100 %  $  124     20 %
 net revenues^2
                   Nine Months Ended
                   September 30, 2012  September 30,    $ Increase  % Increase
                                       2011
                   Amount       % of   Amount    % of   (Decrease)  (Decrease)
                                Total            Total
GAAP Net
Revenues by
Geographic
Region
 North America     $ 1,567     51 %   $ 1,687  51 %   $ (120)    (7) %
 Europe            1,220        39     1,385     41     (165)       (12)
 Asia Pacific      301          10     276       8      25          9
 Total
 consolidated      3,088        100    3,348     100    (260)       (8)
 GAAP net
 revenues
Change in
Deferred Net
Revenues^1
 North America     (459)               (703)
 Europe            (243)               (499)
 Asia Pacific      7                   (66)
 Total changes     (695)               (1,268)
 in net revenues
Non-GAAP Net
Revenues by
Geographic
Region
 North America     1,108        46     984       47     124         13
 Europe            977          41     886       43     91          10
 Asia Pacific      308          13     210       10     98          47
 Total non-GAAP    $ 2,393     100 %  $ 2,080  100 %  $  313     15 %
 net revenues^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
SEGMENT INFORMATION
For the Three and Nine Months Ended September 30, 2012 and 2011
(Amounts in millions)
                     Three Months Ended
                     September 30, 2012  September 30,  $ Increase  % Increase
                                         2011
                     Amount       % of   Amount  % of   (Decrease)  (Decrease)
                                  Total          Total
Segment net
revenues:
  Activision^1      $  283      34 %   $      34 %   $  30     12 %
                                         253
  Blizzard^2        414          49     297     39     117         39
  Distribution^3    54           6      77      10     (23)        (30)
  Operating segment  751          89     627     83     124         20
  total
Reconciliation to
consolidated net
revenues:
  Net effect from
  deferral of net    90           11     127     17
  revenues
  Consolidated net   $  841      100 %  $      100 %  $  87     12 %
  revenues                               754
Segment income
(loss)from
operations:
  Activision^1      $  (14)            $             $  22     (61)%
                                         (36)
  Blizzard^2        168                 120            48          40
  Distribution^3    ---                 1              (1)         (100)
  Operating segment  154                 85             69          81
  total
Reconciliation to
consolidated
operating income and
consolidated income
before income tax
expense:
  Net effect from
  deferral of net
  revenues and       110                 105
  related cost of
  sales
  Stock-based
  compensation       (34)                (18)
  expense
  Restructuring      ---                 (3)
  Amortization of    (3)                 (7)
  intangible assets
  Consolidated       227                 162            65          40
  operating income
  Investment and
  other income       1                   3
  (expense), net
  Consolidated                           $ 
  income before      $  228             165            $  63     38 %
  income tax expense
       Operating
       margin from                       
       total         21%
       operating                         14%
       segments
                     Nine Months Ended
                     September 30, 2012  September 30,  $ Increase  % Increase
                                         2011
                     Amount       % of   Amount  % of   (Decrease)  (Decrease)
                                  Total          Total
Segment net
revenues:
  Activision^1      $  928      30 %   $      27 %   $  30     3 %
                                         898
  Blizzard^2        1,299        42     968     29     331         34
  Distribution^3    166          5      214     6      (48)        (22)
  Operating segment  2,393        77     2,080   62     313         15
  total
Reconciliation to
consolidated net
revenues:
  Net effect from
  deferral of net    695          23     1,268   38
  revenues
  Consolidated net   $ 3,088     100 %  $       100 %  $ (260)    (8) %
  revenues                               3,348
Segment income
(loss) from
operations:
  Activision^1      $  (84)            $             $ (126)    (300) %
                                         42
  Blizzard^2        629                 425            204         48
  Distribution^3    ---                 1              (1)         (100)
  Operating segment  545                 468            77          16
  total
Reconciliation to
consolidated
operating income and
consolidated income
before income tax
expense:
  Net effect from
  deferral of net
  revenues and       514                 943
  related cost of
  sales
  Stock-based
  compensation       (85)                (61)
  expense
  Restructuring      ---                 (24)
  Amortization of    (7)                 (22)
  intangible assets
  Consolidated       967                 1,304          (337)       (26)
  operating income
  Investment and
  other income       4                   7
  (expense), net
  Consolidated                           $
  income before      $  971             1,311         $ (340)    (26) %
  income tax expense
       Operating
       margin from
       total         23%                 23%
       operating
       segments
       ^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.



ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOK
For the Quarter Ending December 31, 2012 and
Year Ending December 31, 2012
GAAP to Non-GAAP Reconciliation
(Amounts in millions, except per share data)
                                   Outlook for             Outlook for
                                   Three Months Ending     Year Ending
                                   December 31, 2012       December 31, 2012
Net Revenues (GAAP)                $    1,485           $    4,574
Excluding the impact of:
Change in deferred net       (a)   927                     231
revenues
Non-GAAP Net Revenues              $    2,412          $    4,805
Earnings Per Diluted Share         $    0.19           $    0.88
(GAAP)
Excluding the impact of:
Net effect from deferral in
net revenues and related     (b)   0.46                    0.11
cost of sales
Stock-based compensation     (c)   0.04                    0.09
Amortization of intangible   (d)   0.01                    0.02
assets
Non-GAAP Earnings Per              $    0.70           $    1.10
Diluted Share
(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.
The per share adjustments are presented as calculated, and the GAAP and
non-GAAP earnings (loss) per share information is also presented as
calculated. The sum of these measures, as presented, may differ due to the
impact of rounding.





SOURCE Activision Blizzard, Inc.

Website: http://www.activisionblizzard.com
Contact: Kristin Southey, SVP, Investor Relations, +1-310-255-2635,
ksouthey@activision.com, or Maryanne Lataif, SVP, Corporate Communications,
+1-310-255-2704, mlataif@activision.com