Activision Blizzard Announces Better-Than-Expected Fourth Quarter and Calendar Year 2012 Results
Activision Blizzard Announces Better-Than-Expected Fourth Quarter and
Calendar Year 2012 Results
Full Year Non-GAAP EPS Increased 27% to a Record $1.18 Company Generated More
Than $1.3 Billion in Operating Cash Flow Company Increases Cash Dividend to
$0.19 per Common Share
Business Wire
SANTA MONICA, Calif. -- February 7, 2013
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected
financial results for the fourth quarter and calendar year 2012.
Fourth Quarter Calendar Year
(in millions, Prior
except EPS) 2012 2011 2012 2011
Outlook*
GAAP
Net Revenues $ 1,768 $ 1,485 $ 1,407 $ 4,856 $ 4,755
EPS $ 0.31 $ 0.19 $ 0.08 $ 1.01 $ 0.92
Non-GAAP
Net Revenues $ 2,595 $ 2,412 $ 2,408 $ 4,987 $ 4,489
EPS $ 0.78 $ 0.70 $ 0.62 $ 1.18 $ 0.93
*Prior Outlook was provided by the company on November 7, 2012 in its earnings
release
For calendar year 2012, Activision Blizzard delivered record GAAP net revenues
of $4.86 billion, as compared with $4.76 billion for 2011. On a non-GAAP
basis, the company’s net revenues were $4.99 billion, as compared with $4.49
billion for 2011. For the calendar year 2012, GAAP net revenues from digital
channels were $1.54 billion and represented 32% of the company’s total
revenues. On a non-GAAP-basis, for the calendar year 2012, net revenues from
digital channels were a record $1.60 billion and represented 32% of the
company’s total net revenues.
For calendar year 2012, Activision Blizzard delivered record GAAP earnings per
diluted share of $1.01, as compared with $0.92 per diluted share for 2011. On
a non-GAAP basis, the company also delivered record earnings per diluted share
of $1.18, as compared with $0.93 per diluted share for 2011.
For the quarter ended December 31, 2012, the company delivered record GAAP net
revenues of $1.77 billion, as compared with $1.41 billion for the fourth
quarter of 2011. On a non-GAAP basis, the company’s net revenues were a record
$2.60 billion, as compared with $2.41 billion for the fourth quarter of 2011.
For the quarter ended December 31, 2012, Activision Blizzard’s GAAP earnings
per diluted share set a fourth quarter record of $0.31, as compared with
earnings per diluted share of $0.08 for the fourth quarter of 2011. On a
non-GAAP basis, the company’s earnings per diluted share were a record $0.78,
as compared with $0.62 for the fourth quarter of 2011.
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, “We are very
pleased to report that Activision Blizzard delivered the best performance in
its history. With better-than-expected net revenues, record operating margins
and record earnings, and over $1.3 billion in operating cash flow, we continue
to set the industry success bar. I would like to thank our incredibly talented
employees around the world for their passion, drive and creativity, which
continues to fuel our success.”
Kotick added, “As we look to 2013, we will continue to invest in our
established franchises, as well as several new properties. We expect these
investments to drive our growth over the long term and to enable us to deliver
superior returns to our shareholders in the years to come. In the short-term,
we expect to continue delivering strong profitability, but below our record
setting 2012 performance, due to a challenged global economy, the ongoing
console transition and a difficult year-over-year comparison because of
Blizzard’s record-shattering Diablo® III success in 2012.”
Selected Business Highlights:
* In North America and Europe combined Activision Publishing was the #1
console and handheld publisher for the calendar year with the #1 and #3
best-selling franchises—Call of Duty and Skylanders.^1
* Activision Blizzard reported record digital revenues for the calendar year
and was the #1 third-party interactive entertainment Western digital
publisher.^2
* For the calendar year, in aggregate across all platforms in the U.S. and
Europe, Activision Publishing’s Black Ops II was the #1 best-selling title
in dollars and Modern Warfare 3® was the #9 best-selling title in
dollars.^1
* In November 2012, Black Ops II became the first video game ever to cross
the $1 billion mark in 15-days, eclipsing “Avatar’s” 17-day movie
record.^4
* In both North America and Europe, Skylanders Giants™ was the #1
best-selling kids’ title in dollars for the fourth quarter.¹ Additionally,
for the calendar year, in North America and Europe combined, Skylanders
Giants was the #5 best-selling game in dollars, and Skylanders Spyro’s
Adventure® was the #4 best-selling game in dollars.^1
* As of December 31, 2012, the Skylanders franchise has generated,
life-to-date, more than $1 billion in worldwide sales,¹ and through
January 2013, Activision has sold more than 100 million Skylanders toys
worldwide.^2
* For the calendar year, Blizzard Entertainment had two top-10 PC games in
North America and Europe. Diablo III was the #1 best-selling PC game at
retail, breaking PC-game sales records with more than 12 million copies
sold worldwide through December 31, 2012, and World of Warcraft®: Mists
of Pandaria® was the #3 best-selling PC game at retail.^5
* As of December 31, 2012, Blizzard Entertainment’s World of Warcraft
remains the #1 subscription-based MMORPG, with more than 9.6 million
subscribers.^2
Company Outlook
On January 29, 2013, Activision Publishing released Revolution, the first
downloadable map pack for Black Ops II, on the Xbox 360 video game and
entertainment system from Microsoft. The company expects to release Revolution
on other platforms during the first quarter.
Additionally, on March 12, 2013, Blizzard Entertainment expects to release
StarCraft^® II: Heart of the Swarm™, the first expansion to Blizzard’s
award-winning real-time strategy game StarCraft II: Wings of Liberty^®.
The company is considering or may consider during 2013, substantial stock
repurchases, dividends, acquisitions, licensing or other non-ordinary course
transactions, and significant debt financings relating thereto. The company’s
first quarter and full year 2013 outlooks do not take into account any such
transactions or financings that may or may not occur during the year, with the
exception of the $0.19 cent per share cash dividend announced below.
(in millions, except EPS) GAAP Non-GAAP Outlook
Outlook
CY 2013
Net Revenues $ 4,085 $ 4,175
EPS $ 0.68 $ 0.80
Q1 2013
Net Revenues $ 1,160 $ 690
EPS $ 0.29 $ 0.10
Board Declares Cash Dividend
The Board of Directors declared a cash dividend of $0.19 per common share
payable 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. 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, 2012 and management’s outlook for 2013. 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 888-427-9414 in the U.S. with
passcode 3168482.
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 and Activision Blizzard internal
estimates, including toys and accessories
^2According to Activision Blizzard internal estimates
^3According to The NPD Group and Gfk Chart-Track
^4According to Chart-Track retail customer sell-through information, internal
company estimates and screenrant.com
^5According to The NPD Group, GfK Chart-Track and Activision Blizzard internal
estimates
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;
* expenses related to restructuring;
* the amortization of intangibles, and impairment of intangible assets and
goodwill; 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, the console transition, adoption rate and
availability of new hardware (including peripherals) and related software,
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. 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 December Year Ended December
31, 31,
2012 2011 2012 2011
Net revenues:
Product sales $ 1,413 $ 1,060 $ 3,620 $ 3,257
Subscription,
licensing and 355 347 1,236 1,498
other revenues^1
Total net 1,768 1,407 4,856 4,755
revenues
Costs and expenses:
Cost of sales - 483 483 1,116 1,134
product costs
Cost of sales -
online 60 65 263 255
subscriptions
Cost of sales -
software 87 85 194 218
royalties and
amortization
Cost of sales -
intellectual 52 96 89 165
property
licenses
Product 222 249 604 629
development
Sales and 232 281 578 545
marketing
General and 148 122 561 456
administrative
Restructuring - 1 - 25
Total costs and 1,284 1,382 3,405 3,427
expenses
Operating income 484 25 1,451 1,328
Investment and
other income 3 (5 ) 7 3
(expense), net
Income before 487 20 1,458 1,331
income tax expense
Income tax expense 133 (79 ) 309 246
Net income $ 354 $ 99 $ 1,149 $ 1,085
Basic earnings per $ 0.31 $ 0.09 $ 1.01 $ 0.93
common share
Weighted average
common shares 1,111 1,139 1,112 1,148
outstanding
Diluted earnings $ 0.31 $ 0.08 $ 1.01 $ 0.92
per common share^2
Weighted average
common shares 1,115 1,147 1,118 1,156
outstanding
assuming dilution
Subscription, licensing and other revenues represents revenues from World
^1 of Warcraft subscriptions, Call of Duty Elite memberships, licensing
royalties from our products and franchises, value-added services,
downloadable content, and other miscellaneous revenues.
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 24 million for the three months and year ended December 31,
2012, respectively, and we had, on a weighted-average basis,
participating securities of approximately 17 million for the three months
and year ended December 31, 2011. Net income attributable to Activision
^2 Blizzard Inc. common shareholders used to calculate earnings per common
share assuming dilution was $345 million and $1,125 million for the three
months and year ended December 31, 2012, as compared to the total net
income of $354 million and $1,149 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 $97 million and $1,069 million for the three months and year
ended December 31, 2011, as compared to total net income of $99 million
and $1,085 million for the same periods, respectively.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
December 31, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 3,959 $ 3,165
Short-term investments 416 360
Accounts receivable, net 707 649
Inventories, net 209 144
Software development 164 137
Intellectual property licenses 11 22
Deferred income taxes, net 487 507
Other current assets 321 396
Total current assets 6,274 5,380
Long-term investments 8 16
Software development 129 62
Intellectual property licenses 30 12
Property and equipment, net 141 163
Other assets 11 12
Intangible assets, net 68 88
Trademark and trade names 433 433
Goodwill 7,106 7,111
Total assets $ 14,200 $ 13,277
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 343 $ 390
Deferred revenues 1,657 1,472
Accrued expenses and other liabilities 652 694
Total current liabilities 2,652 2,556
Deferred income taxes, net 25 55
Other liabilities 206 174
Total liabilities 2,883 2,785
Shareholders’ equity:
Common stock --- ---
Additional paid-in capital 9,450 9,616
Retained earnings 1,893 948
Accumulated other comprehensive income (26 ) (72 )
(loss)
Total shareholders’ equity 11,317 10,492
Total liabilities and shareholders’ $ 14,200 $ 13,277
equity
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
Three Months Ended Year Ended December 31,
December 31,
2012 2011 2012 2011
Cash flows from
operating
activities:
Net income $ 354 $ 99 $ 1,149 $ 1,085
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Deferred income (30 ) (49 ) (10 ) 75
taxes
Impairment of
goodwill / --- 12 --- 12
intangible assets
Depreciation and 51 71 120 148
amortization
Loss on disposal of
property and 1 3 1 4
equipment
Amortization and
write-off of
capitalized
software 85 136 208 287
development costs
and intellectual
property licenses
(1)
Stock-based
compensation 43 42 126 103
expense (2)
Excess tax benefits
from stock options (1 ) (3 ) (5 ) (24 )
exercises
Changes in
operating assets
and liabilities:
Accounts (496 ) (503 ) (46 ) 13
receivable, net
Inventories, net 83 62 (62 ) (34 )
Software
development and (83 ) (73 ) (301 ) (254 )
intellectual
property licenses
Other assets (140 ) (237 ) 88 (67 )
Deferred revenues 792 1,020 153 (248 )
Accounts payable 87 148 (54 ) 31
Accrued expenses
and other 230 122 (22 ) (179 )
liabilities
Net cash provided
by operating 976 850 1,345 952
activities
Cash flows from
investing
activities:
Proceeds from
maturities of 139 137 444 740
available-for-sale
investments
Proceeds from
auction rate 10 10 10 10
securities ("ARS")
called at par
Payment of
contingent --- --- --- (3 )
consideration
Purchases of
available-for-sale (121 ) (92 ) (503 ) (417 )
investments
Capital (27 ) (25 ) (73 ) (72 )
expenditures
Decrease in 20 26 (2 ) 8
restricted cash
Net cash provided
by (used in) 21 56 (124 ) 266
investing
activities
Cash flows from
financing
activities:
Proceeds from
issuance of common 3 27 33 69
stock to employees
Tax payment related
to net share
settlements of (11 ) (12 ) (16 ) (15 )
restricted stock
awards
Repurchase of --- (168 ) (315 ) (692 )
common stock
Dividends paid --- --- (204 ) (194 )
Excess tax benefits
from stock option 1 3 5 24
exercises
Net cash used in
financing (7 ) (150 ) (497 ) (808 )
activities
Effect of foreign
exchange rate 60 (60 ) 70 (57 )
changes on cash and
cash equivalents
Net increase in
cash and cash 1,050 696 794 353
equivalents
Cash and cash
equivalents at 2,909 2,469 3,165 2,812
beginning of period
Cash and cash
equivalents at end $ 3,959 $ 3,165 $ 3,959 $ 3,165
of period
(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 Three Months Ended Year over
Year Year
December March June 30, September December % Increase March June September December % Increase
31, 31, 30, 31, 31, 30, 30, 31,
2010 2011 2011 2011 2011 (Decrease) 2012 2012 2012 2012 (Decrease)
Cash Flow Data
Operating $ 993 $ 134 $ (78 ) $ 46 $ 850 (14 )% $ 154 $ 93 $ 122 $ 976 15 %
Cash Flow
Capital 21 4 14 29 25 19 8 17 21 27 8
Expenditures
Non-GAAP
Free Cash 972 130 (92 ) 17 825 (15 ) 146 76 101 949 15
Flow^2
Operating
Cash Flow - 1,376 1,283 1,231 1,095 952 (31 ) 972 1,143 1,219 1,345 41
TTM^1
Capital
Expenditures 97 89 76 68 72 (26 ) 76 79 71 73 1
- TTM^1
Non-GAAP
Free Cash $ 1,279 $ 1,194 $ 1,155 $ 1,027 $ 880 (31 )% $ 896 $ 1,064 $ 1,148 $ 1,272 45 %
Flow - TTM^1
TTM represents trailing twelve months. Operating Cash Flow for the year
ended December 31, 2010, three months ended September 30, 2010, three
months ended June 30, 2010, and three months ended March 31, 2010 was
^1 $1,376 million, $182 million, $(26) million, and $227 million,
respectively. Capital expenditures for the year ended December 31, 2010,
three months ended September 30, 2010, three months ended June 30, 2010,
and three months ended March 31, 2010 was $97 million, $37 million, $27
million, and $12 million, respectively.
Non-GAAP free cash flow represents operating cash flow minus capital
^2 expenditures (which includes payment for acquisition of intangible
assets).
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 - - Software Intellectual Product Sales and General and Costs
December 31, 2012 Revenues Product Online Royalties Property Development Marketing Administrative and
Costs Subscriptions and Licenses Expenses
Amortization
GAAP $ 1,768 $ 483 $ 60 $ 87 $ 52 $ 222 $ 232 $ 148 $ 1,284
Measurement
Less: Net
effect from
deferral in
net revenues (a) 827 186 - 31 3 - - - 220
and related
cost of
sales
Less:
Stock-based (b) - - - (3 ) - (6 ) (2 ) (29 ) (40 )
compensation
Less:
Amortization
of (c) - - - - (23 ) - - - (23 )
intangible
assets
Non-GAAP Measurement $ 2,595 $ 669 $ 60 $ 115 $ 32 $ 216 $ 230 $ 119 $ 1,441
Three Months Ended Operating Net Basic Diluted
December 31, 2012 Income Income Earnings Earnings
per Share per Share
GAAP $ 484 $ 354 $ 0.31 $ 0.31
Measurement
Less: Net
effect from
deferral in
net revenues (a) 607 485 0.43 0.42
and related
cost of
sales
Less:
Stock-based (b) 40 38 0.03 0.03
compensation
Less:
Amortization
of (c) 23 14 0.01 0.01
intangible
assets
Non-GAAP Measurement $ 1,154 $ 891 $ 0.78 $ 0.78
Cost of Cost of
Cost of Cost of Sales Sales - Sales - Total
Year Ended December Net Sales - - Software Intellectual Product Sales and General and Costs
31, 2012 Revenues Product Online Royalties Property Development Marketing Administrative and
Costs Subscriptions and Licenses Expenses
Amortization
GAAP $ 4,856 $ 1,116 $ 263 $ 194 $ 89 $ 604 $ 578 $ 561 $ 3,405
Measurement
Less: Net
effect from
deferral in
net revenues (a) 131 - 1 36 3 - - - 40
and related
cost of
sales
Less:
Stock-based (b) - - - (9 ) - (20 ) (8 ) (89 ) (126 )
compensation
Less:
Amortization
of (c) - - - - (30 ) - - - (30 )
intangible
assets
Non-GAAP Measurement $ 4,987 $ 1,116 $ 264 $ 221 $ 62 $ 584 $ 570 $ 472 $ 3,289
Year Ended December Operating Net Basic Diluted
31, 2012 Income Income Earnings Earnings
per Share per Share
GAAP $ 1,451 $ 1,149 $ 1.01 $ 1.01
Measurement
Less: Net
effect from
deferral in
net revenues (a) 91 84 0.07 0.07
and related
cost of
sales
Less:
Stock-based (b) 126 98 0.09 0.09
compensation
Less:
Amortization
of (c) 30 19 0.02 0.02
intangible
assets
Non-GAAP Measurement $ 1,698 $ 1,350 $ 1.19 $ 1.18
(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 $870 million and $1,322 million for the
three months and year ended December 31, 2012 as compared to the total
non-GAAP net income of $891 million and $1,350 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 - - Software Intellectual Product Sales and General and Restructuring Costs
December 31, 2011 Revenues Product Online Royalties Property Development Marketing Administrative and
Costs Subscriptions and Licenses Expenses
Amortization
GAAP $ 1,407 $ 483 $ 65 $ 85 $ 96 $ 249 $ 281 $ 122 $ 1 $ 1,382
Measurement
Less: Net
effect from
deferral in (a) 1,001 209 - 37 (3 ) - - - - 243
net revenues
and related
cost of sales
Less:
Stock-based (b) - - - (3 ) - (25 ) (2 ) (13 ) - (43 )
compensation
Less: (c) - - - - - - - (1 ) (1 ) (2 )
Restructuring
Less:
Amortization (d) - (2 ) - - (48 ) - - - - (50 )
of intangible
assets
Less:
Impairment of (e) - - - - - - - (12 ) - (12 )
goodwill
Non-GAAP $ 2,408 $ 690 $ 65 $ 119 $ 45 $ 224 $ 279 $ 96 $ - $ 1,518
Measurement
Three Months Ended Operating Net Basic Diluted
December 31, 2011 Income Income Earnings Earnings
per Share per Share
GAAP $ 25 $ 99 $ 0.09 $ 0.08
Measurement
Less: Net
effect from
deferral in (a) 758 549 0.47 0.47
net revenues
and related
cost of sales
Less:
Stock-based (b) 43 33 0.03 0.03
compensation
Less: (c) 2 1 - -
Restructuring
Less:
Amortization (d) 50 31 0.03 0.03
of intangible
assets
Less:
Impairment of (e) 12 12 0.01 0.01
goodwill
Non-GAAP $ 890 $ 725 $ 0.63 $ 0.62
Measurement
Cost of Cost of
Cost of Cost of Sales Sales - Sales - Total
Year Ended December Net Sales - - Software Intellectual Product Sales and General and Restructuring Costs
31, 2011 Revenues Product Online Royalties Property Development Marketing Administrative and
Costs Subscriptions and Licenses Expenses
Amortization
GAAP $ 4,755 $ 1,134 $ 255 $ 218 $ 165 $ 629 $ 545 $ 456 $ 25 $ 3,427
Measurement
Less: Net
effect from
deferral in (a) (266 ) (11 ) - (48 ) (24 ) - - - - (83 )
net revenues
and related
cost of sales
Less:
Stock-based (b) - - - (10 ) - (40 ) (6 ) (47 ) - (103 )
compensation
Less: (c) - - - - - - - (1 ) (25 ) (26 )
Restructuring
Less:
Amortization (d) - (2 ) - (1 ) (69 ) - - - - (72 )
of intangible
assets
Less:
Impairment of (e) - - - - - - - (12 ) - (12 )
goodwill
Non-GAAP Measurement $ 4,489 $ 1,121 $ 255 $ 159 $ 72 $ 589 $ 539 $ 396 $ - $ 3,131
Year Ended December Operating Net Basic Diluted
31, 2011 Income Income Earnings Earnings
per Share per Share
GAAP $ 1,328 $ 1,085 $ 0.93 $ 0.92
Measurement
Less: Net
effect from
deferral in (a) (183 ) (151 ) (0.13 ) (0.13 )
net revenues
and related
cost of sales
Less:
Stock-based (b) 103 76 0.07 0.06
compensation
Less: (c) 26 19 0.02 0.02
Restructuring
Less:
Amortization (d) 72 46 0.04 0.04
of intangible
assets
Less:
Impairment of (e) 12 12 0.01 0.01
goodwill
Non-GAAP $ 1,358 $ 1,087 $ 0.93 $ 0.93
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 from purchase price
accounting.
(e) Reflects impairment of goodwill.
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 $715 million and $1,071 million for the
three months and year ended December 31, 2011 as compared to the total
non-GAAP net income of $725 million and $1,087 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 Months and Year Ended December 31, 2012 and 2011
(Amounts in millions)
Three Months Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net
Revenues by
Distribution
Channel
Retail $ 1,177 67 % $ 841 60 % $ 336 40 %
channel
Digital
online 451 25 363 26 88 24
channels^1
Total
Activision 1,628 92 1,204 86 424 35
and Blizzard
Distribution 140 8 203 14 (63 ) (31 )
Total
consolidated 1,768 100 1,407 100 361 26
GAAP net
revenues
Change in
Deferred Net
Revenues^2
Retail 900 1,055
channel
Digital
online (73 ) (54 )
channels^1
Total
changes in 827 1,001
deferred net
revenues
Non-GAAP Net
Revenues by
Distribution
Channel
Retail 2,077 80 1,896 79 181 10
channel
Digital
online 378 15 309 13 69 22
channels^1
Total
Activision 2,455 95 2,205 92 250 11
and Blizzard
Distribution 140 5 203 8 (63 ) (31 )
Total
non-GAAP net $ 2,595 100 % $ 2,408 100 % $ 187 8 %
revenues^3
Year Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net
Revenues by
Distribution
Channel
Retail $ 3,013 62 % $ 2,697 57 % $ 316 12 %
channel
Digital
online 1,537 32 1,640 34 (103 ) (6 )
channels^1
Total
Activision 4,550 94 4,337 91 213 5
and Blizzard
Distribution 306 6 418 9 (112 ) (27 )
Total
consolidated 4,856 100 4,755 100 101 2
GAAP net
revenues
Change in
Deferred Net
Revenues^2
Retail 69 (185 )
channel
Digital
online 62 (81 )
channels^1
Total
changes in 131 (266 )
deferred net
revenues
Non-GAAP Net
Revenues by
Distribution
Channel
Retail 3,082 62 2,512 56 570 23
channel
Digital
online 1,599 32 1,559 35 40 3
channels^1
Total
Activision 4,681 94 4,071 91 610 15
and Blizzard
Distribution 306 6 418 9 (112 ) (27 )
Total
non-GAAP net $ 4,987 100 % $ 4,489 100 % $ 498 11 %
revenues^3
Net revenues from digital online channel represent revenues from
^1 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 December 31, 2012 and 2011
(Amounts in millions)
Three Months Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net Revenues
by
Segment/Platform
Mix
Activision and
Blizzard:
Online $ 285 16 % $ 268 19 % $ 17 6 %
subscriptions^1
PC and Other^5 487 27 123 9 364 296
Sony
PlayStation 259 15 262 19 (3 ) (1 )
3
Microsoft 314 18 300 21 14 5
Xbox 360
Nintendo Wii 183 10 166 12 17 10
and Wii U
Total console^2 756 43 728 52 28 4
Sony PS Vita 18 1 3 --- 15 500
Nintendo 3DS 82 5 82 6 - -
and DS
Total handheld 100 6 85 6 15 18
Total
Activision and 1,628 92 1,204 86 424 35
Blizzard
Distribution:
Total 140 8 203 14 (63 ) (31 )
Distribution
Total
consolidated 1,768 100 1,407 100 361 26
GAAP net
revenues
Change in
Deferred Net
Revenues^3
Activision and
Blizzard:
Online (8 ) (18 )
subscriptions^1
PC and Other^5 (89 ) 54
Sony
PlayStation 441 453
3
Microsoft 467 483
Xbox 360
Nintendo Wii 16 24
and Wii U
Total console^2 924 960
Nintendo 3DS --- 5
and DS
Total changes
in deferred net 827 1,001
revenues
Non-GAAP Net
Revenues by
Segment/Platform
Mix
Activision and
Blizzard:
Online 277 11 250 10 27 11
subscriptions^1
PC and Other^5 398 15 177 7 221 125
Sony
PlayStation 700 27 715 30 (15 ) (2 )
3
Microsoft 781 30 783 32 (2 ) -
Xbox 360
Nintendo Wii 199 8 190 8 9 5
and Wii U
Total console^2 1,680 65 1,688 70 (8 ) -
Sony PS Vita 18 1 3 --- 15 500
Nintendo 3DS 82 3 87 4 (5 ) (6 )
and DS
Total handheld 100 4 90 4 10 11
Total
Activision and 2,455 95 2,205 91 250 11
Blizzard
Total 140 5 203 9 (63 ) (31 )
Distribution
Total non-GAAP $ 2,595 100 % $ 2,408 100 % $ 187 8 %
net revenues^4
Revenue from online subscriptions consists of revenue from all World of
^1 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.
Other includes standalone sales of toys and accessories products from
^5 Skylanders franchise, mobile sales and other physical merchandise and
accessories.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Year Ended December 31, 2012 and 2011
(Amounts in millions)
Year Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net Revenues
by
Segment/Platform
Mix
Activision and
Blizzard:
Online $ 986 20 % $ 1,357 29 % $ (371 ) (27 )%
subscriptions^1
PC and Other^5 1,214 25 374 8 840 225
Sony
PlayStation 876 18 948 20 (72 ) (8 )
3
Microsoft 1,019 21 1,140 24 (121 ) (11 )
Xbox 360
Nintendo Wii 291 6 351 7 (60 ) (17 )
and Wii U
Total console^2 2,186 45 2,439 51 (253 ) (10 )
Sony PS Vita 23 1 15 --- 8 53
Nintendo 3DS 141 3 152 3 (11 ) (7 )
and DS
Total handheld 164 4 167 3 (3 ) (2 )
Total
Activision and 4,550 94 4,337 91 213 5
Blizzard
Distribution:
Total 306 6 418 9 (112 ) (27 )
Distribution
Total
Activision and 4,856 100 4,755 100 101 2
Blizzard
Change in
Deferred Net
Revenues^3
Activision and
Blizzard:
Online 85 (202 )
subscriptions^1
PC and Other^5 36 (75 )
Sony
PlayStation 30 36
3
Microsoft (3 ) 43
Xbox 360
Nintendo Wii (12 ) (66 )
and Wii U
Total console^2 15 13
Nintendo 3DS (5 ) (2 )
and DS
Total changes
in deferred net 131 (266 )
revenues
Non-GAAP Net
Revenues by
Segment/Platform
Mix
Activision and
Blizzard:
Online 1,071 22 1,155 26 (84 ) (7 )
subscriptions^1
PC and Other^5 1,250 25 299 7 951 318
Sony
PlayStation 906 18 984 22 (78 ) (8 )
3
Microsoft 1,016 20 1,183 26 (167 ) (14 )
Xbox 360
Nintendo Wii 279 6 285 6 (6 ) (2 )
and Wii U
Total console^2 2,201 44 2,452 54 (251 ) (10 )
Sony PS Vita 23 --- 15 --- 8 53
Nintendo 3DS 136 3 150 4 (14 ) (9 )
and DS
Total handheld 159 3 165 4 (6 ) (4 )
Total
Activision and 4,681 94 4,071 91 610 15
Blizzard
Distribution:
Total 306 6 418 9 (112 ) (27 )
Distribution
Total non-GAAP $ 4,987 100 % $ 4,489 100 % $ 498 11 %
net revenues^4
Revenue from online subscriptions consists of revenue from all World of
^1 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.
Other includes standalone sales of toys and accessories products from
^5 Skylanders franchise, mobile sales and other physical merchandise and
accessories.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Three Months And Year Ended December 31, 2012 and 2011
(Amounts in millions)
Three Months Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net
Revenues by
Geographic
Region
North $ 869 49 % $ 718 51 % $ 151 21 %
America
Europe 748 42 605 43 143 24
Asia Pacific 151 9 84 6 67 80
Total
consolidated 1,768 100 1,407 100 361 26
GAAP net
revenues
Change in
Deferred Net
Revenues^1
North 538 548
America
Europe 271 395
Asia Pacific 18 58
Total
changes in 827 1,001
net revenues
Non-GAAP Net
Revenues by
Geographic
Region
North 1,407 54 1,266 53 141 11
America
Europe 1,019 39 1,000 41 19 2
Asia Pacific 169 7 142 6 27 19
Total
non-GAAP net $ 2,595 100 % $ 2,408 100 % $ 187 8 %
revenues^2
Year Ended
December 31, 2012 December 31, 2011 $ Increase % Increase
Amount % of Amount % of (Decrease) (Decrease)
Total Total
GAAP Net
Revenues by
Geographic
Region
North $ 2,436 50 % $ 2,405 50 % $ 31 1 %
America
Europe 1,968 41 1,990 42 (22 ) (1 )
Asia Pacific 452 9 360 8 92 26
Total
consolidated 4,856 100 4,755 100 101 2
GAAP net
revenues
Change in
Deferred Net
Revenues^1
North *Story
America too
large*
[TRUNCATED]
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