Activision Blizzard Announces Better-Than-Expected Third Quarter 2011 Net Revenues and Earnings Company Raises 2011 Net Revenues and EPS Outlook

- 2011 Nine-Month Net Revenues from Digital Channels Up Over 16% From Prior Year

- Company Generated Record 2011 Nine-Month EPS

- Company Expects Record 2011 GAAP EPS of $0.76 and Non-GAAP EPS of $0.85

- Online-Enabled Product Slate Expected to Drive Profitable Growth in 2012

SANTA MONICA, Calif., Nov. 8, 2011 /PRNewswire/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the third quarter of 2011.



Third Quarter


Nine Months


(in millions, except EPS)

2011


Prior

Outlook*


2010



2011



2010

GAAP
 Net Revenues

$

754


$

650


$

745


$

3,348


$

3,019

 EPS

$

0.13


$

0.05


$

0.04

$

0.84

$

0.52

Non-GAAP
 Net Revenues

$

627


$

530


$

857


$

2,080


$

2,254

 EPS

$

0.07


$

0.01


$

0.12

$

0.31

$

0.27


*Prior Outlook was provided by the company on August 3, 2011 in its earnings release





For the quarter ended September 30, 2011, the company delivered GAAP net revenues of $754 million, as compared with $745 million for the third quarter of 2010.  On a non-GAAP basis, the company's net revenues were $627 million, as compared with $857 million for the third quarter of 2010.  The company delivered record third-quarter GAAP net revenues from digital channels, accounting for more than 57% of the company's total net revenues.  On a non-GAAP basis, the company also delivered record third-quarter net revenues from digital channels, accounting for more than 62% of the quarter's total net revenues.  

For the quarter ended September 30, 2011, Activision Blizzard's GAAP earnings per diluted share were $0.13, as compared with $0.04 for the third quarter of 2010.  On a non-GAAP basis, the company's earnings per diluted share were $0.07, as compared with $0.12 for the third quarter of 2010.  

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

Robert Kotick, Chief Executive Officer, Activision Blizzard, said, "Today, we launched Call of Duty®: Modern Warfare 3™, which is perhaps the most anticipated video game in history and Call of Duty Elite, our new online service that makes playing together easier and more fun than ever before. Call of Duty Elite is a truly new form of entertainment combining Facebook-like social networking features and online television shows, offering the most accessible way to play Call of Duty games with other people."

Kotick continued, "We continue to strengthen our position as the worldwide leader in interactive entertainment and the broadening of our audiences is confirmation that games are becoming as important as film and television as a mass-market form of entertainment. Our record nine-month results were driven the by the continued strength of our online-enabled franchises. Based on our third-quarter performance, stronger than expected consumer response to our new entertainment property, Skylanders: Spyro's Adventures™, and Call of Duty: Modern Warfare 3, we are raising our full-year financial outlook and expect once again to deliver record operating margins and the highest earnings per share in our company's history."

Kotick continued, "One of Activision Blizzard's greatest skills is the creation and introduction of new intellectual properties. On October 16, we released Skylanders: Spyro's Adventures – a uniquely immersive entertainment experience that integrates the world of toys, video games and online play.  The game has received terrific reviews and sales so far are exceeding our expectations.  Millions of Skylander toys are already in kids' hands, and we expect the game will be a great holiday success."  

Kotick added, "As we focus on 2012, we have a strong product pipeline which features a minimum of two highly-anticipated new titles from Blizzard Entertainment, including Diablo® III, and a new Call of Duty game from Activision Publishing.  As a result, we expect to deliver another year of profitable growth. I believe our unyielding commitment to excellence and our creative talent around the globe will continue to position Activision Blizzard as the leader in interactive entertainment."

Selected Financial Highlights:

  • Q3 GAAP net revenues from digital channels were a record $427 million, accounting for 57% of total net revenues  
  • Q3 non-GAAP net revenues from digital channels were a record $386 million, accounting for 62% of total net revenues  
  • Year to date, GAAP net revenues from digital channels grew 25% to $1.28 billion, accounting for 38% of total net revenues
  • Year to date, non-GAAP net revenues from digital channels grew 16% to $1.25 billion, accounting for 60% of total net revenues
  • Year to date, the company has generated record operating margin and EPS
  • Trailing twelve-month operating cash flow exceeded $1 billion

Selected Business Highlights:

  • Activision Publishing's Call of Duty®: Black Ops has been the #1 best-selling title in dollars in aggregate across all platforms in the U.S. and Europe for each of the first three quarters of 2011. (1)
  • To date, Call of Duty: Black Ops players have logged more than 2.8 billion hours of online gameplay. (2)
  • Total unique online gamers playing Call of Duty: Black Ops were more than 29% greater than the total unique online gamers who played Call of Duty: Modern Warfare® 2 during the first eleven months after each game's release. (2)
  • For the third quarter, Blizzard Entertainment had two top-10 PC games in the U.S. and Europe with World of Warcraft®: Cataclysm™ and StarCraft® II: Wings of Liberty™.(1)
  • For the first nine months of the calendar year, StarCraft® II: Wings of Liberty™ was the #1 best-selling game sku in dollars on the PC in the U.S. and Europe. (1)
  • As of September 30, 2011, Activision Blizzard had purchased approximately 45 million shares of its common stock, for an aggregate price of approximately $502 million, under the $1.5 billion stock repurchase program authorized by its Board of Directors in February 2011.
  • On October 21, 2011, Blizzard Entertainment announced plans for the fourth World of Warcraft expansion, World of Warcraft: Mists of Pandaria™.

Company Outlook

On October 4, 2011, Activision Publishing released Spider-Man: Edge of Time and on October 16, 2011, Activision Publishing launched its innovative new entertainment property, Skylanders: Spyro's Adventure.  Additionally, on November 1, 2011, Activision Publishing shipped GoldenEye 007™: Reloaded Double 'O' Edition and two new console titles from its popular Cabela's franchise—Cabela's Survival: Shadows of Katmai and Cabela's Adventure Camp.  Today, Activision Publishing released its highly anticipated Call of Duty: Modern Warfare 3 and its innovative new digital platform, Call of Duty Elite, both of which we expect to set new standards for multiplayer gaming.

Based on third-quarter performance, stronger than expected consumer response to the new entertainment property, Skylanders: Spyro's Adventures, and an unprecedented level of pre-orders for Call of Duty: Modern Warfare 3, Activision Blizzard is raising its outlook for calendar year 2011 from the estimates it provided on August 3, 2011.




GAAP
Outlook


Prior*

GAAP
Outlook


Non-GAAP
Outlook


Prior*

Non-GAAP
Outlook

CY 2011
 Net Revenues

  (in billions)


$

4.33


$

4.18


$

4.25


$

4.05

 EPS


$

0.76


$

0.68


$

0.85


$

0.77

Q4 2011
 Net Revenues

  (in millions)


$

980


$

n/a


$

2,170


$

n/a

 EPS


$

(0.08)


$

n/a


$

0.55


$

n/a















*Prior outlook was provided by the company on August 3, 2011 in its earnings release.




Activision Blizzard's financial outlook is subject to significant risks and uncertainties, including declines in demand for its products, competition, fluctuations in foreign exchange and tax rates, and counterparty risks relating to customers, licensees, licensors and manufacturers.  The company's outlook is also based on assumptions about sell-through rates for its products, and the launch timing, success and pricing of its slate of new products.  Current macroeconomic conditions increase those risks and uncertainties.  As a result of these and other factors, actual results may deviate materially from the outlook presented above.

Conference Call

Today at 4:30 p.m. EST, Activision Blizzard's management will host a conference call and Webcast to discuss the company's results for the third quarter and management's outlook for the remainder of the year. The company welcomes all members of the financial and media communities and other interested parties to visit the "Investor Relations" area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-339-3504 in the U.S. with passcode 1472789.

About Activision Blizzard

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

Activision Blizzard maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China.  More information about Activision Blizzard and its products can be found on the company's website, www.activisionblizzard.com.

Non-GAAP Financial Measures:  In order to supplement our financial measures that are presented in accordance with GAAP, Activision Blizzard presents certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.  In addition, these non-GAAP measures have limitations in that they do not reflect all of the items associated with the company's results of operations as determined in accordance with GAAP.  

Activision Blizzard provides net revenues, net income (loss), earnings (loss) per share and operating margin data and guidance both including (in accordance with GAAP) and excluding (non-GAAP) certain items. The non-GAAP financial measures exclude the following items, as applicable in any given reporting period:

  • the change in deferred net revenue and related cost of sales with respect to certain of the company's online-enabled games;
  • expenses related to stock-based compensation;
  • expenses related to the restructuring of our Activision Publishing operations;
  • the amortization of intangibles and impairment of intangible assets; and
  • the income tax adjustments associated with any of the above items.

In the future, Activision Blizzard may also consider whether other significant non-recurring items should also be excluded in calculating the non-GAAP financial measures used by the company.  Management believes that the presentation of these non-GAAP financial measures provides investors with additional useful information to measure Activision Blizzard's financial and operating performance.  In particular, the measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of Activision Blizzard by excluding certain items that may not be indicative of the company's core business, operating results or future outlook.  Internally, management uses these non-GAAP financial measures in assessing the company's operating results, as well as in planning and forecasting.

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

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

In addition to the reasons stated above, which are generally applicable to each of the items Activision Blizzard excludes from its non-GAAP financial measures, there are additional specific reasons why the company believes it is appropriate to exclude the change in deferred net revenue and related cost of sales with respect to certain of the company's online-enabled games.

Since Activision Blizzard has determined that some of our games' online functionality represents an essential component of gameplay and, as a result, a more-than-inconsequential separate deliverable, we recognize revenue attributed to these game titles over their estimated service periods, which may range from five months to a maximum of less than a year. The related cost of sales is deferred and recognized as the related revenues are recognized. Internally, management excludes the impact of this change in deferred net revenue and related cost of sales in its non-GAAP financial measures when evaluating the company's operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team.

Management believes this is appropriate because doing so enables an analysis of performance based on the timing of actual transactions with our customers, which is consistent with the way the company is measured by investment analysts and industry data sources. In addition, excluding the change in deferred net revenue and the related cost of sales provides a much more timely indication of trends in our operating results.

Cautionary Note Regarding Forward-looking Statements:  Information in this press release that involves Activision Blizzard's expectations, plans, intentions or strategies regarding the future, including statements under the heading "Company Outlook," are forward-looking statements that are not facts and involve a number of risks and uncertainties.    Activision Blizzard generally uses words such as "outlook," "will,"  "could," "should," "would," "might," "to be," "plans," "believes," "may," "expects," "intends," "anticipates," "estimate," "future," "plan," "positioned," "potential," "project," "remain," "scheduled," "set to," "subject to," "upcoming" and similar expressions to identify forward-looking statements.  Factors that could cause Activision Blizzard's actual future results to differ materially from those expressed in the forward-looking statements set forth in this release include, but are not limited to, sales levels of Activision Blizzard's titles, increasing concentration of titles, shifts in consumer spending trends, the impact of the current macroeconomic environment and market conditions within the video game industry, Activision Blizzard's ability to predict consumer preferences, including interest in specific genres such as first-person action and massively multiplayer online games and preferences among competing hardware platforms, the seasonal and cyclical nature of the interactive game market, changing business models including digital delivery of content, competition, including from used games and other forms of entertainment, possible declines in software pricing, product returns and price protection, product delays, adoption rate and availability of new hardware (including peripherals) and related software, rapid changes in technology and industry standards, litigation risks and associated costs, protection of proprietary rights, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high quality "hit" titles, counterparty risks relating to customers, licensees, licensors and manufacturers, domestic and international economic, financial and political conditions and policies, foreign exchange rates and tax rates, and the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion, and the other  factors  identified in the risk factors section of Activision Blizzard's most recent annual report on Form 10-K.   The forward-looking statements in this release are based upon information available to Activision Blizzard as of the date of this release, and Activision Blizzard assumes no obligation to update any such forward-looking statements.  Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of the future performance of Activision Blizzard and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.

(1) According to The NPD Group, Charttrack and Gfk
(2) According to Microsoft, Sony and 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 September 30,

Nine Months Ended September 30,



2011 

2010 

2011 

2010 











Net revenues:










Product sales

$

369

$

397

$

2,197

$

2,025


Subscription, licensing and other
revenues


385


348


1,151


994


    Total net revenues


754


745


3,348


3,019











Costs and expenses:










Cost of sales - product costs


138


194


650


765


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


59


61


181


168


Cost of sales - software royalties and
amortization


24


61


133


211


Cost of sales - intellectual property
licenses


16


33


69


105


Product development


133


118


390


361


Sales and marketing


115


110


264


291


General and administrative


104


113


333


253


Restructuring


3


---


24


---


    Total costs and expenses


592


690


2,044


2,154

Operating income


162


55


1,304


865

Investment and other income, net


3


14


7


15

Income before income tax expense


165


69


1,311


880

Income tax expense


17


18


325


229

Net income

$

148

$

51

$

986

$

651





















Basic earnings per common share

$

0.13

$

0.04

$

0.84

$

0.53

Weighted average common shares
outstanding


1,140


1,212


1,151


1,230





















Diluted earnings per common share(1)

$

0.13

$

0.04

$

0.84

$

0.52

Weighted average common shares
outstanding assuming dilution


1,148


1,227


1,160


1,245











(1) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $146 million and $972 million for the three and nine months ended September 30, 2011 as compared to the total net income of $148 million and $986 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 $51 million and $645 million for the three and nine months ended September 30, 2010 as compared to total net income of $51 million and $651 million for the same periods, respectively.





ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions)





September 30,


December 31,





2011 


2010 

ASSETS






Current assets:







Cash and cash equivalents

$

2,469

$

2,812



Short-term investments


432


696



Accounts receivable, net


139


640



Inventories


207


112



Software development


150


147



Intellectual property licenses


42


45



Deferred income taxes, net


507


648



Other current assets


136


299



    Total current assets


4,082


5,399


Long-term investments


25


23


Software development


114


55


Intellectual property licenses


13


28


Property and equipment, net


167


169


Other assets


15


15


Intangible assets, net


138


160


Trademark and trade names


433


433


Goodwill


7,126


7,132



Total assets

$

12,113

$

13,414








LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:







Accounts payable

$

250

$

363



Deferred revenues


487


1,726



Accrued expenses and other liabilities


542


838



     Total current liabilities


1,279


2,927



Deferred income taxes, net


95


120



Other liabilities


168


164



Total liabilities


1,542


3,211









Shareholders' equity:







Common stock


---


---



Additional paid-in capital


9,751


12,353



Treasury stock


---


(2,194)



Retained earnings


849


57



Accumulated other comprehensive income (loss)


(29)


(13)



     Total shareholders' equity


10,571


10,203



         Total liabilities and shareholders' equity

$

12,113

$

13,414












ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except earnings per share data)
























Three months ended September 30, 2011


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales 
MMORPG

Cost of Sales -
Software Royalties
and Amortization

Cost of Sales -
Intellectual
Property Licenses

Product
Development

Sales and
Marketing

General and
Administrative

Restructuring

Total Costs and
Expenses

GAAP Measurement


$

754

$

138

$

59

$

24

$

16

$

133

$

115

$

104

$

3

$

592


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

(a)


(127)


(10)


-


(10)


(2)


-


-


-


-


(22)


Less:  Stock-based compensation

(b)


-


-


-


-


-


(5)


(2)


(11)


-


(18)


Less:  Restructuring

(c)


-


-


-


-


-


-


-


-


(3)


(3)


Less:  Amortization of intangible assets

(d)


-


-


-


-


(7)


-


-


-


-


(7)

Non-GAAP Measurement


$

627

$

128

$

59

$

14

$

7

$

128

$

113

$

93

$

-

$

542






































































Three months ended September 30, 2011


Operating
Income

Net Income

Basic Earnings
per Share

Diluted Earnings per Share













GAAP Measurement


$

162

$

148

$

0.13

$

0.13














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

(a)


(105)


(81)


(0.07)


(0.07)














Less:  Stock-based compensation

(b)


18


13


0.01


0.01














Less:  Restructuring

(c)


3


2


-


-














Less:  Amortization of intangible assets

(d)


7


5


-


-













Non-GAAP Measurement


$

85

$

87

$

0.07

$

0.07































































Nine months ended September 30, 2011


Net Revenues

Cost of Sales -
Product Costs

Cost of Sales -
MMORPG

Cost of Sales -
Software Royalties
and Amortization

Cost of Sales -
Intellectual
Property Licenses

Product
Development

Sales and
Marketing

General and
Administrative

Restructuring

Total Costs and Expenses

GAAP Measurement


$

3,348

$

650

$

181

$

133

$

69

$

390

$

264

$

333

$

24

$

2,044


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

(a)


(1,268)


(220)


-


(84)


(21)


-


-


-


-


(325)


Less:  Stock-based compensation

(b)


-


-


-


(8)


-


(15)


(4)


(34)


-


(61)


Less:  Restructuring

(c)


-


-


-


-


-


-


-


-


(24)


(24)


Less:  Amortization of intangible assets

(d)


-


-


-


(1)


(21)


-


-


-


-


(22)

Non-GAAP Measurement


$

2,080

$

430

$

181

$

40

$

27

$

375

$

260

$

299

$

-

$

1,612






































































Nine months ended September 30, 2011


Operating
Income

Net Income

Basic Earnings

per Share

Diluted Earnings
per Share













GAAP Measurement


$

1,304

$

986

$

0.84

$

0.84














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

(a)


(943)


(699)


(0.60)


(0.59)














Less:  Stock-based compensation

(b)


61


43


0.04


0.04














Less:  Restructuring

(c)


24


18


0.02


0.02














Less:  Amortization of intangible assets

(d)


22


14


0.01


0.01













Non-GAAP Measurement


$

468

$

362

$

0.31

$

0.31
































































(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.

























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 $85 million and $357 million for the three and nine months ended September 30, 2011 as compared to the 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

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES

(Amounts in millions, except earnings per share data)






















Three months ended September 30, 2010

Net Revenues

Cost of Sales -
Product Costs

Cost of Sales -
MMORPG

Cost of Sales -
Software Royalties
and Amortization

Cost of Sales - Intellectual
Property Licenses

Product
Development

Sales and
Marketing

General and
Administrative

Total Costs and
Expenses

GAAP Measurement


$

745

$

194

$

61

$

61

$

33

$

118

$

110

$

113

$

690


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

(a)


112


3


-


8


4


-


-


-


15


Less:  Stock-based compensation

(b)


-


-


-


(11)


-


(6)


(2)


(15)


(34)


Less:  Amortization of intangible assets

(d)


-


(1)


-


(5)


(12)


-


-


-


(18)

Non-GAAP Measurement


$

857

$

196

$

61

$

53

$

25

$

112

$

108

$

98

$

653
































































Three months ended September 30, 2010

Operating
Income

Net Income

Basic Earnings per Share

Diluted Earnings per Share











GAAP Measurement


$

55

$

51

$

0.04

$

0.04












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

(a)


97


81


0.07


0.07












Less:  Stock-based compensation

(b)


34


21


0.02


0.02












Less:  Amortization of intangible assets

(d)


18


(5)


-


-











Non-GAAP Measurement


$

204

$

148

$

0.12

$

0.12




































Nine months ended September 30, 2010

Net Revenues

Cost of Sales -
Product Costs

Cost of Sales -
MMORPG

Cost of Sales -
Software Royalties
and Amortization

Cost of Sales -
Intellectual
Property Licenses

Product
Development

Sales and
Marketing

General and
Administrative

Total Costs and
Expenses

GAAP Measurement


$

3,019

$

765

$

168

$

211

$

105

$

361

$

291

$

253

$

2,154


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

(a)


(765)


(198)


-


(16)


(12)


-


-


-


(226)


Less:  Stock-based compensation

(b)


-


-


-


(51)


-


(4)


(6)


(33)


(94)


Less:  Restructuring (included in general and administrative)

(c)


-


-


-


-


-


-


-


(3)


(3)


Less:  Amortization of intangible assets

(d)


-


(3)


-


(10)


(33)


-


-


(1)


(47)

Non-GAAP Measurement


$

2,254

$

564

$

168

$

134

$

60

$

357

$

285

$

216

$

1,784
































































Nine months ended September 30, 2010

Operating
Income

Net Income

Basic Earnings per Share

Diluted Earnings per Share











GAAP Measurement


$

865

$

651

$

0.53

$

0.52












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

(a)


(539)


(392)


(0.32)


(0.31)












Less:  Stock-based compensation

(b)


94


64


0.05


0.05












Less:  Restructuring (included in general and administrative)

(c)


3


2


-


-












Less:  Amortization of intangible assets

(d)


47


12


0.01


0.01











Non-GAAP Measurement


$

470

$

337

$

0.27

$

0.27





































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


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


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


(d) Reflects amortization of intangible assets from purchase price accounting.

























The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard common shareholders used to calculate


non-GAAP earnings per common share assuming dilution was $147 million and $334 million for the three and nine months ended September 30, 2010 as compared to total non-GAAP net income of $148 million and $337 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, 2011 and 2010

(Amounts in millions)
























Three Months Ended





September 30, 2011



September 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Distribution Channel           



















Retail channels

$

250


33

%


$

320


43

%


$

(70)


(22)

%


Digital online channels*


427


57




363


49




64


18



Total Activision and Blizzard


677


90




683


92




(6)


(1)























Distribution


77


10




62


8




15


24



Total consolidated GAAP net revenues  


754


100




745


100




9


1






















Change in Deferred Net Revenues(1) 



















Retail channels


(86)






112











Digital online channels*


(41)






---











Total changes in deferred net revenues


(127)






112






























Non-GAAP Net Revenues by Distribution Channel



















Retail channels


164


26




432


51




(268)


(62)



Digital online channels*


386


62




363


42




23


6



Total Activision and Blizzard


550


88




795


93




(245)


(31)























Distribution


77


12




62


7




15


24



Total non-GAAP net revenues(2) 

$

627


100

%


$

857


100

%


$

(230)


(27)

%












































Nine Months Ended





September 30, 2011



September 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Distribution Channel



















Retail channels

$

1,856


56

%


$

1,808


60

%


$

48


3

%


Digital online channels*


1,278


38




1,026


34




252


25



Total Activision and Blizzard


3,134


94




2,834


94




300


11























Distribution


214


6




185


6




29


16



Total consolidated GAAP net revenues  


3,348


100




3,019


100




329


11






















Change in Deferred Net Revenues(1) 



















Retail channels


(1,240)






(816)











Digital online channels*


(28)






51











Total changes in deferred net revenues


(1,268)






(765)






























Non-GAAP Net Revenues by Distribution Channel



















Retail channels


616


30




992


44




(376)


(38)



Digital online channels*


1,250


60




1,077


48




173


16



Total Activision and Blizzard


1,866


90




2,069


92




(203)


(10)























Distribution


214


10




185


8




29


16



Total non-GAAP net revenues(2) 

$

2,080


100

%


$

2,254


100

%


$

(174)


(8)

%






















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


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


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





ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Three Months Ended September 30, 2011 and 2010

(Amounts in millions)









Three Months Ended





September 30, 2011



September 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Segment/Platform Mix           


















Activision and Blizzard:



















Online subscriptions*

$

336


44

%


$

289


39

%


$

47


16

%


PC and Other


45


6




73


10




(28)


(38)




Sony PlayStation  3


96


13




109


15




(13)


(12)




Sony PlayStation  2


4


1




6


1




(2)


(33)




Microsoft Xbox 360


144


19




127


16




17


13




Nintendo Wii


33


4




56


8




(23)


(41)



Total console^


277


37




298


40




(21)


(7)




Sony PlayStation Portable


4


1




3


---




1


33




Nintendo Dual Screen


15


2




20


3




(5)


(25)



Total handheld


19


3




23


3




(4)


(17)



Total Activision and Blizzard


677


90




683


92




(6)


(1)






















Distribution:



















Total Distribution


77


10




62


8




15


24



Total consolidated GAAP net revenues


754


100




745


100




9


1






















Change in Deferred Net Revenues(1) 


















Activision and Blizzard:



















Online subscriptions*


(62)






(7)











PC and Other


(5)






141












Sony PlayStation  3


(18)






(5)












Microsoft Xbox 360


(36)






(26)












Nintendo Wii


(5)






9











Total console^


(59)






(22)












Nintendo Dual Screen


(1)






---











Total changes in deferred net revenues


(127)






112






























Non-GAAP Net Revenues by Segment/Platform Mix


















Activision and Blizzard:



















Online subscriptions*


274


44




282


33




(8)


(3)



PC and Other


40


6




214


25




(174)


(81)




Sony PlayStation  3


78


12




104


12




(26)


(25)




Sony PlayStation  2


4


1




6


1




(2)


(33)




Microsoft Xbox 360


108


17




101


12




7


7




Nintendo Wii


28


5




65


8




(37)


(57)



Total console^


218


35




276


33




(58)


(21)




Sony PlayStation Portable


4


1




3


---




1


33




Nintendo Dual Screen


14


2




20


2




(6)


(30)



Total handheld


18


3




23


2




(5)


(22)



Total Activision and Blizzard  


550


88




795


93




(245)


(31)






















Distribution:



















Total Distribution


77


12




62


7




15


24



Total non-GAAP net revenues(2) 

$

627


100

%


$

857


100

%


$

(230)


(27)

%






















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


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


* Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.


^ Downloadable content and its related revenues are included in each respective console platforms, hence, total console.





ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

FINANCIAL INFORMATION

For the Nine Months Ended September 30, 2011 and 2010

(Amounts in millions)
























Nine Months Ended






September 30, 2011




September 30, 2010



$ Increase


% Increase





Amount


% of Total



Amount


% of Total



(Decrease)


(Decrease)


GAAP Net Revenues by Segment/Platform Mix           


















Activision and Blizzard:



















Online subscriptions*

$

1,090


33

%


$

890


29

%


$

200


22

%


PC and Other


251


8




201


7




50


25




Sony PlayStation  3


676


20




595


20




81


14




Sony PlayStation  2


10


---




29


1




(19)


(66)




Microsoft Xbox 360


840


25




751


25




89


12




Nintendo Wii


185


6




267


9




(82)


(31)



Total console^


1,711


51




1,642


55




69


4




Sony PlayStation Portable


12


---




11


---




1


9




Nintendo Dual Screen


70


2




90


3




(20)


(22)



Total handheld


82


2




101


3




(19)


(19)



Total Activision and Blizzard


3,134


94




2,834


94




300


11






















Distribution:



















Total Distribution


214


6




185


6




29


16



Total consolidated GAAP net revenues


3,348


100




3,019


100




329


11






















Change in Deferred Net Revenues(1) 


















Activision and Blizzard:



















Online subscriptions*


(185)






(13)











PC and Other


(129)






81












Sony PlayStation  3


(417)






(317)












Microsoft Xbox 360


(440)






(425)












Nintendo Wii


(90)






(91)











Total console^


(947)






(833)












Nintendo Dual Screen


(7)






---











Total changes in deferred net revenues


(1,268)






(765)






























Non-GAAP Net Revenues by Segment Platform Mix


















Activision and Blizzard:



















Online subscriptions*


905


44




877


39




28


3



PC and Other


122


6




282


13




(160)


(57)




Sony PlayStation  3


259


12




278


12




(19)


(7)




Sony PlayStation  2


10


---




29


1




(19)


(66)




Microsoft Xbox 360


400