Activision Blizzard, Inc. (Nasdaq: ATVID) today announced that Activision’s
stand-alone preliminary financial results for the first quarter of
fiscal year 2009, which ended on June 30, 2008, prior to the closing of
the transaction with Vivendi, on July 9, 2008, were higher than
Activision’s previously provided first quarter
outlook.
For the fiscal first quarter, Activision expects record net revenues of
approximately $650 million and earnings per diluted share between $0.16
and $0.18, an increase from Activision’s prior
outlook of $500 million in net revenues and earnings per diluted share
of $0.04 on a stand-alone basis.
Excluding the expected impact of expenses related to equity-based
compensation of $0.02 per diluted share and expected one-time costs of
$0.03 per diluted share related to the business combination between
Activision and Vivendi Games, Activision’s
stand-alone non-GAAP earnings per diluted share are expected to be
between $0.21 and $0.23 per diluted share, as compared to Activision’s
prior non-GAAP outlook of $0.13 per diluted share which had excluded
$0.02 per share for expenses related to equity-based compensation and
$0.07 per share for one-time costs related to the business combination
between Activision and Vivendi Games.
Activision’s performance was driven by the
North American launch of Kung Fu Panda early in the
quarter, which was the largest launch of a DreamWorks Animation licensed
property by Activision. Late in the quarter, Activision had two record
setting North American launches from the Guitar Hero franchise - Guitar
Hero: On Tour, which was the largest North American launch for
the Nintendo DS™ in Activision’s
history and Guitar Hero: Aerosmith, which ranked as one of
Activision’s top-five North American
multiplatform launches.
“Activision’s
first quarter stand-alone net revenues and earnings were the highest
ever for a non-holiday quarter,” stated
Robert Kotick, President and CEO of Activision Blizzard, Inc. “Our
significant overperformance in Q1 would have further added to our
previously given stand-alone fiscal 2009 net revenues and earnings
outlook, making it by far the largest and most profitable year in
Activision’s history. As we have recently
closed our transaction with Vivendi Games, we will be providing an
outlook for Activision Blizzard as a combined company moving forward.”
Kotick continued, “We are extremely excited
about the additional possibilities created by the completion of our
combination with Vivendi Games last week and remain very optimistic
about the long-term opportunities. Both Activision and Blizzard
Entertainment’s businesses have maintained
their momentum and Activision Blizzard is well positioned to exceed the
financial goals set for the combined company.”
Non-GAAP Financial Measures
Activision Blizzard provides net income (loss) and earnings (loss) per
share data and guidance both including (in accordance with GAAP) and
excluding (non-GAAP) the impact of expenses related to employee stock
options, employee stock purchase plans, restricted stock rights and
other equity-based compensation; one-time costs related to the business
combination between Activision and Vivendi Games; and the associated tax
benefits. In the future Activision Blizzard's non-GAAP results will also
exclude the impact of the change in deferred net revenues and costs of
sales; the impact of purchase price accounting related adjustments
including the amortization of intangibles; as well as any one-time
restructuring costs and results related to the discontinuation of
operations should there be any.
As online functionality becomes a more important component of gameplay,
in fiscal 2009, the company expects that certain online-enabled games,
to be released in fiscal 2009, will contain a more-than-inconsequential
separate service deliverable in addition to the product, and its
performance obligations for these games will extend beyond the sale of
the games. Vendor-specific objective evidence of fair value will not
exist for the online services, as the company does not plan to
separately charge for this component of online-enabled games.
As a result, for certain key titles to be released in the December
quarter of calendar year 2008 and thereafter, the company will recognize
all of the revenues from the sale of certain online-enabled games for
certain platforms ratably over an estimated service period, which it
currently estimates to be six months beginning the month after shipment.
In addition, it will defer the costs of sales of those titles. As a
consequence, the company's non-GAAP results will exclude the impact of
the change in deferred revenue and costs of sales related to certain
online-enabled games for certain of the Microsoft, Sony, Nintendo and PC
platforms in order to provide comparable year-over-year performance.
Additionally, in order to provide comparable year-over-year performance,
as of June 30, 2008, Activision Blizzard has excluded from its non-GAAP
operating results the impact of one-time costs related to the business
combination between Activision and Vivendi Games.
Non-GAAP net revenues, non-GAAP net income (loss), non-GAAP earnings
(loss) per share, and non-GAAP operating margin, excluding (for the
quarterly period ended June 30, 2008) expenses related to equity-based
compensation and one-time costs related to the business combination
between Activision and Vivendi Games, (and, for future periods,
excluding also the impact of changes in deferred net revenues and cost
of sales; the impact of purchase price accounting related adjustments
including the amortization of intangibles; and any one-time
restructuring costs and results related to the discontinuation of
operations) are not determined in accordance with GAAP, and the
exclusion of those items has the effect of increasing non-GAAP net
revenues, non-GAAP net income, non-GAAP earnings per share and non-GAAP
operating margin (and reducing non-GAAP net loss and non-GAAP loss per
share) by the same amounts as compared with GAAP net revenues, GAAP net
income (loss), GAAP earnings (loss) per share and GAAP operating margin
for the period. Activision Blizzard recognizes that there are
limitations associated with the use of these non-GAAP financial measures
as they do not reflect net revenues, net income (loss), earnings (loss)
per share and operating margin as determined in accordance with GAAP,
and may reduce comparability with other companies that calculate similar
non-GAAP measures differently.
Management compensates for the limitations resulting from the exclusion
of these items by considering the impact of these 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, net revenues, net income (loss), earnings (loss) per share and
operating margin directly ahead of non-GAAP net revenues, non-GAAP net
income (loss), non-GAAP earnings (loss) per share, and non-GAAP
operating margin, and by providing a reconciliation which indicates and
describes the adjustments made.
Management believes that the presentation of these non-GAAP financial
measures provides investors with additional useful information to
measure Activision Blizzard's financial and operating performance
because they allow for a better comparison of results between periods.
Management further believes that reflecting the use of non-GAAP measures
that eliminate the impact of deferred revenues and costs of sales in its
operating results is important to facilitate comparisons to prior
periods during which the application of its accounting policies did not
result in deferral of significant amounts of revenues and costs of sales
related to online-enabled games. Internally, management uses these
non-GAAP financial measures in assessing the company's operating
results, as well as in planning and forecasting.
These non-GAAP financial measures should be considered in addition to,
not as a substitute for or superior to, financial measures determined in
accordance with GAAP.
These non-GAAP financial measures are not based on a comprehensive set
of accounting rules or principles, and the terms non-GAAP net revenues,
net income (loss), non-GAAP earnings (loss) per share, 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.
About Activision Blizzard
Activision entered into a Business Combination Agreement, dated as of
December 1, 2007 with Vivendi S.A., among other things, to combine
Vivendi Games and Activision. On July 9, 2008, Activision completed the
transactions contemplated by this Business Combination Agreement. Upon
the closing of the transactions, Activision was renamed Activision
Blizzard, Inc.
Headquartered in Santa Monica, California, Activision Blizzard, Inc. is
a worldwide pure-play online and console game publisher with leading
market positions across all 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, Norway,
Denmark, the Netherlands, Romania, Australia, Chile, India, Japan,
China, the region of Taiwan and South Korea. More information about
Activision Blizzard and its products can be found on the company's
website, www.activisionblizzard.com.
Cautionary Note Regarding Forward-looking
Statements: Information in this press release that involves
Activision Blizzard’s expectations, plans,
intentions or strategies regarding the future 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,” “remains,”
“to be,” “plans,”
“believes,” “may,”
“expects,” “intends,”
and similar expressions. 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 of Activision Blizzard’s
titles in its fiscal year 2009, shifts in consumer spending trends, the
seasonal and cyclical nature of the interactive game market, Activision
Blizzard’s ability to predict consumer
preferences among competing hardware platforms (including
next-generation hardware), declines in software pricing, product returns
and price protection, product delays, retail acceptance of Activision
Blizzard’s products, adoption rate and
availability of new hardware and related software, industry competition,
rapid changes in technology and industry standards, protection of
proprietary rights, litigation against Activision Blizzard, maintenance
of relationships with key personnel, customers, vendors and third-party
developers, domestic and international economic, financial and political
conditions and policies, foreign exchange rates, integration of recent
acquisitions and the identification of suitable future acquisition
opportunities, Activision Blizzard’s success
in integrating the operations of Activision and Vivendi Games in a
timely manner, or at all, and the combined company’s
ability to realize the anticipated benefits and synergies of the
transaction to the extent, or in the timeframe, anticipated. Other such
factors include the further implementation, acceptance and effectiveness
of the remedial measures recommended or adopted by the special
sub-committee of independent directors established in July 2006 to
review Activision’s historical stock option
granting practices, the finalization of the tentative settlement of the
SEC's formal investigation and final court approval of the proposed
settlement of the derivative litigation filed in July 2006 against
certain current and former directors and officers of Activision Blizzard
relating to Activision Blizzard's stock option granting practices, and
the possibility that additional claims and proceedings will be
commenced, including additional action by the SEC and/or other
regulatory agencies, and other litigation unrelated to stock option
granting practices and any additional risk factors identified in
Activision Blizzard’s most recent annual
report on Form 10-K and quarterly reports on Form 10-Q and the
definitive proxy statement filed on June 6, 2008 in connection with the
Vivendi transaction. 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. Forward-looking statements believed
to be true when made 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.
