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Press release from PR Newswire

Activision Blizzard Announces Better-than-expected First Quarter 2012 Financial Results

Wednesday, May 09, 2012

Activision Blizzard Announces Better-than-expected First Quarter 2012 Financial Results16:05 EDT Wednesday, May 09, 2012- Skylanders Spyro's Adventure? was #1 Kids Video Game for First Quarter 2012 with 30+ Million Toys Sold Life to Date Through 3/31/12 - Call of Duty Elite Has 10+ Million Registered Users Including Two+ Million Annual Premium Members as of 4/30/12 - Blizzard Entertainment's World of Warcraft® Remains #1 Subscription-Based MMORPG with Approximately 10.2 Million Subscribers as of 3/31/12 - Blizzard Entertainment's Diablo® III Has Set A New All-Time Pre-Order Record for Blizzard Entertainment(1) - Company Expects to Deliver Record Q2 Non-GAAP Net Revenues - Company Increases CY 2012 Net Revenue and EPS OutlookSANTA MONICA, Caif., May 9, 2012 /PRNewswire/ -- Activision Blizzard, Inc. (Nasdaq: ATVI) today announced better-than-expected financial results for the first quarter of 2012.First Quarter  (in millions, except EPS)2012      PriorOutlook*2011GAAP  Net Revenues$1,172$965$1,449EPS$0.33$0.22$0.42Non-GAAP  Net Revenues$587$525$755 EPS$0.06$0.03$0.13*Prior Outlook was provided by the company on February 9, 2012 in its earnings release For the quarter ended March 31, 2012, Activision Blizzard's GAAP net revenues were $1.17 billion, as compared with $1.45 billion for the first quarter of 2011.   On a non-GAAP basis, the company's net revenues were $587 million, as compared with $755 million for the first quarter of 2011.  For the first quarter, GAAP net revenues from digital channels represented 27% of the company's total revenues.  On a non-GAAP basis, net revenues from digital channels were 51%.  For the quarter ended March 31, 2012, Activision Blizzard's GAAP earnings per diluted share were $0.33, as compared with $0.42 for the first quarter of 2011.  On a non-GAAP basis, the company's earnings per diluted share were $0.06, as compared with $0.13 for the first 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, "Our better-than-expected first-quarter performance was driven by global consumer demand for Activision Publishing's Call of Duty®: Modern Warfare® 3, and Skylanders Spyro's Adventures?, as well as Blizzard Entertainment's World of Warcraft® which remains the #1 subscription-based MMORPG in the world. Through March 31, players have logged more than 1.6 billion hours of online gameplay of Activision Publishing's Call of Duty: Modern Warfare 3,(4) and for the quarter in North America and Europe, including the accessory packs and figures, Skylanders Spyro's Adventures was the #3 best-selling game overall in dollars across all platforms.(2)  Based on our internal estimates, we believe that Skylander's toys sales in the first quarter exceeded those of Star Wars, the #1 action figure line.(3)  Additionally, Activision Publishing's Call of Duty Elite service continues to grow and currently has more than 10 million registered users including more than two million annual premium members, an increase of approximately 33% from January 31, 2012."(4) Kotick added, "On May 15 Blizzard Entertainment will release the highly anticipated Diablo® III and we are proud to report that pre-orders for the game worldwide have set a new record for Blizzard.(1)  For the remainder of 2012 and beyond, our product pipeline includes some of the most innovative games we have ever developed for our established franchises, including Blizzard Entertainment's World of Warcraft: Mists of Pandaria?, StarCraft® II: Heart of the Swarm? and all new MMORPG game, as well as Activision Publishing's Skylander's Giants?, Call of Duty: Black Ops 2 and a new universe from Bungie.  We also continue to expand our service platforms, Blizzard Entertainment's Battle.net® and Activision Publishing's Call of Duty Elite, grow our global footprint into new markets and strengthen our development resources for the future.  Our high-quality brands, industry leading operational capabilities and solid balance sheet should enable us to continue to take full advantage of the opportunities afforded by the expanding interactive entertainment market and deliver continued superior returns to our shareholders." Selected Business Highlights:As of March 31, 2012, the Call of Duty franchise had approximately 40 million monthly active users.(4) Players have logged more than 1.6 billion hours of online gameplay of Call of Duty: Modern Warfare 3  through March 31, 2012.(4) As of April 30, 2012, more than 10 million gamers have registered for Call of Duty Elite, including more than two million premium annual memberships the company has sold for the online service.(4)  In North America and Europe, including accessory packs and figures, Skylanders Spyro's Adventure was the #3 best-selling game overall in dollars across all platforms for the first quarter of 2012 and the #1 selling kids' title in dollars in the quarter.(2)   On April 5, 2012, Activision Publishing expanded the reach of the Skylanders franchise with the debut of Skylanders Cloud Patrol?, an entirely new gaming experience for iPhone, iPad and iPod touch users. For the first quarter, Activision Blizzard had two top-10 PC titles in North America and Europe with Activision Publishing's Call of Duty: Modern Warfare 3 and Blizzard Entertainment's  StarCraft II: Wings of Liberty®.(2) On March 20, 2012, Blizzard Entertainment announced that they renewed their license with NetEase for the distribution of World of Warcraft in mainland China.  The new license will continue for an additional three years following the expiration of the current license agreement. On March 21, 2012, Blizzard Entertainment launched the World of Warcraft: Mists of Pandaria beta test. During the first quarter, Activision Blizzard purchased an aggregate of 22 million shares of its common stock for an aggregate purchase price of approximately $261 million.    Activision Blizzard will pay a cash dividend of $0.18 per common share on May 16, 2012 to shareholders of record at the close of business on March 21, 2012.  This represents a 9% increase over the dividend that was paid in 2011.On March 5, 2012, Activision Blizzard, Inc. announced that Microsoft veteran Dennis Durkin has been named Chief Financial Officer of the company.   Durkin assumes the position from Thomas Tippl, who had been serving in the Chief Financial Officer position on an interim basis since his promotion to Chief Operating Officer in 2010.Company OutlookIn April 2012, Activision Publishing released Call of Duty: Modern Warfare 3 Content Collection #1, a compilation of content previously released to Call of Duty Elite premium members and on the Xbox 360® video game and entertainment system from Microsoft, for Sony's PlayStation 3 computer entertainment system.  The company also released PROTOTYPE 2 for the Xbox 360 video game and entertainment system from Microsoft, PlayStation®3 computer entertainment system and Windows PC.During the quarter, Activision Publishing also expects to release two additional games based on feature films, BATTLESHIP®, which is slated for release on May 15, 2012 and The Amazing Spider-Man?, which is slated for release on June 26, 2012.  Each game will be released for the Xbox 360® video game and entertainment system from Microsoft, Sony's PlayStation®3 computer entertainment system, Wii? system from Nintendo, the Nintendo 3DS? and Nintendo DS? hand-held system. Additionally, Blizzard Entertainment expects to release Diablo III, the next chapter in its critically acclaimed action role-playing game series, on May 15, 2012.Based on better-than-expected first quarter results, the company is raising its calendar year net revenue and earnings per share outlook.     (in millions, except EPS)GAAP OutlookPrior* GAAP OutlookNon-GAAPOutlookPrior* Non-GAAP OutlookCY 2012 Net Revenues $4,200$4,150$4,530$4,500EPS$0.65$0.63$0.95$0.94Q2 2012 Net Revenues $950n/a $805n/a EPS$0.13n/a $0.10n/a * Prior Outlook was provided by the company on February 9, 2012 in its earnings release Conference Call        Today at 4:30 p.m. EST, Activision Blizzard's management will host a conference call and Webcast to discuss the company's results for the quarter ended March 31, 2012 and management's outlook for the remainder of the calendar year. The company welcomes all members of the financial and media communities and other interested parties to visit the "Investor Relations" area of www.activisionblizzard.com to listen to the conference call via live Webcast or to listen to the call live by dialing into 888-352-6798 in the U.S. with passcode 3738470.About Activision BlizzardHeadquartered 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:  As a supplement to our financial measures presented in accordance with 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 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) Includes units pre-ordered as part of Blizzard Entertainment's World of Warcraft® Annual Pass promotion, as well as retail and digital pre-orders. (2) According to The NPD Group, Charttrack and Gfk (3) According to Activision Blizzard internal estimates and The NPD Group(4) Microsoft, Sony and Activision Blizzard internal estimates (Tables to Follow)ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(Amounts in millions, except per share data) Three Months Ended March 31,20122011Net revenues:Product sales$874$1,061Subscription, licensing and other revenues (1) 298388     Total net revenues1,1721,449Costs and expenses:Cost of sales - product costs257299Cost of sales - online subscriptions5963Cost of sales - software royalties and amortization3161Cost of sales - intellectual property licenses729Product development124142Sales and marketing7960General and administrative102102Restructuring-19     Total costs and expenses659775Operating income513674Investment and other income (expense), net12Income before income tax expense514676Income tax expense130173Net income$384$503Basic earnings per common share$0.34$0.42Weighted average common shares outstanding1,1201,173Diluted earnings per common share (2)$0.33$0.42Weighted average common shares outstanding assuming dilution1,1271,182(1) Subscription, licensing and other revenues represents revenues from World of Warcraft subscriptions, Call of Duty Elite memberships, licensing royalties from our products and franchises, value-added services, downloadable content, and other miscellaneous revenues.(2) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $377 million for the three months ended March 31, 2012 as compared to the total net income of $384 million for the same period. Net income attributable to Activision Blizzard Inc. common shareholders used to calculate earnings per common share assuming dilution was $496 million for the three months ended March 31, 2011 as compared to total net income of $503 million for the same period.  ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(Amounts in millions)March 31,December 31,20122011ASSETSCurrent assets:Cash and cash equivalents$3,049$3,165Short-term investments427360Accounts receivable, net 103649Inventories, net146144Software development148137Intellectual property licenses2222Deferred income taxes, net445507Other current assets226396     Total current assets4,5665,380Long-term investments1716Software development9162Intellectual property licenses1212Property and equipment, net154163Other assets1512Intangible assets, net8588Trademark and trade names433433Goodwill7,1097,111Total assets$12,482$13,277LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Accounts payable$181$390Deferred revenues9171,472Accrued expenses and other liabilities676694      Total current liabilities1,7742,556Deferred income taxes, net5755Other liabilities165174Total liabilities1,9962,785Shareholders' equity:Common stock------Additional paid-in capital9,3919,616Retained earnings1,128948Accumulated other comprehensive income (loss)(33)(72)      Total shareholders' equity10,48610,492          Total liabilities and shareholders' equity$12,482$13,277ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESRECONCILIATION OF GAAP NET INCOME TO NON-GAAP MEASURES(Amounts in millions, except earnings per share data)Three months ended March 31, 2012Net RevenuesCost of Sales - Product CostsCost of Sales - Online SubscriptionsCost of Sales - Software Royalties and AmortizationCost of Sales - Intellectual Property LicensesProduct DevelopmentSales and MarketingGeneral and AdministrativeTotal Costs and ExpensesGAAP Measurement$1,172$257$59$31$7$124$79$102$659Less:  Net effect from deferral in net revenues and related cost of sales (a)(585)(119)-(18)(1)---(138)Less:  Stock-based compensation(b)---(3)-(4)(2)(12)(21)Less:  Amortization of intangible assets(d)----(3)---(3)Non-GAAP Measurement$587$138$59$10$3$120$77$90$497Three months ended March 31, 2012Operating IncomeNet IncomeBasic Earnings per ShareDiluted Earnings per ShareGAAP Measurement$513$384$0.34$0.33Less:  Net effect from deferral in net revenues and related cost of sales (a)(447)(335)(0.29)(0.29)Less:  Stock-based compensation(b)21160.010.01Less:  Amortization of intangible assets(d)32--Non-GAAP Measurement$90$67$0.06$0.06 Three months ended March 31, 2011Net RevenuesCost of Sales - Product CostsCost of Sales- OnlineSubscriptions Cost of Sales - Software Royalties and Amortization Cost of Sales - Intellectual Property Licenses Product DevelopmentSales and MarketingGeneral and AdministrativeRestructuringTotal Costs and ExpensesGAAP Measurement$1,449$299$63$61$29$142$60$102$19$775Less:  Net effect from deferral in net revenues and related cost of sales (a)(694)(132)-(42)(14)----(188)Less:  Stock-based compensation(b)---(4)-(6)(1)(12)-(23)Less:  Restructuring (c)--------(19)(19)Less:  Amortization of intangible assets(d)----(8)----(8)Non-GAAP Measurement$755$167$63$15$7$136$59$90$-$537Three months ended March 31, 2011Operating IncomeNet IncomeBasic Earningsper ShareDiluted Earnings per ShareGAAP Measurement$674$503$0.42$0.42Less:  Net effect from deferral in net revenues and related cost of sales (a)(506)(381)(0.32)(0.32)Less:  Stock-based compensation(b)23150.010.01Less:  Restructuring (c)19140.010.01Less:  Amortization of intangible assets(d)85--Non-GAAP Measurement$218$156$0.13$0.13(a) Reflects the net change in deferred net revenues and related cost of sales.(b) Includes expense related to stock-based compensation.(c) Reflects restructuring related to our Activision Publishing operations.(d) Reflects amortization of intangible assets.The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Activision Blizzard Inc. common shareholders used tocalculate non-GAAP earnings per common share assuming dilution was $65 million for the three months ended March 31, 2012 as compared to total non-GAAP net income of $67 million for the same period.  Net income attributable to Activision Blizzard Inc. commonshareholders used to calculate non-GAAP earnings per common share assuming dilution was $154 million for the three months ended March 31, 2011 as compared to total non-GAAP net income of $156 million for the same period.The per share adjustments are presented as calculated, and the GAAP and non-GAAP earnings per share information is also presented as calculated.  The sum of these measures, as presented, may differ due to the impact of rounding.ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESFINANCIAL INFORMATIONFor the Three Months Ended March 31, 2012 and 2011(Amounts in millions)Three Months EndedMarch 31, 2012March 31, 2011$ Increase% IncreaseAmount% of TotalAmount% of Total(Decrease)(Decrease)GAAP Net Revenues by Distribution ChannelRetail channel$79367%$94665%$(153)(16)%Digital online channels(1) 314 2742830(114)(27)Total Activision and Blizzard1,107 941,37495(267)(19)Distribution65 6755(10)(13)Total consolidated GAAP net revenues 1,172 1001,449100(277)(19)Change in Deferred Net Revenues(2) Retail channel(569)(706)Digital online channels(1) (16)12Total changes in deferred net revenues(585)(694)Non-GAAP Net Revenues by Distribution ChannelRetail channel224 3824032(16)(7)Digital online channels(1) 298 5144058(142)(32)Total Activision and Blizzard522 8968090(158)(23)Distribution65 117510(10)(13)Total non-GAAP net revenues (3) $587100%$755100%$(168)(22)%(1) Net revenues from digital online channel represent revenues from subscriptions and memberships, licensing royalties, value-added services, downloadable content, digitally distributed products, and wireless devices.(2) We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.(3) Total non-GAAP net revenues presented also represents our total operating segment net revenues. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESFINANCIAL INFORMATIONFor the Three Months Ended March 31, 2012 and 2011(Amounts in millions)Three Months EndedMarch 31, 2012March 31, 2011$ Increase% IncreaseAmount% of TotalAmount% of Total(Decrease)(Decrease)GAAP Net Revenues by Segment/Platform MixActivision and Blizzard:Online subscriptions(1) $25622%$39527%$(139)(35)%PC and Other137 1112491310Sony PlayStation  3300 2634224(42)(12)Sony PlayStation  22 ---4---(2)(50)Microsoft Xbox 360335 2939627(61)(15)Nintendo Wii51 4826(31)(38)Total console(2) 688 5982457(136)(17)Sony PlayStation Portable3 ---5---(2)(40)Nintendo 3DS9 14---5125Nintendo Dual Screen14 1222(8)(36)Total handheld26 2312(5)(16)Total Activision and Blizzard1,107 941,37495(267)(19)Distribution:Total Distribution65 6755(10)(13)Total consolidated GAAP net revenues1,172 1001,449100(277)(19)Change in Deferred Net Revenues(3) Activision and Blizzard:Online subscriptions(1) (6)(56)PC and Other(23)(87)Sony PlayStation  3(263)(244)Microsoft Xbox 360(277)(259)Nintendo Wii(14)(46)Total console(2) (554)(549)Nintendo Dual Screen(2)(2)Total changes in deferred net revenues(585)(694)Non-GAAP Net Revenues by Segment/Platform MixActivision and Blizzard:Online subscriptions(1) 250 4333945(89)(26)PC and Other114 1937477208Sony PlayStation  337 69813(61)(62)Sony PlayStation  22 ---41(2)(50)Microsoft Xbox 36058 1113718(79)(58)Nintendo Wii37 636413Total console(2) 134 2327536(141)(51)Sony PlayStation Portable3 ---51(2)(40)Nintendo 3DS9 2415125Nintendo Dual Screen12 2203(8)(40)Total handheld24 4295(5)(17)Total Activision and Blizzard 522 8968090(158)(23)Distribution:Total Distribution65 117510(10)(13)Total non-GAAP net revenues(4) $587100%$755100%$(168)(22)%(1) Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.  It also includes revenues from Call of Duty Elite memberships.(2) Downloadable content and their related revenues are included in each respective console platforms and total console.(3) We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.(4) Total non-GAAP net revenues presented also represents our total operating segment net revenues. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESFINANCIAL INFORMATIONFor the Three Months Ended March 31, 2012 and 2011(Amounts in millions)Three Months EndedMarch 31, 2012March 31, 2011$ Increase% IncreaseAmount% of TotalAmount% of Total(Decrease)(Decrease)GAAP Net Revenues by Geographic RegionNorth America$60151%$74852%$(147)(20)%Europe485 4159441(109)(18)Asia Pacific86 81077(21)(20)Total consolidated GAAP net revenues 1,172 1001,449100(277)(19)Change in Deferred Net Revenues(1) North America(331)(383)Europe(225)(271)Asia Pacific(29)(40)Total changes in net revenues(585)(694)Non-GAAP Net Revenues by Geographic RegionNorth America270 4636548(95)(26)Europe260 4432343(63)(20)Asia Pacific57 10679(10)(15)Total non-GAAP net revenues(2) $587100%$755100%$(168)(22)%(1) We provide net revenues including (in accordance with GAAP) and excluding (non-GAAP) the impact of changes in deferred net revenues.(2) Total non-GAAP net revenues presented also represents our total operating segment net revenues. ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESSEGMENT INFORMATIONFor the Three Months Ended March 31, 2012 and 2011(Amounts in millions)Three Months EndedMarch 31, 2012March 31, 2011$ Increase% IncreaseAmount% of TotalAmount% of Total(Decrease)(Decrease)Segment net revenues:Activision(1) $27123%$32322%$(52)(16)%Blizzard(2) 2512135725(106)(30)Distribution(3) 656755(10)(13)Operating segment total5875075552(168)(22)Reconciliation to consolidated net revenues:Net effect from deferral of net revenues585 5069448Consolidated net revenues$1,172100%$1,449100%$(277)(19)%Segment income from operations:Activision(1) $---$48$(48)(100)%Blizzard(2) 89 170(81)(48)Distribution(3) 1 ---1NMOperating segment total90 218(128)(59)Reconciliation to consolidated operating income and consolidated income before income tax expense:Net effect from deferral of net revenues and related cost of sales447506Stock-based compensation expense(21)(23)Restructuring ---(19)Amortization of intangible assets(3)(8)Consolidated operating income513 674(161)(24)Investment and other income (expense), net1 2Consolidated income before income tax expense$514$676$(162)(24)%Operating margin from total operating segments15%29%(1) Activision Publishing ("Activision") ? publishes interactive entertainment products and contents.(2) Blizzard ? Blizzard Entertainment, Inc. and its subsidiaries ("Blizzard") publishes PC games and online subscription-based games in the MMORPG category.(3) Activision Blizzard Distribution ("Distribution") ? distributes interactive entertainment software and hardware products.   ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES OUTLOOKFor the Quarter Ending June 30, 2012 and Year Ending December 31, 2012GAAP to Non-GAAP Reconciliation(Amounts in millions, except per share data)Outlook forOutlook forThree Months EndingYear EndingJune 30, 2012December 31, 2012Net Revenues (GAAP)$950$4,200Excluding the impact of:Change in deferred net revenues (a)(145)330Non-GAAP Net Revenues $805$4,530Earnings Per Diluted Share (GAAP)$0.13$0.65Excluding the impact of:Net effect from deferral in net revenues and related cost of sales (b)(0.06)0.19Stock-based compensation(c)0.020.08Amortization of intangible assets(d)-0.03Non-GAAP Earnings Per Diluted Share $0.10$0.95(a) Reflects the net change in deferred net revenues.(b) Reflects the net change in deferred net revenues and related cost of sales.(c) Reflects expense related to stock-based compensation.(d) Reflects amortization of intangible assets.The per share adjustments are presented as calculated, and the GAAP and non-GAAP earnings (loss) per share informationis also presented as calculated. The sum of these measures, as presented, may differ due to the impact of rounding.SOURCE Activision Blizzard, Inc.For further information: Kristin Southey, SVP, Investor Relations, +1-310-255-2635, ksouthey@activision.com, or Maryanne Lataif, SVP, Corporate Communications, +1-310-255-2704, mlataif@activision.com