Activision Reports First Quarter Fiscal 2007 Results
Company Delivers Better-Than-Expected Q1 Results
SANTA MONICA, Calif., Aug 03, 2006: Activision, Inc. (Nasdaq: ATVI) today announced results for the first fiscal quarter ended June 30, 2006.
Net revenues were $188 million, as compared to $241 million reported for the first quarter last fiscal year. For the first quarter, the company reported a net loss of $18 million, or a loss per share of $0.06 including equity-based compensation, as compared to the company's previous outlook of a loss per share of $0.11. Excluding the impact of equity-based compensation, the company had a loss per share of $0.05, as compared to the company's previous outlook of a loss per share of $0.10. For the previous year's first quarter, the company reported a net loss of $3.6 million, or a loss per share of $0.01. A reconciliation of the company's non-GAAP financial measures to the most comparable GAAP financial measures appears at the end of this press release.
Robert Kotick, Chairman and CEO of Activision, Inc. commented, "Activision delivered better-than-expected results for the first quarter and our balance sheet remains one of the strongest in the industry. We are excited about our strong launch lineup for the PlayStation 3 and Nintendo Wii, as well as our solid slate for the Xbox 360. While there is still uncertainty with respect to the opportunities next-generation consoles will provide this fiscal year, we remain confident about the long-term industry prospects and our ability to realize superior returns for our shareholders."
Business Highlights
Activision's results for the quarter were driven by the release of Over the Hedge for the PlayStation ® 2 computer entertainment system, Xbox ® video game system, Nintendo ® GameCube TM , PC, Nintendo Game Boy ® Advance TM and Nintendo DS and X-Men: The Official Game for the Xbox 360 TM video game and entertainment system from Microsoft, PlayStation 2 computer entertainment system, Xbox video game system, Nintendo GameCube, PC, Nintendo Game Boy Advance and Nintendo DS.
According to The NPD Group, Call of Duty ® 2 remains the #1 Xbox 360 game to date. In April, Activision was awarded the rights to the James Bond license through 2014. Since the initial release of Dr. No in 1962, James Bond films have grossed more than $3.6 billion theatrically worldwide, and approximately 30 million units of video games based on the world of James Bond have been sold to date. Bond is one of the most successful franchises in film history and continues to have popular global appeal. In May, the company announced an exclusive multi-year agreement with Mattel, Inc. to distribute video games based on the Barbie ® brand. The video games are expected to be available at retail stores worldwide this fall. In June, Activision acquired video game publisher RedOctane, Inc., the publisher of the popular Guitar Hero TM franchise. The acquisition provides Activision with an early leadership position in music-based gaming, which the company expects will be one of the fastest growing genres in the coming years. Guitar Hero ranked as the #4 best-selling title overall for the month of June and has remained a top-10 selling title for calendar 2006, according to The NPD Group. In June, Activision opened a publishing office in Seoul, Korea, one of the fastest growing gaming markets in Asia, through the acquisition of CSR Entertainment's software distribution operations. The new office will enable Activision to fully leverage its product portfolio in the territory, particularly the upcoming online multiplayer action game Enemy Territory: Quake Wars, the prequel to id Software's legendary QUAKE II ® .Company Outlook
For the second quarter of fiscal 2007, Activision expects net revenues of $130 million and a loss per share of $0.13, which excludes equity-based compensation of $0.01 per share.
For fiscal 2007, Activision is raising its net revenues outlook to $1.075 billion. The company expects earnings per diluted share of $0.15, which excludes equity-based compensation of $0.05.
Activision also reaffirmed its fiscal year 2008 outlook. The company expects net revenues to exceed $1.6 billion.
Non-GAAP Financial Measures
To supplement Activision's consolidated financial statements presented in accordance with GAAP, the company provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data which is defined as net income (loss) excluding expenses related to stock options, employee stock purchase plan, and restricted stock under Statement of Financial Accounting Standards No. 123 (revised 2004), "Share Based Payment" and the associated tax benefit.
Management believes that the presentation of these non-GAAP financial measures provide investors with additional useful information to measure the company's financial performance. These non-GAAP financial measures are not determined in accordance with generally accepted accounting principles (GAAP) and should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. The limitations of non-GAAP net income (loss) are that, it does not include certain costs, and the term non-GAAP net income (loss) does not have a standardized meaning. Therefore, other companies may use the same or similarly named measure but exclude different items, which may not provide investors a comparable view of the company's performance in relation to other companies in the same industry.
Management compensates for this limitation by presenting the most comparable GAAP measure, net income, directly ahead of non-GAAP net income (loss) in this earnings release and by providing a reconciliation that shows and describes the adjustments made. Management does not believe these limitations are material, particularly when such measure is disclosed with its most comparable GAAP financial measure, net income (loss). A reconciliation of GAAP net income (loss) to non-GAAP net income (loss) is provided in the accompanying tables.
Conference Call
Today at 4:30 p.m. EDT, Activision's management will host a conference call and Webcast to discuss its first quarter fiscal results and outlook. The company welcomes all members of the financial and media communities to visit the "Investor Relations" area of www.activision.com to listen to the conference call via a live Webcast or to listen to the call live by dialing into (719) 457-2679 in the U.S.
About Activision
Headquartered in Santa Monica, California, Activision, Inc. is a leading worldwide developer, publisher and distributor of interactive entertainment and leisure products. Founded in 1979, Activision posted net revenues of $1.47 billion for the fiscal year ended March 31, 2006.
Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Italy, Spain, Japan, Australia, Scandinavia, the Netherlands and South Korea. More information about Activision and its products can be found on the company's World Wide Web site, which is located at www.activision.com.
Note: The statements made in this press release that are not historical facts are "forward-looking" statements. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties. The company cautions readers of this press release that a number of important factors could cause Activision's actual future results to differ materially from those expressed in any such forward-looking statements. Such factors include, without limitation, sales of the company's titles during the remainder of fiscal 2007, consumer spending trends, the seasonal and cyclical nature of the interactive game market, the company's ability to predict consumer preferences among competing hardware platforms including next-generation hardware, software pricing, product returns and price protection, product delays, retail acceptance of our products, delays in hardware launches, industry competition, rapid changes in technology and industry standards, protection of proprietary rights, litigation and an informal SEC inquiry, maintenance of relationships with key personnel, vendors and third-party developers, international economic and political conditions, integration of recently acquired subsidiaries and identification of suitable future acquisition opportunities. These important factors and other factors that potentially could affect the company's financial results are described in our filings with the Securities and Exchange Commission, including the company's most recent Annual Report on Form 10-K. Readers of this press release are referred to such filings. The company may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in the company's assumptions or otherwise. The company undertakes no obligation to release publicly any revisions to its forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.