- Net Revenues Hit Q2 All Time High, Increasing 164% Year Over Year -
- Q2 Diluted E.P.S. Grew to $0.17 From a Loss Per Share of $0.08 Last Year -
- Net Revenues for Six Month Period Rise 89% -
- Company Increases FY 2005 Outlook -
SANTA MONICA, Calif., Oct. 26 /PRNewswire-FirstCall/ -- Activision, Inc.
(Nasdaq: ATVI) today announced financial results for the second fiscal quarter
ended September 30, 2004.
Net revenues were $310.6 million, an increase of $193.1 million or 164%,
as compared to net revenues of $117.5 million reported for the second quarter
last fiscal year. Net income for the second fiscal quarter was $25.5 million,
as compared with a net loss for the second fiscal quarter last year of
$10.1 million. Earnings per diluted share were $0.17, as compared with a loss
per share of $0.08 reported for the same period last year.
Net revenues for the six-month period ended September 30, 2004, were
$521.9 million, an increase of $245.7 million or 89%, as compared to net
revenues of $276.2 million reported for the six-month period of last fiscal
year. Net income for the six-month period was $37.5 million, or earnings per
diluted share of $0.24, as compared with net loss of $5.9 million, or a loss
per share of $0.04, reported for the same period last year.
Robert A. Kotick, Chairman and CEO of Activision, stated, "In addition to
delivering record net revenues and earnings for the quarter, we also
significantly increased our market position in North America and Europe. As
of this date, five of our games have shipped more than one million units each
and three of those titles have achieved multi-million -unit status. Our focus
on big propositions is yielding tremendous results worldwide. As we look to
the future, we will continue to leverage our increasing portfolio of
franchises as we expand and strengthen our competitive position."
Kotick continued, "We are very excited about future growth opportunities
that will result from the Nintendo(R) DS, PlayStation(R) Portable, wireless
gaming, in-game advertising and the next-generation of console hardware.
These emerging opportunities combined with the ever increasing installed base
of console hardware and our strong portfolio of brands should enable us to
continue growing our revenues, earnings and operating margin as we have over
the past several years."
Business Highlights
Activision's second quarter results were driven by strong worldwide sales
of Spider-Man 2(TM), which was the company's best-selling title for the
quarter, and newly released games across all platforms including Doom 3(TM),
Rome: Total War(TM) and Call of Duty: United Offensive(TM) for the PC,
X-Men(TM) Legends and DreamWorks' Shark Tale for the PlayStation(R) 2
computer entertainment system, Xbox(R) video game system from Microsoft and
Nintendo(R) Game Cube(TM) and DreamWorks' Shark Tale for the Nintendo Game
Boy(R) Advance and PC. The company's catalogue titles Shrek 2(TM), Tony
Hawk's Underground and True Crime: Streets of L.A.(TM) also performed well.
The company strengthened its market position worldwide resulting in a
number of unprecedented rankings. Activision was the #1 PC publisher in North
America for the month of August, according to NPD Techworld; the #1 publisher
overall in the U.K. for the months of July and August, according to Chart
Track; and the #1 publisher overall in Germany and the #2 publisher overall in
France for the month of August, according to Media Control and GfK
respectively.
Other highlights include:
* On October 21, Activision confirmed that based on strong consumer
response to its action role playing game X-Men Legends, the company is
developing a sequel based on the ever-popular Marvel franchise with
Raven Software.
* According to NPD, Doom 3 is the #1 best-selling PC game in North
America year to date.
* On October 18, Activision announced that the company is launching a
groundbreaking test with Nielsen Entertainment using its newly
released Tony Hawk's Underground 2 game to determine how long and how
often players interact with brands. The Chrysler Group will be the
first advertiser to take part in the test, which will measure consumer
interaction with the Jeep(R) brand.
* Additionally on October 18, Activision and Nielsen Entertainment
announced the results of a new study that examined the ability of game
players to recall brand name products that were integrated within the
video game experience. Among the study's key findings were: brands
with which gamers must actively interact substantially impact consumer
awareness and recall; and that highly integrated ads tend to enhance a
gamer's interest in purchasing the advertised products.
* On October 13, Activision confirmed that the company is in development
on new games based on Spider-Man 2 and Tony Hawk's Underground 2 which
are expected to be launch titles for SCEA'S PlayStation(R) Portable
Entertainment Platform.
* On September 22, Activision announced that the company's first title
for the Nintendo(R) DS video game platform will be a new video game
based on Spider-Man 2, which is currently the #1 best-selling movie
game of 2004 according to NPD Funworld.
Company Outlook
Activision also increased its outlook for fiscal 2005. For the full
fiscal year, the company expects net revenues of $1.15 billion, an increase of
$50 million, and earnings per diluted share of $0.75. The company's previous
fiscal year outlook was $1.10 billion in net revenues and earnings per diluted
share of $0.69.
For the third quarter, the company expects net revenues of $500 million
and earnings per diluted share of $0.49 as compared to its previous outlook of
$515 million in net revenues and earnings per diluted share of $0.52. The
change in Activision's third quarter outlook was based on over performance of
its titles in the second quarter, which the company expects will result in a
lower likelihood of reorders during the third quarter, and the movement of
Doom 3 for the Xbox into the fourth quarter. For the fourth quarter,
Activision expects net revenues of $128 million and earnings per diluted share
of $0.01, as compared with its previous outlook of net revenues of
$120 million and earnings per diluted share of $0.01.
Kotick continued, "We are on track to deliver another record year of net
revenues and operating margin. Our net revenues exceeded $1 billion for the
trailing 12 month period. We ended the quarter with more than $600 million in
cash and short term investments. For the trailing 12 months, free cash flow
was $122 million and return on invested capital was 42%."
Looking ahead to the third quarter, Activision's slate will be driven by
Tony Hawk's Underground 2 and Lemony Snicket's A Series of Unfortunate
Events(TM) for the PlayStation 2 computer entertainment system, Xbox video
game system, Nintendo GameCube, Nintendo Game Boy Advance and the PC; Call of
Duty: Finest Hour(TM) for the PlayStation 2 computer entertainment system,
Xbox video game system and Nintendo GameCube; Vampire: The
Masquerade(R)-Bloodlines(TM) and Shrek 2: Team Action for the PC; Spider-Man 2
for the Nintendo DS and Shrek 2(TM): Beg for Mercy! for the Nintendo Game Boy
Advance.
Non-GAAP Financial Measures
The company's press release includes the non-GAAP financial measures of
"free cash flow" and "return on invested capital." A reconciliation of these
non-GAAP financial measures to the most comparable GAAP financial measure
appears at the end of this press release.
Conference Call
Today at 4:30 p.m. EDT, Activision's management will host a conference
call and Webcast to discuss its second quarter fiscal year 2005 results and
outlook. The company welcomes all members of the financial and media
communities to visit the "Investor Relations" area of http://www.activision.com to
listen to the conference call via live Webcast or to listen to the call live
by dialing into (913) 981-4903 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
$948 million for the fiscal year ended March 31, 2004.
Activision maintains operations in the U.S., Canada, the United Kingdom,
France, Germany, Italy, Japan, Australia, Scandinavia and the Netherlands.
More information about Activision and its products can be found on the
company's World Wide Web site, which is located at http://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, product delays, retail
acceptance of our products, industry competition, rapid changes in technology
and industry standards, protection of proprietary rights, 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 and Quarterly Reports on Form 10-Q. 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.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except earnings per share data)
Quarter ended Six months ended
September 30, September 30,
2004 2003 2004 2003
Net revenues $310,626 $117,523 $521,902 $276,248
Costs and expenses:
Cost of sales - product costs 123,177 72,391 212,265 149,001
Cost of sales - software
royalties and amortization 46,363 11,397 58,646 26,895
Cost of sales - intellectual
property licenses 17,551 7,401 35,199 17,544
Product development 19,881 15,894 40,986 29,474
Sales and marketing 53,234 17,237 94,968 43,522
General and administrative 15,762 10,136 29,447 21,599
Total operating expenses 275,968 134,456 471,511 288,035
Operating income (loss) 34,658 (16,933) 50,391 (11,787)
Investment income, net 2,645 1,404 4,757 2,661
Income (loss) before provision
for income taxes 37,303 (15,529) 55,148 (9,126)
Provision (benefit) for income
taxes 11,760 (5,436) 17,648 (3,196)
Net income (loss) $25,543 $(10,093) $37,500 $(5,930)
Basic earnings per share $0.18 $(0.08) $0.27 $(0.04)
Weighted average common shares
outstanding 138,505 132,243 138,137 132,158
Diluted earnings per share $0.17 $(0.08) $0.24 $(0.04)
Weighted average common shares
outstanding assuming dilution 152,685 132,243 153,127 132,158
Share and earnings per share data have been restated to reflect our
three-for-two stock split for shareholders of record as of February 23,
2004, paid March 15, 2004.
ACTIVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, March 31,
2004 2004
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $606,087 $587,649
Accounts receivable, net 138,586 62,577
Inventories 63,690 26,427
Software development 79,432 58,320
Intellectual property licenses 15,945 32,115
Deferred income taxes 21,203 26,127
Other current assets 29,930 18,660
Total current assets 954,873 811,875
Software development 21,023 28,386
Intellectual property licenses 19,885 16,380
Property and equipment, net 24,712 25,539
Deferred income taxes 5,056 9,064
Other assets 1,018 1,080
Goodwill 77,602 76,493
Total assets $1,104,169 $968,817
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $103,001 $72,874
Accrued expenses 113,341 63,205
Total current liabilities 216,342 136,079
Shareholders' equity:
Common stock -- --
Additional paid-in capital 777,337 758,626
Retained earnings 245,779 208,279
Treasury stock (144,128) (144,128)
Accumulated other
comprehensive income 8,839 9,961
Total shareholders' equity 887,827 832,738
Total liabilities and
shareholders' equity $1,104,169 $968,817
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Six Months Ended September 30, 2004 and 2003
(Amounts in thousands)
Percent
Increase
(Decrease)
Quarter Ended
September 30, 2004 September 30, 2003
% of % of
Amount Total Amount Total
Geographic Revenue Mix
United States $157,705 51% $46,450 40% 240%
International 152,921 49% 71,073 60% 115%
Total net revenues $310,626 100% $117,523 100% 164%
Activity/Platform Mix
Publishing:
Console $145,542 55% $46,019 64% 216%
Hand-held 23,669 9% 4,187 6% 465%
PC 97,184 36% 21,590 30% 350%
Total publishing $266,395 86% $71,796 61% 271%
Distribution:
Console $29,929 68% $33,188 73% -10%
Hand-held 3,556 8% 4,730 10% -25%
PC 10,746 24% 7,809 17% 38%
Total distribution $44,231 14% $45,727 39% -3%
Total net revenues $310,626 100% $117,523 100% 164%
Percent
Increase
Six Months Ended (Decrease)
September 30, 2004 September 30, 2003
Amount % of % of
Total Amount Total
Geographic Revenue Mix
United States $282,896 54% $129,189 47% 119%
International 239,006 46% 147,059 53% 63%
Total net revenues $521,902 100% $276,248 100% 89%
Activity/Platform Mix
Publishing:
Console $264,669 62% $134,503 72% 97%
Hand-held 42,099 10% 8,783 5% 379%
PC 121,279 28% 42,915 23% 183%
Total publishing $428,047 82% $186,201 67% 130%
Distribution:
Console $69,123 74% $68,530 76% 1%
Hand-held 7,211 8% 7,642 9% -6%
PC 17,521 19% 13,875 15% 26%
Total distribution $93,855 18% $90,047 33% 4%
Total net revenues $521,902 100% $276,248 100% 89%
ACTIVISION, INC. AND SUBSIDIARIES
FINANCIAL INFORMATION
For the Quarter and Six Months Ended September 30, 2004 and 2003
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2004 2003 2004 2003
Publishing Net
Revenues
PC 36% 30% 28% 23%
Console 55% 64% 62% 72%
PlayStation 2 33% 32% 37% 35%
Microsoft Xbox 14% 18% 15% 26%
Nintendo
GameCube 8% 4% 10% 5%
PlayStation 0% 10% 0% 6%
Hand-held 9% 6% 10% 5%
Game Boy Advance 9% 5% 10% 5%
Game Boy Color 0% 1% 0% 0%
Total publishing
net
revenues 100% 100% 100% 100%
ACTIVISION, INC. AND SUBSIDIARIES
Non-GAAP Disclosures
Free Cash Flow
(In thousands)
Trailing Three Three Three Three
Twelve Months Months Months Months
Months Ended Ended Ended Ended
09/30/2004 09/30/2004 06/30/2004 03/31/2004 12/31/2003
Net Cash
Provided by
Operating
Activities $130,202 $62,846 $(52,136) $21,069 $98,423
Less: Capital
Expenditures $(8,204) $(2,562) $(1,881) $(2,521) $(1,240)
Free Cash
Flow $121,998 $60,284 $(54,017) $18,548 $97,183
ACTIVISION, INC. AND SUBSIDIARIES
Non-GAAP Disclosures
Return on Invested Capital
(In thousands)
Trailing Three Three Three Three
Twelve Months Months Months Months
NET OPERATING Months Ended Ended Ended Ended
PROFIT AFTER 09/30/2004 09/30/2004 06/30/2004 03/31/2004 12/31/2003
TAXES
Net income $121,145 $25,543 $11,957 $6,664 $76,981
Less:
Investment
income (8,272) (2,645) (2,112) (2,051) (1,464)
Tax effect on
Investment
income (B) 2,703 846 697 677 483
Net Operating
Profit After
Taxes $115,576 $23,744 $10,542 $5,290 $76,000
INVESTED CAPITAL
Total
assets (A) $1,040,030 $1,104,169 $985,841 $968,817 $1,101,291
Less:
Cash and
short term
investments
(A) 571,140 606,087 539,146 587,649 551,677
Current
liabilities
(A) 196,034 216,342 132,092 136,079 299,623
Invested
capital $272,856 $281,740 $314,603 $245,089 $249,991
Return on
Invested
Capital 42% 8% 3% 2% 30%
(A) Amounts for the trailing twelve months represent averages of the
previous four fiscal quarters
(B) Tax effect represents investment income multiplied by our effective
tax rate.
SOURCE Activision, Inc.
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Related links:
http://www.activision.com
Company News On-Call:
http://www.prnewswire.com/comp/007396.html
CONTACT:
Bill Chardavoyne, Chief Financial Officer,
+1-310-255-2229, bchardavoyne@activision.com, or Kristin
Mulvihill Southey, Vice President, Investor Relations,
+1-310-255-2635, ksouthey@activision.com, or Maryanne Lataif,
Vice President, Corporate Communications, +1-310-255-2704,
mlataif@activision.com, all of Activision, Inc.
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