Activision Blizzard, Inc (ATVI)

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Activision Blizzard (ATVI)

Q4 2012 Earnings Call

February 07, 2013 4:30 pm ET


Kristin Mulvihill Southey - Former Vice President of Investor Relations

Robert A. Kotick - Chief Executive Officer, President and Director

Dennis Durkin - Chief Financial Officer

Eric Hirshberg - Chief Executive Officer of Publishing Unit

Michael Morhaime - Chief Executive Officer of Blizzard Entertainment and President Blizzard Entertainment


Eric O. Handler - MKM Partners LLC, Research Division

Brian J. Pitz - Jefferies & Company, Inc., Research Division

Neil A. Doshi - Citigroup Inc, Research Division

Brian Karimzad - Goldman Sachs Group Inc., Research Division

Daniel Ernst - Hudson Square Research, Inc.

Andrew D. Connor - Piper Jaffray Companies, Research Division

Douglas Creutz - Cowen and Company, LLC, Research Division

Andrew E. Crum - Stifel, Nicolaus & Co., Inc., Research Division

Edward S. Williams - BMO Capital Markets U.S.



Good day, and welcome to the Activision Blizzard's fourth quarter 2012 results conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn today's call over to the Senior Vice President of Investor Relations, Kristin Southey. Please go ahead, Kristin.

Kristin Mulvihill Southey

Good afternoon, and thank you for joining us today for Activision Blizzard's fourth quarter 2012 conference call. With me today are Bobby Kotick, CEO of Activision Blizzard; Thomas Tippl, COO of Activision Blizzard; Dennis Durkin, CFO of Activision Blizzard; Eric Hirshberg, CEO of Activision Publishing; and Mike Morhaime, CEO of Blizzard Entertainment.

I would like to remind everyone that during this call, we will be making statements that are not historical facts. These are forward-looking statements that are based on current expectations and assumptions and are subject to risk and uncertainty. As indicated in the slide that is showing, a number of important factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements.

Such factors include, without limitation, sales levels; current macroeconomic conditions; increasing concentration of titles; shifts in consumer spending trends; our ability to predict consumer preferences among competing genres and hardware platforms; maintenance of key relationships, including the ability to attract, retain and develop key personnel and developers that can create high-quality hit titles; the seasonal and cyclical nature of our industry; changing business models, including digital delivery of content, competition, including from used games; possible declines in prices; product returns; price protection; product delays; the console transition; adoption rate and availability of new hardware and related software; rapid changes in technology and industry standards; the current regulatory environment; litigation and associated costs; protection of proprietary rights; counterparty risks; economic, financial and political conditions and policies; foreign exchange and tax rates; and potential changes associated with geographic expansion.

These important factors and other factors that potentially could affect the company's financial results are described in the company's most recent Annual Report on Form 10-K for the period and on the company's other SEC filings. The company may change its intentions, beliefs or expectations made at any time and without notice based upon any changes in such factors in the company's assumptions or otherwise.

The forward-looking statements in this presentation are based on information available to the company as of the date of this presentation and, while we believe them to be true, may ultimately prove to be incorrect. The company undertakes no obligation to release publicly any revision to any forward-looking statements to reflect events or circumstances after today, February 7, 2013, or to reflect the occurrence of unanticipated events.

I'd like to note that certain numbers we will be presenting today will be made on a non-GAAP basis, excluding the impact of the change in deferred net revenues and related cost of sales with respect to certain of our 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 associated tax benefits. Please refer to our earnings release which is posted at for a full GAAP to non-GAAP reconciliation and further explanation. There's also a PowerPoint overview, which you can access with the webcast and which will be posted to the website following the call. In addition, we will also be posting a 12-quarter financial overview, highlighting both GAAP and non-GAAP results on a one-page summary sheet.

And now I'd like to introduce our CEO, Bobby Kotick.

Robert A. Kotick

Thank you, Kristin, and thank you all for joining us today. 2012 was another great year for Activision Blizzard. We achieved record fourth quarter and annual results. And in 2012, on a non-GAAP basis, we generated approximately $5 billion in revenues, a 34% operating margin and EPS growth of 27% over the prior year. We increased our operating cash flow by 41%.

Our strong cash flow has given us the flexibility to invest in our portfolio and product pipeline, while also returning $3.8 billion to investors since 2009 through dividends and share repurchases. Today, we announced our Board of Directors has increased our annual cash dividend to $0.19 a share.

Our 2012 results are due to the drive, passion and creativity of our employees around the world. Their efforts, aligned with our focused long-term strategy and investment discipline, produced strong creative and financial results for our company.

In the U.S. and Europe, we were the #1 video game publisher at retail, with the #1 title overall, the #1 console title and the #1 PC title. We were also the #1 independent Western Digital game publisher and had the #1 subscription-based MMORPG.

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