Activision Blizzard, Inc (ATVI)

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Activision Blizzard, Inc. (ATVI)

Q2 2009 Earnings Call

August 5, 2009 4:30 pm ET


Kristin Southey - Vice President, Investor Relations and Treasurer

Robert A. Kotick - President, Chief Executive Officer

Thomas Tippl - Chief Financial Officer

Michael J. Griffith - President & Chief Executive Officer of Publishing Unit

Michael Morhaime - President and Chief Executive Officer of Blizzard Entertainment, Inc.


Tony Gikas - Piper Jaffray

Jeetil Patel - Deutsche Bank

Ben Schacter - Analyst

Brian Pitz - Analyst

Heath Terry - FBR Capital

Jess Lubert - Analyst

Shawn Milne - Janney Montgomery

Ralph Schackart - William Blair



Good afternoon. My name is Philip and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter CY 2009 financial results conference call. (Operator Instructions) I would now like to turn the call over to Kristin Southey. Madam, you may begin your conference.

Kristin Southey

Good afternoon and thank you for joining us today for Activision Blizzard's second quarter calendar ’09 conference call. As always, I will start today’s call with a review of our Safe Harbor disclosure, followed by comments from Bobby Kotick, CEO; Thomas Tippl, Chief Corporate Officer and CFO; Mike Griffith, President and CEO of Activision Publishing; and Mike Morhaime, Chief Executive Officer of Blizzard Entertainment.

I would like to remind everyone that statements will be made during this call 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 that a number of important factors could cause Activision Blizzard's actual future results and other future circumstances to differ materially from those expressed in any such forward-looking statements.

Such factors include without limitation sales levels of the company’s titles, shifts in consumer spending trends, the impact of the current macroeconomic environment, the seasonal and cyclical nature of the interactive game market, any further difficulties related to the transition of World of Warcraft in China from the former licensee to NetEase, the company’s ability to predict consumer preferences among competing hardware platforms, declines in software pricing, product returns and price protection, product delays, retail acceptance of our products, adoption rate and availability of new hardware and related software, industry competition, rapid changes in technology, industry standards and consumer preferences, protection of proprietary rights, litigation, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, counter-party risks relating to customers, licensees, licensors, and manufacturers, 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, our success in completing the integration of the operations of Activision and Vivendi games in a timely manner and our ability to realize the anticipated benefits and synergies of the transaction to the extent or in the timeframe anticipated.

These important factors and other factors that potentially could affect the company’s financial results are described in the company’s annual report on Form 10-K for the period ended December 31, 2008, and subject [inaudible] quarterly reports on Form 10-Q.

The company may change its intentions, beliefs, or expectations 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 any forward-looking statements to reflect events or circumstances after today, August 5, 2009, or to reflect the occurrence of unanticipated events.

I would also like to note that certain numbers we will be presenting today, including net revenues, operating income, EPS, manufacturing and distribution costs, product creation costs, sales and marketing expense, and G&A spending, inventory, catalog software, and intellectual property will be made on a non-GAAP basis excluding the impact of the change in deferred net revenues and related cost of sales. Expenses related to equity-based compensation costs, the operating results of products and operations from the historical Vivendi Games businesses that the company has exited or is winding down, one-time costs related to the business combination between Activision and Vivendi Games, the amortization of intangibles and the changes in cost of sales resulting from purchase price accounting adjustments and the associated tax benefits.

Please refer to our earnings release for a full GAAP to non-GAAP reconciliation.

In addition, due to the fact that our business combination was accounted for as a reverse acquisition, we will be presenting additional non-GAAP information that includes Activision standalone results for the periods prior to July 9th ’08, which we refer to as a non-GAAP comparable basis.

Please refer to our earnings release, which is posted on our website, at for reconciliations and further explanations.

I would also like to highlight that for your convenience, we are now including some additional information in our reporting. This quarter we have begun adding a brief PowerPoint overview which you can access with the webcast and which will posted to the website following the call.

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

Robert A. Kotick

Thank you, Kristen and thank you for joining us this afternoon. July 9th marked our one-year anniversary as Activision Blizzard. As a combined company, we’ve delivered better-than-expected financial performance for the fourth consecutive quarter. We are in a very unique position in our industry. We have the breadth of product portfolio and resources to deliver our short-term commitments of earnings growth and margin expansion and the ability to shift products to future release dates to increase our long-term financial returns and to ensure our product quality objectives are met.

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