- Fiscal Year Net Revenue Outlook Increases from $2.30 Billion to $2.45 Billion - - Fiscal Year Earnings Per Diluted Share Outlook Up From $0.75 to $0.85 -
SANTA MONICA, Calif., Dec 19, 2007 -- Activision, Inc. (Nasdaq: ATVI) announced today that based on better than expected consumer response to its holiday slate worldwide, the company is raising its net revenue and earnings per diluted share outlook for the third quarter, ending December 31, 2007 and fiscal year 2008. Activision's revised outlook marks the highest net revenues and earnings per diluted share in the company's history for both the third quarter and full fiscal year.
For the fiscal third quarter, Activision expects record net revenues of $1.375 billion and earnings per diluted share of $0.76, an increase from the company's prior net revenues outlook of $1.225 billion and earnings outlook of $0.66 per diluted share. The company's per share outlook for the third quarter includes costs associated with its recently announced agreement with Vivendi. Excluding the impact of equity based compensation expense, which Activision expects to total $0.04 per diluted share for the third quarter of fiscal 2008, the company expects earnings per diluted share for the third quarter of $0.80, as compared to the company's previous outlook of $0.70.
For the full fiscal year 2008, Activision expects record net revenues of $2.45 billion and earnings per diluted share of $0.85, as compared to its previous outlook of net revenues of $2.30 billion and earnings per diluted share of $0.75. The company's per share outlook for the full fiscal year includes costs associated with its recently announced agreement with Vivendi. Excluding the impact of equity-based compensation expense, which Activision expects to total $0.10 per diluted share for the full fiscal year 2008, the company expects earnings per diluted share of $0.95 for the full fiscal year, as compared to the company's previous outlook of $0.85.
"Activision is the #1 U.S. console and handheld publisher, according to the recently announced results from The NPD Group, for calendar 2007 through November," said Robert Kotick, Chairman and CEO, Activision, Inc. "The company increased its market share for the eleven month period to a record 16.8%, a 7.9% increase over the same period last year. We continue to see strong audience excitement for our products and as a result we are again raising our financial outlook for the December quarter and the fiscal year."
Non-GAAP Financial Measures
This release provides expected earnings per diluted share data both including (in accordance with GAAP) and excluding (non-GAAP) the impact of expenses related to employee stock options, employee stock purchase plans, restricted stock rights and other equity-based compensation and the associated tax benefits. Prior to April 1, 2006, Activision accounted for equity-based compensation under the Accounting Principles Board, Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). In accordance with the APB No. 25, the company historically used the intrinsic value method to account for equity-based compensation. Beginning on April 1, 2006, the company has accounted for equity-based compensation using the fair value method under the Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("FAS 123(R)").
Expected earnings per diluted share, excluding the impact of expenses related to equity-based compensation, are not determined in accordance with generally accepted accounting principles (GAAP), and the exclusion of those amounts has the effect of increasing expected non-GAAP earnings per diluted share by the same amounts as compared with expected GAAP earnings per diluted share for the indicated periods. Activision recognizes that there are limitations associated with the use of this non-GAAP financial measure as it does not reflect earnings per diluted share results as determined in accordance with GAAP, and may reduce comparability with other companies that calculate similar non-GAAP measures differently. Management compensates for the limitations resulting from the exclusion of expenses related to equity-based compensation by considering the amount and impact of these expenses separately and by considering the company's expected GAAP as well as non-GAAP results and, in this release, by presenting the most comparable GAAP measures, expected earnings per diluted share, directly ahead of expected non-GAAP earnings per diluted share.
Management does not believe the limitations resulting from the exclusion of these expenses are material, particularly when this non-GAAP financial measure is disclosed with its most comparable GAAP financial measure, expected earnings per share. Management believes that the presentation of this non-GAAP financial measure provides investors with additional useful information to measure the company's financial performance because it allows for a better comparison of expected results in the periods covered herein to those in historical periods. Internally, management uses this non-GAAP financial measure in assessing the company's operating results, as well as in planning and forecasting.
This non-GAAP financial measure should be considered in addition to, not as a substitute for or superior to, financial measures determined in accordance with GAAP. Expected non-GAAP earnings per diluted share do not include the impact of certain expenses required to be recorded in order to present expected earnings per share in accordance with GAAP. This non-GAAP financial measure is not based on a comprehensive set of accounting rules or principles, and the term expected non-GAAP earnings per share does 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 the company's performance in relation to other companies in the same industry.
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 $1.5 billion for the fiscal year ended March 31, 2007.
Activision maintains operations in the U.S., Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, Japan 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 http://www.activision.com.