Activision Blizzard (ATVI) 7 Nov 192019 Q3 Earnings call transcript

Good day and welcome to the Activision Blizzard Q3 2019 Earnings Conference Call. At this time, I would like to turn the conference over to Chris Hickey, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us today for Activision Blizzard’s third quarter 2019 conference call. With us are Bobby Kotick, CEO; Coddy Johnson, COO and President; and Dennis Durkin, company CFO and President of Emerging Businesses. Kostich, Activision; Rob Q&A, for President J. of And Entertainment; Sakhnini, us. President Brack, President King, Humam Blizzard of join Allen of and will also

may I true, to that presentation. believe everyone to will would this of presentation prove The remind this this on in they as like we information them of based call, date available forward-looking that statements we be company incorrect. not to And are during statements ultimately while are be historical the facts. be making to the

is of factors and SEC any our publicly undertakes risk obligation events X, number Annual those differ could Report on revisions Form any A or XX-K the actual cause in November and in future statements The other materially filings, the including that circumstances to results no showing. to release those XXXX. forward-looking expressed to any include discussed slide to company’s forward-looking on today, statements. reflect our These future XXXX after circumstances company the factors from

restructuring activities. potential the positions tax-related items including related to unique to amounts resolution associated will during intangible non-GAAP to this refinancings; tax tax non-GAAP and items, exclude tax-related amounts stock-based call. financial and related compensation; other legal benefits final and of related and the related and related including charges; present expenses, costs, assets expenses fees, accruals; or of related measures the the items; to to changes financings discrete of expenses provide measures, which amortization financial and acquisitions, We and these both and We unusual of significant excluded or laws, impact expenses GAAP tax debt in

substitute There's before non-GAAP to be which from, superior to respect in an isolation presentation, release, for, our also with explanation measures investment webcast results. all the posted Please investors to will for following non-GAAP is reconciliation further not can be These GAAP website and our making non-GAAP access our to to www.activisionblizzard.com, earnings to posted as are which encourage intended We or on decision. you refer the GAAP measures consider measures. to considered with the an which call. a full and earnings a

will non-GAAP highlighting posting financial overview addition, results. a we and GAAP both be also In

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

Thank Chris, you us and today. joining thank you, for all

Our for results we third as revenue on earnings made our share quarter prior growth continued progress exceeded XXXX for our outlook both initiatives beyond. per and and

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growth potential increased and our us for QX Our future. that up franchises confidence durability focus and our business the results of and meaningful our reinforce sets the and year investment our this in

I'll Dennis our now over to to and outlook. discuss the financial hand call performance our Dennis?

our rate. XXXX outlook. of our QX, performance, included Thanks, results outlook business EPS Coddy. review GAAP I our timing favorable QX ahead and will non-GAAP prior QX. and cost Key over a Today, tax and factors were for lower

release quarterly and of Ops Black operating To with of revenue segment Destiny review year-over-year start and were the margin Forsaken. of Call Operating $XXX Team income against million was Activision revenues included million, Racing. I'll the quarter Key down Crash our results. of that contributors sales the in-game was upfront Duty: comparable $XX XX%. ongoing an X with

lower included of year-over-year $XX revenue Operating Azeroth. was income Blizzard million, release operating with World margin that XX%. $XXX against an the of for the million of Battle was comparable Warcraft:

almost flat million same revenues King the Candy Crush grew was revenue $XXX roughly of year-over-year business the ads and period. year-over-year with modestly over doubling sequentially.

Battle Operating Forsaken three expansions being in net the quarter. with segments, year-over-year. income the XX%, drivers year-over-year Azeroth for million was with operating in-game the year-ago margin Across our $XXX an bookings of $XXX million, lower points were biggest higher and

with execution certain improve notably area franchises, progress are and in We are most QX pleased in we we saw for the this to of Call continuing Duty. our

consolidated our otherwise to turn I be refer for earnings indicated, reconciliations. let's full figures. Unless will GAAP our overall referencing to non-GAAP Please non-GAAP Now release to results.

million above GAAP-only $XX of of For EPS the August which of $XXX QX we generated we of non-GAAP GAAP net above outlook. guidance. our included revenues was related restructuring the of of include $X.XX, recognition QX These million $X.XX. charges incurred EPS $X.XX of $X.XX GAAP net of deferrals We of $XXX $X.XX recognition This and August bookings $XX figures and million and million. generated above QX were guidance. deferrals billion the billion, $X.XX our quarter, Net

flow flow our billion. ended QX of From approximately structure position $X.X and net capital a September cash a end operating was the and $XXX cash million and at perspective, And billion. cash quarter of with the investments approximately cash $X.X we was

and quarter year to full Now fourth our let's outlook. turn

slate. release the at Looking

Warcraft Activision's of and Mobile to addition released on December. on Xst In on Warfare the Modern October Duty Reforged to Nintendo XXth, XXth Overwatch Blizzard release on Switch III: and in of plans October October launches Call

the franchises system our the and includes open services, see originally also for Modern will of QX mode we events Battlegrounds support the and other with and stream a features. which Hearthstone the of for expansion for key content, Warfare new of beta December, Ascent Dragons will than planned. release in This later begins in-game slightly

Before I provide our to context. financial provide guidance, I'd like some

of at the Warcraft early to of remain Duty we Call and as more strong delighted we Firstly, results but we the quarter. momentum, Warfare. execution are Mobile rest of Modern the the Classic, wish prudent season same focus the with than on We're World holiday time ending for with for

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numbers. Now to the on

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game expenses of operating a and distribution on product expenses software and XX% non-GAAP of QX including costs, expect basis, XX%. For operations we amortization

We non-GAAP EPS includes rate expect which deferrals non-GAAP GAAP of tax of XX% $X.XX a and of $X.XX.

XXXX net including billion $X.XX we On a GAAP of deferrals bookings basis of GAAP for expect million. $XX

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rate We $X.XX. EPS count and expect of and a share $XXX XX%, of GAAP of GAAP non-GAAP million tax

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includes We expect $X.XX. GAAP XX% $X.XX which of non-GAAP non-GAAP tax and a deferrals rate of of EPS

owned early our volumes Duty and and portfolio speaks fully intellectual we the property. have of summary at and week, World what's last in the Mobile, you Call broad been in understand years. why And So large with of about value Warfare made announcements potential success about significant Modern so the Warcraft of Classic, we excited of for for our now our pipeline Blizzcon coming can durable

not and entertainment franchises to foundation strong creating it's opportunities of ours one is biggest sustaining the and media growth our all and interactive upon. a While build like us gives franchises enduring in of stable easy largest of

progress term. We rest disciplined the to the are portfolio. encouraged as maintain can shoots across by franchises has well that of our continue of results company us will green our strong long the will characterized to a in number as and We value our recent position confident focus plan against over operating the We that and for our shareholder many executing years. remain deliver

call. welcome business Rob for our Operator? Now portion join Human the leaders of the as Q&A they J, I and us

Sachs. come [Operator with Ng Instructions] from will Michael today question Our Goldman first

you the very question. Hi, much thank for

Just on Modern Warfare.

very implementation in-game Thank new the with absence in-game could what versus next for you the X? Ops that of Black season means system, growth year you pass and much. a of talk spending the about With

Thanks Mike. It's for Rob. the question

talk trying and overarching important through the think them content we're keeping building focused what and to We're together great one about bringing community and to really big community do. playing features. together, it's our I first on principles

believe long-term changes we engagement, for and that to are been those success. service in critical our certainly The of course long-term which is they're only for we've not sustaining making great also principles players but of and our growing

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we events But long the let Dennis about together speak kind seasons revenue and keep of and beyond. Now for quarter for to have the believe content will that side, we plans how community on haul. in-game this playing think I'll the we

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Thanks, Mike. Operator, can question have we please. next the

Certainly.

next Our Piper Olson Jaffray. question comes Mike from with

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Mike. the please? Thanks, have Operator, can we next question,

Our next question Barclays. will with come from Mario Lu

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come Citi. question next Bazinet Jason will from Our with

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my me Yes. Hi. Thanks for taking A please. couple for questions.

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question. one Thanks time we for last have Operator, Rob.

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