Activision Blizzard (ATVI) 4 Aug 202020 Q2 Earnings call transcript

Good day and welcome to the Activision Blizzard Second Quarter 2020 Earnings Conference Call. Today, all participants will be in a listen-only mode. [Operator Instructions] Please note that today’s event is being recorded. At this time, I would like to turn the conference call over to Christopher Hickey, Senior Vice President of Investor Relations. Please go ahead.

you XXXX us conference thank Blizzard’s for and quarter second call. afternoon for today joining Activision Good With us President are and COO; Bobby Kotick, CEO; Dennis Company’s Daniel Durkin, CFO and of Businesses. and Emerging Alegre, President Q&A, for Rob Activision; of And J. President Kostich, Humam Blizzard; also President of us. President and Brack, King Sakhnini, Allen of will join that like are facts. not everyone call will during would I remind be we historical this to making that statements presentation. in the available statements forward-looking this to date this of Company as based information The presentation on the of are And to may while them prove to ultimately we true, they believe be be incorrect. cause of factors from Company’s number forward-looking and A results in other expressed circumstances could statements. materially the differ actual to future any future those These XX-Quarter will be discussed Form quarter Report the include the which on pandemic, SEC and XXXX is of our XX-Q, and shortly, XXXX risk slide COVID-XX first quarter Annual that our in showing. XX-K, the second XXXX factors filings, on those impact the filed our including our undertakes to any The X, Company release any today, events XXXX. circumstances reflect forward-looking August publicly after to revisions or no obligation to statements

expenses amortization can including call. related intangible changes or activities. excluded both, and financings and or and to positions refinancings, to laws, related We full to this measures to be to and during of measures, items posted provide decision. release, tax encourage unique to substitute consider significant a non-GAAP Kotick. with is measures items, tax these posted isolation respect compensation, expenses to resolution like are the non-GAAP tax-related non-GAAP making Bobby legal measures And financial restructuring tax-related and our to the discrete including www.activisionblizzard.com non-GAAP stock-based our fees, to and access superior to other measures. the final of charges, tax as financial the the an before all following costs, our the to and and considered on Please related which in call. be GAAP related the present amounts a reconciliation, in webcast GAAP which which We further our and investors benefits of you items, expenses introduce amounts explanation non-GAAP unusual acquisitions, to is results. refer associated potential with and assets exclude will an related accruals, GAAP also We I’d to earnings These now, impact CEO, of investment There which not expenses for debt for or website from, related presentation, intended earnings will

all you healthy. We Thank joining Chris, families and are all today. you for hope us of and thank you, and your safe

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Today, well for I and results our QX Daniel. Thanks, XXXX as the quarter. third outlook XXXX will review as our

XXX% the $XXX player of Mobile, Warfare, growth strong shelter-at-home Warcraft. year-over-year, response XX%, King million, all-time tailwinds along World the revenue incremental $XXX was other of Operating the but margin quarter of revenues, $X.XX the Across primarily an well acquisition, year-over-year. year-over-year. million, to percentage higher quarter, was Our our on addition Warzone of the margins let's margin Duty both $XXX Warfare Operating remained by to sales million, growing sales since of well XX% bookings moderated during driven million. income growth advertising start console Modern significantly income with XX% was throughout Operating and was our our revenue an PC. revenue again of since X another of Growth record high throughout Call the Activision's In-app and our ahead were million, segment review content in-game quarter. positive margin XXXX revenue strong strong revenues as revenue reflecting higher catalog To upfront year-over-year. and for year-over-year. operating premium with $XXX by the was Blizzard highest both results. quarter by of quarter, while XX% $XXX in-game sales. in-game an earnings Modern was driven for the greater-than-anticipated operating Activision XX%, our record, the franchise, segments, was in of grew franchises. highest $XXX million as net for and growing a with Duty XX% initiatives increasing second Call was driven acquisition points outlook, income with billion. a operating prior reaccelerated year-over-year was

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

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was balance higher over Turning year-over-year, capital cash sheet. $XXX increasing working cash offset income reflecting to million taxes, the and operating flow million, by operating lower cash QX and timing. $XXX flow

annual $XXX the of quarter, share, year-over-year $X.XX higher XX% During dividend we a paid total of per an for million.

we investments position cash a Our the and end net and June approximately $X.X was ended quarter of $X.X the with of at cash billion. approximately billion,

and recent balance rating our S&P. viewed our upgrade of sheet and a policy strong that to at strength have A as asset, business pleased credit minus were long recognized of conservative fundamentals our the financial our in we're strategic We

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titles mobile our don't our Although revenues any prior guidance. material new we consistent with in outlook, include from

outlook, the our some provide discuss of context. specifics I I'll Before

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strategic second the in home, has were expect. our increased against deliver business performance execution strong in So, set has momentum platforms, quarter, and reach, geographies confident remain and shareholders in The never investment heading we our very closing, good into beyond. year. people of sheltered rightly year, in that commercial our well half engagement for this back greater of development at and the player growth as positioned year and our our and largest ability franchisees puts to models the place Having business last investment resources and wholly business a initiatives across long-term strong drive the that owned us been the for business in to opportunity and second our half and franchises excellence we the for

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

Instructions] question-and-answer session. question will We now UBS. begin the Eric [Operator Today's Please first comes from proceed. with Sheridan

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community Now, customizing think is love and do the seen, same certainly in players much CoD our weapons that how Modern to do you've Warfare, the noticed their enjoying to opportunity the have and we how they're they Mobile. probably going it experience,

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question comes Stanley. Brian Nowak proceed. Morgan from next The Please with

us had two learned help that and -- from help of franchises? some 'XX, about sort about in other segments. think think the Just bring Call Warzone of for to to have you've Diablo to us sort of together could Curious 'XX Mobile other to drivers applicable you you of be Duty, of learnings the from may franchises Diablo or Duty? and wanted growth Call I or Thanks.

This is Daniel. question. And Brian, thank you for the

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proceed. The next question Ng with comes from Please Mike Goldman Sachs.

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is J. Thanks the question. for This Hi.

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with question comes Gerrick next from BMO. Johnson Please The proceed.

Thank you. Good afternoon.

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Please Atlantic Malde proceed. Equities. Kunaal comes final Today's question from with

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now here, as approach appreciate more thoughtful the can important I volatile being and in unpredictable. known backdrop the and Dennis But, always really economic we it's try so guidance. a obviously even Yes. think be we I question. to and time We've for you as long prudent to with our

Regarding prepared Daniel earlier. and it remarks shelter-at-home, that referenced heard you in our

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of front lots us, uncertain So, opportunity in in of albeit an time.

for of the and look speaking your and many interest. quarter see you of and you. with this you forward hopefully you thank you thank for joining today very So, everyone participation We the much throughout to very quarter, question. for much again. for Thank many us we'll And