Gamers Rejoice: Activision Shares Jump Following Earnings & Guidance

Activision Blizzard ATVI on Tuesday announced better-than-expected first quarter 2014 results.

CEO Bobby Kotick commented, “Our better-than-expected performance was driven by record digital sales in Blizzard Entertainment's franchises, including World of Warcraft®, Diablo®, and Hearthstone™: Heroes of Warcraft™, a new free-to-play game which had already registered more than 10 million users as of its March 11, 2014 launch on Windows® and Mac®, in addition to Activision Publishing's Skylanders™ and Call of Duty® franchises.

"For the first quarter, net revenues from non-GAAP digital channels accounted for more than 68% of our revenues, setting a new quarterly record and driving record non-GAAP Q1 operating margin and record non-GAAP Q1 EPS. Additionally, we are raising our full year outlook and expect to grow our non-GAAP revenues year-over-year and deliver record non-GAAP earnings per share.”

Summary of First Quarter Results

• The company reported GAAP net revenues of $1.11 billion compared with $1.32 billion for 1Q13. Net revenues (GAAP) from digital channels represented 34 percent of the company's total revenues.
• Non-GAAP net revenues were $772 million, versus $804 million in the same period last year. Net revenues (non-GAAP) from digital channels represented a record 68% of the company's total revenues.
• Activision reported record non-GAAP EPS of $0.19, compared with $0.17 in 1Q13.
• On February 11, 2014, the company repaid $375 million of its outstanding Loan B.
• For the quarter, Activision Publishing had the #1 and #2 best-selling titles of Skylanders SWAP Force and Call of Duty: Ghosts in North American and Europe combined.
• The company launched Hearthstone: Heroes of Warcraft and Diablo III: Reaper of Souls in the first quarter.
• Diablo III: Reaper of Souls was the number 1 PC title in dollars in both North America and Europe.
• World of Warcraft remains the #1 subscription-based MMORPG, with approximately 7.6 million subscribers, as of March 31, 2014.

Guidance

• Activision expects second quarter GAAP and non-GAAP net revenues of $910 million and $600 million, respectively.
• Management sees Q2 non-GAAP EPS of $0.01.
• The company raised CY 2014 GAAP net revenue and EPS from $4.0 million and $0.76 to $4.22 million and $0.89.
• The company raised CY 2014 non-GAAP net revenue and EPS from $4.6 million and $1.26 to $4.675 million and $1.27.

Stock Action

Shares of Activision Blizzard closed at $19.31 on Tuesday. In after-hours trading, the stock spiked to $20.40 and hovered around $19.70 for the night. Shares have held around $20.00 in pre-market trading.