Market Overview

Activision Blizzard Announces First-Quarter 2018 Financial Results


Record First-Quarter Revenues, Net BookingsA,
and EPS

Record First-Quarter Digital, Mobile, and In-Game Revenues and Net

Record First-Quarter Operating Cash Flow of $529 Million, up 29%

Company Increases CY 2018 Revenues and EPS Outlook

Activision Blizzard, Inc. (NASDAQ:ATVI) today announced first-quarter
2018 results.

"Activision Blizzard had another strong quarter, growing year-over-year,
setting top and bottom line records, and over-performing guidance. Our
continued ability to set new records speaks to the quality of our teams
and the breadth and enduring nature of our portfolio of franchises
against the backdrop of a large and growing interactive market," said
Bobby Kotick, Chief Executive Officer of Activision Blizzard. "As we
look ahead, our innovative core gaming pipeline, as well as initiatives
like mobile, esports, and advertising, will continue to drive growth for
our business."

Financial Metrics:

  First Quarter
(in millions, except EPS)     2018   Outlook*   2017  
GAAP Net Revenues $ 1,965   $ 1,820   $ 1,726
Impact of GAAP deferralsB $ (581 ) $ (540 ) $ (530 )
GAAP EPS $ 0.65 $ 0.47 $ 0.56
Non-GAAP EPS $ 0.78 $ 0.65 $ 0.72
Impact of GAAP deferralsB   $ (0.40 )   $ (0.34 )   $ (0.41 )

* Prior outlook was provided by the company on February 8, 2018 in its
earnings release.

For the quarter ended March 31, 2018, Activision Blizzard's net revenues
presented in accordance with GAAP were a Q1 record $1.97 billion, as
compared with $1.73 billion for the first quarter of 2017. GAAP net
revenues from digital channels were an all-time quarterly record $1.46
billion. GAAP operating margin was 30%. GAAP earnings per share were an
all-time quarterly record $0.65, as compared with $0.56 for the first
quarter of 2017.

For the quarter ended March 31, 2018, on a non-GAAP basis, Activision
Blizzard's operating margin was 39% and earnings per diluted share were
an all-time quarterly record $0.78, as compared with $0.72 for the first
quarter of 2017.

For the quarter ended March 31, 2018, operating cash flow was a Q1
record $529 million, up 29% year-over-year.

Please refer to the tables at the back of this press release for a
reconciliation of the company's GAAP and non-GAAP results.

Operating Metric:

Net bookingsA is an operating metric that is defined as the
net amount of products and services sold digitally or sold-in physically
in the period, and includes license fees, merchandise, and publisher
incentives, among others, and is equal to net revenues excluding the
impact from deferrals.

For the quarter ended March 31, 2018, Activision Blizzard's net bookingsA
were a Q1 record $1.38 billion, as compared with $1.20 billion for
the first quarter of 2017. Net bookingsA from digital
channels were a Q1 record $1.20 billion, as compared with $1.07 billion
for the first quarter of 2017.

Selected Business Highlights:

Activision Blizzard's record first-quarter results demonstrate our
ability to deliver strong results, even in quarters without large
content releases, illustrating the enduring nature of our franchises and
our shift to a games-as-a-service model.

Audience Reach

  • Activision Blizzard had 374 million Monthly Active Users (MAUs)C
    in the quarter.
  • King had 285 million MAUsC. King's engagement remained
    strong with daily time spent per user at record levels.
  • Activision had 51 million MAUsC. Call of Duty® grew
    its audience year-over-year with players engaging across the franchise
    including with Call of Duty: WWII.
  • Blizzard had 38 million MAUsC. World of Warcraft®
    over-performed versus the prior expansion at this point in time, with
    higher engagement sequentially and strong community participation with
    in-game purchases. Preorders for the upcoming expansion, Battle
    for Azeroth™
    , are ahead of plan. Hearthstone®
    continues to reach and engage its large global audience through
    multiple efforts including a new promotional bundle, expansion, and
    player-versus-environment mode, Monster Hunts, which has had strong
    engagement. Overwatch® continues to add new players, and
    engagement remains strong, with the most recent seasonal event,
    Retribution, having a higher participation rate than any prior event.

Deep Engagement

  • The Overwatch League launched its inaugural regular
    season in January and continues to have strong viewership globally,
    reaching millions each week, with the playoffs still to come this
    summer. This has led to increased engagement for the franchise
    overall, with combined hours spent playing and watching Overwatch
    increasing sequentially. The Overwatch League and its partners
    also introduced new engagement programs, which deliver enhanced
    viewing experiences.
  • The Call of Duty World League completed stage one in mid-April
    and continues to have strong viewership, with cumulative hours watched
    doubling year-over-year.

Player Investment

  • Activision Blizzard delivered a first-quarter record of approximately
    $1 billion of in-game net bookingsA.
  • King's mobile business had the highest quarterly net bookingsA
    in its history. Total net bookingsA were up 3%
    quarter-over-quarter and up 13% year-over-year and reached their
    highest level since Q1 2015, just after Candy Crush Soda SagaTM
    was released. This quarter, King had two of the top-10
    highest-grossing titles in the U.S. mobile app stores for the
    eighteenth quarter in a row, with Candy Crush Saga
    and Candy Crush Soda Saga at #1 and #2 for the second
    quarter in a row, respectively.1
  • King continues to make progress in ramping its advertising business,
    with industry-leading viewability, completion, and ad-recall rates2.
    King continues to attract new advertisers and has repeat advertisers
    across multiple industries.
  • Activision's Call of Duty grew in-game net bookingsA
    year-over-year, with WWII's first quarter second only to
    that of Black Ops III.

Company Outlook:

  • Based on the strength of our Q1 beat and confidence in our franchises
    and pipeline, we're modestly raising our full year outlook.
  • As we previously shared, we expect revenues and operating income for
    2018 to be more influenced by the last six months of our operating
    results than 2017.

GAAP Outlook

    Non-GAAP Outlook     Impact of GAAP deferralsB
(in millions, except EPS)      

CY 2018

Net Revenues $ 7,355 $ 7,355 $ 120
EPS $ 1.79 $ 2.46
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