ATVI - Earnings call transcript Q2 2018 | Activision Blizzard, Inc.

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Operator

Good day everyone and welcome to Activision Blizzard's Q2 2018 Earnings Conference Call. Today's call is being recorded. And now it's my pleasure to turn the conference over to Chris Hickey, Senior Vice President of Investor Relations. Please go ahead, sir.

Christopher Hickey

Thank you. you XXXX us conference thank Blizzard's for and quarter second call. afternoon for today joining Activision Good With us Morhaime, are will and and Spencer Bobby Zacconi, also Kotick, CEO; CFO; Riccardo for Coddy join and us. Q&A, of Mike CEO CEO Blizzard Neumann, of King, Johnson, COO; I to facts. that remind during will call, we historical would making are be not like be making everyone this statements that presentation, available and in be this we may date presentation to information the statements on the ultimately company forward-looking to The of incorrect. them based this while believe they be of as are true, to prove A to number could differ company's any the circumstances those results from actual in expressed future of factors materially forward-looking future and other statements. cause including on Annual and include Form XX-K slide on the our XXXX These factors SEC risk the those Report is discussed that showing. in filings, our company revisions no and after any today, The August reflect to any to publicly XXXX. events obligation statements to circumstances undertakes X, release forward-looking

call. measures both present will We the GAAP non-GAAP financial during and

and non-GAAP the explanation also with We items non-GAAP the you PowerPoint certain will posted measures or for all the this our decision. to restructuring related full financings to for, posted refinancings, on isolation will There's to substitute as these impact our Please expenses measures. in to intended webcast expenses from, results. to investment expenses tax be amortization and measures can is call. following measures, consider a assets and a the not also significant are costs, legal of intangible access release, the expenses charges, compensation, reflect a website to and of and financial respect benefit excluded discrete debt tax-related Non-GAAP an to and to fees, of to associated overview items. www.activisionblizzard.com be which stock-based considered further related our accruals, provide acquisitions, GAAP the including non-GAAP earnings GAAP with making caution which to reconciliation related impact We of superior before investors which refer

be GAAP financial also introduce will I'd results we Kotick. both like posting addition, in that has Bobby overview CEO, non-GAAP a our In a one-page to summary. and

Robert A. Kotick

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

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Collister Johnson

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Spencer Adam Neumann

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into we a to QX, certain During intercompany agreement settle IRS entered pricing the with arrangements. transfer closing

prior tax non-GAAP to to quarter non-GAAP expect decrease the flow capital to in aggregate taxes modestly of cash tax versus includes primary settlement the XXXX. than tax cash rate. half perspective, lower share, a our a And $X.XX flow XX% total structure and the trailing timing. of expect From XX% impact per We which related is a of cash had We over dividend for in $X paid in and up to $XXX $X.XX year. cash pay and previously QX million capital second from the reason year. of basis, mostly second rate year-over-year flow operating earnings operating tax a full XX, $XXX The the XX% a GAAP versus up the settlement, as settlement, was March cash of working anticipated some record of XX% billion GAAP previously. now of higher million and following we shareholders of rates year-over-year cash of million a common with was On XX% year rate XX-month a approximately

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of overall I'll to the the on the of context phasing year. our some for guidance Before and remainder of I outlook, turn specifics earnings provide

be last content and timing relative on back-end two As to we calls, for to operating income major and expect I loaded, the prior our of given revenues the said more XXXX releases slate year.

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and Now Riccardo they the join us as I welcome Operator? for Mike Q&A portion of call. the

Operator

you. And Thank first check at to Merwin button. Go Chris mute please Sachs, your Goldman please.

Christopher Hickey

are go waiting Chris, the there? Chris, for question, next you While we're we'll to operator.

Operator

Okay. to Thank And we'll Robert you. go at Sebastian Baird. next Colin

Colin Alan Sebastian

season of quarter. on Great. forward from My season more what Very some we the afternoon. with League, was hoping Overwatch expect from now could and complete Thanks. Good Thanks. key can franchise. reflect first the broadly, I question the is you the learnings for nice the going

Michael Morhaime

Hi, Blizzard. Colin. is from Mike This

I'd as team that as there X. come new the an in success to partners about already for will we think awesome expectations. the definitely we've our of like had delivering to Season we of mentioned, exceeded success, more shout-out Season that X, great and So well. have that for Bobby Bobby some talked a Because to be added that two experience

awesome people listening Brooklyn. start and celebrate I to it movement enjoyed as I that Just weekend the there Finals we in know well. just esports the and growing attended celebration, everybody I a It I and of last quickly, hope many in was will were as of did. as the Grand think the as best player that's recognize future part be of well. fan a much Blizzard

in Looking for consumer enjoy content, esports, including coming to forward, in-game there's fans Overwatch more lot months, a the products.

Overwatch this League later the Arena. at we esports, month Game have Blizzard the For All-Star

have a We we've There's been BlizzCon in well. in working November. game Cup as the Finals at on World ton that

that in South a about to There's some upcoming have we most events, at August. a of excitement and done making Wrecking Ball and lot XXXX, Summer be deal our announcements for new fan hero, buzz a in and content in the festival seasonal at Our recent generate engagement Seoul, great Games we'll has gamescom Korea, community.

We for to some addition sponsors the partners game. also also, we've esports on side, our partnerships consumer announced with in products the new

Nerf, We new Overwatch those world. bring help UNIQLO and and audiences think fans throughout have the partnerships to LEGO, and us we will Kellogg,

So very about excited the of future Overwatch.

Colin Alan Sebastian

Great.

Christopher Hickey

Can Thanks, the question, have he next we operator. please?

Operator

And Creutz you. Thank & Cowen at to Doug Company. we'll go

Doug Creutz

Thank Hey. you.

willing preorders bit You get are on of be if any granular you looking you'd little of wondered I that, mentioned give to a your Duty strong. to that more Call maybe you might some selling comparison in Duty titles the Call are maybe interesting. you else title interest then of anything better of terms in you. in looking that past. And guys at the that can think be Thank

Collister Johnson

Sure. hear Coddy. is voice. level. Well, high This at start your Thanks, Doug, a could just I'd

XXX announcements deep it building that to on billion it is preorders builds like appealing playing are response highly on remember, many context million I'll multiplayer We at We And We known is Black before it we with And hands Blackout kicks provides in zombies play you be that feel All this starts we're multiplayer really even amount universe over XX now sort the also excitement at really seen Ops reveal franchise and the really watched, as strong. remembering of this that game. three us. hope the the so date about just of development a fan have even off strong about EX received and I we call and about this momentum. event, the and it trend. tomorrow, has registered back far. and some engagement And We as give that just strength in the will incredibly major seeing of said, now expectations you good we new beta a over surge back, Ops for of what players advance those stepping We've and X think underway. to about feel the that first, to game really interest of great hours the mode. how sub-franchise seeing. guess and and were fans. build and interest of tremendous community And had us, ongoing may engagement think we're seeing has launch. on of had we really, well had already We're we with Comic-Com. May. it in Black

the June think (XX:XX) speaks on as fun bring earlier and really just We to map. As X overwhelmingly end. content tests for that. for teased many we're the the happens in teams well. in which week in are the and and take-downs rides also that of it find in Black I you said, It's seen, see in hours doing, And powers this, was we abilities of of generating years massive positive ATVs experience. Duty kind weeks to as of the an consumers hungry masters our play and tests you've past think Ops to move the out. And we the now, fans the you response hands through as this beds, that fans confidential are that both creation in But we for trailer just There's It's the think into from we that play and scripted. we it. helicopter we players truck that's sort in of Call it put and creating wild games And we moment-to-moment saw putting own it with really of the through. this this leans

we date. XX the Duty installments of to made of think So Call might it we're best October be and fired launch that we've of the up one for

Doug Creutz

Thank you. Great.

Christopher Hickey

operator. please, we Can next have the question,

Operator

we'll at Chris to Sachs. And go Goldman Merwin

Christopher Merwin

impact the business. grew talk Monetization further of headwinds Great. the for about title from in factoring XQ? was to pretty just core to and there relative you. the Thanks. rest you compare could if significantly engagement to any year? Could quarter-on-quarter Hey. Fortnite to curious Thank in how any so the franchises you incremental QX you of Are the Fortnite the headwinds

Spencer Adam Neumann

It's thought to your there. Chris. Hey, Sure. you glad we Spence. lost voice. We hear We're

welcome So back.

Christopher Merwin

Sorry about that.

Spencer Adam Neumann

seeing overall Bobby backdrop bringing in royale battle the these And are something to the we primarily at increasing We, I the But is case, prior royale. including of on new. question. what think and interest very some players be last the guess level, incremental I in players. games And like to games strong games seem gaming we to time between battle the engagement, we're like results I some trying new it as looks around earnings the across centered the problem. as with the quarter. And for franchises, and a for that on it delivered Thanks out, heard, mentioned no our you believe last compared of certain continues against as impact to highest engagement. performance it's industry. achieved call, there's point QX that strong that consumer our you stability splitting revenue making to this overall, and be that call, around highly mainstream. sector us which we Look, gaming more whole, talked They're It's their are no,

we the remain existing community. tried overall innovation gaming and dynamic driving that over and believe both shows And will this on franchises content excite in players our laser underscore to we it periods compelling in time. as sustain expands and once we again of new So fresh engagement draws that within long focused and and players today, innovation content

of of Battle see of when and in a think lot Call Thanks. way for you're release going we X in October. big Azeroth Duty a year to in release we a Ops when Black we So the in weeks ahead that couple again

Christopher Merwin

Okay. Thank you.

Operator

at we'll And next go Olson Piper to Jaffray. Mike

Michael J. Olson

progress? King Wondering could good you update on advertising afternoon. just Hey, Thanks. if us

Riccardo Zacconi

It's Riccardo Hi, Mike. here.

saying advertising start business me that the let So momentum. has

the So completion leaf and the heard past, QX we In a audience me rates environment branch at business and direct we progress the on the scale, ad a indirect offers channels. say that in you and King recall. and industry-leading network both encouraging ramped see

are we of advertisers and now see So them the seeing agencies, both power combination. of this to starting

the We our saw off new games a player Our we new to advertising products, at approach expansive in continue experience. phase. look testing teams the all teams, advertising innovative after and an a closely both and measured introduce to to are player on ads small growth to we to positive and take QX, base, we game In segments will also work roll-out. which the very team together and a continuing adds delivering if the teams, experience the

and of in the brief, meaningful ramp expect I a summarize continue make would to say have ad momentum, revenues half will I we and year So our the position as to XXXX. in more contribution second the we in

Michael J. Olson

Thank you.

Christopher Hickey

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

Operator

Certainly, and that Stifel. is from Drew at Crum

Drew Crum

can Good this afternoon, expansion hoping Thanks. Okay. I'm for you everyone. Thanks. just an the fall? the on expectations Destiny provide more update of franchise your major and

Collister Johnson

one. take it. Got I'll that is This Thanks, Drew. Coddy.

the quarters, Bungie a better gameplay Destiny doing to two with X ongoing And team to experience. game. in to As the last more have regrow engaging about end the last in moment gameplay talked And a with updates the the now, listening Destiny ongoing lot in to game game since evolve a made the remember, showed regrow of moment launched a overall the that's place at the community Activision the of series May, in September. here and deeper and most rewards the that particular, at strides we've really live users. that, ability lot improvements the team us to experience, expansion Warmind engagement the provide particularly and ongoing and you'll community, and with positive But that

happens be and next with whole and both The content of in this social And highest of of that's the response a transformative. way really engagement honestly around between sentiment do to step big of Forsaken think have which we online brings it month. the players years so three could which great this a we cooperative EX; part so, the new led Gambit, far launch is And with play we've seen lot around excitement competitive teams. to have encouraging EX, now hands-on gameplay had announcement, which

about good come feel on the we the momentum. we we've good do feel really the in engagement what about build overall, content to seen and and community to So Forsaken would that

it, in the period we're to countdown now fans. for put our that it hands excited we're in and of So

Drew Crum

Great. Thanks.

Christopher Hickey

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

Operator

Brandon Ross from at BTIG. that's and Certainly,

Brandon Ross

your press of there? World In taking us Warcraft there relative expectations presales are give you for strong other any the the question. release, And Hi. expansions? your mentioned for color Thanks what for overall Is expansion Thanks. you Battle current to could maybe further Azeroth. of

Michael Morhaime

This Thanks, is Mike. Brandon.

series. So launch. story-based We've Battle the another with for into this the we're the definitely tell Blizzard building Excitement released gearing releasing of excited up YouTube from Those And shorts pieces just to including seen animated drop story content Azeroth new strong the we're for expansion. Legion, we for community. pretty We expansion, They as major already, is Battle players have about two we're previous more story Warbringers started Azeroth. and the from had expansion, soon. up Warcraft both million also content called new racked our weeks away for special very, World X we've some very the that. on engagement and updates, views bridge inside of pre-patch. than And about

a into with game. removed players also hurdle can We started the how get

So we a front. gaming up a positivity by been lot and That's no require met of box with the longer purchase press community.

mentioned, As strong. preorders Coddy have been

important. the both very As expansions ongoing that and this been expansion, content a well has of for is the marks as work fresh, also a working the to time. point steady to milestone which increasingly in of celebrating out content I'll on of we're the big have on X,XXXth even day stream operation, think in game team's done the after kudos on I that continuing with we The keep great Warcraft some Warcraft. coming. big always, between as all job Today think we World great team a content World and improve and content

expansion lot momentum forward beyond to the into a the next that. We're the and heading and the about launch. very to there's look couple in So weeks also excited

Brandon Ross

Thank you.

Christopher Hickey

question, Brandon. can get we Thanks, Operator, the next please?

Operator

Wingren KeyBanc Capital to we'll Yes, sir. at And Evan go Markets.

Evan Wingren

Thanks.

from particularly least term do how above the get if sales release guess I near And to about at potential One the of full, industry I the high the schedule, for the main it seems you end is agree? on of at do risk questions that would ask, years? games. and the investors and holiday think grow you prior we so, about

Spencer Adam Neumann

the in years that competition just every strong more our feels Hey. dealt. it driving question, seems question year XXXX. than And and draw like is game Spence. Thanks every There's we're this one others, year, one. gaming. is And used out, like games play most gamers' to attention. what's as to and own probably It's fun quality factor our in industry, This point company how may across this the take we people the make bring business, And who year is regardless the now Evan. really the because to I'll the it not got to competition crowded in that all but number teams for a know the innovation and like It's that be and you game and the frankly. we've we happening, games there of experience. we're hand sense bit our in want a talented great makes time success gets the competitive

October positioned in to drive in in major up to look of release of communities. deliver the rest we're are you if releases X August, that we've across got Forsaken extremely Destiny a Battle we Between a at our franchise September, shaping So year, amazing growth. portfolio the major passionate number for experiences think and to from Ops X: well Azeroth King, Black our

season. So as we're in great of I execution said but of us plenty earlier, we've heading ahead our franchises into holiday got confident the

Evan Wingren

Thank you.

Christopher Hickey

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

Operator

Certainly. from And Matthew Thornton that's at SunTrust.

Matthew C. Thornton

maybe the the you we the afternoon. kind on one back bit work good so little the taking year? half slate Could for develop of will how Thanks is Maybe Yeah, King's for through about as of talk Riccardo. another a reach question. King, this and

Riccardo Zacconi

Indeed it's me. Matthew. It's Hi, Riccardo.

XXX active the monthly reach users on a after question we On then we let reach, then first had address slate. , on So answer a in of few We QX me QX. question stability. decrease million saw the and improved in the quarters

and down slow were seasonally the QX X% is quarter, versus here we a quarter. Now, previous

reach it initiatives encouraged our base player users temporarily Spence, that our as been you said, that the higher some some from third-party This monthly would both partners were trends, of by which earlier technical changes some active play paying heard not Now for at are show and to impacted users' invest. ability we off. have are

fresh time plan Slots and Crush per example, year-over-year, QX to mobile spent optimize In more delivery for we year, next and a before think monthly just franchises. end features high. to new content large to including will new here, engagement we from the think about also we we we to continue about games see continue in about our games. in not of updates the we a the game the player aim And live network, slate, regards the we games. of quarters. accelerate we strong of also remaining And to launches, users the slate, grew our established think Royal active across game So live with but Candy When launch one Charm do released major the the launch in and in

Christopher Hickey

time one question. last have we Operator, probably for

Operator

Certainly. And Tim to we'll Jefferies. go at O'Shea

Timothy O'Shea

Yes. question. for Thank taking you my

investors EX, and been what have platforms. streaming? streaming you. emerging position focused curious, since is gaming I'm these cloud So on on your Thank

Collister Johnson

Thanks, Tim. Coddy. This is

strong particularly very term, positive in It cloud-based is growing gaming ultimately think industry. and already and long for industry, the we the us. So an over streaming growth for a accelerate should

to to console. in the on the And have content of And experiences, when accessible think engagement streaming don't have PC, a our audiences system reducing expand don't easily cloud-based streaming more day And it more even reach you're third, well the as to provide enabling particular systems, we that streaming it experiences potential to talking the is we existing depending a able are placed big significantly in ongoing cases be throughout should the comes. about. some for deeper has First, take second, of screen friction, gaming they available. gamers, advantage

certainly deep, audiences. have broader to exposure that We franchises from benefit strong

fully positioned player that well of gaming content, may a ways some to as that take any access to advantage vibrant looking of our the love. has owns company bring economics in they creates And have additional to are streaming the our franchises IP, for for, We IP who platforms think, right associated the now we're we best communities bear. that

disrupt hurdles that So providers about I in lot show. you them, in doesn't to infrastructure but large and also a global milliseconds one solutions. example, in might expect, in number cloud measured dialogue TV just overcome a Live requirements or a streaming really that, we matter for But some mean of the watching adopted. movie tech it gaming widely important think before gaming. becomes platform latency as with can way their There's a there as mean, experience are a potential we're streaming

is so mainstream done the feel there's we And for like still before adoption. ready be tech to work

want So will the to to is in positioned think when it as we this heard, would through And do global broaden for mobile. happen. think and not well Probably bigger say term large the term we're it's does. near unlock you've reach near a I the us, we though, of over opportunity. the franchises our

that engaged We pipeline, And have And business. are it, can we're, really coming excited who today's you over look our that what the next we you look get about take bring. when for them communities day. future we're deeply at we really looking to at as heard our incubation when throughout really And really we're steps area excited expanding to on focused experiences of or quarters. call, the have with in

Timothy O'Shea

Thanks.

Christopher Hickey

the And concludes call. that

to to forward So look thank joining and next quarter. talking for everybody you we you us,

Robert A. Kotick

Thanks much. I soon. it. call. talk first said on your Thanks, think you joining we'll Congrats to you for Chris. Thanks and everyone so today,

Operator

today. us that again everyone ladies once to today's joining and thank conference, does conclude gentlemen, And and like I'd again for

Activision Blizzard (ATVI) 2 Aug 182018 Q2 Earnings call transcript