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Activision (ATVI) Q2 Earnings & Revenues Beat on Coronavirus Push

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Activision Blizzard’s (ATVI - Free Report) second-quarter 2020 non-GAAP earnings of 81 cents per share jumped 52.8% year over year.

Consolidated revenues surged 74.4% year over year to $2 billion. Adjusting for net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues jumped 38.4% to $1.93 billion.

The Zacks Consensus Estimate for earnings and revenues was pegged at 68 cents per share and $1.69 billion, respectively.

For the quarter ended Jun 30, 2020, overall Monthly Active Users (MAUs) were 428 million compared with 327 million as of Jun 30, 2019.

Activision Blizzard’s net bookings increased 72.2% year over year to $2.08 billion. Net bookings from digital channels were $1.82 billion, up 80.2% year over year.
 

Activision Blizzard, Inc Price, Consensus and EPS Surprise

Activision Blizzard, Inc Price, Consensus and EPS Surprise

Activision Blizzard, Inc price-consensus-eps-surprise-chart | Activision Blizzard, Inc Quote

 

Notably, in-game net bookings were $1.37 billion, up 76.6% year over year.

Top-Line Details

Product sales (27.6% of revenues) were $533 million, up 48.5% year over year. Subscription, licensing and other revenues (72.4% of revenues) increased 35% to $1.40 billion.

Based on distribution channels, Activision Blizzard reported retail-channel sales of $168 million, down 13% year over year. However, digital online revenues of $1.59 billion were up 46.5% from the year-ago quarter. Other revenues improved 48% year over year to $173 million.

Further, on the basis of platforms, revenues from mobile and ancillary (32.2% of revenues) rose 21.7% year over year to $622 million. Additionally, PC revenues (24.9% of revenues) jumped 33.5% year over year to $482 million. Moreover, revenues from console (33.9% of revenues) surged 61% year over year to $655 million.

On a geographic basis, revenues from the Americas (57.6% of revenues) increased 45.5% year over year to $1.11 billion. Europe, the Middle East and Africa revenues (31.8% of revenues) were up 34% year over year to $615 million. Moreover, revenues from the Asia Pacific (10.6% of revenues) increased 18.5% year over year to $205 million.

Segment Details

Activision (49.5% of revenues) revenues surged 270.5% year over year to $993 million. The division had 125 million MAUs as of Jun 30, 2020 compared with 37 million as of Jun 30, 2019.

Call of Duty: Warzone has reached more than 75 million players to date. Further, Call of Duty in-game net bookings more than doubled sequentially and were almost five times higher year over year, creating a new quarterly record.

Call of Duty Mobile witnessed strong sequential growth in engagement and player investment, as well as monthly seasonal-content addition in the quarter under review.

Blizzard (23% of revenues) revenues of $461 million increased 20.1% from the year-ago quarter. Blizzard had 32 million MAUs as of Jun 30, 2020, unchanged year over year.

World of Warcraft’s reach and engagement increased sequentially, as shelter-at-home conditions further boosted the franchise’s strong trajectory.

Additionally, Overwatch engagement grew year over year, including among returning players during the quarter.

King’s (27.6% of revenues) revenues of $553 million increased 10.8% year over year. MAUs were 271 million as of Jun 30, 2020, compared with 258 million as of Jun 30, 2019.

Candy Crush franchise MAUs grew by a double-digit percentage year over year. Candy Crush was once again the top-grossing franchise in the U.S. mobile app stores.

Advertising net bookings grew year over year in the second quarter.

Operating Details

Product development expense increased 22.8% year over year to $280 million. Sales & marketing expenses were $236 million, up 25.5% year over year.

However, general & administrative expenses decreased 3.2% year over year to $149 million.

Total costs & expenses on a non-GAAP basis increased 17.6% year over year to $1.12 billion in the reported quarter.

On a non-GAAP basis, operating income was $811 million, up 83.1% year over year.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash and cash equivalents were $6.34 billion compared with $5.91 billion as of Mar 31, 2020.

Long-term debt as of Jun 30, 2020, was $2.68 billion, flat sequentially.

Operating cash flow surged 399% year over year to $768 million. Free cash flow jumped 494% year over year to $755 million.

On a trailing-12 month basis, free cash flow increased 17% to $2.04 billion.

Guidance

For third-quarter 2020, Activision Blizzard expects non-GAAP revenues of $1.80 billion and earnings of 75 cents per share. Net bookings are expected to be $1.65 billion.

For 2020, Activision Blizzard anticipates non-GAAP revenues of $7.28 billion (up from previous guidance of $6.80 billion) and earnings of $2.87 per share (up from previous guidance of $2.62). Net bookings are expected to be $7.63 billion.

Zacks Rank & Stocks to Consider

Activision Blizzard currently carries a Zacks Rank #3 (Hold).

Vista Outdoor (VSTO - Free Report) , LiveXLive Media (LIVX - Free Report) and TEGNA (TGNA - Free Report) are some better-ranked stocks in the broader consumer & discretionary sector. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While both Vista Outdoor and LiveXLive Media are set to report quarterly results on Aug 6, TEGNA is scheduled to report on Aug 10.

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