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Activision (ATVI) Q3 Earnings Up Y/Y on Solid Top-Line Growth

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Activision Blizzard’s (ATVI - Free Report) third-quarter 2020 non-GAAP earnings of 88 cents per share jumped 66% year over year.

Consolidated revenues surged 55.9% year over year to $1.72 billion. Adjusting for net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues jumped 52.4% to $1.95 billion.

The Zacks Consensus Estimate for earnings and revenues was pegged at 64 cents per share and $1.70 billion, respectively.

For the quarter ended Sep 30, 2020, overall Monthly Active Users (MAUs) were 390 million compared with 316 million as of Sep 30, 2019.

Activision Blizzard’s net bookings increased 45.6% year over year to $1.77 billion. Net bookings from digital channels were $1.61 billion, up 65.1% year over year.

Notably, in-game net bookings were $1.20 billion, up 76.6% 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

 

Top-Line Details

Product sales (20.9% of revenues) were $408 million, up 56.9% year over year. Subscription, licensing and other revenues (79.1% of revenues) increased 51.3% to $1.55 billion.

Based on distribution channels, Activision Blizzard reported retail-channel sales of $117 million, up 25.8% year over year. Moreover, digital online revenues of $1.75 billion were up 72.9% from the year-ago quarter. However, other revenues declined 52% year over year to $84 million.

Further, on the basis of platforms, revenues from mobile and ancillary (33.8% of revenues) rose 25.9% year over year to $661 million. Additionally, PC revenues (26.3% of revenues) jumped 50.7% year over year to $514 million. Moreover, revenues from console (35.6% of revenues) surged 188.4% year over year to $695 million.

On a geographic basis, revenues from the Americas (57.7% of revenues) soared 72.1% year over year to $1.13 billion. Europe, the Middle East and Africa revenues (30.3% of revenues) were up 30.3% year over year to $589 million. Moreover, revenues from Asia Pacific (12.2% of revenues) increased 36% year over year to $238 million.

Segment Details

Activision (44.9% of revenues) revenues surged 270% year over year to $773 million. The division had 111 million MAUs as of Sep 30, 2020 compared with 36 million as of Sep 30, 2019.

The segment’s top-line growth benefited from strong adoption of Call of Duty: Modern Warfare and Warzone titles.

Blizzard (23.9% of revenues) revenues of $411 million increased 4.3% from the year-ago quarter. Blizzard had 30 million MAUs as of Sep 30, 2020 compared with 33 million as of Sep 30, 2019.

Strong demand for World of Warcraft and Hearthstone drove segment revenues. Hours played in Hearthstone grew year over year in the reported quarter. Overwatch hit 10 million MAUs in the quarter under review.

King’s (31.2% of revenues) revenues of $536 million increased 7.2% year over year. MAUs were 249 million as of Sep 30, 2020, compared with 247 million as of Sep 30, 2019.

Candy Crush franchise MAUs grew year over year. Candy Crush was once again the top-grossing franchise in the U.S. app stores.

The Farm Heroes and Bubble Witch franchises also grew net bookings year over year.

Advertising net bookings grew double-digit year over year.

Operating Details

Product development expense increased 29.1% year over year to $262 million. Sales & marketing expenses were $233 million, up 29.4% year over year.

However, general & administrative expenses decreased 6.3% year over year to $148 million.

Total costs & expenses on a non-GAAP basis increased 18.1% year over year to $1.10 billion in the reported quarter.

On a non-GAAP basis, operating income was $856 million, up 143.2% year over year.

Balance Sheet & Cash Flow

As of Sep 30, 2020, cash and cash equivalents were $7.42 billion compared with $6.34 billion as of Jun 30, 2020.

Long-term debt as of Sep 30, 2020 was $3.60 billion compared with $2.68 billion as Jun 30.

Operating cash flow declined 37% year over year to $196 million. Free cash flow fell 37% year over year to $172 million.

On a trailing-12 month basis, free cash flow increased 8% to $1.94 billion.

Guidance

For fourth-quarter 2020, Activision Blizzard expects non-GAAP revenues of $2 billion and earnings of 63 cents per share. Net bookings are expected to be $2.73 billion.

For 2020, Activision Blizzard anticipates non-GAAP revenues of $7.68 billion (up from previous guidance of $7.28 billion) and earnings of $3.08 per share (up from previous guidance of $2.87). Net bookings are expected to be $8.10 billion.

Zacks Rank & Stocks to Consider

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

TEGNA (TGNA - Free Report) , ViacomCBS (VIAC - Free Report) and Fox Corp. (FOXA - Free Report) are some better-ranked stocks in the broader consumer & discretionary sector. While TEGNA sports a Zacks Rank #1 (Strong Buy) both ViacomCBS and Fox carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox, ViacomCBS and TEGNA are set to report their quarterly earnings results on Nov 3, 6, and 9, respectively.

 

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