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Activision Blizzard Inc. posted first-quarter 2017 adjusted earnings of 27 cents and revenues (including deferrals) of $1.196 billion, which easily beat the respective Zacks Consensus Estimate of 16 cents and $1.103 billion. However, on a year-over-year basis, revenues (including deferrals) were down approximately 18%.
Quarterly Numbers
Excluding deferral revenues, Activision reported sales figure of $1.726 billion, up 18.6%. Revenues were driven by increasing digital revenues, overwhelming success of Overwatch and the buyout of King Digital Entertainment.
Segment-wise, Product sales were $509 million, down 21.1%, whereas subscription, licensing and other revenues grew 50.2% to $1.217 billion.
On the basis of distribution channels, Activision reported retail channel sales of $270 million (down 44% year over year) and digital online revenues of $1.386 billion (up 50%). Digital revenues contributed 80% of total revenue in the quarter. Other revenues grew 49% year over year to $70 million.
Activision Blizzard, Inc Price, Consensus and EPS Surprise
On a geographical basis, revenues from North America grew 23% to $929 million, while that from EMEA grew 6% to $554 million. Revenues from Asia Pacific grew 34% to $243 million.
On a non-GAAP (redefined) basis, operating income was $747 million compared with $621 million reported in the year-ago quarter.
It is to be noted that Activision and a host of other video-game companies have changed the way they report their non-GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online-enabled products.
The company had over 431 million monthly active users (MAUs) at quarter end.
Activision and Blizzard divisions’ online player community MAUs were 48 million and 41 million, respectively. King Digital reported MAUs of 342 million due to the absence of any big releases.
Financial Position
Activision exited the quarter with $3.248 billion in cash and cash equivalents. Long-term debt was $4.393 billion. Operating cash flow for the quarter was $411 million.
Outlook
For 2017, Activision expects GAAP revenues of $6.1 billion and earnings per share of 88 cents against an earlier projection of revenues of $6 billion and earnings per share of 72 cents. On a non-GAAP basis, revenues and earnings are expected to be $6.1 billion and $1.80 per share, respectively against an earlier projection of revenues of $6 billion and earnings per share of $1.70. Deferral revenues are expected around $230 million.
The Zacks Consensus Estimate for revenues and earnings is pegged at $6.47 billion and $1.80 per share, respectively.
For second-quarter 2017, Activision anticipates GAAP revenues of $1.425 billion and earnings per share of 15 cents. On a non-GAAP basis, revenues and earnings are likely to be $1.425 billion and 38 cents per share, respectively. Deferral revenues are expected to be around negative $225 million.
Our Take
Activision has been benefiting from its focus on broadening its franchise portfolio, innovation and initiatives to expand to new geographies. Its offerings like StarCraft, World of Warcraft, Heroes of the Storm and Call of Duty are widely popular and should continue to contribute to the bottom line.
Activision is aggressively working on becoming a media entertainment giant, somewhere on the lines of The Walt Disney Company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. Recently, the company announced the launch of Overwatch e-sports league. Plus, it introduced a new consumer product division to be spearheaded by an ex-Walt Disney executive, Tim Kiplin.
Nevertheless, the higher adoption of free-to-play games and significant competition from the likes of Electronic Arts (EA - Free Report) , Take Two Interactive (TTWO - Free Report) and Glu Mobile remain near-term headwinds. Also, an uncertain macro-economic outlook adds to its woes as video games form a part of discretionary spending. Also, the company’s dependence on a handful of mega franchises (Call of Duty, World of Warcraft) for the lion’s share of its revenues makes it highly vulnerable.
Shares of Activision have registered impressive growth in the past one year. The stock generated a return of 51.82% compared with the Zacks Toys/Games/ Hobbies Product industry’s gain of 35.24%.
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Activision (ATVI) Q1 Earnings & Revenues Beat Estimates
Activision Blizzard Inc. posted first-quarter 2017 adjusted earnings of 27 cents and revenues (including deferrals) of $1.196 billion, which easily beat the respective Zacks Consensus Estimate of 16 cents and $1.103 billion. However, on a year-over-year basis, revenues (including deferrals) were down approximately 18%.
Quarterly Numbers
Excluding deferral revenues, Activision reported sales figure of $1.726 billion, up 18.6%. Revenues were driven by increasing digital revenues, overwhelming success of Overwatch and the buyout of King Digital Entertainment.
Segment-wise, Product sales were $509 million, down 21.1%, whereas subscription, licensing and other revenues grew 50.2% to $1.217 billion.
On the basis of distribution channels, Activision reported retail channel sales of $270 million (down 44% year over year) and digital online revenues of $1.386 billion (up 50%). Digital revenues contributed 80% of total revenue in the quarter. Other revenues grew 49% year over year to $70 million.
Activision Blizzard, Inc Price, Consensus and EPS Surprise
Activision Blizzard, Inc Price, Consensus and EPS Surprise | Activision Blizzard, Inc Quote
On a geographical basis, revenues from North America grew 23% to $929 million, while that from EMEA grew 6% to $554 million. Revenues from Asia Pacific grew 34% to $243 million.
On a non-GAAP (redefined) basis, operating income was $747 million compared with $621 million reported in the year-ago quarter.
It is to be noted that Activision and a host of other video-game companies have changed the way they report their non-GAAP fiscal results to meet stricter guidelines imposed by the SEC. The company will no longer include the impact from revenue deferrals accounting treatment on certain online-enabled products.
The company had over 431 million monthly active users (MAUs) at quarter end.
Activision and Blizzard divisions’ online player community MAUs were 48 million and 41 million, respectively. King Digital reported MAUs of 342 million due to the absence of any big releases.
Financial Position
Activision exited the quarter with $3.248 billion in cash and cash equivalents. Long-term debt was $4.393 billion. Operating cash flow for the quarter was $411 million.
Outlook
For 2017, Activision expects GAAP revenues of $6.1 billion and earnings per share of 88 cents against an earlier projection of revenues of $6 billion and earnings per share of 72 cents. On a non-GAAP basis, revenues and earnings are expected to be $6.1 billion and $1.80 per share, respectively against an earlier projection of revenues of $6 billion and earnings per share of $1.70. Deferral revenues are expected around $230 million.
The Zacks Consensus Estimate for revenues and earnings is pegged at $6.47 billion and $1.80 per share, respectively.
For second-quarter 2017, Activision anticipates GAAP revenues of $1.425 billion and earnings per share of 15 cents. On a non-GAAP basis, revenues and earnings are likely to be $1.425 billion and 38 cents per share, respectively. Deferral revenues are expected to be around negative $225 million.
Our Take
Activision has been benefiting from its focus on broadening its franchise portfolio, innovation and initiatives to expand to new geographies. Its offerings like StarCraft, World of Warcraft, Heroes of the Storm and Call of Duty are widely popular and should continue to contribute to the bottom line.
Activision is aggressively working on becoming a media entertainment giant, somewhere on the lines of The Walt Disney Company. Apart from launching a movie studio, the company is also strengthening its presence in the lucrative e-sports market. Recently, the company announced the launch of Overwatch e-sports league. Plus, it introduced a new consumer product division to be spearheaded by an ex-Walt Disney executive, Tim Kiplin.
Nevertheless, the higher adoption of free-to-play games and significant competition from the likes of Electronic Arts (EA - Free Report) , Take Two Interactive (TTWO - Free Report) and Glu Mobile remain near-term headwinds. Also, an uncertain macro-economic outlook adds to its woes as video games form a part of discretionary spending. Also, the company’s dependence on a handful of mega franchises (Call of Duty, World of Warcraft) for the lion’s share of its revenues makes it highly vulnerable.
Currently, Activision has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Activision have registered impressive growth in the past one year. The stock generated a return of 51.82% compared with the Zacks Toys/Games/ Hobbies Product industry’s gain of 35.24%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>