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Activision Blizzard reported that its second-quarter bookings reached $1.64 billion, slightly better than analysts’ expectations, while profits hit exactly the target.
The company said its Activision, Blizzard and King divisions all grew in the second quarter compared to the first quarter, and it praised a strong slate for the second half. Microsoft has announced that it expects its $68.5 billion acquisition of Activision Blizzard to be approved by regulators in its current fiscal year ending June 30, 2023. In after-hours trading, the stock has climbed slightly to $80. .32 per share.
“Our acquisitions of Proletariat and Peltarion in the quarter strengthen our development assets, including our artificial intelligence and machine learning capabilities,” said Bobby Kotick, CEO of Activision Blizzard, in a statement. “Even in a challenging economic environment, with so many companies announcing freezes and layoffs, our development workforce grew 25% year-over-year from the end of the second quarter. Our talented teams plan to release exciting new Call of Duty, World of Warcraft and Overwatch content later this year. We look forward to completing our pending $95 per share cash transaction with Microsoft as soon as possible.”
The company’s previously announced titles are still coming in on schedule, with Call of Duty: Modern Warfare II releasing on October 28 as a follow-up to 2019’s Modern Warfare, the most successful Call of Duty title to date. Call of Duty: Warzone 2.0 is also coming later this year, with no specific date yet.
World of Warcraft: Wrath of the Lich King Classic will be released on September 26, with World of Warcraft: Dragonflight coming later this year as an expansion for the modern game. Overwatch 2 is scheduled for early access on PC and console on October 4 with a free-to-play live service model.
“Activision Blizzard’s total net postings (non-GAAP revenue) were 8% better than we forecasted,” said Wedbush Securities analyst Michael Pachter. King came close to our prediction (missed by $1 million), but Activision Publishing beat out $50 million and Blizzard by $100 million. I can’t say how much of that is Diablo Immortal (probably just $25 million or so), but those are very good numbers.”
Pachter added: “Most importantly, revenue from King-in-game purchases is up 6% year-over-year, and mobile games have been widely reported to suffer. I was skeptical of the ‘data’- services, because I think they’re making these things up along the way, and King’s performance proves them wrong. More importantly, ad revenue was up more than 20%, and again, skeptics predicted a miss. Only Zynga has material mobile revenue and ad revenue (now part of Take-Two), so that report should be interesting.”
In mobile games, Activision Blizzard praised the successful June launch of Diablo Immortal, a high-end free-to-play mobile game that tops the game charts in more than 100 countries. It was also in the top 10 highest-grossing games in US app stores for the month of June. The company did not say how much revenue Diablo Immortal generated. Sensor Tower Estimated that Diablo Immortal reached $100 million in revenue in its first eight weeks.
King’s segment revenue and operating income grew year on year, thanks to Candy Crush, King’s largest franchise. King’s in-game net bookings were up 6% year-over-year, driven by strong execution in live operations and user acquisition.
Time spent in Candy Crush again grew year-over-year, franchise payers grew at a double-digit percentage year-over-year, and Candy Crush was the top-grossing game franchise in US app stores for the 20th consecutive quarter.
Activision Blizzard said its developer base grew 25% year-over-year in the second quarter and that it has acquired two companies to continue delivering compelling content, including the acquisition of Boston-based Proletariat, maker of Spellbreak, for its World of Warcraft. team to expand.
And in June, King acquired software company Peltarion to accelerate the use of AI and machine learning technology to deliver more engaging content to its community.
More financial details
For the quarter ended June 30, 2022, Activision Blizzard’s GAAP net revenue was $1.64 billion, compared to $2.30 billion for the second quarter of 2021. GAAP net revenue from digital channels was $1.47 billion.
GAAP operating margin was 21%. GAAP earnings per diluted share were 36 cents, compared to $1.12 for the second quarter of 2021. On a non-GAAP basis, Activision Blizzard’s operating margin was 28% and earnings per diluted share were 48 cents, compared to $1.20 for the second quarter of 2021.
Activision Blizzard generated $198 million in operating cash flow for the quarter, compared to $388 million for the second quarter of 2021.
For the quarter ended June 30, 2022, Activision Blizzard’s net bookings were $1.64 billion, compared to $1.92 billion for the second quarter of 2021. In-game net bookings were $1.20 billion, compared to $1 .32 billion for the second quarter of 2021.
For the quarter ended June 30, 2022, Activision Blizzard’s total Monthly Active Users (MAUs)D was 361 million.
Based on its current pipeline, the company said the segment’s total operating income is expected to increase modestly in the third quarter from the second quarter, and return to year-over-year growth in the fourth quarter.
Activision Blizzard faces a major lawsuit for alleged sexual harassment at the company. The company said it remains committed to becoming the most welcoming, inclusive company in the industry and continues to implement previously announced initiatives to strengthen our practices and policies. In the second quarter, Activision Blizzard said it added experienced diversity, equality and inclusion leaders to key positions across the organization.
In July, the company launched Level Up U, a 12-week program that prepares talented individuals from inside and outside the industry to become full-time game developers. Level Up U is the first major program to be funded through a $250 million investment over a 10-year period announced in October to accelerate gaming and technology opportunities for underrepresented communities.
The company said Activision’s expansive studios also continue to make strong strides with an innovative mobile experience that will expand Warzone into the largest and fastest-growing platform. Within the Call of Duty ecosystem, the teams are well positioned to support these launches with substantial live operations, while also continuing to develop new premium content slated for 2023 and beyond, the company said.
Activision’s segment revenue and operating income in the second quarter were down year-over-year due to lower involvement in the Call of Duty franchise, but grew from the first quarter. Net bookings for Call of Duty on console and PC grew sequentially in the second quarter, following gameplay improvements and seasonal content in Call of Duty: Vanguard and Call of Duty: Warzone that the company said was well received by players. Net bookings for Call of Duty: Mobile were consistent with the first quarter.
Diablo IV, the next-generation installment in the action-RPG series, is slated to launch on PC and console in 2023. The title supports cross-play and cross-progression across platforms and is designed to provide the foundation for a live service, providing ongoing stories and new content.
During the second quarter, Blizzard unveiled Warcraft: Arclight Rumble, a mobile strategy game set in the Warcraft universe. Public testing of the game is underway in certain regions.
Blizzard’s segment sales and operating income in the second quarter were lower year on year, but higher than in the first quarter. World of Warcraft net bookings were down from a quarter ago with the launch of Burning Crusade Classic, offsetting the year-over-year growth for Hearthstone and the contribution of the June launch of Diablo Immortal.
King’s advertising business grew more than 20% year-over-year, despite mounting macroeconomic headwinds during the quarter, as the team continued to cautiously increase ad volume on the King network.
Cash and short-term investments at the end of the second quarter were $10.8 billion, and Activision Blizzard closed the quarter with a net cash position of approximately $7.1 billion. The corrections made.
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