Macro Tsimmis

intelligently hedged investment

Activision Blizzard (ATVI) update #6—2Q09 results again exceed expectations

Posted by intelledgement on Wed, 05 Aug 09

Our game publishing company, Activision Blizzard (ATVI), announced 2Q09 results today which topped their guidance and increased their FY2009 profit estimates. The company also expanded their share buyback program 25% to $1.25 billion. Revenues for 2Q09 were $1.038 billion as compared to previous guidance of $1 billion and profits amounted to 15¢/share, 50% above the previous guidance of 10¢/share. The results—which were released after the close of the market today—set off a brisk after-hours rally in the stock price, which rocketed up as much as 15%—to north of $13/share—from the close of $11.39.

“Since our merger one year ago, we have delivered better-than-expected financial performance for four consecutive quarters,” stated Activision Blizzard CEO Robert Kotick, CEO. “Our second quarter overperformance was driven by Activision Publishing’s PROTOTYPE, Transformers: Revenge of the Fallen, X-Men Origins: Wolverine and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment’s World of Warcraft. During a challenging economic climate, Activision Blizzard grew its quarterly North American and European market share 2.8 points across all platforms to 12.7% from 9.9% for the previous year and was the #1 North American third-party console and handheld publisher for the quarter and first six months of the calendar year.”

And for the second time this year, company management raised guidance for FY2009 profits, this time from 24¢ per share to 26¢ per share. Citing decisions to delay the publication of Starcraft II and Singularity from late 2009 to the first half of 2010, they lowered revenue guidance for the full year from $4.3 billion to $4.05 billion.

Highlights of the second quarter included:

  • For the second quarter, Activision Publishing was the #1 U.S. third-party console and handheld publisher and had three of the top-10 best-selling titles in the U.S.—PROTOTYPE, Guitar Hero World Tour, and Wolverine
  • For the first six months of the calendar year, Activision Publishing had two of the top-five best-selling titles in North America and Europe—Guitar Hero World Tour and Call of Duty: World at War—and grew their North American and European market share of the music/dance category eight points to 53% as compared to the same period last year
  • During the quarter, Activision Blizzard was the #1 publisher overall in North America and Europe on the Xbox 360™ and the PlayStation® 2
  • Activision Blizzard increased its European market share by 2.8 points to 10.5% for the quarter, as compared to the same period during the previous calendar year
  • Activision Publishing’s new IP PROTOTYPE, was the #1 best-selling console title in North America for the month of June
  • X-Men Origins: Wolverine and  Transformers: Revenge of the Fallen were respectively the #1 and #2 best-selling movie games released on the same dates as their respective theatrical films in North America for the second quarter
  • Guitar Hero was the #1 third-party franchise in North America and Europe for the first six months of the calendar year

Also, last month Activision Blizzard’s Board of Directors authorized an increase of $250 million to the company’s stock repurchase program bringing the total authorization to $1.25 billion. As of 30 June, Activision Blizzard had purchased $668 million—or approximately 64 million shares—of common stock at an average price of $10.41, under its stock repurchase program.

There was also news on the World of Warcraft (WoW) front…mixed news. The good news was that Sam Raimi of the Spider-Man trilogy and “Drag Me to Hell” fame has signed on to direct the forthcoming WoW feature film. No date has been announced for the movie’s release. The not-so-good news, as usual, emanated from China. On 16 July, Blizzard and their newly anointed replacement licensee NetEase (NTSE) announced that WoW—which has been offline since midnite 7 June, when former licensee The9’s (NCTY) old contract expired—is ready to relaunch pending receipt of the necessary approval from the Chinese government. Howsoever, no such approval has yet been achieved and with the outage having lasted two months—and no end in sight—concerns are mounting as to how many of China’s million-plus WoW players will return to the fold once it restarts. Some mainland players have opened new accounts in Taiwan—where servers feature the long-delayed-on-the-mainland “Wrath of the Lich King” expansion as an added attraction—but connection times are slow and Blizzard is not supporting the migration of existing characters from mainland accounts which means players have to start from scratch to develop new characters. In the meantime, other MMORPG game publishers are marketing hard to recruit idle WoW players.

In 3Q09, ATVI management plan to release:

  • Guitar Hero 5 for the Xbox 360, PLAYSTATION®3, Wii™, and PlayStation 2
  • Marvel: Ultimate Alliance 2 for the Xbox 360, PLAYSTATION 3, Wii, PlayStation 2, PlayStation Portable, and the Nintendo DS™
  • Wolfenstein for the Xbox 360, PLAYSTATION 3, and Windows.

The release date for the sf first-person action title, Singularity, has been pushed back to the first quarter of 2010, when there will be fewer competitive titles releasing. Hopefully, this should improve the probability of achieving stronger sales. The release date for the sf real-time strategy game, StarCraft II, has been delayed to the first half of 2010 to coincide with the relaunch of the company’s upgraded® online-gaming service. Overall for 3Q09, Activision Blizzard expect GAAP net revenues of $680 million, and project a GAAP loss per diluted share of three cents.

Previous ATVI-related posts:

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