Activision Blizzard, Inc. (NASDAQ:ATVI) Q3 2019 Earnings Conference Call - Final Transcript

Nov 07, 2019 • 04:30 pm ET

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Activision Blizzard, Inc. (NASDAQ:ATVI) Q3 2019 Earnings Conference Call - Final Transcript

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Executive
Coddy Johnson

great.

And Blizzard continues to work on Diablo Immortal, a collaboration with its partner NetEase that will deliver an authentic Diablo experience on mobile and development is progressing well. As Bobby said, this year's BlizzCon featured the most robust content pipeline in Blizzard history and the team is working on more projects behind the scenes, including new IP. We look forward to sharing more with you when the time is right.

Now turning to King. Monthly active users were 247 million lower year-over-year driven by declines in King's web and smaller mobile titles, but importantly on Candy Crush, King's key franchise mobile reach grew year-over-year driven by the addition of Candy Crush Friends last October. And the team continued to expand on live services, features and content for the Candy franchise driving reach and engagement across current returning and new players. King also launched a number of initiatives in the quarter aimed at broadening payer engagement and longer term monetization, which delivered an encouraging uptake in payer conversion in Q3, but which did come at some expense to in-game net bookings in the quarter.

All that said, Candy Crush was still and once again, the top grossing franchise in the US app stores. King's advertising business also continued to grow profitably, with net bookings almost doubling year-over-year, it's advertisers embrace the value proposition of a native video ad product in a safe environment. The business remains well on track to exceed 100 million in net bookings this fiscal year.

So in summary, we are excited by the momentum we are seeing in many of our franchises and the growth opportunities they present. Our Q3 results reinforce the durability and potential of our franchises and our business and our confidence that our increased investment and focus this year sets us up for meaningful growth in the future.

I'll now hand the call over to Dennis to discuss our financial performance and our outlook. Dennis?

Executive
Dennis Durkin

Thanks, Coddy. Today, I will review our Q3 2019 results and our outlook for Q4. Q3 GAAP and non-GAAP EPS were ahead of our prior outlook. Key factors included business overperformance, favorable cost timing, and a lower tax rate. To review the quarter, I'll start with our segment results. Activision revenue was $209 million down year-over-year against a comparable that include the release of Destiny Forsaken. Key quarterly contributors were Call of Duty, Black Ops 4, in-game and upfront revenues, and ongoing sales of Crash Team Racing.

Operating income was $26 million with an operating margin of 12%. Blizzard revenue was $394 million lower year-over-year against the comparable that included the release of World of Warcraft: Battle for Azeroth. Operating income was $74 million with an operating margin of 19%. King revenue of $500 million was roughly flat year-over-year and sequentially. Candy Crush revenues grew modestly year-over-year with the ads business almost doubling over the same period.

Operating income was $194 million with an operating margin of 39%, 3 points higher year-over-year. Across our segments in-game net