Attendees play the Activision Blizzard Inc. Call Of Duty: Black Ops 4 video game at the company's booth during the E3 Electronic Entertainment Expo in Los Angeles, California, U.S., on Tuesday, June 12, 2018. Activision Blizzard reported mixed fourth-quarter results Tuesday and offered weak guidance for the first half of 2019. Shares fell as much as 5 percent in extended trading before gaining as much as 4 percent. Activision Blizzard has revealed headwinds in recent weeks, and said Tuesday it plans to cut its global workforce by 8 percent. "Our restructuring plan sheds investment and less productive nonstrategic areas to our business and will result in a net headcount reduction of approximately 8 percent while also driving a significant increase in investment focus and capabilities around our biggest franchises," Coddy Johnson, Activision's operating chief, said on the company's earnings call. "We're confident that over time this plan will enable our teams to accelerate the delivery of high-quality content to our communities." Here's how the company did during the fourth quarter compared with what Wall Street was expecting: EPS: $1.29 adjusted vs. $1.28 estimated by Refinitiv Revs. $2.84 billion vs. $3.04 billion estimated by Refinitiv Activision Blizzard expects first-quarter earnings per share of 20 cents— less than half of what Wall Street was looking for — on revenue of $1.18 billion. Refinitiv consensus estimates projected EPS of 46 cents on revenue of $1.45 billion for Q1 2019. The company expects full-year 2019 earnings of $2.10 per share on $6.30 billion in revenue, compared with analyst estimates of earnings of $2.54 per share on $7.25 billion in revenue, according to Refinitiv. The company's net bookings are expected to drop in 2019 to $6.30 billion, down from $7.26 billion during 2018 and $7.16 billion during 2017. "In-game execution was inadequate in some of our franchises, and we saw weaker-than-anticipated retail demand," Johnson said on the call. "Our 2019 outlook assumes that we will not improve in-game monetization as quickly as we would like and that it is a transition year where we have less new major content to release than we should." The company publishes popular game titles like "Call of Duty," "Diablo" and "Warcraft," and last month split from game studio Bungie, relinquishing rights to the "Destiny" game franchise. Each of those franchises will see increased investment over the next year, Johnson said. The gaming industry is feeling increasing pressure from free-to-play competitor "Fortnite." Last week, Electronic Arts and Take-Two Interactive lost 13 percent and 14 percent respectively in a single day after revealing increased competition. Shares of Activision have lost nearly 50 percent of their value since hitting a 52-week intraday high of $84.68 in October. The stock surged 4 percent Tuesday ahead of the earnings report. The company has also seen a series of high-profile executive shakeups in recent months. Its former chief financial officer, Spencer Neumann, was hired as CFO at Netflix. —CNBC's Eustance Huang contributed to this report. Correction: An earlier version of this story mistakenly quoted Activision CEO Bobby Kotick instead of COO Coddy Johnson. WATCH: Gaming stocks battling it out as Fortnite is causing glitches for the biggest companies<doc-sep>US gaming giant Activision Blizzard has said it is cutting 8pc of its workforce, despite the Call of Duty publisher posting record revenues in 2018. On Activision Blizzard’s Q4 earnings call on Tuesday, CEO Bobby Kotick said that the cuts were part of a ‘restructuring’ as the company looks to focus on its core game franchises and as it would be "de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business". The job losses will effect around 770 of Activision Blizzard’s 9,600 employees across the company’s different segments, which includes Call of Duty publisher Activision, World of Warcraft creator Blizzard and Candy Crush maker King. Each segment operates independently with different titles and direction. The cuts are thought to be hitting non-development roles the hardest, such as publishing and esports. Activision Blizzard said that it would be "aggressively hiring talent" to increase development teams on key titles, such as Call of Duty, Overwatch, World of Warcraft and Diablo, by around 20pc. The news of layoffs comes despite Activision Blizzard announcing net revenue of $7.5bn (£5.8bn) for 2018, the highest in the company’s history and up from $7bn in 2017. According to Mr Kotick, however, this did not reach the company’s expectations and Activision Blizzard is expecting 2019 to be a "transitional year".<doc-sep>During today's Activision Blizzard fourth quarter results conference call, CEO Bobby Kotick announced that the company had a record year in 2018, and that it will "reduce complexity and duplication," confirming reports of impending layoffs. "We're staffing up production on our incubation efforts faster, and increasing our investment in live services, in our tools, in our Battle.net platform, and in new areas like our fast growing esports and advertising efforts, but all with an intense focus on excellence, so we never disappoint our players," said Kotick. "Our pipeline is excellent and our development talent the very best in the world, but we need to refocus our efforts so that our development and production resources are better aligned with our priorities. We're reducing or eliminating investment in games and initiatives that weren't living up to player expectations or our leadership teams have determined may not live up to player expectations in the future. To drive improved execution and to fund development investment, we will in certain parts of the business reduce complexity and duplication in our back office functions, consolidate certain commercial operations, and revamp our consumer marketing capabilities to reflect our continued migration to a largely digital network." Later in the earnings call, Activision COO Coddy Johnson stated that the company will be laying off "approximately eight percent" of its employees, which amounts to hundreds of layoffs given the size of Activision Blizzard. (The company has over 9,000 employees according to its website.) Prior to the call, Kotaku obtained a letter reportedly sent by Blizzard president J. Allen Brack saying that the expansion of the company's "non-development teams" over the past few years have left some staffing levels "out of proportion" with the developer's current release plans. "This means we need to scale down some areas of our organization. I’m sorry to share that we will be parting ways with some of our colleagues in the US today," Brack wrote in the letter. "In our regional offices, we anticipate similar evaluations, subject to local requirements." Brack said that employees who are laid off will be given "a comprehensive severance package," as well as profit-sharing bonuses and job search assistance. Based on Kotick and Brack's comments, as well as a source who spoke to PC Gamer anonymously, the layoffs will primarily affect community, esports, and other departments not directly involved with programming, art, and game design. The Warcraft development team, for instance, has not been affected. In the same conference call, Activision said that Blizzard won't be releasing any major new games this year, but that the Diablo development team will be growing. "Overall, Blizzard's management is reinforcing its pipeline with more resources than ever before to support planned mobile titles, several PC and console releases, and WoW's continued cadence of content," said Johnson.<doc-sep>For Immediate Release Chicago, IL – February 11, 2018 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Under Armour UAA, Activision Blizzard ATVI, Nike NKE, Groupon GRPN and Cisco CSCO. Earnings Growth Deceleration Details The picture emerging from the Q4 earnings season is not great, but it is not as bad either as many in the market had feared ahead of the start of this earnings season. We knew that the period of very strong growth was now behind us. But the steady negative revisions to earnings estimates for the current and coming quarters have left growth expectations for the first half of 2019 barely in positive territory. This negative revisions trend is a function of uncertainty about global economic growth, with a host of leading companies in different industries citing weakness in China, Europe and elsewhere as the driver of weak guidance. We will share the current scorecard and what’s on deck this week a little later, but let’s first point out the key trends that we have seen from the Q4 results through Friday, February 8th. First , growth is decelerating. This isn’t a surprise, as we knew already that Q4 growth would be materially below the pace set in the first three quarters of the year. Total earnings for the 332 companies that have reported are up +13.4% from the same period last year on +7.2% higher revenues. Earnings and revenue growth for the same cohort of companies had been +24.3% and +9.7% in the preceding earnings season, respectively. The growth pace is on track to decelerate even further in the current and coming quarters, as we will show a little later. Second , companies appear to be struggling to beat consensus EPS estimates. For the 332 index members that have reported results already, 67.2% are beating EPS estimates and only 62% are beating revenue estimates. For the same cohort of companies, the proportion of positive EPS and revenue surprises was 78.6% and 60.8% in the Q3 earnings season, respectively. Story continues The proportion of these 332 index members beating both EPS and revenue estimates is 46.7%, which compares to 50.9% for the same group of companies in the preceding reporting cycle and 12-quarter average of 53.9%. The revenue beats percentage is on the weak side relative to historical periods, but the lag on the EPS beats percentage side is particularly noteworthy. The fact is that the Q4 EPS beats percentage is the lowest in more than 3 years. With Q4 positive surprises this hard to come by, one would reasonably assume that perhaps estimates had been too high. We know that wasn’t the case as estimates for the quarter had fallen the most of any other recent periods. Third , estimates for 2019 Q1 and full-year 2019 are coming down in a major way, with the Q1 growth rate now in negative territory. Negative revisions to 2019 Q1 estimates are along the same lines that we saw ahead of the start of the Q4 earnings season as well. Estimates for full-year 2019 have been coming down as well. Estimates were effectively unchanged during the September quarter, but they have been on a consistent downtrend since early October. Many in the market suspect that estimates have further to drop before stabilizing. Key Earnings Reports This Week We have more than 400 companies coming out with quarterly reports this week, including 63 S&P 500 members. Tuesday, February 12th: We have 15 index members reporting results on Tuesday, of which 9 will come out before the market’s open and the rest after the market’s close. There is no shortage of big-name reporters today, but Under Armour will be the notable report in the morning session and Activision Blizzard after the market’s close. Under Armour shares jumped following the Q3 earnings release on October 30th and even though the stock has since lost ground, it is still up big over the past year, up +57.3% vs. +31.3% gain for Nike and +5.1% gain for the S&P 500 index. Activision Blizzard and other game publishers have been struggling lately, with Epic Games’ Fortnight stealing their thunder. While estimates for the December quarter have been stable, the same for full-year have been steadily coming down. The stock is down -34% over the past year, lagging its industry’s -25.3% decline over the same time period. Groupon is another notable company reporting after the close on Tuesday. Wednesday, February 6th: We have 21 S&P 500 members reporting results on Wednesday, with Cisco as the more prominent company reporting after the market’s close. Cisco shares have outperformed the Tech sector as well as the broader market in the last 12 months, with the networking giant up +21.3% vs. +4% gain for the Zacks Tech sector. The stock typically responds in a major way to quarterly releases; it was up following the last two quarterly reports. Q4 Earnings Season Scorecard(as of Feb 8th, 2019) We now have Q4 results from 332 S&P 500 members that combined account for 78% of the index’s total market capitalization. Total earnings for these 332 index members are up +13.4% from the same period last year on +7.2% higher revenues, with 67.2% beating EPS estimates and 62% beating revenue estimates. For Q4 as a whole, combining the actual results from the 332 index members that have reported with estimates for the still-to-come 168 companies, total earnings for the S&P 500 index are expected to be up +13.7% from the same period last year on +6.2% higher revenues, which would follow the +25.7% earnings growth on +8.5% higher revenues in 2018 Q3. Earnings growth is expected to be in double digits for 8 of the 16 Zacks sectors, with Energy (+100.3% growth), Finance (+16.1%), Construction (+21.8%) and Transportation (+29.3%) as the strongest growth. Tech sector earnings are track to decelerate meaningfully in Q4, up +7.7%, after back-to-back quarters of very strong growth. Four sectors are expected to have lower earnings in Q4 relative to the year-earlier period, namely Conglomerates (-7.4% decline), Autos (-9.8%), Utilities (-7.8%) and Basic Materials (-0.7%) Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts<doc-sep>
Activision Blizzard (NASDAQ:ATVI) had one of its most polarizing quarters in memory during the fourth quarter of 2018, reporting record results but also a major restructuring of the company's operations. In all, about 775 people, or 8% of the workforce, will be laid off as the company tries to adapt to a changing gaming environment. At the same time, Activision Blizzard is putting more development resources into some of its biggest games. As you might expect, Fortnite's success is driving a lot of the changes for Activision and competitors like Electronic Arts (NASDAQ:EA). Here's what you need to know about the fourth quarter of 2018 and management's view about 2019. Check out the latest earnings call transcripts for Activision Blizzard. Activision Blizzard: The raw numbers Metric Q4 2018 Q4 2017 Year-Over-Year Change Revenue $2.38 billion $2.04 billion 16.5% GAAP operating margin 29% 11% +1800 basis points GAAP EPS $0.84 ($0.77) n/a What happened with Activision Blizzard this quarter? The numbers for the fourth quarter were solid all around and for the most part beat the guidance management had laid out three months ago. But 2019 brings about a lot of questions. The earnings-per-share figures look like a huge jump from a loss to a profit, but the 2017 numbers include a loss related to the tax changes passed in late 2017. On a non-GAAP basis, earnings were $0.90 per share in Q4 2018, up from $0.49 a year ago. The closely watched engagement metric was up at Activision and King while falling for Blizzard. Activision's monthly active users (MAUs) rose 7 million sequentially to 53 million people, driven by the Call of Duty: Black Ops 4 launch. King MAUs were up 6 million to 268 million on Candy Crush Friends Saga's launch. Blizzard MAUs were down 2 million to 35 million as World of Warcraft play declined. Net bookings for the quarter were $2.84 billion, up from $2.64 billion a year ago but below management's $3.05 billion guidance. Free cash flow for 2018 was $1.66 billion, down from $2.06 billion a year ago. Guidance for 2019 is where we see the real impact of Fortnite and other battle royale games like EA's newly launched Apex Legends. To make matters worse, Activision Blizzard doesn't have a great pipeline of games for 2019, so it's going to be a down year across the board. Revenue is expected to be $6.03 billion in 2019, compared to $7.50 million in revenue during 2018. First-quarter revenue is expected to be $1.72 billion. Earnings per share for the year are expected to be $1.18 on a GAAP basis and $1.85 on a non-GAAP basis. This compares to $2.35 in GAAP earnings per share during 2018 and $2.72 per share in non-GAAP EPS. For the first quarter, GAAP and non-GAAP guidance are for $0.39 and $0.63 per share in earnings, respectively. The expected decline in revenue and earnings led management to announce 775 job cuts from the company's 9,800-person workforce. The cuts come as part of a reorganization that will see Activision Blizzard put more money into its biggest game titles like Call of Duty, World of Warcraft, and Diablo while cutting down on the development of smaller titles. Management is also expecting to cut back on sales staff and rationalize some back-office functions that overlap between the company's three divisions. What management had to say COO Coddy Johnson laid out the problems for Activision Blizzard during the company's conference call, saying: "Our 2019 outlook assumes that we will not improve in-game monetization as quickly as we would like. And that it is a transition year where we have less new major content to release than we should." In-game monetization is what's going to drive growth, so the slow uptake is a bit concerning. And management is also using its slow year of releases to make the organizational changes I highlighted above. All in all, it's going to be a year of change for Activision Blizzard. Looking forward The challenges for Activision Blizzard may be bigger than they seem on the surface. In the past year, gamers have trended toward battle royale games that aren't the company's strong suit and seem to be gravitating to a "freemium" price point -- some free and some premium options -- that's been successful in mobile games. But the development of PC and console games is much more costly, and the scale of the games isn't as large as those for mobile devices.