Q3 2019 Earnings Reports

While I don’t exactly have time to dig into these in detail, I stopped for a moment to check out the latest Activision/Blizzard and Starbreeze Q3 reports. It’s almost scary how much more sense they make with a basic understanding of accounting.

I mean, just looking at the consolidated balance sheet for AB, I get it. I know what those things and at least vaguely understand what they mean. Hopefully, that means I’ll have something more meaningful to say when they year-end report rolls around in a few months.

That knowledge sure doesn’t make Starbreeze look any better. I noticed an announcement buried in there that their partner for Payday: Crime Wars, a mobile title, has shut down most of the mobile publishing wing. This is probably one of the reasons why Payday 2 development began again recently. While the resumed Payday 2 income is certainly going to help, but probably not enough to offset the 80ish million SEK (roughly 8.4M USD) their VR parks are costing them. I realize most of the cost is an impairment, but still, they’re posing an overall operating loss of 20M SEK (~2.1M USD). They have 113.2M SEK (~11.7M USD) of cash(ish), so we don’t exactly have to worry about them sinking tomorrow. At this rate they have roughly a year to year and a half of operation. I’m sure the new paid DLC for Payday 2 will help extend that further.

Either way, y’all know the drill. None of this should be considered financial or investment advice. Likewise, I don’t own any stake in either of these companies. Partially because I have yet to find a way to buy shares internationally.

Y’all take care.

Activision Blizzard – 2019 Q2 Earnings

Okay, I didn’t get a chance to listen to the whole call. In fact, I missed most of it. You can find the recorded call, the slideshow, and a financial spreadsheet here. Feel free to double-check any and everything because I’m working primarily off the slideshow. There wasn’t a whole lot I thought was particularly interesting. That said, I’m not really a very active player of their products.

This is the obligatory “I don’t own any shares in this company” statement. Too rich for my blood, as they say.

I was honestly more interested in what they didn’t say, or how they phrased it, than what they actually said. In the grand scheme of things, this is a slam dunk of a financial report. They had pretty conservative guidance for Q2 and they exceeded that by a good bit. Investors seem to love it when a company “does better than it thought it would.”

Having said that, net revenue, operating income, and earnings per share are all down compared to last year. Just not as down as they expected it to be.

All of their monthly active users are reported as increasing or steady year over year, except WoW. They have a much more cagey “increased since mid-May” thing to say about that, though I don’t think it’s fair to compare the pre-expansion period last year to the mid-expansion position they’re in now. I’m fairly confident that’s why they didn’t issue a similar statement.

In the same fashion, King and CoD time spent are reported as “total time spent” which is growing for each title. Blizzard has a more predictable increase in “time spent per player.” As an MMO player, that seems fairly normal. One way to make that number go up is to lower the number of active players, which is probably a bit low in the pre-patch Q2. I suspect the Q3 will show a more positive WoW report.

I did find it interesting that they also reported viewtime for Overwatch League and CoD World League. Naturally, those numbers are up and increasing year over year. I imagine the current climate towards video games and violence, as well as ESPN dropping Apex Legends, may slow that down just a bit.

abq219incbysegment

Looking at the data in the financial spreadsheet though, it’s important to note that the company as a whole has been, and continues to, operate at a profit. Even broken out into Activision, Blizzard, and King, every segment is currently pulling a profit. They aren’t “losing money.” At least not yet.

There does seem to be a downward trend for Activision and Blizzard over the last few years while King has held pretty steady. I’ve been under the impression that the games industry as a whole is kinda down right now, so that’s to be expected.

abq219incbyplat

I find it particularly interesting that the platform that has taken the hardest hit is PC, though both it and console seem pretty volatile and both appear to be down compared to Q2 in other years.

Either way, time will tell I guess. Y’all take care, and remember not to put all your eggs in one basket.


BlaugustBOnlylogoIn case you haven’t heard, we’re in the middle of an event called Blaugust. The goal is to simply promote and stimulate the blogging community by encouraging people of all skill levels and backgrounds to post. The official post can be found here and it’s never too late to start.

A Very Brief Mention of the Activision Blizzard Earnings Call

splash screen

I figured I’d drop in on the A/B earnings call again since I did it last time. Theirs are actually pretty well timed for right after work, so I can pull it up on on the way home and listen to it while I’m cooking.

q1 results.png

Overall they beat their expectations, by a fair margin at that. I believe they cited better than expected sales of Sakiro Shadows Die Twice as being one of the major contributing factors.

segment results

They did talk a bit about both CoD Blops 4 and WW2 and how well it did, as well as constant mention of esports, which they seem to be pushing fairly heavily.

engagement models

While they mentioned in-game advertising several times, I only found it on one slide. It’s also possible I missed some.

On the whole, I didn’t see a whole lot of interest. It all seems pretty par for the course. Despite a fairly positive report, a lot of the numbers are down from last year and their stock price dropped. Of course, it may rebound Monday, who knows?

I’m falling asleep as I write this though, so I’m heading to bed. Y’all take care.

Activision Bizzard – Q4 2018 Earnings Call

Okay, so they had this bit at the beginning of the call and I feel compelled to mention it here as well. All of this is what’s called a “forward looking statement” and isn’t in any way guaranteed. It’s true to the best of their knowledge, but they can’t predict the future so it might change. All these slides are screenshots directly from their presentation.

I never realized it was possible to be bored and interested in something at the same time. That’s a pretty good way to describe the earnings call though. I was interested to hear what they had to say, but the actual nuts and bolts of it is pretty dry and boring. It’s also worth pointing out that I didn’t have any intention of sitting in, but I got an app notification while I was making dinner that said “tap here to listen in” and I was like “oh, sure, sounds like a plan.” So I was attempting to make and serve dinner and get other things done during this call, so my notes were kinda spotty, especially at the beginning.

Screenshot_20190212-164258
Just noticed the volume bar, sorry.

The overview of 2018 is actually mildly positive. Overall revenue is up compared to 2017 and actually beat the existing outlook for 2018. That’s actually pretty good news for a company that’s been struggling lately. I personally would have expected them to miss target. They did have some major releases for 2018 though, like Battle for Azeroth, so I’m sure that helped.

Screenshot_20190212-163749

Overall, though, most of their net revenue is coming from Activision. Call of Duty has continued to perform well for them, and PC sales of Black Ops 4 are really strong. Something else mentioned is that they’re seeing an increase in digital sales across platforms as well.

Blizzard is the black sheep of the family. Their major performers are the obvious one, Overwatch, Hearthstone, and WoW. I could have sworn I heard them say all three were experiencing “sequential decline” but that’s somewhat in conflict with the information presented in the slide. I felt this was pretty obvious for was WoW though, and it does specifically say “expected declines” there.

As for King, apparently Candy Crush Friends Saga, whatever that is, is performing well and is expected to continue doing so. Most of what they had to say is that it’s showing signs of nearing a full recovery from some network issues in Q2. Not sure what those issues were and I’m not intending to look or get into it here.

Screenshot_20190212-164401

Going forward, they outright said that 2019 is going to be down year over year. The only thing I heard them talk about for Activision was CoD 4. It’s apparently revolutionary and everyone is excited about it. For their sake I hope that’s true, but from where I sit CoD is CoD.

The big thing that’s been in the news is the “reducing certain non-developmental and administrative-related ‘costs.'” I realize this is more than layoff, but this is also layoffs. They specifically said they wanted to increase development talent and resources and that this is how they’d planned to, ah, make room. The bit that’s probably most concerning to games is the “de-prioritizing games and initiatives that are not meeting our expectations.”

They did discuss the situation with Bungie and Destiny in the Q&A section. It was a mutual decision driven by three majors factors. It was allegedly the outlier in that they didn’t fully own the Destiny IP, it’s revenue wasn’t really performing as well as they’d hoped, and it was tying up some of those pesky development resources and they wanted them back.

Blizzard itself has a pretty dismal outlook, with no major projects slated for release in 2019. None. I’m not sure if Diablo Immortal is considered a “Blizzard” product or not, because where it and CoD Mobile are concerned they “have no additional announcements at this time.” We do know they’re working on Diablo 4 among “several Diablo projects.” They also plan to devote some more resources to Overwatch, as its season 2 League starts… tomorrow, I guess? If they offered anything specific about Hearthstone I must have missed it.

Screenshot_20190212-164924

So the outlook for 2019 at Activision Blizzard is harsh. Revenue is shown down by about 1.5B and earnings per share are about half of 2018. It really makes sense given the layout though. Activision is riding on CoD 4, which I believe is more of an autumn release, Blizzard has basically nothing, and King is… doing whatever it is that King does. It’s just not going to be a income heavy year, which is somewhat expected when major releases have a multi-year development cycle.

This is why micro-transactions and subscriptions are a thing. It provides revenue from existing titles while new ones are developed. I’m not saying it’s always a good thing, but surely we can meet them halfway and not complain to much about reasonable monetization, whatever that may be.

Overall they seem to be doing okay, they’re currently up around $1/share in premarket trading so I’d say most people are pleased with and/or okay with the results. I’m personally indifferent, but this may be a good year to consider buying some stock if you’re in the market. I dunno, maybe shouldn’t listen to me, as that’s pure speculation on my part.

Y’all take care, and congratulations to anything that managed to get through all that without falling asleep.

Guitar Hero Live Refunds and Fortnite/Apex

I don’t have a lot going on today. Weird schedule has me a little off course, as it is wont to do. Still managed to have a few things on the radar though. Mostly just watching games compete and Activision do… whatever it’s doing.

I actually got pinged pretty early in the day that the Activision Blizzard stock was down 5% for the day. I didn’t catch much, but it look like they’re gonna have some layoffs, so I guess it kind of follows that some people choose to jump ship when they do. Ironically that ping came from the Robinhood app that I was looking at. They have a fairly no-frills sort of brokerage that’s conveniently also light on fees, but doesn’t have the sort of information and news feed that the better services have, so I have to actually go looking for that kind of stuff when I get the alerts.

The news about layoffs seems to have been somewhat expected, with most people looking for it ahead of an earnings call that’s happening tomorrow. In addition to that there’s also a refund program for Guitar Hero Live. It only applies to people who purchased it in the last year and it’s due to a decent chunk of the library being unavailable after a server shutdown. I’m not certainly how many qualifying sales they expect, but it’s still not good amidst everything else they  have going on.

It’s additionally fun to watch the internet shift from Fortnite to Apex Legends. I admittedly don’t know much about Apex, but it looks like it’s breaking into the scene pretty strong. I generally consider competition to be a good thing though. Wouldn’t want Epic thinkin’ they own the place. I’ve been seeing a lot of battle royale modes popping up in other games as well. Black Desert introduced one called the Shadow Arena. I haven’t played it personally, but I’ve heard it pays pretty good regardless.

small babies

I’m also at least going to make an attempt to include some images, relevant or otherwise. These are week old mini-rex babies. They have a very silky and shiny coat which is a trademark rex trait. These may in fact be satin rexs, I honestly can’t keep track. They’re cute in a fuzzy rabbit maggot kind of way though.

Think that’s about it for today. It’s either that to tell you the ever exciting tale of afk processing in Black Desert. Y’all take care, try not invest all your money in Enron, and maybe think long and hard if you’re considering Activision.

GameStop, Nvidia, and Activision Stock Stuff

It still feels weird, watching various gaming and tech companies rise and fall via share price. I’ve actually gone so far as to create an account over at marketwatch.com this morning, where I’m slowly accumulating a list of companies I feel like monitoring.

This came about because both GameStop and Nvidia are in my headlines this morning for taking some manner of fall or another. According to my little watchlist ol’ Activision Blizzard is in the club too.

GameStop’s, though, is the most severe. They seem to have stopped looking for a buyer for the business and as a result their stock price is down somewhere around 25% overnight. It’s sad to watch, in a way, as I have some fairly fond memories of using GameStop, say, around 2012. We’ll see though, it’s not like they’ve gone out of business just yet. Maybe they’ll get their hands on a CEO and find some way to secure their market.

Nvidia seems like less of an issue to me. Their stock is down due to lower than expected sales during the holiday season. I get it, but the whole shares dropping because we made less than expected is a general pet peeve. Their 2018 Gross and Net Income are both up year over year since 2014. Like, a lot. Net income in 2014 was 630M and 2018 was 3B, with a B. Of course, people are people, I guess. It does look like 2018 over was a very flat year for them, quarter to quarter not much has changed. Makes sense though, I’ve been trying to delay major computer upgrades hoping prices would come back down. Maybe this year will be the year.

That’s another thing though. See, everyone talks about Q4 sales, holiday sales, and I get it, traditionally a lot of product moves during that time period. As a consumer, though, the holidays aren’t where it’s at for me. Yeah, some extra spending happens, but I simply don’t spend what some of my coworkers do on the holidays.

Maybe that’s just me though. In a wonderful show of shareholder confidence, AMD, the company I usually buy from, is also down due to Nvidia’s report. Neither case is really a big deal, I don’t think. Especially not compared to the drop they both experienced back in September.

Activision Blizzard is also down a little bit because an analyst changed their opinion of the stock from “outperform” to “perform.” So, y’know, whatever.

Unfortunately this sort of odd analysis doesn’t apply to everyone I watch. Both Valve and Epic Games are private, which means none of these numbers are collected in a nice handy place for me to look at. Apparently Koch Media has decided that Metro Exodus will be an Epic Games exclusive for it’s first year. I’m sure some money changed hands, as it seems to be doing a lot lately with Epic Games. I’m assuming that’s mostly Fortnite money being used to launch the EG Store.

I’ve seen people criticizing the EG Store for it’s use of exclusives as well. I’m admittedly not a fan of having a bunch of exclusive storefronts, and have expressed sentiments against them in the past. Valve needs some competition though, and this may in fact be required to establish themselves. Not that I think they will stop when they’ve done so.

On that note, I’m going to fade back into the swirling thoughts of capitalists and proletariats from which I came and get some “real” work done. Y’all take care.

Activision Lawsuits and Fractional Reserve Banking?

Well, Activision now officially has two class action lawsuits on their hands. The sum total of the suit(s) seems to allege that they knew Bungie intended to leave and take Destiny with them and continued to misleadingly present Destiny and their plans for it to investors. While I don’t know enough to draw many conclusions at the moment, it’s safe to say that it’s not a good look for Activision Blizzard, and even if it’s not true and/or they win, it will likely be a costly win for both their finances and investor confidence.

Marathal mentioned in the comments of the last post I wrote about it, that they may end up dropping the Blizzard part of the name, possibly even the studio, and reforming as just Activision. This could certainly push that forward and even if they keep Blizzard the studio they may have to reform after it’s said and done in order to get some of that investor confidence back.

Speaking of economics, there’s the continuing train of thought I’ve been following in the background. I talked about the tragedy of the commons, but I got kinda curious and started with the general question of where money comes from anyway. Y’know, if the government “created” the money, how was it then placed into the system for general use. So I look it up, and, well, I had the whole thing wrong right from the start. In fact, it’s still bothering me a little bit. A small existential crisis of sorts.

Now, the government does, in fact, create the physical cash currency, typically through a “Central Bank.” The problem is that in the grand scheme of things, commercial banks create most of the money we use. Most of the world uses what’s called “fractional reserve banking.” This is where banks are told they can only lend out a certain percentage of the deposits that they hold. It’s properly called a reserve ratio. I’ve seen 10% used in a lot of examples, and this is in fact the current ratio for US banks holding more than 122.3M USD of certain liabilities. Mostly checking accounts.

So a US bank, then, that holds, say, 200M USD can lend out up to 180M. In theory it’s actually 1B (10% of 1B is 200M) but that’s kinda weird and complicated and makes some assumptions. Because I find it funny and amusing, my example bank is called the “Damn Bank.” If the Damn Bank lends out 50M to start a new business. This business takes it’s money and buys a variety of things like real estate and equipment and hires some labor to make it move. Let’s say they spend 30M on capital and labor and keep 20M for operating expenses. In a really simple scenario it would be safe to assume that most of the 30M they spent is going to end up being deposited back into the bank by the locals. Now the bank has a total of 230M USD in deposits, which increases it’s lending ability. The new business might even use the bank to hold it’s 20M operating cash which brings it up to 250M.

In reality, they don’t so much give the debtor 50M as much as they create a new account at the bank with 50M in it, so it never really leaves the bank, per se, just moves around amongst different accounts. The part that hurts my head is when we start considering that the 50M they created was technically already in the bank. If there was a run on the bank, they would only have 150M “real” money to pay the 250M they have deposited. Now, it’s worth mentioning that in this system the central bank generally controls various things like the reserve ratio and the ability to create new new “real” money. It’s entire purpose is not only to regulate the whole system but also the network of safety nets that protect from bank runs, creating additional “real” money for the commercial banks, if need be.

This is also not representative of every first world country. UK, NZ, Australia, and some others don’t have a required reserve ratio but instead have a “capital requirement” that sounds kinda like the same thing but apparently isn’t. I’m assuming it’s measured differently and probably includes more than just deposit account risk.

That’s something to look up another day though. I’m still trying really hard to swallow just what I’ve presented here. It suggests rather strongly that most of the money in our system only exists because it is borrowed.

For a good portion of my life I’ve believed that being debt free, or at least doing as much as possible to limit debt, was the best practice and that if everyone did it a lot of problems could be solved. This line of thinking, however, appears to be in error. If everyone avoided debt, new money would not be created.

Now, all of this is obviously not exactly a perfect reflection of the real world. There are multiple banks, so the 50M created by the Damn Bank wouldn’t necessarily stay there, but in fact be transferred to other commercial banks, increasing their lending ability and decreasing that of the Damn Bank. The there was a run on the Damn Bank they could, of course, borrow additional funds from the other banks to make the system keep running, and this is actually what happens under most circumstances. If a the Damn Bank ends up with more issued credit than it’s reserve ratio would allow, it typically borrows that money from the other banks to balance the sheet out a little bit.

I don’t even know how this works in international banking either. I’m sure I’ll get there at some point, but it all feels like information overload.

At the end of the day though, I still get paid. The money I get paid, while likely not “real” in the strictest sense, can still be exchanged for goods and services. The whole system, crazy as it seems, is specifically designed to avoid immediate catastrophe.

With that in mind, I’m going to shut up and go about my business. I barely understand any of this and what I do understand is suspect at best. Y’all take care.

 

Activision Needs a Wizard and AGDQ Final Tally

What on earth is going down over at Activision Blizzard? Every time I get ready to write some new manner of monkey business pops up that makes me wait a little while longer.

It started a couple of weeks ago when Spencer Neumann, the CFO for Activision Blizzard was put on paid leave amid rumors that he was moving to Netflix. This turned out to be accurate and he did indeed move to the CFO position at Netflix.

Then, right on the heels of that, Amrita Ahuja, the CFO for subsidiary Blizzard, left and took up the CFO position at Square.

Last Friday another bombshell got dropped. Bungie, currently known for it’s Destiny franchise, split from it’s publisher, you guessed it, Activision Blizzard. They’re taking the Destiny IP with them on the way out.

It was also announced right after, that a law firm was investigating Activision Blizzard on behalf of “investors” over concerns of security fraud. This is linked primarily to the severe overnight drop in the stock price that occurred when the Bungie split was announced. It closed Thursday Jan 10 @ $51.35/share and opened Friday Jan 11 @ $46.33/share. Looking at the overall history of the stock price, it doesn’t look overly suspicious to me, but I’m sure they know what they’re about.

There are two things about this that need clearing up though. See, I tried to figure out what exactly “securities fraud” is, and it covers a wide variety corporate misbehavior. It seems to primarily revolve around making a company appear to be something it isn’t in order to secure and/or keep funding. Notable examples would be ponzi schemes and Enron.

Second, this investigation is being conducted by a law firm, not “the authorities.” At least not yet anyway. I’m sure they’ll turn it over should anything untoward be discovered.

Let me just say, by the way, that I never thought I’d see that day that I was discussing a gaming company or its’ future using investor reports and announcements. Not only that, but I would be writing about it online with interest. What on earth has happened?

On a lighter note, Awesome Games Done Quick wrapped up with weekend with a total of $2,399,135.00 USD raised, at the time of writing. I’d say it was a really good year overall. The reddit user Kruulos posted a list of notable runs, with video links. I particularly enjoyed the Donkey Kong Country: Tropical Freeze race, as well as the Megaman X1-3 relay race, but generally enjoyed watching most of what I tuned in for. Even the games I don’t enjoy I still have a measure of awe and respect for the level of expertise these people possess.

For 2020 AGDQ will actually be in Orlando, FL. This is probably the closest it will ever be to me. Not sure I’ll be attending, but that would at least be feasible. This year’s SGDQ will be the last week of June, though that’s just a little ways off yet, and somehow right around the corner at the same time.

Let’s hope they fare better than Activision Blizzard yeah? Y’all take care.