Rising expectations finally caught up to Activision Blizzard (NASDAQ: ATVI) last week. The video game giant merely met its holiday sales growth forecast on Thursday after beating management's targets in each of its last seven quarterly outings.
Yet the earnings report was packed with good news for investors, including far higher earnings than CEO Bobby Kotick and his team had predicted. Let's take a look at a few numbers that highlight Activision's healthy operating trends this past quarter.
385 million: Engaged user base
Activision's pool of monthly active users ticked up for the first time in over a year, rising to 385 million from 384 million in the prior quarter. Stabilization in the King Digital segment helped, but so did gains in its other core divisions.
The Activision side of the business shot up to 55 million users, matching a record high thanks to healthy demand for Call of Duty: WWII, Destiny 2, and Crash Bandicoot N. Sane Trilogy. Blizzard held steady at 40 million users despite having no major game release during the quarter.
50 minutes: Average gamer interaction time
The average gamer spent 50 minutes per day interacting with an Activision Blizzard title, or about the same as the prior quarter's record engagement result. That figure puts the company in the same league as some of the most popular online platforms around, including Facebook and Netflix. Its games remained huge broadcast draws, too, with Activision titles dominating streaming demand on Twitch.
$1 billion: In-game spending
If there were any concerns that gamers are losing their appetite for micro-transactions, Activision put them to rest this week. The publisher logged over $1 billion of in-game spending during the quarter as it sold more virtual goods and services in both its Call of Duty and Destiny franchises while significantly boosting monetization in casual games like Candy Crush.
78%: Portion of sales from digital sources
The digital sales channel rose to 78% of the business, up from 74% in 2016. Activision succeeded at boosting this metric on several fronts. It set a record for full-game downloads of Call of Duty: WWII, for example, and made Destiny 2 available for direct purchase through its PC-based platform. Monetizing trends were healthy in casual gaming, too, with Candy Crush franchise games holding the No. 1 and No. 2 spots among highest-grossing apps.
25%: Operating margin
Operating margin came in at 25% to nudge past management's 24% forecast. The Activision and Blizzard segments each logged record results here, thanks in part to those booming digital sales. Blizzard held the overall figure back, yet still managed a record result for a year that included no major game release but only built on content in established franchises like Overwatch, Hearthstone, and World of Warcraft.
Management's first look at the 2018 fiscal year predicts net bookings will rise by about 4% to $7.5 billion, with each of its three main publishing segments contributing to growth. In-game spending will be the main driver and is forecast to expand at a double-digit pace.
There are major content expansions on the way for Destiny 2 and World of Warcraft, but some of the most-anticipated developments involve Activision's new business lines.
The Overwatch esports league is aiming to reach profitability in 2018, and the company is set to introduce an advertising business that, given its massive audience and healthy engagement, could become a big profit driver over the long term.
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Demitrios Kalogeropoulos owns shares of Activision Blizzard, FB, and NFLX. The Motley Fool owns shares of and recommends Activision Blizzard, FB, and NFLX. The Motley Fool has the following options: short March 2018 $200 calls on FB and long March 2018 $170 puts on FB. The Motley Fool has a disclosure policy.