Activision Blizzard, Inc. (ATVI) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Activision Blizzard First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Chris Hickey, Senior Vice President, Investor Relations. Please go ahead. Christopher Hickey: Good afternoon, and thank you for joining us today for Activision Blizzard's first quarter 2021 conference call. With us are Bobby Kotick, CEO; Daniel Alegre, President and COO; Armin Zerza, CFO and Dennis Durkin. For Q&A, Rob Kostich, President of Activision; J. Allen Brack, President of Blizzard Entertainment; and Humam Sakhnini, President of King will also join us. Bobby Kotick: Thank you, Chris, and thank you all for joining us today. For more than a year now amid very challenging conditions the teams at Activision Blizzard have played an important role in supporting and serving our community of 400 million players in 190 countries. Our teams have kept players connected using our platform to comfort, inspire, and draw people together. Their hard work and dedication enabled us to deliver significantly better than expected first quarter results. Dennis Durkin: Thanks for the kind words Bobby. I did want to take this opportunity to personally say thank you, to you, Bobby, to the incredible people in teams at Activision Blizzard and to the Board for all the wonderful support and partnership over the last nine years. It's truly been an incredible journey and one I will never forget. I'll also miss my interactions with all our great analysts and investors. I really appreciate all our dialogue over the years. You pushed us and made me and our business better. So thank you. Well it's tough to go I'm pleased to be leaving at a time when the business has never been stronger and I can't wait to see the results as the company continues to execute against our strong pipeline. And I know this business is in good hands with Armin, who I've known for a long time. I know that he will continue to bring our disciplined and prudent approach and commitment to shareholder value creation that investors expect from Activision Blizzard. I'll sign off by saying one last thank you. I truly am grateful for it all. I'll now hand it over to Daniel to go through the highlights from the quarter. Daniel? Daniel Alegre: Thank you, Dennis. And I would like to add my own appreciation for all your contributions to the company. I will certainly miss our partnership although I am thrilled to continue my close working relationship with Armin in his new role. As you've just heard, Activision Blizzard significantly exceeded its prior outlook for the first quarter delivering very strong growth across our largest franchises. These results confirm that our strategy is working, creating new experiences for our franchises across platforms, alongside engagement and player investment opportunities that appeal to the broadest audience. It is incredible to see with the backdrop of ongoing challenges from working from home, our teams have risen to the occasion and they really continue to deliver exceptional results. Our increased investments in our largest franchises are enabling us to connect and engage people in more ways than ever before. Shelter from home has accelerated trend we have been seeing where consumers around the world are turning to gaming for entertainment, connection, and community. Our successful growth initiatives in our largest franchises, vibrant and active communities and our strong pipeline position us to continue driving strong results this year as regions start to reopen. Align with our overall strategy we also continue to enhance our Battle.net platform as we build on our direct digital relationship with our players. Armin Zerza: Thanks, Daniel. I am glad to be with you all for my first earnings call as CFO and would like to echo Bobby's and Daniel's comments in thanking Dennis. He has been a fantastic mentor and partner over the years, and I wish him all the best for the future. Now, let me review our record first quarter results as well as outlook for 2021 and the second quarter. First quarter revenue and earnings per share, were well ahead of our prior outlook, driven by better than expected performance for Call of Duty and Candy Crush. Net bookings grew 36% year-over-year to $2.07 billion and segment operating income grew 59% to $853 million. Total segments operating margin expanded 6 percentage points year-over-year, reflecting the highest incremental margin associated with digital revenue stream. Now, let me turn to our segments result each of Activision Blizzard, and King contributed to the top and bottom line growth in the quarter. Activision revenue was $891 million growing 72% year-over-year. Growth was driven by Call of Duty Black Ops Cold War and Warzone income revenue, premium sales, and Call of Duty Mobile. Operating income more than doubled year-over-year to $442 million with an operating margin of 50%, 14 percentage points higher year-over-year. Blizzard revenue was $483 million increasing 7% year-over-year with very strong growth for World of Warcraft partially offset by product timing. Operating income was $208 million and business operating margin was 43% for the consistent year-over-year. King revenue grew 22% year-over-year to $609 million. This is a new record led by strong in-game revenue growth of Candy Crush and advertising revenue grew 70% year-over-year. Operating income was $203 million growing 30% year-over-year even after increasing investments in user acquisition. And King's operating margin was 33%, 2 percentage points higher year-over-year. Finally, across our segment, in-game net bookings grew 40% year-over-year to $1.34 billion representing 65% of overall net bookings with each of Activision, Blizzard, and King contributing to the strong performance. Okay. Now let's turn to our overall consolidated results. And unless otherwise indicated, I'll be referencing non-GAAP figure. As always, please refer to our earnings release for our full GAAP to non-GAAP reconciliation. Now for the quarter, we generated quarter 1 GAAP revenues of $2.28 billion, $260 million above our February outlook. This includes the network recognition of the growth of $9 million and net bookings of $2.7 billion were $316 million above outlook and we generate this GAAP of EPS of $0.79 and quarter 1 non-GAAP EPS of $0.98 which was $0.14 above our February outlook. These figures include the net work recognition of the growth of $0.14. Now turning to cash flow and the balance sheet. Our strong business fundamentals also grew substantial cash flow generation in the quarter. We delivered operating cash flow of $844 million significantly higher year-over-year reflecting higher operating income tax settlement in the year ago quarter and changes in working capital. Our cash and investments at the end of March where approximately $9.5 billion by the end of the quarter with net cash position of approximately $5.9 billion. And as previously announced, this week will pay an annual dividend of $0.47 per share, 15% higher year-over-year. Now let me turn to output for quarter two and the full year. Regarding the slate our expanded teams are focused on delivering epic in-game and upfront content. This means that we'll continue to support our franchises with new in-game content, events and features all of which are critical elements of our business as we focus on keeping our communities engaged and drive year round player investment. In terms of upfront releases, we will release while Burning Crusade Classic in the coming months. And we're looking forward to launching Diablo 2 Resurrected and the latest premium release of Call of Duty in the second half of the year. And on mobile, we continue to plan for the launch of Diablo Immortal in the second half although as is customary we do not include meaningful contribution for new mobile launches in our outlook. Now before I discuss the specifics of our outlook let me provide some context. The year is off to a very strong start. Our growth initiative continues to deliver great results in the first quarter and our momentum has continued across all of our key franchises into the second quarter. Competition for talent remains high and in this context, we have been increasing our investment in creative and commercial talent to deliver even more compelling experiences across our portfolio to the remainder of the year. As a result, we feel great about our ability to continue liking and engaging our communities. So while it is still early in the year and we remain prudent in our assumptions, we are raising our outlook for full year net bookings and earnings per share. From a facing perspective, as discussed on the last end call, qualitative face difficult year-over-year comparison in Q2. Continuing a year ago benefited from the launch of Warzone, product timing and the introduction of shelter from home mandates. We also intend to take advantage of our strong business momentum to increase marketing around new content in Q2. We therefore continuously expect total segment operating profit to be lower year-over-year in the second quarter with stronger year-over-year performance in the second half of the year as we deliver against our second half pipeline. Now let me get into specific. For product to on a cash basis we expect revenues of $2.14 billion including the net recognition of the sales of $285 million. We expect net booking of $1.85 million. We expect a GAAP operating margin of 39%, a tax rate of 21%, GAAP and non-GAAP share costs of 785 million, an EPS of $0.81. For quarter two on a non-GAAP basis, we expect a tax rate of 18% and non-GAAP EPS of $0.91 including a net recognition of deferrals $.021. Now turning to the fiscal on a GAAP basis for 2021, we now expect revenues of $8.37 billion including net deferrals of $230 million. We now expect net bookings of $8.6 billion. We expect a GAAP operating margin of 36%, a GAAP tax rate of 22% GAAP and non-GAAP share count of 787 million and GAAP EPS of $2.91. By 2021 on a non-GAAP basis, we expect a tax rate of 20% and non-GAAP EPS $3.42 including net deferral to $0.28. So to close in Q1, we continue to deliver strong results across our largest franchises and our momentum has continued into Q. We are making great progress in our pipeline which includes key content that we expect to deliver another step change in financial performance in 2022, as well as unannounced initiatives that we expect to drive longer term growth for the company. We have a combination of leading on franchises best in class developer and commercial talent, and expertise across platforms and business models; all of which create a powerful platform for sustained financial performance. We remain focused on execution and operational discipline and committed to profitable growth to drive shareholder value over the long term. Now I will ask our business leaders Rob to join Bobby, Dan, and myself to answer your question. Operator? Operator: We will now begin the question and answer session. Our first question comes from Tyler Parker with KeyBanc Capital Markets. Please go ahead. Tyler Parker: Great, thanks for the question. I just wanted to ask about consumer behavior as we reopen and vaccines start to roll out or are rolling out more significantly. The question is, are we seeing any effects on engagement outside of typical seasonal trends? Thanks. Daniel Alegre: I'll take that in. Thanks, Tyler. Thanks for the question. Well, first and foremost, it is clearly great news that the regions are starting to reopen. So it's great to see people out and about and obviously healthy. We've been looking at engagement trends very-very closely. And as you'd probably expect, the trends vary between the franchises, depending on the nature of the audience, and also the type of the game. Now we do see some variation between regions that are reopening versus those that are locking back down. But overall, as we continue to execute against our strategy, we really continue to see strong engagement across each of our largest franchises and importantly player investment really remains very consistent across regions and that's important to note. I reiterate now, while we have seen some benefit from sheltering from the home, similar to the rest of the gaming industry, we do believe that much of the expansion that we've seen in our largest franchises is due to product initiatives that we've implemented via the launch of Warzone and Call of Duty Mobile or the introduction of Classic and a great WoW expansion and Shadowlands or our work to grow the payer base and deliver more frequent, compelling content in Candy. And I think some of the comments you heard today support that in terms of how April went for us, even as some of the regions have continued to open. For instance, Call of Duty season three is at similarly a strong trajectory, as we've seen before season one and season two. The current season of Call of Duty Mobile is tracking as the best yet in terms of player investment in the West and World of Warcraft is performing very well with strong engagement ahead of the upcoming launch of Burning Crusade Classic and can't ignore Candy. Candy is continuing to grow year-over-year against really tough comps. So these trends really do show our ability to build on the expansion that we've already seen in some of our franchises even as regions reopen. And as we look forward, we see a long term trend for more people gaming than ever before in more geographies and on more platforms. And that's been going on for decades that we only see that continuing with gaming becoming even more significant form of social connection and obviously entertainment. So it's great to see so many people being vaccinated around the world and some regions reopening. And we're encouraged by the fact that we're seeing engagement as economies reopen, but as ever we remain prudent our outlook and I appreciate your question. Hopefully that answers it. Next question. Operator: The next question comes from Alexia Quadrani with JPMorgan. Please go ahead. Alexia Quadrani: Thank you. Can you discuss the ongoing integration of Warzone with Black Ops and maybe circling back to your comments on the launch of Call of Duty Mobile in China anymore color you can provide perhaps on terms of engagement and monetization there or perhaps if you can touch on where you see the opportunity longer term. Rob Kostich: Alexia, it's Rob Kostich. I'll take this one. But I guess before I get into those questions directly I do think it's worth stepping back and noting some of the incredible milestones we've hit across the Call of Duty ecosystem which has always been focused on building more holistically. Warzone which you've probably seen which has obviously been transformational for our business in so many ways has now crossed 100 million players. Our premium Call of Duty games have now sold over 400 million copies live to-date on the franchise and Call of Duty Mobile has now crossed over 500 million downloads. So remarkably, after all these years, the franchise has never been stronger or more widely played and for that, we are just super thankful for the community's ongoing support and we're more committed than ever to provide them with the best possible experiences in the years that lie ahead. Now with respect to the integration of Warzone and Black Ops, we're really pleased with the integration. You've heard some of the financial results already on the call. Season three has maintained the great momentum of seasons one and two. And we look at even other factors season three set a new viewership record for us that reveal with over 2 million streaming viewers and this is higher than even Warzone launch in March of last year and this just continues to demonstrate the strength of our direct connection we have with our players and with all that said, we still truly fundamentally believe we are just scratching the surface of what Warzone can expand into for the community and that's the exciting part and thanks to our world class developer and publishing teams, we certainly believe the future of Warzone has never looked better. Now as we look ahead for Warzone later this year, there will be some other really fun integration with the great work that Sledgehammer Game is leading to this year, new premium release. And Daniel mentioned this already. It's worth noting that Sledgehammer studio now is also a stronger than ever. The studio has expanded its very talented team across its Foster City and Melbourne location. And now is even expanding further to Sledgehammer Toronto. Most importantly at the end of the day, we believe fans are going to be really-really excited and they will love with the studio is building. That's what it's all about in this business. And we can't wait to share more on this front. And finally, back to just your question on Mobile, we talked about a lot of the data I think on the call a little bit but Mobile live in China as you know doing very well. The West continues to perform very strongly and globally today, the Mobile has now crossed over a billion dollars in player investment in addition to the over 500 million downloads around the world. The current season is referenced Tokyo Escape is tracking to as the highest grossing to-date. So what I would say is overall, our teams are just continuing to execute really well across the East and the West and we continue to see really strong opportunities in all regions. And we remain very-very excited for the future of this platform and the broader Call of Duty ecosystem. Thank you for the question. Bobby Kotick: Thanks Alexia. Can we have next question please? Operator: The next question is from Ryan Gee with Bank of America. Please go ahead. Ryan Gee: Afternoon, everyone. Great results. Thanks for taking the question. Last quarter you guys talked about the breadth of content in the Blizzard pipelines. It would be great if we could get an update on how the Blizzard teams are progressing on the projects you've already announced, namely, Overwatch 2 and Diablo IV. And then if you could talk a little bit more about what else might be in the pipeline? That would be great. Thank you. J. Allen Brack: Hi there. This is J. Thanks for the question. When we look at the sort of the Blizzard development population we've added hundreds of developers across our key franchises over the last few years. And we continue to invest in world class development working to bring talent in from all around the globe and the goal here is to execute on the plans that we have to create continuous content for players across all of our games. Speaking of Overwatch 2 we've got some great feedback from the player community around the development progress that we showcased in February at Blizzconline and we feel really confident in both the game and the team and they're going to continue to share updates about Overwatch 2 progress, new features in a live game going forward. With Diablo, there is a lot of strong momentum right now. We have public testing that's taken place in both April and May for both Immortal and Diablo Resurrected Diablo® II: Resurrected rather. And we also have a lot of community interest around the development of Diablo IV as you mentioned. We're also continuing to make progress across multiple mobile titles that we've alluded to in the past. We really want to bring authentic Blizzard quality experiences to all the games that we have. And so for us, it's a pretty exciting time as we continue to work on PC, console, and mobile expressions of all of our franchises. And we feel like the IP and the franchises that we have are really full of a lot of potential and we'll look forward to sharing more as these projects progress and we make more progress going forward. Thanks for the question. Bobby Kotick: Thanks Ryan. Operator can we have the next question, please? Operator: The next question is from Mike Hickey with the Benchmark Company. Please go ahead. Mike Hickey: Congrats on your quarter. Thanks for taking my questions and Dan best of luck to you. You will be missed. Great job. I guess on King very strong performance you noted. I guess how sustainable do you see these trends in particular as you navigate the roll out of IDFA? Thanks guys. Humam Sakhnini: Thanks for the question, Mike. This is Humam. So as you noted, Q1 was a great quarter for King. We marked the five year anniversary of King's acquisition and we did that with record financial performance across the business including our best revenue quarter ever. Now, as you've heard, we have momentum across both our in-game and advertising sides of the business and we expect that momentum to continue. So on IDFA I believe we're very well equipped as the industry navigates towards IDFA changes and we're equipped on both the advertising side, and also on the user acquisition side. So let me give you a little bit of color on each of those. On the advertising side with our Q1 exit trajectory and including kind of the continued momentum we see in our direct business that positions us well as we navigate those advertising changes and as we look ahead we're adding to that momentum with initiatives underway along some examples and product innovation where we're expanding kind of the number of products that we have in our network. We're expanding our partner network and our direct sales force and we're broadening the categories of the advertisers that we work with. And so, when you put all those together, we believe we still have a long runway for growth in the advertising side. And we're constantly bringing in new brands, I should say, as we develop deeper and deeper relationships with brands across the category, as just one example, in the United Kingdom, we worked with Sky across three parts or three different areas of their business in Q1 and we were able to drive significant improvement and their brand metrics across. Recall consideration and association of their brand. So with all of that, we continue to believe that there is a good trajectory there as the industry navigates with IDFA. Now, as I turn on the other side, which is our user acquisition, we have strong momentum in our business and we continue to leverage the strength of our brand as we invest in and as we invest in our live Ops, and we invest also an ROI positive marketing to deliver new installs and bring back returning players. So more broadly, as we put more live events like Candy Crush stars and as we add more social features, as an example of the March launch of our competitive mode in Candy Soda, we are bringing more exciting moments that help us on that user acquisition. So all in all, current momentum is really good as you saw, and we expect that momentum to continue and we have confidence in our ability to deliver that over the next few quarters. Bobby Kotick: Thanks Mike. Operator, can we have the next question, please? Operator: And the next question is from Kunaal Malde with Atlantic Equities. Please go ahead. Kunaal Malde: Hi Armin Zerza, congrats on your new role. I was wondering if you could give us some color on your areas of focus going forward. And what you might be looking to do differently than Dennis? Armin Zerza: Yes. Thanks Kunal. Look for me, it all comes down to execution. We have an incredible team and as you've heard today we also have an incredible pipeline and we know when we execute that well, we not only delight player, but we also create attractive returns for shareholders. So what you should expect from me is to focus on a few key areas. Look it all starts with a focus on shareholder value creation. This has always been a focus for the company and frankly we have never been better positioned. As you have heard today, all of our franchises have incredible potential. So I'm very focused on working with the team to prioritize investment, and resources towards our biggest value creation opportunities. Next as I mentioned expect a very strong focus for me on execution excellence both creatively and commercially. And in that context, I do believe that the CFO has an important role to play in not just overseeing the achievement of financial targets but also the progress against our operating and commercial plan. So if you expect me to leverage my experiences as Chief Commercial Officer of the company, and Chief Operating Officer of Blizzard, to help make sure that all of our financial result is set up for success. And then of course, you should expect continuous focus around financial discipline and organizational excellence. Fortunately, our culture is centered around growth, operational discipline, and financial conservatism and that won't change. So from an organizational perspective finally I continue to be focused on building a world class team in order to support our growth plans that we have discussed today. So I hope that gives you a sense of how I'm approaching the role. But really what I'm looking forward to is getting out there and meeting all of you in the coming months. Thanks for your question Kunal. Bobby Kotick: Thanks. Operator can we have a next question please? Operator: The next question is from Brian Nowak with Morgan Stanley. Please go ahead. Brian Nowak: Thanks for taking my question. I want to ask about Diablo Mobile. Curious to hear about any learnings thus far from the Diablo Mobile beta things that are sort of working particularly well versus areas where you see room for further innovation. Then sort of a bigger picture one on Diablo, talk to us about sort of the how you are thinking about the importance of a sequence approach to having Diablo remaster followed by Mobile followed by part for us are really maximize the gamer interest. Thanks. Rob Kostich: Yes. Thanks a lot for that question. I personally am a massive fan of Diablo. I have put in 1000s of hours into various Diablo games over the decades. And we're all very excited about the overall strategy and the direction of the games that you mentioned. When we think and look at Diablo we've got three upcoming releases that we expect to really expand the audience and really delight the community and exceed their expectations. So Diablo II: Resurrected is bringing we think of as really a true classic in-gaming into the modern gaming world for both new fans and fans that really are going to come back and play it again. Diablo Immortal the point there or the goal there is to broaden the audience bring an authentic version of Diablo to Mobile and then with Diablo IV that's going to be our next mainline title that we feel is going to advance the art of the action RPG genre. And so, it's really never been a better time in the history of Diablo to be a Diablo fan. We've seen positive reception to the development progress that we shared this year for Diablo IV. We announced the new class the Rogue at Blizzconline and the team is continuing to progress through important internal development milestones. With Diablo Immortal it's currently in the second phase of testing. We've introduced another new class. We've introduced new zones and we've also introduced first time to the public the high end in game and PVP content. And we've seen the community respond pretty positively thus far particularly around the system's design. And we're looking forward to more of their feedback as testing continues. On top of being an authentic Diablo experience on mobile Immortal is also bridging a narrative gap between the events of what happened at the end of Diablo II and the start of Diablo III and so that's bringing additional storytelling into the franchise. And then lastly Diablo® II: Resurrected recently completed its first public test and the reception that we received was really great. The original Diablo II is a landmark game in Blizzards history, and that we're really happy that we've been able to kind of reintroduce this experience to new players and spark renewed passion in players who really love the original. And so the overall strategy for Diablo is to really provide players with different ways to engage in the franchise on their platform of choice. And we think that this will welcome all kinds of people all around the world into the Diablo player community. Thanks for the question. Bobby Kotick: Thanks, Brian. Operator can we have the next question, please? Operator: And the next question is from Andrew Uerkwitz with Jeffries. Please go ahead. Andrew Uerkwitz: Thanks for taking the question. There have been quite a few game delays in 2020 so far in 2021. Obviously consoles are very hard to find. Could you talk about how this may have impacted game development for you or is impacting a development? Are you hiring more? Are you limiting scope? Are you pushing out timelines? And then lastly, how are you balancing all of this with crunch and kind of the other mental aspects for all of your employees working from home? Thank you. Daniel Alegre: This is Daniel again and thank you Andrew for the question. First of all our focus is absolutely ensuring the health and safety of our employees. This means both physical and psychological. And we've been in constant touch with our team managers to ensure that our employees are kept safe and also if they're able to find the time that they really need to recharge when needed. Early on in the pandemic Bobby shared his personal telephone number with each and every employee for them to reach out if they needed any help and I'm personally very proud of our company's response and also amazed by the talent in our organization who have adapted to so many curveballs that this pandemic has really thrown at people. As for your question on game development we are fortunate that to-date we really haven't seen any significant impact to game development with our current games in pipeline because we're really meeting our pre-COVID milestone. And as we have seen in 2020 and also in early 2021 we've delivered the games that our players have expected and with the quality that really defines our company and we also have been very fortunate that we haven't had to compromise game that our players have as a result just the best value for the money. So it's been incredible to see. Now, as mentioned in previous earning calls, we have reopened some of our studio capabilities in the limited fashion for areas that really needed it like motion capture, for instance. And that was really to ensure that we just stayed on top of our milestone. And in each case, we obviously ensured strict adherence to heightened COVID testing and separation protocols that have ensured that our employees were kept safe. But having said that we recognized with our strategy of increasing game content and frequency as well as doubling down on live operations we must and we have to continue to grow our developer base. And this is why we recently announced as Bobby alluded to in his opening remarks, the goal to hire 2000 plus developers over the coming few years, and we're actively hiring around the globe and we have the benefit of having studios and cities across Asia, Europe, and of course, across the Americas. So our teams are really adept at working across geographies and you'll see us opening or expanding studios in locations such as Poland, and in Toronto for instance to give us access to some of the great pools of talent to really help us deliver on even more content in the years ahead. Thanks again Andrew. Bobby Kotick: Operator can we have the next question, please? Operator: The next question is from Gerrick Johnson from BMO Capital Markets. Please go ahead. Gerrick Johnson: Good afternoon. Thank you. So your peers have been active. Some of your peers have been active in M&A recently. What is your perspective on inorganic growth now that we're sitting here five years after the King acquisition? Thank you. Armin Zerza: This is Armin. Thanks Garrick. Look, we haven't changed our approach. We have a very strong track record of being balanced and disciplined in how we allocate capital across investing into organic business growth, returning capital to shareholders via buybacks and dividends, as well as strategic M&A and on M&A specifically, we have completed several transactions that have created significant value. As you mentioned, King is a great example of that. We mentioned today that we just celebrated the fifth anniversary of this acquisition which gave us a leadership position in mobile and evaluation that delivered significant value to our shareholders as you know. Now when we look at the industry today we do continue to see key benefit. Look, as you know, we are still only 4% of a very fragmented market even though we are the leading standalone game publisher in the West but we will, and we can afford to be disciplined in our approach around the key criteria which we believe are essential for value creation, through M&A and those we generally look for large established franchises or technologies that have the potential for scale. We also look for strong leadership teams with a strong track record of profitability and then of course, we look for an attractive valuation that fits our return threshold. That's a pretty high bar and it can be difficult to find the right target that meets this criteria, especially, as you mentioned, with so much capital in the industry right now. But as I mentioned, we can afford to be and we will stay disciplined frankly even more so with the significant organic growth opportunities we have. So we remain patient for the right opportunity. It's an approach that has the company well for the last 30 years and we believe we’re safe as well into the future. Again, thanks for your question. Bobby Kotick: Operator, we have time for one last question, please. Operator: Next question will come from Colin Sebastian with Baird. Please go ahead. Colin Sebastian: Thanks and good afternoon. First, just to congratulate Armin on the new position and to wish Dennis all the best on what's next. I know you touched on some of this already but I wanted to follow up a bit more on the broader mobile development strategy including the genres and types of mobile games that you may be exploring both within the existing franchise base as well as extending out perhaps to new experiences? Thanks. Daniel Alegre: Thanks Colin and I will take the last question. This is Daniel again. Look we believe our franchises absolutely have to be accessible wherever the players are and that obviously includes mobile, and not only in developed countries but even more so in developing countries. In mobile this is just the ultimate driver of reach with almost 3 billion smartphones worldwide. That's forecasted to increase to 4 billion in the next five years. We are really doing ourselves and a community a disservice if our games are not almost platforms. And that's why this is so critical to our strategy. And the opportunity is crystal clear. Little known fact is most of the top 10 franchises on mobile worldwide are actually based on existing PC, or console IP and our franchises are in genres that are particularly well suited for mobile and they are amongst the few franchises in the industry to really have the appeal around the world including regions where mobile is the main way that people play core games. And as a result, we really want all of our franchises to be on mobile. And in some cases there might be several different ways in which a franchise can be represented on mobile. You may have re-imagination of an IP or mobile in addition to games that are just more similar to an existing console or a PC experience. And as a core part of our strategy to make our franchise available across platforms we've done a number of things. So obviously, we acquired King. And that brought tremendous mobile talent which has proven to be the case through continued momentum in that business exemplified by what you just saw in our Q1 results. And we've also as a company, we leverage the learnings from King across the business, platform engagement, live ops, user acquisition, or managing game economies and across Activision, and Blizzard, we started with Call of Duty Mobile, following up with Diablo mobile that Jay was just referring to and we're also working on a number of Warcraft mobile titles, and some unannounced initiatives as well underway. So players will increasingly be able to enjoy these franchises they love on console, PC, and on the mobile experiences we are building. So as you can tell this is a real priority for us. A lot of investment. We're hiring hundreds of mobile developers to achieve these targets. And you should continue to see the results of this work in the coming quarters. Thanks Colin. Bobby Kotick: Thanks, Daniel. Thank you all for your interest and participation. This concludes our call for today and as I mentioned I'm really looking forward to getting out there and meeting all of you in the coming months. Stay healthy. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.ATVI Ratings Summary
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