Activision Blizzard Inc. (ATVI), the world's largest video game publisher, said Thursday after the markets closed that its second quarter profit fell 45% from last year, hurt by lower revenue as well as higher costs and expenses.
However, the company's quarterly earnings per share, excluding items, breezed past Wall Street expectations as did its adjusted revenue.
At the same time, the company forecast third quarter revenue and earnings below analysts' current consensus estimate, but once again raised its outlook for the calendar year 2012.
Bobby Kotick, Chief Executive Officer of Activision Blizzard, said, "On a non-GAAP basis, we delivered record Q2 and first half net revenues, operating income and earnings. Our performance was driven by strong audience demand for our great games. We are very excited to have announced our expanded investment in China through Activision Publishing's agreement with Tencent to bring the Call of Duty franchise to the Chinese market."
Activision Blizzard shares are currently losing 3.57% in after hours trading after closing the day's regular trading session at $11.77, down 5 cents. The shares trade in a 52-week range of $10.40 to $14.40.
Santa Monica, California-based Activision Blizzard, which is a subsidiary of French media and telecoms giant Vivendi SA, reported net income for the second quarter of $185 million or $0.16 per share, compared to $335 million or $0.29 per share for the year-ago quarter.
Excluding items, adjusted net income for the second quarter was $224 million or $0.20 per share, compared to $118 million or $0.10 per share in the prior year quarter.
On average, 23 analysts polled by Thomson Reuters expected the company to earn $0.12 per share for the second quarter. Analysts' estimates typically exclude special items.
The maker of the "World of Warcraft" and "Call of Duty" titles said net revenues for the second quarter fell 6% to $1.08 billion from $1.15 billion a year earlier, while adjusted net revenues rose 51% to $1.05 billion from $699 million last year. Twenty-two analysts had a consensus revenue estimate of $834.79 million for the second quarter.
Second quarter revenues from digital channels fell 19% from last year to $343 million and represented 32% of the company's total revenues, while adjusted revenues from digital channels rose 17% from a year earlier to $497 million and represented 47% of the company's total revenues.
For the June quarter, Activision Blizzard was the number one independent game publisher overall in North America and Europe.
As of June 30, Blizzard Entertainment's World of Warcraft remains the number one subscription-based MMORPG and had about 9.1 million subscribers. Blizzard Entertainment expects to release World of Warcraft: Mists of Pandaria on September 25.
In early July, Activision Publishing and Chinese Internet services provider Tencent Holdings Ltd. announced a strategic relationship to bring the Call of Duty franchise to the Chinese market.
During the second quarter, Activision Blizzard purchased 4.4 million shares of its common stock for about $54 million.
In late June, there were reports that Vivendi has decided to seek a buyer for its $8.1 billion stake in Activision Blizzard. If no buyer emerges for the 61% holding in Activision Blizzard, Vivendi plans to sell a partial holding on the open market, the reports said.
Looking forward to the third quarter, Activision Blizzard net revenue of $740 million, adjusted net revenue of $690 million, earnings of $0.06 per share and adjusted earnings of $0.07 per share. Analysts currently expect the company to earn $0.12 per share on revenue of $728.14 million for the third quarter.
For the calendar year 2012, the company now expects net revenue of $4.33 billion, adjusted net revenue of $4.63 million, earnings of $0.69 per share and adjusted earnings of $0.99 per share. Previously, the company expected net revenue of $4.20 billion, adjusted net revenue of $4.53 million, earnings of $0.65 per share and adjusted earnings of $0.95 per share.
Analysts currently expect the company to earn $0.98 per share on revenue of $4.58 billion for the calendar year 2012.
"While we are increasing our financial outlook for full year 2012, we remain cautious given economic uncertainty, risks to consumer spending especially during the holiday season and the recognition that the majority of our key franchise launches are still ahead of us," Kotick said.
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