Activision Blizzard, Inc.
Q4 2020 Earnings Call Transcript

Published: 5 Feb 2021

[Operator:]

Good day, and welcome to the Activision Blizzard Fourth Quarter 2020 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 of Investor Relations. Please go ahead, sir.

[Christopher Hickey:]

Good afternoon, and thank you for joining us today for Activision Blizzard's fourth quarter 2020 conference call. With us are Bobby Kotick CEO; Daniel Alegre, President and COO; and Dennis Durkin, CFO. And for Q&A, Rob Kostich, President of Activision; Jay 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. Through incredibly challenging circumstances our focused execution and increased investment in people and new content enabled us to achieve record results during 2020. On a GAAP basis, revenues increased year-over-year by 25%. Operating income increased 70% to $2.7 billion and earnings per share increased by 45%. Since present management assumed control of the company 30 years ago our returns to shareholders have been four times greater than the returns generated by the S&P 500 during the same period of time.

[Daniel Alegre:]

Thank you, Bobby. Activision Blizzard delivered better than expected results for the fourth quarter and for the fiscal year and we are entering 2021 with momentum across our largest franchises. Throughout 2020 we continued executing on fundamental changes to our core franchises investing in development resources and doubling down on content delivery. We saw early returns from our initiatives to transform our largest franchises through compelling premium content, more robust in-game operations, expanding the mobile and ramping new engagement models, including advertising and especially expanding free-to-play opportunities to attract new players. In Call of Duty, a new approach and player engagement and investment through adding free-to-play Warzone and mobile entry points have meaningfully expanded the ways in which players can interact with the franchise. And this is only adding to our premium proposition creating highly differentiated ecosystem with consistent and immersive seasonal content across mobile, console and PC. If you look back at the reach for the franchise since we embarked on this new direction we have seen monthly active users grow from approximately 40 million in 2018 to over 100 million in 2020, and we see more opportunities to grow the user base. In World of Warcraft, the introduction of the classic game drove substantial growth in reach and engagement between expansions for the modern game. And we have built on this momentum with the Shadowlands expansion, which has seen a tremendous response. We have multiple initiatives underway to ensure players can continue to experience the magic of Warcraft on a more consistent basis in a more platforms than ever before. And in Candy Crush our investments to expand the payer base while keeping players engage with continually updated content and went to double-digit year-over-year growth in net bookings in the fourth quarter, and we finished the year with the strongest performance since we acquired King. Throughout 2020 we also continue to invest in building our direct digital relationship with players, including through Battle.net, the entry point for tens of millions of players on PC to access our games each month. Since, inception over 400 million accounts worldwide have been created with multiple forms of payment. Our record results illustrate our opportunity to drive step changes in the reach, engagement and player investment of our franchise. While our business is benefited from industry tailwinds in 2020, much of our growth was driven by strong product and commercial execution. We expect our growth initiatives for Call of Duty, World of Warcraft and Candy Crush to again drive strong results in 2021. And we believe all of our large franchises will see meaningful user growth, engagement growth and player investment growth over the next two years to three years.

[Dennis Durkin:]

Thanks, Daniel. Today, I will review our 2020 and Q4 results as well as our outlook for 2021 and the first quarter. All growth comparisons are year-over-year unless otherwise indicated, I will be referencing non-GAAP figures. Please refer to our earnings release for full GAAP to non-GAAP reconciliations. Our full year results were substantially above our original outlook. This was a record setting year in which successful growth initiatives for several of our key franchises saw net bookings grow 32% year-over-year, GAAP revenues increased 25%, operating income grew 70%, and EPS grew 45% all reaching new highs. For the year, we generated GAAP revenues of $8.1 billion this includes the net deferral of $333 million. Net bookings were $8.4 billion. We generated GAAP diluted EPS of $2.82 and non-GAAP EPS of $3.21. These figures include net deferrals of $0.26. Over the fourth quarter GAAP and non-GAAP EPS were ahead of our prior outlook reflecting business overperformance and a lower tax rate. Now let's look at segment results. For the full year Activision revenue grew 78%, with Call of Duty revenues approximately doubling. Operating income increased to 120% and operating margin expanded 9 percentage points to 47%. For the quarter Activision revenue of $1.66 billion grew 16% driven primarily by Call of Duty and game revenues. Operating income rose 12%, to $780 million with an operating margin of 47%. Blizzard full year revenue increased 11%, and operating income grew 49% with a 9 percentage point expansion in operating margin. Blizzard Q4 revenue of $579 million was slightly lower year-over-year as growth for World of Warcraft was offset by a decline for other titles and the absence of BlizzCon in the quarter. Operating income was $160 million lower year-over-year, driven primarily by increased marketing investment and amortization of development costs behind the launch of Shadowlands. Blizzard's operating margin was 28% in the fourth quarter. For the full year King revenue grew 7% with operating income growing 16% and margin expanding 3 percentage points. King grew revenue 15% year-over-year to $577 million in Q4 with both in-game net bookings and advertising growing strongly. Operating income was $242 million with an operating margin of 42%, 3 points higher year-over-year driven by high incremental margins from advertising. Our business continues to shift to more recurring and digital revenue streams driving structurally higher margins over time. In 2020 in-game net bookings grew 44% year-over-year to reach 58% of net bookings, and digital net bookings grew 45% to represent 85% of total net bookings. A record performance on the income statement also drove record full year cash flow. Annual operating cash flow grew 23% to $2.3 billion, despite cash payments for tax settlements. For the full year free cash flow defined as operating cash flow less capital expenditure grew 27% to $2.2 billion. Our cash investments at the end of December was approximately $8.8 billion with net cash of approximately $5.2 billion. Turning to capital allocation. We enter 2021 with a strong balance sheet and significant flexibility. As always we continue to take a disciplined and balanced approach to capital allocation. With this in mind, our Board has authorized for the 11th year in a row an increase in our annual dividend, this year to $0.47 per share, an increase of 15% over the prior year, which will be payable in May. And also our Board has adopted a new two-year, $4 billion share repurchase authorization, an increase from our prior $1.5 billion share repurchase authorization. Now let's turn to our outlook for 2021. First, I will provide some context. Much of our success in 2020 was due to strong product and commercial execution, driving structural improvements in our largest owned franchises. While we believe we benefited from various shelter-at-home requirements we are seeing continued strength, even in markets where restriction have eased. Overall, we are entering 2021 with momentum in our biggest franchises and a pipeline of content and growth initiatives that we expect will enable each of our segments to grow operating income for the full year 2021. Activision enters the year with strong momentum for Call of Duty and has a fantastic pipeline of in-game content ahead across all platforms. We will benefit from a full year of Warzone driving upgrades to our premium content and incremental in-game player investment, and we have a substantial opportunity to continue migrating the community to Black Ops Cold War as well as another strong premium release planned for Q4 in 2021. In our outlook, we are conservatively assuming Call of Duty premium units are lower year-over-year. However, with opportunities in in-game across all platforms including the ramp up of Call of Duty Mobile in China we do expect growth in net bookings overall for the Call of Duty franchise. We expect Blizzard's net bookings to grow given the momentum in World of Warcraft and the other growth initiatives we have in the business. Our outlook does not include Diablo IV or Overwatch 2 launching in 2021. And while Diablo Immortal is progressing well, and we anticipate its launch later this year we don't have any material contribution from the title in our outlook presently. We expect top line growth at King primarily by ongoing growth in Candy Crush across both in-app purchases and advertising. We assume relatively little contribution from the release of Crash Bandicoot

[Operator:]

Thank you. And the first question will come from Tyler Parker with KeyBanc Capital Markets. Please go ahead.

[Tyler Parker:]

Hey thanks for the question, guys. I'd like to touch on Call of Duty first, I guess. So first off, now that you've launched a new addition in the franchise with Black Ops Cold War and integrated it into Warzone, I guess what are learning so far? Has it gone as expected? And then following up on that, just reinforce your confidence maybe in the strategy going forward, or did you come away with any new ideas on how to integrate this future releases into the Warzone experience? Thanks.

[Rob Kostich:]

Hey, Tyler. It's Rob. Thanks for the question. As you mentioned Warzone is now tightly integrated both with Black Ops Cold War and Modern Warfare. And this was a really big effort by our development teams across content, progression, in-game systems and a lot more. And overall as we've noted on the call, it's gone extremely well now. We have historic fourth quarter engagement across our premium games and Warzone. We had a record second year sales for Modern Warfare in 2020, and also the Black Ops Cold War sales started strong even gained momentum in December when we launched Season 1 and the great news is we're seeing positive momentum early in this quarter as well. Now that said to your question we learned a lot through this integration. I'd say here is probably few of the toplines. Black Ops Cold War brought a ton of content to Warzone, at over 30 new weapons, new operators and a lot more, and this was a massive update that required a lot of resources on our side. And having gone through this integration now we now have even a greater sense for how we can make these transitions work even better and smoother for all of our players in the future. And this is really important for us because Warzone it's going to be front and center for us for a long time. And on that front, I'd like to take a moment to thank our players for their content and continuous feedback on all aspects of the game. It's something we listen to each and every day and it's important to our process. And overall on the content side, the community responded really well, the Black Op content as we saw with battle pass as you heard those being increased and off to a record start. Our upsell was strong and our engagement respiked in the fourth quarter, particularly around the Season one launch in December when a Black Ops content came in. Now this is only strengthened our commitment to continue to bring compelling new content to both premium and free-to-play players on a regular basis. And that said, we know our player expectations are very high as the new content and rightly so. We want to make sure we over-deliver on that front as we move forward. I'd say another insight that became evident to us over the course of the year and in the fourth quarter is that Warzone has just become the best way for us to communicate with our fans. So, in the game itself events like the reveal of Black Ops Cold War were fun for the community at attractive like a large and engaged audience. It also had a great impact on our results. On the marketing front, year-on-year now we've more than doubled the number of players who have opted in the marketing from us and that I'll provide a great ongoing benefit. And additionally, we've also seen great results on conversion with our free premium trials with the free-to-play audience in Warzone. So net having this direct relationship and dialog with our community really puts us in a unique position relative to other forms of entertainment, to communicate to really a broad, broad audience and also relative to other, many of the games. So in your last part of your question, overall, we feel really good about and very confident in our strategy going forward. Warzone will continue to be a central part of that future content planning to our entire community, you can come together and experience the latest franchise has to offer. And our goal remains the same. Whether you're a premium or free-to-play Call of Duty player, we want to provide everyone with incredible gameplay experiences and we're going to continue to invest significantly across all fronts to support that effort for the community. Thank you.

[Tyler Parker:]

Thanks, guys.

[Christopher Hickey:]

Operator, can we have the next question, please?

[Operator:]

The next question will come from Eric Sheridan with UBS. Please go ahead.

[Eric Sheridan:]

Thanks for taking the question. Hope all is well, and Happy New Year to the whole team. Can you comment maybe on how titles continue to perform in the COVID-19 environment? We still find ourselves in most of the world. Maybe as a follow-up with some of the key learnings or behaviors you think they'd either permanent or transient coming out of COVID-19? And how we should think about that as hopefully we move away from the virus and back to a normalized environment as we go through '21 to '22? Thank you so much, guys.

[Daniel Alegre:]

Hi, Eric. It's Daniel Alegre, and Happy New Year and, thanks for the question. First, as Rob said I just really want to take this opportunity to thank our development teams for their incredible resilience, and real dedication to our mission. I know it hasn't been easy, and they have just nevertheless delivered an incredible quality that our players have come to expect of all our games. To your question, the biggest factor in how our communities have grown across our portfolio really is our focus on the execution of the new engagement models, and platforms such as with Warzone and Call of Duty that I talked about a little bit earlier. This is why I have a very strong conviction that our momentum is sustainable. We have a deep pipeline of content and initiatives within our franchises to really meet and exceed our player's expectations. Now going to the shelter-at-home we're seeing a consistent pattern in audience size and engagement that I referred to earlier. As you may expect many of our key title saw an uplift in players and engagement around the first wave of the lockdown and engagement patterns really isolated throughout the pandemic. In particular, in countries where restrictions that were eventually lifted. But two things that we saw, one is that on our more social titles engagement remain at an elevated level. Second, and I think more importantly, we see that for the franchises where we are executing on our new franchise strategy especially Call of Duty and World of Warcraft, we see engagement substantially higher than we had even as regions reopen, and that's why we're just still focus on making content available across all platforms, enabling us to reach much wider audiences globally and connecting players through our games and through this COVID time that connection that players have found has really been special and as rewarded. Now regarding the retail to digital shift we have seen an acceleration obviously. COVID has helped it, but this is actually a shift that's been going on for quite some time, and I don't need to emphasize the improved margins to our business from digital distribution. So across all these initiatives, I think one thing I really need to emphasize is quality is key. That's the expectations that players have of our games and the development teams have executed really fantastically under very difficult circumstances. And I know this very talented team will continue to delight our players. Thanks again, Eric.

[Christopher Hickey:]

Operator, can we have the next question please?

[Operator:]

The next question will come from Kunaal Malde with Atlantic Equities. Please go ahead.

[Kunaal Malde:]

Hi, congrats on the strong results. I was wondering if you could give us any more color on the puts and takes for the 2021 guidance? Is there anything to be aware of in terms of the phasing of that through the year? And then you also mentioned a step change in 2022, how should we think about sizing that?

[Dennis Durkin:]

Yeah. Hi, Kunaal it's Dennis here. Thanks for the question. As you can imagine, we do spend a lot of time putting together our full-year plan and a long-range plan as well. And we always trying to be thoughtful and prudent and the numbers we put together and guide to, this year is no different on that front. You did hear a lot about the strong momentum that we have particularly in our biggest franchises. So it's always nice to start the year out strong, but each of our big three franchises really have great opportunities for growth this year and that's really embedded in our guidance. I mean in COD, you can see we've got obviously a full year of Warzone and the premium integration and as well as obviously the mobile opportunity in particular with China being added this year. WoW has tremendous momentum coming out of the late Shadowlands launch from last year. Great engagement as we've heard on the classic side, which frankly will give us great momentum throughout the year, which is kind of unusual in a non-expansion year for a WoW. And then Humam and King and the Candy team had a really great 2020, and the business is really firing on all cylinders, both on the in-app purchase side, the advertising side. So across our three biggest franchise we have great momentum. And then we have a few other things up our sleeve in terms of remastered content that will unveil in due course which should provide further opportunities for us this year. And as Daniel mentioned and we sort of mentioned throughout our remarks, all of this incremental opportunity is digital, which should allow us to continue to grow our margin as we did, and we set record margins last year. So we should be able to build upon that. From a phasing point of view, you see our Q1 guide is obviously extremely strong, and we expect that to continue into Q2. Our Q2 will probably be roughly in the same range as Q1, and that's a little bit of a tough comp versus last year when Warzone launched, and some of the earliest shelter-at-home trends hit, but then you should see pretty natural phasing as you'd expect in the back half of the year. And then we'll have very strong momentum as you pivot and we pivot looking at 2022. It's obviously early and we still have work to do, but we have an incredible lineup planned across all platforms, and it should be a great year for each of our business units with Blizzard in particular obviously driving significant financial growth. I suggest, obviously we try to model the business prudently, but when you think about the ramp up that we have with multiple bets in mobile and the three franchise that we have operating at scale, and the opportunity to bring maybe a fourth and a fifth franchise to that we can have a meaningful step change in our earnings power over the next couple of years. So obviously we feel great about the trajectory for not only this year, but next year and beyond. And the opportunity is sizable and we're just very focused on execution. So we can realize that potential.

[Christopher Hickey:]

Thanks, Kunaal. Can we have the next question please?

[Operator:]

The next question will come from Colin Sebastian with Baird. Please go ahead.

[Colin Sebastian:]

All right. Thanks, guys. Good afternoon, and Happy New Year as well. Question is, how should we should think about the sustainability of the King growth trajectory into the New Year? And then in particular can you discuss what levers are available to drive growth and both reach and player investment? Thank you.

[Humam Sakhnini:]

Hey, thanks for the question. This is Humam. So look 2020 was a remarkable year for King. Earlier in the year we saw the highest daily game rounds across our network ever. And then we close the year out in real strength. So, in Q4 Candy Crush Saga posted its highest revenue days, and we had the strongest quarter since 2014. And then across all of King our revenues grew 7% sequentially, and 14% year-on-year. So, we're really pleased with the momentum and trajectory as we enter into 2021. Now let me talk a little bit about what drove that performance. In Candy Crush we accelerated the pace of content and feature delivery in 2020, and again to echo everybody's thoughts amazing execution from the team under a very difficult circumstances, but we've also invested in deeper product roadmaps in the Candy franchise and so we had more structure around seasonal events and a lot more integrated player facing programming and that seems to resonate quite well. We saw the benefit of this as we saw more player investment trends. So the payers in Candy were up year-over-year in Q4. But broadly, we also started increasing frequency and high impact events in live -- in our other titles and the portfolio and that led Farm Heroes and Bubble Witch to grow year-over-year for the second quarter in a row in Q4. And so we like the momentum in that as well. So as I look ahead in 2021 our live businesses got really good momentum and we want to continue to add to that. We think we have a good formula and we're going to continue to improve it. So we'll continue to bring a fresh slate of content and events to our players. And then we're going to complement that with big feature innovation including more collaborative and competitive social features especially in Candy. And we've seen that when we have that social connection in our games it correlates with player engagement and player investment. So let me give you a quick example here. We're creating more mode in the game. So that it brings more players and teams together to experience the game at the same time, we're also finding ways to connect those players with each other in a large audience network that's King had. Now if that's the momentum we're driving in the live games, what we have in '21 is we're gearing up for a game launch later in this quarter. So we're hard at work, bringing Crash

[Colin Sebastian:]

Great. Thanks.

[Christopher Hickey:]

Thanks, Colin. Can we have the next question please?

[Operator:]

The next question will come from Stephen Ju with Credit Suisse. Please go ahead.

[Stephen Ju:]

All right. Thank you so much. So I think you guys have been pretty clear on ramping up engineering talent to facilitate development of your play mobile as well as your existing premium games. And I think in the past you've also called out the need for franchise partners to handle the business and customer acquisition management and monetization. So, how is the availability of talent along these directions? And where do you stand in terms of either having enough or not having enough resources to do all of the things that you want to do? Thank you.

[Daniel Alegre:]

Great. Thanks for the question, Stephen. This is Daniel. Maybe I'll tag team with Jay on answering your question. Since we're focusing our business a couple of years ago on our biggest IP and the biggest opportunities we've made very great progress on expanding the development teams on these key franchises. And you're already seeing this increased investment is delivering really strong growth, which are in our biggest three franchises Call of Duty, World of Warcraft and in Candy. And as we look to drive the significant expansion across our other franchises we're also continuing to invest in talent in a few key areas. One of them, and it's just a crystal clear opportunity for us is mobile. We're hiring mobile developers around the world to really join our growing creative and development teams. This is an imperative for the business, and we're laser focused on driving that. And more broadly we will continue to focus resources and investments on our largest franchises. That's where we want to bring more content, more frequently to our communities because they expect it. This is obviously incredibly relevant to Blizzard. So Jay, why don't you give your opinion and your point of view on this question as well?

[Jay Allen Brack:]

Thank you. I think it's actually a great question. And I think part of it is, we're coming up on an each milestone term where we will celebrate -- company, and we have a great community at that both Conline February 19th and 20th and we'll share the plans that have in things. And we're working on, I think presently be excited about. Now the company has accomplished a lot in the last 30 years and when I think about our near and long-term development pipelines, when you look at just the Warcraft franchise alone, there are hundreds of millions of players around the world who have either played or interacted at Warcraft through different games or different expression in that universe. And when we bring those experiences to players, we think that there is a lot of potential or beyond where we are today, especially if you get these games, right. The same is true for our other franchises. And so if we look at the near term for Diablo as an example we have a AAA Diablo IV that's in development, as well as a free-to-play mobile expression in Diablo Immortal both teams have continued to make great progress. Overwatch 2 is another great example. We've successfully passed a major internal milestone in December and that involved testing many key features of the game with hundreds of developer across world, and so we're happy with how that game is progressing. So doing and achieve these probably aspirations, it takes the right kind of talent as you brought up. And so we're continuing to grow and lean in on the teams and we have plans to hire more developers going forward. One of the competitive advantages that we have at Blizzard is the ability to really focus talent and bring talent from one game to another internally. That's something that turned really well in the past. And I think the last note that's important to bring up is our aspiration to bring games and players around the world across different platforms and genres. WoW is going to be led by gameplay and quality, that our goals to give the team's everything that they need in all order make the best possible experience to strong players.

[Christopher Hickey:]

All right. Thanks, Stephen. Operator, can we have the next question please?

[Operator:]

The next question will come from Alexia Quadrani with J.P. Morgan. Please go ahead.

[Alexia Quadrani:]

Thank you. My question is on, back on King, if you can maybe discuss your outlook for advertising for 2021, but more specifically what impact you expect from the IDFA changes?

[Humam Sakhnini:]

Hey, Alexia, this is Humam, again. So look, the ad business was entering '21 with incredible momentum, particularly in our direct sales part of the business, which grew more than 80% from last -- or grew 80% last year. So I'll touch on some of the specific initiatives that drove that performance because I agree we believe that those are also the levers that we move the business forward in '21 and beyond. What we saw is that the team executed really well and deepening our product offering around the platform -- what we call the platform brand safe proposition. When we -- it allows us to specifically focus our offering on large scale brand. All of this was in the context of building a product that was very compatible with the player experience. And so we think that's working really well. It worked in 2020 and we continue to look forward in '21. And alongside of that we grew the direct sales team and growing the sales team allowed us to broaden our coverage to reach new brands. And then we started seeing those two things come together and really give us a great result. So, as one example. We worked with Sky in the United Kingdom to design alongside of them and execute an Ad campaign that leverage that rewarded video product that we have and it's created really engaging game of find add experience that really drove results for kind of the advertisers. So the campaign that I'm referring to drove an eight point uplift in ad recall, and a six point uplift in Player Association to the Sky brand messaging. So, and we continue to drive that forward. And as you alluded to, we are also preparing for the IDFA changes, and at the industry with initiatives underway, kind of just specifically addressing that. I think our current momentum and the direct sales momentum that we have given us confidence in the growth trajectory of our Ad business overall, even with taking IDFA in context. So this year, what I see ahead of us is further product innovations that are already underway, and further ramping up of the direct sales resources, and both of which should enable us to reach more brands and provide more experiences. And more broadly, we think that there will be expansion even beyond there. So as I look at more titles available to repeat what we did with Candy and our other King titles we have other launches across the company that we should look into integrating that experience, and broaden the overall network. So all these opportunities ahead of us and the scale of the player network gives us a really good kind of momentum, and we feel pretty good about where the business is headed.

[Alexia Quadrani:]

Thank you.

[Christopher Hickey:]

Thanks, Alexia. Can we have the next question, please?

[Operator:]

The next question will come from Mike Ng with Goldman Sachs. Please go ahead.

[Michael Ng:]

Great. Thank you very much for taking the question. I was just wondering if you could talk a little bit more about your long-term content plans for World of Warcraft? And just also talk a little bit about the philosophy around management content for classic and modern? And could you just share a little bit more about your expectations for WoW growth in 2021? Thanks.

[Jay Allen Brack:]

Sure. Thank you for the question. So modern and classic WoW are certainly, they're not one to one in terms of what players expect than desire. The two communities are really different and engage in different ways, but we think, they have the same love of the game world and they have a unified subscription which is virtuous to both communities. The release of Shadowlands in the work from home environment is a huge point of pride for us. I think the expansion turned out great, and it's got content for players of all kinds thoroughly engage well. The metrics that we traditionally track and expansions -- expansions release have been quite successful. Life-to-date on Shadowlands, it's actually the highest any expansion in the last 10 years. We also see significantly more player engagement than we typically see at this stage. And that momentum has continued through January with the player base so significantly larger than it was a year ago. For Classic the community continues to be highly engaged, and it's a global community. Since the launch, Classic has really given players who love the game a way to experience as are up in the community, the way they experienced it for the very first time. And as a result, the overall World of Warcraft has a significantly larger player base, which provides us with a lot of opportunities. Looking ahead, we have plans to continue serving both those communities in creative ways, and allow players to continue to explore classic way of nostalgia in ways that feel great. We'll have more to share about the various content updates for WoW shortly, but we do see WoW as a significant growth driver for Blizzard overall this year.

[Michael Ng:]

Great. Thank you very much.

[Christopher Hickey:]

Thanks, Mike. Operator, can we squeeze in one last question please?

[Operator:]

Yes. The next question will come from Brian Nowak with Morgan Stanley. Please go ahead.

[Matthew Cost:]

Hi, everyone. It's Matt on for Brian. Thanks for taking the question. Can you just provide a quick update on Call of Duty Mobile? And how we should think about growth vectors for the game in its second year now? And any early thoughts on the launch in China? Thanks.

[Rob Kostich:]

Yeah, Matt, it's Rob. Thanks for the question. Look, I'd say, overall we see a ton of opportunity ahead on mobile. I think it's really important for us to step back and look at the fact is Call of Duty Mobile in the West is only been live for about, actually a little less than a year and a half. And in that time period, and then we shared this data, but we quickly scaled over 300 million downloads. And Daniel had also mentioned in the fourth quarter we delivered our best quarter yet, and obviously a clear sign that our team's focused on gameplay, new seasonal content and just driving engagement overall is driving strong results for us. But this is certainly just a point in time, and when you step back and look at the biggest games in the West, they continue to scale at the three year mark and well beyond in many cases. So we believe we have a lot of headroom in regions around the world to grow this business. And the beauty of COD Mobile that allows us to reach new players in markets where console and PC may not be as well developed. And we've seen tens of millions of new players in regions like Latin America, India and beyond what we're seeing potential for a lot more upside. And looking ahead for this global community of course, we're going to take our in-game seasons and content events to another level for our community. And I also see a lot of opportunity for us at the local market level to drive local initiatives to make Call of Duty even more relevant in those local markets. And I want to go back and mention one other thing which I think I mentioned on the previous call, which is, it's really important to note that all of this right now is accretive to our overall franchise success. When we look at registered players who play both on mobile and on console or PC these players show a significantly higher engagement and player investment than other groups. And so again it's just proof that the ecosystem is working really, really well together. Now you also asked about the recent release in China by Tencent, and it is early, right. But the game is off to a great start. We've seen tens of millions of downloads in the first month. A lot of good reception early on, and we do think this is going to be a meaningful contributor to our overall mobile results as we move forward. And as I step back, I'm just really excited about our ability to now grow our brand further on a global basis, by being in such a massive, massive market. And so, what I -- the way add sum it up is that -- it's been a great start on mobile, but it's just that it's a great start. Mobile is a critical long term growth driver for Activision, and we are definitely taking a long-term view of the platform and the opportunity. We're hiring aggressively to make sure we're well positioned to create the best possible mobile experiences for our community, and I think importantly as we project even further out making sure we have the ability to expand to mobile, the very best of what's working in the Call of Duty ecosystem which I think presents yet another layer of opportunity for us in the years ahead. Thanks for the question.

[Christopher Hickey:]

All right. Thank you, everyone. We really appreciate your interest and participation today. And we look forward to hopefully seeing you either at BlizzConline in a few weeks or in-game somewhere. Thanks, and have a great day.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.