Activision Blizzard 4Q16 Earnings Call Notes

Robert A. Kotick

King focused on advertising initiatives

“King also made meaningful progress with its advertising initiatives. Last year’s advertising tests had two primary goals: to design and build an outstanding ad platform that would actually enhance our users’ in-game experience, and to deliver significant value to advertisers. We’re encouraged with the early results. In most tests, our users play more game rounds, spend more time in the game, and have a self reported better game experience with advertising. Additionally, our platform delivers meaningful value to advertisers. ”

Trying to grow consumer products business

“Great question, Eric. It’s Bobby. I think Disney is a great example. They’ve figured out probably better than any entertainment company how to turn consumer products into a multi-billion dollar business, but also to increase the touch points for their franchises around the world. And so we’ve elevated consumer products to a new strategic pillar for the company. We hired Tim Kilpin who is a veteran of both Disney and Mattel, and we think that consumer products can accelerate growth by leveraging our IP and creating new ways for people to connect with our franchises, especially as we’re launching our e-sports leagues. If you think about consumer products as they relate to the NFL or the NBA, these are billions of dollars of revenues for the leagues, and we think they’ll be great opportunities for league and team merchandise. That’ll be important components of what we do in the consumer products business. Generally, we think creating more consumer touch points in a low capital investment, high-return way, adds tremendous value to the franchises”

Dennis Durkin

$1 billion of in game purchases

“For the year, we delivered record digital revenues of $4.9 billion, up 94% versus last year. The primary driver for our digital momentum is the continued growth of in-game content. As Thomas mentioned, in-game purchases were close to $1 billion for the quarter, and a record $3.8 billion for the year, more than double the $1.7 billion we had last year. We believe we still are in the early days of this important vector in our business with more opportunity ahead.”

Ricardo Zacconi

30 min per day of candy crush gameplay

“So, first of all, we have a large user base, but more importantly, it’s a very engaged user base. You’ve heard earlier Thomas saying that we have more than half an hour of gameplay per player per day, and we think this is an attractive opportunity, a very attractive opportunity for advertisers. It’s a very engaged user base.”

Activision Blizzard (ATVI) 2Q16 Earnings Call Notes

The rise of esports feeds into ATVI’s model of strong franchises capable of retaining audiences year after year

“Our esports and film and TV initiatives are not only a driver of audience expansion, but drive deeper engagement which will lead to longer franchise lives with greater profitability. First, on esports. Last year, BlizzCon had its highest livestream viewership ever with over 10 million people around the world tuning in, higher than the viewership for this year’s NBA and MLB All Star games. This November, Blizzard will be hosting its tenth BlizzCon. One of the biggest attractions there will be the culmination of the Road to BlizzCon tournaments with global champions across a number of franchises being crowned, including the champion for the just-announced Overwatch World Cup.” Thomas Tippl – Chief Operating Officer

 

Pokemon Go’s success in bringing in more players to mobile may present an opportunity to ATVI

“In terms of learnings, Pokémon Go has been very successful in expanding the mobile games audience. They have brought the large Pokémon fan base to mobile. And I believe this is very good for the whole gaming industry. What it has also proven is that when you pair innovation to very strong branded IP, there is a huge potential. And so I think this is actually very good, and it’s a great opportunity for Activision Blizzard on mobile.” Riccardo Zacconi – Chief Executive Officer & Executive Director, King Digital Entertainment Plc

 

Strides in digital and digital in-game sales bode well for margins

“The first is just the trend that we’re going to continue to see around the shift from retail to digital on full game sales, and that will continue. But even more importantly and a bigger driver as you saw in Q2 is the deeper player investment that we see once we have players inside of our experience and new opportunities to add micro-transactions, advertising, other things into those experiences, which are all really contribution margin and accretive to the overall margin of the company.” Dennis M. Durkin – Chief Financial Officer

 

Hopes for esports are very high

“Having said that, more people are spectating on video games than ever before. There are more opportunities for spectators than ever before. The live event competitions are providing greater prize pools, greater recognition, greater opportunities for players. And we think that this is one of the areas that’ll present great opportunities for us for the long-term. Getting from here to a place that will allow our franchises to resemble the NFL, the NBA, Major League Baseball, is going to take some time, but I could tell you the best minds of the company, the people who are in this room are all committed to continuing the efforts that we’ve made.” Robert A. Kotick – President, Chief Executive Officer & Director

Activision 2Q16 Earnings Call Notes

Activision Blizzard (ATVI) Robert A. Kotick on Q2 2016 Results

Going to take some time to get esports to NFL or NBA level but we’re committed to it

“Getting from here to a place that will allow our franchises to resemble the NFL, the NBA, Major League Baseball, is going to take some time, but I could tell you the best minds of the company, the people who are in this room are all committed to continuing the efforts that we’ve made. And I think we have a genuine belief that in all of these sports, we’ve been the most successful. I think most of what you see is organized competition started out with Blizzard games a long time ago. And so we have a lot of belief and a lot of expectation that the promise of esports will continue to be something that we will excel at.”

Michael Morhaime – President and Chief Executive Officer of Blizzard Entertainment, Activision Blizzard, Inc.

Video game franchises are now assessed for their esport potential

“I also want to point out that while we had a great start with the game release, we really view this as just the beginning. We think we’ve created a strong character driven universe with big opportunities beyond just the game. We think Overwatch has strong potential as an esport. The recently announced Overwatch World Cup, which will take place at BlizzCon this year is a good first taste of that, but we’ll be talking more about our Overwatch esports plans later in the year. We also look forward to telling more stories about the characters in the world of Overwatch through other media. You’ve seen some of this through the animated shorts and comics, but there’s still more to come.”

Miscellaneous Earnings Call Notes 11.5.15

Colgate-Palmolive’s (CL) CEO Ian Cook on Q3 2015 Results

Have seen a decline in private label

“At the same time, we’ve seen a decline in private label shares in many of our categories indicating the consumers preference for branded products and respect of our equities.”


Anheuser-Busch InBev’s (BUD) CEO Carlos Brito on Q3 2015 Results

Big change in the Chinese economy towards consumption

“I think what’s happening in China at this point is that there is a big change from an economy that was all lead by exports and heavy investments in fixed assets, okay that generates a lot of blue-collar work or jobs to now an economy that’s much more service and domestic oriented economy. So more consumption, more consumer spending. So that of course, in the midst of this change, we see that in the Southeast, where some years ago there was lack of blue-collar workers and now there is too many of them. So there is a shift in there and I think that’s what the segments are showing us. But the segments that are more high priced are growing ahead of the ones that are lower price. And that’s exactly where we have most of our business and most of our brands position. So I think this change, while it may be bad for the industry, is not bad for us.”


PriceSmart’s (PSMT) CEO Jose Luis Laparte on Q4 2015 Results

We do have a soft economy in Columbia right now

“We do have a little bit of a soft economy right now, driven by the devaluation and other factors in the country. But we still are pretty optimistic about Columbia, and we haven’t reduced our efforts.”


Phillips 66’s (PSX) CEO Greg Garland on Q3 2015 Results

We see that the consumer side of China is doing very well

“we’re continuing to see good demand in Asia and across the system globally. So I think our view is demand is good. China is particular interest I think largely because of the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well.””

By 2017/18 we’d expect not to be in a $50 crude environment any longer

“I mean our view consistently remains by 2017 and 2018 that really sort itself out and we are probably not $50 crude environment but we are probably not $100 but somewhere $60, $70, $80 in that range.”


Greenlight Capital Re’ (GLRE) CEO Bart Hedges on Q3 2015 Results

-16.9% through October

“The Greenlight Re investment portfolio lost 14.2% in the third quarter, bringing the year-to-date return to minus 16.9%.”

Brought next exposure up slightly during market sell off in August

“We reduced our gross exposure by 30 points in the quarter. Our net exposure increased slightly from 21% to 26% as we covered several shorts during the market sell-off in August. We continue to hold macro positions including gold, short Asian currencies and short French sovereign bonds. Overall, it’s been a challenging environment. We’re optimistic that we should get some recovery from our beaten down long portfolio.”


The Sherwin-Williams Company’s (SHW) CEO Chris Connor on Q3 2015 Results

Volume demand lagged initial expectations in virtually ever market we serve

“Volume demand lagged our initial expectations for the quarter in virtually every market we serve, but we remain focused on delivering positive results regardless of the demand environment.”

Continue to see deteriorating demand outside of NA

“We continue to see deteriorating demand for our product outside of North America.”


Banco Santander-Chile (BSAC) Q3 2015 Results

Economy has done better than most regional peers

“Segment [ph] in the corporate sectors continue to contract, but given the diversity of Chile’s economy and the fact that the average GDP growth of Chile’s main trading partners is relatively high, the economy has done better than other regional peers.”

No deterioration in asset quality

“In terms of evolution of asset quality, we think that the aligned trends are generally positive, especially in the consumer side, in the mortgage side and in the mid-size market. We haven’t seen any deterioration. ”


CBS (CBS) Leslie Moonves on Q3 2015 Results

Advertising is coming back in a big way

“advertising is coming back in a big way at CBS. Underlying network advertising was up 8% in the third quarter with strong growth in primetime, double-digit growth in sports and daytime and huge growth in late night, which was up 42%.’

The dire predictions of cord-cutting are overblown

“I think we’re all seeing that the dire predictions of cord-cutting are overblown, but the good news for CBS is, no matter where distribution goes, no matter how or where you want your content, we are in a perfect position. ”

There can never be too much content

“we are a content company, we believe the world can have more content, we don’t believe the guy who says oh, there’s too much content. There never can be too much content and we want more of it.”


Activision Blizzard (ATVI) Robert A. Kotick on Q3 2015 Results

Comparing King to Blizzard

“When we merged with Blizzard Entertainment, we found the right partner with extraordinary leadership. And when others dismissed the sustainability of Blizzard’s incredible capacity for innovation, we were certain patience would be rewarded. And it has. We see a lot of the same characteristics today in King. We think now is the right time to enter mobile gaming in a meaningful way. ”


Third Point Reinsurance’s (TPRE) CEO John Berger on Q3 2015 Results

Third Point owns Argentine debt

“Sovereign credit was up 3.1% on average exposure during the quarter, due to strength in Argentinean government debt the largest position in our credit portfolio. We’re looking forward to the run off Argentinean presidential election next month and we’ll be pleased with the victory from either candidate.’


Michael Kors Holdings (KORS) John D. Idol on Q2 2016 Results

Warm weather bad for seasonal items. Watch business still under pressure

“We saw accelerated growth in footwear, although the warm weather tempered boot sales in the quarter. The watch business continues to remain under pressure in retail and wholesale. ‘

Trend has been towards smaller handbags

” the idea that people are not buying handbags, I do not believe is a correct concept. They happen to be the fashion trend of smaller bags, so if we were selling x percent of $350, $400 and $500 handbags at this time last year we were selling less of those because we were selling a lot more in particular across bodies and large wallets. And that is what the consumer in particular the millennial is viewing as a fashion trend.’

All of us are now being impacted in parts of Texas because of oil prices

“all of us are now being impacted in parts of Texas because of oil prices there, that’s a little bit less tourist, but some of it’s related to the Mexicans shopping cross-border with the peso to the dollar.”


Time Warner (TWX) Jeff L. Bewkes on Q3 2015 Results

Programming is the most significant area of investment for the company

“Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond.’


Stratasys (SSYS) David Reis on Q3 2015 Results

Excess capacity created by extraordinary expansion in 2014

“We also believe the situation has been worsened by the negative impact of excess capacity that followed the two-year period of extraordinary industry expansion that ended in 2014. Reflecting the low visibility of the current market environment, expected orders did not materialize as expected at the end of the quarter.’

Focused on adjusting the cost structure of the company to fit customer demand

“what I can tell is that we are taking very seriously the change in the business volume that we see in front of us and we are dealing with adjusting the cost structure of the company, the entire cost structure of the company not only MakerBot, to fit through what we see today in the market in terms of customer demand.”


Douglas Emmett’s (DEI) CEO Jordan Kaplan on Q3 2015 Results

Seems like occupancy is being driven by much stronger tenants

“I would say that, what’s driving — what’s going on here right now is a much stronger and wider base than what was driving the run up in ’04, ’05, ’06 and ’07. It’s way more comfortable, a way better percentage of kind of expenses for the tenants. The tenants are very — we’re seeing strong balance sheet and good credit. We’re seeing a good diversity of industries. You’re not seeing like a heavy lean on, I remember before, it was the mortgage — these mortgage guys were taking huge chunks of space”

“the strength in this market, all seems really healthy going to just literally more functional space for our tenants, as opposed to some of the tenants before that were literally just space grabbing and whether it be a big dotcom guy that didn’t exist a year ago and all of a sudden now needs 50,000 feet, 100,000 feet. What’s going on now seems a lot more comfortable and it’s backed by much stronger, more established tenants.”


Annaly Capital Management’s (NLY) CEO Kevin Keyes on Q3 2015 Results

Continued improvement in CRE fundamentals in the US

“The third quarter saw continued improved in U.S. commercial real estate fundamentals with healthy demand across all property types. Vacancy rates across all asset types declined compared to last quarter, with office and industrial continuing a trend of 22 consecutive quarters of positive demand.”

While the pace of CRE asset sales has slowed, we don’t see this as a weakening trend

“While the pace of sales has more recently begun to slow down 10% in September, we don’t see this as a weakening trend, as large take-private transactions continue to be announced with private equity taking advantage of the discount between listed markets and asset values.”

CMBS spreads have moved wider, but cap rates have not yet moved higher

“Spreads, however, have a continued widening that started this summer, with AAAs now at about 120 basis points, 32 basis points wider than at the beginning of the year and 34 basis points wider than this time last year. In addition, BBBs are almost 200 basis points wider than this time last year. While, this type of rate expansion is significant, we have not yet seen cap rates move higher. ”