Activision Blizzard Inc. reported record annual performance Tuesday, but missed estimates for holiday sales and its 2019 forecast while confirming layoffs and increasing payments to shareholders.
“While we had record performance in 2018, it didn’t quite live up to our expectations,” Chief Executive Bobby Kotick said in a conference call. “We didn’t execute as well as we hoped to in 2018 and our current outlook for 2019 falls below what is possible in an industry filled with growth opportunities.”
stock has been slammed lately, especially after disappointing results from rivals Electronic Arts Inc.
and Take-Two Interactive Inc.
created pessimism about the videogame industry. Reports of layoffs have also circulated in recent days, including reports of active layoffs happening at the company’s Southern California headquarters Tuesday. Shares have declined 22.1% in the past three months, as the S&P 500 index
The videogame publisher confirmed the layoff news in a fourth-quarter earnings report Tuesday afternoon. Activision said it expected $150 million in restructuring charges, and intends to focus resources on development of its most popular titles while stripping away some other efforts.
“Our restructuring plan sheds investment and less productive nonstrategic areas to our business and will result in a net headcount reduction of approximately 8% while also driving a significant increase in investment focus and capabilities around our biggest franchises,” Chief Operating Officer Coddy Johnson said in the conference call.
Activision did not reveal an end-of-year headcount with its financial performance. As of the end of 2017, Activision reported 9,800 employees, which would mean an 8% reduction affects almost 800 employees.
“Increasing the flow and the frequency of compelling in-game content and upfront releases to serve the needs of our players is the No. 1 goal set by the new Blizzard leadership team going forward,” Johnson added.
Executives stressed that the money saved from the layoffs will be rerouted into work on the most popular videogames that Activision Blizzard makes.
“The number of developers working on ‘Call of Duty,’ ‘Candy Crush,’ ‘Overwatch,’ ‘Warcraft,’ ‘Hearthstone’ and ‘Diablo’ in aggregate will increase approximately 20% over the course of 2019,” Activision said in its release. “The company will fund this greater investment by de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business.”
Shares gained more than 3% in after-hours trading following the release of the results, jumping once the conference call started.
Activision announced fourth-quarter earnings of 84 cents a share on revenue of $2.43 billion, up from $2.08 billion a year ago. After adjusting for share-based compensation and other effects, Activision claimed profit of 90 cents a share. Activision also said bookings, which reflects total business including deferred revenue, came in at $2.84 billion. Analysts on average projected adjusted earnings of $1.29 a share on bookings of $3.04 billion, according to FactSet.
Activision’s forecast was also well short of analysts’ expectations, calling for adjusted earnings of $1.85 a share on GAAP revenue of $6.03 billion. Analysts on average expected adjusted earnings of $2.50 a share on revenue of more than $7 billion, according to FactSet.
The company also revealed that it is increasing its dividend by 9%, to 37 cents a share, and that the board approved a two-year, $1.5 billion stock-repurchase plan.