Activision Blizzard, Inc. today announced second-quarter 2018 results.

"This was another strong quarter for Activision Blizzard. Our portfolio of global franchises enabled us to deliver record first half revenues and earnings per share," said Bobby Kotick, Chief Executive Officer of Activision Blizzard. "This past weekend we held the Overwatch League TM Grand Finals. We had a very successful first season as we enhanced our leadership position in esports. And, today we announced two additional Overwatch League franchise sales at record prices, adding Atlanta, Georgia and Guangzhou, China to our league. We plan to announce additional franchises over the next few months."For the quarter ended June 30, 2018, Activision Blizzard's net revenues presented in accordance with GAAP were a Q2 record $1.64 billion, as compared with $1.63 billion for the second quarter of 2017. GAAP net revenues from digital channels were $1.26 billion. GAAP operating margin was 26%. GAAP earnings per diluted share were a Q2 record $0.52, as compared with $0.32 for the second quarter of 2017.

For the quarter ended June 30, 2018, on a non-GAAP basis, Activision Blizzard's operating margin was 35% and earnings per diluted share were a Q2 record $0.62, as compared with $0.55 for the second quarter of 2017.

For the quarter ended June 30, 2018, operating cash flow was $9 million. For the trailing twelve-month period, operating cash flow was $2.08 billion.

Please refer to the tables at the back of this press release for a reconciliation of the company's GAAP and non-GAAP results.

Operating Metric:
Net bookings is an operating metric that is defined as the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others, and is equal to net revenues excluding the impact from deferrals.

For the quarter ended June 30, 2018, Activision Blizzard's net bookingsA were $1.38 billion, as compared with $1.42 billion for the second quarter of 2017. Net bookingsA from digital channels were $1.20 billion, as compared with $1.28 billion for the second quarter of 2017.

Selected Business Highlights:
Activision Blizzard's consistent second-quarter results illustrate the enduring nature of our franchises. In the second half of 2018, we have several exciting launches which we expect to drive strong full-year results.

Audience Reach

• Activision Blizzard had 352 million Monthly Active Users (MAUs) in the quarter.
• Activision had 45 million MAUs. Call of Duty : World War II continued to have more MAUs than the prior franchise release. Pre-orders for Call of Duty: Black Ops 4 are strong. Black Ops 3 MAUs grew quarter-over-quarter and, in June,reached the highest level for this year as over 15 million players geared up for the October 12th release of Black Ops 4. During the quarter, Destiny 2 released its second expansion, Warmind, with higher attach rates than Destiny 1's second expansion, and Destiny 2 MAUs grew quarter-over-quarter. Crash Bandicoot N. Sane Trilogy successfully launched for Xbox One, Switch, and PC in the quarter with strong performance.
• Blizzard had 37 million MAUs ahead of significant content coming in the second half of 2018. World of Warcraft momentum remains high ahead of the upcoming expansion, Battle for Azeroth , which is seeing strong pre-orders. Blizzard is building on the excitement around the Overwatch League with further Overwatch esports events, and a continuous stream of content for the game in the second half of this year, including seasonal events, maps, heroes, and new cosmetic items. Pre-purchases for theupcoming Hearthstone expansion, TheBoomsday Project , are tracking ahead of any prior expansion at the same point in time pre-release.
• King had 270 million MAUsC. Candy Crush Saga mobile MAUsC were stable quarter-over-quarter and grew year-over-year. King's engagement remained strong with daily time spent per user at 36 minutes.

Deep Engagement

• The Overwatch League held its Grand Finals event at Barclays Center in New York on June 27-28. The Grand Finals had a sold-out live audience and millions of global viewers watched on TV networks and streaming platforms. The hard-to-reach 18 to 34 demographic made up approximately 70% of the global audience.
• Activision's Call of Duty World League continued to enjoy momentum with year-to-date minutes watched up 50% year-over-year heading into its championships in Columbus, Ohio later this month.

Player Investment

• Activision Blizzard delivered $1 billion of in-game net bookings in the second quarter and a record of approximately $2 billion year-to-date.
• Activision had record Q2 in-game net bookings A, driven by Call of Duty: WWII, Call of Duty: Black Ops 3, and Destiny 2.
• This quarter, King had two of the top-10 highest-grossing titles in the U.S. mobile app stores for the nineteenth quarter in a row, with Candy Crush Saga at #1 again.1 Overall Candy Crush franchise net bookings A grew double digits year-over-year.
• King's advertising business was profitable for the second quarter in a row with net bookings A growing sequentially.

Net bookings (operating metric) is expected to be $7.48 billion for 2018 and $1.61 billion for the third quarter of 2018.

Currency Assumptions for 2018 Outlook:

• $1.21 USD/Euro for current outlook (vs. average of $1.12 for 2017 and $1.11 for 2016); and
• $1.35 USD/British Pound Sterling for current outlook (vs. average of $1.30 for 2017 and $1.36 for 2016).
• Note: Our financial guidance includes the forecasted impact of our FX hedging program.

Capital Allocation:
The company paid a cash dividend of $0.34 per common share, up 13% year-over-year, in May 2018 to shareholders of record at the close of business on March 30, 2018. Cash payments totaled $259 million. The Board of Directors has authorized a debt paydown of up to $1.8 billion during 2018, and the company expects to utilize the full authorization in Q3.