GGP Gaming Weekly – February 9 - Griffin Gaming Partners

GGP Gaming Weekly – February 9

February 9, 2022 Gaming Weekly

Highlights

Unity reported FQ4 2021 earnings (link)

Unity stock traded down 9% over the day and traded up 14% after hours
Unity reported significant YoY growth in revenue
- For FQ4 2021, reported revenue of $316M, up 43% YoY and exceeding consensus of $296M and guidance of $285M-$290M. Reported an operating loss of ($145M), versus consensus of ($129M) and compared to an operating loss of ($81M) in FQ4 2020
- For FY 2021, reported revenue of $1,111M, up 44% YoY and exceeding consensus of $1,088M and guidance of $1,080M-$1,085M. Reported an operating loss of ($532M), versus consensus of ($516M) and compared to an operating loss of ($275M) in FY 2020
- Unity issued $1,725M in 5-year convertible notes with 0% coupon. Conversion at $308.72 per share
KPIs
- 1,052 customers each generated more than $100,000 of revenue in the trailing 12 months as of FQ4 2021, compared to 793 as of FQ4 2020
- Dollar-based net expansion rate as of FQ4 2021 was 140% as compared to 138% as of FQ4 2020
Business Updates
- In 2021, Operate Solutions contributed to the stability and success of more than 200k games. Use of Unity monetization services drove more than 2B net-new installs
- Create Solutions experienced a strong year across games and non-gaming. In late 2021 particularly, AAA publishers and platform providers launched made with Unity games, including Riot Games’ Ruined King: A League of Legends Story
- Unity continued to expand market share within the top 1,000 mobile games in 2021
- Unity acquired Ziva Dynamics in January 2022, SyncSketch and Weta Digital in November 2021

Activision Blizzard reported FQ4 2021 earnings (link)

Activision Blizzard stock traded down 0.4% over the day and traded flat after hours
Financial Highlights
- Reported FQ4 2021 net bookings ex-deferrals of $2,487M representing a (18.5%) decrease YoY, and missing prior net bookings outlook of $2,783M. Reported FQ4 2021 operating income of $682M, compared to $594M in FQ4 2020
- Reported FY 2021 net revenues of $8,800M, compared to $8,090M in 2020. Reported operating income of $3,259M compared to $2,734M in 2020
- FY 2021 digital net revenue increased YoY to $7,660M from $6,660M in FY 2020, representing 87% of total net revenue
- Reported overall Activision Blizzard MAUs of 371M
Business Segment Highlights
- Activision
  - Call of Duty net bookings on console and PC declined YoY in FQ4 2021, driven by lower premium sales for Call of Duty: Vanguard versus Call of Duty: Back Ops Cold War and lower engagement in Call of Duty: Warzone
  - For Call of Duty Mobile, net bookings grew YoY in FQ4 2021, driven by continued contribution from the game in China, with Call of Duty Mobile 2021 worldwide consumer spending exceeding $1B
- Blizzard
  - World of Warcraft delivered its strongest engagement and net bookings outside of a Modern expansion year in a decade
  - Hearthstone FQ4 2021 net bookings grew YoY, driven by new content
  - Diablo II: Resurrected sold through more units from its September release until the year-end than any other Activision Blizzard remaster over an equivalent period
- King
  - In-game net bookings grew 14% YoY, driven by 20% YoY growth for Candy Crush
  - Payer numbers grew by a double-digit percentage versus the year-ago quarter
  - Advertising revenue grew 60% YoY
  - King has now passed the $1B operating income milestone in 2021

EA reported FQ3 2022 earnings (link)

EA stock traded down 2% over the day and traded down 3% after hours
Financial Highlights
- Reported FQ3 2022 net bookings of $2,577M, up 7% YoY and falling short of guidance by 2%. Gross profit of $1,158M, representing a 65% margin on net revenues
- Full game net bookings grew 5% YoY to $900M, representing 35% of total net bookings. Live Services net bookings grew 9% YoY to $1,677M, representing 65% of total net bookings
- Net bookings for the trailing twelve months were $7,254M, up 22% YoY
- Reported FQ3 2022 net income of $66M, representing a 4% margin on net revenues. Diluted earnings per share of $0.23, compared to $0.72 in the same period of the previous year
- EA repurchased 2.4M shares for $325M in FQ3 2022 bringing the total to 9.4M shares for $1.3B in the last twelve months. EA paid a $0.17 cash dividend per share in FQ3 2022
Portfolio Highlights
- Net bookings in EA SPORTS portfolio have grown nearly 10% year-to-date compared to FY21
- At quarter-end, Apex Legends monthly active players were up more than 30% YoY. EA expects net bookings for Apex to approach $1B in FY22
- Over the last year, the EA player network has grown to more than 540M unique active accounts across more than 18 games and 25 live services
- During FY22 to date, more than 180M monthly active accounts on average engaged in EA’s games across all platforms

Sony reported FQ3 2021 earnings (link)

Sony Game & Network Services Financial Highlights
- Reported Game & Network Services Sales of $7.1B, down 7.9% YoY and falling short of consensus by 12.5%
  - Sony’s decline in Game & Network Services Sales was driven by decreases in hardware and peripheral devices, first-party title sales, and non-first-party title sales
- Reported Game & Network Services Operating Income of $811M, up 15% YoY and exceeding consensus by 3.4%
  - Sony’s increase in Game & Network Services Operating Income was driven by decreases in SG&A expenses
Portfolio Highlights
- Total gameplay time / PlayStation users in December 2021 was 20% lower than in the same period of the previous year, which was immediately after the release of the PS5
- Total gameplay time / PlayStation users in December 2021 was around 7% higher than in
- God of War for PC was released in January 2022 and has received high acclaim among the PC gaming community, obtaining a Metacritic score of 93

Twitch, YouTube, and Facebook Gaming averaged 653M hours of weekly viewership during 2021 (link)

According to Stream Hatchet’s 2021 Video Game Live Streaming Trends Report, overall live streaming saw an increase of 21% YoY
The live-streaming analytics company also said that Twitch continues to take up the lion’s share of viewership with 71% of total hours watched last year
In terms of games, the report notes that the genre of open world games generated the most in viewership as Minecraft, Grand Theft Auto V, and Rust amassed 4.28B hours watched during 2021
The second-most viewed categories were shooters and battle royales while Fortnite, Garena Free Fire, Valorant, PUBG Mobile, and Call of Duty: Warzone generated over 1B hours in views

GameStop launches NFT marketplace on Immutable X, creates $100M dev fund (link)

GameStop has teamed up with Immutable X to launch a marketplace for NFTs later this year
GameStop’s NFT marketplace is being built for launching gaming developer-focused NFT projects
Immutable X will enable game developers to have high transactions rates and zero gas fees, or costs related to computing usage, for trading and minting NFTs in a carbon-neutral environment

Rockstar announces new Grand Theft Auto over Twitter (link)

Rockstar publicly confirmed that it is making and currently developing a new Grand Theft Auto game

Nintendo Switch sales pass 100M milestone (link)

Nintendo revealed during its latest financial report that lifetime sales for the Switch are at 103.54M as of December 31
The total lifetime sales for the Switch also surpassed the Nintendo Wii’s 101.63M consoles sold

Netmarble says 70% of the upcoming lineup will use blockchain (link)

Netmarble is currently preparing to launch 20 new titles where 70% of them will use blockchain technology, according to a report by Forbes
These games will be aimed at foreign markets as play-to-earn games are currently banned in Korea due to gambling concerns
One of Netmarble’s first play-to-earn games will be the RPG A3: Still Alive, which is scheduled to launch this March

Sony plans to launch more than 10 live services games by 2026 (link)

Sony aims to collaborate with Bungie to launch over 10 live services games by 2026
The Company emphasized its commitment to multiplatform games as “a major growth opportunity” to both pre-existing Sony properties and Bungie

M&A and Capital Raises

Sony Interactive Entertainment acquires Bungie for $3.6B (link)

Bungie is Based in Bellevue, WA and has more than 900 employees. The studio has developed several iterations of the Halo and Destiny franchises
This acquisition will give Sony Interactive Entertainment access to Bungie’s approach to live game services and technology expertise
Approximately 1/3 of the $3.6B consideration for the acquisition consists primarily of deferred payments to employee shareholders conditional upon their continued employment and other retention incentives. These amounts will be paid over the course of several years after the acquisition closes
Post-acquisition, Bungie will be an independent subsidiary of Sony Interactive Entertainment and run by its Board of Directors chaired by Pete Parsons and Bungie’s current management team

Lost Lake Games raises $5M in seed funding round (link)

Lost Lake Games was founded in 2021 by former Blizzard Entertainment and Rockstar Games veterans
The Company will use the proceeds to expand its game development team
The funding round was led by Bitkraft ventures with additional participation from Lightspeed Venture Partners, Moon Holdings, and 1UP Ventures

Azarus raises $4M for League of Legends trivia game overlay (link)

Azarus is developing a platform that gamifies livestreams of titles such as League of Legends. An influencer using the overlay can engage fans with a relevant trivia game during livestreams of League of Legends gameplay
The Company will use the proceeds to expand to the top 10 games on Twitch and to develop its fan-based economy
In some measurements, the Company has seen anywhere between 40% to 90% engagement with the game
Existing investors Galaxy Digital, Animoca Brands, and Kleiner Perkins, led the extended seed round

Voldex raises $3M to continue expansion of its Roblox-based games (link)

Voldex’s Roblox-based games include Pet Zoo, Encounters, Base Battles, and Cursed Islands
The Company will use the proceeds to augment its roster of games and improve its current library
Dune Ventures led the round with additional participation from Makers Fund, POW! Interactive, and others

The New York Times acquires Wordle (link)

The free online daily word game Wordle has been acquired by The New York Times’ Games division for a low-seven-figure-sum
The popular game features a daily word challenge, and it is entirely free with no advertising or any form of monetization method
The New York Times says no changes will be made to the gameplay and it will remain free to use

Tilting Point acquires AstroKings developer AN Games (link)

Tilting Point will help grow the developers’ successful games, including AstroKings
AN Games will continue to operate independently and will benefit from the acquisition with Tilting Point’s ability to secure new IP for AN Games to work on
Tilting Point entered into a partnership with AN Games to scale AstroKings in January 2020

TLM Partners acquires Heroes & Generals business operations (link)

The transfer was made from the title’s developer, Danish game studio RETO MOTO
The publisher aims to expand the WWII strategy game’s commercial activity and continue its development
The WWII-themed Heroes & Generals was originally released in 2016 on PC

Other

Breakpoint 2 Summit next week: Wednesday, February 16^th (link)
Griffin Gaming Partners is a sponsor

A free, virtual game developer summit featuring talks by industry leaders including Unity, Epic Games, AWS, Google Stadia, Helpshift, and IGDA
An opportunity to learn from each other, network, share best practices and ideas through technical talks
Discussions will focus on game quality, testing pipelines, and performance issues
To register, click here (link)

Google deprioritizes Stadia as it shifts to securing streaming deals (link)

The focus for Google’s leadership is now securing streaming deals for Stadia under the label Google Stream, according to Business Insider
Last year Google pitched its technology to Destiny developer, Bungie. Sources told Bloomberg that the proposed deal would have given the studio ownership over content and front-end user experience, with Google powering the backend technology

PlayStation 5 sales fall behind PS4’s pace due to semiconductor shortage (link)

Sony shipped 3.9M PlayStation 5 consoles during its fiscal Q3. That brings the Company’s total to 17.3M PS5s shipped as of the end of 2021
Sony had managed to ship 20.2M PS4s in the same timeframe it took the company to ship the 17.3M PS5s reported
Sony stated that the market demand for PS5 is very high, but that partners supplying components are strapped because of various chip shortages. Sony expects to see continued component shortages in the coming year

Activision is planning to make more Call of Duty games after a disappointing quarter for the franchise (link)

Call of Duty revenue was down on console and PC during the fourth quarter of last year and Call of Duty: Vanguard had lower sales than its annual predecessor, according to Activision Blizzard’s latest earnings report
Call of Duty studio Infinity Ward is overseeing the next annual installment in the series as well as the next major upgrade to Warzone
Activision Blizzard is adding development resources worldwide as plans continue for ongoing live operations and new, unannounced titles in the Call of Duty universe

Warcraft content is coming to mobile in 2022 (link)

As part of its latest earnings report, Activision Blizzard revealed that new Warcraft content is coming to mobile later this year
Additionally, the Warcraft franchise will add new experiences in World of Warcraft and Hearthstone

Blockchain.com announces partnership with Cloud9 (link)

The cryptocurrency platform will offer financial literacy opportunities to Cloud9’s audience
Cloud9 will feature the Blockchain.com logo on its jersey and will also receive a portion of the deal in crypto

Ubisoft supports gaming on decentralized Hedera network (link)

Ubisoft announced it has partnered with the HBAR Foundation to support gaming on the Hedera decentralized network
The HBAR Foundation was established to independently promote ecosystem growth with grants and to provide support to organizations developing on the Hedera network, and now Ubisoft will become a member of the Hedera Governing Council
As a council member, Ubisoft will use its computing power to operate a node on the Hedera network, meaning that Ubisoft will use its computing power to verify transactions on the Hedera network

Xbox Game Pass adds CrossfireX and Edge of Eternity for February (link)

Xbox Game Pass will add the eight new titles in batches on February 3, 10, and 14
The subscription service will chronologically add Contrast, Dreamscaper, Telling Lies, CrossfireX, Edge of Eternity, we lose Control, The Medium, The Falconeer, Code Vein, Project Winter, and Final Fantasy XII: The Zodiac Age