Still So Much to Do! (And Pally Progress)

So I'm still working my there on toon #4, my ret pally.  I'm trying to do the emissary quests every day on my three existing max level toons as well as doing extra Suramar world quests for rep on the warlock each day.  Those end up taking quite a bit of time, making the leveling process pretty slow.

Oh, and can I just go on record that the artifact weapon tree for ret pallies suck.  It's the first one that I I've seen that almost seems like it requires a reboot at some point in the process.  There's this wonderful little golden trait sitting there, called Ashes to Ashes, with a nice short path to get to it, but with absolutely nothing on that path doing much to help your DPS.

But I enjoy those.  I still have a fair amount of quest content still to go.  Kalec is patiently waiting at the Azure dragon spot in Aszuna for me to come talk to him about something.  And I've got the next installment of the Illidan quest line waiting for me back in Kalimdor.

I need to get to those.

I also continue to discover cool little things.  On my beast mastery hunter, I had no idea that there was a quest you could do to get an item allowing you to transform Hati to look like something else.  That, and grabbing a mana saber spirit beast pet from Suramar made for a cool looking combination.  The quest for the device to transform Hati gets picked up from a platform right to the right of your mission board in your class order hall.  Interact with that platform, a voila, Mimiron will appear and ask you to go get a bunch of stuff that he'll then use to build you said device.  Pretty cool.

So I'm continuing to slog my way through Nightfallen rep on Joar to try to finish up the Good Suramaritan achievement for Pathfinder.  I've got two more pieces of the story left, but then heard from a little bird about this nugget in the 7.1 patch notes:

Yes, you read that correctly.  That's nine more weeks of Suramar quests ladies and gentlemen.  Nine more week.

I guess I can hold off on that strongly worded resignation letter I was working on for the nice folks of the Nightfallen.

Cheers,

Joar

Ding, Level 110 #3.

So I managed to hit 110 on my hunter on Thursday of last week.  Definitely starting to see some pick up in level time as mob competition really drops off.  So the hunter managed to get there in right at 17 hours (16 hours and 58 minutes technically), compared to 23 hours and 24 minutes for the DK.  I did end up switching to beast mastery at the half way point, and while it was an absolute beast for leveling, I'm not finding it as awesome for world quests as I would have expected.

I now have 3 toons that I'm completing world quests and world bosses on regularly and beginning to wonder at the wisdom of doing that.

The death knight continues to be my absolute favorite toon for doing world quests, although I am decidedly not going to go back and work on Suramar on a second toon, so I'll still be relying on the warlock to get to completion on that front.

I'm pretty close to hitting revered with Nightfallen, leaving me with two more major quest chains to get through for Good Suramaritan.  All the other pieces of the first stage of Pathfinder are essentially done at this point.

So now I'm off to leveling the paladin, although with working 3 toons through world quests on a regular basis, I suspect that one may take some time to get through.

Cheers,

Joar

Ding, Level 110 #2 and Pathfinder Update

So I managed to finish up my death knight earlier this week.  I did most of the leveling experience with him as frost, but ended up switching to blood at the end just for the ease of taking down some of the higher level mobs and large packs of mobs.  I'm thinking staying blood may be the best bet for doing world quests as well since I'm not likely to do much raiding on my death knight this time around.  I think that activity is likely going to be limited to my warlock and hunter, at least for now.

Overall, the leveling time for the death knight wasn't wildly different than it was for my warlock, finishing up at 23 hours and 24 minutes (or only about an hour and 45 minutes faster than the lock).  Of course, the warlock with pet is an absolute leveling machine with no downtime, so that certainly comes into play.

I'll be starting the hunter next while continuing to work on world quests on both the warlock and death knight and also trying to finish up the Suramar quest line on Joar in order to get the Pathfinder achievement under way.  There's one piece of the Good Suramaritan achievement that you need for Loremaster of Legion that can't be done without normal raiding until Xavius unlocks on LFR, but I'm not necessarily having the rep to unlock that piece anyway, so not a big worry at this point.

The hunter is up next.  I've started him as Marksmanship, but I haven't really been enjoying it all that much, so I'm thinking of switching to Beast Mastery, at least for now.  After the hunter, the paladin will be up next as I continue to rotate between melee and ranged.  It works out well that I have exactly six of each, at least on the Horde side.

Oh, and -10 points to me for using "at least for now" way too many times in this blog post.  I clearly need to cut back on that phrase, at least for now.

Cheers,

Joar.

Activision-Blizzard Reviewed by the SEC

Let me just start this blog post by saying that, while the title of this sounds ominous, being reviewed and going through a comment letter process with the Securities and Exchange Commission (the "SEC") is not at all unusual for a public company.  In fact, the SEC tries to review most public companies at least once every 3-5 years.  Activision-Blizzard had not been reviewed since 2012, so in that sense, they were due.

This was a relatively short initial comment letter, particularly for a company as large and complex as Activision-Blizzard and they only went through three rounds of comments over about a four month period of time, which is fairly typical.

Typically, when you receive one of these letters, the SEC gives you two weeks to respond, although they are generally pretty flexible about granting extensions if there are circumstances that make it difficult to gather the information they're requesting and respond that quickly and Acti-Blizz actually requested and received an extension on their second round of comments.  Once you receive one of these letters and start working on your response, the response letter that you're drafting also gets reviewed by your legal counsel and by your audit firm, which adds to the length of time these take to prepare.

Typically, once you respond to the SEC's questions, they will then take somewhere around 2 weeks to review your response and will then potentially get back to you with either follow up or new questions.  So in general, these things typically take a month to a month and a half for each round of comments, and it's not at all unusual to go through a couple of rounds of questions and answers.  At the end of the process, you'll get the anxiously awaited "We have no further comment" letter from the SEC at which point the entire exchange gets posted to the SEC website for the world to see.

So that's the context and the background of the whole SEC comment letter process.

Acti-Blizz's original letter was received back in early April, and the SEC's first question was around a topic that we've discussed here a few times:  the Monthly Active User metric ("MAU's").  Here's the question that the SEC asked:

They asked two other questions in the letter, one related to the period of time over which they were recognizing revenues for certain games and whether they had considered disclosing that time period either by major game title or by game type.

The second question related to what was in some of their other cost of sales categories and whether those related to product sales, services or other.

Here is Acti-Blizz's response to the MAU question:

Monthly average users (MAUs) is a player engagement metric that the Company has been evaluating as an emerging “key performance indicator” in light of various business developments discussed below. Although player engagement helps drive players’ investment in our games, mainly through digital sales transactions, prior to the current year (2016) we have not viewed MAUs as a “key performance indicator” or concluded that a discussion of MAUs was required in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for investor understanding of our business.  Instead, we have considered digital revenues, which we have provided and discussed in MD&A since 2011, as providing direct and relevant financial information about the growth in our digital business. We believe that our discussion and analysis of digital revenues performance has provided investors with the information required to evaluate the Company’s trends and performance, in accordance with Section III.B.1 of SEC Release No. 33-8350.

 In light of the development of our year-round engagement model, and growth of the free-to-play (“FTP”) and in-game items purchases business model across our franchises, in the second half of 2015 we began to consider the utility of the MAU metric by accumulating data, working to harmonize the metric across businesses, performing reviews and quality checks, and seeking alignment with senior management.  As a result, we began using MAU as a metric in communications with investors, such as earnings releases, beginning in August 2015, but do not believe that MAU was a key performance indicator required to be discussed in MD&A prior to 2016.

 With our recent acquisition of King Digital Entertainment Limited (“King”), which closed on February 23, 2016 and significantly increased the size of our FTP business model, we have concluded that MAUs are now a key performance indicator for our business.  Therefore, in future filings, we plan to include a discussion of MAUs within our MD&A.

So one of the interesting things here is it makes it clear that some of the additional disclosures that we were seeing out of Blizzard in the last quarter or two were at least in part in response to a request from the SEC.

In the third round of comments, the SEC introduced a couple of new questions to the conversation, including focusing on some of the non-GAAP measures that we'd previously discussed in an earlier blog post.  Specifically, there were three questions around their presentation of non-GAAP measures:

In Blizzard's response, they basically agreed to make the changes that the SEC was requesting to their future earnings releases, which led to the changes that we talked about in Q2.    And that ended the comment letter process for them.

The other mildly interesting point to note is that the SEC doesn't only review the official quarterly and annual Form 10-Q and Form 10-K's.  The 3 comments listed above are based on a review of the company's earnings release and not it's financial statements.

So Much To Do!

So I've been level 110 for around a week now, and I'm still finding myself completely overwhelmed by the amount of things to do.  A week later, and I'm still not geared enough for heroics (although I'm VERY close, sitting at 808).

So I guess we were all whining a bit about lack of content, so boy did we get it.  And it's almost overwhelming.

• World quests (including daily emissary quests)
• Profession quests (for me, both tailoring and enchanting)
• Cooking quests and Nomi work orders
• Class order hall quest line
• Class order hall mission (including training troops)
• Artifact weapon stuff, including training artifact knowledge
• Suramar quests (I've finished all of the other zones, but I've barely scratched the surface of this one).
• Nightfallen rep - there are two dungeons gated behind Nightfallen rep along with portions of my profession quest chains
• Fishing / working towards the fishing artifact rod and reel

Needless to say, with all of this going on, I haven't made any progress at all on leveling other alts.  In Warlords, my second character hit max level 26 days after launch.  We're at 15 days now, and I don't feel like I'm likely going to get there in the next 11 days given that my next highest level character is sitting at 101.  But that's okay.  Because that means there is a lot to keep me occupied and engaged this time around.

In terms of gearing, I seem to be having equal luck from world quests and normal dungeons.  If I wasn't doing so much other stuff, I think I likely could have geared up for heroics fairly quickly, but it honestly hasn't been a priority.  There also seems to be a fair amount of reasonably priced 815 gear on the auction house on my server to supplement where needed, but I haven't felt the need at this point.  (And maybe others haven't as well, given the "reasonably priced" part)  I find the Companion App is better for figuring out which gear related world quests I want to go after because they're easier to pick out there.

Cheers,

Joar

Joar Hits 110, and Still Lots to Do

So I managed to get to 110 yesterday on my warlock and then promptly got overwhelmed by the amount of things that I still needed to do.  Before unlocking world quests, I needed to get to Friendly with a number of factions, which meant doing a couple more quests in Stormheim beyond where I'd dinged.  It also meant heading to Suramar and doing a couple of quest chains there.

Then that opened up the window of world quests and all the fun to be had with those.  Plus I still have my Class Order quest line and a bunch of profession quests, and while I've been mucking about doing the profession quests, I haven't actually been doing much of anything to level my actual professions.  (Am I the only one that thinks its a bit odd that you don't actually get profession skill for doing all these quests?)

I also want to start working on fishing and cooking a bit to see how those go.  I figured out the recipe system with Nomi in Dalaran, so am accumulating lots of fun and exciting cooking recipes.  I just need some fish to go with a few of them.

So there's lots to do.  Oh, and I still haven't decided if I want to be affliction or destro.  Affliction was really annoying me while leveling with the little ghosts that it leaves for every mob that you kill, courtesy of your artifact weapon.  I also see all the posts on the forums and such as how affliction is absolutely bottom of the barrel in DPS right now, although given that I'm not going to be doing anything past LFR at this point, and we're still very early, I'm not sure that's even worth looking at.

In terms of leveling time on Joar, my first toon in an expansion is always extremely slow, because I do things like read quest text, and explore a bit, so he was at 25 hours and 11 minutes /played from 100 to 110.  This actually pretty in line with previous expansions.  Warlords was 24 hours and 30 minutes.  MOP was actually 28 hours.  The first toon that I leveled in Cataclysm actually was my paladin and not my warlock and he clocked in at 35 hours played to max level in that expansion.  And yes, I'm fully aware that it's a bit sad that I actually have all that data.

I'm also debating whether the death knight or the hunter will be up next.  I'm inclined to switch between melee and caster (particularly since we now have a nice even number of each thanks to the new DH hunter class, at least Horde side for me, alliance side tends to be melee heavy because I play both enhancement and feral there).

So far, I'm enjoying the expansion.  More updates next week.

Cheers!

Joar

Prepared for Legion, and Ding, Level 100 #27

So I've finished preparing the Joar empire for Legion, which is to say, I didn't do a whole lot.  The first four or five toons that I'm likely to level have had their bags cleaned out and they are more or less ready to go.  Folks are generally either in Orgrimmar, Stormwind, or their garrison, and most folks have done the Broken Isles quest line (although I wonder if that will actually even be needed after a while, I guess we'll find out for sure tomorrow).

I'm generally taking a much more casual approach to this one than I have in the past.  No lengthy to-do lists.  No significant advance preparation.  Even some basics like buying food I didn't bother with, because it has finally occurred to me that there's almost always better food and bandages available almost immediately in the new questing areas.  But hey.  I'm ready.  Ready enough.

In the meantime, I managed to get toon #27 to 100 purely on the back of doing invasions.  This was neither the fire mage or the shaman that I had been working on, but instead was a third druid.  Sunfiring the shit out of everything was just excellent for keeping that XP rolling in.  I managed to get him to 100 in slightly less than half the time that it would have taken to do purely by questing.  And with the added advantage that he was immediately iLvL 700 based on all the chests he had to open.

The one thing that I did do in preparation for launch was to get all the current /played times for my toons recorded so that I can appropriately measure the time to level to 110 for all them.  Strangely, it's not that I even care about the speed at this point.  That gets adjusted so much these days over the course of an expansion that I'm not sure it matters anymore.  But because I've been doing it since Cataclysm, I hate to stop now.

At some point tomorrow afternoon'ish, Joar will be embarking on the path to 110.  I'm actually not in any giant hurry at this point.  Just going to enjoy it for what it is.

Cheers.

Gearing Up Alts, and Ding #24, #25 and #26

OK, so #24 and #25 were quite a while ago, and were my boosted Outlaw Rogue, my third hunter and now a shiny new demon hunter.  I was going to go ahead and finish up the demon hunter quest line on the alliance side as well, but I noticed that I actually hit 100 pretty far before finishing the storyline, so I figured I'd wait so I could use the starting area to get a head start towards 110 on him.

So rather than work on #27, #28 etc using the invasions, I'm actually using them to gear up some of the lesser geared alts.  The goal is to have all 26 level 100's at a minimum ilvl of at least 660 by the time Legion releases.  I may bump that up a bit at some point, because at least now, I'm showing really fast gains using the invasions.  My lowest geared alt at the moment is at 626 and that's essentially with only working on this for a day since I was out on holiday all of last week.

So I may pick up and try to invasion my way through some levels on some toons at some point, but at least for now, I'm sticking with just gearing folks.

So here are some generally spoiler free thoughts on the invasions and Broken Shores questline.  My first thought on the Broken Shores quest line was to wonder when George R. R. Martin started writing content for Blizzard.  In general, I thought the story was pretty well done, although there were a few things that I was wondering (and I haven't finished the whole Harbinger series yet, so some of this may be expalined there).  Main question in my mind was where was Khadgar?

Also, portions of the main scenario still seemed a bit glitchy to me, which was disappointing, but in general, it was a really nice way to get a feel for your new class layouts and abilities if you hadn't done so already.

The invasions have been fun so far as well.  I'm a bit confused by the weapon drops and weapon upgrade items given that we'll all be replacing our weapons in a couple of weeks, but I guess that's okay.  The invasions are also making me very happy that I finally splurged and bought top level flying for all my toons.

So that's it for now.

Cheers.

An Analysis of Blizzard's Second Quarter Earnings Release

So this quarter again marked more changes in what Activision-Blizzard reports in their earnings releases on a quarterly basis, and we'll get to more information that later.

Overall, it was a fantastically successful quarter for Activision-Blizzard.  They reported non-GAAP revenue of $1.6 billion for the quarter, compared to $759 million in the prior year, an increase of 112%.  Non-GAAP EPS increased from $0.13 per share to $0.54 per share, and increase of 315%, and soundly beat the consensus estimates by the analysts that follow the company, which were $0.42 per share.

The company also generated an enormous amount of cash during the quarter, with free cash flow of $435 million for the quarter and $717 million year to date.  They paid off another $816 million of debt taken on from the Candy Crush acquisition during the quarter.  Combine that with the repayments from Q1, and that means that they've already repaid $1.3 billion of the $2.3 billion in total debt that they took on to help finance the King / Candy Crush acquisition just FIVE MONTHS AGO.  This company continues to be a cash generating machine.

On Monthly Active User's ("MAU's"), the company's new organization-wide user engagement metric, MAU's as a whole were down, with declines in both King and Activision more than offsetting a significant increase for Blizzard, driven mostly by the release of Overwatch.

Here is the table from their 10-Q:

The decline at Activision from prior quarter is due to the release of Call of Duty:  Black Ops III in the fall of 2015, which caused numbers to be high for the last couple of quarters.

So overall, a very positive quarter for the Company as a whole.

The one interesting change that I referenced earlier is that for the first time in recent history, the company did not include any detailed financial information for their individual segments (i.e., Activision, Blizzard and King) in their earnings release.  That information is still publicly available, but as I discussed last quarter, you now have to hunt down their Form 10-Q filing with the SEC to find it (see my discussion of what's in their 10-Q here).

So in terms of information for Blizzard specifically, revenue for the quarter was up 92% from $385 million to $738 million.  Operating income for the quarter was up 185% from $117 million to $333 million and operating margins increased from 30.3% to 45.1%.  For the first six months of the year, revenue for Blizzard was up 40% from $737 million to $1,032 million.  Operating profit for the first six months increased 64% from $256 million to $419 million.  Operating margins increased from 34.7% to 40.6%.

According to their 10-Q filing, the increase in Blizzard revenue was due to increases for Overwatch and Hearthstone, offset by declines in Diablo III (which released in China in the second quarter of last year).  Revenue was also impacted by declines in Heroes of the Storm and Warcraft (due to a smaller subscriber base).  They also mentioned that sales and marketing costs were up for Blizzard due to current and future product launches.

The other specific item that was mentioned on the earnings call was the pre-purchases of Legion were tracking in line with where they were with pre-purchases for Warlords.

So that's it for this quarter.  Stayed tuned later this month for more from @AlternativeChat and I in podcast form as we'll dive into more details on the earnings release, quarterly reports and other developments!

A Change in How Blizzard Reports Revenue

On Friday, Blizzard hosted a brief conference call with their investors to explain some changes that would be coming with this quarter in how they present their revenue.

As I've discussed in this space before, Blizzard presents their revenue on both a GAAP and a non-GAAP basis.  GAAP stands for Generally Accepted Accounting Principles.  GAAP requires that Blizzard record their revenue when it is actually earned and not necessarily when they collect the cash.  

As a quick example, let's look at the WoW Token.  On a non-GAAP basis, as soon as Blizzard sells that WoW Token to someone, they are counting that $20 as non-GAAP revenue as soon as they have your cash in hand.  But on a GAAP basis, they aren't allowed to record the cost of that Token as revenue until someone actually uses it for game time.

Similar differences occur if you are pre-ordering a product like Legion, or if you are paying for your subscription in 6 month blocks.

Back in May, the U.S. Securities and Exchange Commission (SEC), which regulates public companies like Activision-Blizzard that trade on U.S. stock exchanges, issued new rules and regulation on the use of non-GAAP measures by public companies.  

In response to those new rules, Blizzard announced that they will no longer be disclosing non-GAAP revenue in their earnings releases.  Only GAAP revenue.

They said they will continue to use non-GAAP revenue internally to measure their performance and incentivize their people, but just won't continue to disclose it externally.

Here is a link to a presentation that Blizzard used on the call on Friday that explains the differences:

non-GAAP presentation

So what does this mean for those of us that follow Blizzard closely.  Very little.  As you can tell from the presentation, while they won't have an actual line on their earnings release for non-GAAP revenue, all of the information that you need to calculate that number will still be there and easily available, so we'll continue to calculate it and talk about it in the analysis that I do every quarter on their releases.

Thoughts So Far on 7.0.3

So I've had the chance to give patch 7.0.3 a solid trial run at this point and have a few thoughts that I wanted to share:

• I don't like the new name plates, but am still hunting for an add-on that produces an option that I like better.
• Not a big fan of Outlaw so far, although I need to give it more of a try before reaching any final conclusions.
• Both destruction and affliction feel different but okay to me as a warlock at this point.  Haven't had much time with demonology yet.
• I've been leveling as BM on my hunter, which feels very different, but I like it being more about "send in the pets".  Marksmanship feels okay but very different.  Haven't had the chance to do much with SV yet.
• I like shadow priests, although other than the new voidform thing, it doesn't feel all that different.
• Loving the boomkin changes so far.
• Mages are still mages.

I think I'm probably going to get that third hunter to level 100 before Legion drops at this point.  He's working his way through Pandaria now, so feels like I've got a decent amount of time to get it done.  That'll be #25 along with my level 100 boost (which I've already used on an Outlaw rogue).

Cheers.