Fourth Quarter Net Bookings Grew 43%
Year-Over-Year to a Quarterly Record
Fourth Quarter Mobile Net Bookings Grew
Mid-Teens Year-over-Year
Fourth Quarter In-Game Net Bookings Grew 46%
Year-Over-Year
Activision Blizzard, Inc. (Nasdaq: ATVI) today announced fourth
quarter 2022 results.
Bobby Kotick, CEO of Activision Blizzard, shared, "We ended 2022
with record quarterly net bookings as we delivered on our mission
to bring epic joy to players. I’m grateful to our talented and
hardworking teams for their many successes entertaining our
hundreds of millions of players around the world. We look forward
to a historic year, as we work toward merging with Microsoft. This
merger will enable us to better serve our players, create greater
opportunities for our employees, and allow us to succeed in an
increasingly competitive global gaming industry.”
Financial Metrics
Q4
CY
(in millions, except EPS)
2022
2021
2022
2021
GAAP Net Revenues
$2,334
$2,163
$7,528
$8,803
Impact of GAAP deferralsA
$1,232
$324
$986
$(449)
GAAP EPS
$0.51
$0.72
$1.92
$3.44
Non-GAAP EPS
$0.78
$1.01
$2.58
$4.08
Impact of GAAP deferralsA
$1.09
$0.24
$0.83
$(0.36)
Please refer to the tables at the back of this earnings release
for a reconciliation of the company’s GAAP and non-GAAP
results.
For the year ended December 31, 2022, Activision Blizzard’s net
revenues presented in accordance with GAAP were $7.53 billion, as
compared with $8.80 billion for 2021. GAAP net revenues from
digital channels were $6.63 billion. GAAP operating margin was 22%.
GAAP earnings per diluted share was $1.92, as compared with $3.44
for 2021. On a non-GAAP basis, Activision Blizzard’s operating
margin was 30% and earnings per diluted share was $2.58, as
compared with $4.08 for 2021.
For the quarter ended December 31, 2022, Activision Blizzard’s
net revenues presented in accordance with GAAP were $2.33 billion,
as compared with $2.16 billion for the fourth quarter of 2021. GAAP
net revenues from digital channels were $1.97 billion. GAAP
operating margin was 16%. GAAP earnings per diluted share was
$0.51, as compared with $0.72 for the fourth quarter of 2021. On a
non-GAAP basis, Activision Blizzard’s operating margin was 24% and
earnings per diluted share was $0.78, as compared with $1.01 for
the fourth quarter of 2021.
Activision Blizzard generated $2.22 billion in operating cash
flow for the year ended December 31, 2022, as compared with $2.41
billion for 2021. Activision Blizzard generated $1.12 billion in
operating cash flow for the quarter as compared with $661 million
for the fourth quarter of 2021.
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 Metrics
For the year ended December 31, 2022, Activision Blizzard’s net
bookingsB were $8.51 billion, as compared with $8.35 billion for
2021. In-game net bookingsC were $5.38 billion, as compared with
$5.10 billion for 2021.
For the quarter ended December 31, 2022, Activision Blizzard’s
net bookingsB were $3.57 billion, as compared with $2.49 billion
for the fourth quarter of 2021. In-game net bookingsC were $1.82
billion, as compared with $1.24 billion for the fourth quarter of
2021.
For the quarter ended December 31, 2022, overall Activision
Blizzard Monthly Active Users (MAUs)D were 389 million.
Microsoft transaction
As announced on January 18, 2022, Microsoft plans to acquire
Activision Blizzard for $95.00 per share in an all-cash
transaction. The transaction has been approved by the boards of
directors of both Activision Blizzard and Microsoft and by
Activision Blizzard’s stockholders. The two parties are continuing
to engage with regulators reviewing the transaction and are working
toward closing it in Microsoft’s fiscal year ending June 30 2023,
subject to obtaining required regulatory approvals and satisfaction
of other customary closing conditions.
Conference Call and Earnings Presentation
In light of the proposed transaction with Microsoft, and as is
customary during the pendency of an acquisition, Activision
Blizzard will not be hosting a conference call, issuing an earnings
presentation, or providing detailed quantitative financial guidance
in conjunction with its fourth quarter 2022 earnings release. For
further detail and discussion of our financial performance please
refer to our upcoming Annual Report on Form 10-K for the year ended
December 31, 2022.
Selected Business Highlights
Activision Blizzard delivered 43% year-over-year net bookings
growth and record segment financial results in the fourth quarter.
Net bookings grew 49% year-over-year on a constant currency basisE.
Amid an uncertain macro environment, our focus on expanding key
intellectual properties across platforms, geographies and business
models positions the business for further growth.
Strong execution by our talented teams enabled each of our
business units to break records in the fourth quarter. At
Activision, Call of Duty®: Modern Warfare® II delivered the
highest opening-quarter sell-through in franchise history. Blizzard
reported its highest quarterly net bookings to date, driven by
strong growth for Warcraft® and the reinvigoration of
Overwatch® and Diablo®. At King, Candy Crush®
once again delivered a record performance. Activision Blizzard net
bookings on the mobile platform grew mid-teens year-over-year while
overall in-game net bookings grew 46% year-over-year.
Our robust product pipeline, live game opportunity, and ongoing
focus on operational discipline create a foundation for strong
financial performance in 2023. While we remain cognizant of risks,
including those related to our execution, economic conditions, the
labor market, and exchange rates, we expect at least high-teens
year-over-year growth for GAAP revenue, and at least high-single
digit year-over-year growth in net bookings and total segment
operating income for 2023. We also expect interest income to be
significantly higher year-over-year in 2023 given the current rate
environment.
For the first quarter, we expect at least high-teens
year-over-year growth for GAAP revenue, at least mid-teens
year-over-year growth for net bookings, and at least high-single
digit year-over-year growth for total segment operating income. The
first quarter will see significant development and marketing
investment in live operations and future releases, including the
June launch of Diablo IV.
In the fourth quarter we continued to invest in growing our
development teams and in our goal of being the model workplace in
our industry. Our game development teams grew over 25%
year-over-year in 2022. We shared our latest representation update
in the quarter, which showed that we increased our representation
for those who identify as women or non-binary to 26% globally, as
of the end of November, versus 24% a year earlier. Representation
for underrepresented ethnic groups increased to 38% from 36% in the
US over the same period.
Activision
- Activision segment revenue and operating income grew
approximately 60% year-over-year in the fourth quarter, driven by
the performance of Call of Duty across console, PC and
mobile.
- Following its October launch, Call of Duty: Modern
Warfare II delivered the highest opening-quarter sell-through
in franchise history. The strong performance was broad-based, and
digital sales were particularly robust on PC and in Asia-Pacific
after Activision expanded distribution of the title to Steam's PC
digital storefront. At the end of the fourth quarter, cumulative
hours played were the highest in franchise history for a premium
title at this stage of its release.
- The November release of Warzone™ 2.0,
including its new DMZ mode, also contributed to a strong
year-over-year increase in franchise reach and engagement on
console and PC in the fourth quarter, as well as record quarterly
player investment. Year-over-year engagement growth in the free
title has moderated following the launch, although next week sees
the launch of Season 2, which will include new content, modes and
gameplay updates aimed at delighting the community and accelerating
growth. Our teams are also looking forward to further expanding the
Warzone community with the release of Call of Duty:
Warzone Mobile™ planned for this year.
- Fourth quarter Call of Duty Mobile net bookings grew
double-digits year-over-year to a new quarterly record, driven by
enhancements to the player experience and well-received seasonal
content.
- Across the Call of Duty franchise, our teams are working
to amplify the success of the fourth quarter, with 2023 plans
including even more engaging live services across platforms and the
next full annual premium release in the blockbuster series.
Blizzard
- Blizzard segment revenue and operating income grew
approximately 90% year-over-year in the fourth quarter, as our
teams executed against a substantial pipeline to deliver
well-received content across key intellectual properties.
Warcraft, Overwatch and Diablo grew strongly
year-over-year and each delivered over $100M in net bookings.
- In the Warcraft franchise, World of Warcraft
delivered significant year-over-year growth in reach, engagement
and net bookings in the fourth quarter following the September
release of Wrath of the Lich King® Classic and the November
launch of Dragonflight™. While early
Dragonflight sales have not reached the level of the prior
expansion, community feedback on the title has been positive.
Blizzard has announced plans to deliver substantially more
follow-on content for the expansion than in the past, and
post-launch subscriber retention in the West is higher than recent
expansions. Elsewhere in the Warcraft franchise, mobile
title Warcraft: Arclight Rumble™ continues to
progress well through regional testing.
- The October launch of Overwatch 2 with a free-to-play
model delivered the highest quarterly figures for player numbers
and hours played in Overwatch history. Player investment is
also off to a strong start, with fourth quarter in-game net
bookings at the highest level to date for Overwatch. The
team is working on an ambitious slate of regular seasonal updates,
including PVE content, to engage and expand the community, as well
as other ways for new and existing players to experience the
Overwatch universe longer-term.
- Diablo Immortal™ on mobile and PC also
contributed to Blizzard’s fourth quarter year-over-year growth.
Engagement and player investment trends for the title were stable
at the end of the fourth quarter and into the new year. Diablo
IV, the next installment in the genre-defining series, is
planned for release on PC and console on June 6, 2023. This
ambitious title will serve as the launch for a compelling live
service, with regular seasons and story-driven expansions planned
for years to come.
- Licensing agreements with NetEase that covered the publication
of several titles in China expired in January 2023. Nonetheless, we
still expect very strong year-over-year financial growth globally
for Blizzard in 2023, driven by both the launch of Diablo IV
and live operations. Blizzard remains focused on finding
alternative ways to serve the community in China.
King
- King continued to outperform amid a challenging backdrop for
mobile games. Fourth quarter segment revenue grew 6%
year-over-year, equivalent to low double-digit growth on a constant
currency basisE. King’s fourth quarter segment operating income was
lower year-over-year, due to the year ago quarter benefiting from
lower cash compensation expense and insurance claim proceeds.
- King’s in-game net bookings increased 9% year-over-year, driven
by the Candy Crush franchise. Candy Crush was the
top-grossing game franchise in the U.S. app stores1 for the 22nd
quarter in a row. King advertising revenue was stable
year-over-year despite an ongoing difficult macro environment for
digital advertising.
- Candy Crush Saga™, the largest title in the
Candy Crush franchise, celebrated its 10-year anniversary in
November. In-game net bookings for the title grew approximately 20%
year-over-year for every quarter of 2022, driven by continuous live
operations improvements and highly-effective user acquisition. The
team sees further opportunities to increase engagement, retention
and payer conversion in the title, including through further social
and competitive features and deeper seasonal content. In 2023, King
will also intensify focus on applying its proven live operations
strategy to other games in the portfolio.
Balance Sheet
- Cash and short-term investments at the end of the fourth
quarter stood at $12.1 billion, and Activision Blizzard ended the
quarter with a net cashF position of approximately $8.4
billion.
Service Periods for Games
As we have continued to focus on delivering increased content to
our players and to deliver such content more frequently through
in-game updates, certain of our games are seeing player engagement
and monetization over longer periods of time. This has resulted in
certain expenses, including capitalized software cost amortization,
and GAAP revenues being recognized over longer periods of time than
in prior years. Additionally, these elongations have resulted in an
increased portion of our capitalized software costs being
classified as non-current on our consolidated balance sheet. For
further details and discussion, refer to our upcoming Annual Report
on Form 10-K for the year ended December 31, 2022.
Activision Blizzard Disclosure Channels to Disseminate
Information
Activision Blizzard, Inc. (“Activision Blizzard”) discloses
information to the public concerning Activision Blizzard,
Activision Blizzard’s products, content and services, and other
items through a variety of disclosure channels in order to achieve
broad, non-exclusionary distribution of information to the public.
Some of the information distributed through these disclosure
channels may be considered material information. Investors and
others are encouraged to review the information we make public in
the locations below.2 This list may be updated from time to
time.
- For information concerning Activision Blizzard and its
products, content and services, please visit:
https://www.activisionblizzard.com.
- For information provided to the investment community, including
news releases, events and presentations, and filings with the U.S.
Securities and Exchange Commission, please visit:
https://investor.activision.com.
- For the latest information from Activision Blizzard, including
press releases and the Activision Blizzard blog, please visit:
https://www.activisionblizzard.com/newsroom.
- For additional information, please follow Activision Blizzard’s
and Lulu Cheng Meservey’s (Activision Blizzard’s Executive Vice
President, Corporate Affairs and Chief Communications Officer)
Twitter accounts: https://twitter.com/atvi_ab and
https://twitter.com/lulumeservey. Except with respect to
communications regarding Activision Blizzard, Ms. Meservey’s social
media communications from https://twitter.com/lulumeservey are
personal communications of Ms. Meservey and are not communications
on behalf of Activision Blizzard.
About Activision Blizzard
Our mission, to connect and engage the world through epic
entertainment, has never been more important. Through communities
rooted in our video games we enable hundreds of millions of people
to experience joy, thrill and achievement. We enable social
connections through the lens of fun, and we foster purpose and a
sense of accomplishment through healthy competition. Like sport,
but with greater accessibility, our players can find purpose and
meaning through competitive gaming. Video games, unlike any other
social or entertainment media, have the ability to break down the
barriers that can inhibit tolerance and understanding. Celebrating
differences is at the core of our culture and ensures we can create
games for players of diverse backgrounds in the 190 countries our
games are played.
As a member of the Fortune 500 and as a component company of the
S&P 500, we have an extraordinary track record of delivering
superior shareholder returns for over 30 years. Our sustained
success has enabled the company to support corporate social
responsibility initiatives that are directly tied to our games. As
an example, our Call of Duty Endowment has helped find employment
for over 100,000 veterans.
Learn more information about Activision Blizzard and how we
connect and engage the world through epic entertainment on the
company's website, www.activisionblizzard.com.
1 Based on data.ai Intelligence
2 These corporate websites and social media channels, and the
contents thereof, are not incorporated by reference into this press
release nor deemed filed with the U.S. Securities and Exchange
Commission.
A Net effect of accounting treatment from revenue deferrals on
certain of our online-enabled products. Since certain of our games
are hosted online or include significant online functionality that
represents a separate performance obligation, we defer the
transaction price allocable to the online functionality from the
sale of these games and then recognize the attributable revenues
over the relevant estimated service periods, which are generally
less than a year. The related cost of revenues is deferred and
recognized as an expense as the related revenues are recognized.
Impact from changes in deferrals refers to the net effect from
revenue deferrals accounting treatment for the purposes of
revenues, along with, for the purposes of EPS, the related cost of
revenues deferrals treatment and the related tax impacts.
Internally, management excludes the impact of this change in
deferred revenues and related cost of revenues when evaluating the
company’s operating performance, when planning, forecasting and
analyzing future periods, and when assessing the performance of its
management team. Management believes this is appropriate because
doing so enables an analysis of performance based on the timing of
actual transactions with our customers. In addition, management
believes excluding the change in deferred revenues and the related
cost of revenues provides a much more timely indication of trends
in our operating results.
In the fourth quarter of 2022, the Company completed its annual
assessment of the estimated service periods for players of our
games. We have noted that players who purchase in-game content are
playing certain of our titles, notably those in our Call of Duty
and World of Warcraft offerings, for longer periods of time than in
prior years as they engage with services we provide that are
designed to enhance and extend gameplay. As such, we have concluded
that the estimated service period for in-game revenues from such
games has lengthened by approximately 3 months.
Based on the carrying amount of deferred revenue and deferred
cost of revenue as of September 30, 2022, the change resulted in a
decrease in net revenues recognized of $103 million, a decrease in
cost of revenues recognized of $9 million, and a decrease in
earnings per diluted share of $0.10 during the three months ended
December 31, 2022. Such amounts will now be recognized during the
year ended December 31, 2023. The change in the estimated service
period had no impact on net bookings, segment net revenues, or net
cash provided by operating activities.
B 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.
C In-game net bookings primarily includes the net amount of
downloadable content and microtransactions sold during the period,
and is equal to in-game net revenues excluding the impact from
deferrals.
D Monthly Active User (“MAU”) Definition: We monitor MAUs as a
key measure of the overall size of our user base. MAUs are the
number of individuals who accessed a particular game in a given
month. We calculate average MAUs in a period by adding the total
number of MAUs in each of the months in a given period and dividing
that total by the number of months in the period. An individual who
accesses two of our games would be counted as two users. In
addition, due to technical limitations, for Activision and King, an
individual who accesses the same game on two platforms or devices
in the relevant period would be counted as two users. For Blizzard,
an individual who accesses the same game on two platforms or
devices in the relevant period would generally be counted as a
single user. In certain instances, we rely on third parties to
publish our games. In these instances, MAU data is based on
information provided to us by those third parties, or, if final
data is not available, reasonable estimates of MAUs for these
third-party published games.
E Year-over-year growth on a constant currency basis is
calculated by translating current quarter local currency amounts to
U.S. dollars based on prior period exchange rates. These amounts
are compared to the prior period to derive constant-currency
year-over-year performance. We present constant currency
information to provide a framework for assessing how our underlying
businesses performed excluding the effect of currency rate
fluctuations.
- Total net bookings increased by 43% year-over-year for the
fourth quarter of 2022. On a constant currency basis, total net
bookings increased 49% year-over-year for the fourth quarter of
2022 as currency rate changes negatively impacted year-over-year
growth in the quarter by 6 percentage points.
- Activision segment net revenues grew by 60% year-over-year,
Blizzard segment net revenues grew by 89%, and King segment net
revenues grew by 6% for the fourth quarter of 2022. On a constant
currency year-over-year basis, Activision segment net revenue grew
67%, Blizzard segment net revenue grew 97%, and King segment net
revenue grew 11% for the fourth quarter of 2022, as currency rate
changes negatively impacted Activision segment net revenue
year-over-growth by 7 percentage points, Blizzard segment net
revenue year-over-year growth by 8 percentage points, and King
segment net revenue year-over-year growth by 5 percentage
points.
F Net cash is defined as cash and cash equivalents ($7.1B as of
December 31, 2022) and short-term investments ($5.0B as of December
31, 2022) minus gross debt ($3.7B as of December 31, 2022).
Non-GAAP Financial Measures: As a supplement to our
financial measures presented in accordance with U.S. Generally
Accepted Accounting Principles (“GAAP”), Activision Blizzard
presents certain non-GAAP measures of financial performance. These
non-GAAP financial measures are not intended to be considered in
isolation from, as a substitute for, or as more important than, the
financial information prepared and presented in accordance with
GAAP. In addition, these non-GAAP measures have limitations in that
they do not reflect all of the items associated with the company’s
results of operations as determined in accordance with GAAP.
Activision Blizzard provides net income (loss), earnings (loss)
per share, and operating margin data and guidance both including
(in accordance with GAAP) and excluding (non-GAAP) certain items.
When relevant, the company also provides constant currency
information to provide a framework for assessing how our underlying
businesses performed excluding the effect of currency rate
fluctuations. In addition, Activision Blizzard provides EBITDA
(defined as GAAP net income (loss) before interest (income)
expense, income taxes, depreciation, and amortization) and adjusted
EBITDA (defined as non-GAAP operating margin (see non-GAAP
financial measure below) before depreciation). The non-GAAP
financial measures exclude the following items, as applicable in
any given reporting period and our outlook:
- expenses related to share-based compensation, including
liability awards accounted for under ASC 718;
- the amortization of intangibles from purchase price
accounting;
- fees and other expenses related to merger and acquisitions,
including related debt financings, and refinancing of long-term
debt, including penalties and the write off of unamortized discount
and deferred financing costs;
- restructuring and related charges;
- expenses related to the wind down of our partnership with
NetEase in China in regards to licenses covering the publication of
several Blizzard titles which expired in January 2023;
- other non-cash charges from reclassification of certain
cumulative translation adjustments into earnings as required by
GAAP;
- the income tax adjustments associated with any of the above
items (tax impact on non-GAAP pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results); and
- significant discrete tax-related items, including amounts
related to changes in tax laws, amounts related to the potential or
final resolution of tax positions, and other unusual or unique
tax-related items and activities.
In the future, Activision Blizzard may also consider whether
other items should also be excluded in calculating the non-GAAP
financial measures used by the company. Management believes that
the presentation of these non-GAAP financial measures provides
investors with additional useful information to measure Activision
Blizzard’s financial and operating performance. In particular, the
measures facilitate comparison of operating performance between
periods and help investors to better understand the operating
results of Activision Blizzard by excluding certain items that may
not be indicative of the company’s core business, operating
results, or future outlook. Additionally, we consider quantitative
and qualitative factors in assessing whether to adjust for the
impact of items that may be significant or that could affect an
understanding of our ongoing financial and business performance or
trends. Internally, management uses these non-GAAP financial
measures, along with others, in assessing the company’s operating
results, and measuring compliance with the requirements of the
company’s debt financing agreements, as well as in planning and
forecasting.
Activision Blizzard’s non-GAAP financial measures are not based
on a comprehensive set of accounting rules or principles, and the
terms non-GAAP net income, non-GAAP earnings per share, non-GAAP
operating margin, and non-GAAP or adjusted EBITDA do not have a
standardized meaning. Therefore, other companies may use the same
or similarly named measures, but exclude different items, which may
not provide investors a comparable view of Activision Blizzard’s
performance in relation to other companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering Activision Blizzard’s GAAP, as well
as non-GAAP, results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
Cautionary Note Regarding Forward-looking Statements: The
statements contained herein that are not historical facts are
forward-looking statements including, but not limited to statements
about: (1) projections of revenues, expenses, income or loss,
earnings or loss per share, cash flow, or other financial items;
(2) statements of our plans and objectives, including those related
to releases of products or services; (3) statements of future
financial or operating performance, including the impact of tax
items thereon; (4) statements regarding the proposed transaction
between Activision Blizzard and Microsoft (such transaction, “the
proposed transaction with Microsoft”), including any statements
regarding the expected timetable for completing the proposed
transaction with Microsoft, the ability to complete the proposed
transaction with Microsoft, and the expected benefits of the
proposed transaction with Microsoft; and (5) statements of
assumptions underlying such statements. Activision Blizzard, Inc.
generally uses words such as “outlook,” “forecast,” “will,”
“could,” “should,” “would,” “to be,” “plan,” “aims,” “believes,”
“may,” “might,” “expects,” “intends,” “seeks,” “anticipates,”
“estimate,” “future,” “positioned,” “potential,” “project,”
“remain,” “scheduled,” “set to,” “subject to,” “upcoming,” and the
negative version of these words and other similar words and
expressions to help identify forward-looking statements.
Forward-looking statements are subject to business and economic
risks, reflect management’s current expectations, estimates, and
projections about our business, and are inherently uncertain and
difficult to predict.
We caution that a number of important factors, many of which are
beyond our control, could cause our actual future results and other
future circumstances to differ materially from those expressed in
any forward-looking statements. Such factors include, but are not
limited to: the risk that the proposed transaction with Microsoft
may not be completed in a timely manner or at all, which may
adversely affect our business and the price of our common stock;
the failure to satisfy the conditions to the consummation of the
proposed transaction with Microsoft, including the receipt of
certain governmental and regulatory approvals; the occurrence of
any event, change, or other circumstance that could give rise to
the termination of the Agreement and Plan of Merger, dated as of
January 18, 2022, by and among Activision Blizzard, Microsoft, and
Anchorage Merger Sub Inc., a wholly owned subsidiary of Microsoft
(the “Merger Agreement”); the effect of the announcement or
pendency of the proposed transaction with Microsoft on our business
relationships, operating results, and business generally; risks
that the proposed transaction with Microsoft disrupts our current
plans and operations and potential difficulties in employee
retention as a result of the proposed transaction with Microsoft;
risks related to diverting management’s attention from ongoing
business operations; the outcome of any legal proceedings that have
been or may be instituted against us related to the Merger
Agreement or the transactions contemplated thereby; restrictions
during the pendency of the proposed transaction with Microsoft that
may impact our ability to pursue certain business opportunities or
strategic transactions; the global impact of the ongoing COVID-19
pandemic and other macroeconomic factors (including, without
limitation, the potential for significant short- and long-term
global unemployment and economic weakness and a resulting impact on
global discretionary spending; potential strain on the retailers,
distributors, and manufacturers who sell our physical products to
customers and the platform providers on whose networks and consoles
certain of our games are available; effects on our ability to
release our content in a timely manner and with effective quality
control; effects on our ability to prevent cyber-security incidents
while our workforce is dispersed; effects on the operations of our
professional esports leagues; the impact of rising interest rates
as a result of large-scale intervention by the Federal Reserve and
other central banks around the world and other economic factors;
increased demand for our games due to stay-at-home orders and
curtailment of other forms of entertainment, which may not be
sustained and may fluctuate as stay-at-home orders are reduced,
lifted, and/or reinstated; macroeconomic impacts arising from the
long duration of the COVID-19 pandemic, including labor shortages
and supply chain disruptions; and volatility in foreign exchange
rates); our ability to consistently deliver popular, high-quality
titles in a timely manner, which has been made more difficult as a
result of the COVID-19 pandemic; our ability to satisfy the
expectations of consumers with respect to our brands, games,
services, and/or business practices; negative impacts on our
business from concerns regarding our workplace; our ability to
attract, retain, and motivate skilled personnel; competition;
concentration of revenue among a small number of franchises;
negative impacts from unionization or attempts to unionize by our
workforce; rapid changes in technology and industry standards;
increasing importance of revenues derived from digital distribution
channels; our ability to manage growth in the scope and complexity
of our business; substantial influence of third-party platform
providers over our products and costs; success and availability of
video game consoles manufactured by third parties, including our
ability to predict the consoles that will be most successful in the
marketplace and develop commercially-successful products for those
consoles; risks associated with the free-to-play business model,
including our dependence on a relatively small number of consumers
for a significant portion of revenues and profits from any given
game; risks and uncertainties of conducting business outside the
United States (the “U.S.”), including the need for regulatory
approval to operate, impacts on our business arising from the
current conflict between Russia and Ukraine, the relatively weaker
protection for our intellectual property rights, and the impact of
cultural differences on consumer preferences; risks associated with
the retail sales business model; difficulties in integrating
acquired businesses or otherwise realizing the anticipated benefits
of strategic transactions; the seasonality in the sale of our
products; fluctuation in our recurring business; risks relating to
behavior of our distributors, retailers, development, and licensing
partners, or other affiliated third parties that may harm our
brands or business operations; our reliance on tools and
technologies owned by third parties; risks associated with our use
of open source software; risks associated with undisclosed content
or features that may result in consumers’ refusal to buy or
retailers’ refusal to sell our products; risks associated with
objectionable consumer- or other third-party-created content;
outages, disruptions or degradations in our services, products,
and/or technological infrastructure; data breaches, fraudulent
activity, and other cybersecurity risks; significant disruption
during our live events; risks related to the impacts of
catastrophic events; climate change; provisions in our corporate
documents that may make it more difficult for any person to acquire
control of our company; ongoing legal proceedings related to
workplace concerns and otherwise, including the impact of the
complaint filed in 2021 by the California Civil Rights Department
(formerly known as the Department of Fair Employment and Housing)
alleging violations of the California Fair Employment and Housing
Act and the California Equal Pay Act and separate investigations
and complaints by other parties and regulators related to certain
employment practices and related disclosures; successful
implementation of the requirements of the court-approved consent
decree with the Equal Employment Opportunity Commission;
intellectual property claims; increasing regulation in key
territories; regulation relating to the Internet, including
potential harm from laws impacting “net neutrality;” regulation
concerning data privacy, including China’s Personal Information
Protection Law; scrutiny regarding the appropriateness of our
games’ content, including ratings assigned by third parties;
changes in tax rates and/or tax laws or exposure to additional tax
liabilities; fluctuations in currency exchange rates; impacts of
changes in financial accounting standards; insolvency or business
failure of any of our business partners, which has been magnified
as a result of the COVID-19 pandemic; risks associated with our
reliance on consumer discretionary spending; risks associated with
increased inflation on our costs and the impacts on consumer
discretionary spending; and the other factors included in Part I,
Item 1A “Risk Factors” of our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the U.S. Securities and
Exchange Commission.
The forward-looking statements contained herein are based on
information available to Activision Blizzard, Inc. as of the date
of this filing, and we assume no obligation to update any such
forward-looking statements. Actual events or results may differ
from those expressed in forward-looking statements. As such, you
should not rely on forward-looking statements as predictions of
future events. We have based the forward-looking statements
contained herein primarily on our current expectations and
projections about future events and trends that we believe may
affect our business, financial condition, operating results,
prospects, strategy, and financial needs. These statements are not
guarantees of our future performance and are subject to risks,
uncertainties, and other factors, some of which are beyond our
control and may cause actual results to differ materially from
current expectations.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(Amounts in millions)
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Net revenues
Product sales
$
721
$
645
$
1,642
$
2,311
In-game, subscription, and other
revenues
1,613
1,518
5,886
6,492
Total net revenues
2,334
2,163
7,528
8,803
Costs and expenses
Cost of revenues—product sales:
Product costs
240
274
519
649
Software royalties and amortization
78
73
231
346
Cost of revenues—in-game, subscription,
and other:
Game operations and distribution costs
376
290
1,324
1,215
Software royalties and amortization
62
20
148
107
Product development
486
321
1,421
1,337
Sales and marketing
415
299
1,217
1,025
General and administrative 1
309
174
1,001
788
Restructuring and related costs
—
30
(3
)
77
Total costs and expenses
1,966
1,481
5,858
5,544
Operating income
368
682
1,670
3,259
Interest expense from debt
27
27
108
108
Other (income) expense, net
(117
)
18
(182
)
(13
)
Income before income tax expense
458
637
1,744
3,164
Income tax expense
55
73
231
465
Net income
$
403
$
564
$
1,513
$
2,699
Basic earnings per common share
$
0.52
$
0.72
$
1.94
$
3.47
Weighted average common shares
outstanding
783
779
782
777
Diluted earnings per common share
$
0.51
$
0.72
$
1.92
$
3.44
Weighted average common shares outstanding
assuming dilution
791
782
789
784
1
Included in the three months and year
ended December 31, 2022 is $35 million for settlement of the SEC
matter announced February 3, 2023.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in millions)
December 31, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
7,060
$
10,423
Held-to-maturity investments
4,932
—
Accounts receivable, net
1,204
972
Software development
640
449
Other current assets
633
712
Total current assets
14,469
12,556
Software development
641
211
Property and equipment, net
193
169
Deferred income taxes, net
1,201
1,377
Other assets
508
497
Intangible assets, net
442
447
Goodwill
9,929
9,799
Total assets
$
27,383
$
25,056
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable
$
324
$
285
Deferred revenues
2,088
1,118
Accrued expenses and other liabilities
1,143
1,008
Total current liabilities
3,555
2,411
Long-term debt, net
3,611
3,608
Deferred income taxes, net
158
506
Other liabilities
816
932
Total liabilities
8,140
7,457
Shareholders' equity
Common stock
—
—
Additional paid-in capital
12,260
11,715
Treasury stock
(5,563
)
(5,563
)
Retained earnings
13,171
12,025
Accumulated other comprehensive loss
(625
)
(578
)
Total shareholders’ equity
19,243
17,599
Total liabilities and shareholders’
equity
$
27,383
$
25,056
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(Amounts in millions)
Year Ended December
31,
2022
2021
Cash flows from operating activities:
Net income
$
1,513
$
2,699
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes
(164
)
7
Non-cash operating lease cost
77
65
Depreciation and amortization
106
116
Amortization of capitalized software
development costs and intellectual property licenses1
213
324
Share-based compensation expense2
462
508
Other
(31
)
(26
)
Changes in operating assets and
liabilities, net of effect of business acquisitions:
Accounts receivable, net
(231
)
71
Software development and intellectual
property licenses
(693
)
(426
)
Other assets
(140
)
(114
)
Deferred revenues
987
(537
)
Accounts payable
37
(7
)
Accrued expenses and other liabilities
84
(266
)
Net cash provided by operating
activities
2,220
2,414
Cash flows from investing activities:
Proceeds from maturities of
available-for-sale investments
213
214
Proceeds from sale of available-for-sale
investments
26
66
Purchases of available-for-sale
investments
(109
)
(248
)
Purchases of held-to-maturity
investments
(4,899
)
—
Acquisition of business, net of cash
acquired
(135
)
—
Capital expenditures
(91
)
(80
)
Other investing activities
1
(11
)
Net cash used in investing activities
(4,994
)
(59
)
Cash flows from financing activities:
Proceeds from issuance of common stock to
employees
47
90
Tax payment related to net share
settlements on restricted stock units
(214
)
(246
)
Dividends paid
(367
)
(365
)
Net cash used in financing activities
(534
)
(521
)
Effect of foreign exchange rate changes on
cash and cash equivalents
(44
)
(48
)
Net (decrease) increase in cash and cash
equivalents and restricted cash
(3,352
)
1,786
Cash and cash equivalents and restricted
cash at beginning of period
10,438
8,652
Cash and cash equivalents and restricted
cash at end of period
$
7,086
$
10,438
1
Excludes deferral and amortization of
share-based compensation expense.
2
Includes the net effects of
capitalization, deferral, and amortization of share-based
compensation expense.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
SUPPLEMENTAL CASH FLOW INFORMATION
(Amounts in millions)
Three Months Ended
March 31, 2021
June 30, 2021
September 30, 2021
December 31,
2021
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
Year over Year % Increase
(Decrease)
Cash Flow Data
Operating Cash Flow
$
844
$
388
$
521
$
661
$
642
$
198
$
257
$
1,123
70
%
Capital Expenditures
22
14
23
21
15
37
15
24
14
Non-GAAP Free Cash Flow1
$
822
$
374
$
498
$
640
$
627
$
161
$
242
$
1,099
72
Operating Cash Flow - TTM2
$
2,948
$
2,568
$
2,893
$
2,414
$
2,212
$
2,022
$
1,758
$
2,220
(8
)
Capital Expenditures - TTM2
81
82
81
80
73
96
88
91
14
Non-GAAP Free Cash Flow1 - TTM2
$
2,867
$
2,486
$
2,812
$
2,334
$
2,139
$
1,926
$
1,670
$
2,129
(9
) %
1
Non-GAAP free cash flow represents
operating cash flow minus capital expenditures.
2
TTM represents trailing twelve months.
Operating Cash Flow for three months ended June 30, 2020, three
months ended September 30, 2020, and three months ended December
31, 2020, were $768 million, $196 million, and $1,140 million,
respectively. Capital Expenditures for the three months ended June
30, 2020, three months ended September 30, 2020, and three months
ended December 31, 2020, were $13 million, $24 million, and $22
million, respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 31,
2022
Net Revenues
Cost of Revenues— Product
Sales: Product Costs
Cost of Revenues— Product
Sales: Software Royalties and Amortization
Cost of Revenues—In-
game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues—In-
game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
2,334
$
240
$
78
$
376
$
62
$
486
$
415
$
309
$
—
$
1,966
Share-based compensation1
—
—
(13
)
(3
)
(3
)
(86
)
(15
)
(41
)
—
(161
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
—
—
(3
)
Partnership wind down and related
costs3
—
—
—
—
—
—
—
(27
)
—
(27
)
Merger and acquisition-related fees and
other expenses4
—
—
—
—
—
—
—
(10
)
—
(10
)
Non-GAAP Measurement
$
2,334
$
240
$
65
$
373
$
56
$
400
$
400
$
231
$
—
$
1,765
Net effect of deferred revenues and
related cost of revenues5
$
1,232
$
51
$
87
$
23
$
12
$
—
$
—
$
—
$
—
$
173
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
368
$
403
$
0.52
$
0.51
Share-based compensation1
161
161
0.21
0.20
Amortization of intangible assets2
3
3
—
—
Partnership wind down and related
costs3
27
27
0.03
0.03
Merger and acquisition-related fees and
other expenses4
10
10
0.01
0.01
Income tax impacts from items above6
—
10
0.01
0.01
Non-GAAP Measurement
$
569
$
614
$
0.78
$
0.78
Net effect of deferred revenues and
related cost of revenues5
$
1,059
$
868
$
1.11
$
1.09
1
Reflects expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects expenses related to the wind down
of our partnership with NetEase, Inc. ("NetEase") in China in
regards to licenses covering the publication of several Blizzard
titles which expired in January 2023.
4
Reflects fees and other expenses related
to our proposed transaction with Microsoft Corporation
("Microsoft"), primarily legal and advisory fees.
5
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
6
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Year Ended December 31, 2022
Net Revenues
Cost of Revenues— Product
Sales: Product Costs
Cost of Revenues— Product
Sales: Software Royalties and Amortization
Cost of Revenues—In-
game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues—In-
game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
7,528
$
519
$
231
$
1,324
$
148
$
1,421
$
1,217
$
1,001
$
(3
)
$
5,858
Share-based compensation1
—
—
(21
)
(7
)
(3
)
(224
)
(58
)
(149
)
—
(462
)
Amortization of intangible assets2
—
—
—
—
(7
)
—
—
(6
)
—
(13
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
3
3
Partnership wind down and related
costs4
—
—
—
—
—
—
—
(27
)
—
(27
)
Merger and acquisition-related fees and
other expenses5
—
—
—
—
—
—
—
(68
)
—
(68
)
Non-GAAP Measurement
$
7,528
$
519
$
210
$
1,317
$
138
$
1,197
$
1,159
$
751
$
—
$
5,291
Net effect of deferred revenues and
related cost of revenues6
$
986
$
24
$
13
$
59
$
42
$
—
$
—
$
—
$
—
$
138
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
1,670
$
1,513
$
1.94
$
1.92
Share-based compensation1
462
462
0.59
0.59
Amortization of intangible assets2
13
13
0.02
0.02
Restructuring and related costs3
(3
)
(3
)
—
—
Partnership wind down and related
costs4
27
27
0.03
0.03
Merger and acquisition-related fees and
other expenses5
68
68
0.09
0.09
Income tax impacts from items above7
—
(46
)
(0.06
)
(0.06
)
Non-GAAP Measurement
$
2,237
$
2,034
$
2.60
$
2.58
Net effect of deferred revenues and
related cost of revenues6
$
848
$
657
$
0.84
$
0.83
1
Reflects expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives.
4
Reflects expenses related to the
wind down of our partnership with NetEase in China in regards to
licenses covering the publication of several Blizzard titles which
expired in January 2023.
5
Reflects fees and other expenses related
to our proposed transaction with Microsoft, primarily legal and
advisory fees.
6
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
7
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended December 31,
2021
Net Revenues
Cost of Revenues— Product
Sales: Product Costs
Cost of Revenues— Product
Sales: Software Royalties and Amortization
Cost of Revenues—In-
game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues—In-
game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
2,163
$
274
$
73
$
290
$
20
$
321
$
299
$
174
$
30
$
1,481
Share-based compensation1
—
—
(3
)
(5
)
—
(145
)
(29
)
(67
)
—
(249
)
Amortization of intangible assets2
—
—
—
—
—
—
—
(2
)
—
(2
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(30
)
(30
)
Non-GAAP Measurement
$
2,163
$
274
$
70
$
285
$
20
$
176
$
270
$
105
$
—
$
1,200
Net effect of deferred revenues and
related cost of revenues4
$
324
$
29
$
68
$
6
$
6
$
—
$
—
$
—
$
—
$
109
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
682
$
564
$
0.72
$
0.72
Share-based compensation1
249
249
0.32
0.32
Amortization of intangible assets2
2
2
—
—
Restructuring and related costs3
30
30
0.04
0.04
Income tax impacts from items above5
—
(57
)
(0.07
)
(0.07
)
Non-GAAP Measurement
$
963
$
788
$
1.01
$
1.01
Net effect of deferred revenues and
related cost of revenues4
$
215
$
188
$
0.24
$
0.24
1
Reflects expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
5
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Year Ended December 31, 2021
Net Revenues
Cost of Revenues— Product
Sales: Product Costs
Cost of Revenues— Product
Sales: Software Royalties and Amortization
Cost of Revenues—In-
game/Subs/Other: Game Operations and Distribution Costs
Cost of Revenues—In-
game/Subs/Other: Software Royalties and Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
8,803
$
649
$
346
$
1,215
$
107
$
1,337
$
1,025
$
788
$
77
$
5,544
Share-based compensation1
—
—
(17
)
(7
)
—
(211
)
(44
)
(229
)
—
(508
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(7
)
—
(10
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(77
)
(77
)
Non-GAAP Measurement
$
8,803
$
649
$
329
$
1,208
$
104
$
1,126
$
981
$
552
$
—
$
4,949
Net effect of deferred revenues and
related cost of revenues4
$
(449
)
$
(5
)
$
(109
)
$
5
$
7
$
—
$
—
$
—
$
—
$
(102
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
3,259
$
2,699
$
3.47
$
3.44
Share-based compensation1
508
508
0.65
0.65
Amortization of intangible assets2
10
10
0.01
0.01
Restructuring and related costs3
77
77
0.10
0.10
Income tax impacts from items above5
—
(98
)
(0.13
)
(0.13
)
Non-GAAP Measurement
$
3,854
$
3,196
$
4.11
$
4.08
Net effect of deferred revenues and
related cost of revenues4
$
(347
)
$
(280
)
$
(0.36
)
$
(0.36
)
1
Reflects expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
5
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
(Amounts in millions)
Three Months Ended
December 31, 2022
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
1,851
$
747
$
727
$
3,325
$
694
$
360
$
43
$
1,097
Intersegment net revenues1
—
47
—
47
—
15
—
15
Segment net revenues
$
1,851
$
794
$
727
$
3,372
$
694
$
375
$
43
$
1,112
Segment operating income
$
1,013
$
311
$
310
$
1,634
$
395
$
150
$
(75
)
$
470
Operating Margin
48.5
%
December 31, 2021
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
1,157
$
387
$
684
$
2,228
Intersegment net revenues1
—
32
—
32
Segment net revenues
$
1,157
$
419
$
684
$
2,260
Segment operating income
$
618
$
161
$
385
$
1,164
Operating Margin
51.5
%
Year Ended
December 31, 2022
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
3,275
$
1,936
$
2,785
$
7,996
$
(203
)
$
203
$
205
$
205
Intersegment net revenues1
—
76
—
76
—
(18
)
—
(18
)
Segment net revenues
$
3,275
$
2,012
$
2,785
$
8,072
$
(203
)
$
185
$
205
$
187
Segment operating income
$
1,317
$
625
$
1,121
$
3,063
$
(350
)
$
(73
)
$
(19
)
$
(442
)
Operating Margin
37.9
%
December 31, 2021
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
3,478
$
1,733
$
2,580
$
7,791
Intersegment net revenues1
—
94
—
94
Segment net revenues
$
3,478
$
1,827
$
2,580
$
7,885
Segment operating income
$
1,667
$
698
$
1,140
$
3,505
Operating Margin
44.5
%
1
Intersegment revenues reflect licensing
and service fees charged between segments.
Our operating segments are consistent with the manner in which
our operations are reviewed and managed by our Chief Executive
Officer, who is our chief operating decision maker (“CODM”). The
CODM reviews segment performance exclusive of: the impact of the
change in deferred revenues and related cost of revenues with
respect to certain of our online-enabled games; share-based
compensation expense (including liability awards accounted for
under ASC 718); amortization of intangible assets as a result of
purchase price accounting; fees and other expenses (including legal
fees, costs, expenses and accruals) related to acquisitions,
associated integration activities, and financings; certain
restructuring and related costs; and other non-cash charges. See
the following page for the reconciliation tables of segment
revenues and operating income to consolidated net revenues and
consolidated income before income tax expense.
Our operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. We do not aggregate operating segments.
In 2021, the Company reviewed its overall compensation structure
and philosophy and began implementing changes to its compensation
payments for 2021, primarily to enhance equity ownership for
employees and bring our employee equity compensation more in line
with current industry practice. As an aspect of this change, the
Company determined to settle amounts not yet paid as of December
31, 2021 under its annual performance plans in stock as opposed to
cash and further to provide such incentives at no less than target
performance without regard to whether target performance was
achieved, resulting in a year-end share-based compensation
liability of $194 million. The changes in Q4 2021 resulted in $160
million of expense related to achievement against 2021 performance
targets that would have otherwise been included in our segment
operating income to instead be excluded from our 2021 segment
operating income as it is now part of share-based compensation,
accounted for as a liability under ASC 718. The changes increased
our Activision, Blizzard, King and non-reportable segment operating
income by $43 million, $25 million, $65 million, and $27 million,
respectively, for the three months and year ended December 31,
2021.
Similarly, in 2022, the Company is expecting to pay out certain
of its annual performance plans in stock as opposed to cash. The
share-based compensation expense associated with the bonus programs
for Activision, Blizzard, King and non-reportable segments was $19
million, $32 million, $4 million, and $3 million, respectively, for
the three months ended December 31, 2022. The share-based
compensation expense associated with the bonus programs for
Activision, Blizzard, King and non-reportable segments was $37
million, $34 million, $16 million, and $24 million, respectively,
for the year ended December 31, 2022.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
(Amounts in millions)
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Reconciliation to consolidated net
revenues:
Segment net revenues
$
3,372
$
2,260
$
8,072
$
7,885
Revenues from non-reportable segments1
241
259
518
563
Net effect from recognition (deferral) of
deferred net revenues2
(1,232
)
(324
)
(986
)
449
Elimination of intersegment revenues3
(47
)
(32
)
(76
)
(94
)
Consolidated net revenues
$
2,334
$
2,163
$
7,528
$
8,803
Reconciliation to consolidated income
before income tax expense:
Segment operating income
$
1,634
$
1,164
$
3,063
$
3,505
Operating income (loss) from
non-reportable segments1
(6
)
14
22
2
Net effect from recognition (deferral) of
deferred net revenues and related cost of revenues2
(1,059
)
(215
)
(848
)
347
Share-based compensation expense4
(161
)
(249
)
(462
)
(508
)
Amortization of intangible assets
(3
)
(2
)
(13
)
(10
)
Restructuring and related costs5
—
(30
)
3
(77
)
Partnership wind down and related
costs6
(27
)
—
(27
)
—
Merger and acquisition-related fees and
other expenses7
(10
)
—
(68
)
—
Consolidated operating income
368
682
1,670
3,259
Interest expense from debt
27
27
108
108
Other (income) expense, net
(117
)
18
(182
)
(13
)
Consolidated income before income tax
expense
$
458
$
637
$
1,744
$
3,164
1
Includes other income and expenses outside
of our reportable segments, including our distribution business and
unallocated corporate income and expenses.
2
Reflects the net effect from (deferral) of
revenues and recognition of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products.
3
Intersegment revenues reflect licensing
and service fees charged between segments.
4
Reflects expenses related to share-based
compensation.
5
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
6
Reflects expenses related to the wind down
of our partnership with NetEase in China in regards to licenses
covering the publication of several Blizzard titles which expired
in January 2023.
7
Reflects fees and other expenses related
to our proposed transaction with Microsoft, primarily legal and
advisory fees.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
NET REVENUES BY DISTRIBUTION CHANNEL
(Amounts in millions)
Three Months Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
1,965
84
%
$
1,780
82
%
$
185
10
%
Retail channels
114
5
125
6
(11
)
(9
)
Other3
255
11
258
12
(3
)
(1
)
Total consolidated net revenues
$
2,334
100
%
$
2,163
100
%
$
171
8
Change in deferred revenues4
Digital online channels2
$
1,087
$
169
Retail channels
137
151
Other3
8
4
Total changes in deferred revenues
$
1,232
$
324
Year Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
6,633
88
%
$
7,663
87
%
$
(1,030
)
(13
) %
Retail channels
290
4
479
5
(189
)
(39
)
Other3
605
8
661
8
(56
)
(8
)
Total consolidated net revenues
$
7,528
100
%
$
8,803
100
%
$
(1,275
)
(14
)
Change in deferred revenues4
Digital online channels2
$
970
$
(421
)
Retail channels
3
(42
)
Other3
13
14
Total changes in deferred revenues
$
986
$
(449
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from Digital online channels
represent revenues from digitally-distributed downloadable content,
microtransactions, subscriptions, and products, as well as
licensing royalties.
3
Net revenues from Other primarily include
revenues from our distribution business, the Overwatch League, and
the Call of Duty League.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY PLATFORM
(Amounts in millions)
Three Months Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
558
24
%
$
576
27
%
$
(18
)
(3
) %
PC
573
25
496
23
77
16
Mobile and ancillary2
948
41
833
39
115
14
Other3
255
11
258
12
(3
)
(1
)
Total consolidated net revenues
$
2,334
100
%
$
2,163
100
%
$
171
8
Change in deferred revenues4
Console
$
679
$
276
PC
519
25
Mobile and ancillary2
26
19
Other3
8
4
Total changes in deferred revenues
$
1,232
$
324
Year Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
1,753
23
%
$
2,637
30
%
$
(884
)
(34
) %
PC
1,653
22
2,323
26
(670
)
(29
)
Mobile and ancillary2
3,517
47
3,182
36
335
11
Other3
605
8
661
8
(56
)
(8
)
Total consolidated net revenues
$
7,528
100
%
$
8,803
100
%
$
(1,275
)
(14
)
Change in deferred revenues4
Console
$
313
$
(254
)
PC
491
(228
)
Mobile and ancillary2
168
19
Other3
13
14
Total changes in deferred revenues
$
985
$
(449
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from Mobile and ancillary
primarily include revenues from mobile devices.
3
Net revenues from Other primarily include
revenues from our distribution business, the Overwatch League, and
the Call of Duty League.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY GEOGRAPHIC
REGION
(Amounts in millions)
Three Months Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
1,211
52
%
$
1,112
51
%
$
99
9
%
EMEA2
742
32
751
35
(9
)
(1
)
Asia Pacific
381
16
300
14
81
27
Total consolidated net revenues
$
2,334
100
%
$
2,163
100
%
$
171
8
Change in deferred revenues3
Americas
$
784
$
188
EMEA2
363
123
Asia Pacific
85
13
Total changes in deferred revenues
$
1,232
$
324
Year Ended
December 31, 2022
December 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
4,208
56
%
$
4,931
56
%
$
(723
)
(15
) %
EMEA2
2,236
30
2,797
32
(561
)
(20
)
Asia Pacific
1,084
14
1,075
12
9
1
Total consolidated net revenues
$
7,528
100
%
$
8,803
100
%
$
(1,275
)
(14
)
Change in deferred revenues3
Americas
$
609
$
(288
)
EMEA2
257
(136
)
Asia Pacific
120
(25
)
Total changes in deferred revenues
$
986
$
(449
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from EMEA consist of the
Europe, Middle East, and Africa geographic regions.
3
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
EBITDA AND ADJUSTED EBITDA
(Amounts in millions)
March 31, 2022
June 30, 2022
September 30,
2022
December 31,
2022
Trailing Twelve Months Ended
December 31, 2022
GAAP Net Income
$
395
$
280
$
435
$
403
$
1,513
Interest expense from debt
27
27
27
27
108
Other income (expense), net
(13
)
(10
)
(42
)
(117
)
(182
)
Provision for income taxes
70
41
65
55
231
Depreciation and amortization
24
25
29
28
106
EBITDA
503
363
514
396
1,776
Share-based compensation expense1
98
100
102
161
462
Restructuring and related costs2
(2
)
(3
)
2
—
(3
)
Partnership wind down and related
costs3
—
—
—
27
27
Merger and acquisition-related fees and
other expenses4
32
16
10
10
68
Adjusted EBITDA
$
631
$
476
$
628
$
594
$
2,330
Change in deferred net revenues and
related cost of revenues5
$
(235
)
$
(1
)
$
25
$
1,059
$
848
1
Reflects expenses related to share-based
compensation.
2
Reflects restructuring initiatives.
3
Reflects expenses related to the wind down
of our partnership with NetEase in China in regards to licenses
covering the publication of several Blizzard titles which expired
in January 2023.
4
Reflects fees and other expenses related
to our proposed transaction with Microsoft, primarily legal and
advisory fees.
5
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products.
Trailing twelve months amounts are
presented as calculated. Therefore, the sum of the four quarters,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING METRICS
(Amounts in millions)
Net Bookings1
Three Months Ended December
31,
Year Ended December
31,
2022
2021
$ Increase (Decrease)
% Increase (Decrease)
2022
2021
$ Increase (Decrease)
% Increase (Decrease)
Net bookings1
$
3,566
$
2,487
$
1,079
43
%
$
8,514
$
8,354
$
160
2
%
In-game net bookings2
$
1,818
$
1,241
$
577
46
%
$
5,382
$
5,100
$
282
6
%
1
We monitor net bookings as a key operating
metric in evaluating the performance of our business because it
enables an analysis of performance based on the timing of actual
transactions with our customers and provides more timely
indications of trends in our operating results. Net bookings is 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. Net bookings is equal to
net revenues excluding the impact from deferrals.
2
In-game net bookings primarily includes
the net amount of downloadable content and microtransactions sold
during the period, and is equal to in-game net revenues excluding
the impact from deferrals.
Monthly Active Users3
December 31, 2021
March 31, 2022
June 30, 2022
September 30, 2022
December 31, 2022
Activision
107
100
94
97
111
Blizzard
24
22
27
31
45
King
240
250
240
240
233
Total MAUs
371
372
361
368
389
3
We monitor monthly active users (“MAUs”)
as a key measure of the overall size of our user base. MAUs are the
number of individuals who accessed a particular game in a given
month. We calculate average MAUs in a period by adding the total
number of MAUs in each of the months in a given period and dividing
that total by the number of months in the period. An individual who
accesses two of our games would be counted as two users. In
addition, due to technical limitations, for Activision and King, an
individual who accesses the same game on two platforms or devices
in the relevant period would be counted as two users. For Blizzard,
an individual who accesses the same game on two platforms or
devices in the relevant period would generally be counted as a
single user. In certain instances, we rely on third parties to
publish our games. In these instances, MAU data is based on
information provided to us by those third parties, or, if final
data is not available, reasonable estimates of MAUs for these
third-party published games.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230204005007/en/
Activision Blizzard, Inc.
Investors and Analysts: ir@activisionblizzard.com or Press:
pr@activisionblizzard.com
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