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Activision (ATVI) Q4 Earnings Fall, Call of Duty Steers Sales

Activision Blizzard ATVI delivered non-GAAP earnings of 78 cents per share for fourth-quarter 2022, down 22.8% year over year. Consolidated revenues increased 7.9% year over year to $2.3 billion.

Total revenues increased 49.2% to $3.37 billion after adjusting for revenues from non-reportable segments, the net effect from the recognition of deferred revenues and the elimination of intersegment revenues.

A string of launches in October and November, including Call of Duty: Modern Warfare II, Warzone 2.0 and World of Warcraft: Dragonflight, helped the company’s top-line growth in the fourth quarter.

The Zacks Consensus Estimate for earnings and revenues was pegged at $1.51 per share and $3.22 billion, respectively.

For the quarter ended Dec 31, 2022, overall Monthly Active Users (MAUs) were 389 million, up 4.9% year over year.

Activision Blizzard’s net bookings jumped 43.4% year over year to $3.56 billion. In-game net bookings were $1.81 billion, up 46.5% year over year.

Activision Blizzard is in the process of being acquired by Microsoft MSFT. Microsoft will pay $95.00 per Activision share with the total transaction value being $68.7 billion.

The transaction, expected to close in Microsoft’s fiscal year ending Jun 30, 2023, has been approved by the boards of Activision Blizzard and Microsoft.

Activision Blizzard, Inc Price, Consensus and EPS Surprise

 

Activision Blizzard, Inc Price, Consensus and EPS Surprise
Activision Blizzard, Inc Price, Consensus and EPS Surprise

Activision Blizzard, Inc price-consensus-eps-surprise-chart | Activision Blizzard, Inc Quote

Top-Line Details

Product sales (30.9% of revenues) amounted to $721 million, up 11.8% year over year. In-game subscriptions and other revenues (69.1% of revenues) increased 6.3% to $1.61 billion.

Based on distribution channels, Digital online revenues of $1.96 billion were up 10.4% from the year-ago quarter. Activision Blizzard reported retail channel sales of $114 million, which fell 8.8% year over year. Other revenues declined 1.2% year over year to $255 million.

Based on platforms, revenues from mobile and ancillary (40.6% of revenues) rose 13.8% year over year to $948 million. Revenues from consoles (23.9% of revenues) declined 3.1% year over year to $558 million. PC revenues (24.6% of revenues) increased 15.5% year over year to $573 million. Other revenues declined 1.2% year over year to $255 million.

On a geographic basis, revenues from the Americas (51.9% of revenues) improved 8.9% year over year to $1.21 billion. Europe, the Middle East and Africa revenues (31.8% of revenues) were down 1.2% year over year to $742 million. Revenues from the Asia Pacific (16.3% of revenues) jumped 27% year over year to $381 million.

Segmental Details

Activision (54.9% of revenues) revenues jumped 60% year over year to $1.85 billion. The division had 111 million MAUs as of Dec 31, 2022, up 3.7% year over year. In the fourth quarter, Activision saw its Call of Duty: Modern Warfare II game deliver the highest opening-quarter sell through in the history of the gaming franchise. The game crossed the $1-billion mark within 10 days of its late-October launch.

Blizzard (23.5% of revenues) revenues totaled $794 million, up 89.5% from the year-ago quarter’s levels. Blizzard had 45 million MAUs as of Dec 31, 2022, up 87.5% year over year. Blizzard reported its highest quarter net bookings to date, thanks to growth in its Warcraft game and in Overwatch and Diablo.

In the last three months of 2022, Overwatch 2 pulled in more than $100 million in net bookings. Warcraft and Diablo also each pulled in more than $100 million in net bookings in the fourth quarter.

King’s (21.6% of revenues) revenues of $727 million increased 6.3% year over year. MAUs were 233 million as of Dec 31, 2022, down 2.9% year over year.

Operating Details

Product development expenses jumped 127.3% year over year to $400 million. Sales and marketing expenses were up 48.1% year over year to $400 million.

Moreover, general and administrative expenses were $231 million, up 120% year over year.

Total costs and expenses on a non-GAAP basis increased 47.1% year over year to $1.76 billion in the reported quarter.

On a non-GAAP basis, operating income was $569 million, down 40.9% year over year.

Balance Sheet & Cash Flow

As of Dec 31, 2022, cash and cash equivalents were $7.1 billion compared with $7.7 billion as of Sep 30, 2022.

Long-term debt, as of Dec 31, 2022, was $3.61 billion, unchanged from the figure reported as of Sep 30, 2022.

Activision Blizzard generated $1.12 billion in operating cash flow for the quarter compared with $661 million for the fourth quarter of 2021.

Non-GAAP free cash flow jumped 72% year over year to $1.09 billion.

On a trailing 12-month basis, free cash flow decreased 9% to $2.12 billion.

Zacks Rank & Stocks to Consider

Activision Blizzard currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Consumer Discretionary sector are Liberty Global LBTYA and Warner Bros. Discovery WBD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Global and Warner Bros. Discovery are scheduled to report their quarterly results on Feb 23 and Mar 2, respectively.

The Zacks Consensus Estimate for LBTYA’s fourth-quarter 2022 earnings is pegged at 49 cents per share, unchanged over the past 30 days.

The Zacks Consensus Estimate for WBD’s fourth-quarter 2022 earnings is pegged at 8 cents per share, down 42.9% over the past 30 days.

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