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Activision Blizzard Announces First Quarter 2023 Financial Results

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First Quarter Net Bookings Grew 25% Year-Over-Year

First Quarter Mobile Net Bookings Grew Double-Digits Year-Over-Year

First Quarter GAAP Operating Income Grew Approximately 70% Year-Over-Year, Segment Operating Income Grew Approximately 30% Year-Over-Year

SANTA MONICA, Calif.–(BUSINESS WIRE)–Activision Blizzard, Inc. (Nasdaq: ATVI) today announced first quarter 2023 results.

Bobby Kotick, CEO of Activision Blizzard, shared, “In our 33rd year, Activision Blizzard is performing exceptionally well. Every one of our key intellectual properties continues to grow year-over-year, with Call of Duty once again a key driver of growth. Mobile net bookings grew double digits including another record quarter for King. Pre-sales for Diablo IV are strong. And none of this would be possible without our people, who deliver excellence for our players every single day. We remain confident that our deal with Microsoft benefits competition, consumers, and job creation in markets around the world, especially in the UK. The CMA’s report today does not reflect these realities, and we will work aggressively with Microsoft to reverse it on appeal.”

Financial Metrics

 

 

Q1

(in millions, except EPS)

 

 

2023

 

 

 

2022

 

GAAP Net Revenues

 

$

2,383

 

 

$

1,768

 

Impact of GAAP deferralsA

 

$

(528

)

 

$

(287

)

 

 

 

 

 

GAAP EPS

 

$

0.93

 

 

$

0.50

 

Non-GAAP EPS

 

$

1.09

 

 

$

0.64

 

Impact of GAAP deferralsA

 

$

(0.49

)

 

$

(0.26

)

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 quarter ended March 31, 2023, Activision Blizzard’s net revenues presented in accordance with GAAP were $2.38 billion, as compared with $1.77 billion for the first quarter of 2022. GAAP net revenues from digital channels were $2.16 billion. GAAP operating margin was 34%. GAAP earnings per diluted share was $0.93, as compared with $0.50 for the first quarter of 2022. On a non-GAAP basis, Activision Blizzard’s operating margin was 40% and earnings per diluted share was $1.09, as compared with $0.64 for the first quarter of 2022.

Activision Blizzard generated $577 million in operating cash flow for the quarter as compared with $642 million for the first quarter of 2022.

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 quarter ended March 31, 2023, Activision Blizzard’s net bookingsB were $1.86 billion, as compared with $1.48 billion for the first quarter of 2022. In-game net bookingsC were $1.29 billion, as compared with $1.01 billion for the first quarter of 2022.

For the quarter ended March 31, 2023, overall Activision Blizzard Monthly Active Users (MAUs)D were 368 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.

On April 26, 2023, the United Kingdom Competition and Markets Authority (“CMA”) announced a decision to block the merger, stating that competition concerns arose in relation to cloud gaming and that Microsoft’s remedies addressing any concerns in cloud gaming were not sufficient. Activision Blizzard considers that the CMA’s decision is disproportionate, irrational and inconsistent with the evidence. Microsoft has announced its decision to appeal the CMA’s ruling, and Activision Blizzard intends to fully support Microsoft’s efforts on this appeal. Activision Blizzard continues to believe that the deal is pro-competitive, will bring Activision Blizzard content to more gamers, and will result in substantial benefits to consumers and developers in the UK and globally. The parties continue to fully engage with other regulators reviewing the transaction to obtain any required regulatory approvals.

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 first quarter 2023 earnings release. For further detail and discussion of our financial performance, please refer to Activision Blizzard’s upcoming Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

Selected Business Highlights

Activision Blizzard continued to connect and engage the world through epic entertainment in the first quarter. Our talented teams are focused on delighting our communities and expanding our fully-owned intellectual properties across platforms, geographies and business models. Execution against our focused strategy fueled 25% growth in net bookings, approximately 70% growth in GAAP operating income, and approximately 30% growth in segment operating income, in each case on a year-over-year basis.

First quarter growth was broad-based, with net bookings increasing year-over-year in each of our five largest intellectual properties: Call of Duty®, Candy Crush®, Warcraft®, Overwatch®, and Diablo®. We continued to deliver strong results for our intellectual properties on the strategically-important mobile platform, with mobile net bookings growing double-digits year-over-year, driven by Candy Crush, Call of Duty Mobile and last year’s launch of Diablo Immortal.

Our robust product pipeline, live game opportunity, and focus on operational discipline continue to create a foundation for strong financial performance for the full year. We remain cognizant of risks, including those related to our execution, economic conditions, the labor market and exchange rates, as well as headwinds for our professional esports business model. Nonetheless, we continue to expect at least high-teens year-over-year growth for GAAP revenue in 2023, and at least high-single digit year-over-year growth in net bookings and total segment operating income for the year.

Demand indicators for Diablo IV, which launches on June 6, are strong, although we continue to plan prudently. We expect Activision Blizzard second quarter GAAP revenue to grow at least 10%, net bookings to grow at least 30%, and total segment operating income to grow at least 40%, in each case on a year-over-year basis.

Activision

Blizzard

King

Balance Sheet

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.

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.com2.

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.

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 microtransactions and downloadable content 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.

F Net cash is defined as cash and cash equivalents ($9.2B as of March 31, 2023) and short-term investments ($3.4B as of March 31, 2023) minus gross debt ($3.7B as of March 31, 2023).

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:

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.

Contacts

Activision Blizzard, Inc.

Investors and Analysts:
ir@activisionblizzard.com
or
Press:
pr@activisionblizzard.com

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