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Activision (ATVI) Q4 Earnings Rise Y/Y Despite Top-Line Decline

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Activision Blizzard’s (ATVI - Free Report) fourth-quarter 2021 non-GAAP earnings of $1.01 per share surged 33.6% year over year.

Consolidated revenues decreased 19.7% year over year to $2.26 billion. Adjusting for revenues from non-reportable segments, net effect from the recognition of deferred revenues and elimination of intersegment revenues, total revenues declined 10.4% to $2.16 billion.

The Zacks Consensus Estimate for earnings and revenues was pegged at $1.30 per share and $2.78 billion, respectively.

For the quarter ended Dec 31, 2021, overall Monthly Active Users (MAUs) were 397 million, up 7% year over year.
 

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

 

Activision Blizzard’s net bookings decreased 18.5% year over year to $2.49 billion. In-game net bookings were $1.24 billion, down 6.3% year over year.

Markedly, on Jan 18, Microsoft (MSFT - Free Report) announced plans to acquire Activision Blizzard.

Microsoft will be paying $95.00 per Activision share, with the total transaction value being worth $68.7 billion. The deal is expected to close in the fiscal year 2023.

Top-Line Details

Product sales (29.8% of revenues) were $645 million, down 25.5% year over year. In-game, subscriptions and other revenues (70.2% of revenues) decreased 1.9% to $1.52 billion.

Based on distribution channels, Activision Blizzard reported retail channel sales of $125 million fell 46.6% year over year. Digital online revenues of $1.78 billion were up 5% from the year-ago quarter. Other revenues declined 15.4% year over year to $258 million.

Further, based on platforms, revenues from mobile and ancillary (38.5% of revenues) rose 17.8% year over year to $833 million. PC revenues (22.9% of revenues) decreased 11.6% year over year to $496 million. Revenues from console (26.6% of revenues) declined 31.4% year over year to $576 million. Other revenues declined 15.4% year over year to $258 million.

On a geographic basis, revenues from the Americas (51.4% of revenues) declined 10.8% year over year to $1.11 billion. Europe, the Middle East and Africa revenues (34.7% of revenues) were down 17.5% year over year to $751 million. Revenues from the Asia Pacific (13.9% of revenues) increased 17.2% year over year to $300 million.

Segment Details

Activision (51.2% of revenues) revenues decreased 30.2% year over year to $1.16 billion. The division had 128 million MAUs as of Dec 31, 2021, compared with 107 as of Dec 30, 2020.

Blizzard (18.5% of revenues) revenues of $419 million decreased 27.6% from the year-ago quarter. Blizzard had 29 million MAUs as of Dec 31, 2021, compared with 24 million as of Dec 30, 2020.

King’s (30.3% of revenues) revenues of $684 million increased 18.5% year over year. MAUs were 240 million as of Dec 31, 2021, unchanged sequentially.

Operating Details

Product development expenses contracted 47.6% year over year to $176 million. Sales & marketing expenses were down 20.1% year over year to $270 million.

Moreover, general & administrative expenses were $105 million, down 45.6% year over year.

Total costs & expenses on a non-GAAP basis decreased 28% year over year to $1.20 billion in the reported quarter.

On a non-GAAP basis, operating income was $963 million, up 28.9% year over year.

Balance Sheet & Cash Flow

As of Dec 31, 2021, cash and cash equivalents were $10.42 billion compared with $9.72 billion as of Sep 30, 2021.

Long-term debt as of Dec 31, 2021, was $3.61 billion, unchanged from the figure reported as of Sep 30, 2021.

Operating cash flow decreased 42% year over year to $661 million. Free cash flow declined 43% year over year to $640 million.

On a trailing 12-month basis, free cash flow increased 7% to $2.33 billion.

Zacks Rank & Stocks to Consider

Activision Blizzard currently carries a Zacks Rank #5 (Strong Sell).

Activision’s shares have outperformed the Zacks Consumer Discretionary sector in the past year. The stock is down 14.8% compared with the sector’s decline of 19.5%.

Hasbro (HAS - Free Report) and Gildan Activewear (GIL - Free Report) are a couple of better-ranked stocks that investors can consider from the broader sector. Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hasbro’s shares have underperformed the sector in the past year, declining 3.2%.

HAS is set to report fourth-quarter 2021 results on Feb 7.

Gildan Activewear’s shares have outperformed the sector in the past year, gaining 49.2%.

GIL is set to report fourth-quarter fiscal 2021 results on Feb 23.

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