AB(US:ATVI)2023-05-04 20:07Financial Performance - Consolidated net revenues for the three months ended March 31, 2023, increased 35% to $2.4 billion, compared to $1.8 billion in 2022[130] - Consolidated operating income for the same period increased 67% to $800 million, up from $479 million in 2022[130] - Diluted earnings per common share rose 86% to $0.93, compared to $0.50 in 2022[130] - For the three months ended March 31, 2023, total net revenues increased by 35% to $2,383 million compared to $1,768 million for the same period in 2022[156] - In-game net revenues rose by 26% to $1,430 million for the three months ended March 31, 2023, up from $1,134 million in the prior year[157] - The increase in consolidated net revenues was primarily driven by higher revenues from Call of Duty: Modern Warfare II, Diablo Immortal, World of Warcraft, Overwatch 2, and the Candy Crush franchise, totaling an increase of $734 million[158] - Operating income for the three months ended March 31, 2023, was $800 million, representing a 67% increase from $479 million in the same period of 2022[154] - Segment net revenues for Activision increased to $1,762 million, driven by higher revenues from Call of Duty: Modern Warfare II compared to Call of Duty: Vanguard[169] - Blizzard's segment net revenues rose due to higher revenues from Diablo Immortal, Overwatch 2, and World of Warcraft, although operating income remained comparable to the previous year[170] - King's segment net revenues increased primarily from in-game purchases in the Candy Crush franchise, but operating income was similar to the prior year due to higher costs[171] User Engagement - Monthly active users (MAUs) totaled 368 million as of March 31, 2023, a decrease of 21 million or 5% from 389 million in December 2022[142] - Blizzard's MAUs decreased to 27 million from 45 million in December 2022, primarily due to lower engagement with Overwatch 2[142] - Activision's MAUs fell to 98 million from 111 million in December 2022, driven by lower engagement in the Call of Duty franchise[142] - King’s MAUs increased to 243 million from 233 million in December 2022, supported by the Candy Crush franchise[142] Costs and Expenses - Total costs and expenses for the three months ended March 31, 2023, were $1,583 million, which is 66% of total net revenues, compared to 73% in the same period of 2022[154] - Total cost of revenues increased to $665 million, representing 28% of associated net revenues, up from 27% in the previous year[183] - Product development costs rose to $402 million, accounting for 17% of consolidated net revenues, compared to 20% in the prior year[186] - Sales and marketing expenses increased to $278 million, representing 12% of consolidated net revenues, driven by higher spending for the Candy Crush franchise and Diablo IV[187] - General and administrative expenses increased to $238 million for the three months ended March 31, 2023, representing 10% of consolidated net revenues, up from $212 million in the same period of 2022[188] Cash Flow and Investments - Cash and cash equivalents increased to $9.236 billion as of March 31, 2023, compared to $7.060 billion as of December 31, 2022, marking an increase of $2.176 billion[195] - Net cash provided by operating activities was $577 million for the three months ended March 31, 2023, down from $642 million in the same period of 2022, a decrease of $65 million[199] - Net cash provided by investing activities surged to $1.663 billion for the three months ended March 31, 2023, compared to $7 million in the same period of 2022, an increase of $1.656 billion[200] - Capital expenditures amounted to $37 million during the three months ended March 31, 2023, compared to $15 million in the same period of 2022[205] - The company anticipates total capital expenditures of approximately $100 million in 2023, primarily for computer hardware, leasehold improvements, and software purchases[205] Foreign Exchange and Taxation - The company experienced a negative foreign exchange impact of approximately $66 million on consolidated net revenues for the three months ended March 31, 2023, primarily due to fluctuations in the U.S. dollar against the euro and British pound[160] - Foreign exchange rates negatively impacted segment net revenues by $42 million, primarily due to changes in the value of the U.S. dollar against the euro and British pound[172] - Income tax expense rose to $155 million for the three months ended March 31, 2023, reflecting an effective tax rate of 17%, up from 15% in the same period of 2022[190] Strategic Initiatives - The company is currently involved in a merger agreement with Microsoft, with a proposed acquisition price of $95.00 per share, subject to regulatory approvals[118] - The launch of Diablo Immortal in June 2022 and the upcoming release of Call of Duty: Warzone Mobile in 2023 are part of the company's strategy to expand its mobile gaming presence[145] - The free-to-play business model has gained broader acceptance, contributing to increased player investment and engagement, as seen with Overwatch 2 and Call of Duty: Warzone 2.0 releases[146] Debt and Interest - Total gross long-term debt remained at $3.650 billion as of March 31, 2023, unchanged from December 31, 2022[203] - Interest expense from debt remained stable at $27 million for the three months ended March 31, 2023, consistent with the same period in 2022[189] - Other (income) expense, net, increased to $(122) million for the three months ended March 31, 2023, compared to $(13) million in the same period of 2022, primarily due to a $125 million increase in interest income[189] Market Trends - Digital online channels generated $2,157 million in net revenues, a 36% increase from $1,589 million in the same period last year[175] - The PC platform saw a 74% increase in net revenues, reaching $666 million, compared to $383 million in the prior year[178] - The company's franchises, including Call of Duty, Warcraft, and Candy Crush, accounted for 79% of consolidated net revenues in 2022[147] - The company continues to face challenges in attracting and retaining talent, although recent trends have shown improvement in these areas[151] - As of March 31, 2023, the composition of the investment portfolio indicates that movements in short-term interest rates by the U.S. Federal Reserve can significantly impact future interest income[215]