Name: Activision Blizzard Inc. (NASDAQ:ATVI) | Common-Size Income Statement
Creator: Stock Analysis on Net

Common-Size Income Statement

Activision Blizzard Inc., common-size consolidated income statement

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Product sales	21.81%	26.25%	29.06%	30.44%	30.07%
In-game, subscription, and other revenues	78.19%	73.75%	70.94%	69.56%	69.93%
Net revenues	100.00%	100.00%	100.00%	100.00%	100.00%
Product costs	-6.89%	-7.37%	-8.72%	-10.11%	-9.59%
Software royalties and amortization	-3.07%	-3.93%	-3.33%	-3.70%	-4.95%
Product sales	-9.96%	-11.30%	-12.05%	-13.81%	-14.53%
Game operations and distribution costs	-17.59%	-13.80%	-13.99%	-14.87%	-13.71%
Software royalties and amortization	-1.97%	-1.22%	-1.92%	-3.59%	-5.32%
In-game, subscription, and other	-19.55%	-15.02%	-15.90%	-18.46%	-19.03%
Cost of revenues	-29.52%	-26.32%	-27.95%	-32.27%	-33.56%
Gross profit	70.48%	73.68%	72.05%	67.73%	66.44%
Product development	-18.88%	-15.19%	-14.22%	-15.38%	-14.68%
Sales and marketing	-16.17%	-11.64%	-13.16%	-14.27%	-14.16%
General and administrative	-13.30%	-8.95%	-9.70%	-11.28%	-10.96%
Restructuring and related costs	0.04%	-0.87%	-1.16%	-2.03%	-0.13%
Operating income	22.18%	37.02%	33.81%	24.76%	26.51%
Interest expense from debt	-1.43%	-1.23%	-1.22%	-1.39%	-1.87%
Interest income	2.19%	0.06%	0.26%	1.22%	0.87%
Realized and unrealized gain (loss) on equity investment	-0.01%	0.32%	0.04%	0.59%	0.00%
Other income (expense)	0.24%	-0.23%	-0.15%	-0.02%	0.05%
Other income (expense), net	2.42%	0.15%	0.15%	1.79%	0.92%
Loss on extinguishment of debt	0.00%	0.00%	-0.38%	0.00%	-0.53%
Income before income tax expense	23.17%	35.94%	32.35%	25.17%	25.03%
Income tax expense	-3.07%	-5.28%	-5.18%	-2.00%	-0.85%
Net income	20.10%	30.66%	27.17%	23.16%	24.17%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

Between 2018 and 2022, a strategic transition in the revenue mix is evident, characterized by a sustained shift from traditional product sales toward recurring digital revenue streams. This evolution is accompanied by a period of expanding gross margins that peaked in 2021, followed by a contraction in operating efficiency and net profitability in 2022.

Revenue Composition: Product sales declined steadily from 30.07% of net revenues in 2018 to 21.81% in 2022. Conversely, revenues from in-game purchases, subscriptions, and other sources grew from 69.93% to 78.19% over the same period. This indicates an increasing reliance on high-margin, digital-first monetization models.
Gross Profitability: Gross profit margins demonstrated an upward trend for the majority of the period, rising from 66.44% in 2018 to a peak of 73.68% in 2021. This improvement was driven by a reduction in the cost of revenues, which fell from 33.56% in 2018 to a low of 26.32% in 2021. However, 2022 saw a reversal of this trend, with gross profit contracting to 70.48% as cost of revenues increased to 29.52%.
Operating Expense Trends: Operating expenses remained relatively stable until 2022, when a significant increase was observed across all primary categories. Product development costs rose to 18.88% of net revenues in 2022, up from 15.19% in 2021. Similarly, sales and marketing expenses increased to 16.17% in 2022, and general and administrative expenses climbed to 13.30%. This synchronized increase in spending contributed to a sharp decline in operating efficiency during the final year of the analysis.
Operating and Net Income Performance: Operating income margin experienced significant volatility, climbing from 26.51% in 2018 to a high of 37.02% in 2021, before dropping sharply to 22.18% in 2022. Net income followed a similar trajectory, peaking at 30.66% of net revenues in 2021 and declining to 20.10% by the end of 2022. The decline in 2022 is primarily attributable to the rise in operating expenses rather than non-operating factors, as interest expenses remained relatively stable throughout the five-year period.
Taxation and Other Income: Income tax expenses as a percentage of revenue fluctuated, reaching a peak of 5.28% in 2021 before moderating to 3.07% in 2022. Other income, net, showed a notable increase in 2022, contributing 2.42% to net revenues, largely driven by an increase in interest income to 2.19%.

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