Activision Blizzard Inc. (NASDAQ:ATVI)

The financial ratios indicate several notable trends over the five-year period from 2018 to 2022. The receivables turnover ratio initially increased from 7.25 in 2018 to a peak of 9.06 in 2021, suggesting an improvement in the efficiency of collecting receivables. However, this ratio then declined sharply to 6.25 in 2022, indicating a potential slowdown in collections or an increase in credit sales. This trend is corroborated by the average receivable collection period, which shortened from 50 days in 2018 to 40 days in 2021, reflecting quicker collections, but then increased significantly to 58 days in 2022, supporting the observation of slower receivables turnover.

Regarding payables turnover, the ratio decreased sharply from 9.95 in 2018 to 7.17 in 2019, then exhibited a moderate upward trend through 2021, reaching 8.13, before decreasing again to 6.86 in 2022. This implies a tendency towards slower payment to suppliers in the later years, which is confirmed by the average payables payment period. The payables payment period increased from 37 days in 2018 to 51 days in 2019, followed by a gradual decline to 45 days in 2021, and then rose again to 53 days in 2022. Longer payment periods suggest extended credit terms with suppliers or delayed payments during certain periods.

The working capital turnover ratio exhibits a clear downward trend over the entire period, declining from 2.17 in 2018 to 0.69 in 2022. This steady decrease indicates a reduced efficiency in utilizing working capital to generate sales. This declining trend could signal either an increase in working capital levels not matched by proportional sales growth or a decrease in sales relative to the working capital base.

Receivables Turnover

Increased until 2021 reflecting improved collection efficiency, then deteriorated in 2022 suggesting slower collections or increased credit sales.

Average Receivable Collection Period

Decreased through 2021 indicating faster collections, but spiked in 2022, corroborating the drop in receivables turnover.

Payables Turnover

Shallower fluctuations overall; initial decrease in 2019 indicating slower payments to suppliers, partial recovery, then a decline in 2022 indicating extended payment periods.

Average Payables Payment Period

Increased sharply in 2019, decreased slightly by 2021, then rose again in 2022 indicating periodic delays in settling payables.

Working Capital Turnover

Consistently decreased, signaling decreasing efficiency in using working capital to generate sales or a shift in working capital management.

Throughout the presented periods, net revenues demonstrate notable fluctuations. Starting at 7,500 million US dollars in 2018, revenues declined to 6,489 million US dollars in 2019, indicating a significant dip. However, a recovery trend is evident in the subsequent years, with revenues rising to 8,086 million US dollars in 2020 and further increasing to 8,803 million US dollars in 2021. In 2022, revenues decreased again to 7,528 million US dollars, reflecting volatility in sales performance over the years.

Accounts receivable, net, exhibit variability and an overall upward trend across the analyzed periods. Beginning at 1,035 million US dollars in 2018, the value dropped to 848 million in 2019 before increasing to 1,052 million in 2020. It then slightly decreased to 972 million in 2021 but rose notably to 1,204 million US dollars in 2022. This suggests varying levels of credit extended to customers and changes in collection efficiency or sales mix impacting receivables.

The receivables turnover ratio shows variable efficiency in collecting receivables throughout the years. The ratio increased from 7.25 in 2018 to 7.65 in 2019 and marginally to 7.69 in 2020, indicating steady improvement in collection speed. A more pronounced improvement is observable in 2021, reaching 9.06, which signifies enhanced collection effectiveness. However, in 2022, the ratio declined sharply to 6.25, reflecting a slower collection cycle and potential challenges in receivables management during that year.

Net Revenues

Fluctuated over the five years with declines in 2019 and 2022; recovery and peak recorded in 2021.

Accounts Receivable, Net

Displayed a non-linear trend with an initial decrease in 2019 followed by increases, ending at the highest level in 2022.

Receivables Turnover Ratio

Generally improved from 2018 to 2021, signaling better collection efficiency, but experienced a significant decrease in 2022, indicating slower collections.

Cost of Revenues

The cost of revenues showed a decreasing trend from 2018 to 2019, dropping from 2,517 million USD to 2,094 million USD. This was followed by a moderate recovery in 2020 to 2,260 million USD and a slight increase in 2021 to 2,317 million USD. In 2022, there was a decline again to 2,222 million USD. Overall, the cost of revenues fluctuated over the period but ended slightly lower than the initial value in 2018.

Accounts Payable

Accounts payable steadily increased over the five-year period. Starting at 253 million USD in 2018, it rose each year with minor fluctuations, reaching 324 million USD by the end of 2022. This implies an increasing level of liabilities related to supplier payments.

Payables Turnover Ratio

The payables turnover ratio declined significantly from 9.95 in 2018 to 7.17 in 2019, indicating slower payment to suppliers. After a slight improvement to 7.66 in 2020 and a further increase to 8.13 in 2021, the ratio decreased again to 6.86 in 2022, the lowest point in the given period. This trend suggests a general slowing in the rate at which the company is settling its payables over the years.

Working Capital

The working capital exhibited a consistent upward trend from 2018 through 2022. It increased significantly, starting at 3,464 million USD in 2018 and reaching 10,914 million USD by the end of 2022. This indicates a strengthening liquidity position over the years, with more resources available to cover short-term liabilities.

Net Revenues

Net revenues showed variability over the five-year period. Revenues initially declined from 7,500 million USD in 2018 to 6,489 million USD in 2019. Subsequently, there was a recovery and growth phase in 2020 and 2021, where revenues rose to 8,086 million USD and 8,803 million USD respectively. However, in 2022, revenues decreased again to 7,528 million USD. This pattern indicates fluctuating sales performance with a peak in 2021 followed by a decline.

Working Capital Turnover

The working capital turnover ratio declined steadily each year, starting from 2.17 in 2018 down to 0.69 in 2022. A decreasing ratio suggests that the company is generating less revenue per unit of working capital over time. Despite the increase in working capital, the declining turnover ratio reflects diminishing operational efficiency or slower utilization of the working capital in generating sales.

Receivables Turnover

The receivables turnover ratio exhibited fluctuations over the five-year period. Starting at 7.25 in 2018, the ratio showed modest increases through 2019 and 2020, reaching 7.69. A more pronounced improvement occurred in 2021, with the ratio rising to 9.06, indicating more efficient collection of receivables during that year. However, in 2022, the ratio declined sharply to 6.25, reflecting a reduction in receivables collection efficiency compared to the previous year and earlier periods.

Average Receivable Collection Period

The average collection period followed a generally inverse pattern to the receivables turnover ratio. It decreased consistently from 50 days in 2018 to a low of 40 days in 2021, suggesting accelerated cash collections and improved liquidity management. However, in 2022, there was a substantial increase to 58 days, representing a slowdown in cash inflows from receivables. This increase corresponds with the decline in receivables turnover during the same period, indicating potential challenges in receivables management or customer payment delays in 2022.

Overall Trend Analysis

The data indicates an overall improvement in receivables management from 2018 through 2021, culminating in the most efficient collection cycle in 2021. The sharp reversal in 2022, marked by a reduced turnover ratio and a longer collection period, suggests deteriorating effectiveness in credit and collection processes or changes in customer payment behavior. This shift may require further investigation and managerial action to address potential cash flow impacts.

Payables Turnover

The payables turnover ratio demonstrates a fluctuating downward trend over the five-year period. It begins at a high of 9.95 in 2018, drops sharply to 7.17 in 2019, and then shows slight recovery in the subsequent years, reaching 8.13 in 2021 before declining again to 6.86 in 2022. This pattern indicates a general weakening in the company's rate of paying off its suppliers.

Average Payables Payment Period

The average payables payment period follows a complementary trend, inversely related to the payables turnover ratio. It increases significantly from 37 days in 2018 to 51 days in 2019, then slightly decreases to 48 days in 2020, continues to improve to 45 days in 2021, but rises again to 53 days by 2022. This trend suggests that the company is taking progressively longer to settle its outstanding payables, particularly evident in the initial increase and final year uptick in payment period.

Overall Observations

The inverse relationship between payables turnover and the average payment period over the period suggests that the company has generally extended its payment terms with suppliers or experienced delays in payment. This could be indicative of efforts to manage cash flow more conservatively or potential liquidity constraints. The increase in average payment days, especially noted in 2019 and 2022, may require further investigation to understand impacts on supplier relationships and operational efficiency.