Activision Blizzard, Inc. (Nasdaq: ATVI) today announced first
quarter 2022 results.
Financial Metrics
Q1
(in millions, except EPS)
2022
2021
GAAP Net Revenues
$1,768
$2,275
Impact of GAAP deferralsA
$(287)
$(209)
GAAP EPS
$0.50
$0.79
Non-GAAP EPS
$0.64
$0.98
Impact of GAAP deferralsA
$(0.26)
$(0.14)
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, 2022, Activision Blizzard’s net
revenues presented in accordance with GAAP were $1.77 billion, as
compared with $2.28 billion for the first quarter of 2021. GAAP net
revenues from digital channels were $1.59 billion. GAAP operating
margin was 27%. GAAP earnings per diluted share was $0.50, as
compared with $0.79 for the first quarter of 2021. On a non-GAAP
basis, Activision Blizzard’s operating margin was 34% and earnings
per diluted share was $0.64, as compared with $0.98 for the first
quarter of 2021.
Activision Blizzard generated $642 million in operating cash
flow for the quarter as compared with $844 million for the first
quarter of 2021.
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, 2022, Activision Blizzard’s net
bookingsB were $1.48 billion, as compared with $2.07 billion for
the first quarter of 2021. In-game net bookingsC were $1.01
billion, as compared with $1.34 billion for the first quarter of
2021.
For the quarter ended March 31, 2022, overall Activision
Blizzard Monthly Active Users (MAUs)D were 372 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 is subject to customary closing
conditions and completion of regulatory review and Activision
Blizzard's stockholder approval. The transaction, which is expected
to close in Microsoft’s fiscal year ending June 30, 2023, has been
approved by the boards of directors of both Activision Blizzard and
Microsoft.
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 financial guidance in conjunction with
its first quarter 2022 earnings release. For further detail and
discussion of our financial performance please refer to our
upcoming quarterly report on Form 10-Q for the quarter ended March
31, 2022.
Selected Business Highlights
Activision Blizzard continued to engage and connect its network
of hundreds of million people worldwide in the first quarter.
Financial performance declined year-over-year, primarily reflecting
lower results for Call of Duty and product cycle timing at
Blizzard, offsetting robust growth at King. The company incurred an
increase in legal and other professional fees, primarily driven by
costs associated with our proposed transaction with Microsoft. We
continue to increase investment in our development resources in
order to meet the demand from our players, and grew our developer
headcount by several hundred people in the first quarter. Our teams
are making strong progress on a broad pipeline of compelling
content for established franchises, which we expect to drive
renewed expansion in the business in the fourth quarter and longer
term.
Activision Blizzard is committed to ensuring an inclusive and
safe working environment for its employees, and in the first
quarter continued to implement previously announced initiatives to
strengthen its practices and policies. In March, the federal court
approved the company’s settlement with the EEOC, paving the way to
compensate eligible complainants through an $18 million fund. In
April, the company announced the conversion of over 1,000 temporary
workers to full-time employees, with most receiving increased wages
and benefits. We also announced the appointment of Kristen Hines as
the company’s new Chief Diversity, Equity, and Inclusion
Officer.
Activision
- Call of Duty® net bookings on console and PC declined
year-over-year in the first quarter, reflecting lower premium sales
for Call of Duty: Vanguard versus the year ago title and
lower engagement in Call of Duty: Warzone™. Call of Duty
Mobile net bookings were little changed year-over-year.
- The Call of Duty teams delivered substantial gameplay
improvements for Vanguard and Warzone in the first
quarter. Development on this year’s premium and Warzone
experiences, led by Infinity Ward, is proceeding very well. This
year’s Call of Duty is a sequel to 2019’s Modern Warfare®,
the most successful Call of Duty title to date, and will be
the most advanced experience in franchise history. The new
free-to-play Warzone experience, which is built from the
ground-up alongside the premium game, features groundbreaking
innovations to be revealed later this year.
- Activision continued to rapidly expand its Call of Duty
development resources in the first quarter. Its growing teams are
focused on delivering even more compelling content to the community
on PC and console, as well as expanding Warzone to the
mobile platform.
Blizzard
- Blizzard’s first quarter financial results were lower
year-over-year, primarily reflecting product cycle timing for the
Warcraft® franchise. Blizzard’s teams reached important
milestones across its key franchises in recent months, and the
second quarter represents the start of a period of planned
substantial releases across Blizzard’s portfolio.
- Blizzard continues to work on numerous new experiences to
delight and expand the Warcraft community. The newest
Hearthstone® expansion, Voyage to the Sunken City™,
launched on April 12. Blizzard’s teams are working on major new
content for World of Warcraft® including World of
Warcraft: Dragonflight, the innovative upcoming expansion for
the modern game, and World of Warcraft: Wrath of the Lich King®
Classic. Blizzard is also planning to unveil more details about
its first Warcraft mobile experience in the coming
weeks.
- Diablo® Immortal™ will launch on June 2, 2022 in most
regions around the world, with the remaining regions in
Asia-Pacific gaining access a few weeks later. Over 30 million
people have already pre-registered for the game. In addition to
offering a deep, authentic, and free-to-play Diablo
experience on the mobile platform, Diablo Immortal will also
be available free-to-play on Windows® PC, initially as an open beta
starting on June 2, 2022, and will support cross-play and
cross-progression.
- Development on Diablo 4 and Overwatch® 2 is also
progressing well. Company-wide internal testing of Diablo 4
is underway, and external testing of the player-versus-player mode
of Overwatch 2 begins tomorrow, April 26, 2022.
King
- King’s teams continued to deliver compelling new content,
features and events in the first quarter, driving year-over-year
growth in engagement and player investment. King’s in-game net
bookings grew 8% year-over-year, driven by double-digit
year-over-year growth for Candy CrushTM, King’s largest
franchise, in both cases building on strong growth in the prior
year quarter.
- Candy Crush was the top-grossing game franchise in the
U.S. app stores1 for the 19th consecutive quarter.
- King’s payer numbers again grew by a double-digit percentage
year-over-year, driven by strong execution in Candy’s features and
live operations, effective user acquisition, and ongoing
optimization of the Candy Crush in-game economy.
- King’s advertising business continued to grow rapidly
year-over-year, fueled by volume growth and ramping relationships
with demand partners.
Balance Sheet and Dividend
- Cash and short-term investments at the end of the first quarter
stood at $11.1 billion, and Activision Blizzard ended the quarter
with a net cash position of approximately $7.5 billion.
- As previously announced, the Board of Directors has declared a
cash dividend of $0.47 per common share, payable on May 6, 2022 to
shareholders of record at the close of business on April 15,
2022.
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 game franchises 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 enduring franchises are some of the world’s most popular,
including Call of Duty®, Crash Bandicoot™, Warcraft®, Overwatch®,
Diablo®, StarCraft®, Candy Crush™, Bubble Witch™, Pet Rescue™ and
Farm Heroes™. Our sustained success has enabled the company to
support corporate social responsibility initiatives that are
directly tied to our franchises. As an example, our Call of Duty
Endowment has helped find employment for over 90,000 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.com.
1 Based on App Annie Intelligence.
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
downloadable content and microtransactions 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.
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 FX information to
provide a framework for assessing how our underlying businesses
performed excluding the effect of foreign 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:
- expenses related to share-based compensation, including
liability awards accounted for under ASC 718;
- the amortization of intangibles from purchase price
accounting;
- fees and other expenses related to merger and acquisitions,
including related debt financings, and refinancing of long-term
debt, including penalties and the write off of unamortized discount
and deferred financing costs;
- restructuring and related charges;
- other non-cash charges from reclassification of certain
cumulative translation adjustments into earnings as required by
GAAP;
- the income tax adjustments associated with any of the above
items (tax impact on non-GAAP pre-tax income is calculated under
the same accounting principles applied to the GAAP pre-tax income
under ASC 740, which employs an annual effective tax rate method to
the results); and
- significant discrete tax-related items, including amounts
related to changes in tax laws, amounts related to the potential or
final resolution of tax positions, and other unusual or unique
tax-related items and activities.
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. Therefore, other companies may use the same
or similarly named measures, but exclude different items, which may
not provide investors a comparable view of Activision Blizzard’s
performance in relation to other companies.
Management compensates for the limitations resulting from the
exclusion of these items by considering the impact of the items
separately and by considering Activision Blizzard’s GAAP, as well
as non-GAAP, results and outlook, and by presenting the most
comparable GAAP measures directly ahead of non-GAAP measures, and
by providing a reconciliation that indicates and describes the
adjustments made.
Cautionary Note Regarding Forward-looking Statements: The
statements contained herein that are not historical facts are
forward-looking statements including, but not limited to statements
about: (1) projections of revenues, expenses, income or loss,
earnings or loss per share, cash flow, or other financial items;
(2) statements of our plans and objectives, including those related
to releases of products or services; (3) statements of future
financial or operating performance, including the impact of tax
items thereon; (4) statements regarding the proposed transaction
between Activision Blizzard and Microsoft (such transaction, “the
proposed transaction with Microsoft”), including any statements
regarding the expected timetable for completing the proposed
transaction with Microsoft, the ability to complete the proposed
transaction with Microsoft, and the expected benefits of the
proposed transaction with Microsoft; and (5) statements of
assumptions underlying such statements. Activision Blizzard, Inc.
generally uses words such as “outlook,” “forecast,” “will,”
“could,” “should,” “would,” “to be,” “plan,” “aims,” “believes,”
“may,” “might,” “expects,” “intends,” “seeks,” “anticipates,”
“estimate,” “future,” “positioned,” “potential,” “project,”
“remain,” “scheduled,” “set to,” “subject to,” “upcoming,” and the
negative version of these words and other similar words and
expressions to help identify forward-looking statements.
Forward-looking statements are subject to business and economic
risks, reflect management’s current expectations, estimates, and
projections about our business, and are inherently uncertain and
difficult to predict.
We caution that a number of important factors, many of which are
beyond our control, could cause our actual future results and other
future circumstances to differ materially from those expressed in
any forward-looking statements. Such factors include, but are not
limited to: risk that the proposed transaction with Microsoft may
not be completed in a timely manner or at all, which may adversely
affect our business and the price of our common stock; the failure
to satisfy the conditions to the consummation of the proposed
transaction with Microsoft, including shareholder approval and the
receipt of certain governmental and regulatory approvals; the
occurrence of any event, change, or other circumstance that could
give rise to the termination of the Agreement and Plan of Merger,
dated as of January 18, 2022, by and among Activision Blizzard,
Microsoft, and Anchorage Merger Sub Inc., a wholly owned subsidiary
of Microsoft (the “Microsoft Merger Agreement”); the effect of the
announcement or pendency of the proposed transaction with Microsoft
on our business relationships, operating results, and business
generally; risks that the proposed transaction with Microsoft
disrupts our current plans and operations and potential
difficulties in employee retention as a result of the proposed
transaction with Microsoft; risks related to diverting management’s
attention from ongoing business operations; the outcome of any
legal proceedings that have been or may be instituted against us
related to the Microsoft Merger Agreement or the transactions
contemplated thereby; restrictions during the pendency of the
proposed transaction with Microsoft that may impact our ability to
pursue certain business opportunities or strategic transactions;
the potential for receipt of alternative acquisition proposals from
potential acquirors; the global impact of the ongoing COVID-19
pandemic (including, without limitation, the potential for
significant short- and long-term global unemployment and economic
weakness and a resulting impact on global discretionary spending;
potential strain on the retailers, distributors, and manufacturers
who sell our physical products to customers and the platform
providers on whose networks and consoles certain of our games are
available; effects on our ability to release our content in a
timely manner and with effective quality control; effects on our
ability to prevent cyber-security incidents while our workforce is
disbursed; effects on the operations of our professional esports
leagues; the impact of large-scale intervention by the Federal
Reserve and other central banks around the world, including the
impact on interest rates; increased demand for our games due to
stay-at-home orders and curtailment of other forms of
entertainment, which may not be sustained and may fluctuate as
stay-at-home orders are reduced, lifted, and/or reinstated;
macroeconomic impacts arising from the long duration of the
COVID-19 pandemic, including labor shortages and supply chain
disruptions; and volatility in foreign exchange rates); our ability
to consistently deliver popular, high-quality titles in a timely
manner, which has been made more difficult as a result of the
COVID-19 pandemic; our ability to satisfy the expectations of
consumers with respect to our brands, games, services, and/or
business practices; negative impacts on our business from concerns
regarding our workplace; our ability to attract, retain, and
motivate skilled personnel; competition; concentration of revenue
among a small number of franchises; negative impacts from
unionization or attempts to unionize by our workforce; rapid
changes in technology and industry standards; increasing importance
of revenues derived from digital distribution channels; our ability
to manage the continued growth in the scope and complexity of our
business; substantial influence of third-party platform providers
over our products and costs; success and availability of video game
consoles manufactured by third parties, including our ability to
predict the consoles that will be most successful in the
marketplace and develop commercially-successful products for those
consoles; risks associated with the free-to-play business model,
including our dependence on a relatively small number of consumers
for a significant portion of revenues and profits from any given
game; risks and uncertainties of conducting business outside the
U.S., including the need for regulatory approval to operate,
impacts on our business arising from the current conflict between
Russia and Ukraine, the relatively weaker protection for our
intellectual property rights, and the impact of cultural
differences on consumer preferences; risks associated with the
retail sales business model; our ability to realize the expected
benefits of our recent restructuring actions; difficulties in
integrating acquired businesses or otherwise realizing the
anticipated benefits of strategic transactions; the seasonality in
the sale of our products; fluctuation in our recurring business;
risks relating to behavior of our distributors, retailers,
development, and licensing partners, or other affiliated third
parties that may harm our brands or business operations; our
reliance on tools and technologies owned by third parties; risks
associated with our use of open source software; risks associated
with undisclosed content or features that may result in consumers’
refusal to buy or retailers’ refusal to sell our products; risks
associated with objectionable consumer- or other
third-party-created content; outages, disruptions or degradations
in our services, products, and/or technological infrastructure;
data breaches, fraudulent activity, and other cybersecurity risks;
significant disruption during our live events; risks related to the
impacts of catastrophic events; climate change; provisions in our
corporate documents that may make it more difficult for any person
to acquire control of our company; ongoing legal proceedings
related to workplace concerns and otherwise, including the impact
of the complaint filed in 2021 by the California Department of Fair
Employment and Housing alleging violations of the California Fair
Employment and Housing Act and the California Equal Pay Act and
separate investigations and complaints by other parties and
regulators related to certain employment practices and related
disclosures; successful implementation of the requirements of the
court-approved consent decree with the Equal Employment Opportunity
Commission; intellectual property claims; increasing regulation in
key territories; regulation relating to the Internet, including
potential harm from laws impacting “net neutrality”; regulation
concerning data privacy, including China’s recently passed Personal
Information Protection Law; scrutiny regarding the appropriateness
of our games’ content, including ratings assigned by third parties;
changes in tax rates and/or tax laws or exposure to additional tax
liabilities; fluctuations in currency exchange rates; impacts of
changes in financial accounting standards; insolvency or business
failure of any of our business partners, which has been magnified
as a result of the COVID-19 pandemic; risks associated with our
reliance on discretionary spending; and the other factors included
in “Risk Factors” included in Part I, Item 1A of our Annual Report
on Form 10-K for the year ended December 31, 2021, filed with the
U.S. Securities and Exchange Commission.
The forward-looking statements contained herein are based on
information available to Activision Blizzard, Inc. as of the date
of this filing, and we assume no obligation to update any such
forward-looking statements. Actual events or results may differ
from those expressed in forward-looking statements. As such, you
should not rely on forward-looking statements as predictions of
future events. We have based the forward-looking statements
contained herein primarily on our current expectations and
projections about future events and trends that we believe may
affect our business, financial condition, operating results,
prospects, strategy, and financial needs. These statements are not
guarantees of our future performance and are subject to risks,
uncertainties, and other factors, some of which are beyond our
control and may cause actual results to differ materially from
current expectations.
Additional Information and Where to Find It
In connection with the transaction, Activision Blizzard has
filed with the SEC and mailed to Activision Blizzard stockholders
entitled to vote at the special meeting to approve the transaction
a definitive proxy statement on March 21, 2022 (as amended or
supplemented from time to time, the “definitive proxy statement”).
INVESTORS AND SECURITY HOLDERS OF ACTIVISION BLIZZARD ARE URGED TO
READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE
TRANSACTION THAT ACTIVISION BLIZZARD HAS FILED OR WILL FILE WITH
THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY DO OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT ACTIVISION BLIZZARD AND THE
TRANSACTION. The definitive proxy statement and other relevant
materials in connection with the transaction (when they become
available), and any other documents filed by Activision Blizzard
with the SEC, may be obtained free of charge at the SEC’s website
(http://www.sec.gov) or at Activision Blizzard’s website
(https://investor.Activision.com) or by writing to Activision
Blizzard, Investor Relations, 2701 Olympic Boulevard, Building B,
Santa Monica, CA 90404.
Activision Blizzard and certain of its directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies from
Activision Blizzard’s stockholders with respect to the transaction.
Information about Activision Blizzard’s directors and executive
officers and their ownership of Activision Blizzard’s common stock
is set forth in the definitive proxy statement. To the extent that
holdings of Activision Blizzard’s securities have changed since the
amounts printed in the definitive proxy statement, such changes
have been or will be reflected on Statements of Change in Ownership
on Form 4 filed with the SEC. Information regarding the identity of
the participants, and their direct or indirect interests in the
transaction, by security holdings or otherwise, are set forth in
the definitive proxy statement and other materials filed with the
SEC in connection with the transaction.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(Amounts in millions)
Three Months Ended March
31,
2022
2021
Net revenues
Product sales
$
386
$
675
In-game, subscription, and other
revenues1
1,382
1,600
Total net revenues
1,768
2,275
Costs and expenses
Cost of revenues—product sales:
Product costs
91
140
Software royalties, amortization, and
intellectual property licenses
81
112
Cost of revenues—in-game, subscription,
and other:
Game operations and distribution costs
288
296
Software royalties, amortization, and
intellectual property licenses
19
30
Product development
346
353
Sales and marketing
252
237
General and administrative
214
282
Restructuring and related costs
(2
)
30
Total costs and expenses
1,289
1,480
Operating income
479
795
Interest and other expense (income),
net
14
30
Income before income tax expense
465
765
Income tax expense
70
146
Net income
$
395
$
619
Basic earnings per common share
$
0.51
$
0.80
Weighted average common shares
outstanding
780
775
Diluted earnings per common share
$
0.50
$
0.79
Weighted average common shares outstanding
assuming dilution
786
783
1
In-game, subscription, and other revenues
represent revenues from microtransactions and downloadable content,
World of Warcraft subscriptions, licensing royalties from our
products and franchises, and other miscellaneous revenues.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Amounts in millions)
March 31, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
10,967
$
10,423
Accounts receivable, net
530
972
Software development
433
449
Other current assets
556
712
Total current assets
12,486
12,556
Software development
289
211
Property and equipment, net
174
169
Deferred income taxes, net
1,308
1,377
Other assets
511
497
Intangible assets, net
445
447
Goodwill
9,799
9,799
Total assets
$
25,012
$
25,056
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable
$
207
$
285
Deferred revenues
835
1,118
Accrued expenses and other liabilities
1,249
1,008
Total current liabilities
2,291
2,411
Long-term debt, net
3,608
3,608
Deferred income taxes, net
375
506
Other liabilities
907
932
Total liabilities
7,181
7,457
Shareholders' equity
Common stock
—
—
Additional paid-in capital
11,927
11,715
Treasury stock
(5,563
)
(5,563
)
Retained earnings
12,053
12,025
Accumulated other comprehensive loss
(586
)
(578
)
Total shareholders’ equity
17,831
17,599
Total liabilities and shareholders’
equity
$
25,012
$
25,056
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL CASH FLOW
INFORMATION
(Amounts in millions)
Three Months Ended
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
March 31, 2022
Year over Year % Increase
(Decrease)
Cash Flow Data
Operating Cash Flow
$
844
$
388
$
521
$
661
$
642
(24
) %
Capital Expenditures
22
14
23
21
15
(32
)
Non-GAAP Free Cash Flow1
$
822
$
374
$
498
$
640
$
627
(24
)
Operating Cash Flow - TTM2
$
2,948
$
2,568
$
2,893
$
2,414
$
2,212
(25
)
Capital Expenditures - TTM2
81
82
81
80
73
(10
)
Non-GAAP Free Cash Flow1 - TTM2
$
2,867
$
2,486
$
2,812
$
2,334
$
2,139
(25
) %
1
Non-GAAP free cash flow represents
operating cash flow minus capital expenditures.
2
TTM represents trailing twelve months.
Operating Cash Flow for three months ended June 30, 2020, three
months ended September 30, 2020, and three months ended December
31, 2020, were $768 million, $196 million, and $1,140 million,
respectively. Capital Expenditures for the three months ended June
30, 2020, three months ended September 30, 2020, and three months
ended December 31, 2020, were $13 million, $24 million, and $22
million, respectively.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended
March 31, 2022
Net Revenues
Cost of Revenues—Product
Sales: Product Costs
Cost of Revenues—Product
Sales: Software Royalties and Amortization
Cost of
Revenues—In-game/Subs/Other: Game Operations and Distribution
Costs
Cost of
Revenues—In-game/Subs/Other: Software Royalties and
Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
1,768
$
91
$
81
$
288
$
19
$
346
$
252
$
214
$
(2
)
$
1,289
Share-based compensation1
—
—
(4
)
(2
)
—
(53
)
(15
)
(24
)
—
(98
)
Amortization of intangible assets2
—
—
—
—
—
—
—
(2
)
—
(2
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
2
2
Merger and acquisition-related fees and
other expenses4
—
—
—
—
—
—
—
(32
)
—
(32
)
Non-GAAP Measurement
$
1,768
$
91
$
77
$
286
$
19
$
293
$
237
$
156
$
—
$
1,159
Net effect of deferred revenues and
related cost of revenues5
$
(287
)
$
(14
)
$
(38
)
$
(2
)
$
2
$
—
$
—
$
—
$
—
$
(52
)
Operating Income
Net Income
Basic Earnings
per Share
Diluted Earnings per
Share
GAAP Measurement
$
479
$
395
$
0.51
$
0.50
Share-based compensation1
98
98
0.13
0.13
Amortization of intangible assets2
2
2
—
—
Restructuring and related costs3
(2
)
(2
)
—
—
Merger and acquisition-related fees and
other expenses4
32
32
0.04
0.04
Income tax impacts from items above6
—
(24
)
(0.03
)
(0.03
)
Non-GAAP Measurement
$
609
$
501
$
0.64
$
0.64
Net effect of deferred revenues and
related cost of revenues5
$
(235
)
$
(204
)
$
(0.26
)
$
(0.26
)
1
Reflects expenses related to share-based
compensation, including $15 million for outstanding liability
awards accounted for under ASC 718.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects fees and other expenses related
to our proposed transaction with Microsoft Corporation
("Microsoft"), primarily legal and advisory fees.
5
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
6
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share
information is presented as calculated. The sum of these measures,
as presented, may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Three Months Ended
March 31, 2021
Net Revenues
Cost of Revenues—Product
Sales: Product Costs
Cost of Revenues—Product
Sales: Software Royalties and Amortization
Cost of
Revenues—In-game/Subs/Other: Game Operations and Distribution
Costs
Cost of
Revenues—In-game/Subs/Other: Software Royalties and
Amortization
Product Development
Sales and Marketing
General and
Administrative
Restructuring and related
costs
Total Costs and
Expenses
GAAP Measurement
$
2,275
$
140
$
112
$
296
$
30
$
353
$
237
$
282
$
30
$
1,480
Share-based compensation1
—
—
(6
)
—
—
(16
)
(5
)
(124
)
—
(151
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(2
)
—
(5
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(30
)
(30
)
Non-GAAP Measurement
$
2,275
$
140
$
106
$
296
$
27
$
337
$
232
$
156
$
—
$
1,294
Net effect of deferred revenues and
related cost of revenues4
$
(209
)
$
(13
)
$
(64
)
$
—
$
—
$
—
$
—
$
—
$
—
$
(77
)
Operating Income
Net Income
Basic Earnings
per Share
Diluted Earnings per
Share
GAAP Measurement
$
795
$
619
$
0.80
$
0.79
Share-based compensation1
151
151
0.20
0.19
Amortization of intangible assets2
5
5
0.01
0.01
Restructuring and related costs3
30
30
0.04
0.04
Income tax impacts from items above5
—
(37
)
(0.05
)
(0.05
)
Non-GAAP Measurement
$
981
$
768
$
0.99
$
0.98
Net effect of deferred revenues and
related cost of revenues4
$
(132
)
$
(107
)
$
(0.14
)
$
(0.14
)
1
Reflects expenses related to share-based
compensation.
2
Reflects amortization of intangible assets
from purchase price accounting.
3
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products,
including the effects of taxes.
5
Reflects the income tax impact associated
with the above items. Tax impact on non-GAAP pre-tax income is
calculated under the same accounting principles applied to the GAAP
pre-tax income under ASC 740, which employs an annual effective tax
rate method to the results.
The GAAP and non-GAAP earnings per share information is
presented as calculated. The sum of these measures, as presented,
may differ due to the impact of rounding.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
(Amounts in millions)
Three Months Ended
March 31, 2022
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
453
$
265
$
682
$
1,400
$
(438
)
$
(193
)
$
73
$
(558
)
Intersegment net revenues1
—
9
—
9
—
(16
)
—
(16
)
Segment net revenues
$
453
$
274
$
682
$
1,409
$
(438
)
$
(209
)
$
73
$
(574
)
Segment operating income
$
59
$
53
$
243
$
355
$
(383
)
$
(155
)
$
40
$
(498
)
Operating Margin
25.2
%
March 31, 2021
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
891
$
458
$
609
$
1,958
Intersegment net revenues1
—
25
—
25
Segment net revenues
$
891
$
483
$
609
$
1,983
Segment operating income
$
442
$
208
$
203
$
853
Operating Margin
43.0
%
1
Intersegment revenues reflect licensing
and service fees charged between segments.
Our operating segments are consistent with the manner in which
our operations are reviewed and managed by our Chief Executive
Officer, who is our chief operating decision maker (“CODM”). The
CODM reviews segment performance exclusive of: the impact of the
change in deferred revenues and related cost of revenues with
respect to certain of our online-enabled games; share-based
compensation expense (including liability awards accounting for
under ASC 718); amortization of intangible assets as a result of
purchase price accounting; fees and other expenses (including legal
fees, costs, expenses and accruals) related to acquisitions,
associated integration activities, and financings; certain
restructuring and related costs; and other non-cash charges. See
the following page for the reconciliation tables of segment
revenues and operating income to consolidated net revenues and
consolidated income before income tax expense.
Our operating segments are also consistent with our internal
organization structure, the way we assess operating performance and
allocate resources, and the availability of separate financial
information. We do not aggregate operating segments.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING SEGMENTS INFORMATION
(Amounts in millions)
Three Months Ended March
31,
2022
2021
Reconciliation to consolidated net
revenues:
Segment net revenues
$
1,409
$
1,983
Revenues from non-reportable segments1
81
108
Net effect from recognition (deferral) of
deferred net revenues2
287
209
Elimination of intersegment revenues3
(9
)
(25
)
Consolidated net revenues
$
1,768
$
2,275
Reconciliation to consolidated income
before income tax expense:
Segment operating income
$
355
$
853
Operating income (loss) from
non-reportable segments1
19
(4
)
Net effect from recognition (deferral) of
deferred net revenues and related cost of revenues2
235
132
Share-based compensation expense4
(98
)
(151
)
Amortization of intangible assets
(2
)
(5
)
Restructuring and related costs5
2
(30
)
Merger and acquisition-related fees and
other expenses6
(32
)
—
Consolidated operating income
479
795
Interest and other expense (income),
net
14
30
Consolidated income before income tax
expense (benefit)
$
465
$
765
1
Includes other income and expenses outside
of our reportable segments, including our distribution business and
unallocated corporate income and expenses.
2
Reflects the net effect from (deferral) of
revenues and recognition of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products.
3
Intersegment revenues reflect licensing
and service fees charged between segments.
4
Reflects expenses related to share-based
compensation, including liability awards accounted for under ASC
718.
5
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
6
Reflects fees and other expenses related
to our proposed transaction with Microsoft, primarily legal and
advisory fees.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY DISTRIBUTION
CHANNEL
(Amounts in millions)
Three Months Ended
March 31, 2022
March 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
1,589
90
%
$
2,006
88
%
$
(417
)
(21
) %
Retail channels
85
5
149
7
(64
)
(43
)
Other3
94
5
120
5
(26
)
(22
)
Total consolidated net revenues
$
1,768
100
%
$
2,275
100
%
$
(507
)
(22
)
Change in deferred revenues4
Digital online channels2
$
(222
)
$
(141
)
Retail channels
(64
)
(74
)
Other3
(1
)
6
Total changes in deferred revenues
$
(287
)
$
(209
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from Digital online channels
represent revenues from digitally-distributed downloadable content,
microtransactions, subscriptions, and products, as well as
licensing royalties.
3
Net revenues from Other primarily include
revenues from our distribution business, the Overwatch League, and
the Call of Duty League.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY PLATFORM
(Amounts in millions)
Three Months Ended
March 31, 2022
March 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
484
27
%
$
799
35
%
$
(315
)
(39
) %
PC
383
22
622
27
(239
)
(38
)
Mobile and ancillary2
807
46
734
32
73
10
Other3
94
5
120
5
(26
)
(22
)
Total consolidated net revenues
$
1,768
100
%
$
2,275
100
%
$
(507
)
(22
)
Change in deferred revenues4
Console
$
(221
)
$
(173
)
PC
(80
)
(45
)
Mobile and ancillary2
15
3
Other3
(1
)
6
Total changes in deferred revenues
$
(287
)
$
(209
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from Mobile and ancillary
primarily include revenues from mobile devices.
3
Net revenues from Other primarily include
revenues from our distribution business, the Overwatch League, and
the Call of Duty League.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
NET REVENUES BY GEOGRAPHIC
REGION
(Amounts in millions)
Three Months Ended
March 31, 2022
March 31, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
1,016
57
%
$
1,307
57
%
$
(291
)
(22
) %
EMEA2
527
30
731
32
(204
)
(28
)
Asia Pacific
225
13
237
10
(12
)
(5
)
Total consolidated net revenues
$
1,768
100
%
$
2,275
100
%
$
(507
)
(22
)
Change in deferred revenues3
Americas
$
(174
)
$
(121
)
EMEA2
(93
)
(65
)
Asia Pacific
(20
)
(23
)
Total changes in deferred revenues
$
(287
)
$
(209
)
1
The percentages of total are presented as
calculated. Therefore, the sum of these percentages, as presented,
may differ due to the impact of rounding.
2
Net revenues from EMEA consist of the
Europe, Middle East, and Africa geographic regions.
3
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues on certain of our
online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
EBITDA AND ADJUSTED EBITDA
(Amounts in millions)
Trailing Twelve Months
Ended
June 30, 2021
September 30,
2021
December 31,
2021
March 31, 2022
March 31, 2022
GAAP Net Income
$
876
$
639
$
564
$
395
$
2,474
Interest and other expense (income),
net
(43
)
65
45
14
81
Provision for income taxes
126
120
73
70
389
Depreciation and amortization
28
27
27
24
106
EBITDA
987
851
709
503
3,050
Share-based compensation expense1
43
64
249
98
454
Restructuring and related costs2
13
3
30
(2
)
44
Merger and acquisition-related fees and
other expenses3
—
—
—
32
32
Adjusted EBITDA
$
1,043
$
918
$
988
$
631
$
3,580
Change in deferred net revenues and
related cost of revenues4
$
(276
)
$
(154
)
$
215
$
(235
)
$
(450
)
1
Reflects expenses related to share-based
compensation, including liability awards accounted for under ASC
718.
2
Reflects restructuring initiatives,
primarily severance and other restructuring-related costs.
3
Reflects fees and other expenses related
to our proposed transaction with Microsoft, primarily legal and
advisory fees.
4
Reflects the net effect from deferral of
revenues and (recognition) of deferred revenues, along with related
cost of revenues, on certain of our online-enabled products.
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
OPERATING METRICS
(Amounts in millions)
Net Bookings1
Three Months Ended March
31,
2022
2021
$ Increase (Decrease)
% Increase (Decrease)
Net bookings1
$
1,481
$
2,066
$
(585
)
(28
) %
In-game net bookings2
$
1,011
$
1,343
$
(332
)
(25
) %
1
We monitor net bookings as a key operating
metric in evaluating the performance of our business because it
enables an analysis of performance based on the timing of actual
transactions with our customers and provides more timely
indications of trends in our operating results. Net bookings is 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. Net bookings is equal to
net revenues excluding the impact from deferrals.
2
In-game net bookings primarily includes
the net amount of downloadable content and microtransactions sold
during the period, and is equal to in-game net revenues excluding
the impact from deferrals.
Monthly Active Users3
March 31, 2021
June 30, 2021
September 30, 2021
December 31, 2021
March 31, 2022
Activision
150
127
119
107
100
Blizzard
27
26
26
24
22
King
258
255
245
240
250
Total MAUs
435
408
390
371
372
3
We monitor monthly active users (“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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220422005665/en/
Activision Blizzard, Inc.
Investors and Analysts: ir@activisionblizzard.com or Press:
pr@activisionblizzard.com
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