Financial Performance - Total net revenues for the three months ended June 30, 2022, were $1,644 million, a decrease of 28.5% compared to $2,296 million for the same period in 2021[12]. - In-game, subscription, and other revenues for the six months ended June 30, 2022, were $2,722 million, down 18.5% from $3,328 million in the prior year[12]. - Operating income for the three months ended June 30, 2022, was $338 million, a decline of 64.8% from $959 million in the same quarter of 2021[12]. - Net income for the three months ended June 30, 2022, was $280 million, down 68.1% from $876 million for the same period in 2021[12]. - Basic earnings per share for the three months ended June 30, 2022, were $0.36, compared to $1.13 for the same period in 2021, representing a decrease of 68.0%[12]. - Total costs and expenses for the three months ended June 30, 2022, were $1,306 million, a slight decrease of 2.3% from $1,337 million in the same quarter of 2021[12]. - Comprehensive income for the three months ended June 30, 2022, was $275 million, down from $883 million in the same period of 2021[14]. - Consolidated net revenues for Q2 2022 decreased by 28% to $1.6 billion, compared to $2.3 billion in Q2 2021[140]. - Diluted earnings per share for Q2 2022 decreased by 68% to $0.36, down from $1.12 in Q2 2021[140]. - The decrease in consolidated net revenues for the six months ended June 30, 2022, was primarily driven by a $1.2 billion decline in revenues from franchises like Call of Duty and World of Warcraft[169]. Assets and Liabilities - Total current assets as of June 30, 2022, were $12,507 million, a slight decrease from $12,556 million at December 31, 2021[11]. - Cash and cash equivalents increased to $10,483 million from $10,423 million[11]. - Accounts receivable decreased significantly to $572 million from $972 million, indicating a reduction in outstanding payments[11]. - Total liabilities decreased to $6,746 million from $7,457 million, reflecting improved financial health[11]. - Shareholders' equity increased to $18,248 million from $17,599 million, showing growth in company value[11]. - Long-term debt remained stable at $3,609 million compared to $3,608 million[11]. - Total long-lived assets as of June 30, 2022, were $406 million, unchanged from December 31, 2021[2]. - The fair value of money market funds was $10.095 billion as of June 30, 2022, compared to $10.035 billion as of December 31, 2021[45]. - The total fair value of financial assets measured at fair value on a recurring basis was $10.418 billion as of June 30, 2022[45]. Revenue Segments - Activision segment revenues for Q2 2022 were $490 million, a decrease of $299 million compared to the previous year[177]. - Blizzard segment revenues for Q2 2022 were $401 million, down $32 million from Q2 2021[177]. - King segment revenues for Q2 2022 were $684 million, an increase of $49 million compared to the previous year[177]. - The Activision segment reported net revenues of $943 million for the six months ended June 30, 2022, down from $1,680 million in the same period of 2021, a decline of approximately 43.8%[62]. - The Blizzard segment's net revenues for the six months ended June 30, 2022, were $675 million, compared to $916 million in the same period of 2021, reflecting a decrease of about 26.4%[62]. - The King segment achieved net revenues of $1,366 million for the six months ended June 30, 2022, down from $1,244 million in the same period of 2021, a decline of approximately 9.8%[62]. Cash Flow and Investments - Cash and cash equivalents at the end of the period were $10,510 million, an increase from $9,223 million at the end of June 30, 2021[15]. - Net cash provided by operating activities for the six months ended June 30, 2022, was $840 million, down from $1,232 million in the same period of 2021[15]. - The company reported total capitalized software development costs of $892 million as of June 30, 2022, up from $660 million at December 31, 2021[34]. - The amortization of capitalized software development costs for the three months ended June 30, 2022, was $60 million, down from $87 million for the same period in 2021[34]. - The company incurred share-based compensation expenses of $100 million for the three months ended June 30, 2022, compared to $43 million for the same period in 2021, indicating an increase of approximately 132.6%[64]. Mergers and Acquisitions - The company entered into a merger agreement with Microsoft for $95.00 per share in an all-cash transaction, expected to close in Microsoft's fiscal year ending June 30, 2023[132]. - The merger agreement with Microsoft involves an acquisition price of $95.00 per share, totaling approximately $68.7 billion based on outstanding shares[23]. - The company has agreed to conduct its business in the ordinary course during the merger process, ensuring it meets ongoing operational and capital needs[23]. - The merger remains subject to customary closing conditions, including regulatory approvals, and the company is conducting its business in the ordinary course during this period[132]. Legal and Regulatory Matters - The company is facing multiple legal proceedings related to employment practices, including a complaint filed by the California Department of Fair Employment and Housing[121]. - The company has received subpoenas from the SEC and the Department of Justice regarding trading activities related to the proposed merger with Microsoft[129]. - The company is cooperating with investigations regarding disclosures on employment matters and related issues, including responses to subpoenas from the SEC[125]. - An $18 million settlement fund was established as part of a consent decree with the EEOC to address employment practices and prevent workplace harassment[119]. Market and User Metrics - Monthly active users (MAUs) decreased by 11 million or 3% from Q1 2022 to Q2 2022, primarily due to lower MAUs for King and Activision[158]. - Digital online channels generated $1,474 million in Q2 2022, a decrease of 27.2% from $2,026 million in Q2 2021[196]. - The company reported a total of $4,571 million in consolidated net revenues for the year, with digital online channels contributing $4,031 million, which is a significant portion of the total[73]. Future Outlook - Upcoming titles include Call of Duty: Modern Warfare II launching on October 28, 2022, and Overwatch 2 expected to launch in early access on October 4, 2022[161].

Financial Performance - Total net revenues for Q1 2022 were $1,768 million, a decrease of 22.3% from $2,275 million in Q1 2021[11] - Product sales in Q1 2022 were $386 million, down 42.8% from $675 million in Q1 2021[11] - In-game, subscription, and other revenues were $1,382 million, a decline of 13.6% compared to $1,600 million in Q1 2021[11] - Operating income for Q1 2022 was $479 million, representing a 39.7% decrease from $795 million in Q1 2021[11] - Net income for Q1 2022 was $395 million, down 36.3% from $619 million in Q1 2021[11] - Basic earnings per share for Q1 2022 were $0.51, compared to $0.80 in Q1 2021, reflecting a 36.3% decline[11] - Comprehensive income for the three months ended March 31, 2022, was $387 million, down from $641 million in the same period of 2021[13] - Consolidated net income for the three months ended March 31, 2022, was $395 million, down from $619 million for the same period in 2021, representing a decrease of approximately 36.3%[90] - Diluted earnings per common share also fell to $0.50 for the three months ended March 31, 2022, down from $0.79 in the prior year, a decrease of 36.7%[90] - Consolidated net revenues decreased by 22% to $1.8 billion for the three months ended March 31, 2022, compared to $2.3 billion in 2021[116] Assets and Liabilities - Total current assets as of March 31, 2022, were $12,486 million, slightly down from $12,556 million at December 31, 2021[10] - Total liabilities decreased to $7,181 million as of March 31, 2022, from $7,457 million at December 31, 2021[10] - Cash and cash equivalents increased to $10,967 million as of March 31, 2022, from $10,423 million at December 31, 2021[10] - The company had $1.5 billion available under a revolving credit facility as of March 31, 2022, with no draws made to date[45] - Fair value measurements of financial assets as of March 31, 2022, totaled $10.818 billion, with $10.797 billion classified as Level 1 inputs[39] - Long-lived assets totaled $399 million as of March 31, 2022, a slight decrease from $406 million at December 31, 2021[70] Revenue Breakdown - The segment net revenues for Activision, Blizzard, and King were $453 million, $274 million, and $682 million respectively for the three months ended March 31, 2022, totaling $1.409 billion[53] - Segment net revenues from Activision, Blizzard, and King were $891 million, $483 million, and $609 million respectively, totaling $2,066 million[59] - Digital online channels generated $1,589 million in net revenues, a decrease of $417 million from $2,006 million in the prior year[156] - Console platform revenues fell to $484 million, down $315 million from $799 million, primarily due to lower sales of Call of Duty titles[159][161] - Mobile and ancillary revenues increased by $73 million to $807 million, driven by higher in-game purchases and advertising in the Candy Crush franchise[159][163] Deferred Revenues - The company reported a decrease in deferred revenues from $1,118 million at December 31, 2021, to $835 million at March 31, 2022[10] - Deferred revenues decreased by $278 million for the three months ended March 31, 2022, compared to a decrease of $204 million for the same period in 2021[15] - The aggregate of deferred revenues as of March 31, 2022, was $0.8 billion, a decrease from $1.1 billion as of December 31, 2021[43] - The company recognized a net effect from the deferral of deferred net revenues of $287 million for the three months ended March 31, 2022, compared to $209 million in the same period of 2021[55] Cash Flow and Expenses - Net cash provided by operating activities was $642 million for the three months ended March 31, 2022, compared to $844 million for the same period in 2021, reflecting a decrease of 24%[15] - Total cost of revenues for the three months ended March 31, 2022, was $479 million, a decrease of $99 million compared to $578 million for the same period in 2021, representing 27% of net revenues[164] - Product costs decreased by $49 million to $91 million for the three months ended March 31, 2022, compared to $140 million in the same period of 2021, which was 24% of associated net revenues[164] - General and administrative expenses decreased by $68 million to $214 million for the three months ended March 31, 2022, compared to $282 million in the same period of 2021, maintaining 12% of consolidated net revenues[169] Merger and Acquisitions - The company entered into a Merger Agreement with Microsoft, with Microsoft agreeing to acquire the company for $95.00 per share in an all-cash transaction[22] - The merger is expected to close in Microsoft's fiscal year ending June 30, 2023, subject to regulatory approvals[22] - The company has a stock repurchase program authorized for up to $4 billion, but no shares had been repurchased as of March 31, 2022, due to restrictions related to the merger agreement with Microsoft[92] Legal and Regulatory Matters - The company is subject to ongoing legal proceedings related to workplace issues, which may have adverse effects on its operations and financial condition[110] - The company is cooperating with investigations by the SEC and DOJ regarding trading activities related to the proposed merger with Microsoft[105] Market Performance - Monthly Active Users (MAUs) decreased by 63 million or 14% year-over-year to 372 million for the three months ended March 31, 2022[131] - Activision's MAUs dropped to 100 million, down from 150 million in the same period last year[130] - Blizzard's MAUs decreased to 22 million, while King's MAUs increased to 250 million, driven by the Candy Crush franchise[130] Future Outlook - Upcoming releases include Diablo Immortal on June 2, 2022, and a new premium title in the Call of Duty franchise in the second half of 2022[134] - The company plans to continue investing in advertising initiatives and mobile titles to drive long-term growth[134]

Merger and Acquisition - Activision Blizzard entered into a Merger Agreement with Microsoft Corporation for $95.00 per share in an all-cash transaction, expected to close in Microsoft's fiscal year ending June 30, 2023[9] - The company anticipates a termination fee of approximately $2.27 billion if the Merger Agreement is terminated under specified circumstances[10] - The company’s merger with Microsoft is expected to enhance its competitive position in the interactive entertainment industry, particularly in cloud computing and AI[45] Business Strategy and Revenue Generation - Activision Blizzard's strategy focuses on expanding audience reach, deepening consumer engagement, and increasing player investment[12] - The company generates revenue through multiple segments, including Activision Publishing, Blizzard Entertainment, and King Digital Entertainment, with key franchises like Call of Duty and Candy Crush[16][19] - The company aims to enhance player investment through digital revenue streams, including in-game purchases and advertising[15] - The company is focused on developing new revenue streams through esports and consumer products, which are still in early stages[15] - The company has shifted to a more consistently recurring and year-round revenue model, increasing player engagement and investment outside of premium full-game purchases[26] - For the years ended December 31, 2021, 2020, and 2019, the top three franchises—Call of Duty, Candy Crush, and Warcraft—accounted for 82%, 79%, and 72% of net revenues, respectively[41] Impact of COVID-19 - The COVID-19 pandemic initially increased demand for the company's products, but trends have moderated as stay-at-home orders have been lifted[21] - The company continues to monitor the impact of the COVID-19 pandemic on its business operations and may adjust strategies accordingly[23] Employee and Workforce Development - As of December 31, 2021, approximately 68% of the company's 9,800 employees were involved in game and technology development, representing a seven percentage point increase from 2020[58] - The company converted approximately 500 temporary workers to full-time employees at its Activision studios, enhancing its overall investment in development and operations[66] - The company is focused on developing diverse talent through performance management and leadership development opportunities[70] - The company aims to increase the percentage of women and non-binary employees in its workforce by 50% over the next five years, targeting over one-third representation[62] Corporate Social Responsibility and Diversity - The company has committed to diversity, with 20% of its Board of Directors being women and 20% from underrepresented communities as of December 31, 2021[60] - In 2021, the company committed to invest $250 million over the next 10 years to expand opportunities in gaming and technology for underrepresented communities[65] - The company placed 16,138 veterans in jobs through its support of the Call of Duty Endowment, contributing over $1 billion in positive economic impact for the veteran community[65] - The company reported that women earned slightly more than men for comparable work in 2020, indicating progress in equal pay practices[66] Environmental Sustainability - The company achieved a 60% reduction in packaging waste in 2021, surpassing its original goal of a 50% reduction by 2024[72] - The company is transitioning to a more digital business model to achieve sustainability goals, including net zero greenhouse gas emissions by 2050[72] Financial Management - The company’s significant customers included Apple and Google, each accounting for 17% of consolidated net revenues as of December 31, 2021[39] - The company’s investment portfolio primarily consists of money market funds and government securities with high credit quality and short average maturities[382] - The company anticipates that investment yields may remain low, negatively impacting future interest income, although this impact is not expected to be material to liquidity[383] - The company's outstanding debt is all at fixed rates, reducing exposure to market rate risk from interest rate changes[382] Intellectual Property and Marketing - The company is actively engaged in enforcing its intellectual property rights, including copyright and trademark protections, to prevent piracy and unauthorized use of its products[49] - The company’s marketing strategy includes direct communication with gamers through customized advertising and in-game messaging, leveraging digital platforms for distribution[31] Compensation and Workplace Policies - The company has established a "Workplace Responsibility Committee" to oversee the implementation of workplace policies and ensure accountability[51] - The company has implemented changes to its compensation structure to enhance employee equity ownership and align with industry practices[68] Currency Risk - A hypothetical adverse foreign currency exchange rate movement of 10% could have resulted in a theoretical decline of net income by approximately $184 million[381]

Financial Data and Key Metrics Changes - Activision Blizzard reported Q3 GAAP revenues of $2.07 billion, exceeding the outlook by $100 million [37] - Net bookings reached $1.88 billion, $30 million above the August outlook [38] - Operating cash flows were $521 million, more than double the year-ago levels [38] - The company ended the quarter with approximately $10 billion in cash and investments, and a net cash position of approximately $6.4 billion [38] Business Line Data and Key Metrics Changes - Activision segment revenue was $641 million, lower year-over-year due to the prior year's launch of Tony Hawk and declines in Call of Duty [39] - Blizzard's revenue grew 20% year-over-year to $493 million, driven by the successful launch of Diablo II: Resurrected [40] - King's revenue grew 22% year-over-year to $652 million, achieving record highs [41] Market Data and Key Metrics Changes - Monthly active users for Activision reached 119 million, with Call of Duty sustaining engagement well above pre-Warzone levels [21] - Blizzard's monthly active users were 26 million, with strong demand for Diablo II: Resurrected [25] - King saw a double-digit percentage increase in payer numbers year-over-year, with in-game net bookings for Candy Crush growing over 20% [31][32] Company Strategy and Development Direction - The company is focused on becoming a leader in workplace culture and has implemented various initiatives to improve employee satisfaction and retention [7][10] - There is a commitment to invest $250 million over the next 10 years to foster opportunities in gaming and technology for underrepresented communities [12] - The strategy includes geographic diversification and investment in creative talent to enhance game development [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term potential of the company despite facing challenges such as negative media attention and increased competition for talent [15][47] - The company is planning for a substantial amount of content from Blizzard next year, although some titles like Overwatch 2 and Diablo IV will see delayed launches [20][19] - Management emphasized the importance of maintaining a safe working environment to foster creativity and professional growth [50] Other Important Information - The company announced a comprehensive agreement with the U.S. Equal Opportunity Commission to strengthen policies against harassment and discrimination [10] - Jen Oneal, co-leader of Blizzard, will leave the company at the end of the year, with Mike Ybarra taking over her responsibilities [34] Q&A Session Summary Question: Can you talk about the progress around rectifying workplace issues? - Management expressed confidence in the progress made and emphasized the importance of creating a welcoming and inclusive environment to attract and retain talent [53][55] Question: Can you provide more details on the release timeline for Overwatch 2 and Diablo IV? - Management indicated that both titles will benefit from additional development time to ensure quality, but specific release dates were not shared [60][61] Question: What are the fundamental drivers behind Candy Crush's in-app net bookings growth? - The company highlighted increased content frequency and successful live operations as key drivers for growth in Candy Crush and other titles [64][66] Question: How will Vanguard integrate with Warzone? - Management confirmed that Vanguard and Warzone will share technology and progression, enhancing the player experience across both games [71][72] Question: What has been the performance of Diablo II: Resurrected? - The reception has been strong, with record sales for a remaster, indicating a robust demand for the Diablo franchise [77][79]

Financial Performance - Total net revenues for the three months ended September 30, 2021, were $2,070 million, an increase of 5.9% compared to $1,954 million in the same period of 2020[13]. - Total net revenues for the nine months ended September 30, 2021, were $5,626 million, an increase from $5,198 million in the same period of 2020, representing a growth of 8.2%[72]. - Consolidated net revenues for Q3 2021 increased 6% to $2.1 billion compared to $2.0 billion in Q3 2020[160]. - Consolidated net revenues for the nine months ended September 30, 2021, increased 17% to $6.6 billion compared to $5.7 billion in 2020[160]. - The total segment net revenues for the three months ended September 30, 2021, were $1,880 million, an increase from $1,767 million in the same period of 2020, representing a growth of 6.4%[81]. Revenue Breakdown - In-game, subscription, and other revenues reached $1,647 million for the three months ended September 30, 2021, up from $1,546 million in the prior year, reflecting a growth of 6.5%[13]. - Digital online channels generated $1,852 million in net revenues for the three months ended September 30, 2021, compared to $1,753 million in the same period of 2020, marking an increase of 5.6%[79]. - Segment net revenues for Activision, Blizzard, and King were $5.87 billion for the nine months ended September 30, 2021, reflecting a 62% decrease[93]. - For the three months ended September 30, 2021, Activision generated net revenues of $641 million, Blizzard $493 million, and King $652 million, totaling $1.786 billion[197]. Earnings and Income - Operating income for the three months ended September 30, 2021, was $824 million, representing a 5.9% increase from $778 million in the same period of 2020[13]. - Net income for the three months ended September 30, 2021, was $639 million, compared to $604 million in the same period of 2020, marking an increase of 5.8%[17]. - Basic earnings per common share for the three months ended September 30, 2021, were $0.82, compared to $0.78 for the same period in 2020[135]. - Diluted earnings per share for Q3 2021 increased 5% to $0.82 compared to $0.78 in Q3 2020[160]. Assets and Liabilities - Total assets increased to $23,977 million as of September 30, 2021, up from $23,109 million at December 31, 2020, representing a growth of approximately 3.76%[11]. - Total current liabilities decreased to $2,016 million from $3,100 million, reflecting a reduction of approximately 34.97%[11]. - The company reported a total shareholders' equity of $16,950 million, an increase from $15,037 million, representing a growth of approximately 12.69%[11]. - Long-term debt remained relatively stable at $3,607 million, slightly up from $3,605 million[11]. Cash Flow and Investments - The company reported a net cash provided by operating activities of $1,753 million for the nine months ended September 30, 2021, compared to $1,112 million in the same period of 2020, representing a growth of 57.7%[19]. - Cash and cash equivalents rose to $9,718 million, compared to $8,647 million at the end of 2020, indicating an increase of about 12.37%[11]. - The company had $1.5 billion available under a revolving credit facility, which has not been drawn upon[60]. Deferred Revenues - Deferred revenues decreased significantly to $844 million from $1,689 million, a decline of about 50%[11]. - The aggregate amount of deferred revenues was $0.9 billion, down from $1.7 billion as of December 31, 2020[58]. - The change in deferred revenues for the nine months ended September 30, 2021, was $(773) million, compared to $(306) million in the same period of 2020, indicating a significant increase in deferred revenue[82]. Stock and Dividends - The company has authorized a stock repurchase program of up to $4 billion, effective from February 14, 2021, with no shares repurchased as of September 30, 2021[138]. - A cash dividend of $0.47 per common share was declared on February 4, 2021, with a total payment of $365 million made on May 6, 2021[140]. Restructuring and Costs - The total restructuring and related costs incurred through September 30, 2021, amounted to $267 million, with $180 million attributed to Activision, $50 million to Blizzard, and $37 million to King[120][123]. - The company does not expect significant net savings in total operating expenses due to the restructuring plan, as cost reductions will be offset by increased investment in product development[121]. Market and Competition - The company continues to face risks related to competition and market dynamics, particularly in the context of the ongoing COVID-19 pandemic[6]. - The company experienced increased competition for talent, affecting its ability to deliver future game releases[180].

Activision Blizzard, Inc. (NASDAQ:ATVI) Q2 2021 Earnings Conference Call August 3, 2021 4:30 PM ET Company Participants Chris Hickey - SVP of IR Bobby Kotick - CEO Daniel Alegre - President and COO Armin Zerza - CFO Rob Kostich - President of Activision Jen Oneal - Co-leader of Blizzard Mike Ybarra - Co-leader of Blizzard Allen Adham - Executive Producer of Blizzard Incubation Conference Call Participants Matthew Cost - Morgan Stanley Mike Hickey - The Benchmark Company Andrew Uerkwitz - Jefferies Matthew T ...