AB(US:ATVI)2022-11-07 21:28Financial Performance - Total net revenues for the three months ended September 30, 2022, were $1,782 million, a decrease of 14% compared to $2,070 million for the same period in 2021[8]. - Net income for the three months ended September 30, 2022, was $435 million, down 32% from $639 million in the same period last year[10]. - Cash and cash equivalents at the end of the period were $7,769 million, a decrease from $9,736 million at the end of September 30, 2021[12]. - Total current assets increased to $13,110 million as of September 30, 2022, compared to $12,556 million at December 31, 2021[6]. - Total liabilities decreased to $6,812 million as of September 30, 2022, from $7,457 million at December 31, 2021[6]. - Operating income for the nine months ended September 30, 2022, was $1,302 million, a decline of 50% from $2,578 million in the same period of 2021[8]. - The company reported a basic earnings per share of $0.56 for the three months ended September 30, 2022, compared to $0.82 for the same period in 2021[8]. - Cash flows from operating activities for the nine months ended September 30, 2022, were $1,097 million, down from $1,753 million in the same period last year[12]. - The company incurred total costs and expenses of $1,297 million for the three months ended September 30, 2022, compared to $1,246 million for the same period in 2021[8]. - The company’s total assets increased to $25,620 million as of September 30, 2022, from $25,056 million at December 31, 2021[6]. - As of September 30, 2022, total shareholders' equity was $18.808 billion, an increase from $17.599 billion at December 31, 2021[16]. - The company reported a comprehensive income loss of $8 million for the three months ended September 30, 2022[16]. - The company declared dividends of $0.47 per common share, totaling $367 million for the three months ended September 30, 2022[16]. - The company had $1.5 billion available under a revolving credit facility as of September 30, 2022, with no draws made to date[55]. - The gross unsecured senior notes outstanding as of September 30, 2022, amounted to $3.7 billion[57]. - The total net carrying amount of long-term debt as of September 30, 2022, was $3.610 billion[57]. - The company reported segment net revenues of $1.715 billion for the three months ended September 30, 2022, compared to $1.786 billion for the same period in 2021[66]. - Consolidated net revenues for the three months ended September 30, 2022, were $1,782 million, a decrease of 14% from $2,070 million in the same period of 2021[67]. - Segment operating income for the three months ended September 30, 2022, was $616 million, down 16% from $735 million in the prior year[67]. - The company experienced a net effect from the recognition (deferral) of deferred net revenues of $(47) million for the three months ended September 30, 2022, compared to $190 million in the same period of 2021[67]. - The total change in deferred revenues for the nine months ended September 30, 2022, was $(246) million, compared to $(421) million in the same period of 2021[73]. - Total consolidated net revenues for the nine months ended September 30, 2022, were $6,640 million, compared to $6,867 million for the same period in 2021, reflecting a decrease of approximately 3.3%[83]. - The total segment net revenues for the nine months ended September 30, 2022, were $5,867 million, down from $6,200 million in the same period of 2021, indicating a decline of approximately 5.4%[83]. Business Risks and Challenges - Activision Blizzard's forward-looking statements are based on current expectations and projections, which may differ from actual results due to various risks and uncertainties[4]. - The company emphasizes the importance of regulatory approvals for the proposed transaction with Microsoft, which could impact business operations and stock price[4]. - Activision Blizzard acknowledges potential disruptions to its business from the ongoing COVID-19 pandemic and macroeconomic factors, including rising interest rates and supply chain issues[4]. - The company highlights the need to attract and retain skilled personnel amid competition and potential unionization efforts[4]. - Activision Blizzard's reliance on a small number of franchises for revenue concentration poses risks to its financial stability[4]. - The company is subject to various legal proceedings and regulatory scrutiny, which could affect its business operations and reputation[4]. - The company faces risks associated with conducting business outside the U.S., including regulatory compliance and cultural differences[4]. - Activision Blizzard's financial performance is influenced by consumer discretionary spending, which may fluctuate due to economic conditions[4]. - The company is currently under examination by the IRS for federal tax returns from 2012 to 2019, with several state and non-U.S. audits pending[112]. - The company anticipates resolving King's transfer pricing matters through a collaborative process with tax authorities, which may affect profit and loss allocations[112]. - The company is cooperating with an SEC investigation regarding disclosures on employment matters, including responding to subpoenas from the SEC[127]. - The company is involved in various legal proceedings, including a proposed consent decree with the EEOC that includes an $18 million settlement fund for eligible claimants[122]. - The company has faced multiple shareholder derivative actions related to allegations of fiduciary duty breaches and other claims, which are currently in various stages of litigation[126]. - The final resolution of the company's global tax disputes is uncertain, but management does not expect a material adverse effect on the company's consolidated financial position[114]. Mergers and Acquisitions - The company entered into a Merger Agreement with Microsoft for $95.00 per share, expected to close in Microsoft's fiscal year ending June 30, 2023[22]. - The company plans to continue its business operations in the ordinary course until the merger with Microsoft is completed[22]. - The company completed acquisitions of Proletariat Inc. and Peltarion AB for a total purchase price of $152 million, enhancing resources for the Warcraft franchise and AI capabilities[40]. Revenue Streams and Segments - Blizzard's key product offerings include popular franchises such as World of Warcraft and Candy Crush, contributing to its revenue generation through in-game sales and subscriptions[26][28]. - The company maintains a proprietary online gaming platform, Battle.net, facilitating digital distribution and user-generated content[26]. - Digital online channels generated $1,852 million in net revenues for the three months ended September 30, 2022, compared to $1,606 million in the same period of 2021, reflecting a 15% increase[72]. - The digital online channels contributed $4,668 million in net revenues for the nine months ended September 30, 2022, compared to $5,626 million in the same period of 2021, representing a decline of 17%[73]. - The Americas region contributed $999 million in net revenues, representing a 56% share of total revenues[78]. - The EMEA region generated $498 million in net revenues, showing a significant contribution to overall performance[78]. - The Asia Pacific region contributed $285 million in net revenues, indicating a stable market presence[78]. - Segment net revenues for Activision were $2.32 billion, while Blizzard and King reported $1.41 billion and $1.90 billion, respectively[76]. - The company is focusing on expanding its digital offerings and enhancing user engagement through new product developments and market strategies[76]. Upcoming Products and Market Strategies - Upcoming titles include Overwatch 2, Call of Duty: Modern Warfare II, and World of Warcraft: Dragonflight, with expected releases in Q4 2022[166]. - The company is in discussions regarding the renewal of licensing agreements for Blizzard titles in China, which contributed approximately 3% of consolidated net revenues in 2021[167]. Shareholder Returns and Stock Performance - The company declared a cash dividend of $0.47 per common share on February 3, 2022, resulting in an aggregate cash dividend payment of $367 million to shareholders on May 6, 2022[120]. - The company has a stock repurchase program authorized for up to $4 billion, but as of September 30, 2022, no shares had been repurchased under this program[118].