Activision Blizzard, Inc. (Nasdaq: ATVI) today announced third
quarter 2022 results.
Bobby Kotick, CEO of Activision Blizzard, shared, "Our games are
the result of passion and excellence. This comes from an
environment that fosters inspiration, creativity, and an unwavering
commitment to develop and support our talent. Our employees’
dedication and teamwork are at the heart of an extraordinary
workplace that enables the magic embodied in our games. We look
forward to continuing to release epic entertainment in service of
our global community of players as a part of Microsoft, one of the
world’s most admired companies. We continue to expect that our
transaction will close in Microsoft’s current fiscal year ending
June 2023."
Financial Metrics
Q3
(in millions, except EPS)
2022
2021
GAAP Net Revenues
$
1,782
$
2,070
Impact of GAAP deferralsA
$
47
$
(190
)
GAAP EPS
$
0.55
$
0.82
Non-GAAP EPS
$
0.68
$
0.89
Impact of GAAP deferralsA
—
$
(0.17
)
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 September 30, 2022, Activision Blizzard’s
net revenues presented in accordance with GAAP were $1.78 billion,
as compared with $2.07 billion for the third quarter of 2021. GAAP
net revenues from digital channels were $1.61 billion. GAAP
operating margin was 27%. GAAP earnings per diluted share was
$0.55, as compared with $0.82 for the third quarter of 2021. On a
non-GAAP basis, Activision Blizzard’s operating margin was 34% and
earnings per diluted share was $0.68, as compared with $0.89 for
the third quarter of 2021.
Activision Blizzard generated $257 million in operating cash
flow for the quarter as compared with $521 million for the third
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 September 30, 2022, Activision Blizzard’s
net bookingsB were $1.83 billion, as compared with $1.88 billion
for the third quarter of 2021. In-game net bookingsC were $1.36
billion, as compared with $1.20 billion for the third quarter of
2021.
For the quarter ended September 30, 2022, overall Activision
Blizzard Monthly Active Users (MAUs)D were 368 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. 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 and by Activision Blizzard’s
stockholders.
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 detailed quantitative financial guidance
in conjunction with its third quarter 2022 earnings release. For
further detail and discussion of our financial performance please
refer to our quarterly report on Form 10-Q for the quarter ended
September 30, 2022.
Selected Business Highlights
Successful content initiatives for key intellectual properties
have positioned the company for a return to strong growth. Our
expanded development teams are executing well as they deliver a
wide range of compelling content across our portfolio. Following
its October 28 launch, Call of Duty®: Modern WarfareTM II
has broken records as the fastest-selling title in the history of
the Call of Duty franchise. At Blizzard, the October 4
free-to-play launch of Overwatch® 2 has driven community
engagement to new highs. These results build on the recent strong
launch for Diablo® Immortal™ and a substantial content
rollout underway for World of Warcraft®. At King, the
Candy Crush™ franchise again delivered a record
performance.
While the company remains cognizant of risks including those
related to the labor market and economic conditions, we expect to
expand our global audience, deepen community engagement, and
deliver renewed growth in player investment in the fourth quarter
and beyond. The company expects fourth quarter GAAP revenue to be
5% lower year-over-year or better. Net bookings and total segment
operating income are each expected to grow at least 20%
year-over-year.
Third quarter net bookings declined 3% year-over-year on a
reported basis, and were slightly higher year-over-year on a
constant currency basisE. The company continued to deliver strong
results on the strategically important mobile platform, with mobile
net bookings growing over 20% year-over-year to approximately
$1.0B. Third quarter segment operating income increased versus the
second quarter for each of Activision, Blizzard and King.
Activision
- Since its October 28 launch, Call of Duty: Modern Warfare
II has set new records for our largest franchise, becoming the
fastest premium Call of Duty release to cross $1 billion in
sell-through. Sales have been robust across all platforms,
including on PC, where unit sell-through to date is approximately
twice the level of recent strong titles in the series. Modern
Warfare II has set new franchise engagement records for a
premium Call of Duty release, with hours played in the first
10 days more than 40% above the prior franchise record.
- On November 16, alongside the first season of in-game content
for Modern Warfare II, Activision will release Call of
Duty: Warzone™ 2.0. This all-new, free-to-play Call of
Duty experience encompasses a wide array of learnings gained
from the highly successful original Warzone. Tightly
integrated with the premium game, Warzone 2.0 extends the
Modern Warfare universe while bringing compelling new
sandbox experiences to the franchise from day one, with further
exciting content planned for the coming months.
- In the third quarter, Activision also unveiled Call of Duty:
Warzone MobileTM, planned for full release in 2023. Internally
developed on the same engine as Modern Warfare II and
Warzone 2.0, the game will offer our community compelling
battle royale gameplay on mobile as well as shared social features
and cross-progression with the console and PC experiences. Over 20
million people have already pre-registered for the game on Google
Play.
- Following a three-year period in which Call of Duty
reached well over half a billion players and delivered a step
change increase in engagement and player investment, these launches
mark the start of a new era intended to take the franchise to new
heights. Activision is looking forward to building on its current
momentum in 2023, with plans for next year including the most
robust Call of Duty live operations to date, the next full
premium release in the blockbuster annual series, and even more
engaging free-to-play experiences across platforms.
- Activision’s third quarter financial performance was lower
year-over-year, primarily reflecting reduced engagement for Call
of Duty following the weaker reception for last year's premium
release. In-game net bookings on console and PC again grew
sequentially in the third quarter versus the second quarter,
contributing to sequential growth in segment operating income.
Segment revenue and operating income are expected to return to
strong year-over-year growth in the fourth quarter following the
successful launch of Modern Warfare II.
Blizzard
- October 4 saw the global launch of Overwatch 2, with a
free-to-play model designed to allow more people than ever before
to experience the acclaimed team-based action game. Over 35 million
people played the game in its first month, including many who were
new to Overwatch. The expanded community is engaging deeply,
with average daily player numbers for the first month of
Overwatch 2 more than double that of its acclaimed
predecessor. Player investment is also off to a strong start,
positioning the title to be a meaningful contributor to Blizzard's
business in the fourth quarter. Blizzard is looking forward to
delivering an ambitious slate of regular seasonal updates for
Overwatch 2 that introduce new characters, maps and modes,
including the game’s much-anticipated PvE mode planned for
2023.
- In the Warcraft franchise, the September 26 release of
World of Warcraft: Wrath of the Lich King® Classic
contributed to a strong increase in WoW reach and engagement at the
end of the third quarter. On November 28, Blizzard will release
World of Warcraft: DragonflightTM, the innovative next
expansion for the modern game, as the team increases the cadence of
WoW content for the community. Elsewhere in the Warcraft
franchise, mobile title Warcraft: Arclight RumbleTM is
progressing well through regional testing.
- On mobile, Diablo Immortal expanded its global reach
with a strong launch in China in July. The title reached the top of
the download charts and has ranked in the top 10 grossing mobile
games in China since launch. Around the world, Diablo
Immortal is being supported with major new content, features,
and events aimed at keeping the community engaged. Meanwhile, work
on Diablo IV and its substantial ongoing post-launch content
continues to progress very well ahead of its launch planned for
2023.
- Blizzard’s third quarter segment revenue grew double-digits
year-over-year against a year ago quarter that included the release
of Diablo II: ResurrectedTM. The third quarter benefited
from the recent launch of Diablo Immortal, while
Warcraft franchise net bookings were stable year-over-year.
Segment operating margin was lower year-over-year, due to marketing
investment to support the strong release slate and the shift in the
mix of business in the quarter.
- Currently, we have licensing agreements with a third party
covering the publication of several Blizzard titles in China. These
agreements, which contributed approximately 3% of Activision
Blizzard's consolidated net revenues in 2021, expire in January
2023. We are in discussions regarding the renewal of these
agreements, but a mutually-satisfactory deal may not be reached. We
continue to see substantial long-term growth opportunities for our
business in the country. The co-development and publishing of
Diablo Immortal is covered by a separate long-term
agreement.
King
- King’s in-game net bookings increased 8% year-over-year, driven
by the Candy Crush franchise, reflecting ongoing strong
execution across live operations and user acquisition. King’s payer
numbers again increased by a double-digit percentage
year-over-year.
- King continues to introduce more player-versus-player features
within Candy Crush, fueling engagement and player
investment. Time spent within Candy grew year-over-year for a fifth
successive quarter, and Candy Crush was the top-grossing
game franchise in the U.S. app stores1 for the 21st quarter in a
row.
- King’s third quarter segment revenue grew 6% year-over-year,
equivalent to low double-digit growth on a constant currency
basisE. Advertising revenue was consistent year-over-year despite a
challenging macro environment. King’s third quarter operating
margin was lower year-over-year, due to the year ago quarter
benefiting from insurance claim proceeds.
- This November marks the 10-year anniversary of Candy Crush
SagaTM, the original and largest title in the Candy
Crush franchise. Candy Crush enters its second decade in
strong health, with over 200 million monthly active users and with
player investment at record levels. King’s development, commercial
and analytics teams are working on a strong pipeline of content and
initiatives expected to delight the community and drive further
growth in the coming years.
Balance Sheet
- Cash and short-term investments at the end of the second
quarter stood at $10.9 billion, and Activision Blizzard ended the
quarter with a net cashF position of approximately $7.3
billion.
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 games 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 sustained
success has enabled the company to support corporate social
responsibility initiatives that are directly tied to our games. As
an example, our Call of Duty Endowment has helped find employment
for over 100,000 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 data.ai 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.
E Year-over-year growth on a constant currency basis is
calculated by translating current quarter local currency amounts to
U.S. dollars based on prior period exchange rates. These amounts
are compared to the prior period to derive constant-currency
year-over-year performance. We present constant currency
information to provide a framework for assessing how our underlying
businesses performed excluding the effect of currency rate
fluctuations.
- Total net bookings declined by 3% year-over-year for the third
quarter of 2022. On a constant currency basis, total net bookings
increased 1% year-over-year for the third quarter of 2022 as
currency rate changes negatively impacted the quarter by 4%.
- Activision segment net revenues declined by 25% year-over-year,
Blizzard segment net revenues grew by 10%, and King segment net
revenues grew by 6% for the third quarter of 2022. On a constant
currency year-over-year basis, Activision segment net revenue
declined 22%, Blizzard segment net revenue grew 16%, and King
segment net revenue grew 11% for the third quarter of 2022, as
currency rate changes negatively impacted Activision segment net
revenue by 3%, Blizzard segment net revenue by 6%, and King segment
net revenue by 5%.
F Net cash is defined as cash and cash equivalents ($7.7B as of
September 30, 2022) and short-term investments ($3.2B as of
September 30, 2022) minus gross debt ($3.7B as of September 30,
2022).
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 currency
information to provide a framework for assessing how our underlying
businesses performed excluding the effect of 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: the 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 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 “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 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 and other macroeconomic factors
(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 dispersed;
effects on the operations of our professional esports leagues; the
impact of rising interest rates as a result of large-scale
intervention by the Federal Reserve and other central banks around
the world and other economic factors; 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 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 United
States (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; 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 Civil Rights Department
(formerly known as the 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 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 consumer discretionary spending; risks associated with
increased inflation on our costs and the impacts on consumer
discretionary spending; and the other factors included in Part I,
Item 1A “Risk Factors” 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.
(Tables to Follow)
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(Amounts in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net revenues
Product sales
$
231
$
423
$
921
$
1,666
In-game, subscription, and other
revenues
1,551
1,647
4,273
4,974
Total net revenues
1,782
2,070
5,194
6,640
Costs and expenses
Cost of revenues—product sales:
Product costs
107
120
279
375
Software royalties and amortization
9
72
153
272
Cost of revenues—in-game, subscription,
and other:
Game operations and distribution costs
343
307
948
925
Software royalties and amortization
43
28
86
87
Product development
277
329
935
1,016
Sales and marketing
287
244
801
727
General and administrative
229
143
693
614
Restructuring and related costs
2
3
(3
)
46
Total costs and expenses
1,297
1,246
3,892
4,062
Operating income
485
824
1,302
2,578
Interest and other (income) expense,
net
(15
)
65
16
52
Income before income tax expense
500
759
1,286
2,526
Income tax expense
65
120
176
391
Net income
$
435
$
639
$
1,110
$
2,135
Basic earnings per common share
$
0.56
$
0.82
$
1.42
$
2.75
Weighted average common shares
outstanding
782
778
781
777
Diluted earnings per common share
$
0.55
$
0.82
$
1.41
$
2.72
Weighted average common shares outstanding
assuming dilution
789
783
788
784
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(Amounts in millions)
September 30, 2022
December 31, 2021
Assets
Current assets
Cash and cash equivalents
$
7,743
$
10,423
Held-to-maturity investments
2,945
—
Accounts receivable, net
658
972
Software development
1,011
449
Other current assets
753
712
Total current assets
13,110
12,556
Software development
156
211
Property and equipment, net
171
169
Deferred income taxes, net
1,266
1,377
Other assets
541
497
Intangible assets, net
448
447
Goodwill
9,928
9,799
Total assets
$
25,620
$
25,056
Liabilities and Shareholders'
Equity
Current liabilities
Accounts payable
$
229
$
285
Deferred revenues
979
1,118
Accrued expenses and other liabilities
1,070
1,008
Total current liabilities
2,278
2,411
Long-term debt, net
3,610
3,608
Deferred income taxes, net
98
506
Other liabilities
826
932
Total liabilities
6,812
7,457
Shareholders' equity
Common stock
—
—
Additional paid-in capital
12,192
11,715
Treasury stock
(5,563
)
(5,563
)
Retained earnings
12,768
12,025
Accumulated other comprehensive loss
(589
)
(578
)
Total shareholders’ equity
18,808
17,599
Total liabilities and shareholders’
equity
$
25,620
$
25,056
ACTIVISION BLIZZARD, INC. AND
SUBSIDIARIES
SUPPLEMENTAL CASH FLOW INFORMATION
(Amounts in millions)
Three Months Ended
September 30,
December 31,
March 31,
June 30,
September 30,
Year over Year
2021
2021
2022
2022
2022
% Increase (Decrease)
Cash Flow Data
Operating Cash Flow
$
521
$
661
$
642
$
198
$
257
(51
)%
Capital Expenditures
23
21
15
37
15
(35
)
Non-GAAP Free Cash Flow1
$
498
$
640
$
627
$
161
$
242
(51
)
Operating Cash Flow - TTM2
$
2,893
$
2,414
$
2,212
$
2,022
$
1,758
(39
)
Capital Expenditures - TTM2
81
80
73
96
88
9
Non-GAAP Free Cash Flow1 - TTM2
$
2,812
$
2,334
$
2,139
$
1,926
$
1,670
(41
)%
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 December 31, 2020, three
months ended March 31, 2021, and three months ended June 30, 2021,
were $1,140 million, $844 million, and $388 million, respectively.
Capital Expenditures for the three months ended December 31, 2020,
three months ended March 31, 2021, and three months ended June 30,
2021, were $22 million, $22 million, and $14 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 September 30,
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
$
1,782
$
107
$
9
$
343
$
43
$
277
$
287
$
229
$
2
$
1,297
Share-based compensation1
—
—
—
(1
)
—
(38
)
(15
)
(48
)
—
(102
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(3
)
—
(6
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(2
)
(2
)
Merger and acquisition-related fees and
other expenses4
—
—
—
—
—
—
—
(10
)
—
(10
)
Non-GAAP Measurement
$
1,782
$
107
$
9
$
342
$
40
$
239
$
272
$
168
$
—
$
1,177
Net effect of deferred revenues and
related cost of revenues5
$
47
$
(3
)
$
(8
)
$
19
$
14
$
—
$
—
$
—
$
—
$
22
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
485
$
435
$
0.56
$
0.55
Share-based compensation1
102
102
0.13
0.13
Amortization of intangible assets2
6
6
0.01
0.01
Restructuring and related costs3
2
2
—
—
Merger and acquisition-related fees and
other expenses4
10
10
0.01
0.01
Income tax impacts from items above6
—
(16
)
(0.02
)
(0.02
)
Non-GAAP Measurement
$
605
$
539
$
0.69
$
0.68
Net effect of deferred revenues and
related cost of revenues5
$
25
$
—
$
—
$
—
1
Reflects expenses related to
share-based compensation, including $25 million for liability
awards accounted for under ASC 718.
2
Reflects amortization of
intangible assets from purchase price accounting.
3
Reflects restructuring
initiatives.
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)
Nine Months Ended September 30,
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
$
5,194
$
279
$
153
$
948
$
86
$
935
$
801
$
693
$
(3
)
$
3,892
Share-based compensation1
—
—
(7
)
(4
)
—
(139
)
(42
)
(109
)
—
(301
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(6
)
—
(9
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
3
3
Merger and acquisition-related fees and
other expenses4
—
—
—
—
—
—
—
(58
)
—
(58
)
Non-GAAP Measurement
$
5,194
$
279
$
146
$
944
$
83
$
796
$
759
$
520
$
—
$
3,527
Net effect of deferred revenues and
related cost of revenues5
$
(246
)
$
(26
)
$
(75
)
$
35
$
30
$
—
$
—
$
—
$
—
$
(36
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
1,302
$
1,110
$
1.42
$
1.41
Share-based compensation1
301
301
0.38
0.38
Amortization of intangible assets2
9
9
0.01
0.01
Restructuring and related costs3
(3
)
(3
)
—
—
Merger and acquisition-related fees and
other expenses4
58
58
0.08
0.08
Income tax impacts from items above6
—
(55
)
(0.07
)
(0.07
)
Non-GAAP Measurement
$
1,667
$
1,420
$
1.82
$
1.80
Net effect of deferred revenues and
related cost of revenues5
$
(210
)
$
(211
)
$
(0.27
)
$
(0.27
)
1
Reflects expenses related to
share-based compensation, including $54 million for liability
awards accounted for under ASC 718.
2
Reflects amortization of
intangible assets from purchase price accounting.
3
Reflects restructuring
initiatives.
4
Reflects fees and other expenses
related to our proposed transaction with 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 September 30,
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
$
2,070
$
120
$
72
$
307
$
28
$
329
$
244
$
143
$
3
$
1,246
Share-based compensation1
—
—
(3
)
(1
)
—
(32
)
(8
)
(20
)
—
(64
)
Amortization of intangible assets2
—
—
—
—
—
—
—
(2
)
—
(2
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(3
)
(3
)
Non-GAAP Measurement
$
2,070
$
120
$
69
$
306
$
28
$
297
$
236
$
121
$
—
$
1,177
Net effect of deferred revenues and
related cost of revenues4
$
(190
)
$
(4
)
$
(33
)
$
1
$
—
$
—
$
—
$
—
$
—
$
(36
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
824
$
639
$
0.82
$
0.82
Share-based compensation1
64
64
0.08
0.08
Amortization of intangible assets2
2
2
—
—
Restructuring and related costs3
3
3
—
—
Income tax impacts from items above5
—
(9
)
(0.01
)
(0.01
)
Non-GAAP Measurement
$
893
$
699
$
0.90
$
0.89
Net effect of deferred revenues and
related cost of revenues4
$
(154
)
$
(133
)
$
(0.17
)
$
(0.17
)
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
RECONCILIATION OF GAAP NET INCOME TO
NON-GAAP MEASURES
(Amounts in millions, except per share
data)
Nine Months Ended September 30,
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
$
6,640
$
375
$
272
$
925
$
87
$
1,016
$
727
$
614
$
46
$
4,062
Share-based compensation1
—
—
(14
)
(2
)
—
(66
)
(16
)
(161
)
—
(259
)
Amortization of intangible assets2
—
—
—
—
(3
)
—
—
(5
)
—
(8
)
Restructuring and related costs3
—
—
—
—
—
—
—
—
(46
)
(46
)
Non-GAAP Measurement
$
6,640
$
375
$
258
$
923
$
84
$
950
$
711
$
448
$
—
$
3,749
Net effect of deferred revenues and
related cost of revenues4
$
(773
)
$
(34
)
$
(177
)
$
—
$
—
$
—
$
—
$
—
$
—
$
(211
)
Operating Income
Net Income
Basic Earnings per
Share
Diluted Earnings per
Share
GAAP Measurement
$
2,578
$
2,135
$
2.75
$
2.72
Share-based compensation1
259
259
0.33
0.33
Amortization of intangible assets2
8
8
0.01
0.01
Restructuring and related costs3
46
46
0.06
0.06
Income tax impacts from items above5
—
(39
)
(0.05
)
(0.05
)
Non-GAAP Measurement
$
2,891
$
2,409
$
3.10
$
3.07
Net effect of deferred revenues and
related cost of revenues4
$
(562
)
$
(469
)
$
(0.60
)
$
(0.59
)
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
September 30, 2022
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
480
$
534
$
692
$
1,706
$
(161
)
$
56
$
40
$
(65
)
Intersegment net revenues1
—
9
—
9
—
(6
)
—
(6
)
Segment net revenues
$
480
$
543
$
692
$
1,715
$
(161
)
$
50
$
40
$
(71
)
Segment operating income
$
153
$
166
$
297
$
616
$
(91
)
$
(22
)
$
(6
)
$
(119
)
Operating Margin
35.9
%
September 30, 2021
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
641
$
478
$
652
$
1,771
Intersegment net revenues1
—
15
—
15
Segment net revenues
$
641
$
493
$
652
$
1,786
Segment operating income
$
244
$
188
$
303
$
735
Operating Margin
41.2
%
Nine Months Ended
September 30, 2022
$ Increase /
(Decrease)
Activision
Blizzard
King
Total
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
1,423
$
1,189
$
2,058
$
4,670
$
(898
)
$
(158
)
$
162
$
(894
)
Intersegment net revenues1
—
29
—
29
—
(33
)
—
(33
)
Segment net revenues
$
1,423
$
1,218
$
2,058
$
4,699
$
(898
)
$
(191
)
$
162
$
(927
)
Segment operating income
$
304
$
314
$
811
$
1,429
$
(745
)
$
(223
)
$
56
$
(912
)
Operating Margin
30.4
%
September 30, 2021
Activision
Blizzard
King
Total
Segment Net Revenues
Net revenues from external customers
$
2,321
$
1,347
$
1,896
$
5,564
Intersegment net revenues1
—
62
—
62
Segment net revenues
$
2,321
$
1,409
$
1,896
$
5,626
Segment operating income
$
1,049
$
537
$
755
$
2,341
Operating Margin
41.6
%
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 accounted 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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Reconciliation to consolidated net
revenues:
Segment net revenues
$
1,715
$
1,786
$
4,699
$
5,626
Revenues from non-reportable segments1
123
109
278
303
Net effect from recognition (deferral) of
deferred net revenues2
(47
)
190
246
773
Elimination of intersegment revenues3
(9
)
(15
)
(29
)
(62
)
Consolidated net revenues
$
1,782
$
2,070
$
5,194
$
6,640
Reconciliation to consolidated income
before income tax expense:
Segment operating income
$
616
$
735
$
1,429
$
2,341
Operating income (loss) from
non-reportable segments1
14
4
28
(12
)
Net effect from recognition (deferral) of
deferred net revenues and related cost of revenues2
(25
)
154
210
562
Share-based compensation expense4
(102
)
(64
)
(301
)
(259
)
Amortization of intangible assets
(6
)
(2
)
(9
)
(8
)
Restructuring and related costs5
(2
)
(3
)
3
(46
)
Merger and acquisition-related fees and
other expenses6
(10
)
—
(58
)
—
Consolidated operating income
485
824
1,302
2,578
Interest and other (income) expense,
net
(15
)
65
16
52
Consolidated income before income tax
expense (benefit)
$
500
$
759
$
1,286
$
2,526
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
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
1,606
90
%
$
1,852
89
%
$
(246
)
(13
) %
Retail channels
25
1
69
3
(44
)
(64
)
Other3
151
8
149
7
2
1
Total consolidated net revenues
$
1,782
100
%
$
2,070
100
%
$
(288
)
(14
)
Change in deferred revenues4
Digital online channels2
$
59
$
(164
)
Retail channels
(17
)
(27
)
Other3
5
1
Total changes in deferred revenues
$
47
$
(190
)
Nine Months Ended
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Distribution
Channel
Digital online channels2
$
4,668
90
%
$
5,883
89
%
$
(1,215
)
(21
) %
Retail channels
177
3
354
5
(177
)
(50
)
Other3
349
7
403
6
(54
)
(13
)
Total consolidated net revenues
$
5,194
100
%
$
6,640
100
%
$
(1,446
)
(22
)
Change in deferred revenues4
Digital online channels2
$
(117
)
$
(590
)
Retail channels
(135
)
(192
)
Other3
6
9
Total changes in deferred revenues
$
(246
)
$
(773
)
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
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
336
19
%
$
523
25
%
$
(187
)
(36
) %
PC
363
20
578
28
(215
)
(37
)
Mobile and ancillary2
932
52
820
40
112
14
Other3
151
8
149
7
2
1
Total consolidated net revenues
$
1,782
100
%
$
2,070
100
%
$
(288
)
(14
)
Change in deferred revenues4
Console
$
(49
)
$
(114
)
PC
29
(80
)
Mobile and ancillary2
62
3
Other3
5
1
Total changes in deferred revenues
$
47
$
(190
)
Nine Months Ended
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Platform
Console
$
1,195
23
%
$
2,061
31
%
$
(866
)
(42
) %
PC
1,080
21
1,827
28
(747
)
(41
)
Mobile and ancillary2
2,570
49
2,349
35
221
9
Other3
349
7
403
6
(54
)
(13
)
Total consolidated net revenues
$
5,194
100
%
$
6,640
100
%
$
(1,446
)
(22
)
Change in deferred revenues4
Console
$
(366
)
$
(530
)
PC
(28
)
(253
)
Mobile and ancillary2
142
1
Other3
6
9
Total changes in deferred revenues
$
(246
)
$
(773
)
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
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
999
56
%
$
1,166
56
%
$
(167
)
(14
) %
EMEA2
498
28
619
30
(121
)
(20
)
Asia Pacific
285
16
285
14
—
—
Total consolidated net revenues
$
1,782
100
%
$
2,070
100
%
$
(288
)
(14
)
Change in deferred revenues3
Americas
$
9
$
(136
)
EMEA2
6
(63
)
Asia Pacific
32
9
Total changes in deferred revenues
$
47
$
(190
)
Nine Months Ended
September 30, 2022
September 30, 2021
$ Increase (Decrease)
% Increase (Decrease)
Amount
% of Total1
Amount
% of Total1
Net Revenues by Geographic
Region
Americas
$
2,999
58
%
$
3,819
58
%
$
(820
)
(21
) %
EMEA2
1,493
29
2,045
31
(552
)
(27
)
Asia Pacific
702
14
776
12
(74
)
(10
)
Total consolidated net revenues
$
5,194
100
%
$
6,640
100
%
$
(1,446
)
(22
)
Change in deferred revenues3
Americas
$
(178
)
$
(475
)
EMEA2
(105
)
(260
)
Asia Pacific
37
(38
)
Total changes in deferred revenues
$
(246
)
$
(773
)
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
December 31,
2021
March 31, 2022
June 30, 2022
September 30,
2022
September 30,
2022
GAAP Net Income
$
564
$
395
$
280
$
435
$
1,674
Interest and other expense (income),
net
45
14
17
(15
)
61
Provision for income taxes
73
70
41
65
249
Depreciation and amortization
27
24
25
29
105
EBITDA
709
503
363
514
2,089
Share-based compensation expense1
249
98
100
102
549
Restructuring and related costs2
30
(2
)
(3
)
2
27
Merger and acquisition-related fees and
other expenses3
—
32
16
10
58
Adjusted EBITDA
$
988
$
631
$
476
$
628
$
2,723
Change in deferred net revenues and
related cost of revenues4
$
215
$
(235
)
$
(1
)
$
25
$
4
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 September
30,
Nine Months Ended September
30,
2022
2021
$ Increase (Decrease)
% Increase (Decrease)
2022
2021
$ Increase (Decrease)
% Increase (Decrease)
Net bookings1
$
1,829
$
1,880
$
(51
)
(3
) %
$
4,948
$
5,867
$
(919
)
(16
) %
In-game net bookings2
$
1,356
$
1,198
$
158
13
%
$
3,564
$
3,859
$
(295
)
(8
) %
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
September 30, 2021
December 31, 2021
March 31, 2022
June 30, 2022
September 30, 2022
Activision
119
107
100
94
97
Blizzard
26
24
22
27
31
King
245
240
250
240
240
Total MAUs
390
371
372
361
368
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/20221104005678/en/
Activision Blizzard, Inc. Investors and Analysts:
ir@activisionblizzard.com or Press: pr@activisionblizzard.com
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