AB(ATVI) - 2022 Q1 - Quarterly Report

Financial Performance - Total net revenues for Q1 2022 were $1,768 million, a decrease of 22.3$2,275 million in Q1 2021[11] - Product sales in Q1 2022 were $386 million, down 42.8$675 million in Q1 2021[11] - In-game, subscription, and other revenues were $1,382 million, a decline of 13.6$1,600 million in Q1 2021[11] - Operating income for Q1 2022 was $479 million, representing a 39.7$795 million in Q1 2021[11] - Net income for Q1 2022 was $395 million, down 36.3$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$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$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]