AB(ATVI) - 2022 Q2 - Quarterly Report

Financial Performance - Total net revenues for the three months ended June 30, 2022, were $1,644 million, a decrease of 28.5$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$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$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$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$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$675 million, compared to $916 million in the same period of 2021, reflecting a decrease of about 26.4$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$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$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$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].