Activision Blizzard | SEC Filing

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atvi-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-15839

https://cdn.kscope.io/2e29e7da2b216eb29267f64bfd245f62-atvi-20210331_g1.jpg

ACTIVISION BLIZZARD, INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4803544

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

N/A

(Address of principal executive offices)

(Zip Code)

(310) 255-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.000001 per share

ATVI

The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Non-accelerated Filer

☐

Accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding at April 27, 2021 was 777,016,759.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

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	Cautionary Statement	3

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and March 31, 2020	5

	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and March 31, 2020	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and March 31, 2020	7

	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, 2021 and March 31, 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

Item 4.	Controls and Procedures	43

PART II.	OTHER INFORMATION	43

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43



Item 6.	Exhibits	43

EXHIBIT INDEX		44

SIGNATURE		45

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CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains, or incorporates by reference, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements consist of any statement other than a recitation of historical facts and include, but are not limited to: (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 and restructuring activities; (3) statements of future financial or operating performance, including the impact of tax items thereon; and (4) 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 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 ongoing global impact of a novel strain of coronavirus which emerged in December 2019 (“COVID-19”) (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 and distributors who sell our physical product to customers; effects on our ability to release our content in a timely manner; the impact of large-scale intervention by the Federal Reserve and other central banks around the world, including the impact on interest rates; 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; concentration of revenue among a small number of franchises; our ability to satisfy the expectations of consumers with respect to our brands, games, services, and/or business practices; our ability to attract, retain and motivate skilled personnel; rapid changes in technology and industry standards; competition, including from other forms of entertainment; increasing importance of revenues derived from digital distribution channels; risks associated with the retail sales business model; the continued growth in the scope and complexity of our business, including the diversion of management time and attention to issues relating to the operations of our newly acquired or started businesses and the potential impact of our expansion into new businesses on our existing businesses; substantial influence of third-party platform providers over our products and costs; risks associated with transitions to next-generation consoles; success and availability of video game consoles manufactured by third parties; risks associated with the free-to-play business model, including dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game; our ability to realize the expected financial and operational benefits of, and effectively implement and manage, our restructuring actions; our ability to quickly adjust our cost structure in response to sudden changes in demand; risks and costs associated with legal proceedings; intellectual property claims; changes in tax rates or exposure to additional tax liabilities, as well as the outcome of current or future tax disputes; our ability to sell products at assumed pricing levels; reliance on external developers for development of some of our software products; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; the seasonality in the sale of our products; counterparty risks relating to customers, licensees, licensors, and manufacturers, which have been magnified as a result of the COVID-19 pandemic; risks associated with our use of open source software; piracy and unauthorized copying of our products; insolvency or business failure of any of our partners, which has been magnified as a result of the COVID-19 pandemic; risks and uncertainties of conducting business outside the United States (the “U.S.”); increasing regulation of our business, products, and distribution in key territories; compliance with continually evolving laws and regulations concerning data privacy; reliance on servers and networks to operate our games and our proprietary online gaming service; potential data breaches and other cybersecurity risks; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

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. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. 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.

Activision Blizzard, Inc.’s names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of Activision Blizzard, Inc. All other product or service names are the property of their respective owners. All dollar amounts referred to in, or contemplated by, this Quarterly Report on Form 10-Q refer to U.S. dollars, unless otherwise explicitly stated to the contrary.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions, except share data)


	At March 31, 2021		At December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	9,281	$	8,647

Accounts receivable, net of allowances of $59 and $83, at March 31, 2021 and December 31, 2020, respectively	773		1,052

Software development	283		352

Other current assets	585		514
Total current assets	10,922		10,565


Software development	207		160

Property and equipment, net	192		209
Deferred income taxes, net	1,250		1,318
Other assets	643		641
Intangible assets, net	446		451

Goodwill	9,765		9,765
Total assets	$	23,425	$	23,109

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	225	$	295
Deferred revenues	1,459		1,689
Accrued expenses and other liabilities	1,497		1,116

Total current liabilities	3,181		3,100
Long-term debt, net	3,606		3,605
Deferred income taxes, net	365		418
Other liabilities	942		949
Total liabilities	8,094		8,072
Commitments and contingencies (Note 16)
Shareholders’ equity:
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,205,570,562 and 1,202,906,087 shares issued at March 31, 2021 and December 31, 2020, respectively	—		—
Additional paid-in capital	11,549		11,531
Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2021 and December 31, 2020	(5,563)		(5,563)
Retained earnings	9,945		9,691
Accumulated other comprehensive loss	(600)		(622)
Total shareholders’ equity	15,331		15,037
Total liabilities and shareholders’ equity	$	23,425	$	23,109

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)


	For the Three Months Ended March 31,
		2021		2020
Net revenues
Product sales		$	675	$	543
In-game, subscription, and other revenues		1,600		1,245
Total net revenues		2,275		1,788

Costs and expenses
Cost of revenues—product sales:
Product costs		140		119
Software royalties, amortization, and intellectual property licenses		112		82
Cost of revenues—in-game, subscription, and other:
Game operations and distribution costs		296		258
Software royalties, amortization, and intellectual property licenses		30		46
Product development		353		238
Sales and marketing		237		243
General and administrative		282		167
Restructuring and related costs		30		23
Total costs and expenses		1,480		1,176

Operating income		795		612

Interest and other expense (income), net (Note 12)		30		8

Income before income tax expense		765		604

Income tax expense		146		99

Net income		$	619	$	505

Earnings per common share
Basic		$	0.80	$	0.66
Diluted		$	0.79	$	0.65

Weighted-average number of shares outstanding
Basic		775		769
Diluted		783		774

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Amounts in millions)


	For the Three Months Ended March 31,
		2021		2020
Net income		$	619	$	505

Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax		(5)		(14)
Unrealized gains (losses) on forward contracts designated as hedges, net of tax		29		1
Unrealized gains (losses) on investments, net of tax		(2)		4

Total other comprehensive income (loss)		$	22	$	(9)
Comprehensive income		$	641	$	496

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in millions)


	For the Three Months Ended March 31,
	2021		2020
Cash flows from operating activities:
Net income	$	619	$	505
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	3		11

Depreciation and amortization	33		62
Non-cash operating lease cost	16		16
Amortization of capitalized software development costs and intellectual property licenses (1)	106		77



Share-based compensation expense (2)	151		43

Other	(11)		(10)
Changes in operating assets and liabilities:
Accounts receivable, net	276		249

Software development and intellectual property licenses	(84)		(85)
Other assets	(2)		(1)
Deferred revenues	(204)		(334)
Accounts payable	(70)		(132)
Accrued expenses and other liabilities	11		(253)
Net cash provided by operating activities	844		148

Cash flows from investing activities:
Proceeds from maturities of available-for-sale investments	16		—
Purchases of available-for-sale investments	(80)		(9)


Capital expenditures	(22)		(19)

Net cash used in investing activities	(86)		(28)

Cash flows from financing activities:
Proceeds from issuance of common stock to employees	29		26
Tax payment related to net share settlements on restricted stock units	(124)		(19)








Net cash provided by (used in) financing activities	(95)		7
Effect of foreign exchange rate changes on cash and cash equivalents	(28)		(15)
Net increase in cash and cash equivalents and restricted cash	635		112
Cash and cash equivalents and restricted cash at beginning of period	8,652		5,798
Cash and cash equivalents and restricted cash at end of period	$	9,287	$	5,910

Supplemental cash flow information - Non-cash financing activities:
Dividends payable	$	365	$	316

(1) Excludes deferral and amortization of share-based compensation expense.

(2) Includes the net effects of capitalization, deferral, and amortization of share-based compensation expense.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Three Months Ended March 31, 2021 and March 31, 2020

(Unaudited)

(Amounts and shares in millions, except per share data)


	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	1,203	$	—	(429)	$	(5,563)	$	11,531	$	9,691	$	(622)	$	15,037

Components of comprehensive income:
Net income	—	—		—	—		—		619		—		619
Other comprehensive loss	—	—		—	—		—		—		22		22
Issuance of common stock pursuant to employee stock options	1	—		—	—		33		—		—		33
Issuance of common stock pursuant to restricted stock units	4	—		—	—		—		—		—		—
Restricted stock surrendered for employees’ tax liability	(2)	—		—	—		(165)		—		—		(165)
Share-based compensation expense related to employee stock options and restricted stock units	—	—		—	—		150		—		—		150
Dividends ($0.47 per common share)	—	—		—	—		—		(365)		—		(365)
Balance at March 31, 2021	1,206	$	—	(429)	$	(5,563)	$	11,549	$	9,945	$	(600)	$	15,331


	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2019	1,197	$	—	(429)	$	(5,563)	$	11,174	$	7,813	$	(619)	$	12,805
Cumulative impact from adoption of new credit loss standard	—	—		—	—		—		(3)		—		(3)
Components of comprehensive income:
Net income	—	—		—	—		—		505		—		505
Other comprehensive loss	—	—		—	—		—		—		(9)		(9)
Issuance of common stock pursuant to employee stock options	1	—		—	—		27		—		—		27
Issuance of common stock pursuant to restricted stock units	1	—		—	—		—		—		—		—
Restricted stock surrendered for employees’ tax liability	—	—		—	—		(31)		—		—		(31)
Share-based compensation expense related to employee stock options and restricted stock units	—	—		—	—		43		—		—		43
Dividends ($0.41 per common share)	—	—		—	—		—		(316)		—		(316)
Balance at March 31, 2020	1,199	$	—	(429)	$	(5,563)	$	11,213	$	7,999	$	(628)	$	13,021

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business and Basis of Consolidation and Presentation

Activision Blizzard, Inc. is a leading global developer and publisher of interactive entertainment content and services. We develop and distribute content and services on video game consoles, personal computers (“PC”s), and mobile devices. We also operate esports leagues and offer digital advertising within some of our content. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries.

Our Segments

Based upon our organizational structure, we conduct our business through three reportable segments, each of which is a leading global developer and publisher of interactive entertainment content and services based primarily on our internally developed intellectual properties.

(i) Activision Publishing, Inc.

Activision Publishing, Inc. (“Activision”) delivers content through both premium and free-to-play offerings and primarily generates revenue from full-game and in-game sales, as well as by licensing software to third-party or related-party companies that distribute Activision products. Activision’s key product franchise is Call of Duty®, a first-person action franchise. Activision also includes the activities of the Call of Duty League™, a global professional esports league with city-based teams.

(ii) Blizzard Entertainment, Inc.

Blizzard Entertainment, Inc. (“Blizzard”) delivers content through both premium and free-to-play offerings and primarily generates revenue from full-game and in-game sales, subscriptions, and by licensing software to third-party or related-party companies that distribute Blizzard products. Blizzard also maintains a proprietary online gaming service, Blizzard Battle.net®, which facilitates digital distribution of Blizzard content and selected Activision content, online social connectivity, and the creation of user-generated content. Blizzard’s key product franchises include: World of Warcraft®, a subscription-based massive multi-player online role-playing franchise; Hearthstone®, an online collectible card franchise based in the Warcraft universe; Diablo®, an action role-playing franchise; and Overwatch®, a team-based first-person action franchise. Blizzard also includes the activities of the Overwatch League™, a global professional esports league with city-based teams.

(iii) King Digital Entertainment

King Digital Entertainment (“King”) delivers content primarily through free-to-play offerings and primarily generates revenue from in-game sales and in-game advertising on the mobile platform. King’s key product franchise is Candy Crush™, a “match three” franchise.

Other

We also engage in other businesses that do not represent reportable segments, including the Activision Blizzard Distribution (“Distribution”) business, which consists of operations in Europe that provide warehousing, logistics, and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

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Basis of Consolidation and Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. Accordingly, certain notes or other information that are normally required by U.S. GAAP have been condensed or omitted if they substantially duplicate the disclosures contained in our annual audited consolidated financial statements. Additionally, the year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. Accordingly, the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Generally, making these estimates and developing our assumptions requires consideration of forecasted information, which, in context of the COVID-19 pandemic, involves additional uncertainty. While there was no material impact to our estimates in the current period, in future periods, facts and circumstances could change and impact our estimates. Additionally, actual results could differ from these estimates and assumptions. In the opinion of management, all adjustments considered necessary for the fair statement of our financial position and results of operations in accordance with U.S. GAAP (consisting of normal recurring adjustments) have been included in the accompanying unaudited condensed consolidated financial statements.

The accompanying condensed consolidated financial statements include the accounts and operations of the Company. All intercompany accounts and transactions have been eliminated.

Certain reclassifications have been made to prior-year amounts to conform to the current period presentation.

2. Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance which is intended to simplify various aspects to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 for recognizing deferred taxes for investments, performing an intraperiod allocation, and calculating income taxes in interim periods. The amendment also clarifies and amends certain areas of existing guidance to reduce complexity and improve consistency in the application of Topic 740. Generally the guidance must be applied prospectively upon adoption, with the exception of certain topics which are required to be applied on a retrospective or modified retrospective basis. On January 1, 2021, we adopted this new accounting standard and applied the topics in the manner required by the standard. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

3. Software Development and Intellectual Property Licenses

Our total capitalized software development costs of $490 million and $512 million, as of March 31, 2021 and December 31, 2021, respectively, primarily relates to internal development costs. As of both March 31, 2021 and December 31, 2020, capitalized intellectual property licenses were not material.

Amortization of capitalized software development costs and intellectual property licenses was as follows (amounts in millions):


	For the Three Months Ended March 31,
		2021		2020
Amortization of capitalized software development costs and intellectual property licenses		$	112	$	83

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4. Intangible Assets, Net

Intangible assets, net, consist of the following (amounts in millions):


	At March 31, 2021
	Estimated useful lives			Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,154)	$	—


Trade names and other	1	-	10 years	73		(60)		13
Total definite-lived intangible assets (1)				$	1,227	$	(1,214)	$	13

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite							386
Acquired trade names	Indefinite							47
Total indefinite-lived intangible assets								$	433
Total intangible assets, net								$	446

(1) At March 31, 2021, the balances of the developed software intangible assets have been removed as such amounts were fully amortized in the prior year.


	At December 31, 2020
	Estimated useful lives			Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,151)	$	3
Developed software	2	-	5 years	601		(601)		—

Trade names and other	1	-	10 years	73		(58)		15
Total definite-lived intangible assets				$	1,828	$	(1,810)	$	18

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite							386
Acquired trade names	Indefinite							47
Total indefinite-lived intangible assets								$	433
Total intangible assets, net								$	451

Amortization expense of our intangible assets was $5 million and $33 million for the three months ended March 31, 2021 and March 31, 2020, respectively.

5. Goodwill

The carrying amount of goodwill by reportable segment at both March 31, 2021 and December 31, 2020 was as follows (amounts in millions):


	Activision		Blizzard		King		Total




Goodwill	$	6,899	$	190	$	2,676	$	9,765

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6. Fair Value Measurements

The FASB literature regarding fair value measurements for certain assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

•Level 1—Quoted prices in active markets for identical assets or liabilities;

•Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data; and

•Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Fair Value Measurements on a Recurring Basis

The table below segregates all of our financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions):


			Fair Value Measurements at March 31, 2021 Using
	As of March 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,968	$	8,968	$	—	$	—	Cash and cash equivalents
Foreign government treasury bills	25		25		—		—		Cash and cash equivalents
U.S. treasuries and government agency securities	227		227		—		—		Other current assets
Foreign currency forward contracts designated as hedges	12		—		12		—		Other current assets and Other assets

Total	$	9,232	$	9,220	$	12	$	—

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(1)	$	—	$	(1)	$	—	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	(7)		—		(7)		—		Accrued expenses and other liabilities
Total	$	(8)	$	—	$	(8)	$	—

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			Fair Value Measurements at December 31, 2020 Using
	As of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,345	$	8,345	$	—	$	—	Cash and cash equivalents
Foreign government treasury bills	34		34		—		—		Cash and cash equivalents
U.S. treasuries and government agency securities	164		164		—		—		Other current assets


Total	$	8,543	$	8,543	$	—	$	—

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(2)	$	—	$	(2)	$	—	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	(24)		—		(24)		—		Accrued expenses and other liabilities
Total	$	(26)	$	—	$	(26)	$	—

Foreign Currency Forward Contracts

Foreign Currency Forward Contracts Designated as Hedges (“Cash Flow Hedges”)

The total gross notional amounts and fair values of our Cash Flow Hedges, all of which have remaining maturities of 19 months or less as of March 31, 2021, are as follows (amounts in millions):


	As of March 31, 2021				As of December 31, 2020
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:
Buy USD, Sell Euro	$	850	$	5	$	542	$	(24)

For the three months ended March 31, 2021 and 2020, pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of “Accumulated other comprehensive income (loss)” and into earnings were not material.

Foreign Currency Forward Contracts Not Designated as Hedges

The gross notional amounts and fair values of our foreign currency forward contracts not designated as hedges are as follows (amounts in millions):


	As of March 31, 2021				As of December 31, 2020
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:




Buy USD, Sell GBP	$	148	$	(1)	$	116	$	(2)

For the three months ended March 31, 2021 and 2020, pre-tax net gains (losses) associated with these forward contracts were recorded in “General and administrative expenses” and were not material.

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7. Deferred revenues

We record deferred revenues when cash payments are received or due in advance of the fulfillment of our associated performance obligations. The aggregate of the current and non-current balances of deferred revenues as of March 31, 2021 and December 31, 2020, were $1.5 billion and $1.7 billion, respectively. For the three months ended March 31, 2021, the additions to our deferred revenues balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenues balance were primarily due to the recognition of revenues upon fulfillment of our performance obligations, all of which were in the ordinary course of business. During the three months ended March 31, 2021, $1.1 billion of revenues were recognized that were included in the deferred revenues balance at December 31, 2020. During the three months ended March 31, 2020, $0.8 billion of revenues were recognized that were included in the deferred revenues balance at December 31, 2019.

As of March 31, 2021, the aggregate amount of contracted revenues allocated to our unsatisfied performance obligations was $2.2 billion, which included our deferred revenues balances and amounts to be invoiced and recognized as revenue in future periods. We expect to recognize approximately $1.7 billion over the next 12 months, $0.4 billion in the subsequent 12-month period, and the remainder thereafter. This balance did not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum guarantee or any estimated amounts of variable consideration that are subject to constraint in accordance with the revenue standard.

8. Debt

Credit Facilities

As of March 31, 2021 and December 31, 2020, we had $1.5 billion available under a revolving credit facility (the “Revolver”) pursuant to a credit agreement entered into on October 11, 2013 (as amended thereafter and from time to time, the “Credit Agreement”). To date, we have not drawn on the Revolver and we were in compliance with the terms of the Credit Agreement as of March 31, 2021.

Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, 2020 for further details regarding the Credit Agreement and its key terms.

Unsecured Senior Notes

As of March 31, 2021 and December 31, 2020, we had $3.7 billion of gross unsecured senior notes outstanding. A summary of our outstanding unsecured senior notes is as follows (amounts in millions):


				At March 31, 2021			At December 31, 2020
Unsecured Senior Notes	Interest Rate	Semi-Annual Interest Payments Due On	Maturity	Principal		Fair Value (Level 2)	Principal		Fair Value (Level 2)
2026 Notes	3.40%	Mar. 15 & Sept. 15	Sept. 2026	850		930	850		970
2027 Notes	3.40%	Jun. 15 & Dec. 15	Jun. 2027	400		438	400		454
2030 Notes	1.35%	Mar. 15 & Sept. 15	Sept. 2030	500		450	500		490
2047 Notes	4.50%	Jun. 15 & Dec. 15	Jun. 2047	400		469	400		525
2050 Notes	2.50%	Mar. 15 & Sept. 15	Sept. 2050	1,500		1,258	1,500		1,462
Total gross long-term debt				$	3,650		$	3,650
Unamortized discount and deferred financing costs				(44)			(45)
Total net carrying amount				$	3,606		$	3,605

We were in compliance with the terms of the notes outstanding as of March 31, 2021. As of March 31, 2021, we have no contractual principal repayments of our long-term debt due within the next five years.

Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, 2020 for further details regarding key terms under our indentures that govern our outstanding notes.

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9. Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) were as follows (amounts in millions):


	For the Three Months Ended March 31, 2021
	Foreign currency translation adjustments		Unrealized gain (loss) on forward contracts		Unrealized gain (loss) on available-for-sale securities		Total
Balance at December 31, 2020	$	(589)	$	(28)	$	(5)	$	(622)
Other comprehensive income (loss) before reclassifications	(5)		20		(3)		12
Amounts reclassified from accumulated other comprehensive income (loss) into earnings	—		9		1		10
Balance at March 31, 2021	$	(594)	$	1	$	(7)	$	(600)


	For the Three Months Ended March 31, 2020
	Foreign currency translation adjustments		Unrealized gain (loss) on forward contracts		Unrealized gain (loss) on available-for-sale securities		Total
Balance at December 31, 2019	$	(624)	$	8	$	(3)	$	(619)
Other comprehensive income (loss) before reclassifications	(12)		10		4		2
Amounts reclassified from accumulated other comprehensive income (loss) into earnings	(2)