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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, 2022
 
OR
    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/a22e3e7de581edd2731992858daf3358-atvi-20220331_g1.jpg
ACTIVISION BLIZZARD, INC.
(Exact name of registrant as specified in its charter)
Delaware95-4803544
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2701 Olympic Boulevard Building BSanta Monica,CA90404
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.000001 per shareATVIThe 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 FilerNon-accelerated FilerAccelerated 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 26, 2022 was 781,881,472.


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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
 
Table of Contents

 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
   
   
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CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains, or incorporates by reference, statements reflecting our views about our future performance that constitute 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; (4) statements regarding the proposed transaction between Activision Blizzard, Inc. and Microsoft Corporation (“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 (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 disbursed; effects on the operations of our professional esports leagues; the impact of large-scale intervention by the Federal Reserve and other central banks around the world, including the impact on interest rates; 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; our ability to realize the expected benefits of our recent restructuring actions; 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 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 recently passed 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; and the other factors included in “Risk Factors” included in Part I, Item 1A 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 “SEC”).

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 in this Quarterly Report on Form 10-Q 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.

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, 2022At December 31, 2021
Assets
Current assets:
Cash and cash equivalents$10,967 $10,423 
Accounts receivable, net of allowances of $31 and $36, at March 31, 2022 and December 31, 2021, respectively
530 972 
Software development433 449 
Other current assets556 712 
Total current assets12,486 12,556 
Software development289 211 
Property and equipment, net174 169 
Deferred income taxes, net1,308 1,377 
Other assets511 497 
Intangible assets, net445 447 
Goodwill9,799 9,799 
Total assets$25,012 $25,056 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$207 $285 
Deferred revenues835 1,118 
Accrued expenses and other liabilities1,249 1,008 
Total current liabilities2,291 2,411 
Long-term debt, net3,608 3,608 
Deferred income taxes, net375 506 
Other liabilities907 932 
Total liabilities7,181 7,457 
Commitments and contingencies (Note 16)
Shareholders’ equity:  
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,210,312,481 and 1,207,729,623 shares issued at March 31, 2022 and December 31, 2021, respectively
  
Additional paid-in capital11,927 11,715 
Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2022 and December 31, 2021
(5,563)(5,563)
Retained earnings12,053 12,025 
Accumulated other comprehensive loss(586)(578)
Total shareholders’ equity17,831 17,599 
Total liabilities and shareholders’ equity$25,012 $25,056 

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,
 20222021
Net revenues
Product sales$386 $675 
In-game, subscription, and other revenues1,382 1,600 
Total net revenues 1,768 2,275 
Costs and expenses
Cost of revenues—product sales:
Product costs91 140 
Software royalties, amortization, and intellectual property licenses81 112 
Cost of revenues—in-game, subscription, and other:
Game operations and distribution costs288 296 
Software royalties, amortization, and intellectual property licenses19 30 
Product development346 353 
Sales and marketing252 237 
General and administrative214 282 
Restructuring and related costs(2)30 
Total costs and expenses1,289 1,480 
Operating income479 795 
Interest and other expense (income), net (Note 12)
14 30 
Income before income tax expense465 765 
Income tax expense70 146 
Net income$395 $619 
Earnings per common share
Basic$0.51 $0.80 
Diluted$0.50 $0.79 
Weighted-average number of shares outstanding
Basic780 775 
Diluted786 783 

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,
 20222021
Net income$395 $619 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax(4)(5)
Unrealized gains (losses) on forward contracts designated as hedges, net of tax
(5)29 
Unrealized gains (losses) on available-for-sale securities, net of tax1 (2)
Total other comprehensive income (loss)$(8)$22 
Comprehensive income$387 $641 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
 For the Three Months Ended March 31,
 20222021
Cash flows from operating activities:
Net income$395 $619 
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes(64)3 
Non-cash operating lease cost18 16 
Depreciation and amortization24 33 
Amortization of capitalized software development costs and intellectual property licenses (1)75 106 
Share-based compensation expense (2)98 151 
Realized and unrealized gain on equity investment (11) 
Other(11)(11)
Changes in operating assets and liabilities:
Accounts receivable, net440 276 
Software development and intellectual property licenses(104)(84)
Other assets125 (2)
Deferred revenues(278)(204)
Accounts payable(76)(70)
Accrued expenses and other liabilities11 11 
Net cash provided by operating activities642 844 
Cash flows from investing activities:
Proceeds from maturities of available-for-sale investments22 16 
Purchases of available-for-sale investments (80)
Capital expenditures(15)(22)
Net cash provided by (used in) investing activities7 (86)
Cash flows from financing activities:
Proceeds from issuance of common stock to employees16 29 
Tax payment related to net share settlements on restricted stock units(113)(124)
Net cash used in financing activities(97)(95)
Effect of foreign exchange rate changes on cash and cash equivalents(10)(28)
Net increase in cash and cash equivalents and restricted cash542 635 
Cash and cash equivalents and restricted cash at beginning of period10,438 8,652 
Cash and cash equivalents and restricted cash at end of period$10,980 $9,287 
Supplemental cash flow information - Non-cash financing activities:
Dividends payable$367 $365 

(1)Excludes deferral and amortization of share-based compensation expense, including liability awards accounted for under ASC 718.
(2)Includes the net effects of capitalization, deferral, and amortization of share-based compensation expense, including liability awards accounted for under ASC 718.

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, 2022 and March 31, 2021
(Unaudited)
(Amounts and shares in millions, except per share data)
 Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
 SharesAmountSharesAmount
Balance at December 31, 20211,208 $ (429)$(5,563)$11,715 $12,025 $(578)$17,599 
Components of comprehensive income:
Net income— — — — — 395 — 395 
Other comprehensive income (loss)— — — — — — (8)(8)
Issuance of common stock pursuant to employee stock options — — — 15 — — 15 
Issuance of common stock pursuant to restricted stock units4 — — — — — —  
Restricted stock surrendered for employees’ tax liability(2)— — — (131)— — (131)
Settlement of liability-classified awards in restricted stock units (Note 10)
— — — — 204 — — 204 
Share-based compensation expense related to employee stock options and restricted stock units— — — — 124 — — 124 
Dividends ($0.47 per common share)
— — — — — (367)— (367)
Balance at March 31, 20221,210 $ (429)$(5,563)$11,927 $12,053 $(586)$17,831 

 Common StockTreasury StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
 SharesAmountSharesAmount
Balance at December 31, 20201,203 $ (429)$(5,563)$11,531 $9,691 $(622)$15,037 
Components of comprehensive income:
Net income— — — — — 619 — 619 
Other comprehensive income (loss)— — — — — — 22 22 
Issuance of common stock pursuant to employee stock options1 — — — 33 — — 33 
Issuance of common stock pursuant to restricted stock units4 — — — — — —  
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, 20211,206 $ (429)$(5,563)$11,549 $9,945 $(600)$15,331 
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 (“PCs”), 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.

Merger Agreement

On January 18, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Microsoft Corporation (“Microsoft”) and Anchorage Merger Sub Inc. (“Merger Sub”), a wholly owned subsidiary of Microsoft. Subject to the terms and conditions of the Merger Agreement, Microsoft agreed to acquire the Company for $95.00 per issued and outstanding share of our common stock, par value $0.000001 per share, in an all-cash transaction. Pursuant to the Merger Agreement, following consummation of the merger of Merger Sub with and into the Company (the “Merger”), the Company will be a wholly-owned subsidiary of Microsoft. As a result of the Merger, we will cease to be a publicly traded company. We have agreed to various customary covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger (the “Effective Time”). We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs or capital expenditure requirements. The consummation of the Merger remains subject to customary closing conditions, including satisfaction of certain regulatory approvals. On April 28, 2022, the Company’s stockholders adopted the Merger Agreement at a special meeting of stockholders. The Merger is currently expected to close in Microsoft’s fiscal year ending June 30, 2023.

For additional information related to the Merger Agreement, please refer to the Definitive Proxy Statement on Schedule 14A filed with the SEC on March 21, 2022, as supplemented by the Current Report on Form 8-K filed with the SEC on April 15, 2022, as well as Part I Item 1 “Business” of our Annual Report on Form 10-K for the year ended December 31, 2021, and other relevant materials in connection with the proposed transaction with Microsoft that we will file with the SEC and that will contain important information about the Company and the Merger.

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 platform, 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: Warcraft®, which includes World of Warcraft®, a subscription-based massive multi-player online role-playing game, and Hearthstone®, an online collectible card game 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.

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(iii) King Digital Entertainment

King Digital Entertainment (“King”) delivers content through free-to-play offerings and primarily generates revenue from in-game sales and in-game advertising on mobile platforms. 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.

Basis of Consolidation and Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC 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, 2021.

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. 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. Actual results could differ from these estimates and assumptions.

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

2. Software Development and Intellectual Property Licenses

Our total capitalized software development costs of $722 million and $660 million as of March 31, 2022 and December 31, 2021, respectively, primarily relate to internal development costs. As of both March 31, 2022 and December 31, 2021, 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,
 20222021
Amortization of capitalized software development costs and intellectual property licenses$79 $112 

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3. Intangible Assets, Net

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

 At March 31, 2022
 Estimated
useful
lives
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Acquired definite-lived intangible assets (1):
Trade names and other1-10 years$80 $(68)$12 
Acquired indefinite-lived intangible assets: 
Activision trademarkIndefinite$386 
Acquired trade namesIndefinite47 
Total indefinite-lived intangible assets$433 
Total intangible assets, net$445 

(1) Beginning with the first quarter of 2022, the balances of the internally-developed franchises intangible assets have been removed as such amounts were fully amortized in the prior year.

 At December 31, 2021
 Estimated
useful
lives
Gross
carrying
amount
Accumulated
amortization
Net carrying
amount
Acquired definite-lived intangible assets:
Internally-developed franchises3-11 years$1,154 $(1,154)$ 
Trade names and other1-10 years80 (66)14 
Total definite-lived intangible assets $1,234 $(1,220)$14 
Acquired indefinite-lived intangible assets: 
Activision trademarkIndefinite$386 
Acquired trade namesIndefinite47 
Total indefinite-lived intangible assets$433 
Total intangible assets, net$447 

4. Goodwill

The carrying amount of goodwill by reportable segment at both March 31, 2022 and December 31, 2021, was as follows (amounts in millions):

 ActivisionBlizzardKingTotal
Goodwill$6,933 $190 $2,676 $9,799 

5. 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;

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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, 2022 Using
 As of March 31, 2022Quoted 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$10,583 $10,583 $ $ Cash and cash equivalents
Foreign government treasury bills46 46   Cash and cash equivalents
U.S. treasuries and government agency securities107 107   Other current assets
Equity securities61 61   Other current assets
Foreign currency forward contracts designated as hedges21  21  Other current assets
Total$10,818 $10,797 $21 $  

 Fair Value Measurements at December 31, 2021 Using 
 As of December 31, 2021Quoted 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$10,035 $10,035 $ $ Cash and cash equivalents
Foreign government treasury bills34 34   Cash and cash equivalents
U.S. treasuries and government agency securities130 130   Other current assets
Equity securities50 50   Other current assets
Foreign currency forward contracts designated as hedges20  20  Other current assets
Total$10,269 $10,249 $20 $ 

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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 primarily had remaining maturities of 12 months or less as of March 31, 2022, are as follows (amounts in millions):

As of March 31, 2022As of December 31, 2021
Notional amountFair value gain (loss)Notional amountFair value gain (loss)
Foreign Currency:
Buy USD, Sell EUR$441 $21 $382 $20 

For the three months ended March 31, 2022 and 2021, 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.

6. 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, 2022 and December 31, 2021, were $0.8 billion and $1.1 billion, respectively. For the three months ended March 31, 2022, 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, 2022 and March 31, 2021, $0.7 billion and $1.1 billion, respectively, of revenues were recognized that were included in the deferred revenues balance at beginning of the period.

As of March 31, 2022, the aggregate amount of contracted revenues allocated to our unsatisfied performance obligations was $1.2 billion, which included our deferred revenues balances and amounts to be invoiced and recognized as revenue in future periods. We expect to recognize approximately $1.1 billion over the next 12 months, approximately $0.1 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 accounting standard.

7. Debt

Credit Facilities

As of March 31, 2022 and December 31, 2021, 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, 2022.

Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, 2021 for further details regarding the Credit Agreement and its key terms.

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Unsecured Senior Notes

As of March 31, 2022 and December 31, 2021, 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, 2022At December 31, 2021
Unsecured Senior NotesInterest RateSemi-Annual Interest Payments Due OnMaturityPrincipalFair Value
(Level 2)
PrincipalFair Value
(Level 2)
2026 Notes3.40%Mar. 15 & Sept. 15Sept. 2026$850 $866 $850 $912 
2027 Notes3.40%Jun. 15 & Dec. 15Jun. 2027400 406 400 430 
2030 Notes1.35%Mar. 15 & Sept. 15Sept. 2030500 435 500 463 
2047 Notes4.50%Jun. 15 & Dec. 15Jun. 2047400 455 400 480 
2050 Notes2.50%Mar. 15 & Sept. 15Sept. 20501,500 1,238 1,500 1,320 
Total gross long-term debt$3,650 $3,650 
Unamortized discount and deferred financing costs(42)(42)
Total net carrying amount$3,608 $3,608 

We were in compliance with the terms of the notes outstanding as of March 31, 2022. As of March 31, 2022, with the exception of our 2026 Notes, which are scheduled to mature in September 2026, no other contractual principal repayments of our long-term debt were 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, 2021 for further details regarding key terms under our indentures that govern our outstanding notes.

8. 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, 2022
Foreign currency
translation
adjustments
Unrealized gain (loss)
on available-for-
sale securities
Unrealized gain (loss)
on forward
contracts
Total
Balance at December 31, 2021$(606)$3 $25 $(578)
Other comprehensive income (loss) before reclassifications(4)2 6 4 
Amounts reclassified from accumulated other comprehensive income (loss) into earnings (1)(11)(12)
Balance at March 31, 2022$(610)$4 $20 $(586)

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

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9. Operating Segments and Geographic Regions

We have three reportable segments—Activision, Blizzard, and King. 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, expenses, and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; and certain other non-cash charges. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto.

Our operating segments are also consistent with our internal organizational structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.

Information on reportable segment net revenues and operating income are presented below (amounts in millions):

Three Months Ended March 31, 2022
ActivisionBlizzardKingTotal
Segment Revenues
Net revenues from external customers$453 $265 $682 $1,400 
Intersegment net revenues (1) 9  9 
Segment net revenues$453 $274 $682 $1,409 
Segment operating income$59 $53 $243 $355 
Three Months Ended March 31, 2021
ActivisionBlizzardKingTotal
Segment Revenues
Net revenues from external customers$891 $458 $609 $1,958 
Intersegment net revenues (1)