Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2008
- Debt to Equity since 2008
- Price to Sales (P/S) since 2008
- Analysis of Debt
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Economic Profit
Activision Blizzard Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes experienced a notable decline from 1,379 million US dollars in 2018 to 980 million in 2019. This was followed by a significant increase to 2,485 million in 2020. Subsequently, NOPAT decreased to 2,162 million in 2021 but slightly rebounded to 2,208 million in 2022. Overall, the trend shows recovery and growth after the initial dip in 2019, although the values fluctuate somewhat in the latter years.
- Cost of Capital
- The cost of capital demonstrated a gradual upward trend over the five-year period, moving from 8.54% in 2018 to 8.75% in 2022. There were minor increases year over year, indicating a slowly rising cost to finance the company's operations and investments.
- Invested Capital
- Invested capital increased steadily from 16,084 million US dollars in 2018 to a peak of 22,243 million in 2021. However, this was followed by a decline to 19,837 million in 2022. The trend indicates growth in capital investment through 2021, with a notable contraction in the most recent year.
- Economic Profit
- Economic profit showed considerable volatility throughout the period. It was marginally positive at 6 million in 2018 before dropping sharply to a negative 497 million in 2019. The company then returned to a positive economic profit of 711 million in 2020, followed by a reduction to 228 million in 2021 and a moderate increase to 471 million in 2022. This pattern reflects challenges in generating returns above the cost of capital in some years, with recovery periods interspersed.
Net Operating Profit after Taxes (NOPAT)
Activision Blizzard Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for sales returns and price protection and other allowances.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in accrued restructuring and related costs.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2022 Calculation
Tax benefit of interest expense from debt = Adjusted interest expense from debt × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
- Net Income
- The net income exhibited volatility over the five-year period. Starting at 1,813 million US dollars in 2018, it declined to 1,503 million in 2019. This was followed by a substantial increase in 2020, reaching 2,197 million. The upward trend continued in 2021, culminating in a peak of 2,699 million. However, in 2022, net income dropped sharply to 1,513 million, almost reverting to the 2019 level.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated an inconsistent trend throughout the timeline. It started at 1,379 million US dollars in 2018, decreased substantially to 980 million in 2019, then sharply increased to 2,485 million in 2020. Unlike net income, NOPAT decreased in 2021, reaching 2,162 million, but showed a slight rebound in 2022 to 2,208 million. Despite fluctuations, the overall level of NOPAT in the latter years remained higher than the initial years.
- Comparative Insights
- While both net income and NOPAT fluctuated, their trends did not move entirely in tandem, especially notable in 2021 and 2022. Net income reached its highest point in 2021, but saw a steep decline the following year, whereas NOPAT remained relatively stable in those two years. The divergence suggests variations in operational efficiency and the impact of other financial factors such as non-operating income or expenses.
- Overall Interpretation
- The data reflects a period of considerable financial fluctuation with some years of strong profitability followed by significant declines. The volatility might imply external market impacts, changing operational conditions, or other elements influencing profitability both at the operational and net levels. Further investigation into the underlying causes of these trends would be necessary for comprehensive understanding and strategic decision-making.
Cash Operating Taxes
Activision Blizzard Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data reveals notable fluctuations in both income tax expenses and cash operating taxes over the five-year period from 2018 to 2022.
- Income Tax Expense
- The income tax expense demonstrates a significant upward trend from 2018 to 2021, increasing from $64 million in 2018 to a peak of $465 million in 2021. This represents a more than sevenfold increase over the four-year span. However, in 2022, income tax expense dropped sharply to $231 million, approximately half of the 2021 level, indicating a substantial reduction.
- Cash Operating Taxes
- The cash operating taxes present a different pattern, with a steep increase observed between 2018 and 2019, from $54 million to $478 million. This level remained relatively stable in 2020 and 2021, with values of $535 million and $473 million respectively. In 2022, there was a noticeable decrease to $384 million, indicating a downward adjustment following the previous high-pressure tax years.
Overall, the data suggests a period of escalating tax-related expenses through 2019 to 2021, with both income tax expense and cash operating taxes reaching their highest points during this time. The subsequent decline in 2022 could imply changes in profitability, tax planning strategies, or external tax regulations impacting the company's tax liabilities. The divergence in the scale and timing of changes between income tax expenses and cash operating taxes highlights different components that contribute to the company’s overall tax burden.
Invested Capital
Activision Blizzard Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenues.
5 Addition of accrued restructuring and related costs.
6 Addition of equity equivalents to shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of u.S. treasuries, government agency securities, and equity securities.
- Total reported debt & leases
- The reported debt and leases remained relatively stable from 2018 to 2019, with a slight decrease from 2,984 million USD to 2,948 million USD. However, there was a notable increase in 2020, rising to 3,895 million USD. The debt level then plateaued in 2021 at 3,897 million USD and marginally decreased to 3,856 million USD in 2022. Overall, debt showed moderate growth peaking in 2020 and 2021 before slightly declining.
- Shareholders’ equity
- Shareholders’ equity demonstrated a consistent upward trend throughout the period analyzed. It increased steadily from 11,357 million USD in 2018 to 12,805 million USD in 2019, then to 15,037 million USD in 2020. This growth continued into 2021 with equity reaching 17,599 million USD and further expanded to 19,243 million USD in 2022. The rising equity suggests strengthening of the company's net asset base over time.
- Invested capital
- Invested capital showed an overall increasing trend from 16,084 million USD in 2018 to a peak of 22,243 million USD in 2021. Notably, invested capital grew each year from 2018 through 2021. However, in 2022, there was a decline to 19,837 million USD, indicating a reduction in total capital invested in the business after several years of growth.
- Summary Insights
- Between 2018 and 2021, the company exhibited growth in both shareholders’ equity and invested capital, reflecting expansion and possibly reinvestment into the business. The relatively stable but elevated debt levels from 2020 onwards may indicate increased borrowing or lease obligations supporting this expansion. The decline in invested capital in 2022 despite continued growth in equity could signal asset disposals, capital restructuring, or efficiency improvements. Meanwhile, the slight reduction in debt in 2022 suggests cautious management of financial leverage following the prior increase.
Cost of Capital
Activision Blizzard Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Activision Blizzard Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit showed significant variability over the analyzed periods. Initially, in 2018, a modest positive economic profit of 6 million US dollars was recorded. This was followed by a substantial decline in 2019, with an economic loss of 497 million US dollars. Subsequent years demonstrated recovery, with economic profits of 711 million in 2020, 228 million in 2021, and 471 million in 2022. Overall, despite the sharp downturn in 2019, the company managed to restore positive economic profitability in the years following, indicating improved operational performance or cost management.
- Invested Capital
- The invested capital exhibited a generally increasing trend from 2018 to 2021, rising from 16,084 million US dollars in 2018 to a peak of 22,243 million US dollars in 2021. However, in 2022, there was a decrease to 19,837 million US dollars. This pattern suggests an initial phase of investment growth, potentially for expansion or capital improvements, followed by a reduction in invested capital, possibly reflecting asset disposals, increased efficiency requirements, or strategic divestments.
- Economic Spread Ratio
- The economic spread ratio, representing the difference between return on invested capital and cost of capital, showed notable fluctuations. In 2018, the ratio was marginally positive at 0.04%. A marked negative value of -2.92% in 2019 indicates that the company’s returns fell below its cost of capital that year. Recovery ensued with a positive ratio of 3.5% in 2020, followed by a decrease to 1.03% in 2021, and a subsequent increase to 2.38% in 2022. These changes reflect the company’s varying efficiency at generating returns above its capital cost, with improvements after the down year in 2019 and moderate stabilization in recent years.
Economic Profit Margin
Activision Blizzard Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted net revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Revenues
- The adjusted net revenues demonstrate a fluctuating yet generally increasing trend over the period from 2018 to 2022. Beginning at $7,064 million in 2018, the revenues declined to $6,371 million in 2019, representing a notable decrease. However, in 2020, revenues increased significantly to $8,400 million, followed by a slight decline to $8,232 million in 2021. By 2022, adjusted net revenues rose again to $8,498 million, reaching the highest level within the observed timeframe.
- Economic Profit
- The economic profit shows considerable volatility throughout the years. Starting with a positive $6 million in 2018, the metric declined sharply to a negative $497 million in 2019, indicating a substantial loss in economic value. This was followed by a strong recovery in 2020, when economic profit surged to $711 million. The figure then decreased to $228 million in 2021 but rebounded to $471 million in 2022. Overall, the economic profit reflects a pattern of sharp downturn followed by recovery phases, with positive results re-established after 2019.
- Economic Profit Margin
- The economic profit margin aligns with the trends observed in economic profit, exhibiting significant fluctuations. In 2018, the margin was marginally positive at 0.08%, then fell sharply to a negative margin of -7.8% in 2019. The margin rebounded strongly to 8.47% in 2020, before contracting to 2.78% in 2021. By 2022, the margin improved again to 5.55%. This pattern reflects variability in profitability and economic efficiency, with negative performance in 2019 followed by recovery and moderate profitability in subsequent years.
- Overall Insights
- The financial data indicates a challenging period in 2019, characterized by declines in both adjusted net revenues and economic profit, as well as a negative economic profit margin. The subsequent years show a recovery trajectory, with adjusted net revenues generally increasing and economic profits returning to positive territory. The economic profit margin improvements in 2020 and beyond suggest enhanced operational efficiency or profitability after 2019. Despite some fluctuation, the company demonstrates resilience with an upward trend in financial performance towards the end of the period.