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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

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	2,208)	2,162)	2,485)	980)	1,379)
Cost of capital²	8.27%	8.21%	8.24%	8.18%	8.07%
Invested capital³	19,837)	22,243)	20,332)	17,047)	16,084)

Economic profit⁴	568)	336)	810)	(415)	81)

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
= 2,208 – 8.27% × 19,837 = 568

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Activision Blizzard Inc. economic profit decreased from 2020 to 2021 but then slightly increased from 2021 to 2022.

Activision Blizzard Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	1,513)	2,699)	2,197)	1,503)	1,813)
Deferred income tax expense (benefit)¹	(168)	12)	(97)	(353)	27)
Increase (decrease) in allowances for sales returns and price protection and other allowances²	(1)	(46)	(55)	(68)	(88)
Increase (decrease) in deferred revenues³	970)	(571)	314)	(118)	(436)
Increase (decrease) in accrued restructuring and related costs⁴	(51)	(6)	56)	35)	—)
Increase (decrease) in equity equivalents⁵	750)	(611)	218)	(504)	(497)
Interest expense from debt	108)	108)	99)	90)	140)
Interest expense, operating lease liability⁶	8)	9)	10)	11)	10)
Adjusted interest expense from debt	116)	117)	109)	101)	150)
Tax benefit of interest expense from debt⁷	(24)	(25)	(23)	(21)	(31)
Adjusted interest expense from debt, after taxes⁸	92)	92)	86)	80)	118)
(Gain) loss on marketable securities	(21)	(18)	1)	(46)	(5)
Interest income	(165)	(5)	(21)	(79)	(65)
Investment income, before taxes	(186)	(23)	(20)	(125)	(70)
Tax expense (benefit) of investment income⁹	39)	5)	4)	26)	15)
Investment income, after taxes¹⁰	(147)	(18)	(16)	(99)	(55)
Net operating profit after taxes (NOPAT)	2,208)	2,162)	2,485)	980)	1,379)

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
= 245 × 3.34% = 8

⁷ 2022 Calculation
Tax benefit of interest expense from debt = Adjusted interest expense from debt × Statutory income tax rate
= 116 × 21.00% = 24

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
= 186 × 21.00% = 39

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Activision Blizzard Inc. NOPAT decreased from 2020 to 2021 but then slightly increased from 2021 to 2022.

Activision Blizzard Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Income tax expense	231)	465)	419)	130)	64)
Less: Deferred income tax expense (benefit)	(168)	12)	(97)	(353)	27)
Add: Tax savings from interest expense from debt	24)	25)	23)	21)	31)
Less: Tax imposed on investment income	39)	5)	4)	26)	15)
Cash operating taxes	384)	473)	535)	478)	54)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Activision Blizzard Inc. cash operating taxes decreased from 2020 to 2021 and from 2021 to 2022.

Activision Blizzard Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Long-term debt, net	3,611)	3,608)	3,605)	2,675)	2,671)
Operating lease liability¹	245)	289)	290)	273)	313)
Total reported debt & leases	3,856)	3,897)	3,895)	2,948)	2,984)
Shareholders’ equity	19,243)	17,599)	15,037)	12,805)	11,357)
Net deferred tax (assets) liabilities²	(1,044)	(871)	(901)	(788)	(387)
Allowances for sales returns and price protection and other allowances³	16)	17)	63)	118)	186)
Deferred revenues⁴	2,088)	1,118)	1,689)	1,375)	1,493)
Accrued restructuring and related costs⁵	34)	85)	91)	35)	—)
Equity equivalents⁶	1,094)	349)	942)	740)	1,292)
Accumulated other comprehensive (income) loss, net of tax⁷	625)	578)	622)	619)	601)
Adjusted shareholders’ equity	20,962)	18,526)	16,601)	14,164)	13,250)
U.S. treasuries, government agency securities, and equity securities⁸	(4,981)	(180)	(164)	(65)	(150)
Invested capital	19,837)	22,243)	20,332)	17,047)	16,084)

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Activision Blizzard Inc. invested capital increased from 2020 to 2021 but then decreased significantly from 2021 to 2022.

Activision Blizzard Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	60,444)	60,444)	÷	63,557)	=	0.95	0.95	×	8.57%	=	8.15%
Long-term debt³	2,868)	2,868)	÷	63,557)	=	0.05	0.05	×	2.96% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	245)	245)	÷	63,557)	=	0.00	0.00	×	3.34% × (1 – 21.00%)	=	0.01%
Total:	63,557)					1.00					8.27%

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 »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	63,461)	63,461)	÷	67,355)	=	0.94	0.94	×	8.57%	=	8.08%
Long-term debt³	3,605)	3,605)	÷	67,355)	=	0.05	0.05	×	2.95% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	289)	289)	÷	67,355)	=	0.00	0.00	×	3.01% × (1 – 21.00%)	=	0.01%
Total:	67,355)					1.00					8.21%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	74,702)	74,702)	÷	78,893)	=	0.95	0.95	×	8.57%	=	8.12%
Long-term debt³	3,901)	3,901)	÷	78,893)	=	0.05	0.05	×	2.95% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	290)	290)	÷	78,893)	=	0.00	0.00	×	3.40% × (1 – 21.00%)	=	0.01%
Total:	78,893)					1.00					8.24%

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 »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,869)	44,869)	÷	47,966)	=	0.94	0.94	×	8.57%	=	8.02%
Long-term debt³	2,824)	2,824)	÷	47,966)	=	0.06	0.06	×	3.21% × (1 – 21.00%)	=	0.15%
Operating lease liability⁴	273)	273)	÷	47,966)	=	0.01	0.01	×	4.02% × (1 – 21.00%)	=	0.02%
Total:	47,966)					1.00					8.18%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,188)	32,188)	÷	35,081)	=	0.92	0.92	×	8.57%	=	7.86%
Long-term debt³	2,580)	2,580)	÷	35,081)	=	0.07	0.07	×	3.15% × (1 – 21.00%)	=	0.18%
Operating lease liability⁴	313)	313)	÷	35,081)	=	0.01	0.01	×	3.15% × (1 – 21.00%)	=	0.02%
Total:	35,081)					1.00					8.07%

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 »

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	568)	336)	810)	(415)	81)
Invested capital²	19,837)	22,243)	20,332)	17,047)	16,084)
Performance Ratio
Economic spread ratio³	2.86%	1.51%	3.98%	-2.44%	0.50%
Benchmarks
Economic Spread Ratio, Competitors⁴
Alphabet Inc.	16.07%	38.36%	19.60%	18.65%	—
Comcast Corp.	-6.73%	-1.71%	-3.37%	-1.32%	—
Meta Platforms Inc.	6.14%	28.59%	19.80%	12.91%	—
Netflix Inc.	-0.94%	3.38%	-2.01%	-3.83%	—
Walt Disney Co.	-9.20%	-11.97%	-14.26%	-4.06%	1.07%

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 × 568 ÷ 19,837 = 2.86%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Activision Blizzard Inc. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 not reaching 2020 level.

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	568)	336)	810)	(415)	81)

Net revenues	7,528)	8,803)	8,086)	6,489)	7,500)
Add: Increase (decrease) in deferred revenues	970)	(571)	314)	(118)	(436)
Adjusted net revenues	8,498)	8,232)	8,400)	6,371)	7,064)
Performance Ratio
Economic profit margin²	6.68%	4.08%	9.64%	-6.52%	1.15%
Benchmarks
Economic Profit Margin, Competitors³
Alphabet Inc.	9.90%	22.00%	13.12%	11.58%	—
Comcast Corp.	-11.91%	-3.36%	-7.26%	-2.61%	—
Meta Platforms Inc.	5.36%	22.46%	18.63%	11.95%	—
Netflix Inc.	-1.12%	3.95%	-2.37%	-4.55%	—
Walt Disney Co.	-18.93%	-30.51%	-38.35%	-9.71%	1.44%

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 × 568 ÷ 8,498 = 6.68%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Activision Blizzard Inc. economic profit margin deteriorated from 2020 to 2021 but then slightly improved from 2021 to 2022.

Activision Blizzard Inc. (NASDAQ:ATVI)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin