Activision Blizzard Inc. (NASDAQ:ATVI)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited a fluctuating trend over the observed periods. It started at 1,379 million USD in 2018, declined notably to 980 million USD in 2019, and then experienced a significant increase to 2,485 million USD in 2020. Following this peak, NOPAT slightly decreased in 2021 to 2,162 million USD and showed a marginal increase again in 2022 reaching 2,208 million USD. Overall, despite the dip in 2019, there is an upward trajectory from 2018 to 2022.

Cost of Capital

The cost of capital maintained a relatively stable pattern, with minor incremental increases throughout the years. It started at 8.6% in 2018 and rose gradually each year, reaching 8.82% in 2022. The range of variation is narrow, suggesting consistent financing costs.

Invested Capital

The invested capital showed growth from 2018 through 2021, increasing from 16,084 million USD to 22,243 million USD. However, in 2022, there was a reduction to 19,837 million USD. This indicates an initial phase of capital expansion followed by some contraction or reallocation in the final year.

Economic Profit

The economic profit metric displayed considerable volatility. It started slightly negative at -4 million USD in 2018, dropped further to -507 million USD in 2019 indicating a period of value destruction. However, there was a positive turnaround in 2020 with economic profit rising to 699 million USD, followed by a decline in 2021 to 215 million USD. In 2022, economic profit increased again to 459 million USD. This pattern suggests challenges in generating returns above the cost of capital in certain years, but overall improvement in value creation since 2019.

Summary Insights

The entity’s profitability (NOPAT) recovered strongly after 2019 and sustained relatively high levels through 2022, albeit with some fluctuations. The cost of capital remained stable with a slight upward trend, indicating consistent financing conditions. Invested capital expanded until 2021 but contracted in 2022, which may reflect strategic decisions regarding asset management or capital requirements. Economic profit results highlight variability in value creation capabilities, with notable losses in 2019 but improvements afterward, signaling enhanced efficiency or profitability relative to capital costs in recent years.

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.

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.

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.

Economic Profit

Economic profit exhibited significant fluctuations over the analyzed period. It started at a marginal loss of 4 million US dollars in 2018, deteriorated sharply to a negative 507 million in 2019, suggesting considerable setbacks during that year. However, a substantial turnaround occurred in 2020 with a positive economic profit of 699 million US dollars, indicating improved profitability and value creation. The economic profit decreased in 2021 to 215 million but rebounded again in 2022 to 459 million US dollars, reflecting continued recovery and somewhat stable profitability in the latest years.

Invested Capital

The invested capital demonstrated an overall upward trend from 2018 through 2021, increasing from 16,084 million US dollars to a peak of 22,243 million US dollars. This consistent growth suggests ongoing investments or reinvestments into the company’s operations or assets. However, in 2022, the invested capital decreased to 19,837 million US dollars, indicating possible divestment, asset optimization, or capitalization adjustments during that year.

Economic Spread Ratio

The economic spread ratio, which measures the difference between returns and the cost of capital, displayed considerable variability. It was slightly negative in 2018 at -0.02%, signifying marginal negative returns relative to capital cost. The ratio worsened significantly in 2019, dropping to -2.98%, aligning with the negative economic profit that year. In 2020, the spread ratio sharply improved to 3.44%, evidencing strong financial performance and superior returns compared to capital costs. The ratio then declined in 2021 to 0.97% but climbed again in 2022 to 2.31%, indicating a stabilization in generating returns above its cost of capital over the last two years.

The economic profit exhibited significant fluctuations over the analyzed period. Starting from a slight negative value in 2018, it declined sharply in 2019, reaching a substantial loss. However, in 2020, there was a notable recovery with economic profit turning positive and peaking considerably. The following years, 2021 and 2022, showed continued positive economic profit, although with some reduction compared to the 2020 peak, indicating a stabilization phase but still maintaining profitability above earlier losses.

Adjusted net revenues revealed a somewhat variable pattern. Beginning at a high point in 2018, revenues declined in 2019 before experiencing a sharp increase in 2020. The revenues then slightly decreased in 2021 but rose again in 2022, reaching the highest level observed within this timeframe. This pattern suggests a recovery and growth trajectory following the dip in 2019, with 2022 marking the strongest revenue performance.

The economic profit margin closely mirrored the trends in economic profit, underscoring profitability efficiency relative to revenues. The margin was negative in 2018 and worsened markedly in 2019, indicating inefficiencies or increased costs relative to income. In 2020, the margin sharply increased to a high positive figure, reflecting improved profitability. Although the margin decreased in 2021, it remained positive and further improved in 2022, suggesting that the company managed to maintain better control over costs and profitability relative to revenues after the initial recovery.

Overall, the data describes a company that faced profitability challenges until 2019, followed by a significant turnaround in 2020. Subsequent years indicate sustained positive economic profit and an improving margin, alongside a generally increasing revenue trend, suggesting enhanced financial performance and operational effectiveness in the latter part of the period.