Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Activision Blizzard Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,208) | 2,162) | 2,485) | 980) | 1,379) | |
| Invested capital2 | 19,837) | 22,243) | 20,332) | 17,047) | 16,084) | |
| Performance Ratio | ||||||
| ROIC3 | 11.13% | 9.72% | 12.22% | 5.75% | 8.57% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Alphabet Inc. | 25.98% | 45.36% | — | — | — | |
| Comcast Corp. | 3.21% | 8.38% | — | — | — | |
| Meta Platforms Inc. | 20.47% | 43.26% | — | — | — | |
| Netflix Inc. | 13.20% | 17.47% | — | — | — | |
| Walt Disney Co. | 3.85% | 1.28% | -1.25% | — | — | |
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 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,208 ÷ 19,837 = 11.13%
4 Click competitor name to see calculations.
The analysis of the return on invested capital reveals a period of significant volatility between 2018 and 2022, characterized by a sharp peak in efficiency during 2020 followed by a period of stabilization and capital optimization.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited substantial fluctuations, starting at US$ 1,379 million in 2018 and declining to US$ 980 million in 2019. A significant surge occurred in 2020, where NOPAT reached a period peak of US$ 2,485 million. Following this peak, the figure settled at US$ 2,162 million in 2021 and US$ 2,208 million in 2022, establishing a higher operational profit baseline than that seen in the 2018-2019 window.
- Invested Capital
- A steady upward trajectory in invested capital was observed from 2018 through 2021, increasing from US$ 16,084 million to a maximum of US$ 22,243 million. This growth trend reversed in 2022, as invested capital contracted to US$ 19,837 million, indicating a reduction in the capital employed to generate profits.
- Return on Invested Capital (ROIC)
- ROIC mirrored the volatility of NOPAT, hitting a low of 5.75% in 2019 before ascending to a peak of 12.22% in 2020. A decline to 9.72% occurred in 2021, primarily driven by the continued expansion of the invested capital base. However, ROIC improved to 11.13% in 2022, a result of the combined effect of slightly increasing operating profits and a significant decrease in the total invested capital.
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Decomposition of ROIC
Activision Blizzard Inc., decomposition of ROIC
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The Return on Invested Capital (ROIC) exhibited significant volatility between 2018 and 2022, characterized by a notable peak in 2020. After an initial contraction in 2019 to 5.75%, the ROIC surged to 12.22% in 2020 before stabilizing between 9.72% and 11.13% in the subsequent two years. This fluctuation is primarily driven by shifts in operating profitability and tax efficiency rather than capital turnover.
- Operating Profit Margin (OPM)
- A strong upward trend in operating profitability was observed from 2018 to 2020, with the margin expanding from 20.28% to a peak of 35.95%. While a slight contraction occurred in 2021 and 2022, the margin remained substantially higher than the 2018 baseline, ending the period at 30.50%. This suggests that improved operational efficiency was a primary catalyst for the overall increase in ROIC.
- Turnover of Capital (TO)
- The turnover of capital remained relatively stagnant throughout the five-year period, fluctuating within a narrow range between 0.37 and 0.44. The ratio ended 2022 at 0.43, nearly returning to its 2018 level. This stability indicates that changes in ROIC were not driven by significant improvements in asset utilization or revenue generation per unit of invested capital.
- Effective Cash Tax Rate Impact (1 – CTR)
- The tax efficiency component showed a sharp decline in 2019, dropping to 67.22%, which acted as a significant drag on the ROIC for that year. A recovery followed in 2020, with the factor stabilizing between 82% and 85% through 2022. The recovery of this metric contributed to the rebound in return on invested capital observed after 2019.
Analysis of the decomposition indicates that the 2020 spike in ROIC was the result of a convergence of a peak operating profit margin and a recovery in tax efficiency. The subsequent stability in ROIC through 2022 was supported by a recovery in capital turnover, which helped offset the gradual softening of the operating profit margin.
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Operating Profit Margin (OPM)
Activision Blizzard Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,208) | 2,162) | 2,485) | 980) | 1,379) | |
| Add: Cash operating taxes2 | 384) | 473) | 535) | 478) | 54) | |
| Net operating profit before taxes (NOPBT) | 2,592) | 2,635) | 3,020) | 1,458) | 1,433) | |
| 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) | |
| Profitability Ratio | ||||||
| OPM3 | 30.50% | 32.01% | 35.95% | 22.88% | 20.28% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Alphabet Inc. | 25.43% | 34.97% | — | — | — | |
| Comcast Corp. | 10.68% | 20.21% | — | — | — | |
| Meta Platforms Inc. | 25.55% | 40.15% | — | — | — | |
| Netflix Inc. | 19.10% | 22.76% | — | — | — | |
| Walt Disney Co. | 10.16% | 5.56% | -1.34% | — | — | |
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 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Adjusted net revenues
= 100 × 2,592 ÷ 8,498 = 30.50%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a significant surge in profitability and operational efficiency peaking in 2020, followed by a period of gradual normalization.
- Net Operating Profit Before Taxes (NOPBT) and Revenue Trends
- Net operating profit exhibited substantial growth, rising from 1,433 million USD in 2018 to a peak of 3,020 million USD in 2020. This represents a more than twofold increase over a two-year period. Following the 2020 peak, NOPBT experienced a moderate decline, settling at 2,592 million USD by the end of 2022. Adjusted net revenues followed a similar trajectory, with a notable dip in 2019 to 6,371 million USD before climbing to 8,400 million USD in 2020 and remaining relatively stable through 2022.
- Operating Profit Margin (OPM) Dynamics
- The operating profit margin demonstrated a strong upward trajectory in the early part of the analyzed period. Despite a decrease in adjusted net revenues in 2019, the OPM increased from 20.28% to 22.88%, suggesting successful cost management or a shift toward higher-margin revenue streams. The margin reached its zenith in 2020 at 35.95%, coinciding with the highest reported NOPBT. From 2021 onward, a gradual contraction in the OPM is observed, falling to 32.01% in 2021 and further to 30.50% in 2022.
- Operational Efficiency Analysis
- The divergence between revenue and profitability observed between 2020 and 2022 indicates a decline in operating leverage. While adjusted net revenues in 2022 reached their period high of 8,498 million USD, the NOPBT for the same year was lower than the 2020 level. This trend results in the observed compression of the operating profit margin, indicating that operating expenses grew at a faster rate than revenues during the post-2020 period.
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Turnover of Capital (TO)
Activision Blizzard Inc., TO 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) | ||||||
| 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) | |
| Invested capital1 | 19,837) | 22,243) | 20,332) | 17,047) | 16,084) | |
| Efficiency Ratio | ||||||
| TO2 | 0.43 | 0.37 | 0.41 | 0.37 | 0.44 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Alphabet Inc. | 1.40 | 1.51 | — | — | — | |
| Comcast Corp. | 0.57 | 0.51 | — | — | — | |
| Meta Platforms Inc. | 1.15 | 1.27 | — | — | — | |
| Netflix Inc. | 0.84 | 0.86 | — | — | — | |
| Walt Disney Co. | 0.49 | 0.39 | 0.37 | — | — | |
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 Invested capital. See details »
2 2022 Calculation
TO = Adjusted net revenues ÷ Invested capital
= 8,498 ÷ 19,837 = 0.43
3 Click competitor name to see calculations.
The financial performance between 2018 and 2022 demonstrates a non-linear relationship between revenue generation and the invested capital base. While revenues exhibited volatility, the efficiency of capital utilization fluctuated, reflecting periods of capital expansion followed by a subsequent shift toward optimization.
- Adjusted Net Revenue Trends
- Revenues experienced a contraction in 2019, falling to 6,371 million USD, before surging to 8,400 million USD in 2020. This growth stabilized through 2021 and 2022, concluding the period at 8,498 million USD, representing an overall increase from the 2018 baseline of 7,064 million USD.
- Invested Capital Trajectory
- A consistent upward trend in invested capital was observed from 2018 to 2021, increasing from 16,084 million USD to a peak of 22,243 million USD. However, 2022 saw a reversal of this trend, with invested capital decreasing to 19,837 million USD, indicating a reduction in the total capital employed.
- Capital Turnover Efficiency
- The turnover of capital ratio fluctuated within a range of 0.37 to 0.44. A decline was noted in 2019, followed by a recovery to 0.41 in 2020. Efficiency dropped again to 0.37 in 2021, coinciding with the peak in invested capital. By 2022, the ratio improved to 0.43, a result of the simultaneous reduction in invested capital and a slight increase in adjusted net revenues.
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Effective Cash Tax Rate (CTR)
Activision Blizzard Inc., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,208) | 2,162) | 2,485) | 980) | 1,379) | |
| Add: Cash operating taxes2 | 384) | 473) | 535) | 478) | 54) | |
| Net operating profit before taxes (NOPBT) | 2,592) | 2,635) | 3,020) | 1,458) | 1,433) | |
| Tax Rate | ||||||
| CTR3 | 14.83% | 17.94% | 17.70% | 32.78% | 3.75% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Alphabet Inc. | 27.09% | 13.97% | — | — | — | |
| Comcast Corp. | 47.01% | 18.38% | — | — | — | |
| Meta Platforms Inc. | 30.06% | 15.37% | — | — | — | |
| Netflix Inc. | 17.52% | 10.36% | — | — | — | |
| Walt Disney Co. | 22.01% | 41.25% | — | — | — | |
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 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 384 ÷ 2,592 = 14.83%
4 Click competitor name to see calculations.
The effective cash tax rate (CTR) demonstrated significant fluctuation over the five-year period from 2018 to 2022, characterized by a sharp peak in 2019 followed by a period of gradual decline and stabilization.
- Cash Tax Rate Volatility
- An extreme variance is noted between 2018 and 2019, where the CTR rose from 3.75% to 32.78%. This spike coincided with cash operating taxes increasing from 54 million US$ to 478 million US$, despite the Net Operating Profit Before Taxes (NOPBT) remaining relatively flat, moving from 1,433 million US$ to 1,458 million US$.
- Relationship Between Profitability and Tax Burden
- A notable divergence occurred in 2020, as NOPBT surged to a period high of 3,020 million US$. Despite this substantial increase in profitability, the CTR decreased significantly to 17.70%, indicating improved tax efficiency relative to operating gains during that fiscal year.
- Recent Trajectory and Stabilization
- From 2021 to 2022, a downward trend in the cash tax burden is observed. While the CTR remained relatively stable at 17.94% in 2021, it further declined to 14.83% by the end of 2022. This reduction in the effective rate occurred alongside a slight contraction in NOPBT, which fell to 2,592 million US$, and a corresponding decrease in cash operating taxes to 384 million US$.
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