Activision 2013 Annual Report Download - page 14

ANNUAL REPORT 2013
DEAR FELLOW
SHAREHOLDERS
2013 was a transformational year for Activision Blizzard.
In the 23 years since present management assumed
responsibility for delivering shareholder value, our incred-
ibly talented employees transformed an insolvent company
into the world’s leading interactive entertainment company.
Over the past 20 years, we have delivered 1,608% in total
shareholder return compared to 484% for the S&P 500.
Since 1991, our book value per share has grown more
than 30% compounded annually, outperforming the S&P
500 by a wide margin. During that time, we have paid out
over $10 billion in the form of share repurchases and divi-
dends, our revenues have increased at a compounded
annual growth rate of approximately 30% per year, and
our earnings per share have increased at a compounded
annual growth rate of over 20% per year.
During 2013, the S&P 500 experienced remarkable per-
formance and increased, including dividends, by 32%,
while our shares increased, including dividends, by 70%.
At the same time, our book value per share declined by
5%, including dividends. This decline was driven by our
repurchase of 429 million shares at $13.60 per share, a
price that reflected a 10% discount to our closing price
on the day before we announced the transaction; how-
ever, our market value increased by more than $1.5 bil-
lion after the announcement of the transaction and since
then has increased by more than $2.1 billion or 18%
through March 31, 2014.
Because we had a majority shareholder for the last five
years, we have been excluded from many indices like the
S&P 500, but Activision Blizzard compares favorably
with many of the companies in the S&P 500. Had we
been included in the S&P 500 for the last 20 years, our
total shareholder return would rank among the top 15%
of companies in the index. In terms of profitability, our
2013 Non-GAAP Operating Margin of 31% was approxi-
mately three times the weighted average margin of the
index as a whole and would have ranked us in the top
25% of all companies in the index.
For the first time in more than five years, we are an inde-
pendent company without Vivendi as our controlling
shareholder. As of October 11, 2013, the majority of our
shares are in the hands of public shareholders. Our
transaction with Vivendi delivered immediate benefits to
our public shareholders in the form of significant earnings-
per-share accretion and the challenges and constraints
that came from operating as a controlled company were
eliminated, allowing for even greater focus and flexibility.
This return to independence could not have come at a
more important time. 2013 was a year of industry transi-
tion as well as greater clarity for emerging growth oppor-
tunities. The industry experienced one of the most
significant and accelerated console transitions in its his-
tory, mobile devices began to deliver larger creative
opportunities and financial returns, and business models
like free-to-play games with virtual item monetization and
new geographies like China began presenting new
opportunities for game makers.
We delivered better-than-expected financial results based
on the continued success of our games and ended the
year with our position solidified as the world’s leading
interactive entertainment company. We experienced
strong sales and healthy margins notwithstanding the
most competitive and volatile year for videogames since
the last console transition, and a slate with fewer major
releases than the year before due to the timing of our
development cycles. Last year, we anticipated that
industry and company factors would make it difficult for
us to replicate prior year results. That proved true, though
2013 was still a year of many highlights, including:
• GAAP and non-GAAP operating margins of 30% and
31%, respectively.
• GAAP and non-GAAP net revenues of $4.58 billion
and $4.34 billion, respectively.
•
Over $1.26 billion in operating cash flow, with $4.45 billion
in cash and investments remaining post-transaction.