Erin Parker Atvidcf V1

Erin Parker Atvidcf V1

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  Stanford Blyth Fund- Activision Blizzard BUY Pitch ACTIVISION BLIZZARD DISCOUNTED CASH FLOW MODEL MULTIPLE-SCENARIO ANALYSIS TOGGLE Current Price $10.87 Product Sales Growth 10.00% Subscription & Licensing Growth 10.00% Terminal Growth Rate 5.00% Risk-Free Rate 4.22% Rm-Rf 6.00% Projected Price $13.87 Effective Tax Rate -43% * Terminal & Rm-Rf are very sensitive to changes Forward Effective Tax Rate 35% *Received income tax benefit as result of net loss *Assumed 35% tax rate from 2010 forward
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  sensitive to changes tas result of net loss 2010 forward
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  Page 74 OPERATING ASSUMPTIONS Historical Projected 2006 2007 2008 2009 2010 REVENUE ITEMS Product Sales $421 $457 $1,872 $2,059 $2,265 Growth 8.55% 309.63% 10.00% 10.00% Subscription & Licensing 597 892 1,154 1,269 1,396 Growth 49.41% 29.37% 10.00% 10.00% Total Revenue 1,018 1,349 3,026 3,329 3,661 COGS ITEMS Product Costs 153 171 1,160 789 868 % Sales 15.03% 12.68% 38.33% 38.33% 38.33% Software Royalties 71 52 267 182 200 % Sales 6.97% 3.85% 8.82% 8.82% 8.82% Intellectual Property Licenses 24 9 219 149 164 % Sales 2.36% 0.67% 7.24% 7.24% 7.24% COGS MMORPG 119 204 193 131 144 % Sales 11.69% 15.12% 6.38% 6.38% 6.38% Total COGS 367 436 1,839 1,251 1,377 Gross Profit 651 913 1,187 2,077 2,285 Margin 63.95% 67.68% 39.23% 62.40% 62.40% SG&A Items Product Development 246 397 592 $651 $716 % Sales 24.17% 29.43% 19.56% 19.56% 19.56% Sales & Marketing 147 172 464 $510 $561 % Sales 14.44% 12.75% 15.33% 15.33% 15.33% Restructuring Costs 4 (1) 93 $102 $113 % Sales 0.39% -0.07% 3.07% 3.07% 3.07% General & Administrative 133 166 271 $298 $328 % Sales 13.06% 12.31% 8.96% 8.96% 8.96% Total SG&A 530 734 1,420 1,562 1,718 Operating Profit (EBIT) 121 179 (233) 515 567 Margin 11.89% 13.27% -7.70% 15.48% 15.48% Depreciation & Amortization 39 63 385 424 466 Margin 3.83% 4.67% 12.72% 12.72% 12.72% EBITDA 160 242 152 939 1,033 Margin 15.72% 17.94% 5.02% 28.20% 28.20% Growth 51.25% -37.19% 517.54% 10.00% Capital Expenditures (96) (68) (46) (31) (34) % Sales 9.43% 5.04% 1.52% 1.52% 1.52%
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  Projected Note: Links to Cover Page in Purple 2011 2012 2013 $2,492 $2,741 $3,015 10.00% 10.00% 10.00% 1,536 1,690 1,859 10.00% 10.00% 10.00% 4,028 4,430 4,873 955 1,051 1,156 38.33% 38.33% 38.33% 220 242 266 8.82% 8.82% 8.82% 180 198 218 7.24% 7.24% 7.24% 159 175 192 6.38% 6.38% 6.38% 1,514 1,666 1,832 2,513 2,765 3,041 62.40% 62.40% 62.40% $788 $867 $953 19.56% 19.56% 19.56% $618 $679 $747 15.33% 15.33% 15.33% $124 $136 $150 3.07% 3.07% 3.07% $361 $397 $436 8.96% 8.96% 8.96% 1,890 2,079 2,287 623 686 754 15.48% 15.48% 15.48% 512 564 620 12.72% 12.72% 12.72% 1,136 1,249 1,374 28.20% 28.20% 28.20% 10.00% 10.00% 10.00% (38) (42) (46) 1.52% 1.52% 1.52%
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  Page 72 WORKING CAPITALASSUMPTIONS Cash Impact of Working Capital Historical 2007 2008 Working Capital Assets Accounts Receivable 112 1,210 Inventories 21 262 Software Development & Intellectual Prop Licenses 25 235 % Sales 2% 8% Other Working Capital Assets 23 201 % Sales 1.70% 6.64% Working Capital Liabilities Deferred Revenues 197 923 % COGS 45.18% 50.19% Accounts Payable 49 555 % COGS 11.24% 30.18% Accrued Expenses & Other Liabilities 282 842 % COGS 64.68% 45.79% Ratios Days Receivable (AR / (Total Sales/365) ) 30.30 145.95 Inventory Turns (Total COGS / Inventory) 20.76 7.02 Working Capital Working Capital (347) (412) Change in Working Capital (65) "Less" Change in Working Capital 65
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  Projected 2009 2010 2011 2012 2013 804 884 972 1,070 1,177 127 139 153 169 185 259 284 313 344 378 8% 8% 8% 8% 8% 221 243 267 294 324 6.64% 6.64% 6.64% 6.64% 6.64% 628 691 760 836 920 50.19% 50.19% 50.19% 50.19% 50.19% 378 415 457 503 553 30.18% 30.18% 30.18% 30.18% 30.18% 573 630 693 763 839 45.79% 45.79% 45.79% 45.79% 45.79% 88.13 88.13 88.13 88.13 88.13 13.89 13.89 13.89 13.89 13.89 (169) (186) (204) (225) (247) 243 (17) (19) (20) (22) (243) 17 19 20 22
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  VALUATION - DISCOUNTEDCASH FLOW METHOD Historical 2006 2007 2008 Free Cash Flow Calculation EBITDA 160 242 152 Less: Taxes on EBITDA 69 104 65 Less: Capex (96) (68) (46) Add: Working Capital Impact - 65 (243) Unlevered Free Cash Flow $343 $(72) Discounted Cash Flow DCF Enterprise Value Calculation Terminal Value Calculation Terminal Growth Rate 5.00% Terminal Enterprise Value 20,431.07 Discounted Terminal Value 14,917.75 Enterprise Value 18,128.93 Enterprise Value Net Debt 18,128.93 Share Price $13.87 Discount Rate (WACC) 8.18% *Company has not utilized debt financing p Current Price 10.87 Shares Outstanding 1,307 Equity (Market Cap) 14,207 Debt + Equity 14,207 Cost of Equity 8.18% Equity/Value 100.00% Cost of Debt 7.08% Debt 0 Debt/Value 0.00% Tax Rate -43% Cost of Equity (CAPM) 8.18% Risk-Free Rate 4.22% Beta 0.66 Rm-Rf 6.00%
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  Projected Terminal 2009 2010 2011 2012 2013 0 1 2 3 4 5 939 1,033 1,136 1,249 1,374 404 444 (398) (437) (481) (31) (34) (38) (42) (46) 17 19 20 22 - $1,328 $1,461 $721 $793 $847 $1,328 $1,350 $616 $626 $619 $650 y has not utilized debt financing p58