annual report rollup
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Annual Report RollupAnnual Report RollupTRANSCRIPT
2011ANNUAL REPORT
2010 Results: Another Record Yeari—In 2010, we delivered non-GAAP net revenues of $4.8 billion and grew non-GAAP earnings per diluted share by 14.5% year over year to $0.79. On a GAAP ba-sis, our net revenues were $4.4 billion and earnings per diluted share were $0.33. Although we are firm believers that the use of Generally Accepted Accounting Principles (GAAP) is an appropri-ate lens through which to view our performance, we believe that the use of non-GAAP financial measures provides investors with an additional important perspective from which to view our results that is consistent with the way management assesses our business.Our strong performance this year enhanced our financial position. We ended the year with approximately $3.5 billion in cash and investments and no debt. We generated a record $1.4 billion in operating cash flow, a good measure of how we build shareholder value. We also delivered the most profitable year in our company’s his-tory, as well as a record non-GAAP operating margin of 29%, an industry recordii, and a return on invested capital of 30%iii. These financial metrics are reflections of our continued migration to, and leadership in, online entertainment and a clear illustration that our strategy and continued superb execution should provide supe-rior long-term returns for our shareholders. Our commitment to entertaining audiences with excellent games hasn’t changed in twenty years— but the way we reach our audiences, and the methods our audiences have available to determine how they best want to pay for our content, have changed greatly. We continue to heavily invest in our franchises, in new potential franchises, and in our systems and capabilities to bring our products and services to new markets around the world. Yet, we are generating more cash than we can find good uses for. As a result, in 2010, we became the first company in our industry to issue a dividend and we repurchased nearly $1 billion of our stock, bringing our two-year share buyback total to approximately $2.2 billion. We think buying our own shares represents a very good investment for our shareholders and, if our share price remains within our targets for repurchase, we plan to continue to buy the additional $1.5 billion worth of shares that our Board recently authorized us to repurchase. We are always on the lookout for ways to use our capital thoughtfully, and it is probably worth mentioning that the criteria haven’t changed much in twenty years. We like to invest our capital in proprietary products or services that have a history of profitability (which we measure in years, not days or months), are internationally appealing, serve to deepen our moats, and can reasonably be expected to generate a financial return that is greater than our weighted average cost of capital.
TO OUR SHAREHOLDERS
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
26% $0.70 $1.2
29% $0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
2011ANNUAL REPORT
2010 Results: Another Record Yeari—In 2010, we delivered non-GAAP net revenues of $4.8 billion and grew non-GAAP earnings per diluted share by 14.5% year over year to $0.79. On a GAAP ba-sis, our net revenues were $4.4 billion and earnings per diluted share were $0.33. Although we are firm believers that the use of Generally Accepted Accounting Principles (GAAP) is an appropri-ate lens through which to view our performance, we believe that the use of non-GAAP financial measures provides investors with an additional important perspective from which to view our results that is consistent with the way management assesses our business.Our strong performance this year enhanced our financial position. We ended the year with approximately $3.5 billion in cash and investments and no debt. We generated a record $1.4 billion in operating cash flow, a good measure of how we build shareholder value. We also delivered the most profitable year in our company’s his-tory, as well as a record non-GAAP operating margin of 29%, an industry recordii, and a return on invested capital of 30%iii. These financial metrics are reflections of our continued migration to, and leadership in, online entertainment and a clear illustration that our strategy and continued superb execution should provide supe-rior long-term returns for our shareholders. Our commitment to entertaining audiences with excellent games hasn’t changed in twenty years— but the way we reach our audiences, and the methods our audiences have available to determine how they best want to pay for our content, have changed greatly. We continue to heavily invest in our franchises, in new potential franchises, and in our systems and capabilities to bring our products and services to new markets around the world. Yet, we are generating more cash than we can find good uses for. As a result, in 2010, we became the first company in our industry to issue a dividend and we repurchased nearly $1 billion of our stock, bringing our two-year share buyback total to approximately $2.2 billion. We think buying our own shares represents a very good investment for our shareholders and, if our share price remains within our targets for repurchase, we plan to continue to buy the additional $1.5 billion worth of shares that our Board recently authorized us to repurchase. We are always on the lookout for ways to use our capital thoughtfully, and it is probably worth mentioning that the criteria haven’t changed much in twenty years. We like to invest our capital in proprietary products or services that have a history of profitability (which we measure in years, not days or months), are internationally appealing, serve to deepen our moats, and can reasonably be expected to generate a financial return that is greater than our weighted average cost of capital.
TO OUR SHAREHOLDERS
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
26% $0.70 $1.2
29% $0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
26% $0.70 $1.2
29% $0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
26% $0.70 $1.2
29% $0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN EXPANSION
2008 2009 2010 2011
60% + OPERATING
MARGIN
20% +GROWTH
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN
PROVEN RECORD OF GROWINGREVENUES AND PROFITABILITY
2008
2008
2009
2009
2010
2010
2011
2011 2011
60% + OPERATING
MARGIN
20% +GROWTH
12M+
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN EXPANSION
PROVEN RECORD OF GROWING REVENUES AND PROFITABILITY
2008
2008
2009
2009
2010
2010
2011
2011
60% + OPERATING
MARGIN
20% +GROWTH
12M+
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN EXPANSION
PROVEN RECORD OF GROWING REVENUES AND PROFITABILITY
2008
2008
2009
2009
2010
2010
2011
2011
60% + OPERATING
MARGIN
12M+
20% +GROWTH
SUBSCRIBERS TO WORLD OF WARCRAFT
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN EXPANSION
PROVEN RECORD OF GROWING REVENUES AND PROFITABILITY
2008
2008
2009
2009
2010
2010
2011
2011
12M+
20% +GROWTH
SUBSCRIBERS TO WORLD OF WARCRAFT
1.5B+
2011ANNUAL REPORT
ANOTHER RECORD YEAROPERATING MARGIN 2010
EARNINGS PER SHARE 2010
BILLION IN OPERAT-ING CASH FLOW 2010
OPERATING MARGIN 2011
OPERATING MARGIN 2011
OPERATING MARGIN 2011
29%
29% $0.70 $1.2
$0.79 $1.4
FIRST EVERCASHDIVIDEND
$$$$$$
MIGRATION TO ONLINE DRIVING MARGIN EXPANSION
PROVEN RECORD OF GROWING REVENUES AND PROFITABILITY
2008
2008
2009
2009
2010
2010
2011
2011
12M+
20% +GROWTH
SUBSCRIBERS TO WORLD OF WARCRAFT
1.5B+