AppLovin Corp. (NASDAQ:APP)

Current Income Tax Expense

The current income tax expense displays a consistent upward trend throughout the observed periods. Beginning at approximately $76.7 million, it increased steadily to about $89.9 million in the following year, then rose further to $106.2 million. The most substantial increase occurred in the final period, where the expense nearly doubled to $192.3 million. This indicates growing taxable income or changes in the tax position affecting current tax liabilities over the years.

Deferred Income Tax Expense

The deferred income tax figures are negative in all periods, reflecting deferred tax benefits rather than expenses. The magnitude of these benefits increased sharply in the second period, from roughly -$65.8 million to -$102.2 million. It then declined in magnitude to -$82.4 million before deepening significantly in the last period to about -$196.1 million. This pattern suggests fluctuations in the timing differences between accounting income and taxable income, potentially due to varying recognition of revenues and expenses or adjustments in deferred tax assets and liabilities.

Provision for (Benefit from) Income Taxes

The overall provision for income taxes demonstrates considerable volatility, with positive and negative values alternating over the years. Initially, the company recorded a tax provision of approximately $11.0 million. This turned into a tax benefit of around $12.2 million in the next reporting period, indicating that the company recognized more tax benefit than expense in that year. In the following period, the tax provision rose again to $23.9 million. In the latest period, it reverted to a tax benefit of nearly $3.8 million. These swings reveal significant year-to-year changes in the effective tax expense, influenced by both current and deferred tax components as well as possibly by discrete tax events or variations in pre-tax earnings.

The analysis of the annual financial data reveals notable trends in the tax-related metrics over the four-year period ending 2024.

U.S. federal statutory income tax rate

The statutory tax rate remained stable at 21% from 2021 through 2023, which is consistent with the established federal tax rate. However, there is a significant and likely anomalous increase reported for 2024, showing a rate of 210%. This spike appears unusual and may indicate either an error in recording or an extraordinary tax event requiring further investigation.

Effective income tax rate

The effective income tax rate showed a declining trend from 23.69% in 2021 to 5.96% in 2022, followed by a slight increase to 6.27% in 2023. This decreasing trend indicates that the company was able to reduce its overall tax burden relative to income over the initial years analyzed. In 2024, the effective rate became slightly negative at -0.24%, suggesting the company may have recorded a tax benefit or credit that exceeded its tax expense that year.

Overall, the effective income tax rate displayed a marked decrease over the four-year period, contrasting with the stable statutory rate until the aberrant jump in 2024. The sudden divergence of the statutory rate and the negative effective tax rate in the final year warrant further examination to clarify underlying causes, such as accounting adjustments, tax credits, or non-recurring items impacting tax calculations.

Accrued expenses and reserves

There is a consistent upward trend from approximately 6.4 million to 13.5 million over the four-year period, indicating an increase in anticipated future obligations or liabilities.

Stock-based compensation

After a significant decrease in the second year, stock-based compensation rises again but does not reach the initial level, ending slightly lower. This suggests variability in employee compensation expenses related to stock grants.

Tax credit carryforwards

This item shows substantial growth, increasing more than twentyfold from under 5 million to nearly 100 million, reflecting a growing pool of tax credits potentially usable against future tax liabilities.

Net operating loss

Net operating losses increase significantly in the second year, then decline somewhat before rising again. This pattern suggests fluctuating operational profitability but with an overall increasing trend in cumulative loss carryforwards.

Identified intangibles

Beginning with no value reported in the first year, identified intangible assets increase markedly through the subsequent years, reaching nearly 47 million, indicating substantial acquisitions or capitalization of intangible assets.

Operating lease liability

Operating lease liabilities decrease steadily across the period from about 16.6 million to just over 10 million, consistent with lease obligations being reduced or leases being terminated or renegotiated.

Other comprehensive income

This item fluctuates but shows an overall increasing trend, peaking close to 38 million in the final year, which could reflect favorable changes in items such as foreign currency translations or unrealized gains on investments.

Foreign tax deduction

There is a consistent decline in foreign tax deductions, dropping from over 12 million to less than 2 million, suggesting a diminishing amount of foreign taxes available for deduction.

Capital loss

Capital loss experiences significant growth from just over 1 million to approximately 18 million, indicating accumulated investment losses or realized capital losses increasing over time.

Capitalized R&D expenses

From no reported value initially, capitalized research and development expenses rise sharply throughout the period, more than tripling from about 78 million to over 268 million, reflecting intensified investment in development activities.

Deferred tax assets, gross

There is a strong upward trajectory in gross deferred tax assets, increasing more than sixfold from around 85 million to over 552 million, indicating growing temporary differences or carryforwards expected to reduce future tax payments.

Valuation allowance

The valuation allowance shown as a negative balance deepens substantially from approximately -19 million to nearly -98 million, suggesting increased caution in recognizing deferred tax assets fully due to uncertainty regarding recoverability.

Deferred tax assets

Net deferred tax assets increase significantly, rising from 66.5 million to nearly 454 million, supporting the outlook of greater expected tax benefits from timing differences and carryforwards.

Depreciation and amortization

These expenses decrease substantially over time from around -5.4 million to a minimal expense of -0.3 million, which could reflect changes in asset base or accounting methods applied.

Operating lease right-of-use assets

Corresponding to the decrease in lease liabilities, right-of-use assets decline steadily from approximately -16.6 million to around -7.8 million, showing amortization or reduction in leased asset values.

Deferred tax liabilities

Deferred tax liabilities decrease from around -28.1 million to approximately -17.7 million, indicating a reduction in taxable temporary differences or changes in tax basis of liabilities.

Net deferred tax assets (liabilities)

This figure rises dramatically from about 38.4 million to over 436 million, emphasizing a significant net tax asset position with increasing expectation of future tax savings.

The analysis of the financial indicators over the four-year period reveals several notable trends and shifts in the financial position and profitability of the company.

Total Assets

The reported total assets decreased consistently from the end of 2021 through 2023, falling from approximately 6.16 billion US dollars to 5.36 billion US dollars, before experiencing a slight recovery to about 5.87 billion US dollars by the end of 2024. The adjusted total assets followed a similar downward trajectory, declining more sharply and ending lower than reported assets in each year, particularly in 2024. This suggests a more conservative recognition of asset values when adjustments for income tax effects are considered.

Stockholders’ Equity

A significant downward trend is apparent in both reported and adjusted stockholders’ equity. Reported equity fell steadily from around 2.14 billion to approximately 1.09 billion US dollars over the period, while the adjusted figures showed an even more pronounced decline, ending at roughly 654 million US dollars. The widening gap between reported and adjusted equity suggests increasing deferred tax-related adjustments or other tax impacts reducing equity when adjustments are applied.

Net Income (Loss) Attributable to the Company

Reported net income showed considerable volatility. The year 2022 saw a reported net loss of approximately 193 million US dollars, following a modest profit in 2021. Significant recovery occurred in 2023 with net income rising to approximately 357 million US dollars and surged dramatically in 2024 to nearly 1.58 billion US dollars. Adjusted net income figures display a similar volatile pattern but consistently are lower than reported net income, reflecting tax adjustments. Notably, the adjusted net loss in 2021 and 2022 was higher in magnitude than reported losses, while the profits in subsequent years were substantially reduced by these adjustments.

Overall, the financial data indicate that while the company faced asset and equity contraction over the early years, there is evidence of financial recovery, particularly in profitability by 2023 and 2024. Adjustments related to income taxes significantly affect the reported figures, indicating deferred tax liabilities or other tax-based adjustments materially impact the net asset and earnings positions. This behavior underscores the importance of considering adjusted data for a conservative view of the company’s financial health.

The financial performance over the analyzed periods exhibits notable fluctuations and overall improvement in profitability and efficiency, particularly towards the later years.

Net Profit Margin

The reported net profit margin displays a decline from a modest 1.27% to a negative margin of -6.84%, indicating a loss in the second period. Subsequently, it recovers significantly to 10.87% and surges to 33.55%, indicating improved profitability. The adjusted net profit margin follows a similar pattern but remains slightly lower, reflecting the impact of adjustments for deferred taxes and related items, with a negative value of -10.47% during the downturn, recovering to 8.36%, and further rising to 29.38% by the final period.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios show a progressive increase across the periods. The reported total asset turnover improves from 0.45 to 0.8, while the adjusted ratio moves from 0.46 to 0.87, suggesting enhanced efficiency in utilizing assets to generate revenue. The consistent upward trend indicates growing operational effectiveness.

Financial Leverage

Financial leverage ratios reveal an increasing reliance on debt or other financing sources over time. Reported financial leverage rises from 2.88 to 5.39, and adjusted leverage grows even more sharply from 2.92 to 8.31. The significant increase in adjusted leverage by the final period implies higher financial risk, potentially amplifying returns but also increasing exposure to financial distress.

Return on Equity (ROE)

The reported ROE experiences a steep decline into negative territory (-10.13%) before rebounding dramatically to 28.39% and then to an exceptionally high 144.96%. The adjusted ROE behaves similarly but with more pronounced negative and positive swings, dipping to -16.83% before climbing to 26.65% and then reaching an extraordinarily high 211.74%. These extreme fluctuations reflect a combination of changes in profit margins, asset efficiency, and financial leverage, with the latter significantly boosting equity returns in later periods.

Return on Assets (ROA)

Reported ROA moves from a positive 0.58% to a negative -3.3%, followed by a recovery to 6.66% and a large increase to 26.92%. Adjusted ROA trends similarly but with deeper negative and slightly lower positive values, underscoring the effects of adjustments on profitability measures. The growth in ROA demonstrates improving asset utilization to generate earnings.

Overall, the data highlights initial profitability challenges with losses evident in the early periods, followed by marked improvement in margins and returns. Asset utilization consistently strengthens, while increasing financial leverage significantly amplifies return on equity, albeit with higher financial risk. The adjusted figures, accounting for deferred and income tax effects, generally accentuate negative impacts during downturns and positive gains during recovery, providing a more conservative measure of performance.

Net Income Trends

The reported net income attributable to the company exhibited significant volatility over the analyzed periods. Starting with a positive figure of $35.4 million in 2021, the company experienced a substantial loss of approximately $192.7 million in 2022. This was followed by a marked recovery in 2023 with reported net income rising to $356.7 million, and a further dramatic increase in 2024 reaching nearly $1.58 billion.

The adjusted net income figures also followed a similar pattern of fluctuation. There was an initial loss of about $30.3 million in 2021, which deepened to a larger loss of approximately $294.9 million in 2022. Subsequently, adjusted net income turned positive and rose to $274.3 million in 2023, continuing to increase substantially to $1.38 billion in 2024.

Net Profit Margin Trends

The reported net profit margin mirrored the net income trend with a low positive margin of 1.27% in 2021, a sharp decline to negative 6.84% in 2022, and a strong rebound to positive margins of 10.87% in 2023 and an impressive 33.55% in 2024.

Similarly, the adjusted net profit margin showed negative margins initially, starting at -1.09% in 2021 and steepening to -10.47% in 2022. The margin then recovered to 8.36% in 2023 before increasing further to 29.38% in 2024.

Overall Analysis

The data indicates a period of considerable financial challenge during 2022, reflected in significant losses and negative profit margins. However, the company demonstrated a strong turnaround beginning in 2023, with both reported and adjusted figures showing robust profitability improvements. The upward trend continued markedly into 2024, suggesting effective operational and financial management leading to substantially improved profitability and margin expansion. The adjusted figures, which incorporate income tax considerations, closely track the reported results, indicating consistency in the underlying financial performance improvements.

The analysis of the adjusted and reported financial metrics over the four-year period reveals notable trends in the company’s asset management efficiency and asset base fluctuations.

Total Assets

Reported total assets displayed a declining trend from 6,163,579 thousand US dollars at the end of 2021 to 5,359,187 thousand US dollars by the end of 2023, followed by a recovery to 5,869,259 thousand US dollars in 2024. Adjusted total assets, which likely account for deferred income tax adjustments, mirrored this pattern, decreasing from 6,125,140 thousand US dollars in 2021 to 5,132,214 thousand US dollars in 2023, then rising to 5,432,946 thousand in 2024. The fluctuations indicate a contraction in asset base over the first three years, with a partial rebound in the last year observed in both reported and adjusted figures.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios exhibit a consistent upward trend across the period, indicating improving efficiency in utilizing assets to generate revenue. Reported turnover increased from 0.45 in 2021 to 0.80 in 2024, while adjusted turnover rose from 0.46 to 0.87 over the same period. The acceleration is particularly notable between 2023 and 2024. This improvement suggests enhanced operational performance or revenue growth relative to the asset base.

Overall Insights

The company experienced a contraction in total assets over three years, potentially reflecting asset disposals, write-downs, or strategic refocusing, followed by a recovery phase. Concurrently, the rising asset turnover ratios indicate better asset utilization efficiency, which may contribute positively to profitability. The gap between reported and adjusted figures is relatively small, implying that deferred tax adjustments do not materially alter the interpretation of asset trends and efficiency metrics.

The financial data reveals notable trends in the company’s assets, equity, and leverage over the four-year period from 2021 to 2024. Both reported and adjusted figures display consistent patterns with subtle differences in magnitude.

Total Assets

Reported total assets show a gradual decline from approximately 6.16 billion US dollars at the end of 2021 to about 5.36 billion in 2023, followed by a recovery to nearly 5.87 billion in 2024. Adjusted total assets reflect a similar trajectory but with marginally lower values, decreasing from 6.13 billion in 2021 to 5.13 billion in 2023, then rising to 5.43 billion in 2024. This pattern indicates a contraction phase during the second and third years, succeeded by partial asset growth in the final year.

Stockholders’ Equity

Reported stockholders’ equity consistently declines across the entire period, starting at approximately 2.14 billion in 2021 and falling to around 1.09 billion by 2024. The adjusted equity figures exhibit a steeper decline, descending from about 2.10 billion in 2021 to 653 million in 2024. The sharper decrease in adjusted equity suggests that the deferred tax adjustments have a significant impact in reducing the equity base over time, highlighting potential tax-related adjustments affecting shareholder value.

Financial Leverage

Financial leverage ratios, both reported and adjusted, demonstrate a marked upward trend, signifying increasing reliance on debt relative to equity. Reported leverage rises from 2.88 in 2021 to 5.39 in 2024, indicating leverage almost doubling within the period. Adjusted leverage shows an even more pronounced increase, moving from 2.92 to 8.31, which reflects the compounded effect of declining adjusted equity alongside total assets. The increasing leverage ratios imply growing financial risk and higher leverage burden.

Overall, the data portrays a scenario of asset contraction followed by modest recovery, coupled with a significant and continuous decline in equity. The leverage ratios reinforce this picture by evidencing increasing dependence on debt financing. The adjusted figures, incorporating deferred income tax considerations, amplify these trends, indicating more pronounced reductions in equity and higher leverage levels than those suggested by reported figures alone.

The financial data indicate marked fluctuations in both reported and adjusted income figures over the four-year period. Reported net income attributable to the company shows a significant decline from a positive figure in the initial period to a considerable loss in the second period, followed by a substantial recovery and sharp increase in the subsequent years. The adjusted net income follows a similar pattern, with losses initially turning into significant gains in the latter years, albeit with values somewhat lower than the reported figures in the early 2020s and then surpassing them notably by the end of the period.

Stockholders’ equity presents a declining trend across the timeline. Both reported and adjusted equity values decrease steadily year over year. This contraction suggests a possible reduction in retained earnings or other equity components, potentially driven by the company’s performance and adjustments made for deferred income tax effects.

Return on Equity (ROE) metrics demonstrate high volatility, reflecting the fluctuations in net income relative to shareholders' equity. Reported ROE moves from a slight positive return to a significant negative in the second year, then recovers dramatically to very high positive percentages, peaking in the last period. Adjusted ROE exhibits a comparable trajectory but starts from a negative base and reaches even higher levels than reported ROE by the final year, indicating that the adjustments amplify the return measured on the adjusted equity base.

Income Trends

Financial results show a turnaround from substantial losses to robust profitability in adjusted and reported terms post-2022, signaling operational improvements or significant one-time events reversal.

Equity Trends

There is a consistent decrease in stockholders’ equity figures, with adjusted metrics declining more steeply, which could imply adjustments for deferred tax liabilities impacting equity adversely.

Profitability Metrics (ROE)

ROE analysis reveals significant financial performance variability, with adjusted returns showing magnified recovery and growth compared to reported figures, suggesting adjustments materially affect perceived profitability.

Overall, the data reflect a company undergoing substantial financial volatility, with improvements in income metrics in later years alongside shrinking equity balances, resulting in higher leverage of net income on equity. The adjusted figures highlight the impact of deferred tax considerations, affecting both income and equity, thus modifying the company's financial profile and investment returns as presented.

The financial data reveals significant fluctuations in both reported and adjusted figures over the four-year period. Reported net income experienced a sharp decline from a positive $35.4 million in 2021 to a negative $192.7 million in 2022. However, a strong recovery followed with net income rising to $356.7 million in 2023 and surging further to $1.58 billion in 2024. Adjusted net income exhibited a similar trend but with consistently lower values; it started with a loss of $30.3 million in 2021, deepened to a loss of $294.9 million in 2022, then rebounded to a gain of $274.3 million in 2023 and rose sharply to $1.38 billion in 2024.

Total assets, both reported and adjusted, showed a general downward trend through 2023 before rebounding somewhat in 2024. Reported total assets decreased from $6.16 billion in 2021 to $5.35 billion in 2023, increasing slightly to $5.87 billion thereafter. Adjusted total assets followed a similar pattern, falling from $6.13 billion in 2021 to $5.13 billion in 2023, then rising to $5.43 billion in 2024.

The return on assets (ROA) indicators reflected the profitability trends. Reported ROA dropped to a negative 3.3% in 2022 from a modest 0.58% in 2021, then increased markedly to 6.66% in 2023 and sharply to 26.92% in 2024. Adjusted ROA showed comparable movements with negative returns of -0.49% and -5.18% in 2021 and 2022 respectively, followed by recovery to 5.35% in 2023 and a substantial rise to 25.47% in 2024.

Income Trends

Both reported and adjusted net income displayed a pronounced dip in 2022, followed by a recovery and strong growth in the subsequent years. The adjusted net income figures were consistently lower than the reported figures, indicating significant adjustments related to income tax or other factors.

Asset Trends

The total asset base contracted during 2022 and 2023, reflecting possible asset sales, writedowns, or other balance sheet adjustments. The partial recovery in 2024 suggests either new investments, asset revaluation, or acquisition activities.

Profitability Metrics

The ROA metrics closely mirrored the income trends, with negative returns in 2022 followed by substantial improvements in 2023 and 2024. The large increase in ROA in the final year indicates an exceptional improvement in asset profitability.