AppLovin Corp. (NASDAQ:APP)

Net Operating Profit After Taxes (NOPAT)

There is a significant fluctuation in NOPAT across the periods. In 2021, the NOPAT was positive at 46,321 thousand US dollars but turned negative in 2022, reaching -171,497 thousand US dollars. The following years show a strong recovery and growth, with NOPAT increasing substantially to 508,977 thousand US dollars in 2023 and further to 1,022,182 thousand US dollars in 2024. This trend indicates an initial decline in operating profitability followed by a robust improvement.

Cost of Capital

The cost of capital shows some variability but generally trends upwards over the four years. It decreased from 24.69% in 2021 to 18.96% in 2022, suggesting a reduction in the company's required return or risk perception during that year. However, it increased sharply to 25.38% in 2023 and climbed further to 27.67% in 2024, which may reflect increased risk, higher capital costs, or changes in market conditions impacting the company's financing expenses.

Invested Capital

Invested capital demonstrates a declining trend from 5,576,322 thousand US dollars in 2021 to 4,517,462 thousand US dollars in 2023, with a slight increase to 4,539,074 thousand US dollars in 2024. This overall reduction in invested capital suggests possible asset disposals, efficiency improvements, or strategic capital allocation decisions aimed at optimizing the capital base.

Economic Profit

Economic profit remains negative throughout the period but shows consistent improvement year over year. The deficit decreases from -1,330,537 thousand US dollars in 2021 to -1,166,359 thousand US dollars in 2022, further to -636,609 thousand US dollars in 2023, and finally to -233,586 thousand US dollars in 2024. Although still negative, this trend indicates the company is progressively moving closer to generating returns above its cost of capital.

Net income (loss) attributable to AppLovin

The net income demonstrates significant volatility over the four-year period. In 2021, the company reported a net income of $35,446 thousand. However, there was a considerable decline in 2022, with a net loss of $192,746 thousand recorded. The financial performance improved markedly in the subsequent years, with net income rebounding to $356,711 thousand in 2023 and substantially increasing to $1,579,776 thousand in 2024. This pattern indicates an initial downturn followed by strong recovery and growth.

Net operating profit after taxes (NOPAT)

The NOPAT values follow a trend similar to net income. Starting at $46,321 thousand in 2021, NOPAT shifted into a negative territory in 2022 with a loss of $171,497 thousand. The metric then showed a sharp improvement in 2023, increasing to $508,977 thousand, and further doubling to $1,022,182 thousand in 2024. This trend suggests an effective turnaround in the company’s operational profitability post-2022.

Overall Analysis

The financial data reveals a period of operational and financial struggle in 2022, characterized by negative net income and NOPAT. The subsequent years reflect a successful recovery, highlighted by substantial positive gains in profitability in 2023 and 2024. The strong upward trajectory in both net income and NOPAT during the latter years underscores significant improvements in both operational efficiency and overall financial health.

The financial data reveals distinct patterns in the company's tax-related figures over the four-year period ending December 31, 2024.

Provision for (benefit from) income taxes

This item fluctuates significantly throughout the period. In 2021, the company recorded a positive provision of approximately $10,973 thousand, indicating an expected tax expense. In 2022, this shifted to a benefit of about $12,230 thousand, suggesting recognition of tax benefits or credits reducing income tax expense. In 2023, the provision reverted to a substantial tax expense of roughly $23,859 thousand. The following year, 2024, again showed a tax benefit of $3,771 thousand. The alternating pattern between tax expenses and benefits over the years may reflect varying profitability levels, tax planning strategies, or one-time adjustments impacting the income tax provision.

Cash operating taxes

This figure shows a consistent upward trend, with a notable acceleration in the final year. Starting at approximately $99,248 thousand in 2021, cash taxes paid increased steadily to $126,764 thousand in 2022 and further to $164,738 thousand in 2023. The year 2024 presents an exceptional rise to $865,828 thousand, which is a significant leap compared to prior years. This sudden increase in cash operating taxes may indicate higher taxable income, changes in tax rates or policy, or settlement of prior tax liabilities, suggesting a considerable impact on the company's cash flows related to tax payments.

Overall, the data demonstrates a pattern of fluctuating tax provisions, alternating between expenses and benefits, alongside a steadily increasing and then sharply rising cash tax outflow. This divergence might hint at timing differences, disparities between accounting tax provision and actual cash taxes paid, or episodic tax events influencing the company’s tax expenses and cash taxes paid differently.

The financial data reveals several notable trends in the company's capital structure and leverage over the four-year period under review.

Total Reported Debt & Leases

The total reported debt and leases remained relatively stable between 2021 and 2023, with slight decreases from approximately 3.35 billion to 3.34 billion US dollars. However, there was a significant increase in 2024, reaching approximately 3.71 billion US dollars. This indicates a shift towards higher leverage or increased borrowing in the most recent year.

Stockholders’ Equity

Stockholders' equity exhibited a consistent declining trend throughout the period. Starting at about 2.14 billion US dollars in 2021, it decreased to roughly 1.90 billion in 2022, followed by a more pronounced decline to about 1.26 billion in 2023, and further reducing to nearly 1.09 billion in 2024. This steady reduction potentially signals increased losses, share repurchases, or distributions exceeding retained earnings, weakening the equity base.

Invested Capital

Invested capital displayed a downward trajectory from 5.58 billion US dollars in 2021 to 4.51 billion in 2023, reflecting a decrease of approximately 19%. In 2024, there was a slight uptick to 4.54 billion US dollars, indicating some stabilization or minor growth after the decline. The overall reduction aligns with the trends observed in equity and debt, suggesting changes in the company's asset base or capital structure.

In summary, the company has experienced a notable increase in debt levels in the most recent year alongside a steady erosion of equity, leading to a reduced invested capital base. These developments point to an increased reliance on debt financing and potential pressures on financial stability, which warrant further analysis of profitability, cash flow, and risk management practices.

The analysis of the financial data over the four-year period reveals a continuous improvement in the company's economic profit, although it remains negative throughout. Economic profit increased from a loss of approximately $1.33 billion in 2021 to a smaller loss of approximately $234 million in 2024. This indicates a steady reduction in economic losses, suggesting improvements in operational efficiency or profitability.

Invested capital exhibited a decreasing trend from 2021 to 2023, falling from approximately $5.58 billion to about $4.51 billion, before stabilizing slightly in 2024 to around $4.54 billion. The reduction in invested capital could be indicative of asset divestitures, optimization efforts, or a strategic shift in the company's capital allocation. The stabilization in 2024 suggests that the reduction phase may have concluded.

The economic spread ratio, a key indicator reflecting the return on invested capital relative to its cost, remained negative throughout the period but displayed significant improvement. It improved from -23.86% in 2021 to -5.15% in 2024, suggesting that the company is gradually moving towards achieving returns closer to or above its cost of capital. However, the consistently negative values indicate that the company has yet to generate positive economic value consistently.

In summary, the data trends indicate ongoing efforts to improve economic profitability and optimize invested capital, resulting in progressively narrower economic losses and an improving economic spread. Continued focus on these areas may potentially transition the company into positive economic profit territory in the future.

The annual financial data indicates a significant improvement in economic profit over the reported periods. Economic profit, while negative in all years, shows a decreasing loss trend from approximately -1,330 million US dollars in the first period to about -234 million in the latest period. This suggests a steady movement toward profitability.

The adjusted revenue exhibits consistent growth across the years. Starting near 2,785 million US dollars, revenue increased slightly in the second period to approximately 2,802 million, followed by a stronger growth to about 3,298 million and a substantial increase to roughly 4,701 million in the final period. This upward trajectory in revenue aligns with the improving economic profit figures.

Correspondingly, the economic profit margin, expressed as a percentage, improved markedly over time. Initially recorded at nearly -48%, it became less negative in each following year, reaching approximately -5% in the last period. This closer approach to breakeven margin illustrates enhanced efficiency or profitability relative to revenue generation.

Overall, the data reveals a company that is successfully increasing its revenue base while progressively reducing its economic losses, indicating positive financial momentum and operational improvements over the periods analyzed.