AppLovin Corp. (NASDAQ:APP)

Net Operating Profit After Taxes (NOPAT)

NOPAT experienced significant volatility over the period. It decreased sharply from approximately $46.3 million in 2021 to a negative $171.5 million in 2022. However, there was a strong recovery in the following years, with NOPAT rising to about $509.0 million in 2023 and further increasing to approximately $1.02 billion in 2024. This indicates a substantial improvement in operational profitability after the initial downturn.

Cost of Capital

The cost of capital showed an overall upward trend. It started at 24.48% in 2021, decreased to 18.81% in 2022, then increased notably to 25.16% in 2023, and further to 27.42% in 2024. The decline in 2022 may reflect a temporary drop in capital costs, but the subsequent increases suggest rising required returns or increased financial risk over time.

Invested Capital

Invested capital demonstrated a steady decline from about $5.58 billion in 2021 to roughly $4.53 billion in 2024. The most significant reduction occurred during 2022 and 2023, with a slight stabilization observed in 2024. This trend might indicate divestitures, capital efficiency measures, or reduction in asset base over the years.

Economic Profit

Economic profit remained negative throughout the period, though it showed progressive improvement. In 2021, the economic loss was approximately $1.32 billion, slightly reduced to $1.16 billion in 2022, and further declined to $627 million in 2023. By 2024, the negative economic profit narrowed significantly to about $223 million. The consistent negative values suggest that, despite profitability improvements, the company has struggled to generate returns above its cost of capital, although the gap is closing over time.

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.

Economic Profit

The economic profit demonstrates a consistent improvement over the observed periods. Starting at a considerable negative value of -1,318,797 thousand US dollars in 2021, the loss diminishes each year, reaching -222,503 thousand US dollars by 2024. This trend indicates a substantial reduction in economic losses, suggesting enhanced operational efficiency or profitability drivers in the company.

Invested Capital

Invested capital shows a declining trend from 5,576,322 thousand US dollars in 2021 to 4,514,462 thousand US dollars in 2023, followed by a slight increase to 4,539,074 thousand US dollars in 2024. The overall decrease over the four years may reflect divestitures, asset disposals, or strategic capital reallocations. The slight rebound in the final year could indicate new investments or revaluation of existing assets.

Economic Spread Ratio

This ratio, which measures the spread between return on invested capital and cost of capital, remains negative in all periods but shows a marked improvement. Starting at -23.65% in 2021, it improves progressively, reaching -4.9% in 2024. Although still negative, this narrowing gap suggests a movement towards covering the cost of capital and improving value creation.

Summary of Trends

The data reveals a coherent pattern where decreasing invested capital coincides with improving economic profit and a less negative economic spread ratio. The company appears to be enhancing its financial performance and capital efficiency, reducing losses and narrowing the deficit between returns and costs. Continued focus on improving returns relative to capital costs could lead to positive economic profits in the future.

Economic Profit

The economic profit shows a consistent improvement over the four-year period. It started at a negative value of approximately -1.32 billion US dollars in 2021 and improved steadily each year, reaching around -223 million US dollars by the end of 2024. This trend indicates a reduction in economic losses and suggests progress toward achieving profitability.

Adjusted Revenue

Adjusted revenue exhibits a positive growth trajectory across the observed years. Beginning at approximately 2.79 billion US dollars in 2021, revenue increased slightly to around 2.80 billion in 2022. The growth accelerated in the subsequent years, with revenues reaching nearly 3.30 billion in 2023 and a significant rise to over 4.70 billion US dollars by the end of 2024. This upward trend indicates strong top-line growth and expanding operational scale.

Economic Profit Margin

The economic profit margin, expressed as a percentage, also improved markedly during the period. From a deeply negative margin of -47.35% in 2021, it rose to -41.34% in 2022, -19.01% in 2023, and further to -4.73% in 2024. Despite remaining negative, the substantial narrowing of the loss margin signals enhanced efficiency and a movement closer to profitability.