AppLovin Corp. (NASDAQ:APP)

Net Operating Profit After Taxes (NOPAT)

The company experienced significant fluctuations in net operating profit after taxes over the analyzed period. In 2021, NOPAT was positive at approximately $46.3 million. However, in 2022, it declined sharply to a negative value of around $171.5 million, indicating an operational loss during that year. Subsequently, there was a strong recovery and growth in 2023, with NOPAT rising to about $509.0 million. This upward trend continued into 2024, nearly doubling the previous year's figure to roughly $1.02 billion, demonstrating improved profitability and operational efficiency.

Invested Capital

Invested capital showed a consistent downward trend from 2021 to 2023, decreasing from approximately $5.58 billion to $4.51 billion. This reduction indicates that the company reduced the amount of capital employed in its operations during this period. In 2024, invested capital stabilized slightly, showing a marginal increase to around $4.54 billion, suggesting a pause or slight reversal in the previous disinvestment trend.

Return on Invested Capital (ROIC)

The return on invested capital mirrored the trends observed in NOPAT and invested capital. ROIC was low but positive at 0.83% in 2021. It then declined sharply to -3.27% in 2022, reflecting the operational losses that year and inefficient capital use. In 2023, the company achieved a notable turnaround with ROIC increasing to 11.27%. This momentum accelerated further in 2024, with ROIC reaching 22.52%, indicating substantially enhanced capital efficiency and value creation for the investors.

Overall Analysis

The company's financial performance over the four-year period displays a volatile but ultimately improving trajectory. The steep loss in 2022 was followed by remarkable recoveries in profitability and capital returns in the subsequent two years. The reduction in invested capital alongside improving NOPAT and ROIC suggests a more focused and efficient use of resources, contributing to increased financial returns and operational strength by 2024.

Operating Profit Margin (OPM)

The operating profit margin displayed considerable volatility over the observed periods. Initially, it was positive at 5.23% in 2021 before declining to a negative margin of -1.6% in 2022, indicating a loss at the operating level for that year. However, a notable recovery and expansion occurred in subsequent years, reaching 20.43% in 2023 and further increasing to 40.17% in 2024. This suggests significant improvements in operational efficiency or profitability.

Turnover of Capital (TO)

The turnover of capital ratio showed a consistent upward trend, improving steadily from 0.5 in 2021 to 1.04 by 2024. This increase implies growing effectiveness in utilizing capital assets to generate revenues over time, potentially reflecting enhanced asset management or operational scaling.

Effective Cash Tax Rate (1 – CTR)

The adjusted measure related to the effective cash tax rate exhibited high variability. Starting at 31.82% in 2021, it surged sharply to 100% in 2022, indicating no tax cash outflow or possibly significant tax credits or timing differences. The rate then declined to 75.55% in 2023 and further to 54.14% in 2024. These fluctuations suggest changes in taxable income, tax planning strategies, or tax regulations affecting the company’s tax obligations during this period.

Return on Invested Capital (ROIC)

The return on invested capital reflected initial underperformance with a low positive return of 0.83% in 2021, followed by a negative return of -3.27% in 2022, which indicates value destruction in that year. Subsequently, the company achieved a substantive turnaround, posting an ROIC of 11.27% in 2023 and further enhancing it to 22.52% in 2024. This progression suggests increased effectiveness in generating returns from invested capital, aligning with improvements noted in operating profit margin and capital turnover.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes exhibited significant fluctuations over the observed periods. There was a notable decline from a positive figure of approximately 145.6 million USD in the first period to a negative value of around 44.7 million USD in the subsequent period, indicating an operational loss. This was followed by a robust recovery, with the NOPBT rising sharply to about 673.7 million USD and further increasing to 1.89 billion USD by the last period. This pattern suggests a volatile performance initially, transitioning into strong profitability growth over time.

Adjusted Revenue

Adjusted revenue showed a generally upward trajectory throughout the periods. Starting at approximately 2.79 billion USD, revenue remained relatively stable in the next period with a slight increase to 2.80 billion USD. Subsequently, there was a significant growth spurt, with revenues increasing to nearly 3.30 billion USD and then accelerating further to 4.70 billion USD by the end of the last period. This steady increase implies a growing scale of operations or improved sales performance over time.

Operating Profit Margin (OPM)

The operating profit margin mirrored the trends observed in net operating profit. Initially, the margin was positive at around 5.23%. It then dipped into negative territory at -1.6% in the following period, reflecting the operational loss indicated earlier. However, the margin rebounded strongly in subsequent periods, reaching 20.43% and further expanding to 40.17%. The substantial expansion of the margin in the final periods points to improved operational efficiency and profitability relative to revenue.

The financial data reveals several significant trends over the four-year period ending in December 31, 2024.

Adjusted Revenue

The adjusted revenue demonstrates a steady increase from 2,785,148 thousand US dollars in 2021 to 2,802,146 thousand in 2022. This is followed by a more substantial growth to 3,297,628 thousand in 2023 and a sharp rise to 4,700,528 thousand by the end of 2024. This indicates a strong upward trajectory in revenue generation with an accelerating growth rate, particularly notable in the last year of the period.

Invested Capital

Invested capital shows a declining trend from 5,576,322 thousand US dollars in 2021 to 5,247,079 thousand in 2022, followed by a further decrease to 4,514,462 thousand in 2023. This downward movement continues with a minor increase to 4,539,074 thousand in 2024. Overall, invested capital is trending downward over the period, stabilizing near the end.

Turnover of Capital (TO)

The turnover of capital ratio exhibits a consistent improvement, rising from 0.5 in 2021 to 0.53 in 2022. The ratio experiences a more marked increase to 0.73 in 2023 and reaches 1.04 by 2024. This upward trend reflects increasingly efficient use of invested capital to generate revenue over the period.

In summary, while the company has reduced its invested capital base over the years, it has simultaneously managed to significantly boost its adjusted revenue. This has led to a marked increase in capital turnover, indicating enhanced operational efficiency and a stronger ability to generate revenue from each unit of capital invested. The rapid revenue growth in the latest year is particularly notable and suggests an accelerating business momentum.

Cash operating taxes

Cash operating taxes have shown a consistent upward trend from 2021 to 2024. Starting at $99,248 thousand in 2021, the amount increased to $126,764 thousand in 2022, followed by a further increase to $164,738 thousand in 2023. In 2024, there was a significant rise to $865,828 thousand, representing a substantial jump compared to the previous years.

Net operating profit before taxes (NOPBT)

The net operating profit before taxes exhibited considerable volatility over the period. In 2021, the NOPBT was $145,570 thousand. It then declined sharply to a negative value of -$44,733 thousand in 2022, indicating an operating loss before taxes. In 2023, the figure rebounded strongly to $673,715 thousand and further increased dramatically to $1,888,011 thousand in 2024, demonstrating a robust recovery and significant profitability growth in the last two years.

Effective cash tax rate (CTR)

The effective cash tax rate data is partially reported, with a value of 68.18% in 2021, no data for 2022, then decreasing substantially to 24.45% in 2023. In 2024, the rate increased again to 45.86%. This suggests a fluctuation in the tax burden relative to cash operating taxes and pre-tax profits, with a notably lower tax rate in 2023 compared to 2021, followed by a partial rise in 2024.