AppLovin Corp. (NASDAQ:APP)

Leverage Ratios

The debt to equity ratio has exhibited a clear upward trend, increasing from 1.53 in 2021 to 3.36 in 2024. This indicates a growing reliance on debt relative to shareholders' equity over the period. When operating lease liabilities are included, the ratio follows a similar pattern, slightly higher but consistent in its increase. The debt to capital ratio and its variant including operating lease liabilities also demonstrate a steady rise, moving from around 0.60 to approximately 0.77, reflecting an increasing share of debt within the company’s capital structure.

Debt to Assets

The debt to assets ratio has increased from 0.53 in 2021 to 0.62 in 2024, indicating that the proportion of total assets financed by debt has risen moderately. Including operating lease liabilities results in marginally higher values, but the trend remains consistent. This suggests a gradual shift towards higher financial leverage at the asset level.

Financial Leverage

Financial leverage shows a significant increase, rising from 2.88 to 5.39 over the period. This sharp increase corroborates the trends observed in the debt-related ratios and points to an expanding use of debt financing which amplifies the company’s overall leverage.

Interest and Fixed Charge Coverage

Interest coverage has demonstrated considerable volatility. It began at 1.45 in 2021, dropped to a negative figure in 2022 (indicating inability to cover interest expenses), but then recovered strongly to 2.38 in 2023 and improved further to 5.95 in 2024. This trajectory reflects an initial period of financial stress or decreased earnings relative to interest obligations, followed by robust improvement in earnings or reduction in interest burden. A parallel pattern is observed in the fixed charge coverage ratio, showing negative coverage in 2022 but recovering and surpassing its initial levels by 2024.

The financial data reveals significant changes in the capital structure over the observed period. Total debt has exhibited a gradual increase each year, starting from approximately 3.27 billion US dollars at the end of 2021 and rising to around 3.66 billion US dollars by the end of 2024. This persistent growth in debt suggests a strategy of increased leveraging or additional borrowing during the timeframe.

Conversely, stockholders' equity has experienced a notable decline over the same period. Beginning at about 2.14 billion US dollars at the end of 2021, equity decreased to approximately 1.09 billion US dollars by the end of 2024. The decline in equity may indicate accumulated losses, share repurchases, or other capital adjustments reducing the net book value attributable to shareholders.

The combined effect of rising debt and declining equity has led to a substantial increase in the debt-to-equity ratio. The ratio moved from 1.53 at the end of 2021 to 3.36 at the end of 2024, reflecting a considerable shift toward higher financial leverage. This higher leverage ratio suggests increased financial risk, indicating that the company relies more heavily on borrowed funds relative to shareholders' equity to finance its assets and operations.

In summary, the trend over the four-year period demonstrates a strategic or operational inclination toward greater indebtedness, accompanied by a reduction in equity, culminating in a marked increase in financial leverage. This pattern warrants close attention to the implications for the company's solvency, cost of capital, and risk profile going forward.

Total debt (including operating lease liability)

The total debt remained relatively stable from 2021 through 2023, showing a slight decrease from approximately $3.35 billion to $3.34 billion. However, in 2024, there is a notable increase in total debt, reaching about $3.71 billion, indicating an increase in leverage or financing activities during that year.

Stockholders’ equity

Stockholders' equity exhibited a consistent downward trend over the four-year period. Starting at roughly $2.14 billion in 2021, it decreased to about $1.90 billion in 2022, further declined to approximately $1.26 billion in 2023, and reached around $1.09 billion by the end of 2024. This decline suggests a reduction in net assets or increased losses impacting equity.

Debt to equity (including operating lease liability)

The debt to equity ratio shows a clear upward trajectory, indicating growing financial leverage. It increased from 1.57 in 2021 to 1.76 in 2022, followed by a more pronounced increase to 2.66 in 2023, and peaked at 3.41 in 2024. This significant rise in the debt to equity ratio reflects a shift towards greater reliance on debt financing relative to equity, pointing to higher financial risk and potential pressure on solvency.

Total debt

The total debt shows a consistent increase over the observed periods. It rose slightly from approximately 3.27 billion US dollars at the end of 2021 to about 3.29 billion US dollars at the end of 2023. A more significant increase is noted in 2024, where total debt reached around 3.67 billion US dollars. This upward trend indicates a growing reliance on debt financing over time.

Total capital

Total capital, conversely, demonstrates a declining trend from 2021 through 2023, decreasing from approximately 5.41 billion US dollars to about 4.54 billion US dollars. In 2024, there is a modest recovery to an estimated 4.76 billion US dollars, but the level remains below that of 2021. This overall decrease in total capital alongside rising debt suggests changes in equity or other components of capital structure.

Debt to capital ratio

The debt to capital ratio exhibits a clear increasing trend over the four years. It started at 0.60 in 2021 and rose steadily to 0.77 in 2024. This implies that the proportion of debt within the total capital structure has increased, indicating a higher leverage position and potentially greater financial risk.

Summary

The financial data reveals a pattern of increasing leverage, as evidenced by rising total debt and an escalating debt to capital ratio. The decrease in total capital through 2023, followed by a slight improvement in 2024, combined with growing debt levels, suggests the company's capital structure is becoming more debt-driven. This shift may affect the company's financial risk profile and should be monitored closely.

The financial data indicates specific trends in the company's capital structure over the four-year period ending December 31, 2024. Both total debt and total capital amounts experienced fluctuations that influenced the overall leverage ratios.

Total Debt

The total debt, inclusive of operating lease liabilities, slightly decreased from approximately 3.35 billion US dollars at the end of 2021 to about 3.34 billion at the end of 2022, and further marginally to roughly 3.34 billion at the end of 2023. However, a notable increase occurred in 2024, with total debt rising to around 3.71 billion US dollars. This upward movement suggests an increased reliance on debt financing towards the end of the period.

Total Capital

Total capital, also inclusive of operating lease liabilities, showed a declining trend from approximately 5.49 billion US dollars in 2021 to about 5.25 billion in 2022. The downward trajectory continued more sharply into 2023, where total capital decreased to approximately 4.60 billion, followed by a slight recovery to about 4.80 billion in 2024. Despite this modest rebound, total capital at the end of 2024 remained below the 2021 level.

Debt to Capital Ratio

The debt to capital ratio increased consistently over the period, rising from 0.61 in 2021 to 0.64 in 2022. The escalation continued to 0.73 in 2023, reaching 0.77 in 2024. This upward trend indicates that debt comprises an increasingly larger proportion of the company’s capital structure, pointing to higher financial leverage and potentially greater financial risk.

Overall, the data reflect a gradual decline in total capital accompanied by an increase in total debt, resulting in a rising debt-to-capital ratio. This pattern suggests that the company has been progressively financing a greater portion of its capital structure through debt, which may affect its financial stability and risk profile moving forward.

The financial data indicates a clear upward trend in the company's total debt over the four-year period, increasing from approximately $3.27 billion to about $3.67 billion. This rise in debt suggests increased leverage or borrowing during this time frame.

Conversely, total assets have exhibited a declining trend from 2021 through 2023, decreasing from roughly $6.16 billion to $5.36 billion, followed by a partial recovery in 2024 where total assets grew again to approximately $5.87 billion. Despite this recovery, total assets in 2024 remain below their initial levels observed in 2021.

Debt to Assets Ratio

The ratio of debt to assets has steadily increased from 0.53 in 2021 to 0.62 in 2024. This upward trajectory reflects growing financial leverage and indicates that a larger portion of the company’s assets is financed through debt. This trend is consistent with the rising total debt and relatively stagnant or slightly recovering asset base.

Overall, the data reveals a pattern of increasing leverage, which may raise concerns regarding financial risk and dependency on external financing. The company's ability to manage this rising debt in relation to its asset base may become a critical factor for financial stability going forward.

The financial data reveals a discernible trend in the leverage and asset base of the company over the period analyzed.

Total Debt (Including Operating Lease Liability)

The total debt remained relatively stable from 2021 through 2023, with slight decreases each year, shifting from approximately 3.35 billion to 3.34 billion and then to 3.34 billion in thousands of US dollars. However, there is a noticeable increase in 2024, where total debt rises to approximately 3.71 billion. This suggests an increased reliance on debt financing in the most recent year observed.

Total Assets

Total assets demonstrate a decreasing trend from 2021 through 2023, falling from about 6.16 billion to 5.85 billion and then further to 5.36 billion in thousands of US dollars. In 2024, total assets show a moderate recovery, increasing to approximately 5.87 billion. This fluctuation indicates a contraction followed by a partial rebound in the asset base.

Debt to Assets Ratio (Including Operating Lease Liability)

The debt to assets ratio presents an increasing trend throughout the four years, starting at 0.54 in 2021 and rising steadily to 0.57 in 2022, 0.62 in 2023, and reaching 0.63 in 2024. The rising ratio signals that the company's leverage position has intensified, with a growing proportion of its assets being financed by debt.

Overall, the data suggests a strategic shift towards increased leverage, especially in the most recent year, combined with a period of asset contraction followed by slight growth. The escalation in the debt to assets ratio reflects a higher financial risk profile, potentially impacting the company’s solvency and cost of capital considerations moving forward.

Total Assets

Total assets demonstrate a declining trend from the end of 2021 through 2023, decreasing from approximately $6.16 billion to $5.36 billion. However, there is a notable recovery in 2024, with total assets increasing to around $5.87 billion. This indicates some rebound in asset base after a period of contraction.

Stockholders’ Equity

Stockholders’ equity shows a consistent and marked decline over the four-year period. Starting at about $2.14 billion at the end of 2021, equity drops steadily each year to approximately $1.91 billion in 2022, $1.26 billion in 2023, and further down to roughly $1.09 billion in 2024. This decline suggests either continued losses, dividend distributions exceeding earnings, or potential equity repurchases.

Financial Leverage

Financial leverage exhibits a clear upward trajectory across the time span analyzed. Beginning at 2.88 in 2021, leverage increases progressively to 3.07 in 2022, then surges to 4.27 in 2023, and reaches 5.39 in 2024. The rising leverage ratio indicates a growing reliance on debt financing relative to equity, which can imply increased financial risk and greater sensitivity to changes in earnings or interest rates.

Earnings Before Interest and Tax (EBIT)

The EBIT demonstrates significant volatility over the observed periods. In 2021, EBIT was positive at approximately $149.5 million. However, it declined sharply to a negative figure of about $33.3 million in 2022, indicating operational difficulties or extraordinary items impacting profits. The subsequent years show a strong recovery and growth, with EBIT rising substantially to $656.2 million in 2023 and further advancing to $1.89 billion in 2024. This upward trend in the last two years highlights improved operational efficiency or a significant increase in profitability.

Interest Expense and Loss on Settlement of Debt

The interest expense and loss on settlement of debt have increased consistently throughout the periods analyzed. Starting from $103.2 million in 2021, it rose to $171.9 million in 2022, then to $275.7 million in 2023, reaching $318.3 million by 2024. This steady increase suggests growing debt levels or higher financing costs, which may represent increased leverage or refinancing activities at higher rates.

Interest Coverage Ratio

The interest coverage ratio, which measures the company's ability to meet interest obligations from operating earnings, exhibits marked fluctuations. It was 1.45 in 2021, indicating moderate coverage of interest charges. The ratio sharply declined into negative territory to -0.19 in 2022, reflecting EBIT losses and an inability to cover interest expenses during that year. Subsequently, the ratio improved significantly to 2.38 in 2023 and further to 5.95 in 2024, indicating a strong recovery in operational earnings relative to interest obligations. The upward trajectory signals improving financial health and enhanced capacity to service debt.

Summary

The financial data reveal a challenging period in 2022 marked by negative EBIT and insufficient earnings to cover interest expenses. Despite increasing interest burdens over time, the company has shown a robust recovery in operating profitability in 2023 and 2024. This recovery has resulted in substantially enhanced EBIT levels and improved interest coverage ratios, indicative of stronger operational performance and better debt management. Continuing growth in EBIT alongside rising interest expenses suggests careful monitoring of leverage is warranted to sustain financial stability.

Earnings Before Fixed Charges and Tax

The earnings before fixed charges and tax exhibited significant volatility over the analyzed periods. Initially, there was a positive value in 2021, followed by a decline into negative territory in 2022, indicating operational challenges or increased expenses affecting profitability. However, a substantial recovery occurred in the subsequent years, with earnings rebounding markedly in 2023 and further increasing in 2024. This trend suggests a strong turnaround in operating performance or improved revenue streams and cost management during the later periods.

Fixed Charges

Fixed charges demonstrated a steady and consistent upward trend throughout the timeframe. From 2021 to 2024, fixed charges more than doubled, indicating rising costs related to financing activities such as interest expenses or other contractual obligations. This increase poses a higher financial burden on the company, potentially influencing its cash flow and overall financial stability if not matched by proportional earnings growth.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio, a measure of the company's ability to cover fixed financial obligations with its earnings, reflected noticeable fluctuations aligned with earnings and fixed charges trends. Starting with a ratio above 1 in 2021, indicating the company comfortably covered its fixed charges, the ratio sharply declined into negative territory in 2022, signaling insufficient earnings to cover these obligations that year. Subsequent periods showed recovery and strong improvement, with the ratio increasing above 2 in 2023 and reaching nearly 5.7 in 2024, demonstrating a significant enhancement in the company's capacity to meet its fixed financial charges through operating earnings.