AppLovin Corp. (NASDAQ:APP)

Receivables Turnover

The receivables turnover ratio consistently declined from 5.43 in 2021 to 3.33 in 2024. This indicates a slowing pace of collecting receivables over the period, suggesting that the company takes longer to convert its accounts receivable into cash.

Payables Turnover

The payables turnover ratio exhibited fluctuations, increasing from 3.83 in 2021 to a peak of 4.6 in 2022, followed by a sharp decline to 2.07 by 2024. This trend reveals that the company initially accelerated payment of its obligations but then significantly extended the payment period in the following years.

Working Capital Turnover

Working capital turnover improved markedly from 1.08 in 2021 to 4.89 in 2023, before retreating slightly to 3.75 in 2024. This implies enhanced efficiency in utilizing working capital to generate revenue until 2023, with a minor reduction in efficiency in the most recent year.

Average Receivable Collection Period

There was a steady increase in the average receivable collection period, climbing from 67 days in 2021 to 110 days in 2024. This trend aligns with the decreasing receivables turnover, confirming a lengthening duration to collect payments from customers.

Average Payables Payment Period

The average payables payment period decreased from 95 days in 2021 to 79 days in 2022, before increasing sharply to 176 days by 2024. This suggests a strategy to defer payments to suppliers over time, possibly to conserve cash or manage liquidity more flexibly in recent periods.

Over the analyzed period, the revenue demonstrates a consistent upward trajectory, increasing substantially each year. Starting from approximately $2.79 billion, revenue rose marginally to around $2.82 billion in the subsequent year, followed by a more significant increase to about $3.28 billion, and culminating in a considerable jump to nearly $4.71 billion. This pattern suggests sustained growth in sales or service income.

The net accounts receivable also exhibit a pronounced increase, expanding from roughly $514.5 million to approximately $1.41 billion over the period. This marked growth in receivables is consistent with the rising revenue figures but indicates that a greater portion of sales is tied up in receivables.

The receivables turnover ratio declines steadily from 5.43 to 3.33 during the same time frame. This decreasing trend implies that the company is collecting its receivables more slowly as time progresses, as the turnover ratio measures how many times receivables are collected during a period. The decline may suggest extended credit terms to customers or increasing difficulties in collection.

Collectively, these trends reveal strong revenue growth accompanied by an increasing balance of accounts receivable and a reduction in the efficiency of receivables collection. This situation signals a potential increase in credit risk and the need for management to monitor working capital closely. The data indicates that while demand and sales appear robust, attention should be given to improving collections and managing credit policies to support liquidity.

Cost of Revenue

The cost of revenue exhibited a fluctuating trend over the observed period. It increased significantly from 988,095 thousand US dollars at the end of 2021 to 1,256,065 thousand US dollars in 2022, indicating a substantial rise in direct costs associated with the generation of revenue. This was followed by a decline to 1,059,191 thousand US dollars in 2023, which may suggest improved efficiency or changes in sales volume or pricing strategies. However, in 2024, the cost of revenue rose again to 1,166,806 thousand US dollars, implying a partial reversal of the prior year's reduction.

Accounts Payable

Accounts payable demonstrated a consistent upward trend from 258,220 thousand US dollars in 2021 to 563,427 thousand US dollars by the end of 2024. The growth accelerated notably in the last year observed, with accounts payable increasing more sharply between 2023 and 2024 compared to previous years. This rise might reflect extended payment terms with suppliers or increased business activity necessitating higher credit purchases.

Payables Turnover Ratio

The payables turnover ratio revealed a marked decline throughout the period. Starting at 3.83 in 2021 and rising slightly to 4.6 in 2022, the ratio then dropped to 2.85 in 2023 and further decreased to 2.07 in 2024. This declining ratio suggests the company is taking longer to settle its obligations to suppliers, potentially indicating a strategic shift towards utilizing trade credit more extensively or experiencing cash flow management challenges. The inverse relationship between the rising accounts payable and the falling turnover ratio supports this interpretation.

Working Capital

The working capital has exhibited a declining trend from 2,594,967 thousand US dollars at the end of 2021 to 672,041 thousand US dollars by the end of 2023, followed by a partial recovery to 1,254,718 thousand US dollars in 2024. This overall reduction indicates a decrease in the difference between current assets and current liabilities over the first three years, with a rebound observed in the most recent period.

Revenue

Revenue demonstrated steady growth over the observed periods. Starting at 2,793,104 thousand US dollars in 2021, revenue slightly increased to 2,817,058 thousand in 2022, then rose more significantly to 3,283,087 thousand in 2023, and saw a pronounced escalation up to 4,709,248 thousand in 2024. This indicates a strong upward trajectory in the company's ability to generate sales.

Working Capital Turnover

The working capital turnover ratio increased markedly from 1.08 in 2021 to 2.07 in 2022 and surged further to 4.89 in 2023 before declining to 3.75 in 2024. This ratio's initial rise suggests improved efficiency in utilizing working capital to generate revenue despite decreasing working capital balances. The decrease in 2024, while still remaining high, reflects an increase in working capital which outpaced revenue growth to some degree during that year.

Summary

The data reveals that while the company experienced a reduction in working capital in the first three years, it managed to increase revenue consistently, enhancing working capital turnover efficiency during this period. The partial recovery in working capital in 2024 coincided with a significant revenue increase, resulting in a slight decrease in turnover ratio but maintaining a strong operating performance. Overall, the company demonstrates an ability to grow revenue effectively with improved or stable efficiency in the use of working capital.

Receivables Turnover

The receivables turnover ratio demonstrates a declining trend over the four-year period, decreasing from 5.43 in 2021 to 3.33 in 2024. This decline indicates that the company is collecting its receivables less frequently each year.

Average Receivable Collection Period

Correspondingly, the average receivable collection period has increased steadily from 67 days in 2021 to 110 days in 2024. This upward trend implies that on average, it is taking the company longer to collect payments from its customers, which could adversely impact its cash flow.

Overall Analysis

The inverse relationship observed between the receivables turnover and the collection period is consistent with typical financial behavior, where a lower turnover ratio correlates with a higher collection period. The trends suggest potential challenges in accounts receivable management or customer payment behavior, warranting closer attention to credit policies and collection practices to prevent further deterioration.

The financial data reveals notable shifts in the company's payables management over the four-year period ending in 2024. These changes are reflective of the company's evolving operational or financial strategies concerning its obligations to suppliers and vendors.

Payables Turnover

The payables turnover ratio exhibits a declining trend from 3.83 in 2021 to 2.07 in 2024. This decline indicates that the company is paying off its suppliers less frequently each year. A lower turnover ratio generally suggests an elongation in the payment cycle or more extended credit terms from suppliers.

Average Payables Payment Period

Correspondingly, the average payables payment period has increased substantially, from 95 days in 2021 to 176 days in 2024. This increase reinforces the observation that the company is lengthening the duration it takes to settle its payables. A longer payment period can improve short-term liquidity by keeping cash within the company longer but may impact supplier relationships.

Overall, the data points to a strategic decision or necessary adjustment in managing cash flows leading to slower payment cycles. While this may benefit the company’s working capital position in the short term, continuous monitoring is advisable to ensure that this strategy does not adversely affect supplier terms or the company's reputation.