Analysis of Debt
Total Debt (Carrying Amount)
Twitter Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
Total debt exhibited a significant upward trajectory between 2017 and 2021, increasing from approximately $1.79 billion to $4.25 billion. Despite a slight contraction in 2019, the overall trend indicates a substantial expansion of the company's leverage, with the most aggressive growth occurring in the final year of the period analyzed.
- Convertible Notes Analysis
- Convertible notes serve as the primary component of the debt structure. Long-term convertible notes grew steadily from $1.63 billion in 2017 to $1.88 billion in 2020, before experiencing a sharp increase to $3.56 billion in 2021. Short-term convertible notes appeared intermittently, with balances of approximately $897 million in 2018 and $918 million in 2020, suggesting the movement of these instruments into current liabilities as they approached maturity.
- Senior Notes Integration
- The debt profile was diversified in 2019 with the introduction of long-term senior notes totaling $692 million. This balance remained remarkably stable through 2021, contributing a consistent layer of long-term obligations to the overall carrying amount.
- Finance Lease Liabilities
- A systematic reduction in finance lease liabilities is evident. Combined short-term and long-term lease obligations totaled approximately $166 million in 2017 but declined consistently over the following years, effectively reaching zero by 2021. This indicates a shift away from capitalized lease financing.
The overall financial position reflects a strategic pivot toward high-value convertible debt instruments. The surge in total debt during 2021 was driven almost exclusively by the issuance of long-term convertible notes, while the elimination of lease liabilities suggests a consolidation of financing methods focused on tradable debt securities.
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Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Convertible and senior notes outstanding | 4,476,926) |
| Finance lease liabilities | —) |
| Total debt (fair value) | 4,476,926) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.05 |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 0.80%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 0.25% | 1,244,760) | 3,112) | |
| 0.38% | 1,206,210) | 4,523) | |
| 0.00% | 1,297,200) | —) | |
| 3.88% | 728,756) | 28,239) | |
| Total | 4,476,926) | 35,874) | |
| 0.80% | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 35,874 ÷ 4,476,926 = 0.80%
Interest Costs Incurred
Twitter Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The total interest costs incurred demonstrate a period of sustained growth followed by a significant reduction. Between 2017 and 2020, there was a consistent upward trajectory in the costs associated with debt servicing, which reversed sharply in 2021.
- Growth Trend (2017–2020)
- Total interest costs incurred rose from 108,837 thousand US$ in 2017 to a peak of 156,678 thousand US$ in 2020. This reflects a cumulative increase of approximately 43.9% over the four-year period, driven predominantly by the steady rise in interest expense.
- Contraction in 2021
- A substantial decline is observed in 2021, with interest costs incurred dropping to 52,686 thousand US$. This represents a decrease of approximately 66.3% relative to the 2020 peak, suggesting a significant reduction in outstanding debt principal or a restructuring of financing terms.
- Interest Capitalization Analysis
- Interest costs capitalized remained a marginal component of the total costs incurred throughout the period. These costs peaked at 4,600 thousand US$ in 2019 before falling to 1,500 thousand US$ in 2021. The stability and low relative volume of capitalized interest indicate that the majority of interest costs were recognized immediately as expenses rather than being allocated to long-term assets.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= -359,927 ÷ 51,186 = -7.03
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= -359,927 ÷ 52,686 = -6.83
The interest coverage metrics exhibit extreme volatility over the five-year period ending December 31, 2021, transitioning from near-zero levels to a peak in 2018, followed by a severe decline into negative territory.
- Interest Coverage Ratio Trends
- A significant fluctuation is observed in the interest coverage ratio (without capitalized interest), which rose sharply from 0.09 in 2017 to a peak of 4.19 in 2018. This strength persisted moderately into 2019 at 3.82 before experiencing a precipitous drop to 0.67 in 2020 and collapsing to -7.03 by 2021.
- Adjusted Interest Coverage Analysis
- The adjusted interest coverage ratio (with capitalized interest) closely mirrors the trend of the non-adjusted ratio. The values remained nearly identical in 2017 (0.09) and followed a similar trajectory, peaking at 4.08 in 2018 and declining to -6.83 in 2021. The marginal difference between the two ratios suggests that capitalized interest had a negligible impact on the overall coverage profile.
- Solvency and Earnings Capacity
- The trajectory indicates a critical deterioration in the ability to service debt from operating earnings. While 2018 and 2019 showed sufficient coverage, the ratios in 2017, 2020, and 2021 fell below 1.0, signaling that earnings were insufficient to cover interest obligations. The transition to a negative ratio in 2021 reflects a shift to negative earnings before interest and taxes (EBIT), indicating a total loss of coverage capacity.
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