Twitter Inc. (NYSE:TWTR)

The analysis of the financial data presents several notable trends over the five-year period ending December 31, 2021.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows considerable volatility throughout the period. Initially, there is a significant negative figure in 2017, reflecting operational losses. This is followed by a strong positive recovery in 2018 and 2019, peaking in 2018 with a value exceeding $440 million. However, from 2019 onwards, the NOPAT declines sharply, turning marginally positive in 2020 before falling back into negative territory in 2021, reaching its lowest point in the observed period. This pattern indicates fluctuating operational performance with recent challenges impacting profitability adversely.

Cost of Capital

The cost of capital remains relatively stable across the years, fluctuating within a narrow range between approximately 9.95% and 10.96%. This slight variation suggests that the company’s capital costs have not experienced significant shifts, maintaining a consistent hurdle rate for investment evaluations.

Invested Capital

Invested capital demonstrates a steady upward trend, increasing by over 60% from 2017 to 2021. This consistent rise indicates ongoing capital investments or asset growth, which may be aimed at expanding operational capacity or supporting business development despite variability in profitability.

Economic Profit

The economic profit remains negative throughout all years, with a general worsening trend. After an improvement from 2017 to 2018, economic profit deteriorates persistently from 2019 onwards, reaching its most substantial deficit in 2021. This persistent negative economic profit suggests that the company has not generated returns exceeding its cost of capital, indicating value destruction from an economic perspective during the period analyzed.

In summary, while invested capital has increased steadily, the operational profitability has been highly inconsistent, and the continued negative economic profit highlights ongoing challenges in creating shareholder value. The relatively stable cost of capital further accentuates that the lack of economic profit arises principally from operational inefficiencies or market conditions rather than changes in the company’s funding costs.

The financial data reveals significant fluctuations in net income and net operating profit after taxes (NOPAT) over the five-year period.

Net Income (Loss)

Initially, there was a substantial net loss of approximately -108 million US dollars at the end of 2017. This was followed by a strong recovery in 2018, with net income increasing sharply to nearly 1.2 billion US dollars. The positive trend continued into 2019, with net income reaching around 1.47 billion US dollars. However, the company experienced a pronounced reversal in 2020, recording a significant net loss of approximately -1.14 billion US dollars. This negative result persisted into 2021, albeit at a reduced loss of about -221 million US dollars. Overall, net income demonstrates high volatility, with a peak in 2019 and losses resurging in the last two years of the period.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a similar pattern to net income, starting with a negative value of around -74 million US dollars in 2017. It then sharply increased to 443 million US dollars in 2018, followed by a slight decline to 382 million US dollars in 2019. A notable decline occurred in 2020, with NOPAT dropping to a marginal positive figure of about 17.5 million US dollars, indicating a substantial reduction in operational profitability. In 2021, NOPAT turned negative again, reaching approximately -388 million US dollars, which reflects a deterioration in operational efficiency or increased operating costs relative to revenue.

In summary, both profitability measures indicate a period of growth and profitability in the middle years (2018–2019), contrasting sharply with losses and reduced operating performance in the earlier and later years. This suggests the company faced considerable challenges affecting its bottom line and operations towards the end of the examined timeframe.

Provision (benefit) for income taxes

The provision (benefit) for income taxes displays significant fluctuations over the analyzed periods. Initially, in 2017, the company reported a positive provision, indicating tax expenses amounting to approximately 12.6 million US dollars. Subsequently, in 2018 and 2019, the figures reflect substantial negative values, with benefits representing tax credits or reductions exceeding 782 million and 1.07 billion US dollars respectively. This shift suggests large tax benefits or loss carrybacks during these years. However, in 2020, the provision reverted sharply to a positive expense exceeding 1.08 billion US dollars, indicating a considerable tax charge. Lastly, in 2021, the provision again turned negative at around 190 million US dollars, signifying a tax benefit. This volatililty suggests that the company experienced considerable variability in taxable income, tax planning outcomes, or tax accounting treatments across the years.

Cash operating taxes

Cash operating taxes have generally remained within a more stable range compared to the provision for income taxes. The amounts paid in cash taxes fluctuated moderately between approximately 27.6 million and 51.6 million US dollars throughout the periods. The lowest cash taxes occurred in 2018 at roughly 27.6 million US dollars, while the highest payment was recorded in 2021 at approximately 51.6 million US dollars. The intermediate years show amounts oscillating around 41.8 million to 49.7 million US dollars. The overall trend suggests relatively consistent cash outflows for taxes despite the considerable volatility in the tax provision figures, which may indicate timing differences, deferred tax effects, or non-cash tax items affecting the taxable income reconciliation.

The financial data reveals several key trends in the company's capital structure and financial positioning over the five-year period ending in 2021.

Total Reported Debt & Leases

This liability measure shows a general upward trend throughout the period. Starting at approximately 2.34 billion USD in 2017, the amount increased significantly to around 3.49 billion USD in 2018. A slight decrease to roughly 3.29 billion USD is observed in 2019, but the figure rises sharply again in the two subsequent years, reaching approximately 4.48 billion USD in 2020 and peaking at about 5.55 billion USD by the end of 2021. This trend indicates a growing reliance on debt and lease obligations to finance operations or investments.

Stockholders’ Equity

Equity shows overall growth from 2017 to 2019, moving from around 5.05 billion USD to above 8.7 billion USD. However, this is followed by a decline in the two subsequent years, falling to roughly 7.97 billion USD in 2020 and further to about 7.31 billion USD in 2021. This decrease suggests potential distribution of earnings (such as dividends or share buybacks), losses, or other equity-reducing events during these years.

Invested Capital

Invested capital displays a solid overall upward trajectory. It starts at approximately 4.63 billion USD in 2017 and steadily rises each year, reaching close to 7.45 billion USD by 2021. The progression is consistent, with the most notable increases occurring from 2019 onward. This upward movement indicates an expanding base of capital utilized to support the company’s operations and growth initiatives.

In summary, the company has increasingly utilized debt and leases as part of its capital structure, while stockholders' equity experienced growth through 2019 followed by reductions in subsequent years. The consistent increase in invested capital underscores an ongoing expansion in financial resources employed by the company, reflecting potential investments in assets or operational capabilities. The interplay between rising debt and declining equity toward the end of the period may warrant further analysis regarding financial risk and capital cost optimization.

Economic Profit

The economic profit exhibited a fluctuating but overall deteriorating trend over the five-year period. Starting from a negative value of approximately -579 million USD in 2017, the loss sharply decreased in 2018 to about -108 million USD, indicating a temporary improvement. However, this gain was not sustained as the economic profit worsened again in the subsequent years, reaching around -1.13 billion USD by the end of 2021. This indicates increasing economic losses, with the most significant downturn observed in 2021.

Invested Capital

Invested capital showed a consistent increasing trend throughout the period. It rose from approximately 4.63 billion USD at the end of 2017 to about 7.45 billion USD by the end of 2021. This steady growth suggests ongoing capital investment and asset accumulation, amounting to a total increase of over 3 billion USD across the five years.

Economic Spread Ratio

The economic spread ratio, which reflects the difference between return on invested capital and cost of capital, remained negative throughout the period, indicating that the returns generated by invested capital did not cover the associated costs. There was a notable improvement in 2018 to -2.09%, the least negative point during the period analyzed. However, from 2019 onwards, the ratio deepened negatively, reaching -15.15% by 2021, which points to a growing inefficiency in generating value relative to the capital invested.

Overall Insights

The data reveal a company experiencing escalating economic losses despite increasing investments in capital. While there was a brief improvement in economic profit and spread ratio in 2018, subsequent years showed deterioration in profitability metrics. The persistent negative and worsening economic spread ratio suggests challenges in achieving returns sufficient to cover the cost of capital, underlining concerns about operational efficiency and capital allocation effectiveness during the period evaluated.

Adjusted Revenue

The adjusted revenue exhibited a generally upward trend over the five-year period. Starting at approximately 2.44 billion US dollars in 2017, revenue increased significantly to over 5.09 billion US dollars by the end of 2021. The growth was steady each year, with the most substantial rise occurring between 2020 and 2021.

Economic Profit

Economic profit reflected consistent negative values throughout the period, indicating ongoing losses. The loss narrowed substantially from -579.5 million US dollars in 2017 to a smaller loss of approximately -108.2 million US dollars in 2018. However, economic profit deteriorated again in subsequent years, particularly increasing in magnitude in 2020 and reaching its most significant negative value of about -1.13 billion US dollars by 2021.

Economic Profit Margin

The economic profit margin, a measure of profitability relative to revenue, followed a pattern similar to that of economic profit. The margin improved notably from -23.77% in 2017 to -3.54% in 2018, suggesting enhanced efficiency or profitability in that year. Nevertheless, after 2018, the margin worsened, dropping to -22.15% by 2021, reflecting increasing losses relative to revenue despite the growth in revenue.

Overall Analysis

While the company experienced consistent revenue growth over the period, the sustained negative economic profit and declining economic profit margin indicate challenges in converting revenue growth into economic profitability. The substantial losses in economic profit in the later years, despite increased revenues, could point to rising costs, investments, or inefficiencies that have outweighed the benefits of revenue expansion.