Twitter Inc. (NYSE:TWTR)

The analysis of the financial data over a five-year period reveals several notable trends regarding net operating profit after taxes (NOPAT), cost of capital, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited considerable volatility throughout the period. Initially, the company experienced a negative NOPAT in 2017, indicating operational losses after taxes. A significant turnaround occurred in 2018 with a sharp increase to a positive NOPAT, peaking at approximately 443 million USD. However, the following years saw a decline with NOPAT dropping sharply in 2020 and turning negative again by 2021, reaching roughly -388 million USD. This pattern suggests fluctuating operating performance and challenges in sustaining profitability.

Cost of Capital

The cost of capital remained relatively stable around 11% for the first four years, showing only minor fluctuations between 10.63% and 10.97%. In 2021, there was a slight decrease to approximately 9.95%. This modest reduction could reflect changes in market conditions, the company’s risk profile, or capital structure adjustments.

Invested Capital

Invested capital consistently increased each year, growing from approximately 4.63 billion USD in 2017 to nearly 7.45 billion USD in 2021. This steady increase indicates ongoing investments in assets or working capital, suggesting an expansion in the company’s operational base or strategic asset deployment over time.

Economic Profit

Despite fluctuations in NOPAT, economic profit remained negative throughout the entire period, reflecting that the company has not generated returns above its cost of capital. Economic losses decreased from around -580 million USD in 2017 to a low of approximately -108 million USD in 2018, followed by an increase in economic losses in subsequent years, culminating in the largest negative value of about -1.13 billion USD in 2021. This trend highlights persistent value destruction and an inability to cover the capital costs associated with its investments.

Overall, the data illustrates challenges in achieving consistent profitability and generating economic value despite increasing capital investments, coupled with a largely stable cost of capital during the analyzed timeframe.

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.

The analysis of the annual economic profit, invested capital, and economic spread ratio reveals significant trends over the five-year period ending in 2021.

Economic Profit

The economic profit has consistently been negative throughout the period, indicating that the company did not generate returns above its cost of capital. Initially, the economic loss decreased from -579,764 thousand US dollars in 2017 to a smaller loss of -108,474 thousand US dollars in 2018. However, from 2018 onward, the economic profit deteriorated again, with losses increasing to -193,111 thousand US dollars in 2019, then sharply declining to -637,418 thousand US dollars in 2020, and further worsening to -1,128,973 thousand US dollars in 2021. This suggests increasing challenges in achieving value creation annually.

Invested Capital

Invested capital showed a consistent upward trend, growing from approximately 4,627,898 thousand US dollars in 2017 to 7,449,784 thousand US dollars in 2021. This indicates ongoing capital investment or asset growth over the years, with a particularly marked increase between 2020 and 2021. The expanding capital base suggests efforts to increase capacity, scale, or resources, even as economic profit remained negative.

Economic Spread Ratio

The economic spread ratio, representing the differential between return on invested capital and cost of capital, was negative in all years, reflecting that the company did not earn sufficient returns above costs. The ratio showed improvement from -12.53% in 2017 to -2.09% in 2018, indicating a relatively better position; however, it then worsened to -3.65% in 2019, further declined to -10.68% in 2020, and reached the lowest point of -15.15% in 2021. This pattern suggests increasing inefficiency or diminishing profitability relative to invested capital.

Overall, the trends indicate that despite rising invested capital, the company's ability to generate economic profit has declined significantly in recent years, with increasing negative spreads highlighting challenges in achieving returns above capital costs. The deteriorating economic profit and spread ratio despite growth in capital investment could concern stakeholders regarding operational efficiency and value creation.

The financial data reveals notable trends in economic profit, adjusted revenue, and economic profit margin over the five-year period ending December 31, 2021.

Adjusted Revenue

The adjusted revenue shows a consistent upward trajectory each year, increasing from approximately 2.44 billion US dollars in 2017 to over 5.09 billion US dollars in 2021. This represents more than a doubling of revenue within the period, indicating significant growth in the company's top-line performance.

Economic Profit

Economic profit remains negative throughout the entire period, indicating the company did not generate economic value over its cost of capital. The figure exhibits substantial volatility, with a marked decrease in 2017 to -579.8 million US dollars, a smaller negative in 2018 at -108.5 million, then deteriorating again to -193.1 million in 2019. Post-2019, there is a sharp decline in economic profit, plunging to -637.4 million in 2020 and further down to -1.13 billion in 2021. This worsening trend suggests increasing economic losses despite revenue growth.

Economic Profit Margin

The economic profit margin follows a fluctuating yet predominantly negative pattern, starting at -23.79% in 2017, improving significantly to -3.55% in 2018, and then declining to -5.53% in 2019. The margin then sharply decreases to -17.18% in 2020 and further to -22.16% in 2021. This pattern mirrors the economic profit trend, underscoring rising inefficiency or increased cost burdens relative to revenue as time progresses despite the revenue growth.

In summary, the data indicates robust revenue growth coupled with increasingly negative economic profit and deteriorating economic profit margins. This suggests that although sales grew substantially, the costs and capital charges grew at a pace that worsened the company's overall economic profitability during the period under review.