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Who Produces The Most Cash? Fb, Twtr, Snap Or Pins?

A hand full of cash money. Flickr Image.

Cash is the lifeline of a business.

Without cash, even a profitable company can still succumb to a liquidity crisis.

In this aspect, the company may be doing a lot of credit sales and hence, cash is not received on time.

It’s no exception for social media companies such as Facebook, Twitter, Pinterest and Snap where cash is critical for these companies’ operations.

In this article, we will look at and compare several cash metrics of Facebook, Twitter, Pinterest and Snap.

These metrics include operating cash flow, free cash flow, net cash from financing activities and cash to revenue ratio.

Keep in mind that the comparison of these cash metrics may not be on an apple to apple basis but it is close as all of them are operating in the same industry and have the same business model.

Let’s go check them out!

Net Cash From Operations (With Facebook)

Facebook, Twitter, Snap and Pinterest's net cash from operations

Facebook, Twitter, Snap and Pinterest’s net cash from operations

* Net cash from operations is a GAAP measure and is obtained from the respective companies’ statements of cash flow.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

Let’s first look at the net cash from operations for social media companies such as Facebook, Twitter, Snap and Pinterest as shown in the chart above.

The net cash from operations is a cash metric that measures cash flow used in or provided by the core business operations.

For social media companies, their core business operations are about selling advertisement spaces on their platforms.

Therefore, the net cash from operations for social media companies measures primarily the amount of cash generated from the businesses of selling advertisement spaces.

From the first look at the chart, Facebook has been the dominating figure since fiscal 2016, generating tens of billions of net cash from operations, well above the amount of cash generated by Twitter, Pinterest and Snap.

As of fiscal 2020, Facebook’s net cash from operations totaled $38 billion, a record high for the company in the last 5 years.

Since fiscal 2016, Facebook has managed to grow its net cash from operation at a compounded annual growth rate (CAGR) of around 25%, a feat that no other social media company can match.

In contrast, Twitter, Snap and Pinterest’s net cash from operations look significantly small when compared to that of Facebook.

As a matter of fact, Twitter, Snap and Pinterest’s net cash from operations has not even crossed the $5 billion mark as of fiscal 2020.

In short, Facebook is the elephant in the room when it comes to generating net cash from operations.

Net Cash From Operations (Without Facebook)

Twitter, Snap and Pinterest's net cash from operations

Twitter, Snap and Pinterest’s net cash from operations

* Net cash from operations is a measurement determined in accordance with GAAP and is obtained from the respective statements of cash flow.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

Without Facebook in the chart, Twitter, Snap and Pinterest’s net cash from operations looks much clearer.

Of all social media companies in the chart, Twitter has been the only one that has managed to cross the $1 billion level since fiscal 2018.

However, Twitter’s net cash from operations declined significantly in fiscal 2020 to only $993 million, a drop of over 20% compared to the prior year.

For Snap and Pinterest, their respective net cash from operations has been mostly in the red, suggesting that these companies have been burning cash instead of producing it.

While Snap and Pinterest have been producing negative operating cash flow, the figures have been narrowing.

In other words, their cash-generating capability has been on a rise.

In fact, Snap and Pinterest’s net cash from operations was the best ever reported in fiscal 2020.

As of fiscal 2020, Snap and Pinterest’s net cash from operations totaled -$168 million and $29 million, respectively, a much better figure compared to the prior year.

Cash To Revenue Ratio

Facebook, Twitter, Snap and Pinterest's cash to revenue ratio

Facebook, Twitter, Snap and Pinterest’s cash to revenue ratio

* Cash to revenue ratio comes from the author’s calculation and is based on the ratio of net cash from operations to annual revenue obtained from the respective income statements.
* Negative ratio is capped at -100% so that the chart does not go out of proportion.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

The cash to revenue ratio is another cash metric that measures the cash conversion efficiency from revenue.

Therefore, the higher the ratio, the better the cash conversion efficiency is for a company.

That said, Facebook has again sat at the top of the chart, with a cash-to-revenue ratio that has outperformed all other social media companies in the last 5 years.

While Facebook’s cash conversion efficiency has been the best among Twitter, Snap and Pinterest, the ratio has been on a decline and reached 45% as of fiscal 2020, a new low for the company.

At a 45% cash to revenue ratio, Facebook still beats Twitter, Snap and Pinterest by a very wide margin in terms of cash conversion efficiency.

On the contrary, Snap has been the worst in terms of cash conversion efficiency among all social media companies.

Snap’s figures are notably in the red in all fiscal years.

In short, Facebook generates about $0.45 dollars of net cash from operations out of $1 dollars of sales at a 45% cash to revenue ratio.

Again, Facebook leaves other social media companies in the dust when it comes to cash conversion efficiency.

Free Cash Flow (With Facebook)

Facebook, Twitter, Snap and Pinterest's free cash flow

Facebook, Twitter, Snap and Pinterest’s free cash flow

* Free cash flow is a measurement determined NOT in accordance with GAAP and is obtained from the respective earnings releases.
* Free cash flow is the difference between net cash from operation and capital spending.
* Capital spending includes mainly purchases of property and equipment and may also include the payment on finance leases for some social media companies.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

A discussion of the cash flow will be incomplete without involving free cash flow.

As such, a chart above is created to show the free cash flow of Facebook, Twitter, Snap and Pinterest.

In terms of free cash flow, Facebook is again the top social media company that produces billions of free cash flow, far exceeding that of Twitter, Pinterest and Snap Inc.

Since fiscal 2016, Facebook’s free cash flow has been growing at a CAGR of 20%.

As of fiscal 2020, Facebook’s free cash flow reached as much as $23 billion, a year-over-year growth of 12% and also a record high for the company.

In contrast, Twitter, Pinterest and Snap’s free cash flow looks considerably small with respect to that of Facebook.

And some of them even had a negative free cash flow as a result of their inability to produce positive operating cash flow which we saw earlier.

In short, Facebook wins hands-down compared to Twitter, Snap and Pinterest when it comes to free cash flow generation.

Free Cash Flow (Without Facebook)

Twitter, Snap and Pinterest's free cash flow

Twitter, Snap and Pinterest’s free cash flow

* Free cash flow is a measurement determined NOT in accordance with GAAP and is obtained from the respective earnings releases.
* Free cash flow is the difference between net cash from operation and capital spending.
* Capital spending includes mainly purchases of property and equipment and may also include the payment on finance leases for some social media companies.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

Without Facebook in the picture, Twitter, Pinterest and Snap’s free cash flow figures look much clearer.

According to the chart, Twitter’s free cash flow comes next after Facebook at an average figure of around $500 million between fiscal 2016 and 2020.

However, Twitter’s free cash flow topped out at $853 million in fiscal 2018 and has since declined dramatically.

As of fiscal 2020, Twitter’s free cash flow totaled only $129 million, a record low for the company since fiscal 2016.

For Snap and Pinterest, their respective free cash flow has been getting better in the last 5 years.

While Snap has been having negative free cash flow, the figures are narrowing and reached only -$225 million as of fiscal 2020, a new low for the company.

Similarly, Pinterest experienced the same trend in which free cash flow has been improving and even turned positive in fiscal 2020 at $12 million.

Despite a relatively small amount, Pinterest’s positive free cash flow marks a new milestone for the company when it successfully produced a positive free cash flow for the first time since its inception.

Overall, Twitter seems inconsistent when it comes to generating free cash flow while Snap is still consuming hundreds of millions of cash.

Pinterest has managed to produce $12 million of free cash flow as of fiscal 2020, marking a new achievement for the company.

Net Cash From Financing Activities

Facebook

Facebook, Twitter, Snap and Pinterest’s net cash from financing activities

* Net cash from financing activities is a measurement determined in accordance with GAAP and is obtained from the respective statements of cash flow.
* Net cash from financing activities is adjusted by the author to exclude share buyback if there is any to rule out the effect of stock repurchases.
* All companies’s fiscal year begins on Jan 1 and ends on Dec 31.

Net cash from financing activities is a cash metric that measures the cash flow as a result of financing activities such as dividend payment, share buyback, capital raise through loan and/or equity, etc.

For the most part, this metric is meant to find out if the company has been on a borrowing spree or issuing equity to raise cash.

For this purpose, I have excluded the share buyback and/or dividend payment if there is any to rule out the effect of share buyback and dividend payment.

For your information, Facebook has been the only company that has been buying back shares in the last 5 years.

For dividend payout, none of the social media companies has so far paid any cash dividend.

All told, according to the chart, Facebook’s net cash from financing activities has been entirely in the red in the last 5 years, suggesting that the company has not been borrowing or issuing equity to raise capital.

In contrast, Snap and Twitter have been having positive net cash from financing activities in most of the fiscal years, indicating that they have been either on a borrowing spree or issuing equity for capital raise.

Snap seems to be the social media company that has raised the most cash in the last 5 years, reporting a minimum of $1 billion of net cash from financing activities in each fiscal year from 2016 to 2020.

Twitter also has been doing the same and has raised $1 billion of cash in fiscal 2018 and 2020, respectively.

On the other hand, Pinterest raised the least cash as shown in the chart among all social media companies, reporting slightly over $1 billion of net cash from financing activities in fiscal 2019.

As of fiscal 2020, Pinterest did not do anything to raise cash, prompting us to think that the company may have been able to sustain itself in terms of cash flow.

Conclusion

Of all social media companies, Facebook has the most superior cash metrics, including net cash from operations as well as free cash flow.

Additionally, Facebook also has the best cash to revenue ratio that totals more than 40%, showing that the social media giant’s cash conversion efficiency is far exceeding that of Twitter, Pinterest and Snap.

While Snap and Pinterest are weak at generating cash, their results have been improving and negative cash flow has been narrowing.

In fact, Pinterest is slightly better than Snap in terms of cash generation.

On the other hand, Twitter’s cash flow results have slightly declined between fiscal 2016 and 2020, indicating that the company’s cash-producing ability may have weakened over the years.

It’s not surprising to see that Twitter and Snap have resorted to raising cash again in fiscal 2020 given the companies’ weak cash flow metrics.

References and Credits

1. Financial figures for all companies discussed above were obtained and referenced from their respective financial statements which can be obtained from the following links:

a) Facebook Investor Relations
b) Pinterest Investor Relations
c) Twitter Investor Relations
d) Snap Investor Relations

2. Featured images in this article are used under creative commons license and sourced from the following websites: A hand full of cash money and one hundred dollar bills cash money USD.

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