Cash is the lifeline of a business.
Without cash, even a profitable company can still succumb to a liquidity crisis.
The reason can be that the company does 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 margin.
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)
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 stem primarily from 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 sales of 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 2021, Facebook’s net cash from operations swelled to a massive $58 billion, a record high for the company in the last 6 years.
Since fiscal 2016, Facebook has managed to grow its net cash from operation at a compounded annual growth rate (CAGR) of around 30%, 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 2021.
In short, Facebook is the elephant in the room when it comes to generating net cash from operations and is way ahead of other social media companies.
Net Cash From Operations (Without Facebook)
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 since fiscal 2020 and reached only $633 million, a drop of 36% 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 2021, Snap and Pinterest’s net cash from operations totaled $293 million and $753 million, respectively, a much better figure compared to the prior year.
Operasting Net Cash Margin
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 6 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 49% as of fiscal 2021, one of the lowest figures ever seen for the company.
At a 49% cash margin, 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.
While Snap’s result has been down the drain, Pinterest’s cash margin has been on a rise and reached as much as 29% in 2021, second only to Facebook.
In short, Facebook generates about $0.49 dollars of net cash from operations out of $1 dollar of sales at a 49% cash margin.
Again, Facebook leaves other social media companies in the dust when it comes to cash conversion efficiency.
Free Cash Flow (With Facebook)
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 2021, Facebook’s free cash flow reached as much as $38 billion, a year-over-year growth of 65% 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)
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 2021.
However, Twitter’s free cash flow topped out at $853 million in fiscal 2018 and has since declined dramatically.
As of fiscal 2021, Twitter’s free cash flow tumbled to -$370 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 6 years.
While Snap has been having negative free cash flow, the figures are narrowing and reached $223 million as of fiscal 2021, a record high for the company.
Similarly, Pinterest experienced the same trend in which free cash flow has been improving and even turned positive.
As of 2021, Pinterest’s free cash flow surged to $707 million, way ahead of other social media companies.
Despite a relatively small amount in comparison to that of Facebook, Pinterest’s surging free cash flow marks a new milestone for the company and is now a cash cow.
Overall, Twitter seems inconsistent when it comes to generating free cash flow while Snap is already having positive free cash flow.
Pinterest has managed to produce $700 million of free cash flow as of fiscal 2021, marking a new achievement for the company.
Net Cash From Financing Activities
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 6 years while Twitter also has started a share repurchase program in 2020.
For dividend payout, none of the social media companies has so far paid any cash dividend but Facebook can absolutely afford to pay a dividend according to this article – Facebook dividend.
All told, according to the chart, Facebook’s net cash from financing activities has been entirely in the red in the last 6 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 raising.
Snap seems to be the social media company that has raised the most cash in the last 6 years, reporting a minimum of $1 billion of net cash from financing activities in each fiscal year from 2016 to 2021.
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.
In this aspect, Pinterest has only raised capital once in the last 6 years and that was in 2019, at more than $1 billion USD.
Since fiscal 2020, Pinterest has not been raising capital, prompting us to think that the company may have been able to sustain itself in terms of cash flow.
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 margin, totaling 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 much better than Snap in terms of cash generation.
On the other hand, Twitter’s cash flow results have slightly declined between fiscal 2016 and 2021, 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 2021 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:
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