TikTok’s Owner Generated Nearly $7 Billion in Cash From Operations in First Quarter
The cash machine of TikTok’s owner is getting bigger.
ByteDance’s revenue rose 34% to $24.5 billion in the first quarter of 2023, a slight slowdown from its 38% revenue growth in the 2022 calendar year, according to detailed financial results viewed by The Information. But the company generated $6.8 billion in cash from operations in the period, an improvement from $5.8 billion in cash flows from operations in the same period a year earlier.
THE TAKEAWAY
• ByteDance swung to a profit as revenue rose 34%
• Revenue is nearly on par with Facebook-owner Meta’s
• Cash holdings give it more ammo for shopping expansion
The padded cash holdings give ByteDance plenty of firepower as it expands aggressively into live shopping in the U.S. The company expects TikTok Shop, its online shopping service, to lose more than $500 million in the U.S. this year as it spends on hiring, developing a fulfillment network and providing incentives to merchants, The Information has reported. Growth in social shopping should help offset a slowdown in the growth rate of TikTok’s main business of advertising.
In terms of revenue, ByteDance is getting closer to Facebook owner Meta Platforms, which generated $28.6 billion in the first quarter. It isn’t possible to compare the companies when it comes to free cash flow because ByteDance’s cash flow statement doesn’t disclose what it spent on capital expenditures. Meta generated $7.2 billion in free cash flow in the first quarter.
ByteDance’s cash holdings grew to $30.4 billion as of March 31, up from $22.3 billion at the end of 2022. The company, which owns TikTok but generates most of its revenue from a TikTok-like service in China, generated a $2.7 billion profit in the March quarter, an improvement from a $4.7 billion loss in the first quarter of 2022, but that loss was mainly due to a change in value of its preferred shares, documents showed.
The figures provide a unique glimpse at one of the world’s biggest privately held companies that has been at the center of a political maelstrom in the U.S. and elsewhere, due to TikTok’s growing influence and the Chinese government’s closeness to ByteDance. The new financial data have emerged as The Information reported the company is planning to buy back $300 million worth of shares from employees at an implied valuation of $223.5 billion.
The company’s cash production has grown even as expenses creep higher. In the first quarter, ByteDance’s marketing, research and other expenses rose 10% to $8.1 billion, the documents show. In contrast, such expenses fell 33% last year from 2021.
The Information previously reported in detail about ByteDance’s 2022 financial results, including its slowing growth in China. The Wall Street Journal earlier reported the company's operating profit in the first quarter.
ByteDance has raised $8 billion in financing from firms including Sequoia Capital China, Susquehanna International Group, Coatue Management and Tiger Global Management.