AppLovin Corporation (APP) on Q1 2023 Results - Earnings Call Transcript
David Hsiao: Welcome, everyone, to the AppLovin earnings call for the first quarter ended March 31, 2023. I'm David Hsiao, Head of Investor Relations. Joining me today to discuss our results are Adam Foroughi, our Co-Founder, CEO and Chairperson; and Herald Chen, our President and CFO. Please note our SEC filings as well as our shareholder letter discussing our first quarter performance are available at investors.applovin.com. During today's call, we may be making forward-looking statements regarding future events, market expectations, the future financial performance of the company and the strategic review of our apps portfolio. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them except as required by law. Actual results may differ materially from the results predicted. We encourage you to review the risk factors in our most recently filed Form 10-K for the fiscal year ended December 31, 2022. Additional information will also be set forth in our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2023. We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for or superior to our GAAP results. Please be sure to review the reconciliations of our GAAP and non-GAAP financial measures in our shareholder letter available on our Investor Relations site. This conference call is being recorded and a replay will be available on our IR website. I'll turn it over to Adam for some opening remarks, then we'll open it up for Q&A. Adam Foroughi: Good afternoon, everyone, and thank you for joining us today. We had a strong Q1 on our software platform business with significant growth quarter-over-quarter. This was directly attributable to our advertisers seeing improved performance on our platform and returning to more of a growth mindset, leading them to more confidently spend with us. Further, we've always talked about mobile gaming being a resilient category and we always believed it would be stable even in weaker economic times. We're seeing just that. At AppLovin, our teams have been working tirelessly over the past few quarters, focusing on several key growth initiatives. Firstly, we have been working on significant upgrades to our advertising technology. This has been a major focus for us and we are starting to see early benefits from these efforts. Secondly, we have been working hard to unlock the synergies from our Wurl acquisition by bringing our advertising platform into CTV. While we don't expect this to have a material financial impact in the near term, we are excited about the early data we are seeing in this area. And finally, we're extending our marketing solutions to carriers and OEMs through our Array business. Although this is still in the early stages, we are pleased with our progress. At the same time, we have been optimizing our gaming business and are now running at a more efficient level. We are confident that this business will be a stable source of cash flow going forward. Now let's talk a little bit more in detail about AXON improvements. We have been discussing the development of AXON 2 for a year now and have always communicated that our strongest growth would come from advancements in our own technology. It's been challenging to explain what this means, but with the exploding popularity of consumer-facing AI tools, we can draw a simple analogy. Upgrading from AXON 1 to 2 is no different than OpenAI moving from ChatGPT 3 to 4. Our models can always be improved, and our entire business is powered by the evolution of our technology. The enhancements to our machine learning and AI are not a onetime thing, but a series of upgrades over time. As we make these, there is the potential for significant lifts to both revenue and cash flow. We are currently in the midst of a staged rollout of AXON 2 and we are very excited about the long-term potential of this new technology for our partners and our business. We are extremely pleased with our execution so far this year. We believe that our technology and innovation will continue to be the driving force behind our success and we are committed to continuously improving our business. Thank you again for joining us today and we look forward to sharing more updates with you in the future. With that, I'll hand it off to Herald. Herald Chen: Thanks, Adam, and good afternoon, everyone. I'd like to begin by expressing my gratitude to Ryan Gee for his leadership of our IR activities over the past few years. Additionally, I want to extend a warm welcome to David Hsiao, who joined AppLovin in early '21 and has taken on the Head of IR role for the company. As Adam mentioned, we had a solid first quarter, exceeding expectations across revenue, EBITDA and cash flow. Importantly, in addition to financial performance, we're just as pleased with the focused execution and progress achieved by our teams during the quarter, in particular, as it pertains to our software platform growth initiatives. To touch on a few key financial highlights, in Q1, our revenue reached $715 million and our adjusted EBITDA hit $274 million surpassing the high end of our guidance. Our adjusted EBITDA margin was 38%, which was the highest run rate margin we've had since 2018. Our software platform segment was a standout performer recording -- record quarterly revenue of $355 million, which is a 16% increase over the prior quarter. What's more, our software platform adjusted EBITDA grew 18% quarter-over-quarter to $219 million translating to a 62% adjusted EBITDA margin. Our software platform growth over the past two years has been robust with Q1 '23 revenue exceeding Q1 '21 revenue by over 4 times. This represents a 100% compounded annual growth rate. Additionally, software platform adjusted EBITDA increased from $59 million in Q1 '21 to $219 million in Q1 '23, a strong 90% plus CAGR. As Adam noted, while it's challenging to predict the precise timing and impact of our software platform growth initiatives, we are optimistic that they will drive meaningful revenue growth and high-margin cash flow. Turning to the App segment. We had $361 million of revenue in Q1, a 9% decline from prior quarter, which includes the impact of optimizing certain studio assets. Q1 App's adjusted EBITDA was $55 million and adjusted EBITDA margin was 15%. The margin was slightly lower than recent quarters due to the launch of several new games leading to an increase in user acquisition spend as a percentage of revenue. As a consolidated level, we are pleased to report that we have robust free cash flow of $283 million in Q1, due in part to the growth of our high margin software platform business. We also benefited from several significant customer payments delayed from prior periods as well as lower cash taxes in the period. With regard to guidance for Q2 '23, we are targeting $710 million to $730 million in revenue with $280 million to $300 million in adjusted EBITDA, which equates to a 39% to 41% adjusted EBITDA margin. We anticipate continuing growth from our software platform business, offset to some degree by the apps business. The impact of the AXON 2.0 rollout will be a key factor in the quarter. As previously mentioned on our calls, we expect free cash flow to be approximately 50% to 60% of adjusted EBITDA on a normal run rate basis, noting that we may have some deviations from that in any particular quarter. From a cash perspective, at the end of Q1, we had $1.2 billion of cash on the balance sheet, a clear testament to our strong financial position and cash generation. During the quarter, we repurchased approximately $76 million of stock. And year-to-date through May 8, we repurchased $202 million of stock, leaving $210 million on our $750 million authorized buyback program. As we look toward the future, we're determined to maintain our position as a market leader by investing in our teams, solutions and key growth initiatives. Our strong financial position and cash generation allows us to take calculated risks to make strategic decisions to keep AppLovin at the forefront of the industry. It's an exciting time for AppLovin, and we're excited about our future prospects. Now I invite the moderator to lead us through Q&A. Operator: Thank you so much. We will now begin the question-and-answer portion of our call. [Operator Instructions] And our first question is going to come from Martin Yang with Oppenheimer. Operator: Now moving on to Ralph Schackart with William Blair. Operator: And we'll move on to David Pang with Stifel. Operator: And D.A. Davidson's Franco Granda has the next question. A – Herald Chen: I think in general, there was some ad trend softness and some seasonality coming off the fourth quarter. Also, we -- about half the delta on the revenue from quarter-over-quarter on the app side actually came from us closing down some studios or divesting studios as well. So there’s some, I guess, call it, onetime impacts in terms of the mix there. Operator: I will now hear from Bernie McTernan with Needham & Company. Operator: Eric Sheridan with Goldman Sachs has the next question. Operator: And we have time for one additional question, which will come from Matt Cost with Morgan Stanley. [Operator Instructions] Thank you. Operator: And this does conclude the question-and-answer session for this quarter. We thank you all so much for joining us today. Enjoy the rest of your day, and we will see you next time. Herald Chen: Thank you. Adam Foroughi: Thank you.
AppLovin Corp (NASDAQ:APP) Insider Sale and Financial Overview
AppLovin Corp (NASDAQ:APP) is a technology company that provides a platform for mobile app developers to enhance their marketing and monetization efforts. The company operates in a competitive landscape alongside other tech firms like Robinhood Markets and Emcor Group. Recently, AppLovin has been in the spotlight due to its inclusion in the S&P 500 index, a significant achievement for any company.
On September 5, 2025, Harvey Dawson Alyssa, a director at AppLovin, sold 350 shares of Class A Common Stock at $487.97 each. This transaction, reported under Form 4, leaves Alyssa with 3,150 shares. Despite this insider sale, AppLovin's inclusion in the S&P 500 is expected to boost its visibility and attract more investors, as highlighted by S&P Dow Jones Indices.
AppLovin's stock, however, experienced a decline of 1.95% following the announcement of its S&P 500 inclusion. This drop might seem counterintuitive, but it reflects the market's complex dynamics. The company's high price-to-earnings (P/E) ratio of 68.33 suggests a high valuation, which can sometimes lead to stock price volatility.
The company's financial metrics reveal a mixed picture. With a price-to-sales ratio of 31.20 and an enterprise value to sales ratio of 31.64, investors are paying a premium for AppLovin's sales and overall valuation. The enterprise value to operating cash flow ratio of 58.88 indicates a high valuation relative to its cash flow, which could be a concern for some investors.
AppLovin's debt-to-equity ratio of 3.01 shows a significant level of debt compared to its equity, which might raise questions about its financial leverage. However, the current ratio of 2.74 suggests that the company is well-positioned to meet its short-term liabilities, providing some reassurance about its financial health.
AppLovin Corporation (NASDAQ:APP) Earnings Preview: A Look into the Future
- AppLovin Corporation (NASDAQ:APP) is expected to report a significant increase in earnings per share (EPS) and revenue in its upcoming quarterly earnings.
- The company's advanced Axon 2 technology is driving a substantial boost in advertising revenues.
- Despite a high debt-to-equity ratio, AppLovin's strong earnings growth and technological advancements position it well in the competitive market.
AppLovin Corporation (NASDAQ:APP) is a key player in the mobile app industry, helping developers publish and promote their applications. The company is set to release its quarterly earnings on August 6, 2025. Analysts expect an earnings per share (EPS) of $1.99, reflecting a significant 123.6% increase from the previous year. Revenue is projected to be around $1.22 billion.
The anticipated surge in AppLovin's earnings is largely due to its advanced Axon 2 technology. This machine learning algorithm optimizes ad placement, significantly boosting advertising revenues. In the second quarter, advertising revenues are expected to reach $1.22 billion, a 72% increase from the previous year. This growth is driven by enhanced ad targeting and optimization capabilities.
AppLovin's stock has seen a remarkable 465% increase over the past year, outperforming competitors like Meta and Alphabet. Despite a slight 1.5% decline in the Zacks Consensus Estimate for the upcoming quarter, the company has a strong history of exceeding earnings expectations. This track record may positively influence investor sentiment ahead of the earnings release.
The company's financial metrics indicate a robust valuation. AppLovin's price-to-earnings (P/E) ratio is approximately 66.88, suggesting investors are willing to pay $66.88 for every dollar of earnings. The price-to-sales ratio is about 24.92, and the enterprise value to sales ratio is around 25.53, reflecting the company's total valuation relative to its sales.
AppLovin's financial health is further highlighted by its current ratio of approximately 1.68, indicating a good level of liquidity to cover short-term liabilities. However, the debt-to-equity ratio of about 6.45 suggests a significant level of debt compared to equity. Despite this, the company's strong earnings growth and advanced technology position it well in the competitive mobile app advertising market.
Citi Reaffirms Buy on AppLovin Ahead of Q2 Earnings
Citi reiterated its Buy rating and $600 price target on AppLovin (NASDAQ:APP), naming the stock its top pick as the company approaches its second-quarter earnings report, scheduled for August 6th.
The firm expects AppLovin’s Q2 results to come in at the higher end of guidance for both revenue and adjusted EBITDA, reflecting continued strength in the business. Key areas of investor focus include the company’s growing eCommerce advertising initiative, the anticipated launch of self-serve tools—likely in the fourth quarter—and potential shifts in mobile ad spending tied to changes in app store fee structures.
Citi is also watching how AppLovin navigates an evolving competitive landscape, particularly in light of Unity’s recent Vector launch. Additionally, capital allocation decisions remain an important topic, with investors looking for updates on how the company plans to deploy cash in the current environment.
With robust growth catalysts in place and operational momentum building, Citi maintains a bullish stance on AppLovin, viewing it as well-positioned for long-term outperformance in the mobile advertising sector.
AppLovin Corporation (NASDAQ:APP) Receives Upgrade from Scotiabank
- Scotiabank upgraded AppLovin Corporation (NASDAQ:APP) to "Sector Outperform," indicating a positive outlook on the company's future performance.
- AppLovin's stock price saw an increase of $7.99 or 2.32% to $352.74, reflecting positive market sentiment.
- The company is expected to deliver a 30-40% compound annual growth rate over the next two years, positioning it as an elite-growth stock.
AppLovin Corporation (NASDAQ:APP) is a technology company that provides a platform for mobile app developers to grow their businesses. The company offers a suite of tools for app discovery, user acquisition, and monetization. AppLovin competes with other mobile advertising and app monetization companies like Unity Software and IronSource.
On July 9, 2025, Scotiabank upgraded AppLovin's stock to "Sector Outperform," signaling confidence in the company's future performance. At the time of this announcement, the stock price was $352.74. This upgrade suggests that Scotiabank believes AppLovin will perform better than the average company in its sector.
AppLovin is seen as a promising investment opportunity, with expectations of delivering a 30-40% compound annual growth rate over the next two years in a bullish scenario. This growth potential positions AppLovin as an elite-growth stock available at a reasonable price. The current stock price of $352.74 reflects an increase of $7.99 or 2.32% today, indicating positive market sentiment.
The stock has shown significant volatility, with today's trading range between $344.75 and $362.64. Over the past year, AppLovin's stock has reached a high of $525.15 and a low of $60.67, highlighting its potential for substantial returns. The company's market capitalization is approximately $119.37 billion, reflecting its significant presence in the industry.
Investors are encouraged to take strategic risks with AppLovin, as the risks associated with regulatory concerns are minimal. With a trading volume of 4,228,095 shares on the NASDAQ exchange today, AppLovin remains an attractive option for those seeking significant annual returns.
AppLovin Corp (NASDAQ: APP) Performance and Financial Highlights
- AppLovin's stock has risen by 532% since its public debut, marking it as a top growth stock.
- The company's share price experienced a significant decline of over 35% after reaching an all-time high, due to a pending class action lawsuit and reports from short sellers.
- Despite challenges, AppLovin reported better-than-expected first-quarter results, leading to a 10% increase in its stock price earlier this month.
AppLovin Corp (NASDAQ: APP) is a prominent player in the tech industry, known for its software solutions that enhance marketing and monetization for online advertisers. Since its public debut in 2021, AppLovin has seen its stock rise by 532%, marking it as a top growth stock for investors. Despite recent challenges, the company remains a favored tech stock in the market.
On May 21, 2025, Valenzuela Victoria, the Chief Legal Officer and Corporate Secretary of AppLovin, sold 600 shares of Class A Common Stock at $366.50 each. This transaction comes amid a significant decline in AppLovin's share price, which dropped over 35% after reaching an all-time high of $525.15 in February. The decline was due to a pending class action lawsuit and reports from short sellers.
Despite these challenges, AppLovin reported better-than-expected first-quarter results, leading to a 10% increase in its stock price earlier this month. Currently, the share price is 13.2% higher than at the start of the year and has surged 336.1% compared to the same time last year. This performance significantly outpaces both the S&P 500 and the Nasdaq.
AppLovin's financial metrics reveal a price-to-earnings (P/E) ratio of approximately 63.43, indicating that investors are willing to pay over 63 times the company's earnings for its shares. The price-to-sales ratio stands at about 23.61, suggesting the market values the company at over 23 times its annual sales. The enterprise value to sales ratio is around 24.23, reflecting the company's total valuation in relation to its sales.
The company has a high debt-to-equity ratio of 6.45, indicating significant use of debt compared to equity. However, the current ratio of approximately 1.68 suggests a relatively healthy liquidity position, with current assets being 1.68 times current liabilities. Despite a challenging environment, AppLovin continues to focus on its core business, maintaining its position as a leading tech stock.
Jefferies Reaffirms Buy Rating on AppLovin Ahead of Earnings Announcement
Jefferies reiterated its Buy rating and $460 price target on AppLovin (NASDAQ:APP) ahead of the company’s upcoming first-quarter earnings on May 7, expressing confidence in both near-term results and the broader ad market backdrop.
The firm highlighted strength in AppLovin’s gaming ad segment and growing traction with e-commerce advertisers as key drivers of potential revenue upside in Q1 and guidance strength in Q2. Initial concerns about tariff-related headwinds have eased, thanks to reassuring results from Meta, Google, and Reddit, which suggest advertising demand remains solid.
Jefferies noted that new advertiser additions—a key growth metric—appear to be exceeding the expected pace of 100 per month, which could provide further momentum. The firm also pointed to growing evidence that AppLovin is becoming a top-three advertising channel for many e-commerce brands, with some allocating more than 10% of their ad budgets to the platform.
If the company reports over 60% year-over-year ad revenue growth in Q1 and offers at least mid-single-digit sequential revenue growth guidance for Q2, Jefferies expects the stock to respond positively—especially given its 40% decline since early February.
Jefferies Reaffirms Buy Rating on AppLovin Ahead of Earnings Announcement
Jefferies reiterated its Buy rating and $460 price target on AppLovin (NASDAQ:APP) ahead of the company’s upcoming first-quarter earnings on May 7, expressing confidence in both near-term results and the broader ad market backdrop.
The firm highlighted strength in AppLovin’s gaming ad segment and growing traction with e-commerce advertisers as key drivers of potential revenue upside in Q1 and guidance strength in Q2. Initial concerns about tariff-related headwinds have eased, thanks to reassuring results from Meta, Google, and Reddit, which suggest advertising demand remains solid.
Jefferies noted that new advertiser additions—a key growth metric—appear to be exceeding the expected pace of 100 per month, which could provide further momentum. The firm also pointed to growing evidence that AppLovin is becoming a top-three advertising channel for many e-commerce brands, with some allocating more than 10% of their ad budgets to the platform.
If the company reports over 60% year-over-year ad revenue growth in Q1 and offers at least mid-single-digit sequential revenue growth guidance for Q2, Jefferies expects the stock to respond positively—especially given its 40% decline since early February.
