AppLovin Corporation (APP) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the AppLovin First Quarter 2021 Earnings Call. . As a reminder, this conference is being recorded. It is now my pleasure to introduce Tori Valenzuela, Chief Legal Office and Corporate Secretary for AppLovin. You may begin. Victoria Valenzuela: Thank you, and welcome to the AppLovin earnings call for the quarter ended March 31, 2021. Joining me today to discuss AppLovin's results and key business initiatives are Co-Founder, CEO and Chairperson, Adam Foroughi; and President and Chief Financial Officer, Herald Chen. Adam Foroughi: Thank you for joining us today for our first public company earnings call. I want to begin by thanking our amazing teammates around the world who continue to push relentlessly to execute on our vision. Of course, we wouldn't be here without our partners who trust us as an integral part of their growth and monetization strategy. And thank you for the support from our new investors. We are very much focused on the long term and appreciate that you recognize our competitive advantages and long-term opportunities. We are looking forward to sharing details about AppLovin's first quarter results. Herald Chen: Thanks, Adam, and thanks, everyone, for taking the time to join us. As Adam mentioned, we appreciate that our business model is a bit nuanced. What we hope through this call, our shareholder letter, our first quarter results, our guidance and our financial performance over time is that you come to appreciate that our integrated model is the reason for our strong Q1 and for our confidence in our long-term growth prospects. Before we get to your questions, I want to briefly highlight a few topics. We did have a very strong first quarter with 132% and 110% year-over-year revenue and EBITDA growth, respectively. For those wanting to understand our mix of organic versus inorganic growth, our organic growth was a robust 89%. Next, I want to discuss our software business, which falls under our business revenue. We wanted to provide you additional metrics regarding just our software business to help you understand the scale and growth drivers of that business. The first is total software transaction value, a new metric for us. It measures and helps dimensionalize the scale of our software business. Our software is used by our first-party apps and third-party clients. However, we can't report our own spend on our own software under GAAP rules. So we measure TSTV, or total software transaction value, as the total net value transacted from all clients as if our own studios were stand-alone businesses. In Q1, this TST measure increased by 155% year-over-year to $148 million to nearly a $600 million run rate. That illustrates both the scale and rapid growth of our software platforms. Operator: . Your first question comes from the line of Stephen Ju with Credit Suisse. Stephen Ju: Okay. So Adam, I think it's only been about 9 short months since you switched over from contextual ads to AXON. And it seems like the benefits you get from ML and particularly as you keep feeding it more first-party data should continue to accrete over time. So what inning do you think you are in terms of the overall value you think you can extract? And secondarily, just wondering what the M&A pipeline may look like at this point. Are deals getting more contested now? Or are the private market valuations about where they are? Adam Foroughi: Thanks, Stephen, for the questions. And taking the first one. Really, ML, if you look at the success of all the biggest companies in the world today, whether it's Google or Facebook, you can tie their success over years back to the inflection point where they really executed on putting ML into the core of their platforms and then growing off of it. These systems are built so that as they get bigger, more data feeds into them, more clients come in and the system becomes more and more accurate. Our AXON engine is trying to predict what a consumer will download and engage with in the future, and it does it at exceptionally high accuracy, that every day we go forward, that accuracy improves. And really, when we executed on it, we were trying to execute on the vision of expanding our first-party data, which was speeding it and then unlocking the power of that data with the machine learning engine so as that first-party data continues to grow as well, that engine will only get better. I would say, really, what inning are we in, it's 6 months in, so we think we're very early in it. Tying into Adjust, too, we're just -- we're thrilled to bring that team on. They have great products. But the reality is the strategic benefit for us with that deal that can unlock the most cash flow for us going forward was that to date, we haven't had a sales force. We haven't been selling our product to the marketplace. It's working exceptionally well. And as you look at the growth of both the third-party clients and the TSTV stat, growth rate is second to none in the marketplace, and our enterprise clients are still under 200. The market has over 10,000 potential enterprise clients, and we're excited about Adjust sales force coming in and really help us deliver on more clients into the system, which will continue to help it grow. On the second question around M&A. Our pipeline is always robust because our approach is just different when it comes to the content side of M&A. We're working with our own clients to bring them into effectively our walled garden and help facilitate more growth off of their business that they've built. Almost every single one of our transactions in the past have been client first outside of banker-run processes early in their evolution, companies that we were able to acquire and then accelerate the growth thereof. And then we just announced in the release 2 deals that we executed on in April for 2 more early but top grossing games that we think we can go quite materially from here: one, West Game; And Two, a slots game that brings the first slots game into our portfolio. These 2 games are at a run rate of $200 million a year revenue, and we paid upfront $300 million for them within some contingent payments that will -- they'll be able to accumulate as they grow their businesses with our platform. Operator: Your next question comes from the line of Alexia Quadrani with JPMorgan. Alexia Quadrani: I just have two questions as well. One, can you discuss the integration of Machine Zone so far and the learnings from operating in the mid-core space? and then with West Game, this does look like you're moving deeper into the space. I guess do you expect synergies you realize in casual can be applied to other genres like mid-core and casino? And then my second question is just if you could maybe elaborate on the full year revenue guide of what your assumption is in that guide for organic growth. Adam Foroughi: Thanks, Alexia. I'll take the first question, and I'll leave the guidance question over to Herald. On the first question, the Machine Zone transaction, we closed actually almost exactly a year ago. And really, integration for us with content studios is pretty straightforward. We want them to focus on creating, and then we want our platform to really be their accelerator of growth. And so it creates a perfect environment to unlock that creative talent that they've got. The Machine Zone transaction for us was interesting for 2 reasons. One was they had a team that was very skilled at building these core games. The -- and we believe that they can unlock that value going forward with future games. But then more importantly, the reason it was interesting to us is they have the biggest pool of first-party data where consumers had transacted in their games, consumers that are interested in these male-centric strategy games, a really high-value segment for advertising. And our content strategy, really, the core reason we got into content was to be able to supply our advertising ecosystem, our platform and our software with first-party data. Machine Zone gave us scaled data second to none. And with West Game, as far as synergies go, the reason we're excited about growing that game particularly is it's much earlier in its life cycle than Machine Zone games. And we've got the data to be able to execute on the machine learning to be able to grow that game through our platform. So we think we're going to be able to grow it quite a lot from where it is today, already one of the top 100 grossing games in the world. Herald, do you want to take the point around or the forecast? Herald Chen: Yes. That's great. Yes. Thanks for the question. In terms of the guidance we've given for the full year, it really takes into consideration just the tremendous opportunities we're seeing across all of our assets. And you can see in our strong first quarter here where we had growth in each one of the businesses, and we also had very, very robust organic growth. And so we see that continuing in our 2021 full year guidance where the majority of it will continue to be from organic measures as well as we will augment that with M&A. As you just mentioned, we just did 2 acquisitions that -- or run rate of about $200 million, which will be included in our guidance. But we still see opportunities for M&A on top of that. But in terms of guidance, our policy is really not to include any additional meaningful M&A, nor do we include any large, new hits from our studios, both of which are very hard to predict. We're certainly pursuing both those things, but notwithstanding, it's hard to project those 2 things. Operator: Your next question comes from the line of Brian Nowak with Morgan Stanley. Brian Nowak: I have two. First one on the software side. AXON has been a big success. Curious to hear about other areas where you see low-hanging fruit improvements to make to that product, to continue to competitively differentiate and win even more market share and just kind of get beyond the AXON lapping. And then secondly, on the first-party consumer business, can you give us examples where are you using any machine learning on that side yet? Or is that sort of something you're still thinking about doing over time to improve the over algorithms on the consumer side? Adam Foroughi: Thanks, Brian, for the questions. On the first point, really, when it comes to machine learning, one, you have to have a data advantage to be able to execute on machine learning at this level. And we had the data advantage. We executed on getting the machine learning to market. We also had invested over the last decade in building our large-scale data infrastructure, which is a key component of machine learning. Now where it is today, once you put these software programs out, there's a couple of areas where you get leverage to grow them. One is just getting more clients into our platform will continue to expand the business model. Two is the first-party data continuing to scale, giving us that exclusive data will continue to power that machine learning to become more accurate and allow us to get more growth in that business model. And then the third is, of course, we've got data scientists and machine learning engineers working on improving the algorithms all the time. Those three pieces are all really early stages. So we see a lot of upside in that technology. And then you brought up taking market share. We don't look at the ecosystem as we're executing on AXON, and we're taking market share from peers. As you know, a couple of our direct peers have been in the public markets recently and just reported their first quarter earnings. We're all doing very well. The way this ecosystem works is when something like AXON happens, we're driving more value to our clients. And as our clients grow, and as our own studios grow, the TAM just grows with it. And all of the companies in the ecosystem have different models, different algorithms and different data, and all of us end up growing with that. And that's what makes this market so exciting. On the other question around applying AXON or machine learning specifically to games, it's a great point. And frankly, we started our games business 3 years ago. We're really new into content. And the intent of that games business was to get first-party data at scale to power our advertising business. We've been busy building AXON and applying it to the advertising side, so we haven't had the time yet to go apply it to the game side of the business. We think that presents us an immense opportunity for growth as we go forward, and it's work that we're actively working on today. Operator: Your next question comes from the line of Jason Bazinet with Citi. Jason Bazinet: You guys have been pretty consistent in your messaging about wanting to do M&A, and you've done some more today. But I guess my longer-term question is do you feel like it's mostly done on the ad tech side, and more of what you're going to do is more about buying apps or games. Is that the way to think about it? Or do you still think there are other pieces of the puzzle on the tech side? Adam Foroughi: I think the way we look at it is the content side is just natural. If we've got clients on the platform, whether they're gaming or they're nongaming and they've got content and they need a growth partner, then we can be acquisitive and really help facilitate their growth and facilitate our goal of accumulating more first-party data into our engine. On the software side, it's much more opportunistic. If you look at every -- the 3 deals we've done on that side, MAX, SafeDK and Adjust, they were all to go acquire software that our studios used or our platform could utilize to expand the offering to the marketplace. And we'll continue to look for those opportunities that we think there are opportunities to be acquisitive to augment the offering that we've got in the market. Operator: Your next question comes from the line of Ryan Gee with Bank of America. Ryan Gee: Two, if I may. I think the consumer business is very strong, accelerating to over 3x year-over-year, well ahead of our expectations. I think the complacent investor might view that as just a gaming company benefiting from the pandemic. But is there a way that you can maybe tie in how the strength there is actually a direct reflection of the power of your platform to drive monetization and discovery for your first-party apps? And then secondly, just on the outlook real quick. It seems like that was also well ahead of what we were expecting in absolute terms, but regarding the profit margin of the business, can you talk about the factors influencing the year-over-year trends there in margins? How much of this is evolving revenue mix versus incremental investments to grow software or grow apps? Adam Foroughi: Thanks, Ryan. I'll jump on the first, and I'll let Herald handle the second. On the first point, really, of course, we know the pandemic was beneficial for many gaming companies. But I think there's a little bit of a disconnect on the types of games that benefited. Our games are predominantly casual mobile games. If you look at some of the oldest titles in our library that we own, a game like Wordscapes, that game is played on the go. And when we have the pandemic hit, we're all sitting at home, we had plenty more time on our hands. Console gaming really benefited the most. And then the second benefit was to be deeply engaging metaverse-type games on mobile. The casual games didn't see much of an uptick. If you look back at the growth of our content, you could see a direct correlation to when we launched AXON, and we gave you that TSTV stat, too. You can see the acceleration and the difference between the total TSTV and the third-party clients on our platform. That difference is us spending on our own platform to grow our apps. Pre-AXON, frankly, we just weren't as successful at growing our own apps because we didn't have that software at the level of efficiency that it is today. Now, today, with that software running at the capacity it's running at, we're accelerating every part of our business. The content grows because we're able to grow the spend through our own platform and through other channels utilizing our software. And then that content and feedback data, which makes the software more accurate, and then the software grows the content. So we've really unlocked that flywheel effect that we highlighted in our S-1 only dating back 6 months ago, and that's what we're so excited about looking forward. Herald Chen: Ryan, thanks for the second question as well, which I'll address. Yes. Again, in terms of the guidance and the margin structure and how that progresses, we're confident in our top line growth rates across the board. As we mentioned, again, we show that in this quarter with 90% on software, 57% on business apps and 215% growth on consumer apps. And so as we build out the year, we see each one of those businesses continuing to grow. And as we're able to grow and scale over our cost structure, our margins do expand. And so composition is important to follow as well, and certainly, in this first quarter, with Project Makeover, we had more, as you noted, more consumer app revenue, which did increase that side and also increased cost of goods sold on that piece of revenue. So we see for our full year guidance, at 26% margin, we do see our software business accelerating relative to the other businesses, as you also saw in the first quarter and I think relative to most of your models that you published earlier this week. And so we're confident in the top line, just given all the aspects of the business that we're executing against and then having margins expand as we continue to scale over our cost structure as well as the mix of the business continues to accelerate on the software side. Operator: Your next question comes from the line of Youssef Squali with Truist Securities. Youssef Squali: Great. Guys, congrats on your inaugural earnings call. So two questions, if I may. First, for games you acquire, can you just speak to maybe a typical lift in growth to their revenues, how long until they peak? I realize it's probably early until most of the peak, but to those that may have had -- and what's kind of the decline curve for some of these maybe earlier games? That's a question that we've actually gotten from a number of investors earlier this week. And then second, can you speak to the nongaming opportunity, especially now that you own Adjust? How quickly do you start moving in that direction? And Any verticals that excite you? Or I guess what are the verticals that excite you the most? If you can comment on that. Adam Foroughi: Thanks, Youssef. On the acquisition side, we put in the S-1 data around the acquisitions that we had for over a year. But we are just so fresh in the strategy. So we haven't had a lot of time with a lot of the games in the portfolio. We typically, in the first 12 months, when we measure it on average, grow these businesses over 100% once they come on to the platform. Now there's something interesting about our acquisition strategy is that we don't buy to sit on top of the EBITDA that they previously had. Most gaming companies don't operate in an aggressive marketing fashion because they're sensitive to generating cash flow. Our objective with the content business is not to generate cash flow or material cash flow from the content business yet. The objective from the Content business is to grow the games to as large as possible to get as much transactional data that we can get from the customers playing our games and use that data in a behavioral and privacy safe manner in our ad algorithm, which accelerates our business and has exceptionally high software margins. And so we operate that way. We're going these games through their life cycle where when they're early, they can grow to a ceiling in revenue. Eventually, the cohorts that you're accumulating stack up on top of each other, and the games become cash flow businesses. So over time, as our game business continues to become bigger and bigger, we will get to a point where it will also become a high contributor of margin to the business. But right now, we're focused on growth, and we've been able to execute on that strategy across almost every single one of the acquisitions we've made. On the second question, when it comes to nongaming, of course, exclusively, for most of the company's history, we've been focused on gaming companies. That's not because our technology was specifically geared towards gaming. It's also not because our data or machine learning is geared towards gaming. The data that we have in our business is built on top of this casual audience that we have across all of our games and then also that male-centric strategy player, which is a very high-value category of consumer for many advertisers outside gaming. But the nongaming businesses require companies to sell into them, to explain to them that there's an opportunity on our platform for them to go execute a growth strategy. To date, we've never had a sales force, and Adjust brings us 300 seasoned salespeople who know how to sell software in the ecosystem. They have over 3,000 clients, and 40% of those enterprise clients are nongaming companies. We're already executing on the strategy there of being able to bring nongaming companies onto our platform. It's the fastest-growing category of company that's coming on to the platform today. And just to give you a sense of one case study of why we were really excited about the Adjust transaction and the potentially leveraged financial profile that we can build off of that sales force cross-selling our product against their clients, when we went and assessed that transaction, we did one case, to really build the case internally on why this is potentially so valuable. We took a health and fitness subscription app and took that, put it on our platform. The company is paying Adjust today $3,000 a month. They went live on our platform about 90 days ago, and they're now yielding us close to $500,000 a year or $40,000 a month. We're not to say that every one of Adjust's clients that amount to over $100 million a year SaaS business are going to convert at 13x revenue dollars to our platform, but we're very excited about the cross-sell opportunity, especially when it comes to nongaming. Herald Chen: Youssef, if I can go back to your question on the game side, you'd asked about just the decline rate. What we're finding with these casual games is -- once we get them launched, we do grow them. Once we own them, launch new games. They reach peaks. They do plateau at some level. But they do last for a very long period of time. You'll see in our letter for Q1, we show existing studios from Q1 of 2020 to Q1 of '21. Existing studios were able to grow at a 91% rate. And so even after a year, they continue to grow because of our software and because of our marketing expertise. And so we're trying to build these cohorts. As Adam said, we're only 3 years into this. So we start layering these annual cohorts, and they start building up. The great thing behind that, too, is that the content business then starts to generate even higher margins because we're not going out and have to buy a lot of that revenue stream that's been already paid for. overall, the games business grew, for those 2, to 141%. So still the new pieces that we've added that we acquired added more growth but at 91% growth on existing games. We think those -- that type of layering will allow us to continue to compound growth on the content side. Operator: . Your next question comes from the line of Martin Yang with Oppenheimer & Company. Unidentified Analyst: My first question is on your acquisition targets. When you think about the content you're going to acquire and how that aligns with your first-party data strategy, do you intentionally pick out like the missing genres or trying to sell out the full spectrum of the most popular genres for mobile games? Adam Foroughi: Martin , yes, that's a good point and a good catch. If you look at our acquisition strategy historically, we've targeted a whole bunch of different genres, and that wasn't by coincidence. Fundamentally, we want content that's appealing to every single one of the 400 million-plus daily active users we see on the platform so that we can build first-party data relationships with those consumers. And we've been able to execute on that strategy really efficiently. We're at a point now where we've got content for everyone. And so now the strategy is just scaling that content. The bigger we get on the content side, the better our software gets. The better our software gets, the more growth we get on the content side. And so we're really excited about getting to this point where now we've got titles after the Slots transaction that we just announced across every single major genre in mobile gaming. Unidentified Analyst: Got it. So related to that question, do you apply the same strategy with maybe different geographies? Because in my understanding, some -- player behavior might differ a little bit in between different regions. Adam Foroughi: Yes. That's for sure true. International is actually one of our big growth vectors. So far, the U.S. has made up a majority of our revenue. Tier 1 English-speaking markets is the focus. Japan is actually our second biggest market. And to your point, some games will overlap with the Japanese audience, but culturally, there are some games that are specific to it. And then China is a whole another vector that's just unique to itself, half the world's gaming audience an opportunity but contained within the country. We think these international expansion points present a big opportunity for growth in the future for us. Unidentified Analyst: One more question, if I may. Can you maybe comment on the user acquisition environment in the first quarter, whether you see anything unique or different than usual as most publishers are preparing for the IDFA impact? Adam Foroughi: We haven't seen any changing trends. If you look at our TSTV stat, you'll see a lot of our user acquisition does flow through our own platform. So that does make us a little bit unique in terms of having this perspective, but we do spend a lot on other channels as well. I would say the marketplace itself continues to expand in potential applications that can market on marketing platforms. And this is why we're really excited about potentially new clients and new categories on our software platform. Things like fintech have been exploding in competitiveness in ad auctions with crypto-based apps spending a lot of money. And these are just all new concepts to us in our software platform. We haven't gone out and sold these companies to buy with us yet, but we're actively executing on that strategy when it comes to our platform. Operator: Your next question comes from the line of Ralph Schackart with William Blair. Ralph Schackart: On the Consumer business, which overall was much stronger than expected, in particular, at least relative to our model, you had a very strong MAP number. Just curious how much of that might have been driven by Project Makeover versus just the broader portfolio set of games performing well versus, perhaps, any improvements that you had in the software platform. Adam Foroughi: Yes. So I can handle that. And then if Herald knows the exact split, he can give it to you. But for the most part, the way we look at our content portfolio is at any given time, the content that's newer, that's fresher is going to be what we're going to be able to accelerate the growth of. And Project Makeover launched in November. It accelerated to -- today, it's a top 15 grossing game. So certainly, it's feeding a whole bunch of consumers that are transacting back into our systems. But it launched in November, and that was 3 months after we launched AXON. And really, the growth in that game was facilitated from how well our software is performing, and it just fed back into the system. So what we're really excited about is that you see that MAP number grow. The most important data that really drives the success of ad algorithms for any company is if you can accumulate scaled transactional data. When you understand what the consumer is interested in purchasing, you can give them much more relevant advertising. And when consumers purchase in Project Makeover, we're able to take that MAP data, anonymize it and use that behavioral signal back in our ad algorithm, and that facilitates expansion in everything. And that's why you're seeing our business growing so quickly in Q1. Herald Chen: Ralph, it's Herald. Yes, Certainly, Product Makeover had a big impact in our first quarter in consumer revenue. But even when excluding Project Makeover from consumer in the quarter, we still grew it at a very, very high rate. So almost a triple-digit -- maybe actually to slightly over triple-digit rate on everything else. And that's really due to the fact, what Adam is referring to, the overall platform also improved, right, at the same time, with the launch of AXON underlying a lot of our own marketing spend. And we increased our percentage of our own spending on our platform. Instead, that improves the consumer base overall, but certainly nice to have Project Makeover included to get to that 200%- plus growth rate. Operator: Ladies and gentlemen, there are no further questions at this time. I would like to turn the floor back over to management for closing comments. Adam Foroughi: We just wanted to thank everyone for spending time with us and really getting to know our business, and we'll look forward to talking to you all more on callbacks and at next quarter's earnings call. We are thrilled with where our business is at. We don't know of many other companies in this environment that are growing revenue and EBITDA triple digits this Q1 versus last year's Q1. We're executing on all cylinders, and we see a road map to growth for many years to come, and we're excited for you all to learn more about our business as we go forward. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.APP Ratings Summary
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BofA Analyst Raises AppLovin Price Target, Stock Surges 13%
AppLovin (NASDAQ:APP) shares rose more than 13% intra-day today after BofA Securities analysts increased their price target for the company from $100 to $120, reaffirming a Buy rating on the stock.
After meeting with AppLovin's CEO and CFO in New York, BofA shared insights on why the company remains their top pick. The analysts believe the Software division has the potential to grow by over 20% annually through 2026, significantly outpacing the mobile gaming market’s expected 5% to 10% yearly growth. According to BofA estimates, despite capturing only about a third of the projected ad spend in 2024, AppLovin is well-positioned to generate a majority of new in-app purchase (IAP) revenue for advertisers.
The analysts highlighted that one of the key challenges in the mobile advertising space is effectively matching mobile gamers—an audience of over 3 billion worldwide—with the right games. Currently, mobile ad networks convert around three installs per 1,000 impressions, according to BofA estimates. Even a modest improvement, such as increasing the conversion rate to five installs per 1,000 impressions, could significantly boost industry growth.
Since the first quarter of 2023, AppLovin's AI Engine has proven its ability to enhance install rates, contributing to a 112% growth in the company’s quarterly run rate. The analysts noted that the company’s use of large language models (LLMs) for data collection, still in its early stages, presents further opportunities for long-term growth by continuing to improve matching efficiency.
AppLovin Gains 6% Following Q3 Earnings Report
Shares of AppLovin (NASDAQ:APP) surged more than 6% intra-day today following the announcement of robust earnings for the third quarter.
The company's revenue for the quarter stood at $864.3 million, topping the market's forecast of $798 million. Earnings per share also beat expectations, coming in at 30 cents compared to the predicted 27 cents.
Throughout the year, AppLovin has bought back $1.154 billion of its Class A common stock, with the average purchase price being under $25 per share.
The company also announced that Herald Chen, its President and CFO, will be stepping down from his day-to-day duties by the end of 2023. Despite his transition, Chen will continue to serve on AppLovin's Board of Directors and will become an Advisor to the CEO. Taking over the financial helm, Matt Stumpf, the current Vice President of Finance, has been named the new Chief Financial Officer.
AppLovin Gains 6% Following Q3 Earnings Report
Shares of AppLovin (NASDAQ:APP) surged more than 6% intra-day today following the announcement of robust earnings for the third quarter.
The company's revenue for the quarter stood at $864.3 million, topping the market's forecast of $798 million. Earnings per share also beat expectations, coming in at 30 cents compared to the predicted 27 cents.
Throughout the year, AppLovin has bought back $1.154 billion of its Class A common stock, with the average purchase price being under $25 per share.
The company also announced that Herald Chen, its President and CFO, will be stepping down from his day-to-day duties by the end of 2023. Despite his transition, Chen will continue to serve on AppLovin's Board of Directors and will become an Advisor to the CEO. Taking over the financial helm, Matt Stumpf, the current Vice President of Finance, has been named the new Chief Financial Officer.
AppLovin Stock Jumps 30% Following Q2 Report
AppLovin (NASDAQ:APP) saw its shares skyrocket by more than 30% intra-day today after posting its Q2 results.
The company outperformed predictions with an EPS of $0.22, surpassing the Street estimate of $0.08. Despite a 3% year-over-year decline, revenue reached $750 million, exceeding the Street estimate of $723.97 million. Notably, the Software Platform division experienced substantial growth, surging 28% year-over-year to reach $406 million—a quarterly record. This rise was fueled by AI advancements integrated into AXON, which led to increased installations and higher revenue per installation compared to the previous quarter.
Looking ahead to Q3, AppLovin anticipates revenue in the $780-$800 million range, surpassing the Street estimate of $741.41 million.
AppLovin Shares Surge 34% Despite Q1 Miss
AppLovin Corporation (NASDAQ:APP) shares surged more than 34% on Thursday despite Q1 results coming in worse than the consensus estimates. Quarterly EPS came in at ($0.31) and revenue at $625 million, both missing the Street estimates of ($0.08) and $823.37 million, respectively.
The company lowered its 2022 revenue guidance to a range of $3.14-3.44 billion, below the Street estimate of $3.69 billion, while the adjusted EBITDA estimate was raised to $1.20 billion from $1 billion at the midpoint. The raise reflects the ongoing growth of the Software Platform business and expected operating improvements in Apps.
The rapid growth of the Software Platform and the massive reach post-MoPub acquisition give the company confidence that it is still able to do well with less reliance on first-party data from its games. That means the company will not only reduce UA investments into those games, but also consider divesting the first-party game business if that makes financial sense.
What to Expect From AppLovin Corporation’s Q4 Results?
Analysts at Credit Suisse provided their outlook on AppLovin Corporation (NASDAQ:APP) ahead of the company’s Q4 results, which will be reported tomorrow.
The analysts increased their price target on the company’s shares to $128 from $115 as they incorporate the MoPub transaction and recalibrate their model. Their new 2021/2022 Adjusted EBITDA estimates are $705 million/$1080 million.
According to the analysts, the main focus heading into Q4 will be the MoPub transition as other platforms will look to poach publishers. The analysts reiterated their Outperform rating due to (1) operations in the fastest-growing segment in videogames, (2) software to offer more diversified exposure to mobile games secular growth theme, and (3) optionality to expand the total addressable market to non-gaming apps.
