-
The total turnover: $1.06 billion
-
Adjusted EBITDA: $549 million, 52% margin
-
Free cash flow: $388 million, 71% flow-through of adjusted EBITDA
-
Software platform revenues: $678 million
-
Adjusted EBITDA for software platform: $492 million, 73% margin
-
Adjusted EBITDA margin for Apps portfolio: 15%
-
Share buybacks: 14.9 million shares, reducing the total number of shares outstanding by approximately 3%
-
Second quarter revenue guidance: Between $1.06 billion and $1.08 billion
-
Adjusted EBITDA guidance for the second quarter: Between $550 million and $570 million, 52%-53% margin
Release date: May 8, 2024
For the full earnings call transcript, please refer to the full earnings call transcript.
Positive points
-
AppLovin Corp (NASDAQ:APP) reported a record quarter with total revenue of $1.06 billion and adjusted EBITDA of $549 million, demonstrating strong financial performance.
-
Revenue from the company’s software platform grew significantly from $355 million to $678 million year-over-year, with a high margin of 73%.
-
AppLovin Corp (NASDAQ:APP) generated $388 million in free cash flow during the quarter, indicating efficient cash management and profitability.
-
The company successfully expanded its AXON technology beyond gaming into web-based marketing and e-commerce, demonstrating potential for further growth and market penetration.
-
AppLovin Corp (NASDAQ:APP) has continued to innovate and improve its AI models, resulting in better performance and efficiency in ad placements.
Negative points
-
Despite strong financial results, AppLovin Corp (NASDAQ:APP) experienced a significant increase in cloud data center costs due to reserving GPU capacity for future growth.
-
The company faces challenges in expanding its mobile gaming technology into other verticals, which will require strategic adjustments and potentially new sales strategies.
-
AppLovin Corp (NASDAQ:APP) is still in the early stages of entering the web advertising market, which could bring unforeseen challenges and competition.
-
There is a dependence on the continuous improvement of AI models for growth, which does not always yield predictable results.
-
Although the company has significantly reduced the total number of shares outstanding, the heavy investment in share buybacks could be seen as a risk if not balanced with other growth strategies.
Q&A highlights
Q: Adam, I have 2 on software and AppDiscovery. You mentioned in the prepared remarks that this quarter’s results exceeded your internal expectations. Is there anything specific you could mention for us as one of the key sources of outperformance? a: Adam Arash Foroughi – AppLovin Corporation – Co-Founder, CEO & Chairman: Yes. Thanks, Clark, for the question. So on the first one, I addressed this in the script. But we have a few growth vectors. We’re going to be adding more advertisers, both in gaming, and then breaking into these new verticals that we’re working on and are pretty excited about. Second, and more importantly, every time we see improvements in our core models, we see gains in our business. And there are two types of improvements. These models are self-learning. That is why we have them on the market. We serve up a ton of screenings every day. And there is a feedback loop that brings this data back into the model and improves itself. So there is part of that. That’s why the system has been getting better and better since we launched it.
Q: You’ve been pretty consistent in saying that the AXON 2 engine works outside of the gaming industry, and you kind of addressed that in your last response. Can you maybe give an update on where you are in those types of endeavors outside of gaming? Do you need a new sales team? Are you testing? Any results you could share just want to get a sense of where you are in that effort. a: Adam Arash Foroughi – AppLovin Corporation – Co-Founder, CEO & Chairman: Yes. Thanks, Ralph. Good to see you. And a few things. One is, we’re looking at the advertising world with apps and websites, right? As if there are two forms of media that people buy until their final destination. And nowadays in the app marketing world we are very good at gaming. We also work with non-gaming apps, and we’ve seen success as we rolled out AXON 2 to several non-gaming companies that were also growing on our platform. And I think we pointed out on the last call that the non-gaming app space is growing faster than the gaming app space on our platform just because it’s starting from a lower base.
Q: I don’t dare ask this question because you are doing so well. Would you like to give us an update on your sales process? I remember a few years ago you were kidding yourself because you didn’t really have a sales team and didn’t think about it. And I’m just trying to get an idea. You didn’t talk about it as a vector. But is all this growth we’re seeing a result of sales and technology? Or is it just purely the technology and does it sell itself based on the return… a: Adam Arash Foroughi – AppLovin Corporation – Co-Founder, CEO & Chairman: So look, since day 1, I’ve known that I’m not a very good salesperson and being product first at the company was something that we really focused on. We believe that if we build great products and innovate well, then the advertisers, when they see success on our platform, they will tell their peers and their peers will come to our platform and this thing could sell itself. And we’ve seen that happen in mobile gaming, as AXON 2 continues to perform well.
Q: I had a few questions about header bidding, also called real-time bidding, I think it’s the same term. What is the quarterly revenue trajectory for the rest of this year? I think you said you collect a 5% fee for header bids in MAX offerings. I wondered where that stood and how it would develop in the future. a: Matt Stumpf – AppLovin Corporation – CFO: Yes. So Omar, we don’t disclose that level of detail, the revenue for specifically the MAX business or for header bids. But we continue to see the trend that we’ve talked about historically, the trend of people accelerating to header bidding in the first quarter. So we continue to see that positive trend.
Q: Maybe a follow-up to Tim’s question, but in a slightly different way. Adam, if you’re thinking about entering new industries or new campuses, we’ve seen you take a number of different approaches: buying companies, taking stakes in companies, building partnerships. How should we think about the dynamics of capital allocation around organic versus inorganic growth thinking? How does that maximize ROI when you think about how far the platform can reach when you look at some of these campuses in the medium to longer term? a: Adam Arash Foroughi – AppLovin Corporation – Co-Founder, CEO & Chairman: Yes, I’ll start with the first, and Matt can answer the second. Thanks, Erik. When we think about our company, we have really built a very compelling implementation of AI, one of the most powerful systems the world has ever seen in this field. And so organically we have a huge advantage in building on that.
For the full earnings call transcript, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.