APP - Earnings call transcript Q2 2021

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Operator

Greetings. And welcome to the AppLovin Earnings Call for the Quarter ended June 30, 2021. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my Mr. now is to host, introduce It Strategic Investor Ryan of and Finance. Gee, Head Relations Thank you, Mr. Gee.

You begin. may

Ryan Gee

Yes. Thank XXXX. you, earnings call Alex. And welcome, the ended everyone, quarter June XX, for to AppLovin’s

and Letter investors.applovin.com, Joining to release filings Shareholder CEO Chairperson, posted Please our Financial Foroughi; me Adam and note where are performance. also Chief initiatives our a and Herald discuss results earnings and President today and we Officer, QX are have key discussing our that Co-Founder, at business available Chen. SEC our

I it to uncertainties remind company. the statements future call, could that materially be Before turn I’d the different over like actual those projected and from of forward-looking you we today. These cause to our to or statements making regarding Adam, and performance implied the future are events that subject results during financial risk may to

for May will and any rely forward-looking as few XX-Q For hereof, said, forward-looking not and statements on future events. assumptions make our on required the All of of statements potential obligation disclaims by this recent to call more as and on update and you based days. these our XX-Q Form second except please on statements refer most the XX, AppLovin should that next XXXX, date are filed forward-looking predictions we beliefs these law. our in the to quarter filed That risks, Form be XXXX

financial with SEC, Form our non-GAAP financial non-GAAP as results. isolation website. to historical our GAAP as will Shareholder results, These Investor X-K of include addition results, an non-GAAP filed including and be regarding discussion Our for in Letter our Information may measures be substitute GAAP today with our measures. non-GAAP found to should a a Relations considered at our well today in our furnished reconciliation

turn it will that, Finally, call over this Adam? our now available Adam CEO, And I has website with ended. a our conference of on be Foroughi. this shortly will recording also call IR after to

Adam Foroughi

Ryan. you, Thank

the all billion first-party to lot software the data a are marketplace. data in in Shareholder the very you We spoke show that we we you this Letter you we have about had significant us are advantage software have business the excited quarter financial I today. to has second once period public you each resulted of financial in by to on AppLovin our business since gains hope I the proud was our a powered of Today, then. excelling an read and opportunity proud am how Through is we app on give posted team. had which you for a strong highlighting record This will QX first installs. software in our quarter, year themselves. Consumers afternoon, we joining Thank the are the one organic have second almost billion In company, apps platforms downloading performance. teams stores roughly earnings half performance. X through the earnings year, call, again, as the and the discovery execution of by those half and the of this XXX downloaded our extremely probably AppLovin consumers

become two on growing will I strength. topics Our that have to our market and is market one to consumers. largest share developers the for touch we demonstrate platforms of

adoption. has we the than revenue efficacy second tripled SPECs software number accelerated of our of growth prospects tripled quarter, quarters. XXX. during engine AXON, and a customers customer is the the In or second the consecutive software And three accelerated learning software platform First launch also our Since performance platform software in has of machine quarter tremendous the our Improvement revenue more year-over-year. enterprise software our for our to for business. platform

just as when more We retention than dollar of to existing Even growth SPECs from than revenue XXX% with SPECs. we based also net impressive our was with troubling. more software spend saw significant XXX exclude growth doubling in and Adjust

XX% all-time also average excluding was Adjust to year-over-year SPEC an per high. quarterly revenue Our up

our We on drives are focused growing our in up which in base, marketplace. client turn pricing

businesses flow-through software material there of performance. included, most to with us EBITDA. record This a revenue high is incremental to achieving ours growth As EBITDA led

Looking integrating are the excited forward business. Adjust our to team we be into

year Here of the is double. one client way our this team AL their software clients XXX about of Adjust business into a X,XXX one people sales marketing to opportunity. the SPEC the out just simple think in If every and convert next will an on

of be growth favorable will long-term the profile we key value margin driver our creation. the our a of believe it Given software business,

content. I’d differentiated is like second point to our highlight mobile The approach to

unlike We publishers. gaming mobile are traditional

Our to and margin a first-party is capabilities, data growth leading Larger wide software scaled as in top higher scale data to targeting our across the audience. generate we our enhances exceptional priority saw ultimately quarter. first-party this business

billion, us the past have creators mobile content to more exclusively more heavily year-over-year. us. We for according mobile across expertise categories, studios in Even organically were the $X gaming and in in invested over the have in second with quarter with to globally talent XX of SensorTower. nearly in one an growing one have downloads building importantly, business X,XXX this content global world, the by number of the close publisher all popular We pools than three we annualize development revenue largest XX% years now

relatively of to content. new teams are have the invested new tirelessly in those the we many While on been have teams majority gaming working AppLovin, of

Project a business on and of million revenue of titles a use for half term us meaningful we We annual launch of planned that for have second To and makes scale prospects new a P&L handful Makeover, of Wordscapes the is second evergreen ability others quarter. we content impact $XXX can of for what our over titles years. pipeline many more confident We summarize, in This the for the the hits at year. to evergreen believe have come. in to many very years like great had this

our integrated team. many The advertising business technology rate solution, despite grew great faster in than a run our headwind our of was that our our due us. data, gains performance software fact to growth a be business data to and record share to strong engine regards tremendous afforded powered proprietary opportunity with would our and what Our any the scaled industry our market privacy year-over-year those from to and other growth first-party of and a software unique unique by organically our result model significant insights ahead for anticipated

financial Now performance, Herald announce also joined that before Sharma like I Board to it our has off highlight hand Asha I’d of Directors. to recently to

and are be very proven and roles will it working pass her. senior has With Asha excited and successful is that, Facebook, Microsoft. to tech Porch leader with InstaCart we to operator COO at and held the She’s of I Herald. a

Herald Chen

join to Thanks, to everyone Adam, and taking for thanks time us.

well our our and integrated awesome in momentum and to by market, data, confidence result exceptionally and AppLovin’s team performed for growth driven business future the global hard the quarter, software and in work and the focus bolsters confidence scaled of second strategic Our team. in This AppLovin turn, namely expansion. the approach content by fueled

In the addition additional mentioned to points already to all a the like excellent growth from highlight I’d by quarter. metrics few Adam,

That category. us an software Xx year-over-year annual transaction the our over million. makes fastest of value the to growing TSTV one largest approximately grew $XXX First quarter the in run second software in on rate the and of or total side, players

second and back the in eliminated are Of where app increase relevant A early our of non-gaming accelerate drove the customer we point An peers. our on we software first. scale is absolute Adjust software, large Fastic. a customers, our case making we our base marketing TSTV half reminder, category. we platform customer revenue an although installs. intercompany success highlighting in an compared of app well more quarter to which compared total on this study owned leading spend. over on adds first where also is and do to progress give One note, comparison the quarter non-gaming basis are doubled the a software operated pleased from you website, whose our launched order in called our additional business revenue with for we than growth As the posted If our that to will XXX% on with in fasting in

higher and margin of EBITDA XX%. margin which grows more margin. year-over-year have us our to which and mentioned, our improved I the our XXX% diversification Therefore evergreen mentioned, scale We want adjusted games adjusted us A model record businesses. delivered and apps XX% and for and can highlight, platform, short-term. drive business gives in and XXX%. highlight and apps paths Margins growth million. quarter-over-quarter meaningful software the our growth expansion a big development we EBITDA. of to One depth organic $XXX pipeline emphasize flow, related quick at much operates last cash as is growth strong than the strong grew growth combined regard to of capabilities, doubled our that to reason for coming the of and their business this software rule than QX Adam With new EBITDA portfolio durability a this measure revenue Next, business. of we as business apps to year-over-year Adam in a led both over

between to have against was are $X.XX outlook million to $XXX half second previously, and we XXXX which $XXX strong our the that deliver adjusted of financial outlook, XXXX to billion we organic $X.X in between we EBITDA Moving the can in momentum for billion and confident million. provided -- revenue

several our questions. we line momentum please Importantly, taking quarters the in several made given business. and growth over grow next past investments the open apps over all particular Again added we the in strong for years today. thanks to few software for opportunities see for and time the the Operator, quarters, from

Operator

your first Please Quadrani question. with Thank comes proceed with you. Alexia Instructions] [Operator Our JPMorgan. from question

David Karnovsky

a utilizing the experience their of your and what launching have Oh! as of in out can your clearly then Hi. Thanks. software walled core found you what’s or And been entry Adjust just the an versus talk at little at networks changes, drivers, Alexia. business for Adam, here competing see the This David can services is their force clients through platform IDFA sales software you. games? developers sort that garden point can are the of the amid of starting far Karnovsky integration some more to of your bit you sort accelerating customer Adjust, channels? serve Thank think you that you discuss new some do just on so

Adam Foroughi

Great.

seeing used So thought we we lot first-party data impact engagement across which XXX and is And of a in advertising. data, we for data, users also games, have then is a lot million both transactional scaled IDFA that our scaled we the month software side govern highlighted very unique. of our data case how really with changes The playing how be. last scaled share and quarter it data is would touched when and first-party acceleration a what obviously on third-party

the of terms and is in last and which We add to learning then of able reflective up having performance are millions paid you of growth our of this and dollars year the of customers terms have advertiser. our games. engine in got to doubled come year-over-year. recommendations people on we the with immense amounts seen new put AXON which really our on are have that in clients paying performance platform, rolled out both data machine And drive of for side, We QX in on that spending much coming better that software in the

We going we And then the are trend Adjust, very integration in closed of confident terms forward. of late that in April. this

them more was year. on an into to ticket of thousands integrating a a software QX The tens just is So the solutions average it operate. team, our up speed Adjust getting work on size client through how them of

$X to you those size grow up million ticket revenue. advertiser reported roughly net by of much Adjust clients to factor you how clients platform double figure on is to three X,XXX out next a to software of spending the is a and will typical even And look we year. software possibly can a on AppLovin set all become average network AppLovin client margins business. second X% ago, convert go in know AppLovin opportunity we our more we year And or SPECs become an Our even as I touch a typical a at ad year is and per of SPECs our convert as on this

David Karnovsky

out decision guidance on Okay. strong set that adjust not maybe quarter, squeeze And Shareholder in if more, Letter just laid of time through one on just to just just talk your after Thanks. could one outlook you the year? maybe Great. the the philosophy you start the at your the I to

Adam Foroughi

to forward business and on this and been would a quarter to ahead Really the performing know what side we the of present, trying more Yeah. that thing. That’s, and our with short-term to we the started into didn’t numbers I shifting long-term of Obviously, that’s me where pattern execute looking is it. get operating single our are team say focused. is and at value focus we since shareholder is most I years opportunities long-term product want update every a well. technology creates a to I exceptionally have mindset from our to business one

to materially we guidance the will very we those decided assets to should We unless operate got have are diverge believe confident and in you, will we going and strong update path we very so us numbers. But to will lot for that that financial from a we up put for and years guidance. many that annually match a way are of place growth give we to we come, quarters continue

David Karnovsky

you. Thank Great.

Operator

Thank you.

with Our question. proceed Please Stephen your Suisse. with next question comes Ju Crédit from

Stephen Ju

so Thank you Hey. much.

question So, a spending non-gaming Adam, you follow X,XXX calling marketers and dollars. I for in up ad gaming as are out $XX mobile guess, Adjust, billion

So in to order you what gain work more you you. talk incremental can do about there? share to think know Thank need you do wallet you

Adam Foroughi

they went and that’s our was going we almost there then with during overlap. Thanks reason team like there. transaction it and do process, a We this is. from had in east Adjust really has interesting, Adjust it to Berlin crossed to do and we It’s the no felt got IPO really was really based we but excited because difficult and do to clients the clients Stephen. invested frankly

clients didn’t they client mobile even a sales have international customers obviously are didn’t So and huge who a we their were force, base. are of know sort international realized of into lot we without and just these marketers. any this We penetration

really excited. go got saw So that’s greenfield us just operate. to what We

plus they got probably that We AppLovin and have clients got those become X,XXX SPECs. have big to almost are XXX of enough

marketing a for take just low creates for on and of not to substantial it’s mobile us already it’s one the to business. something going to us going touched are of Adjust test our So out because immense are heavily go case investing to was go such of spending growth path if upside, in Fastic, It’s going which we the easy cost But into work tackle amounts convince amounts them and to Herald, massive to lot create earliest platform. forward, cross sells. it’s on software of be then an they dollars of that

Operator

Thank you.

from Our question. with with Citi. Jason next question Bazinet comes Please proceed your

Jason Bazinet

in only went million, from but something middle to a the to platform $XXX last going wrap am advance, revenue in shrunk? worth grew up I highlighting there to this to that $XX software $XXX have I that because revenue new million around million apps if Okay. million, there But KPI business my from you head $XXX up million, may still quarter. million. $XX is Is the $XX am the trying question apologize gave that dumb is year-over-year confess I

Adam Foroughi

now apps, third-party is, our then ad applications clear obviously from typically landscape. solution, net advantages the revenue exceptionally thought we changing report. Adjust, the max into so going and and had That quickly that discovery be software solution are our and just networks the game within own and the to app we with So mobile advertising business business business that software is we grew

earnings business is, that changes the touched through things of call first drop iOS the we prices in prediction flows on would on on ecosystem publishing. the in quarter other where IDFA the to One our and

that pricing mobile the publishing in to Now despite outsized doesn’t sizable a were ecosystem, growth still that grow basis, in generate ecosystem as had a able to lower gaming so quickly on business business tend the we year-over-year quite The despite that, growth. well.

Herald Chen

I to maybe And that. can add on

Jason Bazinet

Yeah. Yeah. Okay.

Herald Chen

Yeah.

Business the apps within still number total you quarter, revenue which software revenues see a faster course, enterprise customers letter the have before, So the business customers, we We the software software in We apps on of includes disclosure now the the grew of rate XXX% apps XX% category, pretty revenue. to in business -- showing broke much and of the would and to will both business for are had side the the then, you the side. which it originally up aggregate we out and the we but revenue, software. in grew the explicitly the

Jason Bazinet

that. it those of Can Okay. take one ask compare spend two and a generate I I Adjust million $XXX,XXX, error. the than Thanks. beginning software to quarter, Is over used maybe a I $XXX rounding the to In less the that generate are or like other sort be I question. together more sort quarter, becoming accounts like number? to traction dumb multiply clients you platform up If jumped business of if larger revenue, something like it to $XXX,XXX get from whereas this per or numbers to it acquisition what’s from

Herald Chen

one well. can I as Yeah. take that

So, we Adjust did in the you Adjust. without and what do with the letter show business

client without spent revenue quarter. $XXX,XXX $XXX, And average for so, the the SPEC $XXX, sorry, Adjust, in

So it quarter. lower a which a incremental much the bigger increase they -- the prior was Adjust over SPECs, a have much Then, is average. XXX that’s do customers, the

combine overall when total the them the So was XXX. you average

Jason Bazinet

you Thank it. very Got Okay. much.

Operator

you. Thank

Our question. your Please proceed Youssef Truist next with with from question Squali Securities. comes

Youssef Squali

on Thank Great. congrats solid guys you Hi. a quarter. and

acquisition. IDFA, questions, of selling the cross that or that ramp of of can to up one, for of guidance kind two or to the a back you. later percentage baked your And what’s opting users kind if or rollout if So, -- and speak but maybe was you on was salespeople? quickly numbers just the iOS can wondering business? into Adjust XXX to Thank just you have on think what that and of that of you just of how can on impact the far? do on so the I on of XX.X have follow up kind sliver And that seen potential either upgraded second, basically rates themselves, and the you I comment speak the the obviously, you wondering published going

Adam Foroughi

second answer first, the will I just Youssef. is Thanks, it because quicker.

devices seen lot in folks are than, or think, have projected. XX.X industry had the later quite rates We high the around to bit iOS a and It’s different about coming opting updated XX% on now the by on a in I are of higher and XX% of consent information. or app-by-app, to XX% XX% an XX% end to lands into the but sharing average between XX% anywhere and to to on it XX% low end

So that’s changes. on IDFA

Adjust to and the QX get was again, piece, a bit takes for It integration, there’s the learning clients up, come platform little and costs of just timeframe. On a on our trained because ramp team learning actually up. time

So, start of taking in quite QX shape year will really Adjust. next the seeing we effects and QX materially. Starting impacting really in

into much As numbers we cross-sell project too such, our all at Adjust didn’t this from year.

frankly, heard in salespeople go of convince easy too, of one such really traffic clients to These as hadn’t They are spend quite are for performance platform. lot know mobile isn’t to test I my They our buyers. starting big their to how marketers. are their on though see And dollars a source really We acquisition grown activity cross-selling touched that summary hard on a of to to mobile mobile. already it before have us sell. happening, become we who of because a on it’s

Youssef Squali

Okay.

Adam Foroughi

on if that there want, to And Herald, in we I terms you you the explicit included if give of yeah, anything Adjust? guidance know don’t want

Herald Chen

year the we for it of gave of the the so we in and acquisitions to the quarter the at have announced in was Adjust first we terms two going first quarter. we done acquire time, the our In that guidance inclusive guidance are

Youssef Squali

Got it.

Okay.

Adam Foroughi

Yeah.

creates outside a numbers much for so from in their that included cross us we and lot not upside of the future. So quite sell,

Youssef Squali

Okay.

for that actually Thanks clarification. Okay. you. was That important. Thank

Operator

Thank you.

from comes Brian question proceed Stanley. Please with final Morgan Our Nowak your with question.

Matt Cost

on for taking the for question. It’s guys. Matt Hi, Brian. Thanks

strength at guys software AXON contribute And organic XX% all in that said had and guess did growth in change versus letter the like the So XQ. you I How did about are the contextual to contextual of And quarter, ecosystem terms this think to quarter I and then, the you growth share for in versus to sequentially that XX.X product the platform maybe -- do you the through upgrading continuing as people move gain share you gaining were or at this higher? the share software think iOS you more stage? donors Thanks. mentioned, who products?

Adam Foroughi

Matt. Hi,

that are answer it have in you on We me first, mind. advertising if business. sequentially, XX% top just still themselves as first pie of not well last another Unity let which it’s second publishers was growing, I So software growth are hours space itself that the ecosystem Source great remember report lean market’s quick the what XX that a and taking one, obviously answer? market, and from in see growth as growth think numbers so platforms is of quickly, for me, the the Iron improving are that pace, who to sequentially. to quite at are industry-leading we though key then numbers, marketing it’s outpacing the question great just is rephrase increases growing exactly our seen again And What just we ecosystem we players the is on company, you leading in the the growing, to reported and improving with grow think they of numbers. triple-digit happening We all is the which growth can XX% the the the can their the really

Matt Cost

Oh! Yeah.

to It was and from growth that advertising AXON contextual just course. did… contribution the versus it about Of you

Adam Foroughi

Yeah. got I got. Yeah. it. I

Matt Cost

… shift may be towards the end?

Adam Foroughi

Yeah.

fall back recall completely contextual the solution completely going to a in we you we solution that data. advantage first is the into quarter change like IDFA with earnings, to get from lacked touched on our to weren’t personalized was compared a that felt our you going we peers personalization if So

scaled advantage first-party truly very from data. Our comes

we users $XXX have We month every single on. have million that got games good got data playing engagement

having of customers gaming paid got business. have our over millions us history of We the

performance you or without in into obviously, IDFA, we going models in like and in advantages. of intact XX% quarter, of because the years. step-up and investments remains over QX. business those have data all that the outperform are we then, that we in able that clients marketplace have in that Xx and the ramp-up made it articulated and huge -- we a the couple you to with And We quarter-over-quarter in software of the for seen had in last so felt our All growth

Matt Cost

Great. Thank you.

Operator

you. Thank

Angie next question from Our with comes Please with question. Oppenheimer. proceed Song your

Angie Song

Yang more for Hi. speaking talk you call. bit Thank you games XXXX are entering Oppenheimer. And of for market Martin behalf first-party XXXX? I into taking into at or versus actually revenue you on And your opportunities? my planning about software? first what and Could is expanding mix pipeline am to on your goal genres for us a little games expanding party also long-term

Adam Foroughi

roughly. pipeline operated The about game ecosystem our our as ago But investments we months. three and started don’t content can happened last for a XX itself, question. tell the games, in into to while thanks the we has years creators most the because business of us So, portfolio, is build we what this really this. talk game coming you We for

now around roughly content are every category creators have mobile world game X,XXX across building expertise got for that us. gaming nearly of We the

of the built out to titles but notion amount These take pulled of investment go dollars cost, seen Yet, evergreen importantly millions of expenses. title. on rollout gaming new, that working in our us. yet R&D haven’t is year our one Since so reflected it more also pipeline are of we business this from a an usually in to two a it we you development Now and of substantial content time. you are seen have years of

XX last within that November of launched game year Makeover globally months a time. and fastest game, one mobile all two was the growing top Project organically first of in came The grossing

be believe will gets the have over in we half to of So to what that. we us we next will confidence are as being many to we to games the as And revenue going $XXX of per constant come a with is of have have threshold a at And launch. now well? repeating we this outlook year define do title title generate big the that clear an second the able really coming rolling months then, will to of pipeline in handful years an that evergreen few million that excited and second out, question per year able you mind least

Herald Chen

Mix of and apps. software

Adam Foroughi

one, So, to do you want answer Herald? that

Herald Chen

we are we sides -- Look grow can Sure. Sure. where our be is to the opportunistic strategy of both and business Sure. be. Yeah.

course, as our long Of quite time. has in growth can see market a you rates software see that quarter, big in a robust so quite for we this and growth tremendous potential business business

have zero time, On billion few three a the gone just we target recent mix. our quarters those behind games. years. in more over Adam And IP so well the side, that don’t be look come mentioned, should from we and several live that necessarily in to dollars a very less of as as accelerating as than lot has games. We improve And we get studios, launching ops new

a now EBITDA we and the will we accelerated the than targeting as significant because faster as are to business, it, as as grows is structure drive of overall margin looking quarter this possible. And if think, margins. that the see I percentage XX% both increase not that though, of will apps, XX% software we software businesses we as it grow are the again mentioned growth. efficiently of in We the quickly Again, and now we revenue, year, XXXX are given where it, business for in

Adam Foroughi

our EBITDA. -- as conversion thing generating to as with one scale. you strategy, think games that stream the about terms to two we you value the software upfront is When to -- add as And build revenue in least of at is revenue streams, Yeah. we just are higher much

user We acquisition. are the investing heavily in

of dollar that $XXX have can we third-party that software annualized minus was number for just million that UA synergies cost the savings year that take revenue reported And a Now, number. TSTV we and you have every solutions. lot we business, exceptionally incremental That integrated business we high want gaming because margin. still But a audience. of our are is investing the software growing because that and

beat our quickly, to at software improve is, and when revenue almost is the look you quarter, EBITDA grow you the because revenue EBITDA and entirely if the we numbers why the you beat business take So can we will yeah, really way dollar-for-dollar that’s performing notice the well. EBITDA and our continue software look so the business this at can and beat, that’s through flows to

Angie Song

the Great. a Congrats for on great quarter. color. Thanks

Operator

Thank you. your Thank you participation. today’s teleconference. This concludes for

may your at You this lines disconnect time.

AppLovin (APP) 12 Aug 212021 Q2 Earnings call transcript