Earnings call transcript Q1 2023

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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. on obligation assumptions as to law. based we beliefs, required are no assume update statements our and current and by These them except results predicted. the Actual materially results differ may from factors We to Form for fiscal encourage the XXXX. most ended XX, review risk XX-K December you year recently in the filed our

forth will fiscal XX, March quarter set quarterly on in information Additional be Form report ended XXXX. our also XX-Q the for

for our our a our call on to GAAP our or measures. will financial and financial to This We being is non-GAAP will be on measures non-GAAP replay shareholder letter are Please conference website. site. a not Relations discussing substitute in be available and review recorded of available results. Investor also IR GAAP These intended to the superior measures our non-GAAP sure be be reconciliations

turn for I'll it open some over for Adam it then opening we'll remarks, to Q&A. up

Adam Foroughi

business a returning This We on seeing Good our joining us our and to on afternoon, today. improved platform significant more you for advertisers performance everyone, our strong QX and directly attributable with platform had to growth thank software being be was growth resilient always economic to mindset, leading gaming spend and just confidently us. category times. we've stable that. would even a seeing always in about believed We're mobile more it Further, we talked of with them a weaker quarter-over-quarter.

the quarters, focusing few tirelessly on past our growth AppLovin, over been key initiatives. have At working teams several

starting our see upgrades on us working to Firstly, This these are significant been focus technology. from efforts. early a to we for has have advertising and we benefits been major

acquisition by the unlock into Secondly, Wurl bringing our CTV. hard we platform have to working from been our advertising synergies

are we a this to material area. term, the impact in this early are data While the near about financial we don't excited in seeing have expect we

solutions and marketing business. Array carriers through finally, to our OEMs our extending we're And

are now our pleased we and running progress. time, same more efficient still been this have optimizing stages, is early a the gaming with level. we Although are our in business the At at

going confident this a be flow forward. business of cash are We that will stable source

a little AXON let's about Now more bit detail in talk improvements.

of It's analogy. year always discussing We technology. from growth our of we development what the in this consumer-facing challenging own strongest simple popularity tools, a but explain communicated have advancements to would with the can X and been been now come for that have means, AXON our draw exploding AI a

from no is to different OpenAI Upgrading X AXON X from to X. moving than ChatGPT X

improved, not learning of series The and powered Our business a our are evolution over technology. the models time. by thing, and our AI but onetime be machine our to can always upgrades a is entire enhancements of

As there cash to potential we these, and flow. lifts revenue for make both significant the is

new X the business. AXON the We our for this a are excited of currently midst technology and potential staged in and of of we are about long-term partners our very rollout

are improving pleased our with technology our We to committed will so success continuously that are extremely behind this innovation and be far to execution and the we our our believe year. force driving business. We continue

the in today joining more you for and us to we forward updates future. again sharing you look with Thank

With to I'll off that, it hand Herald.

Herald Chen

begin the over I'd IR our past Thanks, few and leadership his by like good afternoon, for gratitude of to everyone. Gee Ryan activities my Adam, years. to expressing

for to I the on David early joined of taken company. want extend warm Head a to welcome the 'XX in has Additionally, role and Hsiao, AppLovin who IR

EBITDA first across As exceeding cash quarter, a revenue, and expectations solid had Adam mentioned, we flow.

teams progress particular, to growth with just quarter, performance, addition by initiatives. execution pleased pertains it our software in focused the our in during achieved to the we're financial platform Importantly, as as and

our reached end adjusted the million $XXX of guidance. highlights, and QX, in revenue $XXX financial on high our million To touch a hit few EBITDA key our surpassing

highest run margin Our XX%, EBITDA since was the XXXX. was margin had which adjusted rate we've

recording performer quarter. standout a is was of segment the a over quarterly -- prior million, platform revenue XX% record software which increase $XXX Our

grew more, software XX% adjusted to million $XXX to EBITDA a adjusted margin. translating EBITDA XX% quarter-over-quarter platform What's our

QX Our QX software by annual platform exceeding with This revenue a X over growth over times. compounded represents the past 'XX has XXX% been two revenue growth years 'XX rate. robust

adjusted platform strong to software plus EBITDA from $XX Additionally, QX CAGR. increased QX in in 'XX, million million $XXX a 'XX XX%

Adam revenue of optimistic are drive while challenging platform growth it's flow. As the impact and will software initiatives, precise and high-margin noted, they meaningful we to timing predict that cash our growth

QX, adjusted quarters App's $XXX impact margin launch million as had adjusted of leading in the than X% $XX which Turning was to spend studio in to prior acquisition assets. of a optimizing was million user percentage the several EBITDA QX from decline games new the a App The segment. includes revenue. XX%. We revenue of quarter, increase margin and slightly recent lower of was EBITDA due to an certain

of have As a level, flow pleased to growth report cash are free robust consolidated to our software business. that margin part high million we in platform the QX, we due in $XXX of

significant as payments several from from well prior benefited also as the periods customer in taxes cash lower We delayed period.

by a growth EBITDA targeting impact regard million million quarter. of which in to million rollout adjusted margin. X.X guidance key AXON With in We platform for be business, factor the the with we will our in offset million EBITDA, 'XX, apps equates a anticipate to revenue business. adjusted QX to $XXX $XXX to continuing to software the XX% are degree from some XX% The $XXX $XXX to

in normal XX% flow As previously adjusted free quarter. approximately cash some on mentioned noting to have be expect a particular our that of EBITDA from we XX% may rate on basis, to we run calls, that any deviations

at From clear the position a our to a and cash generation. of sheet, perspective, testament balance billion the strong end cash $X.X on financial had we of QX, cash

approximately $XX of we million of million authorized on X, buyback million quarter, our year-to-date And $XXX we $XXX program. the repurchased May leaving stock, During through stock. million repurchased $XXX

growth initiatives. the market key toward and look leader maintain to our by as teams, we determined our position in we're solutions As investing future, a

calculated forefront of an allows the at It's keep position industry. and we're time financial decisions AppLovin, our future for cash prospects. the and about risks take to strong make exciting Our AppLovin us excited strategic to generation to

lead to Q&A. through Now the us I moderator invite

Operator

so much. you Thank

the We And Instructions] Oppenheimer. going question-and-answer question portion with to Yang will begin our come call. is of [Operator our from first Martin now

Martin Yang

Hi. and Adam, AXON Herald. performance that question how much on My Good software to is first for driver -- will strength did meaningful for the platform X afternoon, AXON a always sequentially?

Adam Foroughi

is that really version. AXON midst And In basis. Thanks an Martin. in And the the the on improvements Hey, QX, after incremental rollout business question. now quarter. we technology core came improvements our to in for in did about ongoing -- a talked X.X technology, X, we're AXON so the of stage see core our fundamentally we our

starting return We also from good seeing back seeing And our on growth. momentum We're were saw the well. advertisers to to good more results. in confidence as spending they platform mindset industry ecosystem is the as

Martin Yang

Got it.

with to would So you're someone from taking as line sequential opposed you in share else? say more market improvement was the

Adam Foroughi

Yeah. sum. with so I zero as not we technology, gains it selves. our would advertisers grew investing talk don't in their market market about quarter-over-quarter. with don't Much more I because about more think in market think this efficiency XX% the really And

market. and think take about So a, We someone extra the as $X.XX. loses $X.XX to additive it an it's we else not

improved And that by efficiency of our our benefit peers, from would the default, for partners. well. creates So market gains as all in

Martin Yang

maybe My well of bidding open as helped players on you other you. as in or Thanks. some Google's their bidding. three question your the and or how Thank second AppLovin Can long-term is real-time that impact that on comment including more implication business?

Adam Foroughi

both much with in MAX it's bringing for ecosystem. the We're Facebook their way Google the really now is market a we to on us demand for think them create for time and whole adopting this. the stage to efficient that in early more solutions brought their We've super market. more leaning efficiently external market go. to huge bidding, a will We Yes. upside bullish first win originally the been And the them being -- history believing to

been a the ecosystem. now MAX, gaming. publishers is of we've in for to all of mediation in open while. obviously, share So theirs majority the a It's this movement partner in

to great we bulk to on extend a mobile that. broadly with And so publishers got and in efficient that. relationship about we're of gaming continue and manner More the build we've speaking, demand can a excited Google we very their

Martin Yang

Thank you.

Operator

William Now Schackart with to Blair. moving Ralph on

Ralph Schackart

please. if you And quarter saw that the the talked market. you letter, partial quarter ad stabilization Hi. the about have the about versus could, Two it? mobile in a stabilization. in linearity I exit talk throughout you please. How the Adam, then I follow-up, entered Can questions, you in you maybe did how

Adam Foroughi

ecosystem. this what developers mean generally well, seeing a in lot we're I a confidence and mobile my lot game conversations true is with of just more Yeah. as the in

We stable. Now gone little we're through reaching that year, a more we've point. seems the trough that economy feel like last bit

dollars confidence starting to great to are our which developers will in, come for mindset lead it time. builds as over And business more so gaming that And oriented, mobile those be is growth growth.

reflected in guidance, well. very confident obviously in continuing the this commentary, Herald's This saw a reference So our software function. onetime and We're is isn't really or perform platform where to to set event business you going.

Ralph Schackart

to leading software business. of kind the Maybe Great.

business? growth should this seems anything giving through guidance, know sort you're growth would about or sort preclude on Thank of how year persisting I talked XXXX full year You broadly about not stabilizing. sort the and the that growth you. think just this software the seeing but it you're speaking, strong of rate like that currently is of market we

Adam Foroughi

really the at economy ad sort building was looking blocks. the whole We're ecosystem for it of Last it year, general. to and difficult obviously, in

us is AXON we're material really X. we've got our core this rolling Now place. we're of The in phenomenal. business it. There's biggest our about quarter on good we're one and platform, is change today for a working team excited out The upgrade -- in

out But ecosystem. this talked become we’ve market to always gaming And growth. mobile a in this our the so could own in for position is getting quite large our about market catalyst

We So become out be roll growth the sector. ecosystem us. And what’s continues irregardless to if as rest really that’s think across we go we’ll we’ll we’re whole able of in we’re what growth about. of create – the to well more this create it excited on this going if around the throughout able efficient, this to year,

Ralph Schackart

Okay. Thank you.

Operator

on with move Pang Stifel. David to we'll And

David Pang

near-term ad to are 'XX. in you for Great. spend if Thanks. intermediate your flowing And what targets us I what through MAX was your remind could just are? hoping see the and expectations

Adam Foroughi

MAX. really we've do disclosed. momentum numbers not are on see We good Those

As the the bidders platform. more pub usually get market on more efficient live, creates and increases that spend to becomes heavy you

it allows growth. So more. themselves. them that these creates gains It efficient, that to them like systems Those ARPDAU go market become more get a market gives to go then ours gains. as publishers place creates better And

that momentum base. our on So very we're seeing platform, publisher stickiness across good high

We're a the is product in MAX disclosing good numbers the on really So product. exact spot. just that not

David Pang

what of currently of ballpark as a the spend RTB? portion is Just Could follow-up. one you provide in

Adam Foroughi

we've scales and the the about majority real-time that being bidding talked platform out. of Now vast it majority the to as taking product already, Google as

David Pang

Got it. Thanks.

Operator

Franco has Davidson's D.A. the next question. And Granda

Franco Granda

questions here. continue as Thanks fine the to taking they as Are wine. I'd Hi. it? efficiency like age AMD saying on the build where iterate approaching for to way a X my by top references you similar like to architectures same of AXON way itself the that you reference X in on continues AXON as

Adam Foroughi

our I innovation the seen the rate we've AI today of with is we incredible. Yeah. and just is live mean change lifetimes. evolution in in fastest world in technology technologies these ever The

for That very, we will X, drive incremental X AXON and platform. AXON to incremental basis, time. to ongoing improvements time. there's, AXON expertise fuel we business X. can make as core to our very long is a there's business that so going to go on AXON This And then then and our for X the uptick the an some And

high about. lifts generate technology how what And technologies, always These about so that our evolve, software through only And our we're from to revenue technologies revenue. we've drive because to and gains much talked we've a powerful. as excited volume through are position, efficiency our lifts these more to they flow business got of will very flowing that's going get market-leading systems and

Franco Granda

apps a the ad a on the dipped for relative Any where in-app Awesome. the And quarter seems to it softness? of purchases kind the advertising then was note color. to or Was and been spend in trends just it Thanks then it business, well bit. little like basis, there? fell going that off

Herald Chen

quarter-over-quarter some was there softness quarter. off delta some about app -- general, side the coming us as the down divesting on the fourth from came in trend on we think closing half from Also, revenue the ad well. I some or studios seasonality and studios actually

there. mix of So impacts guess, there’s it, some, I the onetime in call terms

Franco Granda

Okay. Thanks.

Operator

Company. & McTernan I from now with will Bernie hear Needham

Unidentified Participant

is have point This to growth for you platform marketing OEMs. three calling of Can that taking the for you of you carriers drivers and confidence to Crist and technology Stefanos remind number the Hi. on our in extending the questions. just gives organically? Bernie. us the do What relationships Thanks

Adam Foroughi

place what core quite business. we're nascent. mean, the so in confidence of on And a our technologies there I good in us industry the Yeah. gives only is There's is there. technologies, we've that marketing gaming and time. category, couple that We players game that a all the similar category. end having up In market-leading to the very we've for a very, long mobile got proven in

core that OEM do. thing to and like so space efficiency out a And carriers very the to extending seem smart

turn, in we new will products we're their make that, some think the to Incremental too, bringing material OEMs, impact to and to that businesses, a ours. and carriers

it businesses going going to core on businesses plus we're business that a investing that about excited when term. short-term needle in billion move is all $X we caveat we're expect bet. related that pay talking with and the that the three we're long aren't are in business, So not into expect These big after new to years, parts our is to off talking are will our go. materially This we're I of term. that short we're this business a in but can software about you one where the to

Unidentified Participant

touch have Great. combination the there competitive you you. changes just Thank seen on? then speaking Unity Thank the of any and ironSource And you. environment, can of with you

Adam Foroughi

It's up just that we know to. talk really time. and companies big peers And they're to together bringing takes X and what difficult. can't integration We

the also know well. partners. this them of do need do We growth to we in that us drive our They marketing need ecosystem, to well. companies All

our so company that lot And very expect a is in so we'll been very, every sticky, products we quarter, as operating to and the have did see efficiently, We grow and long continue. growth.

Unidentified Participant

you. Thank

Operator

with Sheridan Eric Sachs has next the Goldman question.

Eric Sheridan

XXXX, if apps in anything Thank keeping mind you Coming potential back how terms That there game just now launches could. in out new so we the those the on landscape? launches I to impact be and understand better we mismatches the one. might you're revenue two, of remainder growth much. Maybe calling be is game between would of it business, of investing so and the between on and some should number margin

advertiser about Connected back platform coming a so a to talked helping your about broader advertising go TV opportunity then density diversity I bit landscape. and into how of Thanks you're sounded long it wanted thinking and It you terms but already, that to the the And medium deeper little widen to out over number the term? potential two, like further in little much. bit

Herald Chen

game take question optimization And I'll apps on of Yes. have do which plan in said studios, They've portfolio out major -- quarter's Thanks, very other impact, launches our would got number investing I margin always run of the we a this basis. XX think, a pleased to Eric. Overall, down side think on studio. rate against. a the it apps. games. And we're that the of of about this game we've be launch We're coming, every getting of new mid-teens I we're first. new

remain I come awesome, there's that think we whole of there, down. margin Eric. a games thought could we really were bolus If that

into building regularly margin right it range. the still mid-teens be in it will think remain double-digit But We really think the we see now, games. launching of model that a number. I business should

Adam Foroughi

they online pre-existing on effectively as lot their we're all the bring channels about. schedule excited the And in companies. CDN companies, like On They've have TV build these relationships year that you the CTV a of think with and a various of over Wurl the the we ago. connected content, we were devices obviously in them They what for business. but them SSP Eric, question, relationships an across preexisting content -- a fragmented little also devices Those were a invested got help media space.

in already market. solution their AppDiscovery to SSP through connected we're inventory. in plugging so our And TV We're

early, early is This stage.

the no this is So ever we The hasn't category financial that manner in strong. our is based near app significant scaled and developers. term. performance solution There performance been basis a impact really performance talked on in the But for a for data we about cool charge in performance. mobile really offering to

leaning leaning And so that are the into excited advertisers potential that it it the by scaling us into are and very offering. of

Operator

Stanley. And will we with Thank Cost have Morgan for from you. [Operator Matt one time which additional question, come Instructions]

Unidentified Participant

Matt. of Apologies missed know impact, said on there? it how rolling AXON Dave the, Hi. I color of the we release out. earlier, on you were for And are sense about financial share should that I able a I this This line can X? you give guess, earlier, to if time any is if you you full but think

Adam Foroughi

talk guidance we're I'll stages. it cover by upgrade It's rolling we've financial early But going we reflected forward. time our in the a can line, results, about excited confidence Herald impact. in that market and complex are the out technological in

Herald Chen

did that because rolled impact, then earlier, on And going AXON been all in X.X. rollout impact the superior it of it is Just to I say at then is was no not the do first ultimately think is forward, we predict quarter impact had X.X. know out there the financially AXON still technology. of But the difficult technology the to we what timing for the and

in Just script ChatGPT like as to his what from does that X X. X, we X Adam see said to

more it's technology, more know it's better effective, So efficient. we it's

line. significant predict. it difficult there believe do impact software that a hits we is to will be so And on When the

flow through The that though, do we to we amount the margins, the of other does given a think also line. bottom software know, revenue thing significant

margin very a increase percentage be in will as it the high well. So

Unidentified Participant

Great. Thank you.

Operator

for today. session thank Enjoy question-and-answer and time. of your joining much the day, we us quarter. will the conclude next all you for this does see you rest this so We And

Herald Chen

Thank you.

Adam Foroughi

Thank you.

AppLovin (APP) 10 May 232023 Q1 Earnings call transcript