AppLovin Announces Record Third Quarter 2023 Financial Results and the Transition of the President and CFO

AppLovin Corporation (NASDAQ: APP) (“AppLovin”), a leading marketing platform, today announced financial results for the quarter ended September 30, 2023 and posted a letter to shareholders on its Investor Relations website located at www.investors.applovin.com.

AppLovin’s robust third quarter exceeded the high end of revenue, Adjusted EBITDA and margin guidance. Outperformance was driven primarily by the continued performance of AXON 2.0, the AI-based advertising engine behind the company’s AppDiscovery platform.

Financial highlights for the third quarter of 2023 include:

  • Total revenue grew 21% year-over-year to $864 million, and net income improved to $109 million at a net margin of 13%
  • Adjusted EBITDA grew 63% year-over-year to $419 million at an improved Adjusted EBITDA margin of 49%
  • Net cash from operating activities was $199 million and Free Cash Flow was $194 million
  • Software Platform: Revenue was $504 million, an increase of 65% year-over-year. Adjusted EBITDA was $364 million, growing 91% year-over-year, at an Adjusted EBITDA margin of 72%
  • Apps: Revenue was $360 million, a decrease of 11% year-over-year. Adjusted EBITDA was $55 million, a decrease of 18% year-over-year, at an Adjusted EBITDA margin of 15%
  • Year-to-date through the end of the third quarter, the company repurchased $1.154 billion of Class A common stock at a weighted average price under $25 per share

Separately, AppLovin announced today that Herald Chen, President and Chief Financial Officer, will transition from a full-time role with the company to pursue new career opportunities at the end of 2023. He will remain on the AppLovin Board of Directors and serve as Advisor to the CEO, where he will continue to work with the management team on key strategic topics and financial matters.

Matt Stumpf, current Vice President of Finance and FP&A, has been appointed as Chief Financial Officer, and Dmitriy Dorosh, Vice President Controller, has been designated Principal Accounting Officer, both effective January 1, 2024. Stumpf joined AppLovin in early 2020 and has been an integral leader across all facets of finance and IR. Dorosh has been a key executive on the AppLovin accounting team since 2019, having taken over the accounting leadership role in August 2022.

“We are thrilled to announce our best quarter ever leading to very strong financial results,” said Adam Foroughi, CEO and Co-Founder of AppLovin. “We would also like to thank Herald for his dedication and leadership as he helped us transition to a public company and build processes to help us deliver significant growth in our core business. The management team and Board look forward to working with him in his new role. We are pleased to have Matt assume the role of CFO and we are confident in his future success.”

“I am deeply honored to have been a part of the remarkable AppLovin team since joining the Board in 2018 and in the President and CFO role since 2019. During this time, we’ve dramatically enhanced our technology and market position and driven extraordinary growth in revenue, net income and Adjusted EBITDA as reflected in this quarter’s record performance,” said Chen. “Through my continuing role on the Board, and as an Advisor to the CEO, I look forward to working with Adam, Matt, and the rest of the AppLovin team on the next phase of growth.”

Webcast and Conference Calls

AppLovin will host a webinar today at 2:00 PM PT / 5:00 PM ET, during which management will discuss the Company’s third quarter 2023 results and provide commentary on its business performance. A question-and-answer session will follow the prepared remarks.

The webinar may be accessed on the Company’s investor relations website or via webinar registration. A replay of the webinar will also be available under the Events & Presentations section of our Investor Relations website.

About AppLovin

AppLovin makes technologies that help businesses of every size connect to their ideal customers. The company provides end-to-end software and AI solutions for businesses to reach, monetize and grow their global audiences. For more information about AppLovin, visit: www.applovin.com.

Source: AppLovin Corp.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this release include statements regarding expected changes in the Company’s executive leadership team. These forward-looking statements are subject to risks and uncertainties, including those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the period ended September 30, 2023 filed with the SEC on the day of this press release. The forward-looking statements in this press release are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law.

Non-GAAP Financial Metrics

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), this press release includes certain financial measures that are not prepared in accordance with GAAP, including Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow. A reconciliation of each such non-GAAP financial measure to the most directly comparable GAAP measure can be found below.

We define Adjusted EBITDA for a particular period as net income (loss) before interest expense and loss on settlement of debt, interest income and other, net (excluding certain recurring items), provision for (benefit from) income taxes, amortization, depreciation and write-offs and as further adjusted for non-operating foreign exchange (gains) losses, stock-based compensation expense, acquisition-related expense and transaction bonuses, publisher bonuses, MoPub acquisition transition services, restructuring costs, impairment and loss in connection with sale of long-lived assets, loss (gain) on extinguishments of acquisition-related contingent consideration, lease modification and abandonment of leasehold improvements, and change in the fair value of contingent consideration. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue for the same period.

We define Free Cash Flow as net cash provided by operating activities, less purchases of property and equipment and principal payments on finance leases. We subtract both purchases of property and equipment and payment of finance leases in our calculation of Free Cash Flow because we believe these items represent our ongoing requirements for property and equipment to support our business, regardless of whether we utilize a finance lease to obtain such property or equipment.

We believe that the presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations and operating performance, as they are similar to measures reported by our public competitors and are regularly used by securities analysts, institutional investors, and other interested parties in analyzing operating performance and prospects.

Adjusted EBITDA and Adjusted EBITDA margin are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts, and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. We use Adjusted EBITDA and Adjusted EBITDA margin in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our board of directors concerning our financial performance. We use Free Cash Flow in addition to GAAP measures to help manage our business and prepare budgets and annual planning, and we believe Free Cash Flow provides useful supplemental information to help investors understand underlying trends in our business and our liquidity.

These measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statement of operations that are necessary to run our business. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

AppLovin Corporation

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

(unaudited)

 

 

September 30,

 

December 31,

 

 

2023

 

 

 

2022

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

332,491

 

 

$

1,080,484

 

Accounts receivable, net

 

849,140

 

 

 

702,814

 

Prepaid expenses and other current assets

 

119,161

 

 

 

155,785

 

Total current assets

 

1,300,792

 

 

 

1,939,083

 

Property and equipment, net

 

102,156

 

 

 

78,543

 

Operating lease right-of-use assets

 

52,998

 

 

 

60,379

 

Goodwill

 

1,813,567

 

 

 

1,823,755

 

Intangible assets, net

 

1,386,591

 

 

 

1,677,660

 

Other assets

 

349,124

 

 

 

268,426

 

Total assets

$

5,005,228

 

 

$

5,847,846

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

281,103

 

 

$

273,196

 

Accrued and other current liabilities

 

181,679

 

 

 

147,801

 

Licensed asset obligation

 

13,389

 

 

 

15,254

 

Short-term debt

 

215,000

 

 

 

33,310

 

Deferred revenue

 

77,899

 

 

 

64,018

 

Operating lease liabilities

 

13,800

 

 

 

14,334

 

Deferred acquisition costs, current

 

22,604

 

 

 

31,045

 

Total current liabilities

 

805,474

 

 

 

578,958

 

Long-term debt

 

2,912,302

 

 

 

3,178,412

 

Operating lease liabilities, non-current

 

46,887

 

 

 

54,153

 

Licensed asset obligation, non-current

 

11,794

 

 

 

26,970

 

Other non-current liabilities

 

132,981

 

 

 

106,676

 

Total liabilities

 

3,909,438

 

 

 

3,945,169

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

Class A and Class B Common Stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000 and Class B 200,000,000) shares authorized, 335,783,928 (Class A 264,621,306 and Class B 71,162,622) and 373,873,683 (Class A 302,711,061 and Class B 71,162,622) shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

11

 

 

 

11

 

Additional paid-in capital

 

2,174,658

 

 

 

3,155,748

 

Accumulated other comprehensive loss

 

(93,657

)

 

 

(83,382

)

Accumulated deficit

 

(985,222

)

 

 

(1,169,700

)

Total stockholders’ equity

 

1,095,790

 

 

 

1,902,677

 

Total liabilities and stockholders’ equity

$

5,005,228

 

 

$

5,847,846

 

AppLovin Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenue

$

864,256

 

 

$

713,099

 

 

$

2,329,826

 

 

$

2,114,751

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of revenue

 

265,049

 

 

 

300,988

 

 

 

785,584

 

 

 

886,697

 

Sales and marketing

 

212,352

 

 

 

196,785

 

 

 

607,755

 

 

 

719,014

 

Research and development

 

159,288

 

 

 

122,059

 

 

 

441,563

 

 

 

389,417

 

General and administrative

 

41,249

 

 

 

44,000

 

 

 

116,231

 

 

 

144,988

 

Total costs and expenses

 

677,938

 

 

 

663,832

 

 

 

1,951,133

 

 

 

2,140,116

 

Income (loss) from operations

 

186,318

 

 

 

49,267

 

 

 

378,693

 

 

 

(25,365

)

Other income (expense):

 

 

 

 

 

 

 

Interest expense and loss on settlement of debt

 

(78,583

)

 

 

(48,627

)

 

 

(204,081

)

 

 

(117,141

)

Interest income and other, net

 

1,490

 

 

 

969

 

 

 

27,062

 

 

 

3,501

 

Total other expense, net

 

(77,093

)

 

 

(47,658

)

 

 

(177,019

)

 

 

(113,640

)

Income (loss) before income taxes

 

109,225

 

 

 

1,609

 

 

 

201,674

 

 

 

(139,005

)

Provision for (benefit from) income taxes

 

586

 

 

 

(22,053

)

 

 

17,196

 

 

 

(25,570

)

Net income (loss)

 

108,639

 

 

 

23,662

 

 

 

184,478

 

 

 

(113,435

)

Less: Net loss attributable to noncontrolling interest

 

 

 

 

(109

)

 

 

 

 

 

(201

)

Net income (loss) attributable to AppLovin

$

108,639

 

 

$

23,771

 

 

$

184,478

 

 

$

(113,234

)

Less: Net income attributable to participating securities

 

804

 

 

 

122

 

 

 

963

 

 

 

 

Net income (loss) attributable to AppLovin common stockholders:

 

 

 

 

 

 

 

Basic

$

107,835

 

 

$

23,649

 

 

$

183,515

 

 

$

(113,234

)

Diluted

$

107,869

 

 

$

23,653

 

 

$

183,545

 

 

$

(113,234

)

Net income (loss) per share attributable to AppLovin common stockholders:

 

 

 

 

 

 

 

Basic

$

0.32

 

 

$

0.06

 

 

$

0.51

 

 

$

(0.30

)

Diluted

$

0.30

 

 

$

0.06

 

 

$

0.50

 

 

$

(0.30

)

Weighted average common shares used to compute net income (loss) per share attributable to AppLovin common stockholders:

 

 

 

 

 

 

 

Basic

 

341,435,759

 

 

 

369,389,170

 

 

 

357,009,609

 

 

 

371,736,763

 

Diluted

 

356,906,222

 

 

 

378,462,207

 

 

 

368,259,513

 

 

 

371,736,763

 

AppLovin Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

Operating Activities

 

 

 

Net income (loss)

$

184,478

 

 

$

(113,435

)

Adjustments to reconcile net income (loss) to operating activities:

 

 

 

Amortization, depreciation and write-offs

 

369,897

 

 

 

445,507

 

Stock-based compensation

 

275,058

 

 

 

143,943

 

Change in operating right-of-use asset

 

11,732

 

 

 

13,725

 

Amortization of debt issuance costs and discount

 

9,663

 

 

 

9,685

 

Loss on settlement of debt

 

4,337

 

 

 

 

Other

 

(3,906

)

 

 

2,133

 

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

Accounts receivable

 

(146,796

)

 

 

(139,350

)

Prepaid expenses and other current assets

 

28,695

 

 

 

(70,242

)

Other assets

 

(58,179

)

 

 

(4,616

)

Accounts payable

 

7,955

 

 

 

(7,881

)

Operating lease liabilities

 

(12,253

)

 

 

(15,345

)

Accrued and other liabilities

 

32,416

 

 

 

(2,645

)

Deferred revenue

 

14,425

 

 

 

(11,905

)

Net cash provided by operating activities

 

717,522

 

 

 

249,574

 

Investing Activities

 

 

 

Acquisitions, net of cash acquired

 

(51,816

)

 

 

(1,335,698

)

Purchase of non-marketable equity securities

 

(16,934

)

 

 

(56,546

)

Capitalized software development costs

 

(6,523

)

 

 

(4,546

)

Purchase of property and equipment

 

(4,002

)

 

 

(621

)

Proceeds from sale of assets

 

8,250

 

 

 

3,657

 

Net cash used in investing activities

 

(71,025

)

 

 

(1,393,754

)

Financing Activities

 

 

 

Repurchases of stock

 

(1,153,593

)

 

 

(338,880

)

Principal repayments of debt

 

(490,494

)

 

 

(17,482

)

Payment of withholding taxes related to net share settlement

 

(115,846

)

 

 

 

Payments of licensed asset obligation

 

(15,254

)

 

 

(17,374

)

Principal payments on finance leases

 

(16,191

)

 

 

(18,099

)

Payments of deferred acquisition costs

 

(11,503

)

 

 

(104,998

)

Payment of debt issuance cost

 

(4,545

)

 

 

 

Proceeds from issuance of debt

 

210,281

 

 

 

 

Proceeds from revolving credit facility

 

185,000

 

 

 

 

Proceeds from exercise of stock options

 

17,807

 

 

 

21,733

 

Proceeds from the issuance of common stock under the Employee Stock Purchase Plan

 

2,071

 

 

 

3,663

 

Net cash used in financing activities

 

(1,392,267

)

 

 

(471,437

)

Effect of foreign exchange rate on cash and cash equivalents

 

(2,223

)

 

 

(11,379

)

Net decrease in cash and cash equivalents

 

(747,993

)

 

 

(1,626,996

)

Cash, cash equivalents and restricted cash equivalents at beginning of the period

 

1,080,484

 

 

 

2,570,504

 

Cash and cash equivalents at end of the period

$

332,491

 

 

$

943,508

 

AppLovin Corporation

Reconciliation of Net Cash Provided By (Used In) Operating Activities to Free Cash Flow

(in thousands)

 

The following table provides a reconciliation of net cash provided by operating activities to free cash flow for the past eight quarters:

 

 

 

 

 

 

 

 

4Q21

 

 

 

1Q22

 

 

 

2Q22

 

 

 

3Q22

 

 

 

4Q22

 

 

 

1Q23

 

 

 

2Q23

 

 

 

3Q23

 

Net cash provided by (used in) operating activities

 

 

85,015

 

 

 

(31,719

)

 

 

106,811

 

 

 

174,482

 

 

 

163,199

 

 

 

288,662

 

 

 

229,794

 

 

 

199,066

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(428

)

 

 

(285

)

 

 

(115

)

 

 

(221

)

 

 

(41

)

 

 

(70

)

 

 

(3,749

)

 

 

(183

)

Principal payments on finance leases

 

 

(5,581

)

 

 

(6,176

)

 

 

(6,150

)

 

 

(5,773

)

 

 

(5,984

)

 

 

(5,447

)

 

 

(5,468

)

 

 

(5,276

)

Free Cash Flow

 

$

79,006

 

 

$

(38,180

)

 

$

100,546

 

 

$

168,488

 

 

$

157,174

 

 

$

283,145

 

 

$

220,577

 

 

$

193,607

 

Net cash provided by (used in) investing activities

 

$

(8,678

)

 

$

(1,059,743

)

 

$

(292,001

)

 

$

(42,010

)

 

$

22,286

 

 

$

(12,975

)

 

$

(42,217

)

 

$

(15,833

)

Net cash provided by (used in) financing activities

 

$

1,446,939

 

 

$

(65,424

)

 

$

(269,622

)

 

$

(136,391

)

 

$

(55,411

)

 

$

(111,415

)

 

$

(556,698

)

 

$

(724,154

)

AppLovin Corporation

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(in thousands)

 

The following table provides our Adjusted EBITDA and Adjusted EBITDA margin and a reconciliation of Net Income (Loss) to Adjusted EBITDA for the periods presented:

 

 

 

 

 

 

 

3Q22

 

 

 

4Q22

 

 

 

1Q23

 

 

 

2Q23

 

 

 

3Q23

 

Revenue

 

$

713,099

 

 

$

702,307

 

 

$

715,405

 

 

$

750,165

 

 

$

864,256

 

Net income (loss)

 

$

23,662

 

 

$

(79,512

)

 

$

(4,518

)

 

$

80,357

 

 

$

108,639

 

Net Margin

 

 

3

%

 

 

(11

)%

 

 

(1

)%

 

 

11

%

 

 

13

%

Interest expense and loss on settlement of debt

 

 

48,627

 

 

 

54,722

 

 

 

74,511

 

 

 

50,987

 

 

 

78,583

 

Interest income and other, net

 

 

(3,604

)

 

 

(10,174

)

 

 

(9,771

)

 

 

(15,817

)

 

 

(771

)

Provision for (benefit from) income taxes

 

 

(22,053

)

 

 

13,340

 

 

 

1,165

 

 

 

15,445

 

 

 

586

 

Amortization, depreciation and write-offs

 

 

136,094

 

 

 

129,313

 

 

 

128,208

 

 

 

119,892

 

 

 

121,797

 

Impairment and loss in connection with sale of long-lived assets

 

 

27,736

 

 

 

100,156

 

 

 

 

 

 

 

 

 

 

Non-operating foreign exchange loss (gain)

 

 

(406

)

 

 

1,519

 

 

 

(672

)

 

 

126

 

 

 

(613

)

Stock-based compensation

 

 

42,147

 

 

 

47,669

 

 

 

82,966

 

 

 

81,253

 

 

 

110,839

 

Acquisition-related expense and transaction bonus

 

 

4,317

 

 

 

227

 

 

 

517

 

 

 

247

 

 

 

231

 

Restructuring costs

 

 

1,117

 

 

 

2,340

 

 

 

1,292

 

 

 

1,024

 

 

 

 

Total adjustments

 

 

233,975

 

 

 

339,112

 

 

 

278,216

 

 

 

253,157

 

 

 

310,652

 

Adjusted EBITDA

 

$

257,637

 

 

$

259,600

 

 

$

273,698

 

 

$

333,514

 

 

$

419,291

 

Adjusted EBITDA Margin

 

 

36

%

 

 

37

%

 

 

38

%

 

 

44

%

 

 

49

%

AppLovin Corporation

Segment Information

(in thousands)

 

The following table provides selected financial data for our reportable segments for the periods indicated:

 

 

 

3Q22

 

 

 

4Q22

 

 

 

1Q23

 

 

 

2Q23

 

 

 

3Q23

 

Revenue:

 

 

 

 

 

 

 

 

 

Software Platform

$

306,592

 

 

$

306,195

 

 

$

354,758

 

 

$

406,063

 

 

$

504,452

 

Apps

 

406,507

 

 

 

396,112

 

 

 

360,647

 

 

 

344,102

 

 

 

359,804

 

Total Revenue

$

713,099

 

 

$

702,307

 

 

$

715,405

 

 

$

750,165

 

 

$

864,256

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Software Platform

$

190,256

 

 

$

185,860

 

 

$

218,694

 

 

$

272,886

 

 

$

364,117

 

Apps

 

67,381

 

 

 

73,740

 

 

 

55,004

 

 

 

60,628

 

 

 

55,174

 

Total Segment Adjusted EBITDA

$

257,637

 

 

$

259,600

 

 

$

273,698

 

 

$

333,514

 

 

$

419,291

 

 

 

 

 

 

 

 

 

 

 

Interest expense and loss on settlement of debt

 

(48,627

)

 

 

(54,722

)

 

 

(74,511

)

 

 

(50,987

)

 

 

(78,583

)

Interest income and other, net

 

3,604

 

 

 

10,174

 

 

 

9,771

 

 

 

15,817

 

 

 

771

 

Amortization, depreciation and write-offs

 

(136,094

)

 

 

(129,313

)

 

 

(128,208

)

 

 

(119,892

)

 

 

(121,797

)

Impairment and loss in connection with sale of long-lived assets

 

(27,736

)

 

 

(100,156

)

 

 

 

 

 

 

 

 

 

Non-operating foreign exchange gain (loss)

 

406

 

 

 

(1,519

)

 

 

672

 

 

 

(126

)

 

 

613

 

Stock-based compensation

 

(42,147

)

 

 

(47,669

)

 

 

(82,966

)

 

 

(81,253

)

 

 

(110,839

)

Acquisition-related expense and transaction bonus

 

(4,317

)

 

 

(227

)

 

 

(517

)

 

 

(247

)

 

 

(231

)

Restructuring costs

 

(1,117

)

 

 

(2,340

)

 

 

(1,292

)

 

 

(1,024

)

 

 

 

Income (loss) before provision for tax

$

1,609

 

 

$

(66,172

)

 

$

(3,353

)

 

$

95,802

 

 

$

109,225

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA Margin:

 

 

 

 

 

 

 

 

 

Software Platform

 

62

%

 

 

61

%

 

 

62

%

 

 

67

%

 

 

72

%

Apps

 

17

%

 

 

19

%

 

 

15

%

 

 

18

%

 

 

15

%

 

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