APP Q1 2022 Earnings

Call Details

• Call Title: Applovin Q1 2022 Earnings Call
• Date: May 11, 2022 at 9:00 PM UTC
• Management Team:
  • Adam Foroughi (Co-founder, Chief Executive Officer and Chairperson)
  • Harold Chen (President and Chief Financial Officer)
  • Ryan Gee (Head of Investor Relations and Strategic Finance)

Call Summary

Financial Performance

• The company reported record EBITDA of $276 million for Q1 with a reported EBITDA margin of 44%.
• When normalizing for $210 million of publisher migration contra revenue, adjusted EBITDA margin was 33%, which the company presented as a 500 basis point increase versus 28% in Q4 2021.
• The software platform GAAP revenue was stated as $119 million for Q1, and when adding the $210 million of contra revenue related to the Mopub migration the total software-related amount reached $329 million in the quarter.
• The software business in Q1 2022 was reported as four times larger than Q1 2021 and contributed over 80% of Q1 EBITDA.
• Net dollar-based revenue retention for the software business was reported at 258% year-over-year in the quarter on a normalized basis.
• Normalized spec count reached 519 customers in software, an increase of 58 customers sequentially, with normalized average revenue per spec of $603,000.
• The company disclosed approximately $40 million of revenue in Q1 attributable to Mopub/Twitter integrations prior to full integration.

Guidance

• Full-year 2022 GAAP revenue guidance was revised to a range of $3.14 billion to $3.44 billion after reflecting the contra revenue treatment and the apps revenue reduction.
• Apps revenue guidance for 2022 was lowered by $200 million to a new range of $2.00 billion to $2.15 billion for the year.
• The company reiterated an expectation for software platform revenue of over $1 billion in each quarter from Q2 through Q4 2022.
• The company reaffirmed a 2023 software platform revenue target of $2.0 billion, which it stated is a 10x increase from 2020 and a 65% increase over the midpoint of the revised 2022 software guidance.
• Adjusted EBITDA guidance was raised to a midpoint target of $1.2 billion for 2022, representing a ~65% increase over the prior year and implying a 36% adjusted EBITDA margin at the midpoint of GAAP revenue guidance.
• Excluding contra revenue, the company targets a 34% adjusted EBITDA margin as the run-rate margin to focus on, which management said is an 800 basis point increase over the prior year.
• The company estimated that the software platform (assuming ~70% margin and ~70% cash flow conversion) would generate over $0.5 billion of unlevered free cash flow in the next three quarters, and that normalized adjusted EBITDA converts to unlevered pre-cash flow at ~65% to 75%.