APP Q3 2021 Earnings

{ "callDetails": { "callTitle": "Applovin Q3 2021 Earnings Call", "dateTime": "November 10, 2021 at 10:00 PM UTC", "managementTeam": [ { "name": "Ryan Gee", "title": "Head of Investor Relations and Strategic Finance" }, { "name": "Adam Foroughi", "title": "Co-founder, CEO, and chairperson" }, { "name": "Harold Chen", "title": "President and Chief Financial Officer" } ] }, "callSummary": { "sections": [ { "title": "Financial Performance", "importance": "major", "bullets": [ "Total revenue grew 90% year over year in Q3 2021.", "Software platform revenue grew 385% year over year to $193 million in Q3 2021.", "Software platform revenue excluding Adjust quadrupled year over year and increased organically by 316%.", "EBITDA more than doubled year over year and the company delivered 26% EBITDA margins in Q3 2021.", "SoftwareNow represented 27% of overall revenue in the quarter.", "The app portfolio grew 56% year over year and contributed to scaled first-party data for Axon.", "There were 280 specs on AppDiscovery excluding Adjust and 449 total specs including Adjust, with specs up 18% quarter over quarter and dollar per spec up 13% quarter over quarter.", "GAAP reported software revenue per spec was $587,000 per quarter as disclosed, and the company presented both GAAP and non-GAAP measures with reconciliations." ] }, { "title": "Guidance", "importance": "major", "bullets": [ "The company reiterated its prior outlook that software is expected to reach over $1 billion of revenue in fiscal 2022.", "The $1 billion fiscal 2022 software target implies over 60% year-over-year growth versus the prior $600 million target offered in Q2.", "Applovin stated that it does not intend to update the previously provided guidance today and plans to update guidance when reporting Q4 results early next year.", "The company expects a potential incremental revenue run rate of $240 million to $260 million exiting 2022 from the pending MoPub acquisition, with associated incremental costs of about $40 million.", "Timing for the MoPub close is explicitly conditioned on regulatory approval and therefore remains uncertain.", "Management expressed a multi-year target to grow the software business 30% plus year over year, subject to execution and scale benefits." ] }, { "title": "Capital Allocation", "importance": "major", "bullets": [ "Applovin reported approximately $180 million of acquisition-related spend in the quarter, with a single app asset purchase of about $150 million comprising the majority of that spend.", "The company stated it will continue to pursue strategic M&A selectively and emphasized discipline given elevated market pricing for apps.", "Applovin characterized software-driven cash flow as funding reinvestment across studios, product development, and go-to-market initiatives.", "The MoPub transaction remains pending regulatory approval and is expected to add material revenue run-rate with minimal incremental costs per company disclosure.", "The company added Alisa Harvey-Dawson to the board and noted a board change with Kathy Sun stepping down due to new internal role.", "Applovin described reinvestment in studio development capacity and a robust slate of future titles as a use of incremental cash flow." ] }, { "title": "AI & Technology Initiatives", "importance": "minor", "bullets": [ "Axon machine learning engine is one year old and was credited with driving rapid software adoption and performance improvements.", "Applovin has only recently begun selling the Axon platform externally as a software product offering.", "Management highlighted that Axon improves with scale and first-party data, enabling better personalization and higher pricing over time.", "The company stated that increased first-party data from apps feeds Axon and creates a virtuous cycle of performance and incremental spend per client." ] }, { "title": "Competitive Positioning", "importance": "minor", "bullets": [ "Applovin positioned Max as a large ad exchange processing around $5 billion in annual media spend and serving almost 30,000 apps at the end of Q3 2021.", "The company stated it expects a unified Max and MoPub platform to surpass $15 billion in advertiser spend entering 2023, making it one of the largest ad ecosystems.", "Applovin said its scaled first-party data and Axon provided a competitive advantage after IDFA changes and supported outperformance versus peers during the quarter.", "Non-gaming customers were called out as the fastest-growing vertical, with non-gaming growth of almost 100% quarter over quarter in Q3." ] }, { "title": "Partnerships & Ecosystem", "importance": "minor", "bullets": [ "Adjust integration is driving cross-sell and added salesforce capacity, contributing to spec growth and a total of 449 specs including Adjust.", "The MoPub acquisition is intended to expand supply, bring broader demand partners and DSP relationships, and enable unified monetization tools.", "Applovin described partner reception to a unified Max/MoPub solution as positive, citing publisher and advertiser interest in combining products and scale.", "The company noted that mediation platforms tend to be single-integrations for publishers and that MoPub brings non-game demand capabilities that complement Max." ] } ] }, "notableQuotes": [ { "quote": "Our software platform revenue just grew 385% year over year to $193 million.", "speakerName": "Adam Foroughi" }, { "quote": "We quadrupled our new specs and our net dollar base retention was 255%.", "speakerName": "Adam Foroughi" }, { "quote": "We think we have a path to grow our software business for 30% plus year over year for many years to come.", "speakerName": "Adam Foroughi" }, { "quote": "In Q3, year over year, we did grow total revenue 90%, and EBITDA more than doubled year over year.", "speakerName": "Harold Chen" }, { "quote": "We were able to drive 26% EBITDA margins.", "speakerName": "Harold Chen" }, { "quote": "SoftwareNow represents 27% of our overall revenue.", "speakerName": "Harold Chen" }, { "quote": "Max is already one of the largest and fastest-growing ad exchanges, powering around $5 billion in media spend.", "speakerName": "Adam Foroughi" }, { "quote": "As of the end of Q3, that number is almost 30,000.", "speakerName": "Adam Foroughi" }, { "quote": "We believe our unified platform should surpass $15 billion in advertiser spend across all industry bidders entering 2023.", "speakerName": "Adam Foroughi" }, { "quote": "We don't intend to update that guidance today.", "speakerName": "Harold Chen" } ], "qaSummary": [ { "question": { "analystName": "Youssef Squali", "firm": "Truist Securities", "summary": "Asked about software platform revenue trajectory for Q4 and fiscal 2022 and composition of specs added (Adjust cross-sell vs net new)." }, "answers": [ { "executiveName": "Harold Chen", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Harold provided spec counts, stating 280 specs on AppDiscovery excluding Adjust and 237 in Q2, and a total of 449 including Adjust, implying roughly 40 incremental specs excluding Adjust since Q2. He reiterated that Adjust brings salesforce cross-sell and that MoPub could add further selling capacity. He stated the company will not update the prior software guidance today and expects to revisit guidance when reporting Q4 results." } ] }, { "question": { "analystName": "Stephen Ju", "firm": "Credit Suisse", "summary": "Asked how Applovin can scale installs from current levels to materially higher volumes and whether growth will be volume-driven or pricing-driven." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Partial", "newInfo": "No", "guidance": "No", "summary": "Adam attributed future growth to Axon improving with scale and more specs coming online, which should enable better personalization and higher pricing over time. He emphasized the virtuous cycle where increased spend adds data, improving efficiency and attracting more spend, but provided no new quantitative timeline or incremental pricing projections." } ] }, { "question": { "analystName": "Tim Nollen", "firm": "Macquarie", "summary": "Requested additional color on scale benefits from the MoPub acquisition and its ability to accelerate growth beyond Applovin's current mediation offering." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Partial", "newInfo": "Partial", "guidance": "No", "summary": "Adam described MoPub as a decade-old platform with tools that attract broader demand, and said combining MoPub supply with Max could target over $15 billion of ad spend by late 2022/entering 2023. He outlined qualitative benefits around attracting demand and product capabilities but did not provide a definitive timeline for integration or quantified accretion beyond the previously stated $240–$260 million run-rate figure." } ] }, { "question": { "analystName": "Alexia Quadrani", "firm": "JP Morgan", "summary": "Asked how IDFA changes impacted software and content businesses through the quarter and about risk of client attrition during MoPub integration." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Direct", "newInfo": "Yes", "guidance": "No", "summary": "Adam stated that IDFA changes reduced targeting and iOS CPMs broadly, but that publisher CPM declines were offset by Android gains and that Applovin's scaled first-party data and Axon provided a competitive advantage which helped accelerate growth. He reported that publisher and advertiser reception to a unified Max/MoPub solution has been positive and did not indicate client attrition risks, describing integration interest from publishers." } ] }, { "question": { "analystName": "Clark Lampen", "firm": "BTIG", "summary": "Asked whether MoPub should reduce friction on budget deployment and lead to compounding share gains, and requested pipeline update on new game releases and studios." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Direct", "newInfo": "Partial", "guidance": "No", "summary": "Adam said the company is executing on technology, customer acquisition, and share gains simultaneously and that IDFA changes decreased competition benefiting Applovin. He noted three 'evergreen' titles launched in the quarter that could reach $100 million annual run rates and reaffirmed continued investment in over 3,000 creators and studio capacity, but he did not provide specific launch schedules or incremental revenue timelines for titles." } ] }, { "question": { "analystName": "Unidentified (Harold Chen to group)", "firm": "Stiefel (as listed)", "summary": "Asked whether there was an uptick in non-gaming enterprise clients in Q3.", }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Direct", "newInfo": "Yes", "guidance": "No", "summary": "Adam reported that non-gaming customers grew almost 100% quarter over quarter and called non-gaming the fastest-growing vertical in Q3. He cautioned that the non-gaming base is still small in absolute terms but identified it as a significant growth opportunity going forward." } ] }, { "question": { "analystName": "Nick Livaldon (for Ralph Shackart)", "firm": "William Blair", "summary": "Asked about the competitive landscape in mobile ad tech given consolidation among mediation platforms and overlapping client bases." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Direct", "newInfo": "No", "guidance": "No", "summary": "Adam said publishers generally use a single mediation integration, highlighted Max's rapid growth to almost 30,000 apps since launch three years ago, and characterized consolidation as positive for publisher choice and innovation. He reiterated focus on executing product vision and integrating MoPub clients to expand scale." } ] }, { "question": { "analystName": "Matt (for Brian Nowak)", "firm": "Morgan Stanley", "summary": "Asked about the composition of the reported $180 million of acquisition spend and any revenue contribution from acquired assets in Q3." }, "answers": [ { "executiveName": "Harold Chen", "executiveTitle": "President and Chief Financial Officer", "quality": "Direct", "newInfo": "Yes", "guidance": "No", "summary": "Harold disclosed that approximately $150 million of the quarter's acquisition spend was for one app asset purchase and that the asset fits the portfolio; he said that was the majority of the spend. He emphasized continued selective M&A discipline and that the company is not aggressively adding apps given elevated market pricing." } ] }, { "question": { "analystName": "Martin Yang", "firm": "Oppenheimer", "summary": "Asked how scaled first-party data informs app development and whether there are synergies between MoPub and Adjust to approach non-gaming customers." }, "answers": [ { "executiveName": "Adam Foroughi", "executiveTitle": "Co-founder, CEO, and chairperson", "quality": "Direct", "newInfo": "Yes", "guidance": "No", "summary": "Adam clarified that first-party data primarily fuels the software engine (Axon) and that app development strategy focuses on partnering with studios across genres, with roughly 20 studios and 3,000 creators currently active. He said MoPub, Adjust, and Applovin salesforces will create a unified offering to reach both publishers and advertisers, which should help approach non-gaming customers, but provided no incremental revenue timetable." } ] } ], "redFlagsWatchItems": [ "MoPub acquisition timing is contingent on regulatory approval and therefore remains uncertain, which creates execution and timing risk for projected $240–$260 million incremental revenue run-rate.", "High concentration risk in the nascent software business given only 280 specs (excluding Adjust) driving outsized software revenue growth and per-spec revenue of $587,000 per quarter GAAP.", "Axon machine learning platform is only one year old, so continued outperformance depends on successful scale and model maturation vs. competitors.", "Company deferred any update to software guidance until Q4 reporting, leaving a near-term guidance gap for investors despite large growth claims.", "Significant reliance on Adjust cross-sell and Adjust's salesforce to drive spec growth introduces execution dependency on an external integration.", "Selective M&A posture noted, yet the company spent ~$150 million on one app asset in Q3, which indicates potential valuation sensitivity and downside if acquired IP underperforms." ] }