Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AppLovin Corp (APP, Financial) reported a record quarter with total revenue of $1.06 billion and adjusted EBITDA of $549 million, demonstrating a strong financial performance.
- The company's software platform revenue grew significantly from $355 million to $678 million year-over-year, with a high margin of 73%.
- AppLovin Corp (APP) generated $388 million in free cash flow during the quarter, indicating efficient cash management and profitability.
- The company successfully expanded its AXON technology beyond gaming into web-based marketing and e-commerce, showing potential for further growth and market penetration.
- AppLovin Corp (APP) has continued to innovate and improve its AI models, leading to better performance and efficiency in advertising placements.
Negative Points
- Despite strong financial results, AppLovin Corp (APP) experienced a significant increase in cloud data center costs due to reserving GPU capacity for future growth.
- The company faces challenges in expanding its technology from mobile gaming to other verticals, requiring strategic adjustments and potentially new sales strategies.
- AppLovin Corp (APP) is still in the early stages of entering the web advertising market, which may involve unforeseen challenges and competition.
- There is a reliance on the continuous improvement of AI models for growth, which may not always yield predictable results.
- While the company has reduced its total shares outstanding significantly, the heavy investment in share repurchases could be seen as a risk if not balanced with other growth strategies.
Q & A Highlights
Q: Adam, I've got 2 on software and AppDiscovery. You mentioned in the prepared remarks that this quarter results exceeded your internal expectations. Is there anything specific that you might call out for us amongst the sort of key sources of outperformance?
A: Adam Arash Foroughi - AppLovin Corporation - Co-Founder, CEO & Chairperson: Yes. Thanks, Clark, for the question. So on the first one, I touched on this in the script. But we've got a few growth vectors. One is going to be adding more advertisers both within gaming and then breaking out to these new verticals that we're working on and quite excited about. Secondarily and more importantly, anytime we see improvements in our core models, we see gains in our business. And there's 2 forms of improvements. These models are self-learning. So we've got them in the marketplace. We're serving a ton of impressions every single day. And there's a feedback loop that gets this data back into the model and it improves itself. So there's a component of that. That's why the system continues to get better since we launched it.
Q: You've been fairly consistent in saying that AXON 2 engine works outside sort of the gaming vertical, and you sort of touched on that in your last response. Can you maybe give an update sort of where you are in that sort of effort outside of gaming? Do you need a new sales force? Are you testing? Any results you could share, sort of want to get a sense of sort of where you are in that effort.
A: Adam Arash Foroughi - AppLovin Corporation - Co-Founder, CEO & Chairperson: Yes. Thanks, Ralph. Good to see you. And a couple of things. One is, we look at the advertising world with apps and websites, right? Like there's 2 forms of media that people are buying to the end destination. And today in the app marketing world, we're very good at gaming. We also work with nongaming apps, and we've seen success once we rolled out AXON 2 across a variety of nongaming companies growing on our platform, too. And I think last call, we touched on that the non-gaming app space is growing faster than the gaming app space on our platform just because it starts from a lower base.
Q: I'm afraid to ask this question because you guys are doing so well. Would you mind just giving us an update on your sales process? I remember several years ago, you sort of made fun of yourself because you didn't really have a sales force and didn't think about it. And I'm just trying to get a sense. You haven't talked about it as a vector. But is all of this growth we're seeing a function of sales and the technology? Or is it just purely the technology and it's sort of selling itself based on the return...
A: Adam Arash Foroughi - AppLovin Corporation - Co-Founder, CEO & Chairperson: So look, since day 1, I know that I'm not a very good seller and it was something that we really focus on being product first at the company. We believe if we build great products and we innovate well, that if the advertisers are seeing success on our platform, they're going to tell their peers and their peers are going to come to our platform and this thing could self-sell itself. And we've seen that happen in mobile gaming as AXON 2 continues to perform well.
Q: I had a couple of questions about header bidding, aka real-time bidding, I guess, those are the same term. What is the quarterly revenue run rate trajectory for the rest of this year for that? I think you guys said that you collect a 5% fee on header bidding into MAX supply. I was wondering where that stood and how that's going to move going forward.
A: Matt Stumpf - AppLovin Corporation - CFO: Yes. So Omar, we don't disclose that level of detail, the revenue for specifically the MAX business or for header bidding. But we have continued to see that trend that we've been talking about historically, the trend of people shifting over to header bidding with an acceleration in Q1. So we're continuing to see that positive trend.
Q: Maybe following up on Tim's question, but asking it a little bit different way. Adam, when you think about entering new verticals or new campuses, we've seen you taken a number of different approaches, purchasing companies, taking stakes in companies, partnerships. How should we be thinking about the capital allocation dynamics around thinking through organic versus inorganic growth? How that sort of maximize for ROI when you think about how far-reaching the platform can become as you look at some of these campuses over the medium to longer term?
A: Adam Arash Foroughi - AppLovin Corporation - Co-Founder, CEO & Chairperson: Yes, I'll start with the first, and Matt can answer the second. Thanks, Eric. Really, when we think about our business, we've built a very, very compelling implementation of AI, one of the most powerful systems the world has ever seen in this space. And so organically, we have a huge advantage to continue to build on that.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
