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

Rhea-AI Summary

AppLovin Corporation (NASDAQ: APP) announced its financial results for Q3 2023, with total revenue growing 21% year-over-year to $864 million and net income improving to $109 million. The company's robust performance was driven by the continued success of AXON 2.0, their AI-based advertising engine. AppLovin also announced a transition in its executive team, with Herald Chen, President and CFO, moving to an advisory role and Matt Stumpf being appointed as the new CFO.

Positive

• Total revenue grew 21% year-over-year to $864 million
• Adjusted EBITDA grew 63% year-over-year to $419 million
• AppLovin's robust third quarter exceeded the high end of revenue, Adjusted EBITDA, and margin guidance
• The company repurchased $1.154 billion of Class A common stock at a weighted average price under $25 per share

Negative

• None.

PALO ALTO, Calif.--(BUSINESS WIRE)-- 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	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231108254921/en/

Investors

David Hsiao

ir@applovin.com

Press

Kim Hughes

press@applovin.com

Source: AppLovin Corp.

FAQ

What are AppLovin's financial results for Q3 2023?

AppLovin's total revenue grew 21% year-over-year to $864 million, and net income improved to $109 million.

Who is transitioning in AppLovin's executive team?

Herald Chen, President and CFO, will transition to an advisory role, and Matt Stumpf has been appointed as the new CFO.

When will the webinar discussing AppLovin's Q3 2023 results take place?

The webinar will be held today at 2:00 PM PT / 5:00 PM ET, with a replay available on the Company's investor relations website.