Financial

3Q24 Shareholder Letter

Published by AppLovin

Summary

AppLovin reported a robust third‑quarter 2024 performance, with revenue rising to $1.20 billion—up 39% YoY—and net income reaching $434 million, a 300% increase and a 36% margin. Adjusted EBITDA climbed to $722 million, a 72% jump and a 60% margin. Operating cash flow surged to $551 million, while free cash flow hit $545 million, both up more than 170% YoY. Cash and equivalents stood at $568 million with 335 million shares outstanding. The Software Platform segment dominated growth, generating $835 million in revenue (+66%) and $653 million in Adjusted EBITDA (+79%), achieving a 78% margin. The Apps segment remained stable, with revenue at $363 million (+1%) and Adjusted EBITDA of $68 million (19% margin). Share repurchases totaled 5.0 million shares at a cost of $437 million, and the board increased repurchase authorization by $2.0 billion, aiming to fund future buybacks from free cash flow. Guidance for Q4 2024 projects total revenue of $1.24–$1.26 billion and Adjusted EBITDA of $740–$760 million, maintaining a 60% margin. The company emphasizes continued investment in talent and technology to drive organic growth, disciplined capital allocation through share buybacks and equity grants, and maintaining a net debt leverage ratio below 2.0×. Financials are presented in US GAAP terms, with non‑GAAP Adjusted EBITDA and Free Cash Flow defined for investor clarity. The letter notes forward‑looking statements, risks, and the intent to rename the Software Platform segment to “Advertising” in future filings.

From the report

To Our AppLovin Shareholders: We had another fantastic quarter in Q3. Our AXON models continue to improve through learning and, more importantly this quarter, from technology enhancements by our engineering team. As we continue to improve our models our advertising partners are able to successfully spend at a greater scale. We're proud to be a catalyst to reinvigorating growth in our industry. In the third quarter, we generated revenue of $1.20 billion (+39% year-over-year), net income of $434 million (+300% year-over-year) at a net margin of 36%, and Adjusted EBITDA of $722 million (+72% year-over-year) at an Adjusted EBITDA margin of 60%. We generated net cash from operating activities of 551 million (+177% year-over-year) and Free Cash Flow of 545 million (+182% year-over-year). At the end of 3Q24, we had $568 million in cash and cash equivalents and 335 million shares of our Class A and Class B common stock outstanding. Our Software Platform revenue grew in the third quarter to $835 million (+66% year-over-year) and Software Platform Adjusted EBITDA expanded to $653 million (+79% year-over-year) at an Adjusted EBITDA margin of 78%. During the third quarter, we retired and withheld a total of 5.0 million shares of our Class A common stock for a total cost of $437 million¹. Given our confidence in AppLovin's future, our board of directors has increased our share repurchase authorization by an incremental 2.0 billion, increasing our total aggregate remaining authorization to 2.3 billion, with future repurchases to be funded from Free Cash Flow.

cost of $437 million¹. Given our confidence in AppLovin's future, our board of directors has increased our share repurchase authorization by an incremental 2.0 billion, increasing our total aggregate remaining authorization to 2.3 billion, with future repurchases to be funded from Free Cash Flow. We believe a strong capital structure and effective capital allocation plan are crucial to the creation of long-term shareholder value. To achieve this goal, we are focused on: • Investing in top talent and technology to drive organic growth; • Managing share capital through ongoing share repurchases funded from Free Cash Flow and prudent equity grants to employees; and • Building a strong capital foundation with sufficient liquidity to support financial flexibility and a net debt leverage ratio below 2.0x. Looking ahead to the fourth quarter of 2024, our outlook is as follows: Financial Guidance Summary² 4Q24 Total Revenue 1,240 to 1,260 million Adjusted EBITDA 740 to 760 million Adjusted EBITDA Margin 60% 1Includes repurchased shares as well as withholdings upon net share settlement of vested equity awards. Total cost includes repurchase costs, including commissions and fees, as well as cash paid in connection with tax withholding and remittance obligations upon net share settlement. 2We have not provided the forward-looking GAAP equivalents for forward-looking non-GAAP metrics, specifically Adjusted EBITDA and Adjusted EBITDA margin, or a GAAP reconciliation as a result of the uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense.

ovided the forward-looking GAAP equivalents for forward-looking non-GAAP metrics, specifically Adjusted EBITDA and Adjusted EBITDA margin, or a GAAP reconciliation as a result of the uncertainty regarding, and the potential variability of, reconciling items such as stock-based compensation expense. Accordingly, a reconciliation of these non-GAAP guidance metrics to their corresponding GAAP equivalents is not available without unreasonable effort. However, it is important to note that material changes to reconciling items could have a significant effect on future GAAP results. We have provided historical reconciliations of GAAP to non-GAAP metrics in tables at the end of this letter.

3Q24 Financial Overview ALL COMPARISONS ARE TO 3Q23 UNLESS OTHERWISE NOTED. Revenue was 1.20 billion, an increase of 39%. Net Income was 434 million, a net margin of 36% compared to a net income of $109 million and a net margin of 13%. Software Platform revenue grew 66% to 835 million. Adjusted EBITDA increased 72% to 722 million, an Segment Adjusted EBITDA increased 79% to Adjusted EBITDA margin of 60%. $653 million, a 78% Adjusted EBITDA margin. Apps revenue grew 1% to 363 million. Segment Cash Flow: We generated 551 million of net cash from Adjusted EBITDA increased 24% to 68 million, a 19% operating activities and 545 million of Free Cash Flow. margin. Revenue Net Income Net Income Revenue Net Income Adjusted EBITDA $1,198 Net Income ( millions) 1,058 1,080 1,198 Adjusted EBITDA Adjusted EBITDA 953 1,058 1,080 ( millions) $722 864 953 549 601 $722 864 476 549 601 $434 419 476 $434 109 172 236 310 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Q124 Q224 Q324 (As % Revenue) 50% 52% 56% 60% 49% Software Platform Revenue 13% 18% 22% 29% 36% ( millions) 835 678 711 576 678 504 576 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Software Platform Adjusted EBITDA ($ millions, as a % of revenue) ($ millions, as a % of revenue) Q124 Q224 Q324 Cash Flow and Shares Cash Flow from Operations Q124 Q224 Q324 Outstanding Free Cash Flow Shares Outstanding 653 ( and shares in millions) Free Cash Flow 653 ( and shares in millions) Shares Outstanding 492 520 340 364 420 492 520 336 340 455 446 551 545 420 78% 336 393 388 334 334 551 335 364 73% 73% 73% 78% 344 340 393 329 455 446 72% 199 194 344 340 $388 334

standing Free Cash Flow Shares Outstanding 653 ( and shares in millions) Free Cash Flow 653 ( and shares in millions) Shares Outstanding 492 520 340 364 420 492 520 336 340 455 446 551 545 420 78% 336 393 388 334 334 551 335 364 73% 73% 73% 78% 344 340 393 329 455 446 72% 199 194 344 340 $388 334 72% 73% 73% 73% 199 194 329 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Q124 Q224 Q324 Q323 Q423 Q124 Q224 Q324 Note: Totals may not sum due to rounding

Software Platform Update Our Software Platform segment continued to grow in the third quarter, with Software Platform revenue of $835 million, up 66% year-over-year, driven by continued development of our AXON engine through ongoing self-learning and directed model enhancements. These technology enhancements allowed our advertising partners to further increase the scale of their spend on our platform while consistently achieving their return on ad spend ("ROAS") goals. Software Platform Adjusted EBITDA grew 79% year-over-year to $653 million at an Adjusted EBITDA margin of 78% reflecting continued management of operating leverage as we scale. As we have noted in the past, our margins for this business will fluctuate on a quarterly basis, primarily driven by our investment in infrastructure as we continue to scale and secure data center capacity to support future growth. Our core advertising business now represents substantially all of our Software Platform revenue and future focus for the company. Starting with our next shareholder letter and Annual Report on SEC Form 10-K, we will rename our “Software” Platform and associated revenue to “Advertising” to better align with the nature of this business. Software Platform Revenue Software Platform Adjusted EBITDA ( millions) ( millions, as % revenue) 835 653 504 576 678 711 364 420 492 520 78% 72% 73% 73% 73% 3Q23 4Q23 1Q24 2Q24 3Q24 3Q23 4Q23 1Q24 2Q24 3Q24 Apps Update

Pages: 15
Words: 4,421
Type: Financial

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