4Q23 Shareholder Letter
To Our AppLovin Shareholders: As we reflect back on 2023, we’re very proud of the progress and performance across our business. 2022 was a challenging year for the industry but we believed that our culture of adaptability would help us overcome those challenges. In 2023 we released our advanced AXON 2.0 technology, optimized our gaming studios, and invested in new initiatives to drive future market expansion and long-term growth. In 4Q23 there were several key factors driving the growth of our customers and partners including a strong holiday season, year-over-year growth in the mobile app advertising market, our MAX bidding enhancements and the market shift to real-time bidding. The combination of these factors is helping the market improve advertising efficiency, which we believe will lead to continued compounding growth for our partners. In the fourth quarter, we generated revenue of $953 million (+36% yr/yr), net income of $172 million at a net margin of 18%, and Adjusted EBITDA of $476 million (+83% yr/yr) at an Adjusted EBITDA margin of 50%. Net cash from operating activities was $344 million, with free cash flow of $340 million. At the end of 4Q23, we had approximately 340 million shares outstanding. Total revenue for 2023 was $3.3 billion (+17% yr/yr), with net income of $357 million at a net margin of 11%, and Adjusted EBITDA of $1.5 billion (+41% yr/yr) at an Adjusted EBITDA margin of 46%. In 2023 net cash from operating activities was $1.1 billion (+157% yr/yr) with free cash flow of $1.0 billion (+167% yr/yr). At the end of 2023 we had $502 million of cash and cash equivalents. Our team’s focus on execution and innovation in 2023 exceeded our expectations, driving double-digit revenue growth in our Software Platform business every quarter this year. Software Platform revenue grew to a record $1.8 billion (+76% yr/yr) in 2023, generating Adjusted EBITDA of $1.3 billion (+58% yr/yr) at an Adjusted EBITDA margin of 69%. We remain focused on delivering long-term shareholder value through a combination of share management and free cash flow generation. During 2023, we repurchased and withheld a total of 54.3 million shares of our Class A common stock, which, net of share issuances during the year, reduced our total shares outstanding by nearly 10%. We continue to remain committed to further share management through an increase to our share repurchase program of $1.25 billion. Looking ahead to the first quarter of 2024, we anticipate further stability and growth. Our 1Q 2024 outlook is as follows: Financial Guidance Summary1 1Q24 Total Revenue $955 to $975 million Adjusted EBITDA $475 to $495 million Adjusted EBITDA Margin 50% - 51% AppLovin Corporation / 4Q23 Shareholder Letter 2 1 We 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. 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.
$994 $1,451 $2,793 $2,817 $3,283$210 2019 2020 2021 2022 2023 Revenue ($ millions) $198 $207 $674 $1,049 $1,842 $210 2019 2020 2021 2022 2023 Software Platform Revenue ($ millions) 136 121 457 808 1,275 69% 58% 68% 69% 69% 77% 2019 2020 2021 2022 2023 Software Platform Adjusted EBITDA $119 $(126) $35 $(193) $357$301 $345 $727 $1,063 $1,503 2019 2020 2021 2022 2023 Net Income (Loss), Adjusted EBITDA ($ millions) Cash Flow and Shares Outstanding ($ and shares in millions) $189 $210 $345 $388 $1,037$198 $223 $362 $413 $1,062 220 226 375 374 340 2019 2020 2021 2022 2023 2023 Financial Overview ALL COMPARISONS ARE TO 2022 UNLESS OTHERWISE NOTED. Revenue was $3.3 billion, an increase of 17%. Net Income was $357 million, a net margin of 11% compared to a net loss of $193 million and a net margin of -7%. Software Platform revenue grew 76% to $1.8 billion. Segment Adjusted EBITDA increased 58% to $1.3 billion, a 69% margin. Adjusted EBITDA increased 41% to $1.5 billion, an Adjusted EBITDA margin of 46%. Apps revenue declined 18% to $1.4 billion. Segment Adjusted EBITDA declined 11% to $227 million, a 16% margin. Cash Flow: We generated $1.1 billion of net cash from operating activities and $1.0 billion of Free Cash Flow. Note: Totals may not sum due to rounding 1 Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow are non-GAAP measures. Please see “Non-GAAP Financial Measures” and the reconciliation from GAAP to non-GAAP measures in the Appendix. Cash Flow from Operations Free Cash Flow Net Income (Loss) Shares Outstanding Adjusted EBITDA Excluding Publisher bonuses 35% 30% 24% 26% 38% 46% 12% -9% 1% -7% 11% 2019 2020 2021 2022 2023 Excluding Publisher bonuses Publisher bonuses Publisher bonuses
$702 $715 $750 $864 $953 4Q22 1Q23 2Q23 3Q23 4Q23 Revenue ($ millions) $306 $355 $406 $504 $576 4Q22 1Q23 2Q23 3Q23 4Q23 Software Platform Revenue ($ millions) $186 $219 $273 $364 $420 61% 62% 67% 72% 73% 4Q22 1Q23 2Q23 3Q23 4Q23 Software Platform Adjusted EBITDA $(80) $(5) $80 $109 $172 $260 $274 $334 $419 $476 4Q22 1Q23 2Q23 3Q23 4Q23 Net Income (Loss), Adjusted EBITDA ($ millions) Net Income (Loss) Adjusted EBITDA 37% 38% 44% 49% 50% -11% -1% 11% 13% 18% 4Q22 1Q23 2Q23 3Q23 4Q23 As % Revenue $132 $120 $264 $257 $396 $377 4Q22 4Q23 Apps Revenue ($ millions) In-App Advertising In-App Purchases 4Q23 Financial Overview ALL COMPARISONS ARE TO 4Q22 UNLESS OTHERWISE NOTED. Revenue was $953 million, an increase of 36%. Software Platform revenue increased to 60% of total revenue compared to 44%. Net Income was $172 million, a net margin of 18% compared to a net loss of $80 million and a net margin of -11%. Software Platform revenue grew 88% to $576 million. Segment Adjusted EBITDA increased 126% to $420 million, a 73% margin. Adjusted EBITDA increased 83% to $476 million, an Adjusted EBITDA margin of 50%. Apps revenue decreased 5% to $377 million. Segment Adjusted EBITDA decreased 24% to $56 million, a 15% margin. Cash Flow: We generated $344 million of net cash from operating activities and $340 million of Free Cash Flow. Note: Totals may not sum due to rounding 1 Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow are non-GAAP measures. Please see “Non-GAAP Financial Measures” and the reconciliation from GAAP to non-GAAP measures in the Appendix.
Software Platform Update Our Software Platform segment revenue and Adjusted EBITDA grew consecutively every quarter in 2023, driven by our team’s commitment to improving the performance of our technology. Over the past five years our annual Software Platform revenue has grown over 9x while maintaining an approximate 70% Adjusted EBITDA margin during that period. In 2023, our Software Platform revenue was $1.8 billion (+76% yr/yr) while Adjusted EBITDA increased to $1.3 billion (+58% yr/yr), an Adjusted EBITDA margin of 69%. In the fourth quarter, we achieved another record quarter with Software Platform revenue of $576 million, growing 88% year-over-year and 14% from the third quarter. The growth was driven by the continued performance of AppDiscovery, as the AXON engine continues to learn and scale. During the quarter, we saw advertisers spend more as a result of improved performance from our AI-enhanced advertising engine. Software Platform Adjusted EBITDA grew 126% year-over-year to $420 million at an Adjusted EBITDA margin of 73%. We remain excited and committed to growing the advertising ecosystem as we work towards expanding our Software Platform reach in 2024. $306 $355 $406 $504 $576 4Q22 1Q23 2Q23 3Q23 4Q23 Software Platform Revenue ($ millions) $186 $219 $273 $364 $420 61% 62% 67% 72% 73% 4Q22 1Q23 2Q23 3Q23 4Q23 Software Platform Adjusted EBITDA ($ millions, as % revenue) AppLovin Corporation / 4Q23 Shareholder Letter 5 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Net Revenue per Installation 0 % 57 % 161 % 115 % 113 % 58 % 33 % 26 % 48 % 38 % 40 % 20 % Installations 74 % 91 % 74 % 33 % 45 % 47 % 19 % (3) % (14) % (8) % 29 % 66 % The following table provides the year-over-year change of net revenue per installation and installations for the past twelve quarters:
Apps Update Our Apps segment revenue declined in 2023 to $1.4 billion (-18% yr/yr) as a result of our strategic optimization efforts that began in 2022, which reduced our studio footprint and user acquisition spend, driving improved focus and Adjusted EBITDA margin. Our Apps Adjusted EBITDA was $227 million, (-11% yr/yr) representing a 16% Adjusted EBITDA margin. In the fourth quarter, our Apps segment revenue grew 5% from the third quarter to $377 million as a result of increased investment in user acquisition marketing spend. Fourth quarter Apps Adjusted EBITDA was $56 million with Adjusted EBITDA margin of 15%. $396 $361 $344 $360 $377 4Q22 1Q23 2Q23 3Q23 4Q23 Apps Revenue ($ millions) $74 $55 $61 $55 $56 19% 15% 18% 15% 15% 4Q22 1Q23 2Q23 3Q23 4Q23 Apps Adjusted EBITDA ($ millions, as % revenue) AppLovin Corporation / 4Q23 Shareholder Letter 6
Conclusion 2023 has been another phenomenal year of growth for AppLovin. Looking towards 2024, we see additional opportunities to improve our technology, broaden our customer base and expand into new content industries through our Connected-TV (Wurl) and OEM & Carrier (Array) initiatives. We remain steadfast in our commitment to delivering innovation and long-term value for our customers and shareholders as we grow. Regards, Adam Foroughi, CEO Matt Stumpf, CFO AppLovin Corporation / 4Q23 Shareholder Letter 7
Appendix This shareholder letter contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “going to,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, priorities, plans, or intentions. Forward-looking statements in this letter to shareholders include, but are not limited to, statements regarding our future financial performance, including our expected financial results and guidance, and growth prospects; our expectations regarding improvements to our technology and its reach; our expectations regarding the benefits of our Software Platform to and the growth of our advertising partners; our expectations regarding the expansion of our customer base and the growth of advertising spending and the mobile app ecosystem; our expectations regarding share repurchases; and our expectations regarding our future strategy and expansion in Connected-TV and OEM & Carrier. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties, including changes in our plans or assumptions, which could cause actual results to differ materially from those projected. These risks include our inability to forecast our business due to our limited operating history, the macroeconomic environment, fluctuations in our results of operations, our ability to execute on our operational and financial priorities, our ability to scale our Software Platform to support new users, the competitive advertising and mobile app ecosystems, and our inability to adapt to emerging technologies and business models. The forward-looking statements contained in this letter are also subject to other risks and uncertainties, including those more fully described in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023. Additional information will also be set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The forward-looking statements in this letter 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. AppLovin Corporation / 4Q23 Shareholder Letter 8
Non-GAAP Financial Metrics To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), this shareholder letter 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 / 4Q23 Shareholder Letter 9
Key Metrics We review the following key metrics on a regular basis to evaluate the health of our business, identify trends affecting our performance, prepare financial projections, and make strategic decisions. Quarterly Key Metrics Monthly Active Payers (MAPs). We define a MAP as a unique mobile device active on one of our apps in a month that completed at least one In-App Purchases (IAP) during that time period. A consumer who makes IAPs within two separate apps on the same mobile device in a monthly period will be counted as two MAPs. MAPs for a particular time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution partners. Some of our apps do not utilize such third-party attribution partners, and therefore, our MAPs figure for any period does not capture every user that completed an IAP on our apps. We estimate that our counted MAPs generated approximately 100% of our IAP revenue during the three months ending December 31, 2023, and as such, management believes that MAPs are still a useful metric to measure the engagement and monetization potential of our games. Average Revenue Per Monthly Active Payer (ARPMAP). We define ARPMAP as (i) the total IAP Revenue derived from our Apps in a monthly period, divided by (ii) MAPs in that same period. ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP. 4Q 2023 4Q 2022 Monthly Active Payers (millions) 1.8 1.9 Average Revenue per Monthly Active Payer (ARPMAP) $47 $46 Our key metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our key metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. The numbers that we use to calculate MAPs and ARPMAP are based on internal data. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. AppLovin Corporation / 4Q23 Shareholder Letter 10
AppLovin Corporation Consolidated Balance Sheets (in thousands, except for share and per share data) (unaudited) December 31, December 31, 2023 2022 Assets Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 502,152 $ 1,080,484 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953,810 702,814 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,201 155,785 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,616,163 1,939,083 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,331 78,543 Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,210 60,379 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,842,850 1,823,755 Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,292,635 1,677,660 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,998 268,426 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,359,187 $ 5,847,846 Liabilities and stockholders’ equity Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 371,702 $ 273,196 Accrued and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252,202 147,801 Licensed asset obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,054 15,254 Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215,000 33,310 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,559 64,018 Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,605 14,334 Deferred acquisition costs, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 31,045 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,122 578,958 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,905,906 3,178,412 Operating lease liabilities, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,905 54,153 Licensed asset obligation, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 26,970 Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209,925 106,676 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,102,858 3,945,169 Stockholders’ equity: Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2023 and 2022 . . . . . . . — — Class A, Class B and Class F common stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000, Class B 200,000,000, Class F nil) and 1,700,000,000 (Class A 1,500,000,000, Class B 200,000,000, Class F nil) shares authorized, 339,886,712 (Class A 268,774,090, Class B 71,112,622, Class F nil) and 373,873,683 (Class A 302,711,061, Class B 71,162,622, Class F nil) shares issued and outstanding as of December 31, 2023 and 2022, respectively 11 11 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,134,581 3,155,748 Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,274) (83,382) Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (812,989) (1,169,700) Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,256,329 1,902,677 Total liabilities, redeemable noncontrolling interest, and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,359,187 $ 5,847,846 AppLovin Corporation / 4Q23 Shareholder Letter 11
AppLovin Corporation Consolidated Statements of Operations (in thousands, except share and per share data) (unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2023 2022 2023 2022 Revenue $ 953,261 $ 702,307 $ 3,283,087 $ 2,817,058 Costs and expenses: Cost of revenue 273,607 369,368 1,059,191 1,256,065 Sales and marketing 222,963 200,536 830,718 919,550 Research and development 150,823 118,190 592,386 507,607 General and administrative 36,354 36,639 152,585 181,627 Total costs and expenses . . . . . . . . . . . . . . . . . . 683,747 724,733 2,634,880 2,864,849 Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . 269,514 (22,426) 648,207 (47,791) Other income (expense): Interest expense and loss on settlement of debt . . . (71,584) (54,722) (275,665) (171,863) Other Income (expense), net . . . . . . . . . . . . . . . . . . . . . (19,034) 10,976 8,028 14,477 Total other expense, net . . . . . . . . . . . . . . . . . . (90,618) (43,746) (267,637) (157,386) Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . 178,896 (66,172) 380,570 (205,177) Provision for (benefit from) income taxes . . . . . . . . . . . . . . 6,663 13,340 23,859 (12,230) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,233 (79,512) 356,711 (192,947) Less: Net loss attributable to noncontrolling interest . . . — — — (201) Net income (loss) attributable to AppLovin . . . . . . . . . . . . $ 172,233 $ (79,512) $ 356,711 $ (192,746) Less: Net income attributable to participating securities 714 — 1,769 — Net income (loss) attributable to common stock—Basic . $ 171,519 $ (79,512) $ 354,942 $ (192,746) Net income (loss) attributable to common stock— Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 171,540 $ (79,512) $ 354,993 $ (192,746) Net income (loss) per share attributable to Class A and Class B common stockholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.51 $ (0.21) $ 1.01 $ (0.52) Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.49 $ (0.21) $ 0.98 $ (0.52) Weighted average common shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,136,956 371,075,205 351,952,187 371,568,011 Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347,492,545 371,075,205 362,589,246 371,568,011 AppLovin Corporation / 4Q23 Shareholder Letter 12
AppLovin Corporation Consolidated Statements of Cash Flows (in thousands) (unaudited) Years Ended December 31, 2023 2022 Operating Activities Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 356,711 $ (192,947) Adjustments to reconcile net income (loss) to operating activities: Amortization, depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489,008 547,084 Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,107 191,612 Impairment of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,953 — Change in operating right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,842 17,107 Amortization of debt issuance costs and discount . . . . . . . . . . . . . . . . . . . . . . . . . 9,363 12,678 Impairment and loss in connection with sale of long-lived assets . . . . . . . . . . . . — 127,892 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 1,786 Changes in operating assets and liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (261,279) (174,829) Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,280) (3,725) Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (121,688) (77,343) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,574 3,479 Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,612) (18,898) Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,754 (6,412) Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,857 (14,711) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,061,510 412,773 Investing Activities Acquisitions of businesses and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63,899) (1,345,776) Purchase of investments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,934) (66,342) Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,246) (662) Proceeds from sale of assets and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,250 41,312 Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,829) (1,371,468) Financing Activities Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,153,593) (338,880) Principal repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (497,994) (25,810) Payments of withholding taxes related to net share settlement . . . . . . . . . . . . . . . . . (246,435) (27,535) Payments of deferred acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,903) (124,184) Payments of licensed asset obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,110) (17,374) Principal payments of finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,170) (24,083) Payments of debt issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,655) — Proceeds from debt issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395,281 — Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,932 25,487 Proceeds from the issuance of common stock through ESPP . . . . . . . . . . . . . . . . . . . 4,856 5,531 Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,562,791) (526,848) Effect of foreign exchange rate on cash, cash equivalents and restricted cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778 (4,477) Net decrease in cash, cash equivalents and restricted cash equivalents (578,332) (1,490,020) Cash, cash equivalents and restricted cash equivalents at beginning of the period 1,080,484 2,570,504 Cash, cash equivalents and restricted cash equivalents at end of the period . . . . . . $ 502,152 $ 1,080,484 AppLovin Corporation / 4Q23 Shareholder Letter 13
AppLovin Corporation Reconciliation of Net Cash Provided By 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 periods presented: Three Months Ended Twelve Months Ended 4Q22 4Q23 2019 2020 2021 2022 2023 Net cash provided by operating activities 163,199 343,988 198,462 222,883 361,851 412,773 1,061,510 Less: Purchase of property and equipment (41) (244) (3,358) (3,241) (1,390) (662) (4,246) Principal payments on finance leases (5,984) (3,979) (5,663) (9,708) (15,271) (24,083) (20,170) Free Cash Flow $ 157,174 $ 339,765 $ 189,441 $ 209,934 $ 345,190 $ 388,028 $ 1,037,094 Net cash provided by (used in) investing activities $ 22,286 $ (6,804) $ (411,554) $ (679,891) $ (1,214,930) $ (1,371,468) $ (77,829) Net cash provided by (used in) financing activities $ (55,411) $ (170,524) $ 333,160 $ 377,855 $ 3,109,546 $ (526,848) $ (1,562,791) AppLovin Corporation / 4Q23 Shareholder Letter 14
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: Three Months Ended 4Q22 1Q23 2Q23 3Q23 4Q23 Revenue $ 702,307 $ 715,405 $ 750,165 $ 864,256 $ 953,261 Net income (loss) $ (79,512) $ (4,518) $ 80,357 $ 108,639 $ 172,233 Net Margin (11) % (1) % 11 % 13 % 18 % Interest expense and loss on settlement of debt 54,722 74,511 50,987 78,583 71,584 Other income (expense), net (10,174) (9,771) (15,817) (771) 18,528 Provision for income taxes 13,340 1,165 15,445 586 6,663 Amortization, depreciation and write-offs 129,313 128,208 119,892 121,797 119,111 Impairment and loss in connection with sale of long-lived assets 100,156 — — — — Non-operating foreign exchange loss (gain) 1,519 (672) 126 (613) (65) Stock-based compensation 47,669 82,966 81,253 110,839 88,049 Acquisition-related expense 227 517 247 231 52 Restructuring costs 2,340 1,292 1,024 — — Total adjustments 339,112 278,216 253,157 310,652 303,922 Adjusted EBITDA $ 259,600 $ 273,698 $ 333,514 $ 419,291 $ 476,155 Adjusted EBITDA Margin 37 % 38 % 44 % 49 % 50 % AppLovin Corporation / 4Q23 Shareholder Letter 15
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: Twelve Months Ended 2019 2020 2021 2022 2023 Revenue $ 994,104 $ 1,451,086 $ 2,793,104 $ 2,817,058 $ 3,283,087 Net income (loss) $ 119,040 $ (125,934) $ 35,338 $ (192,947) $ 356,711 Net Margin 12 % (9) % 1 % (7) % 11 % Interest expense and loss on settlement of debt 73,955 77,873 103,170 171,863 275,665 Other income (expense), net (5,818) (6,183) (7,545) (18,647) (7,831) Provision for (benefit from) income taxes 7,194 (9,772) 10,973 (12,230) 23,859 Amortization, depreciation and write-offs 92,806 254,951 431,063 547,084 489,008 Impairment and loss in connection with sale of long-lived assets — — — 127,892 — Non-operating foreign exchange loss (gain) — 1,210 (1,537) (164) (1,224) Stock-based compensation 10,222 62,387 135,468 191,612 363,107 Acquisition-related expense and transaction bonus 3,798 7,850 16,887 21,279 1,047 Publisher bonuses — — 3,227 209,635 — MoPub acquisition transition services — — — 6,999 — Restructuring costs — — — 10,834 2,316 Change in the fair value of contingent consideration — 442 (230) — — Lease modification and abandonment of leasehold improvements — 7,851 — — — Loss on extinguishments of acquisition related contingent consideration — 74,820 — — — Total adjustments 182,157 471,429 691,476 1,256,157 1,145,947 Adjusted EBITDA $ 301,197 $ 345,495 $ 726,814 $ 1,063,210 $ 1,502,658 Adjusted EBITDA Margin 30 % 24 % 26 % 38 % 46 % AppLovin Corporation / 4Q23 Shareholder Letter 16
AppLovin Corporation Segment Information (in thousands) The following table provides selected financial data for our reportable segments for the periods indicated: 4Q22 1Q23 2Q23 3Q23 4Q23 Revenue: Software Platform $ 306,195 $ 354,758 $ 406,063 $ 504,452 $ 576,489 Apps 396,112 360,647 344,102 359,804 376,772 Total Revenue $ 702,307 $ 715,405 $ 750,165 $ 864,256 $ 953,261 Segment Adjusted EBITDA: Software Platform $ 185,860 $ 218,694 $ 272,886 $ 364,117 $ 420,008 Apps 73,740 55,004 60,628 55,174 56,147 Total Segment Adjusted EBITDA $ 259,600 $ 273,698 $ 333,514 $ 419,291 $ 476,155 Interest expense and loss on settlement of debt (54,722) (74,511) (50,987) (78,583) (71,584) Other income (expense), net 10,174 9,771 15,817 771 (18,528) Amortization, depreciation and write- offs (129,313) (128,208) (119,892) (121,797) (119,111) Impairment and loss in connection with sale of long-lived assets (100,156) — — — — Non-operating foreign exchange gain (loss) (1,519) 672 (126) 613 65 Stock-based compensation (47,669) (82,966) (81,253) (110,839) (88,049) Acquisition-related expense (227) (517) (247) (231) (52) Restructuring costs (2,340) (1,292) (1,024) — — Income (loss) before provision for tax $ (66,172) $ (3,353) $ 95,802 $ 109,225 $ 178,896 Segment Adjusted EBITDA Margin: Software Platform 61 % 62 % 67 % 72 % 73 % Apps 19 % 15 % 18 % 15 % 15 % AppLovin Corporation / 4Q23 Shareholder Letter 17
AppLovin Corporation Segment Information (in thousands) The following table provides selected financial data for our reportable segments for the periods indicated: 2019 2020 2021 2022 2023 Revenue: Software Platform $ 198,305 $ 207,285 $ 673,952 $ 1,049,167 $ 1,841,762 Apps 795,799 1,243,801 — 2,119,152 1,767,891 1,441,325 Total Revenue $ 994,104 $ 1,451,086 $ 2,793,104 $ 2,817,058 $ 3,283,087 Segment Adjusted EBITDA: Software Platform $ 136,257 $ 121,114 $ 457,302 $ 808,415 $ 1,275,705 Apps 164,940 224,381 269,512 254,795 226,953 Total Segment Adjusted EBITDA $ 301,197 $ 345,495 $ 726,814 $ 1,063,210 $ 1,502,658 Interest expense and loss on settlement of debt (73,955) (77,873) (103,170) (171,863) (275,665) Other income (expense), net 5,818 6,183 7,545 18,647 7,831 Amortization, depreciation and write- offs (92,806) (254,951) (431,063) (547,084) (489,008) Impairment and loss in connection with sale of long-lived assets — — — (127,892) — Non-operating foreign exchange gain (loss) — (1,210) 1,537 164 1,224 Stock-based compensation (10,222) (62,387) (135,468) (191,612) (363,107) Acquisition-related expense (3,798) (7,850) (16,887) (21,279) (1,047) Publisher bonuses — — (3,227) (209,635) — MoPub acquisition transition services — — — (6,999) — Restructuring costs — — — (10,834) (2,316) Change in the fair value of contingent consideration — (442) 230 — — Lease modification and abandonment of leasehold improvements — (7,851) — — — Loss on extinguishments of acquisition related contingent consideration — (74,820) — — — Income (loss) before provision for tax $ 126,234 $ (135,706) $ 46,311 $ (205,177) $ 380,570 Segment Adjusted EBITDA Margin: Software Platform 69 % 58 % 68 % 77 % 69 % Apps 21 % 18 % 13 % 14 % 16 % AppLovin Corporation / 4Q23 Shareholder Letter 18
