Applovin(US:APP)2023-02-09 03:49Financial Data and Key Metrics - Q4 revenue and EBITDA came in at the high end of guidance, with Software Platform revenue growing 24% YoY [12] - Full-year 2022 revenue was $2.8 billion, with over $1 billion in EBITDA, representing a 38% margin [12] - Q1 2023 guidance indicates flat revenue and EBITDA compared to Q4 2022 [12] - Free cash flow in Q4 was $132 million, with total cash exceeding $1 billion [15] - Revenue per install for ALX and AppDiscovery increased 46% YoY, while the number of installs grew 24% [14] Business Line Performance - Software Platform grew 24% YoY in Q4, driven by AppDiscovery and ALX [12] - The company has optimized its apps portfolio, reducing underperforming assets and focusing on 11 remaining studios [10] - A $128 million net loss charge was taken for divestitures and closures, including $100 million in Q4 [11] Market Performance - The Connected TV (CTV) space is identified as a significant growth opportunity, with the company extending its marketing solutions to CTV devices [7] - The company is investing in innovative products to help carriers and OEMs monetize their users, as the mobile market becomes saturated [8] Strategic Direction and Industry Competition - The company is focused on long-term growth, with key initiatives including the development of AXON 2, leveraging advancements in AI technologies [7] - The CTV market is seen as a faster-growing category than the current mobile advertising market, with potential for significant expansion [7] - The company is simplifying its KPIs, removing metrics like SPEC and TSTV, and focusing on revenue per install and install numbers [13] Management Commentary on Operating Environment and Future Outlook - Management emphasized the importance of relevant advertising in funding free digital content, despite economic slowdowns and privacy challenges [6] - The company remains optimistic about the future, with a strong team and culture, and a focus on long-term growth [5] - The rollout of AXON 2 is expected to have a significant impact on the business, improving efficiency and benefiting advertisers [26] Other Important Information - The company has over $1 billion in cash and is focused on free cash flow, with $260 million in EBITDA and $132 million in free cash flow in Q4 [15] - Share buybacks in 2022 totaled $340 million, but no shares were repurchased in Q4 as the company assessed its capital allocation policy [16] Q&A Session Summary Question: How is the company addressing the Connected TV market? [18] - The company is leveraging its performance marketing expertise to bring full-stack advertising solutions to CTV, combining its DSP and SSP capabilities [19][20][23] Question: What is the expected impact of AXON 2? [25] - AXON 2 is expected to improve efficiency and scale for advertisers, with a gradual rollout expected in 2023 [26] Question: How is the company managing its apps portfolio? [31] - The company has optimized its portfolio, focusing on 11 studios with growth potential, and expects margins to stabilize in the mid-teens [34][36] Question: What is the competitive landscape in the advertising market? [38] - The company remains a leader in mobile marketing, with competition driving improvements in algorithms and targeting, which could benefit the entire category [40][41] Question: How does the company view the DOJ lawsuit against Google? [43] - The company has a strong partnership with Google and does not expect any negative impact from the lawsuit [44] Question: What is the outlook for in-app purchase behavior and advertising? [49] - The company believes that improvements in marketing technologies and targeting will drive growth in in-app purchases, with stability already evident in the market [50][51] Question: How is the company expanding beyond mobile gaming? [59] - The company is exploring opportunities in CTV and other verticals, leveraging its data engine and marketing platform [62][63] Question: What is the impact of hyper-casual game publishers reducing ad spend? [66] - The company has a diverse advertiser base and does not expect significant impact from any single category, with stable performance in Q4 and Q1 guidance [68] Question: How is the new game release environment changing? [74] - The bar for new game releases has increased, with developers focusing on more innovative concepts and hybrid monetization models [75][77] Question: What is the trend in Software Platform client revenue? [80] - The company has seen steady growth in Software Platform clients, with net dollar retention exceeding 160%, and is simplifying its reporting metrics to better reflect business performance [85]