AppLovin Corp Q4 FY2024 earnings call

• Q4 was a milestone, capturing holiday shopping ad dollars and seeing ecommerce advertisers contribute positively. - Signed an exclusive term sheet to sell the Apps business. - Focus on adjusted EBITDA per employee, with Q4 run rate adjusted EBITDA per employee in Advertising at ~$3 million. - Advertising business drove growth with mobile gaming partners and early ecommerce results. - Apps revenue and adjusted EBITDA for the quarter were $373 million and $71 million respectively. - Annual results showed strong revenue, adjusted EBITDA, and free cash flow growth.

The Advertising business generated $999 million in revenue and $777 million in adjusted EBITDA in Q4, achieving a 78% margin. The Apps business had $373 million in revenue, a 1% decrease from the prior year, with $71 million in adjusted EBITDA and a 19% margin. For the year, total revenue was $4.7 billion, up 43% year-over-year. Adjusted EBITDA was $2.72 billion, a 81% increase, with a 58% margin. Free cash flow for the year was $2.1 billion, representing a 76% flow-through from adjusted EBITDA.

• For Q1 2025, Advertising business anticipates revenue between $1.030 billion and $1.050 billion, with adjusted EBITDA between $805 million and $825 million, targeting a 78%-79% adjusted EBITDA margin. - Apps revenue expected between $325 million and $335 million, with adjusted EBITDA between $50 million and $60 million.

• Regulatory clearance for the Apps business divestment could impact the transaction timeline. - Attribution challenges and lack of clear call to action in CTV advertising present hurdles. - Seasonality and market dynamics could affect revenue growth and performance in different quarters.

Q: Curious about ecommerce verticals and CTV advertising, and what changed with Wurl?

A: Adam discussed that Wurl brought supply online, but gaming ads on full-screen TV weren't compelling. CTV advertising is a challenge with attribution issues but a huge opportunity if solved.

Q: On model enhancements and ecommerce contribution in 2025?

A: Matt and Adam mentioned confidence in ecommerce contributing materially in 2025, but it's hard to predict timing and amount. Model enhancements and opening up to more advertisers drive potential growth.

Q: How many ecommerce pilots are there?

A: Adam stated they're not broken out, but it's not in the tens or thousands, limited by core team.

Q: Go-to-market for ecommerce and non-DTC adjacencies?

A: Adam said the challenge is getting tools out for self-service to bring more companies on, with the model working out of the box for non-DTC categories.

Q: Inventory conversion for ecommerce vs gaming?

A: Adam said it's all the same inventory, full-screen video ads on 1 billion+ daily active users playing games.

Q: 1Q sequential growth drivers for ecommerce?

A: Adam mentioned traditional seasonality, but the business is growing quickly, guiding for expansion even with two less days in Q1.

Q: HR changes and streamlining?

A: Adam said focus is on streamlining teams and processes to align with organic growth opportunities.

Q: Market share gain on mediation and supply for gaming?

A: Adam said they're working on bringing in non-gaming supply to expand gaming publishers' ad load and create growth vectors.

Q: Personalizing ad experiences?

A: Adam discussed using generative AI to create variations of ads, but it's complex due to full-screen video and HTML in gaming, work in progress for 2025.

Q: Feedback from gaming companies on e-commerce and other verticals?

A: Adam said gaming companies see better performance on the platform, and publishers are excited about non-gaming impressions shifting to their ads.