• Total Revenue: $1.37 billion, a 44% increase year-over-year.
• Adjusted EBITDA: $848 million, a 78% increase, with a 62% margin.
• Free Cash Flow: $695 million, up 105% year-over-year.
• Cash and Cash Equivalents: $741 million at the end of Q4.
• Advertising Revenue: $999 million with $777 million in adjusted EBITDA, achieving a 78% margin.
• Apps Revenue: $373 million, a 1% decrease from last year, with $71 million in adjusted EBITDA at a 19% margin.
• Annual Revenue: $4.7 billion, a 43% increase from last year.
• Annual Adjusted EBITDA: $2.72 billion, an 81% increase, with a 58% margin.
• Annual Free Cash Flow: $2.1 billion, representing a 76% flow-through from adjusted EBITDA.
• Share Repurchase: 25.7 million shares repurchased for $2.1 billion at an average price of $83 per share.
• Q1 2025 Advertising Revenue Guidance: $1.030 billion to $1.050 billion, with adjusted EBITDA between $805 million and $825 million.
• Q1 2025 Apps Revenue Guidance: $325 million to $335 million, with adjusted EBITDA between $50 million and $60 million.

• Warning! GuruFocus has detected 2 Warning Sign with QS.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AppLovin Corp (NASDAQ:APP) achieved a 44% increase in total revenue year-over-year, reaching $1.37 billion in Q4 2024.
• Adjusted EBITDA increased by 78% to $848 million, with a strong margin of 62%.
• The company generated $695 million in free cash flow, marking a 105% increase year-over-year.
• AppLovin Corp (NASDAQ:APP) is expanding its advertising platform beyond gaming, successfully attracting a broader set of advertisers, including e-commerce.
• The company is transitioning to a pure advertising platform, focusing on productivity, automation, and building lean, high-impact teams, with a notable $3 million in run rate adjusted EBITDA per employee in the advertising business.

Negative Points

• AppLovin Corp (NASDAQ:APP) is still developing its systems and lacks full self-service capabilities, which limits its ability to handle growth at scale.
• The company experienced a step function increase in data center costs, impacting the flow-through from revenue to adjusted EBITDA.
• There is uncertainty regarding the timing and extent of growth from the e-commerce segment, making it difficult to predict its material contribution in 2025.
• The company is in the process of divesting its Apps business, which could lead to a decrease in revenue from this segment.
• AppLovin Corp (NASDAQ:APP) faces challenges in expanding its platform to include non-gaming app advertisers and websites, requiring further development and integration efforts.

Q & A Highlights

Q: Can you elaborate on the early benefits you're seeing for brands in various verticals beyond direct-to-consumer (DTC) marketers? A: Adam Foroughi, CEO, explained that while the platform initially targeted DTC commerce, it has shown success across a wide range of categories. This success gives confidence that as more tools are released and the platform becomes more self-service, they can target a larger set of advertisers globally. The focus is on automation and AI to maintain a lean operation while expanding the platform's reach.

Q: What are the key learnings from the e-commerce pilot, and how do you plan to scale it? A: Adam Foroughi noted that the pilot focused on mid-market DTC brands, which are easier to onboard due to their agility. The positive results have generated organic interest, leading to a long queue of potential clients. The main challenge is scaling through self-service tools, which are being developed to allow broader access without increasing headcount significantly.

Q: How does the e-commerce opportunity impact your financial outlook for 2025? A: CFO Matthew Stumpf confirmed confidence in e-commerce contributing materially to revenue in 2025, although the exact timing and scale are unpredictable. The company expects baseline growth of 20% year-over-year, with potential upside from model enhancements and expanding the platform to more advertisers.

Q: Can you discuss the impact of your e-commerce strategy on gaming publishers and the mediation market? A: Adam Foroughi highlighted that as more non-gaming advertisers join the platform, it reduces the need for gaming publishers to show competitor ads, which is beneficial. This shift could lead to increased supply from publishers who were previously hesitant to run ads due to competitive concerns.

Q: What are the plans for personalizing ad experiences using AI? A: Adam Foroughi explained that the goal is to use generative AI to create personalized ad variations, enhancing consumer engagement. This involves developing models that can automatically generate diverse ad content, which is more complex than text ads due to the full-screen video format used in mobile gaming.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.