AppLovin Corp 10-Q for FY2023 Q3

AppLovin Corp (APP)

10-Q 2023-11-08 For: 2023-09-30

Added on April 08, 2026

About this 10-Q

AppLovin Corp filed this 10-Q on November 8, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $864.26M; up 21.2% from $713.1M a year earlier
Net income: $108.64M; up 357.0% from net income of $23.77M a year earlier
Diluted EPS: $0.30; up 400.0% from $0.06 a year earlier

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Delaware						45-3264542
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


			Page
PART I		FINANCIAL INFORMATION (UNAUDITED)	3
	Item 1.	Condensed Consolidated Financial Statements	3
		Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	3
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2023 and 2022	5
		Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity for the Three and Nine Months Ended September 30 , 2023 and 2022	6
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30 , 2023 and 2022	8
		Notes to Condensed Consolidated Financial Statements	10
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4.	Controls and Procedures	40

PART II		OTHER INFORMATION	41
	Item 1.	Legal Proceedings	41
	Item 1A.	Risk Factors	41
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
	Item 5.	Other Information	80
	Item 6.	Exhibits	82
		Signatures	83



	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	332,491	$	1,080,484
Accounts receivable, net	849,140		702,814
Prepaid expenses and other current assets	119,161		155,785
Total current assets	1,300,792		1,939,083
Property and equipment, net	102,156		78,543
Operating lease right-of-use assets	52,998		60,379
Goodwill	1,813,567		1,823,755
Intangible assets, net	1,386,591		1,677,660
Other assets	349,124		268,426
Total assets	$	5,005,228	$	5,847,846
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	281,103	$	273,196
Accrued and other current liabilities	181,679		147,801
Licensed asset obligation	13,389		15,254
Short-term debt	215,000		33,310
Deferred revenue	77,899		64,018
Operating lease liabilities	13,800		14,334
Deferred acquisition costs, current	22,604		31,045
Total current liabilities	805,474		578,958
Long-term debt	2,912,302		3,178,412
Operating lease liabilities, non-current	46,887		54,153
Licensed asset obligation, non-current	11,794		26,970
Other non-current liabilities	132,981		106,676
Total liabilities	3,909,438		3,945,169
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022	—		—
Class A and Class B Common Stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000 and Class B 200,000,000) shares authorized, 335,783,928 (Class A 264,621,306 and Class B 71,162,622) and 373,873,683 (Class A 302,711,061 and Class B 71,162,622) shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	11		11
Additional paid-in capital	2,174,658		3,155,748
Accumulated other comprehensive loss	(93,657)		(83,382)
Accumulated deficit	(985,222)		(1,169,700)
Total stockholders’ equity	1,095,790		1,902,677
Total liabilities and stockholders’ equity	$	5,005,228	$	5,847,846


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	864,256	$	713,099	$	2,329,826	$	2,114,751
Costs and expenses:
Cost of revenue	265,049		300,988		785,584		886,697
Sales and marketing	212,352		196,785		607,755		719,014
Research and development	159,288		122,059		441,563		389,417
General and administrative	41,249		44,000		116,231		144,988
Total costs and expenses	677,938		663,832		1,951,133		2,140,116
Income (loss) from operations	186,318		49,267		378,693		(25,365)
Other income (expense):
Interest expense and loss on settlement of debt	(78,583)		(48,627)		(204,081)		(117,141)
Interest income and other, net	1,490		969		27,062		3,501
Total other expense, net	(77,093)		(47,658)		(177,019)		(113,640)
Income (loss) before income taxes	109,225		1,609		201,674		(139,005)
Provision for (benefit from) income taxes	586		(22,053)		17,196		(25,570)
Net income (loss)	108,639		23,662		184,478		(113,435)
Less: Net loss attributable to noncontrolling interest	—		(109)		—		(201)
Net income (loss) attributable to AppLovin	$	108,639	$	23,771	$	184,478	$	(113,234)
Less: Net income attributable to participating securities	$	804	$	122	$	963	$	—
Net income (loss) attributable to AppLovin common stockholders:
Basic	$	107,835	$	23,649	$	183,515	$	(113,234)
Diluted	$	107,869	$	23,653	$	183,545	$	(113,234)
Net income (loss) per share attributable to AppLovin common stockholders:
Basic	$	0.32	$	0.06	$	0.51	$	(0.30)
Diluted	$	0.30	$	0.06	$	0.50	$	(0.30)
Weighted average common shares used to compute net income (loss) per share attributable to AppLovin common stockholders:
Basic	341,435,759		369,389,170		357,009,609		371,736,763
Diluted	356,906,222		378,462,207		368,259,513		371,736,763


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income (loss)	$	108,639	$	23,662	$	184,478	$	(113,435)
Other comprehensive loss:
Foreign currency translation adjustment, net of tax	(17,127)		(11,794)		(10,275)		(94,691)
Total other comprehensive loss, net of tax	(17,127)		(11,794)		(10,275)		(94,691)
Comprehensive income (loss) including noncontrolling interest	91,512		11,868		174,203		(208,126)
Less: Comprehensive loss attributable to noncontrolling interest	—		(109)		—		(201)
Comprehensive income (loss) attributable to AppLovin	$	91,512	$	11,977	$	174,203	$	(207,925)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Redeemable Noncontrolling Interest		Class A and Class B Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
			Shares	Par Value
Balance as of December 31, 2022	$	—	373,873,683	$	11	$	3,155,748	$	(83,382)	$	(1,169,700)	$	1,902,677
Stock issued in connection with equity awards	—		4,061,015	—		2,974		—		—		2,974
Shares withheld related to net share settlement	—		(1,281,849)	—		(19,167)		—		—		(19,167)
Repurchase of Class A common stock	—		(5,396,617)	—		(76,358)		—		—		(76,358)
Stock-based compensation	—		—	—		82,966		—		—		82,966
Total other comprehensive income, net of tax	—		—	—		—		10,006		—		10,006
Net loss	—		—	—		—		—		(4,518)		(4,518)
Balance as of March 31, 2023	$	—	371,256,232	$	11	$	3,146,163	$	(73,376)	$	(1,174,218)	$	1,898,580
Stock issued in connection with equity awards	—		4,053,303	—		3,677		—		—		3,677
Shares withheld related to net share settlement	—		(1,503,757)	—		(37,436)		—		—		(37,436)
Repurchase of Class A common stock	—		(25,483,835)	—		(503,448)		—		—		(503,448)
Issuance of Class A common stock under employee stock purchase plan	—		174,670	—		2,071		—		—		2,071
Stock-based compensation	—		—	—		76,753		—		—		76,753
Total other comprehensive loss, net of tax	—		—	—		—		(3,154)		—		(3,154)
Net income	—		—	—		—		—		80,357		80,357
Balance as of June 30, 2023	$	—	348,496,613	$	11	$	2,687,780	$	(76,530)	$	(1,093,861)	$	1,517,400
Stock issued in connection with equity awards	—		4,621,926	—		11,319		—		—		11,319
Shares withheld related to net share settlement	—		(1,549,778)	—		(59,243)		—		—		(59,243)
Repurchase of Class A common stock	—		(15,784,833)	—		(573,787)		—		—		(573,787)
Stock-based compensation	—		—	—		108,589		—		—		108,589
Total other comprehensive loss, net of tax	—		—	—		—		(17,127)		—		(17,127)
Net income	—		—	—		—		—		108,639		108,639
Balance as of September 30, 2023	$	—	335,783,928	$	11	$	2,174,658	$	(93,657)	$	(985,222)	$	1,095,790


	Nine Months Ended September 30,
	2023		2022
Operating Activities
Net income (loss)	$	184,478	$	(113,435)
Adjustments to reconcile net income (loss) to operating activities:
Amortization, depreciation and write-offs	369,897		445,507
Stock-based compensation	275,058		143,943
Change in operating right-of-use asset	11,732		13,725
Amortization of debt issuance costs and discount	9,663		9,685
Loss on settlement of debt	4,337		—
Other	(3,906)		2,133
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	(146,796)		(139,350)
Prepaid expenses and other current assets	28,695		(70,242)
Other assets	(58,179)		(4,616)
Accounts payable	7,955		(7,881)
Operating lease liabilities	(12,253)		(15,345)
Accrued and other liabilities	32,416		(2,645)
Deferred revenue	14,425		(11,905)
Net cash provided by operating activities	717,522		249,574
Investing Activities
Acquisitions, net of cash acquired	(51,816)		(1,335,698)
Purchase of non-marketable equity securities	(16,934)		(56,546)
Capitalized software development costs	(6,523)		(4,546)
Purchase of property and equipment	(4,002)		(621)
Proceeds from sale of assets	8,250		3,657
Net cash used in investing activities	(71,025)		(1,393,754)
Financing Activities
Repurchases of stock	(1,153,593)		(338,880)
Principal repayments of debt	(490,494)		(17,482)
Payment of withholding taxes related to net share settlement	(115,846)		—
Payments of licensed asset obligation	(15,254)		(17,374)
Principal payments on finance leases	(16,191)		(18,099)
Payments of deferred acquisition costs	(11,503)		(104,998)
Payment of debt issuance cost	(4,545)		—
Proceeds from issuance of debt	210,281		—
Proceeds from revolving credit facility	185,000		—
Proceeds from exercise of stock options	17,807		21,733
Proceeds from the issuance of common stock under the Employee Stock Purchase Plan	2,071		3,663
Net cash used in financing activities	(1,392,267)		(471,437)
Effect of foreign exchange rate on cash and cash equivalents	(2,223)		(11,379)
Net decrease in cash and cash equivalents	(747,993)		(1,626,996)
Cash, cash equivalents and restricted cash equivalents at beginning of the period	1,080,484		2,570,504
Cash and cash equivalents at end of the period	$	332,491	$	943,508


				As of September 30, 2023
	Balance Sheet Location	Total		Level 1		Level 2		Level 3
Financial Assets:
Money market deposit accounts	Cash and cash equivalents	$	1,332	$	1,332	$	—	$	—
Interest rate swap	Prepaid expenses and other current assets	$	1,606	$	—	$	1,606	$	—
Total financial assets		$	2,938	$	1,332	$	1,606	$	—


				As of December 31, 2022
	Balance Sheet Location	Total		Level 1		Level 2		Level 3
Financial Assets:
Money market funds(1)	Cash and cash equivalents	$	604,399	$	604,399	$	—	$	—
Interest rate swaps	Prepaid expenses and other current assets	$	7,319	$	—	$	7,319	$	—
Total financial assets		$	611,718	$	604,399	$	7,319	$	—


Intangible assets
Advertiser Relationships—estimated useful life of 9 years	$	212,700
Publisher Relationships—estimated useful life of 9 years	123,300
Developed Technology—estimated useful life of 5 years	61,800
Tradename—estimated useful life of 3 months	60
Goodwill	632,472
Total purchase consideration	$	1,030,332


Cash and cash equivalents	$	400
Accounts receivable and other current assets	15,194
Intangible assets	—
Customer Relationships—estimated useful life of 15 years	41,000
Developed Technology—estimated useful life of 6 years	60,500
Tradename—estimated useful life of 10 years	14,700
Goodwill	264,149
Property and equipment, net	363
Other assets	159
Accounts payable, accrued liabilities and other current liabilities	(12,854)
Deferred revenue	(209)
Deferred income tax liability	(5,235)
Total purchase consideration	$	378,167


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Revenue	$	713,099	$	2,123,783
Net income (loss)	$	23,662	$	(104,775)


	Software Platform		Apps		Total
December 31, 2022	$	1,478,014	$	345,741	$	1,823,755

Foreign currency translation	(10,188)		—		(10,188)
September 30, 2023	$	1,467,826	$	345,741	$	1,813,567


(Mark One)


	Weighted- Average Remaining Useful Life (Years)	As of September 30, 2023						As of December 31, 2022
		Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value


Long-lived intangible assets:
Apps	3.9	$	1,830,329	$	(1,083,524)	$	746,805	$	1,790,820	$	(836,375)	$	954,445
Customer relationships	8.5	513,182		(97,174)		416,008		515,084		(58,881)		456,203
User base	2.5	68,817		(44,436)		24,381		68,817		(37,122)		31,695
License asset	2.3	59,207		(27,478)		31,729		59,207		(16,901)		42,306
Developed technology	3.9	205,205		(79,038)		126,167		206,060		(53,879)		152,181
Other	4.5	60,100		(18,599)		41,501		53,933		(13,103)		40,830
Total long-lived intangible assets		2,736,840		(1,350,249)		1,386,591		2,693,921		(1,016,261)		1,677,660
Short-lived intangible assets:
Apps	0.3	47,640		(47,480)		160		45,791		(44,838)		953
Total intangible assets		$	2,784,480	$	(1,397,729)	$	1,386,751	$	2,739,712	$	(1,061,099)	$	1,678,613


		PSUs Eligible to Vest
Company Stock Price Target		Adam Foroughi	Vasily Shikin	Additional Participants (in aggregate)
$	36.00	1,380,400	1,380,400	690,200
$	46.75	1,380,400	1,380,400	690,200
$	57.50	1,380,400	1,380,400	690,200
$	68.25	1,380,400	1,380,400	690,200
$	79.00	1,380,400	1,380,400	690,200
		6,902,000	6,902,000	3,451,000


	As of September 30,
	2023	2022
Stock options exercised for promissory notes	1,399,999	1,399,999
Early exercised stock options	5,736	191,748
Stock options	613,968	12,168,796
Unvested RSUs	4,747,127	9,318,132
ESPP	—	413,829
Total antidilutive potential common shares	6,766,830	23,492,504


	Three Months Ended September 30,				2022 to 2023 % change		Nine Months Ended September 30,				2022 to 2023 % change
	2023		2022				2023		2022
	(in thousands, except percentages)
Software Platform Revenue	$	504,452	$	306,592	65	%	$	1,265,273	$	742,972	70	%
In-App Purchases Revenue	247,309		272,437		(9)	%	732,262		915,177		(20)	%
In-App Advertising Revenue	112,495		134,070		(16)	%	332,291		456,602		(27)	%
Total Apps Revenue	359,804		406,507		(11)	%	1,064,553		1,371,779		(22)	%
Total Revenue	$	864,256	$	713,099	21	%	$	2,329,826	$	2,114,751	10	%


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
	(in thousands)			(in thousands)	(in millions)
July 1 - 31	785	$	26.80	785	$	107
August 1 - 31	15,000	$	36.85	15,000	$	2
September 1 - 30	—	$	—	—	$	2
Total	15,785			15,785


	APPLOVIN CORPORATION

Date: November 8, 2023	By:	/s/ Adam Foroughi
		Chief Executive Officer
		(Principal Executive Officer)



Date: November 8, 2023	By:	/s/ Herald Chen
		Chief Financial Officer
		(Principal Financial Officer)



Date: November 8, 2023	By:	/s/ Herald Chen
		Herald Chen
		Chief Financial Officer (Principal Financial Officer)


Date: November 8, 2023	By:	/s/ Adam Foroughi
	Name:	Adam Foroughi
	Title:	Chief Executive Officer
		(Principal Executive Officer)