AppLovin Files For IPO

? Initial Public Offering

• California-based mobile gaming, tech, and analytics company AppLovin has filed for IPO on NASDAQ under the “APP” ticker. The company has not disclosed either the sum it’s planning to raise or its valuation

• AppLovin offers Class A (1 vote per share) of common stock to the market, while all Class B (20 votes per share) will be held by Adam Foroughi, Herald Chen, and KKR Denali Holdings. As a result, Class B Stockholders will control more than 50% of the voting power

? Financial Performance

• During the last three years, AppLovin has shown a rapid increase in revenue, which seems not to be that influenced by the lockdown.

• For 2020, AppLovin reported revenue of $1.45B (46% increase compared to 2019) and Adjusted EBITDA of $407.5m ($35% increase) with EBITDA margin of 28.1% (2.2% decrease). Overall, the company has demonstrated 76% CAGR from 2016 to 2020 years

• Despite such impressive growth, AppLovin is now far from profitability because of high operating expenses. The company demonstrated a net loss in two out of three reported years: net loss of $125.9m in 2020, net income of 119m in 2019, and a net loss of $260m in 2018

• AppLovin doesn’t expect to reach profitability in the nearest future. The company plans to continue to rise operational expenses, investing in technology, acquiring assets, expanding software business, and launching new apps

? Business Overview

• AppLovin divides its revenue into two major categories: Business revenue and Сonsumer revenue:

  • Business revenue (49% of total) is generated from fees paid by mobile app advertisers and those who use AppLovin’s software to monetize their mobile apps. What is worth noting, 71% of Business revenue relates to revenue from mobile gaming apps

  • Consumer revenue (51%) is generated by in-app purchases made in mobile gaming apps

• Though the company prefers to position itself as a mobile analytics company focused on tech, its financials show that AppLovin — is mostly a gaming business with 85.8% of revenue generated by mobile games

• Moreover, Consumer revenue saw 13.7x growth during the last three years, outgrowing business revenue, which means we can expect AppLovin to shift further towards gaming with each year.

? Acquisitions And Investments

• AppLovin reports $1B investment into 15 acquisitions and partnerships since 2018

• In February 2021, AppLovin entered into an agreement to acquire Berlin-based mobile app distribution and analytics company Adjust for around $1B

• In May 2020, the Company acquired Palo-Alto-based mobile game developer Machine Zone for an aggregate price of $328.6m

• In April 2020, the Company acquired Redemption Games, San-Diego-based mobile game developer under the top-grossing puzzle game, Sweet Escapes

• In January 2020, AppLovin acquired Prague-based casual mobile game developer and publisher Geewa for about $25.5m

? AppLovin’s Latest IP Acquisitions

• In November 2020, the Company acquired several mobile game Apps from UK-based mobile game developer Athena for a total consideration of $170.7m

• In June 2020, AppLovin acquired certain IP’s from Singapore-based, Cooking Joy maker, Zenlife for a total consideration of $173.3m, including an upfront payment of $160m and earn-outs

• In March and April 2020, AppLovin completed two IP acquisition from separate mobile game developers for a total upfront cash consideration of $35m and future earn-outs

• During 2020, AppLovin acquired undisclosed mobile game IP assets for a total cash consideration of $46.4m

? Product

• Initially, AppLovin focused solely on mobile marketing analytics, providing game developers with data and insights on their performance, to help them monetize more efficiently. Like ironSource, Applovin focuses on the distribution and monetization of apps with a particular focus on mobile games via its ad network, mobile ad mediation, and UA platforms.

• AppLovin’s marketing analytics portfolio consists of:

  • AppLovin core technology infrastructure, which collects, stores and manages marketing data, powering software and apps of the company.

  • AppLovin software: marketing tools for developers, including AppDiscovery, MAX and Compass solutions

• In 2018, the company started its active expansion into game development. Currently, the company has 12 internal studios with over 200 free-to-play mobile games which bring around 32m DAU.

• Some of AppLovin’s gaming subsidiaries are:

  • Machine Zone (Game of War: Fire Age, Mobile Strike)

  • Geewa (Smashing Four, Smash rivals)

  • Redemption Games (Sweet Escapes)

  • PeopleFun (Wordscapes, Wordscapes Search)

  • ClipWire (Bingo Story, Solitaire Buddies)