UPDATE: Applovin Targets $30B Valuation At IPO

? Initial Public Offering

• California-based mobile gaming, tech, and analytics company AppLovin has announced its aims for valuation exceeding $30B at IPO
• The company intended to raise up to $2.13B through the sale of 25m shares, prices ranging from $75 to $85 per share. AppLovin’s stock will be listed on the Nasdaq under the ticker symbol “APP”
• AppLovin will allocate Class A (1 vote per share) common stock to the general public, while its CEO, CFO, and KKR Denali Holdings will retain all Class B (20 votes per share) common stock, giving them a combined voting power of more than 50%
• According to Reuters, Morgan Stanley is hired to manage the IPO. Morgan Stanley, J.P. Morgan, KKR, BofA Securities, and Citigroup are the offering’s lead underwriters

? Financial Performance

• In 2020, AppLovin reported $1.45B Revenue and $407.5m adj. EBITDA with 28% EBITDA margin. The company’s AppLovin’s Revenue CAGR 2016-2020 is 76%, with gaming-related activities and M&As driving the majority of the increase
• Despite a net loss of $126m in 2020, AppLovin is a cash-flow positive company (+$223m). Depreciation, amortization, and write-offs of newly purchased properties account for the majority of the gap
• AppLovin does not plan to reach profitability in the near future. The company intends to increase operating expenses by investing in infrastructure, purchasing properties, expanding its software business, and releasing new applications

? Buy and Build strategy

• Since 2018, AppLovin has invested more than $1.1B in 15 strategic agreements and acquisitions, with an emphasis on gaming studios. Currently, the company operates 12 studios, both owned and partner-owned
• AppLovin has acquired apps in 2018 and 2019 that boosted their quarterly sales by an average of over 100%, resulting in accretive deals. Given that cash used for M&As increased from $70m in 2018 to $670m or more in 2020, and given that M&As were a key growth factor, strategic acquisitions will continue to be a component of the company’s inorganic growth strategy

? Business Overview

• AppLovin categorizes its sales into two distinct revenue streams: business revenue and consumer revenue
  • Business revenue (49% of total) is generated by fees charged by mobile app marketers and others who use AppLovin’s software to monetize their mobile applications. 71% of business revenue comes from mobile gaming apps
  • Consumer revenue (51%) is generated through in-app purchases in mobile gaming applications
• Although the company prefers to position itself as a technology-focused mobile analytics company, AppLovin’s financials indicate that the company is predominantly gaming, with mobile games accounting for 85.8% of sales
• Furthermore, consumer sales grew 13.7 times in the last three years, outpacing business revenue, indicating that AppLovin’s focus would continue to move toward gaming with each passing year

? Acquisitions And Investments

• In February 2021, AppLovin agreed to acquire Adjust, a Berlin-based mobile app delivery and analytics firm, for approximately $1B
• In May 2020, the company acquired Machine Zone, a mobile game developer based in Palo Alto, for an aggregate purchase price of $328.6m
• The company acquired Redemption Games, a San Diego-based mobile game developer best known for the top-grossing puzzle game Sweet Escapes, in April 2020
• AppLovin acquired Geewa, a casual mobile game developer and publisher based in Prague, in January 2020 for approximately $25.5m

? Product

• Initially, AppLovin was primarily based on mobile marketing analytics, offering data and insights into game developers’ success in order to help them monetize more efficiently. Applovin’s ad network, mobile ad mediation, and UA networks concentrate on the delivery and monetization of apps, with a special focus on mobile games
• The marketing analytics portfolio of AppLovin includes:
  
  • AppLovin’s core technology infrastructure that collects, stores, and manages marketing data, which is used to power the company’s applications and apps
  • AppLovin software includes AppDiscovery, MAX, and Compass marketing tools for developers
• The company began its active expansion into game development in 2018. The company currently has 12 internal studios with over 200 free-to-play mobile games that bring in about 32m DAU

Sources: REUTERS