AppLovin Corporation (NASDAQ:APP) Q3 2023 Earnings Call Transcript

Herald Chen: Yes, we see both sides of the business growing. As we mentioned, we’ve had the first quarter of growth, quarter-over-quarter growth in the app since we started our portfolio optimization program. But clearly, the vast majority of growth will remain in the software side as well as translation if we were able to grow that business translation to EBITDA. EBITDA as we mentioned, there’s some onetime items in the third quarter that will come out in the fourth quarter. And then the fourth quarter, we are considering some additional investments on the growth side, both on the software and app side.

Clark Lampen: And I’ll step away really quick in just a second, but any uplift that you guys were seeing from sort of non-gaming customers this quarter also? Or was this mostly your sort of core game developers base that was driving most of the improvement we’re seeing?

Adam Foroughi: No, what we’re seeing success at cost, both gaming and non-gaming. Obviously, gaming is a much bigger part of our business. Non-gaming is growing faster because the number that is starting out is materially smaller. It will take a sales effort to substantially grow non-gaming so that it can become a much more material part of the business, but the technology works very effectively regardless of the type of app on dealers.

Operator: [Indiscernible] with Wolfe has the next question.

Unidentified Analyst: Just very briefly a high-level question. How far ahead is AXON 2’s advantage versus competitors? How long does this persist before competitors maybe catch up? And following up on that, how should we think about the pace of new releases? What that kind of becomes for you guys? And when should we expect like an AXON 3? How much the new requirements and changes in privacy in the ad market drive that new release desire versus, say, competitors improving their competitive positioning against you?

Adam Foroughi: So there’s a bunch of questions in there. Look, these technologies are super complicated. We think ours is cutting edge and one of the leading AI solutions in the market across any of the AI implementations we’ve seen. We have very large deployment of software and hardware to power it, and we’ve got a material amount of data. These systems themselves, they said, are self-learning. And we’re continuing to evolve what we have on an ongoing basis on a regular basis. So this isn’t something where we look at competition catching up. We look at — we’ve set a new standard, and we’re going to go build on that and that hopefully will lead to many quarters of growth coming up. the privacy question that leading to AXON 3 year changes in the platform.

Look, we’ve dealt with privacy changes probably since 2014. Every time there’s a change on platform or with regulators, you’ve changed something in your stock, but we’re a nimble company, we’ve rewritten our core technology multiple times over the years, and we are always able to adapt and perform in the face of any of those kinds of changes. And as far as AXON 3 goes, we signaled AXON 2 to you all a year ago. We’ve obviously executed really well on putting it together. We’re not talking about AXON 3. We’re talking about a lot of excitement about multiple quarters of growth coming up from what we put together here.

Operator: And we will now hear from Franco Granda with D.A. Davidson.

Franco Granda: I had a question around the investments on CTV and OEM. Obviously, last year, you put those investments in cost then on Essentials and these were some areas that suffered. But now that you’re planning on implementing AXON into those categories, can you comment on perhaps the magnitude of this investment and how we should think about those moving forward?