AppLovin Corporation 2021 Form 10-K Summary
Business context and reporting period
AppLovin operates a mobile-app marketing and monetization platform comprising AppDiscovery, Adjust and MAX, supported by AXON machine learning, the App Graph and cloud infrastructure. It also operates a portfolio of more than 350 free-to-play mobile games through 19 owned and partner studios.
This filing covers the fiscal year ended December 31, 2021, with comparative 2019 and 2020 results. The filing does not provide a clear standalone fourth-quarter 2021 income statement or cash-flow presentation; quarterly metrics are provided where noted.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $2.793 billion | $1.451 billion | +92% |
| Business revenue | $1.335 billion | $711.2 million | +88% |
| Consumer revenue | $1.459 billion | $739.9 million | +97% |
| Income from operations | $150.0 million | $(62.0) million | Returned to operating profit |
| Net income | $35.3 million | $(125.9) million | Returned to profitability |
| Diluted EPS | $0.09 | $(0.58) | Improved |
| Adjusted EBITDA | $726.8 million | $345.5 million | +110% |
| Adjusted EBITDA margin | 26.0% | 23.8% | +2.2 percentage points |
| Net income margin | 1.3% | (8.7)% | Improved |
| Cash flow from operations | $361.9 million | $222.9 million | +62% |
Revenue mix in 2021 was approximately 48% Business Revenue and 52% Consumer Revenue. Software Platform revenue increased 225% to $674.0 million, Apps advertising revenue increased 31% to $660.6 million, and Consumer Revenue increased 97% to $1.459 billion.
Cost of revenue was $988.1 million, or 35% of revenue, compared with 38% in 2020. Sales and marketing was $1.130 billion, or 40% of revenue, including $983.7 million of advertising and user-acquisition costs. Research and development was $366.4 million, or 13% of revenue, and general and administrative expense was $158.7 million, or 6% of revenue.
At December 31, 2021, cash and cash equivalents were $1.521 billion, with an additional $1.050 billion of restricted cash related to the MoPub acquisition escrow. Total assets were $6.164 billion and stockholders’ equity was $2.138 billion.
Outstanding debt principal was approximately $3.272 billion, comprising senior secured term loans. Net debt carrying value, after unamortized debt discounts and issuance costs, was approximately $3.228 billion. The debt is secured, primarily bears variable interest rates, and has maturities extending through 2028.
Material changes versus the prior comparable period
- Revenue nearly doubled, driven by stronger AppDiscovery performance, the Adjust acquisition, increased advertising impressions, higher in-app purchase volume and portfolio expansion.
- AppDiscovery installations increased 62% and price per installation increased 81% year over year. Apps advertising impressions increased 44%, while price per impression declined 9%.
- Monthly Active Payers increased from 1.5 million to 3.0 million, while average revenue per monthly active payer increased from $41 to $43.
- Enterprise Clients increased from 172 to 407, and Software Platform Enterprise Clients increased from 158 to 461. Reported net dollar-based retention was 176% for Enterprise Clients and 204% for Software Platform Enterprise Clients under the filing’s respective definitions.
- Operating leverage improved despite substantial investment: sales and marketing declined to 40% of revenue from 43%, and cost of revenue declined to 35% from 38%.
- Stock-based compensation increased to $133.2 million from $62.4 million, while acquired-intangible amortization increased to $396.4 million from $239.9 million.
- AppLovin completed its April 2021 IPO, receiving net proceeds of approximately $1.75 billion, and used $400 million to repay its revolving credit facility.
- Investing cash outflows increased to $1.215 billion, including $1.206 billion for acquisitions. Financing cash inflows were $3.110 billion, including IPO and debt proceeds.
Guidance, outlook, commentary and unusual items
Management did not provide specific 2022 revenue or earnings guidance in the provided filing. Management expects continued investment in AXON, AppDiscovery, Adjust, MAX, new Apps, international expansion and strategic acquisitions. Longer-term objectives include expansion beyond mobile gaming into other app categories and geographies.
- MoPub was acquired from Twitter in January 2022 for approximately $1.0 billion. Management expected approximately $200 million of publisher migration fees to support migration to MAX.
- AppLovin agreed in February 2022 to acquire Wurl, a connected-TV software platform, for approximately $430 million in cash and Class A stock. The transaction was expected to close in the first half of 2022 and included a potential performance-based equity incentive of up to $600 million through 2025.
- The board authorized a $750 million Class A share-repurchase program in February 2022. As of March 11, 2022, the company had repurchased 893,556 shares for $43.7 million.
- AppLovin committed in March 2022 to invest up to approximately $47.5 million in a China-based private-equity fund; no capital had been funded as of the financial-statement issuance date.
- Apple’s App Tracking Transparency and IDFA changes had not materially affected overall results through year-end, but management warned that future effects could reduce advertising targeting, measurement and monetization effectiveness.
- COVID-19 and the Russia-Ukraine conflict had not materially affected reported results as of issuance, but management identified potential effects on demand, collections, operations, partners and the broader economy.
- Unusual 2021 items included $16.9 million of debt-extinguishment loss, $133.2 million of stock-based compensation, $431.1 million of amortization, depreciation and write-offs, and substantial acquisition-related amortization.
Principal risks and contingencies
- High leverage: approximately $3.27 billion of debt, variable-rate exposure, secured collateral, restrictive covenants and significant scheduled maturities, including approximately $1.736 billion due in 2025.
- Revenue concentration: three games—Project Makeover, Matchington Mansion and Wordscapes—represented approximately 29% of 2021 revenue; a substantial portion of revenue also depends on Apple, Google and other distribution platforms.
- Dependence on volatile advertising demand, user acquisition economics, in-app purchases, user engagement and the success of new or acquired Apps.
- Privacy, data-protection, advertising-tracking and protection-of-minors regulation, including GDPR, CCPA, CPRA, COPPA, Brazil’s LGPD and China’s PIPL.
- Cybersecurity, data breaches, service outages, fraud, cheating programs and misuse of user data.
- Integration and execution risks relating to Adjust, MoPub, Wurl and the company’s broader acquisition strategy, including goodwill and intangible-asset impairment risk.
- Potential effects from competition, macroeconomic weakness, COVID-19, geopolitical conflict, sanctions, foreign exchange, tax disputes and the phaseout of LIBOR.
- Contingent consideration and earn-out obligations related to acquired Apps and studios are not fully included in the contractual-obligations table and may depend on future revenue or EBITDA performance.
- As a controlled company, the Voting Agreement Parties held approximately 84% of voting power as of December 31, 2021, limiting unaffiliated stockholders’ influence.
- The company reported no legal proceedings that management believed would have a material adverse effect, but noted that litigation and regulatory outcomes remain uncertain.
Investor verification checklist
- Verify the latest post-2021 results for MoPub integration, MAX migration costs, Wurl closing and performance, and the share-repurchase program.
- Reconcile GAAP net income and cash flow with Adjusted EBITDA, including the substantial effects of stock-based compensation, amortization and acquisition-related items.
- Review debt maturities, interest-rate exposure, covenant compliance and refinancing requirements, particularly the 2025 maturities.
- Assess concentration in the three leading games, major platforms and Enterprise Clients, and monitor changes in user-acquisition costs and advertising pricing.
- Evaluate goodwill and acquired-intangible carrying values against actual user engagement, revenue and cash-flow performance.
- Review evolving privacy, tracking, tax, antitrust and gaming-content regulations and their potential effect on targeting, monetization and operating costs.
- Confirm the effect of the multi-class structure, Voting Agreement and controlled-company exemptions on governance and minority-stockholder rights.