First impressions of AppLovin’s IPO filing

AppLovin released its S-1 filing yesterday, taking the Palo Alto-based mobile-app-centric software company one-step further into the public market. The business results detailed in the document are generally impressive. While some companies that have gone public in recent months have taken detailed epidemiological-fueled growth toward the hotspots or membership rather than individual results, AppLovin’s filing tells the story of a fast-growing company that has been able to achieve consolidated profits as it grows.

Now, with annual revenues of over $1 billion, AppLovin is a very large company, which means its IPO will be widely viewed. Therefore, this morning we are rifling through its IPO filing and wanting to know what is important about adding another name to our IPO lists. The exchange has a long list of non-IPO issues that we want to get. If everyone can stop going public for a few days, we want to write something different! Okay, let us get into it!

Most of the news is good

As a brief introduction, the company’s products designed to help developers search users and monetize their applications. Approving’s mobile app has its own internal suite, which its S-1 says “a worldwide diverse portfolio of more than 200 free-to-play mobile games powered by 12 studios.” These apps have 32 million active daily worldwide. Regardless of whether it is a very nice company to dig into if you are in mobile applications at all, the number we care about today is the number. So let us talk about growth, quality of income, profit, cash spending and capital structure. While there is some downside to Approving’s capital structure, most of the news is good.

Recall that KKR bought a portion of AppLovin in mid-2018, valued at about $2 billion. The figure appears to be lower, with the company earning $483.4 million in revenue this year, a figure that nearly doubled in 2019 to $994.1 million. Growth in terms of percentage has slowed in 2020.

When AppLovin made a total revenue of $1.45 billion although the company managed a similar growth terms of gross-dollar. In terms of percentage AppLovin increased by 106% from 2018 to 2019 and KKR from 2019 to 46% by 2020. The company growing well, but is AppLovin raising high-quality earnings? Yes, but to understand these we need to spread some narrowness. AppLovin’s revenue spending has steadily increased as a percentage of revenue from 2018 to 2020 as the company leans towards annual results.

In fact, the numbers have gone from 11% in 2018 to 24% in 2019 and 38% in 2020. That is a surprising progress and it is not that bad. About $1 million in share-based compensation and $228.3 million in “acquisition-related immobilization costs” were included in the 2020 revenue expenditure. If we exclude the item from the cost-earnings line, AppLovin’s total margin for 2020 has increased from 62% to 77.5%. It is much better.