Q2 2022 Applovin Corp Earnings Call
Average price was $38 per share.
Before we open it up for Q&A I want to turn it back to Adam to address the unique partnership proposal. We made this week to the Unity Board.
Thanks Harold.
We will be happy to answer as much as we can on the call, but I wanted to address some of the key points now.
First why now.
Over the last decade, we've been an innovative company focused on building marketing and monetization solutions for App developers at.
At the same time, we've always had a lot of admiration for what unity is built with their create and operate businesses.
Our goal is to have always been very similar helping grow the app economy by giving tools to creators to help them turn their ideas into growing businesses.
In the past internally, we've discussed the strategic rationale to bring the two companies together, but at the time it didn't make sense for a few reasons.
Up until a couple of years ago, Our AD Tech business was very similar to unity operate we were both successful and growing on networks, but in the last two years, we launched our machine learning engine, axon, which powers, our AD network and helped us grow by over 500%.
We integrated <unk> hub into Max, creating the best and App monetization platform for developers.
And we added adjust giving us one of the leading mobile attribution analytics companies.
In particular because of the strength of axon, we now see a path to unlocking very meaningful synergies by bringing the two companies together when you entity announced their iron source deal. We started analyzing these synergies and we were excited by the possibilities as they should be over $700 million in just three years.
We also were ensure the unity would be open to improving their technologies through a merger.
Their iron source bid made it clear that they now see the potential of a full stack solution and given the synergies we assess we felt it necessary to put a thoughtful proposal out there of what our combined companies would look like.
To be clear, we are confident in our standalone prospects. However, the combined business offers additional scale data and reach which if constructed correctly would be accretive to the market and to all of our shareholders.
So how did we arrive at over $700 million of synergies.
Simple, it's based on the numbers and gains we see from our marketing and monetization solutions.
In Q1, 2021, our first full quarter with Exxon our software revenue was $88 million.
At the time unity operate reported a $146 million revenue.
This past quarter, our software business reported $318 million of revenue compared to unity operate reported a $158 million.
The fast growth of our software business allows us to apply the trend and get us really excited about what we could unlock together.
Axon is extremely good at predicting which apps users will engage with next.
Can always be improved.
We have two paths to this continued improvement.
One as we've touched on our code improvements to lower error rates in our predictions.
Another and just as important as more access to data, which strengthens our algorithms.
With the reach of unity create combined with the reach of our marketing and monetization solutions. The datasets of the two companies would be even more compelling.
That incremental data should give us the potential to drive material lift in our combined businesses.
In 2023 separately, our software business plus <unk> operated business would be projected to be over $2 5 billion in revenue.
We believe just next year, the incremental data flowing into axon would create material gains and it only takes 20% improvement to the accuracy of our algorithms to generate $500 million more revenue with nearly 100% flow through.
And what does this mean for the industry as a whole.
This $500 million as net revenue. So if you gross it up to what advertisers would spend in round you would get $2 billion extra a performance spending in the combined platform just from synergies.
Now remember we size the advertising market in mobile games for you at 25 billion and our prior shareholder letter so the synergies alone would unlock.
8% growth in the whole market.
This will be a catalyst for growth in our market for years to come.
Why did we make the proposal we did.
Our proposal was constructed to best position the combined company to drive strong returns for App 11 immunity shareholders.
We know that unity board would need to find our proposal superior to their current option on the table and we believe we've done just that.
While iron source is a great business. The scale we operate at is just much greater.
We believe our proposal offers both superior terms and a stronger partner and technology scale cash flow and strategic position.
Importantly, we have axon proven to be super impactful and the efficiencies that could unlock higher amounts.
From a cash flow standpoint, our business alone will generate over $1 billion of EBITDA. This year, whereas their current combined plan contemplates reaching that in 2025.
From a pure price standpoint, our proposal is at one <unk> the EBITDA multiple versus their existing deal.
We strongly believe this is also good for <unk> shareholders. We're very confident we can quickly unlock synergies and the longer term strategic strength of the business would be very compelling, creating the unquestionable leader and a growth category and a software business with strong growth in cash flow prospects for as long as people.
We will use mobile devices.
This would benefit shareholders on both sides, making ownership in the joint company really valuable.
Now importantly, our personal decision around why I'm willing to take a back seat on the CEO role.
My motivations at every step of our business where to build a bigger platform and truly innovate.
I've never been motivated by power equity or needing to be the face of an organization.
I have been committed long term to what we've built here because this is my life's work and I'm incredibly proud of everyone I work with here, who continue to contribute to building great things.
This combined company could potentially become a $100 billion enterprise and that gets me really excited.
John <unk> is a strong leader and CEO for unity, we've known each other for years and I believe that together with our combined teams there is a huge opportunity to capitalize on.
Hello means many things, but in this case integration will be a key to unlocking the revenue and efficiency gains we would be asking our shareholders to believe them.
Over to you all to spend my time, ensuring success there.
So what's next.
We are not going to speculate on the outcome of our proposal, but we feel strongly that we have put forth and offer the unit is for its shareholders and our App 11 shareholders should find compelling and be as excited about as we are.
In the meantime, our team remains focused on the three strategic priorities, we outlined in our shareholder letter and we feel very strongly about our ability to continue to grow our business, whether we're successful on this proposal or not.
We continue to see exceptional opportunities driven by improvements in our software platform and we are optimizing our business to improve our margin and our cash generation potential.
We've been gold since we went public but really we've involved since we started this company.
I have the passion and drive to lead an exceptional team to building a $100 billion company and we will do that here with or without this deal, but we're definitely excited that this merger getting started both of our path to that goal.
Now happy to take your questions.
<unk>.
We'd be happy to take your questions. We will go up right up until the hour and get as many as we can.
If you want to ask a question. Please do use the raise hand function on your zim client down bottom.
And then b share too.
Yes, Youre device before asking your question. So we'll pause for a second just to compile the roster.
Okay.
It looks like we have seen rates and so on.
First we will take our first question from Clarke Lampkin at BT hygiene.
Okay.
Thanks, guys can you hear me.
Ed.
Hi.
Okay perfect. Thanks, guys, Hey, Adam I guess, just for starters I wanted to unpack some of the things that you were talking about with sort of two key variances with software.
The demand I guess migration the cut in the take rate any way you could quantify maybe how much of a headwind that was.
For the quarter I think if I heard right. It was down 3% is it could you give us a baseline maybe for for the first quarter and then I guess as we step back maybe from the unity deal you talked about being open to exploring other avenues of growth or sort of scaling the business maybe towards that $100 billion long term target.
Do you think about I guess sort of avenues outside of the AD space similar to this deal or could you elaborate I guess just on <unk>.
Big picture strategic priorities.
Thanks, a lot thanks.
I'm going to reverse the answers second one strategic opportunities in the future to expand our Tam and and really our market potential that really aligns with the new initiatives that we've talked about in the past.
We're excited about our current market and our leadership position in it.
You expand to the scale that we aspire to get to we've got to both expand our reach and the monetization potential for the developers that we have great relationships with one of those new initiatives CTV expands reach its all about tapping into new audience on our fast growing platform and we're now live with the product there. It's just really early stage.
But as I touched on in the script, we're seeing positive results already and then we're also talking about.
We released an announcement around a rate array is now a marketing platform for carriers and Oems to give them a lifecycle native marketing solution to take to give them the.
Capacity to deliver a better advertising so that our customers we were sharing revenue with those carriers and Oems and we think that can create a big expansion of reach as well.
And then we talked about in the past and Ftes, we're still working on <unk> blockchain as a new initiative and really the idea there is to get into payments.
To allow our developers to create the transfer of ownership of a digital good to their customers and that transfer of ownership to be a transaction that would flow through our payment mechanism our own blockchain. If we can execute on these new initiatives, we will be executing and expanding the tam and giving ourselves a runway for many many years of growth.
Now that said, we have a lot of confidence in our current business for multiple quarters. Now we've had a lot of sequential growth in that business and that came from Exxon the efficiencies, we unlocked by improving our technology made our ability to drive better results for advertisers that has carried forward the more <unk>.
Improvements, we make on oxon going forward the bigger we're going to be able to expand the dollars of flow through our platform and the bigger we will be able to create an influence on Tam expansion in the market that we're in today that creates upside in this business and the core opportunity we have going forward as well.
Oh I think Clark you. Other question was around MAU pub Dst's.
We did bring them <unk>, we're in the process of transitioning <unk> over to Alex.
At the moment and that's an ongoing process again. This the mobile Q1 focus was around publisher migration because that part of the platform was shutting down Q2, and ongoing will be around getting dsp's onto our platform and ramped we did make a short term decision to cut take rate as I touched on by buying a little bit under half.
In Belgium by two reasons, one we want the DSP to be successful and ramp on our platform, but more importantly, we want to flow more dollars through to our publishers at a time, when frankly, because brand dollars or less in the economy and lessen the ecosystem publisher yield has gone down. So we wanted to offset that by reinvesting back into our owned Max.
We don't talk about the scale of.
The DSP business really but you can back into it in a way by understanding the short term impact with what we sized <unk> originally.
$100 million business does now transitional coming over will then be be let's call. It.
In a migration period down a little bit and then have that and then divide by four to get to a quarterly impact so call. It call it somewhere in the neighborhood of $20 million.
Okay.
Part of the question, we'll go next to Matt cost with Morgan Stanley Go ahead, Matt.
Great. Thanks for taking the question, maybe I'll piggyback on <unk> question about the.
Nope up north of in migration, but just wanted to understand so that the publisher bonuses and please correct me if I'm wrong about this the publisher bonuses last quarter, where to get people to transition onto the combined Maximo pub.
Platform that the publishers that have inventory for sale to now you're working to get DSP that were previously bidding in that inventory to more Mac I guess, if that's correct what is holding them back from transitioning I mean, if they were already bidding instead inventory.
What are they looking for in order to move over to the new platform and have you noticed or observed that cutting the take rate has been enough to get them to start through that product and then I ask one follow up yeah. Good question is that so look the publisher bonuses, what the publishers, we don't yield dollars off the publishers, but once we get the supply.
That creates strength of platform, that's given us the largest reach of mobile for that Max audience platform and then and then the Bsp's will follow and so we do have over 90% migrated now but these DSP is one have to go through the technical effort of reconnecting the pipes to a new exchange most hub over to Max secondary.
Really their models have to learn on new inventory data, let's call. It over the last 10 years. Most of these dst's, we're plugged into mobile five plus years. So they have tons of learning on the Mojave exchange now has support over until the Max exchange for them to get their spend through the platform to increase the levels of was that well.
On that way cause Max is a bigger platform, but we paired that with just cutting the take rates. So that's just a short term cut to the potential revenue, we're not bound to give the dollars that we're pushing to publishers from the BSP is at the level that we decided to put it out but our goal with Max is to ensure that publishers have a consistent.
And strong business and as we're looking at the macro trends that we're seeing brand cpm's through the Max platform advocate, indicating the entire digital landscape and with that publisher yield has gone down. So we felt like it was our responsibility to flow more dollars due to the publisher, which helps them maintain a good standard of base.
<unk> and their business and then as the economy improves and dollars slow back into the ecosystem, we can make whatever adjustments we need to on the economics of these different revenue streams in our business.
Great. Thank you and then just on the guidance for the software platform is there a market growth assumption underlying that and has that changed or how has that changed year to date.
Obviously, you're operating in a tougher overall environment. It was we said we do control, mostly our own destiny through our own technology, we're able to improve our axon engine, which has driven obviously extraordinary growth over the past year and actually now a few years. We think that's the key driver so with the summer months are slower third quarter will be.
Probably similar to the second quarter, but we do see acceleration in the fourth quarter due to seasonality, but more importantly, due to our own efforts on our technology platforms.
Great. Thanks.
Okay.
Okay, great. Thanks, Thanks, Matt for the question.
We'll go next to Martin Yang at Oppenheimer.
Please make sure you're on your device versus Martin.
Hi, good afternoon, and thank you for taking my question.
Adam can you address.
Sure strategic rationale for the entities create side of the business if you're in a row of the C. O. How would you think about creates synergy with the rest of the business with Apple ovens, and it's longer and longer term future.
Thanks, Martin and obviously they were really early stages here, we made a proposal.
We'll be waiting for a response and so we're not too deep into into this type of analysis, but I will say just conceptually because I'm.
The energy business the whole time, we've been building. This business we have a lot of respect for the creative business is frankly, it's one of the most complicated and impressive technologies and the technological world today and it enables creators of all kinds to bring their content online and a three D real time manner and the value of that to us and why we were excited about.
Making this proposal is that we built this complex and very powerful machine learning technology axon and it does better if it has more data creates is the underlying technology and over in the majority of mobile games. So if you think about that does that contextual data that unity has access to the various impella.
We also reach a lot of the mobile games in the ecosystem through our technologies are maxing out discovery, but that combination can be very compelling and that's why I created is important to us.
And why we see this path to being able to unlock a lot of synergies by the complementary nature of these two complicated technologies, which could unlock a lot.
Can I just add to that again, we're very early in that discussion.
So far it's been a one way discussion.
Create is definitely at a different business model than how we've operated our business, but the beauty of the transactions. Adam said is the centers, who can get using our axon technology with their operating business, where we would have tremendous free cash flow generation.
On the creative side, where they've invested very very heavily in the business. It is a market leader. It is very very difficult for anybody to chase them down now and they are on the precipice of migrating over to being cash flow positive on that business our view in the medium and long term.
Very very unique software assets with high growth and ultimately will also be contributing to two free cash flow, which we're excited about.
Thank you I have a follow up with.
Harold can you maybe confirm that your 2 billion software platform.
Target for 'twenty three is still intact.
That's still our target obviously with the headwinds of macro in the industry and some changes in privacy.
Comes a higher target, but given our strategic positioning today some of the new investments, we've been making acquisitions. We've made sure that that remains our our internal targets.
Yeah.
I think the the important piece that.
We want our investors to understand about our businesses, we do control our own growth and that's really truly improvements to the axon technology and you've seen that the last four quarters, where we had the sequential step ups. Each one of those where enhancements to the technology to make it more accurate visit predictive technology and the goal is to predict.
Which obviously users going to download it and engage with every predictive technology that was built on top of a lot of data that's going to have an error rate and we have an error rates every time, we can reduce that error rate the accuracy of those predictions go up and the business will see a step function gain in revenue. So while we get excited about why our teams worked so hard is to look for those.
Lips, when we find one it'll increase the business and it won't be a slow increase there'll be a step function. So given time, we're going to find more of those lifts more of these accuracy enhancements and that'll give us a lot of confidence in bigger numbers in this business given the scale that we're operating at today.
Got it thank you.
Yeah.
Thank you Martin for the question.
Although next to David Pang at Stifel. David Go ahead.
Yeah.
Great. Thanks can you hear me.
Yeah David.
So thanks for the question can you talk about the implications of <unk>.
Google joining Max as a bidder and as a follow up.
Can you talk about just your thoughts on capital allocation in the midst of the unity merger proposal.
I'll tackle the first one Harold I'll tackle the second one so on Google bidding, obviously, we announced that we were one of three eight mediation platforms. There externally bidding into for the first time ever. This is truly exciting for us when we built knocks our intent with it was to create an open transparent and fair platform for real time auction.
A lot of the AD technologies in the industry Werent there yet now we've got a good amount of the market already bidding the googles the biggest company and they were the big one to go tip into bidding to really make this this initial goal that we have for the platform a reality, where we one day envision the entire market real time bidding on our exchange.
And that being the best way to create efficiency for all constituents in the market the publisher of the advertiser and the consumer.
And so Google taking us up we think is giant and theyre still in the midst of testing we're in a beta period with them on the platform, but as it ramps of course, you know and we've disclosed our economics on Max or 5% of the dollars that flow through our ecosystem from a bidder we take so today, we're not generating any dollars.
Or any material dollars I should say from Google into our platform and the day that they can scale bidding it will become a material revenue stream for our business, which we're excited about.
And then with regard to capital allocation strategy I think we remained the same as we've always been we're focused on how do we create.
The best long term shareholder value.
They're all all of our shareholders. So on a standalone basis, we've obviously been doing that through the acquisitions through investing in our team and our development projects.
We do believe specifically in the case of unity really having a partnership with them and that's why we offered essentially our combination is.
Fairly equal a little different on voting will little different economics, but essentially the partnership.
To go attack the market that we know extremely well and do it well together they do have an amazing engine. That's basically the operating system for the mobile gaming industry for a large portion of it. That's also applicable outside the gaming industry, which is very interesting.
That is a different business model that I just mentioned from the one that we've been pursuing with cash flow focus on the other side they are operate business.
Bind with ours.
It will be a very very powerful business and we're excited to put our capital behind that so we'd rather reserve our balance sheet cash leverage capacity.
We're investing in that combined business, whereas I said on a standalone businesses, we've been doing in the past we've been reinvesting when we find.
If you will the no brainer acquisitions to do.
We're we're certainly leaning into the Ot those things.
Okay. Thanks, David for the question.
We'll go next is even Ju with credit Suisse.
Stephen Please go ahead.
Okay. Thank you can you hear me.
Yes.
Great Hi, Adam and Arrow So I.
I wanted to dig in a little bit on the.
And puts to the synergy calculation.
It out earlier, so you talked about potentially a 20% lift to accuracy to generate an incremental.
500, Bucks and net revenue so, but you know from the outside looking in it and you know without an engineering or a data science background, it's hard for us.
Investors to kind of conceptualize conceptualize, how easy or difficult it will be to drive that occupancy lift. So can you talk about from a practical perspective, what you need to do so day zero. The merger has been consummated and you're sitting in the room with John .
What are you doing first.
And also you know should we be think about potentially a materially better than 20% or 50, or even 100% lift for accuracy.
And what the potential could be thanks.
Yeah, I mean look this is what gets us really frankly, most excited about the opportunity is as you all know the trajectory of that are our advertising business was on and the scale that it was that was so materially different than what axon enabled us to get to over a very very short time, now really like to unpack a little bit.
What what is axon so underlying our entire platform is a big data platform. This is what we built over the last decade, we ingest a ton of data from all sorts of data sources and this comes into our platform and the axon has the modeling on top that's the math that says I have a bunch of contextual data the engagement data.
On devices, how do I take that data and predict which apps are users going to engage with so that I can show them a very relevant advertisement.
That math is extremely complex and the data platform that underlying infrastructure and all the tools in our reporting and everything that we built over the last decade on top of it is also extremely complex.
And then you've got unity operate this already has scaled advertising business, we know well obviously, we're in the market whether they are customers of Max but if you take those two businesses and allow them to tap into that same underlying data platform and allow them to tap into the same math and the same algorithms the unlock that potential.
Be huge it is more scale more customer reach more data all coming into the same place has proven to be very very successful for us and this is what we look for when we look for synergies in deals is where can we apply our machine learning and data technology expertise to be able to unlock more so to your point of 20 per.
Obviously, we don't know if it's going to be 20% or 50% of our 100% for us it was over 500% in seven quarters. So had a huge impact we put out there. What we think is a conservative number because we know the power of our own technologies and maybe you can see it from two high level perspectives, one obviously on their current.
Transactions Theyre discussing 300 billion of synergies.
We're obviously much larger.
Partner for them.
Figure business and a lot more overlap.
So you just think about a baseline it at 300, probably it wasn't clear whether that's cost or revenue synergies. We're talking about the cost side for a moment just talked down Adam mentioned, having a combined operate in our software platform business over $2 billion to $5 billion of revenue that would probably have a cost base of $1 billion billion, a half dollars of costs and so.
Apply any reasonable percentage of that theres, an opportunity to really get some efficiencies.
Let alone obviously, all the normal back office corporate functions and two public companies considering coming together. So we do think the ability to achieve $700 million.
EBITDA synergy a lot of work to be done, but given the lift we havent revenue side and on the cost side.
We think thats achievable.
Thank you.
Thank you Steven.
We'll go next to Ralph checkered with William Blair.
Please go ahead.
Great. Thanks for taking the question first one just more short term in nature on the take rate out I'm just curious on the duration of that kind of how youre thinking about that and are you seeing the sort of intended.
Sort of benefits that you were looking for and then I have a follow up for Harold.
Yeah, I mean look like ultimately this is us reinvesting into our own ecosystem and we see it out of necessity right now because of brand dollars are really dried up and these digital markets today, while we've got the supply chain and macro issues.
As that eases up as we go forward, we have a decision to make keep the take rate where it is or expand it.
That's something that's there's just Emmanuel toggle in our system, what's more important for us is ensuring that the publishers on our system have a thriving business. So when we get there we'll make the decision, but as the economy improves and as more dollars go back into the system.
This part of our business frankly isn't the biggest driver of growth in our business. Our entire system is automated around return on AD spend goals for advertisers. So do you think about our axon platform again advertisers plugging the goals and they want us to go achieve those goals, we have very little churn on our platform we've got over 200%.
Net dollar retention. So these advertisers are still spending but the problem is that their ability to generate revenue on the other side of those dollar spent decreases in a bad economy, because they have less brand dollars flowing it so in a way, we're offsetting that and as the brand dollars come back into the ecosystem our systems for the much bigger part of our business.
Discovery automatically will increase beds will increase yield to the advertiser will increased scale of our platform. So we ended up with two benefits.
When the economy turns the other way and that's hopefully not going to take too much longer here.
Great and then held yet again made a comment that on the end of the offer it had been primarily sort of a one way conversation sort of any color you could add to that are you in dialogue at all are you comfortable sharing.
Got it thanks.
Thanks, Ralph No we've put out a proposal and we're waiting to hear back.
Okay.
Thank you.
Thanks, Rob for the question well go next to Youssef Squali at <unk> Securities.
Go ahead, you said.
Excellent can you hear me.
Alright, so two quick ones for me.
As you said earlier something about your expectation that in 2023, we expect to grow that.
Apps business topline as stabilized margins can you may be just under the assumption that you are you still own that business. By then what gives you confidence in that considering the most recent performance in the last couple of quarters.
And then I guess on the on the the entity proposed offer.
I guess a high level philosophically how are you guys looking at voting control and how important is that you noticed that you had that in their 50 149, how important is that to cause any transaction.
Okay.
Yeah happy to.
So we think both of those maybe in reverse order. So on the on the unity voting structure look the reality is we want to be partner of theirs.
We think it's a very friendly nonbinding unsolicited offer.
So we wanted to make sure they understood that the reality is no one would really have a controlling stake in the combined business and so we will have a diversified shareholder base highly liquid and no one would really be about control seat was.
Was really our goal there.
And then the first question was remind me.
Around the apps business, yes, yes, Aspen aside.
<unk>.
We've had a change of leadership there.
Slightly different lens of how we're managing the portfolio, Adam and I are now getting quite deeply with each of the applications and.
And studios themselves and so.
And in some ways, we get to Cherry pick what are we gonna be locked with coming into 'twenty, three and that we want to be a healthy business of course, if the market improves and someone can come in and pay us a very attractive price for that as we said is non strategic and if that's right financial return we will do that.
The wise, we want to make sure we have a business that is healthy that is growing and has industry.
Industry type margins, which is we think 15% to 20% at least.
On an EBITDA basis, yes, I think the other point that on the growth point is really like we're not talking about exceptional growth just industry growth and when you think about the period that we are now in the period that we were for the last couple of years. There was a lot of overconsumption of games. During Covid people were spending dollars more than they typically would in games.
Who are consuming more context, because frankly, they can go anywhere now we're in a period of under consumption. Because people are just pass COVID-19 everyone's traveling Sun's out and people are having fun in the sun.
We will eventually get back to normal traffic patterns and mobile gaming is still the most accessible and most affordable form of entertainment. We started this business in 2012. So we've been on the front lines of seeing all of the traffic patterns all the trends in both the Covid period and today's period are anomalies once we get back to normal traffic patterns. We.
Do you expect this to be a growth category and our RF business now that we've had a couple of quarters, where we've minimized we've taken down user acquisition spend based on much more realistic ROE azgul as to what the industry norms are we're seeing revenue stabilized and then now we expect that business to just be a.
Standard mobile gaming business, which will grow with the ecosystem.
Thank you and just very very quickly.
Was there that community to proposed transaction did you guys have any discussions with them before the deal was announced.
No I mean look.
Can answer that.
Without answering it to directly because we've known entity for a long time I've known Jr. For years at a lot of respect for what he and the team have built over a unity with create and operate and I hope. They are mutual respect for what we built over here. So in a way like you can't answer that too clearly because over the past many years we've had.
Discussions well in the past, but what we're looking at today was a bid that we made really unsolicited. It was we were really busy in Q1 with <unk> and then we've seen a lot of growth in our own business you are putting the pieces together and of course over the years, we assess the unity business and been very.
But really impressed with what they've put together and over the last couple of years as we put our technology stack together, we saw a lot of complementary pieces, but we didn't stop to think about the synergy math until they announce that iron ore steel and we started doing the analysis and then we just saw a need to put the spit out there because the math was.
So compelling to us that we felt putting a very thoughtful offer out there would be appropriate for both parties company's teams and shareholders.
Thank you. Thank you.
Yes.
Thank you Lisa for the question and we'll go next to you.
Ken knowing at Macquarie.
Go ahead Ken.
Thanks, a lot.
Hi.
Couple of things I wanted to follow up on the last point, which is also to a previous question and I'm. Just wondering how much does the effort to sell the gaming App business factor into any decision to unity might make is it is it it sounds from previous comments like it might be something that would be very useful to them to the combined company, but at the same time you go into the process of selling.
And so I'm just wondering how that would factor into any decision that unity would make to actually go ahead with you.
So Canada.
Well, let's answer that one first so look like we can't we can't.
Address what other People's visitors would be on parts of our business, but we decided last quarter. It wasn't strategically critical to our software business is our software business has become so large scale. If we were able to put the two companies together that software business would be incredibly large scale.
Truly the parts of the components of that that would be in focus would be axon and adjust and Max and create and operate these are software businesses at their core they don't need the mobile gaming side and so we would still operate the business as a good business just like we would do independently, but I don't think.
The thought process around games changes materially in any way when when the combined business would be one of the world's largest fastest growing most cash flow generative software businesses.
Yes, Okay I get it.
Secondly in separately.
You mentioned privacy as initiatives kind of weighing on things right. Now you haven't really talked about privacy concerns being being an issue before I think like.
A quarter or two or three ago. We were all worried about idea fan would impact that would have on the business and it had little to none I think.
Are you just talking more on the game App side, if that's weighing down things you could just talk a bit more about what you mean by the privacy implications.
Unpack that it really has to do with with our privacy constricting growth opportunities in the whole sector and when you take the idea far away you lower the capacity for mobile gaming companies to go target effectively on all channels working textual channel at its core so it didn't have as much direct impact on our business, but we are.
Now seeing the gaming category slowdown in growth and of course, there's macro trends, but more specific to the gaming category is this idea of FAA was taken away. So we're four or five quarters in to advertisers mobile gaming companies not being able to spend all of their money as efficiently as they used to be able to spend and that eventually.
<unk> has effects on growth and so we think thats one of the inputs into the fact that we're seeing lower game consumption today, where we do think the bigger one is just this hangover post this COVID-19 overconsumption period that will reverse out that this privacy. One is an issue and frankly, it's one of the reasons why we were really compelled.
To make this bid.
For for this merged with unity, because thats synergy math is so impactful on the ecosystem itself to be able to spend more dollars.
Together, we were able to unlock these synergies and mobile gaming advertisers could spend billions of dollars more a year in our performance manner together, we'd actually be able to be a catalyst for growth in the ecosystem of course on our own we've been doing that with axon as our business has grown really quickly and got into large scale, we're causing that Tam expansion two to offset.
Some of the losses for <unk>.
Sure has come to our platform.
<unk> system, just needs more of that.
Okay. Thanks.
Okay.
Okay. Thanks, Thanks, Tim for the question.
We'll take our last question from the Franco Granda with D. A Davidson.
Frank Please go ahead.
Hi, yes, thanks Ross.
And we lost you franca.
Yeah.
You.
You bet.
Awesome.
Thanks for taking my question here.
Your software business is clearly doing very well so so well in fact that youre able to pass on some of the potential revenue to your customers and keep your outlook unchanged.
And this is during a moment, where the south attributing networks are seeing big headwind. So.
So can you speak to what is driving the outperformance of App discovery is it simply improvements and recommendations are what are your thoughts there and then secondly, Adam you talked about the introduction of <unk> during the quarter.
What potential customers would you be focusing on first and what is that active outreach declines due to your margins.
Okay. So maybe I'll answer the first one here will you take the second one so on the first really.
Our growth has come from from a couple of things and one traditionally we've always been a contextual data platform. We've never known the user in fact, we don't need to know the user's name the uterus background. The demographics of the user. These are not things that matter for our models. What we care about is mobile game engagement data off of the device and so.
Our models had always been built around that now we took this this baseline of data, which which definitely was inferior to a lot of the bigger platforms that have direct relationships with the consumer in an era of idea Fei and prior to all of these privacy changes much more personalized advertising to the person and so now.
Advertising has shifted much more to the device then we paired our data with axon the math in our system, just got better and Thats systems really really complicated, but when we put it together, we put our data platform and oxon together, the right way and made our system just much more accurate and getting more accurate driving more value to advertise.
So they can put more dollars in that's what's reflected in that net dollar revenue retention that we've put up over 200% every one of the last five quarters and it really that's why we're thriving in this ecosystem today and we expect that to carry forward. These are not advantages that we have that somehow we're going to disappear. This is just what our business is built on because of this.
As the only access to data that we've ever had since we started the company.
With your question regarding array, we're super excited about it but it's still very early we've got a really good team. So a small nimble team I think doing a app loving style, where we can move very very quickly build great product. It does leverage our existing AD tech capabilities of course and so.
I think you asked about the customer base.
We will go after the same Oems.
And providers that are out there.
Yeah.
A number of those there, but we've already started really good dialogues with several key ones, we're helping them build product roadmaps are helping us build hours and so we hope it to be.
Something more meaningful in terms of getting started from a revenue standpoint really in 'twenty three and scaling.
Scaling up to something more meaningful to 'twenty four 'twenty five.
That's helpful. Thanks.
Okay. It looks like Thats all the questions. We have for today I'd like to turn it back to Adam are Harold for any closing remarks before we conclude the conference call.
Thanks for taking the time I know it is a.
Interesting period.
In our industry. We are excited about the standalone prospects about our business. We think we've built a stack a full stack solution. That's super interesting. If we think that we can integrate that as a partner in the unity.
That would be a very interesting place to be as well a different path, but it could be also very accretive to both sides of the shareholders. We did need to put a superior proposal and according to their contract, which we think are our proposal is just that in so many ways strategically scale.
And also just in terms of absolute price.
So we'll keep everybody informed as to the extent, we can on that process, but in the meantime, we're certainly all heads down focused on our own business. So thanks, thanks for the time.
Thanks, everyone.
Yeah.
The recording has stopped.