Q4 2023 Applovin Corp Earnings Call

Okay.

David Karnovsky: Please stand by; we are about to begin. Welcome everyone to the Applovin Earnings Call for the fourth quarter and year ended December 31st, 2021. I'm David Chao, Head of Investor Relations. Joining me today to discuss our results are Adam Ferrughi, our co-founder, CEO, and chairperson, and Matt Stumpf, our CFO. Please note, our SEC filings to date, as well as our shareholder letter and press release discussing our fourth quarter and annual performance, are available at Investors.applovin.com.

Please standby we are about to begin.

Welcome everyone.

Speaker Change: One to the App Love an earnings call for the fourth quarter and year ended December 31 2023.

I'm, David <unk> head of Investor Relations joining.

Speaker Change: Joining me today to discuss our results are Adam Fruity, our co founder CEO and chair person and Matt <unk> our CFO.

Speaker Change: Please note our SEC filings to date as well as our shareholder letter and press release discussing our fourth quarter and annual performance are available at investors on App Love and dotcom.

Speaker Change: During today's call, we will be making forward looking statements regarding our production services market expectations for future financial performance of the company and other future events.

David Karnovsky: During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the future financial performance of the company, and other future objectives. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except as required by law. Our actual results may differ materially from the results predicted. We encourage you to review the risk factors in our most recently filed Form 10-Q for the fiscal quarter ended September 30, 2023. We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for or superior to our GAAP resolution.

Speaker Change: These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except as required by law. Our actual results may differ materially from the results predicted.

Speaker Change: We encourage you to review the risk factors in our most recently filed Form 10-Q for the fiscal quarter ended September 30th 2023.

Speaker Change: We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be a substitute for or superior to our GAAP results. Please be sure to review the reconciliations of our GAAP to non-GAAP financial measures in our earnings release and shareholder letter available on our Investor Relations site.

David Karnovsky: Please be sure to review the reconciliations of our GAAP and non-GAAP financial measures in our earnings release and shareholder letter available on our Investor Relations website. This conference call is being recorded, and a replay will be available on our IR website. Now I'll turn it over to Adam and Matt for some opening remarks, then we'll have the moderator take us through Q&A. Welcome everyone, and thank you for joining us.

Speaker Change: This conference call is being recorded and a replay will be available at our IR website now I'll turn it over to Adam and Matt for some opening remarks, then we'll have the moderator take us through Q&A.

Welcome everyone and thank you for joining we're thrilled to report another outstanding quarter in Q4, we surpassed the high end of our guidance and established a consistent pattern of exceptional performance throughout 2023.

Adam Ferrughi: We're thrilled to report another outstanding quarter in Q4. We surpassed the high end of our guidance and established a consistent pattern of exceptional performance throughout 2016. Reflecting on the last year, it's remarkable to consider how much we have grown and evolved in just one year. After a challenging 2022 characterized by stagnant growth, we refocused on growing our existing business and investing in new energy. I am immensely proud of our team's dedication and hard work, which has resulted in our software platform revenue growing by 76% in 2020. Despite a challenged economic landscape and a mobile gaming sector, we have continued to grow. This is a clear testament to the strength and potential of the updates we have made to our AI advertising engine, Acrobat.

Speaker Change: Reflecting on the last year, it's remarkable to consider how much we have grown and evolved in just one year.

Speaker Change: After a challenging 2020 to characterize my stagnant growth, we refocus on growing our existing business and investing in new initiatives.

Speaker Change: I'm immensely proud of our team's dedication and hard work, which has resulted in our software platform revenue growing by 76% in 2023 despite a.

Speaker Change: Challenged economic landscape and mobile gaming sector. We have continued to grow this is a clear testament to the strength and potential of the updates we have made to our AI advertising engine axon.

Adam Ferrughi: When we embarked on our public journey in 2021, our software platform revenue was nearly 700 million. And now, only two years later, we have reached close to $2 billion. We also forecast that we would have significant margins on incremental revenue for our software. I'm proud to state that in Q4 2023, our incremental revenue had an approximate 80% flow-through to adjusted EBITDA, culminating in record cash. This growth trajectory underscores robust financial health and positions us favorably for diverse opportunities to enhance shareholder value like ongoing share repurchase. Now looking ahead to 2024 and beyond, we continue to remain bullish about the potential of our core AI technologies, which stand amongst the most advanced across all markets. Our focus on leveraging these technologies for world-class in the CTV space and array in the carrier OEM market is just the beginning.

Speaker Change: When we embarked on our public journey in 2021 software platform revenue was nearly 700 million and now only two years later, we have reached close to $2 billion.

Speaker Change: We also forecast that we would have significant margins on incremental revenue for our software runs.

I'm proud to state that in Q4 2023, our incremental revenue had an approximate 80% flow through to adjusted EBITDA, culminating in record cash flows.

Speaker Change: This growth trajectory underscores our robust financial help and positions us favorably for diverse opportunities to enhance shareholder value like ongoing share repurchases.

Now looking ahead to 2024 and beyond we continue to remain bullish about the potential of our core AI technologies would stand amongst the most advanced across all markets. Our focus on leveraging these technologies for world in the CTV space and array and the carrier OEM market is just the beginning.

Adam Ferrughi: We are poised to explore and expand into new applications of our AI technologies in the coming quarters and years, which has the potential to significantly broaden our TAM and opportunities. Now I'll turn it over to Matt, who will deliver his first financial summary as our CFO. We are incredibly fortunate to have him on the team.

Speaker Change: We are poised to explore and expand into new applications of our AI technologies in the coming quarters and years, which has the potential to significantly broaden our tam and opportunities.

Speaker Change: Now I'll turn it over to Matt who will deliver his first financial summary, as our CFO, we're incredibly fortunate to have him in this role.

Matt Stumpf: Thank you once again for your unwavering support on this. Thanks, Adam, and good afternoon. I'm pleased to step into my first earnings release as CFO with such amazing financial results. First, I'd like to thank the team for having executed so well and Macon Maggio. In the fourth quarter, we exceeded the high end of our guidance for both revenue and adjusted EBIT. In this scenario, applying some of these frameworks, we would be achieving $953M in total revenue and $476M in adjusted EBITDA, an impressive 50% adjusted EBITDA margin. We also exceeded our analysts' expectations. So that leaves us with just under $3.4 million.

Matt: Thank you once again for your unwavering support on this journey.

Matt: Thanks, Adam and good afternoon, I'm pleased to step into my first earnings release, a CFO with such amazing financial results. So first I'd like to thank the team for having executed so well this quarter and making my job easy.

Speaker Change: In the fourth quarter, we exceeded the high end of our guidance for both revenue and adjusted EBITDA, achieving $953 million in total revenue and $476 million and adjusted EBITDA. That's an impressive 50% adjusted EBITDA margin. We also exceeded our analysts expectations this quarter.

Matt Stumpf: Until fate decides to suspend operations, that 50% adjusted EBITDA rate may connect to adjusted costs by beating the consensus averages for both revenue and adjusted EBIT, and Justin D'Iviza was nearly 10% higher than expected. Our revenue grew by 36% from the same period last year and 10% from last quarter. Optimization efforts within our apps business in the first half of the year resulted in a slight decline in revenue, but it led to improved EBITDA margins.

Speaker Change: By beating the consensus averages for both revenue and adjusted EBITDA adjusted EBITDA was nearly 10% higher than expectations. Our revenue grew by 36% from the same period last year and 10% from last quarter optimization efforts within our apps business and the first half of the year resulted.

Speaker Change: And a slight decline in revenue, but it led to improved EBITDA margin. We still grew revenue every quarter. This year due to the tremendous performance of our software platform and continued strength and growth in the advertising market.

Matt Stumpf: We still grew revenue every quarter this year due to the tremendous performance of our software platform and continued strength and growth in the advertising market. Our app portfolio continues to perform well with 5% growth from last quarter while maintaining a consistent 15% adjusted EBITDA margin. Our software platform had another excellent quarter. We achieved revenue of $576 million and adjusted EBITDA of $420 million. That's a 73% mark.

Speaker Change: Our apps portfolio continues to perform well with 5% growth from last quarter, while maintaining a consistent 15% adjusted EBITDA margin.

Speaker Change: Our software platform had another excellent quarter, we achieved revenue of $576 million and adjusted EBITDA of $420 million at the 73% margin. This represents nearly an 80% flow through from revenue given our relatively fixed cost base and continued cost is.

Matt Stumpf: This represents nearly an 80% flow-through from revenue, given our relatively fixed cost base and continued costs. All of our businesses were able to grow their revenue, with AppDiscovery, the primary. Our growth stemmed from a combination of market factors and our execution, including a strong holiday season. Growth in the Mobile App Advertisement, a market shift to real time, early contributions from our array business. SourceFed.com Transcription by CastingWords, Karnovsky, Ralph Schackart, Ryan Gee, and Applovin, leading to compounding growth for our company and our partners, turning briefly to our annual. Revenue for the year was $3.3 billion.

Speaker Change: Okay.

Speaker Change: All of our businesses were able to grow their revenue this quarter with App discovery. The primary driver of our success our growth stemmed from a combination of market factors and our execution, including a strong holiday season growth in the mobile app advertising market a market shift to real time bidding early contributions from our array business.

Speaker Change: Enhancement of our technologies like axon expansion of our advertiser base and growth in advertiser budgets the.

Speaker Change: The combination of these factors are contributing to improved efficiency, leading to compounding growth for our company and our partners in the industry.

Speaker Change: Turning briefly to our annual results revenue for the year was three points $3 billion. That's an increase of 17% from last year adjusted EBITDA was 1.5 billion mezzanine.

Matt Stumpf: That's an increase of 17% from last year. Adjusted EBITDA was $1.5 million; it's an incredible 41% increase from last year at an adjusted EBITDA margin of 46%. Over the last five years, we've been able to achieve remarkable growth in our software platform. We grew from $136 million in adjusted EBITDA in 2019 to nearly $1.3 billion. During that time, we had roughly 60% to 70%... Free cash flow for the year was $1 billion, representing an impressive 69% flow-through from adjusted EBITDA of 1.5%.

Speaker Change: That's an incredible 41% increase from last year at an adjusted EBITDA margin of 46% over the last five years, we've been able to achieve remarkable growth in our software platform business, we grew from $136 million and adjusted EBITDA in 2019 to nearly one.

Speaker Change: $1.3 billion. This year during that time, we had roughly 60% to 70% adjusted EBITDA margin free.

Speaker Change: Free cash flow for the year was $1 billion, representing an impressive 69% flow through from adjusted EBITDA of $1 $5 billion.

Matt Stumpf: Going forward, we hope to retain roughly 70% with quarterly fluctuations due to work and capital and, During the year, we extended the maturity of our term limits. Karnovsky, Ralph Schackart, Ryan Gee, and Applovin, in addition to our debt management. We also repurchased and withheld a combined $54.3 million.

Speaker Change: Going forward, we hope to retain roughly 70% flow through on an annual basis with quarterly fluctuations due to working capital and tax payments.

Speaker Change: During the year, we extended the maturity of our term loan to 2030 at the same time, reducing our interest rate to continue to manage our ongoing costs in.

Speaker Change: In addition to our debt management activities. This year, we also repurchased and withheld a combined 54 points 3 million shares in 2023 after.

Matt Stumpf: ... after considering share... This represents a nearly 10% reduction in our through the combination of free cashflow and Share Management, we hope to continue to generate significant long-term value and our new. Our board has also approved an increase in our share repurchase authorization by 1.25%. We plan to use this to continue to, Thank you for joining us. We're turning to our first quarter.

Speaker Change: After considering share compensation. This represents a nearly 10% reduction in our total shares outstanding.

Speaker Change: Through the combination of free cash flow generation and share management, we hope to continue to generate significant long term value for our existing and our new shareholders. Our board has also approved an increase in our share repurchase authorization by one point to $5 billion. We plan to use this to continue to manage our outstanding shares.

Speaker Change: Turning to our first quarter 2024 guidance, we hope to deliver between 955 and $975 million in revenue in the first quarter.

Matt Stumpf: We hope to deliver between $955 and $975 million. Adjusted EBITDA is expected to be within the range of $475,000 and $495,000. That represents an adjusted EBITDA margin of Schackart.

Speaker Change: Adjusted EBITDA is expected to be within the range of 475 and $495 million that represents an adjusted EBITDA margin of between 50 and 51%.

Matt Stumpf: We believe these results are achievable given the various growth factors I highlighted. While taking into account the first quarter is a seasonal period, In conclusion, we're very happy with our financial results for all of, as a result of it. Market. Combined.

Speaker Change: We believe these results are achievable given the various growth factors I highlighted earlier, while taking into account. The first quarter is a seasonally low period for the industry.

Speaker Change: In conclusion, we're very happy with our financial performance this quarter and for all of 2023 as a result of a strengthening market combined with our team's execution.

Moderator: We look forward to continued growth and others, new verticals, and the industry. Now, with that, I'll hand it over to our moderator. Thank you so much, Matt.

Speaker Change: We look forward to continued growth over the coming year as we continued to expand our business into new verticals and industries, such as non gaming IGT.

Speaker Change: Now with that I'll hand, it over to our moderator to take us through it.

Speaker Change: Okay.

Speaker Change: Thank you so much match and now we will take your questions. When I call. Your name. Please turn on your video and on mute and we will get through as many questions as possible in the time allotted.

Moderator: And now we will take your questions. When I call your name, please turn on your video and unmute, and we will get through as many questions as possible in the time allotted. And our first question is going to come from Omar Dasuki with BFA. Omar, go ahead and come off the video, please.

First question is going to come from Omar to Suki with Bofa.

Omar: Or go ahead and come off video place great. Thank you.

Omar Dasuki: Great. Thank you. Thank you.

Omar: Thank you.

Omar Dasuki: Thank you for taking my question. So, on the one hand, you're not giving calendar year 24 guidance, but on the other hand, you did talk about in your letter that you're working towards expanding your software platform reach in 2024. So I was wondering if you could unpack those two things for us, especially the software platform part. Thank you. Thanks, Omar.

Thank you for taking my question so.

Omar: Let's see on the one hand, youre, not giving calendar year 'twenty for guidance, but on the other hand.

Speaker Change: You did talk about.

Speaker Change: And in your letter that you are working towards expanding your software platform reach in.

Speaker Change: In 2024, so I was wondering if you could you could unpack those two things for us.

Speaker Change: Especially the software platform reach part thank you.

Speaker Change: Thanks, Omar I'll start with the business side and the metal jump into the financials, but ultimately we launched axon to the upgrade of our AI platform and in Q2 last year from that point to Q4 the business. The software business grew almost 50% and obviously you know the impact on margins we've.

Adam Ferrughi: I'll start with the business side, and then Matt will jump into the financials. But ultimately, we launched Axon 2, the upgrade of our AI platform, in Q2 last year. From that point to Q4, the business, the software business, grew almost 50%. And obviously, you know the impact on margins. We've talked about a huge flow through in dollars, the incremental dollars of growth there, coming in at 80% roughly in the quarter. This is an early stage technology. It's only been live for a little over half a year.

Speaker Change: Talking about a huge flow through in dollars the incremental dollars of growth there.

Speaker Change: Coming in at 80% roughly in the quarter. This is a early stage technology. Its only been live for a little over half a year is growing exceptionally quickly very high margin. We think the applications of this core technology are much broader than what we do today and the team is continuously improving the technology too. So we're very.

Adam Ferrughi: It's growing exceptionally quickly, with very high margins. We think the applications of this core technology are much broader than what we do today, and the team is continuously improving the technology, too. So we're very excited about where it could go.

Speaker Change: Are you excited about where it could go ultimately when you've got a business is growing that quickly on a technology that's not new at the margins. We operate up it's very hard to understand going forward exactly where we're going to land, but we've never been more excited about the growth prospects, we've got in front of us.

Matt Stumpf: Ultimately, when you've got a business that's growing that quickly on a technology that's that new, at the margins we operate at, it's very hard to understand going forward exactly where we're going to land. But we've never been more excited about the growth prospects we've got in front of us. Yeah, just to echo what Adam said, Armour, given the difficulty in kind of forecasting and understanding the impact of launching a new technology like we did with Axon 2.0, it's very difficult for us to forecast what the impact, the financial impact of that is. So for that reason, we don't provide longer-term guidance.

Speaker Change: Ken just a tack of what Adam said armour, given the difficulty in kind of forecasting and understanding the impact of launching a new technology like we did with axon to point out it's very difficult for us to forecast what the impact was the financial impact of that is so for that reason, we don't provide a longer term guidance.

Adam Ferrughi: And just a quick follow-up, if I could, so Facebook called out Chinese advertisers, both e-commerce and video game publishers, as one of the reasons. Their advertising is outperforming Q4. I didn't see it in your shareholder letter, and I was wondering if that's something you guys had seen at all or perhaps expected in the first quarter. No, we don't have any specific concentration or change of mix. And we index lower in terms of Chinese partners to the rest of the world than I think they do. But this is something we called out during COVID. The Chinese lockdown was a huge area of inefficiency in the market.

Speaker Change: And then just a quick follow up if I could so Facebook called out Chinese advertisers, both ecommerce and video game publishers as one of the reasons.

Speaker Change: Their advertising outperformed in Q4 I didn't see it in your your shareholder letter and I was wondering if that's something you guys had seen at all or perhaps expecting in the first quarter.

Speaker Change: No. We don't have any specific concentration or change of mix and wimax slower in terms of the Chinese partners to rest of world, but I think they do but this is something we'd called out during Covid, China Lockdown was a huge area of inefficiency in the market. So as we've seen the market really hit a trough last year.

Adam Ferrughi: So we've seen the market really hit a trough two years ago and then start recovering late last year. A lot of that was because Chinese developers were back in the office for a year, coming back online, and getting efficient again. And we'd signaled that we thought eventually that's going to help bring efficiency back to the market. Because while we don't index heavily on the revenue side, there is a lot of content that's created in China that comes out West and does benefit advertising-related businesses. And so that was a good trend that we've seen continue to expand. Thank you very much.

Speaker Change: <unk> and our two years ago, and then start recovering late last year, a lot of hours because Chinese developers were back in office for a year coming back online getting efficient again, and we've signaled that we thought eventually that's going to help bring efficiency back to the market because while we don't index heavily on the revenue side. There is a lot of cars.

Speaker Change: <unk>, that's created out of China that it comes out west and does benefit advertising related businesses and so that that was a good trend that we've seen continue to expand.

Speaker Change: Thank you very much I appreciate it.

Tim Nolan: I appreciate it. Thanks, Omar. And our next question will come from Tim Nolan with Macquarie. Hi guys, can you hear me OK?

Thanks AMR.

Speaker Change: Next question will come from Tim Nolan with Macquarie.

Tim Nolan: Hi, guys can you hear me okay.

Tim Nolan: Okay, great. Thanks. I had some trouble with the sound during the first part of that presentation, but I'm glad you can hear me now.

Tim Nolan: Yeah, We got you.

Tim Nolan: Great. Thanks, I had some trouble with above with the with the sound on the first part of that presentation glad you can hear me now.

Adam Ferrughi: I wanted to ask about some of these big changes coming in the mobile ad landscape this year, mainly the DMA, which comes into effect, I guess, in a couple weeks' time, three weeks' time, and also the deprecation of the Google Android ID and then also the iOS 17.4, kind of a lot of things in there to wonder about how they might impact the mobile ad market share. I wonder if you could comment on those, please? Yeah, look, I think we've said this before when it comes to privacy, Tim, you don't know the dates on a lot of these releases. So when you're talking about Google, like, who knows when the actual rollout will be? Cookies were a lot later than expected and still in a very small percentage of rollout.

Tim Nolan: I wanted to ask about some of these big changes company in the mobile AD landscape. This year, mainly the BMA, which comes into effect I guess in a couple of weeks' time through these times.

Tim Nolan: And after the deprecation of the Google Android idea and then also the Io was 17 point for kind of a lot of things in there to wonder about how it might impact the mobile AD market share Wonder if you could comment on those please.

Speaker Change: Yeah look I think we've said this before when it comes to privacy. Tim is that you don't know dates on a lot of these releases so when you're talking about Google and who knows when the actual rollout will be cookies were a lot later than expected and still in a very small percentage rollouts.

Adam Ferrughi: So we don't know when these changes will come, or we don't know the exact impact of the changes. What we do know is that, one, the way we've operated traditionally, we're very entrepreneurial, we're very nimble, and we've been able to adapt very well whenever there have been these changes. And number two, we run a much more contextual behavioral model than a lot of properties on the open web. And because we don't interface as much when it comes to really sensitive user data with the consumer, we're in a much better starting point than a lot of other businesses, too. So those two things always give us confidence that no matter what the change is, we're going to be able to cope.

Speaker Change: So we don't know when these changes will come we don't know the exact impact of the changes while we do know is that one the way we've operated traditionally.

Speaker Change: We're very entrepreneurial, we're very nimble and we've been able to atop Bert adapt very well whenever there have been these changes and number two we run a much more of a contextual behavioral model than a lot of properties on the open web and so because we don't interface as much when it comes to really sensitive user data with the.

Speaker Change: <unk>, we're in a much better starting point than a lot of other businesses too. So there's two things always give us confidence that no matter, what the changes were going to be able to navigate.

Adam Ferrughi: Okay, could I ask a follow-up question on the DMA, which would be: do you think, you know, saying allowing much lower app store fees in Europe, at least, would be positive for app development, which might then lead to more ads spending going down the road? Or do you have any input, any opinion on the Apple response of adding this extra 50 cents charge? Yeah. I think it would be up there.

Speaker Change: Okay can I ask a follow up on the DMA, which would be do you think you know.

Speaker Change: Allowing much lower app store fees in Europe at least would be a positive for App development, which might then lead to more.

Speaker Change: AD spending going down the road or do you have any input.

Speaker Change: Any opinion on the Apple response to be adding this extra.

Speaker Change: If you send charge.

Adam Ferrughi: But the way Apple responded makes it not really a great business decision to go off-store. Because one thing people don't talk about is there is organic value to being on store. So if you take the 30% fee and figure 10 to 15 points of value from organic rank, then you're down to 15 points of cost savings, and the expense to the developer that they, all the different layers of expense amounted to roughly 20 points.

Speaker Change: But the way Apple responded makes it not really a great business decision to go off store because what one thing people and talk about is there is organic value to being on store. So if you take the 30% fee and figure 10 to 15 points of value from organic rank, then you're down to 15 points of cost savings and the expense to the <unk>.

Speaker Change: Birla Birla day, all of the different layers of expense amounted to roughly 20 points. So there is no economic reason to go off store today, where we think over time, though theres enough global pressure and there's going to be enough movement from the courts over time that are going to continue to scrutinize. This in different jurisdictions, where eventually we think there could be benefits economically.

Adam Ferrughi: So there's no economic reason to go offline today. But we think over time, though, there's enough global pressure and there's going to be enough movement from the courts over time that they're going to continue to scrutinize this in different jurisdictions, where eventually, we think there could be benefits economically to the content developers. And if that happens, we've always said that it's going to greatly benefit advertising solutions. If you just think about the dollars on our platform, the majority are transacted to drive IAP today, and the dollar is taxed down to 70 cents.

Speaker Change: To the content developers and if that happens we've always said that.

Speaker Change: That's going to greatly benefit the advertising solutions. If you just think about the dollars on a platform majority are transacted to drive IEP today and the dollar is tax down to 70 cents is that one day one to $85 15, you could go take that and say every developer now makes 20% more and how.

Jason Boisvert Bazinet: If that one day went to 85, 15, you could take that and say every developer now makes 20% more. And how much of that are they going to be willing to put into marketing? A large part of it, which would be greatly beneficial to a platform. Yep. Great. Thanks, Adam. Moving on to Jason Bazinet with Citi. Thanks. This is maybe a long winded question, but I can't help but look at your stock, and the multiple seems so low to me given the attractiveness of your business and the growth and the free cash flow conversion, and I saw the $1.2 billion authorization for buybacks, but I don't think you bought back any stock in the quarter, and yet your guidance is good. You knew it was gonna be above the street.

Speaker Change: Much of that are they going to be willing to put into marketing a large part of it which would be greatly beneficial to a platform like ours.

Speaker Change: Yeah, great. Thanks, Adam.

Speaker Change: Moving on to Jason Bazinet with Citi.

Speaker Change: Thanks.

Jason Bazinet: This is maybe a long winded question, but I can't help but look at your stock and the multiple seems so low to me given the attractiveness of your business and the growth in the free cash flow conversion.

Jason Bazinet: And I saw the $1 2 billion authorization on buybacks, but I don't think you bought back any stock in the quarter and yet your guidance is good you knew who is going to be above the street. So my first question is can you just comment on sort of the tactical pause in the fourth quarter on buybacks and then my second one related is.

Jason Boisvert Bazinet: So my first question is, can you just comment on sort of the tactical pause in the fourth quarter on buybacks? And then my second question, related to that, is, do you think your multiple is low because of the two divergent businesses that you have between the software platform and first party gains? And does it still make sense to hold these two businesses together given that one is phenomenally attractive and one is just good? Thanks. Yes, I'll take the buyback piece first.

Jason Bazinet: Do you think your multiple is low because of the two divergent businesses that you have between the software platform and first party games and does that does that still make sense to hold these two businesses together given that one is phenomenally attractive and one is just good. Thanks.

Speaker Change: Yes, I'll take the buyback piece first.

Matt Stumpf: Yeah. So Jason, just from a strategic view, our approach to doing buybacks is to do directed large repurchases rather than buyback in the open market. That's how we feel like we can have the most impact and the opportunity to then present itself itself in Q4 to do a large buyback from an existing shareholder. So to the extent that that does present itself in the future, that's the approach that we're going to take. Yeah, and we just did authorize the big buyback. We're going to be committed to it going forward. We do think as a company like ours, where we're generating this much cash flow, we should be able to continue to facilitate buybacks and return value to shareholders in that manner. But when it comes to the question of where we trade, and why we trade at the certain multiple we trade at, well, we can't answer that. We're not traders.

Speaker Change: So Jason just from a strategic view that our approach to doing buybacks as to do directed larger repurchases rather than buyback in the open market. That's how we feel like we can have the most impact and the opportunity to present itself in Q4 to do a large buyback from an existing shareholder so to the extent that.

That does present itself in the future that's different that we're going to take.

And we just did authorize the big buyback, we're going to be committed to it going forward. We do think as a company like ours, where we're generating this much cash flow, we should be able to continue to facilitate buybacks and return value to shareholders in that manner.

Speaker Change: When it comes to the question of where we trade, where we trade at a certain multiple we trade at what we can't answer that were not traders and it's very hard to unpack does mobile gaming discount. The overall company valuation, we don't frankly believes though because the core software business is growing so quickly and we breakout financials, that's pretty easy to say lets just look at this.

Adam Ferrughi: And it's very hard to unpack: does mobile gaming discount the overall company valuation? We don't frankly believe so because the core software business is growing so quickly, and we break out the financials. It's pretty easy to just say, let's just look at the software segment. We think the harder part when it comes to our business is that we were in a no growth period in 22. We've had to come off of that and really focus on execution, which is what we asked of our teams.

Speaker Change: Software segment.

Speaker Change: There is that we think the harder part when it comes to our business is that we were in a no growth period and 22, we had to come off of that and really focus on execution, which is what we asked of our teams and now we put together for subsequent quarters of stellar performance and agility that software segment. There's all other software businesses was 70%.

Adam Ferrughi: And now we put together four subsequent quarters of stellar performance. And as you look at that software segment, there's not a lot of software businesses with 70% plus EBITDA margin growing at the rate that is, I mean, the rule of 140, 150 or whatever. And so it's just an astounding number. And then we convert a very high percentage of that EBITDA to cash flow as well. So we think because the technologies are new, it'll take a while for investors to understand what we already see, which is not only this very powerful technology in our core market, but we've been able to grow much faster than the market is growing because this technology is efficient. And in conjunction with that, our partners are growing much faster too. And you see some of these games that are in the market today at the top of the top grossing, they depend on our marketing channel, and they're growing because our solutions are becoming more efficient. That's in our core market.

Speaker Change: That plus EBITDA margin growing at the rate that is I mean rule of 141, 50 or whatever and so it's just an astounding number then we convert a very high percentage of that EBITDA to cash flow as well. So we think because the technologies are new it'll take a while for investors to understand what we already see which is not only of this very powerful tech.

Speaker Change: Knowledge in our core market, we've been able to grow much greater than the market is growing because of this technology is efficient and in conjunction with that our partners are growing much faster too and you see some of these games that are in the market today at the top of the top grossing they depend on our marketing channel and they're growing because our solutions become more efficient that's in our core market and now.

Adam Ferrughi: And now we see applications of that technology in multiple adjacent markets. And we think we're going to be able to apply it not only to what we've talked about, but to some other applications too that we'll talk about in the upcoming quarters. And that's what gets us really excited.

Speaker Change: We see applications of that technology in multiple adjacent markets and we think we're going to be able to go apply it not only to what we've talked about some other obligations Susan will talk about in the upcoming quarters and that's what gets US really excited so we're for sure committed to buybacks, because we see value and we're able to unpack the value much more easy.

Ralph Edward Schackart: So we're for sure committed to buybacks because we see value and we're able to unpack the value much more easily today than investors are. And we hope to be able to articulate that narrative in the coming quarters to investors. All right. But we will now hear from Ralph Schackart, I apologize, with William Blair.

Speaker Change: Lee today than investors are and we hope to be able to articulate that narrative in the coming quarters to investors.

Speaker Change: Thank you.

Speaker Change: So we will now hear from Ralph Shakur, I apologize with William Blair.

Adam Ferrughi: Good afternoon, Adam. Thanks for taking the questions. First one, I know you've talked historically about Axon expanding beyond just sort of the gaming vertical, but maybe just sort of give us an update on progress. You know, are you starting to get contributions outside of the gaming vertical? Then I have a follow-up. Yeah, Ralph.

Ralph Edward Schackart: Hey, good afternoon, Adam Thanks for taking the question.

Ralph Edward Schackart: First one I know you've talked historically about axon to extend beyond just sort of the gaming vertical, but maybe just sort of give us an update on our progress and are you starting to get contributions outside of the gaming vertical then I have a follow up.

Speaker Change: Yeah. Thanks, Rob.

Adam Ferrughi: Non-gaming is growing faster than gaming, and it's smaller, so obviously there's more room to grow. It's going to be an commitment of ours to broaden out the platform. We've talked about broadening out to non-gaming. That's a component.

Speaker Change: Gaming is growing faster in gaming, it's smaller so obviously, there's more room to grow is going to be a commitment of ours to broaden out the platform.

Speaker Change: We've talked about broadening out to non gaming that's a component we've talked about connected TV that was an application that is in progress right now expanding our reach to the TV device and we've talked about delivering marketing solutions to carriers and Oems powered by axon two that's in progress as well, we're starting to see as Matt touched on in his script some.

Adam Ferrughi: We've talked about connected TV. That's an application that's in progress right now, expanding our reach to the television device. We've talked about delivering marketing solutions to carriers and OEMs powered by Axon 2. That's in progress as well.

Adam Ferrughi: We're starting to see, as Matt touched on in his script, some benefit from both those initiatives. We think there are not only those applications but more beyond that that we'll talk about in the coming quarters as well. We're very excited about not only what our solution can do within our core category but the expansion opportunities it presents.

Speaker Change: From both of those initiatives and we think there are not only those applications, but more beyond that that will talk about in the coming quarters as well and so we're very excited about not only what our solution can do within our core category, but the expansion opportunities are pretty loves us.

Adam Ferrughi: Maybe we can sort of provide some context of, you know, what's really outperforming versus expectations. I'm sure there's an element of, you know, conservatism and wanting to guide, but just sort of frame for investors, you know, why is Exxon 2 doing better, perhaps, than you expected. Look, I mean, what people don't understand about our platform, and I guess we don't tend to articulate that very well, is that the Max business sits on top of over a billion daily active users, a billion users playing games. So if you think about in the U.S., roughly 170 million daily active users.

Speaker Change: Great. Maybe if you can sort of provide some context of whats really outperforming versus expectations I'm sure. There's an element of conservatism on wanting to guide, but just sort of frame for investors. You know why is axon to doing better perhaps than you expected.

Speaker Change: I mean, what people don't understand about our platform and I guess, we don't tend to articulate too is the Max business sits on top of over 1 billion daily active users of 1 billion users playing games. So if you think about in the U S. Roughly 170 million daily active users the talking about the majority of American adults are playing game.

Adam Ferrughi: So you're talking about the majority of American adults are playing games daily in mobile apps, and we're able to service them. Historically, in this channel, the modernization has been very low per 1,000 impressions compared to what the social networks and the search engines and the video apps have gotten to. And those companies had very sophisticated technology and a lot of data. We've been able to get to a point now where technology has become much more efficient, so we're just monetizing this audience more effectively. What gets us really excited is that we're a couple quarters in.

Speaker Change: <unk> daily and mobile apps, and we're able to service them.

Speaker Change: Historically in this channel the monetization has been very low for 1000 impressions compared to what the social networks and the search engines in the video apps have gotten to and those companies had very sophisticated technology and a lot of data we've been able to get to a point now where our technology has become much more efficient. So we're just more.

Speaker Change: Monetizing this audience more effectively what gets US really excited is we're a couple of quarters and we're really starting from a low monetization point the whole market is monetizing these users buying games at a low point when you're when you have that much reach 170 million daily actives and the states. These aren't people that are just playing more.

Adam Ferrughi: We're really starting from a low monetization point. The whole market is monetizing these users playing games at a low point. When you have that much reach, 170 million daily actives in the States, these aren't people that are just playing mobile games. There's just no way.

Speaker Change: Games, there's no way, it's a very very widespread audience predominantly adult that are doing other things and as these technologies get to a point of predicting more broader application of advertising till this audience not only we will get more efficient and will expand out the reach for a company like ours to other verticals and it'll create more.

Adam Ferrughi: It's a very, very widespread audience, predominantly adults, that are doing other things. And as these technologies get to a point of predicting more broader applications of advertising to this audience, not only will it get more efficient, it'll expand out the reach for a company like ours to other verticals, and it'll create more efficiency for the publisher. We should grow everything.

Speaker Change: More efficiency for the publisher where should grow everything and so that's what gets us really excited that it all comes down to efficiently monetizing a huge audience that we have access to them.

Adam Ferrughi: And so that's what gets us really excited. It all comes down to efficiently monetizing the huge audience that we have. Great, maybe if I could speak more and more, and you know, we get the question all the time, in simple terms, if you could explain, you know, what's the main difference between Axon 2 versus Axon 1? Maybe, just for simplicity's sake for investors, sort of framed, you know, what's the biggest change or observation you see on your end? Thanks, Adam.

Speaker Change: Great and then if I can sneak one more in you know we get the question all the time and in simple terms. If you could explain what's the main difference from axon two versus axon, one maybe just for simplicity sake for investors sort of frame what what's the biggest change your observation you see in Europe, yes.

Adam Ferrughi: Yeah, it's just better. I mean, it's just the technology is built to scale better. It's more efficient, more effective. These are predictive technologies in the day, and I've drawn the analogy to chat GPT, and the only reason I do that is because we can all type in a box and get a result, and we all know that chat GPT 3 to 3, 5 to 4, 4 was better than 3, 5 was better than 3, right? But we could have seen that.

Speaker Change: Is this better now.

Speaker Change: Just the technology is built to scale better it's more efficient more effective these are predictive technologies on the day and I'm drawing the analogy to chatty routine and the only reason I do that is because we can all type in a box and get a result, and we all know that Chad D. V. D. Three to three five to four four was better than three five was better than three rate, but we can assume.

Adam Ferrughi: Well, what we can't see in a black box algorithm is a type in and a result, but what we can see is that what we're trying to predict is show an advertisement to a consumer for some advertiser and drive value to the advertiser, and there's a whole bunch of predictions along the way, and Axon 2 makes them better than the prior version, and that creates a lot of efficiency gains, both for our business Okay, thanks y'all, and Cannonball's Vasily Karasov has the next question. Thank you. I have two.

Speaker Change: That will well what we can see in a black box algorithm is a type in in our result, but what we can see is that what we're trying to predict is shown advertising to a consumer for some advertiser.

Speaker Change: And drive value to the advertiser and Theres, a whole bunch of predictions along the way and axon two makes them better than the prior version and that creates a lot of efficiency gain both for our business and that of our partners.

al: Okay. Thanks al.

al: Yep.

Sealy Caris: Add cannonballs the Sealy Caris off has the next question.

Speaker Change: Thank you I have two first one can you talk in a little more detail about <unk>.

Matt Stumpf: First one, can you talk in a little more detail about the different trends for domestic and international markets that you see and revenue, or maybe metrics? Is there any difference? Do you see different penetration and, you know, customer response? And then the second one is, given what you said about extending the software platform, how sustainable are the margins in this segment that we saw in Q4? So, on the first point, we don't see a whole lot of difference domestically to internationally.

Sealy Caris: A different trends for domestic or international market that you see in the revenue or maybe metrics.

Sealy Caris: Is there any difference that you see a different penetration and customer response and then the second one is a.

Sealy Caris: Given what you said about extending software platform, how sustainable are they moved up margins in this segment that we saw in Q4. Thank you.

Speaker Change: On the first well.

Speaker Change: We don't see a whole lot of difference domestic to international there's consumption that drives our value and theres efficiency of the algorithms and partners that are advertising on us that drive the value and so other than like one off holidays in international locations that would alter the revenue percentages have you assumed a period of engagement is.

Adam Ferrughi: There's consumption that drives our value, and there's efficiency of the algorithms and partners that are advertising on us that drive the value. And so, other than like one-off holidays in international locations that would alter the revenue percentages, if you assume the period of engagement is consistent, then the revenue mix would also be consistent. And the other core thing to always remember about our business is that all of our advertising is 100% performance-based. So an advertiser that wants a specific performance, a yield, in the U.S. is willing to get the same yield in Turkey or in the U.K. or in Germany or in Japan.

Speaker Change: Consistent then the revenue mix would also be consistent in the other core thing always are about our businesses all of our advertising is 100% performance based so an advertiser. The once a specific performance of yield in the U S is willing to get the same yield and in Turkey or in the U K or in Germany or in Japan.

Matt Stumpf: And so when they advertise with us, they are predominantly global advertisers. So we don't tend to see much variance. And on your second question, Vasili, in terms of just margin, we haven't seen any significant difference. I mean, as Adam mentioned previously, it's relatively small at this point, a non-gaming component of the business. But as we push into these other new verticals and industries, we don't see any material difference between the margin profiles of the existing mobile gaming business and non-gaming. Yeah, we've let you all know that when you see roughly 80% flow-through, we don't really expect that to be different as that's how our business continues to grow. The flow-through should be a really high conversion EBITDA. So Q4 is indicative of what we should expect next year, every quarter?

Speaker Change: And so when they advertise with us they are predominately global advertisers so.

Speaker Change: So we don't tend to see much variance there and.

Speaker Change: And on your second question was really in terms of just margin, we havent seen any significant difference I mean and as I mentioned previously it's relatively small at this point the non gaming component of the business, but as we push into these other new verticals and industries, we don't see any material difference between the margin profiles of the existing mobile gaming business of non gaming.

Speaker Change: Yeah. We've let you all know that you know when you see roughly 80% flow through we don't really expect that to be different is our software business continues to grow they'll flow through should be a really high conversion EBITDA.

Speaker Change: So Q4 is indicative of what we should expect next year every quarter.

Matt Stumpf: Well, on the incremental revenue growth, yeah. Yeah, I mean, if you look at just our guidance, Vasili, we're guiding to a similar position, right, in the 50 to 51% overall EBITDA margin. Thank you so much.

Speaker Change: On the incremental revenue round, yeah, Yeah, I mean, if you look at just our guidance phacelia, where we're guiding to similar position right in that $50 51 per se overall EBITDA margin.

Speaker Change: Thank you so much congratulations welcome. Thank you.

Matt Koss: Congratulations. You're welcome. Thank you, and Matt Koss with Morgan Stanley. Please go ahead with your question. Two, if I could. So from a real-time bidding perspective, it looks like I might have frozen. Can you still hear me?

Speaker Change: And Matt Coss with Morgan Stanley. Please go ahead with your question.

Hi, everybody. Thanks for taking the questions queue, if I could so from a real time bidding perspective, it looks like I might have frozen can you still hear me.

Matt Koss: Yep. Okay, good. Well, then we'll keep going. From a real-time bidding perspective, how much of the market has shifted towards real-time bidding at this point? And then can you talk about the financial impact that that will have when that process is complete and how investors should think about that through? And then I have a second.

Matt Coss: Yep Yep.

Matt Coss: Okay. Good well then we'll keep going on for real time bidding perspective, how much of the market has shifted toward real time bidding at this point and then can you talk about the financial impact that that will have when that process is complete and how investors should think that through and then I have a second.

Adam Ferrughi: Yeah, so the first one, the Google announcements on their move to go predominantly real-time bidding and mobile-mediated auctions came out, I think it was at some point in October, and they made a commitment to do it by January. But throughout Q4, the vast majority of the market was traded in a programmatic, real-time manner. And the impact of that is twofold for a business like ours. One is that we've operated the Max platform, not charging anything to advertising companies when they're not real-time bidding, but charging a take rate of 5% when they are real-time bidding. And we've disclosed that number before. That's just a consistent fee that we charge to bid on our platform.

Speaker Change: Yeah. So the first one on the.

Speaker Change: The Google announcements on their move to go predominate real time bidding and mobile mediated auctions came out I think it was some point in October and medical women to do by January but throughout Q4, the vast majority of the market was traded in a programmatic real time manner.

Speaker Change: The impact of that is twofold for a business like ours. One is we've operated the Max platform not charging anything to advertising companies when they're not real time bidding, but charging a take rate of 5%. When they are real time bidding and we've disclosed that number before that shows a consistent fee that we charge to been on our platform now with the majority.

Adam Ferrughi: Now, with the majority of the market moving that way, that's a good economic development for the Max platform, and that obviously benefits our software segment. On the second point of the impact, what real-time bidding does is clear an auction faster. There's less consumption, so there's just less infrastructural load in order to process a real-time auction versus a waterfall auction, and there's a quicker ad delivery. And by delivering an advertisement more quickly, the publisher benefits because they can show more advertisements to their consumers whenever they want to. Instead of waiting for an advertisement to actually clear, it clears faster and more often. By doing that, it creates a world where the publisher starts yielding more in an efficient manner, which can then drive up their ad revenue per user.

Speaker Change: We are the market moving that way that's a good economic development for the Max Biopharma and that obviously benefits our software segment on.

Speaker Change: On the second point of the impact there what real time bidding does is clear and auction faster there is less consumption. So they're just less infrastructural load in order to process, a real time auction versus a waterfall auction and theres, a quicker ad delivery and by delivering an advertisement more quickly the publisher benefits.

Speaker Change: Because they can show more advertisements to their consumer whenever they want to instead of waiting for an advertisement to actually clear it clears faster and more show by doing that it creates a world where the publisher search yielding more in an efficient manner, which can then drive up their AD revenue per user in and then the whole formula that we operate on us.

Adam Ferrughi: And then the whole formula that we operate on is the publisher makes more, they reinvest more in user acquisition, their business grows, and we enable that growth, and our business grows with it. So we're only seeing positive results from this transition. Great, thank you.

Speaker Change: Bulger makes more of the reinvest more in the user acquisition their business grows and we enable that growth in our business grows with it. So we're we're only seeing positive from this transition.

Speaker Change: Great. Thank you and then the second question was just on the competitive environment.

Adam Ferrughi: And then the second question was just on the competitive environment. Obviously, one of your competitors is going through a major restructuring. I guess, are you seeing any shifts, positive or negative, in the competitive landscape, you know, year to date? Look, since we went public, we've been a very strong independent leader in the sector. I don't think anything has changed there. We've been focused on executing ourselves. And as our technology has gotten more efficient, obviously, we're driving more value to advertisers. But we've said this for, I think, multiple quarters now: none of us operate in a zero-sum game. So when we're able to drive more value to these advertisers who are buying on a performance basis, they don't go; we have a fixed budget, and we're going to pull from here. They go, OK, we have a budget over here. We have a budget over here. But Applovin is now five times better than they were.

Speaker Change: Obviously, you know one of your competitors is going through a major restructuring I guess are you seeing any shift positive or negative in the competitive landscape.

Speaker Change: Year to date.

Speaker Change: What books says we went public we've been a very strong independent leader in the sector. I don't think anything has changed there we've been focused on executing ourselves in is our technology has gotten more efficient obviously were driving more value to advertisers, but we said this for multiple quarters out none of us operate in a zero sum game. So we were able to drive more.

Speaker Change: More value type these advertisers who are buying on a performance basis. They don't go we have a fixed budget and we're going to pull from here. They go okay. We have budget over here, we have budget over here, but Apple ovens now five times better than they were so let's expand the budget with them too and they're able to reinvest more dollars into the user acquisition, which helps their businesses grow and that's what makes.

Adam Ferrughi: So let's expand the budget with them too, and they're able to reinvest more dollars into user acquisition, which helps their businesses grow. And that's what makes the space quite appealing, is that none of it's zero-sum, whether on the publisher or the advertiser side. And so we've been able to focus our heads down on our own execution.

Speaker Change: This space quite appealing is that none of us zero-sum, whether on the publisher or the advertiser side and so we've been able to focus heads down on our own execution. Our team has built really cutting edge technology that works better than any other I think any of the advertisers or our peers have seen in the sector, but that benefits everyone in the sector and so we're excited that that.

Adam Ferrughi: Our team has built really cutting-edge technology that works better than any other, I think, any of the advertisers or our peers have seen in the sector. But that benefits everyone in the sector, and so we're excited that that is just a reality in the industry. Great, thank you.

Speaker Change: That is just a reality of the industry we're in.

Speaker Change: Great. Thank you.

David Karnovsky: David Karnovsky with J.P. Morgan has the next question. Thanks for taking the question. Adam, relative to your prior shareholder letters, you seem to be describing a mobile market which is broadly inflecting for the better. So I wanted to see if you could walk through some of the drivers of that, what you're seeing. And then for Matt, wanted to confirm you said 70% pre-cash flow conversion expected from here. I think the prior range was 50 to 60.

Speaker Change: David Karnofsky with Jpmorgan has the next question.

David Karnovsky: Alright, Thanks for taking the question Adam maybe relative to your prior shareholder letters you seem to be describing a mobile market.

Which is broadly in selecting for the better so wont see you could walk through some of the drivers of that what Youre seeing and then for Matt wanted to confirm you said 70 ish, 70% free cash flow conversion expected from here I think the prior range was 50 to 60, so maybe what's driving the better flow through and it just housekeeping on the Q1 guide any color in terms of.

Adam Ferrughi: So, you know, maybe what's driving the better flow through. And then, just housekeeping on the Q1 guide, any color in terms of expected app growth there, even on a directional basis, should you gain sequentially, or would we see sort of a seasonal decrease? Matt covered two and three.

Matt Coss: Expected apps growth there even on a directional basis should again sequentially or would we see sort of a seasonal decrease all.

Speaker Change: Our mountain cover two and three on the first one on the mobile market, we put out a blog I think it was around Thanksgiving. So that it was a good one highlighting just CPM growth in the industry compared comparing 'twenty three to 'twenty two holiday period, and what we saw in Q4 was that just coming off a weak comps in 'twenty two when every part.

Matt Stumpf: On the first one on the mobile market, we put out a blog, I think it was around Thanksgiving, so that was a good one, highlighting just CPM growth in the industry, comparing 23 to 22 holiday periods. And what we saw in Q4 was that just coming off of weak comps in 22 when every part of the economy was fearful, and this sector was particularly fearful, brands and performance advertisers were more willing to invest in marketing dollars. Now, what we don't know about that is, are the AI-driven advancements in marketing technologies that you've seen implied by our numbers and our performance in technology, and what Facebook has done and what Google has done over the last year driving that acceleration? Or is it just the economy recovering? And we think it's a function of both.

Speaker Change: The economy was fearful and in this sector was particularly fearful we saw brand and performance advertisers more willing to invest in marketing dollars now what we don't know about that is are the AI driven advancements in the marketing technologies that you've seen implied by our numbers and our performance and technology and <unk>.

Speaker Change: What Facebook has done and what Google have done over the last year, driven that acceleration or is it just the economy recovering and we think it's a it's a function of both and we actually think because we're not brand advertising at all ours is entirely due to the technology efficiency, you're seeing this markets start recovering its coming off a weak comps so getting.

Adam Ferrughi: And we actually think because we're not brand advertising at all, ours is entirely due to technology efficiency. You're seeing this market start recovering. It's coming off of weak comps, so getting back to growth is easier than it was in the past, but the marketing technologies evolving from here and continuing to improve are gonna be a really good catalyst for a return to growth for this mobile market. In terms of free cash flow, we guided to 70% going forward on a long-term basis. On a quarterly basis, we will have fluctuations depending upon just working capital and then also the timing of tax payments.

Speaker Change: Back to growth is easier than it was in the past, but the marketing technologies evolving from here and continuing to improve is going to be a really good catalyst for a return to growth for this mobile market.

In terms of free cash flow and so we did guide to 70% going forward on a long term basis on a quarterly basis, we will have fluctuations depending upon just working capital and then also the timing of tax payments, but we are sitting seeing better free cash flow conversion from EBITDA than we were expecting which is a.

Matt Stumpf: But we are seeing better free cash flow conversion from EBITDA than we were expecting, which is a positive impact that we're seeing from all the technology improvements that we've made. And then in terms of the Q1 guide, your last question, obviously, we don't provide segment guidance, so I won't comment on apps versus software, but we are happy to be able to guide into Q1 with slight growth, considering the fact that it is a seasonally low period for the advertising market. Anything else, David?

Speaker Change: Positive.

Speaker Change: No impact that we're seeing from all of the technology improvements that we've done.

Speaker Change: And then in terms of the Q1 guide here and your last question.

Speaker Change: Obviously, we don't provide segment guidance, so I won't comment on Cao apps versus software, but we are happy to be able to guide into Q1 with slight growth considering the fact that it is a seasonally low period for the advertising market.

Speaker Change: Okay.

Speaker Change: Anything else David.

David Karnovsky: All right, well, Adam, and Matt, we will take our last question from Chris Kintarich with UBS. Great, thanks for taking the question. I think we're a bit further on into the PTV testing at this point.

David: Alright, well out of them that we will take our last question from Chris Qintar H with UBS.

Speaker Change: Great. Thanks for taking the question.

Speaker Change: So I think we're a bit further on into the CTV testing at this point can you just give us some feedback from advertisers on on how that adoption of that scaling.

Chris Kintarich: Can you just give us some feedback from advertisers on how that adoption is going? Look, the CTV testing and the rollout are in the early stage, and we've got a really large software platform business now with net revenue near $2 billion. So for it to become very substantial for these advertisers is a ways out. But they're all intrigued by it because, traditionally, and I don't know if you do channel checks, you won't find another place where these advertisers can buy on a performance basis the way we can enable it on connected TV today. So I'd say it's the first inning.

Speaker Change: Yes.

Speaker Change: Look the CTV testing in the LOE is early stage and we've got a really large software platform is this now not revenue near $2 billion. So for it to become very substantial for these advertisers is a ways out there all intrigued by it because traditionally and I don't know if you do channel checks you won't find another place where these adverse.

Speaker Change: Titers can buy on a performance basis the way we can enable it on connected TV today. So let's say this first inning everyone's excited by the prospect of being able to go recruit a consumer on a new device that they just had never had the access to before and the way that we can enable it but it's early and in our business as big as we are and as fast growing as is.

Adam Ferrughi: Everyone's excited by the prospect of being able to go recruit a consumer on a new device that they just haven't had access to before in the way that we can enable it. But it's early, and in our business, as big as we are, and as fast growing as that business is, for any new initiative to make a material impact, we're talking multiple years. understood. And maybe just going back to the non-gaming business.

Speaker Change: That business is.

Speaker Change: For any new initiative to make a material impact we're talking multiple years.

Understood and maybe just going back to the non gaming business I think had been a position in the past that there was a bit of a lag between the adoption of axon to.

Adam Ferrughi: I think it's been argued in the past that there was a bit of a lag between the adoption of axon from gaming to non-gaming and just the scaling of budgets here within the non-gaming business. Once those advertisers adopt Axon, can you just talk about kind of if that slowness to scale budgets within that non-gaming business, if you guys are starting to see that normalize and start to kind of revert to what you're saying? In your gaming business. Thanks. Yeah, it's a good question.

Speaker Change: From gaming and non gaming and just the scaling it budgets here.

Speaker Change: Within the non gaming business one it says advertisers adopt axon two can you just talk about kind.

Speaker Change: Is that a slowness to scale budgets within that non gaming business that you guys are starting to see that normalizing and then start to kind of revert to what you're saying in your gaming business.

Yeah. It's a good question and non gaming will will probably never get to as quick as mobile gaming mobile gaming marketer.

Adam Ferrughi: Non-gaming will probably never get as quick as mobile gaming; the mobile gaming marketer sees an opportunity and jumps on it. It's just that it tends to be a more commoditized space and it's a tougher space for content providers to plan, whereas non-gaming enterprises tend to have a brand, and they have fixed budgets, and they normally plan their budgets every quarters and years out. And so because of that, it won't ever be a quick-to-move market. That said, we talked about it growing faster than the gaming segment. We do know the technology application works across any category that we've seen so far.

Speaker Change: Season opportunity and jumps on it is just that.

Speaker Change: It tends to be a more commoditized space and it's a tougher space for content providers. The plan, whereas non gaming enterprises tend to have a brand and they have fixed budgets and they normally plan their budgets and every quarters in years out and so because of that it won't ever be a quick to move market that said, we talked about it growing faster than the gaming segment, we do know the.

Speaker Change: <unk> application works across any category that we've seen so far so as we get a fintech advertiser lives or rentals company or an E. Commerce company, we're seeing success across the board. So it's an area, we're investing and we're increasing our head count there now we always operate efficiently and lean so that doesn't mean a lot of costs, but we are investing in bringing.

Adam Ferrughi: So as we get a fintech advertiser live, or a rental company, or an e-commerce company, we're seeing success across the board. So it's an area we're investing in. We're increasing our headcount there. Now, we always operate efficiently and lean, so that doesn't mean a lot of cost, but we are investing in bringing in the right people to really expand these non-gaming verticals because we see a ton of opportunity. Okay, and maybe just one housekeeping job if I can squeeze it in.

Speaker Change: And the right people to really expand these non gaming verticals, because we see a ton of opportunity there.

Speaker Change: Okay, and maybe just one housekeeping if I can squeeze in and I think you had called out in the software segment outperformance in 14, you listed off the handful of factors I think it started with.

Chris Kintarich: I think you called out the software segment outperformance in 4Q. You've listed off a handful of factors. I think it started with a strong market and wrapped up with growth and advertiser budgets. Should we be directionally or kind of if we were to stack stack rank these various impacts?

Speaker Change: A strong marketing and wrapped up with growth in advertiser budgets, so even directionally or kind of if we were to stack stack rank. These various impacts is that kind of from the most impactful the least impactful or anything to read into there.

Adam Ferrughi: Is that kind of from most impactful to least impactful or anything to read into there? Thanks. No, they're not rank ordered on my list of factors. Yeah, it's just a combination. And I'd say just given the growth rate we're on, and you've seen for multiple quarters now, the bigger part of our growth is driving more efficient value to advertisers, unlocking more budget, and expanding the advertiser total than the market. The market isn't growing anywhere near as fast as we are.

No theyre not rank ordered my list of factors Yeah. It's just a combination and I would say just given the growth rate wrong and you've seen for multiple quarters now the bigger part of our growth is driving more efficient value to advertisers unlocking more budget and expanding the advertiser total that then it is the market the market isn't growing anywhere near as fast.

Speaker Change: That's what we are.

Chris Kintarich: Hunter's Inn. Thanks. Thanks, Chris. Well, this does conclude our question and answer session for the quarter. We thank you all for joining us today. Have a good afternoon. We'll see you next time. Thanks, Sarah.

Speaker Change: Understood. Thanks.

Speaker Change: Thanks, Chris.

Speaker Change: This does conclude our question and answer session for the quarter. We thank you all for joining US today have a good afternoon, we'll see you next time thanks.

Speaker Change: Thanks Sarah.

Speaker Change: Good.

Speaker Change: Yes.