Q2 2024 AppLovin Corp Earnings Call

August 7, 2024

Welcome to the Applovin earnings call for the second quarter into June 30th, 2024. I'm David Hsiao, head of investor relations. Joining me today to discuss our results are Adam Foroughi, 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 second quarter are available at investors.applovin.com.

30th, 2024.

David Hsiao: I'm David Hsiao, head of investor relations. Joining me today to discuss our results are Adam Foroughi, our co-founder, CEO, and chairperson, and Matt Stumpf, our CFO.

David Hsiao: I'm David Hsiao, head of investor relations.

David Hsiao: David Hsiao, Head of Investor Relations Joining me today to discuss our results are Adam Foroughi, our co-founder, CEO, and chairperson, and Matt Stumpf, our CFO. Please note, our SEC filings to date, as well as our schedule letter and press release discussing our second quarter are available at Investors. Applovin.com. During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the expected future financial performance of the company, and other future events. 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 those predicted.

David Hsiao: Joining me today to discuss our results are Adam Foroughi, our co-founder, CEO, and chairperson, and Matt Stumpf, our CFO. Please note, our SCV filings to date, as well as our Cheryl letter and press release, discussing our second quarter, are available at investors.hablovin.com.

David Hsiao: Please note, our SEC filings to date, as well as our schedule letter and press release discussing our second quarter, are available at investors.applovin.com. During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the expected future financial performance of the company, and other future events. 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 those predicted.

David Hsiao: During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the expected future financial performance of the company, and other future events. 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: During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the expected future financial performance of the company, and other future events.

These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except as required by law.

David Hsiao: We encourage you to review the risk factors in our most recently filed Form 10-Q for the first quarter and in March 31st, 2024. Additional information may also be found on our quarterly report and Form 10-Q for the fiscal quarter and the June 30th, 2024, which will be filed later today.

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 first quarter and in March 31, 2024.

David Hsiao: We encourage you to review the risk factors in our most recently filed Form 10-Q for the first quarter and March 31st, 2025. Additional information may also be found on our quarterly report in Form 10-Q for the fiscal quarter ended June 30, 2024, which will be filed later today. We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be superior to or substitute for our GAAP results.

Additional information may also be found on our quarterly report in Form 10-Q for the fiscal quarter ending June 30, 2024, which will be filed later today.

David Hsiao: We will also be discussing non-GAAP financial measures. These non-gap measures are not intended to be superior to, or as substitute for, our gap results. Please be sure to review the reconciliation of our GAAP and non-GAAP financial measures in our earnings release and Cheryl letter, available on our investor relations site.

We will also be discussing non-GAAP financial measures.

These non- GAAP measures are not intended to be superior to or substitute for our gap results.

David Hsiao: 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 site. This conference call is being recorded, and a replay will be available for a period of time 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.

Please be sure to review the reconciliations of our GAAP and non-GAAP financial measures in our earnings release and shareable letter, available on our Investor Relations site.

David Hsiao: This conference call is being recorded, and a replay will be available for a period of time on our IR website.

This conference call is being recorded and a replay will be available for a period of time on our IR website.

Adam Foroughi: 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. We had another strong quarter in Q2. Our software business had 5% revenue growth quarter over quarter because our models continue to improve. As you'll recall in Q1, we had a big step up in growth, so continuing that trend to continue to grow quarter over quarter is a really promising sign. As we've stated in previous earnings calls, if we keep growing the software business, the flow through to EBITDA and cash is very high, and our business margins and cash conversion will continue to improve.

Speaker Change: 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.

David Hsiao: We encourage you to review the risk factors in our most recently filed Form 10-Q for the first quarter and in March 31st, 2021. Additional information may also be found on our quarterly report in Form 10-Q for the fiscal quarter ended June 30, 2024, which will be filed later today. We will also be discussing non-GAAP financial measures. These non-GAAP measures are not intended to be superior to or substitute for our GAAP results.

Adam Foroughi: Welcome, everyone, and thank you for joining us. We had another strong quarter in Q2. Our software business had 5% revenue growth quarter over quarter because our models continue to improve. As you'll recall, in Q1 we had a big step up in growth, so continuing that trend to continue to grow quarter over quarter is a really promising sign. As we've stated in previous earnings calls, if we keep growing the software business, the flow through to EBITDA in cash is very high, and our business margins and cash conversion will continue to improve.

Speaker Change: Welcome everyone, and thank you for joining us. We had another strong quarter in Q2.

Speaker Change: Our software business had 5% revenue growth quarter over quarter because our models continue to improve.

Speaker Change: As you'll recall, in Q1 we had a big step up in growth, so continuing that trend to continue to grow quarter over quarter is a really promising sign.

As we've stated in previous earnings calls, if we keep growing the software business, the flow through to EBITDA and cash is very high, and our business margins and cash conversion will continue to improve.

Adam Foroughi: We've also consistently said that the slower growth market we're in, mobile gaming doesn't constrain our opportunity to grow our software business.

Adam Foroughi: We've also consistently said that the slower growth market we're in, mobile gaming, doesn't constrain our opportunity to grow our software business. We've noticed that at times, this concept needs a little bit more explaining for our shareholders and prospective investors, so I wanted to take the time to do that here. Our platform is entirely performance-based.

We've also consistently said that the slower growth market we're in, mobile gaming doesn't constrain our opportunity to grow our software business.

Adam Foroughi: We've noticed that at times this concept is needed a little bit more explaining for our shareholders and prospective investors, so I wanted to take the time to do that here. Our platform is entirely performance-based. In other words, gaming advertisers who market on our platform generate a measurable revenue and profit from the dollars they spend on our platform. Our customers run marketing campaigns with target return goals but tend to have a much higher appetite for spend on our platform than we can deliver today. And why can't we deliver more today? Because our current system can only find a limited number of users who will meet their revenue goals.

We've noticed that at times this concept is needed a little bit more explaining for our shareholders and prospective investors. So I wanted to take the time to do that here.

Adam Foroughi: In other words, gaming advertisers who market on our platform generate measurable revenue and profit from the dollars they spend on our platform. Our customers run marketing campaigns with target return goals but tend to have a much higher appetite for spend on our platform than we can deliver today. And why can't we deliver more today?

Speaker Change: Our platform is entirely performance-based. In other words, gaming advertisers who market on our platform generate a measurable revenue and profit from the dollars they spend on our platform.

Speaker Change: Our customers run marketing campaigns with target return goals, but tend to have a much higher appetite for spend on our platform than we can deliver today. And why can't we deliver more today?

Adam Foroughi: because our current system can only find a limited number of users who will meet their revenue goals. As our technology improves, we will continue to find more users who achieve these goals, increasing advertiser spend, resulting in materially higher growth than the growth rate of the mobile gaming market. Last quarter, I talked about a goal of growing our software business 20 to 30% for the long term. I typically don't communicate externally about our goals if I don't have confidence in them.

Speaker Change: Because our current system can only find a limited number of users who will meet their revenue goals.

Adam Foroughi: As our technology improves, we will continue to find more users who achieve these goals, increasing advertiser spend, resulting in materially higher growth than the growth rate of the mobile gaming market. Last quarter, I talked about a goal of growing our software business 20 to 30 percent for the long term. I typically don't communicate externally about our goals if I don't have confidence in it. I'm communicating it now because I do have strong confidence in it, and I see many years of growth ahead of us.

Speaker Change: As our technology improves, we will continue to find more users who achieve these goals, increasing advertiser spend, resulting in materially higher growth than the growth rate of the mobile gaming market.

Speaker Change: Last quarter I talked about a goal of growing our software business 20-30% for the long term. I typically don't communicate externally about our goals if I don't have confidence in it.

Adam Foroughi: I'm communicating this now because I do have strong confidence in it and I see many years of growth ahead of us. Here are the primary drivers of that growth. Continued improvement from our models as they learn from more data. As our models gather more data, they'll become more accurate and find more good users for our advertisers. Gains that our team delivers to the efficacy of our models through enhanced, Our research science and core engineering team members are exceptionally talented and consistently deliver lifts to the performance of our models.

Speaker Change: I'm communicating it now because I do have strong confidence in it and I see many years of growth ahead of us.

Adam Foroughi: House.

Adam Foroughi: Here are the primary drivers of that growth goal. Continued improvement from our models as they learn from more data. As our models gather more data, they'll become more accurate and find more good users for our advertisers. Gains that our team delivers to the efficacy of our models through enhancements. Our research science and core engineering team members are exceptionally talented and consistently delivered lifts to the performance of our models. Demand expansion into new verticals. We just launched the first web advertising campaigns for shops this quarter. And while in pilot right now, we think it will unlock a lot of demand expansion opportunities for us.

Speaker Change: Here are the primary drivers of that growth goal.

Speaker Change: Continued improvement from our models as they learn from more data. As our models gather more data, they'll become more accurate and find more good users for our advertisers.

Speaker Change: Gains that our team delivers to the efficacy of our models through enhancements.

Speaker Change: Our research science and core engineering team members are exceptionally talented and consistently deliver lifts to the performance of our models.

Adam Foroughi: Demand Expansion into New Verticals. We just launched the first web advertising campaigns for shops this quarter. And while in pilot right now, we think it will unlock a lot of demand expansion opportunities for us. And then supply expansion. As we broaden out our demand base outside of gaming, we expect the new categories will really help grow our CPB footprint. We continue to be very excited about our prospects and the performance our team is able to deliver.

Speaker Change: Demand Expansion into New Verticals

Speaker Change: We just launched the first web advertising campaigns for shops this quarter. And while in pilot right now, we think it will unlock a lot of demand expansion opportunities for us.

Adam Foroughi: And then supply expansion. As we broaden out our demand-based outside of gaming, we expect the new categories will really help grow our CKB footprint. We continue to be very excited about our prospects, and the performance our team is able to deliver. We will work tirelessly to achieve the goals we set and hope that over the next many quarters and years together, you will have a better sense of how an AI-driven marketing platform creates growth opportunities that just weren't possible in advertising before because technologies were not this sophisticated.

Speaker Change: And then supply expansion. As we broaden out our demand base outside of gaming, we expect the new categories will really help grow our CPB footprint.

Speaker Change: We continue to be very excited about our prospects and the performance our team is able to deliver.

Adam Foroughi: We will work tirelessly to achieve the goals we set and hope that, over the next few quarters and years, together, you will have a better sense of how an AI-driven marketing platform creates growth opportunities that just weren't possible in advertising before because technologies were not this sophisticated. With that, I'll hand it off to Matt to run you through the financial highlights.

Speaker Change: We will work tirelessly to achieve the goals we set and hope that over the next many quarters and years, together, you will have a better sense of how an AI-driven marketing platform creates growth opportunities that just weren't possible in advertising before because technologies were not this sophisticated.

Matt Stumpf: With that, I'll hand it off to Matt to run you through the financial highlights. Thanks, Adam, and good afternoon. I'm pleased to report we had another strong quarter, with total revenue reaching $1.08 billion and adjusted EBITDA of $601 million, achieving a 56% adjusted EBITDA margin. This marks a 44% increase in revenue and an 80% increase in adjusted EBITDA from the same period last year, translating to an impressive 81% flow through from revenue to adjusted EBITDA. In the first quarter, we generated $446 million in free cash flow, which is a 74% flow through from adjusted EBITDA.

David Hsiao: Please be sure to review the reconciliations of our GAAP and non-GAAP financial measures in our earnings release and shareable letter, available on our investor relations site. This conference call is being recorded, and a replay will be available for a period of time 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.

Speaker Change: With that, I'll hand it off to Matt to run you through the financial highlights.

Matt Stumpf: Thanks, Adam, and good afternoon. I'm pleased to report we had another strong quarter with total revenue reaching $1.08 billion, and an adjusted EBITDA of $601 million, achieving a 56 percent adjusted EBITDA margin. This marks a 44 percent increase in revenue and an 80 percent increase in adjusted EBITDA from the same period last year. Translating to an impressive 81% flow through from revenue to adjusted EBITDA, In the first quarter, we generated $446 million in free cash flow, which is a 74% flow-through from adjusted EBITDA.

Adam Foroughi: Welcome, everyone, and thank you for joining us. We had another strong quarter in Q2. Our software business had 5% revenue growth quarter over quarter because our models continue to improve. As you'll recall, in Q1 we had a big step up in growth, so continuing that trend to continue to grow quarter over quarter is a really promising sign. As we've stated in previous earnings calls, if we keep growing the software business, the flow through to EBITDA and cash is very high, and our business margins and cash conversion will continue to improve.

Matt: Thanks, Adam, and good afternoon.

Adam Foroughi: We've also consistently said that the slower growth market we're in, mobile gaming, doesn't constrain our opportunity to grow our software business. We've noticed that at times this concept needs a little bit more explaining for our shareholders and prospective investors, so I wanted to take the time to do that here.

Matt: i'm pleased to report we had another strong quarter with total revenue reaching one point zero eight billion dollars

Matt: An adjusted EBITDA of $601 million, achieving a 56% adjusted EBITDA margin. This marks a 44% increase in revenue and an 80% increase in adjusted EBITDA from the same period last year.

Adam Foroughi: Our platform is entirely performance-based. In other words, gaming advertisers who market on our platform generate measurable revenue and profit from the dollars they spend on our platform. Our customers run marketing campaigns with target return goals but tend to have a much higher appetite for spend on our platform than we can deliver today. And why can't we deliver more today?

Matt: Translating to an impressive 81% flow-through from revenue to adjusted EBITDA.

Matt: In the first quarter, we generated $446 million in free cash flow.

Matt Stumpf: Quarter-over-quarter, our free cash flow grew 15% compared to 10% growth in adjusted EBITDA over the same period, as we benefited from a relatively stable base of cash tax and interest. During the quarter, improvement in our axel on technology, driven by ongoing self-learning, contributed to further growth of our software platform, which generated $711 million in revenue and $520 million in adjusted EBITDA, retaining our 73% margin and growing 91% from the same period last year. This represents an 87% flow through of revenue from the prior quarter, illustrating our ability to remain disciplined with our costs, growing revenue while remaining lean and efficient.

Matt Stumpf: Quarter over quarter, our free cash flow grew 15% compared to 10% growth in adjusted EBITDA over the same period, as we benefited from a relatively stable base of cash taxes. During the quarter, improvement in our Axon technology, driven by ongoing self-learning, contributed to further growth of our software platform, which generated $711 million in revenue and $520 million in adjusted EBITDA, retaining our 73% margin and growing at 91% from the same period last year.

Matt: which is a seventy four percent flowthrough from adjusted vida

Matt: Quarter over quarter, our free cash flow grew 15%.

Matt: compared to 10% growth in adjusted EBITDA over the same period as we benefited from a relatively stable base of cash tax and interest.

Adam Foroughi: because our current system can only find a limited number of users who will meet their revenue goals. As our technology improves, we will continue to find more users who achieve these goals, increasing advertiser spend, resulting in materially higher growth than the growth rate of the mobile gaming market. Last quarter, I talked about a goal of growing our software business 20% to 30% for the long term. I typically don't communicate externally about our goals if I don't have confidence in them.

Matt: during the quarter improvement in our excellent technology driven by ongoing self learning contributed to further growth of our softwareplatform which generated seven hundred and eleven million dollars in revenue

Matt: and five hundred and twenty million dollars in adjusted ebitda retaining our seventy three percent margin and growing at ninety one percent from the samean period last year

Matt Stumpf: This represents an 87% flow-through of revenue from the prior quarter, illustrating our ability to remain disciplined with our costs, growing revenue while remaining lean and efficient. Our app's revenue for the quarter was $369 million, an increase of 7% from last year, with $81 million in adjusted EBITDA, representing a 22% margin. During the quarter, we readjusted our user acquisition return goals, resulting in an 11% quarterly-over-quarter decrease in total app segment costs, while revenue decreased by 3%.

Matt: This represents an 87% flow-through of revenue from the prior quarter, illustrating our ability to remain disciplined with our costs, growing revenue while remaining lean and efficient.

Matt Stumpf: Our axel revenue for the quarter was 369 million dollars, and increased the 7% from last year, with 81 million dollars in adjusted EBITDA, representing a 22% margin. During the quarter, we re-adjusted our user acquisition return goals, resulting in an 11% quarter-to-quarter decrease in total app segment costs, while revenue decreased by 3%.

Matt: our apps revenue for the quarter with three hundred and sixty nine million dollars

Matt: An increase of 7% from last year.

Matt: with $81 million in adjusted EBITDA, representing a 22% margin.

Matt: During the quarter, we readjusted our user acquisition return goals, resulting in an 11% quarter-over-quarter decrease in total app segment costs, while revenue decreased by 3%. We expect our future margin profile to normalize to approximately 15% over the long term, consistent with industry standards.

Matt Stumpf: We expect our future margin profile to normalize to approximately 15% over the long term, consistent with industry standards. Looking ahead to capital allocation, we plan to focus on three key areas. First, investment in organic growth is and initiatives. Specifically, our engineering and business development headcounts to support the development of our axel on technology and expansion into e-commerce. We do not expect significant capital investment here since we plan to expand our teams in a very lean and targeted manner. Second, continued share management activities with the combination of withhold the cover on future share investing and strategic repurchases.

Matt Stumpf: We do not expect significant capital investment here since we plan to expand our teams in a very lean and targeted manner. Second, continued share management activities with a combination of withholding the cover on future share vesting and strategic repurchase. And third, strengthening our balance sheet to enhance operational flexibility and liquidity while reducing net income. In Q2, we used $356 million to withhold 4.2 million shares, allocating about 80% of our free cash flow in the quarter to share makers.

Matt: Looking ahead to capital allocation, we plan to focus on three key areas. First, investment in organic growth initiatives, specifically our engineering and business development headcount, to support the development of our excellent technology and expansion into e-commerce.

Matt: We do not expect significant capital investment here, since we plan to expand our teams in a very lean and targeted manner.

Matt: second continued share management activities with a combination of withhold to cover on future share fasting and strategic repurchases

Matt Stumpf: And third, strengthening of our balance sheet to enhance operational flexibility and liquidity while reducing that debt. In Q2, we use $356 million to withhold 4.2 million shares, allocating about 80% of our free cash flow in the quarter to share management. Since 2022, we have invested nearly $3 billion to repurchase and withhold a combined $83.6 million shares.

Matt: And third, strengthening of our balance sheet to enhance operational flexibility and liquidity while reducing net debt.

Matt: In Q2, we used $356 million to withhold 4.2 million shares, allocating about 80% of our free cash flow in the quarter to share management.

Matt Stumpf: Since 2022, we have invested nearly $3 billion to repurchase and withhold a combined $83.6 million. Finally, in the third quarter of 2024, we anticipate delivering between $1.115 and $1.135 billion in revenue, with adjusted EBITDA between $630 and $650 million, targeting an adjusted EBITDA margin of $57.5.

Matt: since two thousand and twenty-two we've invested nearly three billion dollars to repurchase and withhold that combined eighty-three point six million shares

Matt Stumpf: Finally, in the third quarter of 2024, we anticipate delivering between $1.115 and $1.135 billion in revenue, with adjusted EBITDA between $630 and $650 million, targeting an adjusted EBITDA margin of 57%.

Matt: finally in the third quarter of two thousand and twenty four we anticipate to deliver between one point one one five and one point one three five billion dollars in revenue with adjusted ebitda between six hundred and thirty and six hundred and fifty million dollars targeting an adjusted ebit a margin of fifty seven percent

Operator: 30th, 2024.

David Hsiao: I'm David Hsiao, head of investor relations. Joining me today to discuss our results are Adam Foroughi, our co-founder, CEO, and Chairperson, and Matt Stumpf, our CFO. Please note, our SCV fileings to date, as well as our Cheryl Letter and press release, discussing our second quarter, are available at investors.hablovin.com.

David Hsiao: Now, with that, let's move to Q&A. Thank you so much, Matt. And again, like Matt mentioned, we will now take your questions. When I call your name, please tone your new video and go ahead and unmute yourself as well. And we will take as many questions as time permits. Our first question is going to come from Jason Mezzamette with City. Jason, please go ahead with your question. And go ahead and turn on your video as well if you wouldn't mind, Jason. All right, Jason, I see that you're out there. Go ahead and unmute yourself and turn on your video.

David Hsiao: Now with that, let's move on to, Thank you so much, Matt. And again, like Matt

David Hsiao: Thank you so much, Matt. And again, like Matt mentioned, we will now take your questions. When I call your name, please turn on your video, and go ahead and unmute yourself as well.

Matt: now with that let's move to q

Speaker Change: Thank you so much, Matt. And again, like Matt mentioned, we will now take your questions. When I call your name, please turn on your video and go ahead and unmute yourself as well. We will take as many questions as time permits. Our first question is going to come from Jason Bezinet with Citi. Jason, please go ahead with your question.

David Hsiao: During today's call, we will be making forward-looking statements regarding our products and services, market expectations, the expected future financial performance of the company, and other future events. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except it's 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 10Q for the first quarter and in March 31st, 2024.

David Hsiao: We will take as many questions as time permits. Our first question is going to come from Jason Bazinet with Citi. Jason, please go ahead with your question. And go ahead and turn on your video as well, if you wouldn't mind, Jason. All right, Jason. I see that you're out there. Go ahead, unmute yourself, and turn on your video.

Matt: And go ahead and turn on your video as well if you wouldn't mind, Jason.

Matt: All right Jason, I see that you're out there. Go ahead, unmute yourself and turn on your video.

David Hsiao: Well, it says the host won't let me do my video, so I can't do that part, but nonetheless. Ah, I got it. All right. You can do it now. Sorry about that, Jason. That was my fault. That's all right. I just had a quick question about some of the initiatives you guys are pursuing outside of gaming. I know it's still a little bit early, and you said some of these products were in beta.

David Hsiao: Well, it's just a host won't let me do my videos. I can't do that part. I got it. All right, you can do it now. Sorry about that too. That's my fault.

Speaker Change: well it's the host onetlet me do my vo i can't do that part but i'm a lot it all right you can do it now sorry about that's that's

David Hsiao: Additional information may also be found on our quarterly report and form 10Q for the fiscal quarter and the June 30th, 2024, which will be filed later today. We will also be discussing non-gap financial measures. These non-gap measures are not intended to be superior to, or as substitute for, our gap results. Please be sure to review the reconciliation of our gap and non-gap financial measures in our earnings release and Cheryl Letter, available on our investor relations site. This conference call is being recorded and a replay will be available for a period of time on our IR website.

Jason Mezzamette: I just said a quick question. On some of the initiatives you guys are pursuing outside of gaming. I know it's still a little bit early, and you said some of these products were in beta. But can you just sort of refresh us on sort of what your ambitions are and anything that you've learned so far? And when you think it might be sort of something that this is large enough where the street could, could care about it. Is it a 25, a 26 event? Just some sort of dimensionalization of the timing. Thanks. Yeah, good to see you, Jason.

Speaker Change: I just had a quick question on some of the initiatives you guys are pursuing outside of gaming. I know it's still a little bit early, and you said some of these products were in beta.

David Hsiao: But can you just sort of refresh us on sort of what your ambitions are and anything that you've learned so far, and when you think it might be sort of something that is large enough where the street could care about it? Is it a 25, a 26 event? Some sort of dimensionalization of the timing.

Speaker Change: But can you just sort of refresh us on sort of what your ambitions are and anything that you've learned so far and and when you think it might be sort of something that this is large enough where the street could could care about it. Is it a 25, a 26 event? Just some sort of dimensionalization of the timing. Thanks.

Adam Foroughi: Yeah, good to see you, Jason. In the quarter, Q2, we launched the pilot of our web advertising program. This allows an e-commerce shop that has a website to buy from our in-app inventory the billion plus daily active users we see in mobile gaming, a video advertisement, route that user to their shop, and purchase that user in the same way that mobile game companies like purchasing users on our platform. So we're doing it on a performance basis, and then we're delivering measurable revenue and results. This is brand new. I'd say it's been in pilot for a few months now.

Adam Foroughi: Yeah, good to see you, Jason.

Adam Foroughi: In the quarter Q2, we launched a pilot of our web advertising program. And this allows, let's talk about e-commerce first. This allows an e-commerce shop that has a website to buy on our in-app inventory, the billion plus daily active users we see in mobile gaming, a video advertisement and route that user to their shop and purchase that user in the same way that mobile game companies like purchasing users on our platform. So doing it on a performance basis. And then we're delivering a measurable revenue and results.

Matt: Yeah, good to see you, Jason.

Adam Foroughi: 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. We had another strong quarter in Q2. Our software business had 5% revenue growth quarter over quarter because our models continue to improve. As you'll recall in Q1, we had a big step up in growth, so continuing that trend to continue to grow quarter over quarter is a really promising sign.

Speaker Change: In the quarter, Q2, we launched pilot of our web advertising program.

Adam Foroughi: We will work tirelessly to achieve the goals we set and hope that, together, you will have a better sense of how an AI-driven marketing platform creates growth opportunities that just weren't possible in advertising before because technologies were not this sophisticated. With that, I'll hand it off to Matt to run you through the financial highlights.

Speaker Change: This allows, let's talk about e-commerce first, this allows an e-commerce shop that has a website

Speaker Change: to buy on our in-app inventory the billion-plus daily active users we see in mobile gaming.

Matt Stumpf: Thanks, Adam, and good afternoon. I'm pleased to report we had another strong quarter with total revenue reaching $1.08 billion, and an adjusted EBITDA of $601 million, achieving a 56 percent adjusted EBITDA margin. This marks a 44 percent increase in revenue and an 80 percent increase in adjusted EBITDA from the same period last year, translating to an impressive 81% flow-through from revenue to adjusted EBIT. In the first quarter, we generated $446 million in free cash flow, which is a 74% flow-through from adjusted EBITDA.

Matt Stumpf: Quarter over quarter, our free cash flow grew 15% compared to 10% growth in adjusted EBITDA over the same period, as we benefited from a relatively stable base of cash taxes. During the quarter, improvement in our Axon technology, driven by ongoing self-learning, contributed to further growth of our software platform, which generated $711 million in revenue and $520 million in adjusted EBIT, retaining our 73% margin and growing at 91% from the same period last year.

Matt: a video advertisement and route that user to their shop and purchase that user in the same way that mobile game companies like purchasing users on our platform. So doing it on a performance basis and then we're delivering a measurable revenue and results.

Matt Stumpf: We do not expect significant capital investment here since we plan to expand our teams in a very lean and targeted manner. Second, continued share management activities with a combination of withholding the cover on future share vesting and strategic repurchase. And third, strengthening our balance sheet to enhance operational flexibility and liquidity while reducing net debt. In Q2, we used $356 million to withhold 4.2 million shares, allocating about 80% of our free cash flow in the quarter to share makers.

Matt Stumpf: Since 2022, we have invested nearly $3 billion to repurchase and withhold a combined $83.6 million. Finally, in the third quarter of 2024, we anticipate to deliver between $1.115 and $1.135 billion in revenue with adjusted EBITDA between $630 and $650 million, targeting an adjusted EBITDA margin of $57.

David Hsiao: Now, with that, let's move on to... Thank you so much, Matt. And again, like Matt

Adam Foroughi: This is brand new. I'd say it's been in pilot for a few months now. Results are looking really promising, materially better than what we would have expected this early in our progression and trying to get into web advertising. So this product we think is something that we're going to invest heavily behind. Start scaling out, and hopefully we'll show a material impact in 25 and beyond. And it is not limited to just e-commerce. It opens the door to advertising for any website of any type that wants to drive transactions that are measurable on a performance basis on our platform.

Adam Foroughi: As we've stated in previous earnings calls, if we keep growing the software business, the flow through to EBITDA and cash is very high and our business margins and cash conversion will continue to improve. We've also consistently said that the slower growth market we're in, mobile gaming doesn't constrain our opportunity to grow our software business. We've noticed that at times this concept is needed a little bit more explaining for our shareholders and prospective investors, so I wanted to take the time to do that here.

Matt: this is brand new and say it's beenin pilot for a few months now results are looking really promising materially better than what we would have expected this early in our progression and trying to get into web advertising so this product we think is something that we're going to invest heavily behind

Adam Foroughi: Results are looking really promising, materially better than what we would have expected this early in our progression in trying to get into web advertising. So this product, we think, is something that we're going to invest heavily in, start scaling out, and hopefully, we'll show material impact in 25 and beyond. And it is not limited to just e-commerce. It opens the door to advertising for any website of any type that wants to drive transactions that are measurable on a performance basis on our platform.

Matt: start scaling out and hopefully willll show material impact in twenty five and beyond and it is not limited to just se commerce it opens the door to advertising for any website of any tyght that wants to drive transactions that are measurable on a performance basis on possible

Adam Foroughi: Our platform is entirely performance-based. In other words, gaming advertisers who market on our platform generate a measurable revenue and profit from the dollars they spend on our platform. Our customers run marketing campaigns with target return goals but tend to have a much higher appetite for spend on our platform than we can deliver today. And why can't we deliver more today? Because our current system can only find a limited number of users who will meet their revenue goals.

Jason Mezzamette: Thank you very much. Thanks.

Clark Lampen: Our next question will come from Eric. My apologies, Clark Lampen, with BTIG. Please go ahead. Hey, guys, good afternoon. Hopefully you can see and hear me at a perfect, so Adam, if we look at the third quarter guidance and we sort of assume that abstracts are relatively similar to what we saw last year, there's sort of an implied, comp-adjusted re-exceleration in the software business. And I'm going to guess that it's going to be driven by that sort of first primary driver that you mentioned, sort of model improvements and sort of the learnings that go on.

David Hsiao: Our next question will come from Eric. Oh, my apologies, Clark Lampen with BTEIG. Please go ahead, Clark.

David Hsiao: Thank you so much, Matt. And again, like Matt mentioned, we will now take your questions. When I call your name, please turn on your video, and go ahead and unmute yourself as well.

Speaker Change: Thank you very much.

Speaker Change: Thanks.

Speaker Change: Our next question will come from Eric, my apologies, Clark Lampen with BTEIG. Please go ahead, Clark.

David Hsiao: Hey, guys. Good afternoon. Hopefully, you can see and hear me. I've got you. Perfect.

Clark Lampen: Hey guys, good afternoon. Hopefully you can see and hear me. Perfect. So Adam, if we look at the third quarter guidance and we sort of assume that

Adam Foroughi: So, Adam, if we look at the third-quarter guidance and assume that app trends are relatively similar to what we saw last year, there's sort of an implied comp-adjusted re-acceleration in the software business. And I'm going to guess that it's going to be driven by that sort of first primary driver that you mentioned, sort of model improvements and sort of the learnings that go on. But one, I guess I'm curious if you could give us a sense of what's actually driving acceleration against tougher comps now. And then, you know, maybe what that sort of pretends for the back half into 25.

Speaker Change: Apps trends are relatively similar to what we saw last year. There's sort of an implied comp-adjusted re-acceleration.

Speaker Change: in the software business. And I'm going to guess that it's going to be driven by that sort of first primary driver that you mentioned, sort of model improvements and sort of the learnings that go on.

Adam Foroughi: But one, I guess I'm curious if you could give us a sense of what's actually driving acceleration against tougher comps now and then, you know, maybe what that sort of pretends for the back half into 25. Yeah, I mean, when we've talked about this growth goal, if you just think about the growth goal in terms of mobile gaming and the business that we have today, we just grew five percent quarter of a quarter. As the numbers are getting pretty big, Q1 was materially more. It was in the teens quarter of a quarter. We've always talked about like the model is going to continue to improve itself and pick up a few points of growth every single quarter, just from that enhancement.

Speaker Change: One, I guess I'm curious if you could give us a sense of what's actually driving acceleration against tougher comps now, and then, you know, maybe what that sort of pretends for the back half into 25.

Adam Foroughi: Yeah, I mean, when we talked about this growth goal, if you just think about the growth goal in terms of mobile gaming in the business that we have today, we just grew 5% quarter over quarter. The numbers are getting pretty big. Q1 was materially more, it was in the teens quarter over quarter. We've always talked about how the model is going to continue to improve itself and pick up a few points of growth every single quarter, just from that enhancement. But then the team is also trying to apply enhancements on top. When we get lifts from the team, those can be a step function.

Operator: House.

Speaker Change: Yeah, I mean, like when we've talked about this, this growth goal, if you just think about the growth goal in terms of mobile gaming in the business that we have today,

Speaker Change: We just grew 5% quarter over quarter. The numbers are getting pretty big. Q1 was materially more. It was in the teens quarter over quarter. We've always talked about, like, the model is going to continue to improve itself and pick up a few points of growth every single quarter just from that enhancement.

Adam Foroughi: But then the team is also trying to apply enhancements on top. When we get lifts from the team, those can be step function-like we saw in Q1. You wouldn't expect Q1 having double-digit growth over Q4. And so we're seeing really good trends in Q3; the business is still very strong. We've got a lot of momentum with our customers; they continue to see us as really the main channel now in mobile gaming advertising. And around and behind that, we're also announcing exciting trends in what we just talked about: the web advertising categories.

Speaker Change: But then the team is also trying to apply enhancements on top. When we get lifts from the team, those can be step function. Like we saw in Q1, you wouldn't expect Q1 having double-digit growth over Q4. And so we're seeing really good trends in Q3. The business is still very strong. We've got a lot of momentum with our customers. They continue to see us as really the main channel now in mobile gaming advertising. And around and behind that, we're also now seeing exciting trends in what we just talked about, the web advertising category. So we've got a lot of optimism going into the next four.

Adam Foroughi: Like we saw in Q1, you wouldn't expect Q1 to have double-digit growth over Q4. And so we're seeing really good trends in Q3, the business is still very strong. We've got a lot of momentum with our customers; they continue to see us as really the main channel now in mobile gaming and advertising. Around and behind that, we're also now seeing exciting trends in what we just talked about, the web advertising category. So we've got a lot of optimism going into the next quarter.

Adam Foroughi: We just launched the first web advertising campaigns for shops this quarter. And while in pilot right now, we think it will unlock a lot of demand expansion opportunities for us. And then supply expansion. As we broaden out our demand-based outside of gaming, we expect the new categories will really help grow our CKB footprint. We continue to be very excited about our prospects, and the performance our team is able to deliver. We will work tirelessly to achieve the goals we set and hope that over the next many quarters and years together, you will have a better sense of how an AI-driven marketing platform creates growth opportunities that just weren't possible in advertising before, because technologies were not this sophisticated.

Clark Lampen: So we've got a lot of optimism going into the next quarter. Okay.

David Hsiao: Okay. And if I could, Matt, you know, year to date, you've purchased around 1.1 billion shares of stock. The guidance implies both an uptick in margins and higher incrementals, if we take sort of app margins at 15%, I think, as you just said, how do you think about, I guess, as the free cash flow profile of the business is improving, maybe being a little bit more tactical with the buyback in periods where there is a bigger dislocation between the market price and then what you guys view as intrinsic value?

Adam Foroughi: Thanks. Yeah, good to see you, Jason.

Clark Lampen: And if I could, Matt, you know, here today, you've purchased around 1.1 billion of stock.

Speaker Change: Okay, and if I could, Matt, you know, year-to-date you've purchased around 1.1 billion of stock. The guidance implies...

Matt Stumpf: The guidance implies both an uptake in margins and higher incrementals if we take sort of apps margins at 15%, I think, as you just said. How do you think about, I guess, as the free cash flow profile of the business is improving, maybe being a little bit more tactical with the buyback in periods where there is a bigger dislocation between the market price and then what you guys, you as intrinsic value? Thanks a lot. Yeah, sure. Clark, so our plan currently is to continue kind of the historical trend of continuing to manage our shares through withholding cover on shares that are lasting each quarter.

Speaker Change: both in uptick in margins and higher incrementals.

Speaker Change: if we

Speaker Change: Take sort of apps margins at 15%, I think, as you just said. How do you think about, I guess, as the free cash flow profile of the business is improving, maybe being a little bit more tactical with the buyback in periods where there is a bigger dislocation between the market price and then what you guys view as intrinsic value? Thanks a lot.

Matt Stumpf: With that, I'll hand it off to Matt to run you through the financial highlights. Thanks, Adam, and good afternoon. I'm pleased to report we had another strong quarter with total revenue reaching $1.08 billion, and adjusted EBITDA of $601 million, achieving a 56% adjusted EBITDA margin. This marks a 44% increase in revenue and an 80% increase in adjusted EBITDA from the same period last year, translating to an impressive 81% flow through from revenue to adjusted EBITDA.

Matt Stumpf: Yeah, sure, Clark. So our plan currently is to continue kind of the historical trend of continuing to manage our shares through withholding the cover on shares that are vesting each quarter, and then on a strategic basis, we'll continue to do supplemental repurchases in addition to the quarterly vesting.

Matt Stumpf: Thanks a lot. Yeah, sure, Clark. So, our plan

Operator: Our next question will come from Eric, oh, my apologies, Clark Lampen with BTEIG. Please go ahead, Clark.

Adam Foroughi: Yeah, good to see you, Jason. In the quarter, Q2, we launched the pilot of our web advertising program, and this allows us to talk about e-commerce first. This allows an e-commerce shop that has a website to buy from our in-app inventory the billion plus daily active users we see in mobile gaming, a video advertisement, route that user to their shop, and purchase that user in the same way that mobile game companies like purchasing users on our platform. So doing it on a performance basis, and then we're delivering measurable revenue and results. This is brand new, but I'd say it's been in pilot for a few months now.

Adam Foroughi: Results are looking really promising, materially better than what we would have expected this early in our progression in trying to get into web advertising. So this product, we think, is something that we're going to invest heavily in, start scaling out, and hopefully we'll show material impact in 25 and beyond. And it is not limited to just e-commerce. It opens the door to advertising for any website of any type that wants to drive transactions that are measurable on a performance basis on our platform.

Speaker Change: Yeah, sure, Clark. So our plan currently is to continue kind of the historical, you know, trend of continuing to manage our shares through withhold the cover on shares that are vesting each quarter, and then on a strategic basis, we'll continue to do supplemental repurchases, in addition to the quarterly vesting.

Matt Stumpf: And then, on a strategic basis, we'll continue to do supplemental repurchases in addition to the quarterly fasting.

David Hsiao: Thanks, Clark, and we'll move on to James Heaney with Jefferies. Great. Hey, guys, and thanks for taking the questions.

Operator: Hey, guys. Good afternoon. Hopefully, you can see and hear me. I've got you. Perfect.

David Hsiao: Thanks, Clark. And we'll move on to James Heaney with Jeffreys.

Speaker Change: Thanks Clark and we'll move on to James Heaney with Jeffries.

Matt Stumpf: In the first quarter, we generated $446 million in free cash flow, which is a 74% flow through from adjusted EBITDA. Quarter-requarter, our free cash flow grew 15% compared to 10% growth in adjusted EBITDA over the same period, as we benefited from a relatively stable base of cash tax and interest. During the quarter, improvement in our axel on technology, driven by ongoing self-learning, contributed to further growth of our software platform, which generated $711 million in revenue, and $520 million in adjusted EBITDA, retaining our 73% margin and growing 91% from the same period last year.

David Hsiao: Great, hey guys, and thanks for taking the questions. Could you just talk more about the 20 to 30 percent long-term software platform growth that you referenced? I'm curious just how dependent that goal is on verticals beyond gaming. And then I just have one more follow-up.

Adam Foroughi: So, Adam, if we look at the third-quarter guidance and assume that app trends are relatively similar to what we saw last year, there's sort of an implied comp-adjusted re-acceleration in the software business. And I'm going to guess that it's going to be driven by that sort of first primary driver that you mentioned, sort of model improvements and sort of the learnings that go on. But one, I guess I'm curious if you could give us a sense of what's actually driving acceleration against tougher comps now and then maybe what that sort of promises for the back half into 25.

James Heaney: Could you just talk more about the 20 to 30% long-term software platform growth that you referenced going to curious just how dependent that goal is on verticals beyond gaming? And then I said, "but more follow-up." Yeah, we only get the very dependent outside of gaming at all. You've got a mobile gaming category; it's got a few percentage points to grow through the year now. So, let's call that low-single digits. You've got a business that, as these models continue to improve from gathering more data, we think that's an extra three, four percent a quarter as well. So that's where we get you to the low end.

James Heaney: great hey guys and thanks for getting the questions could you just talk more about the twenty to thirty percent long-term software platform growth that you reference and him curious just how dependent that goal is on verticals beyondgaining and then i said what morewill follow

Adam Foroughi: Yeah, we don't think it's very dependent outside of gaming at all. You've got a mobile gaming category.

Adam Foroughi: Yeah, I mean, when we've talked about this growth goal, if you just think about the growth goal in terms of mobile gaming in the business that we have today, we just grew 5% quarter over quarter. The numbers are getting pretty big, Q1 was materially more, it was in the teens quarter over quarter. We've always talked about how the model is going to continue to improve itself and pick up a few points of growth every single quarter just from But then the team is also trying to apply enhancements on top. When we get lifts from the team, those can be step functions like we saw in Q1. You wouldn't expect Q1 to have double-digit growth over Q4.

Speaker Change: Yeah, we don't think it's very dependent outside of gaming at all. You've got a mobile gaming category, it's got a few percentage points of growth a year now, so let's call that low single digits.

Adam Foroughi: It's got a few percentage points of growth a year now. So it's called low single digits. You've got a business that, as these models continue to improve from gathering more data, we think that's an extra 3%, 4% a quarter as well. So that's where it gets you to the low end.

Speaker Change: You've got a business that, as these models continue to improve from gathering more data, we think that's an extra 3-4% a quarter as well.

Adam Foroughi: And then we've got a team that's constantly working on improving the models, and any improvement that's actually developer-driven enhancement to the models that makes them more accurate, then steps you up into the higher end of that range. And so we've got a lot of confidence in the growth goal we put out there, just on a baseline basis, for the current business. Now, we do sit on a billion plus daily active users. We've got one of the most sophisticated advertising platforms in the world, and we're driving billions of dollars of performance value in gaming.

Adam Foroughi: And then we've got a team that's constantly working on improving the models, and any improvement that's actually developer-driven enhancement to the models that makes them more accurate, then steps you up into the higher end of that range. So, we've got a lot of confidence in the growth goal we put out there; just on a baseline basis, the current business. Now, we do sit on a billion-plus daily active users. We've got one of the most sophisticated advertising platforms in the world, and we're driving billions of dollars of performance value in gaming. There's nothing about the technology we have that would disallow it from going outside of just mobile gaming, and we're already seeing positive trends in that pilot.

Speaker Change: So that's where it gets you to the low end. And then we've got a team that's constantly working on improving the models and any improvement that's actually developer-driven enhancement to the models that makes them more accurate.

Matt Stumpf: This represents an 87% flow through of revenue from the prior quarter, illustrating our ability to remain disciplined with our costs, growing revenue while remaining lean and efficient. Our axel revenue for the quarter was 369 million dollars, and increased the 7% from last year, with 81 million dollars in adjusted EBITDA, representing a 22% margin. During the quarter, we re-adjusted our user acquisition return goals, resulting in an 11% quarter-requarter decrease in total app segment costs, while revenue decreased by 3%.

Speaker Change: then steps you up into the higher end of that range. And so we've got a lot of confidence in the growth goal we put out there, just on a baseline basis, the current business.

Adam Foroughi: And so we're seeing really good trends in Q3. The business is still very strong. We've got a lot of momentum with our customers that continue to see us as really the main channel now in mobile gaming advertising. And around and behind that, we're also now seeing exciting trends in what we just talked about in the web advertising categories. So we've got a lot of optimism going into the next quarter.

Speaker Change: Now, we do sit on a billion plus daily active users, we've got one of the most sophisticated advertising platforms in the world, and we're driving billions of dollars of performance value in gaming.

Adam Foroughi: There's nothing about the technology we have that would disallow it from going outside of just mobile gaming, and we're already seeing positive trends in that pilot. So as we start putting these pieces together and broadening out our platform over time, we're really excited about how big the numbers could become.

Speaker Change: There's nothing about the technology we have that would disallow it from going outside of just mobile gaming, and we're already seeing positive trends in that pilot. So as we start putting these pieces together and broaden out our platform over time, we're really excited about how big the numbers can become.

Adam Foroughi: So, as we start putting these pieces together and broaden our platform over time, we're really excited about how big the number.

Matt Stumpf: We expect our future margin profile to normalize to approximately 15% over the long term, consistent with industry standards. Looking ahead to capital allocation, we plan to focus on three key areas. First, investment in organic growth is and Initiatives. Specifically, our engineering and business development headcounts to support the development of our axel on technology and expansion into e-commerce. We do not expect significant capital investment here since we plan to expand our teams in a very lean and targeted manner.

Matt Stumpf: Okay. And if I could, Matt, you know, year-to-date, you've purchased around $1.1 billion of stock. The guidance implies both an uptick in margins and higher incrementals if we take sort of app margins at 15%, I think, as you just said. How do you think about, I guess, as the free cash flow profile of the business is improving, maybe being a little bit more tactical with the buyback in periods where there is a bigger dislocation between the market price and then what you guys view as intrinsic value? Thanks a lot. Yeah, sure, Clark. So our plan currently

Adam Foroughi: Great, and then just one more follow-up on just the overall health of the mobile gaming market. I think you've talked about three to 4% industry growth in the past. So curious if you're seeing any, you know, any change in those trends.

Speaker Change: Great and then just one more follow-up on the just the overall health of the mobile gaming market. I think you've in the past talked about three to four percent industry growth so curious if you're seeing any you know any change in those trends.

Adam Foroughi: No, and we're not seeing any change in the aggregate, but you also have to remember our market is a little bit different. We're driven in large part by advertising-based applications' growing audience, so that billion plus daily active users are inside of apps that run advertisements. You monetize those apps partially with games that generate purchases, partially with games that generate purchases and advertising. And so that number isn't documented anywhere, but we're seeing the overall IAP market. Everyone can look at industry reports and see it growing in low single digits. We're also seeing the advertising-supported market grow faster than that.

Adam Foroughi: Nollen, we're not seeing any change in the aggregate, but you also have to remember our market is a little bit different. We're driven a large part by advertising-based applications growing audience, so that billion-plus daily active users are inside of the market. Apps that run advertisements, you monetize those apps partially with games that generate purchases, partially with games that generate purchases and advertising. And so that number isn't documented anywhere, but we're seeing the overall IEP market; everyone can look at industry reports and see growing low single digits. We're also seeing the advertising-supported market grow faster. Great.

Speaker Change: No, and we're not seeing any change in the aggregate, but you also have to remember our market is a little bit different.

Speaker Change: We're driven a large part by advertising-based applications growing audience. So that billion plus daily active users are inside of apps that run advertisements. You monetize those apps partially with games that generate purchases, partially with games that generate purchases and advertising. And so that number isn't documented anywhere, but we're seeing the overall IAP market, everyone can look at industry reports and see it growing low single digits. We're also seeing the advertising supported market grow faster than that.

Matt Stumpf: Second, continued share management activities with the combination of withhold the cover on future share investing and strategic repurchases. And third, strengthening of our balance sheet to enhance operational flexibility and liquidity while reducing that debt. In Q2, we use $356 million to withhold 4.2 million shares allocating about 80% of our free cash flow in the quarter to share management. Since 2022, we have invested nearly $3 billion to repurchase and withhold a combined $83.6 million shares.

James Heaney: Thank you.

Omar Dessouky: We will now hear from Omar Dessouky with B of A, and Adam and Matt. Just to let you know, he is on audio only. Hey guys, I'm on audio only. Thanks.

David Hsiao: We will now hear from Omar Dessouky with B of A, and Adam and Matt, just to let you know, he is on audio only.

Speaker Change: Great, thank you.

Omar Dessouky: We will now hear from Omar Dessouky with B of A, and Adam and Matt, just to let you know, he is on audio only.

David Hsiao: Great. Hey, Omar. Hey, guys. I'm on audio only.

Omar Dessouky: ayor hey guys i'm on aio only thank

Matt Stumpf: Thanks. So, look, I'm just looking at your third-quarter guidance if I were to back out the app business. I kind of get a number that's sort of 50% year on year in the third quarter, which is still pretty far, pretty far off from the 20 to 30% long-term growth that you talked about. So I think you, myself, and a lot of people would kind of want to know like what that potentially that trajectory going from the Software Business of maybe 50% year-over-year next quarter, eventually to that 20-30%. Do you have any visibility into the first couple of quarters of 2025 yet that you're able to share?

Omar Dessouky: So look, I'm just looking at your third quarter guidance. If I were to back out the app business, I kind of get a number that's sort of 50% year on year in the third quarter, which is still a pretty far off from the 20 to 30% long term growth that you talk about. So I think, you know, myself and a lot of people would kind of want to know like what is potentially that trajectory going from software business of maybe 50% year over year next quarter eventually to that 20, 30%. Do you have any visibility into the first couple of quarters of 2025 yet that you're able to share with us?

David Hsiao: Finally, in the third quarter of 2024, we anticipate to deliver between $1.115 and $1.135 billion in revenue with adjusted EBITDA between $630 and $650 million, targeting an adjusted EBITDA margin of 57%. Now with that, let's move to Q&A. Thank you so much, Matt. And again, like Matt mentioned, we will now take your questions. When I call your name, please tone your new video and go ahead and unmute yourself as well. And we will take as many questions as time permits.

Omar Dessouky: So, um, look, I'm just looking at your third quarter guidance, um, if I were to back out the app business.

Speaker Change: I kind of get a number that's sort of 50% year-on-year in the third quarter.

Speaker Change: which is still pretty far off from the 20-30% long-term growth that you talked about.

Speaker Change: So I think, you know, myself and a lot of people would kind of want to know, like, what is potentially that trajectory going from...

Operator: Our first question is going to come from Jason Mezzamette with City. Jason, please go ahead with your question. And go ahead and turn on your video as well if you wouldn't mind, Jason. All right, Jason, I see that you're out there. Go ahead and unmute yourself and turn on your video. Well, it's just a host won't let me do my videos. I can't do that part. I got it. All right, you can do it now. Sorry about that too. That's my fault.

Speaker Change: Do you have any visibility into the first couple of quarters of 2025 yet that you're able to share with us?

Matt Stumpf: Yeah, sure, Clark. So our plan currently is to continue kind of the historical trend of continuing to manage our shares through withhold to cover on shares that are vesting each quarter, and then on a strategic basis, we'll continue to do supplemental repurchases in addition to the quarterly vesting.

Matt Stumpf: So we don't provide long-term guidance, obviously. We're only looking at a quarter ahead. As Clark touched on, you can sort of deduce where that software business we're guiding to in the upcoming quarter.

Adam Foroughi: So we don't provide long-term guidance. Obviously, we're only looking up a quarter ahead. As Clark touched on, you can sort of deduce where that software business we're guiding to on the upcoming quarter. It's still; if you start adding up the quarters to get into 20, 30%, you want to see five, six, seven percent quarter-over-quarter growth. We think we can, we can be confidently in those ranges for quite some time. We see a lot of opportunity to grow. Now that removes any opportunity for stuff-function gains and model enhancements driven by the team. That also does not include really any sort of thought given to what new categories are going to contribute to our business long term, because frankly, again, they're in pilot.

Operator: Thanks, Clark. And we'll move on to James Heaney with Jeffreys.

Speaker Change: So, we don't provide long-term guidance, obviously. We're only looking a quarter ahead. As Clark touched on, you can sort of deduce

Adam Foroughi: Great, hey guys, and thanks for taking the questions. Could you just talk more about the 20 to 30 percent long-term software platform growth that you referenced? I'm curious just how dependent that goal is on verticals beyond gaming. And then I just have one more follow-up.

Adam Foroughi: It's still, if you start adding up the quarters to get into 20%, 30%, you want to see 5%, 6%, 7% quarter-over-quarter growth. We think we can be confidently in those ranges for quite some time. We see a lot of opportunity to grow. Now, that removes any opportunity for sub-function gains and model enhancements driven by the team. That also does not include really any sort of thought given to what new categories are going to contribute to our business long-term because, frankly, again, they're in pilot.

Clark Lampen: Where that software business we're guiding to on the upcoming quarter, it's still, if you start adding up the quarters to get into 20, 30%, you want to see 5, 6, 7% quarter over quarter growth.

Adam Foroughi: Yeah, we don't think it's very dependent outside of gaming at all. You've got a mobile gaming category.

Clark Lampen: We think we can we can be confidently in those ranges for quite some time. We see a lot of opportunity to grow.

Clark Lampen: that

Clark Lampen: It removes any opportunity for sub-function gains and model enhancements driven by the team. That also does not include really any sort of thought given to what new categories are going to contribute to our business long-term, because frankly, again, they're in pilot. So we're not backing those numbers into longer-term views on the business. So we think we're going to be in a place where this business is going to be steady. It's going to be growing at a very nice rate. The conversion to cash flow is only going to improve.

Adam Foroughi: So we're not backing those numbers into longer-term views on the business. We think we're going to be in a place where this business is going to be steady. It's going to be growing at a very nice rate. The conversion to cash flow is only going to improve, and we've got a lot of other exciting things that are going on that give us confidence that we could even be above those ranges.

Adam Foroughi: So we're not backing those numbers into longer-term views on the business. So we think we're going to be in a place where this business is going to be steady. It's going to be growing at a very nice rate. The conversion to cash flow is only going to improve. And we've got a lot of other exciting things that are going on that give us confidence that we could even be above those range.

Adam Foroughi: In the quarter Q2, we launched pilot of our web advertising program. And this allows, let's talk about e-commerce first. This allows an e-commerce shop that has a website to buy on our in-app inventory, the, the billion plus daily active users we see in mobile gaming, a video advertisement and route that user to their shop and purchase that user in the same way that mobile game companies like purchasing users on our platform.

Clark Lampen: and we've got a lot of other exciting things that are going on give us confidence that we could even be above those range

David Hsiao: Okay, could I just ask you another quick question? So, in terms of the opportunity for in-app advertising... Some of the checks that I did suggested that there were some improvements there, you know.

Adam Foroughi: Okay, can I just ask you another quick question. So, in terms of the opportunity for in-app advertising, some of the checks that I did suggest that there were some improvements there. So I think the in-app purchase market is somewhere around $100 billion. The in-app advertising market, you know, a lot smaller. It's somewhere maybe between 20 and 30 as my- Antsman, you know, does your technology really drive advertising revenues for publishers as well? You know, and potentially turn that into a growth market, and could that make a major difference in your software business? Yeah, well, so look, that market already is growing much faster than the in-app purchasing market because it's just at a smaller base.

Adam Foroughi: Great, and then just one more follow-up on just the overall health of the mobile gaming market. I think you've talked about three to four percent industry growth in the past, so curious if you're seeing any, you know, any change in those trends. No, and...

Speaker Change: Okay, can I just ask you another quick question? So, in terms of the opportunity for in-app advertising...

Speaker Change: some of the check that i did suggest that there were some improvements there

Adam Foroughi: So I think the in-app purchase market is somewhere around $100 billion. The in-app advertising market is, you know, a lot smaller, somewhere maybe between 20 and 30, is my estimate. Does your technology really drive advertising revenues for publishers as well and potentially turn that into a growth market, and could that make a major difference in your software business?

Adam Foroughi: So doing it on a performance basis. And then we're delivering a measurable revenue and results. This is brand new. I'd say it's been in pilot for a few months now. Results are looking really promising, materially better than what we would have expected this early in our progression and trying to get into web advertising. So this product we think is something that we're going to invest heavily behind. Start scaling out and hopefully we'll show a material impact in 25 and beyond. And it is not limited to just e-commerce. It opens the door to advertising for any website of any type that wants to drive transactions that are measurable on a performance basis on our platform.

Operator: We will now hear from Omar Dessouky with B of A, and Adam and Matt, just to let you know, he is on audio only.

Operator: Thank you very much. Thanks.

Speaker Change: You know, so I think the in-app purchase market is somewhere around $100 billion. The in-app advertising market, you know, a lot smaller, somewhere maybe between $20 and $30 is my estimate.

Operator: Great. Hey, Omar. Hey, guys. I'm on audio only.

Speaker Change: Does your technology really drive advertising revenues for publishers as well, and potentially turn that into a growth market, and could that make a major difference in your software business?

Adam Foroughi: Yeah. Well, so look, that market is already growing much faster than the in-app purchasing market because it's just at a smaller base. We're also, the Max platform we've touched on in the past; the majority of the mobile gaming in-app advertising market is running through that Max auction. That Max auction has gone from the inefficient world of waterfall to programmatic bidding. The vast, vast majority of the auction is now in a bidding state.

Adam Foroughi: Thanks. So, um, look, I'm just looking at your third quarter guidance, um, if I were to back out the app business. I kind of get a number that's sort of 50% year on year in the third quarter, which is still pretty far, pretty far off from the 20 to 30% long-term growth that you talked about. So I think you know myself and a lot of people would kind of want to know like what that trajectory is going from. Do you have any visibility into the first couple of quarters of 2025 yet that you're able to share with us?

Speaker Change: Yeah, well, so look, that market already is growing much faster than the in-app purchasing market, because it's just at a smaller base. We're also, the Max platform we've touched on in the past, the majority of the mobile gaming in-app advertising market is running through that Max auction.

Adam Foroughi: So, we don't provide long-term guidance, obviously. We're only looking at a quarter ahead. As Clark touched on, you can sort of deduce where that software business we're guiding to in the upcoming quarter.

Adam Foroughi: We're also the Max platform we touched on the past, the majority of the mobile gaming in-app advertising market is running through that Max auction. That max auction has gone from the inefficient world of waterfall to programmatic bidding; vast, vast majority of the auction is now on a bidding state, and so it's continuously gotten more efficient. Our advertising has also gotten a lot more efficient. So as you've seen our business double in the last year, there's billions of dollars of more investment happening from mobile gaming companies in user acquisition and user discovery. Some part of that is in-app advertising advertisers, and that's helped be a catalyst to re-growing this industry as a whole in-app purchasing, but some some portion of that also is the are these publishers that are buying more users now because their systems are more effective for advertising-based applications and so all of this stuff is intertangled together, and we're one of the main catalysts of growth in this category because our scale is so large inside this category on both fronts.

Adam Foroughi: So, we're not backing those numbers into longer-term views on the business. We think we're going to be in a place where this business is going to be steady. It's going to be growing at a very nice rate. The conversion to cash flow is only going to improve, and we've got a lot of other exciting things that are going on that give us confidence that we could even be above those ranges.

Operator: Okay, could I just ask you another quick question? So in terms of the opportunity for in-app advertising... Some of the checks that I did suggested that there were some improvements there, you know.

Clark Lampen: Our next question will come from Eric. My apologies, Clark Lampen with BTIG. Please go ahead, Clark. Hey, guys, good afternoon. Hopefully you can see and hear me. Adam, perfect. So Adam, if we look at the third quarter guidance, and we sort of assume that apps trends are relatively similar to what we saw last year, there's sort of an implied, comp-adjusted re-exceleration in the software business. And I'm going to guess that it's going to be driven by that sort of first primary driver that you mentioned, sort of model improvements and sort of the learnings that go on.

Speaker Change: That max auction has gone from the inefficient world of waterfall to programmatic bidding. The vast, vast majority of the auction is now in a bidding state. And so it's continuously gotten more efficient.

Adam Foroughi: And so it's continuously gotten more efficient. Our advertising has also gotten a lot more efficient. So as you've seen our business double in the last year, there are billions of dollars of more investment happening from mobile gaming companies in user acquisition and user discovery. Some part of that is in-app advertising advertisers, and that's helped be a catalyst to regrowing this industry as a whole and in-app purchasing, but some portion of that also are these publishers that are buying more users now because our systems are more effective for advertising-based applications. And so all of this stuff is intertangled together, and we're one of the main catalysts of growth in this category because our scale is so large inside this category on both.

David Hsiao: I understand. Thank you very much.

Speaker Change: Our advertising has also gotten a lot more efficient. So as you've seen our business double in the last year, there's billions of dollars of more investment happening from mobile gaming companies in user acquisition and user discovery.

Adam Foroughi: And so it's continuously gotten more efficient. Our advertising has also gotten a lot more efficient. So as you've seen our business double in the last year, there's billions of dollars of more investment happening from mobile gaming companies in user acquisition and user discovery. Some part of that is in-app advertising advertisers, and that's helped be a catalyst to regrowing this industry as a whole and in-app purchasing, but some portion of that also are these publishers that are buying more users now because our systems are more effective for advertising-based applications. And so all of this stuff is intertangled together, and we're one of the main catalysts of growth in this category because our scale is so large inside this category on both.

Speaker Change: Some part of that is in app advertising advertisers, and that's helped be a catalyst to regrowing this industry as a whole in app purchasing. But some portion of that also are these publishers that are buying more users now because their systems are more effective for advertising-based applications.

Clark Lampen: But one, I guess I'm curious if you could give us a sense of what's actually driving acceleration against tougher comps now. And then, you know, maybe what that sort of pretends for the back half into 25. Yeah, I mean, like, when we've talked about this growth goal, if you just think about the growth goal in terms of mobile gaming and the business that we have today, we just grew 5% quarter of a quarter of the numbers are getting pretty big.

Speaker Change: All of this stuff is intertangled together, and we're one of the main catalysts of growth in this category because our scale is so large inside this category on both fronts.

Omar Dessouky: Understood. Thank you very much.

Operator: I understand. Thank you very much.

Clark Lampen: The silly carousade with Cannibal has the next question and is also audio only? Yes, apologies for that.

David Hsiao: Vasily Karasov with Cannonball has the next question and is also audio only.

Operator: Vasily Karasov with Cannonball has the next question and is also audio only.

Speaker Change: Understood. Thank you very much.

David Hsiao: Yes, apologies for that. Good afternoon.

Speaker Change: Vasily Karasov with Cannonball has the next question and is also audio only.

Operator: Yes, apologies for that. Good afternoon.

Adam Foroughi: Good afternoon. Adam, I think on the previous call, you mentioned that the big publishers started spending with you, and before that they were not because they saw you as a competitor. So I was wondering how the trend continued this quarter. Do you still see them coming in in bigger, bigger buckets, and then does that open up a significant corner of the market that you sort of could not address before? Would appreciate your thoughts here. Thank you. Yeah, I mean, look, like at this level of scale, with how big the software business is, if you backed out total advertiser dollars that you think are in our platform, it's in the many billions of dollars. So we've always worked with some of the very large publishers.

Vasily Karasov: Yes, apologies for that. Good afternoon.

Clark Lampen: T1 was materially more. It was in the team's quarter of a quarter. We've always talked about like the model is going to continue to improve itself and pick up a few points of growth every single quarter, just from that enhancement. But then the team is also trying to apply enhancements on top when we get lifts from the team, those can be step function, like we saw in q1, you wouldn't expect q1 having double digit growth over q4.

Vasily Karasov: Adam, I think on the previous call you mentioned that the big publishers started spending with you and before that they were not because they saw you as a competitor.

Adam Foroughi: Adam, I think on the previous call you mentioned that the big publishers started spending with you, and before that, they weren't because they saw you as a competitor. So I was wondering how the trend continued this quarter. Do you still see them coming in, in bigger, bigger buckets? And then does that open up a significant market? of the market that you sort of could not address before. We'd appreciate your thoughts here. Thank you.

Adam Foroughi: Adam, I think on the previous call you mentioned that the big publishers started spending with you, and before that, they weren't because they saw you as a competitor. So I was wondering how the trend continued this quarter. Do you still see them coming in in bigger, bigger buckets? And then does that open up a significant market? of the market that you sort of could not address before. We'd appreciate your thoughts here. Thank you.

Vasily Karasov: So, I was wondering how the trend...

Speaker Change: continue this quarter? Do you still see them coming in in bigger, bigger buckets? And then does that open up a significant

Clark Lampen: And so we're seeing really good trends in q3. The business is still very strong. We've got a lot of momentum with our customers, they continue to see us as really the main channel now in mobile gaming advertising. And around and behind that, we're also now seeing exciting trends in what we just talked about the web advertising category. So we've got a lot of optimism going into the next four.

Speaker Change: corner of the market that you sort of could not address before. We'd appreciate your thoughts here. Thank you. Yeah, I mean, look, like at this level of scale with how big the software business is,

Adam Foroughi: Yeah, I mean, look, at this level of scale with how big the software business is, if you back out the total advertiser dollars that you think are in our platform, it's in the many billions of dollars. So we've always worked with some of the very large publishers. We usually have had pretty deep penetration in mobile gaming, but there are some very well-known, large publishers that did look at us as a competitor. At this point, our platform is so successful in mobile gaming, it's very, very hard for any publisher to look the other way.

Adam Foroughi: Yeah, I mean, look, like at this level...

Adam Foroughi: Yeah, I mean, look, at this level.

Speaker Change: If you backed out total advertiser dollars that you think are in our platform, it's in the many billions of dollars. So we've always worked with some of the very large publishers. Like we usually have had pretty deep penetration in mobile gaming, but there are some very well-known large publishers that did look at us as a competitor.

Adam Foroughi: Like we usually have had pretty deep penetration and mobile gaming, but there are some very well known large publishers that did look at us as a competitor. At this point, our platform is so successful in mobile gaming. It's very, very hard for any publisher to look the other way, and so we've gotten a lot more adoption across even those publishers. There isn't really a customer that I know of in mobile gaming that does not find success as a scalable success on our platform at this point today.

Matt Stumpf: Okay. And if I could Matt, you know, you're to date you purchased around 1.1 billion of stock. The guidance implies both an uptaken margins and higher incrementals. If we take sort of apps margins at 15% I think as you just said, how do you think about I guess as the free cash flow profile of the business is improving. Maybe being a little bit more tactical with the buyback in periods where there is a bigger dislocation between the market price and then what you guys view as intrinsic value.

Speaker Change: At this point, our platform is so successful in mobile gaming, it's very, very hard for any publisher to look the other way. And so we've gotten a lot more adoption across even those publishers. There isn't really a customer that I know of in mobile gaming that does not find success and scalable success on our platform at this point.

Adam Foroughi: And so we've gotten a lot more adoption across even those publishers. There isn't really a customer that I know of in mobile gaming that does not find success and scalable success on our platform. Thank you very much.

Adam Foroughi: Yeah, thank you very much.

Operator: Moving on, to Mohamed Galouf with HSBC. Mohamed, do you want to turn your video on? Mohammed, if you can hear me, go ahead and unmute yourself so we can at least hear you to ask a question. All right, well, hearing no response, we'll move on to Matt Cost with Morgan Stanley.

David Hsiao: Moving on, to Mohamed Galouf with HSBC. Mohamed, do you want to turn your video on? Mohammed, if you can hear me, go ahead and unmute yourself so we can at least hear you to ask a question. All right, well, hearing no response, we'll move on to Matt Cost with Morgan Stanley.

Mohamed Golov: Moving on to Mohamed Golov with HSBC. Mohamed, do you want to turn your video on? Mohamed, if you can hear me, go ahead and unmute yourself so we can at least hear you to ask your question.

dlam: thank dlam

Vasily Karasov: Moving on to Mohamed Galouf with HSBC. Mohamed, do you want to turn your video on?

Matt Stumpf: Thanks a lot. Yeah, sure Clark. So are playing currently is to continue kind of the historical trend of continuing to manage our shares through with all the cover on shares that are lasting each quarter. And then on a strategic basis, we'll continue to do supplemental repurchases in addition to the quarterly investing. Thanks, Clark.

Speaker Change: Mohamed, if you can hear me go ahead and unmute yourself so we can at least hear you to ask your question.

Matt Cost: Alright, well, hearing no response, we'll move on to Matt Cost with Morgan Stanley.

Speaker Change: Matt Stumpf, Herald Chen, Adam Foroughi, Herald Chen, Matt Stumpf and Herald Chen

Speaker Change: All right, well, hearing no response, we'll move on to Matt Cost with Morgan Stanley .

David Hsiao: Great. Hi guys. Thanks for taking the question. I guess when I think about e-commerce advertising in kind of an in-app environment or an in-game environment, as I understand it today because of the Applovin exchange, which should allow people like Google or a trade desk to access the inventory on Macs to run e-commerce ads today, you know, that should be possible, but it doesn't seem like it's a very big business today. So I guess what are the impediments to running e-commerce advertising in an in-game or in-app environment that are preventing others from doing it already since I believe it should be possible, and then how are you solving those problems or aiming to solve them with your e-commerce platform?

Operator: Great. Hi guys. Thanks for taking the question. I guess when I think about e-commerce advertising in kind of an in-app environment or an in-game environment, as I understand it today because of the Applovin exchange, which should allow people like Google or a trade desk to access the inventory on Macs to run e-commerce ads today, you know, that should be possible, but it doesn't seem like it's a very big business today. So I guess what are the impediments to running e-commerce advertising in an in-game or in-app environment that are preventing others from doing it already since I believe it should be possible, and then how are you solving those problems or aiming to solve them with your e-commerce platform?

Matt Cost: Great, hi guys, thanks for sticking to question. I guess when I think about e-commerce advertising, kind of an in-app environment or an in-game environment, as I understand it today because of the app love and exchange, which should allow people like Google or trade desks to access the inventory on Macs, to run e-commerce ads today, that should be possible, but it doesn't seem like it's a very big business today. So I guess what are the impediments to running e-commerce advertising in an in-game or in-app environment that are preventing others from doing it already since I believe it should be possible.

Matt Cost: Great. Hi, guys. Thanks for taking the question.

James Heaney: And we'll move on to James Heaney with Jeffries. Great. Hey guys. And thanks for taking the questions. Could you just talk more about the 20 to 30% long term software platform growth that you reference. I'm curious just how dependent that goal is on vertical beyond gaming and then I said one more follow up. Yeah, we only get very dependent outside of gaming at all. You've got a mobile gaming category. It's got a few percentage points to growth a year now.

Matt Cost: When I think about e-commerce advertising in an in-app environment or an in-game environment, as I understand it today, because of the Applovin exchange, which should allow people like Google or a trade desk to access the inventory on Macs,

Matt Cost: To run e-commerce ads today, you know, that should be possible, but it doesn't seem like it's a very big business today. So I guess, what are the impediments to running e-commerce advertising in an in-game or in-app environment that are preventing others from doing it already, since I believe it should be possible? And then how are you solving those problems or aiming to solve them with your e-commerce product?

James Heaney: So let's call that low single digits. You've got a business that as these models continue to improve from gathering more data. We think that's an extra three four percent of quarter as well. So that's where we get you to the low end. And then we've got a team that's constantly working on improving the models and any improvement that's actually developer driven enhance into the models that makes them more accurate. Then steps you up into the higher end of that range.

Adam Foroughi: And then how are you solving those problems or aiming to solve them with your e-commerce? Thank you.

Adam Foroughi: Like, we can't speak to other people's technologies or things that prohibit them from being able to get categories to work in gaming, but trade that's products are nothing like ours. When it comes to succeeding on behalf of advertisers in any category, we want our models to be able to drive measurable revenue. So you got to have an attribution framework. You've got to have models that can predict revenue and match the user up with the advertiser, and you've got to make it all work together.

Adam Foroughi: We can't speak to other people's technologies or things that prohibit them from being able to get categories to work in gaming, but TradeDesk products are nothing like ours. When it comes to succeeding on behalf of advertisers in any category, we want our models to be able to drive measurable revenue. So you've got to have an attribution framework, you've got to have models that can predict revenue and match the user up with the advertiser, and you've got to make it all work together.

Speaker Change: Thank you.

Speaker Change: Like, we can't speak to other people's technologies or things that prohibit them from being able to get categories to work in gaming, but TradeNuts products are nothing like ours.

Speaker Change: When it comes to succeeding on behalf of advertisers in any category, we want our models to be able to drive measurable revenue. So you've got to have an attribution framework, you've got to have models that can predict revenue and match the user up with the advertiser, and you've got to make it all work together.

James Heaney: And so we've got a lot of confidence in the growth goal we put out there just on a baseline basis the current business. Now we do sit on a billion plus daily active users. We've got one of the most sophisticated advertising platforms in the world and we're driving billions of dollars of performance value in gaming. There's nothing about the technology we have that would disallow it from going outside of just mobile gaming and we're already seeing positive trends in that pilot.

Adam Foroughi: We're in pilot with this product right now, and it's looking quite promising. And so we think it's something that we're going to be able to build on and build on very aggressively as we go.

Speaker Change: We're in pilot with this product right now, it's looking quite promising, and so we think it's something that we're going to be able to build on and build on very aggressively as we go forward.

David Hsiao: And just to follow up on that, I guess from a data perspective, is it just a matter of iterating on it? I mean, because obviously, you have so much data that's specifically relevant to kind of like the game advertising products you've done historically. You know, is that applicable directly to e-commerce advertising or other verticals? Or is it about iterating and kind of building a new data set? I think it is.

Adam Foroughi: And just to follow up on that, I guess from a data perspective, is it just a matter of iterating on it? I mean, because obviously, you have so much data that's specifically relevant to kind of like the game advertising products you've done historically. You know, is that applicable directly to e-commerce advertising or other verticals, or is it about iterating and kind of building a new data set? I think.

Adam Foroughi: And just to follow up on that, I guess from a data perspective, it's just a matter of iterating on it. I mean, because obviously you have so much data that's specifically relevant to kind of like the game advertising products you've done historically. If that applicable directly to e-commerce advertising or other verticals, or is it about iterating and kind of building a new data set? I think it's a combination of both. I mean, we process tens of billions of dollars of transactional volume already, and we see a billion plus daily active. So our platform is not small at this point.

James Heaney: So as we start putting these pieces together and broaden our platform over time, we're really excited about how big the numbers. Nollen, we're not seeing any change in the aggregate, but you also have to remember our market is a little bit different. We're driven a large part by advertising based applications growing audience, so that billion plus daily active users are inside of the market. Apps that run advertisements, you monetize those apps partially with games that generate purchases, partially with games that generate purchases and advertising. And so that number isn't documented anywhere, but we're seeing the overall IEP market, everyone can look at industry reports and see growing low single digits. We're also seeing the advertising supported market grow faster. Great.

Speaker Change: And just to follow up on that, I guess from a data perspective, is it just a matter of iterating on it? I mean, because obviously you have so much data that's specifically relevant to kind of like the game advertising products you've done historically. You know, is that applicable directly to e-commerce advertising or other verticals? Or is it about iterating and kind of building a new data set?

Adam Foroughi: I think it's a combination of both. I mean, we process tens of billions of dollars of transactional volume already, and we see a billion plus active users daily. So our platform is not small at this point, and that data is able to be used across anything. These are human beings, not just mobile gamers, and the audience skews female and middle-aged. And so it's... completely different than what people would assume a gaming audience is, on a very, very large scale, directly applicable to e-commerce.

Operator: Thank you.

Speaker Change: I think it's a combination of both. I mean, we process.

Speaker Change: 10s of billions of dollars of transactional volume already, and we see a billion plus daily active. So our platform is not small at this point, and that data is able to be used across anything. These are human beings, not just mobile gamers, and the audience skews female and middle-aged, and so it's

Adam Foroughi: And that data is able to be used across anything. These are human beings, not just mobile gamers, and the audience sees female and middle aged. And so it's completely different than what people would assume a gaming audience is at a very, very large scale. Directly applicable to e-commerce is something that we've always hypothesized as possible. The models and acts on to are so much more sophisticated and technologies we've had in the past that they should enable success there. Now we're in pilot, and we're seeing success there. So we're at the point now where we know we put the pieces in place.

Speaker Change: Completely different than what people would assume a gaming audience is at a very, very large scale.

Adam Foroughi: It's something that we've always hypothesized as possible. The models in Axon 2 are so much more sophisticated than technologies we've had in the past that they should enable success there. Now we're in pilot, and we're seeing success there. So we're at the point now where we know we've put the pieces in place, and now it's more of a go-to-market problem and less of a technology problem

Speaker Change: directly applicable to e-commerce is something that we've always hypothesized as possible. The models in Axon 2 are so much more sophisticated than technologies we've had in the past.

Speaker Change: that they should enable success there. Now we're in pilot and we're seeing success there. So we're at the point now where we know we put the pieces in place, and now it's more of a go-to-market problem and less of a technology problem.

Omar Dessouky: We will now hear from Omar Dessouky with B of A and Adam and Matt just to let you know he is on audio only. Hey guys, I'm on audio only. Thanks. So look, I'm just looking at your third quarter guidance. If I were to back out the app business, I kind of get a number that's sort of 50% year on year in the third quarter, which is still a pretty far off from the 20 to 30% long term growth that you talk about.

Matt Cost: And now it's more of a go-to-market problem unless the technology. Great.

Or Sent: Thank you. Or sent you a topic with Wolf has the next question. Thanks for taking my question. So looking at app discovery installations growing 77% on a tough comp and revenue per installation accelerating versus last quarter. I guess just is there any strength and installations from non gaming? I know it's a smaller revenue base today, but in terms of app discovery installations, is it a more material portion of that growth?

Operator: Arsenji Matovec with Wolf House, the next question.

David Hsiao: Or Sanjeeva Tovik with Wolf House, the next question.

Speaker Change: Great, thank you.

Omar Dessouky: So I think, you know, myself and a lot of people would kind of want to know like what is potentially that trajectory going from software business of maybe 50% year over year next quarter eventually to that 20, 30%. Do you have any visibility into the first couple of quarters of 2025 yet that you're able to share with us?

David Hsiao: Thanks for taking my question. So looking at AppDiscovery installations growing 77% on a tough comp and revenue per installation accelerating versus last quarter, I guess just, is there any strength in installations from non-gaming? I know it's a small revenue base today, but in terms of AppDiscovery installations, is it a more material portion of that growth? And then, just aside from that, any types of, could you go into a little bit more detail on how you're still seeing that strong strength in installations and revenue per installation? And then just to follow up on the app business. Thank you. Thanks.

Speaker Change: Arsen Zhimatovich with Wolf House, the next question.

Operator: Thanks for taking my question. So looking at AppDiscovery installations growing 77% on a tough comp and revenue per installation accelerating versus last quarter, I guess just, is there any strength in installations from non-gaming? I know it's a small revenue base today, but in terms of AppDiscovery installations, is it a more material portion of that growth? And then, just aside from that, any types of, could you go into a little bit more detail on how you're still seeing that strong strength in installations and revenue per installation, and then just to follow up on the apps business. Thanks.

Arsen Zhimatovich: thanks for taking my question so looking at discover installations growing seventy seven percent on a tough comp and revenue for installation accelerating versus last quarter i guess just is there any strengththen installations from non gaming i know it's smaller revenue base today but in terms of isdiscovery installation is it a more material portion of that growth

Adam Foroughi: And then just decide from that any types of could you go into a little bit more detail on how you're still seeing that strong strength and installations and revenue installation than just to follow up on the F's business. Thanks. Yes, sure, sure. So the non-gaming continues to grow, but it's still a relatively small portion of the overall installations when you look at the overall software business. So, to Adam's previous comments, like it's still a relatively small portion of the existing business, and it's still kind of in pilot mode there.

Speaker Change: And then just aside from that, could you go into a little bit more detail on how you're still seeing that strong strength in installations and revenue per installation, and then just a follow-up on the AFS business. Thanks. Yeah, sure. So the non-gaming continues to grow, but it's still a relatively small portion of the overall installations when you look at...

Operator: Yeah, sure. So the non-gaming continues to grow, but it's still a relatively small portion of the overall installations when you look at the overall software business. So to Adam's previous comments, like it's still a relatively small portion of the existing business, and it's still kind of in pilot mode there. So we continue to see kind of promising results, but it's really not necessary.

David Hsiao: Sure. So the non-gaming market continues to grow, but it's still a relatively small portion of the overall installations when you look at the overall software business. So to Adam's previous comments, like it's still a relatively small portion of the existing business, and it's still kind of in pilot mode there. So we continue to see kind of promising results, but it's really not need only

Speaker Change: the overall software business so adams previous comments like it's still a relatively small portion of the existing business and it's still kind of imppiot mode there so we continue to see kind of promising results but it's really not mean leving to

Adam Foroughi: So we don't provide long term guidance. Obviously, we're only looking up a quarter ahead. As Clark touched on, you can sort of deduce where that software business we're guiding to on the upcoming quarter. It's still, if you start adding up the quarters to get into 20, 30%, you want to see five, six, seven percent quarter over quarter growth. We think we can, we can be confidently in those ranges for quite some time.

Matt Stumpf: So we continue to see kind of promising results, but it's really not needle living today. And then just on apps, despite the dip in monthly active pairs, you saw I think we need to back it out in that advertising basically flat sequentially. Is this a function of the strength from X on two and also on apps? Do you plan on exploring any by best true studio. Some people are like that. We're talking about morning fed more studios. Does that would that support some of your capital allocation plans in the medium term. Thanks.

Adam Foroughi: And then just on apps, despite the dip in monthly active payers, you saw, I think, when you back it out in-app advertising basically flat sequentially. Is this a function of the strength of Exxon 2? And also on apps, do you plan on exploring any divestiture studios? Some people earlier today were talking about wanting to add more studios. Does that, would that support some of your capital allocation plans in the medium term? Thanks. I mean, like, like

David Hsiao: And then just on apps, despite the dip in monthly active payers, you saw, I think, when you back it out, in-app advertising basically flat sequentially. Is this a function of the strength from Exxon 2?

Speaker Change: Got it. And then just on apps, despite the dip in monthly active payers, you saw, I think, when you back it out, in-app advertising basically flat sequentially. Is this a function of the strength from Exxon too? And also on apps, do you plan on exploring any divestiture of studios? Some people earlier today were talking about wanting to add more studios. Would that support some of your capital allocation plans in the medium term? Thanks. I mean, like we've said in the past about M&A and divesting the apps businesses, we continue to be open to it. And we're really just waiting for the market to improve. And we've been optimizing the app studios over

Adam Foroughi: And also on apps, do you plan on exploring any divestiture of studios? Some people earlier today were talking about wanting to add more studios. Would that support some of your capital allocation plans in the medium term? Thanks.

Adam Foroughi: We see a lot of opportunity to grow. Now that removes any opportunity for stuff-function gains and model enhancements driven by the team. That also does not include really any sort of thought given to what new categories are going to contribute to our business long term, because frankly again, they're in pilot. So we're not backing those numbers into longer term views on the business. So we think we're going to be in a place where this business is going to be steady.

Adam Foroughi: Thanks. I mean, like we've said in the past about M&A and divesting the app businesses, we continue to be open to it. And we're really just waiting for the market to improve, and we've been optimizing the app studios for over a year. So you can see that as well in this quarter where we've adjusted the return goals for our UA spend, decreasing costs pretty materially and increasing our margin profile. So we'll continue to maximize those businesses for profit, and we'll be open to transactions.

Matt Stumpf: Like we've said in the past about M&A and investing the apps businesses, we continue to be open to it, and we're really just waiting for the market to improve. And we've been optimizing the app studios over. You know, over the last, over a year. So you can see that as well, right in this quarter, where we've adjusted the return goals for our UA spend, decreasing cost pretty materially and increasing our margin profile. So we'll continue to maximize those businesses for profit, and we'll be open to transactions in the future.

Speaker Change: over the last over a year. So you can see that as well right in this quarter where we've adjusted the

Adam Foroughi: It's going to be growing at a very nice rate. The conversion to cash flow is only going to improve. And we've got a lot of other exciting things that are going on that give us confidence that we could even be above those range.

Speaker Change: The return goals for our UA spend, we're decreasing costs pretty materially and increasing our margin profile. So we'll continue to maximize those businesses for profit and we'll be open to transactions in the future.

Adam Foroughi: Okay, can I just ask you another quick question. So in terms of the opportunity for in-app advertising, some of the checks that I did suggest that there were some improvements there. So I think the in-app purchase market is somewhere around $100 billion. The in-app advertising market, you know, a lot smaller. It's somewhere maybe between 20 and 30 as my- Antsman, you know, does your technology really drive advertising revenues for publishers as well?

Martin Yang: Thank you. We have time for one additional question for Martin Yang with OpCo. Sorry about that, Martin. Thank you for taking my question. I want to dig a little deeper into your confidence on that 35% constant improvement on a sequential basis. What gave you that type of confidence? Because I look at the underlying market and your customer behavior. It's a very dynamic market for mobile gaming, with new game launches; you know, certain games performing worse or better, and customers are doing all sorts of things. So what is. Constance in that type of market that gave you the confidence that your improvement can be pretty consistent on a clearly basis.

David Hsiao: We have time for one additional question from Martin Yang with OPCO. Sorry about that, Martin.

Operator: We have time for one additional question from Martin Yang with OPCO. Sorry about that, Martin.

Speaker Change: Thank you.

Speaker Change: We have time for one additional question from Martin Yang with OPCO. Sorry about that, Martin.

David Hsiao: Thank you for taking my question. I want to dig a little deeper into your confidence in that 35% constant improvement on a sequential basis. What gives you that type of confidence? Because I look at the underlying market and your customer behavior, it's a very dynamic market for mobile gaming with new game launches, you know, certain games performing worse or better, and customers are doing all sorts of things. So what is a constant in that type of market that gives you the confidence that your improvement can be pretty consistent on a quarterly basis?

Operator: Thank you for taking my question. I want to dig a little deeper into your confidence in that 35% constant improvement on a sequential basis. What gives you that type of confidence? Because I look at the underlying market and your customer behavior, it's a very dynamic market for mobile gaming with new game launches, you know, certain games performing worse or better, and customers are doing all sorts of things. So what is a constant in that type of market gives you the confidence that your improvement can be pretty consistent on a quarterly basis?

Martin Yang: Thank you for taking my question. I want to dig a little deeper into your confidence on that 35% constant improvement on a sequential basis. What gave you that type of confidence? Because I look at the underlying market and your customer behavior.

Speaker Change: It's a very dynamic market for mobile gaming, with new game launches, you know, certain games performing worse or better, and customers are doing all sorts of things. So what is

Adam Foroughi: You know, and potentially turn that into a growth market and could that make a major difference in your software business? Yeah, well, so look, that market already is growing much faster than the in-app purchasing market because it's just at a smaller base. We're also the max platform we touched on the past, the majority of the mobile gaming in-app advertising market is running through that max auction. That max auction has gone from the inefficient world of waterfall to programmatic bidding, vast vast majority of the auction is now on a bidding state, and so it's continuously gotten more efficient.

Speaker Change: constant in that type of market that gave you the confidence that your improvement can be pretty consistent on a quarterly basis.

Adam Foroughi: I think you said 35% sequential quarter over quarter. Three to five, three to five percent.

David Hsiao: I think you said 35% sequential quarter-over-quarter. What was that? Three to five, three to five percent.

Martin Yang: I think you said 35% sequential quarter of a quarter. What will you say? 325, 325.

Speaker Change: I think you said 35% sequential core. 3 to 5. 3 to 5%. Oh, 3 to 5%.

Adam Foroughi: So there's two components, right? One is market growth, which we can all say is low single digits. One is just models getting better every single quarter because they see more data and they get more accurate. And these models, by definition, this is how they work. And so we see that in real time.

Adam Foroughi: So there are two components, right? One is market growth, which we can all say is low single digits. One is just models getting better every single quarter because they see more data and they get more accurate. And that's what these models, by definition; this is how they work. And so we see that in real time, the models continue to get more accurate. Now, our advertisers, and I said this in my talk track, our advertisers will spend much more today on our platform than we can deliver to them. The limitation is, how many users can the models match up on across every single one of those advertisers at those revenue goals?

Adam Foroughi: So there's two components, right? Like one is the market growth, which we can all say is low single digits. One is just models getting better every single quarter because they see more data and they get more accurate. That's these models by definition. This is how they work. And so we see that in real time. The models continue to get more accurate. Now, our advertisers and I said this in my talk track. Our advertisers will spend much more today on our platform than we can deliver to them. The limitation is how many users can the models match up on across every single one of those advertisers at those revenue goals.

Speaker Change: There's two components. One is the market growth, which we can all say is low single digits.

Speaker Change: One is just models getting better every single quarter because they see more data and they get more accurate. And that's these models by definition, this is how they work. And so we see that in real time, the models continue to get more accurate. Now, our advertisers, and I said this in my talk track, our advertisers will spend much more today on our platform that we can deliver to them.

Adam Foroughi: Our advertising has also gotten a lot more efficient. So as you've seen our business double in the last year, there's billions of dollars of more investment happening from mobile gaming companies in user acquisition and user discovery. Some part of that is in-app advertising advertisers, and that's helped be a catalyst to re-growing this industry as a whole in-app purchasing, but some some portion of that also is the are these publishers that are buying more users now because their systems are more effective for advertising based applications and so all of this stuff is intertangled together, and we're one of the main catalysts of growth in this category because our scale is so large inside this category on both fronts.

Adam Foroughi: The models continue to get more accurate. Our advertisers, and I said this in my talk track, our advertisers will spend much more on our platform today than we can deliver to them. The limitation is how many users can the models match up on across every single one of those advertisers at those revenue goals. If the models get better, they're able to process more data and find more users for those advertisers, so the spend will go up naturally.

Operator: Understood. Thank you very much.

Speaker Change: the limitation is how many users can the models match up on across every single one of those advertisers at those revenue goals

Adam Foroughi: If the models get better, they're able to process more data and find more users for those advertisers. So the spend will go up naturally. And it's not that these advertisers are adding more budget; it's not that they're saying we want to buy users at a more expensive cost to them, by definition, lowering their goals. It's that the models get better, all else stays equal, and these advertisers grow on our platform. And so we're seeing that in real time.

Adam Foroughi: If the models get better, they're able to process more data and find more users for those advertisers. So the spend will go up naturally. And it's not that these advertisers are adding more budget. It's not that they're saying we want to buy users at a more expensive cost to them, let by definition lowering their goals. It's that the models get better, all else stays equal, and these advertisers grow on our platform. And so we're seeing that in real time. And there is a very, very large appetite for incremental spend on our platform because we deliver profits to these advertisers.

Speaker Change: If the models get better, they're able to process more data and find more users for those advertisers, so the spend will go up naturally. And it's not that these advertisers are adding more budget, it's not that they're saying we want to buy users at a more expensive cost to them, by definition, lowering their goals.

Adam Foroughi: And it's not that these advertisers are adding more budget. It's not that they're saying we want to buy users at a more expensive cost to them, by definition, lowering their goals. It's that the models get better, all else stays equal, and these advertisers grow on our platform. And so we're seeing that in real time. And there is a very, very large appetite for incremental spend on our platform because we deliver profits to these advertisers. They're arbitrage marketing on us. They're buying them at a profit.

Speaker Change: It's that the models get better, all else stays equal, and these advertisers grow on our platform. And so we're seeing that in real time. And there is a very, very large appetite for incremental spend on our platform because we deliver profits to these advertisers. They're arbitrage marketing on us.

Operator: The silly carousade with Cannibal has the next question and is also audio only? Yes, apologies for that.

Adam Foroughi: And there is a very, very large appetite for incremental spend on our platform because we deliver profits to these advertisers. They're arbitraging marketing on us, they're buying at a profit, and so they will spend a lot more if our models can do it. And so those two things can build out a very good sustainable growth rate inside the mobile gaming category. And then the third piece is that if you end up having a lift on the form of technology that you're using, you materially enhance that technology. And in the past, I've used things like ChatGPT 3.5, 4. These are incremental changes that are step functions in these types of technologies. And I use that as an analogy because people understand it.

Adam Foroughi: They're arbitrage marketing on us. They're buying it at a profit. And so they will spend a lot more if our models can do it. And so those two things can build out a very good sustainable growth rate inside the mobile gaming category.

Adam Foroughi: And so they will spend a lot more if our models can do it. And so those two things can build out a very good, sustainable growth rate inside the mobile gaming category. And then the third piece is if you end up having a lift to the form of technology that you're using, you materially enhance that technology. And in the past, I've used things like ChatGPT 3.5, 4.

Martin Yang: They're buying at a profit, and so they will spend a lot more if our models can do it. And so those two things can build out a very good sustainable growth rate inside the mobile gaming category. And then the third piece is, if you end up having a lift to the form of technology that you're using, you materially enhance it.

Adam Foroughi: And then the third piece is if you end up having a lift to the form of technology that you're using, you materially enhance that technology. In the past, that use like chat GPT three and a half for these are incremental changes that are step functions in these types of technologies. And I use that as an analogy because people understand it. But in our world, we're constantly making enhancements to the technology. When there is a lift to the technology, that could be a step function and growth for the same reason because these advertisers will spend more and it can make our models more accurate at larger scale on behalf of them.

Adam Foroughi: These are incremental changes that are step functions in these types of technologies. And I use that as an analogy because people understand it. But in our world, we're constantly making enhancements to the technology. When there is a lift in the technology, that could be a step function in growth for the same reason, because these advertisers will spend more, and it can make our models more accurate at a larger scale on behalf of them. So hopefully, that answers it for you, Martin.

Speaker Change: Matt Stumpf, Herald Chen, Adam Foroughi

Adam Foroughi: Yeah, I mean, look, like at this level of scale, with how big the software business is, if you backed out total advertiser dollars that you think are in our platform, it's in the many billions of dollars, so we've always worked with some of the very large publishers. Like we usually have had pretty deep penetration and mobile gaming, but there are some very well known large publishers that did look at us as a competitor.

Adam Foroughi: In our world, we're constantly making enhancements to the technology. When there is a lift in the technology, that could be a step function in growth for the same reason, because these advertisers will spend more, and it can make our models more accurate at a larger scale on behalf. So hopefully, that answers it for you, Martin.

Speaker Change: When there is a lift to the technology, that could be a step function in growth for the same reason, because these advertisers will spend more and it can make our models more accurate at larger scale on behalf of them.

Adam Foroughi: At this point, our platform is so successful in mobile gaming. It's very, very hard for any publisher to look the other way, and so we've gotten a lot more adoption across even those publishers. There isn't really a customer that I know of in mobile gaming that does not find success as a scalable success on our platform at this point today.

Adam Foroughi: So hopefully that ends for you, Martin. Yeah, quick follow up. So are you saying that the key inputs to your own modeling movement is probably volume driven or the volume data drift? Yeah, I mean, look, we're a very, very large scale, right? So this data creates a mode, and the more data are models processed, the better they're going to get. So every single core, we launched this system. We just went and laughed the one year anniversary, right? So it's been in the market now for a year plus. Every month has been bigger than the prior month.

David Hsiao: Yeah, quick follow-up. So are you saying that the key inputs to your own modeling improvement are primarily volume-driven or volume data-driven?

Adam Foroughi: Yeah, a quick follow-up. So are you saying that the key inputs to your own modeling improvement are primarily volume-driven or volume data-driven? Yeah, I mean, look, we're on a very, very large scale, right? So that data creates a moat. And the more data our models process, the better they're going to get. So every single quarter since we launched this system, we have just gone and lapped the one year anniversary, right? So it's been in the market now for a year plus, and every month has been bigger than the prior month.

Speaker Change: So hopefully that answers it for you, Martin.

Martin Yang: Yeah, a quick follow-up. So are you saying that the key inputs to your own model improvement is primarily volume-driven or the volume data-driven?

Adam Foroughi: Yeah, I mean, look, we're on a very, very large scale, right? So that data creates a moat. And the more data our models process, the better they're going to get. So every single quarter we launch this system, we just went and lapped the one year anniversary, right? So it's been in the market now for a year plus. Every month has been bigger than the prior month.

Adam Foroughi: So we get more data, process more data, and with those incremental data points, the math gets stronger, the model gets stronger, and it can drive more value. And so we've seen that consistently. These AI technologies are very, very new. So it's not like in the world we have 10 years of history to look back on and go, when do these models stop improving? They are currently doing that today. That's by nature. That's how this AI technology works, processing immense amounts of data. And through that, the math gets stronger and more accurate and more predictive. And so we're seeing that in real time. And that gives us confidence that this core underlying technology is going to continue to.

Speaker Change: Yeah, I mean, look, we're a very, very large scale, right? So that data creates a moat. And the more data our models process, the better they're going to get. So every single quarter we launched this system, we just went and lapped the one year anniversary, right? So it's been in the market now for a year plus.

Operator: Yeah, thank you very much.

Operator: Moving on to Mohamed Golov with HSBC. Mohamed, do you want to turn your video on? Mohamed, if you can hear me go ahead and unmute yourself, so we can at least hear you to ask your question.

Adam Foroughi: So we get more data, process more data with those incremental data points. The math gets stronger, the model gets stronger, and it can drive more value. And so we've seen that consistently. The AI technologies are very, very new. So it's not like in the world we have 10 years of history to look back on and go, when do these models stop improving? himself. They currently are doing that today. That's by nature. That's how the AI technology works. Processes immense amounts of data, and through that, the math gets stronger and more accurate and more predictive. And so we're seeing that in real time, and that gives us confidence that this core underlying technology is going to continue to grow over time.

Adam Foroughi: So we get more data, process more data. With those incremental data points, the math gets stronger, the model gets stronger, and it can drive more value. And so we've seen that consistently. These AI technologies are very, very new. So it's not like in the world, we have 10 years of history to look back on and go, when do these models stop improving? They currently are doing that today. That's by nature.

Speaker Change: Every month has been bigger than the prior month, so we get more data, processes more data. With those incremental data points, the math gets stronger, the model gets stronger, and it can drive more value. And so we've seen that consistently.

Matt Stumpf: Alright, well, hearing no response, we'll move on to Matt Cost with Morgan Stanley. Great, hi guys, thanks for sticking to question. I guess when I think about e-commerce advertising, kind of an in-app environment or an in-game environment, as I understand it today because of the app love and exchange, which should allow people like Google or trade desks to access the inventory on Macs, to run e-commerce ads today, that should be possible, but it doesn't seem like it's a very big business today.

Martin Yang: These AI technologies are very, very new. So it's not like in the world we have 10 years of history to look back on and go, when do these models stop improving themselves?

Matt Stumpf: So I guess what are the impediments to running e-commerce advertising in an in-game or in-app environment that are preventing others from doing it already since I believe it should be possible. And then how are you solving those problems or aiming to solve them with your e-commerce? Thank you.

Adam Foroughi: That's how this AI technology works, processes immense amounts of data, and through that, the math gets stronger and more accurate and more predictive. And so we're seeing that in real time. And that gives us confidence that this core underlying technology is going to continue to grow.

Speaker Change: they currently are doing that today that's that's by nature that's how they say i technology works processes immense amounts of data and do that the mth gets stronger and more accurate more predicve and so we're seeing that real time indthat gives confidence that this core underlying technology is going to continue to go over to

David Hsiao: You talked about matching. Is there a sense you can give us on how accurately you are matching users to the apps now and how much more accurate it can be in the future?

Adam Foroughi: Got it. You talked about matching. Is there a sense you can give us on how accurately are you matching users to the apps now and how much more accurate it can be in the future?

Adam Foroughi: You talked about matching. Is there a sense you can give us how accurately are you matching the users to the apps now and how much more accurate it can be in the future? Yeah, I mean look, we're very, very accurate today. When an advertiser says, "I want to break even in 30 days" on our platform, we achieve that goal for them. When I say increasing the match rate, it means let's say that advertiser says I want to spend a thousand dollars today, and I want to get the thousand back in 30 days, and we get that within a percent of inaccuracy.

Speaker Change: You talked about matching. Is there a sense you can give us on how accurately are you matching

Speaker Change: the users to the apps now and how much more accurate it can be in the future.

Adam Foroughi: Yeah, I mean, look, we're very, very accurate today. When an advertiser says, "I want to break even in 30 days on our platform," we achieve that goal for them. When I say increasing the match rate, it means, let's say that an advertiser says, I want to spend $1,000 today, and I want to get the $1,000 back in 30 days, and we get that within a percent of inaccuracy. So they get, whether it's 990 or $1,010 back in 30 days, that we have a limit of $1,000 that they can spend today, though the system can only deliver that much with a very low error rate for them.

Adam Foroughi: Yeah, I mean, look, we're very, very accurate today. When an advertiser says, "I want to break even in 30 days on our platform," we achieve that goal for them. When I say increasing the match rate, it means, let's say that an advertiser says, I want to spend $1,000 today, and I want to get the $1,000 back in 30 days, and we get that within a percent of inaccuracy. So they get whether it's 990 or $1,010 back in 30 days. We have a limit of $1,000 that they can spend today, though, the system can only deliver that much with a very low Now, let's say tomorrow; the system processes more data, or a team makes an enhanced version.

Speaker Change: Yeah, I mean, look, we're very, very accurate today. When an advertiser says...

Adam Foroughi: Like, we can't speak to other people's technologies or things that prohibit them from being able to get categories to work in gaming but trade that's products are nothing like ours. When it comes to succeeding on behalf of advertisers in any category, we want our models to be able to drive measurable revenue. So you got to have an attribution framework. You've got to have models that can predict revenue and match the user up with the advertiser and you've got to make it all work together.

Speaker Change: I want to break even in 30 days on our platform. We achieved that goal for them.

Martin Yang: When I say increasing the match rate, it means let's say that advertiser says, I want to spend $1,000 today, and I want to get the 1,000 back in 30 days, and we get that within a percent of inaccuracy. So they get whether it's $990 or $1,010 back in 30 days.

Adam Foroughi: So they get whether it's nine hundred nine year a thousand ten dollars back in 30 days that we have a limit of a thousand dollars that they can spend today though the system can only deliver that much with the very low error rate for them. Now let's say tomorrow the system processes more data or a team makes an enhancement and now the system can deliver two thousand dollars at that same 30-day break even. The advertiser is going to say, "I got the two thousand dollars ready to go." You're breaking even 30 days. I'll put it on my credit card.

Speaker Change: that we have a limit of a thousand dollars that they can spend today though the system can only deliver that much with the very low err rate for thenow let's say tomorrow this is in process is more data or a team makes an enhancement and now the system can deliver two thousand dollars at that same thirty day breakeking

Adam Foroughi: Now, let's say tomorrow; the system processes more data, or a team makes an enhancement, and now the system can deliver $2,000 during that same 30 day break. The advertiser is going to say, I have the $2,000 ready to go, you're breaking even in 30 days, and I'll put it on my credit card. Well, they have an unlimited tolerance to spend if all else remains equal. And as our technology continues to improve, that business will continue to grow.

Adam Foroughi: We're in pilot with this product. We've got it right now. It's looking quite promising. And so we think it's something that we're going to be able to build on and build on very aggressively as we go forward. And just to follow up on that, I guess from a data perspective, it's just a matter of iterating on it. I mean, because obviously you have so much data that's specifically relevant to kind of like the game advertising products you've done historically.

Speaker Change: The advertiser is going to say, I got the $2,000 ready to go. You're breaking even in 30 days. I'll put it on my credit card. Well, they have unlimited tolerance to spend if all else remains equal. And as our technology continues to improve, that business will continue to grow.

Martin Yang: Well, they have unlimited tolerance to spend if all else remains equal, and as our technology continues to improve, that business will continue to go. Thank you.

Adam Foroughi: If that applicable directly to e-commerce advertising or other verticals, or is it about iterating and kind of building a new data set? I think it's a combination of both. I mean, we process tens of billions of dollars of transactional volume already and we see a billion plus daily active. So our platform is not small at this point. And that data is able to be used across anything. These are human beings, not just mobile gamers and the audience sees female and middle aged.

David Hsiao: Well, this concludes our question and answer session and today's webinar. We thank you all for your participation, and we look forward to seeing you on next quarter. You may now disconnect. Enjoy your summer.

David Hsiao: Goodbye.

Adam Foroughi: And so it's completely different than what people would assume a gaming audience is at a very, very large scale directly applicable to e-commerce is something that we've always hypothesized as possible. The models and acts on to are so much more sophisticated and technologies we've had in the past that they should enable success there. Now we're in pilot and we're seeing success there. So we're at the point now where we know we put the pieces in place. And now it's more of a go to market problem unless the technology. Great.

Operator: Thank you.

Operator: Or sent you a topic with Wolf has the next question.

Operator: Thanks for taking my question. So looking at app discovery installations growing 77% on a tough comp and revenue per installation accelerating versus last quarter. I guess just is there any strength and installations from non gaming? I know it's smaller revenue base today, but in terms of app discovery installations, is it more material portion of that growth? And then just decide from that any types of could you go into a little bit more detail on how you're still seeing that strong strength and installations and revenue installation than just to follow up on the F's business.

Operator: Thanks. Yes, sure, sure. So the non gaming continues to grow, but it's still a relatively small portion of the overall installations when you look at the overall software business. So to Adam's previous comments like it's still a relatively small portion of the existing business and it's still kind of in pilot mode there. So we continue to see kind of promising results, but it's really not needle living today. And then just on apps, despite the dip in monthly active pairs, you saw I think we need back it out in that advertising basically flat sequentially.

Operator: Is this a function of the strength from X on two and also on apps, do you plan on exploring any by best true studio. Some people are like that we're talking about morning fed more studios. Does that would that support some of your capital allocation plans in the medium term.

Matt Stumpf: Thanks. Like we've said in the past about M&A and investing the apps businesses, we continue to be open to it and we're really just waiting for the market to improve. And we've been optimizing the app studios over. You know, over the last, over a year. So you can see that as well right in this quarter, where we've adjusted the return goals for our UA spend decreasing cost pretty materially and increasing our margin profile. So we'll continue to maximize those businesses for profit and we'll be open to transactions in the future.

Operator: Thank you.

Martin Yang: We have time for one additional question for Martin Yang with opco. Sorry about that, Martin. Thank you for taking my question. I want to dig a little deeper into your confidence on that 35% constant improvement on a sequential basis. What gave you that type of confidence, because I look at the underlying market and your customer behavior. It's a very dynamic market for mobile gaming with new game launches, you know, certain games, performing worse or better and customers are doing all sorts of things.

Adam Foroughi: So what is. Constance in that type of market that gave you the confidence that your improvement can be pretty consistent on a clearly basis. I think you said 35% sequential quarter of a quarter. What will you say? 325, 325. So there's two components, right? Like one is the market growth, which we can all say is low single digits. One is just models getting better every single quarter because they see more data and they get more accurate.

Adam Foroughi: That's these models by definition. This is how they work. And so we see that in real time. The models continue to get more accurate. Now our advertisers and I said this in my talk track. Our advertisers will spend much more today on our platform that we can deliver to them. The limitation is how many users can the models match up on across every single one of those advertisers at those revenue goals.

Adam Foroughi: If the models get better, they're able to process more data and find more users for those advertisers. So the spend will go up naturally. And it's not that they're these advertisers are adding more budget. It's not that they're saying we want to buy users at a more expensive cost to them, let by definition lowering their goals. It's that the models get better all else stays equal and these advertisers grow on our platform.

Adam Foroughi: And so we're seeing that in real time. And there is a very, very large appetite for incremental spend on our platform because we deliver profits to these advertisers. They're arbitrage marketing on us. They're buying it a profit. And so they will spend a lot more if our models can do it. And so those two things can build out a very good sustainable growth rate inside the mobile gaming category.

Martin Yang: And then the third piece is if you end up having a lift to the form of technology that you're using you materially enhance that technology in the past that use like chat GPT three and a half for these are incremental changes that are step functions in these types of technologies. And I use that as an analogy because people understand it. But in our world, we're constantly making enhancements to the technology. When there is a lift to the technology, that could be a step function and growth for the same reason because these advertisers will spend more and it can make our models more accurate at larger scale on on behalf of them. So hopefully that ends for you, Martin.

Adam Foroughi: Yeah, quick follow up. So are you saying that the key inputs to your own modeling movement is probably volume driven or the volume data drift? Yeah, I mean, look, we're a very, very large scale, right? So that data creates a mode and the more data are models processed, the better they're going to get. So every single core, we launched this system. We just went and laughed the one year anniversary, right? So it's been in the market now for a year plus every month has been bigger than the prior month.

Adam Foroughi: So we get more data processes more data with those incremental data points. The math gets stronger, the model gets stronger, and it can drive more value. And so we've seen that consistently. The AI technologies are very, very new. So it's not like in the world we have 10 years of history to look back on and go, when do these models stop improving? himself. They currently are doing that today. That's by nature.

Adam Foroughi: That's how the AI technology works. Processes immense amounts of data and through that the math gets stronger and more accurate and more predictive. And so we're seeing that in real time and that gives us confidence that this core underlying technology is going to continue to grow over time.

Adam Foroughi: You talked about matching. Is there a sense you can give us how accurately are you matching the users to the apps now and how much more accurate it can be in the future? Yeah I mean look we're very very accurate today. When an advertiser says I want to break even in 30 days on our platform we achieve that goal for them. When I say increasing the match rate it means let's say that advertiser says I want to spend a thousand dollars today and I want to get the thousand back in 30 days and we get that within a percent of inaccuracy.

Adam Foroughi: The advertiser is going to say I got the two thousand dollars ready to go. You're breaking even 30 days I'll put it on my credit card. Well they have unlimited tolerance to spend if all else remains equal and as our technology continues to improve that business will continue to go.

Operator: Thank you.

Operator: Well this concludes our question and answer session and today's webinar. We thank you all for your participation and we look forward to seeing you on next quarter. You may now disconnect. Enjoy your summer. Goodbye.

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