Invest and let it run (sounds like a James Bond title, “Live and let die”). This is often the best thing to do when you have a winner in your portfolio.
As Peter Lynch would say, “we cut the weeds and water the flowers“. And this is what we do since the action is present in the Momentum Picks selection since the start of the second quarter (03/31/2024) with an unrealized capital gain of around +250%. It is one of the rare stocks to have remained in Zonebourse’s quality-momentum selection for three consecutive quarters.
AppLovin released its financial results for the third quarter of 2024 last night, revealing a remarkable performance that exceeded market expectations. The stock gained +28% after closing last night.
The company reported revenue of $1.20 billion, an increase of 39% from the previous year. This figure exceeds the forecasts of analysts, who expected a turnover slightly lower than 1.13 billion. I had forecasted 1.17 billion.
Net profit stood at $434 million, marking an impressive 300% increase over the previous year, with a net margin of 36%. Here too, the consensus predicted 322 million and I was more around 386 million dollars.
AppLovin’s software platforms segment was the primary driver of this growth, generating revenue of $835 million, an increase of 66% from the previous year. Adjusted EBITDA for this segment increased 79% to $653 million, with an adjusted EBITDA margin of 78%.
This performance is attributed to the continued improvement of their AXON engine, which has enabled advertising partners to increase their spend while meeting their advertising ROI goals. The apps segment also saw slight growth, with revenue up 1% to $363 million. Adjusted EBITDA for this segment increased 24% to $68 million, with a margin of 19%. AppLovin continues to manage user acquisition and optimize the cost structure of its apps business, expecting continued stability in this area.
Financially, AppLovin generated $551 million in net cash flow from operating activities and $545 million in free cash flow, an increase of 177% and 182% respectively from the prior year.
At the end of the third quarter of 2024, the company had $568 million in cash and cash equivalents, with 335 million shares of Class A and B common stock outstanding. A highlight of the quarter was the repurchase and reserve of 5 million shares of Class A common stock for a total cost of $437 million.
With confidence in the company’s future, AppLovin’s board of directors increased stock repurchase authorization by an additional $2 billion, bringing the total remaining authorization to $2.3 billion. dollars. These future repurchases will be financed by free cash flow.
AppLovin emphasizes a strong capital structure and efficient capital allocation to create long-term shareholder value. The company focuses on investing in talent and technology to drive organic growth, managing capital stock through ongoing share repurchases funded by free cash flow, and building a capital base strong with sufficient liquidity to support financial flexibility and maintain a net debt leverage ratio below 2.0x.
Looking to the outlook for the fourth quarter of 2024, AppLovin expects revenue between $1.240 billion and $1.260 billion, with adjusted EBITDA between $740 million and $760 million, and an adjusted EBITDA margin of 60%. . These forecasts reflect the company’s confidence in its ability to maintain its growth trajectory.
The third quarter of 2024 was a success for AppLovin (and the Momentum Picks selection up +65% since the start of 2024), thanks to the continuous improvement of its technological models and effective management of its business segments. The company is well positioned to continue its growth and create value for its shareholders over the long term.
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