filings.toolsItem 8. Financial Statements and Supplementary Data
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Item 8. Financial Statements and Supplementary Data
APPLOVIN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of AppLovin Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AppLovin Corporation and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), redeemable noncontrolling interest and stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current‐period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Performance-based Restricted Stock Units - Refer to Note 2 and Note 11 to the financial statements
Critical Audit Matter Description
In November 2024, the Company granted performance-based restricted stock units (“PSUs”) which are eligible to vest based on the achievement of certain stock price targets and the satisfaction of service conditions. The grant date fair value of the PSUs is $36.1 million.
A Monte Carlo simulation was utilized to determine the grant date fair value. The Monte Carlo simulation model utilized the stock price on the date of grant, expected volatility, risk-free interest rate, discount for lack of marketability and dividend yield to calculate the grant date fair value. The assumptions used in the Monte Carlo simulation model had a significant effect on the grant date fair value of the PSUs.
Given the level of judgment involved by management, which included the use of a specialist to determine the grant date fair value of the PSUs and the derived service period, our audit procedures required a high degree of auditor judgment and increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of the PSUs included the following, among others:
◦We tested the design and operating effectiveness of the Company’s internal controls over the determination of the grant date fair value of the PSUs.
◦We inquired of management the key valuation assumptions and the Monte Carlo simulation model methodology used in the determination of the grant date fair value of the PSUs.
◦We performed risk assessment procedures over the valuation assumptions and performed a sensitivity analysis to understand the impacts of the valuation assumptions used.
◦We tested the accuracy of the data used in measuring the awards by agreeing the underlying inputs, such as the grant date, and the stock price, among others, back to source documents, such as grant agreements.
◦We evaluated the qualifications of the Company's specialists by assessing their certifications and determining whether they meet the qualifications necessary to perform independent PSU valuations.
◦With the assistance of our fair value specialists, we evaluated management’s valuation of the PSUs by:
I.Evaluating the Monte Carlo simulation model methodology and the reasonableness of the valuation assumptions, including the stock price on the date of grant, expected volatility, risk-free interest rate, discount for lack of marketability, and dividend yield.
II.Independently developing the Monte Carlo simulation model and independently calculating valuation inputs.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 27, 2025
We have served as the Company's auditor since 2015.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of AppLovin Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of AppLovin Corporation and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated February 27, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 27, 2025
AppLovin Corporation
Consolidated Balance Sheets
(In thousands, except share and per share data)
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 741,411 | $ | 502,152 | |||||||
| Accounts receivable, net | 1,414,246 | 953,810 | |||||||||
| Prepaid expenses and other current assets | 156,533 | 160,201 | |||||||||
| Total current assets | 2,312,190 | 1,616,163 | |||||||||
| Property and equipment, net | 160,530 | 173,331 | |||||||||
| Operating lease right-of-use assets | 38,069 | 48,210 | |||||||||
| Goodwill | 1,803,426 | 1,842,850 | |||||||||
| Intangible assets, net | 896,677 | 1,292,635 | |||||||||
| Other assets | 658,367 | 385,998 | |||||||||
| Total assets | $ | 5,869,259 | $ | 5,359,187 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 563,427 | $ | 371,702 | |||||||
| Accrued and other current liabilities | 409,392 | 265,256 | |||||||||
| Short-term debt | — | 215,000 | |||||||||
| Deferred revenue | 69,839 | 78,559 | |||||||||
| Operating lease liabilities, current | 14,814 | 13,605 | |||||||||
| Total current liabilities | 1,057,472 | 944,122 | |||||||||
| Long-term debt | 3,508,983 | 2,905,906 | |||||||||
| Operating lease liabilities, non-current | 32,608 | 42,905 | |||||||||
| Other non-current liabilities | 180,378 | 209,925 | |||||||||
| Total liabilities | 4,779,441 | 4,102,858 | |||||||||
| Commitments and contingencies (Note 5) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of December 31, 2024 and 2023 | — | — | |||||||||
| Class A, Class B, and Class C Common stock, $0.00003 par value—1,850,000,000 (Class A 1,500,000,000, Class B 200,000,000, Class C 150,000,000) shares authorized, 340,041,739 (Class A 309,353,198, Class B 30,688,541, Class C nil) and 339,886,712 (Class A 268,774,090, Class B 71,112,622, Class C nil) shares issued and outstanding as of December 31, 2024 and 2023, respectively | 11 | 11 | |||||||||
| Additional paid-in capital | 593,699 | 2,134,581 | |||||||||
| Accumulated other comprehensive loss | (103,096) | (65,274) | |||||||||
| Retained earnings (Accumulated deficit) | 599,204 | (812,989) | |||||||||
| Total stockholders’ equity | 1,089,818 | 1,256,329 | |||||||||
| Total liabilities and stockholders’ equity | $ | 5,869,259 | $ | 5,359,187 |
See Accompanying Notes to Consolidated Financial Statements.
AppLovin Corporation
Consolidated Statements of Operations
(In thousands, except share and per share data)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenue | $ | 4,709,248 | $ | 3,283,087 | $ | 2,817,058 | |||||||||||
| Costs and expenses: | |||||||||||||||||
| Cost of revenue | 1,166,806 | 1,059,191 | 1,256,065 | ||||||||||||||
| Sales and marketing | 849,209 | 830,718 | 919,550 | ||||||||||||||
| Research and development | 638,689 | 592,386 | 507,607 | ||||||||||||||
| General and administrative | 181,085 | 152,585 | 181,627 | ||||||||||||||
| Total costs and expenses | 2,835,789 | 2,634,880 | 2,864,849 | ||||||||||||||
| Income (loss) from operations | 1,873,459 | 648,207 | (47,791) | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest expense and loss on settlement of debt | (318,260) | (275,665) | (171,863) | ||||||||||||||
| Other income, net | 20,806 | 8,028 | 14,477 | ||||||||||||||
| Total other expense, net | (297,454) | (267,637) | (157,386) | ||||||||||||||
| Income (loss) before income taxes | 1,576,005 | 380,570 | (205,177) | ||||||||||||||
| Provision for (benefit from) income taxes | (3,771) | 23,859 | (12,230) | ||||||||||||||
| Net income (loss) | 1,579,776 | 356,711 | (192,947) | ||||||||||||||
| Less: Net loss attributable to noncontrolling interest | — | — | (201) | ||||||||||||||
| Net income (loss) attributable to AppLovin | $ | 1,579,776 | $ | 356,711 | $ | (192,746) | |||||||||||
| Less: Net income attributable to participating securities | 2,717 | 1,769 | — | ||||||||||||||
| Net income (loss) attributable to common stock—Basic | $ | 1,577,059 | $ | 354,942 | $ | (192,746) | |||||||||||
| Net income (loss) attributable to common stock—Diluted | $ | 1,577,144 | $ | 354,993 | $ | (192,746) | |||||||||||
| Net income (loss) per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | $ | 4.68 | $ | 1.01 | $ | (0.52) | |||||||||||
| Diluted | $ | 4.53 | $ | 0.98 | $ | (0.52) | |||||||||||
| Weighted-average common shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders: | |||||||||||||||||
| Basic | 336,921,483 | 351,952,187 | 371,568,011 | ||||||||||||||
| Diluted | 347,807,555 | 362,589,246 | 371,568,011 |
See Accompanying Notes to Consolidated Financial Statements.
AppLovin Corporation
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income (loss) | $ | 1,579,776 | $ | 356,711 | $ | (192,947) | |||||||||||
| Other comprehensive income (loss): | |||||||||||||||||
| Foreign currency translation adjustment, net of tax | (37,822) | 18,108 | (37,928) | ||||||||||||||
| Other comprehensive income (loss), net of tax | (37,822) | 18,108 | (37,928) | ||||||||||||||
| Comprehensive income (loss) including noncontrolling interest | 1,541,954 | 374,819 | (230,875) | ||||||||||||||
| Less: Comprehensive loss attributable to noncontrolling interest | — | — | (201) | ||||||||||||||
| Comprehensive income (loss) attributable to AppLovin | $ | 1,541,954 | $ | 374,819 | $ | (230,674) |
See Accompanying Notes to Consolidated Financial Statements.
AppLovin Corporation
Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity
(In thousands, except share data)
| Redeemable Noncontrolling Interest | Class A and Class B Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Accumulated Deficit) | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2021 | $ | 201 | 375,089,360 | $ | 11 | $ | 3,160,487 | $ | (45,454) | $ | (976,954) | $ | 2,138,090 | |||||||||||||||||||||||||||||||
| Stock issued in connection with equity awards | — | 6,780,460 | — | 30,547 | — | — | 30,547 | |||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | — | (1,186,147) | — | (27,535) | — | — | (27,535) | |||||||||||||||||||||||||||||||||||||
| Repurchase of Class A common stock | — | (9,389,682) | — | (338,880) | — | — | (338,880) | |||||||||||||||||||||||||||||||||||||
| Issuance of Class A common stock in connection with acquisitions | — | 2,579,692 | — | 137,422 | — | — | 137,422 | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 193,707 | — | — | 193,707 | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (37,928) | — | (37,928) | |||||||||||||||||||||||||||||||||||||
| Net loss | (201) | — | — | — | — | (192,746) | (192,746) | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | — | 373,873,683 | 11 | 3,155,748 | (83,382) | (1,169,700) | 1,902,677 | |||||||||||||||||||||||||||||||||||||
| Stock issued in connection with equity awards | — | 20,319,859 | — | 25,998 | — | — | 25,998 | |||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | — | (7,641,545) | — | (246,435) | — | — | (246,435) | |||||||||||||||||||||||||||||||||||||
| Repurchase of Class A common stock | — | (46,665,285) | — | (1,153,593) | — | — | (1,153,593) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 352,863 | — | — | 352,863 | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | 18,108 | — | 18,108 | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 356,711 | 356,711 | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | — | 339,886,712 | 11 | 2,134,581 | (65,274) | (812,989) | 1,256,329 | |||||||||||||||||||||||||||||||||||||
| Stock issued in connection with equity awards | — | 25,821,647 | — | 55,596 | — | — | 55,596 | |||||||||||||||||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | — | (9,585,212) | — | (1,152,131) | — | — | (1,152,131) | |||||||||||||||||||||||||||||||||||||
| Repurchase of Class A common stock | — | (16,081,408) | — | (813,714) | — | (167,583) | (981,297) | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 369,367 | — | — | 369,367 | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | — | — | — | — | (37,822) | — | (37,822) | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 1,579,776 | 1,579,776 | |||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2024 | $ | — | 340,041,739 | $ | 11 | $ | 593,699 | $ | (103,096) | $ | 599,204 | $ | 1,089,818 |
See Accompanying Notes to Consolidated Financial Statements.
AppLovin Corporation
Consolidated Statements of Cash Flows
(In thousands)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Operating Activities | |||||||||||||||||
| Net income (loss) | $ | 1,579,776 | $ | 356,711 | $ | (192,947) | |||||||||||
| Adjustments to reconcile net income (loss) to operating activities: | |||||||||||||||||
| Amortization, depreciation and write-offs | 448,680 | 489,008 | 547,084 | ||||||||||||||
| Stock-based compensation, excluding cash-settled awards | 369,367 | 363,107 | 191,612 | ||||||||||||||
| Impairment of investments | — | 27,953 | — | ||||||||||||||
| Loss on settlement of debt | 28,375 | 4,337 | — | ||||||||||||||
| Change in operating right-of-use assets | 12,689 | 17,842 | 17,107 | ||||||||||||||
| Amortization of debt issuance costs and discount | 5,460 | 9,363 | 12,678 | ||||||||||||||
| Loss on disposal of long-lived assets | 1,646 | — | 127,892 | ||||||||||||||
| Other | 2,557 | 1,863 | 1,786 | ||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | (467,028) | (261,279) | (174,829) | ||||||||||||||
| Prepaid expenses and other current assets | 4,056 | (12,280) | (3,725) | ||||||||||||||
| Other assets | (189,387) | (121,688) | (77,343) | ||||||||||||||
| Accounts payable | 189,585 | 98,574 | 3,479 | ||||||||||||||
| Operating lease liabilities | (14,106) | (18,612) | (18,898) | ||||||||||||||
| Accrued and other liabilities | 133,974 | 92,754 | (6,412) | ||||||||||||||
| Deferred revenue | (6,633) | 13,857 | (14,711) | ||||||||||||||
| Net cash provided by operating activities | 2,099,011 | 1,061,510 | 412,773 | ||||||||||||||
| Investing Activities | |||||||||||||||||
| Purchase of non-marketable equity securities | (76,983) | (17,934) | (66,342) | ||||||||||||||
| Acquisitions of businesses and intangible assets | (25,553) | (63,899) | (1,345,776) | ||||||||||||||
| Purchase of property and equipment | (4,776) | (4,246) | (662) | ||||||||||||||
| Proceeds from sale of assets and other | 558 | 8,250 | 41,312 | ||||||||||||||
| Net cash used in investing activities | (106,754) | (77,829) | (1,371,468) | ||||||||||||||
| Financing Activities | |||||||||||||||||
| Principal repayments of debt | (4,225,223) | (497,994) | (25,810) | ||||||||||||||
| Payments of withholding taxes related to net share settlement | (1,143,525) | (246,435) | (27,535) | ||||||||||||||
| Repurchases of common stock | (981,297) | (1,153,593) | (338,880) | ||||||||||||||
| Payments of deferred acquisition costs | — | (33,903) | (124,184) | ||||||||||||||
| Payments of licensed asset obligation | — | (27,110) | (17,374) | ||||||||||||||
| Payments of debt issuance cost | (35,563) | (4,655) | — | ||||||||||||||
| Principal payments of finance leases | (20,875) | (20,170) | (24,083) | ||||||||||||||
| Proceeds from issuance of debt | 4,614,841 | 395,281 | — | ||||||||||||||
| Proceeds from issuance of common stock upon exercise of stock options and purchase of ESPP shares | 41,798 | 25,788 | 31,018 | ||||||||||||||
| Net cash used in financing activities | (1,749,844) | (1,562,791) | (526,848) | ||||||||||||||
| Effect of foreign exchange rate on cash, cash equivalents, and restricted cash equivalents | (3,154) | 778 | (4,477) | ||||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash equivalents | 239,259 | (578,332) | (1,490,020) | ||||||||||||||
| Cash, cash equivalents, and restricted cash equivalents at beginning of the period | 502,152 | 1,080,484 | 2,570,504 | ||||||||||||||
| Cash and cash equivalents at end of the period | $ | 741,411 | $ | 502,152 | $ | 1,080,484 |
See Accompanying Notes to Consolidated Financial Statements.
AppLovin Corporation
Consolidated Statement of Cash Flows
(In thousands)
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Supplemental non-cash investing and financing activities disclosures: | |||||||||||||||||
| Right-of-use assets acquired under finance leases | $ | 20,874 | $ | 113,440 | $ | 46,108 | |||||||||||
| Right-of-use assets acquired under operating leases | $ | 5,451 | $ | 6,471 | $ | 7,105 | |||||||||||
| Accrued withholding taxes related to net share settlement of restricted stock units | $ | 8,606 | $ | — | $ | — | |||||||||||
| Issuance of common stock and common stock warrants in connection with acquisitions | $ | — | $ | — | $ | 137,422 | |||||||||||
| Acquisitions not yet paid | $ | — | $ | — | $ | 31,045 | |||||||||||
| Assets acquired not yet paid | $ | 510 | $ | — | $ | 33,566 | |||||||||||
| Proceeds from sale of long-lived assets not yet received | $ | — | $ | — | $ | 7,000 | |||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||||||||
| Cash paid for income taxes, net of refunds | $ | 67,332 | $ | 75,433 | $ | 86,264 | |||||||||||
| Cash paid for interest | $ | 270,615 | $ | 248,828 | $ | 165,959 |
See Accompanying Notes to Consolidated Financial Statements.
APPLOVIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**1.**Description of Business
AppLovin Corporation (the “Company” or “AppLovin”) was incorporated in the state of Delaware on July 18, 2011. The Company is a leader in the advertising ecosystem providing end-to-end Advertising solutions that allow businesses to reach, monetize and grow their global audiences. The Company also has a globally diversified portfolio of apps—free-to-play mobile games that it operates through its owned or partner studios.
The Company is headquartered in Palo Alto, California, and has several operating locations in the U.S. as well as various international office locations in North America, Asia, and Europe.
The Company reports financial results under two segments: Advertising and Apps. Concurrent with this Form 10-K filing, the Company renamed the segment formerly known as Software Platform to Advertising. The segment name change did not result in any change to the composition of the Company's segments and therefore did not result in any change to historical results. See Note 14 - Segments and Geographic Information.
**2.**Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation—The accompanying consolidated financial statements have been prepared in conformity with U.S generally accepted accounting principles ("GAAP"). Consolidated financial statements include accounts and operations of the Company and its wholly owned and majority owned subsidiaries, and the ownership interest of minority investors is recorded as noncontrolling interest. In accordance with the provisions of Accounting Standards Codification ("ASC") 810, Consolidation, the Company is also required to consolidate any variable interest entities ("VIE") when it is the primary beneficiary. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE, or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company evaluates its relationships with all VIEs on an ongoing basis. All intercompany transactions and balances have been eliminated upon consolidation.
Certain prior period amounts reported in the Company's consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.
Use of Estimates—The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. The Company bases its estimates on assumptions that are believed to be reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to fair values of assets and liabilities acquired through acquisitions, useful lives of intangible assets and property and equipment, expected period of consumption of virtual goods, income and indirect taxes, contingent liabilities, evaluation of recoverability of intangible assets and long-lived assets, goodwill impairment, stock-based compensation, fair value of derivatives and other financial instruments. These estimates are inherently subject to judgment and actual results could differ materially from those estimates.
Risk and Uncertainties—The Company is subject to risks and uncertainties, including, but not limited to, as a result of the political uncertainty and international conflicts around the world, such as between Russia and Ukraine and in the Middle East, as well as, friction between the United States and China. As of the issuance date of these consolidated financial statements, the Company’s results of operations have not been materially impacted. However, the future impact of these events remains uncertain as the response to and information related to these events is rapidly evolving. A weakened global economy may negatively impact in-app purchasing decisions and consumer buying decisions across the globe generally, which could adversely affect advertiser activity. The full impact of these events on the global economy and the extent to which these events may impact the Company’s business, financial condition, and results of operations in the future remains uncertain. The severity of the impact of the political uncertainty and international conflicts around the world on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of these events and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms and uncertain demand.
Revenue from Contracts with Customers—The Company generates Advertising and Apps Revenue. Advertising Revenue is generated primarily from fees collected from advertisers including advertising networks who use the Advertising solutions. Apps Revenue consists of in-app purchase revenue ("IAP Revenue") generated from in-app purchases made by users within the Company’s apps (“Apps”), and in-app advertising revenue ("IAA Revenue") generated from third-party advertisers that purchase ad inventory from Apps.
Advertising Revenue
The vast majority of the Advertising Revenue is generated through AppDiscovery and MAX, which provide the technology to match advertisers and owners of digital advertising inventory (“Publishers”) via auctions at large scale and microsecond-level speeds. The terms for all mobile advertising arrangements are governed by the Company’s terms and conditions and generally
stipulate payment terms of 30 days subsequent to the end of the month. Substantially all of the Company's contracts with customers are fully cancellable at any time or upon a short notice.
The Company’s performance obligation is to provide customers with access to the Advertising solutions, which facilitates the advertiser’s purchase of ad inventory from Publishers. The Company does not control the ad inventory prior to its transfer to the advertiser, because the Company does not have the substantive ability to direct the use of nor obtain substantially all of the remaining benefits from the ad inventory. The Company is not primarily responsible for fulfillment. The Company is an agent as it relates to the sale of third-party advertising inventory and presents revenue on a net basis. The transaction price is the product of either the number of completions of agreed upon actions or advertisements displayed and the contractually agreed upon price per advertising unit with the advertiser less consideration paid or payable to Publishers. The Company recognizes Advertising Revenue when the agreed upon action is completed or when the ad is displayed to users. The number of advertisements delivered and completions of agreed upon actions is determined at the end of each month, which resolves any uncertainty in the transaction price during the reporting period.
Advertising Revenue also includes revenue generated from Adjust's measurement and analytics marketing platform that is recognized ratably over the subscription period of generally up to twelve months. Revenue from other services was not material.
Apps Revenue
In-App Purchase Revenue
IAP Revenue includes fees collected from users to purchase virtual goods to enhance their gameplay experience. The identified performance obligation is to provide users with the ability to acquire, use, and hold virtual items over the estimated period of time the virtual items are available to the user or until the virtual item is consumed. Payment is required at the time of purchase, and the purchase price is a fixed amount.
Users make IAPs through the Company’s distribution partners. The transaction price is equal to the gross amount charged to users because the Company is the principal in the transaction. IAP fees are non-refundable. Such payments are initially recorded as deferred revenue. The Company categorizes its virtual goods as either consumable or durable. Consumable virtual goods represent goods that can be consumed by a specific player action in gameplay; accordingly, the Company recognizes revenue from the sale of consumable virtual goods as the goods are consumed. Durable virtual goods represent goods that are accessible to the user over an extended period of time; accordingly, the Company recognizes revenue from the sale of durable virtual goods ratably over the period of time the goods are available to the user, which is generally the estimated average user life (“EAUL”).
The EAUL represents the Company’s best estimate of the expected life of paying users for the applicable game. The EAUL begins when a user makes the first purchase of durable virtual goods and ends when a user is determined to be inactive. The Company determines the EAUL on a game-by-game basis. For a newly launched game with limited playing data, the Company determines its EAUL based on the EAUL of a game with sufficiently similar characteristics.
The Company determines the EAUL on a quarterly basis and applies such calculated EAUL to all bookings in the respective quarter. Determining the EAUL is subjective and requires management’s judgment. Future playing patterns may differ from historical playing patterns, and therefore the EAUL may change in the future. The EAULs are generally between five and ten months.
In-App Advertising Revenue
IAA Revenue is generated by selling ad inventory on the Company's Apps to third-party advertisers. Advertisers purchase ad inventory either through the Advertising solutions or through third-party advertising networks (“Ad Networks”). Revenue from the sale of ad inventory through Ad Networks is recognized net of the amounts retained by Ad Networks as the Company is unable to determine the gross amount paid by the advertisers to Ad Networks. The Company recognizes revenue when the ad is displayed to users.
The Company presents taxes collected from customers and remitted to governmental authorities on a net basis.
Disaggregation of Revenue
The following table presents revenue disaggregated by segment and type (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Advertising Revenue | $ | 3,224,058 | $ | 1,841,762 | $ | 1,049,167 | |||||||||||
| In-App Purchases Revenue | 1,002,656 | 989,007 | 1,179,133 | ||||||||||||||
| In-App Advertising Revenue | 482,534 | 452,318 | 588,758 | ||||||||||||||
| Total Apps Revenue | 1,485,190 | 1,441,325 | 1,767,891 | ||||||||||||||
| Total Revenue | $ | 4,709,248 | $ | 3,283,087 | $ | 2,817,058 |
Revenue disaggregated by geography, based on user location, consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | 2,688,993 | $ | 1,970,856 | $ | 1,728,958 | |||||||||||
| Rest of the World | 2,020,255 | 1,312,231 | 1,088,100 | ||||||||||||||
| Total Revenue | $ | 4,709,248 | $ | 3,283,087 | $ | 2,817,058 |
Contract Balances
Contract liabilities consist of deferred revenue, which are recorded for payments received in advance of the satisfaction of performance obligations. During the years ended December 31, 2024 and 2023, the Company recognized $78.0 million and $63.6 million of revenue that was included in deferred revenue as of December 31, 2023 and 2022, respectively.
Unsatisfied Performance Obligations
Substantially all of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of one year or less.
Publisher Bonuses
In the first quarter of 2022, the Company paid or promised to pay a total of $209.6 million in bonuses to publishers consisting primarily of non-recurring bonuses to migrate publishers to MAX, the Company's own in-app mediation platform. The Company accounted for such publisher bonuses as a reduction to revenue since the publishers receiving such bonuses are also customers of the Company.
Cash and Cash Equivalents—Cash and cash equivalents primarily consist of cash on deposit with banks and highly liquid investments with original maturities of 90 days or less from the date of purchase.
Non-Marketable Equity Investments—Non-marketable equity securities are investments without readily determinable fair values that are recorded using a measurement alternative measured at cost less any impairment, plus or minus changes resulting from qualifying observable price changes. An impairment loss is recorded when an event or circumstance indicates a decline in value. For certain securities, the Company applies the net asset value (NAV) practical expedient, where NAV represents the estimated fair value of these investments. See Note 3 - Financial Instruments and Fair Value Measurements for additional information.
Accounts Receivable, net—The Company records accounts receivable at the invoiced amount, net of allowance for potentially uncollectible amounts. The Company reviews accounts receivable periodically and estimates the allowance based on known troubled accounts, historical experience, and other currently available evidence. As of December 31, 2024 and 2023, the allowance for uncollectible amounts was not material.
Derivatives—The Company accounts for derivative instruments at fair value within its consolidated balance sheets, and the accounting treatment for each derivative is based on its hedge designation. The Company does not enter into derivative instruments for trading or speculative purposes. Changes in the fair value of derivatives that are designated as cash flow hedges are recorded within accumulated other comprehensive income (loss) until earnings are affected by the variability of cash flows. Changes in the fair value of non-designated derivatives are recorded immediately through earnings. The Company classifies cash flows from derivatives in a manner consistent with the underlying hedged item**.** See Note 3 - Financial Instruments and Fair Value Measurements for additional information.
Fair Value of Financial Instruments—The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly.
Level 3—Unobservable inputs of which there is little or no market data, which require the Company to develop its own assumptions.
Concentration of Credit Risk and Uncertainties—The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. The Company maintains its cash and cash equivalents with large, reputable financial institutions in amounts which exceed Federal Deposit Insurance Corporation limits.
The Company performs ongoing credit evaluations of its customers and generally requires no collateral for its accounts receivable. No individual customer represented 10% or more of the Company’s accounts receivable, net as of December 31, 2024 or 2023. The Company also uses various distribution partners to collect payments for IAPs made by users within Apps. No individual distribution partner represented 10% or more of the Company's accounts receivable, net as of December 31, 2024 or
- No individual customer represented 10% or more of the Company’s total revenue during the years ended December 31, 2024, 2023, or 2022.
Property and Equipment, net—Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is as follows:
| Useful Life | ||||||||
| Leasehold improvements | Over the shorter of useful life (up to 10 years) or lease term | |||||||
| Software and licenses | 3 years | |||||||
| Furniture and fixtures | 3-5 years | |||||||
| Computer equipment | 3-5 years |
When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred.
Leases—Leases consist primarily of operating leases for office facilities and finance leases for servers and networking equipment. The Company determines if an arrangement is or contains a lease at inception. The Company accounts for lease and non-lease components as a single lease component and does not recognize right-of-use assets and lease liabilities for leases with a term of 12 months or less. Payments under the Company's lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, primarily including common-area maintenance, utilities, taxes or other operating costs, which are expensed as incurred and not included in the lease right-of-use assets and liabilities.
Operating and finance lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments consist primarily of the fixed payments under the arrangement, less any lease incentives. The Company generally uses an incremental borrowing rate estimated based on the information available at the lease commencement date or on the date of lease modification, if applicable, to determine the present value of lease payments unless the implicit rate is readily determinable. The Company estimates its incremental borrowing rate based on the rate of interest it would have to pay to borrow on a collateralized basis with an equal lease payment amount, over a similar term, and in a similar economic environment. Generally, the lease term is based on non-cancelable lease term when determining the lease assets and liabilities. The lease terms may include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current on the Company's consolidated balance sheets. Finance leases are included in property and equipment, net, accrued and other current liabilities, and other non-current liabilities on the Company's consolidated balance sheets.
Operating lease costs are recognized on a straight-line basis over the lease terms. Finance lease assets are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease terms.
Acquisitions—The Company applies a screen test to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination.
For transactions accounted for as business combinations, the Company allocates the fair value of acquisition consideration to the identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair value, with excess recorded as goodwill. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable, and as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related costs are expensed as incurred. There were no business combinations during the years ended December 31, 2024 or 2023.
For transactions accounted for as asset acquisitions, the cost, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values. The Company generally includes contingent consideration in the cost of the assets acquired only when the uncertainty is resolved. The Company amortizes contingent consideration adjustments to the cost of the acquired assets prospectively using the straight-line method over the remaining useful life of the assets. No goodwill is recognized in asset acquisitions. During the years ended December 31, 2024 and 2023, the Company recognized total contingent consideration of $12.6 million and $52.2 million, respectively, related to asset acquisitions closed in 2021 and prior. There were no other asset acquisitions during the periods presented.
Divestitures—The Company classifies assets as held for sale when management commits to a formal plan to actively market the assets at a reasonable price relative to fair value, the assets are available for immediate sale in their current condition, an active program to locate a buyer and complete the transaction has been initiated, the sale is expected to be completed within one year, with no significant changes anticipated to the plan. Once designated as held for sale, the Company records the assets at the lower of their carrying value or estimated fair value, less costs to sell, ceases depreciation and amortization, and reassesses their fair value each reporting period until disposal.
As part of its operational optimization initiatives within the Apps segment, the Company sold certain non-strategic assets for $44.0 million during the year ended December 31, 2022. In connection with these sales, the Company recorded a total loss of $127.9 million, including a $53.0 million impairment charge for assets classified as held for sale during 2022. There were no material divestitures during the years ended December 31, 2024 or 2023.
Services and Development Agreements—The Company enters into strategic agreements with third-party mobile gaming studios. The Company has historically allowed these studios to continue their operations with a significant degree of autonomy. In some cases, the Company bought Apps from these studios and entered into service and development agreements whereby these studios provide support in improving existing Apps and developing new Apps. The majority of payments associated with service agreements for existing Apps are expensed to research and development when the services are rendered as the payments primarily relate to developing enhancements for the Apps. Payments for new Apps associated with development agreements are generally made in connection with the development of a particular App, and therefore, the Company is subject to development risk prior to the release of the App. Accordingly, payments that are due prior to completion of an App are generally expensed to research and development over the development period as the services are incurred.
Software Development Costs—The Company incurs development costs related to internal-use software and Apps. Development costs meet the criteria for capitalization once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Software development costs that meet the capitalization criteria were not material for any period presented.
Goodwill—The Company allocates goodwill to reporting units based on the expected benefit from the business combination. In the event of changes in reporting units, the Company reassigns goodwill using a relative fair value allocation approach. The Company tests goodwill for impairment at the reporting unit level on an annual basis during the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. A goodwill impairment is recognized for the amount that the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. No goodwill impairment was recorded for any period presented.
Intangible Assets—Intangible assets are carried at cost and amortized on a straight-line basis over their estimated useful lives. The Company determines the appropriate useful life of its intangible assets based on their expected cash flows.
Impairment of Long-Lived Assets—The Company reviews long-lived assets that are held and used for impairment whenever events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. If such indicators are present, the Company assesses the recoverability of the asset or asset group by comparing its carrying value to the undiscounted future cash flows expected to be generated by the asset or asset group. If the future undiscounted cash flows are less than the carrying value of the asset or asset group, an impairment charge is recognized by the amount by which the carrying value of the asset or asset group exceeds its estimated fair value. There was no impairment related to long-lived assets that are held and used for any period presented.
Cost of Revenue—Cost of revenue consists primarily of payment processing fees related to IAP Revenue, amortization of intangible assets related to acquired technology and Apps, amortization of finance lease right-of-use assets related to servers and networking equipment and data center costs related primarily to third-party cloud computing services.
Sales and Marketing—Sales and marketing expenses consist primarily of user acquisition costs, amortization of acquired customer-related intangible assets, and personnel-related expenses. User acquisition costs, representing substantially all of advertising costs, are expensed as incurred. User acquisition costs were $521.5 million, $539.4 million, and $665.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Research and Development—Research and development expenses consist primarily of personnel-related expenses and third-party costs for development of Apps.
General and Administrative—General and administrative expenses consist primarily of personnel-related expenses of the Company’s finance, accounting, legal, human resources, and other administrative functions, third-party professional service costs, software, facilities costs and other administrative costs.
Stock-Based Compensation—The Company measures and recognizes stock-based compensation expense for share-based awards, primarily including restricted stock units ("RSUs"), performance-based RSUs (“PSUs”) with both service and market-based conditions, stock options and stock purchase rights granted under the Employee Stock Purchase Plan ("ESPP"), based on the grant-date fair value of the awards. The Company accounts for forfeitures for all awards as they occur.
The fair value of RSUs is based on the closing price of the Company's Class A common stock on the grant date, with stock-based compensation expense recognized on a straight-line basis over the requisite service period, which is generally one or four years.
The fair value of PSUs with both service and market conditions is estimated using the Monte Carlo simulation pricing model, which incorporates various assumptions including the expected stock price volatility, the risk-free interest rate, the expected dividend yield and the discount for awards subject to post-vesting restrictions, with stock-based compensation expense recognized using the accelerated attribution method over the derived service period ranging from 0.5 to 3.1 years, regardless of whether the stock price targets are achieved. If the stock price targets are achieved earlier than the derived service period, the Company adjusts its stock-based compensation expense to reflect the cumulative expense associated with the vested awards.
The fair value of stock options and purchase rights granted under the ESPP is estimated using the Black-Scholes option-pricing model, which incorporates various assumptions including the expected term, the expected stock price volatility, the risk-free interest rate, and the expected dividend yield, with stock-based compensation expense recognized on a straight-line basis over the requisite service period.
Income Taxes—The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of their net recorded amount, an adjustment to the deferred tax asset valuation allowance would be made to reduce the provision for income taxes. The Company presents deferred tax assets and liabilities on a net basis by jurisdictional filing group. Net deferred tax assets are included in other assets, while net deferred tax liabilities are included in other non-current liabilities on the Company’s consolidated balance sheets.
The Company records uncertain tax positions on the basis of a two-step process in which determinations are made (1) whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position; and (2) for those tax positions that meet the more- likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with a tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheets.
Foreign Currency Transactions—Generally, the functional currency of the Company's international subsidiaries is the U.S. dollar. In cases where the functional currency is not the U.S. dollar, the Company translates the financial statements of these subsidiaries to U.S. dollars using the exchange rate at the balance sheet date for assets and liabilities, and average exchange rates during the period for revenue and expenses. The Company records translation gains and losses in accumulated other comprehensive income (loss) as a component of stockholders’ equity. The Company reflects foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency as a component of other income (expense), net.
Comprehensive Income (Loss)—Comprehensive income (loss) is composed of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) consists of foreign currency translation adjustments.
Net Income (Loss) Per Share Attributable to Common Stockholders—Basic and diluted net income (loss) per share attributable to common stockholders is computed under the two-class method required for participating securities. The Company considers options exercised by non-recourse promissory notes, early exercised unvested stock options, and common stock subject to certain share repurchase agreements to be participating securities. Under the two-class method, the net loss attributable to common stockholders is not allocated to participating securities as the holders of these instruments do not have a contractual obligation to share in the Company’s losses. Net income is attributed to common stockholders and participating securities based on their respective participation rights. Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted income (loss) per share attributable to common stockholders is computed by giving effect to all potentially dilutive securities outstanding during the period. For periods in which the Company reports net losses, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because potentially dilutive common shares are anti-dilutive.
As the liquidation and dividend rights are identical for Class A and Class B common stock, the undistributed earnings are allocated on a proportional basis and the resulting basic and diluted EPS are the same for Class A and Class B common stock on an individual or combined basis.
Recent Accounting Pronouncements (Issued and Adopted)—In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The amendment must be applied retrospectively, and early adoption is permitted. The Company adopted this ASU in its 2024 annual reporting. For additional information, see Note 14 - Segments and Geographic Information.
Recent Accounting Pronouncements (Issued and Not Yet Adopted)—In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures, which requires disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments will be effective for annual periods beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. The Company is
currently evaluating this ASU to determine its impact on the Company's disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement: Reporting Comprehensive Income-Expense Disaggregation Disclosures, which requires disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The amendments will be effective for annual periods beginning February 1, 2027, and interim periods beginning February 1, 2028. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company's disclosures.
**3.**Financial Instruments and Fair Value Measurements
The following table sets forth the Company’s financial instruments that were measured at fair value by level within the fair value hierarchy on a recurring basis (in thousands):
| As of December 31, 2024 | |||||||||||||||||||||||||||||
| Balance Sheet Location | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||
| Money market deposit accounts | Cash and cash equivalents | $ | 41,454 | $ | 41,454 | $ | — | $ | — | ||||||||||||||||||||
| Total financial assets | $ | 41,454 | $ | 41,454 | $ | — | $ | — |
| As of December 31, 2023 | |||||||||||||||||||||||||||||
| Balance Sheet Location | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||||||||
| Money market deposit accounts | Cash and cash equivalents | $ | 1,352 | $ | 1,352 | $ | — | $ | — | ||||||||||||||||||||
| Total financial assets | $ | 1,352 | $ | 1,352 | $ | — | $ | — |
Non-Marketable Equity Securities Measured at Net Asset Value
The Company held equity interests in certain private equity funds of $77.3 million and $56.7 million as of December 31, 2024 and 2023, respectively, which are measured using the net asset value practical expedient. Under the net asset value practical expedient, the Company records investments based on the proportionate share of the underlying funds’ net asset value. These investments are included in other assets in the Company’s consolidated balance sheets.
These funds vary in investment strategies and generally have an initial term of 7 to 10 years, which may be extended for 2 to 3 additional years with the applicable approval. These investments are subject to certain restrictions regarding transfers and withdrawals and generally cannot be redeemed with the funds. Distributions from the funds will be received as the underlying investments are liquidated. The Company’s maximum exposure to loss is limited to the carrying value of these investments of $77.3 million and the unfunded commitments of $21.5 million as of December 31, 2024.
During the year ended December 31, 2024, the Company made total capital contributions of $19.0 million related to these investments. The Company recorded an immaterial unrealized gain related to these investments for any period presented.
Non-Marketable Equity Securities Measured at Fair Value on a Non-Recurring Basis
The Company's non-marketable equity securities are investments in privately held companies without readily determinable fair values. The Company elected the measurement alternative to account for these investments. Under the measurement alternative, the carrying value of the non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in carrying value are recorded within other income, net in the Company's consolidated statement of operations.
In February 2024, the Company entered into an agreement to invest $50.0 million in the Series C preferred stock financing of Humans, Inc., the developer of the Flip Shop social shopping app ("Flip Shop"), of which $10.0 million was closed in February 2024 and the remaining $40.0 million was closed in April 2024. In February 2024, the Company also entered into an arm's length commercial agreement with Flip Shop related to its use of the Company's AXON technology under a revenue share model.
During the year ended December 31, 2024, the Company also acquired certain additional non-marketable equity securities for a total of $8.0 million.
As of December 31, 2024 and 2023, the carrying amounts of the Company's non-marketable equity securities were $68.1 million and $10.1 million, respectively, and were included in other assets in the Company’s consolidated balance sheets.
Derivatives Not Designated as Hedging Instruments
In October 2022 and March 2023, the Company entered into multiple pay-fixed receive-variable interest rate swaps as part of its interest rate risk management strategy in connection with the term loans under a certain credit agreement (see Note 9 - Debt). The Company elected to not designate the interest rate swaps as hedging instruments for accounting purposes and recorded both realized and unrealized gains and losses associated with the interest rate swaps immediately through earnings in interest expense in the Company's consolidated statement of operations. The fair value of the outstanding interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash
flows of the interest rate swaps. The Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. All interest rate swaps were settled during 2023 and the Company had no outstanding interest rate swaps as of December 31, 2023. The Company recorded net gains of $15.8 million and $5.9 million related to the interest rate swaps during the years ended December 31, 2023 and 2022, respectively. Cash paid for or received from the settlements of the interest rate swaps are presented in net cash provided by operating activities and the supplemental disclosure of cash paid for interest, net in the Company's consolidated statement of cash flows.
**4.**Supplemental Financial Statement Information
Property and equipment, net consisted of the following (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Finance lease right-of-use assets | $ | 222,203 | $ | 216,493 | |||||||
| Leasehold improvements | 18,746 | 17,553 | |||||||||
| Software and licenses | 7,146 | 3,911 | |||||||||
| Furniture and fixtures | 3,835 | 4,144 | |||||||||
| Computer equipment | 3,341 | 3,236 | |||||||||
| Total property and equipment, gross | 255,271 | 245,337 | |||||||||
| Less: accumulated depreciation | (94,741) | (72,006) | |||||||||
| Total property and equipment, net | $ | 160,530 | $ | 173,331 |
Depreciation expenses were $29.4 million, $26.4 million, and $29.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Accrued and other current liabilities consisted of the following (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Accrued taxes | $ | 280,153 | $ | 141,854 | |||||||
| Compensation and related liabilities | 64,642 | 48,263 | |||||||||
| Accrued expenses and other | 64,597 | 75,139 | |||||||||
| Total accrued and other current liabilities | $ | 409,392 | $ | 265,256 |
**5.**Commitments and Contingencies
Commitments—As of December 31, 2024, the Company's non-cancelable minimum purchase commitments totaled $1.2 billion, which consisted primarily of a certain arrangement related to third-party cloud computing services. In August 2024, the Company amended its agreement with the cloud service provider. Under the amended agreement, the Company committed to spend a minimum of $1.3 billion over a three-year period. As of December 31, 2024, the Company had made payments of $107.4 million towards this commitment.
As of December 31, 2024, future minimum payments under these non-cancelable purchase commitments with a remaining term in excess of one year were as follows (in thousands):
| 2025 | $ | 438,856 | |||
| 2026 | 430,825 | ||||
| 2027 | 294,814 | ||||
| 2028 | — | ||||
| 2029 | — | ||||
| Total non-cancelable purchase commitments | $ | 1,164,495 |
In addition, the Company had total unfunded commitments of $21.5 million related to investments in certain private equity funds. For additional information, see Note 3 - Financial Instruments and Fair Value Measurements.
Contingencies—From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.
Letters of Credit—As of December 31, 2024 and 2023, the Company had outstanding letters of credit in the aggregate amount of $6.3 million and $6.3 million, respectively, which were issued as security for certain leased office facilities under the Credit Agreement. These letters of credit have never been drawn upon. For additional information, see Note 9 - Debt.
Legal Proceedings—The Company is involved from time to time in litigation, claims, and proceedings. The outcomes of the Company’s legal proceedings are inherently unpredictable and subject to significant uncertainty.
The Company records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. If it is determined that a loss is reasonably possible and the loss or range of loss can be estimated, the reasonably possible loss is disclosed. The Company evaluates developments in legal matters that could affect the amount of liability that has been previously accrued, and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine the likelihood of matters and the estimated amount of a loss related to such matters. Losses in connection with legal proceedings have not been material for any period presented.
The Company expenses legal fees in the period in which they are incurred.
Indemnifications—The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including certain customers, business partners, investors, contractors and the Company’s officers, directors and certain employees. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s consolidated statements of operations in connection with the indemnification provisions have not been material. As of December 31, 2024, the Company did not have any material indemnification claims that were probable or reasonably possible.
Non-income Taxes—The Company may be subject to audit by various tax authorities with regard to non-income tax matters. The subject matter of non-income tax audits primarily arises from different interpretations on tax treatment and tax rates applied. The Company accrues liabilities for non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss.
**6.**Business Combinations
Wurl—On April 1, 2022, the Company completed its acquisition of all of the equity interests of Wurl, Inc. ("Wurl"), a connected TV ("CTV") advertising company, for a total purchase price of $378.2 million, consisting of $219.3 million in cash, 2,579,692 shares of the Company's Class A common stock valued at $137.4 million and a deferred payment of $22.7 million, with a present value of $21.5 million at the closing of the acquisition, relating to an indemnity holdback amount to be paid in 18 months following the transaction close date, less any eligible claims against Wurl paid by AppLovin. The transaction allowed the Company to expand into the connected TV market. The Company accounted for the acquisition as a business combination. Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $1.9 million. During the fourth quarter of 2023, the indemnity holdback was paid.
The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed (in thousands):
| Cash and cash equivalents | $ | 400 | |||
| Accounts receivable and other current assets | 15,194 | ||||
| Intangible assets: | |||||
| Customer Relationships—estimated useful life of 15 years | 41,000 | ||||
| Developed Technology—estimated useful life of 6 years | 60,500 | ||||
| Tradename—estimated useful life of 10 years | 14,700 | ||||
| Goodwill | 264,149 | ||||
| Property and equipment, net | 363 | ||||
| Other assets | 159 | ||||
| Accounts payable, accrued liabilities and other current liabilities | (12,854) | ||||
| Deferred revenue | (209) | ||||
| Deferred income tax liability | (5,235) | ||||
| Total purchase consideration | $ | 378,167 |
The income approach was used to determine the fair value of the customer relationships, developed technology, and tradename. Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, no tax deductible goodwill was generated as a result of this acquisition.
Contemporaneously with entering into the definitive agreement, the Company also adopted a multi-year performance-based incentive plan for certain key employees of Wurl, under which the key employees may earn up to a total of $600.0 million in additional shares of the Company's Class A common stock through 2025, contingent upon the achievement of certain revenue and other performance targets by the acquired business and the continued employment of such key employees between 2023 and 2025. In April 2023, the Company amended the multi-year performance-based incentive plan into a one-year plan for 2023, under which the Company may be obligated to issue up to a total of $90.0 million in additional shares of the Company's Class A
common stock, contingent upon Wurl’s achievement of certain revenue and other performance targets and the continued employment of the key employees. For additional information, see Note 11 - Stock-Based Compensation.
The Company’s consolidated statement of operations as of December 31, 2022, includes Wurl's revenue of $35.0 million and pre-tax loss of $11.8 million for the period from the acquisition date of April 1, 2022 to December 31, 2022.
See Pro forma results of operations below under "Supplemental Pro Forma Information".
MoPub—On January 1, 2022, the Company completed its acquisition from Twitter, Inc. of certain assets that comprised of its MoPub business for a total purchase price of $1.0 billion in cash. The acquisition allowed the Company to integrate certain product features of the MoPub platform into MAX, the Company's own in-app mediation platform, and migrate publishers and demand partners from the MoPub platform to MAX. The Company accounted for the acquisition as a business combination. Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $14.4 million.
The following table summarizes the allocation of the purchase consideration to the fair value of the assets acquired (in thousands):
| Intangible assets: | |||||
| Advertiser Relationships—estimated useful life of 9 years | $ | 212,700 | |||
| Publisher Relationships—estimated useful life of 9 years | 123,300 | ||||
| Developed Technology—estimated useful life of 5 years | 61,800 | ||||
| Tradename—estimated useful life of 3 months | 60 | ||||
| Goodwill | 632,472 | ||||
| Total purchase consideration | $ | 1,030,332 |
The income approach was used to determine the fair value of the advertiser relationships, publisher relationships, developed technology and tradename. Goodwill represents the excess of the purchase price over the preliminary fair value of identifiable assets acquired at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, an estimated tax deductible goodwill of $645.1 million was generated as a result of this acquisition. No liabilities were assumed in the transaction.
Contemporaneously with the signing of the asset purchase agreement, the Company entered into an agreement for Twitter, Inc. to provide certain transitional services to facilitate the migration of publishers and demand partners to MAX during a three-month transitional period following the closing of the transaction (the "TSA"). The Company accounted for the TSA as a transaction separate from the business combination since it was negotiated primarily for the benefit of the Company. In the first quarter of 2022, the Company recognized total expense of $7.0 million related to the transitional services, which was included primarily in cost of revenue in the Company's consolidated statement of operations.
Due to the significant integration of the MoPub business with MAX, it was impractical to determine the impact of the acquired business on revenue or earnings.
See Pro forma results of operations below under "Supplemental Pro Forma Information".
Supplemental Pro Forma Information
The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company, the MoPub Business and Wurl for the period presented as if the MoPub business and Wurl had been acquired as of January 1, 2021 (in thousands):
| Year Ended December 31, 2022 | ||||||||
| Revenue | $ | 2,826,090 | ||||||
| Net loss | $ | (184,317) |
The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):
| Year Ended December 31, 2022 | |||||
| An increase in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results | $ | (3,512) | |||
| A decrease in expenses related to the TSA | $ | 7,000 | |||
| A decrease in expenses related to transaction expenses | $ | 16,899 | |||
| A decrease in expenses related to transaction bonuses | $ | 1,101 | |||
| An increase due to replacement stock awards | $ | (1,221) | |||
| An increase in income tax provision | $ | (4,654) |
The unaudited supplemental pro forma information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisitions taken place on the date indicated, or of the Company's future consolidated results of operations. The supplemental pro forma information presented above has been derived from the Company's historical consolidated financial statements and from the historical accounting records of the MoPub business and Wurl.
7. Goodwill and Intangible Assets, Net
The following table presents the changes in the carrying amount of goodwill by reporting unit (in thousands):
| Advertising | Apps | Total | |||||||||||||||
| Balances as of December 31, 2022 | $ | 1,478,014 | $ | 345,741 | $ | 1,823,755 | |||||||||||
| Foreign currency translation | 19,095 | — | 19,095 | ||||||||||||||
| Balances as of December 31, 2023 | $ | 1,497,109 | $ | 345,741 | $ | 1,842,850 | |||||||||||
| Foreign currency translation | (39,424) | — | (39,424) | ||||||||||||||
| Balances as of December 31, 2024 | $ | 1,457,685 | $ | 345,741 | $ | 1,803,426 |
Intangible assets, net consisted of the following (in thousands):
| Weighted- Average Remaining Useful Life (in years) | As of December 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Book Value | Gross Carrying Value | Accumulated Amortization | Net Book Value | ||||||||||||||||||||||||||||||||||||
| Apps | 3.4 | $ | 1,828,036 | $ | (1,419,559) | $ | 408,477 | $ | 1,818,907 | $ | (1,152,611) | $ | 666,296 | ||||||||||||||||||||||||||||
| Customer relationships | 7.2 | 511,125 | (160,810) | 350,315 | 519,175 | (111,374) | 407,801 | ||||||||||||||||||||||||||||||||||
| User base | 1.3 | 68,817 | (56,626) | 12,191 | 68,817 | (46,874) | 21,943 | ||||||||||||||||||||||||||||||||||
| License asset | 3.0 | 60,707 | (59,207) | 1,500 | 59,207 | (31,003) | 28,204 | ||||||||||||||||||||||||||||||||||
| Developed technology | 2.7 | 204,286 | (120,808) | 83,478 | 207,900 | (88,716) | 119,184 | ||||||||||||||||||||||||||||||||||
| Other | 2.2 | 66,020 | (25,304) | 40,716 | 71,196 | (21,989) | 49,207 | ||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | 2,738,991 | $ | (1,842,314) | $ | 896,677 | $ | 2,745,202 | $ | (1,452,567) | $ | 1,292,635 |
The Company recorded amortization expenses related to acquired intangible assets as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cost of revenue | $ | 338,380 | $ | 382,956 | $ | 448,462 | |||||||||||
| Sales and marketing | 74,248 | 67,190 | 66,173 | ||||||||||||||
| Total | $ | 412,628 | $ | 450,146 | $ | 514,635 |
As of December 31, 2024, the expected future amortization expense related to acquired intangible assets was estimated as follows (in thousands):
| 2025 | $ | 229,932 | |||
| 2026 | 222,617 | ||||
| 2027 | 193,981 | ||||
| 2028 | 93,814 | ||||
| 2029 | 48,495 | ||||
| Thereafter | 107,838 | ||||
| Total | $ | 896,677 |
8. Leases
The Company has entered into various non-cancelable operating and finance leases primarily for its office facilities and servers and networking equipment. These leases have remaining lease terms of less than 1 year to 7 years, some of which include options to extend the leases for up to 5 years.
The components of lease costs recognized in the Company's consolidated statements of operations were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of right-of-use assets | $ | 24,308 | $ | 22,673 | $ | 24,064 | |||||||||||
| Interest | 9,231 | 7,036 | 2,802 | ||||||||||||||
| Operating lease cost | 15,286 | 16,674 | 20,783 | ||||||||||||||
| Variable lease cost and other | 6,190 | 6,329 | 2,691 | ||||||||||||||
| Total lease cost | $ | 55,015 | $ | 52,712 | $ | 50,340 |
Maturities of lease liabilities as of December 31, 2024 were as follows (in thousands):
| Operating Leases | Finance Leases | ||||||||||
| 2025 | $ | 16,808 | $ | 30,481 | |||||||
| 2026 | 15,297 | 30,459 | |||||||||
| 2027 | 12,509 | 30,448 | |||||||||
| 2028 | 5,523 | 30,445 | |||||||||
| 2029 | 1,204 | 30,402 | |||||||||
| Thereafter | 70 | 31,898 | |||||||||
| Total lease payments | 51,411 | 184,133 | |||||||||
| Less: amount representing interest | (3,989) | (27,904) | |||||||||
| Present value of future lease payments | 47,422 | 156,229 | |||||||||
| Less: current obligations under leases | (14,814) | (22,336) | |||||||||
| Non-current lease obligations | $ | 32,608 | $ | 133,893 |
Supplemental balance sheet information related to lease liabilities was as follows:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Weighted-average remaining lease term: | |||||||||||
| Finance leases | 6.0 years | 7.0 years | |||||||||
| Operating leases | 3.3 years | 4.1 years | |||||||||
| Weighted-average discount rate: | |||||||||||
| Finance leases | 5.7 | % | 5.6 | % | |||||||
| Operating leases | 5.2 | % | 5.2 | % |
Supplemental cash flow information related to leases was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Operating cash flows for operating leases | $ | 16,708 | $ | 17,147 | $ | 22,013 | |||||||||||
| Operating cash flows for finance leases | $ | 9,231 | $ | 7,036 | $ | 2,802 | |||||||||||
| Financing cash flows for finance leases | $ | 20,875 | $ | 20,170 | $ | 24,083 |
As of December 31, 2024, the Company did not have any significant lease that had not yet commenced.
9. Debt
The Company’s outstanding debt consisted of the following (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| 2029 Notes | $ | 1,000,000 | $ | — | |||||||
| 2031 Notes | 1,000,000 | — | |||||||||
| 2034 Notes | 1,000,000 | — | |||||||||
| 2054 Notes | 550,000 | — | |||||||||
| Term loans under the Credit Agreement | — | 2,966,250 | |||||||||
| Revolving Credit Facility | — | 185,000 | |||||||||
| Total principal amount | 3,550,000 | 3,151,250 | |||||||||
| Less: unamortized debt discount and issuance costs | (41,017) | (30,344) | |||||||||
| Net carrying amount | $ | 3,508,983 | $ | 3,120,906 | |||||||
| Less: short-term debt | — | (215,000) | |||||||||
| Long-term debt | $ | 3,508,983 | $ | 2,905,906 |
As of December 31, 2024, the future principal payments for the outstanding debt were as follows (in thousands):
| 2025 through 2028 | $ | — | |||
| 2029 | 1,000,000 | ||||
| Thereafter | 2,550,000 | ||||
| Long-term debt | $ | 3,550,000 |
Senior Notes
In December 2024, the Company issued $3.6 billion in aggregate principal amount of senior notes, consisting of $1.0 billion in aggregate principal amount of 5.125% notes due December 1, 2029 (the "2029 Notes"), $1.0 billion in aggregate principal amount of 5.375% notes due December 1, 2031 (the "2031 Notes"), $1.0 billion in aggregate principal amount of 5.500% notes due December 1, 2034 (the “2034 Notes”), and $550.0 million in aggregate principal amount of 5.950% notes due December 1, 2054 (the "2054 Notes", and collectively with the 2029 Notes, the 2031 Notes and 2034 Notes, the "Senior Notes"). Interest on each series of the Senior Notes is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025.
The Senior Notes are unsecured obligations and are not guaranteed by any of the Company's subsidiaries. The Senior Notes rank equally with all existing and future unsecured and unsubordinated indebtedness of the Company. The Company may redeem the Senior Notes in whole or in part at any time or from time to time at specified redemption prices. In addition, upon the occurrence of certain change of control repurchase events, the Company may be required to repurchase the Senior Notes at a specified repurchase price plus accrued and unpaid interest on the Senior Notes to, but excluding, the repurchase date. The indentures governing the Senior Notes also includes customary affirmative and negative covenants (including covenants that limit the Company’s ability and the ability of its restricted subsidiaries to create liens on certain assets to secure debt, enter into sale and leaseback transactions, and, with respect to the Company, consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets, in each case subject to certain exceptions), events of default, and other customary provisions. As of December 31, 2024, the Company was in compliance with all applicable covenants.
The Company incurred debt discount and issuance cost of $41.3 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2029 Notes, 2031 Notes, 2034 Notes, and 2054 Notes. The debt discount and issuance costs are amortized to interest expense over the contractual term of each series of the Senior Notes under the effective interest rate method. The effective interest rates on the 2029 Notes, 2031 Notes, 2034 Notes, and 2054 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 5.34%, 5.56%, 5.66%, and 6.07%, respectively.
As of December 31, 2024, the total estimated fair value of the Senior Notes was $3.6 billion. The estimated fair value of the Senior Notes, which the Company has classified as Level 2 financial instruments, was determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.
Credit Agreement
2024 Credit Agreement
In December 2024, concurrently with the issuance of its Senior Notes, the Company entered into the 2024 Credit Agreement, establishing a $1.0 billion revolving credit facility maturing on December 5, 2029, with the option for two one-year extensions as permitted under the agreement. The obligations of the Company under the 2024 Credit Agreement are unsecured and are not guaranteed by any of the Company's subsidiaries. As of December 31, 2024, no amounts had been borrowed under the 2024 Credit Agreement.
U.S. Dollar borrowings under the 2024 Credit Agreement will bear interest, at the Company’s option, based on either (1) a base rate equal to the highest of (i) the prime rate then in effect, (ii) the federal funds rate, plus 0.50% and (iii) the Term SOFR rate for a one-month interest period plus 1.10%, in each case subject to a 1.00% floor, plus an applicable margin; or (2) the Term SOFR rate for the applicable interest period plus 0.10%, subject to a 0% floor, plus an applicable margin. The applicable margin ranges from 0.125% to 1.000% for base rate borrowings and from 1.125% to 2.000% for Term SOFR rate borrowings, in each case determined by the Company’s credit ratings. Additionally, the 2024 Credit Agreement also requires the Company to pay a commitment fee on unused amounts, ranging from 0.100% to 0.325%, based on the Company’s credit ratings.
The 2024 Credit Agreement includes usual and customary provisions for unsecured revolving credit agreements of this type, including covenants limiting, with certain exceptions, (1) incurrence of indebtedness by the Company’s subsidiaries, (2) liens, (3) fundamental changes and (4) sale and leaseback transactions, and requires the Company to maintain a maximum total net debt-to-EBITDA ratio of 3.50 to 1.00 as of the last day of each fiscal quarter, subject to a step-up to 4.00 to 1.00 at the Company's option for a certain period following certain qualified acquisitions. As of December 31, 2024, the Company was in compliance with all applicable covenants and ratios.
The 2024 Credit Agreement replaced the existing credit agreement, originally entered into in August 2018 and subsequently amended multiple times (the “2018 Credit Agreement).
2018 Credit Agreement
In August 2018, the Company entered into the 2018 Credit Agreement. The 2018 Credit Agreement, as last amended in March 2024, provided for a $1.5 billion term loan maturing in October 2028, a $2.1 billion term loan maturing in August 2030, and a $610.0 million secured revolving credit facility. Under the 2018 Credit Agreement, the Company may voluntarily prepay outstanding loans at any time, subject to notice, minimum amount requirements, and customary breakage costs, and may be required to prepay outstanding loans under certain circumstances. Prepaid amounts under the revolving credit facility may be re-borrowed.
The term loans and borrowings under the 2018 Credit Agreement bear interest, at the Company’s option, based on either (1) a base rate equal to the highest of (i) the prime rate then in effect, (ii) the federal funds rate, plus 0.50% and (iii) the Term SOFR rate for a one-month interest period plus 1.00%, plus an applicable margin; or (2) the Term SOFR rate for a specified period, subject to a 0.50% floor in the case of the term loans and a 0% floor in the case of the revolving credit facility, plus an applicable margin. The applicable margin with respect to the term loans was 1.50% for base rate borrowings and 2.50% for Term SOFR rate borrowings. The applicable margin with respect to the amounts outstanding under the revolving credit facility ranges from 1.00% to 1.25% for base rate borrowings, and from 2.10% to 2.35% for Term SOFR rate borrowings, in each case determined by the Company’s senior secured net leverage ratio. Additionally, the 2018 Credit Agreement also requires the Company to pay a commitment fee on unused amounts under the revolving credit facility, ranging from 0.25% to 0.50%, based on the Company’s senior secured net leverage ratio. As of December 31, 2023, the interest rates for the term loans and the borrowings under the 2018 Credit Agreement were 8.45% and 7.45%, respectively.
The Company’s obligations under the 2018 Credit Agreement are secured by substantially all assets of the Company and its domestic subsidiary guarantors, with certain exclusions. The 2018 Credit Agreement also includes covenants restricting debt, liens, business mergers, dissolutions, investments, dividends, asset disposals, and affiliate transactions, along with default provisions covering payment failures, cross-defaults, change of control, judgments, and bankruptcy. In case of default, lenders may demand immediate repayment and enforce other remedies provided under the agreement. The Company was in compliance with all applicable covenants at all times.
In March 2024, the Company drew $418.7 million from the revolving credit facility to fund certain share repurchases and subsequently repaid the entire outstanding amount of $603.7 million.
Upon executing the 2024 Credit Agreement, the Company used the proceeds from the issuance of the Senior Notes to repay the entire remaining $3.5 billion principal amount on both term loans under the 2018 Credit Agreement and terminated the secured revolving credit facility under the 2018 Credit Agreement, which had no outstanding balance. The Company recognized a $27.7 million loss on extinguishment of the term loans, while the modification to the revolving credit facility had no material impact on the Company's consolidated statements of operations for the year ended December 31, 2024.
Interest Expense on Debt
The following table sets forth total interest expense recognized related to the Company’s debt (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Contractual interest expense | $ | 274,141 | $ | 268,583 | $ | 162,150 | |||||||||||
| Amortization of debt discount and issuance costs | 5,460 | 8,792 | 10,031 | ||||||||||||||
| Loss on debt extinguishment | 28,375 | 4,337 | — | ||||||||||||||
| Total interest expense | $ | 307,976 | $ | 281,712 | $ | 172,181 |
The table above includes interest expense related to the revolving credit facilities of $7.5 million, $6.5 million, and $0.1 million during the years ended December 31, 2024, 2023, and 2022, respectively.
10. Equity
Preferred Stock
The Company’s amended and restated certificate of incorporation authorizes the issuance of preferred stock from time to time in one or more series. The Company's board of directors is authorized to determine the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions.
Common Stock
The Company’s amended and restated certificate of incorporation authorizes the issuance of Class A common stock, Class B common stock, and Class C common stock (collectively referred to as the “Common Stock”). The rights of the holders of the Common Stock are identical, except with respect to voting and conversion.
Each share of Class A common stock is entitled to one vote per share, each share of Class B common stock is entitled to 20 votes per share, and Class C common stock is not entitled to vote, except as otherwise required by law. The holders of the Class B common stock (the “Voting Agreement Parties”) have entered into a voting agreement (the “Voting Agreement”), which provides that all shares of Class B common stock held by the Voting Agreement Parties and their respective permitted entities and permitted transferees will be voted as determined by two of Adam Foroughi, Herald Chen, and KKR Denali Holdings L.P.(“KKR Denali”) (one of which must be Mr. Foroughi). In the event that Mr. Chen or KKR Denali is no longer party to the Voting Agreement, all shares of Class B common stock subject to the Voting Agreement will be voted by the mutual decision of the remaining parties, or, if the parties disagree, the shares of Class B common stock will be voted by each party in their own discretion.
One share of Class B common stock is convertible into one share of Class A common stock voluntarily at any time by the holder, and will convert automatically into one share of Class A common stock upon (1) certain transfers or (2) the date set by the Company's board of directors, between 61 days and 180 days following the date on which (i) the Voting Agreement is terminated or (ii) Adam Foroughi is no longer involved with the Company as a member of the Board or as an executive officer. After the conversion or exchange of all outstanding shares of the Company’s Class B common stock into shares of Class A common stock, all outstanding shares of Class C common stock will automatically convert into Class A common stock on a one-for-one basis at the date or time determined by a majority of the outstanding shares of Class A common stock, voting as a separate class.
In 2024, KKR Denali, who previously owned more than 10% of the Company's voting interests, converted its remaining shares of Class B common stock into Class A common stock and subsequently sold all such shares. As a result, as of December 31, 2024, KKR Denali was no longer a party to the Voting Agreement. See Note 16 - Related Party Transactions for additional information.
Stock Repurchase Program
In February 2022, the Company's board of directors authorized a stock repurchase program for the Company's Class A common stock. As of December 31, 2023, $2.2 million remained available for repurchases under the program. During 2024, the Company repurchased and retired 16,081,408 shares of Class A common stock for a total cost of $981.3 million, including commissions and fees, and the board authorized an additional $3.3 billion for repurchases under the program. As of December 31, 2024, $2.3 billion remained available for repurchases under the program.
Repurchases may be made from time to time through open market purchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company may also, from time to time, enter into Rule 10b-5 trading plans, to facilitate repurchases of shares. The repurchase program does not obligate the Company to acquire any particular amount of Class A common stock, has no expiration date and may be modified, suspended, or terminated at any time at the Company's discretion.
The Company retires its Class A common stock upon repurchases, and records the excess of repurchase price over par value for shares repurchased to retained earnings to the extent the Company has retained earnings. If the Company has an accumulated deficit, the Company records the excess of repurchase price over par value for shares repurchased first to additional paid-in capital, to the extent the Company has additional paid-in capital, until depleted, and then to accumulated deficit in the Company’s consolidated statements of redeemable noncontrolling interest and stockholders’ equity.
11. Stock-based Compensation
2011 Equity Incentive Plan
The Company’s 2011 Equity Incentive Plan (the "2011 Plan") provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), RSUs, stock appreciation rights ("SARs") and restricted stock to the Company's employees, directors and consultants. Immediately prior to the effectiveness of the 2021 Plan, the 2011 Plan was terminated, and no further awards were granted thereunder. All outstanding awards under the 2011 Plan continue to be governed by their existing terms.
2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Plan”) provides for the grant of ISOs, NSOs, restricted stock, RSUs, SARs,
performance units and performance shares to the Company’s employees, directors and consultants. A total of 39,000,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2021 Plan. In addition, the shares reserved for issuance under the 2021 Plan include any shares subject to awards granted under the 2011 Plan in the case of certain occurrences, such as expirations, terminations, exercise and tax-related withholding, or failures to vest. The number of shares available for issuance under the 2021 Plan also include an annual increase of shares, equal to the least of (a) 39,000,000 shares, (b) five percent (5%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s board of directors may determine. In 2022, the Company's board of directors decreased the number of shares of Class A common stock reserved for issuance under the 2021 Plan by 2,000,000 shares. As of December 31, 2024, there were 68,922,661 shares available for future issuance under the 2021 Plan.
2021 Partner Studio Incentive Plan
The 2021 Partner Studio Incentive Plan (the “2021 Partner Plan”) provides for the grant of NSOs, restricted stock, RSUs, SARs, performance units, and performance shares to individuals or entities engaged by the Company to render bona fide services. A total of 390,000 shares of the Company’s Class A common stock were initially reserved for issuance pursuant to the 2021 Partner Plan. In 2022, the Company's board of directors reserved an additional 2,000,000 shares of Class A common stock for future issuance under the 2021 Partner Plan. As of December 31, 2024, there were 1,550,986 shares available for future issuance under the 2021 Partner Plan.
Employee Stock Purchase Plan
The ESPP permits participants to purchase shares of the Company’s Class A common stock through contributions of up to 15% of their eligible compensation. The ESPP provides for consecutive, overlapping 24-month offering periods, during which the contributed amount by the participant will be used to purchase shares of the Company’s Class A common stock at the end of each 6-month purchase period with the purchase price of the shares being 85% of the lower of the fair market value of the Company’s Class A common stock on the first day of an offering period or on the exercise date. The ESPP has an automatic reset feature, whereby the offering period resets if the fair value of the Company’s common stock on a purchase date is less than that on the original offering date. No participant may purchase, in any one purchase period, more than 590 shares of Class A common stock, or 3,500 shares of Class A common stock for offering periods commencing on or after May 20, 2023. Participants may end their participation at any time during an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with the Company.
A total of 7,800,000 shares of the Company’s Class A common stock were initially reserved for issuance under the ESPP. The number of shares available for issuance under the ESPP also include an annual increase of shares, equal to the least of: (a) 7,800,000 shares, (b) one percent (1%) of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding fiscal year, or (c) such other amount as the Company’s board of directors may determine. As of December 31, 2024, there were 17,582,902 shares available for future issuance under the ESPP.
RSUs
A summary of the RSU activities for the year ended December 31, 2024 is as follows:
| Number of Restricted Stock Units | Weighted-Average Grant-Date Fair Value (per share) | ||||||||||
| Balances as of December 31, 2023 | 9,209,309 | $ | 41.14 | ||||||||
| Granted | 1,017,237 | $ | 105.09 | ||||||||
| Vested | (7,214,595) | $ | 39.59 | ||||||||
| Forfeited | (861,930) | $ | 46.85 | ||||||||
| Balances as of December 31, 2024 | 2,150,021 | $ | 74.34 |
The weighted-average grant-date fair value of RSUs granted during the years ended December 31, 2023 and 2022 was $25.11 and $23.08, respectively. The total fair value of RSUs vested as of the vesting dates during the years ended December 31, 2024, 2023, and 2022 was $844.2 million, $403.1 million, and $88.0 million, respectively.
PSUs
In March 2023, the Company granted 6,902,000 PSUs under the 2021 Plan to each of Adam Foroughi, its CEO and Chairperson, and Vasily Shikin, its CTO. In April 2023, the Company granted an additional 3,451,000 PSUs to certain non-executive employees under the same plan. These PSUs, divided into five tranches, vest upon achieving stock price targets ranging from $36.00 to $79.00, based on the minimum closing price of the Company’s Class A common stock over any 30 consecutive trading days during a five-year performance period from the respective grant date, subject to continued employment through the applicable vesting date. In the event of a change in control, unvested PSUs may vest a pro-rata amount if the transaction price falls between two stock price targets that have not previously been achieved, subject to continued employment through the date prior to the transaction. For Mr. Foroughi and Mr. Shikin, PSUs may continue to vest for up to one year post-employment if certain conditions are met.
In November 2024, the Company granted 348,327 PSUs under the 2021 Plan to certain non-executive employees. These
PSUs, divided into 3 tranches, vest upon achieving stock price targets ranging from $184.35 to $294.96, based on the minimum closing price of the Company’s Class A common stock over any 30 consecutive trading days during a 2.5-year performance period from the grant date, subject to continued employment through the applicable vesting date.
A summary of the PSU activities for the year ended December 31, 2024 is as follows:
| Number of Performance Stock Units | Weighted-Average Grant-Date Fair Value (per share) | ||||||||||
| Balances as of December 31, 2023 | 13,804,000 | $ | 7.20 | ||||||||
| Granted | 348,327 | $ | 103.76 | ||||||||
| Vested | (13,841,737) | $ | 9.26 | ||||||||
| Forfeited | (310,590) | $ | 7.90 | ||||||||
| Balances as of December 31, 2024 | — | $ | — |
The weighted-average grant-date fair value of PSUs granted during the year ended December 31, 2023 was $7.20. The total fair value of PSUs vested as of the vesting dates during the years ended December 31, 2024 and 2023 was $1.3 billion and $132.7 million, respectively.
The following assumptions were used to estimate the fair value of PSUs:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Stock price on the date of grant | $159.11 | $12.41 - $16.43 | |||||||||
| Expected volatility | 64.72 | % | 73.76% - 73.95% | ||||||||
| Risk-free interest rate | 4.05 | % | 3.58% - 3.60% | ||||||||
| Discount for lack of marketability | 15.29 | % | 20.43% - 20.65% | ||||||||
| Dividend yield | 0% | 0% |
Stock Options
A summary of the stock option activities for the year ended December 31, 2024 is as follows:
| Number of Options | Weighted-Average Exercise Price (per share) | Weighted-Average Remaining Contractual Term (in years) | |||||||||||||||
| Balances as of December 31, 2023 | 9,814,632 | $ | 6.11 | 5.8 | |||||||||||||
| Exercised | (6,044,258) | $ | 5.76 | ||||||||||||||
| Forfeited | (23,222) | $ | 17.63 | ||||||||||||||
| Balances as of December 31, 2024 | 3,747,152 | $ | 6.60 | 4.9 | |||||||||||||
| Vested and exercisable as of December 31, 2024 | 3,746,502 | $ | 6.60 | 4.9 | |||||||||||||
| Vested and expected to vest as of December 31, 2024 | 3,747,152 | $ | 6.60 | 4.9 |
The fair value of stock options granted during the year ended December 31, 2023 was not material and no stock options were granted during the years ended December 31, 2024 or 2022. The total intrinsic value of share options exercised during the years ended December 31, 2024, 2023, and 2022 was $671.2 million, $60.1 million, and $87.5 million, respectively. The aggregate intrinsic value of stock options outstanding as of December 31, 2024 was $1.2 billion.
ESPP
The stock-based compensation expenses recognized for the ESPP were not material during the years ended December 31, 2024, 2023, or 2022. During the year ended December 31, 2024, 418,893 shares of Class A common stock were purchased under the ESPP at a weighted-average price of $16.63 per share.
Stock-based Compensation Expense
Stock-based compensation included in the Company's consolidated statements of operations was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cost of revenue | $ | 5,499 | $ | 5,229 | $ | 6,307 | |||||||||||
| Sales and marketing | 83,435 | 79,879 | 41,533 | ||||||||||||||
| Research and development | 239,902 | 230,806 | 94,319 | ||||||||||||||
| General and administrative | 47,619 | 47,193 | 49,453 | ||||||||||||||
| Total stock-based compensation expense | $ | 376,455 | $ | 363,107 | $ | 191,612 |
During the year ended December 31, 2023, the Company recorded $15.7 million in stock-based compensation expense for a performance-based incentive plan for certain employees of Wurl. The plan was initially recorded in accrued and other current liabilities on the Company’s consolidated balance sheets as the monetary value of the obligation under each potential outcome of the performance condition was predominantly based on a fixed monetary amount known at inception to be settled in a variable number of shares. In February 2024, the Company settled the liability by issuing 346,836 shares of the Company's Class A common stock and paying $2.1 million in cash. For additional information, see Note 6 - Business Combinations.
During the year ended December 31, 2024, the Company recorded $7.1 million in stock-based compensation expense for certain cash-settled awards, whose value was based in part on the price of its Class A common stock. As of December 31, 2024, these awards were vested and included in accrued and other current liabilities on the Company’s consolidated balance sheets.
As of December 31, 2024, the total unrecognized stock-based compensation expense was $145.6 million, which is expected to be recognized over a weighted-average period of 0.92 years. For the years ended December 31, 2024, 2023, and 2022, the Company recognized net income tax benefit (deficiency) related to stock-based compensation of $203.7 million, $34.3 million, and $(10.9) million, respectively.
12. Net Income (Loss) Per Share
The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders for the years ended December 31, 2024, 2023, and 2022 (in thousands, except share and per share data):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Basic EPS | |||||||||||||||||
| Numerator: | |||||||||||||||||
| Net income (loss) | $ | 1,579,776 | $ | 356,711 | $ | (192,746) | |||||||||||
| Less: | |||||||||||||||||
| Income attributable to options exercises by promissory notes | (1,508) | (1,412) | — | ||||||||||||||
| Income attributable to unvested early exercised options | (2) | (23) | — | ||||||||||||||
| Income attributable to common stock subject to share repurchase agreements | (1,207) | (334) | — | ||||||||||||||
| Net income (loss) attributable to common stockholders—Basic | $ | 1,577,059 | $ | 354,942 | $ | (192,746) | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average shares used in computing net income (loss) per share—Basic | 336,921,483 | 351,952,187 | 371,568,011 | ||||||||||||||
| Net income (loss) per share attributable to common stockholders—Basic | $ | 4.68 | $ | 1.01 | $ | (0.52) | |||||||||||
| Diluted EPS | |||||||||||||||||
| Numerator: | |||||||||||||||||
| Net income (loss) | $ | 1,579,776 | $ | 356,711 | $ | (192,746) | |||||||||||
| Less: | |||||||||||||||||
| Income attributable to options exercises by promissory notes | (1,461) | (1,371) | — | ||||||||||||||
| Income attributable to unvested early exercised options | (2) | (23) | — | ||||||||||||||
| Income attributable to common stock subject to share repurchase agreements | (1,169) | (324) | — | ||||||||||||||
| Net income (loss) attributable to common stockholders—Diluted | $ | 1,577,144 | $ | 354,993 | $ | (192,746) | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average shares used in computing net income (loss) per share—Basic | 336,921,483 | 351,952,187 | 371,568,011 | ||||||||||||||
| Weighted-average dilutive share-based awards and warrants | 10,886,072 | 10,637,059 | — | ||||||||||||||
| Weighted-average shares used in computing net income (loss) per share—Diluted | 347,807,555 | 362,589,246 | 371,568,011 | ||||||||||||||
| Net income (loss) per share attributable to common stockholders—Diluted | $ | 4.53 | $ | 0.98 | $ | (0.52) |
The following table presents the forms of antidilutive potential common shares:
| As of December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Stock options exercised for promissory notes | 85,000 | 1,399,999 | 1,399,999 | ||||||||||||||
| Early exercised stock options | — | 3,147 | 99,372 | ||||||||||||||
| Stock options | — | 115,229 | 11,315,805 | ||||||||||||||
| Unvested RSUs | 2,034 | 3,340,992 | 15,616,743 | ||||||||||||||
| ESPP | 49,488 | 1,917 | 856,811 | ||||||||||||||
| Total antidilutive potential common shares | 136,522 | 4,861,284 | 29,288,730 |
As of December 31, 2023, the table above excludes any unvested PSUs since the related market conditions had not yet been met.
13. Income Taxes
Net income (loss) before income taxes for the years ended December 31, 2024, 2023, and 2022, included the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| U.S. | $ | 125,402 | $ | 14,911 | $ | 8,660 | |||||||||||
| Foreign | 1,450,603 | 365,659 | (213,837) | ||||||||||||||
| Net income (loss) before income taxes | $ | 1,576,005 | $ | 380,570 | $ | (205,177) |
Provision for (benefit from) income taxes for the years ended December 31, 2024, 2023, and 2022 consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 19,832 | $ | 46,515 | $ | 74,843 | |||||||||||
| State | 11,426 | 12,407 | 13,548 | ||||||||||||||
| Foreign | 161,046 | 47,309 | 1,548 | ||||||||||||||
| Total current | 192,304 | 106,231 | 89,939 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (151,309) | (65,476) | (74,588) | ||||||||||||||
| State | (19,424) | (6,454) | (6,718) | ||||||||||||||
| Foreign | (25,342) | (10,442) | (20,863) | ||||||||||||||
| Total deferred | (196,075) | (82,372) | (102,169) | ||||||||||||||
| Total provision for (benefit from) income taxes | $ | (3,771) | $ | 23,859 | $ | (12,230) |
The reconciliation of federal statutory income tax rate to the effective income tax rate is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Tax provision (benefit) at U.S. federal statutory rate | $ | 330,961 | $ | 79,920 | $ | (43,034) | |||||||||||
| State income taxes, net of federal benefit | (30,296) | (5,259) | (1,356) | ||||||||||||||
| Foreign income taxed at different rates | (162,402) | (39,171) | 27,114 | ||||||||||||||
| Global intangible low-taxed income | 54,118 | 19,417 | 2,917 | ||||||||||||||
| Stock-based compensation | (176,670) | (3,793) | 22,064 | ||||||||||||||
| Capital loss | — | (2,121) | (14,687) | ||||||||||||||
| Foreign-derived intangible income | (9,743) | (20,569) | (17,667) | ||||||||||||||
| Research and development credits | (56,666) | (25,128) | (11,803) | ||||||||||||||
| Foreign income inclusion | (305) | 919 | 357 | ||||||||||||||
| Change in valuation allowance | 42,623 | 15,182 | 21,061 | ||||||||||||||
| Return to Provision | 2,942 | 3,223 | (1,323) | ||||||||||||||
| Other | 1,668 | 1,239 | 4,127 | ||||||||||||||
| Total provision for (benefit from) income taxes | $ | (3,771) | $ | 23,859 | $ | (12,230) |
The Company operates in jurisdictions outside of the US, such as Singapore, where it has tax incentive arrangements. The Company's qualifying income earned in Singapore is taxed at reduced rates, subject to its compliance with the conditions specified in these incentives and legislative developments. These Singapore tax incentives are expected to expire in June 2028 which the Company can affirmatively elect to renew. Before taking into consideration the effects of the U.S. Tax Cuts and Jobs Act and other indirect tax impacts, the effect of these tax incentives and tax holiday decreased the provision for income taxes by approximately $135.4 million ($0.39 per diluted share) and $38.0 million ($0.11 per diluted share) for the years ended December 31, 2024 and 2023, respectively.
The following summarizes the current and deferred tax assets and liabilities (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued expenses and reserves | $ | 13,506 | $ | 12,558 | |||||||
| Stock-based compensation | 10,124 | 11,169 | |||||||||
| Tax credit carryforwards | 99,314 | 22,896 | |||||||||
| Net operating loss | 45,463 | 24,817 | |||||||||
| Identified intangibles | 46,851 | 24,284 | |||||||||
| Operating lease liability | 10,137 | 10,201 | |||||||||
| Other comprehensive income | 37,997 | 24,540 | |||||||||
| Foreign tax deduction | 1,900 | 7,560 | |||||||||
| Capital loss | 18,198 | 17,688 | |||||||||
| Capitalized R&D expenses | 268,918 | 142,386 | |||||||||
| Valuation allowance | (98,444) | (55,822) | |||||||||
| Total deferred tax assets | 453,964 | 242,277 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (324) | (1,587) | |||||||||
| Operating lease right-of-use assets | (7,798) | (6,808) | |||||||||
| Other | (9,529) | (6,909) | |||||||||
| Total deferred tax liabilities | (17,651) | (15,304) | |||||||||
| Net deferred tax assets | $ | 436,313 | $ | 226,973 |
As of December 31, 2024 and 2023, the Company had federal net operating loss carryforwards of $2.8 million and $8.5 million on a return basis, respectively, to reduce future taxable income. The post-2017 Tax Act net operating losses are not subject to expiration.
As of December 31, 2024 and 2023, the Company had federal tax credit carryforwards of $67.7 million and $5.1 million on a return basis, respectively, to offset future tax liability. The credit carryforwards will begin to expire in 2035.
As of December 31, 2024 and 2023, the Company had federal capital loss carryforwards of $78.1 million and $77.1 million on a return basis, respectively, to reduce future capital gains. The capital loss carryforwards will begin to expire in 2027.
As of December 31, 2024 and 2023, the Company had California net operating loss carryforwards of $12.4 million and $3.6 million on a return basis, respectively, to reduce future taxable income. The net operating losses will begin to expire in 2039.
As of December 31, 2024 and 2023, the Company had California tax credit carryforwards of $63.0 million and $33.3 million on a return basis, respectively, to offset future tax liability. The credit carryforwards are not subject to expiration.
As of December 31, 2024 and 2023, the Company had other state net operating loss carryforwards of $74.1 million and $26.6 million on a return basis, respectively, to reduce future taxable income. The net operating losses will begin to expire in 2038.
As of December 31, 2024 and 2023, the Company had Texas tax credit carryforwards of $1.2 million and $0.5 million on a return basis, respectively, to offset future tax liability. The credit carryforwards will begin to expire in 2043.
As of December 31, 2024 and 2023, the Company had foreign net operating loss carryforwards of $255.5 million and $140.5 million on a return basis, respectively, to reduce future taxable income. The foreign net operating losses will begin to expire in 2027.
The valuation allowance on the Company's net deferred tax assets increased by $42.6 million, $15.2 million and $21.8 million during the years ended December 31, 2024, 2023, and 2022, respectively.
In assessing the realizability of the Company’s deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management’s assessment is based on the weight of available evidence, including cumulative losses since inception and expected future losses and as such, management believes it is more likely than not that the deferred tax assets will be realized. As of December 31, 2024, 2023, and 2022, the Company maintained a valuation allowance with respect to certain of its deferred tax assets relating primarily to certain state tax credits, U.S. capital losses and operating losses in certain non-U.S. jurisdictions that we believe are not likely to be realized, due to generating more credits and losses than can be utilized.
Internal Revenue Code (IRC) Section 382 places a limitation on the amount of taxable income that can be offset by net operating loss carryforwards and tax credits after a greater than 50% change in control in ownership; California has similar rules. The Company’s capitalization described herein may have resulted in such a change. Utilization of the net operating loss
carryforwards may be subject to annual limitations under IRC Section 382 and similar state provisions. The annual limitation may result in the expiration of the net operating loss carryforwards before utilization.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2024 and 2023, because it intends to permanently reinvest such earnings outside of the U.S., except for Singapore. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place in the 2017 Tax Act.
Uncertain Tax Positions
The following table summarizes the activity related to the gross unrecognized tax benefits (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Balance at beginning of year | $ | 35,880 | $ | 19,052 | $ | 18,456 | |||||||||||
| Increases related to prior year positions | 4,393 | 3,522 | — | ||||||||||||||
| Decreases related to prior year positions | (2,183) | — | (2,837) | ||||||||||||||
| Increases related to current year positions | 25,921 | 13,548 | 7,083 | ||||||||||||||
| Decreases related to lapse of statutes | (2,797) | (242) | (758) | ||||||||||||||
| Decreases related to settlements | (309) | — | (2,892) | ||||||||||||||
| Balance at end of year | $ | 60,905 | $ | 35,880 | $ | 19,052 |
Of the unrecognized tax benefits, $51.1 million and $23.9 million represents the amount that if recognized, would favorably affect the effective income tax rate in 2024 and 2023, respectively. The Company does not expect a significant change to its unrecognized tax benefits or recorded liabilities over the next twelve months. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.
The Company records interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2024, 2023, and 2022, the Company had approximately $8.3 million, $4.0 million, and $2.6 million of interest and penalties, respectively.
The tax returns for years 2017 through 2023 remain open to examination for federal and other major domestic taxing jurisdictions and for years 2018 through 2023 for other major foreign jurisdictions.
14. Segments and Geographic Information
The Company determines its operating segments based on how its CODM manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Company’s CODM is the Chief Executive Officer.
The Company's two operating and reportable segments are as follows:
-
Advertising*:* Revenue is generated primarily from fees paid by advertisers for the placement of ads on mobile applications owned by Publishers.
-
Apps*:* Revenue is generated when a user of one of the Apps makes an in-app purchase ("IAP Revenue") and when clients purchase the digital advertising inventory of the Company's portfolio of Apps ("IAA Revenue").
The CODM evaluates the performance of each operating segment using revenue and segment Adjusted EBITDA. The Company defines segment Adjusted EBITDA as revenue less expenses, excluding depreciation and amortization and certain items that the Company does not believe are reflective of the operating segments’ core operations. Expenses include indirect costs that are allocated to operating segments based on a reasonable allocation methodology, which are generally related to sales and marketing activities and general and administrative overhead. Revenue and expenses exclude transactions between the Company's operating segments.
The CODM uses segment Adjusted EBITDA to allocate resources during the annual budgeting and forecasting process. The CODM considers segment Adjusted EBITDA when making decisions on operating and capital resource allocation. Additionally, the CODM uses segment Adjusted EBITDA to evaluate operating strategy and assess segment performance by comparing the results of each segment.
The CODM does not evaluate operating segments using asset information, and, accordingly, the Company does not report asset information by segment.
The following tables provide information about the Company's reportable segments and a reconciliation of the total segment Adjusted EBITDA to consolidated income (loss) before income taxes (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Advertising: | |||||||||||||||||
| Revenue | $ | 3,224,058 | $ | 1,841,762 | $ | 1,049,167 | |||||||||||
| Less: | |||||||||||||||||
| Data center costs | (392,498) | (251,197) | (201,718) | ||||||||||||||
| Personnel related expenses | (242,134) | (208,878) | (162,327) | ||||||||||||||
| Publisher bonuses1 | — | — | 209,635 | ||||||||||||||
| Other expenses2 | (146,830) | (105,982) | (86,341) | ||||||||||||||
| Advertising Adjusted EBITDA | 2,442,597 | 1,275,705 | 808,415 | ||||||||||||||
| Apps: | |||||||||||||||||
| Revenue | $ | 1,485,190 | $ | 1,441,325 | $ | 1,767,891 | |||||||||||
| Less: | |||||||||||||||||
| User acquisition costs | (521,516) | (539,444) | (666,128) | ||||||||||||||
| Payment processing fees | (287,891) | (295,613) | (345,573) | ||||||||||||||
| Professional services costs | (260,278) | (236,229) | (320,282) | ||||||||||||||
| Other expenses3 | (138,497) | (143,086) | (181,113) | ||||||||||||||
| Apps Adjusted EBITDA | 277,008 | 226,953 | 254,795 | ||||||||||||||
| Total Segment Adjusted EBITDA | $ | 2,719,605 | $ | 1,502,658 | $ | 1,063,210 | |||||||||||
| Interest expense and loss on settlement of debt | $ | (318,260) | $ | (275,665) | $ | (171,863) | |||||||||||
| Other income, net | 25,440 | 7,831 | 18,647 | ||||||||||||||
| Amortization, depreciation and write-offs | (448,680) | (489,008) | (547,084) | ||||||||||||||
| Loss on disposal of long-lived assets | (1,646) | — | (127,892) | ||||||||||||||
| Non-operating foreign exchange gain (loss) | (291) | 1,224 | 164 | ||||||||||||||
| Stock-based compensation | (376,455) | (363,107) | (191,612) | ||||||||||||||
| Acquisition-related expense and transaction bonus | (885) | (1,047) | (21,279) | ||||||||||||||
| Publisher bonuses | — | — | (209,635) | ||||||||||||||
| MoPub acquisition transition services | — | — | (6,999) | ||||||||||||||
| Restructuring costs | (22,823) | (2,316) | (10,834) | ||||||||||||||
| Income (loss) before income taxes | $ | 1,576,005 | $ | 380,570 | $ | (205,177) |
1 In connection with the MoPub acquisition, the Company incurred certain one-time, non-recoupable costs to incentivize publishers to migrate to its MAX mediation solution. As these costs were not historically significant nor expected to be in the future, the Company excluded their impact from the Advertising Adjusted EBITDA.
2 Other segment items for the Advertising reportable segment include professional services costs, facilities costs, advertising costs, software costs, and other individually insignificant costs.
3 Other segment items for the Apps reportable segment include personnel related expenses, data center costs, facilities costs, software costs, and other individually insignificant costs.
The following table presents long-lived assets by geographic area which consist of property and equipment, net (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| United States | $ | 44,641 | $ | 47,612 | |||||||
| Germany | 74,533 | 79,863 | |||||||||
| Netherlands | 40,215 | 45,307 | |||||||||
| All other countries | 1,141 | 549 | |||||||||
| Total property and equipment, net | $ | 160,530 | $ | 173,331 |
For information regarding revenue disaggregated by geography, see Note 2 - Summary of Significant Accounting Policies.
15. Restructuring
For the year ended December 31, 2024, the Company implemented certain workforce reduction measures, resulting in restructuring charges of $20.2 million for the Advertising segment and $5.7 million for the Apps segment. These charges consisted primarily of one-time termination benefits. As of December 31, 2024, $6.9 million remained unpaid and was included in accrued and other current liabilities in the Company's consolidated balance sheets.
For the year ended December 31, 2022, the Company implemented certain workforce reduction measures and recorded a total restructuring charge of $10.8 million comprising primarily of one-time termination benefits, which had been paid in full prior to 2024.
16. Related Party Transactions
Stock Repurchase Transactions
In February 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with KKR Denali, and BofA Securities, Inc., acting for themselves and as representative of other underwriters (collectively, the “Underwriters”), in connection with a secondary public offering (the “Offering”) of 19,866,397 shares of the Company's Class A common stock by KKR Denali. Pursuant to the Underwriting Agreement, on March 6, 2024, the Company repurchased from the Underwriters 10,466,397 shares of Class A common stock sold to the Underwriters by KKR Denali in the Offering at a price per share of $54.46, the same per share price paid by the Underwriters to KKR Denali in the Offering.
In August 2023, the Company repurchased 15,000,000 shares of its Class A common stock from KKR Denali in a private transaction at a price per share equal to $36.85, for an aggregate purchase price of $552.8 million under the Company's stock repurchase program.
In May 2023, the Company repurchased 15,952,381 shares of its Class A common stock from KKR Denali in a private transaction at a price per share equal to $21.00, for an aggregate purchase price of $335.0 million under the Company's stock repurchase program.
Credit Agreement
KKR Capital Markets LLC, an affiliate of KKR Denali, served as a joint lead arranger and joint bookrunner for the 2018 Credit Agreement. In 2024, 2023, and 2022, the Company paid fees of $0.1 million, $1.2 million, and nil, respectively, to KKR Capital Markets LLC in connection with amendments to the 2018 Credit Agreement. Additionally, KKR Corporate Lending (CA) LLC, an affiliate of KKR Denali, provided revolving credit commitments totaling $15.0 million under the 2018 Credit Agreement. The 2018 Credit Agreement was terminated in December 2024. See Note 9 – Debt for additional information.
Other Transactions
Herald Chen, the Company’s former President and Chief Financial Officer and a current member of its board of directors, served as an advisor to the Chief Executive Officer for a one-year term beginning on January 1, 2024. In connection with this role, Mr. Chen received an award of 62,418 RSUs with a grant-date fair value of $43.79 per share.
In February 2024, the Company entered into certain investment and arm's length commercial agreements with Humans, Inc. See Note 3 - Financial Instruments and Fair Value Measurements for additional information. Eduardo Vivas, a member the Company's board of directors, serves as the Chief Operating Officer of Humans, Inc., and a member of its board of directors.
In March 2019, the Company entered into a promissory note with Rafael Vivas, the brother of Eduardo Vivas, a member of the Company's board of directors, for the purpose of advancing him funds to allow him to early exercise his stock options (“Vivas Note”). The Vivas Note was issued in the amount of $2.3 million at an interest rate of 2.59%, and later amended on August 7, 2020 to lower the interest rate on the outstanding balance of such note to the then applicable IRS annual mid-term rate of 0.41%. In March 2024, the principal amount due under the Vivas Note plus accrued interest, or $2.3 million, was repaid in full to the Company and the Vivas Note was extinguished.
The Company had no other material related party transactions in 2024, 2023, or 2022.
17. Subsequent Events
On February 12, 2025, the Company announced that it had entered into a term sheet for the sale of the Company’s mobile gaming business to a privately held company (the “Acquirer”) for total consideration of $900.0 million (the “Term Sheet”). The Term Sheet provides for the total consideration to consist of $400.0 million in shares of the Acquirer’s common equity and $500.0 million in cash, subject to customary purchase price adjustments. The Term Sheet also provides that the Acquirer will borrow up to $250.0 million of the cash portion of the total consideration and that, if the Acquirer is unable to obtain such financing, the Company agrees to provide financing in such amount to the Acquirer through the issuance of a promissory note. The Term Sheet is non-binding, except with respect to an agreement by the parties to use commercially reasonable best efforts in good faith to negotiate and finalize definitive agreements for the proposed transaction, a prohibition on the Company from engaging in discussions or negotiations with any third party other than the Acquirer regarding the sale of the Company’s mobile gaming business for a specified period, and customary terms such as fees and expenses, governing law, and termination.
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