Combination of industry’s leading platforms
would deliver optimal shareholder value and create an unprecedented
full stack solution for developers to create, monetize, measure and
grow games
- Comprehensive full-stack set of integrated industry-leading
solutions including real-time 3-D creation tools, analytics, user
acquisition, monetization, attribution and programmatic ad
exchange
- Scaled operations and cash flow, targeting combined run-rate
revenue of over $7 billion and run-rate Adjusted EBITDA of over $3
billion by the end of 2024E
- Estimated synergies of over $700 million Adjusted EBITDA
achieved in 2025E, with a minimum of $500 million in 2024E, based
on accelerated revenue opportunities, operational efficiencies and
scale benefits
- All-stock merger consideration payable in a mix of AppLovin
Class A and Class C common stock would value Unity at $58.85 per
share and $20 billion enterprise value, representing a 48% premium
to the Unity share price as of 7/12/2022 and 18% to yesterday’s
closing price (based on the closing price of AppLovin’s Class A
common stock on 8/8/2022)
- AppLovin confirms 2022E guidance for Adjusted EBITDA midpoint
of $1.2 billion and Software Platform revenue of $1.14 to $1.29
billion and is lowering the Apps revenue range to $1.70 to $1.85
billion
AppLovin (NASDAQ: APP) today announced it has submitted a
compelling non-binding proposal to the Board of Directors of Unity
Software Inc. (NYSE: U) to combine AppLovin, a leader in mobile
marketing and monetization, with Unity, an industry leading
platform for creating and operating interactive, real-time 3D
(RT3D) content, in a transaction where each outstanding share of
Unity common stock would be exchanged for 1.152 shares of AppLovin
Class A voting common stock and 0.314 shares of AppLovin Class C
non-voting common stock.1 Under these terms, current Unity
shareholders would receive approximately 55.0% of the outstanding
shares of the combined company, with the Class A shares
representing approximately 49.0% of the outstanding voting rights
of the combined company. Together the combined business would be
poised to offer the most comprehensive and fully integrated
creation and growth platform for app developers.
“We believe that together, AppLovin and Unity create a market
leading business that has tremendous growth potential that would
generate an estimated run-rate Adjusted EBITDA of over $3 billion
by the end of 2024 and would be in the best interest of
shareholders of both companies,” said Adam Foroughi, AppLovin CEO.
“Over the last decade we have built and operated a leading and
innovative company in mobile app marketing and monetization
solutions. Unity is one of the world's leading platforms for
helping creators turn their inspirations into real-time 3D content.
With the scale that comes from unifying our leading solutions and
innovation that would be achieved with the combination of our
teams, we expect that game developers would be the biggest
beneficiaries as they continue to lead the mobile gaming sector to
its next chapter of growth.”
The combination of the two businesses would expect to generate
substantial revenue growth, cash flow and operational efficiencies
that are well beyond each company’s potential standalone
performance. AppLovin estimates this combination will create over
$700 million of Adjusted EBITDA from synergies in 2025E, with a
minimum of $500 million in 2024E. Given AppLovin’s track record as
a leader in the growth and monetization space for app developers
the company believes it is better positioned than any other company
to develop an end-to-end platform with Unity. AppLovin runs their
Software business at a high margin and believes there would be
substantial infrastructure savings and other efficiencies of scale
for the combined Growth business. The cash flow benefits of running
a large, scaled combined Growth business can be reinvested in the
Create Solutions business, which AppLovin views as a cornerstone of
its joint strategic advantage.
Unity’s audience reach through games built on Create Solutions
paired with AppLovin’s powerful AXON machine learning engine will
create material efficiency gains for the combined growth platform,
leading to revenue gains, but even more importantly facilitating
materially more value to app developers. With AppLovin and Unity
working in concert, developers would be able to seamlessly take
their app from concept to commercialization with continued growth
and optimization at far greater scale and effectiveness, which can
drive higher growth for the entire mobile app industry and
beyond.
Delivers significant value to shareholders of both
companies
- Scale: Approximately $35
billion combined market cap enterprise which offers greater reach
and market presence with more than $7 billion in estimated run-rate
revenue and over $3 billion run-rate Adjusted EBITDA by the end of
2024E
- Synergy value creation:
AppLovin expects to achieve over $700 million in Adjusted EBITDA
synergies in 2025E, with a minimum of $500 million in 2024E
- Capacity for strategic
investments: Given cash flow profile, the combined
entity would be expected to continue to have the ability to
reinvest for growth and take advantage of strategic opportunities
as they arise
- Diverse and liquid shareholder
base: The proposed transaction will meaningfully
increase the float and diversification of AppLovin’s and Unity’s
shareholder base
- Shareholder value creation:
Given the combined strategic position and industry leadership,
leading to strong top-line growth and cash flow, the proposed
combined entity would yield attractive long-term shareholder
returns
Management and Board of Directors
AppLovin proposes that Unity’s CEO John Riccitiello become CEO
of the combined business and Adam Foroughi become the COO. The
Board of Directors of the combined company would be reconstituted
so that Unity would appoint the majority of members, consistent
with Unity shareholders’ economic stake. The rest of the management
team and Board of Directors would be a combination from each
company to be mutually determined.
Transaction Details and Timing
Based on this non-binding proposal, existing AppLovin Class B
common shares (20:1 votes) would be converted to Class A common
shares (1:1 vote) in connection with the closing of the proposed
transaction. AppLovin shareholders would hold approximately 45% of
the outstanding common shares of the combined company, including
Class C, with such shares representing approximately 51% of the
outstanding voting rights of the combined company. Unity
stockholders would receive approximately 55% of the outstanding
shares of the combined company, with Class A common shares
representing approximately 49% of the outstanding voting rights of
the combined company. The rights of holders of AppLovin Class A
common stock and Class C common stock are the same, except with
respect to voting. Shares of AppLovin Class C common stock have no
voting rights, except as required by law. AppLovin’s Class C common
stock is not currently listed on Nasdaq. In connection with the
proposed transaction, AppLovin expects to apply to list its shares
of Class C common stock on the Nasdaq Global Select Market in
connection with the proposed combination.
This proposal has the unanimous support of the AppLovin Board of
Directors. Pending acceptance by the Unity Board of Directors,
AppLovin is highly confident that its proposed transaction would be
completed on a timely basis. The execution of a definitive merger
agreement between AppLovin and Unity would be subject to approval
by each company’s Board of Directors, the termination of the
proposed acquisition of ironSource LTD, and other customary signing
conditions. The completion of the transaction would be subject to
customary closing conditions, including receipt of required
regulatory approvals and approval of AppLovin and Unity
shareholders.
Please join AppLovin’s earnings call on Wednesday, August 10,
2022 at 2:00 pm PT for further discussion of this non-binding
proposal.
Financial Outlook for 2022E
As AppLovin resets and optimizes the level of investment in the
Apps business, the company is lowering the revenue outlook for the
Apps portfolio, while maintaining the targets for the Software
Platform revenue and overall Adjusted EBITDA.
Full-Year 2022
UPDATED
Full-Year 2022
PRIOR
Software Platform
$1.140 - $1.290 Billion
$1.140 - $1.290 Billion
Apps
$1.700 - $1.850 Billion
$2.000 - $2.150 Billion
Total Revenue
$2.840 - $3.140 Billion
$3.140 - $3.440 Billion
Adjusted EBITDA[1] (Midpoint)
$1.200 Billion
$1.200 Billion
Adjusted EBITDA Margin
37% - 40%
Mid-30s
[1] We have not provided the forward-looking GAAP equivalents
for forward-looking non-GAAP metrics, specifically Adjusted EBITDA
and Adjusted EBITDA margin, or a GAAP reconciliation as a result of
the uncertainty regarding, and the potential variability of,
reconciling items such as stock-based compensation expense.
Accordingly, a reconciliation of these non-GAAP guidance metrics to
their corresponding GAAP equivalent is not available without
unreasonable effort. However, it is important to note that material
changes to reconciling items could have a significant effect on
future GAAP results.
Advisors
J.P. Morgan is serving as AppLovin’s financial advisor and
Wilson Sonsini Goodrich & Rosati is serving as AppLovin’s legal
advisor.
About AppLovin
AppLovin's leading marketing software platform provides app
developers with a powerful, integrated set of solutions to solve
their mission-critical functions like user acquisition,
monetization and measurement. AppLovin is headquartered in Palo
Alto, California with several offices globally.
Source: AppLovin Corp.
About Non-GAAP Financial Measures
To supplement financial information presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), AppLovin uses certain financial measures that are not
prepared in accordance with GAAP, including EBITDA and Adjusted
EBITDA. We have not provided the forward-looking GAAP equivalents
for forward-looking non-GAAP metrics, including EBITDA and Adjusted
EBITDA, or a GAAP reconciliation as a result of the uncertainty
regarding, and the potential variability of, reconciling items such
as stock-based compensation expense. Accordingly, a reconciliation
of these non-GAAP guidance metrics to their corresponding GAAP
equivalent is not available without unreasonable effort. However,
it is important to note that material changes to reconciling items
could have a significant effect on future GAAP results. AppLovin’s
non-GAAP financial measures should be considered in addition to,
not as substitutes for, or in isolation from, measures prepared in
accordance with GAAP.
We define Adjusted EBITDA for a particular period as net income
(loss) before interest expense and loss on settlement of debt,
other (income) expense, net (excluding certain recurring items),
provision for (benefit from) income taxes, amortization,
depreciation and write-offs and as further adjusted for
non-operating foreign exchange (gains) losses, stock-based
compensation expense, acquisition-related expense and transaction
bonuses, customer acquisition bonuses, loss (gain) on
extinguishments of acquisition-related contingent consideration,
lease modification and abandonment of leasehold improvements, and
change in the fair value of contingent consideration. Based on
their preliminary proxy statement filed with the Securities and
Exchange Commissions on July 29, 2022, Unity defines Adjusted
EBITDA as net income, before interest expense, income taxes,
depreciation and amortization and excluding the impact of
stock-based compensation expense. We define Adjusted EBITDA Margin
as Adjusted EBITDA divided by revenue for the same period.
Forward Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements generally relate to future events or AppLovin’s future
financial or operating performance. In some cases, you can identify
forward-looking statements because they contain words such as
“can,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,”
“going to,” “could,” “intend,” “target,” “project,” “contemplate,”
“believe,” “estimate,” “predict,” “potential,” or “continue,” or
the negative of these words or other similar terms or expressions
that concern AppLovin’s expectations, strategy, priorities, plans,
or intentions. Forward-looking statements in this press release
include, but are not limited to, statements regarding AppLovin’s
proposal to combine with Unity, the expected per share exchange
ratio payable to Unity stockholders, the expected synergies and
operations of the companies on a combined basis, projected
estimates regarding Adjusted EBITDA and AppLovin’s expectations
regarding the financial and operational performance and success of
the combined companies as well as the technology offering of the
combined companies and statements regarding AppLovin’s future
financial performance, including AppLovin’s expected financial
results, guidance, long-term goals and growth prospects. AppLovin’s
expectations and beliefs regarding these matters may not
materialize, and actual results are subject to risks and
uncertainties, including changes in AppLovin’s plans or
assumptions, that could cause actual results to differ materially
from those projected or expected. These risks include fluctuations
in AppLovin’s results of operations; the outcome of discussions
between AppLovin and Unity with respect to a proposed transaction,
including the possibility that the parties may not agree to pursue
a business combination or that the terms of any transaction will be
materially different from those described herein; AppLovin’s
ability to consummate the proposed combination or achieve the
expected synergies and/or efficiencies; potential regulatory
delays; the industry and market reaction to AppLovin’s proposal to
combine with Unity; the possibility that the integration of Unity
may be more difficult, time-consuming or costly than expected or
that operating costs and business disruptions may be greater than
expected; changes in the overall economic conditions; AppLovin’s
ability to attract new clients; AppLovin’s ability to maintain and
scale its technical infrastructure; risks related AppLovin’s review
of its Apps business; and AppLovin’s ability to adapt to emerging
technologies and business models. The forward-looking statements
contained in this press release are also subject to other risks and
uncertainties, including those more fully described in AppLovin’s
Annual Report on Form 10-K for the fiscal year ended December 31,
2021 and Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 2022. Additional information will also be set forth in
AppLovin’s Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2022. The forward-looking statements in this press
release are based on information available to AppLovin as of the
date hereof, and AppLovin disclaims any obligation to update any
forward-looking statements, except as required by law.
No Offer or Solicitation
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which the offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
This press release is also not a solicitation of a proxy nor a
substitute for any proxy statement or other filings that may be
made with the SEC. Nonetheless, AppLovin and its directors and
executive officers may be deemed to be participants in the
solicitation of proxies in connection with the proposed
transaction. Information about the directors and executive officers
of AppLovin is set forth in its proxy statement for its 2022 annual
meeting of stockholders, which was filed with the SEC on April 27,
2022. These documents can be obtained free of charge from the
sources indicated above. Additional information regarding the
potential participants in the proxy solicitations and a description
of their direct and indirect interests, by security holdings or
otherwise, will be contained in one or more registration
statements, proxy statements, tender offer statements or other
documents filed with the SEC if and when they become available.
Additional Information and Where to Find It
This press release relates to a proposal that AppLovin has made
for a business combination transaction with Unity. In furtherance
of this proposal and subject to future developments, AppLovin (and,
if a negotiated transaction is agreed to, Unity) may file one or
more registration statements, proxy statements, tender offer
statements or other documents with the SEC. This press release is
not a substitute for any proxy statement, registration statement,
tender offer statement, prospectus or other document AppLovin
and/or Unity may file with the SEC in connection with the proposed
transaction. INVESTORS AND SECURITY HOLDERS OF APPLOVIN AND UNITY
ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT,
TENDER OFFER STATEMENT, PROSPECTUS AND/OR OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME
AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Any definitive proxy statement(s) or
prospectus(es) (if and when available) will be mailed to
stockholders of AppLovin and/or Unity, as applicable. Investors and
security holders will be able to obtain free copies of these
documents (if and when available) and other documents filed with
the SEC by AppLovin through the website maintained by the SEC at
www.sec.gov, and by visiting AppLovin’s investor relations site at
https://investors.applovin.com.
1change ratios based on capitalization information disclosed in
the Unity / ironSource merger agreement and subject to change to
achieve the stated ownership percentages based on any change in
capitalization between now and signing.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005530/en/
Investors Ryan Gee ir@applovin.com Press Kim
Hughes press@applovin.com
Applovin (NASDAQ:APP)
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