AppLovin Corporation -- Moody's says AppLovin's IPO enhances liquidity and is credit positive

Announcement: Moody's says AppLovin's IPO enhances liquidity and is credit positiveGlobal Credit Research - 15 Apr 2021New York, April 15, 2021 -- Moody's Investors Service, ("Moody's") said that the recent IPO of AppLovin Corporation (AppLovin) meaningfully enhances liquidity and is credit positive. After full repayment of $400 million of revolver borrowings, the remainder of net proceeds from the IPO exceeds $1.3 billion and will be added to cash balances and earmarked to fund general corporate purposes including working capital, growth investments, and acquisitions.AppLovin's B1 Corporate Family Rating (CFR) and stable outlook are unchanged given AppLovin has been very acquisitive and Moody's expects excess cash will be used to fund continued growth investments including deferred acquisition cost liabilities ($185 million as of December 2020) and future acquisitions. As a publicly traded company, AppLovin is now able to fund at least a portion of future acquisitions with public equity, if desired.Moody's expects continued organic revenue and profit growth will bring adjusted leverage below Moody's 4.5x downgrade trigger by mid-2021 with adjusted EBITDA margins remaining above 20% and capital expenditures of less than 2% of revenues. Moody's expects AppLovin's overall top line and EBITDA will grow in the double-digit percentage range supported by continued growth in mobile publishing revenue and consumer in-app purchase sales. After acquiring a dozen game studios, AppLovin has amassed a diversified portfolio of mobile games primarily targeting the casual gamer. In addition to acquiring game studios, recent acquisitions add to AppLovin's capabilities. In August 2020, the company launched AXON, a proprietary next-generation machine learning engine, which has enhanced delivery of targeted ads, and in February 2021 the company entered into an agreement to acquire Adjust GmbH, a leading mobile app attribution, measurement, and analytics company based in Germany.AppLovin is a controlled company under NASDAQ corporate governance requirements with Adam Foroughi (co-founder, CEO, and Chairperson), Herald Chen (President and CFO), and KKR Denali Holdings, L.P. (KKR Denali) holding all outstanding Class B super voting common shares (20 votes per share) which provides greater than 50% voting control. AppLovin will rely on NASDAQ controlled company exemptions to avoid certain corporate governance requirements. Accordingly, shareholders of AppLovin are not afforded the same protections as shareholders of other NASDAQ-listed companies with respect to corporate governance. Nevertheless, Moody's expects more transparent financial reporting as well as greater accountability to financial policies.AppLovin Corporation, founded in 2011 with headquarters in Palo Alto, CA, is a leader in the mobile game industry. In addition to having acquired a dozen mobile game development studios since the beginning of 2018, the company provides proprietary cloud-first tools to match buyers and sellers of mobile advertising via auctions. Moody's expects revenues pro forma for recent and pending acquisitions will exceed $2.5 billion over the next year.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. Carl Salas VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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