Okay, everyone, please stand by. We're about to begin. This meeting is being recorded. Okay. Welcome, everyone, to AppLovin's earnings call for the fourth quarter and year ended December 31st, 2022. I'm Ryan Gee, Head of Investor Relations. Joining me today to discuss our results are Adam Foroughi, our Co-Founder, CEO, and Chairperson, and Herald Chen, our President and CFO. Please note our SEC filings as well as our shareholder letter discussing our fourth quarter performance are available at investors.applovin.com. During today's call, we may be making forward-looking statements regarding future events, market expectations, the future financial performance of the company, and the strategic review of our app's portfolio. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them except as required by law. Actual results may differ materially from the results predicted. We encourage you to review the risk factors in our most recently filed Form 10-Q for the fiscal quarter ended December 30th, 2022, and in our upcoming Form 10-K for the year ended December 31st, 2022. We will also be discussing non-GAAP financial measures. These non-GAAP financial measures are not intended to be a substitute for or superior to our GAAP results. Please be sure to review the reconciliations of our GAAP and non-GAAP financial measures in our shareholder letter. This conference call is being recorded, and a replay will be available on our IR website shortly. I'd now like to turn it over to Adam for some opening remarks, and then we'll open it up for Q&A. Please go ahead, Adam. Thanks, Ryan. Ryan, are we on video? Yeah. Please go ahead, you guys. Okay. Thank you. Thanks for joining us today. Recently, I was reflecting on our first 1.5 years as a public company. Some things are certainly much different from when we were private. A lot more people are fixated on quarterly results than our long-term plan. Every day there's a scoreboard, our stock price, and of course, we hold these earnings calls every quarter. We didn't have to do that when we were private. The most important things have not changed one bit. First and foremost, the most important thing we've got here is our team and culture. Our key team continues to work very closely together to deliver on our products and our vision, and we continue to add great talent to our team while maintaining our entrepreneurial and lean culture. Second is our motivation. We're all still incredibly hungry today and working harder than ever before because the opportunities we see in front of us are bigger than anything we've ever seen in the past. The other thing that hasn't changed is the need for relevant advertising. Relevant advertising funds free digital content. As we talk about the economic slowdown, and we talk about the IDFA and privacy headwinds, we sometimes lose sight of the fact that relevant advertising helps consumers discover content, and it helps the publisher monetize the content that they've developed that are giving away for free. If any part of this equation breaks down, you're gonna end up having less usage and consumption and less investment into great content, and it's just gonna be a tremendous loss for consumers and businesses. Because of that, we know that our industry is going to be resilient. What are the business opportunities that we here are most focused on today? Number one, over the last several years since we released AXON, the advancements in AI technologies have been incredible. Well, now we're working on AXON 2, and we're gonna use some of these new technologies for release some point in 2023. We believe this new platform and upgrade to our core technology will make an immense impact on our business and for our business partners. Second, we're really excited about the connected TV space. We're actively extending our marketing solutions today to the connected TV device. This category of advertising is bigger than the one we operate in today, and it's much faster-growing. We believe this is gonna become a big part of our software platform in the coming years and a very fast-growing one. Third, we continue to invest in innovative products to help carriers and OEMs better monetize their users. We all know that handset device sales have slowed down as mobile market has saturated, and these constituents need better products to be able to monetize their audience with, and we're gonna deliver those products. As we've gone public a little over a year and a half ago, we continue to operate the same way we did private because we know that works. We were incredibly successful for a decade before we went public, focusing on building long-term products and technologies that are innovative, that when we release into the market and have success with, we can create immense value gains for our business, our shareholders, and our customers. With that, I'm gonna hand it off to Herald. Thanks, Adam. In our last two shareholder letters, we talked about a theme of stability, which is a very nice thing to have in this current market environment. In particular, we have stability with a fantastic team, and we have stability with our business model and financial profile. That affords us the resources and time to invest wisely in our existing and leading products, new initiatives, as well as invest for the future. There's a couple other themes that we wanted to touch on today as well, two of them being simplification and focus. Both internally and externally. Internally, we are focused on what we control and spend a lot of time ensuring that our best resources are allocated to our best returning projects. The example of that has been our effort to optimize our apps portfolio, which is nearing completion. We spent the last six months working on headcount reductions, reformatting earn-outs, focused on the sale and spin and closure of underperforming assets. That's really allowed us now to get to a position where we've increased the cash flow and management time is now focused on delivering value with our remaining portfolio. We're pleased to say we have 11 remaining studios and publishing partners that are excited to invest to grow and ultimately maximize the value of that portfolio going forward. One note you'll see in this, in the shareholder letter and our financials that we did take a $128 million net loss charge for the divestiture and closure of these assets, including $100 million in the fourth quarter. Another area where we're simplifying and focusing is on initiatives we have in-hand. As Adam mentioned, we've got some amazing projects underway we're super optimistic about, and that means the bar for our M&A program has gone up. We're certainly still in the market for assets that are attractive to us, but they would need to be highly synergistic, strategic, and a great valuation. The bar is high for M&A. Lastly, we remain focused on what we've always been focused on when we were private or public, and that's making decisions for the long term so that while we will give the first quarterly guidance 1 quarter out, we're very much focused on the long term and won't manage to the near-term targets. Turning to the financials quickly, I won't reiterate all the facts and data that's in the shareholder letter, but I will highlight a few key things. First of all, the fourth quarter came in at the high end, both on the top line and bottom line from where we guided to in the third quarter for the fourth quarter. Included in that was software platform performance, which grew 24% year-over-year. For the entire year 2022, we came in at $2.8 billion of revenue and generated over $1 billion of EBITDA, and that equates to a 38% margin. For the first quarter of this coming year, we're guiding to essentially, the quarter being flat to the fourth quarter in total revenue as well as total EBITDA. One note for the next quarter is we are going to change and simplify some of our KPIs that we're reporting, in particular with regard to the software platform side of the equation. We believe several of the metrics that we've been offering are a bit confusing and really are not indicative or helpful to understanding our business. That's because the software platform apps, applications and solutions have become much broader. The size of the customers are different as well. Having a singular metric like SPEC and revenue per SPEC aren't terribly helpful. We'll be taking away those two metrics as well as the TSTV metric going forward. Where we do wanna focus you, though, are on the metrics that are meaningful. Our biggest business in software platform is the AppDiscovery business plus ALX. There's a metric that we've been reporting historically, we'll report going forward that we do think is important, and that's around our revenue per install and the number of installs, and we will continue to report those metrics going forward. In 2022 over 2021, that metric increased 46% in terms of revenue per install for ALX and AppDiscovery, and increased in terms of the number of installs by 24%. We would guide you to make sure you're focused on those metrics going forward. Of course, we will continue to evaluate what are the best metrics to describe our business going forward as other components of our software business grow over time. In terms of the overall financial performance of our business, we are glad that we had $1 billion of EBITDA, and we have now over $1 billion of cash. We are very focused on free cash flow as well. You'll see in our shareholder letter, we've added a new table where we've given you the eight trailing quarters of free cash flow performance. We had $260 million of EBITDA in the fourth quarter and $132 of free cash flow. Our definition of free cash flow is the free cash flow from operations, less CapEx and less finance leases. we think that's a great indicator of not just EBITDA, but actual free cash flow to the bottom line, which we're proud of. Our financial position allows us to have this resiliency in our business where we can invest in what we want it to grow as well as find new investments going forward. That can range from M&A, where there's a high bar, but also share buybacks. In terms of share buybacks, as you can see, in 2022, we invested over $340 million against our $750 million authorized buyback. In the fourth quarter, we did not buy back any shares as we were continuing to assess our capital allocation policy as well as increase the amount of cash in the quarter so that we ended the year with over $1 billion of cash. We think we're well-positioned today and going forward, given the financial wherewithal for our business to invest in initiatives we are excited about, as well as consider other investments, including share repurchases going forward. In summary, we're very glad to have the stability that we have in our business, as well as the financial wherewithal that we have. We think we've got an amazing team focused on the right things, and we're optimistic about the future ahead. With that, I'll turn it over to Ryan for Q&A. Yep. Thank you, Herald. We'll now begin the question and answer portion of the call. If you'd like to ask a question, be sure to use the Raise Hand function on your Zoom client. For those joining by the phone, just push star nine. Be sure to unmute your equipment before asking your question, and we'll get through as many as we can in the time allotted. Please wait a moment while we compile the roster. Our first question will come from Vasily Karasyov from Cannonball Research. Vasily, please go ahead. Afternoon. Adam, in your prepared remarks, you mentioned connected TV as one of the growth areas. I think investors and analysts at this point understand connected TV pretty well. We understand what you do. Can you help us connect how exactly you're going to address that market and what function you're hoping to perform there and what kind of revenue opportunities you see maybe in simple terms? Would appreciate it. Thank you. Yeah, for sure. I'll speak to just the product side. We're a performance marketing business at its core, and what we've done really well in mobile over the last decade is enable advertisers to buy advertising, full screen video ad, high definition, and measure all the performance of everything that happens after the fact and be able to buy effectively as arbitrage marketers. The connected TV device is really exciting for us because it's a television device, full screen, living room, tons of consumption per day. It's connected to the Internet. Today, we're not seeing that much performance advertising happening at large scale on that platform, especially when it comes to mobile app developers. In the last couple of years, we invested in an attribution company that's one of the leaders in trying to bring attribution to connected TV device. We invested in Wurl, which has, effectively, we've talked about a CDN for streamers, for very high-profile media companies to bring their content to fast channels. We've also got our core performance platform that we think is the leader in mobile marketing. We're gonna take that and use Wurl to bring it to market in connected TV, and we think it could become a big opportunity. As far as revenue and numbers, this is still really early days here. We believe it'll become a substantial and growing part of our software platform over years, we're not ready to talk numbers at this point. Essentially, will you be acting as a DSP in a programmatic CTV buys, but with performance advertising? Is that the right way to think about it? I'd think about it as full stack. The same way in mobile, we're an SSP and a DSP. Wurl today has a very well-performing SSP business. We at AppLovin, our biggest business is our DSP. We'll couple those pieces and have a full stack offering for connected TV partners. Thank you. Okay. Thank you, Vasily. Next, we'll go to Ralph Schackart with William Blair. Ralph, please go ahead. Ralph, please check your equipment. Yep. Great. Sorry. Adam, in the prepared remarks, you talked about the upgrade that's coming in sometime in 2023 for AXON 2. I think you said it could have a significant or immense impact. You know, maybe just a little bit more color about that. Will that be something that will phase in over time? You know, will it be more sort of abrupt in nature, meaning it potentially have a bigger impact in near term? Just love a little bit more color on that, please. Yeah. I mean, look, we released AXON 1, I guess, it was around three years ago, started working on it four years ago. Business grew a ton since we did it. I I think we 10x'd over the period of time from AXON 1 to today. It did build over time, and that's how these technologies work. In the period of time since we built that first technology, obviously, there's been huge advancements in AI technologies, and we're working on bringing those to our core platform. The rollout and potential growth from it is just building more efficiency into our system, which will benefit our advertisers. They should be able to hit their goals at larger scale, creating more growth for them and in the category, and obviously will benefit us. We don't yet know if it's gonna be a step function and continue to build over time, but we do believe that will be how it'll look. Great. Just one more on the macro, if I could, please. In the letter, you talked about Q4 being soft but stable with Q3, and then Q1 being relatively stable. Maybe just talk about the linearity there. Has it been, I guess, sort of stable over that period? Is it improving? Just any more color you could add on the macro would be great. Thank you. In our business, what was directly tied to our revenue, the biggest part of our revenue is performance marketing, and in particular, the largest part of our segment is game advertisers. Game advertisers are performance marketers. They're buying on some sort of return curve. They have an LTV to CAC model that works in today's market that's a lot more conservative than it was one and a half years ago when interest rates were near zero. As cost of capital went up last year, advertisers got conservative in performance because you just can't afford as long a payback as before. Those values were reset with an expectation of interest rates getting to sort of today's levels, and that was done a couple quarters ago. What we've seen in our business might be disconnected from what we talk about in the macro economy as a whole. In the performance marketing sector, the advertisers got conservative, but they're not getting any more conservative because we're not seeing material changes in the economy today versus a couple quarters ago. We've seen a lot of stability in our business and continue to do so. Okay. Thank you. Thank you. Thanks, Ralph. We'll next go to David Karnovsky with J.P. Morgan. David, please go ahead. Hey. Thank you. Adam, I guess the logical question after that last comment would be kind of what breaks developers, you know, out of that conservative mentality? Is that kind of macro-based? A separate question, Herald, just regarding your apps portfolio. Any update on what you think is the right margin for that to run at going forward? You know, as you listed the sale of assets in the future as a possibility, I'm curious to know if you've had any expressions of interest from, you know, strategic or financial buyers at any point. Thanks. On the first question, the reality is performance marketing advertisers have an approach. They have an LTV to CAC, and they have their own products. If their products improve, they can spend more. If interest rates go down, they can spend more. What's more in our control and what's gonna drive this for our business and our partners are efficiency gains in our core technologies. And that's what I'm talking about with AXON 2. As we all know that these core technologies, these AI-based implementations of technology are continuing to evolve. As they get more efficient, what ends up happening is advertisers have the same goal, but you can drive them more scale. They start growing their business. They're reinvesting more and more into it. It's all arbitrage marketing on the front end. On the back end, the algorithm continues to perform better as the technologies evolve over time. That's a trend we've seen over the last decade. It's accelerating now, and it's something that we're very excited about as we look out into our business into the future. David, thanks for the question. On the app side, as we mentioned, we've been in the process of optimizing that portfolio. We do think in the first half of this coming year or this year, that will start to asymptote out in terms of the trough of revenue, and the margin has gone up, as you've noted. I'd say from there then, you know, it really depends on our opportunity to grow the assets. We're excited that of the 11 studios, I think all 11 of them have opportunities for growth. Many of them have some new games that they're thinking about launching this year. If we have a hit, we'll invest in dollars there, and we'll bring down the margin. You know, right now we're obviously in the very high teens, and that could back into the low teens, something in that range. If we're investing in new games, it really depends, you know, on how robust that return is on those dollars. I'd say, you know, expect the revenue side to still come down a bit in the near term, but it eventually will reach a steady state and then be thinking about how we grow the business from there. I'd say longer run rate is probably a mid or mid-teens type of margin for that business. No, go ahead. Yeah. Just on the M&A side, look, we would take an offer if it was the right price for these assets, but as we said, we've now winnowed it down to these 11 studios that we really like. We're excited to work with them. The market's obviously difficult given cost of capital out there. You know, we're gonna manage these things as if we own them forever. If people do show up at the right price, we'll look to optimize the portfolio, as we said we would along the way. Yeah. The only thing I'd add too is we've removed the distraction of weaker performing studios. We're now really proud of the studios that we have. The leaders of these studios are exceptional talents. They've got great teams underneath them. The pipelines are really strong at these studios. We do look at this business unit now as something that we're excited about going forward. Thank you. Thank you, David. We'll next go to Clark Lampen with BTIG. Clark, please go ahead. Thanks, guys. I had a question maybe first on competitive dynamics across maybe both the sort of gaming but also broader ad market in light of, I guess more recently sort of peer mergers, but also, some of your peers talking about making progress closing the targeting gap relative to sort of pre-IDFA levels. Has that had an impact or has that showed up in sort of developer conversations? Maybe, a follow-up on the AXON update. Are you in a beta stage right now where there are clients actually sort of testing this product for you? Or, you know, could we use the baseball analogy to maybe think about how close we are or what sort of progress you maybe have made, I guess against the form launch, you know, versus last quarter? Thank you. Yeah. Thanks, Clark. I'll start with the second one first. We're not ready to talk about timing. We do expect it to go full scale in 2023. You know, we'd love products that come to market at large scale faster. This product is super complex. Really excited about the prospects. It does take time to develop. We started talking about it a few quarters ago. What we can tell you today is we think it's gonna make an impact in 2023, and it's also not a rollout to customers. It's effectively taking an old engine and upgrading it, so it'll impact the whole business at once when it does go to full scale. On the first question, competition in the ecosystem with M&A or ad algorithms improving. We've been in an advertising sector for 12 years now. I've been doing this for nearly 20 years. Advertising is immensely competitive. There's a lot of players that are trying to get ad dollars from advertisers and trying to build algorithms to help those advertisers. There's never been a shortage of competition. Now, what we do know about our sector is that if algorithms improve, if targeting can get back to pre-IDFA levels, the category was growing almost every single way for it. The IDFA change impaired that growth prospect. All of these marketing companies are really in the business of improving our algorithms. When together, the category gets to a point where it was before, the category itself will get back to growth. We sit at a leadership point in the category with our market-leading monetization solution and our market-leading growth platform with AppDiscovery. We'll stand to benefit greatly if that does happen in the marketplace. Clark, did you have a follow-up? All set. Thank you, guys. Okay. Thanks, Clark. We'll next go to Bernie McTernan with Needham. Bernie, please go ahead. Great. thank you very much for taking the questions. just two for me. First, just a broad question to Adam. Any thoughts on DOJ suing Google, what that means for AppLovin? For Herald, anything special about the $1 billion in cash? Just wanted to follow up on the comments and no buyback in the quarter if that kind of $1 billion cash balance is what a minimum you want to maintain on the balance sheet. Thank you. Look, all we can do is speak about our experience with Google. We're a large cloud customer. They launched their bidding solution onto our platform. I think it was their first large-scale external implementation of bidding. They obviously help monetize publisher inventory with better advertisements than any company we've ever seen before. With us, we're great partners and we look forward t o expanding that partnership into the future. Thanks for the question. With regard to the $1 billion and the buyback, no there's nothing magical about $1 billion. It's just a lot of money, and we're glad to have it on our balance sheet. You know, the reality is we're bullish on our business. As we talked about, you know, we need to be patient. We think we're gonna be stable, you know, for the short term here. We wanna be careful with the cash balance and think about our capital allocation. In the fourth quarter as well as the third quarter, you know, we had different projects going on. The market was changing. The financial market was also, the cost of capital was changing. We feel really good where we are today. We think, having over $1 billion of capital on the balance sheet does help. We are generating a lot of free cash flow, as we highlighted. We think that will continue in the first quarter. We are investing in all the projects internally as we can. We will again, as we always do with our board, think carefully about capital allocation and we still think, you know, our stock is a great place to put money to work. Thank you. Thanks, Bernie. We'll next go to Matthew Cost with Morgan Stanley. Matt, please go ahead. Hi, everybody. Thanks for taking the questions. There is a perception based on some of the third-party data out there about in-app purchase behavior at the level of the mobile games market that maybe things are bottoming out exiting 2022 into 2023. I guess you're pretty well positioned to assess both from your view into the market and from your own games, you know, whether or not that might be true. Maybe more importantly, whether or not, you know, the rate of change of consumer spending is bottoming out. When that does ultimately turn, like we've been through a year or two of really weak space turns around, is that something you expect to flow through to the in-app advertising market pretty quickly, or is there likely to be more of a lag there? Then I have a follow-up. Thank you. We think what drove the growth in in-app purchasing over the last decade had a lot more to do with the marketing technologies and targeting than it did with the economy. Consumers need to discover content they love to go spend in it. The IDFA change happened abruptly. Now it's been a year and a half. We just saw this in some other earnings reports. You've seen the stability in our earnings reports. All of us marketing companies are working on improving our algorithms to be built around what today's era of privacy allows you to do. It takes time to do that. The game developers themselves also are working to create content that's different than what they would've built a year and a half ago. Whale hunting, which is an industry term, Marketing to go buy whales for games that can monetize consumers at immense levels is just not something that's possible anymore in today's identity free universe. Game developers have had to go figure out how to make more casual games. That's also a cycle. The other thing that isn't widely known is that a lot of the top grossing games in the in-app purchasing category come from developed in China. These Chinese development teams have been highly inefficient in the zero COVID state, and that's just reversed out, so you're gonna get back to more efficiency. We think there's a lot of reasons why we're seeing stability, and we think there's also growth that will come in the future. We don't know exactly when. As the marketing platforms improve and as the game developers adapt to this new era. Great. Thank you. You know, using the new disclosure, if I read it correctly, I think that pricing grew at almost double the rate of volume in the quarter. I'm just wondering, is that sort of a recovery off of a period of lower auction and bid density? You know, is that the way you should think of what happened in the quarter? Are you expecting pricing to be a stronger driver than volume over the course of the coming quarter and year as things hopefully recover? Yeah. Thanks, Matt. Yeah, just one correction for you is it wasn't the quarterly metrics there. It was actually the annual metrics from 2022 to over 2021 was the, I guess, the revenue per install was twice the rate of the actual installs. That really has to do a lot with the efficacy of AXON and then the increase in the volume, both from our network side as well as, you know, our ability to bring on more publishers. It was really the combination of the two of them. Those are metrics that we did report in our public financials historically, and we'll continue to talk about those going forward. Great. Thank you. Thank you, Matt. We'll take the next question from Franco Granda with D.A. Davidson. Franco, please go ahead. Good afternoon, everyone. Two for me today. You know, entering last year, you had talked about the expectation to have $10 billion transacted through your platform. Last quarter, you obviously stopped talking about it due to macro, but what was the actual number for 2022? What was the number exiting, or the run rate number exiting the fourth quarter? For the second question, what is the magnitude of investments for the AXON to upgrade? I think the first question you're talking about our maximization platform, how many dollars are flowing through it. We're not disclosing exact. The MAX platform, though, has a ton of reach in industry. We actually recently asked our team to pull top app stores to see how much usage of our platform there was versus the rest of the market. Those apps, top downloaded apps are monetizing using our MAX solution. In terms of usage, there's been exactly what we expected with that platform, market leading. What's changed versus the beginning of last year and today, or end of the year, are CPMs, in particular from brands. As the economy became more difficult throughout the year, the dollars and the density in the ad auction, which is monetized by many companies more than us, has decayed. That would be what threw us off of our projection. The daily active users and the trends to MAX usage are exactly where we thought they'd be. They're performing very well. On the magnitude of the AXON investment, that's all built into our P&L. Our R&D investments, in line with what I mentioned on my talk track around our culture are always gonna be lean. We've got a core group of talent on our engineering team, and we're adding really exceptional people to that team, but we're adding them in the tens, not hundreds or thousands. You don't see a dramatic R&D expense line in our business, yet we do invest heavily into new products that can make big impact. Thank you, Franco. We'll next go to Eric Sheridan with Goldman Sachs. Eric, please go ahead. Can you hear me? Sorry, it just took me a second to unmute there. Maybe two, if I can. One sort of bigger picture question that maybe is a little bit outside the box. You know, obviously you talked earlier in the call about connected TV. You know, how do you think about taking the data engine you've built, and I know obviously the central dynamic is still around mobile gaming, but how do you think about taking the data engine and the platform and thinking about a wider array of canvases and possibly a wider array of SKU and industry verticals from the advertiser side, either through your own organic efforts or maybe through partnership around the broader advertising landscape? That'd be number one. You talked a lot on the call about how we've gotten sort of back to a level of stability, but probably not full return from a demand perspective on the advertising side. Is there a way to frame up the element of how much of your margin structure is somewhat held back or depressed by a lack of return, to sort of pre-IDFA or pre-pandemic normalization levels? In which case a full recovery could possibly be an extra layer of tailwind to the incremental margin structure. Thanks. Thanks, Eric. I'll answer the first one. Herald will take the second. On the first one, to answer the question simply, we're super excited about the potential to extend our marketing engine and the algorithms to other platforms. CTV obviously being the first. There's nothing that restricts us to the games category. Games is obviously the largest part of our AppDiscovery solution. Really the limitation so far has been that our advertisements almost always show up in the games. If you're doing a contextual and behavioral advertisement, that signal is very strong to match up a game advertiser and a game publisher. What connected TV offers a completely different landscape for us. We believe what's missing from that platform is performance marketing, and we can do that well. Our engine, our data is not limited to just gaming. We think the connected TV screen is gonna allow us not only to extend game advertising to that television device, but also to bring other advertising for other companies. Wurl, for instance, works very closely with a lot of high-profile streaming businesses, and advertising on a performance basis for those is a huge initiative and big opportunity. We think as we talk about our connected TV business in a couple of years, we're gonna be talking about a wide breadth of advertiser types. Yeah, on the margin side for our business, yeah, we're at a steady state and stable as we talked about. We are excited by the fact that if we can lift, for example, our biggest business in particular on the AppDiscovery side with an AXON 2.0 implementation at some point, those are very high margin dollars, you know, that flow through to the bottom line, and that would be pretty meaningful increase in EBITDA for the segment and EBITDA for the overall business. What does offset that is there is infrastructure costs that do increase, but obviously at a much slower rate potentially. We do have an incremental headcount that we're hiring, as Adam said, more in the tens and 20s, not 100s, to go after some of these new initiatives that are pretty big, whether it be CTV or our endeavor into a business called Array, which is focused on the OEM carrier space. That could bring down margins to some degree. But, you know, we're comfortable with the margins we run at today, and we think it's more incremental on the upside in particular for our biggest business, to the extent we can get that to grow. Great. Thanks so much. Thank you, Eric. We'll next go to Omar Dessouky with Bank of America. Omar, please go ahead. Hi, thank you for taking my question. One of the large hyper casual publishers that reported earlier this week appeared to be implying that they would be reducing advertising spend. I was wondering, number one, how consequential is the hyper casual market to your ad platform? Number two, are you seeing that as a kind of trend in the fourth quarter and potentially going forward? I have a follow-up on hyper casual. We've got a lot of density of advertisers. No single category makes up a huge part of our business. As you saw in our numbers in Q4, our numbers were really stable. And in Q1 we're guiding to similar numbers to Q4, both for top line and bottom line, implying that our software business is really healthy right now. Yes, certain categories, especially those that are dependent on ads, might perform worse. On the flip side, when you have a super dense auction and you work with tons of advertisers across a lot of different genres, and you've got a good targeting engine, that doesn't create exposure for you and your business. Great. Thanks. The follow-up question is that, you know, according to industry experts, Google has begun sending rejection notices for ad exposures and formats that are not compliant with its new better ads experiences policy. This policy disallows interruptive interstitial ads among other practices. I was wondering whether this is something, you know, the industry is over already or is it something that, you know? Is the solution to this problem within AppLovin's technology stack, or is it at the kind of studio level, you know? Again, have you seen any of the effects of this policy on hyper casual? We actually don't expect any effects from the policy. We didn't see any early on. We don't expect any going forward because the best apps, the ones with a lot of users, they don't tend to show ads out of place. The policy itself was explicitly written to prevent a publisher from showing an ad when a user expected something else. For example, you go click a play the game button and you get a pop-up ad. That's disruptive and Google doesn't want that. The highest quality publishers and the ones that are at scale that we work with or know personally are bigger customers. They can never run ads like that because users usually churn out of those games. It's certainly a policy to clean up the App Store. The Google Play App Store has millions of apps in it. The ones that are large scale apps never engaged in those types of practices. Excellent. Super helpful. Thank you. Thank you, Omar. We'll next go to Stephen Ju with Credit Suisse. Stephen, please go ahead. Okay, thank you. I guess, you spent a lot of time talking about potentially expanded opportunities. You know, I think in the past, we've talked about the advertising opportunity outside the games vertical. You know, I get that this is probably a tough market to go after new business. I was wondering if you know, can comment on where you may be seeing greater traction because, you know, I would love to see the games as a% of, you know, ad revenue de-index over time and other performance-oriented budgets starting to, you know, flow into AppLovin. Thanks. Yeah. Thanks, Stephen Ju. We're looking at expansion there, on the connected TV screen and also with the carrier OEM product. Both of these are advertisements in a placement without context. When you're showing an advertisement in a game app, it's really hard to suggest that you could go, especially as the world goes to more contextual with some data in order to drive a relevant advertisement, but with more of a contextual signal. It's really hard to suggest that it's a good strategy to go outside the gaming sector in that publisher set. We do believe that these other categories of advertising will become very big businesses for us over time, and we also have a gateway into that category with that Adjust team and all of the non-gaming advertisers they work with. If you recall, when we first did that transaction, we talked about the majority of their 4,000+ customers are non-gaming customers. These are the types of customers that are really excited about our connected TV offer. Thank you. Okay. Thanks, Stephen. We'll take our next question from Martin Yang with Oppenheimer. Martin, please go ahead. Hi, good afternoon. Thank you for taking my quest. Can you hear me? Yep, we got you, Martin. Sorry. Thanks. My first question is on new games release environment. You talk about potential growth opportunity from the 11 studios for the new games. Can you maybe comment on how does new game release environment change over time versus pre-pandemic or pre-IDFA? You know, is there any signals that give you confidence that those new games can test well and then release onto market as you expected? Look, with the changes in marketing, the bar has gone way up for new games. Traditionally, you could create iterations of working concepts in the market. Now, developers have to be a lot more innovative to get a new game to grow, and our studios have made the same shift. The ones that we've retained have really strong development teams and are working on games that the ones that are in soft launch, it will get tested longer now. We'll make sure that the data looks strong before we release it to market, that it'll be something that we're confident in. The ones that are developing are no longer developing the way they would have a year and a half ago. They're developing in a new format. We think this is where the whole market's gonna go, is you're gonna take longer term bets that are more innovative. There might be less likelihood of success to new games. You don't expect one out of every two games to hit. Maybe it's one out of every four or five. By creating innovative new concepts, it can expand the market over time. That's where we're investing, and we think we have the teams to do that well. Got it. A follow-up question on games is, can you maybe comment broadly on what genres do you see a higher success rate in this market, and what type of business model within the games? Is it hybrid in-game purchase plus advertising only or in-game purchase? Yeah. We think it's a requirement. All those three factors. We think it's a requirement now for developers to make hybrid, just as you said. If you can't go and market to the whales, well, you've got to monetize the whole audience. Traditionally, the IAP category, 95% of the users were unmonetized, 5% were whales. They funded this $100 billion in growing space. You can't go find those users as successfully as before, so you've got to monetize the 95% to subsidize the cost of acquiring the 5%. That's actually really good for us in our MAX business and our AppDiscovery business because it brings more inventory online, and we're starting to see some of those trends. Thank you. Thank you, Martin. We'll take our last question from Mark Zgutowicz with Benchmark. Mark, go ahead, please. Mark, please check that you've unmuted your equipment. Oh, sorry. Thanks, guys. You know, if we look at your software platform clients and the revenue per that client, over the last four quarters, it's, you know, consistently been down sequentially. I'm just wondering what is the sort of the driver of that, you know, trend line and sort of why that is not, I guess, consequential to your results, going forward, anymore? Thank you. Thanks very much Mark. I'm not sure which metrics you're referring to. Our SPEC metric went up from Q3 to Q4, from 532 accounts to 566 accounts. I'm looking at just quarter-over-quarter growth, just declined sequentially over the last four quarters for both of those metrics. You're talking about pricing, right? It's just the composition is hugely different than it was before because we've added on Wurl, we've added on Adjust, we added on ALX through MoPub. The composition's changed so much that those metrics aren't very comparable anymore to the past, and they're not very predictive of the business going forward. That's why we decided this quarter to remove them. Okay. What about just the software, the platform enterprise client itself, that number? How important is growth in that number going forward in terms of your software platform revenue? Yeah. Again, Mark, that number has gone up and the actual average revenue per software client has remained steady around $1.9 million. The net dollar retention went up over 160%. These are exactly the reason why we're going to move these metrics from our reporting because they're not indicative, nor give you a better sense for, you know, how the software business is performing, which is obviously flat, you know, essentially flat from Q3 to Q4. As Adam said, we're excited and optimistic about the platform. You know, we think the market is reasonably stable. We're investing a lot to improve our market-leading tools in the category. As we're able to launch new capabilities and hopefully the market returns to growth, you know, we should be in a good spot for both top line and bottom line growth in that segment. Okay. Thanks, guys. Appreciate it. Thank you, Mark. That does conclude the question and answer session for this quarter. We thank you all for joining us today. Have a good afternoon. The recording has stopped.