Fitch Ratings assigned AppLovin Corporation a first-time Long-Term Issuer Default Rating (IDR) of 'BBB-' with a Stable Outlook on November 4, 2024. This rating reflects AppLovin's leading market position among performance marketing ad-tech companies, particularly those focused on mobile gaming.
The rating is supported by recent enhancements to AppLovin's machine learning and AI-based recommendation engine, AXON 2, which have significantly improved ad performance metrics for customers. These upgrades have led to increased customer spending on AppLovin's software platforms for user acquisition and app monetization, bolstering customer retention and expanding market share.
Fitch also highlighted AppLovin's strong Free Cash Flow (FCF) generation and conservative financial policy, with expectations for EBITDA leverage to remain below 2.0x. The agency projects further margin expansion, reaching the mid-60s, and strong FCF generation with margins in the high 30s, improving to low 40s, driven by the rapid growth within its high-margin software segment.
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