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Acquisitions and Dispositions
 12 Months Ended
Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Acquisitions and Dispositions Acquisitions and Dispositions
2023 Acquisitions
During the year ended December 31, 2023, the Company recognized total earn-out costs of $52.2 million, related to asset acquisitions closed in 2021 and prior. No other business or asset acquisition was completed during 2023.
2022 Acquisitions
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") software platform 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 is expected to enable 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 assets15,194 
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 
Goodwill264,149 
Property and equipment, net363 
Other assets159 
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. At the end of the performance period, the Company determined that $15.7 million was earned under the plan based on Wurl's financial results, which is expected to be settled in the first quarter of 2024. The plan was accounted for as liability classified share-based compensation awards.
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 $1.03 billion in cash. The acquisition allows 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 
Goodwill632,472 
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".
Asset Acquisitions
During the year ended December 31, 2022, the Company recognized total earn-out costs of $104.2 million, related to asset acquisitions closed in 2021 and prior.
Supplemental Pro Forma Information
The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company, the MoPub Business, Wurl and Adjust (an acquisition completed in 2021) for each of the periods presented as if the MoPub business and Wurl had been acquired as of January 1, 2021 and Adjust had been acquired as of January 1, 2020 (in thousands):
Year Ended December 31,
20222021
Revenue
$2,826,090 $3,036,661 
Net income (loss)
$(184,317)$25,940 
The unaudited supplemental pro forma information above includes the following adjustments to net income (loss) in the appropriate pro forma periods (in thousands):
Year Ended December 31,
20222021
An (increase) in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results$(3,512)$(73,121)
A decrease (increase) in expenses related to the TSA$7,000 $(7,000)
A net increase in revenue related to fair value adjustment$— $1,902 
A decrease (increase) in expenses related to transaction expenses$16,899 $(7,341)
An (increase) in interest cost$— $(2,641)
A decrease in expenses related to transaction bonuses$1,101 $8,899 
An (increase) due to replacement stock awards$(1,221)$(10,145)
An (increase) decrease in income tax provision$(4,654)$20,535 
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 Wurl, the MoPub business, and Adjust.
Asset Dispositions
During the fourth quarter of 2022, the Company completed the sale of certain non-strategic assets for $44.0 million as part of its operational optimization of the Apps reportable segment. As a result of the sale, the Company recorded a total net loss of $74.9 million in cost of revenue in the Company's consolidated statements of operations.