Liftoff Mobile Q3 Earnings Call Highlights

Key Points

• Q3 results beat guidance: Revenue rose 32% year over year to $238 million, while adjusted EBITDA climbed 45% to $145 million. Liftoff also reported $87 million in net income and $93 million in free cash flow.
• Growth came from a broad customer base: Core advertising revenue grew 33%, with existing customers contributing 55% of growth and newer customers 45. More than half of advertiser revenue came from outside gaming.
• Q4 outlook points to continued growth: Liftoff forecast revenue of $244 million to $249 million and adjusted EBITDA of $150 million to $154 million. Updates to its Cortex prediction engine are included in the outlook, but gains from future model improvements are not.

Liftoff Mobile NASDAQ: LFTO reported third-quarter revenue of $238 million, up 32% from a year earlier, as advertising demand grew across several app categories and improvements to its prediction engine helped drive spending on its platform.

Revenue exceeded the high end of the company’s guidance by $16 million. Adjusted EBITDA rose 45% to $145 million, exceeding the top of its forecast by $17 million, President and Chief Financial Officer Tarek Kutrieh said on the earnings call. The company recorded net income of $87 million, or $0.47 per diluted share.

Chief Executive Officer Jeremy Bondy said the quarter marked Liftoff’s 12th consecutive quarter of revenue growth. He pointed to strength in social media, entertainment and finance, as well as continued spending by advertisers that had increased their activity around the FIFA World Cup.

Existing and new customers contributed to growth

Core advertising revenue, which accounts for substantially all of Liftoff’s total revenue, increased 33% year over year. Existing customers represented 55% of that growth, while customers acquired in the 12 months through Sept. 30 accounted for the remaining 45%, Kutrieh said.

Liftoff had 396 customers that each generated more than $100,000 in core advertising revenue over the 12-month period, up from 362 a year earlier. More than half of advertiser revenue during the quarter came from customers outside gaming, Bondy said.

Kutrieh said the balance between new and existing customers was similar to the prior quarter and that he expects existing customers to remain the largest source of growth over time.

The company generated $93 million in third-quarter free cash flow, compared with $28 million a year earlier. It ended the quarter with $386 million in cash and $1.4 billion in total debt. Its net leverage ratio fell to 2.1 times trailing 12-month adjusted EBITDA from 2.4 times at the end of the second quarter.

Cortex updates target user value

Bondy said Liftoff improved Cortex, its AI-powered prediction engine, during the quarter to better estimate the value of users who generate revenue by watching ads inside apps. The company also changed the model’s data architecture, allowing it to learn from a longer history of user behavior while giving greater weight to recent activity.

Those changes help the model distinguish enduring patterns from shifts in behavior, Bondy said. The company’s initial results from the architecture update were encouraging, he added, and its pipeline of experiments is expanding.

Asked how much model improvements contributed to quarterly growth, Kutrieh said it was difficult to separate their effects from market growth and Cortex’s ongoing learning. The mix of those drivers can vary from quarter to quarter, he said.

Bondy also argued that artificial intelligence is making app creation easier and changing how consumers discover businesses. He said those trends could increase demand for user acquisition as businesses seek direct relationships with customers through their own apps. AI apps were not yet a significant driver of Liftoff’s third-quarter results, he said.

Fourth-quarter outlook

Liftoff forecast fourth-quarter revenue of $244 million to $249 million, representing approximately 26% to 28% year-over-year growth. It expects adjusted EBITDA of $150 million to $154 million, for a margin of about 61% to 62%.

The outlook implies full-year revenue of $907 million to $912 million and adjusted EBITDA of $547 million to $551 million. Kutrieh said the forecast includes expected benefits from improvements already deployed, but not gains from future model advances whose timing or impact the company cannot reliably predict.

Liftoff did not provide 2027 guidance. Kutrieh said he expects margin expansion to continue as revenue grows faster than the company’s cost base, while Bondy said the business historically has not followed a particularly discernible seasonal pattern.

Beginning with first-quarter 2027 results, Liftoff plans to stop reporting core advertising revenue separately because revenue outside its core advertising platforms is now minimal, Kutrieh said. The company plans to continue reporting customer metrics using total GAAP revenue.

About Liftoff Mobile (NASDAQ:LFTO)

Liftoff Mobile provides marketing and monetization technology for mobile apps. Its platform helps app developers and publishers attract users, promote engagement and generate revenue through in-app advertising. The company's services include user acquisition campaigns, advertising creative tools, audience targeting and optimization, and monetization solutions that connect app publishers with advertisers. Liftoff uses data and machine-learning technology to help clients manage and improve campaign performance across mobile platforms.

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