Liftoff Mobile, Inc. (LFTO) Earnings Call Transcript & Summary

Thanks, operator, and good afternoon to all of you. It's a pleasure to have you with us for Liftoff's Third Quarter 2026 Earnings Call. With me on the line today are Jeremy Bondy, who serves as Liftoff's Chief Executive Officer, and Tarek Kutrieh, Liftoff's President and Chief Financial Officer. We issued our financial results for the third quarter of 2026 earlier this afternoon. Jeremy and Tarek will start things off with prepared remarks that walk through our performance and the highlights of the business, and after that we'll open the line so you can ask your questions. To give as many of you as possible an opportunity to ask something, we ask that you limit yourself to a single question and one follow-up. This session, along with the earnings release and the accompanying slide deck, includes mentions of specific non-GAAP financial measures and key operating metrics. You can find definitions and additional details about our key performance indicators and non-GAAP financial measures — including reconciliations of those non-GAAP figures to the most directly comparable GAAP financial measures — in the appendices to the earnings release and slide presentation, available on our Investor Relations site at investors.liftoff.ai. At the outset, let me note that some of what we say today could contain forward-looking statements about how we expect to perform financially and operationally going forward, along with our business strategy and growth plans. Anything we say regarding the future is inherently uncertain. Such statements are based on information and assumptions we have right now, and they involve several substantial risks and uncertainties that might make our actual results turn out differently than what those forward-looking statements anticipate. A number of these uncertainties are laid out in the Risk Factors section of the prospectus contained in our latest Form S-1 registration statement, along with our most recent earnings release, slide presentation, and other documents we file with the SEC periodically. Such forward-looking statements reflect only today's view, so please don't rely on them excessively. Liftoff explicitly disclaims any duty to revise forward-looking statements, unless the law demands it. At this point, I'll hand the call over to Jeremy.

Good afternoon, everyone, and thanks for being here on our third quarter 2026 earnings call, which is also our second call since becoming a public company. Revenue for the third quarter totaled $238 million, up 32% from a year earlier. Adjusted EBITDA reached $145 million, a margin of 61%. Both figures landed comfortably above the top end of the guidance we had given. Q3 marked our 12th quarter in a row of revenue growth. That works out to 3 years of progress, and we feel confident that much more lies ahead of us. The growth was broad-based across many verticals, helped along by steady enhancements to our products and models. Our role is to help customers become more profitable. When that happens, they put more money into working with us. Tarek will walk through the financials, while I'll concentrate on what powered the quarter and why we think our growth will last. On the prior call, I framed Liftoff as an index on the whole app economy. Our Q3 results showed that breadth. Let's begin with market growth. We experienced strength in key app categories, among them social media, entertainment and finance. Stronger results for our customers led them to invest more in our platform, which reinforced our flywheel. On the last call, we mentioned how events such as the FIFA World Cup draw high-intent users into the mobile app ecosystem; during Q3, that momentum extended well beyond the tournament, as advertisers continued spending to engage those users through the NFL season and after. Our platform is designed for moments like these; we help advertisers connect with engaged users, and we help publishers turn that attention into revenue. Self-learning mattered as well. Cortex, our AI-powered prediction engine, becomes smarter with each customer. New customers teach it something different, and those already scaling with us continue to refine it. We also keep serving customers where they earn revenue by extending our predictive capabilities so they are supported throughout the app ecosystem. We help advertisers determine how much to put in when acquiring new users. That calls for understanding how their app generates money and when that revenue arrives. Our direction is to back additional business models and longer time horizons, so customers can base acquisition decisions on a fuller picture of user value. Cortex draws on the data our customers share with us as well as from our own activity on the platform. The more signal it receives, the more precise it becomes. For instance, this quarter we made our model better at estimating what users who generate revenue by seeing in-app mobile ads are worth. For a lot of apps, a significant portion of revenue comes from ads, so this sharpens the way we optimize acquisition across monetization models. We also made improvements to our data training architecture, enabling Cortex to learn from far more data than was previously possible. The goal is to broaden the scope for future gains. Initial results are promising, and we're eager about what we can build on top of this base. The enhancements we've made are just the first steps toward a much larger opportunity we see — one that helps customers across the app economy grow more profitably by making acquisition decisions grounded in their own business economics. We expect these improvements to fuel growth going forward, and there is a great deal more still to come. Our experiment pipeline is expanding quickly. Advertisers on our platform come from every part of the app ecosystem, and they differ in monetization models, payback periods and growth cycles. Cortex tailors itself to each of them, pinpointing the users and attention moments that are most likely to produce measurable results. For the quarter, more than half of our advertiser revenue again came from advertisers outside gaming, which gives Cortex a broader view of the consumer and lets us spot ROI-positive users throughout the app economy. Someone who pays inside a game can also be a valuable customer for a store, a social platform, or a streaming provider. Advertisers are able to bid against each other to reach that very same individual, which gives publishers additional avenues to earn money from the audience already in hand; in one earlier study, we saw roughly 30% improved gaming prediction accuracy after adding nongaming purchase data. What we pick up in a single category sharpens our precision beyond the rest. Our range turns us into an attention index. Anywhere people devote time within apps, advertisers go, and we are present to assist them in reaching those users. Q3 growth arrived from an assortment of categories and customers, and every new one we bring in keeps the flywheel turning. We're set up to grab growth no matter where it shows up. Like I mentioned last quarter, this isn't a zero-sum market. Advertisers who meet their objectives put more money in. A 2025 study we commissioned found that 87% of advertisers say they'd be willing to increase spending with a partner that's beating their KPIs. The total addressable market isn't a fixed number. It's big right now, and it grows as our customers reach their goals and invest more with us. The market clearly has a long runway, too, with space for several scaled, high-growth players. Independent ad tech platforms face a gross serviceable addressable market projected to reach roughly $136 billion by 2030, and that market is hugely undermonetized compared with other channels — it brings in only around $0.07 per user hour, while traditional TV generates about $0.38, a gap of nearly 6x. AI sits at the heart of how we operate. Cortex determines which ad goes to whom and at what price, producing about 1 billion predictions each second. Throughout the industry, AI is bringing down the barrier to building an app. Just in the first half of this year, the number of new apps released in the Apple App Store doubled from the prior year, reaching roughly 560,000. What we're seeing amounts to an app-creation renaissance — greater innovation, a growing number of apps, and expanding categories — and in our view, this is only getting started. Each app that launches becomes yet another business vying for attention, and all of them must attract new users. From Liftoff's standpoint, that translates into stronger demand for user acquisition. AI is likewise changing the starting point for search and discovery, and it resolves more queries without sending anyone to a website. As a result, companies have greater motivation to invest in their own apps and to build direct relationships with customers. We're confident this leaves both the app ecosystem and Liftoff better positioned for durability in an AI-driven world. Since tech now handles necessary chores more efficiently, our attention is on where folks opt to direct the free time they recover. Our view is that those hours will gravitate more and more toward activities people genuinely want—gaming, viewing a creator's content, tracking live sports, or linking up with friends through social platforms. In every one of those, the worth stems from the experience itself. AI is capable of writing your e-mail. The game, the match and the conversation remain yours. That is precisely where our business sits. We follow wherever people devote their time, and we are structured around the advertising formats within those apps—rewarded video inside a game, a native placement within a social feed, an ad break during a stream. We think many additional experiences like these will define the app economy's future. We assist people in discovering them, and we assist the companies behind them in growing. Going through the fourth quarter, we anticipate ongoing contributions from product enhancements rolled out in Q3, with demand rising throughout the app economy, from sports through holiday commerce. Over the longer term, our focus is straightforward: to gain more of our customers' trust; to assist people in finding the coming generation of app experiences; and to keep elevating our standards; we perceive a chance to build a considerably larger business with an obvious route to sustained compounding growth and margin expansion. In my fifth year as CEO, my confidence in the opportunity ahead has never been greater. We’re only at the beginning, and I’m eager to see how much additional progress we can make as a team. With that said, I’ll now turn things over to Tarek.

Thank you, Jeremy, and hello everyone this afternoon. During this call, I'll walk you through the financial results from our third quarter and give you more detail on what we expect for the fourth quarter as well as the entire year. Just to remind you, we help advertisers bring in users who generate positive ROI. When advertising delivers stronger performance, our customers have a reason to increase their spending with us. The solid results we posted in the third quarter clearly demonstrate this dynamic at work. Revenue for the third quarter reached $238 million, representing 32% growth year-over-year and 8% growth quarter-over-quarter. Core advertising revenue, which now accounts for substantially all of total revenue, increased 33% year-over-year. We came in $16 million above the top of our guidance range. The gains came from widespread outperformance in a number of verticals, plus the Cortex advances Jeremy walked through and really solid execution by our team. Of our year-over-year core advertising revenue growth, 55% came from existing customers. The other 45% came from new customers we brought on in the 12 months through September 30, 2026. And as Jeremy mentioned, the newer customers who increased their spending around the World Cup are continuing to spend with us now that the event is over. This fits with how we approach things—leveraging big moments to build deeper client relationships that can grow even more down the road. For the twelve months that ended September 30, 2026, 396 customers each generated more than $100,000 in core advertising revenue, compared with 362 during the same period a year earlier, which shows that more clients keep spending at scale on our platform. Turning to profitability: adjusted EBITDA reached $145 million, a 45% increase over the prior year. Adjusted EBITDA margin was 61%, which is about 1 percentage point wider than Q2 and 5 percentage points wider than Q3 of last year. A big part of the margin improvement came from operating leverage, since our revenue grew efficiently relative to our cost base. That included infrastructure costs falling as a share of revenue, because our machine learning investments are producing revenue growth that ran ahead of the added expense. Adjusted EBITDA came in $17 million above the top of guidance, and margin exceeded the high end of guidance by 3 percentage points. This shows how strongly the extra top line growth in the quarter flowed through compared with what we had expected. Third-quarter net income was $87 million, which gave us diluted earnings per share of $0.47. So these really solid financials demonstrate just how much earning power this business has, and they help us keep establishing our track record as a public company. We continue to produce substantial free cash flow — $93 million in the third quarter, versus $28 million a year earlier. Over the trailing 12 months, free cash flow came to $249 million, compared with $97 million in the same period the year before. Just to remind everyone, ours is a capital-light operation: CapEx was $14 million this quarter, roughly 6% of revenue. The way our business model is set up allows us to keep funding R&D and the infrastructure that growth requires, all while still generating strong free cash flow. We closed out the quarter holding $386 million in cash alongside $1.4 billion in total debt. At quarter end, our net leverage ratio stood at 2.1x net debt to trailing 12-month adjusted EBITDA. That's down from 2.4x at the close of Q2, which reflects both higher cash balances and adjusted EBITDA growth. As the company keeps growing and generating excess free cash flow, we anticipate deleveraging naturally over time. Doing so will bolster our balance sheet and give us flexibility to fund future growth. We finished the third quarter with 169 million common shares outstanding. For the quarter, weighted average basic shares came to 169 million and diluted shares to 183 million. Moving on to our Q4 outlook. For fourth-quarter revenue, we are raising the figure that our earlier full-year guidance had implied, and the new range is $244 million to $249 million — that works out to year-over-year growth of about 26% to 28%. Just like last quarter, this view reflects market growth, ongoing learning at Cortex, and the gains we anticipate from improvements that are already in place. We have not included any extra upside from discrete model advances down the road, because their timing and effect can't be reliably predicted yet. For Q4, we expect adjusted EBITDA between $150 million and $154 million, an adjusted EBITDA margin of about 61% to 62%; that puts our full year 2026 expectations at revenue of $907 million to $912 million, growth of roughly 32% to 33%; and adjusted EBITDA of $547 million to $551 million, an adjusted EBITDA margin of about 60%. As Jeremy mentioned, we see a long runway ahead for strong, continued compounding growth with expanding margins. One last housekeeping item. Starting with the results we report for the first quarter of 2027, we intend to stop reporting core advertising revenue. Income from areas outside our main ad platforms is now negligible, and looking at overall GAAP revenue offers a straightforward view of business performance. Reporting gets simpler with this shift; after it goes into effect, we'll continue sharing our customer metrics, which are derived from total GAAP revenue. In closing, our attention stays on producing improved results for customers and converting that into lasting, profitable expansion along with robust cash generation. We appreciate your time today; at this point, we're open to your questions.

I'd like to return to Slide 8, where you discussed advertisers' willingness to spend as well as the monetization gap compared with other platforms. As you consider your main strategic priorities and the business's building blocks beyond just Q4, over a more medium- to long-term horizon, could you tell us a bit about the opportunity set you see taking shape and how you intend to close that gap in line with your priorities? I'll leave it at that.

Thanks for the questions, Eric. It's a very broad topic when we consider the market ahead of us. We truly view ourselves as an index on the app economy. So the opportunity we're pursuing is the full range of mobile experiences throughout the app ecosystem. Page 8, which you referenced, lays out what we expect to happen with the TAM in the years ahead; and the reality is that the market is drastically undermonetized at $0.07 per user hour compared with television, which, as we point out, monetizes at 6x the density; we see growth coming not only from the gaming category, which has driven growth since the early days of the mobile app ecosystem, but also from the non-gaming categories that we are so deeply positioned to help grow across the ecosystem in the years to come; and as you know, most of our demand is generated from beyond gaming. We see this TAM as quite vast and these days as very, very early. As for our path, we just finished our 12th consecutive quarter of growth. With our Q4 guide, we're forecasting growth in the mid-30s percent year-over-year, which echoes the growth we delivered last year as well. And our second public quarter showing positive EPS. So the pattern we're delivering is one we're excited about, and the opportunity ahead of us is vast, and we believe we're well positioned to capitalize on it.

This is Ken, sitting in for Shweta. My first question is this: what are the puts and takes when it comes to EBITDA margin expansion in 2027?

Our business really lends itself to strong operating leverage, and you're able to see that in the numbers versus the prior year and the prior quarter. That operating leverage genuinely shows revenue growth moving faster than our cost base, and infrastructure costs keep falling as a percentage of revenue. There's truly no structural reason for that dynamic to change. We're quite optimistic that we can keep expanding margins as we grow the top line. So I think for 2027 and beyond, that's something we would expect to continue. I'd also note that our FY '26 guidance reflects a 5 percentage point margin increase versus 2025. That's a solid example of the track record we have when it comes to that margin expansion.

I'll just make a couple of additional points. We aren't giving 2027 guidance today, but even so, there are a few things worth highlighting beyond what Tarek just shared. We feel very, very confident about the business as we head into 2027; our pipeline of experiments is expanding quite quickly, and that supports the margin expansion Tarek was referencing. We've shown that we're able to invest in Cortex, widen those margins and produce more cash at the same time. And that's what we intend to continue doing, with real confidence in the platform, the team and the customer relationships as well as the financial capacity as we think about really approaching becoming a much larger business.

Could you speak a bit more generally about how seasonal your business is as we head into the fourth quarter? I realize model enhancements are usually what drives that sequential growth, but is there anything we ought to keep in mind about normal seasonality, Q3 into Q4? I know you serve a mix of different advertising clients, so I'm just trying to get a handle on the puts and takes behind the strength you're seeing in Q4 compared with Q3?

Yes. Thanks for asking, James. Seasonal moments do show up, but innovation, growth throughout the app economy and consumer taste shifting all the time generally say more about how the business performs. So the seasonal pattern in any single vertical usually isn't a great way to look at — to look at the next quarter or the quarter ahead. Thinking about Q3, obviously we had the World Cup wrapping up. We had the NFL season kicking off. We had back-to-school. But many seasonal moments are — exist in Q4, as we all know, with the holiday season, more NFL, a range of verticals that get activated around live events. So having this business activated across the app economy wherever attention is accruing, it's a durable business that historically hasn't really followed a particularly discernible seasonal pattern. What we'll keep focusing on is product innovation and capturing the growth alongside the app economy, and the calendar will play out alongside our development and innovation. We've grown in each of the last 12 quarters, which is 3 trips around the sun. And we grow because Cortex keeps improving and the app economy is expanding, and those 2 things happen in every season.

Great job this quarter, everyone. About the data architecture change you mentioned — you said it lets you get more insight from your data. Can you say a bit more about whether that mainly helps with things like how much data you can take in, or is it more about making better use of the data assets you already have? And for our own context, how often does a change like this come along, and how out of the ordinary is it? That would be genuinely useful background.

Appreciate the question, Matt, and thanks for the kind words. As you know, we really see ourselves as an attention index for the entire app economy. The goal behind our predictive tools is to connect with users in the places where they're bringing in money. These tools will show up as specific gains in the model's accuracy at forecasting and optimizing ad results, and that's what delivers the durable performance improvements we talked about. They sit on top of the automated learning layer. I mentioned 2 recent examples of improvements, and now I'll walk through them in a bit more depth. For the first, we improved during the quarter how well our model estimates the worth of users who bring in revenue by viewing ads within apps. A lot of apps out there make a meaningful portion of their revenue from advertising. This feature therefore enhances the way we optimize acquisition for customers whose users bring in revenue via various monetization approaches. We've also modified the way Cortex retains information. Cortex now learns from a more extended record of user behavior, while still placing the greatest emphasis on what it observed this week. That matters a great deal, since it can now distinguish a lasting pattern from a genuine change in behavior; as a result, for customers, when behavior changes, their campaigns now adapt far more rapidly, and our model keeps holding on to what it has learned about users that is valuable. Think of it as giving more weight to recent data while still considering information over time—that's what's making our forecasts increasingly precise. The best part is that every enhancement I just mentioned keeps delivering benefits for us long after the quarter in which it launched. And the lineup of experiments coming behind those will keep on growing.

Thanks for that, and could I squeeze in one more question? In your prepared remarks you talked about customers responding to the way search and discovery is shifting its starting point, and it makes a lot of sense to me that people are sort of pushing the search process upstream. Thinking about how that's generating demand for a space with strong attention and viewability, such as mobile in-app, could you speak a bit about those shifting dynamics and how that fits, I suppose, with your existing customer base?

That's a topic I find really exciting, Matt. From our perspective, AI is genuinely speeding up the app economy; there are many angles to it, but the data already reflects it. Begin with what AI is doing for app creation. Objectively, there are more apps now than at any prior point. Building an app has become easier thanks to AI. Roughly 560,000 new releases hit the App Store during the first half of 2026. My understanding is that's around twice the prior year; so the empirical pattern you observe is fragmentation. More apps exist, more options exist, more rivalry for attention exists. And each of those apps requires discovery and requires growth. Meanwhile, as you said, when we consider discovery, AI is elevating the app's importance for businesses since it's altering where search and discovery begins; so businesses are putting more investment into their own experience. Within the app, the customer relationship belongs to them; the data, the repeat visit and the transaction belong to them. There's a lengthy list of consumer companies we've heard report over the past few weeks, including DoorDash, eBay, Spotify, Walmart, and they've expressed some version of this quite recently, and it's growing increasingly prominent that drawing users into your experience is a key direction and initiative. And then there's the consumer, who arrives at apps seeking the experience. The categories we serve are largely about connection and entertainment. The game, the match and the conversation, that's the product itself. Agents can remove the surrounding work and assist people in locating those experiences. People still turn up for the experience itself; and the bulk of our business is built around these particular experiences. And for us, it's genuinely, genuinely exciting that AI is delivering this tailwind to monetization through more experiences and through user acquisition as businesses sharpen their emphasis on drawing users into their environment.

Drew Daniels here, sitting in for Alec. We saw a meaningful rise in how far Google AI overviews penetrated during Q3, and it looks like that's being driven by desktop and mobile web traffic degrading. Do you figure that played a part in the strong results you and your mobile ad network peers posted this quarter?

Thanks for asking, Alec. Like I was saying a moment ago when we were on Matt's second question, there's definitely a shift happening in the funnel, and recent earnings reports have echoed that. As a category we're certainly beneficiaries of the growing emphasis on user acquisition via the app environment, and businesses are getting more and more attuned to the reality that this funnel through Google has changed. Now my expectation is that disruption to the funnel will keep growing and that value will accrue to the app ecosystem, given that the consumer application is an environment where the business itself is able to own the journey. And we're here to help businesses acquire those users who are the right fit for a given product, whether that's across the sports experience or the e-commerce experience, particularly with the holiday season approaching, which is certainly a top of mind set of verticals. It could be travel or finance. We're definitely seeing that trend. It's quite prominent, and I expect it will be ubiquitous.

Jeremy, in the previous quarter I believe you said Cortex had cut the time needed for a campaign to hit optimal performance down to roughly a day. So when you combine that with Gen AI reducing creative friction, does that at all alter the profile of advertisers who are able to scale on your platform? And does it even get you thinking somewhat differently about the longer-term addressable market?

Thanks, Ben, good question. Moving from linear regression to a neural net, which is really what we capture in the shift to Cortex, made available on the market as of Q4 of 2023, was pretty transformational for the business. You’re right that cutting exploration time from what used to be several weeks on average to just one day, as you put it, delivers a transformative advantage for a company such as ours. Then, from that point, as you noted, comes the work of constructing the model and developing its intelligence once we’re operating in this neural-net paradigm. The gains we can realize by building inside Cortex are also quite significant, and we’ve highlighted a few of those recent releases. The thing I'd focus on is being able to learn from less data, while also compressing more data and becoming smarter over time at judging and balancing recent signals against everything we've absorbed. And one advantage of what we shipped last quarter was precisely that — our model's intelligence in balancing all the data we've collected on a given advertiser for practicality against how novel the data arriving on any particular day is. Sure, you could keep pushing optimization below that 24-hour mark, but what really matters for unlocking far more growth in this sector—and for that multiyear catch-up we've discussed and are so enthusiastic about—is getting sharper at identifying which kinds of user qualities actually add value to a particular app. So we'll continue developing Cortex so its capabilities grow more accurate over time. One avenue will definitely be whether we can learn more quickly, but thinking broadly, it's about steadily becoming smarter across the wider range of data and opportunity ahead of us.

When you look around at some of the publicly traded companies in this space, over the past year or so they've seen some truly enormous step-ups in how their ad models perform; and clearly, we're witnessing fairly steady, meaningful gains in Cortex, which came through in the results for this quarter. But as we consider what the coming couple of years of Cortex development will deliver, should we be expecting AXON 3.0 or Vector style big jumps in Cortex's improvement? And also, how should we think about the pace of those gains over time?