The technology company Iron Source is reacting for the first time to the proposal made by the competitor, AppLovin, to Unity – a proposal that, if realized, would cancel the merger agreement between Iron Source and Unity.
A day after it became known that AppLovin is seeking to acquire Unity, on the condition that it does not complete the Iron Source deal, the Israeli company published today (Wednesday) its reports for the second quarter of 2022, in which it addressed the issue.
According to Iron Source, “Unity received a hostile and non-binding offer for acquisition by AppLovin. We firmly believe that our and Unity’s offer is definitely superior, and will add more value to the shareholders of Unity and Iron Source.”
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Iron Source provides a platform for game and application developers, and among other things gives them advertising tools, service, analytics and the like. Unity, into which Iron Source is supposed to merge, developed a 3D software environment for creating computer games.
The two companies announced last month a merger in a stock transaction, which at the time reflected a value of 4.4 billion dollars for Iron Source (although its value in the transaction varies according to Unity’s share price). As mentioned yesterday (Tuesday), AppLovin, which deals in a similar field to Iron Source, reported on a proposal for a merger with Unity, upon completion of which Unity’s shareholders will own 55% of the merged company, and the balance will be held by AppLovin’s shareholders. In response, the stock fell Iron Sources by 11% to a value of 4.3 billion dollars. The company was merged into a SPAC last year and began trading at a value of 11.1 billion dollars.
The CEO of Unity, John Riccitello, sent a letter to the employees yesterday that was also forwarded to the SEC (Securities Authority of the USA), in which he wrote that he could not provide more information, and that he gave them two points to think about: “There is Great interest in being part of Unity. It says a lot about what you have built here. Second, we continue to focus on customers and partners.”
At the same time, a letter sent by Iron Source CEO Tomer Bar-Zev to the company’s employees was forwarded to the SEC, in which he wrote that AppLovin’s offer to Unity is a one-sided offer. “We see this as evidence of the value that our proposed merger with Unity creates and the strength of the combined company we will create. We believe that this is a defensive and desperate move by AppLovin.”
35% growth in revenue
In the second quarter reports, Iron Source recorded revenues of 183 million dollars, a growth of 35% compared to the corresponding quarter last year. GAAP net profit increased by 27.2% to $12.7 million, and the company posted quarterly EBITDA (earnings excluding interest, tax, depreciation and amortization) of $56 million, an increase of 22%. According to Iron Source data, in the last 12 months it had 446 customers who contributed over $100,000 to revenue, an increase from 309 a year earlier.
In the first half of the year, revenues grew by 46% to $372 million, and net profit increased by 31% to $26.5 million.
During the quarter, a negative flow of $45.3 million was recorded from current operations, and at the end of it, the company had about $387 million in cash.
Due to the merger with Unity, Iron Source does not provide forecasts for the rest of the year. The previous forecast given before the merger was for revenues of 750-780 million dollars and EBITDA of 230-240 million dollars, which means an EBITDA rate of 29.5%-32%.
Tomer Bar-Zev, co-founder and CEO of Iron Source, said: “We are very satisfied with the results of the second quarter. Iron Source is proud to be among the few technology companies that show double-digit growth alongside profitability. We had a strong quarter, with revenues of $183 million, reflecting a 35% growth.”
He added that “during the quarter we signed an agreement to merge with Unity in a stock transaction, a combination that we believe will create a unique and strong platform that will create significant value for customers and shareholders.”