Digital Turbine, Inc. (NASDAQ:APPS) Q4 2022 Results Conference Call May 31, 2022 4:30 PM ET Company Participants Brian Bartholomew - Senior Vice President of Capital Markets Bill Stone - Chief Executive Officer Barrett Garrison - Chief Financial Officer Conference Call Participants Darren Aftahi - ROTH Capital Partners Tim Horan - Oppenheimer Anthony Stoss - Craig-Hallum Operator Good afternoon and welcome to the Digital Turbine Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. All participants ...

Digital Turbine, Inc. (NASDAQ:APPS) Q3 2022 Earnings Conference Call February 8, 2022 4:30 PM ET Company Participants Brian Bartholomew – Senior Vice President of Capital Markets Bill Stone – Chief Executive Officer Barrett Garrison – Chief Financial Officer Conference Call Participants Anthony Stoss – Craig-Hallum Tim Horan – Oppenheimer Darren Aftahi – ROTH Capital Partners Tim Nollen – Macquarie Allen Klee – Maxim Operator Good afternoon, and welcome to the Digital Turbine Fiscal 2022 Third Quarter Finan ...

```markdown [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides a detailed overview of Digital Turbine's unaudited condensed consolidated financial statements and related disclosures [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Digital Turbine, Inc.'s unaudited condensed consolidated financial statements for the quarter ended December 31, 2021, including balance sheets, statements of operations and comprehensive income, cash flows, and stockholders' equity, along with detailed notes on business description, accounting policies, recent acquisitions, segment information, and other financial details [CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets Summary | Metric | Dec 31, 2021 (Unaudited) ($ thousands) | Mar 31, 2021 ($ thousands) | |:----------------------------|:---------------------------------------|:---------------------------| | **Total Assets** | 1,473,480 | 260,369 | | Cash | 115,046 | 30,778 | | Accounts receivable, net | 291,200 | 61,985 | | Intangible assets, net | 446,535 | 53,300 | | Goodwill | 554,975 | 80,176 | | **Total Liabilities** | 987,614 | 115,257 | | Accounts payable | 171,562 | 34,953 | | Acquisition purchase price liabilities | 253,700 | — | | Long-term debt, net | 341,590 | — | | **Total Stockholders' Equity** | 483,692 | 145,112 | - Total assets significantly increased to **$1,473,480 thousand** as of **December 31, 2021**, from **$260,369 thousand** at **March 31, 2021**, primarily driven by substantial increases in intangible assets and goodwill due to recent acquisitions[6](index=6&type=chunk) - Total liabilities also saw a large increase, reaching **$987,614 thousand** from **$115,257 thousand**, mainly due to acquisition purchase price liabilities and long-term debt[6](index=6&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%2F%20%28LOSS%29) This section outlines the company's financial performance, including revenues, expenses, and net income over specific periods Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss) Summary | Metric (in thousands) | Three months ended Dec 31, 2021 | Three months ended Dec 31, 2020 | |:----------------------------------|:--------------------------------|:--------------------------------| | Net revenue | $375,487 | $88,592 | | Total costs of revenue and operating expenses | $346,348 | $68,075 |\n| Income from operations | $29,139 | $20,517 | | Net income attributable to Digital Turbine, Inc. | $7,014 | $14,515 | | Basic EPS | $0.07 | $0.16 | | Diluted EPS | $0.07 | $0.15 | | Metric (in thousands) | Nine months ended Dec 31, 2021 | Nine months ended Dec 31, 2020 | |:----------------------------------|:-------------------------------|:-------------------------------| | Net revenue | $898,307 | $218,497 | | Total costs of revenue and operating expenses | $833,491 | $175,242 | | Income from operations | $64,816 | $43,255 | | Net income attributable to Digital Turbine, Inc. | $15,446 | $24,828 | | Basic EPS | $0.16 | $0.28 | | Diluted EPS | $0.15 | $0.26 | - Net revenue for the three months ended **December 31, 2021**, surged by **323.8%** to **$375,487 thousand** from **$88,592 thousand** in the prior year, primarily due to recent acquisitions and organic growth[7](index=7&type=chunk)[157](index=157&type=chunk) - Despite significant revenue growth, net income attributable to Digital Turbine, Inc. decreased to **$7,014 thousand** for the three months ended **December 31, 2021**, from **$14,515 thousand** in the prior year, largely impacted by increased operating expenses and a substantial charge for changes in fair value of contingent consideration[7](index=7&type=chunk)[179](index=179&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section details the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Summary | Metric (in thousands) | Nine months ended Dec 31, 2021 | Nine months ended Dec 31, 2020 | |:------------------------------------------|:-------------------------------|:-------------------------------| | Net cash provided by operating activities | $43,462 | $48,612 | | Net cash used in investing activities | $(163,884) | $(14,513) | | Net cash provided by / (used in) financing activities | $210,298 | $(11,780) | | Cash and restricted cash, end of period | $115,440 | $43,659 | - Net cash provided by operating activities decreased by **10.6%** to **$43,462 thousand** for the nine months ended **December 31, 2021**, primarily due to higher net working capital and payout of accrued compensation, partially offset by increased non-cash charges[9](index=9&type=chunk)[194](index=194&type=chunk) - Net cash used in investing activities significantly increased by **1,029.2%** to **$163,884 thousand**, driven by **$148,192 thousand** in business acquisitions (AdColony and Fyber) and increased capital expenditures[9](index=9&type=chunk)[195](index=195&type=chunk) - Net cash provided by financing activities dramatically shifted to **$210,298 thousand** from a net use of **$11,780 thousand**, mainly due to **$369,913 thousand** in proceeds from borrowings to fund acquisitions[9](index=9&type=chunk)[196](index=196&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity Summary | Metric (in thousands) | Balance at Mar 31, 2021 | Balance at Dec 31, 2021 | |:----------------------------------|:------------------------|:------------------------| | Common Stock Shares | 89,790,086 | 96,731,227 | | Additional Paid-In Capital | $373,310 | $740,592 | | Accumulated Other Comprehensive Loss | $(903) | $(45,051) | | Accumulated Deficit | $(227,334) | $(211,888) | | Total Stockholders' Equity | $145,112 | $485,866 | - Total stockholders' equity increased significantly from **$145,112 thousand** at **March 31, 2021**, to **$485,866 thousand** at **December 31, 2021**[12](index=12&type=chunk) - The increase was primarily driven by a substantial rise in additional paid-in capital due to shares issued for the acquisition of Fyber (**$359,233 thousand**) and stock-based compensation expense[12](index=12&type=chunk) - Accumulated other comprehensive loss widened from **$(903) thousand** to **$(45,051) thousand**, mainly due to foreign currency translation adjustments[12](index=12&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [1. Description of Business](index=8&type=section&id=1.%20Description%20of%20Business) This section discusses 1. description of business - Digital Turbine, Inc. is a leading end-to-end solution provider for mobile technology companies, offering advertising and monetization solutions through its digital media platform[18](index=18&type=chunk) - The Company's platform facilitates brand discovery, advertising, user acquisition, engagement, operational efficiency, and monetization for mobile carriers, device OEMs, app publishers, developers, brands, and advertising agencies[18](index=18&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section discusses 2. basis of presentation and summary of significant accounting policies - The financial statements are prepared in accordance with **GAAP** and include consolidated accounts of the Company and its subsidiaries, with intercompany balances eliminated[19](index=19&type=chunk) - Management makes significant estimates and assumptions, including for revenue recognition, credit losses, stock-based compensation, fair value of acquired assets and liabilities, and tax valuation allowances[22](index=22&type=chunk) - Effective **April 1, 2021**, the Company reassessed its operating and reportable segments due to the AdColony and Fyber acquisitions, now reporting through three segments: **On Device Media**, **In App Media - AdColony**, and **In App Media - Fyber**[26](index=26&type=chunk) - The Company adopted **ASU** 2019-12 (Income Taxes) as of **April 1, 2021**, which did not have a material impact, and is assessing **ASU** 2020-04 (Reference Rate Reform) for potential future impacts[35](index=35&type=chunk)[34](index=34&type=chunk) [3. Acquisitions](index=11&type=section&id=3.%20Acquisitions) This section discusses 3. acquisitions - On **May 25, 2021**, Digital Turbine acquired **95.1%** of Fyber N.V. for an estimated aggregate consideration of up to **$600,000 thousand**, comprising cash and newly-issued common stock[37](index=37&type=chunk)[38](index=38&type=chunk) - On **April 29, 2021**, the Company acquired AdColony Holding AS for an estimated total consideration of **$400,000 thousand to $425,000 thousand**, including cash and an earn-out payment[53](index=53&type=chunk) - The AdColony earn-out payment was fixed at **$204,500 thousand** on **August 27, 2021**, and was paid on **January 15, 2022**[55](index=55&type=chunk)[123](index=123&type=chunk) - As of **December 31, 2021**, the fair value of the contingent earn-out consideration for Fyber was re-evaluated to **$49,200 thousand**, resulting in an **$18,200 thousand** charge for the quarter[43](index=43&type=chunk) - The acquisitions of Fyber and AdColony resulted in significant goodwill of **$298,911 thousand** and **$199,050 thousand**, respectively, and identifiable intangible assets such as customer relationships, developed technology, and trade names[49](index=49&type=chunk)[50](index=50&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) [4. Segment Information](index=16&type=section&id=4.%20Segment%20Information) This section discusses 4. segment information - Digital Turbine now operates through three segments: **On Device Media (ODM)**, **In App Media – AdColony (IAM-A)**, and **In App Media – Fyber (IAM-F)**, following the AdColony and Fyber acquisitions[68](index=68&type=chunk)[69](index=69&type=chunk) - **ODM** focuses on mobile application and content media distribution to end-users via carriers and OEMs[68](index=68&type=chunk) - **IAM-A** provides an end-to-end platform for brands, agencies, publishers, and app developers to deliver advertising to mobile consumers, with advertisers as primary customers[69](index=69&type=chunk) - **IAM-F** enables mobile app developers and digital publishers to monetize content through advanced ad technologies, with publishers as primary customers[69](index=69&type=chunk) Segment Net Revenues and Profit | Segment (in thousands) | Net Revenues (3 months ended Dec 31, 2021) | Segment Profit (3 months ended Dec 31, 2021) | |:-----------------------|:-------------------------------------------|:---------------------------------------------| | ODM | $133,594 | $47,090 | | IAM-A | $94,335 | $29,987 | | IAM-F | $157,380 | $30,688 | | Consolidated | $375,487 | $107,765 | Geographic Net Revenue | Geographic Area (in thousands) | Net Revenue (3 months ended Dec 31, 2021) | |:-------------------------------|:------------------------------------------| | United States and Canada | $211,703 | | Europe, Middle East, and Africa | $118,864 | | Asia Pacific and China | $50,587 | | Mexico, Central America, and South America | $4,155 | | Consolidated | $375,487 | [5. Goodwill and Intangible Assets](index=19&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) This section discusses 5. goodwill and intangible assets Goodwill and Intangible Assets Summary | Metric (in thousands) | Mar 31, 2021 | Dec 31, 2021 | |:----------------------------------|:-------------|:-------------| | Goodwill | $80,176 | $554,975 | | Intangible Assets, Net | $53,300 | $446,535 | | - Customer relationships | $42,229 | $156,920 | | - Developed technology | $9,385 | $128,298 | | - Trade names | $1,686 | $61,886 | | - Publisher relationships | — | $99,431 | - Goodwill increased significantly from **$80,176 thousand** to **$554,975 thousand**, primarily due to the acquisitions of AdColony (**$199,050 thousand**) and Fyber (**$298,911 thousand**)[77](index=77&type=chunk) - Intangible assets, net, grew from **$53,300 thousand** to **$446,535 thousand**, with new categories like publisher relationships emerging from acquisitions[79](index=79&type=chunk) - Amortization expense for intangible assets increased to **$13,773 thousand** for the three months ended **December 31, 2021**, from **$670 thousand** in the prior year, reflecting the expanded asset base[79](index=79&type=chunk) [6. Accounts Receivable](index=20&type=section&id=6.%20Accounts%20Receivable) This section discusses 6. accounts receivable Accounts Receivable Summary | Metric (in thousands) | Dec 31, 2021 (Unaudited) | Mar 31, 2021 | |:----------------------------------|:-------------------------|:-------------| | Billed Accounts Receivable | $201,814 | $28,636 | | Unbilled Accounts Receivable | $97,028 | $38,837 | | Allowance for Credit Losses | $(7,642) | $(5,488) | | Accounts Receivable, Net | $291,200 | $61,985 | - Net accounts receivable increased significantly to **$291,200 thousand** as of **December 31, 2021**, from **$61,985 thousand** at **March 31, 2021**, reflecting substantial growth in billed and unbilled receivables[82](index=82&type=chunk) - The allowance for credit losses increased to **$7,642 thousand**, with bad debt expense of **$512 thousand** for the three months ended **December 31, 2021**, reflecting management's review of receivable composition and economic trends[82](index=82&type=chunk)[83](index=83&type=chunk) [7. Property and Equipment](index=20&type=section&id=7.%20Property%20and%20Equipment) This section discusses 7. property and equipment Property and Equipment Summary | Metric (in thousands) | Dec 31, 2021 (Unaudited) | Mar 31, 2021 | |:----------------------------------|:-------------------------|:-------------| | Property and Equipment, Gross | $41,876 | $23,632 |\n| Accumulated Depreciation | $(16,014) | $(10,582) | | Property and Equipment, Net | $25,862 | $13,050 | - Net property and equipment increased to **$25,862 thousand** as of **December 31, 2021**, from **$13,050 thousand** at **March 31, 2021**, primarily due to growth in developed software and leasehold improvements[84](index=84&type=chunk) - Depreciation expense for the three months ended **December 31, 2021**, was **$2,192 thousand**, up from **$1,151 thousand** in the prior year, reflecting increased asset base from acquisitions and internal development[84](index=84&type=chunk) [8. Leases](index=20&type=section&id=8.%20Leases) This section discusses 8. leases - The Company has non-cancellable operating lease agreements for offices, with lease periods expiring between **fiscal years 2022 and 2029**, including leases assumed through recent acquisitions[85](index=85&type=chunk) Lease Liabilities Schedule | Fiscal Year (in thousands) | Lease Liabilities (Dec 31, 2021) | |:---------------------------|:---------------------------------|\n| Remainder of FY 2022 | $1,277 | | Fiscal year 2023 | $4,576 | | Fiscal year 2024 | $4,101 | | Fiscal year 2025 | $3,028 | | Fiscal year 2026 | $2,578 | | Thereafter | $3,000 | | Total undiscounted cash flows | $18,560 | | Present value of lease liabilities | $16,934 | - As of **December 31, 2021**, the Company reported right-of-use assets of **$16,657 thousand**, with a weighted-average remaining lease term of **4.76 years** and discount rates ranging from **2.00% to 6.75%**[88](index=88&type=chunk) [9. Debt](index=21&type=section&id=9.%20Debt) This section discusses 9. debt Debt Balances and Interest Rates | Debt Type (in thousands) | Balance (Dec 31, 2021) | Interest Rate (Dec 31, 2021) | |:-------------------------|:-----------------------|:-----------------------------| | Revolver | $345,134 | 1.99% | | Fyber - Bank Leumi | $12,501 | 5.90% | - Total debt, net, increased significantly to **$354,091 thousand** as of **December 31, 2021**, from **$14,557 thousand** at **March 31, 2021**, primarily due to increased borrowings under the New Credit Agreement[91](index=91&type=chunk) - The Company's revolving line of credit was increased to **$525,000 thousand** on **December 29, 2021**, with **$345,134 thousand** drawn as of **December 31, 2021**, and an additional **$179,000 thousand** drawn subsequently to satisfy the AdColony earn-out[96](index=96&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk) - Interest expense, net, increased to **$(2,195) thousand** for the three months ended **December 31, 2021**, from **$(266) thousand** in the prior year, driven by higher borrowings and assumed debt from the Fyber acquisition[104](index=104&type=chunk) [10. Stock-Based Compensation](index=23&type=section&id=10.%20Stock-Based%20Compensation) This section discusses 10. stock-based compensation Stock-Based Compensation Metrics | Metric (in thousands, except shares) | Dec 31, 2021 | Mar 31, 2021 | |:-------------------------------------|:-------------|:-------------| | Options outstanding (shares) | 7,640,928 | 8,146,445 | | Unvested restricted shares outstanding (shares) | 363,729 | 333,544 | | Unrecognized stock-based compensation expense (options) | $24,233 | $6,495 | | Unrecognized stock-based compensation expense (RSUs/RSAs) | $9,448 | $1,463 | - Stock-based compensation expense for the three months ended **December 31, 2021**, was **$5,739 thousand**, a significant increase from **$160 thousand** in the prior year, reflecting increased equity plan activity and headcount[109](index=109&type=chunk) - As of **December 31, 2021**, total unrecognized stock-based compensation expense for options was **$24,233 thousand** (weighted-average recognition period of **2.26 years**) and for RSUs/RSAs was **$9,448 thousand** (weighted-average recognition period of **1.86 years**)[106](index=106&type=chunk)[108](index=108&type=chunk) [11. Earnings per Share](index=24&type=section&id=11.%20Earnings%20per%20Share) This section discusses 11. earnings per share Earnings per Share Summary | Metric (in thousands, except per share) | Three months ended Dec 31, 2021 | Three months ended Dec 31, 2020 | |:----------------------------------------|:--------------------------------|:--------------------------------| | Net income attributable to Digital Turbine, Inc. | $7,014 | $14,515 | | Basic EPS | $0.07 | $0.16 | | Diluted EPS | $0.07 | $0.15 | | Metric (in thousands, except per share) | Nine months ended Dec 31, 2021 | Nine months ended Dec 31, 2020 | |:----------------------------------------|:-------------------------------|:-------------------------------| | Net income attributable to Digital Turbine, Inc. | $15,446 | $24,828 | | Basic EPS | $0.16 | $0.28 | | Diluted EPS | $0.15 | $0.26 | - Basic and diluted EPS for the three months ended **December 31, 2021**, decreased to **$0.07**, down from **$0.16** and **$0.15** respectively in the prior year, despite revenue growth, due to higher expenses and contingent consideration charges[111](index=111&type=chunk) - Weighted-average common shares outstanding (diluted) increased to **103,287 thousand** for the three months ended **December 31, 2021**, from **96,976 thousand** in the prior year, contributing to EPS dilution[111](index=111&type=chunk) [12. Income Taxes](index=24&type=section&id=12.%20Income%20Taxes) This section discusses 12. income taxes Income Tax Provision and Effective Tax Rate | Metric (in thousands) | Three months ended Dec 31, 2021 | Nine months ended Dec 31, 2021 | |:----------------------|:--------------------------------|:-------------------------------| | Income tax provision | $3,718 | $4,799 | | Effective tax rate | 34.5% | 23.7% | - The effective tax rate for the three months ended **December 31, 2021**, was **34.5%**, and for the nine months, it was **23.7%**[112](index=112&type=chunk) - Differences from the statutory rate are primarily due to state income taxes, non-taxable adjustments to earn-outs, and tax deductions for stock compensation[112](index=112&type=chunk) - The Company recorded a net increase of **$35,733 thousand** to deferred tax liabilities in **Q1 FY22** due to the AdColony and Fyber acquisitions, mainly from revaluation of acquired intangible assets[113](index=113&type=chunk) - Acquired Net Operating Losses (NOLs) include **$108,628 thousand** (**U.S. Federal**), **$129,685 thousand** (**State**), **$90,203 thousand** (**Germany**), and **$17,885 thousand** (**Israel**)[115](index=115&type=chunk) [13. Commitments and Contingencies](index=25&type=section&id=13.%20Commitments%20and%20Contingencies) This section discusses 13. commitments and contingencies - The Company has recognized acquisition purchase price liabilities of **$253,700 thousand** as of **December 31, 2021**, comprising **$204,500 thousand** for the AdColony earn-out and **$49,200 thousand** for the Fyber contingent earn-out[119](index=119&type=chunk) - The AdColony earn-out of **$204,500 thousand** was a fixed amount and was paid in full on **January 15, 2022**[117](index=117&type=chunk) - The Fyber contingent earn-out of up to **$50,000 thousand** is based on net revenue targets for the 12-month period ending **March 31, 2022**, with an estimated fair value of **$49,200 thousand** as of **December 31, 2021**[118](index=118&type=chunk) - Minimum purchase commitments under hosting agreements total approximately **$228,800 thousand** over the **next five years**[121](index=121&type=chunk) [14. Subsequent Events](index=26&type=section&id=14.%20Subsequent%20Events) This section discusses 14. subsequent events - Subsequent to **December 31, 2021**, the Company drew an additional **$179,000 thousand** against the New Credit Agreement[122](index=122&type=chunk) - The proceeds from the additional borrowing, combined with available cash-on-hand, were used to satisfy the **$204,500 thousand** AdColony Acquisition earn-out payment on **January 15, 2022**[122](index=122&type=chunk)[123](index=123&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=27&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Digital Turbine's financial condition and operational results for the three and nine months ended December 31, 2021, highlighting the impact of recent acquisitions, segment performance, and liquidity, along with forward-looking statements and risk factors [Company Overview](index=27&type=section&id=Company%20Overview) This section provides a high-level description of Digital Turbine's business model and market position - Digital Turbine is a leading end-to-end solution for mobile technology companies, providing advertising and monetization solutions through its digital media platform[126](index=126&type=chunk) - The platform supports brand discovery, user acquisition, operational efficiency, and monetization for mobile carriers, device OEMs, app publishers, developers, brands, and advertising agencies[126](index=126&type=chunk) [Recent Developments](index=27&type=section&id=Recent%20Developments) This section highlights key business events, including acquisitions, credit facility amendments, and segment reporting changes - The Company amended its Credit Agreement on **April 29, 2021**, establishing a New Credit Agreement with a revolving line of credit up to **$400,000 thousand**, maturing on **April 29, 2026**[128](index=128&type=chunk) - On **December 29, 2021**, the revolving line of credit was further increased by **$125,000 thousand** to a maximum of **$525,000 thousand**[129](index=129&type=chunk) - Digital Turbine completed the acquisitions of **Appreciate (March 2021)**, **AdColony (April 2021)**, and **Fyber (May 2021)**, significantly expanding its mobile advertising solutions and global footprint[134](index=134&type=chunk)[136](index=136&type=chunk)[141](index=141&type=chunk) - The AdColony earn-out payment was fixed at **$204,500 thousand** and paid on **January 15, 2022**, while the Fyber earn-out consideration was re-evaluated to **$49,200 thousand** as of **December 31, 2021**[139](index=139&type=chunk)[140](index=140&type=chunk)[148](index=148&type=chunk) - The Company reassessed its segment reporting, now operating with three segments: **On Device Media (ODM)**, **In App Media – AdColony (IAM-A)**, and **In App Media – Fyber (IAM-F)**, effective **April 1, 2021**[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - The Company continues to monitor the impact of the COVID-19 pandemic on its business, noting no specific event requiring estimate updates as of the reporting date, but acknowledging potential future impacts[155](index=155&type=chunk) [RESULTS OF OPERATIONS](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's revenue and expense trends, detailing performance across segments and cost categories Results of Operations Summary | Metric (in thousands) | Three months ended Dec 31, 2021 | Three months ended Dec 31, 2020 | % of Change | |:----------------------------------|:--------------------------------|:--------------------------------|:------------| | Total net revenues | $375,487 | $88,592 | 323.8% | | On Device Media revenue | $133,594 | $88,592 | 50.8% | | In App Media - AdColony revenue | $94,335 | — | 100.0% | | In App Media - Fyber revenue | $157,380 | — | 100.0% | | Total costs of revenue and operating expenses | $346,348 | $68,075 | 408.8% | | License fees and revenue share | $267,722 | $50,144 | 433.9% | | Product development | $17,720 | $5,202 | 240.6% | | Sales and marketing | $15,857 | $5,219 | 203.8% | | General and administrative | $39,924 | $6,761 | 490.5% | - Total net revenues increased by **323.8%** for the three months ended **December 31, 2021**, to **$375,487 thousand**, driven by organic growth in On Device Media (**50.8%** increase) and contributions from the newly acquired In App Media segments (AdColony and Fyber)[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) - Total costs of revenue and operating expenses increased by **408.8%** to **$346,348 thousand**, primarily due to the acquisitions and associated higher license fees and revenue share (up **433.9%**), which also increased as a percentage of total net revenue[162](index=162&type=chunk)[163](index=163&type=chunk)[166](index=166&type=chunk) - Product development, sales and marketing, and general and administrative expenses all saw significant increases (**240.6%**, **203.8%**, and **490.5%** respectively) due to increased headcount, development activities, and acquisition-related costs[162](index=162&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk)[177](index=177&type=chunk) [Interest and other income / (expense), net](index=34&type=section&id=Interest%20and%20other%20income%20%2F%20%28expense%29%2C%20net) This section details non-operating income and expenses, including interest, foreign exchange, and fair value adjustments Interest and Other Income / (Expense) Summary | Metric (in thousands) | Three months ended Dec 31, 2021 | Three months ended Dec 31, 2020 | % of Change | |:----------------------------------------------|:--------------------------------|:--------------------------------|:------------| | Change in fair value of contingent consideration | $(18,200) | $(4,662) | (290.4)% | | Interest expense, net | $(2,195) | $(266) | (725.2)% | | Foreign exchange transaction gain | $2,122 | — | 100.0% | | Total interest and other income / (expense), net | $(18,359) | $(4,941) | (271.6)% | - Total interest and other income / (expense), net, significantly increased to an expense of **$18,359 thousand** for the three months ended **December 31, 2021**, from **$4,941 thousand** in the prior year[178](index=178&type=chunk) - This increase was primarily driven by a **$18,200 thousand** charge for changes in the fair value of contingent consideration related to the Fyber and AdColony acquisitions, and a substantial increase in interest expense due to new borrowings[179](index=179&type=chunk)[182](index=182&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations - As of **December 31, 2021**, the Company had **$115,440 thousand** in cash and **$179,866 thousand** available under its New Credit Agreement, which was subsequently drawn to fund the AdColony earn-out[183](index=183&type=chunk) - The Company believes it has sufficient cash flow and liquidity to meet business requirements for at least the **next twelve months**[185](index=185&type=chunk) - Acquisition purchase price liabilities totaled **$253,700 thousand**, including **$204,500 thousand** for AdColony and **$49,200 thousand** for Fyber, which the Company plans to pay using cash, borrowings, or future capital financings[186](index=186&type=chunk) - Minimum purchase commitments under hosting agreements amount to approximately **$228,800 thousand** over the **next five years**[187](index=187&type=chunk) - Outstanding secured indebtedness under the New Credit Agreement was **$345,134 thousand**, with covenants including a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio[189](index=189&type=chunk)[190](index=190&type=chunk) Cash Flow Summary | Cash Flow Summary (in thousands) | Nine months ended Dec 31, 2021 | Nine months ended Dec 31, 2020 | % of Change | |:------------------------------------------|:-------------------------------|:-------------------------------|:------------| | Net cash provided by operating activities | $43,462 | $48,612 | (10.6)% | | Net cash used in investing activities | $(163,884) | $(14,513) | (1,029.2)% | | Net cash provided by / (used in) financing activities | $210,298 | $(11,780) | 1,885.2% | [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) This section clarifies the absence of material off-balance sheet arrangements that could impact financial condition - The Company does not have relationships with unconsolidated entities or financial partners for off-balance sheet arrangements, nor does it have undisclosed borrowings or synthetic leases[198](index=198&type=chunk) - Management believes the Company is not materially exposed to financing, liquidity, market, or credit risk from such arrangements[198](index=198&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses key accounting policies and the significant management judgments and estimates involved in financial reporting - The preparation of financial statements relies on management's judgments, estimates, and assumptions, particularly for revenue recognition, credit losses, stock-based compensation, and fair value of acquired assets and liabilities[199](index=199&type=chunk) - These estimates are based on available information, and actual results could differ materially under different assumptions or conditions[22](index=22&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=38&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section outlines Digital Turbine's exposure to market risks, primarily focusing on interest rate fluctuations and foreign currency exchange risks, and their potential impact on the Company's financial performance - The Company is exposed to interest rate fluctuation risk due to variable interest rates on its credit facility; a hypothetical **100 basis point** increase would raise interest expense by **$0.01 million** per year for every **$1 million** of outstanding debt[201](index=201&type=chunk) - Foreign currency exchange risk arises from revenues and operating expenses denominated in non-U.S. dollar currencies, impacting net income through translation gains/losses on cash, receivables, payables, and intercompany balances[202](index=202&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of Digital Turbine's disclosure controls and procedures and changes in internal control over financial reporting, confirming their effectiveness and ongoing integration of recent acquisitions - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of **December 31, 2021**, providing reasonable assurance of timely and accurate financial reporting[205](index=205&type=chunk) - The Company is in the process of integrating the recently acquired Fyber N.V. and AdColony Holdings, AS, into its internal control over financial reporting, with no other material changes identified during the quarter[206](index=206&type=chunk) [PART II - OTHER INFORMATION](index=40&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other required disclosures including legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that there are no legal proceedings to report for the period - The Company has no legal proceedings to disclose[208](index=208&type=chunk) [ITEM 1A. RISK FACTORS](index=40&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section indicates that there are no material changes to the risk factors previously disclosed in the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 - No material changes from the risk factors set forth in the Quarterly Report on Form 10-Q for the fiscal quarter ended **June 30, 2021**, were identified[208](index=208&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=40&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports that there were no unregistered sales of equity securities or use of proceeds to disclose - There were no unregistered sales of equity securities and use of proceeds to report[208](index=208&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=40&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there are no defaults upon senior securities to report - Not applicable; no defaults upon senior securities[208](index=208&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=40&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section indicates that mine safety disclosures are not applicable to the Company - Not applicable; no mine safety disclosures[208](index=208&type=chunk) [ITEM 5. OTHER INFORMATION](index=40&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - No other information to report[208](index=208&type=chunk) [ITEM 6. EXHIBITS](index=41&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including amendments to credit agreements, certifications of executive officers, and XBRL documents - Exhibits include the First Amendment to the Credit Agreement (**10.1**), Certifications of the Principal Executive Officer (**31.1**, **32.1**) and Principal Financial Officer (**31.2**, **32.2**), and various XBRL documents (**101 INS**, **SCH**, **CAL**, **DEF**, **LAB**, **PRE**)[210](index=210&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) This section contains the signatures of Digital Turbine, Inc.'s Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is signed by William Stone, Chief Executive Officer, and Barrett Garrison, Chief Financial Officer, on **February 8, 2022**[212](index=212&type=chunk)[213](index=213&type=chunk) ```

Key Points Company and Industry Overview - **Company**: Digital Turbine, Inc. (NASDAQ:APPS) - **Industry**: Mobile advertising and app monetization - **Focus**: Providing end-to-end solutions for advertisers and app publishers to monetize mobile devices throughout their lifecycle Core Views and Arguments - **Market Growth**: The mobile advertising market is expected to grow from $300 billion to $0.5 trillion over the next few years. - **Tailwinds**: - **Secular Trends**: Increasing app usage and media dollars following consumer attention. - **Regulatory Environment**: Favorable regulations promoting customer choice and competition. - **Growth Drivers**: - **Device Footprint**: Expanding reach to more devices, including Android, iOS, connected TVs, wearables, and automobiles. - **Product Offerings**: Diversifying product portfolio to include app discovery, content discovery, brand advertising, and programmatic advertising. - **Media Partnerships**: Building relationships with advertisers, brands, and app publishers to create a robust ecosystem. Other Important Points - **Acquisitions**: Digital Turbine has acquired companies like Mobile Posse, Appreciate, Fyber, and AdColony to expand its capabilities and reach. - **SingleTap**: A product that simplifies app installation by allowing users to download apps in the background while staying in their current app experience. - **Synergies**: The company is seeing encouraging results from synergies between its acquired companies, including cross-selling opportunities and improved customer relationships. - **Unique Selling Proposition**: - **On-device Access**: Direct access to devices without going through intermediaries. - **Transparency and Independence**: Offering full independence and transparency to publishers. - **One-stop Shop**: Providing a comprehensive suite of solutions for advertisers and app publishers. Financials - **Revenue Growth**: Digital Turbine has experienced significant revenue growth, with a hockey stick chart showing acceleration over the past few years. - **Operating Leverage**: The company's business model provides strong operating leverage, with gross profit growing faster than revenue. - **Revenue Per Device**: Revenue per device has increased by 50% year-over-year, indicating strong demand for the company's solutions.

Summary of Digital Turbine, Inc. Conference Call Company Overview - **Company**: Digital Turbine, Inc. (NASDAQ: APPS) - **Event**: 16th Annual Needham Virtual Technology & Media Conference - **Date**: May 18, 2021 - **Participants**: Bill Stone (CEO), Vincent Kover (Needham & Company) Key Points Industry and Market Dynamics - Digital Turbine operates in the mobile advertising and app distribution industry, capitalizing on the increasing time consumers spend on mobile devices, which is now nearly a month per year [3][4] - The company aims to connect advertisers with consumers through mobile devices, leveraging the shift of media dollars towards mobile platforms [3][4] Business Growth and Financial Performance - Digital Turbine has achieved a **142% year-over-year growth in revenues** and a **300% growth in EBITDA** [6][23] - The company is on a combined run rate of **$1 billion in revenue**, touching **1.5 billion users monthly** and installing software on **60 million devices quarterly** [4][24] - The company emphasizes the importance of profitability alongside growth, highlighting its ability to generate operating leverage [6][23] Acquisitions and Strategic Expansion - Digital Turbine has acquired three companies: Appreciate, Fyber, and AdColony to enhance its advertising technology stack and expand its market reach [8][9][12] - The acquisitions are expected to create revenue synergies and improve overall margins [30] - The integration of these companies is progressing well, with Appreciate already fully integrated and AdColony's back-office functions being merged [12] Product Development and Innovation - The company is focused on expanding its product portfolio, particularly through its **SingleTap technology**, which allows seamless app downloads from ads without leaving the current application [17][20] - SingleTap has rapidly scaled from a seven-figure annual business to a seven-figure weekly business, indicating strong market demand [20] Competitive Advantages - Digital Turbine positions itself as an independent player in the ad tech space, avoiding conflicts of interest that may arise from vertical integration [10][25] - The company has established long-term relationships with key partners like Verizon and Samsung, which provide a competitive moat [11][25] Future Outlook - Digital Turbine aims to continue its aggressive growth trajectory, targeting a larger share of the mobile advertising market, which is projected to be worth hundreds of billions [6][40] - The company is optimistic about its ability to maintain high growth rates without sacrificing profitability, leveraging its unique business model [34][48] Challenges and Considerations - The primary focus for the company is on successful integration of acquired businesses and maintaining a strong corporate culture as it scales [46] - Management acknowledges the need to differentiate itself from competitors and emphasizes the importance of transparency in advertising effectiveness to attract more advertisers [27][48] Financial Guidance - The company plans to report full financial results soon, with expectations of continued strong performance across its business segments [24][48] Additional Insights - Digital Turbine's strategy includes expanding its device footprint and enhancing media relationships to drive network effects and breakout performance [13][14] - The company is not currently focused on new acquisitions but will consider future opportunities once the integration of recent acquisitions is complete [32] This summary encapsulates the key insights and strategic direction of Digital Turbine as discussed during the conference call, highlighting its growth, acquisitions, and competitive positioning in the mobile advertising industry.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-35958 DIGITAL TURBINE, INC. (NASDAQ Capital Market) | --- | --- | --- | |------------------------------------------------------------------------------------- ...

Digital Turbine, Inc. (NASDAQ:APPS) Q1 2021 Earnings Conference Call August 5, 2020 4:30 PM ET Company Participants Brian Bartholomew - SVP, Capital Markets and Strategy Bill Stone - CEO Barrett Garrison - CFO Conference Call Participants Tim Horan - Oppenheimer. Darren Aftahi - Roth Capital Partners Anthony Stoss - Craig-Hallum Austin Moldow - Canaccord Lee Krowl - B. Riley FBR Jon Hickman - Ladenburg Operator Good afternoon. And welcome to the Digital Turbine Conference Call. All participants will be in a ...