Core Viewpoint - Digital Turbine, Inc. will host a conference call to discuss its fiscal 2025 third quarter financial results and operational progress on February 5th, 2025 [1] Group 1: Conference Call Details - The conference call will be hosted by CEO Bill Stone and CFO Barrett Garrison [1] - Access to the call can be made via a webcast link or by dialing specific phone numbers for the United States and international locations [1] - A playback of the call will be available until February 12th, 2025 [2] Group 2: Company Overview - Digital Turbine is focused on enhancing mobile experiences for consumers and delivering results for mobile operators, advertisers, and publishers [3] - The company's platform simplifies the process for partners to achieve recognition, acquisition, and monetization across various devices [3] - Digital Turbine is headquartered in North America and has a global presence with offices worldwide [3]

Core Insights - TIM Brazil and Digital Turbine have formed a strategic partnership to enhance smartphone experiences for TIM customers through personalized app recommendations and seamless access to apps on Android devices [1][2][4] - This collaboration is expected to significantly expand Digital Turbine's presence in Brazil, allowing it to partner with more mobile carriers and reach tens of millions of users [2][5] Group 1: Partnership Details - The partnership will integrate Digital Turbine's mobile platform into TIM's offerings, providing features like Dynamic Installs and Push Notifications tailored to user preferences [3][4] - Digital Turbine's solutions will be incorporated into hundreds of thousands of Android devices sold by TIM annually, enhancing user engagement and satisfaction [3][6] Group 2: Company Profiles - TIM Brazil is a leading mobile operator with the largest mobile coverage and 4G presence in Brazil, actively implementing 5G technology [7] - Digital Turbine specializes in creating superior mobile experiences and is positioned to drive engagement and monetization for mobile operators, advertisers, and publishers globally [8]

Core Insights - Digital Turbine, Inc (NASDAQ: APPS) experienced a strong market reaction following its earnings report, prompting a deeper analysis of the company's performance and potential [1] Group 1: Company Analysis - The focus is on identifying high-quality companies with a market capitalization of less than $10 billion that can reinvest capital effectively for impressive returns [1] - The ideal companies should demonstrate a long-term capability of capital compounding, with a compound annual growth rate (CAGR) that could potentially yield tenfold returns or more [1] - A conservative investment strategy is primarily adopted, with occasional pursuit of opportunities that present a favorable risk-reward ratio, ensuring overall portfolio stability [1]

Financial Data and Key Metrics - Revenue for Q2 2025 was $119 million, with EBITDA of $15.3 million, showing modest sequential growth [41] - ODS segment revenue reached $82.4 million, a 2% increase from the previous quarter but down 17% year-over-year [42] - AGP business revenue was $37.3 million, with brand revenues up 26% year-over-year and 13% sequentially [45] - Consolidated gross margin was 45%, down from 46% in Q1 and 47% in the same quarter last year [46] - Non-GAAP adjusted net income was $5 million, or $0.05 per share, compared to $13.9 million, or $0.13 per share, in Q2 2024 [49] - Cash balance at the end of the quarter was $32 million, a decrease of $3 million from the previous quarter [50] Business Line Performance - International ODS revenues improved nearly 25% year-over-year, driven by better RPDs and new supply [15] - SingleTap licensing product continued to grow, expanding relationships with multiple partners [16] - AGP business saw double-digit sequential growth, with year-over-year growth exceeding 25% [18] - DTX revenues on non-gaming applications nearly doubled over the past year [22] - SDK bidding now accounts for approximately 70% of total impressions on the exchange, up from 5% a year ago [29] Market Performance - U.S. device sales declined, with Q2 device volumes experiencing the largest year-on-year percentage decline in the past four quarters [43] - International markets showed growth, particularly in the EU and Latin America, driven by partnerships like ONE Store [11][34] - Regulatory developments in the EU, Japan, Korea, India, and the U.S. are expected to create growth opportunities for alternative app distribution [33][36] Strategic Direction and Industry Competition - The company is focusing on growth and efficiency, with key drivers being expanding device footprint, improving product portfolio, and leveraging first-party data [24][25] - A multiyear agreement with a Tier 1 U.S. operator and the ONE Store partnership are expected to be significant growth catalysts [11][26] - The company is transitioning from waterfall bidding to SDK bidding, with investments in AI, machine learning, and first-party data to drive brand revenues [28][30] - Alternative app distribution is a critical growth initiative, with the launch of DT Hub in the U.S. and plans to expand in the EU and Latin America [34][35] Management Commentary on Operating Environment and Future Outlook - The company expects the trend of declining U.S. device sales to reverse in 2025, driven by new AI features on OEM hardware and the migration from two- to three-year leases [17] - Management emphasized the importance of improving execution to capitalize on the enormous market opportunity in front of the company [12] - The company is optimistic about the future, with a focus on strengthening the financial position, driving top-line and free cash flow growth, and achieving full potential [59] Other Important Information - The company has initiated a transformation program aimed at achieving more than $25 million in annual cost reductions, with $15 million already achieved in the current quarter [10][55] - The company plans to reinvest a portion of the savings into strategic growth areas, such as the alternative app business [55] - The company expects revenue for fiscal year 2025 to be in the range of $475 million to $485 million, with non-GAAP adjusted EBITDA between $65 million and $70 million [57] Q&A Session Question: Phone Activation and Performance Advertising - The company is seeing growth from new international partners but is still facing headwinds from declining U.S. device sales and reduced software updates [62] - Performance DSPs are executing their own supply path optimization strategies, which has impacted the company's performance advertising business [64] Question: RPD and Strategic Alternatives - RPDs improved outside the U.S. but declined slightly in the U.S. due to software update issues [67] - The company's focus is on executing its current strategy rather than exploring strategic alternatives [68]

Revenue Performance - Net revenue for the three months ended September 30, 2024, was $118,728, a decrease of 17.1% compared to $143,259 for the same period in 2023[117]. - On Device Solutions revenue decreased by 16.8% to $82,414 for the three months ended September 30, 2024, down from $99,060 in the prior year[118]. - App Growth Platform revenue decreased by 19.1% to $37,346 for the three months ended September 30, 2024, compared to $46,183 in the same period last year[118]. - Net revenue for the three months ended September 30, 2024, decreased by $24,531 or 17.1% compared to the same period in 2023[119]. - ODS revenue for the three months ended September 30, 2024, decreased by $16,646 or 16.8%, with application media revenue declining by approximately $17,211 due to lower new device volumes[120]. - AGP revenue for the three months ended September 30, 2024, decreased by $8,837 or 19.1%, primarily due to weaker demand and the impact of consolidating certain legacy platforms[122]. Cost and Expense Management - Total costs of revenue and operating expenses for the three months ended September 30, 2024, were $132,270, a decrease of 55.3% from $295,876 in the prior year[117]. - Total costs of revenue and operating expenses decreased by $163,606 or 55.3% for the three months ended September 30, 2024, compared to the same period in 2023[125]. - The decrease in total costs of revenue and operating expenses was primarily due to lower revenue share and product development costs, with expectations of increased transformation costs in future quarters[127]. - Product development expenses decreased by $4,604 or 32.8% to $9,433 for the three months ended September 30, 2024, primarily due to lower employee-related costs[135]. - General and administrative expenses increased by $791 or 1.9% to $42,176 for the three months ended September 30, 2024, including severance costs of approximately $300[148]. - General and administrative expenses increased by $3,875 for the six months ended September 30, 2024, compared to the same period in 2023, primarily due to higher employee-related costs of $1,674 and depreciation and amortization of $1,363[151]. Operational Loss and Financial Position - Loss from operations for the three months ended September 30, 2024, was $(13,542), a significant improvement from $(152,617) in the same period last year, representing a decrease of 91.1%[117]. - The company reported a net loss of $(24,986) and $(50,142) for the three and six months ended September 30, 2024, respectively[157]. - Cash provided by (used in) operating activities was $(10,071) for the six months ended September 30, 2024, compared to $28,772 for the same period in 2023, a decrease of $38,843[169]. - The company had unrestricted cash of approximately $32,081 and restricted cash of approximately $684 as of September 30, 2024[157]. - The outstanding secured indebtedness under the Amended and Restated Credit Agreement was $411,000 as of September 30, 2024[162]. Business Transformation and Future Outlook - The company incurred $1,309 in business transformation costs during the six months ended September 30, 2024, as part of a multi-year project to implement a new global ERP system[114]. - The company is targeting over $25,000 in annual cash expense savings through ongoing transformation efforts, including workforce reductions[115]. - The company expects the business transformation program to be substantially implemented by the first quarter of fiscal year 2026[115]. Market Conditions and Challenges - The company continues to monitor macroeconomic conditions and geopolitical developments that may impact its business, including inflation and supply chain disruptions[100]. - The company is facing challenges due to lower-than-expected sales of new mobile devices, which may continue to affect its financial performance[102]. Interest and Taxation - Interest expense, net, increased by $1,388 or 17.7% for the three months ended September 30, 2024, and by $2,248 or 14.8% for the six months ended September 30, 2024, primarily due to an increase in interest rates of 112 basis points[154]. - The effective tax rate for the three and six months ended September 30, 2024, was (5.9)% and (6.7)%, respectively[155].

Financial Performance - Total revenue for the fiscal second quarter of 2025 was $118.7 million, reflecting a 1% increase quarter-over-quarter but a 17% decline year-over-year [2][4] - GAAP net loss for the fiscal second quarter of 2025 was $25.0 million, or ($0.24) per share, compared to a net loss of $161.5 million, or ($1.61) per share in the same quarter of the previous year [2][4] - Non-GAAP adjusted net income for the fiscal second quarter of 2025 was $5.0 million, or $0.05 per share, down from $13.9 million, or $0.13 per share in the fiscal second quarter of 2024 [2][5] - Non-GAAP adjusted EBITDA for the fiscal second quarter of 2025 was $15.3 million, a 6% increase quarter-over-quarter but a 45% decline year-over-year [2][5] Strategic Initiatives - The company has initiated a transformation program aimed at enhancing efficiency and cash flow generation, targeting over $25 million in annual cash expense savings [2][3] - The acquisition of ONE Store International was announced to create a competitive alternative app ecosystem, providing greater value to app developers, consumers, and mobile operators [2] Business Outlook - For fiscal year 2025, the company expects revenue to be between $475 million and $485 million and non-GAAP adjusted EBITDA to be between $65 million and $70 million [6]

Fiscal 2025 Second Quarter Financial Results Overview Digital Turbine reported mixed Q2 FY25 results with sequential revenue growth but year-over-year declines, improved GAAP net loss, and reduced non-GAAP profitability, alongside a new transformation program and acquisition [Recent Financial Highlights](index=1&type=section&id=Recent%20Financial%20Highlights) Digital Turbine reported Q2 FY25 revenue of $118.7 million, a 1% quarter-over-quarter increase but a 17% year-over-year decline, with GAAP net loss significantly improving while Non-GAAP adjusted net income and EBITDA decreased year-over-year, alongside a transformation program and acquisition announcement Q2 FY25 Key Financial Highlights (in millions) | Metric | Q2 FY25 | Q2 FY24 | | :-------------------------------- | :------ | :------ | | Revenue | $118.7 | $143.3 | | GAAP Net Loss | ($25.0) | ($161.5) | | GAAP EPS | ($0.24) | ($1.61) | | Non-GAAP Adjusted Net Income | $5.0 | $13.9 | | Non-GAAP Adjusted EPS | $0.05 | $0.13 | | Non-GAAP Adjusted EBITDA | $15.3 | $27.7 | - Revenue increased **1% quarter-over-quarter** but declined **17% year-over-year**; GAAP net loss improved significantly year-over-year, primarily due to a **$147.2 million** noncash goodwill impairment charge in Q2 FY24; Non-GAAP adjusted net income and EBITDA both declined year-over-year[2](index=2&type=chunk)[3](index=3&type=chunk) - The company initiated a transformation program targeting over **$25.0 million** in annual cash expense savings to drive efficiency and enhance cash flow; Digital Turbine also announced the acquisition of ONE Store International to create an alternative app ecosystem[3](index=3&type=chunk)[4](index=4&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Bill Stone noted a second consecutive quarter of sequential growth with expectations for continued sequential growth and a return to year-over-year growth in the March quarter, despite a reduced full fiscal year 2025 outlook due to legacy business headwinds and an ongoing strategic transformation project targeting over $25 million in annual cost savings - Achieved second consecutive quarter of sequential growth and anticipates continued sequential growth in the December quarter, with a return to year-over-year growth in the March quarter[5](index=5&type=chunk) - Fiscal 2025 outlook reduced due to significant anticipated headwinds in legacy businesses[5](index=5&type=chunk) - Enacted a strategic transformation project to drive greater efficiencies, enhance cash flow generation, and accelerate innovation, expected to yield over **$25 million** in annual cost savings[5](index=5&type=chunk) Detailed Financial Performance The company's Q2 FY25 revenue was $118.7 million with a GAAP net loss of $25.0 million, and it projects FY25 revenue between $475 million and $485 million [Fiscal 2025 Second Quarter Financial Results (GAAP & Non-GAAP)](index=2&type=section&id=Fiscal%202025%20Second%20Quarter%20Financial%20Results%20(GAAP%20%26%20Non-GAAP)) Total revenue for Q2 FY25 was $118.7 million, with On Device Solutions contributing $82.4 million and App Growth Platform $37.3 million before intercompany eliminations, resulting in a GAAP net loss of $25.0 million, a substantial improvement from the prior year's $161.5 million loss, while Non-GAAP adjusted net income was $5.0 million and Non-GAAP adjusted EBITDA was $15.3 million, both showing year-over-year declines Q2 FY25 Detailed Financial Results (in millions) | Metric | Q2 FY25 | Q2 FY24 | | :-------------------------------- | :------ | :------ | | Total Revenue | $118.7 | $143.3 | | On Device Solutions Revenue (pre-elim) | $82.4 | $99.1 | | App Growth Platform Revenue (pre-elim) | $37.3 | $46.2 | | GAAP Net Loss | ($25.0) | ($161.5) | | GAAP EPS | ($0.24) | ($1.61) | | Non-GAAP Adjusted Net Income | $5.0 | $13.9 | | Non-GAAP Adjusted EPS | $0.05 | $0.13 | | Non-GAAP Adjusted EBITDA | $15.3 | $27.7 | [Business Outlook for Fiscal Year 2025](index=2&type=section&id=Business%20Outlook%20for%20Fiscal%20Year%202025) For the full fiscal year 2025, Digital Turbine projects revenue to be between $475 million and $485 million, and Non-GAAP adjusted EBITDA to range from $65 million to $75 million, without providing a GAAP net income outlook due to the difficulty in estimating certain variable expenses FY25 Business Outlook (in millions) | Metric | Range | | :--------------------- | :------------------ | | Revenue | $475 - $485 | | Non-GAAP Adjusted EBITDA | $65 - $75 | - A business outlook for GAAP net income is not provided due to the inability to reasonably estimate changes in stock-based compensation expense and other difficult-to-predict items[7](index=7&type=chunk) Company Information Digital Turbine empowers mobile consumer experiences for telcos and advertisers, and held a conference call to discuss Q2 FY25 results [About Digital Turbine, Inc.](index=2&type=section&id=About%20Digital%20Turbine%2C%20Inc.) Digital Turbine empowers mobile consumer experiences and delivers results for leading telcos, advertisers, and publishers through its platform, which simplifies awareness, acquisition, and monetization, connecting partners with consumers across various devices, with headquarters in North America and global offices - Digital Turbine's core business is empowering superior mobile consumer experiences and results for telcos, advertisers, and publishers[8](index=8&type=chunk) - The company's end-to-end platform simplifies partners' abilities to supercharge awareness, acquisition, and monetization, connecting them with more consumers across more devices[8](index=8&type=chunk) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Digital Turbine hosted a conference call and webcast on November 6, 2024, at 6:00 p.m. ET to discuss Q2 FY25 financial results and operational updates, with replay options available for a week and an online webcast archive accessible for one year - A conference call and webcast were held on **November 6, 2024, at 6:00 p.m. ET** to discuss fiscal 2025 second quarter financial results and operational updates[9](index=9&type=chunk) - A playback was available through **November 13, 2024**, and an online webcast will be archived for one year on the Investor Relations section of Digital Turbine's website[10](index=10&type=chunk) Non-GAAP Financial Measures Digital Turbine uses various non-GAAP measures like adjusted net income, EBITDA, and free cash flow to provide a clearer view of core business performance by excluding specific non-recurring or non-cash items [Use and Definition of Non-GAAP Measures](index=3&type=section&id=Use%20and%20Definition%20of%20Non-GAAP%20Measures) Digital Turbine utilizes non-GAAP measures such as adjusted net income, EPS, EBITDA, free cash flow, and gross profit to complement GAAP financial statements, aiming to provide investors with a clearer understanding of the company's core business performance by excluding certain non-recurring or non-cash expenses, facilitating period-to-period comparisons and trend analysis, while emphasizing that these non-GAAP measures should not be considered in isolation or as a substitute for GAAP results - Non-GAAP measures (adjusted net income/EPS, EBITDA, free cash flow, gross profit) are used to supplement GAAP statements, enhancing understanding of current financial performance and prospects[11](index=11&type=chunk)[12](index=12&type=chunk) - These measures provide meaningful supplemental information by excluding expenses and benefits not indicative of recurring core business operating results, improving comparability and transparency[12](index=12&type=chunk) - Non-GAAP measures are not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared in accordance with GAAP[12](index=12&type=chunk) [Non-GAAP Adjusted Net Income and EPS Definition](index=3&type=section&id=Non-GAAP%20Adjusted%20Net%20Income%20and%20EPS%20Definition) Non-GAAP adjusted net income and EPS are defined as GAAP net income and EPS, respectively, adjusted to exclude specific items including stock-based compensation expense, amortization of intangibles, business transformation costs, transaction-related expenses, severance costs, impairment of goodwill, changes in fair value of contingent considerations, and tax adjustments - Non-GAAP adjusted net income and EPS exclude stock-based compensation, amortization of intangibles, business transformation costs, transaction-related expenses, severance costs, impairment of goodwill, changes in fair value of contingent considerations, and tax adjustments[13](index=13&type=chunk) [Non-GAAP Adjusted EBITDA Definition](index=4&type=section&id=Non-GAAP%20Adjusted%20EBITDA%20Definition) Non-GAAP adjusted EBITDA is calculated by taking GAAP net income and excluding various cash and non-cash expenses, including stock-based compensation, depreciation and amortization, net interest income (expense), net other income (expense), business transformation costs, foreign exchange transaction gains (losses), income tax (benefit) provision, transaction-related expenses, impairment of goodwill, changes in fair value of contingent considerations, and severance costs - Non-GAAP adjusted EBITDA is GAAP net income excluding stock-based compensation, depreciation and amortization, net interest income (expense), net other income (expense), business transformation costs, foreign exchange transaction gains (losses), income tax (benefit) provision, transaction-related expenses, impairment of goodwill, changes in fair value of contingent considerations, and severance costs[14](index=14&type=chunk) [Non-GAAP Free Cash Flow Definition](index=4&type=section&id=Non-GAAP%20Free%20Cash%20Flow%20Definition) Non-GAAP free cash flow is a non-GAAP financial measure derived from net cash provided by operating activities, excluding transaction-related expenses, severance costs, and business transformation costs, and further reduced by capital expenditures - Non-GAAP free cash flow is defined as net cash provided by operating activities, excluding transaction-related expenses, severance costs, and business transformation costs, reduced by capital expenditures[15](index=15&type=chunk) [Non-GAAP Gross Profit Definition](index=4&type=section&id=Non-GAAP%20Gross%20Profit%20Definition) Non-GAAP gross profit is defined as GAAP income from operations adjusted to exclude specific cost categories, including product development costs, sales and marketing costs, general and administrative costs, impairment of goodwill, and depreciation of software - Non-GAAP gross profit is GAAP income from operations adjusted to exclude product development costs, sales and marketing costs, general and administrative costs, impairment of goodwill, and depreciation of software[16](index=16&type=chunk) Forward-Looking Statements and Risk Factors The report contains forward-looking statements subject to various risks, including operational challenges, industry competition, regulatory changes, intellectual property issues, and capital structure limitations [Forward-Looking Statements Disclaimer](index=5&type=section&id=Forward-Looking%20Statements%20Disclaimer) This news release contains forward-looking statements regarding future results, financial position, economic conditions, and product releases, which involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations, and the company explicitly states it does not undertake to update these statements, except as required by law - The news release includes forward-looking statements concerning future results, financial position, economic conditions, and product releases, which are predictions of future performance or events[18](index=18&type=chunk) - These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied[18](index=18&type=chunk) - The Company does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law[25](index=25&type=chunk) [Risks Specific to Digital Turbine's Business](index=5&type=section&id=Risks%20Specific%20to%20Digital%20Turbine%27s%20Business) Digital Turbine faces several business-specific risks, including a history of net losses, limited operating history for its current assets, significant demands on management due to growth, and global operational exposure to added business, political, regulatory, and economic risks, alongside highly variable financial results, reliance on a limited number of wireless carriers and customers, goodwill impairment, economic downturns, software errors, data security failures, IT system disruptions, cyber-attacks, talent retention challenges, acquisition integration issues, and potential litigation - Risks include a history of net losses, limited operating history for current assets, significant demands on management from growth, and global operational risks[19](index=19&type=chunk) - Financial results can vary significantly quarter-to-quarter, with a substantial portion of revenue derived from a limited number of wireless carriers and customers; there is also a risk of goodwill impairment and adverse effects from economic downturns[19](index=19&type=chunk) - Operational risks include software errors, data security failures, IT system failures, network disruptions, and cyber-attacks; challenges in hiring and retaining key talent, maintaining corporate culture, integrating future acquisitions, and potential litigation also pose risks[19](index=19&type=chunk) [Risks Related to the Mobile Advertising Industry](index=6&type=section&id=Risks%20Related%20to%20the%20Mobile%20Advertising%20Industry) The mobile advertising industry is intensely competitive and rapidly evolving, posing risks of market decline or limited growth, with Digital Turbine's business dependent on the continued growth of smartphone usage and its ability to adapt to rapidly changing wireless technologies, facing challenges from device complexity, incompatibilities, potential security vulnerabilities, and shifts in technology platforms by wireless carriers and device manufacturers, alongside external factors like legal liability, public health issues, geopolitical conditions, and U.S.-China relations - The mobile advertising industry is intensely competitive and rapidly evolving, with markets that may decline or experience limited growth[20](index=20&type=chunk) - Business is dependent on the continued growth in smartphone usage and the ability to work with rapidly changing wireless technologies, facing challenges from device complexity and incompatibilities[20](index=20&type=chunk) - Risks include actual or perceived security vulnerabilities, legal liability for mobile and online services, public health issues, geopolitical conditions, and the geopolitical relationship between the U.S. and China[20](index=20&type=chunk) [Industry Regulatory Risks](index=6&type=section&id=Industry%20Regulatory%20Risks) Digital Turbine is subject to rapidly changing and increasingly stringent laws and regulations concerning privacy, data security, and child protection, with its international operations also governed by anti-corruption, import/export, and government sanction laws, and potential government regulation of marketing methods that could restrict the company's ability to adequately advertise and promote its products and services in certain jurisdictions - The company is subject to rapidly changing and increasingly stringent laws, regulations, and contractual requirements related to privacy, data security, and protection of children[21](index=21&type=chunk) - International operations are subject to anti-corruption, import/export, government sanction, and similar laws[21](index=21&type=chunk) - Government regulation of marketing methods could restrict or prevent the ability to adequately advertise and promote content, products, and services[21](index=21&type=chunk) [Risks Related to Intellectual Property and Potential Liability](index=6&type=section&id=Risks%20Related%20to%20Intellectual%20Property%20and%20Potential%20Liability) Digital Turbine faces risks related to intellectual property, including the potential for third parties to improperly use its IP, which could adversely affect its competitive position if not adequately protected, and the company may also be sued for intellectual property infringement, leading to significant damage awards and business disruption, additionally, the platform's use of open-source software and indemnity provisions in various agreements expose the company to substantial liability for IP infringement, malicious software, and other losses - Third parties may obtain and improperly use the company's intellectual property, adversely affecting its competitive position if IP rights are not adequately protected[22](index=22&type=chunk) - The company may be sued for intellectual property infringement, which could prevent or limit IP use, disrupt business, and require significant damage awards[22](index=22&type=chunk) - The platform contains open-source software, and indemnity provisions in agreements potentially expose the company to substantial liability for intellectual property infringement, damages caused by malicious software, and other losses[23](index=23&type=chunk) [Risks Relating to Common Stock and Capital Structure](index=7&type=section&id=Risks%20Relating%20to%20Common%20Stock%20and%20Capital%20Structure) Digital Turbine's financial flexibility is limited by its secured and unsecured indebtedness, requiring significant cash generation for debt service and other obligations, with the market price of its common stock being highly volatile, and shareholders potentially unable to resell shares at or above their purchase price, alongside other risks including the inability to raise capital for growth, lack of securities or industry analyst research coverage, potential material weaknesses in internal control over financial reporting, and anti-takeover provisions in charter documents - Secured and unsecured indebtedness could limit financial flexibility, requiring significant cash generation dependent on factors beyond control[24](index=24&type=chunk) - The market price of common stock is likely to be highly volatile, with a risk of being unable to resell shares at or above the purchase price[24](index=24&type=chunk) - Risks include not being able to raise capital, lack of securities or industry analyst research coverage, potential material weakness in internal control over financial reporting, and anti-takeover provisions in charter documents[24](index=24&type=chunk) Condensed Consolidated Financial Statements Q2 FY25 financial statements show a net loss of $25.0 million, total assets of $844.5 million, and net cash used in operating activities of $8.7 million [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) For the three months ended September 30, 2024, Digital Turbine reported a net loss of $25.0 million on net revenue of $118.7 million, representing a significant improvement from the net loss of $161.5 million in the prior year, which included a substantial goodwill impairment charge, with loss from operations also improving considerably Condensed Consolidated Statements of Operations (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :------ | :------ | | Net Revenue | $118,728 | $143,259 | | Total Costs of Revenue & Operating Expenses | $132,270 | $295,876 | | Loss from Operations | ($13,542) | ($152,617) | | Total Interest & Other Expense, Net | ($10,044) | ($9,578) | | Loss Before Income Taxes | ($23,586) | ($162,195) | | Income Tax Provision (Benefit) | $1,400 | ($713) | | Net Loss | ($24,986) | ($161,482) | | Basic EPS | ($0.24) | ($1.61) | | Diluted EPS | ($0.24) | ($1.61) | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2024, Digital Turbine's total assets were $844.5 million, a decrease from $865.5 million at March 31, 2024, while total liabilities increased to $662.1 million from $651.6 million, primarily driven by an increase in long-term debt, consequently, total stockholders' equity decreased to $182.4 million from $213.9 million Condensed Consolidated Balance Sheets (in thousands) | Metric | Sep 30, 2024 | Mar 31, 2024 | | :-------------------------------- | :----------- | :----------- | | Total Current Assets | $243,889 | $242,341 | | Total Assets | $844,486 | $865,540 | | Total Current Liabilities | $223,631 | $236,024 | | Long-term Debt, net | $407,620 | $383,490 | | Total Liabilities | $662,116 | $651,608 | | Total Stockholders' Equity | $182,370 | $213,932 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended September 30, 2024, net cash used in operating activities was $8.7 million, a shift from $27.5 million provided in the prior year, with net cash used in investing activities at $7.5 million, and net cash provided by financing activities significantly improved to $13.4 million, compared to $20.2 million used in the prior year, resulting in an overall decrease of $3.0 million in cash and cash equivalents during the quarter Condensed Consolidated Statements of Cash Flows (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :------ | :------ | | Net Cash Provided by (Used in) Operating Activities | ($8,719) | $27,454 | | Net Cash Used in Investing Activities | ($7,477) | ($7,001) | | Net Cash Provided by (Used in) Financing Activities | $13,406 | ($20,244) | | Net Change in Cash & Cash Equivalents | ($2,964) | ($420) | | Cash & Cash Equivalents, End of Period | $32,765 | $58,649 | Supplemental Financial Data Supplemental data provides detailed revenue by segment and reconciliations for non-GAAP metrics such as gross profit, adjusted net income, EBITDA, and free cash flow [Revenue by Segment](index=11&type=section&id=Revenue%20by%20Segment) In Q2 FY25, Digital Turbine's On Device Solutions segment generated $82.4 million in revenue, a **17% year-over-year decrease**, while the App Growth Platform segment reported $37.3 million, down **19% year-over-year**, resulting in consolidated revenue for the quarter of $118.7 million, representing a **17% year-over-year decline** Revenue by Segment (Three Months Ended September 30, in thousands) | Segment | Q2 FY25 | Q2 FY24 | % Change | | :------------------ | :------ | :------ | :------- | | On Device Solutions | $82,414 | $99,060 | (17)% | | App Growth Platform | $37,346 | $46,183 | (19)% | | Consolidated | $118,728 | $143,259 | (17)% | [GAAP (Loss) Income from Operations to Non-GAAP Gross Profit Reconciliation](index=11&type=section&id=GAAP%20(Loss)%20Income%20from%20Operations%20to%20Non-GAAP%20Gross%20Profit%20Reconciliation) For Q2 FY25, Non-GAAP gross profit was $54.0 million, resulting in a Non-GAAP gross profit percentage of **45%**, a decrease from **47%** in Q2 FY24, with this reconciliation starting from GAAP loss from operations and adding back product development, sales and marketing, general and administrative costs, depreciation of software, and goodwill impairment Non-GAAP Gross Profit Reconciliation (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :------ | :------ | | (Loss) Income from Operations | ($13,542) | ($152,617) | | Add-back items (total) | $67,547 | $218,149 | | Non-GAAP Gross Profit | $54,005 | $67,032 | | Non-GAAP Gross Profit Percentage | 45% | 47% | [GAAP Net (Loss) Income to Non-GAAP Adjusted Net Income Reconciliation](index=11&type=section&id=GAAP%20Net%20(Loss)%20Income%20to%20Non-GAAP%20Adjusted%20Net%20Income%20Reconciliation) Non-GAAP adjusted net income for Q2 FY25 was $5.0 million, down from $13.9 million in Q2 FY24, with this figure reconciled from GAAP net loss by adding back stock-based compensation, amortization of intangibles, tax adjustments, business transformation costs, severance costs, and goodwill impairment, while adjusting for changes in fair value of contingent consideration Non-GAAP Adjusted Net Income Reconciliation (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :------ | :------ | | Net (Loss) Income | ($24,986) | ($161,482) | | Add-back items (net) | $30,009 | $175,398 | | Non-GAAP Adjusted Net Income | $5,023 | $13,916 | | Non-GAAP Adjusted Net Income per Common Share | $0.05 | $0.13 | [GAAP Net (Loss) Income to Non-GAAP Adjusted EBITDA Reconciliation](index=12&type=section&id=GAAP%20Net%20(Loss)%20Income%20to%20Non-GAAP%20Adjusted%20EBITDA%20Reconciliation) Non-GAAP adjusted EBITDA for Q2 FY25 was $15.3 million, a decrease from $27.7 million in Q2 FY24, with this reconciliation beginning with GAAP net loss and adding back various non-cash and non-recurring expenses, including stock-based compensation, depreciation and amortization, net interest expense, income tax provision, and goodwill impairment Non-GAAP Adjusted EBITDA Reconciliation (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :------ | :------ | | Net (Loss) Income | ($24,986) | ($161,482) | | Add-back items (total) | $40,300 | $189,146 | | Non-GAAP Adjusted EBITDA | $15,314 | $27,664 | [GAAP Cash Flow from Operating Activities to Non-GAAP Free Cash Flow Reconciliation](index=12&type=section&id=GAAP%20Cash%20Flow%20from%20Operating%20Activities%20to%20Non-GAAP%20Free%20Cash%20Flow%20Reconciliation) Non-GAAP free cash flow for Q2 FY25 was a negative $15.7 million, a significant change from a positive $23.9 million in Q2 FY24, derived from net cash used in operating activities by adjusting for capital expenditures, transaction-related expenses, severance costs, and business transformation costs Non-GAAP Free Cash Flow Reconciliation (Three Months Ended September 30, in thousands) | Metric | Q2 FY25 | Q2 FY24 | | :------------------------------------ | :-------- | :-------- | | Net Cash Provided by (Used in) Operating Activities | ($8,719) | $27,454 | | Capital Expenditures | ($7,477) | ($7,001) | | Transaction-related Expenses | — | $79 | | Severance Costs | $268 | $809 | | Business Transformation Costs | $237 | $2,528 | | Non-GAAP Free Cash Flow Provided (Used) by Operations | ($15,691) | $23,869 |

Core Insights - Digital Turbine is acquiring ONE Store International to enhance its app growth solutions and expand into North America, the EU, and LATAM [1][5] - The acquisition is part of a strategic partnership aimed at creating a fairer app ecosystem and empowering app developers [2][6] - ONE Store has over 38 million users and nearly $1 billion in annual transactions, indicating a strong market presence [5][7] Company Overview - Digital Turbine is a leader in mobile growth solutions, providing services to telcos, advertisers, and publishers globally [8] - ONE Store is the second-largest app marketplace in South Korea, backed by major shareholders including SK Square, Naver, and Microsoft [8] Strategic Partnership - The partnership aims to leverage Digital Turbine's device footprint and SingleTap technology for seamless app installations [5][6] - Both companies are committed to developing new technologies and distribution capabilities for iOS devices in the future [6] Market Impact - The acquisition is expected to create a competitive ecosystem beyond traditional app stores, offering more value to developers and consumers [6][7] - The partnership seeks to address high fees and limited choices in the app economy, promoting a more open mobile ecosystem [7]

Core Points - Digital Turbine, Inc. will host a conference call and webcast to discuss its fiscal 2025 second quarter financial results and operating progress on November 6th, 2024 [1] - The call will be led by CEO Bill Stone and CFO Barrett Garrison, and can be accessed via a provided webcast link or by dialing specific phone numbers [1] - A playback of the call will be available until November 13th, 2024, with access details for both domestic and international callers [2] Company Overview - Digital Turbine powers mobile consumer experiences for leading telcos, advertisers, and publishers through its end-to-end platform [3] - The company simplifies partners' ability to enhance awareness, acquisition, and monetization, connecting them with consumers across various devices [3] - Digital Turbine is headquartered in North America and has offices globally [3]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher," contrasting with traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investing can be risky as stocks may lose momentum if future growth does not justify high valuations [1] - Identifying the right entry point for fast-moving stocks is challenging, and traditional momentum parameters may not always be reliable [1] Group 2: Digital Turbine (APPS) Analysis - Digital Turbine (APPS) has shown a four-week price change of 11.4%, indicating growing investor interest [2] - Over the past 12 weeks, APPS stock gained 22.7%, demonstrating its ability to deliver positive returns over a longer timeframe [3] - APPS has a beta of 2.61, suggesting it moves 161% higher than the market in either direction, indicating fast-paced momentum [3] Group 3: Earnings Estimates and Valuation - APPS has a Momentum Score of A and a Zacks Rank 1 (Strong Buy), supported by upward revisions in earnings estimates [4] - The stock is trading at a Price-to-Sales ratio of 0.60, meaning investors pay 60 cents for each dollar of sales, indicating a reasonable valuation [4] - The combination of strong momentum and attractive valuation suggests APPS has significant growth potential [5]