Financial Performance and Results - Net revenue for 2023 was $665.9 million, down 10.9% from $747.6 million in 2022[307] - Net income attributable to Digital Turbine, Inc. was $16.67 million in 2023, a decrease of 53.1% from $35.55 million in 2022[307] - Basic net income per common share was $0.17 in 2023, down from $0.37 in 2022[307] - Diluted net income per common share was $0.16 in 2023, down from $0.35 in 2022[307] - Total costs of revenue and operating expenses decreased to $619.76 million in 2023 from $655.36 million in 2022, a 5.4% reduction[307] - Net income for the year 2023 was $16.87 million, a decrease from $35.57 million in 2022 and $54.88 million in 2021[309] - Net cash provided by operating activities in 2023 was $113.38 million, compared to $84.74 million in 2022 and $62.80 million in 2021[309] - Depreciation and amortization expenses increased to $81.07 million in 2023 from $57.45 million in 2022 and $7.11 million in 2021[309] - Stock-based compensation expense rose to $30.40 million in 2023, up from $19.30 million in 2022 and $5.88 million in 2021[309] - Net cash used in investing activities was $35.07 million in 2023, significantly lower than $172.00 million in 2022 and $37.81 million in 2021[309] - Net cash provided by (used in) financing activities was $(128.29) million in 2023, compared to $185.24 million in 2022 and $(15.22) million in 2021[309] - Common stock issued for the acquisition of Fyber was $50.00 million in 2023, down from $356.69 million in 2022[309] - Total stockholders' equity at March 31, 2023 was $516.22 million, up from $145.11 million in 2021[312] - Foreign currency translation loss was $(2.60) million in 2023, compared to $(38.44) million in 2022 and $(312) thousand in 2021[312] - Additional paid-in capital increased to $745.66 million in 2022 from $360.22 million in 2021, and further to $776.91 million in 2023[312] - The company's balance at March 31, 2023, was $99,458,369, with a net share settlement of equity awards resulting in a withholding tax payment of $6,709[313] Revenue Recognition and Segments - The company's revenue recognition is based on fixed CPM, CPI, or CPA arrangements, with revenue recognized upon ad rendering or end consumer action completion[320] - The company's On Device Solutions (ODS) segment operates under a revenue share model with OEMs and carriers, offering services such as SaaS platform access and hosting[322] - The company's ODS - Application Media segment operates through CPI, CPP, and CPA arrangements, with revenue recognized upon application delivery to end-user devices[323] - The company's ODS - Content Media segment offers programmatic advertising and targeted media content delivery under CPM and page-view arrangements[324] - The company's AGP - Marketplace segment facilitates real-time bidding auctions for ad inventory, with revenue recognized based on impressions and bid prices[327] - The company's AGP - Brand and Performance segment contracts directly with advertisers, recognizing revenue based on CPM or CPI rates[328] Acquisitions and Integration - The company recently completed acquisitions of Appreciate, AdColony, and Fyber, aiming to integrate these businesses to achieve strategic goals in mobile advertising and monetization[54] - Integration challenges with recent acquisitions could lead to unforeseen expenses, delays, or failure to realize anticipated benefits[54][57] - The company plans to pursue acquisitions to expand its business, but these could involve significant costs, integration challenges, and potential dilution of stockholder value[84][87] - The company initiated two significant acquisitions in the fiscal quarter ended June 30, 2021[313] Expenses and Costs - The company expects to increase expenses significantly due to initiatives such as new product development, international and domestic expansion, and infrastructure growth[50] - The company capitalized software development costs of $22,816, $23,784, and $8,859 for fiscal years 2023, 2022, and 2021, respectively[338] - The company's software development costs are amortized over a 3-year useful life[338] - The company made contributions to the 401(k) plan of $1,360, $811, and $558 for the years ended March 31, 2023, 2022, and 2021, respectively[342] Risks and Challenges - The company has a history of net losses and may incur substantial net losses in the future, potentially failing to achieve or sustain profitability[50] - The company faces risks in international operations, including regulatory compliance, cultural differences, and higher costs, which could hinder growth[59] - Revenue and operating results may vary significantly due to factors such as seasonal advertiser spending, product release timing, and economic conditions[62][63] - A significant portion of the company's revenue is derived from a limited number of wireless carriers and customers, making it vulnerable to changes in these relationships[64][67] - Advertising spend levels significantly impact revenue, and a reduction in advertising budgets could negatively affect financial performance[68] - The company may face goodwill impairment, potentially requiring a significant charge to earnings[70] - Global economic downturns, inflation, and geopolitical instability could adversely affect the company's business, operating results, and financial condition[71] - The company relies on complex software for its products and services, which may contain undetected errors, bugs, or vulnerabilities, potentially leading to customer dissatisfaction, delayed product launches, and financial losses[74] - The company handles confidential and personally identifiable information, and any failure to safeguard this data could result in reputational harm, legal liabilities, and financial damages[75][76] - Cybersecurity risks, including data breaches and cyber-attacks, could disrupt operations, damage the company's reputation, and negatively impact revenue and stock price[77][78] - The company faces challenges in hiring and retaining key talent, particularly in high-demand regions with high living costs, which could affect its ability to meet operational and managerial requirements[80][81] - The company is implementing a new ERP system globally, and any delays or issues in this process could disrupt business operations and financial reporting[88][89] - The company operates in a highly competitive mobile advertising industry, facing competition from major players like Google, Facebook, and Amazon, which could impact market share and profitability[93][94] - Rapid technological changes in mobile devices and networks require the company to continuously adapt its products and services, with failure to do so potentially limiting market opportunities[96][97] - The company must navigate evolving regulatory requirements, particularly in data protection, which could increase operational costs and restrict business activities[99] - The company's financial stability could be affected by adverse developments in the financial services industry, including liquidity issues or defaults by financial institutions[89][90] - The company's business depends on the continued growth in usage of smartphones, tablets, and other mobile connected devices, which could be inhibited by factors such as inadequate network infrastructure, security concerns, and changes in network carrier pricing plans[101][102] - Rapid changes in wireless communication technologies may require the company to invest heavily in product development to remain competitive, potentially delaying product releases and increasing costs[103] - The complexity and incompatibility among mobile devices necessitate continuous investment in product development and maintenance, which could lead to increased costs as more advanced devices are introduced[104] - A decline in wireless subscribers' use of mobile devices to access content and applications could adversely affect the company's business growth and future revenue[106] - Security vulnerabilities in mobile devices or wireless networks could lead to reduced user engagement and delayed adoption of new devices, negatively impacting the company's revenue[109] - The company faces potential legal liabilities related to intellectual property and data privacy, which could result in costly legal actions and require changes to its business operations[111] - The COVID-19 pandemic has caused significant disruptions to the global economy, and its ongoing impact on the company's operations and financial performance remains uncertain[113][114] - The Russia-Ukraine conflict has created geopolitical instability and economic disruptions, including inflation and supply chain issues, which could adversely affect the company's business[115] - Trade tensions between the U.S. and China, along with regulatory changes in China, could restrict the company's ability to operate in Chinese markets and impact its business[116][118] - The company is subject to stringent data protection laws, such as the GDPR and UK GDPR, which impose significant compliance requirements and potential fines for breaches[120][121] - The company is subject to the Brazilian General Data Protection Law enacted in September 2020, which imposes similar obligations to GDPR[123] - The California Consumer Privacy Act (CCPA) took effect on January 1, 2020, and became enforceable on July 1, 2020, creating new privacy rights for California consumers and increasing compliance costs[125] - The California Privacy Rights Act (CPRA) was passed on November 3, 2020, and will take substantial effect on January 1, 2023, expanding consumer rights and increasing regulation on online advertising[126] - Virginia, Colorado, and Utah have passed privacy laws taking effect in 2023, with Virginia's law effective January 1, 2023, Colorado's on July 1, 2023, and Utah's on December 31, 2023[127] - The EU-US Privacy Shield Framework was invalidated by the CJEU on July 16, 2020, creating uncertainty for cross-border data transfers from the EEA to the U.S.[129] - The U.S. and EU announced an "agreement in principle" on March 25, 2022, for a new trans-Atlantic data transfer framework, but its implementation and legal standing remain unclear[133] - China's Personal Information Protection Law and Data Security Law, effective November 1, 2021, impose stringent data transfer requirements, including data subject consent[134] - The Children's Online Privacy Protection Act (COPPA) in the U.S. requires parental consent for collecting personal information from children under 13, with increased enforcement in recent years[137] - The company faces potential fines, litigation, and reputational harm due to non-compliance with privacy laws, including GDPR, CCPA, and other global regulations[140] - The company is subject to anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, with risks increasing in countries with high corruption levels[140] - Regulatory changes in marketing and advertising could significantly impact the company's revenue and financial condition[144][145] - Potential health concerns related to mobile phone use may increase government regulation and reduce demand for the company's products[147] - Intellectual property risks include potential infringement claims and the need for costly litigation to protect rights[150][152][153] - Use of open-source software in the company's platform poses risks of security vulnerabilities and potential legal disputes[155][156][159] - The company faces potential litigation risks, including class action lawsuits, which could result in significant costs and management distraction[160][161] - Indemnity provisions in agreements with carriers and customers expose the company to substantial liability for intellectual property infringement and other losses[162] - The company has secured and unsecured indebtedness totaling $413,134 as of March 31, 2023, which could limit financial flexibility and increase vulnerability to economic conditions[164] - Variable interest rates on the company's credit facility expose it to interest rate fluctuations, potentially adversely affecting operations[165] - The company's ability to service debt and fund capital requirements depends on future performance and factors beyond its control[167] - The market price of the company's common stock is highly volatile and subject to wide fluctuations due to various external factors[168][170] - The company does not anticipate paying dividends due to restrictions from secured and unsecured indebtedness, and the Board of Directors does not intend to declare dividends for the foreseeable future[174] - A material weakness in internal control over financial reporting was identified, which could result in material misstatements if not remediated. Management concluded that internal controls were not effective as of March 31, 2022[176][177] - The company is exposed to interest rate fluctuation risk, with a hypothetical 100 basis points increase in market interest rates resulting in an additional $10 interest expense per year for every $1,000 of outstanding debt[283] - Foreign currency exchange risk impacts the company's operations, particularly with transactions in euros, Turkish lira, and British pounds. Fluctuations in exchange rates may affect future revenues, expenses, and cash flows[284] - The company's financial statements for the fiscal years ending March 31, 2023, and 2022 were audited and found to present fairly in accordance with U.S. GAAP[288] - A critical audit matter was identified regarding the goodwill impairment assessment of the App Growth Platform reporting unit, involving subjective and complex judgments in discounted future cash flow assumptions[292][293] - The company has not used derivative financial instruments to manage interest rate or foreign currency exchange risk exposure[283][284] - The company's internal control remediation efforts may divert management's attention from other business concerns, potentially harming operating results and financial condition[180] - The company's bylaws include anti-takeover provisions that could limit stockholder actions and affect the market price of its common stock[182][183] - The company's foreign operations may face increased exposure to currency exchange rate fluctuations as they expand[284] Assets and Liabilities - Total assets decreased to $1.266 billion in 2023 from $1.458 billion in 2022, a decline of 13.2%[305] - Cash and cash equivalents dropped to $75.06 million in 2023 from $126.77 million in 2022, a 40.8% decrease[305] - Accounts receivable decreased to $178.19 million in 2023 from $263.14 million in 2022, a 32.3% reduction[305] - Long-term debt decreased to $410.52 million in 2023 from $520.79 million in 2022, a 21.2% reduction[305] Internal Controls and Audits - The company maintained effective internal control over financial reporting as of March 31, 2023[299] - A material weakness in internal control over financial reporting was identified, which could result in material misstatements if not remediated. Management concluded that internal controls were not effective as of March 31, 2022[176][177] - The company's internal control remediation efforts may divert management's attention from other business concerns, potentially harming operating results and financial condition[180] Stock and Dividends - The market price of the company's common stock is highly volatile and subject to wide fluctuations due to various external factors[168][170] - The company does not anticipate paying dividends due to restrictions from secured and unsecured indebtedness, and the Board of Directors does not intend to declare dividends for the foreseeable future[174] - The company's bylaws include anti-takeover provisions that could limit stockholder actions and affect the market price of its common stock[182][183] Taxation and Accounting - The company accounts for income taxes using FASB ASC 740-10, recognizing deferred tax assets and liabilities based on expected future tax consequences[343] - The company evaluates its ability to realize deferred tax assets using all available evidence and determines if a valuation allowance is needed[344] - The company reported foreign currency translation adjustment losses of $2,386, $39,395, and $312 for the years ended March 31, 2023, 2022, and 2021, respectively[345] Technology and Development - The company relies on complex software for its products and services, which may contain undetected errors, bugs, or vulnerabilities, potentially leading to customer dissatisfaction, delayed product launches, and financial losses[74] - The company uses the Black-Scholes option pricing model to value stock options, involving subjective assumptions like expected volatility, interest rates, dividend rates, and option's expected life[341] Regulatory Compliance - The company is subject to stringent data protection laws, such as the GDPR and UK GDPR, which impose significant compliance requirements and potential fines for breaches[120][121] - The company is subject to the Brazilian General Data Protection Law enacted in September 2020, which imposes similar obligations to GDPR[123] - The California Consumer Privacy Act (CCPA) took effect on January 1, 2020, and became enforceable on July 1, 2020, creating new privacy rights for California consumers and increasing compliance costs[125] - The California Privacy Rights Act (CPRA) was passed on November 3, 2020, and will take substantial effect on January 1, 2023, expanding consumer rights and increasing regulation on online advertising[126] - Virginia, Colorado, and Utah have passed privacy laws taking effect in 2023, with Virginia's law effective January 1, 2023, Colorado's on July 1, 2023, and Utah's on December 31, 2023[127] - The EU-US Privacy Shield Framework was invalidated by the CJEU on July 16, 2020, creating uncertainty for cross-border data transfers from the EEA to the U.S.[129] - The U.S. and EU announced an "agreement in principle" on March 25, 2022, for a new trans-Atlantic data transfer framework, but its implementation and legal standing remain unclear[133] - China's Personal Information Protection Law and Data Security Law, effective November 1, 2021, impose stringent data transfer requirements, including data subject consent[134] - The Children's Online Privacy Protection Act (COPPA) in the U.S. requires parental consent for collecting personal information from children under 13, with increased enforcement in recent years[137] - The company faces potential fines, litigation, and reputational harm due to non-compliance with privacy laws, including GDPR, CCPA, and other global regulations[140] - The company is subject to anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, with risks increasing in countries with high corruption levels[140] - Regulatory changes in marketing and advertising could significantly impact the company's revenue and financial condition[144][145] - Potential health concerns related to mobile phone use may increase government regulation and reduce demand for the company's products[147]

Digital Turbine, Inc. (NASDAQ:APPS) Q4 2023 Earnings Conference Call May 24, 2023 4:30 PM ET Corporate Participants Brian Bartholomew - Senior Vice President, Capital Markets and Strategy Bill Stone - Chief Executive Officer Barrett Garrison - Chief Financial Officer Conference Call Participants Darren Aftahi - ROTH MKM Omar Dessouky - Bank of America Anthony Stoss - Craig-Hallum Dan Day - B. Riley Operator Good afternoon, and welcome to the Digital Turbine Fourth Quarter and Fiscal Year 2023 Financial Resu ...

Summary of Digital Turbine, Inc. (NASDAQ:APPS) 35th Annual Roth Conference Company Overview - **Company**: Digital Turbine, Inc. (NASDAQ:APPS) - **Industry**: Advertising Technology (Ad Tech) Key Points and Arguments Industry Insights - The Mobile World Congress was encouraging, indicating a strong demand for new revenue streams from operators, OEMs, and publishers post-COVID [3][5] - The digital advertising industry is substantial, with hundreds of billions of dollars at stake, and is expected to rebound as advertisers reassess their spending [8][10] Business Model and Strategy - Digital Turbine's software is pre-installed on devices, creating a competitive advantage as it limits competition for device space [5] - Recent partnerships include a high eight-figure deal with TIMU and a new relationship with Walmart, indicating a resurgence in demand [5][8] - The company is diversifying its revenue sources by expanding relationships with traditional brands like Starbucks and Procter & Gamble, reducing reliance on pandemic-driven sectors [10] Market Performance - The company experienced a decline in effective cost per mille (eCPMs) by 10% to 15% in the December quarter, reflecting broader industry trends [8] - March performance is showing improvement compared to February, indicating a potential recovery [8] Global Market Dynamics - Strong device supply is noted in Latin America, while demand in the U.S. faced challenges during the December quarter [12] - The S23 launch has positively impacted the U.S. market, with strong demand reported in APAC and Europe [12] Strategic Partnerships - The relationship with Samsung is viewed positively, with plans to enhance collaboration on single tap technology [15] - Digital Turbine is focusing on the postpay market in the U.S., which presents a larger opportunity compared to the prepaid market [17] Product Development - Single tap technology is positioned as a key growth driver, with plans to license it to other providers, including Amazon and Epic Games [19][24] - The app install market is estimated at $100 billion, with significant opportunities for monetization through licensing [24][31] Future Outlook - The company is investing in alternative app stores and payment solutions, anticipating regulatory changes that could disrupt the current app store model [29][30] - Digital Turbine aims to monetize through app installations, ad tech assets, and payment solutions, presenting a multi-faceted growth strategy [31] Financial Management - The company has a strong operating leverage model, with plans to continue paying down debt while exploring shareholder-friendly strategies [38][40] - The focus remains on executing day-to-day operations while also pursuing larger strategic opportunities [40] M&A Strategy - Digital Turbine is open to acquisitions that can enhance growth and scale, with lessons learned from past integration challenges during COVID [35][36] Additional Important Insights - The relationship with Google is strong, with Google acting as a channel partner for licensing [33] - The company is cautious about introducing new metrics to avoid confusing investors, emphasizing the importance of clear communication [26][27] This summary encapsulates the key insights and strategic directions discussed during the conference, highlighting Digital Turbine's position in the ad tech industry and its future growth potential.

Financial Data and Key Metrics Changes - Revenue for Q3 2023 was $162.3 million, down 25% year-over-year, impacted by a deceleration in advertising spending and declines in U.S. device sales [26][28] - Non-GAAP gross profit margin increased to 50% from 46% year-over-year, with non-GAAP gross profit of $81.2 million, down 18% year-over-year [27][28] - Adjusted EBITDA was $40 million, a decrease of 30% year-over-year, with an EBITDA margin of 25% compared to 26% in the prior year [28][29] - Non-GAAP adjusted net income was $30.2 million or $0.29 per share, down from $50.9 million or $0.49 per share in Q3 2022 [29] Business Line Data and Key Metrics Changes - The on-device business saw a 10% year-over-year increase in overall devices, but U.S. device sales were the lowest since fiscal 2019, impacting quarterly results [15][26] - Revenue per device (RPD) in the U.S. was over $5, up year-over-year, while international RPD did not see the same growth due to a higher mix of devices in developing markets [15][16] - The app growth platform (AGP) business was flat quarter-over-quarter but down 24% year-over-year, primarily due to macro declines in ad rates and consolidation of AdColony business lines [18] Market Data and Key Metrics Changes - Global device shipments declined by 12% in 2022, the lowest level since 2013, with U.S. shipments at their lowest since 2019 [10][15] - ECPMs across all ad formats and geographies declined between 10% to 20% year-over-year, consistent with industry trends [19] Company Strategy and Development Direction - The company is focusing on capital allocation towards future projects, emphasizing growth in the brand business and SingleTap while deemphasizing legacy performance and reseller ad tech businesses [14] - The launch of alternative app stores is seen as a strategic growth opportunity, with plans to leverage on-device technology and partnerships to create new revenue streams [20][22] - The company aims to build a Shopify for app stores, addressing market pain points and enhancing app publisher experiences [21][22] Management's Comments on Operating Environment and Future Outlook - Management views the current macroeconomic challenges as temporary, with expectations for a rebound in digital ad spending as advertisers adjust their strategies [8][12] - The company is committed to running a lean and profitable business, with cash operating expenses decreasing year-over-year [30] - The outlook for fiscal 2023 revenue is projected to be between $660 million and $670 million, with adjusted EBITDA between $165 million and $170 million [31] Other Important Information - The company has extended contracts with AT&T and Verizon for three and four years, respectively, which is expected to provide stability [13] - The company is experiencing headwinds from prepaid content media products, which are not prioritized over other growth initiatives [54] Q&A Session Summary Question: Visibility on device numbers and assumptions for the March quarter - Management indicated that they had visibility on device forecasts from partners, but the holiday season did not meet expectations, leading to a haircut in assumptions for the current quarter [34][35] Question: Pipeline for SingleTap licensing - Management noted strong product market fit for SingleTap, with operational challenges being the main hurdle rather than interest from potential partners [36][37] Question: Impact of pricing and volume on revenue decline - Management clarified that the decline was primarily driven by pricing on the ad tech side, while volumes remained relatively flat [47][48] Question: Update on prepaid content media partnerships - Management acknowledged the need for improvement in content media partnerships but emphasized focus on other growth areas [52][54] Question: Challenges from SDK runtime changes - Management stated that they are not currently facing headwinds from SDK changes, focusing instead on ad tech enhancements [56]

[Part I - Financial Information](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This part presents the company's unaudited financial statements, management's analysis, and market risk disclosures [Item 1. Consolidated Financial Statements](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Presents the unaudited condensed consolidated financial statements for the period ended December 31, 2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Balance Sheet Highlights | Balance Sheet Highlights (in thousands) | Dec 31, 2022 (Unaudited) | March 31, 2022 | | :--- | :--- | :--- | | Cash | $79,307 | $126,768 | | Accounts receivable, net | $231,001 | $263,139 | | Goodwill | $560,340 | $559,792 | | Intangible assets, net | $395,181 | $440,589 | | **Total Assets** | **$1,352,675** | **$1,458,509** | | Accounts payable | $154,320 | $167,858 | | Long-term debt, net | $422,310 | $520,785 | | **Total Liabilities** | **$745,048** | **$942,294** | | **Total Stockholders' Equity** | **$605,649** | **$514,571** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%2F%20(LOSS)) Income Statement | Income Statement (in thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Nine Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $162,310 | $216,818 | $525,802 | $563,461 | | Income from operations | $9,797 | $29,139 | $55,314 | $64,816 | | Net income | $4,062 | $7,062 | $30,723 | $15,428 | | Diluted EPS | $0.04 | $0.07 | $0.30 | $0.15 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flows | Cash Flows (in thousands) | Nine Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $97,514 | $43,462 | | Net cash used in investing activities | ($25,306) | ($163,884) | | Net cash provided by / (used in) financing activities | ($116,701) | $210,298 | | Net change in cash | ($47,301) | $84,322 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Details significant accounting policies, recent acquisitions, segment restructuring, and legal contingencies - On November 1, 2022, the Company acquired In App Video Services UK LTD for an estimated total consideration between **$2.25 million and $5.5 million**[30](index=30&type=chunk)[31](index=31&type=chunk) - Effective April 1, 2022, the company restructured its segments into **'On Device Solutions' (ODS)** and a single **'App Growth Platform' (AGP)** to drive efficiencies[53](index=53&type=chunk)[54](index=54&type=chunk) - As of December 31, 2022, the company had **$422.3 million in long-term debt**, net of issuance costs, primarily from its revolving credit facility[76](index=76&type=chunk) - The company is facing **shareholder class action and derivative complaints** related to its May 2022 announcement of a financial restatement, with an uncertain outcome[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes financial performance, including a quarterly revenue decline and segment results [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Net Revenue by Segment | Net Revenue by Segment (in thousands) | Q3 FY23 (ended Dec 31, 2022) | Q3 FY22 (ended Dec 31, 2021) | % Change | | :--- | :--- | :--- | :--- | | On Device Solutions | $96,316 | $133,594 | (27.9)% | | App Growth Platform | $67,407 | $89,113 | (24.4)% | | **Total net revenue** | **$162,310** | **$216,818** | **(25.1)%** | - **On Device Solutions (ODS) revenue decreased by 27.9% YoY** for the quarter, driven by the ending of a carrier partnership and weak new device demand[118](index=118&type=chunk) - **App Growth Platform (AGP) revenue decreased by 24.4% YoY** for the quarter, attributed to weak advertising demand and broader market weakness[120](index=120&type=chunk) - **License fees and revenue share decreased by 32.7% YoY** for the quarter, falling from 50.3% to 45.2% of total net revenue due to changes in revenue mix[124](index=124&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - As of December 31, 2022, primary liquidity sources included **$79.3 million in unrestricted cash** and **$174.9 million available under its credit facility**[141](index=141&type=chunk) - **Cash flow from operating activities increased significantly to $97.5 million** for the nine months ended Dec 31, 2022, up from $43.5 million in the prior-year period[149](index=149&type=chunk) - The company has minimum purchase commitments under hosting agreements totaling approximately **$181.6 million over the next 4 years**[144](index=144&type=chunk) - **Net cash used in financing was $116.7 million** for the nine-month period, primarily due to debt repayments of $129.5 million[152](index=152&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Identifies primary market risks from interest rate fluctuations and foreign currency exchange exposure - The company is exposed to **interest rate risk** as its credit facility borrowings are at variable rates[155](index=155&type=chunk) - The company faces **foreign currency exchange risk** from transactions denominated in currencies other than the U.S. dollar, mainly the euro, Turkish lira, and British pound[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls were deemed ineffective due to a material weakness in financial reporting - Management concluded that **disclosure controls and procedures were not effective** as of December 31, 2022, due to a material weakness in internal control[161](index=161&type=chunk) - The material weakness relates to **business combinations**, where a control was not adequately designed to conform an acquiree's accounting policies to company standards[160](index=160&type=chunk) - **Remediation efforts are underway** and management expects the remediation to be complete by March 31, 2023[163](index=163&type=chunk)[164](index=164&type=chunk) [Part II - Other Information](index=40&type=section&id=PART%20II%20OTHER%20INFORMATION) Covers legal proceedings and updates to risk factors [Item 1. Legal Proceedings](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Details shareholder class action and derivative complaints related to a financial restatement - Shareholders filed **class action and derivative complaints** against the company and its officers in mid-2022 following the announcement of a financial restatement[168](index=168&type=chunk) - The claims allege violations of federal securities laws and breaches of fiduciary duties, which the company denies and plans to defend against[168](index=168&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=ITEM%201A.%20RISK%20FACTORS) Confirms no material changes to previously disclosed risk factors from the annual report - There are **no material changes** to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022[169](index=169&type=chunk)

Digital Turbine, Inc. (NASDAQ:APPS) Q2 2023 Results Conference Call November 9, 2022 4:30 PM ET Company Participants Brian Bartholomew - Senior Vice President, Capital Markets Bill Stone - Chief Executive Officer Barrett Garrison - Chief Financial Officer Conference Call Participants Dan Day - B. Riley Securities Darren Aftahi - ROTH Capital Partners Omar Dessouky - Bank of America Anthony Stoss - Craig-Hallum Arthur Chu - BofA Security Operator Good afternoon, and welcome to the Digital Turbine Fiscal Sec ...

Digital Turbine, Inc. (NASDAQ:APPS) Q1 2023 Earnings Conference Call August 8, 2022 4:30 PM ET Company Participants Brian Bartholomew - SVP, Capital Markets & Strategy and IR William Stone - CEO & Director Barrett Garrison - EVP & CFO Conference Call Participants Daniel Day - B. Riley Securities Darren Aftahi - ROTH Capital Partners Anthony Stoss - Craig-Hallum Timothy Nollen - Macquarie Research Mitchell Pindus - Wells Fargo Clearing Services Operator Good day, and welcome to the Digital Turbine Fiscal Fir ...

PART I [Business](index=5&type=section&id=ITEM%201.%20BUSINESS) Digital Turbine operates an independent mobile growth platform providing end-to-end solutions for the mobile ecosystem - Digital Turbine is an independent mobile growth platform offering end-to-end products for advertisers, publishers, carriers, and OEMs, focusing on brand discovery, user acquisition, and monetization[10](index=10&type=chunk) - The company executed a strategy to become a leading end-to-end solution for mobile advertising and monetization through the recent acquisitions of **Appreciate (March 2021)**, **AdColony (April 2021)**, and **Fyber (May 2021)**[11](index=11&type=chunk) - The business is organized into three main product and solution categories: **On Device Media (ODM)**, **In-App Media - Fyber (IAM-F)**, and **In-App Media - AdColony (IAM-A)**[23](index=23&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) Product Development Expenses (FY2020-FY2022) | Fiscal Year Ended March 31 | Product Development Costs (in thousands) | | :--- | :--- | | 2022 | $52,723 | | 2021 | $20,119 | | 2020 | $12,018 | - In fiscal year 2022, **no single customer represented more than 10% of net revenue**, a contrast to prior years where major carriers were significant revenue sources[36](index=36&type=chunk)[38](index=38&type=chunk) [Risk Factors](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks related to acquisition integration, industry competition, regulatory changes, and a material weakness in internal controls - The company's business is subject to numerous risks, including the failure to **successfully integrate recent acquisitions**, reliance on a limited number of wireless carriers, and the rapidly evolving nature of its markets[54](index=54&type=chunk) - The mobile advertising industry is **intensely competitive**, and the business depends on the continued growth of smartphone usage, which may be affected by changing technologies and consumer behavior[55](index=55&type=chunk) - The company is subject to increasingly stringent and rapidly changing laws related to privacy and data security, such as **GDPR and CCPA**, which could impose significant costs and restrictions[57](index=57&type=chunk) - A **material weakness in internal control over financial reporting** has been identified, which could result in material misstatements in financial statements if not remediated[62](index=62&type=chunk) - The **Russia-Ukraine conflict** is identified as a risk factor that could negatively impact geopolitical conditions, the global economy, and advertising spending, potentially affecting the company's operating results[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[271](index=271&type=chunk) [Properties](index=47&type=section&id=ITEM%202.%20PROPERTIES) The company's principal executive offices are in Austin, Texas, with additional leased offices in the US and internationally - The company's main offices are in Austin, Texas[271](index=271&type=chunk) - Digital Turbine leases additional office properties in Durham, NC; Arlington, VA; San Mateo, CA; Los Angeles, CA; and San Francisco, CA[271](index=271&type=chunk) - International leased properties are located in Singapore, Berlin, Germany, and Tel Aviv, Israel[271](index=271&type=chunk) [Legal Proceedings](index=48&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Information regarding legal proceedings is incorporated by reference from the notes to the consolidated financial statements - Details on legal proceedings are provided in Note 13 of the financial statements[273](index=273&type=chunk) [Mine Safety Disclosures](index=48&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURE) This item is not applicable to the company's business operations - Not applicable[274](index=274&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=49&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%2C%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on NASDAQ under "APPS," with no cash dividends anticipated and no equity repurchases in fiscal year 2022 - Common stock is traded on the NASDAQ Capital Market under the symbol **"APPS"**[276](index=276&type=chunk) - As of May 24, 2022, there were **99 holders of record** of the common stock[276](index=276&type=chunk) - The company has **not paid cash dividends** and does not plan to in the foreseeable future, with dividends also restricted by debt covenants[276](index=276&type=chunk) - **No purchases of equity securities** were made by the issuer during the fiscal year ended March 31, 2022[276](index=276&type=chunk) [Reserved](index=50&type=section&id=ITEM%206.%20RESERVED) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=50&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Fiscal year 2022 revenue grew 138.4% to $747.6 million, driven by organic growth and acquisitions, while expenses rose 157.6% Net Revenue by Segment (FY2022 vs. FY2021) | Segment | FY 2022 Net Revenue (in thousands) | FY 2021 Net Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | On Device Media | $502,636 | $313,579 | 60.3% | | In App Media - AdColony | $169,725 | $0 | 100.0% | | In App Media - Fyber | $92,611 | $0 | 100.0% | | Elimination | ($17,376) | $0 | (100.0)% | | **Total Net Revenue** | **$747,596** | **$313,579** | **138.4%** | Costs of Revenue and Operating Expenses (FY2022 vs. FY2021) | Expense Category | FY 2022 (in thousands) | FY 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | License fees and revenue share | $370,648 | $178,649 | 107.5% | | Other direct costs of revenue | $29,838 | $2,358 | 1,165.4% | | Product development | $52,723 | $20,119 | 162.1% | | Sales and marketing | $63,309 | $19,304 | 228.0% | | General and administrative | $138,837 | $33,940 | 309.1% | | **Total Costs & Expenses** | **$655,355** | **$254,370** | **157.6%** | - As of March 31, 2022, the company had **$524.1 million drawn against its revolving credit facility**, primarily to finance recent acquisitions[287](index=287&type=chunk) Cash Flow Summary (FY2022 vs. FY2021) | Cash Flow Activity | FY 2022 (in thousands) | FY 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $84,738 | $62,795 | | Net cash used in investing activities | ($172,002) | ($37,808) | | Net cash provided by / (used in) financing activities | $185,243 | ($15,216) | [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from interest rate fluctuations on its variable-rate debt and foreign currency exchange rates - The company's primary market risks are **interest rate fluctuations** and **foreign currency exchange risk**[382](index=382&type=chunk) - Borrowings under the credit facility are subject to variable interest rates; a **1% (100 basis points) increase** in market rates would increase annual interest expense by **$1 million for every $100 million of debt outstanding**[384](index=384&type=chunk) - Foreign currency risk exists due to revenue and expenses denominated in currencies other than the U.S. dollar, which affects reported financial results upon translation[385](index=385&type=chunk) [Financial Statements and Supplementary Data](index=67&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) The auditor issued an unqualified opinion on financial statements but an adverse opinion on internal controls due to a material weakness - The independent auditor, Grant Thornton LLP, issued an **unqualified opinion on the financial statements** but an **adverse opinion on the company's internal control over financial reporting** as of March 31, 2022[392](index=392&type=chunk)[404](index=404&type=chunk) - The adverse opinion on internal controls was due to a **material weakness** related to the failure to adequately conform the accounting policies of acquired companies to U.S. GAAP, specifically concerning revenue presentation and classification[405](index=405&type=chunk) Consolidated Balance Sheet Highlights (as of March 31) | Account | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,458,509 | $260,369 | | Goodwill | $559,792 | $80,176 | | Total Liabilities | $942,294 | $115,257 | | Long-term debt, net | $520,785 | $0 | | Total Stockholders' Equity | $514,571 | $145,112 | Consolidated Statement of Operations Highlights (Year Ended March 31) | Account | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net Revenue | $747,596 | $313,579 | | Income from continuing operations | $92,241 | $59,209 | | Net Income | $35,569 | $54,884 | | Diluted EPS | $0.35 | $0.57 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosures](index=101&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURES) The company reports no changes in or disagreements with its accountants on accounting principles, practices, or financial disclosures - None reported[574](index=574&type=chunk) [Controls and Procedures](index=101&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls were not effective as of March 31, 2022, due to a material weakness in internal control - Management concluded that disclosure controls and procedures were **not effective** as of March 31, 2022, due to a material weakness in internal control over financial reporting[576](index=576&type=chunk)[578](index=578&type=chunk) - The material weakness relates to the company's internal control for business combinations, which did not adequately ensure that accounting policies of acquired companies were conformed to company policy and GAAP[584](index=584&type=chunk) - The error led to the **improper gross presentation of certain revenues** that should have been reported net and the misclassification of certain hosting costs[582](index=582&type=chunk)[583](index=583&type=chunk) - A **remediation plan** is in place to strengthen accounting policy reviews for acquisitions, standardize contract review processes, and formalize the approval process for changes to the global chart of accounts[586](index=586&type=chunk) [Other Information](index=102&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[587](index=587&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=102&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) The company reports no information for this item - None[587](index=587&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=103&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%2C%20AND%20CORPORATE%20GOVERNANCE) Required information is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference to the Proxy Statement for the 2022 Annual Meeting of Stockholders[589](index=589&type=chunk) [Executive Compensation](index=103&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Required information is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference to the Proxy Statement for the 2022 Annual Meeting of Stockholders[589](index=589&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=103&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Required information is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference to the Proxy Statement for the 2022 Annual Meeting of Stockholders[589](index=589&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=103&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Required information is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference to the Proxy Statement for the 2022 Annual Meeting of Stockholders[589](index=589&type=chunk) [Principal Accountant Fees and Services](index=103&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Required information is incorporated by reference from the company's Proxy Statement for the 2022 Annual Meeting of Stockholders - Information is incorporated by reference to the Proxy Statement for the 2022 Annual Meeting of Stockholders[590](index=590&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=104&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the documents filed as part of the report, including financial statements and various material exhibits - This section contains the index to Consolidated Financial Statements and a list of all exhibits filed with the report[592](index=592&type=chunk) - Financial statement schedules are omitted because they are not applicable or the required information is already included in the financial statements[592](index=592&type=chunk) [Form 10-K Summary](index=106&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company provides no summary for this item - None[597](index=597&type=chunk)