Digital Turbine(APPS) - 2025 Q1 - Quarterly Results

Fiscal 2025 First Quarter Financial Overview This section provides an overview of Digital Turbine's Q1 FY25 financial performance, including key metrics and CEO commentary on sequential growth drivers Recent Financial Highlights Digital Turbine reported Q1 FY25 revenue of $118.0 million, showing sequential growth but a year-over-year decline, with increased GAAP net loss and decreased non-GAAP adjusted net income and EBITDA Fiscal First Quarter Financial Highlights | Metric | Q1 FY25 (Millions) | Q4 FY24 (Millions) | Q1 FY24 (Millions) | QoQ Change | YoY Change | | :-------------------------------- | :----------------- | :----------------- | :----------------- | :--------- | :--------- | | Revenue | $118.0 | - | - | +5% | -19% | | GAAP Net Loss | ($25.2) | - | ($8.4) | - | +199.9% | | GAAP EPS | ($0.25) | - | ($0.08) | - | +212.5% | | Non-GAAP Adjusted Net Income | $7.3 | - | $18.2 | - | -59.89% | | Non-GAAP Adjusted EPS | $0.07 | - | $0.18 | - | -61.11% | | Non-GAAP Adjusted EBITDA | $14.5 | - | $27.0 | +18% | -46% | CEO Commentary CEO Bill Stone highlighted an encouraging start to the fiscal year with sequential growth in revenue and EBITDA, driven by increased international device adoption and stronger demand for platform offerings - The company returned to quarterly sequential growth in revenue and EBITDA, marking an encouraging start to the new fiscal year[2] - On Device Solutions revenue grew 3% sequentially, largely due to newly added international devices and higher average revenue-per-device[2] - App Growth Platform revenue increased 11% sequentially, attributable to stronger demand for Brand and Exchange offerings[2] - EBITDA margin expanded by 135 basis points sequentially, driven by top-line growth and continued expense discipline[2] Detailed Fiscal 2025 First Quarter Financial Results This section details Digital Turbine's Q1 FY25 financial results, presenting revenue breakdowns by segment and comprehensive GAAP and non-GAAP performance metrics Revenue Breakdown by Segment For Q1 FY25, Digital Turbine's total revenue was $118.0 million, with On Device Solutions contributing $80.7 million and App Growth Platform contributing $38.4 million before intercompany eliminations Q1 FY25 Revenue by Segment (before intercompany eliminations) | Segment | Revenue (Millions) | | :-------------------- | :----------------- | | On Device Solutions | $80.7 | | App Growth Platform | $38.4 | | Total Revenue | $118.0 | GAAP Financial Performance The company reported a GAAP net loss of $25.2 million, or ($0.25) per share, for Q1 FY25, a significant increase in loss compared to $8.4 million, or ($0.08) per share, in Q1 FY24 GAAP Net Loss and EPS | Metric | Q1 FY25 (Millions) | Q1 FY24 (Millions) | | :-------------------- | :----------------- | :----------------- | | GAAP Net Loss | ($25.2) | ($8.4) | | GAAP EPS | ($0.25) | ($0.08) | Non-GAAP Financial Performance Non-GAAP adjusted net income for Q1 FY25 was $7.3 million, or $0.07 per share, down from $18.2 million, or $0.18 per share, in Q1 FY24, while non-GAAP adjusted EBITDA also decreased to $14.5 million from $27.0 million year-over-year Non-GAAP Adjusted Financials | Metric | Q1 FY25 (Millions) | Q1 FY24 (Millions) | | :-------------------------- | :----------------- | :----------------- | | Non-GAAP Adjusted Net Income | $7.3 | $18.2 | | Non-GAAP Adjusted EPS | $0.07 | $0.18 | | Non-GAAP Adjusted EBITDA | $14.5 | $27.0 | Business Outlook Digital Turbine reaffirmed its fiscal year 2025 expectations, projecting revenue between $540 million and $560 million and non-GAAP adjusted EBITDA between $85 million and $95 million, while noting it cannot reasonably provide a GAAP net income outlook Fiscal Year 2025 Business Outlook | Metric | Range (Millions) | | :-------------------------- | :----------------- | | Revenue | $540 - $560 | | Non-GAAP Adjusted EBITDA | $85 - $95 | - The company cannot reasonably provide a business outlook for GAAP net income due to difficulties in estimating stock-based compensation expense and other unpredictable items[5] Company Information This section provides an overview of Digital Turbine, Inc., detailing its mission and global presence, alongside information regarding the Q1 FY25 conference call About Digital Turbine, Inc. Digital Turbine enhances mobile consumer experiences and delivers results for telcos, advertisers, and publishers through its end-to-end platform, simplifying awareness, acquisition, and monetization across various devices globally - Digital Turbine empowers superior mobile consumer experiences and results for leading telcos, advertisers, and publishers[6] - Its end-to-end platform simplifies partners' abilities to supercharge awareness, acquisition, and monetization across more consumers and devices[6] - Digital Turbine is headquartered in North America, with offices around the world[6] Conference Call Details Management hosted a conference call and webcast on August 7, 2024, at 4:30 p.m. ET to discuss Q1 FY25 financial results and provide operational updates, with a replay available through August 14, 2024 - A conference call and webcast were held on August 7, 2024, at 4:30 p.m. ET to discuss fiscal 2025 first quarter financial results and operational updates[7] - A playback was available through August 14, 2024, and an online webcast will be archived for one year on the Investor Relations section of Digital Turbine's website[8] Non-GAAP Financial Measures This section defines Digital Turbine's non-GAAP financial measures, including adjusted net income, EPS, EBITDA, free cash flow, and gross profit, and explains their purpose Purpose and General Definition Digital Turbine uses non-GAAP financial measures to supplement GAAP statements, providing enhanced understanding of current and future financial performance by excluding certain non-recurring or non-operating expenses and benefits, but these are not substitutes for GAAP results - Non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and future prospects[10] - These measures exclude certain expenses and benefits that may not be indicative of recurring core business operating results[10] - The presentation of non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared in accordance with GAAP[10] Non-GAAP Adjusted Net Income and EPS Definition Non-GAAP adjusted net income and EPS are defined as GAAP net income and EPS adjusted to exclude the effect of stock-based compensation expense, amortization of intangibles, business transformation costs, transaction-related expenses, severance costs, 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, and tax adjustments[11] Non-GAAP Adjusted EBITDA Definition Non-GAAP adjusted EBITDA is calculated as GAAP net income, excluding cash and non-cash expenses such as stock-based compensation, depreciation and amortization, net interest income/expense, other income/expense, business transformation costs, foreign exchange gains/losses, income tax provision/benefit, transaction-related expenses, and severance costs - Non-GAAP adjusted EBITDA excludes 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, and severance costs[12] Non-GAAP Free Cash Flow Definition Non-GAAP free cash flow is defined as net cash provided by operating activities, excluding transaction-related expenses, severance costs, and business transformation costs, 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[12][13] Non-GAAP Gross Profit Definition Non-GAAP gross profit is defined as GAAP income from operations, adjusted to exclude product development costs, sales and marketing costs, general and administrative costs, and depreciation of software - Non-GAAP gross profit is defined as GAAP income from operations adjusted to exclude product development costs, sales and marketing costs, general and administrative costs, and depreciation of software[14] Forward-Looking Statements and Risk Factors This section outlines the forward-looking statement disclaimer and details various risks specific to Digital Turbine's business, the mobile advertising industry, regulatory environment, intellectual property, and capital structure Forward-Looking Statement Disclaimer The news release contains forward-looking statements regarding future results, financial position, and economic conditions, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially, and the company does not undertake to update these statements unless required by law - The news release includes forward-looking statements concerning future results from operations, financial position, economic conditions, and product releases[15] - These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[15] - The Company does not undertake to update forward-looking statements, except as required by law[21] Risks Specific to Digital Turbine's Business Key business risks include a history of net losses, limited operating history for current assets, demands on management from growth, global operational risks, significant quarter-to-quarter financial variability, reliance on a limited number of carriers/customers, goodwill impairment risk, and effects of economic downturns - Risks include a history of net losses, limited operating history for current assets, and significant demands on management and infrastructure due to growth[15] - The company faces global operational risks, highly variable and difficult-to-predict financial results, and reliance on a limited number of wireless carriers and customers[15] - Other risks involve software errors, data security failures, IT system disruptions, inability to hire and retain key talent, challenges in maintaining corporate culture, and potential disruptions from future acquisitions[16] Risks Related to the Mobile Advertising Industry Risks in the mobile advertising industry include intense competition, rapidly evolving markets, dependence on smartphone usage growth, challenges with new wireless technologies, complexities of mobile devices, potential decline in mobile content usage, platform shifts by carriers/manufacturers, security vulnerabilities, legal liability for mobile services, public health issues, and geopolitical conditions - The mobile advertising business is intensely competitive, with rapidly evolving markets that may decline or experience limited growth[17] - Business is dependent on continued growth in smartphone usage and adapting to rapidly changing wireless technologies and device complexities[17] - Risks include platform shifts by wireless carriers, security vulnerabilities, legal liability, public health issues, and geopolitical conditions[17] Industry Regulatory Risks The company faces risks from rapidly changing and stringent laws regarding privacy, data security, and child protection, and is also subject to anti-corruption, import/export, and government sanction laws, especially in international operations, and regulatory requirements concerning marketing, advertising, and promotion methods - The company is subject to rapidly changing and increasingly stringent laws, regulations, and contractual requirements related to privacy, data security, and protection of children[18] - It is also subject to anti-corruption, import/export, government sanction, and similar laws, especially related to international operations[18] - Government regulation of marketing methods could restrict or prevent the ability to adequately advertise and promote content, products, and services[18] Risks Related to Intellectual Property and Potential Liability Risks include third parties improperly using the company's intellectual property, potential lawsuits for intellectual property infringement, the use of open-source software, and substantial liability from indemnity provisions in agreements - Third parties may obtain and improperly use the company's intellectual property, adversely affecting its competitive position[19] - The company may be sued for intellectual property infringement, potentially leading to significant damage awards and business disruption[19] - The platform contains open source software, and indemnity provisions in agreements potentially expose the company to substantial liability[19] Risks Relating to Common Stock and Capital Structure Risks related to common stock and capital structure include secured and unsecured indebtedness limiting financial flexibility, significant cash requirements for debt service and operations, highly volatile stock price, inability to raise capital, lack of analyst coverage, and potential material weaknesses in internal controls - The company has secured and unsecured indebtedness, which could limit its financial flexibility and require significant cash to service[20] - The market price of common stock is likely to be highly volatile, and there is a risk of not being able to raise capital for business growth[20] - A material weakness in internal control over financial reporting could result in material misstatements, and anti-takeover provisions could make an acquisition more difficult[20] Condensed Consolidated Financial Statements This section presents Digital Turbine's condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows for the first quarter of fiscal year 2025 Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income The statement of operations shows a net loss of $25.16 million for Q1 FY25, significantly higher than the $8.40 million loss in Q1 FY24, primarily due to lower net revenue and increased general and administrative expenses Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Net revenue | $117,989 | $146,366 | | Total costs of revenue and operating expenses | $134,077 | $151,081 | | Loss from operations | ($16,088) | ($4,715) | | Net loss | ($25,156) | ($8,399) | | Basic Net loss per common share | ($0.25) | ($0.08) | | Diluted Net loss per common share | ($0.25) | ($0.08) | Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $860.20 million, a slight decrease from $865.54 million at March 31, 2024, while total liabilities increased to $664.24 million from $651.61 million, and total stockholders' equity decreased to $195.95 million from $213.93 million over the same period Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2024 (Unaudited) | March 31, 2024 | | :--------------------------------- | :------------------------ | :--------------- | | Total current assets | $252,688 | $242,341 | | Total assets | $860,197 | $865,540 | | Total current liabilities | $240,375 | $236,024 | | Total liabilities | $664,244 | $651,608 | | Total stockholders' equity | $195,953 | $213,932 | Condensed Consolidated Statements of Cash Flows For Q1 FY25, net cash used in operating activities was $1.35 million, a shift from $1.32 million provided in Q1 FY24, net cash used in investing activities decreased to $5.93 million from $7.28 million, while net cash provided by financing activities was $9.97 million, a significant improvement from $8.95 million used in Q1 FY24 Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | ($1,352) | $1,318 | | Net cash used in investing activities | ($5,931) | ($7,276) | | Net cash provided by (used in) financing activities | $9,966 | ($8,951) | | Net change in cash and cash equivalents and restricted cash | $2,124 | ($16,489) | | Cash and cash equivalents and restricted cash, end of period | $35,729 | $59,069 | Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including revenue by segment, gross profit, adjusted net income, adjusted EBITDA, and free cash flow Revenue by Segment In Q1 FY25, On Device Solutions revenue was $80.65 million, an 18% decrease year-over-year, and App Growth Platform revenue was $38.39 million, a 22% decrease year-over-year, resulting in consolidated revenue declining by 19% to $117.99 million Revenue by Segment (Unaudited, in thousands) | Segment | Three months ended June 30, 2024 | Three months ended June 30, 2023 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | On Device Solutions | $80,650 | $98,250 | (18)% | | App Growth Platform | $38,392 | $48,959 | (22)% | | Consolidated | $117,989 | $146,366 | (19)% | GAAP (Loss) Income from Operations to Non-GAAP Gross Profit Non-GAAP gross profit for Q1 FY25 was $54.52 million, with a non-GAAP gross profit percentage of 46%, down from $68.92 million and 47% in Q1 FY24, after adding back product development, sales and marketing, general and administrative costs, and depreciation of software to GAAP loss from operations GAAP (Loss) Income from Operations to Non-GAAP Gross Profit (in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | | (Loss) income from operations | ($16,088) | ($4,715) | | Non-GAAP gross profit | $54,524 | $68,917 | | Non-GAAP gross profit percentage | 46% | 47% | GAAP Net (Loss) Income to Non-GAAP Adjusted Net Income Non-GAAP adjusted net income for Q1 FY25 was $7.35 million, or $0.07 per share, a decrease from $18.21 million, or $0.18 per share, in Q1 FY24, primarily due to adjustments for stock-based compensation, amortization of intangibles, and tax adjustments GAAP Net (Loss) Income to Non-GAAP Adjusted Net Income (in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net (loss) income | ($25,156) | ($8,399) | | Non-GAAP adjusted net income | $7,346 | $18,210 | | Non-GAAP adjusted net income per common share | $0.07 | $0.18 | | Weighted-average common shares outstanding, diluted | 103,143 | 103,509 | GAAP Net (Loss) Income to Non-GAAP Adjusted EBITDA Non-GAAP adjusted EBITDA for Q1 FY25 was $14.53 million, a significant decline from $26.96 million in Q1 FY24, with key add-back items including depreciation and amortization, interest expense, and stock-based compensation GAAP Net (Loss) Income to Non-GAAP Adjusted EBITDA (in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :-------------------- | :------------------------------- | :------------------------------- | | Net (loss) income | ($25,156) | ($8,399) | | Non-GAAP adjusted EBITDA | $14,528 | $26,963 | GAAP Cash Flow from Operating Activities to Non-GAAP Free Cash Flow Non-GAAP free cash flow used in operations for Q1 FY25 was $5.65 million, comparable to $5.56 million used in Q1 FY24, after adjusting net cash from operating activities by capital expenditures and certain business transformation and severance costs GAAP Cash Flow from Operating Activities to Non-GAAP Free Cash Flow (in thousands) | Metric | Three months ended June 30, 2024 | Three months ended June 30, 2023 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | ($1,352) | $1,318 | | Capital expenditures | ($5,931) | ($7,276) | | Non-GAAP free cash flow provided (used) by operations | ($5,654) | ($5,555) |