Digital Turbine(APPS) - 2020 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements The report presents unaudited consolidated financial statements for the quarter and six months ended September 30, 2019 Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 (Unaudited) | Mar 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $53,530 | $37,123 | | Total Assets | $102,222 | $82,861 | | Total Current Liabilities | $51,545 | $38,308 | | Total Liabilities | $53,655 | $46,503 | | Total Stockholders' Equity | $48,567 | $36,358 | - Total assets grew to $102.2 million from $82.9 million at March 31, 2019, primarily driven by a significant increase in cash from $10.9 million to $25.2 million[5] Consolidated Statements of Operations and Comprehensive Income / (Loss) Statement of Operations Summary - Three Months Ended Sep 30 (in thousands, except per share amounts) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $32,795 | $23,854 | 37.5% | | Gross Profit | $12,305 | $7,544 | 63.1% | | Income from Operations | $3,115 | $315 | 888.9% | | Net Income / (Loss) | $(1,425) | $1,712 | -183.2% | | Diluted EPS | $(0.02) | $0.02 | -200.0% | - The company reported a net loss of $1.4 million for the quarter, a significant shift from a net income of $1.7 million in the prior-year period, primarily driven by a non-cash charge of $4.5 million related to the change in fair value of warrant liability[6] Consolidated Statements of Cash Flows Cash Flow Summary - Six Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash from operating activities (continuing) | $11,764 | $(157) | | Net cash used in investing activities (continuing) | $(1,805) | $(1,085) | | Net cash provided by financing activities | $4,813 | $110 | | Net change in cash | $14,260 | $(4,271) | - Cash from continuing operations showed a strong positive turnaround to $11.8 million for the six-month period, compared to a use of $0.2 million in the prior year, indicating improved operational efficiency[7] Notes to Consolidated Financial Statements The notes detail the company's single 'Advertising' segment, discontinued operations, customer concentration, and credit facility terms - The company operates as a single reportable segment, Advertising, focused on its Operator and OEM (O&O) business through its Ignite™ platform[12] - In April 2018, the company divested its Direct Carrier Billing (Content) and Advertising and Publishing (A&P) assets, which are now classified as discontinued operations[46][47][49] - The company has significant customer concentration, with Verizon Communications (19.6%) and GSN Games (10.9%) being major revenue sources for the six months ended Sep 30, 2019[41][43] - As of September 30, 2019, all convertible notes have been extinguished, and the company maintains an undrawn $20 million revolving credit facility[66][68][73] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth, margin expansion, and improved liquidity despite a net loss from non-cash charges Results of Operations - Net revenues for the three and six months ended September 30, 2019, increased by 37.5% and 37.8% respectively, driven by demand for the Ignite service[131][132] - Gross margin percentage increased to 37.5% for the quarter from 31.6% in the prior year, attributed to an improved mix of partner diversification and higher-margin revenue[138] - Operating expenses rose 27.1% for the quarter, driven by increased sales, marketing, and general and administrative costs to support global expansion and growth[139][141][142] - A $4.5 million loss from the change in fair value of warrant liability, due to an increase in the company's stock price, significantly impacted 'Total interest and other income / (expense)'[143][149] Liquidity and Capital Resources - As of September 30, 2019, the company had a strong liquidity position with $25.3 million in cash and restricted cash and no outstanding debt[150] - Net cash provided by continuing operating activities was $11.8 million for the six months ended September 30, 2019, a substantial improvement from a net cash use of $0.2 million in the prior year[151] - The company's senior secured credit facility was increased to $20 million, remained undrawn as of September 30, 2019, and the company was in compliance with all covenants[158][161][162] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations on its credit facility and foreign currency exchange risk - The company is exposed to interest rate risk through its variable-rate credit facility, where a hypothetical 100 basis point increase would raise annual interest expense by $0.01 million for every $1 million of debt[167] - Foreign currency exchange risk exists due to international revenues and expenses, with a potential disproportionate impact on operating income as most media costs are billed in U.S. dollars[168] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[170] - No material changes in internal control over financial reporting occurred during the quarter that would be reasonably likely to materially affect these controls[171] PART II - OTHER INFORMATION Legal Proceedings The company notes potential financial exposure related to the settlement of assets from its discontinued Pay business - The company notes a potential financial exposure related to the settlement of assets and liabilities from the disposition of the Pay business, as detailed in Note 4, "Discontinued Operations"[171] Risk Factors No material changes were reported to the risk factors disclosed in the company's latest Annual Report on Form 10-K - There are no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended March 31, 2019[171] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported for the period[172] Exhibits This section lists the exhibits filed with the report, including required officer certifications and XBRL data files - The report includes required certifications from the Principal Executive Officer and Principal Financial Officer, along with XBRL instance documents[172]