Second Quarter Revenue Totaled $143.3 Million

Second Quarter GAAP Net Loss of $161.5 Million, or GAAP EPS of ($1.61), Included a Noncash Goodwill Impairment Charge of $147.2 Million ($1.46 Per Share)

Second Quarter Non-GAAP Adjusted Net Income1 of $13.9 Million and Non-GAAP Adjusted EPS of $0.13

Second Quarter Non-GAAP Adjusted EBITDA2 Totaled $27.7 Million

AUSTIN, Texas, Nov. 8, 2023 /PRNewswire/ -- Digital Turbine, Inc. (Nasdaq: APPS) announced financial results for the fiscal second quarter ended September 30, 2023.

Recent Financial Highlights:

  • Fiscal second quarter of 2024 revenue totaled $143.3 million, representing a year-over-year decline of 18% as compared to the fiscal second quarter of 2023.
  • GAAP net loss for the fiscal second quarter of 2024 was $161.5 million, or ($1.61) per share, as compared to GAAP net income for the fiscal second quarter of 2023 of $11.7 million, or $0.11 per share. GAAP net loss for the fiscal second quarter of 2024 included a noncash goodwill impairment charge of $147.2 million, or ($1.46) per share.
  • Non-GAAP adjusted net income1 for the fiscal second quarter of 2024 was $13.9 million, or $0.13 per share, as compared to Non-GAAP adjusted net income1 of $35.0 million, or $0.34 per share, in the fiscal second quarter of 2023.
  • Non-GAAP adjusted EBITDA2 for the fiscal second quarter of 2024 was $27.7 million, representing a 3% sequential increase as compared to the fiscal first quarter of 2024 and a 43% year-over-year decline as compared to the fiscal second quarter of 2023.
  • Net cash provided by operating activities in the fiscal second quarter of 2024 was $27.5 million.  Free cash flow3 in the fiscal second quarter of 2024 was $23.9 million.  The Company reduced its long-term debt balance by $21.9 million to $383.8 million as of the end of the fiscal second quarter of 2024, as compared to $405.7 million as of the end of the fiscal first quarter of 2024.

"The mobile app distribution market is entering an exciting new era, and I believe that Digital Turbine is uniquely positioning itself to be a major player in its evolution," said Bill Stone, CEO. "We have made, and continue to make, important strategic investments in order to more effectively leverage our advantageous on-device presence to optimize measurable performance for app publishers and advertisers, and to simultaneously provide them access to alternative, newly-available, direct distribution models. Meanwhile, our end-to-end platform is better enabling our mobile OEM and operator partners to provide subscribers with enhanced access to more relevant content and a more seamless app discovery and install experience.  We believe that our strategy has positioned Digital Turbine to play a meaningful role in facilitating the new-era transformation, and we are already seeing very strong global interest to partner with us on this opportunity."

Fiscal 2024 Second Quarter Financial Results

Total revenue for the second quarter of fiscal 2024 was $143.3 million. Total On Device Solutions revenue before intercompany eliminations was $99.1 million. Total App Growth Platform revenue before intercompany eliminations was $46.2 million.

GAAP net loss for the second quarter of fiscal 2024 was $161.5 million, or ($1.61) per share. GAAP net loss for the second quarter of fiscal 2024 included a noncash goodwill impairment charge of $147.2 million, or ($1.46) per share, associated with the App Growth Platform segment.

Non-GAAP adjusted net income1 for the second quarter of fiscal 2024 was $13.9 million, or $0.13 per share, as compared to Non-GAAP adjusted net income1 of $35.0 million, or $0.34 per share in the second quarter of fiscal 2023.

Non-GAAP adjusted EBITDA2 for the second quarter of fiscal 2024 was $27.7 million, as compared to Non-GAAP adjusted EBITDA2 for the second quarter of fiscal 2023 of $48.2 million.

Business Outlook

Based on information available as of November 8, 2023, and considering the ongoing uncertainties in the macro environment, the Company currently expects the following for the third quarter of fiscal 2024:

  • Revenue of between $144 million and $150 million
  • Non-GAAP adjusted EBITDA2 of between $27 million and $31 million
  • Non-GAAP adjusted EPS1 of between $0.16 and $0.19, based on approximately 104 million diluted shares outstanding and an effective tax rate of 25% on Non-GAAP adjusted net income1

It is not reasonably practicable to provide a business outlook for GAAP net income because the Company cannot reasonably estimate the changes in stock-based compensation expense, which is directly impacted by changes in the Company's stock price, or other items that are difficult to predict with precision.

About Digital Turbine, Inc.

Digital Turbine empowers superior mobile consumer experiences and results for the world's leading telcos, advertisers, and publishers. Its end-to-end platform uniquely simplifies its partners' abilities to supercharge awareness, acquisition, and monetization – connecting them with more consumers, in more ways, across more devices. Digital Turbine is headquartered in North America, with offices around the world. For additional information visit www.digitalturbine.com.

Conference Call

Management will host a conference call and webcast today at 4:30 p.m. ET to discuss its fiscal 2024 second quarter financial results and provide operational updates on the business. The conference call will discuss forward guidance and other material information. The call can be accessed online via the webcast link: https://app.webinar.net/1kEqz4Lza3J. The call can also be accessed by dialing 888-317-6003 in the United States (or 412-317-6061 from international locations) and entering access code 1463426.

A playback will be available through November 15, 2023. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 3273418.  An online webcast will be archived for a period of one year, and is available via the Investor Relations section of Digital Turbine's website.

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements presented in accordance with GAAP, Digital Turbine uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP adjusted net income and earnings per share ("EPS"), non-GAAP adjusted EBITDA, non-GAAP free cash flow and non-GAAP gross profit. Reconciliations to the nearest GAAP measures of all non-GAAP measures included in this press release can be found in the tables below.

Non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance, prospects for the future and as a means to evaluate period-to-period comparisons. The Company believes that these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results. The Company believes the non-GAAP measures that exclude such items when viewed in conjunction with GAAP results and the accompanying reconciliations enhance the comparability of results against prior periods and allow for greater transparency of financial results. The Company believes non-GAAP measures facilitate management's internal comparison of its financial performance to that of prior periods as well as trend analysis for budgeting and planning purposes. The presentation of non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

1Non-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, adjustment to acquisition-related liabilities, business transformation costs, transaction-related expenses, severance costs and impairment of goodwill. Readers are cautioned that non-GAAP adjusted net income and EPS should not be construed as an alternative to comparable GAAP net income figures determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.

2Non-GAAP adjusted EBITDA is calculated as GAAP net income excluding the following cash and non-cash expenses: stock-based compensation expense, depreciation and amortization, net interest income (expense), adjustment to acquisition-related liabilities, business transformation costs, foreign exchange transaction gains (losses), income tax provision, transaction-related expenses, severance costs and impairment of goodwill. Non-GAAP adjusted EBITDA margin is calculated as non-GAAP adjusted EBITDA as a percentage of total revenue. Readers are cautioned that non-GAAP adjusted EBITDA should not be construed as an alternative to net income determined in accordance with U.S. GAAP as an indicator of performance, which is the most comparable measure under GAAP.

3Non-GAAP free cash flow, which is a non-GAAP financial measure, is defined as net cash provided by operating activities (as stated in our Consolidated Statements of Cash Flows), excluding transaction-related expenses, severance costs, business transformation costs, and impairment of goodwill, reduced by capital expenditures. Readers are cautioned that free cash flow should not be construed as an alternative to net cash provided by operating activities determined in accordance with U.S. GAAP as an indicator of profitability, performance or liquidity, which is the most comparable measure under GAAP.

4Non-GAAP gross profit is defined as GAAP income from operations adjusted to exclude the effect of product development costs, sales and marketing costs, general and administrative costs, depreciation of software and impairment of goodwill. Readers are cautioned that non-GAAP gross profit should not be construed as an alternative to income from operations determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.

Non-GAAP adjusted EBITDA, non-GAAP adjusted net income and EPS, non-GAAP free cash flow and non-GAAP gross profit are used by management as internal measures of profitability and performance. They have been included because the Company believes that the measures are used by certain investors to assess the Company's financial performance before non-cash charges and certain costs that the Company does not believe are reflective of its underlying business.

Forward-Looking Statements

This news release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements in this news release that are not statements of historical fact and that concern future results from operations, financial position, economic conditions, product releases and any other statement that may be construed as a prediction of future performance or events, including financial projections and growth in various products are forward-looking statements that speak only as of the date made and which involve known and unknown risks, uncertainties and other factors which may, should one or more of these risks uncertainties or other factors materialize, cause actual results to differ materially from those expressed or implied by such statements. These factors and risks include:

Risks Specific to our Business

  • We have a history of net losses
  • We have a limited operating history for our current portfolio of assets.
  • The failure to successfully integrate our recent acquisitions may adversely affect our future results.
  • Growth may place significant demands on our management and our infrastructure.
  • Our operations are global in scope, and we face added business, political, regulatory, legal, operational, financial and economic risks as a result of our international operations.
  • Our financial results could vary significantly from quarter-to-quarter and are difficult to predict.
  • A significant portion of our revenue is derived from a limited number of wireless carriers and customers.
  • The risk of impairment of our goodwill.
  • The effects of the current and any future general downturns in the U.S. and the global economy, including financial market disruptions.
  • Our products, services and systems rely on software that is highly technical, and if it contains errors or viruses, our business could be adversely affected.
  • Our business may involve the use, transmission and storage of confidential information and personally identifiable information, and the failure to properly safeguard such information could result in significant reputational harm and monetary damages.
  • System security risks and cyber-attacks could disrupt our internal operations or information technology services provided to customers.
  • Our business and growth may suffer if we are unable to hire and retain key talent.
  • If we are unable to maintain our corporate culture, our business could be harmed.
  • If we make future acquisitions, this could require significant management attention and disrupt our business.
  • If we fail to implement or are delayed in the implementation of our new ERP system platform, we may not be able to effectively transact our business or produce our financial statements on a timely basis.
  • Adverse effects of negative developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions.

Risks Related to the Mobile Advertising Industry

  • The mobile advertising business is an intensely competitive industry, and we may not be able to compete successfully.
  • The markets for our products and services are rapidly evolving and may decline or experience limited growth.
  • Our business is dependent on the continued growth in usage of smartphones and other mobile connected devices.
  • Wireless technologies are changing rapidly, and we may not be successful in working with these new technologies.
  • The complexity of and incompatibilities among mobile devices may require us to use additional resources for the development of our products and services.
  • If wireless subscribers do not continue to use their mobile devices to access mobile content and other applications, our business growth and future revenue may be adversely affected.
  • A shift of technology platform by wireless carriers and mobile device manufacturers could lengthen the development period for our offerings, increase our costs, and cause our offerings to be published later than anticipated.
  • Actual or perceived security vulnerabilities in devices or wireless networks could adversely affect our revenue.
  • We may be subject to legal liability associated with providing mobile and online services.
  • Risks of public health issues, such as a major epidemic or pandemic.
  • Risk related to geopolitical conditions and the global economy, including financial markets, and inflation.
  • Risks associated with the ongoing conflict in Israel has caused, and is currently expected to cause, negative effects on geopolitical conditions and the global economy, including financial markets, inflation, and the global supply chain, which could have an adverse impact on our business, operating results and financial condition, especially given our significant business presence in the region.
  • Risk related to the geopolitical relationship between the U.S. and China or changes in China's economic and regulatory landscape.

Industry Regulatory Risks

  • We are subject to rapidly changing and increasingly stringent laws, regulations and contractual requirements related to privacy, data security, and protection of children.
  • We are subject to anti-corruption, import/export, government sanction, and similar laws, especially related to our international operations.
  • Government regulation of our marketing methods could restrict or prevent our ability to adequately advertise and promote our content, products and services available in certain jurisdictions.
  • Regulatory requirements pertaining to the marketing, advertising, and promotion of our products and services.
  • Governmental regulation of our marketing methods.

Risks Related to Our Intellectual Property and Potential Liability

  • Third parties may obtain and improperly use our intellectual property; and if so, our competitive position may be adversely affected, particularly if we do not, or are unable to, adequately protect our intellectual property rights
  • Third parties may sue us for intellectual property infringement, which may prevent or limit our use of the intellectual property and disrupt our business and could require us to pay significant damage awards.
  • Our platform contains open source software.
  • Litigation may harm out business.
  • Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, damages caused by malicious software, and other losses.

Risks Relating to Our Common Stock and Capital Structure

  • We have secured and unsecured indebtedness, which could limit our financial flexibility.
  • To service our debt and fund our other obligations and capital requirements, we will require a significant amount of cash, and our ability to generate cash will depend on many factors beyond our control.
  • The market price of our common stock is likely to be highly volatile and subject to wide fluctuations, and you may be unable to resell your shares at or above the current price or the price at which you purchased your shares.
  • Risk of not being able to raise capital to grow our business.
  • Risk to trading volume of lack of securities or industry analysts research coverage.
  • We have identified a material weakness in our internal control over financial reporting and disclosure controls and procedures which could, if not remediated, result in additional material misstatements in our financial statements.
  • Maintaining and improvising financial controls and being a public company may strain resources.
  • Anti-takeover provisions in our charter documents could make an acquisition of our company more difficult.
  • Our bylaws designate Delaware as the exclusive forum for certain disputes.
  • Other risks described in the risk factors in Item 1A of our latest Annual Report on Form 10-K under the heading "Risk Factors" and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.

You should not place undue reliance on these forward-looking statements. 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.

Investor Relations Contact:
Brian Bartholomew
Digital Turbine, Inc.
brian.bartholomew@digitalturbine.com

 

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)

(in thousands, except share and per share amounts)




Three months ended September 30,


Year ended March 31,



2023


2022


2023


2022

Net revenue


$  143,259


$  174,859


$  289,625


$  363,492

Costs of revenue and operating expenses









Revenue share


68,719


76,881


138,311


164,248

Other direct costs of revenue


9,017


9,199


18,630


18,114

Product development


14,037


14,736


29,837


28,869

Sales and marketing


15,537


15,490


31,114


31,548

General and administrative


41,385


37,471


81,884


75,196

Impairment of goodwill


147,181



147,181


Total costs of revenue and operating expenses


295,876


153,777


446,957


317,975

(Loss) income from operations


(152,617)


21,082


(157,332)


45,517

Interest and other income (expense), net









Change in fair value of contingent consideration


372



372


Interest expense, net


(7,844)


(5,229)


(15,234)


(9,311)

Foreign exchange transaction loss


(2,106)


(281)


(183)


(612)

Other income, net



312


244


384

Total interest and other expense, net


(9,578)


(5,198)


(14,801)


(9,539)

(Loss) income before income taxes


(162,195)


15,884


(172,133)


35,978

Income tax (benefit) provision


(713)


4,181


(2,252)


9,317

Net (loss) income


(161,482)


11,703


(169,881)


26,661

Less: net (loss) income attributable to non-controlling interest



39


(220)


75

Net (loss) income attributable to Digital Turbine, Inc.


(161,482)


11,664


(169,661)


26,586

Other comprehensive loss









Foreign currency translation adjustment


(1,287)


(9,246)


(7,394)


(14,788)

Comprehensive (loss) income


(162,769)


2,457


(177,275)


11,873

Less: comprehensive income attributable to non-controlling interest



32


519


275

Comprehensive (loss) income attributable to Digital Turbine, Inc.


$ (162,769)


$      2,425


$ (177,794)


$    11,598

Net (loss) income per common share









Basic


$       (1.61)


$        0.12


$       (1.69)


$        0.27

Diluted


$       (1.61)


$        0.11


$       (1.69)


$        0.26

Weighted-average common shares outstanding









Basic


100,604


98,887


100,272


98,324

Diluted


100,604


102,898


100,272


102,777

 

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)




September 30, 2023


March 31, 2023



(Unaudited)



ASSETS





Current assets





Cash


$             58,138


$            75,058

Restricted cash


511


500

Accounts receivable, net


195,531


178,189

Prepaid expenses and other current assets


15,644


12,319

Total current assets


269,824


266,066

Property and equipment, net


44,931


39,327

Right-of-use assets


8,376


10,073

Intangible assets, net


345,392


379,632

Goodwill


408,976


561,576

Other non-current assets


13,689


9,882

TOTAL ASSETS


$        1,091,188


$       1,266,556






LIABILITIES AND STOCKHOLDERS EQUITY





Current liabilities





Accounts payable


$           139,852


$          119,338

Accrued revenue share


55,149


69,221

Accrued compensation


8,627


10,984

Other current liabilities


41,219


21,377

Total current liabilities


244,847


220,920

Long-term debt, net of debt issuance costs


383,810


410,522

Deferred tax liabilities, net


2,816


13,940

Other non-current liabilities


11,853


13,919

Total liabilities


643,326


659,301

Commitments and contingencies





Stockholders' equity





Preferred stock





Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares

authorized, 100,000 issued and outstanding (liquidation preference of $1)


100


100

Common stock





$0.0001 par value: 200,000,000 shares authorized; 101,847,271 issued and

101,089,146 outstanding at September 30, 2023; 100,216,494 issued and

99,458,369 outstanding at March 31, 2023


10


10

Additional paid-in capital


842,677


822,217

Treasury stock (758,125 shares at September 30, 2023 and March 31, 2023)


(71)


(71)

Accumulated other comprehensive loss


(50,078)


(41,945)

Accumulated deficit


(344,776)


(175,115)

Total stockholders' equity


447,862


605,196

Non-controlling interest



2,059

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$        1,091,188


$       1,266,556

 

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)




Three months ended September 30,



2023


2022

Cash flows from operating activities:





Net (loss) income


$       (161,482)


$           11,703

Adjustments to reconcile net (loss) income to net cash provided by operating activities:





Depreciation and amortization


20,668


20,081

Non-cash interest expense


(147)


198

Stock-based compensation expense


9,016


5,779

Change in fair value of contingent consideration


(372)


Right-of-use asset


1,173


2,425

Deferred income taxes


(12,351)


(3,278)

Foreign exchange transaction loss


2,106


281

Impairment of goodwill


147,181


(Increase) decrease in assets:





Accounts receivable, gross


8,102


3,290

Allowance for credit losses


475


1,363

Prepaid expenses and other current assets


(334)


359

Other non-current assets


(2,566)


(52)

Increase (decrease) in liabilities:





Accounts payable


1,663


(3,347)

Accrued revenue share


5,350


(7,433)

Accrued compensation


(1,906)


(3,524)

Other current liabilities


11,808


2,038

Other non-current liabilities


(930)


(2,203)

Net cash provided by operating activities


27,454


27,680






Cash flows from investing activities





Capital expenditures


(7,001)


(6,517)

Net cash used in investing activities


(7,001)


(6,517)






Cash flows from financing activities





Proceeds from borrowings


12,000


Repayment of debt obligations


(34,136)


(25,992)

Acquisition of non-controlling interest in consolidated subsidiaries



Payment of withholding taxes for net share settlement of equity awards


(106)


(1,572)

Options exercised


1,998


643

Net cash used in financing activities


(20,244)


(26,921)






Effect of exchange rate changes on cash and cash equivalents and restricted cash


(629)


(868)






Net change in cash and cash equivalents and restricted cash


(420)


(6,626)






Cash and cash equivalents and restricted cash, beginning of period


59,069


89,839






Cash and cash equivalents and restricted cash, end of period


$           58,649


$           83,213

 

REVENUE BY SEGMENT

(in thousands)

(Unaudited)










Three months ended September 30,



2023


2022


% Change

On Device Solutions


$          99,060


$        108,466


(9) %

App Growth Platform


46,183


68,256


(32) %

Elimination


(1,984)


(1,863)


6 %

Consolidated


$        143,259


$        174,859


(18) %

 

GAAP (LOSS) INCOME FROM OPERATIONS TO NON-GAAP GROSS PROFIT

(in thousands)

(Unaudited)








Three months ended September 30,



2023


2022

Net revenue


$      143,259


$      174,859

(Loss) income from operations


(152,617)


21,082

Add-back items:





Product development


14,037


14,736

Sales and marketing


15,537


15,490

General and administrative


41,385


37,471

Depreciation of software included in other direct costs of revenue


1,509


1,763

Impairment of goodwill


147,181


Non-GAAP gross profit


$       67,032


$       90,542

Non-GAAP gross profit percentage


47 %


52 %











GAAP NET (LOSS) INCOME TO NON-GAAP ADJUSTED NET INCOME

(in thousands)

(Unaudited)








Three months ended September 30,



2023


2022

Net (loss) income


$    (161,482)


11,703

Add-back items:





Stock-based compensation expense


9,016


5,779

Amortization of intangibles


16,157


16,185

Adjustment to estimated earn-out liability


(372)


Business transformation costs


2,528


Transaction-related expenses


79


1,284

Severance costs


809


Impairment of goodwill


147,181


Non-GAAP adjusted net income


$       13,916


$       34,951

Non-GAAP adjusted net income per common share


$           0.13


$           0.34

Weighted-average common shares outstanding, diluted


103,428


102,898

 

GAAP NET (LOSS) INCOME TO NON-GAAP ADJUSTED EBITDA

(in thousands)

(Unaudited)








Three months ended September 30,



2023


2022

Net (loss) income


$       (161,482)


$           11,703

Add-back items:





Stock-based compensation expense


9,016


5,779

Depreciation and amortization


20,668


20,081

Interest expense, net


7,844


5,229

Other income, net



(312)

Change in fair value of contingent consideration


(372)


Business transformation costs


2,528


Foreign exchange transaction (gain) loss


2,106


281

Income tax (benefit) provision


(713)


4,181

Transaction-related expenses


79


1,284

Severance costs


809


Impairment of goodwill


147,181


Non-GAAP adjusted EBITDA


$           27,664


$           48,226

 

GAAP CASH FLOW FROM OPERATING ACTIVITIES TO NON-GAAP FREE CASH FLOW

(in thousands)

(Unaudited)








Three months ended September 30,



2023


2022

Net cash provided by operating activities


$           27,454


$           27,680

Capital expenditures


(7,001)


(6,517)

Transaction-related expenses


79


1,284

Severance costs


809


Business transformation costs


2,528


Non-GAAP free cash flow provided (used) by operations


$           23,869


$           22,447

 

Digital Turbine (PRNewsfoto/Digital Turbine, Inc.)

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SOURCE Digital Turbine, Inc.

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