Digital Turbine Reports Fiscal 2023 Third Quarter Financial Results

Third Quarter Revenue Totaled $162.3 Million Third Quarter GAAP Net Income of $4.0 Million and GAAP EPS of $0.04; Third Quarter Non-GAAP Adjusted Net Income1 of $30.2 Million and Non GAAP EPS of $0.29 Third Quarter Non-GAAP Adjusted EBITDA2 Totaled $40.0 Million AUSTIN, Texas, Feb. 8, 2023 /PRNewswire/ — Digital Turbine, Inc. (Nasdaq: APPS) announced financial results […]

Third Quarter Revenue Totaled $162.3 Million

Third Quarter GAAP Net Income of $4.0 Million and GAAP EPS of $0.04; Third Quarter Non-GAAP
Adjusted Net Income
1 of $30.2 Million and Non GAAP EPS of $0.29

Third Quarter Non-GAAP Adjusted EBITDA2 Totaled $40.0 Million

AUSTIN, Texas, Feb. 8, 2023 /PRNewswire/ — Digital Turbine, Inc. (Nasdaq: APPS) announced financial results for the fiscal third quarter ended December 31, 2022.

Recent Financial Highlights:

  • Fiscal third quarter of 2023 revenue totaled $162.3 million representing a 25% decline year-over-year as compared to the fiscal third quarter of 2022.
  • GAAP net income for the fiscal third quarter of 2023 was $4.0 million, or $0.04 per share, as compared to GAAP net income for the fiscal third quarter of 2022 of $7.0 million, or $0.07 per share. Non-GAAP adjusted net income1 for the fiscal third quarter of 2023 was $30.2 million, or $0.29 per share, as compared to Non-GAAP adjusted net income1 of $50.9 million, or $0.49 per share, in the fiscal third quarter of 2022.
  • Non-GAAP adjusted EBITDA2 for the fiscal third quarter of 2023 was $40.0 million, as compared to Non-GAAP adjusted EBITDA2 of $57.0 million in the fiscal third quarter of 2022.
  • GAAP cash provided by operating activities was $33.2 million in the fiscal third quarter of 2023. Non-GAAP free cash flow3 was $29.9 million in the fiscal third quarter of 2023.

“While nothing has changed regarding our long-term view of the digital media industry or our strategic positioning within the industry, macro headwinds are impacting our near-term results,” said Bill Stone, CEO. “We expect current macro headwinds to continue into the first half of the calendar year, but our high-level strategic vision remains intact, as advertising spending tends to be among the first items to be negatively impacted at the onset of a cyclical downturn, but is typically also among the first items to rebound. We remain laser-focused on the execution of our core growth objectives, and effectively controlling that which we can control. We are making important progress on our SingleTap licensing business, new ad tech platform enhancements, and other initiatives that opportunistically leverage our on-device presence and first-party data. The history of Digital Turbine shows that we have successfully navigated challenges far more difficult than today’s macro environment, emerging stronger and better-positioned for long-term growth. We remain optimistic that we have the right culture, team, strategy and focus to win.”

Fiscal 2023 Third Quarter Financial Results

Total revenue for the third quarter of fiscal 2023 was $162.3 million. Total On-Device Solutions revenue before intercompany eliminations was $96.3 million. Before intercompany eliminations, total revenue from our App Growth Platform was $67.4 million.

GAAP net income for the third quarter of fiscal 2023 was $4.0 million, or $0.04 per share, as compared to GAAP net income of $7.0 million, or $0.07 per share for the third quarter of fiscal 2022. Non-GAAP adjusted net income1 for the third quarter of fiscal 2023 was $30.2 million, or $0.29 per share, as compared to Non-GAAP adjusted net income of $50.9 million, or $0.49 per share, in the third quarter of fiscal 2022.

Non-GAAP adjusted EBITDA2 for the third quarter of fiscal 2023 was $40.0 million, as compared to Non-GAAP adjusted EBITDA of $57.0 million in the third quarter of fiscal 2022. The reconciliations between GAAP and Non-GAAP financial results for all referenced periods are provided in the tables immediately following the Unaudited Condensed Consolidated Statements of Cash Flows below.

Business Outlook

Based on information available as of February 8, 2023, the Company currently expects the following for the full-year fiscal 2023:

  • Revenue of between $660 million and $670 million
  • Non-GAAP adjusted EBITDA2 of between $165 million and $170 million
  • Non-GAAP adjusted EPS1 of $1.15 to $1.20, based on approximately 104 million diluted shares outstanding and an effective tax rate of 25%

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 is the leading independent mobile growth platform and levels up the landscape for advertisers, publishers, carriers and OEMs. By integrating a full ad stack with proprietary technology built into devices by wireless operators and OEMs, Digital Turbine supercharges advertising and monetization. The company is headquartered in Austin, Texas, with global offices in New York, Los Angeles, San Francisco, London, Berlin, Singapore, Tel Aviv and other cities serving top agency, app developer and advertising markets. For additional information visit www.digitalturbine.com.

Conference Call

Management will host a conference call today at 4:30 p.m. ET to discuss its fiscal 2023 third quarter financial results and provide operational updates on the business. To participate, interested parties should dial 888-317-6003 in the United States, or 412-317-6061 from international locations, and enter access code 7637186. A webcast of the conference call will be available at ir.digitalturbine.com/events.

For those who are not able to join the live call, a playback will be available through February 15, 2023. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 4128001.

The conference call will discuss forward guidance and other material information.

Use of Non-GAAP Financial Measures

To supplement the Company’s condensed 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, change in fair value of contingent liability, transaction-related expenses and severance costs. 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), change in fair value of contingent liability, foreign exchange transaction gains/(losses), income tax provision, transaction-related expenses and severance costs. 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 Condensed Consolidated Statements of Cash Flows), excluding transaction-related expenses and severance costs, 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 and depreciation of software. 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:

  • a decline in general economic conditions nationally and internationally
  • decreased market demand for our products and services
  • market acceptance and brand awareness of our products
  • risks associated with indebtedness
  • the ability to comply with financial covenants in outstanding indebtedness
  • the ability to protect our intellectual property rights
  • risks associated with adoption of our platform among existing customers (including the impact of possible delays with major carrier and OEM partners in the roll out for mobile phones deploying our platform)
  • actual mobile device sales and sell-through where our platform is deployed is out of our control
  • risks associated with our ability to manage the business amid the COVID-19 pandemic and difficult macroeconomic environment
  • the impact of COVID-19 and the macroeconomic environment on our partners, digital advertising spend and consumer purchase behavior
  • the impact of COVID-19 and the macroeconomic environment on our results of operations
  • risks associated with new privacy laws, such as the European Union’s GDPR and similar laws which may require changes to our development and user interface for certain functionality of our mobile platform
  • risks associated with the activities of advertisers
  • risks associated with the timing of our platform software pushes to the embedded bases of carrier and OEM partners
  • risks associated with end user take rates of carrier and OEM software pushes which include our platform
  • new customer adoption and time to revenue with new carrier and OEM partners is subject to delays and factors out of our control
  • risks associated with fluctuations in the number of our platform slots across US carrier partners
  • required customization and technical integration which may slow down time to revenue notwithstanding the existence of a distribution agreement
  • risks associated with delays in major mobile phone launches, or the failure of such launches to achieve the scale
  • customer adoption that either we or the market may expect
  • the difficulty of extrapolating monthly demand to quarterly demand
  • the challenges, given the Company’s comparatively small size, to expand the combined Company’s global reach, accelerate growth and create a scalable, low-capex business model that drives EBITDA (as well as adjusted EBITDA)
  • ability as a smaller company to manage international operations
  • varying and often unpredictable levels of orders; the challenges inherent in technology development necessary to maintain the Company’s competitive advantage such as adherence to release schedules and the costs and time required for finalization and gaining market acceptance of new products
  • changes in economic conditions and market demand
  • rapid and complex changes occurring in the mobile marketplace
  • pricing and other activities by competitors
  • technology management risk as the Company needs to adapt to a rapidly developing mobile device marketplace, complex specifications of different carriers and the management of a complex technology platform given the Company’s relatively limited resources
  • system security risks and cyberattacks
  • risks and uncertainties associated with the integration of the acquisition of AdColony, including our ability to realize the anticipated benefits of the acquisition
  • risks and uncertainties associated with the integration of the acquisition of Fyber, including our ability to realize the anticipated benefits of the acquisition
  • challenges and risks associated with our rapid growth by acquisitions and resulting significant demands on our management and infrastructure
  • challenges and risks associated with our global operations and related business, political, regulatory, operational, financial, and economic risks as a result of our global operations
  • other risks including those described from time to time in Digital Turbine’s filings on Forms 10-K and 10-Q with the Securities and Exchange Commission (SEC), press releases and other communications.

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.

[email protected]

Digital Turbine, Inc. and Subsidiaries


Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss)

(Unaudited)

(in thousands, except per share amounts)




Three months ended December 31,



2022


2021

Net revenue


$                162,310


$                216,818

Costs of revenue and operating expenses





License fees and revenue share


73,370


109,053

Other direct costs of revenue


9,324


9,090

Product development


14,218


13,755

Sales and marketing


16,469


15,857

General and administrative


39,132


39,924

Total costs of revenue and operating expenses


152,513


187,679

Income from operations


9,797


29,139

Interest and other income / (expense), net





Change in fair value of contingent consideration



(18,200)

Interest expense, net


(6,913)


(2,195)

Foreign exchange transaction gain


17


2,122

Other income / (expense), net


8


(86)

Total interest and other income / (expense), net


(6,888)


(18,359)

Income before income taxes


2,909


10,780

Income tax provision / (benefit)


(1,153)


3,718

Net income


4,062


7,062

Less: net income attributable to non-controlling interest


43


48

Net income attributable to Digital Turbine, Inc.


4,019


7,014

Other comprehensive income / (loss)





Foreign currency translation adjustment


10,144


(8,389)

Comprehensive income / (loss)


14,206


(1,327)

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


59


(11)

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


$                  14,147


$                  (1,316)

Net income per common share





Basic


$                       0.04


$                       0.07

Diluted


$                       0.04


$                       0.07

Weighted-average common shares outstanding





Basic


99,108


96,548

Diluted


103,348


103,287

Digital Turbine, Inc. and Subsidiaries


Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)




December 31, 2022


March 31, 2022



(Unaudited)



ASSETS





Current assets





Cash


$               79,307


$           126,768

Restricted cash


554


394

Accounts receivable, net


231,001


263,139

Prepaid expenses and other current assets


31,912


20,570

Total current assets


342,774


410,871

Property and equipment, net


38,759


31,086

Right-of-use assets


10,973


15,439

Intangible assets, net


395,181


440,589

Goodwill


560,340


559,792

Other non-current assets


4,648


732

TOTAL ASSETS


$         1,352,675


$        1,458,509






LIABILITIES AND STOCKHOLDER’S EQUITY





Current liabilities





Accounts payable


$             154,320


$           167,858

Accrued license fees and revenue share


75,380


95,170

Accrued compensation


16,206


28,775

Acquisition purchase price liabilities



50,000

Current portion of debt



12,500

Other current liabilities


43,460


30,960

Total current liabilities


289,366


385,263

Long-term debt, net of debt issuance costs


422,310


520,785

Deferred tax liabilities, net


18,786


19,976

Other non-current liabilities


14,586


16,270

Total liabilities


745,048


942,294

Commitments and contingencies (Note 13)





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; 99,901,328 issued and
99,143,203 outstanding at December 31, 2022; 97,921,826 issued and
97,163,701 outstanding at March 31, 2022


10


10

Additional paid-in capital


810,994


745,661

Treasury stock (758,125 shares at December 31, 2022 and March 31, 2022)


(71)


(71)

Accumulated other comprehensive loss


(44,201)


(39,341)

Accumulated deficit


(161,183)


(191,788)

Total stockholders’ equity


605,649


514,571

Non-controlling interest


1,978


1,644

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY


$         1,352,675


$        1,458,509

Digital Turbine, Inc. and Subsidiaries


Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)




Three months ended December 31,



2022


2021

Cash flows from operating activities:





Net income


$              4,062


$              7,062

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization


20,137


15,965

Non-cash interest expense


211


202

Stock-based compensation expense


7,620


5,739

Change in fair value of contingent consideration



18,200

Right-of-use asset


(211)


1,319

Deferred income taxes


(266)


4,621

Foreign exchange transaction gain


(31)


(1,603)

(Increase) / decrease in assets:





Accounts receivable, gross


22,900


(42,680)

Allowance for doubtful accounts


760


443

Prepaid expenses and other current assets


(6,789)


(843)

Other non-current assets


(60)


(21)

Increase / (decrease) in liabilities:





Accounts payable


(16,484)


(13,209)

Accrued license fees and revenue share


(3,458)


27,995

Accrued compensation


1,978


12,188

Other current liabilities


2,378


(1,529)

Other non-current liabilities


458


1,859

Net cash provided by operating activities


33,205


35,708






Cash flows from investing activities





Equity investments


(4,000)


Business acquisitions, net of cash acquired


(2,708)


(136)

Capital expenditures


(5,668)


(5,281)

Net cash used in investing activities


(12,376)


(5,417)






Cash flows from financing activities





Proceeds from borrowings


18,000


102,779

Payment of debt issuance costs


(94)


(1,056)

Payment of deferred business acquisition consideration



(98,175)

Options and warrants exercised


156


659

Payment of withholding taxes for net share settlement of equity awards


(273)


(7,587)

Repayment of debt obligations


(43,000)


(6,367)

Net cash used in financing activities


(25,211)


(9,747)






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


1,030


(1,321)






Net change in cash and cash equivalents and restricted cash


(3,352)


19,223






Cash and cash equivalents and restricted cash, beginning of period


83,213


96,217






Cash and cash equivalents and restricted cash, end of period


$            79,861


$          115,440

REVENUE BY SEGMENT

(in thousands)

(Unaudited)










Three months ended December 31,



2022


2021


% Change

On Device Solutions


$           96,316


$         133,594


(28) %

App Growth Platform


67,407


89,113


(24) %

Elimination


(1,413)


(5,889)


(76) %

Consolidated


$         162,310


$         216,818


(25) %

GAAP INCOME FROM OPERATIONS TO NON-GAAP GROSS PROFIT

(in thousands)

(Unaudited)








Three months ended December 31,



2022


2021

Net revenue


$      162,310


$      216,818

Income from operations


9,797


29,139

Add-back items:





Product development


14,218


13,755

Sales and marketing


16,469


15,857

General and administrative


39,132


39,924

Depreciation of software included in other direct costs of revenue


1,618


753

Non-GAAP gross profit


$        81,234


$        99,428

Non-GAAP gross profit percentage


50 %


46 %











GAAP NET INCOME TO NON-GAAP ADJUSTED NET INCOME

(in thousands)

(Unaudited)








Three months ended December 31,



2022


2021

Net income


$          4,062


$          7,062

Add-back items:





Stock-based compensation expense


7,620


5,739

Amortization of intangibles


16,120


13,773

Adjustment to estimated earn-out liability



18,200

Transaction-related expenses


1,297


6,167

Severance costs


1,110


Non-GAAP adjusted net income


$        30,209


$        50,941

Non-GAAP adjusted net income


$            0.29


$            0.49

Weighted-average common shares outstanding, diluted


103,348


103,287

GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDA

(in thousands)

(Unaudited)








Three months ended December 31,



2022


2021

Net income


$              4,062


$              7,062

Add-back items:





Stock-based compensation expense


7,620


5,739

Depreciation and amortization


20,137


15,965

Interest expense, net


6,913


2,195

Other income / (expense), net


(8)


86

Change in fair value of contingent consideration



18,200

Foreign exchange transaction gain


(17)


(2,122)

Income tax provision / (benefit)


(1,153)


3,718

Transaction-related expenses


1,297


6,167

Severance costs


1,110


Non-GAAP adjusted EBITDA


$            39,961


$            57,010

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

(in thousands)

(Unaudited)








Three months ended December 31,



2022


2021

Net cash provided by operating activities


$            33,205


$            35,708

Capital expenditures


(5,668)


(5,281)

Transaction-related expenses


1,297


6,167

Severance costs


1,110


Non-GAAP free cash flow provided by operations


$            29,944


$            36,594

SOURCE Digital Turbine, Inc.

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