11/07/2017 | Press release | Archived content
AUSTIN, Texas, Nov. 7, 2017 /PRNewswire/ -- Digital Turbine, Inc. (Nasdaq: APPS), the Company empowering operators and Original Equipment Manufacturers ("OEMs") around the globe with end-to-end mobile solutions, announced financial results for the fiscal second quarter ended September 30, 2017.
Recent Highlights:
"The September quarter was another solid quarter for Digital Turbine," said Bill Stone, CEO. "The Company made significant progress in a number of key focus areas. We successfully scaled additional phones and slots with several partners recently added to our growing platform. At the same time, we continue to work closely with all of our partners around the world to develop new products and services designed to enhance the overall end-user experience while generating additional sources of high-margin revenue. In addition to fostering higher engagement levels with existing and prospective OEM and carrier partners during the quarter, we also welcomed many well-respected advertisers to our platform, as we continue to promote awareness for our unique value proposition and strive to gain share from other less effective and less accountable modes of mobile advertising in today's marketplace."
"Healthy operating metrics within our O&O business enabled the Company to achieve increased profitability on a non-GAAP adjusted EBITDA basis once again during the quarter. Our primary objective here at Digital Turbine is to utilize the power of our platform to generate new revenue streams with enhanced margins, and we are taking important strides toward the realization of this vision. Furthermore, I am very excited about several upcoming partner launches and product initiatives currently under development that have the potential to meaningfully expand the platform's reach and contribute to the next phase of revenue and profit growth for Digital Turbine."
Mr. Stone concluded, "I am very pleased with the progress that we are making as an overall organization right now, and I am more convinced than ever that Digital Turbine has the platform, the partners, the people and the passion to deliver a meaningful return to shareholders in the second half of fiscal 2018 and beyond."
Fiscal 2018 Second Quarter Financial Results
Total revenue for the second quarter of fiscal 2018 was $27.9 million, representing an increase of 22% year-over-year. Advertising segment revenue of $18.1 million increased 19% year-over-year. Within Advertising, O&O revenue of $15.9 million during the second quarter of fiscal 2018 increased 61% year-over-year. Growth in the O&O business was attributable to organic growth derived from pre-existing partners, as well as incremental contributions from new carrier and OEM partners added to the Ignite platform over the preceding 12 months. Importantly, the Company has also benefitted from higher revenue-per-slot rates on new high-end phone models with its leading tier-one carrier partners, which is reflective of healthy advertiser demand.
Content revenue for the second quarter of fiscal 2018 of $9.8 million increased 28% year-over-year. The continuing rebound in Content revenue reflects the addition of new merchants and services.
GAAP gross margin was 26% in the second quarter of fiscal 2018, as compared to 14% in the second quarter of fiscal 2017. Non-GAAP adjusted gross margin3 was 29% for the second quarter of fiscal 2018, as compared to 22% in the second quarter of fiscal 2017. Gross margin expansion year-over-year was driven by an improving revenue mix, as the higher-margin O&O business has increased from 43% of total revenue in the fiscal second quarter of 2017 to 57% of total revenue in the fiscal second quarter of 2018. The reconciliation between GAAP and non-GAAP financial results for all referenced periods is provided in a table immediately following the Unaudited Consolidated Statements of Operations and Comprehensive Loss included below.
Net loss for the second quarter of fiscal 2018 was $6.5 million, or ($0.10) per share, as compared to the net loss for the first quarter of fiscal 2018 of $4.2 million, or ($0.06) per share. Non-GAAP adjusted net loss1 was $0.6 million, or ($0.01) per share, in the second quarter of fiscal 2018, as compared to a net loss of $0.9 million, or ($0.01) per share, in the first quarter of fiscal 2018.
Non-GAAP adjusted EBITDA2 for the second quarter of fiscal 2018 was $0.4 million, as compared to a loss of $3.0 million for the second quarter of fiscal 2017. Growth in non-GAAP adjusted EBITDA was achieved primarily via the combination of gross profit growth in the O&O business and effective expense management. Please see 'Use of Non-GAAP Measures' at the end of this press release for the definition of Non-GAAP adjusted EBITDA and a reconciliation to GAAP net loss.
Business Outlook
Based on information available as of November 7, 2017, the Company expects third quarter of fiscal 2018 revenue of approximately $31 million, with further sequential improvement in non-GAAP adjusted EBITDA2. The Company reaffirms its expectations to generate positive non-GAAP adjusted EBITDA2 for the full year fiscal 2018.
About Digital Turbine, Inc.
Digital Turbine works at the convergence of media and mobile communications, connecting top mobile operators, OEMs and publishers with app developers and advertisers worldwide. Its comprehensive Mobile Delivery Platform powers frictionless user acquisition and engagement, operational efficiency and monetization opportunities. Digital Turbine's technology platform has been adopted by more than 30 mobile operators and OEMs, and has delivered more than 700 million app preloads for tens of thousands advertising campaigns. The company is headquartered in Austin, Texas, with global offices in Durham, Mumbai, San Francisco, Singapore, Sydney and Tel Aviv. For additional information visit www.digitalturbine.com.
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Conference Call
Management will host a conference call today at 4:30 p.m. ET to discuss its first quarter financial results and provide operational updates on existing business. To participate, interested parties should dial 855-238-2713 in the United States or 412-542-4111 from international locations. 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 November 14, 2017. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 10113911.
The conference call will discuss guidance and other material information.
Use of Non-GAAP Financial Measures
To supplement the Company's condensed financial statements presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), Digital Turbine uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP adjusted gross profit, non-GAAP gross margin, non-GAAP adjusted EBITDA, and Non-GAAP adjusted net income and EPS. 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 loss and EPS are defined as GAAP net income and EPS adjusted to exclude the effect of stock-based compensation, amortization of intangibles, changes in the fair value of derivatives and warrants related to the September 2016 convertible notes offering, and tax adjustments due to updates resulting from finalization of a transfer pricing study. 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 loss excluding the following cash and non-cash expenses: interest expense, foreign transaction gains (losses), income taxes, depreciation and amortization, stock-based compensation expense, the change in fair value of derivatives and warrants that are recorded related to the September 2016 convertible notes offering, other income / (expense), impairment of intangible assets, loss on disposal of fixed assets, and loss on extinguishment of debt. Readers are cautioned that Non-GAAP adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with U.S. GAAP as an indicator of performance, which is the most comparable measure under GAAP.
3Non-GAAP adjusted gross profit and gross margin are defined as GAAP gross profit and gross margin adjusted to exclude the effect of intangible amortization expense, impairment of intangible assets, and depreciation of software. Readers are cautioned that Non-GAAP adjusted gross profit and gross margin should not be construed as an alternative to gross margin 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 gross profit and gross margin, adjusted EBITDA, and Non-GAAP adjusted net income and EPS 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 the U.S. federal securities laws. 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:
Investor Relations Contacts:
Brian Bartholomew
Digital Turbine
[email protected]
Digital Turbine, Inc. and Subsidiaries |
||||||||
Consolidated Statements of Operations and Comprehensive Loss |
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|
||||||||
(in thousands, except per share amounts) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
3 Months Ended |
|
3 Months Ended |
|
6 Months Ended |
|
6 Months Ended |
|
|
September 30, 2017 |
|
September 30, 2016 |
|
September 30, 2017 |
|
September 30, 2016 |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
Net revenues |
|
$ 27,891 |
|
$ 22,832 |
|
$ 54,011 |
|
$ 46,871 |
Cost of revenues |
|
|
|
|
|
|
|
|
License fees and revenue share |
|
19,885 |
|
17,797 |
|
38,766 |
|
37,021 |
Other direct cost of revenues |
|
643 |
|
1,882 |
|
1,266 |
|
3,762 |
Total cost of revenues |
|
20,528 |
|
19,679 |
|
40,032 |
|
40,783 |
Gross profit |
|
7,363 |
|
3,153 |
|
13,979 |
|
6,088 |
Operating expenses |
|
|
|
|
|
|
|
|
Product development |
|
2,837 |
|
3,117 |
|
5,595 |
|
5,952 |
Sales and marketing |
|
1,688 |
|
1,528 |
|
3,246 |
|
2,972 |
General and administrative |
|
4,088 |
|
4,815 |
|
7,912 |
|
9,920 |
Total operating expenses |
|
8,613 |
|
9,460 |
|
16,753 |
|
18,844 |
Loss from operations |
|
(1,250) |
|
(6,307) |
|
(2,774) |
|
(12,756) |
Interest and other expense, net |
|
|
|
|
|
|
|
|
Interest expense, net |
|
(662) |
|
(622) |
|
(1,369) |
|
(1,304) |
Foreign exchange transaction loss |
|
(73) |
|
(1) |
|
(217) |
|
(4) |
Change in fair value of convertible note |
|
(3,344) |
|
(430) |
|
(4,652) |
|
(430) |
Change in fair value of warrant liability |
|
(1,164) |
|
(140) |
|
(1,628) |
|
(140) |
Loss on extinguishment of debt |
|
(882) |
|
(293) |
|
(882) |
|
(293) |
Other income |
|
33 |
|
15 |
|
36 |
|
33 |
Total interest and other expense, net |
|
(6,092) |
|
(1,471) |
|
(8,712) |
|
(2,138) |
Loss from operations before income taxes |
|
(7,342) |
|
(7,778) |
|
(11,486) |
|
(14,894) |
Income tax benefit |
|
(884) |
|
(437) |
|
(853) |
|
(141) |
Net loss |
|
$ (6,458) |
|
$ (7,341) |
|
$ (10,633) |
|
$ (14,753) |
|
|
|
|
|
|
|
|
|
Other comprehensive income / (loss) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
3 |
|
(80) |
|
(5) |
|
(53) |
Comprehensive loss |
|
$ (6,455) |
|
$ (7,421) |
|
$ (10,638) |
|
$ (14,806) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share |
|
$ (0.10) |
|
$ (0.11) |
|
$ (0.16) |
|
$ (0.22) |
Weighted average common shares outstanding, basic and diluted |
66,846 |
|
66,457 |
|
66,723 |
|
66,358 |
Digital Turbine, Inc. and Subsidiaries |
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Consolidated Balance Sheets |
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|
|||
(in thousands, except par value and share amounts) |
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|
|
|
|
|
September 30, 2017 |
|
March 31, 2017 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets |
|
|
|
Cash |
$ 5,867 |
|
$ 6,149 |
Restricted cash |
331 |
|
331 |
Accounts receivable, net of allowances of $832 and $597, respectively |
23,787 |
|
16,554 |
Deposits |
117 |
|
121 |
Prepaid expenses and other current assets |
444 |
|
510 |
Total current assets |
30,546 |
|
23,665 |
Property and equipment, net |
2,565 |
|
2,377 |
Deferred tax assets |
688 |
|
352 |
Intangible assets, net |
3,393 |
|
4,565 |
Goodwill |
76,621 |
|
76,621 |
TOTAL ASSETS |
$ 113,813 |
|
$ 107,580 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ 23,277 |
|
$ 19,868 |
Accrued license fees and revenue share |
10,442 |
|
8,529 |
Accrued compensation |
1,876 |
|
1,073 |
Short-term debt, net of debt issuance costs of $290 and $0, respectively |
2,210 |
|
- |
Other current liabilities |
1,194 |
|
1,304 |
Total current liabilities |
38,999 |
|
30,774 |
Convertible notes, net of debt issuance costs and discounts of $3,491 and $6,315, respectively |
6,509 |
|
9,685 |
Convertible note embedded derivative liability |
5,116 |
|
3,218 |
Warrant liability |
2,704 |
|
1,076 |
Other non-current liabilities |
241 |
|
782 |
Total liabilities |
53,569 |
|
45,535 |
Stockholders' equity |
|
|
|
Preferred stock |
|
|
|
Series A convertible preferred stock at $0.0001 par value; |
100 |
|
100 |
Common stock |
|
|
|
$0.0001 par value: 200,000,000 shares authorized; |
10 |
|
8 |
Additional paid-in capital |
308,415 |
|
299,580 |
Treasury stock (754,599 shares at September 30, 2017 and March 31, 2017) |
(71) |
|
(71) |
Accumulated other comprehensive loss |
(326) |
|
(321) |
Accumulated deficit |
(247,884) |
|
(237,251) |
Total stockholders' equity |
60,244 |
|
62,045 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ 113,813 |
|
$ 107,580 |
Digital Turbine, Inc. and Subsidiaries |
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Consolidated Statement of Cash Flows |
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|
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(in thousands) |
|||
|
|
|
|
|
6 Months Ended |
|
6 Months Ended |
|
September 30, 2017 |
|
September 30, 2016 |
|
(Unaudited) |
|
(Unaudited) |
Cash flows from operating activities |
|
|
|
Net loss |
$ (10,633) |
|
$ (14,753) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
Depreciation and amortization |
1,808 |
|
4,199 |
Change in allowance for doubtful accounts |
235 |
|
7 |
Amortization of debt discount and debt issuance costs |
680 |
|
681 |
Accrued interest |
(24) |
|
(91) |
Stock-based compensation |
1,479 |
|
2,310 |
Stock-based compensation for services rendered |
150 |
|
166 |
Change in fair value of convertible note embedded derivative liability |
4,652 |
|
430 |
Change in fair value of warrant liability |
1,628 |
|
140 |
Loss on extinguishment of debt |
882 |
|
293 |
(Increase)/decrease in assets: |
|
|
|
Restricted cash transferred from operating cash |
- |
|
(321) |
Accounts receivable |
(7,468) |
|
35 |
Deposits |
4 |
|
61 |
Deferred tax assets |
(336) |
|
99 |
Prepaid expenses and other current assets |
66 |
|
68 |
Increase/(decrease) in liabilities: |
|
|
|
Accounts payable |
3,409 |
|
4,771 |
Accrued license fees and revenue share |
1,912 |
|
(1,009) |
Accrued compensation |
803 |
|
(280) |
Other current liabilities |
(86) |
|
(393) |
Other non-current liabilities |
(541) |
|
20 |
Net cash used in operating activities |
(1,380) |
|
(3,567) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Capital expenditures |
(823) |
|
(1,115) |
Net cash used in investing activities |
(823) |
|
(1,115) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Cash received from issuance of convertible notes |
- |
|
16,000 |
Proceeds from short-term borrowings |
2,500 |
|
- |
Options exercised |
19 |
|
11 |
Repayment of debt obligations |
(247) |
|
(11,000) |
Payment of debt issuance costs |
(346) |
|
(2,091) |
Net cash provided in financing activities |
1,926 |
|
2,920 |
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
(5) |
|
(53) |
|
|
|
|
Net change in cash and cash equivalents |
(282) |
|
(1,815) |
|
|
|
|
Cash and cash equivalents, beginning of period |
6,149 |
|
11,231 |
|
|
|
|
Cash and cash equivalents, end of period |
$ 5,867 |
|
$ 9,416 |
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
Common stock of the Company issued for extinguishment of debt |
$ 7,187 |
|
$ - |
GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN |
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|
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(in thousands) |
|||
|
|||
|
3 Months Ended |
|
3 Months Ended |
|
September 30, 2017 |
|
June 30, 2017 |
|
(Unaudited) |
|
(Unaudited) |
Revenue |
$ 27,891 |
|
$ 26,120 |
Gross profit |
$ 7,363 |
|
$ 6,616 |
Gross margin percentage |
26% |
|
25% |
Add back items: |
|
|
|
Amortization of intangibles |
$ 582 |
|
$ 590 |
Depreciation of software |
61 |
|
33 |
Non-GAAP gross profit |
$ 8,006 |
|
$ 7,239 |
Non-GAAP gross margin percentage |
29% |
|
28% |
|
|
|
|
|
|
|
|
GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA |
|||
|
|||
(in thousands) |
|||
|
|||
|
3 Months Ended |
|
3 Months Ended |
|
September 30, 2017 |
|
June 30, 2017 |
|
(Unaudited) |
|
(Unaudited) |
Net Loss |
$ (6,458) |
|
$ (4,175) |
Add back items: |
|
|
|
Stock and stock option compensation |
765 |
|
864 |
Amortization of intangibles |
582 |
|
590 |
Depreciation expense |
338 |
|
298 |
Interest expense, net |
662 |
|
707 |
Other income |
(33) |
|
(3) |
Change in fair value of convertible note |
3,344 |
|
1,308 |
Change in fair value of warrant liability |
1,164 |
|
464 |
Loss on extinguishment of debt |
882 |
|
- |
Foreign exchange transaction loss |
73 |
|
144 |
Income tax provision / (benefit) |
(884) |
|
31 |
Non-GAAP Adjusted EBITDA |
$ 435 |
|
$ 228 |
|
|
|
|
|
|
|
|
GAAP NET LOSS TO NON-GAAP ADJUSTED NET LOSS |
|||
|
|||
(in thousands) |
|||
|
|||
|
3 Months Ended |
|
3 Months Ended |
|
September 30, 2017 |
|
June 30, 2017 |
|
(Unaudited) |
|
(Unaudited) |
Net Loss |
$ (6,458) |
|
$ (4,175) |
Add back items: |
|
|
|
Stock and stock option compensation |
765 |
|
864 |
Amortization and impairment of intangibles |
582 |
|
590 |
Change in fair value of convertible note |
4,508 |
|
1,772 |
Loss on extinguishment of debt |
882 |
|
- |
Tax adjustment (1) |
(848) |
|
- |
Non-GAAP Adjusted Net Loss |
$ (569) |
|
$ (949) |
|
|
|
|
Non-GAAP Adjusted Net Loss per share |
$ (0.01) |
|
$ (0.01) |
Weighted average common shares outstanding, basic and diluted |
66,846 |
|
66,599 |
|
|
|
|
(1) A tax benefit of $848k resulted during the three months ended September 30, 2017. These non cash changes to the tax provision and benefit reported in the current quarter are largely due to updates resulting from finalization of a transfer pricing study. |
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SOURCE Digital Turbine, Inc.
Released November 7, 2017