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AUSTIN, Texas, Nov. 9, 2016 /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 2017 second quarter ended September 30, 2016.
Recent Highlights:
"Digital Turbine made meaningful operational progress during the September quarter," said Bill Stone, CEO. "While unsatisfied with our A&P and Content results, we achieved 42% sequential growth in our O&O business despite slower-than-expected onboarding of key new partners and the much-publicized Samsung Note 7 recall during the quarter. Specifically, O&O revenue in the U.S. grew 38% sequentially, while International O&O revenue nearly doubled sequentially, as we grew revenue with our existing partners as well as with several new partners. With a total of 20 partners now utilizing the Ignite platform, we have successfully positioned our O&O business to achieve continued solid growth in the December quarter and beyond."
"With respect to the onboarding of new Ignite partners, we have made definitive progress in recent weeks and look forward to revenue growth with carriers such as AT&T, America Movil, Reliance Jio and Airtel in coming quarters. In addition, our pipeline remains strong, as demand for our offerings is at an all-time high. Our focus remains on turning that demand into faster time-to-revenue."
Mr. Stone concluded, "Execution and profitability remain the prevailing themes at Digital Turbine. The commitment level of our partners and the range of our opportunities has never been greater. We are making significant strides toward the realization of this opportunity, but we recognize that there is considerably more work to be performed in order to fully capitalize on our unique value proposition and generate the type of meaningful revenue and profit growth expected by our investors in the quarters ahead."
Second Quarter 2017 Financial Results
As a reminder, the Company names the components of its Advertising segment to better reflect the entities with whom it partners. Advertising is comprised of Operators & OEMs ("O&O"), which includes Ignite, Discover and other professional advertising services; and Advertisers & Publishers ("A&P"), which includes the former "Appia Core" business, as well as the developing RTB business. The Content business is comprised of Marketplace and Pay.
Revenue for the fiscal second quarter of 2017 was $22.8 million, representing growth of 10% versus the prior year quarter and a decline of 5% when compared to the fiscal first quarter of 2017. Advertising revenue of $15.2 million increased 11% versus the prior year period and 19% versus the fiscal first quarter. Within Advertising, O&O revenue reached a record $9.9 million, representing growth of 143% year-over-year and 42% when compared to the fiscal first quarter. Strength in the O&O business was primarily attributable to Ignite growth with preexisting carrier partners, but was also enhanced by the onset of revenue from new carrier partners in the quarter. O&O managed to achieve these record results despite the well-publicized Samsung Note 7 recall, which clearly had an adverse impact on revenue during the quarter.
A&P revenue of $5.3 million declined 44% year-over-year and 9% sequentially stemming from the ongoing shift in budget allocation toward programmatic and RTB away from legacy business development deals. While the Company has made some early progress with its own pivot to RTB and expects its uniquely valuable dataset to represent a strategic advantage in this business over time, RTB activities have yet to reach the critical mass necessary to keep pace with the dramatic industry shift in budget allocations.
Content revenue of $7.6 million increased 8% versus the comparable prior year period, yet declined 32% when compared to the fiscal first quarter of 2017. Within Content, DT Pay revenue of $7.2 million declined 33% quarter-over-quarter. The sequential decline in DT Pay revenue is largely driven by the pronounced impact of new double opt-in policies enacted by our largest DT Pay carrier partner during the preceding June quarter.
GAAP gross margin was 14% for the second quarter of fiscal 2017, modestly above the 12% GAAP gross margin for the fiscal first quarter. Excluding the amortization of intangibles, non-GAAP adjusted gross margin was 22%, as compared to 20% for the fiscal first quarter. The increase in GAAP and non-GAAP gross margin, despite a sequential decline in total revenue, was driven by a richer business mix during the quarter, driven by strong growth in our higher-margin O&O business. 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 below.
Net loss for the second quarter of fiscal 2017 was $7.3 million, or ($0.11) per share, as compared to the net loss for the fiscal first quarter of $7.4 million, or ($0.11) per share.
Non-GAAP adjusted EBITDA loss for the second quarter of fiscal 2017 was $3.0 million, as compared to a loss of $3.1 million for the fiscal first quarter. Please see 'Use of Non-GAAP Measures' at the end of this press release for the definition of adjusted EBITDA and a reconciliation to GAAP net loss.
About Digital Turbine, Inc.
Digital Turbine works at the convergence of media and mobile communications, delivering end-to-end products and solutions for mobile operators, device OEMs, app advertisers and publishers, that enable efficient user acquisition, app management and monetization opportunities. The company's products include Ignite™, a mobile device management solution with targeted app distribution capabilities, Discover™, a customized user experience and app discovery tool, Marketplace™, an application and content store, and Pay™, a content management and mobile payment solution. Digital Turbine Media encompasses a leading independent user acquisition network as well as an advertiser solution for unique and exclusive carrier inventory. Digital Turbine has delivered more than 150 million app installs for hundreds of advertisers. In addition, more than 31 million customers use Digital Turbine's solutions each month across more than 20 global operators. The company is headquartered in Austin, Texas, with global offices in Durham, San Francisco, Singapore, Sydney and Tel Aviv. For additional information visit www.digitalturbine.com or connect with Digital Turbine on Twitter at @DigitalTurbine.
www.digitalturbine.com
Twitter: https://twitter.com/DigitalTurbine
Facebook: https://www.facebook.com/DigitalTurbineInc
LinkedIn: https://www.linkedin.com/company/digital-turbine?trk=tyah&trkInfo=tas:digital+tur
Conference Call
Management will host a conference call today at 4:30 p.m. ET to discuss its second quarter financial results and provide operational updates on existing business, as well as newly announced carrier initiatives. 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 16, 2016. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 10093917.
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 and non-GAAP adjusted EBITDA. 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.
Non-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. 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 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 and the change in fair value of derivatives that are recorded related to the recent convertible notes offering. 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.
Non-GAAP adjusted gross profit and gross margin and adjusted EBITDA 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
(512) 800-0274
brian.bartholomew@digitalturbine.com
Carolyn Capaccio/Sanjay M. Hurry
LHA
(212) 838-3777
digitalturbine@lhai.com
(Financial Tables Follow)
Digital Turbine, Inc. and Subsidiaries |
||||||||
Consolidated Statements of Operations and Comprehensive Loss |
||||||||
(in thousands, except per share amounts) |
||||||||
3 Months Ended |
3 Months Ended |
6 Months Ended |
6 Months Ended |
|||||
September 30, 2016 |
September 30, 2015 |
September 30, 2016 |
September 30, 2015 |
|||||
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||
Net revenues |
$ 22,832 |
$ 20,734 |
$ 46,871 |
$ 39,420 |
||||
Cost of revenues |
||||||||
License fees and revenue share |
17,797 |
16,099 |
37,021 |
30,320 |
||||
Other direct cost of revenues |
1,882 |
4,558 |
3,762 |
6,749 |
||||
Total cost of revenues |
19,679 |
20,657 |
40,783 |
37,069 |
||||
Gross profit |
3,153 |
77 |
6,088 |
2,351 |
||||
Operating expenses |
||||||||
Product development |
3,117 |
2,406 |
5,952 |
5,160 |
||||
Sales and marketing |
1,528 |
1,468 |
2,972 |
2,750 |
||||
General and administrative |
4,815 |
4,347 |
9,920 |
9,736 |
||||
Total operating expenses |
9,460 |
8,221 |
18,844 |
17,646 |
||||
Loss from operations |
(6,307) |
(8,144) |
(12,756) |
(15,295) |
||||
Interest and other expense, net |
||||||||
Interest expense, net |
(622) |
(405) |
(1,304) |
(896) |
||||
Foreign exchange transaction loss |
(1) |
(13) |
(4) |
(12) |
||||
Change in fair value of convertible note |
(430) |
- |
(430) |
- |
||||
Change in fair value of warrant liability |
(140) |
- |
(140) |
- |
||||
Loss on extinguishment of debt |
(293) |
- |
(293) |
- |
||||
Loss on disposal of fixed assets |
- |
- |
- |
(23) |
||||
Other income |
15 |
11 |
33 |
28 |
||||
Total interest and other expense, net |
(1,471) |
(407) |
(2,138) |
(903) |
||||
Loss from operations before income taxes |
(7,778) |
(8,551) |
(14,894) |
(16,198) |
||||
Income tax provision / (benefit) |
(437) |
(229) |
(141) |
243 |
||||
Net loss |
$ (7,341) |
$ (8,322) |
$ (14,753) |
$ (16,441) |
||||
Other comprehensive income / (loss): |
||||||||
Foreign currency translation adjustment |
(80) |
111 |
(53) |
62 |
||||
Comprehensive loss: |
$ (7,421) |
$ (8,211) |
$ (14,806) |
$ (16,379) |
||||
Basic and diluted net loss per common share |
$ (0.11) |
$ (0.14) |
$ (0.22) |
$ (0.29) |
||||
Weighted average common shares outstanding, basic and diluted |
66,457 |
57,274 |
66,358 |
57,328 |
Digital Turbine, Inc. and Subsidiaries |
|||
Consolidated Balance Sheets |
|||
(in thousands, except par and share amounts) |
|||
September 30, 2016 |
March 31, 2016 |
||
(Unaudited) |
|||
ASSETS |
|||
Current assets |
|||
Cash and cash equivalents |
$ 9,416 |
$ 11,231 |
|
Restricted cash |
321 |
- |
|
Accounts receivable, net of allowances of $471 and $464, respectively |
17,477 |
17,519 |
|
Deposits |
152 |
213 |
|
Prepaid expenses and other current assets |
515 |
583 |
|
Total current assets |
27,881 |
29,546 |
|
Property and equipment, net |
2,462 |
1,784 |
|
Cost method investment |
999 |
999 |
|
Deferred tax assets |
401 |
500 |
|
Intangible assets, net |
8,729 |
12,490 |
|
Goodwill |
76,621 |
76,621 |
|
TOTAL ASSETS |
$ 117,093 |
$ 121,940 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current liabilities |
|||
Accounts payable |
$ 20,071 |
$ 15,300 |
|
Accrued license fees and revenue share |
8,613 |
9,622 |
|
Accrued compensation |
1,073 |
1,353 |
|
Short-term debt, net of debt issuance costs and discounts of $0 and $568, respectively |
- |
10,432 |
|
Other current liabilities |
1,660 |
2,147 |
|
Total current liabilities |
31,417 |
38,854 |
|
Convertible notes, net of debt issuance costs and discounts of $6,616 and $0, respectively |
9,384 |
- |
|
Convertible note embedded derivative liability |
4,123 |
- |
|
Warrant liability |
1,363 |
- |
|
Other noncurrent liabilities |
835 |
815 |
|
Total liabilities |
47,122 |
39,669 |
|
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; |
8 |
8 |
|
Additional paid-in capital |
297,929 |
295,423 |
|
Treasury stock (754,599 shares at September 30, 2016 and March 31, 2016) |
(71) |
(71) |
|
Accumulated other comprehensive loss |
(255) |
(202) |
|
Accumulated deficit |
(227,740) |
(212,987) |
|
Total stockholders' equity |
69,971 |
82,271 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ 117,093 |
$ 121,940 |
Digital Turbine, Inc. and Subsidiaries |
|||
Consolidated Statement of Cash Flows |
|||
(in thousands) |
|||
6 Months Ended |
6 Months Ended |
||
September 30, 2016 |
September 30, 2015 |
||
(Unaudited) |
(Unaudited) |
||
Cash flows from operating activities |
|||
Net loss |
$ (14,753) |
$ (16,441) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|||
Depreciation and amortization |
4,199 |
6,850 |
|
Loss on disposal of fixed assets |
- |
23 |
|
Change in allowance for doubtful accounts |
7 |
3 |
|
Amortization of debt discount |
237 |
236 |
|
Amortization of debt issuance costs |
444 |
- |
|
Accrued interest |
(91) |
(16) |
|
Stock-based compensation |
2,310 |
2,524 |
|
Stock-based compensation for services rendered |
166 |
600 |
|
Change in fair value of convertible note embedded derivative liability |
430 |
- |
|
Change in fair value of warrant liability |
140 |
- |
|
Loss on extinguishment of debt |
293 |
- |
|
Stock issued for settlement of liability |
- |
283 |
|
(Increase)/decrease in assets: |
|||
Restricted cash transferred to / (from) operating cash |
(321) |
200 |
|
Accounts receivable |
35 |
(2,313) |
|
Deposits |
61 |
(1) |
|
Deferred tax assets |
99 |
- |
|
Deferred financing costs |
- |
(187) |
|
Prepaid expenses and other current assets |
68 |
243 |
|
Increase/(decrease) in liabilities: |
|||
Accounts payable |
4,771 |
5,177 |
|
Accrued license fees and revenue share |
(1,009) |
2,336 |
|
Accrued compensation |
(280) |
(597) |
|
Other current liabilities |
(393) |
(585) |
|
Other non-current liabilities |
20 |
- |
|
Net cash used in operating activities |
(3,567) |
(1,665) |
|
Cash flows from investing activities |
|||
Capital expenditures |
(1,115) |
(610) |
|
Net cash used in investing activities |
(1,115) |
(610) |
Digital Turbine, Inc. and Subsidiaries |
|||
Consolidated Statement of Cash Flows |
|||
(in thousands) |
|||
6 Months Ended |
6 Months Ended |
||
September 30, 2016 |
September 30, 2015 |
||
(Unaudited) |
(Unaudited) |
||
Cash flows from financing activities |
|||
Cash received in convertible notes issuance |
16,000 |
- |
|
Repayment of debt obligations |
(11,000) |
(300) |
|
Payment debt issuance costs |
(2,091) |
- |
|
Options exercised |
11 |
49 |
|
Net cash provided / (used) in financing activities |
2,920 |
(251) |
|
Effect of exchange rate changes on cash and cash equivalents |
(53) |
39 |
|
Net change in cash and cash equivalents |
(1,815) |
(2,487) |
|
Cash and cash equivalents, beginning of period |
11,231 |
7,069 |
|
Cash and cash equivalents, end of period |
$ 9,416 |
$ 4,582 |
GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN |
|||
(in thousands) |
|||
3 Months Ended |
3 Months Ended |
||
September 30, 2016 |
June 30, 2016 |
||
(Unaudited) |
(Unaudited) |
||
Revenue |
$ 22,832 |
$ 24,039 |
|
Gross profit |
$ 3,153 |
$ 2,935 |
|
Gross margin percentage |
14% |
12% |
|
Add back: Amortization of intangibles |
$ 1,882 |
$ 1,880 |
|
Non-GAAP gross profit |
$ 5,035 |
$ 4,815 |
|
Non-GAAP gross margin percentage |
22% |
20% |
|
GAAP NET LOSS TO ADJUSTED EBITDA |
|||
(in thousands) |
|||
3 Months Ended |
3 Months Ended |
||
September 30, 2016 |
June 30, 2016 |
||
(Unaudited) |
(Unaudited) |
||
Net Loss |
$ (7,341) |
$ (7,412) |
|
Add back items: |
|||
Stock and stock option compensation |
1,173 |
1,303 |
|
Amortization of intangibles |
1,882 |
1,880 |
|
Depreciation expense |
223 |
214 |
|
Interest expense |
622 |
682 |
|
Other income |
(15) |
(18) |
|
Change in fair value of convertible note |
430 |
— |
|
Change in fair value of warrant liability |
140 |
— |
|
Loss on extinguishment of debt |
293 |
— |
|
Foreign exchange transaction loss |
1 |
3 |
|
Income tax provision / (benefit) |
(437) |
296 |
|
Adjusted EBITDA |
$ (3,029) |
$ (3,052) |
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SOURCE Digital Turbine, Inc.
Released November 9, 2016