apps-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35958

DIGITAL TURBINE, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						22-2267658
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)
110 San Antonio Street, Suite 160, Austin, TX						78701
(Address of Principal Executive Offices)						(Zip Code)

(512) 387-7717

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


Common Stock, Par Value $0.0001 Per Share	APPS	The Nasdaq Stock Market LLC
		(NASDAQ Capital Market)
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 31, 2022, the Company had 96,961,158 shares of its common stock, $0.0001 par value per share, outstanding.

Digital Turbine, Inc.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED December 31, 2021

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	3
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4.	CONTROLS AND PROCEDURES	38
PART II	OTHER INFORMATION	40
ITEM 1.	LEGAL PROCEEDINGS	40
ITEM 1A.	RISK FACTORS	40
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40
ITEM 4.	MINE SAFETY DISCLOSURES	40
ITEM 5.	OTHER INFORMATION	40
ITEM 6.	EXHIBITS	41
	SIGNATURES	42

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets1

(in thousands, except par value and share amounts)


	December 31, 2021		March 31, 2021
	(Unaudited)
ASSETS
Current assets
Cash	$	115,046	$	30,778
Restricted cash	394		340
Accounts receivable, net	291,200		61,985
Prepaid expenses and other current assets	21,928		4,282
Total current assets	428,568		97,385
Property and equipment, net	25,862		13,050
Right-of-use assets	16,657		3,495
Intangible assets, net	446,535		53,300
Goodwill	554,975		80,176
Deferred tax assets, net	—		12,963
Other non-current assets	883		—
TOTAL ASSETS	$	1,473,480	$	260,369

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable	$	171,562	$	34,953
Accrued license fees and revenue share	111,173		46,196
Accrued compensation	37,106		9,817
Acquisition purchase price liabilities	253,700		—
Short-term debt	12,501		14,557
Other current liabilities	23,586		5,626
Total current liabilities	609,628		111,149
Long-term debt, net of debt issuance costs	341,590		—
Deferred tax liabilities, net	18,856		—
Other non-current liabilities	17,540		4,108
Total liabilities	987,614		115,257
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; 97,471,352 issued and 96,731,227 outstanding at December 31, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021	10		10
Additional paid-in capital	740,592		373,310
Treasury stock (758,125 shares at December 31, 2021 and March 31, 2021)	(71)		(71)
Accumulated other comprehensive loss	(45,051)		(903)
Accumulated deficit	(211,888)		(227,334)
Total stockholders' equity	483,692		145,112
Non-controlling interest	2,174		—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,473,480	$	260,369

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss)1

(Unaudited)

(in thousands, except per share amounts)


	Three months ended December 31,				Nine months ended December 31,
	2021		2020		2021		2020
Net revenue	$	375,487	$	88,592	$	898,307	$	218,497
Costs of revenue and operating expenses
License fees and revenue share	267,722		50,144		619,215		122,976
Other direct costs of revenue	5,125		749		11,496		1,971
Product development	17,720		5,202		51,171		13,827
Sales and marketing	15,857		5,219		47,072		14,372
General and administrative	39,924		6,761		104,537		22,096
Total costs of revenue and operating expenses	346,348		68,075		833,491		175,242
Income from operations	29,139		20,517		64,816		43,255
Interest and other income / (expense), net
Change in fair value of contingent consideration	(18,200)		(4,662)		(40,287)		(15,419)
Interest expense, net	(2,195)		(266)		(5,307)		(859)
Foreign exchange transaction gain	2,122		—		1,603		—
Other expense, net	(86)		(13)		(598)		(51)
Total interest and other income / (expense), net	(18,359)		(4,941)		(44,589)		(16,329)
Income before income taxes	10,780		15,576		20,227		26,926
Income tax provision	3,718		1,061		4,799		2,098
Net income	7,062		14,515		15,428		24,828
Less: net income / (loss) attributable to non-controlling interest	48		—		(18)		—
Net income attributable to Digital Turbine, Inc.	7,014		14,515		15,446		24,828
Other comprehensive loss
Foreign currency translation adjustment	(8,389)		(132)		(45,062)		(319)
Comprehensive income / (loss)	(1,327)		14,383		(29,634)		24,509
Less: comprehensive loss attributable to non-controlling interest	(11)		—		(932)		—
Comprehensive income / (loss) attributable to Digital Turbine, Inc.	$	(1,316)	$	14,383	$	(28,702)	$	24,509
Net income per common share
Basic	$	0.07	$	0.16	$	0.16	$	0.28
Diluted	$	0.07	$	0.15	$	0.15	$	0.26
Weighted-average common shares outstanding
Basic	96,548		89,003		94,620		88,140
Diluted	103,287		96,976		101,346		95,563

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows1

(Unaudited)

(in thousands)


	Nine months ended December 31,
	2021		2020
Cash flows from operating activities
Net income	$	15,428	$	24,828
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,946		5,062
Non-cash interest expense	500		55

Stock-based compensation expense	15,369		4,286
Foreign exchange transaction (gain) / loss	(1,603)		—
Change in fair value of contingent consideration	40,287		15,419
Payment of contingent consideration in excess of amount capitalized at acquisition	—		(5,419)
Right-of-use asset	3,270		430
Deferred income taxes	4,799		—
(Increase) / decrease in assets:
Accounts receivable, gross	(104,535)		(26,746)
Allowance for credit losses	412		854
Prepaid expenses and other current assets	(5,760)		1,698
Other non-current assets	74		—
Increase / (decrease) in liabilities:
Accounts payable	38,467		2,563
Accrued license fees and revenue share	29,377		16,765
Accrued compensation	(33,506)		4,029
Other current liabilities	1,114		5,273
Other non-current liabilities	(1,177)		(485)
Net cash provided by operating activities	43,462		48,612

Cash flows from investing activities
Business acquisitions, net of cash acquired	(148,192)		(7,968)
Capital expenditures	(15,692)		(6,545)
Net cash used in investing activities	(163,884)		(14,513)

Cash flows from financing activities
Payment of contingent consideration	—		(16,957)
Proceeds from borrowings	369,913		—
Payment of debt issuance costs	(4,044)		—
Payment of deferred business acquisition consideration	(98,175)		—
Options and warrants exercised	2,814		5,927
Payment of withholding taxes for net share settlement of equity awards	(7,587)		—
Repayment of debt obligations	(52,623)		(750)
Net cash provided by / (used in) financing activities	210,298		(11,780)

Effect of exchange rate changes on cash	(5,554)		(319)

Net change in cash	84,322		22,000

Cash and restricted cash, beginning of period	31,118		21,659

Cash and restricted cash, end of period	$	115,440	$	43,659

Supplemental disclosure of cash flow information
Interest paid	$	3,882	$	832
Income taxes paid	$	954	$	—

Supplemental disclosure of non-cash activities
Common stock for the acquisition of Fyber	$	356,686	$	—
Unpaid cash consideration for the acquisition of Fyber Minority Interest	$	3,106	$	—

Fair value of contingent consideration in connection with business acquisition	$	204,500	$	—

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


	Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2021	89,790,086	$	10	100,000	$	100	758,125	$	(71)	$	373,310	$	(903)	$	(227,334)	$	—	$	145,112
Net income	—	—		—	—		—	—		—		—		14,284		(31)		14,253
Foreign currency translation	—	—		—	—		—	—		—		(20,019)		—		(762)		(20,781)
Stock-based compensation expense	207,758	—		—	—		—	—		3,705		—		—		—		3,705
Shares issued:
Exercise of stock options	178,127	—		—	—		—	—		695		—		—		—		695

Shares for acquisition of Fyber	4,716,935	—		—	—		—	—		359,233		—		—		—		359,233
Acquisition of non-controlling interests in Fyber	—	—		—	—		—	—		—		—		—		24,558		24,558



Balance at June 30, 2021	94,892,906	$	10	100,000	$	100	758,125	$	(71)	$	736,943	$	(20,922)	$	(213,050)	$	23,765	$	526,775
Net income	—	—		—	—		—	—		—		—		(5,852)		(35)		(5,887)
Foreign currency translation	—	—		—	—		—	—		—		(15,799)		—		(93)		(15,892)
Stock-based compensation expense	28,477	—		—	—		—	—		5,925		—		—		—		5,925
Shares issued:
Exercise of stock options	480,422	—		—	—		—	—		1,460		—		—		—		1,460

Shares for acquisition of Fyber	1,058,364	—		—	—		—	—		(2,547)		—		—		—		(2,547)
Acquisition of non-controlling interests in Fyber	—	—		—	—		—	—		—		—				(21,452)		(21,452)



Balance at September 30, 2021	96,460,169	$	10	100,000	$	100	758,125	$	(71)	$	741,781	$	(36,721)	$	(218,902)	$	2,185	$	488,382
Net income	—	—		—	—		—	—		—		—		7,014		48		7,062
Foreign currency translation	—	—		—	—		—	—		—		(8,330)		—		(59)		(8,389)
Stock-based compensation expense	—	—		—	—		—	—		5,739		—		—		—		5,739
Shares issued:
Exercise of stock options	201,015	—		—	—		—	—		659		—		—		—		659
Vesting of restricted and performance stock units	70,043	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(7,587)		—		—		—		(7,587)
Balance at December 31, 2021	96,731,227	$	10	100,000	$	100	758,125	$	(71)	$	740,592	$	(45,051)	$	(211,888)	$	2,174	$	485,866

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


	Common Stock Shares*	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares*	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2020	87,147,023	$	10	100,000	$	100	758,125	$	(71)	$	360,224	$	(591)	$	(282,218)	$	—	$	77,454
Net income	—	—		—	—		—	—		—		—		9,940		—		9,940
Foreign currency translation	—	—		—	—		—	—		—		(142)		—		—		(142)
Stock-based compensation expense	—	—		—	—		—	—		1,611		—		—		—		1,611
Shares issued:
Exercise of stock options	224,012	—		—	—		—	—		437		—		—		—		437






Balance at June 30, 2020	87,371,035	$	10	100,000	$	100	758,125	$	(71)	$	362,272	$	(733)	$	(272,278)	$	—	$	89,300
Net income	—	—		—	—		—	—		—		—		373		—		373
Foreign currency translation	—	—		—	—		—	—		—		(45)		—		—		(45)
Stock-based compensation expense	106,663	—		—	—		—	—		2,515		—		—		—		2,515
Shares issued:
Exercise of stock options	1,059,644	—		—	—		—	—		3,089		—		—		—		3,089






Balance at September 30, 2020	88,537,342	$	10	100,000	$	100	758,125	$	(71)	$	367,876	$	(778)	$	(271,905)	$	—	$	95,232
Net income	—	—		—	—		—	—		—		—		14,515		—		14,515
Foreign currency translation	—