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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
or
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 ShareAPPSThe 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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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 August 5, 2021, the Company had 96,096,317 shares of its common stock, $0.0001 par value per share, outstanding.



EXPLANATORY NOTE
Digital Turbine, Inc., referred to in this report as "Digital Turbine," the "Company," "we," "us," and "our," is filing this Amendment No. 1 on Form 10-Q/A (the "Amendment") to its Quarterly Report on Form 10-Q for the three months ended June 30, 2021, originally filed on August 9, 2021 (the "Original Report"). This Amendment amends and restates Items 1, 2, and 4 of Part I and Item 6 of Part II of the Original Report. In Item 1, this Amendment includes our restated condensed consolidated statements of operations and comprehensive income / (loss) for the three months ended June 30, 2021 to correct the errors discussed below.
In connection with the integration of the Company’s recently acquired businesses (AdColony Holding AS and Fyber N.V. (the “Acquired Companies”)), management performed a review of the presentation of revenue and license fees and revenue share expense based on accounting guidance for revenue recognition, including considerations of principal and agent (or “gross and net”) presentation. After a detailed review of the Acquired Companies' product lines and related contracts with customers and publishers, the Company concluded each Acquired Company acts as an agent in certain of their respective product lines and, as a result, revenue for those product lines should be reported net of license fees and revenue share expense. Previously, all revenue of the Acquired Companies, which are reported as separate segments referred to as In App Media – AdColony ("IAM-A") and In App Media – Fyber ("IAM-F"), were reported on a gross basis. The Company’s legacy business, which is reported in a separate segment referred to as On Device Media, is not impacted by the change described above and it's revenue continues to be reported on a gross basis.
In addition, management determined certain hosting costs for the Acquired Companies incorrectly reported as product development expenses should be reclassified as other direct costs of revenue and general and administrative expenses.
The corrections have the effect of:
1.Decreasing both net revenue and license fees and revenue share in a like amount on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months ended June 30, 2021;
2.Increasing other direct costs of revenue and general and administrative expenses and decreasing product development expenses in a like amount on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months ended June 30, 2021.
These corrections do not relate to or have any impact on the Company’s operating performance, income from operations, net income / (loss), or cash flows, and the financial position and liquidity of the Company remain unchanged.
This Amendment amends and restates Item 2 of Part I, which includes our revised discussion of operating results to reflect the impact of the correction discussed above. Item 4 of Part I includes our revised assessment of the effectiveness of our disclosure controls and procedures. This restatement resulted in the identification of a material weakness in our internal control over financial reporting.
In addition, the Exhibits index in Item 6 of Part II of the Original Report is hereby amended and restated in its entirety, and new certifications of the Company's principal executive officer and principal financial officer required under Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, dated as of the filing of this Amendment, are filed and furnished, as applicable, as exhibits to this Amendment.
Except as described above, no other changes have been made to the Original Report. This Amendment continues to speak as of the date of the Original Report and does not reflect events occurring after the filing of the Original Report.




Digital Turbine, Inc.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED June 30, 2021
TABLE OF CONTENTS
  
 
 
 
 
 
 



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)
June 30, 2021March 31, 2021
(Unaudited)
ASSETS
Current assets  
Cash$83,129 $30,778 
Restricted cash883 340 
Accounts receivable, net219,099 61,985 
Prepaid expenses and other current assets20,675 4,282 
Total current assets323,786 97,385 
Property and equipment, net18,927 13,050 
Right-of-use assets19,565 3,495 
Deferred tax assets, net 12,963 
Intangible assets, net488,360 53,300 
Goodwill572,607 80,176 
Other non-current assets799  
TOTAL ASSETS$1,424,044 $260,369 
LIABILITIES AND STOCKHOLDER'S EQUITY  
Current liabilities 
Accounts payable$155,378 $34,953 
Accrued license fees and revenue share84,428 46,196 
Accrued compensation23,251 9,817 
Short-term debt20,415 14,557 
Other current liabilities21,659 5,626 
Acquisition purchase price liabilities313,413  
Total current liabilities618,544 111,149 
Long-term debt, net of debt issuance costs233,830  
Deferred tax liabilities, net24,676  
Other non-current liabilities20,219 4,108 
Total liabilities 897,269 115,257 
Commitments and contingencies (Note 14)
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; 95,788,373 issued and 95,052,667 outstanding at June 30, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021
10 10 
Additional paid-in capital736,943 373,310 
Treasury stock (754,599 shares at June 30, 2021 and March 31, 2021)
(71)(71)
Accumulated other comprehensive loss(20,922)(903)
Accumulated deficit(213,050)(227,334)
Total stockholders' equity attributable to Digital Turbine, Inc.503,010 145,112 
Non-controlling interest23,765  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,424,044 $260,369 
1In the quarter ending June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 4 in the accompanying condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income1
(Unaudited)
(in thousands, except per share amounts)
Three months ended June 30,
20212020
Restated
Net revenues$158,075 $59,012 
Costs of revenues and operating expenses
License fees and revenue share83,808 32,300 
Other direct costs of revenues4,468 560 
Product development12,924 4,408 
Sales and marketing13,736 4,318 
General and administrative23,984 6,804 
Restructuring and impairment costs10  
Total costs of revenues and operating expenses138,930 48,390 
Income from operations19,145 10,622 
Interest and other income / (expense), net
Interest expense, net(1,157)(306)
Foreign exchange transaction loss(270) 
Other income / (expense), net(35) 
Total interest and other income / (expense), net(1,462)(306)
Income before income taxes17,683 10,316 
Income tax provision3,430 376 
Net income14,253 9,940 
Less: net loss attributable to non-controlling interest(31) 
Net income attributable to Digital Turbine, Inc.14,284 9,940 
Other comprehensive loss
Foreign currency translation adjustment(20,781)(142)
Comprehensive income / (loss)(6,528)9,798 
Less: comprehensive income / (loss) attributable to non-controlling interest(793) 
Comprehensive income / (loss) attributable to Digital Turbine, Inc.$(5,735)$9,798 
Net income per common share
Basic$0.16 $0.11 
Diluted$0.14 $0.11 
Weighted-average common shares outstanding
Basic91,585 87,386 
Diluted98,822 93,108 
1In the quarter ending June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 4 in the accompanying condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows1
(Unaudited)
(in thousands)
Three months ended June 30,
20212020
Cash flows from operating activities  
Net income$14,253 $9,940 
Adjustments to reconcile net income to net cash provided by / (used in) by operating activities:
Depreciation and amortization8,653 1,552 
Non-cash interest expense127 18 
Stock-based compensation2,365 1,438 
Stock-based compensation for services rendered1,340 173 
(Increase) / decrease in assets:
Accounts receivable, gross(48,817)(10,686)
Allowance for credit losses26 378 
Deferred tax assets12,966  
Prepaid expenses and other current assets(4,492)456 
Right-of-use asset628 61 
Other non-current assets160  
Increase / (decrease) in liabilities:
Accounts payable35,396 (1,698)
Accrued license fees and revenue share3,573 4,199 
Accrued compensation(46,956)(1,018)
Other current liabilities2,455 1,036 
Deferred tax liabilities(10,089) 
Other non-current liabilities(585)163 
Net cash provided by / (used in) operating activities(28,997)6,012 
Cash flows from investing activities
Business acquisitions, net of cash acquired(126,604)(7,232)
Capital expenditures(4,364)(2,011)
Net cash used in investing activities(130,968)(9,243)
Cash flows from financing activities
Proceeds from borrowings237,041  
Payment of debt issuance costs(2,988) 
Options and warrants exercised695 437 
Repayment of debt obligations(19,680) 
Net cash provided by financing activities215,068 437 
Effect of exchange rate changes on cash(2,209)(142)
Net change in cash52,894 (2,936)
Cash and restricted cash, beginning of period31,118 21,659 
Cash and restricted cash, end of period$84,012 $18,723 
Supplemental disclosure of cash flow information
Interest paid$337 $299 
Income taxes paid$311 $ 
Supplemental disclosure of non-cash activities
Common stock for the acquisition of Fyber$359,233 $ 
Unpaid cash consideration for the acquisition of Fyber Minority Interest$24,558 $ 
Unpaid cash consideration for the acquisition of AdColony$100,000 $ 
Fair value of contingent consideration in connection with business acquisition$213,413 $ 
1In the quarter ending June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 4 in the accompanying condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity1
(Unaudited)
(in thousands, except share counts)
Common Stock
Shares
AmountPreferred Stock
Shares
AmountTreasury Stock
Shares
AmountAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Non-Controlling InterestTotal
Balance at March 31, 202189,949,847 $10 100,000 $100 754,599 $(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 compensation207,758 — — — — — 2,365 — — — 2,365 
Stock-based compensation for services rendered— — — — — — 1,340 — — — 1,340 
Shares for acquisition of Fyber4,716,935 — — — — — 359,233 — — — 359,233 
Non-controlling interests in Fyber— — — — — — — — — 24,558 24,558 
Options exercised178,127 — — — — — 695 — — — 695 
Balance at June 30, 202195,052,667 $10 100,000 $100 754,599 $(71)$736,943 $(20,922)$(213,050)$23,765 $526,775 
Common Stock
Shares
AmountPreferred Stock
Shares
AmountTreasury Stock
Shares
AmountAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Non-Controlling InterestTotal
Balance at March 31, 202087,306,784 $10 100,000 $100 754,599 $(71)$360,224 $(591)$(282,218)$ $77,454 
Net income— — — — — — — — 9,940 — 9,940 
Foreign currency translation— — — — — — — (142)— — (142)
Stock-based compensation— — — — — — 1,438 — — — 1,438 
Stock-based compensation for services rendered— — — — — — 173 — — — 173 
Options exercised224,012 — — — — — 437 — — — 437 
Balance at June 30, 202087,530,796 $10 100,000 $100 754,599 $(71)$362,272 $(733)$(272,278)$ $89,300 
1In the quarter ending June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 4 in the accompanying condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


Digital Turbine, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2021
(in thousands, except share and per share amounts)
1.    Description of Business
Digital Turbine, Inc., through its subsidiaries (collectively "Digital Turbine" or the "Company"), is a leading end-to-end solution for mobile technology companies to enable advertising and monetization solutions. Its digital media platform powers frictionless end-to-end application for brand discovery and advertising, user acquisition and engagement, operational efficiency, and monetization opportunities. The Company provides on-device solutions to all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers (“OEMs”) that participate in the app economy, app publishers and developers, and brands and advertising agencies.
2.    Restatement of Condensed Consolidated Financial Statements
On May 11, 2022, management and the Audit Committee of the Board of Directors of the Company concluded (a) the Company will restate its financial statements for the three months ended June 30, 2021, the three and six months ended September 30, 2021, and the three and nine months ended December 31, 2021 (the “Relevant Periods”), and (b) the Company’s previously issued unaudited interim condensed consolidated financial statements for the Relevant Periods included in its Quarterly Reports on Form 10-Q for the Relevant Periods, as originally filed with the Securities and Exchange Commission on August 9, 2021, November 2, 2021, and February 8, 2022, respectively, should no longer be relied upon.
In connection with the integration of the Company’s recently acquired businesses (AdColony Holding AS and Fyber N.V. (the “Acquired Companies”)), management performed a review of the presentation of revenue and license fees and revenue share expense based on accounting guidance for revenue recognition, including considerations of principal and agent (or “gross and net”) presentation. After a detailed review of the Acquired Companies' product lines and related contracts with customers and publishers, the Company concluded each Acquired Company acts as an agent in certain of their respective product lines and, as a result, revenue for those product lines should be reported net of license fees and revenue share expense. Previously, all revenue of the Acquired Companies, which are reported as separate segments referred to as In App Media – AdColony ("IAM-A") and In App Media – Fyber ("IAM-F"), were reported on a gross basis. The Company’s legacy business, which is reported in a separate segment referred to as On Device Media, is not impacted by the change described above and it's revenue continues to be reported on a gross basis. Further, the acquisitions of the Acquired Companies were completed during the three-month period ended June 30, 2021, and, as a result, there is no impact to the fiscal year ended March 31, 2021.
In addition, management determined certain hosting costs for the Acquired Companies reported as product development expenses should be reclassified as other direct costs of revenue and general and administrative expenses.
The corrections have the effect of:
1.Decreasing both net revenue and license fees and revenue share in a like amount on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months ended June 30, 2021;
2.Increasing other direct costs of revenue and general and administrative expenses and decreasing product development expenses in a like amount on the condensed consolidated statements of operations and comprehensive income / (loss) for the three months ended June 30, 2021.
These corrections do not relate to or have any impact on the Company’s operating performance, income from operations, net income / (loss), or cash flows, and the financial position and liquidity of the Company remain unchanged.
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The following table summarizes the impact of the restatements on select unaudited condensed consolidated statements of operations and comprehensive income / (loss) line items:
Three months ended June 30, 2021
ReportedAdjustmentRestated
Net revenues$212,615$(54,540)$158,075
Costs of revenues and operating expenses
License fees and revenue share138,348(54,540)83,808
Other direct costs of revenues2,5331,9354,468
Product development15,547(2,623)12,924
Sales and marketing13,73613,736
General and administrative23,29668823,984
Restructuring and impairment costs1010
Total costs of revenues and operating expenses193,470138,930
Income from operations$19,145$19,145
The adjustments in the table above also affect the tables and disclosures within Note 3, "Basis of Presentation and Summary of Significant Accounting Policies," Note 4, "Acquisitions," and Note 5, "Segment Information" of these financial statements.
3.    Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“U.S.”), or GAAP. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates the financial results and reports non-controlling interests representing the economic interests held by other equity holders of subsidiaries that are not 100% owned by the Company. The calculation of non-controlling interests excludes any net income (loss) attributable directly to the Company. All intercompany balances and transactions have been eliminated in consolidation.
These financial statements should be read in conjunction with the Company's audited financial statements and related notes included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021 (the "2021 Form 10-K").
Unaudited Interim Financial Information
These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly the Company’s financial condition, results of operations, comprehensive income, stockholders’ equity, and cash flows for the interim periods indicated. The results of operations for the three months ended June 30, 2021 are not necessarily indicative of the operating results for the full fiscal year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, allowance for credit losses, stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, fair value of contingent earn-out considerations (please see Note 14, "Commitments and Contingencies," for further information on the fair value of the Company's contingent earn-out considerations), incremental borrowing rates for right-of-use assets and lease liabilities, and tax valuation allowances. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from management’s estimates using different assumptions or under different conditions.
9


In light of the ongoing and quickly evolving COVID-19 pandemic, management has considered the impacts of the COVID-19 pandemic on the Company’s critical and significant accounting estimates and as of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates or judgments or revise the carrying value of its assets or liabilities as a result of the COVID-19 pandemic. These estimates may change as new events occur and additional information is obtained and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s condensed consolidated financial statements.
Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies in Note 4, “Summary of Significant Accounting Policies,” of the notes to the consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021, other than changes for revenue recognition related to the principal-versus-agent presentation matter for the businesses acquired discussed below, "New Accounting Standards Adopted" disclosed below, and changes to the Company's segment reporting disclosed in Note 5, "Segment Information."
Revenue Recognition
The Company generates revenue from transactions for the purchase and sale of digital advertising inventory through our various platforms and service offerings. Generally, our revenue is based on a percentage of the ad spend through our platforms, although for certain service offerings, we receive a fixed cost-per-thousand ("CPM") or cost-per-install ("CPI") for ad impressions sold or app installs completed. We recognize revenue upon fulfillment of our performance obligation to our customers, which generally occurs at the point in time when an ad is rendered or an end consumer action, such as an app install, is completed.
ODM - Carriers and OEMs
The Company enters into contracts with OEMs for our On Device Media ("ODM") segment to help the customer control, manage, and monetize the mobile device through the marketing of application slots or advertisement space/inventory to advertisers and delivering the applications or advertisements to the mobile device. The Company generally offers these services under a revenue share model or, to a lesser extent, a customer contract per-device license fee model for a two-to-four year software as a service ("SaaS") license agreement. These agreements typically include the following services: the access to a SaaS platform, hosting, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently, interdependently, and continuously with all other promised services over the contract term and, as such, has concluded these promises are a single performance obligation that is delivered to the customer over a series of distinct service periods over the contract term. The Company meets the criteria for overtime recognition because the customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs, and the same method would be used to measure progress over each distinct service period. The fees for such services are not known at contract inception, but are measurable during each distinct service period. The Company's contracts do not include advance non-refundable fees. The Company’s fees for these services are based upon a revenue-share arrangement with the carrier or OEM. Both parties have agreed to share the revenue earned from third-party advertisers, discussed below, for these services.
ODM - Third-Party Advertisers
The Company generally offers these services through CPI, cost-per-placement ("CPP"), and/or cost-per-action ("CPA") arrangements with third-party advertisers, developers, agencies, and advertising aggregators, generally in the form of insertion orders. The insertion orders specify the type of arrangement and additional terms such as advertising campaign budgets and timelines as well as any constraints on advertising types. These customer contracts can be open ended in regards to length of time and can renew automatically unless terminated; however, specific advertising campaigns are generally short-term in nature. These agreements typically include the delivery of applications to home screens of mobile devices. Access to inventory of application slots is allocated by carriers or OEMs in the contracts identified above. The Company controls these application slots and markets it on behalf of the carriers and OEMs to the advertisers. The Company has concluded that the performance obligation within the contract is complete upon delivery of the application to the device. Revenue recognition related to CPI and CPA arrangements is dependent upon an action of the end user. As a result, the transaction price is variable and is fully constrained until an install or action occurs.
ODM - Programmatic Advertising and Targeted Media Delivery
10


The Company generally offers these services under CPM impression arrangements and page-view arrangements. Through its mobile phone first screen applications and mobile web portals, the Company markets ad space/inventory within its content products for display advertising. The ad space/inventory is allocated to the Company through arrangement with the carrier or OEM in the contracts discussed above. The Company controls this ad space/inventory and markets it on behalf of the carriers and OEMs to the advertisers. The Company’s advertising customers can bid on each individual display ad and the highest bid wins the right to fill each ad impression. Advertising agencies acting on the behalf of advertisers bid on the ad placement via the Company’s advertising exchange customers. When the bid is won, the ad will be received and placed on the mobile device by the Company. The entire process happens almost instantaneously and on a continuous basis. The advertising exchanges bill and collect from the winning bidders and provide daily and monthly reports of the activity to the Company. The Company has concluded that the performance obligation is satisfied at the point in time upon delivery of the advertisement to the device based on the impressions or page-view arrangement, as defined in the contract.
Through its mobile phone first screen applications and mobile web portals, the Company’s software platform also recommends sponsored content to mobile phone users and drives web traffic to a customer's website. The Company markets this content to content sponsors, such as Outbrain or Taboola, similarly to the marketing of ad space/inventory. This sponsored content takes the form of articles, graphics, pictures, and similar content. The Company has concluded that the performance obligation within the contract is complete upon delivery of the content to the mobile device.
IAM-A and IAM-F - Marketplace
The Company, through its IAM-A and IAM-F segments provide platforms that allow demand-side platforms (“DSPs”) and publishers to buy and sell ad inventory, respectively, in a programmatic, real-time bidding ("RTB") auction. The Company generally contracts with DSPs through an RTB Ad Exchange Agreement (“Exchange Agreement”). It also separately contracts with publishers through an Advertising insertion order or service order to provide access to its auction platform and the ad inventory available through the platform. The auction is held when ad inventory becomes available. AdColony will send bid requests to various DSPs, which may choose to bid on the available ad inventory. Once a DSP wins an auction, it must deliver an ad, which is generally served through the Company's software development kits (“SDK”). The entire auction process is nearly instantaneous. The Company bills the DSP based on the total number of impressions and the bid price. It then remits the payment to the publishers, net of a revenue share agreed with the publisher that is generally a percentage of the DSPs’ total spending with the publisher through the platform.
IAM-A - Brand and Performance
The Company, through its IAM-A segment for its Brand and Performance offerings, contracts directly with advertisers or agencies. through insertion orders, that require the Company to fulfill advertising campaigns by identifying and purchasing targeted ad inventory and serving ads on behalf of the advertiser. The insertion orders or addendum communications provide advertising campaign details, such as campaign start and end date, target demographics, maximum budget, and rate. Rates are generally based on an end user action (CPI) or on a CPM basis. Revenue is recognized based on the rate and the number of impressions or end user actions at the time the ad is rendered or the end suer action is completed.
Principal vs Agent Reporting
The determination of whether we act as a principal or as an agent in a transaction requires significant judgement and is based on an assessment of the terms of customer arrangements and the relevant accounting guidance. When we are the principal in a transaction, revenue is reported on a gross basis, which is the amount billed to DSPs, advertisers and agencies. When we are an agent in a transaction, revenues are reported net of license fees and revenue share paid to app publishers or developers.
The Company has determined that it is a principal for its advertiser services for application management and programmatic advertising and targeted media delivery when it controls the application slots or ad space/inventory. This is because it has been allocated such slots or space from the carrier or OEM and is responsible for marketing or monetizing the slots or space. The advertisers look to the Company to acquire such slots or space, and the Company’s software is used to deliver the applications, ads or content to the mobile device. The Company also may manage application or ad campaigns of advertisers associated with these services. If the applications or advertisements are not delivered to the mobile device or the Company doesn’t comply with certain policies of the advertiser, the Company would be responsible and have to indemnify the customer for these issues. The Company also has discretion in setting the price of the slots or space based on market conditions, collects the transaction prices, and remits the revenue-share percentage of the transaction price to the carrier or OEM.
The Company recognizes the transaction price received from advertisers, content providers, or websites gross and the carrier or OEM share of such transaction price as costs of revenue - license fees and revenue share - in the accompanying
11


consolidated statements of operations and comprehensive income / (loss).
The carrier or OEM may have the right to market and sell application slots or ad space to advertisers using the Company’s software. The carrier or OEM will share revenue with the Company when it does so. The Company recognizes the revenue shared by the carrier or OEM on a net basis as the Company is not considered the primary obligor in these transactions.
The Company has determined that it it is a principal for its Brand and Performance offerings as the advertisers or agencies provide parameters for their target audiences, as well as a budget for ad campaigns. Once an advertiser or advertising agency provides its specifications, the Company has the discretion to fulfill the campaign by utilizing its data and proprietary technology. The Company controls the service because it has the ultimate discretion in purchasing ad inventory; and once an ad inventory slot is purchased, filling that ad inventory slot. As a result, the Company reports the revenues billed to advertisers and agencies on a gross basis and revenue shares paid to publishers as license fees and revenue share.
The Company has determined that is an agent in transactions on its Marketplace platforms. The Company acts as an intermediary between DSPs and publishers by providing access to a platform and the SDKs that allow both parties to transact in the buying and selling of ad inventory. The transaction price is determined through a real-time auction and the Company has no pricing discretion or obligation related to the fulfillment of the advertising delivery.
New Accounting Standards Adopted
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes. The Company adopted this guidance as of April 1, 2021, which did not have a material impact on the condensed consolidated financial statements upon adoption.
4.    Acquisitions
Acquisition of Fyber N.V.
On May 25, 2021, the Company completed the initial closing of the acquisition of at least 95.1% of the outstanding voting shares (the “Majority Fyber Shares”) of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the "Fyber Acquisition") between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company's knowledge) widely held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.
Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.
The Company acquired Fyber in exchange for an estimated aggregate consideration of up to $600,000, consisting of:
i.Approximately $150,000 in cash, $124,336 of which was paid to the Seller at the closing of the acquisition and the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below;
ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares were determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to $359,233 at the Company's common stock closing price on May 25, 2021, as follows.
1.3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;
2.1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;
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3.1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;
4.59,289 shares of common stock of the Company equal in value to $3,662, to be newly-issued during its fiscal second quarter 2022, but subject to a true-up reduction based on increased transaction costs associated with the staggered delivery of the Majority Fyber Shares to the Company; and
iii.Contingent upon Fyber’s net revenues (revenues less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares and cash in aggregate will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on current estimates, it is unlikely the contingent earn-out consideration target will be achieved and no contingent liability was recognized in the provisional purchase accounting. Management will re-evaluate this estimate on a quarterly basis.
The Company paid the cash closing amount on the closing date and intends to pay the remainder of the cash consideration for the acquisition with a combination of available cash-on-hand, borrowings under the Company’s senior credit facility, and proceeds from future capital financings.
Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of EUR 0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. The Company anticipates completing the tender offer during its fiscal second quarter 2022. Please see Note 15, "Subsequent Events," for further information.
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Due to the proximity of the Fyber Acquisition to our fiscal first quarter ended June 30, 2021, the fair values of the assets acquired and liabilities assumed at the date of acquisition are presented on a preliminary basis and are as follows1:
Assets acquired
Cash$71,489 
Accounts receivable64,877 
Other current assets10,470 
Property and equipment1,561 
Right-of-use asset13,191 
Publisher relationships106,400 
Developed technology86,900 
Trade names32,100 
Customer relationships31,400 
Favorable lease1,483 
Goodwill303,015 
Other non-current assets851 
Total assets acquired$723,737 
Liabilities assumed
Accounts payable$78,090 
Accrued license fees and revenue share5,929 
Accrued compensation52,929 
Other current liabilities12,273 
Short-term debt25,789 
Deferred tax liability, net25,213 
Other non-current liabilities15,386 
Total liabilities assumed$215,609 
Total purchase price$508,128 
The excess of cost of the Fyber Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - Fyber segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.
The identifiable intangible assets consist of publisher relationships, developed technology, trade names, customer relationships, and a favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives of 20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The favorable lease was derived from a sublease at Fyber's offices in Berlin, Germany and, per ASC 842, Leases, will be combined with Fyber's right-of-use asset for that lease and will be amortized over the remaining life of that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:
Publisher Relationships - Multi-Period Excess Earnings Method
Developed Technology - Relief from Royalty Method
Trade Names - Relief from Royalty Method
Customer Relationships - With-and-Without Method
Favorable Lease - Income Approach
The Company recognized $3,599 of costs related to the Fyber Acquisition, which were included in general and administrative expenses on the condensed consolidated statement of operations and comprehensive income for the three months ended June 30, 2021.
1 The purchase consideration was translated using the Euro-to-U.S. dollar exchange rate in effect on the acquisition closing date, May 25, 2021, of approximately €1.22 to $1.00.
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Acquisition of AdColony Holdings AS
On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration in the range of $400,000 to $425,000, to be paid as follows: (1) $100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of $200,000 to $225,000, to be paid in cash, based on AdColony achieving certain future target net revenues, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending on December 31, 2021 (the “Earn-Out Period”). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which AdColony achieves certain target net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period. The Company paid the cash closing amount on the closing date and intends to pay the remainder of the cash consideration for the acquisition with a combination of available cash-on-hand, borrowings under the Company’s senior credit facility, and proceeds from future capital financings.
AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company will expand its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.
Due to the proximity of the AdColony Acquisition to our fiscal first quarter ended June 30, 2021, the fair values of the assets acquired and liabilities assumed at the date of acquisition are presented on a preliminary basis and are as follows:
Assets acquired
Cash$24,793 
Accounts receivable57,285 
Other current assets1,845 
Property and equipment1,566 
Right-of-use asset2,460 
Customer relationships102,400 
Developed technology51,100 
Trade names36,100 
Publisher relationships4,400 
Goodwill202,552 
Other non-current assets131 
Total assets acquired$484,632 
Liabilities assumed
Accounts payable$21,140 
Accrued license fees and revenue share28,920 
Accrued compensation8,453 
Other current liabilities1,867 
Deferred tax liability, net10,520 
Other non-current liabilities1,770 
Total liabilities assumed$72,670 
Total purchase price$411,962 
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The excess of cost of the AdColony Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - AdColony segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.
The identifiable intangible assets consist of customer relationships, developed technology, trade names, and publisher relationships and were assigned useful lives of 8.0 years to 15.0 years, 7.0 years, 7.0 years, and 10.0 years, respectively. The values for the identifiable intangible assets were determined using the following valuation methodologies:
Customer Relationships - Multi-Period Excess Earnings Method
Developed Technology - Relief from Royalty Method
Trade Names - Relief from Royalty Method
Publisher Relationships - Cost Approach
The Company recognized $2,871 of costs related to the AdColony Acquisition, which were included in general and administrative expenses on the condensed consolidated statement of operations and comprehensive income for the three months ended June 30, 2021.
Acquisition of Appreciate
On March 1, 2021, Digital Turbine, through its subsidiary DT EMEA, an Israeli company and wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement with Triapodi Ltd., an Israeli company (d/b/a Appreciate) (“Appreciate”), the stockholder representative, and the stockholders of Appreciate, pursuant to which DT EMEA acquired, on March 2, 2021, all of the outstanding capital stock of Appreciate in exchange for total consideration of $20,003 in cash (the "Appreciate Acquisition"). Under the terms of the Purchase Agreement, DT EMEA entered into bonus arrangements to pay up to $6,000 in retention bonuses and performance bonuses to the founders and certain other employees of Appreciate. The Purchase Agreement contains customary representations and warranties, covenants, and indemnification provisions. The Company determined the operating results of Appreciate to not be material to the condensed consolidated financial statements for the three months ended June 30, 2020 and, therefore, has not included pro forma financial information for Appreciate below. None of the goodwill recognized for the Acquisition was deductible for tax purposes.
The acquisition of Appreciate delivers valuable deep ad-tech and algorithmic expertise to help Digital Turbine execute on its broader, longer-term vision. Deploying Appreciate's technology expertise across Digital Turbine’s global scale and reach should further benefit partners and advertisers that are a part of the combined Company’s platform.
Acquisition Purchase Price Liability
The Company has recognized acquisition purchase price liability of $313,413 on its condensed consolidated balance sheet as of June 30, 2021, comprised of the following components:
$100,000 of unpaid cash consideration for the AdColony Acquisition
$213,413 of estimated contingent earn-out consideration for the AdColony Acquisition
Pro Forma Financial Information (Unaudited)
The pro forma information below gives effect to the Fyber Acquisition and the AdColony Acquisition (collectively, the “Acquisitions”) as if they had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative of the Company’s results had the Acquisitions been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Acquisitions and does not reflect additional revenue opportunities following the Acquisitions. The pro forma information includes adjustments to record the assets and liabilities associated with the Acquisitions at their respective fair values, which are preliminary at this time, based on available information, and to give effect to the financing for the Acquisitions.
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Three months ended June 30,
20212020
UnauditedUnaudited
Restated
(in thousands, except per share amounts)
Net revenues$180,472 $102,376 
Net income / (loss) attributable to controlling interest$(18,417)$3,585 
Basic net income / (loss) attributable to controlling interest per common share$(0.20)$0.04 
Diluted net income / (loss) attributable to controlling interest per common share$(0.20)$0.04 
5.    Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer ("CEO") is the CODM.
Prior to the acquisitions of both AdColony and Fyber disclosed above in Note 4, "Acquisitions," the Company had one operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the following three segments, each of which represents an operating and reportable segment, as follows:
On Device Media ("ODM") - This segment is the legacy single operating and reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenues from services that deliver mobile application media or content media to end users. This segment's customers are mobile device carriers and OEMs that pay for the distribution of media. The other reporting segments are not dependent on these mobile device carrier and OEM relationships.
In App Media – AdColony ("IAM-A") - This segment is inclusive of the acquired AdColony business and generates revenues from services provided as an end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on mobile devices around the world. IAM-A customers are primarily advertisers.
In App Media – Fyber ("IAM-F") - This segment is inclusive of the acquired Fyber business and generates revenues from services provided to mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making. IAM-F customers are primarily publishers.
The Company's CODM evaluates segment performance and makes resource allocation decisions primarily through the metric of net revenues less associated license fees and revenue share, as shown in the segment information summary table below. The Company's CODM does not allocate other direct costs of revenues, operating expenses, interest and other income / (expense), net, or provision for income taxes to these segments for the purpose of evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as the CODM does not manage the Company's segments by such metrics.
A summary of segment information follows:
Three months ended June 30, 2021
RestatedRestatedRestatedRestated
ODMIAM-AIAM-FEliminationsConsolidated
Net revenues$120,383 $30,302 $9,172 $(1,782)$158,075 
License fees and revenue share70,031 15,559  (1,782)83,808 
Segment profit$50,352 $14,743 $9,172 $ $74,267 
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 Three months ended June 30, 2020
ODMIAM-AIAM-FEliminationsConsolidated
Net revenues$59,012 $ $ $ $59,012 
License fees and revenue share32,300    32,300 
Segment profit$26,712 $ $ $ $26,712 
Geographic Area Information
Long-lived assets, excluding deferred tax assets and intangible assets, by region follows:
 June 30, 2021March 31, 2021
United States and Canada$16,245 $12,995 
Europe, Middle East, and Africa2,588 40 
Asia Pacific and China94 15 
Mexico, Central America, and South America  
Consolidated property and equipment, net$18,927 $13,050 
Net revenues by geography are based on the billing addresses of the Company's customers and a reconciliation of disaggregated revenues by segment follows:
 Three months ended June 30, 2021
RestatedRestatedRestated
ODMIAM-AIAM-FConsolidated
United States and Canada$71,131 $15,070 $5,540 $91,741 
Europe, Middle East, and Africa30,060 12,306 1,333 43,699 
Asia Pacific and China16,790 2,409 2,299 21,498 
Mexico, Central America, and South America2,402 517  2,919 
Eliminations— — — (1,782)
Consolidated net revenues$120,383 $30,302 $9,172 $158,075 
 Three months ended June 30, 2020
ODMIAM-AIAM-FConsolidated
United States and Canada$38,240 $ $ $38,240 
Europe, Middle East, and Africa15,355   15,355 
Asia Pacific and China5,211