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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 September 30, 2022
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 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 November 1, 2022, the Company had 99,016,830 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 September 30, 2022
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
| | | | | | | | | | | | | | |
| | September 30, 2022 | | March 31, 2022 |
| | (Unaudited) | | |
ASSETS | | | | |
Current assets | | | | |
Cash | | $ | 82,653 | | | $ | 126,768 | |
Restricted cash | | 560 | | | 394 | |
Accounts receivable, net | | 255,666 | | | 263,139 | |
Prepaid expenses and other current assets | | 26,479 | | | 20,570 | |
Total current assets | | 365,358 | | | 410,871 | |
Property and equipment, net | | 36,891 | | | 31,086 | |
Right-of-use assets | | 11,358 | | | 15,439 | |
Intangible assets, net | | 407,669 | | | 440,589 | |
Goodwill | | 548,240 | | | 559,792 | |
| | | | |
Other non-current assets | | 4,613 | | | 732 | |
TOTAL ASSETS | | $ | 1,374,129 | | | $ | 1,458,509 | |
| | | | |
LIABILITIES AND STOCKHOLDER’S EQUITY | | | | |
Current liabilities | | | | |
Accounts payable | | $ | 171,571 | | | $ | 167,858 | |
Accrued license fees and revenue share | | 79,167 | | | 95,170 | |
Accrued compensation | | 14,932 | | | 28,775 | |
Acquisition purchase price liabilities | | — | | | 50,000 | |
Current portion of debt | | — | | | 12,500 | |
Other current liabilities | | 46,931 | | | 30,960 | |
Total current liabilities | | 312,601 | | | 385,263 | |
Long-term debt, net of debt issuance costs | | 447,193 | | | 520,785 | |
Deferred tax liabilities, net | | 16,684 | | | 19,976 | |
Other non-current liabilities | | 11,948 | | | 16,270 | |
Total liabilities | | 788,426 | | | 942,294 | |
Commitments and contingencies (Note 13) | | | | |
Stockholders’ equity | | | | |
Preferred stock | | | | |
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1) | | 100 | | | 100 | |
Common stock | | | | |
$0.0001 par value: 200,000,000 shares authorized; 99,743,560 issued and 98,985,435 outstanding at September 30, 2022; 97,921,826 issued and 97,163,701 outstanding at March 31, 2022 | | 10 | | | 10 | |
Additional paid-in capital | | 803,276 | | | 745,661 | |
Treasury stock (758,125 shares at September 30, 2022, and March 31, 2022) | | (71) | | | (71) | |
Accumulated other comprehensive loss | | (54,329) | | | (39,341) | |
Accumulated deficit | | (165,202) | | | (191,788) | |
Total stockholders’ equity | | 583,784 | | | 514,571 | |
Non-controlling interest | | 1,919 | | | 1,644 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 1,374,129 | | | $ | 1,458,509 | |
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 September 30, | | Six months ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | |
Net revenue | | $ | 174,859 | | | $ | 188,568 | | | $ | 363,492 | | | $ | 346,643 | | | |
Costs of revenue and operating expenses | | | | | | | | | | |
License fees and revenue share | | 76,881 | | | 91,508 | | | 164,248 | | | 175,316 | | | |
Other direct costs of revenue | | 9,199 | | | 7,827 | | | 18,114 | | | 12,295 | | | |
Product development | | 14,736 | | | 13,915 | | | 28,869 | | | 26,839 | | | |
Sales and marketing | | 15,490 | | | 17,479 | | | 31,548 | | | 31,215 | | | |
General and administrative | | 37,471 | | | 41,307 | | | 75,196 | | | 65,301 | | | |
Total costs of revenue and operating expenses | | 153,777 | | | 172,036 | | | 317,975 | | | 310,966 | | | |
Income from operations | | 21,082 | | | 16,532 | | | 45,517 | | | 35,677 | | | |
Interest and other income / (expense), net | | | | | | | | | | |
Change in fair value of contingent consideration | | — | | | (22,087) | | | — | | | (22,087) | | | |
Interest expense, net | | (5,229) | | | (1,955) | | | (9,311) | | | (3,112) | | | |
Foreign exchange transaction loss | | (281) | | | (249) | | | (612) | | | (519) | | | |
| | | | | | | | | | |
Other income / (expense), net | | 312 | | | (477) | | | 384 | | | (512) | | | |
Total interest and other income / (expense), net | | (5,198) | | | (24,768) | | | (9,539) | | | (26,230) | | | |
Income / (loss) before income taxes | | 15,884 | | | (8,236) | | | 35,978 | | | 9,447 | | | |
Income tax provision / (benefit) | | 4,181 | | | (2,349) | | | 9,317 | | | 1,081 | | | |
Net income / (loss) | | 11,703 | | | (5,887) | | | 26,661 | | | 8,366 | | | |
Less: net income / (loss) attributable to non-controlling interest | | 39 | | | (35) | | | 75 | | | (66) | | | |
Net income / (loss) attributable to Digital Turbine, Inc. | | 11,664 | | | (5,852) | | | 26,586 | | | 8,432 | | | |
Other comprehensive loss | | | | | | | | | | |
Foreign currency translation adjustment | | (9,246) | | | (15,892) | | | (14,788) | | | (36,673) | | | |
Comprehensive income / (loss) | | 2,457 | | | (21,779) | | | 11,873 | | | (28,307) | | | |
Less: comprehensive income / (loss) attributable to non-controlling interest | | 32 | | | (128) | | | 275 | | | (921) | | | |
Comprehensive income / (loss) attributable to Digital Turbine, Inc. | | $ | 2,425 | | | $ | (21,651) | | | $ | 11,598 | | | $ | (27,386) | | | |
Net income / (loss) per common share | | | | | | | | | | |
Basic | | $ | 0.12 | | | $ | (0.06) | | | $ | 0.27 | | | $ | 0.09 | | | |
Diluted | | $ | 0.11 | | | $ | (0.06) | | | $ | 0.26 | | | $ | 0.08 | | | |
Weighted-average common shares outstanding | | | | | | | | | | |
Basic | | 98,887 | | | 96,157 | | | 98,324 | | | 93,807 | | | |
Diluted | | 102,898 | | | 96,157 | | | 102,777 | | | 100,457 | | | |
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)
| | | | | | | | | | | | | | | | | |
| | | Six months ended September 30, |
| | | 2022 | | 2021 | | |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | 26,661 | | | $ | 8,366 | | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | | 40,010 | | | 24,981 | | | |
| Non-cash interest expense | | 408 | | | 298 | | | |
| | | | | | | |
| Stock-based compensation expense | | 12,023 | | | 9,630 | | | |
| Foreign exchange transaction (gain) / loss | | 612 | | | — | | | |
| Change in fair value of contingent consideration | | — | | | 22,087 | | | |
| | | | | | | |
| Right-of-use asset | | 5,079 | | | 1,951 | | | |
| Deferred income taxes | | (2,228) | | | 178 | | | |
| (Increase) / decrease in assets: | | | | | | |
| Accounts receivable, gross | | 9,916 | | | (61,855) | | | |
| Allowance for credit losses | | 2,249 | | | (31) | | | |
| Prepaid expenses and other current assets | | (4,608) | | | (4,917) | | | |
| Other non-current assets | | 160 | | | 95 | | | |
| Increase / (decrease) in liabilities: | | | | | | |
| Accounts payable | | 2,371 | | | 51,676 | | | |
| Accrued license fees and revenue share | | (16,866) | | | 1,382 | | | |
| Accrued compensation | | (15,109) | | | (45,694) | | | |
| Other current liabilities | | 9,406 | | | 2,643 | | | |
| Other non-current liabilities | | (5,775) | | | (3,036) | | | |
| | | | | | | |
| | | | | | | |
| Net cash provided by operating activities | | 64,309 | | | 7,754 | | | |
| | | | | | | |
| Cash flows from investing activities | | | | | | |
| Business acquisitions, net of cash acquired | | — | | | (148,056) | | | |
| Capital expenditures | | (12,930) | | | (10,411) | | | |
| Net cash used in investing activities | | (12,930) | | | (158,467) | | | |
| | | | | | | |
| Cash flows from financing activities | | | | | | |
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| Proceeds from borrowings | | — | | | 267,134 | | | |
| Payment of debt issuance costs | | — | | | (2,988) | | | |
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| Options and warrants exercised | | 939 | | | 2,155 | | | |
| Payment of withholding taxes for net share settlement of equity awards | | (5,929) | | | — | | | |
| Repayment of debt obligations | | (86,500) | | | (46,256) | | | |
| Net cash provided by / (used in) financing activities | | (91,490) | | | 220,045 | | | |
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| Effect of exchange rate changes on cash and cash equivalents and restricted cash | | (3,838) | | | (4,233) | | | |
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| Net change in cash and cash equivalents and restricted cash | | (43,949) | | | 65,099 | | | |
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| Cash and cash equivalents and restricted cash, beginning of period | | 127,162 | | | 31,118 | | | |
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| Cash and cash equivalents and restricted cash, end of period | | $ | 83,213 | | | $ | 96,217 | | | |
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| Supplemental disclosure of cash flow information | | | | | | |
| Interest paid | | $ | 7,410 | | | $ | 2,199 | | | |
| Income taxes paid | | $ | 1,076 | | | $ | 693 | | | |
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| Supplemental disclosure of non-cash activities | | | | | | |
| Common stock issued for the acquisition of Fyber | | $ | 50,000 | | | $ | 356,686 | | | |
| Unpaid cash consideration for the acquisition of Fyber Minority Interest | | $ | 2,578 | | | $ | 3,108 | | | |
| Unpaid cash consideration for the acquisition of AdColony | | $ | — | | | $ | 100,000 | | | |
| Fair value of unpaid contingent consideration in connection with business acquisitions | | $ | — | | | $ | 235,500 | | | |
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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)
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| | 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, 2022 | | 97,163,701 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 745,661 | | | $ | (39,341) | | | $ | (191,788) | | | $ | 1,644 | | | $ | 516,215 | |
Net income | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,922 | | | 36 | | | 14,958 | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,749) | | | — | | | 207 | | | (5,542) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 6,463 | | | — | | | — | | | — | | | 6,463 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 380,176 | | | — | | | — | | | — | | | — | | | — | | | 296 | | | — | | | — | | | — | | | 296 | |
Issuance of restricted shares and vesting of restricted units | | 7,763 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares for acquisition of Fyber | | 1,205,982 | | | — | | | — | | | — | | | — | | | — | | | 50,000 | | | — | | | — | | | — | | | 50,000 | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (4,357) | | | — | | | — | | | — | | | (4,357) | |
Balance at June 30, 2022 | | 98,757,622 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 798,063 | | | $ | (45,090) | | | $ | (176,866) | | | $ | 1,887 | | | $ | 578,033 | |
Net income | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 11,664 | | | 39 | | | 11,703 | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9,239) | | | — | | | (7) | | | (9,246) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 6,142 | | | — | | | — | | | — | | | 6,142 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 198,778 | | | — | | | — | | | — | | | — | | | — | | | 643 | | | — | | | — | | | — | | | 643 | |
Issuance of restricted shares and vesting of restricted units | | 29,035 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (1,572) | | | — | | | — | | | — | | | (1,572) | |
Balance at September 30, 2022 | | 98,985,435 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 803,276 | | | $ | (54,329) | | | $ | (165,202) | | | $ | 1,919 | | | $ | 585,703 | |
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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)
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| | 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 | | — | | | — | | | — | | | — | | | — | | | — | | | 3,705 | | | — | | | — | | | — | | | 3,705 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 178,127 | | | — | | | — | | | — | | | — | | | — | | | 695 | | | — | | | — | | | — | | | 695 | |
Vesting of restricted and performance stock units | | 207,758 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares for acquisition of Fyber | | 4,716,935 | | | — | | | — | | | — | | | — | | | — | | | 359,233 | | | — | | | — | | | — | | | 359,233 | |
Acquisition of non-controlling interests in Fyber | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 24,558 | | | 24,558 | |
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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 loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (5,852) | | | (35) | | | (5,887) | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (15,799) | | | — | | | (93) | | | (15,892) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 5,925 | | | — | | | — | | | — | | | 5,925 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 480,422 | | | — | | | — | | | — | | | — | | | — | | | 1,460 | | | — | | | — | | | — | | | 1,460 | |
Issuance of restricted shares and vesting of restricted units | | 28,477 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Shares for acquisition of Fyber | | 1,058,364 | | | — | | | — | | | — | | | — | | | — | | | (2,547) | | | — | | | — | | | — | | | (2,547) | |
Acquisition of non-controlling interests in Fyber | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (21,452) | | | (21,452) | |
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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 | |
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*De minimis adjustment to previously disclosed share count; no impact on quarter-to-date or year-to-date earnings per share in any period presented.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Digital Turbine, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 2022
(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, independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers (“OEMs”). The Company offers end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.
2. 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 (“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, 2022.
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 and six months ended September 30, 2022, 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, including the determination of gross versus net revenue reporting, 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, 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.
Management considered the impacts of both global inflation as well as the continued effects of COVID-19 pandemic on the Company’s critical and significant accounting estimates. 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 global inflation or the COVID-19 pandemic.
Management’s estimates may change as new events occur and additional information is obtained. Actual results could differ from 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 significant changes to the Company’s significant accounting policies in Note 2, “Basis of Presentation and 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, 2022, other than the “Recent Accounting Pronouncements” disclosed below and changes to the Company’s segment reporting disclosed in Note 4, “Segment Information.”
Accounting Pronouncements Adopted During the Period
ASU 2020-04
In March 2020, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to amendments to contracts, hedging relationships, and other contractual transactions impacted by the discontinuation of the London Inter-Bank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities through December 31, 2022 and can be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company has adopted the update as of the quarter ended September 30, 2022 and the impact of the adoption was not material to the Company’s consolidated financial statements.
3. Acquisitions
Acquisition of Fyber N.V.
On May 25, 2021, the Company completed the initial closing of the acquisition of 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) 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 was 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;
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 equal in value to $3,662, to be newly-issued during the Company’s 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, which true-up reduction has been finalized, as described below; and
iii.Contingent upon Fyber’s net revenue (revenue 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, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate, will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a result, no contingent liability was recognized at that time.
The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.
On September 30, 2021, the Company entered into the Second Amendment Agreement (the “Second Amendment Agreement”) to the Sale and Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of shares of Company common stock to be issued to the Seller at 18,000 shares (i.e., a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company issued a total of 5,775,299 shares of Company common stock to the Seller in connection with the Company’s acquisition of Fyber.
As of March 31, 2022, the Company had recognized the acquisition purchase price liability of $50,000. The Company settled the obligation through the issuance of 1,205,982 shares of the Company’s common stock effective May 19, 2022.
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 was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €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. During the fiscal year ended March 31, 2022, the Company purchased an additional $18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as of September 30, 2022. The Company expects to complete the purchase of the remaining outstanding Fyber shares during fiscal year 2023.
The delisting of Fyber’s remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.
The fair values of the assets acquired and liabilities assumed at the date of the Fyber Acquisition are presented as follows1:
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| | May 25, 2021 | | Measurement Period Adjustments | | May 25, 2021 (adjusted) |
Assets acquired | | | | | | |
Cash | | $ | 71,489 | | | $ | — | | | $ | 71,489 | |
Accounts receivable | | 64,877 | | | |