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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, 2024
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 the 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, 2024, the Company had 103,725,564 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, 2024
TABLE OF CONTENTS
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, 2024 | | March 31, 2024 |
| | (Unaudited) | | |
ASSETS | | | | |
Current assets | | | | |
Cash and cash equivalents | | $ | 32,765 | | | $ | 33,605 | |
| | | | |
Accounts receivable, net | | 191,612 | | | 191,015 | |
Prepaid expenses | | 7,093 | | | 7,704 | |
Other current assets | | 12,419 | | | 10,017 | |
Total current assets | | 243,889 | | | 242,341 | |
Property and equipment, net | | 48,159 | | | 45,782 | |
Right-of-use assets | | 11,222 | | | 9,127 | |
Intangible assets, net | | 285,848 | | | 313,505 | |
Goodwill | | 221,059 | | | 220,072 | |
| | | | |
Other non-current assets | | 34,309 | | | 34,713 | |
TOTAL ASSETS | | $ | 844,486 | | | $ | 865,540 | |
| | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Current liabilities | | | | |
Accounts payable | | $ | 148,062 | | | $ | 159,200 | |
Accrued revenue share | | 29,518 | | | 33,934 | |
Accrued compensation | | 7,408 | | | 7,209 | |
| | | | |
| | | | |
Other current liabilities | | 38,643 | | | 35,681 | |
Total current liabilities | | 223,631 | | | 236,024 | |
Long-term debt, net of debt issuance costs | | 407,620 | | | 383,490 | |
Deferred tax liabilities, net | | 17,460 | | | 20,424 | |
Other non-current liabilities | | 13,405 | | | 11,670 | |
Total liabilities | | 662,116 | | | 651,608 | |
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; 104,279,577 issued and 103,521,452 outstanding at September 30, 2024; 102,877,057 issued and 102,118,932 outstanding at March 31, 2024 | | 10 | | | 10 | |
Additional paid-in capital | | 875,827 | | | 858,191 | |
Treasury stock (758,125 shares at September 30, 2024, and March 31, 2024) | | (71) | | | (71) | |
Accumulated other comprehensive loss | | (48,011) | | | (48,955) | |
Accumulated deficit | | (645,485) | | | (595,343) | |
Total stockholders’ equity | | 182,370 | | | 213,932 | |
| | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 844,486 | | | $ | 865,540 | |
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 (Loss) Income
(Unaudited)
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Six months ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
Net revenue | | $ | 118,728 | | | $ | 143,259 | | | $ | 236,717 | | | $ | 289,625 | | | |
Costs of revenue and operating expenses | | | | | | | | | | |
Revenue share | | 56,336 | | | 68,719 | | | 112,145 | | | 138,311 | | | |
Other direct costs of revenue | | 8,438 | | | 9,017 | | | 16,228 | | | 18,630 | | | |
Product development | | 9,433 | | | 14,037 | | | 20,147 | | | 29,837 | | | |
Sales and marketing | | 15,887 | | | 15,537 | | | 32,134 | | | 31,114 | | | |
General and administrative | | 42,176 | | | 41,385 | | | 85,693 | | | 81,884 | | | |
Impairment of goodwill | | — | | | 147,181 | | | — | | | 147,181 | | | |
Total costs of revenue and operating expenses | | 132,270 | | | 295,876 | | | 266,347 | | | 446,957 | | | |
Loss from operations | | (13,542) | | | (152,617) | | | (29,630) | | | (157,332) | | | |
Interest and other income (expense), net | | | | | | | | | | |
Change in fair value of contingent consideration | | 200 | | | 372 | | | 200 | | | 372 | | | |
Interest expense, net | | (9,232) | | | (7,844) | | | (17,482) | | | (15,234) | | | |
Foreign exchange transaction loss | | (976) | | | (2,106) | | | (158) | | | (183) | | | |
| | | | | | | | | | |
Other income (expense), net | | (36) | | | — | | | 78 | | | 244 | | | |
Total interest and other income (expense), net | | (10,044) | | | (9,578) | | | (17,362) | | | (14,801) | | | |
Loss before income taxes | | (23,586) | | | (162,195) | | | (46,992) | | | (172,133) | | | |
Income tax provision (benefit) | | 1,400 | | | (713) | | | 3,150 | | | (2,252) | | | |
Net loss | | (24,986) | | | (161,482) | | | (50,142) | | | (169,881) | | | |
Less: net loss attributable to non-controlling interest | | — | | | — | | | — | | | (220) | | | |
Net loss attributable to Digital Turbine, Inc. | | (24,986) | | | (161,482) | | | (50,142) | | | (169,661) | | | |
Other comprehensive income (loss) | | | | | | | | | | |
Foreign currency translation gain (loss) | | 2,157 | | | (1,287) | | | 944 | | | (7,394) | | | |
Comprehensive loss | | (22,829) | | | (162,769) | | | (49,198) | | | (177,275) | | | |
Less: comprehensive income attributable to non-controlling interest | | — | | | — | | | — | | | 519 | | | |
Comprehensive loss attributable to Digital Turbine, Inc. | | $ | (22,829) | | | $ | (162,769) | | | $ | (49,198) | | | $ | (177,794) | | | |
Net loss per common share | | | | | | | | | | |
Basic | | $ | (0.24) | | | $ | (1.61) | | | $ | (0.49) | | | $ | (1.69) | | | |
Diluted | | $ | (0.24) | | | $ | (1.61) | | | $ | (0.49) | | | $ | (1.69) | | | |
Weighted-average common shares outstanding | | | | | | | | | | |
Basic | | 103,041 | | | 100,604 | | | 102,722 | | | 100,272 | | | |
Diluted | | 103,041 | | | 100,604 | | | 102,722 | | | 100,272 | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands) | | | | | | | | | | | | | | | |
| | | Six months ended September 30, |
| | | 2024 | | 2023 | | |
| Cash flows from operating activities | | | | | | |
| Net (loss) income | | $ | (50,142) | | | $ | (169,881) | | | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | |
| Depreciation and amortization | | 40,171 | | | 41,926 | | | |
| Non-cash interest expense | | 757 | | | 424 | | | |
| | | | | | | |
| Allowance for credit losses | | 1,298 | | | 1,227 | | | |
| Stock-based compensation expense | | 17,167 | | | 19,033 | | | |
| Foreign exchange transaction loss | | 158 | | | 183 | | | |
| Change in fair value of contingent consideration | | (200) | | | (372) | | | |
| | | | | | | |
| Right-of-use asset | | (1,883) | | | 1,817 | | | |
| Impairment of goodwill | | — | | | 147,181 | | | |
| (Increase) decrease in assets: | | | | | | |
| Accounts receivable, gross | | (1,933) | | | (16,637) | | | |
| Prepaid expenses | | 652 | | | 252 | | | |
| Other current assets | | (1,851) | | | (3,387) | | | |
| Other non-current assets | | 418 | | | (3,799) | | | |
| Increase (decrease) in liabilities: | | | | | | |
| Accounts payable | | (11,377) | | | 20,283 | | | |
| Accrued revenue share | | (4,531) | | | (14,373) | | | |
| Accrued compensation | | 135 | | | (2,698) | | | |
| Other current liabilities | | 2,698 | | | 19,751 | | | |
| Deferred income taxes | | (3,109) | | | (10,732) | | | |
| Other non-current liabilities | | 1,501 | | | (1,426) | | | |
| | | | | | | |
| | | | | | | |
| Net cash provided by (used in) operating activities | | (10,071) | | | 28,772 | | | |
| Cash flows from investing activities | | | | | | |
| | | | | | | |
| | | | | | | |
| Capital expenditures | | (13,408) | | | (14,277) | | | |
| Net cash used in investing activities | | (13,408) | | | (14,277) | | | |
| Cash flows from financing activities | | | | | | |
| | | | | | | |
| Proceeds from borrowings | | 38,000 | | | 17,000 | | | |
| Payment of debt issuance costs | | (1,561) | | | — | | | |
| | | | | | | |
| Repayment of debt obligations | | (13,000) | | | (44,136) | | | |
| Acquisition of non-controlling interest in consolidated subsidiaries | | — | | | (3,751) | | | |
| Payment of withholding taxes for net share settlement of equity awards | | (160) | | | (1,037) | | | |
| Options exercised | | 93 | | | 2,729 | | | |
| Net cash provided by (used in) financing activities | | 23,372 | | | (29,195) | | | |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | | (733) | | | (2,209) | | | |
| Net change in cash, cash equivalents, and restricted cash | | (840) | | | (16,909) | | | |
| Cash, cash equivalents, and restricted cash, beginning of period | | 33,605 | | | 75,558 | | | |
| Cash, cash equivalents, and restricted cash, end of period | | $ | 32,765 | | | $ | 58,649 | | | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands) | | | | | | | | | | | | | | | |
| | | Six months ended September 30, |
| | | 2024 | | 2023 | | |
| | | | | | | |
| Reconciliation of cash, cash equivalents, and restricted cash | | | | | | |
| Cash and cash equivalents | | $ | 32,081 | | | $ | 58,138 | | | |
| Restricted cash | | 684 | | 511 | | |
| Total cash, cash equivalents and restricted cash | | $ | 32,765 | | | $ | 58,649 | | | |
| | | | | | | |
| Supplemental disclosure of cash flow information | | | | | | |
| Interest paid | | $ | 18,578 | | | $ | 15,582 | | | |
| Income taxes paid | | $ | 703 | | | $ | 444 | | | |
| Supplemental disclosure of non-cash activities | | | | | | |
| Assets acquired not yet paid | | $ | 461 | | | $ | 425 | | | |
| Right-of-use assets acquired under operating leases | | $ | 3,519 | | | $ | 353 | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Fair value of unpaid contingent consideration in connection with business acquisitions | | $ | 1,215 | | | $ | 2,366 | | | |
| | | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(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 | | | | Total |
Balance at March 31, 2024 | | 102,118,932 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 858,191 | | | $ | (48,955) | | | $ | (595,343) | | | | | $ | 213,932 | |
Net loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (25,156) | | | | | (25,156) | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,213) | | | — | | | | | (1,213) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 8,424 | | | — | | | — | | | | | 8,424 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 8,599 | | | — | | | — | | | — | | | — | | | — | | | 14 | | | — | | | — | | | | | 14 | |
Issuance of restricted shares and vesting of restricted units | | 390,752 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (48) | | | — | | | — | | | | | (48) | |
Balance at June 30, 2024 | | 102,518,283 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 866,581 | | | $ | (50,168) | | | $ | (620,499) | | | | | $ | 195,953 | |
Net loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (24,986) | | | | | (24,986) | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,157 | | | — | | | | | 2,157 | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 9,279 | | | — | | | — | | | | | 9,279 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 1,667 | | | — | | | — | | | — | | | — | | | — | | | 79 | | | — | | | — | | | | | 79 | |
Issuance of restricted shares and vesting of restricted units | | 1,001,502 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (112) | | | — | | | — | | | | | (112) | |
Balance at September 30, 2024 | | 103,521,452 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 875,827 | | | $ | (48,011) | | | $ | (645,485) | | | | | $ | 182,370 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Digital Turbine, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(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, 2023 | | 99,458,369 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 822,217 | | | $ | (41,945) | | | $ | (175,115) | | | $ | 2,059 | | | $ | 607,255 | |
Net loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (8,179) | | | (220) | | | (8,399) | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (6,846) | | | — | | | 739 | | | (6,107) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 10,017 | | | — | | | — | | | — | | | 10,017 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 378,507 | | | — | | | — | | | — | | | — | | | — | | | 731 | | | — | | | — | | | — | | | 731 | |
Issuance of restricted shares and vesting of restricted units | | 449,781 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Acquisition of non-controlling interests in Fyber | | — | | | — | | | — | | | — | | | — | | | — | | | (1,173) | | | — | | | — | | | (2,578) | | | (3,751) | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (931) | | | — | | | — | | | — | | | (931) | |
Balance at June 30, 2023 | | 100,286,657 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 830,861 | | | $ | (48,791) | | | $ | (183,294) | | | $ | — | | | $ | 598,815 | |
Net loss | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (161,482) | | | — | | | (161,482) | |
Foreign currency translation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,287) | | | — | | | — | | | (1,287) | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | — | | | — | | | 9,924 | | | — | | | — | | | — | | | 9,924 | |
Shares issued: | | | | | | | | | | | | | | | | | | | | | | |
Exercise of stock options | | 575,599 | | | — | | | — | | | — | | | — | | | — | | | 1,998 | | | — | | | — | | | — | | | 1,998 | |
Issuance of restricted shares and vesting of restricted units | | 226,890 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Payment of withholding taxes related to the net share settlement of equity awards | | — | | | — | | | — | | | — | | | — | | | — | | | (106) | | | — | | | — | | | — | | | (106) | |
Balance at September 30, 2023 | | 101,089,146 | | | $ | 10 | | | 100,000 | | | $ | 100 | | | 758,125 | | | $ | (71) | | | $ | 842,677 | | | $ | (50,078) | | | $ | (344,776) | | | $ | — | | | $ | 447,862 | |
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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, 2024
(in thousands, except share and per share amounts)
Note 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, the Company’s products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.
Note 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. The Company acquired the remaining minority interest shareholders’ outstanding shares in one of its subsidiaries during the three months ended June 30, 2023, for $3,751. As a result, the Company owned 100% of all its subsidiaries as of September 30, 2024.
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, 2024.
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, 2024, 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 potential impacts of ongoing macroeconomic uncertainty due to global events such as the conflicts in Ukraine and Israel, inflation, disruptions in supply chains, recessionary concerns impacting the markets in which the Company operates, and others, 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 such factors. 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, 2024.
Note 3—Fair Value Measurements
Equity securities without readily determinable fair values
Occasionally, the Company may purchase certain non-marketable equity securities for strategic reasons. During the six months ended September 30, 2024, the Company did not make any such investments. During the year ended March 31, 2024, the Company purchased non-marketable equity securities for a total of $19,094.
As of September 30, 2024 and March 31, 2024, the carrying value of the Company’s investments in equity securities without readily determinable fair values totaled $27,594, and are included in “Other non-current assets” in the accompanied consolidated balance sheet. These equity securities without readily determinable fair values represent the Company’s strategic investments in alternative app stores.
As the non-marketable equity securities are investments in a privately held company without a readily determinable fair value, the Company elected the measurement alternative to account for these investments. Under the measurement alternative, the carrying value of the non-marketable equity securities is adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in carrying value are recorded within other income (loss), net in the Company's condensed consolidated statement of operations.
For the six months ended September 30, 2024, there were no adjustments to the carrying value of equity securities without readily determinable fair values.
Fair Value Measurements
The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.
Level 3. Significant unobservable inputs which are supported by little or no market activity.
As of September 30, 2024 and March 31, 2024, Level 1 equity securities recorded at fair value totaled $468 and $501, respectively, and are classified as other non-current assets. As of September 30, 2024 and March 31, 2024, there were no Level 2 or Level 3 equity securities recorded at fair value.
Note 4—Segment Information
Operating segments are identified as components of an enterprise for 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 is the CODM. The Company reports its results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:
•On Device Solutions (“ODS”) - This segment generates revenue from the delivery of mobile application media or content to end users with solutions for all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device. This includes mobile carriers and device OEMs that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs.
•App Growth Platform (“AGP”) - AGP customers are primarily advertisers and publishers, and the segment provides platforms that allow mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies.
The Company’s CODM evaluates segment performance and makes resource allocation decisions primarily based on segment net revenue and segment profit, as shown in the segment information summary table below. The Company’s CODM does not allocate other direct costs of revenue, 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 September 30, 2024 |
| | ODS | | AGP | | Eliminations | | Consolidated |
Net revenue | | $ | 82,414 | | | $ | 37,346 | | | $ | (1,032) | | | $ | 118,728 | |
Revenue share | | 48,951 | | | 8,417 | | | (1,032) | | | 56,336 | |
Segment profit | | $ | 33,463 | | | $ | 28,929 | | | $ | — | | | $ | 62,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2023 |
| | ODS | | AGP | | Eliminations | | Consolidated |
Net revenue | | $ | 99,060 | | | $ | 46,183 | | | $ | (1,984) | | | $ | 143,259 | |
Revenue share | | 60,980 | | | 9,723 | | | (1,984) | | | 68,719 | |
Segment profit | | $ | 38,080 | | | $ | 36,460 | | | $ | — | | | $ | 74,540 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2024 |
| | ODS | | AGP | | Eliminations | | Consolidated |
Net revenue | | $ | 163,064 | | | $ | 75,738 | | | $ | (2,085) | | | $ | 236,717 | |
Revenue share | | 98,094 | | | 16,136 | | | (2,085) | | | 112,145 | |
Segment profit | | $ | 64,970 | | | $ | 59,602 | | | $ | — | | | $ | 124,572 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 |
| | ODS | | AGP | | Eliminations | | Consolidated |
Net revenue | | $ | 197,310 | | | $ | 95,142 | | | $ | (2,827) | | | $ | 289,625 | |
Revenue share | | 119,278 | | | 21,860 | | | (2,827) | | | 138,311 | |
Segment profit | | $ | 78,032 | | | $ | 73,282 | | | $ | — | | | $ | 151,314 | |
Geographic Area Information
Long-lived assets, excluding deferred tax assets, by region follow:
| | | | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 | | |
United States and Canada | | $ | 36,904 | | | $ | 32,899 | | | |
Europe, Middle East, and Africa | | 11,145 | | | 12,809 | | | |
Asia Pacific and China | | 110 | | | 74 | | | |
| | | | | | |
Consolidated property and equipment, net | | $ | 48,159 | | | $ | 45,782 | | | |
| | | | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 | | |
United States and Canada | | $ | 5,943 | | | $ | 4,314 | | | |
Europe, Middle East, and Africa | | 5,155 | | | 4,598 | | | |
Asia Pacific and China | | 124 | | | 215 | | | |
| | | | | | |
Consolidated right-of-use assets | | $ | 11,222 | | | $ | 9,127 | | | |
| | | | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 | | |
United States and Canada | | $ | 120,968 | | | $ | 133,381 | | | |
Europe, Middle East, and Africa | | 160,615 | | | 175,878 | | | |
Asia Pacific and China | | 4,265 | | | 4,246 | | | |
| | | | | | |
Consolidated intangible assets, net | | $ | 285,848 | | | $ | 313,505 | | | |
Net revenue by geography is based on the billing addresses of the Company’s customers and a reconciliation of disaggregated revenue by segment follows:
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2024 |
| | ODS | | AGP | | Total |
United States and Canada | | $ | 33,664 | | | $ | 23,064 | | | $ | 56,728 | |
Europe, Middle East, and Africa | | 28,846 | | | 10,135 | | | 38,981 | |
Asia Pacific and China | | 18,688 | | | 4,141 | | | 22,829 | |
Mexico, Central America, and South America | | 1,216 | | | 6 | | | 1,222 | |
Elimination | | — | | | — | | | (1,032) | |
Consolidated net revenue | | $ | 82,414 | | | $ | 37,346 | | | $ | 118,728 | |
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2023 |
| | ODS | | AGP | | Total |
United States and Canada | | $ | 40,176 | | | $ | 32,256 | | | $ | 72,432 | |
Europe, Middle East, and Africa | | 48,348 | | | 8,966 | | | 57,314 | |
Asia Pacific and China | | 10,114 | | | 4,940 | | | 15,054 | |
Mexico, Central America, and South America | | 422 | | | 21 | | | 443 | |
Elimination | | — | | | — | | | (1,984) | |
Consolidated net revenue | | $ | 99,060 | | | $ | 46,183 | | | $ | 143,259 | |
| | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2024 |
| | ODS | | AGP | | Total |
United States and Canada | | $ | 67,549 | | | $ | 48,146 | | | $ | 115,695 | |
Europe, Middle East, and Africa | | 60,550 | | | 20,548 | | | 81,098 | |
Asia Pacific and China | | 33,260 | | | 7,029 | | | 40,289 | |
Mexico, Central America, and South America | | 1,705 | | | 15 | | | 1,720 | |
Elimination | | — | | | — | | | (2,085) | |
Consolidated net revenue | | $ | 163,064 | | | $ | 75,738 | | | $ | 236,717 | |
| | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 |
| | ODS | | AGP | | Total |
United States and Canada | | $ | 79,117 | | | $ | 63,173 | | | $ | 142,290 | |
Europe, Middle East, and Africa | | 94,370 | | | 22,518 | | | 116,888 | |
Asia Pacific and China | | 22,657 | | | 9,387 | | | 32,044 | |
Mexico, Central America, and South America | | 1,166 | | | 64 | | | 1,230 | |
Elimination | | — | | | — | | | (2,827) | |
Consolidated net revenue | | $ | 197,310 | | | $ | 95,142 | | | $ | 289,625 | |
Note 5—Goodwill and Intangible Assets
Goodwill
Changes in the carrying amount of goodwill by segment follows:
| | | | | | | | | | | | | | | | | | | | |
| | ODS | | AGP | | Total |
Goodwill as of March 31, 2024 | | $ | 80,176 | | | $ | 139,896 | | | $ | 220,072 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Impairment of goodwill | | — | | | — | | | — | |
Foreign currency translation | | $ | — | | | $ | 987 | | | $ | 987 | |
Goodwill as of September 30, 2024 | | $ | 80,176 | | | $ | 140,883 | | | $ | 221,059 | |
The Company evaluates goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value.
During the six months ended September 30, 2024, no occurrence of event or circumstance indicated they would more likely than not reduce the fair value of a reporting unit below its carrying value. As such, no impairment of goodwill was recognized during the period.
During the three months ended September 30, 2023, as a result of sustained decline in the quoted market price of the Company’s common stock, increase in interest rates, and the Company’s forecasted operating trends, the Company identified interim indicators of impairment related to the goodwill assigned to the AGP reporting unit. The Company completed an interim impairment assessment of its goodwill, and as a result of this review, recorded a $147,181 non-deductible, non-cash goodwill impairment charge for the AGP reporting unit as of September 30, 2023.
The Company subsequently performed its annual goodwill impairment evaluation as of March 31, 2024, noting continued trends in quoted market price, interest rates, and the Company’s forecast. The Company completed its annual impairment assessment of goodwill, and as a result, recorded an additional $189,459 non-deductible, non-cash goodwill impairment charge for a total of $336,640 to the AGP reporting unit during the twelve months ended March 31, 2024.
There was no impairment of goodwill for the ODS reporting unit during the fiscal year ended March 31, 2024.
Intangible Assets
The components of intangible assets were as follows as of the periods indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2024 |
| | |
| | Weighted-Average Remaining Useful Life | | Cost | | Accumulated Amortization | | Net |
Customer relationships | | 11.75 years | | $ | 138,057 | | | $ | (34,778) | | | $ | 103,279 | |
Developed technology | | 3.82 years | | 146,852 | | | (69,961) | | | 76,891 | |
Trade names | | 0.83 years | | 70,072 | | | (54,742) | | | 15,330 | |
Publisher relationships | | 16.37 years | | 109,265 | | | (18,917) | | | 90,348 | |
Total | | | | $ | 464,246 | | | $ | (178,398) | | | $ | 285,848 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 |
| | Weighted-Average Remaining Useful Life | | Cost | | Accumulated Amortization | | Net |
Customer relationships | | 12.04 years | | $ | 168,349 | | | $ | (59,222) | | | $ | 109,127 | |
Developed technology | | 4.31 years | | 146,524 | | | (59,470) | | | 87,054 | |
Trade names | | 1.33 years | | 69,957 | | | (45,470) | | | 24,487 | |
Publisher relationships | | 16.86 years | | 108,860 | | | (16,023) | | | 92,837 | |
Total | | | | $ | 493,690 | | | $ | (180,185) | | | $ | 313,505 | |
The Company recorded amortization expense of $13,505 and $28,709, respectively, during the three and six months ended September 30, 2024, and $16,157 and $32,346, respectively, during the three and six months ended September 30, 2023, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income.
Estimated amortization expense in future fiscal years is expected to be:
| | | | | | | | |
Fiscal year 2025 | | $ | 27,020 | |
Fiscal year 2026 | | 41,510 | |
Fiscal year 2027 | | 35,378 | |
Fiscal year 2028 | | 35,378 | |
Fiscal year 2029 | | 18,454 | |
Thereafter | | 128,108 | |
Total | | $ | 285,848 | |
Note 6—Accounts Receivable | | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 |
| | | | |
Billed | | $ | 130,195 | | | $ | 136,604 | |
Unbilled | | 70,355 | | | 64,117 | |
Allowance for credit losses | | (8,938) | | | (9,706) | |
Accounts receivable, net | | $ | 191,612 | | | $ | 191,015 | |
Billed accounts receivable represent amounts billed to customers for which the Company has an unconditional right to consideration. Unbilled accounts receivable represent revenue recognized but billed after period-end. All unbilled receivables as of September 30, 2024 are expected to be billed and collected (subject to the allowance for credit losses) within twelve months.
The Company considers various factors, including credit risk associated with customers. To the extent any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such customer. The Company makes concerted efforts to collect all outstanding
balances due, however account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered.
Allowance for Credit Losses
The Company maintains reserves for current expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves.
The Company considers a receivable past due when a customer has not paid by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (customer default), based on factors such as customer credit assessments as well as the length of time the amounts are past due.
Changes in the allowance for credit losses on trade receivables were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Six months ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
Balance, beginning of period | | $ | 9,215 | | | $ | 10,319 | | | $ | 9,706 | | | $ | 10,206 | |
Provision for credit losses | | 1,084 | | | 488 | | | 1,298 | | | 1,227 | |
Write-offs | | (1,361) | | | (701) | | | (2,066) | | | (1,327) | |
Balance, end of period | | $ | 8,938 | | | $ | 10,106 | | | $ | 8,938 | | | $ | 10,106 | |
The Company recorded $1,084 and $1,298 of credit loss expense during the three and six months ended September 30, 2024, respectively, and $488 and $1,227 of credit loss expense during the three and six months ended September 30, 2023, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income.
Note 7—Property and Equipment | | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 |
| | | | |
Computer-related equipment | | $ | 5,676 | | | $ | 7,057 | |
Developed software | | 103,319 | | | 88,258 | |
Furniture and fixtures | | 2,051 | | | 2,069 | |
Leasehold improvements | | 3,695 | | | 3,690 | |
Property and equipment, gross | | 114,741 | | | 101,074 | |
Accumulated depreciation | | (66,582) | | | (55,292) | |
Property and equipment, net | | $ | 48,159 | | | $ | 45,782 | |
Depreciation expense was $5,847 and $11,462 for the three and six months ended September 30, 2024, respectively, and $4,529 and $9,584 for the three and six months ended September 30, 2023, respectively. Depreciation expense for the three and six months ended September 30, 2024, includes $5,796 and $11,277, respectively, related to internal-use software included in general and administrative expense and $51 and $185, respectively, related to internally developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue. Depreciation expense for the three and six months ended September 30, 2023, includes $3,020 and $6,319, respectively, related to internal-use software included in general and administrative expense and $1,509 and $3,265, respectively, related to internally developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.
Cloud Computing Arrangements
As of September 30, 2024, the net carrying value of capitalized implementation costs related to cloud computing arrangements that were incurred during the application development stage was $6,349, of which $1,233 was included in prepaid expenses and other current assets and $5,116 was included in other non-current assets.
As of March 31, 2024, the net carrying value of capitalized implementation costs related to cloud computing arrangements that were incurred during the application development stage was $6,965, of which $1,239 was included in prepaid expenses and other current assets and $5,727 was included in other non-current assets.
As of September 30, 2024 and 2023, amortization expenses for implementation costs of cloud-based computing arrangements were $613 and $0, respectively.
Note 8—Other Current Liabilities
Other current liabilities consisted of the following:
| | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 |
| | | | |
Accrued expenses | | $ | 8,529 | | | $ | 7,376 | |
Accrued interest | | 1,790 | | | 3,414 | |
Foreign income tax payable | | 19,410 | | | 14,371 | |
Other current liabilities | | 8,914 | | | 10,520 | |
Total | | 38,643 | | | 35,681 | |
Note 9—Other Non-Current Liabilities
Other noncurrent liabilities consisted of the following:
| | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 |
| | | | |
Non-current lease liabilities | | $ | 7,423 | | | $ | 5,746 | |
Contingent consideration | | 1,215 | | | 1,015 | |
Other long-term liabilities | | 4,767 | | | 4,909 | |
Total | | 13,405 | | | 11,670 | |
During the six months ended September 30, 2024, the Company reassessed the fair value of its contingent consideration based on current forecasts in association with the Company’s acquisition of In App Video Services UK LTD. (“In App”). Based on the purchase agreement, executed on November 1, 2022, consideration included potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024, and 2025. The annual earn-out payments are up to $250 for the year ended December 31, 2022, and $1,000 for each of the calendar years ended December 31, 2023, 2024, and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024, and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.
As a result of the Company’s assessment for the six months ended September 30, 2024, a remeasurement gain equal to the change in fair value of $200 was recorded. During fiscal year ended March 31, 2024, the Company 1) paid approximately $1,100 for the earn-out associated with the calendar year ended December 31, 2023 and 2) recognized a change in the fair value of contingent consideration of $372. Changes in the fair value of the earn-out liability subsequent to the acquisition date are recognized in the condensed consolidated statements of operations and comprehensive (loss) income.
Note 10—Debt
The following table summarizes borrowings under the Company’s debt obligations and the associated interest rates:
| | | | | | | | | | | | | | | | | | | | |
| | September 30, 2024 |
| | Balance | | Interest Rate | | Unused Line Fee |
Revolver (subject to variable interest rate) | | $ | 411,000 | | | 8.34 | % | | 0.35 | % |
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 |
| | Balance | | Interest Rate | | Unused Line Fee |
Revolver (subject to variable interest rate) | | $ | 386,000 | | | 7.71 | % | | 0.35 | % |
Debt obligations on the consolidated balance sheets consist of the following:
| | | | | | | | | | | | | | |
| | September 30, 2024 | | March 31, 2024 |
| | | | |
Revolver | | $ | 411,000 | | | $ | 386,000 | |
Less: Debt issuance costs | | (3,380) | | | (2,510) | |
| | | | |
| | | | |
| | | | |
Long-term debt, net of debt issuance costs | | $ | 407,620 | | | $ | 383,490 | |
Revolver
On February 3, 2021, the Company entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A. (“BoA”), which provided for a revolving line of credit (the “Revolver”) of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000.
On April 29, 2021, the Company amended and restated the Credit Agreement (the “Amended and Restated Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provided for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026, and contains an accordion feature enabling the Company to increase the total amount of the Revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The Amended and Restated Credit Agreement was subsequently amended as follows:
•First Amendment: Increase in the Revolver to $525,000 while retaining the $75,000 accordion feature discussed above, for a total potential revolving line of credit of $600,000 on December 29, 2021.
•Second Amendment: LIBOR was replaced with the Term Secured Overnight Financing Rate (“SOFR”). As a result, borrowings under the Amended and Restated Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25% beginning on the effective date of the Second Amendment, which was October 26, 2022.
•Third Amendment: On February 5, 2024, the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant were amended. In addition, it increased the limit of permitted, other investments, including equity investments and joint ventures from $20,000 in the aggregate in any fiscal year of the Company to $75,000 and increased the annual interest rate to SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.
•Fourth Amendment: On August 6, 2024, the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant were amended. Additionally, the Revolver was reduced by $100,000 to $425,000 (while retaining the $75,000 accordion feature), and the annual interest rate for the highest leverage ratio results was increased to SOFR plus between 1.00% and 3.75%, based on the Company’s consolidated leverage ratio. The Fourth Amendment also provided for payment against the outstanding Revolver balance to the extent the Company holds cash in excess of $40,000, and reduced the permitted investments threshold limit from $70,000 to $25,000.
Other than the changes described above regarding the covenants in the Fourth Amendment, the amendments discussed made no other changes to the terms of the Amended and Restated Credit Agreement, which contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.
The Company incurred debt issuance costs of $6,564 for the Amended and Restated Credit Agreement, inclusive of costs incurred for the First, Second, Third and Fourth Amendments. Deferred debt issuance costs are recorded as a reduction of the carrying value of the debt on the consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the loan to interest expense.
As of September 30, 2024, the Company had $411,000 drawn against the Amended and Restated Credit Agreement, classified as long-term debt on the consolidated balance sheets, with remaining unamortized debt issuance costs of $3,380.
As of September 30, 2024, amounts outstanding under the Amended and Restated Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) SOFR plus between 1.50% and 3.75%, based on the Company’s consolidated secured net leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA’s prime rate, or (c) SOFR plus 1.00% plus between 0.50% and 2.75%, based on the Company’s consolidated secured leverage ratio. Additionally, the Amended and Restated Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio. As of September 30, 2024, the interest rate was 8.34% and the unused line of credit fee was 0.35%.
The Company’s payment and performance obligations under the Amended and Restated Credit Agreement and related loan documents are secured by its grant of a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company acquires any real property assets with a fair market value in excess of $5,000, it is required to grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.
As of September 30, 2024, the Company had $14,000 available to draw on the revolving line of credit under the Amended and Restated Credit Agreement, excluding the accordion feature, subject to the required covenants. As of September 30, 2024, the Company was in compliance with all covenants. The fair value of the Company’s outstanding debt approximates its carrying value.
Interest expense, net
Interest expense, net, amortization of debt issuance costs, and unused line of credit fees were recorded in interest expense, net, on the condensed consolidated statements of operations and comprehensive (loss) income, as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Six months ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
Interest expense, net | | $ | (8,722) | | | $ | (7,543) | | | $ | (16,562) | | | $ | (14,657) | | | |
Amortization of debt issuance costs | | (456) | | | (212) | | | (757) | | | (424) | | | |
Unused line of credit fees and other | | (54) | | | (89) | | | (163) | | | (153) | | | |
Total interest expense, net | | $ | (9,232) | | | $ | (7,844) | | | $ | (17,482) | | | $ | (15,234) | | | |
Note 11—Stock-Based Compensation
2020 Equity Incentive Plan of Digital Turbine, Inc. (the “2020 Plan”)
On September 15, 2020, the Company’s stockholders approved the 2020 Plan, pursuant to which the Company may grant equity incentive awards to directors, employees and other eligible participants. A total of 12,000,000 shares of common stock were reserved for grant under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, and restricted stock units. The 2020 Plan became effective on September 15, 2020, and has a term of ten years. Stock options may be either incentive stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options.
On August 27, 2024, our stockholders approved an amendment to the Company’s 2020 Plan to increase the number of shares of common stock reserved for issuance thereunder by 8,560,000 shares, from 12,000,000 shares to 20,560,000 shares and to make certain other changes. As of September 30, 2024, 7,055,643 shares of common stock were available for issuance as future awards under the 2020 Plan.
Stock Options
Stock options are granted with an exercise price no lower than the fair market value at the grant date. They typically encompass a vesting period of two to three years and a contractual term of ten years. Share-based compensation expense for stock options is recognized on a straight-line basis over the requisite vesting period, determined by the grant-date fair value for the portion of the award expected to vest. The Company employs the Black-Scholes options-pricing model to estimate the fair value of its stock options. The Company may issue either new shares or treasury shares upon exercise of these awards.
The following table summarizes stock option activity:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares | | Weighted-Average Exercise Price (per share) | | Weighted-Average Remaining Contractual Life (in years) | | Aggregate Intrinsic Value (in thousands) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Options outstanding as of March 31, 2024 | | 5,797,869 | | | $ | 13.26 | | | 5.39 | | $ | 2,423 | |
Granted | | 1,625,000 | | | 1.99 | | | | | |
Exercised | | (10,312) | | | 1.55 | | | | | |
Forfeited / Expired | | (533,610) | | | 20.15 | | | | | |
Options outstanding as of September 30, 2024 | | 6,878,947 | | | $ | 10.03 | | | 6.12 | | $ | 4,965 | |
| | | | | | | | |
Exercisable as of September 30, 2024 | | 4,713,988 | | | $ | 11.40 | | | 4.68 | | $ | 3,313 | |
At September 30, 2024, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was $9,060, with an expected remaining weighted-average recognition period of 1.75 years.
Restricted Stock
Awards of restricted stock units may be either grants of time-based restricted stock units (“RSUs”) or performance-based restricted stock units (“PSUs”) that are issued at no cost to the recipient. The stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to restricted or unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. The Company periodically grants PSUs to certain key employees that are subject to the achievement of specified internal performance metrics over a specified performance period. The terms and conditions of the PSUs generally allow for vesting of the awards ranging between forfeiture and up to 200% of target. Stock-based compensation expense for PSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario over the performance period. The most likely attainment scenario is re-evaluated each period.
Restricted stock awards (“RSAs”) are awards of common stock that are legally issued and outstanding. RSAs are subject to time-based restrictions on transfer and unvested portions are generally subject to a risk of forfeiture if the award recipient ceases providing services to the Company prior to the lapse of the restrictions. The stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock on the date of the grant. The RSAs have time conditions and in some cases, once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period, from three months to one year, depending on the terms of the RSA.
The following table summarizes RSU, PSU, and RSA activity:
| | | | | | | | | | | | | | |
| | Number of Shares | | Weighted-Average Grant Date Fair Value |
| | | | |
| | | | |
| | | | |
| | | | |
Unvested restricted shares outstanding as of March 31, 2024 | | 3,919,842 | | | $ | 12.44 | |
Granted | | 5,450,248 | | | 2.23 | |
Vested | | (1,440,822) | | | 6.99 | |
Forfeited | | (383,083) | | | 8.51 | |
Unvested restricted shares outstanding as of September 30, 2024 | | 7,546,185 | | | $ | 6.04 | |
At September 30, 2024, total unrecognized stock-based compensation expense related to RSUs, PSUs and RSAs, net of estimated forfeitures was $30,670, with an expected remaining weighted-average recognition period of 1.60 years.
Stock-Based Compensation Expense
Stock-based compensation expense for the three and six months ended September 30, 2024, was $8,999 and $17,167, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income. Stock-based compensation expense for the three and six months ended September 30, 2023, was $9,016 and $19,033, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive (loss) income.
Note 12—Earnings per Share
Basic net (loss) income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) income per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the applicable methods. The Company excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is antidilutive.
The following table sets forth the computation of basic and diluted net (loss) income per share of common stock (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Six months ended September 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
Net loss per common share | | $ | (24,986) | | | $ | (161,482) | | | $ | (50,142) | | | $ | (169,881) | | | |
Less: net loss attributable to non-controlling interest | | — | | | — | | | — | | | (220) | | | |
Net loss attributable to Digital Turbine, Inc. | | $ | (24,986) | | | $ | (161,482) | | | $ | (50,142) | | | |