Annual report pursuant to Section 13 and 15(d)

Acquisitions

v3.20.1
Acquisitions
12 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisitions
Acquisitions
On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (“Mobile Posse”) pursuant to the previously-reported stock purchase agreement (the "Purchase Agreement") with ACME Mobile, LLC (“ACME”), Mobile Posse, and certain equity holders of ACME. The Company acquired (the “Acquisition”) all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments) and (2) an estimated earn-out of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares) for the relevant period. The earn-out payments will be paid quarterly with a true-up calculation and payment after the first nine months of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments have not yet been determined.
The preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows:
Assets
 
 
Cash
 
$
4,613

Accounts receivable
 
10,864

Other current assets
 
422

Property, plant, and equipment
 
2,041

Right-of-use asset
 
2,379

Developed technology
 
1,600

Customer relationships
 
42,500

Goodwill
 
27,267

Other non current assets
 
1,473

Total Assets
 
$
93,159

 
 
 
Liabilities
 
 
Accounts payable
 
$
499

Accrued license fees and revenue share
 
6,847

Accrued compensation
 
180

Other current liabilities
 
827

Non-current deferred tax liability
 
10,854

Other non-current liabilities
 
3,469

Total Liabilities
 
$
22,676



Note the the total consideration listed above excludes cash of $4,613 and working capital adjustments.
The amortization period for the intangible assets acquired in the transaction are as follows:
Intangible Asset
 
Remaining Useful Life
Developed technology
 
5 years
Customer relationships
 
18 years
Goodwill
 
Indefinite


The operating results of Mobile Posse, Inc. which are included in the accompanying consolidated statements of operations from the acquisition date to March 31, 2020 are as follows:
 
 
Unaudited
Revenues
 
$
4,817

Cost of goods sold
 
2,512

Gross profit
 
2,305

Operating expenses
 
1,290

Net income
 
$
1,015


Unaudited pro forma combined financial statements are presented below for informational purposes only. The unaudited pro forma combined statements of operations for the twelve months ended March 31, 2020, and for the twelve months ended March 31, 2019 for the Company and the period from April 3, 2018 through March 31, 2019 for Mobile Posse, combine the historical consolidated statements of operations of the Company and Mobile Posse, giving effect to the acquisition as if it had been consummated on April 3, 2018, the beginning of the earliest period presented.

DIGITAL TURBINE, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the twelve months ended March 31, 2020
(Unaudited)
(in thousands, except share and per share data)
 
 
Historical Digital Turbine
 
Historical Mobile Posse
 
Pro Forma Adjustments
 
 
 
Pro Forma Combined
 
 
US$
 
US$
 
US$
 
Footnote
 
US$
Net revenues
 
$
138,715

 
$
52,205

 
$

 
 
 
$
190,920

Cost of revenues
 
 
 
 
 
 
 
 
 
 
License fees and revenue share
 
83,588

 
24,932

 
 
 
 
 
108,520

Other direct cost of revenues
 
1,454

 
1,735

 


 
 
 
3,189

Total cost of revenues
 
85,042

 
26,667

 


 
 
 
111,709

Gross profit
 
53,673

 
25,538

 


 
 
 
79,211

Operating expenses
 
 
 
 
 
 
 
 
 
 
Product development
 
12,018

 
6,831

 
 
 
 
 
18,849

Sales and marketing
 
11,244

 
4,794

 
 
 
 
 
16,038

General and administrative
 
17,199

 
5,518

 
173

 
(a)
 
22,890

Total operating expenses
 
40,461

 
17,143

 
173

 
 
 
57,777

Gain / (loss) from operations
 
13,212

 
8,395

 
(173
)
 
 
 
21,434

Interest and other income / (expense), net
 
 
 
 
 
 
 
 
 
 
Interest income / (expense), net
 
41

 
(1,741
)
 
675

 
(b) (c)
 
(1,025
)
Change in fair value of warrant liability
 
(9,580
)
 

 
 
 
 
 
(9,580
)
Loss on extinguishment of debt
 

 
(590
)
 
590

 
(d)
 

Other income / (expense)
 
232

 
(1,421
)
 
 
 
 
 
(1,189
)
Total interest and other income / (expense), net
 
(9,307
)
 
(3,752
)
 
1,265

 
 
 
(11,794
)
Income / (loss) from operations before income taxes
 
3,905

 
4,643

 
1,092

 
 
 
9,640

Income tax provision
 
(10,375
)
 
1,668

 
 
 
 
 
(8,707
)
Net income / (loss) from continuing operations, net of taxes
 
14,280

 
$
2,975

 
$
1,092

 
 
 
18,347

Income / (loss) from discontinued operations
 
(380
)
 
 
 
 
 
 
 
(380
)
     Net income / (loss) from discontinued operations
 
(380
)
 
 
 
 
 
 
 
(380
)
Net income / (loss)
 
13,900

 
 
 
 
 
 
 
17,967

Foreign currency translation adjustment
 
(235
)
 
 
 
 
 
 
 
(235
)
Comprehensive income / (loss):
 
$
13,665

 
 
 
 
 
 
 
$
17,732

Basic net income / (loss) per common share
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
0.17

 
 
 
 
 
 
 
$
0.22

Discontinued operations
 

 
 
 
 
 
 
 

Net income / (loss)
 
$
0.17

 
 
 
 
 
 
 
$
0.22

Weighted average common shares outstanding, basic
 
84,594

 
 
 
 
 
 
 
84,594

Diluted net income / (loss) per common share
 
 
 
 
 
 
 
 
 


Continuing operations
 
0.16

 
 
 
 
 
 
 
0.20

Discontinued operations
 

 
 
 
 
 
 
 
$

Diluted net income / (loss) per common share
 
$
0.16

 
 
 
 
 
 
 
$
0.20

Weighted-average common shares outstanding, diluted
 
89,558

 
 
 
 
 
 
 
$
89,558



DIGITAL TURBINE, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the period April 3, 2018 through March 31, 2019 for Mobile Posse
and April 1, 2018 through March 31, 2019 for Digital Turbine, Inc.
(Unaudited)
(in thousands, except share and per share data)
 
 
Historical Digital Turbine
 
Historical Mobile Posse
 
Pro Forma Adjustments
 
 
 
Pro Forma Combined
 
 
US$
 
US$
 
US$
 
Footnote
 
US$
Net revenues
 
$
103,569

 
$
59,387

 
$

 
 
 
$
162,956

Cost of revenues
 
 
 
 
 
 
 
 
 
 
License fees and revenue share
 
65,981

 
30,464

 

 
 
 
96,445

Other direct cost of revenues
 
2,023

 
1,903

 

 
 
 
3,926

Total cost of revenues
 
68,004

 
32,367

 

 
 
 
100,371

Gross profit
 
35,565

 
27,020

 

 
 
 
62,585

Operating expenses
 
 
 
 
 
 
 
 
 
 
Product development
 
10,876

 
6,316

 

 
 
 
17,192

Sales and marketing
 
8,212

 
5,095

 

 
 
 
13,307

General and administrative
 
13,032

 
10,448

 
197

 
(a)
 
23,677

Total operating expenses
 
32,120

 
21,859

 
197

 
 
 
54,176

Gain / (loss) from operations
 
3,445

 
5,161

 
(197
)
 
 
 
8,409

Interest and other income / (expense), net
 
 
 
 
 
 
 
 
 
 
Interest income / (expense), net
 
(1,120
)
 
(3,233
)
 
2,071

 
(b) (c)
 
(2,282
)
Foreign exchange transaction gain / (loss)
 
3

 

 

 
 
 
3

Change in fair value of convertible note embedded derivative liability
 
(1,008
)
 

 

 
 
 
(1,008
)
Change in fair value of warrant liability
 
(4,875
)
 

 

 
 
 
(4,875
)
Loss on extinguishment of debt
 
(431
)
 

 

 
 
 
(431
)
Other income / (expense)
 
153

 

 

 
 
 
153

Total interest and other income / (expense), net
 
(7,278
)
 
(3,233
)
 
2,071

 
 
 
(8,440
)
Income / (loss) from operations before income taxes
 
(3,833
)
 
1,928

 
1,874

 
 
 
(31
)
Income tax provision
 
469

 
887

 

 
 
 
1,356

Net income / (loss) from continuing operations, net of taxes
 
(4,302
)
 
$
1,041

 
$
1,874

 
 
 
(1,387
)
Income / (loss) from discontinued operations
 
(1,708
)
 
 
 
 
 
 
 
(1,708
)
     Net income / (loss) from discontinued operations
 
(1,708
)
 
 
 
 
 
 
 
(1,708
)
Net income / (loss)
 
(6,010
)
 
 
 
 
 
 
 
(3,095
)
Foreign currency translation adjustment
 
(31
)
 
 
 
 
 
 
 
(31
)
Comprehensive income / (loss):
 
$
(6,041
)
 
 
 
 
 
 
 
$
(3,126
)
Basic and diluted net income / (loss) per common share
 
 
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.06
)
 
 
 
 
 
 
 
$
(0.02
)
Discontinued operations
 
(0.02
)
 
 
 
 
 
 
 
(0.02
)
Net income / (loss)
 
$
(0.08
)
 
 
 
 
 
 
 
$
(0.04
)
Weighted average common shares outstanding, basic
 
77,440

 
 
 
 
 
 
 
77,440

Weighted average common shares outstanding, diluted
 
77,440

 
 
 
 
 
 
 
77,440


Pro Forma Adjustments
(a) Amortization of intangible assets. Adjustment to remove the impact of Mobile Posse historical intangible amortization expense and record the estimated amortization expense on identified intangible assets recorded as part of the purchase price allocation. The adjustment is based on estimated useful lives of 18 years for customer relationships and 5 years for developed technology.
(b) Interest expense. Adjustment to eliminate Mobile Posse historical interest expense and record interest on Loan Agreement with Western Alliance Bank.
(c) Interest expense. Adjustment to eliminate Mobile Posse historical amortization of debt discount and debt issuance costs and record amortization of debt issuance costs on Loan Agreement with Western Alliance Bank.
(d) Loss on extinguishment of debt. Eliminate Mobile Posse historical loss on extinguishment of debt.