Digital Turbine Reports Fiscal 2019 Second Quarter Results
AUSTIN, Texas, Nov. 5, 2018 /PRNewswire/ -- Digital Turbine, Inc. (Nasdaq: APPS) announced financial results for the fiscal second quarter ended September 30, 2018. The Company divested its Content and Advertisers & Publishers ("A&P") businesses in two separate transactions that closed on July 1, 2018, and June 28, 2018 (effective June 1, 2018), respectively. As a result, the operating results of these businesses are reflected as discontinued operations for all periods presented. All operating results discussed below, except as otherwise specifically noted, refer only to the continuing operations of the Company, and all comparisons to prior periods have been adjusted to reflect only continuing operations.
Recent Highlights:
-- Fiscal second quarter revenue was $23.9 million, representing 50% growth
when compared to the fiscal second quarter of 2018.
-- GAAP net income from continuing operations for the fiscal second quarter
was $2.1 million, or $0.03 per share. Non-GAAP adjusted net income(1)
was $1.1 million, or $0.01 per share, as compared to a Non-GAAP adjusted
net loss of $1.0 million, or ($0.01) per share in the fiscal second
quarter of 2018.
-- Non-GAAP adjusted EBITDA(2) for the fiscal second quarter was $1.6
million, as compared to a Non-GAAP adjusted EBITDA loss of $0.1 million
in the fiscal second quarter of 2018.
-- Non-GAAP free cash flow(3) totaled $1.6 million in the fiscal second
quarter, as compared to $1.2 million in the fiscal second quarter of
2018.
-- The Company has surpassed 200 million total devices with Ignite
installed to date, including nearly 25 million devices installed during
the September quarter.
-- The Company signed a global agreement with Netflix for distribution of
the Netflix application with select Digital Turbine operator and OEM
partners.
-- The Company successfully renewed multi-year agreements with both Verizon
and AT&T, and launched commercial service with Tracfone.
"September was a solid quarter with 50% annual revenue growth, improved gross margins, and continued positive Adjusted EBITDA(2) growth," said Bill Stone, CEO. "We continue to witness strengthening demand for our enhanced Mobile Delivery Platform. Advertisers are steadily adopting the platform as a vehicle to add value-added mobile users in a cost-effective manner. We have recently welcomed several new top-tier advertisers, including LinkedIn and Netflix, to the platform. Meanwhile, our platform, which now offers a wider array of features such as Single-Tap and Smart Folders, is continuing to gain momentum with key global operators and OEMs, who are seeking to leverage the platform as a means to better monetize their assets while simultaneously enhancing the end-user experience. We are extremely pleased to welcome Samsung, the world's largest smartphone OEM, as one of our newest strategic partners. We view these new OEM partnerships as further validation of our platform, and look forward to collaborating with Samsung and other leading OEMs to better capitalize on the burgeoning global Bring-Your-Own-Device, or 'BYOD' opportunity. The net result of all of these clear demand trends is an extended global reach and expanded addressable market opportunity for Digital Turbine and its platform constituents."
Mr. Stone concluded, "Armed with a more robust platform offering and growing platform adoption among influential operator and OEM partners, Digital Turbine is in an ideal position to capitalize on prevailing secular tailwinds in the mobile advertising world. Our focus now and going forward is squarely on execution and translating this explosive market opportunity into substantive financial gains for the Company, its partners and its shareholders."
Second Quarter Fiscal 2019 Financial Results
Revenue for the fiscal second quarter of 2019 was $23.9 million, representing an increase of 50% year-over-year. Revenue growth was attributable to significantly higher revenue-per-device with our larger U.S.-based carrier partners, which reflected strengthening advertiser demand and incremental contributions from new product offerings added to the platform.
GAAP gross margin was 32% for the second quarter of fiscal 2019, as compared to a 35% GAAP gross margin in the fiscal second quarter of 2018. Non-GAAP adjusted gross margin(4) was 34% for the fiscal second quarter of 2019, as compared to 31% in the first quarter of fiscal 2019 and 38% for the fiscal second quarter of 2018.
Net income from continuing operations for the second quarter of fiscal 2019 was $2.1 million, or $0.03 per share, as compared to a net loss from continuing operations for the fiscal second quarter of 2018 of $6.6 million, or ($0.10) per share. Non-GAAP adjusted net income(1) for the second quarter of fiscal 2019 was $1.1 million, or $0.01 per share, as compared to a Non-GAAP adjusted net loss of $1.0 million, or ($0.01) per share, during the fiscal second quarter of 2018.
Non-GAAP adjusted EBITDA(2) was $1.6 million for the second quarter of fiscal 2019, as compared to a Non-GAAP adjusted EBITDA loss of $0.1 million for the second quarter of fiscal 2018. The reconciliation between GAAP and Non-GAAP financial results for all referenced periods is provided in a table immediately following the Unaudited Consolidated Statements of Operations and Comprehensive Income/(Loss) below.
Business Outlook
Based on information available as of November 5, 2018, the Company expects third quarter of fiscal 2019 revenue between $28 million and $30 million, and non-GAAP adjusted EBITDA(2) between $1.8 million and $2.2 million. It is not reasonably practicable to provide a business outlook for GAAP net income from continuing operations because the Company cannot reasonably estimate the changes in the fair value of derivatives and warrants related to the September 2016 convertible notes offering, which are directly impacted by changes in the Company's stock price.
About Digital Turbine, Inc.
Digital Turbine works at the convergence of media and mobile communications, connecting top mobile operators, OEMs and publishers with app developers and advertisers worldwide. Its comprehensive Mobile Delivery Platform powers frictionless user acquisition and engagement, operational efficiency and monetization opportunities. Digital Turbine's technology platform has been adopted by more than 30 mobile operators and OEMs worldwide, and has delivered more than one billion app preloads for tens of thousands advertising campaigns. The company is headquartered in Austin, Texas, with global offices in Durham, Mumbai, San Francisco, Singapore and Tel Aviv. For additional information visit www.digitalturbine.com.
Conference Call
Management will host a conference call today at 4:30 p.m. ET to discuss its second quarter financial results and provide operational updates on the business. To participate, interested parties should dial 855-238-2713 in the United States or 412-542-4111 from international locations. A webcast of the conference call will be available at ir.digitalturbine.com/events.
For those who are not able to join the live call, a playback will be available through November 12, 2018. The replay can be accessed by dialing 877-344-7529 in the United States or 412-317-0088 from international locations, passcode 10125847.
The conference call will discuss guidance and other material information.
Use of Non-GAAP Financial Measures
To supplement the Company's condensed consolidated financial statements presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), Digital Turbine uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP adjusted gross profit, non-GAAP gross margin, non-GAAP adjusted EBITDA and non-GAAP free cash flow. Reconciliations to the nearest GAAP measures of all non-GAAP measures included in this press release can be found in the tables below.
Non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance, prospects for the future and as a means to evaluate period-to-period comparisons. The Company believes that these Non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of recurring core business operating results. The Company believes the non-GAAP measures that exclude such items when viewed in conjunction with GAAP results and the accompanying reconciliations enhance the comparability of results against prior periods and allow for greater transparency of financial results. The Company believes Non-GAAP measures facilitate management's internal comparison of its financial performance to that of prior periods as well as trend analysis for budgeting and planning purposes. The presentation of Non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
(1)Non-GAAP adjusted net income/(loss) and EPS are defined as GAAP net income/(loss) and EPS adjusted to exclude the effect of stock-based compensation, amortization of intangibles, changes in the fair value of derivatives and warrants related to the September 2016 convertible notes offering, loss on extinguishment of debt, and tax adjustment largely due to updates resulting from finalization of a transfer pricing study. Readers are cautioned that Non-GAAP adjusted net income/(loss) and EPS should not be construed as an alternative to comparable GAAP net income figures determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.
(2)Non-GAAP adjusted EBITDA is calculated as GAAP net income/(loss) excluding the following cash and non-cash expenses: interest expense, foreign exchange transaction loss/(gain), income tax benefit, depreciation and amortization, stock-based compensation expense, the change in fair value of derivatives and warrants that are recorded related to the September 2016 convertible notes offering, other income / (expense), and a loss on extinguishment of debt. Readers are cautioned that Non-GAAP adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with U.S. GAAP as an indicator of performance, which is the most comparable measure under GAAP.
(3)Non-GAAP free cash flow, which is a non-GAAP financial measure, is defined as net cash provided by operating activities (as stated in our Consolidated Statement of Cash Flows) reduced by capital expenditures. Readers are cautioned that free cash flow should not be construed as an alternative to net cash provided by operating activities determined in accordance with U.S. GAAP as an indicator of profitability, performance or liquidity, which is the most comparable measure under GAAP.
(4)Non-GAAP adjusted gross profit and gross margin are defined as GAAP gross profit and gross margin adjusted to exclude the effect of intangible amortization expense and depreciation of software. Readers are cautioned that Non-GAAP adjusted gross profit and gross margin should not be construed as an alternative to gross margin determined in accordance with U.S. GAAP as an indicator of profitability or performance, which is the most comparable measure under GAAP.
Non-GAAP adjusted gross profit and gross margin, Non-GAAP adjusted EBITDA, Non-GAAP adjusted net income / (loss) and EPS, and Non-GAAP free cash flow are used by management as internal measures of profitability, performance and liquidity. They have been included because the Company believes that the measures are used by certain investors to assess the Company's financial performance before non-cash charges and certain costs that the Company does not believe are reflective of its underlying business.
Forward-Looking Statements
This news release includes "forward-looking statements" within the meaning of the U.S. federal securities laws. Statements in this news release that are not statements of historical fact and that concern future results from operations, financial position, economic conditions, product releases and any other statement that may be construed as a prediction of future performance or events, including financial projections and growth in various products are forward-looking statements that speak only as of the date made and which involve known and unknown risks, uncertainties and other factors which may, should one or more of these risks uncertainties or other factors materialize, cause actual results to differ materially from those expressed or implied by such statements.
These factors and risks include:
-- risks associated with Ignite adoption among existing customers
(including the impact of possible delays with major carrier and OEM
partners in the roll out for mobile phones deploying Ignite)
-- actual mobile device sales and sell-through where Ignite is deployed is
out of our control
-- risks associated with the timing of Ignite software pushes to the
embedded bases of carrier and OEM partners
-- risks associated with end user take rates of carrier and OEM software
pushes which include Ignite
-- new customer adoption and time to revenue with new carrier and OEM
partners is subject to delays and factors out of our control
-- risks associated with fluctuations in the number of Ignite slots across
US carrier partners
-- required customization and technical integration which may slow down
time to revenue notwithstanding the existence of a distribution
agreement
-- risk that strong Apple iPhone sales could result in a disproportionately
low amount of Android sales
-- risks associated with delays in major mobile phone launches, or the
failure of such launches to achieve the scale
-- customer adoption that either we or the market may expect
-- risks associated with the level of our secured and unsecured
indebtedness
-- ability to comply with financial covenants in outstanding indebtedness
-- the difficulty of extrapolating monthly demand to quarterly demand
-- the challenges, given the Company's comparatively small size, to expand
the combined Company's global reach, accelerate growth and create a
scalable, low-capex business model that drives EBITDA (as well as
Adjusted EBITDA)
-- ability as a smaller Company to manage international operations
-- varying and often unpredictable levels of orders; the challenges
inherent in technology development necessary to maintain the Company's
competitive advantage such as adherence to release schedules and the
costs and time required for finalization and gaining market acceptance
of new products
-- changes in economic conditions and market demand
-- rapid and complex changes occurring in the mobile marketplace
-- pricing and other activities by competitors
-- derivative and warrant liabilities on our balance sheet will fluctuate
as our stock price moves and will also produce changes in our income
statement; these fluctuations and changes might materially impact our
reported GAAP financials in an adverse manner, particularly if our stock
price were to rise
-- technology management risk as the Company needs to adapt to complex
specifications of different carriers and the management of a complex
technology platform given the Company's relatively limited resources,
and
-- other risks including those described from time to time in Digital
Turbine's filings on Forms 10-K and 10-Q with the Securities and
Exchange Commission (SEC), press releases and other communications. You
should not place undue reliance on these forward-looking statements. The
Company does not undertake to update forward-looking statements, whether
as a result of new information, future events or otherwise, except as
required by law.
Investor Relations Contacts:
Brian Bartholomew
Digital Turbine
brian.bartholomew@digitalturbine.com
Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income / (Loss)
(in thousands, except per share amounts)
3 Months Ended
3 Months Ended
September 30, 2018
September 30, 2017
(Unaudited)
(Unaudited)
Net revenues $23,854 $15,905
---
Cost of revenues
License fees and revenue share 15,802 9,865
Other direct cost of revenues 508 430
Total cost of revenues 16,310 10,294
Gross profit 7,544 5,610
Operating expenses
Product development 2,637 2,241
Sales and marketing 1,913 1,284
General and administrative 2,679 3,551
Total operating expenses 7,229 7,076
Income /(loss) from
operations 315 (1,465)
Interest and other expense, net
Interest expense, net (135) (662)
Foreign exchange transaction
gain /(loss) 1 (47)
Change in fair value of
convertible note embedded
derivative liability 952 (3,344)
Change in fair value of
warrant liability 926 (1,164)
Loss on extinguishment of debt (15) (882)
Other income 1 78
Total interest and other
income /(expense), net 1,730 (6,021)
Income /(loss) from
continuing operations before
income taxes 2,045 (7,487)
Income tax benefit (23) (884)
Net income /(loss) from
continuing operations, net of
taxes $2,068 $(6,603)
Discontinued operations, net of taxes
Income /(loss) from
operations of discontinued
components $(356) $145
Net income /(loss) from
discontinued operations, net
of taxes $(356) $145
---
Net income / (loss) $1,712 $(6,458)
Other comprehensive income / (loss):
Foreign currency translation
adjustment - (5)
---
Comprehensive income /(loss): $1,712 $(6,463)
===
Basic and diluted net income /
(loss) per common share $0.02 $(0.10)
===
Continuing operations $0.03 $(0.10)
Discontinued operations $(0.01)
Net income / (loss) $0.02 $(0.10)
===
Weighted average common shares
outstanding, basic 77,193 66,846
Weighted average common shares
outstanding, diluted 78,780 66,846
Digital Turbine, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
September 30, 2018
March 31, 2018
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $8,349 $12,720
Restricted cash 431 331
Accounts receivable, net of allowances of $866
and $512, respectively 20,862 17,050
Deposits 152 151
Prepaid expenses and other current assets 716 750
Current assets held for disposal 3,672 8,753
Total current assets 34,182 39,755
Property and equipment, net 3,053 2,757
Deferred tax assets 655 596
Intangible assets, net 561 1,231
Goodwill 42,266 42,268
TOTAL ASSETS $80,717 $86,607
===
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $26,752 $19,895
Accrued license fees and revenue share 5,717 8,232
Accrued compensation 581 2,966
Short-term debt, net of debt issuance costs
and discounts of $120 and $205, respectively 1,480 1,445
Other current liabilities 1,477 1,142
Current liabilities held for disposal 5,915 12,726
Total current liabilities 41,922 46,406
Convertible notes, net of debt issuance costs
and discounts of $1,482 and $1,827,
respectively 3,418 3,873
Convertible note embedded derivative liability 1,728 4,676
Warrant liability 1,484 3,980
Total liabilities 48,552 58,935
Stockholders' equity
Preferred stock
Series A convertible preferred stock at $0.0001
par value; 100 100
2,000,000 shares authorized, 100,000 issued and outstanding
(liquidation preference of $1,000)
Common stock
$0.0001 par value: 200,000,000 shares authorized; 10 10
78,214,570 issued and 77,480,114 outstanding at September 30, 2018;
76,843,278 issued and 76,108,822 outstanding at March 31, 2018
Additional paid-in capital 320,361 318,066
Treasury stock (754,599 shares at September 30,
2018 and March 31, 2018) (71) (71)
Accumulated other comprehensive loss (323) (325)
Accumulated deficit (287,912) (290,108)
Total stockholders' equity 32,165 27,672
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $80,717 $86,607
===
Digital Turbine, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(in thousands)
3 Months Ended
3 Months Ended
September 30, 2018
September 30, 2017
(Unaudited)
(Unaudited)
Cash flows from operating activities
Net income / (loss) $2,068 $(6,603)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 707 661
Change in allowance for doubtful accounts 76 58
Gain /(loss) on disposal of fixed assets
Amortization of debt discount and debt issuance
costs 27 327
Stock-based compensation 479 645
Stock-based compensation for services rendered 123 74
Change in fair value of convertible note embedded
derivative liability (952) 3,344
Change in fair value of warrant liability (926) 1,164
Loss on extinguishment of debt 15 882
(Increase)/decrease in assets:
Accounts receivable (1,592) (2,363)
Deposits 4
Deferred tax assets (23) (336)
Prepaid expenses and other current assets 85 124
Increase/(decrease) in liabilities:
Accounts payable 8,460 5,606
Accrued license fees and revenue share (5,774) (2,077)
Accrued compensation (597) 567
Accrued interest (132) (368)
Other current liabilities 199 460
Other non-current liabilities (5) (602)
Net cash provided by operating activties -
continuing operations 2,238 1,587
Net cash used in operating activties -
discontinued operations (1,874) (1,543)
Net cash provided by operating activties $364 $24
Cash flows from investing activities
Capital expenditures $(674) $(383)
Cash used in investing activties -continuing
operations (674) (383)
Cash provided by /(used in) investing activties
-discontinued operations (66)
Net cash used in investing activities $(674) $(449)
Cash flows from financing activities
Proceeds from short-term borrowings
$ - $250
Options exercised 121 10
Repayment of debt obligations (247)
Payment for debt issuance costs (26)
Net cash provided by (used in) financing
activities $121 $(13)
Effect of exchange rate changes on cash and
restricted cash
$ - $3
Net change in cash and restricted cash $(189) $(435)
Cash and restricted cash, beginning of period $8,969 $6,633
Cash and restricted cash, end of period $8,780 $6,198
GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN
(in thousands)
3 Months Ended
3 Months Ended
September 30, 2018
September 30, 2017
(Unaudited)
(Unaudited)
Continuing Operations:
Revenue $23,854 $15,905
Gross profit $7,544 $5,610
Gross margin percentage 31.6% 35.3%
Add back items:
Amortization of intangibles $336 $369
Depreciation of software $172 $61
Non-GAAP gross profit from
Continuing Operations $8,052 $6,040
Non-GAAP gross margin
percentage from Continuing
Operations 33.8% 38.0%
GAAP NET INCOME / (LOSS) TO NON-GAAP ADJUSTED NET INCOME / (LOSS)
(in thousands)
3 Months Ended
3 Months Ended
September 30, 2018
September 30, 2017
(Unaudited)
(Unaudited)
Continuing Operations:
Net income /(loss) from
continuing operations $2,068 $(6,603)
Add back items:
Stock and stock option
compensation 602 719
Amortization of intangibles 336 369
Change in fair value of
convertible note (1,878) 4,508
embedded derivative and warrant
liability
Loss on extinguishment of debt 15 882
Tax adjustment (1) (848)
Non-GAAP Adjusted Net Income /
(Loss) from Continuing Operations $1,143 $(973)
Non-GAAP Adjusted Net Income /
(Loss) per share from Continuing
Operations $0.01 $(0.01)
Weighted average common shares
outstanding, basic 77,193 66,846
Weighted average common shares
outstanding, diluted 78,780 66,846
(1) A tax benefit of $848k
resulted during the three
months ended September 30,
2017. These non-cash
changes to the tax provision
and benefit reported in the
current quarter are largely
due to updates resulting
from finalization of a
transfer pricing study.
GAAP NET INCOME / (LOSS) TO NON-GAAP ADJUSTED EBITDA
(in thousands)
3 Months Ended
3 Months Ended
September 30. 2018
September 30, 2017
(Unaudited)
(Unaudited)
Continuing Operations:
Net income /(loss) from
continuing operations $2,068 $(6,603)
Add back items:
Stock and stock option
compensation 602 719
Amortization of intangibles 336 369
Depreciation expense 371 292
Interest expense, net 135 662
Other income (1) (78)
Change in fair value of
convertible note (1,878) 4,508
embedded derivative and warrant
liability
Loss on extinguishment of debt 15 882
Foreign exchange transaction loss (1) 47
Income tax benefit (23) (884)
Non-GAAP Adjusted EBITDA from
Continuing Operations $1,624 $(86)
GAAP CASH FLOW FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS TO NON-GAAP FREE CASH FLOW FROM CONTINUING OPERATIONS
(in thousands)
3 Months Ended
3 Months Ended
September 30, 2018
September 30, 2017
(Unaudited)
(Unaudited)
Net cash from
operating
activities from
continuing
operations $2,238 $1,567
Capital
expenditures (674) (383)
Non-GAAP free
cash flow from
continuing
operations $1,564 $1,184
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SOURCE Digital Turbine, Inc.
