Digital Turbine (APPS) 10 Nov 222023 Q2 Earnings call transcript

Good afternoon, and welcome to the Digital Turbine Fiscal Second Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] I would now like to turn the conference over to Brian Bartholomew, Senior Vice President, Capital Markets. Please go ahead.

Thanks, Debbie. to conference Turbine call. welcome second year and earnings quarter afternoon the fiscal Digital XXXX Good

Barrett Joining discuss CEO, CFO, our on results me the are Bill call Stone; today to Garrison. and

forward-looking products like demand and to we you our operating beliefs, topics. on forward-looking including today remarks our started, and These future Before include statements. are take projected that forward-looking get and will statements opportunity market to this current other services, remind anticipated I'd based assumptions, metrics, expectations

that prove believe reasonable, required are incorrect. we no are Although our and statement. they forward-looking undertake as not assumptions performance, obligation future some Except any to by we guarantees to of law, will update inevitably be

to please will differ GAAP forward-looking Exchange not from measures. by our discussion our to of about of measures non-GAAP as Securities with this GAAP for contemplated refer call, using materially a results we discuss the important of non-GAAP to that non-GAAP of could results For those comparable press well statements, documents the financial factors Also during and the certain risk for performance. we refer most the the Commission. information filed cause limitations actual these measures measures are to today's reconciliations release as substitutes measures. Non-GAAP our Please

turn over I Mr. our call the Now, Bill will Chief Executive Stone. Officer,

the experienced currently it our begin macro on in like And our joining before to tonight. for last while know to I focus operator in both prepared devices, my to current remarks, environment I've results It's the I the means for focused years macro majority environment and by XX-year the been I'm diving us open areas. seeing dynamic my about spending it being for investors quarter. to call focus flexible companies going operate you into our over Brian, talking operating environment details. operational OEM and to X.X we're the all while are change. thank lean, and versus my seen Thanks, has and what the micro most vast what I'd and and cover environment business we've career. of macro the means macroeconomic what second and commentary The ad nimble, the want to on digital required regarding

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ad impacted. advertisers For on like difficult a are as platforms tactics have return metrics view tech spend difficult through also reliant have and identifiers, a row upon disproportionately ad been working with example, Apple's having time or historical been IDFA that negatively attribution, platforms time. heavily the Also, on have

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streams commentary global versus operators more for the insurmountable not are a and macro years, declined were finally, devices many they types year supply Unlike macro situation that but versus more more on operators conditions being X still it's the them been documented in are dollars in these new prior later while we is are dollars that ago. in marginally here for in revenue years. their a opportunities to in The by cliff. publishers there like for and takeaway their is albeit they are of can more up like demand than looking in provide work capture for nature, my currently is demand from Digital our situation remarks. compared as but The ad driven and falling the well cautious some industry short-term. difficult grow and the success example, supply This off OEMs, compared environments. investors deliberate And are more demand effort business temporary more a to with from look our tailwind macro or Digital trying how sequentially, driven, more view situation them required prior companies that examples to million is our provide is on and to as companies Turbine For Turbine U.S. sources specific OEMs the the revenue from of I'll in in spends.

had Turning earnings of million of revenues we $X.XX quarter EBITDA of second $XXX share. to non-GAAP $XX million per and our results,

consecutive and sixth In was growth. This margins of of EBITDA record our margin addition, margins record we XX% reported quarter gross EBITDA of XX%.

And performance To we're that focus portions migrating focus we year. end, reorienting Barrett delivered things guiding will versus have are focused towards to margins in and legacy demand the quarter. our in And sequentially and XX% businesses, second we as and in December and struggle make This his to on the reseller key. XX%, did discuss the of quarter of we're help SingleTap preceding is tech ad our improvement headwind seventh quarters, opportunities leveraging is that of environment or prior today the is performance comments, legacy side us over to continue three increase continue for given in improving the something business times those six six we the compared macroeconomic And Many like sharpen this margin things current a pro changes for towards both having but our margin margin a to more quarter years to the consecutive As headcount show short-term on profit have performance, upcoming proud focus improved we nearly our of. our we profile this should are it companies last and on top-line on better. on combined. EBITDA inflationary platform XX% doing Non-GAAP specifically, to products. accretive ability to gross our margins growing margin DSP. situation, future reported from overall forma brand by fewer

down continued or XX internationally drivers sales device $X last improvement products, or RPD per were per business, devices June million U.S., were For driven approximately in was U.S. and the XX% results media revenue in year. year-over-year device was growth X we RPD. more compares our $X relationships. of by On-Device I those which In quarter, as the year-over-year. device, with driven year-over-year. our to about added devices the million pleased June of million This our nearly was devices, over particular, more XX quarter devices the in million more in And

do same to internationally, year-over-year have RPD work growth. as did seem We not we the

lower. of and indexed tend mix versus RPDs devices markets, developed higher a developing to or was the bit As skew

we with products for Verizon pleased to the U.S., revenue another we I'm as add contract extended streams them. also our in continue years that with four Here new and

We SingleTap product. made licensing our also in progress

a of a license we higher its We update to growing profile our with Cloud large I very particular, are last the call be on strategic yet the partnership selling gaming with call. announced Google some Google also want last to track earnings provider product Marketplace. licensing and benefit out a at advertising Google X is Google, press SingleTap the relationships provided we This large Tier another a But will joint and business. e-commerce in release publisher, our year. in with

our our ramped We carriers agreements to with to very product also one licensing. slot want added launching that SingleTap do this layered we the mobile nice to for on or picture take of fit anticipate and then then growth launched will breadth business. on. investors to expanded I generation. Bigger Similar market days and similar executed to operator prospects material only get is sequential with the emerge all the and I a excited during two strong, expect But where we and partners from the of other as early licensing and install we're our the current business two with revenue higher remind It profile SingleTap time depth with SingleTap for another licensing a dynamic trend and about so it and OEMs. quarter.

business. tailwinds and in have also We some our Media both Content headwinds

focused on longer been call, As going compared content, approximately is and term also to product the as postpaid from of subscribers we XX growth our U.S., believe on our come earnings XXX that the for approximately in we growth last advertisers we million for market quality has to have business while media discussed here million prepaid. that the overall activities, prioritizing improving postpaid our

shift growth our headwinds content have postpaid active While businesses prioritizing business other media experienced growth our would to users, year-over-year. On-Device short-term modest daily prepaid strategic the on has from in resulted

media focus revenue content we we postpaid models. have Verizon product, prepaid less to this XXXX. resume expand now content relationship ramp expect and as XX Verizon on with our business content native in device and And AT&T We different our launched are with growth on

the growth a On platform, was revenue app X%. growth business, while or year-over-year AGP

the in driven current diversified regional the year-over-year eCPMs regions, growth volume global higher Asia Pacific declining a across a of was slowing as in we our And major margin to we by continue spending perspective, footprint. OneDT maintain impressions, showing in focused saw particular macro we products. strength. being offset all Our are continue supply additional the add and that From digital with grow to ad quarter, with The impressions gross market. higher on of double of is profit synergies

balanced continued trajectory, Video its Looking and past remains the we types expansion of maintained upside. placement growth waited also a most ad believe this year exchange between the the growth with the format video. accelerated future banner Banners Digital and placement at and portfolio seen interstitials have we've DSP. continues has Turbine

as have that to that us internal expectations. area acquisition. a We on But our business eCPMs is was DSP and is AdColony work our performance strategic in for the was over key on below was to brands focus growth driver business and our see sequential I do a pleased

we those strategic our days, over business business our to we have as optimistic see brand of digits was by see learning field of so I'm a XX things other players now more pleased no growth to on the momentum by AI double also iOS do and We our past through some attribution playing Apple improve to used larger that and level made also in compete us, continue larger will I machine have continue Apple. now players to with hires is year-over-year supported in here. longer like

want for We I few my prior build future, both want positioned media to and whether a device growth relationships. mentioned a are also, growth the we earlier our and we strategic as I mentioned operator to we've highlighting calls, moments drivers. postpaid our Shopify spend Turning as uniquely But relationships, in on SingleTap believe publisher opportunities. stores content OEM to licensing device. technology, on app our and on remarks

the port curation applications pending And some customer leverage app installing machine on regulatory like including can with will of SingleTap their this easier we to making consumers. will of We there big additional our platform, to managing it the into and vision. right focus for provide points global being that to right solving, overwhelmed things apps to to capabilities equity and learning the the versus drive by position in it environment store an applications, efforts foray our features are will app our we pain market, manage vision, help intelligence the a into with installs to the billion On-Device easier in Ignite approximately apps The alternative also and believe apps will making managing which million addressable app market this XX leverage be payments, app choose app dumped help users, thrust But app and market new On-Device And position publishers this called first area took payments, being and micro first port and step over our purchasing us Combining the which supported stores. million Aptoide, these us further advertising will applications. $XXX ad from. by to the revenue. also tech global billion an with stores applications in downloads into easier taking over alternative in with app accelerated is stores X has XXX I'll for to make artificial store we further the with millions achieve today. assets

investments hub variants hub, market and this strong first ad of U.S. new managing year many would a competency to refer we've been to tech XX% we video in that and as that but AdColony for This us build effort many where We methodologies. growth mediation, in people leading basis, the since I we simple global businesses ad our also how well of We're our and Fyber employee dollars priorities. business now excess companies historical us the cost our and lay a also to at and and To to expenses resource at as to out see hub success apps On launching top market. a organic culture games actually served resource limited areas, approximately pandemic, approach. new our which contributing to ago efficient Digital to things partners, much market in bidding tiers of my headcount our are Turbine market across of focused growth and and these we both put the hiring and been cast lower remained in business will with demand, on. which gaming having hub, a been during against You pro in employee received building on anticipate have operator business our resources total DT units of EBITDA, allocation That many any improvements be industry, overstaffed new feedback that capabilities believe allocating has their $XXX,XXX per them from each early have product can as very like materials the strategy by to just the time. now earlier has is new to formats, part This profitability a just the integrated should are will new forma technology. and not want XXXX neither to key. in new as our our opportunity. and Unlike a making XXXX, off net in wider strategic our we make of remarks. beginning is enhancements adding a with well, catalyst, of accomplish that others single platform, serving serve and busy including a new compared this ad and priorities our the were result see new beginning many launch this freeze are is of doing of and approach the time. against But are lower approach all able strategic synergies, nice that are simultaneously investments or We format. focus current today the than been so discussed disciplined tech

are our Kumar. know it to and priorities through leadership. from we conclusion, leadership in prepared joins macro short-term drive new confident very and to Senthil addition to brings XX Senthil some we're numbers. but take are With this include near investments hiring temporary are future confident and against to the and telco, seeing Turbine. tech, of long-term focused, hiring that, years hardware Digital my they're And I'll surgically over ad investors and believe us and value I both us Barrett contributions. Chief technology turn making many a immediate executive we Technology strong concludes remarks you for are a Officer, headwinds, but and his the over looking we our team to in He's forward We Meta very software, product strategic

Bill, good Thanks, everyone. and afternoon,

our results profitability EBITDA QX Our these times. we continued dynamic as profit sustainable during reflect make our focus expand conscious deliver to to margins and efforts even gross

will our last ad no in as a forma results acquisitions X% year-on-year. X% Before XXX.X I year basis. the softer pro made exchange by to begin, grew a Revenue market, the AGP platform. growth and on passed of our of driven dates we Despite the down was a quarter to primarily reminder, business longer on million refer anniversary

largely modest near-term was which our the offset yields Our experienced media XX% as down on our expand. by partially content as year, headwinds segment by driven growth we Bill media RPD products ODS evolve products, over were America discussed prior the continue to app North

the U.S. As trending I've strength dollar. mentioned driven global previously, by headwinds the environment, in companies are facing and this

have rates primarily current exposure majority a expenses in and modest modest business impact exchange have dollars. only are given This revenues our nominated on the U.S. of model, had our Fortunately, climate. foreign due foreign our exchange revenues where only despite to is the we'll macro

Our to year, from XX% in XX.X QX, X% XX% increase in QX. margin sequentially as expansion on expanded million in and efforts enabled up platform and gross from gross XX%, to the to profits reported prior margin up the

margins expansion was driver business year-on-year While continued our focus across lines, ODS our improvement. important the on an all in enabled segment

core quarter our margins. anticipate we quarter, benefit agreement strategies. and In a margin also the enhanced while as a from continue experienced as that we we And expansion, growth synergy rates addition long-term reminder, our gross to to margin partner business in to execute generally on can the quarter fluctuate expansion renewed from

continue on to deliver the efficiency cost We platform.

were in constant XX.X the were sequentially operating year. operating prior operating flat As of compared total XX.X quarter. to also expenses cash the lower of to XX% were and in and in which expenses expenses XX.X total million And represented prior million, which QX, year were million revenues

near-term and and infrastructure, expenses, over our disciplined be realized in have to on further to measured operating remain funding These structure cost our we enabled leverage. benefits are quarters efficiency our coming anticipated improve to operating drive focused new with realized continued the growth efficiencies our our investments While the priorities. teams, investments

XX.X XX.X, our quarter in proud And I'm pleased with EBITDA of sixth the operating adjusted prior over increased we're to our margin of expansion to our Our consecutive sequential over points prior the business. EBITDA per that is or margin non-GAAP and be of $XX to up per expanded achieved, expansion. $X.XX QX I model quarter free year. achieved approximately we and million million and as of durability margin the year. $X.XX especially X% in macro continue XX.X compared the income in delivered cash quarter challenging EBITDA our in or basis XXX profitability quarter our in EBITDA of net pleased share the deliver and growth second environment. a all last adjusted share In flow being million our to

by While driven by income our offset debt from incur over we partially prior year, reduction interest expense rising operations improved rates greater in balance.

to taxes last We in year. have higher relative QX

primarily tax based benefits expected, jurisdictions. foreign As driven in by and awards stock greater income from lower

flows to Our X.X prior GAAP was per outstanding shares loss million flow net net XX.X or XX.X using million on quarter million our $X.XX XX per of cash in paying loss year from us free cash quarter income XXX deposition. based a compared our $X.XX Healthy the share. or for share, the cash diluted of million exit with free debt in operation XX.X million of further to after million down deleverage enabled to

facility drawn debt continues and XXX the produce Our continue our free quarter to pay into revolving would down balance our to on as expect million strong we to revolver. business flows, at cash credit our

flows, sheet and to model our our given margins, low cost strong facility. our profit and in are expanding position credit confident cash access balance capital We with

the well While growth will when resume we to landscape stronger we improves. are to be conditions expect market temporary, these macro positioned

our to Now, outlook. let me turn

$X.XX, tax $X.XX questions. EBITDA XX effective XX call revenue between adjusted be million back the currently outstanding the XX%. that, on consider QX between and diluted million, we environment. to be ongoing rate between and and million to shares it of operator net Operator? XXX the to and share for With based in me approximately to per million, XXX hand million non-GAAP income diluted macro the XXX We and and be As adjusted uncertainties open to expect an for let

Dan We question-and-answer Instructions] with first B. question Riley Day comes begin Securities. from the will now [Operator The session.

right. look, So doing if math, I'm the

transition a on was that of down with content postpaid things XX% you provided in to in prepared the the seem mind. based Just over it would this couple media revenue a a remarks, little

business revenue right? you walk if -- lost then are you the And wrap. get think back you been that maybe Verizon from we where with So long the that's could then at you postpaid first some might whether prepaid levels should AT&T, the to Mobile the How just if some just confirm the and side side partnerships, about their potential on could point? it back investors in just could T you get if pre-transition of has through expected

Yes. Thanks, Dan.

was Bill did address we Just up did content don't we content out -- we business we, reference Overall excluding slightly. it was the on we ODS. our break answer business Media the But I'll numbers, impactful. the the App reference segment, specifically. was let point. report It strategic

Yes. Dan. Yes, sure,

media really that to broader our than thing XX% a first advertisers better more between from product. specifically, on the really been we've context. yes, this with want other revenues say just to But as postpaid company and for I'd goes for focus a the and relates get for XX% postpaid. market content something it We our us, just The of as to after of quality reminder is lot come get beginning our

as really traction in So, that. some our my remarks, to focusing I And nice that. resources deploying with been mentioned we're starting see we've on

expect Now -- negatively as happen we've it XXXX. get which got our we to prepaid into had turn that what has revenue, that to into impacted and back is nice business. engagement we traction But focus

so active a of that we XXXX. in that. users some as expect resume declines result get daily And as to But into we we've seen

it's then then flowing you're perception material more they thing, from in platform that. to starts I and you deals strike when going the these is you generate than money some deal and revenue, the delay licensing investors turn Clearly, it other between in. about to the complicated on the starts all like the when one sort prepared this get talked remarks think Awesome. of And then it

so can coming delay So if and SingleTap be walk getting why between and in. just we might better little is, why could us that revenue a a you understand there through deal maybe a

Yes, sure.

We're deeper attracting know, revenue more excited to But getting big. manage we've one one got got more on lot we got, of of we've expectations. our to in sequential that investors don't or dynamic case, in fourth we're ones. it expectations business streams get focused our the where that's DSP start very that's something we geographies, continue looks sure other do we important right skis, business, to because thing of terms just SingleTap We and there have enablement then with expand We've business. run about view legacy, is licensing into managing the part know this where is in years fourth You more, I that more whether associated I in four about. a it. want think investor attention think but types just player really we the it it, or different really broader to run material happens this expand at In ones it we We really that an it kind point, then growth like, go understand to know, we thing But AdColony mile be ad and with some many get what capability. you started just over really are you and I player, that's with it a very of about excited we be to SingleTap, through go and integrated that are you've you providers, could And is issues wants you many, to operational our install types, of with Fyber it's we're new that, this that last And to similar ago, market going you the make ramped. whatever for then our our think going, to lot the a part models, business internally. business. exchange this want And of

from is go with ahead. question ROTH Next Darren Capital Partners. Aftahi Please

flow. for the of Samsung then Bill, the Europe, give just any seeing question an relationship job on us on better Thanks Are just And your of traction everything than my SKUs, the that's kind of Nice with commentary my going taking there? business kind cash last for questions. licensing kind update, the Could second you SingleTap. you on quarter? guys with

Tier more in of mentioned Cloud, coaster like like hit to do this inflection point? wins a ride, X be some install? days like You early maybe Google the you -- going you Or roller an of feel finally is dynamic

Yes, sure. Thanks, Darren. Yes.

devices. the to the pleased on first So really on I million devices board. was put in this have XX

all a a of prepared this world. think the the around for contributor major us my I largest record And Samsung vast that's I in as time in of remarks, majority mentioned those is was the all environment. of that contributor internationally, which obviously,

we're number. pleased expand that that. to with continue to look going to we're So And

of are global a to we're for one of operators revenue but the as rethink COVID I was not of think of us different of impacted negatively everybody lot a and looking OEMs and kind more that see here relationships just add in supply working starting streams. to things that new kind

we obviously, that so, provide them. And

momentum So I'd to traction that. expect see continued on and

make made Regarding over at the back don't ago We're to in. about skis. do mistakes a in But seeing earlier, great in get contracts, a think this temper We make our we're dynamic reference I the And sure expectations want we expectations. many, But inflection it, a those inflection revenue roll just as to we want sure it. so we're excited to point. we an we point that install on around point business. many question, taken past, things mentioned signed years we've Dan yes, are think getting we to your where the bit manage little to now I now I idea of at from

want And repeat don't so, to I make sure we that.

So we do deliver can on how promise want and over to focus under we to there. continue

for more could Barrett. one I sneak in If maybe

-- cash of cash what's thumb Your relative free comments generation kind about down? like to deleveraging pay general debt your about rule of flow

Yes.

So our nature cash the still just free We've -- given our view to view conversion we of financial right? to changed, XX% our in XX% the hasn't been flow long-term that as the EBITDA on engine. still

So at be of have going could that that assets in. that rate, you we're investing to lot a don't we assume

so turned an that that opportunity, free down direct not cash paying towards our there's And flow, we if we debt.

take to can the debt XX% Darren, that So you to pay over year and the XX% down. apply

Please with is question next ahead. Dessouky America. go from Our Omar of Bank

is if on And progress Just the wanted any and seeing terms out that in ask to there's if about fiber anything wondering of worth launched. SingleTap you're there? that flows calling integration. demand I'm

soft enabled we've launched it. And we've So it.

are right make plug we performance. sure Fyber. now, And DSPs it our we're with that pressure relative got DSP We we've to into right, to the testing that own want

we're of so of it's in of a around A/B testing ad spend lot their sheer that sure return installs. terms that And on to kind make of doing number meeting versus just expectations

I'd with very it. we're say So being about pretty cautious But it. excited we're

do from the see incremental sense be we that revenue you to have next able year? when any of in And might

Absolutely. we're in as get I that. going you incremental to is into see would expect as see we revenue get from future quarters,

from go is question with Anthony next ahead. Craig-Hallum. Our Please Stoss

custom Tier for learned Bill, SingleTap to work a I margins. a these a through can follow-up after And if new to bunch Have then Congrats Tier I'm getting on here, think And nice there's of take that? the lot potentially you lot can know, your been just a other you process this second where for of onboard had back on on I quicker? Xs quarter. launches he much you per curious several Xs.

in that And days, necessarily it's a the implementation. of on stuff the Yes. call what we've stuff we I'll Dynamic high AT&T, larger and the Verizon, in major when launched focus in that Sure. mile sexy of learned, some early of with and not That's right is to of in announcing our that last of it, working thanks. Tony, Yes. business, at the execution last mile install critical success. terms deals just execution we're Samsung, some is area, now. the scale,

bespoke of that solutions. so And on work versus these working But we And we lot with a have integrate getting into do absolutely we're to to learned variety partners. a how for we've automate.

work their that think has the probably in And spend integrated hardest difficult, something that's for the thing work necessarily us just would isn't to get so, processes. into existing we're And terms the And see progress get some for it. excited this play of out making very But to in I business I XXXX. taking material to can against going. how the time think us

excited And about in combo after this launch pretty early XXXX. then, you Bill, seem a

on more margins And you With or higher impact. just the the I this detail any of wanted U.S. thoughts share one next fiscal sneak maybe year to year, still? in can then kind year for gross Barrett, operator, revenue

Yes.

stores. about think real app we're So, as curated app internally. our the alternative we think opportunity for We store a there's or calling space hub

to Just purchasing. we'll assets more world. the unique I mentioned here we not my also for stores a by like app e-commerce got app in And worlds we're really our we've but foray personal position in that's also stuff regular powered for are our our in And Amazon But buy are advertising, today, first think our back see maybe given just in things billion as on in $XXX good to remarks, tech curated our go Shopify market. and local ad doing, is experiences. we into leverage which device, that our

users, can for and the revenue growth in a of this, So those dollars the that about opportunity if dimension, collecting another payment piece nice now now know, apps, inside advertising think you collecting us. to of NF think that you I with expanding dollars terms us acquiring adds, for new

next going all just EU environment We and be legislation getting the the passed, could U.S. and the as bipartisan the in that exciting, implemented. in process going early I this nice to midterms, get over in regulatory here it's the goes. in be But is Digital and space. get also year. a And expect support tailwind ground off Markets the real how that that, the activities some getting will thrust thing now the so our now you Act I to see see getting know, of think we're to going

Arthur Security. Please from Chu question go next with Our ahead. is BofA

my Thanks just Hey, Omar, guys. you worries. thanks. question. by asked my no for taking Actually, was Thank so question

CEO, conference remarks. over I for the like concludes closing back to any Will the turn This to Stone session. would question-and-answer

to again our to Thank and you joining call. all And great a have all you a the Thanks points reporting progress third quarter forward made today. look in call We'll on in for months. our today's XXXX talk the we'll call against fiscal we few night.

The conference you attending is concluded. for now Thank today's presentation.

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