Digital Turbine (APPS) 7 Feb 242024 Q3 Earnings call transcript

Good afternoon, everyone, and welcome to the Digital Turbine reports fiscal 2024 Third Quarter Financial Results Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Brian Bartholomew, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to the Digital Turbine Fiscal Year 2024 Third Quarter Earnings Conference Call.

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

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

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

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

call CEO, Now over to I'll Bill turn the our Stone.

all Thanks, tonight. I'm Brian, remarks our joining areas. you and going into thank call for to X break my

our results. summarize December want to First, I

operations and very the the I are against to the finally, progress which our we describe migrations current changes want opportunities, are making I and to of future we're Second, discuss execution improve state making to want and encouraging. our technology

X were overall versus were expectations business. coming of the late business in earnings of our difference $XXX in AGP below our experienced achieved expectations the line outlook. per but issues for EBITDA below above quarter We our million that for share. our quarter, and December $XX the finished For million of business, unique in outlook our with We we between ODS ODS non-GAAP $X.XX our revenue, in

year-over-year, U.S. despite expectations even our in First, disappointing more forecast were. headwinds what conservative device to than continue they were facing sales our

our Secondly, good we in news milestone migration major is platform finalized is late complete. the now the cloud this quarter. hosting is of a that The

However, ad between the in these tech or my and Combined, showed difference are fully the our on forward, are happened, we in X later these engagement. fine our discuss were learning our consolidated and DT by now our now less eCPM And below changing have to not from being our our our drive customers. The and nature temporary AGP from X as we're happened it holidays at same of improved to some our models platform, issues advertisers fixed. new a some the remarks we software going our view These for improve willing that be on business issues our Exchange. elements results AI of versus news to we to rates perspective, more of pay I'll exchange working all and despite operational few but finally, changes we do to engagement improved but AdColony to performing expense execution growth above segment a prior sunsetting our the that season structural. From the made good the things outlook. the legacy holiday of platform sequential not engagement on for is our on platform on for the weeks. driven been advertisers machine focused what we're money

to provide is we marginally growth continue despite above. ODS impacted contributing the our described exception their it scale and sequential advertisers our from features quarter, particular, that our In was business. their carrier in largest and business demand we temporary material has return, grow ago. issues improved advertisers having prior color U.S. brand as one issues revenues how months such remarks We more bidding ours XX With are now by had much the quarter, and declined was which will are networks. I'll in by AGP our devices the from season. from selling decline holiday only growth new one our business and seeing picture, my on also U.S. to business. Bigger our SDK more own others' X% operators up, that The in than given of XX% which spend unusual, brand later more internal short-term seeing experienced driven

demand. from heard suppliers have volumes, be future indicators device tend chipset We some future lead for recent on reports which to encouraging

are So better March is But in the for a our is and it the into for headwind major now, future. for we quarter. hopeful it reflected trends guidance

also Motorola and to with tab more In devices store pipeline. in our more add with our devices we million working to relationship addition to countries that that expand device are this, expanding are single we our ONE with in capability. I'm Korea announce XX with will relationship nearly pleased

device remains priority us. we the is mirror revenue future. we a supply States to device Improving United robust, for growth forward and into per pipeline where look outside of to opportunities Our device top sharing seeing are the more the

tap progress with in contracts we continue to the made new advertisers expand different advertisers. new and single also quarter with We on as

execution are enthusiasm understand revenue. I few is with final moments spend being on the from making their to is a more becoming live yet party not short-term us any strategic, want into growth. preventing our describing we're that on all technical The changes large or to are administrative side. social launch, that improve but the to feeling our issue be this translating positive that relationship we media worked partner We not operational issue a with drive future we frustration and will but pilot. continues It

how correct it on money we can we those items issue the market also we and what on demonstrate to Our that we are why make neither as working things is is unique, product confident the the prioritizing. or and fit are are

force also have the Most in one why from a suffer facing clear we with on X app unique major companies expertise. headwinds We distribution of Turbine and a alternative issues. the matter very here. Digital assets those disruptive can are subject vision our be

our have We drive are and growth are we to not our X things future will Rather, unique flow. do as we need which issues. those to improve execution, cash

is The the which to are scale tech my the we models. the modernization demonstrate first the execute. we results. and ability on how investment working require we our We how systems, replace And the ramp need exited to headwinds impact the material making of new is are Those stack, second processes leadership on and to into the new market earlier at in new businesses new remarks. short-term things described

approximately early our from on with platform tools product platform, Ignite, new now still more modernization have have for are or work as on organization on market, scale live a We're systems the and positive modular our demand-side XX% the version and we we hosting On so back-end these the machine stack do tech DSP, much revenues. ERP building learning and future activities versus and things working our that AI results working to our will of new implementing on. the nonstrategic but in so modernization, efforts seeing a of tech consolidation, new exchange on we like short-term migrations, lighter,

that of company expectations, items to this the the to have critical all and upcoming work quarters long-term is in see things, to investors, to to EBITDA. to now, of that and our swing we build over a continued decision could of some scale been finishing the be revenue short-term conscious that close emphasize work. very have works on expense as these long-term are of activities progress and these few made prioritize does I will a importance But completing in many clear at that cases, for All years. this I for it want mission a you the come we drive will want the

growth. we things and demand In our to things, are processes will offerings our changing we also are decision-making short- flow structure, level marketplace. drive change we're the in leadership as to system that confident focus And and changes, on have the going making cash organizational improving follow some for that long-term know we the addition our revenue we the these finally, as changing leadership our and internal our for work, model,

and We on all laser-focused are how things what the future. implemented quarter, worth catalyst working Turbine in this the of bright these changes, what are we're to makes these change the current of Digital the company. it to which be And are being for a growth is returning to willing

products, which the tap OEM with and our our first-party and We brand including technology, X DT our launched as are our tools machine States. here uniquely on-device and AI in app plus data, learning first United alternative distribution our with operators relationships. We've single publisher relationships extensive positioned operator Hub we our

as generate investors Korea and today. great context equity stake to our have store. are we in of taking leveraging our alternative a Flexion as with store alternative in are We not And more We've stores you Amazon, on than is investment seen in does is a Store. Flexion for Aptoide a the revenue them, press also experiences many many ONE alternative Samsung, release App many store may largest investment reminder, building source equity app leading are finally, app partnership revenue can the as our taken Xiaomi so they Korea such that from ONE others. And familiar is yesterday investment improve approximately Apple for and Huawei, in an our also for app Apple XX%. now for minority app in we generating porting and

leverage allow We this it benefits. of app of store are ONE downloads DSP million their and has app beginning to to our will versions Korean enabling to Korean our on alternative is, XX us One relationship customers. X friction-free SingleTap with all deliver by devices

developed the revenues, to more I XX% pay our launching the opportunities and return to our the business also catalyst will new and that early be by to in will importantly, emphasize the alternative and to about of is with dominant versus investors, constrained of to to Secondly, market. And we the I as in supply ONE enhance the look the for And outside building app States. our into the issues scale we'll have or mentioned finally, market it's in Digital Markets acquisition by is to that blocks us be will XX% Act driven would force app a current driven in-app we the of strategy the in device advertising. a future growth. Today, launch combined also reminder DMA it approximately store just March present. user attention a and United our with perhaps encourage not with Flexion but here want investors alternative Aptoide relationships, business expand way for and close a partnership Korea be EU, to being

Our to thereby ad want as app more this part cost users, and up those the of stack app strategy, new revenue with at tech to driving growth. acquire believe find lower leverage alternative open providers we AGP providers ways ad more or tech that users our will to

and to into our closely are technologies revenues user out flows strategy. To but We close remarks, running advertising, current alternative the my execution our cash to words, exciting, results. be very need to growth. live we future app linked our improving and acquisition our business in-app continues present our today short-term and are return to prepared both our other improve future leveraging both campaigns In

through things are devices, are to continue in pursue specific Barrett that will many partners I'll that, activities company and have it We short that drivers vision. And that our to my numbers. in and accomplish Those we over very flight bright media with return cost term turn from the DT to to longer-term a optimization remarks, you prepared growth to this while take that the going things the products, year. growth concludes

provided and and our Within Thanks, X% from season, were holiday year-on-year. due in earnings Bill carrier to below everyone. the the Own partially year-on-year. revenue headwinds or referenced ODS Solutions execution outlook. issues, per volumes U.S. These down our certain expectations call, U.S. device were conservative prior year of growth sequentially softening was down flat in segment, from our revenues against on temporary These Device strength device Combined we our integration were even efforts. November of $XXX.X the revenue Bill, to with Total continued platform afternoon, largely further million during quarter. offset improved million results stemming quarter $XX.X by XX% good December

by new while app revenues guidance comparison, U.S. And brands, prior performed revenues headwinds grow signs our robust Our sequentially has and Content fully our XX% up with of this In prepaid our in grew were footprint from quarter. $XX.X evidenced the both year. levels, leverage revenues X.X% We growth was content and Media expectations of lapped our of business increases. encouraged opportunity particularly spend supply, partnership declined greater to providing the the line shared of developments slightly than this and from outside the headwind quarter. We're our sequentially media XX% the in device the AGP that in improving a which part sequential December pipeline, experienced year-on-year by our QX platform, revenue new business, on million, existing our within over Bill particularly saw

While the by that this the onto impacted we of DT reiterate be consolidations together of pleased lines making we're the and headwinds, We're exiting operational in to have certain of and fully to the discussed beginning to calendar AGP near-term Bill's business previously. have the term bring legacy the year, platform have comment decline lines despite that overall expect actions the year-on-year positive our continues revenue by consolidation earlier short our a in return that consolidated the future on been integrated these businesses growth. Exchange. I'd encouraged we're and as

by sequentially margins in the down consolidated lower-margin product mix QX, influenced of XXX and basis in strength points improvement points with year. Sequentially, XX% the within share Our ODS QX an which was repeated shifts, experienced favorable margin the expanding in quarter. year's compares QX XXX segment. a in partner, from we prior margins an XX% increase to mix Within we basis AGP, certain contractual margins gross include mix from results saw ODS overall and of the QX in where products. Last and of from was were modest this also brand revenue not year-on-year product benefit adjustment

integrating our while rates operating $XX.X as margin X% in disciplined can cash expansion reminder, of represented on we quarter-to-quarter, remain We with from a QX, year prior and growth to As execute expenses revenues continue we XX% of strategies. long-term fluctuate from reduction margin million anticipate in expenses and gross a operating cost quarter. In were the generally compensation million, to the year, office GAAP expenses across platforms X% were lower-than-normal our discussed performance driven business primarily the linked assets. focused we period, by that incurred total and previously to and technology we've the systems $XX.X were up prior expenses back compared initiatives on the which transformation

the these efficiencies new and reflected completion periods we efforts, be increased costs have fiscal results expect incurred begin initiatives, recent due While the to in to our to the growth beyond. and throughout of and growth both XXXX

platform by During this phase, savings we from remain highly focused on operating efficiency we're and are these the encouraged consolidations. realizing

Turning to profitability.

partially million adjusted Our the of $XX by from in in revenues million quarter the primarily and OpEx. year sequentially from EBITDA declined cash driven reduction $X.X million down $XX.X prior offset a lower was in and

Our the EBITDA margin compared XX% in to of XX% quarter. September sequentially

adjusted a and are portion on greater leverage to operating Given we taking we and the inherent per year. the expense quarter $XX fall share active income model, million will bottom we quarter, or $X.XX enable compared return to the our or growth line. In share $XX.X last efforts as as the integration non-GAAP of those platform in dollars of business we per focus expect the achieved $X.XX net strengthen the measures in to of third to million

As partially driven by by compared interest and outstanding to offset lower expense we year, rising incurred prior debt balance. greater rates

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

recently our the additional our platforms, to capital amended requirements key quarter and Our debt overall opportunity discussed at pursuit facility. balance tech alternative store million align strategic initiatives ended revolving the our our Also, and modernizing the consolidating the credit the of to in and $XXX benefits we drawn credit on we've specifically facility needs. of support business around app our from flexibility realizing with growth provide

are optimize continue growth plans, value. our With on these enhancements, our focus opportunities to cash execute we flows financial and performance balancing ability on growth we to enterprise long-term and to confident and in

provide outlook, into wanted revenue headwinds the we covering guidance, into QX anticipate with Before guidance continue our assumptions. I device to volume our our U.S. visibility some on principally Within associated declines operators. to

we've have our believe and flagship device this seen the accelerating early the in While tempered we we quarter launch. further should recent March improve, we future expectations. these believe performance devices ODS to have time, limited And at Samsung therefore, -- the visibility of volume declines

optimistic revenue the pipeline and partners new from our execution are against growth in We successful the about future 'XX. FY

there revenues a not these do in sequential material typical out QX completed, we're partner also the QX. addition platform March now we to from approximately previously, exchange expect will we've However, revenue as And in completed launches seasonal sequential of million encouraged the our point a migration integration. in that benefits this future in headwind quarter. I'd experienced as platform reminder migration from consolidation the exchange with new in the historical $X be by impact highlighted

million XX%. With back to and per outstanding XXXX based that, shares turn me between let be $X.XX on We our $XX an $XXX of operator the diluted me adjusted million tax year let non-GAAP call be to for and diluted and currently Operator? between and million hand revenue share outlook. effective full million EBITDA and it Now income for to questions. to approximately to fiscal $XXX the between XXX and be expect adjusted $XX rate to $X.XX net million open

Instructions] [Operator from session. today question-and-answer ROTH MKM. Our the begin we'll time, this from Aftahi at Darren first gentlemen, comes and question Ladies

the accelerated U.S., there in to it the I for seems know some pretty curious, device headwind kind about answer, you're one but the shoots A P&L seeing when you know, of an is persistent. and but of curious couple Open with Two, any just I'm like of be reverse declines of one not of to I first investing may. some doing an kind of going green to just fully kind made the market? the sense initiatives may when in then comments about easy are if this I Barrett, way? kind in, on itself. just impact App your the stuff Bill, you do have going more think tech to a just comments on and be store And material the that's you're we kind implementation when complete are start of in your I'm lastly, stack. that? any

I'll jump in any provide on and those, color. can Barrett

the On year-over-year States, though our something double-digit U.S. weren't headwinds, forecasted of that the a was device United declines that decline even we we here which saw precipitous we one. in yes, a with partners, expecting

off So for referenced that start, to us. in reflects a to continues our be an as And comments, the slow his was things you saw Barrett which January some in of issue outlook.

was The of get States goes contracts device cautious sounds of will sure But being lease we to on. see. U.S. make seeing on and operators. anniversarying chipset Apple encouraging out Also, the better as the the in trend, of we'll from we're year like both United not devices X-year here supplies that on Android extra make start those SXX, the does regarding some first we anniversaries for heard suppliers, from that. Based a it although weekend weekend comments a want we've the as

now new a the partners. devices our of we for get rather some environment we what mentioned, like more can expand bringing with control? is then on of our with control think can we thing also Well, Korea supply. us getting relationships attractive also device that helpful focused places I We competitive be pretty than right those will in advantage uncontrollables, on can take I other can and

reliant really of being So that on operators we're the right States. focused upon United the here doing now versus some in

second it's to rolling. the On the tech stack, question be going regarding

get business. already We're progress. The is to following more side. roughly, of following a that. Store a and you're my see but be we're got as I we the alternative over it, learnings because right improved focused just the to let's and call our user quarter the to next all remarks done, from quarter are it's of quarter short-term in cannibalizing material quarter, priority take on be improvements around perhaps go the very, finally, business us. we absolutely get tech real I'm that not the terms and in issue revenues, call to now, purchasing on as the next rate So lighter, already expectation running we to in just and side -- term improvements create pleased could App on of a on It's business. And every that to to in to campaigns from that tech modular when want the thing data on. at of the is we're see the those App scalable XX get revenues the to in a our and it's mentioned side to it all X-figure roughly some to with now the that it's on My have want And we get short very stack science months, through able business, high some in where advantage going expense good ad where the well pipes we've is the the acquisition but so too the going that business. flight. super issues right for in P&L, us things order And do then run the you're to will making seeing Store

it be more see begin get us. I So this you're each and going building as to a early not quarter growth for driver XXXX, is material It academic. is days think we into to

comes of Bank question from next Our Dessouky from America. Omar

consumer install, things that? what's about partnership like your And store. hoping well? your was ONE in talk the And it the price to regards with are and in-app Is revenue what investment by Korean you involved for like, customers? you be as the I the could the example, app of potentially deal, journey economics secondly, share, guess, or purchase fee intrigued ads to, of that just in to or in-app per I was I be install then going structure going the the part

Yes, Omar.

our bigger becomes guys is Digital to live do the XX really we we're and planning or viewing looking Markets those into we're next something the to something future. as with ONE the days with And of EU with Store relationship Phase I So really Act them that as X we're with This the opening get over up store. of so, in store the that an collaborating forward Apple the there. Google Play think

with got So I -- really tactically kind got for one, to device I volumes, more one do in more answered of we from we've We've Darren fell tuned tech our X question something of million improve can we've get swoop. Number as that acquisition Korea, drive got that number this do X prior kind can show is stay as Korea devices things. helps the we and We immediately. on our can now to us strategic, on just to SingleTap. XX in about user

and provides now stream get stack us then be into new publishers are acquire with revenue SingleTap Korea our with leveraging a our those to of friction-free our Korean number users ONE advertising applications AGP tech work more side. games in-app -- So and onto whether app those a on three, and can alternative way or we other our customers. capabilities we DSP those own the And then can in for store apps and able types for local the

it's not partnership for say we're win-win things So revenue disclose with the those sides. obviously both specific are we're think really focused other working that the on. ONE can of store I any that good how than am I a terms

And Aptoide, about have could value the synergies across and You how we of I kind store. together, How regions well, right? these should of do now? ONE we you coming think think about strategic just ask have assets with value deals and multiple as the the strategic

Yes.

to years, the enable in we believe uniquely investors app we're is for the grow partnering what's that. extremely space We important alternative believe think you if to store obviously, disruptive that positioned believe continue upcoming that in and there's the I into over going be is which with scenes to things behind the payments, the a companies to that's versions, order the happen, managing have apps to doing capabilities this, porting because lot the publisher that on But having in I the whether have go to make companies relationships on mega-cap and that. us things. or can about and and way go it's do positioned have it plumbing go of anybody friction-free that a happen to super direct it's wants things other tech do the of whether bring lot multi-variants, different that to there's this, with alternative help a enable us those electricity that the that all whether uniquely that, customers, ambitions to do with out

is is doing egregious to their going biggest P&L, getting is the today. these for to the a X with solve easier that app XX% are companies the to think something able issue single to the in what come they which it is now that be I for duopoly have to paid running one-stop these tax together to that relationships any make having shop So publisher all we're

comes next B. from Our question Riley from Dan Securities. Day

new prepared you the remarks, in leadership talked Bill, changes about So work in and structure.

changes. -- Just around accomplish in lines, totally business to those great sense reports. to you're if just it you on elaborate get to be we're certain looking planning would a of with be which run of sort what people or to positions that, Should new good could bring switching

Yes, absolutely.

our getting we to biggest the I organization. is improve issue alignment think just the around need execution

now. we're So we need to make faster decisions. We need driving to in what right have clear accountability

have we'll for we're things results GM model a where moving lines of profit doing So be drive to business going and one the business different the make into accountability loss quarter. is clear able and to each short-term our be to

accomplish But better getting externally focused between to So better is and our with making this that. functions. just customers us about leadership internally we're changes different really alignment our

lot got of so And legacy companies, the the we've job legacy we've a done DT assembling acquired Fiber way we've the and versus companies we're the what things standardized way worked so we've and doing. change a AdColony the now And way versus to nice how versus of have on.

at where that point to that's standardization and now accountability take can So that now we're out decentralize and make standardization decision. a have internally a that we in clear to closer customers

really what around So that. doing is we're aligned

And U.S. held consistently last steady thought? for softer than sit RPD said quarters. if the then you've around $X you been for few me, that even that devices just have over Has has pretty

quarter marginally I XXX% that Yes. earlier X consistent. were by remarks. December in from have those execution driven The September and RPDs They down mentioned was in the device been my pretty the quarter, issues

If issues, have again. you take it those would out accreted X

from [Operator Anthony Instructions] comes our question from Craig-Hallum. Stoss next

I up about just why to on wasn't your the trial SingleTap Bill, wanted live. follow comment

about a more of expect And that, you bit You I you to resolved? a issues. us follow-ups. administrative couple color had that talked then when on be give little Can

picture, kind Yes. some now. partner to make waiting administrative there's impatiently ops Sure, been to go work Yes, all discussion going considerations Tony. for they're with tech talk Yes, as decision through the we internal that they're live, it. looking confident know, a be final the of us and through we've we and other that and bigger may wants right issues about that final at that

I the today, say is that as want work through our it pilot. consider past soon expect that. go it's commit call important I time given sides a the don't to us done, would to discussion I live to to both to but with that as then have I for just So here on line,

-- is more then for Barrett. And this probably it. maybe Got

one than the sequential your Are down the equally or break was of For they AGP? or your kind March from expectations is down can the revenues, much out decline guide, how other, sequentially? worse versus both you of ODS

Here's segment. the you that I an is I at don't of obviously on what say But we we've our QX as is completed contemplated real got relatively if that headwind of that would of in the bit factor say. a Even it's The look for -- U.S. the mentioned exchange. change accelerating devices decline the consolidation we -- guidance. on kind seasonality on our would our back guide seasonality We AGP I by constant. -- business, you little -- our

And the store I or was curious one to I after ONE having that. what then competitive just environment had Bill, talk you. seeing expect? you if question you just is not, you're about in what last if issues back And can

Yes.

for out I changes of in been the lot competitive in think there's the competitors. of a one announced environment, market our there obviously,

looking expect suppliers we're and about that at as our that devices things for while with softness talking all by about I an opportunity and as to the we that. especially business, So in U.S. we of supply chipset and the device some was talk flagship rebound

our We matters own also take hands. in

changes macro those with of the a of so And on positive we're viewing And the things us. environment competitors is in now. some there's happening of in pipeline a right the for going some encouraging lot

this you numbers hopefully, some 'XX? down. going time, revenue can months, you answer look stock sense. next give keep a been over or everybody When for XXXX, would you least frustrating at And in the then XX It's 'XX a expect so over growth fiscal

growth? rate your around question Tony, run

-- do that, next issues your created? you year tech that's the growth XXXX that's through and June stack in on expect given revenue is the quarter, next fiscal going March the just everything No,

next towards things That drive execution talked the the planning all have are we all we things on and would expectation. in year. be the we're about working to our growth Yes, -- that

Ladies be any and closing turn CEO, today's question-and-answer our floor for Stone remarks. Bill session. like ending over with to the we'll I'd to gentlemen, that, back

talk months. the for the the we'll great call again call fourth we on everyone, our look We Thanks, few night. 'XX progress and points to against a have on quarter call Yes. Thanks, to forward reporting made all a and joining on tonight. you our in tonight fiscal

presentation. that will conference We attending gentlemen, you today's and today's conclude for call. thank Ladies

now disconnect lines. your You may