Digital Turbine, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2021, the three months ended June 30, 2020. Unless noted, financial amounts are in millions; the filing presents most financial statements in thousands. The company operates one reportable segment, Media Distribution, delivering application and content media through mobile operator and device-maker partners.
Financial performance and position
| Metric | Quarter ended June 30, 2020 | Prior-year quarter | Change / context |
|---|---|---|---|
| Revenue | $59.0 | $30.6 | Up 93.1% |
| Gross profit / margin | $26.2 / 44.3% | $12.0 / 39.3% | Gross profit up 117.9%; margin improved 5.0 percentage points |
| Operating expenses | $15.5 | $9.0 | Up 73.3% |
| Operating income | $10.6 | $3.0 | Up 249.4%; operating margin was approximately 18.0%, versus 10.0% |
| Net income (loss) | $9.9 | $(1.8) | Prior year included a $5.2 million warrant-liability fair-value charge and $0.1 million discontinued-operations loss |
| Diluted EPS | $0.11 | $(0.02) | Weighted-average diluted shares rose to 93.1 million from 81.8 million |
| Operating cash flow | $6.0 | $5.0 | Continuing-operations cash flow up 19.2% |
- Revenue growth reflected higher demand, improved CPI and CPP revenue per available placement, expanded activity with existing and new partners, and new or expanded services. Application Media generated $44.2 million and Content Media $14.8 million.
- Management attributed improved gross margin to partner diversification, a more favorable mix of application-media revenue, and a full quarter of contribution from Mobile Posse. Operating expenses increased with growth, added personnel, and the acquisition; management said revenue scaled faster than operating expenses.
- Cash and cash equivalents were $18.7 million at June 30, down from $21.5 million at March 31. Current assets were $65.4 million and current liabilities $79.1 million.
- Debt principal outstanding was $20.0 million; the balance sheet reported $19.7 million of short- and long-term debt net of issuance costs. The $5.0 million revolving facility was undrawn and available. Debt is secured, bears a variable rate, and has quarterly principal payments beginning July 2020. The company reported compliance with covenants.
- Investing cash outflow was $9.2 million, including $7.2 million related to Mobile Posse payments and $2.0 million of capital expenditures. Receivables increased $10.3 million from March 31, contributing to operating cash-flow working-capital movements.
Material changes, outlook, and risks
- Mobile Posse: Acquired February 28, 2020 for $41.5 million cash at closing, subject to adjustments, plus an estimated performance-based earn-out initially valued at $23.7 million. The company reported $6.8 million paid toward the earn-out and a $17.0 million estimated liability at June 30. The liability decrease reflected payments and did not affect the quarter’s income statement. Final working-capital adjustments added $0.5 million to purchase consideration.
- Outlook: No specific revenue, earnings, or margin guidance is provided. Management expects liquidity from cash, operating cash flow, and available credit to be sufficient for at least 12 months from the report’s issuance. It notes additional financing may not be available on acceptable terms or at all.
- COVID-19: Management says the pandemic creates uncertainty and could slow business, reduce advertising demand, and adversely affect results and estimates; the extent and duration of impact remained uncertain.
- Concentration: No single customer accounted for 10% or more of quarterly revenue, but four carrier partners contributed 20.5%, 23.2%, 21.8%, and 11.4%, respectively. The filing warns that reduced activity, payment delays, or termination of partner agreements could materially harm results. One customer represented 10.6% of net receivables.
- Other risks and items: Variable interest rates and foreign-currency movements may affect results. The filing reported no material change to the prior annual report’s risk factors, no legal proceedings, and no subsequent events. Management concluded disclosure controls were effective.
Important facts for investors to verify
- How much of revenue growth and margin improvement is organic versus attributable to Mobile Posse, and whether the quarter’s partner and advertising trends persist.
- Receivables collection, allowance adequacy, and the effect of the large receivables increase on future operating cash flow.
- Mobile Posse performance against earn-out targets, remaining payments, and any resulting change in the estimated liability.
- Debt repayment and covenant capacity, including the effect of variable rates and required excess-cash-flow repayments.
- Whether COVID-19, partner concentration, or changes in advertising demand materially affect subsequent results; the filing provides no quantified guidance to benchmark against.