• Revenue: $119 million for the quarter.
• EBITDA: Just over $15 million.
• ODS Segment Revenue: $82.4 million, a 2% increase from the previous quarter, but down 17% year-over-year.
• AGP Business Revenue: $37.3 million, with brand revenues up 26% year-over-year and 13% sequentially.
• Gross Margin: 45%, down from 46% in the previous quarter and 47% in the same period last year.
• Cash Operating Expenses: $38.7 million, down 3% sequentially and 2% year-over-year.
• Non-GAAP Adjusted Net Income: $5 million or $0.05 per share.
• GAAP Loss: $25 million or $0.24 per share.
• Cash Balance: $32 million at the end of the quarter.
• Cash Flow from Operations: Negative $8.7 million.
• Debt Balance: $411 million at the end of the quarter.
• Cost Reduction Target: More than $25 million in annual cost reductions.
• Fiscal Year 2025 Revenue Outlook: $475 million to $485 million.
• Fiscal Year 2025 Non-GAAP Adjusted EBITDA Outlook: $65 million to $70 million.

• Warning! GuruFocus has detected 8 Warning Signs with APPS.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Digital Turbine Inc (NASDAQ:APPS) reported sequential revenue growth, with $119 million in revenue for the quarter, indicating some positive momentum.
• The company has signed a multiyear agreement with a new Tier 1 US operator, which is expected to be a growth catalyst in 2025.
• International ODS revenues improved nearly 25% year over year, driven by better revenue per device (RPD) and new supply.
• The AGP business showed strong performance with brand revenues up 26% year-over-year and 13% sequentially.
• The company is undertaking a transformation project to cut more than $25 million in annual costs, aiming to become leaner and improve cash flow.

Negative Points

• The company's progress is below expectations, with new growth not strong enough to offset declines in exited and legacy businesses.
• US device volumes experienced the largest year-on-year percentage decline in the past four quarters, impacting performance.
• The exchange business underperformed expectations in Q2, affecting overall AGP revenue.
• Gross margin declined to 45% from 46% in the previous quarter, influenced by product mix changes in AGP.
• Cash flow from operations was negative $8.7 million, driven by an improvement in working capital and reduced payable balances.

Q & A Highlights

Q: Bill, could you elaborate on the phone activation side of the business and why it seems to be getting worse? Also, are you losing a substantial share on the performance advertising side? A: We are seeing growth with new partners, but it's not enough to offset legacy supply issues in the US. The decline in device supply and reduced software updates are impacting us. On the performance DSP side, we need to improve our AGP business by leveraging first-party data and enhancing AI and machine learning capabilities. This is a major focus area for us.

Q: Can you provide details on the Revenue Per Device (RPD) for the quarter? Was it up, down, or flat? Also, when might the Board consider exploring strategic alternatives? A: We saw improvement in RPDs outside the US, which is encouraging. However, RPDs in the US declined slightly due to software issues. Regarding strategic alternatives, our current focus is on executing our business strategy and improving our operations.

Q: What are the key growth drivers for Digital Turbine moving forward? A: Our growth drivers include expanding our device footprint, enhancing our product portfolio, and leveraging first-party data. We are also focusing on alternative app distribution and improving our AGP business by increasing brand revenues and diversifying away from gaming applications.

Q: How is the transformation program progressing, and what are its main objectives? A: The transformation program aims to achieve over $25 million in cost reductions by streamlining processes and aligning costs with growth opportunities. We have already realized $15 million in annualized savings and plan to reinvest in strategic growth areas like alternative apps.

Q: What is the outlook for the fiscal year 2025, and what are the expectations for the second half of the year? A: We anticipate fiscal year 2025 revenue to be between $475 million and $485 million, with non-GAAP adjusted EBITDA of $65 million to $70 million. We expect sequential revenue growth in Q3 and a return to year-on-year top-line growth in Q4.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.