Good afternoon and welcome to the Digital Turbine Fiscal First Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Senior Vice President of Capital Markets and Strategy, Brian Bartholomew. Please go ahead.

Thank you. Good afternoon and welcome everyone to the Digital Turbine's first quarter 2017 earnings conference call. Joining me today to discuss our results are Bill Stone, CEO; and Andrew Schleimer, CFO. Before we get started I’d like to take this opportunity to remind you that our remarks today will include forward-looking statements. These forward-looking statements are based on our current assumptions, expectations and beliefs including projected operating metrics, future products and services, anticipated market demand and other forward-looking topics. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. Except as required by law we undertake no obligation to update any forward-looking statements or discussion of the specific risk factors that actual results to differ materially from those contemplated by our forward-looking statements please to the documents we filed with the Securities and Exchange Commission. Also during this we will discuss non-GAAP measures of our performance. Non-GAAP measures are not substitutes for GAAP measures. Please refer to today’s press release for important information about the limitations of using non-GAAP measures as well as reconciliations of these non-GAAP financial results to the most comparable GAAP measures. Now, it is my pleasure to turn the call over to Mr. Bill Stone.

Thanks, Brian, and thanks to all of you for joining us today. I wanted to cover our four main areas in my remarks. First is providing an update on some new customer wins, second will be to close out the June quarter, third will operational updates and new launches that will contribute to September and December operating results. And finally, are some strategic comments about our business. Andrew will take you through the numbers and also provide updates on other important financial issues including our anticipated refinancing of the company’s short term debt. We understand this is a material issue for investors to get clarity on. Andrew will give you more details, but now that our 10-Q has been filed I’m very optimistic that this issue will have a solution in the next 30 days. I want to begin my remarks by announcing a few customer wins. First is another win in India with Reliance Jio. I’ve spoken many times about how important and strategic the Indian market is to us. Reliance Jio is another positive data point validating that strategy. Jio is ground up 4G LTE network being funded primarily by billionaire Mukesh Ambani. Morgan Stanley has forecasted to expect Jio to add 30 million smartphones and subscribers this year and another 60 million new smartphones and subscribers over the next 24 months. Thus it is a very material win for us. Similar to our other Indian carrier partner Airtel, it is a licensing deal where Jio will be paying us for the Ignite software at 100% gross margin to us including minimum guarantees. Any potential advertising revenues would be incremental to the software licensing fees. However, where Airtel is leveraging our Ignite SDK Solution exclusively amongst the Indian operators similar to what American Movil has deployed, Jio will…

Thanks Bill. I’ll start with the review of our financial results for the first quarter of fiscal 2017 and then focus on our balance sheet and outlook. Please note that as we completed the acquisition of Appia on March 6, 2015, all fiscal first quarter comparisons are on the same basis with prior periods noted. Therefore, as first quarter fiscal 2017 is the first quarter in which we owned Appia for the entirety of all periods mentioned, we’re making no references to prior year pro forma results. Revenue for the fiscal first quarter of $24 million increased approximately 4% sequentially and 29% year-on-year. These variances represent apples-to-apples comparisons and fully organic growth. Advertising revenue of $12.8 million declined approximately 15% quarter-over-quarter. Within advertising, O&O revenue increased 117% year-on-year to $7 million as we continued to scale Ignite across a greater number of operators in OEMs that we partnered with over the past 12 months. Sequentially O&O declined 13% due to the lack of the seasonal benefit experienced in the March quarter from revenues directly related to holiday season attribution which we estimate at approximately $1 million. Revenue is otherwise flat on a sequential basis despite growth we incurred by the delayed Ignite launch on the Samsung Galaxy S7, which represented a large percentage of total device sale through in the quarter and a lower average slot count with a large North American carrier. Excluding this particular partner, O&O revenue grew approximately 150% sequentially as we made significant progress toward diversifying the business across carriers and OEMs particularly outside of the United States. Driving this growth during the quarter we saw our first meaningful contributions from successful embedded based pushes of Ignite. We delivered the software and subsequently applications to devices already live in the marketplace with carriers including Cricket and…

[Operator Instructions] Our first question is from Mike Malouf with Craig-Hallum. Please go ahead.

Great, thanks. Thanks for taking my questions, guys. Can you hear me okay?

Yes, we got you Mike.

Right. So, could you talk a little bit about Appia, that's obviously come under a lot of pressure. And I know there's a couple of clients who'd have been pulling back. But as you look out over the next year, can you give us a little bit of color on how you see this RTB sort of reinvigorating that growth. Or is this, kind of continued you think draw down from here just because of the competitive nature of the business and the change that happened in particular in how people are going to market. Thanks.

Yes, sure. So, as we think about our old Appia core business to what we now we call on my comments the A&P business. I really see that going in three directions over the next 12 months, Mike. In number one I do expect that the core business of how that's been running, I do expect that to stabilize, you're correct that it is a very competitive business and the world is moving towards more machines versus traditional business development to do those deals with companies like CNN or Baidu or The Weather Channel and so on. But I think that given our broader traction in O&O and the relationships that we had, there is so on opportunity to win in that space. But in terms of how we grow it and I really see it growing through two predominant vehicles. The first one is RTB and our ability to add scale, be able to use our ignite data sets and the information that we know about consumers in terms of what apps are on the phones, what they've installed, what they deleted, how much time they spent, and so on. And our ability to use that for increased targeting, that gives us an advantage and gives our machines and our data science an advantage in the market place. We need to run faster and jump higher in that part of the business and we are putting a lot of energy and resource and focus on it. And then we are seeing some growth relative to where we were six months ago. They need to be more and we're going to continue really lean in because we know that's where it's going. But I don’t want to just tell how difficult that is. There is some heavy lifting there but we are seeing some encouraging results out of the gain. And then the third part I touched on is a little bit around ignite direct. If you really think about ignite direct is, it really is almost like an Appia publisher deal but rather than having many different providers that would go into a traditional publisher, would be just us on the phone. So, whether that's with your operators in South East Asia, some of the inbound demand that we have. You can almost think of those as exclusive publisher deals on Appia. Yes, so that I think will give us some pricing power in the marketplace and not have to be subject some of the pricing and commodity pressures you see in the traditional part of that business. So, I really see those being a two growth vehicles for the A&P business going forward and has been able to renew relationships continue to stabilize how we've been operating the core business over the past six months or so.

Okay, thanks. And then with regards to the push side of the business, particularly with some of these new clients ramping. You mentioned a lot of data. I'm just wondering if you could just go a little bit deeper in to that, you said $0.50 per phone on the, was it Latin America side and then a $1 per phone in the U.S. Is that what you're getting, you said there is going to be millions of phones with that. So, can we, you play that for a second?

Yes. So -- sure. So, yes so we've done pushing out millions of phones here in the United States, Latin America and other countries. And in terms of just some early stats from the past quarter so of doing this, we are seeing rates approximately of a $1 here in the United States, about $0.50 in Latin America for those pushes. And we've got plans to touch on some of the things happen in Europe, specifically around this. But we anticipate both in, here in America and the United States increase in that too many millions more as we go to the balance of the current quarter.

So, I mean, if you did 10 million phones, you could do between $5 million and $10 million in that business. Is that how we should think about it?

Yes, I think it really going to come down to the take rate, Mike, on the pushes, so there is different devices and devices may have different memory requirements or different accesses to the network or it is a variety of factors that will impact to take rate. So, it's not like we do push out the one device and you get a 100% take rate on this pushes. The take rates can vary anywhere from 25% to 75% depending on the market. The device, how many campaigns your slots were running on those pushes etcetera. So, it's probably something we can take you through from a modeling perspective offline.

So, it's sort of like an open rate, I get it, I understand now.

Yes. But the take rates on it can be can vary depending on how it's pushed and all of our this consumers know is that when we get notifications on our phone are done differently depending upon how the app developer, the operator or the operating system provider or app or Google choose to do it. Those are will impact the take rates. But in terms of the addressable market of devices, it's going to be many millions of more that we anticipate pushing to just in the current quarter and then will do more into the December quarter.

Okay. And then one last question for Andrew. On the free cash flow for the December quarter, can you just help me understand what your definition of free cash flow is?

Yes, so. Very simply will end the quarter with more cash than we start with the quarter. And we will have revenues to cover our cash cost and add the benefit of positive working capital.

Got it, okay, I appreciate it, thanks a lot guys.

Thanks, Mike.

Our next question is from Brian Alger with ROTH Capital Partners. Please go ahead.

Hi guys, good afternoon. Can you hear me?

Yes.

Great. All our folks on the content business, obviously DT Pay is taken off for since obviously shining light on this court. But you mentioned that you think there may be a bit of a hangover in the current quarter due to the pull back in advertising and in Australia which tells just specifically. I'm wondering as we look at this puts and takes within content and the rapid growth that we're getting with DT Pay, is that reasonable to think that on the whole the content business would be up in this current quarter realizing that Telstra is going to be a headwind what we have in the growth coming from DT Pay in India?

Yes, sure, Brian. Yes, a couple of thoughts, let me cover up Australia and growth outside of Australia. I think that the wildcard here is a lot of the DT Pay growth that we saw in the June quarter was really fueled by increase marketing spend from the content providers in the market, the new Telstra implementing this change and then they backed off of that waiting to see what the take rates were going to be from some of these legal language double octane etcetera, things that I mentioned in my remarks. And so starting to the marketing pick up, how much it picks up is happening in real time, we'll probably have visibility to that over the next 30 days in terms of what the impact are but we're starting to just hear over the past week starting to this revenues rebound again in that business. But how much the content providers who are in the market on that as well. I think it is a big driver in Australia in terms of the topline number for the content business in the September quarter. And what we're seeing, we're encouraged though by it, we're starting to see some nice growth in India with Pay. We also have some content opportunities and in other markets in South East Asia as well on this quarter. So, the question was can those outrun anything we're going to see on the risk from the marketing side in Australia. As I mentioned in my remarks, I think for right now the prudent thing for us to do is look at it as a $1 million to $2 million down on the content business from the September to June quarter. But we'll be smarter on that and provide updates as we get going here over the next few weeks into September as that marketing activity picks up from the Australian content guys.

Okay, that's helpful. And then working through on the A&P business, the RTB just getting started. It's small, so the percentage out there is going to be pretty big. But when you look at your opportunities over the next call it six months or so, seasonality improves pretty dramatically where it has in the past. Do you think that business is going to be able to get back to prior revenue levels or is this something where we've seen a dynamic shift in the end market where that's not really achievable?

Yes, I guess I'll break that into two elements. I do think that there is a seasonality element that we're historically seeing going back many years in the Appia business where historically the June quarter is softer than what you see as you go into the fall and to the holiday season. So, I expect that seasonality to help benefit us in the A&P business. As far as RTB goes, the important point I want to make here is that we're trying to go revenues in that business and we want to as I mentioned in my remarks, run faster and jump higher there but equally it focus in terms of building a platform and a product that can scale. So, what I mean by that is we can have an advertiser come to us and say "Hey, let's go spend a $100,000 in RTB and we could go blow that out." But I don’t necessarily know in terms of the data and the insights in the broader platform, so we're not a one here wonder just on that one campaign that we can build that across 100s of campaigns and we can do that different geographies, leverage our Ignite DT and so on. So, we're making some conscious decisions right now to not have revenue be the end all and go, the end all and be our goal of that business in the immediate term ultimately needs to translate into revenue. But it's really important right now that we're focusing on building that platform in terms of how we handle the big data coming in from Ignite, we're able to digest it, we're able to process it across multiple geographies, multiple campaigns. So, it’s a lot of infrastructure heavy lifting that we're really focused on in the current time in that business. But again ultimately it's got to translate into revenue but I want to make sure that that's not the end on be our goal from a day-to-day basis, in terms of how we're thinking about it.

What to that end, to build up the resources to deliver that performance at scale, is this some question of needing to purchase more hardware, is it more guys writing code, is it more time running error dif, learning machine, learning algorithms, what is it that you need to get it up the scale and what how should we interpret that in terms of the need to deploy resources. We get this it seems is now we've known RTB was going to be a big thing for a while but because we've been cash constraint, it hasn’t really got the development that apparently was needed to take advantage of the market shift.

Yes. No, that's right, Brian. And so, we are running a lean but we're also running it very efficient as well. And so, it's a combination of hardware and infrastructure, it's a function of having the processing power to look at 100s of millions of impressions at any single point in time for multiple exchanges coming in across multiple geographies. And there is a lot of just data, hardware, processing things that go into a data piece of it. Ensuring we have multiple data scientists, PhD data scientists on the payroll today helping us get those algorithms right in terms of how we leverage the data and the math to be able to take advantage of this. So, that's another component that we invest in. And then finally it's just the integration and we're working with a lot of third parties versus taking a strategy of we're going to build this ourselves. So, in many cases it makes sense for us to lease or work with other providers or exchanges out there that can help us accelerate our efforts. And so, it's a bit on versus us trying to build the hardware ourselves as people we can license it from, they consist your things more efficiently than we can. And so, those are examples of how we're leveraging others and leveraging our third parties be efficient with the resources. As Andrew talked about regarding the profitability, our view is that as the business continues to ramp on the O&O side, that will give us additional resources to be able to continue to invest in this part of the business because we know what a macro perspective this is where the world's going and we've got the data set to win. We just need to put all pieces together to go execute against it.

Okay. And then finally on the O&O side of things, there's obviously just a ton of moving parts. Is it fair to say that when you look across the multitude of carriers that the number of slots per device relative to where we were in the first half of this calendar year is going to be better in the second half and within that we should be also looking at because of seasonality and improved targeting rates per slot being better just in terms of a macro approach?

Yes. So, I'd say a couple of things. It’s one thing is why you were starting to breakout this stats by geography. And maybe some we can do offline, like I double click on the per geography, something it's a near little bit nuance based upon geography. But in the macro global level, I guess what I'd say is that we expect as we continually add additional demand partners and you've got fixed supply. That should allow prices to rise. It's the economics 101 and we're seeing that as we can do to add additional demand partner. So, that comes with seasonality that comes with us launching a desirable devices like the Note 7 and new customers like AT&T and American Mobile. So, I'd expect to see accretion there that's definitely our expectation, I'm on it. As far as number of slots go, a number of slots is going to be depending upon partner and geography, some of the phones may have lower memory and certain emerging markets maybe have fewer slots, certain new phones coming into the marketplace, you'll have more memory, it's an opportunity for more slots. With the app select product from AT&T, our customer will be able to choose I think up to 25 applications or 25 slots if they just did select all the way down to zero. So, we'll see how the slot count varies with AT&T and we'll provide update on that on the next call. So, I think we're thinking about it as on a very geography-by-geography and partner-by-partner basis. But we're feeling very encouraged in terms of the pure number of devices that was our visibility too that will go on. And that in and by itself will definitely draw our topline.

Okay, and then I guess more of a statement than a question. And I think you've addressed it a number of times on this call but I'm sure Mike and I would echo the realization that getting the refinancing done and just puts up in is of a critical importance to a lot of the investors that we speak with on a daily basis. I think it's very positive to hear that this is something that should be in the very near term and I think the term was eminent. I look forward to seeing an 8-K there because I do believe it's been largely a distraction for the stock and hopefully will be able to start focusing on the growth opportunities that you're describing today instead of worrying about this balance sheet issue. Thanks, guys.

Thanks, Brian.

Our next question is from Sameet Sinha with B. Riley. Please go ahead.

Yes, thank you very much. A couple of questions. So, seems like the way you're guiding in a content down A&P, been a probably down more than up despite the seasonal benefits in the second half. So, Ignite continues to do well. Now, you give us some stats of a $70 revenue per device. My guess is that's for when it's installing new devices and for embedded or ships more like a dollar and that's in the U.S.. Which of these two from a revenue per device perspective do you think it will grow faster, you mentioned in number of factors which can help the accretion there. Which of these have more upside opportunity. That's my first question. Secondly, going back to the RTB issue. Obviously, it's a comparative feel, your RTB offering will enter where there are many of amateur solutions that are out there. The one comparative advantage that you mentioned was Ignite. So, my two part question here, is that would you be able to use your Ignite data because those are two separate business. Ignite is a separate carrier driven business, Appia is more of in advertising & monetization business. That comingling of data and utilization across the business segments is that allowed by your carrier partners, and secondly, apart from that Ignite as a competitive advantage, do you have anything else that separates your solution and your platform from the others that are out there? Thank you.

Thanks Sameet. So let me cover up the first question around visibility on revenue per device over the immediate term and upcoming quarters, and then I will hit on some of the unique aspects of the Ignite data and what we are doing with it. First regarding revenue per device we are seeing lower revenue per device on an embedded based push than on a new subscriber. That is predominantly due just to the fact that a lot of the devices on pure volume tend to have lower memory requirements, and therefore have lower slot counts, and some of the higher CPI, or CPP game titles in particular that we get from many providers tend to very thick and rich files. So therefore we are looking more limited in delivering those applications to consumers on a lower memory phone. So I continue to expect the new customers, the new devices, the $1.70 number that you referenced to be the predominant higher driver than an embedded based push, but in terms of visibility into just pure number of devices over the next 30, 60, 90 days, we expect that to really be tilted in favor of an embedded based pushes. We have good visibility to a number of carriers in Latin America, here in the United States, OEMs in Asia and Europe with many opportunities in front of us. So I think on a pure volume of device basis, even though it will be lower on revenue per device we see that as a very material revenue driver, and remember those are all 50% plus gross margin deals to us, so they are very profitable as well. But in terms of just the actual yield per device we expect that to be higher on the new device deployments that will come…

Okay, thank you.

Our next question is from Ilya Grozovsky with National Securities. Please go ahead.

Thanks guys. Just had kind of a two follow-up questions, you talked about the licensing deal, obviously that is a very different way for you guys to generate revenues as opposed to becoming sort of partners with the operators you are just licensing the software, yes, you get the 100% gross margin, but definitely very different, can you just talk about kind of the difference between the two and where you see it going for you guys down the road and what the impact will be?

Sure. As you know Ilya, we have got a variety of different business models as we partner with carriers and OEMs globally, and as we make our foray into the Indian market, we believe it was prudent to start on a license fee model at 100% gross margin. That being said, the expectation is once we are able to get Ignite deployed on a whole host of devices with both Airtel and Reliance Jio, that there will be a meaningful advertising opportunity. So we certainly don't view the Indian market as solely dollars per device upfront, with no revenue opportunity. We do obviously outside of license fee model have both our rev share model as well as hybrid models that we look at with other distribution partners, but [candidly] there is no one set way in stone that we generate revenue in. At the end of the day, we are in the business of allowing these operators and OEMs to ultimately leverage our demand side platform, as advertisers don't want to go one by each of the operators and OEMs, just like the operators and OEMs don't want to go one by each to each of the advertisers.

Ilya, this is Bill, I will just jump in on that and I think this important distinction is Ignite having a lot of dimensions of how it can be used. One way it can be used is to deliver third-party applications. I talked about Lyft and Uber and [Hulu] and eBay et cetera, and that has been the model we have used and a lot of the things we have talked about on this call. But what we are also seeing is that operators see Ignite as an operational benefit. They have their own applications, their own internally built applications that they want to deliver out to devices. So for that case that is the 100% gross margin. We did that with Millicom in Latin America and in the Indian carriers Andrew mentioned. So really when we go in and we talk to operators we want to understand what their needs are, and if their needs are to use Ignite as an operational tool to help create a lot of flexibility of just delivering software once versus having to embed it on multiple devices and OEMs et cetera, which is operationally difficult, then we get into the licensing model at 100% gross margin. We have numerous other active conversations going on around that model around the world, where operators are interested in that. And then what we will do is we will layer in the advertising or third-party apps on top of that. So in other words if we get $0.10, $0.20, $0.50 whatever it happens to be per device, then any advertising revenue we will share on top of that. So we really like that business model. We think that is a winning business model because we are solving multiple problems for the operator and obviously providing strong gross margins for us.

Okay, got it, and then on – just coming back to the RTB business, so we have been talking about it for some time now, what exactly is the gating factor for you guys to be able to starting today or for RTB in a large-scale way as opposed to just sort of incrementally, to get up each quarter?

I would say right now – it is for us it is a variety of different things. It is not one. We just want to make sure there is just so many variables and moving parts, we can't pursue every single variable and moving part at the same time. Even if we had unlimited resources, we wouldn't do that. It is really making sure that, A, we have got the – first and foremost the insight on what we are actually trying to target. Second, making sure we got all the campaigns from the advertisers and we are aligned on goals that they are trying to do. Third is we got the ability to then have the right mathematics in terms of using the right formulas to target the right advertisers, where we think there is an arbitrage opportunity to be able to buying that for much, much less than we are getting paid from the advertiser to get the install. And then finally as all of the operational infrastructure to be able to process hundreds of millions of impressions simultaneously, many, many billions per day of impressions that are going all over the globe in different geographies across different ad formats, whether those are native, or video or banners or whatever it happens to be able to do it across iOS and android. I mean, I can go on and on about the different variables that are associated with it, but for us it is really being able to prioritize what is going to give us the biggest bang for the buck to leverage our Ignite data set, and so that is really where we are focused today is where we want to place those bets, so we are efficient with how we are spending our resources accordingly.

And how long do you think this takes?

The short answer is I don't know, I don't know how long it takes. I know is that every week when we sit down with the team we have an operations review on this topic. We are going very deep. We have very specific KPIs and metrics and goals, and things we are trying to achieve and we are measuring ourselves against those KPIs and metrics, and we want to just continue to see progress every single week against it, and how long, I don't know the answer to that, but I do know is that we are seeing progress week over week in terms of what we are doing and how much smarter we are getting at doing it.

Great. Thanks guys.

There are no further questions. So this will conclude our question-and-answer session. I would now like to turn the conference back over to Bill Stone for any closing remarks.

Great. Thank you very much. As we stated we are laser focused on execution and to convert all these opportunities we discussed in the pipeline and to scale our revenue and to drive growth for the long-term profitability of this business. We look forward to reporting on our progress as we grow and diversify our revenue streams and we will talk to you again in our fiscal second quarter call coming up in a few months. Thanks and have a great night.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.