Digital Turbine, Inc. (APPS) Q3 2017 Earnings Report, Transcript and Summary

Good morning and welcome to the Digital Turbine Fiscal Third Quarter 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 also note that this event is being recorded. I would now like to turn the conference call over to Mr. Brian Bartholomew, Senior Vice President of Capital Markets and Strategy. Please go ahead.

Thank you. Good morning and welcome to the Digital Turbine fiscal third quarter 2017 earnings conference call. Joining me today to discuss our results are Bill Stone, CEO; and Barrett Garrison, our CFO. Before we get started, I would 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. For a discussion of the specific risk factors that could cause our actual results to differ materially from those contemplated by our forward-looking statements please refer to the documents we filed with the Securities and Exchange Commission. Also during this call, we will discuss certain 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.

Great. Thanks, Brian, and good morning to all of you. I wanted to cover our four things today. First is a review of our Operator and OEM or O&O business including some new partner announcements; second is a review of our Advertising and Publisher or A&P business; third is a review of our Content and Pay business; and finally, are some comments around our work to unlock shareholder value. First on the O&O business, I was very pleased with the continued ramp in this higher margin business and strong demand we are seeing from advertisers wanting to be on the home screen of the device, especially here in the United States. Our overall O&O revenues increase 19% from the prior quarter and 70% compared to the prior year. Of the growth witnessed in the December quarter, 70% of that growth was sourced from new partners that were not live with us last December. Our revenue per slot or RPS was up 22% in this year's holiday period as compared to last year. And as you've heard me say many times, I consider this to be a fundamental health metric of the business as it clearly showcases this demand from advertisers wanted to be on the home screen. Now I'm excited to unveil three new O&O partners. We anticipate having some additional PR around these wins in the coming weeks and months, but I wanted to be able to offer investors some color today. First, I'm pleased to announce that we've signed a new OEM deal with Acer to become a standard feature on their Android devices. We expect to launch with Acer in the June quarter. The Acer deal is a multi-year global partnership, but we anticipate that a majority of the devices will be sold in the Americas. Second, we are launching with Micromax in India. Micromax is consistently one of the largest OEMs in India. We anticipate launching with Micromax over the next 60 days to expand our India opportunity that I’ll address later in my remarks. And finally, we will be deploying Ignite with TracFone. For those of you who don't know TracFone, they are owned by América Móvil and operate in the U.S. under several different brands including TracFone, Simple Wireless, NET10 and Walmart's Wireless brand Straight Talk wireless. Collectively TracFone has more than 25 million subscribers and 90,000 retail locations in the United States. I'm particularly excited about the prospects for this partnership given our success to date with other prepaid bands like Cricket as well as the high device volume units that prepaid companies like TracFone move. We expect TracFone to launch Ignite in the September quarter. With this and other wins we have set ourselves up to be on the vast majority of Android devices sold in the United States by this time next year. In total, as we ramp throughout 2017 we anticipate these three agreements should translate into tens of millions of annual devices. Turning to our O&O performance by geography, our North America revenue increased by 13% sequentially and 50% year-over-year, driven by positive results with our partners Verizon, AT&T Cricket and U.S. Cellular. I’m particularly proud of the performance of the O&O business in North America which factored in a negative impact during the quarter stemming from the Note 7 recall and the Google Pixel phone which resulted in fewer Ignite devices being sold through our largest partners during the quarter. We managed to achieve significant overall growth in the quarter despite this somewhat seasonal muted growth in the quarter as a result of our strong RPS performance and new partner adoption. We also continue to make significant strides diversifying our business both by partner as well as by advertiser. Last year in the December quarter, our largest partner represented 83% of total O&O gross margin dollars. In the September quarter, this number was 55%. For the December quarter, it was 48%, which showcases how additional higher margin partners are continuing to ramp. Helping continue with that diversification, we expect to launch in our first devices with T-Mobile and Metro PCS in the June quarter. Our advertiser base also continues diversified. For 2016, we had over 2,000 advertising partners in our O&O and A&P business and no single advertising partner contributed more than 6% of total revenue. I'm also pleased to report that our Latin America O&O revenue grew 90% sequentially driven by greater Ignite adoption by both Millicom and América Móvil. We are now beginning to see Ignite be preloaded on new América Móvil devices going forward, which should continue to help ramp those revenues. The two biggest headwinds we have had with América Móvil are working through the performance or CPI business model and working through the operational and technical complexities of the SDK solution integrated into their container door application. We’re actively addressing both issues with América Móvil real-time and continue to be optimistic that we will ramp revenues more materially in 2017. In Asia-Pacific, I continue to be pleased with the ramp of Reliance Jio in India. We are surprising our six million devices this week with Ignite in just over four months of being live. We also recently launched advertising with Jio, which will be an additional source of revenue on Jio devices going forward. I mentioned Micromax in my earlier remarks and expect them to start generating revenue in the next 60 days. Regarding Airtel, they've recently begun trying to renegotiate the terms of their exclusivity and then guarantees and as a result I don't have to go live day to highlight today. We continue to launch Ignite on new devices elsewhere in the APAC region, including Singtel in Singapore, Vodafone in Australia and Globe in CloudFone in the Philippines. There are a number of other promising pipeline customers that we hope to announce soon. In Europe, Middle East Africa, we successfully launched with Archos in November. Archos is a top five Android OEM in the European market. Bleak in France continues to be a solid partner, MTS in Russia is launching additional devices this quarter, but we continue to have challenges ramping with Deutsche Telekom. And then with our executive sponsor after the Consumer Electronics Show a few weeks ago and mapped out a game plan and how we can bear more fruits together as both sides want to see improved performance. Some of the issues are structural in Europe with regulatory compliance fragmentation of the local countries versus the group headquarters for decision making and some are local with us in the partner and how we work forecast and get operationalized and so on. We’ll reconvene at Mobile World Congress in a few weeks and check on our progress. But overall, our Europe, Middle East Africa has a strong pipeline and a few solid partners, but it remains the weakest of our three global regions. With our advertisers, I've been pleased with the demand of many new brands and existing brands spending additional dollars such as eBay, Starbucks, spotted by machines own and others being great customers with strong spending. Also implementation of the new advertiser business models including revenue shares with the advertiser has been growing nicely. Advertiser partners in this area include names like Amazon and Yahoo, who share a percentage of the gross revenues they receive via the installed app from Ignite. In the September quarter, the revenue derived from this model was nil and today it’s on a multimillion dollar run rate. We expect this to continue to grow, but more importantly it is highly strategic as it provides an on going monetization opportunity for the entire life of the device versus just revenue at first boot. On the product development front, I'm pleased on how we're evolving our Ignite platform to be more than just app delivery. We are working with operators, OEMs, advertisers and other strategic partners on Ignite 3.0, which will be formally announced in advance of Mobile World Congress in Barcelona later this month. If we reflect back, Ignite 1.0 was about making app delivery simpler and more dynamic. Ignite 2.0 was about giving our operator and OEM partners more choice to the Wizard and through the SDK. Ignite 3.0 builds upon its capabilities, but it’s really focused on building recurring revenue models and solving end consumer pain points around the friction of getting the applications, organization in the app trade and integrating elements, so you can make purchases directly in the applications. You will see more on these capabilities over the upcoming weeks, but Ignite Delivers its 1.0 specifically call out this morning. Today, when customers on Facebook, Snapchat using our A&P service or any third-party mobile advertising there's anywhere from five to eight steps a customer has to go through to seen an app they want before opening on their home screen. This results in frustration for all parties. With Ignite Delivers, we can leverage our access to the system privileges with an android, so that when a customer clicks on any advertisement, we have a deep link to download the application directly to the device with no friction to the end consumer. We are working with many high profile companies and how we leverage this capability to allow our operator and OEM partners to maintain control, while simultaneously allowing any third-party to still be able to get the applications to the device with a single click. One other strategic imperative within our own O&O business that I want to specifically highlight today is our opportunity to capitalize on a global movement towards open market devices. This is where a customer purchases a SIM card from the operator, but already has a device that was acquired from another channel or place. To address this market opportunity, we are increasing our exposure with deals with the likes of the OEMs we announced today with Acer and Micromax, but also our existing partners such as BLU, Archos, Visio and Cloud Phone, whereby we managed third-party app delivery for these OEMs and share advertising revenue directly with that OEM rather than with a specific mobile operator. Next I want to provide a brief update on the Samsung Galaxy S8. I want to confirm that we anticipate being on the Galaxy S8 with our global partners including the key one such as Verizon, AT&T and America Movil among other global carriers when that phone launches later this year. That concludes my remarks on the O&O business except to again repeat my level excitement around the myriad of opportunities that lie in front of us. Demand for Ignite continues to be strong from all sides as evidenced by a growing advertiser interest, rising revenue per slot trends and widespread new partner adoption from carriers as well as OEMs. Additionally, we feel great about the potential for Ignite 3.0 features to expand our addressable marketplace and positioned ourselves to be the primary beneficiary of the trend towards open market devices. Next, I want to move our discussion to the A&P business which in short was a disappointment for the December quarter. While our margins improved slightly, we saw our revenue declined by 17% sequentially and 58% from a year ago. As we've discussed in prior calls, there are structural issues where the A&P business is migrating towards programmatic or real time bidding. We made a strategic investment in this in 2016 and while the results were showing progress, the cost that continue to grow and expand the platform were greater than the margin dollars we were receiving. Thus we made a calculated decision to suspend our real-time bidding efforts in the immediate term as profitability is a higher priority. We have simultaneously taken steps to align our cost structure and deduct many millions of dollars of annualized expenses from the A&P business to ensure that we achieve and grow profitability at this lower level of revenue going forward. Today, our A&P business does generate more gross margin dollars than its direct costs. Our Content and Pay business comprise 27% of revenue which compares to 33% of revenues sequentially and 28% last year. Our Content business also continues to generate more gross margin dollars and its direct costs. And as mentioned on prior calls, the impact of Telstra changes to the user experience did impact marketing by some content providers which in turn impacts revenues. We have seen this stabilized in Australia over the past few months and in fact have seen a return to growth for our overall DT Pay business thus far in the first months of 2017. We have launched Pay in India, the Philippines, and Singapore and those revenues are beginning to ramp as well. We also recently announced a global deal with the Axiata Group, which has nearly 300 million subscribers in 10 countries. This one to many connections will provide access to all 10 markets through a single integration and we expected to go live in the June quarter. Before turning over to Barrett, I want to announce that we enjoyed a break-even month of profitability in December. I recognize it's important to note it’s only one-month and continue in the momentum into the current quarter is key, but nevertheless it's an important milestone against our top priority of a creating a sustainable profitable business here Digital Turbine. Our O&O business continues to perform well and meanwhile we've undertaken actions and reshuffled resources to ensure profitability to our A&P and Content businesses as well. Barrett will talk more about these efforts in his commentary. And finally, as I mentioned on our last call it's incumbent upon us to showcase the value of all of our assets which we do not believe are being fairly valued by the market today. And while you don't have anything specific to announce today we are continue to assess a variety of outside opportunities to unlock greater value for our shareholders in a more timely fashion. This Board supported process is underway and we look forward to updating you further on these value enhancing activities as we deem necessary and appropriate. With that, I'll turn it over to Barrett.

Thanks Bill, and good morning, everyone. Our primary focus is delivering sustainable profitability and generating positive free cash flows. And we're pleased with the progress made in the quarter towards this objective evidence by expanding gross margins, expense reductions and ultimately improving our EBITDA position. While we have more work to do in achieving our goals we are encouraged by the step forward in accelerating the pace. Now let me turn to the specific financial performance in the quarter. Total revenue in the quarter of $22.3 million was down 2% sequentially and down 7% year-on-year. Advertising revenue is $16.2 million increase 7% sequentially driven by strong performance of our higher margin O&O business as discussed by Bill earlier. Total O&O revenue $11.8 million increase 19% sequentially and 70% year-on-year and now comprises more than half of the Company's total revenue. O&O growth continues to be fueled by existing partners via improved metrics as well as new partners coming on to the platform. New partners were a meaningful source of growth in the quarter. As new partners launched during calendar year 2016 represented more than 70% of the year-on-year O&O growth in the quarter during the seasonally strong holiday period. Inside advertising revenue our legacy A&P revenue was $4.4 million in the quarter down 17% sequentially and down 58% year-on-year. As we continue to experience market trends shifting towards programmatic spending. We have recently implemented actions to align our expense structure given these revenue levels. In addition to spending the investments in RTB that Bill discuss. Further cost restructuring measures have been taken in pursuit of our path to profitability and redirect resources towards our growth initiatives. We expect these cost reductions executed at the end of the quarter and the beginning of fiscal Q4 to be an important step in achieving and maintaining profitability. Our Content revenue of $6.1 million in the quarter declined 9% year-on-year and 20% sequentially. Revenues have been impacted from revisions to opt in policies at our largest DT Pay partner and now anticipate the impact has been fully realized and revenues a stabilized exit in the December quarter. We enjoyed solid performance in our margins in the quarter with non-GAAP gross margins expanding to 24% in the third fiscal quarter of 2017 as compared to 22% for the second quarter and 23% in the fiscal quarter 2016. This margin expansion is driven by a continued shift toward higher margin O&O business combined with accretive margins produced from new O&O partners added to the platform. Now turning to expense, total operating expenses for the third quarter of fiscal 2017 were $8.8 million down 700,000 from second fiscal quarter and down 3% year-on-year. Total cash operating expenses in the quarter were $7.4 million down from $8.1 million in the preceding quarter. The sequential expense reduction in the quarter is driven largely from lower G&A and employment cost partially offset by increases in hosting cost from the Ignite platform. Expenses have been in immediate area focus, set it on driving incremental cost disciplines and effective resource allocation. While we believe there are more efficiency is to realize, we are encouraged by our recent expense management progress and the cost restructuring actions taken and underway. Non-GAAP adjusted EBITDA loss for the second quarter of 2017 was $2.1 million as compared to a loss of $3 million for the second fiscal quarter and a loss of $2.1 million for the third quarter of 2016. The sequential improvement in the adjusted EBITDA loss results from higher gross profit combined with a reduction in cash operating expenses in the quarter that I described earlier. Net loss for the third quarter was $2.6 million or $0.04 loss per share based on $66.6 million weighted shares outstanding. This compares to a net loss of $5.8 million or $0.09 loss per share for the fiscal third quarter of 2016 on $66 million shares outstanding. Included in our net loss for the quarter is a recorded gain of $3.8 million for the impact of the change in fair value of the derivative and warrant liabilities resulting from our convertible note issued earlier this year. As a reminder, these derivative and warrant liabilities on the balance sheet will fluctuate as our stock price moves and may have a material impact on our reported GAAP financials. Now let's move to the balance sheet. We finished the quarter with $5.7 million in cash as compared to our second fiscal quarter of $9.4 million. Accounts receivables were up $1.8 million from the prior quarter, largely driven by major advertiser receivable collected in January, while current liabilities were flat. Operations inclusive of the increase in accounts receivable consumed about $4.2 million in cash flow during the quarter. During the quarter, the Company also generated $1 million from the sales as a shift media stock transaction, a position that Company had acquired in 2015. Total long-term debt at quarter end was $9.5 million, consisting of the convertible notes maturing September 2020, which includes the outstanding principle of $16 million net of the $6.5 million unamortized debt discount. That concludes my financial review and before I turn it over to the operator for questions, I'd like to provide some insight as to our view on building value for investors. Today we're focused on five key value creation drivers, which include increasing device penetration, diversification with high margin partners, maximizing device economics, expense efficiencies and unlocking shareholder value from undervalued assets. And finally let me emphasize, we are excited by the steps forward towards profitability and while we're not where we want to be yet, margin expansion, expense discipline and EBITDA improvement in the quarter of positive progress points on our path to strengthen our financial position. That concludes our prepared remarks. Now I’ll turn it over to the operator to give instructions for Q&A. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Mike Malouf with Craig-Hallum Capital Group. Please go ahead.

Great. Thanks guys for taking the questions. First up Bill maybe you can just help us a little bit with the S8 opportunity, it’s nice to see you announce that you're going to be on all the major partners. Can you talk about how big of an opportunity that could be for you guys throughout this calendar year?

Yes, sure Mike. If we just go by assuming the S8 to sell similar to volumes to the S7. It's many millions and millions of devices assuming the sales trends hold the same for the S8 as they did the S7. Obviously, we don't have any insight into what that would be in terms of how the device will be received in the marketplace, but assuming the S8 trend follows the S7 trend. It's a material event for us.

And when you take a look at the AT&T in particularly because obviously on a different program there than Verizon, what kind of history do you have with regards to monetization of that particular phone on a different platform?

Yes, so one of the things that we're working on as part of our Ignite 3.0 efforts is migrating towards what we call blended flow and blended flow is really a combination of both Silent like we do with Verizon and Wizard, like we do with AT&T. So one of things we anticipated that you'll see with AT&T is an implementation of this blended flow on the S8. So we'll be able to combine both the Wizard capability and some modest Silent capabilities as we start out of the gate. So we think that will be very good for monetization with AT&T.

And your expectations just so I can make sure that I'm clear on this is that you'll be generating revenue and this will be live from the first S8 that is sold on the very first day. You're not going to have any kind of two or three week, or two or three-month waiting period to do testing and things like that or…?

Yes. Our anticipation is that will be on for the very first device sold.

Okay, great. And then just another question with regards to cost, so you've taken another leg down cost on the A&P side and you're saying that on I think gross margin basis for the A&P side and for the content side that it's covering your operating expenses currently?

Yes, that's right. To be more clear, so all of the direct costs associated with those business lines and now after thorough review of all the business activities and all the business lines, our gross margins now exceed their direct operating cost.

And that was not the case in the December quarter, is that correct?

That's correct.

Okay. And then is that the case for the O&O business as well?

That’s also true across all lines of business.

Okay. So we just have to cover the corporate expenses after that?

That's correct.

Okay. And then when you take a look, just one more question with regards to the seasonality. As you look into the March quarter, you have a lot of sort of seasonality headwinds, but you have a lot of new carriers coming on as well. Would you expect the O&O revenue to be up sequentially from the December numbers?

Yes. So one of things I mentioned in my remarks, Mike was the seasonality this year was really muted as a result of the Note 7 recall and the resulting increase in Google Pixel Phone sales. So I think the seasonality impact that we saw from the December quarter this year compared to last year was really lower. And so therefore, I think looking at the comps of the December versus the March quarter, you're not going to see the same spike if you will in terms of seasonality to be more normalized performance.

So given those offsets, do you expect O&O revenue to be up sequentially in the March quarter?

We're feeling good about the O&O business right now, Mike and we’re up for any guidance in terms of where it's going to finish out for the March quarter, but looking at it is the comp against the December numbers. You're not going to have the same seasonality impact that be used to see.

Okay. All right, thanks for taking my questions.

The next question comes from Brian Alger with ROTH Capital Partners. Please go ahead.

Good morning, guys. A cut to the chase, it looks like there's a lot of opportunities for growth in the June quarter, whether it's ramping up with the S8 or new products being brought to market, new relationships coming into the fold et cetera. June quarter seems to be a breakout quarter at least from the set up. The concern obviously is that we have to go through the March quarter first. And to Mike's questions with regards to the revenue trajectory, I guess in the case of the cost improvements and the cost controls that there's been able to put in place, we feel pretty confident. We will be able to get through this quarter without any material change in terms of the balance sheet?

Brian, obviously, we're focused on and excited about some of the progress we've made on the expense controls and I point you to some of my comments, some of those were made towards the end of December and obviously the beginning of this quarter. So we're excited about those things. We're focused on strengthening the position of the balance sheet and there's obviously a large opportunity set out there that we've outlined on the call. And clearly I want to and Bill wants to set up in our capital structure to exploit these opportunities and while there maybe a gap here and the inherent medium to long-term growth and a profit potential for the business. We do want to take advantage of all these opportunities and generate many meaningful returns. The steps we've taken to ensure we're successful on those path. We've suspended the RTB investment. We talked about redirecting cost, where margins are beginning to grow over some of the declines we've seen in the A&P business our O&O margins are growing over those, we're expanding we're expanding margins in the Ignite platform and we continue to be extremely focused and disciplined on driving higher gross profit and with optimal operating leverage in order to realize the profitability in the near future. But as we expressed on the call and Bill called out while we were improving these fundamentals we've also a talked about actively assessing various ways to extract more value for our shareholders and in that process to bolster the balance sheet. We don't anything definitive to announce here and we'll update progress as necessary and appropriate. But we're excited about the steps we've taken already to improve profitability.

Okay. I guess maybe ask it a different way. In the past we've talked about a cash break-even level the Company. I presume that with these adjustments we have a meaningful reduced level of cash break-even noted that we had cash operating expense about $7.4 million given the current blend of the revenue mix where do we think that breakeven level will be on the revenue line?

Yes, I wouldn't point you to any break-even revenue at this point what I would point to is we've had success and bringing the profitability by all business lines are the margins greater than our direct expenses and so grown over those corporate overhead and the public company costs are focused now and we've seen a lot of progress there. While we're not giving quarterly guidance here we're excited about the changes we've already made.

And Brian, this is Bill, a couple things I’d added on top of that and group everything Barrett said. Number one is I alluded to my remarks that you know we had our first break-even month in December in terms of your gross margin dollars being greater than cash expenses. So that again one-month I don't want to get too excited about it we're going to stretch it out to make it a trend, but the point being is that the profiles materially improving there for us. And the other thing is really talking about mix as the O&O revenues which are much higher margins in those margins get to 40% versus some of the other two businesses your mix on the topline in terms of what you need to do to get to break-even shifts as well. So from our perspective, we're really excited about this diversification to these higher margin revenue partners on the O&O side combined with the reduce expenses, I think really do provide some help from a balance sheet perspective in the immediate term.

Great and I want to shift gears away from the financial aspects and talk about the strategic and Bill I got to commend you through this obviously Q4 is difficult with the issues with the Note 7 and everything going on with the Pixel. You guys have done a remarkable job by any measure in terms of strategic alignments and new customer wins and credit to you and yourselves stuff there. I want to understand these are the prospects for advertising within Jio obviously Jio has been a phenomenal story in terms of their subscriber growth and obviously you guys are saying some pretty good units at this point. Walk us through what it means with regards to the advertising there. And then there was also some talk in the past about getting some of the hardware OEMs that sell into Jio to preload Ignite. Can you maybe explain what that might do to the revenues coming out India?

Yes, sure, so we're really in the top of the first inning as a relates to advertising with Jio and you know I really draw parallel in a color here to where we start with Verizon in the early days when we launched with Verizon we started with a couple slots and we expanded it’s three and expanded it’s four and obviously expanded our you know from there which is then a catalyst to grow the topline. Our view a similar scenario with Jio, right now in India from an advertising perspective is Red-Hot a lot of advertisers from companies like Facebook and Flipkart and Amazon big name companies you know want to be on home screen for Indian consumers. And Jio is providing basically a first broadband experience with their 4G LTE network too many of those consumers. So we're seeing very strong advertising demand. Right now in just a matter of working out a lot of the operational issues and coordinations and campaign approvals and budgeted, for attribution and just a lot of the operational blocking and tackling things that we have to do to scale it. But in terms of expanding it as I touched on in my remarks, this week we're crossing over six million from devices and we're actually doing that. I believe across over 50 different models of devices. So it's not just Jio branded. We are already tapping into some other OEM's other than Jio, and it's our expectation that that will continue to grow and expand. And I also want to highlight as it relates to Indian advertising opportunity is the Micromax deal. I believe Micromax is the second largest OEM in India after Samsung. And so for us to get a deal going with them for the open market side of things given just the direct sold by the operator will also expand our addressable market opportunity for advertising in India. So again we're in the top of the first inning, but a lot of good things shaping up for us.

Okay, and one last one and I'll hop off. India has gone through a fundamental shift in terms of their economy, remove any amount of cash and circulation and currently taking a hit to the GDP, but the big push here at least publicly is to move things towards digital transactions and more specifically towards mobile transactions. Is there any traction with DT Pay specifically within India or is it just done in Australia and South East Asia?

Yes. No – yes, so we're live. We're generating good revenue, good transaction volume in India. I think I mentioned on the last call, although the average revenue per transaction is much lower in India than it is in Australia just because of the economic dynamics there. We do about 50% of the transaction volume in India already that we're doing in Australia today. So we are doing a sizable amount of transactions there. There are a lot of – we’re not want to get in the weeds on this call, but there are a lot of operational issues in terms of different browsers and how things render differently, so customers can click on things and it makes the implementation a bit more difficult. I think we've tackled the vast majority of those issues. So we anticipate our India Pay business to continue to ramp both because of the dynamics that you referenced, but also as we just add additional content providers that want to sell content to Indian consumers.

Great, thanks for the update.

Thanks Brain.

The next question comes from Sameet Sinha with B. Riley. Please go ahead.

I don’t know if my questions have previously been answered, just jump on a few minutes late. But can you talk about I mean most strategically looking at both the A&P business and the Pay business or any of the business that you have currently? I mean if you've done an assessment any of these businesses, which you don't think strategically important that you can potentially divest and sell, and specifically focusing on the A&P and Pay side?

Yes sure, Sameet. We do all three of our businesses is having strategic value and putting together. I think that as I said in my remarks, I don't believe the street today though is giving us proper value for the A&P and Pay business and so therefore it's incumbent upon us to show how we can unlock shareholder value and there's a myriad of ways that we can do that. But with all that being said on the corporate development side, from a business development strategy perspective, for example, we have launched our Pay product in the Philippines, today integrated with Ignite with Electronic Arts, where you can – we Ignite delivers Electronic Arts games, customer clicks on it and then can have it using our DT Pay capability can have the charges right on to their mobile phone bill. So that shows nice synergies between those. I also touched in my remarks of how we have 1,000 of advertising partners and not one advertiser contributes more than 6% of revenue, part of that is we're able to cross-sell across our platforms between our advertisers. So there's definitely synergies there, but right now our focus is how we can unlock value to show the street that these businesses are not being properly valued today.

Got it, and specifically you're going to focus on the A&P side of it, so you clearly made a decision not to invest in RTB. Can you explain what is left and what's the rest of the business and how should we expected revenue trends there?

Yes, sure. So from A&P business perspective, we’ve seen the revenues have stabilized in that business. We're really focused on publishers that we've been with for a long time. So think of names like Baidu would be an example of that. But also growing revenues with other RTB providers that don't have an exposure to advertisers or the demand catalog that we have, again partially a result of the O&O business. So given that rich demand catalog we have for many advertisers, there's many publishers that want to run our inventory and so that's where we're seeing the growth and the stabilization with our A&P network today.

Got it. Thank you.

[Operator Instructions] The next question comes from Ilya Grozovsky with National Securities. Please go ahead.

All right, thanks. Good morning. Bill, did I understand you correctly just now that you said that the A&P revenues have stabilized at this level and your response to the last question?

Yes.

Okay. So do we think that this is a – this $4 million or so level is for the next several quarters it's something that you guys can maintain?

Absolutely and we're working to grow it, we're not looking to maintain it. None of us are here to maintain anything; we're here to grow things. So there's a variety of things underway in terms of how we can grow that. There are some structural headwinds in our way for that, but there's also a variety of things we're doing as a Company to attack a variety of different opportunities. One specifically I mentioned today is I touched in my remarks around Ignite Delivers, and if you think about all of our publishers today, even I use Baidu in China as an example. They run an ad. A customer has to basically go through five steps to get the app on their phone and get us paid. If we can do that in one step through Baidu that's a tremendous value enhancer and a differentiator for us amongst our other competitors in the A&P space. So that would be an example of us leveraging the O&O capabilities of being in the android priv-app section to be able to grow topline on the A&P business. So those are the examples of things that we're looking to do not just to maintain, but to attempt to grow.

And can you say the same for the Content business that the $6 million level of this quarter is also essentially the bottom?

Yes. As I mentioned in my remarks, we've seen a return to growth as we've entered 2017 in that business and we're very excited about the prospects both in terms of – now marketing partners coming back in Australia, but also the growth in Asia that I touched on for, I think it was Brian’s question in India as well as the Axiata deal that we announced a couple weeks ago.

Okay. And then my last question is given that we’re roughly halfway through the March quarter, where do you think your cash is going to be at the end of March?

Yes. We wouldn't give specific direction on the exact cash levels, but you would have seen and our results for the last quarter where we're easing the burn absent, some of the working capital swings that we'd see like AR. I'd point to our improving EBITDA contributed by expanding margins in our – the expense reduction and redirecting that we talked about as we exit the quarter. So I think we have a path to easing that burn and progress throughout the quarter.

Okay. So then here's my final question, given your comments to – your answers to my question and given the fact that in the past you have given guidance especially a year out or so, and all the good things that are happening in the O&O business, if we're stable in these other pieces of the business that have been sort of messy over the past four, five quarters here. Why do you not feel confident enough to say kind of directionally at least some range that you guys have put out in the past kind of for 2000 and even for the March quarter, but how about 2018 on the fiscal side?

Yes. As you think about our remarks – review remarks why we didn't give the specific guidance. We did aim in our prepared remarks to offer kind of direction and insights into our management intention and our expected progress. And we highlighted – we were very clear about timing of launches to happen over the quarter in the June quarter and important drivers of growth that we see like being on the S8 with a number of global carriers, which has timing uncertainty. We talked about how we're tracking our progress towards our goals, EBITDA expansion and profit expansion so you know those are - and you know kind of insides we provided in our in our comments. Regarding on a annual guidance and philosophy here, what I'd like to do and what I aim to do is go through our full have a chance to go through our full operating plan with our teams and fiscal 2018. And be in a position to give annual guidance and consider annual guidance in our next earnings call.

Understood. Thank you very much. End of Q&A

All right. And this concludes our question-and-answer session. I would now like to turn the call back over to Bill Stone for any closing remarks.

Thank you. And thanks to all of this for join in today. We're poised for a great 2017 and keep an eye out for news flow and we'll be back to you with updates against our progress against our goals. Thanks again. And have a great day.

All right. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.