Digital Turbine, Inc. (APPS) Q2 2019 Earnings Report, Transcript and Summary

Good day. And welcome to the Digital Turbine Fiscal 2019 Second Quarter Results 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 this event is being recorded. I would now like to turn the conference over to Brian Bartholomew, Senior Vice President, Capital Markets and Strategy. Please go ahead.

Thank you, Sean. Good afternoon and welcome to the Digital Turbine second quarter fiscal 2019 earnings conference call. Joining me on the call 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 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 file 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. And with that, I will now turn the call over to Mr. Bill Stone.

Thanks, Brian. And thanks to all for joining us today. Our stated goal has been to build and sustain a profitable growth business. We grew revenues 50% year-over-year in the September quarter and this growth, along this sequential improvement in gross operating margins, enabled us to generate more than $1.6 million in adjusted EBITDA during the quarter, marking our sixth consecutive quarter of positive adjusted EBITDA. We also generated $1.6 million in free cash flow during September quarter. And as pleased as I am with this financial performance, I'm even more excited about the traction of our platform. We continue to see the strategic value of the platform grow with several new and renewal agreements signed over the past few months with blue-chip names such as Verizon, AT&T, Samsung and Netflix. I'm going to break out my prepared remarks into three areas; first, some commentary about these new agreements; secondly, some operational commentary about both the September quarter and the current December quarter; and finally, some commentary about the growth drivers and progress against them as we enter into 2019. I'm pleased to announce that we recently signed a number of new multiyear deals. First, our new AT&T agreement matches the existing terms of the prior agreement. And in addition, we have some enhanced margin terms for new products that are redundant to this existing agreement. We also anticipate additional enhanced margin opportunities as we get into 2019 as we work with AT&T on various integration opportunities with the Time Warner assets. Secondly, we signed a multiyear global deal with Samsung to integrate our mobile delivery platform on Samsung devices. I'll provide additional details on the agreement later in my remarks. But it's a great validation of both our platform and our long-term strategy. And finally, I am pleased to announce the global agreement with Netflix that will have Digital Turbine distributing the Netflix application with various operators and OEMs around the globe. We've already started this agreement with a large North American operator and it is a revenue share where we did paid a portion of the revenues that Netflix generates from new subscriptions. Combined with our recently announced new four-year Verizon agreement, I am very excited about how the combination of renewing our existing partners plus adding new ones demonstrates the value add we bring to these high-profile companies. Turning to the September quarter, we finished with $23.9 million in revenue, which represents 50% growth compared to the September quarter last year and $1.6 million of adjusted EBITDA. Barrett will provide more color on the financials. But from an operational perspective, I was pleased with the progress we made on growing our product diversification. The contribution of our new products such as Single-Tap, Folders, post install actions and our out of the box set of Wizard are beginning to make a more material impact. A year-ago 97% of our O&O revenues were from our dynamic installed product. And while that dynamic install product grew 30% year-over-year, as a percentage of total revenues, the new products have grown from 3% to 17% of revenues, reflecting incremental contribution being generated from a broader platform. Combined with improvements and advertiser demand this results in improvements in revenue per device or RPD. And while device volumes may fluctuate and are not a 100% in our control, revenue per device is a fundamental health metric of our business as it showcases how much we can earn from each device once we embed the Digital Turbine mobile delivery platform on it. RPD for the quarter was $0.96 compared to $0.73 a year-ago, representing 32% increase. And here in the United States, RPD for the quarter was approximately $2, representing an increase of over 60% from the same period last year. We will continue to encourage investors to pay close attention to this operating metric. Turning to the current December quarter, we are pleased with the opportunities for continued growth in our three growth drivers of devices, products and media. On devices, we are now live with many new partners, such as Track Phone, Panasonic, Karbonn, Intex and others, that are generating growth that was not present in the December quarter last year. The combination of these new devices plus the improvements in revenue per device helped offset any macro U.S. device softness. And also, American Mobile has some technical operational improvements that we anticipate will be implemented during this quarter, that should continue to improve performance in that account. And we are already seeing revenue growth in that account with improved advertiser demand and remain optimistic about the partnership. Our new products, we have launched Single Tap across our large North American partners and our scale with one of them and in progress of getting to scale with the other one. Other new products such as Folders, post install actions and Wizard are also poised for growth. On the Media side, we already have tens of millions of dollars of insertion orders signed for the holiday season. While there are no guarantees that all these insertion orders will run as it's dependent upon many factors such as partner, device make and model, performance and so on, the demand is nevertheless strong as Digital Turbine is the number three distributor and android applications in the United States, only trailing Facebook and Google. I've also been pleased at the increasing diversification of the types of applications we are delivering. While we're seeing growth in aggregate gaming revenues, as a percentage of total revenues, we are seeing much faster revenue growth from brands and other non-gaming applications from companies such as LinkedIn, Starbucks, eBay, Yelp and many others. These non-gaming revenues were 46% of revenues in 2016, 60% in 2017 and 68% of our revenues year-to-date in 2018. In particular, brand revenues are now over 50% of our advertising demand. And finally, we are also seeing our efforts from recurring revenue streams on our revenue share applications with companies such as Netflix, The Weather Channel, Yahoo, Amazon and others compared to CPI or CPP models and that’s beginning to make a noticeable impact on our results, which is encouraging. Now turning to the future, I want to provide some commentary on how 2019 is shaping up across our growth levers. First on devices, I want to provide additional details with our new global agreement with Samsung. We are proud to be partnering with Samsung, the largest global supplier of smart phones that sells hundreds of millions of devices per year, including Apple. One in five smart phones sold in the world today is the Samsung device. Our agreement enables our mobile delivery platform to be integrated across Samsung devices. Technically, we are in the process of launching the solution with Tracfone here in United States and are in the planning phases of joining forces with Samsung on pursuing new global operators that do not currently have the Digital Turbine solution, as well as planning geographies to pursue with Samsung’s open market devices. This agreement is validation of our platform and the value-add we bring. And while Samsung is the largest smart phone supplier, there are still more than 700 million android devices that get sold per year from other OEMs. Our pipeline continues to be encouraging with numerous other well-known Asian OEM brands deep in the pipeline process. We also continue to receive inbound interests from operators and OEMs and how we can use the Digital Turbine platform for devices beyond smart phones, and are in the planning phases of how to expand that into other devices in 2019. The overall platform strategy starts with getting our software and device, so this operational progress is a nice executional proof point against the broader company strategy. On products, 2019 will all be about scaling the existing products, while also launching our Bring Your Own Device or BYOD product to the market. Currently, operators don't have a good solution on how to deliver their branded experience to the customers when a device is not directly sold by them. In most of the world, this is how devices are distributed, so it’s a pain point. As we grow our device base now into hundreds of millions, being able to deliver a customized experience out of the box for operator subscribers is a tremendous market opportunity. To that end, I'm pleased that we’ve reached agreement with Reliance Jio in India that will enable us to start monetizing these open market devices with Jio’s applications at first boot. We expect the margins for the BYOD product to be materially better, there’re other products and we’ll be using Jio as the first operator partner for this new product with many more global operators in the pipeline that we anticipate launching in 2019. And finally, on Media, 2019 is all about how we scale our efforts more efficiently within three distinct categories. First is brands, and we have third party partnerships with advertising agencies that allow us to bring their brands and relationships to our O&O partners. We are working on expanding more of these relationships that can accelerate our efforts to bring more partners to the platform. Secondly, we also continue to scale our direct selling force globally that deals with mainstream application companies, such as Yelp, eBay, Amazon, Netflix, Pandora and others that are looking for broader distributional capabilities. And finally, I’ve been pleased with the ramp of our inside sales group that sell 5% of insertion orders, but really helps us efficiently scale the long tail of applications. And as many of you know, there’re millions of applications in the Google play store and using an agency or direct sales approach may not be the best way to facilitate getting those long tail applications to the right subscribers. We’ll look to augment this group with a self service platform for improved automation and efficiency. And finally, before I turn over to Barrett, I want to conclude my remarks that the September quarter was solid and the future growth drivers of devices, products and media, are all coming together nicely to drive continued profitable growth. With that, this concludes my prepared remarks. And I'll turn it over to Barrett to take you through the numbers.

Thanks, Bill and good afternoon everyone. As Bill mentioned, we're very pleased with the results in the quarter, delivering 50% growth, sustainable and expanding profitability with adjusted EBITDA of $1.6 million and non-GAAP net income of $1.1 million, enabling positive free cash flow generation of $1.6 million in the quarter. Now, let me turn into the financial performance in the quarter. As a reminder, the results of our divested businesses treated as discontinued operations for all periods presented in our financials. My comments today will refer to results from continuing operations unless otherwise noted. All of our comparisons are on a year-on-year basis unless otherwise noted. Revenue of $23.9 million in the quarter grew at 50%. This growth rate represents an acceleration over Q1. While we continue to deliver revenue growth from more devices from the platform, a larger portion of the revenue growth generated in the quarter came from expanding revenue per device. Revenue per device or RPD of $0.96 in Q2 was up 30% over the prior year, fueled by both increasing advertiser demand and the expansion of our new products. In the quarter, other product revenues or our non-dynamic install business made up over 17% of total revenues as compared to less than 3% in the same quarter last year, illustrating the progress of the new products added to our platform. Turning to gross profit and margins. Revenue growth enabled non-GAAP gross profit dollars to increase by $2 million year-on-year to $8.1 million in the quarter. Non-GAAP gross margin was 34% in Q2, expanding sequentially from 31% in Q1 of this year, and down from 38% from Q2 of last year. The sequential rebounding margin is largely driven by improved revenue mix towards higher-margin partners in the quarter. As a reminder, our gross margin rates can be sensitive to changes in partner mix and revenue type, which can be pronounced during the holiday season and these fluctuations may vary from quarter-to-quarter. We continue to be encouraged about our opportunity to expand margins overall. And given our current revenue mix, we would expect similar margins as generated in Q2 over the near-term. We also continue to be pleased with the impressive expense scale in the platform. Total operating expenses were $7.2 million compared to $7.1 million in the prior year quarter. Cash expenses in the quarter were $6.4 million compared to $6.1 million in the prior quarter, or an increase of 5% amidst revenue growth of 50%. These results continue to highlight the inherent operating leverage in the business. I would note, while we are not providing quarterly expense guidance, we would expect to make focused investments to support the new partners announced and launching on the platform in addition to the seasonally higher variable cost we see during the holiday season. During Q2, adjusted EBITDA was $1.6 million, up from the loss of $0.1 million in Q2 of last year, and represented an EBITDA margin of approximately 7%. Non-GAAP adjusted net income in the quarter was positive $1.1 million from continuing operations or $0.01 per share as compared to a net loss of $1 million or a loss of a penny per share in the second quarter of 2018. Our GAAP net income from continuing operations for the second quarter was positive $2.1 million or $0.03 per share based on $77.2 million weighted shares outstanding compared to a second quarter of 2018 net loss of $6.6 million or negative $0.10 loss per share. Included in our GAAP net income for the quarter is recorded gain of $1.6 million from the impact of the change in fair value of derivative liabilities, resulting from our convertible notes, which is highly sensitive to the Company’s stock price. As a reminder, the derivative liabilities on our balance sheet will fluctuate as our stock price moves and may have a material impact on our reported GAAP financials. Moving to the balance sheet. We finished the quarter with $8.3 million in cash and generated $1.6 million in positive free cash flow from continuing operations in the quarter. We had a small reduction in our debt levels as there were $800,000 in conversions on our convertible notes during the quarter, and the gross principal amount of our original $16 million convertible notes ended at $4.9 million at the end of the quarter. Before I turn to our business outlook, I wanted to provide a brief update related to the SEC matter tied to internal controls. As a reminder, we recently reported that the company was fully stock compliant for the year ended March 2018. We have been working with the SEC on the final resolution of a settlement connected with the previously disclosed internal control map. The Company has recently received and signed the final settlement order, and we are awaiting the SEC to process and finalize the paperwork. The SEC’s team has communicated they expect to have this matter finalized by the end of the calendar year. Now, let me turn to our outlook. We currently expect revenue for Q3 to grow to between $28 million and $30 million, and expect adjusted EBITDA to grow to $1.8 million to $2.2 million in the quarter. With that, let me hand it back to the operator to open the call for questions. Operator?

We’ll now begin the question-and-answer session [Operator Instructions]. Our first question comes from Mike Malouf with Craig Hallum. Please go ahead.

If I could just talk about a couple of things, first off on Single Tap, sounds like your launch with one partner and you’re very close on the other to launch. Can you take us through little bit of -- now that you're starting to watch a little bit of how the model works and who were some of the publishers that are actually using the product?

So we’re live with one at scale. We’re in the process this month of getting scale with the other one. We’re live on some devices with them. It’s just going through the scaling process, which is really important for the demand side. They want to see those volumes from those two operator before they really go much larger at it. So now that we’ve been able to deal with this kind of chicken or egg problem, we’re excited about the prospects from it. In terms of the specific publishers that are using the platforms, I think of names like Twitter, Yelp, the Weather Channel, all being examples of companies that are using the platform today. The pipeline in terms of people that are interested in it, it’s quite impressive but they want to see scale. So that’s what our focus is on right now. And in terms of the model what we’re seeing right now is we've got really two models with this version of Single Tap, not the integration we have with the large social media provider. But this model Single Tap, where we were getting paid per transaction fee, whether that's from advertisers for the video add, for example, and then getting this Single Tap application, would be one model and the other one would be WAP to app, we're in a mobile Web site like ESPN or Yelp or the Weather Channel and we're able to click and get the app directly to your phone and so stay in that experience. And that model is per transaction fee as well. But that price for download we get on that latter model right now is trending a little bit higher as well is what we're seeing. But it's early days as we have to get the scale at it. But how we're thinking about it, Mike, is a per transaction fee that we get from every app that’s downloaded.

And then you just share that with the carrier. Correct?

That's right, or if it's open market and that's on device and we would keep the 100% of the revenue. But yes, that's right.

And then with this new agreement with Samsung, it sounds to me like they're going to roll this out in very specific areas first. Is that how you see it? And then eventually get to larger or how do you see this working?

Yes, so we're in the planning phases of that for next year real time as we speak. The good news is that it's not academic. We're launching this quarter, as I referenced in my remarks here in the United States, within our platform it's now been basically integrated into the Samsung engine, if you will. And then what we will do is we'll go through the planning exercise, both with Samsung and their geographies and open market, as well as planning exercise and working with global operators that currently are not Digital Turbine partners. And then we'll work with them to decide which products off the platform they want to chose, so it'll be a Chinese menu. So they could select Wizard, they could select Single Tap, they could select Wizard Single Tap and dynamic installs Folders, it will vary based upon what that specific operator or what that specific Samsung open market geography is interested in, and we're working through that real time.

And then one final question, with regards to the self service platform. That's obviously we, I think, really needed in this brand new environment. Can you talk a little bit about where you are in that process and where do you think that -- when will that be up and running?

Yes. So we already have some, what I would like to call, beta versions up doing some things now with that. We've bought in this new inside sales team. It's done a great job really working on the long -- what I'd call the long tail of applications. There's a lot of things to go to get that to commercial scale in terms of validating applications and approvals and testing and all those things. It's definitely something that's a roadmap item for at scale in 2019 but yes, we are just getting started on it today. And as I referenced in my remarks, we are starting to see some nice traction from that insight sales group.

Our next question comes from Darren Aftahi with ROTH Capital Partners. Please go ahead, Darren.

Could you just I guess, first with the Netflix deal. Bill. Could you give a little background how that came about, tying to get something like that over the hump, and then just given how prevalent the need to drive subscribers across a myriad businesses? I mean, what the pipeline look like for similar type media streaming deals. Second question would be the mix on new products going from 15% to 17% or better as a composition. What drove the marginal improvement within new products? And then can you indulge me if my math is right, and I appreciate there's some seasonal expenses here. But you are guiding to 4,000 and roughly better of EBITDA sequentially but revenues roughly 5 million better. So I am just trying to make heads and tails of where the expenses -- the incremental expenses are coming from there as compared to business? Thanks.

So, Darren, I'll take the Netflix and then new product question, I’ll turn it over to Barrett to talk a little bit of the guidance on revenue and EBITDA. Yes, as regarding the Netflix deal, Netflix historically hasn’t done a lot in terms of user acquisitions. And they don’t have the same way that other traditional application companies work with what’s called attribution meaning, how you measure the app, track the app who has opened it, who has used it and there’s a lot of providers who do that. So we worked with Netflix on a custom solution and integrated that in with a large North American operator. And that’s been live for a month or so now. So we’ve been excited about that. And then as we continue work with Netflix, we decided to really expand that into the white space. So in many cases, Netflix may have other direct deals around the world with other providers and there’s many that they don’t. And so as they looked at our roster of partners and pipelines, I think that’s something they became excited about to expand their distribution or reach not just here in the United States but our large North American partner, but more globally. And I think as most people know including yourself that that’s a big important metric for subscriber growth for them, so great that we can help partner with them to meet their goals and objectives. And as far as the business model goes, one of the things we’re starting to do is historically we've done more cost per install or cost per placement where we get paid a fixed fee for the customer ready to putting app on the phone or the customer opening and engaging with the app. And now we’re starting to see more of these revenue share applications where we get a piece of the action as the customer spends on that application on a go forward. Netflix is another example of that but we’ve got that with other providers. As I referenced like Amazon, Yahoo, the Weather Channel and so on. So this is another example of that, and it's becoming much more noticeable. So it is not something overnight like CPI or CPT where you’re seeing immediate growth. But as you get this embedded base of applications deliver that recurring revenues can become much more material and we’re starting to see that. So we’re excited about that on the Netflix side. And then regarding the new product growth, the new product growth is really -- what pleases it’s really balanced. It's not like there’s one thing that’s knocking out of the park that explains 100% of the increase, we’re seeing it across the Board. We’re seeing it with our Folders product that we put across all new AT&T and Cricket, other international operators and OEMs. We’re seeing it with our post install notifications product as well. We’re seeing growth with things like Single Tap and the integration we've got with the large North American operator and the large social media company. So you're seeing it really grow across the board, which is encouraging. It’s a major focal point for us in the business right now. So we've been excited about the new product growth and we'd encourage investors to continue to pay attention around our progress there. Let me turn over to Barrett around the guidance.

Your question around investments, I’ve made some comments in the script. If you look back over, there’s some seasonally high expenses, just variable expenses that come with a higher revenue that we've experienced in past holiday quarters, that’s one. But in addition to that, we have investments across our sales force, across our product groups and our technology groups to make sure we’re taking advantage of these new partnerships that we’re rolling out. Some of those are already planned and some of those we’re working with these partners to make sure these regions and these new launches are successful. Those are the types of expenses we’d anticipate seeing in Q3.

Thank you. Our next question comes from Sameet Sinha with B. Riley. Please go ahead.

I want to ask a couple of question, let me start with Samsung. And can you talk to us about -- I know it's early stages, you're talking about 2019. How would the deal go? Is it all devices or is it only on mid-tier low-tier devices? Can you give us some inside there? Secondly, talking about the self service product, I'm just trying to understand. I mean, if we and all know that add inventory is highly valuable. What is the decision that you have to make, whether to go after the big brands versus some of the long tail applications. Do they pay more if they pay a higher price? How much higher is that some, some insight there? And then I have a one follow-up.

So first regarding the Samsung agreement. From a technical perspective, it will work across the entire Samsung line up, so there's not -- or Android line up. So there 's nothing that’s unique about low end or high end from a technical perspective. My guess would be is that will be contingent upon whatever the global operator wants to do if they want to put it across the whole line-up, only the high end, only the low end, across mid-tier wherever that happens to be. So that would be something that we'll work with the global operators are. History would suggest it goes across all of those based upon how we've deployed it in the past, but we'll see how that works. And then what we will do in the open market and then we'll work with Samsung and their local management teams in India or Brazil, or whatever the geography happens to be, to decide which devices they want to target and which products they want to target. And we're just getting into the plan and stages of that right now. And then we'll have a revenue share between us in terms of how all of that will work. So we're really excited about the partnership and where that's going. As far as the self service platform and how we decide what goes where, now that we're adding all of these products and you think about things like folders where you've got to have dozens of applications and the right applications is to recommend to a customer of being able to have those right applications delivered they may not have the big budgets that some of the big names that I mentioned in my script will have. But nevertheless, those are the right apps with the right customer. So we'll use a variety of techniques, AI and targeting, to get the right apps to the right customer. Obviously, we'll use an option process combined with that AI to get the right apps to the right customer to ensure that we're meeting what the customer expects from us. But the self service platform this inside sales group will be a key to drive growth of these new products, as well as growth in a lot of these geographies outside the United States and making sure that we've got inventory filled for those partners.

I have two follow-up questions one is as you test out these new revenue streams and like you explained the Netflix a continued revenue share. What's the breakeven period between a CPI -- what you would have got paid on the CPI basis versus this revenue share? And second thing was as you sign much more of these long-term deals, whether it's Verizon or AT&T. Help us understand those thresholds that you have to meet. Is it on a cumulative, on a deal term basis or are they annual resets, how would that work, because obviously, you're showing great progress on a gross margin basis. I'm just trying to see if we that resets every year or not.

So first, in terms of decision process, we have a model that we use to optimize the yield that we'll get from a specific application. We will know just because we've done this at scale now for a while what the probability of consumer engagement is, consumer converting to paying subscriber, consumer open rates are, et cetera. And then we can basically work the math backwards to say at the simplest level if somebody wants to pay us $0.50 CPP or somebody is willing to pay us $1 CPI but 50% of the customers open or we know on a recurring rev share model that 10% of the customers are going to pay us $0.05 a month for 10 months, we theoretically be indifferent between those models, because it all yield the same per device. So that would really go to the AI and to the targeting to make sure we're getting the right app to the consumer. So we will do that math and calculus to really optimize the yield, so we’re maximizing the revenue per slot on that device. The revenue share something that’s becoming much more material, but we have taken a very short-term that we would get for CPI. But as we’re starting to get numbers now, it pays dividends in the long run as that revenue stream continues to grow. And then for your second question in terms of how that relates to our operator agreements. Obviously, I am not going to get into specifics of any operator agreements but just say generally from what we filed is with our Verizon agreement it's aggregate or cumulative. So you add up all the revenues together and then you hit a tier and then you're able to accrete margins. With our AT&T agreement, these are done as addendums. So individual product may have different margin profiles depending on what those products are and what strategic goals AT&T and we are trying to achieve. So they're a little bit different in that regard.

Our next question comes from question comes from Jon Hickman with Ladenburg Thalman. Please go ahead.

Bill, I just want to follow-up on the Samsung just a little bit. So Samsung going to put you Ignite on all of their android devices and then the operator gets to decide to put it on and off. Is that what you’re -- or is it a negotiation like the operator will say I want to send Samsung install it?

So Jon what we have is we have our suite of product on our platform, from dynamic installs to Wizard, to Single Tap and so on. And so now what we’ve done is we’ve integrated that platform into Samsung as an on device installer. So we’ve integrated that platform into Samsung’s core engine if you will versus us just placing it on separately, which is historically we’ve done with other operators and OEMs. So now it’s integrated into their broader platform. And so then it will be a decision for Samsung of what they want to do in each individual geography in device for open market, and then it will be something that Samsung and us jointly pursue with different global operators. And then those global operators would decide which products they want to deploy on which devices. And then there’s already pre-existing commercial agreements around what that revenue split would look like between us and Samsung and to the extent the operators involved for non-open market devices. So we’re just getting that kicked off right now and working through the process as we get into 2019.

So you and Samsung have to go out and convince the operator to do this?

Well, I think the barrier historically has been more that the operators have had friction with Samsung getting any third party platform installed globally. Now that Samsung has a solution, if you’re a global operator, you’ve the opportunity for the Digital Turbine solution on non-Samsung devices now that’s integrated one on Samsung. So if you’re a global operator who had some friction with this in the past now Samsung is able to offer solutions. So we think that's great news for our global mobile operator pipeline going forward.

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

I just had two questions. One, can you give the geographic revenue mix? And then the follow-up question that I had was on the Samsung opportunity. What you think the impact will be on your gross margins, will it be better than the carrier direct or will it be the same or worse? Thank you.

So let me take the first one on the Samsung and I'll turn it over to Barrett on the second one, Ilya. As far as the Samsung deal goes, we expect the margins to be better than what we currently have with our large North American partners on a go forward basis. And I'll turn it over to Barrett for the second one.

You'll find listen in the Q we've got the revenue breakout by region. It's a little north of 70% for the U.S. and that’s a breakout by advertiser location, so just north of 70% is coming from U.S.

This now concludes the question-and-answer session. I would like to turn the conference back over to Bill Stone for any closing remarks.

Thanks everyone for joining the call today. And we'll look forward to reporting on our progress against all the points made on today's call and we'll talk to you again on our fiscal third quarter call in early 2019. Thanks, and have a great night.

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.