Good day, and welcome to the Digital Turbine Fiscal 2024 First Quarter Earnings Conference Call. Today, all participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that today’s event is being recorded. I would now like to turn the conference over to Brian Bartholomew, Senior Vice President of Capital Markets. Please go ahead, sir.

Thanks, Chris. Good afternoon, and welcome to the Digital Turbine fiscal year 2024 first quarter earnings conference call. Joining me on the call today to discuss our results are CEO, Bill Stone, and CFO, Barrett Garrison. 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. 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 exchange -- 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. Now I’ll turn the call over to our CEO, Mr. Bill Stone.

Thanks, Brian, and thank you all for joining our call tonight. For the June quarter, I was pleased that we beat the top end of our guidance range, both on the top and bottom lines, but we still have a lot of work to do to reach both our internal expectations and the potential of our broader total addressable market or TAM. I was pleased that we had a very clean quarter as operationally we sequentially improved our business performance across key financial metrics. But the strategy is not simply to harvest our profitable products for short-term financial performance, but rather use our profitability to make capital investments against the future with new technology platforming, new ad tech capabilities, our Hub, alternative app distribution, and SingleTap. We believe these investments will prove to be well served against our future growth. I’ll provide updates on those future growth drivers after providing some operational updates and commentary on the current business. For the June quarter, we had $146.4 million of revenue $27 million of EBITDA, and $0.18 of non-GAAP earnings per share and gross profit margins were 47.1%. All of these financial metrics represented sequential improvements from our March quarterly results. From a segment perspective, despite continued soft device sales, our on device business or ODS also grew sequentially to $98.3 million. Operationally, I was pleased with our improvement of revenue per device or RPD in the U.S., which continues to grow and set an all-time high in the June quarter. Over the past five years, our RPDs have accreted from just over $2 in fiscal year 2020 to $3 in fiscal 2021, to $4 in fiscal 2022 to $5 in fiscal ‘23 and today is now over $6. We continue to see strong demand from our platform both from advertisers and…

Thanks, Bill, and good afternoon, everyone. Overall, we were pleased to see results in the quarter ahead of our expectations for both top line and profitability measures. Revenue of $146.4 million in the quarter, was up 4% sequentially and down 22% year-on-year with revenues improving sequentially across both segments of our business on device solutions or ODS and our app growth platform or AGP from the March quarter. Within ODS, revenues were slightly up sequentially from the March quarter and down 17% to the prior year. However, as Bill referenced, while we saw softer device volumes in Q1, this impact was offset by improved U.S. revenue per device, which exceeded $6 per device and increased both sequentially quarter. As we’ve discussed in the past, while our content business has stabilized in the quarter, our ODS segment continues to experience headwinds from our prepaid content media business from a year-over-year comparison, and we expect this grow over comp to run off by Q3 within the December quarter. On our AGP business, Q1 revenues increased 9% sequentially and declined 32% over prior year. While we’re encouraged by the improvement in the core business, the overall decline in AGP year-on-year continues to be driven largely by the short-term impact of the consolidation and exiting of certain legacy ad colony business lines that we have discussed previously. And we would expect these comps to fully run off by the back half of this fiscal year. I reiterate Bill’s earlier comment that despite the near-term headwinds, we’re encouraged by the integration benefits we are seeing from the investments we’re making to bring these businesses together and expect these moves to have a positive return on our future growth. Our consolidated gross margin was 47% in Q1, which increased from Q4 sequentially and was down from…

Thank you. We’ll begin the question-and-answer session. [Operator Instructions] Today’s first question comes from Omar Dessouky with Bank of America. Please proceed.

Hey, guys. This is Arthur on for Omar. Thanks for taking the question. So my question is on Google’s header bidding into fair bit, you know, I understand this has been testing, but I was wondering if you guys could talk a little bit about, you know, some of the early signals we’re seeing from the initial integrations and, you know, what sort of learnings are you taking away from the initial testing? And probably just, you know, on the same note, like, if we should be expecting any sort of revenue contribution impact for the [Indiscernible] in the next fiscal year? Thank you.

Yes, sure. I’ll take that one. The short answer is yes. you know, we’re seeing positive impacts there and the strategy here is obviously to increase our share of voice and demand, into the mediation platform, which then benefits publishers. And so, having the ability to bring Google is obviously vast demand is a positive for us, still very early days. I wouldn’t characterize it as moving to [Indiscernible] or so. We’re still, kind of, optimizing what we’re doing around that. But, it’s absolutely something as we think as we go into next year, bringing more demand, bringing the credibility of Google to our publishers is something we think will be a benefit for us.

Understood. Thank you.

Today’s next question comes from Dan Day with B. Riley Securities. Please proceed.

Yes. Good morning, guys. Can you hear me? There was a little choppy at that.

Yes, I think it’s the operator’s line.

Okay, great. So, thanks for taking the questions. Bill, in the past, when you talked about SingleTap on these calls, You’ve been pretty cautious around, kind of, the path to material revenue generation. You’ve been pretty clear. You know, you’re developing it, investors should be patient. I didn’t hear you say that this time. Can we take that as a sign that you guys maybe have any more visibility than you have in past quarters into it becoming a material revenue contributor, or am I just reading too much into that?

Yes, we continue to be excited SingleTap. I mean, there’s no question about that, it’s not -- it was not material to our results in the June quarter, but there’s a lot catalysts that we’re seeing into the future, right now. And so, we’re starting to see some excitement on the catalyst and the opportunity for scale to really improve on that. I will say it will, it’s going to take time, but the encouraging signs are starting to really show for us, with the product. And, you know, the thing that really I want to remind investors about is we have this embedded base of many, many hundreds of millions of devices, and that’s extremely difficult for anyone to replicate. And so, you know, having that high, amount of devices already out in the market at global scale and our focus to continue to grow that, you know, something I think that, advertisers, publishers, demand side platforms and all the people that are going to integrate in this new app world is something I think they’re going to -- want to take advantage of. I think important point I want to also make on this is the integration with the alternative app stores, you know, there’s going to be this increasing -- our view is that, I mean, it’s increasing pressure on the duopoly of app stores today. And that the ability to have a publisher get lower rates to pay, is going to -- they want something -- they’re going to acquire new users. And SingleTap is an enabler to help make that happen to distribute a non-Google or non-Apple built, out to customer. So that’s going to be something that, you know, we’re excited about and leveraging our existing hub capabilities to go do.

Great, thanks. And then just for the fiscal second quarter revenue outlook, so the midpoint is right around where, fiscal first quarter revenue came in. Just any material difference between the on device versus the app growth platform segments, as far as the outlet goes? Or do you think pretty flat for both quarter-over-quarter?

Yes. Dan, I think we think about, you know, in the Q1, we’ve seen we touched on the improvements we’re seeing in AGP business, you know, near 10% sequential improvement. You know, we think there’s a lot of opportunity there. We don’t give guidance by segment, but, you know, we’re seeing nice trends there. We touched on some of the device softness, that, you know, is sometimes hard to predict. I think we might see that for the, you know, the near-term that’s kind of embedded in our guidance. But, you know, I think the AGP business is, you know, is growing nicely on a sequential basis. And I think that might be a continued trend we’d expect to see.

Perfect. Thank you guys. Appreciate taking the questions.

Thank you.

Today’s next question is from [Technical Difficulty] Roth. Please proceed.

Hey, this is [Dylan] [ph] on for Darren. Thanks for taking my questions. I wanted to sort of talk about, sort of, RPD in the U.S., you mentioned it’s an all-time high at $6. I think you sort of said 25% full supply. So I guess, I mean, what are sort of your strategies in going after growing that RPD on the international side, both with sort of higher monetization on the existing devices and sort of just capturing more devices in the different markets with some of the partners you’ve mentioned in the past?

Yes, sure. What we’re seeing right now and it was encouraging, is the diversification of our demand on our U.S. supply. And I wanted to highlight that out, particularly because, you know, now we’re to a point where, you know, we’re well north of you know, 50% of the demand coming in to U.S. supply from places outside the United States and a lot of international advertisers, whether they are from Europe or APAC want to be on those devices. And so, being able to bring those onto devices, and then we can do strategic demand deals and whether that’s carving out things like, you know, whether particular game type or, you know, social media or whatever happens to be, allows that international competition as well to come in. And so that allows us to achieve higher rates. So that’s something that, has been really encouraging for us. Now the key is for us, how do we expand that to other markets whether that’s in Europe or Latin America or what have you. So major focus area for us to replicate that success that we’re seeing in the U.S. outside. That’s on the advertiser side. And then the other part would be on the product side. So, you know, historically, as you’re well aware, we started with dynamic installs as a primary product. But as we’ve added so many other products to our portfolio, the product growth is also enhancing RPD. So the combination of this more demand on the platform combined with the more products on the platform is really helping drive those, accretion and results.

Great. Thank you. And sort of as a follow-up with some of the investments you mentioned, with ad tech, and with other app stores, like, how should we think about the timeline of that trade off of the incremental investment dollars that aren’t really bringing in revenue, in terms of, like, the OpEx, sort of, when do you start to see those contribute?

Yes, let me start on the revenue side and then we’ll turn it over to Barrett on the OpEx side. You know, right now in terms of how we’re thinking about it, in terms of the back end of this year, you know, Barrett mentioned his remarks on AGP, you know, show a nice sequential growth. And our view right now is in the short-term as we look at future quarters, in the near-term that, you know, AGP and these enhancements and things I mentioned in my prepared remarks will be drivers. And as we get into next year, you know, I think you’re going to see more things like with the Hub and SingleTap and some of these other things ramping, is how we think about it from a revenue/business perspective. And I’ll turn it over to Barrett to talk about the OpEx and the investment side.

Yes, Dylan, I think, you know, for your model, we touched on it in my remarks, you know, we have -- we’re incurring those expenses some of those excess costs for, you know, a lot of the back office systems that we’re integrating, bringing the companies together. Those are our financial systems. Those are, you know, things like our HR systems, as well as the investments in the teams that Bill touched on. Those investments are in place today. I think we’re going to carry those expenses, at kind of similar levels, out through the end of the calendar year and then we’ll start to see, you know, those costs, those investments drop off and you’ll start to see efficiencies in both our cost structure, as well as the incremental growth in revenues, begin to pick up as well.

Great. Thank you.

Thanks, Dylan.

[Operator Instructions] The next question comes from Anthony Stoss from Craig Hallum. Please proceed.

Hey, Bill. I wanted to ask about this verge article where they were interviewing a meta employee and they are discussing would certainly sound like SingleTap functionality. If not, digital turbine, who else could it be?

Yes. It’s hard for me, Tony, to comment on, like, things that came from somebody on future speculation. So I’m going to kind of stay away from that. But what I will say, is that you’re seeing mega cap tech players not just meta, but others, now talking about alternative app distribution. And you’re seeing, and specifically in Europe, now that the digital markets act is coming into reality and you’re seeing, for example, side loading applications on things like iOS 17, it was really opening up a lot of interest from mega cap players, you know, and I’d highlight Amazon, I’d highlight, with the Microsoft Activision Blizzard deal getting done, as an example, Meta was in the article you’re referencing. So there’s a lot of interest, you know, starting to see right now. But I think the key is that, okay, it’s one thing to have the interest and have the -- want to be able to do this. The question then becomes how? And so when you think about, you know, how the apps actually get ported from different versions, how you manage the internal, kind of, plumbing of the apps, how you make it a friction free experience, if it’s not store. It should be in effect direct distributed down to you. How do you curate that on the device with your telco and OEM partners? Those are all things that we’ve got unique advantages to go to. And so when I mentioned in my comments doing it directly through DT Hub or doing it white labeling with other large players, I think we’re in a pretty unique spot, you know, here to really capture on this wave of alternative app distribution. And so it’s something from our perspective, I think about CTV a few years ago and how CTV is today. I almost say about alternative app distributions, kind of, at these early innings today and, you know, something, you know, as the regulations and some of these other large players and just customers and publishers, you know, really wanting alternative choice. I think it’s going to be some really nice opportunities that, you know, we’re really uniquely positioned to just given the embedded base of devices with our technology already on them.

Okay. And then a couple of follow-ups on -- in past quarters, Bill, you talked about, I think it was in your prepared remarks, quite often international carrier launches. Clearly, the on device segments weak in the U.S, not a shock to anybody. Is there anything or new carriers that you’re planning on launching that will help offset that? I mean, I think in the past, you used to highlight the percent of the international markets covered and then you guys haven’t really done that lately. I’m just -- if you could update us, that’d be helpful.

Yes, absolutely. I did make a comment in the prepared remarks around, you know, strong global pipeline of expanding the telcos and OEM relationships. And so I kind of dry it at that. You know, we’re not going to names here on the call, for obvious reasons. But, we think we have a lot of optimism right now in terms of, you know, the ability to continue expand, our addressable market here.

Got it. And then if I can slide in one for Barrett, you know, normally your seasonal -- your December quarter is up pretty strongly seasonally. Any thoughts on if you expect it to be more muted again this year like it was last?

Maybe Andrew, that’s December?

Yes.

But Tony. Yes, so you know, December was an odd quarter last year, right? We kind of, markets change quite quickly. I think, you know, as we’re seeing things now, I would like to expect that we see, you know, closer to a more normalized seasonal trend. I don’t -- not sure we’re back to -- not sure we’re back to, you know, ‘21 levels, but, yes, we would expect to see some seasonal uplift for the holiday quarter.

Got it. And one last quickie for Bill. Love to hear more on Aptoide, I hope, I know you think it is. I’m just curious kind of where you’re at with Aptoide?

Yes, you know, we continue our Aptoide, technology partnership has been great. They’re techs integrated into our Hub product today. They’ve been great to work with. You know, we’re looking forward to expanding with them looking forward to expanding with others, you know, there’s a lot of players out there in the space, you know, Aptoide has been fantastic, but I think that, you know, we’re -- we want to think about it even broader than that. We think there’s an enormous community, you heard the word investment a lot, in Barrett and in my prepared remarks. So we really want to think about how we can, you know, get after the space and really have some first mover advantages.

Thanks guys. Appreciate it.

Thank you, Tony.

At this time, we [Technical Difficulty] questioner in the queue. And this does concludes our question-and-answer session. I would now like to turn the conference back over to Bill Stone for any closing remarks.

Yes. Thanks for everyone joining the call today. You know, we’ll look forward to reporting on our progress against all the points that we made on the call, and we’ll talk to you again on our fiscal ‘24 second quarter call in a few months. Thanks, and have a great night.

The conference is now concluded. Thank you for attending today’s presentation and you may now disconnect.