Digital Turbine Q3 FY2021 10-Q

Key insights

7 takeaways

01
Digital Turbine reported a significant increase in net cash provided by operating activities, rising to $48.6 million for the nine months ended December 31, 2020, compared to $20.0 million in the same period of the previous year.
02
The company's cash and restricted cash position grew to $43.7 million as of December 31, 2020, up from $33.9 million at the end of the previous fiscal year.
03
The acquisition of Mobile Posse was integrated to expand the company's Media Distribution segment, providing new platforms for monetizing user actions through media-rich content delivery for OEM and carrier partners.
04
Operating expenses for product development increased by 86.9% to $5.2 million for the three months ended December 31, 2020, compared to $2.8 million in the same quarter of 2019.
05
Digital Turbine terminated its existing credit facility with Western Alliance Bank on February 3, 2021, following a previous amendment in May 2019 that had increased the total facility to $20 million.
06
The company transitioned to the 2020 Incentive Plan, which reserves 12 million shares for issuance, after retiring the 2011 Plan that had 4.45 million shares remaining unissued at the time of closure.
07
Future amortization expense for intangible assets is projected at approximately $2.68 million per year over the next five fiscal years, with a residual expense of $28.47 million thereafter.

Summary

Digital Turbine experienced substantial financial expansion during the third quarter of fiscal year 2021, driven by a strategic focus on its core Media Distribution segment. Net revenues for the quarter reached $88.6 million, representing a 146% increase compared to the same period in the prior year, while nine-month consolidated revenues climbed to $218.5 million. This growth trajectory was bolstered by the successful integration of Mobile Posse and the divestiture of legacy business segments, allowing the company to operate as a streamlined platform for application and content media delivery.

Operational efficiency improved significantly, as evidenced by a 396.5% increase in operating income and a 141.2% rise in net cash provided by operating activities over the nine-month period. Despite these gains, the company remains heavily reliant on a concentrated group of major telecommunications partners, including T-Mobile, AT&T, and Verizon, which account for a significant portion of total revenue. Management continues to navigate risks associated with this customer concentration and broader macroeconomic uncertainties stemming from the COVID-19 pandemic.

To support ongoing operations and future strategic initiatives, the company strengthened its capital structure by securing a new $100 million revolving credit facility in February 2021, replacing its previous debt obligations. This facility, which includes an accordion feature allowing for expansion up to $200 million, provides sufficient liquidity to meet business requirements for the foreseeable future. As of the end of the calendar year 2020, the company remained in compliance with all credit covenants while continuing to manage contingent earn-out liabilities related to the Mobile Posse acquisition and executing equity-based compensation plans to incentivize performance.