Digital Turbine, Inc.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would like now to turn the conference over to Brian Bartholomew, VP of Capital Markets. Please go ahead.

Thanks, Matt. Good afternoon, and welcome to the Digital Turbine Fiscal 2021 Third Quarter Earnings Conference Call. Joining me on today's call to discuss our results are CEO Bill Stone and CFO Barrett Garrison. 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 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 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 for the most comparable GAAP measures. Now I'd like to turn the call over to our CEO, Mr. Bill Stone.

Thanks, Brian, and thank you all for joining our call tonight. Before getting into my prepared remarks on our business results and commentary, I want to give a shout-out to our global Digital Turbine team, who are also all shareholders and While investors may only hear from Barrett, Brian, and myself, I want all of you to know that these quarter after quarter positive results don't just magically happen. People make them happen, and the team generating these results, it's the best team I've been around in my nearly 30-year career. Working virtually in a pandemic for almost a year now is a challenge for all of us, and our team continues to hustle and crush it while maintaining amazing focus on our customers, partners, and driving positive business outcomes. I could not be more proud of them, and you should be too. Thanks, DT team. I'm going to break out my prepared remarks into three areas. First, I'll summarize our quarter results. Second, I'll provide some real-time operational updates on many of the exciting new partnerships and initiatives underway. And finally, I'll end with some commentary about the strategic value of the platform and where we're going into the future. To close out our fiscal 21 third quarter, we continue to build out on our breakout momentum from the first half of the fiscal year with record results across the board. We had $88.6 million in revenue, which represented nearly 150% annual growth on an as-reported basis and over 70% on a pro forma basis. Higher gross margins and accelerating operating leverage enabled us to turn the strong revenue growth into more than four times the EBITDA compared to the EBITDA generated a year ago, 278% growth in non-GAAP earnings per share, and more than 3x the free cash flow from a year ago, as we continue to benefit from network effects of our platform and economies of scale. Barrett will provide more details on the numbers, but operationally I was pleased with the improving global reach of our platform. And as a reminder, revenue per device, or RPD, is a core operational health metric of our business, and in the U.S., strong media demand resulted in 25% growth of RPDs, and we saw nearly 70% growth in international RPDs. Combined with the strong device growth, our international supply revenues increased by nearly 200% year over year, And for the first time, we also had more international demand revenues in our app media business come from outside the United States. More specifically on devices for our application media business, we also added approximately 65 million devices in the quarter, which represents over 50% growth year over year. This growth was achieved despite an overall decrease for Android devices in the macro global market. In other words, we're still a penetration story against the larger opportunity. In our content business, revenues in the December quarter pro forma increased by over 100% year over year. This result was driven by our new content platform being fully deployed and our legacy platform being sunset and improved advertising rates all driving better operating results. And this $31.7 million in content revenues is achieved against over 10 million daily active users, or DAOs. It includes just over 100,000 DAOs coming from revenue synergies on our existing addressable market distribution footprint, which is many hundreds of millions of devices with our current software. Thus, the opportunity for growth is enormous. In particular, I'm pleased to announce that we anticipate multiple Tier 1 partners to launch some of our content products later this year, which should materially improve our DAO counts and drive revenue synergies from our Mobile Posse acquisition last year. As you've heard me say on prior calls, diversification is a major strategic priority for the company. Diversification of partners, business models, products, geographies, and advertisers. We continue to have success with our U.S.-based carrier partners with whom we grew revenues healthy double digits year-over-year despite flat number of total devices activated. However, our revenues with partners outside of this group increased by over 100% year-over-year. Now turning to the forward outlook, I want to provide some commentary on how we are positioned for continued growth across each of our growth levers, including devices, media, and new products. First on devices, as I mentioned earlier, we set a quarterly record with more than 65 million new devices launched with our software. Given the flattest U.S. device trends at the moment, the overwhelming majority of growth in devices is occurring internationally as we are ramping our international partners. The international revenue growth from these partners is expanding nicely with almost 200% growth annually in international partner revenues, which was more than a third of our app media revenues in the quarter compared to less than 20% a year ago. Just as a small anecdote to highlight our progress, we did more revenue from our international partners this past Christmas Eve, Christmas Day, and the day after Christmas than the entire digital turbine company generated on those same three days in 2018. Our pipeline remains robust, and we're excited about many opportunities in front of us to further increase our device footprint. And as you've heard me mention on prior calls, expanding devices beyond smartphones is an exciting opportunity for us and a natural extension of our offerings. We continue to make progress on our TV offerings, as we discussed on our last earnings calls, and look forward to those launches occurring later this year. On the product front, our revenues from dynamic installs grew by 40% year over year, but now represents less than 50% of our total revenues compared to over 80% last year. Revenues derived from non-dynamic install products grew nearly 50% sequentially and over 500% year-over-year as our content products, single tap, and other products are showing solid growth. While the strong growth is exciting, I believe it will be even better as we drive more revenue synergies on our content products. We continue to capture the recent momentum in our single tap business and other emerging products such as notifications ramp even faster. Our recurring revenues are now nearly 50% compared to just over 10% a year ago. I also want to specifically call out our progress on Singletap, not including our social media integration with our large carrier partner. A few quarters ago, we talked about Singletap being on a seven-figure run rate. Last quarter, we talked about it being on a seven-figure quarterly business for us, and today I'm happy to say it's now a seven-figure monthly business. The growth is becoming more material and we expect Singletap to be a growth driver for the business in 2021 and beyond. Specifically, we're seeing nice growth from our demand side platform or DSP efforts, and we'll look to continue to scale our ad tech stack here, both in the US and internationally. The bigger picture takeaway for investors is that we have growth occurring on multiple product fronts and will continue to make this diversification a major focus area of the business and will continue to proactively make investments in these areas. On the media front, we are currently very focused on scaling our international demand to meet a significantly greater supply of international devices while continuing to see international application developers want to be on U.S. devices. Last year, in the December quarter, 32% of our application media revenues were from international applications such as things like TikTok or Candy Crush. And for the first time in our history in this past December quarter, we saw more media spending in our application media business from companies that are not based in the United States. And this was despite more than 30% year-over-year growth from our U.S. media partners. Our international media demand increased by approximately 190% from a year ago. Achieving this global scale from a broader set of demand partners is a direct reason why we saw RPDs grow more than 25% in the US and nearly 70% outside the US. We continue to see the benefits of global scale where we see partners spending on more geographies and more devices outside of their home geography whether that is Chinese companies like Alibaba, Tencent, and ByteDance spending in Latin America and Europe, and U.S. and European companies such as Pinterest, Uber, McDonald's, and King all spending with us outside of their respective home geographies. In terms of the mix of verticals, the percentage of revenues coming from gaming and non-gaming remains fairly consistent each quarter for our app media business as both areas grow at similar rates as the overall business. In particular, we've seen very strong growth in streaming video, news, sports, social networking, and entertainment, with the only category showing any material decline from last year is travel. And finally, before I turn it over to Barrett, I want to highlight my enthusiasm, not just for these quarterly results in the team, but for how we're strategically positioned for the long term, given the scale of our on-device distribution footprint. This is unique in the industry and our moat. Our ability to drive additional vertical integration against that footprint through extending both our ad tech stack and our own content is a strategic focus area for us. We look forward to updating you on our progress and want you all to have that context on our strategies as you see future activities from us. With that, this concludes my prepared remarks, and I'll turn it over to Barrett to take you through the numbers.