UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2022~~September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35958

DIGITAL TURBINE, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						22-2267658
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)
110 San Antonio Street, Suite 160, Austin, TX						78701
(Address of Principal Executive Offices)						(Zip Code)

(512) 387-7717

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


Common Stock, Par Value $0.0001 Per Share	APPS	The Nasdaq Stock Market LLC
		(NASDAQ Capital Market)
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~February 5,~~November 3, 2023, the Company had ~~99,197,058~~101,307,609 shares of its common stock, $0.0001 par value per share, outstanding.

DIGITAL TURBINE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~December 31, 2022~~September 30, 2023

TABLE OF CONTENTS

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)


		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash		$	79,307	$	126,768
Cash and cash equivalents						Cash and cash equivalents	$	58,138	$	75,058
Restricted cash	Restricted cash	554		394		Restricted cash	511		500
Accounts receivable, net	Accounts receivable, net	231,001		263,139		Accounts receivable, net	195,531		178,189
Prepaid expenses and other current assets	Prepaid expenses and other current assets	31,912		20,570		Prepaid expenses and other current assets	15,644		12,319
Total current assets	Total current assets	342,774		410,871		Total current assets	269,824		266,066
Property and equipment, net	Property and equipment, net	38,759		31,086		Property and equipment, net	44,931		39,327
Right-of-use assets	Right-of-use assets	10,973		15,439		Right-of-use assets	8,376		10,073
Intangible assets, net	Intangible assets, net	395,181		440,589		Intangible assets, net	345,392		379,632
Goodwill	Goodwill	560,340		559,792		Goodwill	408,976		561,576

Other non-current assets	Other non-current assets	4,648		732		Other non-current assets	13,689		9,882
TOTAL ASSETS	TOTAL ASSETS	$	1,352,675	$	1,458,509	TOTAL ASSETS	$	1,091,188	$	1,266,556

LIABILITIES AND STOCKHOLDER’S EQUITY
LIABILITIES AND STOCKHOLDERS EQUITY						LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	154,320	$	167,858	Accounts payable	$	139,852	$	119,338
Accrued license fees and revenue share		75,380		95,170
Accrued revenue share						Accrued revenue share	55,149		69,221
Accrued compensation	Accrued compensation	16,206		28,775		Accrued compensation	8,627		10,984
Acquisition purchase price liabilities		—		50,000
Current portion of debt		—		12,500

Other current liabilities	Other current liabilities	43,460		30,960		Other current liabilities	41,219		21,377
Total current liabilities	Total current liabilities	289,366		385,263		Total current liabilities	244,847		220,920
Long-term debt, net of debt issuance costs	Long-term debt, net of debt issuance costs	422,310		520,785		Long-term debt, net of debt issuance costs	383,810		410,522
Deferred tax liabilities, net	Deferred tax liabilities, net	18,786		19,976		Deferred tax liabilities, net	2,816		13,940
Other non-current liabilities	Other non-current liabilities	14,586		16,270		Other non-current liabilities	11,853		13,919
Total liabilities	Total liabilities	745,048		942,294		Total liabilities	643,326		659,301
Commitments and contingencies (Note 13)
Commitments and contingencies						Commitments and contingencies
Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Preferred stock	Preferred stock					Preferred stock
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)	Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)	100		100		Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)	100		100
Common stock	Common stock					Common stock
$0.0001 par value: 200,000,000 shares authorized; 99,901,328 issued and 99,143,203 outstanding at December 31, 2022; 97,921,826 issued and 97,163,701 outstanding at March 31, 2022		10		10
$0.0001 par value: 200,000,000 shares authorized; 101,847,271 issued and 101,089,146 outstanding at September 30, 2023; 100,216,494 issued and 99,458,369 outstanding at March 31, 2023						$0.0001 par value: 200,000,000 shares authorized; 101,847,271 issued and 101,089,146 outstanding at September 30, 2023; 100,216,494 issued and 99,458,369 outstanding at March 31, 2023	10		10
Additional paid-in capital	Additional paid-in capital	810,994		745,661		Additional paid-in capital	842,677		822,217
Treasury stock (758,125 shares at December 31, 2022, and March 31, 2022)		(71)		(71)
Treasury stock (758,125 shares at September 30, 2023, and March 31, 2023)						Treasury stock (758,125 shares at September 30, 2023, and March 31, 2023)	(71)		(71)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(44,201)		(39,341)		Accumulated other comprehensive loss	(50,078)		(41,945)
Accumulated deficit	Accumulated deficit	(161,183)		(191,788)		Accumulated deficit	(344,776)		(175,115)
Total stockholders’ equity	Total stockholders’ equity	605,649		514,571		Total stockholders’ equity	447,862		605,196
Non-controlling interest	Non-controlling interest	1,978		1,644		Non-controlling interest	—		2,059
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,352,675	$	1,458,509	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,091,188	$	1,266,556

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income ~~/ (Loss)~~1

(Unaudited)

(in thousands, except per share amounts)


		Three months ended December 31,				Nine months ended December 31,				Three months ended September 30,				Six months ended September 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Net revenue	Net revenue	$	162,310	$	216,818	$	525,802	$	563,461		Net revenue	$	143,259	$	174,859	$	289,625	$	363,492
Costs of revenue and operating expenses	Costs of revenue and operating expenses										Costs of revenue and operating expenses
License fees and revenue share		73,370		109,053		237,618		284,369
Revenue share											Revenue share	68,719		76,881		138,311		164,248
Other direct costs of revenue	Other direct costs of revenue	9,324		9,090		27,438		21,385			Other direct costs of revenue	9,017		9,199		18,630		18,114
Product development	Product development	14,218		13,755		43,087		40,594			Product development	14,037		14,736		29,837		28,869
Sales and marketing	Sales and marketing	16,469		15,857		48,017		47,072			Sales and marketing	15,537		15,490		31,114		31,548
General and administrative	General and administrative	39,132		39,924		114,328		105,225			General and administrative	41,385		37,471		81,884		75,196
Impairment of goodwill											Impairment of goodwill	147,181		—		147,181		—
Total costs of revenue and operating expenses	Total costs of revenue and operating expenses	152,513		187,679		470,488		498,645			Total costs of revenue and operating expenses	295,876		153,777		446,957		317,975
Income from operations		9,797		29,139		55,314		64,816
Interest and other income / (expense), net
(Loss) income from operations											(Loss) income from operations	(152,617)		21,082		(157,332)		45,517
Interest and other income (expense), net											Interest and other income (expense), net
Change in fair value of contingent consideration	Change in fair value of contingent consideration	—		(18,200)		—		(40,287)			Change in fair value of contingent consideration	372		—		372		—
Interest expense, net	Interest expense, net	(6,913)		(2,195)		(16,224)		(5,307)			Interest expense, net	(7,844)		(5,229)		(15,234)		(9,311)
Foreign exchange transaction gain / (loss)		17		2,122		(595)		1,603
Foreign exchange transaction loss											Foreign exchange transaction loss	(2,106)		(281)		(183)		(612)

Other income / (expense), net		8		(86)		392		(598)
Total interest and other income / (expense), net		(6,888)		(18,359)		(16,427)		(44,589)
Income before income taxes		2,909		10,780		38,887		20,227
Income tax provision / (benefit)		(1,153)		3,718		8,164		4,799
Net income		4,062		7,062		30,723		15,428
Less: net income / (loss) attributable to non-controlling interest		43		48		118		(18)
Net income attributable to Digital Turbine, Inc.		4,019		7,014		30,605		15,446
Other income, net											Other income, net	—		312		244		384
Total interest and other expense, net											Total interest and other expense, net	(9,578)		(5,198)		(14,801)		(9,539)
(Loss) income before income taxes											(Loss) income before income taxes	(162,195)		15,884		(172,133)		35,978
Income tax (benefit) provision											Income tax (benefit) provision	(713)		4,181		(2,252)		9,317
Net (loss) income											Net (loss) income	(161,482)		11,703		(169,881)		26,661
Less: net (loss) income attributable to non-controlling interest											Less: net (loss) income attributable to non-controlling interest	—		39		(220)		75
Net (loss) income attributable to Digital Turbine, Inc.											Net (loss) income attributable to Digital Turbine, Inc.	(161,482)		11,664		(169,661)		26,586
Other comprehensive loss	Other comprehensive loss										Other comprehensive loss
Foreign currency translation adjustment	Foreign currency translation adjustment	10,144		(8,389)		(4,644)		(45,062)			Foreign currency translation adjustment	(1,287)		(9,246)		(7,394)		(14,788)
Comprehensive income / (loss)		14,206		(1,327)		26,079		(29,634)
Less: comprehensive income / (loss) attributable to non-controlling interest		59		(11)		334		(932)
Comprehensive income / (loss) attributable to Digital Turbine, Inc.		$	14,147	$	(1,316)	$	25,745	$	(28,702)
Net income per common share
Comprehensive (loss) income											Comprehensive (loss) income	(162,769)		2,457		(177,275)		11,873
Less: comprehensive income attributable to non-controlling interest											Less: comprehensive income attributable to non-controlling interest	—		32		519		275
Comprehensive (loss) income attributable to Digital Turbine, Inc.											Comprehensive (loss) income attributable to Digital Turbine, Inc.	$	(162,769)	$	2,425	$	(177,794)	$	11,598
Net (loss) income per common share											Net (loss) income per common share
Basic	Basic	$	0.04	$	0.07	$	0.31	$	0.16		Basic	$	(1.61)	$	0.12	$	(1.69)	$	0.27
Diluted	Diluted	$	0.04	$	0.07	$	0.30	$	0.15		Diluted	$	(1.61)	$	0.11	$	(1.69)	$	0.26
Weighted-average common shares outstanding	Weighted-average common shares outstanding										Weighted-average common shares outstanding
Basic	Basic	99,108		96,548		98,623		94,620			Basic	100,604		98,887		100,272		98,324
Diluted	Diluted	103,348		103,287		103,674		101,346			Diluted	100,604		102,898		100,272		102,777

1In the fiscal quarter ended June 30, 2021, the Company initiated two significant acquisitions. Please refer to Note 3, “Acquisitions,” in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows1

(Unaudited)

(in thousands)

Nine months ended December 31,
2022 2021
Cash flows from operating activities
Net income $ 30,723 $ 15,428
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 60,147 40,946
Non-cash interest expense 619 500
Stock-based compensation expense 19,643 15,369
Foreign exchange transaction (gain) / loss 581 (1,603)
Change in fair value of contingent consideration — 40,287
Right-of-use asset 4,868 3,270
Deferred income taxes (2,494) 4,799
(Increase) / decrease in assets:
Accounts receivable, gross 32,816 (104,535)
Allowance for credit losses 3,009 412
Prepaid expenses and other current assets (11,397) (5,760)
Other non-current assets 100 74
Increase / (decrease) in liabilities:
Accounts payable (14,113) 38,467
Accrued license fees and revenue share (20,324) 29,377
Accrued compensation (13,131) (33,506)
Other current liabilities 11,784 1,114
Other non-current liabilities (5,317) (1,177)
Net cash provided by operating activities 97,514 43,462
Cash flows from investing activities
Equity investments (4,000) —
Business acquisitions, net of cash acquired (2,708) (148,192)
Capital expenditures (18,598) (15,692)
Net cash used in investing activities (25,306) (163,884)
Cash flows from financing activities
Proceeds from borrowings 18,000 369,913
Payment of debt issuance costs (94) (4,044)
Payment of deferred business acquisition consideration — (98,175)
Options and warrants exercised 1,095 2,814
Payment of withholding taxes for net share settlement of equity awards (6,202) (7,587)
Repayment of debt obligations (129,500) (52,623)
Net cash provided by / (used in) financing activities (116,701) 210,298
Effect of exchange rate changes on cash and cash equivalents and restricted cash (2,808) (5,554)
Net change in cash and cash equivalents and restricted cash (47,301) 84,322
Cash and cash equivalents and restricted cash, beginning of period 127,162 31,118
Cash and cash equivalents and restricted cash, end of period $ 79,861 $ 115,440
Supplemental disclosure of cash flow information
Interest paid $ 12,912 $ 3,882
Income taxes paid $ 3,917 $ 954
Supplemental disclosure of non-cash activities
Common stock issued for the acquisition of Fyber $ 50,000 $ 356,686
Unpaid cash consideration for the acquisition of Fyber Minority Interest $ 2,578 $ 3,106
Fair value of unpaid contingent consideration in connection with business acquisitions $ 2,738 $ 204,500


	Six months ended September 30,
	2023		2022
Cash flows from operating activities
Net (loss) income	$	(169,881)	$	26,661
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	41,926		40,010
Non-cash interest expense	424		408

Allowance for credit losses	1,227		2,249
Stock-based compensation expense	19,033		12,023
Foreign exchange transaction (gain) loss	183		612
Change in fair value of contingent consideration	(372)		—

Right-of-use asset	1,817		5,079
Deferred income taxes	(10,732)		(2,228)
Impairment of goodwill	147,181		—
(Increase) decrease in assets:
Accounts receivable, gross	(16,637)		9,916
Prepaid expenses and other current assets	(3,135)		(4,608)
Other non-current assets	(3,799)		160
Increase (decrease) in liabilities:
Accounts payable	20,283		2,371
Accrued revenue share	(14,373)		(16,866)
Accrued compensation	(2,698)		(15,109)
Other current liabilities	19,751		9,406
Other non-current liabilities	(1,426)		(5,775)


Net cash provided by operating activities	28,772		64,309
Cash flows from investing activities


Capital expenditures	(14,277)		(12,930)
Net cash used in investing activities	(14,277)		(12,930)
Cash flows from financing activities

Proceeds from borrowings	17,000		—


Repayment of debt obligations	(44,136)		(86,500)
Acquisition of non-controlling interest in consolidated subsidiaries	(3,751)		—
Payment of withholding taxes for net share settlement of equity awards	(1,037)		(5,929)
Options exercised	2,729		939
Net cash used in financing activities	(29,195)		(91,490)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(2,209)		(3,838)
Net change in cash, cash equivalents, and restricted cash	(16,909)		(43,949)
Cash, cash equivalents, and restricted cash, beginning of period	75,558		127,162
Cash, cash equivalents, and restricted cash, end of period	$	58,649	$	83,213

Supplemental disclosure of cash flow information
Interest paid	$	15,582	$	7,410
Income taxes paid	$	444	$	1,076
Supplemental disclosure of non-cash activities
Common stock issued for the acquisition of Fyber	$	—	$	50,000


Fair value of unpaid contingent consideration in connection with business acquisitions	$	2,366	$	2,578

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity1

(Unaudited)

(in thousands, except share counts)


		Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest			Total				Common Stock Shares			Amount		Preferred Stock Shares			Amount		Treasury Stock Shares			Amount			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Non-Controlling Interest			Total
Balance at March 31, 2022		97,163,701	$	10	100,000	$	100	758,125	$	(71)	$	745,661	$	(39,341)	$	(191,788)	$	1,644		$	516,215
Net income		—	—		—	—		—	—		—		—		14,922		36			14,958
Balance at March 31, 2023																			Balance at March 31, 2023				99,458,369		$	10		100,000		$	100		758,125		$	(71)		$	822,217		$	(41,945)		$	(175,115)		$	2,059		$	607,255
Net loss																			Net loss				—		—			—		—			—		—			—			—			(8,179)			(220)			(8,399)
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(5,749)		—		207			(5,542)		Foreign currency translation		—			—		—			—		—			—			—			(6,846)			—			739			(6,107)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		—	—		6,463		—		—		—			6,463		Stock-based compensation expense		—			—		—			—		—			—			10,017			—			—			—			10,017
Shares issued:	Shares issued:																				Shares issued:
Exercise of stock options	Exercise of stock options	380,176	—		—	—		—	—		296		—		—		—			296		Exercise of stock options		378,507			—		—			—		—			—			731			—			—			—			731
Issuance of restricted shares and vesting of restricted units	Issuance of restricted shares and vesting of restricted units	7,763	—		—	—		—	—		—		—		—		—			—		Issuance of restricted shares and vesting of restricted units		449,781			—		—			—		—			—			—			—			—			—			—
Shares for acquisition of Fyber		1,205,982	—		—	—		—	—		50,000		—		—		—			50,000

Acquisition of non-controlling interests in Fyber																			Acquisition of non-controlling interests in Fyber				—		—			—		—			—		—			(1,173)			—			—			(2,578)			(3,751)

Payment of withholding taxes related to the net share settlement of equity awards	Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(4,357)		—		—		—			(4,357)		Payment of withholding taxes related to the net share settlement of equity awards		—			—		—			—		—			—			(931)			—			—			—			(931)
Balance at June 30, 2022		98,757,622	$	10	100,000	$	100	758,125	$	(71)	$	798,063	$	(45,090)	$	(176,866)	$	1,887		$	578,033
Net income		—	—		—	—		—	—		—		—		11,664		39			11,703
Balance at June 30, 2023																			Balance at June 30, 2023				100,286,657		$	10		100,000		$	100		758,125		$	(71)		$	830,861		$	(48,791)		$	(183,294)		$	—		$	598,815
Net loss																			Net loss				—		—			—		—			—		—			—			—			(161,482)			—			(161,482)
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(9,239)		—		(7)			(9,246)		Foreign currency translation		—			—		—			—		—			—			—			(1,287)			—			—			(1,287)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		—	—		6,142		—		—		—			6,142		Stock-based compensation expense		—			—		—			—		—			—			9,924			—			—			—			9,924
Shares issued:	Shares issued:																				Shares issued:
Exercise of stock options	Exercise of stock options	198,778	—		—	—		—	—		643		—		—		—			643		Exercise of stock options		575,599			—		—			—		—			—			1,998			—			—			—			1,998
Issuance of restricted shares and vesting of restricted units	Issuance of restricted shares and vesting of restricted units	29,035	—		—	—		—	—		—		—		—		—			—		Issuance of restricted shares and vesting of restricted units		226,890			—		—			—		—			—			—			—			—			—			—

Payment of withholding taxes related to the net share settlement of equity awards	Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(1,572)		—		—		—			(1,572)		Payment of withholding taxes related to the net share settlement of equity awards		—			—		—			—		—			—			(106)			—			—			—			(106)
Balance at September 30, 2022		98,985,435	$	10	100,000	$	100	758,125	$	(71)	$	803,276	$	(54,329)	$	(165,202)	$	1,919		$	585,703
Net income		—	—		—	—		—	—		—		—		4,019		43			4,062
Foreign currency translation		—	—		—	—		—	—		—		10,128		—		16			10,144
Stock-based compensation expense		—	—		—	—		—	—		7,835		—		—		—			7,835
Shares issued:
Exercise of stock options		84,594	—		—	—		—	—		156		—		—		—			156
Issuance of restricted shares and vesting of restricted units		73,174	—		—	—		—	—		—		—		—		—			—
Balance at September 30, 2023																			Balance at September 30, 2023				101,089,146		$	10		100,000		$	100		758,125		$	(71)		$	842,677		$	(50,078)		$	(344,776)		$	—		$	447,862

Payment of withholding taxes related to the net share settlement of equity awards		—	—		—	—		—	—		(273)		—		—		—			(273)
Balance at December 31, 2022		99,143,203	$	10	100,000	$	100	758,125	$	(71)	$	810,994	$	(44,201)	$	(161,183)	$	1,978		$	607,627

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Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity1

(Unaudited)

(in thousands, except share counts)


		Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Non-Controlling Interest			Total				Common Stock Shares			Amount		Preferred Stock Shares			Amount		Treasury Stock Shares			Amount			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Non-Controlling Interest			Total
Balance at March 31, 2021		89,790,086	$	10	100,000	$	100	758,125	$	(71)	$	373,310	$	(903)	$	(227,334)	$	—		$	145,112
Balance at March 31, 2022																			Balance at March 31, 2022				97,163,701		$	10		100,000		$	100		758,125		$	(71)		$	745,661		$	(39,341)		$	(191,788)		$	1,644		$	516,215
Net income	Net income	—	—		—	—		—	—		—		—		14,284		(31)			14,253		Net income		—			—		—			—		—			—			—			—			14,922			36			14,958
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(20,019)		—		(762)			(20,781)		Foreign currency translation		—			—		—			—		—			—			—			(5,749)			—			207			(5,542)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		—	—		3,705		—		—		—			3,705		Stock-based compensation expense		—			—		—			—		—			—			6,463			—			—			—			6,463
Shares issued:	Shares issued:																				Shares issued:
Exercise of stock options	Exercise of stock options	178,127	—		—	—		—	—		695		—		—		—			695		Exercise of stock options		380,176			—		—			—		—			—			296			—			—			—			296
Vesting of restricted and performance stock units	Vesting of restricted and performance stock units	207,758	—		—	—		—	—		—		—		—		—			—		Vesting of restricted and performance stock units		7,763			—		—			—		—			—			—			—			—			—			—
Shares for acquisition of Fyber	Shares for acquisition of Fyber	4,716,935	—		—	—		—	—		359,233		—		—		—			359,233		Shares for acquisition of Fyber		1,205,982			—		—			—		—			—			50,000			—			—			—			50,000
Acquisition of non-controlling interests in Fyber		—	—		—	—		—	—		—		—		—		24,558			24,558

Balance at June 30, 2021		94,892,906	$	10	100,000	$	100	758,125	$	(71)	$	736,943	$	(20,922)	$	(213,050)	$	23,765		$	526,775
Net loss		—	—		—	—		—	—		—		—		(5,852)		(35)			(5,887)
Foreign currency translation		—	—		—	—		—	—		—		(15,799)		—		(93)			(15,892)
Stock-based compensation expense		—	—		—	—		—	—		5,925		—		—		—			5,925
Shares issued:
Exercise of stock options		480,422	—		—	—		—	—		1,460		—		—		—			1,460
Issuance of restricted shares and vesting of restricted units		28,477	—		—	—		—	—		—		—		—		—			—
Shares for acquisition of Fyber		1,058,364	—		—	—		—	—		(2,547)		—		—		—			(2,547)
Acquisition of non-controlling interests in Fyber		—	—		—	—		—	—		—		—		—		(21,452)			(21,452)

Balance at September 30, 2021		96,460,169	$	10	100,000	$	100	758,125	$	(71)	$	741,781	$	(36,721)	$	(218,902)	$	2,185		$	488,382
Payment of withholding taxes related to the net share settlement of equity awards																			Payment of withholding taxes related to the net share settlement of equity awards				—		—			—		—			—		—			(4,357)			—			—			—			(4,357)
Balance at June 30, 2022																			Balance at June 30, 2022				98,757,622		$	10		100,000		$	100		758,125		$	(71)		$	798,063		$	(45,090)		$	(176,866)		$	1,887		$	578,033
Net income	Net income	—	—		—	—		—	—		—		—		7,014		48			7,062		Net income		—			—		—			—		—			—			—			—			11,664			39			11,703
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(8,330)		—		(59)			(8,389)		Foreign currency translation		—			—		—			—		—			—			—			(9,239)			—			(7)			(9,246)
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		—	—		5,739		—		—		—			5,739		Stock-based compensation expense		—			—		—			—		—			—			6,142			—			—			—			6,142
Shares issued:	Shares issued:																				Shares issued:
Exercise of stock options	Exercise of stock options	201,015	—		—	—		—	—		659		—		—		—			659		Exercise of stock options		198,778			—		—			—		—			—			643			—			—			—			643
Issuance of restricted shares and vesting of restricted units	Issuance of restricted shares and vesting of restricted units	70,043	—		—	—		—	—		—		—		—		—			—		Issuance of restricted shares and vesting of restricted units		29,035			—		—			—		—			—			—			—			—			—			—

Payment of withholding taxes related to the net share settlement of equity awards	Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(7,587)		—		—		—			(7,587)		Payment of withholding taxes related to the net share settlement of equity awards		—			—		—			—		—			—			(1,572)			—			—			—			(1,572)
Balance at December 31, 2021		96,731,227	$	10	100,000	$	100	758,125	$	(71)	$	740,592	$	(45,051)	$	(211,888)	$	2,174		$	485,866
Balance at September 30, 2022																			Balance at September 30, 2022				98,985,435		$	10		100,000		$	100		758,125		$	(71)		$	803,276		$	(54,329)		$	(165,202)		$	1,919		$	585,703

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Digital Turbine, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

~~December 31, 2022~~September 30, 2023

(in thousands, except share and per share amounts)

1. Note 1—Description of Business

Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers (“OEMs”). The Company offers end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, the Company’s products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

2. Note 2—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The Company consolidates the financial results and reports non-controlling interests representing the economic interests held by other equity holders of subsidiaries that are not 100% owned by the Company. The calculation of non-controlling interests excludes any net income / (loss) attributable directly to the Company. All intercompany balances and transactions have been eliminated in consolidation. The Company acquired the remaining minority interest shareholders’ outstanding shares in one of its subsidiaries during the three months ended June 30, 2023 for $3,751. As a result, the Company owned 100% of all its subsidiaries as of September 30, 2023.

These financial statements should be read in conjunction with the Company’s audited financial statements and related notes included in its Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022.~~2023.

Unaudited Interim Financial Information

These accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring items, considered necessary to present fairly the Company’s financial condition, results of operations, comprehensive income, stockholders’ equity, and cash flows for the interim periods indicated. The results of operations for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, are not necessarily indicative of the operating results for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, including the determination of gross versus net revenue reporting, allowance for credit losses, stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, fair value of contingent earn-out considerations, incremental borrowing rates for right-of-use assets and lease liabilities, and tax valuation allowances. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ materially from management’s estimates using different assumptions or under different conditions.

Management considered the potential impacts of ongoing macroeconomic uncertainty due to global ~~inflation,~~events such as the conflict in Ukraine, ~~as well as~~ the ~~continued effects of COVID-19 pandemic~~conflict in Israel, inflation, disruptions in supply chains, recessionary concerns impacting the markets in which the Company operates, and others, on the Company’s critical and significant

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accounting estimates. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates or judgments or revise the carrying value of its assets or liabilities as a result of ~~global inflation or the COVID-19 pandemic.~~

such factors. Management’s estimates may change as new events occur and additional information is obtained. Actual results could differ from estimates and any such differences may be material to the Company’s condensed consolidated financial statements.

Summary of Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies in Note ~~2, “Basis~~2—Basis of Presentation and Summary of Significant Accounting Policies,” of the notes to the ~~condensed~~ consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022, other than the “Recent Accounting Pronouncements” disclosed below and changes to the Company’s segment reporting disclosed in Note 4, “Segment Information.”~~

~~Accounting Pronouncements Adopted During the Period~~

~~ASU 2020-04~~

~~In March 2020, the Financial Accounting Standards Board issued Accounting Standard Update (“ASU”) 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~, which provides optional expedients and exceptions for applying GAAP to amendments to contracts, hedging relationships, and other contractual transactions impacted by the discontinuation of the London Inter-Bank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities through December 31, 2022 and can be adopted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020. The Company adopted the update as of the quarter ended September 30, 2022 and the impact of the adoption was not material to the Company’s condensed consolidated financial statements.2023.

3. Note 3—Acquisitions

Acquisition of In App Video Services UK LTD.

On November 1, 2022, the Company completed the acquisition of all ~~of the~~ outstanding ownership interests of In App Video Services UK LTD. (“In App”), pursuant to a Stock Purchase Agreement (the “In App Acquisition”). Prior to the Acquisition, In App acted as a third-party representative of the Company’s App Growth Platform (“AGP”) segment’s products and services in the United Kingdom (“UK”). The acquisition of In App is part of the Company’s strategy to make investments that provide opportunities to grow market share and increase ~~revenues~~revenue in important markets and geographies like the UK.

The Company acquired In App for total estimated consideration in the range of $2,250 to $5,500, paid as follows: (1) $2,708 paid in cash at closing, including a working capital adjustment of approximately $460, with $1,000 of that amount held in escrow for one-year and (2) potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024, and 2025. The annual ~~earn out~~earn-out payments are up to $250 for the year ended December 31, 2022, and $1,000 for each of the calendar years ended December 31, 2023, 2024, and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024, and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.

~~The~~On the acquisition date, the Company recorded the ~~preliminary~~ fair values of the assets acquired and liabilities assumed in the In App Acquisition, which resulted in the recognition of: (1) current assets, net of cash acquired, of $836, (2) current liabilities of $401, (3) acquisition purchase price liability of $2,738, (4) and goodwill of ~~$5,008.~~$4,957.

~~The~~

As of September 30, 2023, the Company ~~recognized costs related~~reassessed the fair value of the purchase price liability based on current forecasts, which resulted in a remeasurement gain equal to the ~~In App Acquisition~~change in fair value of ~~$162 and $207, respectively,~~$372 for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023. Changes in ~~operating expenses on~~the fair value of the earn-out liability subsequent to the acquisition date are recognized in the condensed consolidated statements of operations and comprehensive ~~income /~~ (loss).

~~Acquisition of Fyber N.V.~~

On May 25, 2021, the Company completed the initial closing of the acquisition of 95.1% of the outstanding voting shares (the “Majority Fyber Shares”) of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the “Fyber Acquisition”) between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company’s knowledge) held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.

Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.

~~The Company acquired Fyber in exchange for an estimated aggregate consideration of up to $600,000, consisting of:~~

i.Approximately $150,000 in cash, $124,336 of which was paid to the Seller at the closing of the acquisition and the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below;

~~ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares was determined~~ ~~based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to~~ ~~$359,233 at the Company’s common stock closing price on~~ ~~May 25, 2021, as follows.~~

1.~~3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;~~

2.~~1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;~~

3.~~1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;~~

4.59,289 shares of common stock equal in value to $3,662, to be newly-issued during the Company’s fiscal second quarter 2022, but subject to a true-up reduction based on increased transaction costs associated with the staggered delivery of the Majority Fyber Shares to the Company, which true-up reduction has been finalized, as described below; and

~~iii.~~Contingent upon Fyber’s net revenue (revenue less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company’s common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate, will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a result, no contingent liability was recognized at that time.

~~The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.~~

On September 30, 2021, the Company entered into the Second Amendment Agreement (the “Second Amendment Agreement”) to the Sale and Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of shares of Company common stock to be issued to the Seller at 18,000 shares (i.e., a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company issued a total of 5,775,299 shares of Company common stock to the Seller in connection with the Company’s acquisition of Fyber.

As of March 31, 2022, the Company had recognized the acquisition purchase price liability of $50,000. The Company settled the obligation through the issuance of 1,205,982 shares of the Company’s common stock effective May 19, 2022.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the fiscal year ended March 31, 2022, the Company purchased an additional $18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as of December 31, 2022. The Company expects to complete the purchase of the remaining outstanding Fyber shares during fiscal year 2023.

~~The delisting of Fyber’s remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.~~

~~The fair values of the assets acquired and liabilities assumed at the date of the Fyber Acquisition are presented as follows~~1:

May 25, 2021 Measurement Period Adjustments May 25, 2021
(adjusted)
Assets acquired
Cash $ 71,489 $ — $ 71,489
Accounts receivable 64,877 166 65,043
Other current assets 10,470 — 10,470
Property and equipment 1,561 — 1,561
Right-of-use asset 13,191 — 13,191
Publisher relationships 106,400 (95) 106,305
Developed technology 86,900 — 86,900
Trade names 32,100 474 32,574
Customer relationships 31,400 — 31,400
Favorable lease 1,483 — 1,483
Goodwill 303,015 (2,572) 300,443
Other non-current assets 851 — 851
Total assets acquired $ 723,737 $ (2,027) $ 721,710
Liabilities assumed
Accounts payable $ 78,090 $ (1,501) $ 76,589
Accrued license fees and revenue share 5,929 — 5,929
Accrued compensation 52,929 — 52,929
Other current liabilities 12,273 (1,739) 10,534
Current portion of debt 25,789 — 25,789
Deferred tax liability, net 25,213 3,627 28,840
Other non-current liabilities 15,386 — 15,386
Total liabilities assumed $ 215,609 $ 387 $ 215,996
Total purchase price $ 508,128 $ (2,414) $ 505,714

During the measurement period ended May 25, 2022, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $2,572, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The excess of cost of the Fyber Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s App Growth Platform (“AGP”) segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes. income.

1~~The purchase consideration was translated using the Euro-to-United States (“U.S.”) dollar exchange rate in effect on the acquisition closing date, May 25, 2021, of approximately €1.00 to $1.22.~~

The identifiable intangible assets consist of publisher relationships, developed technology, trade names, customer relationships, and a favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives of 20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The below-market favorable lease was derived from Fyber’s office lease in Berlin, Germany and, per ASC 842, ~~Leases~~, will be combined with Fyber's right-of-use asset for that lease and will be amortized over the remaining life of that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•~~Publisher Relationships - Multi-Period Excess Earnings Method~~

•~~Developed Technology - Relief from Royalty Method~~

•~~Trade Names - Relief from Royalty Method~~

•~~Customer Relationships - With-and-Without Method~~

•~~Favorable Lease - Income Approach~~

The Company recognized costs related to the Fyber Acquisition of $441 and $1,444, respectively, for the three and nine months ended December 31, 2022, and $5,183 and $16,898, respectively, for the three and nine months ended December 31, 2021, in operating expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

~~Acquisition of AdColony Holding AS~~

On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the “AdColony Acquisition”). The Company acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration in the range of $400,000 to $425,000, to be paid as follows: (1) $100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of $200,000 to $225,000, to be paid in cash, based on AdColony achieving certain future target net revenue, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending on December 31, 2021 (the “Earn-Out Period”). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenue (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which AdColony achieves certain target net revenue (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period.

AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company expanded its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.

On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company and AdColony’s previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an $8,913 reduction of the earn-out payment obligation in change in fair value of contingent consideration on the condensed consolidated statement of operations and comprehensive income / (loss) for the fiscal second quarter ended September 30, 2021.

The Company paid the cash consideration amounts that were due at closing and on October 26, 2021, with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility. The payment made on October 26, 2021, was reduced to $98,175 due to an adjustment for the impact of accrued and unpaid taxes to the net working capital acquired. The difference between the amount due of $100,000 and amount paid resulted in an adjustment to goodwill.

On January 15, 2022, the Company paid the AdColony Acquisition earn-out consideration of $204,500 with available cash-on-hand and an additional $179,000 of borrowings under the New Credit Agreement. See Note ~~9, “Debt,” for additional information regarding the New Credit Agreement.~~

~~The fair values of the assets acquired and liabilities assumed at the date of the AdColony Acquisition are presented as follows:~~

April 29, 2021 Measurement Period Adjustments April 29, 2021
(adjusted)
Assets acquired
Cash $ 24,793 $ — $ 24,793
Accounts receivable 57,285 — 57,285
Other current assets 1,845 — 1,845
Property and equipment 1,566 — 1,566
Right-of-use asset 2,460 — 2,460
Customer relationships 102,400 (600) 101,800
Developed technology 51,100 — 51,100
Trade names 36,100 (100) 36,000
Publisher relationships 4,400 — 4,400
Goodwill 202,552 (3,502) 199,050
Other non-current assets 131 — 131
Total assets acquired $ 484,632 $ (4,202) $ 480,430
Liabilities assumed
Accounts payable $ 21,140 $ — $ 21,140
Accrued license fees and revenue share 28,920 — 28,920
Accrued compensation 8,453 — 8,453
Other current liabilities 1,867 — 1,867
Deferred tax liability, net 10,520 (2,377) 8,143
Other non-current liabilities 1,770 — 1,770
Total liabilities assumed $ 72,670 $ (2,377) $ 70,293
Total purchase price $ 411,962 $ (1,825) $ 410,137

During the measurement period ended April 29, 2022, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $3,502, as presented in the table above. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The excess of cost of the AdColony Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s AGP segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.

The identifiable intangible assets consist of customer relationships, developed technology, trade names, and publisher relationships and were assigned useful lives of 8.0 years to 15.0 years, 7.0 years, 7.0 years, and 10.0 years, respectively. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•~~Customer Relationships - Multi-Period Excess Earnings Method~~

•~~Developed Technology - Relief from Royalty Method~~

•~~Trade Names - Relief from Royalty Method~~

•~~Publisher Relationships - Cost Approach~~

The Company recognized costs related to the AdColony Acquisition of $214 for the nine months ended December 31, 2022, and $486 and $3,977, respectively, for the three and nine months ended December 31, 2021, in operating expenses on the condensed consolidated statements of operations and comprehensive income / (loss). There were no such costs for the three months ended December 31, 2022.

~~Pro Forma Financial Information (Unaudited)~~

The pro forma information below gives effect to the Fyber Acquisition and the AdColony Acquisition (collectively, the “Acquisitions”) as if they had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative of the Company’s results had the Acquisitions been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Acquisitions and does not reflect additional revenue opportunities following the Acquisitions. The pro forma information includes adjustments to record the assets and liabilities associated with the Acquisitions at their respective fair values, based on available information and to give effect to the financing for the Acquisitions. The prior period year-to-date pro forma information is presented below. Adjustments for the Acquisitions were not a component in prior period quarter-to-date information and therefore does not differ from amounts presented on the condensed consolidated statements of operations and comprehensive income / (loss).

~~Nine months ended December 31,~~

~~2021~~

~~Unaudited~~

~~(in thousands, except per share amounts)~~

~~Net revenue~~

~~585,858~~

~~Net loss attributable to controlling interest~~

~~(17,255)~~

~~Basic net loss attributable to controlling interest per common share~~

~~(0.18)~~

~~Diluted net loss attributable to controlling interest per common share~~

~~(0.18)~~

4. 4—Segment Information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer is the CODM.

~~As of March 31, 2022, the Company operated through three operating segments, each of which was a reportable segment.~~ The three segments were On Device Media (“ODM”), In-App Media - AdColony (“IAM-A”), and In-App Media-Fyber (“IAM-F”). Effective April 1, 2022, the Company made certain changes to its organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, the Company reassessed its operating and reportable segments in accordance with ASC 280, ~~Segment Reporting. Effective April 1, 2022, the~~ Company reports its results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:

•On Device Solutions (“ODS”) - ~~The Company re-named the ODM segment On Device Solutions to better reflect the nature of the segment's product offerings.~~ This segment generates revenue from the delivery of mobile application media or content to end ~~users. This segment provides focused~~users with solutions tofor all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the ~~device, including~~device. This includes mobile carriers and device OEMs that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs.

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•App Growth Platform (“AGP”) - ~~This segment consists of the previously reported IAM-A and IAM-F segments.~~ AGP customers are primarily advertisers and publishers, and the segment provides platforms that allow mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies.

The Company’s CODM evaluates segment performance and makes resource allocation decisions primarily based on segment net revenue and segment profit, as shown in the segment information summary table below. The Company’s CODM does not allocate other direct costs of revenue, operating expenses, interest and other income / (expense), net, or provision for income taxes to these segments for the purpose of evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as the CODM does not manage the Company’s segments by such metrics.

A summary of segment information follows:


		Three months ended December 31, 2022									Three months ended September 30, 2023
		ODS		AGP		Eliminations		Consolidated			ODS		AGP		Eliminations		Consolidated
Net revenue	Net revenue	$	96,316	$	67,407	$	(1,413)	$	162,310	Net revenue	$	99,060	$	46,183	$	(1,984)	$	143,259
License fees and revenue share		57,555		17,228		(1,413)		73,370
Revenue share										Revenue share	60,980		9,723		(1,984)		68,719
Segment profit	Segment profit	$	38,761	$	50,179	$	—	$	88,940	Segment profit	$	38,080	$	36,460	$	—	$	74,540


		Three months ended December 31, 2021									Three months ended September 30, 2022
		ODS		AGP		Eliminations		Consolidated			ODS		AGP		Eliminations		Consolidated
Net revenue	Net revenue	$	133,594	$	89,113	$	(5,889)	$	216,818	Net revenue	$	108,466	$	68,256	$	(1,863)	$	174,859
License fees and revenue share		86,504		28,438		(5,889)		109,053
Revenue share										Revenue share	59,786		18,958		(1,863)		76,881
Segment profit	Segment profit	$	47,090	$	60,675	$	—	$	107,765	Segment profit	$	48,680	$	49,298	$	—	$	97,978


		Nine months ended December 31, 2022									Six months ended September 30, 2023
		ODS		AGP		Eliminations		Consolidated			ODS		AGP		Eliminations		Consolidated
Net revenue	Net revenue	$	323,419	$	208,029	$	(5,646)	$	525,802	Net revenue	$	197,310	$	95,142	$	(2,827)	$	289,625
License fees and revenue share		185,791		57,473		(5,646)		237,618
Revenue share										Revenue share	119,278		21,860		(2,827)		138,311
Segment profit	Segment profit	$	137,628	$	150,556	$	—	$	288,184	Segment profit	$	78,032	$	73,282	$	—	$	151,314


		Nine months ended December 31, 2021									Six months ended September 30, 2022
		ODS		AGP		Eliminations		Consolidated			ODS		AGP		Eliminations		Consolidated
Net revenue	Net revenue	$	383,426	$	192,764	$	(12,729)	$	563,461	Net revenue	$	227,103	$	140,622	$	(4,233)	$	363,492
License fees and revenue share		232,122		64,976		(12,729)		284,369
Revenue share										Revenue share	128,236		40,245		(4,233)		164,248
Segment profit	Segment profit	$	151,304	$	127,788	$	—	$	279,092	Segment profit	$	98,867	$	100,377	$	—	$	199,244

Geographic Area Information

Long-lived assets, excluding deferred tax assets, ~~and intangible assets,~~ by region follow:

December 31, 2022 March 31, 2022
United States and Canada $ 27,029 $ 25,946
Europe, Middle East, and Africa 11,709 5,086
Asia Pacific and China 21 54
Mexico, Central America, and South America — —
Consolidated property and equipment, net $ 38,759 $ 31,086


	September 30, 2023		March 31, 2023
United States and Canada	$	30,030	$	25,903
Europe, Middle East, and Africa	14,827		13,395
Asia Pacific and China	74		29

Consolidated property and equipment, net	$	44,931	$	39,327

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	September 30, 2023		March 31, 2023
United States and Canada	$	145,795	$	122,377
Europe, Middle East, and Africa	195,192		252,524
Asia Pacific and China	4,405		4,731

Consolidated intangible assets, net	$	345,392	$	379,632

Net revenue by geography is based on the billing addresses of the Company’s customers and a reconciliation of disaggregated revenue by segment follows:


		Three months ended December 31, 2022							Three months ended September 30, 2023
		ODS		AGP		Total			ODS		AGP		Total
United States and Canada	United States and Canada	$	38,949	$	29,911	$	68,860	United States and Canada	$	40,176	$	32,256	$	72,432
Europe, Middle East, and Africa	Europe, Middle East, and Africa	42,321		26,449		68,770		Europe, Middle East, and Africa	48,348		8,966		57,314
Asia Pacific and China	Asia Pacific and China	12,975		10,564		23,539		Asia Pacific and China	10,114		4,940		15,054
Mexico, Central America, and South America	Mexico, Central America, and South America	2,071		483		2,554		Mexico, Central America, and South America	422		21		443
Elimination	Elimination	—		—		(1,413)		Elimination	—		—		(1,984)
Consolidated net revenue	Consolidated net revenue	$	96,316	$	67,407	$	162,310	Consolidated net revenue	$	99,060	$	46,183	$	143,259


		Three months ended December 31, 2021							Three months ended September 30, 2022
		ODS		AGP		Total			ODS		AGP		Total
United States and Canada	United States and Canada	$	74,431	$	45,238	$	119,669	United States and Canada	$	50,978	$	39,808	$	90,786
Europe, Middle East, and Africa	Europe, Middle East, and Africa	35,667		34,297		69,964		Europe, Middle East, and Africa	42,598		22,254		64,852
Asia Pacific and China	Asia Pacific and China	19,877		8,547		28,424		Asia Pacific and China	13,140		6,149		19,289
Mexico, Central America, and South America	Mexico, Central America, and South America	3,619		1,031		4,650		Mexico, Central America, and South America	1,750		45		1,795
Elimination	Elimination	—		—		(5,889)		Elimination	—		—		(1,863)
Consolidated net revenue	Consolidated net revenue	$	133,594	$	89,113	$	216,818	Consolidated net revenue	$	108,466	$	68,256	$	174,859


		Nine months ended December 31, 2022							Six months ended September 30, 2023
		ODS		AGP		Total			ODS		AGP		Total
United States and Canada	United States and Canada	$	152,890	$	115,957	$	268,847	United States and Canada	$	79,117	$	63,173	$	142,290
Europe, Middle East, and Africa	Europe, Middle East, and Africa	125,463		68,118		193,581		Europe, Middle East, and Africa	94,370		22,518		116,888
Asia Pacific and China	Asia Pacific and China	39,989		22,837		62,826		Asia Pacific and China	22,657		9,387		32,044
Mexico, Central America, and South America	Mexico, Central America, and South America	5,077		1,117		6,194		Mexico, Central America, and South America	1,166		64		1,230
Elimination	Elimination	—		—		(5,646)		Elimination	—		—		(2,827)
Consolidated net revenue	Consolidated net revenue	$	323,419	$	208,029	$	525,802	Consolidated net revenue	$	197,310	$	95,142	$	289,625


		Nine months ended December 31, 2021							Six months ended September 30, 2022
		ODS		AGP		Total			ODS		AGP		Total
United States and Canada	United States and Canada	$	220,662	$	96,110	$	316,772	United States and Canada	$	113,941	$	86,046	$	199,987
Europe, Middle East, and Africa	Europe, Middle East, and Africa	96,318		74,257		170,575		Europe, Middle East, and Africa	83,142		41,669		124,811
Asia Pacific and China	Asia Pacific and China	54,636		20,090		74,726		Asia Pacific and China	27,014		12,273		39,287
Mexico, Central America, and South America	Mexico, Central America, and South America	11,810		2,307		14,117		Mexico, Central America, and South America	3,006		634		3,640
Elimination	Elimination	—		—		(12,729)		Elimination	—		—		(4,233)
Consolidated net revenue	Consolidated net revenue	$	383,426	$	192,764	$	563,461	Consolidated net revenue	$	227,103	$	140,622	$	363,492

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Note 5—Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill ~~net,~~ by segment follows:

ODS AGP Total
Goodwill as of March 31, 2022 $ 80,176 $ 479,616 $ 559,792
Purchase of In App Video — 5,008 5,008
Foreign currency translation and other — (4,460) (4,460)
Goodwill as of December 31, 2022 $ 80,176 $ 480,164 $ 560,340


	ODS		AGP		Total





Goodwill as of March 31, 2023	$	80,176	$	481,400	$	561,576



Foreign currency translation	—		(5,419)		(5,419)
Impairment of goodwill	$	—	$	(147,181)	$	(147,181)
Goodwill as of September 30, 2023	$	80,176	$	328,800	$	408,976

The Company evaluates goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value. During annual testing as of March 31, 2023, the Company determined that the fair value of both reporting units was in excess of their carrying value. As a result of this review, the Company did not record an impairment charge in fiscal year 2023.

As of September 30, 2023, the Company determined that the sustained decline in the quoted market price of the Company’s common stock during the fiscal year (in particular, during the quarter ended September 30, 2023 and following such quarter end), the recent increase in interest rates, and the Company’s current and recently updated forecasted operating trends represented a change in circumstances that indicated that the fair value of the Company’s reporting units may be less than their carrying value. The Company completed an impairment assessment of its goodwill, and as a result of this review, recorded a $147,181 non-deductible, non-cash goodwill impairment charge (or $1.46] per basic and diluted share) for the AGP reporting unit for the quarter ended September 30, 2023. There was no impairment of goodwill for the ODS reporting unit.

The fair value of each reporting unit was estimated using a weighted combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach (the “Guideline Public Company Method”). The Company’s September 30, 2023 testing reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach is appropriate, as it directly reflects its future growth and profitability expectations.

The discounted cash flow method requires significant assumptions and estimates, the most significant of which are projected future growth rates, capital expenditures, tax rates, gross margins and terminal values. In addition, the Company determines its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. For the September 30, 2023 testing, as compared to the March 31, 2023 testing, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, gross profits, and EBITDA to reflect its best estimates at this time. The Company also updated key inputs for the discounted cash flow models, including the weighted-average cost of capital, which increased due to higher interest rates, market volatility, and the company specific premium.

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit’s operating performance. These multiples are derived from comparable publicly-traded companies with similar investment characteristics. For the September 30, 2023 testing, as compared to the March 31, 2023 testing, the Company reduced its revenue and EBITDA market multiples, reflecting declining valuations across the Company’s selected peer group. These updates, along with those made to the discounted cash flow models described above, had significant impacts on the estimated fair values of the Company’s reporting units.

As of September 30, 2023, the goodwill impairment evaluation indicated the following for the Company’s reporting units:

ODS

For the ODS reporting unit, the Company determined that the estimated fair value was in excess of its carrying value by $233,100. As a result, no impairment charge was recorded.

The ODS reporting unit has remaining goodwill of $80,176 as of September 30, 2023. Prior to the quantitative goodwill impairment test, the Company tested the recoverability of intangibles and other long-lived assets of the ODS reporting unit and concluded that such assets were not impaired.

AGP

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For the AGP reporting unit, the Company determined that the carrying value was in excess of its estimated fair value, resulting in an impairment charge of $147,181.

The decline in the fair value of the AGP reporting unit below its carrying value resulted primarily from the Company’s recently reduced estimates in its estimated future cash flows, including revenues, gross profits, and EBITDA as mentioned above. Prior to the quantitative goodwill impairment test, the Company tested the recoverability of intangibles and other long-lived assets of the AGP reporting unit and concluded that such assets were not impaired.

Subsequent to the impairment charge discussed above, the AGP reporting unit has remaining goodwill of $328,800, and an excess of fair value over carrying value of net assets of 0% as of the test date (September 30, 2023). As noted above, the fair value of the AGP reporting unit is derived from a 75%/25% allocation between the discounted cash flows method and the market approach.

Intangible Assets

The components of intangible assets were as follows as of ~~December 31, 2022, and March 31, 2022, were as follows:~~the periods indicated:


		As of December 31, 2022								As of September 30, 2023

		Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net			Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	Customer relationships	12.11 years	$	170,030	$	(34,935)	$	135,095	Customer relationships	12.01 years	$	168,405	$	(49,400)	$	119,005
Developed technology	Developed technology	5.53 years	146,419		(33,601)		112,818		Developed technology	4.79 years	146,337		(49,070)		97,267
Trade names	Trade names	2.58 years	69,922		(22,503)		47,419		Trade names	1.83 years	69,894		(36,255)		33,639
Publisher relationships	Publisher relationships	18.07 years	108,821		(8,972)		99,849		Publisher relationships	17.35 years	108,659		(13,178)		95,481
Total	Total		$	495,192	$	(100,011)	$	395,181	Total		$	493,295	$	(147,903)	$	345,392


		As of March 31, 2022								As of March 31, 2023
		Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net			Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	Customer relationships	12.01 years	$	171,060	$	(19,636)	$	151,424	Customer relationships	12.06 years	$	170,281	$	(39,925)	$	130,356
Developed technology	Developed technology	6.26 years	144,581		(18,103)		126,478		Developed technology	5.28 years	146,596		(38,813)		107,783
Trade names	Trade names	3.33 years	69,205		(8,523)		60,682		Trade names	2.33 years	69,983		(27,115)		42,868
Publisher relationships	Publisher relationships	18.77 years	106,514		(4,509)		102,005		Publisher relationships	17.83 years	109,028		(10,403)		98,625
Total	Total		$	491,360	$	(50,771)	$	440,589	Total		$	495,888	$	(116,256)	$	379,632

The Company recorded amortization expense of ~~$16,120~~$16,157 and ~~$48,422,~~$32,346, respectively, during the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, and ~~$13,773~~$16,185 and ~~$34,873,~~$32,302, respectively, during the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss). As of March 31, 2022, the Company changed the useful lives of all its trade names intangible assets to approximately 3.33 years due to the planned rebranding of the Company’s recent acquisitions, which began during the three months ended June 30, 2022.

Estimated amortization expense in future fiscal years is expected to be:


Fiscal year ~~2023~~2024	$	~~16,090~~
~~Fiscal year 2024~~	~~64,361~~32,102
Fiscal year 2025	~~55,740~~55,591
Fiscal year 2026	~~41,491~~41,348
Fiscal year 2027	~~35,372~~35,232
Fiscal year 2028	35,233
Thereafter	~~182,127~~145,886
Total	$	~~395,181~~345,392

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Note 6—Accounts Receivable


		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023

Billed	Billed	$	180,491	$	189,208	Billed	$	165,287	$	136,921
Unbilled	Unbilled	60,424		82,324		Unbilled	40,350		51,474
Allowance for credit losses	Allowance for credit losses	(9,914)		(8,393)		Allowance for credit losses	(10,106)		(10,206)
Accounts receivable, net	Accounts receivable, net	$	231,001	$	263,139	Accounts receivable, net	$	195,531	$	178,189

Billed accounts receivable represent amounts billed to customers for which the Company has an unconditional right to consideration. Unbilled accounts receivable represents revenue recognized but billed after period-end. All unbilled receivables as of ~~December 31, 2022 and March 31, 2022,~~September 30, 2023 are expected to be billed and collected (subject to the allowance for credit losses) within twelve months.

Allowance for Credit Losses

The Company maintains reserves for current expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves.

The Company recorded ~~$683~~$488 and ~~$2,932~~$1,227 of ~~bad debt~~credit loss expense during the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, respectively, and ~~$512~~$1,363 and ~~$693~~$2,249 of ~~bad debt~~credit loss expense during the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

7. Note 7—Property and Equipment


		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023

Computer-related equipment	Computer-related equipment	$	3,469	$	2,855	Computer-related equipment	$	3,582	$	3,527
Developed software	Developed software	59,045		41,011		Developed software	78,894		63,891
Furniture and fixtures	Furniture and fixtures	1,947		1,836		Furniture and fixtures	2,027		2,103
Leasehold improvements	Leasehold improvements	3,637		3,687		Leasehold improvements	3,641		3,647
Property and equipment, gross	Property and equipment, gross	68,098		49,389		Property and equipment, gross	88,144		73,168
Accumulated depreciation	Accumulated depreciation	(29,339)		(18,303)		Accumulated depreciation	(43,213)		(33,841)
Property and equipment, net	Property and equipment, net	$	38,759	$	31,086	Property and equipment, net	$	44,931	$	39,327

Depreciation expense was ~~$4,014~~$4,529 and ~~$11,722~~$9,584 for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, respectively, and ~~$2,192~~$3,893 and ~~$6,073~~$7,708 for the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, respectively. Depreciation expense for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, includes ~~$2,394~~$3,020 and ~~$7,139,~~$6,319, respectively, related to internal-use software included in general and administrative expense and ~~$1,620~~$1,509 and ~~$4,583,~~$3,265, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue. Depreciation expense for the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, includes ~~$1,316~~$2,130 and ~~$3,137,~~$4,745, respectively, related to internal-use software included in general and administrative expense and ~~$1,510~~$1,763 and ~~$2,936,~~$2,963, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.

~~8. Leases~~

The Company has entered into various non-cancellable operating lease agreements for certain offices as well as assumed various leases through its recent acquisitions. These leases currently have lease periods expiring between fiscal years 2023 and 2029. The lease agreements may include one or more options to renew. Renewals were not assumed in the Company’s determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount rates are detailed below.

~~Schedule, by fiscal year, of maturities of lease liabilities as of:~~


	~~December 31, 2022~~

~~Fiscal year 2023~~	$	~~1,052~~
~~Fiscal year 2024~~	~~3,958~~
~~Fiscal year 2025~~	~~2,120~~
~~Fiscal year 2026~~	~~1,641~~
~~Fiscal year 2027~~	~~1,319~~
~~Thereafter~~	~~1,519~~
~~Total undiscounted cash flows~~	~~11,609~~
~~(Less imputed interest)~~	~~(841)~~
~~Present value of lease liabilities~~	$	~~10,768~~

~~The current portion of the Company’s lease liabilities, payable within the next 12 months, is included in~~ ~~other current liabilities,~~ ~~and the long-term portion of the Company’s lease liabilities is included in~~ ~~other non-current liabilities~~ ~~on the condensed consolidated balance sheets.~~

Associated with these financial liabilities, the Company has right-of-use assets of $10,973 as of December 31, 2022, which is calculated using the present value of lease liabilities less any lease incentives received from landlords and any deferred rent liability balances as of the date of implementation. The discount rates used to calculate the imputed interest above range from 2.00% to 6.75% and the weighted-average remaining lease term is 3.99 years.

9. Note 8—Debt

The following table summarizes borrowings under the Company’s debt obligations and the associated interest rates:

December 31, 2022
Balance Interest Rate Unused Line Fee
BoA Revolver (subject to variable rate) $ 425,134 6.12 % 0.20 %


	September 30, 2023
	Balance		Interest Rate		Unused Line Fee
Revolver (subject to variable interest rate)	$	386,000	7.37	%	0.30	%

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Debt obligations on the condensed consolidated balance sheets consist of the following:


		December 31, 2022		March 31, 2022			September 30, 2023		March 31, 2023

Revolver	Revolver	$	425,134	$	524,134	Revolver	$	386,000	$	413,134
Less: Debt issuance costs	Less: Debt issuance costs	(2,824)		(3,349)		Less: Debt issuance costs	(2,190)		(2,612)
Debt assumed through Fyber Acquisition		—		12,500
Total debt, net		422,310		533,285
Less: Current portion of debt		—		(12,500)

Long-term debt, net of debt issuance costs	Long-term debt, net of debt issuance costs	$	422,310	$	520,785	Long-term debt, net of debt issuance costs	$	383,810	$	410,522

Revolver

On February 3, 2021, the Company entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A. (“BoA”), which ~~provides~~provided for a revolving line of credit (the “Revolver”) of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000. Funds are to be used for acquisitions, working capital, and general corporate purposes. The Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

On April 29, 2021, the Company amended and restated the Credit Agreement (the “New Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provided for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026, and contains an accordion feature enabling the Company to increase the total amount of the Revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement ~~contains customary covenants, representations, and events of default and also requires~~was subsequently amended as follows:

•First Amendment: Increase in the ~~Company~~Revolver to ~~comply with~~$525,000 while retaining the $75,000 accordion feature discussed above, for a ~~maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.~~

~~On December 29, 2021, the Company amended the New Credit Agreement (the “First Amendment”), which provides for an increase in the~~total potential revolving line of credit ~~by $125,000, which increased the maximum aggregate principal amount~~ of ~~the revolving line of credit to~~ $600,000 ~~including the accordion feature mentioned above. The First Amendment made no other changes to the terms or interest rates of the New Credit Agreement.~~on December 29, 2021.

~~On October 26, 2022, the Company amended the New Credit Agreement (the “Second Amendment”) to replace~~•Second Amendment: LIBOR was replaced with the Term Secured Overnight Financing Rate (“SOFR”). As a result, borrowings under the New Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25% beginning on the effective date of the Second Amendment, which was October 26, 2022.

The First and Second ~~Amendment~~Amendments discussed above made no other changes into the terms of the New Credit ~~Agreement. As~~Agreement, which contains customary covenants, representations, and events of ~~December 31, 2022, of~~default and also requires the ~~total amount outstanding, $239,000 remains subject~~Company to ~~LIBOR-based~~comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest ~~rates.~~

coverage ratio.

The Company incurred debt issuance costs of $4,064 for the New Credit Agreement, inclusive of costs incurred for the First Amendment. The Company had $425,134 drawn against the New Credit Agreement, classified as long-term debt on the condensed consolidated balance sheet, with remaining unamortized debt issuance costs of $2,824 as of December 31, 2022.and Second Amendments. Deferred debt issuance costs ~~associated with the New Credit Agreement and First Amendment~~ are recorded as a reduction of the carrying value of the debt on the condensed consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the loan to interest expense.

As of ~~December 31, 2022,~~September 30, 2023, the Company had $386,000 drawn against the New Credit Agreement, classified as long-term debt on the condensed consolidated balance sheets, with remaining unamortized debt issuance costs of $2,190.

As of September 30, 2023, amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) SOFR plus between 1.50% and 2.25%, based on the Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA’s prime rate, or (c) SOFR plus 1.00% plus between 0.50% and 1.25%, based on the Company’s consolidated leverage ratio. Additionally, the New Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio. As of ~~December 31, 2022,~~September 30, 2023, the interest rate was ~~6.12%~~7.37% and the unused line of credit fee was ~~0.20%~~0.30%.

The Company’s payment and performance obligations under the New Credit Agreement and related loan documents are secured by its grant of a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company acquires any real property assets with a fair market value in excess of $5,000, it is required to grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.

As of ~~December 31, 2022,~~September 30, 2023, the Company had ~~$174,866~~$139,000 available to draw on the revolving line of credit

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under the New Credit Agreement, ~~and~~excluding the accordion feature, subject to the required covenants. As of September 30, 2023, the Company was in compliance with all covenants. The fair value of the Company’s outstanding debt approximates its carrying value.

Interest ~~income / (expense),~~expense, net

Interest ~~income / (expense),~~expense, net, amortization of debt issuance costs, and unused line of credit fees were recorded in interest ~~and other income / (expense),~~expense, net, on the condensed consolidated statements of operations and comprehensive (loss) income, ~~/ (loss),~~ as follows:


		Three months ended December 31,				Nine months ended December 31,				Three months ended September 30,				Six months ended September 30,
		2022		2021		2022		2021				2023		2022		2023		2022
Interest income / (expense), net		$	(6,671)	$	(1,940)	$	(15,538)	$	(4,565)
Interest expense, net											Interest expense, net	$	(7,543)	$	(5,005)	$	(14,657)	$	(8,867)
Amortization of debt issuance costs	Amortization of debt issuance costs	(211)		(190)		(619)		(500)			Amortization of debt issuance costs	(212)		(198)		(424)		(408)
Unused line of credit fees and other	Unused line of credit fees and other	(31)		(65)		(67)		(242)			Unused line of credit fees and other	(89)		(26)		(153)		(36)
Total interest income / (expense), net		$	(6,913)	$	(2,195)	$	(16,224)	$	(5,307)
Total interest expense, net											Total interest expense, net	$	(7,844)	$	(5,229)	$	(15,234)	$	(9,311)

~~10.~~ Note 9—Stock-Based Compensation

~~Stock-Based Award Plans~~2020 Equity Incentive Plan of Digital Turbine, Inc. (the “2020 Plan”)

On September 15, 2020, the Company’s stockholders approved the 2020 ~~Equity Incentive~~ Plan, ~~of Digital Turbine, Inc. (the “2020 Plan”),~~ pursuant to which the Company may grant equity incentive awards to directors, employees and other eligible participants. A total of 12,000,000 shares of common stock were reserved for grant under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, and restricted stock units. The 2020 Plan became effective on September 15, 2020, and has a term of ten years. Stock options may be either incentive stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options. As of ~~December 31, 2022, 8,857,557~~September 30, 2023, 5,673,471 shares of common stock were available for issuance as future awards under the ~~Company’~~s 2020 Plan.

Stock Options

The following table summarizes stock option activity:


		Number of Shares	Weighted-Average Exercise Price (per share)		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)			Number of Shares	Weighted-Average Exercise Price (per share)		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)

Options outstanding as of March 31, 2022		7,123,300	$	9.33	6.11	$	262,419
Options outstanding as of March 31, 2023								Options outstanding as of March 31, 2023	6,950,436	$	12.73	6.12	$	45,689
Granted	Granted	1,323,986	29.98					Granted	550,626	13.40
Exercised	Exercised	(895,450)	2.19					Exercised	(1,123,960)	3.31
Forfeited / Expired	Forfeited / Expired	(322,512)	47.21					Forfeited / Expired	(148,719)	40.93
Options outstanding as of December 31, 2022		7,229,324	$	12.50	6.20	$	64,889
Options outstanding as of September 30, 2023								Options outstanding as of September 30, 2023	6,228,383	$	13.80	5.96	$	11,195

Exercisable as of December 31, 2022		5,659,738	$	7.34	5.44	$	62,310
Exercisable as of September 30, 2023								Exercisable as of September 30, 2023	4,783,626	$	10.67	5.06	$	11,195

At ~~December 31, 2022,~~September 30, 2023, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was ~~$26,721,~~$19,897, with an expected remaining weighted-average recognition period of ~~2.16~~2.02 years.

Restricted Stock

Awards of restricted stock units ~~(“RSUs”)~~ may be either grants of time-based restricted stock units (“RSUs”) or performance-based restricted stock units (“PSUs”) that are issued at no cost to the recipient. The ~~cost of~~stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock

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on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to restricted or unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. ~~Compensation~~The Company periodically grants PSUs to certain key employees that are subject to the achievement of specified internal performance metrics over a specified performance period. The terms and conditions of the PSUs generally allow for vesting of the awards ranging between forfeiture and up to 200% of target. Stock-based compensation expense for ~~RSUs~~PSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario ~~which~~over the performance period. The most likely attainment scenario is re-evaluated each period.

~~From time-to-time,~~Restricted stock awards (“RSAs”) are awards of common stock that are legally issued and outstanding. RSAs are subject to time-based restrictions on transfer and unvested portions are generally subject to a risk of forfeiture if the award recipient ceases providing services to the Company ~~enters into restricted~~prior to the lapse of the restrictions. The stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock ~~agreements (“RSAs”) with certain employees and consultants.~~on the date of the grant. The RSAs have ~~performance conditions, market conditions,~~ time conditions ~~or a combination thereof. In~~and in some cases, once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period, from three months to one year, depending on the terms of the RSA. As reported in the Company’s Current Reports on Forms 8-K filed with the SEC on February 19, 2014, and June 25, 2014, the Company adopted a Board Member Equity Ownership and Retention Policy that supersedes any post-vesting lock-up in RSAs that are applicable to people covered by the policy, which includes the Company’s Board of Directors and Chief Executive Officer.

The following table summarizes RSU, PSU, and RSA activity:


		Number of Shares	Weighted-Average Grant Date Fair Value			Number of Shares	Weighted-Average Grant Date Fair Value

Unvested restricted shares outstanding as of March 31, 2022		373,301	$	35.82
Unvested restricted shares outstanding as of March 31, 2023					Unvested restricted shares outstanding as of March 31, 2023	1,670,589	$	24.96
Granted	Granted	1,604,925	23.08		Granted	2,775,331	13.39
Vested	Vested	(214,789)	27.51		Vested	(722,553)	18.64
Forfeited	Forfeited	(41,463)	40.73		Forfeited	(132,751)	19.36
Unvested restricted shares outstanding as of December 31, 2022		1,721,974	$	24.87
Unvested restricted shares outstanding as of September 30, 2023					Unvested restricted shares outstanding as of September 30, 2023	3,590,616	$	16.89

At ~~December 31, 2022,~~September 30, 2023, total unrecognized stock-based compensation expense related to RSUs, PSUs and RSAs, net of estimated forfeitures was ~~$34,390,~~$46,417, with an expected remaining weighted-average recognition period of ~~2.32~~2.23 years.

Stock-Based Compensation Expense

Stock-based compensation expense for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, was $~~7,620~~9,016 and $~~19,643~~19,033, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss). Stock-based compensation expense for the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, was ~~$5,739~~$5,779 and ~~$15,369,~~$12,023, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

~~11.~~Note 10—Earnings per Share

Basic net (loss) income per ~~common~~ share is ~~calculated by dividing net income by~~computed based on the ~~weighted-average~~weighted average number of shares of common stock outstanding during the period.

Diluted net (loss) income per ~~common~~ share is ~~calculated by dividing net income by~~computed based on the ~~weighted-average~~weighted average number of common shares outstanding plus the effect of potentially dilutive common ~~stock~~shares outstanding during the period ~~and including~~using the ~~dilutive effects of employee stock-based awards outstanding during the period.~~

Stock options totaling 1,477,381 and 1,462,517 for the three and nine months ended December 31, 2022, respectively, and 296,254 and 448,121 for the three and nine months ended December 31, 2021, respectively, were outstanding but not included in the calculation of diluted earnings per share because inclusion of the options in the calculation would be antidilutive due to their exercise prices exceeding the average market price of the common shares during the periods.applicable methods.

The following table sets forth the computation of basic and diluted net (loss) income ~~/ (loss)~~ per share of common stock (in thousands, except per share amounts):

Three months ended December 31, Nine months ended December 31,
2022 2021 2022 2021
Net income 4,062 7,062 30,723 15,428
Less: net income / (loss) attributable to non-controlling interest 43 48 118 (18)
Net income attributable to Digital Turbine, Inc. $ 4,019 $ 7,014 $ 30,605 $ 15,446
Weighted-average common shares outstanding, basic 99,108 96,548 98,623 94,620
Basic net income per common share attributable to Digital Turbine, Inc. $ 0.04 $ 0.07 $ 0.31 $ 0.16
Weighted-average common shares outstanding, diluted 103,348 103,287 103,674 101,346
Diluted net income per common share attributable to Digital Turbine, Inc. $ 0.04 $ 0.07 $ 0.30 $ 0.15

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	Three months ended September 30,				Six months ended September 30,
	2023		2022		2023		2022
Net (loss) income per common share	(161,482)		11,703		(169,881)		26,661
Less: net (loss) income attributable to non-controlling interest	—		39		(220)		75
Net (loss) income attributable to Digital Turbine, Inc.	$	(161,482)	$	11,664	$	(169,661)	$	26,586
Weighted-average common shares outstanding, basic	100,604		98,887		100,272		98,324
Basic net (loss) income per common share attributable to Digital Turbine, Inc.	$	(1.61)	$	0.12	$	(1.69)	$	0.27
Weighted-average common shares outstanding, diluted	100,604		102,898		100,272		102,777
Diluted net (loss) income per common share attributable to Digital Turbine, Inc.	$	(1.61)	$	0.11	$	(1.69)	$	0.26

Potentially dilutive outstanding securities of 2,823,586 and 3,273,213 for the three and six months ended September 30, 2023, respectively, and 1,526,531 and 1,445,951 for the three and six months ended September 30, 2022, respectively, were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

~~12.~~Note 11—Income Taxes

The ~~Company’s~~Company's provision for income taxes as a percentage of pre-tax earnings (“effective tax rate”) is based on a current estimate of the annual effective income tax rate, adjusted to reflect the impact of discrete items. In accordance with ASC 740, Accounting for Income Taxes,, jurisdictions forecasting losses that are not benefited due to valuation allowances are not included in ~~the Company’s~~our forecasted effective tax rate.

During the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, a tax benefit of $713 and ~~provision of $1,153 and $8,164,~~$2,252, respectively, resulted in an effective tax rate of ~~(39.6)%~~0.4% and ~~21.0%~~1.3%, respectively. Differences between the effective tax rate and

the statutory tax rate primarily relate to ~~return to provision true-ups filed in~~ the ~~current period.~~non-deductible goodwill impairment charge, tax limitations on certain deductions and state tax benefits.

During the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, a tax provision of ~~$3,718~~$4,181 and ~~$4,799~~$9,317 resulted in an effective tax rate of ~~34.5%~~26.3% and ~~23.7%~~25.9%, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to state income taxes, nontaxable adjustments to the AdColony and Fyber earn-outs, and tax deductions for stock compensation that exceed the book expense.

~~13.~~ Note 12—Commitments and Contingencies

Hosting Agreements

The Company enters into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require the Company to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. ~~The Company’s~~Our minimum purchase commitments under these hosting agreements total approximately ~~$181,603~~$284,988 over the next ~~4.00~~four fiscal years.

Legal Matters

The Company may be involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business. The Company accrues a liability when it is both probable a liability has been incurred and the amount of the loss can be reasonably estimated. The Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period such determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made.

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On June 6, 2022 and July 21, 2022, ~~shareholders~~stockholders of the Company filed class action complaints against the Company and certain of the Company’s officers in the Western District of Texas related to Digital Turbine, Inc.’s announcement in May 2022 that it would restate some of its financial results. The claims allege violations of certain federal securities laws. These have been consolidated into In ~~addition, in September and October of 2022, shareholders of~~re Digital Turbine, Inc. Securities Litigation, Case No. 1:22-cv-00550-DAE. On July 19, 2023, the Western District court granted the Company’s motion to dismiss the case. The plaintiffs filed an amended complaint on August 23, 2023, the Company filed a motion to dismiss the amended complaint on September 22, 2023, and briefing is ongoing. In addition, several derivative ~~complaints~~actions have been filed against the Company and the Company’s directors, which all assert claims of breach of fiduciary duties arising out of the same facts as the securities class action. The cases are Olszanski v. Digital Turbine, Inc., et al.; Case No. 1:22-cv-911 in federal court in the Western District of Texas ~~Delaware state courts, and Texas state courts alleging breaches of fiduciary duties relating to the allegations made~~(October 4, 2022); Witt v. Digital Turbine, Inc., et al; Case 1:22-cv-01429-UNA in federal court in the ~~class action complaints.~~District of Delaware (February 14, 2023); and Krumwiede v. Digital Turbine, Inc.; Case No. 2023-0277 in state court in the Delaware Chancery Court (March 6, 2023). The federal derivative cases ~~are consolidated, and the Texas derivative case has~~have been ~~dismissed and re-filed in Delaware federal court and the Delaware derivative cases are now consolidated, and all such derivative cases are~~ stayed under a court order, pending a ruling on any motion to dismiss the federal class ~~action that is later filed.~~action. The Company and the individual defendants filed a motion to dismiss the Delaware Chancery case on May 11, 2023. The Company and individual defendants deny any allegations of wrongdoing and the Company plans to vigorously defend against the claims asserted in these complaints. Due to the early stages of these cases, management is unable to assess a likely outcome or potential liability at this time.

On July 25, 2023, a derivative action was filed against the Company and the members of the Company’s Compensation and Human Capital Management Committee that asserts a claim of breach of fiduciary duties related to the grant of equity awards to the Company’s CEO in excess of the annual share limit set forth in the Company’s 2020 Equity Incentive Plan. The case is Robert Garfield v. Digital Turbine, Inc., et al.; Case No. 2023-0755 in state court in the Delaware Chancery Court. The Company and individual defendants deny any allegations of wrongdoing. Due to the early stages of the case, management is unable to assess a likely outcome or potential liability at this time.

Note 13—Subsequent Events

The Company evaluated subsequent events through the issuance date of the accompanying condensed

consolidated financial statements, which was November 8, 2023. There were no events or transactions during the subsequent event reporting period that required disclosure in the condensed consolidated financial statements, other than:

The Company increased its equity investment in Aptoide, S.A. (“Aptoide”) from 10.6% to 18.6% pursuant to the Addendum to the Class A1 Preferential Shares Investment Agreement (the “Agreement”) between the Company and Aptoide, dated November 8, 2023. The Company will pay consideration of €8,500, or a US Dollar equivalent amount of approximately $9,095 for the additional equity investment.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q ~~(the~~(this “Report”). The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) , as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seeks,” “should,” “could,” “would,” “may,” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time-to-time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

All numbers are in thousands, except share and per share amounts.

Company Overview

~~We are~~Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers (“OEMs”). We offer end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

Recent Developments

~~Credit Agreement~~

On October 26, 2022, we amended the New Credit Agreement (the “Second Amendment”) to replace the London Interbank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“SOFR”). As a result, amounts outstanding under the New Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25%. The Second Amendment made no other changes in the terms of the New Credit Agreement. As of December 31, 2022, of the total amount outstanding, $239,000 remains subject to LIBOR based interest rates.

As of December 31, 2022, we had $425,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds from the borrowings were used to finance the purchases of various acquisitions. As of December 31, 2022, the interest rate was 6.12% and the unused line of credit fee was 0.20%, and we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement.

~~Segment Reporting~~

As of March 31, 2022, we operated through three segments, each of which was a reportable segment. The three segments were On Device Media (“ODM”), In-App Media - AdColony (“IAM-A”), and In-App Media-Fyber (“IAM-F”). Effective April 1, 2022, we made certain changes to our organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, we reassessed our operating and reportable segments in accordance with ASC 280, ~~Segment Reporting. Effective April 1, 2022, we report our results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:~~

•~~On Device Solutions (“ODS”) -~~ We re-named the ODM segment On Device Solutions to better reflect the nature of the segment’s product offerings. This segment generates revenue from the delivery of mobile application media or content to end users. This segment provides focused solutions to all participants in the mobile application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device OEMs that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment’s product offerings are enabled through relationships with mobile device carriers and OEMs.

•~~App Growth Platform (“AGP”) -~~ This segment consists of the previously reported IAM-A and IAM-F segments. AGP customers are primarily advertisers and publishers and the segment provides platforms that allow mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies.

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. We have determined that our Chief Executive Officer is the CODM.

Impact of Economic Conditions and Geopolitical Developments ~~and COVID-19~~

Our results of operations are affected by macroeconomic conditions and geopolitical developments, including but not limited to levels of business and consumer confidence, actions taken by governments to counter inflation, potential trade disputes, including but not limited to any U.S. government actions against China based developers and publishers, Russia’s invasion of Ukraine, and the ~~COVID-19 pandemic.~~recent conflict in Israel.

Inflation, rising interest rates, supply chain disruptions, and reduced business and consumer confidence have caused and may continue to cause a global slowdown of economic activity, which has caused and may continue to cause a decrease in demand for a broad variety of goods and services, including those provided by our clients.

Like other advertising technology companies, we have seen a slowdown in digital advertising spending as well as a demand recession in mobile phone sales, which we believe is driven by the impact of inflation, ~~and~~ recession fears, and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to result in, a decrease in mobile phone sales volume and/or ~~delay of~~ advertising budgets and spending. While the slowdown in ~~digital advertising spending is varied and~~these sales drivers depends on the geography, advertising type, operating system, and business vertical, the current economic environment is likely to continue to impact our business, financial condition, and results of operations, the full impact of which remains uncertain at this time.

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Further, various U.S. federal and state governmental agencies continue to examine the distribution and use of apps developed and/or published by China based companies. In some cases, government agencies have banned certain apps from mobile devices. Further actions by U.S. federal or state governmental agencies or other countries to restrict or ban the distribution of China based apps could negatively impact our business, financial condition, and results of operations.

While the financial impact of Russia’s invasion of Ukraine has not had a direct, material impact on our business, any European conflict, if expanded to include other countries would likely have a material, negative impact on general economic conditions and would impact our business directly.

Additionally, we continue to actively monitor the recent and ongoing conflict in Israel and the Gaza Strip for any material impacts to our business. While no adverse financial or operational impacts have been noted in the current period, if such conflict continues to ensue or escalates, it could have a potential negative impact on our business, given our significant presence in the region.

The extent of the impact of these macroeconomic factors on our operational and financial performance is also dependent on their impact on carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, as well as the impact on application developers and in-app advertisers. If negative macroeconomic factors or geopolitical developments continue to materially impact our partners over a prolonged period, our results of operations and financial condition could also be adversely impacted, the size and duration of which we cannot accurately predict at this time.

We continue to actively monitor these factors and we may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. In addition to monitoring the developments described above, the Company also considers the impact such factors may have on our accounting estimates and potential impairments of our non-current assets, which primarily consist of goodwill and finite-lived intangible assets.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment, including qualitative and quantitative factors such as the identification of reporting units, identification and allocation of assets and liabilities to reporting units, and determinations of fair value. In estimating the fair value of our reporting units when performing our annual impairment test, or when an indicator of impairment is present, we make estimates and significant judgments about the future cash flows of those reporting units and other estimates including appropriate discount rates. Discount rates can fluctuate based on various economic conditions including our capital allocation and interest rates, including the interest rates on U.S. treasury bonds. Changes in judgments on these assumptions and estimates could result in goodwill impairment charges.

Finite-lived intangible assets and property, plant, and equipment are amortized or depreciated over their estimated useful lives on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period or an impairment. We test these assets for potential impairment whenever we conclude events or changes in circumstances indicate carrying amounts may not be recoverable.

AsThe Company determined that the sustained decline in the quoted market price of ~~December 31, 2022, we considered~~ the ~~developments discussed above, our~~Company’s common stock and current and forecasted operating ~~results, and our estimates of future operating results. We concluded there were no triggering events~~trends represented a change in circumstances that ~~indicated it was more likely than not~~indicate that the fair ~~values~~value of ~~our~~the Company’s reporting units ~~were~~may be less than their ~~respective~~ carrying ~~values or~~amounts as of September 30, 2023. Therefore, the Company evaluated goodwill for impairment, the result of which determined that an impairment charge of $147,181 was to be recorded as of September 30, 2023.

Business Transformation Initiative

Beginning in fiscal year 2023, the Company entered into a business transformation project that includes the implementation of a new, global cloud-based enterprise resource planning (“ERP”) system to upgrade our ~~finite-lived intangible assets were impaired.~~existing enterprise-wide operating systems. We ~~will continue~~are also undertaking the consolidation of existing ancillary systems and deploying other new platforms and systems to ~~closely monitor macroeconomic conditions~~improve our operations and ~~their impacts on our~~drive business ~~financial condition,~~ and ~~results of operations.~~cost efficiencies.

This is a multi-year project that includes various costs, including software configuration and implementation costs that would be recognized as either capital expenditures or deferred costs in accordance with applicable accounting policies, with certain costs recognized as operating expense associated with project development and

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project management costs, and professional services with business partners engaged in the planning, design and business process review that would not qualify as software configuration and implementation costs. In addition, the Company is incurring duplicative personnel and other operating costs to maintain legacy systems and operations during the deployment of the new ERP system and certain other ancillary platforms and systems. The Company expects to complete the first deployment phase in the third quarter of fiscal year 2024. Costs are anticipated to be incurred through various deployment phases that are expected to continue through early fiscal year 2026. The Company incurred $1,237 and $1,291 of business transformation costs in the three months ended September 30, 2023 and are recorded in General and Administrative expenses and Product Development expenses, respectively, in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

2622

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RESULTS OF OPERATIONS

~~(Unaudited)~~

The following table sets forth our results of operations for the three and six months ended September 30, 2023 and 2022 (in thousands):


	Three months ended September 30,						Six months ended September 30,
	2023		2022		% of Change		2023		2022		% of Change
Net revenue	$	143,259	$	174,859	(18.1)	%	$	289,625	$	363,492	(20.3)	%
Costs of revenue and operating expenses
Revenue share	68,719		76,881		(10.6)	%	138,311		164,248		(15.8)	%
Other direct costs of revenue	9,017		9,199		(2.0)	%	18,630		18,114		2.8	%
Product development	14,037		14,736		(4.7)	%	29,837		28,869		3.4	%
Sales and marketing	15,537		15,490		0.3	%	31,114		31,548		(1.4)	%
General and administrative	41,385		37,471		10.4	%	81,884		75,196		8.9	%
Impairment of goodwill	147,181		—		100.0	%	147,181		—		100.0	%
Total costs of revenue and operating expenses	295,876		153,777		92.4	%	446,957		317,975		40.6	%
(Loss) income from operations	(152,617)		21,082		(823.9)	%	(157,332)		45,517		(445.7)	%
Interest and other income (expense), net
Change in fair value of contingent consideration	372		—				372		—		100.0	%
Interest expense, net	(7,844)		(5,229)		50.0	%	(15,234)		(9,311)		63.6	%
Foreign exchange transaction loss	(2,106)		(281)		649.5	%	(183)		(612)		(70.1)	%

Other income, net	—		312		(100.0)	%	244		384		(36.5)	%
Total interest and other expense, net	(9,578)		(5,198)		84.3	%	(14,801)		(9,539)		55.2	%
(Loss) income before income taxes	(162,195)		15,884		(1121.1)	%	(172,133)		35,978		(578.4)	%
Income tax (benefit) provision	(713)		4,181		(117.1)	%	(2,252)		9,317		(124.2)	%
Net (loss) income	(161,482)		11,703		(1479.8)	%	(169,881)		26,661		(737.2)	%

Net revenue


		Three months ended December 31,						Nine months ended December 31,							Three months ended September 30,						Six months ended September 30,
		2022		2021		% of Change		2022		2021		% of Change			2023		2022		% of Change		2023		2022		% of Change
Net revenue	Net revenue													Net revenue
On Device Solutions	On Device Solutions	$	96,316	$	133,594	(27.9)	%	$	323,419	$	383,426	(15.7)	%	On Device Solutions	$	99,060	$	108,466	(8.7)	%	$	197,310	$	227,103	(13.1)	%
App Growth Platform	App Growth Platform	67,407		89,113		(24.4)	%	208,029		192,764		7.9	%	App Growth Platform	46,183		68,256		(32.3)	%	95,142		140,622		(32.3)	%
Elimination	Elimination	(1,413)		(5,889)		(76.0)	%	(5,646)		(12,729)		(55.6)	%	Elimination	(1,984)		(1,863)		6.5	%	(2,827)		(4,233)		(33.2)	%
Total net revenue	Total net revenue	$	162,310	$	216,818	(25.1)	%	$	525,802	$	563,461	(6.7)	%	Total net revenue	$	143,259	$	174,859	(18.1)	%	$	289,625	$	363,492	(20.3)	%

Comparison of the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022 ~~and 2021~~

Over the three-month comparative periods, net revenue decreased by ~~$54,508~~$31,600 or ~~25.1%~~18.1%, and over the ~~nine-month~~six-month comparative periods, net revenue decreased by ~~$37,659~~$73,867 or ~~6.7%~~20.3%. See the segment discussion below for further details regarding net revenue.

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On Device Solutions

ODS revenue for the three months ended ~~December 31, 2022,~~September 30, 2023, decreased by ~~$37,278~~$9,406 or ~~27.9%~~8.7% compared to the three months ended ~~December 31, 2021.~~September 30, 2022. Revenue from content media declined by approximately ~~$23,840 million,~~$9,225 primarily due to the ~~ending~~end of a carrier partnership that resulted in lower daily active users ~~(“DAU”)~~ on prepaid devices. ~~In addition, weak demand,~~Revenue from application media declined by approximately $181. The decline was primarily due ~~in part~~ to lower ~~new device volume in the United States and overall advertising spending reductions, resulted in a decline in application media~~ revenue from strategic demand customers of approximately ~~$13,466.~~$3,352, which includes the impact of a contract amendment during the three months ended September 30, 2022. This decline was partially offset by an increase in revenue-per-device, primarily in our US market, which offset lower device volumes.

ODS revenue for the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, decreased by ~~$60,007~~$29,793 or ~~15.7%~~13.1% compared to the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. Revenue from content media declined by approximately ~~$57,140~~$26,325 for the same reason as noted above for the three months ended ~~December 31, 2022.~~September 30, 2023. In addition, application media revenue declined by approximately ~~$2,866~~$3,469 for the ~~nine~~six months ended ~~December 31, 2022. This decrease~~September 30, 2023. The decline in revenue in application media was primarily due toto: (1) lower device volumes in the ~~same reason as noted for~~US and internationally, which offset an increase in revenue-per-device in the ~~three~~US of approximately $1,812 and (2) lower revenue from strategic demand customers of approximately $1,657, which includes the impact of a contract amendment during the six months ended ~~December 31, 2022, partially offset by revenue of $13,700 for two contract amendments during the nine months ended December 31,~~September 30, 2022.

App Growth Platform

AGP revenue for the three months ended ~~December 31, 2022,~~September 30, 2023, decreased by ~~$21,706~~$22,073 or ~~24.4%~~32.3% compared to the three months ended ~~December 31, 2021. The decrease was~~September 30, 2022. Performance and brand advertising revenue declined by approximately $13,586 and advertising exchange revenue declined by $5,771, primarily due to ~~weak~~weaker demand ~~during~~in digital advertising and the ~~three months~~impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. In addition, revenue declined by $2,716 due to a reseller partnership in the Nordic region, which ended on December 31, 2022, as compared to the prior year comparative period. The fiscal third quarter historically sees an uptick in advertising spending due to the holiday shopping season, which did not occur in the current fiscal year. In addition, we experienced a decline in performance advertising, largely due to broader weakness in the advertising markets.2022.

AGP revenue for the ~~nine~~six months ended ~~December 31, 2022, increased~~September 30, 2023, decreased by ~~$15,265~~$45,480 or ~~7.9%~~32.3% compared to the ~~nine~~six months ended ~~December 31, 2021. The increase was~~September 30, 2022. Performance and brand advertising revenue declined by approximately $27,027 and advertising exchange revenue declined by $11,956, primarily due to weaker demand in digital advertising and the impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. In addition, revenue declined by $6,497 due to a ~~full nine months of operations resulting from~~reseller partnership in the ~~AdColony Acquisition and Fyber Acquisition. See Note 3, “Acquisitions,” for further information.~~Nordic region, which ended on December 31, 2022.

Costs of revenue and operating expenses


		Three months ended December 31,						Nine months ended December 31,							Three months ended September 30,			Six months ended September 30,
		2022		2021		% of Change		2022		2021		% of Change			2023	2022	% of Change	2023	2022	% of Change
Costs of revenue and operating expenses	Costs of revenue and operating expenses													Costs of revenue and operating expenses
License fees and revenue share		$	73,370	$	109,053	(32.7)	%	$	237,618	$	284,369	(16.4)	%
Revenue share														Revenue share	$68,719	$76,881	(10.6)%	$138,311	$164,248	(15.8)%
Other direct costs of revenue	Other direct costs of revenue	9,324		9,090		2.6	%	27,438		21,385		28.3	%	Other direct costs of revenue	9,017	9,199	(2.0)%	18,630	18,114	2.8%
Product development	Product development	14,218		13,755		3.4	%	43,087		40,594		6.1	%	Product development	14,037	14,736	(4.7)%	29,837	28,869	3.4%
Sales and marketing	Sales and marketing	16,469		15,857		3.9	%	48,017		47,072		2.0	%	Sales and marketing	15,537	15,490	0.3%	31,114	31,548	(1.4)%
General and administrative	General and administrative	39,132		39,924		(2.0)	%	114,328		105,225		8.7	%	General and administrative	41,385	37,471	10.4%	81,884	75,196	8.9%
Impairment of goodwill														Impairment of goodwill	147,181	—	100.0%	147,181	—	100.0%
Total costs of revenue and operating expenses	Total costs of revenue and operating expenses	$	152,513	$	187,679	(18.7)	%	$	470,488	$	498,645	(5.6)	%	Total costs of revenue and operating expenses	$295,876	$153,777	92.4%	$446,957	$317,975	40.6%

Comparison of the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022

Total costs of revenue and ~~2021~~

~~Over~~operating expenses increased by $142,099 or 92.4% and $128,982 or 40.6%, respectively, for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, compared to the three and six months ended September 30, 2022.

Total costs of revenue and operating expenses included an impairment of goodwill of 147,181. Excluding the impairment of goodwill, total costs of revenue and operating expenses decreased by ~~$35,166~~$5,082 or ~~18.7%~~3.3% and ~~$28,157~~

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$18,199 or ~~5.6%~~5.7%, respectively, for the three and six months ended September 30, 2023, compared to the three and ~~nine~~six months ended ~~December 31, 2021.~~ September 30, 2022.

The decrease in total costs of revenue and operating expenses ~~over the three and nine month~~for both comparative periods, isafter excluding the impairment of goodwill, was primarily due to lower ~~license fees and~~ revenue share, ~~which~~partially offset by higher general and administrative costs. The reduced revenue share is the result of lower revenue over the same comparative periods. Costs of revenue and operating expenses included total business transformation, severance and transaction costs of ~~$1,297~~$3,416 and ~~$3,880,~~$3,819, respectively, for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, compared to ~~$6,167~~$1,284 and ~~$23,671,~~$2,584, respectively, for the three and ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022.

~~License fees and revenue~~Revenue share

~~License fees and revenue~~Revenue share ~~are reflective of~~includes amounts paid to our carrier and OEM partners, as well as app publishers and developers, and are recorded as a cost of revenue.

~~License fees and revenue~~Revenue share decreased by ~~$35,683~~$8,162 or ~~32.7%~~10.6% to ~~$73,370~~$68,719 for the three months ended ~~December 31, 2022,~~September 30, 2023, and was ~~45.2%~~48.0% as a percentage of total net revenue compared to ~~$109,053,~~$76,881, or ~~50.3%~~44.0% of total net revenue, for the three months ended ~~December 31, 2021.~~September 30, 2022.

~~License fees and revenue~~Revenue share decreased by ~~$46,751~~$25,937 or ~~16.4%~~15.8% to ~~$237,618~~$138,311 for the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, and was ~~45.2%~~47.8% as a percentage of total net revenue compared to ~~$284,369,~~$164,248, or ~~50.5%~~45.2% of total net revenue, for the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022.

The decrease in ~~license fees and~~revenue share was attributable to the decrease in total net revenue over the same periods, as these costs are typically paid as a percentage of our revenue. The increase in revenue share as a percentage of total net revenue for the three and six months ended ~~December 31, 2022,~~September 30, 2023 compared to the prior year comparative ~~period,~~periods, was primarily due to revenue mix changes. The decrease in license fees and revenue share as a percentage of total net revenue for the nine months ended December 31, 2022, compared to the prior year comparative period, was primarily due to revenue mix changes partially offset by the two contract amendments discussed above.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense ~~accounted for under ASC 985-20,~~ ~~Costs~~associated with capitalized software costs and amortization of ~~Software to be Sold, Leased, or Otherwise Marketed~~.developed technology intangible assets.

Other direct costs of revenue ~~was relatively unchanged, increasing $234~~decreased by $182 or ~~2.6%~~2.0% to ~~$9,324~~$9,017 for the three months ended ~~December 31, 2022,~~September 30, 2023, and was ~~5.7%~~6.3% as a percentage of total net revenue compared to ~~$9,090,~~$9,199, or ~~4.2%~~5.3% of total net revenue, for the three months ended ~~December 31, 2021.~~September 30, 2022. The decrease in other direct costs was primarily due to slightly lower amortization of developed technology intangible assets. The increase in other direct costs as a percentage of total net revenue was due to the ~~decrease~~decline in total net ~~revenue for the three months ended December 31, 2022.~~

revenue.

Other direct costs of revenue increased by ~~$6,053~~$516 or ~~28.3%~~2.8% to ~~$27,438~~$18,630 for the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, and was ~~5.2%~~6.4% as a percentage of total net revenue compared to ~~$21,385,~~$18,114, or ~~3.8%~~5.0% of total net revenue, for the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The increase in other direct costs ~~of revenue for the nine months ended December 31, 2022, compared to the prior year comparative period,~~ was primarily due to slightly higher ~~hosting costs~~amortization of ~~approximately $4,406 and higher depreciation expense for~~ developed technology intangible assets ~~of approximately $1,647 due in part to the impact of a full nine months of operations resulting from the AdColony Acquisition~~ and ~~Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information.~~hosting costs. The increase in other direct costs as a percentage of total net revenue ~~compared to the prior year comparative period~~ was due to ~~both higher costs as well as~~ the ~~decrease~~decline in total net ~~revenue for the nine months ended December 31, 2022.~~revenue.

Product development

Product development expenses include the development and maintenance of the Company’s product suite. Expenses in this area are primarily a function of personnel. Additionally, product development expenses include certain integration and business transformation costs, which may impact the comparability of product development expenses between periods.

Product development expenses decreased by $699 or 4.7% to $14,037 for the three months ended September 30, 2023, compared to $14,736 for the three months ended September 30, 2022. Product development expenses included severance and acquisition-related costs of approximately $217 and $543 for the three months ended September 30, 2023 and September 30, 2022, respectively. Product development expenses for the three months ended September 30, 2023 also included business transformation costs of approximately $1,291. Product

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development expenses, after excluding severance, acquisition-related and business transformation costs, decreased by approximately $1,664. The decrease in product development expenses was primarily due to lower employee-related costs, primarily cash incentive compensation, of approximately $3,098, partially offset by higher hosting costs of approximately $1,453 for the three months ended September 30, 2023.

Product development expenses increased by ~~$463~~$968 or 3.4% to ~~$14,218~~$29,837 for the ~~three~~six months ended ~~December 31, 2022,~~September 30, 2023, compared to ~~$13,755~~$28,869 for the ~~three~~six months ended ~~December 31, 2021. Product development expenses included acquisition-related costs of $542 and severance costs of $323 for the three months ended December 31,~~September 30, 2022. Product development expenses included severance and acquisition-related costs of ~~$454~~approximately $391 and $1,085 for the ~~three~~six months ended ~~December 31, 2021. Excluding acquisition-related costs~~September 30, 2023 and severance costs, product development expenses were relatively unchanged for the three months ended December 31, 2022. Lower employee-related costs, primarily due to reduced incentive compensation, was mostly offset by third-party development costs to support increased development activities.

September 30, 2022, respectively. Product development expenses ~~increased by $2,493 or 6.1% to $43,087~~ for ~~the nine~~six months ended ~~December 31, 2022, compared to $40,594 for the nine months ended December 31, 2021.~~September 30, 2023 also included business transformation costs of approximately $1,291. Product development expenses, ~~included acquisition-related costs of $1,627 and~~after excluding severance, ~~costs of $323 for the nine months ended December 31, 2022. Product development expenses included acquisition-related costs of $2,364 for the nine months ended December 31, 2021. Excluding~~ acquisition-related and ~~severance~~business transformation costs, ~~product development expenses~~ increased by ~~$2,930 for the nine months ended December 31, 2022.~~approximately $371. The increase in product development expenses ~~after excluding acquisition-related costs and severance costs,~~ was primarily due to higher ~~third-party development costs to support increased development activities of $6,628, partially offset by lower employee-related~~hosting costs of approximately ~~$3,698, primarily due to~~$1,543, for the ~~capitalization of employee-related costs for development activities and lower incentive compensation. The increases were due in part to the impact of a full nine~~six months ~~of operations resulting from the AdColony Acquisition and Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information.~~ended September 30, 2023.

Product development expenses, excluding business transformation costs, acquisition-related costs and severance costs, increased to ~~8.2%~~8.7% and ~~7.8%~~9.7% of total net revenue for the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, respectively, compared to ~~6.1%~~8.1% and ~~6.8%~~7.6% of total net revenue for the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, respectively. The increase in product development expenses as a percentage of total net revenue was due to higher costs and lower revenues.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management.

Sales and marketing expenses increased by $612 or 3.9% to $16,469 for the three months ended December 31, 2022, and was 10.1% as a percentage of total net revenue compared to $15,857, or 7.3% of total net revenue, for the three months ended December 31, 2021. The increase in Additionally, sales and marketing expenses ~~was primarily due to an increase in travel~~include certain integration and ~~sales-related events~~business transformation costs, which may impact the comparability of ~~approximately $1,388 due to the easing of COVID restrictions~~sales and severance costs of approximately $652, primarily for Nordic region employees due to the termination of a reseller partnership in the region. These increases were offset by a decrease of approximately $1,428 for employee-related costs, primarily due to lower headcount and incentive compensation.marketing expenses between periods.

Sales and marketing expenses were relatively unchanged, increasing by ~~$945~~$47 or ~~2.0%~~0.3% to ~~$48,017~~$15,537 for the ~~nine~~three months ended ~~December 31, 2022,~~September 30, 2023, and was ~~9.1%~~10.8% as a percentage of total net revenue compared to ~~$47,072,~~$15,490, or ~~8.4%~~8.9% of total net revenue, for the ~~nine~~three months ended ~~December 31, 2021.~~September 30, 2022. Sales and marketing expenses included severance and acquisition-related costs of approximately $575 and $55 for the three months ended September 30, 2023 and September 30, 2022, respectively. Sales and marketing expenses, after excluding severance and acquisition-related expenses, decreased by approximately $473. The ~~increase~~decrease in sales and marketing expense was primarily due to lower costs for sales-related events of approximately $593 and software and professional services of approximately $516, partially offset by higher employee benefits costs of approximately $630.

Sales and marketing expenses were relatively unchanged, decreasing by $434 or 1.4% to $31,114 for the six months ended September 30, 2023, and was 10.7% as a percentage of total net revenue compared to $31,548, or 8.7% of total net revenue, for the six months ended September 30, 2022. Sales and marketing expenses included severance and acquisition-related costs of approximately $623 and $108 for the six months ended September 30, 2023 and September 30, 2022, respectively. Sales and marketing expenses, after excluding severance and acquisition-related expenses, decreased by approximately $949. The decrease in sales and marketing expenses was primarily due to ~~an increase in travel~~lower costs for software and professional services of approximately $883 and sales-related events of approximately ~~$2,468 due to the easing of COVID restrictions and severance~~$449, partially offset by higher employee benefits costs of approximately $652, primarily for Nordic region employees due to the termination of a reseller partnership in the region. These increases were offset by a decrease of approximately $2,175, primarily for employee-related costs due to lower headcount and incentive compensation.

$376.

General and administrative

General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense.

General and administrative expenses decreased by $792 or 2.0% to $39,132 for the three months ended December 31, 2022, compared to $39,924 for the three months ended December 31, 2021. The three months ended December 31, 2022, included acquisition-related costs and severance costs of $700 and $135, respectively. The three months ended December 31, 2021 included acquisition-related costs of $5,676. Excluding acquisition-related costs and severance costs, Additionally, general and administrative expenses ~~increased $4,048.~~

~~The increase in~~include certain integration and business transformation costs, which may impact the comparability of general and administrative expenses ~~after excluding acquisition-related costs and severance costs was primarily due to: (1) higher depreciation expense~~between periods.

Table of approximately $2,549 for developed technology assets and amortization of acquired intangible assets, (2) an increase in professional fees, primarily for legal, tax, and auditing services, and software costs of approximately $837, and (3) an increase of approximately $661 for employee related costs due to higher wages and stock-based compensation, partially offset by lower incentive compensation.Contents

General and administrative expenses increased by ~~$9,103~~$3,914 or ~~8.7%~~10.4% to ~~$114,328~~$41,385 for the ~~nine~~three months ended ~~December 31, 2022,~~September 30, 2023 compared to ~~$105,225~~$37,471 for the ~~nine~~three months ended December 31, 2021. The nine months ended December 31, 2022, included acquisition-related costs and severance costs of $2,091 and $135, respectively. The nine months ended December 31, 2021, included acquisition-related costs $20,866. Excluding acquisition-related costs and severance costs, generalSeptember 30, 2022. General and administrative expenses ~~increased $27,744.~~included severance and acquisition-related costs of approximately $96 and $686 for the three months ended September 30, 2023 and September 30, 2022, respectively. General and administrative expenses for three months ended September 30, 2023 also included business transformation costs of approximately $1,237.

~~The increase in general~~General and administrative expenses, after excluding severance, acquisition-related and business transformations costs, increased by $3,267. The increase was primarily due to higher stock-based compensation of approximately $3,429, depreciation and amortization expense of approximately $2,993, and other costs, primarily professional fees, of approximately $99. These increases were partially offset by a decline in employee-related costs, primarily cash incentive compensation and salaries, of $2,180 and bad debt expense of $889.

General and administrative expenses increased by $6,688 or 8.9% to $81,884 for the six months ended September 30, 2023, compared to $75,196 for the six months ended September 30, 2022. General and administrative expenses included severance and acquisition-related costs of approximately $277 and $1,391 for the six months ended September 30, 2023 and September 30, 2022, respectively. General and administrative expenses for six months ended September 30, 2023 also included business transformation costs of approximately $1,237.

General and administrative expenses, after excluding severance, acquisition-related costs and ~~severance~~business transformation costs, increased by $6,565. The increase was primarily due ~~to: (1)~~to higher ~~depreciation expense~~stock-based compensation of approximately $17,870 for developed technology assets and amortization of acquired intangible assets, (2) an increase of approximately $4,435 for employee-related costs due to higher wages and stock-based compensation costs,$7,010, partially offset by lower ~~incentive compensation, (3) an increase in~~ bad debt expense of approximately ~~$2,149,~~$1,027 and ~~(4)~~employee-related costs, primarily cash incentive compensation and salaries, of approximately $1,120.

Impairment of goodwill

As of September 30, 2023, the Company determined that the sustained decline in the quoted market price of the Company’s common stock during the current fiscal year (in particular during the quarter ended September 30, 2023 and following such quarter), the increase in interest rates, and the Company’s current and recently updated forecasted operating trends represented a change in circumstances that indicate that the fair value of the Company’s reporting units may be less than their carrying value. The Company completed an impairment assessment of its goodwill, and as a result of this review, recorded a $147,181 non-deductible, non-cash goodwill impairment charge (or $1.46 per basic and diluted share) for the AGP reporting unit for the quarter ended September 30, 2023. There was no impairment of goodwill for the ODS reporting unit.

The fair value of each reporting unit was estimated using a weighted combination of the income approach, which incorporates the use of the discounted cash flows method, and the market approach (the “Guideline Public Company Method”). The Company’s September 30, 2023 testing reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach is appropriate, as it directly reflects its future growth and profitability expectations.

The discounted cash flow method requires significant assumptions and estimates, the most significant of which are projected future growth rates, capital expenditures, tax rates, gross margins and terminal values. In addition, the Company determines its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. For the September 30, 2023 testing, as compared to the March 31, 2023 testing, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, gross profits, and EBITDA, to reflect its best estimates at this time. The Company also updated key inputs for the discounted cash flow models, including the weighted-average cost of capital, which increased due to higher interest rates, market volatility, and the company specific premium.

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting units operating performance. These multiples are derived from comparable publicly-traded companies with similar investment characteristics. For the September 30, 2023 testing, as compared to the March 31, 2023 testing, the Company reduced its revenue and EBITDA market multiples, reflecting declining valuations across the Company’s selected peer group. These updates, along with those made to the discounted

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cash flow models described above, had significant impacts on the estimated fair values of the Company’s reporting units.

As of September 30, 2023, the goodwill impairment evaluation indicated the following for the Company’s reporting units:

ODS

For the ODS reporting unit, the Company determined that the estimated fair value was in excess of its carrying value by $233,100. As a result, no impairment charge was recorded.

The ODS reporting unit has remaining goodwill allocated of $80,176 as of September 30, 2023. The On Device business is facing challenges reflected in the current fiscal year primarily related to fewer daily active users on prepaid devices and lower new device volumes in the US and internationally. The Company currently believes these challenges will be successfully addressed when seasonality-driven increases in new device volumes occur as well as when adverse macro-economic factors begin to subside. However, if the Company continues to see a sustained decline in its stock price, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or the global macroeconomic or geopolitical conditions worsen, it is possible its estimates about the ODS reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the ODS reporting unit exceeding its estimated fair value, and potential impairment charges. Prior to the quantitative goodwill impairment test, the Company tested the recoverability of intangibles and other ~~categories,~~long-lived assets of the ODS reporting unit and concluded that such assets were not impaired.

AGP

For the AGP reporting unit, the Company determined that the carrying value was in excess of its estimated fair value, resulting in an impairment charge of $147,181.

The decline in the fair value of the AGP reporting unit below its carrying value resulted primarily ~~professional services, software,~~from the Company’s recently reduced estimates in the Company’s estimated future cash flows, including revenues, gross profits, and ~~facilities~~EBITDA as mentioned above. Prior to the quantitative goodwill impairment test, the Company tested the recoverability of ~~$3,289.~~intangibles and other long-lived assets of the AGP reporting unit and concluded that such assets were not impaired.

Subsequent to the impairment charge discussed above, the AGP reporting unit has remaining goodwill allocated of $328,800, and an excess of fair value over carrying value of net assets of 0% as of the test date (September 30, 2023). As noted above, the fair value of the AGP reporting unit is derived from a 75%/25% allocation between the discounted cash flows method and the market approach. The ~~increases were due~~App Growth business is facing challenges reflected in ~~part~~the current fiscal year primarily related to weaker demand in digital advertising and the impact of ~~a full nine months~~the consolidation and exiting of ~~operations resulting from~~certain legacy AdColony platforms and business lines. If market demand further weakens or the ~~AdColony Acquisition~~Company is not able to effectively operationalize new product and ~~Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information.~~product feature deployments and improve results, revenue expectations might not be met. This could result in the carrying value of the AGP reporting unit exceeding its future estimated fair value and potential future impairment charges.

Interest and other income / (expense), net

Three months ended December 31, Nine months ended December 31,
2022 2021 % of Change 2022 2021 % of Change
Interest and other income / (expense), net
Change in fair value of contingent consideration $ — $ (18,200) 100.0 % $ — $ (40,287) 100.0 %
Interest expense, net (6,913) (2,195) 214.9 % (16,224) (5,307) 205.7 %
Foreign exchange transaction gain / (loss) 17 2,122 (99.2) % (595) 1,603 (137.1) %
Other income / (expense), net 8 (86) 109.3 % 392 (598) 165.6 %
Total interest and other income / (expense), net $ (6,888) $ (18,359) (62.5) % $ (16,427) $ (44,589) (63.2) %


	Three months ended September 30,						Six months ended September 30,
	2023		2022		% of Change		2023		2022		% of Change
Interest and other income (expense), net
Change in fair value of contingent consideration	$	372	$	—	100.0	%	$	372	$	—	100.0	%
Interest expense, net	$	(7,844)	$	(5,229)	50.0	%	(15,234)		(9,311)		63.6	%
Foreign exchange transaction loss	(2,106)		(281)		649.5	%	(183)		(612)		(70.1)	%
Other income, net	—		312		(100.0)	%	244		384		36.5	%
Total interest and other expense, net	$	(9,578)	$	(5,198)	84.3	%	$	(14,801)	$	(9,539)	55.2	%

Comparison of the three and ~~nine~~six months ended ~~December 31,~~September 30, 2023 and 2022 ~~and 2021~~

~~Change in fair value of contingent consideration~~

For the three and nine months ended December 31, 2021, the Company recorded charges for changes in fair value of contingent consideration in connection with the AdColony Acquisition and Fyber Acquisition of $18,200 and $40,287, respectively. There were no such charges recorded for the three and nine months ended December 31, 2022.

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Interest expense, net

For the three and ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, interest expense, net, increased by ~~$4,718~~$2,615 or ~~214.9%~~50.0% and ~~$10,917~~$5,923 or ~~205.7%~~63.6%, respectively, compared to the three and ~~nine~~six months ended ~~December 31, 2021,~~September 30, 2022, primarily due to an increase in interest rates of ~~371~~330 basis points and ~~228~~363 basis points, respectively, and higher average outstanding borrowings of ~~$129,167~~$65,734 and ~~$229,952,~~$79,783, respectively, over the comparative periods.

Income tax provision (benefit)

During the three and six months ended September 30, 2023, a tax benefit of ($713) and ($2,252), respectively, resulted in an effective tax rate of (0.4%) and (1.3%), respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to the non-deductible goodwill impairment charge, tax limitations on certain deductions and state tax benefits.

During the three and six months ended September 30, 2022, a tax provision of $4,181 and $9,317 resulted in an effective tax rate of 26.3% and 25.9%, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to state income taxes, nontaxable adjustments to the AdColony and Fyber earn-outs, and tax deductions for stock compensation that exceed the book expense.

Liquidity and Capital Resources

Our primary sources of liquidity are our cash and cash equivalents, cash from operations, and borrowings under our New Credit Agreement. As of ~~December 31, 2022,~~September 30, 2023, we had unrestricted cash of approximately ~~$79,307~~$58,138 and ~~$174,866~~$139,000 available to draw under the New Credit Agreement with ~~BoA. The maturity date of~~BoA, excluding the ~~New Credit Agreement is April 29, 2026, and~~accordion feature, subject to the ~~outstanding balance of $425,134 is classified as long-term debt, net of debt issuance costs of $2,824, on our condensed consolidated balance sheet as of December 31, 2022.~~required covenants. We generated ~~$97,514~~$28,772 in cash flows from operating activities for the ~~nine~~three months ended ~~December 31, 2022.~~September 30, 2023.

Our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to availability of borrowing capacity under our credit facility and our ability to access ~~the~~ capital markets as well as financial, business, and other factors affecting our operations, many of which are beyond our control. ~~For example, these~~These factors include general and regional economic, financial, competitive, legislative, regulatory, and other factors such as health epidemics including COVID-19, economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation, and geopolitical developments, including the conflict in ~~Ukraine.~~Ukraine, the political climate related to China, and the conflict in Israel. We cannot guarantee ~~that~~ we will generate sufficient cash flow from operations, or that future borrowings or ~~the~~ capital markets will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

We believe we will generate sufficient cash flow from operations and ~~has~~have the liquidity and capital resources to meet our business requirements for at least ~~twelve~~12 months from the filing date of this ~~Quarterly Report on Form 10-Q.~~

~~Hosting Agreements~~

We enter into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require us to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $181,603 over the next 4 years.Report.

Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is ~~$425,134~~$386,000 as of ~~December 31, 2022. See “Recent Developments - Credit Agreement” for additional information on the New Credit Agreement. Our ability to borrow additional amounts under~~September 30, 2023. The maturity date of the New Credit Agreement ~~could have significant negative consequences, including:~~

•~~increasing~~is April 29, 2026, and the outstanding balance is classified as long-term debt, net of debt issuance costs of $2,190, on our ~~vulnerability to general adverse economic and industry conditions;~~

•~~limiting our ability to obtain additional financing;~~

•~~violating a financial covenant, potentially resulting~~condensed consolidated balance sheets as of September 30, 2023. For further description of the terms of the New Credit Agreement, see Note 8—Debt under the heading “Revolver” in the ~~indebtedness~~notes to ~~be paid back immediately and thus negatively impacting~~ our ~~liquidity;~~

•~~requiring additional~~consolidated financial ~~covenant measurement consents or default waivers without enhanced financial performance in the short term;~~

•~~requiring the use~~statements under Part I, Item 1 of ~~a substantial portion of any cash flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures;~~

•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which it competes, including by virtue of the requirement that we remain in compliance with certain negative operating covenants included in the credit arrangements under which we will be obligated as well as meeting certain reporting requirements; and

•~~placing us at a possible competitive disadvantage to less leveraged competitors that are larger and may have better access to capital resources.~~

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. There can be no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.this Report.

The collateral pledged to secure our secured debt, consisting of substantially all of ~~our and~~ our U.S. subsidiaries’ assets, would be available to the secured creditor in a foreclosure, in addition to many other remedies. Accordingly, any adverse change in our ability to service our secured debt could result in an event of default, cross default, and foreclosure or forced sale. Depending on the value of the assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.

Hosting Agreements

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We enter into hosting agreements with service providers, and, in some cases, those agreements include minimum commitments that require us to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one-year in duration, and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $284,988 over the next four fiscal years.

Cash Flow Summary ($ in thousands)


		Nine months ended December 31,
		2022		2021		% of Change				Six months ended September 30,
		(in thousands)						2023		2022		% of Change
Consolidated statements of cash flows data:	Consolidated statements of cash flows data:								Consolidated statements of cash flows data:
Net cash provided by operating activities	Net cash provided by operating activities	$	97,514	$	43,462	124.4	%		Net cash provided by operating activities	$	28,772	$	64,309	(55.3)	%
Equity investments		(4,000)		—		(100.0)	%
Business acquisitions, net of cash acquired		(2,708)		(148,192)		98.2	%

Capital expenditures	Capital expenditures	(18,598)		(15,692)		(18.5)	%		Capital expenditures	(14,277)		(12,930)		10.4	%
Net cash used in investing activities	Net cash used in investing activities	$	(25,306)	$	(163,884)	84.6	%		Net cash used in investing activities	$	(14,277)	$	(12,930)	10.4	%

Proceeds from borrowings	Proceeds from borrowings	18,000		369,913		(95.1)	%		Proceeds from borrowings	17,000		—		100.0	%
Payment of debt issuance costs		(94)		(4,044)		97.7	%
Payment of deferred business acquisition consideration		—		(98,175)		100.0	%
Options and warrants exercised		1,095		2,814		(61.1)	%

Repayment of debt obligations									Repayment of debt obligations	(44,136)		(86,500)		(49.0)	%
Acquisition of non-controlling interest in consolidated subsidiaries									Acquisition of non-controlling interest in consolidated subsidiaries	(3,751)		—		100.0	%
Payment of withholding taxes for net share settlement of equity awards	Payment of withholding taxes for net share settlement of equity awards	(6,202)		(7,587)		(18.3)	%		Payment of withholding taxes for net share settlement of equity awards	(1,037)		(5,929)		(82.5)	%
Repayment of debt obligations		(129,500)		(52,623)		(146.1)	%
Net cash provided by / (used in) financing activities		$	(116,701)	$	210,298	155.5	%
Options exercised									Options exercised	2,729		939		190.6	%
Net cash used in financing activities									Net cash used in financing activities	$	(29,195)	$	(91,490)	(68.1)	%

Operating Activities

Our cash flows from operating activities are primarily driven by ~~revenues~~revenue generated from user acquisition and advertising activity, offset by the cash costs of operations, and are significantly influenced by the timing of and fluctuations in receipts from ~~buyers~~customers and ~~related~~ payments to ~~sellers.~~our carrier and publisher partners as well as other vendors. Our future cash flows from operating activities will be diminished if we cannot increase our revenue levels and manage costs appropriately. Cash provided by operating activities was ~~$97,514~~$28,772 for the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, compared to ~~$43,462~~$64,309 for the ~~nine~~six months ended ~~December 31, 2021.~~September 30, 2022. The ~~increase~~decrease of ~~$54,052~~$35,537 was due to the following:

•$~~58,961~~196,542 decrease in net income;

•$18,471 increase due to changes in operating assets and liabilities, driven primarily ~~due to lower net~~by working capital ~~for the nine months ended December 31, 2022;~~

•~~$15,295 increase~~changes, including a decrease in ~~net income;~~accounts payable, accrued compensation, and other current liabilities; and

•~~$20,204 decrease due to lower~~ $142,534 increase in non-cash charges during the ~~nine~~six months ended ~~December 31, 2022, including the impact of the change in fair value of contingent consideration during the nine months ended December 31, 2021. This impact was~~September 30, 2023 primarily related to goodwill impairment and increased stock-based compensation, partially offset by ~~accelerated amortization of trade name intangible~~lower right-of-use assets ~~amidst rebranding and a larger employee base receiving stock-based compensation~~ for the ~~nine~~six months ended ~~December 31, 2022.~~September 30, 2023.

Investing Activities

Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. For the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, net cash used in investing activities ~~decreased~~increased by ~~$138,578~~$1,347 to approximately ~~$25,306. Current period~~$14,277. Our cash used in investing activities for the six months ended September 30, 2023 and September 30, 2022, was primarily comprised of capital expenditures related ~~mostly~~ to internally-developed software of $18,598, an equity investment of $4,000 in one of the largest independent Android app stores, and cash expenditures for business acquisitions, net of cash acquired, of $2,708 related to our acquisition of In App Video Services UK LTD. For the nine months ended December 31, 2021, net cash used in investing activities was approximately $163,884, comprised of cash expenditures for business acquisitions, net of cash acquired, of $148,192 related to our acquisitions of AdColony and Fyber and capital expenditures related mostly to internally-developed software of $15,692. The $2,906 increase in capital expenditures was due to incremental investments in product development efforts and is also reflective of a larger product portfolio due to the acquisitions of AdColony and Fyber.software.

Financing Activities

~~Our financing activities consisted of borrowings and repayment of amounts borrowed under our New Credit Agreement and transactions related to our equity plans.~~ For the ~~nine~~six months ended ~~December 31, 2022,~~September 30, 2023, net cash used in financing activities was approximately ~~$116,701,~~$29,195, which was comprised ofof: (1) the net repayment of debt obligations of ~~$129,500 and~~$44,136, (2) payment of $3,751 for the acquisition of the remaining minority interest shareholders’ outstanding shares in one of our subsidiaries, (3) payment of payroll withholding taxes for net share settlement of equity awards of ~~$6,202,~~$1,037. These cash outflows were partially offset by ~~proceeds from borrowings of $18,000 and stock option exercises of $1,095. For the nine months ended December 31, 2021, net~~ cash ~~provided by financing activities was approximately $210,298, which was comprised~~inflows comprising of proceeds from borrowings of ~~$369,913~~$17,000 and stock option exercises of ~~$2,814, partially offset by~~

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$2,729.

For the ~~payment~~six months ended September 30, 2022, net cash used in financing activities was approximately $91,490, which was comprised of ~~deferred business acquisition consideration of $98,175,~~ repayment of debt obligations of ~~$52,623,~~$86,500, payment of payroll withholding taxes for net share settlement of equity awards of ~~$7,587, and payment~~$5,929, partially offset by cash inflows from stock option exercises of ~~debt issuance costs of $4,044.~~$939.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements. The preparation of these financial statements is based on management’s selection and application of accounting policies, some of which require management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and notes. For more information regarding our critical accounting policies and estimates, please see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies,” of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, and Note ~~2, “Basis~~2—Basis of Presentation and Summary of Significant Accounting Policies,” of this ~~Quarterly~~ Report on Form 10-Q for our fiscal ~~third~~second quarter ended ~~December 31, 2022.~~September 30, 2023.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has operations both within the ~~United States~~U.S. and internationally and is exposed to market risks in the ordinary course of business - primarily interest rate and foreign currency exchange risks.

Interest Rate Fluctuation Risk

The primary objective of the Company’s investment activities is to preserve principal while maximizing income without significantly increasing risk. The Company’s cash and cash equivalents consist of cash and deposits, which are sensitive to interest rate changes.

The Company’s borrowings under its credit facility are subject to variable interest rates and thus expose the Company to interest rate fluctuations, depending on the extent to which the Company utilizes its credit facility. If market interest rates materially increase, the Company’s results of operations could be adversely affected. A hypothetical increase in market interest rates of 100 basis points would result in an increase in interest expense of $10 per year for every $1,000 of outstanding debt under the Company’s credit facility. The Company has not used any derivative financial instruments to manage its interest rate risk exposure.

Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk that the Company’s results of operations and/or financial condition could be affected by changes in exchange rates. The Company has transactions denominated in currencies other than the U.S. dollar, principally the euro, Turkish lira, and British pound, that expose the Company’s operations to risk from the effects of exchange rate movements. Such movements may impact future revenues, expenses, and cash flows. In certain of the Company’s foreign operations, the Company transacts primarily in the U.S. dollar, including for net revenue, ~~license fees and~~ revenue share, and employee-related compensation costs, which reduces the Company’s exposure to foreign currency exchange risk. In addition, gains / (losses) related to translating certain cash balances, trade accounts receivable and payable balances, and intercompany balances also impact net income. As the Company’s foreign operations expand, results may be impacted further by fluctuations in the exchange rates of the currencies in which the ~~Company’s~~Company does business. The Company has not used any derivative financial instruments to manage its foreign currency exchange risk exposure.

ITEM 4. CONTROLS AND PROCEDURES

This Report includes the certifications of the Company’s Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2 to this Quarterly Report on Form 10-Q. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

~~Disclosure~~Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ~~are~~means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the ~~Company in~~ reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the ~~SEC’s~~ rules and forms of the SEC. Disclosure controls

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and procedures include, without limitation, controls and procedures designed to ensure that ~~such~~ information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including ~~the Company’s Chief Executive Officer, who is the~~its principal executive ~~officer,~~ and ~~the Company’s Chief Financial Officer, who is the~~ principal financial ~~officer,~~officers, as appropriate to allow timely decisions regarding required disclosure.

~~As previously disclosed~~ Management recognizes that any controls and procedures, regardless of how well they were designed and are operating, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in ~~Item 9A, Disclosure Controls~~evaluating the cost-benefit relationship of possible controls and ~~Procedures,~~procedures. Based on the evaluation of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022, management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of itsour disclosure controls and procedures as of ~~March 31, 2022. Based on~~the end of the period covered by this ~~evaluation, management~~Report, our chief executive officer and chief financial officer concluded that, as of such date, ~~the Company’s~~our disclosure controls and procedures were ~~not~~ effective ~~due to the existence of the material weakness in its internal control over financial reporting therein described.~~

Management concluded the Company’s internal control for business combinations did not include a control adequately designed to ensure acquiree accounting policies, as they relate to presentation and classification, were conformed to those of the Company and GAAP.

With the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2022. Based on this evaluation and as a result of the identification of the material weakness described above, management concluded the Company’s disclosure controls and procedures were not effective as of December 31, 2022.

~~Remediation Plans for Material Weakness in Internal Control over Financial Reporting~~

Prior to the identification of the material weakness, management, with oversight from the Company’s Audit Committee, completed a review of the recently acquired business’ product lines with the consultation of a large, third-party accounting firm as part of the financial close and reporting process. This included a review, at the acquired businesses, of representative customer contracts and agreements, supply/publisher agreements, and each product line’s business model and operations with key operations personnel. Further, management took several other actions to strengthen the Company’s control environment, including hiring a new Chief Accounting Officer and creating and hiring for other key positions including a Senior Manager of Internal Audit/ICFR and Director of Global Tax.

~~The Company is continuing to make progress in implementing improvements to its policies and procedures by:~~

•Strengthening the Company’s procedures for reviewing the accounting policies of material acquired companies, including their accounting for revenue, through initial reviews during the due diligence period and ensuring alignment of accounting policies prior to the first post-acquisition interim reporting date;

•~~Standardizing customer and publisher contract review processes to ensure consistent accounting and reporting of revenue transactions; and~~

•Formalizing the approval process for making changes to the global chart of accounts and accounting systems to ensure the accurate classification of financial statement amounts, including changes resulting from material acquisitions.

Management believes these additional steps will be effective in remediating the material weakness described above and may take additional measures to address the material weakness or modify the remediation plan described above, if deemed necessary. Management continues to make progress implementing the remediation steps discussed above and will continue to test the enhanced control environment in the Company’s fiscal fourth quarter. If the results of remaining controls testing progress as planned, management expects sufficient evidence will be available to conclude the material weakness described above no longer exists as of March 31, 2023.reasonable assurance level.

Changes in Internal Control Over Financial Reporting

~~Other than the revenue recognition review process and ongoing remediation steps described above, there~~There were no changes in ~~the Company’s~~our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(f) or 15d-15(f) of the Exchange Act during the ~~three months ended December 31, 2022,~~period covered by this Report, that materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company may be involved in various claims, suits, assessments, investigations, and legal proceedings that arise from ~~time to time~~time-to-time in the ordinary course of its business.

On June 6, 2022 and July 21, 2022, ~~shareholders~~stockholders of the Company filed class action complaints against the Company and certain of ~~its~~the Company’s officers in the Western District of Texas related to Digital Turbine, Inc.’s announcement in May 2022 that ~~the Company~~it would restate some of its financial results. The claims allege violations of certain federal securities laws. These have been consolidated into In ~~addition, in September and October of 2022, shareholders of~~re Digital Turbine, Inc. Securities Litigation, Case No. 1:22-cv-00550-DAE. On July 19, 2023, the Western District court granted the Company’s motion to dismiss the case. The plaintiffs filed an amended complaint on August 23, 2023, the Company filed a motion to dismiss the amended complaint on September 22, 2023, and briefing is ongoing. In addition, several derivative ~~complaints~~actions have been filed against the Company and ~~its~~the Company’s directors, which all assert claims of breach of fiduciary duties arising out of the same facts as the securities class action. The cases are Olszanski v. Digital Turbine, Inc., et al.; Case No. 1:22-cv-911 in federal court in the Western District of Texas ~~Delaware state courts, and Texas state courts alleging breaches of fiduciary duties relating to the allegations made~~(October 4, 2022); Witt v. Digital Turbine, Inc., et al; Case 1:22-cv-01429-UNA in federal court in the ~~class action complaints.~~District of Delaware (February 14, 2023); and Krumwiede v. Digital Turbine, Inc.; Case No. 2023-0277 in state court in the Delaware Chancery Court (March 6, 2023). The federal derivative cases ~~are consolidated, and the Texas derivative case has~~have been ~~dismissed and re-filed in Delaware federal court and the Delaware derivative cases are now consolidated, and all such derivative cases are~~ stayed under a court order, pending a ruling on any motion to dismiss the federal class ~~action that is later filed.~~action. The Company and the individual defendants filed a motion to dismiss the Delaware Chancery case on May 11, 2023. The Company and individual defendants deny any allegations of wrongdoing and ~~plan~~the Company plans to vigorously defend against the claims asserted in these complaints. Due to the early stages of these cases, management is unable to assess a likely outcome or potential liability at this time.

ITEM 1A. RISK FACTORS

The ~~Company is not aware of any material changes to~~information in this Report should be read in conjunction with the risk factors set forth under Part I, Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended March 31, ~~2022,~~2023, filed with the Securities and Exchange Commission on ~~June 6, 2022.~~May 25, 2023. The Company is not aware of any change to such risk factors except for the addition of the following:

Risks associated with the ongoing conflict in Israel has caused, and is currently expected to cause, negative effects on geopolitical conditions and the global economy, including financial markets, inflation, and the global supply chain, which could have an adverse impact on our business, operating results and financial condition, especially given our significant business presence in the region.

Since October 7, 2023, the hostilities in Israel and the Gaza Strip have further heightened global tensions and instability. At this time, it is unknown whether hostilities in this region will escalate into an even larger conflict. The Company has a significant business presence in the region, and therefore, continuation or escalation of the conflict could cause significant adverse financial impacts, due to reductions in demand and/or interruptions in business operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Table of Contents

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3634

Table of Contents

ITEM 6. EXHIBITS


Exhibit No.						Description


















































1 0.1						Amendment to Notice of Grant and Restricted Stock Unit Agreement (Performance-Based), dated as of September 30, 2023, by and between Digital Turbine , Inc. and William Stone . *
31.1						Certification of William Stone, Principal Executive Officer. *
31.2						Certification of Barrett Garrison, Principal Financial Officer. *
32.1						Certification of William Stone, Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +
32.2						Certification of Barrett Garrison, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. +
101						INS XBRL Instance Document. *
101						SCH XBRL Schema Document. *
101						CAL XBRL Taxonomy Extension Calculation Linkbase Document. *
101						DEF XBRL Taxonomy Extension Definition Linkbase Document. *
101						LAB XBRL Taxonomy Extension Label Linkbase Document. *
101						PRE XBRL Taxonomy Extension Presentation Linkbase Document. *

* Filed herewith.

+ In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed, as part of this Quarterly Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.

•SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Digital Turbine, Inc.

Dated: ~~February~~November 8, 2023

By:

/s/ William Gordon Stone III

William Gordon Stone III

Chief Executive Officer

(Principal Executive Officer)

Digital Turbine, Inc.

Dated: ~~February~~November 8, 2023

By:

/s/ James Barrett Garrison

James Barrett Garrison

Chief Financial Officer

(Principal Financial Officer)

3735






























PART I	FINANCIAL INFORMATION	3
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	6
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2420
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3331
ITEM 4.	CONTROLS AND PROCEDURES	3431
PART II	OTHER INFORMATION	3633
ITEM 1.	LEGAL PROCEEDINGS	3633
ITEM 1A.	RISK FACTORS	3633
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3633
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3633
ITEM 4.	MINE SAFETY DISCLOSURES	3634
ITEM 5.	OTHER INFORMATION	3634
ITEM 6.	EXHIBITS	3735
	SIGNATURES	3735


	May 25, 2021		Measurement Period Adjustments		May 25, 2021 (adjusted)
Assets acquired
Cash	$	71,489	$	—	$	71,489
Accounts receivable	64,877		166		65,043
Other current assets	10,470		—		10,470
Property and equipment	1,561		—		1,561
Right-of-use asset	13,191		—		13,191
Publisher relationships	106,400		(95)		106,305
Developed technology	86,900		—		86,900
Trade names	32,100		474		32,574
Customer relationships	31,400		—		31,400
Favorable lease	1,483		—		1,483
Goodwill	303,015		(2,572)		300,443
Other non-current assets	851		—		851
Total assets acquired	$	723,737	$	(2,027)	$	721,710

Liabilities assumed
Accounts payable	$	78,090	$	(1,501)	$	76,589
Accrued license fees and revenue share	5,929		—		5,929
Accrued compensation	52,929		—		52,929
Other current liabilities	12,273		(1,739)		10,534
Current portion of debt	25,789		—		25,789
Deferred tax liability, net	25,213		3,627		28,840
Other non-current liabilities	15,386		—		15,386
Total liabilities assumed	$	215,609	$	387	$	215,996
Total purchase price	$	508,128	$	(2,414)	$	505,714


	April 29, 2021		Measurement Period Adjustments		April 29, 2021 (adjusted)
Assets acquired
Cash	$	24,793	$	—	$	24,793
Accounts receivable	57,285		—		57,285
Other current assets	1,845		—		1,845
Property and equipment	1,566		—		1,566
Right-of-use asset	2,460		—		2,460
Customer relationships	102,400		(600)		101,800
Developed technology	51,100		—		51,100
Trade names	36,100		(100)		36,000
Publisher relationships	4,400		—		4,400
Goodwill	202,552		(3,502)		199,050
Other non-current assets	131		—		131
Total assets acquired	$	484,632	$	(4,202)	$	480,430

Liabilities assumed
Accounts payable	$	21,140	$	—	$	21,140
Accrued license fees and revenue share	28,920		—		28,920
Accrued compensation	8,453		—		8,453
Other current liabilities	1,867		—		1,867
Deferred tax liability, net	10,520		(2,377)		8,143
Other non-current liabilities	1,770		—		1,770
Total liabilities assumed	$	72,670	$	(2,377)	$	70,293
Total purchase price	$	411,962	$	(1,825)	$	410,137


	ODS		AGP		Total





Goodwill as of March 31, 2022	$	80,176	$	479,616	$	559,792
Purchase of In App Video	—		5,008		5,008


Foreign currency translation and other	—		(4,460)		(4,460)
Goodwill as of December 31, 2022	$	80,176	$	480,164	$	560,340