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~~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, ~~2023,~~2024, the Company had ~~99,197,058~~102,021,342 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~~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
			(Unaudited)
		December 31, 2023						December 31, 2023	March 31, 2023
		(Unaudited)
ASSETS
ASSETS
ASSETS	ASSETS
Current assets	Current assets
Cash			$	79,307	$	126,768
Current assets
Current assets
Cash and cash equivalents
Restricted cash	Restricted cash		554		394
Accounts receivable, net	Accounts receivable, net		231,001		263,139
Prepaid expenses and other current assets	Prepaid expenses and other current assets		31,912		20,570
Total current assets	Total current assets		342,774		410,871
Property and equipment, net	Property and equipment, net		38,759		31,086
Right-of-use assets	Right-of-use assets		10,973		15,439
Intangible assets, net	Intangible assets, net		395,181		440,589
Goodwill	Goodwill		560,340		559,792

Other non-current assets	Other non-current assets		4,648		732
Other non-current assets
Other non-current assets
TOTAL ASSETS	TOTAL ASSETS		$	1,352,675	$	1,458,509

LIABILITIES AND STOCKHOLDER’S EQUITY
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities	Current liabilities						Current liabilities
Accounts payable	Accounts payable		$	154,320	$	167,858
Accrued license fees and revenue share			75,380		95,170
Accrued revenue share
Accrued compensation	Accrued compensation		16,206		28,775
Acquisition purchase price liabilities			—		50,000
Current portion of debt			—		12,500

Other current liabilities

Other current liabilities

Other current liabilities	Other current liabilities		43,460		30,960
Total current liabilities	Total current liabilities		289,366		385,263
Long-term debt, net of debt issuance costs	Long-term debt, net of debt issuance costs		422,310		520,785
Deferred tax liabilities, net	Deferred tax liabilities, net		18,786		19,976
Other non-current liabilities	Other non-current liabilities		14,586		16,270
Total liabilities	Total liabilities		745,048		942,294
Commitments and contingencies (Note 13)
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity	Stockholders’ equity						Stockholders’ equity
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)
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)
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; 102,454,268 issued and 101,696,143 outstanding at December 31, 2023; 100,216,494 issued and 99,458,369 outstanding at March 31, 2023
$0.0001 par value: 200,000,000 shares authorized; 102,454,268 issued and 101,696,143 outstanding at December 31, 2023; 100,216,494 issued and 99,458,369 outstanding at March 31, 2023
$0.0001 par value: 200,000,000 shares authorized; 102,454,268 issued and 101,696,143 outstanding at December 31, 2023; 100,216,494 issued and 99,458,369 outstanding at March 31, 2023
Additional paid-in capital	Additional paid-in capital		810,994		745,661
Treasury stock (758,125 shares at December 31, 2022, and March 31, 2022)			(71)		(71)
Treasury stock (758,125 shares at December 31, 2023, and March 31, 2023)
Accumulated other comprehensive loss	Accumulated other comprehensive loss		(44,201)		(39,341)
Accumulated deficit	Accumulated deficit		(161,183)		(191,788)
Total stockholders’ equity	Total stockholders’ equity		605,649		514,571
Non-controlling interest	Non-controlling interest		1,978		1,644
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,352,675	$	1,458,509

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,
			2022		2021		2022		2021
			Three months ended December 31,
			Three months ended December 31,
			Three months ended December 31,								Nine months ended December 31,
		2023
Net revenue
Net revenue
Net revenue	Net revenue		$	162,310	$	216,818	$	525,802	$	563,461
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
Costs of revenue and operating expenses
Costs of revenue and operating expenses
Revenue share
Revenue share
Revenue share
Other direct costs of revenue
Other direct costs of revenue
Other direct costs of revenue	Other direct costs of revenue		9,324		9,090		27,438		21,385
Product development	Product development		14,218		13,755		43,087		40,594
Product development
Product development
Sales and marketing
Sales and marketing
Sales and marketing	Sales and marketing		16,469		15,857		48,017		47,072
General and administrative	General and administrative		39,132		39,924		114,328		105,225
General and administrative
General and administrative
Impairment of goodwill
Impairment of goodwill
Impairment of goodwill
Total costs of revenue and operating expenses	Total costs of revenue and operating expenses		152,513		187,679		470,488		498,645
Income from operations			9,797		29,139		55,314		64,816
Interest and other income / (expense), net
Total costs of revenue and operating expenses
Total costs of revenue and operating expenses
(Loss) income from operations
(Loss) income from operations
(Loss) income from operations
Interest and other income (expense), net
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
Change in fair value of contingent consideration	Change in fair value of contingent consideration		—		(18,200)		—		(40,287)
Interest expense, net	Interest expense, net		(6,913)		(2,195)		(16,224)		(5,307)
Foreign exchange transaction gain / (loss)			17		2,122		(595)		1,603
Interest expense, net
Interest expense, net
Foreign exchange transaction (loss) gain
Foreign exchange transaction (loss) gain
Foreign exchange transaction (loss) gain

Other income / (expense), net	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 / (expense), net

Other income / (expense), net
Total interest and other expense, net
Total interest and other expense, net
Total interest and other expense, net
(Loss) income before income taxes
(Loss) income before income taxes
(Loss) income before income taxes
Income tax (benefit) provision
Income tax (benefit) provision
Income tax (benefit) provision
Net (loss) income
Net (loss) income
Net (loss) income
Less: net (loss) income attributable to non-controlling interest
Less: net (loss) income attributable to non-controlling interest
Less: net (loss) income attributable to non-controlling interest
Net (loss) income attributable to Digital Turbine, Inc.
Net (loss) income attributable to Digital Turbine, Inc.
Net (loss) income attributable to Digital Turbine, Inc.
Other comprehensive loss
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)
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
Foreign currency translation adjustment
Foreign currency translation adjustment
Comprehensive (loss) income
Comprehensive (loss) income
Comprehensive (loss) income
Less: comprehensive income attributable to non-controlling interest
Less: comprehensive income attributable to non-controlling interest
Less: comprehensive income attributable to non-controlling interest
Comprehensive (loss) income attributable to Digital Turbine, Inc.
Comprehensive (loss) income attributable to Digital Turbine, Inc.
Comprehensive (loss) income attributable to Digital Turbine, Inc.
Net (loss) income per common share
Net (loss) income per common share
Net (loss) income per common share
Basic
Basic
Basic	Basic		$	0.04	$	0.07	$	0.31	$	0.16
Diluted	Diluted		$	0.04	$	0.07	$	0.30	$	0.15
Diluted
Diluted
Weighted-average common shares outstanding
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
Basic
Diluted	Diluted		103,348		103,287		103,674		101,346
Diluted
Diluted

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


	Nine months ended December 31,
	2023		2022
Cash flows from operating activities
Net (loss) income	$	(183,942)	$	30,723
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	62,934		60,147
Non-cash interest expense	633		619

Allowance for credit losses	2,575		3,009
Stock-based compensation expense	27,020		19,643
Foreign exchange transaction (gain) loss	(155)		581
Change in fair value of contingent consideration	(372)		—

Right-of-use asset	545		4,868
Deferred income taxes	(9,009)		(2,494)
Impairment of goodwill	147,181		—
(Increase) decrease in assets:
Accounts receivable, gross	(44,427)		32,816
Prepaid expenses and other current assets	(8,299)		(11,397)
Other non-current assets	(5,004)		100
Increase (decrease) in liabilities:
Accounts payable	40,082		(14,113)
Accrued revenue share	(2,836)		(20,324)
Accrued compensation	(3,441)		(13,131)
Other current liabilities	16,963		11,784
Other non-current liabilities	(15)		(5,317)


Net cash provided by operating activities	40,433		97,514
Cash flows from investing activities
Equity investments	(9,678)		(4,000)
Purchase price adjustment related to business acquisition	65		(2,708)
Capital expenditures	(17,384)		(18,598)
Net cash used in investing activities	(26,997)		(25,306)
Cash flows from financing activities

Proceeds from borrowings	25,000		18,000
Payment of debt issuance costs	—		(94)

Repayment of debt obligations	(62,134)		(129,500)
Acquisition of non-controlling interest in consolidated subsidiaries	(3,751)		—
Payment of withholding taxes for net share settlement of equity awards	(1,176)		(6,202)
Options exercised	2,786		1,095
Net cash used in financing activities	(39,275)		(116,701)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(254)		(2,808)
Net change in cash, cash equivalents, and restricted cash	(26,093)		(47,301)
Cash, cash equivalents, and restricted cash, beginning of period	75,558		127,162
Cash, cash equivalents, and restricted cash, end of period	$	49,465	$	79,861

Supplemental disclosure of cash flow information
Interest paid	$	22,876	$	12,912
Income taxes paid	$	536	$	3,917
Supplemental disclosure of non-cash activities
Common stock issued for the acquisition of Fyber	$	—	$	50,000
Unpaid cash consideration for the acquisition of Fyber Minority Interest	$	—	$	2,578

Fair value of unpaid contingent consideration in connection with business acquisitions	$	2,366	$	2,738

Table of Contents

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
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
Foreign currency translation — — — — — — — (5,749) — 207 (5,542)
Stock-based compensation expense — — — — — — 6,463 — — — 6,463
Shares issued:
Exercise of stock options 380,176 — — — — — 296 — — — 296
Issuance of restricted shares and vesting of restricted units 7,763 — — — — — — — — — —
Shares for acquisition of Fyber 1,205,982 — — — — — 50,000 — — — 50,000
Payment of withholding taxes related to the net share settlement of equity awards — — — — — — (4,357) — — — (4,357)
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
Foreign currency translation — — — — — — — (9,239) — (7) (9,246)
Stock-based compensation expense — — — — — — 6,142 — — — 6,142
Shares issued:
Exercise of stock options 198,778 — — — — — 643 — — — 643
Issuance of restricted shares and vesting of restricted units 29,035 — — — — — — — — — —
Payment of withholding taxes related to the net share settlement of equity awards — — — — — — (1,572) — — — (1,572)
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 — — — — — — — — — —
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


	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, 2023	99,458,369	$	10	100,000	$	100	758,125	$	(71)	$	822,217	$	(41,945)	$	(175,115)	$	2,059	$	607,255
Net loss	—	—		—	—		—	—		—		—		(8,179)		(220)		(8,399)
Foreign currency translation	—	—		—	—		—	—		—		(6,846)		—		739		(6,107)
Stock-based compensation expense	—	—		—	—		—	—		10,017		—		—		—		10,017
Shares issued:
Exercise of stock options	378,507	—		—	—		—	—		731		—		—		—		731
Issuance of restricted shares and vesting of restricted units	449,781	—		—	—		—	—		—		—		—		—		—

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	—	—		—	—		—	—		(931)		—		—		—		(931)
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	—	—		—	—		—	—		—		—		(161,482)		—		(161,482)
Foreign currency translation	—	—		—	—		—	—		—		(1,287)		—		—		(1,287)
Stock-based compensation expense	—	—		—	—		—	—		9,924		—		—		—		9,924
Shares issued:
Exercise of stock options	575,599	—		—	—		—	—		1,998		—		—		—		1,998
Issuance of restricted shares and vesting of restricted units	226,890	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(106)		—		—		—		(106)
Balance at September 30, 2023	101,089,146	$	10	100,000	$	100	758,125	$	(71)	$	842,677	$	(50,078)	$	(344,776)	$	—	$	447,862
Net loss	—	—		—	—		—	—		—		—		(14,061)		—		(14,061)
Foreign currency translation	—	—		—	—		—	—		—		3,585		—		—		3,585
Stock-based compensation expense	—	—		—	—		—	—		8,395		—		—		—		8,395
Shares issued:
Exercise of stock options	29,225	—		—	—		—	—		57		—		—		—		57
Issuance of restricted shares and vesting of restricted units	577,772	—		—	—		—	—		—		—		—		—		—




Payment of withholding taxes related to the net share settlement of equity awards	—	—		—	—		—	—		(140)		—		—		—		(140)
Balance at December 31, 2023	101,696,143	$	10	100,000	$	100	758,125	$	(71)	$	850,989	$	(46,493)	$	(358,837)	$	—	$	445,698

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
Balance at March 31, 2021			89,790,086	$	10	100,000	$	100	758,125	$	(71)	$	373,310	$	(903)	$	(227,334)	$	—	$	145,112
		Common Stock Shares																				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
Net income	Net income		—	—		—	—		—	—		—		—		14,284		(31)		14,253
Foreign currency translation	Foreign currency translation		—	—		—	—		—	—		—		(20,019)		—		(762)		(20,781)
Stock-based compensation expense	Stock-based compensation expense		—	—		—	—		—	—		3,705		—		—		—		3,705
Shares issued:	Shares issued:
Exercise of stock options	Exercise of stock options		178,127	—		—	—		—	—		695		—		—		—		695
Exercise of stock options
Exercise of stock options
Vesting of restricted and performance stock units	Vesting of restricted and performance stock units		207,758	—		—	—		—	—		—		—		—		—		—
Shares for acquisition of Fyber	Shares for acquisition of Fyber		4,716,935	—		—	—		—	—		359,233		—		—		—		359,233
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)
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

Payment of withholding taxes related to the net share settlement of equity awards
Balance at June 30, 2022
Net income
Foreign currency translation	Foreign currency translation		—	—		—	—		—	—		—		(15,799)		—		(93)		(15,892)
Stock-based compensation expense	Stock-based compensation expense		—	—		—	—		—	—		5,925		—		—		—		5,925
Shares issued:	Shares issued:
Exercise of stock options	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
Net income			—	—		—	—		—	—		—		—		7,014		48		7,062
Foreign currency translation			—	—		—	—		—	—		—		(8,330)		—		(59)		(8,389)
Stock-based compensation expense			—	—		—	—		—	—		5,739		—		—		—		5,739
Shares issued:
Exercise of stock options
Exercise of stock options	Exercise of stock options		201,015	—		—	—		—	—		659		—		—		—		659
Issuance of restricted shares and vesting of restricted units	Issuance of restricted shares and vesting of restricted units		70,043	—		—	—		—	—		—		—		—		—		—

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)
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

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
Balance at September 30, 2022
Net income
Foreign currency translation
Stock-based compensation expense
Shares issued:
Exercise of stock options
Exercise of stock options
Exercise of stock options
Issuance of restricted shares and vesting of restricted units

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

Payment of withholding taxes related to the net share settlement of equity awards
Balance at December 31, 2022

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~~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 December 31, 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 months ended December 31, ~~2022,~~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, conflict~~events such as the conflicts in Ukraine ~~as well as~~and Israel, inflation, disruptions in supply chains, recessionary concerns impacting the ~~continued effects of COVID-19 pandemic~~markets in which the Company operates, and others, on the Company’s critical and significant accounting

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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 earn out was not achieved for the calendar year ended December 31, 2022. The Company expects to pay approximately $1,100 for the earn out for the calendar year ended December 31, 2023.

~~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, and (4) ~~and~~ goodwill of ~~$5,008.~~$4,957.

~~The Company recognized costs related to the In App Acquisition of $162 and $207, respectively, for~~During the three ~~and nine~~ months ended December 31, ~~2022,~~2023, the Company reassessed the fair value of the purchase price liability based on current forecasts. As a result of this assessment, no additional remeasurement was recorded. As of December 31, 2023, the total remeasurement gain was equal to $372. 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). income.

~~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~~Additionally, 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 yearthree months 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,~~2023, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by ~~$2,572, as presented in the table above.~~$65 (see Note 6). The Company made these measurement period adjustments to reflect ~~facts~~the release and ~~circumstances that existed as~~refund of escrow amounts in relation to the acquisition purchase price adjustment.

Note 4—Fair Value Measurements

Equity securities without readily determinable fair values

During the three months ended December 31, 2023, the Company purchased certain non-marketable equity securities for total proceeds of $9,138. As of December 31, 2023 and March 31, 2023, the carrying value 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~~Company’s investments in equity securities without readily determinable fair values oftotaled $17,637 and $8,499, respectively, and is included in “Other non-current assets” in the ~~net assets acquired was recorded as goodwill and was assigned to the~~accompanied consolidated balance sheet. 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.~~

1~~The purchase consideration was translated using the Euro-to-United States (“U.S.”) dollar exchange rate~~investments in ~~effect on the acquisition closing date, May 25, 2021, of approximately €1.00 to $1.22.~~these equity securities without readily determinable fair values represents a strategic

1110

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~~The identifiable intangible assets consist~~investment in one of ~~publisher relationships, developed technology, trade names, customer relationships, and~~the largest independent Android application stores.

As the non-marketable equity securities are investments in a ~~favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives~~privately held company without a readily determinable fair value, the Company elected the measurement alternative to account for these investments. Under the measurement alternative, the carrying value of ~~20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The below-market favorable lease was derived~~the non-marketable equity securities are adjusted based on price changes from ~~Fyber’s office lease~~observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in ~~Berlin, Germany and, per ASC 842,~~ ~~Leases~~carrying value are recorded within other income (loss), ~~will be combined with Fyber's right-of-use asset for that lease and will be amortized over~~net in the ~~remaining life~~Company's condensed consolidated statement of ~~that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:~~operations.

•~~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~~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. Pursuant2023, there were no adjustments 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 faircarrying value of ~~contingent consideration on the condensed consolidated statement of operations and comprehensive income / (loss) for the fiscal second quarter ended September 30, 2021.~~equity securities without readily determinable fair values.

Fair Value Measurements

The Company ~~paid~~uses a three-tier fair value hierarchy, which prioritizes the ~~cash consideration amounts~~inputs used in the valuation methodologies in measuring fair value:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2. Significant other inputs that are directly or indirectly observable in the marketplace.

Level3. Significant unobservable inputs which are supported by little or no market activity.

As of December 31, 2023 and March 31, 2023, Level 1 equity securities recorded at fair value were ~~due at closing~~$546 and ~~on October 26, 2021, with a combination of available cash-on-hand~~$0, respectively, 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.are classified as other non-current assets.

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. Note 5—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.

•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
ODS AGP Eliminations Consolidated
Net revenue $ 96,316 $ 67,407 $ (1,413) $ 162,310
License fees and revenue share 57,555 17,228 (1,413) 73,370
Segment profit $ 38,761 $ 50,179 $ — $ 88,940

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			Three months ended December 31, 2021
			ODS		AGP		Eliminations		Consolidated
		Three months ended December 31, 2023											Three months ended December 31, 2023
		ODS									ODS	AGP	Eliminations	Consolidated
Net revenue	Net revenue		$	133,594	$	89,113	$	(5,889)	$	216,818
License fees and revenue share			86,504		28,438		(5,889)		109,053
Revenue share
Segment profit	Segment profit		$	47,090	$	60,675	$	—	$	107,765


			Nine months ended December 31, 2022								Three months ended December 31, 2022
			ODS		AGP		Eliminations		Consolidated
		ODS										ODS	AGP	Eliminations	Consolidated
Net revenue	Net revenue		$	323,419	$	208,029	$	(5,646)	$	525,802
License fees and revenue share			185,791		57,473		(5,646)		237,618
Revenue share
Segment profit	Segment profit		$	137,628	$	150,556	$	—	$	288,184


			Nine months ended December 31, 2021
			ODS		AGP		Eliminations		Consolidated
		Nine months ended December 31, 2023											Nine months ended December 31, 2023
		ODS									ODS	AGP	Eliminations	Consolidated
Net revenue	Net revenue		$	383,426	$	192,764	$	(12,729)	$	563,461
License fees and revenue share			232,122		64,976		(12,729)		284,369
Revenue share
Segment profit	Segment profit		$	151,304	$	127,788	$	—	$	279,092


	Nine months ended December 31, 2022
	ODS		AGP		Eliminations		Consolidated
Net revenue	$	323,419	$	208,029	$	(5,646)	$	525,802
Revenue share	185,791		57,473		(5,646)		237,618
Segment profit	$	137,628	$	150,556	$	—	$	288,184

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	United States and Canada	$	27,029	$	25,946
United States and Canada
United States and Canada
Europe, Middle East, and Africa
Europe, Middle East, and Africa
Europe, Middle East, and Africa	Europe, Middle East, and Africa	11,709		5,086
Asia Pacific and China	Asia Pacific and China	21		54
Mexico, Central America, and South America		—		—
Asia Pacific and China
Asia Pacific and China

Consolidated property and equipment, net	Consolidated property and equipment, net	$	38,759	$	31,086

Consolidated property and equipment, net

Consolidated property and equipment, net


	December 31, 2023		March 31, 2023
United States and Canada	$	139,588	$	122,377
Europe, Middle East, and Africa	186,493		252,524
Asia Pacific and China	4,450		4,731

Consolidated intangible assets, net	$	330,531	$	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:

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	Three months ended December 31, 2023
	ODS		AGP		Total
United States and Canada	$	37,927	$	33,671	$	71,598
Europe, Middle East, and Africa	42,947		11,290		54,237
Asia Pacific and China	12,823		4,201		17,024
Mexico, Central America, and South America	601		19		620
Elimination	—		—		(845)
Consolidated net revenue	$	94,298	$	49,181	$	142,634


	Three months ended December 31, 2022
	ODS		AGP		Total
United States and Canada	$	38,949	$	29,911	$	68,860
Europe, Middle East, and Africa	42,321		26,449		68,770
Asia Pacific and China	12,975		10,564		23,539
Mexico, Central America, and South America	2,071		483		2,554
Elimination	—		—		(1,413)
Consolidated net revenue	$	96,316	$	67,407	$	162,310


			Three months ended December 31, 2021						Nine months ended December 31, 2023
			ODS		AGP		Total
		ODS								ODS	AGP	Total
United States and Canada	United States and Canada		$	74,431	$	45,238	$	119,669
Europe, Middle East, and Africa	Europe, Middle East, and Africa		35,667		34,297		69,964
Asia Pacific and China	Asia Pacific and China		19,877		8,547		28,424
Mexico, Central America, and South America	Mexico, Central America, and South America		3,619		1,031		4,650
Elimination	Elimination		—		—		(5,889)
Consolidated net revenue	Consolidated net revenue		$	133,594	$	89,113	$	216,818


	Nine months ended December 31, 2022
	ODS		AGP		Total
United States and Canada	$	152,890	$	115,957	$	268,847
Europe, Middle East, and Africa	125,463		68,118		193,581
Asia Pacific and China	39,989		22,837		62,826
Mexico, Central America, and South America	5,077		1,117		6,194
Elimination	—		—		(5,646)
Consolidated net revenue	$	323,419	$	208,029	$	525,802

Nine months ended December 31, 2021
ODS AGP Total
United States and Canada $ 220,662 $ 96,110 $ 316,772
Europe, Middle East, and Africa 96,318 74,257 170,575
Asia Pacific and China 54,636 20,090 74,726
Mexico, Central America, and South America 11,810 2,307 14,117
Elimination — — (12,729)
Consolidated net revenue $ 383,426 $ 192,764 $ 563,461

5. Note 6—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



Purchase price adjustment	—		(65)		(65)
Foreign currency translation	—		(3,275)		(3,275)
Impairment of goodwill	$	—	$	(147,181)	$	(147,181)
Goodwill as of December 31, 2023	$	80,176	$	330,879	$	411,055

1613

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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.

During the three months ended September 30, 2023, as a result of sustained decline in the quoted market price of the Company’s common stock, increase in interest rates, and the Company’s forecasted operating trends, the Company identified interim indicators of impairment related to the goodwill assigned to the AGP reporting unit. 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 for the AGP reporting unit for the three months ended September 30, 2023. There was no impairment of goodwill for the ODS reporting unit during the fiscal year.

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.

For the three months ended December 31, 2023, no goodwill impairment charges were recorded.

As of December 31, 2023, the Company recorded a purchase price adjustment of $65 associated with the acquisition of In App Video.

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 December 31, 2023

		Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
		Weighted-Average Remaining Useful Life
		Weighted-Average Remaining Useful Life
		Weighted-Average Remaining Useful Life								Cost	Accumulated Amortization	Net
Customer relationships	Customer relationships	12.11 years	$	170,030	$	(34,935)	$	135,095
Developed technology	Developed technology	5.53 years	146,419		(33,601)		112,818
Trade names	Trade names	2.58 years	69,922		(22,503)		47,419
Publisher relationships	Publisher relationships	18.07 years	108,821		(8,972)		99,849
Total	Total		$	495,192	$	(100,011)	$	395,181


			As of March 31, 2022							As of March 31, 2023
			Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
		Weighted-Average Remaining Useful Life									Weighted-Average Remaining Useful Life	Cost	Accumulated Amortization	Net
Customer relationships	Customer relationships		12.01 years	$	171,060	$	(19,636)	$	151,424
Developed technology	Developed technology		6.26 years	144,581		(18,103)		126,478
Trade names	Trade names		3.33 years	69,205		(8,523)		60,682
Publisher relationships	Publisher relationships		18.77 years	106,514		(4,509)		102,005
Total	Total			$	491,360	$	(50,771)	$	440,589

The Company recorded amortization expense of $15,936 and $48,282, respectively, during the three and nine months ended December 31, 2023, and $16,120 and $48,422, respectively, during the three and nine months ended December 31, 2022, ~~and $13,773 and $34,873, respectively, during the three and nine months ended December 31, 2021,~~ in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss). As

Table 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.Contents

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


~~Fiscal year 2023~~	$	~~16,090~~
Fiscal year 2024	$	~~64,361~~16,102
Fiscal year 2025	~~55,740~~55,759
Fiscal year 2026	~~41,491~~41,484
Fiscal year 2027	~~35,372~~35,356
Fiscal year 2028	35,356
Thereafter	~~182,127~~146,474
Total	$	~~395,181~~330,531

6. Note 7—Accounts Receivable


		December 31, 2023					December 31, 2023	March 31, 2023
			December 31, 2022		March 31, 2022

Billed
Billed
Billed	Billed		$	180,491	$	189,208
Unbilled	Unbilled		60,424		82,324
Allowance for credit losses	Allowance for credit losses		(9,914)		(8,393)
Accounts receivable, net	Accounts receivable, net		$	231,001	$	263,139

Billed accounts receivable represent amounts billed to customers for which the Company has an unconditional right to consideration. Unbilled accounts receivable ~~represents~~represent revenue recognized but billed after period-end. All unbilled receivables as of December 31, ~~2022 and March 31, 2022,~~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~~$1,348 and ~~$2,932~~$2,575 of ~~bad debt~~credit loss expense during the three and nine months ended December 31, ~~2022,~~2023, respectively, and ~~$512~~$683 and ~~$693~~$2,932 of ~~bad debt~~credit loss expense during the three and nine months ended December 31, ~~2021,~~2022, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss).

7. Note 8—Property and Equipment


		December 31, 2023					December 31, 2023	March 31, 2023
			December 31, 2022		March 31, 2022

Computer-related equipment
Computer-related equipment
Computer-related equipment	Computer-related equipment		$	3,469	$	2,855
Developed software	Developed software		59,045		41,011
Furniture and fixtures	Furniture and fixtures		1,947		1,836
Leasehold improvements	Leasehold improvements		3,637		3,687
Property and equipment, gross	Property and equipment, gross		68,098		49,389
Accumulated depreciation	Accumulated depreciation		(29,339)		(18,303)
Property and equipment, net	Property and equipment, net		$	38,759	$	31,086

Depreciation expense was $5,073 and $14,657 for the three and nine months ended December 31, 2023, respectively, and $4,014 and $11,722 for the three and nine months ended December 31, 2022, ~~respectively, and $2,192 and $6,073~~respectively. Depreciation expense for the three and nine months ended December 31, ~~2021, respectively.~~2023, includes $4,501 and $10,820, respectively, related to internal-use software included in general and administrative expense and $572 and $3,837, 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 months ended December 31, 2022, includes $2,394 and $7,139, respectively, related to internal-use software included in general and administrative expense and $1,620 and $4,583, respectively, related to internally-developed software to be sold, leased, or otherwise ~~marketed included in other direct costs~~

Table of revenue. Depreciation expense for the three and nine months ended December 31, 2021, includes $1,316 and $3,137, respectively, related to internal-use software included in general and administrative expense and $1,510 and $2,936, respectively, related to internally-developed software to be sold, leased, or otherwise Contents

marketed included in other direct costs of revenue.

Cloud Computing Arrangements

~~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~~As of December 31, ~~2022, which is calculated using~~2023, the ~~present~~net carrying value of ~~lease liabilities less any lease incentives received from landlords~~capitalized implementation costs related to cloud computing arrangements that were incurred during the application development stage was $7,302, of which $1,239 was included in prepaid expenses and ~~any deferred rent liability balances as~~other current assets and $6,063 was included in other non-current assets. As of March 31, 2023, the ~~date~~net carrying value of ~~implementation. The discount rates used~~capitalized implementation costs related to ~~calculate~~cloud computing arrangements that were incurred during the ~~imputed interest above range from 2.00% to 6.75%~~application development stage was $736, and ~~the weighted-average remaining lease term is 3.99 years.~~was included in other non-current assets.

As of December 31, 2023 and 2022, amortization expenses for implementation costs of cloud-based computing arrangements were $310 and $0, respectively.

9. Note 9—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 %


	December 31, 2023
	Balance		Interest Rate		Unused Line Fee
Revolver (subject to variable interest rate)	$	376,000	7.49	%	0.30	%

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


		December 31, 2023					December 31, 2023	March 31, 2023

Revolver
Revolver
Revolver
Less: Debt issuance costs

			December 31, 2022		March 31, 2022

Revolver			$	425,134	$	524,134
Less: Debt issuance costs			(2,824)		(3,349)
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

Long-term debt, net of debt issuance costs

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.

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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,~~2023, the Company had $376,000 drawn against the New Credit Agreement, classified as long-term debt on the condensed consolidated balance sheets, with remaining unamortized debt issuance costs of $1,966.

As of December 31, 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 secured net 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 secured 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,~~2023, the interest rate was ~~6.12%~~7.49% 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,~~2023, the Company had ~~$174,866~~$149,000 available to draw on the revolving line of credit under the New Credit Agreement, ~~and~~excluding the accordion feature, subject to the required covenants. As of December 31, 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 income / (loss), as follows:


			Three months ended December 31,				Nine months ended December 31,
			2022		2021		2022		2021
Interest income / (expense), net			$	(6,671)	$	(1,940)	$	(15,538)	$	(4,565)
			Three months ended December 31,
			Three months ended December 31,
			Three months ended December 31,								Nine months ended December 31,
		2023
Interest expense, net
Interest expense, net
Interest expense, net
Amortization of debt issuance costs
Amortization of debt issuance costs
Amortization of debt issuance costs	Amortization of debt issuance costs		(211)		(190)		(619)		(500)
Unused line of credit fees and other	Unused line of credit fees and other		(31)		(65)		(67)		(242)
Total interest income / (expense), net			$	(6,913)	$	(2,195)	$	(16,224)	$	(5,307)
Unused line of credit fees and other
Unused line of credit fees and other
Total interest expense, net
Total interest expense, net
Total interest expense, net

~~10.~~ Note 10—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~~2023, 4,407,643 shares of common stock were available for issuance as future awards under the ~~Company’~~s 2020 Plan.

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Stock Options

The following table summarizes stock option activity:


		Number of Shares							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, 2023

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
Granted	Granted		1,323,986	29.98
Exercised	Exercised		(895,450)	2.19
Exercised
Exercised
Forfeited / Expired	Forfeited / Expired		(322,512)	47.21
Options outstanding as of December 31, 2022			7,229,324	$	12.50	6.20	$	64,889
Forfeited / Expired
Forfeited / Expired
Options outstanding as of December 31, 2023
Options outstanding as of December 31, 2023
Options outstanding as of December 31, 2023

Exercisable as of December 31, 2022			5,659,738	$	7.34	5.44	$	62,310
Exercisable as of December 31, 2023
Exercisable as of December 31, 2023
Exercisable as of December 31, 2023

At December 31, ~~2022,~~2023, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was ~~$26,721,~~$16,221, with an expected remaining weighted-average recognition period of ~~2.16~~1.88 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 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				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, 2023

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
Granted	Granted		1,604,925	23.08
Vested	Vested		(214,789)	27.51
Forfeited	Forfeited		(41,463)	40.73
Unvested restricted shares outstanding as of December 31, 2022			1,721,974	$	24.87
Unvested restricted shares outstanding as of December 31, 2023

At December 31, ~~2022,~~2023, total unrecognized stock-based compensation expense related to RSUs, PSUs and RSAs, net of estimated forfeitures was ~~$34,390,~~$44,831, with an expected remaining weighted-average recognition period of ~~2.32~~2.03 years.

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Stock-Based Compensation Expense

Stock-based compensation expense for the three and nine months ended December 31, ~~2022,~~2023, was $~~7,620~~7,987 and $~~19,643~~27,020, 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 months ended December 31, ~~2021,~~2022, was ~~$5,739~~$7,620 and ~~$15,369,~~$19,643, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income / (loss). For the three and nine months ended December 31, 2023, the Company determined that achievement of the performance goals for certain PSU’s was improbable, and as a result, compensation expense of $985 related to the PSUs granted was reversed.

~~11.~~Note 11—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 using the applicable methods.

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


	Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022
Net (loss) income per common share	(14,061)		4,062		(183,942)		30,723
Less: net (loss) income attributable to non-controlling interest	—		43		(220)		118
Net (loss) income attributable to Digital Turbine, Inc.	$	(14,061)	$	4,019	$	(183,722)	$	30,605
Weighted-average common shares outstanding, basic	101,376		99,108		100,643		98,623
Basic net (loss) income per common share attributable to Digital Turbine, Inc.	$	(0.14)	$	0.04	$	(1.83)	$	0.31
Weighted-average common shares outstanding, diluted	101,376		103,348		100,643		103,674
Diluted net (loss) income per common share attributable to Digital Turbine, Inc.	$	(0.14)	$	0.04	$	(1.83)	$	0.30

Potentially dilutive outstanding securities of 2,082,662 and 3,157,800 for the ~~dilutive effects of employee stock-based awards outstanding during the period.~~

~~Stock options totaling~~three and nine months ended December 31, 2023, respectively, and 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~~were excluded from the ~~three and nine months ended December 31, 2021, respectively, were outstanding but not included in the calculation~~computation of diluted ~~earnings~~net income per share because ~~inclusion of the options in the calculation~~their effect would ~~be antidilutive due to their exercise prices exceeding the average market price of the common shares during the periods.~~have been anti-dilutive.

Note 12—Income Taxes

The ~~following table sets forth the computation of basic and diluted net 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

~~12.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 months ended December 31, 2023, a tax benefit of $2,845 and $5,097, respectively, resulted in an effective tax rate of 16.8% and 2.7%, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to the non-deductible goodwill impairment charge, tax limitations on deductions for compensation, state tax benefits and foreign rate differences.

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

the statutory tax rate primarily relate to return to provision true-ups filed induring the ~~current~~ period.

During the three and nine months ended December 31, 2021, a tax provision of $3,718 and $4,799 resulted in an effective tax rate of 34.5% and 23.7%, 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 13—Commitments and Contingencies

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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~~$278,600 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.

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 on the motion to dismiss is complete as of November 13, 2023. The court has not yet issued a ruling on the Company’s motion to dismiss the amended complaint. 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.

As previously disclosed, on July 25, 2023, a stockholder (the “Plaintiff”) filed a Verified Stockholder Derivative and Class Action Complaint captioned Garfield v. Gyani, et al., C.A. No. 2023-0755-JTL (the “Action”) in the Delaware Court of Chancery (the “Court”). Plaintiff alleged that in May 2023, the Compensation and Human Capital Management Committee of the Company’s Board of Directors (the “Board”) granted the Company’s Chief Executive Officer certain equity awards that allegedly exceeded annual limits in the Company’s 2020 Equity Incentive Plan. Defendants denied any and all allegations that they engaged in any wrongdoing. On September 15, 2023, the Board amended the terms of the awards to the Company’s Chief Executive Officer to clarify that any awards exceeding the annual limit were void, thereby mooting the Plaintiff’s claims. The Plaintiff and the Company agreed that the Board’s amendment of the awards rendered the Plaintiff’s claims moot. The Company agreed to pay $180 to settle the Plaintiff’s claim to entitlement to an award of attorneys’ fees and reimbursement of expenses. On December 20, 2023, the Court entered a Stipulation and Order of Dismissal in the Action to reflect the settlement.

Note 14—Subsequent Events

The Company evaluated subsequent events through the issuance date of the accompanying condensed consolidated financial statements, which was February 7, 2024. There were no events or transactions during the subsequent event reporting period that required disclosure in the condensed consolidated financial statements, other than:

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The Company entered into a Third Amendment to the New Credit Agreement on February 5, 2024 to provide further financing flexibility to fund growth initiatives and meet general corporate obligations. The Third Amendment to the New Credit Agreement amended the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant. In addition, it increased the limit of permitted, other investments, including equity investments and joint ventures from $20,000 in the aggregate in any fiscal year of the Company to $75,000 and increased the annual interest rate, which will be SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.

On February 5, 2024, the Company entered into an agreement with One Store Co., Ltd. (“One Store”), whereby the Company will invest $10,000 into One Store in exchange for shares of common stock of One Store, the largest alternative app store in South Korea. In addition, the Company agreed to make additional investments of $10,000 and $10,000 upon the achievement of two distinct performance milestones. Further, the Company agreed to invest $5,000 in a joint venture (“European Joint Venture”) upon achievement of the first above performance milestone and an additional $10,000 into the European Joint Venture upon achievement of the second performance milestone. It is anticipated that the Company would receive a 49.9% interest in the European Joint Venture. The Company expects to fund the initial investment of $10,000 during the three months ended March 31, 2024.

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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,~~We are impacted by the volume of sales of new mobile devices by our partners, which wehas been below our expectations. We believe this is is driven by the impact of inflation, ~~and recession fears~~economic uncertainty, and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to result in, a decrease ~~or delay~~in mobile phone sales volume. Continued weakness in the sale of advertising budgets and spending. While the slowdown in digital advertising spending is varied and depends on the geography, advertising type, operating system, and business vertical, the current economic environmentnew mobile devices is likely to continue to impact our business, financial condition, and results of operations, the full impact of which remains uncertain at this time.

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

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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 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 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, particularly expectations of revenue and cash flow growth rates in future periods and discount rates, could result in goodwill impairment charges.

As of September 30, 2023, the Company determined that the sustained decline in the quoted market price of the Company’s common stock and current and 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 amounts. Therefore, the Company evaluated goodwill for impairment, which resulted in the recognition of an impairment charge for our AGP reporting unit of $147,181 during the three months ended September 30, 2023. There was no goodwill impairment charge recorded during the three months ended December 31, 2023.

In addition to evaluating goodwill for impairment when events or circumstances indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value, the Company also evaluates goodwill for impairment on an annual basis. The Company’s next annual evaluation of goodwill for impairment will be as of March 31, 2024. Given the goodwill impairment recorded for our AGP reporting unit during the three months ended September 30, 2023, material reductions in expected growth rates or increases in the discount rate could result in further goodwill impairments.

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 entered into a Third Amendment to the New Credit Agreement on February 5, 2024 to provide further financing flexibility to fund strategic growth initiatives and meet general corporate obligations. The Third Amendment to the New Credit Agreement amended the maximum consolidated secured net leverage

Table of ~~December 31, 2022, we considered~~Contents

covenant and the ~~developments discussed~~minimum consolidated net interest coverage covenant. In addition, it increased the limit of permitted, other investments, including equity investments and joint ventures from $20,000 in the aggregate in any fiscal year of the Company to $75,000 and increased the annual interest rate, which will be SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.

On February 5, 2024, the Company entered into an agreement with One Store Co., Ltd. (“One Store”), whereby the Company will invest $10,000 into One Store in exchange for shares of common stock of One Store, the largest alternative app store in South Korea. In addition, the Company agreed to make additional investments of $10,000 and $10,000 upon the achievement of two distinct performance milestones. Further, the Company agreed to invest $5,000 in a joint venture (“European Joint Venture”) upon achievement of the first above ~~our current operating results,~~performance milestone and ~~our estimates~~an additional $10,000 into the European Joint Venture upon achievement of ~~future operating results. We concluded there were no triggering events that indicated it was more likely than not~~the second performance milestone. It is anticipated that the ~~fair values~~Company would receive a 49.9% interest in the European Joint Venture. The Company expects to fund the initial investment of $10,000 during the three months ended March 31, 2024.

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 ~~reporting units were less than their respective carrying values or that~~existing enterprise-wide operating systems. Additionally, a new human resource system was also implemented to streamline employee management processes and enhance organizational effectiveness.We are also undertaking the consolidation of existing ancillary systems and deploying other new platforms and systems to improve our ~~finite-lived intangible assets were impaired. We will continue to closely monitor macroeconomic conditions~~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 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 systems and certain other ancillary platforms and systems. The Company completed 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 $4,763 and $7,291 of business transformation costs in the three and nine months ended December 31, 2023, respectively. These costs are recorded in General and Administrative expenses and Product Development expenses in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

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RESULTS OF OPERATIONS

~~(Unaudited)~~

The following table sets forth our results of operations for the three and six months ended December 31, 2023 and 2022 (in thousands):


	Three months ended December 31,						Nine months ended December 31,
	2023		2022		% of Change		2023		2022		% of Change
Net revenue	$	142,634	$	162,310	(12.1)	%	$	432,259	$	525,802	(17.8)	%
Costs of revenue and operating expenses
Revenue share	70,364		73,370		(4.1)	%	208,675		237,618		(12.2)	%
Other direct costs of revenue	8,614		9,324		(7.6)	%	27,244		27,438		(0.7)	%
Product development	13,036		14,218		(8.3)	%	42,873		43,087		(0.5)	%
Sales and marketing	14,432		16,469		(12.4)	%	45,546		48,017		(5.1)	%
General and administrative	45,455		39,132		16.2	%	127,339		114,328		11.4	%
Impairment of goodwill	—		—		100.0	%	147,181		—		100.0	%
Total costs of revenue and operating expenses	151,901		152,513		(0.4)	%	598,858		470,488		27.3	%
(Loss) income from operations	(9,267)		9,797		(194.6)	%	(166,599)		55,314		(401.2)	%
Interest and other income (expense), net
Change in fair value of contingent consideration	—		—		100.0	%	372		—		100.0	%
Interest expense, net	(7,666)		(6,913)		10.9	%	(22,900)		(16,224)		41.1	%
Foreign exchange transaction (loss) gain	338		17		1888.2	%	155		(595)		(126.1)	%
Loss on extinguishment of debt	—		—				—		—		(126.1)	%
Other income / (expense), net	(311)		8		(3987.5)	%	(67)		392		(117.1)	%
Total interest and other expense, net	(7,639)		(6,888)		10.9	%	(22,440)		(16,427)		36.6	%
(Loss) income before income taxes	(16,906)		2,909		(681.2)	%	(189,039)		38,887		(586.1)	%
Income tax (benefit) provision	(2,845)		(1,153)		146.7	%	(5,097)		8,164		(162.4)	%
Net (loss) income	(14,061)		4,062		(446.2)	%	(183,942)		30,723		(698.7)	%

Net revenue


		Three months ended December 31,

			Three months ended December 31,						Nine months ended December 31,
			2022		2021		% of Change		2022		2021		% of Change			2023				2022					% of Change						2023						2022						% of Change
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
On Device Solutions																	$	94,298			$	96,316				(2.1)		%				$	291,608					$	323,419					(9.8)	%
App Growth Platform	App Growth Platform		67,407		89,113		(24.4)	%	208,029		192,764		7.9	%	App Growth Platform		49,181		67,407			67,407		(27.0)				(27.0)		%				144,323		208,029					208,029		(30.6)			(30.6)	%
Elimination	Elimination		(1,413)		(5,889)		(76.0)	%	(5,646)		(12,729)		(55.6)	%	Elimination		(845)		(1,413)			(1,413)		(40.2)				(40.2)		%				(3,672)		(5,646)					(5,646)		(35.0)			(35.0)	%
Total net revenue	Total net revenue		$	162,310	$	216,818	(25.1)	%	$	525,802	$	563,461	(6.7)	%	Total net revenue		$	142,634	$		$	162,310	(12.1)				(12.1)		%				$	432,259	$				$	525,802		(17.8)			(17.8)	%

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

Over the three-month comparative periods, net revenue decreased by ~~$54,508~~$19,676 or ~~25.1%~~12.1%, and over the nine-month comparative periods, net revenue decreased by ~~$37,659~~$93,543 or ~~6.7%~~17.8%. See the segment discussion below for further details regarding net revenue.

Table of Contents

On Device Solutions

ODS revenue for the three months ended December 31, ~~2022,~~2023, decreased by ~~$37,278~~$2,018 or ~~27.9%~~2.1% compared to the three months ended December 31, ~~2021.~~2022. Revenue from content media declined by approximately ~~$23,840 million,~~$3,332 primarily due to the ~~ending~~end of a carrier partnership that resulted in lower daily active users ~~(“DAU”)~~ on prepaid devices. ~~In addition, weak~~Revenue from application media increased by approximately $1,314. The increase was primarily driven by higher strategic demand ~~due in part to lower new device volume~~and revenue-per-device in the United States ~~and overall advertising spending reductions, resulted~~(“US”) market. This increase was partially offset by lower device volume in ~~a decline in application media revenue of approximately $13,466.~~our international markets.

ODS revenue for the nine months ended December 31, ~~2022,~~2023, decreased by ~~$60,007~~$31,811 or ~~15.7%~~9.8% compared to the nine months ended December 31, ~~2021.~~2022. Revenue from content media declined by approximately ~~$57,140~~$29,656 for the same reason as noted above for the three months ended December 31, ~~2022.~~2023. In addition, application media revenue declined by approximately ~~$2,866~~$2,155 for the nine months ended December 31, ~~2022. This decrease~~2023. The decline in revenue in application media was primarily due to lower device volumes in the ~~same reason as noted for the three~~US and internationally, partially offset by higher revenue-per-device, resulting in a $2,908 decrease in revenue. This decrease was partially offset by higher revenue from strategic demand customers of approximately $754. The nine months ended December 31, 2022 ~~partially offset by~~included revenue of $13,700 for two contract amendments ~~during the nine months ended December 31, 2022.~~with strategic demand customers.

App Growth Platform

AGP revenue for the three months ended December 31, ~~2022,~~2023, decreased by ~~$21,706~~$18,226 or ~~24.4%~~27.0% compared to the three months ended December 31, ~~2021. The decrease was~~2022. Performance and brand advertising revenue declined by approximately $11,132 and advertising exchange revenue declined by approximately $2,398, primarily due to ~~weak~~weaker demand ~~during~~and the ~~three months~~impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. Revenue also declined by $4,696 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 months ended December 31, ~~2022, increased~~2023, decreased by ~~$15,265~~$63,706 or ~~7.9%~~30.6% compared to the nine months ended December 31, ~~2021. The increase was~~2022. Performance and brand advertising revenue declined by approximately $29,425 and advertising exchange revenue declined by $23,088, primarily due to weaker demand and the impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. In addition, revenue declined by $11,193 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,

			Three months ended December 31,						Nine months ended December 31,
			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
License fees and revenue share			$	73,370	$	109,053	(32.7)	%	$	237,618	$	284,369	(16.4)	%
Revenue share
Revenue share
Revenue share																	$70,364			$73,370			(4.1)%			$208,675			$237,618			(12.2)%
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		8,614			9,324			(7.6)%			27,244			27,438			(0.7)%
Product development	Product development		14,218		13,755		3.4	%	43,087		40,594		6.1	%	Product development		13,036			14,218			(8.3)%			42,873			43,087			(0.5)%
Sales and marketing	Sales and marketing		16,469		15,857		3.9	%	48,017		47,072		2.0	%	Sales and marketing		14,432			16,469			(12.4)%			45,546			48,017			(5.1)%
General and administrative	General and administrative		39,132		39,924		(2.0)	%	114,328		105,225		8.7	%	General and administrative		45,455			39,132			16.2%			127,339			114,328			11.4%
Impairment of goodwill															Impairment of goodwill			—			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		$151,901			$152,513			(0.4)%			$598,858			$470,488			27.3%

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

~~Over~~Total costs of revenue and operating expenses decreased by $612 or 0.4% and increased by $128,370 or 27.3%, respectively, for the three and nine months ended December 31, ~~2022, total costs of revenue and operating expenses decreased by $35,166 or 18.7% and $28,157 or 5.6%, respectively,~~2023, compared to the three and nine months ended December 31, ~~2021.~~ 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 $612 or 0.4% and $18,811 or 4.0%, respectively, for the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022.

Table of Contents

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~~$5,718 and ~~$3,880,~~$9,535, respectively, for the three and nine months ended December 31, ~~2022,~~2023, compared to ~~$6,167~~$2,407 and ~~$23,671,~~$4,990, respectively, for the three and nine months ended December 31, ~~2021.~~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~~$3,006 or ~~32.7%~~4.1% to ~~$73,370~~$70,364 for the three months ended December 31, ~~2022,~~2023, and was ~~45.2%~~49.3% as a percentage of total net revenue compared to ~~$109,053,~~$73,370, or ~~50.3%~~45.2% of total net revenue, for the three months ended December 31, ~~2021.~~2022.

~~License fees and revenue~~Revenue share decreased by ~~$46,751~~$28,943 or ~~16.4%~~12.2% to ~~$237,618~~$208,675 for the nine months ended December 31, ~~2022,~~2023, and was ~~45.2%~~48.3% as a percentage of total net revenue compared to ~~$284,369,~~$237,618, or ~~50.5%~~45.2% of total net revenue, for the nine months ended December 31, ~~2021.~~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 nine months ended December 31, ~~2022,~~2023 compared to the prior year comparative period, 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,periods, was primarily due to revenue mix changes, ~~partially offset by~~specifically net revenue from AGP, which has a higher margin profile, represented a lower portion of total revenue. In addition, the ~~two contract amendments discussed above.~~three and nine months ended December 31, 2022 included the benefit of a contractual revenue share adjustment with an ODS partner.

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 $710 or ~~2.6%~~7.6% to ~~$9,324~~$8,614 for the three months ended December 31, ~~2022,~~2023, and was ~~5.7%~~6.0% as a percentage of total net revenue compared to ~~$9,090,~~$9,324, or ~~4.2%~~5.7% of total net revenue, for the three months ended December 31, ~~2021.~~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~~decreased by ~~$6,053~~$194 or ~~28.3%~~0.7% to ~~$27,438~~$27,244 for the nine months ended December 31, ~~2022,~~2023, and was ~~5.2%~~6.3% as a percentage of total net revenue compared to ~~$21,385,~~$27,438, or ~~3.8%~~5.2% of total net revenue, for the nine months ended December 31, ~~2021.~~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 of revenue for the nine months ended December 31, 2022, compared to the prior year comparative period, was due to higher hosting costs of approximately $4,406 and higher depreciation expense for developed technology 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. The increase 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 ~~increased~~decreased by ~~$463~~$1,182 or ~~3.4%~~8.3% to $13,036 for the three months ended December 31, 2023, compared to $14,218 for the three months ended December 31, ~~2022, compared to $13,755~~2022. Product development expenses included severance and acquisition-related costs of approximately $256 for the three months ended December 31, ~~2021.~~2023. Product development expenses for the three months ended December 31, 2023 also included business transformation costs of approximately $1,424. Product development expenses included acquisition-related costs of $542 and severance costs of $323 for the three months ended December 31, 2022.

Table of Contents

Product development expenses, ~~included~~after excluding severance, acquisition-related and business transformation costs, ~~of $454~~decreased by approximately $1,997 for the three months ended December 31, ~~2021. Excluding acquisition-related costs and severance costs, product development expenses were relatively unchanged for~~2023 compared to the three months ended December 31, 2022. ~~Lower employee-related costs,~~The decrease in product development expenses was primarily due to ~~reduced~~lower employee-related costs, including base salary and incentive compensation ~~was mostly~~of $1,478, depreciation and amortization expense of $1,015, and other operating costs, including third-party development of $682. These decreases were partially offset by ~~third-party development~~higher hosting and software costs ~~to support increased development activities.~~of $1,177.

Product development expenses ~~increased~~decreased by ~~$2,493~~$214 or ~~6.1%~~(0.5)% to $42,873 for the nine months ended December 31, 2023, compared to $43,087 for the nine months ended December 31, ~~2022, compared to $40,594~~2022. Product development expenses included severance and acquisition-related costs of approximately $647 for the nine months ended December 31, ~~2021.~~2023. Product development expenses for nine months ended December 31, 2023 also included business transformation costs of approximately $2,716. Product development expenses included acquisition-related costs of $1,627 and severance costs of $323 for the nine months ended December 31, 2022.

Product development expenses, ~~included~~after excluding severance, acquisition-related and business transformation costs, ~~of $2,364~~decreased by approximately $1,647 for the nine months ended December 31, ~~2021. Excluding acquisition-related and severance costs, product development expenses increased by $2,930 for~~2023 compared to the nine months ended December 31, 2022. The ~~increase~~decrease in product development expenses ~~after~~was primarily due to lower employee-related costs, mostly incentive compensation of $1,043, depreciation and amortization expense of $1,918, reduced third-party development costs of $864, and other operating costs, including facilities and travel of $932. These decreases were partially offset by higher hosting and software costs of $3,131.

Product development expenses, excluding business transformation costs, acquisition-related costs and severance costs, ~~was primarily due~~changed to ~~higher third-party development costs to support increased development activities~~8.0% and 9.1% of ~~$6,628, partially offset by lower employee-related costs of approximately $3,698, primarily due to~~total net revenue for the ~~capitalization of employee-related costs for development activities~~three and ~~lower incentive compensation. The increases were 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.~~

~~Product development expenses, excluding acquisition-related costs and severance costs, increased~~ended December 31, 2023, respectively, compared to 8.2% and 7.8% of total net revenue for the three and nine months ended December 31, 2022, ~~respectively, compared to 6.1% and 6.8% of total net revenue for the three and nine months ended December 31, 2021,~~ respectively. The increase in product development expenses as a percentage of total net revenue for the nine months ended December 31, 2023 was due to ~~higher costs and lower revenues.~~revenues declining at a rate faster than product development expenses due to the Company’s continued investments in its technology platforms.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Additionally, sales and marketing expenses include certain integration and business transformation costs, which may impact the comparability of sales and marketing expenses between periods.

Sales and marketing expenses ~~increased~~decreased by ~~$612~~$2,037 or ~~3.9%~~12.4% to ~~$16,469~~$14,432 for the three months ended December 31, ~~2022,~~2023, and was 10.1% as a percentage of total net revenue compared to ~~$15,857,~~$16,469, or ~~7.3%~~10.1% of total net revenue, for the three months ended December 31, ~~2021.~~2022. Sales and marketing expenses included severance costs of approximately $575 and $652 for the three months ended December 31, 2023 and December 31, 2022, respectively.

Sales and marketing expenses, after excluding severance expenses, decreased by approximately $1,960 for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The ~~increase~~decrease in sales and marketing expenses was primarily due to ~~an increase in travel and sales-related events of approximately $1,388 due to the easing of COVID restrictions and severance~~lower incentive compensation costs of ~~approximately $652, primarily~~$937, lower costs for ~~Nordic region employees due to the termination~~sales events and sales related travel of ~~a reseller partnership in the region. These increases were offset by a decrease~~$632, and other operating costs, including recruiting and relocation costs, of ~~approximately $1,428 for employee-related costs, primarily due to lower headcount and incentive compensation.~~$337.

Sales and marketing expenses ~~were relatively unchanged, increasing~~decreased by ~~$945~~$2,471 or ~~2.0%~~5.1% to ~~$48,017~~$45,546 for the nine months ended December 31, ~~2022,~~2023, and was ~~9.1%~~10.5% as a percentage of total net revenue compared to ~~$47,072,~~$48,017, or ~~8.4%~~9.1% of total net revenue, for the nine months ended December 31, ~~2021.~~2022. Sales and marketing expenses included severance and acquisition-related costs of approximately $1,199 and $814 for the nine months ended December 31, 2023 and December 31, 2022, respectively.

Sales and marketing expenses, after excluding severance expenses, decreased by approximately $2,856 for the nine months ended December 31, 2023 compared to the nine months ended December 31, 2022. The ~~increase~~decrease in sales and marketing expenses was primarily due to ~~an increase in~~lower costs for sales events and sales related travel ~~and sales-related events~~ of ~~approximately $2,468~~$1,123 mostly due to ~~the easing~~timing, reduced recruiting and relocation of ~~COVID restrictions and severance costs~~sales personnel of ~~approximately $652, primarily for Nordic region employees due to the termination of a reseller partnership~~$384, reduction in the ~~region. These increases were offset by a decrease~~use of ~~approximately $2,175, primarily for employee-related~~professional services of $337, and lower incentive compensation of $366. In addition, other operating costs declined due to lower ~~headcount and incentive compensation.~~sales volume, including marketing supplies, of $885.

2928

Table of Contents

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. Additionally, general and administrative expenses include certain integration and business transformation costs, which may impact the comparability of general and administrative expenses between periods.

General and administrative expenses ~~decreased~~increased by ~~$792~~$6,323 or ~~2.0%~~16.2% to $45,455 for the three months ended December 31, 2023 compared to $39,132 for the three months ended December 31, ~~2022, compared to $39,924~~2022. General and administrative expenses included severance and acquisition-related costs of approximately $78 and $46 for the three months ended December 31, ~~2021. The~~2023, respectively. General and administrative expenses for three months ended December 31, ~~2022,~~2023 also included business transformation costs of approximately $3,339. General and administrative expenses included acquisition-related ~~costs~~ and severance costs of approximately $700 and $135, ~~respectively. The~~respectively for the three months ended December 31, ~~2021 included acquisition-related costs of $5,676. Excluding acquisition-related costs and severance costs, general and administrative expenses increased $4,048.~~2022.

~~The increase in general~~General and administrative expenses, after excluding severance, acquisition-related and business transformations costs, ~~and severance costs~~increased by $3,695 for the three months ended December 31, 2023 compared to the three months ended December 31, 2022. The increase was primarily due ~~to: (1)~~to higher depreciation and amortization of $2,949, professional services including audit, tax and legal fees of $943, and bad debt expense 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,$481. These increases were partially offset by lower compensation costs, primarily incentive ~~compensation.~~compensation, of $676,

General and administrative expenses increased by ~~$9,103~~$13,011 or ~~8.7%~~11.4% to $127,339 for the nine months ended December 31, 2023, compared to $114,328 for the nine months ended December 31, ~~2022, compared to $105,225~~2022. General and administrative expenses included severance and acquisition-related costs of approximately $400 and $2,226 for the nine months ended December 31, ~~2021. The~~2023 and December 31, 2022, respectively. General and administrative expenses for nine months ended December 31, ~~2022,~~2023 also included business transformation costs of approximately $4,575.

General and administrative expenses, after excluding severance, acquisition-related costs and ~~severance~~business transformation costs, ~~of $2,091 and $135, respectively. The~~increased by $10,262 for the nine months ended December 31, ~~2021, included acquisition-related costs $20,866. Excluding acquisition-related costs and severance costs, general and administrative expenses increased $27,744.~~

2023 compared to the nine months ended December 31, 2022. The increase ~~in general and administrative expenses after excluding acquisition-related costs and severance costs~~ was primarily due ~~to: (1)~~to higher ~~depreciation expense~~stock-based compensation of approximately ~~$17,870 for developed technology assets~~$7,302, depreciation and amortization of ~~acquired intangible assets, (2) an increase~~$5,471, and professional services including audit, tax and legal fees, of ~~approximately $4,435 for employee-related costs due to higher wages and stock-based compensation costs,~~$1,131, These increases were partially offset by lower employee-related costs, primarily cash incentive compensation ~~(3) an increase in~~of approximately $1,436, bad debt expense of approximately ~~$2,149,~~$547, recruiting and ~~(4)~~relocation costs of $478, and other operating costs, including software and travel of approximately $1,182.

Impairment of goodwill

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 current fiscal year (in particular during the quarter ended September 30, 2023 and following such quarter), the increase in ~~other categories, primarily professional services, software,~~interest rates, and ~~facilities~~the Company’s current and recently updated forecasted operating trends represented a change in circumstances that indicate that the fair value of ~~$3,289.~~the Company’s reporting units may be less than their carrying value. The ~~increases were due in part~~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 ~~impact~~income approach is appropriate, as it directly reflects its future growth and profitability expectations.

Table of ~~a full nine~~Contents

For the three months ~~of operations resulting from the AdColony Acquisition and Fyber Acquisition. Please see Note 3, “Acquisitions,” for further information.~~ended December 31, 2023, no goodwill impairment charges were recorded.

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
		Three months ended December 31,
			2023
			2023
			2023																			2022							% of Change						2023						2022						% of Change
Interest and other income (expense), net
Change in fair value of contingent consideration
Change in fair value of contingent consideration
Change in fair value of contingent consideration	Change in fair value of contingent consideration		$	—	$	(18,200)	100.0	%	$	—	$	(40,287)	100.0	%		$	—			$			$	—			100.0			100.0		%				$	372		$			$	—			100.0		100.0	%
Interest expense, net	Interest expense, net		(6,913)		(2,195)		214.9	%	(16,224)		(5,307)		205.7	%	Interest expense, net			$	(7,666)		$				$	(6,913)		10.9				10.9		%				(22,900)		(16,224)					(16,224)		41.1			41.1	%
Foreign exchange transaction gain / (loss)			17		2,122		(99.2)	%	(595)		1,603		(137.1)	%
Foreign exchange transaction (loss) gain															Foreign exchange transaction (loss) gain			338							17						1,888.2		%				155						(595)					(126.1)	%

Other income / (expense), net	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)	%
Other income / (expense), net
Other income / (expense), net																		(311)							8						(3,987.5)		%				(67)						392					117.1	%
Total interest and other expense, net															Total interest and other expense, net			$	(7,639)						$	(6,888)					10.9		%				$	(22,440)					$	(16,427)				36.6	%

Comparison of the three and nine months ended December 31, ~~2022~~2023 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.

2022

Interest expense, net

For the three and nine months ended December 31, ~~2022,~~2023, interest expense, net, increased by ~~$4,718~~$753 or ~~214.9%~~10.9% and ~~$10,917~~$6,676 or ~~205.7%~~41.1%, respectively, compared to the three and nine months ended December 31, ~~2021,~~2022, primarily due to an increase in interest rates of ~~371~~201 basis points and ~~228~~309 basis points, respectively, and ~~higher~~lower average outstanding borrowings of ~~$129,167~~$71,967 and ~~$229,952,~~$77,178, respectively, over the comparative periods.

Income tax provision (benefit)

During the three and nine months ended December 31, 2022, a tax benefit of $1,153 and a tax provision of $8,164 resulted in an effective tax rate of (39.6)% and 21.0%, respectively. Differences between the effective tax rate and the statutory tax rate primarily relate to return to provision true-ups filed during the period.

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,~~2023, we had unrestricted cash of approximately ~~$79,307~~$48,959 and ~~$174,866~~$149,000 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~~$40,433 in cash flows from operating activities for the nine months ended December 31, ~~2022.~~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.~~Report.

~~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~~

Table 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.Contents

Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is ~~$425,134~~$376,000 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~~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 $1,966, 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 December 31, 2023. For further description of the terms of the New Credit Agreement, see Note 9—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.

As of December 31, 2023, we were in compliance with all covenants under the New Credit Agreement. Additionally, the Company entered into a Third Amendment to the New Credit Agreement on February 5, 2024 to provide further financing flexibility to fund growth initiatives and meet general corporate obligations. Refer to Note 14 for further discussion.

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 $278,600 over the next four fiscal years.

Cash Flow Summary ($ in thousands)


		Nine months ended December 31,
		2022		2021		% of Change
		(in thousands)
		Nine months ended December 31,
		Nine months ended December 31,
		Nine months ended December 31,
		2023
		2023
		2023
Consolidated statements of cash flows data:
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
Net cash provided by operating activities
Equity investments	Equity investments	(4,000)		—		(100.0)	%
Business acquisitions, net of cash acquired		(2,708)		(148,192)		98.2	%
Equity investments
Equity investments
Purchase price adjustment related to business acquisition
Purchase price adjustment related to business acquisition
Purchase price adjustment related to business acquisition
Capital expenditures	Capital expenditures	(18,598)		(15,692)		(18.5)	%
Capital expenditures
Capital expenditures
Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	Net cash used in investing activities	$	(25,306)	$	(163,884)	84.6	%

Proceeds from borrowings	Proceeds from borrowings	18,000		369,913		(95.1)	%

Proceeds from borrowings

Proceeds from borrowings
Payment of debt issuance costs	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)	%
Payment of debt issuance costs
Payment of debt issuance costs

Repayment of debt obligations

Repayment of debt obligations

Repayment of debt obligations
Acquisition of non-controlling interest in consolidated subsidiaries
Acquisition of non-controlling interest in consolidated subsidiaries
Acquisition of non-controlling interest in consolidated subsidiaries
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)	%
Repayment of debt obligations		(129,500)		(52,623)		(146.1)	%
Net cash provided by / (used in) financing activities		$	(116,701)	$	210,298	155.5	%
Payment of withholding taxes for net share settlement of equity awards
Payment of withholding taxes for net share settlement of equity awards
Options exercised
Options exercised
Options exercised
Net cash used in financing activities
Net cash used in financing activities
Net cash used in financing activities

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

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manage costs appropriately. Cash provided by operating activities was $40,433 for the nine months ended December 31, 2023, compared to $97,514 for the nine months ended December 31, ~~2022, compared to $43,462 for the nine months ended December 31, 2021.~~2022. The ~~increase~~decrease of ~~$54,052~~$57,081 was due to the following:

•$~~58,961~~214,665 decrease in net income, which includes the goodwill impairment charge of $147,181.

•$12,605 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~~changes, including an increase in ~~net income;~~accounts payable, accrued compensation, and other current liabilities, partially offset by a decrease in accounts receivable; and

•~~$20,204 decrease due to lower~~ $144,979 increase in non-cash charges during the nine 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~~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~~deferred income taxes for the nine months ended December 31, ~~2022.~~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 months ended December 31, ~~2022,~~2023, net cash used in investing activities ~~decreased~~increased by ~~$138,578~~$1,691 to approximately ~~$25,306. Current period~~$26,997. Our cash used in investing activities for the nine months ended December 31, 2023 and December 31, 2022, was primarily comprised of capital expenditures related ~~mostly~~ to internally-developed software ~~of $18,598, an~~and equity ~~investment of $4,000~~investments 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.~~ strategic businesses.

Financing Activities

For the nine months ended December 31, ~~2021,~~2023, net cash used in ~~investing~~financing activities was approximately ~~$163,884,~~$39,275, which was comprised ~~of cash expenditures for business acquisitions,~~of: (1) the 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.

~~Financing Activities~~

~~Our financing activities consisted of borrowings and~~ repayment of ~~amounts borrowed under~~debt obligations of $62,134, (2) payment of $3,751 for the acquisition of the remaining minority interest shareholders’ outstanding shares in one of our ~~New Credit Agreement~~subsidiaries, (3) payment of payroll withholding taxes for net share settlement of equity awards of $1,176. These cash outflows were partially offset by cash inflows comprising of proceeds from borrowings of $25,000 and ~~transactions related to our equity plans.~~ stock option exercises of $2,786.

For the nine months ended December 31, 2022, net cash used in financing activities was approximately $116,701, which was comprised of ~~the~~ repayment of debt obligations of $129,500, ~~and~~ payment of payroll withholding taxes for net share settlement of equity awards of $6,202, partially offset by ~~proceeds~~cash inflows 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 of proceeds from borrowings of $369,913 and stock option exercises of $2,814, partially offset by the payment of deferred business acquisition consideration of $98,175, repayment of debt obligations of $52,623, payment of withholding taxes for net share settlement of equity awards of $7,587, and payment of debt issuance costs of $4,044.

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 quarter ended December 31, ~~2022.~~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.

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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 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,~~Except as noted below, there ~~were~~have been no changes in ~~the Company’s~~our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the ~~three months~~quarter ended December 31, ~~2022,~~2023 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

During the quarter ended December 31, 2023, we implemented a new enterprise resource planning (“ERP”) system. The new ERP system replaced our previous ERP systems, including our accounting systems and general ledgers. As a result of this implementation, we modified certain existing controls and implemented new controls and procedures related to the new ERP system to maintain appropriate internal control over financial reporting during and after the system change.

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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 on the motion to dismiss is complete as of November 13, 2023. The court has not yet issued a ruling on the Company’s motion to dismiss the amended complaint. 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

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None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~

On February 5, 2024, the company entered into a Master Agreement (“Master Agreement”) with One Store Co., Ltd. (“One Store”), pursuant to which (a) the Company would invest $10,000 into One Store in exchange for shares of common stock of One Store, (b) upon the achievement of a performance milestone, the Company would invest an additional $10,000 into One Store in exchange for shares of common stock of One Store, which milestone would be achieved upon (i) the execution of a joint venture agreement between the Company and One Store, which joint venture would operate the alternative app market business for the companies in Europe (the “European Joint Venture”), and (ii) the entry into an agreement between One Store and at least two major carriers pursuant to which such major carriers would preload an ADK that would contain the Company’s Ignite SDK functions (provided, that either party may terminate this funding obligation if such funding does not occur within 18 months of the initial funding), (c) upon the achievement of a second performance milestone, the Company would invest an additional $10,000 into One Store in exchange for shares of common stock of One Store, which milestone would be achieved upon the deployment of a device in Europe by a major carrier preloaded with an ADK that would contain the Company’s Ignite SDK functions (provided, that either party may terminate this funding obligation if such funding does not occur by December 31, 2025), and (d) the Company would invest $5,000 in the European Joint Venture upon achievement of the first above performance milestone and an additional $10,000 into the European Joint Venture upon achievement of the second above performance milestone. The Company would receive a 49.9% interest in the European Joint Venture. The description of the Master Agreement provided herein is qualified by reference to the Master Agreement, which is attached to this Form 10-Q as Exhibit 10.3 and is incorporated by reference herein.

On February 6, 2024, the Company and Matt Gillis entered into a mutual Separation and Release Agreement pursuant to which the employment of Matt Gillis, President of the Company, will terminate effective on March 31, 2024. Under the Separation and Release Agreement (1) Mr. Gillis would provide transition services to the Company until March 31, 2024, (2) Mr. Gillis would be eligible to receive his annual bonus for fiscal year 2024 (if any) to the extent earned and payable under the terms of the Company’s annual bonus plan, (3) the Company will pay Mr. Gillis a severance amount of $420, (4) the Company will automatically accelerate the vesting of his stock option and RSU equity awards that were scheduled to vest through June 30, 2024, and (5) Mr. Gillis would provide the Company a release. The Separation and Release Agreement is filed as Exhibit 10.4 to this Form 10-Q and is incorporated in this Item 5 by reference.

On February 5, 2024, Mike Miller, the Chief Accounting Officer of the Company, resigned from his positions with the Company to be effective on February 27, 2024.

Barrett Garrison, the Chief Financial Officer of the Company, will assume the responsibilities of the principal accounting officer of the Company in addition to his responsibilities as the principal financial officer of the Company. Mr. Garrison’s biographical information and employment agreement are disclosed in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on July 18, 2023.

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ITEM 6. EXHIBITS


Exhibit No.						Description


















































1 0.1 #^						Addendum to the Class A1 Preferential Shares Investment Agreement, dated as of November 8, 2023, by and among the shareholders of Aptoide, S.A., Digital Turbine USA, Inc. and Aptoide, S.A. *
1 0.2						Third Amendment to Amended and Restated Credit Agreement, dated as of February 5 , 2024, by and among Digital Turbine, Inc., Digital Turbine Media, Inc., Digital Turbine USA, Inc., Mobile Posse, Inc., AdColony, Inc., AdColony Holdings US, Inc., and Bank of America, N.A., as administrative agent and a lender, and the other lenders party thereto.*
10.3						M aster Agreement, dated as of February 5, 2024, by and between Digital Turbine, Inc. and One Store Co., Ltd. *
1 0.4












































						Mutual S eparation and Release Agreement, dated as of February 6 , 20 24 , by and between the Company and Matt Gillis. *
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.

# Certain exhibits and schedules to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.

^ Certain portions of this Exhibit have been omitted in accordance with Item 601(b)(10)(iv) of Regulation S-K. The registrant agrees to furnish supplementally an unredacted copy of this Exhibit to the Securities and Exchange Commission upon its request.

•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 ~~8, 2023~~7, 2024

By:

/s/ William Gordon Stone III

William Gordon Stone III

Chief Executive Officer

(Principal Executive Officer)

Table of Contents

Digital Turbine, Inc.

Dated: February ~~8, 2023~~7, 2024

By:

/s/ James Barrett Garrison

James Barrett Garrison

Chief Financial Officer

(Principal Financial Officer)






























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	67
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	89
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2422
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3332
ITEM 4.	CONTROLS AND PROCEDURES	3433
PART II	OTHER INFORMATION	3634
ITEM 1.	LEGAL PROCEEDINGS	3634
ITEM 1A.	RISK FACTORS	3634
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3634
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3635
ITEM 4.	MINE SAFETY DISCLOSURES	3635
ITEM 5.	OTHER INFORMATION	3635
ITEM 6.	EXHIBITS	3736
	SIGNATURES	3736


	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