Digital Turbine APPS Q1 2026 Earnings Transcript

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DATE

Tuesday, August 5, 2025 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — William Gordon Stone
• Chief Financial Officer — Stephen Andrew Lasher

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TAKEAWAYS

• Total Revenue -- $130.9 million, reflecting 11% growth year over year.
• Segment Revenue: On Device Solutions (ODS) -- $95.4 million, up 18% year over year, led by stronger device volumes and revenue per device (RPD), especially internationally.
• Segment Revenue: Application Growth Platform (AGP) -- $36.3 million, representing a 5% decline year over year but a 9% sequential increase from the March quarter, indicating early signs of stabilization.
• Adjusted EBITDA -- $25.1 million, an increase of 73% year over year, marking the highest quarterly result since 2023.
• Free Cash Flow -- $1.4 million, improving by approximately $7 million year over year.
• Non-GAAP Gross Margin -- 47%, up more than 100 basis points compared to the prior year.
• Gross Profit -- $62 million, indicating 14% year-over-year growth.
• Cash Operating Expenses -- $36.8 million, down 8% year over year.
• GAAP Net Loss -- $14.1 million, or $0.13 per share.
• Non-GAAP Net Income -- $5.8 million, or $0.05 per share, based on 110 million shares outstanding.
• Quarter-End Cash Balance -- $34.1 million, down approximately $6 million sequentially, attributed to working capital timing.
• Total Debt -- $400.5 million, reduced by more than $8 million sequentially.
• Raised Fiscal 2026 Guidance -- Revenue now expected within $525 million to $535 million; adjusted EBITDA in the $90 million to $95 million range, both midpoints increased versus previous outlook.
• Brand Revenue Diversification -- A nearly 50% quarter-over-quarter increase in the number of campaigns driving brand revenue, spanning advertisers in retail, finance, insurance, entertainment, tech, and telecom.
• AI and First-Party Data Initiatives -- Management announced branded first-party data (DT Ignite) and AI/ML platform (DTiQ) to enhance targeting and advertiser ROI.
• Global Device Volume Trends -- U.S. device volumes shifted from prior year decline to a modest increase between March and June; international device volumes grew both sequentially and year over year.
• Regulatory/Partnership Developments -- Management highlighted joining a coalition with Meta and Spotify to advocate for a more open mobile app market amid regulatory shifts like the Open App Markets Act.

SUMMARY

Management attributed the quarter's performance to improved advertiser demand, higher RPD, and expanding device volumes, particularly in North America and international markets. Investments in branded first-party data and artificial intelligence were positioned as central to unlocking new precision and scale for ad targeting. The company reported substantial progress in operating discipline, resulting in lower cash operating costs and a sequential reduction in total debt. Management suggested new regulatory actions, such as alternative app store rulings, are generating increasing publisher interest in the platform’s distribution solutions. Digital Turbine (NASDAQ:APPS) committed to reporting future milestones for its performance DSP integration with first-party data and AI algorithms as ongoing growth initiatives.

• Device supply partnerships expanded, with launches for T-Mobile via Motorola, Chinese OEMs, and additional European operators, widening the footprint.
• Management stated, "The number of campaigns contributing to brand revenue increased by nearly 50% quarter over quarter," highlighting both vertical diversification and strengthening demand signals.
• Improvements in both U.S. and global device activation rates were called out as new tailwinds after extended periods of headwinds in upgrade cycles.
• Nearly all international billings continue to be denominated in U.S. dollars, reducing exposure to foreign exchange volatility.
• CFO Stephen Andrew Lasher said, "Adjusted EBITDA for our fiscal first quarter was $25.1 million, up 73% year over year, marking our highest quarterly EBITDA since calendar 2023."
• Management confirmed that performance in ODS and selective AGP products (supply-side and DTX) is outpacing gains in performance DSP, with future growth tied to further AI and platform integration.

INDUSTRY GLOSSARY

• RPD (Revenue Per Device): A metric indicating average revenue generated per activated device within a specified period, central to assessing monetization across device installs.
• SingleTap: A proprietary technology enabling users to install mobile applications with a single touch, bypassing standard app store flows.
• DT Ignite: Digital Turbine’s branded first-party data platform, designed to enhance advertising targeting and campaign performance.
• DTiQ: Digital Turbine’s branded artificial intelligence and machine learning platform for real-time ad decisioning and optimization.
• AGP (Application Growth Platform): Segment encompassing solutions that provide mobile advertising and user growth for publishers and brands.
• ODS (On Device Solutions): Segment representing monetization products and services integrated at the device level via carriers and OEMs.
• DTX: Digital Turbine’s proprietary supply-side exchange technology, referenced as a growth driver within the AGP segment.

Full Conference Call Transcript

William Gordon Stone: Thanks, Brian. Good afternoon, everyone, and thank you for joining us for Digital Turbine's Fiscal First Quarter 2026 Earnings Call. We're excited to report on our continued business momentum that accelerated in the first quarter. We delivered $131 million of revenue and $25 million in EBITDA, reflecting 11% revenue growth and 73% EBITDA growth year-over-year. These results are a testament to our strategic focus and improved execution across our platform and enabling us to increase our annual outlook for the fiscal year. Breaking it down by segment, our On Device Solutions business generated $95 million in revenue, which was up approximately 18% from June quarter of last year.

Our Application Growth Platform business posted $35 million in revenue, which was modestly down year-over-year. However, we're encouraged by the nearly 10% sequential improvement compared to fiscal fourth quarter. There are three key drivers that powered our improved performance this quarter. First was higher advertiser demand, which translated into improved pricing and fill rates, particularly for premium placements on our platform. This strong advertiser demand resulted in 30-plus percent year-over-year growth in our revenue per device or RPD, in both the U.S. and international markets for our On-Device business, and we also had solid double-digit year-over-year growth in our Content Media business. Our second driver was improved device volumes, particularly in North America and selected international markets.

This helped us expand our install footprint and monetization base. As an example, last year, we saw a decline of approximately 1 million devices here in the U.S. between March and June. And this year, we saw a modest increase in U.S. devices from March to June. Similarly, our international device volumes were up a few million units sequentially and year-over-year. Combined, these better RPDs and improved device volumes drove strong year-over-year growth. And finally, we made meaningful progress on our first-party data and AI, machine learning platform, which is finally setting the foundation for smarter targeting, higher return on ad spend for advertisers and improved user experiences.

Beyond near-term execution, we're also making strategic progress positioning Digital Turbine for the future. Our first-party data investments, coupled with real-time AI-driven decisioning, we're unlocking new levels of precision and scale. These capabilities are becoming even more valuable as advertisers seek alternatives to the closed walled garden ecosystems and look for transparent, performant ways to engage mobile users. We will begin branding these unique advantages as they are important to showcase to customers and partners why Digital Turbine is special and unique. You'll see us branding our first-party data as the DT [ Ignite ] and our AI machine learning platform, leveraging those data insights to drive improved advertiser and user experiences will be branded as DTiQ.

We're also seeing increasing brand engagement directly on our platform, a trend driven by our audience scale, strong device footprint and proven ability to deliver measurable outcomes. The number of campaigns contributing to brand revenue increased by nearly 50% quarter-over-quarter. This signals stronger and more diversified demand. This diversification spans major advertisers across retail, consumer packaged goods, finance, insurance, entertainment, tech, telco and more, giving us increased confidence in our ability to scale both broadly and deeply across many verticals. Moreover, the macro environment continues to shift in favor of direct distribution and alternative app distribution models. With the combination of our tech enablers such as [ Ignite ], DTiQ and SingleTap, this trends positions us well.

Regulatory momentum is accelerating in all geographies around the world to offer customer and publisher choice, including a reintroduction of the Open App Markets Act here in the United States as well as other recent legal rulings. We've recently joined forces with companies such as Meta, Spotify and others in the Coalition for a Competitive Mobile Experience to work with regulators and other stakeholders to ensure a more open and competitive mobile marketplace for consumers and publishers. To wrap up, the first quarter was a promising start to our fiscal year, which showed solid year-over-year double-digit growth in revenue and EBITDA, driven by a healthy mix of execution, innovation and favorable industry dynamics.

We're building on the right foundation through operational discipline and strategic investment to drive sustained profitable growth. We're excited by the traction we're seeing across the business and confident in our ability to continue to deliver value to partners, advertisers, users and shareholders. With that, I'll turn it over to Steve to take you through the financials in more detail.

Stephen Andrew Lasher: Thank you, Bill, and good afternoon, everyone. The fiscal first quarter represented another meaningful step forward for the company. Total revenue for the quarter was $130.9 million, reflecting 11% growth year-over-year. At a segment level, our ODS business delivered $95.4 million in revenue, up 18% year-over-year, driven by strong growth in both device volumes and revenue per device or RPD, particularly within our international partners. We also saw continued strength in RPDs and modest improvement in activation trends in the U.S. market. Our AGP segment generated $36.3 million in revenue, representing a 5% decline year-over-year.

However, on a sequential basis, AGP revenue increased 9%, reflecting early signs of stabilization and progress as we work to strengthen the platform, leveraging our unique first-party data and AI capabilities. The combination of accelerated top line growth and improving operating efficiencies driven by the transformation initiatives we began late last year resulted in strong EBITDA performance this quarter. Adjusted EBITDA for our fiscal first quarter was $25.1 million, up 73% year-over-year, marking our highest quarterly EBITDA since calendar 2023. Free cash flow remained positive at $1.4 million, an improvement of approximately $7 million year-over-year.

Non-GAAP gross margin for the fiscal first quarter was 47%, representing an improvement of more than 100 basis points compared to the same period last year. As a reminder, our gross margins are primarily influenced by shifts in product and segment mix, which will vary from period to period. Our cash operating expenses for the June quarter were $36.8 million, down 8% year-over-year, in addition to our gross profit of $62 million, which grew 14% over the same period, a strong proof point of the operating leverage of the company.

While we're encouraged by the progress made on cost discipline and operating efficiency, we remain committed to further streamlining our business processes even as we continue to make disciplined investments to support future growth. Turning now to the bottom portion of the income statement. We reported a GAAP net loss of $14.1 million or $0.13 per share in the fiscal first quarter. On a non-GAAP basis, we recorded net income of $5.8 million or $0.05 per share based on 110 million shares outstanding in the fiscal first quarter. Looking at the balance sheet, we ended the quarter with a cash balance of $34.1 million, down approximately $6 million from the March quarter, primarily reflecting the timing of working capital.

Our total debt stood at $400.5 million, a reduction of more than $8 million quarter-over-quarter. With respect to debt refinancing activities, we're pleased with our continued progress, and we'll share additional details as appropriate. Now let me turn to our updated outlook for fiscal 2026. On the heels of a stronger-than-expected first quarter and improved visibility into the remainder of the year, we are raising our full-year revenue and adjusted EBITDA guidance. We now expect revenue to be in the range of $525 million to $535 million and adjusted EBITDA in the range of $90 million to $95 million for fiscal year 2026.

At the midpoint, this represents an increase of $10 million in revenue guidance and $5 million in EBITDA guidance compared to our prior outlook. In closing, we are actively positioning the company for sustainable growth in fiscal 2026 and beyond. While we are encouraged by recent momentum across key areas of the business, our focus remains squarely on disciplined execution, financial rigor and delivering long-term value for our shareholders. With that, let me hand the call back to our operator to open up the call for questions.

Operator: [Operator Instructions] The first question comes from Anthony Stoss with Craig-Hallum.

Anthony Joseph Stoss: Nice execution for sure. Bill, on the international carrier strength and strength on the RPD side on the international business, is that a combination of new international customers? Or is it largely just better take rates on the international side? And then I have a follow- up after that.

William Gordon Stone: Yes. Thanks, Tony. Yes, our international business on our On-Device business in general was up 70%. It was driven by better device volumes and better RPDs. Specifically on the RPDs themselves, we're just getting better at execution. We're seeing also stronger demand coming into these geographies from other geographies. So in other words, where we see a lot of demand coming in from Europe or Asia into the U.S., we've done a much better job, now -- been able to get that demand going into other markets such as Latin America or into Europe on European supply. And so those things are helping us drive better RPDs.

But we continue to see strong performance there, especially combined with the stronger devices really helped drive some solid top line performance.

Anthony Joseph Stoss: Got it. And then the brand revenue or brand portion of your business was exceptionally strong. Can you talk about the longevity of this business? Is it something new? Do you have a bunch of new customers that have come online? And what's your visibility into that continuing?

William Gordon Stone: Yes. One of the things I was really excited about in the brand business for the quarter is just more diversification. I talked about -- in my prepared remarks that we saw nearly 50% increase in the amount of brand advertisers coming on the platform from more and more verticals. It's our job now to continue to grow and scale that. But to see that diversification with more brands looking for solutions on our platform is incredibly encouraging for us. And we think we have something unique and differentiated here in terms of mobile first with our strategy in app and something that we're playing a long game with it and continuing to make good strides there.

Anthony Joseph Stoss: Got it. Last question, Bill, related to just the ongoing potential breakup of Apple or the monopoly of Apple and Google for app stores. What are you seeing recently, just in terms of activity, of potential customers? And do you expect any additional customers to actually launch alternative app stores on top of Epic this year?

William Gordon Stone: Yes. So it's really encouraging to see the recent legal ruling that came out from the judge reiterating what the jury decided in the Epic and Google case, really opening up alternative app stores within the Google Play ecosystem. That's an encouraging development in terms of just more fair, open and transparent. And we're seeing that around the world, not just -- also in the United States, but also in Europe, Korea, Brazil, Japan, India, just to name a few. And so I think from our perspective, what we're seeing is very strong interest, first and foremost, from publishers.

So if you're thinking about large gaming companies or even large nongaming companies looking to find different billing methods to their customers and our ability to leverage our platform with things like SingleTap, DTiQ and our [ Ignite ], I think it is something that's particularly encouraging to offer publishers options, first and foremost. And then on the distribution side, we're seeing a lot of encouraging developments here, not just in the United States -- on partners like Verizon, where we're live, but also we've got traction in Latin America as well as in the EU from a lot of different operator and OEM partners that are excited about what happens here in the future with that.

Operator: The next question comes from Omar Dessouky with Bank of America.

Arthur Chu: This is Arthur on for Omar. Bill, maybe just on the AGP business, obviously, great to see sequential improvement here. What do you think needs to happen to bring this business back to year-over-year growth? Like are there specific products or business segments that you'd like to see more improvement in, this year?

William Gordon Stone: Yes. I think -- in terms of our AGP business, our Supply side platform and our DTX product is showing nice year-over-year growth. I think the real key for us will be on the performance side of the business. That's something we're making a lot of energy and investments and some of those first-party data and AI machine learning things that I referenced in my remarks will be super important here on the demand side of that to really show that top line growth. But as I mentioned in my remarks, we saw really nice sequential growth in that business that gives us encouragement that's going to continue in quarters to come.

Arthur Chu: Got it. And then if I could just follow up on that. Any potential time line you could share with us in terms of just that work that you guys are doing on the performance DSP side?

William Gordon Stone: Yes. We'll communicate our progress and time lines on -- in future calls right now. Again, I'm encouraged because what we've done now is we've been able to connect the actual performance DSP and all the bidding work to now the first-party data and AI machine learning algorithms, and we're getting much better and stronger at that. And that will be the key driver to improved top line performance in that business.

Operator: The next question comes from Mitchell Pindus with Wells Fargo Private Bank.

Mitchell R. Pindus: I'd like to also thank you for what looks like a nice confirmation of DT's turnaround with these numbers. A couple of quick questions. Device sales have, in recent quarters -- actually in recent years, been headwinds, but now it looks like we're starting to get evidence from Apple, from Verizon that there seems to be a turnaround and anecdotally in device sales. Can you talk a little bit as to how that can affect DT going forward?

William Gordon Stone: Yes. Sure, Mitch. We see it really is helping us in two areas. First is just the macro trend, which is something that's been a headwind, as you mentioned, for us for the last couple of years. So this past quarter was an encouraging sign to see that turn around and become a tailwind and show growth from the June quarter to the March quarter and that sequential improvement. It's been a while since we've been able to talk about that. So hopefully, that's an encouraging trend that continues. We've known for a long time that these long, elongated upgrade cycles that are in the U.S. are not sustainable, and we're going to see that turn around.

So we're starting to see that. So that's a nice tailwind for us. But the second thing we can do is also continue to grow our share with getting our technology on more devices. So for example, that could be T-Mobile here in the United States, which we just recently launched with Motorola and a variety of other things with Chinese OEMs and other partners in the EU. So growing our device footprint in addition to just the macro, tailwinds starting to emerge, gives us a lot of optimism that we can see good growth from this part of the business.

Mitchell R. Pindus: Great. And generally speaking, where are you seeing some of your growth geographically coming from?

William Gordon Stone: So on the supply side of the business on AGP, I've been really pleased with our growth in Asia and Europe, in particular. And then for our On-Device business, we've really done a nice job on growing our business in the EU and Latin America. So those have been two bright spots for us. And then on the ODS business, you can see the double-digit growth back here in the United States. It Is also something that's been encouraging. So it's really a true global story that's starting to emerge here.

Mitchell R. Pindus: Got it. And are you -- when you're billing outside the country, are you billing in USD or the local currency?

William Gordon Stone: Yes, predominantly, the vast majority of our revenues all come through USD.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Bill Stone for any closing remarks.

William Gordon Stone: Thanks, everyone, for joining our call today. We'll talk to you again on our fiscal '26 second quarter call in a few months. Thanks, and have a great night.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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