Digital Turbine Q2 Earnings Call Highlights

Key Points

• Digital Turbine raised its fiscal 2027 revenue outlook to $670 million–$690 million after 27% year-over-year quarterly growth, while keeping adjusted EBITDA guidance at $145 million–$155 million as it invests in data, AI, people and systems.
• Fiscal Q2 revenue reached $178.7 million; App Growth Platform revenue rose 42% and On-Device Solutions revenue rose 20%. Adjusted EBITDA increased 46% to $39.8 million, although non-GAAP gross margin declined to 43% from 47%.
• Operating cash flow improved to $18.8 million, and net leverage fell to 2.3 times from more than 4 times a year earlier. Digital Turbine expects Orange revenue to begin this quarter and another European operator partnership to launch this fiscal year, with both expected to support growth next year.

Digital Turbine NASDAQ: APPS raised its fiscal 2027 revenue outlook after reporting 27% growth in its September quarter, but kept its adjusted earnings forecast unchanged as it plans further investment in data and artificial intelligence.

The mobile advertising company now expects annual revenue of $670 million to $690 million, up from its previous range of $650 million to $670 million. It reaffirmed its adjusted EBITDA forecast of $145 million to $155 million.

CEO Bill Stone said stronger performance from the company’s data and AI tools supported the higher revenue forecast. Asked why the company did not also raise its EBITDA outlook, Stone said Digital Turbine was investing in people and systems to expand the business and taking a prudent approach to profitability while it scales.

“We want to make sure that we’ve achieved the first important thing, which is return on ad spend for advertisers using these new things,” Stone said. “Now we want to scale it, and then we’ll scale it with margins as we go forward in the future.”

Revenue Growth Across Both Segments

Fiscal second-quarter net revenue rose to $178.7 million from a year earlier. Adjusted EBITDA increased 46% to $39.8 million, with the margin expanding approximately 290 basis points to 22.3%.

On-Device Solutions revenue rose 20% to $115.6 million. Interim CFO Josh Kinsell attributed the growth to international supply and additional product offerings, even as global device volumes faced headwinds from DRAM pricing in the supply chain.

Stone said international On-Device Solutions revenue grew approximately 50%, helped by higher device volumes and revenue per device. He said improved advertising rates were the larger driver, as data and targeting helped produce better outcomes for advertisers.

App Growth Platform revenue increased 42% to $63.5 million, marking its fifth consecutive quarter of double-digit year-over-year growth. Within that business, DT Exchange revenue rose 42% and brand revenue grew 45%, Kinsell said.

Stone attributed the segment’s performance to a combination of company-specific improvements and broader advertising trends. He said brands were shifting spending away from the open web toward channels such as mobile apps, while Digital Turbine’s data and distribution helped advertisers improve returns.

Nearly 40% of advertiser spending on DT Exchange came from non-gaming partners, according to Stone. Kinsell added that the non-gaming share on the supply side was higher.

Margins, Cash Flow and Investments

Non-GAAP gross margin fell to 43% from 47% a year earlier. Kinsell said revenue sharing rose to 49% of net revenue from 45%, driven by product mix changes and revenue associated with sharing obligations. Other direct costs also increased, primarily because of hosting, bidding and platform fees.

Cash operating expenses declined 3% year over year to $37.6 million. Kinsell said the company expects measured AI investments in the second half, focused on demand-driving areas, direct costs, research and development, and data analysis.

Digital Turbine reported GAAP net income of $10.3 million, or $0.06 per diluted share, compared with a loss of $21.4 million, or $0.20 per share, a year earlier. The latest quarter benefited from a $2.2 million non-cash gain related to warrant liabilities and a $4.7 million gain on the sale of a dormant asset.

Non-GAAP net income was $23.4 million, or $0.18 per share. Cash flow from operations rose to $18.8 million from $14.5 million, while non-GAAP free cash flow increased to $10.5 million.

The company ended the quarter with $51.6 million in cash and cash equivalents and approximately $353.6 million in debt, net of issuance costs and discounts. Stone said net leverage had fallen to 2.3 times from more than 4 times in the prior-year September quarter.

European Expansion and CFO Transition

Stone said Digital Turbine expects its first revenue from Orange in the current quarter and plans to launch a partnership with another Tier 1 European operator during the current fiscal year. He did not identify the new partner or disclose its size.

Neither partnership was material to the company’s revenue guidance for the remainder of this fiscal year, Stone said, though he expects both to contribute to growth in the following year.

Stone also welcomed Daniel Lentz as the company’s incoming CFO, with a start date later in the month. Kinsell, who has served as interim CFO, will continue as chief accounting officer.

About Digital Turbine (NASDAQ:APPS)

Digital Turbine, Inc NASDAQ: APPS is a mobile advertising and application distribution company that helps advertisers, mobile carriers, device manufacturers and application developers connect with smartphone users. Its platform is designed to support the discovery, distribution, promotion and monetization of mobile applications and digital content.

The company provides technology that can be integrated into mobile devices and operating systems, including tools for app recommendations, device setup and application installation.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.