Welcome to the Digital Turbine Fourth Quarter 2015 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Ghen Laraya, Vice President of Business Affairs. Please go ahead.

Thank you. And welcome everyone to Digital Turbine's fiscal 2015 fourth quarter earnings conference call. I’m Ghen Laraya. With me today are Bill Stone, Digital Turbine's Chief Executive Officer; Andrew Schleimer, our Executive Vice President and Chief Financial Officer. Statements made on this call including those during the question-and-answer session may contain forward-looking statements that are subject to risks and uncertainties. Please refer to the Safe Harbor Statement included in today’s press release, as well as Digital Turbine's periodic filings with the SEC for a complete discussion of the risks and uncertainties that could cause actual results to differ materially from those you may perceive today. We will be discussing certain non-GAAP financial results. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. Now it is my pleasure to turn the call over to Bill Stone.

Thanks Ghen, and thank you all for joining us today. I will start with a review of our fourth quarter, in particular advertising ramp which is the combination of Ignite, IQ, and Digital Turbine Media and also we will give you an update on the Core Appia and Appia integration and tell you about the exciting things we’re doing in terms of broadening our product and distribution foot prints and driving revenue per device. And then Andrew will take you through the numbers and then we will open it up for Q&A. So let's get started. First, I want to provide an update on guidance for this current quarter. We’re having a strong quarter and as a result are revising our guidance to the upper end of the previously stated range of $17 million to $19 million. There are a number of potential positive things that we’re working on that could allow us to exceed that guidance, and Andrew will provide some color on that later. But let's first close out fiscal 2015 ending March 31. Digital Turbine's fiscal fourth quarter demonstrated the following takeaway's. The content business has not only stabilized but has shown material growth. Despite seasonality, January was higher than December and the business has diversified away from being relying upon any one individual content source. In constant currency, the September month saw $1.2 million of revenue. This contrasts to 1.8 million in December, 2.1 million in January, and 2.5 million in March. The Ignite business continues to ramp, but as discussed before, it's still dependent in the short term with new device launches. As we thought might happen, the fiscal fourth quarter saw no new major device launches as new roll-outs got pushed into April and was heavily reliant upon the Samsung Galaxy Note 4. The…

Thanks, Bill and good morning. I will start with a review of our financial results for the fourth quarter and the fiscal year 2015 and we will conclude with some additional color and perspective on our revised Q1 financial outlook as well as our full year outlook. Please note that since the Appia acquisition closed on March the 6th, consolidated fourth quarter financial results include 26 days of Appia and therefore are not directly comparable to prior periods results. In addition for the fourth quarter's results all comparisons are being made to the prior sequential quarter in less specifically noted. We believe that this is a better indicator of how our business is performing given the vast differences between our company today and at this time last year. Before I start I would like to take a bit of time to remind you of our two reporting segments so that we’re all aligned on how we intend to report and describe our business on a go forward basis. We have two reporting segments, advertising and content with advertising comprise of Appia Core and DT Media and content comprised of DT Marketplace and DT Pay. Recalled in our content business, the wireless carrier is our customer and we provide content and billing services to them. However in the advertising business our customer is the advertiser and we distribute applications through a network of publishers that include mobile websites, mobile applications and the carrier home screen. This is a key distinction namely as we demonstrate the importance of advertiser relationships and the strategic rationale for the Appia transaction. As the advertisers are the ones writing the checks to Digital Turbine. While our distribution network is important, our ability to drive long term meaningful relationships with application developers via the delivery of high…

[Operator Instructions]. And our first question comes from Mike Malouf of Craig-Hallum Capital Group. Please go ahead.

Can we start off Bill, on the OEM, because that seems to be a nice change in the business model, can you talk a little bit about how this Ignite actually get installed at the point of manufacture and then you are putting apps on the phone at the point of provisioning similar to Ignite now or can you just talk a little bit about how that would work? Thanks.

Yes, sure. So regarding the OEM strategy, it's actually kind of two different prong story here. One is we have relationship with an OEM in the Middle-East called TouchMate and one in the Pacific Rim called CloudFone that is installing Ignite on the devices, and the business model is similar to that of the operators where those particular OEMs have some local market traction. The issues with or the opportunities with HTC, Acer, Asus, and we announced for Sony today is really more on the user interface. So all of these companies are trying to customize and build stickiness into their products and so they have got different types of feeds for example HTC has a something called touch feed, touch sense excuse me where you can customize your feeds for ESPN and Twitter and your contacts, pictures and so on, and so they had a lot of success with that and now they want to figure how to monetize it. So what we’re doing with those OEMs on a global basis is we’re now feeding in all the Appia app installed network into those OEMs. So it's not Ignite going on those phones, but what it is, is we’re handling all the app install monetization that they are going to do from the iBall is now spending time in those user experiences and what's important here is A, that it's global so this is not just a U.S. story, and so it helps address some of the emerging market issues around how you get to monetize when people are buying simcards and secondly it really allows us a great opportunity to get a foothold in with those OEMs for other products and services.

And then just a question on monetization per phone, can you talk a little bit about you’ve been doing this for a little while now, probably have a better idea than you did six months ago. Can you help us with what your targets are with regards to monetization per phone? What is the opportunity for that monetization given the better day that you’re going to have here pretty quickly, and then just maybe compare, contrast that of the U.S. and then international?

Sure. So what we’re seeing right now is good accretion, so every day we’re getting better at this and what we’re seeing here into June is better than what we saw in May, and May was better than what we saw in April and so and so. We’re getting better at it. The thing that why we didn’t put some off that specific, we will on our updated call in for the quarter in August, it's just bouncing around a lot I will give you a simple example. We have one customer that just went from two slots to four slots, so the yield per device just doubled overnight. So clearly that’s a positive development, but in terms of just the average as we’re still getting the model straight, I touched on the CPA example of $5 where we’re seeing 15% - 20% open rates which would yield close to basically a $1 for that slot. That’s a new model for us, that’s emerging. So given things are bouncing around on a daily basis. We don’t want to put something out there today just given that it's moving around a lot. But it's moving around now in the right direction for us, so we’re excited about that. What I will say in the United States is that we’re seeing pretty similar rates to the United States and Australia and then as we go into markets like India and the Philippines, we were probably taking around say probably 50% or so reduction, but that’s offset by obviously opportunity for materially increased volumes.

And our next comes from Andrew D'Silva of Merriman Capital. Please go ahead.

Just got a few questions for you, as far as Ignite devices go during the quarter, are you able to disclose how many devices you added during the quarter?

So Andy, for this current quarter we are seeing a material ramp, we will disclose that on the August call given all the new material device launches that have occurred, but we didn’t disclose anything for the end of the fiscal fourth quarter.

And then kind of elaborating on one of the question that was just asked, as far as your OEM partners, Sony, TouchMate, HTC, so and so forth, the majority of them are using Appia correct, and not Ignite other than TouchMate, they are all utilizing the Appia platform is that the right way to think about it?

So I would think of these OEMs and this is a great synergy from the transaction of, I would think of the OEMs as another publisher for Appia in terms of how we’re utilizing them, but then we’re using our kind of business development at global scale to kind of help round that out and compliment it and then use the opportunity for the other products and services such as Ignite and IQ and marketplace as future business development opportunities with those customers.

And then you went to a conference last month, and you had put out a slide deck and it had some nice metrics as far as how many devices are sold by each of those OEMs and it came out to around 46 million, excluding Sony obviously because that was just announced. Are you assuming that out of those 46 million devices, you’re on all of them or is there an assumption to certain devices that you’re going to be on, a little clarity there would be useful as well.

Yes, so it varies by manufacturer, but basically I think about it is across all of those Android devices you know, both smartphones and tablets that will be on a go-forward basis.

And then continuing with that confidence, you essentially said that you were restating guidance for 2015 as well as 2016, I'm just trying to get my hands around this. When you restated your fiscal year '15 guidance at the conference in your initial full-year guidance stated revenues would be $20 million and $32 million with I think adjusted gross margins at 30% range. What exactly changed or what was missed then for your gross margins to come into low now and then what structurally is changing going forward into 2016 that gives you the confidence that your gross margins are going to be trending up so much more than they were at the end of the year now that Appia is in and that’s going to be substantially lower than what you’re guiding for.

Yes let me start with that and I will then turn it over to Andrew for some color. Yes, so really the gross margin story for us hasn’t changed as we look at on an annualized basis. You know given where we’re at right now that we’re going to see some variations in mix from quarter to quarter and the mix between the content business and the Appia core business for the quarter obviously negatively impacted gross margin as some of the things that Andrew talked about with professional services, you know the ramp of additional Ignite and IQ customers that will positively impact gross margin. I remember [indiscernible] works is done at a 100% gross margin. So those were all things that will impact us positively and so as we look at it from an annual perspectives that’s why we are comfortable in the mid-30 range although on a quarter to quarter basis you could see it bounce around a little bit.

Yes so we finished the year Andy, on adjusted gross margin basis which is where we guided to 29% which was below the mid-30s and as we alluded to handful of items contributing to that largely it's mix and it's the Appia core business as well during that period being somewhat adversely impacted by increased investment in RTB [ph] which had negative impact in margins on the quarter but overall again to reiterate Bill's comments, the story hasn’t changed with the ramp of DT Media which carries much higher margins than core Appia as well as our more traditional content business. We’re comfortable and confident today for the full fiscal year reiterating the mid-30s for '16.

Should we assume I guess -- I know you don’t offer quarter by quarter assumptions but is it fair to assume as we ramp up going forward with IQ and Ignite that we should just begin to see a steady increase in margins and probably topping off in the December quarter and is that an assumption that you guys feel comfortable with or am I just looking at it the wrong way?

I think that’s right, as DT Media holistically becomes a greater proportion of our revenue mix, the margin clearly should accrete overtime and as we get into the summer months we will pass graduation and Father's Day here into the summer as well as back to school on the back end we do have some material selling events to sell into and as we discussed 10 new devices with T-Mobile in the next 90 to 120 days and other device launches amongst carriers get us very comfortable that there will be a mix shift away from content into advertising and within advertising more DT Media relative to Core Appia.

Okay, last question for you guys. As far as precisions going with Verizon I mean can you give an update on that -- are you seeing it being useful and is it helping you better deliver the correct content to the right user and have you begun pushing applications now out after phone has been activated through Verizon, my phone recently got a couple new apps installed and I wasn’t sure if that was you guys or someone else?

So we’re about to begin, Andy our precision work. We have been dealing with a variety of issues with Verizon make sure we got all the legal and security and audit and other things associated with that data is that’s absolutely very sensitive that we take seriously and as does Verizon. And so we anticipate that we’re eminent to start beginning that, we have not yet. We think that that will be a material driver of improved yield per device over the long term but we’re going to start here soon and we will have things like age, gender, language preference and so on and that’s something the advertisers really desire off the Ignite platform.

And the pushing applications, you’re not doing that or are you doing that?

Can do that, we’re not pushing applications out to customers at least in the United States after they get their phone but however if you do, do a factory reset or get a software update or something to that effect then the opportunity to push additional application exists but that’s not something -- at this phase of the game that we’re doing actively.

And our next question comes from Bill Sutherland of Emerging Growth Equities. Please go ahead.

With the big roll-out of IQ with T-Mobile coming up, Bill I'm just curious if you could help us think about the some of the economies per user as you get more data on that.

Sure. How I think of the economics per user, we’re going to be putting software across the 100% of user base we will get some percentage of the user base to engage in that and comeback one of the great things of why T-Mobile want to go forward was the stickiness and the engagement of customers continue to come back into the experience more than one-time. How we will think about the product is we will be able to deliver both organic and sponsor app recommendations leveraging the Xyo technology and from an economics perspective you know as we have kind of said before I will give you any specific deals we think about it similar to Ignite is the average -- the average has been around 50:50 rev share with the operator on all the sponsored app installs that a customer pulls down, but I think the real key here is that unlike Ignite where you’ve a customer that gets a phone out of the box and then we have that basically that first 30 days as monetization with IQ will be ongoing, so while the opportunity to monetize that for the life of the device over 12 to 18 months. So while it's not a material driver now as you then get all the users everyday continue to add on, it's kind of like a snow-ball going down a hill in terms of recurring subscriber opportunities and new interfaces in. So, that’s why my comments I referred to the opportunities we think about as fiscal '17 item. But as we have got to get the ramp going here and get this thing on more devices it won't be material in the short term.

Well sort of two follow-ups on that, I guess I'm trying to figure if you guys have enough history yet with the early installs to have a sense of kind of overall life of a phone with a user what the numbers could look like per user, is it just too early to have any data?

Yes we do have some data. I would consider you know one of the things historically, you know Bill we want to do is change the culture of how we approach these kinds of things in the past. I want to have a good empirical data before we start materially baking things into our guidance. I que it's still early days, yes we have got some data but I'm not at a point where I'm comfortable taking that and extrapolating that out and baking it into a huge number of the guidance because I can run the numbers out and they can look really attractive but we’re just not at a point yet where we want to do that, we have made that mistake in the past we’re not going to do it again. So we’re going to be extremely conservative at this point but I do want to hear my optimism and excitement about the long term potential of the product but until we get few good solid quarters under our belt with significant material volumes of devices like we’re now starting to see with Ignite, we don’t want to get over our skews [ph].

Andrew, the guidance for the quarter also reflects kind of the same given the current mix of business, same kind of currency impact that you saw on Q4?

You’re talking about fiscal Q1 guidance?

Right.

Right now we believe that the Aussie [ph] dollar has stabilized again don’t expect it to go down any further, we ended fiscal Q3 on an average of $0.83 and ended fiscal Q4 on average of about $0.78 and we have seen the dollar kind of stabilize in that quarter. So we’re not putting much credence at this point in time in terms of moving around in the range based upon the Aussie dollar number.

And our next question comes from Jon Hickman of Ladenburg. Please go ahead.

I was wondering could you opine a little bit on what you think the percentage of your business from Australia will be in future quarters?

Yes sure. As we look at the content business overall, 74% of the business overall for Digital Turbine was related to content in Q3 and 64% was related to content in Q4. The lion share of that was related to Australia. We do believe though on a relative basis as DT Media becomes much larger percentage of the overall mix that that percentage of content/Australian business will certainly come down. I just want to refer to the comments that we have made previously as it relates to the midpoint of our guidance range of 110 million to a 130 million on the floor that Bill that alluded to Jon in talking about Core Appia's content of 55 million on a trailing 12 months basis and roughly 60 million as we have quoted publicly. In that -- implicit in that is Australian content business as well as Appia core and the remainder of the growth that gets us from roughly 60 million to the midpoint of the guidance range of a 120 million is from DT Media. So, as we continue to track towards our goals of 110 million to 130 million which we reiterated today the proportion of DT Media relative to the whole will increase substantially which will also mute the impact and effect of the Australian dollar and the content business particularly as it relates to overall margin as well.

I guess my question is more of on the if you isolate the content business itself, Australia is still going to be a major factor in that particular segment going forward.

That’s right. Within content that’s correct although we have launched new customers and penetrated existing customers with new products, the Aussie business will continue to be the material driver of content in the near term.

And then could you -- severance cost, what were they in the quarter?

The severance costs were just under a $1.5 million for the executive team in Appia that we took a charge for.

Okay and then by the comment around cost associated with software integration during the quarter, does that mean that you didn’t get paid for the software integration you did or you didn’t do any during?

The revenue was -- yes we didn’t recognize any revenue for the high margin software integration in the quarter relative to revenue that was recognized in Q3. So that’s correct. We did not have any statement of work if you will in fiscal Q4 and that impacted margin as well, revenue end margin.

Okay, so could you explain just one more question for me, I understand the CPA model where you get paid only if a person does the action that’s required by the advertiser. The CPP model could you elaborate on that?

Yes so the CPP is a cost replacement, so rather than having to wait for the customer to do some sort of action like open the app or make a registration or something within the app. The CPP is where the advertiser pays us for a 100% of the apps that we install on the phone. This is really attractive for providers that are taking more advertisers or developers that are A, taking a more long term view versus an immediate term view because they will have that app on the users device for the lifetime of it which averages anywhere from 1 to 2 years and also it works well for brands that want to make sure again that they have got the your mind-share not just for using the app but also in terms of how you can think and interface with that. So, that’s where we are seeing the predominant amount of CPP today. We expect to see that to continue to grow as the app install business for Ignite, it's a little bit different than for example what a Facebook does or what we do on IQ here is immediate term attribution. So it's much more of a branding play given the home screen of the device. So I think that will be a good thing for us as it provides more certainty and visibility in terms of revenue streams since you’re getting paid across the 100% of those. So we want to find the right balance.

So you don’t on a CPP it doesn’t matter if they open it or?

That’s right, we will get it for 100%.

So right now most of your placements are what model?

Right now they are basically, it literally varies from day to day but I would say that we’re probably majority CPI followed by CPP then CPA. We see the model evolving to other things in the futures we’re having conversations with advertisers but those are the three principles today.

And the open rates the 10% to 60% is how is that fluctuated recently? Is that -- I mean I think before you were saying something between like 30 and 50?

And so it really depends on, Jon, the campaign, because the other -- the variable that’s important there is what's the dollar CPI rate. So I would rather have a 25% open rate on $4 CPI than 50% open rate on a $1.50 CPI. So we look at it holistically in terms of what the rate is and we may take a lower open knowing we are going to get a lower open, we have a higher CPI and vice versa, a bit about the campaign and that’s back to the experimentation that we’re doing. And to Andy's question earlier around some of the precision and other data science tools that we’re integrating, on why those will be so important to get both of those numbers moving north.

And then my last one, just how many brands or advertisers -- I don’t know exactly know the right word to use but I think brands is probably the best. Are you installing apps -- over the course of -- I mean what's your count right now?

Yes from an overall Digital Turbine perspective including Appia it's 100s. As I mentioned on 60, it's top 100 Google Play apps today and then all the brands on top of that. From a Digital Turbine media perspective I would say we’re probably working between 25 and 50 today.

And our next question comes from Ilya Grozovsky of National Securities. Please go ahead.

So my question was just first on clarification, what did you say the guidance was for fiscal '16 adjusted EBITDA?

We said that will be positive for the full year now adding back including bonuses. So we can give specific number Illya, it was just reiterating our previous guidance that we would be positive for the entire year now layering on top the new definition of adjusted EBITDA.

And what about -- and the first quarter?

We haven't given any specific adjusted EBITDA guidance on a quarterly basis just on an annual basis today.

Okay, so as far as the new devices go. So obviously Samsung S6 has been fairly successful that’s in this the launch April, mid-April was -- is going to be in your June quarter. Going forward they are really as far as I know aren't any new devices over the next three, four quarters that are going to be coming around that should have that type of an impact. So your guidance and your sort of outlook for the year, is it kind of assuming that you will add additional carriers or are you assuming that the numbers just continue to grow for the devices that are already out there?

So Ilya, it's a few different dimensions. First off, as we go across the devices in the line-up and the older devices get phased out. We typically see is mobile operators will consistently sell similar volumes quarter over quarter of smartphone. So here in the United States if the four major operators average 20 million devices a year, 5 million a quarter just to keep the math simple that’s a pretty consistent metric. So as the new ones come out and the old ones get phased out and we’re on all those new ones, I would expect us to continue to get enough share on that versus betting on okay what's the next big thing that’s going to launch to be a catalyst for us but I think that, you will still continue to see the G3, the M9, the S6, the S6 Edge and the variety of the other one is coming out continue to drive volumes above and beyond this quarter but more importantly they are equally importantly to that will be the yield conversation that we just had but also the expansion of new customers, new markets as well and I touched on that in some of my remarks. So those will all be the catalyst to drive additional top line growth to the category, more so than just one new big device launch that’s happening over the next few months.

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

Thank you all for joining the call today. We appreciate your support and we will be back in August with our quarterly update to build on the moment that we have today and we appreciate you all joining the call. Thank you very much.

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