Good afternoon and welcome to the Digital Turbine Second Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that this event is being recorded. At this time, I would now like to turn the conference call over to Mr. Brian Bartholomew, Senior Vice President of Capital Markets and Strategy. Sir, you may begin.

Thank you. Good afternoon and welcome everyone to the Digital Turbine's second quarter 2017 earnings conference call. Joining me today to discuss our results are Bill Stone, CEO; and Barrett Garrison, our CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. These forward-looking statements are based on our current assumptions, expectations and beliefs including projected operating metrics, future products and services, anticipated market demand and other forward-looking topics. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. Except as required by law we undertake no obligation to update any forward-looking statements. For a discussion of the specific risk factors that could cause our actual results to differ materially from those contemplated by our forward-looking statements please refer to the documents we filed with the Securities and Exchange Commission. Also during this call, we will discuss non-GAAP measures of our performance. Non-GAAP measures are not substitutes for GAAP measures. Please refer to today’s press release for important information about the limitations of using non-GAAP measures as well as reconciliations of these non-GAAP financial results to the most comparable GAAP measures. Now, it is my pleasure to turn the call over to Mr. Bill Stone.

Thanks, Brian, and thanks to all for joining the call today. First, I would like to welcome Barrett Garrison our new CFO to his first earnings call. Glad to have Barrett on board and while he has only been here a couple of months, he is already having a positive impact on the business. But before I turn it over to Barrett to take you through the numbers, I would like to cove our four topics today. First, is a review of our September quarter including updates on both the content and pay business as well as our Advertising and Publisher or A&P business. Second, is an update on the December quarter and a variety of operational updates in metrics. Third as a new announcements that we believe will be strong drivers of future growth, and finally there are some strategic thoughts of the business and how we are working to unlock shareholder value. First on the September quarter, I'm disappointed with the overall top line of 22.8 million, I am very pleased that despite numerous headwinds such as the Note 7 recall, some testing delays of AT&T and América Móvil specific technical issues which I'll discuss in more detail later in my remarks. And we still grew our O&O or Operator and OEM business by 42% sequentially to a record 9.9 million, which also represented a 143% growth versus the comparable period last year. As most of you know this O&O business is both a short and long-term growth driver and margin expansion focus for us. The relative outperformance of our O&O business is why our total gross margin dollars grew sequentially. We saw revenues from our U.S. O&O partners grow nearly 40% sequentially and our revenues from international partners nearly doubled quarter over quarter. So in other words,…

Thanks Bill, and good afternoon everyone. It's a pleasure to be here on my first earnings call and I look forward to working with many of you more closely in the near future. I have been with Digital, I have been Digital Turbine's CFO for almost two months now, and before I review the financials I would like to take a moment to share with you my motivation in joining the company in areas of focus going forward. Career changes are challenging choices, but in the case after meeting Bill, his team and our Board Members it was an easy decision and it was clear that company has built an exciting set of strategic assets, which will enable Digital Turbine to achieve the next level of performance in a rapidly expanding marketplace. My passion is to be in a business focused on growth, with a compelling addressable market, products in high demand, a robust pipeline and board support to make this a reality. Based on my early observations, I believe these ingredients are in place here at Digital Turbine. In addition, being part of a global company was important to me as this presents further opportunities for growth. In the end, all these factors made it the right choice for me to join the company. While I continue to advance my understanding of the underlying business my immediate focus is centered around strengthening our financial position and achieving profitability through deliberate resource allocation directed towards growth initiatives driving increased cost discipline continuing to improve our companies control environment and also establishing credibility with investors. I'm excited to be here and I look forward to helping drive our strategy forward over the long term. Now let's review the financials. Revenue for the fiscal second quarter of 2017 of 22.8 million decreased…

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] Our first question comes from Mike Malouf from Craig-Hallum Capital Group. Please go ahead with your question.

Thanks guys for taking my questions. Bill, if I could just start with the couple of comments on AT&T and América Móvil. You said that you are planning to be on all of the android phones but I just I didn’t quite get the dates when are you expect that will be rolled out fully?

Yes, sure. Mike. So we anticipate that as we get into the fourth quarter of our fiscal year that will be on the new AT&T device that launch and then going forward on those new devices, your exception I probably drive you attention over to the pixel. I’m fine that’s obviously unique to Google, but all the other android phones, we expect to be included as a standard feature on. And then there is some maintenance release or software upgrades to existing phones, they were also plan that was supposed to be launched in the current quarter. But as result of some of the issues that referenced with the iPhone launch and Note 7 recall excreta, that was that pushed out into next quarter or so, we will be those going forward as well.

Okay and then América Móvil the same?

So for América Móvil, we have started embedded base pushes out to a variety of phones and primarily in Mexico but also throughout all Latin America as part of the new continue to or which is power Ignite embedded in. So basically our to the existing base of devices are still many, many, many more to go. I would say we just scratch the surface - many millions but there is tens of millions in terms of opportunity remaining. And now we have just started over the past 30 days, now having Ignite loaded on new devices but starting first in Mexico and then as we get into the March, you will see that expand into the Latin American markets in South America. But the game plan will be as we exit the quarter that will be standard feature on the América Móvil and new phones being sold going forward.

And then good news on T-Mobile, can you talk a little bit about the relationship there and what you are actually providing for them, I think there might be, that differ than what you are providing for some of the auditors?

Yes. So we anticipate that will be in going here, probably over the next, I would say 90 days, with T-Mobile on a couple of devices and we are working through all the technical details right now. But similar to what we do with Bleak in France where they already have an app delivery away to get their house apps out to customers, there is no way to get third-party apps, you don’t think apps like Uber, Starbucks, E-bay et cetera. And so what we’ll be doing basically handing to our Ignite platform, all of the mentioned above the third-party applications on our devices. So we are going to start first on two devices but tends delivery capability already on the existing phones, similar to how we move quickly with Bleak. I’m feeling very optimistic right now, that will be able to move quickly with T-Mobile since we are just adding on just third-party campaign integration into something that already doing versus starting from scratch, like we were with the AT&T or América Móvil.

As you look into the next year, what kind of the flavor of Ignite can we expect with your largest U.S. carrier now, I know that they have started originally with just standard Ignite and we have gone through some adorations. And also if you could just comment a little bit on that relationship, how much longer do you have on that contract? Thanks.

Yes sure. So we can’t comment specifically, any specific agreement, so we are not going to talk about that and then say there is so as many years left on it, on that agreement. I feel right now that, the relationship is in the fantastic place, where we have been able to really add a lot of value, bringing together a lot of the ALO assets and then being able to take those on to Verizon devices, that’s going to take a bright spot for Verizon. So very happy with how the relationship is right now but to your point, we are looking at a variety of things and how we can continue to collaborate with them as we go forward above and beyond just pre-installed, on the home screen. Whether that’s how we can better leverage advertising models, paying the methods, delivery methods, there is a variety of things that are underway there, that we are working with on. But in a very, very short-term as we get into the current quarter the focus is to continue to optimize the experience with the right apps to the right phones.

Okay, thanks a lot Bill.

Thanks Mike.

Our next question comes from Brian Alger from ROTH Capital Partners, please go ahead with your question.

Hi guys, good afternoon, I appreciate you guys providing the update today. A couple of questions, first off with regards to the DT-pay business. We talked about that being down, it was down a little bit more than we had expected, is that expected to be bouncing back on a seasonal basis.

Yes, so, Brian so as I mentioned in the remarks, I'm going to be over there next week, and there is a variety of very near term things that we are working on. And so one reason I'm making the long trip over there is to unlock some of those things the content providers want to do to take advantage of the seasonality. So we'll have more details on it over the next few weeks. As I did mention in remarks, we did see the business stabilize from October from where it was, so we don't expect anything to deteriorate, the question is how much can we ramp it with the seasonality and approval of new services combined as we start ramping pay in places like India, Singapore, and the Philippines as well.

And we look at that DT-pay business today a lot of that if not most of it has been with the Australian partners. How much of the business as you see looking into the next call it calendar year do you think will be outside of Australia.

So today where that calendar year, the goal is right now if you kind of think of that business is historically you are not looking at any one quarter. But just kind of in more generically think of that business kind of in a $30 plus million range looking in the rear view mirror and us being able to grow that not just in Australia, but as we think about that overland to Asia. I don't see any reason why it shouldn’t be getting to anywhere from kind of 10 to 30% you know of that total as we go into next year.

Great, and not to be pulling on the negatives here. But the A&P business with the app pay guys, how should we think about that, as we go forward we have talked about the shift obviously moving to you know the programmatic and what not, has that stabilized are we going to grow from here is that seasonal. Give us a base line on how to really bring that up.

Sure so how I think about it Brian, is our number one initiative in the business is really to remain profitable and we got be able to show investors that we are generating cash not burning cash and as I mentioned in my remarks Ignite, the Ignite business and the pay business are profitable today and they have been profitable. The A&P business has not been profitable. So we really want to look at how we can get the cost structures right sized and aligned on that which is we have done that through some organizational things over the last few months to really focus on the higher growth O&O. But that doesn't mean I see the A&P business going away or going to zero or anything like that I think there is kind of more in a steady state with it right now as we really kind of right size the effort and resources around it. The question is how quickly can we take advantage of some of the AI machine learning capabilities through RTB and we are looking at how we expand we are just doing some specific things so there how we think about that platform and taking the Ignite data set of knowing what customer's running what apps and what apps they may have a propensity to want to be able to take on. Not just during our CPI basis like we have historically done but if we do that to more brands and advertisers that are looking at targets specific customers for example that they have only had the device for 30 days or may only have the specific device in a specific neighborhood and we have got the ability to do that. So we have been looking at our business models to monetize it and take advantage of data set and in my opinion is that's how we are going to win in the space that's unique that's different to us and so the question is how quickly can you get hit that business ramp? We have made some really material progress on that but we are not the pace yet where we have out run those AMP declines but this is a big investment area for us. This is one of the few strategic investment areas in our business as today against the backdrop of profitability, because we believe strongly that we have got the winning dataset and the world is moving to programmatic way versus doing this new and old kind of business development ways of years past. So I think we are on the right track with this to really sort of move it faster.

Alright, and on the more positive note obviously really happy to see what is going in India I have been tracking that fairly closely. How many [scores of pack here though] you guys describe been involved about 2.5 million devices. My check indicates that in the first 26 days Jio signed up 25 million subscribers and with the first two months there are over 40 million subscribers. How do we square the peg from subscribers versus devices?

Sure. So, on to the vast majority Brain of what we are focused on right now are the Jio branded experience devices, which is the 2.5 million that we have referenced. There are customers who can bring other devices in from in whatever markets they happen to be swap a sim card in Jio is running a free data promotion right now that has a tremendous amount of traction in the marketplace kind of really turning it over. And so when we think about relationship with Jio I think about it really on three dimensions and we are kind of just in the first dimension, which is delivering Jio house applications out to Jio devices and so that's growing nicely it's growing rapidly, I reference some of the comments on the growth that in my remarks. Number two, is they are in taking a same devices and then using similar to what we do with Verizon and taking brands like FaceBook or Uber, Amazon and applications like Flipkart or whatever happen to be in ticking those to those devices in the Indian market. And then number three has been working with other OEM. So I think Samsung and some of the Indian OEMs Micromax, Karbon and [Indiscernible] et cetera. And then having working with Jio to put Ignite on those devices as it's in Jio's interest who wants to do that. So we are just kicking off that process, so that would be another revenue streams. So I really think off Jio as generating three separate unique revenue streams for us as we go into the next 12 months. But in the very present we are really just focused on the first one.

Great and has is there been any revenue to-date with party?

Yes, we expect them to launch of this quarter, we are kind of in the final strokes.

Awesome. Great guys, I appreciate all the help.

Thanks Brian.

And our next question comes from Sameet Sinha from B. Riley. Please go ahead with your question.

Yes. Thank you very much. A couple of questions. Can you detail all the measures you are taking in terms of profitability for that term number of times on this call, and if you could provide together with how you are combining O&O and A&P and do you expect to see - apart from these cost synergies are there any possibilities of revenue synergies off putting them together. Secondly, can you comment on - you announced the Brightstar last quarter that's a big distributor cell phone. Any update so with that and lastly at some point in the call you mentioned if slowing and how to generate value out of certain assets that you have. Can you elaborate on what exactly you are thinking about? Thank you.

Yes, absolutely Sameet. I'll start with it, then I'll turn it over to Barrett for some additional color. First let me take Brightstar. So we are engaged with a number of operators on pretty much every continent right now with Brightstar, you know there is one in Asia that we expect to launch our first service with this quarter. So that's underway right now will be our first you know kind of new partner that we have collaborated with Brightstar and to go and sell in a variety of kind of business development activities with them around the globe. So we continue to be very excited about that relationship and the opportunities are very complementary to what they are doing and what we are trying to do. Regarding the strategy that we are looking at, I think that as I said in my comments we believe that market comparables for what we have built here and the franchise value are misaligned. So it's incumbent upon us to first and foremost execute, but second of all if there is opportunities for the market to establish other values for some of those assets a minor reposition those assets or whatever happens to be, how do we unlock value to showcase that to the street. So that's something that we are going to start beginning to explore here to ensure that the full franchise value of what we have built and assembled can be reflected and be closer to other market comparables in the company. And then, finally regarding profitability. Yes I mean the goal here is to start generating cash, not burning cash and I'll turn it over to Barrett for some additional comments. But from my perspective its first how do we get revenue synergies we are doing that today with…

I think Sameet, if you think about the comments in the prepared remarks are focused around we are encouraged by our O&O group engine and that's where free cash flow is going to be generated in a near-term. And so the focus around directing our investments in areas that accelerate that time to launch and revenue generation along with many of the things Bill just referenced being more intelligent about our hosting, having visibility of the cost and drivers. There is not an easy quick wins, but there is a number of areas that we are focused on that are making progress already that we are excited about.

Great couple of follow-ups. Also on the call you mentioned about hitting a volume threshold with a particular carrier and can you elaborate on that comment, and are there other material tiers threshold that you could hit, which could probably bring down the overall unit economics? That’s it. Thank you.

So to start whether you think about the tiers I comment on. One of our large U.S. partners that hit during the, in the quarter due to significantly more volume in the period. We had a tier towards the end of the quarter and to give you some reference probably in the range of 1.5 points in margin for the O&O business and the construct of some of our agreements are tailored around incentivizing growth. And those volumes tiers for instance this one, is one they reached in the quarter and due to their quick growth in the quarter.

Thank you.

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

Thanks. Good evening guys. So what is the status of, I know your approaching a couple of new carrier opportunities in Europe, what is the update there?

Yes. So let me just comment in kind of in generically on the pipeline that give any kind of one name here. Yes we have got names in Europe, we got names in Asia, we have names in Latin America kind of all over the place. One that the biggest things that we have been focused on a business is, how do we ensure that when you take a lot of these new contracts on, we can do it a way that doesn’t have a lot of custom work and can accelerate time to revenue. I like to use Bleak in France, it’s kind of the foster child where basically within 45 days the contract signature we are up live generating revenue and now they are I believe a top five Ignite partner for us. So we are looking for that kind [Indiscernible] a lot of the work we have to do with América Móvil and AT&T, which I know was very pain staking for all of us, waiting for that revenue to start bear fruit, which it is now, but it took us a very long to do that. So as we are looking at the pipeline, we really look at it through that lens in terms of how quickly can we get up in running and start really gain some traction with these accounts. And then also making sure that we have got strong engagement. The more engagement we get versus just people signing and deal and then they kind a go away and a lot of those things, you need to lose a lot of energy in those accounts, that’s what we see as a big correlator. So that’s where we focus and the other things is been very helpful, as we have a lot of as I said wining gets wining and as a result of that people know who we are in the industry and we have had some nice reach outs from an inbound prospective. There are names that everybody on this call are familiar with. And so I’m quite excited about those because, at anytime, anybody is trying to call you versus the other way around, obviously that names are engaged, when they want to be going and actually give us more leverage in terms of, getting things go in a faster time to revenue way.

Great and then, understand this, but above in the area as far as giving us a sense of how this quarter is going to trend. But maybe it would be helpful for us if you could help us think about the sequential and seasonality kind of effects this year, based on the fact that, you have got so much ramping with América Móvil and T-Mobile and AT&T in the March quarter. And so maybe some sense of maybe how the quarters might be slicing this year?

Yes, let me start and I'm going to turn it over to Barrett. I’ll start off with some operational dynamics and Barrett will comment on the some of the financial specifics. Remember 40% of all the cell phones gets sold in this quarter and I think about 70% or 80% of those get sold from basically the week of Black Friday through the end of the year. So there is definitely a big seasonality ramp and now we have got a couple of those under our belt, so I think from a modeling perspective we know what to expect. The only wild card is going to be what are the carriers promoting for the holidays, a lot of people they expected the Note 7 to be a major driver for the holidays, Samsung is very eager not to lose market share. So the question will be did the carriers respond to those incentives and what they do and are there any other manufacturers that feel that [Indiscernible]. So to me that's kind of the one wildcard, I would put out there operationally for the December quarter. And then, yes, you nailed that for the March quarter obviously as the seasonality impact falls off a little bit in the March quarter, but that's offset by a variety of new partner launches as well as some of the attribution from December phones to kind of role into January as well. So I think those factors will keep the momentum going for us. [Indiscernible] any more specific financials barrier ending that.

Yes, I think couple of things I would point you to, certainly on Bill's prepared remarks he talks about the activities that are undergoing with the pay business and discussions there, but it's points around we think we are stabilized at this point and maybe poised for growth in the future. Also certainly you would have taken away from our comments, our excitement around the O&O business and its growth. And while Bill highlighted some things around seasonal demand, we are still learning everyday about how in place of Note 7 how carriers are developing their promotional programs, but all-in we are certainly encouraged by O&O’s progress.

Great. Thanks for the color guys.

Our next question comes from the line of Jon Hickman from Ladenburg Thalmann. Please go ahead with your question.

Hi. Barrett, could you walk me just through to that thing real quick. In my math as that if you got 14.3 million from proceeds of the convertible and you used 11 million to pay out for debt. Maybe you have about 3 million left right?

That correct.

And then I can add that to the 9 million you have on the balance sheet?

Yes, that's right. So we have our 9.4 million at the end of the June quarter. We generated approximately 3.2 million in cash from net financing activities and then we ended obviously actually that 9.4 so between operations and CapEx we consumed about the same amount of cash that we generated with the financing activity in the quarter.

Okay, then Bill, didn’t you guys build and [REG] (Ph) in Appia?

Yes, so Appia had some RTB activities going on prior to the acquisition. What we did is we moth balled some of those activities when we took over the business until we get our Ignite data set ready to go and ramp. So I think that's what will you need to have win not just the platform. So we took that out of mothball and made a variety of technical and operational improvements to that, that we are doing now. So we very much think about it as iterating and building off of it and many of the people that were involved in that are still involved with building a platform we have today.

So, do you feel like you have the financial wherewithal to utilize that now.

Yes, we are being pretty judicious on the investment here, obviously would always like to be able to go out and do more, so we are being pretty judicious how we are managing it. But it’s definitely an investment area for us and it's definitely where the world is going from a macro perspective. And I believe our data set can win not just in terms of in doing traditional CPI app installs, but those I referenced in the remarks, things like cost per click is more value to brand, the CPM which has more value to brand, how you pack data set up to people. When looking for people within the first 30 days to buy a phone and maybe they like a Bluetooth headset and those kind of things where it adds a lot of value to advertisers in a very discreet targeted audience and something that we should be able to monetize. So that's where we see the platform going.

Okay and then just one more clarification, you did say you have some phones right now this quarter with T-Mobile.

No. yes we anticipate a launch, yes we did say launching a couple of phones of T-Mobile in the March quarter.

In the March quarter, okay, thank you. That's it from me.

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

Ok thanks guys. Just on the housekeeping side, can you just give a little bit of color on the yield per phone in the quarter, you guys usually give that out.

Yes, so Ilya I have referenced that we finished September up with our U.S. partners 20% higher than where we finished June. In terms of yield per phone, it’s something problem we could follow-up offline, it's got a lot of nuance to it, because now what we have got is you got new phones versus the existing phones. You have got pushes to the embedded base, you obviously got variances based on geography and geography influencing things and so there is a lot of moving parts on that. So I think that's a great follow-up item for us as we talk with you and some of the other sell side guys to get a little more granular on that. We didn't want to kind of overload people with a lot of moving parts.

Okay, got it. And then just on the RTB, so I feel like we have been talking about it for probably three, going back three quarters kind of getting it off the ground. At this point, do you have a functioning RTB offering in effect?

Yes, so RTB is live, it's generating revenue, we have had days that [indiscernible] 10% of our total A&P revenues depending upon kind of campaigns and days. So the business is ramping and continues to ramp in size, it just needs to ramp faster and I think some of these business models and things I referenced are maybe some of the key catalyst to grow that above and beyond just the traditional CPI [indiscernible] campaigns.

Okay. So it's about 10% of the A&P number, is that what you are...

Yes, on a pretty good day, it’s not every day. But I mean my point being to be illustrate here is that yes it's live and we have put up some pretty good numbers on any particular day with it.

Okay and from a successful perspective, how would you characterize the success of that platform right now. I mean in other words my question is kind of, it should be much more successful, much faster then it seems to be given that you guys have been focused on this for three quarter or so. I’m just try to understand, what could be from this really taking off?

Yes, sure. I think it’s a little bit, it kind of relates to Jon’s question, it’s partially a resource issue, I think if we invested more resources against there we would probably able to move a little faster, we have in certain areas. The other thing is this is highly complex, I can’t emphasize enough how many moving parts there are to this business. And so there is a lot of things go into it, from the data science, to the platform, to the exchanges and so on. So it’s one of those where, the way the platform works, is you go out and you bid on traffic, and then you try to basically spend less money on the traffic then the advertisers willing to pay you for the application. So if you are not smart and intelligent of how you are going about it, you can lose a lot of money really quickly. So we been very proved and any very conservative to make sure we don’t find ourselves in those situations. And in terms of risk taking on some of those kinds of things again could have moved the platform a little faster along. Those are kind of all the consideration in terms of kind of timing, cost, complexity, et cetera, but we are still continuing to make some pretty modest investment. Again I just want to highlight that it is investment area for the business.

Okay great and the last question, profitability perspective, what color that you can give us as far the second half of this year, when do you think that you can be breakeven? Thanks.

Yes, so we didn’t give specific guidance. I don’t want to with respect to profitability [Technical Difficulty] seasonal demand in the quarter, we want to see some of these things play out. I wanted to ensure as one of the points I made earlier in my comments. It’s important to me to establish investor credibility and I thought at this stage I would like another quarter, under my belt before I give any prospective on timing on profitability.

Okay. Thank you.

And ladies and gentleman, at this time I’m showing no additional questions. I would like to turn the conference back over to management for any closing remarks.

Yes. Thank you very much and thanks to all for your support. We appreciate it and we will see you on likely, potentially some upcoming conference and defiantly on the next earnings call. Thanks for joining.

And ladies and gentleman that thus conclude today’s conference call. We thank you for attending. You may now disconnect your telephone lines.