Hello, and welcome to the Digital Turbine Reports Fiscal Second Quarter Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, today's event is being recorded. I now would like to turn the conference over to your host today, Brian Bartholomew. Mr. Bartholomew, please go ahead.

Thanks, Keith. Good afternoon, and welcome to the Digital Turbine Fiscal 2022 Second Quarter Earnings Conference Call. Joining me on today's call to discuss our results are CEO, Bill Stone; and CFO, Barrett Garrison. 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 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 file with the Securities and Exchange Commission. Also during this call, we will discuss certain 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, I'll turn the call over to Chief Executive Officer, Mr. Bill Stone.

Thanks, Brian, and thank you all for joining our call tonight. First, I want to formally recognize the amazing hustle and effort of the combined One DT team. This is our first earnings call announcing a full quarter of results as one Digital Turbine, and I'm proud of being part of such an amazing team that is scaling together so quickly. It was just a few months ago in June that we were on our earnings call, announcing our DT revenue results of just over $310 million for the full fiscal year. And today, we are announcing quarterly revenue results that are nearly equal to those annual results from the entirety of last year. I'm pleased to be part of something growing so quickly and profitably. Also, I want to remind investors that we'll be hosting an Analyst Day next week where we'll be able to go deeper on our business, including hearing directly from our partners, see demonstrations of our products, get a longer-term growth model for our business; and finally, hear more details about the strategic vision of where we're heading. Tonight, I'm going to break my prepared remarks into four areas: first is some commentary on our consolidated results for the quarter, including a breakout of each of our segments; second, are some real-time operational updates; thirdly, some updates on the strategic integration progress of Wind Digital Turbine; and finally, I want to provide some commentary on the current events going on in our industry and economy such as regulations, supply chains, Apple's IDFA impact and other consolidation and M&A activities. On a consolidated basis, we delivered just over $310 million in revenue and nearly $48 million in EBITDA. Compared to the September quarter of last year, this represents a 338 increase on an as-reported basis and…

Thanks, Bill, and good afternoon, everyone. We're excited to be announcing our first full quarter with the results of the newly joined acquisitions. And we're pleased with our strong second quarter performance across both our existing business and the performance on the newly acquired businesses as well. I will occasionally reference results on a pro forma basis, which references quarterly results and comparisons as if all acquired businesses were owned for the second quarter of fiscal 2021. We believe these pro forma results provide additional insight into the underlying trends when comparing current performance against prior periods. My comments today will refer to comparisons on a year-over-year basis unless otherwise noted. Revenue of $310.2 million in the quarter was up 338% as reported and 63% on a pro forma basis. And adjusted EBITDA increased to $47.9 million, growing 191% year-over-year and adjusted EPS of $0.44 per share increased 193% year-over-year. On Device Media revenue, which represents existing revenue derived from the Company's Application Media, inclusive of SingleTap, DSP and Content Media and platform products, increased 73% year-over-year to $129.4 million. Total in-app media AdColony revenue contributed $61.5 million during the quarter and was up 19% on a pro forma basis. Our in-app Fyber business contributed $125.7 million during the quarter and was up 93% on a pro forma basis. Our non-GAAP gross profit was up 210% to $94 million, which was up 55% on a pro forma basis. Gross margin on the platform was 30% in Q2 and reflects our current business segment mix now that a full quarter of results are reflected for our acquisitions. While our gross margins in the quarter are impacted by the business mix of the new acquisitions, we experienced consistent margins in our existing core on-device business. We delivered continued impressive expense scale in…

[Operator Instructions] And the first question today comes from Anthony Stoss with Craig-Hallum.

Congrats on the results. Bill, if you wouldn't mind, and I guess, additional congrats on the Verizon and AT&T content wins, can you maybe size that opportunity for each of those for DT going forward? And then also I think on the last quarterly conference call, you talked at length about the upcoming Notifications product launch. I'm curious where we stand on that. I know you talked about several products on the call, but any additional details in terms of timing of these product launches would be helpful.

Yes. Thanks, Tony. Yes, as far as the Verizon AT&T go, how we think about it conceptually is we just talked about $35 million in quarterly revenue in the Content Media business. The biggest driver of that is our relationship with T-Mobile. And if you think in rough terms that T-Mobile is 1/3 of the market, Verizon is 1/3 of the market and AT&T is 1/3 of the market. That's how we probably think about the opportunity for us. I mean that's not -- to me, we think that's going to happen in the December quarter. But as we think about it more strategically, as we go forward in time, that's how we'd probably break down the market opportunity for that on the content media side. So we're excited to get going here in early days with Verizon and then get going next quarter with the AT&T on that. Yes, regarding notifications, we're starting to see some significant movement in revenue there. It's not as big as our SingleTap business, but it definitely is growing. It was basically zero business last year and now seven-figure plus business for us today and growing. How we actually see that product is actually packaging up, that product with some of our brand relationships that we have on the AdColony side. We're excited about that development. And one of the things you saw in our business, as we talked about our revenue per device growing by 50% year-over-year here in the United States. And the driver for that was more media dollars, but it's also more products, including things like Notifications now starting to have an impact on the overall RPD metric. So we're really excited about the diversification of what we're doing here. And for you that have been around the story for a long time, remember when Dynamic Installs was the majority part of our business. And now it's very much a small part of our business, even though it's still growing. So we're excited about all the diversification that we have.

And if I could sneak in one further quick one. Any new updates in terms of Samsung's launch of SingleTap? And I'm just curious if you've been approached by other OEMs or when do you think you can start unloading additional OEMs for a similar agreement?

Yes. We're in the process of ramping and scaling with Samsung right now. We started in Brazil. They went to the rest of Latin America. We're in the process now of getting into Europe and scaling up in Europe, and we'll look to expand to other geographies over time. So we're in the process of doing that real time right now. And then we're just also starting to get going with other OEMs as well. It's early days and obviously, the volumes aren't as material there with Samsung. I think the important point here is you're seeing diversification, whether that's other OEMs, whether it's Samsung, whether it's Verizon, whether it's AT&T, American Mobile or what have you, there's a lot of supply sources for us out there to help continue to grow and scale the product.

Thanks, Bill. Congrats again.

Thanks, Tony.

And the next question comes from Tim Horan with Oppenheimer.

Two questions. One, the IDFA impact, is that largely done at this point sequentially? Or you expect another quarter two of impact? And secondly, on SingleTap, can you just talk about customer interest a little bit more, how many customers you have on it now? And how many -- what's the ramp there over the next year or so?

Yes. Sure, Tim. Yes, on IDFA, as I said in my prepared remarks, I think everybody that's advertising on Apple is impacted in some way, shape or form, especially people that are performance players and what performance I mean is people that you're trying to get somebody to do a specific action, not just watch a video of buying a new car, but install this app on your phone kind of advertising. And the players that have, I think, been disproportionately hurt by IDFA, and you've seen some of them come out and talk about it in their earnings releases are the ones that have been the larger players that are overly relying upon the IDFA capabilities to match up, say, I saw a Starbucks ad, and I'm a big player. I didn't click on it. I just saw it, and then I can match an IDFA that somebody might have went to the app store and downloaded that app -- and you may not even clicked on it, but they could claim attribution and therefore, get paid. Those kind of things are gone now. And so I think players were relying upon those things, which was not a Digital Turbine, our ones are being impacted disproportionately there. For us, and as I mentioned in my remarks, on our Performance business, on AdColony. We saw some sequential down activity as a result of IDFA, but for us, it's roughly 1% of our consolidated revenue. So it wasn't material because we're just not relying upon things that are dependent upon IDFAs like other players. But what I do expect over time is this to normalize. And I agree with other companies that have made the comments that as we get into 2022, we'll see this normalize I think what you've been…

And the next question comes from Darren Aftahi with Roth Capital Partners.

Hey, guys, thanks for taking my question. Two, if I may. First, Bill, you talked a little bit about cross synergies. I think you had referenced 10% and mentioned McDonald's and Starbucks. I'm just kind of curious -- what does the pipeline kind of look like for supply and demand products that you now have on your ad stack and in your core DT in terms of like where have you seen kind of the most opportunity, low-hanging fruits what's going to be more of a kind of intermediate term impact and maybe what regions of the world? And then on your Samsung commentary, I think last quarter, you talked about expanding SingleTap and the whole network globally. How much of a needle mover was that, if any, in the quarter? And if not, will that start to kind of light the fuse in the December quarter?

Yes. Thanks, Darren. Yes, first on the synergies, as I mentioned, we affectionately call it internally the Da Vinci code where we've got these dozen plus synergies that we track on a weekly basis and really just about how we mix and match all the different combinations between the companies. And so we're excited to see some real positive growth and momentum there. But just to highlight some of that, I think that I'm probably most excited about, first is just leveraging our appreciated DSP and allowing our clients from both the Fyber and AdColony and DT side to leverage, appreciates capabilities. That's -- number one with WAS single tab. Number two would be the ability to take our AdColony demand and leverage it on Fyber supply. One of the always the constraints on the AdColony business is a company like McDonald's may say, Hey, here's $1 million to go spend. And here's what we're looking for in terms of segments and targets and positioning for return on ad spend. But maybe AdColony, you could only have the supply to deliver $100,000 of that spend, against that target. Well, now with this expanded supply with Fyber, now the opportunity is to spend more of that budget that a company like McDonald's would want to spend. So that's an immediate revenue synergy for us as well. And then the final part is then just being able to package up the user acquisition capabilities we have, whether that is through SingleTap or through our dynamic install business or through our Wizard products and be able to package that up to our publisher and advertising partners is another opportunity for growth. So, when we go in and talk to them about things like mediation or expanding our relationships with other kinds of products like that, it offers up incremental opportunities and differentiating things that others in the marketplace might not be able to offer. And then as far as your last question on the SingleTap and the needle mover in the quarter, yes, I mean in percentage terms, it was nice growth in terms of needle moving against a $310 million quarter. Yes. No, it did move the needle in those kind of terms, but we're laying the foundation. It's kind of as I said in my quote in the press release was really about getting some of these foundational elements established. So when we look at growth drivers into 2022 and beyond, the kind of things that we're doing now position us well.

Can I squeeze in one more? You mentioned gaining a patent for your IP on SingleTap for devices outside of mobile. Can you speak to that? And with the opportunity in connected TV, is that an opportunity for apps? I know we've talked about this in the past, but is that sort of a real-world opportunity near term? Or just walk me through that logic. .

Yes. One of the things that we're excited about is -- and we've talked about this for a while, is we've been focused on smartphones because it's just the sheer volume, right? You're talking about 1 billion plus that gets sold every year. So there's just the volume is there and we focus there. But as we think about the addressable market for our company, it goes much beyond that, right? It goes -- you mentioned TVs and Internet of Things and tablets and PCs and all kinds of different things that we're excited about. And I think it's important for us to think about our technology in that context as well. So as we go forward, we can offer consumers better experiences in terms of delivering apps or content to whatever the device they're on and leveraging some of the things we've done on smartphones. That's a natural extension for us. It's not anything that's going to show up in the December quarter. But as we again, as we think about how the Company is strategically positioned and what I'll call is we're walking and chewing gum here in terms of focus on the short term and just delivering and executing on the quarter, but also looking around the next quarter and where we want to be. These are the kind of things that get me excited about our ability to do both.

And the next question comes from Austin Moldow with Canaccord.

Can you walk through the puts and takes for that AdColony growth number in the quarter, especially since performance is a relatively small piece. Curious what's been slowing down.

Yes. So when we say -- our performance business was challenged a bit in the quarter. It is a relatively smaller piece. But with respect to the focus in our brand business that actually accelerated year-on-year, it didn't. In combination, we grew close to 20%. Some of that IDFA that Bill focused on that we outlined was a small percentage of the impact and headwind in the quarter. It occurred in our performance area of the business, Austin. So anyway, that's the outline of kind of those two puts and takes for in and out and an overall growth position in AdColony.

And Austin, I'll just add I just want to add some color on that, more strategically above and beyond kind of the quarter-over-quarter numbers. The thing you got us excited about AdColony was just the amazing job they did with brand and with video. And that's where the business grew, that's what we're focused on. I think there's a lot of juice still left to squeeze on some of these other legacy businesses they have as we go forward with some of the things we talked about already in some of the other Q&A. But the brand thing is I'd really highlight because that's the synergistic part that really fits hand in glove with what we're trying to do with our core DT on device business in the Fyber business. So that's something we think is performing really well, and we're excited about.

Okay. Great. Now instead kind of looking ahead, what are the major growth drivers for Fyber specifically over maybe the next couple of quarters or so?

Yes. I think on the Fyber side, there's a few drivers. Number one is continuing to expand more and more publishers to the platform. Fyber has done an amazing job specifically overseas in markets like APAC in terms of showing really strong growth. So there's a lot of publishers, I think, still to add there in terms of just expanding the addressable supply would be number one. Number two is continue to bring more demand to the platform and whether that's through things like AdColony or with that other integration things that can be done through the Trade Desk or Google, bringing more of those demand dollars into that supply with more scale. So I think that would be area number two that I would think about. And then area number three, I think about is expansion of new products. And so Fyber has been heavily dominant with their marketplace or exchange product. Their mediation product and their offer wall product they're all things, I think, have some nice room to run. So I think those are the three drivers we see for them going forward.

And the next question comes from Tim Nollen with Macquarie.

This is Chris Quintero on for Tim. So given your On-Device business is on the Android and what's the kind of like sense you guys have gotten from the incremental ad budgets that you've been able to receive because of lower budgets shifting to Android from iOS given IDFA impact, you see more advertisers coming to you now, our current clients increasing their spend? What are you kind of seeing there?

Yes. I think it's a really interesting dynamic for us because I mentioned on the call that we're roughly 75% Android, 25% iOS. But if I want to go back in time a few quarters and look at that on a pro forma basis, it's kind of closer to 65, 35 a few quarters ago. So what you're seeing is this migration of spend increasing towards Android for Digital Turbine relative to iOS. And I think that's due to a few things. Obviously, SingleTap would be a driver of that. Also, I think the second driver of that would be at the end of the day, advertisers are looking for people that meet a specific profile. They're not saying, I want an Apple user, I want an Android user. They're saying, yes, I want to male or female that fits this target with these characteristics and whether they use Android or they're less interested and they're interested in how can I reach that person with the most efficient spend. And given that we're seeing right now is that our ability with SingleTap and our other products, we can do that perhaps more efficiently than that advertiser could do on Apple. So therefore, you're seeing those dollars that would shift over in our direction. So that becomes a little bit of a tailwind for us. So, we're starting to see that trend move over to Android. I think we'd expect to see that continue over time or really over the next few quarters. And as I mentioned to Tim's question earlier, I think that will settle out as we get into the middle of 2021 and some of these machine learnings and SK network integrations and people just get smarter on spend and so on.

Got it. And then one more, if I can. With a lot of the consolidation that you guys called out going on in the industry, are there any kind of products or maybe adjacent kind of marketing areas that you're particularly interested or are looking to add to your current setup?

Yes. Yes. We're really excited about some of the developments that are happening right now for us to continue to grow our business. We think we're really in a perfectly positioned place right now. And whether it's the consolidation, whether it's the regulations that are coming down the pike, or just some of the other industry events that are going on, we think we're in a pretty good place to expand into other adjacencies. And we're going to talk a little bit more about that on our Analyst Day next week. So we look forward to sharing some of those details with you.

And the next question comes from Allen Klee with Maxim.

With your relatively newer business mix, how do you think about your long-term margin opportunity?

Yes, Allen. We see things coming from enhancements to our margins coming from a few different places. So I'll start with, we would see those margins expanding over time as we saw with the existing core own device business over time. A couple of areas that we see as catalyst for expanding margins. One is we put new products on; two, as we realize the synergies we're talking about is having within our vertical integration strategy, we have more opportunities to expand those margins. And as we continue to launch and ramp our products like SingleTap and others, we'll also begin to optimize the yields in those businesses. But to answer your question, we see those margins expanding north of 30%. We do anticipate talking a bit about -- more about kind of our growth model on our Analyst Day. But you should expect, over time, those margins to accrete north of 30%, certainly. The second point I'd make is beyond gross margins is we're thrilled, as you can tell from our comments about the operating leverage in the business and the expanding EBITDA margins and operating income margins. We see a lot of opportunity in those margins continue to expand, especially as the new acquisitions begin to kind of fuel some of that increased operating leverage from where they stand today.

And does conclude the question and answer session. I would like to return the floor to Bill Stone for any closing comments.

Yes. Thanks, everyone, for joining the call tonight, and we look forward to reporting on our progress against all the points we made on tonight's call, and we'll talk to you again on our fiscal '21 third quarter call in a few months and hopefully see many of you next week at our earnings call. Thanks -- excuse me, on our Analyst Day next week. Thanks, and have a great night.

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