Good afternoon, and welcome to the Digital Turbine Fiscal 2022 Third Quarter Financial Results 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 note this event is being recorded. I would now like to turn the conference over to Brian Bartholomew, Senior Vice President of Capital Markets. Please go ahead.

Thank you, Gary. Good afternoon and welcome to the Digital Turbine fiscal 2022 third quarter earnings conference call. Joining me on the call today to discuss our results are CEO, Bill Stone; and CFO, Barrett Garrison. Before we get started, I'd 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 our CEO, Mr. Bill Stone.

Yes. Thanks, Brian, and thank you all for joining our call tonight. First, I want to formally recognize the amazing hustle and effort of our combined One DT team. This is our second 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 successfully scaling together so quickly. I also want to welcome Mollie Spilman, who officially joined our Board of Directors last week. Mollie's deep ad tech, mobile and cloud experience will be helpful as we scale and grow our company. Tonight, we're going to focus on our December results and our near-term forward outlook. As a reminder, we hosted an Analyst Day in November where we discussed our longer-term outlook and strategies, and how we plan to build DT into a $4 billion top-line and $1 billion bottom line business. For investors that want to better understand our longer-term approach, I'd encourage you to go to our website where that replay is available. For our near-term results, I'm going to break my 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, we'll update on the strategic integration progress of One Digital Turbine; and finally, provide some commentary on the current events going on in our industry and economy such as regulations, supply chains, inflation, Apple's IDFA impact and others. For the December quarter, we delivered just over $375 million in revenue and $57 million in EBITDA. Compared to the December quarter of last year, this represents over a 300% increase on an as reported basis and nearly a 40% increase on a pro forma basis for revenues and more than 150% increase…

Thanks, Bill, and good afternoon, everyone. We’re pleased to announce a strong third quarter performance across all our business lines and also to provide our outlook for growth for the balance of fiscal 2022. I will occasionally reference results on a pro forma basis, which referenced quarterly results and comparisons as if all acquired businesses were owned for the third quarter of fiscal 2021. We believe these pro forma results provide additional insights 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 $375.5 million in the quarter was up 324% as reported and 38% on a pro forma basis. Adjusted EBITDA increased to $57 million growing 153% year-over-year and adjusted EPS of $0.49 per share increased 133% year-over-year. Before intercompany eliminations, our on-device media revenue, which represents existing revenue derived from the company’s Application Media inclusive of SingleTap, DST and Content Media platform products increased 43% year-over-year to $133.6 million. Total In-App Media AdColony revenue contributed $94.3 million during the quarter and was up 28% on a pro forma basis. Our In-App Fyber business contributed $157.4 million during the quarter and was up 48% on a pro forma basis. Non-GAAP gross profit was up 169% to $103.4 million in the quarter, and gross margin on the platform was 28%. And on a sequential basis, we experienced an adverse impact from partner and segment revenue mix shifts in the quarter. As a reminder, while gross margin rates can fluctuate from quarter-to-quarter based on our product and partner mix, we anticipate continued margin expansion in the future, in line with our growth targets recently outlined in our Investor Day in November, driven by continued execution on our product and partner diversification strategy. We delivered…

[Operator Instructions] Our first question is from Anthony Stoss with Craig-Hallum. Please go ahead.

Hi guys. Hey Bill, I'd love to hear a little bit more on the Telefonica relationship. Has that started or have they started to push out SingleTap over the air yet? And given – or since you've signed that, have you seen any uptick in other carriers interested in that? And then also probably for you, Bill or Barrett, I know it's only been two, 2.5 months since the Analyst Day is there anything that's changed that's either sped up or slow down, you're reaching some of those 12 to 18-month goals? Thanks.

Yes. Hey thanks, Tony. I'll give a shot, on the first one. And then Barrett comment on the second one a little bit. On Telefonica, yes, we're just in the process of going. It's early days, we've launched in a few countries with them. Part of our plans as we get into the next six months or so is going to be to expand that as part of the global contract that we've signed with them. All the devices that we are shipping to them are SingleTap enabled. And so we're just in the process of ramping and scaling it. So as we think about growth drivers as we get into this year, obviously, that's going to be a key component for us. Just kind of a couple of high-level comments on your Analyst Day comment, yes, nothing's really changed from our comments. We're still as excited about the business, if not more, than when we talked about the long-term views in November. Things continue to be on track. We continue to get great feedback from customers in the marketplace right now about what we're doing. The TAM is enormous. The strategy is winning. So for us, it's just still let's go execute and get after it.

Bill, as a quick follow-up related to SingleTap. Can you comment about what the current SingleTap revenue run rate might be and where you might see it a year from now?

Yes. Yes. So what we're trying to do and that's why I actually gave some examples of some other products and growth is we want to start talking kind of more about all of our growth of our products versus just any single one. SingleTap continues to do well for us. It's a real business. We're excited about it. As I mentioned in my prepared remarks, we've got a number of growth drivers for it, not just more devices, but the ramping of existing advertisers were up to 50 now on the platform, which is fantastic. And then also, we're excited about the licensing capabilities of that. So as we think about that is more of a SaaS model going forward, that's something we think would be a nice catalyst for growth because that is a $100 billion app and sell market that we can now go after.

Thank you.

Thanks Anthony.

Your next question is from Tim Horan with Oppenheimer. Please go ahead.

Hi, thanks guys. I think at the Analyst Day, you said you had about a dozen products or so. Can you just talk about that road map, where can we be maybe a year or so from now and how are some of the newer products doing? And I just had a few follow-ups. Thanks.

Yes. Yes. Sure, Tim. Yes, I mean, that's what we're excited about, is the product road map is really robust right now. So whether it's on the Fyber side as we continue to advance things like mediation and expand our marketplace offerings, whether it's on the AdColony side with a lot of the products we have on the brand side, and then on the Content Media and App Media side as well. So we've got so many shots on goal with so many different products right now, gives us a lot of optimism on the growth where we're not just single threaded only to SingleTap. SingleTap is exciting. We're excited about it. We talked about it in a lot of detail at our Analyst Day about the market opportunity and our progress there. But we also want to make sure investors can keep their eye on a lot of the other products that have pretty impressive growth rates as well. And one of the charts that we really liked from our Analyst Day was where we showed all of our operator and OEM relationships and not just expanding new names like we talked about Telefonica here just on Tony's question or on Oppo or Vivo. We're going to continue to build out the pipeline, but also is getting a deeper set of products embedded with our existing partners. So as we expanded not just from one, but we can expand it to three, four, five and in some cases into double digits with a couple of our partners, so that's really where I think we're going to see a lot of growth is we are a trusted partner with many of these operators and OEMs. And so we can expand that whole product portfolio into them. So that's really strategic for us.

And can you give us a sense with Mobile Posse, how many subscribers you have on there now or what the uptake looks like in the next 12 months?

Yes. So for Mobile Posse right now, we're a little over 10 million daily active users on the Content Media platform right now, Tim. And as we're now just starting to get going with Verizon and AT&T, we expect those to be growth catalysts for us as we get into the future.

And then lastly, Bill, sorry to monopolize here, there seems to be in the advertising ad tech world the haves and have-nots in. A lot of people seem to put you in a have-not bucket right now. Can you maybe just talk about what's going on in the whole ad market and why you think you can have been outperforming your peers and why that will continue?

And you're just talking about the stock, Tim?

The stock, yes. The financials look great. Yes. But there's a lot of obviously disruption in the industry going on. And people seem to be worried that you're going to get disrupted. Obviously, Facebook had some weak results. Snap and others had very, very strong results. Just from your perspective, kind of what's going on?

We're excited. I mean, we're proud of our results, and you're talking about many, many hundreds of billions of dollars of TAM. And we've got such an aggressive market to go after. We're showing impressive growth. I mean, Barrett just had mentioned that for our full year guide, you're talking about 50% top line and over 80% bottom line growth. So we think that's pretty impressive. We're excited about that. And our view is that the markets may not get it right from day to day. But over the long term, they do. And we're going to keep doing our thing. We've got a great TAM, a great strategy, a great team, and we're putting up results quarter after quarter, and we'll let the chips fall where they fall over time.

Thanks guys. Congratulations.

Thanks Tim.

The next question is from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Hey guys. Thanks for taking my questions. So Barrett, just a question on your commentary about the EBITDA outpacing the revenue growth and the flat cash OpEx. So it looks like your Q3 performance in your guide are kind of in the low 15% adjusted EBITDA margin, if my math is correct. At what point do we see more operating leverage kind of beyond that level? And I guess, kind of what needs to happen? Is it any particular segment? Are there some integration costs that you feel like are behind you? You said you talked about investing in new products. I'm just kind of curious when we see some more operating leverage as you kind of grow at this high clip?

Yes. I think it's a good question, Darren. One of the things Bill just highlighted the Google relationship, and I think it highlights some of the purchasing power and integration benefits and synergy we're starting to see, especially on the cost side. So these will bear out over the next few quarters. But I would say we've – I'll highlight that we grew revenue 38% and on an apples-to-apples basis, our cash expenses were flat. So just reiterating the operating leverage we're seeing in this business, and we'll begin to see, as we outlined in our – on our Investor Day. We'll begin to see those margins accrete on both EBITDA and gross margin. That will come over the next few quarters, we expect.

Great. And then on your device expansion on the 6 million to 8 million, is any of that inclusive of the expansion of Samsung?

Yes, absolutely, Samsung is a major driver of the expansion there. And so we saw some nice return to growth in the United States where that's been kind of really flattish in the past. And then internationally where we're seeing a lot of the growth in overall devices as we go forward. So it's good to see the momentum there and that's important just to continue to capture a wider base, especially as all of those devices that are being put out in the marketplace are SingleTap capable.

Great. And just one last one, if I could squeeze it in. TikTok kind of was called out on the medical and I know you guys have a relationship with them in Latin America and expanded to North America on the delivery side. Is there an opportunity for you guys to kind of work with them on inventory within the application, whether it be video, banner, et cetera?

The short answer is absolutely. And we've got active conversations going on with them right now to continue to help them better monetize our users as well as get new users. We've been pleased to see the partnership expansion here into North America. We think there's still a lot of juice left in that squeeze for us with them specifically. And then more broadly, you heard a lot of comments over earnings season, whether it's social media competition or streaming audio competition, streaming video competition or what have you. And you remember, we distribute all of those apps. So that's a good thing for a company like us. And so the more that there's competition in those markets, and they're trying to compete for users and get users, and that's what we do is deliver apps and content that puts us in a pretty good spot.

Great. Thank you.

The next question is from Tim Nollen with Macquarie. Please go ahead.

Guys thanks a lot. I've got a couple of questions. One is on AdColony. But would you mind just elaborating a bit more on how that seems to have turned around in the December quarter. It was a source of a bit of weakness certainly on the IDFA that you referred to again just now. Just wondering how that managed to turn around. That's quite a nice rebound there? And then on Fyber, that growth looks like it slowed quite a bit versus – I'm talking the year-over-year growth rate versus the prior quarter. I'm guessing that's just a matter of kind of law of large numbers and a difficult comp, but if there's anything else you could comment on that, that would be great? Thanks.

Yes. So yes, on AdColony that had a really nice quarter and really proud of the rebound in performance there. The brand business continues to grow, and that's highly strategic for our larger end-to-end ad tech ambitions to be able to leverage some of those brands and names I mentioned in my prepared remarks. So we're seeing really nice growth there across the board. But in particular, was AdColony's performance business, which had contracted in the September quarter and partially due to IDFA. And we saw a nice rebound as we got in December quarter and even December quarter year-over-year showed positive growth there. So that's encouraging for us on the performance side of the business. And we're seeing brand budgets come back. And just editorial comment here is a lot of the big mega-cap tech players have been able to leverage IDFA for things like view-through attribution, and they can't do that anymore. And so there's actually – I said in my prepared remarks, it was actually more of a level playing field right now. And so as we see brand budgets and performance budgets come back to iOS because our eyeballs are on Apple products, players like us are going to benefit from that. So we view that as a positive, and we'll let our machine learning models and our AI compete head-to-head versus things like you through attribution that really give a disproportion an advantage to other players. And so things like AdColony benefit from that. On the Fyber side, yes, you're right. It's just a little bit of a large numbers. Fyber hit a really inflection point in the December quarter of last year. But I do want to emphasize that we're still talking about 50-plus percent growth in that business. So we think that's pretty healthy. And more importantly, it was the 150% EBITDA growth in that business. So in other words, the bottom line's growing faster than the top line. APAC and Europe, in particular, shown really impressive growth as well as on the video side of the business. So we're really excited about the Fyber business and especially pairing it with AdColony's demand in Fyber supply and then being able to also leverage our user acquisition capabilities on the On-Device Media side with Fyber's publishers also has a tremendous amount of upside for us. So we're excited on all fronts in terms of putting this thing together.

Yes. No, that's great. 48% growth is nothing to complain about it, just noticing that more of a convergence between AdColony and Fyber now in the growth rates, which is good from the AdColony perspective. So thanks for the color there.

Yes, I would add is that this is why we combined – we're combining those into one segment, too, right, is to get those synergy benefits so we can have more common approach in terms of how we do our performance, our DSP and in terms of how we also manage our publisher relationships.

Make sense. Thanks a lot.

The next question is from Allen Klee with Maxim. Please go ahead.

My question has been answered. Thank you.

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

Yes. Thanks, everyone, for joining the call tonight. We look forward to reporting out on our progress against all the points made on tonight's call, and we'll talk to you again on our fiscal 2022 fourth quarter call in a few months. Thanks, and have a great night.

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