Good day and welcome to the Digital Turbine Reports Fiscal 2025 Second Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Brian Bartholomew, Head of Investor Relations. Please go ahead.

Thanks, Nick. Good afternoon, and welcome to the Digital Turbine fiscal 2025 second 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 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 our CEO, Bill Stone.

Thanks, Brian, and thank you all for joining our call tonight. Before breaking down our specific quarterly results, I want to start the call with a summary of where we're at in our business. Our results for the September quarter were marginally better than our June quarter and our results for the June quarter were better than the March quarter. Our outlook for the remainder of the fiscal year assumes December will be better than September and we will perform better in this upcoming March than we did last March. However, while these results are showing positive progress, that progress is below our expectations and thus has been baked into our go forward forecast. We have been able to grow the strategic areas of our business that we have discussed on prior calls and will discuss later in my remarks, but that new growth has not been strong enough to offset the declines in both our exited businesses and legacy businesses, including device sales with our U.S. partners, our sunset products, and our legacy performance bidding strategies into the DSPs on our exchange. Given this new operating environment, we need to make these businesses more efficient and right size their cost and support structures to reflect their current profitability contributions. We've begun a transformation project including some third-party consultation to take out more than $25 million of annual cost in our business to become leaner, improve cash flow, and enable us to invest in these growth areas. That future is bright as evidenced by a multiyear agreement we've just signed with a new Tier 1 operator here in the U.S. for a variety of services and our relationship with ONE Store that will be a catalyst for us to grow additional device supply here in the U.S., the EU and…

Thanks Bill and good evening. As we review our performance in this quarter, it's clear we've made progress though not at the pace we had anticipated. Revenue of $119 million in the quarter was up modestly sequentially and EBITDA of $15.3 million also improved quarter over quarter. In our ODS segment, revenues reached $82.4 million a 2% increase from the June quarter, but down 17% compared to the same period last year. While we are encouraged by the positive revenue growth from our international ODS efforts, driven by our focus initiative to expand RPDs outside the U.S., we are facing significant headwinds. Softer U.S. device volumes have impacted our performance, with Q2 device volumes experiencing the largest year-on-year percentage decline in the past four quarters, and we have integrated these disappointing trends into our revised forecast for FY '25. Alternative app distribution remains a critical growth initiative within ODS. While our efforts accelerated this strategy are still in early stages, we are energized by the recent advancements with our ONE Store partnership requiring minimal capital outlay, and we believe this will help us gain further momentum in the market. Turning to our AGP business, Q2 revenues came in at $37.3 million which was a modest sequential decline. As Bill mentioned, revenues from brand spending continues to shine with brand revenues up 26% year-over-year and 13% sequentially. However, these positive trends are tempered by our exchange business, which underperformed expectations in Q2. Despite our initiatives to enhance our bidding capabilities and attract improved DSP spending on our platform, we have not yet achieved the anticipated progress. Our consolidated Q2 gross margin was 45% down from 46% in Q1 and 47% in Q2 of the prior year. This sequential decline in margins was primarily influenced by modest product mix changes in AGP,…

Are you ready for the next question? Next question comes from [Neil Nabar], Private Investor. Neil, please go ahead with your question. No, [Mr. Nabar] s disconnected. [Operator Instructions] The next question comes from Anthony Stoss from Craig-Hallum.

Thank you, operator. Bill, just I'm curious if you could lay out you talked about the phone activation side of the business. I think that's been bouncing along the bottom according to most of our covered companies within the handset space. So, I'm struggling to see why that's getting worse and maybe just comment on that, but also you think you're losing a substantial share on the performance advertising side? Just more detail will be helpful and I have a couple of follow ups. Thanks.

Yes, hey, Tony. Yes, so we're seeing some new partners we brought on that I referenced in my remarks that are actually growing our device supply, which is encouraging. A few of those names have shown nice growth, but just not enough to outrun some of the legacy supply issues here in the United States, and one nuance here is we also because of the declining supply base in the United States, what we've been able to work with our partners on is working on services that would offer applications after they do software updates. And that part of the business because we've reduced the volume is also now starting to have reduced software updates over the life. And so those two drivers are really what we're seeing and we saw the major U.S. Operators report their upgrade rates in the quarter that were down year-over-year. And so, I don't have that broken out by iOS or Android, but in aggregate they are and we will continue to still see that show up in our volumes that we see, but we're seeing some encouraging things internationally. On the performance DSP side, yes, this is the biggest area we got to improve on the on our AGP business. Specifically, we've done a nice job on brands and bringing brands into our network and we think that's unique and differentiated from other players. But taking our first-party data that we have on things like Ignite, bringing that to our performance business, whether we do that through our build which is appreciated in DT Direct, we do that through leasing it, those AI machine learning capabilities from other third parties, we've got to improve here. This is our single biggest area for improvement on the AGP side of the business, as we see some of our legacy performance DSPs doing their own supply path optimization strategy. So, there is a major focus area, but there are some other bright spots in the AGP business, but that's the one we got to focus on.

[Operator Instructions] There's another question from Anthony Stoss at Craig-Hallum.

I'm sorry, I got cut off. Bill, could you list or tell us what the RPD was? Was it up, down, flat in the quarter? And then also just so I don't get cut off from the operator again, at what point does the Board start to explore strategic alternatives?

Yes. So, Tony, as far as RPDs go, you know we had nice improvement in our RPDs outside the United States, so it was encouraging to see some accretion and growth there, that's always been a focus area is to bring more revenue outside the U.S. In the U. S, we saw RPDs decline a little bit, but that was primarily driven by that software issue I mentioned earlier in my remarks. And as far as strategic adoption go for the Company, our focus right now is we had to go execute in the business. We think we've got some right assets. We just got to improve our present to get to the bright future for what we're doing.

At this time, we show no further questions. So, I'd like to turn the conference back over to Bill Stone for closing remarks.

Thanks everyone for joining the call tonight. We'll talk to you again in our fiscal '25 third quarter call in a few months. Thanks, and have a great night.

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