Thank you. Good afternoon, and welcome to the Digital Turbine fiscal 2027 first quarter earnings conference call.

Joining me today on the call to discuss our results are CEO Bill Stone and interim CFO Josh Kinsell. 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 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'd like to turn the call over to our CEO, Bill Stone.

Thanks, Brian. Good afternoon, everyone.

I want to open my remarks by recognizing our team for delivering another quarter of strong results that exceeded our expectations. The results are even more encouraging as they are not due to any single factor, but to many factors.

I'll break those down in my prepared remarks, which will be across three areas. First will be looking back at our June quarter results.

Second will be some commentary on the operational and strategic elements of our business that are enabling us to raise our guidance for the remainder of the fiscal year. Then finally, I want to provide some commentary on AI and macroeconomic trends in our business.

Revenue for the June quarter came in at $166 million, representing 27% year-over-year growth. We also achieved nearly 70% year-over-year growth in adjusted EBITDA during the same period, demonstrating significant operating leverage in our model as we scale.

I'm also pleased with the dramatic improvement in our balance sheet that benefits from our strong results. Last June quarter, our net leverage ratio was greater than 5 turns.

Today, we're at a healthy 2.5 turns, and as implied in our increased outlook, we expect this positive trend to continue. If we break our results down by segment, our On-Device Solutions business generated $110 million in revenue in the June quarter, which was up approximately 15% from last year.

In particular, it was encouraging to see double-digit year-over-year growth in global devices despite macro headwinds on global device volumes due to DRAM pricing issues in the supply chain. Growth in international ODS continues to be a bright spot as higher device volumes combined with higher revenue per device, or RPD, drove nearly 80% year-over-year growth.

Our Application Growth Platform, or AGP business results, were another bright spot. It was our fourth consecutive quarter of year-over-year double-digit growth and our second consecutive quarter of more than 50% year-over-year growth.

Meanwhile, this compares to a global digital advertising market that is growing in the high single digits. In other words, our AGP business is consistently growing many multiples more than the global industry growth rate each quarter.

In June quarter, I was particularly pleased with our direct brand business growing over 70% and our DTX, or SSP business, growing over 40% year-over-year. It took longer than anticipated, but the combination of strong conviction to stay the course on our strategy combined with the hard work to integrate our legacy SSP tech stacks with our brand demand into a data-driven marketplace and AI-first platform is now paying dividends.

Our key growth drivers in June quarter were both rates and volume that powered our improved performance. On rates, we saw higher advertiser demand, which translated into improved pricing and fill rates, particularly for premium placements on our platform.

This strong advertiser demand drove incremental international RPD expansion in our ODS business, resulting in nearly 80% growth year-over-year. We also had strong demand with our brand and DTX businesses, each growing rates by more than 40%.

This is due to our platform delivering better return on ad spend for advertisers, which in turn allows for higher rates. This improvement in ad spend is being driven by AI for two reasons.

First, our platform's first-party data is able to leverage our AI tools and machine learning models to drive better advertiser outcomes. Secondly, is a tailwind we are seeing brands migrate their spend away from the open web to other channels like apps, given traffic declines in the open web, which are caused by AI and resulting in app usage growth as brands and agencies adopt the power of AI in the mobile app channel.

In addition to these positive pricing trends, we continue to see strong diversification of our demand with 85- with 80% of our advertiser spend on DTX coming from non-gaming partners. The second driver was increased supply.

Our global devices grew double digits year-over-year, driven by strong volumes from our international partners. Within the devices we have our technology integrated, we are seeing operators and OEMs wanting to use our technology on new screens for monetization.

In addition, our AGP supply continues to add new apps and publishers by expanding distribution of our SDK footprint. We're seeing this globally with the growth in publishers, but in particular, it's helping driving strong performance with APAC publisher supply as well as adding non-gaming publishers and AI publishers looking for monetization.

Turning to the future, we're increasing our guidance today for the fiscal year, and there are five drivers for this increased forecast. The first is AI and data.

Our ability to leverage our unique first-party data across our platform with DTIQ and IgniteGraph drives better outcomes. This in turn drives more revenue because of better return on spend for advertisers.

I'll provide some additional commentary later in my remarks on the macro impact of AI on our business. Second is the flywheel.

Connecting our diversified demand and supply drives each other. We have nearly 3 billion devices and more than 80,000 apps using our ad tech technology.

The opportunity for these apps drive more user acquisition to our platform, and hence, more monetization will be a growth driver. The third driver is brand.

Our brand business showed impressive 70% year-over-year growth. Our focus is leveraging the macro tailwinds of more time in apps combined with our micro first-party data and audience targeting to drive even more scale and growth.

There are a variety of product and operational improvements being implemented real-time that are improving our ability to scale this important part of our business. Fourth driver is Ignite.

Our international ODS momentum has been fueled by Latin America and Europe, and current and future supply wins are expected to mitigate concerns around the global device supply chain. In addition, our Ignite platform is showcasing there is more opportunity to not just grow device supply, but also leverage the platform capability as a software enabler for distribution of other products on the screens of devices versus just our current products such as SingleTap, SingleTap Out-of-the-Box set ups, and notifications.

We are doing this today in the US with an AI-first partner distributing AI agents to devices, and we see this expanding into other areas such as e-commerce, lock screens, and other forms of content distribution. Finally is the growth of alternative applications.

We continue to ramp and scale more and more partners distributing their versions of applications, helping them get to devices, whether this is via our data targeting, SingleTap, our DSP, and so on. The recent outcome of the Epic-Google case and the Google rulings in the EU are expected to open up opportunities for increased alternative distribution.

Publishers are now seeing real-time what is happening to their businesses because of the impacts of AI on the open web and want to have more control over their destiny for the future versus being reliant on only one or two sources of distribution. These five things are important because it showcases our business is not relying upon any single factor to drive future growth.

We've got many shots on goal that provide optimism in our ability to drive top and bottom-line growth. To close out my prepared remarks, I want to provide some commentary on the impact of AI and other macroeconomic factors to our business.

Regarding AI, it's clearly transformational and an exciting time and a tailwind for our business. It's reinventing businesses, including ours, in three main ways.

First is the automation and simplification of workflows and processes, which is now showing up in our results. A year ago, our revenue per employee was about $800,000.

Today, it is in excess of $1 million. The driver of this efficiency is the ability to use AI and automation activities to scale our business.

We've implemented numerous new AI and automation simplification activities and processes for areas such as quality assurance, our back office, campaign management, software development, and data management, just to name a few. We're seeing an acceleration in these activities as we organize our people, our systems, and our processes for this AI-first world.

The second is leveraging AI on our data to improve outcomes for our customers. As you've seen in our recent Google and Databricks press announcements, we're combining our unique first-party data signals with AI enhancements to drive better outcomes for customers leveraging our DTIQ and IgniteGraph capabilities.

These are not just impacting our strong results today, but will be revenue and EBITDA drivers for us into the future. The final area is how the broader AI landscape will leverage DT's distribution and on-device footprint and data to help their businesses grow.

There are three important macro trends that we expect to be tailwinds for us. The first is more applications.

According to recent analysis from market intelligence provider Appfigures, worldwide app releases in first quarter of 2026 were up 60% year-over-year across both Apple's App Store and Google Play. AI makes it easier for anyone to create apps, driving both growth in app stores as creators no longer need technical skills to build mobile software.

These applications all need distribution to reach consumers given the inherent discovery limitations in the legacy two app stores. The second trend is the increase in time spent in applications.

Today, the average consumer is spending about 5 hours per day inside applications, which is up about an hour over the past decade. This trend is accelerating as the integration of AI chatbots creates a shift in the channels of how we consume information, leaning towards apps and away from the open web.

Multiple measurement sources have reported that AI has likely caused a 10% open web traffic decline so far, with some informational categories seeing anywhere from 20% to 40% declines. The final trend bringing all of this together is monetization.

For centuries, one trend's been consistent: media dollars follow eyeballs. As our eyeballs continue to spend more and more time in applications because of enabling technologies like AI, which is creating more breadth of apps and more depth of time spent in apps, this is a positive for us.

In addition to AI, I've also been receiving many questions on potential macroeconomic impacts to our business, given wider fears around inflation, tariffs, and geopolitics. One of my favorite things about our mobile AI cloud business is that we are more insulated than the vast majority of companies, as our business is a digital one without the traditional input cost pressures many companies must navigate.

Plus, the majority of our customers are using our platform to sell their digital goods and services versus goods that may be more sensitive to those risks. Of course, no single business is 100% insulated from macroeconomics, but as we saw during the pandemic, our business is a resilient one, insulated from these factors given our mobile-first, high operating leverage approach matching where consumers are spending their time.

We expect AI to only accelerate versus slow down these trends. With that, I'll turn it over to Josh to take you through the numbers.

Thank you, Bill, and good afternoon, everyone. Let me turn to our first quarter fiscal 2027 results.

We are off to a strong start to the new fiscal year, with growth across both segments. Total net revenue for the quarter was $166 million, up 27% year-over-year, extending our strong fiscal 2026 exit momentum.

On-Device Solutions net revenue was $110 million, up 15% year-over-year. Growth was again driven by our international business, where higher device volumes and higher revenue per device continue to drive strong results.

App Growth Platform net revenue was $56.6 million, up 56% year-over-year, continuing the growth we highlighted last quarter. This was led by DTX, where revenue increased by 54%.

These results reflect both continued onboarding of publishers and demand partners, particularly in Asia-Pacific, and the performance of our AI-powered optimization capabilities. Turning to profitability, non-GAAP gross margin was 49.4% in the quarter, up from 47.3% in the year-ago period.

This was driven by favorable segment and product mix as AGP continues to grow as a share of our business. Cash operating expenses were $39.5 million, up 7% year-over-year, reflecting a continued expense discipline even as we invest in our highest priority growth initiatives.

Notably, we reached a significant milestone this quarter as our run rate revenue per employee has risen to over $1 million on an annual basis. The combination of strong top-line growth, favorable mix, and expense discipline drove another quarter of substantial adjusted EBITDA.

Adjusted EBITDA totaled $42.5 million, up 69% year-over-year, with margin expanding nearly 640 basis points to 25.6% versus the year-ago quarter, evidence of a meaningful operating leverage beginning to emerge in our model. On the bottom line, we reported a GAAP net loss of $3.2 million, or 3 cents per share, an improvement from a net loss of $14.1 million, or 13 cents per share, in the first quarter of fiscal 2026.

It should be noted that we're finalizing a non-cash adjustment in our Form 10-Q that may be recorded against beginning retained earnings. This adjustment would impact the GAAP net loss, but not our non-GAAP results.

On to our non-GAAP net income of $24.1 million, or 19 cents per share, based on 125.6 million diluted shares outstanding. This is more than tripling our non-GAAP net income of $7 million, or 6 cents per share, in the year-ago quarter, driven by strong top-line growth and continued operating expense discipline.

Moving on to the cash flow and the balance sheet, we generated $17.9 million of cash from operations in the quarter, more than double the $8.8 million we generated in the first quarter of last year. Non-GAAP free cash flow was $11.3 million, an improvement of approximately $10 million versus the prior-year period.

We also made progress in strengthening our balance sheet. We ended the quarter with cash and cash equivalents of $43.2 million, an increase of more than $5 million from the start of the fiscal year.

Our total debt, net of debt issuance costs and discounts, reached approximately $352.9 million, which was down by more than $8 million during the quarter. We amended our financing agreement during the quarter to secure more favorable terms.

This reflected an improved leverage profile we have built over the past several quarters. Subsequent to quarter-end, as a result of achieving certain leverage thresholds under that agreement, the applicable margin on our largest loan tranche was reduced by 50 basis points.

We continue to remain focused to further strengthen the balance sheet as we move through the fiscal year. Turning to our outlook, given our strong start to the year and the continued momentum we are seeing, we are raising our fiscal 2027 guidance.

We now expect revenue in a range of $650 million to $670 million for the year, and adjusted EBITDA in a range of $145 million to $155 million, both up from the initial ranges of $630 million to $650 million and $135 million to $145 million we provided last quarter. With that, let me hand it back to the operator to open the line for questions.

Operator?

Hey, Bill and team, congrats on the strong execution yet again. Bill, you talked about having many shots on net with your different product offerings.

How do you prioritize the growth drivers for this year and next? Then I had a couple follow-ups.

Thanks, Tony. If we kind of look in the rear-view mirror, I think really the three stars of the show were the international ODS business, up 80%.

I know we've talked in the past around concerns around device headwinds on DRAM prices, as you've seen Apple and others raising prices on devices and the fact we're able to grow our devices, almost 15% in the quarter, and then our RPDs were up 40-plus percent, that gets to an 80% growth rate. I think that was star number one.

Star number two and three were really on the AGP side, and just seeing second consecutive quarter of more than 50% growth in that business with our brand business and our DTX business, really starting to show some nice momentum out in the marketplace. We started the journey many years ago in the belief that we could create this mobile-first channel for brand dollars coming onto the exchange, where it's been largely focused on games.

That bearing fruit is something it's great to see. It's kind of turning forward and looking into the future on the increased guide today, if I was going to prioritize, I think data and AI is at the top of the list for us.

We've got a lot of untapped potential in that part of the business. Our brand business as well has got a lot of momentum behind it.

I'd probably put those in the short term as the top two priorities. Then the three things I talked about with flywheels and Ignite and alt apps will be the catalyst to keep it going into the future.

Got it. Then there's been a lot of media reports about the whole saga between Google and Epic and the jury trials, etc.

Is that affecting at all your alternative app initiatives? Then after that, I have one last question.

Yeah.

We think that this is going to open up a lot of opportunities now that injunction's been settled and Google's opened up their app store to other app stores, we think that's a tailwind. I actually just put a blog out on that.

I think it was earlier today that got published. I'd encourage everyone to go take a look at that for the details.

Net-net is it's just showing more democratization of app stores, and so I think that's a positive for companies like us.

Gotcha. Last question, you kind of alluded to on the Ignite section of your call here about more deals coming and international business being strong.

I'm just curious, after it's been a month and a half or so since your Orange deal has been announced, has that kind of rattled the cage, if you will, with some of the other European carriers to get going either on Ignite or SingleTap? I'd love to hear.

We've got a lot of momentum right now in that part of the business, and momentum gets momentum. I mentioned in my prepared remarks that the pipeline's looking really good, I'd say stay tuned for more momentum coming there.

Great job, Bill. Thank you.

Great. Thanks.

Great. Thanks.

Good afternoon. Bill, definitely a fun one to jump into here.

Nice print. Just first, maybe can you give us a little bit more color and unpack the international ODS device growth, just any areas of strength, OEMs, just any additional color you can give, especially given the broader backdrop that you have, and then I want to follow up with several AGP questions.

Thanks.

Sure. On the international ODS front, we really saw growth from really the OEM partners in particular, Motorola and Samsung were encouraging.

Then some of our international operator partners also showed nice growth. That's a good news story given again some of the broader macro things that we're all reading headlines around just chipset prices and so on.

The fact to see growth in that part of our business is really something else also helps us bring more demand to the platform, more supply actually brings more demand, and then you get a cumulative effect, which is showing up in the results of the 80% year-over-year growth.

Got it. Then to that point on demand, brand up 70%, not that DTX was a slouch up 40.

We know that brand budgets can be a little lumpier and more seasonal than programmatic. This is obviously an uneven ad market to say the least, although mobile's been doing particularly well in digital out-of-home, how much of this is durable share gain and how should we kind of model that split for the next, pick a number, 3, 4, 5, 6 quarters?

'Cause the momentum in AGP has been really strong.

We can probably spend more time offline on some of the details around how to model it, but I think in terms of just kind of more generally speaking, we expect the growth to continue. A lot of the hard work we had to do to establish brand as a channel for mobile's been done.

As you're well aware, a lot of the digital brand dollars disproportionately go to things like CTV or go to things like retail media. We had to establish this mobile-first channel for brand, and that required a lot of legwork externally with holding companies and agencies and a lot of the big names, the Procter & Gambles and Apples and Targets and Amazons and so on, they're spending money with us today.

That took time to get those budgets and get those relationships, and we've done that externally. Then internally, getting the tech stacks aligned, getting some of the legacy acquisition assets integrated together to be able to deliver those experiences, that's now paying dividends for us.

As long as we continue to leverage our data and our ability to target audiences, our expectation is that brands are going to continue to spend, we're pretty optimistic about that being a growth driver for us.

Bill, 'cause you brought up AI and yield execution here, is there any way to kind of parse out how much of the fill rate and CPM growth is kind of market-wide versus company-specific?

I don't have anything specific to talk about on the macro side other than what we've seen. It's kind of mid to high single-digit growth from a macro perspective.

Like I mentioned in my prepared remarks that our rates are kind of closer to north of 40% year-over-year. That's driven by just better targeting, better outcomes, better formats, all helping to drive better rates.

Last one is just what's the monetization lag on newly signed distribution? You talked about your SDK footprint expansion in APAC and non-gaming verticals, and I assume you've already kind of spent the CapEx build-out associated with this?

What we're seeing right now that's really encouraging is the trend on the spend is encouraging, which is part of what's powering the 40% growth in DTX. You mentioned non-gaming specifically, those could be news, weather, sports, e-commerce, AI.

There's a whole variety of categories that all of these fall into that we're starting to see encouraging trends for. We believe we're taking share from competitors as a result of that, and it's something that's really great to see showing up in the results.

Got it. Thanks for bearing with me, and congrats on the quarter.

No, thanks.

Thanks, all, for joining our call tonight. We look forward to connecting in a few months to update you on our fiscal '27 second quarter earnings call.

Have a great night.