Q2 2022 Digital Turbine Inc Earnings Call
Hello, and welcome to the digital turbine reports fiscal second quarter results Conference call all participants will be in listen only mode.
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Thanks Keith.
Good afternoon, 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.
Do 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 go.
Evidently 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 the 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 certain non-GAAP measures about 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.
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 Wanna formulary recognize the amazing hustle and effort of the combined one D T 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 just some commentary on our consolidated results for the quarter, including a breakout of each of our segments.
Second or some real time operational updates.
Thirdly, some updates on the strategic integration progress of win digital turbine.
And finally I want to provide some commentary on the current events going on in our industry and our economy, such as regulations supply change apples idea, if a 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, an increase on an as reported basis and a 63% increase on a pro forma basis for revenues and 191% increase in EBITDA on a reported basis and over 130% increase in EBITDA on a pro forma basis.
I was most pleased to see the operating leverage of the model with our combined entity as this strong revenue growth only required 13% operating expense growth.
And as we've said on prior earnings calls the ability for us to grow the top line faster than the expenses required to support it generates accelerating cash flows.
And to support this point I want to call out our all time record of $40 million of free cash flow generated from the September quarter as a proof point of the strong operating dynamic and the health of our overall business model.
Turning to segment results I want to remind investors that our results will be broken into three segments.
The first is our onto vice media business, which includes our App media content media and single tap business.
The second segment is our AD colony business and the third segment is our fiber business.
Given that digital turbine at colony in fiber have all been public companies. We believe reporting these segments in the short term will provide investors the best comparison and transparency of our results.
Also to make comparisons easier for investors I'm going to refer to the add Tony and fiber results as if we had owned them last year. So we can discuss pro forma results.
And as we go forward, we'll look to reorient, our segments to better align with our go forward strategies, but in the short term. We believe this is an easier apples to apples measurement of our results.
First on our on device media business. It set all time revenue records in the September quarter and generated over 120, <unk> hundred $29 million in revenue.
Which is 73% growth year over year.
Driving this strong organic growth with strong performance across the board and our content media at media and single tap business.
Our U S revenues in our media business in the last three September quarters has gone from $30 million in 2019 $40 million in 2020 to over $60 million this past quarter.
We're happy to see 100% growth in our U S. App media revenues over that time period, despite modest device growth.
However, more impressively as our international growth and that media.
In the September 2019 quarter, we'd get approximately $3 million in revenue.
In September 2020 quarter, we did $8 million in revenue and this past September 2020, one quarter, we get over $20 million of revenue.
That is over 500% growth from two years ago, and 150% growth from last year.
We saw devices be a growth driver for part of this revenue increase is overall devices rose by approximately 20% from a year ago, but revenue per device or RPT was the real story.
Our <unk> increased by nearly 50% in the U S compared to a year ago and were up over 100% internationally from a year ago.
And as we've discussed on prior earnings calls.
R. P D as a core health metric of our business as it showcases the value of our platform.
To advertisers and customers.
And finally it is important to note that this is all organic growth and now with our synergies from our acquisitions and continued expansion with new and existing partners. We are optimistic on continued growth from our media business.
In particular, we continue to see hyper growth of our single tap business that is now rapidly approaching a nine figure run rate annual business compared to being a seven figure business a year ago.
Having single tap now fully integrated with our appreciate acquisition is a major driver of these accelerating growth results.
Growth is both coming from U S and international such as partners like Samsung.
And in particular, our international single Tap business has gone from basically nil a year ago to now a multimillion dollar a quarter business.
And last week single tap was recognized by AD exchanger as the number one new demand side platform or DSP Technology Award for 2021.
We are continuing to invest in the technology and we were just granted our second patent on single tap to extend to other device types.
Meanwhile, our content media business has enjoyed similar accelerating results.
In the September quarter of 2019, our content media business did a little more than $10 million in revenue.
In September 2020, it did over $20 million in this past quarter it did over $35 million.
Again this is all organic growth.
I'm pleased to announce that we are expecting to launch our first content products with horizon. Later this month and expect to launch with AT&T next quarter.
In addition, we are expanding internationally with multiple Oems in Asia, and American mobile and Latin America.
Turning to our <unk> segment at colony had approximately 20% year over year growth comparing the September quarter to last September quarter.
In particular, the add Tony brand business, which is highly strategic for our one digital turbine efforts showcased approximately 40% year over year growth and accounts for the fastest growing portion of AD colony revenues.
In particular, our North American brand business is performing well and not seen any material slowdowns due to supply chain related issues.
The less strategic performance business contracted in the quarter by 18%, primarily driven by apples idea Fei changes, which I will speak more about later in my remarks.
And for context. This idea of a impact accounts for approximately 1% of our colleagues consolidated revenues. So it is not material to our overall results.
We continue to be excited with the expanding brand relationships in multiple industries and geographies with top tier names, such as Starbucks, Procter and Gamble P. P Nestle and emerging new brands like crypto Dot com.
And it's two simple examples Starbucks has expanded its brand spend with add Tony by over 50% year over year as we now have more supply for them to leverage with our acquisitions and mcdonalds is in the process of expanding their add Tony branding relationship with US Twin club to include leveraging our single tap technology.
Turning to fiber.
Fibers full quarterly results were impressive showcase in year over year growth of over 90%.
Fiber has achieved over 140% of last year's revenue in the first nine months of 2021 compared to the full year of 2020.
And even more impressively EBITDA in the same comparative period has increased over 700%.
In other words fiber is not only accelerating growth on the top line, but it's now at that critical inflection point of scale that enables accelerating operating leverage in their core business.
This impressive growth was driven by both rates and volumes.
On rates during the September quarter fiber saw both impressions and E. C. P. M increased by approximately 40% compared to a year ago, while also increasing the volume out of ads delivered by almost 50%.
More specifically fueling this strong growth was marketplace video, where we saw revenues more than tripled year over year.
With that Tony fiber made strategic investments in video rendering of mobile ads over the past few years and are now capitalizing on the macro global tailwind a video ad formats.
As advertisers prefer the stickier richer and more pricing elastic AD format compared to other good traditional digital formats.
With these three segments in place we are beginning to increase our focus on revenue synergies.
Our synergy revenue run rate approaching 10% of overall revenues as we exited the quarter.
We are working on over a dozen different revenue synergies between the companies whether that is add Tony on fiber supply appreciate buying on fiber supply or expanding AD colonies demand reach with digital turbines content media supply just to name a few examples.
In addition to the revenues these synergies create many of these synergies also improve our gross margins, while simultaneously delivering more value for our partners.
By taking unnecessary links out of the supply chain of digital advertising.
This is a major strategic focus area for our team to accelerate our progress here.
Now turning to the forward outlook I want to provide some commentary on how we are positioned for continued growth.
With our acquisitions, our growth levers of devices products and media have not changed they've just been accelerated and expanded.
First on devices after many quarters of flattish the declining device sales in the United States I'm pleased to announce that we grew devices nearly 10% in the U S and over 20% internationally compared to September quarter last year.
We're also seeing over 40% of new devices sold with our largest U S carrier partners being five G capable, which is a material increase compared to last year.
And this is important because it drives richer video advertising.
We've now passed 750 million devices that are software has been installed.
Yeah.
On the product front, our revenues from a dynamic installs grew by 25% year over year in the September quarter, but now represent approximately 15% of our total consolidated revenues.
Compared to over 50% last year.
As the company has been repositioned to a monetization over the life of a device company.
First is just a monetization at first activation company.
Our revenues that occur over the lifetime of the device now represent over 80% of our total consolidated revenues compared to just over 40% last year.
Diversifying away from revenues only attributable to first boot and monetizing over the life of the device has been a strategic priority for our business and this progress is material.
I'd mentioned single tap is a major growth driver earlier in my remarks, but we're also looking to many other products to generate growth such as notifications discover bar fair bid offer wall and marketplace.
In other words diversification is working well to drive both topline growth and no reliance on any single product to drive growth.
And to further emphasize this point. This is also our first quarter, where we do not have a single partner or customer that constitute more than 10% of our revenues.
I now want to turn to our integration update.
With the completion of the acquisitions, we've now successfully assembled the key pieces of our full stack end to end platform.
Want to spend a minute here to highlight to investors what truly differentiates our end to end platform approach versus other industry players.
First is having our technology on device the software presence on underlying devices provides us a distinct advantage.
Critical one which is now our ability to use our patented single tap technology to drive materially higher conversion rates in our platform.
Second is our independents.
We've opted to vertically integrate by functionality. Unlike many other industry players who have drifted into the content arena, thereby compromising your platform neutrality imposing potential conflicts of interest for other app publishers and advertisers on the platform.
And finally as owning the end to end network. So much of the supply chain of AD Tech comes from companies that are many steps in many hops involved.
One of the main reasons why companies like Google and Facebook have been successful is to have ownership of the end to end relationship to maximize benefits for both themselves and for advertisers.
While simultaneously, allowing other players to plug in to their platforms to fill the white spaces.
In essence, our on device technology presence and independent approach make our platform more attractive to app publishers and advertisers trying to optimize monetization and return on investment.
It's obviously early days, but we've already received positive feedback from numerous partners and customers validating our approach.
To close out my prepared remarks, I wanted to provide some commentary on the macro and industry specific events happening real time.
First on the macro environment, one of the great things about our business is a cloud based mobile software company is we don't have input are hard cost.
Thus our exposure to supply chain inflation risks is muted relative to others.
We've seen a couple of advertisers rethinking their spends for the December quarter, given supply chain constraints, but to date, we estimate this to be low single digit percentage of overall spend in other words, it's not material.
Regarding new device sales, while we do have see some modest exposure to new device sales, but given over 80% of our revenues are from devices already in the hands of customers. This risk is also relatively small.
On the regulatory front, we are seeing legislation around the globe about regulating big tech firms to offer more consumer choice and control.
Societies in the midst of a debate around antitrust versus privacy and whether we want to consolidate power in the hands of a few in the spirit of privacy or offer customers the ability to choose the products they want versus the enforced to use the products that the big tech firms want them to use.
Theres bipartisan legislation here in the United States looking at that.
Looking at these dynamics closely.
And from a D. T perspective, we view this debate of privacy versus antitrust is a bit of a false narrative as we can be an option of choice for consumers with Verizon and AT&T, Samsung or whoever while simultaneously protecting privacy on device. We're closely monitoring these regulations.
And have already partnered and supplied input to regulatory authorities.
We will discuss these dynamics in more detail at our analyst day on new business opportunities that may open up for us, but given our unique position with operators and Oems, we see today's regulatory environment, It's a tailwind not a headwind for our business.
Regarding <unk> on Apple's iOS platform, specifically I believe all third parties have seen an impact including us on their performance businesses, while brand businesses have been more insulated.
It's not material for us as approximately 75% of our revenues are from Android and 25% are from iOS and the mix shift towards Android it's been accelerating.
Thus the idea of the impact is single digit percentage of our consolidated revenues.
And given we already support apples S. K AD network integration also noticed scan our machine learning models improve on device Decisioning for third party players, we do see this as a temporary phenomenon.
But in the short term idea Fei is a headwind for all third party performance players. We believe the largest players in the space are being hurt disproportionately the most as they.
We're relying upon things like do you through attribution that has become extremely difficult in a world without idea Fay.
However, what we believe makes us different from others is our concentration of brand dollars from AD colony that work, both on iOS and Android and tend to be more pricing elastic or majority focus on Android and our single tap capabilities.
These positive factors are all growing faster than any negative impacts that we see.
We'll break this dynamic down in more detail at our analyst day, but I think it's important for investors to understand which companies are relying upon idea Fe as a core part of their business versus companies that are diversified options to mitigate mitigate any headwinds from Apple's choices.
And finally, we've seen a large number of acquisitions in our space over the past few months.
This is a positive as many companies like digital turbine a recognize the importance of scale and taking point solutions out of the marketplace to be combined with other offerings such as what we did earlier this year.
To allow better experiences for customers and advertisers.
Simultaneously taken inefficiencies out of the market.
And as mentioned earlier, we strongly believe the focused on device race that we're running is unique and differentiated in the market and are going to continue to focus on that race, while ensuring some of these macro things discussed earlier in my remarks allow us as Wayne Gretzky famously said skate to where the puck is going to be versus where it is now that will be our.
<unk>, an organic focus going forward.
With that this concludes my prepared remarks, and I'll turn it over to Barrett to take you through the numbers.
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 were 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 referenced results on a pro forma basis, which reference.
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.
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 <unk> 44 per share increased to 109.
93% year over year.
On device media revenue, which represents existing revenue derived from the company's application media inclusive of single tap DSP and content media and platform products increased 73% year over year to $129 4 million.
Total in App media AD colony revenue contributed $61 5 million during the quarter and was up 19% on a pro forma basis.
In our fiber 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 90 $494 million, which was up 55% on a pro forma basis gross margin on the platform was 30, 30% in Q2 and reflects our current business segment mix now that a full quarter of results are reflected for acquisitions.
While our gross margins in the quarter 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 on the platform as cash expenses were $46 1 million in the quarter.
Our 14, 8% of revenue down from 21% of revenues in the prior year.
And our cash expenses only increased 13% year over year on a pro forma basis, while revenues were up over 63% in the period.
Total operating expenses were $76 7 million, including approximately $9 2 million and transaction related costs and compared to total as reported operating expenses of $17 6 million in the prior year.
As an update the integration of the acquisitions is progressing nicely and we anticipate certain cost benefits to be realized over the coming quarters as integration efforts are successfully implemented to further improve our operating leverage.
I'm also pleased that operating leverage and consistent EBITDA growth is being achieved even as we continue to make a number of focus near term investments.
Primarily with our within our sales force and technology teams to support new products and partners to drive future.
Incremental revenues on the platform.
In this context, we would expect our EBITDA margins to continue to expand over time, given the inherent operating leverage in our business and the return to be realized from our near term investments in synergies.
I continue to be pleased with our profitability and free cash flow delivered by our business.
In the quarter, we achieved non-GAAP adjusted net income of $45 3 million or 40, <unk> per share as compared to $14 5 million or <unk> <unk> per share in the second quarter of 2020 <unk>.
Adjusted EBITDA of $47 9 million was up 191% over prior year.
Our GAAP net loss was $5 9 million or six cents per share based on $102 7 million.
Diluted shares outstanding compared to our second quarter of 'twenty 2020, net income of <unk> 4 million income or zero cents per share.
Our GAAP net loss included a $22 1 million charge for the contingent consideration related to the fiber and add colony acquisitions and also included $9 2 million and transaction related costs in the quarter.
We also experienced certain favorable tax benefits in the quarter, resulting primarily from stock comp expenses.
These nonrecurring tax benefits drove a favorable GAAP effective tax rate in the quarter.
Free cash flow from the quarter was $39 9 million, enabling us to exit the quarter with $95 5 million in cash balances are.
Our debt position was 260 million consisting of $247 1 million drawn against our 470 $475 million revolving credit facility inclusive of the $75 million accordion future plus $13 4 million in debt assumed through the fiber acquisition are.
Net debt position at the end of the quarter was $164 6 million.
I will note. We are currently comfortable with our existing capital position to fund the remaining earn out obligations and the needs of the business operations with our available open revolving line the cash on hand, and the free cash flows generated from our business.
With our expanded credit facility, our healthy balance sheet and strong free cash flows combined with the transformative new acquisitions added to the platform, we're excited and poised to execute on our growth plans for fiscal 'twenty two and beyond.
Now, let me turn to our outlook.
We currently expect revenue for Q3 to grow to between $350 million and $355 million, which represents growth of 30% on a year on year basis.
We expect adjusted EBITDA to grow to between 53, and 56 million and non-GAAP adjusted net income.
Diluted share to be between 41, and 44 cents based on approximately 105 million diluted shares outstanding and an effective tax rate between 15 and 20% on our non-GAAP adjusted net income.
In closing, we're extremely pleased with our performance in the quarter and the continued focused execution from our team I'm excited to build on our momentum and success in the second half of our fiscal year.
With that let me hand, it back to the operator to open the call for questions.
Operator, yeah, yes. Thank you at this time, we will begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question today comes from Anthony Stoss with Craig Hallum.
Okay.
Hey, guys. Congrats on the results Bill if you wouldn't mind.
I guess the additional congrats on the Verizon and AT&T content wins can you maybe size that opportunity for each of those.
DT going forward and then also I think in 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've talked about several products in the call, but any additional details in terms of timing of these product launches will be helpful. Thanks.
Yeah, Hey, thanks, Tony as far as our Horizon AT&T go how do we think about it conceptually is we just we just talked about $35 million in quarterly revenue and the content media business. They're the biggest driver of that is our relationship with T. Mobile. If you think in rough terms at T mobile as a third of the market at Verizon as a third of the market in AT&T.
A third of the market.
That's how we probably think about the opportunity for us I mean, that's not to mean, we think that's going to happen in December quarter, but as we think about it more strategically as we go forward in time, that's how we would probably break down that the market opportunity for that on the 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.
Yeah regarding notifications.
We're starting to see some you know some some significant movement in revenue there.
Not as big as our single tap business, but it definitely is growing it was basically.
Neil 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 add Tony side, we're excited about that.
Development and one thing as you saw in our business.
<unk> 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 RPT metrics. So we're really excited about the diversification of the of what we're doing here and for you there'd been around.
The story for a long time remember when when dynamic installs was the majority part of our business and now it's a 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.
If I could sneak in one one further quick one.
Any new updates in terms of samsung's launch of single tap and I'm just curious if you've been approached by other Oems are when do you think you can start unloading additional Oems for a similar agreement.
Yes, we are in the process of ramping and scaling with Samsung right. Now you know we started in Brazil.
Went to the rest of Latin America, we're in the process now of getting into Europe, and scaling up in Europe, and we will 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 as they are with Samsung, but I think the important point here is you're seeing.
Suffocation, whether that's other Oems, where that Samsung with Verizon, whether it's AT&T American mobile or what have you guys. A lot of supply sources for us out there to help continue to grow and scale the product.
Thanks, Bill Congrats again, thanks, Tony.
Thank you and our next question comes from Tim Horan with Oppenheimer.
Thanks, guys two questions. One I guess a impact is that largely done at this point sequentially or do you expect another quarter or two of impact and secondly on single tap can you just talk about customer interest a little bit more.
Many customers you have on it now.
How many what's.
What's the ramp there over the next year or so thanks.
Yes, sure Tim Yeah, an idea as.
As I said in my prepared remarks, I think everybody that's advertising and Apple is impacted in some way shape or form, especially people that are performance players in web performance I mean as people that youre trying to get somebody to do a specific action not just watch a video or buying a new car but.
Install this app on your phone kind of kind of advertising in it.
Players that have I think been disproportionately hurt by idea far you've.
And you've seen some of them come out and talk about it in their earnings releases are the ones that are at the larger players that are overly lie and upon the <unk> capabilities to match up say I saw at Starbucks AD and I'm, a big player I didn't click on it I just saw it and then I can match an idea that somebody might have went to the app store and download that App and you may not have been clicked on it but they could claim attribution and therefore get.
Paid those kind of things are gone now until I think players that we're relying upon those things which was not digital turbine.
Our ones are being impacted disproportionately there.
US and our as I mentioned in my remarks, our performance business on AD colony. We saw we saw some sequential down active.
Activity as a result of idea far but for US it was roughly 1% of our consolidated revenue. So it wasn't material because we're just not relying upon.
You know things that are dependent upon the idea phase 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 you know as we get into 2022, we'll see this normalize I think what you've been seeing so far is a lot of people that were sprint spending budgets to drive performance or direct response type.
Are things, maybe they are spending $100 before idea Fay they tap the brakes now theyre spending $50.
Want to kind of see how the dust settles before they go back up to 100 and what their return on AD spend expectations are.
But ultimately consumer eyeballs or on iphones and people will I think figure out how to get that spent back whether that's using things like integrating with Apple's S. K AD network or other kind of odd device machine learning models or kind of other things that those things will happen in time, but I think in terms of the current quarter less so for digital turbine maybe more so for other.
Players I think there's definitely some headwinds there and then on your second question around single tap and customers. The great thing about what we're excited about is we've been generating the results that we've been generating with roughly a dozen plus advertisers it's not like it's thousands.
So now we're just in the process of scaling knows so we have been doing great things with companies like Twitter that we've been ramping with I mentioned in my remarks that we're just going to go into the current quarter with companies like Mcdonald's, we expect to expand that number dramatically through our own direct relationship with appreciate and then we will look over time to scale single tap to other.
Distribution channels, whether that's larger social media players.
Other companies have large audiences didn't want to take advantage of the single tap capabilities. So.
Our excitement level here is that we're just getting going on expanding the supply with the Verizon and Samsung and now that's really opened up the chicken or egg to now expand the demand side of it with all these new advertising relationship. So it gives a lot of optimism as we head into 2022.
Okay.
Thank you.
Thank you and the next question comes from Darren <unk> with Roth Capital Partners.
Hey, guys. Thanks for taking my questions.
Two if I may 1st Bill you talked a little bit about cross synergies I think you had referenced 10% I mentioned, Mcdonald's and Starbucks I'm just kind of curious.
What does the pipeline look like for supply and demand products.
On your AD stack and then 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 an intermediate term impact maybe what regions of the world and then on your Samsung commentary I think last quarter, you talked about expanding.
What's happened in the whole network globally, how much of a needle mover was that if any in the quarter and if not will that start to cut a light the fuse in the December quarter.
Yeah, Hey, thanks Darren.
First on the synergies as I mentioned, we affectionately call. It internally the da Vinci code, where we got these dozen plus synergies that we track on a weekly basis.
Just about how we mix and match all the all the different combinations between the companies.
So we're excited to see some real positive growth in momentum there, but just to highlight something I think I'm, probably most excited about.
First is just leveraging our appreciate DSP and allowing.
Our clients from both the fiber and add colony, and DT side to leverage appreciates capabilities.
Number one with single tap.
Number two would be the ability to take our AD colony demand and leverage it on fiber supply. One is always the constraints on the AD colony businesses company like Mcdonald's May say, hey, Here's a $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 add colony could only have the supplier to deliver 100000.
So that spend against that target will now with this expanded supply with fiber 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 single tab or through our dynamic install business or through our wizard products and be able to package that up to.
Our publisher advertising partners as another opportunity for growth. So when we go in and talk to them about things like mediation.
We're expanding our relationships with other kinds of products like that it offers up as 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 single tap and the needle mover in the quarter.
In percentage terms. It was it was nice growth in terms of needle moving against a $310 million quarter.
Yes, no it didn't move the needle and those kind of terms, but.
But we're laying the foundation is kind of as I said in my quote in the press release was really about getting some of these foundational elements.
Tablet so when we look at growth drivers into 2022 and beyond the kind of things that we're doing now position as well.
Can I squeeze in one more you mentioned.
<unk> a pattern.
We have IP on single tap for devices outside of mobile.
Can you speak to that and with the opportunity in connected TV.
Had an opportunity for for apps and that we've talked about this in the past, but is that sort of a real world opportunity in near term or just walk me through that that logic.
Yeah, one of the things that we're excited about is we've talked about this for a while as we've been focused on smartphones because of just the sheer volume right Youre talking about 1 billion plus they get sold every 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 television.
<unk> and internet of things and tablets, and Pcs and all kinds of all kinds of different things that we're excited about.
I think it's important for us to think about our technology in that context as well. So as we go forward and we can offer our consumers better experiences in terms of delivering apps or content to whatever the device. They are on.
Leveraging some of the things we've done on smartphones, that's a natural extension for us.
Not anything thats going to show up in the December quarter, but as we again as we think about how the company is strategically positioned in what I'll call as we're walking and chewing gum here in terms of you know focused on the short term and just delivering and executing on the quarter, but also looking around the next corner and where we want to be.
These are the kind of things that get me excited about our ability to do both.
Thanks Bill.
Thank you.
And the next question comes from Boston rolled out with Canaccord.
Hi, Thanks can you walk through the puts and takes for.
That add colony growth number in the quarter, especially since performance is a relatively small piece I'm curious what you know what's been slowing down.
Yes, so so when we when we say.
Our performance business was was challenged a bit in the quarter. It is a relatively smaller piece.
But with respect to you know the focus in our in our brand business that actually accelerated year on year.
It didn't come.
A combination we grew close to 20%.
Some of that <unk> that bill focused on that we outlined was.
A small percentage of the impact in headwind in the quarter. It occurred in our and our performance area of the business.
Austin.
So anyway, that's the that's the outline of kind of those two puts and takes for ended up in an overall growth position currently.
And I'll just add one last try to add some color on that some more strategically above and beyond kind of the.
Quarter over quarter numbers.
Is the thing you got US excited about add Tony was just the amazing job they did with brand and with video and that's where the business grew that's where we're focused on.
I think so.
I think theres a lot of juice left in a squeeze on some of these other legacy businesses. They have you know as we go forward with some of the things we talked about already on some of the other Q&A.
But the brand thing is I'd really highlight because thats the synergistic part that really fits hand in glove with what we're trying to do with our core DTI device business in the fiber 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 fiber specifically.
Over maybe the next couple of quarters or so.
Yes, I think on the fiber side there. So there's a few drivers number one is continuing to expand more and more publishers to the platform.
5% is done an amazing job of 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 appear.
<unk> and add colony or whether that's other integration things that can be done with through the trade desk or Google, bringing more of those demands.
Into that supply with more scale. So I think that would be area number two that I would think about and an area number three I would think about is expansion of new products and so.
Fiber has been heavily dominant with their marketplace your exchange product.
There mediation product and their offer wall product here all things I think has some nice room to run. So I think those are the three drivers, which you for them going forward.
Okay. Thank you very much.
Thank you and our next question comes from Tim Nolan with Macquarie.
Hey, guys. This is Chris can taro on for Tim Thanks for taking the questions.
So given your AR on device business is on the enjoy and what it looks like kind of like something you guys have gotten from the incremental AD budgets that you've been able to receive.
Because there's more budget shifting to Android iOS give an idea of the impact are you seeing more advertisers coming to you know our current clients increasing their spend what are you kind of seeing there.
Yeah, I think it's I think it's a really I think it's a really interesting dynamic for us is because I mentioned on the I mentioned on the call that roughly 75% Android, 25% iOS because I want to go back in time, a few quarters and look at that on.
Pro forma basis, it's kind of closer to $65 35, a few quarters ago. So what youre seeing is this migration of spend increasing towards Android.
For digital turbine relative to iOS and I think that.
That's due to a few things obviously single tap would be a driver of that.
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 are saying, hey, I want a male or female that fits this target with these characteristics and whether they're using Android or ask there are less interested in they're interested in how can I reached that person with the most efficient spend and given that we're seeing right now.
Is that our ability with single tap and our other products, we can do that perhaps more efficiently than that advertiser could do on Apple.
Therefore, you are 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.
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 learning and as CAD network integrations and people just get smarter on spend and so on.
Yes.
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 of Europe, particularly interested or looking to adhere through current setup.
Yes, we're really excited about some of the developments that are happening right now for us to continue to grow our business and we think we're really in a perfectly positioned place right now and whether it's the consolidation whether it's the regulations.
Coming down the Pike or just some of the other industry events are going on and we think we're in a pretty good place to expanded other adjacencies and we're going to talk a little bit more about that on our analyst day next week. So look forward to sharing some of those details with you.
Thanks, guys.
Thank you and the next question comes from Allen Klee with Maxim.
Oh, good good afternoon, with your relatively new where business mix. How do you think about your long term margin opportunity.
Yes.
Sure.
We see things.
Coming from enhancements to our margins coming from a few different places.
I'll start with we would we would see those those margins expanding over time as we as we saw with.
The existing core on device business over time.
A couple of areas that we see.
As catalyst for expanding margins one is we put new products on.
Two is we.
Realized 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.
No.
Our our products like single tap and others.
We'll also begin to optimize the yields in those businesses.
But to answer your question.
See those margins expanding.
North of 30%.
Do anticipate talking a bit about more about kind of our growth model at our analyst day.
But you should expect over time, those those margins should create north.
North of north of 30% certainly.
The second point I'd make is beyond gross margins as you know.
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.
See we see a lot of opportunity and those margins continue to expand especially as.
The new acquisitions began to kind of fuel some of that increased operating leverage from where they stand today.
Thank you.
Thanks Al.
Thank you.
And that concludes our question and answer session I would like to return to afford a 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 'twenty, one third quarter call in a few months and hopefully seeing many of you next week at our earnings call or excuse me on our analyst day next week, Thanks and have a great day. Thank.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Okay.