Q3 2025 Digital Turbine Inc Earnings Call

Operator: Good day and welcome to the Digital Turbine Fiscal 2025 3rd Quarter Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.

Good day and welcome to the digital turbine fiscal 2025 third quarter results Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your touch.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. And to withdraw your question, please press star, then two. Please note this event is being recorded.

Speaker Change: Telephone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Brian Bartholomew or head of Investor Relations. Please go ahead Sir.

Brian Bartholomew: I would now like to turn the conference over to Mr. Brian Bartholomew, head of investor relations. Please go ahead.

Chuck: Thank you, Chuck.

Speaker Change: Thank you Chad.

Brian Bartholomew: Good afternoon and welcome to the Digital Turbine Fiscal 2025 3rd Quarter. Joining me on the call today to discuss our results are CEO Bill Stone and CFO Barrett Garrison.

Brian Bartholomew: Good afternoon, and welcome to the digital turbine fiscal 2025 third quarter earnings Conference call.

Speaker Change: Joining me on the call today to discuss our results are CEO, Bill stone and CFO Barrett garrison.

Brian Bartholomew: 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, another forward-looking topic. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect.

Speaker Change: 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.

Speaker Change: Although we believe that our assumptions are reasonable they are not guarantees of future performance and some will inevitably prove to be incorrect.

Brian Bartholomew: 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 forward looking statements.

Speaker Change: Sept as required by law, we undertake no obligation to update any forward looking statements.

Speaker Change: For a discussion of the risk factors that could cause our actual results to differ materially from those contemplated by forward looking statements.

Brian Bartholomew: Please refer to the documents we filed with the Securities and Exchange Also, during this call, we will discuss certain non-GATT measures of our performance. Non-GAP measures are not substitutes for GAP. please refer to today's press release for important information about the limitations of using non-GAP.

Speaker Change: Please refer to the documents, we file with the Securities and Exchange Commission.

Speaker Change: 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.

Brian Bartholomew: as well as reconciliations of these non-GAAP financial results to the most comparable GAAP Now I will turn the call over to our CEO, Mr. Bill Stoss.

Speaker Change: I'll turn the call over to our CEO, Mr. Bill Stone.

William Stone: Thanks, Brian, and good afternoon, everyone. Before diving into our quarterly results, I'd like to announce an exciting addition to our executive team. Steve Lasher will be joining us, our new CFO, effective tomorrow. Steve brings a wealth of technology and financial leadership experience as a former public company CFO of Vonage, and before that, handling many financial executive positions with IBM. We're thrilled to have Steve on board.

Bill Stone: Thanks, Brian and good afternoon, everyone.

Bill Stone: Before diving into our quarterly results I'd like to announce an exciting addition to our executive team.

Bill Stone: Steve last year will be joining us our new CFO effective tomorrow Steve.

Bill Stone: Steve brings a wealth of technology and financial leadership experience as a former public company CFO with vantage and before that handling many financial executive positions with IBM and we're thrilled to have Steve on board.

William Stone: However, it's bittersweet for me, as Barrett has been instrumental in building our business over the past eight years, we transition into a consultant role for the next few months to ensure we have a very smooth and solid continuity and transition. When I reflect back on where we were at when Barrett first started on day one and compare that to where we're at today, the progress has been enormous.

Barrett Garrison: However, it's bittersweet for me is Barrett there's been interest are instrumental in building our business over the past year as we transition into a consultant role for the next few months to ensure we have a very smooth and solid continuity in transition.

Barrett Garrison: When I reflect back on where we're at when Barrick first started on day, one and compare that to where we're at today the progress has been enormous.

William Stone: I want to thank Barrett for everything he's done to build DT and the close relationship we've built over the years, not just as colleagues, but also as friends.

Speaker Change: Thank Barry for everything he has done to build D T and a close relationship we built over the years not just his colleagues, but also his friendship.

William Stone: Turning the quarter, I was pleased to see us exceed expectations and also generate positive free cash flow. More specifically, we did $135 million in revenue, $22 million in adjusted EBITDA, and $0.13 in non-GAAP EPS. I'll break out additional details in my remarks, but the main takeaways for the investors on the drivers for our improved performance are improved advertising demand for our overall platform. Our transformation efforts are showing early bottom results, online results, and overall improved execution as a company, especially for our on-device international business and our brand strategy. We've talked about all these things on prior calls, and it's great to see them now showing up in the results and enable us to raise our outlook.

Barrett Garrison: Turning to the quarter.

Barrett Garrison: Pleased to see us exceed expectations and also generate positive free cash flow.

Barrett Garrison: More specifically, we did $135 million in revenue 22 million in adjusted EBITDA, and 13 cents and non-GAAP EPS I'll break out additional details in my remarks, but the main takeaways for the investors on the drivers for our improved performance or improved advertising demand for our overall platform.

Barrett Garrison: Our transformation efforts are showing early bottom results on my results and overall improved execution as a company, especially for on device International business and our brand strategy.

Barrett Garrison: We've talked about all these things on prior calls it was great to see them now showing up in our results and enable us to raise our outlook.

William Stone: For the March quarter, we're guiding for both year-over-year growth, not just on the top line, but nearly 50% growth in EBITDA. For our ODS segments, revenues reached $92 million, an 11% sequential increase from the September quarter. We set all-time records for revenue per device, both inside the U.S. and internationally, driven by strong advertiser demand. However, this was partially offset by continuing softness with U.S. device volumes. with the anniversary of three releases here in the U.S. new AI features, and new flagship device launches, would you expect to see stable device sales in the U.S. in 2025?

Barrett Garrison: For the March quarter, we're guiding for both year over year growth not just on the top line by nearly 50% growth and EBITDA.

Barrett Garrison: For Ods segment's revenues reached 92 million, an 11% sequential increase from the September quarter.

Barrett Garrison: We set all time records for revenue per device, both inside the U S and internationally driven by strong advertiser demand.

Barrett Garrison: However, this was partially offset by continuing softness with U S device volumes.

Barrett Garrison: With the anniversary of three year leases here in the U S.

Barrett Garrison: New AI features and new flagship device launches would you expect to see stable device sales in the U S. In 2025.

William Stone: But the highlight here is our nice breakthrough in our international on-device business. Our on-device international revenues were up 100% year-over-year, driven by strong advertiser demand and improved by execution by our sales, product, tech, and operations teams. For our AGP business, we reported $44 million of revenues and $34 million of gross margin. The bright spots continue to be our investment in brands and our PMPs that want to leverage our first-party data to reach their existing and potential customers over our global network. That's now bearing fruit. We achieve double-digit sequential growth in this part of the business.

Barrett Garrison: But the highlight here is our nice breakthrough in our international on device business are on device International revenues were up a 100% year over year, driven by strong advertiser demand and improved execution by our sales product tech and operations teams.

Barrett Garrison: Four AGP business, we reported $44 million of revenues and $34 million of gross margin.

Barrett Garrison: The bright spots continue to be our investment in brands and R. P. M. P's they want to leverage our first party data to reach their existing and potential customers over our global network, that's now bearing fruit.

Barrett Garrison: We achieved double digit sequential growth in this part of the business.

William Stone: As discussed on prior calls, this is a strategic objective for us and something we've invested in to differentiate us from other players. We are now in a great position to continue to grow and we will continue to invest here as we believe we are building a moat given the high barriers to entry and work required to earn the trust of brands like P&G, Coke, Disney, Starbucks, and so on. However, this new growth has been offset by transitioning from waterfall bidding to SDK bidding on our exchange. Improving our own performance advertising, leveraging our own first party data, is our most important execution improvement area for AGP business.

Barrett Garrison: As discussed on prior calls. So this is a strategic objective for us and something we've invested in to differentiate us from other players.

Barrett Garrison: We are now in a great position to continue to grow and we will continue to invest here as we believe we are building a moat given the high barriers to entry and work required to earn the trust of brands like PNG Coke Disney Starbucks and so on.

Barrett Garrison: However, this new growth has been offset by transitioning from waterfall bidding two SDK bidding on our exchange.

Improving our own performance advertising leverage in our own first party data is our most important execution improvement area for a G P business.

William Stone: The Legacy Fiber and Ad Colony Exchange businesses were focused on waterfall bidding with third-party performance DSPs, primarily buying gaming advertising inside gaming applications. And as expected, these DSPs have been executing their own supply path optimization strategies to vertically integrate their demand connected to their own supply. And for those companies without a strong mediation footprint, it's become a largely commoditized ad tech gaming space for both iOS and Android. We saw this risk years ago, and that's why we invested in our own brand and SDK bidding activities to mitigate that risk, increase our own first party activities over our network, and continue to invest in mediation.

Barrett Garrison: The legacy fiber and add Tony exchange businesses were focused on waterfall bidding with third party performance D. S piece, primarily buying gaming advertising inside gaming applications.

Barrett Garrison: And as expected. These dsp's had been executing their own supply path optimization strategies to vertically integrate their demand connected to their own supply.

Barrett Garrison: And for those companies without a strong mediation footprint, it's become a largely commoditized AD tech gaming space for both iOS and Android, which are this year's risk years ago, and that's why we invested in our own brand and SDK bidding activities to mitigate that risk increase our own first party activities or over our network and continue to invest.

Barrett Garrison: And mediation.

William Stone: We've also been able to expand our AGP supply from historically being largely dependent on game publishers to much more diversified over non-gaming. To illustrate this point, our GTX revenues on non-gaming applications have nearly doubled over the past year.

Barrett Garrison: We've also been able to expand our AGP supply from historically being largely dependent on game publishers to much more diversified over non gaming.

Barrett Garrison: Illustrate this point our gtx revenues are named non gaming applications have nearly doubled over the past year.

William Stone: In summary, our investment and focus areas are showing encouraging growth that is now showing up both in gross profit and EBITDA. We need them to show faster growth to offset the impacts of US device sales with our legacy supply partners, and also outrun our legacy performance DSP declines in our exchange as we transition to more brand AI machine learning or data science, increase our non-gaming applications, and finally improve our share of voice or first party performance demand over our network. Those are our AGP priorities.

Barrett Garrison: In summary, our investment and focus areas are showing encouraging growth that is now showing up both in gross profit and EBITDA.

Barrett Garrison: We needed them to show faster growth to offset the impacts of U S device sales with our legacy supply partners and also outrun our legacy performance DSP declines on our exchange as we transition to more brand AI machine learning to our data science increase our non gaming applications and finally improve our share of voice or first party performance demand over our network.

Barrett Garrison: Those are our AGP priorities.

William Stone: Turning to future, our focus is on growth and efficiency. The keys to driving growth are more devices, improved performance from legacy and new products, and a wider and deeper net of media and brand relationships. The key to efficiency is automation, aligning operating costs to gross profit and realigning our people, process, and systems for maximum benefit. Barrett will provide more details on our transformation activities and his remarks, but on our last call, we discussed targeting more than $25 million of annual operating expense savings from this work, and I'm pleased to announce we're on track to accomplish that goal.

Barrett Garrison: Turning to future our focus is on growth and efficiency.

Barrett Garrison: He used to driving growth or more devices improved performance from legacy and new products and a wider and deeper net of media and brand relationships.

Barrett Garrison: The key to efficiency as automation aligning operating cost to gross profit and realigning our people process and systems for maximum benefit Barrett will provide more details on our transformation activities in his remarks, but on our last call. We discussed targeting more than $25 million of annual operating expense savings from this work and I'm pleased to announce where.

Barrett Garrison: On track to accomplish that goal.

William Stone: Our other goal is driving growth. As a reminder, our growth drivers are devices, products, and media relationships. And for devices, our goal is to expand and deepen our device footprint. And despite the soft device sales in the U.S., we've been expanding our global device relationships through partners like Motorola, Nokia, One Store, Xiaomi, and Telecom Italia Brazil, and now T-Mobile here in the United States. This new supply was a growth driver for our international RPDs improving as more supply density helps us bring more scale in our demand. Our second growth driver is expanding our product portfolio for both our ODS and HEP businesses.

Barrett Garrison: Are their goals driving growth.

Barrett Garrison: As a reminder, our growth drivers are devices products and media relationships and for devices. Our goal is to expand and deepen our device footprint and despite the soft device sales in the U S. We've been expanding our global device relationships through partners like Motorola Nokia, one store, Xiaomi and Telecom Italia, Brazil and <unk>.

Now T mobile here in the United States.

Barrett Garrison: This new supply was a growth driver for our international RPT is improving as more supply density helps us bring more scale in our demand.

Barrett Garrison: Our second growth driver is expanding our product portfolio for both our Ods NH businesses.

William Stone: Scaling new ad tech and on-device capabilities are critical to our return to growth. On our AGP business, as mentioned earlier, our SDK bidding capabilities have been a nice product enhancement to unlock brand spends on our exchange. While we still have plenty of work to do to transform our migration to this method of bidding, SDK bidding is already showing strong growth. It's now over 70% of total impressions on our exchange compared to only 5% a year ago. And we're diversifying away from our waterfall bidding and are now at less than 30% of our traffic compared to over 90% a year ago.

Barrett Garrison: Scaling new AD tech and on device capabilities are critical to our return to growth.

Barrett Garrison: On our AGP business as mentioned earlier, our SDK bidding capabilities had been a nice product enhancement product enhancement to unlock brand spend on our exchange.

We still have plenty of work to do to transform our migration to this method of bidding SDK bidding is already showing strong growth. It's now over 70% of total impressions on our exchange compared to only 5% a year ago, and we're diversifying away from our waterfall bidding it out now in less than 30% of our traffic compared to over 90% a year ago.

William Stone: Our investments in first party data and our Digital Turbine Exchange and other features here are a major enabler to drive more brand revenues through our network. Our other AGP product growth driver will be increasing our share of voice for leveraging our first-party data and our innate capabilities via our demand-side platform or DSP. We do this today through our Appreciate acquisition, which is showing renewed growth. We're also beginning to partner with many other third-party DSPs that can help grow our share of voice. This all translates not into just top-line revenue growth with more demand dollars, but it's very key in driving the flywheel effects of improving revenues on our other products, such as Singletap, The Exchange, and Fairbid, our mediation product.

Barrett Garrison: Our investments and first party data and our digital turbine exchange or other features here are a major enabler to drive more brand revenues through our network.

Barrett Garrison: Yes.

Our other AGP product growth driver will be increasing our share of voice for leveraging our first party data and our ignite capabilities via our demand side platform or DSP would you. This to today through our appreciate acquisition, which is showing renewed growth.

Barrett Garrison: Also beginning to partner with many other third party D. S piece that can help grow our share of voice.

Barrett Garrison: This all translates not into just topline revenue growth with more demand dollars, but it's a very key and driving the flywheel effects of improving revenues on our other products such as single tap the exchange and fair bid our mediation product.

Barrett Garrison: Okay.

William Stone: Our primary product growth drivers in our ODS business are single tap, alternative apps, and better leveraging our first party data for our existing products. Single tap continues to add more devices, more advertisers, and better execution. It's early days for alternative app distribution approach, but as many saw with our PR late last year, our announcement with OneStore, our strategy is now starting to come together. We've already distributed OneStore on many millions of devices and are scaling quickly as we are live on three operators here in the U.S., including Verizon. Epic, Microsoft, and Pinterest are recent examples of partners taking advantage of our alternative and single-tap distribution services.

Barrett Garrison: Primary product growth drivers that are ods business, our single tap alternative apps and better leveraging our first party data for our existing products.

Barrett Garrison: Single tap continues to add more devices more advertisers and better execution.

Barrett Garrison: It's early days for alternative App distribution approach, but as many saw with our P. R. Late last year, our announcement with one store or strategy is now starting to come together, we have already distributed one store on many millions of devices and are scaling quickly as we are alive on three operators here in the U S including Verizon.

Barrett Garrison: Epic, Microsoft and Pinterest are recent examples of partners taken advantage of our alternative and single tap distribution services.

William Stone: We believe one of the keys to unlocking more device supply will be the ability to offer alternative app distribution to publishers, OEMs, megacap tech players, and mobile operators. Many of you have read about all this regulatory activity around the globe in the EU, Japan, Korea, India, and also here in the U.S. There's building momentum to increase options for consumers and publishers on how they distribute and get applications to market.

Barrett Garrison: We believe one of the keys to unlocking more device supply will be the ability to offer alternative app distribution to publishers Oems Mega cap Tech players and mobile operators.

Barrett Garrison: Many of you have read about all of this regulatory activity around the globe in the EU, Japan Korea, India and also here in the U S. There's building momentum to increase options for consumers and publishers on how they distribute and get applications to market.

William Stone: All of our hard work over the past decade has positioned us perfectly to leverage these opportunities. I also want to emphasize that the alternative app strategy is not just about new in-app payment revenues, but perhaps more importantly, be a catalyst to accelerate our existing lines of business beyond this fiscal year. Today approximately 50% of our business is driven by user acquisition and 50% driven by in-app advertising. Our app publishers want to find ways to acquire more users at lower cost with alternative users and we believe that this will also open up new app providers to leverage our ad tech stack as part of the strategy, thereby driving more AGP revenue growth.

Barrett Garrison: All of our hard work over the past decade has positioned us perfectly to leverage these opportunities.

Barrett Garrison: Okay.

Barrett Garrison: I also want to emphasize that the alternative App strategy is not just about new earn out payment revenues, but perhaps more importantly be a catalyst to accelerate our existing lines of business beyond this fiscal year.

Barrett Garrison: Today, approximately 50% of our business is driven by user acquisition and 50% driven by in App advertising.

Barrett Garrison: Our app publishers want to find ways to acquire more users at lower cost with alternative users and we believe that this will also open up new app providers to leverage our AD Tech stack as part of the strategy, thereby driving more AGP revenue growth.

William Stone: We're live today running both alternative app user acquisition campaigns and in-app advertising leveraging our technology. In other words, improving our present revenues and cash flow are both closely linked to the future strategy.

Barrett Garrison: Alive today running both alternative App user acquisition campaigns and in App advertising, leveraging our technology and.

Barrett Garrison: In other words, improving our president revenues and cash flow are both closely linked to the future strategy.

William Stone: In conclusion, the December quarter and current March quarter are additional data points demonstrating that Digital Turbine's momentum has changed. The business is transforming both strategically and financially. We're confident we have the right strategy, partners, market opportunity, commercial model, and products to have a very bright future. We're in the right space at the right time, which is critical for any technology company.

Barrett Garrison: In conclusion, the December quarter, and current March quarter, our additional data points demonstrating that digital turbines momentum has changed the business is transforming both strategically and financially. We're confident we have the right strategy partners market opportunity commercial model and products to have a very fresh.

Barrett Garrison: Future, we're in the right space at the right time, which is critical for any technology company.

Steve Lasher: And with that, I want to turn it over to Steve Lasher to say a few words and then over to Barrett to take you through the numbers. Great. Thanks, Bill. Hi, everyone. I look forward to getting to know the Digital Turbine shareholder and analyst community moving forward. I'm thrilled to be joining Bill as part of the Digital Turbine Leadership Team. Digital Turbine is a highly innovative company that sits at the precipice of tremendous market opportunity, and I'm eager to contribute to the effort and unlock significant shareholder value for all our stakeholders.

Barrett Garrison: And with that I wanted to cover Steve last year to say a few words and then over to Barrett to take you through the numbers great. Thanks, Bill Hi, everyone. I look forward to getting to know the digital turbine shareholder and analyst community moving forward.

Speaker Change: Thrilled to be joining bill as part of the digital turbine leadership team <unk>.

Speaker Change: Digital turbine is a highly innovative company that sits at the precipice of tremendous market opportunity and I'm eager to contribute to the effort and unlock significant shareholder value for all our stakeholders without any further Ado, let me turn it over to Barry who will take you through and give you more color around the positive performance for December quarter.

Barrett Garrison: Without any further ado, let me turn it over to Barrett, who will take you through and give you more color around the positive performance for December quarter.

Barrett Garrison: Thanks, Steve, and good afternoon, everyone.

Barry: Thanks, Steve and good afternoon, everyone before diving into our quarterly performance I'd like to take a quick moment to address my transition.

Barrett Garrison: Before diving into our quarterly performance, I'd like to take a quick moment to address my transition. Reflecting on my time at Digital Turbine, I am truly humbled and grateful for the incredible journey I've had here over the past eight-plus years. What we've achieved as a company, the teams we've built, and the partnerships we've formed have been nothing short of remarkable. And none of this would have been possible without the dedication and hard work of our talented team members who have made it all happen day in and day out. A special thank you goes to Bill.

Speaker Change: Collecting on my time at digital turbine I am truly humbled and grateful for the incredible journey I've had here over the past eight plus years, what we've achieved as a company. The teams we built and the partnerships. We formed have been nothing short of remarkable and none of this would've been possible without the dedication and hard work of our talented.

Speaker Change: Team members, who have made it all happen day in day out a special Thank you goes to bill.

Barrett Garrison: Working alongside you has been a truly rewarding experience. Your leadership, vision, and unwavering commitment to our team and our vision have been inspiring. And I have no doubt Digital Turbine will thrive in the years ahead.

Speaker Change: Working alongside you have done a truly rewarding experience your leadership vision and unwavering commitment to our team and our vision has been inspiring and I have no doubt digital turbine will thrive in the years ahead.

Barrett Garrison: While this transition is bittersweet, I'm excited for what lies ahead for both myself personally and for Digital Turbine. I will remain involved through the transition to ensure a smooth handoff. And I have full confidence that Steve will be an excellent addition to the leadership team. His experience will be invaluable as the company continues on this next wave of growth.

Speaker Change: While this transition is bittersweet I'm excited for what lies ahead for both myself personally and for digital turbine I will remain involved involved through the transition to ensure a smooth handoff and I have full confidence that Steve will be an excellent addition to the leadership team his experience will be invaluable as the company continues on this next.

Speaker Change: A wave of growth.

Barrett Garrison: Now turning to the performance in the quarter. We were pleased to see results exceeding expectations for top line profitability and cash flow measures. Revenue of $134.6 million in the quarter was up 13% sequentially, delivering EBITDA of $22 million and generating positive free cash flow of $6.4 million in the quarter. In our ODS segment, revenues reached $91.7 million, a 11% increase from the September quarter and down 3% compared to the same period last year. As Bill highlighted, revenue per device, or RPD, reached record levels across both U.S. and international devices. This elevated RPD performance helped offset continued softer U.S.

Speaker Change: Now turning to the performance in the quarter, we were pleased to see results exceeding expectations for top line profitability and cash flow measures.

Speaker Change: Revenue of $134 6 million in the quarter was up 13% sequentially, delivering EBITDA of $22 million and generating positive free cash flow of $6 4 million in the quarter and our Ods segment revenues reached $91 7, Million% to 11% increase from the September quarter end.

Speaker Change: One 3% compared to the same period last year as bill highlighted revenue per device or RPE reach record levels across both U S and international devices. This elevated our P. D performance helped offset continued softer U S device volumes in the quarter as we continue to be encouraged by the positive.

Barrett Garrison: device volumes in the quarter as we continue to be encouraged by the positive revenue growth from our international ODS effort.

Speaker Change: <unk> revenue growth from our international Ods effort.

Barrett Garrison: Turning to our AGP business, Q3 revenues came in at $43.8 million, representing 17% sequential quarter growth. Revenues from brand spending continue to be a positive area, with the rate of growth accelerating to 34% year-on-year. As a reminder, we have now lapped the comps for the legacy business lines we exited last year, and Q4 Fiscal 25 will be our first normalized comparison period for our core products. Our consolidated Q3 gross margin was 44% down from 45% in Q2 and 46% in Q3 of the prior year. This model's modest sequential decline in margins was primarily influenced by product mix changes in our ODS cycle.

Speaker Change: Turning to our AGP business Q3 revenues came in at $43 8 million, representing 17% sequential quarter growth.

Speaker Change: Revenues from brand spending continue to be a positive area with the rate of growth accelerating to 34% year on year. As a reminder, we have now lapped the comps for the legacy business lines. We exited last year in Q4 fiscal 'twenty five will be our first normalized comparison period for our core products.

Speaker Change: Our consolidated Q3 gross margin was 44% down from 45% in Q2 and 46% in Q3 of the prior year.

Speaker Change: This model's modest sequential decline in margins was primarily influenced by product mix changes in our <unk> segment.

Barrett Garrison: We continue our focus on pursuing expense efficiencies to maximize the profitability of our growth strategy.

Speaker Change: We continue our focus on pursuing expense efficiencies to maximize the profitability of our growth strategy. We remain disciplined in our cost control measures, which I will discuss further in relation to updates on our transformation program that we announced on our last call in.

Barrett Garrison: We remain disciplined in our cost control measures, which I will discuss further in relation to updates on our transformation program that we announced on our last call. In Q3, our cash operating expenses were $37.6 million, down 3% sequentially and 3% year-on-year, representing 28% of our revenues for the quarter. As I discussed in our last earnings call, we have been focused on driving a significant transformation program across the business, with a target of achieving over $25 million in cost reductions. I'm pleased to report that we are tracking well against this target, having already taken actions totaling more than $25 million in annualized cost efficiency.

Speaker Change: In Q3, our cash operating expenses were 37, 6 million down, 3% sequentially and 3% year on year, representing 28% of our revenues for the quarter.

Speaker Change: As I discussed on our last earnings call. We have been focused on driving a significant transformation program across the business with a target of achieving over $25 million in cost reductions I'm pleased to report that we are tracking well against this target having already taken actions totaling more than 25 million in annualized.

Speaker Change: <unk> cost efficiencies to break this down further we expect the first full quarter of fiscal 'twenty five 'twenty six to be $25 million plus talk a takeout actions to be fully reflected within that quarter.

Barrett Garrison: To break this down further, we expect the first full quarter of fiscal 26 to be 25 million plus takeout actions to be fully reflected within that quarter. And we are continuing to drive further efficiencies that we anticipate will push us beyond our initial goals. These savings are a direct result of our ongoing efforts to streamline operations, optimize our cost structure, and leverage the platform migrations and system integrations that we completed last year. In addition to realizing these cost savings, we are also retooling and enhancing keyword streams and processes across the business. A prime example of this is our efforts to automate and streamline our billing and invoicing process.

Speaker Change: And we are continuing to drive further efficiencies that we anticipate will push us beyond our initial goals.

Speaker Change: These savings are a direct result of our ongoing efforts to streamline operations and optimize our cost structure and leverage the platform migrations and system integrations that we completed last year.

Speaker Change: In addition to realizing these cost savings, we're also retooling and enhancing key work streams and processes across the business. A Prime example of this is our efforts to automate and streamline our billing and invoicing processes.

Barrett Garrison: This initiative is not only improving operational efficiency, but is also enhancing our work in capital management, which is helping to optimize our free cash flow. As we said before, this is not just about cutting costs. It's about creating a faster, leaner, and more agile organization. We've made difficult but necessary decisions to reduce headcount across all areas and to eliminate non-strategic expenses, which are enabling us to reinvest in areas that will drive long-term growth, such as our alternative app business.

Speaker Change: This initiatives not only improving the operational efficiency, but is also enhancing our working capital management, which is helping to optimize our free cash flows.

Speaker Change: As we said before this is not just about cutting costs, it's about creating a faster leaner and more agile organization, we've made difficult, but necessary decisions to reduce head count across all areas and to eliminate non strategic expenses, which are enabling us to reinvest in areas that will drive.

Speaker Change: Long term growth such as our alternative App business, we remain committed to achieving even greater efficiencies in the quarter ahead.

Barrett Garrison: We remain committed to achieving even greater efficiencies in the quarter ahead. While we've made significant progress, we continue to challenge ourselves to identify further opportunities to improve our cross-structure and exceed the $25 million target to fuel our growth plans.

Speaker Change: Well, we've made significant progress we continue to challenge ourselves to identify further opportunities to improve our cost structure and exceed the 25 million target to fuel our growth plans. We expect to continue to provide further updates on our transformation efforts during our next earnings call.

Barrett Garrison: We expect to continue to provide further updates on our transformation efforts during our next earnings. In the quarter, we achieved non-GAAP adjusted net income of $13.7 million, or $0.13 per share, as compared to $15.6 million, or $0.15 per share in the third quarter of fiscal 2020. Our gap net loss was negative $23.1 million, or $0.22 per share, based on $104 million. Basic shares outstanding compared to prior year net loss of $0.14.

Speaker Change: In the quarter, we achieved non-GAAP adjusted net income of $13 7 million or <unk> 13 per share as compared to $15 6 million or <unk> 15 per share in the third quarter of fiscal 'twenty four.

Speaker Change: Our GAAP net loss was negative $23 1 million or 22 per share based on $104 million.

Speaker Change: Basic shares outstanding compared to prior year net loss of <unk> 14 per share.

Barrett Garrison: Moving to the balance sheet and cash flows, our cash balance at the end of the quarter stood at $34.6 million, an increase of $2.5 million from the September quarter. Free cash flow generated in the quarter was $6.4 million, driven from improvements in both business performance and continued working capital efficiency. Our debt balance remained constant to the prior quarter, ending at $408 million. As our business continues to strengthen, we would expect to pay down our revolver in quarterly increments. With steady growth in sequential EBITDA and the executed cost reduction actions I referenced earlier, we maintain ample liquidity to execute on our growth plan.

Speaker Change: Moving to the balance sheet and cash flows our cash balance at the end of the quarter stood at $34 6 million, an increase of $2 5 million from the September quarter.

Speaker Change: Free cash flow generated in the quarter was $6 4 million driven from improvements in both business performance and continued working capital efficiency, our debt balance remained constant to the prior quarter ending at $408 million.

Speaker Change: As our business continues to strengthen we would expect to pay down our revolver in quarterly increments.

Speaker Change: With steady growth in sequential EBITDA and the executed cost reduction actions I referenced earlier, we maintain ample liquidity to execute on our growth plans.

Barrett Garrison: Now let me turn to our outlook. We anticipate revenue in the range of $485 million to $490 million for fiscal year 2025, with projected non-GAAP adjusted EBITDA of between $69 million and $71 million.

Speaker Change: Now, let me turn to our outlook, we anticipate revenue in the range of 485 million to $490 million for fiscal year 2025, with projected non-GAAP adjusted EBITDA of between $69 million and $71 million.

Barrett Garrison: In closing, I just want to express my heartfelt gratitude to everyone at Digital Turbine, our shareholders, partners, board, and most importantly, my colleagues. Thank you for allowing me to be part of something so special. I'm looking forward to watching the company's success and I'm excited about the future ahead.

In closing I, just want to express my heartfelt gratitude to everyone at digital turbine our shareholders Partners Board and most importantly, my colleagues. Thank you for allowing me to be part of something so special I'm looking forward to watching the company success and are excited about the future and with that let me hand, it back to the operator to open the call for questions.

Operator: With that, let me hand it back to the operator to open the call for questions.

Operator: Operator? Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up the handset before pressing the... If at any time your question has been addressed, and you would like to withdraw your question, please press star, then save.

Operator, thank you.

Speaker Change: Thank you we will now begin the question and answer session.

Speaker Change: To ask a question you May press Star then one on your telephone keypad.

Speaker Change: If you're using a speakerphone please pick up the handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Anthony Stoss: And at this time, we'll pause momentarily to assemble our raw And the first question will come from Anthony Stoss with Craig Hallam, please go ahead.

Speaker Change: And at this time, we'll pause momentarily to assemble our roster.

Speaker Change: And the first question will come from Anthony Stoss with Craig Hallum. Please go ahead.

William Stone: Good afternoon, guys. Welcome aboard, Steve and Barrett. Best of luck. years. Bill, I wanted to focus in on your comments about the big brand names coming back to you on the advertising side. Was that because it was a seasonally strong December quarter? What's changed that they're getting more comfort in coming back to Digital Turbine than I had Yeah.

Speaker Change: Good afternoon, guys welcome aboard Steve and Barry Best of luck. It was nice working with you through the years Bill wanted to focus in on on your comments about the brand Big brand names coming back to you on the advertising side.

Speaker Change: Was that because it was a seasonally strong December quarter, what's changed that there, they're getting more comfort and coming back to digital turbine and I had a follow up.

Speaker Change: Yeah, Hey, Thanks, Tony.

William Stone: Hey, thanks, Tony. On the brand business, I'd just like to say it's good old-fashioned hard work. It's perseverance. It takes time to build those relationships. On some of the names I mentioned in my prepared remarks, there's advertising agencies, obviously the brands themselves, and a lot of people involved in earning their trust.

Speaker Change: On the brand business I'd, just like to say, it's just good old fashioned hard work. It's it's perseverance. It takes time to build those relationships on some of the names I mentioned in my prepared remarks, there's there's advertising agencies, obviously the brands themselves and a lot of people involved in and earning their trust and so on it's something we've been talking about for a long time and it's been a really.

William Stone: And so it's something we've been talking about for a long time, and it's been really nice to start seeing it showing up in the results for the business, and getting it approved to be the in-app choice versus a CTV or retail media or things like that that a lot of brand dollars are going to today for a lot of these players. It's something we think we can really build around right now and that we're excited about. Got it.

Speaker Change: Nice to start seeing it showing up in the ER and the results for the business and getting and getting approved to be the inapt choice versus a C. T V or retail media and things like that there are a lot of brand dollars are going to delay for a lot of these players. It's something we think we can really build around right now.

Speaker Change: That we're excited about.

Speaker Change: Got it and I'll, let your powering the epic alternative App store and I think they are gearing up to bring on third party advertisers and there hasn't been much of a response from Google as far as I've seen.

William Stone: And now that you're powering the, uh, the epic alternative app store and Is that giving confidence to other large publishers to get ready to launch their own app stores? And if so, can you maybe not share their names, but just give us a sense of quantity and when you think some of these guys can launch also using Digital Turbine and Calendar? Yeah, so Epic's done a great job out there building awareness and really educating the market around this, so they've done an amazing job. I think you all saw in my prepared remarks, I had mentioned Microsoft and their Xbox group as well that we're doing some things with, and so I think that's another good proof point and validation here.

Speaker Change: Is that giving confidence to other large publishers to to get re launching their own app stores and if so can you maybe not sure their names, but just give us a sense of quantity and when do you think some of these guys can launch also using digital turbine in calendar 2025.

Speaker Change: Yeah. So you know epic has done a great job out there building awareness in and really educating the market around us so they've done they've done an amazing job I think you all said in my prepared remarks, I had mentioned, Microsoft and their Xbox group as well that we're doing some things with and so I think that's another good proof point and validation out here. So the awareness is growing and grow.

William Stone: So the awareness is growing and growing. It's much stronger than what we've seen here a year ago, and now we're starting to see that growth turn into actual distribution on devices.

Speaker Change: It's much stronger than what we've seen you know sitting here a year ago and now we're starting to see that growth turn into actual distribution on devices I think the key watermark I'd highlight for investors is what does the European Commission due with a digital markets Act and Apple's compliance of that here as we get into 2025, I think that's going to be important.

William Stone: I think the key watermark I'd highlight for investors is what does the European Commission do with the Digital Markets Act and Apple's compliance of that here as we get into 2025. I think that's going to be an important moment I'd keep an eye on and perhaps a watershed moment to see a lot of people get a lot more aggressive. And as I mentioned in my remarks, we're really uniquely positioned to take advantage of that.

Speaker Change: And I'd keep an eye on and perhaps a watershed moment to see you know a lot of people get a lot more aggressive and as I mentioned in my remarks, we're really uniquely positioned to take advantage of that.

William Stone: Thanks, Bill, and congrats on the return to good execution. Thank you.

Speaker Change: Thanks, Bill and congrats on the return to good execution. Thank you.

Operator: Thanks, Tony. Again, if you have a question, please press star, then one.

Tony: Thanks, Tony.

Speaker Change: Again, if you have a question. Please press Star then one our next question will come from Omar just Dokey with BSA Securities. Please go ahead.

Omar Dessouky: Our next question will come from Omar Dessouky with BFA Securities. Please go ahead.

Omar Dessouky: Hey, guys, it's Arthur Omar. Thanks for taking the question. So, Bill, I know it's still early and you guys are not providing out for next year yet. But I'm just curious, like what are some.

Speaker Change: Hey, guys. Thanks, Arthur off Omar Thanks for taking my question.

Bill Stone: So bill I know you already and you guys are not providing outlook for next year, yet, but I'm just curious like what what are some of the keys are the moving pieces are dynamics you would contemplate.

William Stone: William Stoss, Daniel Day, William Stone, Omar Dessouky, Barrett Garrison, Brian Bartholomew, Yeah, as I think about going into next year, and then we'll provide an annual guide, our anticipation would be as we get into, you know, on our next earnings calls, as you're well aware, we start on a March fiscal year, not a calendar year, as we kind of think about what's important going into this current year. For us, it's really just building on the things we've done over the past year, and now we're at a point to really grow and scale it. So Tony had asked a question on brand, that is absolutely one of those things.

Bill Stone: When thinking about how 2025, it looks like probably relative to this year.

Bill Stone: Yes, I think about going into next year and then we will provide an annual guide our anticipation would be as we get into our next earnings calls where <unk> as you're well aware we start on a march fiscal year not at not a calendar year as we kind of think about watching what's important going into this this current ear for us. It's really just building on the things we've done over the past year and now we're in it.

Bill Stone: Point to really grow in scale and so Tony to ask a question on brand is absolutely one of the things I spent a lot of time in my remarks talking about the importance of our data and first party data and how we better leverage that we've made some real progress on the plumbing for that now it's time to take advantage of all the plumbing, we've done actually turned it into a revenue and EBITDA for us.

William Stone: I spent a lot of time in my remarks talking about the importance of our data and first-party data and how we better leverage that. We've made some real progress on the plumbing for that. You know, now it's time to take advantage of all the plumbing we've done and actually turn it into revenue and EBITDA for us in the coming year. I talked a lot about devices, and I was really, something I keep an eye on is just our growth in devices from, you know, those operators that haven't been our legacy ones over a number of years.

Bill Stone: And year I talked a lot about devices and I was really sometimes keeps me I'd keep an eye on is just our growth in devices from those operators that haven't been our legacy ones over a number of years and it just a lot of exciting things happening there and that's something that grows shut up in the December quarter.

William Stone: I think there's a lot of exciting things happening there, and some of that growth showed up in the December quarter. And so those would be kind of the keys that I think about in terms of our growth into next year, but it is absolutely our intention to, you know, continue the momentum that we've been building here.

Bill Stone: Quarter.

Bill Stone: And so those are the kind of keys I think about in terms of our AR growth into next year, but it is absolutely our intention to continue the momentum that we've been building here.

Bill Stone: Thanks, Bill appreciate it.

Operator: Thanks for joining us.

William Stone: And this concludes our question and answer session. I would like to turn the conference back over to Bill Stone for any closing remarks. Please go ahead. Yeah, thanks everyone. I appreciate you joining the call today. We'll talk to you again on our fiscal 25 fourth quarter call in a few months.

Speaker Change: And this concludes our question and answer session I would like to turn the conference back over to Bill Stone for any closing remarks. Please go ahead Sir.

Bill Stone: Yeah. Thanks, everyone. I appreciate you joining the call today, we will talk to you again on our fiscal 'twenty five fourth quarter call in a few months, thanks and have a great night.

Operator: Thanks and have a great night.

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

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

Bill Stone: Okay.

Bill Stone: Okay.

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Bill Stone: Okay.