UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2020~~September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35958

DIGITAL TURBINE, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						22-2267658
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

110 San Antonio Street, Suite 160, Austin, TX						78701
(Address of Principal Executive Offices)						(Zip Code)

(512) 387-7717

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:


~~Title of Each Class~~	~~Trading Symbol(s)~~	~~Name of Each Exchange on Which Registered~~
	Common Stock, Par Value $0.0001 Per Share	APPS	The Nasdaq Stock Market LLC
			(NASDAQ Capital Market)
(Title of Class)	(Trading Symbol)	(Name of Each Exchange on Which Registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐☒	Accelerated Filer	☒☐

~~Non-accelerated~~Non-Accelerated Filer	☐	Smaller Reporting Company	☐

Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~January 28,~~October 26, 2021, the Company had ~~89,413,606~~96,625,684 shares of its common stock, $0.0001 par value per share, outstanding.

Digital Turbine, Inc.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~December 31, 2020~~September 30, 2021

TABLE OF CONTENTS


	PART I -	FINANCIAL INFORMATION	3

~~Item~~ITEM 1.	~~Consolidated Financial Statements~~

	~~Consolidated Balance Sheets as of~~ ~~December 3~~1 ~~, 2020 (Unaudited) and March 31, 2020~~CONSOLIDATED FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED BALANCE SHEETS	3
	~~Consolidated Statements of Operations and Comprehensive Income~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / ~~(Loss) for the Three and~~ ~~Nine~~ ~~Months Ended~~ ~~December 3~~1 ~~, 2020 and 2019 (Unaudited)~~(LOSS)	4

	~~Consolidated Statements of Cash Flows for the~~ ~~Nine~~ ~~Months Ended~~ ~~December 3~~1 ~~, 2020 and 2019 (Unaudited)~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5

	~~Consolidated Statements of Stockholders' Equity for the Three and~~ ~~Nine~~ ~~Months Ended~~ ~~December 3~~1 ~~, 2020 and 2019 (Unaudited)~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY	6

	~~Notes to Consolidated Financial Statements (Unaudited)~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8

~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~ITEM 2.	27MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
	ITEM 3.
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4.	CONTROLS AND PROCEDURES	36
PART II	OTHER INFORMATION	37
	ITEM 1.
~~Item 4.~~	~~Controls and Procedures~~LEGAL PROCEEDINGS	37
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4.	MINE SAFETY DISCLOSURES	37
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	38

	~~PART II - OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~SIGNATURES	40

~~Item 1A.~~	~~Risk Factors~~	40

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	40

~~Item 3.~~	~~Defaults Upon Senior Securities~~	40

~~Item 4.~~	~~Mine Safety Disclosures~~	40

~~Item 5.~~	~~Other Information~~	40

~~Item 6.~~	~~Exhibits~~	42

	~~Signatures~~	4339

PART I - FINANCIAL INFORMATION

ITEM ~~1 -~~1. CONSOLIDATED FINANCIAL STATEMENTS

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets1

(in thousands, except par value and share amounts)


		December 31, 2020		March 31, 2020			September 30, 2021		March 31, 2021
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash	Cash	$	43,659	$	21,534	Cash	$	95,522	$	30,778
Restricted cash	Restricted cash	0		125		Restricted cash	695		340
Accounts receivable, net of allowances of $4,913 and $4,059, respectively		59,027		33,135
Accounts receivable, net						Accounts receivable, net	228,107		61,985
Prepaid expenses and other current assets	Prepaid expenses and other current assets	1,955		3,653		Prepaid expenses and other current assets	20,852		4,282
Total current assets	Total current assets	104,641		58,447		Total current assets	345,176		97,385
Property and equipment, net	Property and equipment, net	11,670		8,183		Property and equipment, net	22,116		13,050
Right-of-use assets	Right-of-use assets	3,807		4,237		Right-of-use assets	17,914		3,495
Deferred tax assets, net						Deferred tax assets, net	—		12,963
Intangible assets, net	Intangible assets, net	41,871		43,882		Intangible assets, net	467,528		53,300
Goodwill	Goodwill	70,452		69,262		Goodwill	559,033		80,176
Other non-current assets						Other non-current assets	844		—
TOTAL ASSETS	TOTAL ASSETS	$	232,441	$	184,011	TOTAL ASSETS	$	1,412,611	$	260,369
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDER'S EQUITY						LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities	Current liabilities					Current liabilities
Short-term debt, net of issuance costs of $62 and $62, respectively		$	1,938	$	1,188
Accounts payable	Accounts payable	34,142		$	31,579	Accounts payable	$	167,104	$	34,953
Accrued license fees and revenue share	Accrued license fees and revenue share	36,188		19,423		Accrued license fees and revenue share	81,881		46,196
Accrued compensation	Accrued compensation	8,340		4,311		Accrued compensation	23,675		9,817
Accrued earn-out		10,000		23,735
Short-term debt						Short-term debt	13,423		14,557
Other current liabilities	Other current liabilities	7,849		2,573		Other current liabilities	20,549		5,626
Acquisition purchase price liabilities						Acquisition purchase price liabilities	335,500		—
Total current liabilities	Total current liabilities	98,457		82,809		Total current liabilities	642,132		111,149
Long-term debt, net of issuance costs of $198 and $245, respectively		17,052		18,505
Long-term debt, net of debt issuance costs						Long-term debt, net of debt issuance costs	244,001		—
Deferred tax liabilities, net						Deferred tax liabilities, net	19,571		—
Other non-current liabilities	Other non-current liabilities	4,758		5,243		Other non-current liabilities	18,525		4,108
Total liabilities	Total liabilities	120,267		106,557		Total liabilities	924,229		115,257
Commitments and contingencies (Note 15)		0		0
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)	0		0
Stockholders' equity	Stockholders' equity					Stockholders' equity
Preferred stock	Preferred stock					Preferred stock
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1,000)		100		100
Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)						Series A convertible preferred stock at $0.0001 par value; 2,000,000 shares authorized, 100,000 issued and outstanding (liquidation preference of $1)	100		100
Common stock	Common stock					Common stock
$0.0001 par value: 200,000,000 shares authorized; 90,143,539 issued and 89,409,083 outstanding at December 31, 2020; 88,041,240 issued and 87,306,784 outstanding at March 31, 2020		10		10
$0.0001 par value: 200,000,000 shares authorized; 97,180,782 issued and 96,619,930 outstanding at September 30, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021						$0.0001 par value: 200,000,000 shares authorized; 97,180,782 issued and 96,619,930 outstanding at September 30, 2021; 90,685,553 issued and 89,949,847 outstanding at March 31, 2021	10		10
Additional paid-in capital	Additional paid-in capital	370,435		360,224		Additional paid-in capital	741,781		373,310
Treasury stock (754,599 shares at December 31, 2020 and March 31, 2020)		(71)		(71)
Treasury stock (754,599 shares at September 30, 2021 and March 31, 2021)						Treasury stock (754,599 shares at September 30, 2021 and March 31, 2021)	(71)		(71)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(910)		(591)		Accumulated other comprehensive loss	(36,721)		(903)
Accumulated deficit	Accumulated deficit	(257,390)		(282,218)		Accumulated deficit	(218,902)		(227,334)
Total stockholders' equity		112,174		77,454
Total stockholders' equity attributable to Digital Turbine, Inc.						Total stockholders' equity attributable to Digital Turbine, Inc.	486,197		145,112
Non-controlling interest						Non-controlling interest	2,185		—
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	232,441	$	184,011	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,412,611	$	260,369

1In the quarter ending June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income / (Loss)1

(Unaudited)

(in thousands, except per share amounts)

Three months ended December 31, Nine months ended December 31,
2020 2019 2020 2019
Net revenues $ 88,592 $ 36,016 $ 218,497 $ 99,364
Cost of revenues
License fees and revenue share 50,144 21,576 122,976 59,997
Other direct costs of revenues 749 400 1,971 1,022
Total cost of revenues 50,893 21,976 124,947 61,019
Gross profit 37,699 14,040 93,550 38,345
Operating expenses
Product development 5,202 2,783 13,827 8,312
Sales and marketing 5,219 2,815 14,372 7,534
General and administrative 6,761 4,310 22,096 12,212
Total operating expenses 17,182 9,908 50,295 28,058
Income from operations 20,517 4,132 43,255 10,287
Interest and other income / (expense), net
Interest income / (expense), net (266) 59 (859) 118
Change in fair value of warrant liability 0 (870) 0 (10,601)
Change in estimated contingent consideration (4,662) 0 (15,419) 0
Other income / (expense) (13) (19) (51) 455
Total interest and other income / (expense), net (4,941) (830) (16,329) (10,028)
Income from continuing operations before income taxes 15,576 3,302 26,926 259
Income tax provision 1,061 41 2,098 6
Income from continuing operations, net of taxes 14,515 3,261 24,828 253
Income / (loss) from discontinued operations 0 65 0 (171)
Net income / (loss) from discontinued operations, net of taxes 0 65 0 (171)
Net income $ 14,515 $ 3,326 $ 24,828 $ 82
Other comprehensive loss
Foreign currency translation adjustment (132) (44) (319) (364)
Comprehensive income $ 14,383 $ 3,282 $ 24,509 $ (282)
Basic net income per common share
Continuing operations $ 0.16 $ 0.04 $ 0.28 $ 0
Discontinued operations 0 0 0 0
Net income $ 0.16 $ 0.04 $ 0.28 $ 0
Weighted-average common shares outstanding, basic 89,003 85,876 88,140 83,869
Diluted net income per common share
Continuing operations $ 0.15 $ 0.04 $ 0.26 $ 0
Discontinued operations 0 0 0 0
Net income $ 0.15 $ 0.04 $ 0.26 $ 0
Weighted-average common shares outstanding, diluted 96,976 92,472 95,563 89,759


	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Net revenues	$	310,205	$	70,893	$	522,820	$	129,905
Costs of revenues and operating expenses
License fees and revenue share	213,145		40,532		351,493		72,832
Other direct costs of revenues	3,838		662		6,371		1,222
Product development	17,904		4,217		33,451		8,625
Sales and marketing	17,479		4,835		31,215		9,153
General and administrative	41,307		8,531		64,613		15,335
Total costs of revenues and operating expenses	293,673		58,777		487,143		107,167
Income from operations	16,532		12,116		35,677		22,738
Interest and other income / (expense), net
Change in fair value of contingent consideration	(22,087)		(10,757)		(22,087)		(10,757)
Interest expense, net	(1,955)		(287)		(3,112)		(593)
Foreign exchange transaction loss	(249)		—		(519)		—
Other expense, net	(477)		(38)		(512)		(38)
Total interest and other income / (expense), net	(24,768)		(11,082)		(26,230)		(11,388)
Income / (loss) before income taxes	(8,236)		1,034		9,447		11,350
Income tax provision / (benefit)	(2,349)		661		1,081		1,037
Net income / (loss)	(5,887)		373		8,366		10,313
Less: net loss attributable to non-controlling interest	(35)		—		(66)		—
Net income / (loss) attributable to Digital Turbine, Inc.	(5,852)		373		8,432		10,313
Other comprehensive loss
Foreign currency translation adjustment	(15,892)		(45)		(36,673)		(187)
Comprehensive income / (loss)	(21,779)		328		(28,307)		10,126
Less: comprehensive loss attributable to non-controlling interest	(128)		—		(921)		—
Comprehensive income / (loss) attributable to Digital Turbine, Inc.	$	(21,651)	$	328	$	(27,386)	$	10,126
Net income / (loss) per common share
Basic	$	(0.06)	$	—	$	0.09	$	0.11
Diluted	$	(0.06)	$	—	$	0.08	$	0.11
Weighted-average common shares outstanding
Basic	96,157		88,035		93,807		87,712
Diluted	96,157		96,057		100,457		94,988

1In the quarter ending June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows1

(Unaudited)

(in thousands)


	Six months ended September 30,
	2021		2020
Cash flows from operating activities
Net income	$	8,366	$	10,313
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,981		3,241
Non-cash interest expense	298		36
Stock-based compensation	5,695		3,668
Stock-based compensation for services rendered	3,935		458
Change in fair value of contingent consideration	22,087		10,757
Right-of-use asset	1,951		244
Deferred income taxes	178		—
(Increase) / decrease in assets:
Accounts receivable, gross	(61,855)		(13,735)
Allowance for credit losses	(31)		597
Prepaid expenses and other current assets	(4,917)		1,637
Other non-current assets	95		—
Increase / (decrease) in liabilities:
Accounts payable	51,676		4,776
Accrued license fees and revenue share	1,382		2,777
Accrued compensation	(45,694)		1,225
Other current liabilities	2,643		4,005
Other non-current liabilities	(3,036)		(333)
Net cash provided by operating activities	7,754		29,666

Cash flows from investing activities
Business acquisitions, net of cash acquired	(148,056)		(7,968)
Capital expenditures	(10,411)		(4,177)
Net cash used in investing activities	(158,467)		(12,145)

Cash flows from financing activities
Payment of contingent consideration	—		(9,302)
Proceeds from borrowings	267,134		—
Payment of debt issuance costs	(2,988)		—
Options and warrants exercised	2,155		3,526
Repayment of debt obligations	(46,256)		(250)
Net cash provided by / (used in) financing activities	220,045		(6,026)

Effect of exchange rate changes on cash	(4,233)		(187)

Net change in cash	65,099		11,308

Cash and restricted cash, beginning of period	31,118		21,659

Cash and restricted cash, end of period	$	96,217	$	32,967

Supplemental disclosure of cash flow information
Interest paid	$	2,199	$	571
Income taxes paid	$	693	$	—

Supplemental disclosure of non-cash activities
Common stock for the acquisition of Fyber	$	356,686	$	—
Unpaid cash consideration for the acquisition of Fyber Minority Interest	$	3,108	$	—
Unpaid cash consideration for the acquisition of AdColony	$	100,000	$	—
Fair value of contingent consideration in connection with business acquisitions	$	235,500	$	—

Nine months ended December 31,
2020 2019
Cash flows from operating activities
Net income from continuing operations, net of taxes $ 24,828 $ 253
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization 5,062 1,484
Loss on disposal of fixed assets 0 4
Provision for doubtful accounts 854 206
Non-cash interest expense 55 0
Stock-based compensation 3,545 2,044
Stock-based compensation for services rendered 741 470
Change in fair value of warrant liability 0 10,601
Change in estimated contingent consideration 15,419 0
Payment of contingent consideration in excess of amount capitalized at acquisition (5,419) 0
(Increase) / decrease in assets:
Accounts receivable (26,746) (4,193)
Deferred tax assets 0 40
Prepaid expenses and other current assets 1,698 (829)
Right-of-use assets 430 (2,029)
Increase / (decrease) in liabilities:
Accounts payable 2,563 5,908
Accrued license fees and revenue share 16,765 59
Accrued compensation 4,029 855
Other current liabilities 5,273 3,459
Other non-current liabilities (485) 1,823
Net cash provided by operating activities - continuing operations 48,612 20,155
Net cash used in operating activities - discontinued operations 0 (145)
Net cash provided by operating activities 48,612 20,010
Cash flows from investing activities
Acquisition of Mobile Posse (7,968) 0
Capital expenditures (6,545) (3,179)
Net cash used in investing activities (14,513) (3,179)
Cash flows from financing activities
Payment of contingent consideration (16,957) 0
Options and warrants exercised 5,927 6,353
Repayment of debt obligations (750) 0
Net cash (used in) / provided by financing activities (11,780) 6,353
Effect of exchange rate changes on cash (319) (364)
Net change in cash 22,000 22,820
Cash and restricted cash, beginning of period 21,659 11,059
Cash and restricted cash, end of period $ 43,659 $ 33,879
Supplemental disclosure of cash flow information
Interest paid $ 832 $ 0
Cashless exercise of warrants to purchase common stock of the Company $ 0 $ 791
1In the quarter ending June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


		Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income / (Loss)		Accumulated Deficit		Total			Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income / (Loss)		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2020		87,306,784	$	10	100,000	$	100	754,599	$	(71)	$	360,224	$	(591)	$	(282,218)	$	77,454
Net income		—	—		—	—		—	—		—		—		9,940		9,940
Balance at March 31, 2021																			Balance at March 31, 2021	89,949,847	$	10	100,000	$	100	754,599	$	(71)	$	373,310	$	(903)	$	(227,334)	$	—	$	145,112
Net income / (loss)																			Net income / (loss)	—	—		—	—		—	—		—		—		14,284		(31)		14,253
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(142)		—		(142)		Foreign currency translation	—	—		—	—		—	—		—		(20,019)		—		(762)		(20,781)
Stock-based compensation	Stock-based compensation	—	—		—	—		—	—		1,438		—		—		1,438		Stock-based compensation	207,758	—		—	—		—	—		2,365		—		—		—		2,365
Stock-based compensation for services rendered	Stock-based compensation for services rendered	—	—		—	—		—	—		173		—		—		173		Stock-based compensation for services rendered	—	—		—	—		—	—		1,340		—		—		—		1,340
Shares for acquisition of Fyber																			Shares for acquisition of Fyber	4,716,935	—		—	—		—	—		359,233		—		—		—		359,233
Non-controlling interests in Fyber																			Non-controlling interests in Fyber	—	—		—	—		—	—		—		—		—		24,558		24,558

Options exercised	Options exercised	224,012	—		—	—		—	—		437		—		—		437		Options exercised	178,127	—		—	—		—	—		695		—		—		—		695
Balance at June 30, 2020		87,530,796	$	10	100,000	$	100	754,599	$	(71)	$	362,272	$	(733)	$	(272,278)	$	89,300
Net income		—	—		—	—		—	—		—		—		373		373
Balance at June 30, 2021																			Balance at June 30, 2021	95,052,667	$	10	100,000	$	100	754,599	$	(71)	$	736,943	$	(20,922)	$	(213,050)	$	23,765	$	526,775
Net loss																			Net loss	—	—		—	—		—	—		—		—		(5,852)		(35)		(5,887)
Foreign currency translation	Foreign currency translation	—	—		—	—		—	—		—		(45)		—		(45)		Foreign currency translation	—	—		—	—		—	—		—		(15,799)		—		(93)		(15,892)
Stock-based compensation	Stock-based compensation	61,553	—		—	—		—	—		2,230		—		—		2,230		Stock-based compensation	28,477	—		—	—		—	—		3,330		—		—		—		3,330
Stock-based compensation for services rendered	Stock-based compensation for services rendered	45,110	—		—	—		—	—		285		—		—		285		Stock-based compensation for services rendered	—	—		—	—		—	—		2,595		—		—		—		2,595
Shares for acquisition of Fyber																			Shares for acquisition of Fyber	1,058,364	—		—	—		—	—		(2,547)		—		—		—		(2,547)
Acquisition of non-controlling interests in Fyber																			Acquisition of non-controlling interests in Fyber	—	—		—	—		—	—		—		—		—		(21,452)		(21,452)

Options exercised	Options exercised	1,059,644	—		—	—		—	—		3,089		—		—		3,089		Options exercised	480,422	—		—	—		—	—		1,460		—		—		—		1,460
Balance at September 30, 2020		88,697,103	$	10	100,000	$	100	754,599	$	(71)	$	367,876	$	(778)	$	(271,905)	$	95,232
Net income		—	—		—	—		—	—		—		—		14,515		14,515
Foreign currency translation		—	—		—	—		—	—		—		(132)		—		(132)
Stock-based compensation		15,768	—		—	—		—	—		(123)		—		—		(123)
Stock-based compensation for services rendered		—	—		—	—		—	—		283		—		—		283
Options exercised		696,212	—		—	—		—	—		2,399		—		—		2,399
Balance at December 31, 2020		89,409,083	$	10	100,000	$	100	754,599	$	(71)	$	370,435	$	(910)	$	(257,390)	$	112,174
Balance at September 30, 2021																			Balance at September 30, 2021	96,619,930	$	10	100,000	$	100	754,599	$	(71)	$	741,781	$	(36,721)	$	(218,902)	$	2,185	$	488,382

1In the quarter ending June 30, 2021, the Company initiated 2 significant acquisitions. Please refer to Note 3 in the accompanying condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity1

(Unaudited)

(in thousands, except share counts)


	Common Stock Shares	Amount		Preferred Stock Shares	Amount		Treasury Stock Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income / (Loss)		Accumulated Deficit		Non-Controlling Interest		Total
Balance at March 31, 2020	87,306,784	$	10	100,000	$	100	754,599	$	(71)	$	360,224	$	(591)	$	(282,218)	$	—	$	77,454
Net income	—	—		—	—		—	—		—		—		9,940		—		9,940
Foreign currency translation	—	—		—	—		—	—		—		(142)		—		—		(142)
Stock-based compensation	—	—		—	—		—	—		1,438		—		—		—		1,438
Stock-based compensation for services rendered	—	—		—	—		—	—		173		—		—		—		173




Options exercised	224,012	—		—	—		—	—		437		—		—		—		437
Balance at June 30, 2020	87,530,796	$	10	100,000	$	100	754,599	$	(71)	$	362,272	$	(733)	$	(272,278)	$	—	$	89,300
Net income	—	—		—	—		—	—		—		—		373		—		373
Foreign currency translation	—	—		—	—		—	—		—		(45)		—		—		(45)
Stock-based compensation	61,553	—		—	—		—	—		2,230		—		—		—		2,230
Stock-based compensation for services rendered	45,110	—		—	—		—	—		285		—		—		—		285




Options exercised	1,059,644	—		—	—		—	—		3,089		—		—		—		3,089
Balance at September 30, 2020	88,697,103	$	10	100,000	$	100	754,599	$	(71)	$	367,876	$	(778)	$	(271,905)	$	—	$	95,232

The accompanying notes are an integral part of these ~~consolidated financial statements.~~

~~Digital Turbine, Inc. and Subsidiaries~~

~~Consolidated Statements of Stockholders' Equity (Unaudited)~~

~~(in thousands, except share counts)~~

Common Stock
Shares Amount Preferred Stock
Shares Amount Treasury Stock
Shares Amount Additional
Paid-In
Capital Accumulated
Other
Comprehensive
Income / (Loss) Accumulated
Deficit Total
Balance at March 31, 2019 81,620,485 $ 10 100,000 $ 100 754,599 $ (71) $ 332,793 $ (356) $ (296,118) $ 36,358
Net loss — — — — — — — — (1,819) (1,819)
Foreign currency translation — — — — — — — 98 — 98
Settlement of warrant derivative liability — — — — — — 715 — — 715
Stock-based compensation 38,759 — — — — — 560 — — 560
Stock-based compensation for services rendered — — — — — — 122 — — 122
Options exercised 616,208 — — — — — 910 — — 910
Warrants exercised 212,250 — — — — — 289 — — 289
Balance at June 30, 2019 82,487,702 $ 10 100,000 $ 100 754,599 $ (71) $ 335,389 $ (258) $ (297,937) $ 37,233
Net loss — — — — — — — — (1,425) (1,425)
Foreign currency translation — — — — — — — (418) — (418)
Settlement of warrant derivative liability — — — — — — 8,648 — — 8,648
Stock-based compensation 9,690 — — — — — 740 — — 740
Stock-based compensation for services rendered 75,494 — — — — — 175 — — 175
Options exercised 1,006,792 — — — — — 1,891 — — 1,891
Warrants exercised 1,667,293 — — — — — 1,723 — — 1,723
Balance at September 30, 2019 85,246,971 10 100,000 100 754,599 (71) 348,566 (676) (299,362) 48,567
Net income — — — — — — — — 3,326 3,326
Foreign currency translation — — — — — — — (44) — (44)
Settlement of warrant derivative liability — — — — — — 2,945 — — 2,945
Stock-based compensation — — — — — — 744 — — 744
Stock-based compensation for services rendered — — — — — — 173 — — 173
Options exercised 546,876 — — — — — 927 — — 927
Warrants exercised 529,118 — — — — — 613 — — 613
Balance at December 31, 2019 86,322,965 10 100,000 100 754,599 (71) 353,968 (720) (296,036) 57,251

~~The accompanying notes are an integral part of these~~condensed consolidated financial statements.

Digital Turbine, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

~~December 31, 2020~~September 30, 2021

(in thousands, except share and per share amounts)

1. Description of Business

Digital Turbine, Inc., through its subsidiaries ~~simplifies content discovery~~(collectively "Digital Turbine" or the "Company"), is a leading end-to-end solution for mobile technology companies to enable advertising and ~~delivers it directly to the device.~~monetization solutions. Its ~~on-device~~digital media platform powers frictionless end-to-end application for brand discovery and ~~content discovery,~~advertising, user acquisition and engagement, operational efficiency, and monetization opportunities. ~~Through December 31, 2020, Digital Turbine's technology platform has been adopted by more than 40~~The Company provides on-device solutions to all participants in the mobile ~~operators~~application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers ~~("OEMs"~~(“OEMs”), and has delivered more than 4.8 billion application preloads for tens of thousands of advertising campaigns. The Company operates this business as 1 operating and reportable segment - Media Distribution, which was previously referred to as the operating segment O&O (operators and OEMs) and the reportable segment Advertising.

~~As the Company's suite of product offerings expands, both organically and through acquisitions, we believe~~ that this renaming of our reporting and operating segment better reflects the way management views the business. There are no changes or historical differences to product offerings and financial information that were referred to as the Advertising segment in prior periods. While advertising, in general, remains a focus of our Media Distribution segment, we feel that this change in name more accurately conveys to the reader what we do for our customers and partners.

~~The Company's Media Distribution business consists of products and services that simplify the discovery and delivery of mobile application and content media for consumers.~~

•Application Media represents the portion of the business where our platform delivers apps to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track and manage app install demand from hundreds of application developers across various publishers, carriers, OEMs and devices.

•~~Content Media represents the portion of the business where our platform presents news, weather, sports and other content directly within the native device experience (e.g., as the start page~~participate in the ~~mobile browser, a widget, on unlock, etc.) through partnerships with carrier networks~~app economy, app publishers and ~~OEMs. Content Media optimizes revenue by a combination of:~~

◦~~Programmatic Ad Partner Revenue – advertising within the content media that’s sold on an ad exchange, at a market rate (CPM - Cost Per Thousand),~~

◦~~Sponsored Content – sponsored content media from 3~~rd ~~party content providers – presented similar to an ad – that is monetized when a recommended story is viewed (CPC – Cost Per Click)~~

◦~~Editorial Content – owned or licensed media – presented similar to an ad – that is monetized when the media is clicked on (CPC - Cost Per Click).~~

On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (the "Acquisition") from ACME Mobile, LLC (“ACME”). The Company acquired all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments)developers, and (2) an estimated earn-out of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares) for the relevant period. The earn-out payments will be paid quarterly with a true-up calculation and payment after the first nine months of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments were determined during the quarter ended June 30, 2020 and resulted in additional purchase price consideration of $453, which was reflected on the balance sheet as an increase in goodwill. This changed the initial cash consideration, not inclusive of the earn-out, to $41,953.

During the three and nine months ended December 31, 2020, $4,662 and $15,419 was added to the previous estimated earn-out of $23,735, bringing the estimated total earn-out related to the acquisition of Mobile Posse to $39,154. Of the amounts recorded and accrued for the earn-out related to the Acquisition, $29,154 has been paid to ACME, and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out. As of December 31, 2020, estimated total consideration, inclusive of estimated remaining earn-out, for the Acquisition is $81,107, of which $71,107 has been paid and $10,000 remains accrued. The actual remaining earn-out payment is subject to continued performance of the Acquisition and is subject to re-valuation prior to the final settlement based on final actual results and calculations in March 2021.

During the nine month period ended December 31, 2020 an adjustment to increase goodwill in the amount of $736 was made to reclassify the impact of a change in assumptions related to deferred tax assets previously booked as a component of purchase accounting for the Acquisition.

~~The Acquisition is consistent with the Company's strategy to provide a comprehensive media~~brands and advertising solution for operator and OEM partners while enriching the mobile experience for end users by delivering relevant media rich content to their fingertips. The addition of Mobile Posse's offerings will provide synergies and options for our partners and advertisers. The Company's suite of offerings continue to focus on promoting higher user engagement and boosting advertising revenue for mobile operators and OEMs.

With global headquarters in Austin, Texas and offices in Durham, North Carolina; San Francisco, California; Arlington, Virginia; São Paulo, Brazil; Mexico City, Mexico; Mumbai, India; Singapore; and Tel Aviv, Israel, Digital Turbine’s solutions are available worldwide. For additional information, please visit www.digitalturbine.com.

Unless the context otherwise indicates, the use of the terms “we,” “our,” “us,” “Digital Turbine,” “DT,” or the “Company” refer to the collective businesses and operations of Digital Turbine, Inc. through its operating and wholly-owned subsidiaries: Digital Turbine USA, Inc. (“DT USA”), Digital Turbine EMEA Ltd. (“DT EMEA”), Digital Turbine Australia Pty Ltd (“DT APAC”), Digital Turbine Singapore Pte. Ltd. (“DT Singapore”), Digital Turbine Luxembourg S.a.r.l. (“DT Luxembourg”), Digital Turbine Germany, GmbH (“DT Germany”), Digital Turbine Media, Inc. (“DT Media”), Mobile Posse Inc., and Digital Turbine LATAM Intermediacao De Servicos De Midia LTDA ("DT LATAM"). We refer to all of the Company's subsidiaries collectively as "wholly-owned subsidiaries."agencies.

2. ~~Liquidity~~Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements ~~have been prepared~~are presented in ~~conformity~~accordance with accounting principles generally accepted in the United States ~~of America ("US GAAP"~~(“GAAP”)~~, which contemplate continuation~~. The condensed consolidated financial statements include the accounts of the Company ~~as a going concern.~~

and its subsidiaries. The Company consolidates the financial results and reports non-controlling interests representing the economic interests held by other equity holders of subsidiaries that are not 100% owned by the Company. The calculation of non-controlling interests excludes any net income / (loss) attributable directly to the Company. All intercompany balances and transactions have been eliminated in consolidation.

~~Our primary sources of liquidity have historically been cash from operations, issuance of common stock, preferred stock, and debt. As of December 31, 2020, we had cash totaling approximately $43,659.~~

On May 23, 2017, the Company entered into a Business Finance Agreement (the "Credit Agreement") with Western Alliance Bank (the "Bank"). The Credit Agreement provided for a $5,000 total facility. On May 22, 2019, the Company amended its existing Credit AgreementThese financial statements should be read in conjunction with the ~~Bank. The Credit Agreement, as amended, provided for up to a $20,000 total revolving credit facility, subject to draw limitations derived from current levels of eligible domestic receivables.~~

On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition,Company's audited financial statements and ~~(2) a revolving line of credit of $5,000 to be used for working capital purposes. DT USA and DT Media are additional co-borrowers under the New Credit Agreement. The term loan must be repaid~~related notes included in its Annual Report on a quarterly basis which began on July 2020 until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement)Form 10-K for the fiscal year ~~which percentage is determined based on the Company’s total funded debt to~~ended March 31, 2021 (the "2021 Form 10-K").

Unaudited Interim Financial Information

These accompanying unaudited condensed consolidated ~~adjusted EBITDA ratio. The revolving line of credit matures on February 28, 2025.~~

In connection with the Company entering into the New Credit Agreement with the Bank on February 28, 2020, the Company and the Bank terminated the Credit Agreement, which was the previous revolving credit facility of the Company.

As of December 31, 2020, the Company's principal amount outstanding under the New Credit Agreement was $19,250 and 0 amount was drawn on the $5,000 revolving line of credit. Please refer to the "Debt" footnote for more detail.

The Company anticipates that its primary sources of liquidity will continue to be cash-on-hand, cash provided by operations, and the credit available under the New Credit Agreement. In addition, the Company may raise additional capital through future equity or, subject to restrictions contained in the New Credit Agreement, debt financing to provide for greater flexibility to make acquisitions, new investments in under-capitalized opportunities, or to invest in organic opportunities. Additional financing may not be available on acceptable terms or at all. If the Company issues additional equity securities to raise funds, the ownership percentage of its existing stockholders would be reduced. New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock.

During the evaluation by management of the Company’s financial position, factors such as working capital, current market capitalization, enterprise value, and the fiscal year 2021 operating plan of the Company were considered when determining the ability of the Company to continue as a going concern. Recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to generate positive cash flows from operations. Based on the year-over-year revenue and gross margin increases, coupled with the Company’s management of operating expenses and access to debt, management has determined that when considering all relevant quantitative and qualitative factors, the Company appears to have sufficient cash and capital resources to continue to operate its business for at least twelve months from the filing date of this quarterly report on Form 10-Q.

In view of the matters described in the preceding paragraphs, the consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities, that might be necessary should the Company be unable to continue its existence.

~~3. Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

~~The~~ financial statements have been prepared ~~in accordance with US GAAP and~~ pursuant to the rules and regulations of the Securities and Exchange Commission ~~(“SEC”~~("SEC") for ~~annual~~interim financial statements. The financial statements, in the opinion of management, include all adjustments necessary for a fair statement of the results of operations, financial position and cash flows for each period presented.

~~Interim Consolidated Financial Information~~

The accompanying consolidated financial statements of Digital Turbine, Inc. and its subsidiaries should be read in conjunction with the consolidated financial statements and accompanying notes filed with the SEC in Digital Turbine, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2020 (the "Annual Report"). The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations.reporting. In the opinion of management, ~~the accompanying~~these unaudited condensed consolidated financial statements reflect all adjustments, consisting of a normal recurring ~~nature~~items, considered necessary to present fairly ~~state~~ the Company’s financial ~~position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2020, the~~condition, results of ~~their~~ operations, ~~and corresponding~~ comprehensive income, ~~/ (loss) for the three~~stockholders’ equity, and ~~nine months ended December 31, 2020 and 2019, and their~~ cash flows for the nine months ended December 31, 2020 and 2019. The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation.interim periods indicated. The results of operations for the ~~interim period~~three and six months ended September 30, 2021, are not necessarily indicative of the operating results ~~that may be expected~~ for the full fiscal ~~year ending March 31, 2021.~~

~~Recently Issued Accounting Pronouncements~~

Significant accounting policies and recent accounting pronouncements are described in the Notes of the consolidated financial statements, under the heading "Summary of Significant Accounting Policies," included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020. There have been no significant changes in or updates to the accounting policies since March 31, 2020. Only significant new accounting pronouncements, pertinent to the Company, issued and adopted subsequent to the issuance of our Annual Report are described below. Accounting pronouncements issued and adopted not described in either the Annual Report or in this quarterly report have been determined to either not apply or to have an immaterial impact on our business and related disclosures.

~~Accounting Pronouncements Adopted During the Period~~

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. As such, the Company adopted this standard during the quarter ended June 30, 2020 on a prospective basis, and such adoption has not had a material impact on the Company's consolidated results of operations, financial condition, and cash flows in the current presented periods.

In August 2018, the FASB issued ASU 2018-13: Fair Value Measurement (Topic 820). The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, as a result of the FASB’s final deliberations of the financial reporting concepts pursuant to the March 4, 2014 issued FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, as they relate to fair value measurement disclosures. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. As such, the Company has adopted this standard during our quarter ended June 30, 2020, and it has not materially impacted our consolidated results of operations, financial condition and cash flows.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". Financial Instruments—Credit Losses (Topic 326) amends guideline on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. As such, the Company has adopted this standard during our quarter ended June 30, 2020, and it has not materially impacted our consolidated results of operations, financial condition and cash flows.

~~Concentrations of Credit Risk and Significant Customers~~

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. A significant portion of the Company’s cash is held at one major financial institution that the Company's management has assessed to be of high credit quality. The Company has not experienced any losses in such accounts.

The Company mitigates its credit risk with respect to accounts receivable by performing credit evaluations and monitoring advertisers' and carriers' accounts receivable balances. The Company counts all advertisers and carriers within a single corporate structure as one customer, even in cases where multiple brands, branches, or divisions of an organization enter into separate contracts with the Company. As of December 31, 2020, one major customer represented approximately 12.7% of the Company’s net accounts receivable balance. As of March 31, 2020, two major customers represented 11.6% and 11.5% of the Company's net accounts receivable balance.

With respect to customer revenue concentration, the Company defines a customer as an advertiser or a carrier that is a distinct source of revenue and is legally bound to pay for the services that the Company delivers on the advertiser’s or carrier's behalf. During the three and nine months ended December 31, 2020, no single customer represented 10.0% or greater of the Company's net revenues. During the three and nine months ended December 31, 2019, Verizon Communications Inc., primarily through its subsidiary Oath Inc., represented 14.4% and 17.7%, respectively, of net revenues.

With respect to revenue partner concentration, the Company partners with mobile carriers and OEMs to deliver applications on our platform through the carrier network. During the three and nine months ended December 31, 2020, Verizon Wireless, a carrier partner, generated 16.5% and 18.6%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 20.3% and 22.0%, respectively; T-Mobile US Inc., including Sprint and other subsidiaries, generated 30.6% and 27.0%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 10.4% and 10.4%, respectively, of our net revenues. During the three and nine months ended December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5% and 40.3%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively, of our net revenues.

There is no assurance that the Company will continue to receive significant revenues from any of these or other large customers. A reduction or delay in operating activity from any of the Company’s significant customers or partners, or a delay or default in payment by any significant customer, or a termination of agreements with significant customers, could materially harm the Company’s business and prospects. Because of the Company’s significant customer concentrations, its net sales and operating income could fluctuate significantly due to changes in political or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company's significant customers.year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make ~~certain~~ estimates and assumptions that ~~impact~~affect the reported amounts inof assets and liabilities, disclosure of contingent assets and liabilities at the ~~consolidated~~date of the financial statements, and ~~accompanying notes.~~the reported amounts of income and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include revenue recognition, allowance for credit losses, stock-based compensation, fair value of acquired intangible assets and goodwill, useful lives of acquired intangible assets and property and equipment, fair value of contingent earn-out considerations (please see Note 13, "Commitments and Contingencies," for further information on the fair value of the Company's contingent earn-out considerations), incremental borrowing rates for right-of-use assets and lease liabilities, and tax valuation allowances. These estimates are ~~recurring in nature and relate to transactions occurring in the normal course of business. In the opinion of management, these are appropriate estimates for arrangements to be settled at a later date~~ based on information available as of the ~~facts and circumstances available at~~date of the ~~time of filing. Actual~~financial statements; therefore, actual results could differ materially from ~~those estimates.~~management’s estimates using different assumptions or under different conditions.

~~The~~In light of the ongoing and quickly evolving COVID-19 pandemic, management has ~~created~~considered the impacts of the COVID-19 pandemic on the Company’s critical and ~~may continue to create~~ significant uncertainty in macroeconomic conditions, which may cause further business slowdowns or shutdowns, depress demand for our advertising business, and adversely impact our results of operations. We expect uncertainties around our key accounting estimates and as of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to ~~continue to evolve depending on~~update its estimates or judgments or revise the ~~duration and degree~~carrying value of ~~impact associated with~~its assets or liabilities as a result of the COVID-19 pandemic. ~~Our~~These estimates may change as new events occur and additional information ~~emerges,~~is obtained and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such ~~changes~~differences may be ~~recognized and disclosed in our~~material to the Company’s condensed consolidated financial statements.

~~4. Discontinued Operations~~Summary of Significant Accounting Policies

There have been no significant changes to the Company’s significant accounting policies in Note 4, “Summary of Significant Accounting Policies,” of the notes to the consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2021, other than the "New Accounting Standards Adopted" disclosed below and changes to the Company's segment reporting disclosed in Note 4, "Segment Information."

Revenue Recognition

As mentioned above, there have been no significant changes to the Company's revenue recognition policies, now inclusive of the acquisitions of AdColony and Fyber defined and disclosed below in Note 3, "Acquisitions", since its Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Prior to the acquisitions of AdColony and Fyber, the Company had one operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the 3 segments disclosed below in Note 4, "Segment Information," each of which represents an operating and reportable segment.

On Device Media

This segment is the legacy single operating and reporting segment (Media Distribution) of the Company prior to the AdColony and Fyber acquisitions.

In App Media - AdColony

AdColony’s principal operations consist of supplying a mobile advertising platform that includes a direct supply of in-app advertising inventory to its customers. AdColony's customers provide insertion orders for advertising during campaign windows where AdColony provides, inserts, and tracks the performance of the advertising to serve as the direct supplier for the customer. Customers will contract for this service, which is monetized through a measurement of user views, clicks, or installs of the target product or service offered by the customer. AdColony's customers generally pay subsequently to the total aggregation of the views, clicks, and installs billed on a monthly basis. Specifically, the aggregated activities include the following:

i.When a user installs a game (i.e., a user plays a game, sees advertising, clicks on it, and installs a game), based on a cost per install (CPI) arrangement.

ii.When a mobile ad is delivered to a user, based on a CPM (cost per thousand impressions) arrangement (i.e., every thousand impressions of a mobile ad inside the publisher's inventory, which can be on a mobile app or website).

iii.When a user plays a mobile video ad all the way to completion, based on a CPCV (cost per completed view) arrangement.

iv.When a user clicks on a mobile ad, based on a CPC (cost per click) arrangement (i.e., after each instance when an ad is clicked inside the publisher's inventory).

Due to the nature of AdColony's principal operations and the similarities between how customers obtain control of promised services between this segment and the Company's other two segments, revenues for this segment are recognized in a manner consistent with the Company's legacy On Device Media business.

In App Media - Fyber

Fyber’s principal operations consist of supplying a mobile advertising platform that includes a direct supply of in-app advertising inventory to its customers. Fyber specializes in software-based automated ("programmatic") trading of advertisements and aims to enable mobile app publishers to monetize their digital contents through the placement of targeted, high-quality ads within their apps. Fyber connects app developers and their users with advertisers worldwide, who bid on the ad space within the apps (predefined spaces and instances within apps where ads can be displayed at certain points of time during a session of a user engaging with the app). Fyber’s customers provide insertion orders or equivalent contracts for advertising during campaign windows where Fyber provides, inserts, and tracks the performance of the advertising to serve as the direct supplier for the customer. Alternatively, Fyber also contracts with customers using a framework agreement that is not specific to a campaign or budget, but instead determines parameters for the mobile advertising service. Customers will contract for these services, which are monetized through a measurement of user impressions, clicks, or installs of the target product or service offered by the customer. Fyber’s customers generally pay subsequently to the total aggregation of the impressions, clicks, and installs billed on a monthly basis. Specifically, the aggregated activities include the following:

i.When a user installs a game (i.e., a user plays a game, sees advertising, clicks on it, and installs a game) based on a CPA (cost per action) arrangement.

iii.When a user plays a mobile video ad all the way to completion, based on a CPCV (cost per completed view) arrangement.

iv.When a user clicks on a mobile ad, based on a CPC (cost per click) arrangement (i.e., after each instance when an ad is clicked inside the publisher's inventory).

Due to the nature of Fyber's principal operations and the similarities between how customers obtain control of promised services between this segment and the Company's other two segments, revenues for this segment are recognized in a manner consistent with the Company's legacy On Device Media business.

New Accounting Standards Adopted

ASU 2019-12

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The Company adopted this guidance as of April ~~29, 2018,~~1, 2021. ASU 2019-12 did not have a material impact on the Company's condensed consolidated financial statements upon adoption.

ASU 2020-04

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The Company is implementing a transition plan to identify and modify its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company is continuing to assess ASU 2020-04 and its impact on the Company’s condensed consolidated financial statements.

3. Acquisitions

Acquisition of Fyber N.V.

On May 25, 2021, the Company completed the initial closing of the acquisition of 95.1% of the outstanding voting shares (the “Majority Fyber Shares”) of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the "Fyber Acquisition") between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company's knowledge) held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.

Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for the Company in its mission to develop one of the largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.

The Company acquired Fyber in exchange for an estimated aggregate consideration of up to $600,000, consisting of:

i.Approximately $150,000 in cash, $124,336 of which was paid to the Seller at the closing of the acquisition and the remainder of which is to be paid to the Minority Fyber Shareholders for the Minority Fyber Shares pursuant to the tender offer described below;

ii.5,816,588 newly-issued shares of common stock of the Company to the Seller, which such number of shares were determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to $359,233 at the Company's common stock closing price on May 25, 2021, as follows.

1.3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;

2.1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;

3.1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;

4.59,289 shares of common stock equal in value to $3,662, to be newly-issued during its fiscal second quarter 2022, but subject to a true-up reduction based on increased transaction costs associated with the staggered delivery of the Majority Fyber Shares to the Company, which true-up reduction has been finalized, as described below; and

iii.Contingent upon Fyber’s net revenues (revenues less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, which value of such shares, based on the weighted average share price for the 30-days prior to the end of the earn-out period, and cash in aggregate will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a result, no contingent liability was recognized at that time.

The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.

On September 30, 2021, the Company entered into ~~2 distinct disposition agreements with respect~~the Second Amendment Agreement (the “Second Amendment Agreement”) to ~~selected assets owned by our subsidiaries.~~

~~DT APAC~~the Sale and ~~DT Singapore (together, “Pay Seller”)~~Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of shares of Company common stock to be issued to the Seller at 18,000 shares (i.e., ~~each wholly-owned subsidiaries~~a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company ~~entered into an Asset Purchase Pay Agreement (the “Pay Agreement”), dated as~~issued a total of ~~April 23, 2018, with Chargewave Ptd Ltd (“Pay Purchaser”) to sell certain assets (the “Pay Assets”) owned by the Pay Seller related~~5,775,299 shares of Company common stock to the Company’s Direct Carrier Billing business. The Pay Purchaser is principally-owned and controlled by Jon Mooney, an officer of the Pay Seller. At the closing of the asset sale, Mr. Mooney was no longer employed by the Company or Pay Seller. As consideration for this asset sale, Digital Turbine is entitled to receive certain license fees, profit-sharing, and equity participation rights as disclosedSeller in connection with the Company’s ~~Form 8-K filed~~acquisition of Fyber.

As of September 30, 2021, based on ~~May 1, 2018 with the SEC. The transaction was completed on July 1, 2018. With the sale of these assets, the Company exited the segment of the business previously referred to as the Content business.~~

In accordance with the Pay Agreement, the Company assigned and transferred a material contract to the Pay Purchaser. Subsequent to the transaction closing associated with the Pay Agreement, the Company received notification from the Pay Purchaser that the partner to the material contract had terminated the contract with the Pay Purchaser. Due to the material contract being terminated,current estimates, the Company determined that it is now likely that Fyber will achieve the earn-out net revenue target and, as a result, recognized and accrued the fair value of the contingent earn-out consideration of $31,000 as a charge to change in fair value of contingent consideration on the condensed consolidated statements of operations and comprehensive income / (loss). The fair value of the contingent consideration is subject to material changes based upon certain assumptions, primarily the estimated likelihood of Fyber achieving the earn-out ~~from~~net revenue target. Company will re-evaluate the ~~Pay Purchaser was $0. As all~~fair value of the ~~assets being transferred had been fully impaired prior~~contingent consideration on a quarterly basis until the end of the earn-out period.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the ~~closing~~Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the ~~transaction,~~tender offer, including the ~~gain/loss on sale related~~consideration of €0.84 per share offered to the ~~Pay Agreement transaction~~Minority Fyber Shareholders in connection with the tender offer, was ~~$0. Furthermore,~~determined by the Company ~~retained certain receivables and payables for content delivered for the benefit of the partner~~pursuant to the ~~material contract, where these certain receivables~~applicable Dutch and ~~payables were all recognized prior to~~German takeover laws. During the ~~closing of the Pay Agreement. As of December 31, 2020,~~quarter ended September 30, 2021, the Company ~~has determined there~~purchased approximately $21,000 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.4%. The Company expects to ~~be uncertainty surrounding~~complete the collectability of the receivables due to ongoing discussions with the business partner. We have determined that the amounts recorded are more likely than not to be uncollectible due to disputes surrounding the content delivered. Furthermore, the related payables would also be contractually withheld unless payment is received at a later date. At this time, the Company has reserved for all balances remaining, both receivables and payables, related to the discontinued operations of the Pay business. The total impact to the Company if allpurchase of the remaining ~~receivables and payables are subsequently collected and paid is immaterial. These fully reserved~~outstanding Fyber shares during its fiscal third quarter 2022.

The delisting of Fyber's remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.

The fair values of the assets acquired and liabilities ~~remain~~assumed at the date of acquisition are presented on ~~our books~~a preliminary basis and are as follows1:


Assets acquired
Cash	$	71,489
Accounts receivable	64,877
Other current assets	10,470
Property and equipment	1,561
Right-of-use asset	13,191
Publisher relationships	106,305
Developed technology	86,900
Trade names	32,574
Customer relationships	31,400
Favorable lease	1,483
Goodwill	300,705
Other non-current assets	851
Total assets acquired	$	721,806

Liabilities assumed
Accounts payable	$	78,090
Accrued license fees and revenue share	5,929
Accrued compensation	52,929
Other current liabilities	12,049
Short-term debt	25,789
Deferred tax liability, net	25,920
Other non-current liabilities	15,386
Total liabilities assumed	$	216,092
Total purchase price	$	505,714

1The purchase consideration was translated using the Euro-to-United States ("U.S.") dollar exchange rate in effect on the acquisition closing date, May 25, 2021, of ~~December 31, 2020.~~approximately €1.22 to $1.00.

DTThe excess of cost of the Fyber Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - Fyber segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.

The identifiable intangible assets consist of publisher relationships, developed technology, trade names, customer relationships, and a ~~wholly-owned subsidiary~~favorable lease. The publisher relationships, developed technology, trade names, and customer relationships intangibles were assigned useful lives of 20.0 years, 7.0 years, 7.0 years, and 3.0 years, respectively. The below-market favorable lease was derived from Fyber's office lease in Berlin, Germany and, per ASC 842, Leases, will be combined with Fyber's right-of-use asset for that lease and will be amortized over the remaining life of that lease. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•Publisher Relationships - Multi-Period Excess Earnings Method

•Developed Technology - Relief from Royalty Method

•Trade Names - Relief from Royalty Method

•Customer Relationships - With-and-Without Method

•Favorable Lease - Income Approach

The Company recognized $8,116 and $11,715 of costs related to the Fyber Acquisition, which were included in general and administrative expenses on the condensed consolidated statement of operations and comprehensive income for the three and six months ended September 30, 2021, respectively.

Acquisition of AdColony Holdings AS

On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration in the range of $400,000 to $425,000, to be paid as follows: (1) $100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and (3) an estimated earn-out in the range of $200,000 to $225,000, to be paid in cash, based on AdColony achieving certain future target net revenues, less associated cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a 12-month period ending on December 31, 2021 (the “Earn-Out Period”). Under the terms of the earn-out, the Company would pay the seller a certain percentage of actual net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which AdColony achieves certain target net revenues (less associated cost of goods sold, as such term is referenced in the Share Purchase Agreement) over the Earn-Out Period. The earn-out payment will be made following the expiration of the Earn-Out Period.

On August 27, 2021, the Company entered into an ~~Asset~~Amendment to Share Purchase Agreement (the ~~“A&P~~“Amendment Agreement”)~~, dated as of April 28, 2018,~~ with ~~Creative Clicks B.V. (the “A&P Purchaser”~~AdColony and Otello Corporation ASA, a Norway company (“Otello”) ~~to sell business relationships with various advertisers~~ and ~~publishers (the “A&P Assets”) related~~AdColony's previous parent company. Pursuant to the ~~Company’s Advertising~~Amendment Agreement, the Company and ~~Publishing business. As consideration~~Otello agreed to set a fixed dollar amount of $204,500 for ~~this asset sale, we are entitled~~the earn-out payment obligation, to ~~receive a percentage~~set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the ~~gross profit derived from these customer agreements, for~~Company’s earn-out support obligations under the Share Purchase Agreement. As a ~~period~~result, the Company recognized an $8,913 reduction of ~~three years, as outlined~~the earn-out payment obligation in change in fair value of contingent consideration on the condensed consolidated statements of operations and comprehensive income / (loss) in the fiscal second quarter ended September 30, 2021.

The Company paid the cash closing amount and the $100,000 due six months after closing (subsequent to September 30, 2021) with a combination of available cash-on-hand and borrowings under the Company’s ~~Form 8-K filed on May 1, 2018~~senior credit facility. The Company intends to pay the remaining cash consideration with a combination of available cash-on-hand, borrowings under the ~~SEC. The transaction was completed on June 28, 2018 with an effective date of June 1, 2018. With~~Company's New Credit Agreement, including utilizing the ~~sale of these assets, the Company exited the operating segment~~according feature of the business previously referred to as the A&P business, which was previously part of Advertising, the Company's sole reporting segment (which is now Media Distribution). No gain or loss on sale was recognized related to this divestiture. All transferred assetssenior credit facility if necessary, and liabilities, with the exception of goodwill, were fully amortized prior to entering into the sales agreement. As the consideration given by the purchaser was already materially determined at March 31, 2018, goodwill was impaired to the estimatedproceeds from future cash flows of the divested business, which was effectively the purchase price. With the consummation of the sale, the remaining goodwill asset was netted against the purchase price receivable for a net impact of $0 on the Consolidated Statement of Operations and Comprehensive Loss for the year ended March 31, 2019.

~~These dispositions have allowed the Company to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.~~

~~No assets or liabilities were held for disposal as of December 31, 2020 or March 31, 2020.~~

The following table summarizes the financial results of our discontinued operations for all periods presented in the accompanying Consolidated Statements of Operations and Comprehensive Income / (Loss):

~~Condensed Statements of Operations and Comprehensive Income / (Loss)~~

~~For Discontinued Operations~~

~~(in thousands, except per share amounts)~~

~~(Unaudited)~~

Three months ended December 31, Nine months ended December 31,
2020 2019 2020 2019
Net revenues $ 0 $ 0 $ 0 $ 0
Total cost of revenues 0 (102) 0 (102)
Gross profit 0 102 0 102
Product development 0 0 0 62
General and administrative 0 37 0 122
Loss from operations 0 65 0 (82)
Interest and other income / (expense), net 0 0 0 (89)
Loss from discontinued operations before income taxes 0 65 0 (171)
Loss from discontinued operations, net of taxes 0 65 0 (171)
Comprehensive loss $ 0 $ 65 $ 0 $ (171)
Basic and diluted net loss per common share $ 0 $ 0 $ 0 $ 0
Weighted-average common shares outstanding, basic 0 85,876 0 83,869
Weighted-average common shares outstanding, diluted 0 92,472 0 89,759

capital financings.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are presented on a preliminary basis and are as follows:


Assets acquired
Cash	$	24,793
Accounts receivable	57,285
Other current assets	1,845
Property and equipment	1,566
Right-of-use asset	2,460
Customer relationships	101,800
Developed technology	51,100
Trade names	36,000
Publisher relationships	4,400
Goodwill	200,875
Other non-current assets	131
Total assets acquired	$	482,255

Liabilities assumed
Accounts payable	$	21,140
Accrued license fees and revenue share	28,920
Accrued compensation	8,453
Other current liabilities	1,867
Deferred tax liability, net	8,143
Other non-current liabilities	1,770
Total liabilities assumed	$	70,293
Total purchase price	$	411,962

The excess of cost of the AdColony Acquisition over the net amounts assigned to the fair values of the net assets acquired was recorded as goodwill and was assigned to the Company’s In App Media - AdColony segment. The goodwill consists largely of the expected cash flows and future growth anticipated for the Company. The goodwill is not deductible for tax purposes.

The identifiable intangible assets consist of customer relationships, developed technology, trade names, and publisher relationships and were assigned useful lives of 8.0 years to 15.0 years, 7.0 years, 7.0 years, and 10.0 years, respectively. The values for the identifiable intangible assets were determined using the following valuation methodologies:

•Customer Relationships - Multi-Period Excess Earnings Method

•Developed Technology - Relief from Royalty Method

•Trade Names - Relief from Royalty Method

•Publisher Relationships - Cost Approach

The Company recognized $620 and $3,491 of costs related to the AdColony Acquisition, which were included in general and administrative expenses on the condensed consolidated statement of operations and comprehensive income for the three and six months ended September 30, 2021, respectively.

Acquisition of Appreciate

On March 1, 2021, Digital Turbine, through its subsidiary Digital Turbine (EMEA) Ltd. ("DT EMEA"), an Israeli company and wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement with Triapodi Ltd., an Israeli company (d/b/a Appreciate) (“Appreciate”), the stockholder representative, and the stockholders of Appreciate, pursuant to which DT EMEA acquired, on March 2, 2021, all of the outstanding capital stock of Appreciate in exchange for total consideration of $20,003 in cash (the "Appreciate Acquisition"). Under the terms of the Purchase Agreement, DT EMEA entered into bonus arrangements to pay up to $6,000 in retention bonuses and performance bonuses to the founders and certain other employees of Appreciate. None of the goodwill recognized was deductible for tax purposes.

The acquisition of Appreciate delivers valuable deep ad-tech and algorithmic expertise to help Digital Turbine execute on its broader, longer-term vision. Deploying Appreciate's technology expertise across Digital Turbine’s global scale and reach should further benefit partners and advertisers that are a part of the combined Company’s platform.

Acquisition Purchase Price Liability

The Company has recognized acquisition purchase price liability of $335,500 on its condensed consolidated balance sheet as of September 30, 2021, comprised of the following components:

•$100,000 of unpaid cash consideration for the AdColony Acquisition

•$204,500 of contingent earn-out consideration for the AdColony Acquisition

•$31,000 of contingent earn-out consideration for the Fyber Acquisition

Pro Forma Financial Information (Unaudited)

The pro forma information below gives effect to the Fyber Acquisition, the AdColony Acquisition, and the Appreciate Acquisition (collectively, the “Acquisitions”) as if they had been completed on the first day of each period presented. The pro forma results of operations are presented for information purposes only. As such, they are not necessarily indicative of the Company’s results had the Acquisitions been completed on the first day of each period presented, nor do they intend to represent the Company’s future results. The pro forma information does not reflect any cost savings from operating efficiencies or synergies that could result from the Acquisitions and does not reflect additional revenue opportunities following the Acquisitions. The pro forma information includes adjustments to record the assets and liabilities associated with the Acquisitions at their respective fair values, which are preliminary at this time, based on available information and to give effect to the financing for the Acquisitions.


	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
	Unaudited		Unaudited		Unaudited		Unaudited
	(in thousands, except per share amounts)
Net revenue	$	310,205	$	190,156	$	602,253	$	333,020
Net income / (loss) attributable to controlling interest	$	(5,852)	$	(7,542)	$	(24,269)	$	(3,957)
Basic net income / (loss) attributable to controlling interest per common share	$	(0.06)	$	(0.08)	$	(0.26)	$	(0.04)
Diluted net income / (loss) attributable to controlling interest per common share	$	(0.06)	$	(0.08)	$	(0.26)	$	(0.04)

4. Segment Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company has determined that its Chief Executive Officer ("CEO") is the CODM.

Prior to the acquisitions of both AdColony and Fyber disclosed above in Note 3, "Acquisitions," the Company had one operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the following 3 segments, each of which represents an operating and reportable segment, as follows:

•On Device Media ("ODM") - This segment is the legacy single operating and reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenues from services that deliver mobile application media or content media to end users. This segment's customers are mobile device carriers and OEMs that pay for the distribution of media. The other reporting segments are not dependent on these mobile device carrier and OEM relationships.

•In App Media – AdColony("IAM-A") - This segment is inclusive of the acquired AdColony business and generates revenues from services provided as an end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on mobile devices around the world. IAM-A customers are primarily advertisers.

•In App Media – Fyber ("IAM-F") - This segment is inclusive of the acquired Fyber business and generates revenues from services provided to mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making. IAM-F customers are primarily publishers.

The Company's CODM evaluates segment performance and makes resource allocation decisions primarily through the metric of net revenues less associated license fees and revenue share, as shown in the segment information summary table ~~provides reconciling cash flow~~below. The Company's CODM does not allocate other direct costs of revenues, operating expenses, interest and other income / (expense), net, or provision for income taxes to these segments for the purpose of evaluating segment performance. Additionally, the Company does not allocate assets to segments for internal reporting purposes as the CODM does not manage the Company's segments by such metrics.

A summary of segment information ~~for our discontinued operations:~~follows:

Nine months ended December 31,
2020 2019
(Unaudited) (Unaudited)
Cash flows from operating activities
Net loss from discontinued operations, net of taxes $ 0 $ (171)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 0 19
Change in allowance for doubtful accounts 0 (47)
Loss on disposal of fixed assets 0 104
(Increase) / decrease in assets:
Accounts receivable 0 405
Increase / (decrease) in liabilities:
Accounts payable 0 (232)
Accrued license fees and revenue share 0 (202)
Accrued compensation 0 (56)
Other current liabilities 0 35
Cash used in operating activities 0 (145)
Cash used in discontinued operations $ 0 $ (145)


	Three months ended September 30, 2021
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	129,449	$	61,495	$	125,727	$	(6,466)	$	310,205
License fees and revenue share	75,587		41,833		102,191		(6,466)		213,145
Segment profit	$	53,862	$	19,662	$	23,536	$	—	$	97,060


	Three months ended September 30, 2020
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	70,893	$	—	$	—	$	—	$	70,893
License fees and revenue share	40,532		—		—		—		40,532
Segment profit	$	30,361	$	—	$	—	$	—	$	30,361


	Six months ended September 30, 2021
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	249,832	$	106,432	$	175,368	$	(8,812)	$	522,820
License fees and revenue share	145,618		72,027		142,660		(8,812)		351,493
Segment profit	$	104,214	$	34,405	$	32,708	$	—	$	171,327


	Six months ended September 30, 2020
	ODM		IAM-A		IAM-F		Eliminations		Consolidated
Net revenues	$	129,905	$	—	$	—	$	—	$	129,905
License fees and revenue share	72,832		—		—		—		72,832
Segment profit	$	57,073	$	—	$	—	$	—	$	57,073

Geographic Area Information

Long-lived assets, excluding deferred tax assets and intangible assets, by region follows:


	September 30, 2021		March 31, 2021
United States and Canada	$	18,345	$	12,995
Europe, Middle East, and Africa	3,679		40
Asia Pacific and China	92		15
Mexico, Central America, and South America	—		—
Consolidated property and equipment, net	$	22,116	$	13,050

Net revenues by geography are based on the billing addresses of the Company's customers and a reconciliation of disaggregated revenues by segment follows:


	Three months ended September 30, 2021
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	75,100	$	28,952	$	68,909	$	172,961
Europe, Middle East, and Africa	30,591		29,425		36,182		96,198
Asia Pacific and China	17,969		3,084		20,299		41,352
Mexico, Central America, and South America	5,789		34		337		6,160
Elimination	—		—		—		(6,466)
Consolidated net revenues	$	129,449	$	61,495	$	125,727	$	310,205


	Three months ended September 30, 2020
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	47,118	$	—	$	—	$	47,118
Europe, Middle East, and Africa	17,528		—		—		17,528
Asia Pacific and China	5,901		—		—		5,901
Mexico, Central America, and South America	346		—		—		346
Consolidated net revenues	$	70,893	$	—	$	—	$	70,893


	Six months ended September 30, 2021
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	146,231	$	48,801	$	98,482	$	293,514
Europe, Middle East, and Africa	60,651		51,207		48,872		160,730
Asia Pacific and China	34,759		5,686		27,635		68,080
Mexico, Central America, and South America	8,191		738		379		9,308
Elimination	—		—		—		(8,812)
Consolidated net revenues	$	249,832	$	106,432	$	175,368	$	522,820


	Six months ended September 30, 2020
	ODM		IAM-A		IAM-F		Total
United States and Canada	$	85,358	$	—	$	—	$	85,358
Europe, Middle East, and Africa	32,883		—		—		32,883
Asia Pacific and China	11,112		—		—		11,112
Mexico, Central America, and South America	552		—		—		552
Consolidated net revenues	$	129,905	$	—	$	—	$	129,905

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill, net, by segment follow:


	ODM		IAM-A		IAM-F		Consolidated
Goodwill as of March 31, 2021	$	80,176	$	—	$	—	$	80,176
Purchase of AdColony	—		200,875		—		200,875
Purchase of Fyber	—		—		300,705		300,705
Foreign currency translation and other	—		(6,544)		(16,179)		(22,723)
Goodwill as of September 30, 2021	$	80,176	$	194,331	$	284,526	$	559,033

Intangible Assets

The components of intangible assets as of September 30, 2021, and March 31, 2021, were as follows:


	As of September 30, 2021
	(Unaudited)
	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	12.57 years	$	176,286	$	(11,850)	$	164,436
Developed technology	6.76 years	153,839		(18,792)		135,047
Trade names	6.69 years	68,959		(4,000)		64,959
Publisher relationships	19.25 years	104,954		(1,868)		103,086
Total		$	504,038	$	(36,510)	$	467,528


	As of March 31, 2021
	Weighted-Average Remaining Useful Life	Cost		Accumulated Amortization		Net
Customer relationships	16.81 years	$	46,400	$	(4,171)	$	42,229
Developed technology	9.12 years	20,526		(11,141)		9,385
Trade names	9.92 years	2,000		(314)		1,686
Total		$	68,926	$	(15,626)	$	53,300

The Company recorded amortization expense of $13,999 and $21,100, respectively, during the three and six months ended September 30, 2021, and $670 and $1,341, respectively, during the three and six months ended September 30, 2020, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

Estimated amortization expense in future fiscal years is expected to be:


Remainder of fiscal year 2022	$	27,550
Fiscal year 2023	55,101
Fiscal year 2024	55,101
Fiscal year 2025	46,821
Fiscal year 2026	44,878
Thereafter	238,077
Total	$	467,528

6. Accounts Receivable


		December 31, 2020		March 31, 2020			September 30, 2021		March 31, 2021
		(Unaudited)					(Unaudited)
Billed	Billed	$	28,672	$	18,927	Billed	$	158,856	$	28,636
Unbilled	Unbilled	35,268		18,267		Unbilled	76,692		38,837
Allowance for doubtful accounts		(4,913)		(4,059)
Allowance for credit losses						Allowance for credit losses	(7,441)		(5,488)
Accounts receivable, net	Accounts receivable, net	$	59,027	$	33,135	Accounts receivable, net	$	228,107	$	61,985

Billed accounts receivable ~~represents~~represent amounts billed to customers ~~that have yet~~for which the Company has an unconditional right to ~~be collected.~~consideration. Unbilled accounts receivable represents ~~revenue~~revenues recognized but billed after ~~period end.~~period-end. All unbilled receivables as of ~~December 31, 2020~~September 30, 2021, and March 31, ~~2020~~2021, are expected to be billed and collected (subject to the ~~reserve for~~ allowance for ~~doubtful accounts)~~credit losses) within twelve months.

Allowance for Credit Losses

The Company maintains reserves for current expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves.

The Company recorded ~~$187~~$73 and ~~$415~~$181 of bad debt expense during the three and ~~nine~~six months ended ~~December 31, 2020 ,~~September 30, 2021, respectively, and ~~$56~~$136 and ~~$184~~$228 of bad debt expense during the three and ~~nine~~six months ended ~~December 31, 2019.~~

September 30, 2020, respectively, in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

6.7. Property and Equipment


		December 31, 2020		March 31, 2020			September 30, 2021		March 31, 2021
		(Unaudited)					(Unaudited)
Computer-related equipment	Computer-related equipment	$	2,141	$	1,953	Computer-related equipment	$	2,653	$	2,263
Developed software	Developed software	15,989		9,696		Developed software	27,550		18,473
Furniture and fixtures	Furniture and fixtures	689		681		Furniture and fixtures	1,995		714
Leasehold improvements	Leasehold improvements	2,147		2,099		Leasehold improvements	3,715		2,182
Property and equipment, gross	Property and equipment, gross	20,966		14,429		Property and equipment, gross	35,913		23,632
Accumulated depreciation	Accumulated depreciation	(9,296)		(6,246)		Accumulated depreciation	(13,797)		(10,582)
Property and equipment, net	Property and equipment, net	$	11,670	$	8,183	Property and equipment, net	$	22,116	$	13,050

Depreciation expense was ~~$1,151~~$2,329 and ~~$3,052~~$3,881 for the three and ~~nine~~six months ended ~~December 31, 2020,~~September 30, 2021, respectively, and ~~$540~~$1,018 and ~~$1,484~~$1,900 for the three and ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, respectively. Depreciation expense for the three and ~~nine~~six months ended ~~December 31, 2020~~September 30, 2021, includes ~~$403~~$961 and ~~$1,081,~~$1,821, respectively, related to internal-use assets included in general and administrative expense and ~~$748~~$734 and ~~$1,971,~~$1,426, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue. Depreciation expense for the three and ~~nine~~six months ended ~~December 31, 2019~~September 30, 2020, includes ~~$140~~$356 and ~~$462,~~$678, respectively, related to internal-use assets included in general and administrative expense and ~~$400~~$662 and ~~$1,022,~~$1,222, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.

7.8. Leases

The Company has entered into various ~~non-cancelable~~non-cancellable operating lease agreements for certain ~~offices.~~offices as well as assumed various leases through its recent acquisitions. These leases currently have lease periods expiring between fiscal years ~~2024~~2022 and ~~2026.~~2029. The lease agreements may include 1 or more options to renew. Renewals were not assumed in the Company's determination of the lease term unless the renewals were deemed to be reasonably assured at lease commencement. ~~Our~~The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The components of lease costs, weighted-average lease term, and discount ~~rate~~rates are detailed below.

Schedule, by fiscal year, of maturities of lease liabilities as of:


	~~December 31, 2020~~September 30, 2021
	(Unaudited)
Remainder of fiscal year ~~2021~~2022	$	~~366~~
~~Fiscal year 2022~~	~~1,493~~2,724
Fiscal year 2023	~~1,549~~4,576
Fiscal year 2024	~~1,374~~4,101
Fiscal year 2025	~~1,081~~3,028
Fiscal year 2026	2,578
Thereafter	~~882~~3,000
Total undiscounted cash flows	~~6,745~~20,007
(Less imputed interest)	~~(853)~~(1,778)
Present value of lease liabilities	$	~~5,892~~18,229

The current portion of ~~our~~the Company's lease liabilities, payable within the next 12 months, is included in other current liabilities, and the long-term portion of ~~our~~the Company's lease liabilities is included in other non-current liabilities on ~~our Consolidated Balance Sheets.~~the condensed consolidated balance sheets.

Associated with ~~this~~these financial ~~liability,~~liabilities, the Company has a right-of-use ~~asset~~assets of ~~$3,807~~$17,914 as of ~~December 31, 2020,~~September 30, 2021, which is calculated using the present value of lease liabilities less any lease incentives received from ~~our~~ landlords and any deferred rent liability ~~balance~~balances as of the date of implementation. The discount ~~rate~~rates used to calculate the imputed interest above ~~ranges~~range from ~~5.50%~~2.00% to 6.75% and the weighted-average remaining lease term is ~~4.59~~4.89 years.

~~8. Intangible Assets~~

~~The components of intangible assets at December 31, 2020 and March 31, 2020 were as follows:~~

As of December 31, 2020
(Unaudited)
Cost Accumulated Amortization Net
Developed technology $ 7,926 $ (6,101) $ 1,825
Customer relationships 46,971 (6,925) 40,046
Total $ 54,897 $ (13,026) $ 41,871

As of March 31, 2020
Cost Accumulated Amortization Net
Developed technology $ 7,926 $ (5,861) $ 2,065
Customer relationships 46,971 (5,154) 41,817
Total $ 54,897 $ (11,015) $ 43,882

The Company recorded amortization expense of $670 and $2,011, respectively, during the three and nine months ended December 31, 2020 and $0 during the three and nine months ended December 31, 2019. Amortization expense for the three and nine months ended December 31, 2020 is a component of general and administrative operating expenses in the Consolidated Statements of Operations and Comprehensive Income / (Loss). The determination of the expense category for amortization of intangible assets is determined by capitalization under ASC 350, Intangibles - Goodwill and Other, or ASC 985-20, Costs of Software to be Sold, Leased, or Otherwise Marketed. ASC 350 leads to accounting for amortization of intangible assets under operating expenses, while ASC 985-20 leads to accounting for amortization of intangible assets under other direct costs of revenues.

Based on the amortizable intangible assets as of December 31, 2020, the Company expects future amortization expense to be approximately $2,681 per year over the next five fiscal years and $28,465 in residual expense thereafter.

9. Debt

~~Senior Secured Credit Facility~~The following table summarizes borrowings under the Company's debt obligations and the associated interest rates:


	September 30, 2021
	Balance		Interest Rate		Unused Line Fee
Revolver (subject to variable rate)	$	247,134	1.91	%	0.20	%
Fyber - Discount Bank (subject to variable rate)	$	993	5.88	%	0.60	%
Fyber - Bank Leumi (subject to variable rate)	$	12,430	5.88	%	1.00	%

Debt obligations on the condensed consolidated balance sheets consist of the following:


	September 30, 2021		March 31, 2021
	(Unaudited)
Revolver	$	247,134	$	15,000
Less: Debt issuance costs	(3,133)		(443)
Debt assumed through Fyber Acquisition	13,423		—
Total debt, net	257,424		14,557
Less: Current portion of debt	(13,423)		(14,557)
Non-current debt	$	244,001	$	—

Revolver

On ~~May 23, 2017,~~February 3, 2021, the Company entered into a ~~Business Finance Agreement~~credit agreement (the ~~“Credit Agreement”~~"Credit Agreement") with ~~Western Alliance~~ Bank of America, N.A. (“BoA”), which provides for a revolving line of credit (the ~~“Bank”~~"Revolver"). of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000. Funds are to be used for acquisitions, working capital, and general corporate purposes. The Credit Agreement ~~provided for a $5,000 total revolving credit facility.~~

~~On May 22, 2019,~~contains customary covenants, representations, and events of default and also requires the Company ~~amended its existing Credit Agreement~~to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

The Company incurred $469 in costs to secure the Revolver and had $15,000 drawn against the Revolver, classified as short-term debt on the condensed consolidated balance sheet, with remaining unamortized debt issuance costs of $443 as of March 31, 2021. Deferred debt issuance costs associated with the ~~Bank, to extend~~Revolver are recorded as a reduction of the carrying value of the debt on the condensed consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the ~~agreement~~loan to May 22, 2021, to increase the maximum available revolving credit and to modify the covenants as detailed below. The Credit Agreement, as amended, provided for up to a $20,000 total facility, subject to draw limitations derived from current levels of eligible domestic receivables.

~~The amounts advanced under the Credit Agreement, as amended, accrued~~ interest at prime, as published in the Wall Street Journal, plus 0.50%, subject to a 6.00% floor. The Credit Agreement contained customary covenants, representations, indemnities, and events of default.The obligations under the Credit Agreement were secured by a perfected first-position security interest in all assets of the Company and its subsidiaries. Two of the Company’s subsidiaries, Digital Turbine USA and Digital Turbine Media, were additional co-borrowers.expense.

On ~~February 28, 2020,~~April 29, 2021, the Company entered into ~~a new credit agreement~~an amended and restated Credit Agreement (the "New Credit ~~Agreement"~~Agreement”) with ~~the Bank,~~BoA, as a lender and administrative agent, and a syndicate of other lenders, which provides for ~~(1) a term loan of $20,000, the proceeds of which the Company used to pay a portion of the closing cash purchase price for the Acquisition, and (2)~~ a revolving line of credit of ~~$5,000~~up to ~~be used for working capital purposes. DT Media and DT USA are also additional co-borrowers under the New Credit Agreement.~~

The term loan must be repaid on a quarterly basis, beginning in July 2020, until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio.

$400,000. The revolving line of credit matures on ~~February 28, 2025.~~

~~Amounts outstanding under~~April 29, 2026, and contains an accordion feature enabling the ~~New Credit Agreement accrue interest at an annual rate equal~~Company to ~~LIBOR (or, if necessary, a broadly-adopted replacement index), subject to a 1.75% floor, plus 3.75%. The obligations under~~increase the ~~New Credit Agreement are secured by a perfected first-priority security interest in all the assets~~total amount of the revolver by $75,000 plus an amount that would enable the Company ~~and~~to remain in compliance with its ~~subsidiaries.~~consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a ~~fixed charge coverage~~maximum consolidated secured net leverage ratio and ~~total funded debt to~~minimum consolidated ~~adjusted EBITDA~~interest coverage ratio.

The New Credit Agreement contains representations and warranties by each of the parties to the New Credit Agreement, which were made only for purposes of the New Credit Agreement and as of specified dates. The representations, warranties and covenants in the New Credit Agreement were made solely for the benefit of the parties to the New Credit Agreement, are subject to limitations agreed upon by such parties, including being qualified by schedules, may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the New Credit Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

In connection with the Company entering into the New Credit Agreement with the Bank, on February 28, 2020, the Company and the Bank terminated the existing Credit Agreement, which was the previous revolving credit facility of the Company.

~~At December 31, 2020, there was $19,250 outstanding principal on the New Credit Agreement and the Company had $5,000 available to draw under the revolving line of credit.~~

~~The Company was in compliance with all covenants of the New Credit Agreement as of December 31, 2020.~~

~~On February 3, 2021, the Company entered into a new~~ ~~$100,000~~ revolving credit facility with Bank of America and, in connection therewith, terminated the New Credit Agreement and repaid all amounts outstanding thereunder. For further discussion, see Note "Subsequent Events."

~~Interest Income / (Expense)~~

The Company recorded $(266) and $(859), respectively, of interest income / (expense), net, during the three and nine months ended December 31, 2020. This is comprised of amortization of annual facility fees and interest accrued on drawn amounts under the New Credit Agreement, partially offset by interest income earned on cash balances.

In the prior fiscal year, the Company recorded $59 and $118, respectively, of interest income / (expense) during the three and nine months ended December 31, 2019. This is comprised of interest income earned on cash balances.

~~10. Fair Value Measurements~~

~~The inputs to the valuation techniques used to measure fair value are classified into the following categories:~~

~~Level 1: Quoted market prices in active markets for identical assets or liabilities.~~

~~Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.~~

~~Level 3: Unobservable inputs that are not corroborated by market data.~~

Under ASC 820, a fair value measurement of a nonfinancial asset considers a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. Therefore, fair value is a market-based measurement and not an entity-specific measurement. It is determined based on assumptions that market participants would use in pricing the asset or liability. The exit price objective of a fair value measurement applies regardless of the reporting entity’s intent and/or ability to sell the asset or transfer the liability at the measurement date. The fair value was measured by applying the present value of the expected contingent payments to be made to a Monte Carlo probability-weighted discounted cash flow model for probabilities of possible future payments.

~~As of December 31, 2020, the carrying value of cash and cash equivalents, trade accounts receivables, and accounts payable approximates fair value due to the short-term nature of such instruments.~~

~~The following table summarizes the fair value of our financial assets and liabilities that are measured at fair value:~~

Level 1 Level 2 Level 3 As of December 31, 2020
Financial Liabilities
Estimated earn-out related to the purchase of Mobile Posse $ 0 0 10,000 $ 10,000
Total 0 0 10,000 10,000

The following table provides a reconciliation of the beginning and ending balances for the estimated contingent earn-out liability measured at fair value using significant unobservable inputs (Level 3):


	~~Level 3~~
~~Balance at March 31, 2020~~	$	~~23,735~~
~~Change in estimated earn-out consideration~~	~~15,419~~
~~Payment of earn-out consideration~~	~~(29,154)~~
~~Balance at December 31, 2020~~	$	~~10,000~~

~~11. Description of Stock Plans~~

~~Employee Stock Plan~~

On September 15, 2020, the Company’s stockholders approved the 2020 Equity Incentive Plan of Digital Turbine, Inc. (the “2020 Plan”), pursuant to which the Company may grant equity incentive awards to directors, employees and other eligible participants. A total of 12,000,000 shares of common stock are reserved for grant under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, and restricted stock units. The 2020 Plan became effective on September 15, 2020 and has a term of ten years. Stock options may be either “incentive stock options” (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options (“NQSOs”).

Previous to the approval of the Plan, stock awards were issued under the Amended and Restated Digital Turbine, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), which was approved and adopted by our stockholders by written consent on May 23, 2012. The 2011 Plan provided for grants of stock-based incentive awards to our and our subsidiaries’ officers, employees, non-employee directors, and consultants. Awards issued under the 2011 Plan can include stock options, stock appreciation rights, restricted stock, and restricted stock units. Stock options may be either ISOs, as defined in Section 422 of the Internal Revenue Code of 1986, as amended, or NQSOs.

~~The 2011 Plan and 2020 Plan are collectively referred to as "Digital Turbine's Incentive Plans."~~

The 2011 Plan reserved 20,000,000 shares for issuance, of which 0 and 6,366,088 remained available as of December 31, 2020 and March 31, 2020, respectively. No future grants will be issued pursuant to the 2011 Plan. At the point when the 2011 Plan was retired, 4,452,064 remained unissued. All future awards will be issued under the 2020 Plan.

The 2020 Plan reserves 12,000,000 shares for issuance, of which 11,965,342 remained available for issuance as of December 31, 2020. The change over the period represents stock option grants, stock option forfeitures/cancellations, and restricted shares/units of common stock of 34,658 shares, 0 shares, and 0 shares, respectively.

~~Restricted Stock Units~~

Awards of restricted stock units ("RSUs") may be either grants of time-based restricted units or performance-based restricted units that are issued at no cost to the recipient. The cost of these awards is determined using the fair market value of the Company’s common stock on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. Compensation expense for RSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario, which is re-evaluated each reporting period.

In June 2018, the Company issued 232,558 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $400.

In May 2019, the Company issued 109,416 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $413.

In May 2020, the Company issued 109,034 RSUs to its Chief Executive Officer and Chief Financial Officer. The shares vest over three years. The fair value of the shares on the date of issuance was $700.

With respect to RSUs, the Company expensed $126 and $339 during the three and nine months ended December 31, 2020, respectively, and $68 and $152 during the three and nine months ended December 31, 2019, respectively. Remaining unamortized expense, with respect to RSUs, of $815 is expected to be recognized over a weighted-average period of approximately 2.42 years.

Number of Shares Weighted-Average Grant Date Fair Value
Unvested restricted units outstanding as of March 31, 2020 293,525 $ 2.48
Granted 109,034 6.42
Vested (77,321) 2.49
Cancelled 0 0
Unvested restricted units outstanding as of December 31, 2020 325,238 $ 3.91

~~Stock Option Agreements~~

~~Stock options granted under Digital Turbine's Incentive Plans typically vest over a~~ ~~three~~-to-four year period. These options, which are granted with option exercise prices equal to the fair market value of the Company’s common stock on the date of grant, generally expire up to ten years from the date of grant. Compensation expense for all stock options is recognized on a straight-line basis over the requisite service period.

~~Stock Option Activity~~

~~The following table summarizes stock option activity for Digital Turbine's Incentive Plans for the periods or as of the dates indicated:~~

Number of
Shares Weighted Average
Exercise Price (per share) Weighted Average
Remaining Contractual
Life (in years) Aggregate Intrinsic
Value (in thousands)
Options Outstanding, March 31, 2020 8,984,430 $ 2.75 7.17 $ 16,517
Granted 1,937,462 6.47
Forfeited / Cancelled (282,840) 5.58
Exercised (1,979,387) 2.99
Options Outstanding, December 31, 2020 8,659,665 3.44 7.11 460,038
Vested and expected to vest (net of estimated forfeitures) at December 31, 2020 (a) 7,784,550 3.14 6.90 415,871
Exercisable, December 31, 2020 4,870,289 $ 2.43 6.10 $ 263,634

(a) For options vested and expected to vest, options exercisable, and options outstanding, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Digital Turbine's closing stock price on December 31, 2020 and the exercise price multiplied by the number of in-the-money options) that would have been received by the option holders, had the holders exercised their options on December 31, 2020. The intrinsic value changes based on changes in the price of the Company's common stock.

~~Information about options outstanding and exercisable at December 31, 2020 is as follows:~~

Options Outstanding Options Exercisable
Exercise Price Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Life (Years) Number of Shares Weighted-Average Exercise Price
$0.00 - 5.00 6,008,608 $ 2.09 6.22 4,417,792 $ 2.08
$5.01 - 10.00 2,458,446 $ 5.67 9.10 446,846 $ 5.65
$10.01 - 15.00 126,272 $ 13.43 9.52 0 $ 0
$15.01 - 20.00 31,681 $ 15.54 9.53 3,734 $ 15.54
$30.01 - and over 34,658 $ 30.03 9.83 1,917 $ 30.03
8,659,665 3.44 7.11 4,870,289 2.43

~~Other information pertaining to stock options for Digital Turbine's Incentive Plans for the nine months ended December 31, 2020 and 2019, as stated in the table below, is as follows:~~

December 31,
2020 2019
Total fair value of options vested $ 3,340 $ 2,028
Total intrinsic value of options exercised (a) $ 52,657 $ 10,364

(a) The total intrinsic value of options exercised represents the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price multiplied by the number of options exercised) that was received by the option holders who exercised their options during the nine months ended December 31, 2020 and 2019.

During the nine months ended December 31, 2020 and 2019, the Company granted options to purchase 1,937,462 and 1,738,750 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $6.47 and $4.34, respectively.

At December 31, 2020 and 2019, there was $6,495 and $3,518 of total unrecognized stock-based compensation expense, respectively, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted-average period of 2.12 and 2.16 years, respectively.

~~Valuation of Awards~~

~~For stock options granted under Digital Turbine's Incentive Plans,~~The Company incurred an additional $2,988 in costs for the ~~Company typically uses~~New Credit Agreement and had $247,134 drawn against the ~~Black-Scholes option pricing model to estimate~~revolving line of credit, classified as long-term debt on the ~~fair value~~condensed consolidated balance sheet, with remaining unamortized debt issuance costs of stock options at grant date. The Black-Scholes option pricing model incorporates various assumptions, including volatility, expected term, risk-free interest rates, and dividend yields. The assumptions utilized in this model for options granted during the nine months ended December 31, 2020 are presented below.


						~~December 31, 2020~~
~~Risk-free interest rate~~						~~0.21% to 0.36%~~
~~Expected life of the options~~						~~5.02 to 5.23 years~~
~~Expected volatility~~						~~64% to 69%~~
~~Expected dividend yield~~						0%
~~Expected forfeitures~~						~~28% to 29%~~

~~Expected volatility is based on a blend~~$3,133 as of ~~implied and historical volatility~~September 30, 2021, inclusive of the ~~Company's common stock over~~debt issuance costs for the ~~most recent period commensurate~~initial Credit Agreement discussed above. Deferred debt issuance costs associated with the ~~estimated expected term~~New Credit Agreement are recorded as a reduction of the Company’s stock options. The Company uses this blend of implied and historical volatility, as well as other economic data, because management believes such volatility is more representative of prospective trends. The expected term of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees.

Total stock compensation expense for Digital Turbine's Incentive Plans for the three and nine months ended December 31, 2020, which includes both stock options and restricted stock, was $160 and $4,126, respectively, inclusive of an adjustment during the three months ended December 31, 2020 of $(1,397) as a true-up related to the Company's adoption of ASU 2018-07. Although this is an out-of-period adjustment, the Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim period, nor to the three and nine months ended December 31, 2020. Therefore, we recorded the adjustment in the third quarter of fiscal year 2021 rather than revising prior periods presented. Total stock compensation expense for Digital Turbine's Incentive Plans for the three and nine months ended December 31, 2019, which includes both stock options and restricted stock, was $915 and $1,597, respectively. Please refer to Note "Capital Stock Transactions" regarding restricted stock.

~~12. Capital Stock Transactions~~

~~Preferred Stock~~

There are 2,000,000 shares of Series A Convertible Preferred Stock authorized, $0.0001 par value per share (“Series A”), and 100,000 shares of Series A issued and outstanding, which are currently convertible into 20,000 shares of common stock. The Series A holders are entitled to: (1) vote on an equal per-share basis as common stock, (2) dividends paid to the common stock holders on an if-converted basis, and (3) a liquidation preference equal to the greater of $10 per share of Series A (subject to adjustment) or such amount that would have been paid to the common stock holders on an if-converted basis.

~~Common Stock and Warrants~~

~~For the nine months ended December 31, 2020, the Company issued 1,979,387 shares of common stock from the exercise of options under Digital Turbine's Incentive Plans.~~

~~The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2020:~~

Number of Warrants Outstanding Weighted-Average Exercise Price
Outstanding as of March 31, 2020 25,000 $ 2.04
Issued 0 0
Exercised 0 0
Cancelled 0 0
Expired 0 0
Outstanding as of December 31, 2020 25,000 $ 2.04

~~Restricted Stock Awards~~

From time to time, the Company enters into restricted stock award (“RSAs”) agreements with certain employees, directors, and consultants. The RSAs have performance conditions, market conditions, time conditions, or a combination thereof. In some cases, once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period, from three months to two years, depending on the terms of the RSA, except for Company Board members and the Chief Executive Officer, who are subject to the Company's Board Member Equity Ownership Policy, which supersedes any post-vesting lock-up in RSAs that are applicable to such persons.

~~Service and Time Condition RSAs~~

~~Awards of restricted stock are grants of restricted stock that are issued at no cost to the recipient. The cost of these awards is determined using the fair market~~carrying value of the ~~Company’s common stock~~debt on the ~~date of the grant. Compensation expense for restricted stock awards with a service and time condition is recognized~~condensed consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the ~~requisite service period.~~term of the loan to interest expense.

Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) London Inter-Bank Offered Rate ("LIBOR") plus between 1.50% and 2.25%, based on the Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA's prime rate, or (c) LIBOR plus 1.00% plus between 0.50% and 1.25%, based on the Company’s consolidated leverage ratio. Additionally, the New Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio. As of September 30, 2021, the interest rate was 1.91% and the unused line of credit fee was 0.20%.

~~In July 2019,~~The Company’s payment and performance obligations under the New Credit Agreement and related loan documents are secured by its grant of a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company ~~issued 75,494 restricted shares~~acquires any real property assets with a fair market value in excess of $5,000, it is required to ~~its Board~~grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.

As of ~~Directors for their next annual service period. The shares vest quarterly over one year.~~September 30, 2021, the Company had $152,866 available to withdraw on the revolving line of credit under the New Credit Agreement and was in compliance with all covenants. The fair value of the ~~shares~~Company’s outstanding debt approximates its carrying value.

Debt Assumed Through Fyber Acquisition

As a part of the Fyber Acquisition, the Company assumed $20,415 of debt previously held by Fyber. This debt was comprised of amounts drawn against three separate revolving lines of credit. During the fiscal second quarter 2022 ended September 30, 2021, the Company settled the balance on one of the lines of credit in the amount of $3,834. Details for the remaining two lines of credit can be found in the first table in this note. The balance of these two lines of credit is classified as short-term debt on the ~~date~~condensed consolidated balance sheet as of September 30, 2021. The remaining revolving lines of credit from Discount Bank and Bank Leumi mature on November 15, 2021, and December 30, 2021, respectively.

Interest income / (expense), net

Interest income / (expense), net, amortization of debt issuance ~~was $421.~~

~~In August 2020, the Company issued 45,110 restricted shares to its Board~~costs, and unused line of ~~Directors for their next annual service period. The shares vest quarterly over one year. The fair value of the shares~~credit fees were recorded in interest and other income / (expense), net, on the ~~date~~condensed consolidated statements of ~~issuance was $626.~~operations and comprehensive income, as follows:

With respect to time condition RSAs, the Company expensed $157 and $419 during the three and nine months ended December 31, 2020, respectively; and $105 and $318 during the three and nine months ended December 31, 2019, respectively.

~~The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2020:~~

Number of Shares Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2020 37,746 $ 5.58
Granted 45,110 13.88
Vested (49,023) 7.49
Unvested restricted stock outstanding as of December 31, 2020 33,833 $ 13.88

~~All restricted shares, vested and unvested, cancellable and not cancelled, have been included in the outstanding shares as of December 31, 2020.~~

At December 31, 2020, there was $365 of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested restricted stock awards expected to be recognized over a weighted-average period of approximately 0.58 years.


	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Interest income / (expense), net	$	(1,706)	$	(287)	$	(2,625)	$	(593)
Amortization of debt issuance costs	(178)		—		(310)		—
Unused line of credit fees and other	(71)		—		(177)		—
Total interest income / (expense), net	$	(1,955)	$	(287)	$	(3,112)	$	(593)

2221

10. Stock-Based Compensation

Equity Plan Activity

The following table summarizes stock option activity:


	Number of Shares	Weighted-Average Exercise Price (per share)		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options outstanding as of March 31, 2021	8,146,445	$	4.01	6.86	$	622,249
Granted	630,989	72.31
Forfeited / Cancelled	(214,884)	8.41
Exercised	(658,549)	3.27
Options outstanding as of September 30, 2021	7,904,001	$	9.40	6.65	$	473,227
Vested and expected to vest (net of estimated forfeitures) at September 30, 2021	7,784,152	$	9.04	6.61	$	468,633
Exercisable as of September 30, 2021	5,642,551	$	3.58	5.83	$	368,277

At September 30, 2021 and 2020, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was $28,197 and $8,956, respectively, with expected remaining weighted-average recognition periods of 2.48 years and 2.25 years, respectively.

The following table summarizes restricted stock unit ("RSU") and restricted stock award ("RSA") activity:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested restricted shares outstanding as of March 31, 2021	333,544	$	4.55
Granted	332,061	45.62
Vested	(298,350)	3.69
Cancelled	(3,526)	13.88
Unvested restricted shares outstanding as of September 30, 2021	363,729	$	42.65

At September 30, 2021 and 2020, total unrecognized stock-based compensation expense related to RSUs and RSAs was $12,152 and $1,463, respectively, with expected remaining weighted-average recognition periods of 2.32 years and 2.01 years, respectively.

Stock-Based Compensation Expense

~~13.~~As of September 30, 2021, 11,274,655 shares of common stock were available for issuance as future awards under the Company's equity incentive plans. Stock-based compensation expense for the three and six months ended September 30, 2021, was $5,926 and $9,631, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income. Stock-based compensation expense for the three and six months ended September 30, 2020, was $2,515 and $4,126, respectively, and was recorded within general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

11. Earnings per Share

Basic net income per common share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per common share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period and including the dilutive effects of employee stock-based awards outstanding during the period.

The following table sets forth the computation of basic and diluted net income ~~from continuing operations, net of taxes,~~ per share of common stock (in thousands, except per share amounts):

Three months ended December 31, Nine months ended December 31,
2020 2019 2020 2019
Income from continuing operations, net of taxes $ 14,515 $ 3,261 $ 24,828 $ 253
Weighted-average common shares outstanding, basic 89,003 85,876 88,140 83,869
Basic net income per common share $ 0.16 $ 0.04 $ 0.28 $ 0
Weighted-average common shares outstanding, diluted 96,976 92,472 95,563 89,759
Diluted net income per common share 0.15 0.04 0.26 0


	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Net income / (loss)	(5,887)		373		8,366		10,313
Less: net loss attributable to non-controlling interest	(35)		—		(66)		—
Net income / (loss) attributable to Digital Turbine, Inc.	$	(5,852)	$	373	$	8,432	$	10,313
Weighted-average common shares outstanding, basic	96,157		88,035		93,807		87,712
Basic net income / (loss) per common share attributable to Digital Turbine, Inc.	$	(0.06)	$	—	$	0.09	$	0.11
Weighted-average common shares outstanding, diluted	96,157		96,057		100,457		94,988
Diluted net income / (loss) per common share attributable to Digital Turbine, Inc.	$	(0.06)	$	—	$	0.08	$	0.11
Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive	6,563		—		—		—

~~14.~~12. I~~ncome~~Income Taxes

~~Our~~The Company's provision for income taxes as a percentage of pre-tax earnings (“effective tax rate”) is based on a current estimate of the annual effective income tax rate, adjusted to reflect the impact of discrete items. In accordance with ASC 740, Accounting for Income Taxes, jurisdictions forecasting losses that are not benefited due to valuation allowances are not included in our forecasted effective tax rate.

During the three and ~~nine~~six months ended ~~December 31, 2020,~~September 30, 2021, a tax benefit and provision of ~~$1,061~~$2,349 and ~~$2,098~~$1,081, respectively, resulted in an effective tax rate of ~~6.8%~~28.5% and ~~7.8%~~11.4%, respectively. Differences inbetween the tax provision and the statutory rate ~~are~~ primarily relate to state income taxes, nontaxable adjustments to the AdColony and Fyber earn-outs, and tax deductions for stock compensation that exceed the book expense.

The Company recorded a net increase to deferred tax liabilities of $35,733 in the fiscal first quarter 2022 ended June 30, 2021, related to the AdColony and Fyber acquisitions. The increase in deferred tax liabilities primarily resulted from the revaluation of the acquired intangible assets. The Company’s valuation allowance increased by $13,667 for certain acquired deferred tax assets of Fyber GmbH due to ~~changes~~a history of losses in the ~~valuation allowance.~~taxing jurisdiction. Net operating loss (NOL) carryforwards acquired in the AdColony and Fyber acquisitions were as follows:

AdColony

Jurisdiction

NOLs

Expiration Dates

U.S. Federal

$60,924

2032 through 2037

U.S. Federal

$47,704

Indefinite

State taxing jurisdictions

$129,685

2026 through 2041

Fyber

Jurisdiction

NOLs

Expiration Dates

Germany

$90,203

Indefinite

Israel

$17,885

Indefinite

During the three and ~~nine~~six months ended ~~December 31, 2019,~~September 30, 2020, a tax provision of ~~$41~~$661 and $6$1,037 resulted in an effective tax rate of ~~1.2%.~~63.9% and ~~2.3%~~9.1%, respectively. Differences in the tax provision and statutory rate are primarily due to changes in the valuation allowance.

~~15.~~

13. Commitments and Contingencies

Acquisition of AdColony

Under the terms of the AdColony Acquisition, the Company had an obligation to pay $100,000 in cash on or before October 26, 2021. The payment of $100,000 in cash was made on October 26, 2021. Please see Note 14, "Subsequent Events," for further information.

Contingent Earn-Out Considerations

The ~~Acquisition includes~~Company's recent acquisitions of AdColony and Fyber include contingent earn-out ~~consideration~~considerations as part of the purchase ~~price~~prices under which ~~the Company~~it will make future payments or issue shares of common stock to the ~~seller~~sellers upon the achievement of certain benchmarks. ~~The fair value~~

AdColony

Under the terms of the ~~contingent~~Share Purchase Agreement for the AdColony Acquisition, the Company must pay an earn-out ~~consideration~~estimated between $200,000 to $225,000 in cash following December 31, 2021. On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. This amount is ~~estimated~~included in acquisition price liabilities on the condensed consolidated balance sheet as of September 30, 2021.

Fyber

Under the ~~balance sheet date at the present value~~terms of the ~~expected contingent payments~~Fyber Acquisition, the Company may have to ~~be made using~~make an earn-out payment of up to $50,000 through the issuance of a ~~Monte Carlo probability-weighted discounted cash flow model for probabilities~~variable number of ~~possible future payments. Future payments are driven by~~shares of its common stock based on the ~~continued performance of the the Acquisition through~~30-day weighted average stock price prior to the end of the ~~earn-out~~earn out period ~~ending February 28, 2021. The~~or, under certain circumstances, cash, following March 31, 2022. As of September 30, 2021, the Company estimates the fair value ~~estimates use unobservable inputs that reflect our own assumptions as~~of this payment to the ability of the acquired business to meet the targeted benchmarks and discount rates used in the calculations. The unobservable inputs are defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” as Level 3 inputs discussed in detail in Note "Fair Value Measurements."

At December 31, 2020, the estimated contingent earn-out was $10,000, as compared to $23,735 at March 31, 2020. The Company recorded cash payments against the estimated contingent earn-out liability of $13,073 and $29,154 for the three and nine months ended December 31, 2020, respectively. Furthermore, the Company recorded adjustments to increase the remaining estimated earn-out by $4,662 and $15,419 during the three and nine months ended December 31, 2020, respectively, resulting in a net earn-out balance of $10,000 as of the balance sheet date. The increase in the remaining estimated earn-out is reflected as other income / (expense) on the Consolidated Statements of Operations and Comprehensive Income / (Loss).

be $31,000.

The Company ~~reviews~~will evaluate the ~~probabilities~~probability of ~~possible future payments to~~payment of the estimated fair value of ~~any~~the contingent earn-out consideration on a quarterly basis over the earn-out period. Actual results are compared to the estimates and probabilities of achievement used in forecasts. Should Fyber's actual results ~~of the acquired business~~ increase or decrease as compared to the estimates and assumptions used, the estimated fair value of the contingent earn-out consideration liability will increase or decrease. Changes in the estimated fair value of the contingent earn-out consideration, as a factor of a change in inputs, would be reflected in the Company's results of operations in the ~~period~~periods in which they are identified.

Acquisition Purchase Price Liability

The Company ~~believes that the value~~has recognized acquisition purchase price liability of $335,500 on its condensed consolidated balance sheet as of September 30, 2021, comprised of the following components:

•$100,000 of unpaid cash consideration for the AdColony Acquisition

•$204,500 of unpaid cash consideration for the AdColony Acquisition

•$31,000 of contingent earn-out ~~based on~~consideration for the ~~evaluation~~Fyber Acquisition

14. Subsequent Events

Acquisition of AdColony

Subsequent to its fiscal second quarter ended September 30, 2021, the Company drew an additional $98,000 under its New Credit Agreement in order to fund the payment of the ~~performance, is materially accurate as~~$100,000 of ~~December 31, 2020.~~unpaid consideration for the AdColony Acquisition due six months after the closing of the acquisition. The payment, which was made on October 26, 2021, was reduced to $98,175 due to an adjustment for the impact of accrued and unpaid taxes to the net working capital acquired.

Please refer to Note 3, "Acquisitions," for further information regarding the AdColony Acquisition.

~~16. Geographic Information~~

The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 2020 and 2019. Net revenues by geography are based on the billing addresses of our customers.

Three months ended December 31,
2020 2019
(Unaudited)
Net revenues
     United States and Canada $ 59,192 $ 22,486
     Europe, Middle East, and Africa 21,168 9,205
     Asia Pacific and China 7,047 3,731
     Mexico, Central America, and South America 1,185 594
Consolidated net revenues $ 88,592 $ 36,016
Nine months ended December 31,
2020 2019
(Unaudited)
Net revenues
     United States and Canada $ 144,550 $ 66,057
     Europe, Middle East, and Africa 54,051 24,129
     Asia Pacific and China 18,159 8,137
     Mexico, Central America, and South America 1,737 1,041
Consolidated net revenues $ 218,497 $ 99,364

~~17. Subsequent Event~~

~~New Credit Facility~~

On February 3, 2021, the Company entered into a Credit Agreement with Bank of America, N.A. (the “Bank”), which provides for a revolving line of credit of $100,000, with an accordion feature enabling the Company to increase the amount to up to $200,000, to be used for acquisitions, working capital, and general corporate purposes. Digital Turbine Media, Inc. (“DT Media”) and Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under the Credit Agreement.

~~The revolving line of credit matures on February 3, 2024.~~

Amounts outstanding under the Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index) plus an applicable margin which ranges from 1.50% to 2.25%, depending on the Company’s consolidated leverage ratio. The obligations under the Credit Agreement are secured by a grant of a security interest in substantially all of the assets of the Company and its subsidiaries. The Credit Agreement contains customary covenants, representations, and events of default, and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

~~The description of the Credit Agreement provided herein is qualified by reference to the Credit Agreement, which is attached to this Form 10-Q as Exhibit 10.1 and is incorporated by reference herein.~~

The Credit Agreement contains representations and warranties by each of the parties to the Credit Agreement, which were made only for the purposes of the Credit Agreement and, in some cases, as of specified dates. The representations, warranties, and covenants in the Credit Agreement were made solely for the benefit of the parties to the Credit Agreement, are subject to limitations agreed upon by such parties (including being qualified by schedules), may have been made for the purposes of allocating contractual risk between the parties instead of establishing these matters as facts, and are subject to standards of materiality applicable to the parties that may differ from those applicable to others. Others should not rely on the representations, warranties, and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after the date of the Credit Agreement and such subsequent information may or may not be fully reflected in the Company’s public disclosures.

~~Termination of Existing Credit Facility~~

In connection with the Company entering into the Credit Agreement with the Bank as described above, on February 3, 2021, the Company and Western Alliance Bank terminated the Credit Agreement, dated February 28, 2020, by and among the Company, DT Media, DT USA, and Western Alliance Bank (and the amendments thereto), which was the previous term loan and revolving credit facility of the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, the ~~Financial Statements~~condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (the “Report”). The following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seeks,” “should,” “could,” “would,” “may,” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the fiscal ~~year~~quarter ended ~~March 31, 2020,~~June 30, 2021, as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from ~~time to time~~time-to-time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

All numbers are in thousands, except share and per share amounts.

Company Overview

Digital Turbine, Inc., through its subsidiaries ~~simplifies content discovery~~(collectively "Digital Turbine" or the "Company"), is a leading end-to-end solution for mobile technology companies to enable advertising and ~~delivers it directly to the device.~~monetization solutions. Its ~~on-device~~digital media platform powers frictionless end-to-end application for brand discovery and ~~content discovery,~~advertising, user acquisition and engagement, operational efficiency, and monetization opportunities. ~~Through December 31, 2020, Digital Turbine's technology platform has been adopted by more than 40~~The Company provides on-device solutions to all participants in the mobile ~~operators~~application ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers ~~("OEMs"~~(“OEMs”) that participate in the app economy, app publishers and developers, and brands and advertising agencies.

Recent Developments

Credit Agreement

On February 3, 2021, the Company entered into a credit agreement (the "Credit Agreement") with Bank of America, N.A. (“BoA”), which provides for a revolving line of credit (the "Revolver") of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000. Funds are to be used for acquisitions, working capital, and ~~has delivered more than 4.8 billion application preloads~~general corporate purposes. The Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated leverage ratio and minimum fixed charge coverage ratio.

On April 29, 2021, the Company entered into an amended and restated Credit Agreement (the "New Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provides for ~~tens~~a revolving line of ~~thousands~~credit of ~~advertising campaigns.~~up to $400,000. The revolving line of credit matures on April 29, 2026 and contains an accordion feature enabling the Company ~~operates this business~~to increase the total amount of the revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as ~~one operating~~agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and ~~reportable segment - Media Distribution, which was previously referred~~events of default and also requires the Company to ~~as the operating segment O&O (which refers to operators~~comply with a maximum consolidated secured net leverage ratio and ~~OEMs) and the reportable segment Advertising.~~

As the Company's suite of product offerings expands, both organically and through acquisition, we believe that this renaming of our reporting and operating segment better reflects the way management views the business. There are no changes or historical differences to product offerings and financial information that were referred to as the Advertising segment in prior periods. While advertising, in general, remains a focus of our Media Distribution segment, we feel that this change in name more accurately conveys to the reader what we do for our customers and partners.minimum consolidated interest coverage ratio.

2725

Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) the London Inter-Bank Offered Rate ("LIBOR") plus between 1.50% and 2.25%, based on the Company’s consolidated leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA's prime rate, or (c) LIBOR plus 1.00% plus between 0.50% and 1.25%, based on the Company’s consolidated leverage ratio. Additionally, the New Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio.

The ~~Company's Media Distribution business consists~~Company’s payment and performance obligations under the New Credit Agreement and related loan documents are secured by its grant of ~~products~~a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company acquires any real property assets with a fair market value in excess of $5,000, it is required to grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.

As of September 30, 2021, we had $247,134 drawn against the revolving line of credit under the New Credit Agreement with a maturity date of April 29, 2026. The proceeds were used to finance the acquisitions detailed below. As of September 30, 2021, we were in compliance with the consolidated leverage ratio, interest coverage ratio, and ~~services that simplify~~other covenants under the ~~discovery and delivery of mobile application and content media for consumers.~~New Credit Agreement.

Acquisitions

•Appreciate ~~Application Media represents the portion~~On March 1, 2021, Digital Turbine, through its subsidiary Digital Turbine (EMEA) Ltd. ("DT EMEA"), an Israeli company and wholly-owned subsidiary of the ~~business where our platform delivers apps~~Company, entered into a Share Purchase Agreement with Triapodi Ltd., an Israeli company (d/b/a Appreciate) (“Appreciate”), the stockholder representative, and the stockholders of Appreciate, pursuant to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track, and manage app install demand from hundreds of application developers across various publishers, carriers, OEMs, and devices.

•Content Media represents the portion of the business where our platform presents news, weather, sports, and other content directly within the native device experience (e.g., as the start page in the mobile browser, a widget,which DT EMEA acquired, on ~~unlock, etc.) through partnerships with carrier networks and OEMs. Content Media optimizes revenue by a combination of:~~

◦~~Programmatic Ad Partner Revenue – advertising within the content media that’s sold on an ad exchange at a market rate (CPM - Cost Per Thousand);~~

◦~~Sponsored Content – sponsored content media from 3~~rd ~~party content providers, presented similarly to an ad, that is monetized when a recommended story is viewed (CPC – Cost Per Click);~~

◦~~Editorial Content – owned or licensed media, presented similarly to an ad, that is monetized when the media is clicked on (CPC - Cost Per Click).~~

~~Recent Developments~~

~~On February 28, 2020, the Company completed the acquisition of Mobile Posse, Inc. (the "Acquisition") from ACME Mobile, LLC (“ACME”). The Company acquired~~March 2, 2021, all of the outstanding capital stock of ~~Mobile Posse~~Appreciate in exchange for total consideration of $20,003 in cash (the "Appreciate Acquisition"). Under the terms of the Purchase Agreement, DT EMEA entered into bonus arrangements to pay up to $6,000 in retention bonuses and performance bonuses to the founders and certain other employees of Appreciate. None of the goodwill recognized was deductible for tax purposes.

AdColony Holding AS. On April 29, 2021, the Company completed the acquisition of AdColony Holding AS, a Norway company (“AdColony”), pursuant to a Share Purchase Agreement (the "AdColony Acquisition"). The Company acquired all outstanding capital stock of AdColony in exchange for an estimated total consideration ~~of:~~in the range of $400,000 to $425,000, to be paid as follows: (1) ~~$41,500~~$100,000 in cash paid at closing (subject to customary closing purchase price adjustments), (2) $100,000 in cash to be paid six months after closing, and ~~(2)~~(3) an estimated earn-out in the range of ~~$23,735,~~$200,000 to $225,000, to be paid in cash, based on ~~Mobile Posse~~AdColony achieving certain future target net revenues, less associated ~~revenue shares,~~cost of goods sold (as such term is referenced in the Share Purchase Agreement), over a ~~twelve-month~~12-month period ending on December 31, 2021 (the “Earn-Out Period”) ~~following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation.~~. Under the terms of the earn-out, ~~over the Earn-Out Period,~~ the Company ~~will~~would pay ~~ACME~~the seller a certain percentage of actual net revenues (less associated ~~revenue shares)~~cost of ~~Mobile Posse~~goods sold, as such term is referenced in the Share Purchase Agreement) of AdColony, depending on the extent to which ~~Mobile Posse~~AdColony achieves certain target net revenues (less associated ~~revenue shares) for~~cost of goods sold, as such term is referenced in the ~~relevant period.~~Share Purchase Agreement) over the Earn-Out Period. The earn-out ~~payments~~payment will be ~~paid quarterly with a true-up calculation and payment after~~made following the ~~first nine months~~expiration of the Earn-Out Period. ~~The acquisition~~

AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of ~~cash is not reflected in~~AdColony, the ~~total consideration detailed above. Final working capital adjustments were determined during~~Company will expand its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the quarter ended June 30, 2020 and resulted in additional purchase price consideration of $453, which is reflected on the balance sheet as an increase in goodwill. As of December 31, 2020, $15,419 was addedglobe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to the previous estimated earn-out of $23,735. Of the amounts recorded and accrued related to the Acquisition, $29,154 had been paid to the seller and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out.inventory.

On ~~February 28, 2020,~~August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an $8,913 reduction of the earn-out payment obligation in change in fair value of contingent consideration on the condensed consolidated statements of operations and comprehensive income / (loss) in the fiscal second quarter ended September 30, 2021.

Fyber N.V. On May 25, 2021, the Company completed the initial closing of the acquisition of at least 95.1% of the outstanding voting shares (the ~~“New Credit Agreement”~~“Majority Fyber Shares”) ~~with Western Alliance Bank~~of Fyber N.V. (“Fyber”) pursuant to a Sale and Purchase Agreement (the ~~“Bank”~~"Fyber Acquisition") between Tennor Holding B.V., Advert Finance B.V., and Lars Windhorst (collectively, the “Seller”), ~~which provides~~the Company, and Digital Turbine Luxembourg S.ar.l., a wholly-owned subsidiary of the Company. The remaining outstanding shares in Fyber (the “Minority Fyber Shares”) are (to the Company's knowledge) widely held by other shareholders of Fyber (the “Minority Fyber Shareholders”) and are presented as non-controlling interests within these financial statements.

Fyber is a leading mobile advertising monetization platform empowering global app developers to optimize profitability through quality advertising. Fyber’s proprietary technology platform and expertise in mediation, real-time bidding, advanced analytics tools, and video combine to deliver publishers and advertisers a highly valuable app monetization solution. Fyber represents an important and strategic addition for ~~(1) a term loan~~the Company in its mission to develop one of ~~$20.0 million,~~ the ~~proceeds~~largest full-stack, fully-independent, mobile advertising solutions in the industry. The combined platform offering is advantageously positioned to leverage the Company’s existing on-device software presence and global distribution footprint.

The Company acquired Fyber in exchange for an estimated aggregate consideration of up to $600,000, consisting of:

ii.5,816,588 newly-issued shares of common stock of the Company ~~used~~ to ~~pay a portion~~the Seller, which such number of shares were determined based on the volume-weighted average price of the common stock on NASDAQ during the 30-day period prior to the closing date, equal in value to $359,233 at the Company's common stock closing price on May 25, 2021, as follows.

1.3,216,935 newly-issued shares of common stock of the Company equal in value to $198,678, issued at the closing of the acquisition;

2.1,500,000 newly-issued shares of common stock of the Company equal in value to $92,640, issued on June 17, 2021;

3.1,040,364 newly-issued shares of common stock of the Company equal in value to $64,253, issued on July 16, 2021;

iii.Contingent upon Fyber’s net revenues (revenues less associated license fees and revenue share) being equal to or higher than $100,000 for the 12-month earn-out period ending on March 31, 2022, as determined in the manner set forth in the Sale and Purchase Agreement, a certain number of shares of the Company's common stock, which will be newly-issued to the Seller at the end of the earn-out period, and under certain circumstances, an amount of cash, ~~purchase~~which value of such shares, based on the weighted average share price for the ~~Acquisition,~~30-days prior to the end of the earn-out period, and ~~(2)~~cash in aggregate will not exceed $50,000 (subject to set-off against certain potential indemnification claims against the Seller). Based on estimates at the time of the acquisition, the Company initially determined it was unlikely Fyber would achieve the earn-out net revenue target and, as a ~~revolving line~~result, no contingent liability was recognized at that time.

The Company paid the cash closing amount on the closing date with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility.

On September 30, 2021, the Company entered into the Second Amendment Agreement (the “Second Amendment Agreement”) to the Sale and Purchase Agreement for the Fyber Acquisition. Pursuant to the Second Amendment Agreement, the parties agreed to settle the remaining number of ~~$5.0 million~~shares of Company common stock to be ~~used for working capital purposes. DT Media~~issued to the Seller at 18,000 shares (i.e., a reduction of 41,289 shares from the 59,289 shares described in (ii)(4) above). As a result, the Company issued a total of 5,775,299 shares of Company common stock to the Seller in connection with the Company’s acquisition of Fyber.

As of September 30, 2021, based on current estimates, the Company determined that it is now likely that Fyber will achieve the earn-out net revenue target and, ~~Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under~~as a result, recognized the ~~New Credit Agreement.~~fair value of the contingent earn-out consideration of $31,000 as a charge to change in estimated contingent consideration on the condensed consolidated statements of operations and comprehensive income / (loss). The ~~term loan must be repaid~~Company will re-evaluate this estimate on a quarterly ~~basis beginning~~basis.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July ~~2020 until~~2021, and is subject to certain minimum price rules under German law. The timing and the ~~term loan maturity date~~conditions of ~~February 28, 2025, at which time~~the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the quarter ended September 30, 2021, the Company purchased approximately $21,000 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.4%. The Company expects to complete the purchase of the remaining ~~unpaid principal balance must be repaid.~~ outstanding Fyber shares during its fiscal third quarter 2022.

The ~~quarterly principal payment amounts increase from $0.25 million~~delisting of Fyber's remaining outstanding shares on the Frankfurt Stock Exchange was completed on August 6, 2021.

Segment Reporting

Prior to ~~$1.25 million over~~ the ~~term~~acquisitions of both AdColony and Fyber, the Company had one operating and reportable segment called Media Distribution. As a result of the ~~term loan.~~acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company reports its results of operations through the following three segments, each of which represents a reportable segment, as follows:

•On Device Media ("ODM") - This segment is the legacy single reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenues from services that deliver mobile application media or content media to end users. This segment's customers are mobile device carriers and OEMs that pay for the distribution of media. The ~~revolving line~~other reporting segments are not dependent on these mobile device carrier and OEM relationships.

•In App Media – AdColony("IAM-A") - This segment is inclusive of ~~credit matures~~the acquired AdColony business and generates revenues from services provided as an end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on ~~February 28, 2025. No amount was drawn on~~mobile devices around the ~~revolver as~~world. IAM-A customers are primarily advertisers.

•In App Media – Fyber ("IAM-F") - This segment is inclusive of ~~December 31, 2020. The Company’s Business Finance Agreement, dated May 23, 2017 (the “Credit Agreement”), with~~ the ~~Bank was terminated on February 28, 2020.~~

acquired Fyber business and generates revenues from services provided to mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making. IAM-F customers are primarily publishers.

~~Media Distribution Business~~Impact of COVID-19

Our results of operations are affected by economic conditions, including macroeconomic conditions, levels of business confidence, and consumer confidence. There is some uncertainty regarding the extent to which COVID-19 will impact our business and the demand for our service offerings. The ~~Company's Media Distribution business is an advertiser solution for unique~~extent to which COVID-19 impacts our operational and ~~exclusive carrier and OEM inventory, which is comprised of first boot and recurring life-cycle products, features, and professional services delivered through our platform.~~

~~Our software platform enables mobile operators and OEMs~~financial performance will depend on the impact to control, manage, and monetize devices through application installation at the time of activation and over the life of a device. The platform allows mobile operators to personalize the application activation experience for customers and monetize their home screens via revenue share agreements such as: Cost-Per-Install (CPI), Cost-Per-Placement (CPP), Cost-Per-Action (CPA) with third-party advertisers; or via Per-Device-License Fees (PDL) agreements, which allow operators and OEMs to leverage the platform, its products, and other features for a structured fee. Setup Wizard, Dynamic Installs, or Software Development Kit ("SDK") are the delivery methods available to operators and OEMs on first boot of the device. Additional products and features are available throughout the life-cycle of the device that provide operators and OEMs additional opportunity for media delivery revenue streams. The Company has launched its software with operatorscarriers and OEMs in ~~North America, Latin America, Europe, Israel,~~relation to their sales of smartphones, tablets, and ~~Asia-Pacific.~~

~~The acquisition of Mobile Posse provides an additional platform option, outside of our core platform,~~other devices, and on the impact to monetize user actions over the life-cycle of a device by delivering media rich advertising content to the end user and providing operators and OEMs with an additional opportunity for revenue streams synergistic with our core platform.

~~The Company's Media Distribution business consists of products and services that simplify the discovery and delivery of mobile application and content media for consumers.~~

•Application Media represents the portion of the business where our platform delivers apps to end users through partnerships with carrier networks and OEMs. Application Media optimizes revenues by using the developed technology to streamline, track and manage app install demand from hundreds of application developers ~~across various publishers, carriers, OEMs~~ and ~~devices.~~

•Content Media represents the portion of the business where our platform presents news, weather, sports and other content directly within the native device experience (e.g., as the start page in the mobile browser,in-app advertisers. If COVID-19 continues to have a ~~widget,~~significant negative impact on ~~unlock, etc.) through partnerships with carrier networks and OEMs. Content Media optimizes revenue by~~global economic conditions over a ~~combination of:~~

▪~~Programmatic Ad Partner Revenue – advertising within the content media that’s sold on an ad exchange, at a market rate (CPM - Cost Per Thousand),~~

▪~~Sponsored Content – sponsored content media from 3~~rd ~~party content providers – presented similar to an ad – that is monetized when a recommended story is viewed (CPC – Cost Per Click)~~

▪~~Editorial Content – owned or licensed media – presented similar to an ad – that is monetized when the media is clicked on (CPC - Cost Per Click).~~

~~Disposition of the Content Reportable Segment and A&P Business~~

~~On April 29, 2018, the Company entered into two distinct disposition agreements with respect to select assets owned by our subsidiaries.~~

DT APAC and DT Singapore (together, “Pay Seller”), each wholly-owned subsidiaries of the Company, entered into an Asset Purchase Pay Agreement (the “Pay Agreement”), dated April 23, 2018, with Chargewave Ptd Ltd (“Pay Purchaser”) to sell certain assets (the “Pay Assets”) owned by the Pay Seller related to the Company’s Direct Carrier Billing business. The Pay Purchaser is principally owned and controlled by Jon Mooney, an officer of the Pay Seller. At the closing of the asset sale, Mr. Mooney was no longer employed by the Company or Pay Seller. As consideration for this asset sale, Digital Turbine is entitled to receive certain license fees, profit-sharing, and equity participation rights as outlined in the Company’s Form 8-K filed May 1, 2018 with the SEC. The transaction was completed on July 1, 2018 with an effective date of July 1, 2018. With the sale of these assets, the Company exited the reporting segment of the business previously referred to as the Content business.

DT Media, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated April 28, 2018, with Creative Clicks B.V. (the “A&P Purchaser”) to sell business relationships with various advertisers and publishers (the “A&P Assets”) related to the Company’s Advertising and Publishing business. As consideration for this asset sale, we are entitled to receive a percentage of the gross profit derived from these customer agreements for aprolonged period of three years as outlined in the Company’s Form 8-K filed May 1, 2018 with the SEC. The transaction was completed on June 28, 2018 with an effective date of June 1, 2018. With the sale of these assets, the Company exited the operating segment of the business previously referred to as the A&P business, which was previously part of the Advertising segment, the Company's sole reporting segment (which is now Media Distribution).

~~These dispositions have allowed the Company to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.~~

~~Discontinued Operations~~

~~As a result of the dispositions, the~~time, our results of operations ~~from~~and financial condition could be adversely impacted. Presently, we are conducting business as usual, with some modifications to employee travel, employee work locations, and cancellation of certain marketing events, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our ~~Content reporting segment~~business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and A&P business within the Media Distribution reporting segment, previously referred to as the Advertising segment, are reported as “Loss from discontinued operations, net of taxes” and the related assets and liabilities are classified as “held for disposal" on the prior comparative period Consolidated Financial Statements in Item 1 of this Quarterly Report. The Company has recast prior period amounts presented within this report to provide visibility and comparability.stockholders.

~~Results of Operations~~

All discussions in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, unless otherwise noted, relate to the remaining continuing operations in our sole operating segment after the dispositions, the Media Distribution business.

RESULTS OF OPERATIONS

(Unaudited)

Three months ended December 31, Nine months ended December 31,
2020 2019 % of Change 2020 2019 % of Change
(in thousands, except per share amounts) (in thousands, except per share amounts)
Net revenues $ 88,592 $ 36,016 146.0 % $ 218,497 $ 99,364 119.9 %
License fees and revenue share 50,144 21,576 132.4 % 122,976 59,997 105.0 %
Other direct costs of revenues 749 400 87.3 % 1,971 1,022 92.9 %
Gross profit 37,699 14,040 168.5 % 93,550 38,345 144.0 %
Total operating expenses 17,182 9,908 73.4 % 50,295 28,058 79.3 %
Income from operations 20,517 4,132 396.5 % 43,255 10,287 320.5 %
Interest income / (expense), net (266) 59 (550.8) % (859) 118 (828.0) %
Change in fair value of warrant liability — (870) 100.0 % — (10,601) 100.0 %
Change in estimated contingent consideration (4,662) — (100.0) % (15,419) — (100.0) %
Other income / (expense) (13) (19) (31.6) % (51) 455 (111.2) %
Income from continuing operations before income taxes 15,576 3,302 371.7 % 26,926 259 10,296.1 %
Income tax provision 1,061 41 2,487.8 % 2,098 6 34,866.7 %
Income from continuing operations, net of taxes 14,515 3,261 345.1 % 24,828 253 9,713.4 %
Net income $ 14,515 $ 3,326 336.4 % $ 24,828 $ 82 30,178.0 %
Basic net income per common share $ 0.16 $ 0.04 300.0 % $ 0.28 $ — 100.0 %
Weighted-average common shares outstanding, basic 89,003 85,876 3.6 % 88,140 83,869 5.1 %
Diluted net income per common share $ 0.15 $ 0.04 275.0 % $ 0.26 $ — 100.0 %
Weighted-average common shares outstanding, diluted 96,976 92,472 4.9 % 95,563 89,759 6.5 %

Net revenues


	Three months ended September 30,						Six months ended September 30,
	2021		2020		% of Change		2021		2020		% of Change
Net revenues
On Device Media	$	129,449	$	70,893	82.6	%	$	249,832	$	129,905	92.3	%
In App Media - AdColony	61,495		—		100.0	%	106,432		—		100.0	%
In App Media - Fyber	125,727		—		100.0	%	175,368		—		100.0	%
Elimination	(6,466)		—		(100.0)	%	(8,812)		—		(100.0)	%
Total net revenues	$	310,205	$	70,893	337.6	%	$	522,820	$	129,905	302.5	%

Comparison of the three and ~~nine~~six months ended ~~December 31,~~September 30, 2021 and 2020

Over the three-month comparative periods, net revenues increased by 337.6% ($239,312), and ~~2019~~over the six-month comparative periods, net revenues increased by 302.5% ($392,915). The changes are due to a combination of continuing organic growth of the Company's historical legacy business (now the On Device Media segment) and contributions from recent acquisitions.

~~Net~~On Device Media

The Company's On Device Media segment generates revenues

~~During~~ from services that deliver mobile application media or content media to end users. This segment is the legacy single reporting segment of Digital Turbine (previously called Media Distribution) and its customers are mobile device carriers and OEMs that pay for the distribution of media. Over the three and ~~nine~~six months ended ~~December 31, 2020, there was an approximately $52,576 or 146.0%~~September 30, 2021, On Device Media revenues increased by 82.6% ($58,556) and ~~$119,133 or 119.9% increase in overall revenue,~~92.3% ($119,927), respectively, as compared to the three and ~~nine~~six months ended ~~December 31, 2019.~~

September 30, 2020. The Company's Media Distribution business is an advertiser solution for unique and exclusive carrier and OEM inventory. During the three and nine months ended December 31, 2020 and 2019, the Media Distribution business,increase was primarily through silent application delivery, was the main driver of our revenues. Application Media revenue totaled $56,938 and $150,228, respectively, for the three and nine months ended December 31, 2020, while Content Media revenue, primarily related to the Acquisition, totaled $31,654 and $68,269, respectively. Our application delivery and management software enables operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a device. This increase in net revenues was attributabledue to increased demand for our ~~core~~application media and content media distribution services, which led to higher CPI and CPP ~~revenue~~revenues per available placement, ~~and which was driven primarily by~~as well as increased ~~revenue~~revenues from advertising partners as placement across existing commercial partners ~~expands, as well as~~ expanded, distribution with new partners expanded, and ~~the deployment or expansion of~~ new services and features ~~and through acquisition.~~were deployed or expanded upon.

~~With respect to customer revenue concentration, the Company defines a customer~~In App Media - AdColony

The Company's IAM-A segment generates revenues from services provided as an ~~advertiser or a carrier that is a distinct source of revenue~~end-to-end platform for brands, agencies, publishers, and application developers to deliver advertising to consumers on mobile devices around the world and is ~~legally bound to pay for~~comprised of the ~~services that the Company delivers on the advertiser’s or carrier's behalf. During~~AdColony Acquisition and, as a result, there are no revenues in the three and ~~nine~~six months ended ~~December 31, 2020, no single customer represented 10.0% or greater of the Company's net revenues. During the three and nine months ended December 31, 2019, Verizon Communications Inc.,~~September 30, 2020. IAM-A customers are primarily ~~through its subsidiary Oath Inc., represented 14.4% and 17.7%, respectively, of net revenues.~~advertisers. Please see Note 3, "Acquisitions," for further information.

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~~With respect~~In App Media - Fyber

The Company's IAM-F segment generates revenues from services provided to ~~revenue partner concentration,~~mobile application developers and digital publishers to monetize their content through advanced technologies, innovative advertisement formats, and data-driven decision making, and is comprised of the ~~Company partners with mobile carriers~~Fyber Acquisition and, ~~OEMs to deliver applications on our platform through the carrier network. During~~as a result, there are no revenues in the three and ~~nine~~six months ended ~~December 31, 2020, Verizon Wireless, a carrier partner, generated 16.5%~~September 30, 2020. IAM-F customers are primarily publishers. Please see Note 3, "Acquisitions," for further information.

Costs of revenues and 18.6%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 20.3% and 22.0%, respectively; T-Mobile US Inc., including Sprint and other subsidiaries, generated 30.6% and 27.0%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 10.4% and 10.4%, respectively,operating expenses


	Three months ended September 30,						Six months ended September 30,
	2021		2020		% of Change		2021		2020		% of Change
Costs of revenues and operating expenses
License fees and revenue share	$	213,145	$	40,532	425.9	%	$	351,493	$	72,832	382.6	%
Other direct costs of revenues	3,838		662		479.8	%	6,371		1,222		421.4	%
Product development	17,904		4,217		324.6	%	33,451		8,625		287.8	%
Sales and marketing	17,479		4,835		261.5	%	31,215		9,153		241.0	%
General and administrative	41,307		8,531		384.2	%	64,613		15,335		321.3	%
Total costs of revenues and operating expenses	$	293,673	$	58,777	399.6	%	$	487,143	$	107,167	354.6	%

Comparison of ~~our net revenues. During~~ the three and ~~nine~~six months ended ~~December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5%~~September 30, 2021, and ~~40.3%, respectively;~~2020

Over the three and ~~AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively, of our net revenues.~~

A reduction or delay in operating activity from these customers or partners, or a delay or default in payment by these customers, or a termination of the Company's agreements with these customers, could materially harm the Company’s business and prospects.

~~Gross margin~~

Three months ended December 31, Nine months ended December 31,
2020 2019 % of Change 2020 2019 % of Change
(in thousands) (in thousands)
Gross margin $ $ 37,699 $ 14,040 168.5 % $ 93,550 $ 38,345 144.0 %
Gross margin % 42.6 % 39.0 % 9.2 % 43.0 % 38.6 % 11.4 %

~~Total gross margin, inclusive of the impact of other direct~~six months ended September 30, 2021, total costs of revenues ~~(including amortization~~and operating expenses increased by $234,896 and $379,976, respectively, compared to the three and six months ended September 30, 2020. The increase in total costs of ~~intangibles),~~revenues was ~~approximately $37,699 or 42.6%~~a result of continuing organic growth and ~~$93,550 or 43.0%~~the acquisitions of ~~net~~Appreciate, AdColony, and Fyber. Costs of revenues and operating expenses included transaction costs of $9,159 and $17,503, respectively, for the three and ~~nine~~six months ended ~~December 31, 2020 versus approximately $14,040 or 39.0%~~September 30, 2021, compared to $150 and ~~$38,345 or 38.6% of net revenues,~~$450, respectively, for the three and ~~nine~~six months ended ~~December 31, 2019.~~ September 30, 2020.

License fees and revenue share

License fees and revenue share are reflective of amounts paid to our carrier and OEM partners who drive the revenues generated from advertising via direct CPI, CPP, or CPA arrangements with application developers, or when indirect arrangements through advertising aggregators (ad networks) are shared with our carrier and application development partners and the shared revenue is recorded as a cost of revenue.

License fees and revenue share increased by $172,613 to $213,145 in the three months ended September 30, 2021, and were 68.7% as a percentage of total net revenues compared to $40,532 or 57.2% of total net revenues in the three months ended September 30, 2020.

License fees and revenue share increased by $278,661 to $351,493 in the six months ended September 30, 2021, and were 67.2% as a percentage of total net revenues compared to $72,832 or 56.1% of total net revenues in the six months ended September 30, 2020.

The increase in ~~gross margin~~license fees and revenue share was attributable to the increase in total net revenues over the comparative periods was $23,659 or 168.5% and $55,205 or 144.0%, respectively. Of the increases in gross profit and gross margin, application media delivery drove approximately $16,149 or 68.3% and $30,716 or 55.6%, respectively, of the period-over-period increases driven by continued organic expansionsame period as these costs are paid as a percentage of our platform while content media delivery contributed the remaining $7,510 or 31.7% and $24,489 or 44.4%, respectively, of the period-over-period increases largely driven from the additional content delivery solutions provided by the Acquisition.revenues. The increase in license fees and revenue share as a percentage of total net revenues was primarily ~~attributable~~due to ~~an increased yield from an improved mix~~our recent acquisitions having higher license fees and revenue cost percentages, which is largely due to contractual revenue share percentages that are higher than the legacy business.

Other direct costs of ~~partner diversification and non-dynamic application media install revenue on our Media Distribution platform and from a full two quarters~~revenues

Other direct costs of ~~accretive gross margin contribution from content media distribution from the Acquisition, as compared~~revenues are comprised primarily of hosting expenses directly related to the ~~prior comparative periods.~~

~~Operating expenses~~

Three months ended December 31, Nine months ended December 31,
2020 2019 % of Change 2020 2019 % of Change
(in thousands) (in thousands)
Product development $ 5,202 $ 2,783 86.9 % $ 13,827 $ 8,312 66.3 %
Sales and marketing 5,219 2,815 85.4 % 14,372 7,534 90.8 %
General and administrative 6,761 4,310 56.9 % 22,096 12,212 80.9 %
Total operating expenses $ 17,182 $ 9,908 73.4 % $ 50,295 $ 28,058 79.3 %

~~Total operating expenses~~generation of revenues and depreciation expense accounted for the three and nine months ended December 31, 2020 were approximately $17,182 and $50,295, respectively, and for the three and nine months ended December 31, 2019 were approximately $9,908 and $28,058, respectively, an increaseunder ASC 985-20, Costs of ~~approximately $7,274~~Software to be Sold, Leased, or 73.4% and $22,237 or 79.3% over the comparative periods, respectively. This change was a result of continued growth, including the acquisition of Mobile Posse. Company-wide cost control measures show the Company's ability to scale revenue at a greater rate than operating expense.Otherwise Marketed.

3230

Other direct costs of revenues increased by $3,176 to $3,838 in the three months ended September 30, 2021, and were 1.2% as a percentage of total net revenues compared to $662 or 0.9% of total net revenues in the three months ended September 30, 2020.

Other direct costs of revenues increased by $5,149 to $6,371 in the six months ended September 30, 2021, and were 1.2% as a percentage of total net revenues compared to $1,222 or 0.9% of total net revenues in the six months ended September 30, 2020.

The increase in other direct costs of revenues in both the three and six months ended September 30, 2021, compared to the prior year comparative periods, was primarily driven by our recent acquisitions and continued On-Device Media segment growth. The increase in other direct costs of revenues as a percentage of net revenues was primarily due to higher hosting expenses to support revenue growth.

Product development

Product development expenses include the development and maintenance of the Company's product ~~suite. Expenses in this area~~suite and are primarily a function of personnel.

Product development expenses increased by $13,687 to $17,904 in the three months ended September 30, 2021, and were 5.8% as a percentage of total net revenues compared to $4,217 or 5.9% of total net revenues in the three months ended September 30, 2020.

Product development expenses increased by $24,826 to $33,451 in the six months ended September 30, 2021, and were 6.4% as a percentage of total net revenues compared to $8,625 or 6.6% of total net revenues for the ~~three and nine~~six months ended December 31, 2020 were approximately $5,202 and $13,827, respectively, and for the three and nine months ended December 31, 2019 were approximately $2,783 and $8,312, respectively, an increase of approximately $2,419 or 86.9% and $5,515 or 66.3%, respectively, over the comparative periods. September 30, 2020.

The increase in product development expenses ~~over~~in both the three and six months ended September 30, 2021, compared to the prior year comparative periods, was primarily ~~attributable~~due to increased ~~product development~~ headcount, both ~~organic~~organically and through ~~the Acquisition,~~our recent acquisitions, and ~~other employee-related and~~incremental, third-party ~~development-related~~development costs ~~as the~~to support increased development activities. The Company continues to scale its product development organization to support revenue growth. For the ~~Company's growth.~~three and six months ended September 30, 2021, product development expenses included $455 and $1,910, respectively, of acquisition-related costs.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management.

Sales and marketing expenses ~~for~~increased by $12,644 to $17,479 in the three ~~and nine~~ months ended ~~December 31, 2020~~September 30, 2021, and were ~~approximately $5,219 and $14,372, respectively, and for~~5.6% as a percentage of total net revenues compared to $4,835 or 6.8% of total net revenues in the three ~~and nine~~ months ended ~~December 31, 2019~~September 30, 2020.

Sales and marketing expenses increased by $22,062 to $31,215 in the six months ended September 30, 2021, and were ~~approximately $2,815 and $7,534, respectively, an increase~~6.0% as a percentage of ~~approximately $2,404~~total net revenues compared to $9,153 or ~~85.4% and $6,838 or 90.8%, respectively, over the comparative periods.~~ 7.0% of total net revenues in six months ended September 30, 2020.

The increase in sales and marketing expenses ~~over~~in both the three and six months ended September 30, 2021, compared to the prior year comparative periods, was primarily ~~attributable to the addition of new personnel~~due to: (1) additional headcount in existing markets ~~related~~ to support the Company's continued expansion of its global footprint, ~~and increased commissions~~(2) higher commission costs associated with the ~~sales team generating more revenue~~increase in total net revenues through new and existing advertising relationships and ~~markets.~~markets, and (3) our recent acquisitions. For the three and six months ended September 30, 2021, sales and marketing expenses included $117 and $404, respectively, of acquisition-related costs.

General and administrative

General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense.

General and administrative expenses ~~for~~increased by $32,776 to $41,307 in the three months ended September 30, 2021, and were 13.3% as a percentage of total net revenues compared to $8,531 or 12.0% of total net revenues in the three months ended September 30, 2020. The three months ended September 30, 2021 and 2020 included acquisition-related costs of $8,587 and $150, respectively. Excluding acquisition-related costs, general and administrative expenses as a percentage of total net revenues were 10.5% and 11.8% in the three months ended September 30, 2021 and 2020, respectively.

General and administrative expenses increased by $49,278 to $64,613 in the six months ended September 30, 2021, and were 12.4% as a percentage of total net revenues compared to $15,335 or 11.8% of total net revenues in the six months ended September 30, 2020. The six months ended September 30, 2021 and 2020 included acquisition-related costs of $15,191 and $150, respectively. Excluding acquisition-related costs, general and administrative expenses as a percentage of total net revenues were 9.5% and 11.5% in the six months ended September 30, 2021 and 2020, respectively.

The increase in general and administrative expenses in both the three and ~~nine~~six months ended ~~December 31, 2020 were approximately $6,761 and $22,096, respectively, and for~~September 30, 2021, compared to the three and nine months ended December 31, 2019 were approximately $4,310 and $12,212, respectively, an increase of approximately $2,451 or 56.9% and $9,884 or 80.9%, respectively, over the comparative periods. The increase over theprior year comparative periods, was primarily ~~attributable~~due to the recent acquisitions of AdColony and Fyber. In addition, general and administrative expenses increase due to higher employee-related expenses, ~~as a function of~~including stock-based compensation, primarily from higher headcount ~~inclusive of~~to support the Company’s growth, higher professional service costs, and an ~~increase in the Company's annual accrued bonus expense,~~ increase in depreciation and amortization related to capitalized internal-use software, and continued growth including the acquisition of Mobile Posse. These increases in expense were partially offset by a true-up credit of $1,397 to stock option expense related to the Company's adoption of ASU 2018-07. Although this is an out-of-period adjustment, the Company determined that the adjustment was not material to the consolidated financial statements for any previously reported annual or interim period, nor to the three and nine months ended December 31, 2020. Therefore, we recorded the adjustment in the third quarter of fiscal year 2021 rather than revising prior periods presented.software.

Interest and other income / (expense), net

Three months ended December 31, Nine months ended December 31,
2020 2019 % of Change 2020 2019 % of Change
(in thousands) (in thousands)
Interest income / (expense), net $ (266) $ 59 (550.8) % $ (859) $ 118 (828.0) %
Change in fair value of warrant liability — (870) 100.0 % — (10,601) 100.0 %
Change in estimated contingent consideration (4,662) — (100.0) % (15,419) — (100.0) %
Other income / (expense) (13) (19) (31.6) % (51) 455 (111.2) %
Total interest and other income / (expense), net $ (4,941) $ (830) (495.3) % $ (16,329) $ (10,028) (62.8) %


	Three months ended September 30,						Six months ended September 30,
	2021		2020		% of Change		2021		2020		% of Change
Interest and other income / (expense), net
Interest expense, net	$	(1,955)	$	(287)	(581.2)	%	$	(3,112)	$	(593)	(424.8)	%
Change in fair value of contingent consideration	$	(22,087)	$	(10,757)	(105.3)	%	$	(22,087)	$	(10,757)	(105.3)	%
Foreign exchange transaction loss	(249)		—		(100.0)	%	(519)		—		(100.0)	%
Other expense, net	(477)		(38)		(1,155.3)	%	(512)		(38)		(1,247.4)	%
Total interest and other income / (expense), net	$	(24,768)	$	(11,082)	(123.5)	%	$	(26,230)	$	(11,388)	(130.3)	%

~~Total interest and other income / (expense), net, for~~

Comparison of the three and ~~nine~~six months ended ~~December 31,~~September 30, 2021 and 2020 ~~was approximately $4,941 and $16,329, respectively, and for~~

Interest expense, net

Over the three and ~~nine~~six months ended ~~December 31, 2019 was approximately $830~~September 30, 2021, interest expense, net, increased by $1,668 and ~~$10,028,~~increased by $2,519, respectively, ~~an increase in~~compared to the three and six months ended September 30, 2020, largely due to our borrowings under our New Credit Agreement with Bank of America, which were used for the cash portions of the purchase prices for our acquisitions of AdColony and Fyber, and, to a lesser degree, due to unused line fees under our New Credit Agreement and interest ~~and other income / (expense),~~on the loans we assumed through our acquisition of Fyber. Interest expense also includes the amortization of debt issuance costs related to our New Credit Agreement. These net ~~of approximately $4,111 or 495.3% and $6,301 or 62.8%, respectively, over the comparative periods. The increase in interest and other income / (expense), net,~~increases over the comparative periods ~~was primarily attributable~~were slightly offset by the settlement of one of Fyber's revolving lines of credit (please see Note 9, "Debt," for further information) and interest earned on our cash deposits.

Change in fair value of contingent consideration

On August 27, 2021, the Company entered into an Amendment to Share Purchase Agreement (the “Amendment Agreement”) with AdColony and Otello Corporation ASA, a Norway company (“Otello”) and AdColony's previous parent company. Pursuant to the Amendment Agreement, the Company and Otello agreed to set a fixed dollar amount of $204,500 for the earn-out payment obligation, to set January 15, 2022, as the payment due date for such payment amount, and to eliminate all of the Company’s earn-out support obligations under the Share Purchase Agreement. As a result, the Company recognized an $8,913 reduction in the earn-out payment obligation in change in fair value of ~~warrant liability, due to the conversion of all warrants during fiscal year 2020, as well as the change in estimated~~ contingent consideration ~~for adjustments to~~in the condensed consolidated statements of operations and comprehensive income in the second quarter ended September 30, 2021.

As of September 30, 2021, based on current estimates, the Company determined that it is now likely that Fyber will achieve the earn-out ~~due~~net revenue target and, as a result, recognized and accrued the fair value of the contingent earn-out consideration of $31,000 as a charge to ~~ACME. Interest and other income / (expense), net, includes net interest income / (expense),~~ change in fair value of ~~warrant liability, change in estimated~~ contingent consideration on the condensed consolidated statements of operations and ~~other ancillary~~comprehensive income / ~~(expense) earned or incurred by~~(loss). The fair value of the ~~Company.~~contingent consideration is subject to material changes based upon certain assumptions, primarily the estimated likelihood of Fyber achieving the earn-out net revenue target. Company will re-evaluate the fair value of the contingent consideration on a quarterly basis until the end of the earn-out period.

~~Interest income / (expense), net~~

~~The Company recorded $(266) and $(859), respectively, of interest income / (expense), net, during~~For the three and ~~nine~~six months ended ~~December 31, 2020. This is comprised~~September 30, 2020, as a part of ~~amortization~~our fiscal second quarter 2021 revaluation of ~~annual facility fees and interest accrued on drawn amounts under~~our earn-out liability for the ~~New Credit Agreement, partially offset~~acquisition of Mobile Posse, we increased our earn-out liability estimate by ~~interest income earned on cash balances.~~

~~In the prior fiscal year, the Company recorded $59 and $118, respectively, of interest income / (expense), net,~~$10,757 due to Mobile Posse's performance during the ~~three and nine months ended December 31, 2019. This is comprised~~quarter, per the terms of ~~interest income earned on cash balances.~~our Mobile Posse acquisition agreement.

Liquidity and Capital Resources

Our primary sources of liquidity are cash from operations and debt. As of ~~December 31, 2020,~~September 30, 2021, we had cash totaling approximately ~~$43,659~~$96,217 and ~~$5,000~~$247,134 drawn under, and $152,866 available to draw ~~on the~~under, our New Credit ~~Agreement.~~

~~On February 3, 2021, the Company entered into a new~~ ~~$100,000~~ ~~revolving credit facility~~Agreement with Bank of ~~America and, in connection therewith, terminated the~~America. The amount drawn under our New Credit Agreement is due by April 29, 2026, and ~~repaid all amounts outstanding thereunder. For further discussion, see Part II, Item 5~~is classified as long-term debt on our condensed consolidated balance sheet as of ~~this Form 10-Q.~~

~~Cash Flow Summary~~

Nine months ended December 31,
2020 2019 % of Change
(in thousands)
Consolidated statements of cash flows data:
Net cash provided by operating activities - continuing operations $ 48,612 $ 20,155 141.2 %
Acquisition of Mobile Posse (7,968) — (100.0) %
Capital expenditures (6,545) (3,179) (105.9) %
Payment of contingent consideration (16,957) — (100.0) %
Options and warrants exercised 5,927 6,353 (6.7) %
Repayment of debt obligations (750) — (100.0) %
Effect of exchange rate changes on cash (319) (364) 12.4 %

~~Operating Activities~~

~~During~~September 30, 2021. In addition, subsequently to our fiscal second quarter ended September 30, 2021, we drew an additional $98,000 under our New Credit Agreement in order to fund the ~~nine months ended December 31, 2020 and 2019, the Company's net~~$100,000 cash provided by operating activities from continuing operations was $48,612 and $20,155, respectively, a positive change of $28,457 or 141.2%. The increase in net cash provided by operating activities was primarily attributable to the Company's net incomepayment for the ~~nine~~AdColony Acquisition due six months ~~ended December 31, 2020~~after the closing of the acquisition and ~~the change in~~paid on October 26, 2021.

Our ability to meet our debt service obligations and to fund working capital, ~~accounts over the comparative periods.~~

During the nine months ended December 31, 2020, net cash provided by operating activities from continuing operations was $48,612, resulting from a net income of $24,828 offset by net non-cash expenses of $20,257,capital expenditures, and investments in our business will depend upon our future performance, which included depreciation and amortization, change in provision for doubtful accounts, non-cash interest expense, stock-based compensation, stock-based compensation for services rendered, change in estimated contingent consideration, and payment of contingent consideration in excess of amount capitalized at acquisition of approximately $5,062, $854, $55, $3,545, $741, 15,419, and $5,419, respectively. Net cash provided by operating activities during the nine months ended December 31, 2020 was also impacted by the change in net working capital accounts as of December 31, 2020 as comparedwill be subject to ~~March 31, 2020, with a net increase in current liabilities of approximately $28,630 (inclusive of accounts payable, accrued license fees and revenue share, accrued compensation,~~financial, business, and other ~~current liabilities) offset by a net increase in current assets~~factors affecting our operations, many of ~~approximately $25,048 (inclusive~~which are beyond our control, availability of ~~accounts receivable~~borrowing capacity under our credit facility, and ~~prepaid expenses~~our ability to access the capital markets. For example, these factors could include general and regional economic, financial, competitive, legislative, regulatory, and other ~~current assets but excluding cash) over~~factors. We cannot ensure that we will generate cash flow from operations, or that future borrowings or the ~~comparative periods. Lastly, net cash provided by operating activities during the nine months ended December 31, 2020 was also impacted by decreases~~capital markets will be available, in ~~right-of-use assets of $430~~an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We could face substantial liquidity problems and ~~other non-current liabilities of $485, mainly due~~could be forced to ~~the long-term components of our leases from our implementation of ASC 842.~~

~~Investing Activities~~

~~For the nine months ended December 31, 2020, net cash used in investing activities was approximately $14,513, which is comprised of~~reduce or delay investments and capital expenditures ~~related mostly~~or to ~~internally-developed software~~dispose of ~~$6,545~~material assets or operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, ~~additional consideration paid related~~even if successful, those alternative actions may not allow us to ~~working capital adjustments and earn-out payments in connection with~~meet our acquisition of Mobile Posse of $7,968. For the nine months ended December 31, 2019, net cash used in investing activities was approximately $3,179, which is comprised of capital expenditures related mostly to internally-developed software.

~~Financing Activities~~

~~For the nine months ended December 31, 2020, net cash used in financing activities was approximately $11,780, comprised of payment of contingent consideration of $16,957 and repayment of~~scheduled debt obligations of $750, offset by proceeds from the exercise of stock options of $5,927. For the nine months ended December 31, 2019, net cash provided by financing activities was approximately $6,353, comprised of proceeds from the exercise of stock options and warrants.service obligations.

The Company believes it has sufficient liquidity and capital resources to meet its business requirements for at least twelve months from the filing date of this ~~quarterly report~~Quarterly Report on Form 10-Q.

Acquisition Purchase Price Liability

The Company has recognized acquisition purchase price liability of $335,500 on its condensed consolidated balance sheet as of September 30, 2021, comprised of the following components:

•$100,000 of unpaid cash consideration for the AdColony Acquisition

•$204,500 of contingent earn-out consideration for the AdColony Acquisition

•$31,000 of contingent earn-out consideration for the Fyber Acquisition

The Company intends to pay this consideration with a combination of available cash-on-hand, borrowings under the Company’s New Credit Agreement, including utilizing the accordion feature of the senior credit facility if necessary, and proceeds from future capital financings.

Outstanding Secured Indebtedness

The Company’s outstanding secured indebtedness under the New Credit Agreement of $247,134 as of September 30, 2021, additional draw of $98,000 under the New Credit Agreement subsequent to its fiscal second quarter ended September 30, 2021, and ability to borrow additional amounts under its New Credit Agreement could have significant negative consequences, including:

•increasing the Company’s vulnerability to general adverse economic and industry conditions;

•limiting the Company’s ability to obtain additional financing;

•violating a financial covenant, potentially resulting in the indebtedness to be paid back immediately and thus negatively impacting our liquidity;

~~Senior Secured Credit Facility~~•requiring additional financial covenant measurement consents or default waivers without enhanced financial performance in the short term;

~~On May 23, 2017,~~•requiring the use of a substantial portion of any cash flow from operations to service indebtedness, thereby reducing the amount of cash flow available for other purposes, including capital expenditures;

•limiting the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which it competes, including by virtue of the requirement that the Company ~~entered into a Business Finance Agreement (the “Credit Agreement”)~~remain in compliance with ~~Western Alliance Bank (the “Bank”). The Credit Agreement provided for a $5,000 total revolving~~certain negative operating covenants included in the credit ~~facility.~~

On May 22, 2019, the Company amended its existing Credit Agreement with the Bank, to extend the term of the agreement to May 22, 2021, to increase the maximum available revolving credit and to make certain other amendments. The Credit Agreement, as amended, provided for up to a $20,000 total facility, subject to draw limitations derived from current levels of eligible domestic receivables.

~~On February 28, 2020, the Company entered into a new credit agreement (the "New Credit Agreement") with the Bank, which provides for (1) a term loan of $20,000, the proceeds of~~arrangements under which the Company ~~used~~will be obligated as well as meeting certain reporting requirements; and

•placing the Company at a possible competitive disadvantage to ~~pay~~less leveraged competitors that are larger and may have better access to capital resources.

Our credit facility also contains a ~~portion~~maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. There can be no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the ~~closing cash purchase price for the Acquisition, and (2)~~debt maturity. Any such default would have a ~~revolving line of credit of $5,000 to be used for working capital purposes. DT Media and DT USA are also additional co-borrowers under the New Credit Agreement.~~

~~The term loan must be repaid~~material adverse effect on a quarterly basis, beginning in July 2020, until the term loan maturity date of February 28, 2025, at which time the remaining unpaid principal balance must be repaid. The quarterly principal payment amounts increase from $250 to $1,250 over the term of the term loan. In addition, the Company must, following each fiscal year-end, make principal repayments equal to a percentage of its excess cash flow (as defined under the New Credit Agreement) for the fiscal year, which percentage is determined based on the Company’s total funded debt to consolidated adjusted EBITDA ratio.

~~The revolving line of credit matures on February 28, 2025.~~

Amounts outstanding under the New Credit Agreement accrue interest at an annual rate equal to LIBOR (or, if necessary, a broadly-adopted replacement index), subject to a 1.75% floor, plus 3.75%. The obligations under the New Credit Agreement are secured by a perfected first-priority security interest in all the assets of the Company and its subsidiaries. The New Credit Agreement contains customary covenants, representations and events of default, and also requires the Company to comply with a fixed charge coverage ratio and total funded debt to consolidated adjusted EBITDA ratio.

~~At December 31, 2020, there was $19,250 outstanding principal~~The collateral pledged to secure our secured debt, consisting of substantially all of our and our U.S. subsidiaries’ assets, would be available to the secured creditor in a foreclosure, in addition to many other remedies. Accordingly, any adverse change in our ability to service our secured debt could result in an event of default, cross default, and foreclosure or forced sale. Depending on the ~~New Credit Agreement and~~value of the assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.

Debt Assumed Through Fyber Acquisition

As a part of the Fyber Acquisition, the Company ~~had $5,000 available to draw under the~~assumed $20,415 of debt previously held by Fyber. This debt was comprised of amounts drawn against three separate revolving ~~line~~lines of credit.

~~The Company was in compliance with all covenants of the New Credit Agreement as of December 31, 2020.~~

~~On February 3,~~ During our fiscal second quarter 2022 ended September 30, 2021, the Company ~~entered into~~settled the balance on one of the lines of credit in the amount of $3,834. Details for the remaining two lines of credit can be found in Note 9, "Debt," of the condensed consolidated financial statements. The balance of these two lines of credit is classified as short-term debt on the condensed consolidated balance sheet as of September 30, 2021. The remaining revolving lines of credit from Discount Bank and Bank Leumi mature on November 15, 2021, and December 30, 2021, respectively.

Cash Flow Summary


	Six months ended September 30,
	2021		2020		% of Change
	(in thousands)
Consolidated statements of cash flows data:
Net cash provided by operating activities	$	7,754	$	29,666	(73.9)	%
Business acquisitions, net of cash acquired	(148,056)		(7,968)		(1,758.1)	%
Capital expenditures	(10,411)		(4,177)		(149.2)	%
Payment of contingent consideration	—		(9,302)		100.0	%
Proceeds from borrowings	267,134		—		100.0	%
Payment of debt issuance costs	(2,988)		—		(100.0)	%
Options and warrants exercised	2,155		3,526		(38.9)	%
Repayment of debt obligations	(46,256)		(250)		(18,402.4)	%
Effect of exchange rate changes on cash	(4,233)		(187)		(2,163.6)	%

Operating Activities

Cash provided by operating activities was $7,754 for the six months ended September 30, 2021, compared to $29,666 for the six months ended September 30, 2020. The decrease of $21,912 was due to the following:

•$58,979 decrease for changes in operating assets and liabilities, primarily due to the payout of accrued compensation related to the acquisitions and the Company's annual incentive plan, and a ~~new~~ ~~$100,000~~ ~~revolving credit facility with Bank of America~~decrease in net working capital assets, and ~~in connection therewith, terminated the New Credit Agreement and repaid all amounts outstanding thereunder. For further discussion, see Part II, Item 5 of this Form 10-Q.~~

3634

~~Earn-Out Payment Obligation Under Mobile Posse Stock Purchase Agreement~~•$37,067 increase due to higher non-cash charges, primarily for depreciation and amortization, changes in the fair value of contingent consideration, and stock-based compensation expense. These increase were primarily due to the impact of the Company's acquisitions on operating activities post-acquisition.

~~On February 28,~~Investing Activities

For the six months ended September 30, 2021, net cash used in investing activities was approximately $158,467, comprised of cash expenditures for business acquisitions, net of cash acquired, of $148,056 and capital expenditures related mostly to internally-developed software of $10,411. For the six months ended September 30, 2020, net cash used in investing activities was approximately $12,145, comprised of cash expenditures for business acquisitions, net of cash acquired, of $7,968 and capital expenditures related mostly to internally-developed software of $4,177. The $140,088 increase in cash expenditures for business acquisitions was due to our acquisitions of AdColony and Fyber during the ~~Company completed the~~six months ended September 30, 2021, as compared to our acquisition of Mobile Posse, Inc. ~~(the "Acquisition") from ACME Mobile, LLC (“ACME”).~~, during the six months ended September 30, 2020. The ~~Company acquired~~$6,234 increase in capital expenditures was due to a combination of continued investments in product development across all of our segments, including In App Media - AdColony and In App Media - Fyber.

Financing Activities

For the ~~outstanding capital stock~~six months ended September 30, 2021, net cash provided by financing activities was approximately $220,045, comprised of ~~Mobile Posse in exchange for an estimated total consideration of: (1) $41,500 in cash paid at closing (subject to customary closing purchase price adjustments) and (2) an estimated earn-out~~proceeds from borrowings of $23,735, to be paid in cash, based on Mobile Posse achieving certain future target net revenues, less associated revenue shares, over a twelve-month period (the “Earn-Out Period”) following the closing of the Acquisition, noting that the earn-out amount is subject to change based on final results and calculation. Under the terms of the earn-out, over the Earn-Out Period, the Company will pay ACME a certain percentage of actual net revenues (less associated revenue shares) of Mobile Posse depending on the extent to which Mobile Posse achieves certain target net revenues (less associated revenue shares)$267,134 primarily used for the ~~relevant period. The earn-out payments will be paid quarterly with a true-up calculation~~acquisitions of AdColony and Fyber, and options exercised of $2,155, partially offset by repayment of debt obligations of $46,256 and payment ~~after~~of debt issuance costs of $2,988. For the ~~first nine~~six months ~~of the Earn-Out Period. The acquisition of cash is not reflected in the total consideration detailed above. Final working capital adjustments were determined during the quarter~~ ended ~~June~~September 30, 2020, ~~and resulted~~net cash used in ~~additional purchase price~~financing activities was approximately $6,026, comprised of payment of contingent consideration of ~~$453, which was reflected on~~$9,302 and repayment of debt obligations of $250, offset by proceeds from the ~~balance sheet as an increase in goodwill. This changed the initial cash consideration, not inclusive~~exercise of ~~the earn-out, to $41,953.~~stock options of $3,526.

During the three and nine months ended December 31, 2020, $4,662 and $15,419 was added to the previous estimated earn-out of $23,735, bringing the estimated total earn-out related to the acquisition of Mobile Posse to $39,154. Of the amounts recorded and accrued for the earn-out related to the Acquisition, $29,154 has been paid to ACME and $10,000 remains accrued as of December 31, 2020. See Note "Commitments and Contingencies" for more information regarding the estimated earn-out. As of December 31, 2020, estimated total consideration, inclusive of estimated remaining earn-out, for the Acquisition is $81,107, of which $71,107 has been paid and $10,000 remains accrued. The actual remaining earn-out payment is subject to continued performance of the Acquisition, and is subject to re-valuation prior to the final settlement based on final actual results and calculations in March 2021.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not have any undisclosed borrowings or debt and we have not entered into any synthetic leases. We believe, therefore, that we are not materially exposed to any financing, liquidity, market, or credit risk that would arise if we engaged in such relationships.

Critical Accounting Policies and ~~Judgments~~Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements. The preparation of these financial statements is based on management's selection and application of accounting policies, ~~and the application of significant accounting estimates,~~ some of which require management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and notes. For more information regarding our critical accounting policies and estimates, ~~and policies,~~please see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies,” of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2020.~~2021 and Note 2, "Basis of Presentation and Summary of Significant Accounting Policies," of this Quarterly Report on Form 10-Q for our fiscal second quarter ended September 30, 2021.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have operations both within the United States and internationally and we are exposed to market risks in the ordinary course of our business - primarily interest rate and foreign currency exchange risks.

Interest Rate Fluctuation Risk

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Our cash and cash equivalents consist of cash and deposits, which are sensitive to interest rate changes.

Our borrowings under our credit facility are subject to variable interest rates and thus expose us to interest rate fluctuations, depending on the extent to which we utilize the credit facility. If market interest rates materially increase, our results of operations could be adversely affected. A hypothetical increase in market interest rates of 100 basis points would result in an increase in our interest expense of $0.01 million per year for every $1 million of outstanding debt under the credit facility.

Foreign Currency Exchange Risk

We have foreign currency risks related to our ~~revenue~~revenues and operating expenses denominated in currencies other than the U.S. dollar. While a portion of our sales are denominated in foreign currencies and then translated into U.S. dollars, the vast majority of our media costs are billed in U.S. dollars, causing both our ~~revenue~~revenues and, disproportionately, our operating income ~~/ (loss)~~ and net income ~~/ (loss)~~ to be impacted by fluctuations in exchange rates. In addition, gains / (losses) related to translating certain cash balances, trade accounts receivable balances, and ~~inter-company~~intercompany balances that are denominated in these currencies impact our net ~~income / (loss).~~income. As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.

ITEM 4. CONTROLS AND PROCEDURES

This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). See Exhibits 31.1 and 31.2 to this Report. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Under the supervision of and with the participation of our management, including our ~~chief executive officer,~~Chief Executive Officer, who is our principal executive officer, and our ~~chief financial officer,~~Chief Financial Officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required ~~disclosure.~~disclosures. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Report, our ~~chief executive officer~~Chief Executive Officer and ~~chief financial officer~~Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to determine whether any change in our internal control over financial reporting occurred during the fiscal second quarter ended September 30, 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. On May 25, 2021, we completed the acquisition of Fyber N.V., and on April 29, 2021, we completed the acquisition of AdColony Holdings, AS, and we are completing the integration of these acquisitions into our internal control over financial reporting. There ~~were~~have been no other changes in our internal control over financial reporting ~~identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) or 15d-15(d)~~ that occurred during the fiscal second quarter ~~covered by this Report~~ended September 30, 2021 that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3936

PART II - OTHER INFORMATION

~~Item~~ITEM 1.~~Legal Proceedings~~

LEGAL PROCEEDINGS

None.

~~Item~~ITEM 1A. ~~Risk Factors~~RISK FACTORS

The Company is not aware of any material changes from the risk factors set forth under Part II, Item 1A, “Risk ~~Factors”~~Factors,” in its ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the ~~year~~quarterly period ended ~~March 31, 2020.~~June 30, 2021, filed with the Securities and Exchange Commission on August 9, 2021.

~~Item~~ITEM 2.~~Unregistered Sales of Equity Securities and Use of Proceeds~~ UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

~~Item~~ITEM 3.~~Defaults Upon Senior Securities~~ DEFAULTS UPON SENIOR SECURITIES

Not applicable.

~~Item~~ITEM 4.~~Mine Safety Disclosures~~ MINE SAFETY DISCLOSURES

Not applicable.

~~Item~~ITEM 5.~~Other Information~~ OTHER INFORMATION

~~Fourth Amendment to Bylaws of Digital Turbine, Inc.~~

On January 29, 2021, the Board of Directors (the “Board”) of Digital Turbine, Inc. (the “Company”) approved amendments to Article II and Article III of the Bylaws of the Company (the “Amendment”).

The Amendment contains an advance notice procedure with regard to items of business to be brought before an annual or special meeting of stockholders by a stockholder. These procedures require that the stockholder give timely notice in writing to the Secretary of the Company and that such item of business otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be received by the Secretary of the Company at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders of the Company. In the event that the annual meeting is called for a date more than 50 days prior to such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was first mailed or public disclosure of the date of the meeting was first made, whichever first occurs. Stockholder proposals to be brought before the 2022 annual meeting of stockholders of the Company under these procedures will be considered untimely if they are submitted before May 18, 2021 or after June 17, 2021. The Amendment requires that the notice of the proposal contain certain information concerning the proposing stockholder and the proposal.

The Amendment also contains a similar advance notice procedure for the nomination of candidates for election to the Board by stockholders. Director nominations to be brought by stockholders before the 2022 annual meeting of stockholders of the Company will be considered untimely if they are submitted before May 18, 2021 or after June 17, 2021.

~~New Credit Facility~~

On February 3, 2021, the Company entered into a Credit Agreement with Bank of America, N.A. (the “Bank”), which provides for a revolving line of credit of $100,000,000, with an accordion feature enabling the Company to increase the amount to up to $200,000,000, to be used for acquisitions, working capital, and general corporate purposes. Digital Turbine Media, Inc. (“DT Media”) and Digital Turbine USA, Inc. (“DT USA”) are additional co-borrowers under the Credit Agreement.

~~The revolving line of credit matures on February 3, 2024.~~

None.

~~Termination of Existing Credit Facility~~

4137

ITEM 6. EXHIBITS


~~3.1~~10.1						~~Fourth~~ Amendment to ~~Bylaws~~Share Purchase Agreement, dated as of August 27, 2021, by and among Digital Turbine, Inc.,*Digital Turbine Media, Inc., Digital Turbine AdColony AS, AdColony Holding AS, and Otello Corporation ASA (incorporated by reference to the Company Current Report on Form 8-K filed on August 2 7, 2021).

~~10.1~~10.2						~~Credit~~Second Amendment Agreement to the Sale and Purchase Agreement, dated ~~February~~ 3 ,effective September 23, 2021, by and among Digital Turbine, Inc., Digital Turbine Media, Inc., Digital Turbine ~~USA, Inc.~~Luxembourg S.à r.l., ~~Mobile Posse, Inc.~~Tennor Holding B.V., Advert Finance B.V., and ~~Bank of America, N.A.~~Lars Windhors *t (incorporated by reference to the Company Current Report on Form 8-K filed on October 5, 2021).

31.1						Certification of William Stone, Principal Executive Officer.*

31.2						Certification of Barrett Garrison, Principal Financial Officer.*

32.1						Certification of William Stone, Principal Executive Officer pursuant to U.S.C. Section 1350.+

32.2						Certification of Barrett Garrison, Principal Financial Officer pursuant to U.S.C. Section 1350.+

101						INS XBRL Instance Document.*

101						SCH XBRL Schema Document.*

101						CAL XBRL Taxonomy Extension Calculation Linkbase Document.*

101						DEF XBRL Taxonomy Extension Definition Linkbase Document.*

101						LAB XBRL Taxonomy Extension Label Linkbase Document.*

101						PRE XBRL Taxonomy Extension Presentation Linkbase Document.*

* Filed herewith.

+ In accordance with SEC Release No. 33-8212, these exhibits are being furnished, and are not being filed, as part of ~~the~~this Quarterly Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.

4238

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Digital Turbine, Inc.

~~Dated: February 3, 2021~~

Dated: November 2, 2021

By:

/s/ William Stone

William Stone

Chief Executive Officer

(Principal Executive Officer)

Digital Turbine, Inc.

~~Dated: February 3, 2021~~

Dated: November 2, 2021

By:

/s/ Barrett Garrison

Barrett Garrison

Chief Financial Officer

(Principal Financial Officer)

4339


	Three months ended December 31,				Nine months ended December 31,
	2020		2019		2020		2019
Net revenues	$	88,592	$	36,016	$	218,497	$	99,364
Cost of revenues
License fees and revenue share	50,144		21,576		122,976		59,997
Other direct costs of revenues	749		400		1,971		1,022
Total cost of revenues	50,893		21,976		124,947		61,019
Gross profit	37,699		14,040		93,550		38,345
Operating expenses
Product development	5,202		2,783		13,827		8,312
Sales and marketing	5,219		2,815		14,372		7,534
General and administrative	6,761		4,310		22,096		12,212
Total operating expenses	17,182		9,908		50,295		28,058
Income from operations	20,517		4,132		43,255		10,287
Interest and other income / (expense), net
Interest income / (expense), net	(266)		59		(859)		118
Change in fair value of warrant liability	0		(870)		0		(10,601)
Change in estimated contingent consideration	(4,662)		0		(15,419)		0
Other income / (expense)	(13)		(19)		(51)		455
Total interest and other income / (expense), net	(4,941)		(830)		(16,329)		(10,028)
Income from continuing operations before income taxes	15,576		3,302		26,926		259
Income tax provision	1,061		41		2,098		6
Income from continuing operations, net of taxes	14,515		3,261		24,828		253
Income / (loss) from discontinued operations	0		65		0		(171)
Net income / (loss) from discontinued operations, net of taxes	0		65		0		(171)
Net income	$	14,515	$	3,326	$	24,828	$	82
Other comprehensive loss
Foreign currency translation adjustment	(132)		(44)		(319)		(364)
Comprehensive income	$	14,383	$	3,282	$	24,509	$	(282)
Basic net income per common share
Continuing operations	$	0.16	$	0.04	$	0.28	$	0
Discontinued operations	0		0		0		0
Net income	$	0.16	$	0.04	$	0.28	$	0
Weighted-average common shares outstanding, basic	89,003		85,876		88,140		83,869
Diluted net income per common share
Continuing operations	$	0.15	$	0.04	$	0.26	$	0
Discontinued operations	0		0		0		0
Net income	$	0.15	$	0.04	$	0.26	$	0
Weighted-average common shares outstanding, diluted	96,976		92,472		95,563		89,759


	As of December 31, 2020
	(Unaudited)
	Cost		Accumulated Amortization		Net
Developed technology	$	7,926	$	(6,101)	$	1,825

Customer relationships	46,971		(6,925)		40,046

Total	$	54,897	$	(13,026)	$	41,871


	As of March 31, 2020
	Cost		Accumulated Amortization		Net
Developed technology	$	7,926	$	(5,861)	$	2,065

Customer relationships	46,971		(5,154)		41,817

Total	$	54,897	$	(11,015)	$	43,882


	Level 1		Level 2	Level 3	As of December 31, 2020
Financial Liabilities
Estimated earn-out related to the purchase of Mobile Posse	$	0	0	10,000	$	10,000

Total	0		0	10,000	10,000


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested restricted units outstanding as of March 31, 2020	293,525	$	2.48
Granted	109,034	6.42
Vested	(77,321)	2.49
Cancelled	0	0
Unvested restricted units outstanding as of December 31, 2020	325,238	$	3.91


	Number of Shares	Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Options Outstanding, March 31, 2020	8,984,430	$	2.75	7.17	$	16,517
Granted	1,937,462	6.47
Forfeited / Cancelled	(282,840)	5.58
Exercised	(1,979,387)	2.99
Options Outstanding, December 31, 2020	8,659,665	3.44		7.11	460,038
Vested and expected to vest (net of estimated forfeitures) at December 31, 2020 (a)	7,784,550	3.14		6.90	415,871
Exercisable, December 31, 2020	4,870,289	$	2.43	6.10	$	263,634


	Options Outstanding				Options Exercisable
Exercise Price	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)	Number of Shares	Weighted-Average Exercise Price
$0.00 - 5.00	6,008,608	$	2.09	6.22	4,417,792	$	2.08
$5.01 - 10.00	2,458,446	$	5.67	9.10	446,846	$	5.65
$10.01 - 15.00	126,272	$	13.43	9.52	0	$	0
$15.01 - 20.00	31,681	$	15.54	9.53	3,734	$	15.54


$30.01 - and over	34,658	$	30.03	9.83	1,917	$	30.03
	8,659,665	3.44		7.11	4,870,289	2.43


	December 31,
	2020		2019
Total fair value of options vested	$	3,340	$	2,028
Total intrinsic value of options exercised (a)	$	52,657	$	10,364


	Number of Warrants Outstanding	Weighted-Average Exercise Price
Outstanding as of March 31, 2020	25,000	$	2.04
Issued	0	0
Exercised	0	0
Cancelled	0	0
Expired	0	0
Outstanding as of December 31, 2020	25,000	$	2.04


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2020	37,746	$	5.58
Granted	45,110	13.88
Vested	(49,023)	7.49

Unvested restricted stock outstanding as of December 31, 2020	33,833	$	13.88