Digital Turbine, Inc. (APPS) Q4 2021 Earnings Call Transcript

Good day. And welcome to Digital Turbine Reports Fourth Quarter and Fiscal 2021 Financial Results Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Brian Bartholomew, SVP of Capital Markets. Please go ahead.

Thanks, Sarah. Good afternoon. And welcome to the Digital Turbine fourth quarter and fiscal 2021 earnings conference call. Joining me on today’s call to discuss our results are CEO, Bill Stone; and CFO, Barrett Garrison. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. These forward-looking statements are based on our current assumptions, expectations and beliefs, including projected operating metrics, future products and services, anticipated market demand, and other forward-looking topics. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. Except as required by law, we undertake no obligation to update any forward-looking statements. For a discussion of the risk factors that could cause our actual results to differ materially from those contemplated by our forward-looking statements, please refer to the documents we file with the Securities and Exchange Commission. Also, during this call, we will discuss certain non-GAAP measures of our performance. Non-GAAP measures are not substitutes for GAAP measures. Please refer to today’s press release for important information about the limitations of using non-GAAP measures, as well as reconciliations of these non-GAAP financial results to the most comparable GAAP measures. Now I’ll turn the call over to Chief Executive Officer, Mr. Bill Stone.

Thanks, Brian, and thank you all for joining our call tonight. First, I want to formally welcome the Appreciate, AdColony and Fyber teams to our team. This is our first earnings call being together and while the Digital Turbine team has written some great chapters to date, we think with the addition of the new teams who’ve now assembled, there are many even brighter chapters we’re going to write together. I think it’s important to reiterate to investors that people make this business happen and from what I’ve seen so far, we have a great global team that fits hand in glove with our Digital Turbine team. They’re also now all shareholders in what we’re building together. Digital Turbine’s going through an amazing transformation over the past 18 months, as we are in the midst of an accelerating profitable growth trajectory that very few companies will ever experience. The operating leverage of our platform is clicking on all cylinders. On our earnings call last February, we talked about just having over $100 million annual revenue business with approximately 100 employees. Today, with the closing of Fyber, AdColony, Appreciate and our own Digital Turbine triple-digit organic growth, we are now a company that has over a billion dollars of annualized revenue with nearly 1,000 employees. Given our closing of the AdColony and Fyber transactions, which were completed in the middle of our current quarter, Barrett will talk more about the details of our forward outlook later in his remarks. But I want to emphasize a strategic point regarding our forward outlook. For the current June quarter, we are forecasting all four businesses to deliver approximately $280 million in revenue and $40 million in EBITDA if we had owned all of them for the entire quarter. This represents nearly 90% topline growth and approximately 200% EBITDA growth on an apples-to-apples or pro forma basis. These are strong businesses independently and even stronger businesses when we consider our expected synergies. And this all showcases how we are now positioned with real scale to attack the $300 billion mobile media market. I’ll talk more about the details of how, when and what we’ll be doing later in my remarks, as well as provide some commentary on how we see Digital Turbine positioned against some of the macro items on investors' minds such as inflation, post-COVID reopening trends and the impacts of Apple’s recent privacy changes with IDFA. But suffice it to say that while our past and present results are impressive, I’m even more excited about our future. But first I want to summarize our quarterly results and provide some real-time operational updates on our business. To close out fiscal 2021, we continue to build on our breakout momentum with record results across the board. We have over $313 million in revenue, which represented over 120% annual growth on an as-reported basis and over 60% pro forma basis. When we compare our March quarterly results this year to last year, higher gross margins and accelerating operating leverage enabled us to turn the strong revenue growth into more than four times the EBITDA generated last year and more than 400% growth in non-GAAP earnings per share. Barrett will provide more details on the numbers, but operationally, I was pleased with the improving global reach of our platform, our demand improvements on revenue per device or RPD, and a rebounding of device sales here in the United States. During the fourth quarter, our international revenues from our supply partners such as Samsung, Xiaomi, American Movil and others grew over 200% year-over-year, driven by a 32% increase in device volumes and a 142% increase in revenue per device. In the U.S., we saw double-digit increases in device sales year-over-year, driven by 5G and pent-up demand from COVID. Our U.S. RPDs continue to strengthen and exceeded 50% year-over-year growth in the fourth quarter. In our content business revenues in the March quarter pro forma increased by approximately 120% year-over-year. This result was driven by our new content platform being fully deployed and legacy platform being sunset, as well as improved advertising rates that are all driving better operating results. I also want to reiterate from our prior earnings call that we’re on track to launch with both AT&T and Verizon later this year with some of our content product offerings. As you’ve heard me say on prior calls, diversification is a major strategic priority for the company, diversification of partners, business models, products, geographies and advertisers. We continue to have success with our U.S.-based carrier partners, whom we grew revenues 74% year-over-year during the fourth quarter, while our revenues with other partners outside of this group increased by over 200% year-over-year. Turning to the forward outlook, I now want to provide some commentary on how we’re positioned for future continued growth across each of our growth levers, devices, products and media. First on devices, after many quarters of flattish to declining trends in device sales in the U.S., I’m pleased to announce that we grew devices more than 10% in the U.S. and more than 30% internationally compared to the last March quarter. We’re seeing approximately 30% of new devices sold with our larger carrier partners being 5G, which is a material increase compared to prior quarters. On the product front, our revenues from dynamic installs grew by 73% year-over-year in the fourth quarter, but now represent approximately 50% of our total revenues, compared to over 70% last year. Revenues derived from non-dynamic install products grew over 300% year-over-year as our content products, SingleTap and others showed solid growth. While the strong growth is exciting, I believe it will be even better as we drive more revenue synergies on our content products, continue to capture on the recent momentum in our SingleTap business and expand other emerging products such as notifications even faster. It’s important to note for investors, while we expect our dynamic install business to continue to grow, it’ll be less than 20% of our total revenues as we begin reporting all revenues from our acquisitions. Our recurring revenues now represent over 50% of our total revenues, compared to over just 10% when we purchased the Mobile Posse business last year. I also want to specifically call out our progress on SingleTap. It’s been a long journey on our patented product, but patience and perseverance have paid off as the results are finally beginning to match the potential. Not including our social media integration with our large carrier partner, three quarters ago, we talked about SingleTap being on a seven-figure annual run rate. Two quarters ago we talked about being a seven-figure quarterly business. Last quarter we talked about it being a seven-figure monthly business and today I’m pleased to report it’s a seven-figure per week business. The SingleTap revenue during the fourth quarter more than doubled the revenue from the third quarter and today it’s up more than 1,000% from a year ago. Specifically, we’re seeing nice growth from our demand side platform or DSP efforts from our Appreciate acquisition and we’ll look to continue to scale our ad tech stack both in the United States and internationally. The addressable market is many tens of billions of dollars for SingleTap and we believe we’re just getting started against this larger opportunity. The bigger picture takeaway for investors is that we have growth occurring on multiple product fronts and we will continue to make this diversification a major focus area of the business and we will continue to proactively make investments in these areas. On the media front, we’re currently very focused on scaling our international demands to meet a significantly greater supply of international devices, while continuously international application developers want to be on U.S. devices. Last year, approximately 35% of our app media revenues were from international applications like TikTok and Candy Crush. This year, we saw that number increase to over 50% as more media spending in our application media business is coming from companies that are not based in the United States. And this was despite a 25% year-over-year growth from our U.S. media partners. We saw international media demand grow by over 200% in the fourth quarter. Achieving this global scale from a broader set of demand partners is a direct reason why we saw revenue per device grow so much and it brings the benefits of global scale, where we see partner spending on more geographies and more devices outside of their home geography, whether that is Chinese companies like Alibaba, Tencent or TikTok spending in Latin America and Europe, and European companies and U.S. companies such as Pinterest, Snap, Uber, and McDonald’s, all spending outside of their respective geographies. I now want to turn to our recent acquisitions and strategic game plan. With the completion of the Fyber acquisition last week, along with AdColony and Appreciate before it, we now have successfully assembled the key pieces for a full stack end-to-end ad tech platform. I want to spend a minute here to highlight for investors what truly differentiates our platform approach versus other industry players. I want to start with our overriding mission statement, which is to become the largest independent mobile advertising monetization platform, leveraging our unique on-device technology and long-term partner and advertiser relationships. A couple of words that I want to stress here because this is what differentiates a Digital Turbine platform. First is having our technology on device. The software presence on underlying devices provides us distinct advantages, a critical one, which is our ability to use our patented SingleTap technology to drive materially higher conversion rates on the platform. Second is our independence; we have opted to vertically integrate by functionality, unlike many other industry players who have drifted into the content arena, thereby compromising their platform neutrality and posing potential conflicts of interest for other app publishers and advertisers on the platform. In essence, our on-device technology presents an independent approach, making our platform more attractive to app publishers and advertisers trying to optimize monetization and their return on investment. It’s obviously early days, but we’ve already seen positive feedback from numerous partners and customers validating our unique approach. We’re already benefiting from the revenue synergies within specific accounts and we look forward to sharing supportive data and specific case studies with you on future earnings calls. The final but perhaps most important callout here in terms of our differentiated platform approach relates to the organizational culture. Since they’ve been public companies, you can all see the obvious recent business momentum as evidenced by the accelerating growth rates. But you can’t see is the cultural mindset of the teams at Fyber, AdColony and Appreciate, and how their lean-in, company-first hustle attitude mirrors the same here at Digital Turbine and facilitates a more seamless path towards integration into a One Digital Turbine organization. And any of us would learn in a business school case study, and we at Digital Turbine know firsthand from our prior experience with acquisitions, that the number one factor that defines success in mergers and acquisitions is not strategy, it’s not numbers or other factors, it’s cultural integration. We’ve now fully integrated the Appreciate team into Digital Turbine and that integration has gone very well as evidenced by our significant SingleTap progress we’re now making. We’ve begun early integration with AdColony and Fyber, with an initial focus on integrating back office functions like HR and finance. We have a joint team of executives from AdColony, Fyber and Digital Turbine that meet regularly to build out the detailed plans of One Digital Turbine. These plans will ultimately shape deeper synergistic integrations later this year. But I can’t overstate how optimistic I am that we will successfully integrate the platform and begin to execute on our plan to address the $300 billion market opportunity, which is squarely in our crosshairs. And finally, before I turn it over to Barrett, I want to comment on some of the macro items I hear from investors such as the impacts of reopening the economy, inflation, and Apple’s recent privacy changes with IDFA. Regarding the reopening, we believe our company was healthy and growing before COVID, was healthy and growing during COVID and will continue to profitably grow post-COVID. We do not anticipate the secular tailwinds of device sales and on-device media and content consumption to slow down for our business. We’re very optimistic that the reopening of the economy benefits Digital Turbine in a material way as more devices are sold, and more advertisers try to reach consumers recognizing consumer eyeballs are in the applications and content, which is where the advertisers also need to be. Regarding inflation, it’s important to note that Digital Turbine doesn’t have any material input costs. Our cost of sales is just our revenue shares with our partners. Our people costs are nominal, given we do more than a million dollars of revenue per employee. So in any potential inflationary environment, we’re a company that’s insulated and benefits much more than other companies from those macro pressures to continue to profitably grow our business as we can raise prices without driving increases in input costs to support the revenues. And finally, we’ve not seen any material impact to our AdColony or Fyber business as a result of Apple’s IDFA changes. It doesn’t mean there’s not any risk to the future. But the impact to date and our iOS advertiser rates have been mixed, with some advertisers spending more and some spending less. But more strategically, I’d reference an article to investors that came out this past weekend that highlighted from sources that advertisers' spend on Android jumped double digits since IDFA has been implemented, which is a clear tailwind for our broader businesses and strategy. In closing, I want to emphasize that investors should distinguish between companies that are growing but not profitable versus those that are not growing but profitable, and from those that are both growing revenues and growing profitably. We’re excited about the operating leverage of our business that grew profitably at more than 300% while our revenues grew over 100%. Our expectations are that our acquisitions will generate even further operating leverage as scale begins and winners will win disproportionately. With that, this concludes my prepared remarks and I’ll turn it over to Barrett to take you through the numbers.

Thanks, Bill, and good afternoon, everyone. Before I cover our financial results, I wanted to comment on the successful acquisitions closing in recent months, including Appreciate, which closed in March, AdColony in April and most recently Fyber, which closed at the end of May. I’d like to welcome all our new team members and thank all of our Digital Turbine teams involved in the integration. While the Appreciate business has a small partial period of contributions included in our Q4 results, we will spend more time on the performance breakdown of AdColony and Fyber on future earnings calls as their results will be included beginning in the Q1 reporting period. As Bill highlighted, these strategic acquisitions are very important pieces for Digital Turbine in our mission to develop one of the largest full stack fully independent mobile advertising solutions in the industry. Now, turning to our results, we’re pleased with our strong fourth quarter performance, which exceeded our outlook and capped off another very strong year. As a reminder, our content business includes results from our acquisition of Mobile Posse earlier in the year. I will occasionally reference results on a pro forma basis where appropriate to provide additional insight into the underlying trends when comparing current performance against prior periods. Also, since the company has closed several significant transactions near the end of our fiscal reporting period, which utilized many of our internal teams, and in addition we have engaged a new audit firm to align with the growing scale and growing profile of the company. This has impacted the normal timing of completing our year-end audit. As a result, we will file for a 15-day extension and anticipate reporting our 10-K in the coming days, once the final audit is completed confirming our results announced today. My comments today will refer to comparisons on a year-over-year basis unless otherwise noted. For the fiscal year 2021, we reported $316.6 million in revenue, growing 126% as reported and 64% growth on a pro forma basis; generated $75.6 million in adjusted EBITDA, an increase of 287% over the prior year; and delivered $71.5 million adjusted net income or $0.74 per share, as compared to $0.20 per share in the prior year. Now let me turn to the specific financial performance in the quarter. Revenue of $95.1 million in the quarter was up 142% as reported and 101% on a pro forma basis. Adjusted EBITDA increased to $22.5 million, growing 329% year-over-year. We continue to experience accelerating growth across both our application business and content business. Our application media business delivered revenue of $67.2 million, representing 95% growth in the quarter. We saw continued strength in advertiser demand and product expansion leading to U.S. RPD growth of over 50% and more than 140% on international RPDs. Our content business generated $27.9 million in the quarter, which was up 120% year-over-year, as we experienced improved performance on our fully deployed content platform, combined with increasing advertising demands and yields. Non-GAAP gross profit grew 150% to $39.4 million, which was up 100% on a pro forma basis. Gross margin on the platform was 41% in Q4, up from 40% in the prior year. Our continued margin expansion is largely driven by the acceleration of our high-margin content media business and year-over-year margin improvement on our apps business from momentum in new partner and new product revenue mix. We also experienced continued impressive expense scale on the platform, as cash expenses were $16.9 million in Q4 or 18% of revenue, down from 27% of revenue in the prior year and increased only 27% year-over-year on a pro forma basis while revenues were up 101% in the period. Total operating expenses were $23.1 million, including approximately $3 million in transaction related costs and compared to total operating expenses of $12.4 million in the prior year. I will note that while the key rationale of our new acquisitions is based on driving new revenue growth and platform capabilities and not a cost reduction play, we do expect to realize favorable expense synergies over time that will further complement the operating leverage and scale on the platform. We anticipate these cost benefits to be realized over the coming quarters as integration efforts are successfully implemented and primarily generated from corporate overlaps and other purchasing power cost efficiencies. I will note that our operating leverage is being achieved even as we continue to make a number of focused investments, primarily within our international sales force and technology teams to support new partners and products to drive future incremental revenues on the platform. I continue to be pleased with the profitability and free cash flow delivered by our business. In the quarter, we achieved non-GAAP adjusted net income of $24.5 million or $0.25 per share during the quarter, as compared to $4.2 million or $0.05 per share in the fourth quarter of last year. Adjusted EBITDA was $22.5 million in the quarter, up 329% over prior year and margins continue to expand to 24% this quarter from 13% in the prior year quarter. Our non-GAAP free cash flow totaled $21.9 million, an increase of $10 million as compared to the prior year quarter, enabling us to execute for the cash balance of $30.8 million. Within the quarter, our ending cash position reflects both the final earn-out payment of the $10.3 million payment related to the Mobile Posse acquisition and the $20.3 million net payment on the Appreciate transaction. Our GAAP net income was $30.1 million or $0.31 per share, based on 97.6 million diluted shares outstanding, compared to a fourth quarter of 2020 net income of $13.8 million or $0.15 per share. I would also highlight with respect to the recent acquisitions, each of these new businesses are high revenue growth companies and profitable on a standalone basis, and are expected to be accretive to both our earnings and free cash flows, further improving the profile of the Digital Turbine enterprise. Lastly, to provide additional liquidity and capital for our recent acquisition purchases and for future growth opportunities in our business, we amended our credit facility led by Bank of America to increase a revolving line of credit from $100 million to $400 million with an accordion feature enabling upsizing the facility to $475 million. We currently have drawn $237 million on this revolving line at the end of May and the interest rate currently is less than 3%. With our expanded credit facility, a healthy balance sheet and strong free cash flow generation combined with the transformative new acquisitions added to the platform, we’ve exited fiscal 2021 poised to execute our growth plans for fiscal 2022 and beyond. Now, let me turn to our outlook. The momentum leading into the New Year and progress underway in the quarter has positioned us for a strong fiscal 2022. In that context, we currently expect revenue for Q1 to grow to between $188 million and $192 million, expected adjusted EBITDA to grow to between $32 million and $34 million, and adjusted net income per diluted share to be $0.31 based on approximately 100 million diluted shares outstanding. Within our outlook, we have raised our guidance for both the improved performance in our core business, as well as now incorporated the results from our recent closed acquisitions. As a reminder, our guidance reflects partial period results for the recent acquisitions for the time in which the company owns these new businesses within the quarter. With that, let me hand it back to the operator to open the call for questions.

Thank you. Our first question comes from Anthony Stoss with Craig-Hallum. Please go ahead.

Hi, guys. Congrats on the acquisition and a special congrats on SingleTap, just phenomenal growth. Bill, can you share how much the acquisitions are benefiting from SingleTap already, considering it's still early days? Are they starting to take market share from their current customers? And for Barrett, now that you've had a full quarter with the acquisitions, it seems you're operating at about a 15% adjusted EBITDA margin. Where do you see that heading over the next year or so? That would be helpful. Thanks.

Yeah. Thanks, Tony. And, yeah, as regards to SingleTap and acquisitions, yeah, we’re absolutely already leveraging the SingleTap capability for not just Appreciate who’s buying on it right now, but also with Fyber and AdColony. So there are absolutely synergies there to be had and they’re already happening today. So we’re excited that we think that technology can really help pull through a lot of synergies for the business and we’re seeing it show up today. So great progress; it’s been a long journey, as you’re well aware for us on SingleTap, but great to start seeing the results match it and also great timing in terms of the synergies coming together with the acquisitions. And I will let Barrett take the financial one.

Yeah. Tony, the question on EBITDA margins, just to remind us, just four quarters ago, before Mobile Posse’s acquisition, we were in the low teens as far as EBITDA margins, 13%, 14%, and now growing up to 24% margins in the last reported quarter. I think we have guidance in the high teens as far as EBITDA margins, and we would expect those to continue to expand and down the road, I think we’ll be certainly back in the low 20%s again soon.

Okay. Looks like a further one for Bill, any progress on additional diversity baking start onboarding additional devices?

Sorry, Tony, you are cutting out there a little bit, I just didn’t catch it.

Can you comment on any progress you’re making with additional device placement?

We’re making good progress on devices worldwide. Companies like Telefonica and Telecom Italia are developing strong relationships in Latin America, where we have solid positions with American Movil and Samsung. We're optimistic about these developments. Stay tuned for announcements as we continue to focus not just on smartphones but also on other devices like tablets and televisions to broaden market opportunities.

Our next question comes from Tim Horan with Oppenheimer. Please go ahead.

Hi, can you share the sequential revenue growth performer? I understand you might not have that information, but the 90% year-over-year revenue growth is impressive. Do you have any insights on what it could be for the full year, even though you're not providing exact guidance? Was there anything particularly noteworthy or unusual in that performance?

I’ll start. Hi, Tim. There’s nothing unusual about the growth this quarter, both in our newly acquired businesses and on a pro forma basis. We see a lot of strength in those businesses, each growing nicely. While we’re not providing annual guidance, we believe these growth rates are independent. In the medium term, we think some synergies can further enhance those growth rates. For now, our focus will be on integration, and these businesses are performing well, so we want to maintain that momentum.

And any sense on the sequential growth there, just to see, the base getting when you’re obviously growing 90%, it’s pretty hard to keep that up with the base growing. Yeah, so any color on the sequential? And then, maybe also on the IDFA, while the Apple impact here, sorry? Is that a net positive for the new pro forma combined company or net negative or how are you thinking about it?

Let me address the IDFA topic, and then I'll let Barrett discuss the sequential growth. Regarding IDFA, the long-term effects are still uncertain. However, we believe we are well positioned, especially given our focus on Android and our unique on-device capabilities. Even if there are changes in Android, we still have device identifiers, which we see as a strategic advantage. The recent IDFA changes, like those affecting view-through attribution, have negatively impacted some major players, but those funds are still present and benefit companies like Digital Turbine. Therefore, we see several favorable trends for us compared to the overall market. I mentioned in my prepared remarks that a recent Forbes article highlighted a double-digit increase in spending on Android since the launch of IDFA, which clearly benefits our business as we are heavily invested in Android. Overall, we are cautiously optimistic in the short term based on what we've observed, and we feel positive about our long-term prospects.

Yeah. And then, Tim, while we will be out with more details on the pro forma information, certainly, the AdColony and Fyber have published their results as public companies. We will be out with more details on the pro forma soon on those pro forma results, but sequentially, the revenues are growing within our guidance in this current quarter.

Our next question comes from Darren Aftahi with ROTH Capital Partners. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking my questions. A couple if I may. Bill, could you just talk about with SingleTap, it seems like the dominant was finally fallen? Is that because of just something structurally? Did Appreciate help accelerate that? Just it moved pretty quickly and I’m just kind of curious trying to understand what it is that kind of moved the needle of stuff you did?

Sure, Darren. A few quarters back, we decided to invest in our own advertising to take control of the data. We encountered various operational challenges as we tried to scale our efforts. While we had positive individual results, we struggled with scaling them effectively. We decided to lease some capacity and operated as a demand-side platform, which led to encouraging outcomes. This success prompted us to acquire Appreciate, and now that their team is dedicated to this initiative, we've experienced significant growth. We can now effectively target large audiences, reaching tens or even hundreds of millions of people with SingleTap capabilities on their devices. This expansion allows us to explore a much broader market. We believe we are just beginning to tap into this opportunity, and it's gratifying to see our long-held belief transform into tangible results for everyone involved.

Great. And then on your apps guidance, I think Barrett, you spoke to that being partially acquisition related and partially just stronger core business. I know Fyber put out their own updated guide for the year and I know you’re not commenting on that. But it seems like the marginal profit flow-through on the change in the guide is a lot higher than kind of what Fyber did. So I am just kind of curious if you could maybe de-duplicate, maybe what is Fyber impact, what is kind of seeing stronger traction with your core business and then how much better operating leverage can you guys extract out of these, the AdColony and the Fyber acquisition?

Yeah. Let me take the guidance portion, and then I will invite Bill to talk about the some of the synergies. So, yeah, just for our reference on a U.S. dollar basis, Fyber reported about $100 million in revenue for their March quarter. So, and we just closed that transaction, so we own them at the end of May, so largely one-third of that quarter. So you can kind of take that as far as the lift in our guidance from that portion. And then as we heard about our results on our Digital Turbine core business growing really quite nicely. That’s been reflected as we outpaced our own internal expectations. So, Darren, I hope that helps, but a bit of both here with nice growth on the core plus layering in the expectations of Fyber now that they’re owned by Digital Turbine.

We're really excited about the synergies because the business has been performing exceptionally well on its own. We're already receiving positive feedback from the market regarding both demand and supply. On the demand side, companies like McDonald's, Starbucks, and BP, as well as AdColony clients, are now joining the Digital Turbine platform, which significantly strengthens our position. On the supply side, we are enhancing our relationships with app publishers by providing access to major players like Verizon and Samsung, while also integrating technologies from Fyber, AdColony, and Appreciate into their monetization strategies. This gives us the ability to capture revenue that we historically missed out on. The unique advantage we have with our device has made it challenging for other companies to do this, but now everything is coming together, which is very exciting. We're not just monetizing apps by getting them onto customers' devices; we're tapping into hundreds of billions of dollars in advertising that we can access throughout the lifecycle of the device because we can manage this process end-to-end.

Great. Just one last one for me, Barrett. We sort of think about and maybe not the June quarter, because it’s started, but we think about sort of cash OpEx for the entire company and kind of blended gross margins, I appreciate that things kind of move around. But could you just maybe hold our hand a little bit and help us understand kind of what that might look like, even if it’s a pro forma as you round everything from April 1st?

Our guidance suggests that we are operating at mid-teens for cash operating expenses as a percentage of revenue, typically around 16% to 17%. We anticipate this will be consistent throughout the year and will continue to scale down. We expect to see this percentage gradually decline over the next few quarters, moving from high teens to hopefully mid-teens as we implement the acquisitions.

Our next question comes from Austin Moldow with Canaccord. Please go ahead.

Hi. Thanks for taking my questions. You mentioned gross margin was improving within the application segment itself. So do you anticipate those improvements to be sustainable and what’s the current willingness of your customers to pay those incrementally higher revenue shares to Digital Turbine on the new products?

Sure. Austin, I’ll address this and Barrett can add some details. We see a couple of positive trends for us moving forward. First, our new agreements generally come with better terms compared to earlier ones. As we shift the mix towards newer agreements, it positions us better. Secondly, this approach allows devices to be recycled and released into the open market without being tied to a specific carrier. As this base expands, it contributes to improving our margins over time. Looking ahead, with the addition of AdColony and Fyber solutions, we gain broader visibility into the advertising technology landscape. Instead of just considering a dollar spent to get an app on a phone, we can now account for a five-dollar economic impact associated with that app due to advertising. This presents us with potential opportunities to encourage carriers to engage more since there are more financial incentives involved, which could enhance our margins. Overall, we remain quite optimistic about our app media sector, backed by the consistent positive results we’ve achieved.

Got you. Okay. Can you speak about what’s required on the technology side of things in order to integrate AdColony and Fyber?

One of the great things about these acquisitions is that the connections are often already in place, as AdColony and Fyber have been collaborating. Since many aspects are already established, in the short term, our focus will primarily be on business development, working with app publishers and advertisers to bring everything together. This is quite encouraging. In the long term, we will need to consider how to manage multiple demand-side platforms, exchanges, and software development kits on devices, and it makes sense to align these over time. However, in the short term, it's positive that much of the infrastructure is already set up to meet customer needs.

Our next question comes from Allen Klee with Maxim Group. Please go ahead.

Yes. Hi. I know you guys are in the early days of attractive international expansion. Can you talk a little about your customers starting to be with you a little more in terms of your ability to add more to them to increase the RPDs and what the opportunity might be?

Sure, Allen. One of the things we consistently observe in the United States is similar to the shopping mall analogy; if you have major retailers like Macy’s and Nordstrom as anchor stores, it tends to drive more revenue for the smaller shops in between. In our U.S. partner business, we experience this with companies like Verizon and AT&T acting as anchors, which helps generate revenue for other partners. This creates a rising tide that benefits everyone involved, increasing revenue opportunities. For a long time, we didn't have this dynamic internationally. However, in markets like Brazil, we now have partnerships with American Movil and Samsung, which have facilitated relationships with other carriers and manufacturers in Latin America. This has contributed to an increase in revenue per device by boosting supply and demand. Achieving this kind of scale is crucial for our strategy. We're starting to see positive effects internationally, which is encouraging, and we aim to keep building on this momentum.

This concludes our question-and-answer session. I would like to turn the conference back over to Bill Stone for any closing remarks.

Yeah. Thanks, everyone, for joining our call tonight. We’ll look forward to reporting on our progress against all the points we made on today’s call and we’ll look to talk to you again on our fiscal 2022 first quarter call in a few months. Thanks and have a great night.

This concludes our conference call. Thank you for attending today’s presentation. You may now disconnect.