Digital Turbine, Inc. (APPS) Q1 2023 Earnings Call Transcript

Good day, and welcome to the Digital Turbine Fiscal First Quarter 2023 Earnings Conference Call. I would now like to turn the conference over to Brian Bartholomew, Senior Vice President, Capital Markets and Strategy. Please go ahead, sir.

Thanks, Roco. Good afternoon. Welcome to the Digital Turbine Fiscal Year 2023 First Quarter Earnings Conference Call. Joining me on the call today to discuss our results are CEO, Bill Stone; and CFO, Barrett Garrison. Before we get started, I'd 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 statement. 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 filed 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 will turn the call over to our Chief Executive Officer, Mr. Bill Stone.

Thank you, Brian, and thank you all for joining our call tonight. I know that most investors are currently focused on the macro environment headwinds and their implications for our business compared to the finer operational details. While I will address both in my prepared remarks, I want to start with the macro environment and its significance for us before discussing our first-quarter results. The macro environment we've faced over the last two and a half years has been the most dynamic I've encountered in my 30-year career, compelling companies to operate lean, nimble, flexible, and open to change. I'll focus on four primary aspects: the COVID pandemic, inflationary pressures, recessionary growth fears, and geopolitical concerns. Firstly, concerning the COVID pandemic, the most notable negative impact on our business has been the slower decision-making at larger companies, leading to longer sales cycles for signing new operators and OEMs, licensing partners for SingleTap, and adding features with our existing partners. However, with many people returning to the office, our unrestricted travel capabilities, and the need for our partners to find new revenue streams during this recessionary climate, we've observed positive progress in recent months. While this progress has yet to reflect in our current results, we’re optimistic it indicates potential growth for the year ahead. COVID has also shifted the working model for tech firms. We now see increased in-person collaboration at DT, enhancing our innovation and connection to the company compared to a wholly remote setup. Companies that adopt a hybrid work model rather than a one-size-fits-all approach will gain a competitive edge. Regarding the relaxing of lockdown restrictions, there is a hypothesis among investors that engagement with applications, particularly games, may be decreasing as society shifts back to outdoor and office activities. While it may hold true for certain publishers and app titles, at a macro level, we've been able to enhance our supply of ad impressions without noticing a decrease. We are penetrating various verticals more, which I will elaborate on later. Secondly, in terms of inflation, we are largely insulated from inflationary pressures as we don't face significant input costs or supply chain issues. There are two exceptions: a modest impact from device supply chain challenges with our operator and OEM partners, and some pressure on wages for hiring tech talent. However, this has minimally affected our overall results, as we have increased EBITDA margins for five consecutive quarters. Furthermore, our gross margins have expanded compared to last year, which we regard as a sign of strength amid inflation. Thirdly, addressing recessionary fears, we have noted a slowdown in the digital ad market similar to what other public ad tech companies have reported as advertisers reassess their investment strategies. This slowdown has adversely impacted our recent performance and short-term outlook. However, we believe this is a temporary situation rather than a permanent one. The majority of advertisers appear to be in wait-and-see mode rather than in a completely withdrawn state. Historically, ad dollars tend to follow eyeballs, and our audience continues to engage with digital devices. We currently spend nearly four hours daily on our devices compared to less than three hours in 2018. A change in this trend could lead to a decline in digital ad spending, but we do not anticipate this occurring. Combining this macro trend with the unique value of our end-to-end platform will present stronger incentives for customers to broaden their partnerships with us compared to more commoditized competitors. Further details on this will be provided later, but understanding the nuances of the slowdown by geography, ad type, operating system, and business vertical will also be crucial for investors. Lastly, on geopolitical issues, we are experiencing two primary impacts. The first is the ongoing war in Ukraine, which has led to slight effects from halting our direct operations in Russia, reduced spending in Europe relative to other regions, and disruptions in product development due to operational teams in Ukraine. The second issue revolves around China, where the zero-COVID policy has limited our travel capabilities, and broader U.S.-China relations have stalled our progress with Chinese OEMs trying to expand outside of China. Although these geopolitical events are not majorly impacting our results, they do serve as mild headwinds. Now turning to our first-quarter results, we achieved revenue of $188.6 million, EBITDA of $51.9 million, and non-GAAP earnings per share of $0.38. This reflects a reported growth of 19% in revenue, 30% in EBITDA, and 12% in non-GAAP earnings per share. Additionally, following the closing of our AdColony and Fyber transactions, we can now compare a full year of results. Over the past year, we have generated nearly $150 million in free cash flow since consolidating as one company, compared to under $50 million in the 12 months before the acquisitions—a 200% increase. Before we delve into specifics, I want to highlight our significant achievements in a short timeframe, particularly showcasing our operational leverage. We’re not just profitable; we’re growing that profit faster than our revenue. In the first quarter, we made a conscious effort to prioritize gross margins over top-line growth. Our non-GAAP gross profit improved sequentially from 49% to 50%, compared to a reported margin of 45% in the first quarter last year. Achieving increased margins in the current inflationary context is noteworthy. When combined with effective management of operating expenses, we have driven EBITDA margins to an all-time high of 28%. For our On-Device business, results were boosted by more devices, more products, and more media relationships. Particularly, we added over 67 million devices in the June quarter, compared to 63 million devices in the same quarter last year, with most of this growth occurring internationally, as U.S. device sales saw a slight decline year-over-year. I’m pleased to report continual improvement in revenue per device (RPD). In the U.S., our RPD exceeded $5 per device, marking an all-time high and reflecting roughly 20% year-over-year growth. Given the performance-oriented nature of our On-Device platform, this double-digit growth is encouraging. We have also advanced with our SingleTap licensing product. As previously noted in the last earnings call, we expect to begin seeing revenue this quarter and ramp up in the third quarter. We are on track and anticipate having more than five partners active by the end of September and over ten by December. The product-market fit appears very strong, reminiscent of our early business days when we launched a mobile operator or OEM and subsequently expanded the number of partners, leading to nice sequential growth in the relationships we cultivated. In our app growth platform (AGP) business, we achieved a year-over-year revenue increase of 13%. While the macro slowdown in digital ad spending is ongoing, we are offsetting this with a higher volume of impressions as we continue to enhance our supply in the market. Regionally, we maintain a diverse global presence, and in the current quarter, impressions grew across all major regions, especially in APAC. In EMEA, impressions rose significantly despite the geopolitical issues in Eastern Europe, and while we've seen some sequential slowdowns, this has been largely compensated by higher rates across North America and the EMEA regions. Looking at placement types, we've successfully maintained a balanced portfolio among banner, interstitial, and video formats. Banner placements have seen accelerated growth this past year due to the expansion of the Digital Turbine Exchange and DSP. Video growth for the quarter stands in the high teens and continues to be the format we believe holds the most potential for future growth. Alongside this volume growth, we also experienced improvements in our margins, which increased from a pro forma 67% last June to 71% this quarter, driven by better revenue synergies across our platforms. Lastly, regarding Apple's IDFA changes, after a year of implementation, we can see that our business was minimally affected by the Apple changes. Our iOS revenue share is currently about 15% of our total revenues, even less when considering budgets strictly tied to Apple's platform that we can shift to Android. Many ad tech companies with more reliance on iOS revenues are facing greater challenges. Additionally, many have observed that Google has delayed its Privacy Sandbox initiatives, which, while more pertinent to the mobile web than applications, underscores the difference in market approaches by Google as an ad company versus Apple as a hardware company—something for investors to note. Looking ahead, I want to emphasize our top three priorities: first, concentrating on our business fundamentals and executing within a $300 billion total addressable market; second, integrating our companies into one entity; and third, making strategic investments to position our company for future opportunities, as Wayne Gretzky famously said, skating where the puck is going, not where it's been. On our focus on fundamentals, we aim to grow by adding devices, enhancing product offerings, and expanding media relationships. We plan to broaden our device and product categories, as mentioned with SingleTap licensing. Also, we are pivoting our Content Media business to concentrate on postpaid subscribers, moving away from a primarily prepaid focus. While this shift is impacting current results, we are gaining traction with Verizon and AT&T on postpaid, which should serve as a growth stimulus moving forward. Moreover, we are making significant progress on mediation solutions, onboarding more app publishers this quarter. Our device supply traction is increasing as operator and OEM partners are seeking additional revenue sources in this challenging economic environment. Additionally, we seek to broaden our media relationships, particularly moving beyond gaming, while continuing to grow connections with prominent gaming providers like Tripledot. Our social media vertical, led by platforms like TikTok and Pinterest, as well as our utility and financial verticals with clients like Square and PayPal, all grew over 50% year-over-year. The only significant decline was in the lower single-digit percentage crypto and news verticals. We are also realigning our channel strategies and brand business. AdColony’s previous brand business structure involved a direct sales force in some countries and channel partners in others. We plan to restructure this approach, adopting a more direct strategy in larger brand-spending regions while working with channel partners in smaller markets. Specifically, we aim to bring our channel partners in-house in the U.K. to enhance scale and efficiency in Europe, benefiting both margins and revenues. Our second priority is continuing to unify our company. We've made considerable advancements on internal aspects, including our systems, tools, processes, and organizational design. With these structures in place, we are better positioned to deliver as one cohesive entity rather than four separate parts, shifting our focus externally to better serve our customers and partners. We are now placing greater emphasis on establishing a strong DT brand in the marketplace. We rebranded the company last month, introducing a new look while unifying the legacy teams from DT, Mobile Posse, Appreciate, AdColony, and Fyber under a singular framework, leveraging their combined strengths. We are strategically ensuring that our partners, customers, and other stakeholders recognize the benefits of OneDT in the marketplace, emphasizing our On-Device positioning, independence, and differentiated solutions like SingleTap across the organization. Early feedback from customers has been highly positive. Our final priority focuses on making the right strategic moves for the future, which includes investing in our ad tech scalability and App Store strategies. Although these will be more relevant as we advance beyond 2022, we are already observing progress. Significantly, we anticipate various pieces of bipartisan legislation in the EU and the U.S. to be enacted over the next year that will alter the landscape for applications and digital advertising. We view this regulatory environment as a tailwind for our business. In e-commerce, we typically see companies like Amazon dominate, supplemented by more niche stores utilizing white-label capabilities from companies like Shopify to sell their products. However, the complexities introduced by Apple and Google in the app distribution sector have made executing this approach challenging. We see DT uniquely positioned to empower these types of offerings, regardless of the platform, and our initial discussions have been promising. Furthermore, we are forging strategic partnerships with leading app distribution platforms, which we see as essential steps toward enabling a more democratized app ecosystem in the coming years. As stated in previous calls, we believe the evolving regulatory framework presents favorable conditions for creating a Shopify-like model for app stores, significantly supported by our capability to transition apps from publishers into diverse app stores. We aim to advance our initiatives in this area, and we look forward to keeping investors updated on our progress. In summary, while we are navigating short-term headwinds impacting our immediate results, we believe the combination of our unique growth catalysts and investment initiatives, coupled with recovering secular trends in digital ad spending, positions us well for strong, profitable growth in the future. On a personal note, one of the essential aspects of being a CEO of a public company involves balancing short-term and long-term focus. Currently, investor emphasis on the short term has reached an unprecedented level during my tenure at DT. While I understand this focus, I encourage investors who can adopt a broader perspective beyond a single quarter to consider the long-term rewards. Historically, those who have stayed with us through challenges have often reaped greater benefits than those observing only recent quarters. With that, I conclude my prepared remarks and will now turn it over to Barrett to guide us through the numbers.

Thanks, Bill, and good afternoon, everyone. Before I discuss our financial results, I want to reflect on Bill's comments regarding the challenging macro climate and the headwinds we faced in the first quarter. Despite these conditions, we are optimistic about the significant opportunities ahead for Digital Turbine as we navigate this transformational phase of the company. Now, looking at our quarterly results, our first quarter performance demonstrates our commitment to achieving sustainable profitability. As Bill previously mentioned, we've made intentional efforts to enhance our gross margin and EBITDA margins, even amid these dynamic circumstances. Our revenue for the quarter reached $188.6 million, a 19% increase as reported and a 5% increase on a pro forma basis. Although revenue growth slowed from the fourth quarter due to the discussed macro challenges, our On-Device business encountered expected headwinds from two main areas. First, our content products have been affected as we update these products and onboard users with new partners. Secondly, our strategy to focus on expanding margins in specific areas has led to a necessary slowdown in top-line growth while still driving an increase in absolute gross profit dollars. In the past 12 months, as we integrated our businesses, we've updated our segment reporting to better reflect how we operate. Our On-Device Solutions business remains unchanged, but starting in this June quarter, we will combine the legacy Fyber and AdColony ad tech businesses into a single app growth platform segment. Additionally, it's important to note that in this environment, global companies are encountering challenges due to the strengthening U.S. dollar. Fortunately, foreign exchange rates have only slightly impacted our revenues, primarily thanks to our business model, where most of our revenue is denominated in U.S. dollars. Our revenue growth allowed gross profit to climb 33% as reported and 7% on a pro forma basis to $93.6 million this quarter. Gross margin on the platform rose to 50% in the first quarter, up from 45% in the previous year and sequentially from 49% in the fourth quarter. While our focus on margins has allowed for expansion across business lines, our On-Device business significantly contributed to this sequential increase. Apart from our core business growth, we saw a one-time benefit this quarter from an extended partner agreement that improved margins. While this benefit is not expected to repeat, it illustrates the value we provide to our partners. As a reminder, although gross margin rates may vary from quarter to quarter, we expect further margin expansion as we continue to implement our growth and synergy strategies. We are achieving healthy expense scalability in our platform, with cash expenses reaching $41.6 million this quarter, a 2% increase over the prior year on a pro forma basis, while revenues grew over 5% during this period. Total operating expenses totaled $67.9 million, which includes $16.1 million in amortization of intangibles and $1.3 million in transaction-related costs, compared to total reported operating expenses of $50.7 million from the previous year. Although our operating expenses have been lower than anticipated, partly due to the virtual work environment, we are still investing in our teams, infrastructure, and our recently announced brand relaunch. We have been observing a rise in return-to-work expenses, including events, travel, and other operational costs, which were significantly lower during the pandemic. The integration of our acquisitions remains a priority, and we plan to continue investing to transition certain systems to a unified platform. We anticipate these near-term investments will lead to cost efficiencies over the coming quarters as we successfully implement integration efforts for improved efficiency and operating leverage. Our adjusted EBITDA for the quarter was $51.9 million, representing a 30% increase from the previous year, with an EBITDA margin of 28%, marking a roughly 300 basis point increase year-over-year. We are pleased to report our fifth consecutive quarter of sequential EBITDA margin expansion. I am proud that we are achieving our operating leverage and consistent EBITDA growth while making significant near-term investments in our sales force and technology teams to support new partners and products aimed at generating future incremental revenues. In this context, we expect our EBITDA margins to continue expanding over time, thanks to the inherent operating leverage in our business and the returns from our recent investments and synergies from our acquisition integrations. I remain satisfied with the profitability and free cash flow generated by our business. During this quarter, we reported a non-GAAP adjusted net income of $38.6 million, or $0.38 per share, compared to $33.4 million, or $0.34 per share, in the first quarter of last year. Our GAAP net income stood at $14.9 million, or $0.15 per share, based on approximately 102.7 million diluted shares outstanding, compared to net income of $14.2 million, or $0.14 per share, in the first quarter of 2022. We experienced significant growth in free cash flow during the quarter, increasing by 120% to $31.5 million from $14.3 million in the previous year. We ended the quarter with $89.3 million in cash after paying down $60.5 million in debt, utilizing free cash flows from operations to reduce our debt burden. Our total debt balance at the end of the quarter was $47.1 million, drawn from our revolving credit facility. As our business continues to generate strong cash flow, we plan to keep reducing our revolving credit balance. We are confident in our financial standing and capital position, characterized by a low-cost credit facility and strong free cash flow, alongside strategically integrated acquisitions. We are enthusiastic and prepared to execute our growth plans for fiscal 2023 and beyond. Now, let me outline our outlook. Considering the ongoing macro environment, we currently project revenue for the second quarter to fall between $170 million and $180 million; adjusted EBITDA to range from $46 million to $50 million; and non-GAAP adjusted net income per diluted share expected to be between $0.32 and $0.34, based on roughly 104 million diluted shares outstanding and an effective tax rate of 25% on our non-GAAP adjusted net income.

Today's first question comes from Dan Day at B. Riley FBR.

Yes. As it relates to SingleTap, maybe just talk about any incremental progress on the direct side you've talked about. I appreciate the commentary on the licensing. You laid out the number of advertisers using the product, the monthly spend per advertiser in the Investor Day last November. Just any updates on that. Is that generally trending in line with what you guys have expected so far?

Yes, Dan, sure. Yes, as we think about SingleTap, there's really 4 different ways we're currently approaching the market with it today. One is, you've mentioned, with SingleTap licensing, and we talked about the progress of that in my prepared remarks. I know there's a lot of investor interest around that. Secondly is direct. Third is working on SingleTap through our Fyber exchange, which we're just in the process of launching right now, and we're excited about that. And the fourth is in leveraging our prior AdColony relationships. So we're working at across all 4 of those items. On the SingleTap direct side, if I want to look at the comps for that, year-over-year, we actually generated more margin dollars, but it was really focused on improving margins versus the top line. As you're well aware, we arbitrage CPMs for CPI. And so last year, we're really focused on top line growth. This year, we're much more focused on margins. So I've been pleased with the progress that we're making there. But we really think about SingleTap more as an enablement capability across all 4 of those things and just kind of one single element. We really think it's a nice differentiator for us in the market.

Great. I have one more question. I noticed that the midpoint of guidance for the third quarter indicates a decline in revenue of around 5% year-over-year. Could you provide a breakdown of this figure? Specifically, I would appreciate any insights into the On-Device side and the ad growth segments, particularly how these areas have trended post quarter-end and where you are observing some macro weakness between the two segments.

Yes. Let me begin with a broad overview of my thoughts, and then I'll allow Barrett to discuss some specific details related to your question. Currently, we have observed that some of the dynamics from COVID have caused a slowdown in our supply. As I noted in my earlier comments, we've seen improvements in this area over the last month or two as we gradually resume more in-person interactions and travel, alongside our O&R partners working to generate more revenue amid recession concerns. This recent improvement is promising and should positively influence our future results. However, in the short term, these challenges have led to some supply issues, preventing us from achieving the progress we aimed for. Fortunately, we have managed to navigate these challenges due to strong demand. With current demand slowing and facing macroeconomic headwinds, we see a temporary dip for our business. Nevertheless, we believe this situation is not permanent. The combination of fluctuating supply and demand dynamics has presented some short-term challenges, but we consider them to be temporary. Barry, would you like to provide more specifics?

Yes, certainly. During the call, we identified three main factors, combining insights from Bill and myself. The first factor is the macro conditions, where we observed some weakening in demand across both of our businesses. Although others may have faced greater challenges, we were not immune to this impact. The second set of factors is related to our own Vice business, which we included in our guidance last quarter and have been preparing for. Firstly, regarding our content business, as we shift our products to better suit post-pay devices, this change has created some challenges. Secondly, our focus for this year has been on enhancing our margins and driving growth, which has involved tightening certain areas. While this may have resulted in a decrease in top-line revenue, it led to an absolute increase in gross profit dollars. These are the three areas that have posed challenges for us, and we had mostly anticipated them in connection with the On-Device segment.

And our next question today comes from Darren Aftahi with ROTH Capital Partners.

Two, if I may. It's encouraging to see the focus on the margins. I'm curious if you could quantify perhaps the revenue opportunity you may have given up in the quarter. And then I just wanted to further understand the content piece on the media side with prepaid versus postpaid. When you say kind of headwind, could you just dive a little bit more into that to clarify?

Yes. So why don't I start, Darren, on the content opportunity, and Barrett can talk some about the revenue margin trade-offs. Yes, on Content Media, our legacy Content Media business has been largely prepaid. I think more than 90% of our revenues had come on prepaid. We made some material investments of really going after postpaid just because of the larger addressable market, both in terms of users as well as advertising dollars. And so I'm excited about some of the progress we've made on that front. But it's come at the expense a little bit of prepaid and slowing down in prepaid because we haven't been focused on that as much. So that's really about the commentary there. And now we're starting to see some much more engagement from our larger U.S. carrier partners around that, again, given some of their desires to drive increased revenue engagement from their users. So that's been a positive development. But the offset has been a little bit less of a focus on prepaid for us.

Yes. Regarding the trade-offs in revenue and margin, when we launched the acquisition of Appreciate along with our DSP and SingleTap strategy, we aimed for a broad reach. While we have observed growth in those areas, we have fine-tuned our approach in certain aspects to enhance margins. Consequently, you would notice our margins have expanded; I mentioned an increase of 300 basis points year-on-year, which is partly attributed to that effort. I won't specify the exact revenue impact, but it illustrates how we are expanding our margins and the areas driving that growth.

Great. And if I could just squeeze one more in. Your comment about the 5 partners in September and then 10 in December for the licensing business on SingleTap, are those broad-based? Meaning, once a licensing deal is signed, it's applicable across the entire entities platform? Or is it kind of piecemealed out?

Yes, I think you're going to see it. It's somewhat dependent on the partner. The intention is to implement it fully across the platform. However, what you'll likely observe is a process similar to how we began working with our carrier partners, starting with dynamic installs, then moving on to Wizard and SingleTap, and gradually adding features over time. We'll initiate the process, gain traction, and then continue to broaden our approach. That's the intent of both parties involved. If you're undertaking the technical work and integration, it's because you aim to expand to all your operations to enhance conversion and efficiency. However, you want to ensure that everything works as promised from the start.

And our next question today comes from Anthony Stoss from Craig Hallum.

Pretty solid execution, especially on EBITDA in a tough environment, so hats off on that. Bill, of the 10 SingleTap licenses that you expect to have live by the end of the December quarter, how many are you planning will be Tier 1? And what impact, as you ramp SingleTap licensee revenue, will that have on overall gross margins? Would take it up or take it down? Then add a couple of follow-ups after that for Barrett.

Yes, sure. So the first point is on the gross margins. We absolutely expect it to be accretive since this is more of a licensing SaaS model for us and something we're excited about. In terms of kind of the breakout of the partners, it's definitely a mix of partners in there in terms of what I would call kind of Tier 1s and Tier 2s. But if you think about our business today on our device business, we have Tier 1 partners like AT&T and Verizon and Samsung, and then we have a variety of Tier 2 partners as well. And I wouldn't sleep on the Tier 2s in terms of paying the bill and generating that EBITDA you're just talking about. So it's really going to, be for us a blend of both on SingleTap licensing as well.

Okay. And then Barrett, not asking for a guide for the December quarter, but December is typically strong seasonally for you guys. And if you expect to ramp quite a bit of SingleTap licensing revenue in the December quarter, should we expect December to be up sequentially from September as you see things right now?

Yes. I think it would be unusual to not have a December quarter above September, absent something odd. That would be our normal kind of plan for that seasonality. So yes.

And then lastly, just kind of OpEx going forward. I know it bumps around, but are we generally now in a range, there's not an additional significant investments on the OpEx side?

Yes. For those familiar with the Digital Turbine story, even before last year's major acquisitions, we have successfully achieved scale and operating leverage while continuing to make investments. These efficiencies have somewhat hidden the investments we are undertaking. On the surface, you might notice only minor increases in expenses compared to revenue. However, we are actively investing, as I mentioned on the call, which will yield future returns. That said, we are not incurring any transformative expenses. We actually expect to save money by consolidating our systems onto a single platform.

If I could sneak in one more for Bill. On the last quarterly conference call, you talked about revenue synergies with the acquisitions being about 10%. I know it's tough in a tougher economic environment, but where do you say you're at on that 10% revenue synergies?

Yes, I believe we are in that range. What we're observing, particularly since we transitioned from gross to net reporting, is that the real benefit is coming from the margin side, specifically on the synergies. As I mentioned, we saw pro forma margins increase from 67% to 71% year-over-year, primarily driven by those revenue synergies. They have started to yield significant returns for us.

And our next question today comes from Tim Nollen with Macquarie.

Great. I've got a couple as well, actually. First, just curious about pricing in the ad market. It looks like maybe a little bit of volume pressure, but it looks like pricing may be holding on. Could you just talk a bit more about how that developed in the quarter? And maybe what you're seeing in the current quarter? And then secondly, there's been quite a lot of consolidation on the ad mediation side over the last several months. Could you just speak a bit to your ability to compete and win revenues on that side of things?

Sure. I'll start with the mediation aspect. Many people have noticed recent consolidation in the space, particularly with the announcements involving IronSource and Unity, both of which had their own mediation solutions. About a year ago, Twitter sold its MoPub mediation service to Applove, which also contributed to this trend. As a result, there are now fewer players in the market. We've successfully added publishers, primarily due to two key differentiators. First, our independence stands out, as many competitors also have their own app publishing titles, but we do not, which appeals to publishers. Second, we can provide them with new users and user acquisition through relationships with companies like Verizon, AT&T, and Samsung, in addition to partnerships with SingleTap. These differentiators have enabled us to compete effectively. While we aren't a major player in the space compared to others, we are experiencing positive growth. Regarding pricing in the ad market, it varies. We see strong prices from social media and streaming video companies, particularly in growth sectors like utilities and financial apps. However, in certain regions like Europe or among some programmatic DSP players, advertiser spending is softer, which affects our exchange. Overall, the situation is mixed at the moment. I'm particularly proud of our On-Device business, achieving over $5 in revenue per device in the U.S. Strong pricing is essential for such results, which is reflected in our 20% year-over-year growth. We're quite pleased with this outcome.

Okay. And would you be able to comment on how things are going in the quarter now? I mean if you're talking about macro risk and things and some advertisers maybe holding off on spending, does that weaken your pricing ability?

Yes. I think we are observing similar trends. As we consider our guidance, we want to approach it with the perspective of whether conditions improve or do not improve. Our previous guidance reflects this thought process, and the same philosophy applies now. The situation varies across different sectors, markets, operating systems, and between brand spending and performance or direct response spending. Overall, it's quite mixed. Currently, we are definitely facing both headwinds and tailwinds linked to these variables, as highlighted in recent press discussions.

And our next question today comes from Mitch Pindus with Wells Fargo Private Bank.

Actually, my question was just answered. So thank you, and nice quarter, gentlemen.

Okay. Thank you.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn this conference back over to Bill Stone for closing remarks.

Yes. Thanks, everyone, for joining the call today. We look forward to reporting on our progress against all the points we made on today's call, and we'll talk to you again on our fiscal 2023 second quarter call in a few months. Thanks, and have a great night.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.